Case Summary (G.R. No. 187167)
Key Dates
- Loan to petitioner: August 3, 1972 (P5,000.00 from PBC).
- Judgment against petitioner and co-maker: April 30, 1979 (RTC in Civil Case No. 12188).
- Notice of embargo annotated on titles: January 8, 1981 (Entry No. 110107).
- Sheriff’s sale/public auction: May 13, 1981; certificate of sale issued and registered June 5, 1981 (Entry No. 112552).
- Redemption period under 1964 Rules: one year from June 5, 1981 (i.e., expired June 5, 1982).
- Petitioner’s letter to PDIC offering to pay or seek cancellation: January 1997.
- PDIC denial of cancellation request: August 13, 2001.
- RTC Order granting PDIC’s motion to dismiss: July 24, 2003; motion for reconsideration denied October 20, 2003.
- Court of Appeals decision affirming dismissal: March 23, 2006 (affirmed July 24, 2003 RTC order).
- Supreme Court disposition affirmed on final review.
Procedural History
PBC obtained judgment against Lucasan and commenced execution, resulting in a sheriff’s levy and public auction in 1981 where PBC became highest bidder and a certificate of sale was registered on the titles. Lucasan and mortgagees did not redeem during the statutory redemption period. Years later, after paying mortgagees and seeking cancellation or reacquisition, Lucasan filed a declaratory-relief action (styled for quieting of title) in the RTC against PDIC (PBC’s receiver). PDIC moved to dismiss for lack of cause of action; the RTC granted dismissal, the CA affirmed, and the Supreme Court likewise denied the petition for review.
Factual Background
- Lucasan and his wife owned two parcels of land covered by Torrens Certificates of Title. PBC extended a loan in 1972; the loan was not repaid and PBC sued.
- RTC rendered judgment for PBC in 1979; execution followed, producing a notice of embargo and later a public auction in 1981 where PBC acquired the properties and obtained a registered certificate of sale. Mortgages in favor of Philippine National Bank (PNB) and Republic Planters Bank (RPB) were annotated prior to the embargo; those mortgage liens were subsequently released after Lucasan paid those banks in 1997.
- Lucasan did not redeem within the applicable redemption period. In 1997 he sought cancellation of the certificate of sale and offered to pay; PDIC (by 2001) refused, proposing disposal by public bidding at an appraised minimum.
Issues Presented
- Whether Lucasan had a viable cause of action for quieting of title under Article 476 of the Civil Code and Rule 63 of the Rules of Court.
- Whether the notice of embargo and the certificate of sale, as annotated on the Torrens titles, constituted invalid or inoperative clouds on title that could be removed by quieting of title.
- Whether provisions of PD 1529 §75 and the jurisprudence relied upon by petitioner (notably Cometa v. Court of Appeals and related authorities) required a different result.
Applicable Law and Controlling Doctrines
- Article 476 (quieting of title) and Article 477 (requisites) of the Civil Code: two indispensable requisites — (1) the plaintiff must have legal or equitable title or interest in the property; and (2) the instrument, claim or proceeding alleged to cloud the title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity.
- Rule 63, §1 of the Rules of Court (quieting of title procedure).
- Rules of Court provisions governing levy, sale and redemption (Rule 57 §§7, 11; Rule 39 §12 as referenced by the courts). Under the 1964 Rules in force in 1981, the redemption period was one year from registration of the certificate of sale.
- PD 1529 §75 (application for new certificate upon expiration of redemption period) — purchaser at sale may petition for a new certificate upon expiration; registered owner may still pursue remedies to impeach or annul proceedings before entry of new certificate.
- Relevant jurisprudence discussed by the courts: Cometa v. Court of Appeals (distinguishable facts), Calacala v. Republic (on effect of failure to redeem), De Robles v. Court of Appeals (distinguishing redemption and post-redemption repurchase), Manuel v. PNB (expiration of one-year period makes sheriff’s sale absolute).
