RULE 2 Civpro

8/13/2019 RULE 2 Civpro

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Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 128349 September 25, 1998

BACHRACH CORPORATION, petitioner,vs.THE HONORABLE COURT OF APPEALS and PHILIPPINE PORTSAUTHORITY, respondents.

VITUG, J. :

Bachrach Corporation ("Bachrach"), in its petition for review on certiorari,questions the decision of the Court of Appeals in CA-G.R. SP No. 38763,promulgated on 12 November 1996, the dispositive part of which reading

WHEREFORE, the petition is granted. The assailed RTC

orders art hereby NULLIFIED and SET ASIDE and publicrespondent is ordered to dismiss the subject actionbefore him under Civil Case No. 95-73399. Nopronouncement as to costs. 1

on several counts;viz:

I. THE COURT OF APPEALS GRAVELY ERRED IN NOTDISMISSING CA-G.R. SP NO. 38673 DESPITE THE FACT THATA SIMILAR PETITION EARLIER FILED BY PPA WAS DISMISSEDFOR BEING INSUFFICIENT NOT ONLY IN FORM BUT ALSO INSUBSTANCE WHICH DISMISSAL CONSTITUTESRESJUDICATA INSOFAR AS THE ISSUES RAISED THEREIN ARECONCERNED.

II. THE COURT OF APPEALS GRAVELY ERRED IN RULINGTHAT THE DECISION IN THE UNLAWFUL DETAINER CASECONSTITUTESRES JUDICATA WHICH BARS THE SPECIFICPERFORMANCE CASE.

III. THE COURT CF APPEALS GRAVELY ERRED IN RULINGTHAT THE FILING OF THE SPECIFIC PERFORMANCE CASEVIOLATES THE RULE AGAINST FORUM SHOPPING.

IV. THE COURT OF APPEALS GRAVELY ERRED IN RULINGTHAT THE WRIT OF PRELIMINARY INJUNCTION ISSUED BYTHE TRIAL COURT CONSTITUTES INTERFERENCE WITH ITSJUDGMENT IN THE UNLAWFUL DETAINER CASE.

V. THE COURT OF APPEALS GRAVELY ERRED IN ORDERING

THE DISMISSAL OF CIVIL CASE NO. 95-73399 THEREBYRULING ON THE MERITS OF THE CASE WHEN IN FACT, THEONLY ISSUES FOR ITS RESOLUTION WERE THE PROPRIETYOF THE WRIT OF PRELIMINARY INJUNCTION ISSUED BY THETRIAL COURT AND THE DENIAL OF PPA'S MOTION FORPRELIMINARY HEARING ON AFFIRMATIVE DEFENSES.2

It would appear that petitioner corporation entered into two lease contractswith the Philippine government covering two specified areas, Block 180 andBlock 185, located at the Manila Port Area, then under the control andmanagement of the Director of Lands, for a term of ninety-nine years each,the first lease to expire on 19 June 2017 and the other on 14 February 2018.During her tenure, President Corazon Aquino issued Executive Order No.321 transferring the management and administration of the entire Port Areato herein respondent Philippine Ports Authority ("PPA"). Shortly alter its take-over, PPA issued a Memorandum increasing the rental rates of Bachrach by

1,500%. Bachrach refused to pay the substantial increased rates demandedby PPA.

On 23 March 1992, PPA initiated unlawful detainer proceedings, docketedCivil Case No. 138838 of the Metropolitan Trial Court ("MeTC") of Manila,against Bachrach for non-payment of rent. On 27 April 1993, MeTC rendereda decision ordering the eviction of Bachrach from the leased premises.Bachrach appealed to the Regional Trial Court ("RTC") of Manila which, on21 September 1993, affirmed the decision of the lower courtin toto.3

Bachrach elevated the case to the Court of Appeals by way of a petition forreview. On 29 July 1994, the appellate court affirmed the decision of theRTC. A motion for reconsideration was filed by Bachrach; however, theresolution of the motion was put on hold pending submission of acompromise agreement.4When tile parties failed to submit the promisedcompromise agreement, the Court of Appeals, on 15 May 1995, denied

Bachrach's motion for reconsideration. The decision of the appellate court inthe ejectment suit became final and executory on 20 May 1995.5

Meanwhile on 25 March 1995, while the motion for reconsideration was yetpending with the appellate court, Bachrach filed a complaint against PPA withthe Manila RTC, docketed Civil Case No. 95-73399 (hereinafter referred toalso as the specific performance case), for refusing to honor a compromiseagreement said to have been perfected between Bachrach and PPA duringtheir 04 February 1994 conference that superseded the ejectment case. In itscomplaint, Bachrach prayed for specific performance.

On 08 June 1995, PPA filed a motion for a writ of execution/garnishment inthe ejectment case. The next day, 09 June 1995, Bachrach filed anapplication in the specific performance case for the issuance of a temporaryrestraining order and/or a writ of preliminary injunction to enjoin the MeTCfrom issuing the writ of execution/garnishment. PPA countered by filling amotion for preliminary hearing on its affirmative defenses along the samegrounds mentioned in its motion to dismiss the specific performance case, towit: (a) the pendency of another action between the same parties for thesame cause; (b) the violation of the anti-forum-shopping rule; (c) thecomplaint's lack of cause of action; and (d) the unenforceable character ofthe compromise agreement invoked by Bachrach. On 13 July 1995, the trialcourt issued an omnibus order, granting the application of Bachrach for a writof preliminary injunction, in this tenor

PREMISES CONSIDERED, this Court is of the opinion and soholds (1) that plaintiff (Bachrach) is entitled to the injunctive relief

prayed for and upon the posting of a bond in the amount ofP300,000.00, let a writ of preliminary injunction be issued enjoiningthe defendant (PPA), the Presiding Judge of the Metropolitan TrialCourt of Manila, Branch 2 from issuing a writ ofexecution/garnishment in Civil Case No. 238838-CV entitled"Philippine Ports Authority vs. Bachrach Corporation"; (2)lifting/setting aside the order dated June 5, 1995 and (3) denyingdefendant's motion for a preliminary hearing on affirmativedefenses. 6

PPA moved for reconsideration of the above order but the trialcourt denied the plea in its order of 29 August 1995.

On 25 September 1995, PPA filed a petition forcertiorariand prohibition, withapplication for the issuance of a temporary restraining order and/or writ of

preliminary injunction, docketed CA-G.R. SP No. 36508, before the Court ofAppeals. The petition was dismissed by resolution, dated 28 September1995, of the appellate court for being insufficient in form and substance, i.e.,the failure of PPA to properly attach a certified true copy each of the assailedorder of 13 July 1995 and 29 August 1995 of the trial court. PPA received on05 October 19957a copy of the resolution, dated 28 September 1995, of theappellate court. Undaunted, PPA filed a new petition on 11 October 1995,now evidently in proper form, asseverating that since it had received a copyof the assailed resolution of the trial court only on 07 September 1995, therefiling of the petition with the Court of Appeals within a period of less thantwo months from the date of such receipt was well within the reasonable timerequirement under the Rules for a special civil action forcertiorari. 8In themeantime, the resolution, dated 28 September 1995, of the Court of Appealswhich dismissed CA-G.R. No. 38508 became final on 21 October 1995.9

In its newly filed petition, docketed CA-G.R. SP No. 38673, PPA invoked the

following grounds for its allowance:

I. That respondent judge acted without, or in excess ofjurisdiction, or with grave abuse of discretion when itissued a writ of preliminary injunction against the finaland executory resolution of the Honorable Court ofAppeals Annex "I") inspite of the well-established rulethatcourts are allowed to interferewith each other'sjudgment or decreesby injunction, and worse, in thiscase,against the execution of the judgment of a superioror collegiate court which had already became finalexecutory.

II. That respondent Judge acted without, or in excess ofjurisdiction, or with grave abuse of discretion when it alsodenied petitioner's motion for a preliminary hearing on its

affirmative defenses or in failing to have the case belowoutrightly dismissed on the grounds stated in itsaffirmative defenses, when respondent Judgepronounced there is noidentity as to the causes ofactionbetween the case decided by the Court of Appeals(CA-G.R. SP No. 32630) and the case below (Civil CaseNo. 95-73399) when clearly the causes or action in bothcases revolve on the same issue of possession of thesubject leased premises.

III. That respondent Judge acted without, or in excess ofjurisdiction, or with grave abuse of discretion in refusingto take cognizance (of), abide (by) and acknowledge thefinal judgment of the Court of Appeals which, on saidground alone, is enough justification for the dismissal ofthe case grounded onres judicata. Moreover private


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respondent is guilty of forurn-shopping and the penaltytherefor is the dismissal of its case. 10

On 12 November 1996, the Court of Appeals rendered the assaileddecision nullifying and setting aside the orders of the RTC andordering the latter to dismiss the specific performance case.

