G.R. No. 163902 - Casent Realty and Development Corp. vs. Premiere Development Bank

On December 28, 1994, Casent Realty & Development Corporation (petitioner) secured a commercial loan of Php40,000,000.00 from Premiere Development Bank (respondent).
The loan was secured by Promissory Note No. 235-Z and a real estate mortgage over a parcel of land covered by Transfer Certificate of Title No. 136244 from the Register of Deeds of Makati City.
The loan terms allowed prepayment of the principal (balloon payment) without pre-termination, which Casent Realty partially availed by paying Php10,740,000.00 on August 24, 1995, reducing the principal to Php29,260,000.00.
Additional commercial loans amounting to Php7,860,000.00 and Php2,709,556.16 were also taken out, secured by Promissory Note Nos. 372-Z and 374-X respectively, and covered by the same mortgage.

In January 2001, Premiere Bank sent demand letters regarding the loans under Promissory Note Nos. 372-Z and 235-Z.
To reduce costs, Casent Realty decided to prepay its obligations under Promissory Note No. 235-Z by selling certain real properties and proposed a dacion en pago settlement.
Between March 2001 and July 2001, multiple meetings were held between representatives of Casent Realty and Premiere Bank, during which Casent Realty also requested a reconciliation of the loan balances and payment applications.

On August 2, 2001, Premiere Bank communicated its rejection of Casent Realty’s proposed settlement and warned of filing foreclosure proceedings if sufficient payment was not made.
Premiere Bank filed an application for extrajudicial foreclosure on August 28, 2001, triggering a Notice of Sheriff’s Sale set for October 17, 2001.
Casent Realty responded by filing a complaint for injunction and damages (Civil Case No. 01-1477) on October 4, 2001, seeking a temporary restraining order and a preliminary injunction against the foreclosure process.
The Regional Trial Court (RTC) issued a temporary restraining order on October 15, 2001 and later granted a preliminary injunction on February 27, 2002, holding that foreclosure was premature due to the uncertainty over the unpaid balance.

In subsequent pre-trial conferences (March 14 and April 23, 2003), disputes arose over the computation of the amount due, with Premiere Bank using a 15% annual interest rate after waiving penalties.
The RTC ordered both parties to submit lists of three independent accounting firms to assist in reviewing the computations, resulting in the appointment of Sycip Gorres Velayo and Co.
Casent Realty filed a Very Urgent Motion for Clarification on June 10, 2003, contending that the auditors should only conduct a historical review of payments rather than assess the merits of the banking computations.
On July 21, 2003, the RTC denied Casent Realty’s motion for clarification but allowed it to manifest its disinterest in the independent auditor arrangement, effectively permitting it to proceed with pre-trial without the auditor’s assistance.
Premiere Bank filed a motion for reconsideration on July 24, 2003, which was denied on September 1, 2003 by the RTC, maintaining that the parties could not be compelled to agree to utilize independent auditors for settlement purposes.

Following the RTC’s denial of reconsideration, Premiere Bank elevated the issue via a petition for certiorari under Rule 65 filed on October 28, 2003 before the Court of Appeals (CA), contending a grave abuse of discretion by the RTC.
The Third Division of the CA granted the petition on February 27, 2004 based on the premise that Casent Realty had agreed to the appointment of independent auditors by submitting its list.
Casent Realty filed a motion for reconsideration on March 25, 2004, arguing that no explicit agreement had been reached regarding the scope of the auditor’s functions, and that such issues were not proper for certiorari review.
The CA denied Casent Realty’s motion on May 25, 2004, maintaining that the RTC acted within its discretion by providing an option to proceed with pre-trial without the independent auditor.
Casent Realty then petitioned for certiorari before the Supreme Court, raising specific errors of law in the CA’s decision.

Whether the matter concerning the parties’ agreement (or lack thereof) on appointing an independent auditor is a question of fact or of law, and whether it is appropriate for review under a petition for certiorari.

This issue arose from the dispute over whether Casent Realty had effectively consented to the use of independent auditors by submitting its own list.

Whether the RTC committed grave abuse of discretion in allowing Casent Realty the option to proceed to pre-trial without availing the assistance of the independent auditor.

This issue involves determining if the RTC went beyond its authority by effectively altering the issues raised in Casent Realty’s motion for clarification.

Whether the CA erred in ruling that Premiere Bank executed the requisite written consent under Section 1, Rule 32 of the 1997 Rules of Civil Procedure in referring matters to a commissioner.

This addresses the procedural implications of the parties’ conduct and the application of Rule 32 in the independent auditor arrangement.