THIRD DIVISION
February 15, 2017
G.R. No. 194272
SPOUSES AMADO O. IBAÑEZ and ESTHER R. IBAÑEZ, Petitioners
vs.
JAMES HARPER as Representative of the Heirs of FRANCISCO MUÑOZ, SR., the REGISTER OF DEEDS OF MANILA and the SHERIFF OF MANILA, Respondents
D E C I S I O N
JARDELEZA, J.:
This is an Amended Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court assailing the Decision2 dated October 29, 2009 (assailed Decision) and Resolution3 dated September 29, 2010 (assailed Resolution) of the Court of Appeals (CA) in CA-G.R. SP No. 98623. The CA set aside the Orders dated August 11,20064 and February 20, 20075 and reinstated the Order dated March 24, 20066 of the Regional Trial Court (RTC) of Manila, Branch 40, in Civil Case No. 97-86454.
I
Sometime in October 1996, spouses Amado and Esther Ibañez (spouses Ibañez) borrowed from Francisco E. Muñoz, Sr. (Francisco), Consuelo Estrada (Consuelo) and Ma. Consuelo E. Muñoz (Ma. Consuelo) the amount of ₱1,300,000, payable in three months, with interest at the rate of 3% a month.7
On October 14, 1996, the spouses Ibanez issued a Promissory Note8 binding themselves jointly and severally to pay Ma. Consuelo and Consuelo the loan amount with interest, to wit:
FOR VALUE RECEIVED, I jointly and severally, promise to pay to MA. CONSUELO E. MUÑOZ & CONSUELO C. ESTRADA, at their office at x x x, the principal sum of ONE MILLION THREE HUNDRED THOUSAND ONLY (₱1,300,000.00), Philippine Currency, with interest thereon at the rate of three percent (3%) per month, subject to one (1%) percent penalty if not paid on monthly due date. Interest not paid when due shall be added to and become part of the principal and shall likewise bear interest at the same rate compounded monthly. Payable within a period of three (3) months from the date hereof, beginning Nov. 14, 1996 and every month thereafter, until the whole sum of principal and interest shall have been fully paid.
Upon default of three (3) monthly installments when due, all the other installments shall become due and payable. Interest not paid when due shall be added to, and become part of the principal and shall likewise bear interest at the same rate, compounded monthly.9
As security, on October 1 7, 1996, the spouses Ibañez executed a Deed of Real Estate Mortgage10 in favor of Ma. Consuelo and Consuelo over a parcel of land and its improvements covered by Transfer of Certificate Title (TCT) No. 202978. The mortgage contained the same terms as the promissory note. It further stipulated that Ma. Consuelo and Consuelo shall have the right to immediately foreclose the mortgage upon the happening of the following events: (1) filing by the mortgagor of any petition for insolvency or suspension of payment; and/or (2) failure of the mortgagor to perform or comply with any covenant, agreement, term or condition of the mortgage.11
On September 23, 1997, alleging that the conditions of the mortgage have been violated since November 17, 1996 and that all check payments were dishonored by the drawee, Ma. Consuelo and Consuelo applied for foreclosure of the real estate mortgage.12
On December 8, 1997, the spouses Ibañez filed in the RTC of Manila a Complaint13 for injunction and damages with prayers for writ of preliminary injunction and temporary restraining order against Francisco, Ma. Consuelo, Consuelo, the Clerk of Court and Ex-Officio Sheriff, Sheriff-in-Charge and Register of Deeds of the City of Manila. Docketed as Civil Case No. 97-86454, the Complaint alleged that there is no reason to proceed with the foreclosure because the real estate mortgage was novated.14 They prayed that the public auction of the property be enjoined and that Francisco, Ma. Consuelo and Consuelo be held liable for actual and compensatory, moral and exemplary damages, as well as attorney's fees and costs of suit.15
On December 12, 1997, the spouses Ibañez filed an Amended Complaint.16 They alleged that the public auction was conducted, with Francisco, Ma. Consuelo and Consuelo as the highest bidders17 and prayed that the Ex-Officio Sheriff and the Sheriff-in-Charge be enjoined from executing the certificate of sale in favor of Francisco, Ma. Consuelo and Consuelo. In the event the certificate of sale is already issued, they alternatively prayed for that the Register of Deeds of Manila be enjoined from registering the certificate of sale.18
On December 16, 1997, the RTC issued a status quo order.19
On June 11, 2002, the parties filed a Joint Motion for Approval of Amended Compromise Agreement.20 The Amended Compromise Agreement,21 signed by the spouses Ibañez and Francisco, for himself and on behalf of Ma. Consuelo and Consuelo, reads:
AMENDED COMPROMISE AGREEMENT
PARTIES PLAINTIFFS and DEFENDANTS, assisted by their respective counsels, unto this Honorable Court, most respectfully submit this AMENDED COMPROMISE AGREEMENT, to wit:
I- STIPULATIONS OF THE PARTIES:
1.1. On October 16, 1996, plaintiffs obtained a loan from the defendants, in the principal amount of ₱l,300,000.00, with interest thereon, payable within three (3) months therefrom;
1.2. The loan has been secured by a Real Estate Mortgage, constituted on a parcel of land, situated in the District of Singalong, Malate, Manila, containing an area of 135. 70 Square Meters, registered in the name of Amado O. Ibañez, married to Esther R. Iba[ñ]ez, embraced under Transfer Certificate of Title No. [202978], of the Registry of Deeds for the City of Manila;
1.3. Thereafter, the mortgage was extra-judicially foreclosed by the defendants, for failure to pay the loan obligation, plus interests due thereon, within the agreed period;
1.4. The property in question was not redeemed within the period prescribed by law. Hence, on December 10, 1997, after Notice, the Office of the Clerk of Court and Ex-Officio Sheriff of Manila, sold the same property at public auction where defendant Francisco E. Munoz, Sr. was the highest bidder;
