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Republic of the Philippines

SUPREME COURT
Manila

The mortgage on those lands which Active Wood had


constituted in favor of State Investment to secure an
indebtedness was foreclosed and the lands auctioned off to
State Investment as the highest bidder. The certificate of
sale issued to State Investment was registered on
December 2, 1983.

SECOND DIVISION
G.R. No. 86603

February 5, 1990

ACTIVE WOOD PRODUCTS CO., INC., petitioner


vs.
HON. COURT OF APPEALS, STATE INVESTMENT HOUSE, INC.,
and ATTY. VICTORINO P. EVANGELISTA, Ex-Officio, Sheriff of
Malolos, Bulacan, respondents.
Sotto & Sotto Law Offices for petitioner.
Jardeleza, Sobrevinas
respondent SIHI.

Diaz,

Hayudini

&

Bodegon

for

SARMIENTO, J.:
This is a petition for review on certiorari of a decision
rendered by the Court of Appeals in LRC Case No. P-39-84 of
Branch XIV. 1
The facts narrated in the decision of the Court of Appeals
are accurate.
Respondent Judge Legaspi is the presiding judge of Branch
XX where Civil Case No. 6518-M is pending. LRC Case No. P39-84 is pending in Branch XIV presided over by Judge
Felipe N. Villajuan, Jr.
The LRC Case No. P-39-84 was initiated by the private
respondent State Investment House, Inc., when it filed a
petition for the issuance of a writ of possession over Active
Wood's two parcels of land covered by TCT Nos. 262966 and
262967 of the Register of Deeds of Bulacan.

In view of the foreclosure, Active Wood filed Civil Case No.


6518M with the court a quo, which by its order dated
February 27, 1984 declared as null and void the foreclosure
and State Investment's certificate of sale.
On February 14, 1984 State Investment filed a petition for a
writ of possession pending redemption of the lands by
Active Wood. The petition, docketed as LRC Case No. P-3984, was assigned to Branch XIV of said Regional Trial Court.
On March 23, 1984 Judge Villajuan of Branch XIV granted
the writ upon filing of a bond.
On April 18, 1984 State Investment filed a motion with
Branch XIV in LRC Case No. P-39-84 to reduce the amount
of bond required by the court.
Meanwhile on October 2, 1984 this Court set aside the
order of Branch XX a quo that had earlier declared null and
void the foreclosure and State Investment's certificate of
sale.
On December 3, 1984 Judge Villajuan of Branch XIV denied
State Investment's motion for reduction of bond and in the
same order he set aside his previous order of March 23,
1984 which had granted State Investment the Writ of
Possession conditioned upon the posting of bond.
On March 13, 1985, Active Wood filed a motion in LRC Case
No. P-39-84 pending in Judge Villajuan's Branch XIV for the
consolidation of said case with Civil Case No. 6518-M
pending in respondent Judge's Branch XX. Moreover, Active
Wood filed a motion in said LRC Case No. P-39-84 to dismiss
and/or suspend the proceedings of that case until Branch

XX resolved the issue of validity of the mortgage raised in


Civil Case No. 6518-M.
Acting on Active Wood's motions, Judge Villajuan of Branch
XIV, in his order dated July 1, 1985, held in abeyance
resolution of State Investment's petition for the Writ of
Possession and directed that said LRC Case No. P-39-84
pending in his branch be consolidated with Civil Case No.
6518-M pending in respondent Judge's branch provided the
latter would not object.
On November 28, 1985, the respondent Judge issued his
new assailed order returning the LRC Case No. P-39-84 to
Branch XIV obviously signifying his objection to the
proposed consolidation of that case with the case pending
in his branch. Active Wood's motion for reconsideration of
the order denying consolidation was also denied by
respondent Judge in his now second challenged order of
January 9, 1985. 2
One fact was overlooked by the respondent court thatCivil
Case No. 6518-M was filed by the petitioner herein on June
7, 1982, much ahead than the filing by the private
respondent on February 1, 1984, of its "Petition for Writ of
Possession."
In the light of the facts above-stated, the Court of Appeals
denied the petition and ruled that the "consolidation of
cases is proper when they involve a common question of
law or fact and they are pending before the court." 3 The
public respondent would like to impress that consolidation is
proper only when two or more cases are before the same
judge or branch and that consolidation is not allowed when
the cases are pending before different courts or different
branches of the same court.
Hence this petition was filed.
We rule in favor of the consolidation of the two cases.
The Rules of Court 4 provide:

Sec. 1. Consolidation.When actions involving a common


question of law or fact are pending before the court, it may
order a joint hearing or trial of any or all the matters in
issue in the actions; it may order all the actions
consolidated; and it may make such orders concerning
proceedings therein as may tend to avoid unneccessary
costs or delay.
The rationale for consolidation is to have all cases, which
are intimately related, acted upon by one branch of the
court to avoid the possibility of conflicting decisions being
rendered that will not serve the orderly administration of
justice. 5 Time and again we have said that the rules of
procedure must be liberally construed in order to promote
their object and to assist the parties in obtaining just,
speedy, and inexpensive determination of every action and
proceeding.
State Investment argues that the aforequoted provision of
the rules mention only actions, which means an ordinary
suit in a court of justice by which one party prosecutes
another for the enforcement or protection of a right, or the
prevention or redress of a wrong. Civil Case No. 6518-M is
such an action. 6 On the other hand, LRC Case No. P-39-84
involving the Petition for a Writ of Possession is an ex-parte
proceedings 7 and does not require notice to be given to
the other parties. The two, action and proceedings, being
different, can not be consolidated.
It is true that a petition for a writ of possession is made exparte to facilitate proceedings, being founded on a
presumed right of ownership. Be that as it may, when this
presumed right of ownership is contested and made the
basis of another action, then the proceedings for writ of
possession would also become seemingly groundless. The
entire case must be litigated and if need be as in the case
at bar, must be consolidated with a related case so as to
thresh out thoroughly all related issues.

Thus in the case at bar, this technical difference between


an action and a proceeding becomes insignificant and
consolidation becomes a logical conclusion.
The consolidation of cases becomes mandatory because it
involves the same parties and the same subject matter
which is the same parcel of land. 8 Such consolidation is
desirable to avoid confusion and unnecessary costs and
expenses with the multiplicity of suits. Thus the rules do not
distinguish between cases filed before the same branch or
judge and those that are pending in different branches, or
before different judges of the same court, in order that
consolidation may be proper, as long as the cases involve
the resolution of questions of law or facts in common with
each other. Therefore it appears that the respondent court
in denying the motion for consolidation, has sanctioned the
departure of the trial court from the usual course of judicial
proceedings, thus calling for the exercise of the power of
supervision of the Supreme Court. The respondent court
has, indeed, committed a reversible error.
Consolidation of these two cases in Branch XX, in which the
earlier case filed now pends, is more promotive of their
expeditious and less expensive determination as well as the
orderly administration of justice than if they were to remain
in the two branches of the same court.
Even in the Supreme Court which sits en banc or in three
divisions, the consolidation of cases with issues of fact or
law intimately or substantially related pending in the same
division or in different divisions, and en banc, be they
assigned to the same ponente or to different ponentes is
practically given or conceded to the ponente assigned to
the case with the lower number, i.e., the one filed earlier.
We have found this practice beneficial and desirable from
the results. We think the same advantage would accrue to
the lower courts if they adhere to this procedure.
The delay in the determination of the controversy intimated
by the respondent is all in the mind. One judge would be

able to resolve the different aspects of these cases with


more dispatch and accord than two judges.
WHEREFORE, the petition is GRANTED; the Decision
promulgated on November 22,1988 and the Order issued
on January 10, 1989, both by the respondent Court of
Appeals, are SET ASIDE; Civil Case No. 6518-M and LRC
Case No. P-39-84 are consolidated in Branch XX of the
Regional Trial Court, Third Judicial Region, at Malolos,
Bulacan, for hearing and proper disposition without
unnecessary delay.
Costs against the private respondent.
SO ORDERED.
Melencio-Herrera, Paras and Regalado, JJ., concur.
Padilla, J., took no part.

FIRST DIVISION
[G.R. No. L-64250. September 30, 1983.]
SUPERLINES TRANSPORTATION CO., INC. and ERLITO LORCA,
Petitioners, v. HON. LUIS L. VICTOR, Judge Presiding over
Branch XVI of the Regional Trial Court of Cavite, TIMOTEA T.
MORALDE, CAYETANO T. MORALDE, JR., ALEXANDER T.
MORALDE, EMMANUEL T. MORALDE, and JOCELYN MORALDE
ABELLANA, Respondents.
Benito P. Fabio for Plaintiff-Appellee.
Michael Moralde for Private Respondents.
SYLLABUS
1.
REMEDIAL LAW; ACTIONS; JUDICIAL ECONOMY AND
ADMINISTRATION AS WELL AS CONVENIENCE OF THE
PARTIES; CONSIDERATIONS FOR CONSOLIDATION OF CASES
IN THE CASE AT BAR. There is, however, a more
pragmatic solution to the cotroversy at bar; and that is to
consolidate the Gumaca case with the Cavite case.
Considerations of judicial economy and administration, as
well as the convenience of the parties for which the rules on
procedure and venue were formulated, dictate that it is the
Cavite court, rather than the Gumaca court, which serves
as the more suitable forum for the determination of the
rights and obligations of the parties concerned. As observed
by both the trial and appellate courts, to require private
respondents who are all residents of Kawit, Cavite, to
litigate their claims in the Quezon Court would
unnecessarily expose them to considerable expenses. On
the other hand, no like prejudice would befall the
defendants transportation companies if they were required
to plead their causes in Cavite, for such change of venue
would not expose them to expenses which are not already
liable to incur in connection with the Gumaca case.

2.
ID.; PURPOSE AND OBJECT OF PROCEDURE. The
whole purpose and object of procedure is to make the
powers of the court fully and completely available for
justice. The most perfect procedure that can be devised is
that which gives opportunity for the most complete and
perfect exercise of the powers of the court within the
limitations set by natural justice. It is that one which, in
other words, gives the most perfect opportunity for the
powers of the count to transmute themselves into concrete
acts of justice between the parties before it. The purpose of
such a procedure is not to restrict the jurisdiction of the
court over the subject matter, but to give it effective facility
in righteous action. The purpose of procedure is not to
thwart justice. Its proper aim is to facilitate the application
of justice to the rival claims of contending parties. It was
created not to hinder and delay but to facilitate and
promote the administration of justice. It does not constitute
the thing itself which courts are always striving to secure to
litigants. It is designed as the means best adapted to obtain
that thing. In other words, it is a means to an end. It is the
means by which the powers of the court are made effective
in just judgments. When it loses the character of the one
and takes on that of the other the administration of justice
becomes incomplete and unsatisfactory and lays itself open
to grave criticism." (Manila Railroad Co. v. Attorney-General,
20 Phil. 523)
DECISION
ESCOLIN, J.:
A petition for certiorari to set aside the decision of the
Intermediate Appellate Court in CA-G.R. No. SP-00708
entitled "Superlines Transportation Co., Inc., Et. Al. versus
Hon. Luis L. Victor, Et Al.," which affirmed the orders dated
March 28 and April 27, 1983 of herein respondent Judge
Luis L. Victor in Civil Case No. N-4338 of the Regional Trial

Court of Cavite, entitled "Timotea T. Moralde, Et. Al. versus


Pantranco South Express, Inc., Et. Al."cralaw virtua1aw
library
On December 19, 1982, Bus No. 3008 of the Pantranco
South Express, Inc., Pantranco for short, driven by Rogelio
Dillomas, collided with Bus No. 331 of the Superlines
Transportation Co., Inc., Superlines for short, then driven by
Erlito Lorca along the highway at Lumilang, Calauag,
Quezon, resulting in the instantaneous death of Cayetano P.
Moralde, Sr., a passenger in the Pantranco bus.cralawnad
On January 4, 1983, Superlines instituted an action for
damages before the then Court of First Instance of Quezon,
Gumaca Branch, against Pantranco and Rogelio Dillomas,
driver of said Pantranco Bus No. 3008. In its complaint,
docketed as Civil Case No. 1671-G, Superlines alleged that
the recklessness and negligence of the Pantranco bus driver
was the proximate cause of the accident and that there was
want of diligence on the part of Pantranco in the selection
and supervision of its driver.
On February 11, 1983, private respondents Timotea T.
Moralde, widow of the deceased Cayetano P. Moralde, Sr.,
and her children, Cayetano, Jr., Alexander, Ramon,
Emmanuel, all surnamed Moralde, and Jocelyn M. Abellana,
filed a complaint for damages, docketed as Civil Case No. N4338 of the Regional Trial Court of Cavite City, against
Superlines and its driver, Erlito Lorca, as well as Pantranco
and its driver, Rogelio Dillomas. The cause of action
pleaded against Superlines was based on quasi-delict, while
that against Pantranco, on culpa-contractual.
On February 28, 1983, herein petitioners Superlines and its
driver Erlito Lorca filed a motion to dismiss in Civil Case No.
N-4338 on the ground of pendency of another action,
obviously referring to Civil Case No. 1671-G pending before
the Regional Trial Court of Quezon, Gumaca Branch.
Finding that the two cases (Civil Cases No. 1671-G and No.
N-4338) involved different parties as well as different

causes of action, respondent Judge Luis Victor denied the


motion to dismiss in the challenged order of March 28,
1983. Superlines moved for a reconsideration, but the same
was denied on April 27, 1983.
Dissatisfied, Superlines filed with the Intermediate
Appellate Court a petition for certiorari and prohibition with
preliminary injunction, which petition, however, was denied
due course. Hence, this present recourse.
It is suggested by petitioners that private respondents
Moraldes should pursue their claim for damages by
intervening in the Gumaca action, pursuant to Sec. 2, Rule
12 of the Rules of Court and in the light of Municipality of
Hagonoy v. Secretary of Agriculture and Natural Resources
[73 SCRA 507] and Orellano v. Alvestir [76 SCRA 536]. It is
contended that since the right of private respondents to
claim damages is founded on the same facts involved in the
Gumaca action, any judgment rendered therein will amount
to res judicata in the Cavite case, for whatever adjudication
is made in the former case between Pantranco and
Superlines as regards either of the parties culpability would
set said issue at rest. Furthermore, such intervention would
prevent multiplicity of suits and avoid confusion that may
arise
should
the
trial
courts
render
conflicting
decisions.chanroblesvirtualawlibrary
Petitioners stand is consistent with our ruling in the case of
Marapao v. Mendoza, 119 SCRA 97, where We held
that:jgc:chanrobles.com.ph
"While respondent Castillo has not been impleaded in the
Bohol case, she has similar interests as Hotel de Mercedes,
the defendant therein which is her employer. Petitioner and
private respondent both claim damages based on the same
incident. A decision, whether in favor of petitioner or private
respondent in the Bohol case would amount to res judicata
in the Cebu case. Damages in favor of one party would
preclude damages in favor of the other.

"There is an additional reason for dismissal and that is, to


avoid multiplicity of suits. (Ago Timber Co. v. Hon. Ruiz, Et
Al., 21 SCRA 138 (1967); Erlanger v. Villamor, 98 Phil. 1003
(1956); Teodoro, Jr. v. Mirasol, 99 Phil. 150 (1956).
"To protect the interests of respondent employee, she may
intervene as a party in the Bohol case and file a
counterclaim for damages against petitioner."cralaw
virtua1aw library
There is, however, a more pragmatic solution to the
controversy at bar; and that is to consolidate the Gumaca
case with the Cavite case. Considerations of judicial
economy and administration, as well as the convenience of
the parties for which the rules on procedure and venue
were formulated, dictate that it is the Cavite court, rather
than the Gumaca court, which serves as the more suitable
forum for the determination of the rights and obligations of
the parties concerned.
As observed by both the trial and appellate courts, to
require private respondents who are all residents of Kawit,
Cavite, to litigate their claims in the Quezon Court would
unnecessarily expose them to considerable expenses. On
the other hand, no like prejudice would befall the
defendants transportation companies if they were required
to plead their causes in Cavite, for such change of venue
would not expose them to expenses which they are not
already liable to incur in connection with the Gumaca case.
The objection interposed by Superlines that it has its offices
in Atimonan, Quezon, should not detract from the overall
convenience afforded by the consolidation of cases in the
Cavite Court. For apart from the fact that petitioner and its
driver are represented by the same counsel with offices
located in Manila, defendants transportation companies can
readily avail of their facilities for conveying their witnesses
to the place of trial.chanrobles virtual lawlibrary
The ordered consolidation of cases, to our mind, crystallizes
into
reality
the
thinking
of
our
predecessors
that:jgc:chanrobles.com.ph

". . . The whole purpose and object of procedure is to make


the powers of the court fully and completely available for
justice. The most perfect procedure that can be devised is
that which gives opportunity for the most complete and
perfect exercise of the powers of the court within the
limitations set by natural justice. It is that one which, in
other words, gives the most perfect opportunity for the
powers of the court to transmute themselves into concrete
acts of justice between the parties before it. The purpose of
such a procedure is not to restrict the jurisdiction of the
court over the subject matter, but to give it effective facility
in righteous action. It may be said in passing that the most
salient objection which can be urged against procedure
today is that it so restricts the exercise of the courts
powers by technicalities that part of its authority effective
for justice between the parties is many times an
inconsiderable portion of the whole. The purpose of
procedure is not to thwart justice. Its proper aim is to
facilitate the application of justice to the rival claims of
contending parties. It was created not to hinder and delay
but to facilitate and promote the administration of justice. It
does not constitute the thing itself which courts are always
striving to secure to litigants. It is designed as the means
best adapted to obtain that thing. In other words, it is a
means to an end. It is the means by which the powers of
the court are made effective in just judgments. When it
loses the character of the one and takes on that of the
other the administration of justice becomes incomplete and
unsatisfactory and lays itself open to grave criticism."
(Manila Railroad Co. v. Attorney-General, 20 Phil. 523)
WHEREFORE, the instant petition is hereby denied. Civil
Case No. 1671-G of the Regional Trial Court of Quezon is
hereby ordered consolidated with Civil Case No. N-4338
pending before the Regional Trial Court of Cavite. The
Regional Trial Court of Quezon, Gumaca Branch, is directed
to transfer, without unnecessary delay, the records of Civil
Case No. 1671-G to the Regional Court of Cavite, Branch
XVI.

SO ORDERED.

FIRST DIVISION
STEEL CORPORATION OF THE PHILIPPINES,
Petitioner,

Promulgated:
November 17, 2010
x----------------------------------------------------------------------------------------x

- versus -

DECISION

EQUITABLE PCI BANK, INC.,


(now known as BDO UNIBANK, INC.),
Respondent.
x-------------------------------------------x
DEG
DEUTSCHE
ENTWICKLUNGSGESELLSCHAFT MBH,
Petitioner,

VELASCO, JR., J.:

INVESTITIONS-UND

- versus EQUITABLE PCI BANK, INC., (now known as BDO UNIBANK,


INC.) and STEEL CORPORATION OF THE PHILIPPINES,
Respondents.
G.R. No. 190462
Present:
CORONA, J., Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
PERALTA,* and
PEREZ, JJ.

