Syllabi/Synopsis FIRST DIVISION

[G.R. No. 133366. August 5, 1999]

UNIONBANK OF THE PHILIPPINES, petitioner, vs. THE COURT OF APPEALS and FERMINA S. DARIO and REYNALDO S. DARIO, respondents. SYNOPSIS Petitioner Unionbank of the Philippines (UNIONBANK) appealed, by way of certiorari, the decision of the Court of Appeals (CA) of 26 June 1977 and its resolution of 7 April 1998. The CA nullified the Regional Trial Courts (RTC) order of 7 August 1995 denying private respondents application for preliminary injunction as UNIONBANKs consolidation of ownership divested private respondents of their property without due process of law. It also ordered the Register of Deeds to cancel UNIONBANKs title and the trial court to hear private respondents prayer for injunctive relief. The Supreme Court reversed and set aside the Decision of the CA nullifying the consolidation of ownership and ordering the Register of Deeds of Quezon City to cancel TCT No. 120929 and reinstate TCT No. 41828. The Court reinstated the order of the trial court declaring UNIONBANKs prayer for writ of preliminary injunction moot and academic and remanded the case to the trial court for trial on the merits. The Supreme Court ruled that the consolidation of ownership over the mortgaged property in favor of UNIONBANK and the issuance of a new title in its name during the pendency of an action for annulment and reconveyance will not cause irreparable injury to private respondents who are plaintiffs in the said action that will merit the protection of the court through the writ of preliminary injunction. The Court stressed that as purchaser at a public auction, UNIONBANK is only substituted to and acquires the right, title, and interest and claim of the judgment debtors or mortgagors to the property at the time of its levy. With the main action for reconveyance pending before the RTC, the notice of lis pendens, which despite consolidation remains annotated on UNIONBANKs title subject to the outcome of the litigation, sufficiently protects private respondents interest over the property. SYLLABUS 1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; INJUNCTION; TEMPORARY INJUNCTION TERMINATES AUTOMATICALLY ON THE DISMISSAL OF THE ACTION. - The motion for reconsideration and to amend complaint filed by private respondent on 20 October 1994 was of no moment, this Court recognizing that a dismissal, discontinuance or non-suit of an action in which a restraining order or temporary injunction has been granted operates as a dissolution of the restraining order or temporary injunction, regardless of whether the period for filing a motion for reconsideration of the order dismissing the case or appeal therefrom has expired. The rationale therefor is that even in cases where an appeal is taken from a judgment dismissing an action on the merits, the appeal does not suspend the judgment, hence the general rule applies that a temporary injunction terminates automatically on the dismissal of the action. 2. ID.; ID.; ID.; THE CONSOLIDATION OF OWNERSHIP OVER THE MORTGAGED PROPERTY IN FAVOR OF PETITIONER AND THE ISSUANCE OF A NEW TITLE IN ITS NAME DURING THE PENDENCY OF THE ACTION FOR ANNULMENT AND RECONVEYANCE WILL NOT CAUSE IRREPARABLE INJURY TO PRIVATE RESPONDENTS; THE NOTICE OF LIS PENDENS ANNOTATED ON PETITIONERS TITLE SUBJECT TO THE OUTCOME OF THE LITIGATION, SUFFICIENTLY PROTECTS THE INTEREST OF PRIVATE RESPONDENTS IN THE PROPERTY. - To be entitled to the injunctive writ, movant must show that there exists a right to be protected which is directly threatened by an act sought to be enjoined. Furthermore, there must be a showing that the invasion of the right is material and substantial and that there is an urgent and paramount necessity for the writ to prevent a serious damage. The injunctive remedy prevents a threatened or continuous irremediable injury to some of the parties before their claim can be thoroughly investigated and advisedly adjudicated; it is resorted to only when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation. In the case at bar, the consolidation of ownership over the mortgaged property in favor of UNIONBANK and the issuance of a new title in its name during the pendency of an action for annulment and reconveyance will not cause irreparable injury to private respondents who are plaintiffs in the said action that will merit the protection of the court through the writ of preliminary injunction. This is because as purchaser at a public auction, UNIONBANK is only substituted to and acquires the right, title, interest and claim of the judgment debtors or mortgagors to the property at the time of levy. Perforce, the judgment in the main action for reconveyance will not be rendered ineffectual by the consolidation of ownership and the issuance of title in the name of UNIONBANK. More importantly, with the main action for reconveyance pending before the RTC, the notice oflis pendens, which despite consolidation remains annotated on UNIONBANKs transfer certificate of title subject to the outcome of the litigation, sufficiently protects private respondents interest over the property. A

