Friday, December 30, 2011

SC warned: Corona trial could be another 'Garci' | ABS-CBN News

SC warned: Corona trial could be another 'Garci' | ABS-CBN News

"x x x.

The party-list congressman also rejected the move by Corona's lawyers to call for a preliminary investigation of the complaint before the trial could continue.

He said there was no need for a preliminary probe since the impeachment process is not a judicial proceeding.

"Malinaw sa Constitution at mga rules that the impeachment does not involve criminal sanction. The only sanction is removal from office. Questionable pa nga kung pati retirement benefits or pension pwede ma-forfeit eh...Of course it's the Senate's discretion but pampa-delay eh. In fact, para sa amin mas maganda matapos ito as soon as possible," he said.

Corona's lawyers earlier filed a motion for a preliminary hearing at the Senate. A preliminary hearing will allow the senator-judges to determine whether or not there is enough evidence to hold the trial.

House prosecutors have called the move a delaying tactic. They said if the Senate approves Corona's request, the impeachment trial will not be able to start immediately.

x x x."

IBP statement supporting CJ Corona assailed

The wrong IBP statement
Was both sad and disappointed when the Integrated Bar of the Philippines took the stand that the impeachment against Chief Justice Renato Corona was an affront to the independence on the Judiciary. Sad because I hold the IBP very dearly, having served as its Presidential Assistant for Human Rights for two years during the incumbency of President Feliciano Bautista. Disappointed because knowing almost all of its national officers personally, including its incumbent President Roan Libarios whom I had the pleasure of serving with when he was National Vice-President of the IBP, I do not understand how they can misread the importance of impeachment as a constitutional tool for public accountability of public officers. It was indeed a wrong statement.The IBP anchored its stand on the false belief that any and all means to promote accountability on the part of our magistrates is an affront to the Judiciary. Nothing can be farther from the truth. When the Constitution made the Supreme Court a co-equal branch of government, it did so mindful that there was a need to promote both independence and accountability of our magistrates. To achieve independence, the Constitution gave the Court both fiscal autonomy and security of tenure for all magistrates to serve until age 70. But to balance this independence, the Constitution included the remedy of impeachment to remove magistrates with otherwise fixed terms should they commit culpable violations of the Constitution, betrayal of public trust and graft and corruption. To provide the Court only with means to make it independent but bereft of an instrument of accountability would be to make a monster out of our courts. Hence, contrary to the position taken by the officers of the IBP, impeachment is a constitutional tool to promote accountability and not the sword of Damocles that it portrayed it to be.
Furthermore, as I argued in my paper which I delivered only this month in Hong Kong University on the occasion of the 4th International Conference of the Asian Society of Constitutional Law, the impeachment is a tool by which our policy makers, both from the House of Representatives and the Senate, can uphold the supremacy of the Constitution particularly on the issue of Corona’s appointment as Chief Justice. Normally, legal formalism demands that we accept as final and executory decisions made by the Supreme Court particularly where it interprets the Constitution. In Angara v. Electoral Tribunal, the Court declared that when it declares an act of any branch or instrumentality as unconstitutional and hence, null and void, this is not an exercise of “judicial supremacy”, but one that “upholds the supremacy of the Constitution”.
But what happens when the Court abdicates this duty to uphold the Constitution as it did in De Castro v. JBC when it resorted to constitutional draftsmanship in upholding Corona’s appointment as a midnight Chief Justice in a manner contrary to the language and intent of the Constitution? Are all the other branches of government precluded from defending the Constitution? Certainly not.
All public officers from all branches of government took an oath to uphold the Constitution. Here, the remedy is clearly impeachment, as the issue to be resolved by our policy makers will include that of the correctness and the wisdom of the Court’s ruling in De Castro. Surely, the people that gave life to the Constitution did not intend to grant unto the Court a monopoly of upholding the supremacy of the highest law of the land.
As correctly observed by Senator Joker Arroyo, Article 1 of the articles of impeachment will involve purely legal issues which includes the constitutionality of Corona’s acceptance of the post of Chief Justice.
I would also have appreciated it if the IBP’s leadership attempted to consult its members prior to issuing its statement against the impeachment of Chief Justice Corona. Certainly, as the compulsory national organization of lawyers, there is virtue in hearing what its members, all of whom are trained in constitutional law, have to say before issuing a statement that appears to bind all of its members. As it turned out, I am a bona fide member of the IBP and I have been whole-heartedly supporting the impeachment of Corona as a means of strengthening the constitution and the Court as an institution. My leaders in the IBP did not consult me before they issued their official position despite the fact that the articles of the IBP do contain a provision on consultation with its members. I am now constrained to put on record the fact that I do not approve of the IBP stand and that I have not authorized them to speak on my behalf on this particular issue. This is sad, but necessary.
In any case, I am pleased that the House of Representatives chose lawyer Mario “Ayo” Bautista to lead its panel of private prosecutors in the impeachment trial. Ayo was my boss during my first year of litigation practice and I know him to be a brilliant and dedicated litigator. With him on board, I am sure that the people’s interest would be promoted and safeguarded in the impeachment trial.