Before us are two Petitions for Review on Certiorari under


Rule 45, docketed as G.R. Nos. 190462 and 190538,
assailing the July 3, 2008 Decision[1] and December 3,
2009 Resolution[2] of the Court of Appeals (CA) in CA-G.R.
SP No. 101881, entitled Equitable PCI Bank, Inc. (now
known as Banco de Oro-EPCI, Inc.) v. Steel Corporation of
the Philippines. The CA set aside the Decision[3] dated
December 3, 2007 of the Regional Trial Court (RTC) acting
as a Rehabilitation Court, and, in effect, the CA (1) set aside
the
Rehabilitation
Courts
Decision
approving
the
Rehabilitation Plan; and (2) terminated the corporate
rehabilitation of Steel Corporation of the Philippines (SCP).
We consolidated G.R. No. 190462 with G.R. No. 190538 as
they involve identical parties, arose from the same facts,
and assail the same CA Decision dated July 3, 2008.[4]
The Facts
SCP is a domestic corporation incorporated and registered
with the Securities and Exchange Commission on October 3,
1994. It is engaged in the manufacturing and distribution of
cold-rolled and galvanized steel sheets and coils.

G.R. No. 190538


During its operations, SCP encountered and suffered from
financial difficulties and temporary illiquidity, aggravated by
the 1997 Asian Financial Crisis. And shortage in working
capital and reduced operating capacity compounded its
problem. As a result, SCP was unable to service its principal
payments for its liabilities.

In its Interim Financial Statement as of December 31, 2005,


SCPs total assets amounted to PhP 10,996,551,123, while
its liabilities amounted to PhP 8,365,079,864.
Accordingly, on September 11, 2006, Equitable PCI Bank,
Inc., now known as Banco de Oro-EPCI, Inc. (BDO-EPCIB),
which accounted for 27.45% of the total liabilities of SCP,
filed a creditor-initiated petitionto place the SCP under
corporate rehabilitation pursuant to the provisions of
Section 1, Rule 4 of the Interim Rules of Procedure on
Corporate Rehabilitationentitled In the Matter of the Petition
to have Steel Corporation of the Philippines Placed under
Corporate Rehabilitation with Prayer for the Approval of the
Proposed Rehabilitation Plan. BDO-EPCIB included its
proposed rehabilitation plan in the said petition.
Finding the petition to be sufficient in form and substance,
the Rehabilitation Court issued an Order dated September
12, 2006, directing, among others, the stay of enforcement
of all claims, whether for money or otherwise and whether
such enforcement is by court action or otherwise, against
SCP, its guarantors, and sureties not solidarily liable with it.
The Rehabilitation Court likewise appointed Atty. Santiago T.
Gabionza, Jr. as the Rehabilitation Receiver for SCP.
SCP did not oppose the petition but instead filed its own
counter rehabilitation plan and submitted it for the
consideration of the Rehabilitation Court. Other creditors
filed their respective comments on the petition.
On November 23, 2006, the Rehabilitation Court issued an
Order, giving due course to the petition and directing Atty.
Gabionza to evaluate the rehabilitation plan proposed by
BDO-EPCIB and the proposals of the other participating
creditors, and to submit his recommendations. The
Rehabilitation Court also directed Atty. Gabionza to consider
SCPs
counter rehabilitation plan in drafting his
recommended rehabilitation plan.

In a Compliance dated March 6, 2007, Atty. Gabionza


submitted his recommended rehabilitation plan. The said
plan contained the salient features of the rehabilitation
plans separately submitted by SCP and BDO-EPCIB, as well
as his own comments. The plan was summarized by the
Rehabilitation Court as follows:
Thus, after considering the comments of the other
participating creditors and evaluating the proposals of SCP
and the petitioner, Atty. Gabionza recommended the
following terms and conditions for rehabilitation plan, to wit:
1.
Fresh equity infusion of P3.5 Billion, out of which P3
Billion shall be used for debt reduction, and the balance of
P500 Million as additional working capital.
2.
The P3 Billion allocated for debt repayment shall first
service the secured credits and excess thereafter will be
applied to clean creditors and suppliers.
3.
The remaining short term and long term debt
balances after debt reduction will be restructured over a
period of 12 years inclusive of a 2 year grace period on
principal payments. There shall be 20 equal semi-annual
payments of principal to commence at the end of the grace
period.
4.
Interest rates for the restructure debt shall be 8% per
annum fixed for the duration of the loan and shall be
payable quarterly in arrears. No grace period on interest
payments.
5.
To protect existing clean creditors, SCP may not
secure additional secured credits which will utilize the
excess assets values after the P3.0 Billion debt reduction.
6.
Any excess cash after the annual (normal) CAPEX and
debt service requirements shall be distributed as follows:
70% debt repayment and 30% to be retained by the
Company.

7.
All existing suppliers credits (subject to final
validation) shall have 2 options:
a.
To be paid quarterly over a period of 5 years without
interest, or
b.
To continuously supply the company on the pay-reavail (Deliver same amount paid) basis.
8.
All loans, suppliers credit and other SCP liabilities are
subject to final verification once the recommended
rehabilitation plan is approved.
The rehabilitation plan recommended by Atty. Gabionza has
three (3) phases in the implementation of the proposed
P3.5 Billion fresh equity infusion, thus:
Phase 1
SCPs articles of incorporation and by laws shall be amended
to accommodate the additional equity of P3.5 Billion. The
present stockholders of SCP shall be given sixty (60) days
from approval of the plan to keep their stockholdings SCP
by raising/sourcing the P3.5 Billion fresh equity required.

Although not required by the rules, several consultative


meetings were thereafter conducted by the Rehabilitation
Court between and among the parties to discuss a viable
rehabilitation plan for SCP that is acceptable to all.
In compliance with the directives of the Rehabilitation Court
to consider all the inputs and observations made by the
parties during the consultative meetings and to make the
necessary modification in his recommendations on the
submitted rehabilitation plans, Atty. Gabionza submitted a
Modified Rehabilitation Plan as incorporated in his
compliance dated June 27, 2007. The modifications made
were:
Phase 1 of the Recommended Rehabilitation Plan is retained
under the Modified Rehabilitation Plan. Phase 2, however, is
amended to the effect that in the event the present
stockholders fail to raise the P3.5 Billion fresh equity
needed to keep their stockholdings and save their
company, the same existing stockholders of SCP shall be
afforded a period of 60 days from the expiration of the
period provided in Phase 1 to offer for sale to an acceptable
investor at least 67% stockholdings in SCP for an amount
not less than P3.5 Billion.

Phase 2
In the event the present stockholders fail to raise the P3.5
Billion fresh equity needed to keep their stockholdings and
save their company, Atty. Gabionza shall offer to acceptable
investors, through negotiated sale or bidding, 67% of SCP
for the P3.5 Billion fresh equity required.

Phase 3
Should Phase 1 and 2 fail, there shall be a debt to equity
conversion in the required amount of P3.5 Billion.[5]

Under Phase 3 thereof, there shall be a debt to equity


conversion in the required amount of P3.5 Billion should
Phase 1 and 2 fail. The adjusted book value of SCP under its
2005 Audited Financial Statements is pegged at P1.129
Billion. Accordingly, P1.1.29 Billion of the existing debt will
initially be converted into common shares achieving an
ownership structure where both existing stockholders and
the bank creditors will equally own SCP at 50% each. The
balance of P2.371 Billion will then be converted into noninterest bearing convertible notes.[6]
On June 21, 2007, BDO-EPCIB, joined by creditors DEG,
Planters Development Bank, China Banking Corporation,
Asiatrust Development Bank and GE Money Bank, Inc.,
altogether holding more than 50% of SCPs total liabilities,

filed their Joint Manifestation and Motion declaring their


conformity with and support to Atty. Gabionzas
Recommended Rehabilitation Plan.

foregoing rehabilitation plan. In case no nominee is


submitted by any party, this Court shall directly designate
the corresponding members thereof.

On July 30, 2007, SCP submitted its 2006 Audited Financial


Statements in a Compliance with Motion. Atty. Gabionza
was ordered by the Rehabilitation Court to study the
financial statements and to submit a report on their effects
on the Modified Rehabilitation Plan.

SO ORDERED.[7]

The parties then submitted their respective comments on


the Modified Rehabilitation Plan and Atty. Gabionzas report
on the effects of the 2006 Audited Financial Statements.
Likewise, SCP submitted its Updated Counter Rehabilitation
Plan, attached to its Ad Abundante Cautelam Motion to
Admit Debtor SCPs Updated Counter Rehabilitation Plan,
which was subsequently admitted by the Rehabilitation
Court.
On December 3, 2007, the RTC promulgated a Decision
approving the Modified Rehabilitation Plan. The dispositive
portion reads:
WHEREFORE, premises considered, the present petition is
given due course. The parties are mandated to comply
strictly with the provisions of the approved rehabilitation
plan.
The Rehabilitation Receiver is hereby directed to provide
this Court with periodic reports on the implementation of
the approved Rehabilitation Plan.
The provisions of the approved Rehabilitation Plan shall be
binding on all persons and parties affected by it, whether or
not such persons or parties have participated in the present
proceedings.
The concerned parties are further directed to submit to this
Court their respective nominees for the Management
Committee not later than 60 days before the expiration of
the period for the application of Phases 1 and 2 of the

Therefrom, several creditors went to the CA via separate


Petitions for Review on Certiorari, to wit: (1) SCPs petition
dated January 9, 2008, docketed as CA-G.R. SP No. 101732
and entitled Steel Corporation of the Philippines v. Equitable
PCI Bank, Inc.; (2) DEGs petition dated January 6, 2008,
docketed as CA-G.R. SP No. 101880 and entitled DEG
Deutsche Investitions-und Entwicklungsgesselschaft mbH v.
Steel Corporation of the Philippines; (3) BDO-EPCIBs petition
dated January 8, 2008, docketed as CA-G.R. SP No. 101881
and entitled Equitable PCI Bank, Inc. v. Steel Corporation of
the Philippines; and (4) Investments 2234 Philippines Fund
I, Inc.s (IPFIs) petition dated January 10, 2008, docketed as
CA-G.R. SP No. 101913 and entitled Investments 2234
Philippines Fund I (SPV-AMC), Inc. v. Equitable PCI Bank, Inc.
The petitions of SCP and IPFI were eventually consolidated
under CA-G.R. SP No. 101732. However, the CA denied
BDO-EPCIBs motion to consolidate with CA-G.R. SP No.
101732.[8] As to CA-G.R. SP No. 101881, the Court takes
judicial notice of the fact that it has also been consolidated
with CA-G.R. SP No. 101732 in a Resolution issued by the
CA dated March 22, 2010.
On July 3, 2008, the CA issued the assailed decision in CAG.R. SP No. 101881, ordering the termination of the
rehabilitation proceedings. The dispositive portion reads:
WHEREFORE, premises considered, the Decision dated
December 3, 2007 of the RTC, Branch II, Batangas City, in
SP No. 06-7993 is hereby SET ASIDE, and another one is
hereby entered declaring the rehabilitation proceedings
TERMINATED, pursuant to Section 27, Rule 4 of the Interim
Rules of Procedure on Corporate Rehabilitation.

SO ORDERED.[9]
SCP then filed a Supplemental Petition for Review dated July
21, 2008 in CA-G.R. SP No. 101732, praying, among others,
for the approval of its Revised Updated Counter
Rehabilitation Plan.
From the July 3, 2008 CA Decision, DEG, SCP, Landmark
Glory Limited, and Liquigaz Philippines Corporation
interposed separate motions for reconsideration. However,
on December 3, 2009, the CA denied all motions for
reconsiderations.

the proceedings without passing upon nor giving the


petitioner a chance to be heard on the updated alternative
rehabilitation plan submitted by it.
III.
The [CA] erred and when it did, it failed to perform its duties
and obligations as a court when it found, and thereafter
declared termination of the rehabilitation proceedings
because the case had become litigious and did not try to
allow the parties to adjust their differences so that
rehabilitation of the petitioner could go on.[10]

Hence, these separate recourses are before us.

In G.R. No. 190538, DEG submits as follows:

The Issues

I.

In G.R. No. 190462, SCP raised the following arguments in


support of its amended petition:
I.

The [CA] had no jurisdiction or authority to terminate the


rehabilitation proceedings.

The [CA] erred when it did, it denied the petitioner its rights
to both procedural and substantive due process when

II.

(a) It did not follow its own internal rules of procedure and
thereafter justified its error on the bases of misleading and
false statements;
(b) It granted a relief which none of the parties sought for,
nor were heard, nor given the opportunity to be heard,
thereon, and
(c) It substituted its judgment for that of the rehabilitation
court, usurping in the process the exclusive authority
reposed in the said court.

Assuming, arguendo, that the [CA] had the authority to


terminate the rehabilitation proceedings, such termination
was premature.[11]
The issues raised before the Court can be summarized into
two:
(1) Whether or not the CA erred in refusing to consolidate
the cases pending before it; and
(2) Whether or not the CA erred in granting a relief that was
not prayed for by the parties, i.e., the termination of the
rehabilitation proceedings.

II.
Consolidation of Cases Is Proper
The [CA] erred and when it did, it acted in a manner at war
with orderly procedure when it declared the termination of

Petitioner SCP argues that the CA deviated from its own


Internal Rules when it failed to consolidate the four (4)
appeals arising from the same decision of the rehabilitation
court. In fact, it points out to the fact that CA-G.R. SP No.
101913 had already been consolidated with its own appeal
in CA-G.R. SP No. 101732. However, SCP says that the
failure by the CA to consolidate the remaining two appeals,
namely CA-G.R. SP Nos. 101880 and 101881, with its own
appeal indicates not only a deviation from the rules but also
a disobedience to their plain language and obvious intent.
On the other hand, BDO-EPCIB refutes SCPs arguments by
saying that the consolidation of cases is only discretionary,
not mandatory, upon the court.

(b) Consolidated cases shall pertain to the Justice


(1) To whom the case with the lowest docket number is
assigned, if they are of the same kind;
(2) To whom the criminal case with the lowest number is
assigned, if two or more of the cases are criminal and the
others are civil or special;
(3) To whom the criminal case is assigned and the other
are civil or special; and

The Court agrees with SCP.

(4) To whom the civil case is assigned, or to whom the civil


case with the lowest docket number is assigned, if the
cases involved are civil and special.

Consolidation of actions is expressly authorized under Sec.


1, Rule 31 of the Rules of Court:

(c)
Notice of the consolidation and replacement shall be
given to the Raffle Staff and the Judicial Records Division.

Section 1. Consolidation. When actions involving a common


question of law or fact are pending before the court, it may
order a joint hearing or trial of any or all the matters in
issue in the actions; it may order all the actions
consolidated; and it may make such orders concerning
proceedings therein as may tend to avoid unnecessary
costs or delay.

It is a time-honored principle that when two or more cases


involve the same parties and affect closely related subject
matters, they must be consolidated and jointly tried, in
order to serve the best interests of the parties and to settle
expeditiously the issues involved.[13] In other words,
consolidation is proper wherever the subject matter
involved and relief demanded in the different suits make it
expedient for the court to determine all of the issues
involved and adjudicate the rights of the parties by hearing
the suits together.[14]

Likewise, Rule 3, Sec. 3 of the 2002 Internal Rules of the


CA[12] adopts the same rule:
Sec. 3. Consolidation of Cases. When related cases are
assigned to different Justices, they may be consolidated and
assigned to one Justice.
(a)
At the instance of a party with notice to the other
party; or at the instance of the Justice to whom the case is
assigned, and with the conformity of the Justice to whom
the cases shall be consolidated, upon notice to the parties,
consolidation may be allowed when the cases involve the
same parties and/or related questions of fact and/or law.

The purpose of this rule is to avoid multiplicity of suits,


guard against oppression and abuse, prevent delays, clear
congested dockets, and simplify the work of the trial court.
In short, consolidation aims to attain justice with the least
expense and vexation to the parties-litigants.[15] It
contributes to the swift dispensation of justice, and is in
accord with the aim of affording the parties a just, speedy,
and inexpensive determination of their cases before the
courts. Further, it results in the avoidance of the possibility
of conflicting decisions being rendered by the courts in two

or more cases, which would otherwise require a single


judgment.[16]
In the instant case, all four (4) cases involve identical
parties, subject matter, and issues. In fact, all four (4) arose
from the same decision rendered by the Rehabilitation
Court. As such, it became imperative upon the CA to
consolidate the cases. Even though consolidation of actions
is addressed to the sound discretion of the court and
normally, its action in consolidating will not be disturbed in
the absence of manifest abuse of discretion,[17] in this
instance, we find that the CA gravely erred in failing to
order the consolidation of the cases.
By refusing to consolidate the cases, the CA, in effect,
dispensed a form of piecemeal judgment that has veritably
resulted in the multiplicity of suits. Such action is not
regarded with favor, because consolidation should always
be ordered whenever it is possible.
Relief Is Limited Only to Issues Raised
SCP further contends that the CA denied it its right to
procedural and substantive due process, because it granted
a relief entirely different from those sought for by the
parties and on which they were neither heard nor given the
opportunity to be heard.
Respondent BDO-EPCIB, on the other hand, maintains that
the CA has the power to grant such other appropriate relief
as may be consistent with the allegations and proofs when
a prayer for general relief is added to the demand of
specific relief.[18]

therein will be considered unless stated in the assignment


of errors, or closely related to or dependent on an assigned
error and properly argued in the brief, save as the court
pass upon plain errors and clerical errors.
Essentially, the general rule provides that an assignment of
error is essential to appellate review and only those
assigned will be considered,[19] save for the following
exceptions: (1) grounds not assigned as errors but affecting
jurisdiction over the subject matter; (2) matters not
assigned as errors on appeal but are evidently plain or
clerical errors within the contemplation of the law; (3)
matters not assigned as errors on appeal but consideration
of which is necessary in arriving at a just decision and
complete resolution of the case or to serve the interest of
justice or to avoid dispensing piecemeal justice; (4) matters
not specifically assigned as errors on appeal but raised in
the trial court and are matters of record having some
bearing on the issue submitted which the parties failed to
raise or which the lower court ignored; (5) matters not
assigned as errors on appeal but closely related to an error
assigned; and (6) matters not assigned as errors on appeal
but which the determination of a question properly assigned
is dependent.[20] None of these exceptions exists in this
case.
Notably, the prayer portion of the BDO-EPCIB petition in CAG.R. SP No. 101881 only sought for the following reliefs:
WHEREFORE, it is respectfully prayed of the Honorable
Court that the Decision dated 03 December 2007 of the
Court a quo, or the approved Rehabilitation Plan, be
MODIFIED accordingly, thus:

SCPs contention deserves merit.


