SPOUSES REYNALDO AND G.R. No. 154632
ZENAIDA LEONG, RENATO
C. LEONG AND ALFONSO D.
- versus - PUNO, C.J., Chairperson,
LEONARDO-DE CASTRO, JJ.
HON. EDUARDO ISRAEL TANGUANCO, Presiding Judge, Regional Trial Court, Br. 89, Imus, Cavite, BRANCH SHERIFF, Branch 89-RTC, Bacoor, Cavite, and HERMOSA SAVINGS AND LOAN BANK, INC.,
X ---------------------------------------------------------------------------------------- X
In this petition for review on certiorari under Rule 45 of the Rules on Civil Procedure, petitioners seek the reversal of the March 21, 2002 Decision and July 19, 2002 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 54320 dismissing their petition and, in effect, upholding the May 18, 1999 and June 28, 1999 Orders of respondent judge which denied their twin motions to dismiss/suspend proceedings and for consolidation.
Petitioners filed an Opposition with
Urgent Motion to Dismiss/Suspend Proceedings and Motion for Consolidation,
countering that the extrajudicial foreclosure of the real estate mortgages as
well as the subsequent auction sale of the three parcels of land are null and
void. They asserted that the mortgage
contracts, loan agreements, promissory notes and other documents needed to
implement the loan were executed by petitioner Alfonso in favor of Hermosa Bank
without consideration and were absolutely simulated. Petitioners claimed that Alfonso only agreed
to sign the documents upon the insistent prodding of the bank’s president,
Benjamin J. Cruz, that they were needed for purposes only of the Bangko Sentral’s audit of Hermosa
Bank; in truth, the documents were required to cover up the loan of spouses
Rene and Remedios Dado and Sierra Madre Development
Corporation, who are the real debtors of the bank. To bolster their point,
petitioners substantially restated the factual allegations embodied in their
against Hermosa Bank on
Sometime in 1987, plaintiff Alfonso was employed as the
Assistant Vice-President of Asia Trust Development Bank for Countryside
Dado showed a very attractive project study that would
give a minimum potential income of
P50 Million in a year’s
operation. She gave her assurance that
the loan will be paid within a month from the time the stumpage contract is
released and executed by the Natural Resources Development Corporation. Finally,
she offered 30% ownership to the bank which would grant the needed loan.
5. Plaintiff Alfonso agreed to help her secure the necessary loan. They sought the help of defendant Cruz, who is the President and General Manager of Hermosa Bank. Moreover, defendant Cruz is a close friend and “kumpare” of plaintiff Alfonso.
6. During the meeting, Dado laid down her proposal on the intended project to defendant Cruz. Defendant Cruz agreed to extend the needed loan thru defendant Hermosa Bank on the condition that plaintiff Alfonso would act as his nominee in the board of the corporation to represent his 30% holdings.
Dado was able to secure the loan from defendant Hermosa
Bank in the amount of ONE MILLION EIGHT HUNDRED FORTY FIVE THOUSAND PESOS (
Dado was not able to pay the loan when the promissory
notes matured. She requested for another
90 days extension by issuing her personal checks to cover the payment of
interest and penalties thereon. The
maturity dates of the promissory notes were extended to
Plaintiff Alfonso was forced to advance partial payment
in the amount of
interest and penalties, to give Dado more time to pay the loan and to preserve
his good relations with defendant Cruz.
Dado did not pay the loan when it matured. Defendant
Cruz, Dado, and plaintiff Alfonso even met at Sheraton Hotel on
11. Defendant Cruz requested plaintiff Alfonso to do something about Dado’s loan since the audit of the bank by the Central Bank was forthcoming. He asked plaintiff Alfonso to borrow from other banks and apply the proceeds to his loan to pay Dado’s loan. Plaintiff Alfonso ignored such request.
12. In the meantime, plaintiff Alfonso, as Assistant Vice President of Asia Trust, continued to facilitate “buy-back” transactions of government securities between defendant Hermosa Bank and Asia Trust. This involves the sale of government securities with a guarantee from the seller that he will buy-back from the buyer the same securities at a given future date.
Without the knowledge and consent of plaintiff Alfonso,
defendant Cruz [had] been applying the proceeds of the “buy-back” transactions
to pay Dado’s loan. Defendant Cruz and Hermosa Bank
applied Asia Trust Check No. 13842 for
ONE MILLION PESOS (
P1,000,000.00) and Asia Trust Check No. 193669 for
EIGHT HUNDRED FORTY FIVE THOUSAND PESOS ( P845,000.00) to pay Dado’s loan, in full, even before their maturity dates.
