In Rosa Pamaran vs. Bank of Commerce, the Supreme Court held that a complaint for damages related to the unlawful taking of property should not be dismissed prematurely based on affirmative defenses without a full trial. The Court emphasized the importance of hypothetically admitting the allegations in the complaint when resolving a motion to dismiss, ensuring that a plaintiff’s right to due process is protected. This ruling safeguards individuals from potentially unjust property deprivations during foreclosure proceedings, reinforcing the principle that all parties are entitled to a fair hearing and the opportunity to present their case.

Whose House Is It Anyway? Resolving Ownership Disputes in Foreclosure Actions

The case of Rosa Pamaran, substituted by her heirs, through their representative, Rosemary P. Bernabe, petitioners, vs. Bank of Commerce, respondent, originated from a dispute over a residential house built on land that was later foreclosed by Bank of Commerce (Bankcom). Rosa Pamaran (Rosa) claimed that her house, built on lots owned by her children, was unlawfully taken by Bankcom after the bank foreclosed on the properties due to unpaid loans secured by real estate mortgages (REM). Rosa filed a complaint seeking damages for the value of her house, asserting that Bankcom was aware of her ownership and did not include her house in the loan agreement. The central legal question revolved around whether the Regional Trial Court (RTC) erred in dismissing Rosa’s complaint based on affirmative defenses raised by Bankcom, without allowing her to present evidence to support her claim.

Bankcom argued that Rosa had no cause of action, as she was not a party to the loan agreements and the REM included all improvements on the land. The RTC Olongapo granted Bankcom’s motion to dismiss, leading Rosa to appeal. The Supreme Court addressed whether the RTC prematurely dismissed the case by considering external evidence and failing to hypothetically admit the allegations in Rosa’s complaint. A cause of action, as defined by the Court, consists of: (1) the plaintiff’s right; (2) the defendant’s obligation; and (3) the defendant’s violation of that right, entitling the plaintiff to relief. The Court distinguished between motions to dismiss under Rule 16, Section 1(g) (failure to state a cause of action) and Rule 33 (demurrer to evidence) of the Rules of Court. According to the Court,

In the first situation, the motion must be made before a responsive pleading is filed; and it can be resolved only on the basis of the allegations in the initiatory pleading. On the other hand, in the second instance, the motion to dismiss must be filed after the plaintiff rested his case; and it can be determined only on the basis of the evidence adduced by the plaintiff.

Since Bankcom’s motion was made before trial, it fell under the first category, requiring the RTC to resolve the motion based solely on the allegations in Rosa’s complaint, assuming them to be true. The Court emphasized that the RTC should not have inquired into the truthfulness of the allegations at this stage, as doing so would deny Rosa her right to due process. The Supreme Court held that in determining whether a complaint states a cause of action, the court must hypothetically admit the truth of the allegations and determine if it may grant the relief prayed for based on them. The court cannot consider external factors in determining the presence or the absence of a cause of action other than the allegations in the complaint.

The Court dissected the pertinent allegations in Rosa’s complaint. Specifically, the complaint stated that Rosa owned a residential house built on lots owned by her children and that Bankcom appropriated her house because of the foreclosure of these lots. Consequently, Rosa sought recovery of damages against Bankcom. Hypothetically admitting these allegations, the Court found that Rosa’s cause of action involved her right over her house, Bankcom’s obligation to respect that right, and Bankcom’s violation of that right, giving rise to the action for damages. The RTC, however, improperly considered Bankcom’s arguments and ignored the assertions in the complaint. According to the RTC, the REM included not only the parcels of land, but likewise ‘all the buildings and improvements now existing or may hereafter be erected or constructed thereon’.

The Supreme Court found fault in the RTC’s disregard of the allegations and its failure to recognize that Bankcom’s arguments necessitated an examination of evidence that could only be achieved through a full trial. It emphasized that the determination of Rosa’s right over the house and Bankcom’s violation of that right could not be resolved in a mere motion to dismiss. Instead, it required a full adjudication of the merits of the case based on all evidence presented by the parties. Further, the RTC justified its dismissal by claiming that Rosa’s complaint interfered with the jurisdiction of the RTC Muntinlupa, which had issued writs of possession to Bankcom. The RTC Olongapo argued that by seeking damages, Rosa was effectively seeking the invalidation of the writs of possession.

