G.R. No. 259282, August 30, 2023
Spouses Antonio and Monette Prieto, Petitioners, vs. Bank of the Philippine Islands [as successor-in-interest of Far East Bank and Trust Company] substituted by Philippine Asset Investment [SPV-AMC], as further substituted by Philippine Investment One [SPV-AMC], Inc., Respondent.

FACTS

Far East Bank and Trust Company (FEBTC) granted several loans to petitioners Spouses Antonio and Monette Prieto, secured by real estate mortgages over two properties. Upon petitioners’ failure to pay, the mortgages were extrajudicially foreclosed. Bank of the Philippine Islands (BPI), as FEBTC’s successor-in-interest, filed a Complaint for sum of money to recover the alleged deficiency balance after applying the foreclosure sale proceeds to the total obligation. Petitioners were declared in default. The respondent underwent substitutions, first by Philippine Asset Investments, Inc. (SPV-AMC) and then by Philippine Investment One [SPV-AMC], Inc. (SPV-AMC, Inc.). The Regional Trial Court (RTC) initially dismissed the complaint for lack of evidence but, upon SPV-AMC, Inc.’s motion for reconsideration which attached additional documents (Real Estate Mortgage, Certificate of Sale, and Certificate of Absolute Definitive Deed of Sale), the RTC granted reconsideration and rendered a new Decision ordering petitioners to pay the deficiency. Petitioners filed a Petition for Certiorari with the Court of Appeals (CA), arguing the RTC gravely abused its discretion in admitting evidence not formally offered and in granting the motion for reconsideration which allegedly contained a prohibited second motion for reconsideration. The CA dismissed the petition. Petitioners elevated the case via a Petition for Review on Certiorari.

ISSUE

Whether the Court of Appeals erred in dismissing the petition and affirming the RTC’s Decision which granted respondent’s motion for reconsideration and admitted evidence not formally offered during trial.

RULING

The Supreme Court denied the petition and affirmed the CA’s rulings. The Court held that the RTC did not commit grave abuse of discretion. First, the motion for reconsideration filed by SPV-AMC, Inc. was not a prohibited second motion for reconsideration but the first and only motion seeking reconsideration of the RTC’s August 3, 2017 Decision dismissing the complaint. Second, while as a general rule courts cannot consider evidence not formally offered, exceptions exist. The RTC’s admission of the documents attached to the motion for reconsideration was justified under the exception that documentary evidence attached to a motion for reconsideration may be admitted if it serves the higher interest of substantial justice, especially in default judgments where the defendant, by default, admits the material allegations of the complaint. The documents were pertinent to establish the existence and amount of the loan obligation, the fact of foreclosure, and the resulting deficiency—facts which were already alleged in the complaint and deemed admitted due to petitioners’ default. The Court found no reversible error in the CA’s decision affirming the RTC’s judgment on the merits.