Development Bank of the Philippines v. Castillo

G.R. No. 163827 (August 17, 2011)

Facts:

Corazon Zarate Romero and her brother Gonzalo Zarate co-owned a property in Dagupan City, covered by Transfer Certificate of Title (TCT) No. 10070. In 1975, they obtained a loan from the Development Bank of the Philippines (DBP), securing it with a real estate mortgage over the property. Following their alleged failure to pay the loan, DBP foreclosed on the property on September 15, 1983, and subsequently consolidated ownership after the redemption period lapsed.

After Corazon's death in March 1993, her daughter, Cristina Trinidad Zarate Romero, claimed ownership of half of the property. However, she discovered that the property had already been registered in DBP's name under TCT No. 54142, with the original title cancelled. Cristina filed a complaint in the Regional Trial Court (RTC) of Dagupan City for reconveyance, quieting of title, and damages, alleging that Gonzalo and DBP conspired to defraud her mother and conceal the foreclosure from her.

The RTC issued a Temporary Restraining Order (TRO) against DBP to prevent an auction sale of the property. DBP moved to lift the TRO, arguing it violated Presidential Decree (P.D.) No. 385, which prohibits restraining orders against government financial institutions in foreclosure actions. The RTC denied this motion and granted a writ of preliminary injunction to Cristina, leading DBP to file a petition for certiorari with the Court of Appeals (CA) challenging the RTC's orders.

Legal Issues:

1. Whether the Court of Appeals erred in affirming the RTC's denial of DBP's motion to dismiss the complaint.
2. Whether the issuance of the TRO and preliminary injunction against DBP was proper under P.D. No. 385.
3. Whether the rules of procedure should be applied rigidly to promote substantial justice.

Arguments:

DBP's Arguments:

• DBP contended that Cristina's complaint failed to state a cause of action, asserting that she had no legal right to the property since it was no longer part of her mother's estate at the time of her death.
• DBP argued that the issuance of the TRO and injunction was improper as it violated P.D. No. 385, which prohibits such orders against government financial institutions in foreclosure actions.

Cristina's Arguments:

• Cristina maintained that the CA correctly dismissed DBP's petition for certiorari due to its late filing.
• She argued that the RTC's injunction did not pertain to a foreclosure sale but rather to a public bidding, which is not covered by P.D. No. 385.

Court's Decision and Legal Reasoning:

The Supreme Court affirmed the CA's decision, ruling that DBP's petition for certiorari was filed out of time. The Court noted that DBP received notice of the TRO on November 24, 1998, and had until January 23, 1999, to file a petition, but did not do so until June 23, 1999. The Court also found that the denial of DBP's motion to dismiss was justified, as Cristina's complaint sufficiently alleged a cause of action. The Court highlighted that Cristina, as the sole heir, had a legal right to assert her claim over the property, and DBP had an obligation to respect that right.

The Court further clarified that the RTC's injunction was valid, as it was not merely a restraining order against a foreclosure but aimed at preventing DBP from conducting a public auction of the property while the case was pending.

Significant Legal Principles Established:

• The case underscores the importance of timely filing petitions for certiorari and the consequences of failing to adhere to procedural timelines.
• It reaffirms the principle that a complaint must contain sufficient allegations to establish a cause of action, including the plaintiff's legal right, the defendant's obligation, and the violation of that right.
• The ruling clarifies the applicability of P.D. No. 385, distinguishing between actions related to foreclosure and other forms of property sales.