519 Phil. 791
PANGANIBAN, CJ:
"UPON THE VIEW WE TAKE OF THIS CASE, THUS, the partial judgment appealed from, must be, as it hereby is, VACATED and SET ASIDE, and another one entered DISMISSING the complaint at bench. Without costs."[5]The assailed Resolution denied petitioners' Motion for Reconsideration[6] for lack of merit.
"[Petitioners] filed a complaint before the Regional Trial Court of Quezon City, Branch 90, against [respondent] Traders Royal Bank, the City Sheriff of Quezon City and the Register of Deeds of Quezon City. Docketed thereat as Civil Case No. Q-41203, the complaint sought the annulment of the extra-judicial foreclosure and auction sale made by [the] city sheriff of Quezon City of a parcel of land covered by TCT No. 16711 of the Register of Deeds of Quezon City, the conventional redemption thereof, and prayed for damages and the issuance of a writ of preliminary injunction.Respondent bank appealed the Partial Decision[9] to the CA. During the pendency of that appeal, Ceroferr Realty Corporation and/or Cesar and/or Lorna Roque filed a Manifestation with Motion[10] asking the CA to discharge them as parties, because the case against them had already been dismissed on the basis of their Compromise Agreement[11] with petitioners. On May 14, 1996, the CA issued a Resolution[12] granting Ceroferr et al.'s Manifestation with Motion to discharge movants as parties to the appeal. The Court, though, deferred resolution of the matters raised in the Comment[13] of respondent bank. The latter contended that the Partial Decision had been novated by the Compromise Agreement, whose effect of res judicata had rendered that Decision functus officio.
"The complaint alleged that in mid 1977, [Petitioner] Danilo Chua obtained a loan from [respondent] bank in the amount of P75,000.00 secured by a real estate mortgage over a parcel of land covered by TCT No. 16711, and owned in common by the [petitioners]; that when the loan was not paid, [respondent] bank commenced extra-judicial foreclosure proceedings on the property; that the auction sale of the property was set on 10 June 1981, but was reset to 31 August 1981, on [Petitioner Chua's] request, which, however, was made without the knowledge and conformity of the other [petitioners]; that on the re-scheduled auction sale, [the] Sheriff of Quezon City sold the property to the [respondent] bank, the highest bidder therein, for the sum of P24,911.30; that the auction sale was tainted with irregularity because, amongst others, the bid price was shockingly or unconscionably, low; that the other [petitioners] failed to redeem the property due to their lack of knowledge of their right of redemption, and want of sufficient education; that, although the period of redemption had long expired, [Petitioner] Chua offered to buy back, and [respondent] bank also agreed to sell back, the foreclosed property, on the understanding that Chua would pay [respondent] bank the amount of P40,135.53, representing the sum that the bank paid at the auction sale, plus interest; that [Petitioner] Chua made an initial payment thereon in the amount of P4,000.00, covered by Interbank Check No. 09173938, dated 16 February 1984, duly receipted by [respondent] bank; that, in a sudden change of position, [respondent] bank wrote Chua, on 20 February 1984, asking that he could repurchase the property, but based on the current market value thereof; and that sometime later, or on 22 March 1984, [respondent] bank wrote Chua anew, requiring him to tender a new offer to counter the offer made thereon by another buyer.
"Traversing [petitioners'] complaint, [respondent] bank, upon 05 July 1984, filed its answer with counterclaim, thereunder asserting that the foreclosure sale of the mortgaged property was done in accordance with law; and that the bid price was neither unconscionable, nor shockingly low; that [petitioners] slept on their rights when they failed to redeem the property within the one year statutory period; and that [respondent] bank, in offering to sell the property to [Petitioner] Chua on the basis of its current market price, was acting conformably with law, and with legitimate banking practice and regulations.
"Pre-trial having been concluded, the parties entered upon trial, which dragged/lengthened to several months due to postponements. Upon 11 June 1988, however, a big conflagration hit the City Hall of Quezon City, which destroyed, amongst other things, the records of the case. After the records were reconstituted, [petitioners] discovered that the foreclosed property was sold by [respondent] bank to the Ceroferr Realty Corporation, and that the notice of lis pendens annotated on the certificate of title of the foreclosed property, had already been cancelled. Accordingly, [petitioners], with leave of court, amended their complaint, but the Trial Court dismissed the case 'without prejudice' due to [petitioners'] failure to pay additional filing fees.
"So, upon 11 June 1990, [petitioners] re-filed the complaint with the same Court, whereat it was docketed as Civil Case No. 90-5749, and assigned to Branch 98: the amended complaint substantially reproduced the allegations of the original complaint. But [petitioners] this time impleaded as additional defendants the Ceroferr Realty Corporation and/or Cesar Roque, and Lorna Roque, and included an additional cause of action, to wit: that said new defendants conspired with [respondent] bank in [canceling] the notice of lis pendens by falsifying a letter sent to and filed with the office of the Register of Deeds of Quezon City, purportedly for the cancellation of said notice.
