Civ Pro

[G.R. No. 119879. March 11, 2004] HEIRS OF JUANA GAUDIANE, namely: DATIVA M. PASTOR, MARIA M. ALCORIZA, BEATRIZ M. PATROCIO, SOLOMON I. MARIO, BENJAMIN I. MARIO, LILI MARIO, VERONICA I. MARIO, SEVERINA MARIO VDA. DE ISO, ROSITA ISO, AGRIPINO ISO, ELIZABETH ISO, VIRGINIA ISO, LEOPOLDO ISO, NAPOLEON ISO, petitioners, vs. COURT OF APPEALS and THE HEIRS OF FELIX GAUDIANE, namely: ARNULFO GAUDIANE, GEORGE GAUDIANE, RODOLFO GAUDIANE, RAYMUNDO GAUDIANE, SANDRA GAUDIANE, CEFERINA GAUDIANE, JONNA GAUDIANE, MILLARD GAUDIANE, GLORIA TORRES-GAUDIANE, WILFREDO GAUDIANE, ROLANDO GAUDIANE, ANTONIO GAUDIANE, KATHRYN GAUDIANE, PRISCILLA GAUDIANE, CATALINA PACIOS, DONATELLA PACIOS, REMEDIOS PACIOS, GUALBERTO GAUDIANE, VICTOR GAUDIANE, LORNA GAUDIANE, DOLORES GAUDIANE, respondents. DECISION CORONA, J.: Before us is a petition for review of the decision[1] dated February 24, 1995 of the Court of Appeals[2] affirming the decision[3] dated March 27, 1991 of the Regional Trial Court of Dumaguete City, Branch 34, ordering the partition of Lot 4389 and directing the petitioners to make an accounting of the rentals and profits they have obtained from the said lot from the time the case was filed and to remit to respondents their one-half share thereof. The facts, as found by the courts a quo, follow. The lot in controversy is Lot 4389 located at Dumaguete City and covered by Original Certificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix and Juana Gaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein respondents are the descendants of Felix while petitioners are the descendants of Juana. On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta (Escritura, for brevity) whereby he sold to his sister Juana his one-half share in Lot No. 4156 covered by Transfer Certificate of Title No. 3317-A. The Escritura described the lot sold as follows: A parcel of land (Lot No. 4156 of the Cadastral Survey of Dumaguete), with the improvements thereon, situated in the Municipality of Dumaguete. Bounded on the NE. and E. by Lot No. 4155; on the SW. by Lots Nos. 4157 and 4158; and on the NW. by Lot No. 4154. Containing an area of five hundred and fifty-two (552) square meters, more or less. What muddled the otherwise clear contract of sale was a statement in the Escritura that Lot No. 4156 was declared under Tax Declaration No. 18321. However, said tax declaration was for another parcel of land, Lot 4389 and not Lot 4156. Petitioners predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed that the sale by Felix to their mother Juana in 1927 included not only Lot 4156 but also Lot 4389. In 1974, they filed a pleading in the trial court seeking to direct the Register of Deeds of Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new title in favor of the Isos. This was later withdrawn after respondents predecessors-in-interest, Procopio Gaudiane and Segundo Gaudiane, opposed it on the ground that the Isos falsified their copy of the Escritura by erasing Lot 4156 and intercalating in its place Lot 4389. The Isos again tried their luck to acquire title in their name by filing in 1975 a case for quieting of title of Lot 4389 but the same was dismissed without prejudice. The Isos later filed another action for quieting of title, docketed as Civil Case No. 6817, but it was again dismissed[4] on January 10, 1985 by the RTC of Negros Oriental, Branch 35, due to the failure of the plaintiffs (the Isos) to prosecute and to comply with the orders of the court. When the judgment became final, respondents sent a letter to Ines Iso asking her to surrender the possession of the one-half portion of Lot No. 4389 comprising Felix share. The Isos refused. On August 20, 1986, the respondents filed the present case for partition of Lot 4389, accounting of proceeds and damages against herein petitioners. On March 27, 1991, the trial court rendered a decision in favor of the respondents, the dispositive portion of which read: WHEREFORE, judgment is hereby rendered ordering the partition of the land in question, i.e., Lot No. 4389 of the Dumaguete Cadastre, covered by Original Certificate of Title No. 2986-A, in the names of Felix Gaudiane and his sister Juana Gaudiane, consisting of 36,988 square meters, between the plaintiffs and the defendants in the following proportion: one-half (1/2) share will go to the heirs of the late Felix Gaudiane, (1/2) share will go to the heirs of the late Juana Gaudiane, defendants herein. The defendants who are in possession of the subject property are likewise directed within thirty (30) days from receipt of this decision to make an accounting of the rents and profits they may have obtained from the real estate in question, from the time this action was instituted, and to remit to plaintiffs their proportionate one-half (1/2) share thereof.[5] According to the trial court, Felix did not sell to Juana his one-half share in Lot 4389. The Escritura clearly stated and described that what was sold was Lot 4156, not Lot 4389. Had it been his intention to include Lot 4389, he would have so identified and described it in the deed of sale. The fact that the title to Lot 4389 was still in the names of siblings Felix and Juana was proof that the subject lot continued to be under their co-ownership. The trial court refused to give weight to the tax declarations supposedly evidencing petitioners exercise of ownership over said lot after discovering that said declarations did not state the lot number or the certificate of title number. The trial court also ruled that the dismissal of petitioners second case for quieting of title due to failure to prosecute a nd for failure to comply with court orders had the effect of adjudication on the merits, pursuant t o the Rules of Court. Consequently, petitioners claim of exclusive ownership over Lot 4389 was without merit because it was barred by the order of dismissal dated January 10, 1985 in Civil Case No. 6817. As to whether the respondents lost by prescription their right to their share in the lot, the trial court held that a title, once registered, could not be defeated even by adverse, open and notorious possession. Laches did not also set in because, when petitioners repudiated the respondents share in the second case for quieting of title, the latter immediately opposed the move. They were therefore never negligent in pursuing their rights. On appeal, the Court of Appeals affirmed the decision of the trial court.[6]

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The appellate court reiterated the reasons of the trial court in holding that Felix never sold his share in Lot 4389 to Juana. The order of dismissal of the action for quieting of title was not appealed and therefore the issues raised therein involving the same lot could not be raised in the subject action anymore. Lastly, according to the Court of Appeals, the doctrine that a titled lot may be acquired by prescription in certain exceptional circumstances could not apply in the case at bar for the reason that herein petitioners employed fraud in claiming exclusive ownership over Lot 4389. Hence, this petition for review based on the following assignment of errors: I The respondent honorable court gravely erred in affirming that what was sold by the late Felix Gaudiane to his sister Juana Gaudiane was his one-half (1/2) share of another land, Lot No. 4156, covered by Original Certificate of Title No. 2986-A, pursuant to the Escritura de Compra Venta, Exhibit A dated November 4, 1927, disregarding the documentary evidence of the petitioners as well as the testimonial evidence adduced by the petitioners; II That the respondent honorable court gravely erred in finding that the argument of the petitioners with reference to the second assignment of error to the effect that the dismissal of the complaint for questing of title, docketed as civil case no. 6817 did not bar them from interposing as a defense in the case at bar their cause of action in civil case no. 6817; III That respondent honorable court gravely erred by not giving due course to the claim of petitioners and legal effect of prescription and laches adverted by defendants-appellants in their answer and affirmative defenses proven during the hearing by documentary and testimonial evidence.[7] Unconvinced by the rulings of the courts a quo, petitioners reiterate their arguments to support their claim of exclusive ownership of Lot 4389. Petitioners insist on their ownership over Felix share in said lot on the ground that the Escritura expressly mentioned Tax Declaration No. 18321 representing payment of taxes for Lot 4389. We disagree. As found by the courts a quo, a thorough reading of the Escritura reveals that Felix intended to sell his share in Lot 4156 only. In fact, only Lot 4156 was described in the Escritura. Consequently, the citation of Tax Declaration No. 18321 vis--vis Lot 4156 was clearly a mistake. Even the petitioners predecessors -in-interest, the Isos, believed that Lot 4389 was not included in the Escritura because they erased Lot 4156 and fraudulently replaced it with Lot 4389 in their prayer to cancel OCT 2986-A. Had they honestly believed that Lot 4389 was included in the sale, there would have been no need for them to resort to falsification. Moreover, if Felix had really sold his share in Lot 4389 to Juana, the latter would have had the title to the property transferred to her name alone. But she never did and the title to Lot 4389 continued to be in the names of both Felix and Juana. According to the petitioners, the order dated January 10, 1985 in Civil Case No. 6817 of the RTC of Negros Oreintal, Branch 35, dismissing their case for quieting of title on the ground of failure to prosecute and to comply with the lawful orders of the court was erroneously issued, considering that all the plaintiffs therein (petitioners), except their counsel, failed to attend the supposed hearing. And assuming arguendo that the order was dismissal with prejudice, petitioners contend that they are not barred from raising the defense of exclusive ownership in the instant case for partition because their present defense was not the issue in the case for quieting of title. Also, the effect of said order was effectively waived when the petitioners were allowed during the trial to present evidence of their exclusive ownership of Lot 4389 without any objection from the respondents. Petitioners arguments are misplaced. We cannot delve anymore into the legality and validity of the order of dismissal dated January 10, 1985 in Civil Case No. 6817 because it has long become final and executory for failure of the petitioners to file an appeal. In accordance with Section 3, Rule 17 of the 1997 Rules of Civil Procedure,[8] said order had the effect of judgment on the merits although no trial was conducted because it did not contain any statement that the case was dismissed without prejudice to the filing of a similar future action. As such, based on the principle of res judicata,[9] the petitioners are barred in another action (involving the same subject matter, parties and issues) from raising a defense and from asking for a relief inconsistent with an order dismissing an earlier case with prejudice. Petitioners argue that res judicata does not apply in the case at bar for the reason that a petition to quiet title has a cause of action different from a petition for partition. We do not think so. In Medija vs. Patcho, et al.,[10] we ruled that a case for partition and an action for quieting of title have identical causes of action and can therefore be the subject of res judicata: Is there identity of cause of action between the first and second actions? The answer is yes. The fact that Civil Case No. 1884, filed by the appellees against the appellant was for partition of the hereditary estate with accounting of fruits of several parcels of land, while Civil Case No. 2665, brought by appellant against the appellees, was for quieting of title over two parcels which are parts of the same properties subject of the previous case, does not remove the present proceeding from the operation of the principle of bar by former judgment. As specifically stated in the decision of the Court of Appeals in Civil Case No. 1884, now final and executory, the right of therein plaintiffs (appellees herein) to partition the several parcels of land was based on Article 1103 of the Civil Code. The appellees' right to ownership is based on succession they being heirs of the deceased Lorenzo Morante. What the appellant did is to institute another action which would preclude the execution of the judgment of the lower court in Civil Case No. 1884. It must be remembered that a change in the form of action or in the relief sought does not remove a proper case from the application of res judicata. In other words, a party cannot, by varying the form of action, or adopting a different method of presenting his case, escape the operation of the principle that one and the same cause of action shall not be twice litigated between the same parties (Ramos vs. Pangasinan Transportation Company, Inc., 79 SCRA 171; Aguila vs. J.M. Tuason & Co., Inc., 22 SCRA 690, citing Clemente vs. H.E. Heacock Co., G.R. No. L-23212, May 18, 1967; Francisco vs. Blas, 93 Phil. 43).[11] Petitioners filed an action to quiet title for the sole purpose of claiming for themselves exclusive ownership of Lot 4389. On the other hand, in the case for partition filed by respondents, petitioners set up the defense of sole dominion in order to frustrate the equal division of the property between the heirs of Felix and Juana. Considering the similarity of p etitioners defense in this case with their main averment in the case for quieting of title, petitioners are barred by res judicata from claiming sole ownership of Lot 4389.

