Rule 1 to 5 (inc.

1991 Revised Rules on Summary Procedure)

1) Facts: Respondent FGU Insurance Corporation filed a complaint with the Regional Trial Court of Makati 1 alleging that petitioner Evangeline K. Alday owed it P114,650.76, representing unliquidated cash advances, unremitted costs of premiums and other charges incurred by petitioner in the course of her work as an insurance agent for respondent. Petitioner filed her answer and by way of counterclaim, asserted her right for the payment of P104,893.45, representing direct commissions, profit commissions and contingent bonuses earned from 1 July 1986 to 7 December 1986, and for accumulated premium reserves amounting to P500,000.00. In addition, petitioner prayed for attorney's fees, litigation expenses, moral damages and exemplary damages for the allegedly unfounded action filed by respondent. Respondent filed a motion to dismiss petitioner's counterclaim, contending that the trial court never acquired jurisdiction over the same because of the non-payment of docket fees by petitoner. In response, petitioner asked the trial court to declare her counterclaim as exempt from payment of docket fees since it is compulsory and that respondent be declared in default for having failed to answer such counterclaim. The trial court9 granted respondent's motion to dismiss petitioner's counterclaim and consequently, denied petitioner's motion. The court found petitioner's counterclaim to be merely permissive in nature and held that petitioner's failure to pay docket fees prevented the court from acquiring jurisdiction over the same. 10 The trial court denied petitioner's motion for reconsideration. On appeal, the CA sustained the trial courts decision . A MR was filed but was denied. Hence, this petition for review. Issue: Whether the counterclaim is compulsory or permissive? Held: Permissive. A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. 19 In Valencia v. Court of Appeals,20 this Court capsulized the criteria or tests that may be used in determining whether a counterclaim is compulsory or permissive, summarized 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 s defendant's counterclaim? 4. Is there any logical relation between the claim and the counterclaim? Another test, applied in the more recent case of Quintanilla v. Court of Appeals,21 is the "compelling test of compulsoriness" which requires "a logical relationship between the claim and counterclaim, that is, where conducting separate trials of the respective claims of the parties would entail a substantial duplication of effort and time by the parties and the court." Tested against the abovementioned standards, petitioner's counterclaim for commissions, bonuses, and accumulated premium reserves is merely permissive. The evidence required to prove petitioner's claims differs from that needed to establish respondent's demands for the recovery of cash accountabilities from petitioner, such as cash advances and costs of premiums. The recovery of respondent's claims is not contingent or dependent upon establishing petitioner's counterclaim, such that conducting separate trials will not result in the substantial duplication of the time and effort of t he court and the parties. One would search the records in vain for a logical connection between the parties' claims. This conclusion is further reinforced by petitioner's own admissions since she declared in her answer that respondent's cause of action, unlike her own, was not based upon the Special Agent's Contract. 23 However, petitioner's claims for damages, allegedly suffered as a result of the filing by respondent of its complaint, are compulsory. 24 There is no need for need for petitioner to pay docket fees for her compulsory counterclaim.25 On the other hand, in order for the trial court to acquire jurisdiction over her permissive counterclaim, petitioner is bound to pay the prescribed docket fees.26 The rule on the payment of filing fees has been laid down by the Court in the case of Sun Insurance Office, Ltd. V. Hon. Maximiano Asuncion271. 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. 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 allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period. 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. ALDAY V FGU INSURANCE

2.

3.

In Suson, the Court explained that although the payment of the prescribed docket fees is a jurisdictional requirement, its non-payment does not result in the automatic dismissal of the case provided the docket fees are paid within the applicable prescriptive or reglementary period.

2) Facts:

Korea Technologies Inc. vs. Lerma

Petitioner (KOGIES) is a Korean corporation which is engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation. Petitioner and respondent entered into a contract whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The total contract price amounted to USD 1,530,000. Subsequently, the machineries, equipment, and facilities for the manufacture of LPG cylinders were shipped, delivered, and installed in the Carmona plant. For the remaining balance of USD306,000 for the installation and initial operation of the plant, PGSMC issued two postdated checks. When KOGIES deposited the checks, these were dishonored for the reason [6] PAYMENT STOPPED. Thus, on May 8, 1998, KOGIES sent a demand letter to PGSMC threatening criminal action for violation of BP 22 in case of non-payment. On the same date, the wife of PGSMCs President faxed a letter to KOGIES President who was then staying at a Makati City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not delivered several equipment parts already paid for. PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on the ground that KOGIES had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC filed before the Office of the Public Prosecutor an Affidavit-Complaint for Estafa. KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insisted that their disputes should be settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract. Then, KOGIES instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as amended. Pursuant to the application for arbitration, KOGIES filed a Complaint for Specific Performance before the RTC of Muntinlupa. PGSMC filed its Answer with Compulsory Counterclaim. The petitioner filed a MTD the counterclaim for failing to pay the docket fees. The trial court ruled that payment is unnecessary because the counterclaim of respondent is compulsory in nature. Petitioner elevated the case to the CA via petition for certiorari. The CA affirmed the trial courts decision. Hence, the petition for review.

