G.R. No. 172175 : October 9, 2006
FACTS: A Complaint for nullification of foreclosure proceedings and loan documents with damages against respondent Chinabank was filed by Sps. Expedito and Alice Zepeda before the Regional Trial Court of San Jose, Camarines Sur. They alleged that they obtained a loan in the amount of P5,800,000.00 from respondent secured by a Real Estate Mortgage over a parcel of land. Petitioners subsequently encountered difficulties in paying their loan obligations hence they requested for restructuring which was allegedly granted by Chinabank. Hence, they were surprised when respondent bank extrajudicially foreclosed the subject property where it emerged as the highest bidder. Respondent bank was issued a Provisional Certificate of Sale and upon petitioners failure to redeem the property, ownership was consolidated in its favor. According to petitioners, the foreclosure proceedings should be annulled for failure to comply with the posting and publication requirements. They also claimed that they signed the Real Estate Mortgage and Promissory Note in blank and were not given a copy and the interest rates thereon were unilaterally fixed by the respondent. Respondent banks motion to dismiss was denied, hence it filed an answer with special affirmative defenses and counterclaim. It also filed a set of written interrogatories with 20 questions. In an Order dated April 1, 2004, the trial court denied Chinabanks affirmative defenses for lack of merit as well as its motion to expunge the complaint for being premature.The trial court reiterated its denial of Chinabanks affirmative defenses in its Order dated October 22, 2004 and directed the Clerk of Court to set the pre-trial conference for the marking of the parties documentary evidence. Aggrieved, respondent bank filed a petition for certiorari under Rule 65 which was granted by the Court of Appeals. It held that the trial court gravely abused its discretion in issuing the two assailed Orders. It ruled that compelling reasons warrant the dismissal of petitioners complaint because they acted in bad faith when they ignored the hearings set by the trial court to determine the veracity of Chinabanks affirmative defenses; they failed to answer Chinabanks written interrogatories; and the complaint states no cause of action. Petitioners motion for reconsideration was denied.
ISSUE: Whether or not the complaint should be dismissed for failure of petitioners to answer respondent’s written interrogatories as provided for in Section 3(c), Rule 29 of the Rules of Court.
HELD: NO. The consequences enumerated in Section 3(c) of Rule 29 would only apply where the party upon whom the written interrogatories is served, refuses to answer a particular question in the set of written interrogatories and despite an order compelling him to answer the particular question, still refuses to obey the order. Under the case of Arellano v. Court of First Instance of Sorsogon, the consequences enumerated in Section 3(c) of Rule 29 would only apply where the party upon whom the written interrogatories is served, refuses to answer a particular question in the set of written interrogatories and despite an order compelling him to answer the particular question, still refuses to obey the order. In this case, petitioners refused to answer the whole set of written interrogatories, not just a particular question. Clearly then, respondent bank should have filed a motion based on Section 5 and not Section 3(c) of Rule 29. Due to respondent bank’s filing of an erroneous motion, the trial court cannot be faulted for ruling that the motion to expunge was premature for lack of a prior application to compel compliance based on Section 3.