Zarate v. Regional Trial Court of Kalibo, Aklan
REITERATIONFacts
The Antecedents: Pursuant to a judgment in Civil Case No. 16131, a parcel of land owned by petitioners Francisco G. Zarate and Corazon Tirol-Zarate (ZARATES), covered by TCT No. 5143 and mortgaged to the Development Bank of the Philippines (DBP), was sold on execution to respondents Spouses Tomas and Rhilyn Hautea (HAUTEAS). Before the redemption period expired, the ZARATES filed Civil Case No. 4184 for annulment of the execution sale, claiming the property was exempt from execution under Section 14 of E.O. No. 81 (1986 Revised Charter of DBP) and relevant jurisprudence, as it was mortgaged to DBP. A restraining order was issued. DBP filed a complaint in intervention, asserting its superior lien. Despite the restraining order and pending case, DBP foreclosed the mortgage on the property under P.D. 385 and its mortgage agreement with the ZARATES, with DBP being the highest bidder. The HAUTEAS filed a motion to dismiss, arguing the case became moot and academic due to DBP's foreclosure. DBP also moved to withdraw its complaint in intervention, which was not opposed by the ZARATES. Procedural History: The ZARATES sought to amend their complaint to include grounds of invalidity due to non-compliance with notice requirements under Rule 39 of the Rules of Court and P.D. 1079. The Regional Trial Court (RTC) of Aklan, Branch 2, denied the motion to amend and dismissed the case, holding that the DBP charter provisions were intended to protect DBP, not private individuals like the ZARATES, and that the foreclosure rendered the action unenforceable and without cause of action. The RTC also noted that DBP's withdrawal rendered the case moot and academic. The Petition: The ZARATES filed a Petition for Review on Certiorari, assailing the RTC's dismissal and denial of their motion to amend, arguing they had the standing to invoke E.O. No. 81, that their complaint stated valid causes of action, and that the RTC erred in denying their motion to amend.
Issue(s)
Whether the RTC gravely erred in holding that petitioners are not the real parties in interest to file the complaint based on E.O. No. 81. Whether the RTC gravely erred in dismissing the complaint on the ground of failure to state a cause of action under E.O. No. 81. Whether the RTC gravely erred in denying petitioners' motion to admit the amended complaint.
Ruling
The petition is denied. The Supreme Court affirmed the dismissal of the case, holding that the foreclosure by DBP rendered the case moot and academic, and that the RTC did not commit reversible error in denying the motion to amend and dismissing the case.
Ratio Decidendi
On the issue of standing and cause of action under E.O. No. 81: The Supreme Court held that when DBP foreclosed the subject lot during the pendency of the action to annul the execution sale, DBP was effectively asserting the exemption granted to properties mortgaged to it under Section 14 of E.O. No. 81. The Court found that the foreclosure and sale by DBP rendered the action to annul the execution sale in favor of the HAUTEAS moot and academic. The ZARATES' prayer was to annul the execution sale, which was precisely what DBP's foreclosure achieved by asserting its superior lien. Therefore, there was nothing left to litigate between the ZARATES and the HAUTEAS concerning the execution sale, as DBP had acquired the property through the enforcement of its mortgage. Furthermore, while not strictly necessary to rule on the merits due to mootness, the RTC's observation that the provisions of E.O. No. 81 were intended to protect DBP as a government corporation and might not directly apply to private individuals like the ZARATES was noted. However, the Court focused on the fact that DBP itself invoked its right to exemption through foreclosure, which rendered the issue of the ZARATES' standing to invoke the exemption moot. On the issue of mootness and the withdrawal of DBP: The Court emphasized that DBP's withdrawal of its complaint in intervention, without opposition from the petitioners, rendered the petition moot and academic. The Court reasoned that any judgment rendered in the case could no longer bind DBP, which was an indispensable party. An action cannot proceed without indispensable parties, and if they are not joined, the case must be dismissed. The ZARATES and HAUTEAS effectively conceded the dismissal of the case by not opposing DBP's withdrawal, acknowledging DBP's indispensable role. On the denial of the motion to amend: The Supreme Court affirmed the RTC's denial of the ZARATES' motion to amend their complaint. The Court stated that an order granting or denying a motion to amend the complaint on substantial matters is discretionary with the court. Since the RTC correctly ordered the dismissal of the case on the ground of mootness and lack of cause of action, it committed no reversible error in denying the motion to amend, as any amendment would not cure the fundamental defects that rendered the case moot.
Main Doctrine
When a property mortgaged to the Development Bank of the Philippines (DBP) is foreclosed by DBP during the pendency of an action to annul an execution sale of the same property, the foreclosure effectively asserts DBP's exemption from attachment and execution. If DBP withdraws its intervention without opposition, the case becomes moot and academic, as any judgment would not bind DBP, an indispensable party.