G.R. No. L-9306 - Southern Motors, Inc. vs. Barbosa

Case Summary (G.R. No. L-9306)

Petitioner (Appellant)

Eliseo Barbosa appealed the decision of the Court of First Instance. His contentions on appeal were: (1) that the trial court erred in hearing and deciding plaintiff’s motion for reconsideration without serving him notice of the motion or its hearing; (2) that the court rendered judgment on the pleadings when no issue was properly before it; and (3) that entry of judgment foreclosing his property violated due process.

Respondent (Appellee)

Southern Motors, Inc. sought foreclosure of the real estate mortgage it held as security for Brillantes’ indebtedness. It moved for summary judgment (or judgment on the pleadings) on the basis that Barbosa’s pleadings did not present a legally sufficient defense to bar foreclosure.

Key Dates and Procedural Events

Service of plaintiff’s motion for reconsideration on defendant’s counsel (through an office employee): June 9, 1951, with submission set for June 16, 1951.
Lower court initially denied summary judgment as premature (Judge Roman Ibanez).
Case was transferred to another branch (Judge Querube C. Makalintal) for resolution of the motion for reconsideration; that branch rendered the judgment appealed.
Decision under review rendered and affirmed by the Supreme Court.

Applicable Law and Authorities Relied Upon

Civil Code provisions discussed in the opinion: Article 2058 (on guarantor’s rights generally), Article 2087 (on alienation of pledged or mortgaged things to satisfy obligation), and Article 2126 (on the immediate subjection of mortgaged property to the obligation secured).
Procedural reference: Section 2, Rule 70, Rules of Court (judicial foreclosure); extrajudicial foreclosure under Act No. 3135 and Act No. 4118.
Controlling precedent cited: Saavedra v. Price, 68 Phil. 688 (holding that a mortgagor is not entitled to demand exhaustion of the property of the principal debtor).
Constitutional framework for the decision period: the 1935 Philippine Constitution (applicable to decisions rendered in 1956).

Procedural History and Nature of the Pleadings

Southern Motors filed a complaint to foreclose the mortgage. Barbosa’s answer admitted the complaint’s allegations but asserted a special and affirmative defense: that he executed the mortgage only as guarantor/surety for Brillantes and that plaintiff had not and did not intend to exhaust remedies against the principal debtor’s assets before seeking satisfaction from Barbosa. Plaintiff moved for summary judgment; the trial court initially denied it as premature. Plaintiff sought reconsideration of that denial and requested transfer to another branch. Upon referral and submission, the court rendered judgment for plaintiff. Barbosa appealed.

Issues Presented to the Court

The Supreme Court identified and addressed: (1) whether Barbosa was denied notice and an opportunity to be heard when the trial court considered plaintiff’s motion for reconsideration; (2) whether there was any issue properly submitted for determination so as to permit judgment on the pleadings or summary judgment; and (3) whether the mortgage could be foreclosed without first exhausting the principal debtor’s assets.

Court’s Findings on Notice and Due Process

The Court found that service of the motion for reconsideration was properly made on Barbosa’s counsel (through an office employee, Agripino Aguilar) on June 9, 1951, with notice that the motion would be submitted on June 16, 1951. Consequently, the contention that Barbosa lacked notice of the hearing was contradicted by the record, and the claim of deprivation of due process failed.

Court’s Analysis of Whether an Issue Was Properly Before the Lower Court

Although Barbosa’s answer admitted the complaint’s averments, he raised a special and affirmative defense asserting that the creditor had not exhausted the principal debtor’s assets. The Court concluded that this defense presented a single, determinative issue — the sufficiency of the affirmative defense to bar foreclosure — and that plaintiff’s motion for reconsideration effectively revived and placed that issue before the second-branch judge for resolution. Therefore, the trial court did have an issue properly submitted for resolution, and rendering judgment on the pleadings or by summary procedure was not procedurally improper under the circumstances.