The Court finds merit in the instant appeal interposed by petitioner.

Verily, the decisive issue raised by the parties before the Court in the instant

petition is whether or not the specific performance case (Civil Case No.73399) should be held barred by the unlawful detainer case on the groundofres judicata. There are four (4) essential conditions which must concur inorder thatres judicatamay effectively apply,viz: (1) The judgment sought tobar the new action must be final; (2) the decision must have been renderedby a court having jurisdiction over the subject matter and the parties; (3) thedisposition of the case must be a judgment or order on the merits, and (4)there must be between the first and second action identity of parties, identityof subject matter, and identity of causes of action." 11There is no questionabout the fact that all the first three elements ofres judicataare here extant; itis the final condition requiring an identity of parties, of subject matter and ofcauses of action, particularly the last two,i.e., subject matter and cause ofaction, that presents a problem.

A cause of action, broadly defined, is an act or omission of one party inviolation of the legal right of the other. 12The subject matter, on the other

hand, is the item with respect to which the controversy has arisen, orconcerning which the wrong has been done, and it is ordinarily the right, thething, or the contract under dispute. 13 In a breach of contract, the contractviolated is the subject matter while the breach thereof by the obligor is thecause of action. It would appear quite plain then that the RTC did act aptly intaking cognizance of the specific performance case. In Civil Case No. 138838of the MeTC, the unlawful detainer case, the subject matter is the contract oflease between the parties while the breach thereof, arising from petitioner'snon-payment of rentals, constitutes the suit's cause of action. In Civil CaseNo. 73399 of the RTC, the specific performance case, the subject matter isthe compromise agreement allegedly perfected between the same partieswhile the cause of action emanates from the averred refusal of PPA tocomply therewith. The ultimate test in ascertaining the identity of causes ofaction is said to be to look into whether or not the same evidence fullysupports and establishes both the present cause of action and the formercause of action. In the affirmative, the former judgment would be a bar; ifotherwise, then that prior judgment would not serve as such a bar to the

second. 14The evidence needed to establish the cause of action in theunlawful detainer case would be the lease contract and the violation of thatlease by Bachrach. In the specific performance case, what would beconsequential is evidence of the alleged compromise agreement and itsbreach by PPA.

The next thing to ask, of course, would be the question of whether or not theissuance by the trial court of the writ of preliminary injunction was animproper interference with the judgment in the unlawful detainer suit. It couldbe argued that, instead of filing a separate action for specific performance.Bachrach should just have presented the alleged compromise agreement inthe unlawful detainer case. Unfortunately, the refusal of PPA to honor theagreement after its alleged perfection effectively prevented Bachrach fromseeking the coercive power of the court to enforce the compromise in theunlawful detainer case. The situation virtually left Bachrach with but theremedy of independently initiating the specific performance case in a court of

competent jurisdiction. In its challenged decision, the Court of Appeals, on itspart, has said that respondent PPA's prayer for the issuance of a writ ofexecution and garnishment is but the necessary and legal consequence of itsaffirmance of the lower court's decision in the unlawful in the unlawfuldetainer case which has by then become final and executory. 15The ruleindeed is, and has almost invariably been, that after a judgment has gainedfinality, it becomes the ministerial duty of the court to order itsexecution. 16No court, perforce, should interfere by injunction or otherwise torestrain such execution. The rule, however, concededly admits of exceptions;hence, when facts and circumstances later transpire that would renderexecution inequitable or unjust, the interested party may ask a competentcourt to stay its execution or prevent its enforcement. 17So, also, a change inthe situation of the parties can warrant an injunctive relief. 18Evidently, inissuing its orders of 13 July 1995 and 29 August 1995 assailed by PPA in thelatter's petition orcertiorariand prohibition before the Court of Appeals, thetrial court in the case at bar would want to preserve status quopending itsdisposition of the specific performance case and to prevent the case frombeing mooted by an early implementation of the ejectment writ. In holdingdifferently and ascribing to the trial court grave abuse of discretion amountingto lack or excess of jurisdiction, the appellate court, in our considered view,has committed reversible error.

Having reached the above conclusions, other incidental issues raised bypetitioner no longer need to be passed upon.

WHEREFORE, the petition is GRANTED. The decision of the Court ofAppeals is reversed and set aside; Civil Case No. 73399 along with theassailed orders of the Regional Trial Court, aforedated, are herebyreinstated. No costs.

SO ORDERED.


Manila

SECOND DIVISION

G.R. No. 87434 August 5, 1992

PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUMPLASTICS, INC., petitioners,vs.SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORTSERVICES, INC. and HON. COURT OF APPEALS, respondents.

De Lara, De Lunas & Rosales for petitioners.

Carlo L. Aquino for Sweet Lines, Inc.

REGALADO, J .:

A maritime suit 1was commenced on May 12, 1978 by herein PetitionerPhilippine American General Insurance Co., Inc. (Philamgen) and TagumPlastics, Inc. (TPI) against private respondents Sweet Lines, Inc. (SLI) andDavao Veterans Arrastre and Port Services, Inc. (DVAPSI), along with S.C.I.Line (The Shipping Corporation of India Limited) and F.E. Zuellig, Inc., as co-defendants in the court a quo, seeking recovery of the cost of lost ordamaged shipment plus exemplary damages, attorney's fees and costsallegedly due to defendants' negligence, with the following factual backdropyielded by the findings of the court below and adopted by respondent court:

It would appear that in or about March 1977, the vessel SS"VISHVA YASH" belonging to or operated by the foreign commoncarrier, took on board at Baton Rouge, LA, two (2) consignments ofcargoes for shipment to Manila and later for transhipment to DavaoCity, consisting of 600 bags Low Density Polyethylene 631 andanother 6,400 bags Low Density Polyethylene 647, both consigned

to the order of Far East Bank and Trust Company of Manila, witharrival notice to Tagum Plastics, Inc., Madaum, Tagum, DavaoCity. Said cargoes were covered, respectively, by Bills of LadingNos. 6 and 7 issued by the foreign common carrier (Exhs. E andF). The necessary packing or Weight List (Exhs. A and B), as wellas the Commercial Invoices (Exhs. C and D) accompanied theshipment. The cargoes were likewise insured by the TagumPlastics Inc. with plaintiff Philippine American General InsuranceCo., Inc., (Exh. G).

In the course of time, the said vessel arrived at Manila anddischarged its cargoes in the Port of Manila for transhipment toDavao City. For this purpose, the foreign carrier awaited and madeuse of the services of the vessel called M/V "Sweet Love" ownedand operated by defendant interisland carrier.

Subject cargoes were loaded in Holds Nos. 2 and 3 of theinterisland carrier. These were commingled with similar cargoesbelonging to Evergreen Plantation and also Standfilco.

On May 15, 1977, the shipment(s) were discharged from theinterisland carrier into the custody of the consignee. A later surveyconducted on July 8, 1977, upon the instance of the plaintiff, showsthe following:

Of the cargo covered by Bill of Lading No. 25 or (2)6, supposed tocontain 6,400 bags of Low Density Polyethylene 647 originallyinside 160 pallets, there were delivered to the consignee 5,413bags in good order condition. The survey shows shortages,damages and losses to be as follows:

Undelivered/Damaged bags as tallied during dischargefrom vessel-173 bags; undelivered and damaged asnoted and observed whilst stored at the pier-699 bags;and shortlanded-110 bags (Exhs. P and P-1).

Of the 600 bags of Low Density Polyethylene 631, the surveyconducted on the same day shows an actual delivery to theconsignee of only 507 bags in good order condition. Likewise notedwere the following losses, damages and shortages, to wit:

Undelivered/damaged bags and tally sheets duringdischarge from vessel-17 bags.

Undelivered and damaged as noted and observed whilst

stored at the pier-66 bags; Shortlanded-10 bags.


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Therefore, of said shipment totalling 7,000 bags, originallycontained in 175 pallets, only a total of 5,820 bags were deliveredto the consignee in good order condition, leaving a balance of1,080 bags. Such loss from this particular shipment is what any orall defendants may be answerable to (sic).

As already stated, some bags were either shortlanded or weremissing, and some of the 1,080 bags were torn, the contentsthereof partly spilled or were fully/partially emptied, but, worse, thecontents thereof contaminated with foreign matters and thereforecould no longer serve their intended purpose. The position taken

by the consignee was that even those bags which still had somecontents were considered as total losses as the remaining contentswere contaminated with foreign matters and therefore did not (sic)longer serve the intended purpose of the material. Each bag wasvalued, taking into account the customs duties and other taxes paidas well as charges and the conversion value then of a dollar to thepeso, at P110.28 per bag (seeExhs. L and L-1 M and O). 2

Before trial, a compromise agreement was entered into between petitioners,as plaintiffs, and defendants S.C.I. Line and F.E. Zuellig, upon the latter'spayment of P532.65 in settlement of the claim against them. Whereupon, thetrial court in its order of August 12, 1981 3granted plaintiffs' motion to dismissgrounded on said amicable settlement and the case as to S.C.I. Line andF.E. Zuellig was consequently "dismissed with prejudice and withoutpronouncement as to costs."