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We also find that respondents never waived their right to object to petitioners barred defense of exclusive ownership. While the petitioners were allowed in the subject case for partition, accounting and damages to present their evidence of exclusive ownership, the respondents failure to oppose did not mean that the latter waived the ir right to object to the petitioners evidence. For reasons of public policy, res judicata cannot be waived by a party because the time and energy of the State and the taxpayers are wasted by the re-litigation of settled issues. That is the reason why, under Rule 9 of the 1997 Rules of Civil Procedure, a trial court may dismiss a case motu proprio on grounds of res judicata although it is not raised, and apparently waived, in a motion to dismiss or answer. Conversely, a plaintiff, or the trial court itself, may invoke res judicata to resist a defense barred by prior judgment even after trial on the merits. Lastly, petitioners argue that they acquired Felix share in the lot in question through prescription and laches. As a gener al rule, ownership over titled property cannot be lost through prescription.[12] Petitioners, however, invoke our ruling in Tambot vs. Court of Appeals[13] which held that titled property may be acquired through prescription by a person who possessed the same for 36 years without any objection from the registered owner who was obviously guilty of laches. Petitioners claim is already rendered moot by our ruling barring petitioners from raising the defense of exclusive ownership due to res judicata. Even assuming arguendo that petitioners are not so barred, their contention is erroneous. As correctly observed by the appellate court: The TAMBOT case is inapplicable. The case of Bicarme vs. Court of Appeals would be more in point. In the case at bar, appellees predecessor-in-interest fraudulently denied possession of one-half of Lot No. 4389 to appellants by misrepresenting the Escritura executed by Felix Gaudiane included not only Lot No. 4156 but also Lot No. 4389. That of course is not true. As explained earlier, only Lot No. 4156 was sold. It was through this misrepresentation that appellees predecessor -in-interest succeeded in withholding possession of appellees share in Lot No. 4389. Appellees cannot, by their own fraudulent act, benefit therefrom by alleging prescription and laches.[14] WHEREFORE, the petition is DENIED. Costs against the petitioners. SO ORDERED.

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G.R. No. 101256. March 8, 1993. SPOUSES PEPITO AND LORETO LAUS, petitioners, vs. HON. COURT OF APPEALS, HON. SALVADOR C. CEGUERA, in his capacity as Presiding Judge of the Regional Trial Court of Quezon City, Branch 82; NILO SM. CABANG, in his capacity as Deputy Sheriff of Quezon City and CONSUELO P. TORRES, respondents. Alberto E. Venturanza for petitioners. Leonardo Byron R. Perez, Jr. for private respondent. SYLLABUS 1. REMEDIAL LAW; CIVIL PROCEDURE; JURISDICTION; HOW JURISDICTION OVER PERSON OF DEFENDANT ACQUIRED; EFFECT OF INVALID SERVICE OF SUMMONS; CASE AT BAR. The focal issue is whether or not the trial court acquired jurisdiction over the persons of the petitioners by virtue of the substituted service of summons effected by Deputy Sheriff Cruz. Since the petitioners did not voluntarily submit to the jurisdiction of the trial court, proper service of summons became imperative. If the service effected in the case at bar was, as claimed by the petitioners, invalid, the trial court acquired no jurisdiction over their persons. In such an instance, the order of default, judgment by default and writ of execution issued by the trial court would be null and void. . . . Since the substituted service of summons in this case was not validly effected, the trial court did not acquire jurisdiction over the persons of the petitioners. The order of default, the judgment by default, the writ of execution issued by it, as well as the auction sale of the petitioners' properties levied on execution are, therefore, all null and void. 2. ID.; ID.; SUMMONS; PERSONAL SERVICE; GENERAL RULE; SUBSTITUTED SERVICE NATURE THEREOF; PHRASE "WITHIN A REASONABLE TIME" CONSTRUED. The general rule in this jurisdiction is that summons must be personally served; pursuant to Section 7, Rule 14 of the Revised Rules of Court, such personal service is to be accomplished by "handing a copy thereof to the defendant in person, or, if he refuses to receive it, by tendering it to him." However, if this mode of service cannot be effected within a reasonable time, substituted service may be resorted to under Section 8 of the same Rule. Section 8 provides: "SEC. 8. Substituted Service. If the defendant cannot be served within a reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendant's dwelling house or residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendant's office or regular place of business with some competent person in charge thereof." This provision is a reproduction of Section 8, Rule 7 of the 1940 Rules of Court except that inter alia, "promptly" in the latter was changed to "within a reasonable time" in the former. "Within a reasonable time" contemplates a period of time longer than that demarcated by the word "prompt," and presupposes that a prior attempt at personal service, within a justifiable time frame as would be necessary to bring the defendant within the jurisdiction of the court, had failed. Since substituted service is in derogation of the common law and is extraordinary in character, it must be used only as prescribed and in the circumstances authorized by statute. Statutes prescribing modes other than personal service of summons must be strictly complied with to give the court jurisdiction, and such compliance must appear affirmatively in the return. 3. ID.; ID.; ID.; HOW IMPOSSIBILITY OF PROMPT PERSONAL SERVICE SHOWN; CASE AT BAR. In Keister vs. Navarro, this Court described how the impossibility of personal service should be shown: "Impossibility of prompt service should be shown by stating the efforts made to find the defendant personally and the fact that such efforts failed. This statement should be made in the proof of service (I Moran, Comments on the Rules of Court, 1970 Ed., p. 444). This is necessary because substituted service is in derogation of the usual method of service. It has been held that this method of service is `in derogation of the common law; it is a method extraordinary in character, and hence may be used only as prescribed and in the circumstances authorized by statute.' . . . (72 C.J.S. 1053)." A perusal of the sheriff's return in the case at bar readily reveals that it does not (a) indicate the impossibility of service of summons within a reasonable time, (b) specify the efforts exerted to locate the petitioners and (c) state that it was served on a person of sufficient age and discretion residing therein. The fact of the matter is that as disclosed in his testimony taken in connection with the motion for reconsideration, and the affidavit he prepared in conjunction with such hearing. Deputy Sheriff Cruz resorted to a substituted service on his first and only attempt to effect a personal service. Upon being informed that the petitioners were not around at that time, he immediately resorted to a substituted service through Josephine Areola, a person whose age he did not even know or attempt to discover. He did not even inquire about the whereabouts of the petitioners, the time they were expected to return home, the hours of the day they could be contacted at their house or the location of their offices, if any, in order that he could faithfully comply with the requirement of personal service. 4. ID.; ID.; ID.; SERVICE OF SUMMONS MAY BE MADE AT NIGHT, DURING THE DAY, ON A SUNDAY OR A HOLIDAY; REASON THEREFOR; CASE AT BAR. It is all too obvious that no earnest efforts were exerted by Deputy Sheriff Cruz to effect the personal service of summons. His testimony thus attests to an undue, if not indecent, haste to serve the summons at the first attempt without making sure that personal service was, by then and even thereafter, an impossibility because either the petitioners had left for a foreign country or an unknown destination with not definite date of returning within a reasonable period or had gone into hiding to avoid service of any process from the courts. If he had only made the inquiries suggested above, he could have returned in the evening of 10 October 1989 or on any of the succeeding days including the following Saturday and Sunday. Service of summons may be made at night as well as during the day, or even on a Sunday or holiday because of its ministerial character. 5. ID.; ID.; MOTION TO DISMISS ON GROUND OF LACK OF JURISDICTION OVER DEFENDANT'S PERSON; PERIOD FOR FILING DOES NOT COMMENCE TO RUN UNTIL DEFENDANT VOLUNTARILY SUBMITS TO COURT'S JURISDICTION; REASON THEREFOR; CASE AT BAR. Some further comments, en passant, on the ratiocination of the respondent Court are in order. It is not accurate for the latter to have said that the petitioners' motion to dismiss was not filed seasonably because it was filed beyond the reglementary period provided in the Revised Rules of Court. Such a conclusion would doubtless be correct if there was a valid service of summons. If, however, a defendant has not been properly summoned, the period to file a motion to dismiss for lack of jurisdiction over his person does not commence to run until he voluntarily submits to the jurisdiction of the court, since the court has no jurisdiction to adjudicate the controversy as to him until such time. In this case, petitioners did not voluntarily submit to the jurisdiction of the trial court. Consequently, the period to file a responsive pleading did not even commence to run. 6. ID.; SPECIAL CIVIL ACTIONS; CERTIORARI; WHEN INTERLOCUTORY ORDER MAY BE THE SUBJECT THEREOF; CASE AT BAR. Nor are We persuaded by the respondent Court's declaration that even if the motion to dismiss had been filed on time, the trial court's order denying the same, being interlocutory, still cannot be the subject of a petition for certiorari. To be sure, this rule admits of an exception, as when the trial court clearly acted outside of its jurisdiction or with grave abuse of discretion in denying the motion to dismiss. This is exactly what happened in the case while it was pending before the trial court; the denial of the motion to dismiss was based solely on the ground that a judgment by default had already been entered. Certainly, this does not constitute a valid ground for the denial because the motion raises a fundamental and prejudicial issue affecting the validity of the decision by default. 7. ID.; EVIDENCE DISPUTABLE PRESUMPTIONS; PRESUMPTION OF REGULARITY IN PERFORMANCE OF OFFICIAL FUNCTIONS; DOES NOT APPLY WHERE SHERIFF'S RETURN IS PATENTLY DEFECTIVE. Finally, respondent Court's reliance on the presumption of

