FIRST DIVISION
G.R. No. 247229, September 03, 2020
LUZ V. FALLARME, PETITIONER, V. ROMEO PAGEDPED, RESPONDENT.
D E C I S I O N
REYES, J. JR., J.:
Before the Court is a petition for review on certiorari seeking the reversal of the Decision1 dated May 2, 2018 and the Resolution2 dated February 14, 2019 of the Court of Appeals (CA) in CA-G.R. CV No. 108155 which granted the appeal and reversed the ruling of the Regional Trial Court (RTC) in Civil Case No.7821-R.
Property claimed by Pagedped
The subject matter of this case is a 1,862-square meter land in Baguio City, formerly covered by Transfer Certificate of Title (TCT) No. T-61200 issued in the name of Spouses Rudy and Nena Avila (Avilas).
On May 2, 1999, the Avilas obtained a P200,000.00 loan from Romeo Pagedped (Pagedped) secured by a real estate mortgage (REM) over the property. The Avilas delivered to Pagedped the owner's duplicate copy of TCT No. T-61200, and the REM was annotated on the title, as Entry No. 257381-29-86 on June 1, 1999.
Upon the failure of the Avilas to settle their obligation despite repeated demands, Pagedped judicially foreclosed the REM and the property was sold at a public auction on October 5, 2005 with Pagedped emerging as the highest bidder. The Sheriff's Certificate of Sale was registered and entered with the Register of Deeds on November 22, 2005 and annotated on TCT No. T-61200, as Entry No. 6809-36-178.
After a year from the time the Sheriff's Certificate of Sale was recorded, Pagedped consolidated his ownership over the parcel of land and was issued TCT No. T-91349 over the same on November 24, 2006, thereby cancelling TCT No. T-61200. All the annotations on TCT No. T-61200 were carried over to TCT No. T-91349.
According to Pagedped, it was only then that he discovered that several annotations were made on TCT No. T-61200 in the name of Fallarme.3
Fallarme's claim to 1/2 A of the property
Luz V. Fallarme (Fallarme) instituted a case before the RTC, docketed as Civil Case No. 5045-R, against the Avilas. A Notice of Attachment dated April 4, 2003 and later a Notice of Levy upon Realty dated May 20, 2005, were issued by the court involving one-half (Yi) portion of the subject parcel of land. The notices were annotated on TCT No. T-61200 as Entry Nos. 14015-33-118 and 590-36-16, respectively.
Subsequently, Fallarme caused the sale at public auction of the Vz portion on July 12, 2005. At the public auction, Fallarme emerged as the highest bidder, for P528,000.00, for which reason, she was issued a Sheriff's Certificate of Sale. The Sheriff's Certificate of Sale was annotated on TCT No. T-61200, on June 9, 2006, as Entry No. 13687-37-108.4
RTC, Baguio City, Branch 6
LRC Adm. Case No. 1967-R
On May 26, 2010, Pagedped filed a petition for the cancellation of all annotations appearing on TCT No. T-91349, docketed as LRC Adm. Case No. 1967-R, before the RTC of Baguio City, Branch 6. Fallarme was joined as a respondent in the case.
In his petition, Pagedped alleged that he was surprised to discover that a Notice of Attachment dated April 4, 2003 and a Notice of Levy upon Realty dated May 20, 2005 by Sheriff Oliver N. Landingin involving the case of Fallarme were annotated at the back of his TCT No. T-91349, and that thereafter a Sheriff's Certificate of Sale dated July 12, 2005 issued by Sheriff Landingin in favor of Fallarme was also registered and entered with the Office of the Register of Deeds on June 9, 2006, and annotated on the same title. Pagedped was neither notified nor impleaded as a party to the foreclosure proceedings initiated by Fallarme, even though the Deed of REM executed in his favor was entered and annotated earlier than Fallarme's. He alleged that Fallarme knew of the encumbrance in his favor as appearing in the title, yet she failed to notify him of her foreclosure to his damage and prejudice.5
WHEREFORE, the instant petition is granted. The Register of Deeds, Baguio City, is directed to cancel Entry No. 14015-33-118 (Notice of Attachment), Entry No. 590-36-16 (Notice of Levy upon realty) and Entry No. 13687-37-108 (Sheriff's Certificate of Sale) in the Transfer Certificate of Title No. T-91349 of the Registry of Deeds of Baguio City in the name of Romeo Pagedped.Fallarme filed a notice of appeal on January 31, 2013, and the case was elevated to the Court of Appeals, docketed as CA-G.R. CV No. 100279.
