You are on page 1of 3

University of the Philippines [111] Associated Bank vs.

Spouses Pronstroller
College of Law
Civil Procedure Substitution: Section 19, Rule 3 Nachura, J.
Summary
This case falls under the topic of “substitution of parties”; see Section 19 of Rule 3 of the Rules of Court which
provides:

Section 19. Transfer of Interest. – In case of any transfer of interest, the action
may be continued by or against the original party, unless the court upon motion
directs the person to whom the interest is transferred to be substituted in the
action or joined with the original party.

In applying the provisions of the rule in this case, the Supreme Court ruled that Spouses Vaca have no right to
intervene; a transferee pendente lite stands exactly in the shoes of his predecessor-in-interest, bound by the
proceedings and judgment in the case before the rights were assigned to him.
Facts
1. Eduardo and Ma. Pilar Vaca (“Spouses Vaca”), on April 12, 1988, executed a real estate mortgage
in favor of Associated Bank over their parcel of residential land and house. However, due to failure
to pay the principal loan, Associated Bank was able to acquire the title to the subject property
through public auction.
2. The Spouses Vaca commenced an action for the nullification of the real estate mortgage and the
foreclosure sale; Associated Bank, on the other hand, filed a petition for the issuance of a writ of
possession which was denied by the trial court. Upon appeal to the Court of Appeals (“CA”),
Associated Bank was able to obtain a judgment in its favor. Spouses Vaca appealed the CA
decision before the Supreme Court (“SC”).
3. During the pendency of the cases between Spouses Vaca and Associated Bank, the latter
advertised the subject property for sale to interested buyers for ₱9,700,000.00. The respondents,
Rafael and Monaliza Pronstroller (“Spouses Pronstroller”) offered to purchase the property for
₱7,500,000.00, which offer was coursed through Atty. Jose Soluta, Jr. (“Atty. Soluta, Jr.”) who was
then the Vice-President and Corporate Secretary and a member of the Board of Directors of
Associated Bank.
4. Associated Bank accepted the offer made by Spouses Pronstroller, whereupon the latter
immediately paid ₱750,000.00 as down payment. Subsequently, on March 18, 1993, Associated
Bank, through Atty. Soluta, Jr. and Spouses Pronstroller executed a Letter-Agreement setting forth
therein the terms and conditions of the sale, to wit:
(A) Selling price shall be at ₱7,500,000.00 payable as follows:
(1) Ten percent (10%) deposit and balance of ₱6,750,000.00 to be deposited
under an escrow agreement; said escrow deposit shall be applied as
payment upon delivery of the aforesaid property to the buyers free from
occupants; and
(2) The deposit shall be made within ninety (90) days from date hereof. Any
interest earned on aforesaid investment shall be for the buyers account.
However, the ten percent (10%) deposit is non-interest earning.
5. Prior to the expiration of the ninety (90) day period within which to make the escrow deposit, in view
of the pendency of the case between Spouses Vaca and Associated Bank, Spouses Pronstroller
requested that the balance of the purchase price be made payable only upon service to them of a
final decision or resolution of the SC affirming Associated Bank’s right to possess the subject
property. Atty. Soluta, Jr. referred this request to Associated Bank’s Asset Recovery and Remedial
Management Committee (“ARRMC”) but the latter deferred action on the request.
6. A month after the request was communicated to Associated Bank and after the payment deadline
had lapsed, Spouses Pronstroller and Atty. Soluta, Jr., acting for Associated Bank, executed
another Letter-Agreement allowing the former to pay the balance of the purchase price upon receipt
of a final order from the SC and/or the delivery of the property to them free from occupants.
7. Towards the end of 1993, Associated Bank reorganized its management. Atty. Braulio Dayday
(“Atty. Dayday”) became the Assistant Vice-President and Head of Documentation Section, while
Atty. Soluta, Jr. was relieved of his responsibilities. Upon reviewing the records of Associated
Bank’s outstanding accounts, Atty. Dayday discovered that the Spouses Pronstroller failed to
deposit the balance of the purchase price of the subject property and that there was a request for
an extension of time within which to pay.
8. The matter was resubmitted to the ARRMC which disapproved the request during one of its
meetings; the matter was referred to the Legal Department for rescission or cancellation of the
contract for Spouses Pronstroller’s breach thereof.
9. The Spouses Pronstroller were later informed that their request for extension was disapproved, and
in view of their breach of the contract, Associated Bank was rescinding the same and forfeiting their
deposit. They were also informed that should they still be interested in buying the property, they had
to submit their new proposal. In view thereof, Spouses Pronstroller went to Associated Bank and
communicated with Atty. Dayday showing him the Letter-Agreements executed between them and
Atty. Soluta, Jr., which showed that they were granted an extension. In response to such claim,
Atty. Dayday claimed that the Letter-Agreement was a mistake and that Atty. Soluta, Jr. was not
authorized to give such extension.
10. The respondents, Spouses Pronstroller proposed to pay the balance of the purchase price as
follows: ₱3,000,000.00 upon the approval of their proposal and the balance after six (6) months.
However, this proposal was disapproved by Associated Bank. In its reply to Spouses Pronstroller,
Associated Bank stated that they would only accept the spouses’ proposal only if they would pay
interest at the rate of twenty-four and a half percent (24.5%) per annum on the unpaid balance.
11. For failure of the parties to reach an agreement, Spouses Pronstroller, through their counsel,
informed Associated Bank that they would be enforcing their agreement in the Letter-Agreements
executed with Atty. Soluta, Jr. Associated Bank countered that it was not aware of the existence of
the Letter-Agreements and that Atty. Soluta, Jr. was not authorized to sign for and on behalf of the
bank.
12. The Supreme Court, in the Vaca case upheld the right of Associated Bank to possess the subject
property. Subsequently, the Spouses Pronstroller commenced a suit for specific performance
before the Regional Trial Court (RTC) of Antipolo, Rizal. During the pendency of the case,
Associated Bank sold the subject property to Spouses Vaca, who eventually registered sale; and on
the basis thereof, a new Transfer Certificate of Title (TCT) was issued in favor of Spouses Vaca. As
new owners, Spouses Vaca started demolishing the house on the subject property, which, however,
was not completed by virtue of the writ of preliminary injunction issued by the court.
13. In deciding the case of Spouses Pronstroller against Associated Bank, the RTC rendered judgment
in favor of the former; in applying the rule of apparent authority, the trial court upheld the validity of
the Letter-Agreement where the Spouses Pronstroller were given an extension within which to
make payment. Consequently, Spouses Pronstroller did not incur in delay, and thus, the court
concluded that the rescission of the contract was without basis and contrary to law.
14. Upon appeal to the CA, the appellate court upheld the decision of the RTC. Associated Bank filed a
Motion for Reconsideration which was denied by the CA, hence the elevation of the case to the
Supreme Court. The SC upheld the CA Decision. After the promulgation of the SC Decision,
Associated Bank filed a Motion for Reconsideration while Spouses Vaca filed a Motion for Leave to
Intervene alleging that they are the registered owners of the subject property and are thus, real
parties-in-interest. They also contend that the Court should order Associated Bank to reimburse the
Spouses Vaca the amount they received from the latter.
Issues
W/N the Spouses Vaca’s Motion for Leave to Held: No.
Intervene should be granted
The Motion for Leave to Intervene must be denied.

