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.
Separate Opinions
BARREDO, J., dissenting:
To be in the unenviable position of fully agreeing that herein petitioners, the Banzon spouses, are entitled to the reconveyance of their two lots herein involved but at the same time being unable to see my way clear to giving my comformity to the reliefs granted to them in the dispositive portion of the decision penned for the majority by Mr. Justice Teehankee, in his usual meticulous and forceful, almost passionate, style, for which reason I am constrained to submit this dissent, is something that pains me as a man. My feeling as a Member of the Court, however, is one of grave concern that in their eagerness to render substantial justice, my brethren have deemed it necessary to indulge in the luxury of premising their conclusions on purported legal propositions which in my humble view are, at least, controversial, going as they do beyond the necessities of the case. The majority apparently considers it excusable to do so on the theory that the "peculiar" circumstances of this case justify ad hoc considerations and disposition. For my part, I feel very strongly that there is no need at all to go that far, because I am fully convinced that actually, the seeming peculiarity of the said circumstances do not demand the radical unusual treatment given to them by my colleagues, and rather than lend my hand in possibly creating erroneous impressions as to the correct rules of procedure and practice which should be observed in situations more or less similar to those herein obtaining and thereby place in doubt the validity and efficacy of the existing normal rules to adequately meet the problems in this case, I prefer to be alone, if alone I have to be, in the views hereunder expressed, believing firmly as I do that no case can be worth risking doing violence to any rule for so long as substantial justice can anyway be adequately extended to and achieved by the parties concerned within the same time as they would otherwise by simply adhering to the orthodox approach already understood and practiced by the bench and bar. I consider it but proper, if there must be evidence of judiciousness and absolute impartiality in the decisions of the Court, that We avoid as much as possible hueing Our judgment with perceptible tinge of over-excitedness that can be suspected as having blurred Our vision of the true justice in any case We decide.
As I will explain later in this opinion, there are passages and observations in the majority opinion which I cannot share because they extend to areas beyond my limited knowledge of remedial law which naturally I should fear to tread. Withal, they do not square with my sense of justice and propriety. Worse, I believe that the dispositive portion of the decision of the majority is beyond what is warranted in the premises.
For a more accurate and appropriate orientation, and so that the whole case may be reviewed in proper perspective, I believe it is best to restate first the fundamental and relevant facts appearing in the records.
1. The Philippine National Bank (PNB for short) extended credit by way of crop-loans to one Maximo R. Sta. Maria (Sta. Maria for short) sometime in 1952, for which Associated Insurance & Surety Co., Inc. (Associated for short) executed in favor of PNB a number of surety bonds, on the basis in turn of an indemnity agreement in its favor executed by three parties, one of whom was petitioner Antonio R. Banzon, (Petitioners, whether meant to be referred to individually or together, will hereafter be referred to merely as Banzon, since petitioner Rosa Balmaceda does not appear to have had any active role in all the transaction herein involved.) in which agreement there was an express stipulation expressly authorizing the surety to proceed against the indemnitors as soon as demand is made by PNB. (Pars. 1-3, Annex E of Petition.)
2. Because of demands made by the PNB upon Associated, this in turn made demands upon the principal debtor Sta. Maria, and when the latter failed to pay PNB, a suit, Civil Case No. 31237 of the Court of First Instance of Manila, was instituted by Associated against Sta. Maria and the indemnitors, including petitioner Banzon, which, after trial, allegedly held against Sta. Maria and the other indemnitors only, since Banzon, according to him, was not served with summons, ended nevertheless in a judgment against all the defendants, including Banzon, sentencing all of them to pay Associated jointly and severally the amount therein stated. (Pars. 4-7, Id.)
3. Exactly, this judgment read as follows:
IN VIEW WHEREOF, the Court renders judgment condemning defendants to pay jointly and severally unto plaintiff but for the benefit of the Philippine National Bank the amounts of P6,100.00, P9,346.44 and P14,811.42, all with interest at the rate of 12% per annum from date of the filing of the complaint until fully paid, (b) to pay the amount of P593.76 representing premiums and documentary stamps due on the renewal of the bonds Annexes "E" and "C-1"; (c) plus 15% as attorney's fees, and collateral. This 15% and the interest to be paid for the benefit of the plaintiff, and no pronouncement as to costs.
4. Upon the said judgment becoming final and executotry, Associated caused to be levied upon and sold at public auction the two subject parcels of land covered respectively by T.C.T. Nos. 39685 and 53759 of the Office of the Register of Deeds of Rizal. The purchaser was Associated and no redemption was ever exercised by Banzon. (See Annex "2", Id.)
5. Subsequently, without the said titles having been transferred actually in the name of Associated, since what was done was merely to annotate in the meantime at the back of Banzon's title the execution sale in favor of Associated pursuant to the judgment, and in fact, Associated's petition for the consolidation of the titles in question in its name was still pending in the Supreme Court in G.R. No. L-23971 which was decided only later on December 29, 1968, the Sheriff of Caloocan City levied upon TCT 39685 by virtue of a writ of execution issued against Associated in another case, Civil Case No. 36194 of the Court of First Instance of Manila pursuant to a judgment therein, (affirmed by the Court of Appeals in CA-G.R. No. 25227-R, Pedro Cardenas vs. Victoria Vda. de Tangco, et al.) and on March 23, 1964, said Sheriff sold to herein respondent Pedro Cardenas and Leonila Baluyot, (hereinafter to be referred to merely as Cardenas, irrespective of whether what is meant to be referred to is only the husband, the wife or both of them, since Leonila Baluyot does not appear to have had any active role in any of the transactions herein involved) as the highest and only bidder at the public auction, "all the rights, interest, claims and title" of Associated over the land in question and, after one year without any redemption being made by Associated, issued to said Cardenas, a Deed of Absolute Sale on April 2, 1965. (See p. 6 Memorandum of Cardenas, Annex 6 of their Answer; and p. 5, Opposition of Insurance Commissioner dated March 24, 1971.)
