505 Phil. 278
CARPIO MORALES, J.:
The plaintiffs Locsins thus prayed that:x x x
- Defendant bank, through its Assistant Vice-President-Combank II, Agnes C. Tuason, told plaintiffs that the loan valuation of the two aforementioned properties [of the spouses Evidente securing the CLA] is PHP2.5 Million, and this was in fact the amount received by plaintiff from defendant bank . . .
- The spouses Evidente, through plaintiffs, paid for the monthly installments due on the [CLA] until October, 1997, as evidenced by OR No. 167588 dated October 31, 1997 issued by defendant bank. . . .
- The spouses Evidente were unable to make subsequent payments and the real estate mortgage over the Evidente properties was recommended for foreclosure.
x x x
- . . . . [P]laintiffs advised defendant bank that they will be settling their 1st TLA in full and shall be taking the property covered by TCT No. N-138739 out of the mortgage.
- However, to the shock of plaintiffs, defendant bank through its Account Officer, Nelia Umbal, refused to release the said property because the Evidente properties, the mortgage of which secures . . . the CLA dated November 6, 1996, will be insufficient to cover the balance of the said CLA.
- Plaintiffs were surprised to learn that defendant bank capriciously, recklessly and oppressively gave a loan valuation of only PHP900,000.00 for each of [the] two Evidente properties, or a total of PHP1.8 Million. This valuation is unfair and unreasonable considering that the fair market value of these properties is around PHP5 Million. Furthermore, no reason was given by defendant bank for the sudden and unjust change in the valuation, which was originally pegged by defendant at PHP2.5 Million.
- In effect, the mortgaged property covered by TCT No. N-138739, which secures the 1st TLA dated September 28, 1995, and which has a loan valuation of PHP700,000.00, was also made a collateral for the CLA. Worse, the whole amount of the loan under the 1st TLA was declared due and demandable, although plaintiffs faithfully and regularly paid for the monthly amortization there[of].
- Thus, to complete, rather suspiciously, the security for the CLA which is for PHP2.5 Million, defendant bank further informed plaintiffs that it would cost them PHP1.4 Million to take the property covered by TCT No. N-138739 [which secured the first TLA] out of the mortgage, because the deficiency in the CLA secured by the Evidente properties must also be paid. This amount is preposterous considering that at the time, the remaining balance of the 1st TLA was only around PHP450,000,00. Moreover, plaintiffs were suffering from financial difficulties because of the sharp decline of the peso's purchasing power.
x x x
- Defendant bank filed with the Executive Judge of Quezon City, through public defendants herein, an Application for Extra-Judicial foreclosure of Real Estate Mortgage under Act No, 3135, as amended, dated May 4, 1998. The application sought the sale in a public auction of the Evidente properties and plaintiffs' property covered by TCT No. 67286 [which secured the second TLA and which TLA had been settled]. . . .
x x x
- Yet, defendant bank and public defendants allowed the public auction to proceed as scheduled [on July 23, 1998].
x x x
- In the meantime, without making any effort to cancel the effects of the public auction held on July 23, 1998, defendant bank filed with public defendants an Amended Application for Extra-Judicial Foreclosure of Real Estate Mortgage under Act No. 3135, as amended. The amended application sought the sale in a public auction of the same Evidente properties and plaintiffs' property covered by TCT No. N-138739 [which secured the first TLA].@@
- Acting upon the said application, public defendants issued another notice of Sheriff Sale dated July 28, 1998 which scheduled the public auction of the aforementioned real properties on August 26, 1998 . . .
- Plaintiffs' property covered by TCT No. N-138739 is erroneously included in the amended application and in the Notice of the Sheriff's Sale. The said mortgaged property secures the 1st TLA dated September 28, 1995, for which plaintiffs have faithfully and regularly paid for the monthly amortization due. On the other hand, defendant bank is foreclosing the said property and the two Evidente properties for alleged failure to pay the monthly installments due on the CLA dated November 8, 1996.
x x x- Furthermore, defendant bank acted in bad faith and in willful breach of its contractual obligations to plaintiffs in understating the loan valuation of the two Evidente properties, and in effect declaring the property covered by TCT No. N-133739 [which secured the first TLA] as additional collateral for the said CLA. (Emphasis and underscoring supplied).
