LA NAVAL DRUG CORP vs CA ATWEL vs CONCEPCION PROGRESSIVE ASSO INC The present petition under Rule 45 of the Rules

of Court assails the decision 1 of the Court of Appeals (CA), dated March 17, 2005 in CA-G.R. SP No. 85170, declaring petitioners Eustacio Atwel,2 Lucia Pilpil and Manuel Melgazo estopped from questioning the jurisdiction of Branch 8 of the Regional Trial Court (RTC) of Tacloban City as a special commercial court under Republic Act (RA) No. 8799. 3 The facts follow. In 1948, then Assemblyman Emiliano Melgazo 4 founded and organized Concepcion Progressive Association (CPA) in Hilongos, Leyte. The organization aimed to provide livelihood to and generate income for his supporters. In 1968, after his election as CPA president, Emiliano Melgazo bought a parcel of land in behalf of the association. The property was later on converted into a wet market where agricultural, livestock and other farm products were sold. It also housed a cockpit and an area for various forms of amusement. The income generated from the property, mostly rentals from the wet market, was paid to CPA. When Emiliano Melgazo died, his son, petitioner Manuel Melgazo, succeeded him as CPA president and administrator of the property. On the other hand, petitioners Atwel and Pilpil were elected as CPA vice-president and treasurer, respectively. In 1997, while CPA was in the process of registering as a stock corporation, its other elected officers and members formed their own group and registered themselves in the Securities and Exchange Commission (SEC) as officers and members of respondent Concepcion Progressive Association, Inc. (CPAI). Petitioners were not listed either as officers or members of CPAI. Later, CPAI objected to petitioners' collection of rentals from the wet market vendors. In 2000, CPAI filed a case in the SEC for mandatory injunction. 5 With the passage of RA 8799, the case was transferred to Branch 24 of the Southern Leyte RTC and subsequently, to Branch 8 of the Tacloban City RTC. Both were special commercial courts. In the complaint, CPAI alleged that it was the owner of the property and petitioners, without authority, were collecting rentals from the wet market vendors. In their answer, petitioners refuted CPAI's claim saying that it was preposterous and impossible for the latter to have acquired ownership over the property in 1968 when it was only in 1997 that it was incorporated and registered with the SEC. Petitioners added that since the property was purchased using the money of petitioner Manuel Melgazo's father (the late Emiliano Melgazo), it belonged to the latter. On June 9, 2004, the special commercial court ruled that the deed of sale covering the property was in the name of CPA, not Emiliano Melgazo: The terms and language of said Deed is unmistakable that the vendee is [CPA], through Emiliano Melgazo, and Emiliano Melgazo signed said Deed "for and [in] behalf of the CPA"...there is therefore no doubt as to who the vendee is. It is [CPA] and not Emiliano Melgazo. As such, it is [CPA] who is the owner of said property and not [petitioner] Manuel Melgazo... [Petitioners] contend that the money used in the purchase of [the property] was Emiliano Melgazo['s]. This Court is not persuaded and to rule otherwise...will be a contravention [to] the Parole Evidence Rule. 6 In the dispositive portion of the decision, the court, however, considered CPA to be one and the same as CPAI: WHEREFORE, premises considered, this Court finds for [CPAI] and against [petitioners] and the latter are hereby directed to cease and desist from collecting the vendor's fee for and [on] behalf of [CPAI] and to account what they have

collected from October 1996 up to the present and [turn over] the same to the proper officer. SO ORDERED.7 Aggrieved, petitioners went to the CA and contested the jurisdiction of the special commercial court over the case. According to them, they were not CPAI members, hence the case did not involve an intra-corporate dispute "between and among members" so as to warrant the special commercial court's jurisdiction over it. CPAI, on the other hand, argued that petitioners were already in estoppel as they had participated actively in the court proceedings. In its assailed decision of March 17, 2005, although the CA found that the special commercial court should not have tried the case since there was no intra-corporate dispute among CPAI members or officers, it nonetheless held that petitioners were already barred from questioning the court's jurisdiction based on the doctrine of estoppel. Quoting this Court's ruling in Tijam v. Sibonghanoy,8 the CA held: An examination of the record of the case will show that [CPAI] admitted in its PreTrial Brief and Amended Pre-Trial Brief that petitioners are not its members. The fact that petitioners are admittedly not members of [CPAI], then, [the special commercial court] should not have taken cognizance of the case as [it] exercises special and limited jurisdiction under R.A. No. 8799. However, as correctly argued and pointed out by [CPAI], the acts of the petitioners, through their counsel, in participating in the trial of the case...show that they themselves consider the trial court to have jurisdiction over the case. 9 xxx xxx xxx ...[I]n the case of Tijam v. Sibonghanoy, the Supreme Court categorically that: "The rule is that the jurisdiction over the subject matter is conferred upon the courts exclusively by law, and as the lack of it affects the very authority of the court to take cognizance of the case, the objection may be raised at any stage of the proceedings. However, considering the facts and the circumstances of the present case, a party may be barred by laches from invoking this plea for the first time on appeal for the purpose of annulling everything done in the case with the active participation of said party invoking the plea." Hence, we agree with [CPAI] that petitioners, after actively participating in the trial of the case, can no longer be allowed to impugn the jurisdiction of the court... 10 xxx xxx xxx WHEREFORE, based on the foregoing premises, judgment is hereby rendered by us DISMISSING the petition filed in this case and AFFIRMING the DECISION dated June 9, 2004 of the [special commercial court] of Tacloban City, Branch 8 in SEC Case No. 2001-07-110. SO ORDERED.11 Petitioners filed a motion for reconsideration but it was denied by the CA. 12 Hence, this petition. Petitioners essentially argue that estoppel cannot apply because a court's jurisdiction is conferred exclusively by the Constitution or by law, not by the parties' agreement or by estoppel. We agree. Originally, Section 5 of Presidential Decree (PD) 902-A 13 conferred on the SEC original and exclusive jurisdiction over the following: (1) Devices or schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation which may

be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association; (2) Controversies arising out of intra-corporate, partnership, or association relations, between and among stockholders, members, or associates; or association of which they are stockholders, members, or associates, respectively; (3) Controversies in the election or appointment of directors, trustees, officers or managers of corporations, partnerships, or associations; (4) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payment in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities but is under the management of a rehabilitation receiver or management committee...(emphasis supplied) Upon the enactment of RA 8799 in 2000, the jurisdiction of the SEC over intracorporate controversies and other cases enumerated in Section 5 of PD 902-A was transferred to the courts of general jurisdiction. Under this authority, Branch 8 of the Tacloban City RTC, acting as a special commercial court, deemed the mandatory injunction case filed by CPAI an intra-corporate dispute falling under subparagraph (2) of the aforecited provision as it involved the officers and members thereof. To determine whether a case involves an intra-corporate controversy to be heard and decided by the RTC, two elements must concur: (1) the status or relationship of the parties and (2) the nature of the question that is subject of their controversy. 14 The first element requires that the controversy must arise out of intra-corporate or partnership relations: (a) between any or all of the parties and the corporation, partnership or association of which they are stockholders, members or associates; (b) between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates and (c) between such corporation, partnership or association and the State insofar as it concerns their individual franchises. On the other hand, the second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation.15 If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy. 16 In the case at bar, these elements are not present. The records reveal that petitioners were never officers nor members of CPAI. CPAI itself admitted this in its pleadings. In fact, petitioners were the only remaining members of CPA which, obviously, was not the CPAI that was registered in the SEC. Moreover, the issue in this case does not concern the regulation of CPAI (or even CPA). The determination as to who is the true owner of the disputed property entitled to the income generated therefrom is civil in nature and should be threshed out in a regular court. Cases of this nature are cognizable by the RTC under BP 129.17Therefore, the conflict among the parties here was outside the jurisdiction of the special commercial court. But did the doctrine of estoppel bar petitioners from questioning the jurisdiction of the special commercial court? No. In Lozon v. NLRC,18 this Court came up with a clear rule on when jurisdiction by estoppel applies and when it does not:

The operation of estoppel on the question of jurisdiction seemingly depends on whether the lower court actually had jurisdiction or not . If it had no jurisdiction, but the case was tried and decided upon the theory that it had jurisdiction, the parties are not barred, on appeal, from assailing such jurisdiction, for the same "must exist as a matter of law, and may not be conferred by the consent of the parties or by estoppel." However, if the lower court had jurisdiction, and the case was heard and decided upon a given theory, such, for instance, as that the court had no jurisdiction, the party who induced it to adopt such theory will not be permitted, on appeal, to assume an inconsistent position that the lower court had jurisdiction.... (emphasis supplied) The ruling was reiterated in Metromedia Times Corporation [(Metromedia)] v. Pastorin,19 where we reversed the CA ruling that Metromedia was already estopped from questioning the jurisdiction of the labor arbiter (LA) after it participated in the proceedings before him. There, an illegal dismissal case was filed by an employee against Metromedia alleging that his transfer to another department 20 was tantamount to constructive dismissal. Realizing the issue was properly cognizable by a voluntary arbitrator, Metromedia assailed the LA's jurisdiction in the NLRC and the CA. The CA, also citing Tijam,21 ruled erroneously that Metromedia was already barred from questioning the LA's jurisdiction. We likewise held in Metromedia that Tijam provided an exceptional circumstance. To void the trial court's decision in Tijam for lack of jurisdiction was not only unfair but patently revolting considering that the question on jurisdiction was raised only after 15 years of tedious litigation.22 We said: The notion that the defense of lack of jurisdiction may be waived by estoppel on the party invoking the same most prominently emerged in Tijam v. Sibonghanoy.... [H]owever, Tijam represented an exceptional case wherein the party invoking the lack of jurisdiction only did so after fifteen (15) years, and at a stage where the case was already elevated to the Court of Appeals. In Calimlim v. Ramirez,23 which we extensively quoted in Metromedia, we spoke of Tijam in this sense: A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that jurisdiction is a matter of law and may not be conferred by consent or agreement of the parties....[T]his doctrine has been qualified by recent pronouncements which stemmed principally from the ruling in the cited case of [Tijam v.]Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations which were obviously not contemplated therein. The exceptional circumstances involved in [Tijam v.]Sibonghanoy which justified the departure from the accepted doctrine of non-waivability of objection to jurisdiction has been ignored and instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling [therein] not as the exception, but rather the general rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel. The rule remains that estoppel does not confer jurisdiction on a tribunal that has none over the cause of action or subject matter of the case. 24 Unfortunately for CPAI, no exceptional circumstance appears in this case to warrant divergence from the rule. Jurisdiction by estoppel is not available here. Consequently, CPAI cannot be permitted to wrest from petitioners (as the remaining CPA officers) the administration of the disputed property until after the parties' rights are clearly adjudicated in the proper courts. It is neither fair nor legal to bind

a party to the result of a suit or proceeding in a court with no jurisdiction. 25 The decision of a tribunal not vested with the appropriate jurisdiction is null and void. 26 WHEREFORE, the petition is hereby GRANTED. The assailed decision of the Court of Appeals in CA-G.R. SP No. 85170 is REVERSED and SET ASIDE. Accordingly, SEC Case No. 2001-07-110 is DISMISSED for lack of jurisdiction. SO ORDERED. CITY OF BACOLOD vs SAN MIGUEL An appeal from the decision of the Court of First Instance of Negros Occidental in its Civil Case No. 7355, ordering the San Miguel Brewery, Inc. to pay to the City of Bacolod the sum of P36,519.10, representing surcharges on certain fees which, under existing ordinances of the City of Bacolod, the San Miguel Brewery should have paid quarterly to the treasurer of the said city for and/or during the period from July, 1959 to December, 1962, but which were paid only on April 23, 1963. On February 17, 1949, the City Council of Bacolod passed Ordinance No. 66, series of 1949 imposing upon "any person, firm or corporation engaged in the manufacturer bottling of coca-cola, pepsi cola, tru orange, lemonade, and other soft drinks within the jurisdiction of the City of Bacolod, ... a fee of ONE TWENTY-FOURTH (1/24) of a centavo for every bottle thereof," plus "a surcharge of 2% every month, but in no case to exceed 24% for one whole year," upon "such local manufacturers or bottler above-mentioned who will be delinquent on any amount of fees due" under the ordinance. In 1959, this ordinance was amended by Ordinance No. 150, series of 1959, by increasing the fee to "one-eighth (1/8) of a centavo for every bottle thereof." In other words, the fee was increased from P0.01 to P0.03 per case of soft drinks. Appellant refused to pay the additional fee and challenged the validity of the whole ordinance. Under date of March 23, 1960, appellee sued appellant in Civil Case No. 5693 of the Court of First Instance of Negros Occidental, with the corresponding Complaint alleging, inter alia: 3. That the defendant, Manager of the San Miguel Brewery, Bacolod Coca Cola Plant, Bacolod Branch since the approval of Ordinance No. 66, Series of 1949 as amended by Ordinance No. 150, Series of 1959, which took effect on July 1, 1959, only paid to the plaintiff herein the P0.01 bottling tax per case of soft drinks thereby refusing to pay the P0.03 bottling tax per case of soft drinks which amounted to P26,306.54 at P0.02 per case of soft drinks such as coca cola and tru orange manufactured or bottled by said company as per statement submitted by the Assistant City Treasurer of Bacolod City herewith attached as Annex "C" of this complaint; and praying ... that judgment be rendered for the plaintiff: "(a) Ordering the defendant to pay the plaintiff the bottling taxes of P0.03 per case of soft drinks as provided for in Section 1, Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150, Series of 1959, as well as the sum of P26,306.54 representing unpaid bottling taxes due with legal rate of interest thereon from the date of the filing of this complaint until complete payment thereof; ... costs, etc."'

In due time, appellant filed its answer. This was followed by a stipulation of facts between the parties, whereupon, the court rendered judgment on November 12, 1960; with the following dispositive portion: WHEREFORE, San Miguel Brewery Inc. is ordered to pay to the plaintiff the sum of P26,306.54 and the tax at the rate of three centavos per case levied in Ordinance No. 66 and 150 from March, 1960, and thereafter. Costs against the defendant. Appellant appealed from the said decision to this Court where it pressed the question of the invalidity of the abovementioned taxing ordinances. In that appeal (G.R. No. L-18290), however, this Court affirmed the decision appealed from and upheld the constitutionality of the questioned ordinances and the authority of the appellee to enact the same. For reasons not extant in the record, it was already after this decision had become final when appellee moved for the reconsideration thereof, praying that the same be amended so as to include the penalties and surcharges provided for in the ordinances. Naturally, the said motion was denied, for the reason that "the decision is already final and may not be amended." When execution was had before the lower court, the appellee again sought the inclusion of the surcharges referred to; and once again the move was frustrated by the Court of First Instance of Negros Occidental which denied the motion, as follows: Acting upon the motion dated October 24, 1963, filed by the Assistant City Fiscal, Raymundo Rallos, counsel for the plaintiff, and the opposition thereto filed by attorneys for the defendants dated November 9, 1963, as well as the reply to the opposition of counsel for the defendants dated December 5, 1963, taking into consideration that the decision of this Court as affirmed by the Supreme Court does not specifically mention the alleged surcharges claimed by the plaintiff-appellee, the Court hereby resolves to deny, as it hereby denies, the aforesaid motion, for not being meritorious. Failing thus in its attempt to collect the surcharge provided for in the ordinances in question, appellee filed a second action (Civil Case No. 7355) to collect the said surcharges. Under date of July 10, 1964, it filed the corresponding complaint before the same Court of First Instance of Negros Occidental alleging, inter alia, that: 6. That soon after the decision of the Honorable Supreme Court affirming the decision of the Hon. Court, the defendant herein on April 23, 1963 paid to the City of Bacolod, the amount of ONE HUNDRED FIFTY SIX THOUSAND NINE HUNDRED TWENTY FOUR PESOS and TWENTY CENTAVOS (P156,924.20) as taxes from July, 1959 to December, 1962 in compliance with the provision of Section 1, Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150, Series of 1959, which corresponds to the taxes due under said section in the amount of P0.03 per case of soft soft drinks manufactured by the defendant, but refused and still continued refusing to pay the surcharge as provided for under Section 4 of Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150, Series of 1959, which reads as follows: "SEC. 4 A surcharge of 2% every month, but in no case to exceed 24% for one whole year, shall be imposed on such local manufacturer or bottlers above mentioned who will be delinquent on any amount of fees under the ordinance." which up to now amounted to THIRTY SIX THOUSAND FIVE HUNDRED NINETEEN PESOS AND TEN CENTAVOS (P36,519.10), as shown by the certified statement of the office of the City Treasurer of Bacolod City herewith attached as Annex "E" and made an integral part of this complaint; 7. That the said interest and/or penalties to the said bottling taxes which defendant refused to pay have long been overdue;

and again praying ... that judgment be rendered for the plaintiff: (a) Ordering the defendant to pay the penalty and/or interest therein Section 4 of Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150, Series of 1959 the total amount of THIRTY SIX THOUSAND FIVE HUNDRED NINETEEN PESOS and TEN CENTAVOS (P36,519.10), representing the surcharges from August, 1959 to December, 1962, inclusive, and the 24% penalty computed as of June 30, 1964, from the amount of P152,162.90, with legal rate of interest thereon from the date of the filing of this complaint until complete payment thereof;" plus costs, etc. On July 24, 1964, appellant filed a motion to dismiss the case on the grounds that: (1) the cause of action is barred by a prior judgment, and (2) a party may not institute more than one suit for a single cause of action. This motion was denied by the court a quo in its order dated August 22, 1964; so appellant filed its answer wherein it substantially reiterated, as affirmative defenses, the above-mentioned grounds of its motion to dismiss. Thereafter, the parties submitted the case for judgment on the pleadings, whereupon, the court rendered judgment on March 11, 1965 with the following dispositive portion: . IN VIEW THEREOF, judgment is hereby rendered ordering the defendant San Miguel Brewery, Inc. to pay to the plaintiff the sum of P36,519.10 representing the surcharges as provided in section 4 of Ordinance 66, series of 1949 of the City of Bacolod. No costs. Appellants moved for reconsideration but its motion was denied, hence, the instant appeal. Appellant has only one assignment of error, to wit: THE LOWER COURT ERRED IN FINDING THE APPELLANT LIABLE TO THE APPELLEE FOR THE SUM OF P36,519.10 REPRESENTING SURCHARGES AS PROVIDED IN TAX ORDINANCE NO. 66, SERIES OF 1949, AS AMENDED, OF THE CITY OF BACOLOD. Under this, it argues that the action of appellee cannot be maintained because (1) a party may not institute more than one suit for a single cause of action; and (2) appellee's action for recovery of the surcharges in question is barred by prior judgment. We find appellant's position essentially correct. There is no question that appellee split up its cause of action when it filed the first complaint on March 23, 1960, seeking the recovery of only the bottling taxes or charges plus legal interest, without mentioning in any manner the surcharges. The rule on the matter is clear. Sections 3 and 4 of Rule 2 of the Rules of Court of 1940 which were still in force then provided: SEC. 3. Splitting a cause of action, forbidden. A single cause of action cannot be split up into two or more parts so as to be made the subject of different complaints. . SEC. 4. Effect of splitting. If separate complaints were brought for different parts of a single cause of action, the filing of the first may be pleaded in abatement of the others, and a judgment upon the merits in either is available as a bar in the others. Indeed, this rule against the splitting up of a cause of action is an old one. In fact, it preceded the Rules of Court or any statutory provision. In Bachrach Motor Co., Inc. vs. Icarangal et al.,1 this Court already explained its meaning, origin and purpose, thus: But, even if we have no such section 708 of our Code of Civil Procedure, or section 59 of the Insolvency Law, we have still the rule against splitting a single cause of action. This rule, though not contained in any statutory provision, has been applied

by this court in all appropriate cases. Thus, in Santos vs. Moir (36 Phil. 350, 359), we said: "It is well recognized that a party cannot split a single cause of action into parts and sue on each part separately. A complaint for the recovery of personal property with damages for detention states a single cause of action which cannot be divided into an action for possession and one for damages; and if suit is brought for possession only a subsequent action cannot be maintained to recover the damages resulting from the unlawful detention." In Rubio de Larena vs. Villanueva (53 Phil. 923, 927), we reiterated the rule by stating that "... a party will not be permitted to split up a single cause of action and make it the basis for several suits" and that when a lease provides for the payment of the rent in separate installments, each installment constitutes an independent cause of action, but when, at the time the complaint is filed, there are several installments due, all of them constitute a single cause of action and should be included in a single complaint, and if some of them are not so included, they are barred. The same doctrine is stated inLavarro vs. Labitoria (54 Phil. 788), wherein we said that "a party will not be permitted to split up a single cause of action and make it a basis for several suits" and that a claim for partition of real property as well as for improvements constitutes a single cause of action, and a complaint for partition alone bars a subsequent complaint for the improvements. And in Blossom & Co. vs. Manila Gas Corporation (55 Phil. 226-240), we held that "as a general rule a contract to do several things at several times is divisible in its nature, so as to authorize successive actions; and a judgment recovered for a single breach of a continuing contract or covenant is no bar to suit for a subsequent breach thereof. But where the covenant or contract is entire, and the breach total, there can be only one action, and plaintiff must therein recover all his damages. The rule against splitting a single cause of action is intended "to prevent repeated litigation between the same parties in regard to the same subject of controversy; to protect defendant from unnecessary vexation; and to avoid the costs and expenses incident to numerous suits." (1 C.J. 1107) It comes from that old maxim nemo debet bis vexare pro una et eadem causa (no man shall be twice vexed for one and the same cause). (Ex parte Lange, 18 Wall 163, 168; 21 Law Ed. 872; also U.S. vs. Throckmorton, 98 U.S. 61; 25 Law Ed. 93). And it developed, certainly not as an original legal right of the defendant, but as an interposition of courts upon principles of public policy to prevent inconvenience and hardship incident to repeated and unnecessary litigations. (1 C. J. 1107). In the light of these precedents, it cannot be denied that appellant's failure to pay the bottling charges or taxes and the surcharges for delinquency in the payment thereof constitutes but one single cause of action which under the above rule can be the subject of only one complaint, under pain of either of them being barred if not included in the same complaint with the other. The error of appellee springs from a misconception or a vague comprehension of the elements of a cause of action. The classical definition of a cause of action is that it is "a delict or wrong by which the rights of the plaintiff are violated by the defendant." Its elements may be generally stated to be (1) a right existing in favor of the plaintiff; (2) a corresponding obligation on the part of the defendant to respect such right; and (3) an act or omission of the plaintiff which constitutes a violation of the plaintiff's right which defendant had the duty to respect. For purposes, however, of the rule against splitting up of a cause of action, a clearer understanding can be achieved, if together with these elements, the right to relief is considered.

In the last analysis, a cause of action is basically an act or an omission or several acts or omissions. A single act or omission can be violative of various rights at the same time, as when the act constitutes juridically a violation of several separate and distinct legal obligations. This happens, for example, when a passenger of a common carrier, such as a taxi, is injured in a collision thereof with another vehicle due to the negligence of the respective drivers of both vehicles. In such a case, several rights of the passenger are violated, inter alia, (1) the right to be safe from the negligent acts of either or both the drivers under the law on culpa-acquiliana or quasi-delict; (2) the right to be safe from criminal negligence of the said drivers under the penal laws; and (3) the right to be safely conducted to his destination under the contract of carriage and the law covering the same, not counting anymore the provisions of Article 33 of the Civil Code. The violation of each of these rights is a cause of action in itself. Hence, such a passenger has at least three causes of action arising from the same act. On the other hand, it can happen also that several acts or omissions may violate only one right, in which case, there would be only one cause of action. Again the violation of a single right may give rise to more than one relief. In other words, for a single cause of action or violation of a right, the plaintiff may be entitled to several reliefs. It is the filing of separate complaints for these several reliefs that constitutes splitting up of the cause of action. This is what is prohibited by the rule. In the case at bar, when appellant failed and refused to pay the difference in bottling charges from July 1, 1959, such act of appellant in violation of the right of appellee to be paid said charges in full under the Ordinance, was one single cause of action, but under the Ordinance, appellee became entitled, as a result of such non-payment, to two reliefs, namely: (1) the recovery of the balance of the basic charges; and (2) the payment of the corresponding surcharges, the latter being merely a consequence of the failure to pay the former. Stated differently, the obligation of appellant to pay the surcharges arose from the violation by said appellant of the same right of appellee from which the obligation to pay the basic charges also arose. Upon these facts, it is obvious that appellee has filed separate complaints for each of two reliefs related to the same single cause of action, thereby splitting up the said cause of action. The trial court held that inasmuch as there was no demand in the complaint in the first case for the payment of the surcharges, unlike in the case of Collector of Internal Revenue vs. Blas Gutierrez, et al ., G.R. No. L-13819. May 25, 1960, wherein there was such a demand, there is no bar by prior judgment as to said surcharges, the same not having been "raised as an issue or cause of action in Civil Case No. 5693." This holding is erroneous. Section 4 of Rule 2, above-quoted, is unmistakably clear as to the effect of the splitting up of a cause of action. It says, "if separate complaints are brought for different parts (reliefs) of a single cause of action, the filing of the first (complaint) may be pleaded in abatement of the others, and a judgment upon the merits in either is available as a bar in the others." In other words, whenever a plaintiff has filed more than one complaint for the same violation of a right, the filing of the first complaint on any of the reliefs born of the said violation constitutes a bar to any action on any of the other possible reliefs arising from the same violation, whether the first action is still pending, in which event, the defense to the subsequent complaint would be litis pendentia, or it has already been finally terminated, in which case, the defense would be res adjudicata.2 Indeed, litis pendentia and res adjudicata, on the one hand, and splitting up a cause of action on the other, are not

separate and distinct defenses, since either of the former is by law only the result or effect of the latter, or, better said, the sanction for or behind it. It thus results that the judgment of the lower court must be, as it is hereby, reversed and the complaint of appellee is dismissed. No costs. JALANDONI vs MARTIR-GUANZON Appeal by the spouses Amado P. Jalandoni and Paz Ramos from an order of the Court of First Instance of Occidental Negros dismissing her complaint in Civil Case No. 3586 of said court. It appears that on January 9, 1947, the appellant spouses began a suit (Case No. 573) against the appellees Antonio Guanzon, eta al., for partition of lots Nos. 130-A, 130-B and 130-F of the Murcia Cadastre, as well as lots Nos. 1288 and 1376 of the Bogo Cadastre, and for recovery of damages caused by the defendants' unwarranted refusal to recognize plaintiffs' right and partition said lots, as was to account for and deliver plaintiff's share in the crops obtained during the agricultural years from 1941-1942 to 1946-1947. By decision of February 22, 1955, the Court of First Instance of Negros Occidental held for plaintiffs and ordered the partition of the lands involved, but denied their claim for damages because of failure to "prove the exact and actual damages suffered by them. The decision having become final because none of the parties appealed therefrom, the plaintiffs instituted the present action (No. 3586 of the same Court of First Instance) on August 26, 1955, seeking recovery from the defendants of the following amounts: (1) P20,000 as moral and exemplary damages due to suffering, anguish and anxiety occasioned by the defendant's refusal to partition of the properties involved in the proceeding case; (2) P55,528.20 as share of the products of the property from 1947 (when the preceeding case No. 573 was filed) until 1955 when judgment was rendered therein (3) P4,689.54 as land taxes due unpaid on the properties involved; and (4) P2,500 for attorney's fees. Upon motion of defendant's, the court a quo dismissed the second complaint for failure to state a cause of action; and after their motion to reconsider was denied, plaintiffs appealed to this Court on points of law. We find the dismissal to have been correctly entered. Except as concomitant to physical injuries, moral and corrective damages (allegedly due to suffering, anguish and axiety caused by the refusal of defendants in 1941 to partition the common property) were not recoverable under the Civil Code of 1899 which was the governing law at the time. Recovery of such damages was established for the first time in 1950 by the new Civil Code, and action not be made to apply retroactively to acts that occurred character of these damages. The rule is expressly laid down by paragraph 1 of Article 2257 of the new Code. ART. 2257. Provision of this Code which attach a civil sanction or penalty or a deprivation of rights to acts or ommissions which were not penalized by the former laws, are not applicable to those who, when said laws were in force may have executed the act or incurred in the ommission forbidden or condemmned by this Code. xxx xxx xxx. As to the value of the plaintiff's share in the products of the land during the time that the former action was pending (which are the damages claimed under the second cause of action), their recovery is now barred by the previous judgment.

These damages are but the result of the original cause of action, viz., the continuing refusal by defendants in 1941 to recognize the plaintiffs' right to an interest in the property. In the same way that plaintiffs claimed for their share of the produce from 1941 to 1947, these later damages could have been claimed in the first action, either in the original complaint (for their existence could be anticipated when the first complaint was filed) or else by supplemental plaeding. To allow them to be recovered by subsequent suit would be a violation of the rule against multiplicity of suits, and specifically of sections 3 and 4 of Rules 2 of the Rules of Court, against the splitting of causes of action, since these damages spring from the same cause of action that was pleading in the former case No. 573 between the same parties (Blossom & Co. vs. Manila Gas Corporation, 55 Phil. 26; Santos vs. Moir, 36 Phil. 350; Pascua vs. Sideco, 24 Phil 26; Bachrach Motor Co. vs. Icarangal, 68 Phil. 287). That the former judgment did not touch upon these damages is not material to its conclusive effect; between the same parties, with the same subject matter and cause of action, a final judgment on the merits is conclusive not only the questions actually contested and determined, but upon all matters that might have been litigated and decided in the former suit, i.e., all matters properly belonging to the subject of the controversy and within the scope of the issue (Penalosa vs. Tuason, 22 Phil. 312; National Bank vs. Barretto, 52 Off. Gaz., 182; Miranda vs. Tianco, 96 Phil., 526, 51 Off. Gaz., [3] 1366). Hence, the rejection of plaintiffs' claim for damages in Case No. 573 imports denial of those who claimed, since there are a mere continuation of the former. Annent the land taxes allegedly overdue and unpaid, it is readily apparent that, taxes beein due to the government, plaintiffs have no right to compel payment thereof to themselves. The case could be otherwise if plaintiffs had paid the taxes to stave of forfeiture of the common property of tax delinquency; in that event, they could compel contribution. But the complaint does not aver any such tax payment. Little need be said concerning the claim for attorney's fees under the fourth cause of action. If they be fees for the lawyer's services in the former case, they are barred from recovery for the reasons already given; if for services in the present case, there is no jurisdiction therefor, since no case is made out for the plaintiffs. The order of dismissal appealed from is affirmed. Costs against plaintiffs-appellants. So ordered. JOSEPH vs BAUTISTA Petitioner prays in this appeal by certiorari for the annulment and setting aside of the order, dated July 8, 1975, dismissing petitioner's complaint, as well as the order, dated August 22, 1975, denying his motion for reconsideration of said dismissal, both issued by respondent Judge Crispin V. Bautista of the former Court of First Instance of Bulacan, Branch III. Petitioner herein is the plaintiff in Civil Case No. 50-V-73 entitled "Luis Joseph vs. Patrocinio Perez, Domingo Villa y de Jesus, Rosario Vargas, Antonio Sioson, Lazaro Villanueva and Jacinto Pagarigan", filed before the Court of First Instance of Bulacan, Branch III, and presided over by respondent Judge Crispin V. Bautista; while private respondents Patrocinio Perez, Antonio Sioson, Jacinto Pagarigan and Lazaro Villanueva are four of the defendants in said case. Defendant Domingo Villa y de Jesus did not answer either the original or the amended complaint, while defendant Rosario Vargas could not be served with summons; and respondent

Alberto Cardeno is included herein as he was impleaded by defendant Patrocinio Perez, one of respondents herein, in her cross-claim. The generative facts of this case, as culled from the written submission of the parties, are as follows: Respondent Patrocinio Perez is the owner of a cargo truck with Plate No. 25-2 YT Phil. '73 for conveying cargoes and passengers for a consideration from Dagupan City to Manila. On January 12, 1973, said cargo truck driven by defendant Domingo Villa was on its way to Valenzuela, Bulacan from Pangasinan. Petitioner, with a cargo of livestock, boarded the cargo truck at Dagupan City after paying the sum of P 9.00 as one way fare to Valenzuela, Bulacan. While said cargo truck was negotiating the National Highway proceeding towards Manila, defendant Domingo Villa tried to overtake a tricycle likewise proceeding in the same direction. At about the same time, a pick-up truck with Plate No. 45-95 B, supposedly owned by respondents Antonio Sioson and Jacinto Pagarigan, then driven by respondent Lazaro Villanueva, tried to overtake the cargo truck which was then in the process of overtaking the tricycle, thereby forcing the cargo truck to veer towards the shoulder of the road and to ram a mango tree. As a result, petitioner sustained a bone fracture in one of his legs. 1 The following proceedings thereafter took place: 2 Petitioner filed a complaint for damages against respondent Patrocinio Perez, as owner of the cargo truck, based on a breach of contract of carriage and against respondents Antonio Sioson and Lazaro Villanueva, as owner and driver, respectively, of the pick-up truck, based on quasi-delict. Respondent Sioson filed his answer alleging that he is not and never was an owner of the pick-up truck and neither would he acquire ownership thereof in the future. On September 24, 1973, petitioner, with prior leave of court, filed his amended complaint impleading respondents Jacinto Pagarigan and a certain Rosario Vargas as additional alternative defendants. Petitioner apparently could not ascertain who the real owner of said cargo truck was, whether respondents Patrocinio Perez or Rosario Vargas, and who was the real owner of said pick-up truck, whether respondents Antonio Sioson or Jacinto Pagarigan. Respondent Perez filed her amended answer with crossclaim against her codefendants for indemnity and subrogation in the event she is ordered to pay petitioner's claim, and therein impleaded cross-defendant Alberto Cardeno as additional alternative defendant. On September 27, 1974, respondents Lazaro Villanueva, Alberto Cardeno, Antonio Sioson and Jacinto Pagarigan, thru their insurer, Insurance Corporation of the Philippines, paid petitioner's claim for injuries sustained in the amount of P 1,300.00. By reason thereof, petitioner executed a release of claim releasing from liability the following parties, viz: Insurance Corporation of the Philippines, Alberto Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto Pagarigan. On December 2, 1974, respondents Lazaro Villanueva, Alberto Cardeno and their insurer, the Insurance Corporation of the Philippines, paid respondent Patrocinio Perez' claim for damages to her cargo truck in the amount of P 7,420.61. Consequently, respondents Sioson, Pagarigan, Cardeno and Villanueva filed a "Motion to Exonerate and Exclude Defs/ Cross defs. Alberto Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto Pagarigan on the Instant Case", alleging that respondents Cardeno and Villanueva already paid P 7,420.61 by way of damages to respondent Perez, and alleging further that respondents Cardeno, Villanueva, Sioson and Pagarigan paid P 1,300.00 to petitioner by way of amicable settlement.

Thereafter, respondent Perez filed her "Opposition to Cross-defs.' motion dated Dec. 2, 1974 and Counter Motion" to dismiss. The so-called counter motion to dismiss was premised on the fact that the release of claim executed by petitioner in favor of the other respondents inured to the benefit of respondent Perez, considering that all the respondents are solidarity liable to herein petitioner. On July 8, 1975, respondent judge issued the questioned order dismissing the case, and a motion for the reconsideration thereof was denied. Hence, this appeal, petitioner contending that respondent judge erred in declaring that the release of claim executed by petitioner in favor of respondents Sioson, Villanueva and Pagarigan inured to the benefit of respondent Perez; ergo, it likewise erred in dismissing the case. We find the present recourse devoid of merit. The argument that there are two causes of action embodied in petitioner's complaint, hence the judgment on the compromise agreement under the cause of action based on quasi-delict is not a bar to the cause of action for breach of contract of carriage, is untenable. A cause of action is understood to be the delict or wrongful act or omission committed by the defendant in violation of the primary rights of the plaintiff. 3 It is true that a single act or omission can be violative of various rights at the same time, as when the act constitutes juridically a violation of several separate and distinct legal obligations. However where there is only one delict or wrong, there is but a single cause of action regardless of the number of rights that may have been violated belonging to one person. 4 The singleness of a cause of action lies in the singleness of the- delict or wrong violating the rights of one person. Nevertheless, if only one injury resulted from several wrongful acts, only one cause of action arises. 5 In the case at bar, there is no question that the petitioner sustained a single injury on his person. That vested in him a single cause of action, albeit with the correlative rights of action against the different respondents through the appropriate remedies allowed by law. The trial court was, therefore, correct in holding that there was only one cause of action involved although the bases of recovery invoked by petitioner against the defendants therein were not necessarily Identical since the respondents were not identically circumstanced. However, a recovery by the petitioner under one remedy necessarily bars recovery under the other. This, in essence, is the rationale for the proscription in our law against double recovery for the same act or omission which, obviously, stems from the fundamental rule against unjust enrichment. There is no question that the respondents herein are solidarily liable to petitioner. On the evidence presented in the court below, the trial court found them to be so liable. It is undisputed that petitioner, in his amended complaint, prayed that the trial court hold respondents jointly and severally liable. Furthermore, the allegations in the amended complaint clearly impleaded respondents as solidary debtors. We cannot accept the vacuous contention of petitioner that said allegations are intended to apply only in the event that execution be issued in his favor. There is nothing in law or jurisprudence which would countenance such a procedure. The respondents having been found to be solidarity liable to petitioner, the full payment made by some of the solidary debtors and their subsequent release from any and all liability to petitioner inevitably resulted in the extinguishment and release from liability of the other solidary debtors, including herein respondent Patrocinio Perez.

The claim that there was an agreement entered into between the parties during the pre-trial conference that, after such payment made by the other respondents, the case shall proceed as against respondent Perez is both incredible and unsubstantiated. There is nothing in the records to show, either by way of a pre-trial order, minutes or a transcript of the notes of the alleged pre-trial hearing, that there was indeed such as agreement. WHEREFORE, the challenged orders of the respondent judge are hereby AFFIRMED. SO ORDERED SARSABA vs VDA DE TE Before us is a petition for review on certiorari 1 with prayer for preliminary injunction assailing the Order2 dated March 22, 2006 of the Regional Trial Court (RTC), Branch 19, Digos City, Davao del Sur, in Civil Case No. 3488. The facts, as culled from the records, follow. On February 14, 1995, a Decision was rendered in NLRC Case No. RAB-11-0700608-93 entitled, Patricio Sereno v. Teodoro Gasing/Truck Operator , finding Sereno to have been illegally dismissed and ordering Gasing to pay him his monetary claims in the amount of P43,606.47. After the Writ of Execution was returned unsatisfied, Labor Arbiter Newton R. Sancho issued an Alias Writ of Execution 3 on June 10, 1996, directing Fulgencio R. Lavarez, Sheriff II of the National Labor Relations Commission (NLRC), to satisfy the judgment award. On July 23, 1996, Lavarez, accompanied by Sereno and his counsel, petitioner Atty. Rogelio E. Sarsaba, levied a Fuso Truck bearing License Plate No. LBR-514, which at that time was in the possession of Gasing. On July 30, 1996, the truck was sold at public auction, with Sereno appearing as the highest bidder. 4 Meanwhile, respondent Fe Vda. de Te, represented by her attorney-in-fact, Faustino Castaeda, filed with the RTC, Branch 18, Digos, Davao del Sur, a Complaint 5 for recovery of motor vehicle, damages with prayer for the delivery of the truck pendente lite against petitioner, Sereno, Lavarez and the NLRC of Davao City, docketed as Civil Case No. 3488. Respondent alleged that: (1) she is the wife of the late Pedro Te, the registered owner of the truck, as evidenced by the Official Receipt 6 and Certificate of Registration;7 (2) Gasing merely rented the truck from her; (3) Lavarez erroneously assumed that Gasing owned the truck because he was, at the time of the "taking,"8 in possession of the same; and (4) since neither she nor her husband were parties to the labor case between Sereno and Gasing, she should not be made to answer for the judgment award, much less be deprived of the truck as a consequence of the levy in execution. Petitioner filed a Motion to Dismiss9 on the following grounds: (1) respondent has no legal personality to sue, having no real interests over the property subject of the instant complaint; (2) the allegations in the complaint do not sufficiently state that the respondent has cause of action; (3) the allegations in the complaint do not contain sufficient cause of action as against him; and (4) the complaint is not accompanied by an Affidavit of Merit and Bond that would entitle the respondent to the delivery of the tuck pendente lite. The NLRC also filed a Motion to Dismiss10 on the grounds of lack of jurisdiction and lack of cause of action.

Meanwhile, Lavarez filed an Answer with Compulsory Counterclaim and Third-Party Complaint.11 By way of special and affirmative defenses, he asserted that the RTC does not have jurisdiction over the subject matter and that the complaint does not state a cause of action. On January 21, 2000, the RTC issued an Order12 denying petitioner's Motion to Dismiss for lack of merit. In his Answer,13 petitioner denied the material allegations in the complaint. Specifically, he cited as affirmative defenses that: respondent had no legal personality to sue, as she had no interest over the motor vehicle; that there was no showing that the heirs have filed an intestate estate proceedings of the estate of Pedro Te, or that respondent was duly authorized by her co-heirs to file the case; and that the truck was already sold to Gasing on March 11, 1986 by one Jesus Matias, who bought the same from the Spouses Te. Corollarily, Gasing was already the lawful owner of the truck when it was levied on execution and, later on, sold at public auction. Incidentally, Lavarez filed a Motion for Inhibition, 14 which was opposed15 by respondent. On October 13, 2000, RTC Branch 18 issued an Order 16 of inhibition and directed the transfer of the records to Branch 19. RTC Branch 19, however, returned the records back to Branch 18 in view of the appointment of a new judge in place of Judgedesignate Rodolfo A. Escovilla. Yet, Branch 19 issued another Order 17 dated November 22, 2000 retaining the case in said branch. Eventually, the RTC issued an Order18 dated May 19, 2003 denying the separate motions to dismiss filed by the NLRC and Lavarez, and setting the Pre-Trial Conference on July 25, 2003. On October 17, 2005, petitioner filed an Omnibus Motion to Dismiss the Case on the following grounds:19 (1) lack of jurisdiction over one of the principal defendants; and (2) to discharge respondent's attorney-in-fact for lack of legal personality to sue. It appeared that the respondent, Fe Vda. de Te, died on April 12, 2005. 20 Respondent, through her lawyer, Atty. William G. Carpentero, filed an Opposition,21 contending that the failure to serve summons upon Sereno is not a ground for dismissing the complaint, because the other defendants have already submitted their respective responsive pleadings. He also contended that the defendants, including herein petitioner, had previously filed separate motions to dismiss the complaint, which the RTC denied for lack of merit. Moreover, respondent's death did not render functus officio her right to sue since her attorneyin-fact, Faustino Castaeda, had long testified on the complaint on March 13, 1998 for and on her behalf and, accordingly, submitted documentary exhibits in support of the complaint. On March 22, 2006, the RTC issued the assailed Order 22 denying petitioner's aforesaid motion. Petitioner then filed a Motion for Reconsideration with Motion for Inhibition, 23 in which he claimed that the judge who issued the Order was biased and partial. He went on to state that the judge's husband was the defendant in a petition for judicial recognition of which he was the counsel, docketed as Civil Case No. C-XXI100, before the RTC, Branch 21, Bansalan, Davao del Sur. Thus, propriety dictates that the judge should inhibit herself from the case. Acting on the motion for inhibition, Judge Carmelita Sarno-Davin granted the same24 and ordered that the case be re-raffled to Branch 18. Eventually, the said

RTC issued an Order25 on October 16, 2006 denying petitioner's motion for reconsideration for lack of merit. Hence, petitioner directly sought recourse from the Court via the present petition involving pure questions of law, which he claimed were resolved by the RTC contrary to law, rules and existing jurisprudence. 26 There is a "question of law" when the doubt or difference arises as to what the law is on certain state of facts, and which does not call for an examination of the probative value of the evidence presented by the parties-litigants. On the other hand, there is a "question of fact" when the doubt or controversy arises as to the truth or falsity of the alleged facts. Simply put, when there is no dispute as to fact, the question of whether or not the conclusion drawn therefrom is correct, is a question of law.27 Verily, the issues raised by herein petitioner are "questions of law," as their resolution rest solely on what the law provides given the set of circumstances availing. The first issue involves the jurisdiction of the court over the person of one of the defendants, who was not served with summons on account of his death. The second issue, on the other hand, pertains to the legal effect of death of the plaintiff during the pendency of the case. At first brush, it may appear that since pure questions of law were raised, petitioner's resort to this Court was justified and the resolution of the aforementioned issues will necessarily follow. However, a perusal of the petition requires that certain procedural issues must initially be resolved before We delve into the merits of the case. Notably, the petition was filed directly from the RTC which issued the Order in the exercise of its original jurisdiction. The question before Us then is: whether or not petitioner correctly availed of the mode of appeal under Rule 45 of the Rules of Court. Significantly, the rule on appeals is outlined below, to wit: 28 (1) In all cases decided by the RTC in the exercise of its original jurisdiction , appeal may be made to the Court of Appeals by mere notice of appeal where the appellant raises questions of fact or mixed questions of fact and law; (2) In all cases decided by the RTC in the exercise of its original jurisdiction where the appellant raises only questions of law, the appeal must be taken to the Supreme Court on a petition for review on certiorari under Rule 45. (3) All appeals from judgments rendered by the RTC in the exercise of its appellate jurisdiction, regardless of whether the appellant raises questions of fact, questions of law, or mixed questions of fact and law, shall be brought to the Court of Appeals by filing a petition for review under Rule 42. Accordingly, an appeal may be taken from the RTC which exercised its original jurisdiction, before the Court of Appeals or directly before this Court, provided that the subject of the same is a judgment or final order that completely disposes of the case, or of a particular matter therein when declared by the Rules to be appealable.29The first mode of appeal, to be filed before the Court of Appeals, pertains to a writ of error under Section 2(a), Rule 41 of the Rules of Court, if questions of fact or questions of fact and law are raised or involved. On the other hand, the second mode is by way of an appeal by certiorari before the Supreme Court under Section 2(c), Rule 41, in relation to Rule 45, where only questions of law are raised or involved.30

An order or judgment of the RTC is deemed final when it finally disposes of a pending action, so that nothing more can be done with it in the trial court. In other words, the order or judgment ends the litigation in the lower court. 31 On the other hand, an order which does not dispose of the case completely and indicates that other things remain to be done by the court as regards the merits, is interlocutory. Interlocutory refers to something between the commencement and the end of the suit which decides some point or matter, but is not a final decision on the whole controversy. 32 The subject of the present petition is an Order of the RTC, which denied petitioner's Omnibus Motion to Dismiss, for lack of merit. We have said time and again that an order denying a motion to dismiss is interlocutory.33 Under Section 1(c), Rule 41 of the Rules of Court, an interlocutory order is not appealable. As a remedy for the denial, a party has to file an answer and interpose as a defense the objections raised in the motion, and then to proceed to trial; or, a party may immediately avail of the remedy available to the aggrieved party by filing an appropriate special civil action for certiorari under Rule 65 of the Revised Rules of Court. Let it be stressed though that a petition for certiorari is appropriate only when an order has been issued without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction. Based on the foregoing, the Order of the RTC denying petitioner's Omnibus Motion to Dismiss is not appealable even on pure questions of law. It is worth mentioning that the proper procedure in this case, as enunciated by this Court, is to cite such interlocutory order as an error in the appeal of the case -- in the event that the RTC rules in favor of respondent -- and not to appeal such interlocutory order. On the other hand, if the petition is to be treated as a petition for review under Rule 45, it would likewise fail because the proper subject would only be judgments or final orders that completely dispose of the case. 34 Not being a proper subject of an appeal, the Order of the RTC is considered interlocutory. Petitioner should have proceeded with the trial of the case and, should the RTC eventually render an unfavorable verdict, petitioner should assail the said Order as part of an appeal that may be taken from the final judgment to be rendered in this case. Such rule is founded on considerations of orderly procedure, to forestall useless appeals and avoid undue inconvenience to the appealing party by having to assail orders as they are promulgated by the court, when all such orders may be contested in a single appeal. In one case,35 the Court adverted to the hazards of interlocutory appeals: It is axiomatic that an interlocutory order cannot be challenged by an appeal. Thus, it has been held that "the proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits, incorporating in said appeal the grounds for assailing the interlocutory order. Allowing appeals from interlocutory orders would result in the `sorry spectacle of a case being subject of a counterproductive pingpong to and from the appellate court as often as a trial court is perceived to have made an error in any of its interlocutory rulings. x x x. Another recognized reason of the law in permitting appeal only from a final order or judgment, and not from an interlocutory or incidental one, is to avoid multiplicity of appeals in a single action, which must necessarily suspend the hearing and decision on the merits of the case during the pendency of the appeal. If such appeal were allowed, trial on the merits of the case would necessarily be delayed for a considerable length of time and compel the adverse party to incur unnecessary

expenses, for one of the parties may interpose as many appeals as incidental questions may be raised by him, and interlocutory orders rendered or issued by the lower court.36 And, even if We treat the petition to have been filed under Rule 65, the same is still dismissible for violating the principle on hierarchy of courts. Generally, a direct resort to us in a petition for certiorari is highly improper, for it violates the established policy of strict observance of the judicial hierarchy of courts. 37 This principle, as a rule, requires that recourse must first be made to the lower-ranked court exercising concurrent jurisdiction with a higher court. However, the judicial hierarchy of courts is not an iron-clad rule. A strict application of the rule is not necessary when cases brought before the appellate courts do not involve factual but legal questions.38 In the present case, petitioner submits pure questions of law involving the effect of non-service of summons following the death of the person to whom it should be served, and the effect of the death of the complainant during the pendency of the case. We deem it best to rule on these issues, not only for the benefit of the bench and bar, but in order to prevent further delay in the trial of the case. Resultantly, our relaxation of the policy of strict observance of the judicial hierarchy of courts is warranted. Anent the first issue, petitioner argues that, since Sereno died before summons was served on him, the RTC should have dismissed the complaint against all the defendants and that the same should be filed against his estate. The Sheriff's Return of Service39 dated May 19, 1997 states that Sereno could not be served with copy of the summons, together with a copy of the complaint, because he was already dead. In view of Sereno's death, petitioner asks that the complaint should be dismissed, not only against Sereno, but as to all the defendants, considering that the RTC did not acquire jurisdiction over the person of Sereno. 1avvph!1 Jurisdiction over a party is acquired by service of summons by the sheriff, his deputy or other proper court officer, either personally by handing a copy thereof to the defendant or by substituted service.40 On the other hand, summons is a writ by which the defendant is notified of the action brought against him. Service of such writ is the means by which the court may acquire jurisdiction over his person.41 Records show that petitioner had filed a Motion to Dismiss on the grounds of lack of legal personality of respondent; the allegations in the complaint did not sufficiently state that respondent has a cause of action or a cause of action against the defendants; and, the complaint was not accompanied by an affidavit of merit and bond. The RTC denied the motion and held therein that, on the basis of the allegations of fact in the complaint, it can render a valid judgment. Petitioner, subsequently, filed his answer by denying all the material allegations of the complaint. And by way of special and affirmative defenses, he reiterated that respondent had no legal personality to sue as she had no real interest over the property and that while the truck was still registered in Pedro Te's name, the same was already sold to Gasing. Significantly, a motion to dismiss may be filed within the time for but before the filing of an answer to the complaint or pleading asserting a claim. 42 Among the grounds mentioned is the court's lack of jurisdiction over the person of the defending party.

