Topacio vs. Banco Filipino Savings and Mortgage Bank

A dismissal order for failure to prosecute does not attain finality where it was never served on the adverse party, and Section 6, Rule 39 of the Rules of Court — which limits execution by motion to five years from entry of judgment — applies only to ordinary civil actions, not to ex parte petitions for the issuance of a writ of possession under Section 7 of Act No. 3135, which are governed by a separate and specific legal modality.

Spouses Ernesto and Vicenta Topacio obtained a ₱400,000 loan from Banco Filipino Savings and Mortgage Bank, secured by a real estate mortgage over a parcel of land in Bulacan covered by TCT No. T-191117 (now 13554). Upon default, the bank extrajudicially foreclosed the mortgage under Act No. 3135 and purchased the property at public auction. The bank's operations were shut down by the Monetary Board on January 25, 1985, and remained closed until the Court ordered their reorganization and resumption in G.R. No. 70054, a circumstance that explains the bank's prolonged inaction during the pendency of the proceedings below.

Spouses Ernesto and Vicenta Topacio obtained a loan of ₱400,000 from Banco Filipino Savings and Mortgage Bank. To secure the loan, they executed on May 8, 1980 a real estate mortgage over Lot 1224-B-1 LRC Psd-15436, covered by TCT No. T-191117 (now 13554) of the Registry of Deeds of Bulacan, in favor of the bank. The petitioners failed to pay the loan, prompting the bank to file a Petition for Extrajudicial Foreclosure of Mortgage pursuant to Act No. 3135. On November 8, 1982, the Provincial Sheriff of Bulacan sold the mortgaged property at public auction, where the bank emerged as the highest bidder. A Certification of Sale was issued in its favor and registered with the Registry of Deeds.

On May 26, 1983, the bank filed a Petition for the Issuance of a Writ of Possession before the RTC, Branch 172, Valenzuela City. In an Order dated December 12, 1983, the RTC granted the petition conditioned on the posting of a ₱100,000 bond. Upon posting of the bond, the RTC issued on February 16, 1984 a writ of possession commanding the sheriff to place the bank in possession of the property. The writ was never implemented because on February 27, 1984, the petitioners filed a petition to set aside the auction sale and the writ of possession with an application for a temporary restraining order and a writ of preliminary injunction. The RTC issued a TRO on February 28, 1984, and after hearing, a writ of preliminary injunction on March 13, 1984, enjoining the bank and the Provincial Sheriff from implementing the writ of possession.

The bank filed its Answer on April 26, 1984, and the petitioners filed their Reply on May 21, 1984. After more than two years and a series of postponements at the instance of both parties — particularly petitioner Ernesto Topacio who went abroad for an extended period — then Presiding Judge Teresita D. Capulong issued an Order dated December 16, 1986 dismissing the bank's petition for "failure to prosecute." No copy of this Order was served on the bank, whose operations the Monetary Board had shut down on January 25, 1985.

Nearly six years later, after the Court ordered the reorganization and resumption of the bank's operations in G.R. No. 70054, the bank filed on August 19, 1992 a Motion to Clarify the Order of December 16, 1986 and simultaneously moved for the issuance of an alias writ of possession. On September 18, 1992, the RTC clarified that the dismissal referred to the "main case for issuance of a writ of possession" and denied the motion for an alias writ. The bank moved for reconsideration on May 18, 1993. On June 2, 1993, the RTC, now presided by Judge Emilio L. Leachon, Jr., reconsidered and set aside the December 16, 1986 Order and granted the bank's prayer for an alias writ of possession. The petitioners' motion for reconsideration was denied by Judge Jaime F. Bautista on October 1, 1993, which reiterated the order for the issuance of an alias writ of possession. The RTC found that the dismissal was based on a technicality, not on the merits; that the delay was attributable to both parties; and that the bank, as winning bidder, had an absolute right to a writ of possession. The petitioners elevated the matter to the CA via a Rule 65 petition, which was denied on August 26, 2002 and affirmed the RTC Orders in toto.

