Huerta Alba Resort v. CA G.R. No.

128567; September 1, 2000 Topic: Judicial Foreclosure; Right of Redemption Facts: Private respondent Syndicated Management Group, Inc. (SMGI), as mortgagee-assignee of Intercom Fund Resource, Inc., filed a complaint for judicial foreclosure of four parcels of land mortgaged by petitioner Huerta Alba Resort, Inc. before the Regional Trial Court of Makati City. The trial court ruled in favor of private respondent and ordered the petitioner to pay all its obligations within a period of not less than 150 days from receipt of the decision. The appeals to the Court of Appeals as well as the Petition for Certiorari to the Supreme Court filed by petitioner were all dismissed. The dismissal became final and executory and it was entered in the Book of Entries of Judgment on March 14, 1994. Accordingly, a writ of execution was issued and the auction sale of the subject properties was set on September 6, 1994. The petitioner then questioned the issuance of the said Writ of Execution by claiming that the 150-day period for petitioner to pay the judgment obligation had not yet lapsed. This issue was again raised by petitioner to the Court of Appeals. The Court of Appeals ruled that the 150-day period should be computed from the date the petitioner was notified of the Entry of Judgment and it expired on September 11, 1994. Subsequently, the trial court confirmed the sale of subject properties to the private respondent. When the private respondent filed a motion for a Writ of Possession, again it was opposed by petitioner by filing a motion to compel private respondent to accept redemption. This is the first time petitioner asserted its right to redeem the subject properties under Section 78 of R.A. No. 337 (General Banking Act). The trial court allowed the petitioner to redeem the subject properties. However, in a Petition for Certiorari, Prohibition and Mandamus filed by private respondents, the Court of Appeals set aside the said Order of the trial court. Hence, this petition. Ruling: The Court ruled that the claim that petitioner is entitled to the beneficial provisions of Section 78 of R.A. No. 337 since private respondent's predecessor-in-interest is a credit institution is in the nature of a compulsory counterclaim which should have been averred in petitioner's answer to the complaint for judicial foreclosure. The failure of petitioner to seasonably assert its alleged right under Section 78 of R.A. No. 337 precludes it from so doing at this late stage of the case. Estoppel may be successfully invoked if the party fails to raise the question in the early stages of the proceedings. Hence, in conformity with the ruling in Limpin

vs. IAC (166 SCRA 87), the sale of the subject properties, operated to divest the rights of all the parties to the action and to vest their rights in private respondent. There then existed only what is known as the equity of redemption, which is simply the right of the petitioner to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90-day period after judgment became final. There being an explicit finding by the Court of Appeals in its decision that the herein petitioner failed to exercise its equity of redemption within the prescribed period, redemption can no longer be effected. The confirmation of the sale and the issuance of the transfer certificates of title covering the subject properties to private respondent was in order. The trial court, therefore, has the ministerial duty to place private respondent in the possession of subject properties. SYLLABUS 1.REMEDIAL LAW; SPECIAL CIVIL ACTIONS; FORECLOSURE OF REAL ESTATE MORTGAGE; EQUITY OF REDEMPTION AND RIGHT OF REDEMPTION; DISTINGUISHED. On the distinction between the equity of redemption and right of redemption, the case of Gregorio Y. Limpin vs. Intermediate Appellate Court, comes to the fore. Held the Court in the said case: "The equity of redemption is, to be sure, different from and should not be confused with the right of redemption. The right of redemption in relation to a mortgage understood in the sense of a prerogative to re-acquire mortgaged property after registration of the foreclosure sale exists only in the case of the extrajudicial foreclosure of the mortgage. No such right is recognized in a judicial foreclosed of the mortgage. No such right is recognized in a judicial foreclosed except only where the mortgagee is the Philippine National Bank or a bank or banking institution. Where a mortgage is foreclosed extrajudicially, Act 3135 grants to the mortgagor the right of redemption within one (1) year from the registration of the sheriff's certificate of foreclosure sale. Where the foreclosure is judicially effected, however, no equivalent right of redemption exists. The law declares that a judicial foreclosure sale, when confirmed by an order of the court, . . . shall operate to divest the rights of all the parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may be allowed by law. Such rights exceptionally 'allowed by law' (i.e., even after confirmation by an order of the court) are those granted by the charter of the Philippine National Bank (Acts No. 2747 and 2938), and the General Banking Act (R.A. 337). These laws confer on the mortgagor, his successors in interest or any judgment

