Asset Privatization Trust v CA - WON the rules on Matters of Subject Matter of
Supplemental Pleadings | G.R. No. 81024 Supplemental Pleadings were violated - YES, different
February 3, 2000 | Purisima, J. | Sol
Doctrine Facts: Galleon took out a loan from DBP to acquire
ships and mortgaged the same as security, while also naming SIM
and others as solidary debtors. SIM filed a complaint to be
released from liability when Galleon defaulted. The trial court
issued an preliminary injunction prohibiting DBP from pursuing its
claims against SIM. While the case was pending, SIM took out a
loan of its own from DBP and secured it with mortgages over its
own properties. SIM defaulted, so DBP took possession of the
properties. SIM filed a supplemental complaint bringing up DBP’s
foreclosure for the second mortgage.
Doctrine: The Court reversed the lower courts in allowing the
supplementary complaint. When the cause of action stated in the
supplemental complaint is different from the cause of action
mentioned in the original complaint, the court should not admit the
supplemental complaint. The original complaint and supplemental
one are based on two different mortgages, and therefore do not
share a cause of action.
FACTS:
- This case revolves around DBP’s attempts to foreclose
properties of Sta. Ines Malale Forest Products (SIM) and
its co-respondents. DBP was eventually substituted as
petitioner by the Asset Privatization Trust (APT).
- Galleon Shipping Corp originally obtained foreign loan
accomodations $87M from DBP in 1979 to acquire 5 new
ships and 2 second-hand ones. SIM, Rodolfo Cuenca,
and Manuel Tinio were named joint and solidary debtors.
- The ships were mortgaged to DBP as security.
(MORTGAGE 1) After Galleon’s default, the ships were
auctioned, but about P2.7B of debt remained.
- Before DBP went after SIM and the other solidary debtors,
the latter filed a complaint with the RTC, claiming they
should be freed from liability because the National
Development Corp had acquired Galleon and was the one
who should be liable.
- The trial court issued a preliminary injunction on May 31,
1985 ordering DBP to "refrain from pursuing any other
deficiency claims or any other claim of any nature,
whether judicial or extra-judicial, arising out of, bred by or
incident to the transactions covered by the complaint
except as counterclaims in this proceedings.
- On May 15, 1985, DBP granted SIM, Cuenca, and Tinio a
separate batch of foreign loan accomodations worth
P236M. These were secured by a mortgage over SIM’s
properties in Agusan Del Sur, which the agreement
allowed DBP to take possession of upon breach.
(MORTGAGE 2)
- SIM, Cuenca, and Tinio defaulted, so DBP took
possession of the land and stationed 45 security
personnel.
- SIM took DBP’s action as a “retaliatory move” and filed a
Motion to Admit Supplemental Complaint, where it alleged
that DBP’s taking possession of its Agusan plant was a
“new development” between the parties and violated the
trial court’s preliminary injunction. It also claimed DBP had
no right to foreclose under the contract.
- DBP opposed the supplemental complaint, arguing that it
has a different subject matter from the original. The RTC
and later the CA allowed the supplemental complaint,
leading to this petition for review on certiorari.
ISSUES:
causes of action
- The pertinent rule at the time was Section 6
of Rule 10: Sec. 6. Matters subject of
supplemental pleadings. — Upon motion of a
party the court may, upon reasonable notice
and upon such terms as are just, permit him to
serve a supplemental pleading setting forth
transactions, occurrences or events which
have happened since the date of the
pleading sought to be supplemented. If the
court deems it advisable that the adverse party
should plead thereto, it shall so order, specifying
the time therefor.
- a supplemental pleading is meant to supply
deficiencies in aid of the original pleading and
not to dispense with or substitute the latter.
- While an amended pleading substitutes the
original, the original pleading is to stand after a
supplement.
- The issues joined under the original
pleading remain as issues to be tried in the
action.
- The Court compared this case to Leobora v
CA, where it ruled that when the cause of
action stated in the supplemental complaint
is different from the cause of action
mentioned in the original complaint, the
court should not admit the supplemental
complaint.
- The cause of action in the original complaint
was to stop DBP from going after the
respondents for deficiencies from MORTGAGE
1, over Galleon’s ships. The cause of action in
the supplemental complaint is DBP’s
foreclosure and taking of possession of SIM’s
Agusan del Norte plant.
- The supplemental complaint was impelled by
DBP’s foreclosure of the plant, which is different
from and outside of the subject matter of the
original complaint.
- The Court also took note of how SIM was the
only plaintiff named in the supplemental
complaint, which shows that the other two
plaintiffs of the original complaint, Cuenca and
Tinio, don’t have a cause of action in the
supplement.
- The argument of avoiding multiplicity of suits
also fails because here they do not arise out of
the same contract, transaction, or relation
between the parties, and are not for demands
for money of the same nature and character.
- The original and supplement do not meet the
test of “unity in the problem presented” and “a
common question of law and fact involved”.
- WON venue was proper - NO
- The original complaint was for declaration of
nonliability of SIM and the other respondents
under their contract of solidary liability with
Galleon.
- This is a personal action, and therefore properly
filed with the RTC of Makati.
- The supplemental complaint, however, is a
real action, because it involves a
determination of the validity of the mortgage
 even though its subject matter was all the
way in Agusan Del Sur.
- The Makati RTC would then have to enforce its
decision in Agusan.
- The supplemental complaint should have
been filed a separate action in Agusan Del
Sur.
- WON the De La Rama Steamship v NDC ruling applies
- NO
- The trial court originally decided the case based
on the De La Rama ruling, where the SC
“implicitly recognized the propriety of admitting
a supplemental pleading although the causes
therein mentioned are not in any way relevant
and material to the action originally pleaded as
a means of serving "the ends of speedy
administration of justice or a prompt dispatch of
cases.'"
- But in that case, both the original and
supplementary pleadings stemmed from the
same contract.
- Multiplicity of suits should be avoided if the
filing of a separate and independent action
to recover a claim would entail proving
exactly the same claim in an existing action.
- It can not however, be avoided when the
cause of action in the two complaints are
distinct and separate from each other.

RULING: Reversed, order allowing supplemental complaint null

and void.