Komatsu Industries (Phils.) Inc. vs. Court of Appeals

A minute resolution denying due course to a petition for review for failure to show reversible error, stating its legal basis, complies with Section 14, Article VIII of the Constitution, constitutes an adjudication on the merits adopting the Court of Appeals' findings, and is not subject to a prohibited second motion for reconsideration.

Komatsu Industries (Phils.), Inc. stood as borrower-mortgagor of a parcel of land with improvements covered by TCT No. 469737. Philippine National Bank and National Investment and Development Corporation, its subsidiary, stood as joint mortgagees on a pari passu basis under an amended mortgage deed. Santiago Land Development Corporation later appeared as intervenor-purchaser of the foreclosed property.

Sometime in 1975, NIDC granted KIPI a direct loan of P8,000,000.00 and a P2,000,000.00 guarantee to secure PNB. As security, KIPI executed a Deed of Real Estate Mortgage dated April 24, 1975 in favor of NIDC covering a parcel of land with improvements under TCT No. 469737 of Rizal, now Makati. At PNB's instance and with NIDC's conformity, to secure KIPI's obligation under PNB's deferred letter of credit for US$1,564,826.00 in favor of Toyota Tsusho Kaisha Ltd., Japan, KIPI executed an Amendment of Mortgage Deed dated June 21, 1978 covering the same property on a pari passu basis in favor of PNB and NIDC.

Upon claimed full payment of KIPI's account with NIDC and the P2.0 million credit line with PNB, NIDC executed a Deed of Release and Cancellation of Mortgage dated January 7, 1981 releasing the mortgage on TCT No. 469737, reciting in a whereas clause that the credit accommodations had been fully paid to PNB and NIDC. By virtue thereof NIDC returned the owner's copy of TCT No. 469737, and the deed was registered on January 28, 1981. PNB's position was that some accounts chargeable to KIPI on deferred letters of credit opened in 1974 and 1975 and settled with foreign suppliers in 1978 and 1979 came to its knowledge only in 1981 and 1982.

In a letter dated March 31, 1992, PNB requested KIPI to return the owner's copy of TCT No. 469737, reiterating the request in a July 7, 1982 letter to KIPI President Ricardo C. Silverio, and the title was returned to PNB. On May 7, 1982, PNB filed a Petition for Correction of Entry and Adverse Claim with the Registry of Deeds of Makati, which was annotated at the back of TCT No. 469737. On November 2, 1983, PNB filed with the Ex-Officio Sheriff of Makati a Petition for Sale under Act 1508, as amended by P.D. 385, to extra-judicially foreclose properties by virtue of a Chattel Mortgage with Power of Attorney dated June 21, 1978. On November 25, 1983, KIPI received an undated Notice of Sheriff's Sale that the land under TCT No. 469737 would be foreclosed extra-judicially on December 19, 1983.

Thereafter extrajudicial foreclosure proceedings were conducted, culminating in a Certificate of Sale dated May 17, 1984 and its registration, a Final Deed of Sale and transfer certificate of title to PNB as highest and lone bidder, and a subsequent deed of sale and transfer certificate to intervenor Santiago Land Development Corporation. As early as April 17, 1985, KIPI executed a Deed of Assignment of Right of Redemption over the property in favor of Atty. Norberto J. Quisumbing, whose exercise became involved in Civil Case No. 105 of the Regional Trial Court of Makati. The trial court found for KIPI and nullified the foreclosure with damages, while the Court of Appeals adopted the trial court's findings of fact but reversed on law, sustaining the subsistence of the PNB mortgage and the validity of the foreclosure in its entirety.

• Need for Memoranda and Due Course: Petitioner argued that the parties should have been allowed to file memoranda and that, because the case progressed to the rejoinder stage, the petition must be given due course and decided in its favor.
• Review of Facts After Reversal: Petitioner maintained that because respondent court reversed the court a quo, this Court was duty bound to determine the facts involved.
• Constitutionality of Minute Resolutions: Petitioner argued that the minute resolutions denying the petition and the motion for reconsideration violated Section 14, Article VIII of the Constitution for failure to state facts and law, insinuating culpable violation.
• Nullity of Amended Mortgage: Petitioner submitted that under Article 2089 of the Civil Code the Amendment of Mortgage Deed was null and void for securing two separate credits over a single property, so cancellation of the NIDC mortgage left nothing for PNB to foreclose.
• Release and Redemption: Petitioner argued that the Deed of Release necessarily included the PNB mortgage through NIDC as PNB's wholly owned subsidiary with its knowledge and consent, and faulted respondent court for not resolving entitlement to redeem if foreclosure were valid.

• Redemption Not in Issue: Respondents countered that entitlement to redeem was not proper at the appellate stage since it was never raised in the complaint nor admitted at pre-trial, but only in petitioner's memorandum before the trial court.
• Lapse of Redemption Period: Respondents argued that the one-year redemption period had long lapsed since registration of the sheriff's certificate of sale on May 17, 1984 and was not suspended by an action for nullification of the auction sale.
• Disclaimer of Impropriety: Counsel for respondent private corporation vigorously disclaimed petitioner's imputations of misconduct and pressure, calling for petitioner to prove its charges regarding retired Justice Teodoro Padilla and the disposition of the case.

