G.R. No. 148273 - Simon vs. Canlas

On February 11, 1991, Edgar H. Canlas initiated a complaint for judicial foreclosure of a real estate mortgage against Milagros Simon and Liborio Balatico.
Edgar alleged that on September 10, 1987, Milagros obtained a loan of P220,000.00 secured by a real estate mortgage over her paraphernal property (a 748‑square meter parcel in San Nicolas, Victoria, Tarlac, covered by TCT No. 139884).
The loan was required to be repaid within three years (i.e. by September 18, 1990), and Milagros was accused of defaulting on her repayment obligations despite repeated demands.

On March 25, 1991, petitioners (Milagros and Liborio) filed an Answer with Counterclaim, claiming that no business transaction with Edgar took place and that no consideration had been received for the alleged mortgage.
Edgar filed a Reply and an Answer to the Counterclaim on March 26, 1991, affirming the validity and due execution of the mortgage.
Subsequent to these pleadings, on November 12, 1991, with the court’s permission, petitioners filed a Third-Party Complaint against Virginia Canlas and Aurelia Delos Reyes alleging that they had deceitfully induced Milagros into signing the mortgage documents without proper consideration.

Virginia and Aurelia answered the third‑party complaint on November 18, 1991, contending that they were not privy to the mortgage transaction, with Aurelia appearing only as a witness.
Edgar’s death led to his substitution by his wife, Guia W. Canlas, on December 4, 1991.
During the trial phase, multiple hearings were set, postponed, and rescheduled due to:

Petitioners’ counsel, Atty. Norberto De Jesus, filing motions for postponement (citing his political campaign and later, schedule conflicts), and eventual withdrawal of his appearance.
Retention of new counsel, Atty. Alejo Y. Sedico, who then requested further rescheduling due to conflicts with his existing trial calendar, notably a criminal case scheduled on July 15, 1998.

The RTC, after several postponements and warnings, ultimately denied petitioners’ motion to postpone the July 15, 1998 hearing, holding that petitioners’ repeated failure to have counsel appear constituted waiver of their right to present evidence.

It ruled that Milagros had duly executed the deed of real estate mortgage and had received the P220,000.00 consideration.
Petitioners’ failure to act promptly and their inordinate delay in protesting the receipt of consideration was held against them.
The RTC ordered repayment with interest, attorney’s fees, and costs, and provided that, upon default, the subject property would be auctioned.

Petitioners subsequently filed a Motion for Reconsideration (September 2, 1998) which was denied on October 16, 1998.
Unsatisfied with the RTC ruling, petitioners appealed to the Court of Appeals (CA), which on May 23, 2001 affirmed the RTC decision.

The CA noted the absence of due process claims, emphasizing that petitioners were given every opportunity to present evidence, and that the mortgage’s validity (including its due execution admitted during the pre‑trial conference) remained uncontested.
The CA dismissed the third‑party complaint without further ado.

Petitioners raised several assignments of error before the Supreme Court, alleging:

Abuse of discretion by the CA in upholding the mortgage despite claims of lack of consideration and fraudulent execution.
Erroneous ruling that only the execution (and not the due execution) of the mortgage was admitted.
Incorrect classification of the mortgaged property as paraphernal rather than conjugal.
Denial of the right to counsel and due process via the repeated postponement issues.

Respondent (Guia W. Canlas) argued that procedural defects in the petition (such as improper impleading of the CA, lack of verification, and absence of a certification against forum shopping) mandated dismissal, and contended that no due process was violated as petitioners had ample opportunity to be heard.

Whether the denial of petitioners’ motion to postpone the hearing constituted a denial of due process and an abuse of judicial discretion.

Did the RTC’s refusal to grant another postponement, amid counsel changes and scheduling conflicts, infringe upon petitioners’ right to fully present their evidence?
Was there manifest intentional delay or dilatory tactic on the part of petitioners’ counsel that justified the RTC’s decision?

Whether the real estate mortgage should be considered invalid due to the alleged absence of consideration and purported fraudulent scheme.

Is the admission by Milagros during the pre‑trial conference of the execution of the mortgage equivalent to an admission of receiving the P220,000.00?
Can petitioners still present evidence on lack of consideration and allegations of fraud even after the mortgage’s execution was acknowledged?

Should the property be classified as paraphernal (and thus subject to unilateral disposition by Milagros) or as conjugal/community property requiring spousal consent?

Whether alleged procedural defects in the petition for review (such as the impleading of the lower court as respondent) and other formal errors justify dismissal or warrant a resolution on the merits.