Court’s Substantive Ruling on the Affirmative Defense (Exhaustion of Principal’s Assets)

The Court held that Barbosa’s affirmative defense was legally insufficient for the following reasons drawn from the mortgage instrument and the Civil Code:

The mortgage deed expressly granted the mortgagee (Southern Motors) the authority to foreclose the mortgage judicially or extrajudicially and to apply proceeds to satisfy the secured obligation; it provided for foreclosure to satisfy the full amount of P2,889.53 plus interest.
Under the Civil Code, the right of a guarantor to demand exhaustion of the principal debtor’s property (Article 2058 in the Court’s discussion) exists only where no pledge or mortgage has been given as a special security for the obligation. When a mortgage has been constituted as special security, Title XVI of the Civil Code governs; Article 2087 emphasizes that pledged or mortgaged things may be alienated for payment when the principal obligation becomes due, and Article 2126 states that the mortgage directly and immediately subjects the property to the obligation.
Precedent (Saavedra v. Price) established that a mortgagor is not entitled to demand the exhaustion of the property of the principal debtor.
While an ordinary personal guarantor (not a mortgagor

Case Syllabus (G.R. No. L-9306)

Case Citation and Decision

Reported at 99 Phil. 263, G.R. No. L-9306, decided May 25, 1956.
Decision authored by Concepcion, J.
Record originally forwarded to the Court of Appeals but certified to the Supreme Court because the appeal presented questions of law.

Parties

Plaintiff and Appellee: Southern Motors, Inc.
Defendant and Appellant: Eliseo Barbosa.
Principal debtor referenced in the pleadings: Alfredo Brillantes.

Nature of the Action

Action to foreclose a real estate mortgage constituted by defendant Eliseo Barbosa in favor of plaintiff Southern Motors, Inc.
Mortgage was constituted as security for payment of the sum of P2,889.53 due to plaintiff from Alfredo Brillantes, who had failed to pay according to the mortgage terms.

Relief Sought in Complaint and Lower Court Order

The Court of First Instance of Iloilo ordered:
- (a) Defendant Eliseo Barbosa to pay to the Court, for plaintiff’s benefit within ninety (90) days from receipt, the sum of P2,889.53, with interest at 12% per annum computed on the basis of the amounts of the instalments mentioned in the mortgage and of the dates they fell due, until fully paid; the sum of P200 by way of attorney's fees; plus costs.
- (b) Upon failure of the defendant to pay as aforesaid, ordering that the land described in the complaint and subject of the mortgage be sold at public auction in accordance with law to realize the judgment debt and costs.

Defendant’s Answer and Affirmative Defense

Defendant Eliseo Barbosa admitted the allegations of the complaint.
Defendant alleged, as a "special and affirmative" defense:
- He executed the deed of mortgage solely to guarantee as surety and/or guarantor the debt of Mr. Alfredo Brillantes in favor of plaintiff.
- Plaintiff had no right of action against him because plaintiff "did not intent or intents to exhaust all recourses to collect from the true debtor Mr. Alfredo Brillantes the debt contracted by the latter in favor of said plaintiff, and did not resort nor intends to resort all the legal remedies against the true debtor Mr. Alfredo Brillantes, notwithstanding the fact that said Mr. Alfredo Brillantes is solvent and has many properties within the Province of Iloilo."

Motions and Lower Court Proceedings

Plaintiff moved for summary judgment; a branch of the Court of First Instance of Iloilo, presided by Judge Roman Ibanez, denied the motion on the ground that it "is premature."
Plaintiff filed a motion for reconsideration of Judge Ibanez’s order.
Plaintiff also moved to transfer the case to another branch, alleging Judge Ibanez was busy trying cadastral cases and adopted a "policy of refraining from entertaining any other civil cases and all incidents related thereto, until after said cadastral cases shall have been finally disposed of."
With express authority of Judge Ibanez, the case was referred to the branch presided by Hon. Querube C. Makalintal for action on the motion for reconsideration.
Judge Makalintal thereafter rendered the decision from which defendant appealed.

Appellant’s Assignments of Error

Appellant contended in his brief:
1. The trial court erred in hearing plaintiff-appellee's "motion for reconsideration" dated June 9, 1951, because defendant-appellant was not served with a copy nor notice of the hearing.
2. The trial court erred in rendering a judgment on the pleadings in appellee’s favor when no issue was submitted for resolution, to the prejudice of appellant’s substantial rights.
3. The court a quo erred in depriving defendant-appellant of his property rights without due process of law.

Service and Notice of Hearing

Record shows defendant’s counsel in the lower court, Atty. Manuel F. Zamora, through an employee named Agripino Aguilar, was served on June 9, 1951, with a copy of plaintiff’s motion for reconsideration.
The service included notice that the motion would be submitted for consideration and approval of the lower court on Saturday, June 16, 1951, at 8:00 a.m., or soon thereafter as counsel might be heard.
The Supreme Court found the first assignment of error based on lack of notice to be withou