Thursday, December 29, 2011

When trust does not prescribe - G.R. No. 140528

G.R. No. 140528

"x x x.

The right of the Torbela siblings to recover Lot No. 356-A has not yet prescribed.

The Court extensively discussed the prescriptive period for express trusts in the Heirs of Maximo Labanon v. Heirs of Constancio Labanon,[65] to wit:

On the issue of prescription, we had the opportunity to rule in Bueno v. Reyes that unrepudiated written express trusts are imprescriptible:

“While there are some decisions which hold that an action upon a trust is imprescriptible, without distinguishing between express and implied trusts, the better rule, as laid down by this Court in other decisions, is that prescription does supervene where the trust is merely an implied one. The reason has been expressed by Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as follows:

Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property prescribed in 10 years, excepting only actions based on continuing or subsisting trusts that were considered by section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March 29, 1958, however, the continuing or subsisting trusts contemplated in section 38 of the Code of Civil Procedure referred only to express unrepudiated trusts, and did not include constructive trusts (that are imposed by law) where no fiduciary relation exists and the trustee does not recognize the trust at all.”

This principle was amplified in Escay v. Court of Appeals this way: “Express trusts prescribe 10 years from the repudiation of the trust (Manuel Diaz, et al. vs. Carmen Gorricho et al., 54 O.G. p. 8429, Sec. 40, Code of Civil Procedure).”

In the more recent case of Secuya v. De Selma, we again ruled that the prescriptive period for the enforcement of an express trust of ten (10) years starts upon the repudiation of the trust by the trustee.[66]

To apply the 10-year prescriptive period, which would bar a beneficiary’s action to recover in an express trust, the repudiation of the trust must be proven by clear and convincing evidence and made known to the beneficiary.[67] The express trust disables the trustee from acquiring for his own benefit the property committed to his management or custody, at least while he does not openly repudiate the trust, and makes such repudiation known to the beneficiary or cestui que trust. For this reason, the old Code of Civil Procedure (Act 190) declared that the rules on adverse possession do not apply to “continuing and subsisting” (i.e., unrepudiated) trusts. In an express trust, the delay of the beneficiary is directly attributable to the trustee who undertakes to hold the property for the former, or who is linked to the beneficiary by confidential or fiduciary relations. The trustee's possession is, therefore, not adverse to the beneficiary, until and unless the latter is made aware that the trust has been repudiated.[68]

Dr. Rosario argues that he is deemed to have repudiated the trust on December 16, 1964, when he registered Lot No. 356-A in his name under TCT No. 52751, so when on February 13, 1986, the Torbela siblings instituted before the RTC Civil Case No. U-4359, for the recovery of ownership and possession of Lot No. 356-A from the spouses Rosario, over 21 years had passed. Civil Case No. U-4359 was already barred by prescription, as well as laches.

