G.R. No.

L-27365 January 30, 1970

Parties: Plaintiffs/Apellees FELIX L. LAZO, MERCEDES CASTRO DE LAZO,

and JOSE ROBLES,

Defendants/Appellants REPUBLIC SURETY & INSURANCE CO., INC.

represented by ANTONIO M. KOH, General
Manager and as Atty-in-Fact of plaintiffs, FELIX
and MERCEDES LAZO

Ponente: MAKALINTAL, J.:

FACTS:

Plaintiff Jose Robles obtained a loan in the amount of P12,000.00 from Philippine
Bank of Commerce (PBC) on August 18, 1953, while spouses Felix and Mercedes Lazo
were his guarantors.

Defendant Republic Surety & Insurance Co., Inc. acted as principal co-debtor, for the
said loan, by virtue of a Real Estate Mortgage executed by spouses Lazo in favor of
defendant company.

The loan was renewed several times until the bank refused further renewal.

To accommodate the plaintiffs, the loan was transferred to Republic Investment Co.
as new-creditor through a promissory note executed by the plaintiffs. After 3 renewals, the
plaintiffs defaulted payment and defendant insurance company paid the new creditor.

Thereafter, the mortgage was extra-judicially foreclosed on July 1, 1958 in favor of

defendant Insurance Company for P18,627.00

The certificate of sale was formalized on August 2, 1958, for purposes of

registration, a deed of absolute sale of foreclosed property which sale was executed on
March 20, 1963 which sale was registered on March 28, 1963. Thus, a new titled was issued
in favor of defendant company.

Plaintiffs alleged that the foreclosure of mortgaged was invalid considering that
Robles had paid the loan the sum of P13,466.36 from August 20, 1953 to August 23, 1963.

Thus, plaintiffs filed a case of Accounting of Payments so that if it should appear that
the loan had been paid in full, the mortgage be cancelled, otherwise, plaintiffs be allowed to
pay the balance by way of legal redemption.

The defendants filed a motion to dismiss because the complaint did not state a cause
of action and that the claim already prescribed. Defendants pointed out that accounting is not
demandable if extra-judicial foreclosure but in real property sold on execution sale. and if
accounting is applicable in extra-judicial foreclosure, it is available only to mortgage debtor
who exercise right of redemption which according to defendants had already prescribed
when the action was commenced.

The trial court did not resolve the motion to dismiss but set the case for trial with the
advertence that evidence on whether or not that action has prescribed shall first be
presented and then the court will consider the same as part of the evidence on the merits.

The trial ruled that the transfer of the loan to the Republic Investment Co., Inc.
constituted a novation of the obligation, and that the defendant company was released from
its liability as co-debtor because it does not appear to have signed the new promissory note
executed by the plaintiffs. Consequently, the court concluded, the real estate mortgage in
favor of said defendant was extinguished, and the foreclosure thereof was a nullity.

ISSUE:
WHETHER OR NOT THE JUDGMENT OF THE TRIAL COURT IS LEGALLY
PERMISSIBLE. or WHETHER OR NOT THE TRIAL COURT MAY RENDER
JUDGMENT BASED ON THE ISSUE NOT RAISED IN THE PLEADINGS.
RULING:

The actuation of the trial court was not legally permissible especially because the
theory on which it proceeded involved factual considerations neither touched upon the
pleadings nor made the subject of evidence at the trial. Rule 6, Section 1, is quite explicit in
providing that "pleadings are the written allegations of the parties of their respective claims
and defenses submitted to the court for trial and judgment." This rule has been consistently
applied and adhered to by the courts.

1.) Belandres vs. Lopez Sugar Central Mill Co., Inc., 97 Phil. 100, 103.

The subject matter of any given case is determined by the nature and character of
the pleadings submitted by the parties to the court for trial and judgment.

2.) Ramon v. Ortuzar, 89 Phil. 730, 742

It is a fundamental principle that judgments must conform to both the pleadings and
the proof, and must be in accordance with the theory of the action upon which the
pleadings were framed and the case was tried; that a party can no more succeed
upon a case proved. but not alleged, than upon one alleged but not proved.

3.) Lim Toco vs. Go Pay, 80 Phil. 166

It is a well-known principle in procedure that courts of justice have no jurisdiction or

power to decide a question not in issue.

4.) Salvante v. Cruz, 88 Phil. 236, 244.

A judgment going outside the issues and purporting to adjudicate something upon
which the parties were not heard, is not merely irregular, but extrajudicial and invalid.

The parties here went to court and presented their respective sides on the premise,
admitted by both, that the mortgage was valid and subsisting. Evidence, therefore, to
establish such premise was unnecessary and uncalled for.