Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION

ASUNCION URIETA VDA. DE G.R. No. 164402
AGUILAR, represented by
ORLANDO U. AGUILAR, Present:
Petitioner,
CORONA, C. J., Chairperson,
VELASCO, JR.,
- versus - LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.
SPOUSES EDERLINA B. ALFARO
and RAUL ALFARO, Promulgated:
Respondents. July 5, 2010
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- - x

D E C I S I O N


DEL CASTILLO, J .:

In an action for recovery of possession of realty, who has the better right of possession, the
registered owner armed with a Torrens title or the occupants brandishing a notarized but unregistered
deed of sale executed before the land was registered under the Torrens system?

As we previously ruled in similar cases,[1] we resolve the question in favor of the titleholder.

Factual Antecedents

On August 3, 1995, petitioner filed a Complaint for Recovery of Possession and Damages[2] before the
Regional Trial Court (RTC) of San Jose, Occidental Mindoro. She alleged that on May 16, 1977, her
husband Ignacio Aguilar (Ignacio) was issued Original Certificate of Title (OCT) No. P-9354[3] over a 606-
square meter parcel of land designated as Lot 83 situated in Brgy. Buenavista, Sablayan, Occidental
Mindoro. Prior thereto, or in 1968, Ignacio allowed petitioners sister, Anastacia Urieta (Anastacia),
mother of respondent Ederlina B. Alfaro (Ederlina), to construct a house on the southern portion of said
land and to stay therein temporarily.

In 1994, Ignacio died and his heirs decided to partition Lot 83. Petitioner thus asked the
respondents, who took possession of the premises after the death of Anastacia, to vacate Lot 83. They
did not heed her demand.

Thus, petitioner filed a case for accion publiciana praying that respondents be ordered to vacate
subject property, and to pay moral, temperate, and exemplary damages, as well as attorneys fees and
the costs of suit.

In their Answer with Counterclaims and Affirmative Defenses,[4] respondents did not dispute that
Ignacio was able to secure title over the entire Lot 83. However, they asserted that on April 17, 1973,
Ignacio and herein petitioner sold to their mother Anastacia the southern portion of Lot 83 consisting of
367.5 square meters as shown by the Kasulatan sa Bilihan[5] which bears the signatures of petitioner
and Ignacio. Since then, they and their mother have been in possession thereof. Respondents also
presented several Tax Declarations[6] in support of their allegations.

Respondents also raised the defense of prescription. They pointed out that accion publiciana or an
action to recover the real right of possession independent of ownership prescribes in 10 years.
However, it took petitioner more than 25 years before she asserted her rights by filing accion publiciana.
As alleged in the complaint, they took possession of the disputed portion of Lot 83 as early as 1968, but
petitioner filed the case only in 1995.

By way of counterclaim, respondents prayed that petitioner be directed to execute the necessary
documents so that title to the 367.5-square meter portion of Lot 83 could be issued in their name. They
likewise prayed for the dismissal of the complaint and for award of moral and exemplary damages, as
well as attorneys fees.

In her Reply and Answer to Counterclaim,[7] petitioner denied having signed the Kasulatan sa Bilihan
and averred that her signature appearing thereon is a forgery. She presented an unsworn written
declaration dated January 28, 1994 where her husband declared that he did not sell the property in
question to anyone. As to the issue of prescription, she asserted that respondents occupation of
subject property cannot ripen into ownership considering that the same is by mere tolerance of the
owner. Besides, the purported Kasulatan sa Bilihan was not registered with the proper Registry of
Deeds.

During the trial, petitioner presented the testimonies of Orlando Aguilar (Orlando) and Zenaida Baldeo
(Zenaida). Orlando testified that he has been staying in Lot 83 since 1960 and had built a house thereon
where he is presently residing; and, that his mother, herein petitioner, denied having sold the property
or having signed any document for that matter.

Zenaida also testified that in 1981, her father (Ignacio) and Ederlina had a confrontation before the
barangay during which her father denied having conveyed any portion of Lot 83 to anybody. She further
testified that she is familiar with the signature of her father and that the signature appearing on the
Kasulatan sa Bilihan is not her fathers signature.
For their part, respondents offered in evidence the testimonies of Estrella Bermudo Alfaro (Estrella),
Ederlina, and Jose Tampolino (Jose). Estrella declared that she was present when Ignacio and the
petitioner affixed their signatures on the Kasulatan sa Bilihan, which was acknowledged before Notary
Public Juan Q. Dantayana on April 17, 1973. She narrated that her mother actually purchased the
property in 1954, but it was only in 1973 when the vendor executed the deed of sale. In fact, her father
Francisco Bermudo was able to secure a permit to erect a house on the disputed property from the
Office of the Mayor of Sablayan, Occidental Mindoro in 1954.[8] She was surprised to learn though that
their property is still registered in the name of the petitioner.

Ederlina corroborated the declarations of Estrella. She also alleged that her parents occupied the
property in 1954 when they built a hut there, then later on, a house of strong materials.

Jose corroborated the declarations of the other witnesses for the respondents that the disputed portion
of Lot 83 is owned by Anastacia.

