Trinidad v. Bank of Commerce

FIRST DIVISION

[G.R. No. 214224. * June 16, 2021.]

VICTOR R. TRINIDAD, petitioner, vs.BANK OF COMMERCE, SANTA MONICA INDUSTRIAL AND DEVELOPMENT CORPORATION, EDT TRANSIT, INC., JOSEFINA T. NAGUIAT AND FERNANDO R. TRINIDAD, respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution datedJune 16, 2021which reads as follows: HTcADC

"G.R. No. 214224 (Victor R. Trinidad v. Bank of Commerce, Santa Monica Industrial and Development Corporation, EDT Transit, Inc., Josefina T. Naguiat and Fernando R. Trinidad).

This appeal by certiorari seeks to reverse and set aside the February 21, 2014 Decision 1 and September 4, 2014 Resolution 2 of the Court of Appeals (CA) in CA-G.R. CV No. 99912, which affirmed the September 25, 2012 Order 3 of the Regional Trial Court of Calamba City, Branch 34 (RTC) in Civil Case No. 4524-2011-C. Simply put, the issue in this case is whether or not petitioner's complaint before the RTC sufficiently states a cause of action.

The Facts and the Case

During the lifetime of Eugenio Trinidad (Eugenio), he acquired two parcels of land (subject properties) in Barangay Parian, Calamba, Laguna, covered by Transfer Certificate of Title (TCT) Nos. T-174555 and T-237440, with a total area of about 18,479 square meters. The subject properties were then registered under the name of respondent Sta. Monica Industrial Development Corporation (SMIDC), a family corporation whose stockholders and directors are the children of Eugenio: petitioner Victor Trinidad (Victor), respondents Josefina Trinidad-Naguiat (Josefina) and Fernando Trinidad (Fernando), Michael Trinidad, Celestina Trinidad-Naguiat, and Imaculada Trinidad-Alfonso (collectively, Trinidad Siblings). 4

Sometime in March 1998, the subject properties were mortgaged to respondent Bank of Commerce to secure a loan obtained by respondent EDT Transit, Inc. (EDT) in the amount of P82,317,911.29. EDT defaulted on its loan obligation, resulting in the foreclosure of the mortgage. In 2006, Josefina filed a complaint on behalf of SMIDC for the annulment of the mortgage (docketed as Civil Case No. 3935-2006-C before the RTC of Calamba, Branch 92), followed by a complaint for the annulment of the foreclosure sale (docketed as Civil Case No. 3955-2006-C before the RTC of Calamba, Branch 35). 5

On October 8, 2007, Bank of Commerce entered into a Compromise Agreement with SMIDC, acting through Josefina, which resulted in the dismissal of the two civil cases filed by the latter. Therein, SMIDC recognized the validity of the mortgage on the subject properties and the subsequent foreclosure thereof. The subject properties were then registered in the name of Bank of Commerce under TCT Nos. T-726566 and T-726567. Pursuant to the compromise agreement, SMIDC, acting through Josefina and Fernando, agreed to buy back the properties under a Deed of Conditional Sale dated July 31, 2009. 6

Victor filed a complaint for annulment of compromise agreement and deed of conditional sale before the RTC of Calamba City, Branch 34. He alleged that Eugenio personally provided the funds for the purchase of the Calamba properties but caused them to be registered under the name of SMIDC with the intention that they form part of his patrimony for the equal benefit of his children (Victor, Josefina, Fernando, and their other siblings), with SMIDC acting as a mere instrument to facilitate and implement such intention. Furthermore, he alleged that the mortgage over the subject properties and the foreclosure thereof, as well as the compromise agreement and the subsequent sale of the subject properties, were all done without his knowledge and consent. 7

The pertinent portions of the complaint are reproduced below:

CAUSE OF ACTION

20. Under the above-alleged circumstances, Article 1448 of the Civil Code of the Philippines provides for an indisputable presumption that the Calamba Properties were given by the late Eugenio D. Trinidad to his children, including herein Plaintiff as a gift, thus making Plaintiff a presumptive co-owner of the same. At the very least, Plaintiff, as a legitimate heir of the late Eugenio D. Trinidad, proportionately inherited the latter' s beneficial interest in the Calamba Properties.

21. Plaintiff, as one of the indisputably presumed owners and beneficiaries of the Calamba Properties, was never notified of, and never consented to, any of the aforementioned transactions and agreements.

22. Defendant Sta. Monica cannot likewise be considered the absolute owner of the Calamba Properties at the time of the constitution of the subject mortgage as it was the late Eugenio D. Trinidad who exclusively provided the funds for their acquisition.