As a rule, all defenses and objections not pleaded, either in a motion to dismiss or in an answer, are deemed waived.43 The exceptions to this rule are: (1) when the court has no jurisdiction over the subject matter, (2) when there is another action pending between the parties for the same cause, or (3) when the action is barred by prior judgment or by statute of limitations, in which cases, the court may dismiss the claim. In the case before Us, petitioner raises the issue of lack of jurisdiction over the person of Sereno, not in his Motion to Dismiss or in his Answer but only in his Omnibus Motion to Dismiss. Having failed to invoke this ground at the proper time, that is, in a motion to dismiss, petitioner cannot raise it now for the first time on appeal. In fine, We cannot countenance petitioner's argument that the complaint against the other defendants should have been dismissed, considering that the RTC never acquired jurisdiction over the person of Sereno. The court's failure to acquire jurisdiction over one's person is a defense which is personal to the person claiming it. Obviously, it is now impossible for Sereno to invoke the same in view of his death. Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap the benefit of having the case dismissed against all of the defendants. Failure to serve summons on Sereno's person will not be a cause for the dismissal of the complaint against the other defendants, considering that they have been served with copies of the summons and complaints and have long submitted their respective responsive pleadings. In fact, the other defendants in the complaint were given the chance to raise all possible defenses and objections personal to them in their respective motions to dismiss and their subsequent answers. We agree with the RTC in its Order when it resolved the issue in this wise: As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the person of Patricio Sereno since there was indeed no valid service of summons insofar as Patricio Sereno is concerned. Patricio Sereno died before the summons, together with a copy of the complaint and its annexes, could be served upon him. However, the failure to effect service of summons unto Patricio Sereno, one of the defendants herein does not render the action DISMISSIBLE, considering that the three (3) other defendants, namely, Atty. Rogelio E. Sarsaba, Fulgencio Lavares and the NLRC, were validly served with summons and the case with respect to the answering defendants may still proceed independently. Be it recalled that the three (3) answering defendants have previously filed a Motion to Dismiss the Complaint which was denied by the Court. Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a claim against the estate of Patricio Sereno, but the case with respect to the three (3) other accused will proceed. Anent the second issue, petitioner moves that respondent's attorney-in-fact, Faustino Castaeda, be discharged as he has no more legal personality to sue on behalf of Fe Vda. de Te, who passed away on April 12, 2005, during the pendency of the case before the RTC. When a party to a pending action dies and the claim is not extinguished, the Rules of Court require a substitution of the deceased. 44 Section 1, Rule 87 of the Rules of Court enumerates the actions that survived and may be filed against the decedent's representatives as follows: (1) actions to recover real or personal property or an interest thereon, (2) actions to enforce liens thereon, and (3) actions to recover damages for an injury to a person or a property. In such cases, a counsel is obliged

to inform the court of the death of his client and give the name and address of the latter's legal representative.45 The rule on substitution of parties is governed by Section 16, 46 Rule 3 of the 1997 Rules of Civil Procedure, as amended. Strictly speaking, the rule on substitution by heirs is not a matter of jurisdiction, but a requirement of due process. The rule on substitution was crafted to protect every party's right to due process. It was designed to ensure that the deceased party would continue to be properly represented in the suit through his heirs or the duly appointed legal representative of his estate. Moreover, non-compliance with the Rules results in the denial of the right to due process for the heirs who, though not duly notified of the proceedings, would be substantially affected by the decision rendered therein. Thus, it is only when there is a denial of due process, as when the deceased is not represented by any legal representative or heir, that the court nullifies the trial proceedings and the resulting judgment therein. 47 In the case before Us, it appears that respondent's counsel did not make any manifestation before the RTC as to her death. In fact, he had actively participated in the proceedings. Neither had he shown any proof that he had been retained by respondent's legal representative or any one who succeeded her. However, such failure of counsel would not lead Us to invalidate the proceedings that have long taken place before the RTC. The Court has repeatedly declared that failure of the counsel to comply with his duty to inform the court of the death of his client, such that no substitution is effected, will not invalidate the proceedings and the judgment rendered thereon if the action survives the death of such party. The trial court's jurisdiction over the case subsists despite the death of the party. 48 The purpose behind this rule is the protection of the right to due process of every party to the litigation who may be affected by the intervening death. The deceased litigants are themselves protected as they continue to be properly represented in the suit through the duly appointed legal representative of their estate. 49 Anent the claim of petitioner that the special power of attorney 50 dated March 4, 1997 executed by respondent in favor of Faustino has become functus officio and that the agency constituted between them has been extinguished upon the death of respondent, corollarily, he had no more personality to appear and prosecute the case on her behalf. Agency is extinguished by the death of the principal. 51 The only exception where the agency shall remain in full force and effect even after the death of the principal is when if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor.52 A perusal of the special power of attorney leads us to conclude that it was constituted for the benefit solely of the principal or for respondent Fe Vda. de Te. Nowhere can we infer from the stipulations therein that it was created for the common interest of respondent and her attorney-in-fact. Neither was there any mention that it was to benefit a third person who has accepted the stipulation in his favor. On this ground, We agree with petitioner. However, We do not believe that such ground would cause the dismissal of the complaint. For as We have said, Civil Case No. 3488, which is an action for the recovery of a personal property, a motor vehicle, is an action that survives pursuant to Section 1, Rule 87 of the Rules of Court. As such, it is not extinguished by the death of a party.

In Gonzalez v. Philippine Amusement and Gaming Corporation ,53 We have laid down the criteria for determining whether an action survives the death of a plaintiff or petitioner, to wit: x x x The question as to whether an action survives or not depends on the nature of the action and the damage sued for. If the causes of action which survive the wrong complained [of] affects primarily and principally property and property rights, the injuries to the person being merely incidental, while in the causes of action which do not survive the injury complained of is to the person the property and rights of property affected being incidental. x x x Thus, the RTC aptly resolved the second issue with the following ratiocination: While it may be true as alleged by defendants that with the death of Plaintiff, Fe Vda. de Te, the Special Power of Attorney she executed empowering the Attorneyin-fact, Faustino Castaeda to sue in her behalf has been rendered functus officio, however, this Court believes that the Attorney-in-fact had not lost his personality to prosecute this case. It bears stressing that when this case was initiated/filed by the Attorney-in-fact, the plaintiff was still very much alive. Records reveal that the Attorney-in-fact has testified long before in behalf of the said plaintiff and more particularly during the state when the plaintiff was vehemently opposing the dismissal of the complainant. Subsequently thereto, he even offered documentary evidence in support of the complaint, and this court admitted the same. When this case was initiated, jurisdiction was vested upon this Court to try and hear the same to the end. Well-settled is the rule to the point of being elementary that once jurisdiction is acquired by this Court, it attaches until the case is decided. Thus, the proper remedy here is the Substitution of Heirs and not the dismissal of this case which would work injustice to the plaintiff. SEC. 16, RULE 3 provides for the substitution of the plaintiff who dies pending hearing of the case by his/her legal heirs. As to whether or not the heirs will still continue to engage the services of the Attorney-in-fact is another matter, which lies within the sole discretion of the heirs. In fine, We hold that the petition should be denied as the RTC Order is interlocutory; hence, not a proper subject of an appeal before the Court. In the same breath, We also hold that, if the petition is to be treated as a petition for certiorari as a relaxation of the judicial hierarchy of courts, the same is also dismissible for being substantially insufficient to warrant the Court the nullification of the Order of the RTC. Let this be an occasion for Us to reiterate that the rules are there to aid litigants in prosecuting or defending their cases before the courts. However, these very rules should not be abused so as to advance one's personal purposes, to the detriment of orderly administration of justice. We can surmise from the present case herein petitioner's manipulation in order to circumvent the rule on modes of appeal and the hierarchy of courts so that the issues presented herein could be settled without going through the established procedures. In Vergara, Sr. v. Suelto, 54 We stressed that this should be the constant policy that must be observed strictly by the courts and lawyers, thus: x x x. The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily perform the functions assigned to it by the fundamental charter and immemorial tradition. It cannot and should not be burdened with the task of dealing with causes in the first instance. Its original jurisdiction to issue the so-called

extraordinary writs should be exercised only where absolutely necessary or where serious and important reasons exist therefor. Hence, that jurisdiction should generally be exercised relative to actions or proceedings before the Court of Appeals, or before constitutional or other tribunals, bodies or agencies whose acts for some reason or another are not controllable by the Court of Appeals. Where the issuance of an extraordinary writ is also within the competence of the Court of Appeals or a Regional Trial Court, it is in either of these courts that the specific action for the writs procurement must be presented. This is and should continue to be the policy in this regard, a policy that courts and lawyers must strictly observe. 55 WHEREFORE, premises considered, the Petition is DENIED. The Order dated March 22, 2006 of the Regional Trial Court, Branch 19, Digos, Davao del Sur in Civil Case No. 3488, is hereby AFFIRMED. Costs against the petitioner. SO ORDERED. GONZALES vs PAGCOR At bar is a special civil action for prohibition assailing the constitutionality of the creation of the Philippine Amusement and Gaming Corporation (PAGCOR) as well as the "grant of franchises" by PAGCOR to 1) Sports and Games Entertainment Corporation (SAGE) to engage in internet gambling, 2) Best World Gaming and Entertainment Corporation (BEST WORLD) to engage in computerized bingo gaming, and 3) Belle Jai-alai Corporation (BELLE) and Filipinas Gaming Entertainment Totalizator Corporation (FILGAME) to engage in jai-alai operations. Ramon A. Gonzales, as a citizen, taxpayer and member of the Philippine Bar, filed on September 28, 2000 the instant Petition 1 as a class suit under Section 12, Rule 3 of the Rules of Court2 seeking to restrain PAGCOR from continuing its operations and prohibit it and its co-respondents from enforcing: (1) the "Grant of an Authority and Agreement for the Operation of Sports Betting and Internet Gambling"3 executed between PAGCOR and SAGE; (2) the "Grant of Authority to Operate Computerized Bingo Games"4 between PAGCOR and BEST WORLD; and (3) the "Agreement"5 among PAGCOR, BELLE and FILGAME to conduct jai-alai operations. In compliance with this Courts Resolution of October 18, 2000, respondents filed their respective comments on the petition, to which petitioner filed corresponding replies. In Del Mar v. Phil. Amusement and Gaming Corp., et al., 6 this Court, by Decision of November 29, 2000, enjoined PAGCOR, BELLE, and FILGAME from managing, maintaining and operating jai-alai games, and from enforcing the agreement entered into by them for that purpose. 7 Their motions for reconsideration of said decision in Del Mar having been denied,8 PAGCOR, BELLE and FILGAME filed motions for clarification which this Court, by Resolution of August 24, 2001, resolved in this wise: WHEREFORE, . . . the Court resolves (a) to partially GRANT the motions for clarification insofar as it is prayed thatPhilippine Amusement and Gaming Corporation (PAGCOR) has a valid franchise to, but only by itself (i.e., not in association with any other person or entity) operate, maintain and/or manage the game of jai-alai, and (b) to DENY the motions insofar as respondents would also seek a reconsideration of the Courts decision of 29 November 2000 that has, since then, (i) enjoined the continued

operation, maintenance, and/or management of jai-alai games by PAGCOR in association with its co-respondents Belle Jai-Alai Corporation and/or Filipinas Gaming Entertainment Totalizator Corporation and (ii) held to be without force and effect the agreement of 17 June 1999 among said respondents. SO ORDERED.9 (Emphasis supplied) Respondents BELLE and FILGAME thus filed on December 6, 2001 a Manifestation stating that: 1. Respondents [BELLE] and FILGAME were impleaded in the instant petition by reason of the "Agreement", dated 17 June 1999, which they executed with Philippine Amusement and Gaming Corporation ("PAGCOR"). 2. However, the said "Agreement" was already declared invalid by the Supreme Court (en banc) in the consolidated cases of Del Mar vs. PAGCOR, et al. [G.R. No. 138298] and Sandoval vs. PAGCOR, et al. [G.R. No. 138982] through its "Resolution" dated 16 August 2001, which has already become final and executory. [3]. Considering that there is no more privity of contract between PAGCOR, [BELLE] and FILGAME, it is respectfully submitted that the participation of respondents [BELLE] and FILGAME is no longer warranted. Thus, there is no more necessity for respondents [BELLE] and FILGAME to file a memorandum in the instant case.10(Emphasis supplied) In its Comment on the petition at bar filed on March 29, 2001, BEST WORLD stated that it had "been unable to operate its bingo terminals and bingo games since its closure and shut down by PAGCOR and DILG" pursuant to a Memorandum dated October 19, 2000 issued by then President Joseph Ejercito Estrada. 11 A copy of said Memorandum addressed to the Chairman of PAGCOR, which was attached to BEST WORLDs Comment, reads: MEMORANDUM FROM THE PRESIDENT TO: The Chairman Philippine Amusements and Gaming Corporation (PAGCOR)

SUBJEC CLOSURE OF CERTAIN PAGCOR T: FACILITIES AND OUTLETS DATE: 19 October 2000 You are hereby directed to take immediate steps to close down all PAGCOR facilities and outlets in Jai-alai, on-line bingo and internet casino gaming. For this purpose, you are authorized to secure the support of the Philippine National Police and all concerned local government units. I expect an initial report on the implementation of this directive, through the Executive Secretary, within 48 hours from receipt hereof. For direct and immediate compliance. (SGD. Joseph E. Estrada)12 (Emphasis supplied) This Court, by Resolution of August 13, 2001, granted the motion of Attys. Jose Salvador M. Rivera, E. Hans S. Santos and Agnes H. Maranan of Rivera Santos and Maranan to withdraw as counsel for BEST WORLD "for the reason that despite diligent effort on its part, counsel has been unable to get in touch or communicate with its principal client."13

The petition having been given due course by Resolution of September 19, 2001, the parties were required to submit their respective Memoranda. Only respondents PAGCOR and SAGE submitted their Memoranda, on December 6, 2001 14 and January 24, 2002,15 respectively. Gonzales having failed to file his Memorandum within the prescribed period, this Court which, in the meantime, was informed of the alleged demise of Gonzales, required by Resolution of July 29, 2002 1) respondents to confirm the death of Gonzales, and 2) the parties to manifest whether they were still interested in prosecuting the petition, or whether supervening events had rendered it moot and academic.16 On September 10, 2002, Attys. Manuel B. Imbong and Jo Aurea M. Imbong filed a Motion for Substitution stating, among other things, that (1) Gonzales died on January 17, 2002; (2) his heirs are not interested to pursue and prosecute the present special civil action or be substituted as petitioners herein; and (3) the petition was instituted by Gonzales as a class suit in behalf of "all Filipino citizens, taxpayers and members of the Philippine Bar" and, as such, survives his death. They thus pray that as they are among the "Filipino citizens, taxpayers and members of the Philippine Bar" for whom the herein class suit was instituted and are both capable of prosecuting the instant case, they be substituted as petitioners in lieu of Gonzales and that they be given thirty days from notice within which to file their memorandum.17 By Resolution of December 9, 2002, this Court required respondents to file their Comments on the Motion for Substitution filed by Attys. Imbong and Imbong. In their separate Comments,18 respondents PAGCOR and SAGE both argue that, among others things, movants Attys. Imbong and Imbong may not be substituted for Gonzales as the former are neither legal representatives nor heirs of the latter within the purview of Section 16, Rule 3 of the Rules of Court which reads: Sec. 16. Death of party, duty of counsel. Whenever a party to a pending action dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give the name and address of his legal representative or representatives. Failure of counsel to comply with this duty shall be a ground for disciplinary action. The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or administrator and the court may appoint a guardian ad litem for the minor heirs. The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of thirty (30) days from notice. If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail to appear within the specified period, the court may order the opposing party, within a specified time, to procure the appointment of an executor or administrator for the estate of the deceased and the latter shall immediately appear for and on behalf of the deceased. The court charges in procuring such appointment, if defrayed by the opposing party, may be recovered as costs. (16a, 17a) (Emphasis supplied) Respondents PAGCOR and SAGE further argue that neither Gonzales nor movants have substantiated the allegation that the instant case is a class suit as defined under Section 12, Rule 3 of the Rules of Court. Hence, so said respondents argue, the petition should be considered a personal action which was extinguished with the death of Gonzales.

The criteria for determining whether an action survives the death of a plaintiff or petitioner was elucidated upon in Bonilla v. Barcena 19 as follows: x x x The question as to whether an action survives or not depends on the nature of the action and the damage sued for. If the causes of action which survive the wrong complained [of] affects primarily and principally property and property rights, the injuries to the person being merely incidental, while in the causes of action which do not survive the injury complained of is to the person the property and rights of property affected being incidental. x x x 20 (Emphasis supplied) In claiming standing to bring the instant suit, Gonzales necessarily asserted "a personal and substantial interest in the case" such that he "has sustained or will sustain direct injury as a result of the governmental act that is being challenged."21 A reading of the allegations in the petition readily shows that Gonzales alleged interest does not involve any claim to money or property which he could have assigned to another or transmitted to his heirs. Rather, he claimed to be vindicating his rights as a citizen, taxpayer and member of the bar. Being personal and non-transferable in nature, any interest that he might have had in the outcome of this case cannot be deemed to have survived his death. Movants argue, however, that "unless the herein substitution is allowed, the citizens and taxpayers represented by Gonzales in this class suit will be denied due process."22 From this argument as well as their averment that they are "among the Filipino citizens and taxpayers and member[s] of the Philippine Bar for whom the herein class suit was instituted and are interested to pursue this case," 23 it is evident that movants are not asserting any right or interest transmitted to them by the death of Gonzales, but are seeking to protect their own individual interests as members of the classes alleged to have been represented by Gonzales. As such, the more proper procedure would have been for them to file a Motion for Intervention as expressly provided for in Section 12, Rule 3 of the Rules of Court, and not a Motion for Substitution under Section 17 of the same rule. Ideally, such a Motion for Intervention should be filed before the possibility of abatement is raised by the death of the named/representative party (or parties) to the class suit; or where such is not possible, within a reasonable time from the death of the named or representative party. Considering that movants, as former law partners of Gonzales, could not have been unaware of the latters death on January 17, 2002, respondents rightly question the timeliness of the Motion for Substitution, it having been filed almost eight months thereafter, or only on September 10, 2002. But even if this Court were to consider the Motion for Substitution as a seasonably filed Motion for Intervention, still the instant petition would have to be dismissed for being moot and academic. The Petition in essence raises two substantive issues. First, whether Presidential Decree (P.D.) 1869, as amended (the PAGCOR Charter), is unconstitutional for having been issued pursuant to an unlawful exercise of legislative power by then President Ferdinand E. Marcos. Second, whether the contracts entered into by PAGCOR with its co-respondents are void for being undue delegations by PAGCOR of its franchise24 to operate and maintain gambling casinos, sports, gaming pools and the like. The second issue has already been raised in the Del Mar cases, 25 this Court ruling that PAGCOR "has a valid franchise to, but only by itself (i.e., not in association with any other person or entity) operate, maintain and/or manage the game of jai-alai," and that, consequently, the Agreement of June 17, 1999 among PAGCOR, BELLE

and FILGAME was without force and effect. This ruling was recently reiterated in Jaworski v. Phil. Amusement and Gaming Corp.26 where this Court held: In the case at bar, PAGCOR executed an agreement with SAGE whereby the former grants the latter the authority to operate and maintain sports betting stations and Internet gaming operations. In essence, the grant of authority gives SAGE the privilege to actively participate, partake and share PAGCORs franchise to operate a gambling activity. The grant of franchise is a special privilege that constitutes a right and a duty to be performed by the grantee. The grantee must not perform its activities arbitrarily and whimsically but must abide by the limits set by its franchise and strictly adhere to its terms and conditionalities. A corporation as a creature of the State is presumed to exist for the common good. Hence, the special privileges and franchises it receives are subject to the laws of the State and the limitations of its charter. There is therefore a reserved right of the State to inquire how these privileges had been employed, and whether they have been abused. While PAGCOR is allowed under its charter to enter into operators and/or management contracts, it is not allowed under the same charter to relinquish or share its franchise, much less grant a veritable franchise to another entity such as SAGE. PAGCOR can not delegate its power in view of the legal principle of delegata potestas delegare non potest, inasmuch as there is nothing in the charter to show that it has been expressly authorized to do so. In Lim v. Pacquing, the Court clarified that "since ADC has no franchise from Congress to operate the jai-alai, it may not so operate even if it has a license or permit from the City Mayor to operate the jai-alai in the City of Manila." By the same token, SAGE has to obtain a separate legislative franchise and not "ride on" PAGCORs franchise if it were to legally operate on-line Internet gambling. WHEREFORE, in view of all the foregoing, the instant petition is GRANTED. The "Grant of Authority and Agreement to Operate Sports Betting and Internet Gaming" executed by PAGCOR in favor of SAGE is declared NULL and VOID. SO ORDERED.27 (Emphasis supplied; citations omitted) The first issue has likewise been rendered moot and academic. In assailing the constitutionality of P.D. 1869, petitioner does not point to any inconsistency between it and the present Constitution. Instead, it questions its issuance as an illegal exercise of legislative powers by then President Marcos. Thus, petitioner argues that: (1) P.D. 1416, which gives the President continuing authority to reorganize the national government and is the basis of P.D. 1869, is an undue delegation to the President of the legislative power to create public offices; (2) P.D. 1869 is an undue delegation of legislative power to the President to create PAGCOR, a public corporation, and empowering it to grant franchises; (3) Proclamation 1081 declaring martial law and authorizing the President to issue decrees is unconstitutional, hence P.D. 1416 and P.D. 1869 issued pursuant thereto are likewise unconstitutional; and (4) the 1973 Constitution was not validly ratified, hence it could not have legitimized Proclamation 1081. Petitioners arguments come almost thirty years too late. As he himself was aware, the issues surrounding the effectivity of Proclamation 1081, the force and effectivity of the 1973 Constitution, and the former Presidents legislative powers under Martial Law and the 1973 Constitution were settled in the cases of Javellana v. Executive Secretary,28 Aquino, Jr. v. Enrile,29 Aquino, Jr. v. Commission on Elections,30 and Legaspi v. Minister of Finance.31 While legal scholars may continue to debate the wisdom and reasoning of these decisions, their objective existence and historical impact on the Philippine legal system cannot seriously be questioned.

Indeed, while petitioner made several poignant observations regarding the jurisprudence in the foregoing cases, this Court is unable to accept his invitation to re-examine said cases for the simple reason that the power conferred on it by the Constitution is limited to the adjudication of actual controversies and the determination of whether a branch or instrumentality of the government has acted with grave abuse of discretion amounting to lack or excess of jurisdiction. 32 Even with its expanded jurisdiction, it is beyond the powers of this Court to re-write history. To be sure, the People Power Revolution of 1986 put an end to both the dictatorship of Mr. Marcos and the 1973 Constitution. At the same time, the ratification of the 1987 Constitution and the convening of the first Congress on July 27, 1987 have restored the separation of legislative and executive powers. 33 There is, therefore, no longer any occasion for this Court to pass upon the validity of the late dictators exercise of lawmaking powers. Furthermore, Section 3, Article XVIII of the Constitution expressly provides: Sec. 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed or revoked. (Emphasis supplied) Since petitioner did not endeavor to show that P.D. 1869 itself is inconsistent with the Constitution, his prayer that PAGCOR be enjoined from continuing its operations and doing acts in furtherance of its existence must necessarily be denied. Movants may derive some satisfaction in the knowledge that Gonzales prayer that respondents be enjoined from enforcing the "Agreement" among PAGCOR, BELLE and FILGAME to conduct jai-alai operations and the "Grant of an Authority and Agreement for the Operation of Sports Betting and Internet Gambling" between PAGCOR and SAGE had been granted, albeit in the separate aforementioned cases of Del Mar and Jaworski. WHEREFORE, the instant Petition is hereby DISMISSED. SO ORDERED. UNITED OVERSEAS BANK PHILS. vs ROSEMOORE MINING & DEVELOPMENT CORP. We resolve these two consolidated cases, which though with distinct courts of origin, pertain to issues stemming from the same loan transaction. The antecedent facts follow. Respondent Rosemoor Mining and Development Corporation (Rosemoor), a Philippine mining corporation with offices at Quezon City, applied for and was granted by petitioner Westmont Bank 1 (Bank) a credit facility in the total amount of P80 million consisting of P50,000,000.00 as long term loan and P30,000,000.00 as revolving credit line.2 To secure the credit facility, a lone real estate mortgage agreement was executed by Rosemoor and Dr. Lourdes Pascual (Dr. Pascual), Rosemoors president, as mortgagors in favor of the Bank as mortgagee in the City of Manila. 3 The agreement, however, covered six (6) parcels of land located in San Miguel, Bulacan4 (Bulacan properties), all registered under the name of Rosemoor, 5 and two (2) parcels of land6 situated in Gapan, Nueva Ecija (Nueva Ecija properties), owned and registered under the name of Dr. Pascual. 7

Rosemoor subsequently opened with the Bank four (4) irrevocable Letters of Credit (LCs) totaling US$1,943,508.11.8 To cover payments by the Bank under the LCs, Rosemoor proceeded to draw against its credit facility and thereafter executed promissory notes amounting collectively to P49,862,682.50.9 Two (2) other promissory notes were also executed by Rosemoor in the amounts of P10,000,000.00 and P3,500,000.00, respectively, to be drawn from its revolving credit line.10 Rosemoor defaulted in the payment of its various drawings under the LCs and promissory notes. In view of the default, the Bank caused the extra-judicial foreclosure of the Nueva Ecija properties on 22 May 1998 and the Bulacan properties on 10 August 1998. The Bank was the highest bidder on both occasions. 11 On 8 October 1999, the Bank caused the annotation of the Notarial Certificate of Sale covering the Nueva Ecija properties on the certificates of title concerned. Later, on 16 March 2001, the Notarial Certificate of Sale covering the Bulacan properties was annotated on the certificates of title of said properties. 12 The foregoing facts led to Rosemoors filing of separate complaints against the Bank, one before the Regional Trial Court of Manila (Manila RTC) and the other before the Regional Trial Court of Malolos, Bulacan (Malolos RTC). The Manila Case (G.R. No. 163521) On 5 August 1998, Rosemoor and Dr. Pascual filed a Complaint, originally captioned as one for "Damages, Accounting and Release of Balance of Loan and Machinery and for Injunction" before the Manila RTC. 13Impleaded as defendants were the Bank and Notary Public Jose Sineneng, whose office was used to foreclose the mortgage.14 The complaint was twice amended, the caption eventually reflecting an action for "Accounting, Specific Performance and Damages." 15 Through the amendments, Pascual was dropped as a plaintiff while several officers of the Bank were included as defendants.16 The Bank moved for the dismissal of the original and amended complaints on the ground that the venue had been improperly laid. 17 The motion was denied by the trial court through an Omnibus Resolution dated 24 January 2000. 18 Rosemoors prayer in the Second Amended Complaint, which was filed in November of 1999, reads as follows: WHEREFORE, plaintiff Rosemoor Mining & Development Corporation respectfully prays that, after trial of the issues, this court promulgate judgment 1. Directing Westmont to render an accounting of the loan account of Rosemoor under the Long Term Loan Facility and the Revolving Credit Line at least up to the dates of foreclosure of Rosemoors mortgaged properties on May 22, 1998 and August 18, 1998, showing among others (a) the sums of money paid by Rosemoor or otherwise debited from its deposit account in payment of the loans it had obtained from Westmont to cover the cost of the machinery to be imported under the Unpaid LCs and under LC No. 97-058 for the tiling plant, as well as for working capital, and (b) all interests, penalties and charges imposed on the loans pertaining to the Unpaid LCs and LC No. 97-058 and for which Westmont had foreclosed Rosemoors and Dra. Pascuals real estate mortgage; (c) the amount of import and customs duties, demurrage, storage and other fees which Rosemoor had paid or which was otherwise debited from Rosemoors deposit account, in connection with the importation of the tiling plant and as a consequence of the non-release thereof by Westmont;

2. Ordering all the defendants jointly and severally to pay to Rosemoor, by way of actual damages, the dollar equivalent of the amounts in (1) (a), (b) and (c) at the exchange rate prevailing at the time of the opening of the LCs; 3. Ordering defendants jointly and severally to pay to Rosemoor actual damages for operational losses suffered by Rosemoor due to its failure to use the tiling plaint which Westmont had refused to release to Rosemoor, in such amount as may be proven at the trial; 4. Directing the defendants jointly and severally to pay, by way of correction for the public good, exemplary damages in the amount of P 500,000.00 each; 5. Ordering defendants jointly and severally to indemnify Rosemoor in the sum of P350,000.00, representing attorneys fees and litigation expenses incurred by Rosemoor for the protection and enforcement of its rights and interests. Plaintiff prays for further and other relief as may be just and equitable under the circumstances. 19 On 15 August 2002, the Bank filed another motion to dismiss the Second Amended Complaint on the ground of forum-shopping since, according to it, Rosemoor had filed another petition earlier on 11 March 2002 before the Malolos RTC. 20 The Bank contended that as between the action before the Manila RTC and the petition before the Malolos RTC, there is identity of parties, rights asserted, and reliefs prayed for, the relief being founded on the same set of facts. The Bank further claimed that any judgment that may be rendered in either case will amount to res judicata in the other case.21 Still, the Manila RTC denied the motion to dismiss.22 It also denied the Banks motion for reconsideration of the order of denial. 23 The Bank challenged the Manila RTCs denial of the Banks second motion to dismiss before the Court of Appeals, through a petition for certiorari. The appellate court dismissed the petition in a Decision dated 26 February 2004. 24 The Bank filed a motion for reconsideration which, however, was denied through a Resolution dated 30 April 2004.25 In the Petition for Review on Certiorari in G.R. No. 163521, the Bank argues that the Court of Appeals erred in holding that no forum-shopping attended the actions brought by Rosemoor.26 The Malolos Case (G.R. No. 159669) After the complaint with the Manila RTC had been lodged, on 11 March 2002, Rosemoor and Dr. Pascual filed another action against the Bank, this time before the Malolos RTC. Impleaded together with the Bank as respondent was the Register of Deeds for the Province of Bulacan in the Petition for Injunction with Damages, with Urgent Prayer for Temporary Restraining Order and/or Preliminary Injunction. 27 In the Malolos case, Rosemoor and Dr. Pascual alleged that the redemption period for the Bulacan properties would expire on 16 March 2002. They claimed that the threatened consolidation of titles by the Bank is illegal, stressing that the foreclosure of the real estate mortgage by the Bank was fraudulent and without basis,28 as the Bank had made them sign two blank forms of Real Estate Mortgage and several promissory notes also in blank forms. It appeared later, according to Rosemoor and Dr. Pascual, that the two Real Estate Mortgage blank forms were made as security for two loans, one for P80 million and the other for P48 million, when the total approved loan was only for P80 million. The Bank later released only the amount of P10 million out of the P30 million revolving credit line, to the prejudice of Rosemoor, they added.29 The Petitions prayer reads as follows:

WHEREFORE, premises considered, it is most respectfully prayed that this Honorable Court 1. Issue ex-parte a temporary restraining order before the matter could be heard on notice to restrain and enjoin respondent BANK from proceeding with its threatened consolidation of its titles over the subject properties of petitioner Rosemoor in San Miguel, Bulacan covered by TCT Nos. 42132; 42133; 42134; 42135; 42136 and RT 34569 (T-222448) on March 16, 2002 or at any time thereafter; that the respondent Register of Deeds for the Province of Bulacan be enjoined and restrained from registering any document(s) submitted and/or to be submitted by respondent BANK consolidating its titles over the above-named properties of petitioner Rosemoor in San Miguel, Bulacan; and likewise, that the Register of Deeds for the province of Bulacan be restrained and enjoined from canceling the titles of Rosemoor over its properties, namely, TCT Nos. 42132; 42133; 42134; 42135; 42136 and RT 34569 (T222448); 2. That after due notice, a writ of preliminary injunction be issued upon the posting of a bond in such amount as may be fixed by this Court; 3. That after due hearing and trial, judgment be rendered in favor of petitioners and against respondent BANK a. Permanently enjoining respondent BANK from proceeding with the consolidation of its titles to the subject properties of Rosemoor covered by TCT Nos. 42132; 42133; 42134; 42135; 42136 and RT 34569 (T-222448); and permanently restraining respondent Register of Deeds for the Province of Bulacan from registering any document(s) submitted and/or to be submitted by respondent BANK consolidating its titles over the above-named properties of petitioner Rosemoor in San Miguel, Bulacan; and likewise, that the Register of Deeds for the province of Bulacan be restrained and enjoined from cancelling the titles of Rosemoor over its properties, namely, TCT Nos. 42132; 42133; 42134; 42135; 42136 and RT 34569 (T222448); b. Declaring the foreclosures of Real Estate Mortgages on the properties of petitioners Rosemoor and Dra. Pascual to be null and void; c. Recognizing the ownership in fee simple of the petitioners over their properties above-mentioned; d. Awarding to petitioners the damages prayed for, including attorneys fees and costs and expenses of litigation. Petitioners pray for such other reliefs and remedies as may be deemed just and equitable in the premises.30 As it did before the Manila RTC, the Bank filed a motion to dismiss on 26 March 2002 on the ground that Rosemoor had engaged in forum-shopping, adverting to the pending Manila case.31 The Bank further alleged that Dr. Pascual has no cause of action since the properties registered in her name are located in Nueva Ecija. The Malolos RTC denied the motion to dismiss in an Order dated 13 May 2002. 32 In the same Order, the Malolos RTC directed the Bank to file its answer to the petition within five (5) days from notice.33 Despite receipt of the Order on 21 May 2002, the Bank opted not to file its answer as it filed instead a motion for reconsideration on 5 June 2002. 34 Meanwhile, Rosemoor and Dr. Pascual moved to declare the Bank in default for its failure to timely file its answer.35 On 10 September 2002, the Malolos RTC issued an order denying the Banks motion for reconsideration for lack of merit and at the same time declaring the Bank in default for failure to file its answer. 36

Hence, the Bank filed a second petition for certiorari before the Court of Appeals, where it assailed the Orders dated 13 May 2002 and 10 September 2002 of the Malolos RTC. During the pendency of this petition for certiorari, the Malolos RTC decided the Malolos case on the merits in favor of Rosemoor. 37 The decision in the Malolos case was also appealed to the Court of Appeals. 38 Based on these developments, the appellate court considered the prayer for preliminary injunction as moot and academic and proceeded with the resolution of the petition, by then docketed as CA-G.R. SP No.73358, on the merits. The appellate court dismissed the petition in a Decision dated 20 June 2003. 39 Undaunted, the Bank filed the petition in G.R. No. 159669 before this Court. The two petitions before this Court have been consolidated. We find one common issue in G.R. No. 159669 and G.R. No. 163521 whether Rosemoor committed forum-shopping in filing the two cases against the Bank. The other issues for resolution were raised in G.R. No. 159669, pertaining as they do to the orders issued by the Malolos RTC. These issues are whether the action to invalidate the foreclosure sale was properly laid with the Malolos RTC even as regards the Nueva Ecija properties; whether it was proper for the Malolos RTC to declare the Bank in default; and whether it was proper for the Malolos RTC to deny the Banks motion to dismiss through a minute resolution. 40 Forum-Shopping The central issue in these consolidated cases is whether Rosemoor committed forum-shopping in filing the Malolos case during the pendency of the Manila case. The essence of forum-shopping is the filing of multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment. 41 The elements of forum-shopping are: (a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and (c) the identity with respect to the two preceding particulars in the two cases is such that any judgment rendered in the pending cases, regardless of which party is successful, amount to res judicata in the other case.42 As to the existence of identity of parties, several bank officers and employees impleaded in the Amended Complaint in the Manila case were not included in the Malolos case. These bank officers and employees were sued in Manila in their personal capacity. A finding of negligence or bad faith in their participation in the preparation and execution of the loan agreement would render them personally liable. Dr. Pascual, on the other hand, was included as petitioner only in the Malolos case because it involved properties registered in her name. As correctly pointed out by the Court of Appeals, Dr. Pascual is a real party-in-interest in the Malolos case because she stood to benefit or suffer from the judgment in the suit. Dr. Pascual, however, was not included as plaintiff in the Manila case because her interest therein was not personal but merely in her capacity as officer of Rosemoor. As regards the identity of rights asserted and reliefs prayed for, the main contention of Rosemoor in the Manila case is that the Bank had failed to deliver the full amount of the loan, as a consequence of which Rosemoor demanded the remittance of the unreleased portion of the loan and payment of damages consequent thereto. 43 In contrast, the Malolos case was filed for the purpose of restraining the Bank from proceeding with the consolidation of the titles over the foreclosed Bulacan properties because the loan secured by the mortgage had not yet become due and demandable.44 While the right asserted in the Manila case is to receive the proceeds

of the loan, the right sought in the Malolos case is to restrain the foreclosure of the properties mortgaged to secure a loan that was not yet due. Moreover, the Malolos case is an action to annul the foreclosure sale that is necessarily an action affecting the title of the property sold. 45 It is therefore a real action which should be commenced and tried in the province where the property or part thereof lies. 46 The Manila case, on the other hand, is a personal action 47 involving as it does the enforcement of a contract between Rosemoor, whose office is in Quezon City, and the Bank, whose principal office is in Binondo, Manila.48 Personal actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where the defendants or any of the principal defendants resides, at the election of the plaintiff.49 It was subsequent to the filing of the Manila case that Rosemoor and Dr. Pascual saw the need to secure a writ of injunction because the consolidation of the titles to the mortgaged properties in favor of the Bank was in the offing. But then, this action can only be commenced where the properties, or a portion thereof, is located. Otherwise, the petition for injunction would be dismissed for improper venue. Rosemoor, therefore, was warranted in filing the Malolos case and cannot in turn be accused of forum-shopping. Clearly, with the foregoing premises, it cannot be said that respondents committed forum-shopping. Action to nullify foreclosure sale of mortgaged properties in Bulacan and Nueva Ecija before the Malolos RTC The Bank challenges the Malolos RTCs jurisdiction over the action to nullify the foreclosure sale of the Nueva Ecija properties along with the Bulacan properties. This question is actually a question of venue and not of jurisdiction, 50 which if improperly laid, could lead to the dismissal of the case. 51 The rule on venue of real actions is provided in Section 1, Rule 4 of the 1997 Rules of Civil Procedure, which reads in part: Section 1. Venue of Real Actions. Actions affecting title to or possession of real property, or interest therein, shall be commenced and tried in the proper court which has jurisdiction over the area wherein the real property involved, or a portion thereof, is situated. xxx The venue of the action for the nullification of the foreclosure sale is properly laid with the Malolos RTC although two of the properties together with the Bulacan properties are situated in Nueva Ecija. Following the above-quoted provision of the Rules of Court, the venue of real actions affecting properties found in different provinces is determined by the singularity or plurality of the transactions involving said parcels of land. Where said parcels are the object of one and the same transaction, the venue is in the court of any of the provinces wherein a parcel of land is situated.52 Ironically, the Bank itself correctly summarized the applicable jurisprudential rule in one of the pleadings before the Court.53 Yet the Bank itself has provided the noose on which it would be hung. Resorting to deliberate misrepresentation, the Bank stated in the same pleading that "the Bulacan and Nueva Ecija [p]roperties were not the subject of one single real estate mortgage contract ."54 In the present case, there is only one proceeding sought to be nullified and that is the extra-judicial mortgage foreclosure sale. And there is only one initial transaction

which served as the basis of the foreclosure sale and that is the mortgage contract. Indeed, Rosemoor, through Dr. Pascual, executed a lone mortgage contract where it undertook to "mortgage the land/real property situated in Bulacan and Nueva Ecija," with the list of mortgaged properties annexed thereto revealing six (6) properties in Bulacan and two (2) properties in Nueva Ecija subject of the mortgage. This apparent deliberate misrepresentation cannot simply pass without action. The real estate mortgage form supplied to Rosemoor is the Banks standard pre-printed form. Yet the Bank perpetrated the misrepresentation. Blame must be placed on its doorstep. But as the Banks pleading was obviously prepared by its counsel, the latter should also share the blame. A lawyer shall not do any falsehood, nor consent to the doing of any in court; nor shall he mislead, or allow the Court to be misled by any artifice.55 Both the Banks president and counsel should be made to explain why they should not be sanctioned for contempt of court. Propriety of Default Order The Court of Appeals did not touch upon the soundness or unsoundness of the order of default although it is one of the orders assailed by the Bank. However, the silence of the appellate court on the issue does not improve the legal situation of the Bank. To recall, the Bank filed a motion to dismiss the Malolos case. The Malolos RTC denied the motion in an Order dated 13 May 2002. 56 In the same Order, the Malolos RTC directed the Bank to file its answer to the petition within five (5) days from the receipt of the Order. 57 The Bank received a copy of the Order on 21 May 2002. Instead of filing an answer, the Bank filed a motion for reconsideration but only on 5 June 2002. 58 The motion for reconsideration 59 could not have tolled the running of the period to answer for two reasons. One, it was filed late, nine (9) days after the due date of the answer. Two, it was a mere rehash of the motion to dismiss; hence, pro forma in nature. Thus, the Malolos RTC did not err in declaring the Bank in default. Deviation from the Prescribed Content of an Order Denying a Motion to Dismiss Finally, the Bank questions the Malolos RTCs Order dated 13 May 2002 denying its motion to dismiss on the ground that it is contrary to law and jurisprudence because it had failed to apprise the Bank of the legal basis for the denial. The Bank adverts to the content requirement of an order denying a motion to dismiss prescribed by Sec. 3, Rule 16 of the Rules of Court. The Court in Lu Ym v. Nabua60 made a thorough discussion on the matter, to quote: Sec. 3, Rule 16 of the Rules provides: Sec. 3. Resolution of motion.After the hearing, the court may dismiss the action or claim, deny the motion or order the amendment of the pleading. The court shall not defer the resolution of the motion for the reason that the ground relied upon is not indubitable. In every case, the resolution shall state clearly and distinctly the reasons therefor. xxxx Further, it is now specifically required that the resolution on the motion shall clearly and distinctly state the reasons therefor. This proscribes the common practice of perfunctorily dismissing the motion for "lack of merit." Such cavalier dispositions can often pose difficulty and misunderstanding on the part of the aggrieved party in taking recourse therefrom and likewise on the higher court called upon to resolve the same, usually on certiorari.61 The questioned order of the trial court denying the motion to dismiss with a mere statement that there are justiciable questions which require a full blown trial falls

short of the requirement of Rule 16 set forth above. Owing to the terseness of its expressed justification, the challenged order ironically suffers from undefined breadth which is a hallmark of imprecision. With its unspecific and amorphous thrust, the issuance is inappropriate to the grounds detailed in the motion to dismiss. While the requirement to state clearly and distinctly the reasons for the trial courts resolutory order under Sec. 3, Rule 16 of the Rules does call for a liberal interpretation, especially since jurisprudence dictates that it is decisions on cases submitted for decision that are subject to the stringent requirement of specificity of rulings under Sec. 1, Rule 3662 of the Rules, the trial courts order in this case leaves too much to the imagination. (Emphasis supplied.)63 The assailed order disposed of the motion to dismiss in this wise: xxxx After a careful scrutiny of the grounds cited in the Motion to Dismiss and the arguments en contra contained in the Opposition thereto and finding the Motion to Dismiss to be not well taken as grounds cited are not applicable to the case at bar, the Court hereby DENIES the instant Motion to Dismiss. x x x x64 Clearly, the subject order falls short of the content requirement as expounded in Lu Ym v. Nabua. Despite the aberration, however, the Bank was not misled, though it could have encountered difficulties or inconvenience because of it. Comprehending, as it did, that the Malolos RTC did not share its position that Rosemoor had engaged in forum-shopping, it went to great lengths to impress upon the Court of Appeals that there was indeed forum-shopping on Rosemoors part. But the appellate court did not likewise agree with the Bank as it soundly debunked the forum-shopping charge. In fact, the same forum-shopping argument has been fully ventilated before the Court but we are utterly unimpressed as we made short shrift of the argument earlier on. In the ultimate analysis, therefore, the trial courts blunder may be overlooked as it proved to be harmless. WHEREFORE, considering the foregoing, the Decision of the Court of Appeals in G.R. 163521 dated 26 February 2004 and in G.R No. 159669 dated 20 June 2003 are AFFIRMED. Costs against petitioner. Petitioner, United Overseas Bank, Phils. and its counsel, Siguion Reyna Montecillo & Ongsiako Law Offices, are given ten (10) days from notice to EXPLAIN why they should not be held in contempt of court for making a misrepresentation before the Court as adverted to in this Decision. SO ORDERED. MAGASPI vs RAMOLETE This is a petition for certiorari to review the actuations of the Court of First Instance of Cebu in Civil Case No.R-11882 in respect of the correct amount to be paid for the filing of the case as provided in Sec. 5, par. (a), Rule 141 of the Rules of Court. On September 16, 1970, the petitioners filed a complaint for the recovery of ownership and possession of a parcel of land with damages against The Shell Co. of the Philippines, Ltd. and/or The Shell Refining Co. (Phil.) Inc., Central Visayan Realty & Investment Co., Inc. and Cebu City Savings & Loan Association in the Court of First Instance of Cebu. Upon filing and the payment of P60.00 as docketing fee and P10.00 for sheriff fees, the complaint was assigned Civil Case No. R11882.

