G.R. No. 146519. July 8, 2005
RURAL BANK OF CALINOG (ILOILO), INC., Petitioner, vs. COURT OF APPEALS, SPOUSES GREGORIO CERBAÑA and FILMA CERBO-CERBAÑA, Respondents.

FACTS

Spouses Gregorio and Filma Cerbaña, along with Filma’s mother Carmen Cerbo, filed a complaint for annulment of certificate of sale, accounting, and damages against Rural Bank of Calinog. They alleged that after Carmen Cerbo’s mortgaged property was foreclosed and sold to the bank, they redeemed it by depositing money with the bank and securing an additional loan from another bank, which was also paid. Despite these payments, the property was foreclosed again and sold at auction. The bank moved to dismiss the complaint, arguing that Carmen Cerbo, the original mortgagor, was the only real party-in-interest and, as she was already deceased, the case should be dismissed for lack of cause of action against the petitioners.
The trial court granted the motion to dismiss. It held that the Cerbaña spouses lacked the legal personality to sue, as they were not parties to the original mortgage contract and could not represent the deceased Carmen Cerbo. The spouses then filed a petition for certiorari with the Court of Appeals, contending they filed the suit not merely as representatives but also in their own right, having personally paid the redemption price and subsequent loan.

ISSUE

Whether the trial court committed grave abuse of discretion in dismissing the complaint for failure to state a cause of action.

RULING

Yes, the trial court committed grave abuse of discretion. The Supreme Court affirmed the Court of Appeals’ ruling that the complaint sufficiently alleged a cause of action. A cause of action exists if the complaint shows a right of the plaintiff, a correlative obligation of the defendant, and an act or omission by the defendant violating that right. The complaint alleged that the Cerbaña spouses, in their personal capacity, paid the redemption price and subsequent loans, and that the bank, after accepting these payments, unjustly foreclosed the property without proper accounting. These allegations, if proven true, establish a right on their part to demand an accounting and a refund for any excess payment, and a corresponding obligation on the bank.
The trial court erred in concluding that the spouses lacked personality to sue simply because they were not parties to the original mortgage. Their cause of action stemmed not from the mortgage contract itself, but from their personal transactions and payments to the bank, which gave them a direct interest. The dismissal, based solely on the death of the original mortgagor while ignoring the spouses’ independent claims, was a capricious disregard of the complaint’s allegations, constituting grave abuse of discretion. Thus, certiorari was a proper remedy, and the case was remanded for trial on the merits.