SO ORDERED.7cralawlawlibrary
WHEREFORE, the appeal is GRANTED. The decision of the Regional Trial Court of Baguio City, Branch 6 dated January 10, 2013 in LRC Case No. 1967-R is REVERSED and SET ASIDE. A new decision is entered DISMISSING the petition for cancellation of encumbrances on Transfer Certificate of Title No. T-91349.The CA, through the Special Sixteenth Division, held that the RTC correctly held that the encumbrances in favor of Fallarme are inferior to that of Pagedped. This is because any subsequent lien annotated at the back of a certificate of title cannot, in any way, prejudice a mortgage previously registered even if the sale took place after the annotation of the subsequent lien or encumbrance. While the subject encumbrances were already existing when the auction sale was held on October 5, 2005, the rights of Pagedped as the original mortgagee and purchaser at the auction sale, takes precedence.
SO ORDERED.9cralawlawlibrary
WHEREFORE, as prayed for, plaintiff Luz Fallarme is hereby declared to be entitled to redeem 1/2 portion of the property registered under Transfer Certificate of Title No. T-91349 of the Register of Deeds of Baguio City from defendant Romeo Pagedped who is hereby given thirty (30) days from notice to claim the consigned redemption price of Phpl88,000.00 from the Office of the Executive Judge through the RTC Clerk of Court and immediately thereafter, surrender the Owner's Duplicate Certificate of the said title to the Register of Deeds of Baguio City for cancellation and for the issuance in lieu thereof, of another title registered in the names of Luz Fallarme and Romeo Pagedped as co-owners of the lot covered by the said title.The RTC, in ruling for Fallarme, held that since she was not joined as a party in the case instituted by Pagedped for the judicial foreclosure of real estate mortgage constituted upon the subject land, her right to redeem the Vi portion thereof as a subordinate lien holder remained unforeclosed and unaffected. The RTC then fixed the redemption price at P188,000.00, representing 1/2 of the purchase price plus 12% annual interest computed from the registration of the foreclosure sale to Romeo on November 22, 2005 to the filing of the instant case on April 18, 2013.
SO ORDERED.13cralawlawlibrary
WHEREFORE, the instant appeal is GRANTED. The assailed Decision of the Regional Trial Court of Baguio City, Branch 7, in Civil Case No. 7821-R, is REVERSED and SET ASIDE. Judgment is rendered dismissing the case.The CA held that since what was involved in this case was a judicial foreclosure of mortgage, there is only equity of redemption in accordance with Rule 68 of the Rules of Court. When Fallarme purchased the 1/2 portion of the subject parcel of land at the execution sale held on July 12, 2006, she acquired the same subject to the encumbrance (real estate mortgage constituted in favor of Pagedped) annotated on TCT No. T-61200 on June 1, 1999. The equity of redemption which Fallarme acquired over the lA portion of the subject land subsequent to the real estate mortgage in favor of Pagedped may be divested or barred only by making Fallarme a party to the proceedings to foreclose.16
SO ORDERED.15cralawlawlibrary
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT PETITIONER FAILED TO INVOKE HER EQUITY OF REDEMPTION SEASONABLY AND IS PRECLUDED FROM DOING SO BECAUSE SHE WITHDREW HER OPPOSITION TO TFIE PETITION OF RESPONDENT FOR THE CANCELLATION OF HER NOTICES OF LEVY AND ATTACHMENTFallarme argues that, contrary to the findings of the CA, she did not withdraw her Opposition to the petition filed by Pagedped, docketed as LRC Adm. Case No. 1967-R. Nowhere in the RTC Decision of Branch 6 did the trial court rule that she waived or abandoned any of her rights which she might have acquired in connection with the encumbrances annotated on the certificate of title issued in Pagedped's name.II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT PETITIONER IS ESTOPPED FROM INVOKING HER EQUITY OF REDEMPTION DESPITE THE ABSENCE OF ANY LEGAL AND FACTUAL BASIS AND DESPITE THE FACT THAT SUCH ISSUE ON ESTOPPEL WAS NOT RAISED BY THE RESPONDENT BEFORE THE TRIAL COURT AND EVEN ON APPEAL.20cralawlawlibrary
Section 1. Complaint in action for foreclosure. — In an action for the foreclosure of a mortgage or other encumbrance upon real estate, the complaint shall set forth the date and due execution of the mortgage; its assignments, if any; the names and residences of the mortgagor and the mortgagee; a description of the mortgaged property; a statement of the date of the note or other documentary evidence of the obligation secured by the mortgage, the amount claimed to be unpaid thereon; and the names and residences of all persons having or claiming an interest in the property subordinate in right to that of the holder of the mortgage, all of whom shall be made defendants in the action, (la)The rules require that all persons having or claiming an interest in the premises subordinate in right to that of the holder of the mortgage should be made defendants in the action for foreclosure. Such requirement for joinder of the person claiming an interest subordinate to the mortgage sought to be foreclosed, however, is not mandatory in character but merely directory, such that failure to comply therewith will not invalidate the foreclosure proceedings.25
". . . If upon the trial ... the court shall find the facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff upon the mortgage debt or obligation, including interest and costs, and shall render judgment to be paid into court within a period of not less than ninety (90) days from the date of the service of such order, and that in default of such payment the property be sold to realize the mortgage debt and costs."Clearly, failure of the mortgagee to join a subordinate lien holder as defendant in the foreclosure proceeding does not nullify the foreclosure proceeding, but kept alive the equity of redemption acquired by said junior lien-holder.
