Tambunting, Jr. And Commercial House Of Finance, Inc., v. Spouses Sumabat and Baello

Facts:

This case involves a dispute over a parcel of land situated in Caloocan. It was previously registered in the names of respondents, spouses Emilio Sumabat and Esperanza Baello. Respondents mortgaged it to petitioner Antonio Tambunting, Jr. to secure the payment of a loan. Respondents defaulted in their obligation, thus, petitioner CHFI, as assignee of the mortgage, initiated foreclosure proceedings on the mortgaged property but the same did not push through. It was restrained by the then CFI of Caloocan City. However, the case was subsequently dismissed for failure of the parties to appear at the hearing.

Respondents filed an action for declaratory relief with the CFI of Caloocan City seeking a declaration of the extent of their actual indebtedness. Petitioners were declared in default for failure to file an answer within the reglementary period. They moved for the dismissal but was denied.

The CFI rendered its decision, fixing respondents’ liability at ₱15,743.83 and authorized them to consign the amount to the court for proper disposition.

Respondents received a notice of sheriff’s sale indicating that the mortgage had been foreclosed by CHFI and that an extrajudicial sale of the property would be held.

Respondents instituted a petition for preliminary injunction, damages and cancellation of annotation of encumbrance with prayer for the issuance of a temporary restraining order, with the RTC of Caloocan City. However, the public auction scheduled on that same day proceeded and the property was sold to CHFI as the highest bidder. Respondents failed to redeem the property during the redemption period. Hence, title to the property was consolidated in favor of CHFI and a new certificate of title was issued in its name. In view of these developments, respondents amended their complaint to an action for nullification of foreclosure, sheriff’s sale and consolidation of title, reconveyance and damages.

RTC issued the assailed decision. It ruled that the CFI decision had long attained finality.  Petitioners moved MR but it was denied.

Issue:

Whether or not trial court erred when it affirmed the validity of the consignation

Held:

The trial court erred when it ruled that the CFI decision was already final and executory.

An action for declaratory relief should be filed by a person interested under a deed, will, contract or other written instrument, and whose rights are affected by a statute, executive order, regulation or ordinance before breach or violation thereof. The purpose of the action is to secure an authoritative statement of the rights and obligations of the parties under a statute, deed, contract, etc. for their guidance in its enforcement or compliance and not to settle issues arising from its alleged breach. It may be entertained only before the breach or violation of the statute, deed, contract, etc. to which it refers. Where the law or contract has already been contravened prior to the filing of an action for declaratory relief, the court can no longer assume jurisdiction over the action. In other words, a court has no more jurisdiction over an action for declaratory relief if its subject, i.e., the statute, deed, contract, etc., has already been infringed or transgressed before the institution of the action. Under such circumstances, inasmuch as a cause of action has already accrued in favor of one or the other party, there is nothing more for the court to explain or clarify short of a judgment or final order.