transferee pendente lite stands exactly in the shoes of the transferor and is bound by any judgment or decree which may be rendered for or against the transferor. Once a notice of lis pendens has been duly registered, any cancellation or issuance of the title of the land involved as well as any subsequent transaction affecting the same, would have to be subject to the outcome of the litigation. In other words, upon the termination of the litigation there can be no risk of losing the property or any part thereof as a result of any conveyance of the land or any encumbrance that may be made thereon posterior to the filing of the notice of lis pendens. 3. CIVIL LAW; CONTRACTS; FORECLOSURE OF MORTGAGE; UPON FAILURE TO REDEEM FORECLOSED REALTY, CONSOLIDATION OF TITLE BECOMES A MATTER OF RIGHT ON THE PART OF THE AUCTION BUYER, AND THE ISSUANCE OF A CERTIFICATE OF TITLE IN FAVOR OF THE PURCHASER BECOMES MINISTERIAL UPON THE REGISTER OF DEEDS. - In real estate mortgage, when the principal obligation is not paid when due, the mortgages has the right to foreclose the mortgage and to have the property seized and sold with a view to applying the proceeds to the payment of the principal obligation. Foreclosure may be effected either judicially or extrajudicially. In a public bidding during extra-judicial foreclosure, the creditor-mortgagee, trustee, or other person authorized to act for the creditor may participate and purchase the mortgaged property as any other bidder. Thereafter the mortgagor has one year within which to redeem the property from and after registration of sale with the Register of Deeds. In case of non-redemption, the purchaser at foreclosure sale shall file with the Register of Deeds, either a final deed of sale executed by the person authorized by virtue of the power of attorney embodied in the deed or mortgage, or his sworn statement attesting to the fact of non-redemption; whereupon, the Register of Deeds shall issue a new certificate of title in favor of the purchaser after the owners duplicate of the certificate has been previously deliver ed and cancelled. Thus, upon failure to redeem foreclosed realty, consolidation of title becomes a matter of right on the part of the auction buyer, and the issuance of a certificate of title in favor of the purchaser becomes ministerial upon the Register of Deeds.

DECISION DAVIDE, JR., C.J.: Unionbank of the Philippines (hereafter UNIONBANK) appeals, by way of certiorari, the Decision[1] of the Court of Appeals (CA) of 26 June 1997 and its Resolution of 7 April 1998 [2] The CA nullified the Regional Trial Courts (RTC) Order[3] of 7 August 1995 denying private respondents application for preliminary injunction as UNIONBANKs consolidation of ownership divested private respondents of their property without due process of law. It also ordered the register of deeds to cancel UNIONBANKs title and the trial court to hear private respondents prayer for injunctive relief. This case stemmed from a real estate mortgage executed on 17 December 1991 by spouses Leopoldo and Jessica Dario (hereafter mortgagors) in favor of UNIONBANK to secure a P3 million loan, including interest and other charges. The mortgage covered a Quezon City property with Transfer Certificate of Title (TCT) No. 41828 in Leopoldo Darios name and was anno tated on the title on 18 December 1991. For non-payment of the principal obligation, UNIONBANK extrajudicially foreclosed the property mortgaged on 12 August 1993 and sold the same at public auction, with itself posting the highest bid. On 4 October 1994, one week before the one-year redemption period expired, private respondents filed a complaint with the RTC of Quezon City against the mortgagors, UNIONBANK, the Register of Deeds and the City Sheriff of Quezon City. Docketed as Civil Case No. Q-94-21830, the complaint was for annulment of sale and real estate mortgage with reconveyance and prayer for restraining order and prohibitory injunction. A notice of lis pendens was annotated on the title. On 10 October 1994, RTC, Branch 81, through Presiding Judge (later CA Justice) Celia Lipana-Reyes, issued a temporary restraining order (TRO) enjoining the redemption of property within the statutory period and its consolidation under UNIONBANKs name. At a hearing four days later, UNIONBANKs counsel orally moved for dismissal of the complaint alleging that a certification of non-forum shopping as prescribed by SC Circular 4-94[4] is now Rule 7 Section 5 of the 1997 Rules of Civil Procedure.4 was not attached thereto. Judge Lipana-Reyes settled the motion in favor of UNIONBANK and dismissed[5] the complaint on 17 October 1994. Aggrieved, private respondents filed a motion for reconsideration[6] of the dismissal on 20 October 1994 and prayed that they be permitted to amend their verified complaint to comply with the requisites of Circular 4-94. Upon the appointment of Judge Lipana-Reyes to the CA, pairing Judge Agustin S. Dizon took over the case and on 15 November 1994 allowed private respondents to incorporate the mandatory formal requirements of SC Administrative Circular 4-94 to their complaint. In the meantime, without notifying private respondents, UNIONBANK consolidated its title over the foreclosed property on 24 October 1994. TCT No. 41828 was cancelled and TCT No. 12092 9 in UNIONBANKs name was issued in its stead. Private respondents filed an amended complaint[7] on 9 December 1994, alleging that they, not the mortgagors, are the true owners of the property mortgaged and insisting on the invalidity of both the mortgage and its subsequent extrajudicial

