Gajudo v. Traders Royal Bank
REITERATIONFacts
The Antecedents: Petitioners filed a complaint against Traders Royal Bank (TRB), the City Sheriff, and the Register of Deeds, seeking to annul the extra-judicial foreclosure and auction sale of a parcel of land owned in common by petitioners, which was mortgaged to TRB to secure a loan. Petitioners alleged irregularities in the foreclosure, including a shockingly low bid price, and claimed they failed to redeem the property due to lack of knowledge and education. Petitioner Danilo Chua later offered to buy back the property, and TRB initially agreed to sell it back at the amount the bank paid at auction plus interest. Chua made an initial payment, but TRB later changed its position, proposing to sell back the property based on its current market value and then requiring Chua to make a new offer. Procedural History: The original complaint was filed before the RTC of Quezon City. After a conflagration destroyed the records, the case was reconstituted. Petitioners amended their complaint, but the RTC dismissed it without prejudice due to non-payment of additional filing fees. Petitioners re-filed the complaint, impleading Ceroferr Realty Corporation and others. TRB failed to file an answer, and petitioners filed a motion to declare it in default. The RTC declared TRB in default and allowed petitioners to present evidence ex parte. The RTC rendered a partial decision in favor of petitioners, ordering TRB to pay damages. TRB filed a motion to set aside the default order and admit its answer, which the RTC denied. TRB appealed to the Court of Appeals (CA). The Petition: The CA vacated the RTC's partial decision and dismissed the complaint, holding that TRB's reasons for failing to file an answer were specious and that petitioners failed to prove their right to relief, particularly the invalidity of the foreclosure sale and the agreement to repurchase the property. Petitioners filed a Petition for Review with the Supreme Court, assailing the CA's decision.
Issue(s)
Whether the Court of Appeals erred in failing to apply Section 3, Rule 9 of the Rules of Civil Procedure and instead applied the rule on preponderance of evidence under Section 1, Rule 133. Whether the Court of Appeals failed to apply the conventional redemption rule provided for under Article 1601 of the New Civil Code. Whether the Supreme Court can exercise its judicial prerogative to evaluate the findings of facts, specifically regarding the establishment of the right to conventional redemption and the validity of the foreclosure sale.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, dismissing the complaint.
Ratio Decidendi
On the first issue (Rule 9 vs. Rule 133): The Court held that there is no incompatibility between Section 3 of Rule 9 and Section 1 of Rule 133. Section 3 of Rule 9 governs the procedure when a defendant fails to answer, directing the court to render judgment based on the claimant's pleading, but also allowing the court to require ex parte evidence. Section 1 of Rule 133 requires that in civil cases, the burden of proof rests on the party making allegations, who must establish their case by a preponderance of evidence. The Court reiterated that a default order does not automatically entitle the claimant to relief; they must still prove their claims by a preponderance of evidence. The advantage of presenting evidence ex parte does not lower the degree of proof required. Therefore, the CA correctly applied the rule on preponderance of evidence. On the second issue (Conventional Redemption): The Court found no error in the CA's ruling that petitioners failed to establish their right to conventional redemption. While Act No. 3135 allows for extension of the redemption period by agreement, two requisites must be met: a voluntary agreement to extend the period and a commitment by the debtor to pay the redemption price on a fixed date. The letters exchanged between Petitioner Chua and TRB did not demonstrate a firm agreement to repurchase the property at a fixed price on a fixed date. The bank's letters indicated a proposal to sell at current market value and an invitation to make an offer, not a firm commitment. On the third issue (Evaluation of Facts): Furthermore, petitioners failed to prove the inadequacy of the price at the foreclosure sale or present competent evidence of the property's real market value. The Court also noted that the foreclosure sale itself was not shown to be invalid under Act No. 3135, as personal notice to the mortgagor is not required, and there was no allegation or proof of noncompliance with publication and posting requirements. Consequently, the CA's factual findings, which were supported by evidence, were upheld, and the RTC's award of damages was deemed unsupported.
Main Doctrine
A party declared in default is not automatically entitled to the relief prayed for; the plaintiff must still present evidence to establish their claims by a preponderance of evidence, as required in ordinary civil cases. The default order does not excuse the claimant from proving their case.