The trial court thereafter rendered judgment in favor of herein petitioners onthis dispositive portion:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffPhilippine General American Insurance Company Inc. and againstthe remaining defendants, Sweet Lines Inc. and Davao VeteransArrastre Inc. as follows:

Defendant Sweet Lines, Inc. is ordered to pay said plaintiff the sumof P34,902.00, with legal interest thereon from date of extrajudicialdemand on April 28, 1978 (Exh. M) until fully paid;

Defendant Sweet Lines Inc. and Davao Veterans Arrastre and(Port) Services Inc. are directed to pay jointly and severally, theplaintiff the sum of P49,747.55, with legal interest thereon from

April 28, 1978 until fully paid;

Each of said defendants are ordered to pay the plaintiffs theadditional sum of P5,000 is reimbursable attorney's fees and otherlitigation expenses;

Each of said defendants shall pay one-fourth (1/4) costs. 4

Due to the reversal on appeal by respondent court of the trial court's decisionon the ground of prescription, 5 in effect dismissing the complaint of hereinpetitioners, and the denial of their motion for reconsideration, 6petitionersfiled the instant petition for review on certiorari, faulting respondent appellatecourt with the following errors: (1) in upholding, without proof, the existence ofthe so-called prescriptive period; (2) granting arguendothat the saidprescriptive period does exist, in not finding the same to be null and void; and

(3) assuming arguendothat the said prescriptive period is valid and legal, infailing to conclude that petitioners substantially complied therewith. 7

Parenthetically, we observe that herein petitioners are jointly pursuing thiscase, considering their common interest in the shipment subject of thepresent controversy, to obviate any question as to who the real party ininterest is and to protect their respective rights as insurer and insured. In anycase, there is no impediment to the legal standing of Petitioner Philamgen,even if it alone were to sue herein private respondents in its own capacity asinsurer, it having been subrogated to all rights of recovery for loss of ordamage to the shipment insured under its Marine Risk Note No. 438734dated March 31, 1977 8in view of the full settlement of the claim thereunderas evidenced by the subrogation receipt 9issued in its favor by Far East Bankand Trust Co., Davao Branch, for the account of petitioner TPI.

Upon payment of the loss covered by the policy, the insurer's entitlement tosubrogationpro tanto, being of the highest equity, equips it with a cause ofaction against a third party in case of contractual breach. 10Further, theinsurer's subrogatory right to sue for recovery under the bill of lading in caseof loss of or damage to the cargo is jurisprudentially upheld. 11However, if aninsurer, in the exercise of its subrogatory right, may proceed against theerring carrier and for all intents and purposes stands in the place and insubstitution of the consignee, a fortiorisuch insurer is presumed to know andis just as bound by the contractual terms under the bill of lading as theinsured.

On the first issue, petitioners contend that it was error for the Court ofAppeals to reverse the appealed decision on the supposed ground ofprescription when SLI failed to adduce any evidence in support thereof andthat the bills of lading said to contain the shortened periods for filing a claimand for instituting a court action against the carrier were never offered inevidence. Considering that the existence and tenor of this stipulation on the

aforesaid periods have allegedly not been established, petitioners maintainthat it is inconceivable how they can possibly comply therewith. 12Inrefutation, SLI avers that it is standard practice in its operations to issue billsof lading for shipments entrusted to it for carriage and that it in fact issuedbills of lading numbered MD-25 and MD-26 therefor with proof of theirexistence manifest in the records of the case. 13For its part, DVAPSI insistson the propriety of the dismissal of the complaint as to it due to petitioners'failure to prove its direct responsibility for the loss of and/or damage to thecargo. 14

On this point, in denying petitioner's motion for reconsideration, the Court of

Appeals resolved that although the bills of lading were not offered inevidence, the litigation obviously revolves on such bills of lading which arepractically the documents or contracts sued upon, hence, they are inevitablyinvolved and their provisions cannot be disregarded in the determination ofthe relative rights of the parties thereto. 15

Respondent court correctly passed upon the matter of prescription, since thatdefense was so considered and controverted by the parties. This issue mayaccordingly be taken cognizance of by the court even if not inceptively raisedas a defense so long as its existence is plainly apparent on the face ofrelevant pleadings. 16In the case at bar, prescription as an affirmativedefense was seasonably raised by SLI in its answer, 17except that the bills oflading embodying the same were not formally offered in evidence, thusreducing the bone of contention to whether or not prescription can bemaintained as such defense and, as in this case, consequently upheld on thestrength of mere references thereto.

As petitioners are suing upon SLI's contractual obligation under the contractof carriage as contained in the bills of lading, such bills of lading can becategorized as actionable documents which under the Rules must beproperly pleaded either as causes of action or defenses, 18and thegenuineness and due execution of which are deemed admitted unlessspecifically denied under oath by the adverse party. 19The rules onactionable documents cover and apply to both a cause of action or defensebased on said documents. 20

In the present case and under the aforestated assumption that the time limitinvolved is a prescriptive period, respondent carrier duly raised prescriptionas an affirmative defense in its answer setting forth paragraph 5 of thepertinent bills of lading which comprised the stipulation thereon by parties, towit:

5. Claims for shortage, damage, must be made at the time ofdelivery to consignee or agent, if container shows exterior signs ofdamage or shortage. Claims for non-delivery, misdelivery, loss ordamage must be filed within 30 days from accrual. Suits arisingfrom shortage, damage or loss, non-delivery or misdelivery shall beinstituted within 60 days from date of accrual of right of action.Failure to file claims or institute judicial proceedings as hereinprovided constitutes waiver of claim or right of action. In no caseshall carrier be liable for any delay, non-delivery, misdelivery, lossof damage to cargo while cargo is not in actual custody ofcarrier. 21

In their reply thereto, herein petitioners, by their own assertions that

2. In connection with Pars. 14 and 15 of defendant Sweet Lines,

Inc.'s Answer, plaintiffs state that such agreements are what theSupreme Court considers as contracts of adhesion (seeSweetLines, Inc. vs. Hon. Bernardo Teves, et al., G.R. No. L-37750, May19, 1978) and, consequently, the provisions therein which arecontrary to law and public policy cannot be availed of by answeringdefendant as valid defenses. 22

thereby failed to controvert the existence of the bills of lading and theaforequoted provisions therein, hence they impliedly admitted the same whenthey merely assailed the validity of subject stipulations.

Petitioners' failure to specifically deny the existence, much less thegenuineness and due execution, of the instruments in question amounts toan admission. Judicial admissions, verbal or written, made by the parties inthe pleadings or in the course of the trial or other proceedings in the same

case are conclusive, no evidence being required to prove the same, andcannot be contradicted unless shown to have been made through palpablemistake or that no such admission was made. 23Moreover, when the dueexecution and genuineness of an instrument are deemed admitted becauseof the adverse party's failure to make a specific verified denial thereof, theinstrument need not be presented formally in evidence for it may beconsidered an admitted fact. 24

Even granting that petitioners' averment in their reply amounts to a denial, ithas the procedural earmarks of what in the law on pleadings is called anegative pregnant, that is, a denial pregnant with the admission of thesubstantial facts in the pleading responded to which are not squarely denied.It is in effect an admission of the averment it is directed to. 25Thus, whilepetitioners objected to the validity of such agreement for being contrary topublic policy, the existence of the bills of lading and said stipulations werenevertheless impliedly admitted by them.


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We find merit in respondent court's comments that petitioners failed to touchon the matter of the non-presentation of the bills of lading in their brief andearlier on in the appellate proceedings in this case, hence it is too late in theday to now allow the litigation to be overturned on that score, for to do sowould mean an over-indulgence in technicalities. Hence, for the reasonsalready advanced, the non-inclusion of the controverted bills of lading in theformal offer of evidence cannot, under the facts of this particular case, beconsidered a fatal procedural lapse as would bar respondent carrier fromraising the defense of prescription. Petitioners' feigned ignorance of theprovisions of the bills of lading, particularly on the time limitations for filing aclaim and for commencing a suit in court, as their excuse for non-compliancetherewith does not deserve serious attention.

