J.A.B. Bulao & Associates

CASE 2011-0142: BANGKO SENTRAL NG PILIPINAS VS. ORIENT COMMERCIAL BANKING CORPORATION, JOSE C. GO, GEORGE C. GO, VICENTE C. GO, GOTESCO PROPERTIES, INC., GO TONG ELECTRICAL SUPPLY INC., EVER EMPORIUM, INC., EVER GOTESCO RESOURCES AND HOLDINGS INC., GOTESCO  TYAN MING DEVELOPMENT INC., EVERCREST CEBU GOLF   CLUB AND RESORTS, INC., NASUGBU RESORTS INC., GMCC UNITED DEVELOPMENT CORP., GULOD RESORT, INC., OK STAR, EVER PLAZA, INC. AND EVER ELECTRICAL MFG., INC., (G.R. NO. 148383,  29 JUNE 2011, VILLARAMA, JR., J.) SUBJECTS: MOOT AND ACADEMIC CASE; JUDGMENT BASED ON COMPROMISE. (BRIEF TITLE: BANGKO SENTRAL VS. ORIENT COMMERCIAL).

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SUBJECTS/DOCTRINES:

WHAT IS JUDICIAL COMPROMISE AND WHAT ARE ITS EFFECTS.

A JUDICIAL COMPROMISE IS A COMPROMISE AGREEMENT INTENDED TO RESOLVE A MATTER ALREADY UNDER LITIGATION.

IT HAS THE FORCE AND EFFECT OF A JUDGMENT. IT HAS BECOME A JUDGMENT THAT IS SUBJECT TO EXECUTION IN ACCORDANCE WITH THE RULES.

A compromise agreement intended to resolve a matter already under litigation is a judicial compromise.  Having judicial mandate and entered as its determination of the controversy, such judicial compromise has the force and effect of a judgment.  It transcends its identity as a mere contract between the parties, as it becomes a judgment that is subject to execution in accordance with the Rules of Court.^[1][12]

WHAT IS A MOOT AND ACADEMIC CASE?

IT IS A CASE THAT  CEASES TO PRESENT A JUSTICIABLE CONTROVERSY BY VIRTUE OF SUPERVENING EVENTS, SO THAT A DECLARATION THEREON WOULD BE OF NO PRACTICAL USE OR VALUE.

With the final settlement of the claims of petitioner against herein respondents, the issues raised in the present petition regarding the propriety of the issuance of writ of attachment by the trial court and the grave abuse of discretion allegedly committed by the appellate court in reversing the orders of the trial court, have now become moot and academic. “A moot and academic case is one that ceases to present a justiciable controversy by virtue of supervening events, so that a declaration thereon would be of no practical use or value.”^[2][13]  In such cases, there is no actual substantial relief to which petitioner would be entitled to and which would be negated by the dismissal of the petition.^[3][14]

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FIRST DIVISION

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RESOLUTION

VILLARAMA, JR., J.:

          The present petition although captioned as one for certiorari is hereby treated as a petition for review on certiorari under Rule 45, with prayer for issuance of temporary restraining order and writ of preliminary injunction.  It seeks to annul and set aside the June 11, 2001 Decision^[4][1] of the Court of Appeals (CA) in CA-G.R. SP No. 60509.  The CA nullified the writs of preliminary attachment issued by the Regional Trial Court (RTC) ofManila, Branch12 in Civil Case No. 99-95993 and ordered the dismissal of the amended complaint as against some of the named defendants.

          Briefly, the facts as set forth in the CA Decision:

          On February 13, 1998, herein respondent Orient Commercial Banking Corporation (OCBC) declared a bank holiday on account of its inability to pay all its obligations to depositors, creditors and petitioner Bangko Sentral ng Pilipinas (BSP). 

          On March 17, 1998, OCBC filed a petition for rehabilitation with the Monetary Board. The bank was placed under receivership and the Philippine Deposit Insurance Corporation (PDIC) was designated as Receiver.  Pursuant to the Monetary Board’s Resolution No. 1427, PDIC took over all the assets, properties, obligations and operations of OCBC.  Respondent Jose C. Go, the principal and biggest stockholder of OCBC, with his affiliate companies (respondent corporations), challenged the said action of the PDIC before the RTC of Manila, Branch 44 (Civil Case No. 98-91265). Said case was dismissed and the dismissal was appealed to the CA.

          During the pendency of Civil Case No. 98-91265, the Monetary Board adopted Resolution No. 602 dated May 7, 1999 directing the Receiver to proceed with the liquidation of OCBC.  In June, 1999, the PDIC instituted Special Proceeding No. 99-94328 before the RTC of Manila, Branch 51 entitled “In Re: Petition for Assistance in the Liquidation of Orient Commercial Banking Corporation, Philippine Deposit Insurance Corporation,  Petitioner”.

          On December 17, 1999, petitioner filed in the RTC of Manila (Branch 12) a complaint for sum of money with preliminary attachment (Civil Case No. 99-95993) against the respondents seeking to recover deficiency obligation owed by OCBC which then stood at P1,273,959,042.97 with interest at 8.894 %  per annum, overdraft obligation of P1,028,000,000.00, attorney’s fees and costs of suit.

          On January 14, 2000, the RTC of Manila, Branch 12 issued an Order^[5][2] in Civil Case No. 99-95993 granting petitioner’s motion for preliminary attachment.  On January 19, 2000, following the posting by petitioner of P50 million attachment bond issued by the Government Service Insurance System (GSIS), the corresponding writ was issued ordering the Deputy Sheriffs to attach the real and personal properties of respondents to the value of petitioner’s demand in the amount of P2,301,951,042.97, exclusive of interests and costs, as security for the said claim.^[6][3]

          Respondents filed with the CA a petition for certiorari questioning the aforesaid orders (CA-G.R. SP No. 60509). They also filed a consolidated motion to dismiss Civil Case No. 99-95993, which the trial court denied.^[7][4]

          On June 1, 2001, respondents filed an Urgent Motion to Resolve and/or to Issue a Temporary Restraining Order or a Writ of Preliminary Injunction. On June 11, 2001, the CA rendered the assailed decision dissolving the writ of attachment and ordering the RTC to desist from proceeding with Civil Case No. 99-95993 as against the respondents except Jose C. Go, Vicente C. Go and George C. Go.  It appears, however, that a Manifestation with Motion to Admit Attached Opposition (to the Urgent Motion to Resolve and Issue a Temporary Restraining Order)^[8][5] was filed by petitioner on June 6, 2001.