Issue: Whether respondent was required to pay docket fees for the counterclaim?
Held: No. As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim dated July 17, 1998 in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that was effective at the time the Answer with Counterclaim was filed. Sec. 8 on existing counterclaim or cross-claim states, A compulsory counterclaim or a cross -claim that a defending party has at the time he files his answer shall be contained therein. On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was not liable to pay filing fees for said counterclaims being compulsory in nature. We stress, however, that effective August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross- claims.

3) Facts:

Mercado vs. CA 569 SCRA

Mercado had been distributing respondent San Miguel Corporations (SMCs) beer products in Quiapo, Manila since 1967. In 1991, SMC extended to him a P7.5 million credit line allowing him to withdraw goods on credit. To secure his purchases, Mercado assigned three China Banking Corporation (CBC) certificates of deposit amounting 1 to P5 million to SMC and executed a continuing hold-out agreement stating that Any demand made by [SMC] on [CBC], claiming default on my/our part shall be conclusive on [CBC] and shall serve as absolute authority for [CBC] to encash the [CBC certificates of deposit] in accordance with the third paragraph of this Hold-Out Agreement, whether or not I/we have in fact defaulted on any of my/our obligations with [SMC], it being understood that the issue of whether or not there was factual default must be threshed out solely between me/us and [SMC] SMC notified CBC that Mercado failed to pay for the items he withdrew on credit. Consequently, citing the continuing hold-out agreement, it asked CBC to release the proceeds of the assigned certificates of deposit. CBC approved SMBs request and informed Mercado. Mercado filed an action to annul the continuing hold-out agreement and deed of assignment in the RTC of Manila. He claimed that the agreement constitute pactum commisorium which is void. SMC filed its answer with counterclaim against Mercado. It contended that Mercado delivered only two CBC certificates of deposit amounting 5 to P4.5 million and asserted that the execution of the continuing hold-out agreement and deed of assignment was a recognized business practice. Then, Mercado filed an Urgent Manifestation claiming that he was no longer interested in annulling the continuing hold-out agreement and deed of assignment. The RTC, however, denied the 8 motion. Instead, it set the case for pre-trial. The trial court rendered a judgment in favour of SMC. Petitioner appealed to the CA, insisting that Mercado did not default in the payment of his obligations to SMC. The CA, however, affirmed in toto the RTCs dec ision. Thereafter, Mercado passed away and was substituted by his heirs. Petitioners subsequently filed this petition asserting that the CA erred in affirming the RTC decision in toto. The said decision was void. SMCs counterclaim was permissive in nature. Inasmuch as SMC did not pay docket fees, the RTC never acquired jurisdiction over the counterclaim.

Issue: Whether the counterclaim is permissive or compulsory?

Held: Compulsory. A counterclaim (or a claim which a defending party may have against any party) may be 17 compulsory or permissive. A counterclaim that (1) arises out of (or is necessarily connected with) the transaction or occurrence that is the subject matter of the opposing partys claim; (2) falls within the jurisdiction of the court and (3) does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction, is 18 compulsory. Otherwise, a counterclaim is merely permissive.s When Mercado sought to annul the continuing hold-out agreement and deed of assignment (which he executed as security for his credit purchases), he in effect sought to be freed from them. While he admitted having outstanding obligations, he nevertheless asserted that those were not covered by the assailed accessory contracts. For its part, aside from invoking the validity of the said agreements, SMC therefore sought to collect the payment for the value of goods Mercado purchased on credit. Thus, Mercados complaint and SMCs counter claim both touched the issues of whether the continuing hold-out agreement and deed of assignment were valid and whether Mercado had outstanding liabilities to SMC. The same evidence would essentially support or refute Mercados claim and SMCs counterclaim. Based on the foregoing, had these issues been tried separately, the efforts of the RTC and the parties would have had to be duplicated. Clearly, SMCs counterclaim, being logically related to Mercados claim, was compulsory in 19 nature. Consequently, the payment of docket fees was not necessary for the RTC to acquire jurisdiction over the subject matter.
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4) Facts:

Proton Pilipinas vs. Banque National de Paris 460 SCRA

Proton Pilipinas Corporation (Proton) availed of the credit facilities of herein respondent, Banque Nationale de Paris (BNP). To guarantee the payment of its obligation, its co-petitioners Automotive Corporation Philippines 2 (Automotive), Asea One Corporation (Asea) and Autocorp Group (Autocorp) executed a corporate guarantee to the extent of US$2,000,000.00. BNP and Proton subsequently entered into three trust receipt. Under the terms of the trust receipt agreements, Proton would receive imported passenger motor vehicles and hold them in trust for BNP. Proton would be free to sell the vehicles subject to the condition that it would deliver the proceeds of the sale to BNP, to be applied to its obligations to it. In case the vehicles are not sold, Proton would return them to BNP, together with all the accompanying documents of title. Allegedly, Proton failed to deliver the proceeds of the sale and return the unsold motor vehicles. Pursuant to the corporate guarantee, BNP demanded from Automotive, Asea and Autocorp the payment. These Guarantors refused to pay. Hence, BNP filed a complaint for sum of money. The Makati RTC Clerk of Court assessed the docket fees which BNP paid at P352,116.30. The defendants-herein petitioners filed a Motion to Dismiss on the ground that BNP failed to pay the correct docket fees to thus prevent the trial court from acquiring jurisdiction over the case. The RTC denied the MTD. Petitioner moved for reconsideration but was denied. Petitioners thereupon brought the case on certiorari and mandamus to the Court of Appeals which was denied. Hence, this petition.
9

