SPOUSES MARCIAL VARGAS and ELIZABETH VARGAS, Petitioners, - versus -

G.R. No. 137869

SPOUSES RODOLFO and ROSARIO ANGELES DE GUZMAN, Petitioners, Chairperson, versus -

G.R. No. 137940 Present: PUNO, C.J., CARPIO, CORONA, AZCUNA, and LEONARDO-DE

SPOUSES VISITACION and JOSE CAMINAS, SPOUSES JESUS and LORELEI GARCIA, and SPOUSES RODOLFO and ROSARIO ANGELES DE GUZMAN, Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

SPOUSES VISITACION and JOSE CAMINAS, CASTRO, JJ. and SPOUSES MARCIAL and ELIZABETH VARGAS, Promulgated: Respondents. June 12, 2008 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - x

DECISION CARPIO, J.: The Case

This is a petition for review[1] under Rule 45 of the 1997 Rules of Civil Procedure assailing the Decision dated 2 September 1998 of the Court of Appeals in CA-G.R. CV No. 45050.[2] The Court of Appeals set aside the Order dated 10 February 1994 of the Regional Trial Court of Quezon City, Branch 101 in Civil Case Nos. Q-90-7224 and 90-7439. The Facts

On 6 August 1988, spouses Jose and Visitacion Caminas (spouses Caminas) bought a 54-square meter lot with a two-storey townhouse, designated as townhouse No. 8, from Trans-American Sales and Exposition represented by its developer Jesus Garcia (Garcia). Townhouse No. 8 is located at No. 65 General Lim Street, Heroes Hill, QuezonCity and is on a portion of the land covered by TCT
[4]

No.

195187.

Spouses Caminas paid

Garcia P850,000 as

evidenced

by

contract

of

sale[3] and

provisional

receipt.

According to spouses Caminas, they took possession of townhouse No. 8 upon completion of its construction.

In December of 1988, Garcia bought from Marcial and Elizabeth Vargas (spouses Vargas) various construction materials. As payment to spouses Vargas, Garcia executed an absolute Deed of Sale over townhouse No. 12.[5] However, on 1 March 1990, spouses Vargas and Garcia executed a Deed of Exchange with Addendum[6] whereby spouses Vargas transferred to Garcia townhouse No. 12, and in exchange Garcia transferred to spouses Vargas townhouse No. 8.

The contracts executed by Garcia with spouses Caminas and spouses Vargas were not registered with the Register of Deeds. This was because TCT No. 195187 was still being reconstituted and it was only on 17 August 1989 that TCT No. 7285 was issued in its stead. On 10 May 1990, Garcia and his wife Lorelei (spouses Garcia) executed a Deed of Real Estate Mortgage [7] over townhouse No. 8 in favor of spouses Rodolfo and Rosario Angeles De Guzman (spouses De Guzman) as security for a loan. The mortgage was annotated at the back of TCT No. 7285. As spouses Garcia failed to pay their indebtedness, spouses De Guzman foreclosed the

mortgage on 12 October 1990. At the public auction, spouses De Guzman were the highest bidder.

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On 13 November 1990, spouses Caminas filed a complaint[8] against spouses Garcia, spouses De Guzman, and spouses Vargas before the Regional Trial Court of QuezonCity, docketed as Civil Case No. Q-90-7224 for the declaration of nullity of deed of mortgage and deed of sale, for the declaration of absolute ownership, for the delivery of title or in the alternative for refund of purchase price and damages.

On 6 December 1990, spouses Vargas filed a case against spouses Garcia and spouses De Guzman, also before the Regional Trial Court of Quezon City, for specific performance, declaration of nullity of the mortgage contract, damages or in the alternative for sum of money and damages, docketed as Civil Case No. Q-90-7439.[9]

The two cases were consolidated before the Regional Trial Court, Branch 101, as they involved interrelated issues.[10]

In their Rejoinder dated 27 February 1993, spouses Vargas raised the lack of jurisdiction of the trial court on the ground that the subject matter falls within the exclusive jurisdiction of the Housing and Land Use Regulatory Board (HLURB). [11] Spouses Vargas

further stated that the HLURB had already rendered a decision in HLURB Case No. REM-021291-4730 dated 28 June 1991 awarding the property in their favor.[12]

The Ruling of the Trial Court

On 20 April 1993, the trial court rendered a decision upholding the rights of the spouses Caminas as the first buyer of the property: WHEREFORE, premises above considered, judgment is hereby rendered in favor of plaintiffs Visitacion Caminas and Jose V. Caminas against defendants Sps. Jesus Garcia and Lorelei A. Garcia, Sps. Rosario Angeles K. de Guzman and Rodolfo de Guzman and Sps. Elizabeth and Marcial Vargas, declaring said plaintiffs as the absolute owners of the subject property and ordering the Register of Deeds of Quezon City to divest defendants spouses Rosario Angeles K. de Guzman and Rodolfo P. de Guzman and spouses Elizabeth Vargas and Marcial Vargas of the title to the subject property and to cancel Transfer Certificate of Title No. 72646 issued in the name of spouses Rosario Angeles K. de Guzman and Rodolfo de Guzman and to invest title thereto in favor of plaintiffs Visitacion Caminas and Jose V. Caminas by issuing another transfer certificate of title in their names. Ordering defendants Jesus Garcia and Lorelei A. Garcia to pay defendants Elizabeth Vargas and Marcial Vargas the amount of P700,000.00 and defendants Rosario Angeles K. de Guzman the amount of P562,500.00 with legal rate of interest thereof. SO ORDERED.[13] Spouses De Guzman filed a Motion for Reconsideration. The trial court granted the motion for reconsideration and issued an order
[14]

dated 10 February 1994, this time awarding ownership of the property to spouses De Guzman: IN VIEW OF THE FOREGOING, the decision of this Court dated April 20, 1993 is hereby reconsidered and set aside and in lieu thereof, judgment is hereby rendered in favor of defendants spouses Rosario Angeles K. de Guzman and Rodolfo de Guzman against plaintiffs spouses Visitacion Caminas and Jose V. Caminas and plaintiffs spouses Elizabeth and Marcial Vargas, declaring said defendants as the absolute owners of the subject property embraced in TCT No. 72646. Ordering defendants Jesus Garcia and Lorelei A. Garcia to pay plantiffs spouses Visitacion Caminas and Jose V. Caminas the amount of P850,000.00 and plaintiffs Elizabeth Vargas and MarcialVargas the amount of P700,000.00 with legal interest thereof. SO ORDERED.

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Spouses Caminas and spouses Vargas filed an appeal before the Court of Appeals. The Ruling of the Court of Appeals In its decision dated 2 September 1998, the Court of Appeals set aside the order of the trial court dated 10 February 1994. The appellate court reinstated the trial courts original decision dated 20 April 1993 upholding the

ownership of spouses Caminas: Premises Considered, the Order of the Regional Trial Court dated February 10, 1994 is REVERSED AND SET ASIDE, and the original decision dated April 20, 1993 is REINSTATED. SO ORDERED.[15] The appellate court stated that as between spouses Caminas and spouses Vargas, spouses Caminas have a better right to the property. The appellate court ruled that as neither of the sales were registered, spouses Caminas have a better right being the first possessor in good faith. The appellate court likewise ruled that spouses Caminas have a better right than spouses De Guzman over the property. According to the appellate court, the registration of the mortgage cannot defeat the right of

spouses Caminas since the mortgage was executed by one who was no longer owner of the property. The appellate court further noted that spouses De Guzman failed to prove that they were mortgagees in good faith.

On the issue of jurisdiction, the appellate court ruled that spouses Vargas are estopped from raising the issue of jurisdiction since they filed the complaint and they took active part during the trial of the case. Hence, this appeal. The Issues The issues raised by the parties may be summarized as follows: I. Whether the Court of Appeals committed reversible error in not setting aside the decision and order of the Regional Trial Court since the case is within the exclusive jurisdiction of the HLURB; II. Whether the Court of Appeals committed reversible error in finding that spouses Caminas have a superior right, over spouses Vargas, to the property being the first possessors in good faith; and III. Whether the Court of Appeals committed reversible error in finding that spouses Caminas have a superior right over spouses De Guzman despite the registration of the mortgage since the property was mortgaged by one who was no longer the owner of the property.

The Ruling of the Court

We find the appeal meritorious.

Presidential Decree No. 1344 dated 2 April 1978 expanded the jurisdiction of the National Housing Authority (NHA), the precursor of the HLURB, to include adjudication of the following cases: Sec. 1. In the exercise of its function to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate business practices;

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Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, broker or salesman. (Emphasis ours) Executive Order No. 648 created the Human Settlements Regulatory Commission (HSRC) to assume the regulatory and adjudicatory functions of the NHA, among other purposes. Executive Order No. 90 later renamed the HSRC the HLURB. The HLURB has jurisdiction over cases arising from (1) unsound real estate business practices; (2) claims for refund or other claims filed by subdivision lot or condominium unit buyers against the project owner, developer, dealer, broker or salesman; and (3) demands for specific performance of contractual and statutory obligations filed by buyers of subdivision lots or condominium units against the owner, developer, broker, or salesman.[16] The controversies in this case revolve around the following transactions 1. 2. 3. The sale of townhouse No. 8 by spouses Garcia to spouses Caminas; The sale of townhouse No. 8 by spouses Garcia to spouses Vargas; and The mortgage of townhouse No. 8 by spouses Garcia to spouses De Guzman. under the name Trans-American Sales and Exposition

B.

There is no dispute that spouses Garcia are in the real estate business

and that townhouse No. 8 is part of its Trans-American Sales and Exposition II project. Clearly, the validity of the questioned transactions entered into by spouses Garcia, as the owner and developer of Trans-American Sales and Exposition, falls within the jurisdiction of the HLURB. However, spouses De Guzman argue that (1) the HLURB has no jurisdiction over cases involving the declaration of nullity of a mortgage contract filed against the mortgagee alone; and (2) Section 18 of Presidential Decree No. 957 (PD 957) merely requires the project owner or developer to seek prior authority from NHA before mortgaging the subdivision lot or condominium unit but the law does not grant the HLURB the authority to invalidate the mortgage contract if the requisite authority from the NHA is not obtained. On the other hand, spouses Caminas contend that spouses Vargas are (1) estopped from raising the issue of jurisdiction of the trial court since spouses Vargas filed the case and actively participated in the proceedings before the trial court, and (2) guilty of forum shopping. The Court finds no merit in the arguments raised by spouses De Guzman and spouses Caminas. The complaints filed before the trial court by spouses Caminas and spouses Vargas clearly show that the cases are against spouses Garcia, the developer of townhouse No. 8. Hence, the case filed before the trial court was not against the mortgagee alone. The mere fact that spouses Garcia were declared in default does not change the parties to the case or the nature of the action. On spouses De Guzmans claim that Section 18 of PD 957 does not grant the HLURB the authority to invalidate the mortgage contract if the requisite authority from the NHA is not obtained, this Court has previously ruled that the HLURB has jurisdiction over cases involving the annulment of a real estate mortgage constituted by the project owner without the consent of the buyer and without the prior written approval of the NHA.

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In Union Bank of the Philippines v. HLURB,[17] the Court held that a realty companys act of mortgaging a condominium project without the knowledge and consent of the buyer of one of the condominium units, and without obtaining the prior approval of the NHA, constitutes unsound real estate business practice. Accordingly, the action for the annulment of such mortgage foreclosure sale falls within the exclusive jurisdiction of the HLURB, thus: Clearly, FRDCs act of mortgaging the condominium project to Bancom and FEBTC, without the knowledge and consent of David as buyer of a unit therein, and without the approval of the NHA (now HLURB) as required by P.D. No. 957, was not only an unsound real estate business practice but also highly prejudicial to the buyer. David, who has a cause of action for annulment of the mortgage, the mortgage foreclosure sale, and the condominium certificate of title that was issued to the UBP and FEBTC as [the] highest bidders at the sale. The case falls within the exclusive jurisdiction of the NHA (now HLURB) as provided in P.D. No. 957 of 1976 and P.D. No. 1344 of 1978. The Court reiterated this ruling in Home Bankers Savings and Trust Co. v. Court of Appeals [18] which involves a mortgage entered into by the same Trans-American Sales and Exposition that is a party in this case, thus: The CA did not err in affirming the decision of the Office of the President that HLURB has jurisdiction to declare invalid the mortgage contract executed between Garcia/TransAmerican and petitioner over the subject lots insofar as private respondents are concerned. It correctly relied on Union Bank of the Philippines vs. HLURB, et al. where we squarely ruled on the question ofHLURBs jurisdiction to hear and decide a condominium buyers complaint for: (a) annulment of a real estate mortgage constituted by the project owner without the consent of the buyer and without the prior written approval of the NHA; (b) annulment of the foreclosure sale; and (c) annulment of the condominium certificate of title that was issued to the highest bidder at the foreclosure sale, xxx On the contention that spouses Vargas are estopped from raising the issue of jurisdiction, the well-settled rule is that the jurisdiction of a court may be questioned at any stage of the proceedings. An examination of the records of the trial court will reveal that in its Rejoinder dated 27 February 1993, spouses Vargas raised the issue of lack of jurisdiction of the trial court since the case properly falls within the jurisdiction of the HLURB. However, the trial court failed to address the issue of jurisdiction in its decision as well as in its order granting the motion for reconsideration of spouses De Guzman. Clearly, the trial court erred in not dismissing the case before it. Under the Rules of Court, it is the duty of the court to dismiss an action whenever it appears that the court has no jurisdiction over the subject matter.[19] In De Rossi v. NLRC,[20] citing La Naval Drug Corporation v. Court of Appeals,[21] the Court stated: Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it appears that the court has no jurisdiction over the subject matter, the action shall be dismissed. This defense may be interposed at any time, during appeal or even after final judgment. Such is understandable, as this kind of jurisdiction is conferred by law and not within the courts, let alone the parties, to themselves determine or conveniently set aside. In Mangaliag v. Catubig-Pastoral,[22] the Court ruled that a party who files a suit before a court that lacks jurisdiction is not necessarily estopped from raising the issue of jurisdiction, thus: It is neither fair nor legal to bind a party by the result of a suit or proceeding which was taken cognizance of in a court which lacks jurisdiction over the same irrespective of the attendant circumstances. The equitable defense of estoppel requires knowledge or consciousness of the facts upon which it is based. The same thing is true with estoppel by conduct which may be asserted only when it is shown, among others, that the representation must have been made with knowledge of the facts and that the party to whom it was made is ignorant of the truth of the matter (De Castro vs. Gineta, 27 SCRA 623). The filing of an action or suit in a court that does not possess jurisdiction to entertain the same may not be presumed to be deliberate and intended to secure a ruling which could later be annulled if not favorable to the party who filed such suit or proceeding. Instituting such an action is not a one-sided affair. It can just as well be prejudicial to the one who file the action or suit in the event that he obtains a favorable judgment therein which could also be attacked for having been rendered without jurisdiction. The determination of the correct jurisdiction of a court is not a simple matter. It can raise highly debatable issues of such importance that the highest tribunal of the land is given the exclusive appellate jurisdiction to entertain the same. The point simply is that when a party commits error in filing his suit or proceeding in a court that lacks jurisdiction to take cognizance of the same, such act may not at once be deemed mortgage and

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sufficient basis of estoppel. It could have been the result of an honest mistake or of divergent interpretations of doubtful legal provisions. If any fault is to be imputed to a party taking such course of action, part of the blame should be placed on the court which shall entertain the suit, thereby lulling the parties into believing that they pursued their remedies in the correct forum. Under the rules, it is the duty of the court to dismiss an action whenever it appears that court has no jurisdiction over the subject matter. (Section 2, Rule 9, Rules of Court) Should the Court render a judgment without jurisdiction, such judgment may be impeached or annulled for lack of jurisdiction (Sec. 30, Rule 132, Ibid.), within ten (10) years from the finality of the same (Art. 1144, par. 3, Civil Code). (Emphasis supplied) In Metromedia Times Corporation v. Pastorin,[23] the Court expounded on the issue of estoppel on the question of jurisdiction: The rulings in Lozon v. NLRC addresses the issue at hand. This Court came up with a clear rule as to when jurisdiction by estoppel applies and when it does not: Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it appears that the court has no jurisdiction over the subject matter, the action shall be dismissed (Section 2, Rule 9, Rules of Court). This defense may be interposed at any time, during appeal (Roxas vs. Rafferty, 37 Phil. 957) or even after final judgment (Cruzcosa vs. Judge Concepcion, et al., 101 Phil. 146). Such is understandable, as this kind of jurisdiction is conferred by law and not within the courts, let alone the parties, to themselves determine or conveniently set aside. In People vs. Casiano(111 Phil. 73, 93-94), this Court, on the issue of estoppel, held: The operation of the principle of estoppel on the question of jurisdiction seemingly depends upon whether the lower court actually had jurisdiction or not. If it had no jurisdiction, but the case was tried and decided upon the theory that it had jurisdiction, the parties are not barred, on appeal, from assailing such jurisdiction, for the same must exist as a matter of law, and may not be conferred by consent of the parties or by estoppel (5 C.J.S., 861863). However, if the lower court had jurisdiction, and the case was heard and decided upon a given theory, such, for instance, as that the court had no jurisdiction, the party who induced it to adopt such theory will not be permitted, on appeal, to assume an inconsistent position that the lower court had jurisdiction. Here, the principle of estoppel applies. The rule that jurisdiction is conferred by law, and does not depend upon the will of the parties, has no bearing thereon. Verily, Lozon, Union Motors, Dy and De Rossi aptly resolve the jurisdictional issue obtaining in this case. Applying the guidelines in Lozon, the labor arbiter assumed jurisdiction when he should not. In fact, the NLRC correctly reversed the labor arbiters decision x x x. (Emphasis supplied) In this case, the trial court clearly had no jurisdiction over the subject matter. Hence, spouses Vargas are not barred from assailing the jurisdiction of the trial court and the principle of estoppel does not apply. The appellate court, however, ruled that spouses Vargas are estopped from raising the issue of jurisdiction based on the doctrine in Tijam v. Sibonghanoy.[24] The Court finds that Tijam is not applicable in the present case. The general rule is that lack of jurisdiction of a court may be raised at any stage of the proceedings. InCalimlim v. Ramirez,[25] the Court stated that Tijam is an exception to the general rule because of the presence of laches: A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the jurisdiction of a court over the subject matter of the action is a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent pronouncements which stemmed principally from the ruling in the cited case of [Tijam]. It is to be regretted, however, that the holding in said case had been applied to situations which were obviously not contemplated therein. The exceptional circumstance involved in [Tijam] which justified the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in [Tijam]not as the exception, but rather the general rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel. In Tijam, the lack of jurisdiction was raised for the first time in a motion to dismiss filed almost fifteen (15) years after the questioned ruling had been rendered. Hence, the Court ruled that the issue of jurisdiction may no longer be raised for being barred by laches.

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The circumstances of the present case are different from Tijam.

Spouses Vargas raised the issue of jurisdiction before the

trial court rendered its decision. They continued to raise the issue in their appeal before the Court of Appeals and this Court. Hence, it cannot be said that laches has set in. The exception in Tijam finds no application in this case and the general rule must apply,

that the question of jurisdiction of a court may be raised at any stage of the proceedings. Spouses Vargas are therefore not estopped from questioning the jurisdiction of the trial court. In any case, spouses Caminas cannot invoke the principle of estoppel to prevent the Court from taking up the issue of jurisdiction.[26] In Dy v. NLRC,[27] the Court held: The failure of the appellees to invoke anew the aforementioned solid ground of want of jurisdiction of the lower court in this appeal should not prevent this Tribunal to take up that issue as the lack of jurisdiction of the lower court is apparent upon the face of the record and it is fundamental that a court of justice could only validly act upon a cause of action or subject matter of a case over which it has jurisdiction and said jurisdiction is one conferred only by law; and cannot be acquired through, or waived by, any act or omission of the parties; hence may be considered by this court motu proprio. (citations omitted) The Court shall no longer dwell on the issue of forum shopping. Even if spouses Vargas were guilty of forum shopping, the fact remains that the trial court had no jurisdiction over the case. Spouses Caminas only raised the issue of forum shopping in their opposition to the Motion for Reconsideration (filed by the spouses Vargas) dated 22 October 1998 before the Court of Appeals.[28] In Young v. Keng Seng,[29] the Court ruled that the violation of the rule on forum shopping should be raised at the earliest opportunity in a motion to dismiss or a similar pleading. The fact that spouses Vargas filed a case before the HLURB was made known to the spouses Caminas before the trial court rendered its decision. Yet, spouses Caminas failed to question the alleged forum shopping before the trial court or in their appeal brief before the Court of Appeals. Having concluded that it is the HLURB and not the trial court which has jurisdiction over the present controversy, the Court deems it unnecessary to discuss the other issues raised by the parties. WHEREFORE, we SET ASIDE the Decision of the Court of Appeals dated 2 September 1998 in CA-G.R. CV No. 45050. We DISMISS Civil Case Nos. Q-90-7224 and 90-7439 without prejudice to the parties seeking relief, if so minded, in the proper forum. SO ORDERED.

G.R. No. L-34362 November 19, 1982 MODESTA CALIMLIM AND LAMBERTO MAGALI IN HIS CAPACITY AS ADMINISTRATOR OF THE ESTATE OF DOMINGO MAGALI, petitioners, vs. HON. PEDRO A. RAMIREZ IN HIS CAPACITY AS PRESIDING JUDGE OF THE COURT OF FIRST INSTANCE OF PANGASINAN, BRANCH I, and FRANCISCO RAMOS, respondents. Eugenio Ramos for petitioners. Rogelio P. Closa for respondents. VASQUEZ, J.: The dismissal of Civil Case No. SCC-180 filed by the herein petitioners in the respondent Court against the private respondent is sought to be annulled and set aside by this Petition For Review On Certiorari.

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The antecedent material facts are not disputed. Sometime in 1961, a judgment for a sum of money was rendered in favor of Independent Mercantile Corporation against a certain Manuel Magali by the Municipal Court of Manila in Civil Case No. 85136. After said judgment became final, a writ of execution was issued on July 31, 1961. The Notice of Levy made on September 21, 1961 on a parcel of land covered by Transfer Certificate of Title No. 9138 registered in the name of "Domingo Magali, married to Modesta Calimlim", specified that the said levy was only against "all rights, title, action, interest and participation of the defendant Manuel Magali over the parcel of land described in this title. " The Certificate of Sale executed by the Provincial Sheriff of Pangasinan on October 17, 1961 in favor of Independent Mercantile Corporation also stated that the sale referred only to the rights and interest of Manuel Magali over the land described in TCT No. 9138. Manuel Magali is one of the several children of Domingo Magali who had died in 1940 and herein petitioner Modesta Calimlim. However, when the Sheriff issued the final Deed of Sale on January 25, 1963, it was erroneously stated therein that the sale was with respect to "the parcel of land described in this title" (referring to TCT No. 9138) and not only over the rights and interest of Manuel Magali in the same. The execution of the said final Deed of Sale was annotated at the back of said title. On February 23, 1967, Independent Mercantile Corporation filed a petition in the respondent Court to compel Manuel Magali to surrender the owner's duplicate of TCT No. 9138 in order that the same may be cancelled and a new one issued in the name of the said corporation. Not being the registered owner and the title not being in his possession, Manuel Magali failed to comply with the order of the Court directing him to surrender the said title. On June 20, 1967, Independent Mercantile Corporation filed an exparte petition to declare TCT No. 9138 as cancelled and to issue a new title in its name. The said petition was granted by the respondent Court and in its Order dated July 13, 1967, it directed the issuance of a new certificate of title in the name of the Independent Mercantile Corporation and the cancellation of TCT No. 9138. By virtue of said Order, the Register of Deeds of Pangasinan issued a new title in the name of the corporation, Identified as TCT No. 68568. On November 21, 1967, petitioner Modesta Calimlim, surviving spouse of Domingo Magali, upon learning that her husband's title over the parcel of land had been cancelled, filed a petition with the respondent Court, sitting as a cadastral court, praying for the cancellation of TCT No. 68568. An opposition to the said petition was filed by Independent Mercantile Corporation. After the parties submitted their respective Memoranda, the respondent Court issued an Order dated June 3, 1968 dismissing the petition. (Rollo, pp. 31-38.) The herein petitioners did not appeal the dismissal of the petition they filed in LRC Record No. 39492 for the cancellation of TCT No. 68568. Instead, on January 11, 1971, they filed the complaint in Civil Case No. SCC-180 praying for the cancellation of the conveyances and sales that had been made with respect to the property, covered by TCT No. 9138 previously registered in the name of Domingo Magali, married to Modesta Calimlim. Named as defendant in said civil case was herein private respondent Francisco Ramos who claimed to have bought the property from Independent Mercantile Corporation on July 25, 1967. Private respondent Francisco Ramos, however, failed to obtain a title over the property in his name in view of the existence of an adverse claim annotated on the title thereof at the instance of the herein petitioners. Private respondent Francisco Ramos filed a Motion To Dismiss Civil Case No. SCC-180 on the ground that the same is barred by prior judgement or by statute of limitations (Rollo. pp. 42-45). Resolving the said Motion, the respondent Court, in its Order dated April 21, 1971, dismissed Civil Case No. SCC- 180 on the ground of estoppel by prior judgment. (Ibid., pp, 10-13.) A Motion For Reconsideration filed by the petitioners was denied by the respondent Judge in his Order of September 2, 1971. (Ibid., pp. 13-15.) A

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second Motion For Reconsideration was similarly denied in the Order dated September 29, 197 1. (Rollo, pp. 16-17.) Hence, this Petition. We find merit in this appeal. It is error to consider the dismissal of the petition filed by the herein petitioner in LRC Record No. 39492 for the cancellation of TCT No. 68568 as a bar by prior judgment against the filing of Civil Case No. SCC-180. In order to avail of the defense of res judicata, it must be shown, among others, that the judgment in the prior action must have been rendered by a court with the proper jurisdiction to take cognizance of the proceeding in which the prior judgment or order was rendered. If there is lack of jurisdiction over the subject-matter of the suit or of the parties, the judgment or order cannot operate as an adjudication of the controversy. (2 Moran Comments on the Rules of Court, 1970 Edition, p. 364.) This essential element of the defense of bar by prior judgment or res judicata does not exist in the case presently considered. The petition filed by the herein petitioners in LRC Record No. 39492 was an apparent invocation of the authority of the respondent Court sitting as a land registration court, Although the said petition did not so state, that reliance was apparently placed on Section 112 of the Land Registration Act. It has been settled by consistent rulings of this Court that a court of first instance, acting as a land registration court, is a court of limited and special jurisdiction. As such, its proceedings are not adequate for the litigation of issues pertaining to an ordinary civil action, such as, questions involving ownership or title to real property. (Bareng vs. Shintoist Shrine and Japanese Charity Bureau, 83 SCRA 418; Manalo vs. Mariano, 69 SCRA 80; In re: Nicanor T Santos, 102 SCRA 747; Santos vs. Aquino, 101 SCRA 377.) In Hu chon Sunpongco vs. Heirs of Nicolas Ronquillo, L- 27040, December 19, 1970, 36 SCRA 395, we have held that: Section 112 of Act 496 confers authority upon the land registration court to order the cancellation, alteration or amendment of a certificate of title but withdraws from the Court the power to pass upon any question concerning ownership of the registered property, or any incident where the issues involved have become controversial. It may hardly be questioned that the issues raised by the petitioners in their petition to cancel TCT No. 68568 refer to the ownership or title over the property covered thereby. The said petition presented before the respondent Court in the exercise of its limited jurisdiction as a cadastral court, the question of who should be considered the true and lawful owner of the parcel of land embraced in said title. The petitioners alleged therein that they are the true owners of the property, and that TCT No. 68568 which they sought to cancel was issued as a result of the errors which were not of their own making. In short, the petition raised a highly controversial matter which is beyond the judicial competence of a cadastral court to pass upon or to adjudicate. It may neither be claimed that the parties have mutually agreed to submit the aforesaid issues for the determination by the court, it being a fact that herein private respondent was not a party in the petition in LRC Record No. 39492. Incidentally, although the said petition was filed by the herein petitioners on November 21, 1967, the Opposition filed by Independent Mercantile Corporation to the said petition made no mention of the alleged sale of the property in question in favor of private respondent Francisco Ramos on July 5, 1967. This circumstance places in grave doubt the sincerity of said sale and the claim that the private respondent was an innocent purchaser for value of the property in question. In the order of the respondent Judge dated September 29, 1971 denying the second motion for reconsideration, he cited the case of Tijam vs. Sibonghanoy, 23 SCRA 29, to uphold the view that the petitioners are deemed estopped from questioning the jurisdiction of the respondent Court in having taken cognizance of the petition for cancellation of TCT No. 68568, they being the ones who invoked the jurisdiction of the said Court to grant the affirmative relief prayed for therein. We are of the opinion that the ruling

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laid down in Sibonghanoy may not be applied herein. Neither its factual backdrop nor the philosophy of the doctrine therein expounded fits the case at bar. A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the jurisdiction of a court over the subject-matter of the action is a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent pronouncements which stemmed principally from the ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations which were obviously not contemplated therein. The exceptional circumstance involved inSibonghanoy which justified the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel. In Sibonghanoy, the defense of lack of jurisdiction of the court that rendered the questioned ruling was held to be barred by estoppel by laches. It was ruled that the lack of jurisdiction having been raised for the first time in a motion to dismiss filed almost fifteen (15) years after the questioned ruling had been rendered, such a plea may no longer be raised for being barred by laches. As defined in said case, laches is "failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert has abandoned it or declined to assert it." The petitioners in the instant case may not be faulted with laches. When they learned that the title to the property owned by them had erroneously and illegally been cancelled and registered in the name of another entity or person who had no right to the same, they filed a petition to cancel the latter's title. It is unfortunate that in pursuing said remedy, their counsel had to invoke the authority of the respondent Court as a cadastral court, instead of its capacity as a court of general jurisdiction. Their petition to cancel the title in the name of Independent Mercantile Corporation was dismissed upon a finding by the respondent Court that the same was "without merit." No explanation was given for such dismissal nor why the petition lacked merit. There was no hearing, and the petition was resolved solely on the basis of memoranda filed by the parties which do not appear of record. It is even a possibility that such dismissal was in view of the realization of the respondent Court that, sitting as a cadastral court, it lacked the authority to entertain the petition involving as it does a highly controversial issue. Upon such petition being dismissed, the petitioners instituted Civil Case No. SCC-180 on January 1, 1971, or only two and one-half years after the dismissal of their petition in LRC Record No. 39492. Hence, we see no unreasonable delay in the assertion by the petitioners of their right to claim the property which rightfully belongs to them. They can hardly be presumed to have abandoned or waived such right by inaction within an unreasonable length of time or inexcusable negligence. In short, their filing of Civil Case No. SCC-180 which in itself is an implied non-acceptance of the validity of the proceedings had in LRC Record No. 39492 may not be deemed barred by estoppel by laches. It is neither fair nor legal to bind a party by the result of a suit or proceeding which was taken cognizance of in a court which lacks jurisdiction over the same irrespective of the attendant circumstances. The equitable defense of estoppel requires knowledge or consciousness of the facts upon which it is based. The same thing is true with estoppel by conduct which may be asserted only when it is shown, among others, that the representation must have been made with knowledge of the facts and that the party to whom it was made is ignorant of the truth of the matter. (De Castro vs. Gineta, 27 SCRA 623.) The filing of an action or suit in a court that does not possess jurisdiction to entertain the same may not be presumed to be deliberate and intended to secure a ruling which

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could later be annulled if not favorable to the party who filed such suit or proceeding. Instituting such an action is not a one-sided affair. It can just as well be prejudicial to the one who filed the action or suit in the event that he obtains a favorable judgment therein which could also be attacked for having been rendered without jurisdiction. The determination of the correct jurisdiction of a court is not a simple matter. It can raise highly debatable issues of such importance that the highest tribunal of the land is given the exclusive appellate jurisdiction to entertain the same. The point simply is that when a party commits error in filing his suit or proceeding in a court that lacks jurisdiction to take cognizance of the same, such act may not at once be deemed sufficient basis of estoppel. It could have been the result of an honest mistake, or of divergent interpretations of doubtful legal provisions. If any fault is to be imputed to a party taking such course of action, part of the blame should be placed on the court which shall entertain the suit, thereby lulling the parties into believing that they pursued their remedies in the correct forum. Under the rules, it is the duty of the court to dismiss an action "whenever it appears that the court has no jurisdiction over the subject matter." (Sec. 2, Rule 9, Rules of Court.) Should the court render a judgment without jurisdiction, such judgment may be impeached or annulled for lack of jurisdiction (Sec. 30, Rule 132, Ibid), within ten (10) years from the finality of the same. (Art. 1144, par. 3, Civil Code.) The inequity of barring the petitioners from vindicating their right over their property in Civil Case No. SCC-180 is rendered more acute in the face of the undisputed fact that the property in question admittedly belonged to the petitioners, and that the title in the name of the private respondent was the result of an error committed by the Provincial Sheriff in issuing the deed of sale in the execution proceeding. The justness of the relief sought by herein petitioners may not be ignored or rendered futile by reason of a doctrine which is of highly doubtful applicability herein. WHEREFORE, the Orders appealed from are hereby REVERSED and SET ASIDE. The Motion To Dismiss filed by the private respondent in Civil Case No. SCC-180 shall be deemed denied and the respondent Court is ordered to conduct further proceedings in the case. With costs against the private respondent. SO ORDERED.

[G.R. No. 143990. October 17, 2001] MARIA L. ANIDO, JOSE E. LARRAGA and SALUD E. LARRAGA, petitioners, vs. FILOMENO NEGADO and THE HONORABLE COURT OF APPEALS,respondents. DECISION KAPUNAN, J.: This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the Decision dated February 15, 2000 of the Court of Appeals, Fourth Division, in CA-G.R. CV No. 39137[1]and its Resolution dated June 16, 2000 denying the motion for reconsideration filed by petitioners Maria L. Anido, Jose E. Larraga and Salud E. Larraga (petitioners). This case arose from a complaint for collection of attorneys fees filed by private respondent Filomeno R. Negado (private respondent) in the Regional Trial Court (RTC) of Palo, Leyte against petitioners on November 23, 1987. Private respondent alleged that in July 1978, pursuant to an oral contract for legal services between petitioners and himself, he prepared several legal documents for the settlement of the intestate estate of petitioners parents, Federico V. Larraga and Florentina Entereso. On October 8, 1978, private respondent gave to petitioners the documents entitled Extrajudicial Settlement of Estate Among Heirs and Project of Partition. He also prepared a document entitled Contract for Attorneys Service and Fee which

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stipulated, among others, that, as compensation for legal services rendered by him, petitioners were to pay him four percent (4%) of the proceeds, net of taxes, of the sale of the properties inherited by them. [2] Private respondent claimed that petitioners received the documents he prepared but they refused to sign the contract for legal services. He also averred that petitioners later used the said documents in the settlement of their parents estate, but he was not paid a single centavo therefor. Private respondent prayed for the payment of attorneys fees equivalent to fifteen percent (15%) of the gross sales of all real estate properties subject o f the extra-judicial settlement, plus twenty percent (20%) interest on the P50,000.00 attorneys fees including litigation expenses and costs.[3] In their Answer, petitioners contended that they never retained the services of private respondent since they had earlier retained the services of other lawyers for the settlement of their parents estate, and that private respondent volunteered to draft the l egal documents free of charge since he was a close friend of their deceased parents. Petitioners likewise asserted that private respondent had no cause of action against them, there being no contract for legal services to speak of, and that his claim was barred by laches because the complaint was filed more than ten years after he prepared the said Extrajudicial Settlement of Estate and Project of Partition. They also claimed that private respondents cause of action had already prescribed since the same was based on an alleged oral contract, which, under Article 1145 of the Civil Code, should have been filed within six years from the time the cause of action accrued.[4] During the pre-trial of the case, the issues were narrowed down to the following: (1) whether petitioners engaged the services of private respondent for the settlement of their parents estate; (2) whether the RTC had acquired jurisdiction over the case d espite private respondents failure to pay the correct amount of docket fees; and (3) whether private respondents claim of 15% of the gross sales of all real estate properties subject of extra-judicial settlement was reasonable.[5] After trial on the merits, the RTC promulgated its Decision on August 21, 1990. The dispositive portion thereof states: WHEREFORE, judgment is hereby rendered in favor of the plaintiff [6] and against the defendants:[7] (1) Declaring that the defendants engaged the professional services of the plaintiff in the settlement of the intestate estate of

the deceased parents of the defendants; (2) Declaring that plaintiff had already performed his obligation of the verbal contract of professional services before he was

illegally dismissed as counsel by the defendants; (3) Ordering defendants to solidarily pay plaintiff as professional fee the sum of NINE HUNDRED FIFTY-THREE THOUSAND TWO

HUNDRED FIFTY (P953,250.00) PESOS representing fifteen (15%) percent of the total sales of P6,355,000.00 of the properties subject of the Extrajudicial Settlement; (4) Ordering defendants to solidarily pay interest of twenty percent (20%) of P953,250.00 from the filing of the complaint until

fully paid; (5) Ordering defendants to solidarily pay plaintiff attorneys fees of this litigation plus litigation expenses in the sum of THIRTY

THOUSAND (P30,000.00) PESOS; and (6) Costs of this suit.[8]

Petitioners appealed the decision of the RTC to the Court of Appeals. On February 15, 2000, the appellate court rendered its Decision affirming the trial courts ruling that an oral contract for rendition of legal services was entered into by pet itioners and private respondent. However, the appellate court modified the RTCs decision by reducing the amount of attorneys fees from fifteen percent (15%) to ten percent (10%) of the total sales of the properties subject of the extra-judicial settlement amounting to

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P6,355,000.00; and eliminating the award of interest and litigation expenses for insufficiency of evidence. [9] The Court of Appeals also ruled that private respondents action had already prescribed when he filed the complaint on November 23, 1987 since his cause of action already accrued as early as October 1978 when petitioners refused to sign the contract for legal services, thereby effectively foreclosing private respondents chances of recovering what he regarded as his contingent claims for attorneys fees.[10] However, the appellate court held that since the issue of prescription was not included among the issues during the pre-trial, it could not be resolved on appeal.[11] Both parties filed their respective motions for reconsideration of the decision of the Court of Appeals but these were denied for lack of merit.[12] Petitioners filed the present petition, raising the following arguments: (A) THE HONORABLE COURT OF APEALS ERRED IN NOT DISMISSING THE COMPLAINT ON THE GROUND OF PRESCRIPTION. (B) THE HONORABLE COURT OF APPEALS VIOLATED THE RULE ON RES INTER ALIOS ACTA WHEN IT GAVE CREDENCE TO A HEARSAY PIECE OF EVIDENCE.[13] Anent the issue of prescription, petitioners point out that the appellate court erred in finding that said issue could no longer be resolved on appeal since they had raised prescription as a special and affirmative defense in their Answer, and invoked it again during the pre-trial. The trial court however postponed the resolution of said issue until after the conclusion of the pretrial.[14] Petitioners further claim that assuming arguendo that they failed to raise the issue of prescription in their pleadings, such failure does not amount to a waiver of the right to invoke the same, considering that private respondents allegations in his complaint clearly showed that his cause of action had already prescribed.[15] The Court agrees with petitioners that the appellate court could have resolved the issue of prescription when the case was brought to it on appeal. The records clearly show that petitioners pleaded the defense of prescription at the trial court level.[16] Moreover, this Court has held in several cases that failure to plead the defense of prescription will not amount to a waiver thereof where the plaintiffs own allegation in the complaint or the evidence it presented shows that the action had already prescribed. [17] In the case at bar, private respondents allegation in the complaint that petitioners refused to sign the contract for legal services in October 1978, and his filing of the complaint only on November 23, 1987 or more than nine years after his cause of action arising from the breach of the oral contract between him and petitioners point to the conclusion that the six-year prescriptive period within which to file an action based on such oral contract under Article 1145 of the Civil Code [18] had already lapsed. As a lawyer, private respondent should have known that he only had six years from the time petitioners refused to sign the contract for legal services and to acknowledge that they had engaged his services for the settlement of their parents estate within which to file his complaint for collection of legal fees for the services which he rendered in their favor. Furthermore, Rule 9, Section 1 of the 1997 Rules of Civil Procedure states that when it appears from the pleadings or the evidence on record that an action is barred by prescription, the court is mandated to dismiss the same: Defenses and objections not pleaded. -- Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the same. (Emphasis supplied.)

