Union Bank of the Phils vs CA : 140754 : April 4, 2001 : Atty. Soriano : First Division

[G.R. No. 140754. April 4, 2001]

UNION BANK OF THE PHILS. vs. CA, et al.

FIRST DIVISION

Gentlemen:

Quoted hereunder, for your Information, is a resolution of this Court dated APR 4 2001.

G.R. No. 140754 (Union Bank of the Philippines vs. The Court of Appeals and Sps. Manuel Ley & Janet Ley, David Jonathan Co and James Co, Jr.)

Petitioner Union Bank of the Philippines (UBP), by way of certiorari under Rule 65 of the Rules of Court, seeks the annulment of the decision of the Court of Appeals in CA-G.R. No. 50040 dismissing its petition for certiorari for lack of merit. The facts, as found by the Court of Appeals, are as follows:

On February 20, 1991, respondent spouses Manuel and Janet Ley sold a piece of real estate property, covered by Transfer Certificate of Title (TCT) No. 138484 registered in the spouses’ name, to respondents David Jonathan Co and James Co, Jr., for the sum of Nine Million Pesos (P9,000,000.00). The real estate consisted of a house and lot located at 2127 Dasmariñas Village, Makati City. Subsequently, TCT No. 138484 was cancelled and a new one, TCT No. 174323, was issued in the name of respondents Co. At the time of the sale, no lien or encumbrance was annotated at the back of TCT No. 138484.

In October 1991, (UBP) instituted against respondent spouses Manuel T. Ley and Janet C. Ley a case for “Sum of Money with Preliminary Attachment,” which was docketed as Civil Case No. 9 1-2737 and raffled to Branch 134 of the Makati Regional Trial Court (RTC). The case involved the alleged non-payment of the loan obtained by Ley Construction and Development Corporation (LCDC) arising from a prior “Continuing Surety Agreement” executed on May 23, 1990 by the Spouses Ley as surety and UBP as creditor. The LCDC, as the borrower in said agreement, obtained from UBP credit accommodations amounting to Twenty Million Pesos (P20,000,000.00), which were made through the issuance of three (3) promissory notes drawn between January and March 1991.

On October 14, 1991, UBP filed a case for annulment or rescission of the sale of the subject property against respondent Spouses Ley, David Jonathan Co and James Co, Jr. This was docketed as Civil Case No. 9 1-2829 and raffled to Branch 59 of the Makati RTC. UBP alleged that the sale of the Dasmariñas property by the Spouses Ley to the Cos was fraudulent, having been made after UBP requested the Leys to execute a real estate mortgage over the same property to secure LCDC's account with UBP, which had turned sour sometime in December 1990. UBP further alleged that the sale was simulated and executed in bad faith to prevent the property from being levied and satisfy UBP’s claim against the Spouses Ley. On October 15, 1991, UBP caused the annotation of a notice of lis pendens on TCT No. 138484.

Civil Case Nos. 91-2737 and 91-2829 were subsequently consolidated in Branch 134 of the Makati RTC. On December 14, 1995, the trial court issued an order granting the Cos’ Motion for Cancellation of Notice of Lis Pendens and directing the Register of Deeds of Makati to cancel said notice on TCT No. 174323.

On the basis of the Order dated December 14, 1995, the Cos filed a motion to drop them as defendants in Civil Case No. 91-2829, the action for the rescission of sale. On January 7, 1998, the RTC issued an order granting the Cos’ motion. UBP’s motion for reconsideration of the January 7, 1998 Order was denied.

UBP assailed these two orders in a petition for certiorari before the Court of Appeals. Finding no merit in the petition, the appellate court dismissed the same.

Hence, this petition.

At the outset, the Court notes that the present petition is one for certiorari under Rule 65 of the Rules of Court. A petition for certiorari is not the proper mode to question a final decision of the Court of Appeals, appeal by certiorari under Rule 45 of the Rules of Court being available. The remedy against a final order is an appeal, not a petition for certiorari (Province of Bulacan vs. Court of Appeals, 299 SCRA 442 [1998]).

Furthermore, the party who desires to appeal must file its petition within fifteen (15) days from notice of judgment or of the denial of the motion for reconsideration (Rules of Court, Rule 45, Section 1). In this case, petitioner received notice of the denial of the motion for reconsideration on October 14, 1999 but filed its petition in this Court on December 2, 1999, or 33 days after the 15-day reglementary period had lapsed. Petitioner had therefore already lost its remedy of appeal, and it is settled that it cannot avail of certiorari as a substitute therefor (Chico vs. Court of Appeals, 284 SCRA 33 [1998]; BF Corporation vs. Court of Appeals, 288 SCRA 27 [1998]). On this ground alone, the petition may be dismissed.

