FIRST DIVISION
G.R. No. 162032, November 25, 2015
RURAL BANK OF MALASIQUI, INC., Petitioner, v. ROMEO M. CERALDE AND EDUARDO M. CERALDE, JR., Respondent.
D E C I S I O N
BERSAMIN, J.:
This appeal resolves the question of which between the parties - on one hand, the petitioner, the rural bank that foreclosed the mortgage constituted on the agricultural lands earlier expropriated under the land reform program of the State, and acquired the lands under mortgage as the highest bidder in the ensuing foreclosure sale; and, on the other, the respondents, the registered owners and mortgagors of the lands in favor of the petitioner - was entitled to the payment of the just compensation for the lands.
In this suit initiated by the respondents to assert their right to the net value of the just compensations, the petitioner prevailed in the Regional Trial Court (RTC), Branch 57, in San Carlos City, Pangasinan by virtue of the judgment rendered on July 15, 1995 (dismissing the respondents' complaint for lack of cause of action),1 but the Court of Appeals (CA), reversing the judgment of the RTC on appeal through the assailed decision promulgated on April 15, 2003,2 ordered the petitioner instead to pay to the respondents the sum of P119,912.00, plus legal interest reckoned from July 12, 1993, the date when the complaint was filed, representing the net value of the just compensation .
The petitioner is now before the Court to seek the review and reversal of the adverse decision of the CA.
Romeo M. Ceralde and Eduardo M. Ceralde, Jr., are the owners of the parcels of land covered by Transfer Certificate of Title (TCT) Nos. 111647 and 111648 respectively, of the Registry of Deeds of Pangasinan. Under varied dates in the years 1978, 1980, 1981 and 1982, they mortgaged these properties in favor of appellee [R]ural [B]ank of Malasiqui, Inc., as security for agricultural loans they obtained from the bank. At the time, however, the land had already been placed under the coverage of Operation Land Transfer and the corresponding Certificates of Land Transfer were already issued to the tenants thereon. Nevertheless, appellee rural bank, through its president, adviced (sic) mortgagors-appellants to submit an Affidavit of Non-Tenancy, which appellants complied with. The mortgages were then approved by appellee rural bank.3cralawlawlibrary
Appellants assert, in this appeal, that the court a quo committed error in finding them guilty of, or barred by, estoppel. They argue that the rule on estoppel does not apply to them because appellee rural bank was also aware from the beginning that they have tenants on their landholdings used as collateral for their loans. Thus, in granting the loans, appellee rural bank was also in bad faith. Appellant Romeo Ceralde testified that he was told by the president of appellee rural bank that their loan will be granted if he could secure a certificate of non-tenancy from the Municipal Agrarian Reform Leader whose office is just in front of the rural bank. He further testified that their tenants were the ones depositing their harvests in the warehouse owned by Atty. Dolores Acuna, the President of appellee rural bank, apparently to bolster the contention that appellee rural bank was aware that appellants' lands are tenanted.
The other appellant, Eduardo Ceralde, testified also along the same line. These testimonies were not controverted by appellee rural bank which, accordingly, is deemed to have waived its objection thereto. The argument is well taken considering that the rule on estoppel has no application where the knowledge or means of knowledge of both parties is equal, as in the instant case. Appellee is therefore likewise in estoppel. And having performed affirmative acts, advising them to submit certificates of non-tenancy upon which appellants based their subsequent actions, cannot thereafter refute its acts or renege on the effects of the same, to the prejudice of the latter. To allow it to do so would be tantamount to conferring upon it the liberty to limit its liability at its whim and caprice, which is against the very principles of equity and natural justice.
Appellants further asserted that the Court a quo erred in not declaring that the extrajudicial foreclosure by the appellee rural bank of the mortgages on their landholdings is contrary to law and, therefore, void ab initio.
It is undisputed that when informed by appellee rural bank of the impending foreclosure of their mortgages, appellant Romeo Ceralde went to see the manager of appellee rural bank to inform her that the Land Bank of the Philippines will be the one to pay their mortgage obligations. Notwithstanding the information and apparent objection to the impending foreclosure, appellee went ahead with the foreclosure proceedings and. thereafter, sought the registration of the properties in its name. Eventually, appellee sold the same to the tenants for a total sum of P140,000.00, in the process depriving appellants of their right to receive the sum of P119,912.00 representing the net value of their landholdings after deducting the amount of P28,088.00 for which the properties were sold to appellee rural bank at the public auction sale.