foreclosure. They claimed that the original title, TCT No. 61571, was entrusted to a certain Atty. Reynaldo Singson preparatory to its administrative reconstitution after a fire gutted the Quezon City Hall building. Mortgagor Leopoldo, private respondent Ferminas son, obtained the property from Atty. Singson, had the title reconstituted under his name without private responden ts knowledge, executed an ante-dated deed of sale in his favor and mortgaged the property to UNIONBANK. On 19 December 1994, Judge Ignacio M. Capulong to whom this case was assigned admitted the aforementioned amended complaint and set the application for writ of preliminary injunction for hearing. After UNIONBANKs motion for reconsideration of said Order was denied on 17 January 1995, it filed a petition for certiorari with the CA questioning the admission of the amended complaint. The CA upheld Judge Capulongs order admitting the amended complaint on 24 April 1995, UNIONBANK thereafter elevated its cause to this Court. Meanwhile, on 9 February 1995 UNIONBANK filed its answer ad cautelam asserting its status as an innocent mortgagee for value whose right or lien upon the property mortgaged must be respected even if the mortgagor obtained his title through fraud. It also averred that the action had become moot and academic by the consolidation of the foreclosed property on 24 October 1994 in its name, resulting to the issuance of TCT No. 120929 by the Register of Deeds of Quezon City. In reaction to UNIONBANKs revelation, private respondents moved to declare UNIONBANKs counsel in indirect contempt attacking his disobedience to the TRO. On 19 May 1995, private respondents moved to declare the other defendants in default for their non-filing of responsive pleadings within the mandatory period and to set the application for preliminary injunction and indirect contempt for pre-trial and trial. On 14 June 1995 the second division of this Court denied the petition for certiorari, which it considered as a petition for review under Rule 45, for failure to show that the CA had committed any reversible error in judgment. In its 19 August 1995 Order, the RTC held the mortgagors and the City Sheriff of Quezon City in default and sustained UNIONBANKs contention that the act sought to be enjoined had been enforced, negating the need of hearing the application for preliminary injunction. Private respondents filed a lengthy motion for reconsideration to this Order. The annulment case was re-raffled to Branch 227 under Presiding Judge Vicente Q. Roxas upon the creation of new salas. Judge Roxas, on 25 March 1996, denied the motion to reconsider the 19 August 1995 Order but suggested that private respondents amend their application from prohibitory to mandatory injunction. As private respondents were unable to amend their application, the RTC denied the motion for reconsideration and their motion for indirect contempt, in the interest of free speech and tolerance on 9 July 1996. Asserting grave abuse of discretion, private respondents brought the denial of their motion for reconsideration with the Court of Appeals on 6 September 1996. After considering the arguments presented by the parties, the CA ruled that despite its knowledge that the ownership of the property was being questioned, UNIONBANK took advantage of private respondents procedural error by consolidating title to the property, which smack[ed] of bad faith and evince[d] a reprobate disposition of the part of its counsel to advance his clients cause by fair means or foul. As a result thereof the transfer of title was vitiated by non -adherence to procedural due process.[8] On 26 June 1997, CA nullified the consolidation of ownership, ordered the Register of Deeds to cancel the certificate of title in UNIONBANKs name and to reinstate TCT No. 41828 with the no tice of lis pendens annotated at the back. The CA also set aside the portion of the assailed RTC Orders that declared private respondents prayer for writ of preliminary injunction as moot and academic. UNIONBANKs motion for reconsideration of the above-mentioned decision was likewise rejected for lack of merit on 7 April 1998. Hence, UNIONBANK came to this Court claiming to be a mortgagee in good faith and for value with a right to consolidate ownership over the foreclosed property with the redemption period having expired and there having been no redemptioners. UNIONBANK contends that the TRO which provisionally enjoined the tolling of the redemption period was automatically dissolved upon dismissal of the complaint on 17 October 1994. Conformably, consolidation of title in its name and the issuance of TCT No. 120929 rendered further proceedings on the application for injunction academic. Moreover, the alleged fraudulent mortgage was facilitated through private respondents negligence so they must bea r the loss. It also contends that since private respondents had filed several pleadings, due process, being an opportunity to be heard either through pleadings or oral arguments, was observed. Private respondents maintain that UNIONBANKs consolidation of the title in its name was in bad faith, vitiated a standing court order, is against the law, thus void ab initio. The application for preliminary injunction was not rendered moot and academic by consolidation, which took place during the lifetime of the TRO, and did not follow the proper legal procedure due to the surreptitious manner it was accomplished. By treating the application for preliminary injunction as moot and academic and denying the motion for indirect contempt without hearing, the RTC order ran afoul with the requirements of due process. Two main issues can be gleaned from the posturing and claims of the parties, to wit, was the consolidation of title in UNIONBANKs name proper, and was the dismissal of the application for preliminary prohib itory injunction valid.

