Manila
EN BANC
G.R. No. L-31789 June 29, 1972
ANTONIO R. BANZON and ROSA BALMACEDA, petitioners,
vs.
HON. FERNANDO CRUZ, Spouses PEDRO CARDENAS and LEONILA BALUYOT and ASSOCIATED INSURANCE & SURETY COMPANY, INC. represented by INSURANCE COMMISSIONER in her capacity as LIQUIDATOR OF ASSOCIATED INSURANCE & SURETY COMPANY, INC., respondents.
L. T. Castillo for petitioners.
Dakila F. Castro & Associates for respondents spouses Pedro Cardenas and Leonila Baluyot.
Feliberto V. Castillo for respondent Associated Insurance & Surety Co., Inc.
Office of the Solicitor General Felix Q. Antonio, Assistant Solicitor General Dominador L. Quiroz and Solicitor Lolita O. Galang for respondent Insurance Commissioner, etc.
TEEHANKEE, J.:
An original action to enjoin respondent court from forcing a writ of possession and order of demolition over one of two Caloocan City lots originally owned by petitioners- spouses pending the outcome of their suit for reconveyance of said lots from private respondents.
Sometime in 1952, Maximo Sta. Maria obtained crop loans from the Philippine National Bank (hereinafter referred as the bank). Respondent Associated Insurance & Surety Co., Inc. (hereinafter referred to as Associated) acted as surety of Sta. Maria, filing surety bonds in favor of the bank to answer for prompt repayment of the loans. Petitioner Antonio R. Banzon and Emilio Ma. Naval in turn acted as indemnitors of Associated and were obligated to indemnify and hold harmless Associated from any liability thus acting as surety of the loan. Sta. Maria failed to pay his obligations to the bank, which accordingly demanded payment from Associated as surety.
Instead of paying the bank, Associated filed a complaint dated November 19, 1956 with the Court of First Instance of Manila1 against debtor Sta. Maria and indemnitors Banzon and Naval, alleging that the outstanding obligations of Sta. Maria with the bank guaranteed by it amounted to P6,100.00, P9,346.44 and P14,811.32, or a total of P30,257.86, excluding interest. On December 11, 1957, the said court rendered judgment ordering Sta. Maria, Banzon and Naval "to pay jointly and severally unto plaintiff for the benefit of the Philippine National Bank" the amounts mentioned above, with interest thereon at 12% per annum, P593.76 for premiums and documentary stamps due, and 15% attorney's fees, "the 15% and the interest to be paid for the benefit only of the plaintiff."
What happened thereafter is narrated in the decision of this Court rendered on November 29, 1968 in the appeal instituted by petitioner Banzon and his spouse, co- petitioner Rosa Balmaceda, from a subsequent action of Associated in the Court of First Instance of Rizal wherein the Rizal court ordered Banzon to surrender for cancellation his owner's duplicates of titles to his two Caloocan City lots which had been levied upon and purchased at the execution sale by Associated in supposed satisfaction of the Manila court's judgment, docketed as Case L-23971 of this Court, entitled Associated Ins. & Surety Co. Inc. plaintiff-appellee vs. Antonio Banzon and Rosa Balmaceda, defendants-appellants,2 as follows:
As the above decision3 became final and executory, the corresponding writ of execution was issued and levy was made upon the properties of the judgment debtor Antonio R. Banzon covered by Transfer Certificates of Title Nos. 39685 and 53759 issued in his name by the Register of Deeds of Rizal. The first covered a parcel of land containing an area of 650 square meters situated in Barrio Calaanan, Caloocan, Rizal, and the second, another parcel of 650 square meters situated in the same barrio of the same municipality. After the proceedings required by law in connection with execution sales, the aforesaid properties were sold, the judgment creditor, Associated Insurance and Surety Co., Inc., having been the highest bidder, for the total sum of P41,000.00. The Sheriff of Rizal issued in its favor the corresponding certificate of sale dated June 27, 1957, which was duly registered on June 30, 1959. As the period of redemption expired on June 20, 1960 without the judgment debtor or any proper party having exercised it, the judgment creditor and purchaser obtained in due time the corresponding final certificate of sale, which was likewise duly registered.
In view of the foregoing, herein petitioner-appellee made demands upon Antonio R. Banzon to deliver to it the owner's duplicate of Certificate of Title Nos. 39685 and 53759 mentioned heretofore, but the latter refused to do so. As a result it filed in the Court of First Instance of Rizal in Case No. 3885, G.L.R.O. Record No. 11267, a petition for an order directing Antonio R. Banzon to present his owner's duplicate of Certificae of Title Nos. 89685 and 53759 to the Register of Deeds of Rizal for cancellation, and for another order directing the Register of Deeds of Rizal to cancel said duplicates and to issue new transfer certificates of title covering the properties in the name of petitioner.
Banzon filed his opposition to the petition claiming mainly that (1) the decision of the Court of First Instance of Manila in Civil Case No. 31237 was void as far as he was concerned because he had never been summoned in connection therewith, an that (2) the levy and sale of the properties covered by the petition were likewise void because they were conjugal properties belonging to him and his wife, Rosa Balmaceda.
After a hearing on the motion and opposition mentioned above, the lower court, on February 7, 1961, rendered a decision whose dispositive portion is as follows:
"In view of the foregoing, judgment is hereby rendered in favor of the petitioner granting the relief prayed for. The oppositors are hereby ordered to surrender to the Register of Deeds of Rizal the Certificate of Title in question for cancellation and let a new one be issued in the name of the petitioner."
In this appeal interposed by them, the Banzons seek a reversal of the above decision upon the same grounds relied upon in their opposition filed in the lower court.4
This Court in its decision of November 29, 1968 affirmed the decision of the trial court, relying upon the lower court's findings on Banzon's failure to substantiate his claims which "would amount to a deprivation of (Banzon's) property without due process of law" had he but discharged his burden of proof, thus:
With respect to appellant's contention that Antonio R. Banzon had not been duly served with summons in connection with Civil Case No. 31237 of the Court of First Instance of Manila, it is enough for us to quote here the pertinent portions of the well-considered decision of the lower court —
"With respect to the first contention of oppositors, the latter in effect contends that not having been served by summons, Antonio Banzon never became a party defendant to the aforesaid civil case and hence not bound by any judgment rendered therein. It is erroneous on the part of the petitioner to contend that the objection as to lack of jurisdiction on the defendant's person has been waived for said waiver applies only when summons has been served although defectively, such as one not served by the proper officer. If the contention of the oppositor were true, that is, no summons was ever served upon him and that he was completely unaware of the proceedings in the civil case aforementioned, the properties in question could not be levied upon for that would amount to a deprivation of oppositor's property without due process of law.
"The burden, however, rests upon the oppositors to prove that there was in fact no service of summons and this, the court believes, the oppositors have failed to substantiate with sufficient evidence. It is a fundamental rule that the regularity of all official actions and proceedings will be presumed until the contrary is proved. In said civil case No. 31237, the records show, particularly the answer and the motion to dismiss, that the proceedings were conducted by counsel in behalf of all the defendants therein including the oppositor, Antonio Banzon. The presumption therefore, of the regularity of the proceedings as against said defendant will be maintained including the fact that either summons was duly served or that the defendant Banzon voluntarily appeared in court without such summons. It is therefore incumbent upon the oppositors to rebut this presumption with competent and proper evidence such as the return made by the sheriff who served the summons in question. This, however, the oppositors have not met.