It is to be noted that the carriage of the cargo involved was effected pursuantto an "Application for Delivery of Cargoes without Original Bill of Lading"issued on May 20, 1977 in Davao City 26with the notation therein that saidapplication corresponds to and is subject to the terms of bills of lading MD-25and MD-26. It would be a safe assessment to interpret this to mean that,sight unseen, petitioners acknowledged the existence of said bills of lading.By having the cargo shipped on respondent carrier's vessel and later makinga claim for loss on the basis of the bills of lading, petitioners for all intents andpurposes accepted said bills. Having done so they are bound by allstipulations contained therein. 27Verily, as petitioners are suing for recoveryon the contract, and in fact even went as far as assailing its validity bycategorizing it as a contract of adhesion, then they necessarily admit thatthere is such a contract, their knowledge of the existence of which with itsattendant stipulations they cannot now be allowed to deny.

On the issue of the validity of the controverted paragraph 5 of the bills oflading above quoted which unequivocally prescribes a time frame of thirty(30) days for filing a claim with the carrier in case of loss of or damage to thecargo and sixty (60) days from accrual of the right of action for instituting anaction in court, which periods must concur, petitioners posit that the allegedshorter prescriptive period which is in the nature of a limitation on petitioners'right of recovery is unreasonable and that SLI has the burden of provingotherwise, citing the earlier case of Southern Lines, Inc. vs. Court of Appeals,et al. 28They postulate this on the theory that the bills of lading containing thesame constitute contracts of adhesion and are, therefore, void for beingcontrary to public policy, supposedly pursuant to the dictum in Sweet Lines,Inc. vs. Teves, et al. 29

Furthermore, they contend, since the liability of private respondents has beenclearly established, to bar petitioners' right of recovery on a mere technicality

will pave the way for unjust enrichment.

30

Contrarily, SLI asserts anddefends the reasonableness of the time limitation within which claims shouldbe filed with the carrier; the necessity for the same, as this condition for thecarrier's liability is uniformly adopted by nearly all shipping companies if theyare to survive the concomitant rigors and risks of the shipping industry; andthe countervailing balance afforded by such stipulation to the legalpresumption of negligence under which the carrier labors in the event of lossof or damage to the cargo. 31

It has long been held that Article 366 of the Code of Commerce applies notonly to overland and river transportation but also to maritimetransportation. 32Moreover, we agree that in this jurisdiction, as viewed fromanother angle, it is more accurate to state that the filing of a claim with thecarrier within the time limitation therefor under Article 366 actually constitutesa condition precedent to the accrual of a right of action against a carrier fordamages caused to the merchandise. The shipper or the consignee must

allege and prove the fulfillment of the condition and if he omits suchallegations and proof, no right of action against the carrier can accrue in hisfavor. As the requirements in Article 366, restated with a slight modification inthe assailed paragraph 5 of the bills of lading, are reasonable conditionsprecedent, they are not limitations of action. 33Being conditions precedent,their performance must precede a suit for enforcement 34and the vesting ofthe right to file spit does not take place until the happening of theseconditions. 35

Now, before an action can properly be commenced all the essential elementsof the cause of action must be in existence, that is, the cause of action mustbe complete. All valid conditions precedent to the institution of the particularaction, whether prescribed by statute, fixed by agreement of the parties orimplied by law must be performed or complied with before commencing theaction, unless the conduct of the adverse party has been such as to preventor waive performance or excuse non-performance of the condition. 36

It bears restating that a right of action is the right to presently enforce a causeof action, while a cause of action consists of the operative facts which giverise to such right of action. The right of action does not arise until theperformance of all conditions precedent to the action and may be taken awayby the running of the statute of limitations, through estoppel, or by othercircumstances which do not affect the cause of action. 37Performance orfulfillment of all conditions precedent upon which a right of action dependsmust be sufficiently alleged, 38considering that the burden of proof to showthat a party has a right of action is upon the person initiating the suit. 39

More particularly, where the contract of shipment contains a reasonablerequirement of giving notice of loss of or injury to the goods, the giving ofsuch notice is a condition precedent to the action for loss or injury or the rightto enforce the carrier's liability. Such requirement is not an empty formalism.The fundamental reason or purpose of such a stipulation is not to relieve the

carrier from just liability, but reasonably to inform it that the shipment has

been damaged and that it is charged with liability therefor, and to give it anopportunity to examine the nature and extent of the injury. This protects thecarrier by affording it an opportunity to make an investigation of a claim whilethe matter is fresh and easily investigated so as to safeguard itself from falseand fraudulent claims. 40

Stipulations in bills of lading or other contracts of shipment which requirenotice of claim for loss of or damage to goods shipped in order to imposeliability on the carrier operate to prevent the enforcement of the contractwhen not complied with, that is, notice is a condition precedent and thecarrier is not liable if notice is not given in accordance with the

stipulation,41

as the failure to comply with such a stipulation in a contract ofcarriage with respect to notice of loss or claim for damage bars recovery forthe loss or damage suffered. 42

On the other hand, the validity of a contractual limitation of time for filing thesuit itself against a carrier shorter than the statutory period therefor hasgenerally been upheld as such stipulation merely affects the shipper'sremedy and does not affect the liability of the carrier. In the absence of anystatutory limitation and subject only to the requirement on thereasonableness of the stipulated limitation period, the parties to a contract ofcarriage may fix by agreement a shorter time for the bringing of suit on aclaim for the loss of or damage to the shipment than that provided by thestatute of limitations. Such limitation is not contrary to public policy for it doesnot in any way defeat the complete vestiture of the right to recover, butmerely requires the assertion of that right by action at an earlier period thanwould be necessary to defeat it through the operation of the ordinary statute

of limitations.

43

In the case at bar, there is neither any showing of compliance by petitionerswith the requirement for the filing of a notice of claim within the prescribedperiod nor any allegation to that effect. It may then be said that whilepetitioners may possibly have a cause of action, for failure to comply with theabove condition precedent they lost whatever right of action they may have intheir favor or, token in another sense, that remedial right or right to relief hadprescribed.44

The shipment in question was discharged into the custody of the consigneeon May 15, 1977, and it was from this date that petitioners' cause of actionaccrued, with thirty (30) days therefrom within which to file a claim with thecarrier for any loss or damage which may have been suffered by the cargoand thereby perfect their right of action. The findings of respondent court assupported by petitioners' formal offer of evidence in the court below show that

the claim was filed with SLI only on April 28, 1978, way beyond the periodprovided in the bills of lading45and violative of the contractual provision, theinevitable consequence of which is the loss of petitioners' remedy or right tosue. Even the filing of the complaint on May 12, 1978 is of no remedial orpractical consequence, since the time limits for the filing thereof, whetherviewed as a condition precedent or as a prescriptive period, would in thiscase be productive of the same result, that is, that petitioners had no right ofaction to begin with or, at any rate, their claim was time-barred.

What the court finds rather odd is the fact that petitioner TPI filed aprovisional claim with DVAPSI as early as June 14, 1977 46and, as found bythe trial court, a survey fixing the extent of loss of and/or damage to the cargowas conducted on July 8, 1977 at the instance of petitioners. 47If petitionershad the opportunity and awareness to file such provisional claim and tocause a survey to be conducted soon after the discharge of the cargo, thenthey could very easily have filed the necessary formal, or even a provisional,

claim with SLI itself 48within the stipulated period therefor, instead of doing soonly on April 28, 1978 despite the vessel's arrival at the port of destination onMay 15, 1977. Their failure to timely act brings us to no inference other thanthe fact that petitioners slept on their rights and they must now face theconsequences of such inaction.

The ratiocination of the Court of Appeals on this aspect is worth reproducing:

xxx xxx xxx

It must be noted, at this juncture, that the aforestated time limitationin the presentation of claim for loss or damage, is but arestatement of the rule prescribed under Art. 366 of the Code ofCommerce which reads as follows:

Art. 366. Within the twenty-four hours following thereceipt of the merchandise, the claim against the carrierfor damage or average which may be found therein uponopening the packages, may be made, provided that theindications of the damage or average which gives rise tothe claim cannot be ascertained from the outside part ofthe packages, in which case the claims shall be admittedonly at the time of the receipt.

After the periods mentioned have elapsed, or thetransportation charges have been paid, no claim shall beadmitted against the carrier with regard to the conditionin which the goods transported were delivered.

Gleanable therefrom is the fact that subject stipulation even

lengthened the period for presentation of claims thereunder. Such


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modification has been sanctioned by the Supreme Court. In thecase of Ong Yet (M)ua Hardware Co., Inc. vs. Mitsui SteamshipCo., Ltd., et al., 59 O.G. No. 17, p. 2764, it ruled that Art. 366 of theCode of Commerce can be modified by a bill of lading prescribingthe period of 90 days after arrival of the ship, for filing of writtenclaim with the carrier or agent, instead of the 24-hour time limitafter delivery provided in the aforecited legal provision.

