Case Summary (G.R. No. 72566)
Petitioner
Ma. Luisa A. Pineda alleged she loaned respondent a principal amount evidenced by a real estate mortgage, and sought payment of principal and interest or, in default, foreclosure of the mortgaged property.
Respondent
Virginia ZuAiga vda. de Vega denied material allegations, disputed receipt of the loan amount alleged, questioned the legality of the agreed interest rate as unconscionable, and pleaded procedural defenses including lack of prior barangay conciliation and non-joinder of her husband.
Key Dates and Procedural Posture
- Loan/mortgage transaction alleged: March 25, 2003 (2003 Agreement); reference to prior undated mortgage securing a P200,000 loan (2000).
- Complaint filed by petitioner: June 10, 2005.
- RTC Decision: April 30, 2015 — ruled for petitioner.
- CA Decision reversing RTC: March 21, 2017 — dismissed complaint.
- CA Resolution denying reconsideration: August 30, 2017.
- Supreme Court Decision: April 10, 2019.
Applicable constitution: 1987 Philippine Constitution (decision rendered after 1990).
Applicable Law and Legal Authorities Cited
- 1987 Philippine Constitution (applicable by date of decision).
- Rule 45, Rules of Court (certiorari under Rule 45; limits on review of factual findings).
- Civil Code provisions: Article 1157 (sources of obligations), Article 1169 (mora or delay), Article 1170 (liability for fraud, negligence, or delay), Article 2208 (attorney’s fees).
- Controlling jurisprudence cited: Mangahas v. Court of Appeals; Bachrach Motor Co., Inc. v. IcaraAgal (on exclusivity of remedies), Nacar v. Gallery Frames (on application of post-2013 interest rates), and other precedents referenced in the decision.
Facts Relevant to Liability and Remedies
Petitioner alleged a P500,000 instrument dated 2003 but admitted in interrogatories that the amount in the 2003 Agreement referred to a prior undated real estate mortgage securing a P200,000 loan obtained in 2000. The 2003 Agreement purportedly charged 8% per month (which both parties characterized as unconscionable), though petitioner asserted the effective charge was 4% per month. Petitioner claimed extrajudicial demand was sent by registered mail (demand letter dated August 4, 2004) and received on September 7, 2004; however, the registry return card evidencing receipt was not formally offered in evidence at trial.
Trial Court (RTC) Findings and Disposition
The RTC found (1) existence of the loan and real estate mortgage; (2) the undated agreement contained no interest stipulation so legal interest of 12% per annum applied; (3) the 2003 Agreement’s higher interest rate was unconscionable; (4) non-joinder of the husband and lack of barangay conciliation were not jurisdictional defects; and (5) respondent was in default. The RTC ordered respondent to pay P200,000 plus 12% per annum interest from the date the demand letter was allegedly received (September 3, 2004), awarded P50,000 nominal damages and P30,000 attorney’s fees, and directed foreclosure of the mortgaged property in default of payment.
Court of Appeals (CA) Ruling
The CA reversed and dismissed the complaint, basing its decision chiefly on lack of proof that extrajudicial demand had been received by respondent. The CA observed that petitioner failed to formally offer the registry return card or any competent proof (such as a postman’s certificate) to establish receipt of the demand letter; a photocopy of the registry return card and a copy of the letter were deemed insufficient. Because the CA found no extrajudicial demand and petitioner had not invoked exceptions to the demand requirement under Article 1169, it concluded respondent could not be considered in default and the case failed on that ground.
Issue Presented to the Supreme Court
Whether petitioner established that a demand letter was sent and received by respondent (i.e., whether respondent was in default for failure to pay), and whether the CA’s factual findings and legal conclusion warranted review under Rule 45 exceptions.
Supreme Court: Procedural Review and Exceptions to Rule 45
The Supreme Court recognized the general limitation of Rule 45 to questions of law but considered the exceptions proffered by petitioner (misapprehension of facts, manifestly mistaken inference, conflict with trial court findings, overlooked undisputed facts, or inconsistency with admissions). The Court found the petition timely filed under the extension previously granted and rejected respondent’s procedural challenges to dismissal for lateness or solely raising factual questions.
Supreme Court: Admission of Annex “C” and Sufficiency of Proof of Receipt
The Court agreed with the CA that respondent’s admission of Annex “C” (a copy of the demand letter) amounted only to admission of the letter’s existence and due execution, not to receipt. Because the complaint did not allege receipt and petitioner failed to formally offer the registry return card or other competent proof of receipt at trial, extrajudicial demand was not established for purposes of counting default from that letter.
Supreme Court: Judicial Demand as Trigger of Default (Article 1169 and 1170)
The Court held that even without proof of extrajudicial demand, petitioner’s filing of the complaint on June 10, 2005 constituted a judicial demand that triggers mora (default) under Article 1169. Once judicial demand is made and the obligor fails to perform, delay is present and the obligor becomes liable for damages under Article 1170. Thus, respondent incurred delay beginning with the filing of the complaint and is liable for interest and damages accordingly. The CA’s reversal based solely on lack of extrajudicial demand was therefore legally flawed insofar as it ignored that the complaint itself constituted judicial demand.
