GR 189577; (April, 2016) (Digest)
G.R. No. 189577, April 20, 2016
PHILIPPINE NATIONAL BANK, PETITIONER, VS. SPS. VICTORIANO & JOVITA FARICIA RIVERA, RESPONDENTS.
FACTS
On September 18, 1995, respondents Spouses Victoriano and Jovita Faricia Rivera executed a real estate mortgage in favor of petitioner Philippine National Bank (PNB) over a parcel of land in Marikina City to secure their housing loans and revolving credit line. The mortgage was foreclosed, and the property was sold at a public auction on September 9, 2004. On December 28, 2005, the Spouses Rivera filed a Complaint for Annulment of Sheriff’s Sale with Damages against PNB and Sheriff Julia Coching Sosito. They alleged that they did not receive notice of the auction sale because it was sent to a wrong address, and that had they been notified, they would have informed the sheriff that they had already paid their obligation to PNB. PNB filed a Motion to Dismiss, arguing the complaint stated no cause of action, asserting all banking practices and legal requirements under Act No. 3135 were followed and that personal notice to the mortgagor is not required. The Regional Trial Court (RTC) granted the motion and dismissed the complaint for “lack of cause of action,” finding no flaw in the conduct of the sale. The Spouses Rivera appealed. The Court of Appeals (CA) set aside the RTC Orders and remanded the case, holding that the allegations in the complaint sufficiently made out a cause of action and that the RTC erred in considering extraneous matters. PNB filed the present Petition for Review on Certiorari.
ISSUE
Whether the Court of Appeals erred in setting aside the Orders of the RTC dismissing the complaint and in remanding the case for further proceedings.
RULING
The Supreme Court DENIED the petition, affirming the CA’s decision to remand the case. The Court clarified the distinction between “failure to state a cause of action” and “lack of cause of action.” A motion to dismiss based on “failure to state a cause of action” tests the sufficiency of the allegations in the complaint. Under this ground, the court examines only the material allegations in the complaint, assumes them to be true, and determines if they constitute a cause of action. In contrast, “lack of cause of action” refers to the insufficiency of the factual basis for the action after the plaintiff’s evidence has been presented; it is a ground for a demurrer to evidence under Rule 33, not a motion to dismiss.
Applying the test, the Court found that the allegations in the Spouses Rivera’s complaint—specifically, that the auction sale was void due to lack of proper notice and that their obligation had been paid—sufficiently averred the elements of a cause of action: a right on their part, a correlative duty on PNB, and an act or omission (improper notice and sale despite payment) violating that right. The RTC therefore erred in dismissing the complaint for “lack of cause of action” at the pleading stage. The RTC improperly considered matters outside the complaint, such as PNB’s assertions regarding compliance with notice requirements under Act No. 3135. The determination of whether proper notice was given and whether the obligation was paid involves questions of fact that require a full-blown trial. Consequently, the CA correctly set aside the RTC’s dismissal orders and remanded the case for further proceedings.