MONZON vs. SPS. RELOVA CHICO-NAZARIO, J.

: This is a Petition for Review on Certiorari assailing the Decision[1] of the Court of Appeals dated 27 September 2005 and its Resolution dated 7 March 2006 in CA-G.R. CV No. 83507 affirming the Decision of the Regional Trial Court (RTC) of Tagaytay City, Branch 18. The factual and procedural antecedents of this case are as follows: On 18 October 2000, the spouses James and Maria Rosa Nieves Relova and the spouses Bienvenido and Eufracia Perez, respondents before this Court, filed against Atty. Ana Liza Luna, Clerk of Court of Branch 18 of the RTC of Tagaytay City, and herein petitioner Teresita Monzon an initiatory pleading captioned as a Petition for Injunction. The case, which was filed before the same Branch 18 of the RTC of Tagaytay City, was docketed as Civil Case No. TG-2069. In their Petition for Injunction, respondents alleged that on 28 December 1998, Monzon executed a promissory note in favor of the spouses Perez for the amount of P600,000.00, with interest of five percent per month, payable on or before 28 December 1999. This was secured by a 300-square meter lot in Barangay Kaybagal,Tagaytay City. Denominated as Lot No. 2A, this lot is a portion of Psu-232001, covered by Tax Declaration No. 98-008-1793. On 31 December 1998, Monzon executed a Deed of Absolute Sale over the said parcel of land in favor of the spouses Perez. Respondents also claim in their Petition for Injunction that on 29 March 1999, Monzon executed another promissory note, this time in favor of the spouses Relova for the amount of P200,000.00 with interest of five percent per month payable on or before 31 December 1999. This loan was secured by a 200 square meter lot, denominated as Lot No. 2B, another portion of the aforementioned Psu-232001 covered by Tax Declaration No. 98-008-1793. On 27 December 1999, Monzon executed a Deed of Conditional Sale over said parcel of land in favor of the spouses Relova. On 23 October 1999, the Coastal Lending Corporation extrajudicially foreclosed the entire 9,967-square meter property covered by Psu-232001, including the portions mortgaged and subsequently sold to respondents. According to the Petition for Injunction, Monzon was indebted to the Coastal Lending Corporation in the total amount of P3,398,832.35. The winning bidder in the extrajudicial foreclosure, Addio Properties Inc., paid the amount of P5,001,127.00, thus leaving aP1,602,393.65 residue. According to respondents, this residue amount, which is in the custody of Atty. Luna as Branch Clerk of Court, should be turned over to them pursuant to Section 4, Rule 68 of the Revised Rules of Civil Procedure. Thus, respondents pray in their Petition for Injunction for a judgment (1) finding Monzon liable to the spouses Perez in the amount of P1,215,000.00 and to the spouses Relova in the amount of P385,000.00; (2) ordering Atty. Luna to deliver said amounts to respondents; and (3) restraining Atty. Luna from delivering any amount to Monzon pending such delivery in number (2).

Monzon, in her Answer, claimed that the Petition for Injunction should be dismissed for failure to state a cause of action. Monzon likewise claimed that respondents could no longer ask for the enforcement of the two promissory notes because she had already performed her obligation to them by dacion en pago as evidenced by the Deed of Conditional Sale and the Deed of Absolute Sale. She claimed that petitioners could still claim the portions sold to them if they would only file the proper civil cases. As regards the fund in the custody of Atty. Luna, respondents cannot acquire the same without a writ of preliminary attachment or a writ of garnishment in accordance with the provisions of Rule 57 and Section 9(c), Rule 39 of the Revised Rules of Civil Procedure. On 5 December 2001, the RTC, citing the absence of petitioner and her counsel on said hearing date despite due notice, granted an oral Motion by the respondents by issuing an Order allowing the ex parte presentation of evidence by respondents.[2] On 1 April 2002, the RTC rendered a Decision in favor of respondents. The pertinent portions of the Decision are as follows: That [petitioner] Teresita Monzon owes [herein respondents] certain sums of money is indisputable. Even [Monzon] have admitted to this in her Answer. [Respondents] therefore are given every right to get back and collect whatever amount they gave [Monzon] together with the stipulated rate of interest. Likewise, it has been established that [petitioner] Teresita Monzon has the amount of P1,602,393.65 in the possession of the Clerk of Court, Atty. Ana Liza M. Luna. This amount, as is heretofore stated, represented the balance of the foreclosure sale of [Monzons] properties. By way of this petition, [respondents] would want to get said amount so that the same can be applied as full payment of [petitioners] obligation. That the amount should be divided between the [respondents] in the amount they have agreed between themselves; [respondent] spouses Relova to receive the amount of P400.00.00, while the spouses Perez shall get the rest. WHEREFORE, judgment is hereby rendered ordering the x x x Clerk of Court, Atty. Ana Liza M. Luna, to deliver unto [herein respondents] the amount of P1,602,393.65 plus whatever interest she may received if and when the said amount has been deposited in any banking institution.[3] The Decision also mentioned that the Order allowing the ex parte presentation of evidence by respondents was due to the continuous and incessant absences of petitioner and counsel.[4] On 25 April 2002, Monzon filed a Notice of Appeal, which was approved by the trial court. Monzon claims that the RTC gravely erred in rendering its Decision

immediately after respondents presented their evidence ex parte without giving her a chance to present her evidence, thereby violating her right to due process of law. On 14 June 2002, Addio Properties, Inc. filed before the trial court a Motion for Intervention, which was granted by the same court on 12 July 2002. On 27 September 2005, the Court of Appeals rendered the assailed Decision dismissing the appeal. According to the Court of Appeals, Monzon showed tepid interest in having the case resolved with dispatch. She, thus, cannot now complain that she was denied due process when she was given ample opportunity to defend and assert her interests in the case. The Court of Appeals reminded Monzon that the essence of due process is reasonable opportunity to be heard and submit evidence in support of ones defense. What the law proscribes is lack of opportunity to be heard. Monzons Motion for Reconsideration was denied in a Resolution dated 7 March 2006. On 27 March 2006, Monzon filed on Certiorari under Rule 45 of the Rules of Court. the instant Petition for Review

claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such reception of evidence may be delegated to the clerk of court. (a) Effect of order of default.A party in default shall be entitled to notice of subsequent proceedings but not to take part in the trial. In his book on remedial law, former Justice Florenz D. Regalado writes that failure to appear in hearings is not a ground for the declaration of a defendant in default: Failure to file a responsive pleading within the reglementary period, and not failure to appear at the hearing, is the sole ground for an order of default (Rosario, et al. vs. Alonzo, et al., L-17320, June 29, 1963), except the failure to appear at a pre-trial conference wherein the effects of a default on the part of the defendant are followed, that is, the plaintiff shall be allowed to present evidence ex parte and a judgment based thereon may be rendered against the defendant (Section 5, Rule 18).[6] Also, a default judgment may be rendered, even if the defendant had filed his answer, under the circumstance in Sec. 3(c), Rule 29.[7] Hence, according to Justice Regalado, the effects of default are followed only in three instances: (1) when there is an actual default for failure to file a responsive pleading; (2) failure to appear in the pre-trial conference; and (3) refusal to comply with modes of discovery under the circumstance in Sec. 3(c), Rule 29. In Philippine National Bank v. De Leon,[8] we held: We have in the past admonished trial judges against issuing precipitate orders of default as these have the effect of denying a litigant the chance to be heard, and increase the burden of needless litigations in the appellate courts where time is needed for more important or complicated cases. While there are instances when a party may be properly defaulted, these should be the exception rather than the rule, and should be allowed only in clear cases of obstinate refusal or inordinate neglect to comply with the orders of the court (Leyte vs. Cusi, Jr., 152 SCRA 496; Tropical Homes, Inc. vs. Hon. Villaluz, et al., G.R. No. L-40628, February 24, 1989). It is even worse when the court issues an order not denominated as an order of default, but provides for the application of effects of default. Such amounts to the circumvention of the rigid requirements of a default order, to wit: (1) the court must have