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regularity in the performance of official functions is misplaced. We have held that such a presumption does not apply where it is patent that the sheriff's return is defective. 8. ID.; VOID JUDGMENT CAN NEVER BECOME FINAL AND EXECUTORY; ACTION TO DECLARE NULLITY OF VOID JUDGMENT IMPRESCRIPTIBLE; CASE AT BAR. Equally unmeritorious is the respondent Court's statement that the failure of the petitioners to appeal from the judgment by default rendered such judgment final and unassailable. In the first place, it is axiomatic that a void judgment can never become final and executory and may even be assailed or impugned at any time. An action to declare the nullity of a void judgment does not prescribe. Secondly, the motion to dismiss in this case was filed before the petitioners received a copy of the decision by default. Since the said motion is based on the lack of jurisdiction over the persons of the petitioners which, if true in fact, We have found it to be so would result in the nullification not only of the default order but of the decision as well, then for all legal intents and purposes, the latter was covered by the motion. This was precisely the orientation of the trial court when it allowed the parties to submit evidence to support the motion to reconsider the Order of 5 March 1990 denying the motion to dismiss. It would certainly not have gone that far if it thought otherwise for by then, the decision had already become final. DECISION DAVIDE, JR., J p: Petitioners seek the review and reversal of the 30 May 1991 Decision 1 of respondent Court of Appeals in CA-G.R. SP No. 22232 2 and the 30 July 1991 Resolution denying their motion to reconsider the said decision. The challenged decision dismissed, for lack of merit, their petition for certiorari, prohibition and injunction to annul the Orders dated 5 March 1990 and 9 July 1990 of Branch 82 of the Regional Trial Court (RTC) of Quezon City in Civil Case No. Q-89-3327 which, respectively, declared them in default and denied their motion to reconsider such declaration. The antecedents of this case are not controverted. On 24 August 1989, private respondent Consuelo P. Torres filed against "Loredo (sic) Alfaro-Laus and John Doe" a complaint, docketed as Civil Case No. Q-89-3327, for the collection of a sum of money. The defendants in the said case are the petitioners in the instant petition. The complaint alleges that petitioner Loreto Alfaro-Laus executed a promissory note in favor of the private respondent under which the former undertook to pay the latter the amount of Sixty-Six Thousand Pesos (P66,000.00) after three (3) months from the date thereof. Upon maturity of the said promissory note, however, only Eleven Thousand Pesos (P11,000.00) was paid; despite the receipt of a demand letter from the private respondent, petitioners made no further payments. Thus, the former filed the aforementioned complaint praying for the payment of the unpaid balance of P55,000.00 "plus interest at the rate of ten per cent (10%), compounded monthly beginning February 21, 1989, and twentyfive per cent (25%) of the entire amount due for and as attorney's fees, such being in accordance with the terms and conditions set forth in the promissory note." 3 On 10 October 1989, Deputy Sheriff Romero S. Cruz proceeded to the petitioners' address at 122 Molave Park Subdivision, Paraaque, Metro Manila to serve the summons and a copy of the complaint. Failing to serve the summons personally upon the petitioners after waiting for ten (10) minutes, he resorted to a substituted service through one Josephine Areola, who purportedly represented herself to be the maid of the said petitioners. 4 On the same date, Deputy Sheriff Cruz executed and filed a return 5 which reads: "Respectfully returned to the REGIONAL TRIAL COURT Branch 82, QUEZON CITY, the attached original copy of the summons issued in connection with Civil Case No. 89-3327 entitled CONSUELO P. TORRES versus LOREDO (sic) LAUS & JOHN DOE with the information that duplicate copy of the same together with the complaint and its annexes was duly served upon defendant Loredo (sic) Laus of 122 Molave Park Subd. Paraaque M. M. thru JOSEPHINE AREOLA, maid of Loredo Daus (sic) of same address, received as evidenced by her signature appearing thereon." The petitioners did not file any answer. Consequently, upon motion of the private respondent, the trial court 6 issued on 29 December 1989 an order declaring the former in default and setting the ex parte presentation of the private respondent's evidence for 16 January 1990. 7 The petitioners claim that they received this 29 December 1989 Order only on 22 January 1990. On 24 January 1990, the trial court rendered a judgment by default against the petitioners; it ordered the latter "[T]o pay the plaintiff (private respondent) the amount of FIFTY-FIVE Thousand Pesos (P55,000.00) at the rate of ten per cent (10%), compounded monthly beginning February 21, 1989 up to the present; and . . . [T]o pay attorney's fees equivalent to twenty-five percent (25%) of the entire amount due" to the private respondent. 8 On 2 February 1990, before receiving a copy of the 22 January 1990 decision, petitioners, by way of a special appearance, filed a motion to dismiss the case for lack of jurisdiction over their persons. They allege that the service of summons was ineffective because it was not indicated in the return that the sheriff had first exerted efforts to serve the same personally before resorting to substituted service. 9 In its Order of 5 March 1990, the trial court denied the motion to dismiss for lack of merit on the ground that it had already rendered a judgment by default on 24 January 1990. 10 Petitioners received a copy of this order on 24 March 1990. In the meantime, the trial court issued a writ of execution. On 30 March 1990, public respondent Deputy Sheriff Nilo Cabang, pursuant to a writ of execution issued by the trial court, levied upon petitioners' properties consisting of a 1983 Mitsubishi Galant Sedan and a men's ring. On 3 April 1990, petitioners filed a motion to reconsider the Order of 5 March 1990; 11 they reiterated therein the contention that the trial court did not acquire jurisdiction over their persons because of the defective service of summons, and further aver that: "Josephine Areola, the person who supposedly received the summons is not even known to the defendants. It turned out from their investigation that said Josephine Areola was just a guest of one of their maid (sic) who stayed for only about a week. Furthermore Josephine Areola was just a child of about ten to eleven years old and would not be expected to know what to do with the documents handed to her. With all due respect it would not be fair for the defendant if the summons would be served upon the defendants through a person who is not of sufficient age and discretion at the time the summons was served, and a transcient (sic) at that." 12 A hearing on the motion for reconsideration was held and the parties presented evidence on the issue of service of summons. Petitioner Loreto Alfaro-Laus testified that Josephine Areola, who was 11 to 12 years old at that time, was just a guest of her maid and thus stayed in the house for a week. Private respondent, on the other hand, presented evidence to show that Josephine had been staying in the petitioners' house since July 1990 for she was the person who received the demand letter sent to the petitioners on 3 July 1989. 13 Deputy Sheriff Cruz also took the witness stand, identified the affidavit he executed on 27 April 1990 14 and further asserted that he found no one in the house of the petitioners when he arrived on 10 October 1989; he claimed that he waited for ten (10) minutes. Thereupon, two (2) women arrived; the

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said women told him, upon his inquiry, that the petitioners were not around. He then served the summons through one of them, Josephine Areola. 15 In its Order of 9 July 1990, 16 the trial court denied the petitioners' motion for reconsideration and held that there was a proper service of summons because contrary to Loreto Alfaro-Laus' statement that Areola was a guest of their maid for a week, it was proven that Areola was in fact the very person who, on 3 July 1989, received the demand letter sent by the private respondent. On 17 July 1990, petitioners filed with the Court of Appeals a petition for certiorari, prohibition and injunction with application for a restraining order 17 to set aside the trial court's Orders of 5 March 1990 and 9 July 1990, and to dismiss Civil Case No. Q-89-3327. The petition was docketed as CA-G.R. SP No. 22232. Petitioners insisted therein that the trial court committed grave abuse of discretion and a grave error in denying their motion to dismiss and the motion to reconsider said denial despite the lack of jurisdiction over their persons. They likewise challenged the denial of such motion to dismiss which was based solely on the ground that a judgment by default had already been rendered. 18 On 30 May 1991, the respondent Court of Appeals promulgated its decision 19 denying the petition for lack of merit. It made the following disqualifications: " . . . it was the defendants-petitioners who erred in filing a motion to dismiss at that late stage of the proceedings. A motion to dismiss on the ground that the Court has no jurisdiction over the person of the defendants is proper only when made within the reglementary period for filing a responsive pleading and before such responsive pleading is filed (Rule 16, Sec. 1[a]). In this case, the defendants-petitioners' motion to dismiss was filed five (5) months after the complaint was filed and only after a default judgment had already been rendered by the respondent Court. Thus, it was rather too late in the day for the defendants-petitioners' motion to dismiss to be considered by the respondent Court. In the proper exercise of its sound judicial discretion, the respondent Court did not err in denying the motion to dismiss on the ground that a judgment by default had already been rendered. Besides, even if the motion to dismiss was filed on time, and yet, was still denied by the respondent Court, the order of the court denying the motion to dismiss is interlocutory and cannot be the subject of a petition for certiorari, such as this instant petition (National Investment and Development Corp. vs. Aquino, 163 SCRA 153). The denial of a motion to dismiss cannot be questioned in a petition for certiorari, which is an extra-ordinary writ that is not allowed as a substitute for ordinary appeal (Tan vs. Intermediate Appellate Court, 164 SCRA 130). Be that as it may, the defendants-petitioners had other remedies available to them, but which they failed to avail of. In a long line of cases decided by the Supreme Court, it has been repeatedly provided that the remedies of a defaulted defendant are: (a) The defendant in default may, at any time after discovery thereof and before judgment, file a motion, under oath, to set aside the order of default on the ground that his failure to answer was due to fraud, accident, mistake, excusable negligence, and that he has a meritorious defense; (b) If the judgment has already been rendered when the defendant discovered the default, but before the same has become final and executory, he may file a Motion for New Trial under Section 1[a] of Rule 37; (c) If the defendant discovered the default after the judgment has become final and executory, he may file a petition for relief under Sec. 2 of Rule 38; and (d) He may also appeal from the judgment rendered against him as contrary to the evidence or to law, even if no petition to set aside the order of default has been presented by him (Sec. 2, Rule 41). (Lina vs. Court of Appeals, 135 SCRA 637; Tiburcio vs. Castro, 161 SCRA 583). As it is, the defendants-petitioners failed, after they received notice of the order declaring them in default and before the default judgment was rendered, to file a motion, under oath, to set aside the order of default on the ground that they failed to file a timely answer due to fraud, accident, mistake, or excusable negligence, and showing (sic) that they had a meritorious defense. The other applicable remedy which they failed to employ is the remedy of appeal from the judgment rendered against them as contrary to the evidence or the law, even in the absence of a motion/petition to set aside the order of default. This instant petition for certiorari cannot be a substitute for the remedy of appeal, which the defendants-petitioners did not pursue, as they must first exhaust the remedies available to them (Lina vs. Court of Appeals, supra.). That the judgment by default had already become final and is about to be executed is the result of the defendants-petitioners' failure to file a timely appeal. As such, the default judgment may no longer be challenged (Tiburcio vs. Castro, supra.) Lastly, We find that the respondent Court was liberal enough in hearing the defendants-petitioners' motion for reconsideration of the denial of their motion to dismiss. As the pivotal issue therein, the defendant-petitioners were given their day in court to prove that the service of summons to them was both improper and invalid. After weighing the evidence and testimonies of the parties and other persons involved, the respondent Court ruled that there was valid service of summons. We find no compelling reason to rule otherwise. There is such a presumption of regularity in the performance of official functions by the sheriff, and it was up to the defendants-petitioners to convince the respondent Court that there was, indeed, invalid service of summons. This they failed to do. They could not substantiate their claim that Josephine Areola was a child of 10 to 11 years who would not know what to do with the court documents received by her. The defendants-petitioners' contention that Josephine Areola stayed with them for only a few days backfired when the private respondent presented documentary evidence to show that Josephine Areola was already residing in the defendants-petitioners' house at least three (3) months before the summons was served. No other proof was presented by the defendants-petitioners to bolster their allegations apart from their self-serving, and sometimes conflicting, testimonies. Thus, We find no error or grave abuse of discretion on the part of the respondent Court in denying the defendants-petitioners' motion for reconsideration." 20 Meanwhile, on 13 June 1991, respondent sheriff Nilo Cabang sold at a public auction the levied men's ring - on oval diamond set in yellow gold to the private respondent for P140,000.00, and the Galant car to Atty. Leonardo Perez, Jr., counsel for the latter, for P180,000.00. Both were the highest bidders. 21 Their motion for the reconsideration of the aforesaid decision having been denied in the respondent Court's Resolution of 30 July 1991, 22 petitioners availed of this recourse under Rule 45 of the Revised Rules of Court and raise the following issues: "1. WHETHER OR NOT THE COURT A QUO ACQUIRED JURISDICTION OVER THE REASONS OF THE PETITIONERS BY VIRTUE OF THE SUBSTITUTED SERVICE OF SUMMONS EFFECTED BY DEPUTY SHERIFF ROMEO CRUZ;

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2. WHETHER OR NOT THE REMEDY OF CERTIORARI CAN BE AVAILED OF BY A PARTY IMPROVIDENTLY DECLARED IN DEFAULT TO CHALLENGE THE ORDER OF DEFAULT AND THE SUBSEQUENT JUDGMENT BY DEFAULT." 23 On 10 February 1992, after the filing of the private respondent's comment and the petitioners' reply thereto, We resolved to give due course to the petition and required the parties to file their respective memoranda which they subsequently complied with.

