Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

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D E C I S I O N

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari filed by petitioner Sally Sueno (Sueno) seeking to reverse and set aside the Decision¹ dated 13 July 2006 of the Court of Appeals in CA-G.R. CV No. 79566, which affirmed the Decision² dated 24 January 2003 of the Regional Trial Court (RTC) of Marikina City, Branch 192, inLRC Case No. R-2002-551-MK; and the Resolution³ dated 20 September 2006 of the appellate court which denied Sueno’s Motion for Reconsideration. The RTC, in its Decision affirmed by the Court of Appeals, issued the Writ of Possession authorizing respondent Land Bank of the Philippines (LBP) to take physical possession of the two disputed parcels of land pursuant to its Consolidation of Ownership dated 2 April 2001.

The factual and procedural backdrop of this case are as follows:

On different occasions, Sueno obtained loans from LBP, the total sum of which reached P2,500,000.00, as evidenced by the Contracts of Loan⁴ executed by the parties on 28 February 1996 and 9 October 1996. The loans were secured by Real Estate Mortgages over two parcels of land (subject properties) covered by Transfer Certificates of Title (TCTs) No. T-299900 and No. T-314839 registered in Sueno’s name and registered with the Registry of Deeds of Marikina City. Subsequently, Sueno incurred default, which prompted LBP to cause the extrajudicial foreclosure of the mortgage constituted on the subject properties,⁵ and the sale of said properties at a public auction. LBP was the highest bidder in the auction sale, as shown in the Certificate of Sale⁶ dated 6 March 2000 in its favor.

Before the expiration on 6 March 2001 of the one-year period for the redemption of the subject properties, Sueno wrote LBP a letter⁷ dated 16 February 2001 requesting a six-month extension of her period to redeem. Upon receipt of Sueno’s letter, LBP informed her that she needed to post an initial amount of P115,000.00, so that LBP would not consolidate the titles to the subject properties in its name. The said amount shall be used to answer for penalties and surcharges that the Registry of Deeds may impose as a result of the failure of LBP to consolidate the titles to the subject properties within the required period.⁸

In partial compliance with the aforesaid condition, Sueno issued a check on 23 February 2001 in the amount of P50,000.00 with LBP as the payee. Upon receipt of Sueno’s partial payment, LBP, in a letter dated 6 March 2001, reiterated its previous condition that Sueno must post the full amount of P115,000.00 for LBP to approve her request for the extension of the redemption period. The LBP further warned Sueno that should she fail to pay the balance of P65,000.00 by 7 March 2001, it would proceed to consolidate the ownership of the subject properties in its name. Despite such warning, Sueno failed to remit the balance of P65,000.00.

Thus, in a letter dated 7 March 2001, LBP denied Sueno’s request for an extension of the period to redeem the subject properties, and proceeded to consolidate ownership of the said properties in its name. Accordingly, TCTs No. 299900 and No. 314839 in Sueno’s name were cancelled and were replaced by TCTs No. 411101 and 411102, respectively, in the name of LBP.

In order to acquire physical possession of the subject properties, LBP filed an Ex Parte Petition/Motion for the Issuance of Writ of Possession⁹ before the RTC, docketed as LRC Case No. R-2002-551-MK. During the hearing set by the court for the issuance of the writ, Sueno manifested her Opposition¹⁰ thereto on the ground that a novation of the original obligation was already effected by her and LBP, thereby extending the original period for the redemption of the subject properties. Therefore, the right of LBP to consolidate the titles to the subject properties in its name was held in abeyance pending Sueno’s exercise of her right of redemption within the extended period.

In a Decision dated 24 January 2003, the RTC recognized the right of LBP to the possession of the subject properties as the registered owner thereof after having lawfully acquired the same at the auction sale. It dismissed Sueno’s opposition to the pending Petition/Motion for utter lack of merit, since she failed to establish that she and LBP indeed agreed to extend the redemption period for the subject properties. Hence, the RTC granted the Petition/Motion of LBP for the issuance of a Writ of Possession, to wit:

Wherefore, petition being sufficient in form and substance, and the testimonial and documentary evidence well-founded, the same is hereby GRANTED.

Let a Writ of Possession be issued authorizing [LBP] to take physical possession of the properties covered by Transfer Certificate[s] of Title Nos. 411101 and 411102 of the Registry of Deeds for Marikina City registered in the name of [LBP] by virtue of the consolidation of ownership dated June 6, 2001.¹¹

Unyielding, Sueno filed an appeal of the adverse RTC Decision before the Court of Appeals,¹² where it was docketed as CA-G.R. CV No. 79566.