6. On April 23, 1963, Cardenas filed a petition with the Court of First Instance of Rizal, Caloocan Branch XII, in Reg. Case No. C-211 (LRC Rec. No. 11267) for the issuance of a new certificate of title in his name. On May 3, 1965 an order was issued granting the petition, and on May 5, 1965, TCT 39685 was cancelled and TCT 8567 was issued in the name of the respondents Pedro Cardenas and his wife. (Par. 9, p. 5, Reply of Cardenas to Explanation and Manifestation of Atty. Feliberto Castillo.)
7. It also appears that subsequently, on May 21, 1965, a writ of possession was issued in said case, C-211, but enforcement thereof was held in abeyance in view of the filing before Branch XII, Court of First Instance of Rizal, Caloocan City, of Civil Case No. 5311 by Banzon against Cardenas as well as Associated and the Sheriff questioning the validity not only of the judgment in aforementioned Civil Case No. 31237 on the ground that Banzon had not been summoned therein but also of the levy and sale because allegedly the properties sold were conjugal properties of the Banzons. In addition, it was also alleged in the complaint that Associated was not the owner of TCT 39685 but only the holder thereof as trustee of PNB. This case was, however, dismissed on August 6, 1969 and no appeal was taken by Banzon on time, although, later, on October 17, 1969, he filed a petition for relief, but this was denied on October 21, 1969 on the ground that it was several days late, and it does not appear that any appeal was taken from this denial. (pp. 7-8, Memorandum of Cardenas.)
8. Strangely, however, as already indicated earlier, the record also bears out that after June 20, 1960, the date when the period of Banzon to redeem the two titles, TCT 39685 and 53759, which were sold at auction as stated in paragraph 4 above expired, Associated "obtained in due time the corresponding final certificate of sale, which was likewise duly registered" in view of which, Associated "made demands upon (Banzon) to deliver to it the owner's duplicate of Certificates of Title Nos. 39685 and 53759 ... but the latter refused. As a result, it filed in the Court of First Instance of Rizal in Case No. 3885, GLRO Record No. 11267, a petition for an order directing (Banzon) to present his owner's duplicate(s) ... for cancellation, and for another order directing the Register of Deeds to cancel said duplicate(s) and to issue new transfer certificates of title covering the properties in the name of (Associated) ... Banzon filed his opposition claiming mainly that (1) the decision ... in Civil Case No. 31237 was void as far as he was concerned because he had never been summoned in connection therewith. and that in the levy and sale of the properties ... were likewise void because they were conjugal properties ..." (Decision of the Supreme Court, Annex 2, Id.) The trial court overruled these objections and issued the order prayed for, and on appeal to the Supreme Court, this order was affirmed in toto. This was on November 29, 1968. (Id.) In other words, it appears that the proceedings referred to in paragraphs 5 and 6 above leading to the transfer, by order of the court, of Banzon's title to Cardenas took place even before the said title had been placed in the name of Associated.
9. On the basis of the same decision of the Supreme Court of November 29, 1968, a motion to dismiss Civil Case No. 531, referred to in paragraph 7 above was filed and the same was granted on August 6, 1969. Accordingly, on October 13, 1969, Cardenas applied for an alias writ of possession (the original one was held in abeyance as stated in paragraph 7 above), and this alias writ was issued on October 23, 1969. Due to the refusal of Banzon to vacate, an order of demolition was sought and granted on December 9, 1969, but again the enforcement thereof was enjoined by a writ of preliminary injunction issued by the Court of Appeals in CA-G.R. No. 44391-R, entitled "Antonio Banzon, et al. vs. Hon. Fernando Cruz, et al." This writ of preliminary injunction was, however, dissolved in a final judgment of February 28, 1970, the Court of Appeals holding that:
Hence, the petition for injunction prayed for being merely a devise 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, this petition should be as it is hereby denied, with cost against petitioners.
10. Accordingly, on March 11, 1970, Cardenas sought enforcement of the suspended writ of possession, and on March 13, 1970, the corresponding order was issued. This is the order, inter alia, that this Court has enjoined temporarily in this action, by resolution of March 23, 1970.
11. In the meantime, while all the above proceedings were going on, it appears undisputed that Associated was ordered liquidated and dissolved by the courts. The decision to this effect was rendered by the Court of First Instance of Manila in Civil Case No. 56995, Republic vs. Associated etc., affirmed by the Court of Appeals in C.A. G.R. No. 37985-R on January 3, 1968, certiorari was denied by the Supreme Court on June 20, 1968, and this denial became final on July 9, 1968. Neither the trial courts nor this Court were ever informed of this liquidation in any of the proceedings already mentioned.
12. In the meantime also and importantly, because of the failure of the principal, Sta. Maria, as well as the surety, Associated, to pay PNB, notwithstanding that Associated had, in fact, already executed upon the properties of Banzon, evidently without advising PNB thereof, PNB filed suit in the Court of First Instance of Pampanga, Civil Case No. 1907, against said parties, which ended in the Supreme Court as G.R. No. L-24765 on August 29, 1969 with a judgment favorable to PNB. (29 SCRA) This judgment was satisfied out of Sta. Maria's properties sold on execution on February 16, 1970 and a corresponding release of Associated was issued by PNB on February 20, 1970 (See allegations on p. 6 of Complaint, Annex E, Petition and also Annex E).
13. Having in view these developments, on March 13, 1970, Civil Case No. 72944 was filed by Banzon in the Court of First Instance of Manila basing the same mainly on the trust theory, that is, that Associated and later Cardenas, the latter as the former's virtual successor-in-interest in TCT 39685, acquired the lots in question only as trustees for the PNB, but this case was dismissed as against Cardenas on October 28, 1970 after a preliminary hearing upon the ground of res adjudicata, and this dismissal is now final, no appeal having been taken therefrom by Banzon. In this connection, it is to be noted that in Civil Case No. 531, which, as already noted above, had been dismissed earlier, Banzon already raised the same issue that Associated never became owner of said lots but was only the trustee thereof for PNB. (See p. 7, Memo of Cardenas.)
