Title
Benavidez vs. Salvador
Case
G.R. No. 173331
Decision Date
Dec 11, 2013
Benavidez defaulted on a loan, failed to submit required documents, and defaulted in court. SC upheld ex parte proceedings, reduced unconscionable interest to 6% p.a., and denied her petition.
loan agreement
repayment
validity of documents
A

Case Summary (A.M. No. P-03-1671)

Parties and Setting

Salvador sued Benavidez for sum of money with damages with prayer for preliminary attachment in RTC-Antipolo, while Benavidez had earlier filed a separate case before the RTC, Branch 80, Morong, Rizal (RTC-Morong) involving collection of related reliefs, including a cause directed at the annulment of the promissory note and related instruments. The dispute ultimately required the Court to determine whether Salvador’s later collection case should have been dismissed on account of litis pendentia, whether the complaint’s certification against forum shopping was defective, whether the promissory note was void for being unconscionable, and whether the trial court acted properly in allowing evidence ex parte after the parties’ failure to appear at pre-trial.

Factual Background of the Loan and the Instruments

In February 1998, Benavidez approached Salvador to obtain a loan to repurchase property in Tanay, Rizal, which Farmers Savings had already foreclosed. After inspecting the property, Salvador agreed to lend subject to conditions requiring formal documentation. Benavidez was required to execute a real estate mortgage, a promissory note, and a deed of sale. She was also required to submit a special power of attorney (SPA) signed by her daughter, Florence B. Baning (Baning), who was named as vendee in the deed of absolute sale. The SPA would authorize Benavidez to obtain the loan and to constitute the property as security for her indebtedness to Salvador.

Pursuant to the agreement, Salvador issued a manager’s check to Benavidez in the amount of P1,000,000.00 and released P500,000.00 in cash, making the loan funds P1,500,000.00 as later found by the trial court. Benavidez executed a promissory note dated March 11, 1998. However, she did not deliver the required SPA and she defaulted on her obligations under the promissory note. The postdated checks issued to pay interest were dishonored. Salvador thereafter sent a demand letter with a statement of account dated January 11, 2000. Because Benavidez did not comply, Salvador filed the RTC-Antipolo case for sum of money with damages and prayed for preliminary attachment.

Procedural History Before the RTC-Antipolo Case

Benavidez filed a motion to dismiss on the ground of litis pendentia. She claimed that before Salvador filed the Antipolo case, she had already instituted an earlier complaint before RTC-Morong for collection of sum of money, annulment of contract and checks, with a prayer for preliminary injunction and temporary restraining order. She named Salvador, his counsel (Atty. Nepthalie Segarra), and others as defendants.

RTC-Antipolo denied the motion to dismiss on July 31, 2000. Benavidez later filed her answer with counterclaim on September 15, 2000. A pre-trial conference was set for May 2, 2001, but Benavidez and her counsel failed to appear despite due notice. On motion, the trial court allowed Salvador to present evidence ex parte. On June 1, 2001, RTC-Antipolo rendered judgment in favor of Salvador, finding that Benavidez had obtained a loan of P1,500,000.00 and that she had not settled her obligation despite demands. The court also found that as of January 11, 2000, her obligation had reached a total of P4,810,703.21. It ordered Benavidez to pay that amount (exclusive of interest and penalty charges until fully paid), plus exemplary damages, attorneys’ fees set at 25% of the total obligation, and the costs of suit. Benavidez’s motion for reconsideration was denied on August 10, 2001 for lack of merit.

CA Proceedings and the Partial Modification

Benavidez appealed to the CA. She argued that RTC-Antipolo should have dismissed Salvador’s complaint due to litis pendentia and alleged erroneous certification against forum shopping, insisting that her earlier RTC-Morong complaint involved substantial identity in the causes of action and that any ruling there would necessarily affect the collection case. She also asserted that RTC-Antipolo erred in not reopening the case for pre-trial and in disallowing her to present evidence, stressing that her counsel’s negligence and her own illness justified relief from the consequences of non-appearance.

