THIRD DIVISION
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TERESITA
MONZON, Petitioner, - versus - SPS. JAMES
& MARIA ROSA NIEVES RELOVA and SPS. BIENVENIDO & EUFRACIA PEREZ, Respondents. - versus - ADDIO PROPERTIES, INC., Intervenor. |
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G.R. No. 171827 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ,
CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: September
17, 2008 |
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CHICO-NAZARIO,
J.:
This
is a Petition for Review on Certiorari
assailing the Decision[1]
of the Court of Appeals dated
The
factual and procedural antecedents of this case are as follows:
On
In
their Petition for Injunction, respondents alleged that on P600,000.00,
with interest of five percent per month, payable on or before
Respondents
also claim in their Petition for Injunction that on P200,000.00
with interest of five percent per month payable on or before
On
P3,398,832.35. The winning bidder in the extrajudicial
foreclosure, Addio Properties Inc., paid the amount of P5,001,127.00,
thus leaving a P1,602,393.65 residue.
According to respondents, this residue amount, which is in the custody
of Atty. Luna as Branch Clerk of Court, should be turned over to them pursuant
to Section 4, Rule 68 of the Revised Rules of Civil Procedure. Thus, respondents pray in their Petition for
Injunction for a judgment (1) finding Monzon liable to the spouses Perez in the
amount of P1,215,000.00 and to the spouses Relova in the amount of P385,000.00;
(2) ordering Atty. Luna to deliver said amounts to respondents; and (3)
restraining Atty. Luna from delivering any amount to Monzon pending such
delivery in number (2).
Monzon,
in her Answer, claimed that the Petition for Injunction should be dismissed for
failure to state a cause of action.
Monzon
likewise claimed that respondents could no longer ask for the enforcement of
the two promissory notes because she had already performed her obligation to
them by dacion en pago as evidenced
by the Deed of Conditional Sale and the Deed of Absolute Sale. She claimed that petitioners could still
claim the portions sold to them if they would only file the proper civil cases. As regards the fund in the custody of Atty.
Luna, respondents cannot acquire the same without a writ of preliminary
attachment or a writ of garnishment in accordance with the provisions of Rule
57 and Section 9(c), Rule 39 of the Revised Rules of Civil Procedure.
On
On
That
[petitioner] Teresita Monzon owes [herein respondents] certain sums of money is
indisputable. Even [Monzon] have admitted
to this in her Answer. [Respondents]
therefore are given every right to get back and collect whatever amount they
gave [Monzon] together with the stipulated rate of interest.
Likewise, it has been established that
[petitioner] Teresita Monzon has the amount of P1,602,393.65 in the
possession of the Clerk of Court, Atty. Ana Liza M. Luna. This amount, as is heretofore stated,
represented the balance of the foreclosure sale of [Monzon’s] properties.
By way of this petition, [respondents] would
want to get said amount so that the same can be applied as full payment of
[petitioner’s] obligation. That the
amount should be divided between the [respondents] in the amount they have
agreed between themselves; [respondent]
spouses Relova to receive the amount of P400.00.00, while the spouses
Perez shall get the rest.
WHEREFORE, judgment is hereby rendered
ordering the x x x Clerk of Court, Atty. Ana Liza M. Luna, to deliver unto
[herein respondents] the amount of P1,602,393.65 plus whatever interest
she may received if and when the said amount has been deposited in any banking
institution.[3]
The
Decision also mentioned that the Order allowing the ex parte presentation of evidence by respondents was due to the
continuous and incessant absences of petitioner and counsel.[4]
On
On
On
On
Monzon
claims anew that it was a violation of her right to due process of law for the
RTC to render its Decision immediately after respondents presented their
evidence ex parte without giving her
a chance to present her evidence. Monzon
stresses that she was never declared in default by the trial court. The trial court should have, thus, set the
case for hearing for the reception of the evidence of the defense. She claims that she never waived her right to
present evidence.
Monzon
argues that had she been given the opportunity to present her evidence, she
would have proven that (1) respondents’ Exhibit A (mortgage of land to the
spouses Relova) had been novated by respondent’s Exhibit B (sale of the
mortgage land to the spouses Relova); (2) respondents’ Exhibit C (mortgage of
land to the spouses Perez) had been novated by respondent’s Exhibit B (sale of
the mortgage land to the spouses Perez); and (3) having executed Exhibits “B”
and “D,” Monzon no longer had any obligation towards respondents.