On 13 July 2006, the Court of Appeals rendered a Decision dismissing Sueno’s appeal and affirming the RTC Decision. According to the Court of Appeals, the records were bereft of evidence to prove that LBP granted Sueno’s request for the extension of the redemption period for the subject properties, making Sueno’s novation theory unacceptable. On the other hand, the appellate court ruled that the right of LBP to the possession of the subject properties became absolute after the expiration of the period of redemption without Sueno exercising her right to redeem. The decretal part of the assailed Court of Appeals Decision reads:

Wherefore, the instant appeal is DENIED and the assailed Decision dated January 24, 2003 of the RTC of Markina City, Branch 192 is hereby AFFIRMED.¹³

In its Resolution dated 20 September 2006, the appellate court denied Sueno’s Motion for Reconsideration.

Sueno then proceeded to file this instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court raising the following issues:

I.

WHETHER OR NOT THERE WAS A VALID NOVATION ENTERED BY PARTIES FOR THE EXTENSION OF THE REDEMPTION PERIOD.

II.

WHETHER OR NOT THE ISSUANCE OF THE WRIT OF POSSESSION OF THE SUBJECT PROPERTIES TO LBP IS VALID.

Sueno argues that there was a novation of the original obligation of LBP allowing her to redeem the subject properties within a period of one year, when LBP consented to the extension of said period of redemption. Sueno insists that the acceptance of LBP of her check payment for the partial sum of P50,000.00, and its encashment of said check signifies its acquiescence to her request for an extension of the period of redemption for the subject properties.

We are not persuaded.

An obligation may be extinguished by novation, pursuant to Article 1292 of the Civil Code, which reads as follows:

ART. 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.

Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. In order for novation to take place, the concurrence of the following requisites are indispensable:

1. There must be a previous valid obligation;

2. There must be an agreement of the parties concerned to a new contract;

3. There must be the extinguishment of the old contract; and

4. There must be the validity of the new contract.¹⁴

The elements of novation clearly do not exist in the instant case. While it is true that there is a previous valid obligation (i.e., the obligation of LBP to honor Sueno’s right to redeem the subject property within a period of one year), such obligation expired at the same time as the redemption period on 6 March 2001. There is, however, no clear agreement between the parties to a new contract, again imposing upon LBP the obligation of honoring Sueno’s right to redeem the subject properties within an extended period of six months. Without a new contract, the old contract cannot be considered extinguished.

The condition of LBP for the extension of the redemption period for the subject properties was plain and simple, that Sueno pay an initial amount of P115,000.00 for the extension of the redemption period. Sueno tendered a check for P50,000.00 in partial payment of the amount demanded by LBP. By accepting the check payment, LBP merely accepted partial compliance of Sueno with its demand, but it does not mean that LBP had conceded to the extension of the redemption period for such reduced amount. In fact, LBP promptly sent Sueno a letter dated 6 March 2001, which was duly received by the latter, explicitly and consistently requiring payment of the full amount of P115,000.00 for the extension of the redemption period. It is without doubt that LBP was still expecting Sueno to pay the balance of P65,000.00. Hence, not until full payment of the amount it demanded, for LBP had not yet agreed to extend the period for redemption of the subject properties.

The consent of LBP to an extension of the period to redeem is subject to the suspensive condition that Sueno shall pay the initial amount of P115,000.00 in full. With Sueno’s failure to remit the balance of P65,000.00 to LBP, then there is non-perfection of a new contract. As aptly declared by the Court of Appeals:

The parties are bound to fulfill the stipulations in a contract only upon its perfection. At anytime prior to the perfection of a contract, unaccepted offers and proposals remain as such and cannot be considered binding commitments, hence, not demandable. Since [Sueno] failed to perform what was incumbent upon her then, [LBP] cannot be faulted in not granting the extension sought. x x x.¹⁵

What further belies Sueno’s assertion that LBP consented to her request for extension is its letter dated 7 March 2006, again duly received by Sueno, categorically denying her request to lengthen the redemption period. The language and intent of the letter is too clear and simple to be misinterpreted, to wit:

We wish to inform you that the management denied your request to extend the redemption period of your foreclosed property for six (6) months since you failed to comply with the Bank’s requirement, upfront payment of P115,000.00.

Hence, the Bank is now consolidating the transfer of its ownership in the name of Land Bank. Enclosed is the P50,000.00 Manager’s Check re: your upfront payment refunded to you.¹⁶ (Emphasis supplied).

Irrefragably, there is no mutual agreement to extend the original period for the redemption of the subject properties. There is no common intent by the parties to novate the old obligation by extending the period thereof.