Ruling of the Regional Trial Court

In its Decision[9] dated September 21, 1998, the court a quo ordered the respondents to vacate subject
premises and denied their counterclaim for reconveyance on the grounds of prescription and laches. It
held that the prescriptive period for reconvenyance of fraudulently registered real property is 10 years
reckoned from the date of the issuance of the certificate of title. In this case, however, it is not disputed
that OCT No. P-9354 covering the entire Lot 83 was issued to Ignacio in 1977. The trial court likewise
held that respondents are guilty of laches and that the reconveyance of the disputed property in their
favor would violate the rule on indefeasibility of Torrens title.
The dispositive portion of the trial courts Decision reads:

WHEREFORE, and in the light of all the foregoing considerations, judgment is hereby rendered in favor
of plaintiff and against the defendants, to wit:

1. Ordering the defendants and any person claiming right under them to vacate the premises in question
and surrender the possession thereof to plaintiff;

2. To pay the amount of Ten Thousand Pesos (P10,000.00) as and for reasonable attorneys fees;

3. To pay the costs of this suit.

SO ORDERED.[10]


Ruling of the Court of Appeals


On June 7, 2004, the CA promulgated its Decision*11+ reversing the trial courts Decision and dismissing
the complaint, as well as respondents counterclaim. The CA upheld the validity of the Kasulatan sa
Bilihan since it is a notarized document and disputably presumed to be authentic and duly executed. In
addition, witness Estrella categorically declared that she was present when petitioner and Ignacio signed
the Kasulatan sa Bilihan. The CA elaborated that in order to disprove the presumption accorded to a
notarized document, the party contesting its authenticity and due execution must present a clear and
convincing evidence to the contrary, which the petitioner failed to do.

The CA likewise disagreed with the court a quo that respondents counterclaim should be dismissed on
the ground of indefeasibility of title. It emphasized that the Torrens system was adopted to protect
innocent third parties for value and not to protect fraud. Nonetheless, the CA did not grant the relief
sought in respondents counterclaim considering that not all interested parties were impleaded in the
case.
The dispositive portion of the CAs Decision reads:

IN VIEW OF THE FOREGOING, the decision appealed from is REVERSED, and a new one ENTERED
dismissing the complaint and counterclaim.

SO ORDERED.[12]


Issue

Without seeking reconsideration of the CAs Decision, petitioner interposed the present recourse raising
the sole issue of:

WHETHER X X X THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
VALIDITY/GENUINENESS AND DUE EXECUTION OF THE PURPORTED DEED OF SALE OF THE PORTION OF
THE LOT DESPITE THE VEHEMENT DENIAL OF THE ALLEGED VENDORS.[13]


Petitioner contends that the CA grievously erred in upholding the validity and genuineness of the
Kasulatan sa Bilihan. She alleges that she wanted to take the witness stand to disclaim in open court her
purported signature appearing on respondents Kasulatan sa Bilihan, but could not do so because she is
too old, bed-ridden and has to bear a tortuous five-hour drive to reach the court. Nevertheless, she
executed a sworn statement declaring that she and her husband never sold any portion of Lot 83 and
that their signatures appearing on said deed were forged. She avers that the assistance of an expert
witness is not even necessary to detect the patent dissimilarities between said forged signatures and
their authentic signatures.

Petitioner likewise argues that the CA erred in taking into consideration the appearance and condition of
the paper where the Kasulatan sa Bilihan is written. She posits that the fabrication of an ancient-looking
document nowadays is no longer difficult. She also points to several circumstances which cast doubt on
the authenticity and due execution of the Kasulatan sa Bilihan, but which the CA inexplicably ignored

Furthermore, petitioner maintains that her title is indefeasible. And while there are exceptions to the
rule on indefeasibility of title,[14] she emphasizes that respondents never disputed her title. With
regard to the tax declarations presented by respondents, petitioner asserts that it has been the
consistent ruling of this Court that tax declarations are not necessarily proof of ownership.

In their comment, respondents assert that in petitions filed under Rule 45 of the Rules of Court, only
questions of law can be raised. Factual issues are prohibited. From the arguments advanced by the
petitioner, however, it is clear that she is asking this Court to examine and weigh again the evidence on
record.

Our Ruling

We grant the petition.

This case falls under the exceptions where the Supreme Court may review factual issues.


As a rule, only questions of law may be raised in petitions for review on certiorari.[15] It is settled that
in the exercise of the Supreme Courts power of review, the court is not a trier of facts and does not
normally undertake the re-examination of the evidence presented by the contending parties during the
trial of the case.[16] This rule, however, is subject to a number of exceptions,[17] one of which is when
the findings of the appellate court are contrary to those of the trial court, like in the present case.

Nature and purpose of accion publiciana.


Also known as accion plenaria de posesion,[18] accion publiciana is an
ordinary civil proceeding to determine the better right of possession of realty independently of title.[19]
It refers to an ejectment suit filed after the expiration of one year from the accrual of the cause of action
or from the unlawful withholding of possession of the realty.[20]

The objective of the plaintiffs in accion publiciana is to recover possession only, not ownership.[21]
However, where the parties raise the issue of ownership, the courts may pass upon the issue to
determine who between the parties has the right to possess the property. This adjudication, however,
is not a final and binding determination of the issue of ownership; it is only for the purpose of resolving
the issue of possession, where the issue of ownership is inseparably linked to the issue of possession.
The adjudication of the issue of ownership, being provisional, is not a bar to an action between the same
parties involving title to the property.[22] The adjudication, in short, is not conclusive on the issue of
ownership.[23]

Guided by the foregoing jurisprudential guideposts, we shall now resolve the arguments raised by the
parties in this petition.

As against petitioners Torrens title, respondents Kasulatan sa Bilihan cannot confer better right to
possess.