Sec. 8, Rule 51 of the 1997 Rules of Civil Procedure
expressly provides:
SEC. 8. Questions that may be decided. No error which does
not affect the jurisdiction over the subject matter or the
validity of the judgment appealed from or the proceedings

1.
Under its Phase 1, the articles of incorporation and by
laws of SCP be accordingly amended to accommodate the
additional equity of Php3.0 Billion.
2.
Under Phase 2, the present stockholders and/or the
Rehabilitation Receiver shall offer for sale to acceptable

investors SCPs stocks, through negotiated sale or bidding


for an amount not less than Php3.0 Billion, which is
equivalent to approximately 64% of SCP; and
3.
Under Phase 3, there shall be an immediate
conversion of debt to common shares in the required
amount of Php3.0 Billion, which is equivalent to
approximately 64% of SCP, pursuant to the terms and
conditions of the Recommended Rehabilitation Plan.
Other reliefs, just and equitable under the premises, are
likewise prayed for.[21]
It is very plain in the language of the prayers of BDO-EPCIB
that it only requested the CA to modify the existing
rehabilitation plan. It never sought the termination of the
rehabilitation proceedings. Thus, given the factual backdrop
of the case, it was inappropriate for the CA, motu proprio, to
terminate the proceedings. The appellate court should have
proceeded to resolve BDO-EPCIBs appeal on its merits
instead of terminating the proceedings, a result that has no
ground in its pleadings in the CA.
In Abedes v. Court of Appeals, this Court emphasized the
difference of appeals in criminal cases and in civil cases by
saying, Issues not raised in the pleadings, as opposed to
ordinary appeal of criminal cases where the whole case is
opened for review, are deemed waived or abandoned.[22]
Essentially, to warrant consideration on appeal, there must
be discussion of the error assigned, else, the error will be
deemed abandoned or waived.[23]
This Court even went further in Development Bank of the
Philippines v. Teston, in which it held that it is improper to
enter an order which exceeds the scope of the relief sought
by the pleadings, to wit:
The Court of Appeals erred in ordering DBP to return to
respondent the P1,000,000.00 alleged down payment, a
matter not raised in respondents Petition for Review before

it. In Jose Clavano, Inc. v. Housing and Land Use Regulatory


Board, this Court held:
x x x It is elementary that a judgment must conform to, and
be supported by, both the pleadings and the evidence, and
must be in accordance with the theory of the action on
which the pleadings are framed and the case was tried. The
judgment must be secundum allegata et probate. (Italics in
original.)
Due process considerations justify this requirement. It is
improper to enter an order which exceeds the scope of
relief sought by the pleadings, absent notice which affords
the opportunity to be heard with respect to the proposed
relief. The fundamental purpose of the requirement that
allegations of a complaint must provide the measure of
recovery is to prevent surprise to the defendant.[24]
(Emphasis supplied.)
Thus, this Court cannot sustain the ruling of the CA insofar
as it granted a relief not prayed for by the BDO-EPCIB.
WHEREFORE, the petition in G.R. No. 190462 is PARTIALLY
GRANTED and the petition in G.R. No. 190538 is GRANTED.
The July 3, 2008 Decision and December 3, 2009 Resolution
of the CA in CA-G.R. SP No. 101881 are REVERSED and SET
ASIDE.
Further, the Court hereby REMANDS these cases to the CA
for consolidation with CA-G.R. SP No. 101732. Likewise, CAG.R. SP No. 101880 is also ordered to be consolidated with
CA-G.R. SP No. 101732.

Promulgated:
DEUTSCHE BANK AG,
Petitioner,

- versus -

February 27, 2012


X
------------------------------------------------------------------------------------- X
DECISION

COURT OF APPEALS and STEEL CORPORATION OF THE


PHILIPPINES,
Respondents.
G.R. No. 193065
Present:

VELASCO, JR., J., Chairperson,


PERALTA,
ABAD,

MENDOZA, J.:
This is a petition for certiorari under Rule 65 of the 1997
Rules of Civil Procedure assailing the March 12, 2010[1] and
July 19, 2010[2] Resolutions of the Court of Appeals (CA) in
CA-G.R. SP No. 111556 entitled Deutsche Bank AG v. Hon.
Judge Albert A. Kalalo and Steel Corporation of the
Philippines (Deutsche Bank AG Petition) for having been
issued without jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction, insofar as they
ordered the consolidation of the Deutsche Bank AG Petition
with another case earlier filed and docketed as CA-G.R. SP
No. 107535 entitled Vitarich Corporation v. Judge Danilo
Manalastas (Vitarich Petition) on the ground that the two
cases involve a common question of law.

MENDOZA, and
THE FACTS
PERLAS-BERNABE, JJ.
Private respondent Steel Corporation of the Philippines
(SteelCorp) is a domestic corporation organized and
existing under the laws of the Philippines with principal
place of business in Munting Tubig, Balayan, Batangas. It is
engaged in the business of manufacturing and distribution
of cold-rolled, galvanized and pre-painted steel sheets and
coils.

On December 7, 1995, SteelCorp, as borrower, entered into


a loan agreement[3] with a consortium of lending banks
and other financial institutions for the purpose of partially
financing the construction of its integrated steel mill
project. One of the participating lenders was Rizal
Commercial Banking Corporation (RCBC).

consideration paid by them for the SteelCorp debts


assigned and transferred to them.[9] From this order,
Deutsche Bank AG filed its Petition for Certiorari (With
Urgent Application for a Temporary Restraining Order and/or
Writ of Preliminary Injunction) with the CA docketed as CAG.R. No. 111556.[10]

SteelCorp failed to pay its loan obligations as they fell due.


Thus, on September 11, 2006, Equitable PCI Bank, Inc. (now
Banco de Oro) filed a creditor-initiated petition to place
SteelCorp under corporate rehabilitation before the
Regional Trial Court of Batangas, Branch 2, which was
subsequently raffled to Branch 4 (RTC-Batangas). This case
was docketed as Spec. Proc. No. 06-7993.[4]

Records show that two other petitions for certiorari filed by


other creditors of SteelCorp were pending before different
divisions of the CA, both of which arising from the same
October 28, 2009 Order of the RTC-Batangas. The cases
were docketed as follows:

In its Decision[5] dated December 3, 2007, the RTCBatangas approved the proposed Rehabilitation Plan and
ordered the parties to comply strictly with the provisions of
the approved Rehabilitation Plan.
In February 2008 and during the pendency of the
proceedings before the RTC-Batangas, RCBC and petitioner
Deutsche Bank AG entered into a deed of assignment,[6]
wherein the former assigned to the latter all of its rights,
obligations, title to, and interest in, the loans which it had
extended to SteelCorp in the aggregate outstanding
principal amount of 94,412,862.58.
SteelCorp was duly informed of the said assignment
through the Notice of Transfer[7] sent to it by RCBC.
Through its Entry of Appearance with Motion for
Substitution of Parties[8] dated May 2, 2008, Deutsche
Bank AG informed the RTC-Batangas of the said transfer and
assignment of the loan obligations.
The RTC-Batangas, upon the motion of SteelCorp, issued its
Order dated October 28, 2009, directing the assignees,
including Deutsche Bank AG, to disclose the actual price or

1.
CA-G.R. SP No. 111560 entitled Investments 2234
Philippines Fund, Inc. v. Hon. Albert A. Kalalo, in His
Capacity as the Presiding Judge of the Regional Trial Court
of Batangas City, Branch 4 and Steel Corporation of the
Philippines (Investments 2234 Petition); and
2.
CA-G.R. SP No. 112175 entitled Equitable PCI Bank,
Inc. (now BDO Unibank, Inc.) v. Hon. Albert A. Kalalo in His
Capacity as Presiding Judge of the Regional Trial Court of
Batangas City, Branch 4 and Steel Corporation of the
Philippines (EPCIB Petition).
In the meantime, SteelCorp filed its Motion for
Consolidation[11] dated February 18, 2010, praying for the
consolidation of the Deutsche Bank AG Petition, together
with the Investments 2234 Petition and EPCIB Petition, with
the Vitarich Petition on the ground that the cases involved
the same question of law whether creditors could be
compelled to disclose the actual assignment price for
credits in litigation which were assigned in the context of a
corporate rehabilitation proceeding pursuant to Articles
1634 and 1236 of the Civil Code.
On March 12, 2010, the CA in CA-G.R. SP No. 111556 issued
the assailed Resolution ordering the consolidation of
Deutsche Bank AG Petition with the Vitarich Petition, to wit:

Finding merit in the motion, and pursuant to Section 3(a),


Rule III of the Internal Rules of the Court of Appeals, the
instant petition is ordered CONSOLIDATED with CA-G.R. SP
No. 107535 (the case with the lower docket number),
subject to the conformity of the ponente thereof and with
right of replacement with a case of similar nature and
status.
SO ORDERED.[12]
It appears from the records that the Vitarich Petition
emanated from Civil Case No. 592-M-2006 entitled In the
Matter of the Petition for Corporate Rehabilitation of Vitarich
Corporation which is currently pending before Branch 7,
Regional Trial Court of Bulacan (RTC-Bulacan).
The RTC-Bulacan in its Decision dated May 31, 2007,
approved the Vitarich rehabilitation plan and upheld the
rights of the assignees as subrogees to all the rights and
obligations of the original creditors.
Vitarich sought a partial reversal of the said decision via a
petition for review under Rule 43 of the 1997 Rules of Court
(docketed as CA-G.R. SP No. 99374), contending that it
should only be made to pay the discounted transfer prices
of the assigned credits should it decide to exercise its right
of redemption. Vitarich, however, withdrew the said petition
and instead filed a motion to direct the assignees to
disclose the amounts paid by them to their assignors.
In its Order dated January 15, 2009, the RTC-Bulacan denied
Vitarichs motion, ruling that the rehabilitation case before it
could not be considered as a litigation as contemplated in
Article 1634 of the Civil Code.
Hence, Vitarich filed its petition[13] praying that the CA
order the assignees to disclose the actual amount paid to
their respective assignors so that it could pay the transfer
prices of the assigned credits should it exercise its right of
redemption. Several banks moved for the dismissal of this

petition on the ground that the ruling on the issue raised


therein had already become final.
Deutsche Bank AG filed a motion for reconsideration[14] of
the March 12, 2010 CA resolution arguing that the Deutsche
Bank AG petition and the Vitarich petition were not related
cases that would merit consolidation. It stressed that a
common question of law alone does not warrant
consolidation inasmuch as the Internal Rules of the CA
(IRCA) provides that for consolidation to be proper, the
cases must be related. It also claimed that the consolidation
of these two unrelated cases would not serve the purpose
of consolidation, which was to obtain justice with the least
expense and vexation to the litigants.
The said motion was, however, denied by the CA in its
Resolution dated July 19, 2010. Citing Zulueta v. Asia
Brewery, Inc.,[15] it held that consolidation of cases under
Section 3(a), Rule III of the IRCA was proper as the cases
involved common questions of law.
Thus, the CA agreed with the SteelCorps conclusion that
when two cases involved the same parties, or related
questions of fact, or related questions of law, then they
were considered as related cases for purposes of
consolidation. The pertinent portion of the CA resolution
reads:
To deny the transfer of a case to a court or division where
another case involving the same question of law is pending
could lead to further protracted litigations. The rationale for
consolidation is to have all cases intimately related acted
upon by one Court/Division to avoid the possibility of
conflicting decisions being rendered that will not serve the
orderly administration of justice.

The added expense and unjustified vexation intimated by


petitioner are all in the mind. One division of this Court
would be able to resolve the issue in both petitions with
more dispatch and accord than two divisions.
WHEREFORE, the motion for reconsideration is DENIED.
SO ORDERED.[16]
Hence, Deutsche Bank AG interposes the present special
civil action before this Court anchored on the following
GROUNDS
THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF
DISCRETION, AMOUNTING TO LACK OR EXCESS OF
JURISDICTION, IN ISSUING THE ASSAILED RESOLUTIONS
AND ORDERING THE CONSOLIDATION OF THE TWO (2)
SUBJECT PETITIONS CONSIDERING THAT:
(I)
UNDER SECTION 3(A) RULE III OF THE INTERNAL RULES OF
THE
COURT
OF
APPEALS
AND
LONGSTANDING
JURISPRUDENCE, FOR CONSOLIDATION TO BE PROPER, THE
CASES MUST BE RELATED, I.E., THEY ARISE FROM THE SAME
ACT, EVENT OR TRANSACTION, INVOLVE THE SAME OR LIKE
ISSUES, AND DEPEND LARGELY OR SUBSTANTIALLY ON THE
SAME EVIDENCE. HERE, THE CASES SOUGHT TO BE
CONSOLIDATED ARE TOTALLY UNRELATED;
(II)
THE CONSOLIDATION OF THE TWO CASES WILL BE
COMPLETELY AGAINST THE PURPOSE OF CONSOLIDATION,
WHICH IS TO OBTAIN JUSTICE WITH THE LEAST EXPENSE
AND VEXATION TO THE LITIGANTS.[17]
It appears from the records that on November 18, 2011,
SteelCorp filed a manifestation dated November 17, 2011,
stating that the assailed resolution ordering consolidation
dated March 12, 2010 had been issued in response to the
Motion for Consolidation dated February 18, 2010 filed

therein by SteelCorp. SteelCorp manifested that on


November 14, 2011, in CA-G.R. SP No. 111556, it filed its
Motion to Withdraw the said Motion for Consolidation in
order to forestall further delay and for the CA to proceed in
the resolution of the merits of the case, rendering this
petition moot.
In view of the said withdrawal of the motion for
consolidation, the present petition assailing the CAs order of
consolidation has certainly been rendered moot and
academic.
A moot and academic case is one that ceases to present a
justiciable controversy by virtue of supervening events, so
that a declaration thereon would be of no practical use or
value. Generally, courts decline jurisdiction over such case
or dismiss it on ground of mootness. However, even in
cases where supervening events had made the cases moot,
this Court did not hesitate to resolve the legal or
constitutional issues raised to formulate controlling
principles to guide the bench, the bar and the public.
Moreover, as an exception to the rule on mootness, the
courts will decide a question otherwise moot if it is capable
of repetition, yet evading review.[18]
This case comes within the rule that courts will decide a
question, otherwise moot and academic, if it is capable of
repetition, yet evading review. The issue of whether the CA
pursuant to its internal rules can validly order consolidation
of cases on the sole ground that the same involve a
common question of law most likely will recur. Thus, there is
a necessity to decide the case on the merits.

The Court will now resolve the merits of the sole issue
raised in this petition, whether the CA gravely abused its
discretion amounting to lack or excess of jurisdiction when
it ordered the consolidation of the Deutsche Bank AG
petition and the Vitarich petition.

Deutsche Bank AG argues that a common question of law


alone would not warrant consolidation, and for cases to be
consolidated, the same must be related cases. It cited as
basis the ruling enunciated in the landmark case of Teston
v. Development Bank of the Philippines,[19] that actions
involving common question of law or fact may be tried
together where they arise from the same act, event or
transaction, involve the same or like issues, and depend
largely or substantially on the same evidence. It contends
that there was grave abuse of discretion on the part of the
CA when it ordered the consolidation because Deutsche
Bank AG Petition and the Vitarich Petition were not related,
much less, intimately related cases. The two cases were
entirely different with separate factual antecedents, having
arisen from two separate petitions for rehabilitation of two
distinct corporations. In addition, there were no
interconnected transactions in, nor identical properties
subject of, the two cases. It further argues that
consolidation would only defeat, rather than serve, the
purpose of consolidation.
SteelCorp counters that the CA may consolidate cases on
the sole ground that the cases involve related questions of
law. Thus, the fact that Deutsche Bank AG Petition and
Vitarich Petition involve an identical question of law is
sufficient to make them related cases which were proper for
consolidation pursuant to Section 3(a), Rule III of the IRCA.
The Court agrees with Deutsche Bank AG.
Consolidation of actions involving a common question of
law or fact is expressly authorized under Section 1, Rule 31
of the 1997 Rules of Civil Procedure, to wit:
SECTION 1. Consolidati0n. When actions involving a
common question of law or fact are pending before the
court, it may order a joint hearing or trial of any or all the
matters in issue in the actions; it may order all the actions
consolidated; and it may make such orders concerning
proceedings therein as may tend to avoid unnecessary
costs or delay.

Consolidation of cases is also allowed under Section 3, Rule


III of the 2009 IRCA, to wit:
Consolidation of Cases. When related cases are assigned to
different Justices, they may be consolidated and assigned to
one Justice.
(a) Upon motion of a party with notice to the other
party/ies, or at the instance of the Justice to whom any of
the related cases is assigned, upon notice to the parties,
consolidation shall ensue when the cases involve the same
parties and/or related questions of fact and/or law.
(b) Consolidated cases shall pertain to the Justice
(1) To whom the case with the lowest docket number is
assigned, if they are of the same kind;
(2) To whom the criminal case with the lowest number is
assigned, if two or more of the cases are criminal and the
others are civil or special;
(3) To whom the criminal case is assigned and the other are
civil or special; and
(4) To whom the civil case is assigned, or to whom the civil
case with the lowest docket number is assigned, if the
cases involved are civil and special.
(c) Notice of the consolidation and replacement shall be
given to the Raffle Staff and the Judicial Records Division.
(Emphasis and underscoring supplied)
As can be gleaned from the aforequoted provision, for
consolidation to be proper, the cases sought to be
consolidated must be related.
Similarly, jurisprudence has laid down the requisites for
consolidation. In the recent case of Steel Corporation of the
Philippines v. Equitable PCI Bank, Inc.,[20] the Court held
that it is a time-honored principle that when two or more
cases involve the same parties and affect closely related
subject matters, they must be consolidated and jointly
tried, in order to serve the best interests of the parties and
to settle expeditiously the issues involved. In other words,

consolidation is proper wherever the subject matter


involved and relief demanded in the different suits make it
expedient for the court to determine all of the issues
involved and adjudicate the rights of the parties by hearing
the suits together.
In the present case, there is no sufficient justification to
order the consolidation inasmuch as the Deutsche Bank AG
Petition has no relation whatsoever to the Vitarich Petition.
To recall, the Deutsche Bank AG Petition is an appeal on
certiorari from the Order dated October 28, 2009 of the RTC
Batangas in Sp. Proc. No. 06-7993. Vitarich case, on the
other hand, is an appeal on certiorari and mandamus from
the Order dated January 19, 2009 of the RTC Bulacan in Civil
Case No. 592-M-2006.
The fact that Deutsche Bank AG is a party to both cases
does not make the proceedings intimately related. There is
no factual relation between the two proceedings. SteelCorp
proceedings originated from SteelCorps rehabilitation
proceedings which have nothing to do with the Vitarich
proceeding that originated from Vitarichs rehabilitation
proceeding.
Neither are there interconnected transactions, nor identical
subject matter in the Deutsche Bank AG and Vitarich
petitions. The former involved issue resulting from the
assignment of credits of RCBC to Deutsche Bank AG
whereas in the latter, the issue arose from the assignment
of the receivables of various creditors of Vitarich to several
corporations and special purpose vehicles (SPVs).
Verily, the two petitions having no factual relationship with
and no interconnected transactions on the same subject
matter, they cannot be deemed related cases. As such, the
necessity to consolidate does not become imperative. The
order of consolidation by the CA on the sole ground that the
cases involved a common question of law was, therefore,
not in order.