The Court already rejected a similar argument in Ringor v. Ringor[69] for the following reasons:

A trustee who obtains a Torrens title over a property held in trust for him by another cannot repudiate the trust by relying on the registration. A Torrens Certificate of Title in Jose’s name did not vest ownership of the land upon him. The Torrens system does not create or vest title. It only confirms and records title already existing and vested. It does not protect a usurper from the true owner. The Torrens system was not intended to foment betrayal in the performance of a trust. It does not permit one to enrich himself at the expense of another. Where one does not have a rightful claim to the property, the Torrens system of registration can confirm or record nothing. Petitioners cannot rely on the registration of the lands in Jose’s name nor in the name of the Heirs of Jose M. Ringor, Inc., for the wrong result they seek. For Jose could not repudiate a trust by relying on a Torrens title he held in trust for his co-heirs. The beneficiaries are entitled to enforce the trust, notwithstanding the irrevocability of the Torrenstitle. The intended trust must be sustained.[70] (Emphasis supplied.)

In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose Labiste,[71] the Court refused to apply prescription and laches and reiterated that:

[P]rescription and laches will run only from the time the express trust is repudiated. The Court has held that for acquisitive prescription to bar the action of the beneficiary against the trustee in an express trust for the recovery of the property held in trust it must be shown that: (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) such positive acts of repudiation have been made known to thecestui que trust, and (c) the evidence thereon is clear and conclusive. Respondents cannot rely on the fact that the Torrens title was issued in the name of Epifanio and the other heirs of Jose. It has been held that a trustee who obtains a Torrens title over property held in trust by him for another cannot repudiate the trust by relying on the registration. The rule requires a clear repudiation of the trust duly communicated to the beneficiary. The only act that can be construed as repudiation was when respondents filed the petition for reconstitution in October 1993. And since petitioners filed their complaint in January 1995, their cause of action has not yet prescribed, laches cannot be attributed to them.[72] (Emphasis supplied.)

It is clear that under the foregoing jurisprudence, the registration of Lot No. 356-A by Dr. Rosario in his name under TCT No. 52751 on December 16, 1964 is not the repudiation that would have caused the 10-year prescriptive period for the enforcement of an express trust to run.

The Court of Appeals held that Dr. Rosario repudiated the express trust when he acquired another loan from PNB and constituted a second mortgage on Lot No. 356-A sometime in 1979, which, unlike the first mortgage to DBP in 1965, was without the knowledge and/or consent of the Torbela siblings.

The Court only concurs in part with the Court of Appeals on this matter.

For repudiation of an express trust to be effective, the unequivocal act of repudiation had to be made known to the Torbela siblings as the cestuis que trust and must be proven by clear and conclusive evidence. A scrutiny of TCT No. 52751 reveals the following inscription:

Entry No. 520099

Amendment of the mortgage in favor of PNB inscribed under Entry No. 490658 in the sense that the consideration thereof has been increased to PHILIPPINE PESOS Four Hundred Fifty Thousand Pesos only (P450,000.00) and to secure any and all negotiations with PNB, whether contracted before, during or after the date of this instrument, acknowledged before Notary Public of Pangasinan Alejo M. Dato as Doc. No. 198, Page No. 41, Book No. 11, Series of 1985.

Date of Instrument March 5, 1981

Date of Inscription March 6, 1981[73]

Although according to Entry No. 520099, the original loan and mortgage agreement of Lot No. 356-A between Dr. Rosario and PNB was previously inscribed as Entry No. 490658, Entry No. 490658 does not actually appear on TCT No. 52751 and, thus, it cannot be used as the reckoning date for the start of the prescriptive period.

The Torbela siblings can only be charged with knowledge of the mortgage of Lot No. 356-A to PNB onMarch 6, 1981 when the amended loan and mortgage agreement was registered on TCT No. 52751 as Entry No. 520099. Entry No. 520099 is constructive notice to the whole world[74] that Lot No. 356-A was mortgaged by Dr. Rosario to PNB as security for a loan, the amount of which was increased to P450,000.00. Hence, Dr. Rosario is deemed to have effectively repudiated the express trust between him and the Torbela siblings on March 6, 1981, on which day, the prescriptive period for the enforcement of the express trust by the Torbela siblings began to run.

From March 6, 1981, when the amended loan and mortgage agreement was registered on TCT No. 52751, to February 13, 1986, when the Torbela siblings instituted before the RTC Civil Case No. U-4359 against the spouses Rosario, only about five years had passed. The Torbela siblings were able to institute Civil Case No. U-4359 well before the lapse of the 10-year prescriptive period for the enforcement of their express trust with Dr. Rosario.