We find merit in this petition. The focal issue is whether or not the trial court acquired jurisdiction over the persons of the petitioners by virtue of the substituted service of summons effected by Deputy Sheriff Cruz. Since the petitioners did not voluntarily submit to the jurisdiction of the trial court, proper service of summons became imperative. If the service effected in the case at bar was, as claimed by the petitioners, invalid, the trial court acquired no jurisdiction over their persons. 24 In such an instance, the order of default, judgment by default and writ of execution issued by the trial court would be null and void. 25 The general rule in this jurisdiction is that summons must be personally served; pursuant to Section 7, Rule 14 of the Revised Rules of Court, such personal service is to be accomplished by "handing a copy thereof to the defendant in person, or, if he refuses to receive it, by tendering it to him." However, if this mode of service cannot be effected within a reasonable time, substituted service may be resorted to under Section 8 of the same Rule. Section 8 provides: "SECTION 8. Substituted Service. If the defendant cannot be served within a reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendant's dwelling house or residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendant's office or regular place of business with some competent person in charge thereof." This provision is a reproduction of Section 8, Rule 7 of the 1940 Rules of Court except that inter alia, "promptly" in the latter was changed to "within a reasonable time" in the former. "Within a reasonable time" contemplates a period of time longer than that demarcated by the word "prompt," and presupposes that a prior attempt at personal service, within a justifiable time frame as would be necessary to bring the defendant within the jurisdiction of the court, had failed. 26 Since substituted service is in derogation of the common law and is extraordinary in character, it must be used only as prescribed and in the circumstances authorized by statute. 27 Statutes prescribing modes other than personal service of summons must be strictly complied with to give the court jurisdiction, and such compliance must appear affirmatively in the return. 28 In Keister vs. Navarro, 29 this Court described how the impossibility of personal service should be shown: "Impossibility of prompt service should be shown by stating the efforts made to find the defendant personally and the fact that such efforts failed. This statement should be made in the proof of service (I Moran, Comments on the Rules of Court, 1970 Ed., p. 444). This is necessary because substituted service is in derogation of the usual method of service. It has been held that this method of service is 'in derogation of the common law; it is a method extraordinary in character, and hence may be used only as prescribed and in the circumstances authorized by statute.' . . . (72 C.J.S. 1053)." Emphasizing the need for strict compliance with the requirements of substituted service, this Court issued Administrative Circular No. 59, the pertinent portions of which read as follows: "SUBJECT: Service of Summons. Delays in court proceedings have been caused by faulty and erroneous implementation of Section 8, Rule 14, Rules of Court on Substituted Service of Summons. The Trial Judges of all lower courts, as well as the Clerks of Court in their capacity as Ex-Officio Sheriffs together with the Deputy Sheriffs are reminded of the provision of Section 8, Rule 14, Rules of Court on substituted service as follows: xxx xxx xxx The manner of effecting substituted service as prescribed in Venturanza v. Court of Appeals, 156 SCRA 305, must be strictly complied with, thus: 'The substituted service should be availed only when the defendant cannot be served promptly in person. Impossibility of prompt service should be shown by stating the efforts made to find the defendant personally and the failure of such efforts. The statement should be made in the proof of service. This is necessary because substituted service is in derogation of the usual method of service. Substituted service is a method extraordinary in character, and hence may be used only as prescribed in the circumstances authorized by statute. Thus, the statutory requirements of substituted service must be followed strictly, faithfully, and any substituted service other than that authorized by the statute is considered ineffective.' For immediate compliance." A perusal of the sheriff's return in the case at bar readily reveals that it does not (a) indicate the impossibility of service of summons within a reasonable time, (b) specify the efforts exerted to locate the petitioners and (c) state that it was served on a person of sufficient age and discretion residing therein. The fact of the matter is that as disclosed in his testimony taken in connection with the motion for reconsideration, and the affidavit he prepared in conjunction with such hearing. Deputy Sheriff Cruz resorted to a substituted service on his first and only attempt to effect a personal service. Upon being informed that the petitioners were not around at that time, he immediately resorted to a substituted service through Josephine Areola, a person whose age he did not even know or attempt to discover. He did not even inquire about the whereabouts of the petitioners, the time they were expected to return home, the hours of the day they could be contacted at their house or the location of their offices, if any, in order that he could faithfully comply with the requirement of personal service. Thus, he declared and admitted: "Q In this case, you went to the residence of the defendant once as you stated on paragraph 3 30 on October 10, 1989? A Yes, sir.

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Q And you did not wait the (sic) defendant to come because according to you in paragraph 4, you were informed that the defendant was not around, is that correct? A According to the maid. Q So upon being informed that the defendant was not around you served the summons, according to paragraph 4 to one Josephine Ariola, is that correct? A Yes, sir. Q In other words, you relied on the information given to you by somebody that the defendant was not around? A: I waited there for around ten (10) minutes and then two (2) women arrived in the tricycle and I waited them (sic) to get inside and I asked them if Mr. and Mrs. Laus will be coming. Q And they answered they were not around at that time? A Yes, sir. Q So, you immediately served the summons upon the persons arriving (sic)? A Yes, sir. Q And who were these persons who arrived? A Josephine Ariola. Q And who is her companion? A I did not ask anymore? xxx xxx xxx Q Who is older, is this Josephine Ariola or her companion? A Josephine Ariola, she was the one who signed the summons. Q Did you ask her age? A I did not ask anymore because she look already (sic) of sufficient age. Q That's your conclusion? A Yes because she was the maid there and she was the older one." 31 As it turns out, the unrebutted evidence for the petitioners establishes that Areola (or Ariola) was only 11 to 12 years old at the time substituted service was attempted. 32 It is all too obvious that no earnest efforts were exerted by Deputy Sheriff Cruz to effect the personal service of summons. His testimony thus attests to an undue, if not indecent, haste to serve the summons at the first attempt without making sure that personal service was, by then and even thereafter, an impossibility because either the petitioners had left for a foreign country or an unknown destination with not definite date of returning within a reasonable period or had gone into hiding to avoid service of any process from the courts. If he had only made the inquiries suggested above, he could have returned in the evening of 10 October 1989 or on any of the succeeding days including the following Saturday and Sunday. Service of summons may be made at night as well as during the day, or even on a Sunday or holiday because of its ministerial character. 33 Since the substituted service of summons in this case was not validly effected, the trial court did not acquire jurisdiction over the persons of the petitioners. The order of default, the judgment by default, the writ of execution issued by it, as well as the auction sale of the petitioners' properties levied on execution are, therefore, all null and void. There is more in this case which further unmasks the nullity of the decision of the trial court. Both parties agree that the petitioners were the defendants in Civil Case No. Q-89-3327. However, petitioner Loreto Alfaro-Laus is erroneously mentioned in the complaint as Loredo. On the other hand, petitioner Pepito Laus, the husband of Loreto, is merely designated as JOHN DOE. The latter was impleaded as a co-defendant presumably on the theory that the liability sought to be enforced is a conjugal partnership liability. In short, Loreto's husband was sued as an indispensable party; it is clear that the trial court treated him as such when in its decision, ordered the defendants, not just Loreto, to pay the adjudged amounts. The sheriff's return of service indisputably discloses that no summons was even attempted to be served on petitioner Pepito Laus. Sheriff Cruz unequivocally states therein that the "duplicate copy of the same together with the complaint and its annexes was duly served upon defendant Loredo (sic) Laus of 122 Molave Park Subd. Paraaque M. M. thru JOSEPHINE AREOLA, maid of Loredo Daus (sic) of same address, . . . ." 34 Neither Deputy Sheriff Cruz nor the private respondent had volunteered additional information to the effect that at some other time, summons was in fact served on Pepito Laus. Accordingly, the trial court never acquired jurisdiction over his person. And yet, while it concedes in its 29 December 1989 Order that the substituted service of summons was valid only for Loreto, it declared the defendants and not only her in default. The court could have easily avoided this misdoing if it only examined the records before issuing the order. On this score alone, the judgment by default is fatally flawed. There is still another fact which betrays the trial court's unusual haste in rendering the judgment by default. In the dispositive portion of the decision, the defendants were ordered, inter alia:

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"1. To pay the plaintiff the amount of FIFTY-FIVE Thousand Pesos (P55,000.00) at the rate of ten per cent (10%), compounded monthly beginning February 21, 1989 up to the present;" 35 While this rate of ten per cent (10%) could only refer to the imposable interest, the court failed to state whether its application shall be on a monthly or yearly basis. The body of the decision, however, speaks of ten per cent (10%) interest PER MONTH; 36 this seems to have been the basis relied on by respondent sheriff Cabang in computing for the petitioners' alleged liability for purposes of execution. 37 This award of interest in effect amounting to one hundred twenty per cent (120%) per annum and the additional twenty-five per cent (25%) of the total amount due ordered paid as attorney's fees, are unreasonable and unconscionable. Since the trial court's default order and judgment by default are null and void, the respondent Court gravely erred in affirming them. Some further comments, en passant, on the ratiocination of the respondent Court are in order. It is not accurate for the latter to have said that the petitioners' motion to dismiss was not filed seasonably because it was filed beyond the reglementary period provided in the Revised Rules of Court. Such a conclusion would doubtless be correct if there was a valid service of summons. If, however, a defendant has not been properly summoned, the period to file a motion to dismiss for lack of jurisdiction over his person does not commence to run until he voluntarily submits to the jurisdiction of the court, since the court has no jurisdiction to adjudicate the controversy as to him until such time. 38 In this case, petitioners did not voluntarily submit to the jurisdiction of the trial court. Consequently, the period to file a responsive pleading did not even commence to run. Nor are We persuaded by the respondent Court's declaration that even if the motion to dismiss had been filed on time, the trial court's order denying the same, being interlocutory, still cannot be the subject of a petition for certiorari. To be sure, this rule admits of an exception, as when the trial court clearly acted outside of its jurisdiction or with grave abuse of discretion in denying the motion to dismiss. 39 This is exactly what happened in the case while it was pending before the trial court; the denial of the motion to dismiss was based solely on the ground that a judgment by default had already been entered. Certainly, this does not constitute a valid ground for the denial because the motion raises a fundamental and prejudicial issue affecting the validity of the decision by default. Equally unmeritorious is the respondent Court's statement that the failure of the petitioners to appeal from the judgment by default rendered such judgment final and unassailable. In the first place, it is axiomatic that a void judgment can never become final and executory and may even be assailed or impugned at any time. 40 An action to declare the nullity of a void judgment does not prescribe. 41 Secondly, the motion to dismiss in this case was filed before the petitioners received a copy of the decision by default. Since the said motion is based on the lack of jurisdiction over the persons of the petitioners which, if true in fact, We have found it to be so would result in the nullification not only of the default order but of the decision as well, then for all legal intents and purposes, the latter was covered by the motion. This was precisely the orientation of the trial court when it allowed the parties to submit evidence to support the motion to reconsider the Order of 5 March 1990 denying the motion to dismiss. It would certainly not have gone that far if it thought otherwise for by then, the decision had already become final. Its suggestion that the petitioners should have filed a motion to set aside the order of default on the ground that they had failed to file the answer on grounds of fraud, accident, mistake or excusable negligence or a motion for new trial or a petition for relief from judgment, is untenable for it begs the question. Besides, as shown above, petitioners' failure to file the answer was not based on any of these grounds, but stood on the void service of summons. Finally, respondent Court's reliance on the presumption of regularity in the performance of official functions is misplaced. We have held that such a presumption does not apply where it is patent that the sheriff's return is defective. 42 WHEREFORE, the Decision of the respondent Court of Appeals of 30 May 1991 and the Resolution dated 30 July 1991 in CA-G.R. SP No. 22232 are hereby REVERSED and SET ASIDE. The Order of Branch 82 of the Regional Trial Court of Quezon City of 29 December 1989 (Civil Case No. Q-89-3327) declaring petitioners in default, its Decision of 24 January 1990, Orders of 5 March 1990 and 9 July 1990 and the writ of execution issued therein, as well as all proceedings had pursuant to the writ of execution, are declared NULL and VOID. The case is hereby remanded to the court of origin for further proceedings which shall include the valid service of summons. SO ORDERED.

