JOSIE R. FERRERA, PLAINTIFF-APPELLANT, VS. BANGKO LUZON, INC., REPRESENTED BY DANILO C. CABIEDES AS MANAGER AND PRESIDENT, DEFENDANT-APPELLEE.

Ferrera versus Bangko Luzon

The Case

This is the case of Ferrera versus Bangko Luzon. Josie Ferrera, the borrower and mortgagor, sued Bangko Luzon, the mortgagee bank, to annul an extrajudicial foreclosure, the certificate of sale, and the new transfer certificate of title issued in the bank's name, and to restrain the bank from taking possession. The action matters because it is the Supreme Court's cleanest teaching on two procedural points that examiners love: first, that a motion to dismiss for failure to state a cause of action is resolved on the allegations of the complaint assumed to be true; and second, that an appeal raising only a pure question of law must go to the Supreme Court, so that an appeal wrongly taken to the Court of Appeals is dismissed outright and is not transferred.

Procedural History

Ferrera filed her complaint for annulment of the extrajudicial foreclosure, annulment of the certificate of sale, annulment of the new title, and injunction before the Regional Trial Court of Cabanatuan City, Branch 25. She also prayed for a writ of preliminary injunction. At the hearing on that application, counsel for the bank moved orally to dismiss the complaint, and counsel for Ferrera opposed. The trial court, in its order dated September 30, 1999, denied the injunction and dismissed the complaint, saying the complaint had no more leg to stand on. Ferrera appealed, assigning a single error: that the trial court dismissed the case without hearing, in violation of due process. The appeal was taken to the Court of Appeals. The Supreme Court held that the appeal raised only a pure question of law, which the Court of Appeals had no jurisdiction to entertain, and so dismissed the appeal.

Facts

Sometime in 1993, Ferrera obtained a loan from Bangko Luzon in the amount of 100,000 pesos. To secure payment, she mortgaged a parcel of land of about 595 square meters, covered by a transfer certificate of title registered in her name and issued by the Register of Deeds for Cabanatuan City.

Ferrera failed to pay her loan. The bank then instituted an extrajudicial foreclosure of the mortgaged property through a notary public, under Act Number 3135. On January 20, 1995, an auction sale was conducted, and the bank, being the highest bidder, was issued a certificate of sale, which was registered on February 26, 1996. After the redemption period expired without Ferrera exercising her right to redeem, the Register of Deeds cancelled her title and issued a new title in the name of the bank.

The bank then filed an ex parte petition for a writ of possession, which the trial court granted. On September 7, 1999, Ferrera filed this complaint, alleging that the extrajudicial foreclosure conducted by the ex officio notary public was null and void because it did not comply with Administrative Order Number 3 dated October 19, 1994, which requires that applications for foreclosure of mortgage be filed before the Executive Judge through the Clerk of Court as ex officio sheriff. The bank countered that Administrative Order Number 3 does not apply to foreclosure conducted by a notary public.

Issues

• Whether or not Ferrera's right to due process was violated when the trial court dismissed the complaint at the hearing on the application for a writ of preliminary injunction.
• Whether or not the appeal, which raised only a pure question of law, was properly taken to the Court of Appeals.

Applicable Provisions

Section 1, paragraph g, of Rule 16 of the 1997 Rules of Civil Procedure, on the ground of failure to state a cause of action, provides:

Section 1. Grounds. — Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds: x x x (g) That the pleading asserting the claim states no cause of action.

This is the ground the Court treats as the real basis for the dismissal, since the complaint showed on its face that Ferrera had no cause of action.

Section 2, paragraph c, of Rule 41 of the 1997 Rules of Civil Procedure, on appeals from the Regional Trial Court, provides:

Section 2. Modes of appeal. — x x x (c) Appeal to the Supreme Court. — Where only questions of law are raised or involved, the appeal shall be taken to the Supreme Court by petition for review on certiorari in accordance with Rule 45.

This is the provision that defeats the appeal, because the only question raised is one of law, which belongs to the Supreme Court and not to the Court of Appeals.

Section 2 of Rule 50 of the 1997 Rules of Civil Procedure, on dismissal of appeals, provides:

Section 2. Dismissal of improper appeal to the Court of Appeals. — An appeal under Rule 41 taken from the Regional Trial Court to the Court of Appeals raising only questions of law shall be dismissed, issues purely of law not being reviewable by said court. Similarly, an appeal by notice of appeal instead of by petition for review from the appellate judgment of a Regional Trial Court shall be dismissed. An appeal erroneously taken to the Court of Appeals shall not be transferred to the appropriate court but shall be dismissed outright.

This is the provision the Court applies in disposing of the appeal, since the appeal was wrongly taken to the Court of Appeals.

Ruling

On the first issue, the Court held that there was no violation of due process. Due process is satisfied when the parties are given a fair and reasonable opportunity to explain their side of the controversy, or an opportunity to move for reconsideration of the ruling complained of. The record showed that at the hearing on the injunction, the bank's counsel moved orally to dismiss, Ferrera's counsel opposed, and both were allowed to argue. The assailed order also showed on its face the facts and the law on which the dismissal rested.

On the second issue, the Court held that the appeal raised a pure question of law and was therefore not cognizable by the Court of Appeals. The trial court had dismissed the complaint on the ground that it had no leg to stand on, which the Court read as the more appropriate ground of failure to state a cause of action. In such a motion, the issue is passed upon on the basis of the allegations of the complaint, assuming them to be true, and the court does not rule on the truth or falsity of the documents. Any appeal from such a ruling therefore raises only a question of law. The Court quoted its earlier ruling in China Road and Bridge Corporation versus Court of Appeals:

Any review of a finding of lack of cause of action based on this documents would not involve a calibration of the probative value of such pieces of evidence but would only limit itself to the inquiry of whether the law was properly applied given the facts and these supporting documents. Therefore, what would inevitably arise from such a review are pure questions of law, and not questions of fact.

The Court stressed that it is the Supreme Court which has sole jurisdiction over an appeal raising only a pure question of law, while appeals involving both questions of law and fact fall within the exclusive appellate jurisdiction of the Court of Appeals. Because the appeal was erroneously taken to the Court of Appeals, it had to be dismissed outright and not transferred to the proper court.

Doctrine

First, a motion to dismiss for failure to state a cause of action is resolved solely on the allegations of the complaint, which are assumed to be true; the court does not inquire into the truth or falsity of the facts or the probative value of the evidence. Second, an appeal from such a dismissal raises only a pure question of law, and under Rule 41, Section 2, paragraph c, it must be taken to the Supreme Court by petition for review on certiorari. Third, under Rule 50, Section 2, an appeal raising only questions of law that is wrongly taken to the Court of Appeals shall be dismissed outright and shall not be transferred to the appropriate court. Fourth, due process is satisfied when the parties are given a fair and reasonable opportunity to explain their side, and the order shows the facts and the law on which it rests.

Disposition

The appeal was dismissed for lack of jurisdiction, and the dismissal of Ferrera's complaint stood.

Remember This

Memorize this line: an appeal raising only a pure question of law belongs to the Supreme Court, and if it is wrongly taken to the Court of Appeals, it is dismissed outright and not transferred. Examiners use this case to test the distinction between questions of law and questions of fact, and the proper mode of appeal from a dismissal for failure to state a cause of action.