G.R. No.

98177 June 8, 1993 BARFEL DEVELOPMENT CORPORATION AND SPOUSES VICTOR AND AIDA BARRIOS, petitioner, vs. COURT OF APPEALS, REGINAS INDUSTRIES AND DEVELOPMENT CORPORATION AND TEODORICO E. ARAGO A, respondents. PADILLA, J.: FACTS On June 19, 1987, the defendants, as sellers, and plaintiff corporation, as buyer, and represented by its President, plaintiff Zaragoza, concluded an gree!ent to "ut#$ell t%o &'( parcels of land %ith t%o &'( houses erected thereon. $aid gree!ent bears the e)pressed stipulation, a!ong others, that *+he seller %ill apply the pay!ent of the cash portion of the purchase price to the re!oval of any and all liens on the properties. . . .Plaintiff paid the a!ount of P1,,,,,, as do%n pay!ent upon signing of the aforesaid gree!ent. -uring the ti!e the gree!ent %as under negotiation and even at the conclusion thereof, the defendants repeatedly %arranted that e)cept for a !ortgage in favor of the "an. of the Philippine /slands &"P/( and the -eed of 0estrictions annotated at the bac. of the titles !entioned above, the sub1ect properties are *free fro! any liens and encu!brances*. $o!eti!e on June '2, 1987, plaintiffs found out that defendants !ade a blatant !isrepresentation it %as discovered that the sub1ect properties have a second !ortgage %ith the P/$O#3entral "an. in the a!ount of P',471,2,,.,,. /nfor!ed of this discovery defendant 5ictor $. "arrios advised plaintiff that the second !ortgage obligation is or has been reduced to only P42,,,,.,, and gave assurance that he %ill sub!it the necessary docu!ents to support the sa!e so that a legal valid and acceptable arrange!ent could be %or.ed out %ith the 3entral "an. for the release of said second !ortgage6 . . . . under date of June '9, '987, the Philippine $avings "an. &P$"(, gave a notice that it has approved plaintiff corporation7s application for the loan %ith %hich to pay

sub1ect properties under the gree!ent to "uy#$ell & nne) (, sub1ect to certain ter!s and conditions, principal of %hich is a security of real estate !ortgage upon the sub1ect properties in favor of P$". . . .6 /n this connection, the P$" also sent separate letters of underta.ing#co!!it!ent to the defendants and the "P/ detailing a %or.able arrange!ent to consu!!ate the transaction %hereby ne% titles to the sub1ect properties %ould first be transferred to the plaintiff corporation and the !ortgage in favor of P$" are to be annotated thereon. Once done, the P$", by virtue of authority already given by the plaintiff corporation, %ould directly pay "P/ fro! the proceeds of the loan granted to plaintiff corporation the !ortgage obligation due to it in the a!ount of P847,489.89, and also pay the defendants the balance of the purchase price in the a!ount of P8,92',29,.92 net of %hat has been paid to "P/. . . .6 +he defendants e)pressed their confor!ity to the afore!entioned arrange!ent as sho%n in their letter to the "P/ dated July 8, 1987, . . .6 /n vie% of the assurances of defendants, plaintiffs, in a letter dated July 9, 1987 sent to defendants to further ensure the consu!!ation of the transaction, !anifested its %illingness to pay the su! of P',,,,,,,,.,, ahead of the P$" loan proceeds upon release of the second !ortgage by the 3entral "an. %hich %as to be %or.ed out by the defendants. -efendants confor!ed to the arrange!ent by affir!ing their signatures to the said letter %ere &sic( they also agreed to the release of the certificates of title to P$", free and clear of any liens, upon pay!ent of P',,,,,,,,.,,, . . . :ot%ithstanding the contractual obligations, ter!s and conditions agreed upon by, bet%een and a!ong the parties and those involved in the transaction, plaintiffs conse;uently received infor!ation that defendants have been negotiating %ith other parties for the sale of the properties in ;uestion, although defendants denied such fact6 "e that as it !ay, the undisputed fact is that defendants, in gross and evident bad faith and in !alicious breach of contract, deliberately failed and#or refused and to date continued to