Issue: Whether the case should be dismissed because of incorrect payment of docket fees?
Held: NO. 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. The ruling in Sun Insurance Office was echoed in the 2005 case of Heirs of Bertuldo Hinog v. Hon. Achilles Melicor: Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its non-payment at the time of filing does not automatically cause the dismissal of the case, as long as the fee is paid within the applicable prescriptive or reglementary period, more so when the party involved demonstrates a willingness to abide by the rules prescribing such payment. Thus, when insufficient filing fees were initially paid by the plaintiffs and there was no intention to defraud the government, the Manchester rule does not apply. In the case at bar, respondent merely relied on the assessment made by the clerk of court which turned out to be incorrect. Under the circumstances, the clerk of court has the responsibility of reassessing what respondent must pay within the prescriptive period, failing which the complaint merits dismissal.

5) Facts:

Ruby Shelter Builders vs. Judge Formaran 578 SCRA 283

Petitioner obtained a loan from respondents Romeo Y. Tan (Tan) and Roberto L. Obiedo (Obiedo), secured by real estate mortgages over five parcels of land. When petitioner was unable to pay the loan when it became due and demandable, respondents Tan and Obiedo agreed to an extension of the same. In turn, petitioner is to execute Deeds of Sale of the parcels of land in favor of respondents and if he fails to pay, respondents Tan and Obiedo could already present the Deeds of Absolute Sale covering the same to the RD of Naga to acquire TCTs to the said properties in their names. Also, petitioner may choose to redeem the property. Petitioner failed to pay, respondents Tan and Obiedo presented the Deeds of Absolute Sale before the RD of Naga City. As a result of which, they were able to secure TCTs over the five parcels of land in their names. Petitioner filed before the RTC a Complaint12 against respondents Tan, Obiedo, and Atty. Reyes, for declaration of nullity of deeds of sales. Upon filing its Complaint with the RTC, petitioner paid the sum of P13,644.25 for docket and other legal fees, as assessed by the Office of the Clerk of Court. The Clerk of Court initially considered Civil Case No. 2006-0030 as an action incapable of pecuniary estimation and computed the docket and other legal fees due thereon according to Section 7(b)(1), Rule 141 of the Rules of Court. Only respondent Tan filed an Answer. Thereafter, respondent Tan filed before the RTC an Omnibus Motion in which he contended that the case filed by the petitioner involved real properties, the docket fees for which should be computed in accordance with Section 7(a), not Section 7(b)(1), of Rule 141 of the Rules of Court, as amended by A.M. No. 04-2-04-SC which took effect on 16 August 2004. Since petitioner did not pay the appropriate docket fees for Civil Case No. 2006-0030, the RTC did not acquire jurisdiction over the said case. The RTC ruled in favor of respondent. Petitioner moved for reconsideration but was denied. Petitioner, however, had not yet conceded, and it filed a Petition for Certiorari with the Court of Appeals. This time, petitioner asserts that the RTC24 acted with grave abuse of discretion, amounting to lack or excess of jurisdiction, when it issued the order mandating that the docket/filing fees for Civil Case No. 2006-0030, an action for annulment of deeds of sale, be assessed under Section 7(a), Rule 141 of the Rules of Court, as amended. The CA affirmed the decision of the RTC. Hence, this petition.

Issue: Whether the CA erred in affirming the decision of the RTC in so far as the applicable computation of docket fees is concerned?
Held: No. In Manchester Development Corporation v. Court of Appeals,28 the Court explicitly pronounced that "[t]he court acquires jurisdiction over any case only upon the payment of the prescribed docket fee." Hence, the payment of docket fees is not only mandatory, but also jurisdictional. In Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 29 the Court laid down guidelines for the implementation of its previous pronouncement in Manchester under particular circumstances, to wit: 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. In the Petition at bar, the RTC found, and the Court of Appeals affirmed, that petitioner did not pay the correct amount of docket fees for Civil Case No. 2006-0030. According to both the trial and appellate courts, petitioner should pay docket fees in accordance with Section 7(a), Rule 141 of the Rules of Court, as amended. Consistent with the liberal tenor of Sun Insurance, the RTC, instead of dismissing outright petitioners Complaint in Civil Case No. 2006 -0030, granted petitioner time to pay the additional docket fees. Despite the seeming munificence of the RTC, petitioner refused to pay the additional docket fees assessed against it, believing that it had already paid the correct amount before, pursuant to Section 7(b)(1), Rule 141 of the Rules of Court, as amended. (The SC explained that in order to determine the correct basis for the computation, the nature of the action must be settled. The SC said that it was a real action and not merely an action to declare as null and void the deeds of sale. Hence, Rule 141 (a) should apply. Consequently, in a real action, the assessed value of the property, or if there is none, the estimated value thereof shall be alleged by the claimant and shall be the basis in computing the fees.)

