SECOND DIVISION

[G.R. No. 153777. April 15, 2005.]

PLANTERS DEVELOPMENT BANK , petitioner, vs . LZK HOLDINGS and

DEVELOPMENT CORPORATION , respondent.

DECISION

CALLEJO , SR. , J : p

This is a petition for review of the Decision 1 of the Court of Appeals (CA) in CA-G.R.
SP No. 61262, ordering the dismissal of the petition for certiorari of Planters Development
Bank and its resolution dismissing the motion for reconsideration thereof.
The Antecedents
The LZK Holdings and Development Corporation (LHDC) is a duly-organized
corporation with principal o ce at AGZ Building, Quezon Avenue, San Fernando City, La
Union. 2 The Planters Development Bank (PDB) is a banking institution duly-organized and
existing under and by virtue of the laws of the Philippines. 3
On December 16, 1996, the LHDC, through its Chief Executive O cer, Mrs. Lourdes
Z. Korshak, and the PDB entered into a "Loan Agreement" 4 whereby the former was
extended a credit accommodation in the amount of P40,000,000.00. The amount was to
be used to nance the ongoing construction of the seven-storey AGZ Building at Quezon
Avenue, San Fernando City, La Union. HDTSIE

To secure the loan, the LHDC executed in favor of the PDB a real estate mortgage 5
over the 589-square-meter lot where the AGZ Building was then being constructed,
covered by Transfer Certi cate of Title (TCT) No. T-45337 issued under the name of the
LHDC. Subsequently, the latter executed two promissory notes in favor of the PDB: (1)
Promissory Note No. 97-53-029 6 dated February 24, 1997, in the amount of
P35,200,000.00 payable on or before February 24, 2012; and (2) Promissory Note No. 97-
53-030 7 dated February 24, 1997 in the amount of P4,800,000.00, also payable on or
before February 24, 2012.
Thereafter, the LHDC executed a Deed of Assignment 8 dated October 1, 1997 in
favor of the PDB, wherein it assigned to the latter all its rental incomes from its AGZ
Building, the same to be applied as payment of its obligations.
For non-payment of loan, non-compliance with the terms and conditions of the Deed
of Assignment, and failure to comply with the conditions of the promissory notes, the PDB
caused the extra-judicial foreclosure of the real estate mortgage under Act No. 3135,
before Atty. Melchor Abasolo of San Fernando City, La Union, on April 6, 1998. 9
Consequently, a Notice of Sale dated July 16, 1998 was published. 1 0 On September 21,
1998, the foreclosed property was sold to the PDB as the highest bidder, and the
corresponding Certificate of Sale 1 1 was issued in its favor.
On April 5, 1999, the PDB led with the Regional Trial Court (RTC) of Makati City,
Branch 150, a complaint against the LHDC for "Annulment of Extrajudicial Foreclosure,
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 Mortgage Contract, Promissory Notes and for Damages," docketed as Civil Case No. 99-
471.
It was alleged, inter alia, that the real estate mortgage was void because it was
executed on December 16, 1996, a day after TCT No. T-45337 was issued by the Register
of Deeds, and two months before the execution of the promissory notes; the rst page
was unsigned by the parties; and it never received the proceeds of the loan in the amount
of P40,000,000.00. The LHDC further alleged that it never authorized the PDB to apply the
proceeds of the loan to the personal obligation of Armando La'o and/or his wife Lourdes
Korshak. Moreover, the extrajudicial foreclosure of the real estate mortgage was void
because the LHDC did not, in any way, violate the said deed, and the PDB even failed to
take into account the remittances made under the promissory note. The LHDC also
averred that the PDB dealt with it in gross bad faith, and as such is liable for damages and
attorney's fees, and prayed, thus:
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of
plaintiff LZK and against defendant-bank, as follows:

