Rizal Commercial Banking Corporation vs. Serra

The five-year period for enforcing a final and executory judgment by motion is interrupted or suspended where the delay is caused or occasioned by the acts of the judgment obligor and/or is incurred for his benefit or advantage. Where the judgment debtor fraudulently transfers the subject property to third persons and thereby compels the judgment creditor to institute a separate action to annul those transfers, the pendency of that action suspends the period, and a motion for execution filed within five years from the finality of the annulment case is timely.

Respondent Federico A. Serra owned a 374-square-meter parcel of land along Quezon Street, Masbate, Masbate, which he leased to petitioner Rizal Commercial Banking Corporation under a Contract of Lease with Option to Buy executed on 20 May 1975. The contract granted RCBC a 25-year lease and an option to purchase the land and its improvement within ten years from signing. The ensuing dispute turned on the enforcement of a final and executory judgment arising from that contract, and on the interaction between the five-year period for execution by motion under Rule 39, Section 6 of the Rules of Court and the judgment obligor's intervening fraudulent conveyances of the subject property.

Respondent Federico A. Serra owned a 374-square-meter parcel of land along Quezon Street, Masbate, Masbate. On 20 May 1975, Serra and petitioner Rizal Commercial Banking Corporation entered into a Contract of Lease with Option to Buy, under which Serra agreed to lease the land to RCBC for 25 years and granted the bank an option to purchase the land and its improvement within ten years from signing.

On 4 September 1984, RCBC informed Serra of its decision to exercise its option to buy the property. Serra replied that he was no longer interested in selling it. On 14 March 1985, RCBC filed a Complaint for Specific Performance and Damages against Serra before the Regional Trial Court of Makati City. That court initially dismissed the complaint, but in an Order dated 5 January 1989 it reversed itself and ordered Serra to execute and deliver the proper deed of sale in favor of RCBC, conveying the property covered by Original Certificate of Title No. 0-232 of the Registry of Deeds of Masbate for ₱78,540.00, and to pay ₱5,000.00 in attorney's fees, with costs against the defendant.

Serra appealed to the Court of Appeals. On 18 May 1989, while the appeal was pending, Serra donated the property to his mother, Leonida Ablao. On 20 April 1992, Ablao sold the property to Hermanito Liok, and a new land title was issued in Liok's name. RCBC thereupon filed a Complaint for Nullification of Deed of Donation and Deed of Sale with Reconveyance and Damages against Liok, Ablao, and Serra before the Regional Trial Court of Masbate City.

Meanwhile, the Court of Appeals and later this Court affirmed the Order of the RTC Makati in the Specific Performance case. In a Decision dated 4 January 1994, this Court declared that the Contract of Lease with Option to Buy was valid, effective, and enforceable. On 15 April 1994, that decision became final and executory upon entry of judgment.

On 22 October 2001, the RTC Masbate ruled in favor of RCBC, declaring the donation in favor of Ablao and the subsequent sale to Liok null and void and ordering the Register of Deeds of Masbate to cancel TCT Nos. 7434 and T-8432. In a Decision dated 28 September 2007, the Court of Appeals affirmed, holding that the donation to Ablao was simulated and was done solely to evade Serra's obligation to RCBC, and that because Ablao had no right to transfer the property and Liok was not a buyer in good faith, the subsequent sale to Liok was likewise null and void. Liok filed a Petition for Review on Certiorari docketed as G.R. No. 182478, while Serra and Ablao filed a Petition for Certiorari docketed as G.R. No. 182664. In separate Resolutions dated 30 June 2008 and 22 October 2008, which became final and executory on 27 August 2008 and 3 March 2009, respectively, this Court found neither reversible error nor grave abuse of discretion on the part of the Court of Appeals.

On 25 August 2011, RCBC moved for execution of the decision in the Specific Performance case, alleging that it was legally impossible to ask for execution prior to the annulment of the fraudulent transfers made by Serra, and that the period to execute by motion was suspended during the pendency of the Annulment case. On 22 September 2011, Serra filed his comment and opposition, insisting that the motion for execution was already barred by prescription and laches and that RCBC was at fault for failing to register the Contract of Lease with Option to Buy as a lien on the original title. The RTC Makati denied the motion in an Order dated 16 February 2012, opining that RCBC should have asked for execution of the deed of sale and had the same registered with the Registry of Deeds so that the principle of caveat emptor would set in even if Serra sold or transferred the property to any person; it denied reconsideration on 26 July 2012.