Legal Standard for Quieting of Title (Requisites and Effect)
The remedy of quieting of title under Articles 476–477 requires: (1) that the plaintiff possesses legal or equitable title or interest in the property (possession not strictly required); and (2) that the instrument or proceeding constituting the alleged cloud be shown to be actually invalid, inoperative, voidable or unenforceable despite appearing valid on its face. If both requisites are absent, dismissal is appropriate.
Application of Law to Facts — Ownership and Redemption Rights
- The sheriff’s levy and sale were effectuated pursuant to a valid judgment in Civil Case No. 12188 and pursuant to applicable Rules of Court; the notice of embargo and the certificate of sale were registered entries that, on their face, were valid.
- Under the rules applicable in 1981, Lucasan had a one-year redemption right from registration (i.e., until June 5, 1982) but he admitted he did not redeem within that period. The courts concluded that the failure to redeem extinguished his redemption right and vested absolute ownership in PBC.
- Payment to mortgagees in 1997 and subsequent release of prior mortgage encumbrances did not operate retroactively to revive any redemption right or to nullify the validly registered certificate of sale. The courts held that these payments only discharged obligations to the mortgagees and did not alter the effect of the prior sheriff’s sale and expiration of redemption.
Application of Law to Facts — Validity of the Alleged Clouds
- Lucasan did not contest the procedural validity of the execution sale or allege any infirmity in the levy and sale before or during the redemption period. Because he did not demonstrate that the notice of embargo or the certificate of sale were invalid or inoperative, the second requisite for quieting of title was not satisfied.
- The courts held that the annotations (notice of embargo and certificate of sale) were not invalid clouds but valid entries reflecting legitimate judicial proceedings and sale. Consequently, an action for quieting of title was inappropriate.
Treatment of Cometa and Other Authorities
- Cometa v. Court of Appeals was distinguished: Cometa involved a petition for writ of possession and cancellation of lis pendens and included a valid tender within the red
Case Syllabus (G.R. No. 187167)
Case Citation, Court and Date
- Reported at 579 Phil. 576, Third Division, G.R. No. 176929, decided July 04, 2008.
- Decision authored by Justice Nachura; concurrence by Justices Ynares‑Santiago (Chairperson), Austria‑Martinez, Chico‑Nazario, and Reyes.
- Appeal from the Court of Appeals decision in CA‑G.R. CV No. 81518 dated March 23, 2006, which affirmed the Regional Trial Court of Bacolod City, Branch 43, Order dated July 24, 2003 and its Resolution denying reconsideration dated October 20, 2003.
Parties and Posture of the Case
- Petitioner: Inocencio Y. Lucasan, for himself and as judicial administrator of the intestate estate of the late Julianita Sorbito Lucasan.
- Respondent: Philippine Deposit Insurance Corporation (PDIC), in its capacity as receiver and liquidator of the defunct Pacific Banking Corporation (PBC).
- Relief sought by petitioner: declaration and confirmation of rights under the second paragraph of Section 1, Rule 63 of the Rules of Court in relation to Section 75 of Presidential Decree No. 1529; cancellation/lifting of the notice of embargo and certificate of sale annotated on Torrens Certificate of Title (TCT) Nos. T‑68115 and T‑13816; offer to pay P100,000.00 or such amount as the RTC may determine as consideration for cancellation.
Factual Background
- Ownership: Lucasan and his wife Julianita Sorbito were owners of Lot Nos. 1500‑A and 229‑E in Bacolod City, respectively covered by TCT Nos. T‑68115 and T‑13816.
- Loan and Judgment: On August 3, 1972, Pacific Banking Corporation (PBC) extended a P5,000.00 loan to Lucasan with Carlos Benares as co‑maker. Lucasan and Benares failed to pay; PBC filed collection case Civil Case No. 12188 in the RTC of Bacolod City. On April 30, 1979, the RTC rendered judgment ordering joint and several payment of P7,199.99 with interest at 14% per annum computed from February 7, 1979.
- Execution and Annotations:
- Writ of execution issued and levy effected. City Sheriff of Bacolod issued a Notice of Embargo on January 8, 1981, annotated on TCT Nos. T‑68115 and T‑13816 as Entry No. 110107.