Tested, too, under paragraph 5 of said Bill of Lading, it is crystalclear that the commencement of the instant suit on May 12, 1978was indeed fatally late. In view of the express provision that "suits

arising from. . . damage or loss shall be instituted within 60 days from date ofaccrual of right of action," the present action necessarily fails onground of prescription.

In the absence of constitutional or statutory prohibition, itis usually held or recognized that it is competent for theparties to a contract of shipment to agree on a limitationof time shorter than the statutory period, within whichaction for breach of the contract shall be brought, andsuch limitation will be enforced if reasonable . . . (13C.J.S. 496-497)

A perusal of the pertinent provisions of law on the matter woulddisclose that there is no constitutional or statutory prohibitioninfirming paragraph 5 of subject Bill of Lading. The stipulated

period of 60 days is reasonable enough for appellees to ascertainthe facts and thereafter to sue, if need be, and the 60-day periodagreed upon by the parties which shortened the statutory periodwithin which to bring action for breach of contract is valid andbinding. . . . (Emphasis in the original text.) 49

As explained above, the shortened period for filing suit is not unreasonableand has in fact been generally recognized to be a valid business practice inthe shipping industry. Petitioners' advertence to the Court's holding inthe Southern Linescase, supra, is futile as what was involved was a claim forrefund of excess payment. We ruled therein that non-compliance with therequirement of filing a notice of claim under Article 366 of the Code ofCommerce does not affect the consignee's right of action against the carrierbecause said requirement applies only to cases for recovery of damages onaccount of loss of or damage to cargo, not to an action for refund ofoverpayment, and on the further consideration that neither the Code of

Commerce nor the bills of lading therein provided any time limitation for suingfor refund of money paid in excess, except only that it be filed within areasonable time.

The ruling in Sweet Linescategorizing the stipulated limitation on venue ofaction provided in the subject bill of lading as a contract of adhesion and,under the circumstances therein, void for being contrary to public policy isevidently likewise unavailing in view of the discrete environmental factsinvolved and the fact that the restriction therein was unreasonable. In anycase, Ong Yiu vs. Court of Appeals, et al., 50 instructs us that "contracts ofadhesion wherein one party imposes a ready-made form of contract on theother . . . are contracts not entirely prohibited. The one who adheres to thecontract is in reality free to reject it entirely; if he adheres he gives hisconsent." In the present case, not even an allegation of ignorance of a partyexcuses non-compliance with the contractual stipulations since theresponsibility for ensuring full comprehension of the provisions of a contract

of carriage devolves not on the carrier but on the owner, shipper, orconsignee as the case may be.

While it is true that substantial compliance with provisions on filing of claimfor loss of or damage to cargo may sometimes suffice, the invocation of suchan assumption must be viewed vis-a-visthe object or purpose which such aprovision seeks to attain and that is to afford the carrier a reasonableopportunity to determine the merits and validity of the claim and to protectitself against unfounded impositions. 51Petitioners' would nevertheless adoptan adamant posture hinged on the issuance by SLI of a "Report on Lossesand Damages," dated May 15, 1977, 52 from which petitioners theorize thatthis charges private respondents with actual knowledge of the loss anddamage involved in the present case as would obviate the need for or rendersuperfluous the filing of a claim within the stipulated period.

Withal, it has merely to be pointed out that the aforementioned report bearsthis notation at the lower part thereof: "Damaged by Mla. labor uponunloading; B/L noted at port of origin," as an explanation for the cause of lossof and/or damage to the cargo, together with an iterative note stating that"(t)his Copy should be submitted together with your claim invoice or receiptwithin 30 days from date of issue otherwise your claim will not be honored."

Moreover, knowledge on the part of the carrier of the loss of or damage to thegoods deducible from the issuance of said report is not equivalent to nordoes it approximate the legal purpose served by the filing of the requisiteclaim, that is, to promptly apprise the carrier about a consignee's intention tofile a claim and thus cause the prompt investigation of the veracity and meritthereof for its protection. It would be an unfair imposition to require thecarrier, upon discovery in the process of preparing the report on losses ordamages of any and all such loss or damage, to presume the existence of aclaim against it when at that time the carrier is expectedly concerned merelywith accounting for each and every shipment and assessing its condition.

Unless and until a notice of claim is therewith timely filed, the carrier cannotbe expected to presume that for every loss or damage tallied, acorresponding claim therefor has been filed or is already in existence aswould alert it to the urgency for an immediate investigation of the soundnessof the claim. The report on losses and damages is not the claim referred toand required by the bills of lading for it does not fix responsibility for the lossor damage, but merely states the condition of the goods shipped. The claimcontemplated herein, in whatever form, must be something more than anotice that the goods have been lost or damaged; it must contain a claim forcompensation or indicate an intent to claim. 53

Thus, to put the legal effect of respondent carrier's report on losses ordamages, the preparation of which is standard procedure upon unloading ofcargo at the port of destination, on the same level as that of a notice of claimby imploring substantial compliance is definitely farfetched. Besides, the citednotation on the carrier's report itself makes it clear that the filing of a notice ofclaim in any case is imperative if carrier is to be held liable at all for the lossof or damage to cargo.

Turning now to respondent DVAPSI and considering that whatever right ofaction petitioners may have against respondent carrier was lost due to theirfailure to seasonably file the requisite claim, it would be awkward, to say theleast, that by some convenient process of elimination DVAPSI shouldproverbially be left holding the bag, and it would be pure speculation toassume that DVAPSI is probably responsible for the loss of or damage tocargo. Unlike a common carrier, an arrastre operator does not labor under apresumption of negligence in case of loss, destruction or deterioration of

goods discharged into its custody. In other words, to hold an arrastreoperator liable for loss of and/or damage to goods entrusted to it there mustbe preponderant evidence that it did not exercise due diligence in thehandling and care of the goods.

Petitioners failed to pinpoint liability on any of the original defendants and inthis seemingly wild goose-chase, they cannot quite put their finger down onwhen, where, how and under whose responsibility the loss or damageprobably occurred, or as stated in paragraph 8 of their basic complaint filed inthe court below, whether "(u)pon discharge of the cargoes from the originalcarrying vessel, the SS VISHVA YASH," and/or upon discharge of thecargoes from the interisland vessel the MV "SWEET LOVE," in Davao Cityand later while in the custody of defendant arrastre operator. 54

The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine andAviation Claims Manager of petitioner Philamgen, was definitely inconclusive

and the responsibility for the loss or damage could still not be ascertainedtherefrom:

Q In other words, Mr. Cabato, you only computed the loss on thebasis of the figures submitted to you and based on the documentslike the survey certificate and the certificate of the arrastre?

A Yes, sir.

Q Therefore, Mr. Cabato, you have no idea how or where theselosses were incurred?

A No, sir.

xxx xxx xxx

Q Mr. Witness, you said that you processed and investigated theclaim involving the shipment in question. Is it not a fact that in yourprocessing and investigation you considered how the shipmentwas transported? Where the losses could have occurred and whatis the extent of the respective responsibilities of the bailees and/orcarriers involved?

xxx xxx xxx

A With respect to the shipment being transported, we have ofcourse to get into it in order to check whether the shipment comingin to this port is in accordance with the policy condition, like in thisparticular case, the shipment was transported to Manila and

transhipped through an interisland vessel in accordance with thepolicy. With respect to the losses, we have a general view wherelosses could have occurred.Of course we will have to consider thedifferent bailees wherein the shipment must have passed through,like the ocean vessel, the interisland vessel and the arrastre, butdefinitely at that point and time we cannot determine the extent ofeach liability. We are only interested at that point and time in theliability as regards the underwriter in accordance with the policythat we issued.

xxx xxx xxx

Q Mr. Witness, from the documents, namely, the survey of ManilaAdjusters and Surveyors Company, the survey of Davao Arrastrecontractor and the bills of lading issued by the defendant Sweet


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Lines, will you be able to tell the respective liabilities of the baileesand/or carriers concerned?

A No, sir. (Emphasis ours.) 55

Neither did nor could the trial court, much less the Court of Appeals, preciselyestablish the stage in the course of the shipment when the goods were lost,destroyed or damaged. What can only be inferred from the factual findings ofthe trial court is that by the time the cargo was discharged to DVAPSI, loss ordamage had already occurred and that the same could not have possiblyoccurred while the same was in the custody of DVAPSI, as demonstrated bythe observations of the trial court quoted at the start of this opinion.

ACCORDINGLY, on the foregoing premises, the instant petition is DENIEDand the dismissal of the complaint in the court a quoas decreed byrespondent Court of Appeals in its challenged judgment is herebyAFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. L-13159 February 28, 1962

REMEDIOS QUIOGUE, ET AL.,plaintiffs-appellees,vs.JACINTO BAUTISTA, ET AL.,defendants-appellants.