6) Facts:

St. Louis University vs. Cobarrubias 626 SCRA 649

Respondent Evangeline C. Cobarrubias is an associate professor of the petitioners College of Human Sciences. She is an active member of the Union of Faculty and Employees of Saint Louis University ( UFESLU). Their 2006-2011 CBA, contained the following provisions: Section 7.7. For teaching employees in college who fail the yearly evaluation, the following provisions shall apply: (a) Teaching employees who are retained for three (3) cumulative years in five (5) years shall be on forced leave for one (1) regular semester during which period all benefits due them shall be suspended. SLU placed Cobarrubias on forced leave for the first semester of School Year ( SY) 2007-2008 when she failed the evaluation for SY 2002-2003, SY 2005-2006, and SY 2006-2007, with the rating of 85, 77, and 72.9 points, respectively, below the required rating of 87 points. Respondent sought recourse from the CBAs grievance machinery but no settlement was reached. Thus, respondent filed with the National Conciliation and Mediation Board of the DOLE a case for illegal forced leave and illegal suspension. The case was then referred to the Voluntary Arbitrator (VA). The case was dismissed by the VA. On December 5, 2007, Cobarrubias filed with the CA a petition for review under Rule 43 of the Rules of Court, but failed to pay the required filing fees and to attach to the petition copies of the material portions of the record. The CA dismissed the petition. On February 15, 2008, Cobarrubias filed her motion for reconsideration, arguing that the ground cited is technical. She, nonetheless, attached to her motion copies of the material portions of the record and the postal money orders for P4,230.00. The CA reinstated the petition. It found that Cobarrubias substantially complied with the rules by paying the appeal fee in full and attaching the proper documents in her motion for reconsideration. SLU filed a motion for reconsideration but was denied. SLU insisted that the VA decision had already attained finality for Cobarrubias failure to pay the docket fees on time. When the CA denied the motion for reconsideration that followed, SLU filed the present petition for review on certiorari.

Issue: whether the CA erred in reinstating Cobarrubias petition despite her failure to pay the appeal fee within the reglementary period, and in reversing the VA decision.
Held: Yes. Appeal is not a natural right but a mere statutory privilege, thus, appeal must be made strictly in accordance with the provision set by law. Rule 43 of the Rules of Court provides that appeals from the judgment of the VA shall be taken to the CA, by filing a petition for review within fifteen (15) days from the receipt of the notice of judgment. Furthermore, upon the filing of the petition, the petitioner shall pay to the CA clerk of court the docketing and other lawful fees; non-compliance with the procedural requirements shall be a sufficient ground for the petitions dismissal. Thus, payment in full of docket fees within the prescribed period is not only mandatory, but also jurisdictional. It is an essential requirement, without which, the decision appealed from would become final and executory as if no appeal has been filed. As early as the 1932 case of Lazaro v. Endencia and Andres, we stressed that the payment of the full amount of the docket fee is an indispensable step for the perfection of an appeal. In Lee v. Republic, we decided that even though half of the appellate court docket fee was deposited, no appeal was deemed perfected where the other half was tendered after the period within which payment should have been made. In Aranas v. Endona, we reiterated that the appeal is not perfected if only a part of the docket fee is deposited within the reglementary period and the remainder is tendered after the expiration of the period. In the present case, Cobarrubias filed her petition for review on December 5, 2007, fifteen (15) days from receipt of the VA decision on November 20, 2007, but paid her docket fees in full only after seventy-two (72) days, when she filed her motion for reconsideration on February 15, 2008 and attached the postal money orders for P4,230.00. Undeniably, the docket fees were paid late, and without payment of the full docket fees , Cobarrubias appeal was not perfected within the reglementary period. ( The SC added that respondent failed to prove that the case falls within the exceptions for paying the docket fees in full when she filed her petition for review.)

7) Facts:

Relucio vs. Lopez 373 SCRA 578

Private respondent Angelina Mejia Lopez filed a petition for "APPOINTMENT AS SOLE ADMINISTRATIX OF CONJUGAL PARTNERSHIP OF PROPERTIES, FORFEITURE, ETC.," against defendant Alberto Lopez and petition Imelda Relucio. She alleged that she and Lopez are legally Married and that after abandoning her and their 4 legitimate children, he arrogated unto himself full and exclusive control and administration of the conjugal properties, spending and using the same for his sole gain and benefit to the total exclusion of the private respondent and their four children and that he maintained an illicit relationship and cohabited with herein petitioner since 1976. A Motion to Dismiss the Petition was filed by herein petitioner on the ground that private respondent has no cause of action against her. The trial court denied the motion. Petitioner Relucio filed a Motion for Reconsideration to the Order of the respondent Judge but the same was likewise denied. Petitioner filed with the Court of Appeals a petition for certiorari assailing the trial court's denial of her motion to dismiss. The Court of Appeals promulgated a decision denying the petition. She moved for reconsideration but was also denied. Hence, this appeal.

