The Supreme Court, in this case, ruled that a party actively participating in a trial at a lower court is estopped from later questioning that court’s jurisdiction on appeal. This decision clarifies that while jurisdictional challenges can typically be raised at any time, a party’s conduct during litigation can prevent them from doing so if the lower court initially had jurisdiction. This ruling protects against parties exploiting procedural technicalities after fully engaging in a trial.

Mortgaged Without Consent: Can a Bank Be Stopped from Claiming Jurisdiction?

This case revolves around a property dispute where Atty. Restituto Cudiamat’s share of land was mortgaged by his brother, Perfecto, without his knowledge or consent. Perfecto presented a Special Power of Attorney (SPA) purportedly signed by Restituto. When the bank foreclosed on the property, Restituto contested the mortgage’s validity, arguing he never authorized it. The central legal question is whether the bank, having actively participated in the trial court proceedings, could later challenge the court’s jurisdiction after an unfavorable decision.

The legal saga began when Restituto and his co-petitioners filed a complaint for quieting of title against Batangas Savings and Loan Bank, Inc., and the Register of Deeds. The bank, in its answer, initially maintained the validity of the mortgage and actively participated in the trial. However, after the Balayan Regional Trial Court (RTC) ruled against it, the bank appealed, arguing that the RTC lacked jurisdiction because the bank was under receivership and liquidation by the Philippine Deposit Insurance Corporation (PDIC). The bank contended that jurisdiction belonged to the liquidation court, the Nasugbu RTC.

The Court of Appeals sided with the bank, dismissing the complaint for quieting of title. It reasoned that the Balayan RTC should have deferred to the Nasugbu RTC, which was acting as a liquidation court. However, the Supreme Court reversed this decision, emphasizing the principle of **estoppel**. Estoppel prevents a party from asserting a right or claim that contradicts its previous actions or statements. The Supreme Court underscored the specific circumstances of the case.

The Supreme Court cited Lozon v. NLRC to clarify the application of estoppel in jurisdictional matters:

The operation of estoppel on the question of jurisdiction seemingly depends on whether the lower court actually had jurisdiction or not. If it had no jurisdiction, but the case was tried and decided upon the theory that it had jurisdiction, the parties are not barred, on appeal, from assailing such jurisdiction, for the same “must exist as a matter of law, and may not be conferred by the consent of the parties or by estoppel.” However, if the lower court had jurisdiction, and the case was heard and decided upon a given theory, such, for instance, as that the court had no jurisdiction, the party who induced it to adopt such theory will not be permitted, on appeal, to assume an inconsistent position – that the lower court had jurisdiction…

In this instance, the Balayan RTC initially had jurisdiction over the case. The Nasugbu RTC only assumed jurisdiction over claims against the bank later, when PDIC filed a petition for assistance in liquidation. Building on this principle, the Court asserted that the bank’s active participation in the Balayan RTC proceedings prevented it from later challenging that court’s jurisdiction. This approach ensures fairness and prevents parties from strategically delaying or avoiding unfavorable judgments.

Moreover, the Supreme Court considered the practical implications of requiring the petitioners to refile their claims. Restituto was elderly and resided far from the proposed liquidation court, and one of the co-petitioners had passed away. The Court deemed it an “exercise in futility” to compel them to relitigate the case, especially since the issues had already been thoroughly examined by the Balayan RTC. The Supreme Court in Valenzuela v. Court of Appeals, held that as a general rule, if there is a judicial liquidation of an insolvent bank, all claims against the bank should be filed in the liquidation proceeding. However, the Court in Valenzuela, after considering the circumstances attendant to the case, held that the general rule should not be applied if to order the aggrieved party to refile or relitigate its case before the litigation court would be “an exercise in futility.”

The court has the power to determine jurisdiction and it will become final if a party will be estopped in questioning the court’s jurisdiction. In the case of Tijam vs. Sibonghanoy, G.R. No. L-21450, April 15, 1968, the Supreme Court held that a party may be estopped from questioning a court’s jurisdiction after voluntarily submitting to it and actively participating in the proceedings. This case is a perfect example of that legal principle.

FAQs

What was the key issue in this case?	The key issue was whether Batangas Savings and Loan Bank could question the jurisdiction of the Balayan RTC on appeal, after actively participating in the trial court proceedings. The Supreme Court focused on the principle of estoppel.
What is the principle of estoppel as it relates to jurisdiction?	Estoppel prevents a party from challenging a court’s jurisdiction if they actively participated in the proceedings and only raised the jurisdictional issue after receiving an unfavorable judgment. It applies when the lower court initially had jurisdiction.
Why did the Supreme Court rule in favor of the petitioners?	The Supreme Court ruled that the bank was estopped from questioning the Balayan RTC’s jurisdiction because it had actively participated in the trial. Compelling the elderly petitioner to relitigate in another court would be an exercise in futility.
What was the basis of the bank’s argument that the Balayan RTC lacked jurisdiction?	The bank argued that because it was under receivership and liquidation by PDIC, the Nasugbu RTC, acting as a liquidation court, had exclusive jurisdiction over claims against it.
What is a liquidation court?	A liquidation court is a court assigned to oversee the liquidation process of a company or bank that is insolvent. Its primary role is to ensure the fair and orderly distribution of assets to creditors.
When did the Nasugbu RTC assume jurisdiction over the claims against the bank?	The Nasugbu RTC assumed jurisdiction on May 25, 2000, when PDIC’s petition for assistance in the liquidation was raffled thereat and given due course.
What prior Supreme Court case supported the decision in this case?	The Supreme Court cited Lozon v. NLRC, which clarified the application of estoppel in jurisdictional matters, and Valenzuela v. Court of Appeals, relating to refiling of claims.
What happens to the title of the property as a result of this ruling?	The encumbrance annotated on TCT No. T-37889 is cancelled, and TCT No. T-48405 issued in the name of the bank is cancelled and the former title is reinstated. The bank must return the property to the petitioner spouses.

This case highlights the importance of actively and consistently asserting jurisdictional objections. Parties cannot participate fully in a trial and then, upon receiving an unfavorable outcome, claim the court lacked the power to hear the case. The Supreme Court’s decision reinforces the principles of fairness and efficiency in legal proceedings, preventing strategic manipulation of jurisdictional rules.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ATTY. RESTITUTO G. CUDIAMAT v. BATANGAS SAVINGS AND LOAN BANK, INC., G.R. No. 182403, March 09, 2010