T. Silverio for plaintiffs-appellees.J. Serrano Espiritu for defendants-appellants.

BAUTISTA ANGELO, J. :

This is an action to foreclose two deeds of mortgage executed to secure thepayment of two loans, one for P2,000.00 and another for P6,000.00 coveringtwo parcels of land situated in the City of Manila. The first deed was executedon May 9, 1944 and the second on October 11, 1944 and it was stipulatedtherein as a common provision that the two loans cannot be repaid within oneyear from the date of the termination of the last world war.

The defendants set up the defense that the present action is already barredby Civil Case No. 11969 filed in the same court between the same parties,and that if there is any amount recoverable from them the same shall becomputed in accordance with the Ballantyne schedule. They also set up acounterclaim for moral damages in the amount of P10,000.00.

On August 27, 1957, the trial court rendered decision in favor of plaintiffssentencing defendants to pay the sum of P12,829.81, with interest at therates of 6% and 3% per annum on the amounts of P8,000.00 and P4,829.81,respectively, from July 21, 1957, plus costs, and in default of payment, it wasordered that the properties mortgaged be sold at public auction and theproceeds thereof applied to the payment of the judgment.

Defendants have appealed to this Court on purely questions of law.

It appears that prior to the filing of the present complaint plaintiffs hadinstituted before the Court of First Instance of Manila an action to foreclose afirst mortgage on the same properties and that on the date said action wasfiled the two loans covered by the second and third mortgages which areherein foreclosed had already matured (Civil Case No. 11969). It likewiseappears that judgment was duly entered in the first case and when a writ of

execution was issued to enforce it, it was fully satisfied by defendants onAugust 18, 1952 by paying to the sheriff the sum of P9,000.00.

It is now contended that the trial court erred (1) in not dismissing this case aspremature; (2) in not finding that this case is barred by the decision renderedin Civil Case No. 11969; and (3) in not converting the amounts recoverableunder the Ballantyne scale of values.

With regard to the first contention, the lower court said: .

Considering that the Japanese Peace Treaty terminating theSecond World War between Japan and the Allied Powers, of whichthe Philippines was a signatory, was signed on September 8, 1951at San Francisco. U.S.A., the interpretation of counsel for thedefendants that the war did not terminate for the Philippines until

July 23, 1956 is not tenable.

WHEREFORE, defendants' motion to set aside the decisionrendered in this case and to order a new trial is hereby denied.

Counsel for defendants argues that the trial court erred in not dismissing thiscase as premature because since it was agreed that the loans cannot be paidwithin one year from the termination of the last world war and according tothe treaty between Japan and the Allied Powers the same should come intoforce for each State only after its ratification and from date of the deposit ofits instrument of ratification, it cannot be said that the war has terminatedwhen this action was brought on June 23, 1956, it appearing that theinstrument of ratification was deposited only on July 23, 1956.

This contention is untenable. InNavarre v. Barreto, et al., G.R. No. L-8660,promulgated on May 21, 1956, we said that "in the legal sense, war formallyended in the Philippines the moment President Harry S. Truman officiallyissued a proclamation of peace on December 31, 1946 .... And if counselmeant that there should be a formal treaty of peace, we may say that thispurpose has also been accomplished when the treaty of peace with Japanhad been signed in San Francisco, California on September 8, 1951 by theUnited States and the Allied Powers, including the Philippines." At any rate,even granting that the date of the deposit of the instrument of ratification ofthe treaty should be reckoned with to determine when the last world warshould be deemed legally terminated, this point is now moot since saidinstrument was deposited on July 23, 1956.

The contention that his action is already barred by the filing of Civil Case No.11969 for the simple reason that the two loans herein involved could have

been included in said action because at the time it was filed they had alreadymatured, is likewise untenable, considering that the first case refers to atransaction different from those covered in the present case. Section 3, Rule2, of our Rules of Court, invoked by appellants, which provides that a singlecause of action cannot be split up into two or more parts so as to be madethe subject of different complaints, does not apply, for here there is not asingle cause of action that was split up, but several causes that refer todifferent transactions. And it was held that a contract embraces only onecause of action because it may be violated only once even if it containsseveral stipulations.1Thus, non-payment of a loan secured by mortgageconstitutes a single cause of action. The creditor cannot split up this singlecause of action into two separate complaints, one for payment of the debtand another for the foreclosure of the mortgage. If he does so, the filing of thefirst complaint will bar the second complaint. In other words, the complaintfiled for the payment of certain debt shall be considered as a waiver of theright to foreclose the mortgage executed thereon.2The lower court, therefore,

did not err in denying the motion to dismiss on this ground. 1wph1.t

The third contention that the recoverable amounts should be converted intomoney according to the Ballantyne scale of values cannot also be sustainedit having been agreed between the parties that said loans shall be payableafter the termination of the last world war. The rule is well-settled "that wherethe obligation incurred during the Japanese occupation was made payableafter a fixed period, the maturity falling after liberation, the promissor mustpay in Philippine currency the same amount stated in the obligation, that is,the obligation must be settled peso for peso in Philippine currency. He cannotdischarge his debt by paying only the equivalent in Philippine currency of thevalue of the military notes he had received."3

WHEREFORE, the decision appealed from is affirmed, with costs againstappellants.


Manila

FIRST DIVISION

G.R. No. 167724 June 27, 2006

BPI FAMILY SAVINGS BANK, INC., Petitioner,

vs.MARGARITA VDA. DE COSCOLLUELA, Respondent.

D E C I S I O N

CALLEJO, SR., J .:

Assailed before this Court is a Petition for Review under Rule 45 of the Rulesof Court of the Decision1of the Court of Appeals (CA) in CA-G.R. SP No.69732 granting respondents petition for certiorari, and its resolution denyingpetitioners motion for reconsideration.

The Antecedents
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Respondent Margarita Coscolluela and her husband Oscar Coscolluelaobtained an agricultural sugar crop loan from the Far East Bank & Trust Co.(FEBTC) Bacolod City Branch (later merged with petitioner Bank of thePhilippine Islands) for crop years 1997 and 1998.2However, in the book ofFEBTC, the loan account of the spouses was treated as a singleaccount,3which amounted to P13,592,492.00 as evidenced by 67

Promissory Notes4executed on various dates, from August 29, 1996 toJanuary 23, 1998, to wit:

1avvphil.net

Promissory Note No. DateAmount(in Phil.Peso)

