TRAVERSE DEVELOPMENT CORPORATION, PETITIONER, VS. DEVELOPMENT BANK OF THE PHILIPPINES, RESPONDENT.

Traverse Development versus Development Bank of the Philippines

The Case

This is a petition for review on certiorari brought by Traverse Development Corporation against the Development Bank of the Philippines. Traverse asks the Supreme Court to reverse the Court of Appeals, which had dismissed its appeal for lack of jurisdiction. The case matters because it draws the dividing line between appeals that belong to the Court of Appeals and those that must go straight to the Supreme Court by petition for review on certiorari: where the appeal raises purely legal questions, the Court of Appeals has no jurisdiction, and the proper remedy is a petition under Rule 45.

Procedural History

Traverse filed a complaint for annulment of the extrajudicial foreclosure sale and damages before the Regional Trial Court of Tarlac, docketed as Civil Case No. 7885. The bank moved to dismiss on the grounds of litis pendentia and forum shopping. The trial court granted the motion to dismiss but denied the motion to cite Traverse, its director, and its counsel for contempt. Traverse appealed to the Court of Appeals, raising three assigned errors. The Court of Appeals dismissed the appeal for lack of jurisdiction, holding that the remedy was a petition for review on certiorari under Rule 45 because the sole issue raised was purely legal. Traverse's motion for reconsideration was denied. Traverse then came to the Supreme Court by petition for review on certiorari.

Facts

On July 21, 1980, the Development Bank of the Philippines granted Traverse Development Corporation a loan of 910,000 pesos for the construction of a three-storey commercial building on its property in Tarlac, covered by a transfer certificate of title. The loan was payable over fifteen years. To secure payment, Traverse executed a real estate mortgage over a portion of the property consisting of 349 square meters. Under the mortgage, Traverse was required to secure a fire insurance policy and to endorse it to the bank, which was authorized to foreclose extrajudicially in case of default.

Traverse first secured a fire insurance policy from FGU Insurance Corporation. Before that policy expired, the bank required another policy, and Traverse secured Fire Insurance Policy No. TAR 1056 from Central Surety and Insurance Company for one million pesos, covering the period from May 7, 1982 to May 7, 1983. On August 9, 1982, the building was gutted by fire. Traverse notified the bank of the total loss and filed its claim with the insurer. The insurer proposed a settlement of 230,748 pesos, which Traverse rejected. Traverse then filed a complaint against the insurer and the bank before the Regional Trial Court of Quezon City, docketed as Civil Case No. Q-37497.

During the pendency of that case, and with no restraining order issued, the bank foreclosed the real estate mortgage upon Traverse's default. The bank was the highest bidder at 540,050 pesos, and a certificate of sale was issued in its favor on May 30, 1990. On May 28, 1991, Traverse filed a complaint in the Regional Trial Court of Tarlac for annulment of the extrajudicial foreclosure sale and damages, docketed as Civil Case No. 7432. No preliminary injunction was issued, and the bank consolidated its title on August 21, 1991 and took possession. Almost two years later, on July 7, 1993, Traverse filed another complaint in the same court for annulment of the extrajudicial foreclosure proceedings, reconveyance of title, cancellation of the writ of possession, and damages, docketed as Civil Case No. 7885. The bank moved to dismiss on the grounds of litis pendentia and forum shopping.

Issues

• Whether or not the Court of Appeals erred in dismissing the petitioner's appeal on the ground that it had no jurisdiction over the same.
• Whether or not the petitioner raised purely legal issues in the appellate court, such that the proper remedy was a petition for review on certiorari under Rule 45 rather than an ordinary appeal.

Applicable Provisions

Rule 41, Section 2 of the Rules of Court, as amended, provides:

Section 2. Modes of appeal. (a) Ordinary appeal. The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice of appeal with the court which rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party.

This fixes the ordinary mode of appeal from a Regional Trial Court decision, which the Court uses to contrast with the remedy where only legal questions are raised.

Rule 45 of the Rules of Court, as discussed in the decision, provides the remedy of a petition for review on certiorari to the Supreme Court where the appeal raises purely legal questions. The Court relies on this to hold that the Court of Appeals had no jurisdiction over Traverse's appeal.

Ruling

On the first issue, the Court held that the petition has no merit. Under Batas Pambansa Blg. 129, as amended, the Court of Appeals has exclusive appellate jurisdiction over decisions of the Regional Trial Courts in the exercise of their original jurisdiction. However, the Court of Appeals has no jurisdiction over appeals from such decisions where the issues raised are purely legal. In that situation, the remedy of the aggrieved party is a petition for review on certiorari in the Supreme Court under Rule 45.

On the second issue, the Court agreed with the Court of Appeals that only legal issues were raised: whether the action in Civil Case No. 7885 was barred by the pendency of Civil Case No. 7432 and, if so, whether the petitioner was guilty of forum shopping; whether the director who signed the verification and the petitioner's counsel were guilty of forum shopping; and whether the trial court should have denied consolidation. The Court explained the distinction between the two kinds of questions:

There is a question of law when the doubt or difference arises as to what the law is on certain state of facts, and which does not call for an examination of the probative value of the evidence presented by the parties-litigants.

And conversely:

There is a question of fact when the doubt or controversy arises as to the truth or falsity of the alleged facts.

The Court added that when there is no dispute as to fact, the question of whether or not the conclusion drawn therefrom is correct is a question of law. Since the Court of Appeals had the complaints in both cases before it, it could properly determine that the issues were purely legal and that it lacked jurisdiction over the appeal.

Doctrine

A Bar candidate should retain these rules. First, the Court of Appeals has appellate jurisdiction over decisions of the Regional Trial Court in the exercise of its original jurisdiction, but not where the appeal raises purely legal questions. Second, where the issues are purely legal, the remedy is a petition for review on certiorari in the Supreme Court under Rule 45, not an ordinary appeal. Third, a question of law arises when the doubt concerns what the law is on a given state of facts and does not call for an examination of the probative value of the evidence; a question of fact arises when the doubt concerns the truth or falsity of the alleged facts. When the facts are undisputed, the question of whether the conclusion drawn from them is correct is a question of law.

Disposition

The Supreme Court denied due course to the petition and affirmed the decision of the Court of Appeals, with costs against the petitioner.

Remember This

Memorize this line: where the appeal raises purely legal questions, the Court of Appeals has no jurisdiction, and the remedy is a petition for review on certiorari under Rule 45. Examiners use this case to test the distinction between a question of law and a question of fact, and the correct mode of appeal from a Regional Trial Court decision.