Santiago Land Development Corporation vs. Court of Appeals

A transferee pendente lite of property subject to litigation cannot intervene in the action under Rule 12, §2 of the Rules of Court but must be governed by Rule 3, §20, which provides for substitution or joinder with the original party; the transferee stands in exactly the same position as the transferor and is bound by the judgment, unlike an intervenor who has the choice not to be bound.

The case involves a dispute over the right to redeem foreclosed real properties where the plaintiff sought to enforce redemption rights against the mortgagee-bank. During the pendency of the action, a third party purchased one of the foreclosed properties from the defendant bank, raising questions about the proper procedural mechanism for such a purchaser to participate in the litigation and whether such purchaser could raise defenses not asserted by the original defendant.

• Norberto J. Quisumbing brought an action against Philippine National Bank to enforce an alleged right to redeem certain real properties foreclosed by PNB, bringing the suit as assignee of the mortgagor Komatsu Industries (Phils.), Incorporated.
• On November 21, 1989, with notice of the pending civil action, Santiago Land Development Corporation purchased from PNB one of the properties subject of the litigation, situated along Pasong Tamo Extension in Makati, for P90 Million.
• On December 11, 1989, SLDC filed a motion to intervene with its answer in intervention attached, alleging that it was the transferee pendente lite of the property and that any adverse ruling or decision against PNB would necessarily affect it.
• In its attached answer, SLDC adopted the answer filed by PNB and raised affirmative defenses regarding the trial court's lack of jurisdiction based on alleged failure to pay docket fees and Quisumbing's alleged lack of cause of action due to invalidity of the deed of assignment.
• Quisumbing opposed the motion for intervention, arguing that SLDC's interest was a mere contingency or expectancy dependent on any judgment rendered for or against PNB, and that intervention would complicate, prolong, and make proceedings expensive.
• The trial court granted the motion for intervention on March 30, 1990, and also directed the substitution of heirs in view of Quisumbing's demise.
• As intervenor, SLDC served interrogatories upon private respondents regarding whether consideration was paid for the assignment of redemption rights, the mode of payment, and bank account details, and moved for production, inspection, and copying of certain documents.
• Private respondents filed a motion to quash or disallow the interrogatories, which the trial court denied on March 21, 1991, granting instead SLDC's motion for production of documents.
• Private respondents' motion for reconsideration was denied by the trial court on July 30, 1991, prompting them to file a petition for certiorari with the Court of Appeals.

• The Court of Appeals erred in taking cognizance of the issue regarding the propriety of intervention since this issue was not raised by private respondents before the trial court.
• The Court of Appeals erred in taking cognizance of the petition since private respondents did not raise any jurisdictional error but only questions regarding procedural orders issued by the trial court in the exercise of its jurisdiction and discretion.
• Even if the Court of Appeals could pass upon the procedural question, it erred in barring the trial court from allowing petitioner to intervene under Section 2 of Rule 12 of the Rules of Court despite compliance with the standards for intervention.
• The Court of Appeals denied petitioner the right to genuinely or effectively defend itself in the civil action despite having acquired a real and substantive interest in the subject matter.
• Private respondents failed to object to the interrogatories in the manner prescribed by the Rules of Court and were therefore barred from raising their objections.
• The trial court correctly denied private respondents' motion to quash the interrogatories.

• The issue regarding the propriety of petitioner's motion for intervention was raised before the trial court in the opposition to said motion.
• The petition for certiorari properly charged the RTC with grave abuse of discretion in issuing the questioned orders, constituting a jurisdictional question that the Court of Appeals could resolve.
• SLDC is a transferee pendente lite governed by Rule 3, §20 of the Rules of Court, not an intervenor under Rule 12, §2.
• A transferee pendente lite stands in exactly the same position as its predecessor-in-interest and is bound by the proceedings and judgment, even without formal substitution or joinder as a party-defendant.
• Since SLDC had no right to intervene, it had no right to file interrogatories or seek production of documents.

• Procedural Issues:
  • Whether the Court of Appeals erred in taking cognizance of the issue regarding the propriety of intervention when this was allegedly not raised before the trial court.
  • Whether the Court of Appeals properly entertained the petition for certiorari despite allegedly involving only procedural errors rather than jurisdictional errors amounting to grave abuse of discretion.
  • Whether private respondents were barred from objecting to the interrogatories for failure to comply with the prescribed manner of objection under the Rules of Court.
• Substantive Issues:
  • Whether a transferee pendente lite of property subject to litigation may intervene in the action under Rule 12, §2 of the Rules of Court or is governed exclusively by Rule 3, §20 on transfer of interest.
  • Whether a transferee pendente lite has the right to file interrogatories and seek production of documents.

