7. METROPOLITAN BANK & TRUST COMPANY vs. QUILTS & ALL, INC.

FACTS:
Relita P. de los Santos (de los Santos) then Corporate Secretary of Quilts issued a Secretary's
Certificate which certified that in a special meeting of the BOD of Quilts and All, Inc. (Quilts) its
President, Mr. Senen B. Dizon (Dizon) was authorized and empowered to mortgage in favor of
Metrobank, a property belonging to Quilts.
On the basis of this Secretary's Certificate, Metrobank restructured Dizon's existing personal loan
secured by his house and lot at and the property owned by Quilts.
More than a year later, Metrobank received a letter from Atty. Cesar Villanueva, Quilt's counsel
offering the amount of P200,000.00 for the cancellation of the mortgage on the property owned
by Quilts because, allegedly, "Mr. & Mrs. Senen Dizon had left the Philippines, leaving several
creditors." Metrobank refused the offer since the amount offered did not approximate the
appraised value of the mortgaged property. Later on, Atty. Ranel L. Trinidad, Quilt's new
counsel wrote Metrobank, reiterating the mortgage cancellation. The counsel also claimed that
the alleged special meeting could not have taken place for lack of the requisite number of
directors present to constitute a quorum since the Chairman and 2 other members of the Board of
Directors were abroad on that date.
Quilts filed a complaint against Metrobank, Dizon and de los Santos for annulment and
cancellation of mortgage. On the other hand, Metrobank moved to dismiss the complaint based
on 1) lack of jurisdiction and 2) failure to state a cause of action. Judge Reynaldo B. Daway,
granted the motion However, upon Quilt's motion, Judge Daway reconsidered and setting aside
the dismissal order because the grounds relied upon by Metrobank "did not appear to be
indubitable", and deferred the determination of the motion until the trial.
Metrobank filed an original petition for certiorari, prohibition or mandamus, contesting the
reinstatement of the complaint and in the process reiterating as grounds lack of jurisdiction on
the part of the trial court and failure of Quilt's complaint to state a cause of action. CA upheld the
jurisdiction of the lower Court only with respect to Metrobank. It dismissed the case against
Dizon and de los Santos, since the issue of whether or not these two persons had committed ultra
vires acts is an intra-corporate matter which falls within the original and exclusive jurisdiction of
the Securities and Exchange Commission (SEC) pursuant to Section 5 of Presidential Decree
902-A, as amended. Pending the outcome of the case that would be filed in the SEC, however,
the Court of Appeals directed the suspension of the proceedings against Metrobank. The
appellate court also stated that paragraph 10 of Quilt's complaint was sufficient basis for Quilt's
case against Metrobank.
Par. 10 of Quilts’ complaint:
10. That plaintiff corporation suffered and continue to suffer actual damages as a result of the
illegal acts of defendants for which the former should be compensated in an amount to be proved
during the trial of the instant cases.
ISSUE:
Whether or not Quilt's complaint sufficiently states a cause of action against Metrobank.
RULING:
No, Quilt's complaint did not sufficiently state a cause of action against Metrobank.
In the case of Alzua and Armalot vs. Johnson, (21 Phil. 308 [1912], we stated:
. . . neither legal conclusions, nor conclusions or inferences of facts from fact not stated, nor
incorrect inferences or conclusions from facts stated, being admitted by a demurrer to a
complaint, conclusions of this nature in no wise aid the pleading. The ultimate facts upon which
such conclusions rest must be alleged, though merely probative or evidential facts may be and
should be omitted. (at p. 381.)
An examination of the complaint shows that the allegations therein pertain mostly to the alleged
ultra vires acts of Dizon and de los Santos. Paragraph 10 of the complaint, upon which both the
trial court and the Court of Appeals premised a case against Metrobank, merely expresses legal
conclusions, and is not an averment or allegation of ultimate facts.
The Court agreed with Metrobank that the complaint does not contain allegations that Metrobank
had prior knowledge of, or could have known with the exercise of due diligence, that the recitals
in the Secretary's Certificate were false. The complaint does not even allege specific overt acts
which show that Metrobank acted in conspiracy with its co-defendants to defraud Quilts.
Although it is averred that the defendants' acts were done in bad faith, the Complaint does not
contain any averment of facts showing that the acts were done in the manner alleged. Such a bare
statement neither establishes any right or cause of action on the part of the plaintiff-appellant. It
is a mere conclusion of law not sustained by declarations of facts, much less admitted by
defendants-appellees. It does not, therefore, aid in any wise the complaint in setting forth a cause
of action . . . (pp. 441-442.)

