Title
Zarate vs. Regional Trial Court of Kalibo, Aklan
Case
G.R. No. 102305
Decision Date
Oct 13, 1999
A dispute over property execution sale involving mortgaged land; DBP's foreclosure rendered the case moot, nullifying claims under E.O. No. 81.
execution sale
mortgaged property
attachment
A

Case Digest (G.R. No. L-8110)

Facts:

  • Parties and property subject of the dispute
    • Petitioners were Francisco G. Zarate and Corazon Tirol-Zarate.
    • Respondents were the Regional Trial Court of Kalibo, Aklan (Branch 2); Spouses Tomas Hautea and Rhilyn Hautea; Provincial Sheriff of Iloilo Magdalena Lometillo; Deputy Provincial Sheriff of Iloilo Manolito Ferrer; Register of Deeds of Aklan Eleuterio Perez; and the Development Bank of the Philippines (DBP).
    • The disputed parcel was Lot 2, Plan Psu-136835, covered by LRC Case No. A-56 and L.R.C. Case No. N-9192, and registered under TCT No. 5143 in the names of petitioners.
  • Antecedent judgment and execution sale challenged by petitioners
    • A judgment in Civil Case No. 16131 was rendered by the Regional Trial Court of Iloilo in favor of Tomas Hautea against Francisco Zarate.
    • Pursuant to that judgment, the Provincial Sheriff of Iloilo in coordination with the Provincial Sheriff of Aklan sold on execution the subject parcel of land.
    • The execution sale occurred when the one (1) year redemption period was about to expire.
  • Petitioners’ action for annulment of the execution sale
    • With the redemption period about to expire, petitioners filed a case for annulment of the execution sale with damages and prayed for a writ of preliminary injunction and/or temporary restraining order against:
      • Spouses Tomas and Rhilyn Hautea,
      • the Provincial Sheriffs of Iloilo and Aklan, and
      • the Register of Deeds of Aklan.
    • Petitioners alleged that under Section 14 of Executive Order No. 81, the 1986 Revised Charter of the DBP, and under Supreme Court rulings, the subject property was exempt from attachment and execution.
    • Petitioners asserted that the property was mortgaged to DBP by petitioners.
  • Issuance of restraining order and DBP intervention
    • The trial court issued a restraining order restraining the HAUTEAS for twenty days from consolidating the title and from taking possession and/or alienating the property.
    • DBP filed a complaint in intervention with prayer for writ of preliminary injunction, and the court admitted it in Civil Case No. 4184.
  • DBP’s extrajudicial foreclosure during the pendency of the case
    • Despite the temporary restraining order and pending litigation, DBP foreclosed the mortgage and enforced its lien over the property based on its prior mortgage.
    • DBP and its counsel could not be held in contempt because its extrajudicial foreclosure and public auction sale of the property complied with P.D. 385 and the mortgage agreement.
  • Motions after foreclosure and withdrawal of DBP intervention
    • The HAUTEAS filed a motion to drop them from the case and/or to dismiss the complaint and the complaint in intervention against them, alleging the complaints became moot and academic due to DBP’s foreclosure.
    • DBP likewise filed a motion to withdraw its complaint in intervention.
    • The withdrawal was not opposed by petitioners or respondents.
  • Petitioners’ motion to amend and RTC disposition
    • Petitioners filed a motion to amend the complaint to allege additional grounds:
      • the execution sale was invalid because the property was exempt from execution; and
      • the sale was also invalid due to respondents’ alleged failure to comply with notice requirements under Section 18, Rule 39 of the Rules of Court, and Section 1 of P.D. 1079.
    • On June 26, 1991, the trial court:
      • denied petitioners’ motion to amend; and
      • dismissed the case for annulment of the execution sale in favor of the HAUTEAS.
    • The RTC order ruled, in substance:
      • The complaint was primarily premised on alleged violation of Section 14 of E.O. No. 81 and other cited statutory provisions.
      • The property had been mortgaged to DBP on November 19, 1976 and March 23, 1981.
      • During the case’s pendency, DBP extrajudicially foreclosed the mortgage on January 11, 1991 and sold the property at public auction with DBP as highest bidder.
      • Because of the foreclosure and auction sale, DBP withdrew its intervention and thus the case effectively left only petitioners’ original complaint.
      • The RTC believed the exemption provisions were intended to protect DBP’s interests as a government corporation and did not apparently cover private persons like petitioners.
      • The RTC found that the complaint stated no cause of action and that amendments could not cure the defect.
    • Petitioners’ motion ...(Subscriber-Only)

Issues:

  • Whether the petition had become moot and academic due to DBP’s extrajudicial foreclosure and withdrawal of intervention
    • Whether DBP’s foreclosure during the pendency of the annulment case, and its subsequent withdrawal as intervenor, rendered the execution-sale challenge unenforceable and nonjusticiable.
  • Whether petitioners could invoke Section 14 of E.O. No. 81 and possessed standing/real party in interest
    • Whether petitioners had standing as owners-mortgagors to invoke the exemption from attachment and execution under Section 14 of E.O. No. 81.
  • Whether the complaint stated a cause of action and whether amendments should have been admitted
    • Whether the complaint, as filed, stated a cause of action und...(Subscriber-Only)

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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