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JOSEPHINE PAHAMOTANG v. PHILIPPINE NATIONAL BANK

FACTS:

The case involves a petition for review on certiorari of the Court of Appeals' decision and resolution. It started with the death of Melitona Pahamotang in 1972, leaving her husband and eight children as her surviving heirs. Agustin, the husband, filed a petition for letters of administration and was granted authority over his deceased wife's estate. Agustin and the Philippine National Bank (PNB) executed an amendment of real and chattel mortgages with assumption of obligation, which was approved by the court. Agustin filed petitions to increase the mortgage and seek an additional loan, both of which were granted with conditions. Agustin then filed several petitions to sell estate properties, which were initially granted but required the express conformity of all heirs. However, Agustin's motion for reconsideration was granted, allowing the sale of the properties to Arturo Arguna and Pahamotang Logging Enterprises, Inc.

The property was subsequently sold to Pahamotang Logging Enterprises, Inc. Arguna and PLEI filed a motion for the approval of the deeds of sale, which was granted by the intestate court. The daughters of Agustin then petitioned for the payment of their shares from the sale of the estate properties, which was also granted. However, the mortgaged obligations were never satisfied, leading PNB to file for the extrajudicial foreclosure of the mortgage. Josephine, one of the daughters, filed a motion to restrain PNB from foreclosing the mortgage, but the motion was denied. As a result, the mortgage was foreclosed. Josephine, together with her sisters Eleanor and Susana, filed a complaint to nullify the mortgage contracts and foreclosure proceedings, as well as seek damages against various parties including PNB. PNB moved to dismiss the complaint, which was initially granted but later reversed upon the plaintiffs' motion. The trial court ordered PNB to file its answer, leading to the submission of several issues for resolution. The death of Arturo Arguna resulted in his substitution by his heirs.

The trial court declared the mortgage contracts and foreclosure proceedings as void with respect to the plaintiffs' share in the estate but valid with respect to other parties. Similarly, the deeds of sale were declared void in relation to the plaintiffs' shares but valid with respect to other parties. The trial court denied other claims for lack of evidence. The Philippine National Bank (PNB), Pahamotang Logging Enterprises, Inc. (PLEI), and the heirs of Arturo Arguna appealed the decision to the Court of Appeals. The Court of Appeals reversed the trial court's decision and dismissed the complaint, ruling that the petitioners were essentially attacking collaterally the validity of orders issued by the intestate court instead of directly annulling them. The Court of Appeals clarified the distinction between a direct attack and a collateral attack on a judgment.

ISSUES:

  1. Whether the petitioners’ collateral attack on the four orders of the intestate court is proper.

  2. Whether the orders of the intestate court are valid and not null and void.

  3. Whether the petitioners’ failure to assail the orders at the most opportune time constitutes laches.

  4. Whether the orders of the intestate court authorizing the mortgage and sale of estate properties are void for lack of compliance with the mandatory requirements of Rule 89 of the Rules of Court.

  5. Whether the validity of the subject orders can be collaterally attacked in an action to annul contracts.

  6. Whether the failure to give notice to the heirs of the petitions to mortgage and sell estate properties renders the authority granted by the intestate court null and void.

  7. Whether the lack of notice to the heirs invalidates the subsequent mortgages, sales, and orders approving the same.

  8. Whether or not the Court of Appeals erred in disbelieving the trial court's findings.

  9. Whether or not laches can be applied in this case.

RULING:

  1. The collateral attack on the orders of the intestate court is not proper. A collateral attack is made when an attack on a judgment is made as an incident in an action seeking a different relief. In this case, the petitioners are collaterally attacking the orders of the intestate court in an action for the nullification of the subject mortgages, foreclosure proceedings, and deeds of sale. They should have initiated a direct action to annul the orders instead.

