NEGROS MERCHANTS ENTERPRISES, INC., PETITIONER, VS. CHINA BANKING CORPORATION, RESPONDENT.

Negros Merchants Enterprises versus China Banking Corporation

The Case

This is a petition for review on certiorari brought by Negros Merchants Enterprises, Inc. against China Banking Corporation, arising from a complaint for annulment of foreclosure sale with damages and preliminary injunction. The borrower corporation sued the bank after its mortgaged properties were extrajudicially foreclosed, but the bank moved to dismiss, and the trial court refused. The case matters because the Supreme Court uses it to teach two enduring procedural lessons: an order denying a motion to dismiss is merely interlocutory and cannot be the subject of a petition for certiorari, and a corporate plaintiff's verification and certification against forum shopping must be signed by a person duly authorized by board resolution, or the complaint is not deemed filed at all.

Procedural History

Negros Merchants Enterprises filed its complaint before the Regional Trial Court of Bacolod City, Branch 41, and later filed an amended complaint impleading its president Jacinto Tan, his spouse, and the bank's branch manager. The bank moved to dismiss, and the trial court denied the motion; it also denied the bank's motion for reconsideration. Instead of filing an answer and proceeding to trial, the bank went up to the Court of Appeals on a petition for certiorari. The Court of Appeals gave the petition due course, annulled and set aside the trial court's orders, permanently enjoined their enforcement, and ordered the dismissal of the civil case insofar as the bank was concerned. The borrower's motion for reconsideration was denied, so it elevated the matter to the Supreme Court by petition for review on certiorari.

Facts

In August 1993, Negros Merchants Enterprises, through its president and general manager Jacinto Tan, applied for an eight million peso credit accommodation with China Banking Corporation, on a one year loan line renewable and re-available annually thereafter. The loan was secured by a real estate mortgage over two titled properties. In December 1994, the corporation applied for an additional case to case loan of one million five hundred thousand pesos. Both loans were respectively paid in January and March 1996.

Beginning in March 1996, the corporation allegedly re-availed the eight million peso credit line through promissory notes executed by Tan. It failed to settle the obligation, so the bank sent a demand letter warning of foreclosure. Through counsel, the corporation asked for a detailed statement of account and for the bank to hold legal action in abeyance; the bank replied that the statement could not be released without a proper board resolution or authorization. The properties were then extrajudicially foreclosed and sold at public auction, with the bank as highest bidder, and a certificate of sale was issued in its favor in March 1998.

In March 1999, the corporation filed its complaint for annulment of the foreclosure sale. The bank moved to dismiss, and the corporation filed an amended complaint. Title was later consolidated in the bank's name, and another branch of the trial court granted the bank a writ of possession. The trial court in Branch 41 denied the motion to dismiss and the motion for reconsideration, prompting the bank's petition for certiorari in the Court of Appeals.

Issues

• Whether or not the Court of Appeals erred in entertaining the bank's petition for certiorari assailing the trial court's interlocutory orders denying the motion to dismiss.
• Whether or not the amended complaint should be dismissed for a defective verification and certification against forum shopping, signed by the corporate secretary without board authorization.
• Whether or not the amended complaint is an initiatory pleading that requires an accompanying certification against forum shopping.

Applicable Provisions

Section 5 of Rule 7 of the Rules of Court, on the certification against forum shopping, provides:

The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.

This is the very certification the corporation's secretary signed without authority, and its mandatory character is the heart of the ruling.

Section 8 of Rule 10 of the Rules of Court provides:

An amended complaint supersedes the complaint that it amends.

This defeats the argument that the amended complaint was not an initiatory pleading and needed no certification.

Ruling

On the first issue, the Court held that the bank took the wrong route. An order denying a motion to dismiss is merely interlocutory and therefore not appealable, nor can it be the subject of a petition for review on certiorari. It may be reviewed only in the ordinary course of law, by appeal from the judgment after trial. The correct procedure was to file an answer, go to trial, and if the decision were adverse, to reiterate the issue on appeal from the final judgment. The bank therefore erred in filing a petition for certiorari.

On the second issue, however, the Court agreed with the Court of Appeals that the amended complaint should have been dismissed. The requirement to file a certificate of non-forum shopping is mandatory, and failure to comply cannot be excused. For a private corporation, the certification may be signed by a specifically authorized person. Here, the corporate secretary's certification contained no allegation that the board of directors had authorized him, and no board resolution was appended. Citing its earlier ruling, the Court held that if a complaint is filed for and in behalf of a plaintiff who is not authorized to do so, the complaint is not deemed filed and produces no legal effect, so the court should dismiss it. The Court found no exceptional circumstances warranting substantial compliance.

On the third issue, the Court held that the amended complaint was indeed an initiatory pleading, because an amended complaint supersedes the complaint that it amends.

Doctrine

First, an order denying a motion to dismiss is interlocutory; it is not appealable and cannot be challenged by a petition for certiorari, but must await review on appeal from the final judgment after trial.

Second, the certification against forum shopping under Section 5 of Rule 7 is mandatory and jurisdictional in effect; for a corporation, it must be signed by a person specifically authorized by board resolution, and absent such authority the complaint is not deemed filed and must be dismissed.

Third, an amended complaint supersedes the original and is itself an initiatory pleading that requires its own certification against forum shopping.

Disposition

The petition was denied, and the Decision of the Court of Appeals annulling the trial court's orders and directing the dismissal of the civil case as against China Banking Corporation was affirmed.

Remember This

Memorize this line: a complaint filed by an unauthorized corporate signatory is not deemed filed at all, because the certification against forum shopping is a personal and mandatory responsibility. Examiners use this case to test the interlocutory order rule and the board resolution requirement for corporate verification and certification.