Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc.

When a judgment ordering rescission and reconveyance cannot be implemented due to the absence of the party obligated to receive restitution and execute the conveyance, the trial court may authorize the Clerk of Court to execute the necessary deed of sale and validate the titles issued thereunder, applying the presumption of regularity of official acts, to ensure that the prevailing party is not deprived of the fruits of victory by the losing party's stratagem or disappearance.

The case stems from a prior final decision in G.R. No. 106063 (promulgated November 21, 1996) which resolved a dispute involving parcels of land originally owned by Carmelo & Bauermann, Inc. The Supreme Court therein ordered the rescission of the sale between Carmelo & Bauermann and Equatorial Realty Development, Inc., and directed that the property be sold instead to Mayfair Theater, Inc., which held the right of first refusal. Years after the decision became final, difficulties arose in its execution when the original vendor, Carmelo & Bauermann, could no longer be located, threatening to frustrate the rights of the prevailing party.

• The Supreme Court's prior decision in G.R. No. 106063 (November 21, 1996) became final and executory, ordering the rescission of the sale of parcels of land between Carmelo & Bauermann, Inc. and Equatorial Realty Development, Inc.
• The same decision mandated that Carmelo & Bauermann sell the subject property to Mayfair Theater, Inc., which possessed the right of first refusal.
• Carmelo & Bauermann, the landowner and vendor obligated to receive the purchase price and execute the conveyance, could no longer be located, rendering literal compliance with the decision impossible.
• Mayfair Theater, Inc., as the prevailing party, deposited the amount of P11,300,000.00 representing the purchase price with the Clerk of Court of the Regional Trial Court, Manila.
• In view of the vendor's absence, the Clerk of Court, exercising functions as sheriff, executed the deed of sale conveying the property to Mayfair Theater, Inc.
• Based on this execution, the Registry of Deeds of Manila issued Transfer Certificates of Title Nos. 235120, 235121, 235122, and 235123 in favor of Mayfair Theater, Inc.
• The execution of the final decision was obstructed by the physical disappearance of the party (Carmelo & Bauermann) necessary to effect the restitution and conveyance ordered by the Court.

• Equatorial Realty Development, Inc. presumably argued that the execution of the deed of sale by the Clerk of Court was improper and without legal basis given the absence of Carmelo & Bauermann, the lawful vendor.
• Petitioner likely contended that the titles issued by the Registry of Deeds in favor of Mayfair Theater, Inc. were invalid or irregular due to the unconventional method of execution employed in the absence of the registered owner.
• Petitioner presumably asserted that the inability to locate Carmelo & Bauermann prevented the valid execution of the rescission and subsequent sale, and that the court could not authorize a substitute vendor (the Clerk of Court) to execute the deed.

• Mayfair Theater, Inc. presumably argued that the execution by the Clerk of Court and the issuance of titles were valid measures necessary to implement the final and executory decision of the Supreme Court.
• Respondent likely contended that the deposit of the purchase price with the court satisfied the requirement of restitution, and that the absence of Carmelo & Bauermann should not be allowed to frustrate the rights of the prevailing party.
• Respondent presumably maintained that courts possess inherent power to ensure the execution of their judgments and to prevent losing parties from evading compliance through absence or subterfuge.

• Procedural:
  • Whether the Clerk of Court may validly execute a deed of sale in lieu of the absent vendor (Carmelo & Bauermann) to implement a final judgment ordering rescission and reconveyance.
• Substantive Issues:
  • Whether the Transfer Certificates of Title issued in favor of Mayfair Theater, Inc. based on the Clerk of Court's execution are valid and enforceable.
  • How the trial court should execute a final decision ordering rescission and sale when the vendor obligated to convey the property cannot be located.

• Procedural:
  • The Court held that the trial court has the authority and duty to validate the acts of the Sheriff (Clerk of Court) in executing the deed of sale. The Court remanded the case to the trial court with instructions to execute the decision strictly in accordance with G.R. No. 106063 by validating the sheriff's acts and the titles issued by the Registry of Deeds. The Court authorized the Clerk of Court to release the deposited amount to Equatorial Realty Development, Inc. (petitioner) should Carmelo & Bauermann fail to accept it.
• Substantive:
  • The Court ruled that the titles issued in favor of Mayfair Theater, Inc. are entitled to the presumption of regularity, meaning the Registry of Deeds is presumed to have complied with all legal requirements regarding taxes, fees, and registration procedures. The Court emphasized that courts must exercise their power of execution to prevent a travesty of justice and to ensure that prevailing parties are not deprived of the fruits of victory by the losing party's absence or stratagem. The Court mandated that the trial court effectuate the ultimate result of the suit with Mayfair Theater, Inc. as the prevailing party, validating the titles issued in its favor.

• Presumption of Regularity of Official Acts — Official acts, such as the issuance of transfer certificates of title by the Registry of Deeds, are presumed to have been performed regularly and in compliance with all legal requirements, including the payment of taxes and registration fees, unless proven otherwise. The Court applied this doctrine to validate the titles issued to Mayfair Theater, Inc.
• Finality and Execution of Judgments — Once a judgment becomes final, executory, and unappealable, courts possess the inherent power and duty to ensure its execution. Prevailing parties must not be deprived of the fruits of victory through subterfuges or stratagems devised by losing parties, including physical absence designed to frustrate compliance.
• Power of Courts to Prevent Frustration of Judgments — Courts are constituted to put an end to controversies and must guard against any scheme calculated to prolong litigation or prevent the execution of final decisions. When parties employ means to prevent execution, courts must devise appropriate remedies to attain the ends of litigation.

• "To allow this stratagem would make a travesty of a duly promulgated decision of the Supreme Court that has become final and executory."
• "Litigation must at some time be terminated, for public policy dictates that once a judgment becomes final, executory and unappealable, the prevailing party shall not be deprived of the fruits of victory by some subterfuge devised by the losing party."
• "Courts must guard against any scheme calculated to bring about that result. Constituted as they are to put an end to controversies, courts frown upon any attempt to prolong them."

• Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc. (G.R. No. 106063, 332 Phil. 525 [1996]) — The controlling precedent establishing the rights of the parties and ordering the rescission and sale; the decision being executed in the instant case.
• Velasquez vs. Court of Appeals (G.R. No. 126996, February 15, 2000) — Cited for the doctrine that the presumption of regularity applies to the issuance of certificates of title by the Registry of Deeds.
• Time Transit vs. NLRC (304 SCRA 11 [1999]) — Cited for the principle that prevailing parties should not be deprived of the fruits of victory by subterfuge.
• Salva vs. Court of Appeals (304 SCRA 632 [1999]) — Cited for the principle that courts frown upon attempts to prolong controversies and must put an end to litigation.