- Prior encumbrances annotated on the titles included mortgages in favor of Philippine National Bank (PNB) and Republic Planter’s Bank (RPB).
- Sheriff’s Sale and Certificate of Sale:
- Public auction held May 13, 1981; lots awarded to PBC as highest bidder.
- Certificate of sale executed in favor of PBC and registered/annotated on the titles as Entry No. 112552 on June 5, 1981.
- Neither PNB nor RPB, nor Lucasan, redeemed within the redemption period; PBC did not file petition for consolidation of ownership at that time.
- Post‑sale Events:
- In January 1997 Lucasan, through counsel, wrote to PDIC (PBC’s receiver/liquidator) seeking cancellation of the certificate of sale and offering to pay PBC’s claim.
- Afterward, Lucasan paid his loans with PNB and RPB; the mortgagees executed releases of mortgage, resulting in cancellation of those prior encumbrances.
- PDIC responded by letter dated August 13, 2001, denying cancellation and advising that the properties had become acquired assets of PBC by virtue of the certificate of sale dated May 13, 1981 and registered June 5, 1981; PDIC stated the last day of the redemption period was June 5, 1982 and advised reacquisition must be through PDIC’s disposal policy via public bidding using the appraised value of P2,900,300.00 (as of March 29, 2000) as minimum bid.
Procedural History in Trial and Appellate Courts
- Trial Court (RTC Bacolod City, Branch 43):
- Lucasan filed a petition styled as declaratory relief (Civil Case No. 02‑11874) seeking cancellation/lifting of annotations and confirmation of rights.
- PDIC moved to dismiss for lack of cause of action, arguing that quieting of title under Rule 63 requires a cloud that is apparently valid but in truth invalid, and that the notice of embargo and certificate of sale were valid and operative.
- RTC granted PDIC’s motion to dismiss by Order dated July 24, 2003, finding Lucasan lacked the requisite legal/equitable title and failed to show the registrable instruments were invalid or inoperative; dispositive order dismissed the petition.
- Motion for reconsideration by Lucasan was denied by RTC on October 20, 2003.
- Court of Appeals:
- CA affirmed RTC in its Decision dated March 23, 2006, holding Lucasan lost his right to redeem by failing to do so within the prescribed period, thereby vesting absolute ownership in PBC.
- Reconsideration denied February 7, 2007.
- Supreme Court:
- Petition for review on certiorari filed by Lucasan to the Supreme Court challenging CA decision on grounds of misapplication of Section 75 PD No. 1529 and jurisprudence (Cometa) and on the contention that the annotations affected only an interest and not full title.
Legal Issues Presented
- Primary issue: Whether the dismissal of Lucasan’s complaint for quieting of title was proper where the notice of embargo and the certificate of sale were annotated on his Torrens titles and he sought cancellation after the expiration of the statutory redemption period.
- Subsidiary and related issues:
- Whether Lucasan possessed the legal or equitable title or interest required under Articles 476 and 477 of the Civil Code (and Rules of Court) to maintain an action for quieting of title.
- Whether the notice of embargo and the certificate of sale were invalid or inoperative despite their prima facie appearance of validity.
- Whether Section 75 of PD No. 1529 (Property Registration Decree) and jurisprudence such as Cometa v. Court of Appeals provided a basis to restore Lucasan’s rights.
- Whether failure of PBC to petition for consolidation of ownership or to take further acts after the redemption period would restore rights to Lucasan.
Applicable Legal Provisions and Jurisprudence Cited
- Civil Code:
- Article 476: Remedy for removal of cloud on title/quieting of title where instrument is apparently valid but in truth invalid/ineffective.
- Article 477: Plaintiff must have legal or equitable title or interest; need not be in possession.
- Rules of Court and Execution:
- Section 12, Rule 39 of the Revised Rules of Court cited as creating a lien upon levy on execution over judgment debtor’s right, title and interest, subject to prior liens/encumbrances.
- Provisions of 1964 Rules of Court: twelve (12) months right of redemption from registration of certificate of sale (referenced precedent DBP v. Leonor