          On June 27, 2001, petitioner filed a Very Urgent Manifestation^[9][6] stating that: (1) the June 11, 2001 decision had to await finality as it was rendered without requiring the petitioner to file its comment, and because the complaint was dismissed despite massive evidence presented before the trial court on the participation of respondents in the commission of fraud against BSP; (2) of the total outstanding amount of P2,301,959,042.97 being collected by petitioner from the respondents, only P200 million was garnished and it is doubtful if the taxpayers’ interest can be satisfied there being no assets that can be found in the name of respondents and no assets of OCBC were levied or garnished; and (3) petitioner had filed a Vigorous Opposition before the trial court as the respondents are prematurely implementing the CA decision, even as the petitioner still can elevate the case to this Court.

          On July 2, 2001, the CA recalled its June 11, 2001 decision and granted a ten-day period for petitioner to file its comment.  The ponente likewise inhibited himself from the case.^[10][7]

          On July 3, 2001, BSP filed the instant petition with the following prayer:

WHEREFORE, it is respectfully prayed that this Honorable Court:

1. Give due course to this petition.

2.  Upon its filing and, before the application for the issuance of a writ of preliminary injunction is heard, order the issuance of a temporary restraining order immediately restraining the respondents from proceeding in any manner with the enforcement of the assailed decision [dated] June 11,2001 inCA-G.R. SP No. 60509 until this petition is resolved with finality.

3.  After hearing the application, order the issuance of a writ of preliminary injunction restraining the respondents from proceeding in any manner with the enforcement of the assailed decision June 11,2001 inCA-G.R. SP No. 60509 until the instant case shall have been adjudicated on its merits.

4.  After hearing the instant case on its merits, order that the writ of preliminary injunction be made permanent, nullifying the assailed decision [dated] June 11, 2001 inCA-G.R. SP No. 60509 which is sought to be reviewed and directing the resumption of the proceedings in Civil Case No. 99-95993.^[11][8]

Respondents moved to dismiss the petition on grounds of forum shopping and submission of a defective certificate of non-forum shopping. Subsequently, petitioner filed an Omnibus Motion for clarification and for leave of court to admit comment on the motion to dismiss, to which the respondents filed their opposition.  On February 22, 2002, respondents’ Comment was filed and petitioner filed its Reply on July 2, 2002.  On January 31, 2003, respondents filed an Urgent Motion to Lift, Quash and Dissolve the Writ of Preliminary Attachment Against the Properties of the Respondents Except Orient Commercial Banking Corporation.  Petitioner filed its comment on the said motion on May 5, 2003.^[12][9]

On January 5, 2004, petitioner filed a manifestation informing this Court that on December 16, 2003, the parties have agreed to settle their differences and executed a Compromise Agreement, which was approved by the RTC of Manila, Branch 12 on December 29, 2003.  Attached to the said manifestation is the motion to approve judgment based on compromise agreement and the trial court’s Order approving the same.^[13][10]

Under the Compromise Agreement, the parties agreed to cause the dismissal of nineteen (19) pending civil cases in various courts, including the present case before this Court, CA-G.R. SP No. 60509 and Civil Case No. 95-95993, inconsideration for the faithful compliance by the respondents of the agreed terms and conditions of payment of the total deficiency obligation of OCBC to petitioner amounting to Two Billion Nine Hundred Seventy-Four Million Nine Hundred Three Thousand Pesos (P2,974,903,000.00).  Said outstanding indebtedness of OCBC is to be settled in the following manner:

A.    A downpayment shall be made by the defendants through the DACION of certain real estate properties more particularly described in Annex “B” hereof.

a i)    The parties shall execute separate DEEDS OF DACION over the real estate properties described in Annex “B” upon the execution of the Agreement;

a ii)    All Capital Gains Tax on the properties for DACION shall be payable by the defendants but Documentary Stamp Tax, Transfer Tax and all registration fees on the DACION shall for the account of plaintiff.

B.     The balance remaining after the DACION of the real estate  properties shall be paid by the defendants within a period of ten (10) years but extendible for another five (5) years provided that the defendants shall religiously comply with the amortization schedule (Annex “C” hereof) for a continuous period of two (2) years from date of first amortization.

b i) The foregoing outstanding balance shall be charged interest at 91-day T-bill rate upon execution of this Compromise Agreement repriced every three (3) months for a period of 10 years and payable monthly in arrears.

C.     Additional Properties for Execution

c i)    To ensure payment of the monthly amortizations due under this Compromise Agreement, defendants Ever Crest Golf Club Resort, Inc. and Mega Heights, Inc. have agreed to have its real properties with improvements covered by TCT Nos. T-68963, T-68964, T-68966 and TDs ARPN-AA-17023-00582 and AA-17023-0058 shall be subject of existing writ of attachment to secure the faithful payment of the outstanding obligation herein mentioned, until such obligation shall have been fully paid by defendants to plaintiff.

c ii) That all the corporate approvals for the execution of this Compromise Agreement by Ever Crest Golf Club Resort, Inc. and Mega Heights, Inc. consisting of stockholders resolution and Board of Directors approval have already been obtained at the time of the execution of this Agreement.

c iii)   Failure on the part of the defendants to fully settle their outstanding obligations and to comply with any of the terms of this Compromise Agreement shall entitle the plaintiff to immediately ask for a Writ of Execution against all assets of the Ever Crest Golf Club Resort, Inc. and Mega Heights, Inc. now or hereafter arising from the signing of this Compromise Agreement.

