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GR NO. 181485; FEBRUARY 15, 2012

Respondent GPHI was a subsidiary company of Gateway Electronics
Company (GEC). GEC obtained long term loans from the Land Bank of the
Philippines (LBP) in the amount of P600 million and the loans were secured
by mortgages executed by GEC over its properties.
LBP invited other banks to lend money to GEC. It is alleged that LBP agreed
to submit the mortgaged properties to it by GEC as part of the latters assets
that will be covered by a Mortgage Trust Indenture (MTI), ensuring that all
participating banks in the loan syndicate will have equal security position.
LBP and a consortium of banks entered into a Memorandum of
Understanding (MOU), whereby LBP agreed to release the mortgaged
properties to the consortium of banks on the basis of an MTI. The
participating banks released funds in favor of GEC. Petitioner PNB became
part of this consortium of creditor banks.
GEC then requested PNB to convert its long-term loans into a Convertible
Omnibus Credit Line due to its difficulty in paying its obligation. PNB
approved such a conversion subject to certain conditions- GPHI was made a
co-borrower in the agreement and was obligated to execute in favor of PNB a
real estate mortgage over two parcels of land.
GEC filed a complaint for specific performance against LBP due to the latters
refusal to share the mortgaged properties with the consortium of creditor
PNB demanded payment from GEC and when the latter discovered the
formers intent to foreclose the REM, it prayed that a (TRO) be issued to
enjoin PNB from foreclosing on the properties of GPHI and judgment be
issued declaring that the real estate mortgage involving the properties of
GPHI and executed in favor of PNB is null and void. GPHI contended that the
understanding between GEC and PNB is that the GPHI properties would stand
merely as a temporary security pending the outcome of case filed by GEC
against LBP.
Since no TRO was issued by the Court, PNB was able to foreclosed the
mortgaged properties.
Thereafter, GPHI filed a Petition for Annulment of Foreclosure of Mortgage.
GPHI argued that, in conducting the foreclosure proceedings, the sheriff
failed to observe the requirement of Section 4 of Act No. 3135 that the sale
shall be made at public auction.
Contention of PNB:

There was another action pending between the same parties for the same
cause of action. PNB argued that GPHI resorted to a splitting of a cause of
action by first filing a complaint for the annulment of the contract of real
estate mortgage and then filing a petition for the annulment of the
subsequent foreclosure of the mortgage. PNB further alleged that the
subsequent petition of GPHI failed to state a cause of action.
RTC dismissed the case and ruled that both the civil cases involved the
same parties, substantially identical causes of action and reliefs prayed
for, the reliefs being founded on the same facts. Where a single cause
of action has been split and pursuant to Rule 16, Section 1(e) of the
1997 Rules on Civil Procedure, the Motion to Dismiss filed by PNB, on
the ground that there is another action pending between the same
parties for the same cause, or litis pendentia is proper.
On appeal, the CA set aside the decision of the RTC and ruled that the third
requisite of litis pendentia (the identity in the two cases should be such that
the judgment that may be rendered in one would, regardless of which party
is successful, amount to res adjudicata to the other) is not present
Whether or not the requisites of litis pendentia exist to warrant the dismissal
of Civil Case for Annulment of the Foreclosure Sale
YES. All the requisites of litis pendentia exist.
There is litis pendentia if the following requisites are present: (a) identity of
parties, or at least such parties as represent the same interests in both
actions; (b) identity of rights asserted and relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two preceding
particulars is such that any judgment rendered in the other action, will,
regardless of which party is successful, amount to res judicata in the action
under consideration.
As to the first requisite, GPHI is the plaintiff in both civil cases while PNB is
the party against whom GPHI is asserting a claim.
As to the second requisite, allegations in Civil for Annulment of the Real
Estate Mortgage and Annulment of the Foreclosure Sale reveal that the said
cases invoke the same fundamental issue which is the temporary nature of
the security that was to be provided by the mortgaged properties of GPHI.
As to the third requisite, While the appeal of the dismissal of Annulment of
the Foreclosure Sale was still pending with the Court of Appeals, GPHI filed
on a Motion for Leave to Amend Complaint to Conform to the Evidence in

Civil Case Annulment of the Real Estate Mortgage. GPHI stated therein that
after the parties presented their evidence, the fact of foreclosure and the
acquisition of the mortgaged properties by PNB were duly established. In the
accompanying Amended Complaint in Annulment of the Real Estate
Mortgage, GPHI prayed, for the declaration of the nullity of the foreclosure
and auction sale of the mortgaged properties. As a consequence of such an
action, the two cases that GPHI filed before the court a quo henceforth
contained an identity of rights asserted and reliefs prayed for, the relief
being founded on the same factual allegations.