It bears noting that the CA cited the cases of Zulueta v. Asia


Brewery, Inc.,[21] Benguet Corporation, Inc. v. Court of
Appeals,[22] and Active Wood Products Co., Inc. v. Court of
Appeals[23] as jurisprudential basis of its order to
consolidate. Its reliance on the said cases was misplaced as
the factual milieus therein were not in all fours with the
case at bench. The ruling in these cases, in fact, bolstered
Deutsche Bank AGs position that for consolidation to be
warranted the cases sought to be consolidated must not
only involve related issues but also the same parties and
closely related subject matters.
The CA cannot rely on the case of Zulueta v. Asia Brewery,
Inc., to support its ruling that consolidation is proper when
the cases involve the resolution of a common question of
law or fact. In the said case, a joint trial of the two cases
was justified because both arose out of, or an incident of,
the same Dealership Agreement. Thus, the Court upheld the
consolidation in this wise:
Inasmuch as the binding force of the Dealership Agreement
was put in question, it would be more practical and
convenient to submit to the Iloilo court all the incidents and
their consequences. The issues in both civil cases pertain to
the respective obligations of the same parties under the
Dealership Agreement. Thus, every transaction as well as
liability arising from it must be resolved in the judicial forum
where it is put in issue. The consolidation of the two cases
then becomes imperative to a complete, comprehensive
and consistent determination of all these related issues.
Two cases involving the same parties and affecting closely
related subject matters must be ordered consolidated and
jointly tried in court, where the earlier case was filed.[24]
(underscoring supplied)
In the case of Benguet Corporation, Inc. v. Court of Appeals,
where it was written that the rationale for consolidation is
to have all cases intimately related acted upon by one
Court/Division to avoid the possibility of conflicting
decisions being rendered.[25] A scrutiny of the ruling in
Benguet reveals that the case pending in the 9th Division
was merely an offshoot of the decision rendered in the 10th

Division. Faulting the CA 9th Division with grave abuse of


discretion in denying Benguet's Motion to Transfer Case No.
CA-G.R. SP No. 12964 to the 10th Division, the Court held,
thus:
2. The matter elevated to the 9th Division, namely, the
implementation of the Writ of Preliminary Mandatory
Injunction with Break-open Order issued by the Trial Court
on 29 September 1987 in favor of BENGUET in the
Reconveyance Case (Civil Case No. 5815) was a
consequence of the very Decision rendered by the 10th
Division. It was, therefore, properly within its competence
being intimately related to the very issues raised and
resolved by said Division.
3. The rationale for consolidation is to have all cases
intimately related acted upon by one Court Division to avoid
the possibility of conflicting decisions in cases involving the
same facts and common questions of law. The cases before
the 10th Division and the 9th Division of the Court of
Appeals are two (2) such intimately and substantially
related cases. Consolidation being called for it cannot be
justifiably argued, as private respondents do, that BENGUET
is estopped from pleading for such consolidation. To deny
the transfer could lead to further protracted litigations to
the detriment of the efficient and effective determination of
actions and proceedings.[26] (underscoring supplied)
Hence, consolidation of cases is proper when there is a real
need to forestall the possibility of conflicting decisions
being rendered in the cases.[27] In the case under
consideration, considering that Deutsche Bank AG and
Vitarich cases are not related, the risk of conflicting
decisions is a remote probability.
Lastly, in Active Wood Products Co., Inc. v. Court of Appeals,
the Court sustained the consolidation of the civil case filed
by Active Wood against State Investment House and the
latters petition for a writ of possession in the land
registration case as they involved the same parties and the
same subject matter Active Woods two parcels of land,
thus:

The consolidation of cases becomes mandatory because it


involves the same parties and the same subject matter
which is the same parcel of land. Such consolidation is
desirable to avoid confusion and unnecessary costs and
expenses with the multiplicity of suits.[28] xxx
(underscoring supplied)
Further, the Court finds merit in Deutsche Bank AGs
contention that the consolidation of the subject cases will
defeat the purpose of consolidation.
It is well recognized that the purpose of the rule on
consolidation is to avoid multiplicity of suits; to guard
against oppression and abuse; to prevent delays; to clear
congested dockets; and to simplify the work of the trial
court. In short, consolidation aims to attain justice with the
least expense and vexation to the parties-litigants.[29] It
contributes to the swift dispensation of justice, and is in
accord with the aim of affording the parties a just, speedy,
and inexpensive determination of their cases before the
courts. Further, it results in the avoidance of the possibility
of conflicting decisions being rendered by the courts in two
or more cases, which would otherwise require a single
judgment.[30]
Under the circumstances, the consolidation of the Deutsche
Bank AG Petition with the Vitarich Petition does not appear
to be a prudent move as it serves none of the purposes
cited above. On the contrary and as correctly pointed out
by Deutsche Bank AG, it will only complicate the resolution
of the cases as the CA would have to consider the different
factual antecedents of both the Deutsche Bank AG and
Vitarich petitions.
Moreover, the question of law that the Vitarich proceedings
allegedly shares with the SteelCorp Proceedings whether
Vitarichs creditors could be compelled to disclose the sums
paid for the assigned Vitarich loans - has long been finally
resolved and has already become the law of the case
among the parties in the Vitarich rehabilitation proceedings.

Thus, the consolidation would unduly prejudice the banks


and would lead to complications, delay or restriction on the
right of the banks to the immediate dismissal of the Vitarich
proceedings.
Furthermore, the consolidation will only subject the parties
to added expense and unjust vexation. The number of
parties will substantially increase so as the cost of
furnishing the parties with pleadings, thereby defeating the
very rationale behind consolidation.
Relevant is the case of Republic of the Phils. v. Hon.
Mangrobang,[31] where the Court disallowed the
consolidation of an ejectment case and a case for eminent
domain because the consolidation thereof would complicate
procedural requirements and delay the resolution of the
cases which raised dissimilar issues. The Court held that
fairness and due process might be hampered rather than
helped if the cases were consolidated.
Likewise, in Philippine National Bank v. Tyan Ming
Development, Inc.[32] the non-consolidation of PNBs
petition for a writ of possession and GOTESCOs complaint
for annulment of foreclosure proceeding was upheld for
defeating the very purpose of consolidation, thus:
The record shows that PNBs petition was filed on May 26,
2006, and remains pending after three (3) years, despite
the summary nature of the petition. Obviously, the
consolidation only delayed the issuance of the desired writ
of possession. Further, it prejudiced PNBs right to take
immediate possession of the property and gave GOTESCO
undue advantage, for GOTESCO continues to possess the
property during the pendency of the consolidated cases,
despite the fact that title to the property is no longer in its
name.
It should be stressed that GOTESCO was well aware of the
expiration of the period to redeem the property. Yet, it did
not exercise its right of redemption. There was not even an
attempt to redeem the property. Instead, it filed a case for
annulment of foreclosure, specific performance, and

damages and prayed for a writ of injunction to prevent PNB


from consolidating its title. GOTESCOs maneuvering,
however, failed, as the CA and this Court refused to issue
the desired writ of injunction.
Cognizant that the next logical step would be for PNB to
seek the delivery of possession of the property, GOTESCO
now tries to delay the issuance of writ of possession. It is
clear that the motion for consolidation was filed merely to
frustrate PNBs right to immediate possession of the
property. It is a transparent ploy to delay, if not to prevent,
PNB from taking possession of the property it acquired at a
public auction ten (10) years ago. This we cannot tolerate.
xxx
In De Vera v. Agloro, this Court upheld the denial by the RTC
of a motion for consolidation of a petition for issuance of a
writ of possession with a civil action, as it would prejudice
the right of one of the parties, viz.:
It bears stressing that consolidation is aimed to obtain
justice with the least expense and vexation to the litigants.
The object of consolidation is to avoid multiplicity of suits,
guard against oppression or abuse, prevent delays and save
the litigants unnecessary acts and expense. Consolidation
should be denied when prejudice would result to any of the
parties or would cause complications, delay, prejudice, cut
off, or restrict the rights of a party.[33] (underscoring
supplied)
In the recent case of Espinoza v. United Overseas Bank
Phils.,[34] the Court, in the same manner ruled against the
consolidation of the proceedings for the issuance of a writ
of possession with that for the declaration of nullity of a
foreclosure sale on the ground that it would run counter to
the purpose of consolidation:
In this case, title to the litigated property had already been
consolidated in the name of respondent, making the
issuance of a writ of possession a matter of right.
Consequently, the consolidation of the petition for the
issuance of a writ of possession with the proceedings for
nullification of foreclosure would be highly improper.
Otherwise, not only will the very purpose of consolidation

(which is to avoid unnecessary delay) be defeated but the


procedural matter of consolidation will also adversely affect
the substantive right of possession as an incident of
ownership.[35]
Indeed, the consolidation of actions is addressed to the
sound discretion of the court and its action in consolidating
will not be disturbed in the absence of manifest abuse of
discretion.[36] Grave abuse of discretion defies exact
definition, but it generally refers to capricious or whimsical
exercise of judgment as is equivalent to lack of jurisdiction.
The abuse of discretion must be patent and gross as to
amount to an evasion of a positive duty or a virtual refusal
to perform a duty enjoined by law, or to act at all in
contemplation of law, as where the power is exercised in an
arbitrary and despotic manner by reason of passion and
hostility.[37]
In this particular case, however, the exercise of such
discretion by the CA in ordering the consolidation of the
Deutsche Bank AG Petition and the Vitarich Petition was less
than judicious considering that the two cases were not
intimately and substantially related.
Lest it be misunderstood, the CA may prescribe reasonable
rules governing assignment of cases with similar questions
of law or facts to one justice. In case of consolidation,
however, it may be effected only if the said cases are
related. Needless to state, assignment is different from
consolidation.
WHEREFORE, the petition is GRANTED. The March 12, 2010
and the July 19, 2010 Resolutions of the Court of Appeals in
CA-G.R. SP No. 111556 are REVERSED and SET ASIDE.

Manila
SECOND DIVISION
G.R. No. 152071

May 8, 2009

PRODUCERS BANK OF THE PHILIPPINES, Petitioner,


vs.
EXCELSA INDUSTRIES, INC., Respondent.
DECISION
TINGA, J.:
This is a petition for review on certiorari1 under Rule 43 of
the 1997 Rules of Civil Procedure, assailing the decision2
and resolution3 of the Court of Appeals in CA-G.R. CV No.
59931. The Court of Appeals decision4 reversed the
decision of the Regional Trial Court (RTC), Branch 73,
Antipolo, Rizal, upholding the extrajudicial foreclosure of the
mortgage on respondents properties, while the resolution
denied petitioners motion for reconsideration.5
As borne by the records of the case, the following factual
antecedents appear:
Respondent Excelsa Industries, Inc. is a manufacturer and
exporter of fuel products, particularly charcoal briquettes,
as an alternative fuel source. Sometime in January 1987,
respondent applied for a packing credit line or a credit
export advance with petitioner Producers Bank of the
Philippines, a banking institution duly organized and
existing under Philippines laws.6
The application was supported by Letter of Credit No.
M3411610NS2970 dated 14 October 1986. Kwang Ju Bank,
Ltd. of Seoul, Korea issued the letter of credit through its
correspondent bank, the Bank of the Philippine Islands, in
the amount of US$23,000.00 for the account of Shin Sung
Commercial Co., Ltd., also located in Seoul, Korea. T.L.
World Development Corporation was the original beneficiary

of the letter of credit. On 05 December 1986, for value


received, T.L. World transferred to respondent all its rights
and obligations under the said letter of credit. Petitioner
approved respondents application for a packing credit line
in the amount of P300,000.00, of which about P96,000.00 in
principal remained outstanding.7 Respondent executed the
corresponding
promissory
notes
evidencing
the
indebtedness.8
Prior to the application for the packing credit line,
respondent had obtained a loan from petitioner in the form
of a bill discounted and secured credit accommodation in
the amount of P200,000.00, of which P110,000.00 was
outstanding at the time of the approval of the packing
credit line. The loan was secured by a real estate mortgage
dated 05 December 1986 over respondents properties
covered by Transfer Certificates of Titles (TCT) No. N-68661,
N-68662, N-68663, N-68664, N-68665 and N-68666, all
issued by the Register of Deeds of Marikina.9
Significantly, the real estate mortgage contained the
following clause:
For and in consideration of those certain loans, overdraft
and/or other credit accommodations on this date obtained
from the MORTGAGEE, and to secure the payment of the
same, the principal of all of which is hereby fixed at FIVE
HUNDRED THOUSAND PESOS ONLY (P500,000.00) Pesos,
Philippine Currency, as well as those that the MORTGAGEE
may hereafter extend to the MORTGAGOR, including
interest and expenses or any other obligation owing to the
MORTGAGEE, the MORTGAGOR does hereby transfer and
convey by way of mortgage unto the MORTGAGEE, its
successors or assigns, the parcel(s) of land which is/are
described in the list inserted on the back of this document,
and/or appended hereto, together with all the buildings and
improvements now existing or which may hereafter be
erected or constructed thereon, of which the MORTGAGOR
declares that he/it is the absolute owner, free from all liens
and encumbrances.10

On 17 March 1987, respondent presented for negotiation to


petitioner drafts drawn under the letter of credit and the
corresponding export documents in consideration for its
drawings in the amounts of US$5,739.76 and US$4,585.79.
Petitioner purchased the drafts and export documents by
paying respondent the peso equivalent of the drawings. The
purchase was subject to the conditions laid down in two
separate undertakings by respondent dated 17 March 1987
and 10 April 1987.11

2) EBP-PHO-87-1095 (US$ 5,739.76 x 21.212) = 151,580.97


3) BDS-001-87 = 61,777.78
4) BDS-030/86 A = 123,555.55
5) BDS-PC-002-/87 = 55,822.91
6) BDS-005/87 = 61,323.33

On 24 April 1987, Kwang Ju Bank, Ltd. notified petitioner


through cable that the Korean buyer refused to pay
respondents export documents on account of typographical
discrepancies. Kwang Ju Bank, Ltd. returned to petitioner
the export documents.12
Upon learning about the Korean importers non-payment,
respondent sent petitioner a letter dated 27 July 1987,
informing the latter that respondent had brought the matter
before the Korea Trade Court and that it was ready to
liquidate its past due account with petitioner. Respondent
sent another letter dated 08 September 1987, reiterating
the same assurance. In a letter 05 October 1987, Kwang Ju
Bank, Ltd. informed petitioner that it would be returning the
export documents on account of the non-acceptance by the
importer.13
Petitioner demanded from respondent the payment of the
peso equivalent of the export documents, plus interest and
other charges, and also of the other due and unpaid loans.
Due to respondents failure to heed the demand, petitioner
moved for the extrajudicial foreclosure on the real estate
mortgage over respondents properties.
Per petitioners computation, aside from charges for
attorneys fees and sheriffs fees, respondent had a total
due and demandable obligation of P573,225.60, including
interest, in six different accounts, namely:
1)
EBP-PHO-87-1121
P119,165.06

(US$4,585.97

21.212)

P573,225.6014
The total approved bid price, which included the attorneys
fees and sheriff fees, was pegged at P752,074.63. At the
public auction held on 05 January 1988, the Sheriff of
Antipolo, Rizal issued a Certificate of Sale in favor of
petitioner as the highest bidder.15 The certificate of sale
was registered on 24 March 1988.16
On 12 June 1989, petitioner executed an affidavit of
consolidation over the foreclosed properties after
respondent failed to redeem the same. As a result, the
Register of Deeds of Marikina issued new certificates of title
in the name of petitioner.17
On 17 November 1989, respondent instituted an action for
the annulment of the extrajudicial foreclosure with prayer
for preliminary injunction and damages against petitioner
and the Register of Deeds of Marikina. Docketed as Civil
Case No. 1587-A, the complaint was raffled to Branch 73 of
the RTC of Antipolo, Rizal. The complaint prayed, among
others, that the defendants be enjoined from causing the
transfer of ownership over the foreclosed properties from
respondent to petitioner.18
On 05 April 1990, petitioner filed a petition for the issuance
of a writ of possession, docketed as LR Case No. 90-787,
before the same branch of the RTC of Antipolo, Rizal. The
RTC ordered the consolidation of Civil Case No, 1587-A and
LR Case No. 90-787.19

On 18 December 1997, the RTC rendered a decision


upholding the validity of the extrajudicial foreclosure and
ordering the issuance of a writ of possession in favor of
petitioner, to wit:
WHEREFORE, in Case No. 1587-A, the court hereby rules
that the foreclosure of mortgage for the old and new
obligations of the plaintiff Excelsa Industries Corp., which
has remained unpaid up to the time of foreclosure by
defendant Producers Bank of the Philippines was valid, legal
and in order; In Case No. 787-A, the court hereby orders for
the issuance of a writ of possession in favor of Producers
Bank of the Philippines after the properties of Excelsa
Industries Corp., which were foreclosed and consolidated in
the name of Producers Bank of the Philippines under TCT
No. 169031, 169032, 169033, 169034 and 169035 of the
Register of Deeds of Marikina.