Four official receipts were thereafter issued showing that said amounts were
received from “Remedios Dado” x x
14. Plaintiff Alfonso confronted defendant Cruz upon learning that Dado’s loan [had] been paid. He expressed his concern that if Dado discovers that her loan [had] been paid she may not pay it anymore. Defendant Cruz, however, informed him that the payments were necessary only for the purposes of Central Bank audit and that it would only appear in the books of defendant Hermosa Bank. Defendant Cruz, likewise, stated that Dado would not be informed of the same, in order for her and/or Sierra Madre to still be compelled to pay their obligation to defendant Hermosa Bank.
Defendant Hermosa Bank through defendant Cruz then sent
two demand letters to Dado and Sierra Madre on 8 March and
Defendant Cruz later insisted to plaintiff Alfonso that
he should help him with the payment of the loan of defendant Hermosa Bank with
Asia Trust under the “buy back” transactions. The loan by then amounted to
P2,600,000.00. He said that he would make it appear on the
books of defendant Hermosa Bank that plaintiff Alfonso borrowed money from
them. The proceeds of the fictitious loan will then be used to pay the loan
with Asia Trust. He said that this would be for record purposes only until Dado
shall have paid the loan and the Central Bank audit completed.
Plaintiff Alfonso, due to the persistence and
intimidations of defendant Cruz, agreed to his proposal. On
each or a total of TWO MILLION SIX HUNDRED THOUSAND PESOS ( P2,600,000.00),
the approximate amount of the loan with Asia Trust at that time.
Under the fictitious loan agreements, the loans were
supposed to be secured by real estate mortgages particularly Transfer
Certificate of Title Nos. 30740, 225976, 225973 and T-107260, which are all
owned by the plaintiffs. However, at the
same time[,] the plaintiffs have not executed any
mortgage contract. The spaces provided for the payment of interests were
not even filled up. The loan agreements were, likewise, made to appear to have
been executed on
On the same date of
supposedly released to plaintiff Alfonso and/or Carmelita Leong
21. Defendant Cruz prepared two (2) deeds of mortgage and made it appear that it was the security for the two loans. The said mortgage contracts were registered and annotated to the Transfer Certificate of Titles on 15 July 1988 x x x.
On the same day
payable to Asia Trust Bank, as payment of its loan. Defendant Cruz, however,
surreptitiously typed the phrase “FAO: A. C. LEONG” beside the machine printed
name of Asia Trust Bank, without the knowledge and consent of plaintiff Alfonso
x x x.
24. After the said payment, defendant Cruz, in his own behalf and as President of defendant Hermosa Bank, and plaintiff Alfonso executed and signed a “Release and Quitclaim.” Under the deed[,] defendants Hermosa Bank and Cruz and plaintiff Alfonso agreed to mutually hold one another free, harmless and discharged from any and all claims and damages arising from transaction between defendant Hermosa Bank and Asia Trust. The parties[,] in effect[,] discharged plaintiff Alfonso and the other plaintiffs from the loan agreements, the mortgage contracts, and the promissory notes they executed earlier x x x.
25. Defendant Cruz assured the latter that the mortgages and the promissory notes would subsequently be discharged and released as soon as the Central Bank audit of their bank books was over.
Defendant Cruz did not fulfill his promise to plaintiff
Alfonso. The mortgages and promissory notes were not discharged. On
27. On 7 February 1989, plaintiffs filed a complaint [docketed as Civil Case No. 89-3101] with the Regional Trial Court of Makati, Branch 139 (now Branch 63) for discharge of mortgage, annulment of contract, damages, and injunction with prayer for temporary restraining order against Sps. Rene and Remedios Dado, Sierra Madre Forest Development Corporation and Management Corporation, Benjamin J. Cruz, Hermosa Savings and Loan Bank, and the two sheriffs implementing the extra-judicial foreclosure sale.
Hermosa Bank and Cruz, thereafter, filed their answer with a cross-claim
against [cross-defendants] Sps. Dado and Sierra
Madre. Defendants prayed that “in the
event that judgment be rendered nullifying or diminishing the right of
cross-claimant Bank in the
of plaintiffs, cross-defendants Dado and Corporation be ordered to indemnify
cross-claimant Bank therefor.”