1. On the First Cause of Action, declaring as null and void, the real
estate mortgage executed on 16 December 1996 by plaintiff LZK;
2. On the Second Cause of Action, declaring as a nullity, Promissory
Notes Nos. 97-53-029 and 97-53-030, both dated 24 February 1997;

3. On the Third Cause of Action, ruling that the extrajudicial foreclosure

of Transfer Certi cate of Title No. T-45337, as being void and
without legal effect, as well as the Certi cate of Sale executed by
Notary Public Melchor Abasolo;

4. On the Fourth Cause of Action, holding defendant-bank liable for

moral damages in the amount of not less than P10,000,000.00;
5. On the Fifth Cause of Action, adjudging exemplary damages against
defendant-bank, in the amount of P500,000.00;

6. On the Sixth Cause of Action, declaring defendant liable for

attorney's fees and cost of litigation in favor of plaintiff LZK, in the
amount of P500,000.00, and the additional amount of P5,000.00 for
every court attendance of plaintiff LZK's counsel.

Other reliefs just and equitable under the premises are likewise prayed for.
12

The PDB led in due course its answer, 1 3 traversing the material allegations thereof
and interposing a counterclaim for attorney's fees and costs.
After a reply 1 4 to the answer had been filed, the LHDC moved 1 5 that the case be set
for a pre-trial conference, 1 6 after which the parties submitted their respective pre-trial
briefs. 1 7
On January 14, 2000, just before the scheduled pre-trial, the LHDC led a "Motion for
Leave 1 8 to le a Supplemental Complaint" 1 9 to cover occurrences subsequent to the
original complaint. It alleged that after the ling of the original complaint, it agreed in
principle to enter into a contract of lease with a prospective lessee, AMA Computer
College, over three oors of the AGZ Building, but the latter required it to rst secure the
petitioner's consent. The LHDC thus wrote the PDB, requesting its consent to the said
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 lease. However, the latter gave unreasonable conditions in its reply, thus:
(a) AMA Computer College shall remit to defendant PDB all the
stipulated rental deposits and advance rentals;
(b) Plaintiff withdraws or drops the criminal complaint for falsi cation
and perjury against Mr. Mauro Tividad, an o cer of defendant PDB, then pending
with the Office of the City Prosecutor of Makati; and

(c) all documents shall be subject to review by defendant-bank. 2 0

This prompted the AMA Computer College to back-out from the contract. Furthermore,
the PDB wrote each and every tenant of the LHDC, demanding that they directly remit
their respective rentals to it. Worse still, the PDB, which was leasing a space in the
same building for its branch, had ceased paying its rentals, on the pretext that it was
setting-off the same against the loan de ciency of the LHDC. In fact, according to the
LHDC, the PDB had ceased paying its monthly rental of P73,205.00 since November
1999, and that the total amount due in rentals was P219,615.00.
The LHDC averred that until title to the property had been consolidated to the PDB, it
(the LHDC) remained its owner, and as such is entitled to exercise all the attributes of
ownership, including the right to receive rentals from the tenants of the building. As such,
the PDB had no authority to collect the rentals and apply the previous loan de ciency
because the legality and validity of the promissory notes, the real estate mortgage, and the
subsequent extrajudicial foreclosure were in question before the courts. By applying the
rentals to the perceived loan de ciency, the PDB ignored the authority of the court.
Moreover, imposition by the PDB of unreasonable and unfair conditions to the prospective
lease of the property to AMA Computer College, the LHDC failed to realize expected
rentals of P43,000,000.00. It was also alleged that as a result of the foregoing acts of the
PDB, the LHDC was entitled to moral damages of not less than P1,000,000.00. The LHDC
prayed that judgment be rendered on its supplemental complaint, thus:
WHEREFORE, it is respectfully prayed that this Honorable Court decide this
instant case in favor of plaintiff and against defendant PDB, by rendering
judgment in the following manner:

[a] holding defendant liable to pay compensatory damages in the

amount of no less than One Million Two Hundred Thousand Pesos
(P1,200,000.00) in favor of plaintiff;

[b] adjudging defendant as liable to pay the amount of Two Hundred

Nineteen Thousand Six Hundred Fifteen Pesos (P219,615.00), representing rental
arrearages for the months of November 1999 to January 2000;
[c] ruling that defendant is liable to pay moral damages in favor of
plaintiff in the amount of One Million Pesos (P1,000,000.00); and
[d] to pay the cost of suit.