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Clearly, private respondents claim for payment of fees for legal services rendered is barred by prescription. Hence, the appellate court erred in affirming the award of professional fees in favor of private respondent. WHEREFORE, the petition is hereby GIVEN DUE COURSE and GRANTED. The assailed Decision of the Court of Appeals is hereby REVERSED and SET ASIDE. SO ORDERED.

G.R. No. 134854 January 18, 2000 FELIZARDO S. OBANDO and the ESTATES of JOSE FIGUERAS and DOA ALEGRIA STREBEL VDA. DE FIGUERAS, petitioners, vs. EDUARDO F. FIGUERAS and AMIGO REALTY CORPORATION as represented by ANTONIO A. KAW,respondents. PANGANIBAN, J.: In resolving this appeal, the Court invokes the following principles: (1) a lawyer's standing in a case remains, until a substitute takes over pursuant to Section 26, Rule 138 of the Rules of Court; (2) a trial court may act upon a motion to dismiss at any time a ground therefor becomes available, even after a responsive pleading to the complaint has already been filed; (3) a civil case initiated by an estate administrator may be dismissed upon a showing that the said administrator's appointment as such has been revoked by the probate court; and (4) the dismissal of an action may be made after the ground therefor becomes known, even if the trial court has refused to do so earlier when that ground was not yet available. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to annul the July 30, 1998 Decision of the Court of Appeals1 in CA-GR SP No. 47594, which affirmed the dismissal, without prejudice, of Petitioner Felizardo Obando's action for annulment of contract and reconveyance earlier ordered by the Regional Trial Court (RTC) of Quezon City, 2 Branch 218. The Facts In 1964, Alegria, Strebel Figueras, together with her stepsons, Eduardo and Francisco, filed a Petition for settlement of the intestate estate of her deceased husband Jose Figueras.3 While settlement of the estate was pending, she died and Eduardo assumed administration of the joint estates of Don Jose and Doa Alegria. Hardly had the proceedings in both intestacies begun when Eduardo was served a Petition for Probate of what purported to be Doa Alegria's Last Will and Testament, filed by Felizardo S. Obando (herein petitioner), a nephew of Doa Alegria.4 The alleged Will bequeathed to Petitioner Obando and several other members of the Obando clan properties left by the Figueras couple, including two parcels of land in Gilmore Avenue, New Manila, Quezon City, covered by TCT Nos. 13741 and 17679.5 When the probate case was consolidated with the intestate proceedings, Petitioner Obando was appointed as Eduardo's co-administrator of the joint estates.6 As Eduardo insisted that the alleged Will was a forgery, the document was submitted to the National Bureau of Investigation (NBI) for examination and comparison of Doa Alegria's alleged signature therein with samples which both parties accepted as authentic. The NBI found that the questioned and the standard signatures were not made by the same person. 7 This led to the indictment and the conviction of Petitioner Obando in Criminal Case 90-858198 for estafa through falsification of a public document. On February 20, 1990, the probate court denied Eduardo's Motion for authority to sell the aforementioned two parcels of land in New Manila.9 Despite such denial, Eduardo sold the lots to Amigo Realty Corporation on the strength of an Order issued by the probate court on May 15, 1991. New titles were issued for these lots in the name of Amigo Realty.10

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On June 4, 1992, Petitioner Obando, in his capacity as co-administrator and universal heir of Doa Alegria, filed a Complaint against Eduardo and Amigo Realty (collectively referred to as the respondents) for the nullification of the sale. The proceedings were docketed as Civil Case No. Q-92-12384 and raffled to the Regional Trial Court of Quezon City, Branch 79. However, in Special Proceeding Nos. 61567 and 123948, the probate court, in its Order dated December 17, 1997, removed Petitioner Obando from his office as co-administrator of the joint estate of the Figueras spouses.11Consequently, in the civil case, respondents filed a Joint Motion to Dismiss dated January 27, 1998, after Obando had rested his case. The respondents built their evidence around the loss of his legal standing to pursue the case.12 In its Order dated February 11, 1993, the trial court granted the Motion and dismissed the civil case without prejudice.13 Petitioner Obando filed a Motion for Reconsideration to no avail. As earlier stated, the Court of Appeals likewise dismissed his Petition for Certiorari and Mandamus and affirmed the dismissal Order of the RTC.14 Ruling of the Court of Appeals The Court of Appeals rejected the contention of Obando that he did not lose his legal personality to prosecute the civil case, since there was no categorical statement that the purported will was a forgery and its probate was still pending. The CA affirmed the dismissal of the action for reconveyance, because the probate court's Order dated February 5, 1998 "alluded" to the fact that the alleged Will was a forgery. That the probate of the alleged Will had not yet been decided on the merits did not change the fact that the probate court had removed Petitioner Obando as co-administrator. The dismissal of the civil case was without prejudice, because the trial judge anticipated that Obando could regain co-administration of the estates on appeal. Hence, this Petition.15 Assignment of Errors In their Memorandum, petitioners raise the following issues:16 A. WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN SANCTIONING THE TRIAL COURT'S ALLOWANCE OF RESPONDENTS' JOINT MOTION TO DISMISS, DESPITE THE FACT THAT ONE OF THE LAWYER-MOVANTS THEREIN WAS NO LONGER THE COUNSEL OF RECORD FOR RESPONDENT FIGUERAS AT THE TIME THE MOTION WAS FILED. B. WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN SANCTIONING THE TRIAL COURT'S RADICAL DEPARTURE FROM THE LAW WHEN IT GRANTED A MOTION TO DISMISS ON LACK OF CAPACITY TO SUE/LEGAL STANDING AT THE TIME WHEN THE [PETITIONERS] HAVE ALREADY RESTED THEIR CASE AND THE [RESPONDENTS] HAVE BEGUN PRESENTATION OF THEIR EVIDENCE. C. WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT SANCTIONED THE TRIAL COURT'S DISMISSAL OF THE CASE BASED ON ORDERS OF OTHER COURTS THAT HAVE NOT YET ATTAINED FINALITY. D. WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT UPHELD THE TRIAL COURT'S WHIMSICAL AND CAPRICIOUS DEPARTURE FROM ITS PREVIOUS RULINGS DENYING RESPONDENTS' MOTION TO DISMISS AND MOTION TO SUSPEND PROCEEDINGS. E. WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT RENDERED ITS 30 JULY 1998 DECISION IN CA-G.R. 47594 UPHOLDING THE TRIAL COURT'S ORDERS DATED 11 FEBRUARY 1998 AND 12 MARCH 1998. Simply stated, the following issues are raised by the petitioners: (1) whether the trial court could act on a motion filed by a lawyer who was allegedly no longer Eduardo's counsel of record; (2) whether a motion to dismiss filed after the responsive pleadings were already made can still be granted; (3) whether the conviction of Petitioner Obando for estafa through falsification and the revocation of his appointment as administrator, both of which are on appeal, constitute sufficient grounds to dismiss the civil case; and (4) whether there was a conflict between the Order dismissing the civil case and the previous actions of the trial court. The Court's Ruling The Petition is devoid of merit. First Issue: Counsel of Record

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Petitioners claim that when Atty. Joaquin Yuseco filed the Motion to Dismiss, he no longer represented the respondents, as shown by Eduardo's Manifestation and Motion dated January 8, 1998, dispensing with said counsel's services in the proceedings in view of a Compromise Agreement with Petitioner Obando.17 We disagree. Representation continues until the court dispenses with the services of counsel in accordance with Section 26, Rule 138 of the Rules of Court.18 Counsel may be validly substituted only if the following requisites are complied with: (1) new counsel files a written application for Substitution; (2) the client's written consent is obtained; and (3) the written consent of the lawyer to be substituted is secured, if it can still be; if the written consent can no longer be obtained, then the application for substitution must carry proof that notice of the motion has been served on the attorney to be substituted in the manner required by the Rules. 19 In this case, we are convinced that Eduardo did not dismiss Attorney Yuseco. In fact, the former manifested that he had been tricked by Petitioner Obando into signing the aforesaid Manifestation and Motion and Compromise Agreement. Besides, the filing of the Motion to Dismiss was not prejudicial but beneficial to the said respondent; hence, he had no reason to complain. At the discretion of the court, an attorney who has already been dismissed by the client is allowed to intervene in a case in order to protect the client's rights. In the present case, had there been any irregularity, it should have been raised by the respondents, not the petitioners. Second Issue: Timeliness of the Motion to Dismiss The Rules provide that a motion to dismiss may be submitted only before the filing of a responsive pleading.20Thus, petitioners complain that it was already too late for Respondent Eduardo Figueras to file a Motion to Dismiss after Obando had finished presenting his evidence. This is not so. The period to file a motion to dismiss depends upon the circumstances of the case. Section 1 of Rule 16 of the Rules of Court requires that, in general, a motion to dismiss should be filed within the reglementary period for filing a responsive pleading. Thus, a motion to dismiss alleging improper venue cannot be entertained unless made within that period.21 However, even after an answer has been filed, the Court has allowed a defendant to file a motion to dismiss on the following grounds: (1) lack of jurisdiction,22 (2) litis pendentia,23 (3) lack of cause of action,24 and (4) discovery during trial of evidence that would constitute a ground for dismissal.25 Except for lack of cause of action or lack of jurisdiction, the grounds under Section 1 of Rule 16 may be waived. If a particular ground for dismissal is not raised or if no motion to dismiss is filed at all within the reglementary period, it is generally considered waived under Section 1, Rule 9 of the Rules. 26 Applying this principle to the case at bar, the respondents did not waive their right to move for the dismissal of the civil case based Petitioner Obando's lack of legal capacity. It must be pointed out that it was only after he had been convicted of estafa through falsification that the probate court divested him of his representation of the Figueras estates. It was only then that this ground became available to the respondents. Hence, it could not be said that they waived it by raising it in a Motion to Dismiss filed after their Answer was submitted. Verily, if the plaintiff loses his capacity to sue during the pendency of the case, as in the present controversy, the defendant should be allowed to file a motion to dismiss, even after the lapse of the reglementary period for filing a responsive pleading. Third Issue: Removal from Administration Petitioners aver that it was premature for the trial court to dismiss the civil case because Obando's conviction for estafa through falsification was still on appeal. We disagree. This argument has no bearing at all on the dismissal of the civil case. Petitioner Obando derived his power to represent the estate of the deceased couple from his appointment as co-administrator.27 When the probate court removed him from office, he

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lost that authority. Since he lacked the legal capacity to sue on behalf of the Figueras estates, he could not continue prosecuting the civil case.28 Thus the trial court properly granted the Motion to Dismiss on this ground.29 Whether a final conviction for a crime involving moral turpitude is necessary to remove him from his administration is not a proper issue in this Petition. He should raise the matter in his appeal of the Decision removing him from administration of the Figueras estates. 1wphi1.nt The fact that the conviction of Obando and his removal from administration are on appeal only means that his legal standing could be restored; thus, the civil case was correctly dismissed without prejudice. If his conviction is reversed and his appointment restored by the probate court, the case may continue without being barred by res judicata. The lower court's Decision showed that it was careful in its action. On the other hand, Obando has yet to show that he has regained administration of the Figueras estates. Noteworthy also is the fact that his removal from office was predicated not only on his conviction for a crime, but also on his failure to render an accounting of the rental of a property leased to the Community of Learners. Fourth Issue: No Conflicting Rules Respondent Eduardo Figueras' earlier Motion to Dismiss was denied in the trial court's March 4, 1993 Order which reads: . . . [I]t is pertinent to note that the criminal case of Estafa through Falsification of Public Document filed against [petitioner] and the Petition to Remove him as co-administrator are still pending determination. Thus, suffice it to state that while herein [petitioner] remains as the co-administrator of the estates of the deceased Figueras the Court will continue to recognize his right to institute the instant case in his capacity as judicial administrator, unless he be removed as such by the probate Court pursuant to Rule 82 of the Revised Rules of Court.30 Thus, petitioners allege that the trial court whimsically and capriciously departed from its previous rulings when, in its Resolution dated February 11, 1993, it granted Eduardo's later Motion to Dismiss.31 We cannot see any conflict between these trial court rulings. Obviously, they were based on different grounds. The first Motion to Dismiss was denied because, at the time, Petitioner Obando still had legal capacity to sue as co-administrator of the Figueras estates. On the other hand, the second Motion was granted because the probate court had already removed him from his office as co-administrator. The change in his legal capacity accounts for the difference in the adjudication of the trial court. We see no reversible error in the appellate court's affirmance of the trial court. WHEREFORE, the Petition is hereby DENIED and the assailed Resolution AFFIRMED. Costs against petitioners. SO ORDERED.

G.R. No. 170943

September 23, 2008

PEDRO T. SANTOS, JR., Petitioner, - versus PNOC EXPLORATION CORPORATION, Respondent. DECISION CORONA, J.: This is a petition for review[1] of the September 22, 2005 decision[2] and December 29, 2005 resolution[3] of the Court of Appeals in CA-G.R. SP No. 82482. On December 23, 2002, respondent PNOC Exploration Corporation filed a complaint for a sum of money against petitioner Pedro T. Santos, Jr. in the Regional Trial Court of Pasig City, Branch 167. The complaint, docketed as Civil Case No. 69262, sought to collect

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the amount of P698,502.10 representing petitioners unpaid balance of the car loan[4] advanced to him by respondent when he was still a member of its board of directors. Personal service of summons to petitioner failed because he could not be located in his last known address despite earnest efforts to do so. Subsequently, on respondents motion, the trial court allowed service of summons by publication. Respondent caused the publication of the summons in Remate, a newspaper of general circulation in the Philippines, on May 20, 2003. Thereafter, respondent submitted the affidavit of publication of the advertising manager of Remate[5] and an affidavit of service of respondents employee[6] to the effect that he sent a copy of the summons by registered mail to petitioners last known address. When petitioner failed to file his answer within the prescribed period, respondent moved that the case be set for the reception of its evidence ex parte. The trial court granted the motion in an order dated September 11, 2003. Respondent proceeded with the ex parte presentation and formal offer of its evidence. Thereafter, the case was deemed submitted for decision on October 15, 2003. On October 28, 2003, petitioner filed an Omnibus Motion for Reconsideration and to Admit Attached Answer. He sought reconsideration of the September 11, 2003 order, alleging that the affidavit of service submitted by respondent failed to comply with Section 19, Rule 14 of the Rules of Court as it was not executed by the clerk of court. He also claimed that he was denied due process as he was not notified of the September 11, 2003 order. He prayed that respondents evidence ex parte be stricken off the records and that his answer be admitted. Respondent naturally opposed the motion. It insisted that it complied with the rules on service by publication. Moreover, pursuant to the September 11, 2003 order, petitioner was already deemed in default for failure to file an answer within the prescribed period. In an order dated February 6, 2004, the trial court denied petitioners motion for rec onsideration of the September 11, 2003 order. It held that the rules did not require the affidavit of complementary service by registered mail to be executed by the clerk of court. It also ruled that due process was observed as a copy of the September 11, 2003 order was actually mailed to petitioner at his last known address. It also denied the motion to admit petitioners answer because the same was filed way beyond the reglemen tary period. Aggrieved, petitioner assailed the September 11, 2003 and February 6, 2004 orders of the trial court in the Court of Appeals via a petition for certiorari. He contended that the orders were issued with grave abuse of discretion. He imputed the following errors to the trial court: taking cognizance of the case despite lack of jurisdiction due to improper service of summons; failing to furnish him with copies of its orders and processes, particularly the September 11, 2003 order, and upholding technicality over equity and justice. During the pendency of the petition in the Court of Appeals, the trial court rendered its decision in Civil Case No. 69262. It ordered petitioner to pay P698,502.10 plus legal interest and costs of suit.[7] Meanwhile, on September 22, 2005, the Court of Appeals rendered its decision[8] sustaining the September 11, 2003 and February 6, 2004 orders of the trial court and dismissing the petition. It denied reconsideration. [9] Thus, this petition. Petitioner essentially reiterates the grounds he raised in the Court of Appeals, namely, lack of jurisdiction over his person due to improper service of summons, failure of the trial court to furnish him with copies of its orders and processes including the September 11, 2003 order and preference for technicality rather than justice and equity. In particular, he claims that the rule on

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service by publication under Section 14, Rule 14 of the Rules of Court applies only to actions in rem, not actions in personam like a complaint for a sum of money. He also contends that the affidavit of service of a copy of the summons should have been prepared by the clerk of court, not respondents messenger. The petition lacks merit. PROPRIETY O F SERVICE BY PUBLICATION

Section 14, Rule 14 (on Summons) of the Rules of Court provides: SEC. 14. Service upon defendant whose identity or whereabouts are unknown. In any action where the defendant is designated as an unknown owner, or the like, or whenever his whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper of general circulation and in such places and for such times as the court may order. (emphasis supplied) Since petitioner could not be personally served with summons despite diligent efforts to locate his whereabouts, respondent sought and was granted leave of court to effect service of summons upon him by publication in a newspaper of general circulation. Thus, petitioner was properly served with summons by publication. Petitioner invokes the distinction between an action in rem and an action in personam and claims that substituted service may be availed of only in an action in rem. Petitioner is wrong. The in rem/in personam distinction was significant under the old rule because it was silent as to the kind of action to which the rule was applicable. [10]Because of this silence, the Court limited the application of the old rule to in rem actions only.[11] This has been changed. The present rule expressly states that it applies [i]n any action where the defendant is designated as an unknown owner, or the like, or whenever his whereabouts are unknown and cannot be ascertained by diligent inquiry. Thus, it now applies to any action, whether in personam, in rem or quasi in rem.[12] Regarding the matter of the affidavit of service, the relevant portion of Section 19, [13] Rule 14 of the Rules of Court simply speaks of the following: an affidavit showing the deposit of a copy of the summons and order for publication in the post office, postage prepaid, di rected to the defendant by registered mail to his last known address. Service of summons by publication is proved by the affidavit of the printer, his foreman or principal clerk, or of the editor, business or advertising manager of the newspaper which published the summons. The service of summons by publication is complemented by service of summons by registered mail to the defendants last known address. This complementary service is evidenced by an affidavit showing the deposit of a copy of the summons and order for publi cation in the post office, postage prepaid, directed to the defendant by registered mail to his last known address. The rules, however, do not require that the affidavit of complementary service be executed by the clerk of court. While the trial court ordinarily does the mailing of copies of its orders and processes, the duty to make the complementary service by registered mail is imposed on the party who resorts to service by publication. Moreover, even assuming that the service of summons was defective, the trial court acquired jurisdiction over the person of petitioner by his own voluntary appearance in the action against him. In this connection, Section 20, Rule 14 of the Rules of Court states:

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SEC. 20. Voluntary appearance. The defendants voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance. (emphasis supplied) Petitioner voluntarily appeared in the action when he filed the Omnibus Motion for Reconsideration and to Admit Attached Answer.[14] This was equivalent to service of summons and vested the trial court with jurisdiction over the person of petitioner. ENTITLEMENT T O NOTICE OF PROCEEDINGS

The trial court allowed respondent to present its evidence ex parte on account of petitioners failure to file his answer within the prescribed period. Petitioner assails this action on the part of the trial court as well as the said courts failure to furni sh him with copies of orders and processes issued in the course of the proceedings. The effects of a defendants failure to file an answer within the time allowed therefor are governed by Sections 3 and 4, Rule 9 (on Effect of Failure to Plead) 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 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. SEC. 4. 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. (emphasis supplied) If the defendant fails to file his answer on time, he may be declared in default upon motion of the plaintiff with notice to the said defendant. In case he is declared in default, the court shall proceed to render judgment granting the plaintiff such relief as his pleading may warrant, unless the court in its discretion requires the plaintiff to submit evidence. The defaulting defendant may not take part in the trial but shall be entitled to notice of subsequent proceedings. In this case, even petitioner himself does not dispute that he failed to file his answer on time. That was in fact why he had to file an Omnibus Motion for Reconsideration and to Admit Attached Answer. But respondent moved only for the ex parte presentation of evidence, not for the declaration of petitioner in default. In its February 6, 2004 order, the trial court stated: The disputed Order of September 11, 2003 allowing the presentation of evidence ex-parte precisely ordered that despite and notwithstanding service of summons by publication, no answer has been filed with the Court within the required period and/or forthcoming.[] Effectively[,] that was a finding that the defendant [that is, herein petitioner] was in default for failure to file an answer or any responsive pleading within the period fixed in the publication as precisely the defendant [could not] be found and for which reason, service of summons by publication was ordered. It is simply illogical to notify the defendant of the Order of September 11, 2003 simply on account of the reality that he was no longer residing and/or found on his last known address and his whereabouts unknown thus the publication of the summons. In other words, it was reasonable to expect that the defendant will not receive any notice or order in his last known address. Hence, [it was] impractical to send any notice or order to him. Nonetheless, the record[s] will bear out that a copy of the order of September 11, 2003 was mailed to the defendant at his last known address but it was not claimed. (emphasis supplied) As is readily apparent, the September 11, 2003 order did not limit itself to permitting respondent to present its evidence ex parte but in effect issued an order of default. But the trial court could not validly do that as an order of default can be made only

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upon motion of the claiming party.[15] Since no motion to declare petitioner in default was filed, no default order should have been issued. To pursue the matter to its logical conclusion, if a party declared in default is entitled to notice of subsequent proceedings, all the more should a party who has not been declared in default be entitled to such notice. But what happens if the residence or whereabouts of the defending party is not known or he cannot be located? In such a case, there is obviously no way notice can be sent to him and the notice requirement cannot apply to him. The law does not require that the impossible be done.[16] Nemo tenetur ad impossibile. The law obliges no one to perform an impossibility.[17] Laws and rules must be interpreted in a way that they are in accordance with logic, common sense, reason and practicality.[18] Hence, even if petitioner was not validly declared in default, he could not reasonably demand that copies of orders and processes be furnished him. Be that as it may, a copy of the September 11, 2003 order was nonetheless still mailed to petitioner at his last known address but it was unclaimed. CORRECTNESS O F NON-ADMISSION OF ANSWER

Petitioner failed to file his answer within the required period. Indeed, he would not have moved for the admission of his answer had he filed it on time. Considering that the answer was belatedly filed, the trial court did not abuse its discretion in denying its admission. Petitioners plea for equity must fail in the face of the clear and express language of the rules of procedure and of the September 11, 2003 order regarding the period for filing the answer. Equity is available only in the absence of law, not as its replacement.[19] Equity may be applied only in the absence of rules of procedure, never in contravention thereof. WHEREFORE, the petition is hereby DENIED. Costs against petitioner. SO ORDERED.

G.R. No. 148154

December 17, 2007

REPUBLIC OF THE PHILIPPINES, represented by the Presidential Commission on Good Government (PCGG), petitioner, vs. SANDIGANBAYAN (Second Division) and FERDINAND R. MARCOS, JR. (as executor of the estate of FERDINAND E. MARCOS), respondents. RESOLUTION QUISUMBING, J.: The propriety of filing and granting of a motion for a bill of particulars filed for the estate of a defaulting and deceased defendant is the main issue in this saga of the protracted legal battle between the Philippine government and the Marcoses on alleged ill-gotten wealth. This special civil action for certiorari1 assails two resolutions of the Sandiganbayan ("anti-graft court" or "court") issued during the preliminary legal skirmishes in this 20-year case:2 (1) the January 31, 2000 Resolution3 which granted the motion for a bill of particulars filed by executor Ferdinand R. Marcos, Jr. (respondent) on behalf of his father's estate and (2) the March 27, 2001 Resolution4 which denied the government's motion for reconsideration. From the records, the antecedent and pertinent facts in this case are as follows:

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The administration of then President Corazon C. Aquino successively sued former President Ferdinand E. Marcos and former First Lady Imelda Romualdez-Marcos (Mrs. Marcos), and their alleged cronies or dummies before the anti-graft court to recover the alleged ill-gotten wealth that they amassed during the former president's 20-year rule. Roman A. Cruz, Jr. (Cruz), then president and general manager of the Government Service Insurance System (GSIS); president of the Philippine Airlines (PAL); chairman and president of the Hotel Enterprises of the Philippines, Inc., owner of Hyatt Regency Manila; chairman and president of Manila Hotel Corporation; and chairman of the Commercial Bank of Manila (CBM), is the alleged crony in this case. On July 21, 1987, the Presidential Commission on Good Government (PCGG), through the Office of the Solicitor General, filed a Complaint5 for reconveyance, reversion, accounting, restitution and damages alleging that Cruz and the Marcoses stole public assets and invested them in several institutions here and abroad. Specifically, Cruz allegedly purchased, in connivance with the Marcoses, assets whose values are disproportionate to their legal income, to wit: two residential lots and two condominiums in Baguio City; a residential building in Makati; a parcel of land and six condominium units in California, USA; and a residential land in Metro Manila. The PCGG also prayed for the payment of moral damages of P50 billion and exemplary damages of P1 billion. On September 18, 1987, Cruz filed an Omnibus Motion to Dismiss, strike out averments in the complaint, and for a bill of particulars.6 On April 18, 1988, the court ordered that alias summonses be served on the Marcoses who were then in exile in Hawaii. 7 The court likewise admitted the PCGG's Expanded Complaint8 dated April 25, 1988, then denied Cruz's omnibus motion on July 28, 1988 after finding that the expanded complaint sufficiently states causes of action and that the matters alleged are specific enough to allow Cruz to prepare a responsive pleading and for trial.9 On September 15, 1988, Cruz filed his answer ad cautelam.10 On November 10, 1988, the alias summonses on the Marcoses were served at 2338 Makiki Heights, Honolulu, Hawaii.11 The Marcoses, however, failed to file an answer and were accordingly declared in default by the anti-graft court on April 6, 1989.12 In Imelda R. Marcos, et al. v. Garchitorena, et al.,13 this Court upheld the validity of the Marcoses' default status for failure to file an answer within 60 days from November 10, 1988 when the alias summonses were validly served in their house address in Hawaii. On September 29, 1989, former President Marcos died in Hawaii. He was substituted by his estate, represented by Mrs. Marcos and their three children, upon the motion of the PCGG.14 On July 13, 1992, Mrs. Marcos filed a Motion to Set Aside Order of Default,15 which was granted by the anti-graft court on October 28, 1992.16 In Republic v. Sandiganbayan,17 this Court affirmed the resolution of the anti-graft court, ruling that Mrs. Marcos had a meritorious defense, and that failure of a party to properly respond to various complaints brought about by the occurrence of circumstances which ordinary prudence could not have guarded against, such as being barred from returning to the Philippines, numerous civil and criminal suits in the United States, deteriorating health of her husband, and the complexities of her legal battles, is considered as due to fraud, accident and excusable negligence.18 On September 6, 1995, Mrs. Marcos filed her answer,19 arguing that the former President Marcos' wealth is not ill-gotten and that the civil complaints and proceedings are void for denying them due process. She also questioned the legality of the PCGG's acts and asked for P20 billion moral and exemplary damages and P10 million attorney's fees. On January 11, 1999, after pre-trial briefs had been filed by Cruz, the PCGG, and Mrs. Marcos, the court directed former President Marcos' children to appear before it or it will proceed with pre-trial and subsequent proceedings.20

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On March 16, 1999, respondent filed a Motion for Leave to File a Responsive Pleading as executor of his late father's estate. 21 The PCGG opposed the motion, citing as ground the absence of a motion to set aside the default order or any order lifting the default status of former President Marcos.22 On May 28, 1999, the court granted respondent's motion: xxxx The Court concedes the plausibility of the stance taken by the Solicitor General that the default Order binds the estate and the executor for they merely derived their right, if any, from the decedent. Considering however the complexities of this case, and so that the case as against the other defendants can proceed smoothly as the stage reached to date is only a continuation of the pretrial proceedings, the Court, in the interest of justice and conformably with the discretion granted to it under Section 3 of Rule 9 of the Rules of Court hereby accords affirmative relief to the prayer sought in the motion. Accordingly, Ferdinand R. Marcos, Jr.[,] as executor of the [estate of] deceased defendant Ferdinand E. Marcos[,] is granted a period of ten (10) days from receipt of this Resolution within which to submit his Responsive Pleading. x x x x23 Respondent asked for three extensions totaling 35 days to file an answer. The court granted the motions and gave him until July 17, 1999 to file an answer. But instead of filing an answer, respondent filed on July 16, 1999, a Motion For Bill of Particulars, 24 praying for clearer statements of the allegations which he called "mere conclusions of law, too vague and general to enable defendants to intelligently answer." The PCGG opposed the motion, arguing that the requested particulars were evidentiary matters; that the motion was dilatory; and that it contravened the May 28, 1999 Resolution granting respondent's Motion for Leave to File a Responsive Pleading.25 The anti-graft court, however, upheld respondent, explaining that the allegations against former President Marcos were vague, general, and were mere conclusions of law. It pointed out that the accusations did not specify the ultimate facts of former President Marcos' participation in Cruz's alleged accumulation of ill-gotten wealth, effectively preventing respondent from intelligently preparing an answer. It noted that this was not the first time the same issue was raised before it, and stressed that this Court had consistently ruled in favor of the motions for bills of particulars of the defendants in the other ill-gotten wealth cases involving the Marcoses. The fallo of the assailed January 31, 2000 Resolution reads: WHEREFORE, the defendant-movant's motion for bill of particulars is hereby GRANTED. Accordingly, the plaintiff is hereby ordered to amend pars. 9 and Annex "A", 12 (a) to (e), and 19 in relation to par-3 of the PRAYER, of the Expanded Complaint, to allege the ultimate facts indicating the nature, manner, period and extent of participation of Ferdinand E. Marcos in the acts referred to therein, and the amount of damages to be proven during trial, respectively, within fifteen (15) days from receipt of this resolution[.] SO ORDERED.26 Not convinced by petitioner's Motion for Reconsideration,27 the court ruled in the assailed March 27, 2001 Resolution that the motion for a bill of particulars was not dilatory considering that the case was only at its pre-trial stage and that Section 1,28 Rule 12 of the 1997 Rules of Civil Procedure allows its filing. In urging us to nullify now the subject resolutions, petitioner, through the PCGG, relies on two grounds: i.

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The motion for bill of particulars contravenes section 3, rule 9 of the 1997 rules [OF] civil procedure. ii. The motion for bill of particulars is patently dilatory and bereft of any basis.29 Invoking Section 3,30 Rule 9 of the 1997 Rules of Civil Procedure, petitioner argues that since the default order against former President Marcos has not been lifted by any court order, respondent cannot file a motion for a bill of particulars. Petitioner stresses that respondent did not file a motion to lift the default order as executor of his father's estate; thus, he and the estate cannot take part in the trial. Petitioner also contends that respondent was granted leave to file an answer to the expanded complaint, not a motion for a bill of particulars. The anti-graft court should not have accepted the motion for a bill of particulars after he had filed a motion for leave to file responsive pleading and three successive motions for extension as the motion for a bill of particulars is dilatory. Petitioner insists that respondent impliedly admitted that the complaint sufficiently averred factual matters with definiteness to enable him to properly prepare a responsive pleading because he was able to prepare a draft answer, as stated in his second and third motions for extension. Petitioner adds that the factual matters in the expanded complaint are clear and sufficient as Mrs. Marcos and Cruz had already filed their respective answers. Petitioner also argues that if the assailed Resolutions are enforced, the People will suffer irreparable damage because petitioner will be forced to prematurely divulge evidentiary matters, which is not a function of a bill of particulars. Petitioner maintains that paragraph 12, subparagraphs a to e,31 of the expanded complaint "illustrate the essential acts pertaining to the conspirational acts" between Cruz and former President Marcos. Petitioner argues that respondent erroneously took out of context the phrase "unlawful concert" from the rest of the averments in the complaint. Respondent, for his part, counters that this Court had compelled petitioner in several ill-gotten wealth cases involving the same issues and parties to comply with the motions for bills of particulars filed by other defendants on the ground that most, if not all, of the allegations in the similarly worded complaints for the recovery of alleged ill-gotten wealth consisted of mere conclusions of law and were too vague and general to enable the defendants to intelligently parry them. Respondent adds that it is misleading for the Government to argue that the default order against his father stands because the May 28, 1999 Resolution effectively lifted it; otherwise, he would not have been called by the court to appear before it and allowed to file a responsive pleading. He stresses that the May 28, 1999 Resolution remains effective for all intents and purposes because petitioner did not file a motion for reconsideration. Respondent likewise denies that his motion for a bill of particulars is dilatory as it is petitioner's continued refusal to submit a bill of particulars which causes the delay and it is petitioner who is "hedging, flip-flopping and delaying in its prosecution" of Civil Case No. 0006. His draft answer turned out "not an intelligent" one due to the vagueness of the allegations. He claims that petitioner's actions only mean one thing: it has no specific information or evidence to show his father's participation in the acts of which petitioner complains. In its Reply,32 petitioner adds that the acts imputed to former President Marcos were acts that Cruz committed in conspiracy with the late dictator, and which Cruz could not have done without the participation of the latter. Petitioner further argues that conspiracies need not be established by direct evidence of the acts charged but by a number of indefinite acts, conditions and circumstances.