Issue: 1. Whether respondent's petition for appointment as sole administratrix of the conjugal property, accounting, etc. against her husband Alberto J. Lopez established a cause of action against petitioner. 2. Whether petitioner's inclusion as party defendant is essential in the proceedings for a complete adjudication of the controversy.
Held: 1. No.

"A cause of action is an act or omission of one party the defendant in violation of the legal right of the 10 other." The elements of a cause of action are: (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 in violation 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. A cause of action is sufficient if a valid judgment may be rendered thereon if the alleged facts were admitted or proved. In order 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 merely defectively stated or is ambiguous, indefinite or uncertain. The complaint is by an aggrieved wife against her husband. Nowhere in the allegations does it appear that relief is sought against petitioner. Respondent's causes of action were all against her husband. The first cause of action is for judicial appointment of respondent as administratrix of the conjugal partnership or absolute community property arising from her marriage to Alberto J. Lopez. Petitioner is a complete stranger to this cause of action. 2. No.
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A real party in interest is one who stands "to be benefited or injured by the judgment of the suit." case, petitioner would not be affected by any judgment in Special Proceedings M-3630.

In this

If petitioner is not a real party in interest, she cannot be an indispensable party. An indispensable party is 19 one without whom there can be no final determination of an action. Petitioner's participation in Special Proceedings M-36-30 is not indispensable. Certainly, the trial court can issue a judgment ordering Alberto J. Lopez to make an accounting of his conjugal partnership with respondent, and give support to respondent and their children, and dissolve Alberto J. Lopez' conjugal partnership with respondent, and forfeit Alberto J. Lopez' share in property coowned by him and petitioner. Such judgment would be perfectly valid and enforceable against Alberto J. Lopez. Nor can petitioner be a necessary party in Special Proceedings M-3630. A necessary party as one who is not indispensable but who ought to be joined as party if complete relief is to be accorded those already parties, or for 20 a complete determination or settlement of the claim subject of the action. In the context of her petition in the lower court, respondent would be accorded complete relief if Alberto J. Lopez were ordered to account for his alleged conjugal partnership property with respondent, give support to respondent and her children, turn over his share in the co-ownership with petitioner and dissolve his conjugal partnership or absolute community property with respondent.

8) Facts:

Lotte Phil. Co. Inc. vs. De La Cruz et al. 464 SCRA 591

Petitioner is a domestic corporation. Respondents are among those who were hired and assigned to the confectionery facility operated by private respondent. 7J Maintenance and Janitorial Services ("7J") entered into a contract with petitioner to provide manpower for needed maintenance, utility, janitorial and other services to the latter. In compliance with the terms and conditions of the service contract, and to accommodate the needs of petitioner for personnel/workers to do and perform "piece works," respondents were hired and assigned to private respondent as repackers or sealers. However, either in October, 1999 or on February 9, 2000, petitioner dispensed with their services allegedly due to the expiration/termination of the service contract by respondent with 7J. They were either told " hwag muna kayong pumasok at tatawagan na lang kung may gawa"; or were asked to wait "pag magrereport sila sa trabaho." Unfortunately, petitioners were never called back to work again. Aggrieved, petitioners lodged a labor complaint against both petitioner and 7J for illegal dismissal, regularization, payment of corresponding backwages and related employment benefits, 13th month pay, service incentive leave, moral and exemplary damages and attorneys fees based on total jud gment award. The labor arbiter rendered judgment finding 7J guilty of illegal dismissal. Respondents appealed to the NLRC praying that Lotte be declared as their direct employer because 7J is merely a labor-only contractor. The NLRC ruled that respondents are employees of 7J. A MR was filed but was denied. Respondents filed a petition for certiorari with the CA, insisting that their employer is Lotte and not 7J. Lotte, however, denied that respondents were its employees. It prayed that the petition be dismissed for failure to implead 7J who is a party interested in sustaining the proceedings in court, pursuant to Section 3, Rule 46 of the Revised Rules of Civil Procedure. The CA reversed and set aside the rulings of the arbiter and the NLRC, declaring Petitioner as the employer of the respondents. Hence, this petition.