14. While evidently still in daze because of all these developments, under date of February 27, 1971, Banzon filed with the Court of First Instance of Rizal, Caloocan Branch XXII, Civil Case No. 2052, another action against Maximo R. Sta. Maria and Valeriano R. Sta. Maria alleging, among other things, in his verified complaint that:
4. That defendant failed to pay his aforementioned obligation with the Philippine National Bank, and accordingly upon demand being made by the latter on the Associated Insurance & Surety Co., Inc., to pay said defendant's outstanding obligation, said surety company filed an action for damages against herein plaintiff and his co-indemnitors. True copy of said complaint dated November 19, 1956 is hereto attached and made an integral part hereof as Annex "A";
5. That as a result of the case alleged in the proceeding paragraph 4, a decision was rendered in said case against the defendants therein, among them the present plaintiff. A true copy of said decision dated Dec. 11, 1957 is hereto attached and made integral part of this complaint as Annex "B";
6. That said decision (Annex "B") having become final ,and executory, execution was made on the properties of the herein plaintiff particularly, on his two residential lots situated at Caloocan City and embraced by TCT Nos. 39685 and 53759, of the Registry of Deeds of Rizal Province (now Registry of Deeds of Caloocan City), the total worth of said lots based on the present market value being P300,000.00; that eventually said lots were sold at public auction with the Associated Insurance & Surety Co., Inc., as the highest bidder. True copies of the Sheriff's Certificate of sale dated June 27, 1960 and the Officer's deed of absolute sale dated July 8, 1960 in favor of said Isurety are hereto attached as Annexes "C" and "D", respectively.
7. That subsequently thereafter, one of said lots, particularly that covered and described under TCT No. 39685, was executed upon by a third party to satisfy the said surety's obligation to the latter, leaving only one lot in the name of the Associated Insurance & Surety Co., Inc., thereby damaging plaintiff in the amount of P 150,000.00 which is the worth of the lot at its present market value. A true copy of the corresponding Sheriff's Final Deed of Sale date April 2, 1965 in favor of said third party is hereto attached and made an integral part of this complaint as Annex "E";
8. That through a recent negotiation with the aforementioned insurance company, the latter has agreed to reconvey the remaining lot covered by TCT No. 53759 to the herein plaintiff under the condition that the latter will pay unto said surety company damages in attorney's fees equivalent to 15% of what the present defendant owes the Philippine National Bank or the sum of P6,750.00 and likewise relieving said surety company of its undertaking and liability as surety for said defendant Maximo R. Sta. Maria, with the Philippine National Bank; that plaintiff has agreed to do so but up to the present time of filing this case no reconveyance has yet been made;
9. That plaintiff in pursuant of the arrangement made with the aforementioned surety company has in fact assumed all of defendant's obligation with the Philippine National Bank, in the amount of P45,000.00, thereby actually releasing said surety from any further obligation as such in relation to its undertakings with said bank, and likewise, releasing said defendant from his accountability on the crop loans he secure thereat as mentioned in paragraph 2 hereof;
10. That due to defendants' deliberate failure and refusal to pay their plainly, valid and just obligation with the Philippine National Bank, resulting in the unfortunate happening above enumerated, all of which are prejudicial and damaging plaintiff's interest as the latter has suffered the following damages:
"(a) P150,000.00, as value of his one residential lot embraced by TCT No. 39685, Registry of Deeds of Caloocan City, and which has been irretrievably lost to a third party and P1O,000.00 fair value of the demolished house of strogn materials on the lot having a monthly rental of P200 beginning April, 1970 and months thereafter.
"(b) P6,750.00, reimbursement to be made by plaintiff as attorney's fees suffered by the Associated Insurance & Surety Co., Inc., by reason of the suit occasioned by decision defendants' failure to pay the Philippine National Bank his crop loans;
"(c) P10,000.00 representing damages suffered by the plaintiff by way of attorney's fees in all litigations previous to the present one incident to defendants' obligation with the PNB."
and praying, therefore, specifically that:
2. That after due hearing on the merits on the principal cause of this action, judgment be rendered against the defendants jointly and severally as follows:
"(a) Ordering the defendants to pay the sum of P150,000.00 as value of plaintiff's one residential lot embraced by TCT No. 39685, Registry of Deeds of Caloocan City, which has been irretrievably lost to a third party directly caused by defendants' failure and refusal to pay their just and lawful obligation with the PNB, beside ordering defendant Maximo R. Sta. Maria to pay P10,000.00 the fair value of the house of strong materials built on the lot, which was ordered demolished having a monthly rental of P200.00 beginning April 1970 and monthly thereafter."
Upon these facts, and in the light of the opposing contentions of the parties as to whether or not Banzon is entitled to the reconveyance of the two lots in question, there is no doubt in my mind that he is entitled to the recovery thereof. My fundamental disagreement with the majority refers only to the manner or procedure as to how this can be accomplished in the context of the facts and judicial proceedings related above, and, of course, with the legal reasoning to be pursued in arriving at Our respective conclusions. Withal, I do not see sufficient basis for the dispositive portion of their decision.