A. Upon filing of this complaint, a temporary restraining order (TRO) be immediately issued ex-parte, enjoining defendants, their agents and/or representatives from enforcing the Notice of Sheriff's Sale dated July 28, 1998, and from proceeding with the scheduled public auction of the properties included therein, particularly plaintiffs' real property covered by TCT No. N-138739, on August 26, 1998, or on any date thereafter, until further orders from the Honorable Court.Branch 233 of the Quezon City RTC denied the Locsins' prayer for the issuance of a TRO, by Order of August 25, 1998.
B. After appropriate proceedings, a writ of preliminary injunction be issued, under the same tenor as above, and upon payment of such bond as may be fixed by the Honorable Court.
C. After trial on the merits, judgment be rendered:Other reliefs which are just and equitable are likewise prayed for.[4] (Emphasis and underscoring in the original; italics supplied).
- On the First Cause of Action, ordering defendant bank to faithfully comply with its obligations under the 1st TLA and the CLA, revert the loan valuation of the two Evidente properties covered by TCT's Nos. N-166336 and 166337 to PHP2.5 Million, and allow plaintiffs to take its property covered by TCT No. N-138739 out of the mortgage by paying the balance thereon, minus interests and penalties accruing from February 1998;
- On the First and Second Causes of Action, ordering defendant bank to pay plaintiffs PHP500,000.00 in actual damages;
- On the Third Cause of Action, ordering defendant bank to pay plaintiffs PHP1 Million in actual damages;
- On the Fourth Cause of Action, ordering defendant bank to pay plaintiffs PHP500,000.00 in moral damages;
- On the Fifth Cause of Action, ordering defendant bank to pay plaintiffs PHP300,000.00 in exemplary damages;
- On the Sixth Cause of Action, ordering defendant bank to [pay] plaintiffs PHP200,[000].00 for attorney's fees and litigation expenses;
- Making the injunction issued against defendants permanent; and
- Ordering defendants to pay costs of suit.
8.2 All the promissory notes signed by [the Locsins] uniformly provide:on which letter the Locsins affixed their conformity; that in light of the Locsins' default in the settlement of their monthly obligations under the CLA, it sent them a January 7, 1998 demand letter advising them of the Past Due Status of their promissory note covering the P2.5 million account to thereby "automatically mean that [said promissory note] and the other loan account under [the promissory note covering the 1st TLA] with an outstanding balance of P460,652.95 are considered Due and Demandable already;" that after a follow up letter and a final letter of demand, the Locsins requested, by letter of February 26, 1998, that the promissory note under the 1st TLA and that under the CLA be treated separately and that one of their titles be released upon payment of P1.8 million; that by letter of March 5, 1998, it advised the Locsins that their request in their February 26, 1998 letter "regarding the release of one of the [two Evidente titles]" was approved, "subject to the partial payment on Principal plus all interests and charges amounting to P1,934,465.79 as of March 20, 1998"; that to its March 5, 1998 letter, the Locsins, by letter of March ___, (sic) 1998, replied as follows:Upon the occurrence as to Maker or any Co-Maker of this Promissory Note of any of the following events of default, the outstanding principal, accrued interest and any other sum payable hereunder or under any related agreement shall become immediately due and payable without presentment, demand, protest or notice of any kind (other than notice of the event and fact of default) all of which are hereby expressly waived by the Maker and all of the Co-Makers, if any:8.3 The letter of approval of the P2.5 million loan of [the Locsins] has a cross-default provision, which reads:x x x
3) Failure by the Maker or any Co-Maker to perform or the violation of any provision of this Promissory Note or any related agreement;
x x x
6) The Maker or any Co-Maker fails to pay any money due under any other agreement, standby letter of credit or document evidencing, securing, guaranteeing or otherwise relating to indebtedness of the Maker or any Co-Maker to any other creditor, or there occurs, any event of default or any event which, but for the passage of time or the giving of notice, or both, would constitute under any such agreement, stand by letter of credit or document (and which has not been remedied within any applicable grace period):
