|
METROPOLITAN
BANK AND TRUST COMPANY, Petitioner, - versus - EDGARDO D. VIRAY, Respondent. |
G.R. No. 162218 Present: CARPIO, J., Chairperson, brion, DEL
CASTILLO, ABAD, and PEREZ, JJ. Promulgated: February 25, 2010 |
x- - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - x
CARPIO, J.:
The Case
On 7 July 1979, Rico Shipping, Inc.,
represented by its President, Erlinda Viray-Jarque, together with respondent
Edgardo D. Viray (Viray), in their own personal capacity and as solidary
obligors (the three parties collectively known as the debtors), obtained two
separate loans from petitioner Metropolitan Bank and Trust Company (MBTC) in
the total amount of P250,000. The
debtors executed a promissory note promising to pay in four semi-annual
installments of P62,500 starting on 23 January 1980, with 15% interest
and 2% credit evaluation and supervision fee per annum. The two loans were
subsequently renewed and secured by one promissory note. Under the note, the debtors made a total
payment of P134,054 leaving a balance of P115,946 which remained
unpaid despite demands by MBTC.
On 5 June 1981, the debtors executed
another promissory note and obtained a loan from MBTC in the amount of P50,000,
payable on 2 November 1981, with 16% interest and 2% credit evaluation and
supervision fee per annum. On the due date, the debtors again failed to
pay the loan despite demands to pay by MBTC.
On 3 September 1981, the debtors
obtained a third loan from MBTC in the amount of P50,000 payable on 14
November 1981, with 16% interest and 2% credit evaluation and supervision fee
per annum. Again, the debtors failed and refused to pay
on due date.
MBTC filed a complaint for sum of money against the debtors with the RTC of Manila, Branch 4.[5] On 28 April 1983, the RTC of Manila rendered a judgment in favor of MBTC.[6] The dispositive portion of the decision states:
WHEREFORE, judgment is hereby
rendered ordering defendants to pay jointly and severally plaintiff the
following:
I – On the first cause of action:
(a)
The sum of P50,000 with interest
thereon at the rate of 16% per annum
from date of filing of the complaint until fully paid;
(b)
The sum equivalent to 1% per month of the principal obligation as penalty
charge, computed likewise from the filing of the complaint;
II – On the second cause of action:
(a) The sum of P50,000
with interest thereon at the rate of 16% per annum from date of filing of the complaint until fully paid;
(b) The sum equivalent to 1% per month of the principal sum as penalty charge, computed from date of filing of the complaint;
III – On the third cause of action:
(a) The sum of
P115,946.00 with interest thereon at the rate of 1% per annum from date of filing of the
complaint until fully paid;
(b) The sum equivalent to 1% per month of the
sum of P115,946.00 as penalty charge, computed from date of filing of
the complaint;
IV –
(1)
The sum of P15,000.00 as attorney’s fees; and
(2) To pay the costs of suit.
SO ORDERED.
Meanwhile, on 29 December 1982, the
government issued Free Patents in favor of Viray over three parcels of land
(lots) designated as (1) Lot No.
26275, Cad-237 with an area of 500 square meters; (2) Lot No. 26276, Cad-237, with an area of 888
square meters; and (3) Lot No.
26277, Cad-237 with an area of 886 square meters, all situated in Barangay Bulua, Cagayan de Oro City,
Misamis Oriental. Original Certificate of Title (OCT) Nos. P-2324, P-2325 and
P-2326 were issued covering Free Patent Nos. [X-1] 10525, [X-1] 10526 and [X-1]
10527, respectively.
