Seloza v. Onshore Strategic Assets
REITERATIONFacts
The Antecedents: Gayden Seloza (Seloza) entered into a contract to sell a house and lot with First World Home Philippines, Inc. (First World). Seloza completed payment, but First World failed to deliver the title. Unknown to Seloza, First World had mortgaged the property, including Seloza's lot, to secure a loan from United Overseas Bank Philippines (United Overseas Bank). United Overseas Bank later transferred its rights to Onshore Strategic Assets (SPV-AMC), Inc. (Onshore). First World defaulted, leading Onshore to extrajudicially foreclose the mortgage. A Certificate of Sale was issued to Onshore, which was registered on Seloza's lot's title. Procedural History: Seloza filed a Complaint before the Regional Trial Court (RTC) seeking to annul the extrajudicial foreclosure sale, contending his unregistered rights were superior. Simultaneously, Seloza and other lot buyers had filed a case before the Housing and Land Use Regulatory Board (HLURB) assailing the validity of the real estate mortgages executed by First World. The RTC dismissed Seloza's Complaint for forum shopping, finding litis pendentia present due to the identity of parties, rights asserted, and reliefs prayed for with the HLURB case. The Court of Appeals (CA) affirmed the RTC's dismissal. The Supreme Court initially denied Seloza's Petition for Review but later reinstated it. The Petition: Seloza argued that litis pendentia did not exist because the causes of action and reliefs sought in the two cases were different. He contended that the HLURB case concerned the validity of the mortgage, while the RTC case concerned the lack of notice in the foreclosure proceedings. He also argued that the HLURB and RTC had exclusive jurisdictions over their respective cases.
Issue(s)
Whether or not litis pendentia exists in filing a complaint to annul the extrajudicial foreclosure proceedings while an action assailing the validity of the real estate mortgage is pending. Whether or not the Housing and Land Use Regulatory Board has jurisdiction to annul the extrajudicial foreclosure.
Ruling
The Petition is DENIED. The April 22, 2016 Decision and October 19, 2016 Resolution of the Court of Appeals, which affirmed the Regional Trial Court's dismissal of the Complaint filed by petitioner Gayden Seloza on the basis of litis pendentia and forum shopping, are AFFIRMED.
Ratio Decidendi
On the existence of litis pendentia: The Court affirmed the CA's ruling that all requisites of litis pendentia were present. First, there was substantial identity of parties, as Onshore was the successor-in-interest of United Overseas Bank, and Seloza had acknowledged this privity by impleading Onshore in the HLURB case. Second, there was identity of rights asserted and reliefs prayed for. The Court applied the test that identity of causes of action does not require absolute identity; rather, the same evidence must sustain both actions. Seloza's complaint before the RTC was premised on his unregistered rights being superior to Onshore's mortgage rights, and his position paper further elaborated on the violation of Section 18 of Presidential Decree No. 957. The HLURB case also assailed the validity of the real estate mortgages. The Court found that the substance of both complaints hinged on the validity of the real estate mortgage, and the extrajudicial foreclosure was a consequence, not a separate cause of action. Third, judgment in one case would amount to res judicata in the other, as the validity of the mortgage would be determined in both, creating a possibility of conflicting decisions. The Court cited Asia United Bank v. Goodland Company, Inc. and Goodland Company, Inc. v. Asia United Bank to support the finding that the distinction between assailing the mortgage and assailing the foreclosure is illusory when both are founded on the same underlying issue of the mortgage's validity. On the jurisdiction of the HLURB: The Court denied Seloza's contention that the HLURB and RTC had exclusive jurisdictions. It reiterated that the HLURB has exclusive jurisdiction over complaints for unsound real estate business practices, including the annulment of mortgages executed without the buyer's knowledge and consent, as provided under Section 18 of Presidential Decree No. 957. The Court cited Manila Banking Corporation v. Spouses Rabina and Far East Bank and Trust Co. v. Marquez to establish the HLURB's broad jurisdiction to declare mortgages void when they violate PD 957. Therefore, Seloza's claim that the HLURB lacked jurisdiction to annul the foreclosure was unfounded, as the HLURB could determine the validity of the mortgage, which was the core issue. The Court concluded that Seloza had no reason to split his cause of action and bring the foreclosure issue to the RTC, as the HLURB could resolve the matter of the mortgage's validity and any subsequent foreclosure proceedings stemming from it.
Main Doctrine
Filing a complaint to annul extrajudicial foreclosure proceedings while an action assailing the validity of the real estate mortgage is pending between the same parties and for the same cause of action constitutes forum shopping due to litis pendentia, as the resolution of one case would amount to res judicata in the other.