It is settled that a Torrens title is evidence of indefeasible title to property in favor of the person in
whose name the title appears.[24] It is conclusive evidence with respect to the ownership of the land
described therein.[25] It is also settled that the titleholder is entitled to all the attributes of ownership
of the property, including possession.[26] Thus, in Arambulo v. Gungab,[27] this Court declared that the
age-old rule is that the person who has a Torrens title over a land is entitled to possession thereof.

In the present case, there is no dispute that petitioner is the holder of a Torrens title over the entire Lot
83. Respondents have only their notarized but unregistered Kasulatan sa Bilihan to support their claim
of ownership. Thus, even if respondents proof of ownership has in its favor a juris tantum presumption
of authenticity and due execution, the same cannot prevail over petitioners Torrens title. This has
been our consistent ruling which we recently reiterated in Pascual v. Coronel,[28] viz:

Even if we sustain the petitioners arguments and rule that the deeds of sale are valid contracts, it would
still not bolster the petitioners case. In a number of cases, the Court had upheld the registered owners
superior right to possess the property. In Co v. Militar, the Court was confronted with a similar issue of
which between the certificate of title and an unregistered deed of sale should be given more probative
weight in resolving the issue of who has the better right to possess. There, the Court held that the court
a quo correctly relied on the transfer certificate of title in the name of petitioner, as opposed to the
unregistered title in the name of respondents. The Court stressed therein that the Torrens System was
adopted in this country because it was believed to be the most effective measure to guarantee the
integrity of land titles and to protect their indefeasibility once the claim of ownership is established and
recognized.

Likewise, in the recent case of Umpoc v. Mercado, the Court declared that the trial court did not err in
giving more probative weight to the TCT in the name of the decedent vis--vis the contested
unregistered Deed of Sale. Later in Arambulo v. Gungab, the Court held that the registered owner is
preferred to possess the property subject of the unlawful detainer case. The age-old rule is that the
person who has a Torrens Title over a land is entitled to possession thereof. (Citations omitted.)


As the titleholder, therefore, petitioner is preferred to possess the entire Lot 83. Besides, there are
telltale signs which cast doubt on the genuineness of the Kasulatan. To cite a few:

1. The date of its execution unbelievably coincides with the date the buyer, Anastacia, died;

2. Despite its alleged execution on April 17, 1973, respondents brought up the Kasulatan only
when petitioner asked them to vacate the disputed premises. Prior thereto, they neither asserted their
rights thereunder nor registered the same with the proper Registry of Deeds;

3. The lawyer who notarized the Kasulatan sa Bilihan, as well as the witnesses thereto, was not
presented in court; and,

4. The District Land Officer who signed OCT No. P-9354 by authority of the President is a public
officer who has in his favor the presumption of regularity in issuing said title.

Torrens certificate of title cannot be the subject of collateral attack.


Moreover, respondents attack on the validity of petitioners title by claiming that their mother became
the true owner of the southern portion of Lot 83 even before the issuance of OCT No. P-9354
constitutes as a collateral attack on said title. It is an attack incidental to their quest to defend their
possession of the property in an accion publiciana, not in a direct action whose main objective is to
impugn the validity of the judgment granting the title.[29] This cannot be allowed. Under Section 48 of
Presidential Decree No. 1529, otherwise known as the Property Registration Decree, a certificate of title
cannot be the subject of collateral attack. Thus:

SEC. 48. Certificate not subject to collateral attack. A certificate of title shall not be subject to
collateral attack. It cannot be altered, modified, or canceled except in a direct proceeding in accordance
with law.


A collateral attack transpires when, in another action to obtain a different relief and as an incident to
the present action, an attack is made against the judgment granting the title.[30] This manner of attack
is to be distinguished from a direct attack against a judgment granting the title, through an action whose
main objective is to annul, set aside, or enjoin the enforcement of such judgment if not yet
implemented, or to seek recovery if the property titled under the judgment had been disposed of.[31]
Thus, in Magay v. Estiandan,[32] therein plaintiff-appellee filed an accion publiciana. In his defense,
defendant-appellant alleged among others that plaintiff-appellees Transfer Certificate of Title No. 2004
was issued under anomalous circumstances. When the case reached this Court, we rejected defendant-
appellants defense on the ground that the issue on the validity of said title can only be raised in an
action expressly instituted for that purpose. Also, in Co v. Court of Appeals[33] we arrived at the same
conclusion and elaborated as follows:

In their reply dated September 1990, petitioners argue that the issues of fraud and ownership raised in
their so-called compulsory counterclaim partake of the nature of an independent complaint which they
may pursue for the purpose of assailing the validity of the transfer certificate of title of private
respondents. That theory will not prosper.

While a counterclaim may be filed with a subject matter or for a relief different from those in the basic
complaint in the case, it does not follow that such counterclaim is in the nature of a separate and
independent action in itself. In fact, its allowance in the action is subject to explicit conditions, as above
set forth, particularly in its required relation to the subject matter of opposing partys claim. Failing in
that respect, it cannot even be filed and pursued as an altogether different and original action.

It is evident that the objective of such claim is to nullify the title of private respondents to the property
in question, which thereby challenges the judgment pursuant to which the title was decreed. This is
apparently a collateral attack which is not permitted under the principle of indefeasibility of a Torrens
title. It is well settled that a Torrens title cannot be collaterally attacked. The issue on the validity of
title, i.e., whether or not it was fraudulently issued, can only be raised in an action expressly instituted
for that purpose. Hence, whether or not petitioners have the right to claim ownership of the land in
question is beyond the province of the instant proceeding. That should be threshed out in a proper
action.