creditor of the mortgagor, the right to redeem the property sold on foreclosure after confirmation by the court of the foreclosure sale which right may be exercised within a period of one (1) year, counted from the date of registration of the certificate of sale in the Registry of Property. But, to repeat, no such right of redemption exists in case of judicial foreclosure of a mortgage if the mortgagee is not the PNB or a bank or banking institution. In such a case, the foreclosure sale, 'when confirmed by an order of the court. . . . shall operate to divest the rights of all the parties to the action and to vest their rights in the purchaser.' There then exists only what is known as the equity of redemption. This is simply the right of the defendant mortgagor to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90-day period after the judgment becomes final, in accordance with Rule 68, or even after the foreclosure sale but prior to its confirmation. 2.ID.; ID.; ID.; BENEFICIAL PROVISIONS OF SECTION 78 OF GENERAL BANKING ACT MUST BE RAISED AS COMPULSORY COUNTERCLAIM. [A]t the earliest opportunity, when it submitted its answer to the complaint for judicial foreclosure, petitioner should have alleged that it was entitled to the beneficial provisions of Section 78 of R.A. No. 337 but again, it did not make any allegation in its answer regarding any right thereunder. It bears stressing that the applicability of Section 78 of R.A. No. 337 hinges on the factual question of whether or not private respondent's predecessor in interest was a credit institution. As was held in Limpin, a judicial foreclosure sale, "when confirmed by an order of the court, . . . shall operate to divest the rights of all the parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may be allowed by law," which confer on the mortgagor, his successors in interest of any judgment creditor of the mortgagor, the right to redeem the property sold on foreclosure after confirmation by the court of the judicial foreclosure sale. Thus, the claim that petitioner is entitled to the beneficial provisions of Section 78 of R.A. No. 337 since private respondent's predecessor-in-interest is a credit institution is in the nature of a compulsory counterclaim which should have been averred in petitioner's answer to the complaint for judicial foreclosure. 3.ID.; ID.; ID.; ID.; NOT ALLEGED BY PETITIONER IN EARLY STAGES OF PROCEEDINGS. [I]t was too late in the day for petitioner to invoke a right to redeem under Section 78 of R.A. No. 337. Petitioner failed to assert a right to redeem in several crucial

stages of the proceedings. For instance, on September 7, 1994, when it filed with the trial court an Ex-parte Motion for Clarification, petitioner failed to allege and prove that private respondent's predecessor in interest was a credit institution . . . So also, when it presented before the trial court an Exception to the Order and Motion to Set Aside said Order dated October 13, 1994, petitioner again was silent on its alleged right under Section 78 of R.A. No. 337 . . . Then, too, nothing was heard from petitioner on its alleged right under Section 78 of R.A. No. 337 and of the predecessor in interest of private respondent as a credit institution, when the trial court came out with an order on February 10, 1995, confirming the sale of subject properties in favor private respondent and declaring that all pending incidents with respect to the Order dated September 26, 1994 had become moot and academic. Similarly, when petitioner filed on February 27, 1995 a Motion for Clarification with the Court of Appeals, seeking "clarification" of the date of commencement of the one (1) year redemption period for the subject properties . . . If petitioner were really acting in good faith, it would have ventilated, before the Court of Appeals in CA-G.R. No. 35086 its alleged right under Section 78 of R.A. No. 337; but petitioner never did do so. cDAITS 4.ID.; ID.; ID.; ID.; ID.; PRINCIPLE OF ESTOPPEL APPLIES. The failure of petitioner to seasonably assert its alleged right under Section 78 of R.A. No. 337 precludes it from so doing at this late stage of the case. Estoppel may be successfully invoked if the party fails to raise the question in the early stages of the proceedings. Thus, "a party to a case who failed to invoke his claim in the main case, while having the opportunity to do so, will be precluded, subsequently, from invoking his claim, even if it were true, after the decision has become final, otherwise the judgment may be reduced to a mockery and the administration of justice may be placed in disrepute."