The undersigned law firm filed a motion for New Trial
34. Plaintiff Alfonso upon checking with the Register of Deeds of Las Piñas City also found out that title to his property, TCT No. 304740, [had] likewise been cancelled and a new one a [sic] has been issued, TCT No. T-69716, in defendant Hermosa Bank’s name.
35. Plaintiff[,] because of the unjust acts of defendants Cruz and Hermosa Bank in transferring the title of their properties to its name and threatening to oust [them] from their properties[,] decided to withdraw their pending motion for new trial. They instead decided to avail of their right to file the action anew and initiate this complaint before this Honorable Court.
Citing Cometa v. Intermediate Appellate Court, petitioners alleged that before the Cavite RTC could issue a writ of possession, the issues as to the validity of the real estate mortgage contracts, loan agreements, promissory notes, extrajudicial foreclosure and auction sale of the subject properties must first be resolved by the Las Piñas RTC. They averred that their rights in Civil Case No. LP-99-0072 would be greatly and gravely prejudiced and that their claims in said case would be rendered nugatory if the court would allow Hermosa Bank to prematurely take possession of the properties. While petitioners agreed that it is ministerial for the court to issue a writ of possession in favor of the purchaser in a foreclosure sale, they referred to the case of Barican v. Intermediate Appellate Court wherein this Court disposed that the rule is not unqualified if justice and equity would be better served thereby.
Petitioners noted that Hermosa Bank violated their status quo agreement in Civil Case No. 89-3101 before the Makati RTC. They recalled that in said case they prayed for the issuance of a preliminary injunction to enjoin the bank from extrajudicially foreclosing and selling the subject properties at public auction. In the March 20, 1989 hearing, however, Hermosa Bank manifested that the issue on preliminary injunction should be deferred and integrated on the trial on the merits and that, in the meantime, it would be amenable to maintain the status quo. Relying on its statement, petitioners no longer pursued their prayer. But contrary to their accord, Hermosa Bank conducted the public auction while the case was pending and the trial court was yet to render its decision on the merits of the case.
The fact that they did not exercise their right of redemption was not denied by petitioners. Nonetheless, citing again the case of Cometa, they argued that the redemption of the subject properties would be inconsistent with their claim of invalidity of the mortgage contracts, loan agreements and promissory notes, and would mean an implied admission or conformity to the regularity of the extrajudicial foreclosure and auction sales held. In any case, petitioners pointed out that the period of redemption has not even elapsed since, according to Consolidated Bank and Trust Corporation (Solidbank) v. Intermediate Appellate Court, the pendency of an action tolls the term for the exercise of the right of redemption.
Lastly, petitioners posited that the instant case should be dismissed/suspended and consolidated with the civil case pending before the Las Piñas RTC. Taking their cue from Active Wood Products Co., Inc. v. Court of Appeals, they advanced that the consolidation of their case, Civil Case No. LP-99-0072, with Hermosa Bank’s case, LRC Case No. 8843-99-11, is proper since both cases involve a common question of law and fact, with the same parties and subject matter. Aside from avoiding confusion and unnecessary cost and expense, petitioners also opined that the Las Piñas RTC, as a court of general jurisdiction, has broader jurisdiction and competence to rule upon the validity of the mortgage contracts, loan agreements, promissory notes, extrajudicial foreclosure and auction sale. They further asserted that the issues raised in this case would only be determined in an ordinary civil action and not in a summary ex-parte proceeding.
After giving Hermosa Bank the opportunity
to file its Reply to the Opposition, the Cavite RTC
issued its assailed Order on
The factual backgrounds of the Cometa and Barican cases, however, are vastly different from the case at bar.
The Cometa case involved an execution under Rule 39, Section 35 of the Rules of Court and the properties were sold at an unusually lower price than their true value, while in Barican, the mortgagee bank took five years form the time of foreclosure on 10 October 1980 before filing the petition for issuance of writ of possession on 16 August 1985. Earlier, the property had been sold to third parties who assumed the indebtedness of the mortgagor and took possession of the property.
The Supreme Court held that under the circumstances the obligation of the court to issue the writ of possession ceased to be ministerial.
In the case at bar, however, none of these equitable circumstances is present so as to justify making an exception to the rule that the issuance of a writ of possession to a purchaser in an extra judicial foreclosure is ministerial on the part of the court.
The mere pendency of Civil Case No. LP-99-0072 is not sufficient legal ground to justify the non-issuance of a writ of possession in favor of the petitioner.