The complaint contains, among other prayers, the following: 3. To declare Transfer Certificate of Title No. 41215 issued in the name of the defendant Central Visayan Realty & Investment Co., Inc. as null and void and hence of no legal effect; 4. That the herein plaintiffs in their capacity as heirs of the deceased spouses Crispulo Magaspi and Rosalia Rodis be declared as owners of the land in question; 5. That once declared as null and void, The Register of Deeds for the City and Province of Cebu be ordered to cancel the abovementioned Transfer Certificate of Title and issue another in their place in the name of the herein plaintiffs; 6. To order the defendants, The Shell Company of the Philippines Limited, formerly known as The Asiatic Petroleum Co. (P.I.), Ltd., and/or The Shell Refining Company (Phil), Inc., to pay the plaintiffs the amount of P3,500.00 a month representing unpaid monthly rentals starting from June 2, 1948 up to May 15, 1968, and to order all the defendants jointly and solidarity to pay the plaintiffs the amount of P3,500.00 a month representing unpaid monthly rentals starting from May 16, 1968 up to the date that the land is actually delivered to the herein plaintiffs; 7. To order the defendants jointly and solidarily to return the ownership and possession of the lot in question to the herein plaintiffs; 8. To order the defendants jointly and solidarity to pay the plaintiffs the amount of P500,000.00 as moral damages and at. attorney's fees in the amount of P250,000.00 and the cost of this action; 9. Exemplary damages be imposed on the defendants jointly and solidarity in the amount of P500,000.00 as an example and deterrent to any similar acts in the future. On September 18, 1970, Central Visayan Realty & Investment Co., Inc. and Cebu City Savings and Loan Assn. filed a motion to compel the plaintiffs to pay the correct amount for docket fee. The motion, omitting the confusing footnotes, reads: 1. That the complaint of the plaintiffs contains or states two, if not three alternative causes of action: a) Reconveyance of real property. Par. 4. That the herein plaintiffs in their capacity as heirs of the deceased spouses Crispulo Magaspi and Rosalia Rodis be declared as owners of the land in question; Par. 5. That once declared null and void, the Register of Deeds for the City and Province of Cebu are ordered to cancel the above-mentioned Transfer Certificate of Title and issue another in their place in the names of the herein plaintiffs. If the plaintiffs are unable to have the property reconveyed and the title cancelled, having passed to an innocent purchaser for value, their recourse would be for damages, i.e., recovery of the value of the land and other damages. b) Recovery of the value of the land and Damages. 1. To order the defendants, to pay plaintiffs the amount of P3,500.00 a month representing unpaid monthly rentals starting from June 2, 1948 up to May 15, 1968, and to order all the defendants jointly and severally to pay the plaintiffs the amount of P3,500.00 a month starting from May 16, 1968 up to the date that the land is actually delivered to herein plaintiffs; 2. To order the defendants jointly and solidarily to pay the plaintiffs the amount of P500,000-00 as moral damages and attorney's fees in the amount of P250,000.00; 3. Exemplary damages be imposed on the defendants jointly and severally in the amount of P500,000.00;

4. That because of the unlawful occupation and usurpation the plaintiffs suffered damages in the amount of P1,250,000.00 which is the reasonable market value of the land in question it being a first class commercial land. c) Cancellation of Titles. 1. To declare Transfer Certificate of Title No. 41215 null and void; 2. That each of these alternative causes of action is distinct and separate from each other. Each may be instituted by plaintiffs against the defendants and the same may constitute a valid cause of action. Each constitutes an appropriate basis therefore, for determining the correct amount of the docket fee in this case; 3. That in the suit for reconveyance, the recovery of the improvements existing on the land is deemed included, since defendant Cebu City Savings is alleged to be a builder in bad faith. The value of existing improvement, i.e., assessed value is P70,000.00: 4. Therefore, the docket fee should be: Docket fee Land and Improvement at P87,280.00 assessed value .................... P100.00 Recovery of Value of the Land and damages: a) P1,250,000.00 Land value b) 500,000.00 Moral Damages c) 500,000.00 Exemplary Damages d) 250,000.00 Attorney,s fees e) 890,633.24 Monthly rentals up to date of filing of complaint 6,632.00 . P3,390,633.24 (Six Thousand Seven Hundred Thirty Two Pesos) 6,732.00 5. That under the Old Rules of Court, Sec. 5, Rule 130 provides that it is the sum claimed, 'exclusive of interest and damages while under the new Rules of Court, Sec. 5, Rule 141, it is the sum claimed, 'exclusive of interest,' the word 'damages' having been excluded purposely, indicating the intent to include damages in the computation of the docket fee; WHEREFORE, it is respectfully prayed that the plaintiffs be made to pay the correct docket fee within the time prescribed by this Honorable Court, as properly computed by the Clerk of Court and failing to pay the same within the prescribed period to dismiss the case. Further, until such time as the correct docket fee is paid, the time for filing of responsive pleadings by the defendants be suspended. The motion was opposed by the plaintiffs (petitioners herein) who claimed that the main cause of action was the recovery of a piece of land and on the basis of its assessed valued, P60.00 was the correct docketing fee and that although the Revised Rules of Court do not exclude damages in the computation of the docket fee, damages are nonetheless still to be excluded. On October 5, 1970, the presiding judge ordered the Clerk of Court to comment on the motion and the opposition. The following comment was submitted: 1. That in the matter of fixing the amount of fees that shall be collected by the Clerks of Court of First Instance for the filing of an action or proceeding, Section 5, Rule 141 of the Rules of Court provides as follows: Sec. 5. Clerks of Court of First Instance. (a) For filing an action or proceeding, or a permissive counterclaim or crossclaim not arising out of the same transaction subject of the complaint, a third-party complaint and a complaint in intervention and for all services in the same, if the sum claimed, exclusive of interest, or the value of the property in litigation, or the value of the estate, is:

1 . Less than P200.00.......................................................................P16.00 2 P200.00 or more but less than P600.00....................................... 24.00 3 P600.00 or more but less than P3,000.00.................................... 32.00 4 P3,000.00 or more but less than P5,000.00................................. 40.00 5 P5,000.00 or more but less than P20,000.00............................... 60.00 6 P20,000.00 or more but less than P50,000.00..............................80.00 7 P50,000.00 or more but less than P100,000.00.............................. 100 8 P100,000.00 or more but less than P150,000.00........................ 150.00 9 And for each Pl,000.00 in excess of P150,000.00......................... 2.00 10 When the value of the case cannot be estimated ..................200.00 11 When the case does not concern property (naturalization, adoption, legal separation, etc.) ....................................................................................................32.00 12 In forcible entry and illegal detainer cases appealed from inferior cases ........................................................................................................................... ................20.00 If the case concerns real estate, the assessed value thereof shall be considered in computing the fees. (Emphasis supplied) In case the value of the property or estate of the sum claimed is less or more in accordance with the appraisal of the court, the difference of fee shall be refunded or paid as the case may be. 2. That a reading of the complaint in this case would show that the action is not only for recovery of property but also for actual and moral damages as well as for attorney's fees; 3. That under the provisions of Sec. 5, Rule 141 of the Rules of Court, already cited above, it appears that for the purpose of determining the amount of the fees that should be collected for the filing of an action or proceeding, the basis should be the totality of the sum or sums claimed, exclusive of interest, except in the case of real estate where the assessed value thereof shall be considered in computing the fees; 4. That in the light of the foregoing, it is the opinion of the undersigned that the basis for computing the fees for the filing of the complaint in this case should be as follows: (a) Assessed value of the land (please see par. 4 of the complaint) ...................................................................................................P17,280.00 (b) Moral damages .......................................................................500,000.00 (c) Attorney's fees....................................................................... 250,000.00 (d) Monthly rentals at P3,500.00 a month up to the filing of complaint ..................................................... 890,633.24 TOTAL P1,657,913.24 Accordingly, the correct amount of the legal fees for the filing of this case should be fixed at P3,164.00 plus P2.00 Legal Research fee; On October 14, 1970, Judge Mateo Canonoy issued the following order: This is a motion of the defendants to order the plaintiffs to pay a filing fee of P6,730.00 on the ground that the total demand of the said plaintiffs (the value of the land, which is P17,280.00, plus the damages amounting to P3,390,633.24) should be the basis for computing the filing fee and not the value of the land alone. The plaintiffs paid the amount of P60.00 as filing fee in this case. Examining the allegations of the complaint, the Court is constrained to sustain the Manifestation or contention of the Clerk of Court, dated October 14, 1970. The damages are not merely incidental or ancillary but are principal demands. Besides,

Rule 141, Sec. 5 (a) of the new Rules of Court no longer excludes damages, like interest, from computing the filing fees. (The Old Rules of Court, Rule 130, Sec. 5 (a), expressly includes damages and interest in the exemption.) The exclusion of damages from the exemption in the computation of the filing fees in the new Rules of Court is intentional, since oftentimes, as in the present case, the claim for damages far exceeds the value of the land. To thus exempt the plaintiffs from paying the filing fee for damages is against reason. Besides, in determining the jurisdiction of the court, the amount of damages claimed is taken into account. The opinion of Undersecretary Guillermo Santos that the Court ought to be left alone to determine the question of the filing fee of cases pending therein without any interference from the Secretary of Justice (Attorney General) is commendable. IN VIEW OF THE FOREGOING, the Court hereby overrules the opposition of the plaintiffs and orders them to pay an additional sum of P3,104.00 as filing fees. On October 19, 1970, the Shell companies filed their respective answers. On October 23, 1970, Central Visayan Realty and Cebu City Savings filed the following manifestation: 1. That this Honorable Court issued an Order, dated October 14th,1970 for the plaintiffs to pay an additional P3,104.00 docket fee, per computation and manifestation of the Clerk of Court; 2. That the Clerk of Court manifestations is predicted on the following: Land Value.................................................................. P17,280.00 P60.00 Damages: a) Moral Damages P500,000.00 b) Attorney's fees P250,000.00 c) Monthly Rental P890,633.24 P1,640,633.24 and excusably excluded was the exemplary damages sought (Par. 22 Complaint, Par. 9, Prayer) in the amount of Five Hundred Thousand Pesos (P500,000.00); WHEREFORE, it is respectfully prayed that in the computation of the correct docket fee, besides the sum of P3,104.00, an additional sum of Pl,000.00 be imposed in accordance with Sec. 5 (Par. 9) Rule 141 of the Rules of Court; and should the plaintiffs within a period fixed by this Honorable Court fail to pay the same, the complaint be dismissed with prejudice, and for such other reliefs as this Honorable Court may deem just under the premises. On November 3, 1970, the plaintiffs filed a motion for leave to amend the complaint so as to include the Government of the Republic of the Philippines as a defendant. The amended complaint still sought the return of the lot in question but the pecuniary claim was limited to the following: 8. To order the defendants jointly and solidarily except the Government of the Republic of the Philippines moral damages in such amount as this Court may determine and attorney's fees in the amount of P100,000.00 and the cost of this action; 9. Exemplary damages be imposed on the defendants jointly and solidarily except the Government of the Republic of the Philippines in the amount as this Court may deem just and proper as an example and deterrent to any similar acts in the future. (Emphasis supplied.) On November 12, 1970, the defendants (herein respondents filed an opposition to the admission of the amended complaint. They based their opposition on the following grounds:

1. That while the only reason given for the amendment of the complaint is the inclusion of the Government of the Philippines as an indispensable party; the plaintiffs have taken the improper liberty of amending portions of the allegations in the complaint and even has eliminated entire paragraph, thus: a) By not mentioning the previously alleged value of the land at P1,250,000.00 in paragraph 19; b) By not mentioning the previously averred to monthly rentals due at P3,500.00 from June 2, 1948, or computed at P890,633.24; c) By eliminating completely the claim for moral damages of P500.000.00 and reducing attorney's fees from P250,000.00 to P100,000.00 under par. 21; d) By not mentioning the amount previously claimed as exemplary damages in the sum of P500,000.00, as alleged in par. 21: substituting thereto, the averment that, the amount of these various claims for damages will be proven during the trial of the case; 2. That these amendments are obviously intended to circumvent, it not entirely subvert, the lawful Order of this Honorable Court for the plaintiff to pay the amount of P3,104.00 as docket fee, on the basis of the total amount claimed for damages (plus Pl,000.00 docket fee on the P500,000.00 exemplary damages, pending resolution before this Honorable Court); 3. That if the amended complaint is admitted as it is, plaintiffs would effect, have their cakes and eat it too, in the manner of speaking; 4. That the payment of the correct and in this case, by an Order of this Honorable Court of the docket fee, is a condition precedent for the complaint, amended or otherwise, of the plaintiff to be given due course; On November 16, 1970, Judge Canonoy admitted the amended complaint although the plaintiffs had not yet complied with his Order of October 14, 1970, that they should pay an additional P3,104.00 docket fee. On December 2, 1970, Central Visayan Realty and Cebu City Savings filed the following motion: l. That this Honorable Court issued an Order dated October 14, 1970, for the plaintiffs to pay an additional docket fee of P3,104.00; 2. That such an Order has not been complied with by the plaintiffs nor an appeal or a petition for review filed and the same has become final; 3. That Sec. 3 Rule 17 of the Rules of Court provides that if plaintiff fails: to comply with these rules of any order of the court, the action may be dismissed upon motion of the defendant, or upon the court's own motion. 4. That the filing of the answer by these defendants is premised on the payment of the correct or as ordered docket fee by the plaintiffs; for which reason, no answer has yet been filed; WHEREFORE, it is respectfully prayed that the plaintiffs be ordered to pay the additional docket fee within seven (7) days, otherwise the complaint will be dismissed with prejudice. The above motion was opposed by the plaintiffs on the ground that the amended complaint which had been admitted by the court had replaced the original complaint. On February 12, 1971, the Republic filed its answer to the amended complaint and the plaintiffs filed a reply on February 23, 1971. On March 13, 1971, Central Visayan Realty and Cebu City Savings filed a petition to have their motion of December 2, 1970, resolved by the court. On April 3, 1971, Judge Jose R. Ramolete who had replaced Judge Canonoy issued the following order:

This is a petition of the defendants praying for the resolution of their motion dated December 3, 1970. This motion was brought about by virtue of the order of this Court dated October 14, 1970, ordering the plaintiffs to pay additional docket fees of P3,104.00. Going over the record of the case, it appears that after the issuance of the above order, the plaintiffs filed their amended complaint which was also admitted on November 16, 1970. At the hearing of tills petition the parties supported their respective positions with oral arguments after which they submitted the matter for resolution. It is a rule that the correct docket fee must be paid before the Court will act on the petition or complaint. The Court of Justice is not called upon to act on a complaint or a petition in the absence of payment of a corresponding docket fee. (Garcia vs. Vasquez, 28 SCRA 330, 331.) Before the payment of the docket fee, the case is not deemed registered and docketed (Lazaro vs. Endencia, 57 Phil., 552; Malimit vs. Degamo, 12 SCRA 454; Lee vs. Republic, 10 SCRA, 67). In the light of the above rulings on the matter, the original complaint, up to the present, is not deemed registered or docketed. It follows, therefore, that there is likewise no amended complaint deemed to have been filed and admitted. The Court, therefore, is of the view that up to the present the parties are in the same situation as they were before this proceeding was started. It cannot also order the plaintiffs to comply with the order of this Court dated October 14, 1970, because it has not yet acquired jurisdiction over them neither can it order the dismissal of the complaint for non-compliance of the order of October 14, 1970, by the plaintiffs, for obvious reasons. The plaintiffs are given the choice to pay the docket fee assessed or to forego this proceeding. The petitioners assail the above order. They insist that they had correctly paid the docketing fee in the amount of P60.00, or in the alternative, that if they are to pay an additional docketing fee, it should be based on the amended complaint. For initial determination is the question as to whether or not Civil Case No. 11882 may be considered as having been filed and docketed when P60.00 was paid to the Clerk of Court even on the assumption that said payment was not sufficient in amount. The rule is well-settled that a case is deemed filed only upon payment of the docket fee regardless of the actual date of its filing in court., (Malimit vs. Degamo, No. L17850, Nov. 28, 1964, 12 SCRA 450, 120 Phil. 1247; Lee vs. Republic, L-15027, Jan. 31, 1964, 10 SCRA 65.) Is the case at bar covered by the above rule? It is not because the question posed in the Malimit and Lee cases was the timeliness of the payment of the docket fee whereas the case at bar has no reference to the time of payment but concerns the amount that has to be paid. The case of Garcia vs. Vasquez, L-26808, May 23, 1969, 28 SCRA 330, mentioned in the order of Judge Ramolete will be discussed below. And as to Lazaro vs. Endencia, 37 Phil. 552 (1932), it does not appear to have relevance to the question. In that case an appeal in an ejectment case was made and the appellant deposited only P8.00 as docket fee instead of P16.00 as required by law. It was only after the period for perfecting an appeal that the appellant deposited the additional P8.00 to complete the amount of said docket fee. This Court dismissed the appeal on the ground "that payment of the full amount of the docket fees is an indispensable step for the perfection of an appeal." (At p. 5 5 3.)

The case at bar can be distinguished from the Lazaro case in at least two respects, namely: (a) The Lazaro case involved the timeliness of the perfection of the appeal which was made to depend in turn on the timeliness of the full payment of the docket fee whereas the instant case does not involve an appeal nor the timeliness of the payment of the docket fee; and (b) in the Lazaro case, the amount (P8.00) which was initially paid was palpably inadequate, whereas in the case at bar there is an honest difference of opinion as to the correct amount to be paid as docket fee. The Garcia case, supra, appears to favor the petitioners. In that case, a will was sought to be probated in Special Proceeding No. 62818. Docket fees amounting to P940.00 were paid. Later, a second will was sought to be probated in the same special proceeding. This Court held that there was no need to pay a separate docket fee because the probate of the second will was not sought in another proceeding. We hold that under the circusmtances, Civil Case No. R. 11882 was docketed upon the payment of P60.00 although said amount is insufficient. Accordingly, the trial court had acquired jurisdiction over the case and the proceedings thereafter had were proper and regular. The next question is in respect of the correct amount to be paid as docket fee. Judge Canonoy on October 14, 1970, ordered the payment of P3,104.00 as additional docket fee based on the original complaint. However, the petitioners assert as an alternative view, that the docket fee be based on the amended complaint which was admitted on November 14, 1970, also by Judge Canonoy. The petitioners have a point. "When a pleading is amended, the original pleading is deemed abandoned. The original ceases to perform any further function as a pleading. The case stands for trial on the amended pleading only. " (1 Moran, Rules of Court, 363 119701, citing Reynes v. Compania General de Tobacos de Filipinas, 21 Phil. 417; Reyman v. Director of Lands, 34 Phil, 428.) On the basis of the foregoing, the additional docket fee to be paid by the petitioners should be based on their amended complaint. WHEREFORE, the petition is hereby granted: the petitioners shall be assessed a docket fee on the basis of the amended complaint; and after all of the lawful fees shall have been paid, the proceedings in Civil Case No. R-11882 shall be resumed. No special pronouncement as to costs. SO ORDERED. MANCHESTER DEV CORP vs CA Acting on the motion for reconsideration of the resolution of the Second Division of January 28,1987 and another motion to refer the case to and to be heard in oral argument by the Court En Banc filed by petitioners, the motion to refer the case to the Court en banc is granted but the motion to set the case for oral argument is denied. Petitioners in support of their contention that the filing fee must be assessed on the basis of the amended complaint cite the case of Magaspi vs. Ramolete. 1 They contend that the Court of Appeals erred in that the filing fee should be levied by considering the amount of damages sought in the original complaint. The environmental facts of said case differ from the present in that 1. The Magaspi case was an action for recovery of ownership and possession of a parcel of land with damages. 2While the present case is an action for torts and

damages and specific performance with prayer for temporary restraining order, etc. 3 2. In the Magaspi case, the prayer in the complaint seeks not only the annulment of title of the defendant to the property, the declaration of ownership and delivery of possession thereof to plaintiffs but also asks for the payment of actual moral, exemplary damages and attorney's fees arising therefrom in the amounts specified therein. 4 However, in the present case, the prayer is for the issuance of a writ of preliminary prohibitory injunction during the pendency of the action against the defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question, to attach such property of defendants that maybe sufficient to satisfy any judgment that maybe rendered, and after hearing, to order defendants to execute a contract of purchase and sale of the subject property and annul defendants' illegal forfeiture of the money of plaintiff, ordering defendants jointly and severally to pay plaintiff actual, compensatory and exemplary damages as well as 25% of said amounts as maybe proved during the trial as attorney's fees and declaring the tender of payment of the purchase price of plaintiff valid and producing the effect of payment and to make the injunction permanent. The amount of damages sought is not specified in the prayer although the body of the complaint alleges the total amount of over P78 Million as damages suffered by plaintiff. 5 3. Upon the filing of the complaint there was an honest difference of opinion as to the nature of the action in the Magaspi case. The complaint was considered as primarily an action for recovery of ownership and possession of a parcel of land. The damages stated were treated as merely to the main cause of action. Thus, the docket fee of only P60.00 and P10.00 for the sheriff's fee were paid. 6 In the present case there can be no such honest difference of opinion. As maybe gleaned from the allegations of the complaint as well as the designation thereof, it is both an action for damages and specific performance. The docket fee paid upon filing of complaint in the amount only of P410.00 by considering the action to be merely one for specific performance where the amount involved is not capable of pecuniary estimation is obviously erroneous. Although the total amount of damages sought is not stated in the prayer of the complaint yet it is spelled out in the body of the complaint totalling in the amount of P78,750,000.00 which should be the basis of assessment of the filing fee. 4. When this under-re assessment of the filing fee in this case was brought to the attention of this Court together with similar other cases an investigation was immediately ordered by the Court. Meanwhile plaintiff through another counsel with leave of court filed an amended complaint on September 12, 1985 for the inclusion of Philips Wire and Cable Corporation as co-plaintiff and by emanating any mention of the amount of damages in the body of the complaint. The prayer in the original complaint was maintained. After this Court issued an order on October 15, 1985 ordering the re- assessment of the docket fee in the present case and other cases that were investigated, on November 12, 1985 the trial court directed plaintiffs to rectify the amended complaint by stating the amounts which they are asking for. It was only then that plaintiffs specified the amount of damages in the body of the complaint in the reduced amount of P10,000,000.00. 7 Still no amount of damages were specified in the prayer. Said amended complaint was admitted. On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay the amount of P3,104.00 as filing fee covering the damages alleged in the original complaint as it did not consider the damages to be merely an or incidental to the

action for recovery of ownership and possession of real property. 8 An amended complaint was filed by plaintiff with leave of court to include the government of the Republic as defendant and reducing the amount of damages, and attorney's fees prayed for to P100,000.00. Said amended complaint was also admitted. 9 In the Magaspi case, the action was considered not only one for recovery of ownership but also for damages, so that the filing fee for the damages should be the basis of assessment. Although the payment of the docketing fee of P60.00 was found to be insufficient, nevertheless, it was held that since the payment was the result of an "honest difference of opinion as to the correct amount to be paid as docket fee" the court "had acquired jurisdiction over the case and the proceedings thereafter had were proper and regular." 10 Hence, as the amended complaint superseded the original complaint, the allegations of damages in the amended complaint should be the basis of the computation of the filing fee. 11 In the present case no such honest difference of opinion was possible as the allegations of the complaint, the designation and the prayer show clearly that it is an action for damages and specific performance. The docketing fee should be assessed by considering the amount of damages as alleged in the original complaint. As reiterated in the Magaspi case the rule is well-settled "that a case is deemed filed only upon payment of the docket fee regardless of the actual date of filing in court . 12 Thus, in the present case the trial court did not acquire jurisdiction over the case by the payment of only P410.00 as docket fee. Neither can the amendment of the complaint thereby vest jurisdiction upon the Court. 13 For an legal purposes there is no such original complaint that was duly filed which could be amended. Consequently, the order admitting the amended complaint and all subsequent proceedings and actions taken by the trial court are null and void. The Court of Appeals therefore, aptly ruled in the present case that the basis of assessment of the docket fee should be the amount of damages sought in the original complaint and not in the amended complaint. The Court cannot close this case without making the observation that it frowns at the practice of counsel who filed the original complaint in this case of omitting any specification of the amount of damages in the prayer although the amount of over P78 million is alleged in the body of the complaint. This is clearly intended for no other purpose than to evade the payment of the correct filing fees if not to mislead the docket clerk in the assessment of the filing fee. This fraudulent practice was compounded when, even as this Court had taken cognizance of the anomaly and ordered an investigation, petitioner through another counsel filed an amended complaint, deleting all mention of the amount of damages being asked for in the body of the complaint. It was only when in obedience to the order of this Court of October 18, 1985, the trial court directed that the amount of damages be specified in the amended complaint, that petitioners' counsel wrote the damages sought in the much reduced amount of P10,000,000.00 in the body of the complaint but not in the prayer thereof. The design to avoid payment of the required docket fee is obvious. The Court serves warning that it will take drastic action upon a repetition of this unethical practice. To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadings should specify the amount of damages being prayed for not only in the body of the pleading but also in the prayer, and said damages shall be considered in the assessment of the filing fees in any case. Any pleading that fails

to comply with this requirement shall not bib accepted nor admitted, or shall otherwise be expunged from the record. The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less the payment of the docket fee based on the amounts sought in the amended pleading. The ruling in the Magaspi case 14 in so far as it is inconsistent with this pronouncement is overturned and reversed. WHEREFORE, the motion for reconsideration is denied for lack of merit. SO ORDERED. SUN INSURANCE vs ASUNCION Again the Court is asked to resolve the issue of whether or not a court acquires jurisdiction over a case when the correct and proper docket fee has not been paid. On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint with the Regional Trial Court of Makati, Metro Manila for the consignation of a premium refund on a fire insurance policy with a prayer for the judicial declaration of its nullity against private respondent Manuel Uy Po Tiong. Private respondent as declared in default for failure to file the required answer within the reglementary period. On the other hand, on March 28, 1984, private respondent filed a complaint in the Regional Trial Court of Quezon City for the refund of premiums and the issuance of a writ of preliminary attachment which was docketed as Civil Case No. Q-41177, initially against petitioner SIOL, and thereafter including E.B. Philipps and D.J. Warby as additional defendants. The complaint sought, among others, the payment of actual, compensatory, moral, exemplary and liquidated damages, attorney's fees, expenses of litigation and costs of the suit. Although the prayer in the complaint did not quantify the amount of damages sought said amount may be inferred from the body of the complaint to be about Fifty Million Pesos (P50,000,000.00). Only the amount of P210.00 was paid by private respondent as docket fee which prompted petitioners' counsel to raise his objection. Said objection was disregarded by respondent Judge Jose P. Castro who was then presiding over said case. Upon the order of this Court, the records of said case together with twenty-two other cases assigned to different branches of the Regional Trial Court of Quezon City which were under investigation for under-assessment of docket fees were transmitted to this Court. The Court thereafter returned the said records to the trial court with the directive that they be re-raffled to the other judges in Quezon City, to the exclusion of Judge Castro. Civil Case No. Q-41177 was re-raffled to Branch 104, a sala which was then vacant. On October 15, 1985, the Court en banc issued a Resolution in Administrative Case No. 85-10-8752-RTC directing the judges in said cases to reassess the docket fees and that in case of deficiency, to order its payment. The Resolution also requires all clerks of court to issue certificates of re-assessment of docket fees. All litigants were likewise required to specify in their pleadings the amount sought to be recovered in their complaints. On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q41177 was temporarily assigned, issuedan order to the Clerk of Court instructing

him to issue a certificate of assessment of the docket fee paid by private respondent and, in case of deficiency, to include the same in said certificate. On January 7, 1984, to forestall a default, a cautionary answer was filed by petitioners. On August 30,1984, an amended complaint was filed by private respondent including the two additional defendants aforestated. Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter assigned, after his assumption into office on January 16, 1986, issued a Supplemental Order requiring the parties in the case to comment on the Clerk of Court's letter-report signifying her difficulty in complying with the Resolution of this Court of October 15, 1985 since the pleadings filed by private respondent did not indicate the exact amount sought to be recovered. On January 23, 1986, private respondent filed a "Compliance" and a "Re-Amended Complaint" stating therein a claim of "not less than Pl0,000,000. 00 as actual compensatory damages" in the prayer. In the body of the said second amended complaint however, private respondent alleges actual and compensatory damages and attorney's fees in the total amount of about P44,601,623.70. On January 24, 1986, Judge Asuncion issued another Order admitting the second amended complaint and stating therein that the same constituted proper compliance with the Resolution of this Court and that a copy thereof should be furnished the Clerk of Court for the reassessment of the docket fees. The reassessment by the Clerk of Court based on private respondent's claim of "not less than P10,000,000.00 as actual and compensatory damages" amounted to P39,786.00 as docket fee. This was subsequently paid by private respondent. Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order of Judie Asuncion dated January 24, 1986. On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of P20,000,000.00 as d.qmages so the total claim amounts to about P64,601,623.70. On October 16, 1986, or some seven months after filing the supplemental complaint, the private respondent paid the additional docket fee of P80,396.00. 1 On August 13, 1987, the Court of Appeals rendered a decision ruling, among others, as follows: WHEREFORE, judgment is hereby rendered: 1. Denying due course to the petition in CA-G.R. SP No. 1, 09715 insofar as it seeks annulment of the order (a) denying petitioners' motion to dismiss the complaint, as amended, and (b) granting the writ of preliminary attachment, but giving due course to the portion thereof questioning the reassessment of the docketing fee, and requiring the Honorable respondent Court to reassess the docketing fee to be paid by private respondent on the basis of the amount of P25,401,707.00. 2 Hence, the instant petition. During the pendency of this petition and in conformity with the said judgment of respondent court, private respondent paid the additional docket fee of P62,432.90 on April 28, 1988. 3 The main thrust of the petition is that the Court of Appeals erred in not finding that the lower court did not acquire jurisdiction over Civil Case No. Q-41177 on the ground of nonpayment of the correct and proper docket fee. Petitioners allege that while it may be true that private respondent had paid the amount of P182,824.90 as docket fee as herein-above related, and considering that the total amount sought to be recovered in the amended and supplemental complaint is P64,601,623.70 the

docket fee that should be paid by private respondent is P257,810.49, more or less. Not having paid the same, petitioners contend that the complaint should be dismissed and all incidents arising therefrom should be annulled. In support of their theory, petitioners cite the latest ruling of the Court in Manchester Development Corporation vs. CA, 4 as follows: The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less the payment of the docket fee based on the amounts sought in the amended pleading. The ruling in the Magaspi Case in so far as it is inconsistent with this pronouncement is overturned and reversed. On the other hand, private respondent claims that the ruling in Manchester cannot apply retroactively to Civil Case No. Q41177 for at the time said civil case was filed in court there was no such Manchester ruling as yet. Further, private respondent avers that what is applicable is the ruling of this Court in Magaspi v. Ramolete, 5 wherein this Court held that the trial court acquired jurisdiction over the case even if the docket fee paid was insufficient. The contention that Manchester cannot apply retroactively to this case is untenable. Statutes regulating the procedure of the courts will be construed as applicable to actions pending and undetermined at the time of their passage. Procedural laws are retrospective in that sense and to that extent. 6 In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full amount of the docket fee is an indispensable step for the perfection of an appeal. In a forcible entry and detainer case before the justice of the peace court of Manaoag, Pangasinan, after notice of a judgment dismissing the case, the plaintiff filed a notice of appeal with said court but he deposited only P8.00 for the docket fee, instead of P16.00 as required, within the reglementary period of appeal of five (5) days after receiving notice of judgment. Plaintiff deposited the additional P8.00 to complete the amount of the docket fee only fourteen (14) days later. On the basis of these facts, this court held that the Court of First Instance did notacquire jurisdiction to hear and determine the appeal as the appeal was not thereby perfected. In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to become a Filipino citizen by sending it through registered mail to the Office of the Solicitor General in 1953 but the required filing fee was paid only in 1956, barely 5V2 months prior to the filing of the petition for citizenship. This Court ruled that the declaration was not filed in accordance with the legal requirement that such declaration should be filed at least one year before the filing of the petition for citizenship. Citing Lazaro, this Court concluded that the filing of petitioner's declaration of intention on October 23, 1953 produced no legal effect until the required filing fee was paid on May 23, 1956. In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were applied. It was an original petition for quo warranto contesting the right to office of proclaimed candidates which was mailed, addressed to the clerk of the Court of First Instance, within the one-week period after the proclamation as provided therefor by law. 10However, the required docket fees were paid only after the expiration of said period. Consequently, this Court held that the date of such payment must be deemed to be the real date of filing of aforesaid petition and not the date when it was mailed. Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee must be paid before a court will act on a petition or complaint. However, we also

held that said rule is not applicable when petitioner seeks the probate of several wills of the same decedent as he is not required to file a separate action for each will but instead he may have other wills probated in the same special proceeding then pending before the same court. Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is deemed filed only upon payment of the docket fee regardless of the actual date of its filing in court. Said case involved a complaint for recovery of ownership and possession of a parcel of land with damages filed in the Court of First Instance of Cebu. Upon the payment of P60.00 for the docket fee and P10.00 for the sheriffs fee, the complaint was docketed as Civil Case No. R-11882. The prayer of the complaint sought that the Transfer Certificate of Title issued in the name of the defendant be declared as null and void. It was also prayed that plaintiff be declared as owner thereof to whom the proper title should be issued, and that defendant be made to pay monthly rentals of P3,500.00 from June 2, 1948 up to the time the property is delivered to plaintiff, P500,000.00 as moral damages, attorney's fees in the amount of P250,000.00, the costs of the action and exemplary damages in the amount of P500,000.00. The defendant then filed a motion to compel the plaintiff to pay the correct amount of the docket fee to which an opposition was filed by the plaintiff alleging that the action was for the recovery of a parcel of land so the docket fee must be based on its assessed value and that the amount of P60.00 was the correct docketing fee. The trial court ordered the plaintiff to pay P3,104.00 as filing fee. The plaintiff then filed a motion to admit the amended complaint to include the Republic as the defendant. In the prayer of the amended complaint the exemplary damages earlier sought was eliminated. The amended prayer merely sought moral damages as the court may determine, attorney's fees of P100,000.00 and the costs of the action. The defendant filed an opposition to the amended complaint. The opposition notwithstanding, the amended complaint was admitted by the trial court. The trial court reiterated its order for the payment of the additional docket fee which plaintiff assailed and then challenged before this Court. Plaintiff alleged that he paid the total docket fee in the amount of P60.00 and that if he has to pay the additional fee it must be based on the amended complaint. The question posed, therefore, was whether or not the plaintiff may be considered to have filed the case even if the docketing fee paid was not sufficient. In Magaspi, We reiterated the rule that the case was deemed filed only upon the payment of the correct amount for the docket fee regardless of the actual date of the filing of the complaint; that there was an honest difference of opinion as to the correct amount to be paid as docket fee in that as the action appears to be one for the recovery of property the docket fee of P60.00 was correct; and that as the action is also one, for damages, We upheld the assessment of the additional docket fee based on the damages alleged in the amended complaint as against the assessment of the trial court which was based on the damages alleged in the original complaint. However, as aforecited, this Court overturned Magaspi in Manchester. Manchester involves an action for torts and damages and specific performance with a prayer for the issuance of a temporary restraining order, etc. The prayer in said case is for the issuance of a writ of preliminary prohibitory injunction during the pendency of the action against the defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question, the attachment of such property of defendants that may

be sufficient to satisfy any judgment that may be rendered, and, after hearing, the issuance of an order requiring defendants to execute a contract of purchase and sale of the subject property and annul defendants' illegal forfeiture of the money of plaintiff. It was also prayed that the defendants be made to pay the plaintiff jointly and severally, actual, compensatory and exemplary damages as well as 25% of said amounts as may be proved during the trial for attorney's fees. The plaintiff also asked the trial court to declare the tender of payment of the purchase price of plaintiff valid and sufficient for purposes of payment, and to make the injunction permanent. The amount of damages sought is not specified in the prayer although the body of the complaint alleges the total amount of over P78 Millon allegedly suffered by plaintiff. Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for the docket fee based on the nature of the action for specific performance where the amount involved is not capable of pecuniary estimation. However, it was obvious from the allegations of the complaint as well as its designation that the action was one for damages and specific performance. Thus, this court held the plaintiff must be assessed the correct docket fee computed against the amount of damages of about P78 Million, although the same was not spelled out in the prayer of the complaint. Meanwhile, plaintiff through another counsel, with leave of court, filed an amended complaint on September 12, 1985 by the inclusion of another co-plaintiff and eliminating any mention of the amount of damages in the body of the complaint. The prayer in the original complaint was maintained. On October 15, 1985, this Court ordered the re-assessment of the docket fee in the said case and other cases that were investigated. On November 12, 1985, the trial court directed the plaintiff to rectify the amended complaint by stating the amounts which they were asking for. This plaintiff did as instructed. In the body of the complaint the amount of damages alleged was reduced to P10,000,000.00 but still no amount of damages was specified in the prayer. Said amended complaint was admitted. Applying the principle in Magaspi that "the case is deemed filed only upon payment of the docket fee regardless of the actual date of filing in court," this Court held that the trial court did not acquire jurisdiction over the case by payment of only P410.00 for the docket fee. Neither can the amendment of the complaint thereby vest jurisdiction upon the Court. For all legal purposes there was no such original complaint duly filed which could be amended. Consequently, the order admitting the amended complaint and all subsequent proceedings and actions taken by the trial court were declared null and void. 13 The present case, as above discussed, is among the several cases of underassessment of docket fee which were investigated by this Court together with Manchester. The facts and circumstances of this case are similar to Manchester. In the body of the original complaint, the total amount of damages sought amounted to about P50 Million. In the prayer, the amount of damages asked for was not stated. The action was for the refund of the premium and the issuance of the writ of preliminary attachment with damages. The amount of only P210.00 was paid for the docket fee. On January 23, 1986, private respondent filed an amended complaint wherein in the prayer it is asked that he be awarded no less than P10,000,000.00 as actual and exemplary damages but in the body of the complaint the amount of his pecuniary claim is approximately P44,601,623.70. Said amended complaint was admitted and the private respondent was reassessed the additional

docket fee of P39,786.00 based on his prayer of not less than P10,000,000.00 in damages, which he paid. On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of P20,000,000.00 in damages so that his total claim is approximately P64,601,620.70. On October 16, 1986, private respondent paid an additional docket fee of P80,396.00. After the promulgation of the decision of the respondent court on August 31, 1987 wherein private respondent was ordered to be reassessed for additional docket fee, and during the pendency of this petition, and after the promulgation of Manchester, on April 28, 1988, private respondent paid an additional docket fee of P62,132.92. Although private respondent appears to have paid a total amount of P182,824.90 for the docket fee considering the total amount of his claim in the amended and supplemental complaint amounting to about P64,601,620.70, petitioner insists that private respondent must pay a docket fee of P257,810.49. The principle in Manchester could very well be applied in the present case. The pattern and the intent to defraud the government of the docket fee due it is obvious not only in the filing of the original complaint but also in the filing of the second amended complaint. However, in Manchester, petitioner did not pay any additional docket fee until] the case was decided by this Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this Court held that the court a quo did not acquire jurisdiction over the case and that the amended complaint could not have been admitted inasmuch as the original complaint was null and void. In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester, private respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as required. The promulgation of the decision in Manchester must have had that sobering influence on private respondent who thus paid the additional docket fee as ordered by the respondent court. It triggered his change of stance by manifesting his willingness to pay such additional docket fee as may be ordered. Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the total amount of the claim. This is a matter which the clerk of court of the lower court and/or his duly authorized docket clerk or clerk incharge should determine and, thereafter, if any amount is found due, he must require the private respondent to pay the same. Thus, the Court rules as follows: 1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. 2. The same rule applies to permissive counterclaims, third party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period. 3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same

has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee. WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the court a quo is hereby instructed to reassess and determine the additional filing fee that should be paid by private respondent considering the total amount of the claim sought in the original complaint and the supplemental complaint as may be gleaned from the allegations and the prayer thereof and to require private respondent to pay the deficiency, if any, without pronouncement as to costs. SO ORDERED. HEIRS OF THE LATE RUBEN REINOSO JR vs CA Before the Court is a petition for review assailing the May 20, 1994 Decision 1 and June 30, 1994 Resolution2 of the Court of Appeals (CA), in CA-G.R. CV No. 19395, which set aside the March 22, 1988 Decision of the Regional Trial Court, Branch 8, Manila (RTC) for non-payment of docket fees. The dispositive portion of the CA decision reads: IN VIEW OF ALL THE FOREGOING, the decision appealed from is SET ASIDE and REVERSED and the complaint in this case is ordered DISMISSED. No costs pronouncement. SO ORDERED. The complaint for damages arose from the collision of a passenger jeepney and a truck at around 7:00 oclock in the evening of June 14, 1979 along E. Rodriguez Avenue, Quezon City. As a result, a passenger of the jeepney, Ruben Reinoso, Sr. (Reinoso), was killed. The passenger jeepney was owned by Ponciano Tapales (Tapales) and driven by Alejandro Santos (Santos), while the truck was owned by Jose Guballa (Guballa) and driven by Mariano Geronimo (Geronimo). On November 7, 1979, the heirs of Reinoso (petitioners) filed a complaint for damages against Tapales and Guballa. In turn, Guballa filed a third party complaint against Filwriters Guaranty Assurance Corporation (FGAC) under Policy Number OV09527. On March 22, 1988, the RTC rendered a decision in favor of the petitioners and against Guballa. The decision in part, reads: In favor of herein plaintiffs and against defendant Jose Guballa: For the death of Ruben Reinoso, Sr. 1. 2. Loss of earnings (monthly income at the time of death (P 2,000.00 Court used P 1,000.00 only per month (or P 12,000.00 only per year) & victim then being 55 at death had ten (10) years life expectancy 3. Mortuary, Medical & funeral expenses and P 30,000.0 0

120,000.0 0 15,000.00

all incidental expenses in the wake in serving those who condoled 4. Moral damages .. 5. Exemplary damages 6. Litigation expenses . 7. Attorneys fees Or a total of 50,000.00 25,000.00 15,000.00 25,000.00 P 250,000. 00

For damages to property: In favor of defendant Ponciano Tapales and against defendant Jose Guballa: 1. Actual damages for repair is already awarded to defendant-cross-claimant Ponciano Tapales by Br. 9, RTC-Malolos, Bulacan (Vide: Exh. 1-G-Tapales); hence, cannot recover twice. 2. Compensatory damages (earnings at P 150.00 per day) and for two (2) months jeepney stayed at the repair shop. 3. 4. 5. Moral damages ... Exemplary damages . Attorneys fees

P 9,000.0 0 10,000.0 0 10,000.0 0 15,000.0 0

P 44,000. 00 Under the 3rd party complaint against 3rd party defendant Filwriters Guaranty Assurance Corporation, the Court hereby renders judgment in favor of said 3rd party plaintiff by way of 3rd party liability under policy No. OV-09527 in the amount of P 50,000.00 undertaking plus P 10,000.00 as and for attorneys fees. For all the foregoing, it is the well considered view of the Court that plaintiffs, defendant Ponciano Tapales and 3rd Party plaintiff Jose Guballa established their claims as specified above, respectively. Totality of evidence preponderance in their favor. JUDGMENT WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows: In favor of plaintiffs for the death of Ruben Reinoso, Sr.P250,000.00; or a total of