The OCT’s containing the free patents were registered with the Registry of Deeds of Cagayan de Oro City on 18 January 1983. Written across the face of the OCT’s were the following:
On 6 March 1984, the RTC of Manila
issued a writ of execution over the lots owned by Viray. On 12 October 1984, pursuant to the writ of
execution, the City Sheriff of Cagayan de Oro sold the lots at public
auction in favor of MBTC as the winning
bidder. The next day, the sheriff issued
a Certificate of Sale to MBTC.[8]
On 23 August 1990, the sheriff executed a Deed of Final Conveyance to MBTC. The Register of Deeds of Cagayan de Oro City cancelled OCT Nos. P-2324, P-2325 and P-2326 and issued in MBTC’s name Transfer Certificate of Title (TCT) Nos. T-59171, T-59172 and T-59173,[9] respectively.
On 30 July 1991, Viray filed an action for annulment of sale against the sheriff and MBTC with the RTC of Cagayan de Oro City, Misamis Oriental, Branch 23.[10] Viray sought the declaration of nullity of the execution sale, the sheriff’s certificate of sale, the sheriff’s deed of final conveyance and the TCT's issued by the Register of Deeds.
On 21 September 1993, the RTC of Cagayan de Oro City rendered its decision in favor of MBTC.[11] The dispositive portion states:
Viray filed an appeal with the CA
alleging that the RTC of Cagayan de Oro City committed reversible error in
ruling solely on the issue of redemption instead of the issue of validity of
the auction sale, being the lis mota[13] of the action.
The main issue is whether the auction sale falls within the five-year prohibition period laid down in Section 118 of CA 141.
SECTION 118. Except in favor of the Government or any of its branches, units, or instruction, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent and grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after issuance of title shall be valid without the approval of the Secretary of Agriculture and Natural Resources, which approval shall not be denied except on constitutional and legal grounds.
The law clearly provides that lands which have
been acquired under free patent or homestead shall not be encumbered or
alienated within five years from the date of issuance of the patent or be
liable for the satisfaction of any debt contracted prior to the expiration of
the period.
In the present case, the three loans were obtained on separate dates – 7 July 1979, 5 June 1981 and 3 September 1981, or several years before the free patents on the lots were issued by the government to respondent on 29 December 1982. The RTC of Manila, in a Decision dated 28 April 1983, ruled in favor of petitioner ordering the debtors, including respondent, to pay jointly and severally certain amounts of money. The public auction conducted by the sheriff on the lots owned by respondent occurred on 12 October 1984.
For a period of five years or from 29 December 1982 up to 28 December 1987, Section 118 of CA 141 provides that the lots comprising the free patents shall not be made liable for the payment of any debt until the period of five years expires. In this case, the execution sale of the lots occurred less than two years after the date of the issuance of the patents. This clearly falls within the five-year prohibition period provided in the law, regardless of the dates when the loans were incurred.
In Artates v. Urbi,[15] we held that a civil obligation cannot be enforced against, or satisfied out of, the sale of the homestead lot acquired by the patentee less than five years before the obligation accrued even if the sale is involuntary. For purposes of complying with the law, it is immaterial that the satisfaction of the debt by the encumbrance or alienation of the land grant was made voluntarily, as in the case of an ordinary sale, or involuntarily, such as that effected through levy on the property and consequent sale at public auction. In both instances, the law would have been violated.
Likewise, in Beach v. Pacific Commercial Company and Sheriff of Nueva Ecija,[16] we held that to subject the land to the satisfaction of debts would violate Section 116 of Act No. 2874 (now Section 118 of CA 141).
As correctly observed by the CA in the present case:
It is argued by
defendant-appellee, however, that the debt referred to in the law must have
been contracted within the five-year prohibitory period; any debt contracted before or after the five-year
prohibitory period is definitely not covered by the law. This argument is weakest on two points. Firstly, because the provision of law does
not say that the debt referred to therein should be contracted before the
five-year prohibitory period but before the “expiration” of the five-year
prohibitory period. (Defendant-appellee
deliberately omitted the word “expiration” to suit its defense.) This simply means that it is not material
whether the debt is contracted before the five-year prohibitory period; what is
material is that the debt must be contracted before or prior to the expiration
of the five-year prohibitory period from the date of the issuance and approval
of the patent or grant. x x x
And secondly, while it is
true that the debt in this case was contracted prior to the five-year
prohibitory period, the same is of no consequence, for as held in Artates
vs. Urbi, supra, such
indebtedness has to be reckoned from the date said obligation was adjudicated
and decreed by the court. x x x[17]
It
must be emphasized that the main purpose in the grant of a free patent or
homestead is to preserve and keep in the family of the homesteader that portion
of public land which the State has given to him so he may have a place to live
with his family and become a happy citizen and a useful member of the society.[18]
In Jocson v. Soriano,[19] we held that the conservation of a
family home is the purpose of homestead laws.