Monzon claims anew that it was a violation of her right to due process of law for the RTC to render its Decision immediately after respondents presented their evidence ex parte without giving her a chance to present her evidence. Monzon stresses that she was never declared in default by the trial court. The trial court should have, thus, set the case for hearing for the reception of the evidence of the defense. She claims that she never waived her right to present evidence. Monzon argues that had she been given the opportunity to present her evidence, she would have proven that (1) respondents Exhibit A (mortgage of land to the spouses Relova) had been novated by respondents Exhibit B (sale of the mortgage land to the spouses Relova); (2) respondents Exhibit C (mortgage of land to the spouses Perez) had been novated by respondents Exhibit B (sale of the mortgage land to the spouses Perez); and (3) having executed Exhibits B and D, Monzon no longer had any obligation towards respondents. The Order by the trial court which allowed respondents to present their evidence ex parte states: In view of the absence of [Monzon] as well as her counsel despite due notice, as prayed for by counsel for by [respondents herein], let the reception of [respondents] evidence in this case be held ex-parte before a commissioner who is the clerk of court of this Court, with orders upon her to submit her report immediately upon completion thereof.[5] It can be seen that despite the fact that Monzon was not declared in default by the RTC, the RTC nevertheless applied the effects of a default order upon petitioner under Section 3, Rule 9 of the Rules of Court: SEC. 3. Default; declaration of.If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the

validly acquired jurisdiction over the person of the defendant either by service of summons or voluntary appearance; (2) the defendant failed to file his answer within the time allowed therefor; and (3) there must be a motion to declare the defendant in default with notice to the latter.[9] In the case at bar, petitioner had not failed to file her answer. Neither was notice sent to petitioner that she would be defaulted, or that the effects of default shall be imposed upon her. Mere non-appearance of defendants at an ordinary hearing and to adduce evidence does not constitute default, when they have already filed their answer to the complaint within the reglementary period. It is error to default a defendant after the answer had already been filed. It should be borne in mind that the policy of the law is to have every litigants case tried on the merits as much as possible; it is for this reason that judgments by default are frowned upon.[10] Does this mean that defendants can get away with failing to attend hearings despite due notice? No, it will not. We agree with petitioner that such failure to attend, when committed during hearing dates for the presentation of the complainants evidence, would amount to the waiver of such defendants right to object to the evidence presented during such hearing, and to cross-examine the witnesses presented therein. However, it would not amount to a waiver of the defendants right to present evidence during the trial dates scheduled for the reception of evidence for the defense. It would be an entirely different issue if the failure to attend of the defendant was on a hearing date set for the presentation of the evidence of the defense, but such did not occur in the case at bar. In view of the foregoing, we are, therefore, inclined to remand the case to the trial court for reception of evidence for the defense. Before we do so, however, we need to point out that the trial court had committed another error which we should address to put the remand in its proper perspective. We refer to Monzons argument as early as the Answer stage that respondents Petition for Injunction had failed to state a cause of action. Section 4, Rule 68 of the Rules of Court, which is the basis of respondents alleged cause of action entitling them to the residue of the amount paid in the foreclosure sale, provides as follows: SEC. 4. Disposition of proceeds of sale.The amount realized from the foreclosure sale of the mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing the mortgage, and when there shall be any balance or residue, after paying off the mortgage debt due, the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the court, or if there be no such encumbrancers or there be a balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to the person entitled to it. However, Rule 68 governs the judicial foreclosure of mortgages. Extra-judicial foreclosure of mortgages, which was what transpired in the case at bar, is governed by Act No. 3135,[11] as amended by Act No. 4118,[12] Section 6 of Republic Act No. 7353, Section 18 of Republic Act No. 7906, and Section 47 of Republic Act No. 8791. A.M. No. 99-10-050, issued on 14 December 1999, provides for the procedure to be observed in the conduct

of an extrajudicial foreclosure sale. Thus, we clarified the different types of sales in Supena v. Dela Rosa, [13] to wit: Any judge, worthy of the robe he dons, or any lawyer, for that matter, worth his salt, ought to know that different laws apply to different kinds of sales under our jurisdiction. We have three different types of sales, namely: an ordinary execution sale, a judicial foreclosure sale, and an extrajudicial foreclosure sale. An ordinary execution sale is governed by the pertinent provisions of Rule 39 of the Rules of Court on Execution, Satisfaction and Effect of Judgments. Rule 68 of the Rules, captioned Foreclosure of Mortgage, governs judicial foreclosure sales. On the other hand, Act No. 3135, as amended by Act No. 4118, otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages," applies in cases of extrajudicial foreclosure sales of real estate mortgages. Unlike Rule 68, which governs judicial foreclosure sales, neither Act No. 3135 as amended, nor A.M. No. 99-10-05-0 grants to junior encumbrancers the right to receive the balance of the purchase price. The only right given to second mortgagees in said issuances is the right to redeem the foreclosed property pursuant to Section 6 of Act No. 3135, as amended by Act No. 4118, which provides: Sec. 6. Redemption. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty- six,[14] inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with this Act. Even if, for the sake of argument, Rule 68 is to be applied to extrajudicial foreclosure of mortgages, such right can only be given to second mortgagees who are made parties to the (judicial) foreclosure. While a second mortgagee is a proper and in a sense even a necessary party to a proceeding to foreclose a first mortgage on real property, he is not an indispensable party, because a valid decree may be made, as between the mortgagor and the first mortgagee, without regard to the second mortgage; but the consequence of a failure to make the second mortgagee a party to the proceeding is that the lien of the second mortgagee on the equity of redemption is not affected by the decree of foreclosure.[15] A cause of action is the act or omission by which a party violates the right of another.[16] A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such

right; and (3) an act or omission on the part of such defendant violative of the right of plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of damages.[17] In view of the foregoing discussions, we find that respondents do not have a cause of action against Atty. Ana Liza Luna for the delivery of the subject amounts on the basis of Section 4, Rule 68 of the Rules of Court, for the reason that the foregoing Rule does not apply to extrajudicial foreclosure of mortgages. In Katon v. Palanca, Jr.,[18] we held that where prescription, lack of jurisdiction or failure to state a cause of action clearly appears from the complaint filed with the trial court, the action may be dismissed motu proprio, even if the case has been elevated for review on different grounds. However, while the case should indeed be dismissed insofar as Atty. Luna is concerned, the same is not necessarily true with respect to Monzon. Other than respondents prayer that the amount due to respondents be delivered by Atty. Luna to them, they also pray for a judgment declaring Monzon liable for such amounts. Said prayer, as argued by Monzon herself, may constitute a cause of action for collection of sum of money against Monzon. The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead, an ordinary action to recover the indebtedness with the right to execute a judgment thereon on all the properties of the debtor including the subject matter of the mortgage, subject to the qualification that if he fails in the remedy elected by him, he cannot pursue further the remedy he has waived.[19] However, due to the fact that construing respondents Petition for Injunction to be one for a collection of sum of money would entail a waiver by the respondents of the mortgage executed over the subject properties, we should proceed with caution before making such construction. We, therefore, resolve that upon the remand of this case to the trial court, respondents should be ordered to manifest whether the Petition for Injunction should be treated as a complaint for the collection of a sum of money. If respondents answer in the affirmative, then the case shall proceed with the presentation of the evidence for the defense. If Monzon would be successful in proving her defense of dacion en pago, there would, in effect, be a double sale of the mortgaged properties: the same properties were sold to both respondents and to herein intervenor Addio Properties, Inc. If, pursuant to the rules on double sales, respondents are entitled to the properties, their remedy is to file the proper action to recover possession. If, pursuant to said rules, Addio Properties, Inc. is entitled to the properties, respondents remedy is to file an action for damages against Monzon. If respondents answer in the negative, the case shall be dismissed, without prejudice to the exercise of respondents rights as mortgage creditors. If respondents mortgage contract was executed before the execution of the mortgage contract with Addio Properties, Inc., respondents would be the first mortgagors. Pursuant to Article 2126[20] of the Civil Code, they would be entitled to foreclose the property as against any subsequent possessor thereof. If respondents mortgage contract was executed after the execution of the mortgage contract with Addio Properties, Inc., respondents would be the second mortgagors. As such, they are entitled to a right of redemption pursuant to Section 6 of Act No. 3135, as amended by Act No. 4118.

WHEREFORE, the Decision of the Court of Appeals dated 27 September 2005 and its Resolution dated 7 March 2006 are REVERSED and SET ASIDE. The Petition for Injunction in Civil Case No. TG-2069 is hereby ordered DISMISSED insofar as Atty. Ana Liza Luna is concerned. The Petition for Injunction in Civil Case No. TG-2069, insofar as petitioner Teresita Monzon is concerned, is ordered REMANDED to the Regional Trial Court of Tagaytay City for further proceedings. Upon such remand, the Regional Trial Court of Tagaytay City shall issue an Order to respondents, the spouses James and Maria Rosa Nieves Relova and the spouses Bienvenido and Eufracia Perez, to manifest whether the Petition for Injunction should be treated as a complaint for the collection of a sum of money. If respondents answer in the affirmative, the Regional Trial Court shall set the case for hearing for the presentation of the evidence for the defense. If respondents answer in the negative, the case shall be dismissed, without prejudice to the exercise of respondents rights as mortgage creditors. No costs. SO ORDERED. REYES vs. ADDIO PROPERTIES, INC. (Sept. 17, 2008)

HEIRS OF DOLLETON vs. FIL-ESTATE MGMNT, INC. (April 7, 2009) FACTS: Petitioners Heirs filed for quieting of title and/or recovery of ownership and possession with preliminary injunction/restraining order and damages against respondents Fil-Estate Management Inc. They claimed that they have been in open, exclusive, and notorious possession of parcels of land for more than 90 years until Fil-Estate forcibly ousted them. Fil-Estate contended that that have in their possession numerous certificates covering the parcels of land and can only be attacked collaterally pursuant to PD 1529. The respondents also filed a motion to dismiss on the grounds that the petitioners do not have a cause of action the RTC dismissed the complaint filed by the petitioner. ISSUE: Whether or not there is a sufficient cause of action. HELD: The elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded. The inquiry is into the sufficiency, not the veracity, of the material allegations. If the allegations in the complaint furnish sufficient basis on which it can be maintained, it should not be dismissed regardless of the defense that may be presented by the defendant. This Court is convinced that each of the Complaints filed by petitioners sufficiently stated a cause of action. The Complaints alleged that petitioners are the owners of the subject properties by acquisitive prescription. As owners thereof, they have the right to remain in peaceful possession of the said properties and, if deprived thereof, they may recover the same. The petitioners are in open, continuous and notorious possession of the disputed parcels of land for more than 90 years. The rule of civil procedure provides the elements of a cause of action; 1) a right in favor of a plaintiff. 2) An obligation on the part of the defendant to violate such right. 3) an act or omission on the part of defendant of theright of the plaintiff which constitutes such right.