• Finality of the Dismissal Order: Petitioners contended that the December 16, 1986 Dismissal Order for failure to prosecute constitutes an adjudication on the merits pursuant to Section 3, Rule 17 of the Rules of Court, since the RTC did not declare otherwise. They argued that the order became final and executory because the bank belatedly filed its Motion to Clarify on August 19, 1992, almost six years later, and that res judicata had consequently set in, depriving the RTC of jurisdiction to grant the motion for reconsideration and issue an alias writ of possession.
• Execution by Independent Action Required: Petitioners argued that under Section 6, Rule 39 of the Rules of Court, the writ of possession issued on February 16, 1984 could no longer be enforced by mere motion after the lapse of more than five years, but only by a separate action. They maintained that Section 6, Rule 39 applies because a petition for issuance of a writ of possession is neither a special proceeding nor a land registration case.
• Timeliness of the Motion for Reconsideration: In their Memorandum, petitioners additionally argued that the bank's Motion for Reconsideration filed on May 18, 1993 from the September 18, 1992 Order was filed out of time, rendering the subsequent June 2, 1993 and October 1, 1993 Orders barred by res judicata.

• Lack of Finality Due to Non-Service: Respondent argued that res judicata did not set in because the first element — finality of the judgment — was lacking, as the December 16, 1986 Dismissal Order was never served on the bank.

• Res Judicata: Whether the December 16, 1986 Dismissal Order for failure to prosecute constitutes an adjudication on the merits that attained finality, thereby barring the RTC from reinstating the case and issuing an alias writ of possession.
• Execution by Motion vs. Independent Action: Whether Section 6, Rule 39 of the Rules of Court — requiring enforcement by independent action after five years — applies to a petition for the issuance of a writ of possession in an extrajudicial foreclosure proceeding.

• Res Judicata: No. The December 16, 1986 Dismissal Order never attained finality because it was not properly served on the respondent, whether personally or by registered mail, as required under Section 9, Rule 13 of the Rules of Court.
• Execution by Motion vs. Independent Action: No. Section 6, Rule 39 of the Rules of Court applies only to ordinary civil actions and not to ex parte petitions for the issuance of a writ of possession, which are governed by Section 7 of Act No. 3135 as a special proceeding incident to extrajudicial foreclosure.

• Res Judicata: The requisites of res judicata in the concept of "bar by prior judgment" are: (1) the former judgment must be final; (2) it must be on the merits; (3) rendered by a court with jurisdiction over subject matter and parties; and (4) identity of parties, subject matter, and causes of action. The first element was absent. Under Sections 2, 5, 6, 7, and 9 of Rule 13 of the Rules of Court, judgments and final orders must be served either personally or by registered mail. A judgment attains finality only after service and the lapse of the 15-day period without appeal or motion for reconsideration. The CA found — and the petitioners did not dispute — that the records failed to show that the bank was furnished a copy of the December 16, 1986 Dismissal Order. Without valid service, no reglementary period could begin to run, and the order never became final. This conclusion is consistent with Philemploy Services and Resources, Inc. vs. Rodriguez and Tomawis vs. Tabao-Cudang, where the Court held that judgments never attains finality where the adverse party did not receive a copy. The petitioners' belated claim that the bank's May 18, 1993 Motion for Reconsideration from the September 18, 1992 Order was filed out of time was rejected because it was raised for the first time in the petitioners' Memorandum before the Supreme Court, not before the lower courts. Citing Lianga Lumber Co. vs. Lianga Timber Co., Inc. and China Airlines Ltd. vs. CA, the Court held that theories not raised below cannot be raised for the first time on appeal, as this would be unfair to the adverse party and offend due process.