"Summons was served on [respondent] bank on 26 September 1990, per Sheriff's Return dated 08 October 1990. Supposing that all the defendants had filed their answer, [petitioners] filed, on 23 October 1991, a motion to set case for pre-trial, which motion was, however, denied by the Trial Court in its Order of 25 October 1991, on the ground that [respondent] bank has not yet filed its answer. On 13 November 1991[, petitioners] filed a motion for reconsideration, thereunder alleging that they received by registered mail, on 19 October 1990, a copy of [respondent] bank's answer with counterclaim, dated 04 October 1990, which copy was attached to the motion. In its Order of 14 November 1991, the trial Court denied for lack of merit, the motion for reconsideration, therein holding that the answer with counterclaim filed by [respondent] bank referred to another civil case pending before Branch 90 of the same Court.
"For this reason, [petitioners] filed on 02 December 1991 a motion to declare [respondent] bank in default, thereunder alleging that no answer has been filed despite the service of summons on it on 26 September 1990.
"On 13 December 1991, the Trial Court declared the motion submitted for resolution upon submission by [petitioners] of proof of service of the motion on [respondent] bank.
"Thus, on 16 January 1992, upon proof that [petitioners] had indeed served [respondent] bank with a copy of said motion, the Trial Court issued an Order of default against [respondent] bank.
"Upon 01 December 1992, on [petitioners'] motion, they were by the Court allowed to present evidence ex parte on 07 January 1993, insofar as [respondent] bank was concerned.
"Thereafter, or on 08 February 1993, the Trial Court rendered the new questioned partial decision.[7]
"Aggrieved, [respondent] bank filed a motion to set aside [the] partial decision by default against Traders Royal Bank and admit [respondent] Traders Royal Bank's x x x Answer with counterclaim: thereunder it averred, amongst others, that the erroneous filing of said answer was due to an honest mistake of the typist and inadvertence of its counsel.
"The [trial court] thumbed down the motion in its Order of 26 July 1993."[8]
"1. Whether or not the Respondent Court of Appeals erred in failing to apply the provisions of Section 3, Rule 9 of the 1997 Rules of Civil Procedure [and in applying instead] the rule on preponderance of evidence under Section 1, Rule 133 of the Rules of Court.The first issue is one of law and may be taken up by the Court without hindrance, pursuant to Section 1 of Rule 45 of the Rules of Court.[18] The second and the third issues, however, would entail an evaluation of the factual findings of the appellate court, a function ordinarily not assumed by this Court, unless in some excepted cases. The Court will thus rule on the first issue before addressing the second and the third issues jointly.
"2. Whether or not the respondent appellate court failed to apply the conventional redemption rule provided for under Article 1601 of the New Civil Code.
"3. Whether or not this Honorable Court can exercise its judicial prerogative to evaluate the findings of facts."[17]
"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.We now quote Section 1 of Rule 133:
"(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.
"(b) Relief from order of default. — A party declared in default may at any time after notice thereof and before judgment file a motion under oath to set aside the order of default upon proper showing that his failure to answer was due to fraud, accident, mistake or excusable negligence and that he has a meritorious defense. In such case, the order of default may be set aside on such terms and conditions as the judge may impose in the interest of justice.
"(c) Effect of partial default. — When a pleading asserting a claim states a common cause of action against several defending parties, some of whom answer and the others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence presented.
"(d) Extent of relief to be awarded. — A judgment rendered against a party in default shall not exceed the amount or be different in kind from that prayed for nor award unliquidated damages.
"(e) Where no defaults allowed. — If the defending party in an action for annulment or declaration of nullity of marriage or for legal separation fails to answer, the court shall order the prosecuting attorney to investigate whether or nor a collusion between the parties exists, and if there is no collusion, to intervene for the State in order to see to it that the evidence submitted is not fabricated."
"SECTION 1. Preponderance of evidence, how determined. — In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the court may consider all the facts and circumstances of the case, the witnesses' manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same may legitimately appear upon the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the greater number."Between the two rules, there is no incompatibility that would preclude the application of either one of them. To begin with, Section 3 of Rule 9 governs the procedure which the trial court is directed to take when a defendant fails to file an answer. According to this provision, the court "shall proceed to render judgment granting the claimant such relief as his pleading may warrant," subject to the court's discretion on whether to require the presentation of evidence ex parte. The same provision also sets down guidelines on the nature and extent of the relief that may be granted. In particular, the court's judgment "shall not exceed the amount or be different in kind from that prayed for nor award unliquidated damages."
"Unequivocal, in the literal sense, as these provisions [referring to the subject of default then under Rule 18 of the old Rules of Civil Procedure] are, they do not readily convey the full import of what they contemplate. To begin with, contrary to the immediate notion that can be drawn from their language, these provisions are not to be understood as meaning that default or the failure of the defendant to answer should 'be interpreted as an admission by the said defendant that the plaintiff's cause of action find support in the law or that plaintiff is entitled to the relief prayed for.' x x x.In sum, while petitioners were allowed to present evidence ex parte under Section 3 of Rule 9, they were not excused from establishing their claims for damages by the required quantum of proof under Section 1 of Rule 133. Stated differently, any advantage they may have gained from the ex parte presentation of evidence does not lower the degree of proof required. Clearly then, there is no incompatibility between the two rules.x x x x x x x x x
Being declared in default does not constitute a waiver of rights except that of being heard and of presenting evidence in the trial court. x x x.