The RTC also found that by its admission, respondent had


other loan obligations obtained from petitioner which were
due and demandable; hence, petitioner correctly exercised
its right to foreclose the real estate mortgage, which
provided that the same secured the payment of not only
the loans already obtained but also the export
advances.231avvphi1
Lastly, the RTC found respondent guilty of laches in
questioning the foreclosure sale considering that petitioner
made several demands for payment of respondents
outstanding loans as early as July 1987 and that respondent
acknowledged the failure to pay its loans and advances.24
The RTC denied respondents motion for reconsideration.25
Thus, respondent elevated the matter to the Court of
Appeals, reiterating its claim that petitioner was not only a
collection agent but was considered a purchaser of the
export

SO ORDERED.20
The RTC held that petitioner, whose obligation consisted
only of receiving, and not of collecting, the export proceeds
for the purpose of converting into Philippine currency and
remitting the same to respondent, cannot be considered as
respondents agent. The RTC also held that petitioner
cannot be presumed to have received the export proceeds,
considering that respondent executed undertakings
warranting that the drafts and accompanying documents
were genuine and accurately represented the facts stated
therein and would be accepted and paid in accordance with
their tenor.21
Furthermore, the RTC concluded that petitioner had no
obligation to return the export documents and respondent
could not expect their return prior to the payment of the
export advances because the drafts and export documents
were the evidence that respondent received export
advances from petitioner.22

On 30 May 2001, the Court of Appeals rendered the


assailed decision, reversing the RTCs decision, thus:
WHEREFORE, the appeal is hereby GRANTED. The decision
of the trial court dated December 18, 1997 is REVERSED
and SET ASIDE. Accordingly, the foreclosure of mortgage on
the properties of appellant is declared as INVALID. The
issuance of the writ of possession in favor of appellee is
ANNULLED. The following damages are hereby awarded in
favor of appellant:
(a) Moral damages in the amount of P100,000.00;
(b) Exemplary damages in the amount of P100,000.00; and
(c) Costs.
SO ORDERED.26
The Court of Appeals held that respondent should not be
faulted for the dishonor of the drafts and export documents

because the obligation to collect the export proceeds from


Kwang Ju Bank, Ltd. devolved upon petitioner. It cited the
testimony of petitioners manager for the foreign currency
department to the effect that petitioner was respondents
agent, being the only entity authorized under Central Bank
Circular No. 491 to collect directly from the importer the
export proceeds on respondents behalf and converting the
same to Philippine currency for remittance to respondent.
The appellate court found that respondent was not
authorized and even powerless to collect from the importer
and it appeared that respondent was left at the mercy of
petitioner, which kept the export documents during the
time that respondent attempted to collect payment from
the Korean importer.
The Court of Appeals disregarded the RTCs finding that the
export documents were the only evidence of respondents
export advances and that petitioner was justified in refusing
to return them. It opined that granting petitioner had no
obligation to return the export documents, the former
should have helped respondent in the collection efforts
instead of augmenting respondents dilemma.
Furthermore, the Court of Appeals found petitioners
negligence as the cause of the refusal by the Korean buyer
to pay the export proceeds based on the following: first,
petitioner had a hand in preparing and scrutinizing the
export documents wherein the discrepancies were found;
and, second, petitioner failed to advise respondent about
the warning from Kwang Ju Bank, Ltd. that the export
documents would be returned if no explanation regarding
the discrepancies would be made.
The Court of Appeals invalidated the extrajudicial
foreclosure of the real estate mortgage on the ground that
the posting and publication of the notice of extrajudicial
foreclosure proceedings did not comply with
the personal notice requirement under paragraph 1227 of
the real estate mortgage executed between petitioner and
respondent. The Court of Appeals also overturned the RTCs

finding that respondent was guilty of estoppel by laches in


questioning the extrajudicial foreclosure sale.
Petitioners motion for reconsideration28 was denied in a
Resolution dated 29 January 2002. Hence, the instant
petition, arguing that the Court of Appeals erred in finding
petitioner as respondents agent, which was liable for the
discrepancies in the export documents, in invalidating the
foreclosure sale and in declaring that respondent was not
estopped from questioning the foreclosure sale.29
The validity of the extrajudicial foreclosure of the mortgage
is dependent on the following issues posed by petitioner:
(1) the coverage of the "blanket mortgage clause;" (2)
petitioners failure to furnish personal notice of the
foreclosure to respondent; and (3) petitioners obligation as
negotiating bank under the letter of credit.
Notably, the errors cited by petitioners are factual in nature.
Although the instant case is a petition for review under Rule
45 which, as a general rule, is limited to reviewing errors of
law, findings of fact being conclusive as a matter of general
principle, however, considering the conflict between the
factual findings of the RTC and the Court of Appeals, there
is a need to review the factual issues as an exception to the
general rule.30
Much of the discussion has revolved around who should be
liable for the dishonor of the draft and export documents. In
the two undertakings executed by respondent as a
condition for the negotiation of the drafts, respondent held
itself liable if the drafts were not accepted. The two
undertakings signed by respondent are similarly-worded
and contained respondents express warranties, to wit:
In consideration of your negotiating the above described
draft(s), we hereby warrant that the said draft(s) and
accompanying documents thereon are valid, genuine and
accurately represent the facts stated therein, and that such
draft(s) will be accepted and paid in accordance with
its/their tenor. We further undertake and agree, jointly and

severally, to defend and hold you free and harmless from


any and all actions, claims and demands whatsoever, and
to pay on demand all damages actual or compensatory
including attorneys fees, costs and other awards or be
adjudged to pay, in case of suit, which you may suffer
arising from, by reason, or on account of your negotiating
the above draft(s) because of the following discrepancies or
reasons or any other discrepancy or reason whatever.
We hereby undertake to pay on demand the full amount of
the above draft(s) or any unpaid balance thereof, the
Philippine perso equivalent converted at the prevailing
selling rate (or selling rate prevailing at the date you
negotiate our draft, whichever is higher) allowed by the
Central Bank with interest at the rate prevailing today from
the date of negotiation, plus all charges and expenses
whatsoever incurred in connection therewith. You shall
neither be obliged to contest or dispute any refusal to
accept or to pay the whole or any part of the above draft(s),
nor proceed in any way against the drawee, the issuing
bank or any endorser thereof, before making a demand on
us for the payment of the whole or any unpaid balance of
the draft(s).(Emphasis supplied)31
In Velasquez v. Solidbank Corporation,32 where the drawer
therein also executed a separate letter of undertaking in
consideration for the banks negotiation of its sight drafts,
the Court held that the drawer can still be made liable
under the letter of undertaking even if he is discharged due
to the banks failure to protest the non-acceptance of the
drafts. The Court explained, thus:
Petitioner, however, can still be made liable under the letter
of undertaking. It bears stressing that it is a separate
contract from the sight draft. The liability of petitioner
under the letter of undertaking is direct and primary. It is
independent from his liability under the sight draft. Liability
subsists on it even if the sight draft was dishonored for nonacceptance or non-payment.

Respondent agreed to purchase the draft and credit


petitioner its value upon the undertaking that he will
reimburse the amount in case the sight draft is dishonored.
The bank would certainly not have agreed to grant
petitioner an advance export payment were it not for the
letter of undertaking. The consideration for the letter of
undertaking was petitioners promise to pay respondent the
value of the sight draft if it was dishonored for any reason
by the Bank of Seoul.33
Thus, notwithstanding petitioners alleged failure to comply
with the requirements of notice of dishonor and protest
under Sections 8934 and 152,35 respectively, of the
Negotiable Instruments Law, respondent may not escape its
liability under the separate undertakings, where respondent
promised to pay on demand the full amount of the drafts.
The next question, therefore, is whether the real estate
mortgage also served as security for respondents drafts
that were not accepted and paid by the Kwang Ju Bank, Ltd.
Respondent executed a real estate mortgage containing a
"blanket mortgage clause," also known as a "dragnet
clause." It has been settled in a long line of decisions that
mortgages given to secure future advancements are valid
and legal contracts, and the amounts named as
consideration in said contracts do not limit the amount for
which the mortgage may stand as security if from the four
corners of the instrument the intent to secure future and
other indebtedness can be gathered.36
In Union Bank of the Philippines v. Court of Appeals,37 the
nature of a dragnet clause was explained, thus:
Is one which is specifically phrased to subsume all debts of
past and future origins. Such clauses are "carefully
scrutinized and strictly construed." Mortgages of this
character enable the parties to provide continuous dealings,
the nature or extent of which may not be known or
anticipated at the time, and they avoid the expense and
inconvenience of executing a new security on each new

transaction. A "dragnet clause" operates as a convenience


and accommodation to the borrowers as it makes available
additional funds without their

As regards the issue of whether respondent may still


question the foreclosure sale, the RTC held that the sale
was conducted according to the legal procedure, to wit:

having to execute additional security documents, thereby


saving time, travel, loan closing costs, costs of extra legal
services, recording fees, et cetera.38

Plaintiff is estopped from questioning the foreclosure. The


plaintiff is guilty of laches and cannot at this point in time
question the foreclosure of the subject properties.
Defendant bank made demands against the plaintiff for the
payment of plaintiffs outstanding loans and advances with
the defendant as early as July 1997. Plaintiff acknowledged
such outstanding loans and advances to the defendant
bank and committed to liquidate the same. For failure of the
plaintiff to pay its obligations on maturity, defendant bank
foreclosed the mortgage on subject properties on January 5,
1988 the certificate of sale was annotated on March 24,
1988 and there being no redemption made by the plaintiff,
title to said properties were consolidated in the name of
defendant in July 1989. Undeniably, subject foreclosure was
done in accordance with the prescribed rules as may be
borne out by the exhibits submitted to this Court which are
Exhibit "33," a notice of extrajudicial sale executed by the
Sheriff of Antipolo, Exhibit "34" certificate posting of
extrajudicial sale, Exhibit "35" return card evidencing
receipt by plaintiff of the notice of extrajudicial sale and
Exhibit "21" affidavit of publication.

xxx
Petitioner, therefore, was not precluded from seeking the
foreclosure of the real estate mortgage based on the unpaid
drafts drawn by respondent. In any case, respondent had
admitted that aside from the unpaid drafts, respondent also
had due and demandable loans secured from another
account as evidenced by Promissory Notes (PN Nos.) BDS001-87, BDS-030/86 A, BDS-PC-002-/87 and BDS-005/87.
However, the Court of Appeals invalidated the extrajudicial
foreclosure of the mortgage on the ground that petitioner
had failed to furnish respondent personal notice of the sale
contrary to the stipulation in the real estate mortgage.
Petitioner, on the other hand, claims that under paragraph
1239 of the real estate mortgage, personal notice of the
foreclosure sale is not a requirement to the validity of the
foreclosure sale.
A perusal of the records of the case shows that a notice of
sheriffs sale40 was sent by registered mail to respondent
and received in due course.41 Yet, respondent claims that it
did not receive the notice but only learned about it from
petitioner. In any event, paragraph 12 of the real estate
mortgage requires petitioner merely to furnish respondent
with the notice and does not oblige petitioner to ensure that
respondent actually receives the notice. On this score, the
Court holds that petitioner has performed its obligation
under paragraph 12 of the real estate mortgage.

The Court adopts and approves the aforequoted findings by


the RTC, the same being fully supported by the evidence on
record.
WHEREFORE, the instant petition for review on certiorari is
GRANTED and the decision and resolution of the Court of
Appeals in CA-G.R. CV No. 59931 are REVERSED and SET
ASIDE. The decision of the Regional Trial Court Branch 73,
Antipolo, Rizal in Civil Case No. 1587-A and LR Case No. 90787 is REINSTATED.
SO ORDERED.

ROMEO TESTON, represented G.R. NO. 144374


by Conrado Colarina,
Petitioner,
- versus - Present:
PUNO, Chairman, *
AUSTRIA-MARTINEZ,
DEVELOPMENT BANK OF CALLEJO, SR.,
THE PHILIPPINES, LAND BANK TINGA, and
OF THE PHILIPPINES, and CHICO-NAZARIO,** JJ.
SECRETARY OF AGRARIAN
REFORM, Promulgated:
Respondents. November 11, 2005
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -------x
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45
of the Rules of Court, assailing the Decision[1] of the Court
of Appeals (CA) dated March 9, 2000 in CA-G.R. SP No.
40609 which sustained the Order dated March 13, 1996 of
the Regional Trial Court, Branch 48, Masbate, Masbate
(RTC) dismissing Special Civil Case (SCC) No. 4243; and the
CA Resolution dated August 4, 2000, denying petitioners
motion for reconsideration.
The factual background of the case is as follows:
On November 3, 1993, petitioner Romeo Teston, through his
attorney-in-fact, Conrado Colarina (petitioner), filed a
complaint against respondents Development Bank of the
Philippines (DBP), Land Bank of the Philippines (LBP) and

Secretary of the Department of Agrarian Reform (DAR


Secretary) for the determination and payment of just
compensation of two parcels of agricultural land, docketed
as SCC No. 4243.
In his complaint, petitioner alleges that: he is the owner of
the said two parcels of agricultural land, situated in
Barangay Lantangan, Mandaon, Masbate, covered by
Transfer Certificate of Title (TCT) No. T-6176 and TCT No. T6177, having purchased the same from DBP by way of Deed
of Conditional Sale dated July 15, 1987; on December 1,
1998, he, through Colarina, voluntarily offered to sell the
said parcels of land to the DAR Secretary, under the
Comprehensive Agrarian Reform Law or Republic Act (R.A.)
No. 6657; the DAR Secretary accepted the voluntary offer to
sell for a total price of P12,172,854.63; the DBP, without
notifying him and ignoring the Conditional Sale, transferred
the parcels of land to the Government, through the DAR, for
the coverage of the Comprehensive Agrarian Reform
Program (CARP) and immediate distribution to farmer
beneficiaries; after execution of the Deed of Conditional
Sale in his favor, DBP has no more right to sell and transfer
to the DAR the subject properties, which were already
previously voluntarily offered for sale by him and accepted
by the DAR.
On the same day, Colarina filed his own personal complaint
against the Government Service Insurance System (GSIS),
LBP and the DAR Secretary for the determination and
payment of just compensation of fifteen parcels of
agricultural land, docketed as SCC No. 4242.
Colarina alleged that: the said fifteen parcels of agricultural
land, situated in Barrio Malaran and Lamintao, Municipality
of Dimasalong (now Uson), Masbate, with a total land area
of 32,398,264 square meters, were mortgaged by the
Associated Agricultural Activities, Inc. (AAA) to the GSIS as
security for the payment of its loan; when AAA failed to pay
the loan, GSIS foreclosed the mortgage on the lands, at
public auction, GSIS was the highest bidder; on May 19,
1988, certificates of sale were issued and registered in the

name of GSIS; on December 8, 1988, he bought the lots


from AAA; on April 25, 1989, he voluntarily offered to sell
said properties to the DAR under R.A. No. 6657; on May 6,
1989, he informed GSIS of his offer to sell the properties to
the DAR; subsequently, GSIS consolidated ownership over
the lots in its name; on November 5, 1990, GSIS executed a
Deed of Transfer in favor of the DAR, by virtue of which, TCT
Nos. T-7882 to T-7891 were issued on December 11, 1990
in the name the Republic of the Philippines by the Register
of Deeds of Masbate; on April 16, 1991, TCT Nos. T-94 to T103 were issued in the names of farmer beneficiaries;
despite repeated demands, the LBP and the DAR refused to
determine and pay the just compensation for the lots.
Both cases were raffled to RTC, Masbate, Branch 48.
In separate Answers in SCC No. 4243, respondents DBP, LBP
and the DAR Secretary commonly averred that petitioner
has no cause of action since he was never the owner of the
properties under TCT Nos. T-6176 and T-6177 because DBP
rescinded the Deed of Conditional Sale for nonpayment of
the purchase price.
On the other hand, in separate Answers in SCC No. 4242,
respondents GSIS, LBP and DAR Secretary contend that
Colarina has no cause of action since he is not the owner of
the lands he voluntarily offered for CARP coverage; he only
bought from AAA the right to redeem the property and he
failed to exercise such right on May 19, 1989, within the
one-year period allowed by the law.
Without any order of the RTC expressly consolidating SCC
No. 4242 and No. 4243, a notice of hearing of both cases
was sent to the parties by the clerk of the RTC.[2] In an
Order dated November 16, 1994, the RTC terminated the
pre-trial in both cases.[3]
Subsequently, or on September 19, 1995, GSIS filed a
motion to dismiss for failure of the complaint to state a
cause of action. It argued that Colarina had no right to sell
the lots to the DAR because what it acquired from AAA was

only the right to redeem the lots in question; failing to so


redeem, he never became the owner of said lots and
therefore was not the real party-in-interest in the case.[4]
In an Order dated December 8, 1995, the RTC directed
Colarina to file his comment or opposition thereto.[5]
In his opposition to the motion to dismiss, Colarina did not
dispute the claim of GSIS that he failed to redeem subject
property within the allotted period. He simply declared that
GSIS was a necessary party in the case being the
mortgagee of the lots.[6]
No pleading, manifestation or motion was filed by the
petitioner or respondents DBP, LBP and the DAR Secretary
concerning the motion to dismiss.
At the scheduled hearing of the motion to dismiss, the
parties and counsels, except respondent DBP, failed to
appear despite notice. Only respondent LBP filed a
telegraphic motion for postponement. The RTC thus
considered the motion to dismiss submitted for resolution.
[7]
On March 13, 1996, the RTC issued its Order dismissing the
complaints in both cases for failure to state a cause of
action.[8] It ratiocinated thus:
As admitted in the complaint that the properties in question
in Spec. Civil Case No. 4242 has been foreclosed by the
defendant Government Service Insurance System (GSIS).
During redemption period the plaintiff acquired the said
properties from its original owner, AAA Inc. However, what
the plaintiff had actually acquired then was only the owners
right of redemption within the reglamentary (sic) period. So
when the plaintiff made a voluntary offer to sell the
properties in question to the Department of Agrarian
Reform (DAR) he had no personality for the same inasmuch
as he is not the real party in interest.
While the properties involved in Spec. Civil Case No. 4243
are concerned, T-6176 and T-6177 the same were allegedly

acquired by plaintiff Romeo Teston from defendant DBP by


virtue of a deed of conditional sale dated July 15, 1987, with
DBP as conditional vendor and Romeo Teston as conditional
vendee. However the said conditional sale was rescinded in
1990 in view of plaintiffs failure to update his account, who
has been informed of said rescission per letter of DBP dated
September 24, 1990.
The DBP in transferring the properties in question to the
DAR was only complying (sic) Executive Order 405 and 407
which provide the surrender to the DAR of all agricultural
landholdings of the Government financial institution
including that of defendant DBP. So the plaintiff, Romeo
Teston has no right whatsoever to make any voluntary offer
to sell the properties in question to the DAR much more to
ask the Court (sic) determination and payment of just
compensation.[9]
On March 25, 1996, a motion for reconsideration[10] was
filed by Pejo Buenviaje & Associates, the common counsel
of petitioner and Colarina, but it was denied by the RTC in
its Order dated April 24, 1996.[11]
Dissatisfied, petitioner and Colarina filed separate petitions
for review with the CA, docketed as CA-G.R. SP Nos.
40609[12] and 40610, respectively.
On October 28, 1996, the CA rendered its decision on
Colarinas appeal in CA-G.R. SP No. 40610, setting aside the
RTCs Order dated March 13, 1996, which dismissed SCC No.
4242.[13] However, on petition for review on certiorari with
this Court by GSIS, entitled Government Service Insurance
System vs. Court of Appeals, docketed as G.R. No. 128118,
the Court, on February 15, 2002, set aside the CA decision
and reinstated the RTCs Order dated March 13, 1996, which
dismissed SCC No. 4242.[14]
Meanwhile, on March 9, 2000, the CA rendered judgment in
CA-G.R. SP No. 40609, affirming in toto the RTCs order
which dismissed SCC No. 4243.[15] The CA held that: the

