Leobrera vs. Court of Appeals

A supplemental complaint cannot be admitted where it introduces a new and distinct cause of action unrelated to the original complaint, and a motion to file it must comply with the mandatory notice-of-hearing requirements; a notice that does not state the time and place of hearing and lacks proof of service renders the motion a mere scrap of paper and any order granting it void for grave abuse of discretion.

Carlos Leobrera was a borrower of the Bank of the Philippine Islands under a P 800,000.00 credit facility granted in 1980 as part of an amicable settlement, secured by real estate mortgages, and he later obtained a separate P 500,000.00 three-year term loan secured by a third real estate mortgage. The dispute concerns the procedural requirements for supplemental pleadings under Section 6, Rule 10 of the Rules of Court and for motions under Rule 15, particularly the requirement of reasonable notice and a notice of hearing stating the time and place of hearing.

In 1980, BPI granted Carlos Leobrera a P 800,000.00 credit facility consisting of (a) a P 200,000.00 revolving promissory note line at 10% interest per annum; (b) a P 100,000.00 export advance line at 12% interest per annum; and (c) a P 500,000.00 Industrial Guarantee Loan Fund (IGLF) loan at 12% interest per annum. The facility formed part of an amicable settlement between BPI and Leobrera, under which Leobrera agreed to drop his claims for damages against BPI for its alleged failure to deliver on time three export letters of credit opened in his favor. It was secured by two real estate mortgages dated November 20, 1976 and February 8, 1980.

In 1984, the facility was entirely converted into a revolving promissory note line at 26% interest per annum and set on a floating rate basis the following year. The line was last renewed on March 21, 1986, evidenced by two 90-day promissory notes numbered 017-86/0233-0 and 017-86/0234-8 for P 500,000.00 and P 300,000.00, respectively. Apart from that credit facility, Leobrera obtained from BPI a separate three-year term loan of P 500,000.00 evidenced by Promissory Note No. 01785/0224-0 dated November 15, 1985, secured by a third real estate mortgage dated October 23, 1985.

Upon maturity of the 90-day notes, BPI and Leobrera negotiated unsuccessfully on the terms of their renewal. No agreement having been reached, BPI demanded full payment of the loan. Leobrera failed to settle his loan account, and BPI prepared to foreclose the real estate mortgages securing the same. Before BPI could institute foreclosure proceedings, Leobrera filed on January 6, 1987 a complaint for damages with a prayer for a writ of preliminary injunction seeking to enjoin BPI from foreclosing the mortgages, docketed as Civil Case No. 15644 of the Regional Trial Court of Makati, Metro Manila, Branch CXLV. The trial court issued an order restraining BPI from foreclosing the real estate mortgages securing the 90-day loans and, after hearing, issued a writ of preliminary injunction.

Meanwhile, on February 9, 1987, BPI wrote Leobrera claiming that he failed to pay the amortization due on the three-year term loan, as a result of which BPI opted to accelerate the maturity of the loan and called the entire loan due and demandable. Leobrera likewise failed to remit the amount due, and BPI threatened to foreclose the real estate mortgage securing the loan. Before BPI could foreclose the mortgage, Leobrera filed with the trial court on March 11, 1987 a "Motion to File Supplemental Complaint," attaching thereto a supplemental complaint praying for an injunction to restrain BPI from foreclosing the third mortgage. The next day, March 12, 1987, the trial court granted Leobrera's motion and issued a restraining order enjoining BPI from proceeding with any "Legal, court or other action" arising from the promissory note evidencing the three-year term loan. That order was served on BPI on March 13, 1987. BPI contested the validity of the March 12, 1987 order by filing a motion to set it aside, but the trial court denied the motion on March 31, 1987.

The Court of Appeals found, and petitioner did not dispute, that the Motion to File Supplemental Complaint was filed on March 11, 1987 and that a copy was sent to BPI by registered mail on the same day but was received by BPI only on March 13, 1987, while the trial court had already granted the motion on March 12, 1987. The motion's notice of hearing did not indicate the time and place of hearing, and the record did not show that proof of service was attached to the motion. The original complaint concerned BPI's threat to foreclose the two real estate mortgages securing the two 90-day promissory notes executed in 1986, which Leobrera alleged violated the 1980 amicable settlement; the supplemental complaint alleged acts of harassment by BPI in unreasonably declaring him in default and demanding full liquidation of the 1985 three-year term loan, which was separate from the two promissory notes and independent of the 1980 amicable settlement.

