The Supreme Court ruled that a complaint for damages filed by a homeowner dispossessed of her property due to foreclosure should not have been dismissed without a full trial. The Court emphasized that the homeowner had the right to present evidence to support her claim that her right to due process and equal protection of law was violated, and the RTC Olongapo committed an error in prematurely dismissing the case based on the mortgagee’s arguments. This decision reinforces the importance of protecting the rights of individuals who may not be party to a mortgage agreement but whose property rights are affected by its foreclosure.

Whose House Is It Anyway? Mortgage Foreclosure and the Rights of Third-Party Homeowners

This case, Rosa Pamaran v. Bank of Commerce, revolves around Rosa Pamaran, who built a house on land owned by her children, Rhodora Pamaran and spouses Rosemary and Leonardo Bernabe. These children later mortgaged their land to Bank of Commerce (Bankcom) without Rosa’s explicit consent regarding her house. When the properties were foreclosed, Bankcom took possession of the land and the house, leading Rosa to file a complaint for damages, alleging unlawful taking of her property and violation of her constitutional rights. The central legal question is whether the trial court erred in dismissing Rosa’s complaint without allowing her to present evidence that her rights were violated when Bankcom took possession of her house.

The facts of the case highlight a critical issue: the extent to which a mortgage on land extends to improvements built by someone other than the mortgagor. Rosa argued that the bank was aware of her house and that she never consented to the mortgage covering her property. She claimed that the foreclosure and subsequent dispossession of her house violated her right to due process. Bankcom, on the other hand, contended that the mortgage included all improvements on the land and that Rosa’s complaint was a collateral attack on its title.

The Supreme Court, in its analysis, distinguished between motions to dismiss filed before trial and those filed after the plaintiff has presented evidence. In this case, Bankcom filed a motion to dismiss by way of affirmative defenses before any evidence was presented. The Court emphasized that, in such instances, the motion must be resolved based solely on the allegations in the complaint, assuming them to be true. The RTC Olongapo, however, considered external factors and arguments presented by Bankcom, which the Supreme Court found to be an error.

The Court cited established jurisprudence, stating 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 m determining the presence or the absence of a cause, of action other than the allegations in the complaint.

This principle is crucial in protecting a plaintiff’s right to due process, ensuring they have the opportunity to present evidence to support their claims.

Moreover, the Supreme Court addressed the issue of whether Rosa’s action was a real or personal action. A real action affects title to or possession of real property, while a personal action seeks recovery of damages or enforcement of contractual obligations. Bankcom argued that Rosa’s complaint was a real action that should have been filed in the location of the property (Muntinlupa City), where the RTC had already issued writs of possession. The Supreme Court disagreed, holding that Rosa’s primary objective was to recover damages for the unlawful taking of her house, making it a personal action properly filed in Olongapo City, where she resided.

In its discussion, the Court also addressed the issue of jurisdiction and whether Rosa’s action interfered with the jurisdiction of the RTC Muntinlupa. The Court noted that the nature of the action for damages is distinct from the petition for a writ of possession.

One, the nature of this action, which is for damages, is different from the petition before the RTC Muntinlupa, which is for issuance of writs of possession. Two, the laws relied upon in these actions vary; this damage suit is based on Rosa’s reliance on her right emanating from Article 32 of the Civil Code; while Bankcom’s Petition is pursuant to Act No. 3135, as amended.

Article 32 of the Civil Code provides recourse for damages against anyone who violates a person’s constitutional rights, including the right against deprivation of property without due process.

The ruling clarifies that the action for damages based on a violation of constitutional rights is separate and distinct from the proceedings for a writ of possession. The Court underscored that Rosa’s claim arose from Bankcom’s alleged violation of her rights, not from a challenge to the validity of the writ of possession itself. The Supreme Court emphasized that this case involves a claim arising from Bankcom’s alleged violation of Rosa’s right to due process, and to the enjoyment of her house, which is separate from the application for a writ of possession. The Court held that, since this action is a personal action, it was properly filed in the RTC Olongapo, where Rosa resided.

Building on this principle, the Court stated that the RTC Olongapo erred in dismissing the Complaint on the grounds of lack of cause of action, and of improper venue. The Supreme Court’s decision reinstates Rosa’s complaint and remands the case to the RTC Olongapo for further proceedings, where Rosa’s heirs will have the opportunity to present evidence supporting her claim for damages.

FAQs

What was the key issue in this case?	The key issue was whether the trial court erred in dismissing Rosa Pamaran’s complaint for damages without allowing her to present evidence that her constitutional rights were violated when Bank of Commerce took possession of her house.
What is a cause of action?	A cause of action is an act or omission that violates the right of another, giving rise to a claim for relief. Its essential elements are the plaintiff’s right, the defendant’s obligation, and the defendant’s act or omission violating that right.
What is the difference between a real action and a personal action?	A real action affects title to or possession of real property, while a personal action seeks recovery of damages or enforcement of contractual obligations. The venue for real actions is where the property is located, while personal actions may be filed where the plaintiff or defendant resides.
What is a motion to dismiss for failure to state a cause of action?	A motion to dismiss for failure to state a cause of action argues that, even if all the facts in the complaint are true, the plaintiff is not entitled to any legal relief. It must be resolved based solely on the allegations in the complaint.
What did the RTC Olongapo do wrong?	The RTC Olongapo erred by considering external factors and arguments presented by Bankcom instead of solely relying on the allegations in Rosa’s complaint, assuming them to be true. It also incorrectly concluded that the action was a real action and that it interfered with the jurisdiction of another court.
Why did the Supreme Court reverse the RTC’s decision?	The Supreme Court reversed the RTC’s decision because it found that the RTC had improperly dismissed the complaint without giving Rosa’s heirs the opportunity to present evidence to support her claim for damages. The court held that the complaint stated a valid cause of action and was properly filed in the correct venue.
What is the significance of Article 32 of the Civil Code in this case?	Article 32 of the Civil Code provides a remedy for damages against anyone who violates a person’s constitutional rights. Rosa relied on this article to claim damages for Bankcom’s alleged violation of her right to due process and right to enjoy her house.
What is the practical implication of this ruling?	The ruling reinforces the principle that homeowners who are not party to a mortgage agreement but whose property rights are affected by its foreclosure are entitled to due process and have the right to seek damages if their rights are violated.

This Supreme Court decision underscores the importance of protecting the rights of individuals whose properties are affected by foreclosure proceedings, even if they are not direct parties to the mortgage agreement. It clarifies the distinction between real and personal actions and reinforces the principle that courts must consider only the allegations in the complaint when resolving motions to dismiss filed before trial. The ruling also serves as a reminder to financial institutions to exercise due diligence and respect the rights of all parties involved in foreclosure proceedings.

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, substituted by her heirs, through their representative, Rosemary P. Bernabe, Petitioners, vs. Bank of Commerce, Respondent., G.R. No. 205753, July 04, 2016