23. The late Eugenio D. Trinidad was the beneficial owner of the Calamba properties and when he caused the registration of the same in favor of Defendant Sta. Monica, he did so for the benefit of his children, including herein Plaintiff, who are the stockholders and directors of said Defendant Corporation.

24. Clearly, all the beneficial owners of the Calamba Properties should have consented or acceded to the assailed Compromise Agreement and Deed of Conditional Sale in order to render the same valid. As stated above, Plaintiff never consented to the said agreements, thus rendering the same null and void ab initio.

25. The Compromise Agreement dated 08 October 2007 signed by Defendant Josefina T. Naguiat, purportedly representing Defendant Sta. Monica, and Defendant Bank of Commerce, recognized the validity of the Deed of Real Estate Mortgage executed by Defendant EDT Transit, Inc. in favor of Defendant Bank of Commerce. aScITE

26. The Compromise Agreement further recognized the validity of the Extrajudicial Foreclosure of Mortgage that led to the sale of the Calamba Properties in favor of Defendant Bank of Commerce.

27. Considering that neither Defendant Sta. Monica nor Defendant Josefina T. Naguiat are the absolute owners of the Calamba Properties, they have absolutely no authority to ratify or recognize the validity of the Deed of Real Estate Mortgage and the extrajudicial foreclosure proceedings conducted pursuant thereto.

28. Considering such lack of authority, the Compromise Agreement is clearly null and void and produces no legal effect, especially with respect to the recognition of the validity of the questioned Deed of Real Estate Mortgage and the extrajudicial foreclosure proceedings conducted pursuant thereto.

29. The Deed of Conditional Sale executed by Defendant Bank of Commerce and Defendants Josefina T. Naguiat and Fernando R. Trinidad, purportedly representing Defendant Sta. Monica must be similarly declared null and void.

PRAYER

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that a Decision be rendered:

a) Declaring the Compromise Agreement and the Deed of Conditional Sale as null and void ab initio; and

b) Ordering Defendants to jointly and solidarily pay for the costs of the suit.

xxx xxx xxx. 8

In their answer, SMIDC and Josefina prayed for the dismissal of the complaint for lack of merit, arguing that SMIDC is the legal owner of the subject properties, and therefore has the right to validly enter into transactions over them with the approval of its Board of Directors. On the other hand, Bank of Commerce filed its motion to dismiss, alleging that the complaint failed to state a cause of action. In said motion, Bank of Commerce averred that Victor failed to show his relationship to the subject properties, and is not a real party-in-interest because said properties belonged to SMIDC, which has its own legal personality, distinct from that of its stockholders. 9

Ruling of the RTC

In its September 25, 2012 Order, the RTC dismissed the complaint for failure to state a cause of action, reasoning that Victor had no legal right over the subject properties as these were registered in the name of SMIDC. Such registration could only have been effected by one of three ways: (1) by capitalization, where shares of stock in SMIDC were issued to Victor; (2) as a liability, where the value of the subject properties were an advance by Eugenio payable by SMIDC; or (3) the properties were registered without any consideration, which was not alleged by Victor. Having been registered in its name, the subject properties became property of SMIDC. 10

SMIDC has a separate and distinct personality from its stockholders and directors. Its stockholders do not own the corporation's properties, and their interest in corporate property is merely inchoate. Such purely inchoate interest does not entitle them to bring actions or intervene in litigation involving properties of the corporation. 11

The RTC noted that if Josefina and Ferdinand did not have the requisite authority to represent SMIDC to enter into the compromise agreement and the deed of conditional sale, the proper remedy was for Victor to file a derivative suit in the name of SMIDC. 12

Ruling of the CA

On appeal to the CA, Victor maintained that he was a beneficial owner of the subject properties, and that his property interest was prejudiced by the compromise agreement and deed of conditional sale. The CA, however, upheld the dismissal by the RTC, finding that even assuming the factual allegations in Victor's complaint to be true, a valid judgment could not be rendered in accordance with the prayer therein. 13

Victor has no legal interest to seek nullification of the challenged compromise agreement and deed of conditional sale. The CA held that Victor is not a real party-in-interest in the matter of litigation as he does not stand to be benefited or injured by any judgment herein. The subject properties became property of SMIDC upon registration in its name. The subject properties do not belong to Victor or any of SMIDC's stockholders or directors. Their stockholdings in SMIDC only represent their proportionate or aliquot interest in the properties of the corporation. Such interest is merely contingent or inchoate — it has not ripened into a substantial interest — and does not give Victor the standing to maintain an action involving the subject properties. 14

Issue

Undaunted, Victor filed the instant appeal by certiorari. The sole issue now before the Court is whether or not Victor's complaint before the RTC sufficiently alleges a cause of action.