x x x3.6 A default on any availment under this credit line facility shall automatically mean a default on [the Locsins] existing term loan under Promissory Note No. 29-01-9080-95 [covering the first TLA] and vice versa (Emphasis and underscoring supplied),[6]
We would like to request for a thirty day extension on the deadline given us today for the payment of P1,900,000.00, or (sic) the release of one title under PN No. 11-01-0586-96 [covering the CLA] as the person very much interested in purchasing it has asked us for the same. At the same time we are also going to take out the property under PN No. 29-01-9080-95 [covering the first TLA], so that only one property under the fire (sic) account mentioned shall be left mortgaged to your bank.that despite the grant of the Locsins' request for extension of 30 days or up to April 20, 1998 to pay P1.9 million as a condition "for the release of the title," the Locsins failed to come up therewith; and that the inclusion of the Locsins' mortgaged title covering the 1st TLA in the amended application for extra-judicial foreclosure was "not erroneous because of the cross-default provisions and acceleration clauses in the loan documents which [the Locsins] signed."
Thank you for your kind consideration.[7] (Underscoring supplied);
Petitioner accordingly prayed in its complaint that the Locsins be ordered to pay it jointly and severallyx x x
- Defendants failed to satisfy their obligations under the . . . Promissory Notes [covering the first TLA & the CLA] and Plaintiff deemed them in default;
x x x
- The [amended] extrajudicial sale was conducted on 23 September 1998 and Plaintiff was again declared the highest bidder . . .
- The total outstanding obligation of Defendants at the time of the foreclosure was PESOS: FIVE MILLION TWENTY THREE THOUSAND FOUR HUNDRED NINETY SIX & 64/100 (P5,023.496.64). However, the appraised value of the properties was only P3,879,406.80 and plaintiff thus submitted a bid of PESOS: THREE MILLION EIGHT HUNDRED SEVENTY NINE THOUSAND FOUR HUNDRED SIX & 80/100 (P3,879.406.80);
- After all expenses for the foreclosure and registration of the Certificate of Sale have been deducted from the aforementioned bid, there still remains an outstanding balance in the amount of PESOS: ONE MILLION ONE HUNDRED FORTY FOUR THOUSAND EIGHTY NINE & 84/100 (1,144,089.84), EXCLUSIVE OF INTEREST AT THE RATE OF TWENTY FIVE AND A HALF PERCENT (25.5%) per annum, which Plaintiff is entitled to recover from Defendants;
- On 09 February 1999, counsel for plaintiff sent a letter to defendants dated 05 February 1999, demanding from the latter the payment of said deficiency but Defendants refused and failed and continue to refuse and fail to pay said obligation . . .
- Due to Defendants' unreasonable refusal and failure to comply with Plaintiffs just demands, Plaintiff was compelled to institute the present action and to engage the services of counsel to whom it bound itself to pay the sum of P130,000.00, plus appearance fee of P2,000.00 and other legal costs and expenses.[14] (Emphasis in the original; underscoring supplied).
To petitioner's complaint (for sum of money), the Locsins filed a Motion to Dismiss[16] on the ground that it should have been raised as compulsory counterclaim in their (the Locsins') complaint (for specific performance, damages and nullification of the public auction), and by failing to raise it as such, it is now "barred by the rules." To the Motion, petitioner filed its Opposition which merited the Locsins' filing of a Reply to Opposition.[17]Other just and equit1able reliefs under the premises are likewise prayed for.[15] (Emphasis in the original).
- the outstanding obligation in the sum of PESOS: ONE MILLION ONE HUNDRED FORTY FOUR THOUSAND EIGHTY NINE & 84/100 (1,144,089.84), plus interest thereon at the rate of twenty five and a half percent (25.5%) per annum from 23 September 1998, the date of the foreclosure sale, until the obligation has been fully paid;
- attorney's fees in the sum of P130,000.00, plus appearance fee of P2,000.00; and
- costs of suit and expenses of litigation.
