THIRD DIVISION
[G.R. No. 249536. October 6, 2021.]
LEONCIA LARAYA MERCADO, SUBSTITUTED BY HER CO-PLAINTIFFS AND HEIRS, ET AL., petitioners, vs.LUZON DEVELOPMENT BANK, respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Third Division, issued a Resolution datedOctober 6, 2021, which reads as follows: HTcADC
"G.R. No. 249536(Leoncia Laraya Mercado, Substituted by her co-plaintiffs and heirs, et al., Petitioners, v. Luzon Development Bank, Respondent.) — This resolves the Petition for Review on Certiorari1 seeking to partially modify the Decision 2 dated 29 March 2019 and the Resolution 3 dated 20 September 2019 of the Court of Appeals (CA) in CA-G.R. CV No. 106872. The CA affirmed with modification the Judgment dated 27 November 2015 of Branch 84, Regional Trial Court of Batangas City (RTC) in Civil Case No. 7059.
Antecedents
On 05 April 2002, Leoncia Laraya Mercado (Leoncia), Benito L. Mercado, Enrique L. Mercado, Jose L. Mercado, Josefa L. Mercado and Rodrigo L. Mercado (Rodrigo) (collectively, petitioners) filed a Complaint with the RTC against respondent Luzon Development Bank (LDB). 4
Petitioners alleged that Leoncia is the owner of two parcels of land located in Barangay Don Luis, San Jose, Batangas, covered by Original Certificate of Title (OCT) No. P-3615 and OCT No. P-26262 (subject properties). 5 Said properties formed part of the conjugal properties of Leoncia and her spouse, Matias Mercado (Matias). When Matias died intestate on 27 October 1953, Leoncia's children and co-heirs gave Leoncia administrative powers with usufructuary rights over the parcels of land as shown in the Salaysay sa Ilalim ng Panunumpa dated 23 December 1959. 6
In December 1992, Leoncia mortgaged the subject properties to LDB to secure a loan of Php100,000.00. In May 1993, another loan for Php650,000.00 was secured by Rodrigo and his wife. LDB renewed past due loans by capitalizing interests and penalties, increasing the total loan amount to Php2,550,000.00 for which an Amendment of Real Estate Mortgage was executed in 1995. Thereafter, in August 2000, LDB made Leoncia execute a dacion en pago, assigning to LDB the two parcels of land in payment for the mortgage loan in the amount of Php2,940,000.00. LDB then executed an undated deed of conditional sale over the subject property, which would allow Leoncia to buy back the same for Php3,600,000.00. 7
Per petitioners, the dacion en pago was an equitable mortgage, not an absolute transfer of ownership. This was allegedly shown by the fact that another document was executed allowing Leoncia to buy back the properties and that LDB did not take immediate possession of the same nor had the subject property transferred to its name. 8 In fact, petitioners continued to possess the land and planted crops therein. 9
In 2006, while the parties were negotiating for an amicable settlement, LDB registered the subject properties in its name by virtue of the dacion en pago. 10 Petitioners discovered in February 2012 that Batangas and Producer's Cooperative, Inc., (BEPCO) deposited to LDB the amount of Php2,000,000.00 for the purchase of the subject property. 11
For its part, LDB explained that due to petitioners' failure to pay the loans, the same was restructured and amended, first at Php1,800,000.00 and then at Php2,550,000.00. When they were still unable to pay the loans, a dacion en pago and a deed of conditional sale were executed to enable Leoncia to buy-back the properties. 12
Ruling of the RTC
On 27 November 2015, the RTC rendered its Judgment. The RTC declared the dacion en pago as an equitable mortgage and directed LDB to reconvey the title over the subject property. It allowed petitioners to redeem the property by paying LDB Php2,550,000.00 plus 12% interest per annum from the date of filing of the complaint, specifically on 05 April 2002, until 30 June 2013 and thereafter, six percent (6%) interest per annum until fully paid. 13
Petitioners and LDB filed their respective Motions for Reconsideration, which were denied by the RTC. 14 Dissatisfied, petitioners filed an appeal with the CA.
Ruling of the CA
On 29 March 2019, the CA denied the appeal, viz.:
WHEREFORE, the appeal is DENIED. The assailed Judgment dated 27 November 2015, of the Regional Trial Court, Branch 84, Batangas City in Civil Case No. 7059 is AFFIRMED with MODIFICATION, as follows:
Luzon Development Bank is DIRECTED to pay plaintiffs-appellants the amount of P50,000.00 as Attorney's Fees and P50,000.00 as for the cost of litigation plus interest of 6% per annum from the date of finality of this Decision, until fully paid.