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In a nutshell, the ultimate issue is: Did the court commit grave abuse of discretion amounting to lack or excess of jurisdiction in granting respondent's motion for a bill of particulars as executor of former President Marcos' estates considering that the deceased defendant was then a defaulting defendant when the motion was filed? We rule in the negative, and dismiss the instant petition for utter lack of merit. Under the Rules of Court, a defending party may be declared in default, upon motion and notice, for failure to file an answer within the allowable period. As a result, the defaulting party cannot take part in the trial albeit he is entitled to notice of subsequent proceedings.33 The remedies against a default order are: (1) a motion to set aside the order of default at any time after discovery thereof and before judgment on the ground that the defendant's failure to file an answer was due to fraud, accident, mistake or excusable neglect and that the defendant has a meritorious defense; (2) a motion for new trial within 15 days from receipt of judgment by default, if judgment had already been rendered before the defendant discovered the default, but before said judgment has become final and executory; (3) an appeal within 15 days from receipt of judgment by default; (4) a petition for relief from judgment within 60 days from notice of judgment and within 6 months from entry thereof; and (5) a petition for certiorari in exceptional circumstances.34 In this case, former President Marcos was declared in default for failure to file an answer. He died in Hawaii as an exile while this case was pending, since he and his family fled to Hawaii in February 1986 during a people-power revolt in Metro Manila. His representatives failed to file a motion to lift the order of default. Nevertheless, respondent, as executor of his father's estate, filed a motion for leave to file a responsive pleading, three motions for extensions to file an answer, and a motion for bill of particulars all of which were granted by the anti-graft court. Given the existence of the default order then, what is the legal effect of the granting of the motions to file a responsive pleading and bill of particulars? In our view, the effect is that the default order against the former president is deemed lifted. Considering that a motion for extension of time to plead is not a litigated motion but an ex parte one, the granting of which is a matter addressed to the sound discretion of the court; that in some cases we have allowed defendants to file their answers even after the time fixed for their presentation; that we have set aside orders of default where defendants' failure to answer on time was excusable; that the pendency of the motion for a bill of particulars interrupts the period to file a responsive pleading; and considering that no real injury would result to the interests of petitioner with the granting of the motion for a bill of particulars, the three motions for extensions of time to file an answer, and the motion with leave to file a responsive pleading, the anti-graft court has validly clothed respondent with the authority to represent his deceased father. The only objection to the action of said court would be on a technicality. But on such flimsy foundation, it would be erroneous to sacrifice the substantial rights of a litigant. Rules of procedure should be liberally construed to promote their objective in assisting the parties obtain a just, speedy and inexpensive determination of their case.35 While it is true that there was no positive act on the part of the court to lift the default order because there was no motion nor order to that effect, the anti-graft court's act of granting respondent the opportunity to file a responsive pleading meant the lifting of the default order on terms the court deemed proper in the interest of justice. It was the operative act lifting the default order and thereby reinstating the position of the original defendant whom respondent is representing, founded on the court's discretionary power to set aside orders of default.

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It is noteworthy that a motion to lift a default order requires no hearing; it need be under oath only and accompanied by an affidavit of merits showing a meritorious defense.36 And it can be filed "at any time after notice thereof and before judgment." Thus, the act of the court in entertaining the motions to file a responsive pleading during the pre-trial stage of the proceedings effectively meant that respondent has acquired a locus standi in this case. That he filed a motion for a bill of particulars instead of an answer does not pose an issue because he, as party defendant representing the estate, is allowed to do so under the Rules of Court to be able to file an intelligent answer. It follows that petitioner's filing of a bill of particulars in this case is merely a condition precedent to the filing of an answer. Indeed, failure to file a motion to lift a default order is not procedurally fatal as a defaulted party can even avail of other remedies mentioned above. As default judgments are frowned upon, we have been advising the courts below to be liberal in setting aside default orders to give both parties every chance to present their case fairly without resort to technicality.37 Judicial experience shows, however, that resort to motions for bills of particulars is sometimes intended for delay or, even if not so intended, actually result in delay since the reglementary period for filing a responsive pleading is suspended and the subsequent proceedings are likewise set back in the meantime. As understood under Section 1 of Rule 12, mentioned above, a motion for a bill of particulars must be filed within the reglementary period for the filing of a responsive pleading to the pleading sought to be clarified. This contemplates pleadings which arerequired by the Rules to be answered under pain of procedural sanctions, such as default or implied admission of the facts not responded to.38 But as defaulted defendants are not actually thrown out of court because the Rules see to it that judgments against them must be in accordance with the law and competent evidence, this Court prefers that the lifting of default orders be effected before trial courts could receive plaintiffs' evidence and render judgments. This is so since judgments by default may result in considerable injustice to defendants, necessitating careful and liberal examination of the grounds in motions seeking to set them aside. The inconvenience and complications associated with rectifying resultant errors, if defendant justifies his omission to seasonably answer, far outweigh the gain in time and dispatch of immediately trying the case.39 The fact that former President Marcos was in exile when he was declared in default, and that he later died still in exile, makes the belated filing of his answer in this case understandably excusable. The anti-graft court required the Marcos siblings through its January 11, 1999 Order40 to substitute for their father without informing them that the latter was already declared in default. They were unaware, therefore, that they had to immediately tackle the matter of default. Respondent, who stands as the executor of their father's estate, could assume that everything was in order as far as his standing in court was concerned. That his motion for leave to file a responsive pleading was granted by the court gave him credible reason not to doubt the validity of his legal participation in this case. Coupled with his intent to file an answer, once his motion for a bill of particulars is sufficiently answered by petitioner, the circumstances abovementioned warrant the affirmation of the anti-graft court's actions now being assailed. As to the propriety of the granting of the motion for a bill of particulars, we find for respondent as the allegations against former President Marcos appear obviously couched in general terms. They do not cite the ultimate facts to show how the Marcoses acted "in unlawful concert" with Cruz in illegally amassing assets, property and funds in amounts disproportionate to Cruz's lawful income, except that the former President Marcos was the president at the time. The pertinent allegations in the expanded complaint subject of the motion for a bill of particulars read as follows:

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11. Defendant Roman A. Cruz, Jr. served as public officer during the Marcos administration. During his . . . incumbency as public officer, he acquired assets, funds and other property grossly and manifestly disproportionate to his salaries, lawful income and income from legitimately acquired property. 12. . . . Cruz, Jr., in blatant abuse of his position as Chairman and General Manager of the Government Service Insurance System (GSIS), as President and Chairman of the Board of Directors of the Philippine Airlines (PAL), and as Executive Officer of the Commercial Bank of Manila, by himself and/or in unlawful concert with defendants Ferdinand E. Marcos and Imelda R. Marcos, among others: (a) purchased through Arconal N.V., a Netherland-Antilles Corporation, a lot and building located at 212 Stockton St., San Francisco, California, for an amount much more than the value of the property at the time of the sale to the gross and manifest disadvantageous (sic) to plaintiff. GSIS funds in the amount of $10,653,350.00 were used for the purchase when under the right of first refusal by PAL contained in the lease agreement with Kevin Hsu and his wife, the owners of the building, a much lower amount should have been paid. For the purchase of the building, defendant Cruz allowed the intervention of Sylvia Lichauco as broker despite the fact that the services of such broker were not necessary and even contrary to existing policies of PAL to deal directly with the seller. The broker was paid the amount of $300,000.00 resulting to the prejudice of GSIS and PAL. (b) Converted and appropriated to . . . own use and benefit funds of the Commercial Bank of Manila, of which he was Executive Officer at the time. He caused the disbursement from the funds of the bank of among others, the amount of P81,152.00 for personal services rendered to him by one Brenda Tuazon. (c) Entered into an agency agreement on behalf of the Government Service Insurance System with the Integral Factors Corporation (IFC), to solicit insurance, and effect reinsurance on behalf of the GSIS, pursuant to which agreement, IFC effected a great part of its reinsurance with INRE Corporation, which, was a non-insurance company registered in London[,] with defendant . . . Cruz, Jr., as one of its directors. IFC was allowed to service accounts emanating from government agencies like the Bureau of Buildings, Philippine National Oil Corporation, National Power Corporation, Ministry of Public Works and Highways which under the laws are required to insure with and deal directly with the GSIS for their insurance needs. The intervention of IFC to service these accounts caused the reduction of premium paid to GSIS as a portion thereof was paid to IFC. (d) Entered into an agreement with the Asiatic Integrated Corporation (AIC) whereby the GSIS ceded, transferred, and conveyed property consisting of five (5) adjoining parcels of land situated in Manila covered by Transfer Certificates of Title (TCT) Nos. 49853, 49854, 49855 and 49856 to AIC in exchange for AIC property known as the Pinugay Estate located at Tanay, Rizal, covered by TCT No. 271378, under terms and conditions grossly and manifestly disadvantageous to the government. The appraised value of the GSIS parcels of land was P14,585,600.00 as of June 25, 1971 while the value of the Pinugay Estate was P2.00 per square meter or a total amount of P15,219,264.00. But in the barter agreement, the Pinugay Estate was valued at P5.50 per square meter or a total of P41,852,976.00, thus GSIS had to pay AIC P27,287,976.00, when it was GSIS which was entitled to payment from AIC for its failure to pay the rentals of the GSIS property then occupied by it. (e) purchased three (4) (sic) additional Airbus 300 in an amount much more than the market price at the time when PAL was in deep financial strain, to the gross and manifest disadvantage of Plaintiff.

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On October 29, 1979, defendant Cruz, as President and Chairman of the Board of Directors of . . . (PAL) authorized the payment of non-refundable deposit of U.S. $200,000.00 even before a meeting of the Board of Directors of PAL could deliberate and approve the purchase.41 In his motion for a bill of particulars, respondent wanted clarification on the specific nature, manner and extent of participation of his father in the acquisition of the assets cited above under Cruz; particularly whether former President Marcos was a beneficial owner of these properties; and the specific manner in which he acquired such beneficial control. Also, respondent wanted to know the specific nature, manner, time and extent of support, participation and collaboration of his father in (1) Cruz's alleged "blatant abuse" as GSIS president and general manager, PAL president and chairman of the board, and executive officer of the CBM; (2) the purchase of a lot and building in California using GSIS funds and Cruz's allowing Lichauco as broker in the sale of the lot and building contrary to PAL policies; (3) Cruz's appropriating to himself CBM funds; (4) Cruz's disbursement of P81,152 CBM funds for personal services rendered to him by Tuazon; (5) Cruz's entering into an agency agreement for GSIS with IFC to solicit, insure, and effect reinsurance of GSIS, as result of which IFC effected a great part of its reinsurance with INRE Corporation, a London-registered non-insurance company, of which Cruz was one of the directors; (6) Cruz's allowing IFC to service the accounts emanating from government agencies which were required under the law to insure and deal directly with the GSIS for their insurance needs; (7) the GSIS-AIC agreement wherein GSIS ceded and conveyed to AIC five parcels of land in Manila in exchange for AIC's Pinugay Estate in Tanay, Rizal; (8) PAL's purchase of three Airbus 300 jets for a higher price than the market price; and (9) if former President Marcos was connected in any way to IFC and INRE Corporation. Respondent likewise asked, what is the specific amount of damages demanded? The 1991 Virata-Mapa Doctrine42 prescribes a motion for a bill of particulars, not a motion to dismiss, as the remedy for perceived ambiguity or vagueness of a complaint for the recovery of ill-gotten wealth,43 which was similarly worded as the complaint in this case. That doctrine provided protective precedent in favor of respondent when he filed his motion for a bill of particulars. While the allegations as to the alleged specific acts of Cruz were clear, they were vague and unclear as to the acts of the Marcos couple who were allegedly "in unlawful concert with" the former. There was no factual allegation in the original and expanded complaints on the collaboration of or on the kind of support extended by former President Marcos to Cruz in the commission of the alleged unlawful acts constituting the alleged plunder. All the allegations against the Marcoses, aside from being maladroitly laid, were couched in general terms. The alleged acts, conditions and circumstances that could show the conspiracy among the defendants were not particularized and sufficiently set forth by petitioner. That the late president's co-defendants were able to file their respective answers to the complaint does not necessarily mean that his estate's executor will be able to file an equally intelligent answer, since the answering defendants' defense might be personal to them. In dismissing this petition, Tantuico, Jr. v. Republic44 also provides us a cogent jurisprudential guide. There, the allegations against former President Marcos were also conclusions of law unsupported by factual premises. The particulars prayed for in the motion for a bill of particulars were also not evidentiary in nature. In that case, we ruled that the anti-graft court acted with grave abuse of discretion amounting to lack or excess of jurisdiction in denying an alleged crony's motion for a bill of particulars on a complaint with similar tenor and wordings as in the case at bar. Likewise we have ruled in Virata v. Sandiganbayan45 (1993) that Tantuico's applicability to that case was "ineluctable," and the propriety of the motion for a bill of particulars under Section 1, Rule 12 of the Revised Rules of Court was beyond dispute.46

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In 1996, in the similar case of Republic v. Sandiganbayan (Second Division),47 we also affirmed the resolutions of the Sandiganbayan granting the motion for a bill of particulars of Marcos' alleged crony, business tycoon Lucio Tan. 48 Phrases like "in flagrant breach of public trust and of their fiduciary obligations as public officers with grave and scandalous abuse of right and power and in brazen violation of the Constitution and laws," "unjust enrichment," "embarked upon a systematic plan to accumulate ill-gotten wealth," "arrogated unto himself all powers of government," are easy and easy to read; they have potential media quotability and they evoke passion with literary flair, not to mention that it was populist to flaunt those statements in the late 1980s. But they are just that, accusations by generalization. Motherhood statements they are, although now they might be a politically incorrect expression and an affront to mothers everywhere, although they best describe the accusations against the Marcoses in the case at bar. In Justice Laurel's words, "the administration of justice is not a matter of guesswork." 49 The name of the game is fair play, not foul play. We cannot allow a legal skirmish where, from the start, one of the protagonists enters the arena with one arm tied to his back.50 We must stress anew that the administration of justice entails a painstaking, not haphazard, preparation of pleadings. The facile verbosity with which the legal counsel for the government flaunted the accusation of excesses against the Marcoses in general terms must be soonest refurbished by a bill of particulars, so that respondent can properly prepare an intelligent responsive pleading and so that trial in this case will proceed as expeditiously as possible. To avoid a situation where its pleadings may be found defective, thereby amounting to a failure to state a cause of action, petitioner for its part must be given the opportunity to file a bill of particulars. Thus, we are hereby allowing it to supplement its pleadings now, considering that amendments to pleadings are favored and liberally allowed especially before trial. Lastly, the allowance of the motion for a more definite statement rests with the sound discretion of the court. As usual in matters of a discretionary nature, the ruling of the trial court will not be reversed unless there has been a palpable abuse of discretion or a clearly erroneous order.51 This Court has been liberal in giving the lower courts the widest latitude of discretion in setting aside default orders justified under the right to due process principle. Plain justice demands and the law requires no less that defendants must know what the complaint against them is all about.52 What is important is that this case against the Marcoses and their alleged crony and dummy be decided by the anti-graft court on the merits, not merely on some procedural faux pas. In the interest of justice, we need to dispel the impression in the individual respondents' minds that they are being railroaded out of their rights and properties without due process of law. WHEREFORE, finding no grave abuse of discretion on the part of the Sandiganbayan in granting respondent's Motion for Bill of Particulars, the petition is DISMISSED. The Resolutions of the Sandiganbayan dated January 31, 2000 and March 27, 2001 in Civil Case No. 0006 are AFFIRMED. Petitioner is ordered to prepare and file a bill of particulars containing the ultimate facts as prayed for by respondent within twenty (20) days from notice. SO ORDERED.

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G.R. No. 150768 HEIRS OF MAMERTO MANGUIAT, represented by GERARDO MANGUIAT; HEIRS OF FELIPE MARUDO, represented by JOSE MARUDO; HEIRS OF JULIANA MAILON, represented by GAVINA MAILON MENDOZA; HEIRS OF LEONCIA MERCADO, represented by ANIANA MANGUIAT; HEIRS OF VICENTE PEREZ, represented by SOTERO PEREZ; HEIRS OF VICENTE GARCIA, represented by MACARIO GARCIA LUCIDO; and HEIRS OF TRANQUILINA MENDOZA, represented by RUFINA MENDOZA, Petitioners, - versus THE HON. COURT OF APPEALS and J.A. DEVELOPMENT CORPORATION, Respondents.

G.R. No. 160176

August 20, 2008

HEIRS OF MAMERTO MANGUIAT, represented by GERARDO MANGUIAT; HEIRS OF FELIPE MARUDO, represented by JOSE MARUDO; HEIRS OF JULIANA MAILON, represented by GAVINA MAILON MENDOZA; HEIRS OF LEONCIA MERCADO, represented by ANIANA MANGUIAT; HEIRS OF VICENTE PEREZ, represented by SOTERO PEREZ; HEIRS OF VICENTE GARCIA, represented by MACARIO GARCIA LUCIDO; and HEIRS OF TRANQUILINA MENDOZA, represented by RUFINA MENDOZA, Petitioners, - versus THE HON. COURT OF APPEALS AND REPUBLIC OF THE PHILIPPINES, Respondents.

DECISION PUNO, C.J.: Before us are two petitions for review on certiorari assailing the Decisions of the Court of Appeals in CA-G.R. SP No. 60770 and CAG.R. SP No. 61703 dated August 29, 2001 and January 22, 2003, respectively, and their Resolutions dated November 16, 2001 and September 29, 2003, respectively. In both cases, the Court of Appeals set aside the partial decision of

the Regional Trial Court of Tagaytay City, dated February 18, 2000, in Civil Case No. TG-1904. The facts show that petitioners filed a complaint against respondent J.A. Development Corporation (JDC), Bureau of Telecommunications (BUTEL), Juan dela Cruz, and Pedro dela Cruz on May 14, 1999 with

the Regional Trial Court of Tagaytay City. The complaint, docketed as Civil Case No. TG-1904, was for quieting of title and cancellation of certificates of title over Lot 1993, commonly known as the Calamba Estate. Petitioners alleged that they succeeded to the rights of their predecessors-in-interest to whom Lot1993 was awarded on November 13, 1914 by virtue of a Sales Certificate, in accordance with the provisions of the Friar Land Act. Petitioners, thus, sought to annul the Torrenstitle issued to respondent, BUTEL, Juan dela Cruz, and Pedro dela Cruz. On May 19, 1999, summons was served on respondent JDC through its employee, Jacqueline de los Santos.[1] On the same date, summons was served on BUTEL through a certain employee, Cholito Anitola.[2] The sheriffs return did not describe the position of Mr. Anitola at BUTEL.[3]

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Respondent JDC moved to dismiss the complaint on the following grounds: (1) lack of jurisdiction of the court over the subject matter of the case; (2) lack of cause of action; (3) prescription; and (4) improper venue.[4] With leave of court, it supplemented its motion by raising the additional ground of res judicata citing the judgment of the same court in Civil Case No. TG-1516. It contended that Civil Case Nos. TG-1904 and TG-1516 have identical parties and causes of action, and that the order of dismissal of the latter case has long become final due to prescription, and laches has long set in.[5] The motion to dismiss was denied on January 11, 2000.[6] JDC filed a motion for reconsideration which, to date, has not been resolved. On July 1, 1999, petitioners moved to have BUTEL declared in default for its failure to file an answer despite service of summons and to allow them to present their evidenceex parte.[7] The motion was granted on November 10, 1999.[8] A week later, the petitioners presented their evidence before the branch clerk of court acting as commissioner. On February 18, 2000, the trial court promulgated a partial decision against BUTEL, the dispositive portion of which states: PREMISES CONSIDERED, this Court found and hold (sic) that the plaintiffs were able to prove satisfactorily and convincingly their allegations in the complaint as against defendant Bureau of Telecommunication[s]. WHEREFORE, partial decision is hereby rendered: a. Declaring that (sic) the plaintiffs as the equitable owner of Lot 1993-I and transfer certificate of title covering the same is hereby ordered cancelled as null and void; b. Ordering the transfer of possession of said Lot 1993-I to the plaintiffs; c. Enjoining the defendant Bureau of Telecommunication[s], its representative, agents or privies to remove any improvements they have on Lot 1993-I.[9] On March 28, 2000, petitioners filed a motion to execute. On April 7, 2000, respondent JDC moved to set aside the partial decision, arguing in the main that the decision constitutes a prejudgment of the merits of the entire case. [10] On July 17, 2000, the trial court denied the motion.[11] On August 25, 2000, respondent filed a motion for reconsideration of the order. [12] On August 8, 2000, the trial court ordered the issuance of a writ of execution. On September 15, 2000, respondent JDC filed a petition for certiorari and prohibition with the Court of Appeals to annul: (1) the partial decision dated February 18, 2000; (2) the order dated July 17, 2000; and (3) the writ of execution dated August 8, 2000.[13] The petition was raffled to the Fifteenth Division of the appellate court and docketed as CA-G.R. SP No. 60770. On October 31, 2000, the Republic of the Philippines, through the Office of the Solicitor General, filed a petition for Annulment of Judgment with the Court of Appeals docketed as CA-G.R. SP No. 61703, and raffled to its Ninth Division.[14] It sought the nullification of the partial decision dated February 18, 2000 on the ground of lack of jurisdiction. It alleged that the service of summons made on BUTEL was not valid as it was not made upon the Solicitor General who is its statutory counsel and representative. On August 29, 2001, the Fifteenth Division of the Court of Appeals promulgated its decision granting the petition of respondent JDC. The dispositive portion states: WHEREFORE, it is hereby resolved that the (sic): (a) the Partial Decision dated 18 February 2000; (b) the Order dated 17 July 2000; and (c) Writ of Execution dated 10 August 2000 in Civil Case No. TG-1904 entitled Heirs of Mamerto Manguiat, [e]t [a]l., Plaintiffs, versus J.A. Development Corporation, Bureau of Telecommunication[s], Juan Dela Cruz, and Ped ro Dela Cruz, Defendants[,] are hereby ordered SET ASIDE, for having been issued with grave abuse of discretion. The public respondent is hereby ordered to follow strictly Sec. 3(c), Rule 9 of the 1997 Rules of Civil Procedure.

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SO ORDERED.[15] Petitioners moved for reconsideration of the decision but the motion was denied on November 16, 2001.[16] Hence, petitioners filed the instant petition for review oncertiorari with this Court, docketed as G.R. No. 150768. On January 22, 2003, the Ninth Division of the Court of Appeals promulgated its decision granting the petition of the Republic of the Philippines and setting aside the judgment of the trial court in Civil Case No. TG-1904 for lack of jurisdiction.[17] Petitioners filed a motion for reconsideration but the motion was denied on September 29, 2003. They then filed a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure with this Court which was docketed as G.R. No. 160176. On May 25, 2005, this Court resolved to consolidate G.R. Nos. 150768 and 160176. In G.R. No. 150768, petitioners contend that the Court of Appeals erred in setting aside the partial decision. They claim that the trial court was correct in rendering the partial judgment as the causes of action against the respondent, BUTEL, Juan dela Cruz, and Pedro dela Cruz were distinct and severable, involving distinct lots or interests owned separately by each of the defendants but joined in one complaint to avoid multiplicity of suits.[18] On the other hand, respondent JDC contends that the partial decision was a pre-judgment of the entire case because its interests were inseparable from the respondent, BUTEL, Juan dela Cruz, and Pedro dela Cruz. JDC claims that its set of titles find their origin in the same title whose validity is assailed by the petitioners in their complaint. It argues that the Court of Appeals correctly relied on Section 3(c), Rule 9 of the 1997 Rules of Civil Procedure when BUTEL was declared in default, [19] viz.: SECTION 3. Default, declaration of. If the defending party fails to answer within the time allowed therefor, the court shall, upon

motion of the 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 the 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. x (c) x x Effect of partial default. When a pleading asserting a claim states a common cause of action against several defending

parties, some of whom answer and the others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence presented. In G.R. No. 160176, petitioners assert that summons was validly served on the Republic of the Philippines considering that the sheriffs return states that it was duly served. They further aver that Section 13, Rule 14 of the 1997 Rules of Civil Procedure does not limit service of summons to the Solicitor General but allows service on other officers as the court may direct. They point out that the failure to inform the Solicitor General of Civil Case No. TG-1904 can only be attributed to the gross negligence of the BUTEL.[20] For its part, respondent Republic of the Philippines contends that summons must be served upon it through the Solicitor General and that service of summons on an employee of the BUTEL is insufficient compliance with Section 13, Rule 14 of the Rules of Court.[21] In both cases before us, the decisive issue is whether jurisdiction over the BUTEL was validly acquired by the Regional Trial Court through service of summons upon its employee whose authority to do so does not appear from the sheriffs return. We rule in favor of respondent, BUTEL, Juan dela Cruz, and Pedro dela Cruz. Summons must be served upon a party for valid judgment to be rendered against him. This not only comports with basic procedural law but the constitutional postulate of due process. The disputable presumption that an official duty has been regularly performed will not apply where it is patent from the sheriffs or servers return that it is defective.[22] Rule 14, Section 13 of the 1997 Rules of Procedure provides:

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SECTION 13. Service upon public corporations. When the defendant is the Republic of the Philippines, service may be effected on the Solicitor General; in case of a province, city or municipality, or like public corporations, service may be effected on its executive head, or on such other officer or officers as the law or the court may direct.[23] It is clear under the Rules that where the defendant is the Republic of the Philippines, service of summons must be made on the Solicitor General. The BUTEL is an agency attached to the Department of Transportation and Communications created under E.O. No. 546 on July 23, 1979, and is in charge of providing telecommunication facilities, including telephone systems to government offices. It also provides its services to augment limited or inadequate existing similar private communication facilities. It extends its services to areas where no communication facilities exist yet; and assists the private sector engaged in telecommunication services by providing and maintaining backbone telecommunication network.[24] It is indisputably part of the Republic, and summons should have been served on the Solicitor General. We now turn to the question of whether summons was properly served according to the Rules of Court. Petitioners rely solely on the sheriffs return to prove that summons was properly served. We quote its contents, viz.: THIS IS TO CERTIFY that on the 19th day of May 1999, the undersigned caused the service of Summons and Complaint upon defendant J.A. Development Corporation at the address indicated in the summons, the same having been received by a certain Jacqueline delos Santos, a person employed thereat, of sufficient age and discretion to receive such process, who signed on the lower portion of the Summons to acknowledge receipt thereof. Likewise, copy of the Summons and Complaint was served upon defendant Bureau of Telecommunications at the address indicated in the Summons, a copy of the same was received by a certain Cholito Anitola, a person employed thereat, who signed on the lower portion of the Summons to acknowledge receipt thereof.[25] (Emphasis supplied) It is incumbent upon the party alleging that summons was validly served to prove that all requirements were met in the service thereof. We find that this burden was not discharged by the petitioners. The records show that the sheriff served summons on an ordinary employee and not on the Solicitor General. Consequently, the trial court acquired no jurisdiction over BUTEL, and all proceedings therein are null and void. Further, we likewise affirm the decision of the Court of Appeals in CA-G.R. SP No. 60770, setting aside the partial decision of the trial court for having been issued with grave abuse of discretion. It ruled that when the trial court declared the BUTEL in default, allowed petitioners to present their evidence ex parte and rendered a partial decision holding that petitioners are the owners of the subject property, such was tantamount to prejudging the case against respondent JDC. The trial court ruled that petitioners validly acquired the subject parcel of land without any consideration of the evidence that respondent JDC may present to substantiate its claim of ownership over its aliquot part of the subject property. The trial court should have followed the Rules of Court in this situation. Sec. 3(c) of Rule 9 states that when a pleading asserting a claim states a common cause of action against several defending parti es, some of whom answer and the others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence presented. Therefore, the answer filed by a defendant inure to the benefit of all the defendants, defaulted or not, and all of them share a common fate in the action. It is not within the authority of the trial court to divide the case before it by first hearing it ex parte as against the defaulted defendant and rendering a default judgment (in the instant case, partial decision) against it, then proceeding to hear the case, as to the non-defaulted defendant. This deprives the defaulted defendant of due process as it is denied the benefit of the answer and the evidence which could have been presented by its non-defaulted codefendant.[26]

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IN VIEW WHEREOF, the petitions are DENIED for lack of merit. The Decision and Resolution of the Fifteenth Division of the Court of Appeals in CA-G.R. SP No. 60770, dated August 29, 2001 and November 16, 2001, respectively, are AFFIRMED. Likewise, the Decision and Resolution of the Ninth Division of the Court of Appeals in CA-G.R. SP No. 61703, dated January 22, 2003 and September 29, 2003, respectively, are AFFIRMED. The partial decision of the Regional Trial Court dated February 18, 2000, its order dated July 17, 2000, and the writ of execution dated August 8, 2000 are ANNULLED and SET ASIDE. SO ORDERED.

G.R. No. 170427

January 30, 2009

ROBERTO R. DAVID, Petitioner, vs. JUDGE CARMELITA S. GUTIERREZ-FRUELDA, Honorable Presiding Judge, Branch 43, Regional Trial Court of San Fernando, Pampanga, VICENTE L. PANLILIO, ROBERTO L. PANLILIO, REMEDIOS P. PAPA, ADELWISA P. FERNANDEZ, and LOURDES D. PANLILIO, REPRESENTED BY THEIR ATTORNEY-IN-FACT AND ON BEHALF OF HIMSELF, VICENTE L. PANLILIO, and THE REGISTER OF DEEDS OF PAMPANGA,Respondents. DECISION QUISUMBING, Acting C.J.: The instant petition for certiorari under Rule 65 seeks to set aside the Orders dated July 15, 20051 and September 21, 20052 of the Regional Trial Court (RTC) of San Fernando, Pampanga, Branch 43 in Civil Case No. 13008. The RTC had declared petitioner Roberto R. David in default. The proceedings antecedent to this case are as follows: On September 17, 2004, private respondents filed a complaint3 for accounting, reconveyance and damages with prayer for preliminary attachment against petitioner, his wife Marissa David, and the Register of Deeds of Pampanga. Private respondents alleged that petitioner fraudulently exceeded his special power of attorney to cause the conversion of their agricultural lands to those for residential, commercial and industrial purposes by registering in his name some of the lands, mortgaging others, failing to remit and account any money received from any transaction involving their lands, and absconding. Service of summons failed as petitioner was abroad.4 On January 24, 2005, the RTC ordered service by publication.5 Thereafter, private respondents moved that petitioner be declared in default since he failed to answer within 60 days from date of last publication on March 19, 2005.6 On July 14, 2005, petitioner filed a motion for extension7 of 15 days within which to file Answer, with opposition to the motion to declare him in default. In its Order dated July 15, 2005, the RTC declared petitioner in default. The RTC noted that the period to file petitioners Ans wer lapsed on May 19, 2005, 60 days after the last publication on March 19, 2005, and that petitioner failed to answer despite the "many opportunities" given to him. The RTC also denied petitioners motion for extension to file Answer. The fallo of the Order rea ds: WHEREFORE, the foregoing considered, defendant Roberto David [herein petitioner] is hereby declared in default and the plaintiffs [herein private respondents] are allowed to present evidence ex-parte, insofar as said defendant is concerned. xxxx

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The presentation of evidence against Roberto David may be held simultaneously with the presentation of evidence against Marissa David. xxxx SO ORDERED.8 Petitioner moved to lift the order of default and sought another extension of 15 days within which to file Answer. Petitioner stated that declarations of default are frowned upon, that he should be given the opportunity to present evidence in the interest of substantial justice, and that he has meritorious defenses. The RTC denied the motion in its September 21, 2005 Order. The RTC ruled that while judgments by default are generally looked upon with disfavor, petitioners motion to lift the order of default was fatally flawed under Section 3(b), 9 Rule 9 of the Rules of Court. The RTC noted that petitioners motion was not under oath; unaccompanied by an affidavit of merit; and without any allegation that his failure to file Answer was due to fraud, accident, mistake or excusable negligence. The RTC also ruled that it was not sufficient for petitioner to merely allege that he has a meritorious defense. The dispositive portion of the RTC Order reads: WHEREFORE, premises considered, the motion for reconsideration filed by defendant Roberto David is DENIED.1awphil.et Let the pre-trial (for defendant Marissa David) and the ex-parte presentation of evidence by the plaintiff[s], in so far as defendant Roberto David is concerned, be set on October 7, 2005 at 10:00 oclock in the morning. SO ORDERED.10 Petitioner came directly to this Court. He alleges that: I. THE RESPONDENT JUDGE GRAVELY ABUSED HER DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DENYING THE LIFTING OF THE ORDER OF DEFAULT AND IN HOLDING THAT SUFFICIENT PERIOD OF TIME HAD BEEN GIVEN PETITIONER TO FILE ANSWER WHEN, INTER ALIA, COPIES OF THE COMPLAINT AND ALIAS SUMMONS WERE SENT BY REGISTERED MAIL AS EVIDENCED BY REGISTRY RECEIPT, IN CONTRAST TO A REGISTRY RETURN CARD AS PROOF OF SERVICE, NOTWITHSTANDING THE FACT THAT NO AFFIDAVIT SHOWING THE DEPOSIT OF A COPY OF THE SUMMONS AND ORDER OF PUBLICATION IN THE POST OFFICE, POSTAGE PREPAID, DIRECTED TO PETITIONER BY REGISTERED MAIL TO HIS LAST KNOWN ADDRESS WAS SHOWN BY PRIVATE RESPONDENTS. II. THE RESPONDENT JUDGE GRAVELY ABUSED HER DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DENYING THE LIFTING OF THE ORDER OF DEFAULT FOR SUPPOSED FAILURE OF PETITIONER TO FOLLOW TO THE LETTER SEC. 3(b), RULE 9 OF THE RULES OF COURT WHEN THE RESPONDENT JUDGE HERSELF FAILED TO FOLLOW TO THE LETTER THE MANDATE OF SECTION 15 OF RULE 14, TO SPECIFY, IN ANY ORDER GRANTING LEAVE FOR EXTRATERRITORIAL SERVICE, A REASONABLE TIME WHICH SHALL NOT BE LESS THAN SIXTY DAYS AFTER NOTICE, WITHIN WHICH DEFENDANT MUST ANSWER.1 Private respondents counter that the RTC did not commit grave abuse of discretion in denying petitioners moti on to lift order of default because the motion was not under oath; did not contain an allegation that petitioners failure to file Answer was due to fraud, accident, mistake or excusable negligence; and was unaccompanied by an affidavit of merit showing that petitioner has a meritorious defense.12 The basic issue for our resolution is: Did the RTC commit grave abuse of discretion in denying petitioners motion to lift order of default?

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After a careful study of the case and the parties submissions, we find that the RTC did not commit grave abuse of discretion , nor did it err in denying petitioners motion to lift the order of default. Petitioner belabors his complaint on the alleged defects in the service of summons by publication. He ignores his voluntary appearance before the RTC when he filed two motions for extension to file Answer. His voluntary appearance was equivalent to service of summons.13 It has cured any alleged defect in the service of summons.14 We also note that petitioners motions were not motions to dismiss the complaint on the ground of lack of jurisdiction over his person. On the contrary, the motions invoked the RTCs jurisdiction while seeking the following affirmative reliefs: to grant extension, deny the motion to declare petitioner in default and lift the order of default. Thus, petitioner waived any defect in the service of summons by publication or even want of process because for the RTC to validly act on his motions, it necessarily acquired jurisdiction over his person.15lawphi1.net We proceed now to the issue of default. One declared in default has the following remedies: 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 or excusable negligence, and that he has a meritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]); 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 Section 2 [now Section 1] of Rule 38; and d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to set aside the order of default has been presented by him (Sec. 2, Rule 41). Moreover, a petition for certiorari to declare the nullity of a judgment by default is also available if the trial court improperly declared a party in default, or even if the trial court properly declared a party in default, if grave abuse of discretion attended such declaration.16(Emphasis added.) Petitioner used the first remedy. But the RTC denied his motion to lift the order of default. We affirm the RTCs denial. Indeed, default orders are not viewed with favor. 17 But in this case, petitioner failed to comply with the basic requirements of Section 3(b), Rule 9 of the Rules of Court. The motion was not under oath. There was no allegation that petitioners failure to file an Answer or any responsive pleading was due to fraud, accident, mistake, or excusable negligence. Petitioner merely stated that declarations of default are frowned upon, that he should be given the opportunity to present evidence in the interest of substantial justice, and that he has meritorious defenses. Unfortunately, his claim that he has meritorious defenses is unsubstantiated.1awphi1.zw+ He did not even state what evidence he intends to present if his motion is granted.18 Finally, we need to tackle two procedural matters. First, petitioners failure to attach to the petition a copy of the motion to lift the order of default, a relevant document required by Section 3,19 Rule 46 of the Rules of Court, is sufficient basis for us to dismiss the petition. For us to determine whether the RTC committed grave abuse of discretion in denying the motion and ruling that it did not comply with Section 3(b), Rule 9, we must examine the motion. As it happened, petitioner failed but private respondents submitted a copy of said motion.

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Second, we must emphasize that the special civil action of certiorari under Rule 65 is within the concurrent original jurisdiction of this Court and the Court of Appeals. Resort to the higher courts should be made in accordance with their hierarchical order. 20 On this point, petitioner again failed to render due compliance. WHEREFORE, the instant petition is DISMISSED for lack of merit, and we AFFIRM the Orders dated July 15, 2005 and September 21, 2005 of the Regional Trial Court of San Fernando, Pampanga, Branch 43 in Civil Case No. 13008. Costs against the petitioner. SO ORDERED.