As I have stated at the outset of this opinion, I am afraid that the majority approach unnecessarily cuts corners which remedial law considers as essential, if the administration of justice is to be carried out, as, in my view, it must be, along basic standard procedures contemplated to keep judicial proceedings from being a riotous confusion of impromptu and improvised steps readily to be taken to suit the judge's concept of substantial justice in any given case. I reiterate that I am for giving Banzon what is due him, but I cannot subscribe to many legal propositions in the majority opinion which in my considered opinion deviate from the established and accepted concepts regarding the points touched and referred to therein. To deal with first things first, however, I will discuss these differences later. In the meanwhile, my solutions of the legal problems before the Court are as follows:
I
DESPITE ALL THE PREVIOUS RELATED PROCEEDINGS AMONG THE SAME PARTIES HEREIN APPARENTLY FURNISHING LEGAL BASIS FOR THE ISSUANCE OF TRANSFER CERTIFICATE OF TITLE NO. 8567 IN THE NAMES OF RESPONDENTS CARDENAS AND BALUYOT, THERE SEEM TO BE ENOUGH REASONS TO HOLD THAT THE SAID TITLE IS ABSOLUTELY VOID AND NEITHER SAID TITLE NOR THE JUDICIAL PROCEEDINGS REFERRED TO MAY SERVE AS BASIS FOR THE WRIT OF DEMOLITION HEREIN COMPLAINED OF, ALTHOUGH, IN THE CASE AT BAR, WE CANNOT RULE ON THE VALIDITY OF SAID TITLE, THE ONLY PURPOSE OF THIS PETITION BEING TO HAVE THE SAID ORDER OF DEMOLITION SUSPENDED PENDING FINAL DECISION OF CIVIL CASE NO. 79244 WHEREIN SUCH ISSUE OF VALIDITY IS TO BE FULLY THRESHED OUT.
At the outset, it may be stated incidentally, that it is not due to any fault of Banzon but evidently to the inexperience and inadequate preparation of counsel, that this case has turned out to be more complicated than it should have been, but that cannot deter this Court from straightening out matters and rendering justice accordingly. Indeed, as also observed in the majority opinion, generally, the incompetence of counsel should be overlooked when, anyway, full opportunity has been given to every interested party as regards all the matters upon which the Court is to act. I am satisfied that, considering how extensively and ably counsel for Cardenas has discussed every conceivable aspect of his case, no substantial prejudice can be caused to him, if the Court should now render judgment as the circumstances revealed in the record demand and not exactly in accordance with the theory formulated in the petition. As I see it, the main relief being sought by Banzon is merely the suspension of the order of demolition or dispossession issued by respondent Judge Cruz during the pendency of Civil Case No. 79244, on the ground that it was a grave abuse of discretion on the part of said judge not to order such suspension, considering the nature of said case, hence the ultimate inquiry in this case should be whether or not Banzon's complaint on said case presents a sufficient prima facie basis for such suspension.
Accordingly, the first question that may be asked in connection with the basic problem before Us is, what was acquired by Cardenas at the auction sale in connection with the execution of the judgment in his favor in Civil Case No. 36194 of the Court of First Instance of Manila? The plain answer is, only "the rights, interests, claims and title" of Associated in TCT No. 39685,2 which, according to the said respondent himself on p. 7 of his memorandum, were what were sold to him in that public auction of March 23, 1964. Indeed, it cannot be disputed that on that date of said auction and even on the date of the execution of the deed of absolute sale after the period of redemption expired, on April 2, 1965, Associated was not in law and in fact the absolute owner of the land covered by TCT 39685. To be precise, all that Associated had in said title was the right to hold the same in trust for the PNB. By no means and under no concept could Associated have had any right more than that. Indeed, no other conclusion can be drawn from the facts just narrated.
In the aforequoted judgment against Banzon which served as basis of the writ of execution by virtue of which his two titles were sold at auction, it is necessarily implied that the same, although nominally in favor of Associated, was actually for the benefit of PNB. Anything Associated could get from it was not intended to enrich it, but only to save it, if fully, from the effects of the eventual enforcement of the rights of the PNB in the premises. Conversely, it is also the inescapably implied sense of said judgment that in the event Associated is relieved or released by PNB without its having to resort to said judgment or making use of the proceeds thereof, then Banzon would be entitled not only to be correspondingly relieved or released from the effects of the judgment but also to the reconveyance of whatever may have been acquired by Associated under the same. Again, the situation lends to no other view. Stated otherwise, the judgment in favor of Associated was not for it to be paid with money or property by Banzon for its own benefit or for the satisfaction of any claim of its own, much less for its own enrichment — the judgment was for Banzon to pay Associated so that Associated may pay PNB. Consequently, there can be no doubt that under said judgment, the rights of Associated derived therefrom are not for it to dispose of for its own exclusive benefit, and, accordingly, they could not be subject to the claim of any third party in any manner, either prejudicial to the interests of PNB or dis-advantageous to Banzon, beyond what had to be paid to PNB. Briefly, Associated was made trustee of the judgment against Banzon with the PNB as beneficiary. So, when the Sheriff sold to Cardenas "the rights, interests, claims and title" of Associated in TCT 39685, these carried impressed upon them the trust in favor of PNB (and alternatively, of Banzon) and consequently, Cardenas was under notice that Associated had no dominical title in the property covered thereby, in the sense that what it had was nothing more than the title of a trustee holding the same, for the benefit of PNB with the inseparable obligation to return the same to Banzon should PNB release Associated without the latter paying anything and without the former using the proceeds of the judgment. Factually, Cardenas cannot claim ignorance of these facts because the record is clear that when he caused the transfer of TCT 39685 to his name, this title was still in the name of Banzon, for the simple reason that the petition of Associated to have it consolidated in its name was still pending in the Supreme Court and a cursory examination of the expediente of the case in said Court would have revealed to him the true nature and extent of Associated's interest in said title.