• Second Motion for Reconsideration: Whether a second motion for reconsideration of the denial of a petition for review on certiorari may be entertained.
• Minute Resolutions and Constitution: Whether disposition by minute resolution denying due course for failure to show reversible error violates Section 14, Article VIII of the Constitution.
• Release of Joint Mortgage: Whether the Deed of Release dated January 7, 1981 executed solely by NIDC operated to release the real estate mortgage in favor of PNB under the Amendment of Mortgage Deed dated June 21, 1978.
• Validity of Foreclosure: Whether the extrajudicial foreclosure of the whole Pasong Tamo property and subsequent sales and titles were valid despite payment of the NIDC credit.
• Damages: Whether KIPI was entitled to damages arising from the foreclosure.
• Right of Redemption: Whether petitioner remained entitled to redeem the foreclosed property if foreclosure were held valid.

• Second Motion for Reconsideration: No. Second motions for reconsideration are prohibited under Section 2, Rule 52 in relation to Section 4, Rule 56, and were properly denied and expunged for lack of merit.
• Minute Resolutions and Constitution: No. A resolution refusing due course stating the legal basis, such as factual nature of questions or absence of reversible error, sufficiently complies with Section 14, Article VIII.
• Release of Joint Mortgage: No. The NIDC deed, to which PNB was not a signatory and which PNB did not ratify, could not bind PNB under relativity of contracts, and covered only the paid NIDC loan and guarantee.
• Validity of Foreclosure: Yes. The mortgage being indivisible, PNB could foreclose the whole property on its subsisting credit, pursuant to a verified petition for extrajudicial foreclosure under Act No. 3135.
• Damages: No. No damages were due pursuant to damnum absque injuria, the foreclosure having violated no legal right.
• Right of Redemption: No. The issue was improperly raised for the first time on appeal, the period had lapsed since May 17, 1984, and the right had been assigned on April 17, 1985.

• Second Motion for Reconsideration: The prohibition was reiterated as specific and applicable, with the extensive pleadings — petition, joint comment, reply, joint rejoinder, 24-page motion for reconsideration, comment, reply, and rejoinder — already affording full deliberation. Because no additional and substantial arguments were adduced, reconsideration was denied on January 26, 1998, leaving the second motion unauthorized and subject to expunction as immediately final and executory.
• Minute Resolutions and Constitution: Resolutions denying due course are not decisions within the requirement to express clearly and distinctly facts and law; the petition is not a matter of right but of sound judicial discretion. Under Novino vs. Court of Appeals, Que vs. People, Munal vs. Commission on Audit, and Borromeo vs. Court of Appeals, stating that questions are factual or that no reversible error is shown satisfies the constitutional command to state the legal basis for refusal of due course. Disposition by minute resolution was justified as the only means to discharge constitutional functions over patently unmeritorious or factual petitions.
• Release of Joint Mortgage: Under Article 1311, contracts take effect only between parties, assigns and heirs and cannot prejudice a non-party even with knowledge thereof. PNB, a corporation with separate personality from NIDC, neither signed nor ratified the deed, and promptly objected that its mortgage was erroneously cancelled and requested reannotation. The Amendment expressly secured distinct obligations — NIDC's P8,000,000.00 loan and P2,000,000.00 guarantee, and PNB's US$1,564,826.00 deferred letter of credit plus other obligations appearing in their books — so NIDC could not declare PNB's credit paid. Nothing short of actual payment or express release discharges a mortgage.
• Validity of Foreclosure: A mortgage is indivisible under Article 2089, so payment of part does not extinguish it proportionately absent language making it divisible. The instrument contemplated existing and future accommodations, rendering division by proportionate credits impractical, and Central Bank of the Philippines vs. Court of Appeals on failure of consideration was distinguished. Since the PNB mortgage subsisted, the sheriff's sale on the verified petition for extrajudicial foreclosure, notices, certificate of sale, final deed, and titles were sustained, with Article 2089 construed only to bar demand for proportional release before full payment, not to void pari passu mortgages.
• Damages: Consistent with validity of the foreclosure and non-binding effect of the NIDC release, loss to the mortgagor from a lawful foreclosure created no ground for redress. Applied was damnum absque injuria as defined in Huyong Hian vs. Court of Appeals and Gilchrist vs. Cuddy — damage without violation of legal right or legal wrong.
• Right of Redemption: The matter was never raised in the complaint or admitted at pre-trial and, like the belated attack on the Amendment's validity, could not be raised for the first time on appeal or reconsideration. In any event, the one-year period from registration on May 17, 1984 had lapsed without suspension, and KIPI had assigned the right on April 17, 1985 to Atty. Norberto J. Quisumbing, with its exercise pending in another case.

