Monzon v Relova (2008)

G.R. No. 171827

SUMMARY: Monzon was indebted to the Coastal Lending Corporation which extrajudicially foreclosed
her property, part of which was mortgaged and later sold to Spouses Perez and Spouses Relova. The highest
bidder left an excess of 1.6 M and Spouses Perez and Spouses Relova bring this petition in order to get the
residue. The RTC declared Monzon in default due to her failure to appear despite notice. The CA affirmed
the RTC. The issue in this case is whether Monzon was in default and the Supreme Court held that her
failure to appear, while constituting a waiver to object to the evidence presented during such hearing, would
not amount to a waiver of the defendants right to present evidence. The Court also clarified that it is Act
3135 and not Rule 68 that governs extrajudicial mortgages. The Case is further remanded to the trial court.

FACTS:
Monzon executed a promissory note in favor of spouses Perez for the amount of P600,000.00, with
interest of 5% per month secured by a 300-sqm lot payable on or before 28 December 1999. Monzon
executed a Deed of Absolute Sale over the said parcel of land in favor of the spouses Perez.
Monzon executed another promissory note in favor of the spouses Relova for P200,000.00 with
interest of 5% per month secured by a 200 sqm lot payable on or before 31 December 1999. Monzon
executed a Deed of Conditional Sale over said parcel of land in favor of the spouses Relova.
Monzon was indebted to the Coastal Lending Corporation in the total amount of P3,398,832.35.
Coastal Lending Corporation extrajudicially foreclosed the entire 9,967-sqm property, including the
portions mortgaged and subsequently sold to respondents.The winning bidder in the extrajudicial
foreclosure, Addio Properties Inc., paid the amount of P5,001,127.00, thus leaving P1,602,393.65.
According to Spouses Perez and Relova, this residue amount, should be turned over to them
pursuant to Section 4, Rule 68 of the Revised Rules of Civil Procedure. Thus, respondents pray in their
Petition for Injunction in order to attain the residue amount.
The RTC, citing the absence of Monzon and her counsel on set hearing date despite due notice,
granted an oral Motion by the to present evidence ex parte. Thereafter, the RTC rendered a decision in
favor of Perez and Relova. The decision mentioned that the order allowing the ex parte presentation of
evidence was due to the continuous and incessant absences of petitioner and counsel.
Monzon, on the other hand, claims that respondents could no longer ask for the enforcement of the
two promissory note because she had already performed her obligation to them by dacion en pago as
evidenced by the Deed of Conditional Sale and the Deed of Absolute Sale. She claimed that petitioners
could still claim the portions sold to them if they would only file the proper civil cases.
Monzon appealed based on an alleged violation of due process by the RTC not giving her a chance to
present evidence. The CA denied the appeal ruling that petitioner has already been given ample opportunity
to present evidence. She also claims that she never waived her right to present evidence.
Despite the fact that Monzon was not declared in default by the RTC, the RTC nevertheless applied the
effects of a default order upon petitioner under Section 3, Rule 9 of the Rules of Court.
ISSUE:
Whether Monzon was in default? NO. (Case remanded to trial court.)
HELD: Such failure to attend, when committed during hearing dates for the presentation of the
complainants evidence, would amount to the waiver of such defendants right to object to the evidence
presented during such hearing, and to cross-examine the witnesses presented therein. However, it would
not amount to a waiver of the defendants right to present evidence during the trial dates scheduled
for the reception of evidence for the defense. It would be an entirely different issue if the failure to
attend of the defendant was on a hearing date set for the presentation of the evidence of the defense, but
such did not occur in the case at bar.
Extra-judicial foreclosure of mortgages, which was what transpired in this case, is governed by Act No.
3135. Unlike Rule 68, which governs judicial foreclosure sales, Act No. 3135 does not grant to junior
encumbrancers the right to receive the balance of the purchase price. The only right given to second
mortgagees in said issuances is the right to redeem the foreclosed property pursuant to Section 6 of Act
No. 3135.
The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead, an
ordinary action to recover the indebtedness with the right to execute a judgment thereon on all the properties
of the debtor including the subject matter of the mortgage, subject to the qualification that if he fails in the
remedy elected by him, he cannot pursue further the remedy he has waived.
However, due to the fact that construing respondents Petition for Injunction to be one for a collection of
sum of money would entail a waiver by the respondents of the mortgage executed over the subject
properties, we should proceed with caution before making such construction. We, therefore, resolve that
upon the remand of this case to the trial court, respondents should be ordered to manifest whether the
Petition for Injunction should be treated as a complaint for the collection of a sum of money.
If respondents answer in the affirmative, then the case shall proceed with the presentation of the
evidence for the defense. If Monzon would be successful in proving her defense of dacion en pago, there
would, in effect, be a double sale of the mortgaged properties: the same properties were sold to both
respondents and to herein intervenor Addio Properties, Inc.
If respondents answer in the negative, the case shall be dismissed, without prejudice to the exercise of
respondents rights as mortgage creditors. If respondents mortgage contract was executed before the
execution of the mortgage contract with Addio Properties, Inc., respondents would be the first mortgagors.
Pursuant to Article 2126 of the Civil Code, they would be entitled to foreclose the property as against any
subsequent possessor thereof. If respondents mortgage contract was executed after the execution of the
mortgage contract with Addio Properties, Inc., respondents would be the second mortgagors. As such, they
are entitled to a right of redemption pursuant to Section 6 of Act No. 3135, as amended by Act No. 4118.