The lower courts cannot pass upon or grant respondents counterclaim for lack of jurisdiction.


Both the trial court and the appellate court considered respondents counterclaim as a petition for
reconveyance. In which case, it should be treated merely as a permissive counterclaim because the
evidence required to prove their claim differs from the evidence needed to establish petitioners
demand for recovery of possession. Being a permissive counterclaim, therefore, respondents should
have paid the corresponding docket fees.[34] However, there is no proof on record that respondents
paid the required docket fees. The official receipts were neither attached to nor annotated on
respondents Answer with Counterclaims and Affirmative Defenses*35+ which was filed via registered
mail[36] on August 19, 1995. It has been our consistent ruling that it is not simply the filing of the
complaint or appropriate initiatory pleading, but the payment of the full amount of the prescribed
docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action.[37]
The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall
not be considered filed until and unless the filing fee prescribed therefor is paid.[38]

On a final note, and as discussed above, we stress that our ruling in this case is limited only to the issue
of determining who between the parties has a better right to possession. This adjudication is not a final
and binding determination of the issue of ownership. As such, this is not a bar for the parties to file an
action for the determination of the issue of ownership where the validity of the Kasulatan sa Bilihan and
of OCT No. P-9354 can be properly threshed out.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals dated June 7, 2004
is REVERSED and SET ASIDE and the September 21, 1998 Decision of Regional Trial Court, Branch 46, San
Jose, Occidental Mindoro, insofar as it orders the respondents to vacate the premises is REINSTATED
and AFFIRMED.

SO ORDERED.


MARIANO C. DEL CASTILLO
Associate Justice









FIRST DIVISION


HEIRS OF MACABANGKIT G.R. No. 141447
SANGKAY, namely, CEBU
BATOWA-AN, SAYANA,
NASSER, MANTA, EDGAR, Present:
PUTRI, MONKOY and AMIR,
all surnamed MACABANGKIT, PANGANIBAN, C.J., Chairperson,
Petitioners, YNARES-
SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
- versus - CHICO-NAZARIO, JJ.


NATIONAL POWER Promulgated:
CORPORATION,
Respondent. May 4, 2006
x-----------------------------------------------------------------------------------------x

D E C I S I O N

CALLEJO, SR., J .:

Before this Court is a Petition for Review on Certiorari of the Decision
[1]
of
the Court of Appeals (CA) in CA-G.R. SP No. 54889 which set aside the Special
Order
[2]
dated September 7, 1999 issued by the Regional Trial Court (RTC) of
Iligan City, Branch 61 in Civil Case No. 4094, as well as the Resolution dated
November 12, 1999 denying the motion for reconsideration thereof. The said
Special Order of the RTC granted the Urgent Motion for Execution Pending
Appeal filed by plaintiffs therein of its Decision and Supplemental Decision, thus
obliging the National Power Corporation (NAPOCOR) to pay
plaintiffs P79,472.750.00 as just compensation.

The antecedents are as follows:

Macabangkit Sangkay was the owner of a 227,065-square-meter parcel of
land located in Iligan City. When he died intestate, the property was subdivided
into nine parcels and subsequently titled to his heirs, namely:

Name Title No.
1) Edgar Macabangkit - OCT No. P-1003
2) Nasser Macabangkit - OCT No. P-1004
3) Sayana Macabangkit - OCT No. P-1005
4) Manta Macabangkit - OCT No. P-1007
5) Cebu Macabangkit - OCT No. P-1008
6) Batowa-an Macabangkit - OCT No. P-1010
7) Amir Macabangkit - OCT No. P-1012
8) Monkoy Macabangkit - OCT No. P-1027
9) Putri Macabangkit - OCT No. P-1028
[3]



The said Heirs declared their properties for taxation purposes in their
respective names.
[4]


In 1979, NAPOCOR constructed an underground three-kilometer long
tunnel traversing the properties of the Heirs, about 100 meters beneath the
surface. The tunnel was used to siphon water and divert the flow of
the Agus River for the operation of NAPOCORs Hydro-Electric Project in Agus
V, VI, and VII, at Ditucalan and Fuentes, Iligan City. A transmission line also
traversed the property. The Heirs were not informed that such underground tunnel
had been constructed; neither did NAPOCOR compensate them for the use of their
property.
[5]



The Heirs filed a complaint for damages and recovery of possession of the
property with alternative prayer for just compensation against NAPOCOR before
the RTC of Iligan City, alleging the following in their complaint:

8. In the early part of 1996, plaintiffs entered into a Memorandum of
Agreement with Global Asia Management and Resource Corporation for the sale
of their property. On July 5, 1996, plaintiffs received a letter from the Global
Asia Management and Resource Corporation, refusing the plaintiffs land due to
the presence of defendants underground tunnel. Copy of the Memorandum of
Agreement and the subsequent withdrawal of Global Asia Management and
Resource Corporation, from the agreement are attached herewith as ANNEXES
W and X, forming as part hereof;

9. On October 10, 1996, plaintiffs offered their land as collateral for a
loan applied with the Al-Amanah Islamic Investment Bank of the Philippines,
Iligan City Branch, and again the said parcels of land were not accepted as
collateral due to the presence of defendants underground tunnel, copy of the
letter of the said Bank, dated October 10, 1996 is herewith attached and marked
as ANNEX Y, forming as part hereof;