G.R. No. 153696

September 11, 2006

SPOUSES HUMBERTO DELOS SANTOS and CARMENCITA DELOS SANTOS, petitioners, vs. HON. EMMANUEL C. CARPIO, Presiding Judge of RTC, Branch 16, Davao City and METROPOLITAN BANK and TRUST COMPANY, respondents. DECISION AUSTRIA-MARTINEZ, J.: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court filed by spouses Humberto delos Santos and Carmencita delos Santos (petitioners) assailing the Decision1 dated April 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 64961.2 The antecedent facts of the case as summarized by the CA are as follows: On January 3, 2001, Metropolitan Bank and Trust Company (or "Metrobank") filed a complaint3 for sum of money against spouses Humberto and Carmencita delos Santos (or "petitioners") before the Regional Trial Court of Davao City (Branch 16). On January 22, 2001, petitioners were served with the summons, together with a copy of the complaint. As petitioners failed to file an answer within the reglementary period, Metrobank, on February 8, 2001,4 filed a motion to declare them in default. The motion was set for hearing on February 16, 2001. Acting on the motion, the lower court, presided over by Hon. Emmanuel C. Carpio (or "respondent judge"), issued an order dated February 12, 2001 declaring petitioners in default and setting the ex-partepresentation of Metrobank's evidence on March 7, 2001. On February 15, 2001, petitioners filed an opposition to Metrobank's motion to declare them in default, claiming that upon receipt of the summons, they immediately sought the services of Atty. Philip Pantojan (or "Atty. Pantojan") of the Into Pantojan Gonzales and Marasigan Law Offices but it was only on February 12, 2001 that they were able to meet with Atty. Pantojan. Petitioners alleged that not being "learned in law", they were unaware "of the consequences of delay in the filing of their answer." On the same date, February 15, 2001, petitioners filed a motion to admit answer, as well as the answer. In an order dated February 16, 2001, respondent judge disregarded petitioners' opposition to Metrobank's motion for default and stood pat on his previous default order. On February 19, 2001, Metrobank filed an opposition to petitioners' motion to admit answer, arguing that said motion was rendered moot and academic by the February 12, 2001 order. Metrobank also chided petitioners for violating the three-day notice rule under Sec. 4, Rule 15 of the 1997 Rules of Civil Procedure. In an order dated February 20, 2001, the motion to admit answer was denied.

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On February 27, 2001, petitioners filed a motion to lift the order of default; Metrobank opposed the motion. In their motion, petitioners reiterated that, being laymen, they were unaware of the fifteen-day period within which to file the answer and that their failure to do so was due to the unavailability of Atty. Pantojan who was then "always out of town." They attached to their motion an "Affidavit of Merits" which restated the contents of the motion. Petitioners further claimed that "if given our day in Court, we have a meritorious defense to set up against the allegations of the plaintiff's complaint." On March 2, 2001, respondent judge issued an order holding in abeyance the ex-parte reception of evidence pending resolution of petitioners' motion to lift the order of default. On March 5, 2001, respondent judge issued an order denying petitioners' motion to lift the order of default and setting the reception of Metrobank's evidence on March 7, 2001, as previously scheduled. On that date (March 7, 2001), Metrobank presented its evidence and the case was submitted for decision. Petitioners moved for reconsideration of the March 5, 2001 order but their motion was denied on March 21, 2001.5 Aggrieved, petitioners filed a Petition for Certiorari with the CA ascribing grave abuse of discretion committed by the trial court amounting to lack of jurisdiction in issuing the Orders dated February 12 and 16, 2001, declaring them in default and denying their Opposition to Metropolitan Bank and Trust Company's (Metrobank) Motion to Declare them in Default, respectively; and the Orders dated March 5 and 21, 2001 denying their Motion to Lift the Order of Default and their Motion for Reconsideration, respectively. In a Decision dated April 30, 2002, the CA denied the petition for lack of merit and accordingly dismissed the same. The CA did not find the excuse proffered by petitioners, i.e., the ignorance of procedural rules and their lawyer's unavailability, as constitutive of excusable negligence. It also ruled that for an order of default to be set aside, petitioners must have a meritorious defense or that something could be gained by having the order of default set aside; that petitioners' affidavit of merit did not show a meritorious defense since it merely stated that "they have a meritorious defense to set up against the allegation of petitioners' complaint" but there was no discussion of such defense and the facts which they intend to prove in support thereof. The CA further found unmeritorious the contention of petitioners that they were declared in default without giving them ample time to file an opposition to Metrobank's Motion to Declare them in Default; that under Section 3, Rule 9 of the Rules of Court, it is provided that the court shall, upon motion of the claiming party with notice to the defending party in default, and proof of such failure, declare the defending party in default; and that since it is clear from the records that the reglementary period for filing an answer had expired with no responsive pleading filed by petitioners, the trial court had properly declared them in default. The CA further declared that even assuming that the trial court committed a procedural lapse in declaring petitioners in default before the scheduled hearing of Metrobank's motion, such error is not so serious as to constitute grave abuse of discretion. Hence, the instant petition filed by petitioners raising the following issues, to wit: 1. Whether or not the procedural lapse committed by Honorable Public Respondent in issuing an Order declaring petitioners' [sic] in default on 12 February 2001 or four (4) days before the scheduled hearing of Metrobank's Motion to declare petitioners' [sic] in default on 16 February 2001 is so serious as to constitute grave abuse of discretion. 2. Whether or not LITIS PENDENTIA raised by petitioners' [sic] as an affirmative defense is a meritorious defense. 3. Whether or not it is beyond the authority of the Honorable Trial Court to rule on the issue of LITIS PENDENTIA simply and chiefly because the defendants failed to seasonably raise it. 4. What constitutes Affidavit of Merit?
6

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Petitioners claim that the trial court committed grave abuse of discretion in declaring them in default in its Order dated February 12, 2001, which was four days before the hearing set on Metrobank's Motion to Declare them in Default; that their failure to file their Answer within the reglementary period was due to the fact that the services of their counsel of choice could not be secured within the period; that they had filed their Motion to Admit Answer and their Answer as well as their Opposition to respondent's motion to declare them in default on February 15, 2001, a day prior to the scheduled date of hearing. Petitioners aver that under Section 1, Rule 9 of the Rules of Court, defenses like the "court has no jurisdiction, litis pendentia, res judicata and prescription" can be taken cognizance of by the court despite the fact that they are not in a motion to dismiss or Answer; that the trial court should have looked into their affirmative defense of litis pendentia raised in their Answer since it is a meritorious defense as it is a ground for a dismissal of a complaint. They further contend that although the affirmative defense of litis pendentia had reached the trial court's attention, it still refused to pass judgment on said legal concern; that the defense of litis pendentia raised in their Answer is sufficient to show that the affidavit of merit showed a meritorious defense; that the procedural lapse committed by the trial court would cause the unlawful deprivation of their property rights through undue haste. In its Comment, Metrobank contends that petitioners failed to file a motion for reconsideration before filing the instant petition which would vest authority for this Court to assume jurisdiction; that the rule on declaration of default did not expressly mandate the trial court to conduct a hearing of the motion as it merely requires that the notice of the motion was made to the defending party; that the trial court declared petitioners in default since they failed to file their Answer within the reglementary period; that assuming arguendo that the trial court committed procedural lapse in declaring petitioners in default before the scheduled hearing, there is still no grave abuse of discretion committed by the trial court since even if the hearing was held, it would not make any difference as petitioners failed to file their Answer within the reglementary period. Metrobank further argues that petitioners' negligence is not excusable because if they have consulted the associates of Atty. Pantojan, they would definitely be advised to ask for an extension of time to file their answer; that petitioners failed to present a meritorious defense since aside from merely stating in general terms their claim of litis pendentia as a defense, the same is misplaced because Civil Case No. 28,362-2001 pending in RTC of Davao City, Branch 16, and Civil Case No. 27,875-2000 filed by petitioners in RTC of Davao City, Branch 10, have separate and distinct causes of action; that the trial court is correct in not ruling on the issue of litis pendentia as petitioners' Answer was not admitted as part of the records of the case. Petitioners filed their Reply contending that appeal by certiorari under Rule 45 does not require prior filing of a motion for reconsideration; that the procedural lapse committed by the trial court in declaring petitioners in default before the scheduled hearing should not be tolerated since petitioners' land and building are at stake; and that they should not be faulted for not consulting the associates of Atty. Pantojan as they reposed their trust and confidence in him. Petitioners and Metrobank filed their respective memoranda. Metrobank's Memorandum no longer questioned petitioners' non-filing of a motion for reconsideration of the CA decision. Prefatorily, we agree with petitioners that in appeal by certiorari, the prior filing of a motion for reconsideration is not required.7 The principal issue before us is whether or not the CA erred in upholding the Orders of the trial court declaring petitioners in default and denying their Motion to Lift Order of Default. We rule in the affirmative. Section 3, Rule 9 of the Rules of Court provides:

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Sec. 3. Default; declaration of If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the 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. Clearly, there are three requirements which must be complied with by the claiming party before the court may declare the defending party in default, to wit: (1) the claiming party must file a motion asking the court to declare the defending party in default; (2) the defending party must be notified of the motion to declare him in default; (3) the claiming party must prove that the defending party has failed to answer within the period provided by the Rule. In filing motions, Section 4, Rule 15 of the Rules of Court, specifically provides: Sec. 4. Hearing of motion. Except for motions which the court may act upon without prejudicing the rights of the adverse party, every written motion shall be set for hearing by the applicant. (Emphasis supplied) xxxx Prior to the present rule on default introduced by the 1997 Rules of Civil Procedure, as amended, Section 1 of the former Rule 18 on default is silent on whether or not there is need for a notice of a motion to declare defendant in default. 8 The Court then ruled that there is no need.9 However, the present rule expressly requires that the motion of the claiming party should be with notice to the defending party.10 The purpose of a notice of a motion is to avoid surprises on the opposite party and to give him time to study and meet the arguments.11 The notice of a motion is required when the party has the right to resist the relief sought by the motion and principles of natural justice demand that his right be not affected without an opportunity to be heard.12 Therefore, as the present rule on default requires the filing of a motion and notice of such motion to the defending party, it is not enough that the defendant failed to answer the complaint within the reglementary period to be a sufficient ground for declaration in default. The motion must also be heard. In this case, it is not disputed that petitioners were served summons on January 22, 2001.13 Under Section 1, Rule 11 of the Rules of Court, the defendant shall file his answer to the complaint within 15 days after service of summons, unless a different period is fixed by the court. Petitioners' answer was due on February 6, 2001, but no answer was filed by petitioners. Thus, Metrobank filed a Motion14 to declare petitioners in default on February 9, 2001, setting the hearing thereof on February 16, 2001. However, four days before the scheduled hearing, the trial court issued the Order dated February 12, 2001, declaring petitioners in default. We could not see any justifiable reason why the trial court chose not to hear the petitioners on the date and time fixed in Metrobank's motion, and instead, hastily granted the motion before it could be heard on the ground that it had found the motion to be impressed with merit. Indeed, in totally disregarding the purpose for which the filing of a motion and notice to defending party are required by the Rules, the trial court had acted in a despotic manner that is correctly assailed through a petition for certiorari which petitioners have seasonably filed with the CA. Again, respondent Judge acted capriciously when he totally ignored petitioners' Opposition to Metrobank's Motion to Declare them in Default and denied their Motion to Admit Answer, both filed on February 15, 2001, a day before the scheduled hearing, which showed their desire to be heard before the motion to declare them in default is resolved by the trial court. A mere perusal of the Answer attached to the Motion to Admit Answer would readily reveal that petitioners raised a special and affirmative defense the other action pending between the same parties for the same cause. Petitioners alleged that they entered into several loan agreements with Metrobank involving an aggregate amount ofP12,500,000.00 which was the basis of petitioners' causes

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of action in a civil case they earlier filed against Metrobank with the RTC of Davao City, Branch 10, docketed as Civil Case No. 27,875-2000, for damages, fixing of interest rates, application of excess interest payments; that the principal obligation of P12,500,000.00 includes all other loans which petitioners have with Metrobank; that the P500,000.00 obligation covered by the promissory note subject of the instant Civil Case No. 28,362-2001 is part of the P12,500,000.00 loan of petitioners, subject of Civil Case No. 27,875-2000 that was earlier filed; and that a written copy of the P500,000.00 loan was not attached to the complaint. Thus, the trial court is deemed to have been apprised of the affirmative defense of litis pendentia. Instead of unceremoniously discarding petitioners' Opposition and Motion to Admit Answer 15 which were filed before the scheduled date of hearing of the motion to declare petitioners in default, it behooved upon the trial court to delve into the merits of the Opposition and the Answer. The trial court then should have been guided by Section 11, Rule 11 of the Rules of Court, to wit: Sec. 11. Extension of time to plead. - Upon motion and on such terms as may be just, the court may extend the time to plead provided in these Rules. The court may also, upon like terms, allow an answer or other pleading to be filed after the time fixed by these Rules. and Section 1, Rule 9 of the 1997 Rules of Procedure which provides: Sec. 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim. Under Rule 11, it is within the discretion of the trial court to permit the filing of defendant's answer even beyond the reglementary period, provided there is justification for the belated action, and there was no showing that the defendant intended to delay the case. Petitioners may be considered to have committed excusable negligence when they waited for the counsel of their choice who was out of town which caused the delay in filing their Answer; and the Motion to Admit Answer was filed before the scheduled date of hearing on the Motion to Declare Petitioners in Default, showing that petitioners had no intention to delay the case. Under Rule 9, the trial court may motu proprio dismiss the claim when it appears from the pleadings or evidence on the record that there is another cause of action pending between the same parties for the same cause. With the alleged affirmative defense of litis pendentia, the trial court had justifiable compelling reason to recall its premature Order declaring petitioners in default. In a case,16 we found the trial court to have gravely abused its discretion when it declared defendants in default; that the answer should be admitted because it had been filed before it was declared in default and no prejudice was caused to plaintiff; and that the hornbook rule is that default judgments are generally disfavored.17 In this case, since the Order dated February 12, 2001 declaring petitioners in default is null and void, the filing of the Answer may be considered as having been filed before petitioners were declared in default and therefore no prejudice was caused to Metrobank and there was no undue delay on the part of petitioners. Basic elementary sense of fairness, liberality and substantial justice so dictate that the premature Order be considered as null and void. It is the avowed policy of the law to accord both parties every opportunity to pursue and defend their cases in the open and relegate technicality to the background in the interest of substantial justice.18 Since the Order dated February 12, 2001 was null and void, the trial court likewise committed grave abuse of discretion in issuing the Orders dated March 5, 2001 and March 21, 2001 denying petitioners' Motion to Lift Order of Default and Motion for Reconsideration, respectively.

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We reiterate the ruling in Akut v. Court of Appeals,19 where we found that the trial court committed grave abuse of discretion in declaring therein petitioners in default and in denying their motion to set aside the order of default, thus: The controlling principle ignored by respondent court is that it is within sound judicial discretion to set aside an order of default and to permit a defendant to file his answer and to be heard on the merits even after the reglementary period for the filing of the answer has expired. This discretion should lean towards giving party-litigants every opportunity to properly present their conflicting claims on the merits of the controversy without resorting to technicalities. Courts should be liberal in setting aside orders of default, for default judgments are frowned upon, and unless it clearly appears that reopening of the case is intended for delay, it is best that the trial courts give both parties every chance to fight their case fairly and in the open, without resort to technicality. x x x x x x Moreover, petitioners' answer shows that they have a prima facie meritorious defense. They should, therefore, be given their day in court to avoid the danger of committing a grave injustice if they were denied an opportunity to introduce evidence in their behalf. Our ruling in Mercader v. Bonto20 and the copious precedents therein cited that "considering that the late filing of defendants' answer was due to excusable negligence and that they appear to have a meritorious defense; that defendants filed an answer before they were declared in default; and that the late filing of the answer did not in any way prejudice or deprive the plaintiff of any substantial right, nor was there intention to unduly delay the case, WE hold that the respondent judge committed an abuse of discretion in declaring the defendants in default and in refusing to set aside the order of default" is fully applicable to the case at bar. Time and again the Court has enjoined trial judges to act with circumspection and not to precipitately declare parties in default, needlessly compelling the aggrieved party to undergo the additional expense, anxiety and delay of seeking the intervention of the appellate courts and depriving them of the much needed time and attention that could instead have well been devoted to the study and disposition of more complex and complicated cases and issues.21 (Emphasis supplied) In sum, we find that the RTC Order declaring petitioners in default and its subsequent Order denying petitioners' Motion to Lift Order of Default are null and void; and the CA erroneously upheld the assailed Orders of the trial court. WHEREFORE, the petition for review is GRANTED. The Decision of the Court of Appeals dated April 30, 2002 in CA-G.R. SP No. 64961 is REVERSED and SET ASIDE. The Order of Default of the Regional Trial Court is SET ASIDE and the Answer filed by petitioners is deemed ADMITTED. The trial court is DIRECTED to continue with deliberate speed with the proceedings in the case below. Costs against private respondent. SO ORDERED.

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G.R. No. 181235

July 22, 2009

BANCO DE ORO-EPCI, INC. (formerly Equitable PCI Bank), Petitioner, - versus JOHN TANSIPEK, Respondent.

DECISION CHICO-NAZARIO, J.: Before Us is a Petition for Review on Certiorari assailing the Decision[1] of the Court of Appeals in CA-G.R. CV No. 69130 dated 18 August 2006 and the Resolution of the same court dated 9 January 2008. The facts of the case are as follows: J. O. Construction, Inc. (JOCI), a domestic corporation engaged in the construction business in Cebu City, filed a complaint against Philippine Commercial and Industrial Bank (PCIB) in the Regional Trial Court (RTC) of Makati City docketed as Civil Case No. 97508. The Complaint alleges that JOCI entered into a contract with Duty Free Philippines, Inc. for the construction of a Duty Free Shop in Mandaue City. As actual construction went on, progress billings were made. Payments were received by JOCI directly or through herein respondent John Tansipek, its authorized collector. Payments received by respondent Tansipek were initially remitted to JOCI. However, payment through PNB Check No. 0000302572 in the amount of P4,050,136.51 was not turned over to JOCI. Instead, respondent Tansipek endorsed said check and deposited the same to his account in PCIB, Wilson Branch, Wilson Street, Greenhills, San Juan, Metro Manila. PCIB allowed the said deposit, despite the fact that the check was crossed for the deposit to payees account only, and despite the alleged lack of authority of respondent Tansipek to endorse said check. PCIB refused to pay JOCI the full amount of the check despite demands made by the latter. JOCI prayed for the payment of the amount of the check (P4,050,136.51), P500,000.00 in attorneys fees, P100,000.00 in expenses,P50,000.00 for costs of suit, and P500,000.00 in exemplary damages. PCIB filed a Motion to Dismiss the Complaint on the grounds that (1) an indispensable party was not impleaded, and (2) therein plaintiff JOCI had no cause of action against PCIB. The RTC denied PCIBs Motion to Dismiss. PCIB filed its answer alleging as defenses that (1) JOCI had clothed Tansipek with authority to act as its agent, and was therefore estopped from denying the same; (2) JOCI had no cause of action against PCIB ; (3) failure to implead Tansipek rendered the proceedings taken after the filing of the complaint void; (4) PCIBs act of accepting the deposit was fully justified by esta blished bank practices; (5) JOCIs claim was barred by laches; and (6) the damages alleged by JOCI were hypothetical and speculative. PCIB incorporated in said Answer its counterclaims for exemplary damages in the amount of P400,000.00, and litigation expenses and attorneys fees in the amount of P400,000.00. PCIB likewise moved for leave for the court to admit the formers third -party complaint against respondent Tansipek. The third-party complaint alleged that respondent Tansipek was a depositor at its Wilson Branch, San Juan, Metro Manila, where he maintained Account No. 5703-03538-3 in his name and/or that of his wife, Anita. Respondent Tansipek had presented to PCIB a signed copy of the Minutes of the meeting of the Board of Directors of JOCI stating the resolution that

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Checks payable to J.O. Construction, Inc. may be deposited to Account No. 5703-03538-3 under the name of John and/or Anita Tansipek, maintained at PCIB, Wilson Branch.[2] Respondent Tansipek had also presented a copy of the Articles of Incorporation of JOCI showing that he and his wife, Anita, were incorporators of JOCI, with Anita as Treasurer. In the third-party complaint, PCIB prayed for subrogation and payment of attorneys fees in the sum of P400,000.00. PCIB filed a Motion to Admit Amended Third-Party Complaint. The amendment consisted in the correction of the caption, so that PCIB appeared as Third-Party Plaintiff and Tansipek as Third-Party Defendant. Upon Motion, respondent Tansipek was granted time to file his Answer to the Third-Party Complaint. He was, however, declared in default for failure to do so. The Motion to Reconsider the Default Order was denied. Respondent Tansipek filed a Petition for Certiorari with the Court of Appeals assailing the Default Order and the denial of the Motion for Reconsideration. The Petition was docketed as CA-G.R. SP No. 47727. On 29 May 1998, the Court of Appeals dismissed the Petition for failure to attach the assailed Orders. On 28 September 1998, the Court of Appeals denied respondent Tansipeks Motion for Reconsideration for having been filed out of time. Pre-trial on the main case ensued, wherein JOCI and PCIB limited the issues as follows: 1. Whether or not the defendant bank erred in allowing the deposit of Check No. 0302572 (Exh. A) in the amount of P4,050,136.51 drawn in favor of plaintiff JO Construction, Inc. in John Tansipeks account when such check was crossed and clearly marked f or payees account only. 2. Whether the alleged board resolution and the articles of Incorporation are genuine and a valid defense against plaintiffs effort to collect the amount of P4,050,136.51. On 14 July 2000, the RTC promulgated its Decision in Civil Case No. 97-508, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff [JOCI] and against the defendant bank [PCIB] ordering the latter to pay to the plaintiff the sum of P4,050,136.51 with interest at the rate of twelve percent (12%) per annum from the filing of this complaint until fully paid plus costs of suit. The other damages claimed by the plaintiff are denied for being speculative. On the third party complaint, third-party defendant John Tansipek is ordered to pay the third-party plaintiff Philippine Commercial and Industrial Bank all amounts said defendant/third-party plaintiff shall have to pay to the plaintiff on account of this case.[3] Respondent Tansipek appealed the Decision to the Court of Appeals. The case was docketed as CA-G.R. CV No. 69130. Respondent Tansipek assigned the following alleged errors: a) The trial courts decision upholding the order of default and the consequent ex-parte reception of appellees evidence was anchored on erroneous and baseless conclusion that: 1) 2) 3) The original reglementary period to plead has already expired. The ten day extended period to answer has likewise expired. There is no need to pass upon a second motion to plead much less, any need for a new motion for extended period to plead.

b) The trial court erred in utterly depriving the appellant of his day in court and in depriving constitutional, substantive and procedural due process premised solely on pure and simple technicality which never existed and are imaginary and illusory. c) The trial court erred in ordering the third-party defendant-appellant John Tansipek to pay the third party plaintiff-appellee PCIBank all amounts said bank shall have to pay to the plaintiff-appellee by way of subrogation since appellant if allowed to litigate in the trial court, would have obtained a favorable judgment as he has good, valid and meritorious defenses.[4]

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On 18 August 2006, the Court of Appeals issued the assailed Decision finding that it was an error for the trial court to have acted on PCIBs motion to declare respondent Tansipek in default. The Court of Appeals thus remanded the case to the RTC for further proceedings, to wit: WHEREFORE, premises considered, the appeal is GRANTED. The decision relative to the third party complaint is REVERSED and SET ASIDE. The case is ordered REMANDED to the trial court for further proceedings on the third party complaint. [5] The Court of Appeals denied the Motion for Reconsideration of PCIB in a Resolution dated 9 January 2008. Petitioner Banco de Oro-EPCI, Inc., as successor-in-interest to PCIB, filed the instant Petition for Review on Certiorari, assailing the above Decision and Resolution of the Court of Appeals, and laying d own a lone issue for this Courts consideration: WHETHER OR NOT THE COURT OF APPEALS CAN REVERSE ITS DECISION HANDED DOWN EIGHT YEARS BEFORE. [6] To recapitulate, upon being declared in default, respondent Tansipek filed a Motion for Reconsideration of the Default Order. Upon denial thereof, Tansipek filed a Petition for Certiorari with the Court of Appeals, which was dismissed for failure to attach the assailed Orders. Respondent Tansipeks Motion for Reconsideration with the Court of Appeals was denied for having been filed out of time. Respondent Tansipek did not appeal said denial to this Court. Respondent Tansipeks remedy against the Order of Default was erroneous from the very beginning. Respondent Tansipek should have filed a Motion to Lift Order of Default, and not a Motion for Reconsideration, pursuant to Section 3(b), Rule 9 of the Rules of Court: (b) Relief from order of default.A party declared in default may at any time after notice thereof and before judgment file a motion under oath to set aside the order of default upon proper showing that his failure to answer was due to fraud, accident, mistake or excusable negligence and that he has a meritorious defense. In such case, the order of default may be set aside on such terms and conditions as the judge may impose in the interest of justice. A Motion to Lift Order of Default is different from an ordinary motion in that the Motion should be verified; and must show fraud, accident, mistake or excusable neglect, and meritorious defenses.[7] The allegations of (1) fraud, accident, mistake or excusable neglect, and (2) of meritorious defenses must concur.[8] Assuming for the sake of argument, however, that respondent Tansipeks Motion for Reconsideration may be treated as a Motion to Lift Order of Default, his Petition forCertiorari on the denial thereof has already been dismissed with finality by the Court of Appeals. Respondent Tansipek did not appeal said ruling of the Court of Appeals to this Court. The dismissal of the Petition for Certiorari assailing the denial of respondent Tansipeks Motion constitutes a bar to the retrial of the same issue of default under the doctrine of the law of the case. In People v. Pinuila,[9] we held that: Law of the case has been defined as the opinion delivered on a former appeal. More specifically, it means that whatever is once irrevocably established as the controlling legal rule of decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court. It may be stated as a rule of general application that, where the evidence on a second or succeeding appeal is substantially the same as that on the first or preceding appeal, all matters, questions, points, or issues adjudicated on the prior appeal are the law of the case on all subsequent appeals and will not be considered or readjudicated therein. xxxx

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As a general rule a decision on a prior appeal of the same case is held to be the law of the case whether that decision is right or wrong, the remedy of the party deeming himself aggrieved being to seek a rehearing. Questions necessarily involved in the decision on a former appeal will be regarded as the law of the case on a subsequent appeal, although the questions are not expressly treated in the opinion of the court, as the presumption is that all the facts in the case bearing on the point decided have received due consideration whether all or none of them are mentioned in the opinion. (Emphasis supplied.) The issue of the propriety of the Order of Default had already been adjudicated in Tansipeks Petition for Certiorari with the Court of Appeals. As such, this issue cannot be readjudicated in Tansipeks appeal of the Decision of the RTC on the main case. Once a decision attains finality, it becomes the law of the case, whether or not said decision is erroneous.[10] Having been rendered by a court of competent jurisdiction acting within its authority, the judgment may no longer be altered even at the risk of legal infirmities and errors it may contain.[11] Respondent Tansipek counters that the doctrine of the law of the case is not applicable, inasmuch as a Petition for Certiorari is not an appeal. Respondent Tansipek further argues that the Doctrine of the Law of the Case applies only when the appellate court renders a decision on the merits, and not when such appeal was denied due to technicalities. We are not persuaded. In Buenviaje v. Court of Appeals,[12] therein respondent Cottonway Marketing Corporation filed a Petition for Certiorari with this Court assailing the Decision of the National Labor Relations Commission (NLRC) ordering, inter alia, the reinstatement of therein petitioners and the payment of backwages from the time their salaries were withheld up to the time of actual reinstatement. The Petition for Certiorari was dismissed by this Court. The subsequent Motion for Reconsideration was likewise denied. However, the Labor Arbiter then issued an Order limiting the amount of backwages that was due to petitioners. The NLRC reversed this Order, but the Court of Appeals reinstated the same. This Court, applying the Doctrine of the Law of the Case, held: The decision of the NLRC dated March 26, 1996 has become final and executory upon the dismissal by this Court of Cottonways petition for certiorari assailing said decision and the denial of its motion for reconsideration. Said judgment may no longer be disturbed or modified by any court or tribunal. It is a fundamental rule that when a judgment becomes final and executory, it becomes immutable and unalterable, and any amendment or alteration which substantially affects a final and executory judgment is void, including the entire proceedings held for that purpose. Once a judgment becomes final and executory, the prevailing party can have it executed as a matter of right, and the issuance of a writ of execution becomes a ministerial duty of the court. A decision that has attained finality becomes the law of the case regardless of any claim that it is erroneous. The writ of execution must therefore conform to the judgment to be executed and adhere strictly to the very essential particulars.[13] (Emphases supplied.) Furthermore, there is no substantial distinction between an appeal and a Petition for Certiorari when it comes to the application of the Doctrine of the Law of the Case. The doctrine is founded on the policy of ending litigation. The doctrine is necessary to enable the appellate court to perform its duties satisfactorily and efficiently, which would be impossible if a question once considered and decided by it were to be litigated anew in the same case upon any and every subsequent appeal. [14] Likewise, to say that the Doctrine of the Law the Case applies only when the appellate court renders a decision on the merits would be putting a premium on the fault or negligence of the party losing the previous appeal. In the case at bar, respondent Tansipek would be awarded (1) for his failure to attach the necessary requirements to his Petition for Certiorari with the Court of Appeals; (2)

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for his failure to file a Motion for Reconsideration in time; and (3) for his failure to appeal the Decision of the Court of Appeals with this Court. The absurdity of such a situation is clearly apparent. It is important to note that a party declared in default respondent Tansipek in this case is not barred from appealing from the judgment on the main case, whether or not he had previously filed a Motion to Set Aside Order of Default, and regardless of the result of the latter and the appeals therefrom. However, the appeal should be based on the Decisions being contrary to law or the evidence already presented, and not on the alleged invalidity of the default order.[15] WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 69130 dated 18 August 2006 and the Resolution of the same court dated 9 January 2008 are hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Makati City in Civil Case No. 97-508 dated 14 July 2000 is hereby REINSTATED. No pronouncement as to costs. SO ORDERED.

G.R. No. 153696

September 11, 2006

SPOUSES HUMBERTO DELOS SANTOS and CARMENCITA DELOS SANTOS, petitioners, vs. HON. EMMANUEL C. CARPIO, Presiding Judge of RTC, Branch 16, Davao City and METROPOLITAN BANK and TRUST COMPANY, respondents. DECISION AUSTRIA-MARTINEZ, J.: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court filed by spouses Humberto delos Santos and Carmencita delos Santos (petitioners) assailing the Decision1 dated April 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 64961.2 The antecedent facts of the case as summarized by the CA are as follows: On January 3, 2001, Metropolitan Bank and Trust Company (or "Metrobank") filed a complaint 3 for sum of money against spouses Humberto and Carmencita delos Santos (or "petitioners") before the Regional Trial Court of Davao City (Branch 16). On January 22, 2001, petitioners were served with the summons, together with a copy of the complaint. As petitioners failed to file an answer within the reglementary period, Metrobank, on February 8, 2001,4 filed a motion to declare them in default. The motion was set for hearing on February 16, 2001. Acting on the motion, the lower court, presided over by Hon. Emmanuel C. Carpio (or "respondent judge"), issued an order dated February 12, 2001 declaring petitioners in default and setting the ex-partepresentation of Metrobank's evidence on March 7, 2001. On February 15, 2001, petitioners filed an opposition to Metrobank's motion to declare them in default, claiming that upon receipt of the summons, they immediately sought the services of Atty. Philip Pantojan (or "Atty. Pantojan") of the Into Pantojan Gonzales and Marasigan Law Offices but it was only on February 12, 2001 that they were able to meet with Atty. Pantojan. Petitioners alleged that not being "learned in law", they were unaware "of the consequences of delay in the filing of their answer." On the same date, February 15, 2001, petitioners filed a motion to admit answer, as well as the answer. In an order dated February 16, 2001, respondent judge disregarded petitioners' opposition to Metrobank's motion for default and stood pat on his previous default order.

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On February 19, 2001, Metrobank filed an opposition to petitioners' motion to admit answer, arguing that said motion was rendered moot and academic by the February 12, 2001 order. Metrobank also chided petitioners for violating the three-day notice rule under Sec. 4, Rule 15 of the 1997 Rules of Civil Procedure. In an order dated February 20, 2001, the motion to admit answer was denied. On February 27, 2001, petitioners filed a motion to lift the order of default; Metrobank opposed the motion. In their motion, petitioners reiterated that, being laymen, they were unaware of the fifteen-day period within which to file the answer and that their failure to do so was due to the unavailability of Atty. Pantojan who was then "always out of town." They attached to their motion an "Affidavit of Merits" which restated the contents of the motion. Petitioners further claimed that "if given our day in Court, we have a meritorious defense to set up against the allegations of the plaintiff's complaint." On March 2, 2001, respondent judge issued an order holding in abeyance the ex-parte reception of evidence pending resolution of petitioners' motion to lift the order of default. On March 5, 2001, respondent judge issued an order denying petitioners' motion to lift the order of default and setting the reception of Metrobank's evidence on March 7, 2001, as previously scheduled. On that date (March 7, 2001), Metrobank presented its evidence and the case was submitted for decision. Petitioners moved for reconsideration of the March 5, 2001 order but their motion was denied on March 21, 2001.5 Aggrieved, petitioners filed a Petition for Certiorari with the CA ascribing grave abuse of discretion committed by the trial court amounting to lack of jurisdiction in issuing the Orders dated February 12 and 16, 2001, declaring them in default and denying their Opposition to Metropolitan Bank and Trust Company's (Metrobank) Motion to Declare them in Default, respectively; and the Orders dated March 5 and 21, 2001 denying their Motion to Lift the Order of Default and their Motion for Reconsideration, respectively. In a Decision dated April 30, 2002, the CA denied the petition for lack of merit and accordingly dismissed the same. The CA did not find the excuse proffered by petitioners, i.e., the ignorance of procedural rules and their lawyer's unavailability, as constitutive of excusable negligence. It also ruled that for an order of default to be set aside, petitioners must have a meritorious defense or that something could be gained by having the order of default set aside; that petitioners' affidavit of merit did not show a meritorious defense since it merely stated that "they have a meritorious defense to set up against the allegation of petitioners' complaint" but there was no discussion of such defense and the facts which they intend to prove in support thereof. The CA further found unmeritorious the contention of petitioners that they were declared in default without giving them ample time to file an opposition to Metrobank's Motion to Declare them in Default; that under Section 3, Rule 9 of the Rules of Court, it is provided that the court shall, upon motion of the claiming party with notice to the defending party in default, and proof of such failure, declare the defending party in default; and that since it is clear from the records that the reglementary period for filing an answer had expired with no responsive pleading filed by petitioners, the trial court had properly declared them in default. The CA further declared that even assuming that the trial court committed a procedural lapse in declaring petitioners in default before the scheduled hearing of Metrobank's motion, such error is not so serious as to constitute grave abuse of discretion. Hence, the instant petition filed by petitioners raising the following issues, to wit: 1. Whether or not the procedural lapse committed by Honorable Public Respondent in issuing an Order declaring petitioners' [sic] in default on 12 February 2001 or four (4) days before the scheduled hearing of Metrobank's Motion to declare petitioners' [sic] in default on 16 February 2001 is so serious as to constitute grave abuse of discretion. 2. Whether or not LITIS PENDENTIA raised by petitioners' [sic] as an affirmative defense is a meritorious defense.

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3. Whether or not it is beyond the authority of the Honorable Trial Court to rule on the issue of LITIS PENDENTIA simply and chiefly because the defendants failed to seasonably raise it. 4. What constitutes Affidavit of Merit?
6

Petitioners claim that the trial court committed grave abuse of discretion in declaring them in default in its Order dated February 12, 2001, which was four days before the hearing set on Metrobank's Motion to Declare them in Default; that their failure to file their Answer within the reglementary period was due to the fact that the services of their counsel of choice could not be secured within the period; that they had filed their Motion to Admit Answer and their Answer as well as their Opposition to respondent's motion to declare them in default on February 15, 2001, a day prior to the scheduled date of hearing. Petitioners aver that under Section 1, Rule 9 of the Rules of Court, defenses like the "court has no jurisdiction, litis pendentia, res judicata and prescription" can be taken cognizance of by the court despite the fact that they are not in a motion to dismiss or Answer; that the trial court should have looked into their affirmative defense of litis pendentia raised in their Answer since it is a meritorious defense as it is a ground for a dismissal of a complaint. They further contend that although the affirmative defense of litis pendentia had reached the trial court's attention, it still refused to pass judgment on said legal concern; that the defense of litis pendentia raised in their Answer is sufficient to show that the affidavit of merit showed a meritorious defense; that the procedural lapse committed by the trial court would cause the unlawful deprivation of their property rights through undue haste. In its Comment, Metrobank contends that petitioners failed to file a motion for reconsideration before filing the instant petition which would vest authority for this Court to assume jurisdiction; that the rule on declaration of default did not expressly mandate the trial court to conduct a hearing of the motion as it merely requires that the notice of the motion was made to the defending party; that the trial court declared petitioners in default since they failed to file their Answer within the reglementary period; that assuming arguendo that the trial court committed procedural lapse in declaring petitioners in default before the scheduled hearing, there is still no grave abuse of discretion committed by the trial court since even if the hearing was held, it would not make any difference as petitioners failed to file their Answer within the reglementary period. Metrobank further argues that petitioners' negligence is not excusable because if they have consulted the associates of Atty. Pantojan, they would definitely be advised to ask for an extension of time to file their answer; that petitioners failed to present a meritorious defense since aside from merely stating in general terms their claim of litis pendentia as a defense, the same is misplaced because Civil Case No. 28,362-2001 pending in RTC of Davao City, Branch 16, and Civil Case No. 27,875-2000 filed by petitioners in RTC of Davao City, Branch 10, have separate and distinct causes of action; that the trial court is correct in not ruling on the issue of litis pendentia as petitioners' Answer was not admitted as part of the records of the case. Petitioners filed their Reply contending that appeal by certiorari under Rule 45 does not require prior filing of a motion for reconsideration; that the procedural lapse committed by the trial court in declaring petitioners in default before the scheduled hearing should not be tolerated since petitioners' land and building are at stake; and that they should not be faulted for not consulting the associates of Atty. Pantojan as they reposed their trust and confidence in him. Petitioners and Metrobank filed their respective memoranda. Metrobank's Memorandum no longer questioned petitioners' non-filing of a motion for reconsideration of the CA decision. Prefatorily, we agree with petitioners that in appeal by certiorari, the prior filing of a motion for reconsideration is not required.7 The principal issue before us is whether or not the CA erred in upholding the Orders of the trial court declaring petitioners in default and denying their Motion to Lift Order of Default.

