Benavidez vs. Salvador

When litis pendentia exists, the later-filed action may be retained over the first if it is the more appropriate vehicle for litigating the issues between the parties.

Florpina Benavidez obtained a loan of ₱1,500,000.00 from Nestor Salvador to repurchase a foreclosed property, executing a promissory note as security. Upon defaulting on the loan and dishonoring postdated interest checks, Benavidez was met with a demand letter from Salvador. Prior to Salvador's filing of a collection suit, Benavidez had already initiated a separate action for annulment of the promissory note against Salvador and others.

• The Loan and Default: In February 1998, Benavidez approached Salvador for a loan to repurchase her foreclosed property. Salvador agreed to lend ₱1,500,000.00 subject to conditions, including the execution of a real estate mortgage, a promissory note, a deed of sale, and the submission of a special power of attorney (SPA) from Benavidez's daughter. Salvador released a manager's check for ₱1,000,000.00 and ₱500,000.00 in cash. Benavidez executed a promissory note dated March 11, 1998, but failed to deliver the required SPA. She subsequently defaulted on the obligation, and all postdated checks she issued for the interest payments were dishonored.
• The Competing Suits: On January 11, 2000, Salvador sent a demand letter which was ignored. Benavidez then filed a complaint for annulment of the promissory note against Salvador, his counsel, and others before RTC-Morong, alleging she was duped into signing the note and that the stipulated interest was unconscionable. Salvador, in turn, filed a complaint for sum of money with damages against Benavidez before RTC-Antipolo to enforce his rights under the promissory note.
• Pre-trial Absence: Benavidez filed a motion to dismiss the RTC-Antipolo case on the ground of litis pendentia, which was denied. She then filed an answer with counterclaim. On the scheduled pre-trial conference on May 2, 2001, neither Benavidez nor her counsel appeared, nor did they file a pre-trial brief. Resultantly, RTC-Antipolo allowed Salvador to present evidence ex parte.

• Litis Pendentia: Petitioner argued that the RTC-Antipolo case should have been dismissed because the RTC-Morong case involved the same parties and promissory note, and a judgment in the annulment case would be determinative of the collection case.
• Forum Shopping: Petitioner maintained that Salvador's certification against forum shopping was defective and untruthful because he failed to disclose the pending RTC-Morong case despite having been served summons and filed an answer therein.
• Unconscionable Interest: Petitioner contended that the promissory note was void for stipulating an interest rate that was unconscionable and shocking to the conscience.
• Denial of Due Process: Petitioner asserted that the trial court erred in allowing ex parte evidence and not reopening the case, claiming her counsel's negligence in missing the pre-trial (due to a disagreement over settlement) should not bind her, and her own absence was justified by illness.

• Identity of Causes of Action: Respondent countered that there was no identity of rights asserted or reliefs prayed for between the two cases, as one sought annulment of the promissory note while the other sought collection of a sum of money, thereby negating litis pendentia.
• Validity of Ex Parte Evidence: Respondent argued that the trial court correctly allowed the presentation of evidence ex parte pursuant to the Rules of Court, as both petitioner and her counsel failed to appear at the pre-trial without valid excuse, and the negligence of counsel binds the client.

• Litis Pendentia: Whether the collection case before RTC-Antipolo should have been dismissed on the ground of litis pendentia due to the prior filing of the annulment case before RTC-Morong.
• Forum Shopping: Whether the case is dismissible due to a defective certification against forum shopping.
• Unconscionable Interest: Whether the promissory note is void for stipulating an unconscionable and shocking interest rate.
• Ex Parte Evidence: Whether the CA erred in upholding the order allowing respondent to present evidence ex parte and submitting the case for decision despite the absence of petitioner and her counsel at the pre-trial.

