G.R. No. 181485 - Philippine National Bank vs. Gateway Property Holdings, Inc.

Philippine National Bank (PNB) is the petitioner, and Gateway Property Holdings, Inc. (GPHI) is the respondent.
GPHI is linked to Gateway Electronics Company (GEC), which secured long-term loans from various banks, including a consortium that later involved PNB.

In 1995 and 1996, GEC obtained long-term loans from the Land Bank of the Philippines (LBP) secured by mortgages over its properties.
LBP invited other banks to join in providing additional funds, thus forming a consortium in which PNB participated.
Prior to the formal execution of a Mortgage Trust Indenture (MTI), LBP and the consortium entered into a Memorandum of Understanding (MOU), promising to share the mortgaged properties equally among the banks.
PNB, as part of the consortium, required that in connection with the conversion of GEC’s long-term loans into a Convertible Omnibus Credit Line, GPHI become a co-borrower and execute a real estate mortgage in favor of PNB over two parcels of land (TCT Nos. T-636816 and T-636817).
A letter dated August 13, 1997, issued by PNB approved the conversion subject to conditions, emphasizing that the real estate mortgage was to be held in physical possession by PNB and remain unregistered until an event of default occurred.

GEC allegedly encountered difficulties in paying its obligations, leading PNB to demand full payment on or about June 19, 2000.
GPHI contended that the mortgage was never meant to be a permanent collateral but merely a temporary security pending the outcome of litigation (Civil Case No. TM-1022) concerning the annulment of the mortgage.
GPHI argued that the documents, including the August 13, 1997 letter, evidenced the interim nature of the mortgage arrangement.

On May 3, 2001, PNB initiated extrajudicial foreclosure proceedings on the mortgaged properties.
The properties were auctioned publicly on June 20, 2001, with PNB emerging as the sole bidder, acquiring them for P168,000,000.00.
GPHI challenged the foreclosure sale in two related actions:

Civil Case No. TM-1022 (Annulment of the Real Estate Mortgage) – asserting that the mortgage did not reflect the true intentions of the parties and was temporary.
Civil Case No. TM-1108 (Annulment of the Foreclosure Sale) – contending that the foreclosure sale failed to comply with the statutory requirement of being conducted at a public auction and that GPHI was not yet in default.

The RTC of Trece Martires City, Branch 23, in Civil Case No. TM-1108, dismissed the petition on December 20, 2001, holding that GPHI had split a single cause of action in pursuing two suits.
GPHI sought reconsideration of the dismissal through a Motion for Reconsideration, which was denied on March 14, 2002, and later filed an appeal.
Subsequently, while Civil Case No. TM-1108 was pending, GPHI filed a Motion for Leave to Amend Complaint in Civil Case No. TM-1022 to include issues regarding the foreclosure sale and its propriety.

In the Court of Appeals (CA-G.R. CV No. 75108), on September 28, 2007, the appellate court reversed the RTC’s dismissal by holding that the two cases, though sharing common parties and some factual allegations, did not involve a complete identity of causes of action.
PNB moved for reconsideration of the appellate decision, which was denied on January 24, 2008, prompting the instant petition to the Supreme Court.

Whether the doctrine of litis pendentia applies to bar the proceeding in Civil Case No. TM-1108 based on the alleged splitting of a single cause of action between two pending suits involving identical parties and substantially similar factual allegations.

Do Civil Cases TM-1022 (Annulment of the Real Estate Mortgage) and TM-1108 (Annulment of the Foreclosure Sale) have an identical cause of action such that a decision in one would preclude a different adjudication in the other?
Is the alleged temporary nature of the mortgage evidence sufficient to justify separate litigation on the validity of the mortgage and the foreclosure sale?
Does the presentation of nearly identical documentary evidence in both suits necessarily constitute splitting of a single cause of action, thereby rendering one suit redundant under the rule of litis pendentia?
Can a judgment upholding the validity of the real estate mortgage automatically bar the challenge against the foreclosure proceedings?