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We rule in the affirmative. Section 3, Rule 9 of the Rules of Court provides: Sec. 3. Default; declaration of If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the 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. Clearly, there are three requirements which must be complied with by the claiming party before the court may declare the defending party in default, to wit: (1) the claiming party must file a motion asking the court to declare the defending party in default; (2) the defending party must be notified of the motion to declare him in default; (3) the claiming party must prove that the defending party has failed to answer within the period provided by the Rule. In filing motions, Section 4, Rule 15 of the Rules of Court, specifically provides: Sec. 4. Hearing of motion. Except for motions which the court may act upon without prejudicing the rights of the adverse party, every written motion shall be set for hearing by the applicant. (Emphasis supplied) xxxx Prior to the present rule on default introduced by the 1997 Rules of Civil Procedure, as amended, Section 1 of the former Rule 18 on default is silent on whether or not there is need for a notice of a motion to declare defendant in default. 8 The Court then ruled that there is no need.9 However, the present rule expressly requires that the motion of the claiming party should be with notice to the defending party.10 The purpose of a notice of a motion is to avoid surprises on the opposite party and to give him time to study and meet the arguments.11 The notice of a motion is required when the party has the right to resist the relief sought by the motion and principles of natural justice demand that his right be not affected without an opportunity to be heard.12 Therefore, as the present rule on default requires the filing of a motion and notice of such motion to the defending party, it is not enough that the defendant failed to answer the complaint within the reglementary period to be a sufficient ground for declaration in default. The motion must also be heard. In this case, it is not disputed that petitioners were served summons on January 22, 2001. 13 Under Section 1, Rule 11 of the Rules of Court, the defendant shall file his answer to the complaint within 15 days after service of summons, unless a different period is fixed by the court. Petitioners' answer was due on February 6, 2001, but no answer was filed by petitioners. Thus, Metrobank filed a Motion14 to declare petitioners in default on February 9, 2001, setting the hearing thereof on February 16, 2001. However, four days before the scheduled hearing, the trial court issued the Order dated February 12, 2001, declaring petitioners in default. We could not see any justifiable reason why the trial court chose not to hear the petitioners on the date and time fixed in Metrobank's motion, and instead, hastily granted the motion before it could be heard on the ground that it had found the motion to be impressed with merit. Indeed, in totally disregarding the purpose for which the filing of a motion and notice to defending party are required by the Rules, the trial court had acted in a despotic manner that is correctly assailed through a petition for certiorari which petitioners have seasonably filed with the CA. Again, respondent Judge acted capriciously when he totally ignored petitioners' Opposition to Metrobank's Motion to Declare them in Default and denied their Motion to Admit Answer, both filed on February 15, 2001, a day before the scheduled hearing, which showed their desire to be heard before the motion to declare them in default is resolved by the trial court.

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A mere perusal of the Answer attached to the Motion to Admit Answer would readily reveal that petitioners raised a special and affirmative defense the other action pending between the same parties for the same cause. Petitioners alleged that they entered into several loan agreements with Metrobank involving an aggregate amount ofP12,500,000.00 which was the basis of petitioners' causes of action in a civil case they earlier filed against Metrobank with the RTC of Davao City, Branch 10, docketed as Civil Case No. 27,875-2000, for damages, fixing of interest rates, application of excess interest payments; that the principal obligation of P12,500,000.00 includes all other loans which petitioners have with Metrobank; that the P500,000.00 obligation covered by the promissory note subject of the instant Civil Case No. 28,362-2001 is part of the P12,500,000.00 loan of petitioners, subject of Civil Case No. 27,875-2000 that was earlier filed; and that a written copy of the P500,000.00 loan was not attached to the complaint. Thus, the trial court is deemed to have been apprised of the affirmative defense of litis pendentia. Instead of unceremoniously discarding petitioners' Opposition and Motion to Admit Answer15 which were filed before the scheduled date of hearing of the motion to declare petitioners in default, it behooved upon the trial court to delve into the merits of the Opposition and the Answer. The trial court then should have been guided by Section 11, Rule 11 of the Rules of Court, to wit: Sec. 11. Extension of time to plead. - Upon motion and on such terms as may be just, the court may extend the time to plead provided in these Rules. The court may also, upon like terms, allow an answer or other pleading to be filed after the time fixed by these Rules. and Section 1, Rule 9 of the 1997 Rules of Procedure which provides: Sec. 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim. Under Rule 11, it is within the discretion of the trial court to permit the filing of defendant's answer even beyond the reglementary period, provided there is justification for the belated action, and there was no showing that the defendant intended to delay the case. Petitioners may be considered to have committed excusable negligence when they waited for the counsel of their choice who was out of town which caused the delay in filing their Answer; and the Motion to Admit Answer was filed before the scheduled date of hearing on the Motion to Declare Petitioners in Default, showing that petitioners had no intention to delay the case. Under Rule 9, the trial court may motu proprio dismiss the claim when it appears from the pleadings or evidence on the record that there is another cause of action pending between the same parties for the same cause. With the alleged affirmative defense of litis pendentia, the trial court had justifiable compelling reason to recall its premature Order declaring petitioners in default. In a case,16 we found the trial court to have gravely abused its discretion when it declared defendants in default; that the answer should be admitted because it had been filed before it was declared in default and no prejudice was caused to plaintiff; and that the hornbook rule is that default judgments are generally disfavored.17 In this case, since the Order dated February 12, 2001 declaring petitioners in default is null and void, the filing of the Answer may be considered as having been filed before petitioners were declared in default and therefore no prejudice was caused to Metrobank and there was no undue delay on the part of petitioners. Basic elementary sense of fairness, liberality and substantial justice so dictate that the premature Order be considered as null and void. It is the avowed policy of the law to accord both parties every opportunity to pursue and defend their cases in the open and relegate technicality to the background in the interest of substantial justice.18

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Since the Order dated February 12, 2001 was null and void, the trial court likewise committed grave abuse of discretion in issuing the Orders dated March 5, 2001 and March 21, 2001 denying petitioners' Motion to Lift Order of Default and Motion for Reconsideration, respectively. We reiterate the ruling in Akut v. Court of Appeals,19 where we found that the trial court committed grave abuse of discretion in declaring therein petitioners in default and in denying their motion to set aside the order of default, thus: The controlling principle ignored by respondent court is that it is within sound judicial discretion to set aside an order of default and to permit a defendant to file his answer and to be heard on the merits even after the reglementary period for the filing of the answer has expired. This discretion should lean towards giving party-litigants every opportunity to properly present their conflicting claims on the merits of the controversy without resorting to technicalities. Courts should be liberal in setting aside orders of default, for default judgments are frowned upon, and unless it clearly appears that reopening of the case is intended for delay, it is best that the trial courts give both parties every chance to fight their case fairly and in the open, without resort to technicality. x x x x x x Moreover, petitioners' answer shows that they have a prima facie meritorious defense. They should, therefore, be given their day in court to avoid the danger of committing a grave injustice if they were denied an opportunity to introduce evidence in their behalf. Our ruling in Mercader v. Bonto20 and the copious precedents therein cited that "considering that the late filing of defendants' answer was due to excusable negligence and that they appear to have a meritorious defense; that defendants filed an answer before they were declared in default; and that the late filing of the answer did not in any way prejudice or deprive the plaintiff of any substantial right, nor was there intention to unduly delay the case, WE hold that the respondent judge committed an abuse of discretion in declaring the defendants in default and in refusing to set aside the order of default" is fully applicable to the case at bar. Time and again the Court has enjoined trial judges to act with circumspection and not to precipitately declare parties in default, needlessly compelling the aggrieved party to undergo the additional expense, anxiety and delay of seeking the intervention of the appellate courts and depriving them of the much needed time and attention that could instead have well been devoted to the study and disposition of more complex and complicated cases and issues.21 (Emphasis supplied) In sum, we find that the RTC Order declaring petitioners in default and its subsequent Order denying petitioners' Motion to Lift Order of Default are null and void; and the CA erroneously upheld the assailed Orders of the trial court. WHEREFORE, the petition for review is GRANTED. The Decision of the Court of Appeals dated April 30, 2002 in CA-G.R. SP No. 64961 is REVERSED and SET ASIDE. The Order of Default of the Regional Trial Court is SET ASIDE and the Answer filed by petitioners is deemed ADMITTED. The trial court is DIRECTED to continue with deliberate speed with the proceedings in the case below. Costs against private respondent. SO ORDERED.

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JOSE R. MARTINEZ, Petitioner,

G. R. No. 160895 Present: QUISUMBING, Chairperson,

- versus REPUBLIC OF THE PHILIPPINES, Respondents. Promulgated: October 30, 2006

CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ

x---------------------------------------------------------------------------------x DECISION TINGA, J.: The central issue presented in this Petition for Review is whether an order of general default issued by a trial court in a land registration case bars the Republic of thePhilippines, through the Office of the Solicitor General, from interposing an appeal from the trial courts subsequent decision in favor of the applicant. The antecedent facts follow. On 24 February 1999, petitioner Jose R. Martinez (Martinez) filed a petition for the registration in his name of three (3) parcels of land included in the Cortes, Surigao del Sur Cadastre. The lots, individually identified as Lot No. 464-A, Lot No. 464-B, and Lot No. 370, Cad No. 597, collectively comprised around 3,700 square meters. Martinez alleged that he had purchased lots in 1952 from his uncle, whose predecessors-in-interest were traceable up to the 1870s. It was claimed that Martinez had remained in continuous possession of the lots; that the lots had remained unencumbered; and that they became private property through prescription pursuant to Section 48(b) of Commonwealth Act No. 141. Martinez further claimed that he had been constrained to initiate the proceedings because the Director of the Land Management Services had failed to do so despite the completion of the cadastral survey of Cortes, Surigao del Sur.[1] The case was docketed as Land Registration Case No. N-30 and raffled to the Regional Trial Court (RTC) of Surigao del Sur, Branch 27. The Office of the Solicitor General (OSG) was furnished a copy of the petition. The trial court set the case for hearing and directed the publication of the corresponding Notice of Hearing in the Official Gazette. On 30 September 1999, the OSG, in behalf of the Republic of the Philippines, opposed the petition on the grounds that appellees possession was not in accordance with Se ction 48(b) of Commonwealth Act No. 141; that his muniments of title were insufficient to prove bona-fide acquisition and possession of the subject parcels; and that the properties formed part of the public domain and thus not susceptible to private appropriation.[2] Despite the opposition filed by the OSG, the RTC issued an order of general default, even against the Republic of the Philippines, on 29 March 2000. This ensued when during the hearing of even date, no party appeared before the Court to oppose Martinezs petition.[3] Afterwards, the trial court proceeded to receive Martinezs oral and documentary evidence in support of his petition. On 1 August 2000, the RTC rendered a Decision[4]concluding that Martinez and his predecessors-in-interest had been for over 100 years in possession characterized as continuous, open, public, and in the concept of an owner. The RTC thus decreed the registration of the three (3) lots in the name of Martinez. From this Decision, the OSG filed a Notice of Appeal dated 28 August 2000,[5] which was approved by the RTC. However, after the records had been transmitted to the Court of Appeals, the RTC received a letter dated 21 February 2001[6] from the Land

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Registration Authority (LRA) stating that only Lot Nos. 464-A and 464-B were referred to in the Notice of Hearing published in the Official Gazette; and that Lot No. 370, Cad No. 597 had been deliberately omitted due to the lack of an approved survey plan for that property. Accordingly, the LRA manifested that this lot should not have been adjudicated to Martinez for lack of jurisdiction. This letter was referred by the RTC to the Court of Appeals for appropriate action.[7] On 10 October 2003, the Court of Appeals promulgated the assailed Decision,[8] reversing the RTC and instead ordering the dismissal of the petition for registration. In light of the opposition filed by the OSG, the appellate court found the evidence presented by Martinez as insufficient to support the registration of the subject lots. The Court of Appeals concluded that the oral evidence presented by Martinez merely consisted of general declarations of ownership, without alluding to specific acts of ownership performed by him or his predecessors-in-interest. It likewise debunked the documentary evidence presented by Martinez, adjudging the same as either inadmissible or ineffective to establish proof of ownership. No motion for reconsideration appears to have been filed with the Court of Appeals by Martinez, who instead directly assailed its Decision before this Court through the present petition. We cannot help but observe that the petition, eight (8) pages in all, was apparently prepared with all deliberate effort to attain nothing more but the perfunctory. The arguments raised center almost exclusively on the claim that the OSG no longer had personality to oppose the petition, or appeal its allowance by the RTC, following the order of general default. Starkly put, the [OSG] has no personality to raise any issue at all under the circumstances pointed out hereinabove. [9] Otherwise, it is content in alleging that [Martinez] presented sufficient and persuasive proof to substantiate the fact that his title to Lot Nos. 464 -A and 464-B is worth the confirmation he seeks to be done in this registration case;[10] and that the RTC had since issued a new Order dated 1 September 2003, confirming Martinezs title over Lot No. 370. In its Comment dated 24 May 2004,[11] the OSG raises several substantial points, including the fact that it had duly opposed Martinezs application for registration before the RTC; that jurisprudence and the Rules of Court acknowledge that a party in default is not precluded from appealing the unfavorable judgment; that the RTC had no jurisdiction over Lot No. 370 since its technical description was not published in the Official Gazette; and that as found by the Court of Appeals the evidence presented by Martinez is insufficient for registering the lots in his name.[12] Despite an order from the Court requiring him to file a Reply to the Comment, counsel for Martinez declined to do so, explaining, among others, that he felt he would only be taxing the collective patien ce of this [Court] if he merely repeats x x x what petitioner had succinctly stated x x x on pages four (4) to seven (7) of his said petition. Counsel for petitioner was accordingly fined by the Court.[13] The Courts patience is taxed less by redundant pleadings than by insubstantial arguments. The inability of Martinez to offer an effective rebuttal to the arguments of the OSG further debilitates what is an already weak petition. The central question, as posed by Martinez, is whether the OSG could have still appealed the RTC decision after it had been declared in default. The OSG argues that a party in default is not precluded from filing an appeal, citing Metropolitan Bank & Trust Co. v. Court of Appeals,[14] and asserts that [t]he Rules of Court expressly provides that a party who has been declared in default may appeal from the judgment rendered against him.[15] There is error in that latter, unequivocal averment, though one which does not deter from the ultimate correctness of the general postulate that a party declared in default is allowed to pose an appeal. Elaboration is in order. We note at the onset that the OSG does not impute before this Court that the RTC acted improperly in declaring public respondent in default, even though an opposition had been filed to Martinezs petition. Under Section 26 of Presidential Decree No. 1529, as

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amended, the order of default may be issued [i]f no person appears and answers within the time allowed. The RTC appears to have issued the order of general default simply on the premise that no oppositor appeared before it on the hearing of 29 March 2000. But it cannot be denied that the OSG had already duly filed its Opposition to Martinezs petition long before the said hearing. As we held in Director of Lands v. Santiago:[16] [The] opposition or answer, which is based on substantial grounds, having been formally filed, it was improper for the respondent Judge taking cognizance of such registration case to declare the oppositor in default simply because he failed to appear on the day set for the initial healing. The pertinent provision of law which states: "If no person appears and answers within the time allowed, the court may at once upon motion of the applicant, no reason to the contrary appearing, order a general default to be recorded . . . ," cannot be interpreted to mean that the court can just disregard the answer before it, which has long been filed, for such an interpretation would be nothing less than illogical, unwarranted, and unjust. Had the law intended that failure of the oppositor to appear on the date of the initial hearing would be a ground for default despite his having filed an answer, it would have been so stated in unmistakable terms, considering the serious consequences of an order of default. Especially in this case where the greater public interest is involved as the land sought to be registered is alleged to be public land, the respondent Judge should have received the applicant's evidence and set another date for the reception of the oppositor's evidence. The oppositor in the Court below and petitioner herein should have been accorded ample opportunity to establish the government's claim.[17] Strangely, the OSG did not challenge the propriety of the default order, whether in its appeal before the Court of Appeals or in its petition before this Court. It would thus be improper for the Court to make a pronouncement on the validity of the default order since the same has not been put into issue. Nonetheless, we can, with comfort, proceed from same apparent premise of the OSG that the default order was proper or regular. The juridical utility of a declaration of default cannot be disputed. By forgoing the need for adversarial proceedings, it affords the opportunity for the speedy resolution of cases even as it penalizes parties who fail to give regard or obedience to the judicial processes. The extent to which a party in default loses standing in court has been the subject of considerable jurisprudential debate. Way back in 1920, in Velez v. Ramas,[18] we declared that the defaulting defendant loses his standing in court, he not being entitled to the service of notices in the case, nor to appear in the suit in any way. He cannot adduce evidence; nor can he be heard at the final hearing.[19] These restrictions were controversially expanded in Lim Toco v. Go Fay,[20] decided in 1948, where a divided Court pronounced that a defendant in default had no right to appeal the judgment rendered by the trial court, except where a motion to set aside the order of default had been filed. This, despite the point raised by Justice Perfecto in dissent that there was no provision in the then Rules of Court or any law depriving a defaulted defendant of the right to be heard on appeal. [21] The enactment of the 1964 Rules of Court incontestably countermanded the Lim Toco ruling. Section 2, Rule 41 therein expressly stated that [a] party who has been declared in default may likewise appeal from the judgment rendered against him as contr ary to the evidence or to the law, even if no petition for relief to set aside the order of default has been presented by him in accordance with Rule 38.[22] By clearly specifying that the right to appeal was available even if no petition for relief to set aside the order of default had been filed, the then fresh Rules clearly rendered the Lim Toco ruling as moot. Another provision in the 1964 Rules concerning the effect of an order of default acknowledged that a party declared in default shall not be entitled to notice of subsequent proceedings, nor to take part in the trial. [23] Though it might be argued that appellate proceedings fall part of the trial since there is no final termination of the case as of then, the clear intent of the 1964 Rules was to

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nonetheless allow the defaulted defendant to file an appeal from the trial court decision. Indeed, jurisprudence applying the 1964 Rules was unhesitant to affirm a defaulted defendants right to appeal, as guaranteed under Section 2 of Rule 41, even as Lim Toco was not explicitly abandoned. In the 1965 case of Antonio, et al. v. Jacinto,[24] the Court acknowledged that the prior necessity of a ruling setting aside the order of default however, was changed by the Revised Rules of Court. Under Rule 41, section 2, paragraph 3, a party who has been declared in default may likewise appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition for relief to set aside the order of default has been presented by him in accordance with Rule 38. [25] It was further qualified inMatute v. Court of Appeals[26] that the new availability of a defaulted defendants right to appeal did not preclude a defendant who has been illegally declared in default from pursuing a more speedy and efficacious remedy, like a petition for certiorari to have the judgment by default set aside as a nullity.[27] In Tanhu v. Ramolete,[28] the Court cited with approval the commentaries of Chief Justice Moran, expressing the reformulated doctrine that following Lim Toco, a defaulted defendant cannot adduce evidence; nor can he be heard at the final hearing, although [under Section 2, Rule 41,] he may appeal the judgment rendered against him on the merits. [29] Thus, for around thirty-odd years, there was no cause to doubt that a defaulted defendant had the right to appeal the adverse decision of the trial court even without seeking to set aside the order of default. Then, in 1997, the Rules of Civil Procedure were amended, providing for a new Section 2, Rule 41. The new provision reads: SECTION 1. Subject of appeal.An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter therein when declared by these Rules to be appealable. No appeal may be taken from: (a) (b) (c) (d) (e) An order denying a motion for new trial or reconsideration; An order denying a petition for relief or any similar motion seeking relief from judgment; An interlocutory order; An order disallowing or dismissing an appeal; An order denying a motion to set aside a judgment by consent, confession or compromise on the ground of fraud, mistake

or duress, or any other ground vitiating consent; (f) (g) An order of execution; A judgment or final order for or against or one or more of several parties or in separate claims, counterclaims, cross-claims

and third-party complaints, while the main case is pending, unless the court allows an appeal therefrom; and (h) An order dismissing an action without prejudice.

In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action under Rule 65. Evidently, the prior warrant that a defaulted defendant had the right to appeal was removed from Section 2, Rule 41. On the other hand, Section 3 of Rule 9 of the 1997 Rules incorporated the particular effects on the parties of an order of default: Sec. 3. Default; declaration of.If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the 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.

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(a) the trial. (b)

Effect of order of default.A party in default shall be entitled to notice of subsequent proceedings but shall not take part in

Relief from order of default.A party declared in default may any time after notice thereof and before judgment file a

motion under oath to set aside the order of default upon proper showing that his failure to answer was due to fraud, accident, mistake or excusable negligence and that he has a meritorious defense. In such case, the order of default may be set aside on such terms and conditions as the judge may impose in the interest of justice. (c) Effect of partial default.When a pleading asserting a claim states a common cause of action against several defending

parties, some of whom answer and the others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence presented. (d) Extent of relief to be awarded.A judgment rendered against a party in default shall not exceed the amount or be different

in kind from that prayed for nor award unliquidated damages. xxx It cannot be escaped that the old provision expressly guaranteeing the right of a defendant declared in default to appeal the adverse decision was not replicated in the 1997 Rules of Civil Procedure. Should this be taken as a sign that under the 1997 Rules a defaulted defendant no longer has the right to appeal the trial court decision, or that the Lim Toco doctrine has been reinstated? If post-1997 jurisprudence and the published commentaries to the 1997 Rules were taken as an indication, the answer should be in the negative. The right of a defaulted defendant to appeal remains extant. By 1997, the doctrinal rule concerning the remedies of a party declared in default had evolved into a fairly comprehensive restatement as offered in Lina v. Court of Appeals:[30] 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 or excusable neglect, and that he has meritorious defenses; (Sec 3, Rule 18) 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 Section 2 of Rule 38; and d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to

set aside the order of default has been presented by him. (Sec. 2, Rule 41)[31] The fourth remedy, that of appeal, is anchored on Section 2, Rule 41 of the 1964 Rules. Yet even after that provisions deletion under the 1997 Rules, the Court did not hesitate to expressly rely again on the Lina doctrine, including the pronouncement that a defaulted defendant may appeal from the judgment rendered
[32]

against

him.
[33]

This

can

be

seen

in

the

cases

of Indiana Aerospace University v. Commission on Higher Education,

Tan v. Dumarpa,

and Crisologo v. Globe Telecom, Inc.[34]

Annotated textbooks on the 1997 Rules of Civil Procedure similarly acknowledge that even under the new rules, a defaulted defendant retains the right to appeal as previously confirmed under the old Section 2, Rule 41. In his textbook on Civil Procedure, Justice Francisco answers the question What are the remedies available to a defending party in default? with a reiteration of the Lina doctrine, including the remedy that a defaulted defendant may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to set aside the order of default has been presented by him. [35] Justice

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Regalado also restates the Lina rule in his textbook on Civil Procedure, opining that the remedies enumerated therein, even if under the former Rules of Procedure, would hold true under the present amended Rules. [36] Former Court of Appeals Justice Herrerra likewise reiterates the Lina doctrine, though with the caveat that an appeal from an order denying a petition for relief from judgment was no longer appealable under Section 1, Rule 41 of the 1997 Rules.[37] Herrera further adds: Section 2, paragraph [2] of the former Rule 41, which allows an appeal from a denial of a petition for relief, was deleted from the present Rule, and confined appeals to cases from a final judgment or final order that completely disposes of the case, or of a particular matter therein, when declared by these rules to be appealable. A judgment by default may be considered as one that completely disposes of the case.[38] We are hard-pressed to find a published view that the enactment of the 1997 Rules of Civil Procedure accordingly withdrew the right, previously granted under the 1964 Rules, of a defaulted defendant to appeal the judgment by default against him. Neither is there any provision under the 1997 Rules which expressly denies the defaulted defendant such a right. If it is perplexing why the 1997 Rules deleted the previous authorization under the old Section 2, Rule 41 (on subject of appeal), it is perhaps worth noting that its counterpart provision in the 1997 Rules, now Section 1, Rule 41, is different in orientation even as it also covers subject of appeal. Unlike in the old provision, the bulk of the new provision is devoted to enumerating the various rulings from which no appeal may be taken, and nowhere therein is a judgment by default included. A declaration therein that a defaulted defendant may still appeal the judgment by default would have seemed out of place. Yet even if it were to assume the doubtful proposition that this contested right of appeal finds no anchor in the 1997 Rules, the doctrine still exists, applying the principle ofstare decisis. Jurisprudence applying the 1997 Rules has continued to acknowledge the Lina doctrine which embodies this right to appeal as among the remedies of a defendant, and no argument in this petition persuades the Court to rule otherwise. In Rural Bank of Sta. Catalina v. Land Bank of the Philippines,[39] the Court, through Justice Callejo, Sr., again provided a comprehensive restatement of the remedies of the defending party declared in default, which we adopt for purposes of this decision: It bears stressing that a defending party declared in default loses his standing in court and his right to adduce evidence and to present his defense. He, however, has the right to appeal from the judgment by default and assail said judgment on the ground, inter alia, that the amount of the judgment is excessive or is different in kind from that prayed for, or that the plaintiff failed to prove the material allegations of his complaint, or that the decision is contrary to law. Such party declared in default is proscribed from seeking a modification or reversal of the assailed decision on the basis of the evidence submitted by him in the Court of Appeals, for if it were otherwise, he would thereby be allowed to regain his right to adduce evidence, a right which he lost in the trial court when he was declared in default, and which he failed to have vacated. In this case, the petitioner sought the modification of the decision of the trial court based on the evidence submitted by it only in the Court of Appeals. [40] If it cannot be made any clearer, we hold that a defendant party declared in default retains the right to appeal from the judgment by default on the ground that the plaintiff failed to prove the material allegations of the complaint, or that the decision is contrary to law, even without need of the prior filing of a motion to set aside the order of default. We reaffirm that the Lim Toco doctrine, denying such right to appeal unless the order of default has been set aside, was no longer controlling in this jurisdiction upon the effectivity of the 1964 Rules of Court, and up to this day. Turning to the other issues, we affirm the conclusion of the Court of Appeals that Martinez failed to adduce the evidence needed to secure the registration of the subject lots in his name.

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It should be noted that the OSG, in appealing the case to the Court of Appeals, did not introduce any new evidence, but simply pointed to the insufficiency of the evidence presented by Martinez before the trial court. The Court of Appeals was careful to point out that the case against Martinez was established not by the OSGs evidence, but by petitioners own insufficient evidence. We adopt with approval the following findings arrived at by the Court of Appeals, thus: The burden of proof in land registration cases is incumbent on the applicant who must show that he is the real and absolute owner in fee simple of the land applied for. Unless the applicant succeeds in showing by clear and convincing evidence that the property involved was acquired by him or his ancestors by any of the means provided for the proper acquisition of public lands, the rule is settled that the property must be held to be a part of the public domain. The applicant must, therefore, present competent and persuasive proof to substantiate his claim. He may not rely on general statements, or mere conclusions of law other than factual evidence of possession and title. Considered in the light of the opposition filed by the Office of the Solicitor General, we find the evidence adduced by appellee, on the whole, insufficient to support the registration of the subject parcels in his name. To prove the provenance of the land, for one, all that appellee proffered by way of oral evidence is the following cursory testimony during his direct examination, viz: xxxx Q You mentioned that you are the owner of these three (3) parcels of land. How did you begin the ownership of the same? A I bought it from my uncles Julian Martinez and Juan Martinez. xxxx Q x x x x Who took possession of these parcels of land from then on? A I took possession, sir Q As owner? A Yes, as owner. Q Up to the present who is in possession as owner of these parcels of land? A I took possession. Q Before Julian Martinez and Juan Martinez sold these parcels of land before you took possession who were the owners and in possession of these? A Hilarion Martinez, the father of my predecessors-in-interest and also my grandfather. xxxx Court: Q Of your own knowledge[,] where [sic] did your grandfather Hilarion Martinez acquire these lands? A According to my grandfather he bought that land from a certain Juan Casano in the year 1870s[,] I think. xxxx Q By the way[,] when did your grandfather Hilarion Martinez die? A Either in 1920 or 1921. Q Since you said your immediate predecessors-in-interest Julian Martinez and Juan Martinez inherited the same from your grandfather. Can you say it the same that your predecessors-in-interest were the owners and possessors of the same since 1921 up to the time they sold the land to you in 1952? A Yes, sir. xxxx In the dreary tradition of most land registration cases, appellee has apparently taken the absence of representation for appellant at the hearing of his petition as license to be perfunctory in the presentation of his evidence. Actual possession of land, however, consists in the manifestation of acts of dominion over it of such a nature as a party would naturally exercise over his own property. It is not enough for an applicant to declare himself or his predecessors-ininterest the possessors and owners of the land for which registration is sought. He must present specific acts of ownership to substantiate the claim and cannot just offer general statements which are mere conclusions of law requiring evidentiary support and substantiation. The record shows that appellee did not fare any better with the documentary evidence he adduced before the trial court. The October 20, 1952 Deed of Sale by which appellee claims to have purchased the subject parcels from his uncle, Julian Martinez, was not translated from the vernacular in which it was executed and, by said token, was inadmissible in

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evidence. Having submitted a white print copy of the survey plan for Lot Nos. 464-A and 464-B, appellee also submitted the tracing cloth plan for Lot No. 370 which does not, however, appear to be approved by the Director of Lands. In much the same manner that the submission of the original tracing cloth plan is a mandatory statutory requirement which cannot be waived, the rule is settled that a survey plan not approved by the Director of Lands is not admissible in evidence. [41] These findings of the Court of Appeals, arrived at after a sufficiently extensive evaluation of the evidence, stand in contrast to that contained in the RTC decision, encapsulated in a one-paragraph prcis of the factual allegations of Martinez concerning how he acquired possession of the subject properties. The Court of Appeals, of course, is an appropriate trier of facts, and a comparison between the findings of fact of the Court of Appeals and that of the RTC clearly demonstrates that it was the appellate court which reached a more thorough and considered evaluation of the evidence. As correctly held by the Court of Appeals, the burden of proof expected of the petitioner in a land registration case has not been matched in this case. WHEREFORE, the petition is DISMISSED. Costs against petitioner. SO ORDERED. G.R. No. L-40098 August 29, 1975 ANTONIO LIM TANHU, DY OCHAY, ALFONSO LEONARDO NG SUA and CO OYO, petitioners, vs. HON. JOSE R. RAMOLETE as Presiding Judge, Branch III, CFI, Cebu and TAN PUT, respondents. BARREDO, J.: Petition for (1) certiorari to annul and set aside certain actuations of respondent Court of First Instance of Cebu Branch III in its Civil Case No. 12328, an action for accounting of properties and money totalling allegedly about P15 million pesos filed with a common cause of action against six defendants, in which after declaring four of the said defendants herein petitioners, in default and while the trial as against the two defendants not declared in default was in progress, said court granted plaintiff's motion to dismiss the case in so far as the non-defaulted defendants were concerned and thereafter proceeded to hear ex-parte the rest of the plaintiffs evidence and subsequently rendered judgment by default against the defaulted defendants, with the particularities that notice of the motion to dismiss was not duly served on any of the defendants, who had alleged a compulsory counterclaim against plaintiff in their joint answer, and the judgment so rendered granted reliefs not prayed for in the complaint, and (2) prohibition to enjoin further proceedings relative to the motion for immediate execution of the said judgment. Originally, this litigation was a complaint filed on February 9, 1971 by respondent Tan Put only against the spouses-petitioners Antonio Lim Tanhu and Dy Ochay. Subsequently, in an amended complaint dated September 26, 1972, their son Lim Teck Chuan and the other spouses-petitioners Alfonso Leonardo Ng Sua and Co Oyo and their son Eng Chong Leonardo were included as defendants. In said amended complaint, respondent Tan alleged that she "is the widow of Tee Hoon Lim Po Chuan, who was a partner in the commercial partnership, Glory Commercial Company ... with Antonio Lim Tanhu and Alfonso Ng Sua that "defendant Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan, and Eng Chong Leonardo, through fraud and machination, took actual and active management of the partnership and although Tee Hoon Lim Po Chuan was the manager of Glory Commercial Company, defendants managed to use the funds of the partnership to purchase lands and building's in the cities of Cebu, Lapulapu, Mandaue, and the municipalities of Talisay and Minglanilla, some of which were hidden, but the description of those already discovered were as follows: (list of properties) ...;" and that:

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13. (A)fter the death of Tee Hoon Lim Po Chuan, the defendants, without liquidation continued the business of Glory Commercial Company by purportedly organizing a corporation known as the Glory Commercial Company, Incorporated, with paid up capital in the sum of P125,000.00, which money and other assets of the said Glory Commercial Company, Incorporated are actually the assets of the defunct Glory Commercial Company partnership, of which the plaintiff has a share equivalent to one third ( / 3) thereof; 14. (P)laintiff, on several occasions after the death of her husband, has asked defendants of the above-mentioned properties and for the liquidation of the business of the defunct partnership, including investments on real estate in Hong Kong, but defendants kept on promising to liquidate said properties and just told plaintiff to 15. (S)ometime in the month of November, 1967, defendants, Antonio Lim Tanhu, by means of fraud deceit and misrepresentations did then and there, induce and convince the plaintiff to execute a quitclaim of all her rights and interests, in the assets of the partnership of Glory Commercial Company, which is null and void, executed through fraud and without any legal effect. The original of said quitclaim is in the possession of the adverse party defendant Antonio Lim Tanhu. 16. (A)s a matter of fact, after the execution of said quitclaim, defendant Antonio Lim Tanhu offered to pay the plaintiff the amount P65,000.00 within a period of one (1) month, for which plaintiff was made to sign a receipt for the amount of P65,000.00 although no such amount was given and plaintiff was not even given a copy of said document; 17. (T)hereafter, in the year 1968-69, the defendants who had earlier promised to liquidate the aforesaid properties and assets in favor among others of plaintiff and until the middle of the year 1970 when the plaintiff formally demanded from the defendants the accounting of real and personal properties of the Glory Commercial Company, defendants refused and stated that they would not give the share of the plaintiff. (Pp. 36-37, Record.) She prayed as follows: WHEREFORE, it is most respectfully prayed that judgment be rendered: a) Ordering the defendants to render an accounting of the real and personal properties of the Glory Commercial Company including those registered in the names of the defendants and other persons, which properties are located in the Philippines and in Hong Kong; b) Ordering the defendants to deliver to the plaintiff after accounting, one third (/ 3) of the total value of all the properties which is approximately P5,000,000.00 representing the just share of the plaintiff; c) Ordering the defendants to pay the attorney of the plaintiff the sum of Two Hundred Fifty Thousand Pesos (P250,000.00) by way of attorney's fees and damages in the sum of One Million Pesos (P1,000,000.00). This Honorable Court is prayed for other remedies and reliefs consistent with law and equity and order the defendants to pay the costs. (Page 38, Record.) The admission of said amended complaint was opposed by defendants upon the ground that there were material modifications of the causes of action previously alleged, but respondent judge nevertheless allowed the amendment reasoning that: The present action is for accounting of real and personal properties as well as for the recovery of the same with damages. An objective consideration of pars. 13 and 15 of the amended complaint pointed out by the defendants to sustain their opposition will show that the allegations of facts therein are merely to amplify material averments constituting the cause of action in the original complaint. It likewise include necessary and indispensable defendants without whom no final determination can be had in the action and in order that complete relief is to be accorded as between those already parties.