"Moreover, the circumstances of the case all the more bear out the strength of this presumption when it considered that the oppositor Antonio Banzon received a notice of execution and levy of these properties and notice of the sale of the same at public auction. Had the oppositors have been prejudiced by being deprived of due process, they should have filed either a third party claim upon the property levied or an injunction proceeding to prevent its sale at public auction, nor would they have allowed the consummation of the sale and the lapse of one year within which the redemption would have been exercised. These facts gravely militate against the merits of the opposition, not only insofar as it strengthens the aforesaid presumption of regularity, but also insofar as they are indicative of the fact that the properties levied upon are not conjugal property or even if they were that the debt involved was one which redound to the benefit of the family for which the conjugal partnership may be held liable."
Appellants' second contention namely, that the properties now in question are their conjugal properties, is belied by the record before us which shows that Transfer Certificate of Title Nos. 39685 and 53759 were issued in the name of Antonio R. Banzon. Moreover, there is no sufficient evidence in the record to show that the properties were acquired during appellants' marriage.
IN VIEW OF ALL THE FOREGOING, the decision appealed from is hereby affirmed, with costs.5
It has now been exposed that notwithstanding the judgment of December 11, 1957 obtained from the Manila court by Associated and executed by it against petitioner Banzon as indemnitor " for the benefit of the Philippine National Bank," and which judgment it obtained and executed on the representation to the said court that the bank was exacting payment from it as surety of the debtor Sta. Maria's loans, and that it was therefore enforcing Banzon's undertaking as indemnitor in turn to indemnify it, that it never discharged its liability as surety to the bank nor ever made any payment to the bank, whether in money or property, to discharge Sta. Maria's outstanding obligations as guaranteed by it.
As will be shown later, this suit of Associated against Banzon as indemnitor and the execution against him of the judgment obtained in trust "for the benefit of the PhiIippine National Bank" were absolutely premature and uncalled for, since Article 2071 of the Civil Code permits the surety, even before having paid, to proceed only "against the principal debtor ... (4) when the debt has become demandable, by reason of the expiration of the period for payment" and that "the action of the guarantor is to obtain release from the guaranty, or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor."
In fact, since the bank failed to exact payment from Associated as surety of the debtor Maximo Sta. Maria's matured obligations, the bank itself filed on February 10, 1961, its own complaint with the Court of First Instance of Pampanga against principal debtor Maximo Sta. Maria, his six brothers and sisters (who had executed a special power of attorney in Sta. Maria's favor to mortgage a 16-hectare parcel of land jointly owned by all of them as security also for the bank's loans), and Associated itself, surety, as defendants, for the collection of the outstanding obligations due from the principal debtor, Maximo Sta. Maria.
After trial, the court ordered all the defendants jointly and severally to pay the bank the outstanding amounts due on the crop loans to Sta. Maria, which as of that much later date, August 20, 1963, amounted only to P6,100.00 and P9,346.44 or a total of P15,446.44, exclusive of interests. It should be noted therefore, that the debtor Sta. Maria had been making payments all along to the bank on account of his crop loans so much so that by 1963, the total principal due and amount outstanding thereon amounted only to P15,446.44. This amounts to practically one-half of the advance judgment for the total amount of P30,257.86, excluding interests, obtained by Associated six (6) years earlier in 1957 against Banzon " for the benefit of the Philippine National Bank" allegedly as the amount due from Sta. Maria and which Associated as surety would have to pay the bank, and which as it turns out, Associated never paid to the bank.
These facts and figures are of record in this Court's decision of August 29, 1969, in Philippine National Bank vs. Sta. Maria, et al.," wherein it is further recorded that "(D)efendant Maximo Sta. Maria and his surety, defendant Associated Insurance & Surety Co., Inc. who did not resist the action, did not appeal the judgment (sentencing all defendants jointly and severally to pay the bank the above referred to principal amount of P15,446.44, excluding interests)."
This Court sustained the appeal taken by the debtor Maximo Sta. Maria's brothers and sisters, and reversed the lower court's judgment against them, as follows:
... This appeal has been taken by his six brothers and sisters, defendants-appellants who reiterate in their brief their main contention in their Answer to the complaint that under the special power of attorney, Exh. E, they had not given their brother, Maximo, the authority to borrow money but only to mortgage the real estate jointly owned by them; and that if they are liable at all, their liability should not go beyond the value of the property which they had authorized to be given as security for the loans obtained by Maximo. In their answer, defendants-appellants had further contended that they did not benefit whatsoever from the loans, and that the plaintiff bank's only recourse against them is to foreclose on the property which they had authorized Maximo to mortgage.
We find the appeal of defendants-appellants, except for defendant Valeriana Sta. Maria who had executed another special power of attorney, Exh. E-1, expressly authorizing Maximo to borrow money on her behalf, to be well taken.ℒαwρhi৷
1. Plaintiff bank has not made out a cause of action against defendants-appellants (except Valeriana), so as to hold them liable for the unpaid balances of the loans obtained by Maximo under the chattel mortgages executed by him in his own name alone.
x x x x x x x x x
6. Finally, as to the 10% award of attorney's fees, this Court believes that considering the resources of plaintiff bank and the fact that the principal debtor, Maximo Sta. Maria, had not contested the suit, an award of five (5%) per cent of the balance due on the principal, exclusive of interests, i.e., a balance of P6,100.00 on the first cause of action and a balance of P9,846.44 on the second cause of action, per the bank's statements of August 20, 1968, (Exhs. Q-1 and BB-1 respectively) should be sufficient.
WHEREFORE, the judgment of the trial court against defendant-appellants Emeteria, Teofilo, Quintin, Rosario and Leonila, all surnamed Sta. Maria is hereby reversed and set aside, with costs in both instances against plaintiff. The judgment against defendant-appellant Valeriana Sta. Maria is modified in that her liability is held to be joint and not solidary, and the award of attorney's fees is reduced as set forth in the preceding paragraph, without costs in this instance.
The bank thus collected directly from its debtor Sta. Maria the amounts owing to it, with Associated never having put in one centavo. Per the bank's letter dated February 20, 1970 to Associated, it informed Associated that the amounts of its judgment credit against judgment defendants in the aforementioned case terminated by this Court's decision of August 29, 1969, "had already been satisfied as of February 16, 1970 by virtue of the payment made by and thru the Provincial Sheriff of Bataan on the proceeds of the extra-judicial sale of the mortgaged properties of defendants Sta. Marias," in view of which "we (Philippine National Bank) have now released the Associated Insurance & Surety Co., Inc. of its joint obligation with Maximo Sta. Maria et al. in the aforementioned case."7
This should have put an end to the matter and Banzon's two lots therefore restored fully to his ownership, but for certain complications involving the intervention of the other private respondents, the spouses Pedro Cardenas and Leonila Baluyot, and Associated's own unjustifiable actions, as shall presently be seen.
