Metropolitan Bank and Trust Company vs. Fadcor, Inc

When a defendant fails to appear at pre-trial, resulting in an ex parte presentation of evidence by the plaintiff, the requirement under A.M. No. 03-1-09-SC that evidence must be pre-marked during pre-trial to be admissible does not apply.

The case involves a loan default and subsequent extrajudicial foreclosure, leaving a deficiency balance. The core procedural dispute arises from how the plaintiff's evidence was admitted at trial after the defendants completely failed to participate in pre-trial.

• Original Filing: Civil Case No. 03-1262, RTC, Branch 59, Makati City (Complaint for recovery of deficiency obligation filed Sept 23, 2003)
• Lower Court Decision: March 8, 2006 — RTC ruled in favor of Metrobank, ordering respondents to pay P17,479,371.86 plus 12% interest and P50,000 attorney's fees.
• Appeal: Respondents appealed to the CA.
• CA Decision: May 17, 2011 — CA reversed the RTC, ruling that the RTC erred in admitting exhibits not identified/pre-marked during pre-trial per A.M. No. 03-1-09-SC. CA denied MR on August 5, 2011.
• SC Action: Metrobank filed a Petition for Review on Certiorari under Rule 45.

• The Loans and Mortgages: Metrobank granted Fadcor 5 loans totaling P32,950,000.00. Fadcor executed 5 promissory notes. Individual respondents (Fadcor officers) executed 2 Real Estate Mortgages over 10 parcels of land and 2 Continuing Surety Agreements up to P90,000,000.00.
• Default and Foreclosure: Fadcor defaulted on amortizations totaling P32,350,594.12. Metrobank extrajudicially foreclosed the mortgages on April 20, 2001. Properties were sold at public auction on July 31, 2001 to Metrobank for P32,961,820.72.
• Deficiency Demand and Suit: A deficiency of P17,479,371.86 remained. Metrobank demanded payment; respondents failed to pay. Metrobank filed a complaint for recovery of deficiency on Sept 23, 2003.
• Failure to Appear at Pre-trial: Respondents failed to appear at the scheduled pre-trial conference or file a pre-trial brief despite due notice. The RTC allowed Metrobank to present evidence ex parte. Respondents' MR on this order was denied, and their subsequent certiorari petition to the CA was dismissed.
• Ex Parte Hearing and RTC Decision: During the ex parte hearing, Metrobank's lone witness identified and marked exhibits "A" to "DD-4" (per the TSN). However, Metrobank's Formal Offer of Evidence included exhibits "A" to "MM." The RTC admitted all exhibits and rendered judgment in favor of Metrobank based on them.
• CA Reversal: The CA reversed the RTC, holding that exhibits "EE" to "MM" should not have been admitted because they were not identified or pre-marked during pre-trial as required by A.M. No. 03-1-09-SC.

• The CA erred in reversing the RTC decision.
• A.M. No. 03-1-09-SC has no application to the proceedings before the RTC because no pre-trial was conducted; respondents failed to appear or file their pre-trial brief.

• (Implied from CA ruling adopted by respondents) The RTC erred in admitting exhibits "EE" to "MM" because they were not identified or pre-marked during pre-trial as mandated by A.M. No. 03-1-09-SC, and the TSN only reflects identification up to "DD-4."

• Procedural Issues: Whether the SC can review factual findings of the CA in a Petition for Review on Certiorari under Rule 45 due to conflicting findings between the RTC and CA.
• Substantive Issues: Whether the CA correctly applied A.M. No. 03-1-09-SC to exclude exhibits that were not pre-marked during pre-trial, when the pre-trial was effectively bypassed due to the defendant's failure to appear.

• Procedural: The SC may review factual findings of the CA under Rule 45 when the findings of the trial court are contrary to those of the CA. This is a recognized exception to the general rule that only questions of law may be raised in a Rule 45 petition.
• Substantive: The CA incorrectly applied A.M. No. 03-1-09-SC. Because respondents failed to appear at pre-trial despite due notice, it was as if no pre-trial occurred. The pre-marking requirement of A.M. No. 03-1-09-SC applies specifically to the pre-trial conference. Since there was no pre-trial, the requirement could not be enforced. Furthermore, the questioned exhibits were marked during the ex parte hearing and formally offered and admitted by the RTC. The fact that the TSN did not explicitly reflect the identification of "EE" to "MM" does not mean they were not presented, as they could not have been marked otherwise. By failing to appear at pre-trial, respondents assumed the risk of not being able to dispute the evidence presented ex parte.

• Exceptions to Rule 45 Questions of Law Rule — While Rule 45 petitions generally only raise questions of law, the SC may review factual findings of the CA when the findings of the trial court are contrary to those of the CA.
• Effect of Failure to Appear at Pre-trial (Sec. 5, Rule 18) — If the defendant fails to appear at pre-trial, the plaintiff may present evidence ex parte, and the court may render judgment based thereon. The defendant forfeits the opportunity to rebut or object to the evidence.
• Applicability of A.M. No. 03-1-09-SC Pre-marking Requirement — The guideline stating that no evidence shall be allowed during trial unless pre-marked during pre-trial does not apply when no pre-trial is held due to the defendant's non-appearance. Evidence marked and formally offered during the subsequent ex parte hearing is admissible.

• Section 5, Rule 18, Rules of Court — Effect of failure to appear. Allows the plaintiff to present evidence ex parte and the court to render judgment on the basis thereof when the defendant fails to appear at pre-trial.
• Section 4, Rule 18, Rules of Court — Appearance of parties. Mandates the duty of parties and counsel to appear at the pre-trial.
• A.M. No. 03-1-09-SC (Guidelines to be Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-Trial and Use of Deposition-Discovery Measures) — Requires the pre-marking of evidence during pre-trial. The SC held this inapplicable when pre-trial is bypassed due to defendant's non-appearance.