G.R. No. 219783 , August 3, 2016
SPOUSES ERNESTO TATLONGHARI AND EUGENIA TATLONGHARI, PETITIONERS, VS. BANGKO KABAYAN-IBAAN RURAL BANK, INC., RESPONDENT.

FACTS

Petitioners Spouses Ernesto and Eugenia Tatlonghari (Sps. Tatlonghari) were among the plaintiffs in a civil case for annulment of a Special Power of Attorney (SPA), promissory notes, and a real estate mortgage filed against respondent Bangko Kabayan-Ibaan Rural Bank, Inc. (the bank). The original complaint was filed by Pedro V. Ilagan, who later convinced Sps. Tatlonghari to join as plaintiffs, alleging the bank used a falsified SPA to make it appear they authorized Pedro to obtain a loan secured by a mortgage on their property, which was subsequently foreclosed. Sps. Tatlonghari, through collaborating counsels Atty. Bienvenido Castillo and later Atty. Eliseo Magno Salva, filed a First Amended Complaint and later a Second Amended Complaint, which was admitted by the Regional Trial Court (RTC).
During the pendency of the case, Sps. Tatlonghari engaged their own counsel, Atty. Marlito I. Villanueva, who filed a motion for leave to file a Third Amended Complaint. They alleged the prior complaints lacked specific allegations and prayers pertaining to their cause of action, particularly for the reconveyance of their property, which was different from the one covered by the mortgage and had its title consolidated in the bank’s name. The RTC denied the motion, citing delay in adjudication and noting the motion lacked the signature of Atty. Salva, whom the court considered still the counsel of record. The Court of Appeals (CA) upheld the RTC, finding no grave abuse of discretion.

ISSUE

Whether the CA erred in upholding the denial of Sps. Tatlonghari’s motion for leave to file a third amended complaint and in finding there was no valid substitution of counsels of record.

RULING

Yes, the CA erred. The Supreme Court granted the petition, reversing the CA’s decision and resolution.
The Court ruled that motions for leave to file amended pleadings should be treated with liberality, especially when filed before trial, to determine the case on its real facts and prevent multiplicity of suits. The RTC should have allowed the Third Amended Complaint as the First and Second Amended Complaints were bereft of material allegations and specific prayers for Sps. Tatlonghari’s cause of action, particularly for reconveyance of their property. The delay was not attributable to Sps. Tatlonghari nor done in bad faith, and the motion was filed before trial.
Regarding the substitution of counsel, the Court held there is no rule requiring the written consent of a former attorney prior to substitution. Atty. Villanueva’s entry of appearance, coupled with Sps. Tatlonghari’s filing of the motion for leave through him, constituted a valid change of counsel. An attorney is presumed to be properly authorized to represent a cause in which he appears.
The Supreme Court directed the RTC to admit the Third Amended Complaint and continue with the proceedings.