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[G.R. No. 153751. October 8, 2003] MID PASIG LAND DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, HON.RODRIGO B. LORENZO, in his capacity as Presiding Judge of RTC-Pasig City, Branch 266 and ROCKLAND CONSTRUCTION COMPANY, INC., respondent. DECISION YNARES-SANTIAGO, J.: On December 6, 1999, petitioner Mid-Pasig Land Development Corporation leased a portion of its sequestered property to ECRM Enterprises (ECRM). The leased area, which measures approximately one hectare, is part of two lots registered under TCT Nos. 469702 and 337158[1] of the Register of Deeds of Pasig City and is bounded by Meralco Avenue, Ortigas Avenue, Dona Julia Vargas Avenue and Valle Verde Subdivision. ECRM intended to use the area as staging ground for its Home and Garden Exhibition from December 15, 1999 to March 15, 2000. Under the contract of lease,[2] ECRM agreed to pay petitioner the amount of P1,650,000.00 as rental for three months, inclusive of 10% value-added tax, with option to renew. The parties also stipulated that upon expiration of the lease agreement, ECRM shall without delay or need of demand, turn over the property to petitioner in the same or improved condition. In case the contract is not renewed, ECRM would remove all temporary improvements at its own expense within seven days after expiration of the lease. On March 6, 2000, ECRM irrevocably and absolutely assigned to Laurie M. Litam and/or respondent Rockland Construction Company, Inc. all its rights under the lease agreement. The deed of assignment[3] provided for a total consideration of P1,650,000.00 and declared that thenceforth, respondent would have full control of the leased property including right to the extension of the lease period. Pursuant to the foregoing deed of assignment, respondent, in lieu of ECRM, delivered to petitioner the total sum of P1,650,000.00 as rental payment for the period of April 15 to July 15, 2000. Petitioner accepted the amount and issued the corresponding official receipt.[4] Later, respondent verbally requested petitioner for a renewal of the lease for a term of three (3) years. This was followed by a letter sent by respondent to petitioner explaining that the three-year term would enable it to plan its activities more efficiently.[5] Before the request was acted upon, petitioner retroactively increased the monthly rental to P770,000.00 per month effective April 15, 2000. Respondent apparently agreed to the increased rate and paid petitioner the rent differential.[6] Meanwhile, respondent erected a building on the leased area, also known as the Payanig sa Pasig si te, and sub-leased certain portions thereof. However, in the first week of January 2001, respondent received information that its sub-lessees were served by petitioner with notices to vacate the property. Even if it did not receive a similar notice, respondent nevertheless wrote petitioner on January 5, 2001, requesting that a formal three-year lease contract be executed in its favor.[7] On January 8, 2001, petitioner wrote respondent claiming, among others, that it had not entered into any form of agreement with the latter. As a matter of fact, petitioner stated that it had already undertaken the necessary steps to evict Rockland and the other po ssessors of the premises.[8] Petitioner claimed that the assignment of the lease to respondent was not vali d as it was done without its consent and that provisions of the lease agreement were violated. Respondent thus filed, on January 11, 2001, a complaint for specific performance with prayer for the issuance of a temporary restraining order/writ of preliminary injunction. The case was raffled to Branch 266 of the Regional Trial Court of Pasig City where it was docketed as Civil Case No. 68213. In its complaint,[9] respondent argued that it had actually entered into a new lease contract with petitioner for a three-year term despite the lack of any written agreement. By unqualifiedly and continuously accepting rental payments as well as allowing respondent to remain in the property, petitioner effectively accepted and ratified its offer of a three-year lease despite the absence of a categorical acceptance. The lease contract was thus perfected, giving respondent the right to compel petitioner to execute an agreement pursuant to Article 1357[10] of the Civil Code. Petitioner filed a motion to dismiss on the ground that the complaint was anticipatory in nature, failed to state a cause of action and was not authorized by respondents Board of Directors. Moreover, respondents claim is unenforceable under the Statute of Frauds and the verification as well as certification of non-forum shopping appended to the complaint did not comply with Sections 4[11] and 5,[12] Rule 7 of the Rules of Court. The resolution of petitioners motion to dismiss was deferred after the parties manifested their mutual desire to amicab ly settle the controversy. When the parties failed to reach a compromise, petitioners motion to dismiss was set for hearing on August 20, 2001, at which date petitioner manifested that it will file a complaint for ejectment as well as a supplemental motion to dismiss. Accordingly, on August 22, 2001, petitioner filed Civil Case No. 8788 for unlawful detainer which was raffled to Branch 70 of the Metropolitan Trial Court of Pasig City. Almost simultaneously, petitioner filed a supplemental motion in Civil Case No. 68213 seeking its dismissal on the ground of litis pendentia. Petitioner argued in its supplemental motion[13] that the issue of whether or not respondent should be allowed to continue occupying the land pursuant to the terms of the lease contract should be properly threshed out in the ejectment case. On August 20, 2001, an order[14] was issued in Civil Case No. 68213 denying petitioners motion to dismiss on the ground that respondent substantially complied with all the requirements for the filing of an initiatory pleading and that the complaint clearly stated a cause of action. Petitioner cannot likewise invoke the Statute of Frauds in seeking the dismissal of the complaint because the lease contract was already partially executed by the acceptance of rental payments. A motion for reconsideration was thereafter filed by petitioner.[15] Petitioners supplemental motion to dismiss was likewise denied by the trial court[16] on the ground that there was no litis pendentia between Civil Case No. 68213 and Civil Case No. 8788 for unlawful detainer, because there was no identity of causes of action between the two. Moreover, the Metropolitan Trial Court has no jurisdiction over cases that are incapable of pecuniary estimation, as in the specific performance case; it is thus the unlawful detainer case that should be dismissed since an action for specific performance based on contract properly pertains to the Regional Trial Court. In the meantime, the Regional Trial Court, after hearing respondents prayer for the issuance of a temporary restraining order, granted the same on September 11, 2001. Petitioner filed a motion for reconsideration of the order denying its motion to dismiss,[17] which was denied.

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Petitioner thus filed a petition for certiorari under Rule 65 before the Court of Appeals, alleging that the Regional Trial Court gravely abused its discretion in refusing to dismiss the complaint in the specific performance case. The appellate court dismissed the petition on January 25, 2002[18] and subsequently denied petitioners motion for reconsideration.[19] Hence, petitioner elevated the matter to this court asser ting that: I RESPONDENT COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT HELD THAT THE COMPLAINT FILED BY RESPONDENT ROCKLAND ALLEGES SUFFICIENT CAUSE OF ACTION FOR SPECIFIC PERFORMANCE. II RESPONDENT COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT HELD THAT THE STATUTE OF FRAUDS IS NOT APPLICABLE. III RESPONDENT COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT HELD THAT THERE WAS COMPLIANCE WITH SECTIONS 4 AND 5 OF RULE 7 OF THE 1997 RULES OF CIVIL PROCEDURE. IV RESPONDENT COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT HELD THAT THERE IS NO LITIS PENDENTIA.[20] We need only to resolve the fourth issue, as its resolution will render the three preceding issues superfluous. Petitioner contends that the appellate court erred in holding that litis pendentia could not be invoked in seeking dismissal of respondents complaint for specific performance. Petitioner claims that there is identity of parties as well as rights and reliefs prayed for between the complaint pending before the Regional Trial Court and the second complaint for unlawful detainer filed with the Metropolitan Trial Court. All the elements of litis pendentia are present in the instant case, and a judgment in the first action will amount to res judicata in the second regardless of which party would prevail. Petitioner likewise asserts that it is the complaint for specific performance that should be dismissed notwithstanding the fact that it was filed ahead of the unlawful detainer case. In Teodoro, Jr. v. Mirasol,[21] the first complaint for specific performance was dismissed even if it enjoyed priority in time, considering that the unlawful detainer case filed by respondent was held to be the proper forum for threshing out the real issue of whether or not a lessee should be allowed to continue occupying the property under a contract of lease. We find merit in petitioners assertions. In order to sustain a dismissal of an action on the ground of litis pendentia, the following requisites must concur: (a) identity of parties, or at least such as representing the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts, and (c) identity in the two cases should be such that the judgment that may be rendered in the pending case would, regardless of which party is successful, amount to res judicata in the other.[22] We find the foregoing requisites present in the case at bar. There can be no question that the parties in RTC Civil Case No. 68213 and MTC Civil Case No. 8788 are one and the same. Anent the second and third requisites, a careful examination of the averments of the complaint before the RTC reveals that the rights asserted and reliefs prayed for therein are no different from those pleaded in the MeTC case, such that a judgment in one case would effectively bar the prosecution of the other case. A perusal of the complaint for specific performance shows that its main purpose was to prevent petitioner from ejecting respondent from the leased property. Although the complaint seeks to compel petitioner to execute a formal lease contract, its ultimate intent is to preclude petitioner from filing a complaint for ejectment and for respondent to maintain possession of the property. It must be noted that the right to the execution of a formal agreement is hinged upon the more fundamental issue of whether respondent has a right to the possession of the property under the alleged implied contract of lease. In other words, the central issue to be resolved in the specific performance case unmistakably boils down to respondents alleged right to continued possession of the premises, which issue is essentially similar, if not identical, to the one raised in the unlawful detainer case before the MeTC. Hence, the appellate court erred in finding that RTC Civil Case No. 68213 and MeTC Civil Case No. 8788 have different causes of action. As stated earlier, the ultimate relief sought in the RTC is not really to compel the defendant to formalize in a public instrum ent its lease agreement with plaintiff, as the Court of Appeals held, but to enjoin petitioner from filing the proper action for respondents ejectment so that it could remain in possession of the property. This is evident in respondents prayer in the complaint for specific performa nce, where it expressly sought for the issuance of an o rder from the trial court prohibiting defendant from instituting any action for the ejectment of plaintiff from the leased premises.[23] Since the question of possession of the subject property is at the core of the two actions, it can be said that the parties in the instant petition are actually litigating over the same subject matter, which is the leased site, and on the same issue respondents right of possession by virtue of the alleged contract. As similarly observed in Arceo v. Olivares,[24] the only difference between the two cases herein is that respondent asserts, as a cause of action, its alleged contractual right to possession of the property in the RTC case, while the same matter is set forth as its counterclaim in the MeTC case where it is a defendant. However, the two cases are identical in all other respects, with merely a reversal of the parties position in the two actions. Thus, the next issue to be resolved is which of the two actions should be dismissed. Should it be the RTC case which was instituted ahead of the MeTC case? Or should it be the latter case which, although filed later, is the more appropriate action? In University Physicians Services, Inc. v. Court of Appeals,[25] we held that it is the prior case for specific per formance which should be dismissed, thus: x x x while the case before the Court of First Instance of Cavite appears to be one for specific performance with damages, it cannot be denied that the real issue between the parties is whether or not the lessee should be allowed to continue occupying the land as lessee. xxx xxx xxx

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It has been settled in a number of cases that the right of a lessee to occupy the land leased as against the demand of the lessor should be decided under Rule 70 (formerly Rule 72) of the Rules of Court. There is no merit in the contention that the lessees supposed right to renewal of the lease contract can not be decided in t he ejectment suit. x x x if the plaintiff has any right to the extension of the lease at all, such right is a proper and legitimate issue that could be raised in the unlawful detainer case because it may be used as a defense to the action. In other words, the matter raised in the Court of First Instance of Cavite may be threshed out in the ejectment suit, in consonance with the principle prohibiting multiplicity of suits. And the mere fact that the unlawful detainer-ejectment case was filed later, would not change the situation to depart from the application of the foregoing ruling. (Ital ics ours) The above ruling was quoted from an earlier decision of the Court, Pardo De Tavera v. Encarnacion,[26] which cited the earlier case of Teodoro, Jr. v. Mirasol.[27] Accordingly, the more appropriate suit in which the controversy between the parties should be determined is the unlawful detainer case before the MeTC. The latter court has exclusive original jurisdiction over the subject matter and could grant appropriate relief even if the same would entail compelling the plaintiff to recognize an implied lease agreement. The fact that respondent prayed for an order to compel petitioner to execute a formal contract of lease would not operate to divest the MeTC of its jurisdiction to hear and decide the main issue, which pertains to material or de facto possession. The fact that the unlawful detainer suit was filed later is no bar to the dismissal of the action for specific performance. Where there are two pending cases, the general rule is that the second case filed should be dismissed under the maxim qui prior est tempore, potior est jure. However, the rule is not a hard and fast one, as the priority-in-time rule may give way to the criterion of more appropriate action.[28] It has likewise been held that to determine which action should be dismissed given the pendency of two actions, relevant considerations such as the following are taken into account: (1) the date of filing, with preference generally given to the first action filed to be retained; (2) whether the action sought to be dismissed was filed merely to preempt the latter action or to anticipate its filing and lay the basis for its dismissal; and (3) whether the action is the appropriate vehicle for litigating the issues between the parties.[29] It appears that at the time of the filing of the RTC case, petitioner had communicated to respondent that it filed an ejectment against it for violation of the original lease agreement. Thus, the RTC case, while purportedly one for specific performance, is in reality a preemptive maneuver intended to block the complaint for ejectment, considering that it was brought merely three days after respondent received the communication from petitioner. The latter was correct in pointing out that the RTC case was instituted in anticipation of its forthcoming move to eject respondent from the property. It was filed to bind petitioners hands, so to speak, and to lay the ground for dismi ssal of any subsequent action that the latter may take pursuant to the notice of eviction. Finally, it appears that on April 29, 2002, the MeTC rendered a decision in favor of respondent in the unlawful detainer case.[30] Among others, the court held that the issue to be resolved does not appear to be one of material or physical possession, but that the same refers to the exercise of an option to renew the lease contract. It thus ruled that it had no jurisdiction over the case as the quest ion posited is one incapable of pecuniary estimation. WHEREFORE, the instant petition is GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 66999 is hereby REVERSED and SET ASIDE. Civil Case No. 68213 pending before Branch 266 of the Regional Trial Court of Pasig City is ordered DISMISSED on the ground of litis pendentia. SO ORDERED.