According to the Banzons' petition at bar, sometime in 1965, even before ownership over the two parcels of land belonging to the Banzons could be consolidated in the name of Associated (since the judgment was " for the benefit of the Philippine National Bank" and it had not discharged its surety's liability to the bank), Associated "in clear collusion and confederation with (respondent) Pedro Cardenas, allowed and permitted the latter to execute and levy one of the two parcels of land (that covered by T.C.T. No. 39685-Rizal, Lot 6, Block No. 176 of subdivision plan Psd-2896, G.L.R.O. Rec. No. 11267) for a judgment debt of P5,100.00 (of Associated in favor of Cardenas)8 notwithstanding that the property in question was worth P130,000.00 more or less, and further notwithstanding the fact that said respondent (Associated) knew the property was merely being held in trust by it for the benefit of the Philippine National Bank and therefore, not being the legal owner thereof, it cannot validly dispose of it in any manner."9 Respondent Cardenas being allegedly the lone bidder in the auction sale for execution of his P5,100.00-judgment against Associated was awarded the property in full satisfaction of his judgment, and eventually succeeded in having Banzon's title cancelled and a new one, T.C.T. No. 8567-Caloocan City issued thereto in his name, notwithstanding that Associated's right thereto was still sub-judice in Associated vs. Banzon, to be resolved much later yet by this Court's decision of November 29, 1968. Associated made no move to question or challenge this action of Cardenas, notwithstanding an order for its liquidation and dissolution issued on December 31, 1965 by the Court of First Instance of Manila and eventually affirmed by this Court per resolution of June 20, 1968 in G.R. No. L-38934. Nor did Associated make any effort to resist execution on said property of Banzon's, knowing as it did that its interest in said property was impressed with a trust character since the clear tenor and intent of the judgment granted against Banzon nominally in its favor but expressly " for the benefit of the Philippine National Bank" was to make the execution and operation of the judgment contingent or conditioned upon Associated's being made or compelled to pay the bank, which contingency never materialized.
The Cardenas spouses thereafter filed with the Court of First Instance of Rizal, Caloocan City Branch XII, Reg. Case No. C-211 (LRC Case No. 112167) entitled "Pedro Cardenas, et al., petitioners vs. Antonio Banzon, et al., respondents," to secure possession from the Banzons of the lot covered by T.C.T. No. 8567. A writ of possession was issued in said case on May 21, 1965, but the enforcement thereof was held in abeyance in view of the filing with the same court of Civil Case No. C-531 entitled "Antonio Banzon, et al. vs. Pedro Cardenas and Leonila Baluyot, Associated Insurance and Surety Co., Inc. and Benito Macrohon." Banzon's complaint in Civil Case No. C-531 was, however, dismissed on August 6, 1969, on the ground that "the matter of the legality of the transfer of ownership of the property in question from the plaintiff to the Associated Insurance & Surety Co., Inc., has been upheld by the Supreme Court in its decision promulgated on November 29, 1968, and consequently the transfer to the spouses Pedro Cardenas and Leonila Baluyot must perforce be considered also as valid and legal."
Consequently, respondent Cardenas filed a motion on October 13, 1969, in Case No. C-211 for the issuance of an alias writ of possession; this was granted on October 23, 1969. The alias writ was served on Banzon, who refused to vacate the premises and to remove the improvements thereon. In view of this, an order was issued on December 9, 1969, for the issuance of a writ of demolition, but its enforcement was held in abeyance because a temporary restraining order, later changed to a writ of preliminary injunction, was issued by the Court of Appeals on December 13, 1969, in view of the filing by the Banzons with the said appellate court of a petition for injunction. 10
On February 28, 1970 the Court of Appeals rendered judgment dismissing the petition because it found the same to be allegedly "merely a device to prevent the execution of a final judgment by the filing of a new suit based upon the same grounds which have already been interposed and passed upon in the case where the final judgment had already been rendered ... ." Cardenas thereafter filed a motion for the enforcement of the order of demolition and writ of possession previously issued in Reg. Case No. C-211. On March 13, 1970, Judge Fernando A. Cruz of the Court of First Instance of Rizal, Caloocan City Branch XII, issued an order granting the motion.11
On March 13, 1970, the Banzons having learned of the bank's release of Associated as of February 20,1970, supra, accordingly filed a complaint for reconveyance and damages with the Court of First Instance of Manila against respondents Associated and the Cardenas spouses.12 In their complaint, the Banzons impute bad faith, collusion and confederation between Associated and the Cardenases with regard to the latter's prematurely obtaining T.C.T. No. 8567 covering one of Banzon's lots in their name. The Banzons therein alleged for the first time their new cause of action based on the subsequent development that the Philippine National Bank had collected directly on February 16, 1970 from the principal debtor Sta. Maria the loan guaranteed by Associated (which amounted only to a principal of P15,446.44 as of August, 1963, excluding interests or just one-half of the premature judgment for P30,257.88 excluding interests obtained by Associated six (6) years earlier in 1957 against Banzon in trust and for the benefit of the bank allegedly as the amount owed by Sta. Maria and to be discharged by Associated, which Associated never discharged); 12a and that the bank, per its letter of February 20, 1970 had therefore absolutely released Associated of any liability on its surety undertaking. 12b The Banzons therefore prayed for the return and reconveyance of their two parcels of land covered by T.C.T. No. 8567 (in Cardenas' name) and No. 53759 (still in Banzon's name), in discharge of Associated's implied trust not to unjustly enrich itself and appropriate Banzon's properties at absolutely no cost to itself.
On March 16, 1970, the Sheriff of Caloocan City served upon the Banzons copy of the aforesaid order giving them until March 20, 1970, within which to deliver possession of the parcel of land covered by T.C.T. No. 8567, and to remove the improvements thereon; otherwise, the said sheriff would proceed to enforce the same.
Petitioners Banzons therefore came to this Court on March 20, 1970, by means of the present petition for injunction. At petitioners' instance, the Court on March 24, 1970 restrained respondents and their representatives from enforcing the questioned writ of execution and order of demolition, and respondent Associated from disposing in any manner of its alleged rights and interests over the two lots in question.