Other reliefs just and equitable under the premises are, likewise, prayed for.
21

On January 17, 2000, the LHDC led an Urgent Motion for the Issuance of a
Temporary Restraining Order and Writ of Preliminary Injunction, 2 2 seeking to restrain the
PDB from consolidating its title over the foreclosed property pending the nal
determination of Civil Case No. 99-471. It averred that the period for redemption had yet to
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 expire on March 15, 1999. AHcCDI

On January 18, 2000, the PDB jointly opposed 2 3 the supplemental complaint and
urgent motion, contending that the latter had "miserably failed to establish any right in this
regard." As to the supplemental complaint, it argued that what goes against its admission
is the fact that the supplemental matters involved therein would bring into the case new
causes of action, distinct from those mentioned in the original complaint. It also pointed
out the lack of verification of the said supplemental complaint.
Meanwhile, after the hearing on the issuance of a writ of preliminary injunction, the
trial court issued on March 13, 2000 a Temporary Restraining Order (TRO), effective for 20
days, restraining the PDB from consolidating ownership over the foreclosed property. 2 4
Thereafter, the trial court issued on April 3, 2000 an Order 2 5 granting the issuance of the
writ, and required the LHDC to file a bond of P40,000,000.00.

Despite the injunction, however, the PDB managed to consolidate its title over the
foreclosed property. Consequently, TCT No. T-53253 2 6 was issued by the Register of
Deeds of La Union under its name on May 3, 2000.
On May 9, 2000, the LHDC led an Omnibus Motion 2 7 to declare invalid the
consolidated title, to cite the PDB and its counsel for contempt, and to enjoin the latter
from taking possession of the property. This was opposed by the PDB. 2 8
On June 2, 2000, the trial court issued an Order 2 9 invalidating TCT No. T-53253, and
enjoining the PDB from taking possession of the foreclosed property. The motion to cite
the PDB and its counsel for contempt of court was, however, denied.
On July 27, 2000, over the opposition of the PDB, the trial court issued an Order, 3 0
admitting the supplemental complaint with this fallo:
Wherefore, as prayed for, plaintiff's supplemental complaint is hereby
admitted upon its paying the docket fees corresponding to the amount prayed in
the supplemental complaint with notice of payment to defendant. In turn,
defendant is hereby ordered to plead within (10) days from receipt of said notice
of payment.
SO ORDERED. 3 1

In admitting the same, the trial court declared:

The Court nds the terms in plaintiff's supplemental complaint to be just
and proper; hence, can be permitted by the Court. The additional causes of action
are intimately and necessarily connected to the causes of action set forth in
plaintiff's Complaint dated March 29, 2000 and are proper under the
circumstances inasmuch as the events happened since the ling of the complaint
sought to be supplemented. 3 2