fail and refused to co!ply %ith their contractual of securing the release of the second !ortgage on the sub1ect properties thereby effectively preventing the consu!!ation of the sale to the da!age and pre1udice of the plaintiffs6 +he !alice, fraud and the gross and evident bad faith on the part of the defendants is further de!onstrated by the fact that subse;uently, "P/ advised that it %as disauthorized by defendants to consu!!ate the transaction despite <previous arrange!ents to the contrary as per "P/7s letter to plaintiff7s ban. dated July 81, 1987 . Pre=trial %as concluded by the trial court. Plaintiffs therein &herein private respondents( presented evidence and rested their case. -uring defendants7 &herein petitioners7( presentation of evidence, private respondents filed on 18 >arch 199,, a !otion for a leave to file an a!ended co!plaint and !otion to ad!it the sa!e. +he a!end!ent consisted of i!pleading P/$O ban. as additional party defendant and co!pel it to accept pay!ent of the e)isting second !ortgage fro! private respondent 0eginas, since allegedly no co!plete relief can be had unless the second !ortgage in favor of said P/$O ban. is released. -espite petitioners7 opposition, an order %as issued by the trial court on 8, pril 199, ad!itting the a!ended co!plaint. fter denial of their !otion for reconsideration on 1 June 199,, petitioners proceeded to the 3ourt of ppeals on a petition for certiorari and prohibition &3 =?.0. $p. :o. '8148( raising the issue of %hether an a!end!ent to the co!plaint pleading a cause of action against a ne% or additional party can be allo%ed after the private respondents &as plaintiffs( had rested their case and petitioners &as defendants( had co!!enced the presentation of their evidence. $ustaining private respondents7 contentions, the 3ourt of ppeals7 decision held in effect, as follo%s@ +he change in language fro! the for!er to the present rule &$ection 8, 0ule 1, of the 0evised 0ules of 3ourt(, does not stop the court fro!

allo%ing substantial a!end!ents, after the trial has begun, there being nothing in the rule as changed, %hich li!its the court7s authority to allo% substantial a!end!ents to the pleading 1ust because trial has already begun. +he a!end!ent of the co!plaint %as !ade %ithout intent to delay the action. +he essence of the liberal interpretation accorded by the courts on the filing of an a!ended co!plaint is the avoidance of multiplicity of suits. nd also, private respondents7 cause of action has not been substantially altered. P/$O "an. is a proper party under $ection 8 of 0ule 8 of the 0evised 0ules of 3ourt. Aor the defendants "arfel -evelop!ent 3orporation and the spouses "arrios to be able to co!ply %ith its obligation under the gree!ent to "uy#$ell dated 19 June 1987 and the letter= agree!ent dated 9 July 1987 and the related -eed of $ale, there had to be a deter!ination of the a!ount really due Piso "an. and corresponding order for said ban. to accept the pay!ent of plaintiff corporation to e)tinguish the obligation secured by the !ortgage, before the consu!!ation of said transaction can be effected. ISSUE Bhether an a!end!ent to the co!plaint pleading a cause of action against a ne% or additional party can be allo%ed after the private respondents &as plaintiffs( had rested their case and petitioners &as defendants( had co!!enced the presentation of their evidence. Petitioner said: The amendment was made with the intent to delay the action and substantially alters private respondents' cause of action and petitioners' defense. !ELD Be rule for the petitioners, and reverse the appellate court7s decision. Petitioners7 assertion C %hich is not refuted by private respondents C is that the sub1ect !atter of the original co!plaint sought to be a!ended %as %ell .no%n to private respondents fro! the start. +he reason for the a!end!ent i!pleading P/$O is to co!pel the

latter to accept herein respondents7 pay!ent and release the second !ortgage thereby enabling petitioners to deliver to respondents the titles free fro! all liens and encu!brances. But PISO bank is not a party to the three !" contracts which are the sub#ect of the action for specific performance and dama$es between the private respondents and petitioners. +he ban. %hich is not a party to the transaction is not an indispensable party. " :either is there an acceptable e)planation fro! private respondents %hy P/$O "an. %as not i!pleaded in the original co!plaint filed before the 0+3 of >a.ati. P/$O is a second !ortgagee, %hatever the outco!e of the litigation bet%een the petitioners and the private respondents %ould be. /ts second !ortgage lien attaches to the property. +he action for specific perfor!ance by private respondents against petitioners is not the proper venue for releasing al liens and encu!brances on the sub1ect property. Perhaps, herein private respondents have confused the possible liability of petitioner "arrios for allegedly %ithholding infor!ation on the said second !ortgage as another cause of action a$ainst him arising fro! the e)ecuted contracts. "ut title to the disputed properties can still be delivered by petitioners to herein respondents, by %ay of specific perfor!ance %ith da!ages, encu!bered of course by the second !ortgage in favor of P/$O but the release of such encu!brance can be obtained independently of this case. +o include it as another cause of action in the case at bar against an additional defendant, %ould indeed change the theory of the case, let alone delay the proceedings on the original case of action founded on specific perfor!ance %ith da!ages. +o co!pel P/$O to accept pay!ent cannot be allo%ed in an action for specific perfor!ance %ith da!ages between other parties. +hese are t%o &'( different causes. second !ortgagee li.e P/$O has several options. /t !ay neither@ 1. foreclose the second !ortgage for non= pay!ent. '. pay off the first !ortgagee &"P/ in this instance( and be subrogated to its rights thereby beco!ing the sole lien holder.