SEA-LAND SERVICE INC. vs. CA D E C I S I O N (YNARES-SANTIAGO, J.:) This petition for review on certiorari seeks to annul and set aside the decision of the Court of Appeals dated September 29, 1995 in CA-G.R. SP No. 35777,[1] dismissing the petition for certiorari filed by petitioner to annul the two (2) orders issued by the Regional Trial Court of Quezon City, Branch 216, in Civil Case No. Q-92-12593. The facts are as follows: On April 29, 1991, petitioner Sea-Land Services, Inc. and private respondent A.P. Moller/Maersk Line (hereinafter referred to as "AMML"), both carriers of cargo in containerships as well as common carriers, entered into a contract entitled, "Co-operation in the Pacific"[2] (hereinafter referred to as the "Agreement"), a vessel sharing agreement whereby they mutually agreed to purchase, share and exchange needed space for cargo in their respective containerships. Under the Agreement, they could be, depending on the occasion, either a principal carrier (with a negotiable bill of lading or other contract of carriage with respect to cargo) or a containership operator (owner, operator or charterer of containership on which the cargo is carried). During the lifetime of the said Agreement, or on 18 May 1991, Florex International, Inc. (hereinafter referred to as "Florex") delivered to private respondent AMML cargo of various foodstuffs, with Oakland, California as port of discharge and San Francisco as place of delivery. The corresponding Bill of Lading No. MAEU MNL110263 was issued to Florex by respondent AMML. Pursuant to the Agreement, respondent AMML loaded the subject cargo on MS Sealand Pacer, a vessel owned by petitioner. Under this arrangement, therefore, respondent AMML was the principal carrier while petitioner was the containership operator. The consignee refused to pay for the cargo, alleging that delivery thereof was delayed. Thus, on June 26, 1992, Florex filed a complaint against respondent Maersk-Tabacalera Shipping Agency (Filipinas), Inc. for reimbursement of the value of the cargo and other charges.[3] According to Florex, the cargo was received by the consignee only on June 28, 1991, since it was discharged in Long Beach, California, instead of in Oakland, California on June 5, 1991 as stipulated. Respondent AMML filed its Answer[4] alleging that even on the assumption that Florex was entitled to reimbursement, it was petitioner who should be liable. Accordingly, respondent AMML filed a Third Party Complaint[5] against petitioner on November 10, 1992, averring that whatever damages sustained by Florex were caused by petitioner, which actually received and transported Florexs cargo on its vessels and unloaded them. On January 1, 1993, petitioner filed a Motion to Dismiss the Third Party Complaint [6] on the ground of failure to state a cause of action and lack of jurisdiction, the amount of damages not having been specified therein. Petitioner also prayed either for dismissal or suspension of the Third Party Complaint on the ground that there exists an arbitration agreement between it and respondent AMML. On September 27, 1993, the lower court

issued an Order denying petitioners Motion to Dismiss. Petitioners Motion Reconsideration was likewise denied by the lower court in its August 22, 1994 Order.

for

Undaunted, petitioner filed a petition for certiorari[7] with the Court of Appeals on November 23, 1994. Meanwhile, petitioner also filed its Answer to the Third Party Complaint in the trial court. On September 29, 1995, respondent Court of Appeals rendered the assailed Decision dismissing the petition for certiorari. With the denial of its Motion for Reconsideration, petitioner filed the instant petition for review, raising the following issues I. THE COURT OF APPEALS DISREGARDED AN AGREEMENT TO ARBITRATE IN VIOLATION OF STATUTE AND SUPREME COURT DECISIONS HOLDING THAT ARBITRATION IS A CONDITION PRECEDENT TO SUIT WHERE SUCH AN AGREEMENT TO ARBITRATE EXISTS. THE COURT OF APPEALS HAS RULED IN A MANNER NOT IN ACCORD WITH JURISPRUDENCE WHEN IT REFUSED TO HAVE THE THIRD-PARTY COMPLAINT DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION AND FOR RULING THAT THE FAILURE TO STATE A CAUSE OF ACTION MAY BE REMEDIED BY REFERENCE TO ITS ATTACHMENTS.[8]

II.

Resolving first the issue of failure to state a cause of action, respondent Court of Appeals did not err in reading the Complaint of Florex and respondent AMMLs Answer together with the Third Party Complaint to determine whether a cause of action is properly alleged. In Fil-Estate Golf and Development, Inc. vs. Court of Appeals,[9] this Court ruled that in the determination of whether or not the complaint states a cause of action, the annexes attached to the complaint may be considered, they being parts of the complaint. Coming now to the main issue of arbitration, the pertinent clauses of the "Co-operation in the Pacific" contract entered into by the parties provide: 16.2 For the purposes of this agreement the Containership Operator shall be deemed to have issued to the Principal Carrier for good consideration and for both loaded and empty containers its non-negotiable memo bills of lading in the form attached hereto as Appendix 6, consigned only to the Principal Carrier or its agents, provisions of which shall govern the liability between the Principal Carrier and the Containership Operator and that for the purpose of determining the liability in accordance with either Lines memo bill of lading, the number of packages or customary freight units shown on the bill of lading issued by the Principal Carrier to its shippers shall be controlling. 16.3 The Principal Carrier shall use all reasonable endeavours to defend all in personam and in rem suits for loss of or damage to cargo carried pursuant to bills of lading issued by it, or to settle such suits for as low a figure as reasonably possible. The Principal Carrier shall have the right to seek damages and/or an indemnity from the Containership

Operator by arbitration pursuant to Clause 32 hereof. Notwithstanding the provisions of the Lines memo bills of lading or any statutory rules incorporated therein or applicable thereto, the Principal Carrier shall be entitled to commence such arbitration at any time until one year after its liability has been finally determined by agreement, arbitration award or judgment, such award or judgment not being the subject of appeal, provided that the Containership Operator has been given notice of the said claim in writing by the Principal Carrier within three months of the Principal Carrier receiving notice in writing of the claim. Further the Principal Carrier shall have the right to grant extensions of time for the commencement of suit to any third party interested in the cargo without prior reference to the Containership Operator provided that notice of any extension so granted is given to the Containership Operator within 30 days of any such extension being granted. xxx 32. xxx xxx ARBITRATION

To the extent permitted by the Arbitration Act 1979 the Lines hereto exclude pursuant to S 3(1) of that Act the jurisdiction of the English High Court of Justice to entertain any appeal or application under Section 1 and 2 of the Arbitration Act 1979.[10] From the foregoing, the following matters are clear: First, disputes between the Principal Carrier and the Containership Operator arising from contracts of carriage shall be governed by the provisions of the bills of lading issued to the Principal Carrier by the Containership Operator. Second, the Principal Carrier shall use its best efforts to defend or settle all suits against it for loss of or damage to cargo pursuant to bills of lading issued by it. Third, the Principal Carrier shall have the right to seek damages and/or indemnity from the Containership Operator by arbitration, pursuant to Clause 32 of the agreement. Fourth, the Principal Carrier shall have the right to commence such arbitration any time until one year after its liability has been finally determined by agreement, arbitration award or judgment, provided that the Containership Operator was given notice in writing by the Principal Carrier within three months of the Principal Carrier receiving notice in writing of said claim. Prescinding from the foregoing matters, we find that both the trial court and the Court of Appeals erred in denying petitioners prayer for arbitration. To begin with, allowing respondent AMMLs Third Party Claim against petitioner to proceed would be in violation of Clause 16.2 of the Agreement. As summarized, the clause provides that whatever dispute there may be between the Principal Carrier and the Containership Operator arising from contracts of carriage shall be governed by the provisions of the bills of lading deemed issued to the Principal Carrier by the Containership Operator. On the other hand, to sustain the Third Party Complaint would be to allow private respondent to hold petitioner liable under the provisions of the bill of lading issued by the Principal Carrier to Florex, under which the latter is suing in its Complaint, not under the bill of lading petitioner, as containership operator, issued to respondent AMML, as Principal Carrier, contrary to what is contemplated in Clause 16.2. The Court of Appeals ruled that the terms of the Agreement "explicitly required that the principal carriers claim against the containership operator first be finally determined by, among others, a court judgment, before the right to arbitration accrues." However, the Court of Appeals failed to consider that, precisely, arbitration is the mode by which the liability of the Containership Operator may be finally determined. This is clear from the mandate of Clause 16.3 that "(T)he Principal Carrier shall have the right to seek damages and/or an indemnity from the Containership Operator by arbitration" and that it "shall be entitled to commence such arbitration at any time until one year after its liability has been finally determined by agreement, arbitration award or judgment". For respondent Court of Appeals to arbitration as a condition precedent Agreement clauses aforequoted, it is respondent AMML as Principal Carrier say that the terms of the contract do not require to judicial action is erroneous. In the light of the clear that arbitration is the mode provided by which can seek damages and/or indemnity from petitioner,