5.ID.; CIVIL PROCEDURE; COUNTERCLAIM; ELUCIDATED. ". . . A counterclaim is, most broadly, a cause of action existing in favor of the defendant against the plaintiff. More narrowly, it is a claim which, if established, will defeat or in some way qualify a judgment or relief to which plaintiff is otherwise entitled. It is sometimes defined as any cause of action arising in contract available against any action also arising in contract and existing at the time of the commencement of such an action. It is frequently defined by the codes as a cause of action arising out of the contract

or transaction set forth in the complaint as the foundation of the plaintiff's claim, or connected with the subject of the action." "The counterclaim is in itself a distinct and independent cause of action, so that when properly stated as such, the defendant becomes, in respect to the matters stated by him, an actor, and there are two simultaneous actions pending between the same parties, wherein each is at the same time both a plaintiff and a defendant. Counterclaim is an offensive as well as a defensive plea and is not necessarily confined to the justice of the plaintiffs claim. It represents the right of the defendant to have the claims of the parties counterbalanced in whole or in part, and judgment to be entered in excess, if any. A counterclaim stands on the same footing, and is to be tested by the same rules, as if it were an independent action." 6.ID.; ID.; ID.; PURPOSE. ". . . The rules of counterclaim are designed to enable the disposition of a whole controversy of interested parties' conflicting claims, at one time and in one action, provided all parties' be brought before the court and the matter decided without prejudicing the rights of any party." ScHADI 7.ID.; ID.; EXECUTION OF JUDGMENT; ERRONEOUS FOR THE TRIAL COURT TO ALLOW A PARTY AT THIS STAGE TO INTRODUCE EVIDENCE AND OVERRULE THE LAW OF THE CASE. [T]he trial court erred in still allowing petitioner to introduce evidence that private respondent's predecessor-ininterest was a credit institution, and to thereafter rule that the petitioner was entitled to avail of the provisions of Section 78 of R.A. No. 337. In effect, the trial court permitted the petitioner to accomplish what the latter failed to do before the Court of Appeals, that is, to invoke its alleged right under Section 78 of R.A. 337 although the Court of Appeals in CA-G.R. No. 35086 already found that 'the question of whether the Syndicated Management Council Group, Inc. is a bank or credit institution was never brought before (the Court of Appeals) squarely." The said pronouncement by the Court of Appeals unerringly signified that petitioner did not make a timely assertion of any right under Section 78 of R.A. No. 337 in all the stages of the proceedings below. 8.ID.; ID.; ID.; LAW OF THE CASE; REMAINS AS IT IS, WHETHER OR NOT IT IS ERRONEOUS IS IMMATERIAL. There is, . . . merit in private respondent's contention that to allow petitioner to belatedly invoke its right under Section 78 of R.A. No. 337 will disturb the "law of the case." However, private respondent's statement of what constitutes the "law of the case" is

not entirely accurate. The "law of the case" is not simply that the defendant possesses an equity of redemption. As the Court has stated, the "law of the case" holds that petitioner has the equity of the redemption without any qualification whatsoever, that is, without the right of redemption afforded by Section 78 of R.A. No. 337. Whether or not the "law of the case" is erroneous is immaterial, it still remains the "law of the case." A contrary rule will contradict both the letter and spirit of the rulings of the Court of Appeals in CA-G.R. SP No. 35086, CA-G.R. CV No. 39243, and CA-G.R. 38747, which clearly saw through the repeated attempts of petitioner to forestall so simple a matter as making the security given for a just debt to answer for its payment. HATICc 9.ID.; SPECIAL CIVIL ACTIONS; FORECLOSURE OF REAL ESTATE MORTGAGE; EQUITY OF REDEMPTION CAN NO LONGER BE EFFECTED FOR FAILURE TO EXERCISE WITHIN THE PRESCRIBED PERIOD. [T]he sale of the subject properties, as confirmed by the Order dated February 10, 1995 of the trial court in Civil Case No. 89-5424 operated to divest the rights of all the parties to the action and to vest their rights in private respondent. There then existed only what is known as the equity of redemption, which is simply the right of the petitioner to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90-day period after the judgment became final. There being an explicit finding on the part of the Court of Appeals in its Decision of September 30, 1994 in CA-G.R. No. 35086 that the herein petitioner failed to exercise its equity of redemption within the prescribed period, redemption can no longer be effected. The confirmation of the sale and the issuance of the transfer certificates of title covering the subject properties to private respondent was then, in order. The trial court therefore, has the ministerial duty to place private respondent in the possession of subject properties.