MARTELINO v.

NHMFC
GR No. 160208 – June 30 2008 – Quisumbing
FACTS:
 Petitioners alleged that they obtained housing loans from National Home Mortgage
Finance Corporation (NHMFC) and the Home Development Mutual Fund (HDMF),
respondents herein.
 Respondents directly released the proceeds thereof to the subdivision developer, Shelter
PH, Inc.
 Shelter, however, failed to complete the subdivision according to its representation and
subdivision plan.
 Petitioners are thus compelled to spend their own resources to improve the subdivision
road and alleys, and to install individual water facilities.
 Respondents, on the other hand, failed to ensure Shelter’s completion of the subdivision.
Instead, respondents ignored their right to suspend amortization payment for Shelter’s
failure to complete the subdivision, charged interests and penalties on their outstanding
loans, threatened to foreclose their mortgages and initiated foreclosure proceedings
against petitioner Martelino.
 Petitioners filed a petition for DR and prohibition with urgent prayer for the issuance of a
TRO and/or PI before the RTC against respondents. They sought a declaration from the
RTC of their rights as house and lot buyers.
 NHMFC failed to attend the PI hearing.
RTC: ordered that a WPI be issued retraining respondents from foreclosing the mortgages on
petitioners’ houses.
 NHMFC filed an MD on the ground that RTC had no jurisdiction over its person or over
the subject matter of the case as it was not notified of the hearing and that the petition
should have been filed with the HLURB.
RTC: granted the MD. It held that the Order was not applicable to HDMF since it was not
notified of the PI hearing. Also, it ruled that no judicial declaration can be made because the
petition was vague. Petitioners failed to state which section of the RA 8501 (Housing Loan
Condonation Act) affected their rights and needed judicial declaration. Lastly, since the
respondents still foreclosed their mortgages, there was already a breach of said law. Thus, the
petition for DR is improper and the proper remedy was an OCA.
CA: Affirmed the RTC.

ISSUE: WON the petition for DR and prohibition should be dismissed. YES

HELD: Petition is denied for lack of merit. The assailed Decision and Resolution of the CA
are affirmed.
I. Although the RTC is correct that the petition for DR is improper and the proper remedy is an
OCA, it had not ruled on whether the petition was also improper as a petition for prohibition.
Indeed, under S1R63, a person must file a petition for DR before breach or violation of a
DWOSECA.

In this case, the petitioners had stated in their petition that respondents assessed them interest and
penalties on their outstanding loans, initiated foreclosure proceedings against petitioner
Martelino, and threatened to foreclose the mortgages of the other petitioners, all in disregard of
their right to suspend payment to Shelter for its failure to complete the subdivision. Said
statements clearly mean one thing: petitioners had already suspended paying their amortization
payments. This actual suspension of payments defeated the purpose of the action to secure an
authoritative declaration of their supposed right to suspend payment. Thus, the RTC could no
longer assume jurisdiction over the action for DR because there was already a breach before
filing the action.

In the present case, there would be conversion of the petition for DR and prohibition into an
OCA. Although S6R63 might allow such course of action, the respondents did not argue the
point, and the SC note petitioners’ failure to specify the OCA desired.
Assuming that the SC can treat the Petition for DR and Prohibition as an action for prohibition,
the prohibition must still be held improper. Prohibition is a remedy against proceedings that are
without or in excess of jurisdiction, or with GADALEJ. But here, the petition did not even
impute lack of jurisdiction or GAD committed by respondents regarding the foreclosure
proceedings. Foreclose of mortgage is also the mortgagee’s right in case of non-payment of a
debt secure by mortgage. The mortgagee can sell the encumbered property to satisfy the
outstanding debt. Hence, HDMF cannot be faulted for exercising its right to foreclose the
mortgages.

II. The RTC, however, erred in ruling that the vagueness of the petition furnished additional
justification for its dismissal.

If the petition for DR and Prohibition was vague, dismissal is not proper because the respondents
may ask for more particulars. Notably, the NHMFC never assailed the supposed vagueness of the
petition in its MD nor did it ask for more particulars before filing its answer. Petitioners fairly
stated all the necessary ultimate facts, except that their action for DR was improper.

RTC assumed that RA 8501 was the subject matter of the case. But while the petition mentioned
the law, the declaration that petitioners sought was not anchored on any of its provisions. The
petition only stated that despise the effectivity of said law, respondents still acted in BF and with
under haste threatening petitioners with foreclosures, instead of encouraging them to avail of its
benefits.