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G.R. No. 163280 February 2, 2010 DORIS U. SUNBANUN, Petitioner, vs. AURORA B. GO, Respondent. DECISION CARPIO, J.: The Case This petition for review on certiorari1 assails the 30 September 2003 Decision2 and the 18 March 2004 Resolution3 of the Court of Appeals in CA-G.R. CV No. 67836. The Facts Petitioner Doris U. Sunbanun is the owner of a residential house located at No. 68-F Junquera Street, Cebu City. On 7 July 1995, respondent Aurora B. Go leased the entire ground floor of petitioners residential house for one year which was to expire on 7 July 1996. As re quired under the lease contract, respondent paid a deposit of P16,000 to answer for damages and unpaid rent. To earn extra income, respondent accepted lodgers, mostly her relatives, from whom she received a monthly income of P15,000. Respondent paid the monthly rental until March 1996 when petitioner drove away respondents lodgers by telling them that they could stay on the rented p remises only until 15 April 1996 since she was terminating the lease. The lodgers left the rented premises by 15 April 1996, and petitioner then padlocked the rooms vacated by respondents lodgers. On 10 May 1996, respondent filed an action for damages against petitioner. Respondent alleged that she lost her income from her lodgers for the months of April, May, and June 1996 totaling P45,000. Respondent, who worked in Hongkong, also incurred expenses for plane fares and other travel expenses in coming to the Philippines and returning to Hongkong. On the other hand, petitioner argued that respondent violated the lease contract when she subleased the rented premises. Besides, the lease contract was not renewed after its expiration on 7 July 1996; thus, respondent had no more right to stay in the rented premises. Petitioner also moved to dismiss the complaint in the trial court for failure to comply with prior barangay conciliation. During the pre-trial, petitioner moved for the case to be submitted for judgment on the pleadings considering that the only disagreement between the parties was the correct interpretation of the lease contract. Respondent did not object to petitioners motion. T he trial court then directed the parties to submit their respective memoranda, after which the case would be considered submitted for decision.4 In its decision dated 28 March 2000, the trial court held that the case is not covered by the barangay conciliation process since respondent is a resident of Hongkong. The trial court noted that petitioner did not controvert respondents allegation that petitioner ejected respondents lodgers sometime in March 1996 even if the contract of lease would expire only on 7 July 1996. The trial court found untenabl e petitioners contention that subleasing the rented premises violated the lease contract. The trial court held that respondents act of accepting lodg ers was in accordance with the lease contract which allows the lessee "to use the premises as a dwelling or as lodging house." Thus, the trial court ordered petitioner to pay respondent actual damages of P45,000 for respondents lost income from her lodgers for the months o f April, May, and June 1996, and attorneys fees of P8,000. Both parties appealed before the Court of Appeals. On 30 September 2003, the Court of Appeals rendered its decision in favor of respondent and modified the trial courts decision. Aside from actual damages and attorneys fees, the Court of Appeals also ordered pet itioner to pay moral and exemplary damages and the cost of the suit. The dispositive portion of the Court of Appeals decision reads: WHEREFORE, premises considered, the assailed Decision of the trial court is hereby MODIFIED by ordering defendant-appellant [Doris U. Sunbanun] to pay plaintiff-appellant [Aurora B. Go] the following amounts: 1. P45,000.00 as compensation for actual damages; 2. P50,000.00 as moral damages; 3. P50,000.00 as exemplary damages; 4. P8,000.00 as Attorneys Fees; 5. Cost of the suit. SO ORDERED.5 The Court of Appeals Ruling The Court of Appeals held that petitioners act of forcibly ejecting respondents lodgers three months prior to the terminati on of the lease contract without valid reason constitutes breach of contract. Petitioner also violated Article 1654 of the Civil Code which states that "the lessor is obliged to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract." The Court of Appeals awarded P50,000 as moral damages to respondent for breach of con tract and for petitioners act of pre-terminating the lease contract without valid reason, which shows bad faith on the part of petitioner. The Court of Appeals also awarded respondent P50,000 as exemplary damages for petitioners oppressive act. The Issues Petitioner raises the following issues: I. THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF ACTUAL DAMAGES BY THE TRIAL COURT. II. THE COURT OF APPEALS ERRED IN MODIFYING THE JUDGMENT OF THE TRIAL COURT AND AWARDING MORAL AND EXEMPLARY DAMAGES AND COSTS OF SUIT IN FAVOR OF RESPONDENT.

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III. THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF ATTORNEYS FEES IN FAVOR OF RESPONDENT.6 The Ruling of the Court We find the petition without merit. In this case, the trial court rendered a judgment on the pleadings. Section 1, Rule 34 of the Rules of Court reads: SECTION 1. Judgment on the pleadings. Where an answer fails to tender an issue, or otherwise admits the material allegations of the adverse partys pleading, the court may, on mo tion of that party, direct judgment on such pleading. However, in actions for declaration of nullity or annulment of marriage or for legal separation, the material facts alleged in the complaint shall always be proved. The trial court has the discretion to grant a motion for judgment on the pleadings filed by a party if there is no controverted matter in the case after the answer is filed.7 A judgment on the pleadings is a judgment on the facts as pleaded,8 and is based exclusively upon the allegations appearing in the pleadings of the parties and the accompanying annexes. This case is unusual because it was petitioner, and not the claimant respondent, who moved for a judgment on the pleadings during the pretrial. This is clear from the trial courts Order9 dated 7 October 1997 which reads: ORDER When this case was called for pre-trial, parties appeared together with counsel. Defendant [Doris U. Sunbanun] moved that considering that there is no dispute as far as the contract is concerned and the only disagreement between the parties is on the interpretation of the contract so that the issue boils down on to which of the parties are correct on their interpretation. With the conformity of the plaintiff [Aurora B. Go], this case is therefore considered closed and submitted for judgment on the pleadings. x x x (Emphasis supplied) Petitioner, in moving for a judgment on the pleadings without offering proof as to the truth of her own allegations and without giving respondent the opportunity to introduce evidence, is deemed to have admitted the material and relevant averments of the complaint, and to rest her motion for judgment based on the pleadings of the parties.10 As held in Tropical Homes, Inc. v. CA:111avvphi1 As to the amount of damages awarded as a consequence of this violation of plaintiffs rights, the lower court based its award from the allegations and prayer contained in the complaint. The defendant, however, questions this award for the reason that, according to the defendant, the plaintiff, in moving for judgment on the pleadings, did not offer proof as to the truth of his own allegations with respect to the damages claimed by him, and gave no opportunity for the appellant to introduce evidence to refute his claims. We find this objection without merit. It appears that when the plaintiff moved to have the case decided on the pleadings, the defendant interposed no objection and has practically assented thereto. The defendant, therefore, is deemed to have admitted the allegations of fact of the complaint, so that there was no necessity for plaintiff to submit evidence of his claim. In this case, it is undisputed that petitioner ejected respondents lodgers three months before the expiration of the lease c ontract on 7 July 1996. Petitioner maintains that she had the right to terminate the contract prior to its expiration because respondent allegedly violated the terms of the lease contract by subleasing the rented premises. Petitioners assertion is belied by the provision in the lease contract12 which states that the lessee can "use the premises as a dwelling or as lodging house." Furthermore the lease contract clearly provides that petitioner leased to respondent the ground floor of her residential house for a term of one year commencing from 7 July 1995. Thus, the lease contract would expire only on 7 July 1996. However, petitioner started ejecting respondents lodgers in March 1996 by informi ng them that the lease contract was only until 15 April 1996. Clearly, petitioners act of ejecting respondents lodgers resulted in respondent losing income from her lodgers. Hence, it was proper for the trial court and the appellate court to order petitioner to pay respondent actual damages in the amount of P45,000. We likewise sustain the award of moral damages in favor of respondent. In this case, moral damages may be recovered under Article 2219 and Article 2220 of the Civil Code in relation to Article 21. The pertinent provisions read: Art. 2219. Moral damages may be recovered in the following and analogous cases: xxx (10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. Art. 2220. Wilfull injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. (Emphasis supplied) Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. We agree with the appellate court that petitioners act of ejecting respondents lodgers three months before the lease contra ct expired without valid reason constitutes bad faith. What aggravates the situation was that petitioner did not inform respondent, who was then working in Hongkong, about petitioners plan to pre-terminate the lease contract and evict respondents lodgers. Moral damages may be awarded when the breach of contract was attended with bad faith.13 Furthermore, we affirm the award of exemplary damages and attorneys fees. Exemplary damages may be awarded when a wrongful a ct is accompanied by bad faith or when the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner which would justify an award of exemplary damages under Article 223214 of the Civil Code.15 Since the award of exemplary damages is proper in this case, attorneys fees and cost of the suit may also be recovered as provided under Article 220816 of the Civil Code.17 WHEREFORE, the Court DENIES the petition. The Court AFFIRMS the 30 September 2003 Decision and the 18 March 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 67836. SO ORDERED.