10. That the act of defendant is equivalent to unlawful taking and
condemnation of plaintiffs parcels of land, without just compensation and/or
reasonable rental since 1979. Written and oral demands were made for defendant
to vacate and remove its tunnel, or, in the alternative, to pay just compensation
and rental of plaintiffs parcels of land, but defendant refused and continuously
refuses, sans any valid ground. Copy of plaintiffs demand letter is attached
herewith as ANNEX Z forming as part hereof. Also, the answer of defendant to
plaintiffs demand letter is also attached herewith and marked as ANNEX Z-
1, forming as part hereof;

11. That, as a consequence of defendants unlawful taking and
condemnation of plaintiffs properties and the illegal construction of defendants
underground tunnel, the defendant were deprived of the agricultural, commercial,
industrial and residential value of their land aforesaid;

So also, by the same reason aforestated, the surface of plaintiffs land
became unsafe for habitation as the defendants tunnel will someday collapse, and
the surface will be carried by the current of the water. Those of plaintiffs and
workers with houses on the surface were forced to transfer to a safer site in 1996,
as they were continuously disturb day and night, because of fear and the danger,
coupled by the sound being produce by the water flow and which sometime shake
the surface;

12. That the current aggregate assessed value of plaintiffs, parcels of
land as indicated in their respective Tax Declarations is ONE HUNDRED SIX
THOUSAND AND SEVEN HUNDRED TEN (P106,710.00) PESOS, more or
less;

13. That defendant must be held liable for damages in the form of
rental and other damages starting [from] 1979 when the defendants underground
tunnel was constructed up to the present, plus additional damages beyond 1997,
should defendant continue to illegally stay on plaintiffs land, in such amount as
may be determined and deemed just and equitable by the Honorable Court;

14. That it is necessary for defendant to dismantle its underground
tunnel illegally constructed beneath the lands of plaintiffs and to deliver
possession of the same to plaintiff the subterrain illegally occupied by defendant;

15. The construction of the tunnel by defendant beneath plaintiffs
parcels of lands have caused danger to their lives and properties; sleepless nights,
serious anxiety, and shock, thereby entitling them to recover moral damages in the
amount of TWO HUNDRED THOSUAND (P200,000.00) PESOS. And by way
of example to deter persons similarly minded and for public good, defendant may
be held liable for exemplary damages, also in the amount of TWO HUNDRED
THOUSAND (P200,000.00) PESOS. Or in both cases, in such amount as may be
determined by the Honorable Court;

16. That to protect the interest of the plaintiffs and for purposes of
filing the instant case, they were compelled to engage the services of counsel, in
the amount equivalent to TWO [HUNDRED] THOUSAND (P200,000.00), plus
court appearance fee of ONE THOUSAND (P1,000.00), as and by way of
attorneys fees.
[6]


They prayed that judgment be rendered in their favor after due proceedings,
to wit:

WHEREFORE, premises considered, plaintiffs pray that judgment be
rendered as follows:

1. Directing defendants to remove and dismantle its underground
tunnel constructed beneath the land of plaintiffs and to deliver possession of the
subterrain area illegally occupied by defendant;

2. To pay plaintiffs a monthly rental from 1979 up to the time the
defendant vacates the subterrain of the land of plaintiffs, in such amount as may
be considered reasonable by the Honorable Court;

3. In the alternative, if and when the removal of defendants
underground tunnel is not legally possible, to pay plaintiffs of the just
compensation of their land in the amount as may be deemed reasonable by the
Honorable Court. But, in either case, (either by the removal of the tunnel or by
paying just compensation) to pay plaintiffs a reasonable rental;

4. To pay moral damages in the amount of TWO HUNDRED
THOUSAND (P200,00.00) PESOS and exemplary damages of another TWO
HUNDRED THOUSAND (P200,000.00) PESOS, or in such respective amount as
may be determined by the Honorable Court;

5. Pay attorneys fees in the amount of TWO HUNDRED
THOUSAND (P200,000.00), plus appearance fee of ONE THOUSAND
(P1,0000.00) PESOS, as and by way of attorneys fees;

6. Such other relief deemed just and equitable under the
circumstance.
[7]


In its answer to the complaint, NAPOCOR interposed the following special
and affirmative defenses:

6. That while it is true that under Article 437 of the New Civil Code, the
owner of a parcel of land is the owner of its surface and everything under it and
can therefore construct thereon any work or make any plantation and excavation
which he may deem proper, yet, such exercise of right is without detriment to
servitude and is subject to other limitations imposed either by special law or
ordinances;

7. That under Section 3, paragraph (f) of Republic Act 6395, as amended,
which, by its nature, is a special law, defendant herein is authorized to take water
from any public stream, river, creek, lake, spring or waterfall in the Philippines
for the purposes specified therein; to intercept and divert the flow of water from
lands of riparian owners and from persons owning or interested in water which
are or may be necessary to said purposes, upon payment of just compensation
therefor; to alter, straighten, obstruct or increase the flow of water in streams or
water channels intersecting or connecting therewith or continuous to its works or
any part thereof; thus, the construction of tunnel by defendant is legal and
sanctioned by law;