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Considering that the amendments sought to be introduced do not change the main causes of action in the original complaint and the reliefs demanded and to allow amendments is the rule, and to refuse them the exception and in order that the real question between the parties may be properly and justly threshed out in a single proceeding to avoid multiplicity of actions. (Page 40, Record.) In a single answer with counterclaim, over the signature of their common counsel, defendants denied specifically not only the allegation that respondent Tan is the widow of Tee Hoon because, according to them, his legitimate wife was Ang Siok Tin still living and with whom he had four (4) legitimate children, a twin born in 1942, and two others born in 1949 and 1965, all presently residing in Hongkong, but also all the allegations of fraud and conversion quoted above, the truth being, according to them, that proper liquidation had been regularly made of the business of the partnership and Tee Hoon used to receive his just share until his death, as a result of which the partnership was dissolved and what corresponded to him were all given to his wife and children. To quote the pertinent portions of said answer: AND BY WAY OF SPECIAL AND AFFIRMATIVE DEFENSES, defendants hereby incorporate all facts averred and alleged in the answer, and further most respectfully declare: 1. That in the event that plaintiff is filing the present complaint as an heir of Tee Hoon Lim Po Chuan, then, she has no legal capacity to sue as such, considering that the legitimate wife, namely: Ang Siok Tin, together with their children are still alive. Under Sec. 1, (d), Rule 16 of the Revised Rules of Court, lack of legal capacity to sue is one of the grounds for a motion to dismiss and so defendants prays that a preliminary hearing be conducted as provided for in Sec. 5, of the same rule; 2. That in the alternative case or event that plaintiff is filing the present case under Art. 144 of the Civil Code, then, her claim or demand has been paid, waived abandoned or otherwise extinguished as evidenced by the 'quitclaim' Annex 'A' hereof, the ground cited is another ground for a motion to dismiss (Sec. 1, (h), Rule 16) and hence defendants pray that a preliminary hearing be made in connection therewith pursuant to Section 5 of the aforementioned rule; 3. That Tee Hoon Lim Po Chuan was legally married to Ang Siok Tin and were blessed with the following children, to wit: Ching Siong Lim and Ching Hing Lim (twins) born on February 16, 1942; Lim Shing Ping born on March 3, 1949 and Lim Eng Lu born on June 25, 1965 and presently residing in Hongkong; 4. That even before the death of Tee Hoon Lim Po Chuan, the plaintiff was no longer his common law wife and even though she was not entitled to anything left by Tee Hoon Lim Po Chuan, yet, out of the kindness and generosity on the part of the defendants, particularly Antonio Lain Tanhu, who, was inspiring to be monk and in fact he is now a monk, plaintiff was given a substantial amount evidenced by the 'quitclaim' (Annex 'A'); 5. That the defendants have acquired properties out of their own personal fund and certainly not from the funds belonging to the partnership, just as Tee Hoon Lim Po Chuan had acquired properties out of his personal fund and which are now in the possession of the widow and neither the defendants nor the partnership have anything to do about said properties; 6. That it would have been impossible to buy properties from funds belonging to the partnership without the other partners knowing about it considering that the amount taken allegedly is quite big and with such big amount withdrawn the partnership would have been insolvent; 7. That plaintiff and Tee Hoon Lim Po Chuan were not blessed with children who would have been lawfully entitled to succeed to the properties left by the latter together with the widow and legitimate children; 8. That despite the fact that plaintiff knew that she was no longer entitled to anything of the shares of the late Tee Hoon Lim Po Chuan, yet, this suit was filed against the defendant who have to interpose the following

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COUNTERCLAIM A. That the defendants hereby reproduced, by way of reference, all the allegations and foregoing averments as part of this counterclaim; . B. That plaintiff knew and was aware she was merely the common-law wife of Tee Hoon Lim Po Chuan and that the lawful and legal is still living, together with the legitimate children, and yet she deliberately suppressed this fact, thus showing her bad faith and is therefore liable for exemplary damages in an amount which the Honorable Court may determine in the exercise of its sound judicial discretion. In the event that plaintiff is married to Tee Hoon Lim Po Chuan, then, her marriage is bigamous and should suffer the consequences thereof; C. That plaintiff was aware and had knowledge about the 'quitclaim', even though she was not entitled to it, and yet she falsely claimed that defendants refused even to see her and for filing this unfounded, baseless, futile and puerile complaint, defendants suffered mental anguish and torture conservatively estimated to be not less than P3,000.00; D. That in order to defend their rights in court, defendants were constrained to engage the services of the undersigned counsel, obligating themselves to pay P500,000.00 as attorney's fees; E. That by way of litigation expenses during the time that this case will be before this Honorable Court and until the same will be finally terminated and adjudicated, defendants will have to spend at least P5,000.00. (Pp. 44-47. Record.) After unsuccessfully trying to show that this counterclaim is merely permissive and should be dismissed for non-payment of the corresponding filing fee, and after being overruled by the court, in due time, plaintiff answered the same, denying its material allegations. On February 3, 1973, however, the date set for the pre-trial, both of the two defendants-spouses the Lim Tanhus and Ng Suas, did not appear, for which reason, upon motion of plaintiff dated February 16, 1973, in an order of March 12, 1973, they were all "declared in DEFAULT as of February 3, 1973 when they failed to appear at the pre-trial." They sought to hive this order lifted thru a motion for reconsideration, but the effort failed when the court denied it. Thereafter, the trial started, but at the stage thereof where the first witness of the plaintiff by the name of Antonio Nuez who testified that he is her adopted son, was up for re-crossexamination, said plaintiff unexpectedly filed on October 19, 1974 the following simple and unreasoned MOTION TO DROP DEFENDANTS LIM TECK

CHUAN AND ENG CHONG LEONARDO COMES now plaintiff, through her undersigned counsel, unto the Honorable Court most respectfully moves to drop from the complaint the defendants Lim Teck Chuan and Eng Chong Leonardo and to consider the case dismissed insofar as said defendants Lim Teck Chuan and Eng Chong Leonardo are concerned. WHEREFORE, it is most respectfully prayed of the Honorable Court to drop from the complaint the defendants Lim Teck Chuan and Eng Chong Leonardo and to dismiss the case against them without pronouncement as to costs. (Page 50, Record.) which she set for hearing on December 21, 1974. According to petitioners, none of the defendants declared in default were notified of said motion, in violation of Section 9 of Rule 13, since they had asked for the lifting of the order of default, albeit unsuccessfully, and as regards the defendants not declared in default, the setting of the hearing of said motion on October 21, 1974 infringed the three-day requirement of Section 4 of Rule 15, inasmuch as Atty. Adelino Sitoy of Lim Teck Chuan was served with a copy of the motion personally only on October 19, 1974, while Atty. Benjamin Alcudia of Eng Chong Leonardo was served by registered mail sent only on the same date.

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Evidently without even verifying the notices of service, just as simply as plaintiff had couched her motion, and also without any legal grounds stated, respondent court granted the prayer of the above motion thus: ORDER Acting on the motion of the plaintiff praying for the dismissal of the complaint as against defendants Lim Teck Chuan and Eng Chong Leonardo. The same is hereby GRANTED. The complaint as against defendant Lim Teck Chuan and Eng Chong Leonardo is hereby ordered DISMISSED without pronouncement as to costs. Simultaneously, the following order was also issued: Considering that defendants Antonio Lim Tanhu and his spouse Dy Ochay as well as defendants Alfonso Ng Sua and his spouse Co Oyo have been declared in default for failure to appear during the pre-trial and as to the other defendants the complaint had already been ordered dismissed as against them. Let the hearing of the plaintiff's evidence ex-parte be set on November 20, 1974, at 8:30 A.M. before the Branch Clerk of Court who is deputized for the purpose, to swear in witnesses and to submit her report within ten (10) days thereafter. Notify the plaintiff. SO ORDERED. Cebu City, Philippines, October 21, 1974. (Page 52, Record.) But, in connection with this last order, the scheduled ex-parte reception of evidence did not take place on November 20, 1974, for on October 28, 1974, upon verbal motion of plaintiff, the court issued the following self-explanatory order: . Acting favorably on the motion of the plaintiff dated October 18, 1974, the Court deputized the Branch Clerk of Court to receive the evidence of the plaintiff ex-parte to be made on November 20, 1974. However, on October 28, 1974, the plaintiff, together with her witnesses, appeared in court and asked, thru counsel, that she be allowed to present her evidence. Considering the time and expenses incurred by the plaintiff in bringing her witnesses to the court, the Branch Clerk of Court is hereby authorized to receive immediately the evidence of the plaintiff ex-parte. SO ORDERED. Cebu City, Philippines, October 28, 1974. (Page 53. Record.) Upon learning of these orders on October 23, 1973, the defendant Lim Teck Cheng, thru counsel, Atty. Sitoy, filed a motion for reconsideration thereof, and on November 1, 1974, defendant Eng Chong Leonardo, thru counsel Atty. Alcudia, filed also his own motion for reconsideration and clarification of the same orders. These motions were denied in an order dated December 6, 1974 but received by the movants only on December 23, 1974. Meanwhile, respondent court rendered the impugned decision on December 20, 1974. It does not appear when the parties were served copies of this decision. Subsequently, on January 6, 1975, all the defendants, thru counsel, filed a motion to quash the order of October 28, 1974. Without waiting however for the resolution thereof, on January 13, 1974, Lim Teck Chuan and Eng Chong Leonardo went to the Court of Appeals with a petition for certiorari seeking the annulment of the above-mentioned orders of October 21, 1974 and October 28, 1974 and decision of December 20, 1974. By resolution of January 24, 1975, the Court of Appeals dismissed said petition, holding that its filing was premature, considering that the motion to quash the order of October 28, 1974 was still unresolved by the trial court. This holding was reiterated in the subsequent resolution of February 5, 1975 denying the motion for reconsideration of the previous dismissal.

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On the other hand, on January 20, 1975, the other defendants, petitioners herein, filed their notice of appeal, appeal bond and motion for extension to file their record on appeal, which was granted, the extension to expire after fifteen (15) days from January 26 and 27, 1975, for defendants Lim Tanhu and Ng Suas, respectively. But on February 7, 1975, before the perfection of their appeal, petitioners filed the present petition with this Court. And with the evident intent to make their procedural position clear, counsel for defendants, Atty. Manuel Zosa, filed with respondent court a manifestation dated February 14, 1975 stating that "when the non-defaulted defendants Eng Chong Leonardo and Lim Teck Chuan filed their petition in the Court of Appeals, they in effect abandoned their motion to quash the order of October 28, 1974," and that similarly "when Antonio Lim Tanhu, Dy Ochay, Alfonso Leonardo Ng Sua and Co Oyo, filed their petition for certiorari and prohibition ... in the Supreme Court, they likewise abandoned their motion to quash." This manifestation was acted upon by respondent court together with plaintiffs motion for execution pending appeal in its order of the same date February 14, 1975 this wise: ORDER When these incidents, the motion to quash the order of October 28, 1974 and the motion for execution pending appeal were called for hearing today, counsel for the defendants-movants submitted their manifestation inviting the attention of this Court that by their filing for certiorari and prohibition with preliminary injunction in the Court of Appeals which was dismissed and later the defaulted defendants filed with the Supreme Court certiorari with prohibition they in effect abandoned their motion to quash. IN VIEW HEREOF, the motion to quash is ordered ABANDONED. The resolution of the motion for execution pending appeal shall be resolved after the petition for certiorari and prohibition shall have been resolved by the Supreme Court. SO ORDERED. Cebu City, Philippines, February 14, 1975. (Page 216, Record.) Upon these premises, it is the position of petitioners that respondent court acted illegally, in violation of the rules or with grave abuse of discretion in acting on respondent's motion to dismiss of October 18, 1974 without previously ascertaining whether or not due notice thereof had been served on the adverse parties, as, in fact, no such notice was timely served on the non-defaulted defendants Lim Teck Chuan and Eng Chong Leonardo and no notice at all was ever sent to the other defendants, herein petitioners, and more so, in actually ordering the dismissal of the case by its order of October 21, 1974 and at the same time setting the case for further hearing as against the defaulted defendants, herein petitioners, actually hearing the same ex-parte and thereafter rendering the decision of December 20, 1974 granting respondent Tan even reliefs not prayed for in the complaint. According to the petitioners, to begin with, there was compulsory counterclaim in the common answer of the defendants the nature of which is such that it cannot be decided in an independent action and as to which the attention of respondent court was duly called in the motions for reconsideration. Besides, and more importantly, under Section 4 of Rule 18, respondent court had no authority to divide the case before it by dismissing the same as against the non-defaulted defendants and thereafter proceeding to hear it ex-parte and subsequently rendering judgment against the defaulted defendants, considering that in their view, under the said provision of the rules, when a common cause of action is alleged against several defendants, the default of any of them is a mere formality by which those defaulted are not allowed to take part in the proceedings, but otherwise, all the defendants, defaulted and not defaulted, are supposed to have but a common fate, win or lose. In other words, petitioners posit that in such a situation, there can only be one common judgment for or against all the defendant, the non-defaulted and the defaulted. Thus, petitioners contend that the order of dismissal of October 21, 1974 should be considered also as the final judgment insofar as they are concerned, or, in the alternative, it should be set aside together with all the proceedings and decision held and rendered subsequent thereto, and that the trial be

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resumed as of said date, with the defendants Lim Teck Chuan and Eng Chong Leonardo being allowed to defend the case for all the defendants. On the other hand, private respondent maintains the contrary view that inasmuch as petitioners had been properly declared in default, they have no personality nor interest to question the dismissal of the case as against their non-defaulted co-defendants and should suffer the consequences of their own default. Respondent further contends, and this is the only position discussed in the memorandum submitted by her counsel, that since petitioners have already made or at least started to make their appeal, as they are in fact entitled to appeal, this special civil action has no reason for being. Additionally, she invokes the point of prematurity upheld by the Court of Appeals in regard to the above-mentioned petition therein of the non-defaulted defendants Lim Teck Chuan and Eng Chong Leonardo. Finally, she argues that in any event, the errors attributed to respondent court are errors of judgment and may be reviewed only in an appeal. After careful scrutiny of all the above-related proceedings, in the court below and mature deliberation, the Court has arrived at the conclusion that petitioners should be granted relief, if only to stress emphatically once more that the rules of procedure may not be misused and abused as instruments for the denial of substantial justice. A review of the record of this case immediately discloses that here is another demonstrative instance of how some members of the bar, availing of their proficiency in invoking the letter of the rules without regard to their real spirit and intent, succeed in inducing courts to act contrary to the dictates of justice and equity, and, in some instances, to wittingly or unwittingly abet unfair advantage by ironically camouflaging their actuations as earnest efforts to satisfy the public clamor for speedy disposition of litigations, forgetting all the while that the plain injunction of Section 2 of Rule 1 is that the "rules shall be liberally construed in order to promote their object and to assist the parties in obtaining not only 'speedy' but more imperatively, "just ... and inexpensive determination of every action and proceeding." We cannot simply pass over the impression that the procedural maneuvers and tactics revealed in the records of the case at bar were deliberately planned with the calculated end in view of depriving petitioners and their co-defendants below of every opportunity to properly defend themselves against a claim of more than substantial character, considering the millions of pesos worth of properties involved as found by respondent judge himself in the impugned decision, a claim that appears, in the light of the allegations of the answer and the documents already brought to the attention of the court at the pre-trial, to be rather dubious. What is most regrettable is that apparently, all of these alarming circumstances have escaped respondent judge who did not seem to have hesitated in acting favorably on the motions of the plaintiff conducive to the deplorable objective just mentioned, and which motions, at the very least, appeared to be 'of highly controversial' merit, considering that their obvious tendency and immediate result would be to convert the proceedings into a one-sided affair, a situation that should be readily condemnable and intolerable to any court of justice. Indeed, a seeming disposition on the part of respondent court to lean more on the contentions of private respondent may be discerned from the manner it resolved the attempts of defendants Dy Ochay and Antonio Lim Tanhu to have the earlier order of default against them lifted. Notwithstanding that Dy Ochay's motion of October 8, 1971, co-signed by her with their counsel, Atty. Jovencio Enjambre (Annex 2 of respondent answer herein) was over the jurat of the notary public before whom she took her oath, in the order of November 2, 1971, (Annex 3 id.) it was held that "the oath appearing at the bottom of the motion is not the one contemplated by the abovequoted pertinent provision (See. 3, Rule 18) of the rules. It is not even a verification. (See. 6, Rule 7.) What the rule requires as interpreted by the Supreme Court is that the motion must have to be accompanied by an affidavit of merits that the defendant has a meritorious defense, thereby ignoring the very simple legal point that the ruling of the Supreme Court in Ong Peng vs. Custodio, 1 SCRA 781, relied upon by His Honor, under which a separate affidavit of merit is required refers

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obviously to instances where the motion is not over oath of the party concerned, considering that what the cited provision literally requires is no more than a "motion under oath." Stated otherwise, when a motion to lift an order of default contains the reasons for the failure to answer as well as the facts constituting the prospective defense of the defendant and it is sworn to by said defendant, neither a formal verification nor a separate affidavit of merit is necessary. What is worse, the same order further held that the motion to lift the order of default "is an admission that there was a valid service of summons" and that said motion could not amount to a challenge against the jurisdiction of the court over the person of the defendant. Such a rationalization is patently specious and reveals an evident failure to grasp the import of the legal concepts involved. A motion to lift an order of default on the ground that service of summons has not been made in accordance with the rules is in order and is in essence verily an attack against the jurisdiction of the court over the person of the defendant, no less than if it were worded in a manner specifically embodying such a direct challenge. And then, in the order of February 14, 1972 (Annex 6, id.) lifting at last the order of default as against defendant Lim Tanhu, His Honor posited that said defendant "has a defense (quitclaim) which renders the claim of the plaintiff contentious." We have read defendants' motion for reconsideration of November 25, 1971 (Annex 5, id.), but We cannot find in it any reference to a "quitclaim". Rather, the allegation of a quitclaim is in the amended complaint (Pars. 15-16, Annex B of the petition herein) in which plaintiff maintains that her signature thereto was secured through fraud and deceit. In truth, the motion for reconsideration just mentioned, Annex 5, merely reiterated the allegation in Dy Ochay's earlier motion of October 8, 1971, Annex 2, to set aside the order of default, that plaintiff Tan could be but the common law wife only of Tee Hoon, since his legitimate wife was still alive, which allegation, His Honor held in the order of November 2, 1971, Annex 3, to be "not good and meritorious defense". To top it all, whereas, as already stated, the order of February 19, 1972, Annex 6, lifted the default against Lim Tanhu because of the additional consideration that "he has a defense (quitclaim) which renders the claim of the plaintiff contentious," the default of Dy Ochay was maintained notwithstanding that exactly the same "contentions" defense as that of her husband was invoked by her. Such tenuous, if not altogether erroneous reasonings and manifest inconsistency in the legal postures in the orders in question can hardly convince Us that the matters here in issue were accorded due and proper consideration by respondent court. In fact, under the circumstances herein obtaining, it seems appropriate to stress that, having in view the rather substantial value of the subject matter involved together with the obviously contentious character of plaintiff's claim, which is discernible even on the face of the complaint itself, utmost care should have been taken to avoid the slightest suspicion of improper motivations on the part of anyone concerned. Upon the considerations hereunder to follow, the Court expresses its grave concern that much has to be done to dispel the impression that herein petitioners and their co-defendants are being railroaded out of their rights and properties without due process of law, on the strength of procedural technicalities adroitly planned by counsel and seemingly unnoticed and undetected by respondent court, whose orders, gauged by their tenor and the citations of supposedly pertinent provisions and jurisprudence made therein, cannot be said to have proceeded from utter lack of juridical knowledgeability and competence. 1 The first thing that has struck the Court upon reviewing the record is the seeming alacrity with which the motion to dismiss the case against non-defaulted defendants Lim Teck Chuan and Eng Chong Leonardo was disposed of, which definitely ought not to have been the case. The trial was proceeding with the testimony of the first witness of plaintiff and he was still under re-cross-examination. Undoubtedly, the motion to dismiss at that stage and in the light of the declaration of default against the rest of the defendants was a well calculated surprise move, obviously designed to secure utmost advantage of the situation, regardless of its apparent

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unfairness. To say that it must have been entirely unexpected by all the defendants, defaulted and non-defaulted , is merely to rightly assume that the parties in a judicial proceeding can never be the victims of any procedural waylaying as long as lawyers and judges are imbued with the requisite sense of equity and justice. But the situation here was aggravated by the indisputable fact that the adverse parties who were entitled to be notified of such unanticipated dismissal motion did not get due notice thereof. Certainly, the non-defaulted defendants had the right to the three-day prior notice required by Section 4 of Rule 15. How could they have had such indispensable notice when the motion was set for hearing on Monday, October 21, 1974, whereas the counsel for Lim Teck Chuan, Atty. Sitoy was personally served with the notice only on Saturday, October 19, 1974 and the counsel for Eng Chong Leonardo, Atty. Alcudia, was notified by registered mail which was posted only that same Saturday, October 19, 1974? According to Chief Justice Moran, "three days at least must intervene between the date of service of notice and the date set for the hearing, otherwise the court may not validly act on the motion." (Comments on the Rules of Court by Moran, Vol. 1, 1970 ed. p. 474.) Such is the correct construction of Section 4 of Rule 15. And in the instant case, there can be no question that the notices to the non-defaulted defendants were short of the requirement of said provision. We can understand the over-anxiety of counsel for plaintiff, but what is incomprehensible is the seeming inattention of respondent judge to the explicit mandate of the pertinent rule, not to speak of the imperatives of fairness, considering he should have realized the far-reaching implications, specially from the point of view he subsequently adopted, albeit erroneously, of his favorably acting on it. Actually, he was aware of said consequences, for simultaneously with his order of dismissal, he immediately set the case for the ex-parte hearing of the evidence against the defaulted defendants, which, incidentally, from the tenor of his order which We have quoted above, appears to have been done by him motu propio As a matter of fact, plaintiff's motion also quoted above did not pray for it. Withal, respondent court's twin actions of October 21, 1974 further ignores or is inconsistent with a number of known juridical principles concerning defaults, which We will here take occasion to reiterate and further elucidate on, if only to avoid a repetition of the unfortunate errors committed in this case. Perhaps some of these principles have not been amply projected and elaborated before, and such paucity of elucidation could be the reason why respondent judge must have acted as he did. Still, the Court cannot but express its vehement condemnation of any judicial actuation that unduly deprives any party of the right to be heard without clear and specific warrant under the terms of existing rules or binding jurisprudence. Extreme care must be the instant reaction of every judge when confronted with a situation involving risks that the proceedings may not be fair and square to all the parties concerned. Indeed, a keen sense of fairness, equity and justice that constantly looks for consistency between the letter of the adjective rules and these basic principles must be possessed by every judge, If substance is to prevail, as it must, over form in our courts. Literal observance of the rules, when it is conducive to unfair and undue advantage on the part of any litigant before it, is unworthy of any court of justice and equity. Withal, only those rules and procedure informed, with and founded on public policy deserve obedience in accord with their unequivocal language or words.. Before proceeding to the discussion of the default aspects of this case, however, it should not be amiss to advert first to the patent incorrectness, apparent on the face of the record, of the aforementioned order of dismissal of October 21, 1974 of the case below as regards non-defaulted defendants Lim and Leonardo. While it is true that said defendants are not petitioners herein, the Court deems it necessary for a full view of the outrageous procedural strategy conceived by respondent's counsel and sanctioned by respondent court to also make reference to the very evident fact that in ordering said dismissal respondent court disregarded completely the

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existence of defendant's counterclaim which it had itself earlier held if indirectly, to be compulsory in nature when it refused to dismiss the same on the ground alleged by respondent Tan that he docketing fees for the filing thereof had not been paid by defendants. Indeed, that said counterclaim is compulsory needs no extended elaboration. As may be noted in the allegations hereof aforequoted, it arose out of or is necessarily connected with the occurrence that is the subject matter of the plaintiff's claim, (Section 4, Rule 9) namely, plaintiff's allegedly being the widow of the deceased Tee Hoon entitled, as such, to demand accounting of and to receive the share of her alleged late husband as partner of defendants Antonio Lim Tanhu and Alfonso Leonardo Ng Sua in Glory Commercial Company, the truth of which allegations all the defendants have denied. Defendants maintain in their counterclaim that plaintiff knew of the falsity of said allegations even before she filed her complaint, for she had in fact admitted her common-law relationship with said deceased in a document she had jointly executed with him by way of agreement to terminate their illegitimate relationship, for which she received P40,000 from the deceased, and with respect to her pretended share in the capital and profits in the partnership, it is also defendants' posture that she had already quitclaimed, with the assistance of able counsel, whatever rights if any she had thereto in November, 1967, for the sum of P25,000 duly receipted by her, which quitclaim was, however, executed, according to respondent herself in her amended complaint, through fraud. And having filed her complaint knowing, according to defendants, as she ought to have known, that the material allegations thereof are false and baseless, she has caused them to suffer damages. Undoubtedly, with such allegations, defendants' counterclaim is compulsory, not only because the same evidence to sustain it will also refute the cause or causes of action alleged in plaintiff's complaint, (Moran, supra p. 352) but also because from its very nature, it is obvious that the same cannot "remain pending for independent adjudication by the court." (Section 2, Rule 17.) The provision of the rules just cited specifically enjoins that "(i)f a counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's motion to dismiss, the action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for independent adjudication by the court." Defendants Lim and Leonardo had no opportunity to object to the motion to dismiss before the order granting the same was issued, for the simple reason that they were not opportunity notified of the motion therefor, but the record shows clearly that at least defendant Lim immediately brought the matter of their compulsory counterclaim to the attention of the trial court in his motion for reconsideration of October 23, 1974, even as the counsel for the other defendant, Leonardo, predicated his motion on other grounds. In its order of December 6, 1974, however, respondent court not only upheld the plaintiffs supposed absolute right to choose her adversaries but also held that the counterclaim is not compulsory, thereby virtually making unexplained and inexplicable 180-degree turnabout in that respect. There is another equally fundamental consideration why the motion to dismiss should not have been granted. As the plaintiff's complaint has been framed, all the six defendants are charged with having actually taken part in a conspiracy to misappropriate, conceal and convert to their own benefit the profits, properties and all other assets of the partnership Glory Commercial Company, to the extent that they have allegedly organized a corporation, Glory Commercial Company, Inc. with what they had illegally gotten from the partnership. Upon such allegations, no judgment finding the existence of the alleged conspiracy or holding the capital of the corporation to be the money of the partnership is legally possible without the presence of all the defendants. The non-defaulted defendants are alleged to be stockholders of the corporation and any decision depriving the same of all its assets cannot but prejudice the interests of said defendants. Accordingly, upon these premises, and even prescinding from the other reasons to be discussed anon it is clear that all the six defendants below, defaulted and non-defaulted, are indispensable parties. Respondents could do no less than grant that they are so on page 23 of their answer. Such being the case, the questioned order of dismissal is

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exactly the opposite of what ought to have been done. Whenever it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is the duty of the court to stop the trial and to order the inclusion of such party. (The Revised Rules of Court, Annotated & Commented by Senator Vicente J. Francisco, Vol. 1, p. 271, 1973 ed. See also Cortez vs. Avila, 101 Phil. 705.) Such an order is unavoidable, for the "general rule with reference to the making of parties in a civil action requires the joinder of all necessary parties wherever possible, and the joinder of all indispensable parties under any and all conditions, the presence of those latter being a sine qua non of the exercise of judicial power." (Borlasa vs. Polistico, 47 Phil. 345, at p. 347.) It is precisely " when an indispensable party is not before the court (that) the action should be dismissed." (People v. Rodriguez, 106 Phil. 325, at p. 327.) The absence of an indispensable party renders all subsequent actuations of the court null and void, for want of authority to act, not only as to the absent parties but even as to those present. In short, what respondent court did here was exactly the reverse of what the law ordains it eliminated those who by law should precisely be joined. As may he noted from the order of respondent court quoted earlier, which resolved the motions for reconsideration of the dismissal order filed by the non-defaulted defendants, His Honor rationalized his position thus: It is the rule that it is the absolute prerogative of the plaintiff to choose, the theory upon which he predicates his right of action, or the parties he desires to sue, without dictation or imposition by the court or the adverse party. If he makes a mistake in the choice of his right of action, or in that of the parties against whom he seeks to enforce it, that is his own concern as he alone suffers therefrom. The plaintiff cannot be compelled to choose his defendants, He may not, at his own expense, be forced to implead anyone who, under the adverse party's theory, is to answer for defendant's liability. Neither may the Court compel him to furnish the means by which defendant may avoid or mitigate their liability. (Vao vs. Alo, 95 Phil. 495-496.) This being the rule this court cannot compel the plaintiff to continue prosecuting her cause of action against the defendants-movants if in the course of the trial she believes she can enforce it against the remaining defendants subject only to the limitation provided in Section 2, Rule 17 of the Rules of Court. ... (Pages 6263, Record.) Noticeably, His Honor has employed the same equivocal terminology as in plaintiff's motion of October 18, 1974 by referring to the action he had taken as being "dismissal of the complaint against them or their being dropped therefrom", without perceiving that the reason for the evidently intentional ambiguity is transparent. The apparent idea is to rely on the theory that under Section 11 of Rule 3, parties may be dropped by the court upon motion of any party at any stage of the action, hence "it is the absolute right prerogative of the plaintiff to choosethe parties he desires to sue, without dictation or imposition by the court or the adverse party." In other words, the ambivalent pose is suggested that plaintiff's motion of October 18, 1974 was not predicated on Section 2 of Rule 17 but more on Section 11 of Rule 3. But the truth is that nothing can be more incorrect. To start with, the latter rule does not comprehend whimsical and irrational dropping or adding of parties in a complaint. What it really contemplates is erroneous or mistaken non-joinder and misjoinder of parties. No one is free to join anybody in a complaint in court only to drop him unceremoniously later at the pleasure of the plaintiff. The rule presupposes that the original inclusion had been made in the honest conviction that it was proper and the subsequent dropping is requested because it has turned out that such inclusion was a mistake. And this is the reason why the rule ordains that the dropping be "on such terms as are just" just to all the other parties. In the case at bar, there is nothing in the record to legally justify the dropping of the non-defaulted defendants, Lim and Leonardo. The motion of October 18, 1974 cites none. From all appearances, plaintiff just decided to ask for it, without any relevant explanation at all. Usually, the court in granting such a motion inquires for the reasons and in the appropriate instances directs the granting of some form of compensation for the trouble undergone by the defendant in answering the complaint, preparing for or proceeding

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partially to trial, hiring counsel and making corresponding expenses in the premises. Nothing of these, appears in the order in question. Most importantly, His Honor ought to have considered that the outright dropping of the non-defaulted defendants Lim and Leonardo, over their objection at that, would certainly be unjust not only to the petitioners, their own parents, who would in consequence be entirely defenseless, but also to Lim and Leonardo themselves who would naturally correspondingly suffer from the eventual judgment against their parents. Respondent court paid no heed at all to the mandate that such dropping must be on such terms as are just" meaning to all concerned with its legal and factual effects. Thus, it is quite plain that respondent court erred in issuing its order of dismissal of October 21, 1974 as well as its order of December 6, 1974 denying reconsideration of such dismissal. As We make this ruling, We are not oblivious of the circumstance that defendants Lim and Leonardo are not parties herein. But such consideration is inconsequential. The fate of the case of petitioners is inseparably tied up with said order of dismissal, if only because the order of ex-parte hearing of October 21, 1974 which directly affects and prejudices said petitioners is predicated thereon. Necessarily, therefore, We have to pass on the legality of said order, if We are to decide the case of herein petitioners properly and fairly. The attitude of the non-defaulted defendants of no longer pursuing further their questioning of the dismissal is from another point of view understandable. On the one hand, why should they insist on being defendants when plaintiff herself has already release from her claims? On the other hand, as far as their respective parents-co-defendants are concerned, they must have realized that they (their parents) could even be benefited by such dismissal because they could question whether or not plaintiff can still prosecute her case against them after she had secured the order of dismissal in question. And it is in connection with this last point that the true and correct concept of default becomes relevant. At this juncture, it may also be stated that the decision of the Court of Appeals of January 24, 1975 in G. R. No. SP-03066 dismissing the petition for certiorari of non-defaulted defendants Lim and Leonardo impugning the order of dismissal of October 21, 1974, has no bearing at all in this case, not only because that dismissal was premised by the appellate court on its holding that the said petition was premature inasmuch as the trial court had not yet resolved the motion of the defendants of October 28, 1974 praying that said disputed order be quashed, but principally because herein petitioners were not parties in that proceeding and cannot, therefore, be bound by its result. In particular, We deem it warranted to draw the attention of private respondent's counsel to his allegations in paragraphs XI to XIV of his answer, which relate to said decision of the Court of Appeals and which have the clear tendency to make it appear to the Court that the appeals court had upheld the legality and validity of the actuations of the trial court being questioned, when as a matter of indisputable fact, the dismissal of the petition was based solely and exclusively on its being premature without in any manner delving into its merits. The Court must and does admonish counsel that such manner of pleading, being deceptive and lacking in candor, has no place in any court, much less in the Supreme Court, and if We are adopting a passive attitude in the premises, it is due only to the fact that this is counsel's first offense. But similar conduct on his part in the future will definitely be dealt with more severely. Parties and counsel would be well advised to avoid such attempts to befuddle the issues as invariably then will be exposed for what they are, certainly unethical and degrading to the dignity of the law profession. Moreover, almost always they only betray the inherent weakness of the cause of the party resorting to them. 2 Coming now to the matter itself of default, it is quite apparent that the impugned orders must have proceeded from inadequate apprehension of the fundamental precepts governing such procedure under the Rules of Court. It is time indeed that the concept of this procedural device were fully understood by the bench and bar, instead of being merely taken for granted as being that of a

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simple expedient of not allowing the offending party to take part in the proceedings, so that after his adversary shall have presented his evidence, judgment may be rendered in favor of such opponent, with hardly any chance of said judgment being reversed or modified. The Rules of Court contain a separate rule on the subject of default, Rule 18. But said rule is concerned solely with default resulting from failure of the defendant or defendants to answer within the reglementary period. Referring to the simplest form of default, that is, where there is only one defendant in the action and he fails to answer on time, Section 1 of the rule provides that upon "proof of such failure, (the court shall) declare the defendant in default. Thereupon the court shall proceed to receive the plaintiff's evidence and render judgment granting him such relief as the complaint and the facts proven may warrant." This last clause is clarified by Section 5 which says that "a judgment entered against a party in default shall not exceed the amount or be different in kind from that prayed for." Unequivocal, in the literal sense, as these provisions are, they do not readily convey the full import of what they contemplate. To begin with, contrary to the immediate notion that can be drawn from their language, these provisions are not to be understood as meaning that default or the failure of the defendant to answer should be "interpreted as an admission by the said defendant that the plaintiff's cause of action find support in the law or that plaintiff is entitled to the relief prayed for." (Moran, supra, p. 535 citing Macondary & Co. v. Eustaquio, 64 Phil. 466, citing with approval Chaffin v. McFadden, 41 Ark. 42; Johnson v. Pierce, 12 Ark. 599; Mayden v. Johnson, 59 Ga. 105; People v. Rust, 292 111. 328; Ken v. Leopold 21 111. A. 163; Chicago, etc. Electric R. Co. v. Krempel 116 111. A. 253.) Being declared in default does not constitute a waiver of rights except that of being heard and of presenting evidence in the trial court. According to Section 2, "except as provided in Section 9 of Rule 13, a party declared in default shall not be entitled to notice of subsequent proceedings, nor to take part in the trial." That provision referred to reads: "No service of papers other than substantially amended pleadings and final orders or judgments shall be necessary on a party in default unless he files a motion to set aside the order of default, in which event he shall be entitled to notice of all further proceedings regardless of whether the order of default is set aside or not." And pursuant to Section 2 of Rule 41, "a party who has been declared in default may likewise appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition for relief to set aside the order of default has been presented by him in accordance with Rule 38.". In other words, a defaulted defendant is not actually thrown out of court. While in a sense it may be said that by defaulting he leaves himself at the mercy of the court, the rules see to it that any judgment against him must be in accordance with law. The evidence to support the plaintiff's cause is, of course, presented in his absence, but the court is not supposed to admit that which is basically incompetent. Although the defendant would not be in a position to object, elementary justice requires that, only legal evidence should be considered against him. If the evidence presented should not be sufficient to justify a judgment for the plaintiff, the complaint must be dismissed. And if an unfavorable judgment should be justifiable, it cannot exceed in amount or be different in kind from what is prayed for in the complaint. Incidentally, these considerations argue against the present widespread practice of trial judges, as was done by His Honor in this case, of delegating to their clerks of court the reception of the plaintiff's evidence when the defendant is in default. Such a Practice is wrong in principle and orientation. It has no basis in any rule. When a defendant allows himself to be declared in default, he relies on the faith that the court would take care that his rights are not unduly prejudiced. He has a right to presume that the law and the rules will still be observed. The proceedings are held in his forced absence, and it is but fair that the plaintiff should not be allowed to