1. 02-052-960971 29 August 1996 148,000

2. 02-052-961095 23 September 1996 1,200,000

3. 02-052-961122 27 September 1996 550,000

4. 02-052-961205 11 October 1996 180,000

5. 02-052-961231 18 October 1996 155,000

6. 02-052-961252 24 October 1996 190,000

7. 02-052-961274 30 October 1996 115,000

8. 02-052-961310 8 November 1996 90,000

9. 02-052-961373 21 November 1996 125,000

10. 02-052-961442 6 December 1996 650,000

11. 02-052-961464 12 December 1996 240,000

12. 02-052-961498 19 December 1996 164,000

13. 02-052-961542 27 December 1996 200,000

14. 02-052-970018 3 January 1997 120,000

15. 02-052-970052 10 January 1997 185,000

16. 02-052-970078 15 January 1997 80,000

17. 02-052-970087 17 January 1997 170,000

18. 02-052-970131 23 January 1997 180,000

19. 02-052-970163 31 January 1997 220,000

20. 02-052-970190 7 February 1997 110,000

21. 02-052-970215 13 February 1997 170,000

22. 02-052-970254 20 February 1997 140,000

23. 02-052-970293 28 February 1997 130,000

24. 02-052-970345 7 March 1997 90,000

25. 02-052-970367 13 March 1997 50,000

26. 02-052-970402 21 March 1997 160,000

27. 02-052-970422 26 March 1997 190,000

28. 02-052-970453 4 April 1997 82,000

29. 02-052-970478 11 April 1997 150,000

30. 02-052-970502 17 April 1997 80,000

31. 02-052-970539 25 April 1997 145,000

32. 02-052-970558 30 April 1997 135,000

33. 02-052-970589 8 May 1997 54,000

34. 02-052-970770 25 June 1997 646,492

35. 02-052-970781 27 June 1997 160,000

36. 02-052-970819 4 July 1997 250,000

37. 02-052-970852 11 July 1997 350,000

38. 02-052-970926 1 August 1997 170,000

39. 02-052-970949 5 August 1997 200,000

40. 02-052-970975 8 August 1997 120,000

41. 02-052-970999 15 August 1997 150,000

42. 02-052-971028 22 August 1997 110,000

43. 02-052-971053 29 August 1997 130,000

44. 02-052-971073 4 September 1997 90,000

45. 02-052-971215 12 September 1997 160,000

46. 02-052-971253 19 September 1997 190,000

47. 02-052-971280 26 September 1997 140,000

48. 02-052-971317 2 October 1997 115,000

49. 02-052-971340 10 October 1997 115,000

50. 02-052-971351 15 October 1997 700,000

51. 02-052-971362 16 October 1997 90,000

52. 02-052-971394 24 October 1997 185,000

53. 02-052-971407 29 October 1997 170,000

54. 02-052-971449 6 November 1997 105,000

55. 02-052-971464 13 November 1997 170,000

56. 02-052-971501 20 November 1997 150,000

57. 02-052-971527 25 November 1997 620,000

58. 02-052-971538 28 November 1997 130,000

59. 02-052-971569 4 December 1997 140,000

60. 02-052-971604 12 December 1997 220,000

61. 02-052-971642 18 December 1997 185,000

62. 02-052-971676 23 December 1997 117,000

63. 02-052-971688 29 December 1997 100,000

64. 02-052-980019 7 January 1998 195,000

65. 02-052-980032 8 January 1998 170,000

66. 02-052-980064 15 January 1998 225,000

67. 02-052-980079 23 January 1998 176,000

The promissory notes listed under Nos. 1 to 33 bear the maturity date ofFebruary 9, 1998, with a 30-day extension of up to March 11, 1998, whilethose listed under Nos. 34 to 67 bear December 28, 1998 as maturity date.

Meanwhile, on June 13, 1997, the spouses Coscolluela executed a realestate mortgage in favor of FEBTC over their parcel of land located inBacolod City covered by Transfer Certificate of Title (TCT) No. T-109329 assecurity of loans on credit accommodation obtained by the spouses fromFEBTC and those that may be obtained by the mortgagees which was fixedat P7,000,000.00, as well as those that may be extended by the mortgagor to

the mortgagees.5

Under the terms and conditions of the real estate mortgage, in the event offailure to pay the mortgage obligation or any portion thereof when due, theentire principal, interest, penalties and other charges then outstanding, shallbecome immediately due; upon such breach or violation of the terms andconditions thereof, FEBTC may, at its absolute discretion foreclose the sameextrajudicially in accordance with the procedure prescribed by Act No. 3135,

as amended, and for the purpose appointed FEBTC as its attorney-in-fact
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with full power and authority to enter the premises where the mortgagedproperty is located and to take actual possession and control thereof withoutneed of any order of any court, nor written permission from the spouses, andwith special power to sell the mortgaged property at a public or private sale atthe option of the mortgagee; and that the spouses expressly waived the termof 30 days or any other terms granted by law as the period which mustelapse before the mortgage agreement may be foreclosed and, in any case,such period has already lapsed.

The mortgage was registered with the Registry of Deeds of Bacolod and wasannotated in the title of the land on June 20, 1997.6Meantime, Oscar died

intestate and was survived by his widow, herein respondent.

For failure to settle the outstanding obligation on the maturity dates, FEBTCsent a final demand letter7to respondent on March 10, 1999 demandingpayment, within five days from notice, of the principal of the loan amountingto P13,481,498.68, with past due interests and penalties or in the total

amount of P19,482,168.31 as of March 9, 1999.8Respondent failed to settle

her obligation.

On June 10, 1999, FEBTC filed a petition for the extrajudicial foreclosure ofthe mortgaged property, significantly only for the total amountof P4,687,006.68 exclusive of balance, interest and penalty, covered by

promissory notes from 1 to 33, except nos. 2 and 10.9

While the extrajudicial foreclosure proceeding was pending, petitioner FEBTC

filed a complaint10

with the Regional Trial Court (RTC) of Makati City, Branch64, against respondent for the collection of the principal amountofP8,794,492.00 plus interest and penalty, or the total amount

of P12,672,000.31, representing the amounts indicated in the rest of the

promissory notes, specifically Promissory Note Nos. 34 to 67, as well asthose dated December 6, 1996 and September 23, 1996:

PN No. Date Amount Annex

2-052-980079 January 02, 1998 176,000.00 A

2-052-980064 January 15, 1998 225,000.00 B

2-052-980032 January 08, 1998 170,000.00 C

2-052-980019 January 07, 1998 195,000.00 D

2-052-971688 December 29, 1997 100,000.00 E

2-052-971676 December 23, 1997 117,000.00 F

2-052-971642 December 18, 1997 185,000.00 G

2-052-971604 December 12, 1997 220,000.00 H

2-052-971569 December 04, 1997 140,000.00 I

2-052-971538 November 28, 1997 130,000.00 J

2-052-971527 November 25, 1997 620,000.00 K

2-052-971501 November 20, 1997 150,000.00 L

2-052-971464 November 13, 1997 170,000.00 M

2-052-971449 November 06, 1997 105,000.00 N

2-052-971407 October 29, 1997 170,000.00 O

2-052-971394 October 24, 1997 185,000.00 P

2-052-971362 October 16, 1997 90,000.00 Q

2-052-971351 October 15, 1997 700,000.00 R

2-052-971340 October 15, 1997 115,000.00 S

2-052-971317 October 02, 1997 115,000.00 T

2-052-971280 September 26, 1997 140,000.00 U

2-052-971253 September 19, 1997 190,000.00 V

2-052-971215 September 12, 1997 160,000.00 W

2-052-971073 September 04, 1997 90,000.00 X

2-052-971053 August 29, 1997 130,000.00 Y

2-052-971028 August 22, 1997 110,000.00 Z

2-052-970999 August 15, 1997 150,000.00 AA

2-052-970975 August 08, 1997 120,000.00 BB

2-052-970949 August 05, 1997 200,000.00 CC

2-052-970926 August 01, 1997 170,000.00 DD

2-052-970852 July 11, 1997 350,000.00 EE

2-052-970819 July 04, 1997 250,000.00 FF

2-052-970781 June 27, 1997 160,000.00 GG

2-052-970770 June 25, 1997 646,492.00 HH

2-052-961442 December 06, 1996 650,000.00 II

2-052-961095 September 23, 1996 1,200,000.00 JJ

Petitioner prayed that, after due proceedings, judgment be rendered in its

favor, thus:

WHEREFORE, it is respectfully prayed that, after trial, judgment be renderedin its favor and against defendants ordering them to pay the following:

a. The amount TWELVE MILLION SIX HUNDRED SEVENTY-TWO THOUSAND PESOS and 31/100 (P12,672,000.31), with

additional stipulated interest and penalty equivalent to one (1%)percent of the amount due for every thirty (30) days or fractionthereof, until fully paid;

b. Expense of litigation amounting to P50,000.00;

c. The amount of P500,000.00 as attorneys fees.

Other reliefs just and equitable in the premises are similarly prayed for.12

In her answer, respondent alleged, by way of special and affirmative defense,that the complaint was barred by litis pendentia, specifically, the pendingpetition for the extrajudicial foreclosure of the real estate mortgage, thus:

8) That plaintiff is guilty of forum shopping, in that some of thepromissory notes attached to plaintiffs complaint are also the samepromissory notes which were made the basis of the plaintiff in theirextrajudicial foreclosure of mortgage filed against the defendant-spouses and also marked in evidence in support of their oppositionto the issuance of the preliminary injunction in Civil Case No. 99-10864;

9) That plaintiff-bank has not only charged but over charged thedefendant-spouses with excessive and exorbitant interest over andabove those authorized by law. And in order to add more injury tothe defendants, plaintiff also included other charges not legallycollectible from the defendant-spouses;

10) That the act of the plaintiff-bank in seeking to collect twice onthe same promissory notes is not only unfair and unjust but alsocondemnable as plaintiff seek to unjustly enrich itself at theexpense of the defendants;

11) That there is another action pending between the same partiesfor the same cause;

12) That the claim or demand set forth in the plaintiffs complainthas either been waived, abandoned or otherwise extinguished.13

Petitioner presented Emmanuel Ganuelas, its loan officer in its Bacolod CityBranch, as sole witness. He testified that the spouses Coscolluela weregranted an agricultural sugar loan which is designed to finance the cultivationand plantation of sugar farms of the borrowers.14Borrowers were allowed tomake successive drawdowns or availments against the loan as their needarose. Each drawdown is covered by a promissory note with uniform maturitydates.15The witness also testified that the loan account of the spouses was a"single loan account."16

After petitioner rested its case, respondent filed a demurrer toevidence17contending, among others, that, with Ganuelas admission, thereis only one loan account secured by the real estate mortgage, that thepromissory notes were executed as evidence of the loans. Plaintiff was thusbarred from instituting a personal action for collection of the drawdowns

evidenced by Promissory Note Nos. 2, 10, and 34 to 67 after instituting a
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9/19

petition for extrajudicial foreclosure of the real estate mortgage for theamount covered by Promissory Note Nos. 1, 3 to 9, and 11 to 33.Respondent insisted that by filing a complaint for a sum of money, petitionerthereby split its cause of action against her; hence, the complaint mustperforce be dismissed on the ground of litis pendentia.