The Supreme Court rejected this justification, clarifying the nature of Rosa’s action. In her complaint and related pleadings, Rosa made it clear that her case was a personal action for damages arising from Bankcom’s violation of her right to due process, equal protection, and the enjoyment of her house. She emphasized that she was not questioning the writs issued by the RTC Muntinlupa but rather assailing Bankcom’s use of those writs to deprive her of her right to enjoy her house. The Supreme Court articulated the distinction between real and personal actions. Section 1, Rule 4 of the Rules of Court, in relation to Section 2 thereof, defines a real action as one ‘affecting title to or possession of real property or interest therein;’ and, all other actions are personal actions. A real action must be filed in the proper court with jurisdiction over the subject real property, while a personal action may be filed where the plaintiff or defendant resides, or if the defendant is a non-resident, where he may be found, at the election of the plaintiff. Personal actions include those filed for recovery of personal property, or for enforcement of contract or recovery of damages for its breach, or for the recovery of damages for injury committed to a person or property.

The Court stated that the complaint indicated it was for recovery of damages for the injury committed by Bankcom for violating Rosa’s right to due process, and her right to enjoy her house. Rosa repeatedly averred that she did not seek recovery of its possession or title. Her interest in the house was merely incidental to the primary purpose for which the action was filed, that is, her claim for damages. The Supreme Court stated that the primary objective of the Complaint is to recover damages, and not to regain ownership or possession of the subject property. Hence, this case is a personal action properly filed in the RTC Olongapo, where Rosa resided. The Court underscored that Rosa’s action did not interfere with the jurisdiction of the RTC Muntinlupa because the nature of the action (damages) differed from the petition for writs of possession. Additionally, the laws relied upon varied; Rosa based her claim on Article 32 of the Civil Code, while Bankcom’s petition was pursuant to Act No. 3135, as amended.

The Supreme Court concluded that the RTC erred in dismissing the complaint on the grounds of lack of cause of action and improper venue. The Court held that this case involves a claim arising from Bankcom’s alleged violation of Rosa’s right to due process and the enjoyment of her house. On the other hand, the one for issuance of writs of possession involves Bankcom’s application to be placed in possession of the subject properties. Last, as already discussed, the former is a personal action while the latter is a real action affecting title to and possession of a real property.

FAQs

What was the key issue in this case?	The key issue was whether the RTC erred in dismissing Rosa Pamaran’s complaint for damages based on affirmative defenses without a full trial, particularly focusing on whether the court properly assessed the cause of action based solely on the allegations in the complaint.
What is a cause of action?	A cause of action is the act or omission by which a person violates the right of another. Its essential elements are: (1) a plaintiff’s right; (2) a defendant’s obligation not to violate that right; and (3) the defendant’s act or omission in violation of that right, for which the plaintiff seeks relief.
What is the difference between a real and personal action?	A real action affects title to or possession of real property, while a personal action seeks recovery of personal property or damages. Real actions are filed where the property is located, whereas personal actions are filed where the plaintiff or defendant resides.
Why did the Supreme Court reverse the RTC’s decision?	The Supreme Court reversed the RTC’s decision because the RTC improperly considered external evidence beyond the allegations in the complaint when deciding on the motion to dismiss and failed to hypothetically admit the truth of the allegations in Rosa’s complaint.
What is the significance of hypothetically admitting allegations in a complaint?	Hypothetically admitting allegations means the court must assume the truth of the allegations in the complaint for the purpose of determining whether a cause of action exists. This ensures that the plaintiff has an opportunity to prove their claims in a full trial.
How does this case affect foreclosure proceedings?	This case highlights the importance of due process in foreclosure proceedings and protects the rights of individuals who may have interests in properties subject to foreclosure, ensuring they have a fair opportunity to assert their claims.
What was Rosa Pamaran seeking in her complaint?	Rosa Pamaran was seeking damages from Bank of Commerce for the alleged unlawful taking of her residential house, arguing that the bank violated her right to due process by dispossessing her of the house without adequate compensation.
Did Rosa Pamaran question the validity of the writs of possession?	No, Rosa Pamaran clarified that she was not questioning the validity of the writs of possession issued by the RTC Muntinlupa. Instead, she assailed Bankcom’s use of those writs to deprive her of her right to enjoy her house.

The Supreme Court’s decision in Rosa Pamaran vs. Bank of Commerce reinforces the importance of due process and the protection of property rights in foreclosure cases. By emphasizing the need to hypothetically admit the allegations in a complaint when resolving a motion to dismiss, the Court safeguards individuals from premature and potentially unjust deprivations of their property, ensuring they have a fair opportunity to present their case in court.

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: Rosa Pamaran vs. Bank of Commerce, G.R. No. 205753, July 04, 2016