FACTS:
Respondents obtained a loan from Metropolitan Bank and Trust Co. (Metrobank), which was secured by a real estate mortgage. The loan was later restructured through a Debt Settlement Agreement. Due to nonpayment, Metrobank sought the extrajudicial foreclosure of the mortgage. Respondents filed a Complaint to stop the auction and obtained a temporary restraining order (TRO). However, Metrobank proceeded with the auction and obtained a certificate of sale. The application for preliminary injunction filed by respondents was denied, but the Court of Appeals (CA) later reversed this decision. The case was re-raffled to RTC Branch 258. Petitioner, Asia Recovery Corporation (ARC), filed a motion for joinder of party and/or substitution, claiming that it had acquired Metrobank's credit against respondents. Metrobank and ARC filed their respective comments, and respondents opposed the motion, arguing that they were entitled to full disclosure of the details of the sale and transfer of their debt. RTC Branch 258 granted the motion, but the CA later annulled this decision, ruling that petitioner cannot substitute for Metrobank without disclosing the consideration paid for the transfer of interest.
ISSUES:
- Whether petitioner may be joined as party-defendant in Civil Case No. 01-0207.
RULING:
- The Court of Appeals (CA) granted the petition and annulled the Orders of RTC Branch 258. The CA ruled that the trial court should have excluded Metrobank from the proceedings if it was true that Metrobank had divested itself of any interest in respondents' debt. The CA also doubted the propriety of substitution, as the Deed of Absolute Sale between Metrobank and ARC did not specify whether respondents' debt was included in the portfolio of nonperforming loans sold. The CA further ruled that petitioner could not substitute for Metrobank without disclosing the consideration paid for the transfer of interest.