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III. FUNDS UNDER GARNISHMENT

III i)  The parties agreed that the existing funds under garnishment with Land Bank of thePhilippinesand PCI-Equitable Bank shall be subject of the following disposition:

(a)          75% of the total garnished amounts shall be released to defendants net of reimbursement for the expenses incurred by plaintiff involving the prosecution of this case with RTC-Manila, Branch 12 prior to the execution date of this Compromise Agreement.

(b)         25% of the total garnished amounts shall be paid and applied to defendants’ amortizations per Annex “C”.

III ii)  Insofar as the garnishments on the  rentals and all other income or revenues on the malls owned and operated by the defendants, the same shall continue to guarantee the stipulated amortization due from the defendants per the amortization schedule.^[14][11]

          A compromise agreement intended to resolve a matter already under litigation is a judicial compromise.  Having judicial mandate and entered as its determination of the controversy, such judicial compromise has the force and effect of a judgment.  It transcends its identity as a mere contract between the parties, as it becomes a judgment that is subject to execution in accordance with the Rules of Court.^[15][12]

          With the final settlement of the claims of petitioner against herein respondents, the issues raised in the present petition regarding the propriety of the issuance of writ of attachment by the trial court and the grave abuse of discretion allegedly committed by the appellate court in reversing the orders of the trial court, have now become moot and academic. “A moot and academic case is one that ceases to present a justiciable controversy by virtue of supervening events, so that a declaration thereon would be of no practical use or value.”^[16][13]  In such cases, there is no actual substantial relief to which petitioner would be entitled to and which would be negated by the dismissal of the petition.^[17][14]

          WHEREFORE, the petition is DENIED for being moot and academic.   The case is hereby REMANDED to the Regional Trial Court of Manila, Branch 12 for continuation of proceedings to implement the Compromise Agreement in Civil Case No. 99-95993 dated December 22, 2003 approved by said court on December 29, 2003.

          No costs.

SO ORDERED.

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

CASE 2012-0037: JAIME S. PEREZ, BOTH IN HIS PERSONAL AND OFFICIAL CAPACITY AS CHIEF, MARIKINA DEMOLITION OFFICE VS. SPOUSES FORTUNITO L. MADRONA AND YOLANDA B. PANTE (G.R. NO. 184478, MARCH 21, 2012, VILLARAMA, JR., J.) SUBJECT/S: REQUISITES FOR ISSUANCE OF INJUNCTION; NUISANCE PER SE AND NUISANCE PER ACCIDENS; CITY GOVT CANNOT JUST DEMOLISH A FENCE. IT MUST GO TO COURT.  (BRIEF TITLE: PEREZ VS. SPOUSES MADRONA)

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DISPOSITIVE:

          WHEREFORE, the March 31, 2008 Decision and September 10, 2008 Resolution of the Court of Appeals in CA-G.R. CV. No. 83675 are AFFIRMED with MODIFICATION.  Petitioner Jaime S. Perez, Chief of the Demolition Office of Marikina City is ORDERED to pay respondent Spouses Fortunito L. Madrona and Yolanda B. Pante moral damages in the amount of P10,000.00 and exemplary damages in the amount of P5,000.00.

SO ORDERED.

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FIRST DIVISION

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DECISION

VILLARAMA, JR., J.:

Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, seeking to set aside the March 31, 2008 Decision^[1][1] and September 10, 2008 Resolution^[2][2] of the Court of Appeals (CA) in CA-G.R. CV. No. 83675.  The CA affirmed in toto the Decision^[3][3] of the Regional Trial Court (RTC) ofMarikinaCity, Branch 192 granting respondents’ prayer for injunction against petitioner.

The antecedents follow:

Respondent-spouses Fortunito Madrona and Yolanda B. Pante are registered owners of a residential property located in Lot 22, Block 5, France Streetcorner Italy Street, Greenheights Subdivision, Phase II, MarikinaCityand covered by Transfer Certificate of Title No. 169365^[4][4] of the Registry of Deeds of Marikina.  In 1989, respondents built their house thereon and enclosed it with a concrete fence and steel gate.

In 1999, respondents received the following letter datedMay 25, 1999from petitioner Jaime S. Perez, Chief of the Marikina Demolition Office:

Owner Judge F.L. Madrona

Lot22 B. 5 Phase II

GreenHeights[,Concepcion,]MarikinaCity

G./ Gng. F.L. Madrona[:]

            Ito po ay may kinalaman sa bahay/istruktura na inyong itinayo sa (naturang lugar), Marikina, Kalakhang Maynila.

Bakod umusli sa Bangketa

            Ang naturang pagtatayo ng bahay/istruktura ay isang paglabag sa umiiral na batas/programa na ipatutupad ng Pamahalaang Bayan ng Marikina na nauukol sa:

            [ü]  PD 1096

                    (NationalBuildingCode of thePhilippines)

            [   ] PD 772

                                     (Anti-Squatting Law)

            [ü] Programa sa Kalinisan at Disiplina sa Bangketa

            [   ] RA 7279

                                     (Urban Development and Housing Act of 1992)

            [   ] PD 296

                                     (Encroachment on rivers, esteros, drainage channels and other

                     waterways)

            [ü] RA 917 as amended by Section 23, PD. No. 17, DO No. 4

                                     Series of 1987

                    (Illegally occupied/constructed improvements within the road

                      right-of-way)

            Dahil po dito, kayo ay binibigyan ng taning na Pitong (7) araw simula sa pagkatanggap ng sulat na ito para kusang alisin ang inyong istruktura. Ang hindi ninyo pagsunod sa ipinag-uutos na ito ay magbubunsod sa amin upang gumawa ng kaukulang hakbang na naa[a]yon sa itinatadhana ng Batas.

            Sa inyong kaalaman, panuntuan at pagtalima.

                                                                        Lubos na gumagalang,

                                                                                    (Sgd.)

                                                                           JAIME S. PEREZ

                                                                              Tagapamahala

                                                                    MarikinaDemolition Office^[5][5]

          As response, respondent Madrona sent petitioner a three-page letter^[6][6] dated June 8, 1999 stating that the May 25, 1999 letter (1) contained an accusation libelous in nature as it is condemning him and his property without due process; (2) has no basis and authority since there is no court order authorizing him to demolish their structure; (3) cited legal bases which do not expressly give petitioner authority to demolish; and (4) contained a false accusation since their fence did not in fact extend to the sidewalk.