IT IS SO ORDERED. 15
In denying the appeal, the CA held that petitioners admitted the existence of the loans and that it was proven that the contract executed was indeed an equitable mortgage. Thus, the RTC is correct in ordering the payment of 12% interest from the time of filing the complaint on 05 April 2002 until 30 June 2013, and 6% interest from 01 July 2013 until fully paid. 16
The CA, however, ruled that attorney's fees and cost of litigation should be awarded to petitioners pursuant to Article 2208 (5) of the Civil Code since LDB acted in gross and evident bad faith. The CA underlined that petitioners made earnest efforts to settle the case amicably before the Philippine Mediation Center. They even offered to pay LDB the amount of Php4,000,000.00 and to cover all expenses to revert the title back in the name of petitioners. This was not accepted by LDB. Moreover, while the case was pending, LDB endeavored to transfer the titles of the subject property in its name, four years after the Complaint had been filed, using the dacion en pago. Worse, LDB negotiated and sold the same property to BEPCO while mediation was ongoing. 17
Petitioners' Motion for Reconsideration was denied by the CA in its Resolution dated 20 September 2019. 18 Hence, this petition.
Issue
Aggrieved by the CA's Decision, petitioners are now before this Court raising the sole issue of whether or not the lower courts erred in imposing legal interest on the loan payable to LDB. 19
Ruling of the Court
The petition must be denied.
In the case of Muñoz v. Ramirez, 20 as reiterated in Repuela v. Estate of Spouses Larawan, 21 the Court stated that where it was established that the reciprocal obligations of the parties were under an equitable mortgage, reconveyance of the property should be ordered to the rightful owner therein upon the payment of the loan within 90 days from the finality of that decision. Moreover, interest shall accrue from the date of the filing of the complaint for the mortgagor to repair the property. 22
Indeed, this Court has clarified that "[w]hen the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money," an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed. 23 In the absence of stipulation, the legal interest rate per annum shall be applied, to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 24 Further, when the judgment of the court awarding a sum of money becomes final and executory, legal interest is likewise imposed. 25
Here, upon finding the dacion en pago an equitable mortgage, the RTC correctly ordered the reconveyance of the titles of the subject properties to petitioners and allowed petitioners to redeem the same upon payment of the loan and legal interest to LDB. The lower courts are likewise correct in imposing 12% legal interest per annum from the date of filing of the complaint on 05 April 2002 until 30 June 2013, and 6% per annum from 01 July 2013 until fully paid, 26 in accordance with prevailing law and jurisprudence. 27
Given the foregoing, the Court finds that the CA did not commit any reversible error in issuing its assailed Decision and Resolution affirming the RTC.
WHEREFORE, the petition is hereby DENIED. The Decision dated 29 March 2019 and the Resolution dated 20 September 2019 of the Court of Appeals in CA-G.R. CV No. 106872 are AFFIRMED.
Luzon Development Bank is DIRECTED to pay petitioners the amount of Php50,000.00 as Attorney's Fees and Php50,000.00 as for the cost of litigation plus interest of 6% per annum from the date of finality of this Decision, until fully paid.
SO ORDERED."
By authority of the Court:
(SGD.) MISAEL DOMINGO C. BATTUNG IIIDivision Clerk of Court
Footnotes
1.Rollo, pp. 10-26.
2.Id. at 28-40; penned by Associate Justice Ronaldo Roberto B. Martin, and concurred in by Associate Justices Ramon M. Bato, Jr. and Ramon A. Cruz of the Eighth Division, Court of Appeals, Manila.
3.Id. at 54-56.
4.Id. at 29.
5.Id. at 30.
6.Id. at 29.
7.Id. at 29-30.
8.Id. at 30.
9.Id. at 31.
10.Id. at 30.
11.Id. at 31.
12.Id. at 32.
13.Id. at 32-33.
14.Id. at 33.
15.Id. at 40.
16.Id. at 35-38.
17.Id. at 38-39.
18.Id. at 54-56.
19.Id. at 19.
20.Muñoz, Jr. v. Ramirez, 643 Phil. 267 (2010) [Per J. Brion].
21.Repuela v. Estate of Spouses Larawan, 802 Phil. 821 (2016) [Per J. Mendoza].
22. See id.
23. See Nacar v. Gallery Frames, 716 Phil. 267 (2013) [Per J. Peralta].
24. See Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales, Inc., G.R. No. 225433, 28 August 2019 [Per J. Carpio] citing Nacar v. Gallery Frames, supra at note 23.
25. See Nacar v. Gallery Frames, supra at note 23.
26. See Repuela v. Estate of Spouses Larawan, supra at note 22; and Muñoz, Jr. v. Ramirez, supra at note 20. See also Development Bank of the Philippines v. Sta. Ines Melale Forest Products Corp., G.R. Nos. 193068 & 193099, 01 February 2017 [Per J. Leonen].
27. See BSP Resolution No. 796 and Nacar v. Gallery Frames, supra at note 23.