Respondents Cardenas spouses filed in due course their Answer dated April 2, 1970, admitting in effect the antecedents of the case as recited above, citing even this Court's decision of November 29, 1968 in Associated vs. Banzon, supra, which affirmed the money judgment in favor of Associated " for the benefit of the Philippine National Bank" 13 but alleging that ownership to one parcel (Lot 6, Block 176 covered by T.C.T. No. 8567) "has already absolutely and irrevocably vested in herein respondent Pedro Cardenas." 14 Said respondents further averred that "there is no longer anything that may be restrained," since per the sheriff's return of March 23, 1970, he enforced on said date respondent court's writ of possession and demolition order and demolished all the improvements erected in the premises. 15
To this petitioners countered that "the special deputy sheriff of Rizal did succeed in demolishing the building erected on that lot in question. This he did notwithstanding the fact that he has been duly informed by petitioner Banzon of the existence of a restraining order in this case. however, after accomplishing his purpose, he and his men left the premises."16
Most relevant, however, was a pleading entitled "Explanation and Manifestation" dated April 25, 1970 filed by Atty. Feliberto Castillo, as former counsel for Associated "in the interest of justice and in the name of truth and as an officer of the Court," wherein with respect to the summons for Associated received by his law office, he manifests:
3. That he is entertaining a serious doubt whether he could still represent the Associated Insurance & Surety Co., Inc. in view of the fact that in Civil Case No. 56995 of the Court of First Instance of Manila, entitled "Republic of the Philippines, represented by the Insurance Commissioner vs. Associated Insurance Surety Co., Inc." the said Court of First Instance of Manila ordered the liquidation and dissolution of this surety company, which was appealed to the Court of Appeals, CA-G. R. No. 37985-R but affirmed the decision of the Court of First Instance of Manila in a decision promulgated on January 3, 1968, which was appealed again by the Associated Insurance & Surety Co., Inc to the Honorable Tribunal, G.R. No. L-29834, also affirming the decision of the Court of Appeals by denying the petition for writ of certiorari in its resolution of June 20, 1968, and therefore, since then, the decision of the Court of First Instance of Manila ordering the liquidation and dissolution of the Associate Insurance & Surety Co., Inc. became final and executory, an thereafter, the Insurance Commissioner demanded the surrender of books, documents and other papers of this surety company, an as a matter of fact, books, documents and other papers salvaged were already surrendered to the Insurance Commissioner for liquidation of this company, so that by virtue thereof, the Insurance Commissioner being the liquidator appointed by the court to liquidate the Associated Insurance & Surety Co., Inc., is now the legal representative of this surety company to whom a copy of this paper will be furnished." 17
In his "Explanation and Manifestation," Atty. Castillo further states that his law office was the counsel for Associated in the cases involved in these proceedings, viz., Civil Case No. 31237 of the Court of First Instance of Manila, Case No. 3885, G.L.R.O. Record No. 11267 of the Court of First Instance of Rizal, for consolidation in Associated's favor of T.C.T. No. 29685-Rizal and T.C.T. No. 53759-Rizal, and in G.R. No. L-23971 of the Supreme Court, Associated vs. Banzon, supra, affirming on November 29, 1968 the Rizal court's judgment for consolidation; and
— That since Associated was ordered liquidated and dissolved by the Manila court of first instance in Civil Case No. 56995, as affirmed by the Court of Appeals in CA-G.R. No. 37985-R, which became final upon this Court's denial of review per its resolution of June 20, 1968 in G.R. No. L-28934, the Insurance Commissioner as the appointed liquidator of Associated is the legal representative thereof who may duly act for Associated and upon whom summons should be served;
— That even before the promulgation of the Supreme Court decision on November 29, 1968 in Associated vs. Banzon he, as counsel for Associated, never attempted to secure new titles for his said client, considering that its ownership over the parcel of land covered by them was then "still sub judice;"
— That even after the promulgation of the said Supreme Court decision, he never attempted to secure new titles for his client, because by that time Associated had already been ordered dissolved and liquidated, hence, to be represented in all instances by the Insurance Commissioner as liquidator;
— That he wonders how respondent Pedro Cardenas was able to secure T.C.T. No. 8567 (formerly T.C.T. No. 39685-Rizal) in his name in 1965, when Associated, which really owed Cardenas a certain sum, could only secure new titles over the parcels of land after — not before — November 29, 1968, when the Supreme Court's decision in G.R. No. L-23971 was promulgated; and that in his opinion, the issuance to respondent Cardenas of T.C.T. No. 8567 was "fraudulent and irregular for being without basis when the same was issued, so that the register of deeds of Caloocan City committed some sort of mistakes or negligence in issuing this title to respondent Pedro Cardenas, and as such, this T.C.T. No. 8567 is null and void and without force and effect and calls for an investigation of the guilty parties responsible for the issuance of this T.C.T. No. 8567 in the name of respondent Pedro Cardenas, who might have committed some falsifications;" (for indeed how could Cardenas cause title to said lot to be transferred to Associated for him in turn levy against it for his P5,100.00 judgment against Associated when Associated's case against Banzon for such transfer and consolidation of title was then still pending appeal before this Court, and Associated's judgment against Banzon was one of trust, expressly therein declared to be "for the benefit of the Philippine National Bank?")18 and
— That "anybody who will attempt to offer the said parcel of land for sale would be committing a crime as the position of the same belongs exclusively to the Insurance Commissioner who is the liquidator of the Associated Instance & Security Co., Inc.; consequently, the petitioner should not entertain any worry as said parcel of land is not being disposed of not only because the power to sell the same exclusively belongs to the Insurance Commissioner but also because the Associated Insurance & Surety Co., has no titles yet over these parcels of land as it did not attempt to secure any even before and after the promulgation of the decision of the Honorable Tribunal in G.R. No. 23971 in view of the circumstances earlier explained."
On May 11, 1970, we issued summons on the Insurance Commissioner as liquidator of Associated to answer the petition. In her answer filed on May 29, 1970, the Acting Insurance Commissioner through the Solicitor General disclaimed knowledge of practically all the allegations of the petition for lack of knowledge or information sufficient to form a belief as to their truth, manifesting that she first learned of the material facts averred in the petition when she received copy of Atty. Castillo's "Explanation and Manifestation", because the records and documents pertinent to this case were not among those surrendered to her, and affirming she is the liquidator of Associated by virtue of the Manila court's order dated December 31, 1965 of liquidation and dissolution of said corporation, as follows:
3. That the herein Acting Insurance Commissioner is liquidator of Associated Insurance & Surety Co., Inc. by virtue of an order of liquidation and dissolution of said corporation dated December 31, 1965, by the Court of First Instance of Manila in Civil Case No. 56995, which decision was affirmed on appeal by the Court of Appeals in its decision (CA-G.R. No. 37895) dated January 3, 1968, which decision was again affirmed on appeal by this Honorable Tribunal when it denied the petition for a writ of certiorari in its Resolution of June 20, 1968 (G.R. No. L-38934) and which on July 9, 1968, became final and executory;
4. That by virtue of the aforesaid decision, the Insurance Commissioner as liquidator of Associated Insurance & Surety Co., Inc., is vested by authority of law with the title to all of the property, contracts, and rights of action of said corporation as of the date of the order of liquidation (Sec. 175-C, par. 3 of the Insurance Act, as amended);
5. That any subsequent sale or disposition of the property of said corporation without the knowledge and consent of the herein Acting Insurance Commissioner and approval but the Liquidation Court is contrary to law and null and void;
6. That after the aforesaid order of liquidation and dissolution became final and executory, the Acting Insurance Commissioner demanded for the surrender of all the books, documents and properties of Associated Insurance & Surety Co., Inc. However, the records and documents pertinent to the above-entitled case were not among those surrendered to the Insurance Commissioner and it was only upon receipt of the "Explanation and Manifestation" of Atty. Feliberto Castillo, dated April 25, 1970, and the present "Petition" that she came to know for the first time of the alleged facts averred in this case." 19
