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100 SUPREME COURT REPORTS ANNOTATED

Santiago vs. Pioneer Savings and Loan Bank

*
No. L-77502. January 15, 1988.

EMILIA B. SANTIAGO, plaintiff-appellant, vs. PIONEER

SAVINGS AND LOAN BANK, ET AL., defendants-
appellees.

Remedial Law; Civil Procedure; Actions; Pleadings;

Determination of the sufficiency of a cause of action must be
limited to the facts alleged in the complaint.It is true that the
determination of the sufficiency of a cause of action must be
limited to the facts alleged in the Complaint and no other should
be considered. In this case, however, a hearing was held and
documentary evidence was presented, not on the Motion to
Dismiss but on the question of granting or denying plaintiff-
appellants application for a Writ of Preliminary Injunction,
Counsel for plaintiff-appellant admitted all the evidence
presented. That being so, the Trial Court committed no reversible
error in considering said evidence in the resolution of the Motion
to Dismiss.
Same; Same; Same; Same; General rule that there is no
documentary evidence admitted by stipulation disclosing facts
sufficient to defeat the claim; Exception, is where such evidence is
before the court and has been stipulated upon, a court can go
beyond the disclosure in the complaint.While as contended by
plaintiff-appellant, some aspects of this case differ from those in
Tan, the doctrinal ruling therein, as quoted above, is squarely
applicable to the case at bar. The cases which plaintiff-appellant
cites express the general rule when there is no documentary
evidence admitted by stipulation disclosing facts sufficient to
defeat the claim. Where, however, such evidence is before the
Court and has been stipulated upon, a Court can go beyond the
disclosure in the complaint.
Same; Same; Same; Technicality; Rules of procedure are not
to be applied in a very rigid and technical sense.Moreover, the
rule is explicit that rules of procedure are not to be applied in a
very rigid, technical sense; rules of procedure are used only to
help secure substantial justice.

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Civil Law; Mortgage; Property; Extrajudicial Foreclosure; An

assignment of a mortgage cannot extra-judicially foreclose the
mortgaged property; Nature of Mortgage.The evidence on record
sufficiently defeats plaintiff-appellants claim for relief from
extrajudicial foreclosure. Her Special Power of Attorney in favor
of CRCP specifically

________________

* SECOND DIVISION.

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Santiago vs. Pioneer Savings and Loan Bank

included the authority to mortgage the Disputed Property. The

Real Estate Mortgage in favor of FINASIA explicitly authorized
foreclosure in the event of default. Indeed, foreclosure is but a
necessary consequence of non-payment of a mortgage
indebtedness. Plaintiff-appellant, therefore, cannot rightfully
claim that FINASIA, as the assignee of the mortgagee, cannot
extrajudicially foreclose the mortgaged property. A mortgage
directly and immediately subjects the property upon which it is
imposed to the fulfillment of the obligation for whose security it
was constituted.
Same; Same; Same; A mortgage credit may be alienated or
assigned to a third person in whole or in part, with the formalities
required by law.The assignment of receivables made by the
original mortgagee, FINASIA, to Defendant Bank was valid, since
a mortgage credit may be alienated or assigned to a third person,
in whole or in part, with the formalities required by law. Said
formalities were complied with in this case. The assignment was
made in a public instrument and proper recording in the Registry
of Property was made. While notice may not have been given to
plaintiff-appellant personally, the publication of the Notice of
Sheriffs Sale, as required by law, is notice to the whole world.
Same; Same; Same; Recourse of plaintiff is against the party
whom she issued the power of attorney considering her allegation
that the party failed to observe their agreement.Plaintiff-
appellants recourse is against CRCP, specially considering her
allegation that the latter had failed to observe their agreement.

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APPEAL from the order of the Regional Trial Court of

Valenzuela, Br. 172.

The facts are stated in the opinion of the Court.

MELENCIO-HERRERA, J.:

An appeal certified by the Court of Appeals to this Tribunal

for determination since only a question of law is involved.
The facts are not controverted.
Plaintiff-appellant, Emilia P. Santiago, is the registered
owner of a parcel of land situated at Polo, Valenzuela,
Metro Manila, with an area of approximately 39,007 square
meters, covered by T.C.T. No. B-41669 (briefly, the Title) of
the Register of Deeds of Caloocan City (hereinafter, simply
the Disputed Property).
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102 SUPREME COURT REPORTS ANNOTATED

Santiago vs. Pioneer Savings and Loan Bank

On 7 April 1983, plaintiff-appellant executed a Special

Power of Attorney in favor of Construction Resources
Corporation of the Philippines (CROP, for short)
authorizing and empowering CRCP:

1. To borrow money and make, execute, sign and

deliver mortgages of real estate now owned by me
and standing in my name and to make, sign,
execute and deliver any and all promissory notes
necessary in the premises.
2. For the purpose of these presents, or for the
purpose of securing the payment of any loan,
indebtedness or obligation which my attorney-in-
fact may obtain or contract with the bank, its
renewal, extension of payment of the whole or any
part thereof, said attorney-in-fact is hereby
authorized and empowered to transfer and convey
by way of mortgage in favor of the bank, x x x (the
Disputed Property).