Civil Case No. U-4359 is likewise not barred by laches. Laches means the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier. It 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. As the Court explained in the preceding paragraphs, the Torbela siblings instituted Civil Case No. U-4359 five years after Dr. Rosario’s repudiation of the express trust, still within the 10-year prescriptive period for enforcement of such trusts. This does not constitute an unreasonable delay in asserting one's right. A delay within the prescriptive period is sanctioned by law and is not considered to be a delay that would bar relief. Laches apply only in the absence of a statutory prescriptive period.[75]


Express trust; G.R. No. 140528

G.R. No. 140528

"x x x.

There was an express trust between the Torbela siblings and Dr. Rosario.

There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A from their parents, the Torbela spouses, who, in turn, acquired the same from the first registered owner of Lot No. 356-A, Valeriano.

Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim on December 12, 1964 in which they transferred and conveyed Lot No. 356-A to Dr. Rosario for the consideration of P9.00. However, the Torbela siblings explained that they only executed the Deed as an accommodation so that Dr. Rosario could have Lot No. 356-A registered in his name and use said property to secure a loan from DBP, the proceeds of which would be used for building a hospital on Lot No. 356-A – a claim supported by testimonial and documentary evidence, and borne out by the sequence of events immediately following the execution by the Torbela siblings of said Deed. On December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was already issued in Dr. Rosario’s name. On December 28, 1964, Dr. Rosario executed his own Deed of Absolute Quitclaim, in which he expressly acknowledged that he “only borrowed” Lot No. 356-A and was transferring and conveying the same back to the Torbela siblings for the consideration of P1.00. On February 21, 1965, Dr. Rosario’s loan in the amount of P70,200.00, secured by a mortgage on Lot No. 356-A, was approved by DBP. Soon thereafter, construction of a hospital building started on Lot No. 356-A.

Among the notable evidence presented by the Torbela siblings is the testimony of Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent personal interest in the present case. Atty. Alcantara, when she was still a boarder at the house of Eufrosina Torbela Rosario (Dr. Rosario’s mother), was consulted by the Torbela siblings as regards the extrajudicial partition of Lot No. 356-A. She also witnessed the execution of the two Deeds of Absolute Quitclaim by the Torbela siblings and Dr. Rosario.

In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to prove his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of Appeals,[53] the Court made a clear distinction between title and the certificate of title:

The certificate referred to is that document issued by the Register of Deeds known as the Transfer Certificate of Title (TCT). By title, the law refers to ownership which is represented by that document. Petitioner apparently confuses certificate with title. Placing a parcel of land under the mantle of the Torrens system does not mean that ownership thereof can no longer be disputed. Ownership is different from a certificate of title. The TCT is only the best proof of ownership of a piece of land. Besides, the certificate cannot always be considered as conclusive evidence of ownership. Mere issuance of the certificate of title in the name of any person does not foreclose the possibility that the real property may be under co-ownership with persons not named in the certificate or that the registrant may only be a trustee or that other parties may have acquired interest subsequent to the issuance of the certificate of title. To repeat, registration is not the equivalent of title, but is only the best evidence thereof. Title as a concept of ownership should not be confused with the certificate of title as evidence of such ownership although both are interchangeably used. x x x.[54] (Emphases supplied.)

Registration does not vest title; it is merely the evidence of such title. Land registration laws do not give the holder any better title than what he actually has.[55] Consequently, Dr. Rosario must still prove herein his acquisition of title to Lot No. 356-A, apart from his submission of TCT No. 52751 in his name.

Dr. Rosario testified that he obtained Lot No. 356-A after paying the Torbela siblings P25,000.00, pursuant to a verbal agreement with the latter. The Court though observes that Dr. Rosario’s testimony on the execution and existence of the verbal agreement with the Torbela siblings lacks significant details (such as the names of the parties present, dates, places, etc.) and is not corroborated by independent evidence.