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G.R. No. L-22506 February 28, 1969 ENCARNACION M. SIAYNGCO assisted by her husband, JULIO SIAYNGCO petitioners, vs. MARTIN COSTIBOLO and THE HON. COURT OF APPEALS, respondents. Julio Siayngco for petitioners. Francisco P. Martinez for respondents. TEEHANKEE, J.: This is a petition for view and setting aside of Court of Appeal's decision affirming a decision of the Court of First Instance of Leyte rendered in favor of private respondent Martin Costibolo as therein plaintiff against petitioners, the spouses Encarnacion M. Siayngco and Julio Siayngco as therein defendants, with prayer that the case be remanded to the trial court to enable the petitioners to present their evidence. The background of the case follows: Respondent Martin Costibolo as plaintiff in the trial court originally sought the annulment on the ground of extrinsic fraud of a decision of the Justice of the Peace Court of Dagami, Leyte, in Civil Case 46 thereof, wherein the Siayngco spouses had obtained a money judgment against said Costibolo by virtue of a confession of judgment entered by Costibolo in favor of the Siayngco spouses. According to Costibolo's compliant in the trial court he had confessed judgment in favor of the Siayngco spouses in the Justice of the Peace Court case, on the representation promise and assurance of the latter that they would not ask for a writ of execution of the judgment within five years from the date of the judgment. Costibolo further alleged in his complaint that as soon as he had confessed judgment in favor of the Siayngco spouses and had lost the right to appeal from the judgment or to seek relief therefrom, the Siayngco spouses had secured from the Justice of the Peace Court a writ of execution of the judgment pursuant to which his properties were attached and advertised for sale. He further averred that he had filed a petition for relief from judgement under Rule 38 of the Rules of Court but his petition was denied because it had been submitted after the reglementary six-month period; the case involving this petition for relief, which appears to have been first erroneously filed as a motion with the Justice of the Peace Court in Civil Case 46, was appealed to and docketed as Civil Case 1935 of the Court of First Instance which likewise denied the petition for the same reason. 1 Costibolo finally asked for the issuance of a writ of preliminary injunction pendente lite against the execution of the judgment and sheriff's sale of his properties, which was granted by the trial court, and for P5,500.00 by way of actual and moral damages. In due course, the Siayngco spouses, represented by petitioner Julio Siayngco a member of the bar, filed an Answer to Costibolo's complaint, denying the alleged fraud, pleading res adjudicata by virtue of the judgment of the Justice of the Peace Court in Civil Case 46 as well as the judgment of the Court of First Instance in Civil Case 1935 denying Costibolo's petition for relief, and praying for counter-damages. Hearing was conducted by trial court. After Costibolo had submitted his evidence and rested his case, the Siayngco spouses orally moved for dismissal of the complaint on the ground that since the supposed fraud was committed in 1955 and the original complaint had been filed by them against Costibolo in the Justice of the Peace Court on March 4, 1954 and the judgment of said Court had been rendered two months later on May 31, 1954, the fraud alleged by Costibolo could not have possibly influenced the said judgment and make out a case for its annulment. The Siayngco spouses expressly reserved their right to present their evidence should their motion be denied by the Court. The trial court however informed them that it could not grant such reservation and announced that it would reserve its resolution so that it would have time to peruse and study their motion for dismissal or demurrer to evidence. The trial court thereafter rendered its judgment denying the Siayngco's motion to dismiss and at the same time annulling the judgments of the Justice of the Peace Court of Dagami, Leyte, in Civil Case 46, and of the Court of First Instance of Leyte, in Civil Case No. 1935, in favor of the Siayngcos; it sentenced the Siayngco spouses furthermore to pay to Costibolo the amount of P4,000.00 in actual and moral damages and attorney's fees. The findings of fact and the award made by the trial court, simultaneously with its denial of the Siayngcos dismissal motion or demurrer to evidence without hearing the Siayngcos evidence, as reproduced and affirmed by the Court of Appeals in its decision of October 4, 1963 are hereby spread for the record: ... plaintiff Martin Costibolo and his wife Constancia Pasagui obtained on August 29, 1950, a loan of TWO HUNDRED PESOS (P200.00) from defendant Encarnacion Siayngco at 14% interest. In 1952, they paid fully that debt including interests, in the total amount of P312.00, the first payment of P100.00 having been made by the plaintiff Martin Costibolo himself and his wife Constancia Pasagui. They asked for a receipt for that payment but defendant Encarnacion M. Siayngco told that there was no need for it, as they were relatives and there was confidence between them. All what was done was to write a note on the back of the receipt of the said loan, stating that P100.00 was paid by the plaintiff and his wife on that occasion. The next payment was in another amount of P100.00 handed to defendant Encarnacion M. Siayngco by the said Constancia Pasagui who was accompanied by her brother Apolonio Pasagui. Similar note was written on the back of the aforementioned receipt. The third payment was still another P100.00 by the same last two persons. When the latter insisted in having a receipt for the said payment, Mrs. Siayngco repeated that there was no need because they were relatives and they trusted each other. So the third payment was again annotated on the back of the said receipt like the two previous ones. All the annotations were signed by Constancia Pasagui. Apolonio Pasagui saw the annotations written on the back of the receipt for the first, second and third payments of P100.00 each. The last payment in the amount of P12.00 was made by Isabelo Costibolo, brother of the herein plaintiff. All these payments were made during the year 1952. When asked by the Court why did they not require the defendant Encarnacion M. Siayngco to sign the annotations on the back of the said receipt, witness Apolonio Pasagui answered that they did not like to press too much the defendant Encarnacion M. Siayngco because she was holding fast to the fact that they were relatives and there should be no mistrust between them. As they respect her and her husband, their uncle Atty. Siayngco they were ashamed and afraid to insist further. Inspite of the payments made, the defendants filed a complaint for the collection still of the same debt, with the Justice of the Peace Court of Dagami on March 1, 1954, praying for the payment of the said loan of TWO HUNDRED PESOS (P200.00), NINETY-EIGHT PESOS (P98.00) as agreed interests from August 29, 1950 up to March 1, 1954, plus the interests from the latter dated until it is fully paid, and ONE HUNDRED AND TWENTY PESOS (P120.00), as damages together with the costs, making a total sum of FOUR HUNDRED EIGHTEEN PESOS (P418.00), exhibit "A", page 1 of civil case No. 1935. The plaintiff herein who was defendant in that case, answered the complaint stating that he had already paid fully the said loan, exhibit "B", page 2 of civil case no 1935. Meantime, plaintiff sent his brother-in-law Apolonio Pasagui to the herein defendants, who were plaintiffs in that case in the Justice of the Peace Court, to settle amicably the same. While he had already overpaid their debt, but being a teacher and his wife is related to herein defendant Atty. Julio Siayngco who is their uncle, he wanted to avoid litigation which would be more costly for them. Atty. Pasagui conferred with both defendants and Atty. Siayngco told him that if his brother-in-law, the herein plaintiff Martin Costibolo, would just confess judgment, he would not ask for the execution thereof within five years, thereby giving Costibolo that same period to pay gradually the said amount of FOUR HUNDRED EIGHTEEN PESOS (P418.00). Pasagui returned and informed his brother-in-law Costibolo of the proposal of the defendants, and Costibolo agreed, so he submitted a confession of judgment in that case, marked exhibit "C", page 10 of the record civil case No. 1935. Consequently, the Justice of

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the Peace of Dagami rendered a decision for the payment of the said amount of P418.00 by the defendant, page 11, same expediente. Meantime Apolonio Pasugui went to Manila he was away and after the judgment became final, Atty. Siayngco in violation of his promise and the agreement between the parties in that case, requested the execution of the judgment, exhibit "E", page 12. Execution was issued by the Justice of the Peace on September 21, 1954 exhibits "F" and "F-1", pages 13 and 15. The Sheriff complied with the writ of execution, back of page 14 and exhibit "G", page 16. When the execution was levied by the sheriff, Martin Costibolo was surprised, so he wrote to his brother-inlaw Apolonio Pasagui in Manila about the last development of the case. After the latter's return to Dagami, Leyte, he filed a motion to set aside judgment which was denied by the Justice of the Peace as his decision has long become final. The case was brought to this Court on appeal. This Court also denied the appeal for lack of jurisdiction as the same was filed long after the judgment of the Justice of the Peace had become final. As a result, the present case, civil No. 1993, was filed for the annulment of judgment of the Justice of the Peace Court of Dagami, Leyte. In his desperation the plaintiff filed the present case. He even wrote a complaint to the Secretary of Justice against Atty. Julio Siayngco for misconduct. A copy of that complaint was marked as exhibit H. During the presentation of the evidence by the plaintiff, his attorney demanded the production of the receipt for the aforecited loan by the defendants, but Atty. Julio Siayngco denied their having it in their possession and its annotations. From the facts above related, it is clear that the misrepresentations proved had induced defendant Martin Costibolo in civil case no. 1935 of this Court, now plaintiff in the present case, to confess judgment in the Justice of the Peace Court of Dagami, Leyte, on the agreed condition that it shall not be executed within five years so as to afford time to the defendant to pay the amount of P418.00 within that period. According to the evidence that promise was given because Constancia Pasagui, wife of plaintiff Costibolo is closely related to the defendants herein, being a niece of defendant Atty. Julio Siayngco and because Martin Costibolo is a teacher with a modest salary, he preferred to pay that amount gradually and avoid litigation which would be more costly, according to him, although he had already paid fully the original loan of P200.00 with its interests. The payments in the total amount of P312.00 having been established by the plaintiff and his witness brother-inlaw, Atty. Apolonio Pasagui in the absence of evidence disproving them, are facts considered duly proven. The plaintiff only came to know the misrepresentations made by Atty. Siayngco that he would not ask for the execution of judgment of the Justice of the Peace Court within five years, when the sheriff levied execution upon the properties of the plaintiff sometime in 1954 and for that reason his brother-in-law Apolonio Pasagui, who was then already an attorney, filed a motion to set aside judgment on April 9, 1955, page 20, record of civil case No. 1935, founded on fraud "committed by inducing defendant Martin Costibolo to confess judgment." This misrepresentations which has not been disproved constitute fraud. The period within which to file an action based on fraud is four years according to Art. 1146, No. 1 of the New Civil Code. Since the misrepresentations made by the defendant Julio Siayngco according to the evidence, was only discovered after he had requested the levy of execution against the defendant Martin Costibolo in 1954 and this case was filed on August 30 1955, the action involved herein was presented within the legal period. Hence the motion to dismiss must be, as it hereby is denied. From the nature of the transaction as gleaned from, the original complaint, exhibit "A", filed by the defendants in civil case No. 46 of the Justice of the Peace Court of Dagami, civil No. 1935 of this Court, and considering its terms and conditions there must have necessarily been a receipt or memorandum evidencing such loan and the Court is inclined to believe the evidence of the plaintiffs herein who were defendants then, that such receipt was really executed and actually existed with all its mentioned annotations on the back. But regardless of the demands made by the plaintiff upon the defendants to produce the receipt with its annotations on its back, the defendants denied the existence of such receipt nor that they have it in their possession. For purposes of their own, the defendants did not deem it proper to produce the receipt undoubtedly in order not to disclose the annotations repeatedly mentioned. But its nonproduction merely confirmed the more its execution and existence. The heavy preponderance of evidence, therefore, proved that the original loan of P200.00 was already more than fully paid to the defendants herein. But the question may be raised that if the original loan of P200.00 was fully paid, why did Martin Costibolo agree to the payment of the additional amount of P418.00? He answered that he wanted to avoid litigation between relatives which would have been more costly for him because he is a teacher of meager salary and with a big family to support, and also out of respect to the defendants who are his elder relative. So he preferred paying it gradually or precisely within five years in order not to destroy their family relationship. It may be argued also that if plaintiff Martin Costibolo was willing to pay P418.00 demanded by the defendants in civil case No. 46 of the Justice of the Peace Court of Dagami, Leyte, civil case No. 1935 of this Court, is there any ground or necessity to annul said judgment of the Justice of the Peace for that amount? As stated above, the payment of the original loan of P200.00 was already made in 1952 together with the interests amounting in all to P312.00. If this amount was really paid to the defendants, as the evidence showed without any contradiction nor refutation, then such willingness on the part of the plaintiff to pay the additional amount of P418.00 would be absurd and illegal and the Court cannot be made a tool for, and cannot sanction, such illegality. On the other hand, it is not correct, as the plaintiffs herein testified, that the defendants were asking high rates of interests on the original loan of P200.00, because the complaint in the Justice of the Peace Court praying for the payment of P418.00 or more breaks that amount into P98.00 interests from August 29, 1456 to March 1, 1954, at the rate of 14% interest yearly. However, as the original loan of P200.00 was fully paid, as proved, with P312.00 including interests, the paid amount of P418.00 would be a duplication of the payment of the aforecited P200.00 plus P98.00 as its interest, over and above the original payment of P312.00. In this sense the complaint in the Justice of the Peace Court of Dagami may be considered as requiring not only over payment, but also excessive interests. But since the defendants did not deem it proper for them to present their proofs in the present case, the Court refrains from making any pronouncement as regards the amount representing interests or the rate thereof. The plaintiff has proved that he had suffered humiliation and pain and anguish because of the case filed against him by the herein defendants who were plaintiffs then and, as a teacher in the public service, he was ashamed and humiliated, suffering moral damages in the amount of FIVE THOUSAND PESOS (P5,000.00) and actual damages for expenses incurred in maintaining the previous case and the present in the amount of FIVE HUNDRED PESOS (P500.00), plus attorney's fees of FIVE HUNDRED PESOS (P500.00). Considering all attending circumstances and the facts of the case, the Court believes that the plaintiffs are entitled to THREE THOUSAND PESOS (P3,000.00) moral damages. FIVE HUNDRED PESOS (500.00) actual damages and FIVE HUNDRED PESOS (P500.00) attorney's fees, making a total of FOUR THOUSAND PESOS (P4,000.00). 2 The crucial ruling of the trial court as well as of the trial court's judgment to the Court of Appeals which affirmed it in toto, with costs. The crucial ruling of the trial court as well as of the Court of Appeals concerns the legal effects and consequences of the Siayngco's motion to dismiss or demurrer to plaintiff's evidence.

