Bignay v. Union Bank (G.R. No. 171590; February 12, 2014)


FACTS: In 1984, Alfonso de Leon (Alfonso) mortgaged in favor of Union Bank of the Philippines (Union Bank) real property situated at Esteban Abada, Loyola Heights, Quezon City, which was registered in his and his wife Rosarios name and covered by Transfer Certificate of Title (TCT) No. 286130 (TCT 286130).

The property was foreclosed and sold at auction to Union Bank. After the redemption period expired, the bank consolidated its ownership, whereupon TCT 362405 was issued in its name in 1987.

In 1988, Rosario filed against Alfonso and Union Bank, Civil Case No. Q-52702 for annulment of the 1984 mortgage, claiming that Alfonso mortgaged the property without her consent, and for reconveyance.

In a September 6, 1989 Letter-Proposal, Bignay Ex-Im Philippines, Inc. (Bignay), through its President, Milagros Ong Siy (Siy), offered to purchase the property. The written offer stated, among others, that The property is the subject of a pending litigation between Rosario de Leon and Union Bank for nullification of the foreclosure before the Regional Trial Court of Quezon City. Should this offer be approved by your management, we suggest that instead of the usual conditional sale, a deed of absolute sale be executed to document the transaction in our favor subject to a mortgage in favor of the bank to secure the balance.

This documentation is intended to isolate the property from any lis pendens that the former owner may annotate on the title and to allow immediate reconstitution thereof since the original Torrens title was burned in 1988 when the City Hall housing the Register of Deeds of Quezon City was gutted by fire.

On December 20, 1989, a Deed of Absolute Sale was executed by and between Union Bank and Bignay whereby the property was conveyed to Bignay for P4 million. The deed of sale was executed by the parties through Bignay's Siy and Union Banks Senior Vice President Anthony Robles (Robles).

On December 27, 1989, Bignay mortgaged the property to Union Bank, presumably to secure a loan obtained from the latter.

A Decision was rendered in Civil Case No. Q-52702, finding that defendant Alfonso de Leon, Jr. had alone executed the mortgage on their conjugal property upon a forged signature of his wife plaintiff Rosario T. de Leon. Further, the Court declares plaintiff Rosario T. de Leon the owner still of the undivided ONE HALF (1/2) of the subject property. The writ of possession granted in favor of Union Bank was set aside and quashed.

Alfonso was ordered to pay his co-defendant Union Bank of the Philippines the sum of hisP1M loan with interest from the time the same was extended to him.

Union Bank appealed the above Decision with the CA. The CA appeal was dismissed for failure to file appellants brief; the ensuing Petition for Review with this Court was similarly denied for late filing and payment of legal fees.

Bignay filed a Petition for annulment of the Decision. The CA dismissed the Petition. Bignay's resultant Petition for Certiorari with this Court suffered the same fate.

Bignay was evicted from the property; by then, it had demolished the existing structure on the lot and begun construction of a new building.

Bignay filed a case for breach of warranty against eviction under Articles 1547 and 1548 of the Civil Code, with damages, against Union Bank and Robles.

Union Bank interposed a Motion to Dismiss grounded on lack of or failure to state a cause of action, claiming that it made no warranties in favor of Bignay when it sold the property to the latter on December 20, 1989. The trial court deferred the resolution of the motion on finding that the ground relied upon did not appear to be indubitable.

Union Bank thus filed its Answer Ad Cautelam,where it alleged that Bignay was not an innocent purchaser for value, knowing the condition of the property as evidenced by Siys September 6, 1989 letter-proposal to purchase the same. It interposed a counterclaim as well, grounded on two promissory notes signed by Siy in favor of the bank.

The trial court thus declared that Union Bank, through Robles, acted in bad faith in selling the subject property to Bignay; for this reason, the stipulation in the December 20, 1989 deed of sale limiting Union Banks liability in case of eviction cannot apply, because under Article 1553 of the Civil Code, "[a]ny stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in bad faith."

