G.R. No. L-28764

G.R. No.
L-28764 November 29, 1973
GENERAL INSURANCE AND SURETY CORPORATION, petitioner,

vs.
HON. HONORATO B. MASAKAYAN, Judge of the Court of First Instance of Rizal,
Branch V, Quezon City; LEANDRO E. CASTELO and JOSEFA PAYUMO CASTELO,
respondents.
Facts:
This case stemmed from the filing by petitioner on October 22, 1959, of a complaint
for unlawful detainer against private respondents Castelos in the Municipal Court of
Quezon City.Respondents Castelos likewise filed a complaint with the CFI of Rizal,
Branch V, Quezon City, against herein petitioners.
The petitioner's case for unlawful detainer was dismissed for lack of jurisdiction, both
by the City Court and the Court of First Instance of Quezon City. Upon appeal to the
Court of Appeals, the latter court certified the case to this Court as one involving
purely a question of law. It was accepted and decided affirming the judgment of the
lower court.
This decision was appealed to the Court of Appeals. As set forth in the decision of
the Court of Appeals, the facts of Civil Case Q-4795 are as follows:
Substantially, the complaint alleges that by virtue of a contract to sell, J.M. Tuason,
Inc. represented by its agent, Gregorio Araneta, Inc. was bound to convey plaintiffs
its ownership over a lot upon receipt of the total purchase price which was payable
by installment; that meanwhile, plaintiffs were given possession of the lot, and had
built a house thereon; that before complete payment of the purchase price, plaintiffs,
through the help of defendant General Insurance and Surety Corporation, obtained
from the Philippine Bank of Commerce a loan of P4,000.00 documented by a
promissory note wherein defendant signed as accommodation co-maker; that in view
thereof, plaintiffs entered into indemnity agreements with defendant whereby they
mortgaged to the latter the house as well as the lot; that the mortgage of the lot, did
not however meet with the approval of Gregorio Araneta, Inc. because the same had
not yet been fully paid for by plaintiffs; that on account of this, plaintiffs executed in
the favor of defendant a "Deed of Sale with Right of Repurchase" (in lieu of the real
estate mortgage) whereby they sold to the latter all their rights and interests over the
lot, that subsequently, plaintiffs again obtained, thru the help of the defendant, a loan
of P600.00 from the Philippine Bank of Commerce, likewise with defendant as
accommodation co-maker of the corresponding promissory note; that eventually
thereafter, defendant paid the balance of the purchase price of the lot to Gregorio
Araneta, Inc. and thereby succeeded in obtaining from the latter a deed of sale
thereof in its favor, and later on an owner's title over the property — Transfer
Certificate of Title No. 35546 issued by the Register of Deeds of Quezon City in
defendant's name; that the aforesaid additional loan of P600.00 has already been
liquidated by plaintiffs, and as regards the original loan of P4,000.00, the truth is that
"only P1,000 was received by plaintiffs and the P3,000 was left in the possession of
the defendant and with which it paid Gregorio Araneta, Inc. the balance of the
purchase price of the lot; that although "the aforesaid instrument executed by
plaintiffs over the lot in question is on its face a deed of sale with right of repurchase,
between the parties the real contract is one of mortgage"; that in view of these facts,
defendant is holding the title to the property in question, as a trustee and for the
benefit of the plaintiff.
Traversing the complaint, defendant in its answer with counterclaim, denied among
other things that the real contract is one of mortgage instead of sale with right of
repurchase, and averred in effect that it had rightfully consolidated its ownership over
the lot in question as vendee a retro.
Among the several errors attributed to the trial court is that it abused its discretion in
denying defendant's motion for postponement and in refusing to set aside its order
directing plaintiffs to adduce their evidence ex-parte before a Commissioner. The
Court of Appeals, on August 18, 1965, rendered judgment for the defendant.
After the remand of the case to the Court of First Instance for further proceedings,
the defendant, now herein petitioner filed a motion for leave to file an amended
answer with counterclaim which, as aforementioned, was denied by the lower Court,
now subject of this petition for review.
Issue:
Whether or not the amendments with counterclaim sought to be included by
petitioner in the amended answer, particularly paragraphs 8, 12, 15 and 16, really
changed the theory of petitioner's defense.
Held:
In paragraph 8 of the Original Answer, the theory of the defense is that the original
transaction proposed by respondents Castelos on the land of Araneta, Inc. did not
meet with the approval of the latter and was not carried out over the lot of Araneta
but on respondent Castelos' equitable rights only, because all that respondents had
at the time of execution of the said deed of sale was a right to buy the land in
question. Comparing said theory of defense with that embodied in the amended
answer, We believe that there was no change in the line of defense, the amended
answer being only an amplification of the original answer. The respondents' assertion
that paragraph 8 of the Amended Answer is a substantial amendment and a
complete turnabout from its original stand is unwarranted, as evidenced by the Deed
of Sale with Right of Repurchase (Annex "A" of the complaint), executed by no less
than the petitioner and respondents themselves, clearly showing that it was Gregorio
Araneta, Inc., and not herein petitioner which required the execution of the said Deed
of Sale with Right of Repurchase.
In Paragraph 12 of the petitioner's original and amended answer,
An analysis of the allegations paragraph 12 points out more clearly that the
petitioner's defense "that the consideration for the execution of the Deed of Sale with
Right to Repurchase is the sum of P2,800.00 paid by petitioner to the Bank" for the
loan of respondents Castelos who failed to pay the same when it became due, and
that said loan was not secured at all by any collateral or by the alleged Indemnity
Agreement with Chattel Mortgage, has neither been changed or altered.
In paragraphs 15 and 16 of the original answer, the petitioner specifically denies the
respective allegations contained in paragraphs 15 and 16 of the Complaint, thus
controverting all the allegations in the latter pleading. It denies that it is holding the
title of the property in question as a trustee for the benefit of the respondent. In the
amended answer, the petitioner, without changing its defense theory, gave a more
accurate statement and explanation of the circumstances involving the land; the
different items covered by the P4,000.00 loan, and the events leading to the issuance
to them of the Transfer Certificate Title.
Upon careful comparison of the disputed paragraphs in both the original and
amended answers, this Court is of the opinion that the amendments sought to be
included did not in any manner change the theory of the defense. Hence the trial
court should have admitted the amendments.

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G.R. No.

L-28764 November 29, 1973

GENERAL INSURANCE AND SURETY CORPORATION, petitioner,

In Paragraph 12 of the petitioner's original and amended answer,

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