DOCTRINE:

Rule 8, Section 1. In general. — Every pleading shall contain in a methodical and logical form, a
plain, concise and direct statement of the ultimate facts on which the party pleading relies for his
claim or defense, as the case may be, omitting the statement of mere evidentiary facts. (1)

If a defense relied on is based on law, the pertinent provisions thereof and their applicability to
him shall be clearly and concisely stated. (n)
30. PEDRO T. SANTOS, JR. vs. PNOC EXPLORATION CORPORATION
FACTS:
PNOC Exploration Corporation filed a complaint for a sum of money against petitioner Pedro T.
Santos, Jr. in the Regional Trial Court of Pasig City. The complaint sought to collect the amount
of P698,502.10 representing petitioner's unpaid balance of the car loan advanced to him by
respondent when he was still a member of its board of directors.
Personal service of summons to petitioner failed because he could not be located in his last
known address despite earnest efforts to do so. Subsequently, on respondent's motion, the trial
court allowed service of summons by publication. Respondent caused the publication of the
summons in Remate, a newspaper of general circulation in the Philippines. Thereafter,
respondent submitted the affidavit of publication of the advertising manager of Remate and an
affidavit of service of respondent's employee to the effect that he sent a copy of the summons by
registered mail to petitioner's last known address.
When petitioner failed to file his answer within the prescribed period, despite publication of
summons. Respondent moved that the case be set for the reception of its evidence ex parte. The
trial court granted the motion. Consequently, Santos filed an "Omnibus Motion for
Reconsideration and to Admit Attached Answer". He sought reconsideration of the September
11, 2003 order, alleging that the affidavit of service submitted by respondent failed to comply
with Section 19, Rule 14 of the Rules of Court as it was not executed by the clerk of court. He
also claimed that he was denied due process as he was not notified of the September 11, 2003
order. He prayed that respondent's evidence ex parte be stricken off the records and that his
answer be admitted.
The trial court denied petitioner's motion for reconsideration stating that the rules did not require
the affidavit of complementary service by registered mail to be executed by the clerk of court. It
also ruled that due process was observed as a copy of the September 11, 2003 order was actually
mailed to petitioner at his last known address. It also denied the motion to admit petitioner's
answer because the same was filed way beyond the reglementary period.
Petitioner assailed the September 11, 2003 and February 6, 2004 orders of the trial court in the
Court of Appeals via a petition for certiorari. He contended that the orders were issued with
grave abuse of discretion. He imputed the following errors to the trial court: taking cognizance of
the case despite lack of jurisdiction due to improper service of summons; failing to furnish him
with copies of its orders and processes, particularly the September 11, 2003 order, and upholding
technicality over equity and justice.
Meanwhile, on September 22, 2005, the Court of Appeals rendered its decision sustaining the
September 11, 2003 and February 6, 2004 orders of the trial court and dismissing the petition. It
denied reconsideration. Thus, this petition.
ISSUE:
Whether or not Santos is entitled to notice of proceedings.
RULING:
No, Santos is not entitled to notice of proceedings.
The effects of a defendant's failure to file an answer within the time allowed therefor are
governed by Sections 3 and 4, Rule 9 (on Effect of Failure to Plead) of the Rules of Court:
SEC. 3. Default; declaration of. — If the defending party fails to answer within the time
allowed therefor, the court shall, upon motion of the claiming party with notice to the defending
party, and proof of such failure, declare the defending party in default. Thereupon, the court shall
proceed to render judgment granting the claimant such relief as his pleading may warrant, unless
the court in its discretion requires the claimant to submit evidence. Such reception of evidence
may be delegated to the clerk of court.
SEC. 4. Effect of order of default. — A party in default shall be entitled to notice of subsequent
proceedings but not to take part in the trial. (emphasis supplied)
If the defendant fails to file his answer on time, he may be declared in default upon motion of the
plaintiff with notice to the said defendant. In case he is declared in default, the court shall
proceed to render judgment granting the plaintiff such relief as his pleading may warrant, unless
the court in its discretion requires the plaintiff to submit evidence. The defaulting defendant may
not take part in the trial but shall be entitled to notice of subsequent proceedings.
In this case, even petitioner himself does not dispute that he failed to file his answer on time.
That was in fact why he had to file an "Omnibus Motion for Reconsideration and to Admit
Attached Answer". But respondent moved only for the ex parte presentation of evidence, not for
the declaration of petitioner in default.
To pursue the matter to its logical conclusion, if a party declared in default is entitled to notice of
subsequent proceedings, all the more should a party who has not been declared in default be
entitled to such notice. If the residence or whereabouts of the defending party is not known or he
cannot be located, there is obviously no way notice can be sent to him and the notice requirement
cannot apply to him. The law does not require that the impossible be done. Nemo tenetur ad
impossible. The law obliges no one to perform an impossibility. Laws and rules must be
interpreted in a way that they are in accordance with logic, common sense, reason and
practicality. Hence, even if petitioner was not validly declared in default, he could not
reasonably demand that copies of orders and processes be furnished him. Be that as it may, a
copy of the September 11, 2003 order was nonetheless still mailed to petitioner at his last known
address but it was unclaimed. Therefore, the petition is denied.