Ruling of the Court

The petition fails to impress.

A cause of action is defined as an act or omission by which a party violates a right of another. It has three elements, namely: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff. 15 A case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest, hence grounded on failure to state a cause of action. 16

A person, to be a real party-in-interest, should appear to be the present real owner of the right sought to be enforced, that is, his or her interest must be a present substantial interest, not a mere expectancy, or a future, contingent, subordinate, or consequential interest. 17

Based on the allegations in his complaint, Victor is not the real party-in-interest as he was not a party to the compromise agreement or the deed of conditional sale, which he seeks to have annulled. The parties to a contract are the real parties-in-interest in an action upon it; one who is not a party thereto cannot maintain an action on it. 18

Victor does not even claim that Josefina and Fernando were not duly authorized by SMIDC to act on the latter's behalf, but that SMIDC itself had no authority to enter into the disputed contracts. Victor stakes his interest in the compromise agreement and the deed of conditional sale on a claim of beneficial ownership over the subject properties.

However, as noted by the lower courts, he has no legal right over the subject properties. The subject properties are admittedly registered in the name of SMIDC, which has a separate juridical personality from its stockholders and directors. The interest of stockholders over the properties of a corporation is merely inchoate and does not entitle them to intervene in litigation involving corporate property. 19

Victor insists that he has beneficial interest over the subject properties by way of an implied trust constituted thereon when Eugenio had it registered in the name of SMIDC. He maintains that SMIDC merely holds the property as trustee for the benefit of Eugenio's children, in accordance with Art. 1448 of the Civil Code. Such argument is misplaced. Art. 1448 reads: HEITAD

ARTICLE 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.

Art. 1448 creates an implied trust in favor of the person who paid the price for the property purchased. By Victor's own allegations, it was Eugenio — not the children themselves — who paid for the properties. Thus, no implied trust was created by operation of Art. 1448 in favor of Victor and his siblings. Neither does the latter part of Art. 1448 find any application in this case, as title was not conveyed to the Trinidad siblings, but to SMIDC instead.

While a motion to dismiss for failure to state a cause of action hypothetically admits the allegations in the complaint, such admissions do not extend to the plaintiff's conclusions or interpretations of law. 20 Victor's claims that a trust was created in favor of him and his siblings, and that his consent was required to enter into the challenged agreements, are just that — mere conclusions of law, not supported by any legal basis.

WHEREFORE, the petition is hereby DENIED. The February 21, 2014 Decision and September 4, 2014 Resolution of the Court of Appeals in CA-G.R. CV No. 99912 are hereby AFFIRMED.

SO ORDERED." Inting, J., designated Additional Member per Raffle dated May 26, 2021 vice Carandang, J.

By authority of the Court:

(SGD.) LIBRADA C. BUENADivision Clerk of Court

by:

MARIA TERESA B. SIBULODeputy Division Clerk of Court

 

Footnotes

* Part of the Supreme Court's Case Decongestion Program.

1.Rollo, pp. 26-35; penned by Associate Justice Marlene Gonzales-Sison, with Associate Justice Rosmari D. Carandang (now a Member of this Court) and Associate Justice Edwin D. Sorongon, concurring.

2.Id. at 44-45.

3.Id. at 269-276; penned by Presiding Judge Maria Florencia B. Formes-Baculo.

4.Id. at 84-85.

5.Id. at 27-28.

6.Id. at 28.

7.Id. at 27-29.

8.Id. at 86-88.

9.Id. at 30-31.

10.Id. at 273-274.

11.Id. at 274-275.

12.Id. at 275.

13.Id. at 31-33.

14.Id. at 33-34.

15.Spouses Camara v. Court of Appeals, 369 Phil. 858, 870 (1999).

16.Columbia Pictures, Inc. v. Court of Appeals, 329 Phil. 875, 901 (1996).

17.Stronghold Insurance Co., Inc. v. Cuenca, 705 Phil. 441, 454 (2013).

18.Vda. de Rojales v. Dime, 780 Phil. 698, 708 (2016).

19.Philippine National Bank v. Aznar, 664 Phil. 461, 479 (2011).

20. See San Lorenzo Village Association, Inc. v. Court of Appeals, 351 Phil. 353, 365 (1998).