G.R. No. 162575 - Siok Ping Tang vs. Subic Bay Distribution, Inc.

Petitioner Beatriz Siok Ping Tang, doing business under the name Able Transport, entered into business dealings with respondent Subic Bay Distribution, Inc. (SBDI).
In April 2002, SBDI and petitioner executed two Distributorship Agreements, wherein SBDI, as seller, agreed to supply petroleum products and petitioner, as distributor, agreed to purchase and pay for such products.

The Agreements provided for an initial period of one year (from October 2001 to October 2002) with automatic annual renewal unless terminated with a thirty-day prior written notice.
Section 6.3 of the Agreements allowed SBDI to request that petitioner furnish securities or a performance bond to secure the latter’s obligations.

Petitioner secured a credit line from United Coconut Planters Bank (UCPB), International Exchange Bank (IEBank), and Security Bank Corporation (SBC).
Additionally, petitioner applied for an irrevocable domestic standby letter of credit with Asia United Bank (AUB).
The banks issued separate undertakings governing the terms and conditions for respondent’s drawing of funds under the respective bank facilities.

Petitioner allegedly failed to meet her payment obligations under the Agreements, prompting respondent to attempt drawing funds based on the bank undertakings.
In response, petitioner instituted separate petitions before the Regional Trial Court (RTC) of Quezon City seeking the annulment of the bank undertakings and letter of credit.
Petitioner’s grounds for annulment centered on the contention that the interest and penalty rates charged under the undertakings were oppressive, exorbitant, unreasonable, and unconscionable, rendering the contracts void against public morals and policy.

The petitions for annulment were consolidated (Civil Case Nos. Q-02-48334 to Q-02-48337) and assigned to Branch 101 of the RTC, which conducted hearings on the matter.
On November 28, 2002, during the hearing for a Temporary Restraining Order (TRO) and a writ of preliminary injunction, the RTC elicited the banks’ positions regarding the issuance of the TRO.
The RTC subsequently issued an Order granting the TRO, directing petitioner to include respondent as an indispensable party, and requiring respondent to file a position paper.
On December 17, 2002, the RTC issued an Order enjoining the banks (UCPB, IEBank, SBC, and AUB) from releasing funds to SBDI pending further orders and requiring petitioner to post a 10-million-peso bond.

Dissatisfied with the RTC’s remedial measures, respondent filed a petition for certiorari in the Court of Appeals (CA), challenging the RTC Order.
The CA proceedings included respondent’s petition for a TRO and a writ of preliminary injunction, with petitioner filing a Comment and respondent a Reply.
On July 4, 2003, the CA issued a Resolution granting the TRO as respondent had a legal right under the bank undertakings, and on July 11, 2003, a Supplemental Resolution expanded this to include the domestic standby letter of credit.

On October 17, 2003, the CA rendered its Decision granting the petition for certiorari by petitioner, thereby annulling the RTC Order dated December 17, 2002 and lifting the writ of preliminary injunction.
Petitioner then raised two major assignments of error:

The CA’s failure to implead the banks as indispensable parties in the petition for certiorari.
The CA’s acceptance of the petition despite respondent’s omission of filing a motion for reconsideration.

Petitioner argued that without the proper inclusion of the banks, her rights might be prejudiced as they held the power to release substantial funds, and that the omission of a prior motion for reconsideration was a fatal procedural defect.

Petitioner maintained that the banks ought to have been joined as indispensable parties, given their substantial interest in the bank undertakings and the potential exposure to millions of pesos liability.
Respondent contended that the banks were not indispensable, as their interest in the matter was separable and the subject of the injunction was primarily between petitioner and respondent.
On the question of the motion for reconsideration, respondent argued that exceptions to this filing requirement applied because the issues in the petition had been fully considered in the RTC, and urgency and the nature of the question (purely legal) justified bypassing the motion.

The CA ruled in favor of respondent by annulling the RTC’s injunction, holding that the RTC’s issuance of the TRO had pre-judged the merits of the case.
The CA held that the absence of a motion for reconsideration, in light of the raised exceptions, did not constitute a reversible error.
The CA affirmed the annulment of the RTC Order and lifted the writ of preliminary injunction, a ruling which was later denied for review by the petitioner in the Supreme Court.

Whether the banks that issued the bank undertakings and the standby letter of credit should have been impleaded as indispensable parties in the petition for certiorari filed in the CA.
Whether their non-inclusion affected the rights of the parties or prejudiced the final resolution.

Whether respondent’s omission of filing a prior motion for reconsideration before resorting to a petition for certiorari constituted a fatal procedural defect.
Whether recognized exceptions to the filing of a motion for reconsideration justified respondent’s action.

Whether the RTC’s issuance of the TRO and the writ of preliminary injunction, which effectively pre-judged the main case by accepting petitioner’s claim of oppressive and unconscionable bank undertakings, was justified.
The extent to which such acceptance of petitioner's allegations constituted an abuse of discretion by the lower court.