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Huerta Alba Resort Inc, v. CA and Syndicated Management Grp, Inc.

Petitioner: Huerta Alba Resort Inc Respondent: SMGI. Date: Sep. 1, 2000 Ponente: Purisima This is a fairly long case with two main discussion points. The first main point is the difference between equity of redemption and right of redemption, which we took up in Credit Transactions. Second, and more related to our topic, would be the nature of a counterclaim. At bar is a petition assailing the Court of Appeals decision, setting aside the RTC Makati decision that held that Huerta had the right to redeem property within a one year period prescribed by Sec. 78 of RA 337, the General Banking Act. This section provides -- in case of a foreclosure of a mortgage in favor of a bank, banking or credit institution, whether judicially or extrajudicially, the mortgagor shall have the right, within one year after the sale of the real estate as a result of the foreclosure of the respective mortgage, to redeem the property. Facts SMGI (Respondents) filed a complaint for judicial foreclosure of mortgage on Oct 19, 1989 o They sought to foreclose 4 parcels of land mortgaged by Huerta (petitioner) to Intercon Fund Resource Inc (Intercon) o Respondent instituted this as mortgagee-assignee (Intercon assigned their rights at some point.) o The loan was P8.5M, secured by the subject parcels of land. In its answer, petitioner questioned o Assignment of Intercon of the mortgage right (they said it was ultra vires) o The correctness of charges. Petitioner lost and was ordered to pay the loan, plus interest and charges, within 150 days from receipt of the order, else the properties would be sold to satisfy the debt. Petitioner appealed to the CA, which dismissed the case (late payment of docket fees). Petitioner then went to the SC, which also dismissed their complaint. After these rulings, respondent filed with the original RTC a motion of execution, which was granted. o Thus, a notice of levy and execution was issued by the Sheriff o He issued a notice of Sheriffs sale for the auction of subject properties.

Petitioner then filed a motion to quash and set aside the writ of execution, saying that the trial court acted with GAD. It argued that the record of the case was still with the CA, and thus the writ was premature o The 150 days period had not yet lapsed o There was no default because respondent had not yet demanded for payment. RTC denied this, saying that the judgment had become final and executor o Execution thereof was a matter of right o Writ of execution thus was its ministerial duty Guess what? Petitioner appealed to the CA. While the appeal was pending, the auction sale proceeded and Respondent won the bidding. o The certificate of sale was issued to it, and registered with the RoD. After this, petitioner presented a motion for clarification, asking the trial court if the 12 month period for redemption would apply o RTC ruled that the period of redemption would have to follow the rule on judicially foreclosed property (see Rule 68) o [The sale] shall operate to divest the rights in the property of all the parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may be allowed by law. Thus, petitioner filed a motion to set aside this order, saying that it altered the earlier decision o First decision declared that satisfaction of judgment would be governed by the sale of real estate under execution (not Rule 68). Remember the CA? All this happened while the case was pending there, diba? They held that the 150 day period of redemption should be computed from the date of notification of entry of judgment thus, it had expired on Sept. 11, 1994. o The appeal was dismissed because the subject was already moot and academic. They also dismissed the MR o Even if it is true that Sec 78 of RA 337 (mentioned above) prescribes a period of one year from the auction sale to redeem the property, petitioner never averred in its pleadings that it was entitled to this provision Issue of whether SMGI was a credit institution was never brought squarely before the court. SMGI then filed a petition for writ of possession it was here that Huerta first claimed the right to redeem under the General Banking Act o Original mortgagee, they said, was a credit institution, and the assignment to SMGI did not remove the transaction from the coverage of Sec 78 of RA 337. o Thus, they should have one year to redeem from registration of the auction sale. o Thus, they said, the issuance of titles to SMGI was premature.

RTC denied the petition for writ of possession they agreed (for the first time EVER) with Huerta, saying that they had until Oct 21, 1995 to redeem said parcels of land. o SMGI challenged the order, and the CA overturned it Hence, this petition. Issue w/n Huerta has the one year right of redemption under Sec 78 of RA 337 No. Held Various decisions show that Huerta has been adjudged to have only the Equity of Redemption, not the Right of Redemption (Court cited Limpin v. IAC) o Right of Redemption exists only in extrajudicial mortgage. No right recognized in judicial foreclosure unless mortgagee is PNB or a banking institution Mortgagor has one year from registration of sheriffs certificate of sale to redeem the property. o This does not exist in judicial foreclosure of the mortgagee is not a banking institution The case here is mentioned above (Rule 68). What exists only now is the Equity of Redemption right of the mortgagor to extinguish the mortgage and retain ownership by paying the debt within the 90 day period after judgment becomes final. Rule 68, Sec 2 [court] shall render judgment for the sum so found due and
order the same to be paid into court within a period of not less than ninety (90) days from the date of the service of such order, and that in default of such payment the property be sold to realize the mortgage debt and costs.'

This is the equity of redemption it may even be exercised beyond the 90 day period from date of service of the order, as long as its before the order of confirmation of the sale. (After such order of confirmation, there is no more redemption possible) Petitioner did not seasonably invoke its purported right under Sec 78 of RA 337 o Earliest opportunity when it submitted its answer to the complaint for foreclosure (essentially, they should have filed a counterclaim). What is a Counterclaim? (in case he asks) o A cause of action existing in favor of the defendant against the plaintiff. o It will, if established, defeat/qualify the judgment or relief to which the plaintiff is entitled. o Distinct/independent cause of action o Defendant, in respect to the counterclaim, becomes an actor

There exist 2 simultaneous actions, each party is at the same time a plaintiff and a defendant Represents the right of the defendant to have the claims of the parties counterbalanced Counterclaim is essentially an independent action, and should be treated as such. (tested by the same rules, etc.) The point? Huerta should have asserted their right under Sec 78 of RA 337 as a counterclaim in its answer. o Counterclaims allow the whole controversy between parties to be disposed of in one action o The applicability of Sec 78 hinged on a factual question Was Intercon a credit institution? this was never squarely brought before the court. The claim of benefits under Sec 78 is in the nature of a compulsory counterclaim that should have been in the answer to the complaint. Failure of Huerta to assert this alleged right precludes it from doing so at the late stage of litigation o Estoppel may successfully be invoked. o A party who failed to invoke his claim in the main case, while having opportunity to do so, will be precluded from invoking this claim subsequently. o Huerta should have alleged at the very start that Intercon was a credit institution, in order for Sec 78 to apply.