          On June 9, 1999, respondents received a letter^[7][7] from petitioner requesting them to provide his office a copy of the relocation survey on the subject property.  Respondents, however, did not oblige because it was as if petitioner was fishing evidence from them.

          More than a year later or on February 28, 2001, petitioner sent another letter^[8][8] with the same contents as the May 25, 1999 letter but this time giving respondents ten days from receipt thereof to remove the structure allegedly protruding to the sidewalk.  This prompted respondents to file a complaint^[9][9] for injunction before the Marikina City RTC onMarch 12, 2001.

          In respondents’ injunction complaint, they alleged that (1) petitioner’s letters made it appear that their fence was encroaching on the sidewalk and directed them to remove it, otherwise he would take the corresponding action; (2) petitioner’s threat of action would be damaging and adverse to respondents and appears real, earnest and imminent; (3) the removal of their fence, which would include the main gate, would certainly expose the premises and its occupants to intruders or third persons; (4) petitioner has no legal authority to demolish structures in private properties and the laws he cited in his letters do not give him any authority to do so; (5) respondents enjoy the legal presumption of rightful possession of every inch of their property; (6) if petitioner accuses them of erroneous possession, he should so prove only through the proper forum which is the courts; (7) their fence is beside the sidewalk and the land on which it stands has never been the subject of acquisition either by negotiation or expropriation from the government; (8) petitioner’s intended act of demolition even in the guise of a road right of way has no factual or legal basis since there is no existing infrastructure project of the national government or Marikina City government;  and (9) petitioner’s letter and his intended act of demolition are malicious, unfounded, meant only to harass respondents in gross violation of their rights and in excess and outside the scope of his authority, thereby rendering him accountable both in his personal and official capacity.

          Respondents likewise sought the issuance of a temporary restraining order (TRO) and a writ of preliminary injunction to enjoin petitioner and all persons acting under him from doing any act of demolition on their property and that after trial, the injunction be made permanent.  They also prayed for moral and exemplary damages and attorney’s fees.

          On March 14, 2001, petitioner was served the corresponding summons.^[10][10]

          On March 16, 2001, the RTC issued a TRO against petitioner.^[11][11]

          On March 29, 2001, petitioner filed an Urgent Ex Parte Motion for Extension to File Answer^[12][12] until April 13, 2001.  It appears however that petitioner’s counsel failed to file an Answer within the extended period requested.  Thus, on motion^[13][13] of respondents, petitioner was declared in default on July 13, 2001.^[14][14]

          On July 25, 2001, petitioner filed a Motion to Lift Order of Default (with Ex-Parte Motion to Admit Answer and Notice Entry of Appearance).^[15][15] According to petitioner’s new counsel, an answer was not filed due to the former counsel’s voluminous work load as lone lawyer in the City Legal Office.

          On December 10, 2001, the RTC issued an Order^[16][16] denying the motion to lift the order of default.  Aside from finding that the motion failed to include a notice of hearing, the RTC also held that the alleged cause of delay is not excusable as voluminous work load of the counsel cannot justify the disregard of court processes or failure to abide by the period fixed by the rules and since the delay consisted not only a few days but over a hundred and three days.  Petitioner moved to reconsider the order but the same was denied by the RTC in its March 6, 2002 Order.^[17][17]

          Petitioner thereafter filed a petition for certiorari^[18][18] before the CA assailing the default order.  Thus, on April 18, 2002, the RTC issued an order suspending the proceedings of the injunction case “until such time when the Petition for Certiorari shall have been disposed of with finality.”^[19][19]

On August 20, 2002, the CA rendered a decision^[20][20] dismissing the petition for certiorari for lack of merit.  Petitioner moved to reconsider the appellate court’s decision, but the motion was denied by Resolution^[21][21] datedJanuary 30, 2003.

On September 15, 2003, the RTC issued an Order^[22][22] dismissing the injunction complaint without prejudice.  It held that respondents “have not instituted any action before th[e] Court showing that they are still interested in further prosecuting th[e] case” and “[i]n accordance with Section 3, Rule 17 of the Rules of Court, the Court is constrained to dismiss the complaint for failure of [respondents] to prosecute their complaint for an unreasonable length of time.”  However, upon motion of respondents, the dismissal order was set aside and the complaint was reinstated by Order^[23][23] dated December 3, 2003.  The RTC agreed with the observation of respondents that it was the court which suspended the proceedings in the injunction case pending final disposition of the petition for certiorari before the CA, and when the RTC issued the dismissal order, there was yet no entry of judgment from the CA and so it cannot be said that the petition was already “disposed of with finality.”  Respondents were then allowed to present their evidence ex parte before the branch clerk of court.

On July 27, 2004, the RTC rendered a Decision^[24][24] in favor of respondents.  The fallo of the RTC decision reads:

            WHEREFORE, Judgment is hereby rendered in favor of the plaintiffs. As prayed for, defendant Jaime S. Perez, Chief of the Demolition Office of Marikina City, or any person acting for and in his behalf as well as the successors to his office, is permanently enjoined from performing any act which would tend to destroy or demolish the perimeter fence and steel gate of the plaintiffs’ property situated at Lot 22, Block 5,France StreetcornerItaly Street, Phase II, Greenheights Subdivision,Concepcion,MarikinaCity.

            Defendant is further ordered to pay the amount of Twenty Thousand (P20,000.00) Pesos as attorney’s fees and Five Thousand (P5,000.00) Pesos for the costs of suit.^[25][25]

The RTC held that respondents, being lawful owners of the subject property, are entitled to the peaceful and open possession of every inch of their property and petitioner’s threat to demolish the concrete fence around their property is tantamount to a violation of their rights as property owners who are entitled to protection under the Constitution and laws.  The RTC also ruled that there is no showing that respondents’ fence is a nuisance per se and presents an immediate danger to the community’s welfare, nor is there basis for petitioner’s claim that the fence has encroached on the sidewalk as to justify its summary demolition.