The
Order by the trial court which allowed respondents to present their evidence ex parte states:
In view of the absence of [Monzon] as
well as her counsel despite due notice, as prayed for by counsel for by [respondents
herein], let the reception of [respondent’s] evidence in this case be held
ex-parte before a commissioner who is the clerk of court of this Court, with
orders upon her to submit her report immediately upon completion thereof.[5]
It
can be seen that despite the fact that Monzon was not declared in default by
the RTC, the RTC nevertheless applied the effects of a default order upon
petitioner under Section 3, Rule 9 of the Rules of Court:
SEC. 3. Default; declaration of.—If the
defending party fails to answer within the time allowed therefor, the court
shall, upon motion of the claiming party with notice to the defending party,
and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render judgment
granting the claimant such relief as his pleading may warrant, unless the court
in its discretion requires the claimant to submit evidence. Such reception of
evidence may be delegated to the clerk of court.
(a) Effect of order of default.—A party in default shall be entitled to notice of subsequent
proceedings but not to take part in the trial.
In
his book on remedial law, former Justice Florenz D. Regalado writes that
failure to appear in hearings is not a ground for the declaration of a
defendant in default:
Failure to file a responsive pleading
within the reglementary period, and not
failure to appear at the hearing, is the sole ground for an order of
default (Rosario, et al. vs. Alonzo, et
al., L-17320, June 29, 1963), except
the failure to appear at a pre-trial conference wherein the effects of a default on the part of the
defendant are followed, that is, the plaintiff shall be allowed to present
evidence ex parte and a judgment
based thereon may be rendered against the defendant (Section 5, Rule 18).[6] Also, a default judgment may be rendered,
even if the defendant had filed his answer, under the circumstance in Sec.
3(c), Rule 29.[7]
Hence,
according to Justice Regalado, the effects of default are followed only in
three instances: (1) when there is an actual default for failure to file a
responsive pleading; (2) failure to appear in the pre-trial conference; and (3)
refusal to comply with modes of discovery under the circumstance in Sec. 3(c), Rule 29.
In
Philippine National Bank v. De Leon,[8]
we held:
We have in the past admonished trial judges against
issuing precipitate orders of default as these have the effect of denying a
litigant the chance to be heard, and increase the burden of needless
litigations in the appellate courts where time is needed for more important or
complicated cases. While there are instances when a party may be properly
defaulted, these should be the exception
rather than the rule, and should be allowed only in clear cases of obstinate
refusal or inordinate neglect to comply with the orders of the court (Leyte
vs. Cusi, Jr., 152 SCRA 496; Tropical Homes, Inc. vs. Hon. Villaluz, et al.,
G.R. No. L-40628,
It
is even worse when the court issues an order not denominated as an order of
default, but provides for the application of effects of default. Such amounts to the circumvention of the rigid
requirements of a default order, to wit: (1) the court must have validly
acquired jurisdiction over the person of the defendant either by service of
summons or voluntary appearance; (2) the defendant failed to file his answer
within the time allowed therefor; and (3) there must be a motion to declare the
defendant in default with notice to the latter.[9] In the case at bar, petitioner had not failed
to file her answer. Neither was notice
sent to petitioner that she would be defaulted, or that the effects of default
shall be imposed upon her. “Mere
non-appearance of defendants at an ordinary hearing and to adduce evidence does
not constitute default, when they have already filed their answer to the
complaint within the reglementary period.
It is error to default a defendant after the answer had already been
filed. It should be borne in mind that
the policy of the law is to have every litigant’s case tried on the merits as
much as possible; it is for this reason that judgments by default are frowned
upon.”[10]
Does this mean that
defendants can get away with failing to attend hearings despite due
notice? No, it will not. We agree with petitioner that such failure to
attend, when committed during hearing dates for the presentation of the
complainant’s evidence, would amount to the waiver of such defendant’s right to
object to the evidence presented during such hearing, and to cross-examine the
witnesses presented therein. However, it
would not amount to a waiver of the defendant’s right to present evidence
during the trial dates scheduled for the reception of evidence for the defense. It would be an entirely different issue if
the failure to attend of the defendant was on a hearing date set for the
presentation of the evidence of the defense, but such did not occur in the case
at bar.
In
view of the foregoing, we are, therefore, inclined to remand the case to the
trial court for reception of evidence for the defense. Before we do so, however, we need to point
out that the trial court had committed another error which we should address to
put the remand in its proper perspective.
