Allied Banking Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner, Allied Banking Corporation (through its predecessor-in-interest, General Bank and Trust Company), was the mortgagee-purchaser of a 5,011 square-meter lot owned by Harvey's Trading and Supply Corporation. Private respondent, Loreto Azores, was an officer of Harvey's Trading and Supply Corporation. Following foreclosure, petitioner sought and obtained a writ of possession for the property. Despite this, Azores refused to vacate a 1,365 square-meter portion he occupied, claiming it was separate from the foreclosed lot and that he occupied it in the concept of an owner. Procedural History: After Azores's refusal to vacate and subsequent motions and claims were denied by the trial court, he filed Civil Case No. 2314-0 seeking annulment of the writ of possession, recovery of the 1,365 square-meter lot, and damages, which was dismissed on grounds of res judicata. Azores then petitioned the Court of Appeals for certiorari, seeking to annul the trial court's orders denying his motion to exclude his lot and dismissing his complaint. The Court of Appeals granted his petition. Subsequently, Azores filed a motion for delivery of the 1,365 square-meter lot, which the respondent judge granted, ordering Allied Banking Corporation to re-deliver the lot. After two motions for reconsideration were denied by the respondent judge, Allied Banking Corporation filed a petition for certiorari and prohibition with the Court of Appeals, which dismissed the petition. The Petition: This petition for review on certiorari seeks to set aside the decision of the Court of Appeals which dismissed Allied Banking Corporation's petition for certiorari and prohibition. Allied Banking Corporation argues that the respondent judge acted without or in excess of jurisdiction or with grave abuse of discretion in ordering the re-delivery of the 1,365 square-meter lot to Loreto Azores, especially since the lot had already been sold to Ephraim Gochangco. The core issue is whether the court lawfully ordered the re-delivery of the lot, which was sold to a third party prior to Azores filing his third-party claim.
Issue(s)
Whether the court lawfully ordered the re-delivery of the 1,365 square-meter lot to Loreto Azores, which lot had already been sold to Ephraim G. Gochangco. Whether Ephraim G. Gochangco, as a successor-in-interest and buyer with knowledge of an adverse claim, is bound by the judgment ordering the re-delivery of the lot.
Ruling
The petition is denied for lack of merit and consequently dismissed.
Ratio Decidendi
On the issue of lawful order for re-delivery: The Court ruled in the affirmative. The records showed that the 5,011 square-meter lot sold to petitioner and the 1,365 square-meter lot claimed by private respondent were distinct. The Court of Appeals correctly upheld the nullification of the order that included private respondent's lot in the alias writ of possession because private respondent was not a party to the original case and was not afforded his day in court. Dispossession without notice and hearing constitutes a deprivation of property without due process of law, which cannot be countenanced. Fundamental legal doctrine dictates that a party affected by a personal judgment must have had a day in court and an opportunity to be heard. To rule otherwise would render the due process clause nugatory. On whether Ephraim G. Gochangco is bound by the judgment: The Court held that petitioner bank is estopped from claiming it cannot re-deliver the lot because it was already sold to Ephraim G. Gochangco. The Deed of Sale between petitioner and Gochangco explicitly acknowledged the adverse claim of Loreto Azores. The purchase price was conditioned on this adverse claim, with an agreement for price adjustment should Gochangco fail to perfect title due to Azores' claim. Therefore, Gochangco is a successor-in-interest and is conclusively bound by the judgment of the Court of Appeals ordering the re-delivery of the lot, pursuant to Rule 39, Section 49(b) of the Revised Rules of Court. This provision states that judgments are conclusive between the parties and their successors in interest by title subsequent to the commencement of the action. Furthermore, Gochangco is not a buyer in good faith because he purchased the property with full awareness of Loreto Azores' adverse claim and agreed to the condition of price adjustment. As a buyer in bad faith, he cannot claim protection under the law and must re-deliver the lot belonging to Loreto Azores, with his remedy being to seek a reduction in the purchase price paid to the petitioner.
Main Doctrine
A party dispossessed of property without notice and hearing is deprived of due process, and a subsequent buyer of the property, aware of an adverse claim and whose purchase price is subject to adjustment based on that claim, is bound by the judgment regarding the adverse claim and is not a buyer in good faith.