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DR. GIL J. RICH v. GUILLERMO PALOMA III

FACTS:

The petitioner, Dr. Gil Rich, lent P1,000,000.00 to his brother, Estanislao Rich, and the loan was secured by a real estate mortgage over a 1000-square-meter parcel of land. When Estanislao failed to fulfill his obligations, the petitioner foreclosed on the property and was declared the highest bidder in a public auction sale. However, prior to the foreclosure, Estanislao had entered into an agreement with Maasin Traders Lending Corporation (MTLC), securing loans and advances amounting to P2.6 million with a real estate mortgage over the same property. MTLC's president, respondent Ester L. Servacio, exercised equitable redemption and tendered redemption money to the foreclosure proceedings. The petitioner filed a complaint seeking the annulment of the redemption deed, claiming that MTLC had no juridical personality to effect the redemption as it had been dissolved. The Regional Trial Court (RTC) ruled in favor of the petitioner, but the Court of Appeals (CA) reversed the decision, finding that the allegations of forgery were unsubstantiated and the real estate mortgage enjoyed the presumption of authenticity. The CA, however, affirmed the RTC finding that Servacio's absence during pre-trial was unjustified. Hence, the petitioner filed a petition for review before the Supreme Court.

ISSUES:

  1. Whether the respondent violated Section 13, Rule 44 of the Rules of Court by not including a subject index with page of reference and compliant statement of facts in the appellant's brief.

  2. Whether the Court of Appeals (CA) erred in not dismissing the appeal based on the absence of the required contents in the appellant's brief.

  3. Whether the real estate mortgage agreement executed by Estanislao Rich and MTLC is null and void.

  4. Whether the redemption exercised by MTLC pursuant to the void real estate mortgage agreement is also void.

  5. Whether or not the RTC and CA erred in finding that there was a valid exercise of the right of redemption by MTLC.

  6. Whether or not the MTLC is entitled to the cancellation of the Deed of Redemption in its favor.

RULING:

  1. The Court held that there was no violation of Section 13, Rule 44 of the Rules of Court. The absence of a subject index with page reference and compliant statement of facts in the appellant's brief does not automatically warrant a reversal of the CA's decision. As long as the citations in the appellant's brief are sufficient to enable the CA to locate the relevant portions of the records, there is substantial compliance with the requirements. The CA, in this case, exercised its discretion not to dismiss the appeal and found the appellant's brief to be substantially sufficient. Absent any showing of grave abuse of discretion, the Court refused to interfere with the CA's findings.

  2. The Court held that it does not have the power to review the CA's decision on this issue, as the discretion to dismiss the appeal based on the absence of required contents in the appellant's brief lies with the CA. Unless there is a grave abuse of discretion, the Court will not overturn the CA's decision. In this case, since the petitioner failed to prove any grave abuse of discretion on the part of the CA, the Court upheld the CA's ruling.

  3. The real estate mortgage agreement executed by Estanislao Rich and MTLC is null and void because MTLC's juridical personality has already ceased to exist at the time of its execution. The agreement is considered a new business in which a dissolved corporation no longer has any business pursuing. Consequently, the redemption exercised by MTLC pursuant to the void real estate mortgage agreement is also void and cannot be given any effect.

  4. The Supreme Court ruled in favor of the petitioner, CIR, and ordered the cancellation of the Deed of Redemption in favor of MTLC. The RTC and CA erred in finding that there was a valid exercise of the right of redemption by MTLC. The redemption by MTLC was invalid because it was made beyond the period provided by law.

PRINCIPLES:

  • The grounds for dismissal of an appeal under Rule 50, Section 1 of the Rules of Court are discretionary upon the CA. The grounds are directory, not mandatory, and it is within the CA's sound discretion to dismiss the appeal based on the circumstances of each case. (De Leon vs. Court of Appeals)

  • If the citations in the appellant's brief are sufficient to enable the CA to locate the relevant portions of the records, there is substantial compliance with the requirements of Section 13, Rule 44 of the Rules of Court. The CA's discretion in deciding whether to dismiss an appeal based on the absence of required contents in the appellant's brief should not be interfered with, unless there is a showing of grave abuse of discretion.

  • Once a corporation is dissolved, liquidation will ensue, which includes the collection of all assets, settlement of claims, and payment of debts.

  • The Corporation Code provides for the continued existence of a dissolved corporation for three years after dissolution, solely for the purposes of prosecuting and defending suits, settling and closing affairs, disposing and conveying property, and distributing assets.

  • The dissolution of a corporation does not extinguish obligations or liabilities due by or to it.

  • Any new business engaged in by a dissolved corporation, other than those for liquidation purposes, will be a void transaction due to the non-existence of the corporate party.

  • A redemption must be made within the time prescribed by law, without any extension or grace period.

  • The right of redemption is not absolute and is subject to the statutory limitations and conditions set by law.