RTC is given the option to have a joint hearing or to order


consolidation if the motion involves a common question of
law or fact, pursuant to Section 1, Rule 32 of the 1997 Rules
of Civil Procedure; since SCC Nos. 4242 and 4243 have a
common question of law and fact, which is the
determination and payment of just compensation, the joint
hearing conducted by the RTC is proper and valid; the rule
clearly gives the RTC discretion to decide what course of
action to take, that is, whether to have joint hearing/trial or
to order the cases consolidated; furthermore, the Court may
make such orders concerning proceedings therein to avoid
unnecessary costs or delay and, in this case, to order the
dismissal of both cases.
Petitioner filed a motion for reconsideration[16] but it was
denied by the CA in its Resolution dated August 4, 2000.
[17]
Hence, the present petition for
anchored on a sole error, to wit:

review

on

certiorari

THE COURT OF APPEALS ERRED IN UPHOLDING THE


DISMISSAL BY THE TRIAL COURT OF THE COMPLAINT IN
SPEC. CIVIL CASE NO. 4243 UPON A MOTION TO DISMISS
DIRECTED AGAINST THE COMPLAINT IN SPEC. CIVIL CASE
NO. 4242 EVEN ON ITS JUSTIFICATION THEREOF, NAMELY,
THAT THE TRIAL COURT MAY MAKE SUCH ORDER IN VIEW
OF CONSOLIDATION OF THE TWO CASES ALLOWED UNDER
SEC. 1, RULE 31 OF THE RULES OF CIVIL PROCEDURE.[18]
Petitioner submits that no consolidation in contemplation of
the Rules took place since there was no order for
consolidation; the RTC only scheduled both cases for
simultaneous hearing. He further argues that the RTC erred
in dismissing in one order both cases based on a motion to
dismiss directed against one case only. He maintains that
failure to state a cause of action as ground of a motion to
dismiss solely applies to the complaint in SCC No. 4242 and
it cannot extend to the complaint in SCC No. 4243, unless
the allegations in both complaints are entirely the same in

all respects. Furthermore, he contends that the RTC, in


finding that the complaint in SCC No. 4243 stated no cause
of action, went beyond the allegations of the complaint.
On the other hand, respondent DBP submits that petitioners
argument regarding consolidation deals principally on
technicalities and semantics. It avers that it cannot be
denied that the two cases involved are of the same nature
and pray for the same relief, i.e., the determination and
payment of just compensation, which petitioner admits in
his petition. While admitting that there was no written order
from the RTC expressly consolidating both cases, it
maintains that the RTC scheduled both cases for
simultaneous trial and hearing and all the conditions for
consolidation are attendant herein. It contends also that the
RTC did not abuse its discretion when it dismissed SCC No.
4243 in order to avoid unnecessary cost and delay since the
ground for the dismissal of SCC No. 4242 is perfectly
applicable to the former. Besides, it contends that, in
dismissing SCC No. 4243, the RTC did not go beyond the
averments of the complaint therein.
As for respondent LBP, it submits that the RTC did not err,
much less abuse its jurisdiction, in dismissing SCC No. 4243
upon a motion to dismiss directed against the complaint in
SCC No. 4242, since the two cases were consolidated and
involved common questions of law and facts. It argues that
dismissal of SCC No. 4243 for failure to state a cause of
action is proper since petitioner has no right to voluntarily
offer the disputed properties because he was never the
owner of said properties.
The Court rules in favor of the petitioner.
Consolidation of actions is expressly authorized under
Section 1, Rule 31 of the 1997 Rules of Civil Procedure,
which states:
SECTION 1. Consolidation. When actions involving a
common question of law or fact or pending before the court,
it may order a joint hearing or trial of any or all the matters

in issue in the actions; it may order all the actions


consolidated; and it may make such orders concerning
proceedings therein as may tend to avoid unnecessary
costs or delay.
A court may order several actions pending before it to be
tried together where they arise from the same act, event or
transaction, involve the same or like issues, and depend
largely or substantially on the same evidence, provided that
the court has jurisdiction over the cases to be consolidated
and that a joint trial will not give one party an undue
advantage or prejudice the substantial rights of any of the
parties.[19] The obvious purpose of the rule allowing
consolidation is to avoid multiplicity of suits to guard
against oppression or abuse, to prevent delays, to clear
congested dockets, to simplify the work of the trial court; in
short the attainment of justice with the least expense and
vexation to the parties litigants.[20] Consolidation of
actions is addressed to the sound discretion of the court
and its action in consolidating will not be disturbed in the
absence of manifest abuse of discretion.[21]
In the present case, although both cases which were raffled
to the same branch of RTC Masbate (Branch 48), involve the
prayer
for
determination
and
payment
of
just
compensation, and petitioner and Colarina are represented
by the same counsel, Pejo Buenviaje & Associates, and
respondents LBP and DAR Secretary are common
defendants, these are not sufficient justifications for joint
trial and joint order dismissing both cases. It cannot be
denied that there is no real identity of parties, facts or
rights asserted. SCC No. 4242 was instituted by Colarina in
his own name principally against GSIS and concerns fifteen
parcels of agricultural land in Barrio Malaran and Lamintao,
Municipality of Dimasalong (now Uson), Masbate, while SCC
No. 4243 was instituted by petitioner represented by
Colarina principally against DBP and concerns two parcels
of agricultural land in Barangay Lantangan, Mandaon,
Masbate. Furthermore, a perusal of the complaints in SCC
Nos. 4242 and 4243 plainly shows that Colarina claims

ownership as redemptioner while petitioner claims


ownership as buyer. Clearly, the causes of action in the two
cases arose from different events or transactions, involve
different issues, and ultimately will depend on different
evidence.
Therefore, the RTC exceeded its jurisdiction in setting the
joint trial of the two cases. Consolidation should be denied
when prejudice would result to any of the parties or would
cause complications, delay, cut off, or restrict the rights of a
party,[22] as in this case.
In view of the improper consolidation, the RTC judge was
equally less than judicious in dismissing SCC No. 4243
based on a motion to dismiss filed by GSIS. Notably, the
motion to dismiss was filed by GSIS only with respect to the
complaint in SCC No. 4242. The claim of GSIS that Colarina
never became the owner of the fifteen parcels of land, since
he failed to exercise his right of redemption, is totally alien
from the claim of respondent DBP against petitioner with
respect to two different parcels of land covered by a deed of
conditional sale, which was allegedly rescinded by DBP, an
issue not raised by the DBP in said motion to dismiss.
Furthermore, it must be noted that only Colarina was
directed by the RTC to file his comment or opposition to the
motion to dismiss of GSIS.[23] No pleading, manifestation
or motion, was filed by the petitioner or respondents DBP,
LBP or the DAR Secretary concerning the motion to dismiss.
And, as already stated, at the scheduled hearing on the
motion to dismiss, all the parties and counsels, except
herein respondent DBP, failed to appear despite notice.[24]
Even at that stage, nothing was heard from respondent
DBP; it did not move for the dismissal of the complaint
against it.
Accordingly, the RTC can not, motu proprio or on its own
initiative, consider the ground of lack of cause of action on
the part of petitioner when it was not raised by DBP in the
motion to dismiss filed by GSIS, without running afoul of
petitioners constitutionally protected right to due process.

Without any iota of doubt, due process of law lies at the


foundation of a civilized society which accords paramount
importance to justice and fairness. It has to be accorded the
weight it deserves.
In view of the foregoing, the Court will not delve on the
question of whether petitioners complaint failed to state a
cause of action as it is primarily within the jurisdiction of the
RTC to determine after due hearing.
WHEREFORE, the instant petition is GRANTED. The assailed
Decision dated March 9, 2000 and Resolution dated August
4, 2000 of the Court of Appeals in CA-G.R. SP No. 40609 are
SET ASIDE. The case is REMANDED to the court of origin for
further proceedings insofar as SCC No. 4243 is concerned.

ESPINOZA VS OAB
DECISION
CORONA, J.:
This is a petition for review on certiorari[1] of the November
9, 2006 decision[2] of the Court of Appeals (CA) in CA-G.R.
SP No. 62250.
On March 24, 1996, Firematic Philippines was granted a
credit line by respondent United Overseas Bank (then
known as Westmont Bank). As security, petitioners Gregorio
Espinoza and the late Joji Gador Espinoza (spouses
Espinoza) executed a third-party mortgage in favor of
respondent over four parcels of land, one of which was
covered by Transfer Certificate of Title (TCT) No. 197553 of
the Registry of Deeds of Caloocan City. Through its credit
line, Firematic obtained several loans from respondent, as
evidenced by promissory notes and trust receipts.
Due to Firematics failure to pay its loans, respondent filed a
petition for extrajudicial foreclosure in July 1996 with notary
public Eduardo S. Rodriguez in Caloocan City. After
complying with the legal requirements, the property
covered by TCT No. 197553 was sold at public auction.
Respondent was awarded the property, being the only
bidder in the amount of P200,000.[3]
The certificate of sale was registered with the Register of
Deeds of Caloocan City on September 25, 1996. In July
1998, an affidavit of consolidation of ownership over the
property was also registered with the same office. On July
24, 1998, ownership was consolidated in the name of
respondent as evidenced by the issuance of TCT No. C328807.
On March 10, 2000, respondent filed an ex parte petition for
the issuance of a writ of possession which was docketed as
LRC Case No. C-4233 in the Regional Trial Court (RTC) of
Caloocan City, Branch 124. This action was opposed by
petitioners who moved for the consolidation of the
proceedings with Civil Case No. C-17913 pending before

RTC Branch 120 of the same city. Civil Case No. C-17913
was an action for the nullification of the extra-judicial
foreclosure proceedings and certificate of sale of the
property subject of this case.
In an order dated April 18, 2000, RTC Branch 124 granted
petitioners motion for consolidation and ordered that LRC
Case No. C-4233 be consolidated with Civil Case No. C17913, provided that the presiding judge of RTC Branch 120
did not object. Respondents motion for reconsideration was
denied in an order dated September 7, 2000.
Respondent then filed a petition for certiorari and
mandamus[4] in the CA, which was granted. The orders of
RTC Branch 124 dated April 18, 2000 and September 7,
2000, respectively, were reversed and set aside. The CA
adhered to the long-established doctrine that purchasers in
a foreclosure sale are entitled, as a matter of right, to a writ
of possession and that any question regarding the
regularity and validity of the sale is to be determined in a
separate proceeding. The CA also held that such questions
are not to be raised as a justification for opposing the
issuance of the writ of possession, since such proceedings
are ex parte. Hence, the CA directed the issuance of a writ
of possession in favor of respondent.
Aggrieved, petitioners filed this petition.
The core issue for resolution is whether a case for the
issuance of a writ of possession may be consolidated with
the proceedings for the nullification of extra-judicial
foreclosure.
Petitioners contend that peculiar circumstances in the
instant case make it an exception from the general rule on
the ministerial duty of courts to issue writs of possession.
Given that the issuance of a writ of possession in this case
must be litigated, consolidation with the pending case on
the nullification of extra-judicial foreclosure is mandatory
because both proceedings involve the same parties and
subject matter.
Respondent, on the other hand, insists that the
consolidation of the ex parte petition for the issuance of a

writ of possession with the complaint for nullification of


extra-judicial foreclosure of mortgage is highly improper
and irregular because there are no common questions of
fact and law between the two cases. Respondent also
argues that any question regarding the validity of the
mortgage or foreclosure cannot be a ground for refusing the
issuance of the writ of possession and should, instead, be
taken up in the proceedings for the nullification of the
foreclosure.
We rule for respondent.
The order for a writ of possession issues as a matter of
course upon the filing of the proper motion and the
approval of the corresponding bond if the redemption
period has not yet lapsed.[5] If the redemption period has
expired, then the filing of the bond is no longer necessary.
Any and all questions regarding the regularity and validity
of the sale is left to be determined in a subsequent
proceeding and such questions may not be raised as a
justification for opposing the issuance of a writ of
possession.[6]
In Santiago v. Merchants Rural Bank of Talavera, Inc.,[7] we
defined the nature of a petition for a writ of possession:
The proceeding in a petition for a writ of possession is ex
parte and summary in nature. It is a judicial proceeding
brought for the benefit of one party only and without notice
by the court to any person adverse of interest. It is a
proceeding wherein relief is granted without giving the
person against whom the relief is sought an opportunity to
be heard.
By its very nature, an ex parte petition for issuance of a writ
of possession is a non-litigious proceeding.[8] It is a judicial
proceeding for the enforcement of one's right of possession
as purchaser in a foreclosure sale. It is not an ordinary suit
filed in court, by which one party sues another for the

enforcement of a wrong or protection of a right, or the


prevention or redress of a wrong.[9]
On the other hand, by its nature, a petition for nullification
or annulment of foreclosure proceedings contests the
presumed right of ownership of the buyer in a foreclosure
sale and puts in issue such presumed right of ownership.
Thus, a party scheming to defeat the right to a writ of
possession of a buyer in a foreclosure sale who had already
consolidated his ownership over the property subject of the
foreclosure sale can simply resort to the subterfuge of filing
a petition for nullification of foreclosure proceedings with
motion for consolidation of the petition for issuance of a
writ of possession. This we cannot allow as it will render
nugatory the presumed right of ownership, as well as the
right of possession, of a buyer in a foreclosure sale, rights
which are supposed to be implemented in an ex parte
petition for issuance of a writ of possession.
Besides, the mere fact that the presumed right of
ownership is contested and made the basis of another
action does not by itself mean that the proceedings for
issuance of a writ of possession will become groundless.
The presumed right of ownership and the right of
possession should be respected until and unless another
party successfully rebuts that presumption in an action for
nullification of the foreclosure proceedings. As such, and in
connection with the issuance of a writ of possession, the
grant of a complaint for nullification of foreclosure
proceedings is a resolutory condition, not a suspensive
condition.
Given the foregoing discussion, it is clear that the
proceedings for the issuance of a writ of possession should
not be consolidated with the case for the declaration of
nullity of a foreclosure sale. The glaring difference in the
nature of the two militates against their consolidation.
The long-standing rule is that proceedings for the issuance
of a writ of possession are ex parte and non-litigious in
nature.[10] The only exemption from this rule is Active

Wood Products Co., Inc. v. Court of Appeals[11] where the


consolidation of the proceedings for the issuance of a writ
of possession and nullification of foreclosure proceedings
was allowed following the provisions on consolidation in the
Rules of Court. However, the circumstances in this case are
substantially distinct from that in Active Wood. Therefore,
the exception granted in that case cannot be applied here.
In Active Wood, the petition for writ of possession was filed
before the expiration of the one-year redemption period[12]
while, in this case, the petition for writ of possession was
filed after the one-year redemption period had lapsed.
Moreover, in Active Wood, title to the litigated property had
not been consolidated in the name of the mortgagee.
Therefore, in that case, the mortgagee did not yet have an
absolute right over the property. In De Vera v. Agloro,[13]
we ruled:
The possession of land becomes an absolute right of the
purchaser as confirmed owner. The purchaser can demand
possession at any time following the consolidation of
ownership in his name and the issuance to him of a new
transfer certificate of title. After the consolidation of title in
the buyers name for failure of the mortgagor to redeem the
property, the writ of possession becomes a matter of right.
[14]
In another case involving these two parties, Fernandez and
United Overseas Bank Phils. v. Espinoza,[15] we held:
Upon the expiration of the redemption period, the right of
the purchaser to the possession of the foreclosed property
becomes absolute. The basis of this right to possession is
the purchasers ownership of the property.[16]
In this case, title to the litigated property had already been
consolidated in the name of respondent, making the
issuance of a writ of possession a matter of right.
Consequently, the consolidation of the petition for the

issuance of a writ of possession with the proceedings for


nullification of foreclosure would be highly improper.
Otherwise, not only will the very purpose of consolidation
(which is to avoid unnecessary delay) be defeated but the
procedural matter of consolidation will also adversely affect
the substantive right of possession as an incident of
ownership.
Finally, petitions for the issuance of writs of possession, a
land registration proceeding, do not fall within the ambit of
the Rules of Court.[17] Thus, the rules on consolidation
should not be applied.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.

[G.R. No. L-60601. December 29, 1983.]


CESAR NEPOMUCENO, LEON ARCILLAS and RUBEN
AVENIDO, Petitioners, v. THE HON. COMMISSION ON
ELECTIONS and OSCAR LASERNA, Respondents.
Ceferino P. Padua, Amado R. Perez and Marciano P. Brion, Jr.,
for Petitioners.
The Solicitor General for Respondents.

GRAVE ABUSE OF DISCRETION. In Estrada v. Sto.


Domingo, 28 SCRA 890, We have ruled that . . . Section 12,
Anticle VIII (now Section 9, Article X) of the Constitution and
Section 1, Rule 36, Rules of Court, which require express
findings of fact in a decision, have no application to the
questioned order. Here involved is not a decision on the
merits but a mere order upon a motion to reconsider. The
challenged order being merely an interlocutory order and
not a final judgment or decision, no abuse of discretion was
committed by respondent Comelec in its failure to state the
facts and the law on which its order denying petitioners
demurrer to evidence is based.

SYLLABUS
TEEHANKEE, J., dissenting:chanrob1es virtual 1aw library
1.
REMEDIAL LAW; CIVIL PROCEDURE; DEMURRER TO
EVIDENCE; CONSTRUED. Section 1 of Rule 35 of the Rules
of Court authorizes a judgment on the merits of the case
without the defendant having to submit evidence on his
part as he would ordinarily have to do, if it is shown by
plaintiffs evidence that the latter is not entitled to the relief
sought. The demurrer, therefore, is an aid or instrument for
the expeditious termination of an action, similar to a motion
to dismiss, which the court or tribunal may either grant or
deny.
2.
ID.; ID.; ID.; DENIAL; MERELY, INTERLOCUTORY IN
CHARACTER. The requirement of Section 1 of Rule 36
would only apply if the demurrer is granted, for in this
event, there would in fact be an adjudication on the merits
of the case, leaving nothing more to be done, except
perhaps to interpose an appeal. However, a denial of the
demurrer is not a final judgment, but merely interlocutory in
character as it does not finally dispose of the case, the
defendant having yet the right to present his evidence, as
provided for under Section 1 of Rule 35 of the Rules of
Court.
3.
ID.; SPECIAL CIVIL ACTION; CERTIORARI; FAILURE TO
STATE THE FACTS AND THE LAW ON WHICH AN ORDER
DENYING A DEMURRER TO EVIDENCE IS BASED; NOT A

1.
ELECTIONS; TURNCOATISM; ALL PRE-ELECTION CASES
SEEKING TO DISQUALIFY WINNER ON GROUND THEREOF
SHOULD BE DISMISSED AFTER JANUARY 30, 1980
ELECTIONS; REMEDIES. Suffice it to reproduce, however,
what I had stressed in my above cited separate opinion of
May l5, 1980, viz:" (I) reiterate my stand that all such preelection cases seeking to disqualify the winner simply on
the ground of alleged turncoatism should be ordered
dismissed after the last January 30th elections, subject to
the filing of an appropriate quo warranto action or election
protest against the winner in the appropriate forum."
DECISION
ESCOLIN, J.:
This is the third time that petitioners have come to this
Court to challenge the actuations of the respondent
Commission on Elections in PDC Case No. 65, entitled
"Oscar Laserna, Petitioner, versus Cesar Nepomuceno, Et
Al., Respondents."cralaw virtua1aw library

Petitioners Cesar Nepomuceno, Leon Arcillas and Ruben


Avenido were the official candidates of the Nacionalista
Party in the 1980 local elections for the positions of mayor,
vice-mayor and member of the Sangguniang Bayan,
respectively, of Sta. Rosa, Laguna. On January 14, 1980,
private respondent Oscar Laserna filed a petition before the
COMELEC, docketed as PDC Case No. 65, to disqualify
petitioners on the ground of turncoatism. On January 25,
1980, the COMELEC issued Resolution No. 8484, granting
said petition, thereby denying due course to petitioners
certificates of candidacy. Alleging denial of due process,
petitioners assailed said resolution in a petition for certiorari
and prohibition with prayer for a temporary restraining
order filed with this Court on January 28, 1980 [G.R. Nos.
52427 and 52506]. We issued a restraining order enjoining
the COMELEC from enforcing Resolution No. 8484, by
reason whereof, petitioners were allowed to be voted for in
the elections of January 30, 1980. It appears that in said
elections, petitioners won and were proclaimed winners in
their respective positions.
On May 15, 1980, We issued a Resolution in G.R. No. 52427
and G.R. No. 52506, setting aside the challenged resolution
and remanding the cases to respondent COMELEC "for a full
dress hearing in accordance with due process and to decide
the cases as expeditiously as possible after giving the
parties full opportunity to present all evidence relevant to
the issue of alleged turncoatism." chanrobles virtual
lawlibrary
The COMELEC accordingly set PDC Case No. 65 for hearing
on the merits. However, on July 17, 1980, petitioners filed a
motion to dismiss the said case, alleging that it being a preelection case, the same should be dismissed, without
prejudice to the filing of appropriate quo warranto
proceedings pursuant to Section 189 of the 1978 Election
Code. Having obtained an unfavorable ruling from the
COMELEC, petitioners filed another petition with this Court,
docketed as G.R. No. 54633, assailing the COMELECs
resolution which denied their motion to dismiss. On

December 22, 1980, We dismissed this second petition, as


follows:jgc:chanrobles.com.ph
". . . there is no legal basis for the allegation in the instant
petition that this Court meant by said resolution that its
reference therein to due process is the filing of the
proper petition in accordance with Section 189 and 190 of
the 1978 Election Code and that the disqualification Case
PDC No. 65 in the Comelec has become functus officio after
the election, proclamation and assumption to office of
petitioners herein, the Court resolved to DISMISS the
petition. Had this Court intended to convert the preproclamation proceedings in PDC Case No. 65 into either a
protest or a quo warranto, the resolution would have been
so worded and the case would not have been remanded to
the COMELEC which has no jurisdiction, as correctly pointed
out by petitioners, over such protest or quo warranto, which
belongs to the jurisdiction of the Courts of First Instance. Of
course, the resolution is without prejudice to petitioners
choosing, if they prefer to expedite proceedings, to
abandon the pre-proclamation contest and instead proceed
directly to the proper Court of First Instance with a protest
or quo warranto, as may be proper."cralaw virtua1aw library
Likewise, denying the motion for reconsideration of the
above
Resolution
on
June
8,
1982,
We
said:jgc:chanrobles.com.ph
"G.R. No. 54633 [Cesar Nepomuceno, Et Al., v. Commission
on Elections, Et. Al.]. Acting on the motion filed by
petitioners for reconsideration of the resolution of this Court
of December 22, 1980, the Court resolved to DENY the
same for lack of merit. With the clarification made in said
resolution, it is now the law of the case as to the parties
herein that PDC Case No. 65 pending in the Comelec is a
pre-proclamation proceeding. However, the Court did not
deem it wise to issue any order disturbing the continuance
in office of petitioners precisely because they are entitled to
due process in the disqualification case PDC No. 65. This
denial is final. . . ."cralaw virtua1aw library

Thereafter, the Comelec proceeded to hear PDC Case No.