• Litis Pendentia: The RTC-Antipolo collection case was properly retained as the more appropriate vehicle for litigating the issues between the parties, notwithstanding the priority-in-time rule. Dismissal would result in needless delay and defeat the policy against multiplicity of suits. The judgment in the collection case would settle whether Benavidez should be made accountable for the loan, an obligation she did not deny in her RTC-Morong complaint.
• Forum Shopping: The issue of forum shopping is subsumed under litis pendentia; because the elements of litis pendentia did not warrant the dismissal of the later-filed collection case, forum shopping likewise did not justify its dismissal.
• Unconscionable Interest: The stipulated compounded interest rate of 5% per month (60% per annum) was declared iniquitous, unconscionable, and void from the beginning. Central Bank Circular No. 905 did not grant lenders carte blanche authority to raise interest rates to enslaving levels. The debt was considered without the stipulated interest, and the legal interest of 6% per annum was imposed in lieu thereof.
• Ex Parte Evidence: The order allowing ex parte presentation of evidence was valid pursuant to Sections 5 and 6, Rule 18 of the Rules of Court. The failure of both petitioner and her counsel to appear at the pre-trial and to file a pre-trial brief warranted the authorization of ex parte evidence. The negligence of counsel binds the client, and petitioner herself was negligent in failing to send a representative or inform the court of her illness.

• Litis Pendentia Determination (More Appropriate Action Test and Anticipatory Test) — When litis pendentia exists, the following considerations predominate in ascending order of importance in determining which action should prevail: (1) the date of filing, with preference generally given to the first action; (2) whether the action sought to be dismissed was filed merely to preempt the later action or to anticipate its filing and lay the basis for its dismissal; and (3) whether the action is the appropriate vehicle for litigating the issues between the parties. The Court applied this doctrine by retaining the later-filed collection suit, finding it the more appropriate vehicle to determine accountability for the loan.
• Effect of Failure to Appear at Pre-trial — The failure of the defendant to appear at the pre-trial conference and the failure to file a pre-trial brief shall be cause to allow the plaintiff to present evidence ex parte and the court to render judgment on the basis thereof, pursuant to Sections 5 and 6, Rule 18 of the Rules of Court. The Court applied this doctrine to uphold the trial court's reception of ex parte evidence due to the unexcused absence of both petitioner and her counsel.
• Unconscionable Interest Rates — While parties have wide latitude to stipulate on interest rates following the suspension of the Usury Law ceiling via Central Bank Circular No. 905, stipulated interest rates may still be declared illegal if unconscionable, iniquitous, or exorbitant. A compounded interest rate of 5% per month (60% per annum) was struck down as void and inexistent from the beginning.

• "Under this established jurisprudence on litis pendentia, the following considerations predominate in the ascending order of importance in determining which action should prevail: (1) the date of filing, with preference generally given to the first action filed to be retained; (2) whether the action sought to be dismissed was filed merely to preempt the later action or to anticipate its filing and lay the basis for its dismissal; and (3) whether the action is the appropriate vehicle for litigating the issues between the parties."
• "There is nothing in [Central Bank Circular No. 905] which grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets."

• Spouses Abines v. BPI, 517 Phil. 609 (2006) — Followed. Applied the "priority-in-time rule" and "more appropriate action test" in determining which case should survive litis pendentia.
• Dotmatrix Trading v. Legaspi, G.R. No. 155622, October 26, 2009 — Followed. Extensively discussed the various rules and considerations in determining which case to dismiss under litis pendentia, establishing the ascending order of importance.
• Teodoro v. Mirasol — Followed. Origin of the "more appropriate action test" and "anticipatory test," deviating from the absolute application of the priority-in-time rule.
• Menchavez v. Bermudez, G.R. No. 185368, October 11, 2012 — Followed. Declared a 5% per month interest rate null and void for being excessive, iniquitous, and unconscionable.
• Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013 — Followed. Imposed the legal interest of 6% per annum in lieu of the voided excessive stipulated interest.

• Section 5, Rule 18, 1997 Rules of Court — Provides that the failure of the defendant to appear at the pre-trial conference shall be cause to allow the plaintiff to present evidence ex parte and the court to render judgment on the basis thereof. Applied to justify the trial court's ex parte reception of evidence.
• Section 6, Rule 18, 1997 Rules of Court — Provides that failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial. Applied to further justify the ex parte proceeding due to petitioner's failure to file the brief.
• Central Bank Circular No. 905 s. 1982 — Suspended the Usury Law ceiling on interest effective January 1, 1983. Cited to acknowledge the wide latitude of parties to stipulate interest rates, but interpreted not to grant lenders carte blanche authority to impose unconscionable rates.

Presbitero J. Velasco, Jr., Diosdado M. Peralta, Roberto A. Abad, Marvic Mario Victor F. Leonen