We refer to Monzon’s argument as early as the Answer stage that respondents’
Petition for Injunction had failed to state a cause of action.
Section
4, Rule 68 of the Rules of Court, which is the basis of respondent’s alleged
cause of action entitling them to the residue of the amount paid in the
foreclosure sale, provides as follows:
SEC. 4. Disposition of proceeds of sale.—The amount
realized from the foreclosure sale of the mortgaged property shall, after
deducting the costs of the sale, be paid to the person foreclosing the mortgage,
and when there shall be any balance
or residue, after paying off the mortgage debt due, the same shall be paid to
junior encumbrancers in the order of their priority, to be ascertained
by the court, or if there be no such encumbrancers or there be a balance or
residue after payment to them, then to the mortgagor or his duly authorized
agent, or to the person entitled to it.
However,
Rule 68 governs the judicial foreclosure of mortgages. Extra-judicial foreclosure of mortgages,
which was what transpired in the case at bar, is governed by Act No. 3135,[11]
as amended by Act No. 4118,[12]
Section 6 of Republic Act No. 7353, Section 18 of Republic Act No. 7906, and
Section 47 of Republic Act No. 8791. A.M.
No. 99-10-05-0, issued on
Any judge, worthy of the robe he dons,
or any lawyer, for that matter, worth his salt, ought to know that different
laws apply to different kinds of sales under our jurisdiction. We have three different types of sales,
namely: an ordinary execution sale, a judicial foreclosure sale, and an
extrajudicial foreclosure sale. An
ordinary execution sale is governed by the pertinent provisions of Rule 39 of
the Rules of Court on Execution, Satisfaction and Effect of Judgments. Rule 68 of the Rules, captioned Foreclosure
of Mortgage, governs judicial foreclosure sales. On the other hand, Act No.
3135, as amended by Act No. 4118, otherwise known as "An Act to Regulate
the Sale of Property under Special Powers Inserted in or Annexed to Real Estate
Mortgages," applies in cases of extrajudicial foreclosure sales of real
estate mortgages.
Unlike Rule 68, which
governs judicial foreclosure sales, neither Act No. 3135 as amended, nor A.M. No. 99-10-05-0 grants to junior encumbrancers the right to receive
the balance of the purchase price. The
only right given to second mortgagees in said issuances is the right to redeem
the foreclosed property pursuant to Section 6 of Act No. 3135, as amended by
Act No. 4118, which provides:
Sec. 6. Redemption. In all cases in which an extrajudicial sale is made
under the special power hereinbefore referred to, the debtor, his successors in
interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold,
may redeem the same at any time within the term of one year from and after the
date of the sale; and such redemption shall be governed by the provisions
of sections four hundred and sixty-four to four hundred and sixty- six,[14]
inclusive, of the Code of Civil Procedure, in so far as these are not
inconsistent with this Act.
Even
if, for the sake of argument, Rule 68 is to be applied to extrajudicial
foreclosure of mortgages, such right can only be given to second mortgagees who
are made parties to the (judicial) foreclosure.
While a second mortgagee is a proper and in a sense even a necessary
party to a proceeding to foreclose a first mortgage on real property, he is not
an indispensable party, because a valid decree may be made, as between the
mortgagor and the first mortgagee, without regard to the second mortgage; but the
consequence of a failure to make the second mortgagee a party to the proceeding
is that the lien of the second mortgagee on the equity of redemption is not
affected by the decree of foreclosure.[15]
A
cause of action is the act or omission by which a party violates the right of
another.[16] A cause of action exists if the following
elements are present: (1) a right in
favor of the plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to respect or not
to violate such right; and (3) an act or omission on the part of such defendant
violative of the right of plaintiff or constituting a breach of the obligation
of defendant to the plaintiff for which the latter may maintain an action for
recovery of damages.[17] In view of the foregoing discussions, we find
that respondents do not have a cause of action against Atty. Ana Liza Luna for
the delivery of the subject amounts on the basis of Section 4, Rule 68 of the
Rules of Court, for the reason that the foregoing Rule does not apply to
extrajudicial foreclosure of mortgages.
In
Katon v. Palanca, Jr.,[18]
we held that where prescription, lack of jurisdiction or failure to state a
cause of action clearly appears from the complaint filed with the trial court,
the action may be dismissed motu proprio,
even if the case has been elevated for review on different grounds. However, while the case should indeed be
dismissed insofar as Atty. Luna is concerned, the same is not necessarily true
with respect to Monzon. Other than
respondents’ prayer that the amount due to respondents be delivered by Atty. Luna
to them, they also pray for a judgment declaring Monzon liable for such
amounts. Said prayer, as argued by
Monzon herself, may constitute a cause of action for collection of sum of money
against Monzon.
