NELITA MORENO VDA. DE BACALING, PLAINTIFF AND APPELLANT, VS. GOVERNMENT SERVICE INSURANCE SYSTEM, ET AL., DEFENDANTS AND APPELLEES.

Bacaling versus Government Service Insurance System

The Case

This is an appeal by Nelita Moreno Vda. de Bacaling against the Government Service Insurance System, the Sheriff of Iloilo, and others, arising from an order dismissing her separate civil action to annul a foreclosure sale. The question is procedural but fundamental: may a debtor in a pending foreclosure proceeding, while her opposition to the confirmation of the auction sale is still awaiting the court's consideration, simultaneously bring an independent action to annul that very sale? The case matters because it fixes the boundary between the remedy of a motion in the same suit and the remedy of a separate action, and it teaches the bar candidate how the rule against multiplicity of suits, the principle forbidding two pending actions over identical issues, polices that boundary.

Procedural History

In the foreclosure proceedings before the Court of First Instance of Iloilo, the Government Service Insurance System obtained a judgment foreclosing the real estate mortgage executed in its favor by Doctor Ramon Bacaling and his wife Nelita Moreno. After the debtors failed to pay within the usual ninety-day period, the Sheriff of Iloilo conducted the auction sale in October 1961, and the Government Service Insurance System emerged as the highest bidder. The Sheriff and the System then filed a motion for confirmation of the sale and for a deficiency judgment. Nelita Bacaling, her husband having died, opposed the motion, alleged irregularities, and prayed that the auction sale be set aside and another conducted. After the System had presented evidence on its motion, she filed a separate action to annul the sale, repeating the same irregularities. The System moved to dismiss on the ground that another action between the same parties involving the same issues was pending in the same court. Judge Arsenio Nanawa of Iloilo granted the dismissal. The plaintiff moved for reconsideration, failed, and appealed to the Supreme Court.

Facts

The Government Service Insurance System held a mortgage over the real property of Doctor Ramon Bacaling and his wife Nelita Moreno. When the debtors defaulted, the System obtained a judgment of foreclosure in the Iloilo court. The debtors did not pay within the ninety-day period, so the Sheriff of Iloilo advertised and conducted the public auction in October 1961. The System was the highest bidder and received the award.

On the tenth of October 1961, the Sheriff and the System submitted a motion for confirmation of the sale and for a deficiency judgment. The next day, October 11, 1961, Nelita Bacaling, now a widow, opposed the motion. She alleged irregularities and asked that the auction sale be set aside and a new auction conducted. The System then presented evidence to support confirmation and to overcome her opposition.

While that motion and her opposition were still pending, Nelita Bacaling filed a separate action on March 15, 1962 to annul the sale, alleging the same irregularities she had already raised in her opposition. The System moved to dismiss, and the trial judge dismissed the complaint, finding that the same issues were involved in the foreclosure proceedings. Hence the appeal.

Issues

• Whether or not the defendant-debtor in a foreclosure of mortgage proceeding may maintain a separate action to annul the foreclosure sale while the motion to confirm that sale and her opposition thereto are still pending consideration in the foreclosure proceedings.
• Whether or not the inclusion of the Sheriff as a defendant, and the claim for damages against him, removes the separate action from the operation of the rule against the pendency of another action.

Applicable Provisions

The decision refers to the rule against the pendency of another action, which at the time of the earlier case of Jalandoni versus Ledesma was a ground of demurrer. The Court states the idea of the rule in these words:

The idea of the rule (on pendency of another action) is that where there is already a case between the same parties involving certain issues, no other litigation on identical issues shall be entertained.

This is the provision that governs whether the second suit may proceed alongside the first.

The decision also identifies the grounds raised against the auction sale, which are drawn from the Rules of Court then in force. The Court lists them as follows:

(a) whether or not the Sheriff had complied with the provisions of sec. 16 of Rule 39 (posting notices in public places); (b) publication in newspapers; (c) non-compliance with sec. 19, Rule 39 (selling lots separately); and (d) adequacy of the price.

These are the very issues that the Court holds belong in the foreclosure proceedings, not in a separate action.

Ruling

On the first issue, the Court held that the separate action may not be maintained. The plaintiff relied on Jalandoni versus Ledesma, where the Court had said that a judicial sale may be set aside either on motion in the same suit or in a separate action brought for the purpose. The Court explained that this is correct, but it never held that both a motion and a separate action may proceed simultaneously. It could not have so held, because at that time the pendency of another action was a ground of demurrer. The purpose of the rule, the Court said, is to avoid multiplicity of suits and judicial confusion or contradictions. The Court also distinguished the case of Government versus De los Cajigas, because there the motion for confirmation had already been granted and was no longer pending, and because the civil action there contained an additional and most material element, namely the validity of the order confirming the sale, the plaintiff not having been notified of the motion for confirmation.

On the second issue, the Court held that the claim for damages against the Sheriff does not save the action. That claim depends entirely upon, and is incidental to, the main issues already included in the motion for confirmation and the opposition thereto. The inclusion of the Sheriff as a defendant is immaterial, because he was virtually a party in the foreclosure, and his inclusion should not have the effect of avoiding the rule against a pending action.

Doctrine

A judicial sale may be set aside either by motion in the same suit in which the sale was ordered, or by a separate action brought for the purpose, but the two remedies may not be pursued simultaneously. Where a motion to confirm the sale and an opposition alleging irregularities are pending in the foreclosure proceedings, a separate action to annul the sale on the same grounds is barred by the pendency of another action. The rule rests on the policy against multiplicity of suits and against judicial confusion or contradictions. Incidental claims, such as damages against the Sheriff, and the inclusion of the Sheriff as a defendant, do not remove the bar, because such claims depend on the same issues already pending. The principal issues in a foreclosure, including compliance with the notice and publication requirements, the separate sale of lots, and the adequacy of the price, may and should be decided in the foreclosure proceedings themselves.

Disposition

The Supreme Court affirmed the order of dismissal, with costs against the appellant, Nelita Moreno Vda. de Bacaling.

Remember This

The line worth memorizing is that a judicial sale may be attacked by motion or by separate action, but never by both at the same time. Examiners use this case to test the rule against the pendency of another action and the policy against multiplicity of suits in foreclosure and execution sales.