Petitioner opposed the demurrer arguing that while the loans wereconsidered as a single account, each promissory note executed byrespondent constituted a separate contract. It reiterated that its petition forthe extrajudicial and foreclosure of the real estate mortgage before the Ex-Oficio Provincial Sheriff involves obligations different and separate from those

in its action for a sum of money before the court. Thus, petitioner could availof the personal action for the collection of the amount evidenced by the 36promissory notes not subject of its petition for the extrajudicial foreclosure ofthe real estate mortgage. Petitioner insists that the promissory notes subjectof its collection suit should be treated separately from the other set ofobligations, that is, the 31 promissory notes subject of its extrajudicialforeclosure petition.18

In its Order19dated January 10, 2002, the trial court denied the demurrer onthe ground that the promissory notes executed by respondent and herdeceased husband contained different amounts, and each note covered aloan distinct from the others. Thus, petitioner had the option to file a petitionfor the extrajudicial foreclosure of the real estate mortgage covering 31 of thepromissory notes, and, as to the rest, to file an ordinary action for collection.Petitioner, thus, merely opted to institute an action for collection of the debton the 36 promissory notes, and waived its action for the foreclosure of the

security given on these notes.

Respondent filed a motion for reconsideration,20which the trial court deniedin its February 19, 2002 Order,21prompting her to file a certioraripetition22under Rule 65 with the CA, assailing the January 10, 2002 andFebruary 19, 2002 Orders of the trial court. Respondent alleged that:

1. PUBLIC RESPONDENT GRAVELY ABUSED HERDISCRETION TANTAMOUNT TO LACK AND/OR EXCESS OFJURISDICTION IN HOLDING THAT THE RESPONDENT BANKCAN FILE SIMULTANEOUS ACTIONS FOR FORECLOSUREAND FOR COLLECTION.

Meanwhile, on January 6, 2003, the parcel of land subject of theaforementioned real estate mortgage was sold at public auction where

petitioner emerged as the highest bidder.

23

On September 30, 2004, the CA rendered its Decision24granting the petition,holding, under prevailing jurisprudence, the remedies either a real action toforeclose the mortgage or a personal action to collect the debt of amortgage creditor are alternative and not cumulative. Since respondentavailed of the first one, it was deemed to have waived the second. Further,the filing of both actions results in a splitting of a single cause of action. Thus,in denying her Demurrer to Evidence, the RTC committed grave abuse ofdiscretion as it overruled settled judicial pronouncements. The dispositivepart of the decision states:

WHEREFORE, the instant petition is GRANTED. The assailed Orders datedJanuary 10, 2002 and February 19, 2002 are SET ASIDE.

SO ORDERED.

The CA cited the ruling of this Court in Bachrach Motor Co., Inc. v. EstebanIcaragal and Oriental Commercial Co., Inc.25

Aggrieved, petitioner filed a motion for reconsideration26on October 12,2004. Respondent filed her opposition27to the motion on October 26, 2004.The CA thereafter denied the motion in a resolution promulgated on April 6,2005.28

Petitioner filed the instant petition for review on certiorari, alleging that:

I.

THE COURT OF APPEALS ERRED IN GRANTING THE PETITION FORCERTIORARI OF RESPONDENT ON THE GROUND OF GRAVE ABUSEOF DISCRETION.

x x x x

The Trial Court did not commit grave abuse of discretion amounting to lack orexcess of jurisdiction in denying the Demurrer to Evidence filed by therespondents. Petitioner, in instituting a petition for the Extra JudicialForeclosure of the Mortgage of respondents based on 31 promissory notesexecuted by respondents and another action to collect on a separate set of36 promissory notes, did not split their cause of action.

x x x x

The trial court did not commit grave abuse of discretion amounting to lack orexcess of jurisdiction when it denied respondents Demurrer to Evidence. Inthis wise, the Petition for Certiorari filed by respondents should not have beengranted.29

During the pendency of this appeal, petitioner filed with this Court onDecember 2, 2005 a manifestation and joint motion for substitution, informingthe court that petitioner bank has assigned to the Philippine AssetInvestment, Inc. all its rights, title and interest over its non-performing loanaccounts pursuant to Republic Act No. 9182 entitled "The Special PurposeVehicle Act of 2002."

The issues raised in this case are (1) whether the petition for certiorari underRule 65 of the Rules of Court filed by respondent in the CA was the properremedy to assail the January 10, 2002 Order of the trial court; (2) whether theappellate court issued its January 10, 2002 Order with grave abuse of itsdiscretion amounting to excess or lack of jurisdiction.

Petitioner avers that the January 10, 2002 Order of the RTC denying theDemurrer to Evidence of respondent was interlocutory, and as such could notbe the subject of a petition for certiorari.30The RTC did not commit a graveabuse of its discretion in issuing its January 10, 2002 Order. Petitionermaintains that respondent executed 67 separate loan obligations evidencedby 67 separate promissory notes, with different amounts and maturity dates.It avers that each of the loans, as evidenced by each of the promissory notes,may properly be the subject of a separate action; thus, each promissory noteis an actionable document. Moreover, the real estate mortgage executed by

the spouses secured an obligation only to a fixed amount of P7,000,000.00

which is covered by Promissory Note Nos. 1 to 31, whereas the loanssecured by the spouses covered by the Promissory Note Nos. 32 to 67 forthe total amount of P12,672,000.31 were not secured by the real estate

mortgage. Petitioner insists that it was proper to file the petition forextrajudicial foreclosure of the real estate mortgage only for respondentsloan account covered by the 36 promissory notes for the amountof P7,755,733.64. It was not barred from f iling a separate action for the

collection of the P12,672,000.31 against respondent in the RTC for the

drawdowns as evidenced by Promissory Note Nos. 34 to 67. What shouldapply, petitioner asserts, is the ruling of this Court in Caltex Philippines, Inc.v. Intermediate Appellate Court31and Quiogue v. Bautista,32and not theruling of this Court in Bachrach which involves only one promissory note.

Petitioner insists that, although respondent and her husband had a jointaccount with it, they had separate loan obligations as evidenced by the

promissory notes; hence, it had separate causes of action for each and everydrawdown evidenced by a promissory note.

For her part, respondent admits having executed the promissory notes.However, as testified to by Ganuelas, the witness for petitioner, she and herhusband only have one loan account with petitioner, hence, the latter hadonly one cause of action against her either for the collection of the entire loanaccount or for the extrajudicial foreclosure of the real estate mortgage, alsofor the entire amount of the loan. Petitioner cannot split her single loanaccount by filing a simple collection suit and a petition for extrajudicialforeclosure of the real estate mortgage without violating the rule againstsplitting a single cause of action.

Respondent asserts that the real estate mortgage executed by respondentand her deceased husband was a security not only of their loan account in

the amount of P7,000,000.00 but for all other loans that may have been

extended to them in excess of that amount.

The petition is unmeritorious.

On the first issue, we agree with petitioners contention that the general ruleis that an order denying a motion to dismiss or demurrer to evidence isinterlocutory and is not appealable. Consequently, defendant must go to trialand adduce its evidence, and appeal, in due course, from an adversedecision of the trial court. However, the rule admits of exceptions. Where thedenial by the trial court of a motion to dismiss or demurrer to evidence istainted with grave abuse of discretion amounting to excess or lack ofjurisdiction, the aggrieved party may assail the order of dismissal on apetition for certiorari under Rule 65 of the Rules of Court. A wide breadth ofdiscretion is granted in certiorari proceedings in the interest of substantialjustice and to prevent a substantial wrong.33As the Court held in Preferred

Home Specialties, Inc. v. Court of Appeals:34

It bears stressing that a writ of certiorari is of the highest utility andimportance for curbing excessive jurisdiction and correcting errors and mostessential to the safety of the people and the public welfare. Its scope hasbeen broadened and extended, and is now one of the recognized modes forthe correction of errors by this Court. The cases in which it will lie cannot bedefined. To do so would be to destroy its comprehensiveness and limit itsusefulness.

The appropriate function of a certiorari writ is to relieve aggrieved partiesfrom the injustice arising from errors of law committed in proceedingsaffecting justiciable rights when no other means for an adequate and speedyrelief is open. It is founded upon a sense of justice, to release against wrongsotherwise irreconcilable, wrongs which go unredressed because of want of
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