May 2011 - Philippine Supreme Court Resolutions
Philippine Supreme Court Resolutions
[G.R. No. 192342 : May 30, 2011]
ASSET POOL A (SPV-AMC), INC., AS SUCCESSOR IN INTEREST OF BANK OF THE PHILIPPINE ISLANDS, PETITIONER, V. SPOUSES TEODORO CRUZ AND EDITHA CRUZ, ET AL., RESPONDENTS.
G.R. No. 192342 � ASSET POOL A (SPV-AMC), INC., as successor in interest of Bank of the Philippine Islands, petitioner, v. SPOUSES TEODORO CRUZ and EDITHA CRUZ, et al., respondents.
RESOLUTION
The respondent spouses Teodoro Cruz and Editha Cruz obtained two loans from the petitioner Asset Pool A (SPV-AMC), Inc.[1]:
- a P3.2 million loan, evidenced by a promissory note dated August 20, 1997; and
- a P2.0 million loan, evidenced by a promissory note dated September 29, 1997.
They also executed two real estate mortgages over their properties as security for the loans.[2]
When the spouses Cruz defaulted, the petitioner commenced extrajudicial foreclosure proceedings. At the auction sale, the petitioner emerged as the highest bidder, with a bid price of P4,091,008.00. It, however, contended that the bid price was insufficient to cover the total debt of the spouses Cruz, which amounted to P9,284,040.63. Hence, the petitioner sought to recover the balance of P5,193,032.63 (plus interests) from the spouses Cruz by filing a collection complaint against them before the Regional Trial Court (RTC) of Makati City. Its complaint alleged the following facts:
2. On September 26, 1997, [the spouses Cruz] x x x executed x x x in favor of [the petitioner] a Rea) Estate Mortgage, whereby the former obtained from the latter a loan in the amount of [3.2 million pesos] x x x.
x x x x
6. As of the time of said auction sale, [the spouses Cruz'] entire obligation with [the petitioner] was in the aggregate amount of P9,173,902.63, exclusive of other charges.
7. Thus, with the aforementioned outstanding obligation of the [the spouses Cruz] with the [petitioner] in the aggregate amount of P9,284,040.63 (inclusive of other charges) and the aforementioned amount of P4,091,008.00, representing the bid price x x x, there is a deficiency thereon in the amount of P5,193,032.63 as of February 18, 2002 representing deficiency in the principal balance, interest and late payment charges.
8. [The spouses Cruz] have failed and refused, despite repeated demands, to pay said amount of P5,193.032.63 together with the accumulated interest and other charges thereon.[3]
Noting that the petitioner alleged only the first loan for P3.2 million, the RTC ruled that the petitioner can recover only the balance of this loan and cannot include the unpaid amount of the second loan for P2.0 million. BPI's witnesses testified that the "outstanding balance [of the promissory note for the P3.2 million loan], as of auction date is P2,794,264.54,"[4] plus interest of P1,232,749.10; thus, the total amount due from the first loan as of auction date was P4,027,013.64. Since the bid price was P4,091,008.00, a sum higher than the mortgage debt, the petitioner no longer had a cause of action for collection against the spouses Cruz.
The petitioner appealed the RTC's Decision with the Court of Appeals (CA). It contended that the P5,082,849.63 it claimed as due from the spouses Cruz included the balance of the two loans, plus other charges; thus, the second loan for P2.0 million was included in its cause of action. Indeed, the computation of the amount due from the spouses Cruz was reflected in the statement of account that was attached to the complaint. At any rate, the petitioner claimed that its failure to expressly allege the second loan for P2.0 million in its complaint was cured when the matter was testified to by its witnesses during trial.
The CA disagreed with the petitioner's contentions. It ruled that the RTC correctly disregarded the petitioner's claims with respect to the second loan for P2.0 million, as this matter was not raised in the complaint; that the petitioner's witnesses testified on the matter did not cure the defect because the spouses Cruz objected to its presentation. Thus, it affirmed the RTC's decision. The petitioner sought the reversal of the CA's Decision through a petition for review on certiorari filed with this Court.
In our Resolution of August 9, 2010,[5] we denied the petition for its failure to comply with the following procedural requirements:
- lack of affidavit and proof of service to the CA, as required by Sections 3 and 5, Rule 45, Section 5(d), Rule 56, and Section 13, Rule 13 of the Rules of Court;
- lack of explanation why service was not done personally, as required by Section 11, Rule 13, in relation to Section 3, Rule 45 and Section 5(d), Rule 56 of the Rules of Court;
- lack of certificate against non-forum shopping, as required by Section 4(e), Rule 45, in relation to Section 5, Rule 6, Sections 4 and 5(d), Rule 56, and the second paragraph of Section 2, Rule 42 of the Rules of Court.
The petitioner sought reconsideration of our August 9, 2010 Resolution, and claimed that:
- it belatedly furnished the CA with a copy of its petition on September 13, 2010 by personal delivery, and attached the affidavit of proof of service;
- it did not have sufficient manpower and time to serve a copy of the petition to the spouses Cruz, since its office staff had other equally important tasks to attend to and, thus, had to serve a copy of the petition through registered mail; and
- its certificate against forum shopping[6] was already attached to its Motion for Extension of Time to File Petition for Review, and, thus, found it superfluous and unnecessary to attach another copy to its Petition for Review on Certiorari.
