Facts:

The case involves Banco De Oro Universal Bank (petitioner) and Spouses Enrique Gabriel Locsin and Ma. Geraldine R. Locsin (respondents). The events unfolded when, on September 29, 1995, the Locsin spouses secured a loan of ₱700,000 from Banco De Oro collateralized by a real estate mortgage on their property, documented under Transfer Certificate of Title (TCT) No. N-138739. The promissory note for this loan included an acceleration clause, stipulating that upon any event of default, all amounts due would become immediately payable. Subsequently, on November 6, 1996, the Locsins engaged a credit line facility for ₱2.5 million from BDO, secured by a third-party mortgage on properties belonging to their business partners, the Evidentes, covered by TCT No. N-166336 and N-166337. Despite the insufficiency of the mortgaged Evidente properties, BDO approved the credit line owing to the Locsins' previously good payment history.

However, by October 1997, the Locsins defaulted on the

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Facts:

Loan Transactions and Mortgage Agreements

• On September 29, 1995, respondents, Spouses Enrique Gabriel and Ma. Geraldine Locsin, obtained a loan amounting to P700,000.00 from petitioner Banco De Oro Universal Bank (BDO).
• The loan was secured by a real estate mortgage on the respondents’ property covered by Transfer Certificate of Title (TCT) No. N-138739 (referred to as the 1st Loan).
• The promissory note for the 1st Loan contained an acceleration clause, stipulating that upon default by the maker or any co-maker, the entire outstanding balance (principal, accrued interest, and any other sums) immediately became due and payable without further notice, apart from a notice of default.

Additional Credit Line Facility and Cross-Default Provision

• On November 6, 1996, the Locsins secured a credit line facility of P2.5 million from BDO.
• This credit line was secured by a real estate mortgage on the Evidente properties of their business partners (Juanito and Anita Evidente), covered by TCT Nos. N-166336 and N-166637.
• BDO’s approval letter for the credit line facility incorporated a cross-default provision linking the credit line facility and the 1st Loan; default on one would render the other immediately due and payable.
• Despite the Evidente properties being insufficient to cover the credit line amount, the Locsins were approved based on their previously good paying record.

Default, Demand, and Acceleration of Loans

• The good paying record of the Locsins deteriorated in October 1997 when they defaulted on the credit line facility.
• On January 7, 1998, BDO sent a demand letter to the Locsins, informing them that the default on the credit line facility triggered the cross-default provision and the acceleration clause, thereby making the 1st Loan immediately due and payable.
• The respondents attempted loan restructuring but ultimately failed to meet the bank’s requirements.

Foreclosure Proceedings and Auction Sale

• On August 24, 1998, after the respondents initiated a complaint for Specific Performance, Tort, and Damages against BDO (Civil Case No. Q-98-35337) seeking loan restructuring and an injunction against foreclosure, the trial court denied the injunctive reliefs.
• Consequently, on September 23, 1998, BDO proceeded with the extrajudicial foreclosure of both the property securing the 1st Loan and the Evidente properties.
• At the auction sale, BDO was declared the highest bidder with a bid of P3,879,406.80.
• According to the Sheriff’s Certificate of Sale, the total outstanding balance on the two loans at the time of foreclosure was P3,460,363.97.

Post-Foreclosure Developments and Claims for Deficiency

• On February 5, 1999, BDO sent a letter to the Locsins demanding payment of an additional amount claimed as the deficiency after foreclosure expenses and registration fees, initially alleged to be P1,259,166.21.
• However, a Bid Statement prepared by BDO’s legal counsel indicated the deficiency amount was actually P1,144,089.84.
• On November 29, 1999, BDO filed an action for Collection of a Sum of Money before the Regional Trial Court (RTC) of Mandaluyong City asserting that the respondents should pay the alleged deficiency.
• The Locsins, instead of answering the complaint, filed a Motion to Dismiss on February 21, 2000, contending that the deficiency should have been raised as a compulsory counterclaim in their earlier complaint (Civil Case No. Q-98-35337).
• The RTC denied the Motion to Dismiss on September 18, 2000, leading the respondents to elevate the issue to the Court of Appeals (CA) on certiorari, while the court a quo archived the case pending an incident.