A "Motion to Dissolve Temporary Restraining Order and to Dismiss Petition" was filed on February 12, 1971, by respondents spouses Cardenas and Baluyot. They contend that the restraining order issued by this Court should be dissolved, and the petition itself, insofar as they are concerned, be dismissed, because the petition is predicated on petitioners' complaint for reconveyance and damages in Civil Case No. 79244 before Branch VIII of the Court of First Instance of Manila, and the said court issued an order on October 28, 1970, dismissing the said complaint with respect to defendants therein Cardenas and Baluyot, which dismissal was not appealed and became final and executory on January 5, 1971, per entry of judgment attached to the motion. Consequently, according to these respondents, the temporary restraining order issued by this Court enjoining the enforcement of the writ of execution and the order of demolition in Reg. Case No. C-211 of the Court of First Instance of Rizal, has become inoperative and without any legal basis, the present petition has lost its legal basis, and petitioners have no more cause of action against respondents Cardenas and Baluyot. The said order of dismissal of the complaint against these respondents was issued pursuant to Section 5, Rule 16 of the Rules of Court, after a preliminary hearing on the affirmative defenses of bar by prior judgment and lack of cause of action set up by said respondents in their answer, with the lower court opinion that petitioners' action was already barred by the prior judgments of this Court of November 29, 1968 in Associated vs. Banzon and of the Court of Appeals of February 28, 1970 in Banzon vs. Hon. Fernando Cruz, supra. 20
The Solicitor General filed on March 29, 1971 on behalf of the Insurance Commissioner as liquidator of Associated a strong opposition to the motion to dissolve the restraining order and dismiss the petition. 21 The commissioner-liquidator after complaining that "she is still demanding for the surrender of all the books, documents and properties of Associated" and that "it was only upon receipt on March 11, 1971 of the voluminous records of the cases handled by counsel Feliberto V. Castillo for (Associated) that (her) undersigned counsel have verified and confirmed the truth of the status of the different cases," contends inter alia as follows:
18. That, however, during the pendency of the aforesaid appeal of petitioner Antonio R. Banzon with this Honorable Tribunal and while the case was still sub-judice, particularly on February 8, 1964, the herein respondent Pedro Cardenas as winning party in a case entitled "Pedro Cardenas vs. Victoria Vda. de Tengco and Pablo Tuazon," Civil Case No. 36174, Court of First Instance of Manila, and where the Associated Insurance and Surety Co., Inc. was surety for the defendants therein, executed and levied upon one of the parcels of lands involved in the aforesaid appeal. Ultimately, Pedro Cardenas was able to acquire the land in question (Lot No. 6, Block No. 176, then covered by T.C.T. No. 39685) as highest bidder, for the judgment debt of defendants in said action, plus incidental expenses for the sum of P5,100.00 only;
19. That subsequently thereafter, said respondents Cardenas, thru some scheme and devise, succeeded in having the title of said parcel of land transferred in their names under T.C.T. No. 8567, Registry of Deeds of Caloocan City, on May 5, 1965, at a time when the Associated Insurance & Surety Co., Inc. had not yet earned the authority to consolidate in its name said property, as the case was then pending with this Honorable Tribunal. As alleged in paragraph 18 hereof, the question of consolidation was resolved by this Honorable Tribunal on February 28, 1968; 21a
20. That by the nature of the decision in Civil Case No. 31237, CFI, Manila, as alleged in paragraph 15 hereof, the property or sums of money recovered from defendants therein shall be reserved for the benefit of the Philippine National Bank for the purpose of paying the principal debtor's (Maximo Sta. Maria's) obligation therein, and consequently, the Associated Insurance & Surety Co., Inc. shall hold the property in question or the sums recovered in said action, in trust and for the purpose of paying the aforesaid obligation of Maximo Sta. Maria.22
21. That the Associated Insurance & Surety Co., Inc. failed to pay from its own funds under its surety undertaking, nor from funds realized from the property levied upon by virtue of the decision in Civil Case No. 31237, CFI, Manila, but on the other hand, the principal debtor Sta. Maria paid his own obligation the Philippine National Bank thus, releasing it (Associated Insurance & Surety Co., Inc.) from its obligation under the suretyship undertaking with respect to said obligation of Maximo Sta. Maria, and similarly herein petitioner Antonio R. Banzon was released from this obligation as co-indemnitor in said undertaking;
22. That in fairness to petitioners Antonio R. Banzon and Rosa Balmaceda, the two parcels of land executed and levied upon by virtue of the decision in Civil Case No. 31237, Court of First Instance of Manila, deserve to be reconveyed to them;
23. That one of the lots involved, namely, Lot No. 6, Block No. 176 covered by T.C.T. No. 8567, Registry of Deeds of Caloocan City, in the names of the present respondents Pedro Cardenas and Leonila Baluyot, being one of the two parcels of lands levied upon in Civil Case No. 31237 but transferred to respondents under dubious circumstances and patently unauthorized by law, should be ordered reconveyed to the Associated Insurance Co., Inc. through the Insurance Commissioner for the purpose stated in the next preceding paragraph, as the transaction on the transfer of said parcel of land to them is null and void from the very beginning."23
Petitioners likewise oppose the motion of the Cardenases. They contend that the present petition is not solely predicated on their complaint for reconveyance and damages in Civil Case No. 79244 for, as admitted by the Insurance Commissioner, they are entitled to the reconveyance of the lot covered by T.C.T. No. 8567 and for contribution or indemnification for damages which they may recover from Associated; that respondents Cardenases secured said title fraudulently and irregularly without any legal basis, hence, said title having been anomalously issued, is null and void and without force and effect, and, that, as stated by Insurance Commissioner-liquidator, in fairness and justice to petitioners, the two parcels of land levied in favor of Associated by virtue of the decision on Civil Case No. 31237 should be reconveyed to them; and that to dissolve the temporary restraining order and to dismiss the present petition would leave petitioners without a legal remedy.
In a minute resolution dated April 19, 1971, the Court denied the said motion of respondents Cardenas and Baluyot "to dissolve temporary restraining order and to dismiss petition."
1. The immediate objectives of this petition are: (a) to enjoin respondent Judge Fernando Cruz of the Court First Instance of Rizal, Caloocan City Branch, and respondents Pedro Cardenas and Leonila Baluyot, and their representatives, from enforcing the writ of execution and of demolition issued by said respondent Judge in Reg. Case No. C-211 in relation to the lot covered by T.C.T. No 8567; and (b) to enjoin respondent Associated from disposing its alleged rights and interests in the two lots covered by T.C.T. No. 8567 and T.C.T. No. 53759, the injunction in both cases to be made effective during the pendency of the reconveyance case, Civil Case No. 79244, filed by petitioners as plaintiffs before the Manila court of first instance.
The real and substantive objectives of the petition are to seek the rightful restoration and reconveyance to petitioners Banzons of their two Caloocan city lots, covered by T.C.T. No. 53759 (still in Banzon's name, but on the back whereof is annotated the sheriff's final deed of sale in favor of Associated) and by T.C.T. No. 8567 (in the name of respondents Cardenases) on the fundamental ground that Associated's levy in execution of said lots was in trust for the benefit of the Philippine National Bank for the purpose of paying the bank the loan obligation of Maximo Sta. Maria which Associated had guaranteed as surety and against which liability Banzon in turn as indemnitor had undertaken to indemnify and hold harmless Associated.
Now, the basic 1957 judgment of the Manila court sentencing Banzon to pay Associated a total of P30,257.86 excluding interest, " for the benefit of the Philippine National Bank" expressly made of record the said court's intent and disposition that the execution and operation of its judgment against Banzon were contingent and conditioned upon Associated as plaintiff-surety actually paying or being made or compelled to pay the bank-creditor an equivalent amount as guaranteed by it. That this is so is made more evident when we consider the provisions of Article 2071 of the Civil Code which permit the surety to file such an advance suit against the principal debtor (not against an indemnitor such as Banzon) only to obtain release from the guaranty or security against the danger of the debtor's insolvency. Where the debtor directly discharged his loan obligation to the bank which in turn released Associated from its suretyship liability without Associated having incurred a centavo of liability, it is indisputable that Associated in turn would necessarily release Banzon as indemnitor and the basic 1957 judgment would be inoperable and unenforceable against Banzon.