In favor of defendant Ponciano Tapales due to damage of his passenger jeepney . P44,000.00; In favor of defendant Jose Guballa under Policy No. OV09527 P60,000.00; All the specified accounts with 6% legal rate of interest per annum from date of complaint until fully paid (Reformina vs. Tomol, 139 SCRA 260; and finally; Costs of suit. SO ORDERED.3 On appeal, the CA, in its Decision dated May 20, 1994, set aside and reversed the RTC decision and dismissed the complaint on the ground of non-payment of docket fees pursuant to the doctrine laid down in Manchester v. CA.4 In addition, the CA ruled that since prescription had set in, petitioners could no longer pay the required docket fees.5 Petitioners filed a motion for reconsideration of the CA decision but it was denied in a resolution dated June 30, 1994.6 Hence, this appeal, anchored on the following GROUNDS: A. The Court of Appeals MISAPPLIED THE RULING of the Supreme Court in the case of Manchester Corporation vs. Court of Appeals to this case. B. The issue on the specification of the damages appearing in the prayer of the Complaint was NEVER PLACED IN ISSUE BY ANY OF THE PARTIES IN THE COURT OF ORIGIN (REGIONAL TRIAL COURT) NOR IN THE COURT OF APPEALS. C. The issues of the case revolve around the more substantial issue as to the negligence of the private respondents and their culpability to petitioners." 7 The petitioners argue that the ruling in Manchester should not have been applied retroactively in this case, since it was filed prior to the promulgation of the Manchester decision in 1987. They plead that though this Court stated that failure to state the correct amount of damages would lead to the dismissal of the complaint, said doctrine should be applied prospectively. Moreover, the petitioners assert that at the time of the filing of the complaint in 1979, they were not certain of the amount of damages they were entitled to, because the amount of the lost income would still be finally determined in the course of the trial of the case. They claim that the jurisdiction of the trial court remains even if there was failure to pay the correct filing fee as long as the correct amount would be paid subsequently. Finally, the petitioners stress that the alleged defect was never put in issue either in the RTC or in the CA. The Court finds merit in the petition. The rule is that payment in full of the docket fees within the prescribed period is mandatory.8 In Manchester v. Court of Appeals,9 it was held that a court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. The strict application of this rule was, however, relaxed two (2) years after in the case ofSun Insurance Office, Ltd. v. Asuncion ,10 wherein the Court decreed that where the initiatory pleading is not accompanied by the payment of the docket fee, the court may allow payment of the fee within a reasonable period of time, but in no case beyond the applicable prescriptive or reglementary period. This ruling was made on the premise that the plaintiff had demonstrated his willingness to abide by the rules by paying the additional docket fees required. 11 Thus, in the more recent case of United Overseas Bank v. Ros,12 the Court explained that where the party does not deliberately intend to defraud the court in payment of docket fees, and manifests its willingness to abide by the rules by paying additional docket fees when required by

the court, the liberal doctrine enunciated in Sun Insurance Office, Ltd., and not the strict regulations set in Manchester, will apply. It has been on record that the Court, in several instances, allowed the relaxation of the rule on non-payment of docket fees in order to afford the parties the opportunity to fully ventilate their cases on the merits. In the case of La Salette College v. Pilotin,13the Court stated: Notwithstanding the mandatory nature of the requirement of payment of appellate docket fees, we also recognize that its strict application is qualified by the following: first, failure to pay those fees within the reglementary period allows only discretionary, not automatic, dismissal; second, such power should be used by the court in conjunction with its exercise of sound discretion in accordance with the tenets of justice and fair play, as well as with a great deal of circumspection in consideration of all attendant circumstances. 14 While there is a crying need to unclog court dockets on the one hand, there is, on the other, a greater demand for resolving genuine disputes fairly and equitably,15 for it is far better to dispose of a case on the merit which is a primordial end, rather than on a technicality that may result in injustice. In this case, it cannot be denied that the case was litigated before the RTC and said trial court had already rendered a decision. While it was at that level, the matter of non-payment of docket fees was never an issue. It was only the CA which motu propio dismissed the case for said reason. Considering the foregoing, there is a need to suspend the strict application of the rules so that the petitioners would be able to fully and finally prosecute their claim on the merits at the appellate level rather than fail to secure justice on a technicality, for, indeed, the general objective of procedure is to facilitate the application of justice to the rival claims of contending parties, bearing always in mind that procedure is not to hinder but to promote the administration of justice. 16 The Court also takes into account the fact that the case was filed before the Manchester ruling came out. Even if said ruling could be applied retroactively, liberality should be accorded to the petitioners in view of the recency then of the ruling. Leniency because of recency was applied to the cases of Far Eastern Shipping Company v. Court of Appeals17 and Spouses Jimmy and Patri Chan v. RTC of Zamboanga.18 In the case of Mactan Cebu International Airport Authority v. Mangubat (Mactan),19 it was stated that the "intent of the Court is clear to afford litigants full opportunity to comply with the new rules and to temper enforcement of sanctions in view of the recencyof the changes introduced by the new rules." In Mactan, the Office of the Solicitor General (OSG) also failed to pay the correct docket fees on time. We held in another case: x x x It bears stressing that the rules of procedure are merely tools designed to facilitate the attainment of justice. They were conceived and promulgated to effectively aid the court in the dispensation of justice. Courts are not slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice, courts have always been, as they ought to be, conscientiously guided by the norm that, on the balance, technicalities take a backseat against substantive rights, and not the other way around. Thus, if the application of the Rules would tend to frustrate rather than promote justice, it is always within the power of the Court to suspend the Rules, or except a particular case from its operation. 20 The petitioners, however, are liable for the difference between the actual fees paid and the correct payable docket fees to be assessed by the clerk of court which shall constitute a lien on the judgment pursuant to Section 2 of Rule 141 which provides:

SEC. 2. Fees in lien. Where the court in its final judgment awards a claim not alleged, or a relief different from, or more than that claimed in the pleading, the party concerned shall pay the additional fees which shall constitute a lien on the judgment in satisfaction of said lien. The clerk of court shall assess and collect the corresponding fees. As the Court has taken the position that it would be grossly unjust if petitioners claim would be dismissed on a strict application of the Manchester doctrine, the appropriate action, under ordinary circumstances, would be for the Court to remand the case to the CA. Considering, however, that the case at bench has been pending for more than 30 years and the records thereof are already before this Court, a remand of the case to the CA would only unnecessarily prolong its resolution. In the higher interest of substantial justice and to spare the parties from further delay, the Court will resolve the case on the merits. The facts are beyond dispute. Reinoso, the jeepney passenger, died as a result of the collision of a jeepney and a truck on June 14, 1979 at around 7:00 oclock in the evening along E. Rodriguez Avenue, Quezon City. It was established that the primary cause of the injury or damage was the negligence of the truck driver who was driving it at a very fast pace. Based on the sketch and spot report of the police authorities and the narration of thejeepney driver and his passengers, the collision was brought about because the truck driver suddenly swerved to, and encroached on, the left side portion of the road in an attempt to avoid a wooden barricade, hitting the passenger jeepney as a consequence. The analysis of the RTC appears in its decision as follows: Perusal and careful analysis of evidence adduced as well as proper consideration of all the circumstances and factors bearing on the issue as to who is responsible for the instant vehicular mishap convince and persuade this Court that preponderance of proof is in favor of plaintiffs and defendant Ponciano Tapales. The greater mass of evidence spread on the records and its influence support plaintiffs plaint including that of defendant Tapales. The Land Transportation and Traffic Rule (R.A. No. 4136), reads as follows: "Sec. 37. Driving on right side of highway. Unless a different course of action is required in the interest of the safety and the security of life, person or property, or because of unreasonable difficulty of operation in compliance therewith, every person operating a motor vehicle or an animal drawn vehicle on highway shall pass to the right when meeting persons or vehicles coming toward him, and to the left when overtaking persons or vehicles going the same direction, and when turning to the left in going from one highway to another, every vehicle shall be conducted to the right of the center of the intersection of the highway." Having in mind the foregoing provision of law, this Court is convinced of the veracity of the version of the passenger jeepney driver Alejandro Santos, (plaintiffs and Tapales witness) that while running on lane No. 4 westward bound towards Ortigas Avenue at between 30-40 kms. per hour (63-64 tsn, Jan. 6, 1984) the "sand & gravel" truck from the opposite direction driven by Mariano Geronimo, the headlights of which the former had seen while still at a distance of about 30-40 meters from the wooden barricade astride lanes 1 and 2, upon reaching said wooden block suddenly swerved to the left into lanes 3 and 4 at high speed "napakabilis po ng dating ng truck." (29 tsn, Sept. 26, 1985) in the process hitting them (Jeepney passenger) at the left side up to where the reserve tire was in an oblique manner "pahilis" (57 tsn, Sept. 26, 1985). The jeepney after it was bumped by the truck due to the strong impact was thrown "resting on its right side while the

left side was on top of the Bangketa (side walk)". The passengers of the jeepney and its driver were injured including two passengers who died. The left side of the jeepney suffered considerable damage as seen in the picture (Exhs. 4 & 5-Tapales, pages 331-332, records) taken while at the repair shop. The Court is convinced of the narration of Santos to the effect that the "gravel & sand" truck was running in high speed on the good portion of E. Rodriguez Avenue (lane 1 & 2) before the wooden barricade and (having in mind that it had just delivered its load at the Corinthian Gardens) so that when suddenly confronted with the wooden obstacle before it had to avoid the same in a manner of a reflex reaction or knee-jerk response by forthwith swerving to his left into the right lanes (lanes 3 & 4). At the time of the bumping, the jeepney was running on its right lane No. 4 and even during the moments before said bumping, moving at moderate speed thereon since lane No. 3 was then somewhat rough because being repaired also according to Mondalia who has no reason to prevaricate being herself one of those seriously injured. The narration of Santos and Mondalia are convincing and consistent in depicting the true facts of the case untainted by vacillation and therefore, worthy to be relied upon. Their story is forfeited and confirmed by the sketch drawn by the investigating officer Pfc. F. Amaba, Traffic Division, NPD, Quezon City who rushed to the scene of the mishap (Vide: Resolution of Asst fiscal Elizabeth B. Reyes marked as Exhs. 7, 7-A, 7-B-Tapales, pp. 166-168, records; the Certified Copy found on pages 598-600, ibid, with the attached police sketch of Pfc. Amaba, marked as Exh. 8-Tapales on page 169, ibid; certified copy of which is on page 594, ibid) indicating the fact that the bumping indeed occurred at lane No. 4 and showing how the gavel & sand truck is positioned in relation to the jeepney. The said police sketch having been made right after the accident is a piece of evidence worthy to be relied upon showing the true facts of the bumpingoccurrence. The rule that official duty had been performed (Sec.5(m), R-131, and also Sec. 38, R-a30, Rev. Rules of Court) there being no evidence adduced and made of record to the contrary is that said circumstance involving the two vehicles had been the result of an official investigation and must be taken as true by this Court.211awphi1 While ending up on the opposite lane is not conclusive proof of fault in automobile collisions,22 the position of the two vehicles, as depicted in the sketch of the police officers, clearly shows that it was the truck that hit the jeepney. The evidentiary records disclosed that the truck was speeding along E. Rodriguez, heading towards Santolan Street, while the passenger jeepney was coming from the opposite direction. When the truck reached a certain point near the Meralco Post No. J9450, the front portion of the truck hit the left middle side portion of the passenger jeepney, causing damage to both vehicles and injuries to the driver and passengers of the jeepney. The truck driver should have been more careful, because, at that time, a portion of E. Rodriguez Avenue was under repair and a wooden barricade was placed in the middle thereof. The Court likewise sustains the finding of the RTC that the truck owner, Guballa, failed to rebut the presumption of negligence in the hiring and supervision of his employee. Article 2176, in relation to Article 2180 of the Civil Code, provides: Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasidelict and is governed by the provisions of this Chapter. xxxx

Art. 2180. The obligation imposed by Art. 2176 is demandable not only for ones own acts or omissions but also for those of persons for whom one is responsible. xxxx Employers shall be liable for the damage caused by their employees and household helpers acting within the scope of their assigned tasks even though the former are not engaged in any business or industry. xxxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. Whenever an employees negligence causes damage or injury to another, there instantly arises a presumptionjuris tantum that the employer failed to exercise diligentissimi patris families in the selection or supervision of his employee.23 Thus, in the selection of prospective employees, employers are required to examine them as to their qualification, experience and service record. With respect to the supervision of employees, employers must formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for breaches thereof. These facts must be shown by concrete proof, including documentary evidence.24 Thus, the RTC committed no error in finding that the evidence presented by respondent Guballa was wanting. It ruled: x x x. As expected, defendant Jose Guballa, attempted to overthrow this presumption of negligence by showing that he had exercised the due diligence required of him by seeing to it that the driver must check the vital parts of the vehicle he is assigned to before he leaves the compound like the oil, water, brakes, gasoline, horn (9 tsn, July 17, 1986); and that Geronimo had been driving for him sometime in 1976 until the collision in litigation came about (5-6 tsn, ibid); that whenever his trucks gets out of the compound to make deliveries, it is always accompanied with two (2) helpers (16-17 tsn, ibid). This was all which he considered as selection and supervision in compliance with the law to free himself from any responsibility. This Court then cannot consider the foregoing as equivalent to an exercise of all the care of a good father of a family in the selection and supervision of his driver Mariano Geronimo."25 WHEREFORE, the petition is GRANTED. The May 20, 1994 Decision and June 30, 1994 Resolution of the Court of Appeals are REVERSED and SET ASIDE and the March 22, 1988 Decision of the Regional Trial Court, Branch 8, Manila, is REINSTATED. SO ORDERED. KILUSAN-OLALIA vs CA Before the Court are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. The antecedent facts common to the consolidated cases are as follows: On June 30, 1986, the Collective Bargaining Agreement (CBA) executed by and between Kimberly-Clark (Phils.), Inc. (Kimberly), a Philippine-registered corporation engaged in the manufacture, distribution, sale and exportation of paper products,1 and United Kimberly-Clark Employees Union-Philippine Transport and General Workers Organization (UKCEO-PTGWO) expired. 2 Within the freedom period, on April 21, 1986, KILUSAN-OLALIA, then a newly-formed labor organization,

challenged the incumbency of UKCEO-PTGWO, by filing a petition for certification election with the Ministry (now Department) of Labor and Employment (MOLE), Regional Office No. IV, Quezon City.3 A certification election was subsequently conducted on July 1, 1986 with UKCEOPTGWO winning by a margin of 20 votes over KILUSAN-OLALIA. Remaining as uncounted were 64 challenged ballots 4 cast by 64 casual workers whose regularization was in question. KILUSAN-OLALIA filed a protest. 5 On November 13, 1986, MOLE issued an Order stating, among others, that the casual workers not performing janitorial and yard maintenance services had attained regular status on even date. UKCEO-PTGWO was then declared as the exclusive bargaining representative of Kimberlys employees, having garnered the highest number of votes in the certification election. On March 16, 1987, KILUSAN-OLALIA filed with this Court a petition for certiorari which was docketed as G.R. No. 77629 assailing the Order of the MOLE with prayer for a temporary restraining order (TRO). During the pendency of G.R. No. 77629, Kimberly dismissed from service several employees and refused to heed the workers grievances, 6 impelling KILUSAN-OLALIA to stage a strike on May 17, 1987.7 Kimberly filed an injunction case with the National Labor Relations Commission (NLRC), which prompted the latter to issue temporary restraining orders (TROs).8 The propriety of the issuance of the TROs was again brought by KILUSAN-OLALIA to this Court via a petition for certiorari and prohibition which was docketed as G.R. No. 78791. G.R. Nos. 77629 and 78791 were eventually consolidated by this Court and decided on May 9, 1990.9 The dispositive portion of the decision reads as follows: WHEREFORE, judgment is hereby rendered in G.R. No. 77629: 1. Ordering the med-arbiter in Case No. R04-OD-M-4-15-86 to open and count the 64 challenged votes, and that the union with the highest number of votes be thereafter declared as the duly elected certified bargaining representative of the regular employees of KIMBERLY; 2. Ordering KIMBERLY to pay the workers who have been regularized their differential pay with respect to minimum wage, cost of living allowance, 13th month pay, and benefits provided for under the applicable collective bargaining agreement from the time they became regular employees. All other aspects of the decision appealed from, which are not so modified or affected thereby, are hereby AFFIRMED. The temporary restraining order issued in G.R. No. 77629 is hereby made permanent. The petition filed in G.R. No. 78791 is hereby DISMISSED. SO ORDERED.10 G.R. Nos. 149158-59 On account of the May 17, 1987 strike, Kimberly filed on June 1, 1987 a complaint to declare the strike illegal.11As a counter-complaint, KILUSAN-OLALIA, its officers and members (herein petitioners) charged the company and its officers, among others, with unfair labor practice: union-busting and refusal to bargain; and violations of provisions of the Labor Code. On June 3, 1987, Kimberly dismissed a number of workers for knowingly participating in an illegal strike and for committing illegal acts.12 On November 25, 1998, Labor Arbiter Pedro C. Ramos resolved the case in this wise: 13 WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. Declaring the parties to be in pari delicto;

2. Ordering the parties to cease and desist from committing the same or similar acts complained of; 3. Ordering Kimberly Clark (Phil.), (sic) Inc. to reinstate all respondents and countercomplainants listed in Annex "A" hereof, except those who already died, to their former or equivalent positions, without loss of seniority rights and other privileges, either physically or in the payroll, at the option of the company; 4. Ordering Kimberly Clark (Phil.), (sic) Inc. to pay the respondents and countercomplainants whose names appear in Annex "A" hereof their respective backwages or separation pay in the total sum of P2,144,592.08; 5. Ordering Kimberly Clark (Phil.), (sic) Inc. to pay attorneys fees in the amount of P214,459.28; 6. All other claims are denied for lack of merit. SO ORDERED.14 On appeal by both parties, the NLRC rendered its decision 15 on April 28, 1999 finding no basis in KILUSAN-OLALIAs contention that the action of the company in recognizing and concluding a CBA with UKCEO-PTGWO amounted to refusal to bargain. Thus, Kimberly was held not guilty of an unfair labor practice, precluding the application of the in pari delicto doctrine. The NLRC disposed of the case as follows: WHEREFORE, premises considered, the assailed decision is hereby AFFIRMED in so far as declaring the strike illegal is concerned and the finding that the company is not guilty of unfair labor practice. The same is however modified with our finding: (1) that the in pari delicto doctrine is not applicable to the instant case; (2) that the officers of KILUSAN-OLALIA are hereby declared to have lost their employment status for staging an illegal strike; (3) that the union members listed in Annex "A" are hereby ordered to be paid separation pay at the rate of one half (1/2) month pay for every year of service a fraction of six (6) months is considered one (1) year and in no case it should be less than one (1) month pay computed on the basis of their salary received at the time of dismissal up to and until the promulgation of this decision. All other claims are hereby dismissed for lack of merit. SO ORDERED.16 Both parties filed their respective motions for reconsideration, which were denied by the NLRC.17 The NLRC, nonetheless, corrected its computation of the separation pay and made the following disposition: WHEREFORE, premises considered, our resolution dated April 28, 1999 is hereby, RECONSIDERED only insofar as the award of separation pay to the respondents is concerned whereby an additional one half (1/2) month pay for every year of service and a fraction of six months is considered one year is hereby ordered to be paid to them as separation pay. The motions for reconsideration are hereby, DENIED for lack of merit. SO ORDERED.18 Aggrieved, KILUSAN-OLALIA instituted a Petition for Certiorari 19 with the Court of Appeals, docketed as CA-G.R. SP No. 60035. The records disclose that Kimberly also filed a Petition for Certiorari before the CA questioning the same Orders of the NLRC. This was docketed as CA-G.R. SP No. 60001.20 On September 5, 2000, the CA dismissed KILUSAN-OLALIAs petition on procedural grounds,21 thus: This Court resolved to DISMISS the above-entitled petition on the following grounds:

 The verification was signed only by petitioners president, sans any board resolution or power of attorney authorizing anybody to sign the same and the certificate on non-forum shopping; and The attached complaint and amended complaint thereof are not legible copies. IT IS SO ORDERED.22 In the Resolution dated July 19, 2001, the CA denied the motion for reconsideration. Hence, the instant petition for review on certiorari (G.R. Nos. 149158-59) 23 raising the following: I WITH DUE RESPECT, THE RESPONDENT COURT HAS COMMITTED REVERSIBLE, PATENT AND PALPABLE ERROR IN DISMISSING THE ABOVE-ENTITLED CASE BASED ON SHEER TECHNICALITY AND NOT IN THE MERIT OF THE PETITION ITSELF. 24 II WITH DUE RESPECT, THE RESPONDENT COURT HAS UNCONSTITUTIONALLY APPLIED THE RULES BY SHEER RESORT TO TECHNICALITY. 25 III WITH DUE RESPECT, THE RESPONDENT COURT HAS COMMITTED REVERSIBLE, PATENT AND PALPABLE ERROR IN DISMISSING THE PETITION FILED BY THE PETITIONERS WITH IT WHEN, OBVIOUSLY, THE UNION PRESIDENT IS DULY AUTHORIZED TO FILE AND SIGN THE SAID PETITION AS WELL AS TO EXECUTE A CERTIFICATE OF NON-FORUM SHOPPING.26 IV WITH DUE RESPECT, THE RESPONDENT COURT HAS COMMITTED REVERSIBLE, PATENT AND PALPABLE ERROR IN DISMISSING THE ABOVE-ENTITLED CASE WHEN, OBVIOUSLY, SUCH ACTION WILL UNFAIRLY AND UNDULY PREJUDICED (SIC) THE MEMBERS OF THE PETITIONER UNION AND FAVOR THE RESPONDENT COMPANY WHICH ALSO FILED A PETITION FOR CERTIORARI WITH THE RESPONDENT COURT ASSAILING THE QUESTIONED JUDGMENT OF THE NLRC. 27 V WITH DUE RESPECT, THE RESPONDENT COURT HAD COMMITTED (SIC) REVERSIBLE, PATENT AND PALPABLE ERROR IN DISMISSING THE ABOVE-ENTITLED CASE WHEN, OBVIOUSLY: A. THE COPIES OF THE COMPLAINT AND AMENDED COMPLAINT ARE NOT EXACTLY ILLEGIBLE AS IT COULD BE READ BY NAKED EYES; B. IT IS NOT THE FAULT OF THE PETITIONERS BECAUSE THE SAID PLEADINGS WERE PREPARED AND FILED BY THE RESPONDENT COMPANY IN THE COURT BELOW; C. THE SAID PLEADINGS ARE ANCIENT DOCUMENTS HAVING BEEN PREPARED AND FILED SOMETIME ON (sic) JUNE, 1987; AND D. THE SECOND AMENDED COMPLAINT (ANNEX "F") IS IDENTICAL TO THE CLEAR COPY OF THE FIRST AMENDED COMPLAINT (ANNEX "E") EXCEPT THAT THE ANNEXES THERETO WERE RE-MARKED IN THE SECOND AMENDED COMPLAINT AND THE INCLUSIONS OF PARAGRAPHS 14, 15, 16, 17 AND 18 WHICH COULD BE READ BY NAKED EYES.28 Petitioners further prayed for the remand of this case to the CA and its consolidation with CA-G.R. SP No. 60001.29 Due to the elevation of CA-G.R. SP No. 60035 to this Court, the CA held in abeyance action on CA-G.R. SP No. 60001 until after this case had been decided with finality. G.R. No. 156668 On the Decision of the Court dated May 9, 1990, KILUSAN-OLALIA and 76 individual complainants filed a motion for execution with the DOLE (formerly MOLE). In an

Order30 issued on June 29, 2000, the DOLE considered as physically impossible, and moot and academic the opening and counting of the 64 challenged ballots because they could no longer be located despite diligent efforts, and KILUSAN-OLALIA no longer actively participated when the company went through another CBA cycle. However, the DOLE ordered the payment of the differential wages and other benefits of the regularized workers, to wit: ACCORDINGLY, let a partial writ of execution issue to enforce payment of the sum of (sic) P576,510.57 to the 22 individual workers listed in ANNEX A of Kimberlys Comment/Reply dated 31 October 1991 representing their differential pay with respect to the minimum wage, cost of living allowance, 13th month pay and benefits provided under the applicable collective bargaining agreement from the time they became regular employees as above-indicated. Further, the Bureau of Working Conditions is hereby directed to submit, within twenty (20) days from receipt of this Order, a list of workers who have been regularized and the corresponding benefits owing to them from the time they became regular employees. SO ORDERED.31 Pursuant thereto, on August 1, 2000, the Bureau of Working Conditions (BWC) submitted its report finding 47 out of the 76 complainants as entitled to be regularized.32 Kimberly filed a motion for reconsideration of the DOLE Order as well as the BWC Report, arguing in the main that the decision in G.R. Nos. 77629 and 78791 only pertained to casuals who had rendered one year of service as of April 21, 1986, the filing date of KILUSAN-OLALIAs petition for certification election. On December 6, 2000, however, the DOLE denied the motion, 33 disposing of it as follows: WHEREFORE, the motion for reconsideration filed by the COMPANY is hereby DENIED for lack of merit. No further motion of the same nature shall be entertained. Further, the Report of computation submitted by the Bureau of Working Conditions is hereby APPROVED and made an integral part of this Order. 34 Let a writ of execution be issued immediately. SO ORDERED.35 Kimberly, steadfast in its stand, filed a petition for certiorari 36 before the appellate court, which was docketed as CA-G.R. SP No. 62257 alleging that the employees who were dismissed due to the illegal strike staged on May 17, 1987 (the subject of G.R. Nos. 149158-59) should not be awarded regularization differentials. 37 On June 27, 2002, the CA dismissed Kimberlys petition, and disposed of the case as follows:38 WHEREFORE, the instant petition is DISMISSED for failure to show grave abuse of discretion. The questioned orders dated June 29, 2000 and December 6, 2000 of the Secretary of Labor are AFFIRMED. Costs against petitioners. SO ORDERED.39 With the denial of its motion for reconsideration, 40 Kimberly elevated the case before this Court, on the following grounds: 1. The Court of Appeals committed serious error in affirming the ruling of the Secretary of Labor that even casual employees who had not rendered one year of service were considered regular employees, thereby nullifying and disregarding the Honorable Courts Decision dated May 9, 1990 that only casual employees who had rendered at least one (1) year of service were considered regular employees.

2. The Court of Appeals also gravely erred in upholding the ruling of Labor Secretary that persons not party to the petition in G.R. No. 77629 were entitled to regularization differentials, thereby amending the Honorable Courts decision. On the recommendation41 of the Division Clerk of Court and in the interest of an orderly administration of justice, the Court, on May 24, 2004, ordered the consolidation of this case, G.R. No. 156668, with G.R. Nos. 149158-59. 42 After thoroughly studying the voluminous records of these consolidated cases, however, the Court finds that petitioners KILUSAN-OLALIA, et al. in G.R. Nos. 149158-59 are raising essentially a procedural issuewhether the CA erred in dismissing the petition on the sheer grounds of non-compliance with the requirements of the rule on verification and certification against non-forum shopping, and of non-submission of the legible copies of the pleadings filed in the labor tribunal. Petitioners have not brought up for our resolution the substantial issue of the legality of the May 17, 1987 strike. In fact, the petitioners prayed for a remand of their case to the CA which was the proper court to resolve said issue. On the other hand, petitioner Kimberly in G.R. No. 156668 raises the issue of the propriety of the inclusion in the DOLE Order of the two groups of employees: (1) casuals who have not rendered one year of service as of April 21, 1986, the filing date of KILUSAN-OLALIAs petition for certification election; and (2) the employees who were dismissed due to the illegal strike staged on May 17, 1987 (the subject of G.R. Nos. 149158-59). Kimberly contends in the main that only those employees who were parties in G.R. Nos. 77629 and 78791 should be included in the implementation order. As the consolidated cases do not involve a common question of law, 43 the Court resolves to de-consolidate them. We, however, note the considerable period of time the case has been pending in this Court. Thus, we dispose with dispatch the procedural issues raised in G.R. Nos. 149158-59. We find as sufficient in form the disputed verification and certification against forum shopping. We have emphasized, time and again, that verification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance that the allegations therein made are done in good faith or are true and correct and not mere speculation. The Court may order the correction of the pleading, if not verified, or act on the unverified pleading if the attending circumstances are such that a strict compliance with the rule may be dispensed with in order that the ends of justice may be served.44 Further, in rendering justice, courts have always been, as they ought to be, conscientiously guided by the norm that on the balance, technicalities take a backseat vis--vis substantive rights, and not the other way around. This principle finds greater application in labor cases where social justice should be emphasized. 45 In the instant case, despite the fact that Ernesto Facundo, the union president, was not shown to have been duly authorized to sign the verification on behalf of the other petitioners, the CA should not have been too strict in the application of the Rules. Necessarily, Facundo, being the union president, was in a position to verify the truthfulness and correctness of the allegations in the petition. Further, the petition was signed by the unions lawyer, who had been authorized by a majority of the petitioners to represent them and to sign on their behalf all pleadings and appeals relative to the labor dispute.

With regard to the certification against forum shopping, suffice it to state that in Cavile v. Heirs of Cavile,46 we took cognizance of a petition although its certification was executed and signed by only one of several petitioners, thus: The rule is that the certificate of non-forum shopping must be signed by all the petitioners or plaintiffs in a case and the signing by only one of them is insufficient. However, the Court has also stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective. The rule of substantial compliance may be availed of with respect to the contents of the certification. This is because the requirement of strict compliance with the provisions regarding the certification of non-forum shopping merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded. It does not thereby interdict substantial compliance with its provisions under justifiable circumstances.1avvphil We find that the execution by Thomas George Cavile, Sr. in behalf of all the other petitioners of the certificate of non-forum shopping constitutes substantial compliance with the Rules. All the petitioners, being relatives and co-owners of the properties in dispute, share a common interest thereon. They also share a common defense in the complaint for partition filed by the respondents. Thus, when they filed the instant petition, they filed it as a collective, raising only one argument to defend their rights over the properties in question. There is sufficient basis, therefore, for Thomas George Cavili, Sr. to speak for and in behalf of his copetitioners that they have not filed any action or claim involving the same issues in another court or tribunal, nor is there other pending action or claim in another court or tribunal involving the same issues. Moreover, it has been held that the merits of the substantive aspects of the case may be deemed as "special circumstance" for the Court to take cognizance of a petition for review although the certification against forum shopping was executed and signed by only one of the petitioners. 47 On the legibility of the attached pleadings, particularly the complaint and the amended complaint, we find that the same may be excused given the antiquity of the said documents. Nevertheless, a perusal of the records reveals that the said pleadings are legible enough. Again, the rules of procedure shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding. 48 While the right to appeal is a statutory and not a natural right, it is nonetheless an essential part of our judicial system. Courts are, therefore, advised to proceed with caution, so as not to deprive a party of the right to appeal. Litigants should have the amplest opportunity for a proper and just disposition of their cause free, as much as possible, from the constraints of procedural technicalities. 49 IN VIEW OF THE FOREGOING, the Court, therefore, resolves, as follows: 1) The Resolution of the Court, dated May 24, 2006, ordering the consolidation of G.R. Nos. 149158-59 and G.R. No. 156668 is RECALLED. The said cases are hereby DE-CONSOLIDATED; 2) In G.R. Nos. 149158-59: The petition is PARTIALLY GRANTED. The petition is REMANDED to the Court of Appeals for adjudication on the merits. The CA is further DIRECTED TO CONSOLIDATE CA-G.R. SP No. 60035 with CA-G.R. SP No. 60001, and to resolve the cases with dispatch. 3) As to G.R. No. 156668, the Court will resolve the same in a separate decision after the de-consolidation.

SO ORDERED. IN-N-OUT BURGER, INC. vs SCHWANI INC. This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision1dated 18 July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the Decision 2dated 23 December 2005 of the Director General of the Intellectual Property Office (IPO) in Appeal No. 10-05-01. The Court of Appeals, in its assailed Decision, decreed that the IPO Director of Legal Affairs and the IPO Director General do not have jurisdiction over cases involving unfair competition. Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California, United States (US) of America, which is a signatory to the Convention of Paris on Protection of Industrial Property and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in the restaurant business, but it has never engaged in business in the Philippines. 3 Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.4 On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of Trademarks (BOT) of the IPO for "IN-N-OUT" and "IN-N-OUT Burger & Arrow Design." Petitioner later found out, through the Official Action Papers issued by the IPO on 31 May 2000, that respondent Sehwani, Incorporated had already obtained Trademark Registration for the mark "IN N OUT (the inside of the letter "O" formed like a star)."5 By virtue of a licensing agreement, Benita Frites, Inc. was able to use the registered mark of respondent Sehwani, Incorporated. Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO an administrative complaint against respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner of the trade name IN-N-OUT and the following trademarks: (1) "IN-NOUT"; (2) "IN-N-OUT Burger & Arrow Design"; and (3) "IN-N-OUT Burger Logo." These trademarks are registered with the Trademark Office of the US and in various parts of the world, are internationally well-known, and have become distinctive of its business and goods through its long and exclusive commercial use. 6 Petitioner pointed out that its internationally well-known trademarks and the mark of the respondents are all registered for the restaurant business and are clearly identical and confusingly similar. Petitioner claimed that respondents are making it appear that their goods and services are those of the petitioner, thus, misleading ordinary and unsuspecting consumers that they are purchasing petitioners products. 7 Following the filing of its complaint, petitioner sent on 18 October 2000 a demand letter directing respondent Sehwani, Incorporated to cease and desist from claiming ownership of the mark "IN-N-OUT" and to voluntarily cancel its trademark registration. In a letter-reply dated 23 October 2000, respondents refused to accede to petitioner demand, but expressed willingness to surrender the registration of respondent Sehwani, Incorporated of the "IN N OUT" trademark for a fair and reasonable consideration. 8 Petitioner was able to register the mark "Double Double" on 4 July 2002, based on their application filed on 2 June 1997.9 It alleged that respondents also used this mark, as well as the menu color scheme. Petitioners also averred that respondent Benitas receipts bore the phrase, "representing IN-N-OUT Burger." 10 It should be

noted that that although respondent Sehwahi, Incorporated registered a mark which appeared as "IN N OUT (the inside of the letter "O" formed like a star)," respondents used the mark "IN-N-OUT."11 To counter petitioners complaint, respondents filed before the BLA-IPO an Answer with Counterclaim. Respondents asserted therein that they had been using the mark "IN N OUT" in the Philippines since 15 October 1982. On 15 November 1991, respondent Sehwani, Incorporated filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTTT) an application for the registration of the mark "IN N OUT (the inside of the letter "O" formed like a star)." Upon approval of its application, a certificate of registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17 December 1993. On 30 August 2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a Licensing Agreement, wherein the former entitled the latter to use its registered mark, "IN N OUT." Respondents asserted that respondent Sehwani, Incorporated, being the registered owner of the mark "IN N OUT," should be accorded the presumption of a valid registration of its mark with the exclusive right to use the same. Respondents argued that none of the grounds provided under the Intellectual Property Code for the cancellation of a certificate of registration are present in this case. Additionally, respondents maintained that petitioner had no legal capacity to sue as it had never operated in the Philippines. 12 Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision dated 22 December 2003,13 in favor of petitioner. According to said Decision, petitioner had the legal capacity to sue in the Philippines, since its country of origin or domicile was a member of and a signatory to the Convention of Paris on Protection of Industrial Property. And although petitioner had never done business in the Philippines, it was widely known in this country through the use herein of products bearing its corporate and trade name. Petitioners marks are internationally well-known, given the world-wide registration of the mark "IN-NOUT," and its numerous advertisements in various publications and in the Internet. Moreover, the IPO had already declared in a previous inter partes case that "In-NOut Burger and Arrow Design" was an internationally well-known mark. Given these circumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right to use its tradename and mark "IN-N-OUT" in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark "IN N OUT" in good faith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any intent to ride upon petitioners goodwill by copying the mark "IN-N-OUT Burger" exactly. The inside of the letter "O" in the mark used by respondents formed a star. In addition, the simple act of respondent Sehwani, Incorporated of inquiring into the existence of a pending application for registration of the "IN-N-OUT" mark was not deemed fraudulent. The dispositive part of the Decision of the IPO Director for Legal Affairs reads: With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark "IN-N-OUT" (the inside of the letter "O" formed like a star) issued in favor of Sehwani, Incorporated is hereby CANCELLED. Consequently, respondents Sehwani, Inc. and Benitas Frites are hereby ordered to permanently cease and desist from using the mark "IN-N-OUT" and "IN-N-OUT BURGER LOGO" on its goods and in its business. With regards the mark "Double-Double," considering that as earlier discussed, the mark has been approved by this Office for publication and that as shown by evidence, Complainant is the owner of the said mark,

Respondents are so hereby ordered to permanently cease and desist from using the mark Double-Double. NO COSTS. 14 Both parties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents Motion for Reconsideration 15 and petitioners Motion for Partial Reconsideration 16 were denied by the IPO Director for Legal Affairs in Resolution No. 2004-1817 dated 28 October 2004 and Resolution No. 2005-05 dated 25 April 2005,18 respectively. Subsequent events would give rise to two cases before this Court, G.R. No. 171053 and G.R. No. 179127, the case at bar. G.R. No. 171053 On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Motion for Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal Memorandum with IPO Director General Emma Francisco (Director General Francisco). However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-day reglementary period to appeal. Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December 2004 and docketed as CA-G.R. SP No. 88004, challenging the dismissal of their appeal by the IPO Director General, which effectively affirmed the Decision dated 22 December 2003 of the IPO Director for Legal Affairs ordering the cancellation of the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and enjoining respondents from using the same. In particular, respondents based their Petition on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-2004-00004 ON A MERE TECHNICALITY THE BUREAU OF LEGAL AFFAIRS (SIC) DECISION AND RESOLUTION (1) CANCELLING RESPONDENTS CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY EVIDENCE. Respondents thus prayed: WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to this petition, and thereafter order the Office of the Director General of the Intellectual Property Office to reinstate and give due course to [respondent]s Appeal No. 14-2004-00004. Other reliefs, just and equitable under the premises, are likewise prayed for. On 21 October 2005, the Court of Appeals rendered a Decision denying respondents Petition in CA-G.R SP No. 88004 and affirming the Order dated 7 December 2004 of the IPO Director General. The appellate court confirmed that respondents appeal before the IPO Director General was filed out of time and that it was only proper to cancel the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and to permanently enjoin respondents from using the same. Effectively, the 22 December 2003 Decision of IPO Director of Legal Affairs was likewise affirmed. On 10 November 2005, respondents moved for the reconsideration of the said Decision. On 16 January 2006, the Court of Appeals denied their motion for reconsideration. Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the matter to the Supreme Court in a Petition for Review under

Rule 45 of the Rules of Court, filed on 30 January 2006, bearing the title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.19 This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007, 20 finding that herein respondents failed to file their Appeal Memorandum before the IPO Director General within the period prescribed by law and, consequently, they lost their right to appeal. The Court further affirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the legal capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines, and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the internationally wellknown marks of petitioner, and directing respondents to stop using the said marks. Respondents filed a Motion for Reconsideration of the Decision of this Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008. G.R. No. 179127 Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Legal Affairs, petitioner was able to file a timely appeal before the IPO Director General on 27 May 2005. During the pendency of petitioners appeal before the IPO Director General, the Court of Appeals already rendered on 21 October 2005 its Decision dismissing respondents Petition in CA-G.R. SP No. 88004. In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioners appeal meritorious and modified the Decision dated 22 December 2003 of the IPO Director of Legal Affairs. The IPO Director General declared that respondents were guilty of unfair competition. Despite respondents claims that they had been using the mark since 1982, they only started constructing their restaurant sometime in 2000, after petitioner had already demanded that they desist from claiming ownership of the mark "IN-N-OUT." Moreover, the sole distinction of the mark registered in the name of respondent Sehwani, Incorporated, from those of the petitioner was the star inside the letter "O," a minor difference which still deceived purchasers. Respondents were not even actually using the star in their mark because it was allegedly difficult to print. The IPO Director General expressed his disbelief over the respondents reasoning for the non-use of the star symbol. The IPO Director General also considered respondents use of petitioners registered mark "Double-Double" as a sign of bad faith and an intent to mislead the public. Thus, the IPO Director General ruled that petitioner was entitled to an award for the actual damages it suffered by reason of respondents acts of unfair competition, exemplary damages, and attorneys fees. 21 The fallo of the Decision reads: WHEREFORE, premises considered, the [herein respondents] are held guilty of unfair competition. Accordingly, Decision No. 2003-02 dated 22 December 2003 is hereby MODIFIED as follows: [Herein Respondents] are hereby ordered to jointly and severally pay [herein petitioner]: 1. Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED SEVENTY FOUR AND 28/100(P212,574.28); 2. Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00); 3. Attorneys fees and expenses of litigation in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00).