Again, appellants' argument appears to be well taken. The pertinent provision of the Agrarian Reform Code provides, as follows:"In the event there is existing lien or encumbrance on the land in favor of any Government lending institution at the time of acquisition by the Bank, the landowner shall be paid the net value of the land (i.e., the value of the land determined under Proclamation No. 27 minus the outstanding balance/s of the obligation/s secured by the line/s or encumbrance/s), and the outstanding balance/s of the obligations to the lending institution/s shall be paid by the Land Bank in Land Bank bonds or other securities existing charters of these institutions to the contrary notwithstanding. A similar settlement may be negotiated by the Land Bank in the case of obligations secured by liens or encumbrances in favor of private parties or institutions." (Underscoring supplied)As stated by the Secretary of Justice in his Opinion No. 92, series of 1978, in a similar case or situation, "the Land Bank is thus charged with the obligation to settle or negotiate the settlement of the obligations secured by the mortgage, lien or encumbrance whether the lender is a government or a private lending institution. This assumes that the right of the mortgagee (appellee) to enforce its lien through foreclosure proceedings against appellants' landholdings no longer subsists." Verily, therefore, appellee violated the law, Section 80 of the Agrarian Reform Code, when it enforced its lien against appellants properties through foreclosure proceedings.
In respect of the lower court's findings that appellants are guilty of laches, the same cannot be allowed to prosper. "The question of laches is addressed to the sound direction of the court and since laches is an equitable doctrine, its application is controlled by equitable considerations. It cannot be applied to defeat justice or to perpetuate fraud." Besides, it appears that the properties were sold or the mortgages foreclosed on 12 July 1983 while the complaint was filed on 12 July 1993. As provided for under Article 1142 of the Civil Code, "A mortgage action prescribes after ten years." Obviously, appellants' right of action has not yet prescribed.
Apparently, as the foregoing discussion indicates the trial court has indeed committed errors which warrant the reversal of its decision in the present aforementioned case.
WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE and a new one ENTERED ordering appellee to pay the appellants the sum of P119,912.00, plus interest at the legal rate computed from 12 July 1993, the time when their complaint was filed.
SO ORDERED.8ChanRoblesVirtualawlibrary
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I
THAT IT WAS ERROR FOR THE COURT OF APPEALS TO RULE THAT PRIVATE RESPONDENTS ARE NOT GUILTY OF LACHES AND ESTOPPEL;II
THAT IT WAS ERROR FOR THE COURT OF APPEALS IN RULING (sic) THAT PETITIONER RURAL BANK VIOLATED THE AGRARIAN LAWS;III
THAT IT WAS ERROR FOR THE COURT OF APPEALS TO DECLARE THAT PRIVATE RESPONDENTS ARE STILL ENTITLED TO BE PAID THE SUM OF P119,912.00 WITH INTEREST WHICH IS THE ALLEGED NET VALUE OF THEIR LANDHOLDINGS.9ChanRoblesVirtualawlibrary
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xxx first, the actor who usually must have knowledge, notice or suspicion of the true facts, communicates something to another in a misleading way, either by words, conduct or silence; second, the other in fact relies, and relies reasonably or justifiably, upon that communication; third, the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct; and fourth, the actor knows, expects or foresees that the other would act upon the information given or that a reasonable person in the actor's position would expect or foresee such action.14cralawlawlibrary
Section 80. Modes of Payment. The Bank shall finance the acquisition of farm lots under any of the following modes of settlement:Section 71 of Republic Act No. 6657 reads:1. Cash payment of 10% and balance in 25-year tax-free 6% Land Bank bonds;
2. Payment of 30% in preferred shares of stock issued by the Bank and balance in 25-year tax-free 6% Land Bank bonds;
3. Full guarantee on the payment of the fifteen (15) equal annual amortizations to be made by the tenant/farmer;
4. Payment through the establishment of annuities or pensions with insurance;
5. Exchange arrangement for government stocks in government-owned controlled corporations or private corporations where the government has holdings;
6. Such other modes of settlement as may be further adopted by the Board of Directors and approved by the President of the Philippines.cralawlawlibrary
In the event there is existing lien or encumbrance on the land in favor of any Government lending institution at the time of acquisition by the Bank, the landowner shall be paid the net value of the land (i.e., the value of the land determined under Proclamation No. 27 minus the outstanding balance/s of the obligation/s secured by the lien/s or encumbrance/s), and the outstanding balance/s of the obligations to the lending institution/s shall be paid by the Land Bank in Land Bank bonds or other securities; existing charters of those institutions to the contrary notwithstanding. A similar settlement may be negotiated by the Land Bank in the case of obligations secured by liens or encumbrances in favor of private parties or institutions.