In addition, Dr. Rosario acknowledged the execution of the two Deeds of Absolute Quitclaim datedDecember 12, 1964 and December 28, 1964, even affirming his own signature on the latter Deed. The Parol Evidence Rule provides that when the terms of the agreement have been reduced into writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement.[56] Dr. Rosario may not modify, explain, or add to the terms in the two written Deeds of Absolute Quitclaim since he did not put in issue in his pleadings (1) an intrinsic ambiguity, mistake, or imperfection in the Deeds; (2) failure of the Deeds to express the true intent and the agreement of the parties thereto; (3) the validity of the Deeds; or (4) the existence of other terms agreed to by the Torbela siblings and Dr. Rosario after the execution of the Deeds.[57]

Even if the Court considers Dr. Rosario’s testimony on his alleged verbal agreement with the Torbela siblings, the Court finds the same unsatisfactory. Dr. Rosario averred that the two Deeds were executed only because he was “planning to secure loan from the Development Bank of the Philippines and Philippine National Bank and the bank needed absolute quitclaim[.]”[58] While Dr. Rosario’s explanation makes sense for the first Deed of Absolute Quitclaim dated December 12, 1964 executed by the Torbela siblings (which transferred Lot No. 356-A to Dr. Rosario for P9.00.00), the same could not be said for the second Deed of Absolute Quitclaim dated December 28, 1964 executed by Dr. Rosario. In fact, Dr. Rosario’s Deed of Absolute Quitclaim (in which he admitted that he only borrowed Lot No. 356-A and was transferring the same to the Torbela siblings for P1.00.00) would actually work against the approval of Dr. Rosario’s loan by the banks. Since Dr. Rosario’s Deed of Absolute Quitclaim dated December 28, 1964 is a declaration against his self-interest, it must be taken as favoring the truthfulness of the contents of said Deed.[59]

It can also be said that Dr. Rosario is estopped from claiming or asserting ownership over Lot No. 356-A based on his Deed of Absolute Quitclaim dated December 28, 1964. Dr. Rosario's admission in the said Deed that he merely borrowed Lot No. 356-A is deemed conclusive upon him. Under Article 1431 of the Civil Code, “[t]hrough estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.”[60] That admission cannot now be denied by Dr. Rosario as against the Torbela siblings, the latter having relied upon his representation.

Considering the foregoing, the Court agrees with the RTC and the Court of Appeals that Dr. Rosario only holds Lot No. 356-A in trust for the Torbela siblings.

Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Trust relations between parties may either be express or implied. An express trust is created by the intention of the trustor or of the parties, while an implied trust comes into being by operation of law.[61]

Express trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust. Under Article 1444 of the Civil Code, “[n]o particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended.”[62] It is possible to create a trust without using the word “trust” or “trustee.” Conversely, the mere fact that these words are used does not necessarily indicate an intention to create a trust. The question in each case is whether the trustor manifested an intention to create the kind of relationship which to lawyers is known as trust. It is immaterial whether or not he knows that the relationship which he intends to create is called a trust, and whether or not he knows the precise characteristics of the relationship which is called a trust.[63]

In Tamayo v. Callejo,[64] the Court recognized that a trust may have a constructive or implied nature in the beginning, but the registered owner’s subsequent express acknowledgement in a public document of a previous sale of the property to another party, had the effect of imparting to the aforementioned trust the nature of an express trust. The same situation exists in this case. When Dr. Rosario was able to register Lot No. 356-A in his name under TCT No. 52751 on December 16, 1964, an implied trust was initially established between him and the Torbela siblings under Article 1451 of the Civil Code, which provides:

ART. 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner.

Dr. Rosario’s execution of the Deed of Absolute Quitclaim on December 28, 1964, containing his express admission that he only borrowed Lot No. 356-A from the Torbela siblings, eventually transformed the nature of the trust to an express one. The express trust continued despite Dr. Rosario stating in his Deed of Absolute Quitclaim that he was already returning Lot No. 356-A to the Torbela siblings as Lot No. 356-A remained registered in Dr. Rosario’s name under TCT No. 52751 and Dr. Rosario kept possession of said property, together with the improvements thereon.

x x x."

Barangay conciliation; when not needed - G.R. No. 140528

G.R. No. 140528

"x x x.

Barangay conciliation was not a pre-requisite to the institution of Civil Case No. U-4359.

Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the Torbela siblings for recovery of ownership and possession of Lot No. 356-A, plus damages, should have been dismissed by the RTC because of the failure of the Torbela siblings to comply with the prior requirement of submitting the dispute to barangayconciliation.

The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986, when Presidential Decree No. 1508, Establishing a System of Amicably Settling Disputes at the Barangay Level, was still in effect.[50] Pertinent provisions of said issuance read:

Section 2. Subject matters for amicable settlement. The Lupon of each barangay shall have authority to bring together the parties actually residing in the same city or municipality for amicable settlement of all disputes except:

1. Where one party is the government, or any subdivision or instrumentality thereof;

2. Where one party is a public officer or employee, and the dispute relates to the performance of his official functions;

3. Offenses punishable by imprisonment exceeding 30 days, or a fine exceeding P200.00;

4. Offenses where there is no private offended party;

5. Such other classes of disputes which the Prime Minister may in the interest of justice determine upon recommendation of the Minister of Justice and the Minister of Local Government.

Section 3. Venue. Disputes between or among persons actually residing in the same barangay shall be brought for amicable settlement before the Lupon of said barangay. Those involving actual residents of different barangays within the same city or municipality shall be brought in the barangay where the respondent or any of the respondents actually resides, at the election of the complainant. However, all disputes which involved real property or any interest therein shall be brought in the barangay where the real property or any part thereof is situated.

The Lupon shall have no authority over disputes:

1. involving parties who actually reside in barangays of different cities or municipalities, except where such barangays adjoin each other; and

2. involving real property located in different municipalities.

x x x x

Section 6. Conciliation, pre-condition to filing of complaint. – No complaint, petition, action or proceeding involving any matter within the authority of the Lupon as provided in Section 2 hereof shall be filed or instituted in court or any other government office for adjudication unless there has been a confrontation of the parties before the Lupon Chairman or the Pangkat and no conciliation or settlement has been reached as certified by the Lupon Secretary or the Pangkat Secretary, attested by the Lupon or Pangkat Chairman, or unless the settlement has been repudiated. x x x. (Emphases supplied.)

The Court gave the following elucidation on the jurisdiction of the Lupong Tagapayapa in Tavora v. Hon. Veloso[51]:

The foregoing provisions are quite clear. Section 2 specifies the conditions under which the Lupon of a barangay “shall have authority” to bring together the disputants for amicable settlement of their dispute: The parties must be “actually residing in the same city or municipality.” At the same time, Section 3 — while reiterating that the disputants must be “actually residing in the same barangay” or in “different barangays” within the same city or municipality — unequivocably declares that the Lupon shall have “no authority” over disputes “involving parties who actually reside in barangays of different cities or municipalities,” except where such barangays adjoin each other.

Thus, by express statutory inclusion and exclusion, the Lupon shall have no jurisdiction over disputes where the parties are not actual residents of the same city or municipality, except where the barangays in which they actually reside adjoin each other.

It is true that immediately after specifying the barangay whose Lupon shall take cognizance of a given dispute, Sec. 3 of PD 1508 adds:

"However, all disputes which involve real property or any interest therein shall be brought in the barangay where the real property or any part thereof is situated."

Actually, however, this added sentence is just an ordinary proviso and should operate as such.

The operation of a proviso, as a rule, should be limited to its normal function, which is to restrict or vary the operation of the principal clause, rather than expand its scope, in the absence of a clear indication to the contrary.

“The natural and appropriate office of a proviso is . . . to except something from the enacting clause; to limit, restrict, or qualify the statute in whole or in part; or to exclude from the scope of the statute that which otherwise would be within its terms.” (73 Am Jur 2d 467.)

Therefore, the quoted proviso should simply be deemed to restrict or vary the rule on venue prescribed in the principal clauses of the first paragraph of Section 3, thus: Although venue is generally determined by the residence of the parties, disputes involving real property shall be brought in the barangay where the real property or any part thereof is situated, notwithstanding that the parties reside elsewhere within the same city/municipality.[52] (Emphases supplied.)