It is of no moment, in this regard, that in the indemnity agreement signed by Banzon, Associated had the right to sue Banzon even before it has been made to pay and has actually paid PNB. That stipulation, if it could justify the filing of the action against Banzon as indemnitor, could not be construed to enable Associated to take advantage, for its own benefit, of the judgment it secured against Banzon without its actually and priorly paying PNB, for such a construction would certainly be unconscionable, and being patently iniquitous could not pass the fundamental and all important test that contractual terms and conditions must not be contrary to morals or public policy. Incidentally, under the present Civil Code, Article 2071, the only anticipatory remedy of a surety is either "to obtain release from the guarantee or to demand a security that shall protect him against any proceedings by the creditor and from danger of insolvency," hence, according to our Acting Chief Justice, Mr. Justice J.B.L. Reyes, speaking for the Court in General Indemnity Co., Inc. vs. Alvarez, 100 Phil. 1059, 1062, "an action by the guarantor against the principal debtor for payment, before the former has paid the creditor, is premature." It is quite true that these observations about the right of Associated to sue Banzon ahead of PNB suing it do not necessarily render, by their own force, null and void, the title of Cardenas, but they certainly clarify the true nature and character of his rights in the lot in question. And it is very clear that under the circumstances, even if it were to be held that the transfer of TCT 39685 in their names was validly done, still he would be no more than a mere trustee like Associated into whose shoes he has stepped — trustee for the benefit of the Bank and, in the other contemplated contingency, of Banzon — for which reason, even if procedurally speaking it can be assumed that the said title could be considered as properly transferred to him, still he cannot escape the obligation to reconvey the same to Banzon, in the fashion of a trustee who secures the registration of land in his name in breach of the trust, albeit it is not for this Court to render judgment of that tenor in this case, since such reconveyance is precisely the object of the Manila suit, Civil Case No. 79244 and not of the case at bar by election of the petitioners themselves who have not prayed for such a relief here.
Looking at the matter from another point of view, however, it is obvious that the procedure leading to such transfer, of TCT 39685 to the name of Cardenas cannot stand legal scrutiny. How he secured TCT 8567 has no satisfactory explanation in the record. What is more, I do not believe any such explanation can be found elsewhere. it is indisputable that Associated was still in the process of trying to secure delivery to it of the duplicate certificates of the two titles in question when this Court rendered its judgment in G.R. No. L-23971 on November 29,1968. While it may be true that even before that, or on May 3, 1965, an order was issued by the Court of First Instance of Rizal, Caloocan Branch in C-211 (LRC Rec. 11267), upon motion of Cardenas, for the issuance of a new certificate of title to him, absent any showing that PNB and Banzon were properly notified thereof, because of their interest as beneficiaries of the trust imposed upon Associated as above explained, of which he had actual knowledge or ought to have known, the said order must be held to be void ab initio due to the absence of the indispensable parties — PNB and Banzon. The in rem character of land registration proceedings does not extend to incidents of which no notice by publication is required. In such instances, actual notice to the interested parties is what confers jurisdiction upon the court and gives validity to what is done under its orders; hence, in issuing the order for the issuance of TCT 8657, by transfer from TCT 39685, the Court of First Instance of Rizal acted without jurisdiction, and such want of jurisdiction being patent even on the face of the record, such order is null and void ab initio.
It would not avail Cardenas to invoke the subsequent dismissal of Civil Case No. 72944 in Manila insofar as he and his wife are concerned, even if it were granted that such dismissal is already final. It should be borne in mind that in said action, the Banzons have alleged causes of action jointly against Associated and Cardenas, but when the same was filed on March 13, 1970, Associated had already been ordered liquidated and dissolved. Under Section 1751(c) of the Insurance Act:
Sec. 175(C). Order of rehabilitation or liquidation. — 1. An order to rehabilitate or liquidate a domestic insurer shall direct the Commissioner and his successors in office forthwith to take possession of the property of such insurer and to conduct the business thereof, and to take such steps toward the removal of the causes and conditions which have made such proceedings necessary as the court shall direct.
2. The Commissioner may submit any plan he may deem advisable to protect the public interest for the rehabilitation or liquidation of such insurer to the court for approval and if approved such plan shall be binding upon the insurer, stockholders, and creditors.
3. The Commissioner and his successors shall be vested by operation of law with the title to all of the property, contracts, and rights of action of such insurer as of the date of the order so directing them to rehabilitate or liquidate. The filing or recording of such order in any record office of the Philippines shall impart the same notice that a deed, bill of sale or other evidence of title duly filed or recorded by such insurer would have imparted. The rights and liabilities of any such insurer and of its creditors, policy-holders, stockholders, members and all other persons interested in its estate shall, unless otherwise directed by the court, be fixed as of the date of the entry of the order directing the rehabilitation or liquidation of such insurer in the office of the clerk or court where such insurer had its principal office for the transaction of business upon the date of the institution of proceedings under this Act: Provided, however, That the right of claimants holding contingent claims on said date to share in an insolvent estate shall be determined by section one hundred and seventy-five (a) of this Act.
Consequently, Associated, as such, could no longer be sued on March 13, 1970 and in its place the party that should have been joined was the Insurance Commissioner. What is more, this joinder is indispensable, considering that the Insurance Commissioner is the liquidator of the Corporation. Absent such an indispensable party, naturally, all the proceedings in said case are likewise void and together with them the order of dismissal relied upon by Cardenas.