All products of [herein respondents] including the labels, signs, prints, packages, wrappers, receptacles and materials used by them in committing unfair competition should be without compensation of any sort be seized and disposed of outside the channels of commerce. Let a copy of this Decision be furnished the Director of Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. Further, let a copy of this Decision be furnished the Documentation, Information and Technology Transfer Bureau for their information and records purposes. 22 Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals another Petition for Review under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 92785. Respondents based their second Petition before the appellate court on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN ORDERING THEM TO PAY DAMAGES AND ATTORNEYS FEES TO RESPONDENTS THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIRS DECISION (1) CANCELLING PETITIONERS CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS Respondents assailed before the appellate court the foregoing 23 December 2005 Decision of the IPO Director General, alleging that their use of the disputed mark was not tainted with fraudulent intent; hence, they should not be held liable for damages. They argued that petitioner had never entered into any transaction involving its goods and services in the Philippines and, therefore, could not claim that its goods and services had already been identified in the mind of the public. Respondents added that the disputed mark was not well-known. Finally, they maintained that petitioners complaint was already barred by laches. 23 At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the following prayer: WHEREFORE, [respondents herein] respectfully pray that this Honorable Court: (a) upon the filing of this petition, issue a temporary restraining order enjoining the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the IPO Director Generals Decision dated 23 December 2005, which modified the Decision No. 2003-02 dated 22 December 2003 of the BLA, until further orders from this Honorable Court. (b) after notice and hearing, enjoin the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 and to maintain the status quo ante pending the resolution of the merits of this petition; and (c) after giving due course to this petition: (i) reverse and set aside the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 finding the [respondents] guilty of unfair competition and awarding damages and attorneys fees to the respondent (ii) in lieu thereof, affirm Decision No. 2003-02 of the BLA dated 22 December 2003 and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it finds [respondents] not guilty of unfair competition and hence not liable to the [petitioner] for damages and attorneys fees;

(iii) reverse Decision No. 2003-02 of the BLA dated 22 December 2003, and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it upheld [petitioner]s legal capacity to sue; that [petitioner]s trademarks are well-known; and that respondent has the exclusive right to use the same; and (iv) make the injunction permanent. [Respondents] also pray for other reliefs, as may deemed just or equitable. 24 On 18 July 2006, the Court of Appeals promulgated a Decision 25 in CA-G.R. SP No. 92785 reversing the Decision dated 23 December 2005 of the IPO Director General. The Court of Appeals, in its Decision, initially addressed petitioners assertion that respondents had committed forum shopping by the institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It ruled that respondents were not guilty of forum shopping, distinguishing between the respondents two Petitions. The subject of Respondents Petition in CA-G.R SP No. 88004 was the 7 December 2004 Decision of the IPO Director General dismissing respondents appeal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents questioned therein the cancellation of the trademark registration of respondent Sehwani, Incorporated and the order permanently enjoining respondents from using the disputed trademark. Respondents Petition in CA-G.R. SP No. 92785 sought the review of the 23 December 2005 Decision of the IPO Director General partially modifying the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents raised different issues in their second petition before the appellate court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair competition and the awarding of actual and exemplary damages, as well as attorneys fees, to petitioner. The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not raised by the parties. The appellate court declared that Section 163 of the Intellectual Property Code specifically confers upon the regular courts, and not the BLA-IPO, sole jurisdiction to hear and decide cases involving provisions of the Intellectual Property Code, particularly trademarks. Consequently, the IPO Director General had no jurisdiction to rule in its Decision dated 23 December 2005 on supposed violations of these provisions of the Intellectual Property Code. In the end, the Court of Appeals decreed: WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005 rendered by the Director General of the Intellectual Property Office of the Philippines in Appeal No. 10-05-01 is REVERSED and SET ASIDE. Insofar as they pertain to acts governed by Article 168 of R.A. 8293 and other sections enumerated in Section 163 of the same Code, respondents claims in its Complaint docketed as IPV No. 10-2001-00004 are hereby DISMISSED.26 The Court of Appeals, in a Resolution dated 31 July 2007, 27 denied petitioners Motion for Reconsideration of its aforementioned Decision. Hence, the present Petition, where petitioner raises the following issues: I WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS; II WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND III

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A PATENTLY FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND (B) FORUM SHOPPING PROPER.28 As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its Decision 29 in G.R. No. 171053 on 15 October 2007, which affirmed the IPO Director Generals dismissal of respondents appeal for being filed beyond the reglementary period, and left the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling the trademark registration of respondent Sehwani, Incorporated and enjoining respondents from using the disputed marks. Before discussing the merits of this case, this Court must first rule on the procedural flaws that each party has attributed to the other. Formal Defects of the Petition Respondents contend that the Verification/Certification executed by Atty. Edmund Jason Barranda of Villaraza and Angangco, which petitioner attached to the present Petition, is defective and should result in the dismissal of the said Petition. Respondents point out that the Secretarys Certificate executed by Arnold M. Wensinger on 20 August 2007, stating that petitioner had authorized the lawyers of Villaraza and Angangco to represent it in the present Petition and to sign the Verification and Certification against Forum Shopping, among other acts, was not properly notarized. The jurat of the aforementioned Secretarys Certificate reads: Subscribed and sworn to me this 20th day of August 2007 in Irving California. Rachel A. Blake (Sgd.) Notary Public30 Respondents aver that the said Secretarys Certificate cannot properly authorize Atty. Barranda to sign the Verification/Certification on behalf of petitioner because the notary public Rachel A. Blake failed to state that: (1) petitioners Corporate Secretary, Mr. Wensinger, was known to her; (2) he was the same person who acknowledged the instrument; and (3) he acknowledged the same to be his free act and deed, as required under Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines.31 Respondents likewise impugn the validity of the notarial certificate of Atty. Aldrich Fitz B. Uy, on Atty. Barandas Verification/Certification attached to the instant Petition, noting the absence of (1) the serial number of the commission of the notary public; (2) the office address of the notary public; (3) the roll of attorneys number and the IBP membership number; and (4) a statement that the Verification/Certification was notarized within the notary publics territorial jurisdiction, as required under the 2004 Rules on Notarial Practice. 32 Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines are not applicable to the present case. The requirements enumerated therein refer to documents which require an acknowledgement, and not a mere jurat. A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was subscribed and sworn to by the executor. Ordinarily, the language of the jurat should avow that the document was subscribed and sworn to before the notary public. In contrast, an acknowledgment is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed. It involves an extra step undertaken whereby the signor actually

declares to the notary that the executor of a document has attested to the notary that the same is his/her own free act and deed. 33 A Secretarys Certificate, as that executed by petitioner in favor of the lawyers of the Angangco and Villaraza law office, only requires a jurat.34 Even assuming that the Secretarys Certificate was flawed, Atty. Barranda may still sign the Verification attached to the Petition at bar. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. 35 The party itself need not sign the verification. A partys representative, lawyer or any other person who personally knows the truth of the facts alleged in the pleading may sign the verification.36 Atty. Barranda, as petitioners counsel, was in the position to verify the truth and correctness of the allegations of the present Petition. Hence, the Verification signed by Atty. Barranda substantially complies with the formal requirements for such. Moreover, the Court deems it proper not to focus on the supposed technical infirmities of Atty. Barandas Verification. It must be borne in mind that the purpose of requiring a verification is to secure an assurance that the allegations of the petition has been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and non-compliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement. In the interest of substantial justice, strict observance of procedural rules may be dispensed with for compelling reasons. 37 The vital issues raised in the instant Petition on the jurisdiction of the IPO Director for Legal Affairs and the IPO Director General over trademark cases justify the liberal application of the rules, so that the Court may give the said Petition due course and resolve the same on the merits. This Court agrees, nevertheless, that the notaries public, Rachel A. Blake and Aldrich Fitz B. Uy, were less than careful with their jurats or notarial certificates. Parties and their counsel should take care not to abuse the Courts zeal to resolve cases on their merits. Notaries public in the Philippines are reminded to exert utmost care and effort in complying with the 2004 Rules on Notarial Practice. Parties and their counsel are further charged with the responsibility of ensuring that documents notarized abroad be in their proper form before presenting said documents before Philippine courts. Forum Shopping Petitioner next avers that respondents are guilty of forum shopping in filing the Petition in CA-G.R. SP No. 92785, following their earlier filing of the Petition in CAG.R SP No. 88004. Petitioner also asserts that respondents were guilty of submitting to the Court of Appeals a patently false Certification of Non-forum Shopping in CAG.R. SP No. 92785, when they failed to mention therein the pendency of CA-G.R SP No. 88004. Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. It is an act of malpractice and is prohibited and condemned as trifling with courts and abusing their processes. In determining whether or not there is forum shopping, what is important is the vexation caused the courts and partieslitigants by a party who asks different courts and/or administrative bodies to rule on the same or related causes and/or grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different bodies upon the same issues. 38

Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or causes of action and reliefs prayed for, and (3) the identity of the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res judicata in the action under consideration.39 After a cursory look into the two Petitions in CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785, it would at first seem that respondents are guilty of forum shopping. There is no question that both Petitions involved identical parties, and raised at least one similar ground for which they sought the same relief. Among the grounds stated by the respondents for their Petition in CA-G.R SP No. 88004 was that "[T]he Bureau of Legal Affairs (sic) Decision and Resolution (1) canceling [herein respondent Sehwani, Incorporated]s certificate of registration for the mark IN-NOUT and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business are contrary to law and/or is (sic) not supported by evidence."40 The same ground was again invoked by respondents in their Petition in CA-G.R. SP No. 92785, rephrased as follows: "The IPO Director General committed grave error in affirming the Bureau of Legal Affairs (sic) Decision (1) canceling [herein respondent Sehwani, Incorporated]s certificate of registration for the mark "IN-N-OUT," and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business."41 Both Petitions, in effect, seek the reversal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said Decision of the IPO Director of Legal Affairs based on the merits thereof would bar the Court of Appeals from making a contrary ruling in the other Petition, under the principle of res judicata. Upon a closer scrutiny of the two Petitions, however, the Court takes notice of one issue which respondents did not raise in CA-G.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e., whether respondents are liable for unfair competition. Hence, respondents seek additional reliefs in CA-G.R. SP No. 92785, seeking the reversal of the finding of the IPO Director General that they are guilty of unfair competition, and the nullification of the award of damages in favor of petitioner resulting from said finding. Undoubtedly, respondents could not have raised the issue of unfair competition in CA-G.R. SP No. 88004 because at the time they filed their Petition therein on 28 December 2004, the IPO Director General had not yet rendered its Decision dated 23 December 2005 wherein it ruled that respondents were guilty thereof and awarded damages to petitioner. In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is only predictable, although not necessarily legally tenable, for respondents to reassert their right to register, own, and use the disputed mark. Respondents again raise the issue of who has the better right to the disputed mark, because their defense from the award of damages for unfair competition depends on the resolution of said issue in their favor. While this reasoning may be legally unsound, this Court cannot readily presume bad faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals. True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum Shopping, which they attached to their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the jurisdictional and substantive issues raised herein, justify the

relaxation of another procedural rule. Although the submission of a certificate against forum shopping is deemed obligatory, it is not jurisdictional. 42 Hence, in this case in which such a certification was in fact submitted, only it was defective, the Court may still refuse to dismiss and, instead, give due course to the Petition in light of attendant exceptional circumstances. The parties and their counsel, however, are once again warned against taking procedural rules lightly. It will do them well to remember that the Courts have taken a stricter stance against the disregard of procedural rules, especially in connection with the submission of the certificate against forum shopping, and it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances. The Jurisdiction of the IPO The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-G.R. SP No. 92785. In the afore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs and the IPO Director General had no jurisdiction over the administrative proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property Code confers jurisdiction over particular provisions in the law on trademarks on regular courts exclusively. According to the said provision: Section 163. Jurisdiction of Court.All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws. The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on Infringement; Section 164 on Notice of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of Origin, False Description or Representation. The Court disagrees with the Court of Appeals. Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus: Section 10. The Bureau of Legal Affairs.The Bureau of Legal Affairs shall have the following functions: 10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for compulsory licensing of patents; 10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for contempt all those who disregard orders or writs issued in the course of the proceedings. (b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative penalties: (i) The issuance of a cease and desist order which shall specify the acts that the respondent shall cease and desist from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the order;

(ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary assurance may include one or more of the following: (1) An assurance to comply with the provisions of the intellectual property law violated; (2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal investigation (3) An assurance to recall, replace, repair, or refund the money value of defective goods distributed in commerce; and (4) An assurance to reimburse the complainant the expenses and costs incurred in prosecuting the case in the Bureau of Legal Affairs. The Director of Legal Affairs may also require the respondent to submit periodic compliance reports and file a bond to guarantee compliance of his undertaking. (iii) The condemnation or seizure of products which are subject of the offense. The goods seized hereunder shall be disposed of in such manner as may be deemed appropriate by the Director of Legal Affairs, such as by sale, donation to distressed local governments or to charitable or relief institutions, exportation, recycling into other goods, or any combination thereof, under such guidelines as he may provide; (iv) The forfeiture of paraphernalia and all real and personal properties which have been used in the commission of the offense; (v) The imposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs, which shall in no case be less than Five thousand pesos (P5,000) nor more than One hundred fifty thousand pesos (P150,000). In addition, an additional fine of not more than One thousand pesos (P1,000) shall be imposed for each day of continuing violation; (vi) The cancellation of any permit, license, authority, or registration which may have been granted by the Office, or the suspension of the validity thereof for such period of time as the Director of Legal Affairs may deem reasonable which shall not exceed one (1) year; (vii) The withholding of any permit, license, authority, or registration which is being secured by the respondent from the Office; (viii) The assessment of damages; (ix) Censure; and (x) Other analogous penalties or sanctions. 10.3 The Director General may by Regulations establish the procedure to govern the implementation of this Section.43 (Emphasis provided.) Unquestionably, petitioners complaint, which seeks the cancellation of the disputed mark in the name of respondent Sehwani, Incorporated, and damages for violation of petitioners intellectual property rights, falls within the jurisdiction of the IPO Director of Legal Affairs. The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director General over the decisions of the IPO Director of Legal Affairs, to wit: Section 7. The Director General and Deputies Director General . 7.1 Fuctions.The Director General shall exercise the following powers and functions: xxxx b) Exercise exclusive appellate jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director of Patents, the Director of Trademarks, and the Director of Documentation, Information and Technology Transfer Bureau. The decisions of the Director General in the exercise of his appellate jurisdiction in

respect of the decisions of the Director of Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in accordance with the Rules of Court; and those in respect of the decisions of the Director of Documentation, Information and Technology Transfer Bureau shall be appealable to the Secretary of Trade and Industry; The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferring upon the BLA-IPO jurisdiction over administrative complaints for violations of intellectual property rights, is a general provision, over which the specific provision of Section 163 of the same Code, found under Part III thereof particularly governing trademarks, service marks, and tradenames, must prevail. Proceeding therefrom, the Court of Appeals incorrectly concluded that all actions involving trademarks, including charges of unfair competition, are under the exclusive jurisdiction of civil courts. Such interpretation is not supported by the provisions of the Intellectual Property Code. While Section 163 thereof vests in civil courts jurisdiction over cases of unfair competition, nothing in the said section states that the regular courts have sole jurisdiction over unfair competition cases, to the exclusion of administrative bodies. On the contrary, Sections 160 and 170, which are also found under Part III of the Intellectual Property Code, recognize the concurrent jurisdiction of civil courts and the IPO over unfair competition cases. These two provisions read: Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action.Any foreign national or juridical person who meets the requirements of Section 3 of this Act and does not engage in business in the Philippines may bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair competition, or false designation of origin and false description, whether or not it is licensed to do business in the Philippines under existing laws. xxxx Section 170. Penalties.Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section168, and Subsection169.1. Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioners administrative case against respondents and the IPO Director General had exclusive jurisdiction over the appeal of the judgment of the IPO Director of Legal Affairs. Unfair Competition The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003 Decision of the IPO Director of Legal Affairs which: (1) directed the cancellation of the certificate of registration of respondent Sehwani, Incorporated for the mark "IN-N-OUT" and (2) ordered respondents to permanently cease and desist from using the disputed mark on its goods and business. Such an issue has already been settled by this Court in its final and executory Decision dated 15 October 2007 in G.R. No. 171053, Sehwani, Incorporated v. In-N-Out Burger,44 ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the superior right to own and use the "IN-N-OUT" trademarks vis--vis respondents is a finding which this Court may no longer disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment,

any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claims, demands, purposes, or subject matters of the two actions are the same. 45 Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of unfair competition for which he awarded damages to petitioner. The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown. 46 In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the existence of unfair competition in this case, viz: The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the [petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter "O" Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel their trademark registration. Moreover, [respondents] are also using [petitioners] registered mark Double-Double for use on hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents] are using do not bear the mark registered by the [respondent], but the [petitioners] IN-N-OUT Burgers name and trademark IN-N-OUT with Arrow design. There is no evidence that the [respondents] were authorized by the [petitioner] to use the latters marks in the business. [Respondents] explanation that they are not using their own registered trademark due to the difficulty in printing the "star" does not justify the unauthorized use of the [petitioners] trademark instead. Further, [respondents] are giving their products the general appearance that would likely influence purchasers to believe that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of the goods as packed and offered for sale, and, thus, action will lie to restrain such unfair competition. x x x. xxxx [Respondents] use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers. Exhibit "GG," which shows the business establishment of [respondents] illustrates the imitation of [petitioners] corporate name IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held: "We also note that In-N-Out Burger is likewise, [petitioners] corporate name. It has used the "IN-N-OUT" Burger name in its restaurant business in Baldwin Park, California in the United States of America since 1948. Thus it has the exclusive right to use the tradenems "In-N-Out" Burger in the Philippines and the respondents are unlawfully using and appropriating the same." The Office cannot give credence to the [respondents] claim of good faith and that they have openly and continuously used the subject mark since 1982 and is (sic) in

the process of expanding its business. They contend that assuming that there is value in the foreign registrations presented as evidence by the [petitioner], the purported exclusive right to the use of the subject mark based on such foreign registrations is not essential to a right of action for unfair competition. [Respondents] also claim that actual or probable deception and confusion on the part of customers by reason of respondents practices must always appear, and in the present case, the BLA has found none. This Office finds the arguments untenable. In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using the mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their registered trademark, which they claimed to be using as early as 1982, but did not. [Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-N-OUT Burger and Arrow Design. Even in their listing of menus, [respondents] used [Appellants] marks of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being used by the [respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and receptacles that the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued by the [respondents] even indicate "representing IN-N-OUT." These acts cannot be considered acts in good faith. 47 Administrative proceedings are governed by the "substantial evidence rule." A finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion.48 As recounted by the IPO Director General in his decision, there is more than enough substantial evidence to support his finding that respondents are guilty of unfair competition. With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4 of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement shall apply mutatis mutandis to unfair competition. The remedies provided under Section 156 include the right to damages, to be computed in the following manner: Section 156. Actions, and Damages and Injunction for Infringement.156.1 The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party. In the present case, the Court deems it just and fair that the IPO Director General computed the damages due to petitioner by applying the reasonable percentage of 30% to the respondents gross sales, and then doubling the amount thereof on account of respondents actual intent to mislead the public or defraud the petitioner,49 thus, arriving at the amount of actual damages of P212,574.28.

Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that petitioner be awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, such as the enhancement of the protection accorded to intellectual property and the prevention of similar acts of unfair competition. However, exemplary damages are not meant to enrich one party or to impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious action. 50 While there is no hard and fast rule in determining the fair amount of exemplary damages, the award of exemplary damages should be commensurate with the actual loss or injury suffered. 51 Thus, exemplary damages of P500,000.00 should be reduced to P250,000.00 which more closely approximates the actual damages awarded. In accordance with Article 2208(1) of the Civil Code, attorneys fees may likewise be awarded to petitioner since exemplary damages are awarded to it. Petitioner was compelled to protect its rights over the disputed mark. The amount of P500,000.00 is more than reasonable, given the fact that the case has dragged on for more than seven years, despite the respondents failure to present countervailing evidence. Considering moreover the reputation of petitioners counsel, the actual attorneys fees paid by petitioner would far exceed the amount that was awarded to it. 52 IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 92785, promulgated on 18 July 2006, is REVERSED. The Decision of the IPO Director General, dated 23 December 2005, is hereby REINSTATED IN PART, with the modification that the amount of exemplary damages awarded be reduced to P250,000.00. SO ORDERED. TOKIO MARINE MALAYAN INSURANCE COMPANY INC. et. al. vs VALDEZ For our resolution are two (2) consolidated petitions for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, seeking to reverse the Decision1 of the Court of Appeals dated September 13, 2001 in the consolidated cases CA-G.R. SP No. 52914 and CA-G.R. SP No. 56579. Tokio Marine Malayan Insurance Company Incorporated (Tokio Marine), petitioner in these cases, is a domestic corporation engaged in the insurance business. The individual petitioners are its corporate officers, except Antonio B. Lapid, one of Tokio Marine's consultants. Jorge Valdez, respondent in these cases, was a former unit manager of Tokio Marine pursuant to a Unit Management Contract entered into between them on August 16, 1977. On October 15, 1998, respondent filed with the Regional Trial Court, Branch 35, Manila a complaint for damages against petitioners, docketed as Civil Case No. 9891356. He alleged therein that petitioners violated the terms of the Unit Management Contract by refusing to pay him, among others, his "commissions," and bonuses. Respondent prayed for the following reliefs: a) actual damages in the total amount of P71,866,205.67 and the corresponding interests; b) moral damages of P10,000,000.00; c) exemplary damages amounting toP10,000,000.00; d) attorney's fees corresponding to 30% of the said amounts; and e) costs of the suit. Eventually, respondent filed with the trial court an "Urgent Ex Parte Motion For Authority To Litigate As Indigent Plaintiff."

On October 28, 1998, the trial court issued an Order, the pertinent portions of which read: The Court hereby allows the plaintiff to litigate as pauper there being sufficient showing that he is an indigent. He does not own any real property in the City of Manila or elsewhere. The Court therefore directs the Clerk of Court to accept the complaint for filing without payment of filing fees computed as SIX HUNDRED FIFTEEN THOUSAND SIX HUNDRED SEVENTY TWO AND EIGHTY-THREE CENTAVOS (P615,672.83) which amount, however, shall constitute a lien upon any judgment to be rendered in favor of the plaintiff. On December 11, 1998, petitioners filed their separate motions to dismiss the complaint. On December 17, 1998, respondent manifested before the trial court that he filed various criminal complaints against petitioners with the Office of the City Prosecutor of Makati City. On January 20, 1999, the trial court issued an Order 2 denying petitioners' motions to dismiss. They then filed motions for reconsideration, but they were likewise denied. On March 12, 1999, petitioners filed their "Answer Ad Cautelam" in Civil Case No. 98-91356. On May 24, 1999, petitioners filed a petition for certiorari with prayer for a temporary restraining order and preliminary injunction with the Court of Appeals assailing the Order of the trial court dated January 20, 1999 denying their motions to dismiss, docketed as CA-G.R. SP No. 52914. On October 15, 1999, the Court of Appeals issued a Resolution directing the issuance of a writ of preliminary injunction restraining the trial court from conducting further proceedings in Civil Case No. 98-91356 during the pendency of CA-G.R. SP No. 52914. Then on December 7, 1999, respondent filed with the Court of Appeals an "Urgent Notice of Taking of Deposition Upon Oral Examination of Private Respondent Jorge Valdez For Purposes of the Above-Captioned Pending Case And For Such Other Legal Purposes As May Be Warranted By Existing Law and Jurisprudence." It appears that respondent was already 75 years old and sickly. On December 13, 1999, petitioners filed with the Court of Appeals a petition to cite respondent in contempt of court, docketed as CA-G.R. SP No. 56579. Petitioners alleged therein that in filing with the appellate court an urgent notice of taking his deposition, respondent violated the preliminary injunction issued by the said court. Subsequently, CA-G.R. SP No. 56579 was consolidated with CA-G.R. SP No. 52914. On December 14, 1999, the deposition of respondent was taken by Atty. Alberto A. Aguja, a Notary Public for Manila. On the same date, he filed with the Court of Appeals respondent's deposition. On September 13, 2001, the Court of Appeals rendered its Decision in the consolidated cases CA-G.R. SP No. 52914 and CA-G.R. SP No. 56579 dismissing the petitions and lifting and dissolving the writ of preliminary injunction previously issued, thus: WHEREFORE, for lack of merit, the consolidated petitions filed by the petitioners are hereby DISMISSED. The writ of preliminary injunction dated October 18, 1999 issued by this Court enjoining further proceedings in Civil Case No. 98-91356, pending before the Regional Trial Court of Manila, Branch 35 is hereby LIFTED and DISSOLVED. SO ORDERED.

Hence, the instant consolidated petitions. Petitioners contend that the Court of Appeals erred: (1) in denying their motion to dismiss respondent's complaint in Civil Case No. 98-91356 for nonpayment of docket fees; (2) for not finding that respondent engaged in forum shopping; and (3) in not declaring that he is guilty of contempt of court. On the first issue, it is hornbook law that courts acquire jurisdiction over any case only upon payment of the prescribed docket fee. 3 As we held in Magaspi v. Ramolete,4 the correct docket fees must be paid before courts can act on a petition or complaint. The exception to the rule on payment of docket fees is provided in Section 21, Rule 3 of the 1997 Rules of Civil Procedure, as amended, thus: SEC. 21. Indigent party. - A party may be authorized to litigate his action, claim or defense as an indigent if the court, upon an ex parte application and hearing, is satisfied that the party is one who has no money or property sufficient and available for food, shelter and basic necessities for himself and his family. Such authority shall include an exemption from payment of docket and other lawful fees and of transcripts of stenographic notes which the court may order to be furnished him. The amount of the docket and other lawful fees which the indigent was exempted from paying shall be a lien on any judgment rendered in the case favorable to the indigent, unless the court otherwise provides. Any adverse party may contest the grant of such authority at any time before judgment is rendered by the trial court. If the court should determine after hearing that the party declared as an indigent is in fact a person with sufficient income or property, the proper docket and other lawful fees shall be assessed and collected by the clerk of court. If payment is not made within the time fixed by the court, execution shall issue or the payment thereof, without prejudice to such other sanctions as the court may impose. The guidelines for determining whether a party qualifies as an indigent litigant are provided for in Section 19, Rule 141,5 of the Revised Rules of Court, which reads: SEC. 19. Indigent litigants exempt from payment of legal fees . - INDIGENT LITIGANT (A) WHOSE GROSS INCOME AND THAT OF THEIR IMMEDIATE FAMILY DO NOT EXCEED AN AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE OF AN EMPLOYEE AND (B) WHO DO NOT OWN REAL PROPERTY WITH A FAIR MARKET VALUE AS STATED IN THE CURRENT TAX DECLARATION OF MORE THAN THREE HUNDRED THOUSAND PESOS (P300,000.00) SHALL BE EXEMPT FROM THE PAYMENT OF LEGAL FEES. The legal fees shall be a lien on any judgment rendered in the case favorable to the indigent unless the court otherwise provides. To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he and his immediate family do not earn a gross income abovementioned nor they own any real property with the fair value aforementioned, supported by an affidavit of a disinterested person attesting to the truth of the litigant's affidavit. The current tax declaration, if any, shall be attached to the litigant's affidavit. Any falsity in the affidavit of the litigant or disinterested person shall be sufficient cause to dismiss the complaint or action or to strike out the pleading of that party, without prejudice to whatever criminal liability may have been incurred. For purposes of a suit in forma pauperis, an indigent litigant is not really a pauper, but is properly a person who is an indigent although not a public charge, meaning that he has no property or income sufficient for his support aside from his labor, even if he is self-supporting when able to work and in employment. 6 The term "immediate family" includes those members of the same household who are bound

together by ties of relationship but does not include those who are living apart from the particular household of which the individual is a member. 7 In the instant cases, petitioners maintain that respondent's ex parte motion to litigate as an indigent is defective since it was not accompanied or supported by the affidavits of his children, the immediate members of his family. The argument lacks merit. Section 19 clearly states that it is the litigant alone who shall execute the affidavit. The Rule does not require that all members of the litigant's immediate family must likewise execute sworn statements in support of the petition. Expressio unius est exclusio alterius. Petitioners next argue that respondent's ex parte motion is not supported by sufficient evidence to show his indigent status. 8 Suffice it to state that this Court is, first and foremost, a court of law. It is not its function to analyze and weigh all over again the evidence or premises supportive of factual determination. 9 Thus, petitioners cannot now ask us to review the evidence anew. Anent the second issue, petitioners insist that respondent committed forum shopping when he failed to report to the trial court that he filed criminal cases against petitioners with the Office of the City Prosecutor of Makati City. Gatmaytan v. Court of Appeals10 describes forum shopping as the act of a litigant who "repetitively availed of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in, or already resolved adversely by some other court to increase his chances of obtaining a favorable decision if not in one court, then in another." Differently put, it is "the filing of multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment."11 The rationale against forum shopping is that a party should not be allowed to pursue simultaneous remedies in two different courts as it constitutes abuse of court processes, which tends to degrade the administration of justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of the heavily burdened dockets of the courts. 12 Section 5, Rule 7 of the 1997 Rules of Civil Procedure, as amended, provides: SEC. 5. Certification against forum shopping. - 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 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. Failure to comply with the foregoing requirement shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the

same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions. Respondent's Certificate of Non-Forum Shopping attached to the complaint in Civil Case No. 98-91356 reads: FURTHER, that he has not heretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency, except the criminal case for SWINDLING (ESTAFA) under Art. 315, paragraph 1 (b) and for FALSIFICATION BY PRIVATE INDIVIDUALS OF PRIVATE DOCUMENTS under Art. 172, paragraph 2 of the Revised Penal Code to be filed before the Makati Prosecutor's Office, criminal case for violation of the Insurance Code of the Philippines to be filed before the Makati Prosecutor's Office, and the administrative case for violation of the Insurance Code Commission; that to the best of his knowledge no such other action is pending in the Supreme Court and Court of Appeals. We agree with the Court of Appeals that the foregoing certification is a substantial compliance with Section 5 of Rule 7. Moreover, it should be recalled that respondent manifested before the trial court on December 16, 1998 that he actually filed criminal cases against petitioners with the Office of the City Prosecutor of Makati City. On the final issue, petitioners claim that the deposition of respondent taken on December 14, 1999 violated the injunction issued by the Court of Appeals on October 15, 1999. Such act, petitioners assert, is tantamount to indirect contempt of court. Contempt of court is "a defiance of the authority, justice or dignity of the court: such conduct as tends to bring the authority and administration of the law into disrespect or to interfere with or prejudice parties litigants or their witnesses during litigation."13 Succinctly, it is the despising of the authority, justice, or dignity of the court.14 Rule 71 provides for two forms of contumacious acts - direct and indirect. Indirect contempt refers to contumacious acts perpetrated outside of the sitting of the court and may include misbehavior of an officer of a court in the performance of his official duties or in his official transactions, disobedience of or resistance to a lawful writ, process, order, judgment, or command of a court, or injunction granted by a court or a judge, any abuse or any unlawful interference with the process or proceedings of a court not constituting direct contempt, or any improper conduct tending directly or indirectly to impede, obstruct or degrade the administration of justice.15 It is governed by Section 3, Rule 71 of the 1997 Rules of Civil Procedure, as amended, which provides: SEC. 3. Indirect contempt to be punished after charge and hea ring. - After a charge in writing has been filed and an opportunity given to the respondent to comment thereon within such period as may be fixed by the court and to be heard by himself or by counsel, a person guilty of any of the following acts may be punished for indirect contempt: (a) Misbehavior of an officer of court in the performance of his official duties or in his official transactions; (b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court, including the act of a person who, after being dispossessed or rejected from any real property by the judgment or process of any court of competent jurisdiction, enters or attempts or induces another to enter into or upon such real property, for

the purpose of executing acts of ownership or possession, or in any manner disturbs the possession given to the person adjudged to be entitled thereto; (c) Any abuse of or any unlawful interference with the process or proceeding of a court not constituting direct contempt under Section 1 of this Rule; (d) Any improper conduct tending directly or indirectly to impede, obstruct, or degrade the administration of justice; (e) Assuming to be an attorney or an officer of a court and acting as such without authority; (f) Failure to obey a subpoena duly served; (g) The rescue, or attempted rescue, of any person or property in the custody of an officer by virtue of an order or process of a court held by him. But nothing in this section shall be so construed as to prevent the court from issuing process to bring the respondent into court, or from holding him in custody pending such proceedings. Before one may be convicted of indirect contempt, there must be compliance with the following requisites: (a) a charge in writing to be filed; (b) an opportunity for respondent to comment thereon within such period as may be fixed by the court; and (c) an opportunity to be heard by himself or by counsel. 16 Records show that these requirements were complied with. The Court of Appeals, in CA-G.R. SP No. 56579, dismissed the charge for indirect contempt, holding that respondent's deposition was done in good faith, thus: It should be emphasized that what triggered the holding of private respondent's deposition last December 14, 1999 was the use by the petitioners of the June 09 and 28, 1999 depositions when at that time no orders were issued by Us enjoining any proceedings below. The use of the petitioners of June 09 and 28 depositions have been vigorously objected to by the private respondent, contending that there was a misunderstanding created when the private respondent was cross-examined by the counsel for the petitioners, and in his honest belief to clarify such misunderstanding in the previous depositions, the December 14, 1999 deposition was taken. We see no reason to depart from the foregoing findings by the appellate court. Moreover, the taking of respondent's deposition is not a part of the court proceedings in Civil Case No. 98-91356, hence, not covered by the writ of injunction issued by the Court of Appeals. Let it be stressed at this point that we have always abided by the dogma that courts must exercise their contempt powers sparingly. In sum, we rule that the Court of Appeals did not err in dismissing the petitions in CA-G.R. SP No. 52914 and CA-G.R. SP No. 56579. WHEREFORE, we DENY the petitions. The challenged Decision of the Court of Appeals in CA-G.R. SP No. 52914 and CA-G.R. SP No. 56579 is AFFIRMED. Costs against petitioners. SO ORDERED. DIGITAL MICROWAVE CORP vs CA On December 14, 1994, private respondent Asian High Technology Corp. filed a complaint against petitioner Digital Microwave Corp. for a sum of money and damages before the Regional Trial Court of Pasig city. Petitioner moved for the dismissal of the complaint. The trial court denied the motion, as well as petitioner's subsequent motion for reconsideration.

Petitioner then initiated a special civil action for certiorari before the Court of Appeals, alleging grave abuse of discretion on the part of the trial court. However, the Court of Appeals dismissed the petition for failure to comply with Revised Circular No. 28-91, as amended by Administrative Circular No. 04-94. Said circular requires the petition filed before the Court of Appeals to be accompanied by a sworn certification against forum shopping, signed by petitioner himself. Petitioner's certification was signed by counsel; the petition was, thus, dismissed. Petitioner moved for a reconsideration of the dismissal and submitted a sworn certification against forum shopping duly signed by one of its senior officers. The motion was, however, denied, with the Court of Appeals stating that "In the present case, absent any compelling reason for petitioner's failure to comply, at first instance, with Revised Supreme Court Circular No. 28-91, the Court cannot therefore, accept its subsequent compliance." 1 Aggrieved, petitioner is now before this Court seeking reversal of the ruling of the Court of Appeals. Revised Circular No. 28-91 provided: "To avoid [forum shopping], every petition or complaint filed with the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency, shall comply with the following requirements, aside from pertinent provisions of the Rules of Court and existing circulars: xxx 2. Certification. - The party must certify under oath that he has not commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency, and that to the best of his knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency. If there is any other action pending, he must state the status of the same. If he should learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency, he should notify the court, tribunal or agency within five (5) days from such notice." 2 The requirement for a sworn certification against forum shopping was extended by administrative Circular No. 04-94 to complaints, petitions, applications or other initiatory pleadings filed in all courts or agencies other than the Supreme Court or the Court of Appeals. Petitioner contends that in the case of a corporation as petitioner, the certification against forum shopping may be signed by a natural person authorized to do so and with knowledge of the required facts. The authorized person may be anyone authorized by the corporation, not necessarily an officer thereof. In such a case, petitioner argues, the counsel of record has the authority to execute the certification on behalf of the corporation, particularly considering that under the Rules of Court, counsel's authority to represent his client is presumed. No written power of attorney is required for counsel to appear for his client. If we follow petitioner's line of reasoning, then the requirement in Revised Circular No. 28-91 that petitioner himself must make the certification against forum shopping would have been rendered useless. Why require petitioner himself to certify when his counsel can anyway execute the certification on his behalf? The reason the certification against forum shopping is required to be accomplished by petitioner himself is because only the petitioner himself has actual knowledge of whether or not he has initiated similar actions or proceedings in different courts or

agencies. Even his counsel may be unaware of such fact. For sure, his counsel is aware of the action for which he has been retained. But what of other possible actions? We disagree with petitioner that a corporation cannot possibly hope to comply with the requirement laid down by Revised Circular No. 28-91 because it is a juridical entity and not a natural person. If this were so, then it would have been impossible for a corporation to do anything at all. Needless to say, this is the reason why corporations have directors and officers, to represent it in its transactions with others. The same is true for the certification against forum shopping. It could easily have been made by a duly authorized director or officer of the corporation. That petitioner did not in the first instance comply with the requirement of revised Circular No. 28-91 by having the certification against forum shopping signed by one of its officers, as it did after its petition before the Court of Appeals had been dismissed, is beyond our comprehension. In the recent case of Spouses Valentin Ortiz and Camilla Milan Ortiz v. Court of Appeals, et al., 299 SCRA 708, 711-712 (1998) , we ruled that "Regrettably, we find that substantial compliance will not suffice in a matter involving strict observance as provided for in Circular No. 28-91. The attestation contained in the certification on non-forum shopping requires personal knowledge by the party who executed the same. To merit the Court's consideration, petitioners here must show reasonable cause for failure to personally sign the certification. The petitioners must convince the court that the outright dismissal of the petition would defeat the administration of justice." In this case, petitioner has not adequately explained its failure to have the certification against forum shopping signed by one of its officers. Neither has it shown any compelling reason for us to disregard strict compliance with the rules.1wphi1 As we further stated in Spouses Ortiz, "Utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal construction."3 WHEREFORE, finding no merit in the petition, the petition is hereby DENIED. SO ORDERED. CAVILA vs HEIRS OF CLARITA CAVILE This is a petition for review of the Decision of the Court of Appeals dated December 21, 2000 in CA-G.R. CV. No. 36617 entitled "Heirs of Clarita Cavili,* et al. vs. Heirs of Perfecta Cavili, et al." reversing the Decision of the Regional Trial Court of Dumaguete City, Branch 36 in Civil Case No. 6880 for Partition, Accounting and Damages, and its Resolution dated June 28, 2001 denying the motion for reconsideration. This case has its roots in the complaint filed by the respondents against the petitioners for partition of the properties left by their common ascendant, Bernardo Cavili. It appears that Bernardo Cavili contracted three marriages. The first marriage was with Ines Dumat-ol with whom he had one child, Simplicia. The second was with Orfia Colalho with whom he had two children: Fortunato and Vevencia. And the third was with Tranquilina Galon with whom he had three children: Castor, Susana and

Benedicta. Throughout his lifetime, Bernardo Cavili acquired six parcels of land which became the subject of the instant case. In October 1977, the descendants of Bernardos first and second marriage (herein respondents) filed a complaint for partition against the descendants of his third marriage (herein petitioners). The complaint alleged, among others, that respondents and petitioners were co-owners of the properties in question, having inherited the same from Bernardo Cavili. Upon the death of Bernardo, his son by his third marriage, Castor Cavili, took possession of the properties as administrator for and in behalf of his co-owners. However, when Castor died, his children took possession of the parcels of land but no longer as administrators. They claimed the properties as well as their fruits as their own and repeatedly refused respondents demand for partition. As petitioners failed to file an Answer within the reglementary period, they were declared in default and respondents were allowed to present evidence ex parte. The trial court rendered a decision on October 5, 1979 ordering the partition of the six parcels of land.1 However, upon motion of Primitivo Cavili and Quirino Cavili who were not properly served with summons, the trial court held a new trial and allowed said parties to present evidence. Among the evidence they proferred was a Deed of Partition which appeared to have been executed by the heirs of Bernardo Cavili on April 5, 1937.2 Giving weight to the documentary evidence presented by Primitivo Cavili and Quirino Cavili, the trial court rendered another decision on May 7, 1991 dismissing the complaint for partition.3 The court reasoned: "xxx The court observes that there is only one important issue in this case, that is, was there already division or partition made by the co-owners of the properties left by the deceased Bernardo Cavili. All other issues are subsidiary. Partition is the division of the property or properties by those entitled to them with the desire to put an end to co-ownership. In 1937, a document of partition, marked as Exhibit "1" for the defendants, was executed, it is known as Doc. No. 41; Book No. II; Page No. 100; Series of 1937; and ratified by Notary Public Iluminado Golez; which reveals Simplicia Cavili, the only child of Bernardo Cavili of his first marriage, participated and concurred in the same partition; likewise, the children of the second marriage, were also represented and also the spouse Tranquilina Galon of the third marriage gave her concurrence as well as her legitimate children had with the deceased Bernardo Cavili. In the said document, all the parcels of land acquired during the third marriage were partitioned into two (2) parts: one part pertained to Bernardo Cavili which in turn divided by his children, namely: Simplicia Cavili, the only child of the first marriage, Lucio Cavili in representation of Fortunato Cavili eldest son in the second marriage; Vicenta Navarra in representation of Vevencia Cavili second child of the second marriage; and Susana Cavili, Castor Cavili and Benedicta Cavili, the third marriage; and the second part, or the other half, was equally divided by the three children of the third marriage, namely: Susana, Castor and Benedicta all surnamed Cavili. That the court observed further, that in the same document of deed of partition the share of Bernardo Cavili which was up to the extent of one-half (1/2) share of the conjugal properties with Tranquilina Galon was sold to Castor Cavili for the sum of P166.00 by his legal heirs, likewise, the other one-half (1/2) share of Tranquilina Galon was sold for the same amount by her rightful heirs in favor also of Castor Cavili, who in turn took immediate possession, exercised acts of ownership and made subsequent transfers. Likewise, other heirs of Bernardo Cavili did the same

act of subsequent transfers of what they had inherited just as the heirs of Tranquilina Galon also made subsequent transfer of what they succeeded as inheritance. xxx" Respondents appealed the case to the Court of Appeals raising the following errors: 1. The court a quo erred in concluding that the properties in question were partitioned in 1937; 2. The court a quo erred in admitting the Deed of Partition (Exhibit "1"); and 3. The court a quo erred in dismissing the complaint. 4 The appellate court reversed the decision of the trial court. It ruled that the trial court erred in admitting the Deed of Partition as evidence without proof of its authenticity and due execution. It held that said Deed cannot be considered as an ancient document whose authenticity and due execution need not be proved as the respondents have presented evidence that cast doubt on its authenticity and due execution. The respondents presented the testimonies of Ramona Tacang and Filomena Pareja who testified that Simplicia Cavili, one of the signatories in the Deed, resided in Mindanao from 1934 until 1947. It further observed that the supposed thumbprint of Simplicia Cavili imprinted on the document appeared more like an inkblot than a thumbmark. The Court of Appeals thus directed the trial court "to immediately appoint and constitute the necessary number of commissioners who shall expeditiously effect the partition and accounting of the subject properties in accordance with Rule 69 of the Rules of Court of the Philippines." 5 Hence, this petition. Petitioners pose the following issues for resolution by the Court: 1. Whether or not the Honorable Court of Appeals acted in accordance with law in ruling that the notarized Deed of Partition (Exhibit "1"), a public document, could not be validly admitted in evidence because its genuineness and due execution was not proved by the petitioners? 2. Whether or not the Honorable Court of Appeals acted in accordance with law and prevailing jurisprudence in not ruling that prescription had set in since the petitioners have been in open and adverse occupation of the subject properties for more than forty-five (45) years without recognizing the alleged co-ownership with the respondents?6 Petitioners essentially argue that the Deed of Partition is a public document duly acknowledged before a Notary Public. Hence, its genuineness and due execution need not be proved. Its character as an ancient document under the Revised Rules on Evidence is immaterial in this case since said rule applies only to private documents. They further contend that the Court of Appeals erred in giving credence to the testimonies of Ramona Tacang and Filomena Pareja which were mere general denials. Respondents, on the other hand, pray for the denial of the petition on two grounds: first, it violates the rule on the certification against forum shopping required to be attached to petitions for review filed with this Court; and second, the Court of Appeals did not commit any error in its assailed decision. Respondents harp on the fact that only one of the twenty-two (22) petitioners, Thomas George Cavili, Sr., executed and signed the certification against forum shopping when the Rules require that said certification must be signed by all the petitioners. Furthermore, respondents argue that the Deed of Partition presented by the petitioners may not be admitted in evidence as said document has not been identified and its due execution has not been fully established. Respondents allege that said document is

tainted with forgery because it was shown that Simplicia Cavili was in Mindanao before, during and after its execution. Before going into the substantive issue raised in the petition, we shall first resolve the procedural issue raised by the respondents, that is, that the certification against forum shopping attached to the petition was signed by only one of the petitioners. The rule is that the certificate of non-forum shopping must be signed by all the petitioners or plaintiffs in a case and the signing by only one of them is insufficient. However, the Court has also stressed that the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective.7 The rule of substantial compliance may be availed of with respect to the contents of the certification. This is because the requirement of strict compliance with the provisions regarding the certification of non-forum shopping merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded. It does not thereby interdict substantial compliance with its provisions under justifiable circumstances.8 We find that the execution by Thomas George Cavile, Sr. in behalf of all the other petitioners of the certificate of non-forum shopping constitutes substantial compliance with the Rules. All the petitioners, being relatives and co-owners of the properties in dispute, share a common interest thereon. They also share a common defense in the complaint for partition filed by the respondents. Thus, when they filed the instant petition, they filed it as a collective, raising only one argument to defend their rights over the properties in question. There is sufficient basis, therefore, for Thomas George Cavili, Sr. to speak for and in behalf of his copetitioners that they have not filed any action or claim involving the same issues in another court or tribunal, nor is there other pending action or claim in another court or tribunal involving the same issues. Moreover, it has been held that the merits of the substantive aspects of the case may be deemed as "special circumstance" for the Court to take cognizance of a petition for review although the certification against forum shopping was executed and signed by only one of the petitioners. 9 After a thorough study of the records of this case, we find the petition to be meritorious. We hold that the trial court was correct in dismissing the complaint for partition, it appearing that the lawful heirs of Bernardo Cavili have already divided the properties among themselves, as evidenced by the Deed of Partition dated April 5, 1937. The terms of the Deed read: "DEED OF PARTITION KNOW ALL MEN BY THESE PRESENTS: THAT Susana Cavile, Castor Cavile, Benedicta Cavile, Simplicia Cavile, Lucio Cavile and Vicenta Navarra both (sic) of legal age and residents in the Municipality of Tolong, Province of Oriental Negros, Philippine Islands, after being duly sworn to in legal form, WITNESSETH: That Susana Cavile, Castor Cavile and Benedicta Cavile are the only children of Bernardo Cavile with his wife Tranquilina Galon, and that Simplicia Cavile and Fortunato Cavile and Vevencia Cavile are the children of Bernardo Cavile outside from the conjugal home of Bernardo Cavile and Tranquilina Galon. That Fortunato Cavile and Vevencia Cavile having already been dead are survived by their corresponding children and represented in this document by their oldest child, Lucio Cavile and Vicenta Navarra, respectively.

That during the union of Bernardo Cavile and Tranquilina Galon several properties have been acquired by them and declared under the name of Bernardo Cavile all situated in the Municipality of Tolong, Province of Oriental Negros, which properties are described as follows: xxx That by this document it is hereby agreed by the legal heirs of Bernardo Cavile and Tranquilina Galon to divide and by these presents it is hereby divided the above mentioned properties in the following manner: 1 That the conjugal properties of said Bernardo Cavile and Tranquilina Galon which are already described are hereby divided into two parts ONE (1) part which corresponds to the share of Bernardo Cavile is also divided into SIX (6) equal parts, that is among Susana Cavile, Castor Cavile, Benedicta Cavile, Simplicia Cavile, Fortunato Cavile represented by his oldest son, Lucio Cavile, and Vevencia Cavile represented by her oldest child Vicenta Navarra. 2 That the other ONE (1) part which corresponds to the share of Tranquilina Galon is also hereby equally divided into THREE (3) parts, that is among Susana Cavile, Castor Cavile and Benedicta Cavile. SHARE OF BERNARDO CAVILE xxx That the share of Bernardo Cavile in parcels Tax Declaration Nos. 7421, 7143 and 7956 are sold by the legal heirs to Castor Cavile in consideration of the sum of ONE HUNDRED SIXTY(-) SIX PESOS (P166.00), Philippine currency, which amount has been received and divided equally among them. That parcel under Tax Declaration No. 5729 is hereby sold to Ulpiano Cavile by the legal heirs of Bernardo Cavile and Tranquilina Galon, in consideration of the sum of FIFTY PESOS (P50.00), Philippine currency, which amount has been received and divided equally among them. SHARE OF TRANQUILINA GALON xxx That the share of Tranquilina Galon in parcels Tax Declaration Nos. 7421, 7143 and 7956 are hereby sold by the heirs of said Tranquilina Galon to Castor Cavile in consideration of the sum of ONE HUNDRED SIXTY(-)SIX PESOS (P166.00), Philippine currency(,) which sum has been received and divided equally among them. That the said heirs of Bernardo Cavile and Tranquilina Galon above mentioned hereby agree and accept as it is hereby agreed and accepted all the items and conditions in this DEED OF PARTITION. IN WITNESS HEREOF we have this 5th day of April, 1937, A.D., sign our names below in the Municipality of Tolong, Province of Oriental Negros, Philippine Islands. (sgd)CASTOR CAVILE (sgd)SUSANA CAVILE (sgd)BENEDICTA CAVILE (sgd)SIMPLICIA CAVILE (sgd)VICENTA NAVARRA Signed in the presence of: (sgd) F.B. Malanog WITH MY CONSENT: (thumbmarked) TRANQUILINA GALON (sgd) Iluminado Golez (sgd)LUCIO CAVILE

------------------------------------------------ESTADOS UNIDOS DE AMERICA COMMONWEALTH DE FILIPINAS PROVINCIA DE NEGROS ORIENTAL S.S. MUNICIPIO DE TOLONG. En el dia de hoy 6 de Abril de 1937, A.D., ante mi comparecieron personalmente Castor Cavile, Lucio Cavile, Susana Cavile, Benedicta Cavile, Simplicia Cavile, y Vicenta Cavile y Tranquilina Galon de quienes doy fe que los conozco por ser las personas que otorgaron el documento preinserto y ratificaron ser este un acto de sus libres voluntades y otorgamiento. Castor Cavile me exhibe su cedula personal No. F1138758 expedida el dia 1 de Febrero de 1937, y Lucio Cavile me exhibe con el No. F11393521 expedida el dia 2 de Abril de 1937, y las comparecientes no me exhiben por razon de sus sexos. El documento se refiere a un convenio de particion entre los comparecientes arriba mencionados sobre ciertas porciones de terreno radicadas todas en el municipio de Tolong, Negros Oriental consistente en cuatro (4) paginas utiles inclusive la de ratificacion, cada una de las cuales estan firmadas pos los otorgantes y pos los testigos instrumentales al pie y al margen izquierdo que lleva mi sello notarial y ratifican que el documento preinserto se otorgo bajo sus libres y expontanea voluntad. A N T E M I: (sgd)

ILUMINADO GOLEZ Notario Publico Mi comision expira el Diciembre 31,1937 Reg. Not. No . 41 Pag. . . . . . . . . 100 Lib. II Serie de 1937" The document speaks for itself. The foregoing document was acknowledged before Notary Public Iluminado Golez and recorded in his notarial book as "Reg. Not. No. 41; Pag. 100; Lib. II, Serie de 1937." Documents acknowledged before notaries public are public documents which are admissible in evidence without necessity of preliminary proof as to their authenticity and due execution. They enjoy the presumption of regularity. It is a prima facie evidence of the facts stated therein. To overcome the presumption, there must be evidence that is clear, convincing and more than merely preponderant. Absent such evidence, the presumption must be upheld.10 Contrary to the findings of the Court of Appeals, we find that respondents in this case failed to overcome the presumption of regularity. The appellate court based its conclusion on the testimonies of Ramona Tacang and Filomena Pareja who both testified that Simplicia Cavili resided in Mindanao from 1934 until 1947. 11 Granting such fact to be true, it does not preclude the possibility that Simplicia Cavile could have traveled from her residence in Mindanao to Tolong, Negros Oriental to participate in the execution of the Deed of Partition. Filomena Pareja, a granddaughter of Simplicia Cavili, in fact stated during cross examination that the latter was in perfect health and was completely mobile at that time. She also admitted that there was available transportation from Mindanao to Negros Oriental.12 Their testimonies, therefore, are insufficient to overturn the presumption

that the questioned Deed of Partition has been duly executed. Furthermore, a close examination of the questioned Deed of Partition shows that what respondents claim to be mere inkblot is actually a thumbmark. We note the visible grooves or lines on the imprint that indicate that they are not mere drops of ink but an actual thumbprint. Hence, we uphold the ruling of the trial court finding that the properties left by Bernardo Cavili have already been partitioned among his heirs. In view of the foregoing discussion, we deem it unnecessary to discuss the issue on prescription raised by petitioners. IN VIEW WHEREOF, the petition is GRANTED. The questioned Decision of the Court of Appeals is SET ASIDE and the Decision of the Regional Trial Court of Dumaguete City is hereby REINSTATED. SO ORDERED. SARI-SARI GROUP OF COMPANIES, INC. vs PIGLAS KAMAO Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the March 1, 2004 Decision1 and July 22, 2004 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 51381. The antecedents of the case are as follows: In December 1990, Mariko Novel Wares, Inc. (petitioner) began its retail outlet operations under the name "Sari-Sari" in the basement of Robinson's Galleria in Quezon City.3 Among its employees were: Head Checker Ronnie Tamayo, Checker Jose del Carmen, Section Heads Jocylene Padua, Vicky Bermeo, and Elizabeth Matutina (respondents), all of whom were assigned at the Robinsons Galleria branch.4 On November 30, 1993, respondents organized a union known as Piglas Kamao (Sari-Sari Chapter). At the time of the formation, the officers of the union were respondents Ronnie Tamayo, President; Jose del Carmen, Vice-President; and Jocelyne Padua, Secretary.5 Respondents claim that petitioner, through its President, Rico Ocampo,6 interfered with the formation of the union. On December 14, 1993, respondent union filed a petition for certification elections with the Department of Labor and Employment (DOLE). On the next day, December 15, 1993, petitioner issued a policy statement pertaining to "Employee Complaints/Grievance Procedure," stating, among others, that it "supports an 'open communication policy' both vertical and horizontal within the organization." 7 Meanwhile, respondents were informed of the petitioner's plan to close the basement level store to give way to the opening of a Sari-Sari outlet on the third floor of Robinson's Galleria. Respondents were supposed to be absorbed in other Sari-Sari store branches.8 However, on January 9, 1994, petitioner put up an advertisement in the Manila Bulletin, announcing its need for inventory, accounting, and sales clerks. Applicants were requested to apply personally at the Robinson's Galleria branch.9 During the month of January 1994, petitioner's managerial staff approached union members to express disapproval of the union membership. 10 On January 26, 1994, as a result of the aforementioned events, respondent union filed an unfair labor practice case with the Labor Arbiter (LA) against the petitioner for harassment, coercion, and interference with the worker's right to selforganization.