The motion to dismiss is premised on the ground that plaintiff's claim in the instant case should have been raised in the previous case, [C]ivil [C]ase No. Q98-35337, wherein plaintiff herein was the defendant, said claim being a compulsory counterclaim and for failure to raise the same, it is now barred by the rules.The Locsins' Motion for Reconsideration having been denied by the Mandaluyong RTC by Order of March 21, 2001,[20] they appealed to the Court of Appeals which, by the present assailed decision of June 5, 2003,[21] reversed the Orders of the Mandaluyong RTC, it finding that petitioner's complaint was a compulsory counterclaim which should have been raised in its Answer to the Locsins' complaint, and having failed to do so, it is now barred; that litis pendentia and res judicata apply to the case; and that petitioner violated the rule on forum shopping, hence, the dismissal of its complaint is warranted. Explained the appellate court:
It is noted, however, that the instant case is one for collection of alleged deficiency amount as the proceeds of the foreclosure sale of defendant's properties are not sufficient to cover the entire indebtedness. In effect, such claim did not arise as a consequence of [C]ivil Case No. 098-353337 but was already existing (sic) even before the institution of that earlier case.
Without necessarily delving into the veracity of plaintiff's claim but merely considering its origin and nature as alleged in the complaint, said claim is merely permissive and not compulsory. Thus, such a claim can stand as an independent action.[19] (Underscoring supplied).
[The Locsins'] complaint in Civil Case No. Q-98-35337, pending before Branch 223 of the Regional; Trial Court of Quezon City asks specific performance by private respondent Banco de Oro of its obligations under the very same loan agreements covered by Real Estate Mortgages mentioned in private respondent's Complaint in Civil Case No. MC-99-935 before the Mandaluyong City Trial Court. In both cases, the real properties involved are those covered by TCT Nos. N-138739, [N-166336] and N-166337. The basis of the parties' respective complaints arose from the very same transactions, the Term Loan Agreement, dated September 28, 1995 and the Credit Line Agreement, dated November 6, 1996. Clearly, there is a logical connection between both claims which arose from the same transaction and are necessarily connected and it does not require the presence of third parties for its adjudication. A counterclaim is logically related to the opposing party's claim where separate trials of each of their respective claims would involve substantial duplication of effort and time by the parties and the courts.Hence, the present Petition for Review on Certiorari,[23] petitioner raising the following assignment of errors:
Moreover, Sec. 2, Rule 9 of the Rules of Court provides:"Sec. 2. Compulsory counterclaim, or cross-claim, not set up barred. - A compulsory counterclaim. or a cross claim, not set up shall be barred."Private respondent should have raised its complaint as compulsory counterclaim in the Regional Trial Court of Quezon City. Failing to do so, it is now barred. The reason for the rule relating to counterclaims is to avoid multiplicity of suits and to enable the Courts to dispose of the whole matter in controversy in one action, and adjustment of defendant's demand by counterclaim rather than by independent suit. (Reyes vs. Court of Appeals, 38 SCRA 138).
[The Locsins'] second argument is that private respondent's complaint in Civil Case No. MC-99-935 constitutes litis pendentia, and therefore should have been dismissed by the trial court. For litis pendentia to be a ground for dismissal of an action, three elements must concur: (a) identity of parties, or at least such parties who represent the same interest in both actions; (b) identity of rights asserted and relief prayed for being founded on the same facts; and (c) the identity, with respect to the two preceding particulars in the two cases, is such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other.
Applying this test, the principle of litis pendentia and res judicata will certainly apply to the instant case, all three requisites are present. The parties are the same and what is involved in both Civil Case No. Q-98-35337 pending before the Quezon City Trial Court and Civil Case No. MC-99-935 before the Mandaluyong City Trial Court are the same subject matter and set of circumstances, which would entail presentation of the same evidence. Judgment in favor of one of the parties in Civil Case No. Q-9835337 would bar the institution of the case filed before the Mandaluyong City Trial Court.