Anent the claim of Cardenas that because of the allegations aforequoted in the complaint filed by Banzon against Sta. Maria in Civil Case No. 2052 of the Court of First Instance of Rizal, petitioners are in estoppel to claim that TCT 8567 is invalid, Cardenas is apparently forgetting the fact that said complaint was filed only on February 27, 1971 and, certainly, none of the allegations contained therein could have been the inducement for his claim to said title which was made by him as early as 1965. Estoppel presupposes that the party invoking it must have been misled by the other party. (Tolentino, Civil Code of the Philippines, Vol. IV, p. 600, 1956 ed.) Then also, the allegations alluded to as basis for estoppel involve legal conclusions which as discussed above are erroneous. Errors of law of a party do not create estoppel, for the simple reason that estoppel cannot be founded on ignorance, and since the other party is conclusively presumed to know the law, it cannot be misled thereby. (Eugenio v. Perdido, 97 Phil. 41, 64)
It thus appears that these are actually more than prima facie reasons why the pendency of Civil Case No. 79244 should have induced respondent Judge to suspend the enforcement of his order of demolition or dispossession of March 13, 1970. While, as I have already stated, it is not for the Court to go into the actual merits of Banzon's pose in claiming the right to the reconveyance of the lots in controversy, the above discussion is necessary because they,constitute at least the legal possibilities that have to be considered in determining whether or not the failure of respondent Judge to suspend the enforcement of his questioned order constitutes a grave abuse of discretion. Incidentally, if not strictly binding upon the court taking cognizance of Civil Case No. 79244, they should give him enough light in resolving the issues before him.
II
IT BEING CLEAR FROM THE ABOVE DISCUSSION THAT ASSOCIATED WAS ONLY A TRUSTEE FOR THE BENEFIT OF THE PNB OF THE TWO LOTS OF BANZON ACQUIRED BY IT AT THE AUCTION SALE AND AS A MATTER OF FACT PNB HAS ALREADY RELEASED ASSOCIATED, ALL THAT REMAINS NOW TO BE DONE TO RESTORE BANZON'S FULL OWNERSHIP THEREOF IS FOR THE INSURANCE COMMISSIONER WHO HAS STEPPED INTO THE SHOES OF ASSOCIATED AND WHO HERE ADMITS THE CORRECTNESS OF THE CLAIM OF BANZON THERETO TO EITHER CONFESS JUDGMENT IN CIVIL CASE NO. 79244 OR TAKE ANY OTHER APPROPRIATE STEP IN SAID CASE LEADING TO THE CANCELLATION OF THE ANNOTATION IN TCT 53759 OF THE AUCTION SALE IN FAVOR OF ASSOCIATED:
Considering that no rights of third parties are involved in the matter of the retention by or reconveyance to Banzon of the other lot covered by T.C.T. 53759, as desired by him, the same presents one difficulty. Another treatment may be given this aspect of the case inasmuch as what I am about to state should be done as regards TCT 53759 cannot constitute a preemption of the jurisdiction of the court in Civil Case No. 79244, for the simple reason that, in respect to this title, there are admissions of the Insurance Commissioner which make it unnecessary for the said court to go into a trial on the merits.
As earlier noted, notwithstanding the decision of the Supreme Court in G.R. No. L- 23971 of December 29, 1968, purportedly affirming the order of the Court of First Instance of Rizal in Case No. 3885, GLRO Record No. 11267 requiring Banzon to surrender the said title (together with TCT 39685) to the Register of Deeds of Rizal for cancellation and authorizing the issuance of a new one in the name of Associated, actually, the latter has not taken any steps to that end. Evidently, this must be due to the fact that it was well aware that the order for its liquidation and dissolution by the Court of First Instance of Manila, affirmed by the Supreme Court, had in the meanwhile become final on June 9, 1968, and, therefore, since then, it had already lost personality as a corporation, to pursue the desired transfer. Consequently, TCT 53759 in the name of Banzon remains uncancelled and the only apparent encumbrance thereon, material herein, is the annotation of the purchase thereof by Associated by virtue of the sale at public auction consequent to the execution of the judgment in its favor and against Banzon in Civil Case No. 31237.
As already discussed above, in the first place, all that Associated acquired of Banzon's two lots herein involved by virtue of the said execution was nothing more than the right to be trustee thereof for PNB, with the obligation to return the same to Banzon should it ultimately become unnecessary for it to use the same in settling the obligation of Sta. Maria to the PNB, for which it stood as surety and in regard to which Banzon was bound to it as its indemnitor in accordance with the very terms of the final judgment itself that it (Associated) had secured against Banzon in said case. Inasmuch at it is also indisputable that PNB has as a matter of fact already released Associated from its obligations under the surety agreement, according to the said bank's letter to Associated of February 20, 1970, there can be no question that pursuant to the real sense and intent of the trust created by the aforementioned judgment, Associated has no alternative but to have the annotation on TCT 53759 of the auction sale in its favor cancelled by an appropriate instrument. In this connection, however, whereas it is now the Insurance Commissioner that has sole authority to act for Associated and in the pleadings filed by her in this case, she admits the correctness of the foregoing observations and, on the other hand, there is that pending case of Banzon against Associated for the reconveyance to him of the title in question, Civil Case No. 79244, all that has to be done by the Commissioner is to make the proper appearance in said case and thereafter either file a corresponding confession of judgment therein or take any other appropriate step in the same case to the end that Banzon's title may be freed of the annotation thereon in favor of Associated.
It cannot be an obstacle to his arrangement that there is that judgment of this Court in G.R. No. L-23971 purportedly upholding Associated's claim over TCT 53759 (and TCT 39685). I have already explained in my discussion of the case against Cardenas that because there was no substitution of the Insurance Commissioner in the place of Associated after the latter was ordered dissolved and liquidated by this Court's decision which became final on June 9, 1968, the said judgment must be considered as null and void. After the order for the liquidation and dissolution of a surety corporation has become final, the Insurance Commissioner must indispensably be substituted for said corporation in any pending action wherein it is a party, such that if no such substitution is made, any judgment in said action cannot have any force and effect as to any of the parties. This is a logical rule which no insurance or surety company can ignore. In any event, with the admissions made in the pleadings of the Commissioner in the present case that Banzon is entitled to be relieved from the claim of Associated, it is almost of secondary importance to elucidate on the effects of the judgment of the Court in G.R. No. L-23971.
