SPS. IBAÑEZ v. HARPER

SPOUSES AMADO O. IBAÑEZ and ESTHER R. IBAÑEZ, petitioners vs. JAMES HARPER as Representative of the Heirs of FRANCISCO MUÑOZ, SR., the REGISTER OF DEEDS OF MANILA and the SHERIFF OF MANILA, respondents. 

G.R. No. 194272

February 15, 2017

Facts: 

On October 1996, spouses Amado and Esther Ibañez borrowed from Francisco E. Muñoz, Sr., Consuelo Estrada, and Ma. Consuelo E. Muñoz the amount of ₱1,300,000. The petitioners issued a promissory note to respondents to pay the loan amount with interest and executed a deed of real rstate over a parcel of land as security.

Thereafter, petitioner extra-judicially foreclosed the mortgage for failure of respondents to pay the loan plus interests within the agreed period. The property in question was also not redeemed within the period prescribed by law; hence it was sold at a public auction where defendant Francisco E. Munoz, Sr. was the highest bidder.

On June 11, 2002, the parties filed a Joint Motion for Approval of Amended Compromise Agreement, which the RTC approved and adopted it as its Hatol. On February 28, 2006, Atty. Roberto C. Bermejo representing as collaborating counsel of respondents filed an Omnibus Motion for Execution and Lifting of the Status Quo Order and for the Issuance of Writ of Possession. Atty. Bermejo alleged that the spouses Ibañez failed to comply with their obligation under the Amended Compromise Agreement.

Petitioners moved to reconsider on grounds that respondents failed to inform the court of Francisco’s death and that there was no valid substitution of parties. Atty. Bermejo then filed a Notice of Death of Francisco and named James Harper as Francisco's legal representative. The spouses Ibañez filed a motion to adopt the Judicial Compromise Agreement as the final and executory decision. The RTC granted the spouses Ibañez' motion. However, James sought reconsideration of the RTC's order, which was later on denied. Aggrieved, the heirs of Francisco filed before the CA a Petition for Certiorari. The CA resolved James' petition and reinstating the status quo order.

Issues: 

1. Whether or not Francisco was a real party in interest.

2. Whether or not there was valid substitution of parties.

3. Whether or not all the provisions of the Amended Compromise Agreement have been complied with.

Held:

1. Yes. In their complaint and amended complaint, petitioners impleaded Francisco as a defendant and described him as the capitalist. They also alleged that they took a loan from Francisco, Ma. Consuelo and Consuelo and narrated that a public auction over the mortgaged property was conducted where Francisco emerged as the highest bidder.

Further, attachments to the complaints show that Amado and Francisco communicated with each other regarding the payment of the loan. The Amended Compromise Agreement, approved by the trial court and which served as the basis for the Hatol, referred to the spouses Ibañez as the plaintiffs while the defendants are Francisco, Consuelo and Ma. Consuelo. It was signed by the spouses Ibañez and Francisco, for himself and on behalf of Ma. Consuelo and Consuelo. These facts indicate that Francisco has a material interest in the case as it is in his interest to be paid the money he lent the spouses Ibañez. Any judgment which will be rendered will either benefit or injure Francisco; thus, he is a real party in interest.

2. Yes. While there may have been a failure to strictly observe the provisions of the rules and there was no formal substitution of heirs, the heirs of Francisco, represented by James, voluntarily appeared and actively participated in the case, particularly in the enforcement of the Hatol. As the records show, they have filed multiple pleadings and moved several times to implement the Hatol to protect Francisco's interest. Following the court’s ruling in Vda. de Salazar and Berot, a formal substitution of parties is no longer required under the circumstances.

3. No. The spouses Ibañez assigned the proceeds of the GSIS loan and executed a real estate mortgage over the Puerto Azul property only in Ma. Consuelo and Consuelo's favour. By doing so, they did not discharge their obligation in accordance with the terms of the Amended Compromise Agreement and left their loan obligation to Francisco unsettled. Thus, and as correctly held by the CA, it was gravely erroneous for the trial court to rule that all the stipulations in the Hatol have been complied with. Under the circumstances, the obligations to Francisco, and consequently, his heirs, have clearly not been complied with.

Wherefore, the SC affirmed the decisions of the CA with modifications that the status quo order be lifted.