G.R. No. 168882 - Intestate Estate of Sian vs. Philippine National Bank

Nimfa Sian filed a petition with the Regional Trial Court (RTC) of Himamaylan, Negros Occidental (docketed as Cadastral Case No. 22) seeking the cancellation of mortgage liens on three titled properties.
The mortgage liens in question were annotated on the titles of the properties owned by the petitioner, which were originally encumbered by the Bacolod branch of the Philippine National Bank-Republic Bank (PNB-RB), now Maybank Philippines, Inc. (Maybank).
Summons was served on Maybank, and on Maybank’s motion the RTC granted time for a responsive pleading up to August 23, 2001.

On the last day for filing a responsive pleading (August 23, 2001), PNB filed a Motion for Substitution and a Motion to Dismiss.
PNB alleged that Maybank had referred the case to it because the properties involved had already been transferred to PNB by virtue of a dacion en pago executed between the two banks.
In support of its Motion for Substitution, PNB cited Section 19, Rule 3 of the Rules of Court, claiming that with the transfer of legal interest, it had become an indispensable party under Section 7, Rule 3 of the Rules of Court.
PNB further argued, through its Motion to Dismiss, that the complaint was deficient due to the absence of verification and certification against forum shopping.

Nimfa Sian filed an opposition to PNB's motions.
Maybank confirmed in its comment that the legal interest over the properties had indeed been transferred to PNB, thereby implicitly joining PNB’s prayer for substitution.
During the pendency of the case, Nimfa Sian died and was substituted by her estate, represented by her sister, Charito J. Sian-ParreAo, as the special administratrix and petitioner.
The petitioner later filed a Rejoinder-Opposition on January 16, 2002, addressing PNB’s motions.

On July 8, 2002, the petitioner filed a Motion for Early Resolution of PNB’s motions, scheduling a hearing for August 8, 2002.
A day before the hearing, the parties filed a Joint Manifestation, agreeing to submit the pending incident (specifically, the Motion for Substitution) for resolution without further oral argument and requesting the cancellation of the scheduled hearing.
On August 15, 2002, the trial court rendered an order denying PNB’s Motion for Substitution on the basis that there was no documentary evidence to support the alleged dacion en pago or deed of assignment transferring the properties from Maybank to PNB.
Simultaneously, the trial court denied PNB’s Motion to Dismiss, noting that the petition contained a certification on non-forum shopping, and granted Nimfa Sian’s petition to cancel the mortgage liens.

PNB filed a Motion for Reconsideration of the trial court’s denial of its motions, which was subsequently denied by the trial court on October 29, 2002.
On July 9, 2003, PNB elevated the matter to the Court of Appeals by filing a Petition for annulment of the trial court’s judgment.
The Court of Appeals, in its decision dated January 25, 2005, criticized the trial court for deciding on the merits without affording the parties the opportunity to present evidence, highlighting that the proceedings had effectively denied due process.
The appellate court set aside both the August 15, 2002, and the October 29, 2002, orders of the trial court.

PNB argued that it was now barred from filing a petition for annulment of judgment because it failed to avail the remedy of appeal from the trial court’s order, and it contended that the due process issue was an improper ground for annulment.
The Supreme Court, addressing these contentions, reaffirmed that while the trial court’s denial of PNB’s motion for substitution could not be easily assailed, the order granting cancellation of the mortgage liens was void as it deprived Maybank—PNB’s predecessor-in-interest—of due process by not affording it the opportunity to file an answer and participate in a meaningful hearing.

Whether PNB should have been substituted for Maybank given the alleged transfer of interest through a dacion en pago, and whether the documentation (or lack thereof) supported such a substitution.
Whether Section 19, Rule 3 of the Rules of Court was correctly applied by the trial court in denying PNB’s motion for substitution.

Whether the trial court’s decision to grant the petition for cancellation of mortgage liens—without giving Maybank the opportunity to file an answer—amounted to a violation of due process.
Whether the short-circuiting of procedural processes compromised the parties' rights to present evidence and defenses.

Whether PNB could avail itself of a petition for annulment of judgment based on lack of due process, despite not having appealed the trial court’s order from August 15, 2002, as required by Section 2 of Rule 47 of the Rules of Court.
Whether the additional ground of lack of due process, aside from extrinsic fraud and lack of jurisdiction, is acceptable for annulment of a final judgment.

How the Joint Manifestation submitted by the parties, which addressed the pending incident (i.e., the Motion for Substitution) and not the petition for cancellation of mortgage liens, affected the trial court’s ruling and the subsequent legal issues.