III
THE BASES FOR MY DISSENT
A. Coming now to my dissent, I find it difficult to agree with the dispositive portion of the majority decision.ℒαwρhi৷
(1) I regard the permanent injunction, obviously directed against Associated, enjoining the disposition of the two lots in question except to reconvey them to Banzon as virtually pointless, both from the legal and practical standpoint. Insofar as the lot covered by TCT 53759, there is nothing in the record indicating that after June 9, 1968, the date the order for Associated's liquidation and dissolution became final, Associated has ever taken any move to transfer said title to its name, much less to perform any dominical act regarding the same. Now that the Insurance Commssioner has already stepped into the shoes of Associated and is apparently in full control of its assets and records, at least, for the purposes of the matters herein involved, much less could Associated be expected to move towards these ends. On the other hand, inasmuch as the Insurance Commissioner has practically committed herself to reconvey the disputed lots to Banzon, of what use is there to issue an injunction against either Associated or the Commissioner? Is it not elementary that injunction issue only when it is indispensable to do so?
(2) With particular reference to the lot covered by TCT 39685 now in the name of Cardenas as TCT 8657, the only prayer in the present petition is for this Court to enjoin respondent Judge Cruz from enforcing his order of demolition of March 13, 1970 during the pendency of Civil Case No. 79244. This is plain not only from the remedy stated in the title of the said petition, "Petition for Injunction" but also from the following allegations in paragraph XVI thereof: "That petitioners are entitled to the relief demanded in their complaint in Civil Case No. 79244, Court of First Instance of Manila, which part of such relief consist in restraining respondents from taking possession of the land object of said case and demolishing the buildings found thereon;" All these are odd, for they give the impression that the only purpose of this case now before Us is to secure the issuance of a preliminary injunction ancilliary to the remedies prayed for in Civil Case No. 79244. Now, without actually declaring in this judgment that TCT 8657 and all proceedings leading to its issuance are null and void and that the only right of Cardenas therein in the lot covered thereby is that of a trustee of the PNB which he acquired when he purchased the rights of Associated therein, the majority grants such ancilliary remedy. I have very grave doubts if We can do so legally.
(3) I can understand Banzon's dilemma. As already observed above, he submitted the matter of the legal validity of his claim for the reconveyance to him of the lots in dispute, including, of course, the nullity of all the proceedings related to such claim, to the Manila court, that is, in Civil Case No. 79244, but he is not sure whether or not, as a coordinate court, the Court of First Instance of Manila is in a position to enjoin respondent Judge Cruz from enforcing his order of March 13, 1970. Without necessarily committing myself as to whether or not such an injunction can issue, it is my considered view that Banzon's less controversial remedy should be to insist that Judge Cruz suspend his order of demolition because of the pendency of Civil Case No. 79244 and then charge his refusal to do so as a grave abuse of discretion in the appropriate certiorari proceedings, seeking at the same time, as an added remedy, the corresponding injunction.
I am not losing sight, in this connection, of the fate that befell Banzon's attempt of a similar nature in CA-G.R. No. 44391-R in which the Court of Appeals upheld the writ of possession issued by Judge Cruz notwithstanding Banzon's submittal that the same should have been suspended in view of the pendency of Civil Case No. 531. It is to be observed, however, that no appeal was taken to this Court from that decision of the appellate court and it is an open question whether or not We would have affirmed it. In any event, the thrust of Civil Case No. 79244 appears to be on the more plausible theory of trusteeship above referred to which varies somehow from the main posture of Banzon in his previous cases.
It is, therefore, from this point of view that I consider it proper to look at the petition at bar as an action of certiorari based on the grave abuse of discretion committed by the respondent Judge in refusing to withhold, as evidently submitted by Banzon in opposing Cardenas' motion, the enforcement of his impugned order of demolition during the pendency of Civil Case No. 79244, and correspondingly, injunction should issue against such enforcement. In this manner, it is not really necessary for Us to preempt the jurisdiction of the Manila court to resolve the issues therein and grant Banzon's prayer for reconveyance in said action, but nonetheless, We are able to prevent further acts of dispossession on the part of Cardenas.
(4) In this connection, I fail to see the necessity for the mandatory injunction, being ordered immediately executory by the majority, which to me only betrays considerable over-excitedness, if for no other reason than that Banzon himself insists that he has never lost complete possession of the lots in question despite the demolition by the Sheriff of his residential building found on the lot now in the name of Cardenas. Indeed, not even in this memorandum dated May 19, 1970 wherein Banzon first informed this Court of the demolition of the said building does he make any specific prayer for a mandatory injunction. It is to my mind obvious that, anyway, the restoration of said building need not be the subject of a mandatory injunction inasmuch as the same can be taken care of in Civil Case No. 79244 together with all the other damages claimed by Banzon.
B. I find it difficult as I have indicated earlier, to share some of the views contained in the majority opinion.
(1) I am afraid the majority has given undue importance to the "Explanation and Manifestation" dated April 25, 1970 filed by Atty. Feliberto Castillo not only by calling it a pleading but by even relying on it for many of its findings of fact, more or less adverse to Associated. My position in this respect is that such reliance is uncalled for and possibly unfair to Associated. I would even consider Atty. Castillo's posture as something very close, to put it mildly, to a breach of professional ethics.
It should be recalled that Atty. Castillo has been counsel of Associated and, in fact, was the one that secured in its favor the judgment in Civil Case No. 31237 as well as the decision of this Court in G.R. No. L-23971 also favorable to said corporation and, consequently, under the rules of ethics, he is bound to hold in confidence any information related thereto or the ultimate developments thereof that might adversely affect his client and which have come to him by reason of their attorney-client relationship. Implicit also is his obligation never to give aid and comfort to any party adverse to his client, except in instances allowed by law, which, I believe, do not include the situation on hand.