Whenever the Bank pays the whole or a portion of the total cost of farm lots, the Bank shall be subrogated by reason thereof, to the right of the landowner to collect and receive the yearly amortizations on farm lots or the amount paid including interest thereon, from tenant/farmers in whose favour said farm lots had been transferred pursuant to Presidential Decree No. 27, dated October 21, 1972.
The profits accruing from payment shall be exempt from the tax on capital gains.
Section 71. Bank Mortgages. — Banks and other financial institutions allowed by law to hold mortgage rights or security interests in agricultural lands to secure loans and other obligations of borrowers, may acquire title to these mortgaged properties, regardless of area, subject to existing laws on compulsory transfer of foreclosed assets and acquisition as prescribed under Section 13 of this Act.cralawlawlibrary
a) Whether or not lands covered by P.D. No. 27 may be the object of foreclosure proceedings after October 21, 1972;
b) Whether or not the right of a landowner to receive payment from the Land Bank may be the object of foreclosure proceedings.cralawlawlibrary
I find merit in the position taken by that Ministry that lands covered by P.D. No. 27 may not be the object of foreclosure proceedings after the promulgation of said decree on October 21, 1972. With the peremptory declaration that the tenant farmer "shall be deemed owner" of the land he tills, and the declaration that lands acquired thereunder or under the land reform program of the government "shall not be transferable except by hereditary succession or to the government in accordance with the provisions of the Decree, the Code of Agrarian Reform, and other existing laws and regulations", I believe that whatever right the mortgager has to the property is superseded by the statutory declaration transferring ownership from the mortgagor to the tenant by operation of law. Foreclosure of mortgage is a remedy by which the property covered may be subjected to sale to pay the debt for which the mortgage stands as security, and since the land is by law no longer transferable except to the heirs of the tenant-farmer or to the government, I do not see how the right to foreclose can subsist when the mortgaged property has ceased to be alienable property of the mortgagor, and the property cannot be transferred to the purchaser in the foreclosure proceedings. The situation is analogous to one where the mortgaged property is expropriated before foreclosure takes place, regarding which it has been held that the mortgagee loses his lien upon the expropriated property as "the land taken no longer belongs to the mortgagor, because it has been by virtue of a sovereign power, free of the mortgage", (Chicago v. Salinger, et al. 52 NE 2d-184 [1943]; see also In Re Diliman, 267 NW-623 [1936]; In Re City of Rochester, 32 NE 702 [1892])
This conclusion finds support in the provision of Section 80 of R.A. No. 3844 (Code of Agrarian Reform, as amended by P.D. No. 251), which provides insofar as pertinent:"SEC. 80. Modes of Payment. — The Bank shall finance the acquisition of farm lots under any of the following modes of settlement:chanRoblesvirtualLawlibraryThe Land Bank is thus charged with the obligation to settle, or negotiate the settlement of, the obligations secure by the mortgage, lien or encumbrance whether the lender is a government or a private lending institution. This assumes that the might of the mortgagor to enforce his lien through foreclosure proceedings against the property no longer subsists. I may add that with respect to cases where the mortgage might by now (but after October 21, 1972) have already been foreclosed, the titles of the purchaser at the auction sale having actually been perfected after the redemption period had expired, the foreclosure might have to be set aside through judicial proceedings.
x x x x
"In the event there is existing lien or encumbrance on the land in favor of any Government lending institution at the time of acquisition by the Bank, the landowner shall be paid the net value of the land (i.e., the value of the land determined under Presidential Decree No. 27 minus the outstanding balance/s of the obligation/s secured by the lien/s of encumbrance/s, and the outstanding balance/s of the obligations to the lending institution/s shall be paid by the Land Bank in Land Bank bonds or other securities; existing charters of those institutions to the contrary notwithstanding. A similar settlement may be negotiated by the Land Bank in the case of obligations secured by liens or encumbrances in favor of private parties or institutions.