• Procedural:
  • The Court held that the issue regarding the propriety of intervention was in fact raised by private respondents before the trial court in their opposition to the motion for intervention.
  • SLDC is estopped from questioning the appellate court's ruling on this issue because it failed to object to the consideration of this issue by the Court of Appeals in its comment on the petition filed in that court.
  • The petition for certiorari properly raised a jurisdictional question by charging the RTC with grave abuse of discretion in granting petitioner's motion for intervention and in denying private respondents' motion to quash interrogatories.
  • The Court of Appeals correctly took cognizance of the issue regarding the propriety of SLDC's motion for intervention.
• Substantive:
  • A transferee pendente lite cannot intervene under Rule 12, §2 but is governed exclusively by Rule 3, §20.
  • The purpose of Rule 12, §2 is to enable a stranger to an action to become a party to protect his interest, while Rule 3, §20 provides for substitution of a transferee who is a successor-in-interest, not a stranger, precisely because the transferee is already considered bound by the action.
  • A transferee pendente lite stands exactly in the shoes of the predecessor-in-interest and is bound by the proceedings and judgment rendered against the transferor, unlike an intervenor who can choose not to intervene and thus not be bound by the judgment.
  • The transferee cannot present new or different claims or defenses not alleged by the original party; thus, the Court refused to pass upon SLDC's attempt to inquire into the consideration paid for the assignment and its claim that the transfer violated Article 1491(5) of the Civil Code, matters never alleged by PNB.
  • Since SLDC is a transferee pendente lite with notice of the pending litigation, it stands in the shoes of defendant PNB and is bound by any judgment; it could only participate as a substituted defendant or joint party-defendant, not as an intervenor.
  • Because SLDC had no right to intervene, it had no right to file interrogatories or seek production of documents.

• Transferee Pendente Lite — A person who acquires an interest in property during the pendency of an action involving such property; such transferee stands in exactly the same position as the predecessor-in-interest, is bound by the proceedings had before the transfer, and is bound by the judgment rendered against the transferor, even without formal substitution or joinder as a party.
• Intervention (Rule 12, §2) — A procedural remedy allowing a stranger to an action to become a party to protect his interest; an intervenor has the choice not to intervene and thus not be concluded by the judgment, and may present claims or defenses different from those of the original parties.
• Transfer of Interest Pendente Lite (Rule 3, §20) — Provides that in case of transfer of interest, the action may be continued against the original party unless the court directs the transferee to be substituted or joined with the original party; the transferee is a proper but not indispensable party who takes the place of the transferor and cannot withdraw from the action.
• Estoppel — A party who fails to object to the consideration of an issue by an appellate court cannot subsequently raise such objection before the Supreme Court.

• "While it may be that respondent SLDC has a legal interest in the subject matter of the litigation, its interest as transferee pendente lite is different from that of an intervenor."
• "The purpose of Rule 12, §2 on intervention is to enable a stranger to an action to become a party to protect his interest and the court incidentally to settle all conflicting claims. On the other hand, the purpose of Rule 3, §20 is to provide for the substitution of the transferee pendente lite precisely because he is not a stranger but a successor-in-interest of the transferor, who is a party to the action."
• "As such, he stands exactly in the shoes of his predecessor in interest, the original defendant, and is bound by the proceedings had in the case before the property was transferred to him."
• "How then can it legally be possible for a transferee pendente lite to still intervene when, for all intents and purposes, the law already considers him joined or substituted in the pending action, commencing at the exact moment when the transfer of interest is perfected between the original party-transferor and the transferee pendente lite?"

• Fetalino v. Sanz — Cited for the doctrine that a transferee pendente lite stands exactly in the shoes of the predecessor-in-interest, is bound by proceedings had before the transfer, and is a proper but not indispensable party.
• Jocson v. Court of Appeals — Cited for the proposition that a transferee pendente lite stands in exactly the same position as its predecessor-in-interest and is bound by the judgment against the transferor.
• Associacion de Agricultores de Talisay Silay, Inc. v. Talisay Silay Milling Co., Inc. — Cited in support of the rule that a transferee pendente lite is bound by the judgment against the predecessor-in-interest.
• Tuason v. Reyes — Cited regarding the principle that a transferee's title to property is subject to the incidents and results of the pending litigation and is in no better position than the vendor.
• Director of Lands v. Martin — Cited for the rule that a transferee pendente lite is bound by the judgment for or against the transferor.
• Palace v. Bagtas — Cited regarding the court's power to direct substitution of transferees pendente lite.
• Garcia v. David — Cited regarding the purpose of intervention as enabling a stranger to protect his interest.
• First Philippine Holdings Corporation v. Sandiganbayan — Cited regarding the purpose of intervention.
• Gutierrez v. Villegas — Cited regarding the purpose of intervention.

• Rule 12, §2 of the Rules of Court — Governs intervention; cited to distinguish it from Rule 3, §20 and to explain that an intervenor is a stranger to the action with a choice not to be bound by the judgment.
• Rule 3, §20 of the Rules of Court — Governs transfer of interest pendente lite; cited as the exclusive applicable provision for transferees who stand as successors-in-interest to the original party.
• Article 1491(5) of the Civil Code — Mentioned as the provision allegedly violated by the assignment to Quisumbing (prohibiting attorneys from acquiring property or interest which is the object of litigation in which they take part), which SLDC raised as a defense but which the Court refused to consider since transferees cannot present new claims not alleged by the original party.