• Execution by Motion vs. Independent Action: Section 6, Rule 39 provides that a final and executory judgment may be executed on motion within five years from entry, and thereafter by independent action before it is barred by prescription. The Court has consistently held — as early as Sta. Ana vs. Menla (1961) and reaffirmed in Paderes vs. Court of Appeals and Republic vs. Nillas — that this provision applies only to ordinary civil actions and not to special proceedings or extraordinary proceedings governed by specific laws. An ex parte petition for the issuance of a writ of possession is not a civil action governed by the Rules of Civil Procedure; it is a judicial proceeding governed separately by Section 7 of Act No. 3135, which regulates the method of effecting extrajudicial foreclosure of mortgage. Under Section 7, the purchaser may petition the RTC to give possession during the redemption period, upon filing a motion under oath and posting a bond; the court must order the writ issued upon approval of the bond, and the sheriff must execute it immediately. The duty of the trial court to grant the writ is ministerial. In Philippine National Bank vs. Adil, the Court ruled that once the writ has been issued, the trial court has no alternative but to enforce it without delay. The exacting procedure under Act No. 3135 leaves no room for the application of Section 6, Rule 39. From another perspective, the order for issuance of a writ of possession does not have to be executed by motion or enforced by action within the purview of Rule 39.

• Res Judicata (Bar by Prior Judgment) — Under paragraph (b), Section 47, Rule 39 of the Rules of Court, res judicata in the concept of "bar by prior judgment" requires the concurrence of four elements: (1) the former judgment must be final; (2) it must be on the merits; (3) rendered by a court with jurisdiction over the subject matter and the parties; and (4) identity of parties, subject matter, and causes of action between the first and second action. In this case, the first element was absent because the December 16, 1986 Dismissal Order was never served on the respondent and thus never attained finality.

• Service of Judgments as Requisite for Finality — Under Section 9, Rule 13 of the Rules of Court, judgments, final orders, or resolutions must be served either personally or by registered mail. A judgment or order attains finality only after service and the lapse of the prescribed 15-day period without appeal or motion for reconsideration. Absent proof of valid service, no reglementary period begins to run and the judgment does not become final and executory.

• Ministerial Duty to Issue Writ of Possession in Extrajudicial Foreclosure — Under Section 7 of Act No. 3135, the duty of the trial court to grant a writ of possession to the purchaser in an extrajudicial foreclosure sale is ministerial and mandatory. The writ issues as a matter of course upon filing of the proper motion and approval of the corresponding bond. Once issued, the trial court has no alternative but to enforce the writ without delay.

• Inapplicability of Section 6, Rule 39 to Special Proceedings — Section 6, Rule 39 of the Rules of Court, which governs execution by motion within five years and by independent action thereafter, applies only to ordinary civil actions and not to special proceedings or extraordinary proceedings governed by specific laws. An ex parte petition for a writ of possession under Act No. 3135 is not a civil action but a judicial proceeding governed by a separate legal modality.

• Theory of the Case Cannot Be Changed on Appeal — A party who deliberately adopts a certain theory in the lower court will not be permitted to change that theory on appeal. Points of law, theories, issues, and arguments not brought to the attention of the lower court need not and ordinarily will not be considered by a reviewing court, as this would be unfair to the adverse party who would have no opportunity to present further evidence.

• "The December 16, 1986 Dismissal Order cannot be deemed to have become final and executory in view of the absence of a valid service, whether personally or via registered mail, on the respondent's counsel." — This passage states the ratio decidendi on the res judicata issue: without valid service of the dismissal order, no period to appeal begins to run, and the order never attains finality.

• "Section 6, Rule 39 of the Rules of Court is not applicable to an ex parte petition for the issuance of the writ of possession as it is not in the nature of a civil action governed by the Rules of Civil Procedure but a judicial proceeding governed separately by Section 7 of Act No. 3135 which regulates the methods of effecting an extrajudicial foreclosure of mortgage." — This passage articulates the controlling rule distinguishing civil actions from special proceedings for purposes of execution, and is the canonical formulation of why the five-year limitation on execution by motion does not apply to writs of possession in extrajudicial foreclosure.