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take advantage of the situation to win by foul or illegal means or with inherently incompetent evidence. Thus, in such instances, there is need for more attention from the court, which only the judge himself can provide. The clerk of court would not be in a position much less have the authority to act in the premises in the manner demanded by the rules of fair play and as contemplated in the law, considering his comparably limited area of discretion and his presumably inferior preparation for the functions of a judge. Besides, the default of the defendant is no excuse for the court to renounce the opportunity to closely observe the demeanor and conduct of the witnesses of the plaintiff, the better to appreciate their truthfulness and credibility. We therefore declare as a matter of judicial policy that there being no imperative reason for judges to do otherwise, the practice should be discontinued. Another matter of practice worthy of mention at this point is that it is preferable to leave enough opportunity open for possible lifting of the order of default before proceeding with the reception of the plaintiff's evidence and the rendition of the decision. "A judgment by default may amount to a positive and considerable injustice to the defendant; and the possibility of such serious consequences necessitates a careful and liberal examination of the grounds upon which the defendant may seek to set it aside." (Moran, supra p. 534, citing Coombs vs. Santos, 24 Phil. 446; 449-450.) The expression, therefore, in Section 1 of Rule 18 aforequoted which says that "thereupon the court shall proceed to receive the plaintiff's evidence etc." is not to be taken literally. The gain in time and dispatch should the court immediately try the case on the very day of or shortly after the declaration of default is far outweighed by the inconvenience and complications involved in having to undo everything already done in the event the defendant should justify his omission to answer on time. The foregoing observations, as may be noted, refer to instances where the only defendant or all the defendants, there being several, are declared in default. There are additional rules embodying more considerations of justice and equity in cases where there are several defendants against whom a common cause of action is averred and not all of them answer opportunely or are in default, particularly in reference to the power of the court to render judgment in such situations. Thus, in addition to the limitation of Section 5 that the judgment by default should not be more in amount nor different in kind from the reliefs specifically sought by plaintiff in his complaint, Section 4 restricts the authority of the court in rendering judgment in the situations just mentioned as follows: Sec. 4. Judgment when some defendants answer, and other make difficult. When a complaint states a common cause of action against several defendant some of whom answer, and the others fail to do so, the court shall try the case against all upon the answer thus filed and render judgment upon the evidence presented. The same proceeding applies when a common cause of action is pleaded in a counterclaim, cross-claim and third-party claim. Very aptly does Chief Justice Moran elucidate on this provision and the controlling jurisprudence explanatory thereof this wise: Where a complaint states a common cause of action against several defendants and some appear to defend the case on the merits while others make default, the defense interposed by those who appear to litigate the case inures to the benefit of those who fail to appear, and if the court finds that a good defense has been made, all of the defendants must be absolved. In other words, the answer filed by one or some of the defendants inures to the benefit of all the others, even those who have not seasonably filed their answer. (Bueno v. Ortiz, L-22978, June 27, 1968, 23 SCRA 1151.) The proper mode of proceeding where a complaint states a common cause of action against several defendants, and one of them makes default, is simply to enter a formal default order against him, and proceed with the cause upon the answers of the others. The defaulting defendant merely loses his standing in court, he not being entitled to the service of notice in the cause, nor to appear in the suit in any way. He cannot adduce evidence; nor can he be heard at the final hearing, (Lim Toco v. Go Fay, 80 Phil. 166.) although he may appeal the judgment rendered against him on the merits. (Rule 41, sec. 2.) If the case is finally decided in the plaintiff's favor, a final decree is then entered against all the

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defendants; but if the suit should be decided against the plaintiff, the action will be dismissed as to all the defendants alike. (Velez v. Ramas, 40 Phil. 787-792; Frow v. de la Vega, 15 Wal. 552,21 L. Ed. 60.) In other words the judgment will affect the defaulting defendants either favorably or adversely. (Castro v. Pea, 80 Phil. 488.) Defaulting defendant may ask execution if judgment is in his favor. (Castro v. Pea, supra.) (Moran, Rules of Court, Vol. 1, pp. 538539.) In Castro vs. Pea, 80 Phil. 488, one of the numerous cases cited by Moran, this Court elaborated on the construction of the same rule when it sanctioned the execution, upon motion and for the benefit of the defendant in default, of a judgment which was adverse to the plaintiff. The Court held: As above stated, Emilia Matanguihan, by her counsel, also was a movant in the petition for execution Annex 1. Did she have a right to be such, having been declared in default? In Frow vs. De la Vega,supra, cited as authority in Velez vs. Ramas, supra, the Supreme Court of the United States adopted as ground for its own decision the following ruling of the New York Court of Errors in Clason vs. Morris, 10 Jons., 524: It would be unreasonable to hold that because one defendant had made default, the plaintiff should have a decree even against him, where the court is satisfied from the proofs offered by the other, that in fact the plaintiff is not entitled to a decree. (21 Law, ed., 61.) The reason is simple: justice has to be consistent. The complaint stating a common cause of action against several defendants, the complainant's rights or lack of them in the controversy have to be the same, and not different, as against all the defendant's although one or some make default and the other or others appear, join issue, and enter into trial. For instance, in the case of Clason vs. Morris above cited, the New York Court of Errors in effect held that in such a case if the plaintiff is not entitled to a decree, he will not be entitled to it, not only as against the defendant appearing and resisting his action but also as against the one who made default. In the case at bar, the cause of action in the plaintiff's complaint was common against the Mayor of Manila, Emilia Matanguihan, and the other defendants in Civil Case No. 1318 of the lower court. The Court of First Instance in its judgment found and held upon the evidence adduced by the plaintiff and the defendant mayor that as between said plaintiff and defendant Matanguihan the latter was the one legally entitled to occupy the stalls; and it decreed, among other things, that said plaintiff immediately vacate them. Paraphrasing the New York Court of Errors, it would be unreasonable to hold now that because Matanguihan had made default, the said plaintiff should be declared, as against her, legally entitled to the occupancy of the stalls, or to remain therein, although the Court of First Instance was so firmly satisfied, from the proofs offered by the other defendant, that the same plaintiff was not entitled to such occupancy that it peremptorily ordered her to vacate the stalls. If in the cases of Clason vs. Morris, supra, Frow vs. De la Vega, supra, and Velez vs. Ramas, supra the decrees entered inured to the benefit of the defaulting defendants, there is no reason why that entered in said case No. 1318 should not be held also to have inured to the benefit of the defaulting defendant Matanguihan and the doctrine in said three cases plainly implies that there is nothing in the law governing default which would prohibit the court from rendering judgment favorable to the defaulting defendant in such cases. If it inured to her benefit, it stands to reason that she had a right to claim that benefit, for it would not be a benefit if the supposed beneficiary were barred from claiming it; and if the benefit necessitated the execution of the decree, she must be possessed of the right to ask for the execution thereof as she did when she, by counsel, participated in the petition for execution Annex 1. Section 7 of Rule 35 would seem to afford a solid support to the above considerations. It provides that when a complaint states a common cause of action against several defendants, some of whom answer, and the others make default, 'the court shall try the

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case against all upon the answer thus filed and render judgment upon the evidence presented by the parties in court'. It is obvious that under this provision the case is tried jointly not only against the defendants answering but also against those defaulting, and the trial is held upon the answer filed by the former; and the judgment, if adverse, will prejudice the defaulting defendants no less than those who answer. In other words, the defaulting defendants are held bound by the answer filed by their co-defendants and by the judgment which the court may render against all of them. By the same token, and by all rules of equity and fair play, if the judgment should happen to be favorable, totally or partially, to the answering defendants, it must correspondingly benefit the defaulting ones, for it would not be just to let the judgment produce effects as to the defaulting defendants only when adverse to them and not when favorable. In Bueno vs. Ortiz, 23 SCRA 1151, the Court applied the provision under discussion in the following words: In answer to the charge that respondent Judge had committed a grave abuse of discretion in rendering a default judgment against the PC, respondents allege that, not having filed its answer within the reglementary period, the PC was in default, so that it was proper for Patanao to forthwith present his evidence and for respondent Judge to render said judgment. It should be noted, however, that in entering the area in question and seeking to prevent Patanao from continuing his logging operations therein, the PC was merely executing an order of the Director of Forestry and acting as his agent. Patanao's cause of action against the other respondents in Case No. 190, namely, the Director of Forestry, the District Forester of Agusan, the Forest Officer of Bayugan, Agusan, and the Secretary of Agriculture and Natural Resources. Pursuant to Rule 18, Section 4, of the Rules of Court, 'when a complaint states a common cause of action against several defendants some of whom answer and the others fail to do so, the court shall try the case against all upon the answer thus filed (by some) and render judgment upon the evidence presented.' In other words, the answer filed by one or some of the defendants inures to the benefit of all the others, even those who have not seasonably filed their answer. Indeed, since the petition in Case No. 190 sets forth a common cause of action against all of the respondents therein, a decision in favor of one of them would necessarily favor the others. In fact, the main issue, in said case, is whether Patanao has a timber license to undertake logging operations in the disputed area. It is not possible to decide such issue in the negative, insofar as the Director of Forestry, and to settle it otherwise, as regards the PC, which is merely acting as agent of the Director of Forestry, and is, therefore, his alter ego, with respect to the disputed forest area. Stated differently, in all instances where a common cause of action is alleged against several defendants, some of whom answer and the others do not, the latter or those in default acquire a vested right not only to own the defense interposed in the answer of their co- defendant or co-defendants not in default but also to expect a result of the litigation totally common with them in kind and in amount whether favorable or unfavorable. The substantive unity of the plaintiff's cause against all the defendants is carried through to its adjective phase as ineluctably demanded by the homogeneity and indivisibility of justice itself. Indeed, since the singleness of the cause of action also inevitably implies that all the defendants are indispensable parties, the court's power to act is integral and cannot be split such that it cannot relieve any of them and at the same time render judgment against the rest. Considering the tenor of the section in question, it is to be assumed that when any defendant allows himself to be declared in default knowing that his defendant has already answered, he does so trusting in the assurance implicit in the rule that his default is in essence a mere formality that deprives him of no more than the right to take part in the trial and that the court would deem anything done by or for the answering defendant as done by or for him. The presumption is that otherwise he would not -have seen to that he would not be in default. Of course, he has to suffer the consequences of whatever the answering defendant may do or fail to do, regardless of

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possible adverse consequences, but if the complaint has to be dismissed in so far as the answering defendant is concerned it becomes his inalienable right that the same be dismissed also as to him. It does not matter that the dismissal is upon the evidence presented by the plaintiff or upon the latter's mere desistance, for in both contingencies, the lack of sufficient legal basis must be the cause. The integrity of the common cause of action against all the defendants and the indispensability of all of them in the proceedings do not permit any possibility of waiver of the plaintiff's right only as to one or some of them, without including all of them, and so, as a rule, withdrawal must be deemed to be a confession of weakness as to all. This is not only elementary justice; it also precludes the concomitant hazard that plaintiff might resort to the kind of procedural strategem practiced by private respondent herein that resulted in totally depriving petitioners of every opportunity to defend themselves against her claims which, after all, as will be seen later in this opinion, the record does not show to be invulnerable, both in their factual and legal aspects, taking into consideration the tenor of the pleadings and the probative value of the competent evidence which were before the trial court when it rendered its assailed decision where all the defendants are indispensable parties, for which reason the absence of any of them in the case would result in the court losing its competency to act validly, any compromise that the plaintiff might wish to make with any of them must, as a matter of correct procedure, have to await until after the rendition of the judgment, at which stage the plaintiff may then treat the matter of its execution and the satisfaction of his claim as variably as he might please. Accordingly, in the case now before Us together with the dismissal of the complaint against the non-defaulted defendants, the court should have ordered also the dismissal thereof as to petitioners. Indeed, there is more reason to apply here the principle of unity and indivisibility of the action just discussed because all the defendants here have already joined genuine issues with plaintiff. Their default was only at the pre-trial. And as to such absence of petitioners at the pre-trial, the same could be attributed to the fact that they might not have considered it necessary anymore to be present, since their respective children Lim and Leonardo, with whom they have common defenses, could take care of their defenses as well. Anything that might have had to be done by them at such pre-trial could have been done for them by their children, at least initially, specially because in the light of the pleadings before the court, the prospects of a compromise must have appeared to be rather remote. Such attitude of petitioners is neither uncommon nor totally unjustified. Under the circumstances, to declare them immediately and irrevocably in default was not an absolute necessity. Practical considerations and reasons of equity should have moved respondent court to be more understanding in dealing with the situation. After all, declaring them in default as respondent court did not impair their right to a common fate with their children. 3 Another issue to be resolved in this case is the question of whether or not herein petitioners were entitled to notice of plaintiff's motion to drop their co-defendants Lim and Leonardo, considering that petitioners had been previously declared in default. In this connection, the decisive consideration is that according to the applicable rule, Section 9, Rule 13, already quoted above, (1) even after a defendant has been declared in default, provided he "files a motion to set aside the order of default, he shall be entitled to notice of all further proceedings regardless of whether the order of default is set aside or not" and (2) a party in default who has not filed such a motion to set aside must still be served with all "substantially amended or supplemented pleadings." In the instant case, it cannot be denied that petitioners had all filed their motion for reconsideration of the order declaring them in default. Respondents' own answer to the petition therein makes reference to the order of April 3, 1973, Annex 8 of said answer, which denied said motion for reconsideration. On page 3 of petitioners' memorandum herein this motion is referred to as "a motion to set aside the order of default." But as We have not been favored by the parties with a copy of the said motion, We do not even know the excuse given for

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petitioners' failure to appear at the pre-trial, and We cannot, therefore, determine whether or not the motion complied with the requirements of Section 3 of Rule 18 which We have held to be controlling in cases of default for failure to answer on time. (The Philippine-British Co. Inc. etc. et al. vs. The Hon. Walfrido de los Angeles etc. et al., 63 SCRA 50.) We do not, however, have here, as earlier noted, a case of default for failure to answer but one for failure to appear at the pre-trial. We reiterate, in the situation now before Us, issues have already been joined. In fact, evidence had been partially offered already at the pre-trial and more of it at the actual trial which had already begun with the first witness of the plaintiff undergoing re-crossexamination. With these facts in mind and considering that issues had already been joined even as regards the defaulted defendants, it would be requiring the obvious to pretend that there was still need for an oath or a verification as to the merits of the defense of the defaulted defendants in their motion to reconsider their default. Inasmuch as none of the parties had asked for a summary judgment there can be no question that the issues joined were genuine, and consequently, the reason for requiring such oath or verification no longer holds. Besides, it may also be reiterated that being the parents of the non-defaulted defendants, petitioners must have assumed that their presence was superfluous, particularly because the cause of action against them as well as their own defenses are common. Under these circumstances, the form of the motion by which the default was sought to be lifted is secondary and the requirements of Section 3 of Rule 18 need not be strictly complied with, unlike in cases of default for failure to answer. We can thus hold as We do hold for the purposes of the revival of their right to notice under Section 9 of Rule 13, that petitioner's motion for reconsideration was in substance legally adequate regardless of whether or not it was under oath. In any event, the dropping of the defendants Lim and Leonardo from plaintiff's amended complaint was virtually a second amendment of plaintiffs complaint. And there can be no doubt that such amendment was substantial, for with the elimination thereby of two defendants allegedly solidarily liable with their co-defendants, herein petitioners, it had the effect of increasing proportionally what each of the remaining defendants, the said petitioners, would have to answer for jointly and severally. Accordingly, notice to petitioners of the plaintiff's motion of October 18, 1974 was legally indispensable under the rule above-quoted. Consequently, respondent court had no authority to act on the motion, to dismiss, pursuant to Section 6 of Rule 15, for according to Senator Francisco, "(t) he Rules of Court clearly provide that no motion shall be acted upon by the Court without the proof of service of notice thereof, together with a copy of the motion and other papers accompanying it, to all parties concerned at least three days before the hearing thereof, stating the time and place for the hearing of the motion. (Rule 26, section 4, 5 and 6, Rules of Court (now Sec. 15, new Rules). When the motion does not comply with this requirement, it is not a motion. It presents no question which the court could decide. And the Court acquires no jurisdiction to consider it. (Roman Catholic Bishop of Lipa vs. Municipality of Unisan 44 Phil., 866; Manakil vs. Revilla, 42 Phil., 81.) (Laserna vs. Javier, et al., CA-G.R. No. 7885, April 22, 1955; 21 L.J. 36, citing Roman Catholic Bishop of Lipa vs. Municipality of Unisan 44 Phil., 866; Manakil vs. Revilla, 42 Phil., 81.) (Francisco. The Revised Rules of Court in the Philippines, pp. 861-862.) Thus, We see again, from a different angle, why respondent court's order of dismissal of October 21, 1974 is fatally ineffective. 4 The foregoing considerations notwithstanding, it is respondents' position that certiorari is not the proper remedy of petitioners. It is contended that inasmuch as said petitioners have in fact made their appeal already by filing the required notice of appeal and appeal bond and a motion for extension to file their record on appeal, which motion was granted by respondent court, their only recourse is to prosecute that appeal. Additionally, it is also maintained that since petitioners have expressly withdrawn their motion to quash of January 4, 1975 impugning the order of October 28, 1974, they have lost their right to assail by certiorari the actuations of

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respondent court now being questioned, respondent court not having been given the opportunity to correct any possible error it might have committed. We do not agree. As already shown in the foregoing discussion, the proceedings in the court below have gone so far out of hand that prompt action is needed to restore order in the entangled situation created by the series of plainly illegal orders it had issued. The essential purpose of certiorari is to keep the proceedings in lower judicial courts and tribunals within legal bounds, so that due process and the rule of law may prevail at all times and arbitrariness, whimsicality and unfairness which justice abhors may immediately be stamped out before graver injury, juridical and otherwise, ensues. While generally these objectives may well be attained in an ordinary appeal, it is undoubtedly the better rule to allow the special remedy of certiorari at the option of the party adversely affected, when the irregularity committed by the trial court is so grave and so far reaching in its consequences that the long and cumbersome procedure of appeal will only further aggravate the situation of the aggrieved party because other untoward actuations are likely to materialize as natural consequences of those already perpetrated. If the law were otherwise, certiorari would have no reason at all for being. No elaborate discussion is needed to show the urgent need for corrective measures in the case at bar. Verily, this is one case that calls for the exercise of the Supreme Court's inherent power of supervision over all kinds of judicial actions of lower courts. Private respondent's procedural technique designed to disable petitioners to defend themselves against her claim which appears on the face of the record itself to be at least highly controversial seems to have so fascinated respondent court that none would be surprised should her pending motion for immediate execution of the impugned judgment receive similar ready sanction as her previous motions which turned the proceedings into a one-sided affair. The stakes here are high. Not only is the subject matter considerably substantial; there is the more important aspect that not only the spirit and intent of the rules but even the basic rudiments of fair play have been disregarded. For the Court to leave unrestrained the obvious tendency of the proceedings below would be nothing short of wittingly condoning inequity and injustice resulting from erroneous construction and unwarranted application of procedural rules. 5 The sum and total of all the foregoing disquisitions is that the decision here in question is legally anomalous. It is predicated on two fatal malactuations of respondent court namely (1) the dismissal of the complaint against the non-defaulted defendants Lim and Leonardo and (2) the ex-parte reception of the evidence of the plaintiff by the clerk of court, the subsequent using of the same as basis for its judgment and the rendition of such judgment. For at least three reasons which We have already fully discussed above, the order of dismissal of October 21, 1974 is unworthy of Our sanction: (1) there was no timely notice of the motion therefor to the non-defaulted defendants, aside from there being no notice at all to herein petitioners; (2) the common answer of the defendants, including the non-defaulted, contained a compulsory counterclaim incapable of being determined in an independent action; and (3) the immediate effect of such dismissal was the removal of the two non-defaulted defendants as parties, and inasmuch as they are both indispensable parties in the case, the court consequently lost the" sine qua non of the exercise of judicial power", per Borlasa vs. Polistico, supra. This is not to mention anymore the irregular delegation to the clerk of court of the function of receiving plaintiff's evidence. And as regards the ex-parte reception of plaintiff's evidence and subsequent rendition of the judgment by default based thereon, We have seen that it was violative of the right of the petitioners, under the applicable rules and principles on default, to a common and single fate with their

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non-defaulted co-defendants. And We are not yet referring, as We shall do this anon to the numerous reversible errors in the decision itself. It is to be noted, however, that the above-indicated two fundamental flaws in respondent court's actuations do not call for a common corrective remedy. We cannot simply rule that all the impugned proceedings are null and void and should be set aside, without being faced with the insurmountable obstacle that by so doing We would be reviewing the case as against the two non-defaulted defendants who are not before Us not being parties hereto. Upon the other hand, for Us to hold that the order of dismissal should be allowed to stand, as contended by respondents themselves who insist that the same is already final, not only because the period for its finality has long passed but also because allegedly, albeit not very accurately, said 'non-defaulted defendants unsuccessfully tried to have it set aside by the Court of Appeals whose decision on their petition is also already final, We would have to disregard whatever evidence had been presented by the plaintiff against them and, of course, the findings of respondent court based thereon which, as the assailed decision shows, are adverse to them. In other words, whichever of the two apparent remedies the Court chooses, it would necessarily entail some kind of possible juridical imperfection. Speaking of their respective practical or pragmatic effects, to annul the dismissal would inevitably prejudice the rights of the non-defaulted defendants whom We have not heard and who even respondents would not wish to have anything anymore to do with the case. On the other hand, to include petitioners in the dismissal would naturally set at naught every effort private respondent has made to establish or prove her case thru means sanctioned by respondent court. In short, We are confronted with a legal para-dilemma. But one thing is certain this difficult situations has been brought about by none other than private respondent who has quite cynically resorted to procedural maneuvers without realizing that the technicalities of the adjective law, even when apparently accurate from the literal point of view, cannot prevail over the imperatives of the substantive law and of equity that always underlie them and which have to be inevitably considered in the construction of the pertinent procedural rules. All things considered, after careful and mature deliberation, the Court has arrived at the conclusion that as between the two possible alternatives just stated, it would only be fair, equitable and proper to uphold the position of petitioners. In other words, We rule that the order of dismissal of October 21, 1974 is in law a dismissal of the whole case of the plaintiff, including as to petitioners herein. Consequently, all proceedings held by respondent court subsequent thereto including and principally its decision of December 20, 1974 are illegal and should be set aside. This conclusion is fully justified by the following considerations of equity: 1. It is very clear to Us that the procedural maneuver resorted to by private respondent in securing the decision in her favor was illconceived. It was characterized by that which every principle of law and equity disdains taking unfair advantage of the rules of procedure in order to unduly deprive the other party of full opportunity to defend his cause. The idea of "dropping" the non-defaulted defendants with the end in view of completely incapacitating their co-defendants from making any defense, without considering that all of them are indispensable parties to a common cause of action to which they have countered with a common defense readily connotes an intent to secure a one-sided decision, even improperly. And when, in this connection, the obvious weakness of plaintiff's evidence is taken into account, one easily understands why such tactics had to be availed of. We cannot directly or indirectly give Our assent to the commission of unfairness and inequity in the application of the rules of procedure, particularly when the propriety of reliance thereon is not beyond controversy. 2. The theories of remedial law pursued by private respondents, although approved by His Honor, run counter to such basic principles in the rules on default and such elementary rules on dismissal of actions and notice of motions that no trial court should be

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unaware of or should be mistaken in applying. We are at a loss as to why His Honor failed to see through counsel's inequitous strategy, when the provisions (1) on the three-day rule on notice of motions, Section 4 of Rule 15, (2) against dismissal of actions on motion of plaintiff when there is a compulsory counterclaim, Section 2, Rule 17, (3) against permitting the absence of indispensable parties, Section 7, Rule 3, (4) on service of papers upon defendants in default when there are substantial amendments to pleadings, Section 9, Rule 13, and (5) on the unity and integrity of the fate of defendants in default with those not in default where the cause of action against them and their own defenses are common, Section 4, Rule 18, are so plain and the jurisprudence declaratory of their intent and proper construction are so readily comprehensible that any error as to their application would be unusual in any competent trial court. 3. After all, all the malactuations of respondent court are traceable to the initiative of private respondent and/or her counsel. She cannot, therefore, complain that she is being made to unjustifiably suffer the consequences of what We have found to be erroneous orders of respondent court. It is only fair that she should not be allowed to benefit from her own frustrated objective of securing a one-sided decision. 4. More importantly, We do not hesitate to hold that on the basis of its own recitals, the decision in question cannot stand close scrutiny. What is more, the very considerations contained therein reveal convincingly the inherent weakness of the cause of the plaintiff. To be sure, We have been giving serious thought to the idea of merely returning this case for a resumption of trial by setting aside the order of dismissal of October 21, 1974, with all its attendant difficulties on account of its adverse effects on parties who have not been heard, but upon closer study of the pleadings and the decision and other circumstances extant in the record before Us, We are now persuaded that such a course of action would only lead to more legal complications incident to attempts on the part of the parties concerned to desperately squeeze themselves out of a bad situation. Anyway, We feel confident that by and large, there is enough basis here and now for Us to rule out the claim of the plaintiff. Even a mere superficial reading of the decision would immediately reveal that it is littered on its face with deficiencies and imperfections which would have had no reason for being were there less haste and more circumspection in rendering the same. Recklessness in jumping to unwarranted conclusions, both factual and legal, is at once evident in its findings relative precisely to the main bases themselves of the reliefs granted. It is apparent therein that no effort has been made to avoid glaring inconsistencies. Where references are made to codal provisions and jurisprudence, inaccuracy and inapplicability are at once manifest. It hardly commends itself as a deliberate and consciencious adjudication of a litigation which, considering the substantial value of the subject matter it involves and the unprecedented procedure that was followed by respondent's counsel, calls for greater attention and skill than the general run of cases would. Inter alia, the following features of the decision make it highly improbable that if We took another course of action, private respondent would still be able to make out any case against petitioners, not to speak of their co-defendants who have already been exonerated by respondent herself thru her motion to dismiss: 1. According to His Honor's own statement of plaintiff's case, "she is the widow of the late Tee Hoon Po Chuan (Po Chuan, for short) who was then one of the partners in the commercial partnership, Glory Commercial Co. with defendants Antonio Lim Tanhu (Lim Tanhu, for short) and Alfonso Leonardo Ng Sua (Ng Sua, for short) as co-partners; that after the death of her husband on March 11, 1966 she is entitled to share not only in the capital and profits of the partnership but also in the other assets, both real and personal, acquired by the partnership with funds of the latter during its lifetime." Relatedly, in the latter part of the decision, the findings are to the following effect: .

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That the herein plaintiff Tan Put and her late husband Po Chuan married at the Philippine Independent Church of Cebu City on December, 20, 1949; that Po Chuan died on March 11, 1966; that the plaintiff and the late Po Chuan were childless but the former has a foster son Antonio Nuez whom she has reared since his birth with whom she lives up to the present; that prior to the marriage of the plaintiff to Po Chuan the latter was already managing the partnership Glory Commercial Co. then engaged in a little business in hardware at Manalili St., Cebu City; that prior to and just after the marriage of the plaintiff to Po Chuan she was engaged in the drugstore business; that not long after her marriage, upon the suggestion of Po Chuan the plaintiff sold her drugstore for P125,000.00 which amount she gave to her husband in the presence of defendant Lim Tanhu and was invested in the partnership Glory Commercial Co. sometime in 1950; that after the investment of the above-stated amount in the partnership its business flourished and it embarked in the import business and also engaged in the wholesale and retail trade of cement and GI sheets and under huge profits; xxx xxx xxx That the late Po Chuan was the one who actively managed the business of the partnership Glory Commercial Co. he was the one who made the final decisions and approved the appointments of new personnel who were taken in by the partnership; that the late Po Chuan and defendants Lim Tanhu and Ng Sua are brothers, the latter two (2) being the elder brothers of the former; that defendants Lim Tanhu and Ng Sua are both naturalized Filipino citizens whereas the late Po Chuan until the time of his death was a Chinese citizen; that the three (3) brothers were partners in the Glory Commercial Co. but Po Chuan was practically the owner of the partnership having the controlling interest; that defendants Lim Tanhu and Ng Sua were partners in name but they were mere employees of Po Chuan .... (Pp. 89-91, Record.) How did His Honor arrive at these conclusions? To start with, it is not clear in the decision whether or not in making its findings of fact the court took into account the allegations in the pleadings of the parties and whatever might have transpired at the pre-trial. All that We can gather in this respect is that references are made therein to pre-trial exhibits and to Annex A of the answer of the defendants to plaintiff's amended complaint. Indeed, it was incumbent upon the court to consider not only the evidence formally offered at the trial but also the admissions, expressed or implied, in the pleadings, as well as whatever might have been placed before it or brought to its attention during the pre-trial. In this connection, it is to be regretted that none of the parties has thought it proper to give Us an idea of what took place at the pre-trial of the present case and what are contained in the pre-trial order, if any was issued pursuant to Section 4 of Rule 20. The fundamental purpose of pre-trial, aside from affording the parties every opportunity to compromise or settle their differences, is for the court to be apprised of the unsettled issues between the parties and of their respective evidence relative thereto, to the end that it may take corresponding measures that would abbreviate the trial as much as possible and the judge may be able to ascertain the facts with the least observance of technical rules. In other words whatever is said or done by the parties or their counsel at the pre- trial serves to put the judge on notice of their respective basic positions, in order that in appropriate cases he may, if necessary in the interest of justice and a more accurate determination of the facts, make inquiries about or require clarifications of matters taken up at the pre-trial, before finally resolving any issue of fact or of law. In brief, the pre-trial constitutes part and parcel of the proceedings, and hence, matters dealt with therein may not be disregarded in the process of decision making. Otherwise, the real essence of compulsory pre-trial would be insignificant and worthless.

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Now, applying these postulates to the findings of respondent court just quoted, it will be observed that the court's conclusion about the supposed marriage of plaintiff to the deceased Tee Hoon Lim Po Chuan is contrary to the weight of the evidence brought before it during the trial and the pre-trial. Under Article 55 of the Civil Code, the declaration of the contracting parties that they take each other as husband and wife "shall be set forth in an instrument" signed by the parties as well as by their witnesses and the person solemnizing the marriage. Accordingly, the primary evidence of a marriage must be an authentic copy of the marriage contract. While a marriage may also be proved by other competent evidence, the absence of the contract must first be satisfactorily explained. Surely, the certification of the person who allegedly solemnized a marriage is not admissible evidence of such marriage unless proof of loss of the contract or of any other satisfactory reason for its non-production is first presented to the court. In the case at bar, the purported certification issued by a Mons. Jose M. Recoleto, Bishop, Philippine Independent Church, Cebu City, is not, therefore, competent evidence, there being absolutely no showing as to unavailability of the marriage contract and, indeed, as to the authenticity of the signature of said certifier, the jurat allegedly signed by a second assistant provincial fiscal not being authorized by law, since it is not part of the functions of his office. Besides, inasmuch as the bishop did not testify, the same is hearsay. As regards the testimony of plaintiff herself on the same point and that of her witness Antonio Nuez, there can be no question that they are both self-serving and of very little evidentiary value, it having been disclosed at the trial that plaintiff has already assigned all her rights in this case to said Nuez, thereby making him the real party in interest here and, therefore, naturally as biased as herself. Besides, in the portion of the testimony of Nuez copied in Annex C of petitioner's memorandum, it appears admitted that he was born only on March 25, 1942, which means that he was less than eight years old at the supposed time of the alleged marriage. If for this reason alone, it is extremely doubtful if he could have been sufficiently aware of such event as to be competent to testify about it. Incidentally, another Annex C of the same memorandum purports to be the certificate of birth of one Antonio T. Uy supposed to have been born on March 23, 1937 at Centro Misamis, Misamis Occidental, the son of one Uy Bien, father, and Tan Put, mother. Significantly, respondents have not made any adverse comment on this document. It is more likely, therefore, that the witness is really the son of plaintiff by her husband Uy Kim Beng. But she testified she was childless. So which is which? In any event, if on the strength of this document, Nuez is actually the legitimate son of Tan Put and not her adopted son, he would have been but 13 years old in 1949, the year of her alleged marriage to Po Chuan, and even then, considering such age, his testimony in regard thereto would still be suspect. Now, as against such flimsy evidence of plaintiff, the court had before it, two documents of great weight belying the pretended marriage. We refer to (1) Exhibit LL, the income tax return of the deceased Tee Hoon Lim Po Chuan indicating that the name of his wife was Ang Sick Tin and (2) the quitclaim, Annex A of the answer, wherein plaintiff Tan Put stated that she had been living with the deceased without benefit of marriage and that she was his "common-law wife". Surely, these two documents are far more reliable than all the evidence of the plaintiff put together. Of course, Exhibit LL is what might be termed as pre-trial evidence. But it is evidence offered to the judge himself, not to the clerk of court, and should have at least moved him to ask plaintiff to explain if not rebut it before jumping to the conclusion regarding her alleged marriage to the deceased, Po Chuan. And in regard to the quitclaim containing the admission of a common-law relationship only, it is to be observed that His Honor found that "defendants Lim Tanhu and Ng Sua had the plaintiff execute a quitclaim on November 29, 1967 (Annex "A", Answer) where they gave plaintiff the amount of P25,000 as her share in the capital and profits of

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the business of Glory Commercial Co. which was engaged in the hardware business", without making mention of any evidence of fraud and misrepresentation in its execution, thereby indicating either that no evidence to prove that allegation of the plaintiff had been presented by her or that whatever evidence was actually offered did not produce persuasion upon the court. Stated differently, since the existence of the quitclaim has been duly established without any circumstance to detract from its legal import, the court should have held that plaintiff was bound by her admission therein that she was the common-law wife only of Po Chuan and what is more, that she had already renounced for valuable consideration whatever claim she might have relative to the partnership Glory Commercial Co. And when it is borne in mind that in addition to all these considerations, there are mentioned and discussed in the memorandum of petitioners (1) the certification of the Local Civil Registrar of Cebu City and (2) a similar certification of the Apostolic Prefect of the Philippine Independent Church, Parish of Sto. Nio, Cebu City, that their respective official records corresponding to December 1949 to December 1950 do not show any marriage between Tee Hoon Lim Po Chuan and Tan Put, neither of which certifications have been impugned by respondent until now, it stands to reason that plaintiff's claim of marriage is really unfounded. Withal, there is still another document, also mentioned and discussed in the same memorandum and unimpugned by respondents, a written agreement executed in Chinese, but purportedly translated into English by the Chinese Consul of Cebu, between Tan Put and Tee Hoon Lim Po Chuan to the following effect: CONSULATE OF THE REPUBLIC OF CHINA Cebu City, Philippines TRANSLATION This is to certify that 1, Miss Tan Ki Eng Alias Tan Put, have lived with Mr. Lim Po Chuan alias TeeHoon since 1949 but it recently occurs that we are incompatible with each other and are not in the position to keep living together permanently. With the mutual concurrence, we decided to terminate the existing relationship of common law-marriage and promised not to interfere each other's affairs from now on. The Forty Thousand Pesos (P40,000.00) has been given to me by Mr. Lim Po Chuan for my subsistence. Witnesses: Mr. Lim Beng Guan Mr. Huang Sing Se Signed on the 10 day of the 7th month of the 54th year of the Republic of China (corresponding to the year 1965). (SGD) TAN KI ENG Verified from the records. JORGE TABAR (Pp. 283-284, Record.) Indeed, not only does this document prove that plaintiff's relation to the deceased was that of a common-law wife but that they had settled their property interests with the payment to her of P40,000. In the light of all these circumstances, We find no alternative but to hold that plaintiff Tan Put's allegation that she is the widow of Tee Hoon Lim Po Chuan has not been satisfactorily established and that, on the contrary, the evidence on record convincingly shows that her relation with said deceased was that of a common-law wife and furthermore, that all her claims against the company and its surviving partners as well as those against the estate of the deceased have already been settled and paid. We take judicial notice of the fact that the respective counsel who assisted the parties in the quitclaim, Attys. H. Hermosisima and Natalio Castillo, are members in good standing of the Philippine Bar, with the particularity that the latter has been a member of the Cabinet and of the House of Representatives of the Philippines, hence, absent any credible proof that they had allowed themselves to be parties to a fraudulent document His Honor did right in recognizing its existence, albeit erring in not giving due legal significance to its contents.