"In other words, a defaulted defendant is not actually thrown out of court. While in a sense it may be said that by defaulting he leaves himself at the mercy of the court, the rules see to it that any judgment against him must be in accordance with law. The evidence to support the plaintiff's cause is, of course, presented in his absence, but the court is not supposed to admit that which is basically incompetent. Although the defendant would not be in a position to object, elementary justice requires that only legal evidence should be considered against him. If the evidence presented should not be sufficient to justify a judgment for the plaintiff, the complaint must be dismissed. And if an unfavorable judgment should be justifiable, it cannot exceed in amount or be different in kind from what is prayed for in the complaint."[25]
Having clarified this matter, we proceed to review the facts.
- A copy of respondent bank's Petition for the extrajudicial foreclosure and auction sale of the mortgaged parcel of land[29]
- The Certificate of Sale that was a consequence of the foreclosure sale[30]
- A Statement of Account dated February 15, 1984, showing Petitioner Chua's outstanding debt in the amount of P40,135.53[31]
- A copy of the Interbank check dated February 16, 1984, in the amount of P4,000[32]
- The Official Receipt issued by the bank acknowledging the check[33]
- The bank's letter dated February 20, 1984, advising Petitioner Chua of the sale of the property at an extrajudicial public auction; the lapse of the period of redemption; and an invitation to purchase the property at its current market price[34]
- Another letter from the bank dated March 22, 1984, inviting Petitioner Chua to submit, within five days, an offer to buy the same property, which another buyer had offered to buy[35]
- A copy of the Notice of Lis Pendens, the filing of which was done after that of the Amended Complaint[36]
- A copy of the title showing the inscription of the Notice of Lis Pendens[37]
- A copy of the Absolute Deed of Sale to Cerrofer[38]
- A copy of a letter dated August 29, 1986, made and signed by petitioners' counsel, requesting the cancellation of the Notice of Lis Pendens[39]
- A copy of a page of the Memorandum of Encumbrance from TCT No. (314341) 7778/T-39[40]
"ART. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon."It is true that the one-year period of redemption provided in Act No. 3135, as amended — the law under which the property here was sold in a foreclosure sale — is only directory and, as such can be extended by agreement of the parties.[42] However, it has also been held that for legal redemption to be converted into conventional redemption, two requisites must be established: 1) voluntary agreement of the parties to extend the redemption period; and 2) the debtor's commitment to pay the redemption price on a fixed date.[43] Thus, assuming that an offer was made to Petitioner Chua to buy back the property after the lapse of the period of legal redemption, petitioners needed to show that the parties had agreed to extend the period, and that Petitioner Chua had committed to pay the redemption price on a fixed date.
"The evidence presented by [petitioners] in so far as the cause of action against [respondent] Traders Royal Bank is concerned are preponderant to support the claims of the [petitioners]. However, in view of the fact that the property subject matter of this case has already been conveyed to defendant Cerrofer Realty Corporation thus the issue as to whether or not the said conveyance or sale is valid is sill pending between the [petitioners] and [respondents] Cerrofer Realty Corporation and Cesar Roque and Lorna Roque. Hence, this Court resolves to grant the prayer for damages against Traders Royal Bank.In the light of the pending issue as to the validity of the sale of the property to the third parties (Cerrofer Realty Corporation and Spouses Roque), the trial court properly withheld judgment on the matter and thus left the prayer for damages as the sole issue for resolution.
"The claims of the [petitioners] as against [respondent] Traders Royal Bank having been established and proved by evidence, judgment is hereby rendered ordering [respondent] Traders Royal Bank to pay [petitioners] actual damage or the market value of the land in question in the sum of P500,000.00; the sum of P70,000.00 as compensatory damages; the sum of P200,000.00 to the heirs of [petitioner] Danilo Chua; and attorney's fees in the sum of P30,000.00."[52]
"The claims of the [petitioners] as against [Respondent] Traders Royal Bank having been established and proved by evidence, judgment is hereby rendered ordering [Respondent] Traders Royal Bank to pay [petitioners] actual damage or the market value of the land in question in the sum of P500,000.00; the sum of P70,000.00 as compensatory damages; the sum of P200,000.00 to the heirs of [Petitioner] Danilo Chua; and attorney's fees in the sum of P30,000.00." (Partial Decision dated February 8, 1993, p. 2; records, p. 173).[8] CA Decision, pp. 2-5; rollo, pp. 30-33.
"SECTION 1. Burden of proof. — Burden of proof is the duty of a party to present evidence on the facts in issue necessary to establish his claim or defense by the amount of evidence required by law."[20] Saguid v. CA, ibid. (citing Heirs of Anastacio Fabela v. CA, 362 SCRA 531, August 9, 2001).
"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 or city." (See also Ardiente v. Provincial Sheriff, 436 SCRA 655, August 17, 2004)[54] This fact would have been shown by presenting evidence that another bidder had offered to pay a higher price for the property during the bidding.