Art. 1555. When the warranty has been agreed upon or nothing has been stipulated on this point, in case eviction occurs, the vendee shall have the right to demand of the vendor:

(1) The return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the sale; xxx.Thus, it held that Bignay was entitled to the return of the value of the property (P4 million), as well as the cost of the building erected thereon (P20 million), since Union Bank acted in bad faith. At the same time, the trial court held that the banks counterclaim was not at all connected with Bignays Complaint, which makes it a permissive counterclaim for which the docket fees should accordingly be paid. Since the bank did not pay the docket fees, the trial court held that it did not acquire jurisdiction over its counterclaim; thus, it dismissed the same.

Union Bank appealed to the CA. On the Counterclaim, judgment is rendered ordering plaintiff-appellee to pay defendant-appellant the principal amount ofP1,500,000.00 and P2,000,000.00 under two Promissory Notes.

Regarding the banks counterclaim, the CA held that Union Bank timely paid the docket fees therefor amounting to P32,940.00 at the time it filed its Answer Ad Cautelam.

Bignay filed its Motion for Partial Reconsideration questioning the appellate courts ruling on Union Banks counterclaim. On the other hand, Union Bank in its Motion for Reconsideration took exception to the CAs application of Articles 1548 and 1549 of the Civil Code, as well as its finding that the bank was negligent in the handling and prosecution of Civil Case No. Q-52702.

The CA issued the second assailed Resolution denying the parties respective motions for reconsideration.

ISSUES: 1. Is Petitioner entitled to the warranties against Eviction under Article 1555 of the Civil Code?

2. In a permissive counterclaim, when should the docket fees be paid to enable the trial court to acquire jurisdiction over the case?

3. In the event of non-payment of docket fees for permissive counterclaims, can the court dismiss the said counterclaim?

HELD: The gross negligence of the seller in defending its title to the property subject matter of the sale - thereby contravening the express undertaking under the deed of sale to protect its title against the claims of third persons resulting in the buyer's eviction from the property - amounts to bad faith, and the buyer is entitled to the remedies afforded under Article 1555 of the Civil Code.

Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased. In case eviction occurs, the vendee shall have the right to demand of the vendor, among others, the return of the value which the thing sold had at the time of the eviction, be it greater or less than the price of the sale; the expenses of the contract, if the vendee has paid them; and the damages and interests, and ornamental expenses, if the sale was made in bad faith.

It adds that since Union Bank is guilty of negligence and bad faith in transacting with Bignay, it should be penalized through the proper dismissal of its counterclaim; the Court should instead require Union Bank to prosecute its claims in a separate action.


Bignay correctly observes that if the bank indeed paid the docket fees therefor, the trial court would have so held in its March 21, 2000 Decision; yet in its judgment, the trial court specifically declared that the docket fees remained unpaid at the time of its writing, thus Anent the counterclaims interposed by defendant for the collection of certain sum of money adverted earlier hereof, this Court could not exercise jurisdiction over the same as defendant did not pay the docket fees therefor. Although the counterclaims were denominated as compulsory in the answer, the matters therein alleged were not connected with the plaintiffs complaint. The counterclaims could stand independently from the plaintiffs complaint hence they are a permissive counterclaims. During the pre-trial, this Court had already ruled that the counterclaims were permissive yet the records showed that defendant had not paid the docket fees. This Court therefore has not acquired jurisdiction over said case.


If there is any opportune time to direct the courts attention to such payment and cause the counterclaim to be reinstated, it was at that point and no other. All it had to do was prove payment by presenting to the court the official receipts or any other acceptable documentary evidence, and thus secure the proper reversal of the ruling on its counterclaim. Still, nothing was heard from the bank on the issue, until it filed its brief with the CA on appeal. Indeed, "whatever is repugnant to the standards of human knowledge, observation and experience becomes incredible and must lie outside judicial cognizance."

More than the above, this Court finds true and credible the trial court's express declaration that no docket fees have been paid on the bank's counterclaim; the trial court's pronouncement enjoys the presumption of regularity.