Issue: Whether 7J is an indispensible party and should have been impleaded in the petition before the CA?
Held: Yes. An indispensable party is a party in interest without whom no final determination can be had of an action, 16 17 and who shall be joined either as plaintiffs or defendants. The joinder of indispensable parties is mandatory. The presence of indispensable parties is necessary to vest the court with jurisdiction, which is "the authority to hear and 18 determine a cause, the right to act in a case". Thus, without the presence of indispensable parties to a suit or 19 proceeding, judgment of a court cannot attain real finality. The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. In the case at bar, 7J is an indispensable party. It is a party in interest because it will be affected by the outcome of the case. The Labor Arbiter and the NLRC found 7J to be solely liable as the employer of respondents. The Court of Appeals however rendered Lotte jointly and severally liable with 7J who was not impleaded by holding that the former is the real employer of respondents. Plainly, its decision directly affected 7J. In Domingo v. Scheer, we held that the non-joinder of indispensable parties is not a ground for the 22 23 dismissal of an action and the remedy is to implead the non-party claimed to be indispensable. Parties may be added by order of the court on motion of the party or on its own initiative at any stage of the action and/or such times as are just. If the petitioner refuses to implead an indispensable party despite the order of the court, the latter may dismiss the complaint/petition for the petitioner/plaintiffs failure to comply therefor. Although 7J was a co-party in the case before the Labor Arbiter and the NLRC, respondents failed to include it in their petition for certiorari in the Court of Appeals. Hence, the Court of Appeals did not acquire jurisdiction over 7J. No final ruling on this matter can be had without impleading 7J, whose inclusion is necessary for the effective and complete resolution of the case and in order to accord all parties with due process and fair play.
21 15

9) Facts:

De la Cruz vs. Joaquin 464 SCRA 576

The case originated from a Complaint for the recovery of possession and ownership, the cancellation of title, and damages, filed by Pedro Joaquin against petitioners. Respondent alleged that he had obtained a loan from them in the amount of P9,000 on June 29, 1974, payable after five (5) years; that is, on June 29, 1979. To secure the payment of the obligation, he supposedly executed a Deed of Sale in favor of petitioners. The parties also executed another document entitled "Kasunduan." Respondent claimed that the Kasunduan showed the Deed of Sale to be actually an equitable mortgage. Spouses De la Cruz contended that this document was merely an accommodation to allow the repurchase of the property until June 29, 1979, a right that he failed to exercise. The RTC rendered a decision in favor of respondent. The CA affirmed the decision of the RTC. A MR was filed which was denied. The CA also ordered a substitution by legal representatives. Hence, this Petition.

Issue: Whether the trial court lost jurisdiction over the case upon the death of Pedro Joaquin?
Held: NO. When a party to a pending action dies and the claim is not extinguished, substitution of the deceased. The SC cited Sec. 16 of Rule 3.
21

the Rules of Court require a

22

The rule on the substitution of parties was crafted to protect every partys right to due process. The estate of the deceased party will continue to be properly represented in the suit through the duly appointed legal 23 representative. Moreover, no adjudication can be made against the successor of the deceased if the fundamental right to a day in court is denied. The Court has nullified not only trial proceedings conducted without the appearance of the legal 25 representatives of the deceased, but also the resulting judgments. In those instances, the courts acquired no jurisdiction over the persons of the legal representatives or the heirs upon whom no judgment was binding. This general rule notwithstanding, a formal substitution by heirs is not necessary when they themselves 27 voluntarily appear, participate in the case, and present evidence in defense of the deceased. These actions negate any claim that the right to due process was violated. Strictly speaking, the rule on the substitution by heirs is not a matter of jurisdiction, but a requirement of due process. Thus, when due process is not violated, as when the right of the representative or heir is recognized and protected, noncompliance or belated formal compliance with the Rules cannot affect the validity of a promulgated 31 decision. Mere failure to substitute for a deceased plaintiff is not a sufficient ground to nullify a trial courts decision. The alleging party must prove that there was an undeniable violation of due process. The records of the present case contain a "Motion for Substitution of Party Plaintiff" dated February 15, 2002, filed before the CA. Evidently, the heirs of Pedro Joaquin voluntary appeared and participated in the case. We stress that the 33 appellate court had ordered his legal representatives to appear and substitute for him. The substitution even on appeal had been ordered correctly. In all proceedings, the legal representatives must appear to protect the interests 34 of the deceased. After the rendition of judgment, further proceedings may be held, such as a motion for reconsideration or a new trial, an appeal, or an execution. Considering the foregoing circumstances, the Motion for Substitution may be deemed to have been granted; and the heirs, to have substituted for the deceased, Pedro Joaquin. There being no violation of due process, the issue of substitution cannot be upheld as a ground to nullify the trial courts Decision.

12) Navarro vs. Judge Escobido 606 SCRA Facts: Respondent Karen T. Go filed 2 complaints. for replevin and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarros possession. She alleged that, she, under the Trade name Kargo enterprises, enetered into a contract of lease with option to purchase with Navarro. Under the agreement she was to leased 2 Fuso with mounted crane to Navarro. As consideration, Navarro issued checks. Some of it were dishonoured for insufficiency of funds. The RTC issued writs of replevin for both cases; as a result, the Sheriff seized the two vehicles and delivered them to the possession of Karen Go. Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go was not a party to the Lease Agreements with Option to Purchase. The RTC dismissed the case on the ground that the complaints did not state a cause of action. A MR was filed. The RTC reversed its earlier ruling. Navarro filed a petition for certiorari with the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of the case and directed Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading. The CA denied the petition. A MR was filed but was denied.

