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SPS. ORLANDO M. LAMBINO v. PRESIDING JUDGE

FACTS:

Orlando M. Lambino and his wife borrowed a housing loan from BPI, secured by a mortgage on their property. They failed to pay monthly amortizations, leading to BPI filing for extrajudicial foreclosure of the mortgage. The Lambinos filed a complaint for annulment of the mortgage and foreclosure sale, with a TRO issued by the court. The Lambinos offered to settle the loan but BPI rejected the offer, imposing additional charges. The Lambinos objected to these charges, filing a supplemental complaint alleging unauthorized deductions and escalating interest rates.

In another case, the petitioners entered a credit agreement with the respondent bank and borrowed a significant amount. The bank unilaterally and progressively increased the interest rate, resulting in an obligation three times the amount initially granted. The petitioners argued that these increases were null and void as they were not agreed upon in writing as required by law. They also claimed that their liability should be limited to the mortgage contract amount and should not include other charges such as late payment fees and attorney's fees. The mortgage contract did not mention penalty charges, and the court concluded that penalties were not due.

The petitioners offered to settle their indebtedness, requesting the deletion of arbitrary charges, penalties, and attorney's fees. However, the bank refused and insisted on payment of these charges. The petitioners sought the nullification of the interest rate increases and charges, alleging manipulations and requested other legal and equitable reliefs. The trial court denied the petitioners' motion, stating that only transactions after the complaint date could be included in the supplemental complaint, and also denied their motion for reconsideration.

ISSUES:

  1. Whether the trial court properly denied the motion of the petitioners to admit their supplemental complaint under Section 6, Rule 10 of the Revised Rules of Court.

  2. Whether the imposition of escalating and arbitrary charges by the respondent banking institution is unconscionable and unlawful.

  3. Whether the filing of the supplemental complaint is in accordance with the rules of procedure.

  4. Whether the supplemental complaint is based on matters arising subsequent to the original complaint and related to the claim or defense presented therein.

  5. Whether or not the court has discretion to admit or deny a supplemental pleading.

  6. Whether or not the petitioners would be prejudiced if the supplemental pleading were denied.

  7. Whether or not the petitioners' motion for the admission of their supplemental complaint was dilatory.

RULING:

  1. The trial court properly denied the motion of the petitioners to admit their supplemental complaint under Section 6, Rule 10 of the Revised Rules of Court. The court held that only transactions, occurrences, or events which accrued after the date of the complaint may be set forth in the supplemental complaint. The alleged escalating and arbitrary rate of interest and other charges imposed by the respondent had accrued before the complaint was filed. Therefore, those issues could not be included in the supplemental complaint.

  2. The imposition of interests and other charges on the loan obligations are consequences of the execution of the mortgage loan agreement. They cannot be considered supervening events. Whether or not these interests and charges are arbitrary or in violation of the terms and conditions of the agreement is a matter of evidence and for the court to decide. The appellate court affirmed that the imposition of escalating and arbitrary charges by a banking or lending institution is not automatically unconscionable and unlawful. It must be substantiated and proven.

  3. The Court denied the petition for lack of merit. The Court held that a supplemental complaint must be consistent with and in aid of the cause of action set forth in the original complaint. It must be based on matters arising subsequent to the original complaint and related to the claim or defense presented therein. In this case, the charges, interests, and penalties alleged in the supplemental complaint occurred before the filing of the original complaint, which is contrary to the provisions of Section 6, Rule 10 of the 1997 Rules of Civil Procedure. The Court further explained that the purpose of the rule on supplemental pleadings is to settle the entire controversy in one action, prevent unnecessary litigation, and broaden the scope of the issues in an action. However, a supplemental pleading cannot set up a new and independent cause of action.

  4. The admission or non-admission of a supplemental pleading is discretionary on the court.

  5. The court will consider factors such as resulting prejudice to the parties and whether the movant would be prejudiced if the supplemental pleading were denied. A party who has had notice of the general nature of the claim or matter asserted in the supplemental pleading from the beginning of the action will not be prejudiced by the granting of leave to file a supplemental pleading. However, a motion for leave to file a supplemental pleading may be denied if the movant is guilty of undue delay or laches that causes substantial prejudice to the opposing party.

  6. The petitioners failed to incorporate their alleged charges in their original complaint as a cause of action, despite being aware of them prior to filing the complaint. They are therefore proscribed from incorporating the same via a supplemental complaint. Additionally, the petitioners filed their motion for the admission of their supplemental complaint almost two years after the termination of the pretrial, and failed to provide a meritorious justification for the delay. Thus, there is factual basis for the claim that the motion was dilatory.

PRINCIPLES:

  • Only transactions, occurrences, or events which accrued after the filing of the complaint may be set forth in a supplemental complaint.

  • The imposition of interests and other charges on loan obligations is a consequence of the execution of the mortgage loan agreement.

  • Whether the imposition of charges is arbitrary or in violation of the terms and conditions of the agreement is a matter of evidence and for the court to decide. It must be substantiated and proven.

  • A supplemental complaint must be consistent with and in aid of the cause of action set forth in the original complaint.

  • The supplemental complaint must be based on matters arising subsequent to the original complaint and related to the claim or defense presented therein.

  • Leave to file a supplemental complaint will be granted to allege material facts that happened or came within the plaintiff's knowledge since the original complaint was filed.

  • The purpose of the rule on supplemental pleadings is to settle the entire controversy in one action, prevent unnecessary litigation, and broaden the scope of the issues in an action.

  • The admission or non-admission of a supplemental pleading is discretionary on the court.

  • Resulting prejudice to the parties and potential prejudice to the movant are factors to be considered when deciding on the admission of a supplemental pleading.

  • A party who has had notice of the general nature of the claim or matter asserted in the supplemental pleading from the beginning of the action will not be prejudiced by the granting of leave to file a supplemental pleading.

  • A motion for leave to file a supplemental pleading may be denied if the movant is guilty of undue delay or laches that causes substantial prejudice to the opposing party.

  • The substantial rights of the parties and the merits of the case should not be considered and resolved in a mere motion for leave to file a supplemental complaint.