On 8 April 1983, CRCP executed a Real Estate Mortgage

over the Disputed Property in favor of FINASIA
Investment and Finance Corporation to secure a loan of P1
million. The mortgage contract specifically provided that in
the event of default in payment, the mortgagee may
immediately foreclose the mortgage judicially or

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extrajudicially. The promissory note evidencing the

indebtedness was dated 4 March 1983.
The Special Power of Attorney executed by plaintiff-
appellant in CRCFs favor, the Real Estate Mortgage by
CRCP in favor of FINASIA, together with the Board
Resolution dated 28 March 1983 authorizing the CRCP
President to sign for and on its behalf, were duly annotated
on the Title on 12 April 1983.
On 29 July 1983, FINASIA executed in favor of
defendantappellee, Pioneer Savings & Loan Bank, Inc.
(Defendant Bank, for brevity), an Outright Sale of
Receivables without Recourse including the receivable of
P610,752.59 from CRCP.
On 21 May 1984, FINASIA executed a Supplemental
Deed of Assignment in favor of Defendant Bank
confirming and ratifying the assignment in the latters
favor of the receivable of P610,752.59 from CRCP and of
the mortgage constituted by CRCP over the disputed
property.
On 12 July 1984, the aforesaid Supplemental Deed of
Assignment was inscribed on the Title.
CRCP failed to settle its obligation and Defendant Bank
opted for extrajudicial foreclosure of the mortgage. The
notice of auction sale was scheduled on 16 May 1985.
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Santiago vs. Pioneer Savings and Loan Bank

On 13 May 1985, on learning of the intended sale, plaintiff-

appellant filed before the Regional Trial Court of
Valenzuela, Metro Manila, Branch CLXXII, an action for
declaration of nullity of the real estate mortgage with an
application for a Writ of Preliminary Injunction (Civil Case
No. 2231-V-55). 1
On 14 May 1985, the Trial Court issued a Temporary
Restraining Order enjoining the sale at public auction of
the Disputed Property.
Basically, plaintiff-appellant claimed in her Complaint
that she was not aware of any real estate mortgage she had
executed in favor of Defendant Bank; that she had not
authorized anyone to execute any document for the
extrajudicial foreclosure of the real estate mortgage
constituted on the Disputed Property and that since the
notice of Sheriffs sale did not include her as a party to the
foreclosure proceedings, it is not binding on her nor on her
property.
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Defendant Bank opposed the application for Preliminary

Injunction and asserted its right to extrajudicially foreclose
the mortgage on the Disputed Property based on recorded
public documents.
During the hearing on the petition for Preliminary
Injunction, plaintiff-appellant, through counsel, admitted
the due execution of plaintiff-appellants Special Power of
Attorney in favor of CRCP, the Real Estate Mortgage by
CRCP to FINASIA, the Outright Sale of Receivables by
FINASIA to Defendant Bank, as well the Supplemental
Deed of Assignment by FINASIA to Defendant Bank.
On 30 May 1985, the Trial Court granted the Petition
for Preliminary Injunction enjoining the public auction sale
of the mortgaged property upon plaintiff-appellants
posting of a bond in the amount of P100,000.00.
On 7 June 1985, Defendant Bank filed a Motion to
Dismiss the main case on the ground that the complaint
did not state a cause of action followed on 24 June 1985
with a Motion for Reconsideration of the Order granting
the Writ of Preliminary Injunction, both of which Motions
plaintiff-appellant opposed.
On 30 August 1985, the Trial Court reconsidered its
Order of 30 May 1985, dissolved the Writ of Preliminary
Injunction, and

____________

1 Judge Samilo N. Barlongay, presiding.

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104 SUPREME COURT REPORTS ANNOTATED

Santiago vs. Pioneer Savings and Loan Bank

ordered the dismissal of the case for lack of cause of action.

Plaintiff-appellant appealed to the Court of Appeals,
which, as stated at the outset, certified the case to us on a
pure question of law.
In the meantime, with the dissolution of the Preliminary
Injunction, it appears that defendant Bank completed its
extrajudicial foreclosure and the Disputed Property was
sold at public auction on January 1986, after a re-
publication of the notice of sale, since the first scheduled
sale was enjoined by the Trial Court.
Plaintiff-appellant maintains that:

I. The Lower Court erred in dismissing the complaint

and lifting the Preliminary Injunction by relying
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solely on the admission of the counsel of the

plaintiff-appellant of certain documentary exhibits
presented by the counsel of the defendant-appellee.
II. The Lower Court erred in relying on the case of
Wenceslao Vinzons Tan vs. Director of Forestry
which it qualifies as on all fours with the case at
bar.
III. The Lower Court erred in ignoring the pertinent
doctrines in the Supreme Court cases cited by the
plaintiff-appellant in her Opposition to Motion to
Dismiss.
IV. The Lower Court erred in holding that notice of the
scheduled sale of the land sent to the agent (CRCP)
is also Notice to the principal