8. collect on the loan %ithout foreclosing on the !ortgage. Dnder the facts alleged in the a!ended co!plaint, there is no state!ent that the !ortgage debt in favor of P/$O is due and de!andable6 neither is P/$O foreclosing on the !ortgage. nd in an une)pected act of liberality, P/$O can even %rite off the debt &of course an i!probability(. /n any event private respondents &as plaintiffs belo%( cannot co!pel P/$O to accept pay!ent as it is not even a party to the !ortgage contract &%ith P/$O(6 the latter cannot be i!pleaded as a party defendant, and the for!er only has an inchoate right to the property. "esides, if the principal !ortgagee, "P/, is not even i!pleaded %hy should the second !ortgagee P/$O be so i!pleaded, %hen it is a stranger to the transaction bet%een petitioners and private respondentsE Fven the !ortgage docu!ent purportedly sued upon is not attached to the a!ended co!plaint. *real interest* has been defined as *a present substantial interest, as distinguished fro! a !ere e)pectancy or a future, contingent, subordinate or conse;uential interest.* 3o!plete relief by private respondents against petitioners !ay be had even if P/$O#3entral "an. %ere not i!pleaded as party defendant in the original case. P/$O is not an indispensable or necessary party %ithout %ho! no final deter!ination can be had of the action for specific perfor!ance %ith da!ages. &$ec. 7, 0ule 8, 0ules of 3ourt(. Private respondents !aintain that P/$O is a proper party under sec. 8, 0ule 8 of the 0evised 0ules of 3ourt. +he provision invo.ed reads@ $ection 8. Joinder of proper parties. C Bhen persons %ho are not indispensable but %ho ought to be parties if co!plete reliefs is to be accorded as bet%een those already parties, have not been !ade parties and are sub1ect to the 1urisdiction of the court as to both service of process and venue, the court shall order the! su!!oned to appear in the action. "ut the court !ay, in its discretion, proceed in the action %ithout !a.ing such persons parties, and the 1udg!ent rendered therein shall be %ithout pre1udice to the rights of such persons.

Aro! the above, it is clear that 1oinder of ad!ittedly proper properties is per!issive, that 1udg!ent %ill be decreed even if all the parties are not present if the court %ill be able to proceed to a decree and do 1ustice to the parties already before it, %ithout in1ury to those %ho are absent but e;ually interested in the litigation and %ho cannot conveniently be !ade parties to the suit. 8 Bherever a case %ill be co!pletely decided as bet%een the party litigants, an interest e)isting in so!e other persons %ho! the process of the court cannot reach %ill not prevent a decree upon !erits. 9/n short, as far as the co!plaint for specific perfor!ance and da!ages is concerned, co!plete relief !aybe accorded bet%een private respondents and petitioners &as original parties( %ithout the presence of the second !ortgagee &P/$O ban.(. /f co!plete relief to herein private respondents is the ulti!ate ai! of the 0+3 ruling, %hy did it not include "P/ as &proper( party defendant, since after all, there is an allegation in the original co!plaint that "P/ refused to go along %ith the transaction because of petitioner7s representations. >oreover, the a!end!ent sought by private respondents, %hich is to include a ne% party defendant at a late stage in the proceeding is not a for!al but a substantial one. Private respondents %ill have to present additional evidence on the P/$O second !ortgage. +he effect %ould be to start trial ane% %ith the parties recasting their theories of the case. +he correct a!ount of the second !ortgage o%ed by petitioners to P/$O ban. &apparently a controverted point(, %ould have to be litigated and this could be ti!e consu!ing. s a general policy, liberality in allo%ing a!end!ents is greatest in the early stages of a la% suit, decreases as it progresses and changes at ti!es to a strictness a!ounting to a prohibition. 1# +his is further restricted by the condition that the a!end!ent should not pre1udice the adverse party or place hi! at a disadvantage. BGF0FAO0F, the petition for revie% is ?0 :+F-. +he decision appealed fro! is 0F5F0$F- and $F+ $/-F. Het this case be re!anded to the court of origin for continuation of the presentation of evidence by herein petitioners &as defendants( in 3ivil 3ase :o. 17874.