When Associated nevertheless prematurely and contary to the intent and condition of the basic 1957 judgment levied in execution on the two Caloocan City lots of Banzon the interest it acquired was clearly impressed with a trust character. Such acquisition of Banzon's properties by Associated was effected, if not through fraud 23a on Associated's part, certainly through mistake 23b and there Associated was "by force of law, considered a trustee of implied trust for the benefit of the person from whom the property comes" by virtue of Article 1456 of the Code 23c — since Associated not having paid nor having been compelled to pay the bank had no right in law or equity to so execute the judgment against Banzon as indemnitor. Had there been no fraudulent concealment or suppression of the fact of such non-payment by Associated or a mistaken notion just assumed without factual basis that Associted had paid the bank and was thus entitled to enforce its judgement against Banzon as indemnitor, the writ for execution of the judgment against Banzon's properties would not been issued.23d
Furthermore, Associated's conduct, upon being sued by the Philippine National Bank directly with the principal debtor Sta. Maria for collection of the debt23e and sentenced by the Pampanga court of first instance in 1963 (which it did not appeal) to pay the debt in the much lesser amount of only P15,446.44, excluding interests, in not so discharging its liability notwithstanding that it had already executed its 1957 judgment against Banzon as indemnitor and taken in execution Banzon's two properties, was indeed rank fraud. Associated therefore stands legally bound by force of law to now discharge its implied trust and return Banzon's properties to him as their true and rightful owner.
The obligation imposed upon Associated as implied trustee to so restore Banzon's properties becomes even more compelling when it is considered that in the premature execution sale by virtue of the basic 1957 judgment, Associated ostensibly was the highest bidder therefor applying its purported judgment credit of P41,000.00 when in law such judgment was not subject to execution since the condition of Associated as surety being made to pay the bank to make the judgment operable and enforceable had not materialized and in fact Associated not having paid anything to the bank did not possess such purported judgment credit of P41,000.00, nor did it put out a single centavo for which it could hold Banzon answerable and therefore take Banzon's properties in execution and satisfaction thereof. Actually, as already indicated above, the principal debt of the bank's debtor, when directly collected by the bank six (6) years later, amounted merely to 1/2 the amount or P15,446.44 as of August, 1963, excluding interests.23f As already stated above, Associated did not pay even this much lesser amount, notwithstanding the Pampanga court's judgment against it in the suit directly filed by the bank.
Finally, it would be an outrage on simple justice and iniquitous unjust enrichment if a surety such as Associated, after taking title in execution to the indemnitor's properties in order to protect or reimburse itself from liability to the creditor for the debt guaranteed by it, were to be allowed to retain ownership of the properties even though it did not incur or discharge its liability at all, since it succeeded in evading payment to the creditor who thereafter collect the debt directly from the debtor. Thus, the law (Article 1456, Civil Code) impresses properties thus acquired with trust character and constitutes the erring surety as "trustee of an implied trust for the benefit of the person from who the property comes," in this case, Banzon as the true and rightful owner of the properties.
2. As Cardenas in levying in turn for satisfaction of his P5,100.00 judgment against Associated on one of Banzon's lots acquired only whatever interest Associated had in the lot, and with the knowledge that Associated's basic 1957 judgment against Banzon was "for the benefit of the Philippine National Bank" and hence Associated's interest in the Banzon properties was impressed with a trust character, subject to the obligation of Associated as implied trustee to return the properties to Banzon, the trust character of the lot titled by Cardenas necessarily passed to him. Cardenas could not claim actual or absolute ownership of the lot so titled but could only hold the same as trustee, like Associated as his causante or predecessor.
The respondents Cardenases' pleadings of record should clearly that they were fully aware of these vital antecedents and premises of the suits between Associated and the Banzons. In their memorandum, they cite the Manila court of first instance's basic decision in Civil Case No. 31237 "condemning defendants to pay jointly and severally upon (sic) plaintiff (Associated) but for the benefit of the Philippine National Bank" 24 the several amounts sought by Associated, as surety, totalling P30,257.86. As far as their own claim against Associated is concerned, they likewise recite in their memorandum that:
On April 29, 1959, then Judge (now Justice) Jesus Perez of the Court of First Instance of Manila rendered a decision in Civil Case No. 36194, entitled "Pedro Cardenas vs. Victoria Vda. de Tengco, et al." ordering the defendants, including Associated Insurance & Surety Co., Inc., as surety, to pay certain sums of money to Pedro Cardenas. The liability of the Associated Insurance & Surety Co., Inc., was affirmed by the Court of Appeals in a Decision promulgated on October 30, 1963, in CA-G.R. No. 25227-R. Consequently, pursuant to a Writ of Execution issued on February 8, 1964, the City Sheriff of Caloocan sold on March 23, 1964 at a public auction to Pedro Cardenas, the highest and only bidder, all the "rights, interests, claims and title" of the judgment-debtor Associated Insurance & Surety Co. Inc., over the property plus the improvements thereon covered by Transfer Certificate of Title No. 39685 (one on the properties acquired from Antonio Banzon). The property not having been redeemed within the one year period, a Deed of Absolute Sale was issued in favor of Pedro Cardenas on April 2, 1965. On April 23, 1965, Pedro Cardenas filed a petition with the Court of First Instance of Rizal, Branch XII, Caloocan City, in Registration Case No. C-211 (LRC Rec. No. 11267), entitled "Pedro Cardenas, Petitioner," for the issuance of a new transfer certificate of title over the property in question and to declare null and void the one previously issued. On May 5, 1965, a Transfer Certificate of Title was issued by the Register of Deeds of Caloocan City in the name of Pedro Cardenas pursuant to the order of the court in aforecited Registration Case No. C-211, dated May 3, 1965, as amended. 25
It is obvious that since what Cardenas acquired in his execution for his P5,100.00 judgment against Associated was only "all the rights, interests, claims and title of the judgment-debtor (Associated) over the property ... (one of the properties acquired from Antonio Banzon)" and Associated's rights, if they could be so denominated, over Banzon's properties were merely those of a trustee, supra, and Cardenas thereby acquired no absolute "rights, interests, claim and title" at all but Associated's obligation as trustee to restore Banzon's lawful properties to him.
3. As a point of law, even though under Associated's suretyship agreement guaranteeing Sta. Maria's crop loans with the bank, it was permitted, supposedly for its protection, to proceed judicially against the principal debtor and indemnitors even prior to the surety's making payment to the creditor bank, Article 2071 of the Civil Code regulates such relations and provides that in such cases, the surety's right is against the principal debtor and that "in all these cases, the action of the guarantor is to obtain release from the guaranty, or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor."