65, with petitioners manifestation that "they do not waive
their right to question the jurisdiction of the Comelec"
having been placed on record. After respondent Oscar
Laserna had terminated the presentation of his evidence,
petitioners
filed
their
respective
Motions
to
Dismiss/Demurrer to Evidence, which were seasonably
opposed
by
respondent
Laserna.
Rejoinders
and
memoranda were filed by the parties, and on March 31,
1982, the Comelec issued the following order denying the
demurrer to evidence, to wit:chanrobles virtual lawlibrary
"RESPONDENTS BY COUNSEL individually filed demurrers to
the evidence, to which the petitioner did not lose time to
oppose. It is uniformly maintained by said respondents that
the evidence already adduced by the petitioner does not
establish a good cause to proceed against them, for which
reason the petition as against them should be dismissed.
Petitioner disagreed, arguing otherwise.
"The demurrers should be DENIED. The Commission
[Second Division] would rather have the complete facts and
evidence of the parties upon which to reach a decision than
prematurely go into it now upon the facts and evidence of
the petitioner only. The rationale behind such a procedure is
to enable this Body to properly adjudicate the case on its
merits and to ventilate the adversary issues on the basis of
all the facts and evidence presented by the contending
parties. [See Siayngco v. Costobolo, No. L-22506, Feb. 28,
1982] [Annex "L", Rollo, p. 89]
Petitioners motions for reconsideration of the above order
were likewise denied.
On April 15, 1982, petitioners filed with the Comelec
another Motion to Dismiss, which was denied in an order
dated April 16, 1982. This order was signed for the division
by presiding commissioner Luis L. Lardizabal [Annex "T",
Rollo, p. 126]. From these orders, petitioners came to Us,
alleging:chanrob1es virtual 1aw library

1.
THAT THE COMELEC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO AN ACT IN EXCESS OF OR
WITHOUT JURISDICTION IN REFUSING TO RESOLVE
PETITIONERS DEMURRER TO EVIDENCE BY WAY OF A
JUDGMENT WHEREIN IT SHOULD STATE THE FACTS AND THE
LAW ON WHICH ITS RESOLUTION IS BASED.
2.
THAT THE RESPONDENT COMMITTED GRAVE ABUSE
OF DISCRETION, AMOUNTING TO LACK OF JURISDICTION, IN
DENYING PETITIONERS MOTION TO DISMISS.
3.
THAT THE RESPONDENT COMELEC COMMITTED
GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK OF
JURISDICTION, IN PROMULGATING THE RESOLUTION OF
APRIL 16, 1982 THROUGH THE ACT OF ONLY ONE MEMBER
OF A DIVISION.
Petitioners are obviously misled by the title of Rule 35 of the
Rules of Court, "Judgment on Demurrer to Evidence." Said
Rule, consisting of only one section, allows the defendant to
move for dismissal of the case after the plaintiff has
presented his evidence on the ground of insufficiency of
evidence, and provides for the effects of the dismissal or
non-dismissal, as the case may be, on the right of the
defendant to present his cause. Otherwise stated, it
authorizes a judgment on the merits of the case without the
defendant having to submit evidence on his part as he
would ordinarily have to do, if it is shown by plaintiffs
evidence that the latter is not entitled to the relief sought.
The demurrer, therefore, is an aid or instrument for the
expeditious termination of an action, similar to a motion to
dismiss, which the court or tribunal may either grant or
deny.chanrobles
virtualawlibrary
chanrobles.com:chanrobles.com.ph
It is thus apparent that the requirement of Section 1 of Rule
36 1 would only apply if the demurrer is granted, for in this
event, there would in fact be an adjudication on the merits
of the case, leaving nothing more to be done, except
perhaps to interpose an appeal. However, a denial of the
demurrer is not a final judgment, but merely interlocutory in

character as it does not finally dispose of the case, the


defendant having yet the right to present his evidence, as
provided for under Section 1 of Rule 35.
In Estrada v. Sto. Domingo, 2 We have ruled that." . .
Section 12, Article VIII, Constitution and Section 1, Rule 36,
Rules of Court, which require express findings of fact in a
decision, have no application to the questioned Order. Here
involved is not a decision on the merits but a mere order
upon a motion to reconsider. The judge could simply dish
out a routine capsule-form order Denied for lack of merit
or motion for reconsideration denied. And yet, that kind of
order would serve to immunize the judge against an
unlawful neglect-of-duty charge. . . ."cralaw virtua1aw
library
The challenged order being merely an interlocutory order
and not a final judgment or decision, no abuse of discretion
was committed by respondent Comelec in its failure to state
the facts and the law on which its order denying petitioners
demurrer to evidence is based.
The second issue raised by petitioners hardly deserves
serious consideration. It had long been laid to rest in our
Resolutions in G.R. No. 54633, and considering the number
of times petitioners have succeeded in suspending the
proceedings before the COMELEC, their insistence on
raising said issue over and over again is an obvious dilatory
tactic intended to frustrate this Courts directive to
respondent COMELEC to have the case heard and
terminated as expeditiously as possible.
Neither is there merit in petitioners third contention that
the order of April 16, 1982 signed for the division by
Presiding Commissioner Luis Lardizabal violated Sec. 3, Art.
XII
c
of
the
Constitution,
which
provides:jgc:chanrobles.com.ph
"SECTION 3.
The Commission on Elections may sit en
banc or in three divisions. All election cases may be heard
and decided by divisions, except contests involving

Members of the National Assembly, which shall be heard


and decided en banc. Unless otherwise provided by law, all
election cases shall be decided within ninety days from the
date of their submission for decision."cralaw virtua1aw
library
As aptly observed by the Solicitor General in his Comment,
"It is plain that this provision refers to a decision on the
merits of the case, where the contending causes of the
parties are decided with finality, one way or the other. The
fallacy of petitioners contention is obvious. Their argument
proceeds from the erroneous premise that the April 16,
1982 resolution is a decision on the merits. Clearly, the said
resolution is merely interlocutory, and being such, the
Presiding Commissioner of the Division is competent to sign
said resolution alone (Resolution No. 9805 dated June 18,
1980 of the Comelec).chanrobles virtual lawlibrary
WHEREFORE, the petitioner is hereby denied. Costs against
petitioners.
SO ORDERED.

RADIOWEALTH FINANCE COMPANY, petitioner, vs. Spouses


VICENTE and MA. SUMILANG DEL ROSARIO, respondents.
DECISION
PANGANIBAN, J.:
When a demurrer to evidence granted by a trial court is
reversed on appeal, the reviewing court cannot remand the
case for further proceedings. Rather, it should render
judgment on the basis of the evidence proffered by the
plaintiff. Inasmuch as defendants in the present case
admitted the due execution of the Promissory Note both in
their Answer and during the pretrial, the appellate court
should have rendered judgment on the bases of that Note
and on the other pieces of evidence adduced during the
trial.

FOR VALUE RECEIVED, on or before the date listed below,


I/We promise to pay jointly and severally Radiowealth
Finance Co. or order the sum of ONE HUNDRED THIRTY
EIGHT THOUSAND NINE HUNDRED FORTY EIGHT Pesos
(P138,948.00) without need of notice or demand, in
installments as follows:
P11,579.00 payable for 12 consecutive months starting on
________ 19__ until the amount of P11,579.00 is fully paid.
Each installment shall be due every ____ day of each month.
A late payment penalty charge of two and a half (2.5%)
percent per month shall be added to each unpaid
installment from due date thereof until fully paid.
xxxxxxxxx

The Case
Before us is a Petition for Review on Certiorari of the
December 9, 1997 Decision[1] and the May 3, 1999
Resolution[2] of the Court of Appeals in CA-GR CV No.
47737. The assailed Decision disposed as follows:
WHEREFORE, premises considered, the appealed order
(dated November 4, 1994) of the Regional Trial Court
(Branch XIV) in the City of Manila in Civil Case No. 93-66507
is hereby REVERSED and SET ASIDE. Let the records of this
case be remanded to the court a quo for further
proceedings. No pronouncement as to costs.[3]
The assailed Resolution denied the petitioners Partial
Motion for Reconsideration.[4]
The Facts
The facts of this case are undisputed. On March 2, 1991,
Spouses Vicente and Maria Sumilang del Rosario (herein
respondents), jointly and severally executed, signed and
delivered in favor of Radiowealth Finance Company (herein
petitioner), a Promissory Note[5] for P138,948. Pertinent
provisions of the Promissory Note read:

It is hereby agreed that if default be made in the payment


of any of the installments or late payment charges thereon
as and when the same becomes due and payable as
specified above, the total principal sum then remaining
unpaid, together with the agreed late payment charges
thereon, shall at once become due and payable without
need of notice or demand.
xxxxxxxxx
If any amount due on this Note is not paid at its maturity
and this Note is placed in the hands of an attorney or
collection agency for collection, I/We jointly and severally
agree to pay, in addition to the aggregate of the principal
amount and interest due, a sum equivalent to ten (10%) per
cent thereof as attorneys and/or collection fees, in case no
legal action is filed, otherwise, the sum will be equivalent to
twenty-five (25%) percent of the amount due which shall
not in any case be less than FIVE HUNDRED PESOS
(P500.00) plus the cost of suit and other litigation expenses
and, in addition, a further sum of ten per cent (10%) of said
amount which in no case shall be less than FIVE HUNDRED
PESOS (P500.00), as and for liquidated damages.[6]

Thereafter, respondents defaulted on the monthly


installments. Despite repeated demands, they failed to pay
their obligations under their Promissory Note.
On June 7, 1993, petitioner filed a Complaint[7] for the
collection of a sum of money before the Regional Trial Court
of Manila, Branch 14.[8] During the trial, Jasmer Famatico,
the credit and collection officer of petitioner, presented in
evidence the respondents check payments, the demand
letter dated July 12, 1991, the customers ledger card for the
respondents, another demand letter and Metropolitan Bank
dishonor slips. Famatico admitted that he did not have
personal knowledge of the transaction or the execution of
any of these pieces of documentary evidence, which had
merely been endorsed to him.
On July 4, 1994, the trial court issued an Order terminating
the presentation of evidence for the petitioner.[9] Thus, the
latter formally offered its evidence and exhibits and rested
its case on July 5, 1994.
Respondents filed on July 29, 1994 a Demurrer to
Evidence[10] for alleged lack of cause of action. On
November 4, 1994, the trial court dismissed[11] the
complaint for failure of petitioner to substantiate its claims,
the evidence it had presented being merely hearsay.

Promissory Note, but also of the demand letter dated July


12, 1991. Even if the petitioners witness had no personal
knowledge of these documents, they would still be
admissible if the purpose for which [they are] produced is
merely to establish the fact that the statement or document
was in fact made or to show its tenor[,] and such fact or
tenor is of independent relevance.
Besides, Articles 19 and 22 of the Civil Code require that
every person must -- in the exercise of rights and in the
performance of duties -- act with justice, give all else their
due, and observe honesty and good faith. Further, the rules
on evidence are to be liberally construed in order to
promote their objective and to assist the parties in
obtaining just, speedy and inexpensive determination of an
action.
Issue
The petitioner raises this lone issue:
The Honorable Court of Appeals patently erred in ordering
the remand of this case to the trial court instead of
rendering judgment on the basis of petitioners evidence.
[13]

On appeal, the Court of Appeals (CA) reversed the trial


court and remanded the case for further proceedings.

For an orderly discussion, we shall divide the issue into two


parts: (a) legal effect of the Demurrer to Evidence, and (b)
the date when the obligation became due and demandable.

Hence, this recourse.[12]

The Courts Ruling

Ruling of the Court of Appeals

The Petition has merit. While the CA correctly reversed the


trial court, it erred in remanding the case "for further
proceedings."

According to the appellate court, the judicial admissions of


respondents established their indebtedness to the
petitioner, on the grounds that they admitted the due
execution of the Promissory Note, and that their only
defense was the absence of an agreement on when the
installment payments were to begin. Indeed, during the
pretrial, they admitted the genuineness not only of the

Consequences of a Reversal, on Appeal, of a Demurrer to


Evidence
Petitioner contends that if a demurrer to evidence is
reversed on appeal, the defendant should be deemed to

have waived the right to present evidence, and the


appellate court should render judgment on the basis of the
evidence submitted by the plaintiff. A remand to the trial
court "for further proceedings" would be an outright
defiance of Rule 33, Section 1 of the 1997 Rules of Court.
On the other hand, respondents argue that the petitioner
was not necessarily entitled to its claim, simply on the
ground that they lost their right to present evidence in
support of their defense when the Demurrer to Evidence
was reversed on appeal. They stress that the CA merely
found them indebted to petitioner, but was silent on when
their obligation became due and demandable.
The old Rule 35 of the Rules of Court was reworded under
Rule 33 of the 1997 Rules, but the consequence on appeal
of a demurrer to evidence was not changed. As amended,
the pertinent provision of Rule 33 reads as follows:
SECTION 1. Demurrer to evidence.After the plaintiff has
completed the presentation of his evidence, the defendant
may move for dismissal on the ground that upon the facts
and the law the plaintiff has shown no right to relief. If his
motion is denied, he shall have the right to present
evidence. If the motion is granted but on appeal the order
of dismissal is reversed he shall be deemed to have waived
the right to present evidence.[14]
Explaining the consequence of a demurrer to evidence, the
Court in Villanueva Transit v. Javellana[15] pronounced:
The rationale behind the rule and doctrine is simple and
logical. The defendant is permitted, without waiving his
right to offer evidence in the event that his motion is not
granted, to move for a dismissal (i.e., demur to the plaintiffs
evidence) on the ground that upon the facts as thus
established and the applicable law, the plaintiff has shown
no right to relief. If the trial court denies the dismissal
motion, i.e., finds that plaintiffs evidence is sufficient for an
award of judgment in the absence of contrary evidence, the
case still remains before the trial court which should then

proceed to hear and receive the defendants evidence so


that all the facts and evidence of the contending parties
may be properly placed before it for adjudication as well as
before the appellate courts, in case of appeal. Nothing is
lost. The doctrine is but in line with the established
procedural precepts in the conduct of trials that the trial
court liberally receive all proffered evidence at the trial to
enable it to render its decision with all possibly relevant
proofs in the record, thus assuring that the appellate courts
upon appeal have all the material before them necessary to
make a correct judgment, and avoiding the need of
remanding the case for retrial or reception of improperly
excluded evidence, with the possibility thereafter of still
another appeal, with all the concomitant delays. The rule,
however, imposes the condition by the same token that if
his demurrer is granted by the trial court, and the order of
dismissal is reversed on appeal, the movant losses his right
to present evidence in his behalf and he shall have been
deemed to have elected to stand on the insufficiency of
plaintiffs case and evidence. In such event, the appellate
court which reverses the order of dismissal shall proceed to
render judgment on the merits on the basis of plaintiffs
evidence. (Underscoring supplied)
In other words, defendants who present a demurrer to the
plaintiffs evidence retain the right to present their own
evidence, if the trial court disagrees with them; if the trial
court agrees with them, but on appeal, the appellate court
disagrees with both of them and reverses the dismissal
order, the defendants lose the right to present their own
evidence.[16] The appellate court shall, in addition, resolve
the case and render judgment on the merits, inasmuch as a
demurrer aims to discourage prolonged litigations.[17]
In the case at bar, the trial court, acting on respondents
demurrer to evidence, dismissed the Complaint on the
ground that the plaintiff had adduced mere hearsay
evidence. However, on appeal, the appellate court reversed
the trial court because the genuineness and the due
execution of the disputed pieces of evidence had in fact
been admitted by defendants.

Applying Rule 33, Section 1 of the 1997 Rules of Court, the


CA should have rendered judgment on the basis of the
evidence submitted by the petitioner. While the appellate
court correctly ruled that the documentary evidence
submitted by the [petitioner] should have been allowed and
appreciated xxx, and that the petitioner presented quite a
number of documentary exhibits xxx enumerated in the
appealed order,[18] we agree with petitioner that the CA
had sufficient evidence on record to decide the collection
suit. A remand is not only frowned upon by the Rules, it is
also logically unnecessary on the basis of the facts on
record.
Due and Demandable Obligation
Petitioner claims that respondents are liable for the whole
amount of their debt and the interest thereon, after they
defaulted on the monthly installments.
Respondents, on the other hand, counter that the
installments were not yet due and demandable. Petitioner
had allegedly allowed them to apply their promotion
services for its financing business as payment of the
Promissory Note. This was supposedly evidenced by the
blank space left for the date on which the installments
should have commenced.[19] In other words, respondents
theorize that the action for immediate enforcement of their
obligation is premature because its fulfillment is dependent
on the sole will of the debtor. Hence, they consider that the
proper court should first fix a period for payment, pursuant
to Articles 1180 and 1197 of the Civil Code.
This contention is untenable. The act of leaving blank the
due date of the first installment did not necessarily mean
that the debtors were allowed to pay as and when they
could. If this was the intention of the parties, they should
have so indicated in the Promissory Note. However, it did
not reflect any such intention.