8. That assuming arguendo, without admitting, that a tunnel was indeed
constructed in 1979 under the land claimed by the plaintiffs, their cause of action
against the defendant is barred not only by prescriptionbut also
by estoppel and laches. Under our laws and jurisprudence, easement of aqueduct
canals and tunnels are apparent and continuous easement and any action arising
therefrom prescribes in five (5) years which prescriptive period is to be reckoned
from its accrual. In the instant case, the cause of action of the plaintiffs, if any,
has accrued in 1979 and yet they only filed the complaint in 1997 or after the
lapse of almost eighteen (18) years;
[8]


The Heirs adduced in evidence the Certificate issued by the City Assessors
Office stating that the property had an assessed value of P400.00 to P500.00 per
square meter. Witnesses testified that the adjacent parcels of land were sold
at P700.00 and P750.00 per square meter and that the area where the property is
located is classified as industrial, and residential and adjacent to subdivisions with
industrial classification.
[9]


On August 13, 1999, the RTC rendered judgment in favor of the
Heirs. The fallo of the decision reads:

WHEREFORE, premises considered:

1. The prayer for the removal or dismantling of defendants tunnel is
denied[.] However, defendant is hereby directed and ordered:

a) To pay plaintiffs land with a total area of 227,065
square meters, at the rate of FIVE HUNDRED (P500.00) PESOS
per square meter, or a total of ONE HUNDRED THIRTEEN
MILLION FIVE HUNDRED THIRTY TWO THOUSAND AND
FIVE HUNDRED (P113,532,500.00) PESOS, plus interest, as
actual damages or just compensation;

b) To pay plaintiffs a monthly rental of their land in the
amount of THIRTY THOUSAND (P30,000.00) PESOS from 1979
up to July 1999 with 12% interest per annum;

c) To pay plaintiffs the sum of TWO HUNDRED
THOUSAND (P200,000.00) PESOS, as moral damages;

d) To pay plaintiffs, the sum of TWO HUNDRED
THOUSAND (P200,000.00) PESOS, as exemplary damages;

e) To pay plaintiffs, the sum equivalent to 15% of the total
amount awarded, as attorneys fees, and to pay the cost.

SO ORDERED.
[10]


The RTC declared that the construction of the underground tunnel affected
the entire area of the Heirs property. Consequently, plaintiffs lost the agricultural,
industrial, commercial and residential value of the land.

On August 18, 1999, the RTC rendered a Supplemental Decision,
the dispositive portion of which reads:


Therefore, paragraph 1(a) of the dispositive portion of the original
decision should read, as follows:

a) To pay plaintiffs land with a total area of 227,065
square meters, at the rate of FIVE HUNDRED (P500.00) PESOS
per square meter, or a total of ONE
HUNDRED THIRTEEN MILLION FIVE HUNDRED THIRTY
TWO THOUSAND AND FIVE HUNDRED (P113,532,500.00)
PESOS, plus interest, as actual damages or just
compensation;Consequently, plaintiffs land or properties are
hereby condemned in favor of defendant National Power
Corporation, upon payment of the aforesaid sum;

This supplemental decision shall be considered as part of paragraph 1(a)
of the dispositive portion of the original decision.
[11]


Before NAPOCOR was served with a copy of said Decision, the Heirs filed
an Urgent Motion for Execution of Judgment Pending Appeal, alleging that
execution pending appeal was justified, considering the trial courts finding that it
(NAPOCOR) had acted in bad faith in constructing the tunnel. They pointed out
that it had been illegally occupying their land for a long period of time without any
compensation or rental having been paid to them, and that to prolong the execution
of the decision would likewise prolong its illegal act. The Heirs pointed out that
once they received their share of the money judgment, they would be able to
purchase safer lands and build new houses thereon. They insisted that any appeal
which may be taken by NAPOCOR would be dilatory and frivolous.

The Heirs appended to their motion their Joint Affidavit wherein they
alleged that they constantly feared that an earthquake could happen at any time,
and that the tunnel could collapse or cave in, which would necessarily cause
serious injuries or even death.
[12]


NAPOCOR opposed the motion. It contended that the Heirs failed to prove
that it acted in bad faith when it constructed the tunnel; hence, there was no
justification to grant their motion. It pointed out that the Heirs were
never deprived of the beneficial use of their land; in fact, there was no evidence on
record that they ever attempted to use the affected portion of the property.
NAPOCOR claimed that the Heirs demand for rentals was without factual and
legal basis.

NAPOCOR further alleged that the Heirs claim that the tunnel exposed
them to danger was belied by the testimony of Nasser Macabangkit. On cross-
examination, he testified that only two of his siblings, Sayana and Edgar
Macabangkit, starter to reside in the subject property in 1998, after the complaint
was filed on November 21, 1987. It further alleged that it had already filed an
appeal, which, as gleaned from the evidence and the applicable jurisprudence, was
not a mere dilatory tactic.
[13]


On September 7, 1997, the trial court issued the Special Order granting the
motion for execution pending appeal and awarded 70% of the money judgment,
or P79,472,750.00, upon the filing of a P1,000,000.00
bond. The dispositive portion of the Order reads:

WHEREFORE, premises considered, the Motion for Execution Pending
Appeal is therefore granted, but only for the amount equivalent to SEVENTY
PERCENT (70%) of the amount awarded as fair market value of plaintiffs land or
for a total of SEVENTY-NINE MILLION FOUR-HUNDRED SEVENTY-TWO
THOUSAND AND SEVEN HUNDRED FIFTY (P79,472,750.00) PESOS,
Philippine Currency, subject to the condition that plaintiffs shall file an execution
bond duly approved by this Court, either in cash, surety or property in the amount
of ONE MILLION (P1,000,000.00) PESOS, which bond is in addition to
plaintiffs land already condemned in favor of the defendant, to answer for any
damage that defendant may suffer as a result of the execution of the decision
pending appeal, should it later on be ruled on appeal that plaintiffs be not entitled
to it and the decision be reversed.