The CA rejected these arguments. It held that the trial court had properly allowed Salvador to present evidence ex parte in accordance with Section 5, Rule 18 of the 1997 Rules of Court. It found no valid reason excusing non-appearance at pre-trial and emphasized that negligence of counsel binds the client, adding that Benavidez herself was negligent because she too did not appear. On the litis pendentia and forum shopping arguments, the CA reasoned that the requisites for litis pendentia were absent because the reliefs sought were different: one case sought annulment of the promissory note, while the other sought sum of money. The CA affirmed the RTC-Antipolo decision in toto on November 22, 2005. On June 8, 2006, the CA issued an amended decision, granting partial reconsideration by deleting the awards of exemplary damages and attorneys’ fees, because the award was not supported by sufficient factual, legal, and equitable basis.

Issues Raised in the Petition for Review

Benavidez elevated the controversy to the Court, raising the following issues, with the core question being whether the RTC-Antipolo case should have been dismissed on litis pendentia grounds: whether the collection case was barred by the pending RTC-Morong case; whether dismissal was warranted because the certification against forum shopping was defective; whether the executed promissory note was void for being unconscionable and shocking to conscience; and whether the CA erred in sustaining the trial court’s action allowing evidence ex parte and deciding the case despite the general disfavor towards default judgments.

The Parties’ Contentions on Litis Pendentia and Forum Shopping

Benavidez maintained that the RTC-Antipolo case should have been dismissed because the RTC-Morong complaint involving annulment would be determinative of the collection suit. She asserted that the requisites for litis pendentia existed because the parties were the same, both complaints concerned the promissory note, and the judgment in either case would effectively settle the other. She also argued that the certification against forum shopping was false because Salvador had failed to disclose the pending RTC-Morong case, which she argued was evidenced by the fact that summons had been served on her and she had filed an answer.

On the ex parte evidence issue, Benavidez insisted that the trial court should have been more lenient. She claimed counsel, Atty. Rogelio Jakosalem, was negligent for not filing the pre-trial brief and for failing to attend, and she argued that his incompetence and her illness should have excused strict compliance. She further claimed she submitted her medical certificate within a reasonable period and that it was not belated.

Doctrine on Litis Pendentia and Forum Shopping

The Court reiterated that litis pendentia is a Latin term meaning a pending suit and refers to the situation where two actions are pending between the same parties for the same cause of action such that one becomes unnecessary and vexatious, grounded on policy against multiplicity of suits. It requires identity of parties, substantial identity of causes of action and reliefs sought, and such identity between the actions that a judgment in one case would amount to res judicata in the other. The Court also clarified that forum shopping exists when a party seeks a favorable opinion in another forum through means other than appeal or certiorari, often where litis pendentia elements exist or where a final judgment in one case would amount to res judicata in another.

The Court’s Treatment of Which Case Should Yield

The Court found that litis pendentia existed because all elements were present: Benavidez and Salvador were parties in both actions; both complaints were concerned with the same promissory note; and a judgment in either case would be determinative of the other. The Court then faced the practical question of which case should be dismissed.

While it initially noted that at first glance the priority-in-time rule might apply, it emphasized that such rule was not absolute. The Court explained that exceptions exist where the first case was filed merely to preempt, or where the later case is the more appropriate vehicle for resolving the issues. In this context, it discussed controlling jurisprudence, including Spouses Abines v. BPI and Dotmatrix Trading v. Legaspi, which elaborated that the more appropriate case should generally prevail where it more fully settles the real issues between the parties, and that the bona fides of the parties is crucial in determining whether a prior filing should be abated.

Why RTC-Antipolo’s Collection Case Was Treated as the More Appropriate Vehicle

The Court examined the RTC-Morong complaint’s allegations. It observed that in RTC-Morong, Benavidez alleged that Atty. Segarra arranged the loan for her in the amount of P1,500,000.00, claimed that the amount was received by Segarra from Salvador, asserted that Segarra paid Farmers Bank an amount leaving a balance in Segarra’s possession, and claimed that Segarra made her sign a promissory note evidencing the loan. She sought, among others, that she be ordered to receive the alleged remaining balance and that the promissory note be declared null and void because she was supposedly duped through machinations and because the stipulated interest was shocking to conscience.

The Court held that these allegations still established that Benavidez borrowed money from Salvador which was used to repurchase the foreclosed property. It considered immaterial whether Atty. Segarra arranged the loan because, as between Benavidez and Salvador, an obligation was admitted. The dispute in RTC-Morong would thus boil down to whether Benavidez was accountable for the loan and related amounts. The Court reasoned

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