In the case of Spouses Eduardo Vaca and Ma. Luisita Pilar v. Court of Appeals and Associated Bank (G.R. No. 109672, 14 July 1994), the Supreme Court, citing the earlier cases of Vda. de Jacob v. Court of Appeals (G.R. Nos. 88602 & 89544, 06 April 1990, 184 SCRA 1990) and Navarra v. Court of Appeals (G.R. No. 86237, 17 December 1991, 204 SCRA 850), decreed that the pendency of a separate civil suit questioning the validity of the mortgage or its foreclosure cannot be a legal ground for refusing the issuance of a writ of possession because the same is a ministerial act of the trial court after title has been consolidated in the name of the mortgagee.
Likewise, for obvious reasons, respondents’ prayer for the consolidation of this case with the civil case in Las Piñas is not warranted.
to Section 7 of Act No. 3135, it is this Court which has jurisdiction over this
case considering that the subject parcels of land are all situated in Bacoor,
Petitioners moved to reconsider the
Order but reconsideration was denied;
The motion for reconsideration filed by petitioners was denied; hence, this petition.
Petitioners assert that:
1. The dismissal of the petition under Rule 65 by the CA based on it being moot and academic is patently erroneous;
2. The issues as to the validity of the real estate mortgage contracts, loan agreements, promissory notes, extrajudicial foreclosure and auction sale of petitioners’ properties must first be resolved in the civil case pending in the Las Piñas RTC since the question of whether respondent Hermosa Bank is entitled to a writ of possession in the LRC case is dependent thereon; and that
3. The consolidation and transfer of the title to the subject properties in favor of Hermosa Bank are null and void because the period of redemption is tolled by the pendency of the civil action.
Petitioners contend that the CA was clearly mistaken in hastily concluding that their petition was moot and academic because at the time they filed the petition on August 12, 1999 it still had the opportunity to promptly act on the incident and issue, at the very least, a temporary restraining order to preserve the status quo just in time before the trial court issued the writ of possession a day after. Now, they stress that this Court has the power to correct the CA’s error with our authority to declare the nullity of the questioned orders of the Cavite RTC, which would necessarily remove the legal basis for the issuance of the writ of possession.
It is now prayed for by petitioners that this Court look upon the “iniquitous” situation that they were forced into for being “morally compelled” to execute absolutely simulated loan agreements secured by real estate mortgages. They claim that the mortgage contracts they signed in favor of Hermosa Bank are considered as contracts of adhesion that may be struck down as void and unenforceable since petitioners were deprived of the opportunity to bargain on equal footing. Petitioners assert that they are mere individuals with limited resources compared to the bank which is a corporation with financial means such that what is a question of survival to the former is just a mere bad investment on the part of the latter.
Petitioners insist that their dispossession of the subject properties would bring grave and irreparable injury, a damage that is greater to them than it would cause to Hermosa Bank if the turnover is delayed. They maintain that even without the writ of possession, the right of the bank is protected and secured as the titles to the properties have already been transferred in its name. There is, therefore, no urgent need to evict them and the students of Holy Infant of Jesus High School, Inc., the school building of which also occupied around 538 sq. m. of the litigated lots. In the meantime, petitioners are inviting this Court to give them the opportunity to fully present their claims before the Las Piñas RTC.
Lastly and essentially, petitioners again fervidly invoke this Court’s rulings in Barican, Cometa, Active Wood, and Consolidated Bank cases to support their proposition that courts have the jurisdiction and discretion to stay the writ of possession or declare its issuance as premature, to order the consolidation of cases, and to consider that a pending action tolls the period for the exercise of the right of redemption.
Petitioners have not shown any reversible error on the part of the CA.
As the CA correctly found, the RTC of
This does not, however, preclude petitioners from availing themselves of appropriate remedies depending upon the outcome in the RTC of Las Piñas case.
WHEREFORE, the petition is DENIED.
ADOLFO S. AZCUNA
REYNATO S. PUNO
ANTONIO T. CARPIO RENATO C. CORONA
Associate Justice Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified 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
 Penned by Justice Candido V. Rivera, with Associate Justices Delilah Vidallon-Magtolis and Juan Q. Enriquez, Jr., concurring; CA rollo, pp. 204-209.
 Records, pp. 107-111, 167.
 No. L-69294,
 No. L-79906,
 No. L-73976,
 G.R. No. 86603,
 Records, pp. 107-111.
 CA rollo, pp. 2-21.