On the next day, January 27, 1994, petitioner notified DOLE and the respondents of the closure of the Galleria branch due to irreversible losses and non-extension of the lease of the store premises, to be effective on February 28, 1994. Moreover, the respondents were told that they would not be absorbed in the other branches of the petitioner because of redundancy.11 On February 11, 1994, respondents Tamayo, Del Carmen, and Padua filed amended complaints of unfair labor practice and illegal dismissal against petitioner. On March 28, 1994, respondents filed six supplemental complaints for illegal dismissal, nonpayment of premium pay for holiday and rest day for the years 1992 and 1993, and non-payment of 13th month pay for the year 1994 as well as for moral and exemplary damages.12 In its defense, petitioner denied that the closure of the Galleria branch was intended to prevent the formation of the union, saying that the closure was due to consistent losses the branch was incurring. Petitioner further alleged in its position paper submitted to the LA that: On rentals expenses alone it was already paying its lessor P341,760.38, excluding other charges for the use of the Robinsons Galleria common areas, not to mention water and electric consumption x x x. The premises being leased by Petitioner was too large. Worse, it was located at the Park Avenue area of the Robinsons Galleria which has the lowest shopper traffic in the Robinsons Galleria. When the 3-year lease of the Petitioner was about to expire, it was therefore deemed more prudent to cease operations. 13 Furthermore, petitioner claimed that it consistently failed to reach sales quota, forcing it to pay penalties to Robinson's Galleria and that it was the decision of the Board of Directors to close the branch.14 On April 27, 1997, the LA rendered his decision dismissing the complaint for illegal dismissal, unfair labor practices and damages for lack of merit. However, the LA ordered the petitioner to pay the respondents separation pay and proportionate 13th month pay.15 The LA ruled that the presence of respondent union officers Tamayo, Del Carmen and Padua in the Robinson's Galleria branch was merely coincidental and that the closure of the branch was due to the expiration of the lease contract and the increasing expenses of maintaining the branch. 16 The decision was appealed to the National Labor Relations Commission (NLRC). During the pendency of the appeal, respondents Bermeo, Matutina, and Padua separately filed their respective manifestations and Motions to Dismiss, praying that the appeal be dismissed as to them due to their having already executed their respective quitclaims releasing Mariko from liability. 17 The NLRC affirmed the decision of the LA but dismissed the claims of Bermeo, Matutina and Padua as they had executed quitclaims. Respondents filed a Motion for Reconsideration which was denied by the NLRC. Respondents then appealed to the CA. The CA ruled that petitioner failed to discharge its burden of submitting competent proof to show the irreversible substantial losses it suffered warranting the closure of the Galleria branch. The CA ruled: While the notice of termination stated that the closure of the branch was due to irreversible losses and the non-extension of the lease contract, Mariko did not present any audited financial statements or documents to substantiate its irreversible losses. Its mere allegation thereof is not enough. Also, that the affected branch failed to reach the sales quota was not a factor to justify retrenchment,

since the failure of the affected branch to reach the sales quota did not amount to a substantial loss which met the requisites of a valid retrenchment. 18 Anent the issue of unfair labor practice the CA ruled that such was a question of fact that was beyond the ambit of the present recourse for certiorari. We cannot disturb, therefore, the findings of the NLRC on the matter which were based on substantial evidence for our task is only to determine whether the NLRC committed grave abuse of discretion in applying the law to the established facts. xxx. That manner of abuse did not attend the conclusion of the NLRC that the respondents [petitioner herein] were not involved in union-busting or anti-union activities.19 Lastly, the CA ruled that the release and quitclaims executed by respondents Padua, Bermeo and Matutina did not preclude them from assailing their termination. The dispositive part of the CA decision reads: WHEREFORE, the PETITION FOR CERTIORARI is PARTLY GRANTED. The resolution dated November 17, 1998 of the National Labor Relations Commission is PRO TANTO MODIFIED, ordering respondent MARIKO NOVEL WARES, INC., to pay all individual petitioners their full backwages from the time of their illegal dismissal on February 28, 1994 up to the finality of this judgment. SO ORDERED.20 The CA denied petitioner's motion for reconsideration. Hence, herein petition raising the following issue: WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN GRANTING RESPONDENT'S PETITION FOR CERTIORARI AND IN SETTING ASIDE THE FINDINGS OF BOTH THE NLRC AND THE LABOR ARBITER A QUO. Petitioner claims that: 1. The Court of Appeals committed palpable error in setting aside both the factual findings made by both the Labor Arbiter and the NLRC that respondents had been validly dismissed from employment on the ground of closure.21 2. The Court of Appeals committed serious error in requiring petitioner to prove substantial losses. Dismissal on the ground of closure does not require proof of substantial business reverses. 22 3. If an employer can validly cease operation even when not incurring losses, with more reason can it close down if it is suffering from financial reverses, as what happened in this case.23 4. Article 283 of the Labor Code which permits closure or cessation of operation of an establishment likewise governs cases of partial closure. It was therefore serious error on the part of the Court of Appeals to have applied the rules on retrenchment to the case at bar.24 5. Assuming the Lopez Sugar Corporation case applies, the requisites stated therein were complied with in this case.25 6. The Court of Appeals seriously erred in invalidating the quitclaims of respondents Bermeo, Matutina and Padua.26 7. The Court of Appeals seriously erred in taking cognizance of the petition insofar as the four other alleged petitioners therein were concerned, considering only Jose Del Carmen signed and verified the petition. 27 As general rule, a petition for review on certiorari under Rule 45 of the Rules of Court is limited to questions of law. However, this rule admits of exceptions, 28 such as in this case where the findings of the LA and the NLRC vary from the findings of the CA.

Before discussing the substantive merits of the case, we will first discuss the procedural matters raised. Effect of Non-Verification by All Parties Section 1 of Rule 6529 in relation to Section 3 of Rule 4630 of the Rules of Court requires that a petition for review filed with the CA should be verified and should contain a certificate of non-forum shopping. The purpose of requiring a verification is to secure an assurance that the allegations of the petition have been made in good faith, or are true and correct, not merely speculative.31 On the other hand, the rule against forum shopping is rooted in the principle that a party-litigant shall not be allowed to pursue simultaneous remedies in different fora, as this practice is detrimental to orderly judicial procedure. 32 A distinction must be made between non-compliance with the requirements for Verification and noncompliance with those for Certification of Non-Forum Shopping. As to Verification, non-compliance therewith does not necessarily render the pleading fatally defective; hence, the court may order a correction if Verification is lacking; or act on the pleading although it is not verified, if the attending circumstances are such that strict compliance with the Rules may be dispensed with in order that the ends of justice may thereby be served. 33 A pleading which is required by the Rules of Court to be verified may be given due course even without a verification of the circumstances warranting the suspension of the rules in the interest of justice.34 When circumstances warrant, the court may simply order the correction of unverified pleadings or act on them and waive strict compliance with the rules in order that the ends of justice may thereby be served.35Moreover, many authorities consider the absence of Verification a mere formal, not jurisdictional defect, the absence of which does not of itself justify a court in refusing to allow and act on the case. 36 In Torres v. Specialized Packing Development Corporation ,37 the problem was not lack of Verification, but the adequacy of one executed by only two of the twenty-five petitioners, similar to the case at bar. The Court ruled: These two signatories are unquestionably real parties in interest, who undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in the Petition. This verification is enough assurance that the matters alleged therein have been made in good faith or are true and correct, not merely speculative. The requirement of verification has thus been substantially complied with. 38 Based on the foregoing, the lone Verification of respondent Jose del Carmen is sufficient compliance with the requirements of the law. On the other hand, the lack of a Certificate of Non-Forum Shopping, unlike that of Verification is generally not curable by the submission thereof after the filing of the petition.39 The submission of a certificate against forum shopping is thus deemed obligatory, albeit not jurisdictional.40 The rule on certification against forum shopping may, however, be also relaxed on grounds of "substantial compliance" or "special circumstances or compelling reasons."41 Applicable to this case is Cavile v. Heirs of Clarita Cavile.42 Finding that the petitioners were relatives and co-owners jointly sued over property in which they had common interest, this Court in that case held that the signature of just one coowner on the Certificate of Non-Forum Shopping in the petition before the Court substantially complied with the rule in this wise: We find that the execution by Thomas George Cavile, Sr. in behalf of all the other petitioners of the certificate of non-forum shopping constitutes substantial

compliance with the Rules. All the petitioners, being relatives and co-owners of the properties in dispute, share a common interest thereon. They also share a common defense in the complaint for partition filed by the respondents. Thus, when they filed the instant petition, they filed it as a collective, raising only one argument to defend their rights over the properties in question. There is sufficient basis, therefore, for Thomas George Cavili, Sr. to speak for and in behalf of his copetitioners that they have not filed any action or claim involving the same issues in another court or tribunal, nor is there other pending action or claim in another court or tribunal involving the same issues.43 In the case at bar, respondent Jose del Carmen shares a common interest with the other respondents as to the resolution of the labor dispute between them and the petitioner. They collectively sued the petitioner for illegal dismissal and unfair labor practices and have collectively appealed the NLRC decision. Similarly, there is sufficient basis for Jose del Carmen to speak on behalf of his co-respondents in stating that they have not filed any action or claim involving the same issues in another court or tribunal, nor is there any other pending action or claim in another court or tribunal involving the same issues. Thus, even if only respondent Jose del Carmen signed the Certificate of Non-Forum Shopping, the rule on substantial compliance applies. The CA therefore did not commit any error in entertaining the appeal of the respondents. Effect of Quitclaims Petitioner asserts that the CA erred in invalidating the quitclaims of respondents Bermeo, Matutina and Padua on the ground that there was an absence of showing that their execution was not voluntary; 44 and that the record was devoid of any showing that the terms of the settlement were not fair and just. 45 Under prevailing jurisprudence, a deed of release or quitclaim cannot bar an employee from demanding benefits to which he is legally entitled. 46 Similarly, employees who received their separation pay are not barred from contesting the legality of their dismissal, and the acceptance of such benefits would not amount to estoppel.47 It is well-established that quitclaims and/or complete releases executed by the employees do not estop them from pursuing their claims arising from the unfair labor practice of the employer. The basic reason for this is that such quitclaims and/ or complete releases are against public policy and, therefore, null and void. The acceptance of termination pay does not divest a laborer of the right to prosecute his employer for unfair labor practice acts. 48 As observed in Cario v. Agricultural Credit and Cooperative Financing Administration:49 Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously, do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of job, he had to face the harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice.50 Review of Facts by the CA under Rule 65 As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the CA does not assess and weigh the sufficiency of evidence upon which the LA and the NLRC based their conclusion. The query in the proceeding before the CA is limited to the determination of whether or not the NLRC acted without or in excess of its jurisdiction or with grave abuse of discretion in rendering its decision.

However, as an exception, the appellate court may examine and measure the factual findings of the NLRC if the same are not supported by substantial evidence.51 We find this exception applicable to the case at bar. Main Issue : Closure or Retrenchment? Petitioner and respondents seem to be at variance as to what the theory of the case is. In its Memorandum, petitioner claims that evidence of substantial business reverses is not required in terminating employees on the ground of closure. 52 On the other hand, respondents in their Memorandum claim that evidence of substantial business reverses is required in the termination of employees on the ground of retrenchment.53 Thus, the resolution of the case at bar depends on whether we consider the act of petitioner in terminating respondents as one grounded on closure or as one grounded on retrenchment. The initial notice of the petitioner to DOLE did not clearly state whether petitioner was retrenching workers or simply closing its branch. Petitioner merely stated that they were closing the Galleria branch due to irreversible losses and the nonextension of the lease,54 as a consequence of which the employees of the said branch were terminated. In the position paper of the petitioner submitted to the LA, we find that the theory of the case as far as it was concerned was that it had retrenched employees. This finding is bolstered by the fact that the term "retrenchment" was used in a number of paragraphs, to wit: Accordingly, all the employees of the respondent's Robinsons Galleria branch were terminated/retrenched.55 The separation pay of the employees concerned, and whatever other benefits they were entitled to were tendered to the retrenched employees. 56 It would later appear that certain union officers were among those terminated/retrenched by the respondent pursuant to the closure of its Robinsons Galleria branch.57 Neither was respondent aware that there were union officers among its retrenched employees of the Robinsons Galleria branch.58 x x x then the lawful and legitimate retrenchment of the employees of the respondent's Robinsons Galleria branch negates any notion of illegal dismissal on the part of the petitioner.59 (Emphasis supplied) Moreover, one of the arguments raised by the petitioner in its position paper was that it had "complied with all the requirements of the Labor Code relative to retrenchment."60 In addition, petitioner citedCaffco International Limited v. Office of the Minister-Ministry of Labor and Employment 61 as reference. A reading of the case will show that the issue presented involved the legality of a retrenchment measure in order to minimize business losses. Later, in its Formal Offer of evidence, petitioner submitted Exhibit "5", described as the Notice to Department of Labor and Employment, for the purpose of proving that the employees concerned were not illegally dismissed, because the closure of the Robinson's Galleria Branch was due to business losses which resulted in the retrenchment of employees who could not be absorbed by the company.62Furthermore, petitioner submitted Exhibit "4", described as the Affidavit of Luis Getuela, to prove that the employees concerned were not illegally dismissed, because Mario-Novel closed down its Robinson's Galleria branch due to business losses which resulted in the retrenchment of employees.63 In his affidavit, Luis Getuela made the following declaration: "As a result of its closure due to business losses, the personnel assigned thereat were retrenched."64 (Emphasis supplied)

The decision of the LA, although not categorical in its pronouncement, disposed of the issue by stating that the decision to close the Robinson's branch was a management prerogative. However, the Court notes that the cases cited by the LA, namely: Dangan v. National Labor Relations Commission and Catatista v. National Labor Relations Commission, both involved cases that tackled the issue of retrenchment. Cited was the pertinent portion of the LA decision: The above factors lead us to conclude that the closure of the Robison's Galleria branch was indeed prompted by the expiration of the contract of lease and that Mariko simply saw this as an opportunity to assess its business position in the light of the circumstances surrounding the situation. With the spiraling cost of rental, other incidental charges coupled with its failure to achieve the sales quota required by the lessor, it would be foolhardy for the respondents to continue doing business under the circumstances. Well settled is the principle that it is the prerogative of management to close its business provided it complies with the requirements of the law. In the case at bar, if respondent Mariko opted to cease the operations of its Robinson's Galleria branch due to the expiration of its lease contract and on account of economic reasons, such decision must be respected as entirely within its prerogative. Labor tribunals are not authorized to substitute the judgment of the employer on purely business matters. If an employer has the right to close the entire establishment altogether and cease operations due to economic condition, the closure of a part thereof to minimize expenses and reduce capitalization should also be recognized (Dangan v. NLRC, 127 SCRA 706). The prerogative to continue a business or a part thereof, belongs to the employer, even, if he is not suffering from serious business losses (Catatista v. NLRC, 247 SCRA 46), so long as the requirements of law are complied with. In this connection, records reveal that a written notice was served upon the affected workers and the Department of Labor and Employment on January 28, 1994 (Exhibit "B") and their dismissal was made effective February 28, 1994 or one month hence Mariko tendered the amounts of one-half month salary for every year of service or one month pay whichever is higher, to the individual complainants by way of separation pay, but the individual complainants, except Evangeline dela Cruz who executed a Release Waiver and Quitclaim (Annex "A", respondents' reply), refused to accept the same. Clearly, therefore, respondents also complied with the requirements of the law in affecting the dismissal of the complainants. Respondents cannot be forced to absorb the complainants in the other branches which are already filled up by other Mariko employees. Otherwise, they will be over-staffed. As explained by the respondents, redundancy will result if they are made to absorb the complainants, as there will be surplus employees.65 (Emphasis supplied) xxxx Consonant with the above, we find the termination of the services of the individual complainants were anchored on valid grounds. WHEREFORE, premises considered, judgment is hereby rendered dismissing the complaint for illegal dismissal, unfair labor practice and damges for lack of merit, but ordering the respondent MARIKO NOVEL WARES, INC. to pay complainants Ronnie Tamayo, Jose del Carmen, Vicky Bermeo, Jocelyn Padua ad Elizabeth Matutina the amount of SIXTY-SIX THOUSAND EIGHT HUNDRED FOUR PESOS AND 74/100. xxxx Representing their separation pay and proportionate 13 th month pay for the year 1994 within ten days from receipt hereof

All other issues are dismissed for lack of merit SO ORDERED. Thereafter, in its Opposition to Memorandum of Appeal, petitioner, contrary to its earlier allegation that it had validly retrenched workers, raised the argument that an employer may close or cease his business operations or undertaking even if he is not suffering from serious business losses or financial reverses as long as he pays employees their termination pay.66 Afterwards, the NLRC after re-stating the facts, ruled in this wise: In a nutshell, the Labor Arbiter below did not commit serious error in ruling for the complainant. "Well entrenched is the rule that when the conclusion of the Labor Arbiter are sufficiently corroborated by the evidence on record, the same should be respected by the appellate tribunals since, he is in a better position to assess and evaluate the credibility of the contending parties. Findings of labor tribunals which are substantially supported by evidence and in the absence of grave abuse of discretion are not only accorded respect but with finality. WHEREFORE, the assailed Decision is AFFIRMED as far as complainants Ronie Tamayo and Jose del Carmen are concerned while the complaint of Vicky Bermeo, Jocelyne Padua and Elizabeth Matutina are dismissed pursuant to the Receipt, Release and Quitclaim executed and signed by them. Accordingly, the appeal is dismissed for lack of merit. SO ORDERED.67 Throughout the entire proceedings before the LA and the NLRC, respondents were adamant that petitioner failed to present sufficient and convincing evidence of the alleged losses to justify a retrenchment of workers. 68 It pursued the same argument in the CA,69 which ruled in their favor. After a perusal of the records of the case and pleadings submitted, we find that petitioner had in fact retrenched workers. All the pleadings submitted to the LA by the petitioner clearly showed that what it had in mind when it terminated the services of respondents was that it had retrenched workers. It was only when respondents appealed the LA decision that petitioner pursued a new theory, that is, that what was involved was a simple closure of business which did not require proof of substantial losses. This we cannot allow. The Court's ruling in Nielson & Company, Inc. v. Lepanto Mining Co.,70 is instructive and may be applied by analogy: We have taken note that Lepanto is advancing a new theory. We have carefully examined the pleadings filed by Lepanto in the lower court, its memorandum and its brief on appeal, and never did it assert the theory that it has the right to terminate the management contract because that contract is one of agency which it could terminate at will. While it is true that in its ninth and tenth special affirmative defenses, in its answer in the court below, Lepanto pleaded that it had the right to terminate the management contract in question, that plea of its right to terminate was not based upon the ground that the relation between Lepanto and Nielson was that of principal and agent but upon the ground that Nielson had allegedly not complied with certain terms of the management contract. If Lepanto had thought of considering the management contract as one of agency it could have amended its answer by stating exactly its position. It could have asserted its theory of agency in its memorandum for the lower court and in its brief on appeal. This, Lepanto did not do.71 When a party deliberately adopts a certain theory, and the case is tried and decided on that theory in the court below, the party will not be permitted to change his

theory on appeal. To permit him to change his theory will be unfair to the adverse party.72 It is the rule, and the settled doctrine of this Court, that a party cannot change his theory on appeal; that is, that a party cannot raise in the appellate court any question of law or of fact that was not raised in the court below or which was not within the issue raised by the parties in their pleadings. 73 Having concluded that petitioner retrenched workers, we now decide as to whether or not petitioner had complied with the requisites of retrenchment. For retrenchment to be valid, the following requisites must be satisfied: 1. The losses expected should be substantial and not merely de minimis in extent; 2. The substantial losses apprehended must be reasonably imminent; 3. The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and 4. The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proven by sufficient and convincing evidence.74 (Emphasis supplied) Petitioner claimed to have suffered irreversible loss. To substantiate this, petitioner cites the following factors: (1) that when the lease was about to expire, it was already paying Robinson's Land Corporation almost Three Hundred Forty-One Thousand Seven Hundred Sixty Six Pesos and Thirty-Eight Centavos (P341,766,38) in monthly rental, excluding other charges for the use of Robinson's Galleria common areas, not to mention water and electric consumption; 75 (2) that from the inception of its operation at the Robinson's Galleria, the Sari-Sari branch continually suffered losses in its operations; 76 (3) that it consistently failed to reach the sales quota assigned to it under the lease contract with Robinson's Land Corporation such that it was even forced to pay penalties; 77 (4) that in September 1993, when the lease contract was about to expire, its board of directors decided to close the Robinson's outlet; (5) that Robinson's Land Corporation was not too keen on renewing the lease contract considering it failure to reach sales quota. 78 The CA was correct in finding that petitioner failed to discharge its duty of showing that the dismissal of the employees was legal, to wit: While the notice of termination stated that the closure of the branch was due to irreversible losses and the non-extension of the lease contract, Mariko did not present any audited financial statements or documents to substantiate its irreversible losses. Its mere allegation thereof is not enough. xxxx Without competent and sufficient proof to show that irreversible losses suffered, the legality of the dismissal of the petitioners [herein respondents] cannot be sustained.79 In the case of Uichico v. National Labor Relations Commission,80 this Court affirmed the finding of the NLRC as to the kind of evidence needed to prove irreversible loss: We observe that the basis of the Labor Arbiter in sustaining the argument of financial reverses is the Statement of Profit and Losses submitted by respondent employer. The same, however, does not bear the signature of a certified public accountant or audited by an independent auditor. Briefly stated, it has no evidentiary value.81 (Emphasis supplied) In the case at bar, as pointed out by the respondents, petitioner failed to submit its audited financial statements to the Securities and Exchange Commission for the years 1991 and 1992.82 Thus, other than petitioner's bare allegation of irreversible loss, there is no evidence to prove and substantiate it.

Retrenchment is a management prerogative, a means to protect and preserve the employer's viability and ensure his survival. This Court has always respected this prerogative during trying times, but there must be faithful compliance by management with the substantive and procedural requirements laid down by law and jurisprudence.83 Petitioner having failed in discharging it's burden of submitting sufficient and convincing evidence required by law, we hold that respondents Ronnie Tamayo, Jose del Carmen, Jocylene Padua, Vicky Bermeo and Elizabeth Matutina were illegally dismissed. An illegally dismissed employee is entitled to either (1) reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and (2) backwages. 84 In the case at bar, since fourteen years have already lapsed since the termination of the respondents, we deem it proper that separation pay in lieu of reinstatement be awarded. Since petitioner has already paid respondents their separation pay, it is only liable to pay the respondents their backwages computed from the time of their illegal dismissal up to the time of the finality of this judgment. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated March 31, 2004 and its Resolution dated July 2, 2004 in CA-G.R. SP No. 51381 are AFFIRMED. Costs against petitioner. SO ORDERED. MEDIAN CONTAINER CORP. vs METROPOLITAN BANK &TRUST CO. Respondent, Metropolitan Bank and Trust Company (Metrobank), filed a complaint for sum of money1 on June 23, 2003 before the Regional Trial Court (RTC) of Makati against petitioner Median Container Corporation (MCC) and the spouses Carlos T. Ley and Fely C. Ley, Vice President/Treasurer of MCC for failure of MCC to settle the amount of more than P5,000,000 representing the outstanding balance of loans contracted by MCC, represented by Fely C. Ley. Summonses addressed as follows to the defendants were issued on July 17, 2003 by Branch 22 of the Makati RTC:2 MEDIAN CONTAINER CORPORATION Lot 421 C-4 Katipunan Road Extension, California Village, San Bartolome, Novaliches, Quezon City CARLOS T. LEY AND FELY C. LEY No. 14 Adams Street, West Greenhills, San Juan, Metro Manila (Underscoring supplied) In the August 20, 2003 Process Servers Return, 3 no date of filing of which is indicated, process server George S. de Castro stated that Summons was served on MCC on August 7, 2003 at its given address upon one Danilo Ong (Ong) as shown by Ongs signature at the left bottom portion of the Summons, below which signature the process server wrote the words "General Manager." In the same August 20, 2003 Process Servers Return, the process server stated that he was unable to serve the Summons upon the spouses Ley at their given address as they were no longer residing there. Summons was eventually served upon the spouses Ley. On August 28, 2003, MCC filed a motion to dismiss 4 the complaint on the grounds of defective service of Summons over it and defective verification and certificate

against non- forum shopping. The spouses Ley, upon the impression that the Summons was also served upon them through Ong, also filed a motion to dismiss on the same grounds as those of MCCs. In its Motion to Dismiss, MCC alleged that, contrary to the statement in the August 20, 2003 Process Servers Return,5 Ong, on whom the Summons was served, was not its General Manager, he being merely a former employee who had resigned as of July 2002.6 In support of its claim, MCC annexed to its motion photocopies of a resignation letter dated July 31, 2002 and a quitclaim dated August 1, 2002, both purportedly accomplished by Ong.7 Respecting its claim of defective verification and certificate of non-forum shopping, MCC questioned the authority of Atty. Alexander P. Mendoza to accomplish the same on behalf of Metrobank in this wise: . . . A careful perusal of the "authority" discloses that a certain Atty. Ramon S. Miranda delegated his authority to Atty. Mendoza to "sign the complaint and/or Verification and Certification of Non-Forum Shopping in the case entitled MBTC v. Median Container Corporation and Spouses Carlos T. Ley and Fely C. Ley filed before the RTC-Makati City. This authorization was given only on June 03, 2003. As previously discussed, Atty. Mendoza verified the complaint and signed the certification against forum shopping on May 28, 2003. Therefore, it is clear that Atty. Mendoza did not have the proper authorization when he executed the verification and certification against non-forum shopping because his authority came only at a later date, on June 03, 2003 or six days thereafter. In effect, there is no valid and effective verification and certification by plaintiff in its Complaint.8(Emphasis supplied; underscoring in the original) By Order9 of January 9, 2004, the trial court denied MCCs Motion to Dismiss. As for the spouses Leys motion to dismiss, the trial court denied it for being premature. And the trial court denied too the movants respective motions for reconsideration. 10 The Process Servers Return dated April 12, 2004 11 states that alias Summons was served on the spouses Ley on March 31, 2004. Only MCC went to the Court of Appeals via Petition for Certiorari filed on May 19, 2004 to assail the Order of the trial court denying its Motion to Dismiss and its Motion for Reconsideration, arguing in the main that the trial court "acted with grave abuse of discretion . . . considering that the Complaint failed to comply with Rule 7, Section 5 of the 1997 Rules of Civil Procedure, the Verification and Certification thereof having been signed and executed by one who had no authority to bind respondent Metrobank at the time of such signing and execution." 12 As correctly defined by the appellate court, the issues raised by MCC were: 1) the alleged belated filing of Metrobanks Opposition, and 2) the alleged violation of Rule 7, Section 5 of the 1997 Rules of Civil Procedure regarding the verification/certification against forum shopping. 13 By the present challenged Decision of September 23, 2004, 14 the appellate court dismissed petitioners petition for certiorari, holding that the trial court did not commit any abuse of discretion since "Atty. Mendoza was already clothed with the proper authority to sign the verification and certification through a Boards Resolution dated June 3, 2003 when the complaint was filed on June 23, 2003." 15 Its definition of the issues raised by MCC notwithstanding, the appellate court found it necessary to pass upon the unraised issue of improper service of summons, it finding the same to be a "basic jurisdictional issue and if only to completely dispose of th[e] incident and facilitate the prompt resolution of the main underlying case (sum of money)."16

Brushing aside the impropriety of service of Summons upon MCC, the Court of Appeals stated: The case invoked by [MCC] in support of its position that service of summons was improper, isE.B. Villarosa & Partner Co., Ltd. v. Benito where the Honorable Supreme Court ruled that the trial court did not acquire jurisdiction over the person of the petitioner (a partnership) where service of summons was made on a branch manager instead of the general manager at the partnerships principal office. . . . 17 (Emphasis in original) xxxx After considering the facts and developments in this case in their totality, we believe as the public respondent did that the ruling in the cited Villarosa case should be applied with an eye on the unusual facts of the present case. We find it significant that the process server in this case certified that he served the summons upon the "general manager" of the petitioner. The process server apparently was fully aware of the strict requirements of the Rules as interpreted in the citedVillarosa case. The twist in the process certification is the petitioners claim that Danilo Ong, the person who received the summons, was not the general manager but was a mere former employee. In other words, unlike in Villarosa where summons was served on the branch manager(a patently wrong party under the requirements of the Rules), there was, in the present case, the INTENTION on the part of the process server to observe the mandatory requirements on the services of summons and to serve it on the correct recipient.18 (Emphasis in the original; capitalization and underscoring supplied) Its Motion for Reconsideration19 having been denied,20 MCC filed the present Petition for Review on Certiorari21 raising the following issues including, this time, the impropriety of service of Summons upon it, thus, whether: . . . A COMPLAINT SHOULD PROPERLY BE DISMISSED FOR FAILURE TO COMPLY WITH RULE 7, SECTON 5 OF THE 1997 RULES OF CIVIL PROCEDURE, THE VERIFICATION AND CERTIFICATION PORTION THEREOF HAVING BEEN SIGNED AND EXECUTED BY ONE WHO HAD NO AUTHORITY TO BIND THE PARTY-PLAINTIFF AT THE TIME OF SUCH SIGNING AND EXECUTION; . . . IT IS FULL COMPLIANCE WITH RULE 14, SECTION 11 OF THE 1997 RULES OF CIVIL PROCEDURE, OR THE MERE INTENTION OF THE PROCESS SERVER TO SERVE THE SUMMONS ON THE INTENDED RECIPIENT, THAT DETERMINES THE VALIDITY OF SERVICE OF SUMMONS WHEN THE DEFENDANT IS A DOMESTIC PRIVATE CORPORATION; and . . . IT IS THE ACTUAL RECEIPT OF THE SUMMONS, OR THE VALID SERVICE OF SUMMONS IN ACCORDANCE WITH THE RULES, THAT VESTS THE TRIAL COURT WITH JURISDICTION OVER THE PERSON OF THE DEFENDANT. 22 (Underscoring supplied) Verification is a formal, not jurisdictional, requirement. 23 It is simply intended to secure an assurance that the allegations in the pleading are true and correct, and that the pleading is filed in good faith. 24 That explains why a court may order the correction of the pleading if verification is lacking, or act on the pleading although it is not verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in order to serve the ends of justice. 25 As for the required certification against forum shopping, failure to comply therewith is generally not curable by its submission subsequent to the filing of the petition nor by amendment, and is cause for its dismissal. 26 A certification against forum shopping signed by a person on behalf of a corporation which is unaccompanied by proof that the signatory is authorized to file the petition 27 is generally likewise cause

for dismissal. In several cases, however, this Court relaxed the application of these requirements upon appreciation of attendant special circumstances or compelling reasons. Shipside Incorporated v. Court of Appeals28 cites some of those instances: . . . In Loyola v. Court of Appeals, et. al. . . . , the Court considered the filing of the certification one day after the filing of an election protest as substantial compliance with the requirement. InRoadway Express, Inc. v. Court of Appeals, et. al. . . . , the Court allowed the filing of the certification 14 days before the dismissal of the petition. In Uy v. LandBank, . . . , the Court had dismissed Uys petition for lack of verification and certification against non-forum shopping. However, it subsequently reinstated the petition after Uy submitted a motion to admit [verification] and nonforum shopping certification. In all these cases, there were special circumstances or compelling reasons that justified the relaxation of the rule requiring verification and certification on non-forum shopping. In the instant case, the merits of petitioners case should be considered special circumstances or compelling reasons that justify tempering the requirement in regard to the certificate of non-forum shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused non-compliance with the requirement as to the certificate of non-forum shopping. With more reason should we allow the instant petition since petitioner herein did submit a certification on non-forum shopping, failing only to show proof that the signatory was authorized to do so. That petitioner subsequently submitted a secretarys certificate attesting that Balbin was authorized to file an action on behalf of petitioner likewise mitigates this oversight.29 (Emphasis and underscoring supplied) In the case at bar, simultaneous with the filing of the complaint, Metrobank submitted both a certification of non-forum shopping and proof that Atty. Mendoza who signed it on its behalf was authorized to do so. The proof of authorization of Atty. Mendoza was dated later than the date of his signing of the certification of non-forum shopping, however, thus giving the impression that he, at the time he affixed his signature, was not authorized to do so. The passing on June 3, 2004 of a Board Resolution of authorization before the actual filing on June 23, 2004 of the complaint, however, is deemed a ratification of Atty. Mendozas prior execution on May 28, 2004 of the verification and certificate of non-forum shopping, thus curing any defects thereof.30 As for MCCs contention that the summons addressed to it was served on a wrong party, hence, the trial court did not acquire jurisdiction over it, the same fails. A certificate of service by a proper officer is prima facie evidence of the facts set out therein, and the presumption arising from the certificate can only be overcome by clear and convincing evidence.31 To disprove that Ong was neither its General Manager or an employee of MCC at the time of the service of summons, MCC submitted before the trial court a photocopy of his purported July 31, 2003 resignation letter and a photocopy of an August 1, 2003 Quitclaim purportedly signed by him. MCC did not present the original copies of these documents.32 Be that as it may, the appellate courts en passant disposition of the questioned service of summons, viz: . . . [W]e searched the records particularly the motion to dismiss filed by the petitioner for the reason why and how service was made on a former employee who was then at the correct address, who signed for the summons, and whom the process server identified as "general manager". We note that aside from the bare

allegation that the court did not have jurisdiction due to improper service of summons, no statement was ever made to explain why a former employee was at petitioners premises and ended up receiving the summons served by the process server. Truly, we wondered why a process server who apparently knew the technicalities of his duties so served the summons and then certified that service was upon the general manager, even naming Danilo Ong as the general manager. This aberrant turn of events and the questions it raises convince us that we cannot view the service of summons in this case along the strict lines of Villarosa whose attendant facts are both simple and different. What should assume materiality here are the following circumstances: that the process server went to the correct address of the petitioner to serve the summons; that the summons was received at that address by a person who was there; that the petitioner does not dispute that it ultimately received the summons; and that the process server certified in his return that service was duly made upon the general manager whom he identified as Danilo Ong who acknowledged receipt of the summons by signing on the lower portion thereof.33 (Emphasis and italics in the original; underscoring supplied), persuades as this Court notes the dubious proof that Ong had resigned from MCC at the time the summons was served. Consider this: The signature attributed to Ong in the photocopy of his purported July 31, 2002 letter of resignation effective also on July 31, 2002, and the signature attributed to him in the photocopy of the August 1, 2002 Quitclaim he purportedly executed, appear to have been written by a hand different from that which affixed the signature attributed to him on the Summons. WHEREFORE, the petition is DENIED. Costs against petitioner. SO ORDERED. REMITERE vs YULO This is an appeal from the order of the Court of First Instance of Negros Occidental dismissing the complaint in its Civil Case No. 6377. On December 6, 1961 the plaintiffs-appellants, Alfredo Remitere, et al., filed a complaint against the defendants-appellees, Remedies Montinola Viuda de Yulo and the Register of Deeds of Negros Occidental, the pertinent allegations of which complaint, for the purposes of this decision, are as follows: 2. In Cadastral Decrees Nos. 69518 and 69515 issued by the Court of First Instance of Negros Occidental on August 21, 1918, copies of which are herewith attached as Annexes "A" and "B" and made an integral part of this complaint, Gregorio Remitere was declared and registered owner of Lots Nos. 35 and 52 of the Cadastral Survey of Isabela, with areas of 4.4731 and 29.7398 hectares, respectively. These lots were issued the corresponding Original Certificates of Title under the Land Registration Act, being 10894 and 10898. 3. Upon the demise of Gregorio Remitere on January 1, 1914, the Court of First Instance of Negros Occidental, in Civil Case No. 1661, Re-Application for Letters of Administration, appointed his wife as administratrix of his estate, among which are the two lots in question. During this period, the provincial sheriff of Negros Occidental conducted a public auction sale over the said parcels of land, and on the same day, September 23, 1918, he issued thereof a deed of sale in favor of Mariano Yulo of Binalbagan,

Negros Occidental, for the total consideration of P20,000.00. Copy of the deed of sale is herewith attached as Annex "C" and formed part of this complaint. 4. As a result, series of cancellations to the Original Certificates of Title mentioned in paragraph 2 hereof had followed. First, they were cancelled by Transfer Certificates of Title Nos. 2819 and 2820, registered in the name of Mariano C. Yulo by virtue of the Certificates of Sale issued by the provincial sheriff of Negros Occidental. They were in turn cancelled by R-T 602 and R-T 4706, by virtue of reconstitution of titles. Then these were cancelled by T-532 and T-2979, by virtue of deeds of sales registered in the name of Remedios Montinola Vda. de Yulo, the defendant herein.. 5. The public sale mentioned in Article 3 of this complaint, however, was and still is absolutely a void sale, and certainly did not pass titles and ownership of said lots, starting from its primitive owner, now being represented by the plaintiffs herein, as surviving heirs thereto, until it reaches the possession by the defendant. That by reason of its invalidity, all and every benefits that the transferees, including the defendant herein, had acquired from the parcels of land in question, should be indemnified to the plaintiffs. And that, in order to justify their rights and interests pursuant to the mandates prescribed by law over said lots and discontinue the irreparable losses and damages that they are still sustaining, on account of the perversed transfer of September 23, 1918, the same should be reverted to their immediate possessions and titles. The complaint prayed that the defendants be ordered to reconvey the two lots in question to the plaintiffs; that the defendant Register of Deeds be ordered to cancel the certificates of title in the name of the defendant Remedios Montinola Viuda de Yulo and to issue new ones in the names of the plaintiffs; and that the defendants pay the costs. The defendants-appellees filed a motion to dismiss the complaint on the grounds (1) that the complaint does not state a cause of action, and (2) that even assuming that a cause of action exists, the same has already prescribed. The lower court dismissed the complaint precisely on the grounds relied upon by the defendants-appellees. Hence this appeal. In this appeal, the plaintiffs-appellants contend that the trial court erred: (1) in declaring that the complaint contains no narration of facts; (2) in holding that complaint states no cause of action; and (3) in holding that the plaintiffs' cause of action, if any, has already prescribed. We find that the lower court had correctly dismissed the complaint. 1wph1.t The lack of a cause of action as a ground for dismissal must appear on the face of the complaint, and to determine whether the complaint states a cause of action only the facts alleged therein, and no other, should be considered. A reading of the complaint in this case will readily impress one that no ultimate facts which may constitute the basis of plaintiffs-appellants rights which had been violated are alleged. Neither are there allegations of ultimate facts showing acts or omissions on the part of the defendants-appellees which constitute a violation of the rights of plaintiffs-appellants. Apparently, the plaintiffs-appellants rely on the allegations of paragraphs 3 and 5 of the complaint for their cause of action. Paragraph 3 states: 3. Upon the demise of Gregorio Remitere on January 1, 1914 the Court of First Instance of Negros Occidental, in Civil Case No. 1661, Re-Application for Letters of Administration, appointed his wife as administratrix of his estate, among which the two lots in question.