Monthly rentals, moral and exemplary damages, attorneys fee and cost
are excluded from the execution pending appeal.

Let the corresponding Writ of Execution Pending appeal be issued upon
the posting and approval of the aforesaid execution bond. Mr. Montoy
Lomondot, Sheriff-IV, RTC, Lanao del Norte is hereby commanded to cause the
implementation and execution of the portion of the aforesaid decision in
accordance with the Rules of Court, together with


his lawful fees for the service of the Writ. He shall be assisted by the other
deputy sheriffs assigned to this Court or in another branch after securing the
consent of the presiding Judge thereof. He shall likewise be assisted by Atty.
Cairoding Maruhom, Ex-officio Provincial/City Sheriff of Lanao del Sur-Marawi
City, and Palao Diamla, Sheriff-IV, RTC, Lanao del Sur, subject to the consent of
the Presiding Judge concerned.

The Clerk of Court is hereby ordered to assess and collect the
corresponding additional filing fee from the judgment award.

SO ORDERED.
[14]


The trial court declared that among the good reasons to grant the motion for
execution pending appeal was the fact that NAPOCOR had occupied the property
and had used it in bad faith since 1979 without having paid just
compensation therefor. Moreover, the construction of the tunnel rendered the
subject property unfit for industrial, residential, or commercial use because of the
danger it posed; neither could the Heirs dispose of the property. Thus, they had the
right to compel NAPOCOR to pay the price of the land or the proper rent under
Article 450 of the New Civil Code. The trial court also declared that the appeal of
defendant was dilatory and frivolous, which was resorted to so that it could
continue enjoying and using the property for free. It also stated execution of
judgment pending appeal would not cause prejudice or irreparable damage to
defendant, since the amount of just compensation sought to be executed was
equivalent to the fair market value of the Heirs land, while the rentals were for
NAPOCORS use of the land. It also ruled that the Heirs could file their motion for
execution pending appeal even before NAPOCOR received a copy of the
decision.
[15]


The RTC thereafter issued the Writ of Execution
[16]
on September 9, 1999.

NAPOCOR assailed the trial courts Special Order and Writ of Execution
before the CA via petition for review on certiorari under Rule 65, claiming that
respondent Judge acted without or in excess of jurisdiction and gravely abused his
discretion in granting the Motion for Execution Pending Appeal and issuing the
concomitant writ despite the absence of compelling reasons therefor.
[17]
It
cited Aquino v. Santiago
[18]
to support its argument. It claimed that it was not in
danger of being insolvent as would justify execution of the decision pending
appeal. It further posited that since Republic Act No. 6395, as amended, was a
special law which recognized the construction of water pipes to divert the flow of
water for purposes of generating electricity as a limitation to ownership of
property.

NAPOCOR further claimed that the assailed Special Order rendered
nugatory its right to appeal the decision sought to be executed. It insisted that it
should not be obliged to pay the alleged market value of the property since it was
not entirely affected by the support tunnel.

For their part, the Heirs averred that execution pending appeal is a matter
addressed to the second discretion of the trial court and cannot be nullified by the
appellate court unless grave abuse of discretion amounting to excess or lack of
jurisdiction is shown. They claimed that NAPOCOR failed to prove that the trial
court was guilty of grave abuse of discretion in granting their motion for execution
pending appeal. They pointed out that it was justified by good reasons, and that
they adduced proof of the fair market value of the property and posted the
required P1,000,000.00 bond. The Heirs cited the ruling of the CA in National
Power Corporation v. Ibrahim
[19]
and Municipality of Bian, Laguna v. Court of
Appeals.
[20]


The appellate court heard the parties on oral argument. On November 12,
1999, the CA rendered judgment granting the petition and set aside
the assailed orders of the trial court.
[21]
According to the appellate court,

even assuming NAPOCORs bad faith in constructing its tunnel beneath the
surface of the property, it was not an urgent and compelling reason to grant the
motion for execution pending appeal. The matter goes into the merits of
the case, which the CA should resolve on appeal. Moreover, it was not for the trial
court to rule on whether NAPOCORs appeal was dilatory; the merits of the appeal
should be resolved first, considering the other matters involved in the appeal aside
from the fact that the total amount of the award was P113,532,500.00.

According to the CA, under Section 3(i) of Republic Act No. 6395, the act
revising the charter of NAPOCOR, any action by any person claiming
compensation and/or damages shall be filed within five (5) years after the right-of-
way, transmission lines, substations, plants or other facilities shall have been
established; after the said period, no suit can be brought to question the same. It
stressed that the effect of this proviso on the decision of the trial court can be better
addressed in the appeal.

The Heirs filed a Motion for Reconsideration,
[22]
which the trial court denied
for lack of merit on January 13, 2000;
[23]
hence, the instant petition.

Petitioners allege that the CA erred in granting the writ of certiorari in favor
of respondent NAPOCOR on its finding that the trial court committed grave abuse
of its discretion in issuing the Special Order. Petitioners maintain that the trial
courts finding that respondent NAPOCOR acted in bad faith and that its appeal
was dilatory was supported by the evidence on record and the pleadings of the
parties. They insisted that the appellate court should not substitute its findings for
those of the trial court. Its reliance on Section 3(i) of Republic Act No. 6395 was
misplaced because the law does not apply to the construction of a tunnel
underneath the surface of their property. Petitioners further aver that the CA should
have applied its ruling in National Power Corporation v. Ibrahim.
[24]
By its
decision, the CA condoned the unjust enrichment of private respondent at their
expense.

