G.R. No. 139370 - Knecht vs. United Cigarette Corp.

Case Digest (G.R. No. 139370)
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Facts:

Parties, properties, and principal transaction
Rose Packing Company, Inc. (Rose Packing), a domestic corporation, owned three parcels of land in Sto. Domingo, Cainta, Rizal.
The largest parcel covered by Transfer Certificate of Title (TCT) No. 73620 had an area of 31,447 square meters and was mortgaged with the Philippine Commercial and Industrial Bank (PCIB).
The other two parcels were unregistered.
On October 26, 1965, Rose Packing, through President Rene Knecht, sold the parcels (including buildings and improvements) to United Cigarette Corporation (UCC), also a domestic corporation, for P 800,000.00.
Rose Packing warranted the lots were free from liens and encumbrances except the real estate mortgage over the area covered by TCT No. 73620.
UCC promised to pay P 250,000.00 as down payment upon signing of the deed of sale with mortgage, to assume Rose Packing’s P 250,000.00 overdraft line obligation with PCIB subject to PCIB approval, and to pay the balance of P 300,000.00 in two annual installments of P 150,000.00 each with ten percent (10%) annual interest.
UCC initially paid P 80,000.00 as earnest money.

Discovery of excess PCIB obligation and filing of Civil Case No. 9165
Before the deed of sale was executed, the parties found Rose Packing’s actual obligation with PCIB exceeded the P 250,000.00 that UCC agreed to assume.
PCIB demanded additional collateral from UCC as a condition precedent for approval of the sale of the mortgaged property.
UCC did not comply with the additional collateral requirement.
Rose Packing allegedly offered to sell the same lots to other buyers without UCC’s knowledge and without returning the P 80,000.00 earnest money.
On March 2, 1966, UCC filed a complaint for specific performance and recovery of damages with the then Court of First Instance (CFI) of Rizal, Branch I, docketed as Civil Case No. 9165, against Rose Packing and Rene Knecht.

CFI Decision in Civil Case No. 9165 and Rose Packing’s appeal
On July 15, 1969, the CFI ruled Rose Packing acted in bad faith by not informing UCC of the actual amount of its PCIB obligation.
The CFI held UCC could not be compelled to assume the excess beyond the P 250,000.00 agreed portion of the overdraft line obligation.
The CFI ordered defendants to convey and deliver the three parcels (except machines for canning factory) with all buildings and improvements and to execute the corresponding deed of sale with mortgage for P 800,000.00, subject to the judgment’s detailed payment and assumption terms.
The CFI ordered:

1) payment structure including down payment less earnest money, 2) treatment of the overdraft line assumption up to agreed limits, 3) payment of the P 300,000.00 balance in two installments with ten percent annual interest, 4) reimbursement to UCC if the purchase price balance would be insufficient to free the properties from existing obligations for which Rose Packing’s corporation was answerable, 5) P 10,000.00 moral damages and P 20,000.00 litigation expenses (including costs and attorney’s fees).

Rose Packing appealed to the Court of Appeals (CA) in CA-G.R. No. 45525-R.
During the pendency of the appeal, UCC’s corporate life expired on March 30, 1973.
Alberto Wong, a major stockholder, was appointed trustee/liquidator of the dissolved UCC and represented UCC in Civil Case No. 9165.

CA affirmance with modification and finality in 1977
On June 26, 1976, the CA affirmed the CFI Decision but deleted the award of moral damages.
Rose Packing and Rene Knecht then filed a petition for review on certiorari in the Supreme Court, docketed as G.R. No. L-44977.
The Supreme Court denied the petition for lack of merit in a Resolution dated January 5, 1977.
A motion for reconsideration was denied.
On March 23, 1977, the decision became final and executory.

Supervening foreclosure litigation: Civil Case No. 11015 and PCIB foreclosure
Before the trial court could render the Decision in Civil Case No. 9165, Rose Packing filed Civil Case No. 11015 with the CFI of Rizal, Branch 2 on July 15, 1968, seeking to enjoin PCIB’s foreclosure sale of the land covered by TCT No. 73620.
The CFI denied the injunction application, and the foreclosure proceeded.
Title was consolidated in PCIB’s name through issuance of TCT No. 286176.
On appeal (CA-G.R. No. 43198-R), the CA upheld the validity of the foreclosure sale but declared void *ab initio* the consolidation of ownership in PCIB’s name for being premature.
The CA granted Rose Packing a 60-day period to redeem.
Rose Packing filed a petition for review on certiorari with the Supreme Court, docketed as G.R. No. L-33084.
On November 14, 1988, the Supreme Court declared the foreclosure sale void and remanded Civil Case No. 11015 for further proceedings to determine Rose Packing’s exact liability with PCIB.
In effect, ownership reverted to Rose Packing.
By then, however, Rose Packing had been dissolved upon expiration of its charter on June 10, 1986.
Knecht, Inc. assumed liquidation of Rose Packing’s assets and winding-up of its pending affairs.

UCC’s motions to intervene and execute after Rose Packing’s dissolution
On July 19, 1990, UCC, through liquidator Alberto Wong, filed with the CFI Branch 2 (later absorbed by RTC Branch 152 due to Batas Pambansa Blg. 129) a motion for leave to intervene and to admit its complaint-in-intervention in Civil Case No. 11015, which sought to enforce the final judgment in Civil Case No. 9165.
The complaint-in-intervention sought issuance of a writ of execution to enforce Civil Case No. 9165.
Rose Packing, through its liquidator/trustee Knecht, Inc., opposed on the ground that Civil Case No. 9165 could no longer be enforced because more than ten (10) years had elapsed from finality.
Despite opposition, the RTC of Pasig City (Branch 152) issued an Order dated December 10, 1990 granting leave to intervene and admitting the complaint-in-intervention.
On October 10, 1991, the same court issued an Order granting a writ of execution to enforce Civil Case No. 9165.
Rose Packing assailed the twin orders via certiorari with the CA in CA-G.R. SP No. 26545.
The CA, in a Decision dated March 5, 1992, nullified the RTC orders dated December 10, 1990 and October 10, 1991.
The CA held UCC’s intervention in Civil Case No. 11015 was unwarranted since the only purpose was execution of UCC’s judgment in Civil Case No. 9165.
The CA also clarified that UCC’s right to execute had not yet prescribed as to the parcel covered by TCT No. 73620 because it was involved in Civil Case No. 11015; execution should be pursued in RTC Branch 151, not Branch 152.
Following CA’s directive, RTC Pasig City (Branch 151) issued an Order dated June 17, 1992 granting UCC’s motion for a writ of execution of Civil Case No. 9165 for the land under TCT No. 73620 (then still in PCIB’s name under TCT No. 286176).

Repeated attempts to stop execution: CA-G.R. SP No. 28333, G.R. No. 109385, and related proceedings
Rose Packing filed another certiorari with the CA (CA-G.R. SP No. 28333) to annul the June 17, 1992 order, again arguing that UCC’s right to execute had prescribed.
On March 18, 1993, the CA reiterated its rulings in CA-G.R. SP No. 26545 and held Rose Packing could not relitigate the already final Civil Case No. 9165.
Rose Packing filed a petition for review on certiorari in G.R. No. 109385.
On August 30, 1993, the Supreme Court denied the petition, finding no reversible error.
A motion for reconsideration was denied with finality on October 20, 1993.

Challenge based on UCC dissolution and successive alias writs
On November 14, 1993, Knecht, Inc. and Rene Knecht claimed they newly discovered UCC’s dissolution on April ...(Subscriber-Only)

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