Salvador v. Locsin
REITERATIONFacts
The Antecedents: Plaintiffs sold a parcel of land to Enrique Palenzuela and Lina Camon de Palenzuela for P50,000, with a balance of P32,000 payable within 10 years at 8% interest per annum, secured by a mortgage on the land. The purchasers sold the land to Guillermo Locsin, who assumed the mortgage. Locsin failed to pay the mortgage. Procedural History: Plaintiffs filed an action to foreclose the mortgage. Defendant initially denied the allegations but later amended his answer, alleging the mortgage was not due and demandable due to the moratorium law (Republic Act No. 342) and his filing of a claim with the U.S. War Damage Commission. The parties filed a stipulation of facts admitting the indebtedness and non-payment of interest from 1941, and the filing of the war damage claim. The Court of First Instance of Iloilo ordered the defendant to deposit the sums due within 90 days from the lifting of the moratorium. The Petition: Plaintiffs appealed the decision, arguing that the moratorium law should not apply to a real action for foreclosure and that the law itself is unconstitutional.
Issue(s)
Whether the moratorium law (Republic Act No. 342) applies to an action for foreclosure of mortgage. Whether the defense of moratorium was waived by the defendant. Whether Republic Act No. 342 is constitutional.
Ruling
The Supreme Court ruled that Republic Act No. 342 is null and void for being unreasonable and oppressive. Consequently, the defendant-appellee is ordered to pay the plaintiffs the sum of P32,000, with 8% interest per annum from 1941 to the time of payment, plus P3,000 as attorney's fees and costs, within ninety (90) days from the service of the judgment. Failure to do so will result in the sale of the property to satisfy the debt.
Ratio Decidendi
On the applicability of the moratorium law to foreclosure actions: The Court disagreed with the contention that a foreclosure action is purely a real action to which the moratorium law does not apply. It clarified that in this case, the principal objection is the money indebtedness, and the foreclosure of the property is merely resorted to upon failure to pay the debt. Therefore, the money debt is the principal thing, and the foreclosure is only an incident of the failure to pay the indebtedness. The moratorium law, if it were valid, would have applied. On the waiver of the moratorium defense: The Court found no merit in the argument that the defense of moratorium was waived. It stated that a defense may be pleaded either in an answer or in a motion to dismiss, citing Section 5, Rule 8 of the Rules of Court. The defendant's subsequent motion to dismiss based on the moratorium law did not constitute a waiver of this defense. On the constitutionality of Republic Act No. 342: The Court declared Republic Act No. 342 unconstitutional, null and void, for being unreasonable and oppressive. This ruling followed the precedent set in the case of Rutter vs. Esteban, G.R. No. L-3708, promulgated May 18, 1953. The Court applied the same reasoning and procedure adopted in that case to the present action.
Main Doctrine
The moratorium law, Republic Act No. 342, was declared null and void for being unreasonable and oppressive. An action for foreclosure of mortgage, where the principal obligation is a money debt, is subject to the moratorium law if it were still valid, as the foreclosure is merely incidental to the failure to pay the debt.