The PDB moved for a reconsideration of the order, but the trial court denied the
motion.
Dissatis ed, the PDB sought redress in the CA via a petition for certiorari, docketed
as CA-G.R. SP No. 61262, 3 3 ascribing to the court a quo grave abuse of discretion in
admitting the supplemental complaint. In its petition, it insisted that the supplemental
complaint was improper. It argued that "there is nothing to supplement and the additional
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 causes of action are entirely new, independent, separate and distinct." 3 4 It prayed that the
orders of the court a quo be set aside and that the supplemental complaint be stricken-off
the record. 3 5
On December 20, 2001, the CA rendered a Decision, 3 6 nding that no grave abuse
of discretion was committed by the trial court in admitting the supplemental complaint of
the LHDC. In dismissing the petition, the CA ratiocinated:
In the case at bench, respondent ably demonstrated the connection
between the original complaint and the supplemental complaint. Thus, the
original complaint for annulment of extrajudicial foreclosure, mortgage contract,
promissory notes and for damages was founded on the same transaction — the
loan and contract of mortgage as security for such loan — as that of the
supplemental complaint. The original complaint sought the annulment of the
promissory note and the contract of mortgage. On the other hand, the
supplemental complaint alleged petitioner's subsequent acts in asserting its
rights as such purported obligee and mortgagor. Thus, the acts complained of
under the supplemental complaint, namely: that petitioner imposed unreasonable
conditions in giving its consent to a pending lease agreement between
respondent and a third party and that petitioner demanded that rentals on the
property be made directly to it — are acts calculated to exercise petitioner's rights,
validly or invalidly, as the obligee and mortgagor in the transaction sought to be
annulled in the original complaint.
Conformably, we cannot subscribe to petitioner's view that the cause of
action raised in the supplemental complaint substantially changed or that the
theory of the case altered the causes of action contained in the original
complaint. If at all, the new allegations in the supplemental complaint sought
remedies only for subsequent acts perpetrated by petitioner to protect its rights or
in furtherance of its interests in the transaction sought to be annulled.

The admission of supplemental pleadings, like their amendment, we must

underscore, should be liberally construed. In the present case, we nd justi cation
for allowing the admission of the amended complaint in order that the real
question between the parties be properly and justly threshed out in a single
proceeding, and thus avoid multiplicity of actions. The ling of the supplemental
complaint can well be justi ed to the end that the real matter in dispute and all
matters in the action in dispute between the parties may, as far as possible be
completely determined in a single proceeding. Indeed, what is important is that, as
already stated, the basic allegations of fact in the original and in the
supplemental complaints are the same, namely, that petitioner, without legal
justification, foreclosed the property subject of litigation.

In any event, the original complaint and the supplemental complaint,

involving as they do kindred causes of actions and remedies, are proper subjects
of joinder of causes of action. It is to be noted, furthermore, that the admission or
rejection of this kind of pleadings is within the sound discretion of the court that
will not be disturbed on appeal in the absence of abuse thereof. In this case, the
court clearly acted within the parameters of its discretion. 3 7

As the plea of the PDB for reconsideration there was denied, 3 8 it now comes to this
Court for redress, contending that:
I. DECIDED IN A WAY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
JURISPRUDENCE RENDERED BY THIS HONORABLE COURT, AND/OR HAS
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 SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER
OF SUPERVISION VESTED IN THIS HONORABLE COURT.
II. COMMITTED ERRORS IN THE FINDINGS OF FACTS OR CONCLUSIONS OF
LAW WHICH, IF NOT CORRECTED, WOULD CAUSE GRAVE AND
IRREPARABLE DAMAGE OR INJURY TO PDB; AND

III. COMMITTED GRAVE ABUSE OF DISCRETION IN THE APPRECIATION OF

FACTS. 3 9

The petitioner reiterates its arguments before the appellate court, claiming that the
supplemental complaint was inappropriate because it introduced causes of action which
are "entirely new, totally independent, separate and distinct" from those of the original
complaint. It argues that a supplemental complaint cannot be used for the purpose of
trying new matter or a new cause of action. Citing case law, 4 0 it points out that a
supplemental complaint should, as the name implies, supply only de ciencies in aid of an
original complaint. It 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. 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.
The original complaint vis-à-vis the supplemental complaint, the petitioner
asseverates, would show a great deal of difference in their causes of action.
3. In the supplemental complaint of LZK, the latter wishes to
"supplement" the original complaint with the following additional causes of
action:
a. the alleged imposition of unfair and unreasonable conditions by
PDB to the impending lease agreement between LZK and AMA
Computer College;
b. the alleged unilateral and unjusti ed decision of PDB to stop paying
its monthly rentals; and
c. the demand of PDB upon the other tenants of the AGZ Building to
remit their respective rentals to PDB instead of paying to LZK.
4. The original complaint (Annex "C") sought to be supplemented is for
annulment of extrajudicial foreclosure, mortgage contract, promissory notes and
for damages with the following causes of actions:

a. the mortgage is allegedly null and void ab initio, as the mortgagor,

LZK, was not the registered owner of the subject matter thereof, at
the time the mortgage was executed on 16 December 1996;
b. the promissory notes are allegedly invalid in view of the claimed
lack of valuable consideration;
c. the extrajudicial foreclosure should allegedly be declared as invalid
or void form (sic) the very beginning, inasmuch as LZK allegedly did
not violate the terms and conditions of the promissory notes;
d. PDB is allegedly liable to LZK for moral and exemplary damages
plus attorney's fees. 4 1
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 xxx xxx xxx

7. As discussed above, the original complaint has nothing to do with

the additional causes of action alleged in the supplemental complaint; the latter
does not bolster and it does not add anything to the original complaint. . . . 4 2

The petition has no merit.

Section 6, Rule 10 of the Revised Rules of Court prescribes the manner and
substance of filing supplemental pleadings:
SECTION 6. Supplemental Pleadings. — Upon motion of a party the court
may, upon reasonable notice and upon such terms as are just, permit him to serve
a supplemental pleading setting forth transactions, occurrences or events which
have happened since the date of the pleading sought to be supplemented. The
adverse party may plead thereto within ten (10) days from notice of the order
admitting the supplemental pleading.

As its very name denotes, a supplemental pleading only serves to bolster or adds
something to the primary pleading. A supplement exists side by side with the original. It
does not replace that which it supplements. 4 3 Moreover, a supplemental pleading
assumes that the original pleading is to stand and that the issues joined with the original
pleading remained an issue to be tried in the action. 4 4 It is but a continuation of the
complaint. Its usual o ce is to set up new facts which justify, enlarge or change the kind
of relief with respect to the same subject matter as the controversy referred to in the
original complaint. 4 5

The purpose of the supplemental pleading is to bring into the records new facts
which will enlarge or change the kind of relief to which the plaintiff is entitled; hence, any
supplemental facts which further develop the original right of action, or extend to vary the
relief, are available by way of supplemental complaint even though they themselves
constitute a right of action. 4 6
The parties may le supplemental pleadings only to supply de ciencies in aid of an
original pleading, but not to introduce new and independent causes of action. In Leobrera
v. Court of Appeals, 4 7 the Court ruled that when the cause of action stated in the
supplemental complaint is different from the causes of action mentioned in the original
complaint, the court should not admit the supplemental complaint. However, a broad
de nition of causes of action should be applied. As the United States Supreme Court ruled
in Smith v. Biggs Boiler Works Co.: 4 8
While a matter stated in a supplemental complaint should have some
relation to the cause of action set forth in the original pleading, the fact that the
supplemental pleading technically states a new cause of action should not be a
bar to its allowance but only a factor can be considered by the court in the
exercise of its discretion; and of course, a broad de nition of "cause of action"
should be applied here as elsewhere. 4 9