With respect to the merit of the case, the petitioner insists that its failure to allege the second loan for P2.0 million was cured when it presented evidence on the matter, without objection from the spouses Cruz. For this reason, it claims that its complaint is deemed amended under Section 5, Rule 10 of the Rules of Court:
SEC. 5. Amendment to conform to or authorize presentation of evidence.� When issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made.
Finding the petitioner's explanation of its failure to comply with the procedural requirements satisfactory, we resolve to grant its motion for reconsideration of our August 9, 2010 Resolution. Nevertheless, we resolve to deny the petition for review on certiorari for its failure to show any reversible error committed by the CA.
A complaint is deemed amended to include issues not initially raised but were subsequently addressed through evidence presented at the hearing only when not objected to by the opposing party � that is, when the presentation of evidence was made with the other party's express or implied consent.
When evidence is presented by one party, with the express or implied consent of the adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards those issues, which shall be considered as If they have been raised in the pleadings. There is implied consent to the evidence thus presented when the adverse party fails to object thereto.[7]
When, however, a proper and timely objection is made, "the court may nevertheless admit the evidence where the adverse party fails to satisfy the court that the admission of the evidence would prejudice him in maintaining his defense upon the merits, and the court may grant him a continuance to enable him to meet the new situation created by the evidence.�[8]
The transcript of the hearing before the RTC clearly showed that the spouses Cruz' counsel consistently opposed the petitioner's attempt to present evidence pertaining to the second loan of P2.0 million.[9] At this point, the petitioner should have moved for the amendment of the complaint, but it never did. It did not even include the promissory note covering the second loan in its formal offer of evidence. The RTC could not motu proprio consider the complaint amended; the liberality enjoined by Section 5, Rule 10 of the Rules of Court in allowing amendments presupposes that a party requested for the amendment of his pleadings. To rule otherwise will deny the adverse party of the opportunity to contest the propriety of the amendment. Our ruling in Lapreciosisima Cagungun, et al. v. Planters Development Bank[10] is instructive:
It is thus clear that when there is an objection on the evidence presented because it is not within the issues made by the pleadings, an amendment must be made before accepting such evidence. If no amendment is made, the evidence objected to cannot be considered. In the case before us, the trial court, there being an objection on the evidence being presented by respondent, failed to order the amendment of the complaint. Thus, we are constrained not to consider evidence regarding the P30,000.00 and P118,000.00 allegedly withdrawn from their accounts. With this ruling, it follows that the outstanding loan of petitioners in the amount of P58,297.16 remains unpaid.
In this case, it was crucial for the petitioner to amend its complaint, as one of its causes of action was based on an actionable document � the promissory note covering the second loan of P2.0 million. When a party's action is based on a written instrument, Section 7, Rule 8 of the Rules of Court requires him to either (a) allege the substance of such written instrument in the pleading and attach a copy thereof, or (b) copy the instrument or document in the pleading.[11] The opposing party may contest the genuineness and due execution of the instrument only if, under oath, he specifically denies them and sets forth what he claims to be the facts; otherwise, its genuineness and due execution are deemed admitted.[12] If the petitioner's complaint was not amended to include the promissory note covering the second loan, then the spouses Cruz would have no opportunity to properly contest its genuineness and due execution. The liberal policy adopted in amending a party's pleadings was not meant to prejudice the other party's due process rights.
WHEREFORE, we GRANT the petitioner's motion for reconsideration of our Resolution of August 9, 2010. However, we DENY the petition for review on certiorari for its failure to show any reversible error committed by the Court of Appeals.
SO ORDERED.
Very truly yours,
(Sgd.) LUCITA ABJELINA-SORIANO
Clerk of Court
Endnotes:
[1] Rollo, pp. 23-24. The original creditor was Far East Bank and Trust Company, which later merged with the Bank of Philippine Islands, and then succeeded by the petitioner.[2] Id. at 40.
[3] Id. at 55-56.
[4] Id. at 41.
[5] Id. at 73-74.
[6] Id. at 5
[7] D.M. Wenceslao & Associates, Inc. v. Freyssinet Philippines, Inc., G.R. No. 166857, September 11, 2009, 599 SCRA 413, 419.
[8] Azolla Farms v. Court of Appeals, G.R. No. 138085, November 11, 2004, 442 SCRA 133, 141.
[9] Rollo, pp. 30-32. The transcript, reproduced in the petitioner's petition, read:
Atty. Vistan (spouses Cruz' counsel):
Madam Witness, what is the component part of this P4,300,219.00 which is the outstanding indebtedness of [spouses Cruz) as of August 2001?
Witness:
This is only the principal amount, sir, for the two accounts.
Atty. Vistan:
I am asking you about the P3.2 million which is the subject matter of this complaint.
Witness:
Actually, there were two (2) promissory notes in that Complaint, sir.
Atty. Vistan:
We move to strike out the answer, your Honor, because...
Court:
She is explaining.
Atty. Vistan:
Yes, your Honor, but the Complaint x x x refers to one promissory note, your Honor.
Court:
The Complaint?
Atty. Vistan:
Yes, your Honor.
x x x x
ATTY. VISTAN:
Again, your Honor, we move to strike out the answer because what is litigated here is the amount of P3,200,000.00.
[10] G.R. No. 158674, October 17, 2005, 473 SCRA 259, 277.
[11] RULES OF COURT, Rule 8, Sec. 7. Action or defense based on document. �Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.
[12] RULES OF COURT, Rule 8, Sec. 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.