• Prohibition of second motions for reconsideration — Second motions for reconsideration are prohibited pleadings under Section 2, Rule 52 in relation to Section 4, Rule 56 of the 1997 Rules of Civil Procedure. Applied to deny and expunge petitioner's incorporated second motion and declare the denial immediately final and executory with no further pleadings to be entertained.
• Minute resolutions denying due course — Resolutions refusing due course to a petition for review on certiorari are not decisions under Section 14, Article VIII; stating the legal basis therefor, such as that questions are factual or no reversible error is shown, suffices. A minute resolution denying review constitutes an adjudication on the merits adopting the Court of Appeals' findings where correct, and review is a matter of sound judicial discretion granted only for special and important reasons under Section 6, Rule 45.
• Relativity of contracts — Under Article 1311 of the New Civil Code, contracts take effect only between parties, their assigns and heirs and cannot bind or prejudice a non-party even with knowledge thereof. Applied to hold that NIDC's unilateral deed of release could not discharge PNB's distinct mortgage interest absent signature, conformity, authority, or ratification.
• Indivisibility of mortgage — Under Article 2089 of the Civil Code, payment of part of the secured debt does not extinguish the mortgage proportionately; the mortgagor must pay in full before demanding release, and the indivisibility of the pledge or mortgage does not affect divisibility of the principal obligation. Applied to uphold foreclosure of the entire property for PNB's unpaid share and to allow successive or pari passu mortgages over the same property.
• Damnum absque injuria — Loss or damage without violation of a legal right or amounting to a legal wrong affords no legal redress. Applied to deny damages to the mortgagor where the foreclosure, though causing loss, was lawful.

• "The resolution denying due course or dismissing the petition always gives the legal basis." — States the constitutional minimum for minute resolutions, justifying disposition without a full signed decision where the petition is patently without merit or factual.
• "A minute Resolution denying a Petition for Review of a Decision of the Court of Appeals can only mean that the Supreme Court agrees with or adopts the findings and conclusions of the Court of Appeals, in other words that the decision sought to be reviewed and set aside is correct." — Defines the adjudicative effect of denial of due course, supporting adoption of the Court of Appeals' ruling on the mortgage and foreclosure.
• "Nothing short of an actual payment of the debt or an express release will operate to discharge a mortgage (55 Am. Jur. 394)." — States the strict requirement for discharge, supporting rejection of implied release through NIDC's unilateral act.
• "there might have been a loss (on the part of the appellee-mortgagor) arising from the foreclosure but said loss does not create a ground of legal redress." — Articulates damnum absque injuria as applied to deny damages for a valid foreclosure.

• Novino, et al. vs. Court of Appeals, et al., G.R. No. L-21098 — Cited as early authority that minute resolutions are not decisions under Section 14, Article VIII and that denial of review needs no full explanation since facts and law appear in the Court of Appeals opinion.
• Que vs. People, et al., G.R. Nos. L-75217-18 — Reiterated the Novino rule on sufficiency of minute resolutions denying due course.
• Munal vs. Commission on Audit, et al., G.R. No. 78648 — Clarified that the constitutional mandate applies only to cases submitted for decision after due course and briefs or memoranda, not to petitions refused due course with legal basis stated.
• Borromeo vs. Court of Appeals, et al., G.R. No. 82273 — Followed for the rule that the Court may dispose by minute resolution with legal basis where cases are patently without merit, factual, or supported by substantial evidence, as the only way to discharge constitutional functions.
• Smith Bell & Co. (Phil.), Inc., et al. vs. Court of Appeals, et al., G.R. No. 56294 — Followed for the doctrine that grant of due course is discretionary and denial constitutes adjudication on the merits adopting the Court of Appeals' correct findings.
• Central Bank of the Philippines vs. Court of Appeals, 139 SCRA 46 — Distinguished as involving one mortgagee and failure of consideration limiting enforcement to amounts released, unlike joint pari passu mortgages for distinct actual debts.
• Huyong Hian vs. Court of Appeals, 59 SCRA 114 — Cited with Gilchrist vs. Cuddy to define damnum absque injuria barring damages for lawful foreclosure.
• Gilchrist vs. Cuddy, 29 Phil. 548 — Cited as basis for damnum absque injuria where no legal right is violated.

• Section 14, Article VIII, Constitution — Requires decisions to express clearly and distinctly facts and law, and that refusal of due course state its legal basis; applied to sustain minute resolutions stating factual nature or absence of reversible error.
• Section 2, Rule 52 in relation to Section 4, Rule 56, 1997 Rules of Civil Procedure — Prohibits second motions for reconsideration; applied to deny and expunge petitioner's incorporated second motion.
• Section 6, Rule 45, Rules of Court — Provides review on certiorari is discretionary and granted only for special and important reasons; applied to deny a petition showing no novel substance or contrariety to law.
• Article 1311, New Civil Code — Limits contractual effect to parties, assigns and heirs; applied to hold NIDC's release ineffective against non-signatory PNB.
• Article 2089, Civil Code — Embodies indivisibility of mortgage, barring proportional release before full payment; applied to uphold foreclosure of the whole property and validity of pari passu mortgages.
• Act No. 3135, as amended; Act 1508 as amended by P.D. 385 — Governs extrajudicial foreclosure and sale; applied to sustain the petition for sale, notices of sheriff's sale, certificate and final deed of sale, and resulting titles.

Melo, J., Puno, J., Mendoza, J., Martinez, J.