On the contrary, the Note expressly stipulated that the debt


should be amortized monthly in installments of P11,579 for
twelve consecutive months. While the specific date on
which each installment would be due was left blank, the
Note clearly provided that each installment should be
payable each month.
Furthermore, it also provided for an acceleration clause and
a late payment penalty, both of which showed the intention
of the parties that the installments should be paid at a
definite date. Had they intended that the debtors could pay
as and when they could, there would have been no need for
these two clauses.
Verily, the contemporaneous and subsequent acts of the
parties manifest their intention and knowledge that the
monthly installments would be due and demandable each
month.[20] In this case, the conclusion that the installments
had already became due and demandable is bolstered by
the fact that respondents started paying installments on the
Promissory Note, even if the checks were dishonored by
their drawee bank. We are convinced neither by their
avowals that the obligation had not yet matured nor by
their claim that a period for payment should be fixed by a
court.
Convincingly, petitioner has established not only a cause of
action against the respondents, but also a due and
demandable obligation. The obligation of the respondents
had matured and they clearly defaulted when their checks
bounced. Per the acceleration clause, the whole debt
became due one month (April 2, 1991) after the date of the
Note because the check representing their first installment
bounced.
As for the disputed documents submitted by the petitioner,
the CA ruling in favor of their admissibility, which was not
challenged by the respondents, stands. A party who did not
appeal cannot obtain affirmative relief other than that
granted in the appealed decision.[21]

It should be stressed that respondents do not contest the


amount of the principal obligation. Their liability as
expressly stated in the Promissory Note and found by the
CA is P13[8],948.00[22] which is payable in twelve (12)
installments at P11,579.00 a month for twelve (12)
consecutive months. As correctly found by the CA, the
"ambiguity" in the Promissory Note is clearly attributable to
human error.[23]
Petitioner, in its Complaint, prayed for 14% interest per
annum from May 6, 1993 until fully paid. We disagree. The
Note already stipulated a late payment penalty of 2.5
percent monthly to be added to each unpaid installment
until fully paid. Payment of interest was not expressly
stipulated in the Note. Thus, it should be deemed included
in such penalty.
In addition, the Note also provided that the debtors would
be liable for attorneys fees equivalent to 25 percent of the
amount due in case a legal action was instituted and 10
percent of the same amount as liquidated damages.
Liquidated damages, however, should no longer be imposed
for being unconscionable.[24] Such damages should also be
deemed included in the 2.5 percent monthly penalty.
Furthermore, we hold that petitioner is entitled to attorneys
fees, but only in a sum equal to 10 percent of the amount
due which we deem reasonable under the proven facts.[25]
The Court deems it improper to discuss respondents' claim
for moral and other damages. Not having appealed the CA
Decision, they are not entitled to affirmative relief, as
already explained earlier.[26]
WHEREFORE, the Petition is GRANTED. The appealed
Decision is MODIFIED in that the remand is SET ASIDE and
respondents are ordered TO PAY P138,948, plus 2.5 percent
penalty charge per month beginning April 2, 1991 until fully
paid, and 10 percent of the amount due as attorneys fees.
No costs.
SO ORDERED.

SECOND DIVISION

CASENT REALTY DEVELOPMENT CORP.,


Petitioner,

On appeal to this Court through Rule 45 of the Rules of


Court is the March 29, 2001 Decision[1] and November 7,
2001 Resolution[2] of the Court of Appeals (CA) in CA-G.R.
CV No. 63979 entitled Philbanking Corporation v. Casent
Realty Development Corporation. The CA reversed the May
12, 1999 Order[3] of the Makati City Regional Trial Court
(RTC), Branch 145 in Civil Case No. 93-2612, which granted
petitioners demurrer to evidence and dismissed the
complaint filed by respondent.

- versus -

PHILBANKING
CORPORATION,
Respondent.

The Facts

G.R. No. 150731

In 1984, petitioner Casent Realty Development Corporation


executed two promissory notes in favor of Rare Realty
Corporation (Rare Realty) involving the amounts of PhP
300,000 (PN No. 84-04) and PhP 681,500 (PN No. 84-05). It
was agreed in PN No. 84-04 that the loan it covered would
earn an interest of 36% per annum and a penalty of 12% in
case of non-payment by June 27, 1985, while the loan
covered by PN No. 84-05 would earn an interest of 18% per
annum and 12% penalty if not paid by June 25, 1985.[4] On
August 8, 1986, these promissory notes were assigned to
respondent Philbanking Corporation through a Deed of
Assignment.[5]

Present:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
Promulgated:

The facts according to the appellate court are as follows:

September 14, 2007


x----------------------------------------------------------------------------------------x
DECISION

Respondent alleged that despite demands, petitioner failed


to pay the promissory notes upon maturity such that its
obligation already amounted to PhP 5,673,303.90 as of July
15, 1993. Respondent filed on July 20, 1993 a complaint
before the Makati City RTC for the collection of said amount.
In its Answer,[6] petitioner raised the following as
special/affirmative defenses:

VELASCO, JR., J.:


1.
The complaint stated no cause of action or if
there was any, the same was barred by estoppel, statute of

frauds, statute of limitations, laches, prescription, payment,


and/or release;

obliterated petitioners obligation covered by the promissory


notes, the bank had no right to collect anymore.

2.
On August 27, 1986, the parties executed a
Dacion en Pago[7] (Dacion) which ceded and conveyed
petitioners property in Iloilo City to respondent, with the
intention of totally extinguishing petitioners outstanding
accounts with respondent. Petitioner presented a
Confirmation Statement[8] dated April 3, 1989 issued by
respondent stating that petitioner had no loans with the
bank as of December 31, 1988.

Respondent subsequently filed an Opposition[12] which


alleged that: (1) the grounds relied upon by petitioner in its
demurrer involved its defense and not insufficiency of
evidence; (2) the Dacion and Confirmation Statement had
yet to be offered in evidence and evaluated; and (3) since
respondent failed to file a Reply, then all the new matters
alleged in the Answer were deemed controverted.[13]

3.
Petitioner complied with the condition in the
Dacion regarding the repurchase of the property since the
obligation was fully paid. Respondent sent confirmation
statements in the latter months of 1989, which showed that
petitioner had no more outstanding loan; and
4.
Assuming that petitioner still owed respondent,
the latter was already estopped since in October 1988, it
reduced its authorized capital stock by 50% to wipe out a
deficit of PhP 41,265,325.12.[9]
Thus, petitioner, by way of compulsory counterclaim,
alleged that it made an overpayment of approximately PhP
4 million inclusive of interest based on Central Bank
Reference Lending Rates on dates of overpayment.
Petitioner further claimed moral and exemplary damages
and attorneys fee, amounting to PhP 4.5 million plus the
costs of suit as a consequence of respondents insistence on
collecting.[10]
The parties failed to reach an amicable settlement during
the pre-trial conference. Thereafter, respondent presented
its evidence and formally offered its exhibits. Petitioner then
filed a Motion for Judgment on Demurrer to the Evidence,
[11] pointing out that the plaintiffs failure to file a Reply to
the Answer which raised the Dacion and Confirmation
Statement constituted an admission of the genuineness and
execution of said documents; and that since the Dacion

The trial court ruled in favor of petitioner and dismissed the


complaint through the May 12, 1999 Order, the dispositive
portion of which reads:
WHEREFORE, premises considered[,] finding defendants
Motion For Judgment On Demurrer To The Evidence to be
meritorious[,] the same is hereby GRANTED. Consequently,
considering that the obligation of the defendant to the
plaintiff having been extinguish[ed] by a Dacion en Pago
duly executed by said parties, the instant complaint is
hereby DISMISSED, with prejudice. Without Cost.[14]
The Ruling of the Court of Appeals
On appeal, respondent alleged that the trial court gravely
erred because the promissory notes were not covered by
the Dacion, and that respondent was able to prove its
causes of action and right to relief by overwhelming
preponderance of evidence. It explained that at the time of
execution of the Dacion, the subject of the promissory notes
was the indebtedness of petitioner to Rare Realty and not to
the Bankthe party to the Dacion. It was only in 1989 after
Rare Realty defaulted in its obligation to respondent when
the latter enforced the security provided under the Deed of
Assignment by trying to collect from petitioner, because it
was only then that petitioner became directly liable to
respondent. It was also for this reason that the April 3, 1989
Confirmation Statement stated that petitioner had no
obligations to repondent as of December 31, 1988. On the

other hand, petitioner claimed that the Deed of Assignment


provided that Rare Realty lost its rights, title, and interest to
directly proceed against petitioner on the promissory notes
since these were transferred to respondent. Petitioner
reiterated that the Dacion covered all conceivable amounts
including the promissory notes.[15]
The appellate court ruled that under the Rules of Civil
Procedure, the only issue to be resolved in a demurrer is
whether the plaintiff has shown any right to relief under the
facts presented and the law. Thus, it held that the trial court
erred when it considered the Answer which alleged the
Dacion, and that its genuineness and due execution were
not at issue. It added that the court a quo should have
resolved whether the two promissory notes were covered
by the Dacion, and that since petitioners demurrer was
granted, it had already lost its right to present its evidence.
[16]
The CA found that under the Deed of Assignment,
respondent clearly had the right to proceed against the
promissory notes assigned by Rare Realty. Thus, the CA
ruled, as follows:
WHEREFORE, premises considered, the Order dated May 12,
1999 of the Regional Trial Court, National Capital Judicial
Region, Branch 145, Makati City is hereby REVERSED and
SET ASIDE.
Judgment is hereby entered ORDERING [petitioner] Casent
Realty [Development] Corporation to:
1.
pay [respondent] Philbanking Corporation the amount
of P300,000.00 with an interest of 36% per annum and a
penalty of 12% for failure to pay the same on its maturity
date, June 27, 1985 as stipulated in Promissory Note No. 8404;
2.
pay [respondent] Philbanking Corporation the amount
of P681,500.00 with an interest of 18% per annum and a
penalty of 12% for failure to pay the same on its maturity

date, June 25, 1985 as stipulated in Promissory Note No. 8405; and
3.
pay [respondent] Philbanking Corporation, the amount
representing 25% of total amount due as attorneys fee as
stipulated in the promissory notes.
SO ORDERED.[17]
Petitioner filed a Motion for Reconsideration[18] which was
denied by the CA in its November 7, 2001 Resolution.[19]
The Issues
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
EXCLUDING THE PETITIONERS AFFIRMATIVE DEFENSES IN
ITS ANSWER IN RESOLVING A DEMURRER TO EVIDENCE;
AND
WHETHER OR NOT PETITIONER IS LIABLE TO PAY THE
RESPONDENT
In other words, the questions posed by this case are:
1.
Does respondents failure to file a Reply and deny the
Dacion and Confirmation Statement under oath constitute a
judicial admission of the genuineness and due execution of
these documents?
2.
Should judicial admissions be considered in resolving a
demurrer to evidence? If yes, are the judicial admissions in
this case sufficient to warrant the dismissal of the
complaint?
Petitioner asserts that its obligation to pay under the
promissory notes was already extinguished as evidenced by
the Dacion and Confirmation Statement. Petitioner submits
that when it presented these documents in its Answer,
respondent should have denied the same under oath. Since

respondent failed to file a Reply, the genuineness and due


execution of said documents were deemed admitted, thus
also admitting that the loan was already paid. On the other
hand, respondent states that while it failed to file a Reply,
all the new matters were deemed controverted pursuant to
Section 10, Rule 6 of the Rules of Court. Also, the loan
which was covered by the Dacion refers to another loan of
petitioner amounting to PhP 3,921,750 which was obtained
directly from the respondent as of August 1986.[20]
Furthermore, petitioner argued that assuming respondent
admitted the genuineness and due execution of the Dacion
and Confirmation Statement, said admission was not allencompassing as to include the allegations and defenses
pleaded in petitioners Answer.
The Courts Ruling
The petition is partly meritorious.
Rule 33, Section 1 of the 1997 Rules of Civil Procedure
provides:
Section 1. Demurrer to evidence.After the plaintiff has
completed the presentation of his evidence, the defendant
may move for dismissal on the ground that upon the facts
and the law the plaintiff has shown no right to relief. If his
motion is denied, he shall have the right to present
evidence. If the motion is granted but on appeal the order
of dismissal is reversed he shall be deemed to have waived
the right to present evidence.
In Gutib v. Court of Appeals, we defined a demurrer to
evidence as an objection by one of the parties in an action,
to the effect that the evidence which his adversary
produced is insufficient in point of law, whether true or not,
to make out a case or sustain the issue.[21]
What should be resolved in a motion to dismiss based on a
demurrer to evidence is whether the plaintiff is entitled to
the relief based on the facts and the law. The evidence
contemplated by the rule on demurrer is that which

pertains to the merits of the case, excluding technical


aspects such as capacity to sue.[22] However, the plaintiffs
evidence should not be the only basis in resolving a
demurrer to evidence. The facts referred to in Section 8
should include all the means sanctioned by the Rules of
Court in ascertaining matters in judicial proceedings. These
include judicial admissions, matters of judicial notice,
stipulations made during the pre-trial and trial, admissions,
and presumptions, the only exclusion being the defendants
evidence.
Petitioner points out that the defense of Dacion and
Confirmation Statement, which were submitted in the
Answer, should have been specifically denied under oath by
respondent in accordance with Rule 8, Section 8 of the
Rules of Court:
Section 8. How to contest such documents.When an action
or defense is founded upon a written instrument, copied in
or attached to the corresponding pleading as provided in
the preceding section, the genuineness and due execution
of the instrument shall be deemed admitted unless the
adverse party, under oath, specifically denies them, and
sets forth, what he claims to be the facts; but the
requirement of an oath does not apply when the adverse
party does not appear to be a party to the instrument or
when compliance with an order for an inspection of the
original instrument is refused.
Since respondent failed to file a Reply, in effect, respondent
admitted the genuineness and due execution of said
documents. This judicial admission should have been
considered by the appellate court in resolving the demurrer
to evidence. Rule 129, Section 4 of the Rules of Court
provides:
Section 4. Judicial admissions.An admission, verbal or
written, made by a party in the course of the proceeding in
the same case, does not require proof. The admission may

be contradicted only by showing that it was made through


palpable mistake or that no such admission was made.
On appeal to the CA, respondent claimed that even though
it failed to file a Reply, all the new matters alleged in the
Answer are deemed controverted anyway, pursuant to Rule
6, Section 10:
Section 10. Reply.A reply is a pleading, the office or function
of which is to deny, or allege facts in denial or avoidance of
new matters alleged by way of defense in the answer and
thereby join or make issue as to such new matters. If a
party does not file such reply, all the new matters alleged in
the answer are deemed controverted.

were not falsified and/or whether there was no substantial


alteration to the document. While due execution refers to
whether the document was signed by one with authority.
[25]
The more important issue now is whether the Dacion and
Confirmation Statement sufficiently prove that petitioners
liability was extinguished. Respondent asserts that the
admission of the genuineness and due execution of the
documents in question is not all encompassing as to include
admission of the allegations and defenses pleaded in
petitioners Answer. In executing the Dacion, the intention of
the parties was to settle only the loans of petitioner with
respondent, not the obligation of petitioner arising from the
promissory notes that were assigned by Rare Realty to
respondent.
We AGREE.

We agree with petitioner. Rule 8, Section 8 specifically


applies to actions or defenses founded upon a written
instrument and provides the manner of denying it. It is
more controlling than Rule 6, Section 10 which merely
provides the effect of failure to file a Reply. Thus, where the
defense in the Answer is based on an actionable document,
a Reply specifically denying it under oath must be made;
otherwise, the genuineness and due execution of the
document will be deemed admitted.[23] Since respondent
failed to deny the genuineness and due execution of the
Dacion and Confirmation Statement under oath, then these
are deemed admitted and must be considered by the court
in resolving the demurrer to evidence. We held in Philippine
American General Insurance Co., Inc. v. Sweet Lines, Inc.
that [w]hen the due execution and genuineness of an
instrument are deemed admitted because of the adverse
partys failure to make a specific verified denial thereof, the
instrument need not be presented formally in evidence for
it may be considered an admitted fact.[24]
In any case, the CA found that:
From the facts of the case, the genuineness and due
execution of the Dacion en Pago were never put to issue.
Genuineness merely refers to the fact that the signatures

Admission of the genuineness and due execution of the


Dacion and Confirmation Statement does not prevent the
introduction of evidence showing that the Dacion excludes
the promissory notes. Petitioner, by way of defense, should
have presented evidence to show that the Dacion includes
the promissory notes.
The promissory notes matured in June 1985, and Rare
Realty assigned these promissory notes to respondent
through a Deed of Assignment dated August 8, 1986. The
Deed of Assignment provides, thus:
Rare Realty Corporation, a corporation duly organized and
existing in accordance with law, with office at 8th Floor
Philbanking Building, Ayala Ave., Makati, Metro Manila
(herein called Assignor) in consideration of the sum of
THREE MILLION SEVEN HUNDRED NINETY THOUSAND &
00/100 pesos [PhP 3,790,000.00] and as security fee or in
the payment of the sum, obtained or to be obtained as loan
or credit accommodation of whatever form or nature from
the [PHILBANKING] CORPORATION, with office at Ayala Ave.,
Makati, Metro Manila (herein called Assignee), including
renewals or extensions of such loan or credit

accommodation, now existing or hereinafter incurred, due


or to become due, whether absolute or contingent, direct or
indirect, and whether incurred by the Assignor as principal,
guarantor, surety, co-maker, or in any other capacity,
including interest, charges, penalties, fees, liquidated
damage, collection expenses and attorneys fee, the
Assignor hereby assigns, transfers and conveys to Assignee
all its rights, title and interest in and to: (a) contracts under
which monies are or will be due to Assignor, (b) moneys due
or to be due thereunder, or (c) letters of credit and/or
proceeds or moneys arising from negotiations under such
credits, all which are herein called moneys or receivables
assigned or assigned moneys or receivables, and are
attached, or listed and described in the Attached Annex A
(for contracts) or Annex B (for letters of credit).[26]
It is clear from the foregoing deed that the promissory
notes were given as security for the loan granted by
respondent to Rare Realty. Through the Deed of
Assignment, respondent stepped into the shoes of Rare
Realty as petitioners creditor.
Respondent alleged that petitioner obtained a separate loan
of PhP 3,921,750. Thus, when petitioner and respondent
executed the Dacion on August 27, 1986, what was then
covered was petitioners loan from the bank. The Dacion
provides, thus:
NOW, THEREFORE, in consideration of the foregoing
premises, the DEBTOR hereby transfers and conveys in
favor of the BANK by way of Dacion en Pago, the abovedescribed property in full satisfaction of its outstanding
indebtedness in the amount of P3,921,750.00 to the BANK,
subject to x x x terms and conditions.[27] (Emphasis
supplied.)
The language of the Dacion is unequivocalthe property
serves in full satisfaction of petitioners own indebtedness to
respondent, referring to the loan of PhP 3,921,750. For this
reason, the bank issued a Confirmation Statement saying

that petitioner has no unpaid obligations with the bank as of


December 31, 1988.
In 1989, however, Rare Realty defaulted in its payment to
respondent. Thus, respondent proceeded against the
security assigned to it, that is, the promissory notes issued
by the petitioner. Under these promissory notes, petitioner
is liable for the amount of PhP 300,000 with an interest of
36% per annum and a penalty of 12% for failure to pay on
the maturity date, June 27, 1985; and for the amount of PhP
681,500 with an interest of 18% per annum and a penalty
of 12% for failure to pay on the maturity date, June 25,
1985.
WHEREFORE, the March 29, 2001 Decision and November
7, 2001 Resolution of the CA are AFFIRMED. Costs against
petitioner.
SO ORDERED.