Bignay Ex-Im Philippines v. Union Bank
REITERATIONFacts
The Antecedents: In 1984, Alfonso de Leon mortgaged a Quezon City property to Union Bank of the Philippines (Union Bank). Following foreclosure and consolidation of ownership, Union Bank obtained a new title in its name in 1987. In 1988, Alfonso's wife, Rosario, filed a case against Alfonso and Union Bank, seeking the annulment of the mortgage and reconveyance, alleging Alfonso forged her signature. In 1989, Bignay Ex-Im Philippines, Inc. (Bignay) offered to purchase the property from Union Bank. The offer acknowledged the pending litigation and proposed a deed of absolute sale, subject to a mortgage to secure the balance, to isolate the property from any lis pendens. On December 20, 1989, Union Bank executed a Deed of Absolute Sale conveying the property to Bignay for P4 million, with Union Bank undertaking to defend its title against third-party claims. Bignay subsequently mortgaged the property back to Union Bank. Procedural History: On December 12, 1991, the Regional Trial Court (RTC) declared the mortgage, sheriff's sale, Union Bank's title, and the sale and mortgage between Union Bank and Bignay void, recognizing Rosario as the owner of one-half of the property. Union Bank's appeal to the Court of Appeals (CA) and subsequent petition for review to the Supreme Court were dismissed. Union Bank's subsequent action to annul the RTC judgment was also dismissed by the CA. Bignay also filed a petition for annulment of the RTC judgment, which was dismissed. Consequently, Bignay was evicted from the property. On March 21, 1994, Bignay filed a case against Union Bank for breach of warranty against eviction, seeking damages. The RTC ruled in favor of Bignay, ordering Union Bank to pay P4 million for the land and P20 million for the building, finding Union Bank acted in bad faith. The RTC dismissed Union Bank's counterclaim for failure to pay docket fees. The CA affirmed the award for Bignay but also ordered Bignay to pay Union Bank on its counterclaim. Both parties appealed to the Supreme Court. The Petition: Bignay, as petitioner in G.R. No. 171590, seeks to modify the CA decision by denying Union Bank's counterclaim, arguing that Union Bank failed to pay the required docket fees. Bignay questions the validity of the receipts presented by Union Bank for the docket fees. Union Bank, as petitioner in G.R. No. 171598, assails the CA's award of damages to Bignay, arguing that the letter-proposal of September 6, 1989, limited its liability and that the CA erred in applying Articles 1548 and 1549 of the Civil Code. The Supreme Court granted Bignay's petition, modifying the CA decision to dismiss Union Bank's counterclaim, and denied Union Bank's petition, affirming that Union Bank's gross negligence in handling the prior case amounted to bad faith, making it liable for eviction.
Issue(s)
Whether Union Bank's gross negligence in defending its title amounts to bad faith, entitling Bignay to damages under Article 1555 of the Civil Code. Whether Union Bank's counterclaim for collection of sums of money was properly dismissed by the RTC for non-payment of docket fees. Whether the Court of Appeals erred in ruling on Union Bank's counterclaim regarding the payment of docket fees, and the validity of the presented official receipts.
Ruling
The Supreme Court GRANTED the Petition in G.R. No. 171590 and DENIED the Petition in G.R. No. 171598. The Court modified the Court of Appeals' Decision by ordering Union Bank of the Philippines's counterclaim DISMISSED. The Court affirmed the award in favor of Bignay for the cost of the land and the value of the building.
Ratio Decidendi
On the issue of Union Bank's liability for breach of warranty against eviction: The Court found that Bignay purchased the property without knowledge of the pending Civil Case No. Q-52702. Union Bank was therefore answerable for its express undertaking under the deed of sale to "defend its title to the Parcel/s of Land with improvement thereon against the claims of any person whatsoever." The Court found Union Bank grossly negligent in the handling and prosecution of Civil Case No. Q-52702, citing the dismissal of its appeal for failure to file an appellant's brief, the denial of its Petition for Review on Certiorari for late filing and payment of legal fees, and the dismissal of its petition for annulment of judgment for non-compliance with Supreme Court Circular No. 28-91. This gross negligence amounted to bad faith, which is a ground for the recovery of damages in culpa contractual. Consequently, Bignay was entitled to the return of the value of the property at the time of eviction (₱4 million) and the value of the building it erected thereon (₱20 million), as provided under Article 1555 of the Civil Code. The Court reiterated that any stipulation exempting the vendor from the obligation to answer for eviction is void if the vendor acted in bad faith, pursuant to Article 1553 of the Civil Code. On the issue of Union Bank's counterclaim and the payment of docket fees: The Court disagreed with the Court of Appeals regarding Union Bank's counterclaim. The Court found that the trial court correctly declared that no docket fees had been paid on the bank's counterclaim. The Court noted that if Union Bank had indeed paid the docket fees, the trial court would have so held in its decision, but instead, it specifically declared the fees remained unpaid. The Court found it highly questionable and irregular that official receipts supposedly evidencing payment of docket fees suddenly appeared, and that Union Bank did not raise the issue of payment in a timely motion for reconsideration before the trial court. On the issue of the Court of Appeals' ruling and the validity of the receipts: The Court held that the trial court's pronouncement that no docket fees were paid enjoys the presumption of regularity, and the sudden appearance of the receipts was anomalous. Therefore, the Court ordered the dismissal of Union Bank's counterclaim.
Main Doctrine
The gross negligence of the seller in defending its title to the property subject matter of the sale, thereby contravening the express undertaking under the deed of sale to protect its title against the claims of third persons resulting in the buyer's eviction from the property, amounts to bad faith, and the buyer is entitled to the remedies afforded under Article 1555 of the Civil Code.