32.1 If at any time a dispute or claim arises out of or in connection with the Agreement the Lines shall endeavour to settle such amicably, failing which it shall be referred to arbitration by a single arbitrator in London, such arbitrator to be appointed by agreement between the Lines within 14 days after service by one Line upon the other of a notice specifying the nature of the dispute or claim and requiring reference of such dispute or claim to arbitration pursuant to this Article. 32.2 Failing agreement upon an arbitrator within such period of 14 days, the dispute shall be settled by three Arbitrators, each party appointing one Arbitrator, the third being appointed by the President of the London Maritime Arbitrators Association. 32.3 If either of the appointed Arbitrators refuses or is incapable of acting, the party who appointed him shall appoint a new Arbitrator in his place. 32.4 If one of the parties fails to appoint an Arbitrator either originally or by way of substitution for two weeks after the other party having appointed his Arbitrator has sent the party making default notice by mail, fax or telex to make the appointment, the party appointing the third Arbitrator shall, after application from the party having appointed his Arbitrator, also appoint an Arbitrator in behalf of the party making default. 32.5 Any such arbitration shall be in accordance with the Arbitration Act 1950 as amended by the Arbitration Act 1979 or any other subsequent legislation and the arbitrators award shall be final and binding upon Lines.

as Containership Operator. Stated differently, respondent AMML is barred from taking judicial action against petitioner by the clear terms of their Agreement. As the Principal Carrier with which Florex directly dealt with, respondent AMML can and should be held accountable by Florex in the event that it has a valid claim against the former. Pursuant to Clause 16.3 of the Agreement, respondent AMML, when faced with such a suit "shall use all reasonable endeavours to defend" itself or "settle such suits for as low a figure as reasonably possible". In turn, respondent AMML can seek damages and/or indemnity from petitioner as Containership Operator for whatever final judgment may be adjudged against it under the Complaint of Florex. The crucial point is that collection of said damages and/or indemnity from petitioner should be by arbitration. All told, when the text of a contract is explicit and leaves no doubt as to its intention, the court may not read into it any other intention that would contradict its plain import.[11] Arbitration being the mode of settlement between the parties expressly provided for by their Agreement, the Third Party Complaint should have been dismissed. This Court has previously held that arbitration is one of the alternative methods of dispute resolution that is now rightfully vaunted as "the wave of the future" in international relations, and is recognized worldwide. To brush aside a contractual agreement calling for arbitration in case of disagreement between the parties would therefore be a step backward.[12] WHEREFORE, premises considered, the instant Petition for Review on Certiorari is GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 35777 is REVERSED and SET ASIDE. The Regional Trial Court of Quezon City, Branch 77, is ordered to DISMISS Respondent AMMLs Third Party Complaint in Civil Case No. Q-92-12593. No pronouncement as to costs. SO ORDERED. DABUCO vs. CA MANLICLIC vs. CALAUNAN Nature: Petition for review on certiorari FACTS: 1. The vehicles involved in this case are: (1) Philippine Rabbit Bus owned by petitioner PRBLI and driven by petitioner Mauricio Manliclic; and (2) owner-type jeep owned by respondent Modesto Calaunan and driven by Marcelo Mendoza 2. At approximately Kilometer 40 of the North Luzon Expressway in Barangay Lalangan, Plaridel, Bulacan, the two vehicles collided. - The front right side of the Philippine Rabbit Bus hit the rear left side of the jeep causing the latter to move to the shoulder on the right and then fall on a ditch with water resulting to further extensive damage. - Respondent suffered minor injuries while his driver was unhurt. 3. By reason of such collision, a criminal case was filed charging petitioner Manliclic with Reckless Imprudence Resulting in Damage to Property with Physical Injuries.

4. 5. 6.

7.

Subsequently on 2 December 1991, respondent filed a complaint for damages against petitioners Manliclic and PRBLI The criminal case was tried ahead of the civil case. When the civil case was heard, counsel for respondent prayed that the transcripts of stenographic notes (TSNs) of the testimonies in the criminal case be received in evidence in the civil case in as much as these witnesses are not available to testify in the civil case. The versions of the parties are summarized by the trial court as follows: Respondents version: - According to the respondent and his driver, the jeep was cruising at the speed of 60 to 70 kilometers per hour on the slow lane of the expressway when the Philippine Rabbit Bus overtook the jeep and in the process of overtaking the jeep, the Philippine Rabbit Bus hit the rear of the jeep on the left side. - At the time the Philippine Rabbit Bus hit the jeep, it was about to overtake the jeep. In other words, the Philippine Rabbit Bus was still at the back of the jeep when the jeep was hit. - Fernando Ramos corroborated the testimony of and Marcelo Mendoza. He said that he was on another jeep following the Philippine Rabbit Bus and the jeep of plaintiff when the incident took place. He testified that the jeep of plaintiff swerved to the right because it was bumped by the Philippine Rabbit bus from behind. Petitioners version: - The petitioner explained that when the Philippine Rabbit bus was about to go to the left lane to overtake the jeep, the latter jeep swerved to the left because it was to overtake another jeep in front of it. - Petitioner PRBLI maintained that it observed and exercised the diligence of a good father of a family in the selection and supervision of its employee RTC ruled in favor of the respondent. CA found no reversible error and affirmed the RTCs decision.

8.

ISSUES: 1. Whether the TSNs from the criminal case may be admitted in evidence for the civil case. 2. Whether the petitioner, Manliclic, may be held liable for the collision and be found negligent notwithstanding the declaration of the CA in the criminal case that there was an absence of negligence on his part. 3. Whether the petitioner, PRBLI, exercised due diligence and supervision of its employee. HELD: The petitioner, Manliclic, is civilly liable for the damages for his negligence or reckless imprudence based on quasi-delict. The PRBLI is held solidarily liable for the damages caused by the petitioner Manliclics negligence. 1. Admissibility of the TSNs Petitioners contention: - The TSNs should not be admitted to evidence for failure to comply with the requisites of Sec. 47, Rule 130 of the ROC

Court:

The petitioner, PRBLI, had no opportunity to cross examine the witnesses because the criminal case was filed exclusively against Manliclic. Admission of the TSNs will deprive the petitioner of due process. The testimonies are still admissible on the ground that the petitioner failed to object on their admissibility. Failure to object to the inclusion of the evidence is a waiver on the provision of the law. In addition, the petitioner even offered in evidence the TSN containing the testimony of Ganiban. The court disagrees that it would deprive the petitioner of due process. For the failure of the petitioner to object at the proper time, it waived its right to object for the non compliance with the ROC.

(b) if an accused is acquitted on the basis that he was not the author of the act or omission complained of (or that there is declaration in a final judgment that the fact from which the civil might arise did not exist), said acquittal closes the door to civil liability based on the crime or ex delicto. CIVIL LIABILITY ARISING FROM QUASI-DELICT - A quasi-delict or culpa aquiliana is a separate legal institution under the Civil Code with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. - The same negligence causing damages may produce civil liability arising from a crime under the Penal Code, or create an action for quasi-delicts or culpa extracontractual under the Civil Code. The acquittal of the accused, even if based on a finding that he is not guilty, does not carry with it the extinction of the civil liability based on quasi delict. - civil liability arising from quasi-delict or culpa aquiliana, same will not be extinguished by an acquittal, whether it be on ground of reasonable doubt or that accused was not the author of the act or omission complained of (or that there is declaration in a final judgment that the fact from which the civil liability might arise did not exist). - An acquittal or conviction in the criminal case is entirely irrelevant in the civil case based on quasi-delict or culpa aquiliana.