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2. If, as We have seen, plaintiff's evidence of her alleged status as legitimate wife of Po Chuan is not only unconvincing but has been actually overcome by the more competent and weighty evidence in favor of the defendants, her attempt to substantiate her main cause of action that defendants Lim Tanhu and Ng Sua have defrauded the partnership Glory Commercial Co. and converted its properties to themselves is even more dismal. From the very evidence summarized by His Honor in the decision in question, it is clear that not an iota of reliable proof exists of such alleged misdeeds. Of course, the existence of the partnership has not been denied, it is actually admitted impliedly in defendants' affirmative defense that Po Chuan's share had already been duly settled with and paid to both the plaintiff and his legitimate family. But the evidence as to the actual participation of the defendants Lim Tanhu and Ng Sua in the operation of the business that could have enabled them to make the extractions of funds alleged by plaintiff is at best confusing and at certain points manifestly inconsistent. In her amended complaint, plaintiff repeatedly alleged that as widow of Po Chuan she is entitled to / 3 share of the assets and properties of the partnership. In fact, her prayer in said complaint is, among others, for the delivery to her of such / 3 share. His Honor's statement of the case as well as his findings and judgment are all to that same effect. But what did she actually try to prove at the ex- parte hearing? According to the decision, plaintiff had shown that she had money of her own when she "married" Po Chuan and "that prior to and just after the marriage of the plaintiff to Po Chuan, she was engaged in the drugstore business; that not long after her marriage, upon the suggestion of Po Chuan, the plaintiff sold her drugstore for P125,000 which amount she gave to her husband in the presence of Tanhu and was invested in the partnership Glory Commercial Co. sometime in 1950; that after the investment of the above-stated amount in the partnership, its business flourished and it embarked in the import business and also engaged in the wholesale and retail trade of cement and GI sheets and under (sic) huge profits." (pp. 25-26, Annex L, petition.) To begin with, this theory of her having contributed of P125,000 to the capital of the partnership by reason of which the business flourished and amassed all the millions referred to in the decision has not been alleged in the complaint, and inasmuch as what was being rendered was a judgment by default, such theory should not have been allowed to be the subject of any evidence. But inasmuch as it was the clerk of court who received the evidence, it is understandable that he failed to observe the rule. Then, on the other hand, if it was her capital that made the partnership flourish, why would she claim to be entitled to only to / 3 of its assets and profits? Under her theory found proven by respondent court, she was actually the owner of everything, particularly because His Honor also found "that defendants Lim Tanhu and Ng Sua were partners in the name but they were employees of Po Chuan that defendants Lim Tanhu and Ng Sua had no means of livelihood at the time of their employment with the Glory Commercial Co. under the management of the late Po Chuan except their salaries therefrom; ..." (p. 27,id.) Why then does she claim only / 3 share? Is this an indication of her generosity towards defendants or of a concocted cause of action existing only in her confused imagination engendered by the death of her common-law husband with whom she had settled her common-law claim for recompense of her services as common law wife for less than what she must have known would go to his legitimate wife and children? Actually, as may be noted from the decision itself, the trial court was confused as to the participation of defendants Lim Tanhu and Ng Sua in Glory Commercial Co. At one point, they were deemed partners, at another point mere employees and then elsewhere as partners-employees, a newly found concept, to be sure, in the law on partnership. And the confusion is worse comfounded in the judgment which allows these "partners in name" and "partners-employees" or employees who had no means of livelihood and who must not have contributed any capital in the business, "as Po Chuan was practically the owner of the partnership having the controlling interest", / 3 each of the huge assets and profits of the partnership. Incidentally, it may be observed at this juncture that

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the decision has made Po Chuan play the inconsistent role of being "practically the owner" but at the same time getting his capital from the P125,000 given to him by plaintiff and from which capital the business allegedly "flourished." Anent the allegation of plaintiff that the properties shown by her exhibits to be in the names of defendants Lim Tanhu and Ng Sua were bought by them with partnership funds, His Honor confirmed the same by finding and holding that "it is likewise clear that real properties together with the improvements in the names of defendants Lim Tanhu and Ng Sua were acquired with partnership funds as these defendants were only partners-employees of deceased Po Chuan in the Glory Commercial Co. until the time of his death on March 11, 1966." (p. 30, id.) It Is Our considered view, however, that this conclusion of His Honor is based on nothing but pure unwarranted conjecture. Nowhere is it shown in the decision how said defendants could have extracted money from the partnership in the fraudulent and illegal manner pretended by plaintiff. Neither in the testimony of Nuez nor in that of plaintiff, as these are summarized in the decision, can there be found any single act of extraction of partnership funds committed by any of said defendants. That the partnership might have grown into a multi-million enterprise and that the properties described in the exhibits enumerated in the decision are not in the names of Po Chuan, who was Chinese, but of the defendants who are Filipinos, do not necessarily prove that Po Chuan had not gotten his share of the profits of the business or that the properties in the names of the defendants were bought with money of the partnership. In this connection, it is decisively important to consider that on the basis of the concordant and mutually cumulative testimonies of plaintiff and Nuez, respondent court found very explicitly that, and We reiterate: xxx xxx xxx That the late Po Chuan was the one who actively managed the business of the partnership Glory Commercial Co. he was the one who made the final decisions and approved the appointments of new Personnel who were taken in by the partnership; that the late Po Chuan and defendants Lim Tanhu and Ng Sua are brothers, the latter to (2) being the elder brothers of the former; that defendants Lim Tanhu and Ng Sua are both naturalized Filipino citizens whereas the late Po Chuan until the time of his death was a Chinese citizen; that the three (3) brothers were partners in the Glory Commercial Co. but Po Chuan was practically the owner of the partnership having the controlling interest; that defendants Lim Tanhu and Ng Sua were partners in name but they were mere employees of Po Chuan; .... (Pp. 90-91, Record.) If Po Chuan was in control of the affairs and the running of the partnership, how could the defendants have defrauded him of such huge amounts as plaintiff had made his Honor believe? Upon the other hand, since Po Chuan was in control of the affairs of the partnership, the more logical inference is that if defendants had obtained any portion of the funds of the partnership for themselves, it must have been with the knowledge and consent of Po Chuan, for which reason no accounting could be demanded from them therefor, considering that Article 1807 of the Civil Code refers only to what is taken by a partner without the consent of the other partner or partners. Incidentally again, this theory about Po Chuan having been actively managing the partnership up to his death is a substantial deviation from the allegation in the amended complaint to the effect that "defendants Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan and Eng Chong Leonardo, through fraud and machination, took actual and active management of the partnership and although Tee Hoon Lim Po Chuan was the manager of Glory Commercial Co., defendants managed to use the funds of the partnership to purchase lands and buildings etc. (Par. 4, p. 2 of amended complaint, Annex B of petition) and should not have been permitted to be proven by the hearing officer, who naturally did not know any better. Moreover, it is very significant that according to the very tax declarations and land titles listed in the decision, most if not all of the properties supposed to have been acquired by the defendants Lim Tanhu and Ng Sua with funds of the partnership appear to have

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been transferred to their names only in 1969 or later, that is, long after the partnership had been automatically dissolved as a result of the death of Po Chuan. Accordingly, defendants have no obligation to account to anyone for such acquisitions in the absence of clear proof that they had violated the trust of Po Chuan during the existence of the partnership. (See Hanlon vs. Hansserman and. Beam, 40 Phil. 796.) There are other particulars which should have caused His Honor to readily disbelieve plaintiffs' pretensions. Nuez testified that "for about 18 years he was in charge of the GI sheets and sometimes attended to the imported items of the business of Glory Commercial Co." Counting 18 years back from 1965 or 1966 would take Us to 1947 or 1948. Since according to Exhibit LL, the baptismal certificate produced by the same witness as his birth certificate, shows he was born in March, 1942, how could he have started managing Glory Commercial Co. in 1949 when he must have been barely six or seven years old? It should not have escaped His Honor's attention that the photographs showing the premises of Philippine Metal Industries after its organization "a year or two after the establishment of Cebu Can Factory in 1957 or 1958" must have been taken after 1959. How could Nuez have been only 13 years old then as claimed by him to have been his age in those photographs when according to his "birth certificate", he was born in 1942? His Honor should not have overlooked that according to the same witness, defendant Ng Sua was living in Bantayan until he was directed to return to Cebu after the fishing business thereat floundered, whereas all that the witness knew about defendant Lim Teck Chuan's arrival from Hongkong and the expenditure of partnership money for him were only told to him allegedly by Po Chuan, which testimonies are veritably exculpatory as to Ng Sua and hearsay as to Lim Teck Chuan. Neither should His Honor have failed to note that according to plaintiff herself, "Lim Tanhu was employed by her husband although he did not go there always being a mere employee of Glory Commercial Co." (p. 22, Annex the decision.) The decision is rather emphatic in that Lim Tanhu and Ng Sua had no known income except their salaries. Actually, it is not stated, however, from what evidence such conclusion was derived in so far as Ng Sua is concerned. On the other hand, with respect to Lim Tanhu, the decision itself states that according to Exhibit NN-Pre trial, in the supposed income tax return of Lim Tanhu for 1964, he had an income of P4,800 as salary from Philippine Metal Industries alone and had a total assess sable net income of P23,920.77 that year for which he paid a tax of P4,656.00. (p. 14. Annex L, id.) And per Exhibit GG-Pretrial in the year, he had a net income of P32,000 for which be paid a tax of P3,512.40. (id.) As early as 1962, "his fishing business in Madridejos Cebu was making money, and he reported "a net gain from operation (in) the amount of P865.64" (id., per Exhibit VV-Pre-trial.) From what then did his Honor gather the conclusion that all the properties registered in his name have come from funds malversed from the partnership? It is rather unusual that His Honor delved into financial statements and books of Glory Commercial Co. without the aid of any accountant or without the same being explained by any witness who had prepared them or who has knowledge of the entries therein. This must be the reason why there are apparent inconsistencies and inaccuracies in the conclusions His Honor made out of them. In Exhibit SS-Pre-trial, the reported total assets of the company amounted to P2,328,460.27 as of December, 1965, and yet, Exhibit TT-Pre-trial, according to His Honor, showed that the total value of goods available as of the same date was P11,166,327.62. On the other hand, per Exhibit XX-Pre-trial, the supposed balance sheet of the company for 1966, "the value of inventoried merchandise, both local and imported", as found by His Honor, was P584,034.38. Again, as of December 31, 1966, the value of the company's goods available for sale was P5,524,050.87, per Exhibit YY and YY-Pre-trial. Then, per Exhibit II-3-Pre-trial, the supposed Book of Account, whatever that is, of the company showed its "cash analysis" was P12,223,182.55. We do not hesitate to make the observation that His Honor, unless he is a certified public accountant, was hardly qualified to read such exhibits and draw any definite conclusions therefrom, without risk of erring and committing an injustice. In any event, there is no comprehensible

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explanation in the decision of the conclusion of His Honor that there were P12,223,182.55 cash money defendants have to account for, particularly when it can be very clearly seen in Exhibits 11-4, 11-4- A, 11-5 and 11-6-Pre-trial, Glory Commercial Co. had accounts payable as of December 31, 1965 in the amount of P4,801,321.17. (p. 15, id.) Under the circumstances, We are not prepared to permit anyone to predicate any claim or right from respondent court's unaided exercise of accounting knowledge. Additionally, We note that the decision has not made any finding regarding the allegation in the amended complaint that a corporation denominated Glory Commercial Co., Inc. was organized after the death of Po Chuan with capital from the funds of the partnership. We note also that there is absolutely no finding made as to how the defendants Dy Ochay and Co Oyo could in any way be accountable to plaintiff, just because they happen to be the wives of Lim Tanhu and Ng Sua, respectively. We further note that while His Honor has ordered defendants to deliver or pay jointly and severally to the plaintiff P4,074,394.18 or / 3 of the P12,223,182.55, the supposed cash belonging to the partnership as of December 31, 1965, in the same breath, they have also been sentenced to partition and give / 3 share of the properties enumerated in the dispositive portion of the decision, which seemingly are the very properties allegedly purchased from the funds of the partnership which would naturally include the P12,223,182.55 defendants have to account for. Besides, assuming there has not yet been any liquidation of the partnership, contrary to the allegation of the defendants, then Glory Commercial Co. would have the status of a partnership in liquidation and the only right plaintiff could have would be to what might result after such liquidation to belong to the deceased partner, and before this is finished, it is impossible to determine, what rights or interests, if any, the deceased had (Bearneza vs. Dequilla 43 Phil. 237). In other words, no specific amounts or properties may be adjudicated to the heir or legal representative of the deceased partner without the liquidation being first terminated. Indeed, only time and the fear that this decision would be much more extended than it is already prevent us from further pointing out the inexplicable deficiencies and imperfections of the decision in question. After all, what have been discussed should be more than sufficient to support Our conclusion that not only must said decision be set aside but also that the action of the plaintiff must be totally dismissed, and, were it not seemingly futile and productive of other legal complications, that plaintiff is liable on defendants' counterclaims. Resolution of the other issues raised by the parties albeit important and perhaps pivotal has likewise become superfluous. IN VIEW OF ALL THE FOREGOING, the petition is granted. All proceedings held in respondent court in its Civil Case No. 12328 subsequent to the order of dismissal of October 21, 1974 are hereby annulled and set aside, particularly the ex-parte proceedings against petitioners and the decision on December 20, 1974. Respondent court is hereby ordered to enter an order extending the effects of its order of dismissal of the action dated October 21, 1974 to herein petitioners Antonio Lim Tanhu, Dy Ochay, Alfonso Leonardo Ng Sua and Co Oyo. And respondent court is hereby permanently enjoined from taking any further action in said civil case gave and except as herein indicated. Costs against private respondent.

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REPUBLIC OF THE PHILIPPINES,Petitioner, - versus HON. VICENTE A. HIDALGO, in his capacity as Presiding Judge of the Regional Trial Court of Manila, Branch 37, CARMELO V. CACHERO, in his capacity as Sheriff IV, Regional Trial Court of Manila, and TARCILA LAPERAL MENDOZA, Respondents.

G.R. No. 161657 Present: PUNO, C.J.,Chairperson, SANDOVAL-GUTIERREZ,CORONA, AZCUNA, andGARCIA, JJ. Promulgated:

October 4, 2007 x----------------------------------------------------------------------------------------x DECISION GARCIA, J.: Via this verified petition for certiorari and prohibition under Rule 65 of the Rules of Court, the Republic of the Philippines (Republic, for short), thru the Office of the Solicitor General (OSG), comes to this Court to nullify and set aside the decision dated August 27, 2003 and other related issuances of the Regional Trial Court (RTC) of Manila, Branch 37, in its Civil Case No. 99-94075. In directly invoking the Courts original jurisdiction to issue the extraordinary writs of certiorari and prohibition, without challenge from any of the respondents, the Republic gave as justification therefor the fact that the case involves an over TWO BILLION PESO judgment against the State, allegedly rendered in blatant violation of the Constitution, law and jurisprudence.

By any standard, the case indeed involves a colossal sum of money which, on the face of the assailed decision, shall be the liability of the national government or, in fine, the taxpayers. This consideration, juxtaposed with the constitutional and legal questions surrounding the controversy, presents special and compelling reasons of public interests why direct recourse to the Court should be allowed, as an exception to the policy on hierarchy of courts.

At the core of the litigation is a 4,924.60-square meter lot once covered by Transfer Certificate of Title (TCT) No. 118527 of the Registry of Deeds of Manila in the name of the herein private respondent Tarcila Laperal Mendoza (Mendoza), married to Perfecto Mendoza. The lot is situated at No. 1440 Arlegui St., San Miguel, Manila, near the Malacaang Palace complex. On this lot, hereinafter referred to as the Arlegui property, now stands the Presidential Guest House which was home to two (2) former Presidents of the Republic and now appears to be used as office building of the Office of the President.[1]

The facts: Sometime in June 1999, Mendoza filed a suit with the RTC of Manila for reconveyance and the corresponding declaration of nullity of a deed of sale and title against the Republic, the Register of Deeds of Manila and one Atty. Fidel Vivar. In her complaint, as later amended, docketed as Civil Case No. 99-94075 and eventually raffled to Branch 35 of the court, Mendoza essentially alleged being the owner of the disputed Arlegui property which the Republic forcibly dispossessed her of and over which the Register of Deeds of Manila issued TCT No. 118911 in the name of the Republic. Answering, the Republic set up, among other affirmative defenses, the States immunity from suit. The intervening legal tussles are not essential to this narration. What is material is that in an Order of March 17, 2000, the RTC of Manila, Branch 35, dismissed Mendozas complaint. The court would also deny, in another order dated May 12, 2000, Mendozas omnibus motion for reconsideration. On a petition for certiorari, however, the Court of Appeals (CA), in CA-G.R. SP

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No. 60749, reversed the trial courts assailed orders and remanded the case to the court a quo for further proceedings.[2] On appeal, this Court, inG.R. No. 155231, sustained the CAs reversal action.[3] From Branch 35 of the trial court whose then presiding judge inhibited himself from hearing the remanded Civil Case No. 9994075, the case was re-raffled to Branch 37 thereof, presided by the respondent judge. On May 5, 2003, Mendoza filed a Motion for Leave of Court to file a Third Amended Complaint with a copy of the intended third amended complaint thereto attached. In the May 16, 2003 setting to hear the motion, the RTC, in open court and in the presence of the Republics counsel, admitted the third amended complaint, ordered the Republic to file its answer thereto wit hin five (5) days from May 16, 2003 and set a date for pre-trial. In her adverted third amended complaint for recovery and reconveyance of the Arlegui property, Mendoza sought the declaration of nullity of a supposed deed of sale dated July 15, 1975 which provided the instrumentation toward the issuance of TCT No. 118911 in the name of the Republic. And aside from the cancellation of TCT No. 118911, Mendoza also asked for the reinstatement of her TCT No. 118527.[4] In the same third amended complaint, Mendoza averred that, since time immemorial, she and her predecessors-in-interest had been in peaceful and adverse possession of the property as well as of the owners duplicate copy of TCT No. 118527. Such possession, she added, continued until the first week of July 1975 when a group of armed men representing themselves to be members of the Presidential Security Group [PSG] of the then President Ferdinand E. Marcos, had forcibly entered [her] residence and ordered [her] to turn over to them her Copy of TCT No. 118525 and compelled her and the members of her household to vacate the same ; thus, out of fear for their lives, [she] handed her Owners Duplicate Certific ate Copy of TCT No. 118527 and had left and/or vacated the subject property. Mendoza further alleged the following:

1. Per verification, TCT No. 118527 had already been cancelled by virtue of a deed of sale in favor of the Republic allegedly executed by her and her deceased husband on July 15, 1975 and acknowledged before Fidel Vivar which deed was annotated at the back of TCT No. 118527 under PE: 2035/T-118911 dated July 28, 1975; and 2. That the aforementioned deed of sale is fictitious as she (Mendoza) and her husband have not executed any deed of conveyance covering the disputed property in favor of the Republic, let alone appearing before Fidel Vivar. Inter alia, she prayed for the following: 4. Ordering the Republic to pay plaintiff [Mendoza] a reasonable compensation or rental for the use or occupancy of the subject property in the sum of FIVE HUNDRED THOUSAND (P500,000.00) PESOS a month with a five (5%) per cent yearly increase, plus interest thereon at the legal rate, beginning July 1975 until it finally vacates the same; 5. Ordering the Republic to pay plaintiffs counsel a sum equivalent to TWENTY FIVE (25%) PER CENT of the current value of the subject property and/or whatever amount is recovered under the premises; Further, plaintiff prays for such other relief, just and equitable under the premises.

On May 21, 2003, the Republic, represented by the OSG, filed a Motion for Extension (With Motion for Cancellation of scheduled pre-trial). In it, the Republic manifested its inability to simply adopt its previous answer and, accordingly, asked that it be given a period of thirty (30) days from May 21, 2003 or until June 20, 2003 within which to submit an Answer.[5] June 20, 2003 came and went, but no answer was filed. On July 18, 2003 and again on August 19, 2003, the OSG moved for a 30-day extension at each instance. The filing of the last two motions for extension proved to be an idle gesture, however, since the trial

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court had meanwhile issued an order[6] dated July 7, 2003 declaring the petitioner Republic as in default and allowing the private respondent to present her evidence ex-parte. The evidence for the private respondent, as plaintiff a quo, consisted of her testimony denying having executed the alleged deed of sale dated July 15, 1975 which paved the way for the issuance of TCT No. 118911. According to her, said deed is fictitious or inexistent, as evidenced by separate certifications, the first (Exh. E), issued by the Register of Deeds for Manila and the second (Exh. F), by the Office of Clerk of Court, RTC Manila. Exhibit E[7] states that a copy of the supposed conveying deed cannot, despite diligent efforts of records personnel, be located, while Exhibit F[8] states that Fidel Vivar was not a commissioned notary public for and in the City of Manila for the year 1975.Three other witnesses[9] testified, albeit their testimonies revolved around the appraisal and rental values of the Arlegui property. Eventually, the trial court rendered a judgment by default[10] for Mendoza and against the Republic. To the trial court, the Republic had veritably confiscated Mendozas property, and deprived her not only of the use thereof but also denied her of the income she could have had otherwise realized during all the years she was illegally dispossessed of the same. Dated August 27, 2003, the trial courts decision dispositively reads as follows: WHEREFORE, judgment is hereby rendered: 1. Declaring the deed of sale dated July 15, 1975, annotated at the back of [TCT] No. 118527 as PE:2035/T-118911, as

non-existent and/or fictitious, and, therefore, null and void from the beginning; 2. Declaring that [TCT] No. 118911 of the defendant Republic of the Philippines has no basis, thereby making it null and

void from the beginning; 3. 4. Ordering the defendant Register of Deeds for the City of Manila to reinstate plaintiff [Mendozas TCT] No. 118527; Ordering the defendant Republic to pay just compensation in the sum of ONE HUNDRED FORTY THREE MILLION SIX

HUNDRED THOUSAND (P143,600,000.00) PESOS, plus interest at the legal rate, until the whole amount is paid in full for the acquisition of the subject property; 5. Ordering the plaintiff, upon payment of the just compensation for the acquisition of her property, to execute the

necessary deed of conveyance in favor of the defendant Republic ; and, on the other hand, directing the defendant Register o f Deeds, upon presentation of the said deed of conveyance, to cancel plaintiffs TCT No. 118527 and to issue, in lieu thereof, a new Transfer Certificate of Title in favor of the defendant Republic; 6. Ordering the defendant Republic to pay the plaintiff the sum of ONE BILLION FOUR HU NDRED EIGHTY MILLION SIX

HUNDRED TWENTY SEVEN THOUSAND SIX HUNDRED EIGHTY EIGHT (P1,480,627,688.00) PESOS, representing the reasonable rental for the use of the subject property, the interest thereon at the legal rate, and the opportunity cost at the rate of three (3%) per cent per annum, commencing July 1975 continuously up to July 30, 2003, plus an additional interest at the legal rate, commencing from this date until the whole amount is paid in full; 7. Ordering the defendant Republic to pay the plaintiff attorneys fee, in an amount equivalent to FIFTEEN (15%) PER

CENT of the amount due to the plaintiff. With pronouncement as to the costs of suit. SO ORDERED. (Words in bracket and emphasis added.)

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Subsequently, the Republic moved for, but was denied, a new trial per order of the trial court of October 7, 2003.[11] Denied also was its subsequent plea for reconsideration.[12] These twin denial orders were followed by several orders and processes issued by the trial court on separate dates as hereunder indicated:

1. 2.

November 27, 2003 - - Certificate of Finality declaring the August 27, 2003 decision final and executory.[13] December 17, 2003 - - Order denying the Notice of Appeal filed on November 27, 2003, the same having been filed beyond

the reglementary period.[14] 3. 4. December 19, 2003 - - Order[15] granting the private respondents motion for execution. December 22, 2003 - - Writ of Execution.[16]

Hence, this petition for certiorari.

By Resolution[17] of November 20, 2006, the case was set for oral arguments. On January 22, 2007, when this case was called for the purpose, both parties manifested their willingness to settle the case amicably, for which reason the Court gave them up to February 28, 2007 to submit the compromise agreement for approval. Following several approved extensions of the February 28, 2007 deadline, the OSG, on August 6, 2007, manifested that it is submitting the case for resolution on the merits owing to the inability of the parties to agree on an acceptable compromise. In this recourse, the petitioner urges the Court to strike down as a nullity the trial courts order declaring it in default and the judgment by default that followed. Sought to be nullified, too, also on the ground that they were issued in grave abuse of discretion amounting to lack or in excess of jurisdiction, are the orders and processes enumerated immediately above issued after the rendition of the default judgment.

Petitioner lists five (5) overlapping grounds for allowing its petition. It starts off by impugning the order of default and the judgment by default. To the petitioner, the respondent judge committed serious jurisdictional error when he proceeded to hear the case and eventually awarded the private respondent a staggering amount without so much as giving the petitioner the opportunity to present its defense. Petitioners posture is simply without merit. Deprivation of procedural due process is obviously the petitioners threshold theme. Due process, in its procedural aspect, guarantees in the minimum the opportunity to be heard.[18] Grave abuse of discretion, however, cannot plausibly be laid at the doorstep of the respondent judge on account of his having issued the default order against the petitioner, then proceeding with the hearing and eventually rendering a default judgment. For, what the respondent judge did hew with what Section 3, Rule 9 of the Rules of Court prescribes and allows in the event the defending party fails to seasonably file a responsive pleading. The provision reads: SEC. 3. Default; declaration of.- If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the 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 .[19]

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While the ideal lies in avoiding orders of default,[20] the policy of the law being to have every litigated case tried on its full merits,[21] the act of the respondent judge in rendering the default judgment after an order of default was properly issued cannot be struck down as a case of grave abuse of discretion. The term grave abuse of discretion, in its juridical sense, connotes capricious, despotic, oppressive or whimsical exercise of judgment as is equivalent to lack of jurisdiction.[22] The abuse must be of such degree as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, as where the power is exercised in a capricious manner. The word capricious, usually used in tandem with arbitrary, conveys the notion of willful and unreasoning action. [23] Under the premises, the mere issuance by the trial court of the order of default followed by a judgment by default can easily be sustained as correct and doubtless within its jurisdiction. Surely, a disposition directing the Republic to pay an enormous sum without the trial court hearing its side does not, without more, vitiate, on due procedural ground, the validity of the default judgment. The petitioner may have indeed been deprived of such hearing, but this does not mean that its right to due process had been violated. For, consequent to being declared in default, the defaulting defendant is deemed to have waived his right to be heard or to take part in the trial. The handling solicitors simply squandered the Republics opportunity to be heard. But mor e importantly, the law itself imposes such deprivation of the right to participate as a form of penalty against one unwilling without justification to join issue upon the allegations tendered by the plaintiff.

And going to another point, the petitioner would ascribe jurisdictional error on the respondent judge for denying its motion for new trial based on any or a mix of the following factors, viz., (1) the failure to file an answer is attributable to the negligence of the former handling solicitor; (2) the meritorious nature of the petitioners defense; and (3) the value of the property involved. The Court is not convinced. Even as the Court particularly notes what the trial court had said on the matter of negligence: that all of the petitioners pleadings below bear at least three signatures, that of the handling solicitor, the assistant solicitor and the Solicitor General himself, and hence accountability should go up all the way to the top of the totem pole of authority, the cited reasons advanced by the petitioner for a new trial are not recognized under Section 1, Rule 37 of the Rules of Court for such recourse.[24] Withal, there is no cogent reason to disturb the denial by the trial court of the motion for new trial and the denial of the reiterative motion for reconsideration. Then, too, the issuance by the trial court of the Order dated December 17, 2003 [25] denying the petitioners notice of appeal after the court caused the issuance on November 27, 2003 of a certificate of finality of its August 27, 2003 decision can hardly be described as arbitrary, as the petitioner would have this Court believe. In this regard, the Court takes stock of the following key events and material dates set forth in the assailed December 17, 2003 order, supra: (a) The petitioner, thru the OSG, received on August 29, 2003 a copy of the RTC decision in this case, hence had up to September 13, 2003, a Saturday, within which to perfect an appeal; (b) On September 15, 2003, a Monday, the OSG filed its motion for new trial, which the RTC denied, the OSG receiving a copy of the order of denial on October 9, 2003; and (c) On October 24, 2003, the OSG sought reconsideration of the order denying the motion for new trial. The motion for reconsideration was denied per Order dated November 25, 2003, a copy of which the OSG received on the same date. Given the foregoing time perspective, what the trial court wrote in its aforementioned impugned order of December 17, 2003 merits approval:

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In the case at bar, it is clear that the motion for new trial filed on the fifteenth (15th) day after the decision was received on August 29, 2003 was denied and the moving party has only the remaining period from notice of notice of denial within which to file a notice of appeal. xxx Accordingly, when defendants [Republic et al.] filed their motion for new trial on the last day of the fifteen day (15) prescribed for taking an appeal, which motion was subsequently denied, they had one (1) day from receipt of a copy of the order denying new trial within which to perfect [an] appeal . Since defendants had received a copy of the order denying their motion for new trial on 09 October 2003, reckoned from that date, they only have one (1) day left within which to file the notice of appeal. But instead of doing so, the defendants filed a motion for reconsideration which was later declared by the Court as pro forma motion in the Order dated 25 November 2003. The running of the prescriptive period, therefore, can not be interrupted by a pro forma motion. Hence the filing of the notice of appeal on 27 November 2007 came much too late for by then the judgment had already become final and executory.[26] (Words in bracket added; Emphasis in the original.)

It cannot be over-emphasized at this stage that the special civil action of certiorari is limited to resolving only errors of jurisdiction; it is not a remedy to correct errors of judgment. Hence, the petitioners lament, partly covered by and discussed under the first ground for allowing its petition, about the trial court taking cognizance of the case notwithstanding private respo ndents claim or action being barred by prescription and/or laches cannot be considered favorably. For, let alone the fact that an action for the declaration of the inexistence of a contract, as here, does not prescribe;[27] that a void transfer of property can be recovered by accion reivindicatoria;[28] and that the legal fiction of indefeasibility of a Torrens title cannot be used as a shield to perpetuate fraud,[29] the trial courts disinclination not to appreciate in favor of the Republic the general principles of prescription or lach es constitutes, at best, errors of judgment not correctable by certiorari. The evidence adduced below indeed adequately supports a conclusion that the Office of the President, during the administration of then President Marcos, wrested possession of the property in question and somehow secured a certificate of title over it without a conveying deed having been executed to legally justify the cancellation of the old title (TCT No. 118527) in the name of the private respondent and the issuance of a new one (TCT No. 118911) in the name of petitioner Republic. Accordingly, granting private respondents basic plea for recovery of the Arlegui property, which was legally hers all along, and the reinstatement of her cancelled certificate of title are legally correct as they are morally right. While not exactly convenient because the Office of the President presently uses it for mix residence and office purposes, restoring private respondent to her possession of the Arlegui property is still legally and physically feasible. For what is before us, after all, is a registered owner of a piece of land who, during the early days of the martial law regime, lost possession thereof to the Government which appropriated the same for some public use, but without going through the legal process of expropriation, let alone paying such owner just compensation. The Court cannot, however, stop with just restoring the private respondent to her possession and ownership of her property. The restoration ought to be complemented by some form of monetary compensation for having been unjustly deprived of the beneficial use thereof, but not, however, in the varying amounts and level fixed in the assailed decision of the trial court and set to be executed by the equally assailed writ of execution. The Court finds the monetary award set forth therein to be erroneous. And the error relates to basic fundamentals of law as to constitute grave abuse of discretion. As may be noted, private respondent fixed the assessed value of her Arlegui property at P2,388,990.00. And in the prayer portion of her third amended complaint for recovery, she asked to be restored to the possession of her property and that the

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petitioner be ordered to pay her, as reasonable compensation or rental use or occupancy thereof, the sum of P500,000.00 a month, or P6 Million a year, with a five percent (5%) yearly increase plus interest at the legal rate beginning July 1975. From July 1975 when the PSG allegedly took over the subject property to July 2003, a month before the trial court rendered judgment, or a period of 28 years, private respondents total rental claim would, per the OSGs computation, only amount to P371,440,426.00. In its assailed decision, however, the trial court ordered the petitioner to pay private respondent the total amount of over P1.48 Billion or the mind-boggling amount of P1,480,627,688.00, to be exact, representing the reasonable rental for the property, the interest rate thereon at the legal rate and the opportunity cost. This figure is on top of the P143,600,000.00 which represents the acquisition cost of the disputed property. All told, the trial court would have the Republic pay the total amount of about P1.624 Billion, exclusive of interest, for the taking of a property with a declared assessed value of P2,388,900.00. This is not to mention the award of attorneys fees in an amount equivalent to 15% of the amount due the private respondent. In doing so, the respondent judge brazenly went around the explicit command of Rule 9, Section 3(d) of the Rules of Court
[30]

which defines the extent of the relief that may be awarded in a judgment by default, i.e., only so much as has been

alleged and proved. The court acts in excess of jurisdiction if it awards an amount beyond the claim made in the complaint or beyond that proved by the evidence.[31] While a defaulted defendant may be said to be at the mercy of the trial court, the Rules of Court and certainly the imperatives of fair play see to it that any decision against him must be in accordance with law. [32] In the abstract, this means that the judgment must not be characterized by outrageous one-sidedness, but by what is fair, just and equitable that always underlie the enactment of a law. Given the above perspective, the obvious question that comes to mind is the level of compensation which for the use and occupancy of the Arlegui property - would be fair to both the petitioner and the private respondent and, at the same time, be within acceptable legal bounds. The process of balancing the interests of both parties is not an easy one. But surely, the Arlegui property cannot possibly be assigned, even perhaps at the present real estate business standards, a monthly rental value of at least P500,000.00 orP6,000,000.00 a year, the amount private respondent particularly sought and attempted to prove. This asking figure is clearly unconscionable, if not downright ridiculous, attendant circumstances considered. To the Court, an award of P20,000.00 a month for the use and occupancy of the Arlegui property, while perhaps a little bit arbitrary, is reasonable and may be granted pro hac vice considering the following hard realities which the Court takes stock of: 1. 2. 3. The property is relatively small in terms of actual area and had an assessed value of only P2,388,900.00; What the martial law regime took over was not exactly an area with a new and imposing structure, if there was any; and The Arlegui property had minimal rental value during the relatively long martial law years, given the very restrictive entry

and egress conditions prevailing at the vicinity at that time and even after. To be sure, the grant of monetary award is not without parallel. In Alfonso v. Pasay City,[33] a case where a registered owner also lost possession of a piece of lot to a municipality which took it for a public purposes without instituting expropriation proceedings or paying any compensation for the lot, the Court, citing Herrera v. Auditor General,[34] ordered payment of just

compensation but in the form of interest when a return of the property was no longer feasible. The award of attorneys fees equivalent to 15% of the amount due the private respondent, as reduced herein, is affirmed. The assessment of costs of suit against the petitioner is, however, nullified, costs not being allowed against the Republic, unless otherwise provided by law.[35]

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The assailed trial courts issuance of the writ of execution[36] against government funds to satisfy its money judgment is also nullified. It is basic that government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments.[37] Republic v. Palacio[38] teaches that a judgment against the State generally operates merely to liquidate and establish the plaintiffs claim in the absence of express provision; otherwise, they can not be enforced by processes of law. Albeit title to the Arlegui property remains in the name of the petitioner Republic, it is actually the Office of the President which has beneficial possession of and use over it since the 1975 takeover. Accordingly, and in accord with the elementary sense of justice, it behooves that office to make the appropriate budgetary arrangements towards paying private respondent what is due her under the premises. This, to us, is the right thing to do. The imperatives of fair dealing demand no

less. And the Court would be remiss in the discharge of its duties as dispenser of justice if it does not exhort the Office of the President to comply with what, in law and equity, is its obligation. If the same office will undertake to pay its obligation with reasonable dispatch or in a manner acceptable to the private respondent, then simple justice, while perhaps delayed, will have its day. Private respondent is in the twilight of her life, being now over 90 years of age.[39] Any delay in the implementation of this disposition would be a bitter cut.

WHEREFORE, the decision of the Regional Trial Court of Manila dated August 27, 2003 insofar as it nullified TCT No. 118911 of petitioner Republic of the Philippines and ordered the Register of Deeds of Manila to reinstate private respondent Tarcila L. Mendozas TCT No. 118527, or to issue her a new cer tificate of title is AFFIRMED. Should it be necessary, the Register of Deeds of Manila shall execute the necessary conveying deed to effect the reinstatement of title or the issuance of a new title to her. It is MODIFIED in the sense that for the use and occupancy of the Arlegui property, petitioner Republic is ordered to pay private respondent the reasonable amount ofP20,000.00 a month beginning July 1975 until it vacates the same and the possession thereof restored to the private respondent, plus an additional interest of 6% per annum on the total amount due upon the finality of this Decision until the same is fully paid. Petitioner is further ordered to pay private respondent attorney's fees equivalent to 15% of the amount due her under the premises. Accordingly, a writ of certiorari is hereby ISSUED in the sense that: 1. The respondent courts assailed decision of August 27, 2003 insofar as it ordered the petitioner Republic of the Philippin es to pay private respondent Tarcila L. Mendoza the sum of One Billion Four Hundred Eighty Million Six Hundred Twenty Seven Thousand Six Hundred Eighty Eight Pesos (P1,480,627,688.00) representing the purported rental use of the property in question, the interest thereon and the opportunity cost at the rate of 3% per annum plus the interest at the legal rate added thereon is nullified. The portion assessing the petitioner Republic for costs of suit is also declared null and void. 2. The Order of the respondent court dated December 19, 2003 for the issuance of a writ of execution and the Writ of Execution dated December 22, 2003 against government funds are hereby declared null and void. Accordingly, the presiding judge of the respondent court, the private respondent, their agents and persons acting for and in their behalves are permanently enjoined from enforcing said writ of execution. However, consistent with the basic tenets of justice, fairness and equity, petitioner Republic, thru the Office of the President, is hereby strongly enjoined to take the necessary steps, and, with reasonable dispatch, make the appropriate budgetary arrangements to pay private respondent Tarcila L. Mendoza or her assigns the amount adjudged due her under this disposition SO ORDERED.

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