During this period, the provincial sheriff of Negros Occidental, conducted a public auction sale over the said parcels of land, and on the same day, September 23, 1918, he issued thereof a deed of sale in favor of Mariano Yulo of Binalbagan, Negros Occidental, for the total consideration of P20,000.00. . . . . The allegations embodied in the above quoted paragraph are mere averments or recitals of facts that do not establish any right or claim on the part of the plaintiffs. The allegations do not state any connection that the plaintiffs have with the deceased Gregorio Remitere, nor do they state what connection or claim the plaintiffs have on the properties left by the deceased Gregorio Remitere. The allegation about the sale at public auction does not state in what way the rights or interests of the plaintiffs had been affected, nay prejudiced, by that sale. Again, paragraph 5 of the complaint states: 5. The public sale mentioned in paragraph 3 of this complaint, however, was and still is absolutely a void sale, and certainly did not pass titles and ownership of said lots, starting from its primitive owner, now being represented by the plaintiffs herein, as surviving heirs thereto, until it reaches the possession by the defendants. That by reason of its invalidity, all and every benefits that the transferees, including the defendant herein, had acquired from the parcels of land in question, should be indemnified to the plaintiffs. It is not stated anywhere in the complaint why the sale at public auction was absolutely void, nor were there stated any particular facts or circumstances upon which the alleged nullity of the sale or transaction is predicated. The averment that "the public sale . . . was and still is absolutely a void sale, and certainly did not pass titles and ownerships of said lots, starting from its primitive owner, now being represented by the plaintiffs herein, as surviving heirs thereto, until it reaches the possession by the defendants. . ." is a conclusion of law or an inference from facts not stated in the pleading. A pleading should state the ultimate facts essential to the rights of action or defense asserted, as distinguished from mere conclusion of fact, or conclusion of law. An allegation that a contract is valid, or void, as in the instant case, is a mere conclusion of law. General allegations that a contract is valid or legal, or is just, fair and reasonable, are mere conclusion of law. Likewise, allegations that a contract is void, voidable, invalid, illegal, ultra vires, or against public policy, without stating facts showing its invalidity, are mere conclusions of law; as are allegations that a contract is in conformity with, or in violation of a constitutional or statutory provision . . . . . (71 C.J.S. pp. 44-45.) (Emphasis supplied.) Not being statements of ultimate facts which constitute the basis of a right of the plaintiffs-appellants, nor are they statements of ultimate facts which constitute the wrongful acts or omissions of the defendants-appellees that violated the right of the plaintiffs-appellants the allegations of the complaint in the present case have not fulfilled the requirements of Section 3, Rule 6 of the Revised Rules of Court (Sec. 1, Rule 6 of the former Rules of Court) that the complaint should contain a "concise statement of the ultimate facts constituting the plaintiff's cause or causes of action." This Court has defined the term "cause of action" as follows: A cause of action has been defined by the Supreme Court as an act or omission of one party in violation of the legal right or rights of the other; and its essential elements are legal right of the plaintiff, correlative obligations of the defendant, and act or omission of the defendant in violation of said legal right. (Ma-ao Sugar Central Co., Inc. vs. Barrios, et al., L-1539, Dec. 30, 1947)

The term "ultimate facts" has been defined or explained as follows: Ultimate facts defined.The term "ultimate facts" as used in Sec. 3, Rule 3 of the Rules of Court, means the essential facts constituting the plaintiff's cause of action. A fact is essential if it cannot be stricken out without leaving the statement of the cause of action insufficient. . . . . (Moran, Rules of Court, Vol. I, 1963 ed., p. 213) Ultimate facts are important and substantial facts which either directly form the basis of the primary right and duty, or which directly make up the wrongful acts or omissions of the defendant. The term does not refer to the details of probative matter or particulars of evidence by which these material elements are to be established. It refers to principal determinate, constitutive facts, upon the existence of which, the entire cause of action rests. (Montemayor vs. Raborar, et al., 53 O.G. No. 19, p. 6596, citing Pomeroy, Code Remedies, 5th Ed., sec. 420). We, therefore, hold that the lower court had correctly ruled that the complaint in the present case does not narrate facts that constitute a cause of action. Having arrived at the foregoing conclusion, We deem it not necessary to discuss whether the lower court had correctly ruled that the plaintiffs' cause of action, if any, had prescribed or not. Wherefore, the order of dismissal appealed from is affirmed, with costs against the plaintiffs-appellants. PHILIPPINE STOCK EXCHANGE vs MANILA BANKING CORP. By this petition for review on certiorari, petitioners seek the reversal of the November 20, 2000 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 58111, as reiterated in its Resolution2 of April 4, 2001, upholding the March 7, 2000 order of the Securities and Exchange Commission (SEC) en banc in SEC Case No. 08-986075, which in turn sustained the order issued by its Securities Investigation and Clearing Department (SICD) Hearing Panel in SEC Case No. 08-98-6075 denying petitioners motion to dismiss the Petition for Mandamus with Claim for Damages lodged thereat by respondent The Manila Banking Corporation (TMBC). The facts: On October 1, 1980, TMBC acquired Manila Stock Exchange (MSE) Seat No. 97, registered in the name of Roberto K. Recio (Recio) , through an execution sale which arose from a levy on execution to satisfy a loan obligation of Recio to TMBC. Thereafter, TMBC requested MSE to record its ownership of MSE Seat No. 97 in MSEs membership books. Initially, MSE refused to register TMBC in its membership books and contested the latters ownership of said seat. According to MSE, its bylaws allow only individuals or corporations engaged primarily in the business of stocks and bonds brokers and dealers in securities to be a member or to hold a seat in the MSE. In the end, TMBC settled for a mere acknowledgment from MSE of its legal or naked ownership of, or proprietary right over, MSE Seat No. 97 which was done by MSE through its Acknowledgment Letter dated August 19, 1996. Before the aforementioned acknowledgment of MSEs title, particularly on July 17, 1992, the Philippine Stock Exchange, Inc. (PSEI) was incorporated unifying the MSE and the Makati Stock Exchange (MKSE) into one exchange. On April 16, 1994, the PSEI issued a certificate of membership to Recio as Member No. 29. Believing that MSE Seat No. 97 became PSE Seat No. 29 of the unified exchanges and that the certificate of membership to PSEI was issued to Recio on the basis of his previous ownership of MSE Seat No. 97, TMBC sought to rectify the PSEIs listing

of Recio as a member without any reservation or annotation therein that TMBC owns proprietary rights over PSE Seat No. 29. Armed with MSEs acknowledgment of its legal ownership or naked title over MSE Seat No. 97, TMBC sought PSEIs recognition of its legal ownership of PSE Seat No. 29. However, TMBCs efforts were met with PSEIs repeated refusal. This was the state of things when TMBC lodged a Petition for Mandamus with Claim for Damages, at the SEC SICD, against herein petitioners PSEI and its Board of Governors. The case was docketed as SEC Case No. 08-98-6075. The petition prayed that the SEC order the PSEI to acknowledge TMBCs proprietary interest or legal or naked ownership of PSE Seat No. 29 to enable TMBC to register said seat to a qualified nominee or otherwise sell the same to a qualified vendee. Petitioners filed a motion to dismiss the aforesaid action on the following grounds: the SEC had no jurisdiction to try and hear the same; the petition failed to state TMBCs cause of action against petitioners; and the remedy of mandamus was improper. In the order dated June 14, 1999, the SEC through its SICD Hearing Panel denied said motion to dismiss. The subsequent motion for reconsideration of the said order was also denied in the order dated September 16, 1999. Thereafter, petitioners elevated the case to the SEC en banc by way of a petition for certiorari. Armed with the same arguments, petitioners sought to annul and set aside the twin orders of the SICD Hearing Panel. On March 7, 2000, the SEC en banc issued an Order 3 denying the petition, thus: WHEREFORE, PREMISES CONSIDERED, the instant Petition for Certiorari, with a prayer for the issuance of a Temporary Restraining Order and/or preliminary injunction is hereby DENIED. SO ORDERED. In time, petitioners filed with the CA a petition for review with prayer for the issuance of a temporary restraining order and writ of preliminary injunction maintaining the same grounds and urging the CA to annul and set aside the en banc order of the SEC and ultimately, order the dismissal of TMBCs mandamus petition against them. As stated at the threshold hereof, the CA, in the herein challenged decision dated November 20, 2000, dismissed the petition for lack of merit, to wit: All told, the SEC committed no reversible errors in issuing the assailed orders. WHEREFORE, the petition for review is DISMISSED for lack of merit. SO ORDERED.4 Their motion for reconsideration having been denied by the CA in its resolution of April 4, 2000,5 petitioners are now before the Court praying for the nullification of the CA decision dated November 20, 2000 and for the dismissal of the petition filed by TMBC docketed as SEC Case No. 08-98-6075 reiterating the same arguments. At the outset, the Court notes that upon the denial of their motion to dismiss by the SICD Hearing Panel, petitioners filed a petition for certiorari with the SEC en banc. An order denying a motion to dismiss is an interlocutory order which neither terminates nor finally disposes of a case, because it leaves something to be done by the court before the case is finally decided on the merits. The general rule is that the denial of a motion to dismiss cannot be questioned in a special civil action for certiorari which is a remedy designed to correct errors of jurisdiction and not errors of judgment. Neither can a denial of a motion to dismiss be the subject of an appeal unless and until a final judgment or order is rendered. 6 In order to justify the grant of the extraordinary remedy of certiorari, the denial of the motion to dismiss must

have been tainted with grave abuse of discretion amounting to lack or excess of jurisdiction.7 The same does not obtain here. The SEC en banc correctly sustained the SICD Hearing Panels denial of petitioners motion to dismiss. We quote with approval the findings of the SEC en banc on this matter: The hearing panel held that although it entertains doubts as to the truth of the facts averred, it shall not dismiss the complaint. We believe that the hearing panel exercised its judgment within its proper limits in issuing said order. On the contrary, the factual issues of the case are not merely confined to the question of membership, but also to the existence of the devices and schemes amounting to fraud as alleged by the petitioner below [TMBC]. If it is convinced that there are factual issues which should be discussed in the answer and ventilated during the trial on the merits, such as whether or not the transferor of the MSE was a PSE member, the rights of the successor-in-interest of a purported member of the PSE, Inc., and the evidence supporting the allegations of herein respondent [TMBC] regarding bad faith and fraud committed by PSE against TMBC, it is within the limits of its power considering the fact that there are evidence supporting its ruling. (Words in brackets ours.) We cannot fault the SICD Hearing Panel in requiring a more in-depth and thorough determination of issues raised before it. After all, the allegations in the mandamus petition sufficiently stated a cause of action against the petitioners. Verily, the complaint should contain a concise statement of ultimate facts. Ultimate facts refer to the principal, determinative, constitutive facts upon which rest the existence of the cause of action. The term does not refer to details of probative matter or particulars of evidence which establish the material elements. 8 Section 6 of the SEC Revised Rules of Procedure merely requires, thus: SECTION 6. Complaint - The complaint shall contain the names and residences of the parties, a concise statement of the ultimate facts constituting the complainants cause or causes of action. It shall specify the relief/s sought, but it may add a general prayer further or other relief/s as may be deemed just and equitable. In a number of cases, 9 this Court has repeatedly held that so rigid is the prescribed norm that if the Court should doubt the truth of the facts averred, it must not dismiss the complaint but require an answer and proceed to hear the case on the merits. It is axiomatic that jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint or the petition irrespective of whether the plaintiff is entitled to all or some of the claims or reliefs asserted therein. The three tribunals below are unanimous in appreciating TMBCs cause of action against petitioners and that the same falls within the ambit of Section 5(a) of P.D. 902-A, 10 as aptly ratiocinated by the CA in its ruling, thus: In the present case, it is our perception that what respondent TMBC alleged to be the device and scheme utilized by petitioners, was in the petition expounded exhaustively enough as to intelligently inform the petitioner about the overt acts therein referred to as constituting the device or scheme. For this reason, the SEC committed no error in refusing to dismiss the petition filed before it. xxx [T]he petition bristles with recitals of facts and statements demonstrating petitioners perpetration of devices and schemes amounting to fraud. xxx A careful study of the petition filed with the SEC by respondent TMBC reveals that the factual allegations therein set forth sufficiently make out a case of fraud, misrepresentation and bad faith against petitioners. Among the salient allegations

were: (1) that the MSE had already recognized the legal or naked ownership of respondent TMBC to MSE Seat No. 97, yet PSE, acting through its board of Governors, composed of members of the MSE, unjustifiably refused to recognize the corresponding seat in the PSE; (2) that TMBCs predecessor-in interest, Mr. Roberto K. Recio was issued a Certificate of Membership by the PSE; and (3) that Mr. Recio was consistently listed as member of the PSE in the PSEs Monthly Report. These allegations would suffice to constitute a cause of action against petitioners. That petitioners have a valid defense is another matter. At any rate, matters such as the propriety of the refusal of TMBCs membership to PSE and veracity of the assertion that MSE Seat No. 97 is separate and distinct from PSE Seat No. 29, among others, are best ventilated during trial. They require evidentiary proof and support that can be better threshed out in a full blown trial on the merits. These matters, indeed, would not yet go into the question of the absence of a cause of action as a ground to dismiss.11 As to the propriety of mandamus as a remedy, petitioners claim it was not their ministerial duty to acknowledge the proprietary, legal or naked ownership of TMBC over PSE Seat No. 29. True, the Court has invariably ruled that generally, the performance of an official act or duty, which necessarily involves the exercise of discretion or judgment, cannot be compelled by mandamus. However, the Court has also declared that the general rule does not apply in cases where there is gross abuse of discretion, manifest injustice, or palpable excess of authority. 12These exceptions apply to the present case. As aptly observed by the CA and we quote: It is beyond cavil that the MSE had already recognized the legal or naked ownership of private respondent to MSE Seat No. 97, but for reasons only known to them, the PSE Board of Governors, who are members of the MSE, adamantly refused to recognize the corresponding seat in the PSE. In fact, it is not seriously disputed that MSE Seat No. 97 became PSE Seat No. 29 upon the latters incorporation. Petitioners dubious claim that they could not acknowledge the proprietary interest of respondent TMBC over the seat since allegedly even respondent Roberto K. Recio was not a recognized member due to his failure to so apply is belied by the facts. For one thing Mr. Recio was issued a Certificate of Membership by the PSE. For another, Mr. Recios name has consistently appeared as a member of the PSE in the PSEs Monthly Report. Given these facts, it cannot be gainsaid that petitioners refusal to acknowledge respondent TMBCs proprietary right over PSE Seat No. 29 was grossly unjust and tyrannical and, therefore controllable by the extraordinary writ of mandamus. In fine, the Court finds no reversible error committed by the CA in affirming the order of the SEC and in rendering the herein challenged decision. 1avvphi1 On a final note, on July 18, 2000, prior to the promulgation of the assailed CA decision, Republic Act No. 8799 otherwise known as The Securities Regulation Code was enacted and upon its effectivity, the SECs jurisdiction over this case was transferred to the courts of general jurisdiction or the Regional Trial Courts. 13 WHEREFORE, the petition is DENIED and the assailed decision and resolution of the CA are AFFIRMED. Costs against the petitioners. SO ORDERED. PHILIPPINE BANK OF COMMUNICATIONS vs TRAZO

Petitioners are asking Us to reverse, in this Petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, the Decision 1 of the Court of Appeals dated 25 March 2004 and its Resolution 2 dated 23 September 2004 denying petitioners Motion for Reconsideration. The facts of the case are as follows: In order to facilitate the payment of her salaries and other monetary benefits from her employer, petitioner Philippine Bank of Communications (PBCOM 3), respondent Elenita B. Trazo opened a payroll account with China Banking Corporation (CBC) under Current Account No. 101-003921-9. On or about 29 December 1997, petitioner Romeo G. dela Rosa, PBCOM assistant vice-president, instructed CBC to credit all accounts under its payroll with the medical and clothing subsidy for the year 1998. Accordingly, respondent Trazos current account was credited on that date with the amount of P7,000.00 for such annual subsidy. On 31 December 1997, respondent Trazo, then project manager of the information technology and management group, resigned from PBCOM. Since respondent Trazo severed her employment with PBCOM effective 1 January 1998 and was, therefore, no longer entitled to the medical and clothing subsidy for the year 1998, petitioner dela Rosa wrote William Lim, CBC senior assistant vicepresident, on 5 January 1997 authorizing/directing CBC/Lim to debit the sum of P7,000.00 from respondent Trazos current account. Acting upon such authority/directive, CBC/Lim debited said amount from respondent Trazos account on the same date. Meanwhile, respondent Trazo drew checks against her current account in favor of Bliss Development Corporation (BDC) and the House of Sara Lee Phils., Inc. However, the checks were dishonored by CBC due to insufficiency of funds, which was occasioned by the P7,000.00 debit from her current account. Averring that PBCOM, through dela Rosa, had no authority to unilaterally order the debiting of her current account and that CBC, through Lim, made such debit without her knowledge and consent resulting in the dishonor of her checks, respondent Trazo instituted an action for damages against PBCOM, dela Rosa, CBC, and Lim before the Regional Trial Court (RTC) of Quezon City (Branch 79). Summons was served on CBC and Lim on 19 May 1998 and on petitioners herein, PBCOM and dela Rosa, on 27 May 1998. On 27 May 1998 and 11 June 1998, or before the expiration of the reglementary period for filing their answers, CBC and Lim, and PBCOM and dela Rosa, respectively, filed motions for 15-day extension of time. On 8 June 1998, respondent Trazo filed a Motion to Declare Defendants China Banking Corporation and William Lim in Default and Opposition to Motion for Extension of Time to File Answer and/or Responsive Pleading. On 15 June 1998, respondent Trazo filed a Motion to Declare Defendants Philippine Bank of Communication and Romeo G. dela Rosa in Default. On 16 June 1998, CBC and Lim filed a Motion to Dismiss the case on the ground of improper venue. On 24 June 1998, PBCOM and dela Rosa filed their own Motion to Dismiss on the ground that the complaint failed to state a cause of action. On 7 October 1998, the lower court issued an Omnibus Order granting the motions to dismiss and declaring the motions to declare defendants in default moot and academic. The dispositive portion of the Omnibus Order is as follows: PREMISES CONSIDERED, the case against defendants China Bank and William Lim is DISMISSED on the ground of improper venue. The case against defendants

Philippine Bank of Communications and Romeo G. dela Rosa is DISMISSED for lack of cause of action. 4 Respondent Trazo filed with the trial court a Notice of Appeal. In the assailed Decision, the Court of Appeals ruled in favor of respondent Trazo, disposing of the case in the following manner: WHEREFORE, the omnibus order dated October 7, 1998 of the Regional Trial Court of Quezon City (Branch 79) is REVERSED and SET ASIDE and the complaint REINSTATED. Appellant is given ten (10) days from notice of finality of this decision within which to amend the complaint. 5 Petitioners filed their Motion for Reconsideration on 14 April 2004, while CBC and Lim filed their Motion for Reconsideration on 19 April 2004. On 23 September 2004, the Court of Appeals issued the assailed Resolution wherein both motions for reconsideration were denied for lack of merit. Hence, the instant Petition, where petitioners PBCOM and Trazo bring before us the following issues: A. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE COMPLAINT STATED A CAUSE OF ACTION FOR DAMAGES AGAINST PETITIONERS ARISING OUT OF THE ALLEGED UNLAWFUL DEBITING OF RESPONDENTS CHINABANK ACCOUNT, NOTWITHSTANDING THAT IT WAS CHINABANK WHICH DEBITED THE ACCOUNT, NOT PETITIONERS. B. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE COMPLAINT PLEADED A CAUSE OF ACTION FOR ABUSE OF RIGHTS AGAINST PETITIONERS. C. WHETHER OR NOT THE COURT OF APPEALS ERRED IN ORDERING THE AMENDMENT OF THE COMPLAINT DESPITE THE COMPLAINTS ABSOLUTE FAILURE TO STATE A CAUSE OF ACTION AGAINST PETTIONERS. D. WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT THE VENUE CLAUSE IN THE APPLICATION FOR NEW CURRENT ACCOUNTS IS NOT EXCLUSIVE. 6 Only CBC, and not petitioners PBCOM and dela Rosa, can move for dismissal on the ground of improper venue. The Application for New Current Accounts, which embodies the terms and conditions of respondent Trazos relationship with CBC, contains a stipulation on venue, to wit: In case of litigation hereunder, venue shall be in the City Court or Court of First Instance of Manila as the case may be for determination of any and all questions arising thereunder. 7 The RTC of Quezon City dismissed the complaint against CBC and Lim based on this stipulation, but the Court of Appeals reversed said dismissal. According to the Court of Appeals, absent any qualifying or restrictive words, a stipulation on venue should be considered merely as an agreement on an additional forum, and not to be considered as limiting venue to the specified place. 8 Before proceeding any further, it bears to point out that among the multiple defendants in the case filed by respondent Trazo, only CBC and its officer Lim can assert the alleged impropriety of venue since they are privy to and covered by the contract containing the venue stipulation. Indeed, the dispositive portion of the RTC decision shows that the dismissal on the ground of improper venue was effective

only as against CBC and Lim. As CBC and Lim did not appeal the decision of the Court of Appeals reversing the RTC ruling, such decision has become final and executory as regards its disposition on the issue regarding venue. Nevertheless, We agree with the Court of Appeals that it was incorrect for the RTC to dismiss the complaint on the ground of improper venue. The parties must be able to show that the stipulation is exclusive. Thus, sans words expressing the parties intention to restrict the filing of a suit in a particular place, courts will allow the filing of a case in any of the venues prescribed by law or stipulated by the parties, as long as the jurisdictional requirements are followed. 9 The subject clause contains no qualifying nor restrictive words, such as "must," or "exclusively," as would indicate the parties intention "mandatorily to restrict the venue of actions to the courts of (Manila) only." 10In the 8 December 2000 case of Langkaan Realty Development, Inc. v. United Coconut Planters Bank, 11 where the venue stipulation contained the word "shall," 12 we held that the stipulations of the parties "lack qualifying or restrictive words to indicate the exclusivity of the agreed forum," 13 and therefore "the stipulated place is considered only as an additional, not a limiting venue." 14 Consequently, the dismissal by the RTC of the complaint against CBC and Lim on ground of improper venue is erroneous, and was correctly reversed by the Court of Appeals. Respondent Trazos complaint contains a cause of action against petitioners PBCOM and dela Rosa. As discussed above, the RTC dismissed the complaint, insofar as it operates against CBC and Lim, on the ground of improper venue. In the same Omnibus Order, the RTC also dismissed the same complaint on the ground of failure to state a cause of action, this time, insofar as the complaint operates against petitioners PBCOM and dela Rosa. The Court of Appeals, in reversing the Order of the RTC dismissing the complaint on the ground of failure to state a cause of action, held: Par. 13 of the complaint recites appellants alleged cause of action against [PBCOM and dela Rosa]. It reads: "13. Upon further personal inquiry with [PBCOM], [respondent Trazo] found out that on January 5, 1998 [petitioner] ROMEO G. DE LA ROSA, without [respondent Trazos] knowledge, consent and approval, wrote a letter and authorized/directed x x x CHINABANK and WILLIAM LIM `to debit the account of Elenita Trazo under C/A #101-003921-9 in the amount of PESOS: SEVEN THOUSAND PESOS ONLY P7,000.00 representing her medical and clothing subsidy for the year 1998. He even acknowledged and admitted that [respondent Trazo] resigned from PBCom effective December 31, 1997. He further stated that CHINABANK make the `Managers check payable to Philippine Bank of Communications. x x x." Crucial to appellants action against [PBCOM and dela Rosa] is the issue of whether the latter had the right to authorize/direct [CBC and Lim] to debit the amount of P7,000.00 from appellants current account and, if so, whether appellant was entitled to notice of such authority/directive. In authorizing/directing [CBC and Lim] to debit appellants current account, [PBCOM and dela Rosa] had, in effect, sought to recover, without resorting to a court action, an amount erroneously credited to her. And because appellant was not given the courtesy of a notice of such authority/directive, she was lulled into the belief that her funds at CBC were sufficient to cover the checks she was issuing. Nevertheless, the lower court ruled that the averment in par. 13 of the complaint is insufficient to make out a cause of action against [PBCOM and dela Rosa] on the theory that the "debit (of) the amount of P7,000.00 from the account of [respondent

Trazo] x x x cannot be attributed as the fault of (PBCOM) since the fiduciary relationship exists only between (CBC) and [respondent Trazo] as its depositor and the primary responsibility whether to deposit or not lies with (CBC) alone." However, the lower court did not consider whether the act of authorizing/directing CBC/Lim to debit appellants current account without giving notice to her constitutes a cause of action against [PBCOM and dela Rosa], for abuse of rights. The modern tendency is to depart from the classical and traditional theory and to grant indemnity for damages in cases where there is an abuse of rights, even when the act is not illicit (Sea Commercial Company, Inc. vs. Court of Appeals, 319 SCRA 210). But even supposing that the asserted act of [PBCOM and dela Rosa] is insufficient to make out a case of abuse of rights, the lower court could have simply ordered appellant to amend the complaint. Thus, Sec. 1, Rule 10, in relation to Sec. 3, Rule 16, id., allows amendment of pleadings before a responsive pleading is served. Amendment of the complaint, by way of supplementing and amplifying facts as would carve out a clear abuse of rights situation, would prevent multiplicity of suits. This is so because of Our ruling that the dismissal of the complaint against [CBC and Lim] on ground of improper venue is erroneous, with the effect that the complaint against them is reinstated. However, affirmance of the dismissal of the complaint against [PBCOM and dela Rosa] anchored on failure to state a cause of action would trigger the filing of a new action against the latter, thereby spawning two suits, i.e., the instant action and the new one. Amendment, not dismissal, of the complaint is proper to avoid multiplicity of suits (Eugenio, Sr. vs. Velez, 185 SCRA 425). The policy in this jurisdiction is that amendment of pleadings is favored and liberally allowed in the interest of substantial justice. Amendment of the complaint may be allowed even if an order for its dismissal has been issued provided that the motion to amend is filed before the order of dismissal acquired finality (Tirona vs. Alejo, 367 SCRA 17). Rules of Procedure, after all, are but tools designed to facilitate the attainment of justice (Valenzuela vs. Court of Appeals, 363 SCRA 779). 15 Petitioners argue that the afore-quoted paragraph 13 shows that PBCOM and dela Rosa merely requested CBC to debit the account of respondent Trazo, and that nothing in said paragraph shows that PBCOM and dela Rosa were actually responsible for the alleged unlawful debiting of respondents account. 16 As regards the Court of Appeals finding that the complaint contains a cause of action against petitioners for abuse of rights, 17 petitioners claim that the elements of abuse of rights are not found in the complaint, since no bad faith was imputed to PBCOM and dela Rosa in requesting the debiting of the amount stated, and since there was no allegation showing that PBCOM and dela Rosa acted with the sole intent of prejudicing or injuring respondent in requesting the same. 18 While we agree with petitioners that the complaint does not contain a cause of action against them for abuse of rights, their petition would, nonetheless, fail. A cause of action is an act or omission of one party in violation of the legal right of the other. 19 A motion to dismiss based on lack of cause of action hypothetically admits the truth of the allegations in the complaint. 20 The allegations in a complaint are sufficient to constitute a cause of action against the defendants if, hypothetically admitting the facts alleged, the court can render a valid judgment upon the same in accordance with the prayer therein. A cause of action exists if the following elements are present, namely: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on

the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages. 21 The Court of Appeals, like the RTC, seems to have acquiesced in the petitioners statement 22 that respondents cause of action against them is found exclusively in paragraph 13 of the complaint. An examination of the subject complaint, 23 however, reveals that it contains other provisions establishing the cause of action against petitioners PBCOM and de la Rosa, not the least of which is paragraph 23, which provides: 23. In debiting the checking/current account of the plaintiff, without her knowledge, consent and approval, defendants acted in a wanton, reckless and oppressive manner. Defendants PBCOM and ROMEO G. DE LA ROSA had no cause nor reason to unilaterally order the debiting of plaintiffs account as it was her personal property and not of defendant PBCOM. Even if defendant PBCOM erroneously credited plaintiff with monetary benefits, plaintiff was to receive, as she did receive separation benefits equivalent to more than FIVE HUNDRED THOUSAND PESOS (P500,000.00) more or less, from defendant PBCOM itself. A reasonable set-off or compensation should and could have been resorted to. However, defendant PBCOM never utilized this option. Defendant PBCOM neither informed plaintiff of said transaction, much less seek her approval and authority to debit her CHINABANK account when at the time of the debitting (sic), January 5, 1998, she was no longer an employee of PBCOM. (Emphasis supplied.) 24 As regards respondent Trazos entitlement to damages, the complaint recites that: In order not to jeopardize her housing loan obligations with BDC and Sara Lee, Phil., Inc., and considering the legal actions foisted against her, x x x [respondent Trazo] made immediate restitution to BDC and Sara Lee Phil., Inc. for her outstanding obligations, which included unwarranted charges and penalties which were not [respondent Trazos] making. 25 The Complaint also claims that the actions of defendants therein, including petitioners PBCOM and dela Rosa, caused "mental anguish, moral shock, besmirched reputation, social humiliation, serious fright and anxiety, sleepless nights and wounded feelings." 26 The same was reiterated in Annex K of said complaint, wherein respondent Trazo, through her legal representative, wrote to petitioner dela Rosa, in his capacity as Assistant Vice-President of petitioner PBCOM, stating: On January 5, 1997, you, as AVP of PBCOMs Human Resource Management Department, authorized CHINA BANKING CORPORATION to debit our clients account under C/A # 101-003921-9 in the amount of SEVEN THOUSAND PESOS (P7,000.00), representing her medical and clothing subsidy for the year 1998, without notifying our client, much less acquiring her consent and approval. However, our client resigned from PBCOM effective July 1, 1998, during which time the same account already ceased to be a payroll account. As a result of your action[,] our client incurred damages and injury in several personal transactions involving check payments made by her under said checking account with CHINA BANKING CORPORATION. This unfortunate incident caused her untold sufferings, not to mention lost opportunities in her profession and other businesses, besmirched reputation, sleepless nights, mental anguish and wounded feelings. 27 Paragraph 20 28 of the complaint makes its Annex K an integral part thereof.

We find a sufficient cause of action in the above-quoted allegations. If these allegations are assumed to be true, respondent Trazo would indeed be entitled to damages, though the amount of the same would still depend on the evidence presented during trial. We carefully scrutinize the allegations in the Complaint. It provides that "(d)efendants PBCOM and ROMEO G. DE LA ROSA had no cause nor reason to unilaterally order the debitting (sic) of plaintiffs account as it was her personal property and not of defendant PBCOM." 29 The Complaint also described the action of all defendants, including petitioners PBCOM and dela Rosa, as unjust and illegal, 30 and done in a wanton, reckless and oppressive manner. 31 The cause of action stated in the Complaint, therefore, consists in (1) a right in favor of the plaintiff, which in this case consists of a right to her personal property; 32 (2) an obligation on the part of the named defendant to respect her right to her personal property; and (3) an act of such defendant violative of the right of the plaintiff, which in this case is the order by petitioners to CBC and Lim to debit respondent Trazos account, an act which petitioners allege to have caused them damage. In the case at bar, the allegations in the complaint verily show a cause of action. To sustain a motion to dismiss for lack of cause of action, the Complaint must show that the claim for relief does not exist rather than that a claim has been defectively stated or is ambiguous, indefinite or uncertain. 33 We, however, disagree with the Court of Appeals when it decided that the allegations in the complaint show a cause of action against petitioners for abuse of rights under Article 19 34 of the Civil Code. The elements of abuse of rights are: (1) a legal right or duty; (2) which is exercised in bad faith; and (3) for the sole intent of prejudicing or injuring another. 35 Rather, the allegations bare commission of an act contrary to law under Article 20 of the same Code, which provides: Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same. Whereas Article 19 provides for a cause of action for damages in cases when there is no law violated, the act causing damage being within rights or duties of defendant, Article 20 furnishes a general sanction for violations of provisions of law which do not especially provide their own sanction. 36 The complaint clearly alleges a violation of respondent Trazos property rights with respect to her checking account. Article 429 of the Civil Code provides that the owner or lawful possessor of the thing has the right to exclude any person from the enjoyment and disposal thereof. Petitioners retort that the complaint did not base its claim for damages on Articles 19, 20 and 21 of the Civil Code,37 and faults the Court of Appeals for making out "a cause of action for respondent on grounds not even alleged in the Complaint. 38 We, however, have held in Consolidated Dairy Products, Co. v. Court of Appeals, 39 that the applicable law to a set of facts stated in the complaint need not be set out directly. Consequently, the complaint need not state that the property right alleged to have been violated is found in Article 429 of the Civil Code, or that such violation entitled petitioner Trazo to damages pursuant to Article 20 of the same Code, which provides a cause of action therefor. Petitioners claim that respondent failed to specify in the complaint the standard of proper conduct and decency required of PBCOM and the basis of invoking such standard on PBCOM 40 did not improve their position any. The complaint should state only ultimate facts, not conclusions of law, nor evidentiary facts. In determining whether the allegations of a complaint are sufficient to support a cause

of action, the complaint does not have to establish or allege the facts proving the existence of a cause of action at the outset; this will have to be done at the trial on the merits of the case. 41 Ultimate facts refer to the principal, determinative, constitutive facts upon the existence of which the cause of action rests. The term does not refer to details of probative matter or particulars of evidence which establish the material ingredients. 42 In their last ditch efforts to save their cause, petitioners assert that the duty to notify respondent regarding the debiting of her account properly belongs to CBC 43 and that, had CBC denied petitioners "request," then there would have been no alleged debit of respondents account. 44 Petitioners add that the mere act of "requesting" a bank to return a certain amount of money erroneously credited to one of the banks depositors cannot be considered an act which violates the rights of said depositor. 45 Petitioners allegations are in the nature of defenses, and, thus, cannot be considered in determining the sufficiency of the cause of action. For the complaint to be dismissed for failure to state the cause of action, the insufficiency of the cause of action must appear on the face of the complaint. 46 If the allegations in a complaint can furnish a sufficient basis by which the complaint can be maintained, the same should not be dismissed regardless of the defenses that may be assessed by the defendants. 47 WHEREFORE, the instant petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals, which reversed and set aside the Regional Trial Court of Quezon Citys 7 October 1998 Omnibus Order dismissing respondents complaint, are AFFIRMED. Costs against petitioners. SO ORDERED. NAMARCO vs FEDERATION OF UNITED NAMARCO Appeal by defendant, Federation of United Namarco Distributors, Inc., from a decision of the Court of First Instance of Manila in Civil Case No. 46124, ordering said defendant to pay the plaintiff, National Marketing Corporation the sum of P609,014.73, representing the cost of merchandise delivered to, and not paid for by, the defendant, with interest thereon at the legal rate from the date of delivery of the merchandise, until the whole obligation is paid; and the sum of P5,000.00, for and as attorney's fees and other expenses of litigation, plus costs. The facts of this case, which are not disputed by the parties, are correctly set forth in the appealed decision from which we reproduce hereunder, as follows: The plaintiff, hereinafter to be called the NAMARCO, is a government owned and controlled corporation duly organized and existing under and by virtue of Republic Act No. 1345, as amended; and the defendant, hereinafter to be called the FEDERATION, is a non-stock corporation duly organized and existing under and by virtue of the laws of the Philippines. On November 16, 1959, the NAMARCO and the FEDERATION entered into a Contract of Sale which contains the following stipulations, terms and conditions: "That, WHEREAS, by virtue of NAMARCO Board Resolution dated November 3, 1959, the Management of NAMARCO was authorized to import the following items with the corresponding dollar value totalling Two Million One Thousand Thirty One Dollars ($2,001.031.00), to wit: xxx xxx xxx

"That, WHEREAS, for and in consideration of the sum of Two Hundred Thousand Pesos (P200,000.00) as part payment of the items and/or merchandise abovementioned, and deposited by the FEDERATION with the NAMARCO upon signing of the items and/or merchandise above enumerated items and/or merchandise shall be paid on cash basis upon delivery of the duly indorsed negotiable shipping document covering the same, the NAMARCO agrees to sell the said items and/or merchandise subject to the following terms and conditions: xxx xxx xxx "1. That the FEDERATION shall pay the NAMARCO the value of the goods equivalent to the procurement costs plus 5% mark-up, provided, however, that should there be any adjustment in the procurement costs the same shall be refunded to the FEDERATION. "2. That all handling and storage charges of the goods sold shall be for the account of the FEDERATION. "3. That the FEDERATION waives its right to claim for any loss or damage that may be suffered due to force majeure such as war, riots, strikes, etc., except when such incident is directly or indirectly due to the negligence of the NAMARCO or its representative; "4. That the items and/or merchandise sold by NAMARCO to the FEDERATION shall be distributed among its members and retailers in accordance with NAMARCO's existing rules and regulation,, governing the distribution of NAMARCO goods and at the wholesale and retail prices to be determined by NAMARCO. xxx xxx xxx (Annex "A" to the Complaint or Exh. "A"). Among the goods covered by the Contract of Sale were 2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, 500 cartons of Adams Chicklets, 168 cartons of Blue Denims, and 138 bales of Khaki Twill. To insure the payment of those goods by the FEDERATION, the NAMARCO accepted three domestic letters of credit, to wit: PNB Domestic L/C No. 600570, dated January 27, 1960, in favor of the NAMARCO for the account of the FEDERATION, available by draft up to the aggregate amount of P277,357.91, covering the full invoice value of the 2,000 cartons PK-5 Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets; PNB Domestic L/C No. 600606, dated January 28, 1960, in favor of the NAMARCO for the account of the FEDERATION, available by draft up to the aggregate amount of P135,891.82, covering the full invoice value of the 168 cartons of Blue Denims; and PNB Domestic L/C No. 600586, dated January 28, 1960, in favor of the NAMARCO for the account of the FEDERATION, available by draft up to the aggregate amount of P197,804.12, covering the full invoice value of the 183 bales of Khaki Twill, each to be accompanied by statement of account of buyer issued by the NAMARCO, accepted draft and duly executed trust receipt approved by the Philippine National Bank. Upon arrival of the goods in Manila in January, 1960, the NAMARCO submitted to the FEDERATION Statement of Account for P277,357.91, covering shipment of the 2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets; Statement of Account of P135,891.32, covering shipment of the 168 cartons of Blue Denims; and Statement of Account of P197,824.12, covering shipment of the 183 bales of Khaki Twill or a total of P611,053.35, for the FEDERATION to pay. On January 29, 1960, the FEDERATION received from the NAMARCO the 2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, and 500

cartons of Adams Chicklets, all with a total value of P277,357.91, under the condition that the cost thereof would be paid in cash through PNB Domestic L/C No. 600570; and on February 20, 1960, the FEDERATION received from the NAMARCO the 168 cartons of Blue Denims and 183 bales of Khaki Twill, with a total value of P135,891.82 and P197,804.12, respectively, under the condition that the cost thereof would be paid in cash through PNB Domestic L/C Nos. 600606 and 600586, respectively. On March 2, 1960, the FEDERATION and some of its members filed a complaint against the NAMARCO, which became Civil Case No. 42684 of this Court for specific performance and damages, alleging that after the NAMARCO had delivered a great portion of the goods listed in the Contract of Sale, it refused to deliver the other goods mentioned in the said contract. The pertinent allegations of the complaint in that case is, as follows: "17. That now the defendant has refused and declined to accept the cash payments by the FEDERATION, in accordance with the terms and conditions stipulated in said contract, Annex "A" hereof, against deliveries to it of the commodities listed in paragraph 16 hereof, and has refused and declined to make deliveries thereof to the FEDERATION, in accordance with such terms and conditions; and that the plaintiffs have always been, and still are willing to take deliveries of the same commodities and to pay for them, through the FEDERATION, in accordance with the terms and conditions of said contract." (Exh. "1") On March 10, 1960, the NAMARCO presented to the Philippine National Bank, Manila, for payment Sight Draft, dated March 10, 1960, for P277,357.91, to cover the full payment of the 2,000 cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, and 500 cartons of Adams Chicklets, duly accompanied with supporting papers; Sight Draft, dated March 10, 1960, for P135,891.82, to cover the full payment of the 168 cartons of Blue Denims, duly accompanied with supporting papers; and Sight Draft, dated March 10, 1960, for P197,804.12, to cover the full payment of 183 bales of Khaki Twill, duly accompanied with supporting papers. On March 19, 1960, the NAMARCO filed in Civil Case No. 42684 its answer to the complaint, alleging that the Contract of Sale was not validly entered into by the NAMARCO and, therefore, it is not bound by the provisions thereof, without setting up any counterclaim for the value of the goods which it had already delivered but which had not yet been paid for by the FEDERATION. "On May 19, 1960, the Philippine National Bank informed the NAMARCO that could not negotiate and effect payment on the sight drafts drawn under PNB Domestic L/C Nos. 600570, 600606 and 606586, in the amounts of P277,357.91, P135,891.82 and P197,804.12, respectively, as the requirements of the covering letters of credit had not been complied with. The common condition of the three letters of credit is that the sight drafts drawn on them must be duly accepted by the FEDERATION before they will be honored by the Philippine National Bank. But the said drafts were not presented to the FEDERATION for acceptance. On June 7, 1960, the NAMARCO demanded from the FEDERATION the payment of the total amount of P611,053.35, but the latter failed and refused to pay the said amount, or any portion thereof, to the NAMARCO. In the readjustment made on the basis of actual expenditures, the total cost of the goods was reduced from P611,053.35 to P609.014.73. On October 15, 1960, the Court of First Instance of Manila promulgated its decision in Civil Case No. 42684, ordering the NAMARCO to specifically perform its obligation in the Contract of Sale, by delivering to the FEDERATION the undelivered goods.

On November 11, 1960, the NAMARCO appealed from the decision. On March 31, 1962, the Supreme Court 1 rendered a decision on NAMARCO's appeal in Civil Case No. 42684, holding that the Contract of Sale was valid." (Record on Appeal, pp. 6371, Civil Case No. 46124.) On January 25, 1961, NAMARCO instituted the present action (Civil Case No. 46124) alleging, among others, that the FEDERATION'S act or omission in refusing to satisfy the former's valid, just and demandable claim has compelled it to file the instant action; and praying that the FEDERATION be ordered to pay the NAMARCO the sum of P611,053.35, representing the cost of merchandise mentioned in the preceding paragraph, with interest thereon at the legal rate from the date of delivery of the merchandise in question, until the whole obligation is paid; P20,000.00 as attorney's fees and other expenses of litigation, plus costs. On February 7, 1961, the FEDERATION moved to dismiss the complaint on the ground that the cause of action alleged therein is barred forever, pursuant to Section 6 of Rule 10 of the Rules of Court. In support thereof, the FEDERATION alleged that on March 2, 1960, the FEDERATION and some of its members instituted Civil Case No. 42684 against NAMARCO for specific performance to enforce compliance with the contract of sale; that said contract, basis of Civil Case No. 42684, is also the basis of NAMARCO's present complaint in Civil Case No. 46124; that when NAMARCO filed, on March 19, 1960, its answer to the complaint in Civil Case No. 42684, it did not set up any counterclaim therein; that on October 15, 1960, the Court of First Instance of Manila promulgated the decision in said Civil Case No. 42684, ordering, among others, the NAMARCO to specifically perform its obligation under the contract of sale by delivering to the FEDERATION the goods subject-matter of the contract as are involved in the complaint; that the claim of NAMARCO against the FEDERATION matured either on May 19, 1960 when the Philippine National Bank, Manila, informed the NAMARCO that it could not effect payment on the sight drafts, or on June 7, 1969 when NAMARCO demanded payment of the sum of P611,053,35; that the FEDERATION refused to pay said amount; that NAMARCO's claim in the present case, Civil Case No. 46124, against the FEDERATION alone, being a compulsory counterclaim against the latter, in that it arose out of or is necessarily connected with the transaction or occurrence that is the subject-matter of the action of the FEDERATION in Civil Case No. 42684 against the NAMARCO and therefore it must have been set up in said Civil Case No. 42684 in the manner prescribed by section 4, Rule 10 of the Rules of Court, and within the time between March 19, 1960, the date of filing, in Civil Case No. 42684, of the answer of NAMARCO, and October 15, 1960, the date of the decision in that case; and that the failure of NAMARCO to set up, in said Civil Case No. 42684, such a counterclaim, precludes NAMARCO from raising it as an independent action, pursuant to Section 6 of Rule 10 of the Rules of Court. On February 11, 1961, NAMARCO interposed its opposition to said motion to dismiss contending that its claim for the recovery of the cost of merchandise delivered to the FEDERATION on January 29 and February 20, 1960 is not necessarily connected with the suit in Civil Case No. 42684 for specific performance and, therefore, does not fall under the category of compulsory counterclaim; that NAMARCO's failure to set it up as a counterclaim in its answer in Civil Case No. 42684 does not constitute res judicata; that the deliveries of the merchandise were effected through the fault or negligence of one of its personnel, Juan T. Arive, who was administratively charged therefor, found guilty and accordingly dismissed; that the issue in Civil Case No. 42684, was the genuineness and due execution of said

contract as the same was entered into by the General Manager of the NAMARCO without the knowledge, consent and approval of the Board of Directors and that the same was not approved by the Auditor General conformably with Administrative Order No. 290 dated February 3, 1959 of the President of the Philippines and therefore it would have been inconsistent for NAMARCO to avail itself of the contract the validity of which it was impugning, to enforce its claim; and that the present claim is not necessarily connected with the transaction or occurrence that is the subject matter of Civil Case No. 42684, as the same evidence would not support or refute both. On February 18, 1961, the FEDERATION filed a rejoinder reiterating that the requirements on the rule of compulsory counterclaim are present; that the first requirement that the counterclaim arises out of or is necessarily connected with the contract of sale subject-matter of NAMARCO's cause of action is evident from the face of the complaint itself. On June 3, 1961, the lower court issued an order holding "in abeyance" action on the motion to dismiss till after the trial on the merits. On June 14, 1961, the FEDERATION filed its answer to the NAMARCO's complaint admitting some material averments of the complaint, specifically denying other allegations and consistently with its position averred as affirmative defense that NAMARCO's failure to assert its claim against the FEDERATION before judgment in Civil Case No. 42684 on October 15, 1960 constituted a bar to the institution of the present action. By way of counterclaim, the FEDERATION sought P50,000.00 as attorney's fees and other expenses of litigation, as well as P17,000.00 as damages for improper issuance of a writ of attachment which writ, evidently had been issued earlier by the court. On June 21, 1961, NAMARCO filed an answer to the FEDERATION'S counterclaim specifically denying the material averments thereof and maintaining that the present action is not barred by Civil Case No. 42684. On January 13, 1964, after due hearing, the lower court rendered its aforementioned decision. Hence, the present appeal. In this appeal, the FEDERATION contends that: I The lower court erred in failing to hold that the complaint does not state a cause of action against the defendant-appellant; II The lower court erred in holding that the plaintiff-appellee's claim is not a compulsory counterclaim as defined and governed by section 6, Rule 10 of the old Rules of Court (Section 4, Rule 9 of the new); III The lower court erred in entering judgment in favor of the plaintiff-appellee and ordering defendant-appellant to pay the former the sum of P609,014.73 with interest thereon at the legal rate from the date of delivery of the merchandise, and the sum of P5,000.00 for and as attorney's fees and other expenses of litigation, with costs. We shall first proceed because of its decisive significance, with the issue posed by appellant in its second assignment of error ... whether or not this action of NAMARCO for the collection of the payment of the merchandise delivered to, but not yet paid by, the FEDERATION, is already barred as a consequence of the failure of NAMARCO to set it up as a counterclaim in the previous case, (Civil Case No. 42684).

In ruling that the present claim of NAMARCO is not compulsory counterclaim, that should have been asserted in the previous case the lower court had the following to say: As to the meaning of the terms "transactions" and "occurrence" used in Section 6, Rule 10, Rules of Court, Francisco in his annotations and commentaries on the Rules of Court, Vol, I, p. 577, cites the following: "The terms "transaction" and "occurrence" used in the section now under consideration include the facts and circumstances out of which a claim may arise, and whether two claims arise out of the same transaction or occurrence depends in part on whether the same evidence would support or refute both. (Williams v. Robinson, 3 Federal Rules Service, 174). These terms are broader than the term "contract", and authorize matters to be counter-claimed which could not be counterclaimed as arising out of the contract sued upon by the plaintiff. This is obvious, for while a contract is a transaction, a transaction is not necessarily a contract. One of the definitions of the term "transaction" is, "a matter or affair either completed or in course of completion." (Story, etc., Commercial Co. v. Story, 100 Cal. 35, 34 Pac. 671). "Mr. Pomeroy defines the term as "that combination of acts and events, circumstances and defaults which viewed in one aspect results in the plaintiff's right of action, and viewed in another aspect results in the defendant's right of action. ... As these two opposing rights cannot be the same, it follows that there may be, and generally must be, acts, facts, events, and defaults in the transaction as a whole which do not enter into each cause of action." Every transaction is more or less complex, consisting of various facts and acts done by the respective parties and it frequently happens that one or more of these acts, if viewed by itself, may be such a violation of duty as to give to the other a right of action; but the obligation thus created may be so counter-balanced by other matters growing out of the same transaction that no compensation ought to be made therefor. Insuch a case, simple equity requires that the respective causes of action in behalf of each be adjusted in a single suit." (Story, etc., Commercial Co. v. Story, 100 Cal. 35, 34 Pac. 671). What is the "transaction or occurrence that is the subject-matter of the opposing party's (FEDERATION'S) claim' in Civil Case No. 42684? It must consist in "the facts and circumstances out of which a claim may arise", or it must be "that combination of acts and events, circumstances and defaults which viewed in one aspect results in the plaintiff's right of action, and viewed in another aspect results in defendant's right of action. The complaint of the FEDERATION against the NAMARCO in Civil Case No. 42684 was predicated on the refusal of the latter to perform its obligation under the Contract of Sale. The refusal of the NAMARCO to perform its obligation under the Contract of Sale is the act or the event, the circumstance or default, which constitutes the transaction or the occurrence. The FEDERATION contends that NAMARCO's claim arose out of that transaction or occurrence, or was necessarily connected with that transaction or occurrence, because the cause of action of the FEDERATION in Civil Case No. 42684 and the cause of action of the NAMARCO in this case are based on the same Contract of Sale. But it will be noted that one of the requisites for the application of the rule on compulsory counterclaim is that the counterclaim should at least be connected with or must arise out of the transaction or occurrence which gave rise to the opposing party's claim.