2. Civil liability arising from crime v. Quasi-delict/Culpa Acquiliana Petitioner: - The version of the petitioner deserves more credit as the petitioner was already acquitted by the CA of the charge of Reckless imprudence resulting in damage to property with physical injuries. Court: - From the complaint, it can be gathered that the civil case for damages was one arising from or based on quasi-delict: Petitioner Manliclic was sued for his negligence or reckless imprudence in causing the collision, while petitioner PRBLI was sued for its failure to exercise the diligence of a good father in the selection and supervision of its employees it appears that petitioner Manliclic was acquitted not on reasonable doubt, but on the ground that he is not the author of the act complained of which is based on Section 2(b) of Rule 111 of the Rules of Criminal Procedure which reads: (b) Extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil might arise did not exist.

In spite of said ruling, petitioner Manliclic can still be held liable for the mishap. The afore-quoted section applies only to a civil action arising from crime or ex delicto and not to a civil action arising from quasi-delict or culpa aquiliana. The extinction of civil liability referred to in the quoted provision, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same act considered as a quasi-delict only and not as a crime is not extinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused.

The petitioners urge the court to give more credence to their version of the story however, as they constitute a question of fact, it may not be raised as a subject for a petition for review. Findings of the trial court and appellate court are binding on the Supreme Court. The testimony of the petitioner about the jeep of the respondent overtaking another vehicle in the criminal case was not consistent with what he gave to the investigator which is evidently a product of an after-thought If one would believe the testimony of the defendant, Mauricio Manliclic, and his conductor, Oscar Buan, that the Philippine Rabbit Bus was already somewhat parallel to the jeep when the collision took place, the point of collision on the jeep should have been somewhat on the left side thereof rather than on its rear. Furthermore, the jeep should have fallen on the road itself rather than having been forced off the road.

In sum, the court distinguished civil liability arising from a crime and that arising from quasi-delict: CIVIL LIABILITY ARISING FROM A CRIME (a) if an accused is acquitted based on reasonable doubt on his guilt, his civil liability arising from the crime may be proved by preponderance of evidence only.

3. PRBLIs liability - Under Article 2180 of the New Civil Code, when an injury is caused by the negligence of the employee, there instantly arises a presumption of law that there was negligence on the part of the master or employer either in the selection of the servant or employee, or in supervision over him after selection or both. - The liability of the employer under Article 2180 is direct and immediate; it is not conditioned upon prior recourse against the negligent employee and a prior showing of the insolvency of such employee. Therefore, it is incumbent upon the private respondents to prove that they exercised the diligence of a good father of a family in the selection and supervision of their employee.

Petitioners contention: - PRBLI maintains that it had shown that it exercised the required diligence in the selection and supervision of its employees - In the matter of selection, it showed the screening process that petitioner Manliclic underwent before he became a regular driver. - As to the exercise of due diligence in the supervision of its employees, it argues that presence of ready investigators is sufficient proof that it exercised the required due diligence in the supervision of its employees Court: - In the selection of prospective employees, employers are required to examine them as to their qualifications, experience and service records. In the supervision of employees, the employer must formulate standard operating procedures, monitor their implementation and impose disciplinary measures for the breach thereof. - As the negligence of the employee gives rise to the presumption of negligence on the part of the employer, the latter has the burden of proving that it has been diligent not only in the selection of employees but also in the actual supervision of their work. - The trial court found that petitioner PRBLI exercised the diligence of a good father of a family in the selection but not in the supervision of its employees it seems that the Philippine Rabbit Bus Lines has a very good procedure of recruiting its driver as well as in the maintenance of its vehicles. There is no evidence though that it is as good in the supervision of its personnel. o no evidence introduced that there are rules promulgated by the bus company regarding the safe operation of its vehicle and in the way its driver should manage and operate the vehicles o no showing that somebody in the bus company has been employed to oversee how its driver should behave while operating their vehicles o The presence of ready investigators after the occurrence of the accident is not enough. Same does not comply with the guidelines set forth with regard to the supervision. o Regular supervision of employees, that is, prior to any accident, should have been shown and established. o the lack of supervision can further be seen by the fact that there is only one set of manual containing the rules and regulations for all the drivers - For failure to adduce proof that it exercised the diligence of a good father of a family in the selection and supervision of its employees, petitioner PRBLI is held solidarily responsible for the damages caused by petitioner Manliclics negligence. DISPOSITIVE: WHEREFORE, premises considered, the instant petition for review is DENIED. The decision of the Court of Appeals is AFFIRMED with the MODIFICATION that (1) the award of moral damages shall be reduced to P50,000.00; and (2) the award of exemplary damages shall be lowered to P50,000.00.

RULE 3 BALAGTAS vs. CA 317 SCRA 69 PURISIMA, J.: This is a Petition for Certiorari under Rule 65 of the Revised Rules of Court assailing the Decision of the Court of Appeals[1] in CA G.R. SP No. 28155, dated January 26, 1993, affirming the Decision of Branch 11, 7th Judicial Region, Regional Trial Court of Cebu, dismissing the petition in Special Proceeding Case No. 3328-CEB, entitled In the Matter of the Petition for Habeas Corpus of Rutchel Apostol. The pertinent facts are as follows: On November 18, 1991, the officers of Danao Police Station and Pardo Sub-Station took Rutchel Apostol from the house of Eduardo Balagtas without any warrant of arrest. On December 4, 1991, the petitioner, acting on behalf of Rutchel Apostol, initiated special proceedings for habeas corpus, docketed as Spec. Proc. Case No. 3328-CEB before the Regional Trial Court of Cebu City. He theorized that sometime in May 1991, Rutchel started to reside with him in Cebu City because of her desire to undertake spiritual studies at the Chaitanya Mission. On the same day, the trial Court issued an order directing the public respondents to bring the body of Rutchel before it on December 9, 1991, at 10:40 P.M., and to show cause why Rutchel Apostol had been deprived of her liberty and/or petitioner was denied rightful custody of Rutchel. On December 9, 1991, the public respondents did not produce the body of Rutchel Apostol. As a result, the Trial Court issued another Order giving them five (5) days to submit their opposition to the petition, and resetting the hearing to December 27, 1991, at 10:00 A.M. On December 27, 1991, the respondents explained in their Comment that Mrs. Angeles Apostol, Rutchels mother, sought police assistance from the Metropolitan Command Headquarters of the Philippine National Police to locate Rutchel and thereafter, persuaded her to return to their home in Iloilo City. She brought with her a copy of a police blotter that Rutchel left their home on August 15, 1991. Responding to the same, there was conducted a police surveillance which unearthed that Rutchel was living with the petitioner in Pardo, Cebu City. Thereat, Mrs. Angeles met Rutchel and talked to her, after which the two returned to Iloilo City. Meanwhile, the trial Court reset the hearing on January 14, 1992 and ordered Rutchels parents to produce her body but the latter failed to do so. The trial Court then granted Rutchels parents until February 14, 1992 to comply with the directive but, instead, counsel for respondents presented a telegram signed by Dr. Gustillo stating that Rutchel was undergoing psychiatric treatment and her condition did not allow her to travel and attend the scheduled hearing in Cebu City. The next thing the trial court did was to appoint Nena R. Buenconsejo, a court personnel, as commissioner to determine the veracity of the telegram. The said commissioner reported:

xxx After a short while, Miss Rutchel Apostol appeared. From my observation, she look a bit pale but physically healthy, well-groomed and very accommodating. xxx In few hours, Dr. Gustillo, the psychiatrist arrived. After the amenities, we informed Dr. Gustillo why we were there that day. Then the questioning begun. The undersigned asked Miss Apostol whether she is held against her will in their home to which she answered in the affirmative. When asked whether shes free to go out, she said she can but only if she has a companion. She said that she has freedom but not the freedom of doing what she wants and likes to do. When further asked what does she wants and likes to do. When further asked what does she like, being there in their house or somewhere else, she said that she prefers the Chaitanya Mission. The undersigned also asked her whether she is fit to go to Cebu City and show herself in Court on February 28, 1992, the next scheduled hearing, she answered yes and she wants to. When questioned whether she is under treatment, she said no. However, the psychiatrist said that she has been undergoing psychotherapy, a treatment which do not prescribe medicines, but only deals in psychology. In short, is just talking with the patient, listening to her problems and ideas and in the process, advicing and helping her. The psychiatrist called this psychotherapy. According to him psychiatry deals in two things, the objective and subjective observations. Miss Rutchel Apostol argued and insisted that there was no mention of her being under treatment, that the psychiatrist is merely her and her mothers mediator. But when asked by the doctor to confirm to the truth that she once admitted that she suffered depression which sometimes made her contemplate suicide, she confirmed to the truth of the matter but qualified that she is coping with the situation. At this point, the undersigned sought the psychiatrists opinion on Miss Apostols fitn ess to travel to Cebu City and show herself in Court on February 28, 1992, the psychiatrist said that as of that time, he would not advice her to. However, he said that in about four (4) weeks time from February 22, 1992, Ms. Apostol may do so. The psychiatrist believes that Ms. Apostol may not be able to cope with the stress yet because of the different factors that may ensue. Before the investigation ended, Ms. Rutchel Apostol offered three (3) conditions to her mother which her mother rejected, namely: 1. That she be allowed to go to the mission in Cebu for one (1) month; 2. That when summer classes will open, she will enroll and be allowed to visit the Chaitanya Mission in Iloilo; and 3. That after she will finish her college course, she will be left free to go where she pleases.[2] On March 25, 1992, the Regional Trial Court of origin rendered a Decision dismissing the Complaint for lack of cause of action since it has been shown that Rutchel Apostol was under the care and custody of her parents and not being illegally detained by the respondents.[3]