In the present case, the issue as to whether the petitioner stopped the payment of
rentals and the application thereof on the perceived loan de ciency of the respondent, is a
new matter that occurred after the ling of the original complaint. However, the relief for
damages, the collection of the rentals and the application thereof by the petitioner to the
perceived loan de ciency of the respondent are germane to, and are in fact, intertwined
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 with the cause of action of nulli cation of the real estate mortgage and the extrajudicial
foreclosure thereof, as well as the sale at public auction. It is the respondent's contention
that the petitioner remained liable to it for rentals, and until title to the property had been
lawfully consolidated with the petitioner. The claims of unrealized income by way of rentals
from the AMA Computer College on account of the respondent's insistence that such
should be remitted to it, and that the respondent rst drop the criminal complaint for
falsi cation and perjury led by it against Mauro Tividad, the o cer of the petitioner, are,
likewise, germane and related to the respondent's claim in its original complaint that it
remained the owner of the property despite the sale at public auction; hence, it is entitled
to lease the property and collect the rentals therefrom. By its supplemental complaint, the
respondent merely enlarged its original causes of action on account of events that
transpired after the ling of the original complaint and prayed for additional reliefs. The
principal and core issues raised by the parties in their original pleadings remain the same.
There is no showing on record that the petitioner would be prejudiced by the admission of
the supplemental complaint. After all, the petitioner has the right to le a supplemental
answer to the supplemental complaint, conformably to Section 7, Rule 11 of the Revised
Rules of Court which reads:
SEC. 7. Answer to supplemental complaint. — A supplemental
complaint may be answered within ten (10) days from notice of the order
admitting the same, unless a different period is xed by the court. The answer to
the complaint shall serve as the answer to the supplemental complaint if no new
or supplemental answer is filed.

The trial court cannot, thus, be faulted for admitting the respondent's supplemental
complaint. AIcECS

Besides, the admission of the supplemental complaint will better serve the ends of
justice. After all, the Rules of Court were designed to facilitate the administration of justice
to the rival claims of the parties in a just, speedy and inexpensive manner.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs
against the petitioner.
SO ORDERED.
Puno, Austria-Martinez, Tinga and Chico-Nazario, JJ., concur.

Footnotes
1. Penned by Associate Justice Oswaldo D. Agcaoili (retired), with Associate Justices Jose
L. Sabio, Jr. and Mariano C. Del Castillo, concurring.
2. Records, p. 1. (Vol. I)
3. Ibid.
4. Id. at 20-26.
5. Id. at 44-47.
6. Id. at 42.
7. Id. at 43.

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 8. Id. at 35-37.
9. Id. at 39-41.
10. Id. at 518.
11. Id. at 522.
12. Id. at 17-18.
13. Id. at 69-81.
14. Id. at 145-153.
15. Id. at 160.
16. Id. at 162.
17. Id. at 182 and 196.
18. Id. at 278.
19. Id. at 280.
20. Rollo, p. 53.
21. Records, pp. 285-286. (Vol. I).
22. Id. at 299-302.
23. Id. at 303-306.
24. Id. at 402-404.
25. Id. at 525-527.
26. Id. at 582.
27. Id. at 591-595.
28. Id. at 600-606.
29. Id. at 629-637.
30. Id. at 914-916. (Vol. II).
31. Id. at 916.
32. Id.
33. CA Rollo, p. 2.

34. Id. at 5.
35. Id. at 8.
36. Rollo, pp. 23-29.
37. Id. at 28-29.
38. Id. at 31.
39. Id. at 7.
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 40. British Traders' Insurance Co., Ltd. v. Commissioner of Internal Revenue, G.R. No. L-
20501, 30 April 1965, 13 SCRA 719; De la Rama Steamship Co., Inc. v. National
Development Company, G.R. No. L-15659, 30 November 1962, 6 SCRA 775; Randolph v.
Missouri-Kansas-Texas R. Co., D.C. Mo. 1948, 78 F. Supp. 727, Berssenbrugge v. Luce
Mfg. Co., D.C. Mo. 1939, 30 F. Supp. 101.
41. Rollo, p. 9.
42. Id. at 10.
43. Aznar III v. Bernad, G.R. No. L-81190, 9 May 1988, 161 SCRA 276.
44. Delbros Hotel Corporation v. Intermediate Appellate Court, G.R. No. L-72566, 12 April
1988, 159 SCRA 533.
45. Southern Pacific Co. v. Conway, 115 F. 2d 746.
46. Hughes v. Honeyman, 208 P. 2d. 355 (1949).
47. G.R. No. 80001, 27 February 1989, 170 SCRA 711.
48. 34 ALR 2d. 1125 (1952).
49. Ibid.

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