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The trial court ruled that the Siayngco's after moving to dismiss the case after the presentation of therein plaintiff Costibolo's evidence, were understood to have waived their right to present their evidence, notwithstanding their reservation, and plaintiff could take judgment according to the evidence already on record, holding that: It is, therefore, the considered opinion of this Court that the herein defendants cannot reserve their right to present their evidence after their motion to dismiss is or shall have been denied. 3 On the same specific issue, the Court of Appeals upheld the trial court's ruling thus: At the outset we must express our concurrence in the position taken by the court a quo that the defendants could not legally reserve their right to present evidence in case their last motion was denied. This last motion to dismiss assumed the correctness of the evidence adduced for the plaintiff and it is the defendant's stand thereunder that such evidence does not establish sufficient facts to constitute a valid cause of action. It has been repeatedly held in this jurisdiction that a defendant who, after the plaintiff has submitted his evidence, elects to stand on the insufficiency of the plaintiff's case, must be understood to have waived his right to present evidence, and the plaintiff can take judgment according to the evidence adduced by him. 4 Petitioners in their petition at bar complain that they have been thus deprived of their day in court and invoke in their favor two principal grounds: first, that upon denial of their motion to dismiss or demurrer to plaintiff's evidence, they should have been granted the right to present their evidence in accordance with their express reservation; and second, that in actions for relief under Rule 38 of the Rules of Court as well as in actions to annul judgment on the ground of fraud, the procedure established by the Rules of Court and by this Court's jurisprudence 5 is that two hearings should be conducted by the trial court, (1) a hearing to determine whether the judgment or order complained of was rendered through fraud and should therefore be set aside; and (2) if the decision thereon is in the affirmative, a second hearing on the merits of the principal case. We find merit in the petition. 1. This Court in the case of Director of Lands vs. Hon Patricio V. Ceniza, G. R. No. L-18527, June 29, 1963, already had occasion, in an analogous case to restate the rule governing judgments on demurrers to evidence, by way of collation and clarification of the doctrines enunciated in earlier cases, as now embodied in Rule 35 of the new Rules of Court, which provides in its sole section, as follows: RULE 35 JUDGEMENT ON DEMURRER TO EVIDENCE SECTION 1. Effect of judgment on demurrer to evidence. After the plaintiff has completed the presentation of his evidence, the defendant without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal or the ground that upon the facts and the law the plaintiff has shown no right to relief. However, if the motion is granted and the order of dismissal is reversed on appeal, the movant loses his right to present evidence in his behalf. In the cited case, applying the rule on demurrer to evidence as thus restated, this Court held that the trial court after denying the motion to dismiss for insufficiency of plaintiff's evidence or demurrer to the evidence, should permit the defendant to present his own evidence and give him his day in court, regardless of whether or not the defendant has made a reservation of his right to present his evidence in the event of denial of his motion or demurrer. 6 We reaffirm the doctrine then stated by this Court, in the light of the general provision in Rule 144 that the new Rules of Court, which took effect on January 1, 1964 "shall govern all cases brought after they take effect and also all further proceedings in cases then pending", as follows: At the time the present controversy was being ventilated, the rule governing the subject-matter, which was a clarification of the doctrines on earlier cases (Arroyo v. Azur 76 Phil. 496, April 13, 1946; Guido v. Castelo, L-1613, May 24, 1948, 81 Phil. 81; Ocum, et al. v. Nuez et al., L-8018, Oct. 26, 1955; Montelibano, et al. v. Bacolod Murcia, etc., L-15092, Sept. 29, 1962), was After the plaintiff has completed the presentation of his evidence, the defendant without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief, however, if the motion is granted and the order of dismissal is reversed on appeal, the movant loses his right to present evidence in his behalf. This rule is now embodied in the Revised Rules of Court, section 1, Rule 35, captioned Judgment and Demurrer to Evidence, which will take effect on January 1, 1964. It is, therefore, evident that the respondent court, in the case at bar, after denying the motion to dismiss, for insufficiency of evidence, (demurrer to the evidence), should have permitted the petitioner-defendant to present his own evidence, notwithstanding its failure or omission to make a reservation to that effect; more so, as in this particular case, when the petitioner-defendant had asked to be given a day in court, in order to defend the government's title to a 78-hectare parcel of land. 2. The rationale behind the rule and doctrine is simple and logical. The defendant is permitted, without waiving his right to offer evidence in the event that his motion is not granted, to move for a dismissal (i.e. demur to the plaintiff's evidence) on the ground that upon the facts as thus established and the applicable law, the plaintiff has shown no right to relief. If the trial court denies the dismissal motion, i.e., finds that plaintiff's evidence is sufficient for an award of judgment in the absence of contrary evidence, the case still remains before the trial court which should then proceed to hear and receive the defendant's evidence so that all the facts and evidence of the contending parties may be properly placed before it for adjudication as well as before the appellate courts, in case of appeal. Nothing is lost. The doctrine is but in line with the established procedural precepts in the conduct of trials that the trial court liberally receive all preferred evidence at the trial to enable it to render its decision with all possibly relevant proofs in the record, thus assuring that the appellate courts upon appeal have all the material before them necessary to make a correct judgment, and avoiding the need of remanding the for retrial or reception of improperly excluded evidence with the possibility thereafter of still another appeal, with all the concomitant delays. The rule, however, imposes the condition by the same token that if his demurrer is granted by the trial court, and the order of dismissal is reversed on appeal, the movant loses his right to present evidence in his behalf and he shall have been deemed to have elected to stand on the insufficiency of plaintiff's case and evidence. In such event, the appellate court which reverses the order of dismissal shall proceed to render judgment on the merit on the basis of plaintiff's evidence. Simply restated, a defendant who present a demurrer to plaintiff's evidence retains the right to present his own evidence, if the trial court disagrees with him; but if the trial court agrees with him and on appeal, the appellate court disagrees with both of them and reverses the dismissal order, he has lost the right to present his own evidence. 3. The case before the trial court was one for annulment of judgment on the ground of fraud. As earlier stated, private respondent Castibolo as defendant in the original case filed by the Siayngcos before the Justice of the Peace Court of Dagami, Leyte, where he entered a confession of judgment had unsuccesfully tried to secure relief from said judgment under Rule 38 of the Rules of Court. Section 6 and 7 of

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Rule 38 govern the proceedings for setting aside or annulment of judgments on the grounds of fraud, accident, mistake or excusable negligence, as follows: SEC. 6. Proceedings after answer is filed. Once the answer is filed, or the time for its filing has expired, the court shall hear the petition and if after such hearing, the court finds that the allegations thereof are not true, the petition shall be dismissed; but if it finds said allegations to be true, it shall order the judgment, order or other proceedings complained of to be set aside, upon such terms as may be just, and thereafter the case shall stand as if the judgment, order or other proceeding set aside had never been issued or taken. SEC. 7. Procedure where a judgment is set aside. Where the judgment set aside is that of a Court of First Instance, such court shall proceed to hear and determine the case as if timely motion for a new trial had been granted therein. Where the judgment set aside is that of an inferior court, the case shall be tried in the Court of First Instance as if the same had been regularly brought up by appeal, and the judge of the inferior court may be required by the Court of First Instance to attend and produce at the trial all the trials in the original case. Here while the complain filed by Costibolo for the annulment of the Justice of the Peace Court judgment against him on the basis of extrinsic fraud was a separate action independent of Rule 38 for relief from judgment, still we hold that the above-quoted provisions of Rule 38 should govern the procedure to be followed by the trial court in such separate action for annulment of the judgment of an inferior court. The Court of First Instance would be exercising its appellate jurisdiction, as contemplated in Rule 38, section 7, which expressly provides that "where the judgment set aside is that of an inferior court, the case shall be tried in the Court of First Instance as if the same has been regularly brought up by appeal." This Court, speaking through the now Chief Justice, has already laid down in Villanueva v. Alcoba 7 the procedure to be followed in such proceedings, which contemplates two hearings: first, a hearing to determine whether the judgment or order complained of should be set aside, for as provided in Rule 38, section 6, if the court finds that the allegations of the fraud are not true, the petition shall be dismissed and the entire proceedings terminate; and second, if the court finds the allegations to be true, however, then the same rule provides that it shall set aside the judgment complained of and shall proceed to hear and determine the merits, for the case will then stand as if the judgment set aside had never been issued. Thus, this Court pointed out in the cited case: It is clear from these provisions that in proceedings for relief from judgment under said Rule 38, there may be two (2) hearings, namely: (1) a hearing to determine whether the judgment or order complained of should be set aside, and (2) if the decision thereon is in the affirmative, a hearing on the merits of the principal case. Referring to the present case, it is obvious that, at the hearing held on August 8, 1953, the court was not supposed to receive evidence on the truth of petitioner's allegations relative to the alleged debts of respondents herein. This matter affects already the merits of the principal case, which is not to be inquired into until the Court has decided, after the first hearing, to set aside the judgment or order complained of. Otherwise, the second hearing above referred to would be useless. (at p. 285) The procedure thus laid down is but rational. As petitioners correctly contend in their brief, the trial court in allowing respondent Costibolo to present simultaneously at the first hearing his evidence relating to the merits of the principal case, subject of the judgment which was yet to be annulled, in effect already prejudged or erroneously assumed that the alleged fraud which was the very basis of Costibolo's action for annulment of judgment was already duly proven and that said judgment had been set aside. As pointed out by this Court in the Villanueva cases, supra, the merits of the principal case, subject of the judgment sought to be annulled, should not be inquired into until the court has decided, after the first hearing to set aside the judgment complained of. So it is that even if we were to apply in the case at bar the rule in earlier doctrines already discarded that a defendant who moves to dismiss or presents a demurrer to plaintiff's evidence must be deemed to have waived his right to submit his own evidence in the event of the court's denial of his motion or demurrer, the outcome here would not be affected. For this case is one to set aside a judgment on the ground of fraud, which involves two hearings, as already stated. Such waiver would properly apply only to the first hearing, i.e., the hearing to determine whether the judgment complained of should be set aside on the ground of fraud. But petitioners could not be deemed to have also waived the right to present their evidence at the second hearing on the merits of the case, after the Court shall have denied their motion to and therefore shall have accordingly set aside the judgment sought to be annulled; for it is only then that the second hearing on the merits of the case would be called and held for the reception of plaintiff's evidence as well as of defendant's evidence.lawphi1.nt But under the rule of demurrer to evidence now formally incorporated in Rule 35, supra, since the trial court denied the petitioners' motion to dismiss or demurrer, petitioners could not be held to have waived their right to present their own evidence, to refute respondent Costibolo's evidence, both on the issue of the alleged fraud as well as on the merits of the principal case. WHEREFORE, the decision appealed from is hereby reversed and another one is hereby entered, directing the remand of the case to the Court of First Instance of Leyte for further proceedings in accordance with this decision. With costs against the private respondent.

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