On August 11, 1992, Eduardo Balagtas took an appeal to the Court of Appeals, docketed as CA-G.R. SP. No. 28155, asseverating: Although the original respondents were the policemen who forcibly took away Rutchel Apostol from the Chaitanya Mission, and whom the petitioner believed were in custody of Rutchel Apostol, the petition was deemed amended when the policemen in their comment to the petition alleged that it is the parents of Rutchel Apostol who are now in actual custody of Rutchel Apostol and the parents of Rutchel Apostol admitted that they are in custody of Rutchel Apostol and submitted themselves to the jurisdiction of this Honorable Court by allowing the Commissioner appointed by this Honorable Court to examine Rutchel Apostol in their house in Iloilo City. xxx xxx xxx

It is to be stressed that since Rutchel Apostol is now 19 years of age, she has now reached the age of majority and is now emancipated from parental control: ART. 234. Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of eighteen years. Since Rutchel Apostol has reached the age of majority, the parents of Rutchel Apostol cannot keep her in their custody against her will: xxx xxx xxx

In a case, the petitioner asked for writ of habeas corpus to return his daughter, who had already reached the age of majority, to her parental home which she left without his consent as father nor the consent of her mother. In denying the application, the Supreme Court held: There can be no question that parental authority, which includes the right to custody, terminates upon a child reaching the age of majority, at which age the child acquires the right, power and privilege to control his person (articles 314 and 137, Civil Code). This right to control ones person includes the right to choose a separate place of residence and the persons in whose company he desires to live. The freedom is incompatible with custody; no one can be said to have freedom to control his person and at the same time continue subject to someones custody. As habeas corpus applies only in cases where the rightful custody of a person is denied to another (section 1, Rule 102, Rules of Court), petitioner herein would be entitled thereto only if the right to custody of his daughter is reserved to him by law. Emancipation by majority is always absolute as to ones person; there is no provision in the law that limits it in any case. Article 317 refers to control over property. Article 321 is not an exception to the effects of emancipation by attainment of the age of majority; it is a limitation of the right of an emancipated daughter to leave the home of her parents if she is living with them, in the interest of public decorum (2 Manresa, 786-787). It can not, therefore, be said that the daughter, who after majority continues to live with her parents, remains under her parents custody. The right to freedom and control of ones person is a natural right; no limitation thereto can be imposed or inferred, except by

express provision of law. The prohibition for daughters from leaving their parental homes, if they live in company with their parents, is a limitation of a natural right and can not be enlarged beyond its very limited scope; it can not be extended by interpretation into a sort of parental authority with its corresponding concomitant of custody. Custody ends with emancipation, and the mere fact that she may have live with them cannot be considered as a continuation of revival of the custody, which had definitely terminated upon her emancipation.(V-B, Francisco, The Revised Rules of Court In the Philippines, 696 citing Dy Pico v. Ricardo, 47 O.G. 5232) The parents of Rutchel Apostol should be ordered to discharge Rutchel Apostol from their custody: When prisoner discharged if no appeal.- When the court or judge has examined into the cause of the caption and restraint of the prisoner, and is satisfied that he is unlawfully imprisoned or restrained, he shall forthwith order his discharge from confinement, but such discharge shall not be effective until a copy of the order has been served on the officer or person detaining the prisoner does not desire to appeal, (sic) the petitioner shall be forthwith release. Section 15, Rule 102)[4] On January 26, 1993, the Fifth Division of the Court of Appeals came out with a Decision[5] affirming the Decision below, ratiocinating as follows: xxx Petitioner has failed to establish a cause of action against the respondent members of the Philippine National Police of the Danao Police Station and the PARDO Sub-Station, Cebu City Police Station. There is no showing that respondents ever detained or are restraining Rutchel Apostol, in whose behalf the petition for habeas corpus is purportedly filed. It is the burden of the petitioner to substantiate by clear and convincing evidence that Rutchel is under the custody or is unlawfully detained and restrained of her liberty by the respondents. Petitioners evidence failed to prove this; and the petition should be dismissed (Ngaya-an vs. Balweg, 200 SCRA 149). In this case, respondents presented the mother of Rutchel Apostol, who affirmed in court that the respondents merely responded to her request for assistance in locating her daughter, who voluntarily returned home with her to Iloilo City on the day that she was located. Although the Commissioners report tends to show that she still wishes to join the Chaitanya Mission in Cebu City and that she is presently in the house of her parents, where she is not free to do what she wants and likes to do, the parents are not named as respondents in this case. The fact that the mother Angeles Apostol, testified in behalf of herein respondents does not make the parents a party to this special proceeding, nor justify the issuance of an order directed against parties not properly impleaded. The thrust of the petitioners complaint is that Rutchel Apostol was forcibly taken and abducted on November 18, 1991 and that respondents continue to detain her at the Pardo Police Sub-station and/or Danao Police Station. The essential allegations of the petition were not proven, and the petition was correctly dismissed.[6] Undaunted, the petitioner found his way to this Court via the present Petition for Certiorari, assigning as lone error, that:

THE RESPONDENT COURT ERRED IN DISMISSING THE PETITION ON THE GROUND OF TECHNICALITY THAT THE MOTHER OF RUTCHEL APOSTOL WHO IS ILLEGALLY DETAINING HER WAS NOT FORMALLY IMPLEADED AS A RESPONDENT IN THIS CASE.[7] The petition is not impressed with merit. To begin with, habeas corpus embraces so broad a dimension. In one case, this Court held that: xxx habeas corpus, aside from being thorough and complete, affords prompt relief from unlawful imprisonment of any kind, and under all circumstances. xxx (Cf. People ex rel Livingston vs. Wyatt, 186 N.Y. 383; 79 N.E. 330) (Pepito Lao Alfonso et. al., v. Mirtiniano Vivo, March 31, 1966, G. R. No. L-20801, 16 SCRA 510, 517) However, explicit is the following provision of the Revised Rules of Court: Section 2, Rule 3.- A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest. The trial Court did not acquire jurisdiction over the person of Rutchels mother (Mrs. Angeles Apostol) since she was not impleaded as defendant and neither did she intervene in the case as required by the Rules. No judgment could be pronounced against her; otherwise, she would be deprived of the rudiments of due process. Petitioner has no cause of action against her and therefore, the respondent Court correctly dismissed the Petition. If the suit is not brought in the name of or against the real party in interest, a motion to dismiss may be filed on the ground that the Complaint states no cause of action (Sec. 1(g), Rule 16). The respondents sufficiently explained that they conducted police surveillance and merely acted upon the directive of the PNP officials who, in turn, performed their duties as requested by Rutchels mother. A real party in interest is the party who could be benefited or injured by the judgment or the party entitled to the avails of the suit. Then too, in Bautista v. Barredo, et. al., G.R. No. 20653, April 30, 1965, 13 SCRA 744, 746, the Court held: In dismissing the case against defendant Jose M. Barredo the court a quo took the view that he could not be impleaded on the basis of the judgment rendered in Civil Case No. 1636 for the reason that he was not a party therein upon the theory that an acti on on the judgment cannot be maintained against one not a party or not bound by it. xxx In Filipinas Ind. Corp., et al. v. San Diego, G.R. No. 22347, May 27, 1968, it was held that the foregoing rule is mandatory. Again, in another case, the Court ruled thus:

xxx and as Ayala y Cia, Alfonso Zobel and the Dizons were the only ones impleaded as parties-defendants, the judgment was made effective exclusively against them. xxx (Republic v. Ayala y Cia, et. al, G. R. L-20950, May 31, 1965) Assuming arguendo that the mother of Rutchel was impleaded, still the petitioner failed to substantiate the petition for habeas corpus. The facts clearly indicate that Rutchel is on her right mind, not to mention her being one of the topnotchers in the Midwifery Licensure Examination given by the Professional Regulations Commission. She was not forcibly detained or abducted by her mother, the fact being that she voluntarily went with her mother after the latter persuaded her to return to their home in Iloilo City. There was no amount of force employed on her, which would amount to deprivation of liberty. In light of the attendant circumstances at bar, the Court deems it unnecessary to pass upon the other questions raised by petitioner. WHEREFORE, the Petition is DISMISSED for lack of merit, and the Decision of the Court of Appeals in CA G.R. SP No. 28155 affirming the Decision of Branch 11 of the Regional Trial Court of Cebu AFFIRMED. No pronouncement as to costs. SO ORDERED. RAYO vs. METROBANK, 539 SCRA 571 FACTS: Midas Diversified Export obtained loans from Metrobank. To secure the payment OF the loan, a mortgage was executed in favor of Metrobank over three parcels of land When Midas failed to pay, Metrobank extrajudicially foreclosed the real estate mortgage. At the bidding, Metrobank acquired the property. Metrobank posted a bond required for the issuance of a writ of possession. Rayo, a coassignee of the property filed an action for nullification of the sale. Metrobank opposed for the motion contending that he is not a real party in interest. ISSUE: Whether or not petitioner has a legal personality in the suit. HELD: Initially, it is recognized herein petitioner as the co-assignee of the subject real properties. However, while petitioner would be injured by the judgment in this suit, the petitioner has no present substantial interest to institute the annulment of judgment proceedings and nullify the order granting the writ of possession. Rayo would not be injured by the judgment. An ex-parte application for a writ of possession not a strictly judicial process contemplated in Article 443 of the New Civil Code. It is a judicial proceeding for the enforcement of onesright of possession. Whether or not petitioner has a legal personality in the suit. CARILLO vs. CA 503 SCRA 66 MAXIMINA A. BULAWAN, G.R. No. 182819

Petitioner, Present:

- versus -

CARPIO, J., Chairperson, LEONARDO-DE CASTRO,* PERALTA, ABAD, and MENDOZA, JJ.

EMERSON B. AQUENDE, Respondent. Promulgated: June 22, 2011 x--------------------------------------------------x

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 26 November 2007 Decision2 and 7 May 2008 Resolution3 of the Court of Appeals in CA-G.R. SP No. 91763. In its 26 November 2007 Decision, the Court of Appeals granted respondent Emerson B. Aquendes (Aquende) petition for annulment of judgment and declared the 26 November 1996 Decision 4 of the Regional Trial Court, Legazpi City, Branch 6 (trial court) void. In its 7 May 2008 Resolution, the Court of Appeals denied petitioner Maximina A. Bulawans5 (Bulawan) motion for reconsideration.

Subdivision Plan Psd-187165 for Lot 1634 Albay Cadastre as well as TCT No. 40292 in the name of plaintiff10 over Lot 1634-A of Plan Psd-187165 are hereby declared null and void and the Register of Deeds of Legazpi City is hereby ordered to cancel as well as any other certificate of title issued pursuant to said Plan Psd187165.

The Facts

Defendant Lourdes Yap is hereby ordered to pay plaintiff P10,000.00 as reasonable attorneys fees, P5,000.00 as litigation and incidental expenses and the costs.

On 1 March 1995, Bulawan filed a complaint for annulment of title, reconveyance and damages against Lourdes Yap (Yap) and the Register of Deeds before the trial court docketed as Civil Case No. 9040.6 Bulawan claimed that she is the owner of Lot No. 1634B of Psd-153847 covered by Transfer Certificate of Title (TCT) No. 13733 having bought the property from its owners, brothers Santos and Francisco Yaptengco (Yaptengco brothers), who claimed to have inherited the property from Yap Chin Cun.7 Bulawan alleged that Yap claimed ownership of the same property and caused the issuance of TCT No. 40292 in Yaps name.

SO ORDERED.11

Yap appealed. On 20 July 2001, the Court of Appeals dismissed Yaps appeal.

In her Answer,8 Yap clarified that she asserts ownership of Lot No. 1634-A of Psd-187165, which she claimed is the controlling subdivision survey for Lot No. 1634. Yap also mentioned that, in Civil Case No. 5064, the trial court already declared that Psd-153847 was simulated by the Yaptengco brothers and that their claim on Lot No. 1634-B was void.9 The trial court likewise adjudged Yap Chin Cun as the rightful owner of Lot No. 1634-B. Yap also stated that Lot No. 1634-B was sold by Yap Chin Cun to the Aquende family.

On 7 February 2002, the trial courts 26 November 2006 Decision became final and executory per entry of judgment dated 20 July 2001. On 19 July 2002, the trial court issued a writ of execution.12

On 26 November 1996, the trial court ruled in favor of Bulawan. The trial courts 26 November 1996 Decision reads:

In a letter dated 24 July 2002,13 the Register of Deeds informed Aquende of the trial courts writ of execution and required Aquende to produce TCT No. 40067 so that a memorandum of the lien may be annotated on the title. On 25 July 2002, Aquende wrote a letter to the Register of Deeds questioning the trial courts writ of execution against his property.14 Aquende alleged that he was unaware of any litigation involving his property having received no summons or notice thereof, nor was he aware of any adverse claim as no notice of lis pendens was inscribed on the title.

WHEREFORE, premises considered, decision is hereby rendered in favor of the plaintiff (Bulawan) and against the defendant (Yap) declaring the plaintiff as the lawful owner and possesor of the property in question, particularly designated as Lot 1634-B of Plan Psd-153847. The defendant Lourdes Yap is hereby ordered to respect the plaintiffs ownership and possession of said lot and to desist from disturbing the plaintiff in her ownership and possession of said lot.

On 2 August 2002, Aquende filed a Third Party Claim15 against the writ of execution because it affected his property and, not being a party in Civil Case No. 9040, he argued that he is not bound by the trial courts 26 November 1996 Decision. In a letter dated 5 August 2002,16 the Clerk of Court said that a Third Party Claim was not the proper remedy because the sheriff did not levy upon or seize Aquendes property. Moreover, the property

was not in the sheriffs possession and it was not about to be sold by virtue of the writ of execution.

(LRC) Psd-187165 are hereby ordered REINSTATED. Entry Nos. 3823 A, B and C annotated by the Register of Deeds of LegazpiCity on TCT No. 40067 are hereby ordered DELETED.

Aquende then filed a Notice of Appearance with Third Party Motion17 and prayed for the partial annulment of the trial courts 26 November 1996 Decision, specifically the portion which ordered the cancellation of Psd-187165 as well as any other certificate of title issued pursuant to Psd-187165. Aquende also filed a Supplemental Motion18where he reiterated that he was not a party in Civil Case No. 9040 and that since the action was in personam or quasi in rem, only the parties in the case are bound by the decision.

In its 19 February 2003 Order,19 the trial court denied Aquendes motions. According to the trial court, it had lost jurisdiction to modify its 26 November 1996 Decision when the Court of Appeals affirmed said decision.

The parties are hereby DIRECTED to respect and abide by the Decision dated October 31, 1990 in Civil Case No. 5064 quieting title over Lot No. 1634-B (LRC) Psd-187165, now registered in the name of Emerson Aquende under TCT No. 40067.

SO ORDERED.21 Thereafter, Aquende filed a petition for annulment of judgment before the Court of Appeals on the grounds of extrinsic fraud and lack of jurisdiction.20 Aquende alleged that he was deprived of his property without due process of law. Aquende argued that there was extrinsic fraud when Bulawan conveniently failed to implead him despite her knowledge of the existing title in his name and, thus, prevented him from participating in the proceedings and protecting his title. Aquende also alleged that Bulawan was in collusion with Judge Vladimir B. Brusola who, despite knowledge of the earlier decision in Civil Case No. 5064 on the ownership of Lot No. 1634-B and Aquendes interest over the property, ruled in favor of Bulawan. Aquende added that he is an indispensable party and the trial court did not acquire jurisdiction over his person because he was not impleaded as a party in the case. Aquende also pointed out that the trial court went beyond the jurisdiction conferred by the allegations on the complaint becauseBulawan did not pray for the cancellation of Psd-187165 and TCT No. 40067. Aquende likewise argued that a certificate of title should not be subject to collateral attack and it cannot be altered, modified or canceled except in direct proceedings in accordance with law.

On 8 January 2008, Bulawan filed a motion for reconsideration.22 In its 7 May 2008 Resolution, the Court of Appeals denied Bulawans motion.

Hence, this petition.

The Ruling of the Court of Appeals

The Court of Appeals ruled in favor of Aquende. The 26 November 2007 Decision of the Court of Appeals reads:

The Court of Appeals ruled that it may still entertain the petition despite the fact that another division of the Court of Appeals already affirmed the trial courts 26 November 1996 Decision. The other division of the Court of Appeals was not given the opportunity to rule on the issue of Aquende being an indispensable party because that issue was not raised during the proceedings before the trial court and on appeal.