Section 2, Rule 19 of the Rules of Court, provides:


Section 2. Time to Intervene. – The motion to
intervene may be filed at any time before
rendition of judgment by the trial court. A
copy of the pleading-in-intervention shall be
attached to the motion and served on the
original parties.

Obviously, the Spouses Vaca’s motion for leave to


intervene before this Court was belatedly filed.
The purpose of 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. The Spouses Vaca are not strangers to the
action. Their legal interest in the litigation springs from
the sale of the subject property by Associated Bank in
their favor during the pendency of the case. As
transferee pendent lite, the Spouses Vaca are the
successors-in-interest of the transferor, Associated
Bank, who is already a party to the action. Thus, the
applicable provision is Section 19, Rule 3 of the Rules
of Court, governing transfers of interest pendente lite.

Section 19. Transfer of Interest. – In case of


any transfer of interest, the action may be
continued by or against the original party,
unless the court upon motion directs the person
to whom the interest is transferred to be
substituted in the action or joined with the
original party.

Citing the ruling in the case of Santiago Land


Development Corporation vs Court of Appeals:

[A] transferee pendent lite of the property in litigation


does not have a right to intervene. we held that a
transferee stands exactly in the shoes of his
predecessor-in-interest, bound by the proceedings
and judgment in the case before the rights were
assigned to him. It is not legally tenable to for a
transferee 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 transferee pendent lite.
Ruling
IN LIGHT OF THE FOREGOING, we deny petitioner’s motion for reconsideration and the Spouses Vaca’s
Motion for Intervention.