The policy of the state is to foster families as the foundation of
society, and thus promote general welfare.
The sentiment of patriotism and independence, the spirit of free
citizenship, the feeling of interest in public affairs, are cultivated and
fostered more readily when the citizen lives permanently in his own home, with
a sense of its protection and durability.
Section 118 of CA 141, therefore, is predicated on public policy. Its violation gives rise to the cancellation of the grant and the reversion of the land and its improvements to the government at the instance of the latter.[20] The provision that “nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of the five-year period” is mandatory[21] and any sale made in violation of such provision is void[22] and produces no effect whatsoever, just like what transpired in this case. Clearly, it is not within the competence of any citizen to barter away what public policy by law seeks to preserve.[23]
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 August 2003 and Resolution dated 13 February 2004 of the Court of Appeals in CA-G.R. CV No. 43926.
SO ORDERED.
WE CONCUR :
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 1997 Revised
Rules of Civil Procedure.
[2]Rollo, pp. 33-42. Penned by Justice Buenaventura J. Guerrero with Justices Renato C. Dacudao and Mario L. Guariña III, concurring.
[3]Id. at 43-44.
[4] Id. at 63-65. Penned by Judge Jose L. Sabio, Jr.
[5]Docketed as
Civil Case No. 82-10140 and entitled “Metropolitan
Bank and Trust Company v. Rico Shipping, Inc., Erlinda Viray-Jarque and Edgardo
D. Viray.”
[6] Rollo, pp. 49-50.
[7] Id. at 46-48.
[8] Id. at 51-52.
[9] Id. at 53-55.
[10] Id. at 56-60. Docketed as Civil
Case No. 91-309.
[11] Id. at 63-65.
[12] Id. at 65.
[13]The cause of
the suit or action. It is understood to be the commencement of the controversy,
and the beginning of the suit.
[14] Rollo,
p. 41.
[15] 147 Phil. 334 (1971).
[16] 49 Phil. 365, 369 (1926).
[17] Rollo,
pp. 39-40.
[18]Philippine National Bank v. De Los Reyes, G.R. Nos. 46898-99, 28 November 1989, 179 SCRA
619, 628; Gonzaga v. Court of Appeals,
151-A Phil. 834 (1973); Cadiz v. Nicolas,
102 Phil. 1039 (1958); De Los Santos v.
Roman Catholic Church of Midsayap, 94 Phil. 405 (1954); Pascua v. Talens, 80 Phil. 792 (1948); Jocson v. Soriano, 45 Phil. 375 (1923).
[19] Supra note 18.
[20] Gonzalo
Puyat & Sons, Inc. v. De Las Ama, 74 Phil. 3, 4 (1942).
[21]Beniga v. Bugas, 146 Phil. 118 (1970); Republic of the Philippines v. Ruiz, 131 Phil. 870 (1968).
[22]Ortega v. Tan, G.R. No. 44617, 23 January 1990, 181 SCRA 350; Acierto v. De Los Santos, 95 Phil. 887 (1954).
[23]Saltiga de Romero v. Court of Appeals, 377 Phil. 189, 201 (1999); Ortega v. Tan, supra note 22; Gayotin v. Tolentino, 169 Phil. 559, 569 (1977); Gonzalo Puyat & Sons, Inc. v. De Las Ama, supra note 20.