Case Summary (G.R. No. 143264)
Key Dates and Procedural Posture
Petition for Review under Rule 45 filed after the RTC of Legaspi City dismissed the complaint by Resolution dated November 11, 1999, and denied petitioners’ Motion for Reconsideration and Motion to Admit Amended Complaint by Order dated May 15, 2000. The Supreme Court decision reviewed the propriety of dismissal and denial of leave to amend.
Applicable Law and Precedents Cited
Governing constitution (decision date post‑1990): 1987 Philippine Constitution. Controlling procedural provisions: Rule 45 (petition for review), Rule 10 Sections 2 and 3 of the Rules of Court (amendments of pleadings). Controlling doctrine and cited cases: Tiu v. Philippine Bank of Communications; Valenzuela v. Court of Appeals; Hi‑Yield Realty, Inc. (requisites for derivative suits); Saura v. Saura, Jr. (jurisdiction and relation between SEC and regular courts); statutory reference to R.A. No. 8799 (jurisdiction over intra‑corporate disputes transferred to regular courts).
Core Factual Allegations
LEI purchased a parcel in Legaspi City (TCT No. 37866). On March 28, 1996, Lilian and the late Leandro Soriano obtained a P20 million loan from PCIB and executed a real estate mortgage over LEI’s property as purported corporate officers. Petitioners allege the execution was without board authority, that corporate documents (board resolution, secretary’s certificate, corporate resolution to borrow, deed of assumption) were falsified and notarized improperly, and that PCIB failed to exercise due diligence in verifying corporate authorization. Petitioners discovered these irregularities in April 1999, demanded that the Spouses Soriano clear the mortgage, and filed a derivative complaint at the SEC (June 25, 1999) and the annulment action in the RTC (August 13, 1999). RTC issued TRO and preliminary injunction enjoining the auction, but later dismissed the complaint and refused admission of an amended complaint.
Trial Court Rulings Challenged
The RTC dismissed the complaint on grounds including lack of legal capacity to sue (real party in interest), failure to state a cause of action, and litis pendentia. The court denied petitioners’ motion for reconsideration and denied admission of the amended complaint on the basis that the amendment would “absolutely change” the cause of action and that petitioners had not alleged demands upon the board of directors in the original complaint.
Legal Issue—Admission of Amended Complaint under Rule 10
Rule 10 Sec. 2 permits one amendment as a matter of right before a responsive pleading; Sec. 3 allows substantial amendments by leave of court after a responsive pleading is filed. The Supreme Court emphasized the 1997 Rules’ removal of the former prohibition against amendments that “substantially alter” the cause of action. The trial court’s discretion to admit amendments is broad but must be exercised liberally to serve substantial justice, avoid multiplicity of suits, and allow cases to be decided on the merits unless there is inexcusable delay, prejudice, surprise, or intent to delay.
Application of Precedent (Tiu, Valenzuela) and Court’s Reasoning on Amendment
The Court relied on Tiu and Valenzuela to conclude amendments are generally favored and may be allowed even if they substantially alter the cause of action, provided they serve substantial justice and do not unduly delay proceedings or prejudice the opposing party. Because the amendment was filed before trial and before finality of dismissal, admitting it would not cause delay; instead, it would promote resolution on the merits. The Supreme Court therefore found the trial court erred in refusing to admit the amended complaint and ordered its admission.
Derivative Suit Requirements and Sufficiency of Amended Allegations
Hi‑Yield Realty sets the requisites for a derivative suit: (a) the plaintiff must be a shareholder at the time of the complained act; (b) the plaintiff must have exhausted intra‑corporate remedies by making a demand on the board for relief and the board failed or refused to act; and (c) the cause of action must belong to the corporation, i.e., the harm must be to the corporation rather than only to the stockholder. The amended complaint expressly alleged that petitioner Lolita Soriano made demand upon LEI’s Board to take legal steps to protect the corporation and that the Board failed to act. The Court held these allegations satisfied the requisites and that the amendment remedied the defect in the original complaint, thus stating a cause of action.
Litis Pendentia, Jurisdiction and Relation to SEC Proceedings
The Court distinguished the RTC action from the SEC case. The SEC case concerns intra‑corporate matters—authenticity and due execution of board resolutions and related corporate remedies—while the RTC action challenges the validity of the mortgage and includes the mortgagee bank as a defendant. Because th
...continue readingCase Syllabus (G.R. No. 143264)
Court and Decision
- Decided by the Supreme Court of the Philippines, Third Division.
- G.R. No. 143264; Decision promulgated April 23, 2012.
- Decision authored by Justice Peralta; concurred in by Velasco, Jr. (Chairperson), Abad, Mendoza, and Perlas-Bernabe, JJ.
- Footnote: respondent (Banco de Oro Unibank, Inc.) per Manifestation dated January 26, 2012 (as indicated in source).
Parties
- Petitioners: Lisam Enterprises, Inc. (LEI), represented by Lolita A. Soriano; and Lolita A. Soriano in her individual capacity.