1.5. However, the Certificate of Sale, was not issued in view of the institution by plaintiffs of the present case.
II- TERMS AND CONDITIONS:
2.1. The plaintiffs shall pay unto the defendants, the total sum of THREE MILLION PESOS (₱3,000,000.00), Philippine Currency, portion of which shall be paid through the proceeds of a real estate loan, being secured from the Government Service[] Insurance System (GSIS), and the remaining balance, from such other sources determined by the plaintiffs, subject to the conformity of the defendants;
2.2. The defendants accept, as initial payment, the amount of PESOS: TWO MILLION (₱2,000,000.00) Philippine Currency, from the proceeds of the said real estate loan to be released by the Government Service[] Insurance System (GSIS), which amount is hereby unconditionally committed by the plaintiffs to be paid in full to the defendants, immediately upon release thereof, or within a period of three (3) months from date of this agreement;
2.3. The amount to be released by the Government Service Insurance System (GSIS), representing proceeds of the above-stated loan shall be assigned by the plaintiffs, in favor of the defendants, upon execution of this agreement;
2.4. The remaining balance of the total obligation stated in paragraph 2.1 above, amounting to One Million (₱l,000,000.00), shall be payable within one (1) year from date hereof, with interest at the rate of two (2%) per month, and to be secured by a real estate mortgage, to be constituted on a property registered in the names of the plaintiffs, situated at Puerto Azul, Brgy. Zapang, Ternatc, Cavite, identified as Lot 1-J of the subdivision plan Psd-04-133674, portion of Lot 1, (LRC) Psd-88692, L.R.C. Record No. N-33296, containing an area of Twenty (20) hectares, more or less;
2.5. In the event, that the above-mentioned GSIS loan application will not materialize, parties hereby agree to immediately cause the lifting or recall of the Status Quo Order issued by this Honorable Court, on December 16, 1997. Thereafter, the defendants shall immediately cause the issuance of the Certificate of Sale over the subject property in their favor, and the plaintiffs agree not to further delay the same, with any Court action or otherwise;
2.6. Parties hereby agree to WAIVE such other claims by one party against the other, relative to or connected with the instant case;
2.7. In the event of failure of the plaintiffs to comply with any of the terms and conditions of this agreement, the defendants shall be entitled to a Writ of Execution, to implement this agreement of the parties.
IN WITNESS WHEREOF, parties have hereunto signed this Compromise Agreement, this x x x, in the City of Manila.
(Signed)
AMADO O. IBANEZPlaintiff(Signed)
FRANCISCO E. MUNOZ, SR.
Defendant
For himself and on behalf of his Co-defendants(Signed)
ESTHER R. IBANEZ
PlaintiffASSISTED BY:
(Signed)
ATTY. CESAR G. VIOLA
Counsel for the Plaintiffs(Signed)
ATTY. PROSPERO A. ANAVE
Counsel for the Defendantsx x x22 (Emphasis and underscoring in the original.)
On June 17, 2002, the RTC approved the Amended Compromise Agreement and adopted it as its Hatol.23
On September 24, 2002, the spouses Ibañez manifested that: (1) there will be a slight delay in their compliance due to new loan requirements of the Government Service Insurance System (GSIS);24 and (2) they have executed a Real Estate Mortgage25 dated August 10, 2002 in favor of Ma. Consuelo and Consuelo over a property covered by TCT No. T-77676, as per the parties' Amended Compromise Agreement.