The original parties in Civil Case No. U-4359 (the Torbela siblings and the spouses Rosario) do not reside in the same barangay, or in different barangays within the same city or municipality, or in different barangays of different cities or municipalities but are adjoining each other. Some of them reside outside Pangasinan and even outside of the country altogether. The Torbela siblings reside separately in Barangay Macalong, Urdaneta, Pangasinan; Barangay Consolacion, Urdaneta, Pangasinan; Pangil, Laguna; Chicago, United States of America; and Canada. The spouses Rosario are residents of Calle Garcia, Poblacion, Urdaneta, Pangasinan. Resultantly, the Lupon had no jurisdiction over the dispute and barangay conciliation was not a pre-condition for the filing of Civil Case No. U-4359.

x x x."

Mortgage; extrajudicial foreclosure; deficiency judgment allowed - G.R. No. 175816

G.R. No. 175816

"x x x.

The primary issue posed before us is whether or not BPI Family is still entitled to collect the deficiency mortgage obligation from the spouses Avenido in the amount of P455,836.80, plus interest.

We answer in the affirmative.

It is settled that if “the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the deficiency from the debtor. While Act No. 3135, as amended, does not discuss the mortgagee’s right to recover the deficiency, neither does it contain any provision expressly or impliedly prohibiting recovery. If the legislature had intended to deny the creditor the right to sue for any deficiency resulting from the foreclosure of a security given to guarantee an obligation, the law would expressly so provide. Absent such a provision in Act No. 3135, as amended, the creditor is not precluded from taking action to recover any unpaid balance on the principal obligation simply because he chose to extrajudicially foreclose the real estate mortgage.”[20]

It is no longer challenged before us that the outstanding loan obligation of the spouses Avenido amounted to P2,598,452.80, inclusive of interests, penalties, and charges, by March 8, 1999. The controversy herein now only revolves around the value to be attributed to the foreclosed property, which would be applied against the outstanding loan obligation of the spouses Avenido to BPI Family. BPI Family insists that it should beP2,142,616.00, its winning bid price for the foreclosed property at the public auction sale, which, being less than the outstanding loan obligation of the spouses Avenido, will still leave a deficiency collectible by BPI Family from the spouses Avenido in the amount of P455,836.80. The spouses Avenido maintain that, as the RTC and the Court of Appeals ruled, it should be P2,678,270.00, the fair market value of the foreclosed property, which, being more than the outstanding loan obligation of the spouses Avenido, will already fully settle their indebtedness.

The spouses Avenido, the RTC, and the Court of Appeals may not have said it outright, but they actually consider the winning bid of BPI Family for the foreclosed property at the public auction sale to be insufficient. They took exception to the fact that the winning bid of BPI Family was equivalent to “only” 80% of the appraised value of the mortgaged property. The RTC and the Court of Appeals even went as far as to refer to the amount of the winning bid of BPI Family as “nominal” and “unfair” and would “unjustly enrich” the bank at the expense of the spouses Avenido. So the RTC and the Court of Appeals disregarded the winning bid of BPI Family and applied instead the fair market value of the foreclosed property against the outstanding loan obligation of the spouses Avenido.

According to Section 4 of Act No. 3135, an extrajudicial foreclosure sale of a mortgaged real property shall be conducted as follows:

SEC. 4. Public Auction. - The sale shall be made at public auction, between the hours of nine in the morning and four in the afternoon; and shall be under the direction of the sheriff of the province, the justice or auxiliary justice of the peace of the municipality in which such sale has to be made, or a notary public of said municipality, who shall be entitled to collect a fee of five pesos for each day of actual work performed, in addition to his expenses.

Notably, the aforequoted provision does not mention any minimum bid at the public auction sale. There is no legal basis for requiring that the bid should at least be equal to the market value of the foreclosed property or the outstanding obligation of the mortgage debtor.

We have consistently held in previous cases that unlike in an ordinary sale, inadequacy of the price at a forced sale is immaterial and does not nullify the sale. In fact, in a forced sale, a low price is more beneficial to the mortgage debtor for it makes redemption of the property easier.

Section 6 of Act No. 3135 provides for the redemption of an extrajudicially foreclosed property within a one-year period, to wit:

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 any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act. (Emphasis ours.)