The issues must be answered in the affirmative. UNIONBANKs consolidation of title over the property on 24 October 1994 was proper, though precipitate. Contrary to private respondents allegation UNIONBANK violated no standing court order. The only bar to consolidation was the temporary restraining order issued by Justice Lipana-Reyes on 10 October 1994 which effectively halted the tolling of the redemption period 7 days short of its expiration. When private respondents original complaint was dismissed on 17 October 1994 for failure to append a certification of non-forum shopping, the TRO, as an ancillary order that cannot stand independent of the main proceeding, became functus officio. Thus the tolling of the 12-month redemption period, interrupted by the filing of the complaint and the TRO, recommenced and eventually expired 7 days thereafter or on 24 October 1994, the date of the disputed consolidation. The motion for reconsideration and to amend complaint filed by private respondent on 20 October 1994 was of no moment, this Court recognizing that a dismissal, discontinuance or non-suit of an action in which a restraining order or temporary injunction has been granted operates as a dissolution of the restraining order or tempo rary injunction,[9] regardless of whether the period for filing a motion for reconsideration of the order dismissing the case or appeal therefrom has expired. [10] The rationale therefor is that even in cases where an appeal is taken from a judgment dismissing an action on the merits, the appeal does not suspend the judgment, hence the general rule applies that a temporary injunction terminates automatically on the dismissal of the action.[11] We disagree with the appellate courts observation that consolidation deprived private respondents of their property without due process. It is settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one year after the registration of the sale.[12] Consolidation took place as a matter of right since there was no redemption of the foreclosed property and the TRO expired upon dismissal of the complaint. UNIONBANK need not have informed private respondent that it was consolidating its title over the property, upon the expiration of the redemption period, without the judgment debtor having made use of his right of redemption, the ownership of the property sold becomes consolidated in the purchaser.[13]Notice to the mortgagors and with more reason, to private respondents who are not even parties to the mortgage contract nor to the extrajudicial sale is not necessary. In real estate mortgage, when the principal obligation is not paid when due, the mortgage has the right to foreclose the mortgage and to have the property seized and sold with a view to applying the proceeds to the payment of the principal obligation.[14] Foreclosure may be effected either judicially or extrajudicially. In a public bidding during extra-judicial foreclosure, the creditor-mortgagee, trustee, or other person authorized to act for the creditor may participate and purchase the mortgaged property as any other bidder. Thereafter the mortgagor has one year within which to redeem the property from and after registration of sale with the Register of Deeds. [15] In case of non-redemption, the purchaser at foreclosure sale shall file with the Register of Deeds, either a final deed of sale executed by the person authorized by virtue of the power of attorney embodied in the deed or mortgage, or his sworn statement attesting to the fact of non-redemption; whereupon, the Register of Deeds shall issue a new certificate of title in favor of the purchaser after the owners duplicate of the certificate has been previously delivered and cancelled. [16] Thus, upon failure to redeem foreclosed realty, consolidation of title becomes a matter of right on the part of the auction buyer, [17] and the issuance of a certificate of title in favor of the purchaser becomes ministerial upon the Register of Deeds. There is, moreover, nothing erroneous with the denial of private respondents application for preliminary prohibitory injunction. The acts complained of have already been consummated. It is impossible to restrain the performance of consummated acts through the issuance of prohibitory injunction. When the act sought to be prevented had long been consummated, the remedy of injunction could no longer be entertained,[18] hearing the application for preliminary injunction would just be an exercise in futility. In addition, to be entitled to the injunctive writ, movant must show that there exists a right to be protected which is directly threatened by an act sought to be enjoined. Furthermore, there must be a showing that the invasion of the right is material and substantial and that there is an urgent and paramount necessity for the writ to prevent a serious damage. [19] The injunctive remedy prevents a threatened or continuous irremediable injury to some of the parties before their claim can be thoroughly investigated and advisedly adjudicated; it is resorted to only when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation.[20] In the case at bar, the consolidation of ownership over the mortgaged property in favor of UNIONBANK and the issuance of a new title in its name during the pendency of an action for annulment and reconveyance will not cause irreparable injury to private respondents who are plaintiffs in the said action that will merit the protection of the court through the writ of preliminary injunction. This is because as purchaser at a public auction, UNIONBANK is only substituted to and acquires the right, title, interest and claim of the judgment debtors or mortgagors to the property at the time of levy. [21] Perforce, the judgment in the main action for reconveyance will not be rendered ineffectual by the consolidation of ownership and the issuance of title in the name of UNIONBANK. More importantly, with the main action for reconveyance pending before the RTC, the notice of lis pendens, which despite consolidation remains annotated on UNIONBANKs transfer certificate of title subject to the outcome of the litigation,