Petitioner appealed the RTC decision to the CA.  OnMarch 31, 2008, the appellate court rendered the assailed decision affirming the RTC decision.

Hence this petition based on the following grounds:

I.

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN AFFIRMING THE ACTION OF THELOWER COURTIN REINSTATING/REVIVING THE COMPLAINT FILED BY THE RESPONDENTS.

II.

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN AFFIRMING THE RULING OF THELOWER COURTTHAT THE RESPONDENTS ARE ENTITLED TO PERMANENT INJUNCTION, THEREBY RESTRAINING THE PETITIONER OR ANYONE ACTING FOR AND ON HIS BEHALF FROM CARRYING OUT THE THREATENED DEMOLITION OF THEIR PERIMETER FENCE AND STEEL GATE.

III.

THE COURT OF APPEALS COMMITTED A REVERSIBLE [ERROR] IN AFFIRMING THE RULING OF THE LOWER COURT ORDERING THE PETITIONER TO PAY THE RESPONDENTS THE AMOUNTS OF TWENTY THOUSAND PESOS (P20,000.00) AS ATTORNEY’S FEES AND FIVE THOUSAND PESOS (P5,000.00) AS COSTS OF SUIT.^[26][26]

          Essentially, the issues to be resolved in the instant case are: (1) Did the trial court err in reinstating the complaint of respondents? (2) Are the requisites for the issuance of a writ of injunction present? and (3) Is petitioner liable to pay attorney’s fees and costs of suit?

Petitioner argues that there was express admission of negligence by respondents and therefore, reinstatement of their dismissed complaint was not justified.

We disagree.

A perusal of the respondents’ motion for reconsideration^[27][27] of the order of dismissal reveals that there was no admission of negligence by respondents, either express or implied.  Respondents only contended that (1) they were under the impression that it would be the RTC which would issue the order to continue the proceedings once it considers that the petition before the CA had already been disposed of with finality, and (2) their counsel’s records do not show that the CA had already issued an entry of judgment at the time the dismissal order was issued.  They also only stated that they followed up with the CA the issuance of the entry of judgment but they were just told to wait for its delivery by mail.  Petitioner’s imputation that respondents expressly admitted negligence is therefore clearly unfounded. 

Additionally, as correctly found by both the RTC and the CA, it did not appear that respondent lost interest in prosecuting their case nor was their counsel negligent in handling it.  Accordingly, there was no basis for the dismissal order and reinstatement of respondents’ complaint was justified.

As to the propriety of the issuance of the writ of injunction, petitioner claims that the requisites therefor are not present in the instant case.  Petitioner contends that service of a mere notice cannot be construed as an invasion of a right and only presupposes the giving of an opportunity to be heard before any action could be taken.  He also claims that it is clear from the records of the case that respondents’ concrete fence was constructed on a part of the sidewalk in gross violation of existing laws and ordinance and thus, they do not have absolute right over the same.  According to petitioner, the encroachment is clearly apparent in the Sketch Plan of the government geodetic engineer as compared to the Location Plan attached to respondents’ complaint.  He likewise contends that the clearing of the sidewalks is an infrastructure project of the Marikina City Government and cannot be restrained by the courts as provided in Presidential Decree No. 1818.^[28][28]  Lastly, petitioner points out that the trial court should not have merely relied on the testimonies of respondents alleging that his men were already in the subdivision and destroying properties on other streets to prove that there was urgent necessity for the issuance of the writ.

We disagree.

For injunction to issue, two requisites must concur: first, there must be a right to be protected and second, the acts against which the injunction is to be directed are violative of said right.^[29][29]  Here, the two requisites are clearly present: there is a right to be protected, that is, respondents’ right over their concrete fence which cannot be removed without due process; and the act, the summary demolition of the concrete fence, against which the injunction is directed, would violate said right. 

If petitioner indeed found respondents’ fence to have encroached on the sidewalk, his remedy is not to demolish the same summarily after respondents failed to heed his request to remove it.  Instead, he should go to court and prove respondents’ supposed violations in the construction of the concrete fence.  Indeed, unless a thing is a nuisance per se, it may not be abated summarily without judicial intervention.^[30][30]  Our ruling in Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc., on the need for judicial intervention when the nuisance is not a nuisance per se, is well worth mentioning. In said case, we ruled:

Respondents can not seek cover under the general welfare clause authorizing the abatement of nuisances without judicial proceedings.  That tenet applies to a nuisance per se, or one which affects the immediate safety of persons and property and may be summarily abated under the undefined law of necessity (Monteverde v. Generoso, 52 Phil. 123 [1982]).  The storage of copra in the quonset building is a legitimate business.  By its nature, it can not be said to be injurious to rights of property, of health or of comfort of the community.  If it be a nuisance per accidens it may be so proven in a hearing conducted for that purpose.  It is not per se a nuisance warranting its summary abatement without judicial intervention. [Underscoring supplied.]

In Pampanga Bus Co., Inc. v. Municipality of Tarlac where the appellant-municipality similarly argued that the terminal involved therein is a nuisance that may be abated by the Municipal Council via an ordinance, this Court held: “Suffice it to say that in the abatement of nuisances the provisions of the Civil Code (Articles 694-707) must be observed and followed.  This appellant failed to do.”^[31][31]

          Respondents’ fence is not a nuisance per se.  By its nature, it is not injurious to the health or comfort of the community.  It was built primarily to secure the property of respondents and prevent intruders from entering it. And as correctly pointed out by respondents, the sidewalk still exists.  If petitioner believes that respondents’ fence indeed encroaches on the sidewalk, it may be so proven in a hearing conducted for that purpose.  Not being a nuisance per se, but at most a nuisance per accidens, its summary abatement without judicial intervention is unwarranted.

          Regarding the third issue, petitioner argues that he was just performing his duties and as public officer, he is entitled to the presumption of regularity in the performance of his official functions.  Unless there is clear proof that he acted beyond his authority or in evident malice or bad faith, he contends that he cannot be held liable for attorney’s fees and costs of suit.

