Title
Supreme Court
Diona vs. Balangue
Case
G.R. No. 173559
Decision Date
Jan 7, 2013
Respondents defaulted on a P45,000 loan secured by a mortgage. RTC awarded 5% monthly interest, later reduced to 12% by CA, annulled as excessive and violating due process. SC upheld CA, citing unconscionable interest and counsel's negligence.

Case Summary (G.R. No. 173559)

Factual Background and Complaint

After respondents defaulted on their six-month loan, petitioner filed suit on September 17, 1999, praying for: (a) payment of ₱45,000 plus 12% per annum interest; (b) damages of at least ₱10,000; (c) attorney’s fees and costs; and (d) foreclosure of the mortgaged property.

RTC Default Judgment and Auction Sale

Respondents were declared in default for failing to answer. On October 17, 2000, RTC Branch 75 awarded ₱45,000 plus 5% monthly interest (60% per annum), ₱20,000 attorney’s fees, and foreclosure. The property was sold at auction on November 7, 2001, with petitioner as the lone bidder for ₱420,000.

Post-Judgment Motions and Modifications

Respondents moved to set aside the judgment for lack of service and to correct the interest award. On May 7, 2002, the RTC amended the interest to 12% per annum. Respondents then sought permission to consign the adjusted obligation.

CA Certiorari and Annulment Proceedings

Petitioner filed a Rule 65 certiorari with the Court of Appeals (CA), which on August 5, 2003 annulled both the 5% monthly award and the reduction to 12% per annum as grave abuse of discretion. Respondents later filed a Rule 47 petition in CA-G.R. SP No. 85541, arguing the 5% monthly rate was beyond relief prayed for, violated Rule 9 § 3(d), and breached due process.

CA Ruling on Annulment of Judgment

The CA initially denied the petition but upon reconsideration granted it on November 24, 2005. It annulled the RTC judgment insofar as it awarded 5% monthly interest and set aside all proceedings related to the auction sale. The CA ordered recomputation of the debt at 12% per annum from March 2, 1991. A subsequent motion for reconsideration was denied on June 26, 2006.

Issues on Appeal to the Supreme Court

  1. Whether the CA erred by using a petition for annulment as substitute for a lost appeal.
  2. Whether immutability of judgment barred annulling a final and executed decision.

Petitioner’s Arguments

Petitioner contended that respondents lost their ordinary remedies through their own negligence, that the RTC had proper jurisdiction, and that the doctrine of immutability prevents modification of a final judgment, even if erroneous.

Respondents’ Arguments

Respondents maintained they never agreed to 5% monthly interest, that Rule 9 § 3(d) prohibits relief beyond what was prayed for in a default judgment, and that gross negligence by their former counsel deprived them of due process, justifying a Rule 47 annulment.

Supreme Court’s Ruling and Rationale

The Supreme Court denied the petition and affirmed the CA’s resolutions. It held that:

  • A default judgment cannot grant relief beyond the complaint or evidence presented. Rule 9 § 3(d) protects the defendant’s right to due process by limiting awards to those prayed for.
  • The 5% monthly interest award was void for lack of

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