• Defective Notice of Hearing: Petitioner argued that the Court of Appeals erred in stating that the Motion to Admit Supplemental Complaint filed by him did not contain a notice of hearing or that the same was defective.
• New or Distinct Matter: Petitioner argued that the Court of Appeals erred in considering that the supplemental complaint involved a new or distinct matter which could not be joined with the original complaint.
• Injunction and Injury: Petitioner argued that the Court of Appeals erred in issuing the injunction prayed for by respondents, causing grave and irreparable injury to him.
• Interrelated Causes of Action: Petitioner sought to persuade the Court that the causes of action in the original and supplemental complaints were interrelated.

• Admission of Supplemental Complaint: Whether the Court of Appeals erred in holding that the trial court abused its discretion in admitting the supplemental complaint.
• Notice of Hearing: Whether the Motion to File Supplemental Complaint contained a valid notice of hearing and proof of service, satisfying the requirements of reasonable notice and procedural due process.
• New or Distinct Cause of Action: Whether the supplemental complaint involved a new or distinct matter that could not be joined with the original complaint.
• Injunction: Whether the Court of Appeals erred in issuing the injunction prayed for by respondents, resulting in grave and irreparable injury to petitioner.

• Admission of Supplemental Complaint: No. The Court of Appeals correctly held that the trial court abused its discretion in admitting the supplemental complaint.
• Notice of Hearing: No. The motion's notice did not state the time and place of hearing and lacked proof of service; it was a mere scrap of paper, and the order granting it was tainted with grave abuse of discretion.
• New or Distinct Cause of Action: Yes. The supplemental complaint pleaded a cause of action based on the separate 1985 three-year term loan, independent of the 1980 amicable settlement and the 1986 90-day notes in the original complaint.
• Injunction: No. The Court of Appeals committed no reversible error in annulling the March 12, 1987 order; the petition was denied and the temporary restraining order lifted.

• Admission of Supplemental Complaint: Section 6, Rule 10 permits a supplemental pleading upon motion, with reasonable notice and upon such terms as are just. The Court of Appeals found, and petitioner did not dispute, that the motion was filed on March 11, 1987; a copy was sent to BPI by registered mail the same day but received only on March 13, 1987; and the trial court granted the motion on March 12, 1987, before BPI received notice. The manner of notice was not reasonable, and the trial court's undue haste showed arbitrariness. The Court of Appeals thus committed no reversible error in annulling the March 12, 1987 order.
• Notice of Hearing: Sections 4, 5, and 6 of Rule 15 require seasonable service of a copy of the motion on the adverse party or counsel with a notice of hearing indicating the time and place of hearing. These are mandatory minimum requirements of procedural due process. The notice attached to the motion merely asked the clerk to submit the motion immediately for consideration and approval; it did not state the time and place of hearing. The record also did not show proof of service. The motion was therefore a mere scrap of paper not entitled to cognizance, and the trial court's admission of the supplemental complaint was tainted with clear grave abuse of discretion.
• New or Distinct Cause of Action: A supplemental complaint supplies only deficiencies in aid of an original complaint; it must contain causes of action relevant and material to the plaintiff's right or defense, must be based on matters arising subsequent to the original complaint related to the claim or defense presented therein, and must be founded on the same cause of action. It cannot be used to try a new matter or a new cause of action. The original complaint concerned BPI's threat to foreclose two real estate mortgages securing the two 90-day promissory notes executed in 1986, which Leobrera alleged violated the 1980 amicable settlement. The supplemental complaint alleged acts of harassment by BPI in declaring him in default and demanding full liquidation of the 1985 three-year term loan. That loan was entirely distinct and separate from the two promissory notes and independent of the 1980 amicable settlement. Although both complaints sought injunctive relief, the subsequent cause of action for damages was unrelated to the amicable settlement. Petitioner himself admitted in the supplemental complaint that the P 500,000.00 loan was separate. The two causes of action being entirely different, the supplemental complaint could not be successfully pleaded.
• Injunction: Because the March 12, 1987 order was properly annulled for grave abuse of discretion and the supplemental complaint was improperly admitted, the Court of Appeals committed no reversible error in issuing the injunction prayed for by BPI. The petition was denied and the temporary restraining order lifted. The claim of grave and irreparable injury did not overcome the procedural defects.