          Respondents, for their part, counter that the presumption of regularity has been negated by the fact that despite their reply to the first notice, which put petitioner on notice that what he was doing was ultra vires, he still reiterated his earlier demand and threat of demolition.  Having been warned by respondents that his acts were in fact violations of law, petitioner should have been more circumspect in his actions and should have pursued the proper remedies that were more in consonance with the dictates of due process.  Respondents further pray for moral damages for the serious anxieties and sleepless nights they suffered and exemplary damages to serve as an example to other public officials that they should be more circumspect in the performance of their duties.

          We agree with respondents.

          As respondents were forced to file a case against petitioner to enjoin the impending demolition of their property, the award of attorney’s fees and costs of suit is justified.  Clearly, respondents wanted to settle the problem on their alleged encroachment without resorting to court processes when they replied by letter after receiving petitioner’s first notice.  Petitioner, however, instead of considering the points raised in respondents’ reply-letter, required them to submit the relocation plan as if he wants respondents to prove that they are not encroaching on the sidewalk even if it was he who made the accusation of violation in the first place.  And when he did not get the “proof” he was requiring from respondents, he again sent a notice with a threat of summary demolition.  This gave respondents no other choice but to file an injunction complaint against petitioner to protect their rights.

With regard to respondents’ claim for moral damages, this Court rules that they are entitled thereto in the amount of P10,000.00 pursuant to Article 2217^[32][32] of the Civil Code.  As testified to by respondents, they suffered anxiety and sleepless nights since they were worried what would happen to their children who were left by themselves in their Marikina residence while they were in Ormoc City if petitioner would make real his threat of demolition on their fence.

We likewise hold that respondents are entitled to exemplary damages in the amount of P5,000.00 to serve as an example to other public officials that they should be more circumspect in the performance of their duties.

          WHEREFORE, the March 31, 2008 Decision and September 10, 2008 Resolution of the Court of Appeals in CA-G.R. CV. No. 83675 are AFFIRMED with MODIFICATION.  Petitioner Jaime S. Perez, Chief of the Demolition Office of Marikina City is ORDERED to pay respondent Spouses Fortunito L. Madrona and Yolanda B. Pante moral damages in the amount of P10,000.00 and exemplary damages in the amount of P5,000.00.

SO ORDERED.

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

CASE 2011-0140:  SPOUSES WILFREDO PALADA AND  BRIGIDA PALADA VS. SOLIDBANK CORPORATION AND SHERIFF MAYO DELA CRUZ (G.R. NO. 172227, 29 JUNE 2011,  DEL CASTILLO, J.) SUBJECTS: VALIDITY OF REAL ESTATE MORTGAGE; NOTARIZED DOCUMENT. (BRIEF TITLE: SPOUSE PALADA VS. SOLIDBANK).

==================================== 

SUBJECTS/DOCTRINES:

Likewise flawed is petitioners’ reasoning that TCT Nos. T-225131 and T-225132 could not have been included in the list of properties mortgaged as these were still mortgaged with the PNB at that time.  Under our laws, a mortgagor is allowed to take a second or subsequent mortgage on a property already mortgaged, subject to the prior rights of the previous mortgages.^[1][40]

XXXXXXXXXXXXXXXXXXXXXX

As to the RTC’s finding that “the x x x bank acted in bad faith when it made it appear that the mortgage was executed by the [petitioners] on June 16, 1997, when the document was acknowledged before Atty. German, x x x when in truth and in fact, the [petitioners] executed said mortgage sometime in March, 1997 x x x,” we find the same without basis.  A careful perusal of the real estate mortgage contract would show that the bank did not make it appear that the real estate mortgage was executed on June 16, 1997, the same day that it was notarized, as the date of execution of the real estate mortgage contract was left blank.^[2][41]  And the mere fact that the date of execution was left blank does not prove bad faith.  Besides, any irregularity in the notarization or even the lack of notarization does not affect the validity of the document.  Absent any clear and convincing proof to the contrary, a notarized document enjoys the presumption of regularity and is conclusive as to the truthfulness of its contents.^[3][42]

====================================  

Republic of thePhilippines

Supreme Court

Manila

FIRST DIVISION

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

DEL CASTILLO, J.:

Allegations of bad faith and fraud must be proved by clear and convincing evidence.^[4][1]

This Petition for Review on Certiorari^[5][2] under Rule 45 of the Rules of Court assails the January 11, 2006 Decision^[6][3] of the Court of Appeals (CA) in CA-G.R. CV No. 84236 which dismissed the complaint filed by the petitioners against the respondents and declared as valid the real estate mortgage and certificate of sale.  Also assailed is the April 12, 2006 Resolution^[7][4] which denied the motion for reconsideration thereto.

Factual Antecedents

In February or March 1997, petitioners, spouses Wilfredo and Brigida Palada, applied for a P3 million loan broken down as follows: P1 million as additional working capital under the bills discounting line; P500,000.00 under the bills purchase line; and P1.5 million under the time loan from respondent Solidbank Corporation (bank).^[8][5]

On March 17, 1997, petitioners received from the bank the amount of P1 million as additional working capital evidenced by a promissory note^[9][6] and secured by a real estate mortgage^[10][7] in favor of the bank covering several real properties situated in Santiago City.^[11][8] 

Due to the failure of petitioners to pay the obligation, the bank foreclosed the mortgage and sold the properties at public auction.^[12][9]

On August 19, 1999, petitioners filed a Complaint^[13][10] for nullity of real estate mortgage and sheriff’s certificate of sale^[14][11] with prayer for damages, docketed as Civil Case No. 35-2779, against the bank and respondent Sheriff Mayo dela Cruz (sheriff) before the Regional Trial Court (RTC) of Santiago City, Branch 35.^[15][12]  Petitioners alleged that the bank, without their knowledge and consent, included their properties covered by Transfer Certificate of Title (TCT) Nos. T-225131 and T-225132,^[16][13] among the list of properties mortgaged; that it was only when they received the notice of sale from the sheriff in August 1998 that they found out about the inclusion of the said properties; that despite their objection, the sheriff proceeded with the auction sale; and that the auction sale was done in Santiago City in violation of the stipulation on venue in the real estate mortgage.^[17][14] 