Issue: Who is the real party in interest?

Held: Karen Go. The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were in Kargo Enterprises name, this was merely a trade name without a juridical personality, so the actual parties to the lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go. The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name appears in the title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the name KARGO ENTERPRISES," and this identification was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant "leased from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint specifies and attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the defendant. The SC went further and explained that Karen Go may file the action as the real party in interest base on the Family Code. Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code, supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the property in que stion without the other spouses consent. On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4. Non-joinder of indispensable parties not ground to dismiss action. Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of 26 cases that the misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated in Macababbad v. Masirag: Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the dismissal of an action, thus: Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately. In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable party at any stage of the action. The court, either motu proprio or upon the motion of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity to amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to include the indispensable party is directed refuses to comply with the order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed.

13) China Banking Corp. vs. Oliver 390 SCRA 263 Facts: A certain Mercedes M. Oliver (Oliver One) was granted a loan by petitioner. The loan was secured by a REM. The mortgage was duly registered and annotated on the title. Then, respondent claiming that she is Mercedes M. Oliver (Oliver Two), filed an action for annulment of mortgage and cancellation of title with damages against Chinabank. Chinabank moved to dismiss the case for lack of cause of action and non-joinder of an indispensable party, the mortgagor (Oliver One). The motion was denied. Chinabank filed with the Court of Appeals a petition for certiorari with prayer for the issuance of a writ of preliminary injunction and/or restraining order to enjoin enforcement of the order. Respondent Oliver Two moved to declare petitioner Chinabank in default. She pointed out that since petitioner received the order denying the motion to dismiss on March 21, 1997, it had only until April 7, 1997 to file its answer to the complaint. However, until the filing of the motion for default, no answer had been filed yet. The trial court granted the motion and declared petitioner in default. Consequently, petitioner Chinabank filed a supplemental petition. It argued that the special civil action for certiorari filed in the Court of Appeals interrupted the proceedings before the trial court, thereby staying the period for filing the answer. The Court of Appeals promulgated the assailed decision, finding no grave abuse of discretion committed by the trial judge in ruling that the Rules of Court provided the manner of impleading parties to a case and in suggesting that petitioner file an appropriate action to bring the mortgagor within the courts jurisdiction. The Court of Appeals denied petitioners motion for reconsideration. Hence, this petition .

Issue: 1. Is the mortgagor who goes by the name of Mercedes M. Oliver, herein called Oliver One, an indispensable party? 2. Should Section 7 Rule 3 of the 1997 Rules of Civil Procedure7 apply in this case?
Held: 1. No. Petitioners contention is far from tenable. An indispensable party is a party in interest, without whom 8 no final determination can be had of an action. It is true that mortgagor Oliver One is a party in interest, for she will be affected by the outcome of the case. She stands to be benefited in case the mortgage is declared valid, or injured 9 in case her title is declared fake. However, mortgagor Oliver Ones absence from the case does not hamper the trial court in resolving the dispute between respondent Oliver Two and petitioner. A perusa l of Oliver Twos allegations in the complaint below shows that it was for annulment of mortgage due to petitioners negligence in not determining the actual ownership of the property, resulting in the mortgages annotation on TCT No. S -50195 in the Registry of Deeds custody. To support said allegations, respondent Oliver Two had to prove (1) that she is the real Mercedes M. Oliver referred to in the TCT, and (2) that she is not the same person using that name who entered into a deed of mortgage with the petitioner. This, respondent Oliver Two can do in her complaint without necessarily impleading the mortgagor Oliver One. Hence, Oliver One is not an indispensable party in the case filed by Oliver Two. In Noceda vs. Court of Appeals, et al., 313 SCRA 504 (1999), we held that a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in court. In this case, Chinabank has interest in the loan which, however, is distinct and divisible from the mortgagors interest, which involves the land used as collateral for the loan. Further, a declaration of the mortgages nullity in this case will not necessarily prejudice mortgagor Oliver One. The bank still needs to initiate proceedings to go after the mortgagor, who in turn can raise other defenses pertinent to the two of them. A party is also not indispensable if his presence would merely permit complete relief between him and those already parties to the action, or will simply avoid multiple litigation, as in the case of 10 Chinabank and mortgagor Oliver One. The latters participation in this case will simply enable petitioner Chinabank to make its claim against her in this case, and hence, avoid the institution of another action. Thus, it was the bank who should have filed a third-party complaint or other action versus the mortgagor Oliver One. 2. No. As to the second issue, since mortgagor Oliver One is not an indispensable party, Section 7, Rule 3 of the 1997 Rules of Civil Procedure, which requires compulsory joinder of indispensable parties in a case, does not 11 apply. Instead, it is Section 11, Rule 3, that applies. Non-joinder of parties is not a ground for dismissal of an action. 12 Parties may be added by order of the court, either on its own initiative or on motion of the parties. Hence, the Court of Appeals committed no error when it found no abuse of discretion on the part of the trial court for denying Chinabanks motion to dismiss and, instead, suggested that petitioner file an appropriate action against mortgagor Oliver One. A person who is not a party to an action may be impleaded by the defendant either on the basis of liability to himself or on the ground of direct liability to the plaintiff.