For reasons which do not appear in the record, or perhaps due to what I consider an erroneous practice on the part of the personnel in the office of our clerk of court, instead of serving summons on the present petition upon Associated itself at its address clearly given in Paragraph I thereof as "Room C, Astoria Building, No. 1170 A. Mabini, Ermita, Manila, c/o Mr. Leopoldo C. Sta. Maria," the said service was apparently made upon the law office of Atty. Castillo just because he has appeared in the related cases as counsel for Associated. At least, Atty. Castillo does not state in his "Explanation and Manifestation" it happened that his "law office was in receipt," to use own expression, thereof on April 16, 1970, and his statement in Paragraph 3 of said "Explanation and Manifestation" that "he is entertaining a serious doubt whether he could still represent the Associated Insurance & Surety Co., Inc. in view of its liquidation and dissolution by order of the court," as above related, is to me a revelation that he is aware that his authority to speak for Associated is not as it ought to be. And yet, he makes denials and admissions therein affecting Associated, and its successor-interest, Cardenas, after suggesting that summons should be made upon the Insurance Commissioner. As far as I am concerned, I can give my vote of appreciation for Atty. Castillo's having informed Us that as of June 9, 1968 Associated was already without legal personality, as the insurance and surety corporation that it used to be, to become a party or continue as a party in any action or proceeding and should have been indispensably substituted by the Insurance Commissioner, but to consider his "Explanation and Manifestation" as a pleading and to take into account his admissions and denials therein affecting Associated as the majority do, are to me without basis or justification in any part of our rules of procedure, and to give credit to such admissions and denials as being made "in the interest of justice and in the name of truth and as an officer of the Court" does not square with my concept of the fidelity that a lawyer owes his client. I doubt very much if the Insurance Commissioner or any court, for that matter, can compel the lawyer of a corporation, without the consent of such client, to give out information adverse to it, just because the corporation is under liquidation. If a lawyer cannot be so compelled, much less would I consider it proper for him to furnish such information voluntarily without the client's permission. In any event, insofar as the need for the facts stated by him in this case is concerned, I would rather rely on the statements regarding the same matters appearing in the respective pleadings of the Insurance Commissioner, Banzon and Cardenas, which I consider sufficient for the purposes of this decision. In brief, what Atty. Castillo should have done in fairness to Associated and in strict adherence to the applicable rules of ethics was to simply inform the court of the liquidation of Associated and return the summons to the sheriff or the court for proper service, as suggested by him, to the Insurance Commissioner.
(2) The majority attempt to distinguish what they have characterized as "immediate objectives" from the "real and substantive objectives" of the petition at bar, to justify their direct resolution in this case of the question of validity of TCT 8567, as if such a distinction can ever exist in any pleading, as, in fact, nowhere in the petition do I find any intention on the part of Banzon to forego or disregard that it is in Civil Case No. 79244 that he is seeking the "real and substantive objectives" referred to by the majority. For the rest, I refer to my discussion above of the dispositive portion of the majority decision.
(3) It is not very clear to me that when Associated filed Civil Case No. 31237 it had no cause of action against Banzon, as indemnitor. I am aware of Article 2071 of the Civil Code, as, in fact, I have referred to it above, but I am not prepared to hold in this case, particularly because I do not recall that this particular point was discussed in the deliberations, that such a cause of action cannot exist on the basis of the express stipulation in the indemnity agreement giving Associated the right to file an action upon PNB's making a demand upon it and even before it has complied with such demands although I am in full agreement with the view that should an action be prosecuted to judgment, as it happened in this case, Associated or the surety and all its successors-in-interest become no more than trustees of the creditor.
(4) Among their considerations, the majority state:
Considering that the Insurance Commissioner herself , 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 TC No. 8567, should, in justice to petitioners, be reconveyed to them on account, among others, of petitioner Banzon's release from 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 interests of justice and equity so as to enable the Insurance Commissioner-liquidator in due course to discharge the trust in reconveying Banzon's properties to him.
My observation in this regard is that the invocation the "interests of justice and equity" does not warrant granting of a relief not prayed for by the party concerned. When the majority say "the present petition should be granted ... so as to enable the Insurance Commissioner-liquidator in due course to discharge the trust of reconveying Banzon's properties to him," they have in mind the called "real and substantive objectives", per their irterpretation of the petition and not what exactly petitioners expressly asking for, which is no more than what the majority call "the immediate objectives."
There are other loose statements of legal principles in the majority opinion, but they are minor ones and any further discussion of all of them will unduly extend this opinion.
Incidentally, as I close, I am attempted to ask this question. With the way the majority has disposed of this case in their opinion, is it not rather ambiguous now what has become of Civil Case No. 79244 in the Manila court and how specifically We expect the said court to dispose of the same?
IV
MY VOTE
IN VIEW OF ALL THE FOREGOING, and differently from the majority, I vote to set aside the order of Judge Cruz of March 13, 1970 for having been issued with grave abuse of discretion and to permanently enjoin said respondent from enforcing the same, until it happens, which appears to be very remote that Civil Case No. 79244 is decided in favor of Cardenas, after the case against them therein is revised by a corresponding supplemental pleading of Banzon based on the patent nullity on the face of the record of the order of dismissal of October 28, 1970 because the Insurance Commissioner was not substituted for Associated therein.
As regards the prayer for another injunction against any disposition of the lot covered by TCT 53759, my vote is to deny the same, without prejudice to the Insurance Commissioner following the course of action I have indicated earlier above.
Anent the civil and criminal cases which the majority reserve to be instituted against the officers of Associated, I feel that it should be in Civil Case No. 79244 that such reservation should be done inasmuch as it is there where the more appropriate judgment regarding all the substantive aspects of the claim of Banzon will be rendered, even if quite inevitably the tenor of said judgment might have to be along the lines hereinabove set forth.
Footnotes
1 Filed on September 23, 1965. (Memo of Petitioners, p. 6.)
2 The decision of the Court of Appeals in CA-G.R. No. 44391-R, Annex 6 of the Answer of respondent Cardenases says "all the rights and interests of Associated in the land covered by TCT 39685."
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