• Supplemental Pleadings — A supplemental pleading may be served only upon motion of a party, with reasonable notice and upon such terms as are just, setting forth transactions, occurrences, or events that happened since the date of the pleading sought to be supplemented. It supplies only deficiencies in aid of an original complaint, must be based on matters arising subsequent to the original complaint related to the claim or defense presented therein, and must be founded on the same cause of action. It cannot be used to try a new matter or a new cause of action. In this case, the supplemental complaint was improperly admitted because it introduced a cause of action based on the separate 1985 three-year term loan, independent of the original complaint's subject matter.
• Notice of Hearing and Procedural Due Process — A motion must be served seasonably on the adverse party or counsel with a notice of hearing indicating the time and place of hearing. While literal observance of the notice requirements is not necessary, these are mandatory minimum requirements of procedural due process and cannot be dispensed with. A notice that does not state the time and place of hearing, and a motion without proof of service, is a mere scrap of paper not entitled to cognizance by the trial court. In this case, the motion to file supplemental complaint had such a defective notice and lacked proof of service; the trial court's order granting it was thus tainted with grave abuse of discretion.
• Grave Abuse of Discretion — The trial court's admission of the supplemental complaint and issuance of a restraining order before BPI received notice was arbitrary and tainted with clear grave abuse of discretion. The Court of Appeals correctly annulled the order.

• "The notice of hearing is intended to prevent surprise and to afford the adverse party a chance to be heard before the motion is resolved by the trial court. While the court has said that a literal observance of the notice requirements in Sections 4, 5 and 6 of Rule 15 is not necessary, a seasonable service of a copy of the motion on adverse party or counsel with a notice of hearing indicating the time and place of hearing of the motion are mandatory requirements that cannot be dispensed with as these are the minimum requirements of procedural due process" — This passage states the controlling rule on notice of hearing and procedural due process, explaining why the defective notice rendered the motion ineffective.
• "The minimum requirements of procedural due process not having been satisfied by the notice, the motion to which it was attached is thus a mere scrap of paper not entitled to any cognizance by the trial court." — This is the ratio decidendi on the effect of a defective notice of hearing; it justifies the annulment of the trial court's order.
• "The supplemental complaint must be based on matters arising subsequent to the original complaint related to the claim or defense presented therein, and founded on the same cause of action. It cannot be used to try a new matter or a new cause of action." — This passage defines the proper scope of a supplemental complaint and supplies the rule applied to reject Leobrera's supplemental complaint.
• "The two causes of action being entirely different, the latter one could not be successfully pleaded by supplemental complaint." — This conclusion applies the supplemental-pleading rule to the facts, holding that the separate 1985 term loan could not be joined through a supplemental complaint.

• Ibasan vs. Republic, G.R. No. 48528, April 25, 1980, 97 SCRA 101 — Cited with Estipona and Manila Surety to support the rule that seasonable service of a copy of the motion with a notice of hearing indicating the time and place of hearing is a mandatory requirement of procedural due process.
• Estipona vs. Navarro, G.R. No. L-41825, January 30, 1976, 69 SCRA 285 — Cited for the same mandatory notice-of-hearing requirement.
• Manila Surety and Fidelity Co., Inc. vs. Bath Construction and Co., G.R. No. 16636, June 24, 1965, 14 SCRA 435 — Cited for the same mandatory notice-of-hearing requirement.
• British Traders Insurance Company vs. Commissioner of Internal Revenue, G.R. No. L-20501, April 30, 1965, 13 SCRA 728 — Cited for the rule that a supplemental complaint supplies only deficiencies in aid of an original complaint.
• De la Rama Steamship Co., Inc. vs. National Development Company, G.R. No. L-15659, November 30, 1962, 6 SCRA 775 — Cited for the rule that a supplemental complaint should contain only causes of action relevant and material to the plaintiff's right and which help or aid the plaintiff's right or defense.
• Randolph vs. Missouri-Kansas-Texas R Co., D.C. Mo. 1948, 78 F. Supp. 727 — Cited for the rule that a supplemental complaint cannot be used to try a new matter or a new cause of action.
• Berssenbrugge vs. Luce Mfg. Co., D.C. Mo. 1939, 30 F. Supp. 101 — Cited for the same rule that a supplemental complaint cannot be used to try a new matter or a new cause of action.

• Section 6, Rule 10, Rules of Court — Governs supplemental pleadings. It provides that upon motion of a party, the court may, upon reasonable notice and upon such terms as are just, permit service of a supplemental pleading setting forth transactions, occurrences, or events that happened since the date of the pleading sought to be supplemented. The trial court failed to comply with reasonable notice, and the supplemental complaint did not qualify because it introduced a new cause of action.
• Sections 4, 5, and 6, Rule 15, Revised Rules of Court — Require notice of hearing and proof of service. The motion's notice did not indicate the time and place of hearing and lacked proof of service, so it was a mere scrap of paper and the order granting it was void for grave abuse of discretion.

Gutierrez, Jr., and Bidin, JJ., concurred. Fernan, C.J., took no part.