sufficiently protects private respondents interest over the property. A transfereependente lite stands exactly in the shoes of the transferor and is bound by any judgment or decree which may be rendered for or against the transferor. Once a notice of lis pendens has been duly registered, any cancellation or issuance of the title of the land involved as well as any subsequent transaction affecting the same, would have to be subject to the outcome of the litigation. In other words, upon the termination of the litigation there can be no risk of losing the property or any part thereof as a result of any conveyance of the land or any encumbrance that may be made thereon posterior to the filing of the notice of lis pendens.[22] Finally, as to the issue of who between private respondents and UNIONBANK is negligent and hence must bear the loss, the same is not the proper subject of the present petition and can only be resolved by the trial court after the trial on the merit of the main case. WHEREFORE, the assailed Decision of the Court of Appeals of 26 June 1997 nullifying the consolidation of ownership and ordering the Register of Deeds of Quezon City to cancel TCT No. 120929 and reinstate TCT No. 41828 is hereby REVERSED and SET ASIDE. The order of the trial court dated 7 August 1999, declaring UNIONBANKs prayer for writ of preliminary injunction moot and academic, is hereby REINSTATED. Let this case be remanded to the Regional Trial Court for trial on the merits. No pronouncement as to costs. SO ORDERED. Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

[1] [2] [3] [4] [5] [6] [7] [8] [9]

Per Brawner, R., J. with Tayao-Jaguros, L. and Aquino, H., JJ., concurring. Rollo, 21-29. Id., 31-32. Annex N, Memorandum for Private Respondents, Rollo, 217. Circular 4-9 Rollo, 179-180. Id., 181-189. Rollo, 33-49. Rollo, 26. Santiago v. Vasquez, 217 SCRA 633, 645-646 [1993]. Golez v. Leonidas, 107 SCRA 187, 189 [1981]. Santiago v. Vasquez, supra, note 16 at 645. See Paras v. Roura, 163 SCRA 1 [1988]. F. David Enterprises v. Insular Bank of Asia and America, 191 SCRA 516, 523 [1990]. Medida et al. v. Court of Appeals, et al., May 8, 1992, citing Mateo v. Court of Appeals, et al., 99 Phil. 1042 [1956]. Commodity Financing Co., Inc. v. Jimenez, 91 SCRA 57 [1979]. Secs. 1, 4-6 Act No. 3135; Section 78, General Banking Act. Section 63 (b), paragraph 3, P.D. 1529. Spouses Tarnate v. CA, 241 SCRA 254, 260 [1995]. Africa v. Sandiganbayan, 287 SCRA 408 [1998]; See Manila Railroad Company v. Yatco, 23 SCRA 735 [1968]. Medina, et al. v. City Sheriff, Manila, et al., 276 SCRA 133, 139 [1997].

[10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20]

Wenceslao G. Laureta, Commentaries and Jurisprudence on Injunction 3, citing American Smelting & Ref. Co. v. Godfrey [OCA 8th] 158 F 225, 14 Am. Cas. 8.
[21] [22]

See PNB v. Court of Appeals, 275 SCRA 70 [1997]. J.P. Pellicer & Co., Inc. v. Phil. Realty Corp., 87 Phil. 302, 307 [1950].