(Plaintiff-Appellant), the land owner.

and prays that she be given a real day in Court so that
she may testify and give her side of the case.
Upon the factual and legal context, the errors assigned
are without merit.
It is true that the determination of the sufficiency of a
cause of action must be limited to the facts alleged
2
in the
Complaint and no other should be considered. In this case,
however, a hearing was held and documentary evidence
was presented, not on the Motion to Dismiss but on the
question of granting or denying plaintiff-appellants
application for a Writ of Preliminary Injunction, Counsel
for plaintiff-appellant admitted all the evidence presented.
That being so, the Trial Court committed no reversible
error in considering said evidence in the resolution of

______________

2 Adamos vs. J.M. Tuason & Co., Inc. L-21957, October 14, 1968, 25
SCRA 529.

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Santiago vs. Pioneer Savings and Loan Bank

the Motion to Dismiss.

Furthermore, even if the complaint stated a valid cause of

action, a motion to dismiss for insufficiency of cause of action will
be granted if documentary evidence admitted by stipulation
disclosing facts sufficient to defeat the claim enabled the court to
go beyond disclosure in the complaint (LOCALS No. 1470, No.
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1469, and No. 1512 of the International Longshoremens

Association vs. Southern Pacific Co., 6 Fed. Rules Service, p. 107;
U.S. Circuit Court of Appeals, Fifth Circuit, Dec. 7, 1952; 131 F.
2d 605). Thus, although the evidence of the parties were
presented on the question of granting or denying petitioner-
appellants application for a writ of preliminary injunction, the
trial court correctly applied
3
said evidence in the resolution of the
motion to dismiss. x x x.

While, as contended by plaintiff-appellant, some aspects of

this case differ from those in Tan, the doctrinal ruling
therein, as quoted above, is squarely applicable to the case
at bar. The cases which plaintiff-appellant cites express the
general rule when there is no documentary evidence
admitted by stipulation disclosing facts sufficient to defeat
the claim. Where, however, such evidence is before the
Court and has been stipulated upon,4 a Court can go
beyond the disclosure in the complaint.
Moreover, the rule is explicit that rules of procedure are
not to be applied in a very rigid, technical sense; rules of5
procedure are used only to help secure substantial justice.
The evidence on record sufficiently defeats plaintiff-
appellants claim for relief from extrajudicial foreclosure.
Her Special Power of Attorney in favor of CRCP specifically
included the authority to mortgage the Disputed Property.
The Real Estate Mortgage in favor of FINASIA explicitly
authorized foreclosure in the event of default. Indeed,
foreclosure is but a necessary consequence of non-payment
of a mortgage indebtedness. Plaintiff-appellant, therefore,
cannot rightfully claim that FINASIA, as the assignee of
the mortgagee, cannot extrajudicially foreclose the
mortgaged property. A mortgage directly and immediately
subjects the property upon which it is imposed to the
fulfillment of the obli-

_______________

3 Tan vs. Director of Forestry, L-24548, October 27, 1983, 125 SCRA
302.
4 Ibid.
5 Vol. 1 Francisco, Civil Procedure, 2 ed., 1973, p. 157, citing cases.

106

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Santiago vs. Pioneer Savings and Loan Bank

6
gation for whose security it was constituted.
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The assignment of receivables made by the original

mortgagee, FINASIA, to Defendant Bank was valid, since a
mortgage credit may be alienated or assigned to a third
person,
7
in whole or in part, with the formalities required by
law. Said formalities were complied with in this case. The
assignment was made in a public instrument and8 proper
recording in the Registry of Property was made. While
notice may not have been given to plaintiff-appellant
personally, the publication of the Notice of Sheriffs Sale, as
required by law, is notice to the whole world.
The full-dress hearing that plaintiff-appellant prays for
wherein she intends to prove that she tried to contact the
President of CRCP to urge him to pay the mortgage loan,
that she had failed to do so despite several attempts; that
she did not know that FINASIA had sold its receivables
including that of CRCP to Defendant Bank; and that she
was not informed by CRCP of the scheduled foreclosure
sale will not tilt the scales of justice in her favor in the face
of incontrovertible documentary evidence before the Court.
Plaintiff-appellants recourse is against CRCP, specially
considering her allegation that the latter had failed to
observe their agreement.
WHEREFORE, the Order appealed from is hereby
AFFIRMED, with costs against plaintiff-appellant.
SO ORDERED.

Yap (Chairman), Paras, Padilla and Sarmiento, JJ.,

concur.

Order affirmed.

Notes.Venue of real action is where the real property

or any part thereof is situated. (Punzalan vs. Lacsamana,
121 SCRA 331).
Amended complaint is admissible if amendments did not
alter the cause of action of the original complaint. (Alger
Electric vs. Court of Appeals, 135 SCRA 37).

o0o

_______________

6 Article 2126, Civil Code.

7 Article 2128, ibid.
8 Article 1625, ibid.

107

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