WHEREFORE, the petition is GRANTED. The Decision dated November 26, 1996 in Civil Case No. 9040 is hereby declared NULL and VOID. Transfer Certificate of Title No. 40067 registered in the name of petitioner Emerson B. Aquende and

The Court of Appeals declared that Aquende was an indispensable party who was adversely affected by the trial courts 26 November 1996 Decision. The Court of Appeals

said that the trial court should have impleaded Aquende under Section 11, Rule 323 of the Rules of Court. Since jurisdiction was not properly acquired over Aquende, the Court of Appeals declared the trial courts 26 November 1996 Decision void. According to the Court of Appeals, Aquende had no other recourse but to seek the nullification of the trial courts 26 November 1996 Decision that unduly deprived him of his property. The Court of Appeals added that the trial courts 26 November 1996 Decision was void because the trial court failed to note that the Extrajudicial Settlement of Estate and Partition, from where the Yaptengco brothers derived their ownership over Lot No. 1634-B of Psd-153847 allegedly as heirs of Yap Chin Cun and now being claimed byBulawan, had already been declared void in Civil Case No. 5064.24 The Court of Appeals also said that a reading of Bulawans complaint showed that the trial court had no jurisdiction to order the nullification of Psd-187165 and TCT No. 40067 because this was not one of the reliefs that Bulawan prayed for.

The Former Third Division of the Court of Appeals sanctioned a departure from the accepted and usual course of judicial proceedings when it overturned a final and executory decision of another Division thereof.25

The Ruling of the Court

The petition has no merit. The Issues Petition for Annulment of Judgment Bulawan raises the following issues: is the Proper Remedy

I. The Former Third Division of the Court of Appeals decided contrary to existing laws and jurisprudence when it declared the Decision, dated 26 November 1996, in Civil Case No. 9040 null and void considering that a petition for annulment [of judgment] under Rule 47 of the Rules of Court is an equitable remedy which is available only under extraordinary circumstances.

Bulawan argues that the Court of Appeals erred in granting Aquendes petition for annulment of judgment in the absence of extrinsic fraud and the existence of jurisdiction on the part of the trial court. Bulawan adds that the Court of Appeals erred because it annulled a decision which had already been considered and affirmed by another division of the Court of Appeals. According to Bulawan, the trial courts 26 November 1996 Decision is already final and had been fully executed.

II. The Former Third Division of the Court of Appeals decided contrary to law when it considered Respondent Emerson B. Aquende as an indispensable party in Civil Case No. 9040.

III.

In a petition for annulment of judgment, the judgment may be annulled on the grounds of extrinsic fraud and lack of jurisdiction.26 Fraud is extrinsic where it prevents a party from having a trial or from presenting his entire case to the court, or where it operates upon matters pertaining not to the judgment itself but to the manner in which it is procured.27 The overriding consideration when extrinsic fraud is alleged is that the fraudulent scheme of the prevailing litigant prevented a party from having his day in court.28 On the other hand, lack of jurisdiction refers to either lack of jurisdiction over the person of the defending party or over the subject matter of the claim, and in either case the judgment or final order and resolution are void.29 Where the questioned judgment is annulled, either on the ground of extrinsic fraud or lack of jurisdiction, the same shall be set aside and considered void.30

even if Aquende will be affected by the trial courts 26 November 1996 Decision, this will not make him an indispensable party. In his petition for annulment of judgment, Aquende alleged that there was extrinsic fraud because he was prevented from protecting his title when Bulawan and the trial court failed to implead him as a party. Bulawan also maintained that the trial court did not acquire jurisdiction over his person and, therefore, its 26 November 1996 Decision is not binding on him. In its 26 November 2007 Decision, the Court of Appeals found merit in Aquendes petition and declared that the trial court did not acquire jurisdiction overAquende, who was adversely affected by its 26 November 1996 Decision. We find no error in the findings of the Court of Appeals.

Moreover, annulment of judgment is a remedy in law independent of the case where the judgment sought to be annulled was rendered.31 Consequently, an action for annulment of judgment may be availed of even if the judgment to be annulled had already been fully executed or implemented.32

Contrary to Bulawans argument, it appears that Aquendes Lot No. 1634-B of Psd-187165 and Bulawans Lot No. 1634-B of Psd-153847 actually refer to the same Lot No. 1634-B originally owned by Yap Chin Cun. Both Aquende and Bulawan trace their ownership of the property to Yap Chin Cun. Aquende maintains that he purchased the property from Yap Chin Cun, while Bulawan claims to have purchased the property from the Yaptengco brothers, who alleged that they inherited the property from Yap Chin Cun. However, as the Court of Appeals declared, the title of the Yaptengco brothers over Lot No. 1634-B of Psd-153847 had already been cancelled and they were forever enjoined not to disturb the right of ownership and possession of Yap Chin Cun.

Therefore, the Court of Appeals did not err when it took cognizance of Aquendes petition for annulment of judgment and overturned the trial courts 26 November 1996 Decision even if another division of the Court of Appeals had already affirmed it and it had already been executed.

Section 7, Rule 3 of the Rules of Court defines indispensable parties as parties in interest without whom no final determination can be had of an action. An indispensable party is one whose interest will be affected by the courts action in the litigation. 33 As such, they must be joined either as plaintiffs or as defendants. In Arcelona v. Court of Appeals,34 we said:

The Court also notes that when the Court of Appeals affirmed the trial courts 26 November 1996 Decision, it had not been given the occasion to rule on the issue ofAquende being an indispensable party and, if in the affirmative, whether the trial court properly acquired jurisdiction over his person. This question had not been raised before the trial court and earlier proceedings before the Court of Appeals.

The general rule with reference to the making of parties in a civil action requires, of course, the joinder of all necessary parties where possible, and the joinder of all indispensable parties under any and all conditions, their presence being a sine qua non for the exercise of judicial power. It is precisely when an indispensable party is not before the court (that) the action should be dismissed. The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present.35

Aquende is a Proper Party to Sue for the Annulment of the Judgment During the proceedings before the trial court, the answers of Yap 36 and the Register of Deeds37 should have prompted the trial court to inquire further whether there were other indispensable parties who were not impleaded. The trial court should have taken the initiative to implead Aquende as defendant or to order Bulawan to do so as mandated under Section 11, Rule 3 of the Rules of Court.38 The burden to implead or to order the impleading of indispensable parties is placed on Bulawan and on the trial court, respectively.39

Bulawan argues that Aquende was not an indispensable party in Civil Case No. 9040 because the lot Aquende claims ownership of is different from the subject matter of the case. Bulawan clarifies that she claims ownership of Lot No. 1634-B of Psd-153847, while Aquende claims ownership of Lot No. 1634-B of Psd-187165. Bulawan argues that

However, even if Aquende were not an indispensable party, he could still file a petition for annulment of judgment. We have consistently held that a person need not be a party to the judgment sought to be annulled.40 What is essential is that he can prove his allegation that the judgment was obtained by the use of fraud and collusion and that he would be adversely affected thereby.41

Likewise, Aquende was never made a party in Civil Case No. 9040. Yet, the trial court ordered the cancellation of Psd-187165 and any other certificate of title issued pursuant to Psd-187165, including Aquendes TCT No. 40067. Aquende was adversely affected by such judgment as his title was cancelled without giving him the opportunity to present his evidence to prove his ownership of the property.

WHEREFORE, we DENY the petition. We AFFIRM the 26 November 2007 Decision and 7 May 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 91763. SO ORDERED. We agree with the Court of Appeals that Bulawan obtained a favorable judgment from the trial court by the use of fraud. Bulawan prevented Aquende from presenting his case before the trial court and from protecting his title over his property. We also agree with the Court of Appeals that the 26 November 1996 Decision adversely affectedAquende as he was deprived of his property without due process.

VLASON ENTERPRISES vs. CA 310 SCRA 26

Moreover, a person who was not impleaded in the complaint cannot be bound by the decision rendered therein, for no man shall be affected by a proceeding in which he is a stranger.42 In National Housing Authority v. Evangelista,43 we said:

In this case, it is undisputed that respondent was never made a party to Civil Case No. Q-91-10071. It is basic that no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by judgment rendered by the court. Yet, the assailed paragraph 3 of the trial courts decision decreed that (A)ny transfers, assignment, sale or mortgage of whatever nature of the parcel of land subject of this case made by defendant Luisito Sarte or his/her agents or assigns before or during the pendency of the instant case are hereby declared null and void, together with any transfer certificates of title issued in connection with the aforesaid transactions by the Register of Deeds of Quezon City who is likewise ordered to cancel or cause the cancellation of such TCTs. Respondent is adversely affected by such judgment, as he was the subsequent purchaser of the subject property from Sarte, and title was already transferred to him. It will be the height of inequity to allow respondents title to be nullified without being given the opportunity to present any evidence in support of his ostensible ownership of the property. Much more, it is tantamount to a violation of the constitutional guarantee that no person shall be deprived of property without due process of law. Clearly, the trial courts judgment is void insofar as paragraph 3 of its dispositive portion is concerned.44 (Emphasis supplied)