14) Pacific Consultants vs. Schonfeld 516 SCRA Facts: Respondent was a Canadian citizen. He was offered employment by Pacicon Philippines, Inc. (PPI), a domestic corporation which is a subsidiary Pacific Consultants International of Japan (PCIJ). In a letter of employment to respondent, sent by PCIJs president he was offered a post in the Philippines with PPI. In the same letter, it was stipulated that Any question of interpretation, understanding or fulfillment of the conditions of employment, as well as any question arising between the Employee and the Company which is in consequence of or connected with his employment with the Company and which can not be settled amicably, is to be finally settled, binding to both parties through written submissions, by the Court of Arbitration in London. Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was accorded the status of a resident alien. PPI applied for an Alien Employment Permit (Permit) for respondent before the Department of Labor and Employment (DOLE). The DOLE granted the application and issued the Permit to respondent. Respondent received a letter from Henrichsen informing him that his employment had been terminated. Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled some of his claims (US$5,635.99), but refused to pay the rest. Thus, respondent filed a complaint for illegal dismissal against petitioners PPI and Henrichsen (PCIJs President) with the Labor Arbiter. Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter had no jurisdiction over the subject matter; and (2) venue was improperly laid. It argued that the proper venue was with the Court of Arbitration in London. The Labor Arbiter rendered a decision granting petitioners Motion to Dismiss. On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latters decision in toto. Respondent then filed a petition for certiorari under Rule 65 with the CA. The CA found the petition meritorious. On the issue of venue, the appellate court declared that, even under the January 7, 1998 contract of employment, the parties were not precluded from bringing a case related thereto in other venues. While there was, indeed, an agreement that issues between the parties were to be resolved in the London Court of Arbitration, the venue is not exclusive, since there is no stipulation that the complaint cannot be filed in any other forum other than in the Philippines. A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the appellate court denied for lack of merit. Hence, this petition.

Issue: Whether the venue was properly laid?

Held: Yes. The settled rule on stipulations regarding venue, as held by this Court in the vintage case of Philippine 31 Banking Corporation v. Tensuan, is that while they are considered valid and enforceable, venue stipulations in a contract do not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in the absence of qualifying or restrictive words. They should be considered merely as an agreement or additional forum, not as limiting venue to the specified place. They are not exclusive but, rather permissive. If the intention of the parties were to restrict venue, there must be accompanying language clearly and categorically expressing their purpose and design that actions between them be litigated only at the place named by them. In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other court save 33 ," "particularly," "nowhere else but/except ," or words of equal import were stated in the contract. It cannot be said that the court of arbitration in London is an exclusive venue to bring forth any complaint arising out of the employment contract.

1) Facts:

De Castro vs. CA 386 SCRA 301

Private respondent Francisco Artigo ("Artigo" for brevity) sued petitioners Constante A. De Castro ("Constante" for brevity) and Corazon A. De Castro ("Corazon" for brevity) to collect the unpaid balance of his broker's commission from the De Castros. He alleged that he was authorized by petitioners to act as real estate broker in the sale of these properties for the amount of P23,000,000.00, five percent (5%) of which will be given to the agent as commission. Then, he found Times Transit Corporation, represented by its president Mr. Rondaris, as prospective buyer which desired to buy two (2) lots only, specifically lots 14 and 15. Eventually, sometime in May of 1985, the sale of lots 14 and 15 was consummated. Appellee received from appellants P48,893.76 as commission. Private respondent instituted the action to collect the unpaid balance of his commission which according to him amounts to P303,606.24 after having received P48,893.76 in advance. Said amount is 5% of the purchase price of the two lots. Petitioner argued that the complaint for failing to implead as indispensable parties the other co-owners of the two lots. The trial court rendered judgment in favor of respondent. On appeal, the CA affirmed the decision of the trial court. Hence, the instant petition.

Issue: Whether the complaint merits dismissal for failure to implead other co-owners as indispensable parties?
Held: NO. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case can be had.7 The joinder of indispensable parties is mandatory and courts cannot proceed without their presence.8 Whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop the trial and order the inclusion of such party. However, the rule on mandatory joinder of indispensable parties is not applicable to the instant case. There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to sell the properties of the De Castros for P23 million at a 5 percent commission. The authority was on a first come, first serve basis. Constante signed the note as owner and as representative of the other co-owners. Under this note, a contract of agency was clearly constituted between Constante and Artigo. Whether Constante appointed Artigo as agent, in Constante's individual or representative capacity, or both, the De Castros cannot seek the dismissal of the case for failure to implead the other co-owners as indispensable parties.