G.R. NO.

148273 April 19, 2006

MILAGROS SIMON and LIBORIO BALATICO,

vs. GUIA W. CANLAS, Respondent.

FACTS
Edgar H. Canlas (Edgar) filed a complaint for judicial foreclosure of real estate mortgage against Milagros Simon
(Milagros) and her husband, Liborio Balatico (petitioners). In the complaint, Edgar alleges that Milagros obtained a
loan from him in the amount of P220,000.00 secured by a real estate mortgage over her paraphernal property, a
parcel of land located at San Nicolas, Victoria, Tarlac. The loan was payable within a period of three years. Milagros
defaulted in the payment of the loan and repeated demands for payment went unheeded, prompting the filing of a
case in court.
Petitioners filed their Answer with Counterclaim, alleging that Milagros never transacted any business with Edgar
and she did not receive the consideration of the alleged mortgage. Edgar filed his Reply and Answer to
Counterclaim, reiterating validity and due execution of the real estate mortgage.
With leave of court, petitioners filed a Third-Party Complaint against Virginia Canlas (Virginia) and Aurelia Delos
Reyes (Aurelia), claiming that they duped Milagros to part with her title and sign the mortgage documents without
giving her the consideration and refusing to return her title when demanded. Virginia and Aurelia filed their
Answer with Counterclaim to Third-Party Complaint, alleging that the complaint states no cause of action against
them since they are not privies to the real estate mortgage and Aurelia is only a witness to the mortgage document.
Petitioners filed their Reply and Answer to Counterclaim, reiterating their claims in the third-party complaint.
Edgar died during the pendency of the case. Upon proper motion, the RTC ordered that Edgar be substituted by his
wife, Guia W. Canlas (respondent), as plaintiff.
The RTC issued a pre-trial order stating that the parties failed to arrive at a settlement. However, they agreed to
stipulate on the following: "[t]hat the defendant executed a deed of real estate mortgage in favor of the plaintiff
involving a parcel of land covered by TCT No. 139884 located at San Nicolas, Victoria, Tarlac."
Thereafter, trial on the merits ensued.
Petitioner’s counsel, Atty. Norberto De Jesus, filed an Ex- Parte Urgent Motion for Postponement since he is busy
campaigning as a candidate in the coming elections. There being no objection from respondent, the RTC reset.
On the rescheduled date, Atty. De Jesus and petitioners failed to appear in court. The RTC reset the hearing with a
warning that if the petitioners will still fail to appear again, they will be considered to have waived their right to
present further evidence.
Atty. De Jesus failed to appear in court but petitioners were present. Milagros informed the RTC that Atty. De Jesus
withdrew his appearance as their counsel. In view thereof, the RTC directed petitioners to secure the services of
another counsel.
Milagros informed the RTC that they have retained Atty. Alejo Y. Sedico as new counsel. The hearing was again
reset with the final warning that should petitioners’ witnesses fail to appear at the said hearing, they would be
considered to have waived their right to present further evidence.
Atty. Sedico formally filed his Entry of Appearance with Urgent Ex-Parte Motion to Reset, praying that the hearing
scheduled due to conflict of schedule and as well as to give him more time to study the case since he had just been
retained.
The RTC allowed, in the interest of justice, the resetting of the hearing for presentation of petitioners’ evidence for
the last time. The RTC directed petitioners to secure the services of a counsel of their choice to represent them in
the said hearing considering that it postponed motu propio the hearing in the interest of justice over the vigorous
objection of the respondent due to failure of petitioners’ counsel to appear for three successive times. It warned
petitioners that in case they would be unable to present evidence in the next scheduled hearing, they would be
deemed to have waived their right to present further evidence.
At the scheduled hearing, the RTC was apprised of another Urgent Motion to Reset filed by petitioners’ counsel
due to a hearing in Valenzuela City. In view of the vigorous objection of respondent’s counsel on the ground that
the case has been postponed several times at petitioners’ instance, the RTC denied the motion to reset and
petitioners were deemed to have waived their right to present evidence. The case was then considered submitted
for decision.
The RTC held that Milagros executed a deed of real estate mortgage in favor of Edgar and she received the
consideration for the mortgage in the amount of P220,000.00. The petitioners’ inaction for three years before the
filing of the complaint against them to protest the alleged non-receipt of the consideration for the
mortgage casts serious doubts on their claim. Lastly, the deed of real estate mortgage was duly notarized and
assumed the character of a public instrument.
Petitioners filed a Motion for Reconsideration, claiming that they were denied due process when the RTC decided
the case without petitioners’ evidence. The RTC denied the motion for reconsideration, holding that petitioners
were given ample opportunity to hire a counsel, prepare for trial and adduce evidence, which they took for granted
and they should bear the fault.
Dissatisfied, petitioners filed an appeal with the CA. The CA affirmed the decision of the RTC. The CA merely
noted that the RTC failed to dispose of petitioners’ third-party complaint and without any further discussion,
dismissed the third-party complaint in the dispositive portion of its decision.

ISSUE
Whether or not the judicial admission of the due execution of the real estate mortgage may be contradicted by the
petitioners

RULING

It must be noted that in Benguet Exploration, Inc. v. Court of Appeals, this Court ruled that the admission of the
genuineness and due execution of a document simply means that the party whose signature it bears admits that he
voluntarily signed the document or it was signed by another for him and with his authority; that at the time it was
signed it was in words and figures exactly as set out in the pleading of the party relying upon it; that the document
was delivered; and that any formalities required by law, such as a seal, an acknowledgment, or revenue stamp,
which it lacks, are waived by him.
However, it does not preclude a party from arguing against it by evidence of fraud, mistake, compromise, payment,
statute of limitations, estoppel and want of consideration. Petitioners therefore are not barred from presenting
evidence regarding their claim of want of consideration.
It bears stressing that the matter of absence of consideration and alleged fraudulent scheme perpetuated by third-
party defendants, being evidentiary, should be threshed out in a proper trial. To deny petitioners their right to
present evidence constitutes a denial of due process, since there are issues that cannot be decided without a trial of
the case on the merits.
Ordinarily, when there is sufficient evidence before the Court to enable it to resolve the fundamental issues, the
Court will dispense with the regular procedure of remanding the case to the lower court, in order to avoid further
delays in the resolution of the case. However, a remand in this case, while time-consuming, is necessary, because
the proceedings had in the RTC are grossly inadequate to settle factual issues. Petitioners were unduly deprived of
the full opportunity to present evidence on the merits of their defense and third-party complaint.
Considering the foregoing, the Court need not delve on the other issues raised by petitioners. Suffice it to say that
such matters are best decided by the RTC only after full reception of petitioners’ evidence.