• Legal Impossibility of Prior Execution: RCBC alleged that it was legally impossible to ask for the execution of the decision in the Specific Performance case prior to the annulment of the fraudulent transfers made by Serra, and that the period to execute by motion was consequently suspended during the pendency of the Annulment case.
• Unlawful Prevention by the Judgment Obligor: RCBC maintained that it was unlawfully prevented by Serra from enforcing the 5 January 1989 Decision, and that under the circumstances it was not barred from having that decision executed through a motion.

• Prescription and Laches: Serra insisted that RCBC's motion for execution was already barred by prescription and laches.
• Fault of the Judgment Creditor: Serra contended that RCBC was at fault for failing to register the Contract of Lease with Option to Buy as a lien on the original title, thereby enabling the subsequent transfers of the property.

• Execution by Motion After Five Years: Whether the court a quo erred in holding that petitioner RCBC is barred from having its 5 January 1989 Decision executed through motion, considering that under the circumstances obtaining in the case, RCBC was unlawfully prevented by the respondent from enforcing the said decision.

• Execution by Motion After Five Years: No. The petition has merit. The delay in execution was caused by Serra for his own advantage, and the pendency of the Annulment case effectively suspended the five-year period under Rule 39, Section 6 of the Rules of Court; RCBC's motion filed on 25 August 2011 was therefore deemed filed within the five-year period.

• Execution by Motion After Five Years: Under Rule 39, Section 6 of the Rules of Court, a final and executory judgment may be executed by motion within five years from the date of its entry, or by an action after the lapse of five years and before prescription sets in. This Court, however, allows exceptions when execution may be made by motion even after the lapse of five years, and these exceptions share one common denominator: the delay is caused or occasioned by actions of the judgment obligor and/or is incurred for his benefit or advantage. In Camacho vs. Court of Appeals, the Court held that where the delays were occasioned by the judgment debtor's own initiatives and for her advantage as well as beyond the judgment creditor's control, the five-year period allowed for enforcement of the judgment by motion is deemed to have been effectively interrupted or suspended. Applying that rule, there was no dispute that RCBC sought to enforce the decision that became final and executory on 15 April 1994, which ordered Serra to execute and deliver the proper deed of sale in favor of RCBC. To evade that obligation, Serra transferred the property to his mother Ablao, who then transferred it to Liok, and Serra's action prompted RCBC to file the Annulment case. The delay in the execution of the decision was thus clearly caused by Serra for his own advantage, and the pendency of the Annulment case effectively suspended the five-year period to enforce the decision in the Specific Performance case through a motion. Because the decision in the Annulment case attained finality on 3 March 2009 and RCBC's motion for execution was filed on 25 August 2011, the motion was deemed filed within the five-year period. The purpose of prescribing time limitations for enforcing judgments is to prevent parties from sleeping on their rights; far from sleeping on its rights, RCBC pursued its action against Serra persistently and in accordance with law, while Serra continued to evade his obligation by raising issues of technicality. While strict compliance with the rules of procedure is desired, liberal interpretation is warranted in cases where a strict enforcement of the rules will not serve the ends of justice.

• Execution of Judgments by Motion Under Rule 39, Section 6 — A final and executory judgment may be executed by motion within five years from the date of its entry, or by an action after the lapse of five years and before prescription sets in. The Court applied this rule as the baseline and then treated the filing of the motion for execution on 25 August 2011 as timely because the period had been suspended.
• Suspension of the Five-Year Period by the Judgment Obligor's Acts — The five-year period for enforcement of a judgment by motion is interrupted or suspended where the delay is caused or occasioned by actions of the judgment obligor and/or is incurred for his benefit or advantage. The Court found that Serra's donation of the property to his mother and her subsequent sale to Liok, which necessitated the Annulment case, constituted precisely such acts, so that the period was suspended during the pendency of that case and resumed only upon its finality on 3 March 2009.
• Purpose of Time Limitations on Execution — The purpose of prescribing time limitations for enforcing judgments is to prevent parties from sleeping on their rights. The Court found that RCBC had persistently pursued its action in accordance with law, whereas Serra continued to evade his obligation by raising issues of technicality.
• Liberal Interpretation of Procedural Rules — While strict compliance with the rules of procedure is desired, liberal interpretation is warranted in cases where a strict enforcement of the rules will not serve the ends of justice. The Court invoked this principle to sustain the motion for execution notwithstanding the lapse of the five-year period counted from entry of judgment.

