Akiapat v. Summit Bank
REITERATIONFacts
The Antecedents: Domacia Galipen, Renato Cachero, Richard Cachero, Teresita C. Mainem, Jeanette C. Gamboa, and Lourdes C. Akiapat, Billy Cachero, and Noel Cachero were co-owners of a parcel of land. In 1996 and 1997, Domacia, Renato, Richard, Teresita, and Jeanette executed promissory notes in favor of Summit Bank for separate loans, securing these with a real estate mortgage over the subject property. Lourdes, Billy, and Noel, also co-owners but non-borrowers, joined in executing this mortgage. When Domacia, et al. failed to pay their loan obligations, Summit Bank extrajudicially foreclosed the mortgage, with the bank emerging as the winning bidder in the January 11, 2000 sale. Domacia, et al. challenged this foreclosure, initiating a case for annulment of the loans, mortgage, and foreclosure proceedings. Procedural History: The Regional Trial Court (RTC), Branch 63, La Trinidad, Benguet, initially upheld the validity of the real estate mortgage and promissory notes but nullified the December 3, 1999 extrajudicial foreclosure sale. However, after a subsequent accounting and confirmation of indebtedness, the RTC issued a writ of execution, leading to a second foreclosure sale on May 12, 2010, with Summit Bank again as the winning bidder. Subsequently, Lourdes, Billy, and Noel filed a third-party claim, asserting their consent was not obtained for their inclusion as co-plaintiffs and that their shares should be excluded from the foreclosure. The RTC, in a resolution dated November 25, 2011, nullified previous orders and directed Summit Bank to reapply for foreclosure, excluding the shares of Lourdes, et al. This was affirmed by the RTC despite Summit Bank's motion for reconsideration. Summit Bank then elevated the matter to the Court of Appeals (CA) via a petition for certiorari. The Petition: The Court of Appeals granted Summit Bank's petition, finding that the RTC erred in entertaining the third-party claim, as the remedy of terceria is not available to parties to the action. The CA also ruled that the RTC could not modify a final decision and that directing Summit Bank to reapply for foreclosure added a new directive to the already final decision. Aggrieved, Lourdes, et al. (in G.R. No. 222505) and Richard, Jeanette, and Teresita (in G.R. No. 222776) filed consolidated petitions for review on certiorari with the Supreme Court, assailing the CA's decision and resolution. They argued, among other things, that their third-party claim was belatedly filed due to lack of knowledge and that the RTC's correction of its judgment was in harmony with justice. The Supreme Court, however, dismissed the petitions, holding that the petitioners, as mortgagors and parties to the action, could not avail of the remedy of terceria and that their property was validly subjected to foreclosure.
Issue(s)
Whether the Court of Appeals erred in granting Summit Bank's petition for certiorari. Whether the RTC gravely abused its discretion in ordering the exclusion of the pro indiviso shares of Lourdes, et al. in the mortgaged property for the foreclosure proceedings; and whether the real estate mortgage is divisible or indivisible. Whether the remedy of terceria is available to parties to the action. Whether the RTC could modify a final and executory decision by excluding the shares of non-borrowing co-owners from foreclosure; and on the effect of failure to redeem. Whether there was a violation of due process.
Ruling
The Supreme Court dismissed the consolidated petitions for lack of merit. It affirmed the Court of Appeals' ruling that the RTC gravely abused its discretion. The Court held that petitioners, having signed the real estate mortgage, were not third parties but mortgagors, and their remedy was not a terceria. The Court also reiterated that a real estate mortgage is indivisible and that the shares of non-borrowing co-owners who consented to the mortgage are liable for the debt.
Ratio Decidendi
On the Court of Appeals' decision: The Court held that the RTC erred in entertaining the third-party claim of Lourdes, et al., as they were not strangers to the action. Their active involvement in the proceedings demonstrated that the RTC should not have excluded their shares from the foreclosure proceedings. On the indivisibility of the real estate mortgage and the liability of non-borrowing co-owners: The Court reiterated the principle that a real estate mortgage is indivisible. Lourdes, et al. signed the real estate mortgage, thereby assuming the personality of third-party mortgagors, and their pro indiviso shares were validly subjected to the mortgage and subsequent foreclosure. The Court cited jurisprudence, such as Bank of America, NT and SA v. American Realty Corp. and Lustan v. CA, establishing that third persons who mortgage their property to secure an obligation to which they are foreign become third-party mortgagors. Their property is directly and jointly liable for the fulfillment of the obligation, even if the loans did not directly benefit them. On the availability of terceria and the status of Lourdes, et al.: The Court held that the remedy of terceria under Section 16, Rule 39 of the Rules of Court is available only to a third person who is a stranger to the action and whose property is levied upon. Lourdes, et al. were not strangers to the action; they were parties to the real estate mortgage contract and were even declared in default as co-plaintiffs in Civil Case No. 01-CV-1584. Their participation in the proceedings, including filing a motion to lift the order of default and their conformity to various motions, demonstrated their active involvement. Therefore, their filing of a third-party claim was improper and the RTC erred in entertaining it. On the RTC's modification of a final and executory decision and the effect of failure to redeem: The Court found that the RTC's Resolution dated November 25, 2011, effectively modified the final and executory Decision in Civil Case No. 01-CV-1584. The subsequent order to exclude certain shares constituted a modification of a judgment that had already attained finality, which is impermissible. The Court emphasized that as mortgagors, petitioners lost all interests over the foreclosed property after the expiration of the redemption period. Summit Bank, as the purchaser, became the absolute owner and was entitled to possession as a matter of right. The Court cited Town and Country Enterprises, Inc. v. Hon. Quisumbing, Jr., et al. and Union Bank of the Philippines v. Court of Appeals to underscore that upon failure to redeem foreclosed realty, consolidation of title becomes a matter of right for the auction buyer, and the issuance of a new certificate of title becomes ministerial upon the Register of Deeds. On the alleged violation of due process: The Court found no violation of due process. The petitioners, including Lourdes, et al., actively participated in the proceedings before the RTC. They were listed as witnesses, declared in default but had the order lifted, and their conformity was shown in various motions. The foreclosure proceedings followed the prescribed legal procedures, including publication and posting of notices. Their failure to redeem the property within the statutory period extinguished their rights and vested absolute ownership in Summit Bank.
Main Doctrine
A third-party claim is not available to a party to the action whose property is levied upon, as the remedy is intended for strangers to the case. Furthermore, a real estate mortgage is indivisible, and a mortgagor who is not a borrower but has consented to the mortgage is bound by its terms and their property is subject to foreclosure.