This is the mortgagor's equity (not right) of redemption which, as above stated, may be exercised by him even beyond the 90-day period "from the date of service of the order," and even after the foreclosure sale itself, provided it be before the order of confirmation of the sale. After such order of confirmation, no redemption can be effected any longer.
It is this same equity of redemption that is conferred by law on the mortgagor's successors-in-interest, or third persons acquiring right over the mortgaged property subsequent, and therefore subordinate to the mortgagee's lien [e.g., by second mortgage or subsequent attachment or judgment]. If these subsequent or junior lien-holders be not joined in the foreclosure action, the judgment in the mortgagor's favor is ineffective as to them, of course. In that case, they retain what is known as the "unforeclosed equity of redemption," and a separate foreclosure proceeding should be brought to require them to redeem from the first mortgagee, or the party acquiring title to the mortgaged property at the foreclosure sale, within 90 days, [the period fixed in Section 2, Rule 68 for the mortgagor himself to redeem], under penalty of losing that prerogative to redeem, x x x (Emphasis supplied)
Further, Oppositors Spouses Romeo, Cadias and Victoria Cadias, Oliver Awal, Spouses Julio Labnas, Jr. and Dolores Labnas, Spouses Christopher Caput and Shirdellah Caput, Spouses Ligon Aguinaldo and Brenda Aguinaldo, Spouses Clarito Pacot and Josephine Pacot, Spouses Renato Tapay and Mary Tapay, Spouses Ernesto Wabe and Judith Wabe, Spouses Diego Bilar and Jennelyn Bilar, and Spouses Anton Awal and Laurena Awal filed their opposition on September 27, 2010. The said oppositors acquired through purchase one-half (1/2) portion of the subject property from respondent Luz Fallarme. x x xIn any event, what is clear is that Pagedped has not yet filed a separate foreclosure proceeding to require Fallarme, as subsequent lien holder to redeem from him contested property. What Pagedped filed before RTC Branch 6 in 2010 was a petition for the cancellation of all annotations on his title, TCT No. T-91349.
On October 15, 2010 petitioner filed a Reply to the Opposition of Private Respondent and the Oppositors. In a hearing dated October 26, 2010, the oppositors and the petitioner manifested to settle the matter between them amicably. The parties were given ample time to reach a compromise agreement. Thus, in an Order dated February 7, 2012, on motion of oppositor's counsel, the Opposition was withdrawn.29 (Emphasis supplied)
Endnotes:
1 Penned by Associate Justice Mariflor Punzalan-Castillo and concurred in by Associate Justices Danton Q. Bueser and Henri Jean Paul B. Inting (now a member of this Court); rollo, pp. 20-33.
2 Id. at 34-35.
3 Id. at 22, 38-39.
4 Id. at 21.
5 Id. at 22-23.
6 Id. at 23.
7 Id. at 45.
8 The Decision was penned by Associate Justice Myra V. Garcia-Fernandez and concurred in by Associate Justices Ramon A. Cruz and Maria Elisa Sempio Diy; id. at 46-54.
9 Id. at 53.
10 Id. at 51-53.
11 Id. at 54.
12 Id. at 26.
13See CA Decision, id. at 20-21.
14 Id. at 28.
15 Id. at 33.
16 Id. at 29-30.
17 Id. at 28-32.
18 Id. at 28-31.
19 Id. at 34-35.
20 Id. at 10-11.
21 Id. at 53.
22 Id. at 12-15.
23 Id. at 76-77.
24White Marketing Development Corp. v. Grandwood Furniture & Woodwork, Inc., 800 Phil. 845-859 (2016).
25Looyuko v. Court of Appeals, 413 Phil. 445, 468 (2001).
26 Id.
27 413 Phil. 445 (2001).
28 Id.
29Rollo, p. 42.
30Looyuko v. Court of Appeals, 413 Phil. 445-468 (2001).
31Rollo, p. 54.
32 Id. at 55.chanRoblesvirtualLawlibrary