Supreme Court: Remedy Election and Error in Granting Both Collection and Foreclosure
The Court reversed the RTC’s grant to the extent that it allowed successive or cumulative remedies — specifically, ordering payment of the debt and simultaneously providing for foreclosure in default. Citing Bachrach and subsequent jurisprudence, the Court reiterated the long-settled rule that the creditor’s remedies of personal action for debt and real action to foreclose the mortgage are mutually exclusive; a creditor may pursue either remedy but not both simultaneously or successively for the same cause of action. Consequently, while the Court sustained the RTC’s award of the P200,000 principal obligation, it deleted the provision authorizing foreclosure in the event of default.
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Facts and Antecedent Proceedings
- Petition filed: Complaint dated June 10, 2005 by petitioner Ma. Luisa A. Pineda against respondent Virginia ZuAiga vda. de Vega seeking payment of principal and interest or, in default, foreclosure of the real estate mortgage securing the obligation.
- Alleged loan and security: Petitioner alleged that on March 25, 2003 respondent borrowed P500,000.00 payable within one year with an interest rate of 8% per month, and to secure the loan respondent executed a real estate mortgage (2003 Agreement) over a parcel of land covered by Transfer Certificate of Title No. T-339215 together with all buildings and improvements thereon (the Property), in favor of petitioner.
- Default allegation and accrued interest: On maturity respondent allegedly failed to pay despite demand; as of May 2005 unpaid accumulated interest amounted to P232,000.00.
- Respondent’s denials and defenses: In her answer respondent denied petitioner’s material allegations; contended the complaint was dismissible for lack of prior barangay conciliation and for failure to join her husband as a party; argued the agreed interest rate was excessive, unconscionable and thus illegal; denied receipt of P500,000.00 and claimed the P500,000.00 referred to an accumulated amount of an earlier obligation secured from petitioner.
- Petitioner’s replies and admissions: Petitioner maintained the husband need not be joined because the transaction did not involve him; asserted the agreement stipulated 8% per month but that what was actually charged was 4% per month; admitted the original loan obtained in 2000 was P200,000.00 bearing 3% interest per month; in written interrogatories petitioner admitted the P500,000.00 indicated in the 2003 Agreement referred to a previously executed undated real estate mortgage (undated Agreement) which secured respondent’s earlier P200,000.00 loan.
- Pretrial and trial occurrences: The parties underwent mediation proceedings which were unsuccessful; the case proceeded to hearing; despite leeway from the RTC, respondent failed to formally offer her evidence.
- Documentary claim of demand: Petitioner referred to a purported Demand Letter dated August 4, 2004 and alleged receipt by respondent on a September 2004 date (dates vary in records as noted in the proceedings).
Issues Presented
- Primary factual/legal issue presented for resolution in the Petition: Whether a demand letter was sent by petitioner to respondent and whether it was received by respondent.
- Procedural and scope issues raised by parties: Petitioner invoked exceptions to the Rule 45 limitation on factual review to justify review of CA’s factual findings (asserting misapprehension of facts; manifestly mistaken/absurd inference; CA findings contrary to trial court; CA manifestly overlooked relevant undisputed facts; CA findings contrary to admissions of the parties). Respondent urged dismissal of the Petition on procedural grounds: alleged belated filing and failure by petitioner to pose a question of law.
Trial Court (RTC) Findings and Disposition
- RTC factual findings: The RTC found the existence of the loan and the real estate mortgage established and that judicial foreclosure would be proper given respondent’s non‑compliance; it found the undated Agreement contained no provision on interest and thus legal interest of 12% per annum should be imposed; it found the 2003 Agreement’s stated interest rate unconscionable; it ruled non‑joinder of respondent’s husband was not a jurisdictional defect and did not warrant dismissal; it held non‑referral to barangay conciliation did not prevent jurisdiction given prior conciliation and mediation proceedings between the parties.
- RTC dispositive order: Ordered respondent to pay petitioner the loaned amount of P200,000.00 plus interest of 12% per annum from September 3, 2004 (the date the RTC noted respondent received the demand letter dated August 2004) until finality of decision and satisfaction; awarded P50,000.00 as nominal damages and P30,000.00 as attorney’s fees; directed that in default of payment the mortgaged property and improvements shall be foreclosed and sold and proceeds applied to the amounts due, including damages and attorney’s fees.
Court of Appeals (CA) Findings and Rationale
- CA disposition: In Decision dated March 21, 2017, the CA reversed and set aside the RTC Decision and dismissed the complaint; its Resolution dated August 30, 2017 denied petitioner’s motion for reconsideration.
- CA factual finding on demand: The CA found petitioner failed to prove that prior extrajudicial demand was made upon respondent as required by Article 1169 of the Civil Code. Although petitioner alleged and testified that demand was sent by registered mail and received on a specified September 2004 date, the registry return card evidencing such receipt was not specifically and formally offered in evidence.
- CA evidentiary observations: Petitioner presented a copy of the demand letter with a photocopy of the face of a registry return card claimed to refer to the letter; CA noted no formal offer of the registry return card, no postman’s certificate, and no testimony of a postman or other competent proof that respondent actually received the demand letter. CA found the proffered photocopy insufficient to prove actual receipt.
- CA legal consequence: Because the requisite demand was not proven, the CA concluded respondent could not be considered in default (mora solvendi) and therefore petitioner’s case