• "the duty of the trial court to grant a writ of possession is ministerial; the writ issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond." — This defines the ministerial nature of the court's duty in issuing writs of possession under Act No. 3135, a doctrine frequently cited in subsequent foreclosure jurisprudence.

• Sta. Ana vs. Menla, 111 Phil. 947 (1961) — Controlling precedent establishing that Section 6, Rule 39 applies only to civil actions and not to special proceedings such as land registration cases. The Court relied on this case as the foundational authority for excluding writ of possession proceedings from the five-year execution-by-motion rule.
• Paderes vs. Court of Appeals, G.R. Nos. 147074 and 147075, July 15, 2005, 463 SCRA 504 — Followed the dictum in Sta. Ana, holding that Section 6, Rule 39 finds application only to civil actions and not to special proceedings. The Court cited this as direct authority for the inapplicability of Rule 39 to the present case.
• Republic vs. Nillas, G.R. No. 159595, January 23, 2007, 512 SCRA 286 — Affirmed and clarified the Sta. Ana dictum, stating that Rule 39 applies only to ordinary civil actions, not to extraordinary proceedings governed by other specific laws. The Court relied on this for the proposition that ex parte petitions for writ of possession are governed by Act No. 3135, not by Rule 39.
• Philippine National Bank vs. Adil, 203 Phil. 492 (1982) — Cited for the emphatic rule that once a writ of possession has been issued, the trial court has no alternative but to enforce it without delay, underscoring the ministerial and mandatory nature of the writ.
• Philemploy Services and Resources, Inc. vs. Rodriguez, G.R. No. 152616, March 31, 2006, 486 SCRA 302 — Applied by analogy on the service-of-judgment issue, holding that a resolution cannot be deemed final where there is no conclusive proof of service.
• Tomawis vs. Tabao-Cudang, G.R. No. 166547, September 12, 2007, 533 SCRA 68 — Applied by analogy, holding that a decision does not become final where the respondent did not receive a copy, precluding a valid basis for issuance of a writ of execution.
• Lianga Lumber Co. vs. Lianga Timber Co., Inc., No. L-38685, March 31, 1977, 76 SCRA 197 — Cited for the rule that a party may not change theories on appeal, which the Court applied to reject the petitioners' belated timeliness argument.

• Section 9, Rule 13, Rules of Court — Governs service of judgments, final orders, or resolutions, requiring service either personally or by registered mail. Applied to hold that the December 16, 1986 Dismissal Order never attained finality because it was not served on the respondent.
• Section 6, Rule 39, Rules of Court — Governs execution by motion or by independent action, allowing execution on motion within five years from entry and by independent action thereafter. Held inapplicable to ex parte petitions for writ of possession, which are not civil actions but proceedings governed by Act No. 3135.
• Section 7, Act No. 3135 — Governs possession during the redemption period in extrajudicial foreclosure sales, providing the procedure for the purchaser to petition the RTC for a writ of possession upon filing a motion under oath and posting a bond. Applied as the specific legal modality governing the issuance and enforcement of the writ of possession, to the exclusion of Rule 39.
• Section 3, Rule 17, Rules of Court — Invoked by petitioners to argue that a dismissal for failure to prosecute operates as an adjudication on the merits. The Court did not directly rule on this provision, having found that the dismissal order never attained finality due to non-service.
• Section 47(b), Rule 39, Rules of Court — Defines res judicata in the concept of "bar by prior judgment," requiring finality, adjudication on the merits, jurisdiction, and identity of parties, subject matter, and causes of action. Applied to test the petitioners' res judicata claim, which failed for lack of the first element.

Conchita Carpio Morales, Lucas P. Bersamin, Martin S. Villarama, Jr., and Maria Lourdes P.A. Sereno concurred. No separate concurring opinions were filed.