Developments in the Appellate Courts and Supreme Court

• The respondents prevailed in the Court of Appeals, but the decision was later reversed by the Supreme Court.
• The Supreme Court remanded the case back to the lower court and ordered the continuance of the proceedings based on a final decision rendered on December 19, 2005.
• The Locsins failed to file an answer subsequent to the Supreme Court decision.
• On April 28, 2006, BDO alerted the court to the finality of the remanded proceedings and the respondents’ default, and petitioned for the reinstatement of the case with ex parte evidence presentation.
• The RTC allowed BDO to present its evidence ex parte on October 9, 2006, which included:
• A Statement of Account showing that the deficiency ballooned to P3,709,961.00 by November 24, 2006.
• Supporting documents that were later found to have discrepancies and lacked proper identification of the individuals preparing them.
• On February 20, 2007, the RTC rendered its decision in favor of BDO, holding the respondents jointly and severally liable for:
• P3,709,961.00 representing the outstanding obligation as of November 25, 2006.
• Interest at 12% per annum on the outstanding amount from November 25, 2006.
• An additional P10,000.00 as attorney’s fees.
• The respondents appealed the RTC’s decision with the Court of Appeals, ascribing several errors on the part of the RTC.

Issues Raised on Appeal and Procedural Allegations

• The respondents alleged that the RTC erred in awarding the deficiency amount, contending that:
• The deficiency should have been raised as a compulsory counterclaim in the earlier complaint.
• BDO failed to prove its claim by a preponderance of evidence.
• The respondents also contended that the CA erred in not dismissing the appeal on procedural grounds:
• Failure to comply with Section 7, Rule 44 regarding the required number of copies of the appellate brief.
• Failure to comply with Section 13 (d) and (e) of Rule 44.
• Although the respondents did not specifically raise some of these errors in their original pleadings before the CA, the issue of sufficiency of the evidence was deemed pivotal by both the appellate court and the Supreme Court.

Supreme Court Analysis and Final Outcome

• In addressing the respondents’ assignment of errors, the Supreme Court analyzed whether:
• The CA erred in resolving issues not specifically raised by respondents but closely related to matters of evidentiary sufficiency.
• BDO had met its burden of proving its claim for deficiency by a preponderance of evidence.
• The procedural lapses in the respondents’ appeal (regarding service of the appellate brief) warranted dismissal.
• The Supreme Court noted that:
• The appellate court possesses broad discretionary power to consider plain or clerical errors and issues essential to dispensing just and complete justice.
• The failure of BDO’s evidence — including inconsistencies in the Application for Extrajudicial Foreclosure, the Bid Statement, and the Statement of Account — further weakened its claim.
• The Sheriff’s Certificate of Sale, having been executed by a court officer, was a more reliable proof of the outstanding balance.
• Ultimately, the Supreme Court found no grave or reversible error in the CA’s decision, leading to the affirmation of the CA’s ruling dismissing petitioner BDO’s complaint.

Issue:

Whether the Court of Appeals committed reversible error by considering an issue not raised in the respondents’ appeal:

• The petitioner argued that the respondents failed to raise the sufficiency of evidence issue in their pleadings.
• The Court examined whether the appellate court could consider issues that, although not expressly raised, were necessary for a complete resolution of the dispute.

Whether the Court of Appeals erred in ruling that petitioner BDO failed to prove by a preponderance of evidence its claim to recover the deficiency amount of P3,709,961.00:

• The sufficiency and credibility of the evidence presented by BDO, including discrepancies in various documents, was scrutinized.
• The reliance on the ex parte evidence and its proper authentication were key factors in the ruling.

Whether the Court of Appeals erred in not dismissing the respondents’ appeal for procedural lapses:

• Specifically, failure to serve the required number of copies of the appeal brief under Section 7, Rule 44.
• Non-compliance with Section 13 (d) and (e) of Rule 44, and whether these constituted grounds for mandatory dismissal.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Discretion of the Appellate Court Regarding Unassigned and Procedural Issues

• The Court emphasized that an assignment of error is generally required for appellate review; however, exceptions exist when:

• The error in question is plainly obvious.

• It affects the complete resolution of the issues at hand.

• The Court justified that the sufficiency of BDO’s evidence was inherently related to the primary issue of whether the deficiency amount was proven, and thus within the appellate court’s jurisdiction to examine.

• It was noted that issues affecting the fundamental right of a party may be considered even if not explicitly raised in the appeal.

Evidentiary Burden and Preponderance Standard

• The Court reiterated that in civil cases the burden of proof lies on the party asserting an affirmative claim.
• BDO’s evidence, particularly the self-serving documents such as the Bid Statement and the Statement of Account, failed to meet the required standard due to:
• Inconsistencies between different documents.
• Lack of proper authentication or explanation by competent witnesses.
• Th

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