Republic Act No. 337, the General Banking Act, as amended, in force at the time of the herein transactions, had a specific provision on the redemption of property extrajudicially foreclosed by banks, which reads:

Sec. 78. Loans against real estate security shall not exceed seventy percent (70%) of the appraised value of the respective real estate security, plus seventy percent (70%) of the appraised value of the insured improvements, and such loans shall not be made unless title to the real estate shall be in the mortgagor. In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan granted before the passage of this Act or under the provisions of this Act, the mortgagor or debtor whose real property has been sold at public auction, judicially or extrajudicially, for the full or partial payment of an obligation to any bank, banking or credit institution, within the purview of this Act shall have the right, within one year after the sale of the real estate as a result of the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed by the court in order of execution, or the amount due under the mortgage deed, as the case may be, with interest thereon at the rate specified in the mortgage, and all the costs, and judicial and other expenses incurred by the bank or institution concerned by reason of the execution and sale and as a result of the custody of said property less the income received from the property. However, the purchaser at the auction sale concerned in a judicial foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale by the court and administer the same in accordance with law. (Emphasis ours.)

If the foreclosed property is registered, the mortgagor has one year within which to redeem the property from and after registration of sale with the Register of Deeds.[21]

We explained in Prudential Bank v. Martinez[22] that:

[T]he fact that the mortgaged property is sold at an amount less than its actual market value should not militate against the right to such recovery. We fail to see any disadvantage going for the mortgagor. On the contrary, a mortgagor stands to gain with a reduced price because he possesses the right of redemption. When there is the right to redeem, inadequacy of price should not be material, because the judgment debtor may reacquire the property or also sell his right to redeem and thus recover the loss he claims to have suffered by the reason of the price obtained at the auction sale. Generally, in forced sales, low prices are usually offered and the mere inadequacy of the price obtained at the sheriff’s sale unless shocking to the conscience will not be sufficient to set aside a sale if there is no showing that in the event of a regular sale, a better price can be obtained.[23] (Citations omitted.)

We elucidated further in New Sampaguita Builders Construction Inc. v. Philippine National Bank[24]that:

In the accessory contract of real mortgage, in which immovable property or real rights thereto are used as security for the fulfillment of the principal loan obligation, the bid price may be lower than the property’s fair market value. In fact, the loan value itself is only 70 percent of the appraised value. As correctly emphasized by the appellate court, a low bid price will make it easier for the owner to effect redemption by subsequently reacquiring the property or by selling the right to redeem and thus recover alleged losses. x x x.[25]

In Hulst v. PR Builders, Inc.,[26] we reiterated that:

[G]ross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of equity, a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one’s conscience as to justify the courts to interfere; such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the lesser the price, the easier it is for the owner to effect redemption. When there is a right to redeem, inadequacy of price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale. Thus, respondent stood to gain rather than be harmed by the low sale value of the auctioned properties because it possesses the right of redemption. x x x.[27]

In line with the foregoing jurisprudence, we refuse to consider the question of sufficiency of the winning bid price of BPI Family for the foreclosed property; and affirm the application of said winning bid in the amount of P2,142,616.00 against the total outstanding loan obligation of the spouses Avenido by March 8, 1999 in the sum of P2,598,452.80, thus, leaving a deficiency of P455,836.80. BPI Family may still collect the said deficiency without violating the principle of unjust enrichment, as opined by the Court of Appeals.

“There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience. Article 22 of the Civil Code provides that every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at another’s expense or damage.”[28] There is no unjust enrichment to speak of in this case. There is strong legal basis for the claim of BPI Family against the spouses Avenido for the deficiency of their loan obligation.

BPI Family made an extrajudicial demand upon the spouses Avenido for the deficiency mortgage obligation in a letter dated July 8, 2000 and received by the spouses Avenido on July 17, 2000. Consequently, we impose the legal interest of 12% per annum on the deficiency mortgage obligation amounting to P455,836.80 from July 17, 2000 until the finality of this Decision. Thereafter, if the amount adjudged remains unpaid, it will be subject to interest at the rate of 12% per annum computed from the time the judgment became final and executory until fully satisfied.

x x x."