785 Phil. 450
JARDELEZA, J.:
In the case at bar, plaintiffs miserably failed to establish a cause of action in their case against defendant as all transactions made between them and the Bank were all in accordance with long standing and accepted banking practices, regarding the granting of loans and the availments of the credit facilities extended to plaintiffs. The loan and mortgage contracts between the Bank and plaintiffs were properly and officially documented. By affixing their signatures on the said contracts, they were deemed charged with knowledge of all the stipulated charges imposed by the Bank and cannot, by any stretch of the imagination, feign ignorance at this late stage. Moreover, and more importantly, the Bank observed and complied with all the stringent requirements under Act No. 3135, as amended, regarding the extra-judicial foreclosure sale of plaintiff's mortgaged property.[14] (Emphasis in the original.)PNB also alleged that Act No. 3135[15] does not require personal notice to the mortgagor in case of auction sale and the Spouses Rivera failed to attach the official receipts to show their substantial payments of the amortizations.[16] PNB prayed that the Complaint be dismissed with prejudice for lack of cause of action.[17]
After a careful perusal of the allegations in plaintiffs' complaint for Annulment of Sheriff's Sale with damages against defendants PNB and Julia Coching Sosito, it is very patent that the same failed to state a cause of action. There being a proper notice to plaintiffs of the auction sale of their mortgaged property, defendants had not violated any rights of plaintiffs from which a cause of action had arisen. As appearing on the face of plaintiffs' Complaint and their annexes, there is no showing that there is flaw or defect in the conduct of the sheriff's sale of their mortgaged property that would warrant its annulment and to hold defendants liable for damages.[19]The dispositive portion of the Order reads as follows:
WHEREFORE, in view of the foregoing, defendant PNB's Motion to dismiss is hereby GRANTED and the plaintiff's Complaint filed against both defendants is ordered DISMISSED for lack of cause of action.The Spouses Rivera filed a Motion for Reconsideration but the same was denied in an Order dated January 9, 2007. The Spouses Rivera then filed an appeal to the CA.
SO ORDERED.[20]
WHEREFORE, the appealed Orders dated October 25, 2006 and January 9, 2007 of the trial court are set aside and the case is remanded to the trial court for further proceedings.PNB filed a Motion for Reconsideration which was denied by the CA in a Resolution dated September 11, 2009. Hence, this appeal.
SO ORDERED.[22]
Lack of cause of action refers to the insufficiency of the factual basis for the action.[25] Dismissal due to lack of cause of action may be raised any time after the questions of fact have been resolved on the basis of stipulations, admissions or evidence presented by the plaintiff.[26] It is a proper ground for a demurrer to evidence under Rule 33 of the Revised Rules of Civil Procedure, which provides:
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) Act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages or other appropriate relief.[24]
Section 1. Demurrer to evidence. — After the plaintiff has completed the presentation of his evidence, the defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. If his motion is denied he shall have the right to present evidence. If the motion is granted but on appeal the order of dismissal is reversed he shall be deemed to have waived the right to present evidence.In this case, the RTC could not have dismissed the Complaint due to lack of cause of action for as stated above, such ground may only be raised after the plaintiff has completed the presentation of his evidence.
Section 1. Grounds. — Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:The case of Hongkong and Shanghai Banking Corporation Limited v. Catalan[27] laid down the test to determine the sufficiency of the facts alleged in the complaint, to wit:
x x x
(g) That the pleading asserting the claim states no cause of action; x x x
The elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded. Stated otherwise, may the court render a valid judgment upon the facts alleged therein? The inquiry is into the sufficiency, not the veracity of the material allegations. If the allegations in the complaint furnish sufficient basis on which it can be maintained, it should not be dismissed regardless of the defense that may be presented by the defendants.[28]By filing a Motion to Dismiss, a defendant hypothetically admits the truth of the material allegations of the ultimate facts contained in the plaintiffs complaint.[29] When a motion to dismiss is grounded on the failure to state a cause of action, a ruling thereon should, as a rule, be based only on the facts alleged in the complaint.[30]
Thus, by filing a motion to dismiss on the ground that the complaint does not state a cause of action, defendant-appellee PNB hypothetically admits the material allegations in the complaint. These material allegations read:Allegation of payment of the mortgage loan3. That plaintiff is the owner of a parcel of residential lot with improvements located at blk 17 lot 2 La Colina Subdivision, Parang, Marikina City which it mortgaged to defendant PNB x x x;The foregoing allegations of non-receipt by plaintiffs-appellants of any notice of the auction sale and their full payment of their obligation to defendant-appellee PNB are hypothetically admitted by the latter and sufficiently make out a cause of action against defendants-appellees. Whether said allegations are true or not are inconsequential to a determination of the sufficiency of the allegations in the complaint.[31]
4. That plaintiff came to know that said property had been sold at public auction on September 9, 2004 by co-defendant sheriff, x x x and that the highest bidder was defendant PNB x x x;
5. That there was no notice received by the plaintiff regarding this auction sale as a careful verification would show that the notice was sent to the wrong address at 26 Verdi Street, Ideal Subdivision, Fairview, Quezon City when defendant PNB knows fully well my correct address;
6. That had plaintiff been formally informed of the auction sale he could have made known to co- defendant sheriff that he has already paid his obligation of defendant corporation considering that plaintiff had made a total payment to defendant PNB in the amount of P2,292,159.62 which is even more than the amount of P2,250,000.00 being claimed by defendant PNB.
...a contract is the law between the parties and, that absent any showing that its provisions are wholly or in part contrary to law, morals, good customs, public order, or public policy, it shall be enforced to the letter by the courts. Section 3, Act No. 3135 reads:The determination of the veracity of the allegations on payment as well as PNB's compliance with the notice requirement under the law are better ventilated in actual trial where evidence may be presented, refuted, and ultimately decided upon. Thus, remand to the trial court is necessary."Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality and city."The Act only requires (1) the posting of notices of sale in three public places, and (2) the publication of the same in a newspaper of general circulation. Personal notice to the mortgagor is not necessary. Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements. In this case, petitioner and respondent in entering into a contract of real estate mortgage, agreed inter alia:"all correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or notifications of any judicial or extra-judicial action shall be sent to the MORTGAGOR at 40-42 Aldeguer St., Iloilo City, or at the address that may hereafter be given in writing by the MORTGAGOR to the MORTGAGEE."Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action which petitioner might take on the subject property, thus according him the opportunity to safeguard his rights. When petitioner failed to send the notice of foreclosure sale to respondent, he committed a contractual breach sufficient to render the foreclosure sale on November 23, 1981 null and void.[36] (Citations omitted.)