The bank, in its Answer,^[18][15] denied the material allegations of the Complaint and averred that since petitioners were collaterally deficient, they offered TCT Nos. T-237695, T-237696, T-225131 and T-225132 as additional collateral;^[19][16]  that although the said properties were at that time mortgaged to the Philippine National Bank (PNB), the bank accepted the offer and caused the annotation of the mortgage in the original copies with the Register of Deeds with the knowledge and consent of petitioners;^[20][17] and that when petitioners’ obligation to PNB was extinguished, they delivered the titles of the four properties to the bank.^[21][18]

Ruling of the Regional Trial Court

On October 21, 2004, the RTC rendered a Decision^[22][19] declaring the real estate mortgage void for lack of sufficient consideration.  According to the RTC, the real estate mortgage lacks consideration because the loan contract was not perfected due to the failure of the bank to deliver the full P3 million to petitioners.^[23][20]  The RTC also found the bank guilty of fraud and bad faith, thereby ordering it to pay petitioners moral and exemplary damages, and attorney’s fees.  The RTC ruled:

Furthermore, it appears that the defendant unilaterally changed the term and condition of their loan contract by releasing only P1M of the P3M approved loan.  The defendant, in so doing, violated their principal contract of loan in bad faith, and should be held liable therefor.

Likewise, the defendant bank acted in bad faith when it made it appear that the mortgage was executed by the plaintiffs on June 16, 1997, when the document was acknowledged before Atty. German Balot, more so, when it made it appear that the mortgage was registered with the Register of Deeds allegedly on the same date, when in truth and in fact, the plaintiffs executed said mortgage sometime [in] March, 1997, obviously much earlier than June 16, 1997; for, if indeed the mortgage was executed on said date, June 16, 1997, it should have been written on the mortgage contract itself.  On the contrary, the date and place of execution [were left blank].  Amazingly, defendant claims that it was the plaintiffs who [had the] mortgage notarized by Atty. Balot; such claim however is contrary or against its own interest, because, the defendant should be the most interested party in the genuineness and due execution of material important papers and documents such as the mortgage executed in its favor to ensure the protection of its interest embodied in said documents, and the act of leaving the notarization of such a very important document as a mortgage executed in its favor is contrary to human nature and experience, more so against its interest;  hence,  the claim is untrue.

Moreover, the defendant also appears to have been motivated by bad faith amounting to fraud when it was able to register the mortgage with the Register of Deeds at the time when the collateral certificates of titles were still in the custody and possession of another mortgagee bank (PNB) due also to an existing/subsisting mortgage covering the same. Definitely, the defendant resorted to some machinations or fraudulent means in registering the contract of mortgage with the Register of Deeds.  This should not be countenanced.

Thus, on account of defendant’s bad faith, plaintiffs suffered mental anguish, serious anxiety, besmirched reputation, wounded feelings, moral shock and social humiliation, which entitle them to the award of moral damages, more so, that it was shown that defendants’ bad faith was the proximate cause of these damages plaintiffs suffered.

x x x x

WHEREFORE, with all the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendant as follows:

1.     DECLARING as null and void the undated real estate mortgage between the plaintiffs and the defendant, appearing as Doc. No. 553; Page No. 29; Book No. 28; Series of 1997; (Exhibits “B” for the plaintiffs, Exhibit “1” for the defendant);

2.              Likewise DECLARING as null and void the Sheriff’s Foreclosure and the Certificate of Sale, dated October 7, 1998 (Exhibit “F” to “F-3”);

3.              ORDERING the defendant to pay the plaintiffs the following damages:

a)              Php 1,000,000.00, moral damages;

b)             Php 500,000.00, exemplary damages;  and

c)              Php 50,000.00, Attorney’s fee;  and

4.              ORDERING the defendant to pay the cost of litigation, including plaintiffs’ counsel’s court appearance at Php1,500.00 each.

                SO ORDERED.^[24][21]

Ruling of the Court of Appeals

On appeal, the CA reversed the ruling of the RTC.  The CA said that based on the promissory note and the real estate mortgage contract, the properties covered by TCT Nos. T-225131 and T-225132 were mortgaged to secure the loan in the amount of P1 million, and not the P3 million loan applied by petitioners.^[25][22]  As to the venue of the auction sale, the CA declared that since the properties subject of the case are in Santiago City, the holding of the auction sale in Santiago City was proper^[26][23] pursuant to Sections 1^[27][24] and 2^[28][25] of Act No. 3135.^[29][26]  The CA likewise found no fraud or bad faith on the part of the bank to warrant the award of damages by the RTC, thus: 

The List of Properties Mortgaged printed at the dorsal side of the real estate mortgage contract particularly includes the subject parcels of land covered by TCT No. T-225132 and TCT No. T-225131.  Below the enumeration, the signatures of [petitioners] clearly appear.  The document was notarized before Notary Public German M. Balot.  We therefore find no cogent reason why the validity of the real estate mortgage covering the two subject properties should not be sustained.

Settled is the rule in our jurisdiction that a notarized document has in its favor the presumption of regularity, and to overcome the same, there must be evidence that is clear, convincing and more than merely preponderant; otherwise the document should be upheld. Clearly, the positive presumption of the due execution of the subject real estate mortgage outweighs [petitioners’] bare and unsubstantiated denial that the parcels of land covered by TCT Nos. T-225132 and T-225131 were among those intended to secure the loan of One Million Pesos.  Their imputation of fraud among the officials of [the bank] is weak and unpersuasive. x x x

x x x x

We also note why despite the alleged non-approval of [petitioners’] application for additional loan, the owner’s copy of TCT Nos. T-225131 and T-225132 remained in the possession of [the bank].  [Petitioners’] claim that they were still hoping to obtain an additional loan in the future appears to this court as a weak explanation. The continued possession by the bank of the certificates of title merely supports the bank’s position that the parcels of land covered by these titles were actually mortgaged to secure the payment of the One Million Peso loan.

x x x x

WHEREFORE, in view of the foregoing, the assailed decision of the Regional Trial Court, Branch 35 of Santiago City in Civil Case No. 35-2779 is hereby ANNULLED and SET ASIDE and a new one entered:

(1)         DISMISSING the complaint filed by the plaintiffs-appellees against the defendants-appellants;  and

(2)         Declaring VALID the questioned real estate mortgage and certificate of sale.

