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I.

II.

III.

IV.

Title:

Rural Bank of Calinog (Iloilo), Inc. vs. Court of Appeals


G.R. No. 146519. July 8, 2005.

Doctrine
To sustain a motion to dismiss for lack of cause of action, the complaint must show that
the claim for relief does not exist rather than that a claim has been defectively stated or is
ambiguous, indefinite or uncertain. A defendant moving to dismiss a complaint on the
ground of lack of cause of action is regarded as having hypothetically admitted all the
averments thereof.
Facts

Sps. Cerbaa filed a complaint for annulment of the certificate of sale at public
auction, accounting and damages against Calinog and Dingle Bank.

Carmen Cerbo executed a REM over her prop (REM prop) in favor of Calinog Bank,
mortgage was foreclosed and was sold at a public auction and Calinog was the
highest bidder. Sps. redeemed the prop by depositing 18k to Calinog Bank. To
complete payment of the price, Sps. obtained a loan from Dingle Bank from 109k, to
secure payment, Sps. mortgaged the REM prop to Dingle Bank. Sps. alleged that they
paid the loan in full and was surprised to receive a notice of sale at public auction of
the REM prop for the alleged failure to pay the loan. Sps. then demanded accounting
of all payments and hold in abeyance the foreclosure. However the foeclosure
proceeded and the REM prop was awarded to Calinog as highest bidder.

Calinog Banks Motion to Dismiss: Cerbo is the only one who has cause of action
since she executed the REM, since Cerbo is already dead, case should be dismissed
because Sps. do not have legal personality to represent Cerbo, that the Sps. lack cause
of action. Opposed by Sps. contending that they are heirs of Cerbo (Gregorio
Cerbaa, son-in-law; Filma Cerbo- Cerbaa, daughter of Carmen Cerbo).

RTC: granted MD. MR of Sps. Cerbaa denied.

Sps. Cerbaa to CA: Petition for Certiorari, dismissal improper, real partiesininterest
in the case being children of the late Carmen Cerbo and having paid the redemption
price to Calinog Bank.

CA: Granted. Allegations of the complaint furnish sufficient basis to maintain the
same and should not have been dismissed. Need not be parties to the mortgage
contract in order to have a cause of action to recover the payments, which they allege
to have paid the bank in excess of the redemption price.

Filed the civil suit not just as representatives of Carmen Cerbo but also for
and in their own behalf, the appellate court found them to have both
capacity and personality to sue.

Lack of capacity to sue - plaintiffs general disability to sue, such as on


account of minority, incompetence, lack of juridical personality or other
disqualifications.

Lack of personality to sue - fact that the plaintiff is not the real party in
interest.

Hence this petition for review on certiorari.


Issues
(1) Whether the complaint filed by private respondents with the trial court states a cause of
action. (YES)

V.

Held
(1) A cause of action exists if the following elements are present: (1) a right in favor of the
plaintiff (2) an obligation on the part of the defendant to respect or not to violate such
right; and (3) an act or omission on the part of such defendant violative of the right of
plaintiff or constituting a breach of the obligation of defendant to the plaintiff.
In determining whether the allegations of a complaint are sufficient to support a cause of
action, complaint does not have to establish or allege the facts proving the existence of a
cause of action at the outset; this will have to be done at the trial. If the allegations in a
complaint can furnish a sufficient basis by which the complaint can be maintained, the
same should not be dismissed.
To sustain a motion to dismiss for lack of cause of action, the complaint must show that
the claim for relief does not exist rather than that a claim has been defectively stated or is
ambiguous, indefinite or uncertain. A defendant moving to dismiss a complaint on the
ground of lack of cause of action is regarded as having hypothetically admitted all the
averments thereof.
An examination of the complaint reveals that it sufficiently alleges a cause of action
against Calinog Bank. It is enough that Sps. allege that they made a deposit in the amount
of P18,000.00 after the mortgaged property was sold to Calinog Bank at public auction;
that they subsequently applied for and obtained an agricultural loan from Dingle Bank
which was paid to Calinog Bank to discharge the obligation under the mortgage
constituted on Carmen Cerbos property; that the excess amount of P392.47 was not
accounted for by petitioner; and that the P18,000.00 deposit was not deducted from the
redemption price. That the Sps. were the ones who paid Cerbos loan obligation, and that
they engaged the services of a lawyer and sent demands to Calinog to account for the
payments but the same was not heeded. Whether Sps. are entitled to the reliefs prayed, it is
best resolved after trial on merits.
While the death of Cerbo extinguished whatever cause of action she had against Calinog
Bank, Sps. cause of action, based on the allegations in the complaint, was not
extinguished. Assuming the allegations of the complaint to be true, Sps. having paid the
redemption price, have the right to demand an accounting, to be refunded for whatever
excess payments they made, and even to redeem the property. Correlatively, Calinog Bank
for having accepted payment from Sps. has the obligation to account for such payment, to
return the excess, if any, and to allow redemption.
As regards the ancillary procedural question concerning the propriety of certiorari in lieu
of appeal, Sps. resort to certiorari is warranted under the circumstances. While it is true
that certiorari is not a substitute for appeal, jurisprudence exempts from the application of
this rule cases when the trial courts decision or resolution was issued without jurisdiction
or with grave abuse of discretion. Considering that the trial court in this case completely
disregarded the fact that private respondents also filed the complaint on their own behalf
and in so doing prevented the latter from having their day in court, it gravely abused its
discretion justifying private respondents petition for certiorari.
Petition denied, CA affirmed. Case remanded to RTC.