GR 151098; (March, 2006) (Digest)
G.R. No. 151098 ; March 21, 2006
ERLINDA GAJUDO, FERNANDO GAJUDO, JR., ESTELITA GAJUDO, BALTAZAR GAJUDO and DANILO ARAHAN CHUA, Petitioners, vs. TRADERS ROYAL BANK, Respondent.
FACTS
Petitioners filed a complaint to annul the extrajudicial foreclosure and auction sale of their mortgaged property to respondent Traders Royal Bank. They alleged the 1981 auction sale was irregular due to a shockingly low bid price and that they failed to redeem the property within the one-year statutory period due to lack of knowledge and education. They further claimed that after the redemption period, petitioner Danilo Chua and the bank agreed for him to repurchase the property for P40,135.53, with an initial payment made. The bank later reneged, demanding repurchase at current market value. After the original case records were destroyed by fire, petitioners refiled the complaint. Respondent bank failed to file an answer to the new complaint, leading the trial court to declare it in default and subsequently render a partial judgment in favor of petitioners based solely on their evidence.
ISSUE
Whether the trial court correctly granted the reliefs prayed for by petitioners after respondent bank was declared in default.
RULING
No. The Supreme Court affirmed the Court of Appeals’ decision vacating the partial judgment and dismissing the complaint. The Court reiterated the established rule that a default declaration does not automatically result in a judgment for the plaintiff. The plaintiff in a default proceeding must still present sufficient evidence to prove its case and warrant the judgment sought. The defaulting defendant is only deprived of the right to present evidence and be heard; it is not deemed to have admitted the factual allegations of the complaint. The court must still assess the plaintiff’s evidence based on its merits. In this case, petitioners’ evidence was insufficient to support the annulment of the foreclosure sale. They failed to substantiate their claim of a “shockingly low” bid price, as they did not present evidence of the property’s fair market value at the time of the auction or prove any irregularities in the foreclosure proceedings. Furthermore, their right of redemption had long prescribed, and their subsequent negotiations for repurchase did not revive this statutory right. Since petitioners’ evidence did not establish a valid cause of action, the complaint was properly dismissed despite the bank’s default.