Associated thus did not even have any valid cause of action against Banzon as its indemnitor, but could proceed only against Sta. Maria as the principal debtor. And even as against such principal debtor, it could not prematurely demand payment even before it had paid the creditor, its action being limited only for the purpose of obtaining release from the guaranty or a security against an eventual insolvency of the debtor. As was emphasized by Mr. Justice Reyes for the Court in General Indemnity Co., Inc. vs. Alvarez, 26 while a guarantor may under Article 2071 of the Civil Code proceed against the principal debtor, even before having paid, when the debt has become demandable, "(T)he last paragraph of this same article, however, provides that in such instance, the only action the guarantor can file against the debtor is 'to obtain release from the guaranty, or to demand a security that shall protect him from any proceeding by the creditor and from the danger of insolvency of the debtor.' An action by the guarantor against the principal debtor for payment, before the former has paid the creditor, is premature."
4. The realization of the Banzon's rightful objectives in law and equity as thus restated has somewhat been hampered and beclouded by the ineptitude and sorry neglect with which they and/or their counsel have pursued their remedies in the various suits brought by them. To cite the latest instance, the pending suit filed by them in the Manila court of first instance, Civil Case No. 79244, is from the record the first real case that they have properly filed for reconveyance of their two Caloocan City lots based on their new cause of action that with the debtor's direct payment to the bank, Associated had been released as surety and Banzon consequently likewise released as Associated's indemnitor, and therefore Associated in discharge of the implied trust under which it executed the basic 1957 judgment " for the benefit of the Philippine National Bank" against Banzon was now called upon to discharge such trust and reconvey and restore Banzon's properties to him.
Yet Banzon filed no appeal from the Manila Court's dismissal of his complaint against the Cardenas spouses for reconveyance of the lot wrongfully titled by the latter on the lower court's mistaken concept that this Court's decision of November 29, 1968 in Associated vs. Banzon, supra, constituted res judicata and apparently allowed such dismissal to become final. In reality, since Associated never had to pay the bank, Banzon's two lots, which had been levied upon prematurely under Associated's judgment against Banzon and were therefore held by it in implied trust for Banzon by force of law, "deserve to be reconveyed to them" — in the very words of the insurance commissioner, who alone and officially represents and acts for Associated as liquidator.
As manifested by Associated's former counsel even when Associated was acting on its own unauthorizedly and in violation of law, since an order for its liquidation and dissolution had already been issued by the Manila court since December 31, 1965, he, as Associated's counsel, never attempted to transfer Banzon's titles to Associated since the question was sub-judice before this Court and resolved only per its decision in Associated vs. Banzon of November 29, 1968, as of which time, this Court had already previously affirmed on June 20,1968 in G.R. No. L-28934, the Manila court's dissolution and liquidation order against Associated thus removing all doubt that only the Insurance Commissioner as liquidator could act in any and all matters for Associated. 27
5. Under Sec. 175-C, paragraph 3 of the Insurance Act as amended, 28 the Insurance Commissioner as liquidator of Associated was vested by authority of law with the title to all of the property, contracts and rights of action of Associated as of the date of the judicial order of liquidation, and any sale or disposition of Associated's properties or rights without the knowledge and consent of the insurance commissioner as liquidator and without the approval by the liquidation court is contrary to law and null and void.
Accordingly, petitioners Banzons are, as against their and their counsel's neglect and inattention, nevertheless saved from the otherwise fatal consequences of the invoked final dismissal of their complaint against the Cardenases in Civil Case No. 79244 of the Manila court for recovery of the lot wrongfully titled in the Cardenases' name per T.C.T. No. 8567. Since in all the litigations subsequent to Associated's prematurely obtaining in the Manila court of first instance in Civil Case 31237 the basic 1957 judgment as surety against Banzon as a mere indemnitor to cover the principal debtor Sta. Maria's demandable loans to the bank and thereafter levying in execution on Banzon's two Caloocan City lots, notwithstanding that such judgment was expressly held to be in trust and for the benefit of the bank, the insurance commissioner, as liquidator of Associated and therefore an indispensable party was never impleaded and therefore there could be no final determination of said actions. Under Rule 3, section 7, indispensable parties must always be joined either as plaintiffs or defendants, for the court cannot proceed without them, and hence all judgments and proceedings held after the liquidation and dissolution order against Associated became void for lack of an indispensable party in the person of the insurance commissioner-liquidator. The insurance commissioner as liquidator of Associated by authority of law was indisputably an indispensable party with such an interest in the controversies affecting the judgment for Associated (against Banzon) and against Associated (in favor of Cardenas) that a final decree would necessarily affect its rights (administered by the Commissioner in the public interest and for the public's protection) so that the courts could not proceed therein without the commissioner-liquidator's official presence.
6. The wrongful dismissal by the Manila court of the Banzons' reconveyance suit, Civil Case No. 79244, as against the Cardenases thus does not produce what would otherwise have been fatal consequences due to the Banzons' failure to appeal from such dismissal.
Their reconveyance case as against Associated as principal defendant remains pending in court. And the insurance commissioner as liquidator of Associated, now that she is fully aware of the status of these antecedent cases after she finally received on March 11, 1971 the voluminous records thereof which had hitherto not been surrendered to her office despite demands therefor, is called upon to appear for Associated in the said case, if she has not as yet been duly impleaded as such liquidator. With the insurance commissioner, as liquidator of Associated and an indispensable party now in the case, the said reconveyance suit may now proceed anew and the Cardenas spouses caused by the liquidator to be duly impleaded anew for they are also indispensable parties insofar as the insurance commissioner-liquidator's claim on behalf of Associated to the lot covered by T.C.T. No. 8567 issued in their name is concerned. Herein petitioners seek principally in the said case the reconveyance to them by Associated of their two parcels of land covered by T.C.T. No. 8567 and T.C.T. No. 53759, as acquired in execution by Associated, and thereafter, with respect to the lot covered by T.C.T. No. 8567, by the Cardenases, by virtue of the trust character impressed upon them and Associated's duty as implied trustee to restore said properties to the Banzons.
Considering that the insurance commissioner herself , who now legally can alone represent Associated as liquidator, has herein recognized such trust character and has expressed the belief that the said lot, no less than the other lot covered by T.C.T. No. 8567, should, in justice to petitioners, be reconveyed to them on account, among others, of petitioner Banzon's release from his obligation as indemnitor by virtue of the principal debtor's subsequent payment of his obligation with the Philippine National Bank which likewise released Associated from any liability as surety, the present petition should therefore be granted in the interest of justice and equity so as to enable the insurance commissioner-liquidator in due course to discharge the trust of reconveying Banzons' properties to them.