Granting the petition for certiorari is the appropriate remedy, the petition nevertheless lacks merit.

Petitioner contends that the Court of Appeals erred in affirming the dropping of respondents Co from the complaint for rescission for it spelled defeat to petitioner’s action. It is submitted that, as transferees of the property, the Cos are indispensable parties to this action. Without them, any judgment that the petitioner may obtain from the remaining parties, the Spouses Ley, would be ineffective since it would not bind the Cos. The dropping of respondents Co, in effect, would be a dismissal of the case without affording petitioner the chance to present its evidence that the sale was made in fraud of creditors.

Petitioner correctly argues that respondents Co are indispensable parties to the action for rescission. The Court also agrees with petitioner that the dropping of the Cos is tantamount to a dismissal of the action for rescission.

In the Order dated December 14, 1995, the RTC found respondents Co to be purchasers of the property in good faith and directed the cancellation of the notice of lis pendens in TCT No. 174323:

From the evidence adduced, it is very evident that the Dasmariñas property was acquired in good faith by defendants David Jonathan Co and James, Jr. At the time they purchased the property, no lien or encumbrance was inscribed on the memorandum or encumbrance of the certificate of title. It was also shown that the consideration paid to the spouses Manuel and Janet Ley was reasonable. There are no badges of fraud in the sale for the property in question. (Rollo, p. 50.)

On the basis of the foregoing order, the RTC issued, upon motion of respondents Co, the Order dated January 7, 1998 dropping said respondents as defendants, The RTC held that in the absence of fraud, petitioner had no cause of action against the Cos:

As a prelude, the nature of this case involves rescission of contract and damages. The first depends upon the nature of transfer to defendants Co while the latter determines the complicity of defendants Ley in the fraud.

On the propriety of the transfer, the Resolution dated December 14, 1995 has sufficiently discussed that defendants Co did not act in bad faith, they, having acquired the Dasmariñas property by onerous title and registered it in their name. This is a valid transfer to a third person who acquires the property in good faith which is sufficient to defeat the action for rescission (Soler vs. Chelsey, 43 Phil. 526; Gatchalian vs. Manalo, 68 Phil. 708). There is no proper showing that defendants Co are parties to the fraud, that is, buyers who have knowledge that the transfer would prejudice existing creditors of defendants Ley, considering that when they purchased the property, no lien or encumbrance was annotated on the certificate of title. Hence, the acquisition by defendants Co in good faith is an obstacle to the efficaciousness of the action for rescission.

Defendants Co. having been declared buyers in good faith must necessarily be dropped as defendant in the instant case. The cause of action which holds defendants Co to be impleaded in the case is found to be non-existent.

As regards the claim of plaintiff that the sale of Dasmariñas property was simulated and done in fraud of creditors, for the purpose of determining whether plaintiff is entitled to damages, the same remains to be proved by substantial evidence to be presented in a regular trial. (Rollo, pp. 64-65.)

The Court, however, does not find anything erroneous about the subject Order, The dismissal of the complaint against respondents Co is a necessary consequence of the finding of good faith. An action for rescission will not lie when the subject matter of the contract is legally in the possession of third persons acting in good faith, and a showing of good faith is sufficient to avoid rescission. (Civil Code, Article 1385; Gatchalian vs. Manalo, 68 Phil. 708 [1939]). If in an alienation by onerous title, the transferee acts in good faith, there can be no rescission. Having given something, his position would be similar to that of the creditor, and being already in possession his acquisition will be respected. (IV Tolentino, A.M., Commentaries and Jurisprudence on the Civil Code of the Philippines 582 [1995]).

There is no showing that petitioner was denied the opportunity to present evidence to prove bad faith on the part of respondents Co. Indeed, petitioner filed an opposition to the motion to drop said respondents and, after the issuance of the Order granting the motion, a motion for reconsideration.

Hence, even if treated as a petition for certiorari, the petition must fail for failing to show grave abuse of discretion on the part of the Court of Appeals in ruling that the RTC did not gravely abuse its discretion in granting the motion to drop respondents Co as defendants.

ACCORDINGLY, the petition is DISMISSED, the same being a substitute for a lost appeal and for lack of merit.

Very truly yours,

(Sgd.) VIRGINIA ANCHETA-SORIANO

Clerk of Court