x x x x
I am aware that a ruling that lands covered by P.D. No. 27 may not be the object of the foreclosure proceedings after the promulgation of said decree on October 21, 1972, would concede that P.D. No. 27 had the effect of impairing the obligation of the duly executed mortgage contracts affecting said lands. There is no question, however, that the land reform program of the government as accelerated under P.D. No. 27 and mandated by the Constitution itself (Act XIV, Sec. 12), was undertaken in the exercise of the police power of the state. It is settled in a long line of decisions of the Supreme Court that the constitutional guaranty of non-impairment of obligations of contract is limited by the exercise of the police power of the state. [Pangasinan Transp. v. P.S.C. 70 Phil. 221 (1940); Phil. American Life Ins. Co. v. The Auditor General 22 SCRA, 135 (1968); De Ramos v. Court of Agrarian Relations, 1-19555, May 29, 1964; Stone v. Mississippi, 101 U.S. 814] One limitation on the contract clause arises from the police power, the reason being that public welfare is superior to private rights. [Since, Phil. Pol. Law, 11th ed. at p. 642] The situation here, is like that in eminent domain proceedings, where the state expropriates private property for public use, and the only condition to be complied with is the payment of just compensation. Technically the condemnation proceedings do not impair the contract on destroy its obligations, but merely appropriate of take it for public use [Long Is. Water Sup. Co. v. Brooklyn, 166 U.S. 635]. As the Land Bank is obliged to setter the obligations secured by the mortgage, the mortgagee is not left without compensation.
The first query is therefore answered in the negative.
Regarding query No. 2, I do not see how foreclosure proceedings can be instituted against the "right of the landowner to receive payment from the Land Bank". As the mortgage had ceased to exist upon the transfer of title to the tenant by virtue of the promulgation of P.D. No. 27 on October 21, 1972, there can be no mortgage to foreclose and therefore no subject for the foreclosure proceedings. Whatever equitable interest the mortgagee has in the land owners' right to receive payment is protected under Section 80, above-quoted, directing the Land Bank to settle existing liens and encumbrances affecting the property.cralawlawlibrary
Endnotes:
* Vice Associate Justice Estela M. Perlas-Bernabe, per Special Order No. 2292 dated November 23, 2015.
1 CA rollo, pp. 39-43.
2Rollo, pp. 28-34; penned by Associate Justice Danilo B. Pine (retired), with Associate Justice Godardo A. Jacinto (retired) and Associate Justice Renato C. Dacudao (retired) concurring.
3 Id. at 28-29.
4 Id. at 29.
5 Id. at 29-30.
6 Supra note 1.
7 Supra note 2.
8 Id. at 30-34.
9Rollo, p. 19.
10Philippine National Bank v. Rucamora, G.R. No. 164549. September 18, 2009, 600 SCRA 395, 411; Cando v. Olazo, G.R. No. 160741, March 22, 2007, 518 SCRA 741, 748; Nunez v. GSIS Family Bank, G.R. No. 163988, November 17, 2005, 475 SCRA 305, 321.
11Rollo, pp. 35-38.
12 Article 1144 of the Civil Code slates:chanRoblesvirtualLawlibrary
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:chanRoblesvirtualLawlibrary
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment, (n)
13Benatira v. Heirs of Evaristo Cuyos, G.R. No. 161220, July 30, 2008, 560 SCRA 478, 503.
14Philippine Bank of Communications v. Court of Appeals, G.R. No. 109803, April 20, 1998, 289 SCRA 178, 185-186, citing Dobbs, Law of Remedies, 2nd ed., [1983], p. 65..
15Rollo, p.31.
16 Records, pp. 3-4 (per the certification issued on July 21, 1986 by the DAR attached to the respondents' complaint).
17 Section 15. Suppletory Application of Existing Legislation. The provisions of Republic Act No. 3844 as amended, Presidential Decree Nos. 27 and 266 as amended, Executive Order Nos. 228 and 229, both Series of 1987; and other laws not inconsistent with this Act shall have suppletory effect.
18 Republic Act No. 3834 - An Act to Amend the Last Paragraph of Section One of Commonwealth Act Numbered Sixty-Three, As Amended, Relating to Loss of Citizenship, June 22, 1963.
19 Presidential Decree No. 316 - Prohibiting the Ejectment of Tenant-Tillers from their Farm Holdings Pending the Promulgation of the Rules and Regulations Implementing Presidential Decree No 27 October 22, 1973.
20 Presidential Decree No. 946 - Reorganizing the Courts of Agrarian Relations, Streamlining their Procedures, and for other purposes, June 17, 1976.
21 Presidential Decree No. 1038 - Strengthening the Security of Tenure of Tenant-Tillers in Non-Rice/Corn Producing Private Agricultural Lands, October 21, 1976.