7. The circumstances that respondents Cardenases, insofar as the lot wrongfully claimed by them, caused the Caloocan City special deputy sheriff to enforce on March 23, 1970 respondent court's challenged order of demolition and writ of possession on the very day that this Court ordered the issuance of a restraining order against the enforcement of said challenged order and writ, and notwithstanding that said sheriff was duly advised by Banzon of the petition at bar having been filed on March 20, 1970, does not make the restraining order in any manner moot. The Court does not look with favor upon parties "racing to beat an injunction or restraining order" which they have reason to believe might be forthcoming from the Court by virtue of the filing and pendency of the appropriate petition therefor. Where the restraining order or preliminary injunction are found to have been properly issued, as in the case at bar, mandatory writs shall be issued by the Court to restore matters to the status quo ante. 29
In the case at bar, with the insurance commissioner as liquidator of Associated, recognizing through the Solicitor General that the Banzons' two lots wrongfully taken from them by Associated's premature actions should be reconveyed to them, there is established a clear and indubitable showing on the record that the petitioners are entitled to a writ restoring the status quo ante. A mandatory writ shall therefore issue commanding respondent court to forthwith restore petitioners to their possession of Lot 6, Block 176, covered by T.C.T. 8567 from which they have been removed by enforcement of said respondent court's enjoined order of demolition and writ of possession dated March 13, 1970, Annex "F" of the petition. As to petitioners' building thereon claimed to be worth P10,000.00 (but countered by Cardenas to be a "mere barong-barong" 30), respondent court shall at Banzon's petition cause respondents Cardenases to restore the demolished building or pay Banzon the determined value thereof. As to the fruits of possession of the land, with Cardenas acknowledging that he has been leasing the same to a third person at P200.00 a month, 31 respondents Cardenases shall forthwith pay to petitioners Banzons the whole amount of rentals so received by them to the time that possession of the lot is effectively restored to petitioners. By the very nature of this mandatory writ, the same shall be immediately executory upon promulgation of this decision.
WHEREFORE, the petition for a permanent injunction, during the pendency of Civil Case No. 79244 of the Court of First Instance of Manila against the disposition in any manner of the two parcels of land subject of said case other than their reconveyance to petitioners as the true and rightful owners thereof as expressly recognized by the insurance commissioner as liquidator of Associated is hereby granted. In lieu of the permanent injunction against enforcement of respondent court's order dated March 13, 1970 in Case No. C-211 thereof ordering the delivery of possession of the property covered by T.C.T. No. 8567 to respondents Cardenases and demolition of petitioners Banzons' improvements thereon, (which were prematurely carried out by respondent court's sheriff on March 23, 1970) a writ of mandatory injunction commanding respondent court to forthwith restore the status ante quo and to restore petitioners Banzons to full possession of the property and enjoyment of the fruits and rentals thereof under the terms and conditions stated in the next preceding paragraph is hereby issued, which shall be immediately executory upon promulgation of this decision. With costs against respondents Pedro Cardenas and Leonila Baluyot.
This decision is without prejudice to such civil and criminal liability as the officers of the defunct Associated Insurance & Surety Co., Inc. may have incurred by virtue of their acts of commission and omission which have resuited in grave prejudice and damage to petitioners as well as to the public interest, as in the suppression from and non-surrender to the Insurance Commissioner as liquidator of the records of the relevant antecedent cases, and in the possible misrepresentation to the courts therein that Associated had duly discharged to the bank its liability as surety and could therefore lawfully levy on the properties of Banzon as indemnitor, which would have resulted in the respondents' unjust enrichment at Banzon's expense. The insurance commissioner is directed to conduct the corresponding investigation for the purpose of filing such criminal and other appropriate actions as may be warranted agains the responsible parties. So ordered.
Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro and Fernando, JJ., concur.
Makalintal, Makasiar and Antonio, JJ., took no part.
Footnotes
1 Civil Case No. 31237 thereof, entitled "Associated Surety & Instance. Co. Inc., plaintiff vs. Maximo R. Sta. Maria, Antonio R. Banzon and Emilio R. Naval, defendants"; emphasis supplied.
2 Reported in 26 SCRA 268.
3 This refers to Civil Case No. 31237 of the Manila CFI, supra, wherein Associated obtained a money judgment against Banzon et al. " for the benefit of the Philippine National Bank."
4 Emphasis supplied.
5 Idem.
6 Case G.R. No. L-24765, entitled "PNB, plaintiff-appellee vs. Maximo Sta. Maria, et al., defendants. Valeriana, Emeteria, Teofilo, Quintin, Rosario and Leonila, all surnamed Sta. Maria, defendants-appellants," being the appeal from the Pampanga CFI's decision in Civil Case 1907 thereof. Reported in 29 SCRA 303.
7 Annex D, petition.
8 Cardenas' judgment was as judgment creditor-plaintiff against Victoria Vda. de Tengco and Pablo Tuazon, judgment debtors-defendants in Civil Case No. 36194, CFI of Manila, and Associated issued a counterbond on behalf of said defendants to cover Cardenas' judgment.
9 Petition, par. X; notes and emphasis supplied.
10 CA-G.R. No. 44391-R of the Court of Appeals, entitled "Antonio Banzon and Rosa Balmaceda, petitioners vs. Hon. Fernando Cruz and spouses Pedro Cardenas and Leonila Baluyot, respondents."
11 Annex "F", petition.
12 Civil Case No. 79244 of the Manila Court of First Instance, entitled "Antonio R. Banzon and Rosa Balmaceda, plaintiffs, vs. Associated Ins. & Surety Co., Inc., Pedro Cardenas and Leonila Baluyot, defendants."
12a Supra, at page 6.
12b Supra, at p. 8.
13 Cardenas' answer, par. 5.
14 Idem, par. 14.
15 Idem, par. 2 of special defenses.
16 Petitioners' memorandum, pp. 10-11.
17 Emphasis supplied.
18 Note in parentheses supplied.
19 Emphasis supplied.
20 At page 10.
21 Rollo, pp. 193-200.
21a The correct date of the decision is November 29, 1968, supra, p. 2.
22 Emphasis copied.
23 Emphasis supplied, except that on material dates which is copied.
23a See Gayondato vs. Treasurer, 49 Phil. 244, and Sevilla vs. de los Angeles, 97 Phil. 875, where legal title to property obtained by fraud or concealment is deemed held in "constructive trust" in favor of the defrauded party who is granted right to vindicate the property regardless of the lapse of time.
23b See Laureano vs. Stevenson, 45 Phil. 252, where adjoining property mistakenly included in the neighbor's title deemed held in implied trust by the neighbor for the real owner.
23c "Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes." (Civil Code)
23d As noted in the early case of Gaskell & Co. vs. Tan Sit, 43 Phil. 810, 813-814 (Sept. 23, 1922), Associated's claim against Banzon as indemnitor, without its having paid anything as surety, should not even have been reduced to judgment: "The most common example of the contingent claim is that which arises when a person is bound as surety or guarantor for a principal who is insolvent or dead. Under the ordinary contract of suretyship the surety has no claim whatever against his principal until he himself pays something by way of satisfaction upon the obligation which is secured. When he does this, there instantly arises in favor of the surety the right to compel the principal to exonerate the surety. But until the surely has contributed something to the payment of the debt, or has performed the secured obligation in whole or in part, he has no right of action against anybody — no claim that could be reduced to judgment.
23e In PNB vs. Sta. Maria, et al., G.R. No. L-24765, decided August 29, 1969; see pp. 6-8, and fn. 6.
23f Supra. at page 6.
24 Rollo, at pp. 84-85.
25 Rollo, at pp. 87-88, emphasis supplied.
26 100 Phil. 1059, 1062; emphasis in last sentence supplied.
27 Supra, at pp. 12-13.
28 C.A. No. 697, amending sec. 175 of Act 2427 as amended by Act 3152.
29 See Comm. of Public Highways vs. San Diego, 31 SCRA 616, 623 (Feb. 18, 1970).
30 Cardenas' Answer, par. 12.
31 Idem.
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