- Respondents: Banco de Oro Unibank, Inc. (formerly Philippine Commercial International Bank, PCIB); Lilian S. Soriano; Estate of Leandro A. Soriano, Jr.; Register of Deeds of Legaspi City; Jesus L. Sarte (Notary Public of Daraga, Albay).
Nature of the Action
- Original action filed in the Regional Trial Court (RTC), Legaspi City: Complaint for Annulment of Mortgage with Prayer for Temporary Restraining Order & Preliminary Injunction with Damages.
- Relief sought: annulment of a real estate mortgage alleged to be void ab initio; temporary and preliminary injunctive relief to enjoin auction/foreclosure; damages including moral damages and attorney’s fees.
Material Factual Allegations (as pleaded by petitioners)
- LEI, in 1993, acquired a parcel of residential land with improvement in Legaspi City covered by Transfer Certificate of Title No. 37866 (Annex “A”).
- On or about 28 March 1996, Lilian S. Soriano and the late Leandro A. Soriano, Jr., in their personal capacities, obtained a P20,000,000.00 loan from PCIB (Legaspi Branch).
- As alleged security for that loan, on 28 March 1996 the spouses, purportedly acting as President and Treasurer of LEI, executed a real estate mortgage over LEI’s property in favor of PCIB and had it registered at the Registry of Deeds, Legaspi City (Annex “B” — mortgage deed).
- Petitioners allege that the spouses acted without authority of LEI’s board and used a falsified board resolution dated 6 November 1995 to support the mortgage; the falsified board resolution and Secretary’s Certificate are attached as Annex “C”.
- Petitioners allege that Lolita A. Soriano’s signature as corporate secretary was falsified in the board resolution and Secretary’s Certificate, and that she never signed such a resolution nor acknowledged it before a notary on 28 March 1996.
- Petitioners allege gross negligence on the part of PCIB in failing to investigate or verify the authenticity and due execution of the board resolution and Secretary’s Certificate, including failure to confirm with corporate secretary Lolita A. Soriano and failure to note that the board resolution was notarized on 28 March 1996 although bearing a purported date of 6 November 1995.
- Petitioners assert that because the mortgage was executed without board authority it is null and void and creates no rights against LEI.
- Allegedly, in August 1998 a “Deed of Assumption of Loans and Mortgage Obligations and Amendment of Mortgage” was signed to make LEI assume the spouses’ P20,000,000.00 personal indebtedness to PCIB, without a board resolution duly certified by the corporate secretary (Annex “D”).
- Petitioners allege falsification of a “Corporate Resolution to Borrow” purporting to authorize LEI to assume the loan (Annex “E”).
- Discovery: petitioners discovered the irregular transactions sometime in April 1999; petitions alleged they demanded that the spouses and the estate pay the indebtedness and free LEI’s property from lien, but the demands were ignored.
- Petitioners state they filed a derivative suit with the Securities and Exchange Commission (SEC) on 25 June 1999 docketed SEC Case No. 06-99-6339 for “Fraudulent Scheme and Unlawful Machination with Damages” (Annex “F”).
- Petitioners alleged retention of counsel and payment of P100,000.00 attorney’s fee and claimed moral damages of P200,000.00 for the personal injuries of stockholder Lolita A. Soriano.
- Petitioners alleged that on 30 July 1999 respondent Jesus L. Sarte, as Notary Public, issued a notice of Auction/Foreclosure Sale upon application of PCIB and set auction on 7 September 1999.
Procedural History in the RTC
- Complaint filed in RTC, Legaspi City on August 13, 1999.
- After service of summons, the RTC issued a Temporary Restraining Order on August 25, 1990 (date as stated in source) and later issued a writ of preliminary injunction enjoining PCIB from proceeding with auction sale of the property.
- Respondents Lilian S. Soriano and Estate of Leandro S. Soriano, Jr. filed an Answer dated September 25, 1999 asserting authority to mortgage on behalf of LEI, asserting that loan proceeds were for LEI’s use and benefit, and that Lolita Soriano’s signatures on notarized documents were genuine; they also claimed entitlement to moral damages and attorney’s fees.
- PCIB filed a Motion to Dismiss on September 28, 1999 alleging lack of legal capacity to sue, failure to state a cause of action, and litis pendencia.
- Petitioners filed an Opposition to the Motion to Dismiss; co-defendants filed a Motion to Suspend Action.
- On November 11, 1999 the RTC issued a Resolution dismissing petitioners’ Complaint (first assailed resolution).
- Petitioners filed a Motion for Reconsideration of the dismissal.
- Petitioners, while the motion for reconsideration was pending, filed on January 4, 2000 a Motion to Admit Amended Complaint amending paragraph 13 to add an allegation that Lolita A. Soriano had made demands upon LEI’s Board of Directors to take legal steps to protect the corporation but the Board had not done so, and that the present action was for the benefi