  2. The orders of the intestate court are valid and not null and void. The presumption is that the heirs were notified of the petition for increase of mortgage and of the hearing for the petition for declaration of heirs. The February 25, 1980 order required express conformity from the heirs before the subject property could be sold, and even if this was reconsidered in the January 7, 1981 order, the questioned orders remain valid as they were issued in accordance with the law and procedure.

  3. The petitioners’ failure to assail the orders at the most opportune time constitutes laches. They did not avail of other remedies to set aside the orders and did not appeal the order of denial by another judge. The questioned orders became final and the issues raised should be laid to rest.

  4. The orders of the intestate court granting permission to mortgage and sell estate properties are null and void for lack of compliance with the mandatory requirements of Rule 89 of the Rules of Court, specifically Sections 2, 4, and 7 thereof.

  5. The validity of the subject orders can be directly attacked in an action to annul contracts.

  6. Yes, the failure to give notice to the heirs of the petitions to mortgage and sell estate properties renders the authority granted by the intestate court null and void. The requirements of Rule 89 of the Rules of Court are mandatory, and failure to give notice to the heirs would invalidate the authority granted by the intestate/probate court to mortgage or sell estate assets.

  7. Yes, the lack of notice to the heirs invalidates the subsequent mortgages, sales, and orders approving the same. Any contract or order authorized by the court without previous notice to the heirs is not only null and void but also the order of the court authorizing the same.

  8. The Court of Appeals erred in disbelieving the trial court's findings. The appellate court did not provide clear reasons for setting aside the findings of the trial court. Without any indication to believe otherwise, the conclusion reached by the Court of Appeals cannot be adopted.

  9. Laches cannot be applied in this case. The element of delay in questioning the subject orders of the intestate court is lacking. The petitioners were unaware of the plan to mortgage and sell the estate properties, and there is no indication that they were notified of the contracts executed by Agustin. The Court of Appeals cannot simply impute laches against them.

PRINCIPLES:

  • A collateral attack on a judgment is made when an attack on it is made as an incident in an action seeking a different relief.

  • A direct attack on a judgment is made through an action or proceeding the main object of which is to annul, set aside, or enjoin the enforcement of the judgment.

  • A collateral attack on a judgment is proper only when the judgment, on its face, is null and void, or when it is patent that the court which rendered the judgment has no jurisdiction.

  • Once a judgment or order of a court has become final, the issues raised therein should be laid to rest.

  • Judgment properly rendered by a court vested with jurisdiction, like the RTC, and which has acquired finality, becomes immutable and unalterable, except to correct clerical errors or mistakes. (As cited in the case)

  • The action to annul contracts is not an action to annul the orders of the intestate court, but a direct attack on the validity of the contracts themselves. (As cited in the case)

  • The trial court has jurisdiction over an action to annul contracts if there are allegations that the contracts were entered into without proper notices to the heirs for the approval of the intestate court. (As cited in the case)

  • Orders of the intestate court authorizing the mortgage and sale of estate properties must comply with the mandatory requirements of Rule 89 of the Rules of Court. (As cited in the case)

  • When an order authorizing the sale or encumbrance of real property is issued without previous notice to the heirs, devisees, and legatees, the order and the contract itself are null and void. (Maneclang vs. Baun)

  • Compliance with the requirements of Rule 89 of the Rules of Court, including the notice to the interested parties, is mandatory when seeking authority to sell, mortgage, or encumber estate assets. (Liu vs. Loy, Jr.)

  • Failure to give notice to the heirs of the petitions to mortgage and sell estate properties renders the authority granted by the intestate court null and void. (Liu vs. Loy, Jr.)

  • The lack of notice to the heirs invalidates subsequent mortgages, sales, and orders approving the same. (Liu vs. Loy, Jr.)

  • Findings of the trial court are entitled to great weight and should not be set aside without clear reasons.

  • Laches is negligence or omission to assert a right within a reasonable time, and its essential elements include conduct by the defendant, delay in asserting rights by the complainant, lack of knowledge or notice by the defendant, and injury or prejudice to the defendant if relief is granted.