• "This Court, however, allows exceptions when execution may be made by motion even after the lapse of five years. These exceptions have one common denominator: the delay is caused or occasioned by actions of the judgment obligor and/or is incurred for his benefit or advantage." — This is the ratio decidendi of the decision, stating the single unifying criterion for the exceptions to the five-year rule and supplying the test against which Serra's conduct was measured.
• "In Camacho v. Court of Appeals, we held that where the delays were occasioned by the judgment debtor's own initiatives and for her advantage as well as beyond the judgment creditor's control, the five-year period allowed for enforcement of the judgment by motion is deemed to have been effectively interrupted or suspended." — This passage states the controlling precedent on which the Court rested its disposition and is the formulation most likely to be cited for the suspension doctrine.
• "This Court has reiterated that the purpose of prescribing time limitations for enforcing judgments is to prevent parties from sleeping on their rights." — This passage supplies the policy rationale underlying the five-year period and explains why the Court refused to penalize RCBC for a delay attributable to the judgment obligor.
• "While strict compliance with the rules of procedure is desired, liberal interpretation is warranted in cases where a strict enforcement of the rules will not serve the ends of justice." — This passage articulates the procedural-liberality principle the Court used to excuse the lapse of the five-year period.

• Camacho vs. Court of Appeals, 351 Phil. 108 (1998) — Controlling precedent. Cited for the rule that where delays were occasioned by the judgment debtor's own initiatives and for her advantage as well as beyond the judgment creditor's control, the five-year period for enforcement of the judgment by motion is deemed effectively interrupted or suspended.
• Serra vs. Court of Appeals, G.R. No. 103338, 4 January 1994, 229 SCRA 60 — The Specific Performance case itself. Cited as the source of the final and executory decision declaring the Contract of Lease with Option to Buy valid, effective, and enforceable, and of the RTC Order of 5 January 1989 that RCBC sought to execute.
• Zamboanga Barter Traders Kilusang Bayan, Inc. vs. Plagata, G.R. No. 148433, 30 September 2008, 567 SCRA 163; Yau vs. Silverio, Sr., G.R. No. 158848, 4 February 2008, 543 SCRA 520; Central Surety and Insurance Company vs. Planters Products Inc., 546 Phil. 479 (2007); Francisco Motors Corp. vs. Court of Appeals, 535 Phil. 736 (2006); Republic of the Phils. vs. Court of Appeals, 329 Phil. 115 (1996) — Cited collectively as authority for the exceptions permitting execution by motion even after the lapse of five years, all sharing the common denominator that the delay is caused or occasioned by the judgment obligor and/or incurred for his benefit or advantage.
• Republic of the Phils. vs. Court of Appeals, 329 Phil. 115 (1996) — Cited for the proposition that the purpose of prescribing time limitations for enforcing judgments is to prevent parties from sleeping on their rights.
• Philippine Veterans Bank vs. Solid Homes, Inc., G.R. No. 170126, 9 June 2009, 589 SCRA 40 — Cited, in turn citing Central Surety and Insurance Company vs. Planters Products, Inc., for the principle that liberal interpretation of procedural rules is warranted where strict enforcement will not serve the ends of justice.

• Rule 39, Section 6, Rules of Court — Provides that a final and executory judgment may be executed by motion within five years from the date of its entry, or by an action after the lapse of five years and before prescription sets in. The Court used this provision as the starting point of its analysis, then held that the five-year period had been suspended by Serra's acts so that RCBC's motion for execution filed on 25 August 2011 was timely.
• Rule 45, 1997 Rules of Civil Procedure — The procedural basis on which RCBC's Petition for Review on Certiorari was brought before the Supreme Court, assailing the 16 February 2012 and 26 July 2012 Orders of the RTC Makati.

• Justice Perez
• Justice Mendoza (designated additional member per Special Order No. 1484 dated 9 July 2013)
• Justice Perlas-Bernabe