For this Court to sustain Sueno’s position - that the LBP agreed to extend the redemption period upon her payment of an amount substantially less than what it demanded - offends the elementary principle enunciated in our jurisdiction that novation can never be presumed. As elucidated by this Court in Philippine Savings Bank v. Mañalac, Jr.¹⁷ :

Novation is never presumed, and the animus novandi, whether totally or partially, must appear by express agreement of the parties, or by their acts that are too clear and unmistakable. The extinguishment of the old obligation by the new one is a necessary element of novation, which may be effected either expressly or impliedly. The term "expressly" means that the contracting parties incontrovertibly disclose that their object in executing the new contract is to extinguish the old one. Upon the other hand, no specific form is required for an implied novation, and all that is prescribed by law would be an incompatibility between the two contracts. While there is really no hard and fast rule to determine what might constitute to be a sufficient change that can bring about novation, the touchstone for contrariety, however, would be an irreconcilable incompatibility between the old and the new obligations. (Emphasis supplied.)

Given the lapse of the period for Sueno to redeem the subject properties, then the Court cannot enjoin LBP from taking physical possession of the said properties after the titles thereto were duly consolidated in its name. The right of LBP to physical possession of the subject properties is explicitly authorized by Section 33, Rule 39 of the Revised Rules of Court, which provides:

SECTION 33. Deed and possession to be given at expiration of redemption period; by whom executed or given. – If no redemption be made within one (1) year from the date of the registration of the certificate of sale, the purchaser is entitled to a conveyance and possession of the property; x x x.

Upon the expiration of the right of redemption, the purchaser or redemptioner shall be substituted to and acquire all the rights, title, interest and claim of the judgment obligor to the property as of the time of the levy. The possession of the property shall be given to the purchaser or last redemptioner by the same officer unless a third party is actually holding the property adversely to the judgment obligor.

Corollarily, Section 7 of Act 3135,¹⁸ as amended by Act 4118, reads:

Section 7. Possession during redemption period. –In any sale made under the provisions of this Act, the purchaser may petition the [Regional Trial Court] of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately.

Under the above-quoted provisions, the purchaser in a foreclosure sale may apply for a writ of possession during the redemption period by filing an ex parte motion under oath for that purpose in the corresponding registration or cadastral proceeding in the case of property covered by a Torrens title. Upon the filing of such motion and the approval of the corresponding bond, the law also in express terms directs the court to issue the order for a writ of possession.¹⁹

A writ of possession may also be issued after consolidation of ownership of the property in the name of the purchaser. 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 sale. As such, he is entitled to the possession of the property and can demand it any time following the consolidation of ownership in his name and the issuance of a new transfer certificate of title. In such a case, the bond required in Section 7 of Act No. 3135 is no longer necessary. Possession of the land then becomes an absolute right of the purchaser as confirmed owner.²⁰ Upon proper application and proof of title, the issuance of the writ of possession becomes a ministerial duty of the court.²¹

The right of LBP to the possession of the subject properties is unassailable. It is founded on its right of ownership. As the purchaser of the subject properties in the foreclosure sale, in whose name titles over the subject properties were already issued, the right of LBP over the subject properties has become absolute, vesting in it the corollary right of possession over the subject properties, which the Court must aid by effecting their delivery. In this case, the RTC is already deprived of discretion and must comply with its ministerial duty to issue the writ of possession in favor of LBP.

WHEREFORE, IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Decision dated 13 July 2006 and Resolution dated 20 September 2006 of the Court of Appeals in CA-G.R. CV No. 79566 are hereby AFFIRMED. Costs against petitioner Sally Sueno.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA
Associate Justice Associate Justice

RUBEN T. REYES

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Chief Justice

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¹ Penned by Associate Justice Estela M. Perlas-Bernabe with Associate Justices Andres B. Reyes, Jr., and Hakim S. Abdulwahid, concurring; rollo, pp. 21-28.

² Records, pp. 173-175.

³ Rollo, p. 36.

⁴ Id. at 68-105.

⁵ Id. at 112-113.

⁶ Id. at 134-135.

⁷ Id. at 140.

⁸ Id. at 141.

⁹ Id. at 1-4.

¹⁰ Id. at 51-55.

¹¹ Records, p. 175.

¹² CA rollo, pp. 25-34.

¹³ Rollo, p. 27.

¹⁴ Velasquez v. Court of Appeals, 368 Phil. 863, 871 (1999).

¹⁵ Rollo, p. 26.

¹⁶ Records, p. 142.

¹⁷ G.R. No. 145441, 26 April 2005, 457 SCRA 203, 218.

¹⁸ "An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real Estate Mortgages."

¹⁹ Philippine National Bank v. Sanao Marketing Corporation, G.R. No. 153951, 29 July 2005, 465 SCRA 287, 299.

²⁰ Id.

²¹ F. David Enterprises v. Insular Bank of Asia and America, G.R. No. 78714, 21 November 1990, 191 SCRA 516, 523.

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