                SO ORDERED.^[30][27]

On February 1, 2006, petitioners moved for reconsideration but the CA denied the same in its Resolution dated April 12, 2006.^[31][28]

Issues

Hence, the present recourse, where petitioners allege that:

(A)

THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN ANNULLING OR REVERSING THE FINDINGS OF BRANCH 35, REGIONAL TRIAL COURT OF SANTIAGO CITY THEREBY IN EFFECT DISMISSING THE COMPLAINT FILED BY THE PETITIONERS AGAINST RESPONDENTS SOLIDBANK CORPORATION AND SHERIFF MAYO DELA CRUZ.

(B)

THE COURT OF APPEALS ERRED IN DECLARING VALID THE REAL ESTATE MORTGAGE EXECUTED BETWEEN THE PETITIONERS AND RESPONDENT SOLIDBANK CORPORATION AND IN SUSTAINING THE VALIDITY OF THE CERTIFICATE OFSALEISSUED BY RESPONDENT SHERIFF MAYO DELA CRUZ.

(C)

THE   COURT   OF   APPEALS   ERRED   IN    MISAPPRECIATING    THE

FINDINGS OF FACTS OF BRANCH 35, REGIONALTRIALCOURTOFSANTIAGOCITY.^[32][29]

            Simply  put,  the  core  issue  in  this  case is  the  validity of  the  real  estate

mortgage and the auction sale.

Petitioners’ Arguments

Petitioners echo the ruling of the RTC that the real estate mortgage and certificate of sale are void because the bank failed to deliver the full amount of the loan.  They likewise impute bad faith and fraud on the part of the bank in including TCT Nos. T-225131 and T-225132 in the list of properties mortgaged.  They insist that they did not sign the dorsal portion of the real estate mortgage contract, which contains the list of properties mortgaged, because at that time the dorsal portion was still blank;^[33][30] and that TCT Nos. T-225131 and T-225132 were not intended to be included in the list of mortgaged properties because these titles were still mortgaged with the PNB at the time the real estate mortgage subject of this case was executed.^[34][31]  Moreover, they claim that they delivered the titles of these properties to the bank as additional collateral for their additional loans, and not for the P1 million loan.^[35][32] 

Respondent bank’s Arguments

            The bank denies petitioners’ allegations of fraud and bad faith and argues that the real estate mortgage which was properly notarized enjoys the presumption of regularity.^[36][33] It maintains that TCT Nos. T-225131 and T-225132 were mortgaged as additional collateral for the P1 million loan.^[37][34]

Our Ruling

The petition is bereft of merit.

The loan contract was perfected.

Under Article 1934^[38][35] of the Civil Code, a loan contract is perfected only upon the delivery of the object of the contract. 

In this case, although petitioners applied for a P3 million loan, only the amount of P1 million was approved by the bank because petitioners became collaterally deficient when they failed to purchase TCT No. T-227331 which had an appraised value of P1,944,000.00.^[39][36]  Hence, on March 17, 1997, only the amount of P1 million was released by the bank to petitioners.^[40][37]

Upon receipt of the approved loan on March 17, 1997, petitioners executed a promissory note for the amount of P1 million.^[41][38]  As security for the P1 million loan, petitioners on the same day executed in favor of the bank a real estate mortgage over the properties covered by TCT Nos. T-237695, T-237696, T-237698, T-143683, T-143729, T-225131 and T-225132.  Clearly, contrary to the findings of the RTC, the loan contract was perfected on March 17, 1997 when petitioners received the P1 million loan, which was the object of both the promissory note and the real estate mortgage executed by petitioners in favor of the bank.

Claims   of   fraud   and   bad  faith   are

unsubstantiated.

Petitioners claim that there was fraud and bad faith on the part of the bank in the execution and notarization of the real estate mortgage contract. 

We do not agree.

There is nothing on the face of the real estate mortgage contract to arouse any suspicion of insertion or forgery.  Below the list of properties mortgaged are the signatures of petitioners.^[42][39]  Except for the bare denials of petitioner, no other evidence was presented to show that the signatures appearing on the dorsal portion of the real estate mortgage contract are forgeries. 

Likewise flawed is petitioners’ reasoning that TCT Nos. T-225131 and T-225132 could not have been included in the list of properties mortgaged as these were still mortgaged with the PNB at that time.  Under our laws, a mortgagor is allowed to take a second or subsequent mortgage on a property already mortgaged, subject to the prior rights of the previous mortgages.^[43][40]

As to the RTC’s finding that “the x x x bank acted in bad faith when it made it appear that the mortgage was executed by the [petitioners] on June 16, 1997, when the document was acknowledged before Atty. German, x x x when in truth and in fact, the [petitioners] executed said mortgage sometime in March, 1997 x x x,” we find the same without basis.  A careful perusal of the real estate mortgage contract would show that the bank did not make it appear that the real estate mortgage was executed on June 16, 1997, the same day that it was notarized, as the date of execution of the real estate mortgage contract was left blank.^[44][41]  And the mere fact that the date of execution was left blank does not prove bad faith.  Besides, any irregularity in the notarization or even the lack of notarization does not affect the validity of the document.  Absent any clear and convincing proof to the contrary, a notarized document enjoys the presumption of regularity and is conclusive as to the truthfulness of its contents.^[45][42]

All told, we find no error on the part of the CA in sustaining the validity of the real estate mortgage as well as the certificate of sale.

WHEREFORE, the petition is hereby DENIED.  The assailed January 11, 2006 Decision of the Court of Appeals and its April 12, 2006 Resolution in CA-G.R. CV No. 84236 are hereby AFFIRMED.

            SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

MARTIN S. VILLARAMA, JR.

Associate Justice

C E R T I F I C A T I O N

            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.

RENATO C. CORONA

Chief Justice