On February 28, 2006, Atty. Roberto C. Bermejo (Atty. Bermejo), representing himself as collaborating counsel for Francisco, Ma. Consuelo and Consuelo, filed an Omnibus Motion for Execution and Lifting of the Status Quo Order of December 16, 1997 and for the Issuance of Writ of Possession.26 Atty. Bermejo alleged that the spouses Ibañez failed to comply with their obligation under the Amended Compromise Agreement. Consequently, and following the terms of the Amended Compromise Agreement, the RTC's status quo order must be lifted and a certificate of sale over the subject property be immediately issued.27
On March 24, 2006, the RTC granted Atty. Bermejo's motion. It found that the spouses Ibañez have yet to pay the amount due, in violation of the terms of the Amended Compromise Agreement.28 The Order dated March 24, 2006 reads:
WHEREFORE, in view of the foregoing, Order is issued: (1) lifting the status quo order of December 16, 1997; (2) directing the issuance of a writ of possession directing the private defendant[ s] be placed in possession of the subject property; and (3) directing the Office of the Sheriff of Manila to issue a certificate of sale in favor of the private defendant[s].29 (Emphasis omitted.)
The spouses Ibañez moved to reconsider30 this order on the following grounds: (1) Francisco died in June 2004; (2) Atty. Prospero A. Anave (Atty. Anave), counsel on record of Francisco, Ma. Consuelo and Consuelo, failed to inform the court of such fact; thus, there was no valid substitution of parties; and (3) Atty. Bermejo had no authority to file the omnibus motion as it is without knowledge, approval and consent of Atty. Anave.31
On June 15, 2006, the RTC granted the spouses Ibañez' Motion for Reconsideration.32 It held that: (1) Atty. Anave's failure to report Francisco's death to the court for purposes of substitution rendered the proceedings thereat null and void; (2) Atty. Anave's subsequent conformity to Atty. Bermejo's actions did not cure the initial defect in the filing of the Omnibus Motion; neither did it mean the withdrawal, dismissal or substitution of Atty. Anave by Atty. Bermejo; and (3) a formal entry of appearance with Atty. Anave's conformity is necessary before Atty. Bermejo can legally act as collaborating counsel.
On June 29, 2006, the spouses Ibañez filed a Motion for the Implementation of the Amended Compromise Agreement.33 They argued that since there was no proper substitution of the heirs of Francisco, the proper parties to substitute him are Ma. Consuelo and Consuelo. They also argued that the Amended Compromise Agreement had already been partially complied with: (1) they have already executed a Deed of Assignment assigning to Ma. Consuelo and Consuelo the proceeds of the GSIS loan pursuant to paragraph 2.3; and (2) on May 19, 2006, they have already executed the Real Estate Mortgage provided under paragraph 2.4.34 They further allege that the delay in the implementation of the assignment was due to the assignees' failure to deliver to the GSIS the owner's copy of TCT No. 202978 (the same lot which served as security for the Promissory Note executed by the spouses Ibañez on October 14, 1996) and the discharge of the corresponding Real Estate Mortgage executed by the spouses Ibañez on October 17, 1996.
The spouses Ibañez thus prayed that the Amended Compromise Agreement be considered initially implemented and that Ma. Consuelo and Consuelo be ordered to surrender the owner's copy of TCT No. 202978 or to consider the title lost should the same not be surrendered.35
On July 5, 2006, citing irreconcilable differences, Atty. Anave filed his Notice of Withdrawal of Appearance36 as counsel for Francisco, Ma. Consuelo and Consuelo.
On even date, Atty. Bermejo filed a Notice of Death37 of Francisco and named James Harper (James) as Francisco's legal representative. Atty. Bermejo also filed his Entry of Appearance38 as counsel for James, Ma. Consuelo and Consuelo.
On July 31, 2006, the spouses Ibañez filed a Motion to Adopt/Consider the Judicial Compromise Agreement dated June 17, 2002 Designated as "Hatol" as the Final and Executory Decision.39 The motion prayed that since all the stipulations in the Amended Compromise Agreement have been complied with to the entire satisfaction of all the contending parties, the Compromise Agreement should be considered and adopted as the trial court's decision on the merits.40 The motion was signed by Amado Ibañez with the conformity of Consuelo, signing for herself and Ma. Consuelo.41 Atty. Anave and the Branch Clerk of Court were notified of the hearing. Only Atty. Anave, Ma. Consuelo and Consuelo were, however, furnished copies of the motion.42
In an Order dated August 11, 2006,43 the RTC granted the spouses Ibañez' motion, thus:
x x x It appearing that all the stipulations in the "Hatol", dated June 10, 2002, have been complied with accordingly to the entire satisfaction of each one of the contending parties and the terms and conditions set forth therein were duly performed and satisfied. As prayed for, the said "Hatol ", dated June 10, 2002, is considered, regarded and adopted as this Court's decision on the merits with finality which was approved by this Court on June 17, 2002.