To illustrate the meaning of that requisite, the following cases are cited: "1. In a former suit, B claimed realty under a will of her deceased husband and L claimed the same as a forced heir. After judgment dividing the property and requiring B to turn over a part of the same to L, this suit was brought by B to recover the value of the improvements made on the property during the time she had possession of the same. Defendant pleaded res adjudicata alleging that B should have made a counterclaim in the first action. Held: That the former suit was a petition for the inheritance and the present one being a claim for improvement is in no wise connected with the principal object of the former litigation and that a counterclaim could not properly have been presented in the first action (Bautista v. Jimenez, 24 Phil. 111). "2. Mariano executed an instrument purporting to be a deed of conveyance of two parcels of land in favor of Maclan. About a year later, Mariano instituted an action (Civil Case No. 106) against Maclan for the annulment of the said instrument on the ground of fraud and the recovery of the property. Judgment was rendered in favor of Mariano. About two years later, Maclan filed a complaint against Garcia who acquired the property by inheritance from Mariano, for the purpose of recovering the sum of P5,200.00 as necessary expenses allegedly incurred in the preservation of said property prior to the commencement of case No. 106, Held: It is clear that the claim for repairs or necessary expenses allegedly made by Maclan in the property in dispute in case No. 106, is necessarily connected with the action of the plaintiff therein to recover said property from Maclan. Said connection is substantially identical with that which exists between an action for recovery of a land and the claim for improvements therein made by the defendant in said case. It is well settled that such claim for improvements is barred unless set up by recovery of the land (Bautista v. Jimenez, 24 Phil. 111; Berses v. Villanueva, 25 Phil. 473; Lopez v. Gloria, 40 Phil. 76; Beltran v. Valbuena, 53 Phil. 697; Calit v. Giness and Hernandez, 62 Phil. 451). The right of the NAMARCO to the cost of the goods existed upon delivery of the said goods to the FEDERATION which, under the Contract of Sale, had to pay for them. Therefore, the claim of the NAMARCO for the cost of the goods delivered arose out of the failure of the FEDERATION to pay for the said goods, and not out of the refusal of the NAMARCO to deliver the other goods to the FEDERATION . The action of the FEDERATION in Civil Case No. 42684, based on the refusal of the NAMARCO to deliver the other goods, had nothing to do with the latter's claim for the cost of the goods delivered and, hence, such claim was not necessarily connected therewith. ... The claim of the NAMARCO in this case could have been a permissive counterclaim, but is not a compulsory counterclaim, in Civil Case No. 42684. . While the Contract of Sale created reciprocal obligations between the FEDERATION and the NAMARCO, the refusal of the latter to deliver the other goods was not due to the failure of the FEDERATION to pay for the goods delivered, but rather to the fact that it believed, as alleged in its answer in Civil Case No. 42684, that the Contract of Sale was not validly entered into by it. Such being the case, the failure of the FEDERATION to pay for the goods delivered could not have been properly raised by the NAMARCO as a defense or pleaded as a compulsory counterclaim in Civil Case No. 42684. However, had the NAMARCO alleged its present claim in Civil Case No. 42684, the Court would have permitted it. A permissive counterclaim is one which does not arise out of, or is not necessarily connected with, the transaction or occurrence that is the subject-matter of the opposing party's claim .

Since the cause of action of the FEDERATION in Civil Case No. 42684 is such that the claim of the NAMARCO in this case could not properly be pleaded as a compulsory counter-claim in that case, the NAMARCO is not precluded from bringing this present action. Section 6, Rule 10, Rules of Court, is not applicable. 2 (Emphasis supplied.) This ruling of the court a quo is now assigned as error by the FEDERATION for it is its position that the previous action which it filed against NAMARCO, for specific performance to compel NAMARCO to deliver the goods, was predicated upon the contract of sale of November 16, 1959 executed by the FEDERATION and NAMARCO who are the same parties, both in the previous case as well as in the present case, (Civil Case No. 46124) and therefore this action must be considered as having arisen out of or is necessarily connected with the transaction or occurrence that was the subject matter of the previous case. It is the theory of the FEDERATION that the applicable guiding principle is "that there be a logical relationship between" plaintiff's claim and defendant's counterclaim. It insists that "logical relationship" exists between the previous action for specific performance (Civil Case No. 42684) and NAMARCO's present action for the payment of the goods delivered as (a) both actions are derived from the same contract of sale; and (b) the two actions are but the consequences of the reciprocal obligation imposed by law 3 upon the parties by virtue of the aforesaid contract. The alleged failure of the FEDERATION to pay for goods delivered should therefore have been raised by NAMARCO as a defense or counterclaim in the previous case notwithstanding the fact that said claim only accrued after NAMARCO's answer was filed in said Civil Case No. 42684 because NAMARCO could have set it up as a counterclaim in a supplemental pleading pursuant to section 4 of Rule 1 of the old Rules of Court. 4 On the other hand, NAMARCO insists that the same evidence or substantial identity in the evidence criterion should be applied in determining whether or not its claim is compulsory, ... and on the basis of such test its claim could not be considered compulsory, because: (a) the evidence presented to support the genuineness and due execution of the contract of sale as ground for specific performance in Civil Case No. 42684, is not the same as the evidence presented to support NAMARCO's claim for recovery of the cost of the merchandise received by the FEDERATION, subject of the instant appeal; (b) for NAMARCO in Civil Case No. 42684 to interpose its claim for the payment of the goods delivered pursuant to the contract of sale, and thus seek in effect the enforcement of said contract, would have been inconsistent with its defense that the same contract was a nullity and (c) in any event, such claim could neither have been asserted as a counterclaim by NAMARCO in its answer, filed on March 19, 1960, to the complaint in Civil Case No. 42684, for it had no cause of action as yet against the FEDERATION as, under the rule, a claim to be available as a counterclaim to an action must be due and owing at the time of the commencement of the action, nor could NAMARCO file it as a counterclaim based on a contingent demand for the same cannot be allowed. I 1. The rule on compulsory counterclaim contained the section 6 of Rule 10 of the old Rules of Court, 5 is taken from section 97 of Act No. 190. 6 This rule is substantially the same as Rule 13 (a) of the Federal Rules of Civil Procedure. 7 This rule is "mandatory" because the failure of the corresponding party to set it up will bar his right to interpose it in a subsequent litigation. 8 Under this Rule, counterclaim not set up shall be barred if the following circumstances are present: (1) that it arises out of, or is necessarily connected with, the transaction or

occurrence that is the subject matter of the opposing party's claim (2) that it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (3) that the court has jurisdiction to entertain the claim. 9 Conversely, a counterclaim is merely permissive and hence is not barred if not set up, where it has logical relation with the transaction or occurrence that is the subject matter of the opposing party's claim, or even where there is such connection, the court has no jurisdiction to entertain the claim or it requires for its adjudication the presence of third persons of whom the court cannot acquire jurisdiction. 10 The first requisite that the claim should arise out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party's claim, may give rise to the critical question: What constitutes a "transaction" or "occurrence"? On this point the lower court has conveniently embodied in its decision, quoted elsewhere herein, the meaning of the terms "transaction" or "occurrence", as defined in Williams v. Robinson,11and in Pomeroy's Treatise on Remedies and Remedial Rights. 12 The formulation in Williams v. Robinson shows the futility of attempting to reduce the term "transaction" or "occurrence" within the context of an all-embracing definition. Such formulation does not adequately answer every question whether a particular claim is compulsory in character. As a matter of fact most courts, rather than attempting to define the key terms of the rule on compulsory counterclaim, 13 have preferred to suggest certain criteria or tests by which the compulsory or permissive nature of specific counterclaims can be determined. Wright & Miller in their Federal Practice and Procedure 14 summarize them as follows: 1. Are the issues of fact and law raised by the claim and counterclaim largely the same? 2. Would res judicata bar a subsequent suit on defendant's claim absent the compulsory counterclaim rule? 3. Will substantially the same evidence support or refute plaintiff's claim as well as defendant's counter-claim? 4. Is there any logical relation between the claim and the counter-claim? An affirmative answer to each of the foregoing questions suggests that the counterclaim is compulsory. These tests or standards have been the object of extensive analysis and criticisms, as follows: The first test ... identity of issues, 15 had been considered of doubtful utility for it assumes that, in order to protect himself from inadvertently losing the right to present his claim in a later action, defendant will be both motivated and able to determine before answering whether his claim must be asserted as a compulsory counterclaim. ... Yet, no one can be certain what the issues are until after the pleadings are closed and discovery is underway, and in many instances the issues are not really formulated until the pre-trial conference. The second test ... that the counterclaim is compulsory if it would be barred by res judicata, 16 has been judicially recognized by some courts as "the acid test" for distinguishing compulsory from permissive counterclaim. As aptly stated by Judge Frank in a dissenting opinion: ... Everyone agrees, too, that, if a counterclaim is not "compulsory"' it is "permissive" and that the following is the acid test in distinguishing the two: If a defendant fails to set up a "compulsory" counterclaim, he cannot in a later suit assert it against the plaintiff, since it is barred by res judicata; but if it is "permissive", then it is not thus barred. To put it differently, if a counterclaim is the

kind not thus barred, it is "permissive." We can have recently employed that test; see Claim v. Kastar, 2 Cir., 138 F. 2d 828, 830; See also Moore, Federal Practice, 682; Clark, Code Pleading, 447; Big Cola Corp. v. World Bottling Co., 6 Cir., 134 F. 2d 718. 17 This criterion has however been found inadequate as an overall standard. The third test ... same evidence or substantial identity in the evidence relating to the claim and counterclaim 18 has been considered satisfactory if used with caution. A test based on similarity of evidence appears reasonable considering that the very purpose of making certain types of counterclaims compulsory is to prevent the relitigation of the same set of fact. However, it has been shown that some counterclaims may be compulsory even if they do not meet this test. For instance in an action to void an insurance policy on the ground of fraud, in which there is a counterclaim for the amount of the loss covered by the policy, the evidence of fraud is apt to be entirely different from the evidence as to the loss suffered by the insured (Mercury Ins. Co. v. Verea Ruegg, D.C.N.Y. 1949, 12 F.R. Serv. 13a.11 case 2) or an action for earned freight with counterclaims for damages to cargo, demurrage and expenses due to the unseaworthiness of the vessel (Eastern Transp. Co. v. U.S., C.A. 2d. 1947, 159 F. 2d. 349). The fourth test ... the logical relationship between the claim and counterclaim has been called "the one compelling test of compulsoriness" 19 It was enunciated in the leading case of Moore v. New York Cotton Exchange. 20 Under this test, any claim a party has against an opposing party that is logically related to the claim being asserted by the opposing party and that is not within the exceptions to the rule, is a compulsory counterclaim. Its outstanding quality is its flexibility. On the other hand this flexibility necessarily entails some uncertainty in its application because of its looseness and potentially over broad scope. This difficulty notwithstanding, of the four judicially formulated criteria it has by far attained the widest acceptance among the courts. An examination of the cases on compulsory counterclaims may help clarify and illuminate the judicial application of the "logical relation test". In the leading case of Moore v. New York Cotton Exchange (1926, 46 S.Ct 367, 371, 270 U.S. 593, 70 L.Ed 750, 45 A.L.R. 1370) the logical relation or connection between the defendant's counterclaim and the plaintiff's claim has been explained thus: The bill sets forth the contract with the Western Union and the refusal of the New York Exchange to allow appellant to receive the continuous cotton quotations, and asks a mandatory injunction to compel appellees to furnish them. The answer admits the refusal and justifies it. The counterclaim sets up that, nevertheless, appellant is purloining or otherwise illegally obtaining them, and asks that this practice be enjoined. "Transaction" is a word of flexible meaning. It may comprehend a series of many occurrences, depending not so much upon the immediateness of their connection as upon their logical relationship . The refusal to furnish the quotations is one of the links in the chain which constitutes the transaction upon which appellant here bases its cause of action. It is an important part of the transaction constituting the subject-matter of the counterclaim. It is the one circumstance without which neither party would have found it necessary to seek relief. Essential facts alleged by appellant enter into and constitute in part the cause of action set forth in the counterclaim. That they are not precisely identical, or that the counterclaim embraces additional allegations, as for example, that appellant is unlawfully getting the quotations, does not matter. To hold otherwise would be to rob this branch of the rule of all serviceable meaning, since the facts

relied upon by the plaintiff rarely, if ever, are, in all particulars, the same as those constituting the defendant's counterclaim. Compare Xenia Branch Bank v. Lee, 7 Abb. Pr. 372, 390-394. And see generally, Cleveland Engineering Co. v. Galion Dynamic Motor Truck Co. supra, p. 408 [243 Fed.] Champion Spark Plug Co. v. Champion Ignition Co. (D.C.) 247 Fed. 200, 203-205. So close is the connection between the case sought to be stated in the bill and that set up in the counterclaim, that it only needs the failure of the former to establish a foundation for the latter; but the relief afforded by the dismissal of the bill is not complete without an injunction restraining appellant from continuing to obtain by stealthy appropriation what the court had said it could not have by judicial compulsion. 21 It must be observed that in Moore, the important link which established that "logical relation" between plaintiff Moore's claim and defendant New York Cotton Exchange's counterclaim, is the refusal of the latter to furnish to the former cotton price quotations because of its belief that Moore was purloining or otherwise illegally obtaining its cotton price quotations and distributing them to bucketshops. As the Court pointed out "It is an important part of the transaction constituting the subject matter of the counterclaim. It is the one circumstance without which neither party could have found it necessary to seek relief. ... So close is the connection between the case sought to be stated in the bill and that set up in the counterclaim, that it only needs the failure of the former to establish a foundation for the latter; but the relief afforded by the dismissal of the bill is not complete without an injunction restraining appellant from continuing to obtain by stealthy appropriation what the court held it could not have by judicial compulsion." A review of decided cases in this jurisdiction on compulsory counterclaims likewise demonstrates the nexus between plaintiff's claim and defendant's counterclaim showing the "logical relation" between the two. Thus in actions for ejectment, 22 or for the recovery of possession of real property, 23 it is well settled that the defendant's claims for value of the improvements on the property or necessary expenses for its preservation are required to be interposed in the same action as compulsory counterclaims. In such cases it is the refusal of the defendant to vacate or surrender possession of the premises that serves as the vital link in the chain of facts and events, that constitutes the transaction upon which the plaintiff bases his cause of action. It is likewise an "important part of the transaction constituting the subject matter of the counterclaim" of defendant for the value of the improvements or the necessary expenses incurred for the preservation of the property. For they are off-shoots of the same basic controversy between the parties which is the right of either to the possession of the property. While the refusal of NAMARCO to deliver the remainder of the goods contracted for in its "trade assistance agreement" with FEDERATION, is the important link in the chain of facts and events that constituted the transaction upon which Federation's cause of action was based in Civil Case No. 42684, it is not even a part of the transaction constituting the subject matter of NAMARCO's present suit. For the action of FEDERATION on March 2, 1960, to compel NAMARCO to recognize the validity of their agreement and deliver the remainder of the goods to be paid "on cash basis" in no way involved the payment of the merchandise worth P609,014.73, already delivered and paid for in cash by means of the domestic letters of credit. When the domestic letters of credit were subsequently dishonored by the Philippine National Bank on May 19, 1960 compelling NAMARCO to send on June 7, 1960 a letter of demand for payment to FEDERATION which the latter

received on July 5, 1960, but which it apparently ignored and because of such inaction NAMARCO therefore sued FEDERATION for payment on January 25, 1961, such non-payment by FEDERATION was a matter which was distinct and separate from and had no logical relationship with the subject matter of FEDERATION's own suit. These two claims are separate and distinct, as they involve totally different factual and legal issues and do not represent the same "basic controversy". A counterclaim has been held to be compulsory if there is a logical relationship between it and the main claim. Thus, in Great Lakes Rubber Corporation v. Herbert Cooper Co., 286 F. 2d 631 (1961), Judge Biggs speaking for the Third Circuit Court said this: "We have indicated that a counterclaim is compulsory if it bears a "logical relationship" to an opposing party's claim. Zion v. Sentry Safety Control Corp. , 3 Cir., 1959. 258 F. 2d 31. See also United Artists Corp. v. Masterpiece Productions, Inc. 2 Cir., 1955, 221 F. 2d 213, 216. The phrase "logical relationship" is given meaning by the purpose of the rule which it was designed to implement. Thus, a counterclaim is logically related to the opposing party's claim where separate trials of each of their respective claims would involve a substantial duplication of effort and time by the parties and the courts. Where multiple claims involve many of the same factual issues, or the same factual and legal issues, or where they are offshoots of the same basic controversy between the parties, fairness and considerations of convenience and of economy require that the counterclaimant be permitted to maintain his cause of action. ... 24 II But even assuming for the nonce that NAMARCO's present claim is logically related to the claim of the FEDERATION in the previous case, NAMARCO's claim having accrued or matured after the service of its answer in the earlier case is in the nature of an after-acquired counterclaim which under the rules is not barred even if it is not set up in the previous case as a counterclaim. An after-acquired counterclaim, is one of the recognized exceptions to the general rule that a counterclaim is compulsory and must be asserted if it arises out of the same transaction as the opposing party's claim. Although the claim arises out of the transaction or occurrence three exceptions are made to the compulsory requirement that it be pleaded. They are: (1) Time of Filing. The claim which is the basis of the counterclaim must be in existence at the time of "counter-claimant" files his pleading. Thus if P sues A and A does not have a claim arising out of the transaction or occurrence of P's suit at the time A files his answer A is not obliged to plead such a claim, although one arises subsequent to the filing of his answer. 25 Wright & Miller, Federal Practice and Procedure, 26 explain this exception to the compulsory counterclaim requirement thus: The first exception is that the party need not assert a counterclaim that has not matured at the time he serves his pleading. This is derived from the language in the rule limiting its application to claims the pleader has "at the time of serving the pleading." A counterclaim acquired by defendant after he has answered will not be considered compulsory, even if it arises out of the same transaction as does plaintiff's claim. Similarly, a counterclaim acquired by plaintiff after he has replied to a counterclaim by defendant is not compulsory under Rule 13(a). However, if a party should acquire a matured counterclaim after he has pleaded, Rule 13(e)

provides that he may obtain the court's permission to include it in a supplemental pleading under Rule 15(d). 27 A counterclaim may be asserted under Rule 13(e) only by leave of court, which usually will be granted in order to enable the parties to litigate all the claims that they have against each other at one time thereby avoiding multiple actions. However, Rule 13(e) is permissive in character. An after-acquired counterclaim, even if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim, need not be pleaded supplementally; the after-acquired claim is not considered a compulsory counterclaim under Rule 13(a) and a failure to interpose it will not bar its assertion in a later suit. The decision to grant or deny a motion to serve a supplemental counterclaim is totally within the trial court's discretion. 28 The provisions of Rule 13 of the Federal Rules of Civil Procedure, adverted to in the preceding commentaries and decisions of the federal courts, have been engrafted into our procedural rules. Thus section 3 of Rule 10 29 of the former Rules of Court was taken from Rule 13 (a) and (g) of the Federal Rules of Civil Procedure, while sections 4 and 6 of same Rule 10, 30 were taken, respectively, from Rule 13(e) and (a) of the said Federal Rules. 31 It is a rational rule of statutory construction that a statute adopted from another state or country will be presumed to have been adopted with the construction placed upon it by the courts of that state or country before its adoption. Such construction is regarded as of great weight, or at least persuasive and will generally be followed if sound and reasonable, and in harmony with justice and public policy, and with other laws of the adopting jurisdiction on the subject. 32 And while the construction of a statute by courts of the original state after its adoption by another, may have no controlling effect on the adopting state, it may be strongly persuasive and will be followed when it is considered to give true force and effect to the statute." 33 We find no cogent reason why such uniform and settled construction of Rule 13 of the Federal Rules should not be applied in the interpretation of the aforesaid sections of Rule 10 of the old Rules of Court. Thus while Section 6 of Rule 10 of the old Rules defines a compulsory counterclaim as a claim that "arises out of or is necessarily connected with, the transaction or occurrence that is the subject-matter of the opposing party's claim," Section 3 of the same rule, requires that such counterclaim must be in existence "at the time" the counter-claimant files his answer. The counterclaim must be existing at the time of filing the answer, though not at the commencement of the action for under Section 3 of the former Rule 10, the counterclaim or cross-claim which a party may aver in his answer must be one which he may have "at the time" against the opposing party. That phrase can only have reference to the time of the answer. 34 Certainly a premature counterclaim cannot be set up in the answer. This construction is not only explicit from the language of the aforecited provisions but also serves to harmonize the aforecited sections of Rule 10, with section 4 of the same rule which provides that "a counterclaim ... which either matured or was acquired by a party after serving his pleading may, with the permission of the court, be presented as a counterclaim ... by supplemental pleading before judgment." Thus a party who fails to interpose a counterclaim although arising out of or is necessarily connected with the transaction or occurrence of the plaintiff's suit but which did not exist or mature at the time said party files his answer is not thereby

barred from interposing such claim in a future litigation. However such claim may with the court's permission be included in the same case by way of supplemental pleading before judgment under Section 4 of the former Rule 10 of the Rules (now Sec. 9 of Rule 6). And the same may be allowed unless the case has progressed so far that it may be inconvenient or confusing to allow the additional claim to be pleaded. 35 We therefore rule that NAMARCO's present action, is not barred by its failure to assert it as a counterclaim in the previous case. III The FEDERATION also contends that it has incurred no liability, as NAMARCO has neither alleged nor proved that it has complied with the conditions contained in the three domestic letters of credit, that the sight drafts drawn upon them be presented to FEDERATION for acceptance before they can be honored by the Bank. It is the theory of the FEDERATION in its brief that the failure of NAMARCO to present the sight drafts to the former for acceptance, pursuant to the requirements of the letters of credit deprives NAMARCO of a cause of action against FEDERATION. It must be noted however that such purported discharge from its obligation to NAMARCO due to the failure of the latter to comply with the requirements of the domestic letters of credit, was never invoked by FEDERATION as a basis for its "Motion to Dismiss" of February 7, 1961 36 or as an affirmative defense in its "answer" to the complaint on June 14, 1961 in Civil Case No. 46124. 37 There is no showing that this question was raised as an issue during the trial. As a matter of fact such matter was neither discussed nor mentioned in the appealed judgment since the entire theory of the FEDERATION in its defense is that the claim of NAMARCO being a "compulsory counterclaim", is now barred, NAMARCO having failed to set it up on a counterclaim in the previous case. Well settled is the rule that questions which were not raised in the lower court cannot be raised for the first time on appeal. 38 Defendant-appellant therefore is now precluded from raising that question. In any event NAMARCO's action is not based on the domestic letters of credit, but on its legal right to the cost of the goods delivered to the FEDERATION the correlative obligation of the latter to pay for the same, and its default or refusal to make such payments. Furthermore the mere delivery by the FEDERATION of the domestic letters of credit to NAMARCO did not operate to discharge the debt of the FEDERATION. As shown by the appealed judgment NAMARCO accepted the three letters of credit "to insure the payment of those goods by the FEDERATION ... ." It was given therefore as a mere guarantee for the payment of the merchandise. The delivery of promissory notes payable to order, or bills of exchange or drafts or other mercantile document shall produce the effect of payment only when realized, or when by the fault of the creditor, the privileges inherent in their negotiable character have been impaired. (Art. 1249 New Civil Code.) The clause of Article 1249 relative to the impairment of the negotiable character of the commercial paper by the fault of the creditor, is applicable only to instruments executed by third persons and delivered by the debtor to the creditor, and does not apply to instruments executed by the debtor himself and delivered to the creditor. 39 In the case at bar it is not even pretended that the negotiable character of the sight drafts was impaired as a result of the fault of NAMARCO. The fact that NAMARCO attempted to collect from the Philippine National Bank on the sight drafts on March 10, 1960, is of no material significance. As heretofore stated they were never taken, in the first instance as payment. There

was no agreement that they should be accepted as payment. The mere fact that NAMARCO proceeded in good faith to try to collect payments thereon, did not amount to an appropriation by it of the amounts mentioned in the sight drafts so as to release its claims against the FEDERATION. A mere attempt to collect or enforce a bill or note from which no payment results is not such an appropriation of it as to discharge the debt. 40 We note however, that the lower court erred in imposing interest at the legal rate on the amount due, "from the date of delivery of the merchandise", and not from the date of the extra-judicial demand. In the absence of any stipulations on the matter, the rule is that the obligor is considered in default only from the time the obligee judicially or extrajudicially demands fulfillment of the obligation and interest is recoverable only from the time such demand is made. 41 There being no stipulation as to when the aforesaid payments were to be made, the FEDERATION is therefore liable to pay interest at the legal rate only from June 7, 1960, the date when NAMARCO made the extra-judicial demand upon said party. We likewise fail to find any factual or legal basis for the award of attorney's fees. ACCORDINGLY, with the modifications above indicated, the appealed judgment is hereby affirmed, with costs against defendant-appellant. METALS ENGINEERING vs CA Impugned in this petition for review on certiorari is the decision of respondent Court of Appeals, dated August 9, 1990, 1 dismissing the special civil action for certiorari and prohibition filed therein by petitioner corporation. The appeal herein arose from Civil Case No. 55560 filed by petitioner corporation against private respondent Plaridel Jose, for the annulment of an agreement to buy and sell executed between the parties, before the Regional Trial Court of Pasig, Branch 160, the complaint 2 alleging, inter alia, that: xxx xxx xxx 2. On October 31, 1987, plaintiff and defendant executed a document which was denominated as an "Agreement to Buy and Sell" in which plaintiff offered to sell to the defendant and the latter in turn agreed to buy several parcels of land with an aggregate area of 6,135 sq. m. . . . xxx xxx xxx 4. The "Agreement to Buy and Sell", oil its face, is patently and plainly imperfect and incomplete as there was and could have been no meeting of the minds of the parties in regard to the manner, period and terms of payment of the purchase price or consideration which is undeniably an essential element of the contract. Consequently, the subject "Agreement", not having been perfected and completed, did not contemplate nor did it result to a binding and enforceable contract to sell. In fact, as stipulated in paragraphs 3 and 4 of said "agreement", the terms of sale, including the payment of the purchase price, are uncertain and imperfect as they are subject to the following: a) Defendant's obligation to pay one half (1/2) of the total consideration is conditioned and depends exclusively on the ability of the plaintiff to "look for a place to transfer its offices and plants from the land subject hereof within One hundred twenty days" but should plaintiff "fail to locate a place to transfer its offices and plants from the land subject hereof within the said one hundred and twenty

days "the agreement is merely subject to an "extension" upon terms and conditions to be determined and agreed upon separately and subsequently ; and b) The payment of the remaining fifty percent (50%) thereof SHALL BE THE SUBJECT OF A (ANOTHER) SEPARATE AGREEMENT to be made between the parties together with the execution of a Deed of Absolute Sale. 5. Despite the fact that the subject "agreement" had not yet been perfected and completed, defendant prematurely caused the preparation of a subdivision plan of the lands into several sub-lots and offered the same for sale to the public through an advertisement published in the issue of the "Manila Bulletin" on November 25, 1987 . . . 6. Thus, on December 24, 1987, plaintiff wrote a letter to defendant rescinding and/or withdrawing from the uncompleted and imperfect "Agreement" and tendered a check for the amount of P50,000.00 representing full refund of the earnest money previously delivered by defendant pursuant to paragraph 2 of said agreement but defendant refused to accept the same. xxx xxx xxx 8. The refusal of defendant to acnowledge the imperfection and non-completion of the "Agreement" and to accept the refund P50.000.00 as well as his acts of offering the land for sale to third person and his annotation of adverse claims in the title covering the lands are unjustifiable and great damage and prejudice to plaintiff. xxx xxx xxx Private respondent filed his Answer with Counterclaim 3 alleging a compulsory counterclaim on the following operative facts: 12. Defendant had already spent a considerable amount for the subdivision of the subject properties into smaller parcels of land for resale to a group of buyers, for the advertisements and promotion necessary thereto, and other related expenses; 13. One of the pertinent provisions of the AGREEMENT (Annex "A") is the schedule of payments to be paid by the defendant which provides as follows: 3. Within one hundred and twenty (120) days from the execution of this agreement, the VENDOR shall look for a place to transfer its offices and plant from the land subject hereof. And once a place to transfer is found, the VENDOR shall inform the VENDEE of the same. Within fifteen (15) days from such notice of the VENDOR to the VENDEE, the latter shall immediately pay, without need of demand and further notice, to the former one-half (1/2) of the total purchase price of the land . . . Due to the adamant and unreasonable posture of the plaintiff, defendant's timetable to generate funds and profits was severely stalled and placed at a standstill to the damage and prejudice of his investment and financial projection, which can only be rectified or compensated by way of tacking into, and thus extending the agreed period to pay the said-one-half (1/2) of the purchase price, the length of time from plaintiffs notice to rescind (Annex "1") until defendant complies with its part of the AGREEMENT (Annex "A") whether voluntarily, by compromise, or by judicial compulsion; 14. Defendant suffered further due to the fact that his reputation has been tarnished at the very least considering that he could not pursue his legal and business commitment with those who have already transacted with him over the subject parcels of land; 15. By reason of the present unfounded and malicious action filed by the plaintiff, defendant suffered sleepless nights, serious anxieties, embarrassment and similar injuries due to the indefensible and destructive posture of the plaintiff for which he should be awarded P300,000.00 at least in moral damages;

16. Due to the patent, wanton and gross bad faith displayed by the plaintiff in its dealings with the defendant, the latter should be awarded at least P100,000.00 in exemplary damages likewise to be assessed against the plaintiff; 17. By reason of the present suit, defendant was furthermore forced to hire the services of counsel to protect his rights and interest under the premises, in the amount of P100,000.00 as and for attorney's fees aside from the expenses and cost of litigation which shall be proved at the trial hereof. WHEREFORE, it is respectfully prayed that judgment be rendered in favor of the defendant dismissing the Complaint and declaring the AGREEMENT (Annex "AComplaint") with the defendant valid for all legal intents and purposes and ordering the plaintiff to honor its provisions except the term or period of payment of the first one-half (1/2) of the purchase price, which should be extended by tacking into the 15-day period the length of time mentioned under paragraph 13 hereof; and for the damages, plaintiff be ordered to pay defendant the following: a) P300,000.00 in moral damages for the bersmirched reputation, embarrassment, anguish, anxieties, sleepless nights, and similar injuries suffered by the defendant due to the gross and wanton bad faith of the plaintiff; b) P100,000.00 in exemplary damages so that others who similarly inclined to do as what the plaintiff did against the defendant, should properly be forewarned and deterred therefrom; c) P100,000.00 as and for attorney's fees plus the expenses of litigation proved at the trial; and d) Costs." Before the case could be heard on pre-trial, private respondent filed a Motion to Expunge the Complaint on the ground that the same did not specify the amount of damages sought either in the body or in the prayer of the complaint, citing in support thereof the then ruling case of Manchester Development Corporation, et al. vs. Court of Appeals, et al. 4 and Administrative Circular No. 7 issued by this Court on March 4, 1988. In an Order dated December 15, 1988, the trial court required petitioner to amend its complaint by specifying the amount of damages prayed for, otherwise the original complaint shall be dismissed. In compliance therewith, petitioner filed its Amended Complaint specifying the amount of damages it seeks to recover from private respondent. However, private respondent moved for the reconsideration of the trial court's aforesaid order with respect to the portion allowing petitioner to file an amended complaint, stating that the court did not acquire jurisdiction when the wrong docket fee was paid, hence the amendment of the complaint did not vest jurisdiction upon the court; and that for all legal intents and purposes, no original complaint was filed which could be the subject of an amendment. Acting thereon, on April 12, 1989, the trial court issued an Order 5 granting the motion for reconsideration and ordering that the complaint be expunged from the record on the ground that it did not acquire jurisdiction over the case. Private respondent then filed a Motion to Set Case for Presentation of Evidence in support of his counterclaim. In its Opposition, petitioner averred that since private respondent's counterclaim is compulsory in nature because it is necessarily connected with and arose out of the same transaction subject of the complaint, with the dismissal of petitioner's complaint the compulsory counterclaim can no longer remain pending for independent adjudication; and considering further that since petitioner had re-filed its complaint against private respondent on May 3, 1989

before the Regional Trial Court of Pasig, Branch 168, docketed therein as Civil Case No. 58126, then private respondent could easily set up the same compulsory counterclaim in said later case. Thereafter, the court a quo issued an Order, 6 dated June 20, 1989, granting private respondent's motion to present evidence and holding that "a) compulsory counterclaim is a complaint in itself; that it is a complaint against the plaintiff; that it is independent in character. It has to be set up in the answer otherwise it will be waived or barred and it cannot be invoked in another case, for it would be splitting a cause of action which is not allowed under the rules." It added that herein private respondent "correctly insisted that the compulsory counterclaim should be prosecuted now, otherwise he cannot invoke his claim in a separate proceeding because he will be "barred by the dismissal" of the instant case." Petitioner filed a Motion for Reconsideration of said order alleging that a compulsory counterclaim is essentially ancillary to the main controversy and that, assuming that private respondent's counterclaim can remain pending for independent trial, the same would nevertheless be dismissed for non-payment of any docket fees on the total amount of the counterclaim. Private respondent filed his Opposition at the same time attaching thereto a receipt for the payment of docket fees. In reply, petitioner contended that the belated payment of the docket fees for the counterclaim does not have the effect of vesting the trial court with jurisdiction over the counterclaim. The motion for reconsideration was denied by the trial court in its Order 7 dated September 29, 1989. From said order, petitioner filed a special civil action for and certiorari prohibition with prayer for preliminary injunction and/or temporary restraining order with respondent Court of Appeals. Its contentions for the allowance thereof may be capsulized as follows: 1. Respondent court acted without or in excess of its jurisdiction and gravely abused his discretion in granting respondent Jose's motion to present evidence on his compulsory counterclaim: a. The dismissal of the complaint carries with it the dismissal of the compulsory counterclaim. b. Even assuming that respondent Jose's counterclaim may remain pending for adjudication independently of the principal complaint, it should still be dismissed for failure on the part of respondent to pay docket fees thereon. 2. Great or irreparable injury and injustice would result to petitioner if respondent Jose should be allowed to present evidence ex parte on his counterclaim pursuant to respondent court's order September 29, 1989. 8 Respondent court, in its questioned decision, dismissed the special civil action for certiorari, stating that since the order is merely interlocutory in nature and that at most it is merely an error of judgment, it cannot be corrected by certiorari, thus: It is obvious that no jurisdictional error is involved in this case. If to allow the respondent to present evidence in support of his counterclaim is a mistake, it is at most an error of judgment that is not correctible by certiorari or prohibition. Such an error can be corrected in an appeal which may be taken from the judgment to be rendered on the counterclaim (Fernando vs. Vasquez, 31 SCRA 288). Time and again, it has been said that the function of certiorari and prohibition is to keep an inferior court within the limits of its jurisdiction (Enriquez vs. Rivera, 90 SCRA 641). These two extraordinary writs are not intended to correct every error which may be committed in the course of a trial.

Finally, the order sought to be annulled is interlocutory in nature which again cannot be corrected by certiorari(Perez vs. Moneta Board, 20 SCRA 592; Layag vs. Gerardo, 10 SCRA 837). 9 Its motion for reconsideration having been denied, petitioner filed the instant petition. Petitioner avers that respondent Court of Appeals gravely erred (1) in finding that no jurisdictional defect was committed by the trial court in issuing the order date June 20, 1989 allowing respondent Jose to present evidence in support of his compulsory counterclaim despite the dismissal of the complaint; and (2) in holding that the order of June 20, 1989 cannot be the basis of a petition for certiorari and prohibition. 10 We find for petitioner. Private respondent's asseveration that a compulsory counterclaim is not deemed dismissed just because the main complaint is dismissed by the court, and that the same has to be pursued otherwise it will forever be barred on the ground of res judicata, is at most specious and should be struck down for lack of merit. There is no dispute that private respondent's counterclaim is compulsory in nature since (1) it arises out of, or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party's claim; 2) it does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction; and 3) the court has jurisdiction to entertain the claim. And the rule is that a compulsory counterclaim not set up shall be barred 11 if not raised on time and the party in error is precluded from setting it up in a subsequent litigation on the ground of res judicata, the theory being that what are barred by prior judgment are not only the matters actually raised and litigated upon, but also such matters as could have been raised but were not. 12 In other words, a compulsory counterclaim cannot be made the subject of a separate action but should be asserted in the same suit involving the same transaction or occurrence giving rise to it. Where the counterclaim is made the subject of a separate suit, it may be abated upon a plea of auter action pendant or litis pendentia,and/or dismissed on the ground of res judicata.13 However, such is not the situation obtaining in the present action. In the petition before us, private respondent, in his responsive pleading which is aptly titled "Answer with Counterclaim," has properly raised a counterclaim against herein petitioner's claim that the agreement to buy and sell is imperfect and incomplete. Ironically, the insistence of private respondent in proceeding with the trial of the case is premised on the very existence of his counterclaim. Hence, there can be no res judicata to speak of because a counterclaim was correctly invoked against herein petitioner's complaint. In fine, what private respondent is in effect saying is that his counterclaim should be allowed to proceed independently of the main action. For all intents and purposes, such proposition runs counter to the nature of a compulsory counterclaim in that it cannot remain pending for independent adjudication by the court. 14 This is because a compulsory counterclaim is auxiliary to the proceeding in the original suit 15 and derives its jurisdictional support therefrom, 16 inasmuch as it arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the complaint. It follows that if the court does not have jurisdiction to entertain the main action of the case and dismisses the same, then the compulsory counterclaim, being ancillary to the

principal controversy, must likewise be dismissed 17 since no jurisdiction remained for any grant of relief under the counterclaim. 18 The aforementioned doctrine is in consonance with the primary objective of a counterclaim which is to avoid and prevent circuity of action by allowing the entire controversy between the parties to be litigated and finally determined in one action, wherever this can be done with entire justice to all parties before the court. 19 The philosophy of the rule is to discourage multiplicity of suits. 20 It will be observed that the order of the trial court allowing herein private respondent to proceed wit the presentation of his evidence in support of the latter's counterclaim is repugnant to the very purpose and intent of the rule on counterclaims. Furthermore, it has been held that a counterclaim presupposes the existence of a claim against the party filing the counterclaim. Where there is no claim against the counterclaimant, then the counterclaim is improper and should be dismissed. 21 The complaint filed by herein petitioner was dismissed on the ground of lack of jurisdiction for non-payment of docket fees. By reason of said dismissal, it is as if no claim was filed against herein private respondent, hence the counterclaim has no leg to stand on. In addition, it was at the instance of private respondent that the complaint was dismissed. In the words of Justice Abad Santos, "(private respondent) does not object to the dismissal of the civil case but nonetheless wants (his) counterclaim therein to subsist. Impossible. A person cannot eat his cake and have it at the same time. If the civil case is dismissed, so also is the counterclaim filed therein." 22 American jurisprudence similarly rules that in an action where defendant's answer set up a counterclaim, the court was without authority to sever the causes of action by dismissing the complaint and submitting the counterclaim to the jury, although the order of dismissal purported to be without prejudice to the merits of plaintiff's cause of action upon another trial. 23 This is so because a severance for trial of a claim or counterclaim may increase the possibility of inconsistent verdicts and decrease the ability of the court to resolve such inconsistencies without granting a re-trial in one or both causes. 24 In the case before us, severing herein private respondent's counterclaim to compel petitioner to honor the purchase agreement executed between them, from petitioner's action to declare null and void the same contract, may result in the following outcomes: 1) If the same judgment would be rendered in Civil Case No. 55560 (on the counterclaim) and Civil Case No. 58126 (on the main action which was re-filed) either for the validity or nullification of the contract, then there would plausibly be no problem. 2) However, should different and conflicting decisions be handed down in the two cases, which is not an impossibility, then this will only serve to complicate the issues that will arise and the remedies that may be necessitated. Verily, practical considerations of consistency and economy likewise command a trial of the counterclaim jointly and concurrently with the principal controversy. At any rate, considering that petitioner has re-filed its complaint involving the same cause of action which is now pending before another branch of the court, there is nothing to prevent private respondent from raising the same counterclaim for adjudication in the subsequent action. It is the submission of herein petitioner that assuming arguendo that the counterclaim can proceed independently of the main action, the court did not acquire jurisdiction thereover for failure of private respondent to pay the

corresponding docket fees. Petitioner maintains that the ruling in Manchester should likewise apply to compulsory counterclaims. The argument is incorrect. The rules regarding payment of docket fees have been summarized in a subsequent case 25 as follows: 1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. 2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. . . . The rule, therefore is made to apply specifically to permissive counterclaims only, thereby excluding compulsory counterclaims from its purview. 26 This is because there is no need to pay docketing fees for a compulsory counterclaim. 27 Finally, we do not ascribe to respondent court's declaration that the order of dismissal issued by the trial court is merely interlocutory and, at most, an error of judgment which is not correctible by certiorari and prohibition. As earlier stated, the trial court acted without jurisdiction in proceeding with the hearing on the counterclaim after it had dismissed the complaint to which the counterclaim attached. It is precisely to correct the lower court when in the course of proceedings it acts without jurisdiction or in excess thereof or if the trial judge otherwise acted with grave abuse of discretion that the extraordinary writ of certiorari or prohibition is afforded to parties as a relief. Such a relief is available even in respect to interlocutory orders. 28 WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and judgment is hereby rendered DISMISSING the compulsory counterclaim of private respondent in Civil Case No. 55560, without prejudice to the setting up of the same in Civil Case No. 58126, both of the Regional Trial Court of Pasig, Metro Manila. SO ORDERED BA FINANCE vs CO Does the dismissal of the complaint for nonappearance of plaintiff at the pre-trial, upon motion of defendants, carry with it the dismissal of their compulsory counterclaim? Petitioner BA Finance Corporation brought this action as plaintiff in the court below to recover a sum of money arising from a credit accommodation in the form of a discounting line which it granted to defendant Rufino Co, and from certain suretyship agreements executed in its favor by his co-defendants Highline Mercantile, Inc., Lucita Veloso Yap, Cloverleaf Supermarket, Inc., and San Andres Commercial. After defendants' Amended Answer to Complaint with Compulsory Counterclaim was admitted, the case was set for Pre-Trial Conference. For various reasons, however, the conference was repeatedly reset. On 19 December 1989, counsel for plaintiff, petitioner herein, failed to attend the Pre-Trial Conference. Consequently, defendants moved for dismissal of the case without prejudice. The motion was granted thus

The plaintiff's representative and counsel having failed to appear for today's setting, Atty. Luis Vera Cruz, Jr., for the defendants moved that the above-entitled case be dismissed, without prejudice. Finding merit in said motion, the same is hereby granted. On 22 January 1990, private respondents moved to set the reception of their evidence in support of their counterclaim. Petitioner opposed the motion. On 2 April 1990, the trial court denied the motion of private respondents, prompting them to elevate the order of denial to the Court of Appeals which, on 18 December 1991, reversed the questioned order and directed the trial court to set the reception of their evidence on their counterclaim. Its motion for reconsideration having on 2 June 1992 been denied, petitioner instituted the instant petition. Petitioner contends that the dismissal of the complaint carries with it the dismissal of the counterclaim. Private respondents, on the other hand, claim that their compulsory counterclaim should not have been included in the dismissal. There is merit in the petition. The counterclaim of private respondents is not merely permissive but compulsory in nature: it arises out of, or is necessarily connected with, the transaction or occurrence that is the subject matter of the opposing party's claim; it does not require the presence of third parties of whom the court cannot acquire the presence of third parties of whom the court cannot acquire jurisdiction; and, the trial court has jurisdiction to entertain the claim. 1 The counterclaim of private respondents is denominated "compulsory" and consists of claims for alleged overpayments and damages. They assert that they are no longer indebted to petitioner and are in fact entitled to reimbursement for overpayments. They ask for damages for expenses incurred and inconveniences suffered by them as a result of the filing of the present action. 2 Clearly, the same evidence needed to sustain the counterclaim of private respondents would also refute the cause of action in petitioner's complaint. For, if private respondents could successfully show that they actually made overpayments on the credit accommodations extended by petitioner, then the complaint must fail. The counterclaim is therefore compulsory. The rule is that a compulsory counterclaim cannot "remain pending for independent adjudication by the court." 3This is because a compulsory counterclaim is auxiliary to the proceeding in the original suit and merely derives its jurisdictional support therefrom. 4 Thus, it necessarily follows that if the trial court no longer possesses jurisdiction to entertain the main action of the case, an when it dismisses the same, then the compulsory counterclaim being ancillary to the principal controversy, must likewise be similarly dismissed since no jurisdiction remains for the grant of any relief under the counterclaim. 5 Indeed, as Justice Vicente Abad Santos succinctly puts it . . . . The petitioner does not object to the dismissal of the civil case but nonetheless wants her counterclaim therein to subsist. Impossible. A person cannot eat his cake and have it at the same time. If the civil case is dismissed, so also in the counterclaim filed therein. 6 More recently, this Court ruled that the dismissal of the complaint on defendant's own motion operated likewise to dismiss the counterclaim questioning the complaint. 7 The Rules of Court provides a remedy to recover on defendant's counterclaim if plaintiff moves to dismiss the case. Under Sec. 2, Rule 17, defendant may raise

objection to the dismissal of the complaint; in such case, the trial curt may not dismiss the main action. In the instant petition, private respondents themselves moved for the dismissal of the complaint, They could have simply asked the trial court to declare petitioners to be "non-suited" on their complaint, and "as in default" on their compulsory counterclaim, for their failure to appear at the pre-trial despite due notice. But private respondents did not. Neither did they reserve their right to maintain their counterclaim. Consequently, the dismissal of the complaint carried with it the dismissal of the compulsory counterclaim. It may also be stressed that private respondents moved to set for hearing the reception of evidence to support their counterclaim more than a month after the case was dismissed, i.e., they filed their motion after the lapse of thirty-three (33) days. By then, the order of dismissal had already become final. Thereafter, it was error for the appellate court to set it aside, there being no ground to warrant it. Only error of judgment, not error of jurisdiction, was involved. However, we are not unaware of the seeming unfairness, if not harshness, of the application of the Rule herein enunciated that dismissal of the complaint for failure to prosecute automatically carries with it dismissal of the compulsory counterclaim to a defendant who may be compelled to hire counsel to protect him in a frivolous complaint. Equity and justice dictate that he be accorded adequate relief under the circumstances. Henceforth, for the guidance of Bench and Bar, if any of the grounds to dismiss under Sec. 3, Rule 17, of the Rules of Court arises, 8 the proper recourse for a defendant who desires to pursue his compulsory counterclaim in the same proceeding is not to move for the dismissal of the complaint; instead, he should only move to have plaintiff declared non-suited on the complaint so that the latter can no longer present his evidence thereon, and simultaneously move that he be declared as in default on the compulsory counterclaim, and reserve the right to present evidence ex parte on his counterclaim. This will enable defendant who was unjustly haled to court to prove his compulsory counterclaim, which is intertwined with the complaint, because the trial court retains jurisdiction over the complaint and of the whole case. The non-dismissal of the complaint, the non-suit notwithstanding, provides the basis for the compulsory counterclaim to remain active and subsisting. But the procedure above stated, unfortunately, was not adopted by private respondents herein in the court below, hence, we reverse the Court of Appeals and sustain the trial court. WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals of 18 December 1991 in CA- G.R. No. CV-28420 is REVERSED and SET ASIDE. The Order of the Regional Trial Court of Manila, Branch 40, of 19 December 1989 dismissing Civil Case No. 84-26040 is REINSTATED and REITERATED. SO ORDERED.