Malayan Bank v. Agustin Lagrama
REITERATIONFacts
The Antecedents: Demetrio Llego inherited a portion of land. He informally partitioned it with his siblings, but the title remained in his father's name. On March 25, 1976, Llego sold his share to his uncle, Agustin Lagrama, and Paz Abastillas, promising a deed of sale upon title transfer. Lagrama and Abastillas took possession and paid the balance by December 23, 1977. On March 6, 1979, the property was partitioned, and a new title was issued to Llego for his share. On November 12, 1982, Llego mortgaged this land to Republic Planters Bank (now Malayan Bank) for P45,000.00. Llego defaulted, the mortgage was foreclosed, and the bank became the highest bidder. Llego failed to redeem the property. Procedural History: In 1983, Lagrama and Abastillas filed a complaint for specific performance against Llego, Ceferino Tan (Llego's attorney-in-fact), and Republic Planters Bank. Llego was declared in default. The bank claimed to be a mortgagee in good faith. On May 17, 1993, the Regional Trial Court (RTC) declared Lagrama and Abastillas as absolute owners and ordered Llego and Tan to execute the necessary conveyance and redeem the property from the bank. The RTC also ordered the cancellation of Llego's title and the issuance of a new one in favor of the plaintiffs. Republic Planters Bank appealed, but its appeal was dismissed for failure to file a brief on time, rendering the RTC decision final and executory. A writ of execution was returned unsatisfied as the bank had consolidated its title. Private respondents then filed a motion to compel the bank to execute a deed of reconveyance, which the RTC granted on September 29, 1998. The bank's motion for reconsideration was denied. The Court of Appeals affirmed the RTC's decision. The Petition: Malayan Bank (formerly Republic Planters Bank) filed a petition for review, arguing it was a mortgagee in good faith and for value, and therefore not a transferee pendente lite, as the mortgage was constituted before the filing of the specific performance case. It contended it could not be compelled to execute a deed of reconveyance.
Issue(s)
Whether petitioner bank, as a mortgagee in good faith and for value, can be compelled to execute a deed of reconveyance despite the final and executory judgment against the original owner. Whether petitioner bank is considered a transferee pendente lite and bound by the final judgment in the specific performance case.
Ruling
The petition is denied. The decision of the Court of Appeals affirming the trial court's order for the bank to execute a deed of reconveyance in favor of the private respondents is AFFIRMED.
Ratio Decidendi
On the issue of whether petitioner bank can be compelled to execute a deed of reconveyance: The Court held that petitioner bank, having been impleaded as a co-defendant in the original specific performance case, is bound by the final and executory judgment rendered therein. The bank's appeal was dismissed for failure to file its brief, making the RTC's decision final. While the RTC initially ordered Llego to execute the deed, the subsequent consolidation of title by the bank necessitated the order directed at the bank to effect the reconveyance, which was merely an implementation of the original judgment, not a modification thereof. The bank cannot escape its obligation by claiming it was a mortgagee in good faith, as it was aware of the dispute and the charge of fraud against Llego. On the issue of whether petitioner bank is a transferee pendente lite: The Court found the bank's argument that the mortgage was constituted before the filing of the case to be specious. The bank only became a transferee when it acquired the property through the foreclosure sale and consolidated its title, which occurred after the filing of the specific performance case. Therefore, the bank is a transferee pendente lite and is bound by the decision against its transferor, Demetrio Llego, as it stands in his shoes. Its title is subject to the results of the pending litigation, and its certificate of title affords no special protection in this regard. The Court reiterated the principle that a transferee pendente lite is bound by any judgment or decree rendered for or against the transferor.
Main Doctrine
A bank that acquires property through foreclosure during the pendency of a specific performance case against the mortgagor, despite being aware of the dispute and a prior sale, is bound by the final judgment and can be compelled to execute a deed of reconveyance.