SO ORDERED.44
On same date, the RTC issued an Order45 noting Atty. Anave's withdrawal as counsel and Atty. Bermejo's entry of appearance.
On August 18, 2006, Ma. Consuelo and Consuelo filed a Manifestation46 disclaiming Atty. Bermejo as their counsel and naming Atty. Marigold Ana C. Barcelona (Atty. Barcelona) as their counsel. Attached to the Manifestation is Atty. Barcelona's Entry of Appearance.47
On August 24, 2006, James, as Francisco's legal representative, and through Atty. Bermejo, sought reconsideration48 of the RTC's August 11, 2006 Order. He argued that the trial court erred in holding that all the stipulations in the Hatol have been complied with to the satisfaction of all the parties. According to James, the spouses Ibañez made it appear that only Ma. Consuelo and Consuelo remained as parties after Francisco's death. Since James, as Francisco's representative, was excluded from the Deed of Assignment, the Amended Compromise Agreement could not have been completely complied with.
On February 20, 2007, the RTC denied49 James' motion for reconsideration of the trial court's August 11, 2006 Order, to wit:
A judicial compromise, once stamped with judicial approval becomes more than a contract binding upon the parties and having the sanction of the Court and entered as its determination of the controversy, it has the force and effect and (sic) any other judgment. It has also the effect of res judicata and it is immediately executory and not appeallable (sic).
In this case, the judicial compromise agreement entered into by the parties was already approved by this Court in its HATOL, dated June 17, 2002 and considered it as its decision on the merits with finality. Therefore, the same has become immediately final and executory and could no longer be reconsidered and set aside.
Moreover, there is no reason to disturb this Court's finding that all the stipulations in the HATOL have already been complied with according to the entire satisfaction of each one of the contending parties. James Harper cannot be made a party thereto, there being no valid substitution of parties made.
WHEREFORE, James Harper, through counsel's motion for reconsideration is DENIED for lack of merit.50 (Emphasis in the original, citations omitted.)
Aggrieved, the heirs of Francisco, identified as Maria C. Muñoz, Angelina M. Crocker and Maria Elena M. Webster and represented by James Harper, filed before the CA a Petition for Certiorari51 under Rule 65 of the Revised Rules of Court. They assailed the Orders dated August 11, 2006 and February 20, 2007 of the trial court and clarified that contrary to the findings of the trial court, they are pushing for the execution of the Amended Compromise Agreement. The heirs emphasized that under the terms of the Compromise Agreement, the obligations of the spouses Ibañez are as follows: (1) To pay ₱2,000,000 to be sourced from the proceeds of a GSIS loan and released three months from the date of the agreement; and (2) to pay ₱1,000,000 within one year from the date of the agreement and secured by a real estate mortgage on the spouses Ibañez' property in Puerto Azul. The heirs are of the view that since the spouses Ibañez have not complied with any of the foregoing stipulations, the December 16, 1997 status quo order of the trial court should already be lifted. They likewise argue that the trial court gravely and seriously erred when it disregarded Francisco and his heirs by holding that there was no proper substitution of parties.52
Meanwhile, on April 17, 2007, the spouses Ibañez filed a Motion for Execution53 and prayed that Ma. Consuelo and Consuelo be ordered to surrender to them the owner's copy of TCT No. 202978. In case of failure to surrender, they alternately prayed that the Register of Deeds of Manila be ordered to declare the owner's copy lost for purposes of subsequent reconstitution. 54
On May 18, 2007, James filed his Opposition55 to the Motion for Execution and moved to suspend further proceedings in the trial court due to the pendency of his petition for certiorari in the CA.
On May 31, 2007, the trial court issued its Order56 granting the Motion for Execution and denying James' motion to suspend. According to the trial court, there was no valid substitution; thus, it did not acquire jurisdiction over James. On June 26, 2007, the trial court issued a Writ of Execution.57
On September 20, 2007, Sheriff Gavin P. Reyala (Sheriff Reyala) filed his Return58 indicating that Consuelo failed to surrender the owner's copy of TCT No. 202978 as it was allegedly in James' possession. Thus, the Registry of Deeds of Manila, in compliance with the Writ of Execution, issued a new owner's copy of TCT No. 202978 which Sheriff Reyala delivered to the spouses Ibañez.
On October 29, 2009, the CA resolved James' petition for certiorari, the dispositive portion of which states:
, the instant petition is GRANTED. Setting aside the assailed Orders dated August 11, 2006 and February 20, 2007, the RTC's March 24, 2006 Order granting the February 28, 2006 Omnibus Motion for Execution and the Lifting of the RTC's December 16, 1997 Status Quo Order is hereby Reinstated.WHEREFORE
SO ORDERED.59 (Emphasis in the original.)