The
rule is now settled that a mortgage creditor may elect to waive his security
and bring, instead, an ordinary action to recover the indebtedness with the
right to execute a judgment thereon on all the properties of the debtor
including the subject matter of the mortgage, subject to the qualification that
if he fails in the remedy elected by him, he cannot pursue further the remedy
he has waived.[19]
However,
due to the fact that construing respondents’ Petition for Injunction to be one
for a collection of sum of money would entail a waiver by the respondents of
the mortgage executed over the subject properties, we should proceed with
caution before making such construction.
We, therefore, resolve that upon the remand of this case to the trial
court, respondents should be ordered to manifest whether the Petition for
Injunction should be treated as a complaint for the collection of a sum of
money.
If
respondents answer in the affirmative, then the case shall proceed with the
presentation of the evidence for the defense.
If Monzon would be successful in proving her defense of dacion en pago, there would, in effect,
be a double sale of the mortgaged properties: the same properties were sold to
both respondents and to herein intervenor Addio Properties, Inc. If, pursuant to the rules on double sales, respondents
are entitled to the properties, their remedy is to file the proper action to
recover possession. If, pursuant to said
rules, Addio Properties, Inc. is entitled to the properties, respondents’
remedy is to file an action for damages against Monzon.
If
respondents answer in the negative, the case shall be dismissed, without
prejudice to the exercise of respondents’ rights as mortgage creditors. If respondents’ mortgage contract was executed
before the execution of the mortgage contract with Addio Properties, Inc.,
respondents would be the first mortgagors.
Pursuant to Article 2126[20]
of the Civil Code, they would be entitled to foreclose the property as against
any subsequent possessor thereof. If
respondents’ mortgage contract was executed after the execution of the mortgage
contract with Addio Properties, Inc., respondents would be the second
mortgagors. As such, they are entitled
to a right of redemption pursuant to Section 6 of Act No. 3135, as amended by
Act No. 4118.
WHEREFORE, the
Decision of the Court of Appeals dated
If
respondents answer in the affirmative, the Regional Trial Court shall set the
case for hearing for the presentation of the evidence for the defense. If respondents answer in the negative, the
case shall be dismissed, without prejudice to the exercise of respondents’
rights as mortgage creditors. No costs.
SO
ORDERED.
|
|
MINITA V. CHICO-NAZARIOAssociate Justice |
WE
CONCUR:
CONSUELO
YNARES-SANTIAGO
Associate Justice
Chairperson
Associate
Justice
Associate Justice
RUBEN T. REYES
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant
to Section 13, Article VIII of the Constitution, and the Division Chairperson’s
Attestation, it is hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO S. PUNO
Chief
Justice
[1] Penned by Associate Justice Roberto A. Barrios with Associate Justices Mario L. Guariña III and Santiago Javier Ranada concurring; rollo, pp. 17-23.
[2] Rollo, p. 67.
[3] Records p. 71.
[4]
[5]
[6] Please take note that this Court has issued a new rule governing pre-trials.
[7] Regalado, Remedial Law Compendium, Volume I (1999 Edition), p. 169.
[8] G.R. No. 62370,
[9] Herrera, Remedial Law, Rules 1-22 (2007 Ed.) pp. 807-808.
[10]
[11] AN ACT TO REGULATE THE
[12] AN ACT TO AMEND ACT NUMBERED
THIRTY-ONE HUNDRED AND THIRTY-FIVE, ENTITLED “AN ACT TO REGULATE THE
[13] 334 Phil. 671, 675 (1997).
[14] Now Sections 27, 29 and 34 of Rule
39, Rules of Court.
[15] Feria and Noche, Civil Procedure Annotated, Rules 39-71 (2001 Ed.), p. 569.
[16] Rules of Court, Rule 2, Section 2.
[17] Dulay
v. Court of Appeals, 313 Phil. 9, 20 (1995).
[18] G.R. No. 151149,
[19] Korea Exhange Bank v. Filkor Business Integrated, Inc., 430 Phil. 170, 175 (2002).
[20] Art. 2126. The mortgage directly and immediately subjects the property
upon which it is imposed, whoever the possessor may be, to the fulfillment of
the obligation for whose security it was constituted.