Finally, [the Locsins] assert that Civil Case MC-99-935 should be dismissed since private respondent is guilty of willful and deliberate forum shopping. Jurisprudence has defined forum-shopping as the filing of multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment. Forum shopping exists where the elements of litis pendentia are present, and where the a final judgment in one case will amount to res judicata in the other. (Heirs of Victorina Motus Penaverde v. Heirs of Mariano Penaverde, 344 SCRA 69). Thus, there is forum shopping when there exist: a) identity of parties, or at least such parties as represent the same interest in both actions, b) identity of rights asserted and relief prayed for, the relief being founded on the same facts, and c) the identity of the two preceding particulars is such that any judgment rendered in the other action, will amount to res judicata in the action under consideration. (Prubankers Association vs. Prudential Bank and Trust Company, 302 SCRA 83). As discussed earlier, the elements of litis pendentia being present and that res judicata will eventually result, a decision by the Quezon City Trial Court would bar the institution of the Civil Case in the Mandaluyong City Trial Court for the collection of deficiency claim in the foreclosure sale of the petitioner's properties. Private respondent violated the rule on forum shopping and therefore, the summary dismissal of their action is warranted.[22] (Italics in the original; underscoring supplied).
The test to determine identity of the causes of action is to ascertain whether the same evidence necessary to sustain the second cause of action is sufficient to authorize a recovery in the first, even if the form or nature of the two (2) actions are different from each other. If the same facts or evidence would sustain both, the two (2) actions are considered the same within the rule that the judgment in the former is a bar to the subsequent action; otherwise, it is not. This method has been considered the most accurate test as to whether a former judgment is a bar in subsequent proceedings between the same parties. It has even been designated as infallible.By their Comment,[30] the Locsins maintain that petitioner's claim in Civil Case No. MC-99-935 is "logically related" to their claim in Civil Case No. Q-98-35337, as they involve the same parties, rely on the same facts, subject matter and series of
While it is true that the two (2) cases are founded in practically the same set of facts, as correctly observed by the Court of Appeals, it cannot be said that exactly the same evidence are needed to prove the causes of action in both cases. Thus, in Civil Case No, 91-56185 of the RTC of Manila, the evidence needed to prove that petitioner sustained damage to its reputation and goodwill is not the same evidence needed in Civil Case No. 221 of the RTC of Batangas to prove the allegation that a substantial amount of respondent Bausas' bank deposit in petitioner's bank was illegally withdrawn without her consent or authority, The RTC of Batangas and the Court of Appeals, therefore, did not abuse their discretion in denying petitioner's motion to dismiss which was based on the ground of litis pendentia.[29] (Emphasis and underscoring supplied).
The counterclaim must be existing at the time of filing the answer, though not at the commencement of the action for under Section 3 of the former Rule 10, the counterclaim or cross-claim which a party may aver in his answer must be one which he may have "at the time" against the opposing party. That phrase can only have reference to the time of the answer. Certainly a premature counterclaim cannot be set up in the answer. This construction is not only explicit from the language of the aforecited provisions but also serves to harmonize the aforecited sections of Rule 10, with section 4 of the same rule which provides that "a counterclaim . . . which either matured or was acquired by a party after serving his pleading may, with the permission of the court, be presented as a counterclaim . . . by supplemental pleading before judgment."While petitioner could have, after the Locsins filed on March 26, 1999 a Supplemental Complaint in Civil Case No. Q-98-35337, set up, in its Supplemental Answer, its claim subject of Civil Case No. MC-99-935, again assuming arguendo that it is a Compulsory Counterclaim, the setting up of such "after-acquired counterclaim," is merely permissive, not compulsory.[34]
Thus a party who fails to interpose a counterclaim although arising out of or is necessarily connected with the transaction or occurrence of the plaintiff's suit but which did not exist or mature at the time said party files his answer is not thereby barred from interposing such claim in a future litigation. . .[33] (Emphasis and underscoring supplied).