The issue for resolution is whether the CA erred in finding that the trial court
committed grave abuse of its discretion in granting petitioners motion for
execution pending appeal of its decision and supplemental decision in the amount
of P79,472,750.00.

The petition is dismissed for lack of merit.

The rule is that execution shall issue as a matter of right, on motion, upon a
judgment or order that disposes of the action or proceedings upon the expiration of
the period to appeal therefrom if no appeal has been perfected.
[25]
However, the
trial court may grant execution before the expiration of the period to appeal upon
motion of the prevailing party provided that it has jurisdiction over the case and is
in possession of either the original record or the record on appeal, as the case may
be, and there are good reasons for such execution to be stated in a special order
after due hearing. The rule does not proscribe the prevailing party from filing such
motion even before the losing party has received his copy of the decision or final
order of the trial court. Such motion for execution pending appeal may be filed by
the prevailing party at any time before the expiration of the period to appeal. It
may happen that, upon service on the prevailing party of a copy of the decision or
final order of the trial court, he files a motion for execution pending appeal but the
losing party files a motion for reconsideration of the decision or final order within
the required 15-day period under Rule 39 of the Revised Rules of Court. In such a
case, the motion of the prevailing party for execution pending appeal may be held
in abeyance pending final resolution of the losing partys motion for
reconsideration of the decision or final order. Upon the other hand, if the losing
party does not appeal the decision or final order, the execution of the decision
becomes a matter of right on the part of the prevailing party. In such case, the
motion for execution pending appeal becomes moot and
academic, as the prevailing party may file a motion for a writ of execution of the
decision or final order.

As provided in Section 2, Rule 39 of the Revised Rules of Court, execution
of the judgment or final order pending appeal is discretionary. It is the exception
to the rule that only a final judgment may be executed, hence, must be strictly
construed. Execution pending appeal should not be granted routinely but only in
extraordinary circumstances.
[26]
However, if the trial court grants execution
pending appeal in the absence of good reasons therefor, it is incumbent upon the
CA to issue a writ of certiorari; failure to do so would constitute grave abuse of
discretion on its part.
[27]


The CA ruled correctly when it held that the trial court acted with grave
abuse of its discretion amounting to excess or lack of jurisdiction when it granted
private respondents motion for execution pending appeal in the absence of good
reasons to justify the grant of said motion.

The Rules of Court do not enumerate the circumstances which would justify
the execution of the judgment or decision pending appeal.
[28]
However, this Court
has held that good reasons consist of compelling or superior circumstances
demanding urgency which will outweigh the injury or damages should the losing
party secure a reversal of the judgment or final order. Were the rule otherwise,
execution pending appeal may well become a tool of oppression and inequity
instead of an instrument of solicitude and justice.
[29]


The existence of good reasons is what confers discretionary power on a
court to issue a writ of execution pending appeal. These reasons must be stated in
the order granting the same. Unless they are divulged, it would be
difficult to determine whether judicial discretion has been properly exercised in the
case. The mere posting of a bond will not justify execution pending appeal.
Furthermore, a combination of circumstances is the dominant consideration which
impels the grant of immediate execution. The requirement of a bond is imposed
merely as an additional factor for the protection of the defendants creditor;
otherwise, execution pending appeal could be obtained through the mere filing of
such bond.
[30]


Petitioners insist that, as gleaned from their Joint Affidavit, when they
discovered the existence of respondents tunnel in 1996, they were impelled to
transfer their residence; they then lived with one of their brothers-in-
law, Camama Ibrahim in Mahayahay, Iligan City. They assert that there is nothing
in the testimony of petitioner Nasser Macabangkit which would negate the urgency
to buy properties located in a safe area. The relevant portion of the Joint Affidavit
reads:

4. That we constantly fear that an earthquake may happen at any time
which would could cause the collapse or caving in of the tunnel with the resultant
violent destruction of our houses, and would necessarily cause us serious injuries,
or even our death or those of the members of our family. The recent incident of
erosion and landslide at Cherry Hills, Antipolo City, is not remote possibility,
that it may had happen to us. May God forbid.

5. That our fear has been aggravated by the fact that we often feel the
vibration of the area beneath our houses whenever the volume of the water that
passes through the tunnel increases, especially at midnight. Thus, we have been
suffering from sleepless nights or, at least troubled sleep, for countless times ever
since the tunnel was illegally constructed by the defendant;

6. That as a result of the very real danger that we have been exposed to,
we have long decided to leave our houses and reside at the residence of our
brother-in-law, one Camama Ibrahim, at Mahayahay, Iligan City, and suffered a
humiliating condition, as well as the congestion. As soon as we have the financial
means, we have to liberate our family from the same humiliation and congestion,
by purchasing a lot


and construct a house. We are entitled to a humane, dignified and decent shelter
which commensurate to our social standing in the community.

7. That we, therefore, need money very badly right now and, if we
received our share in the damages awarded to us in the decision, we would readily
use it for a suitable land far from the area where the tunnel exists, and build our
houses thereon, so that we may be freed from the ever-present fear of a very real
danger to ourselves, our families and our properties, which we have been
subjected to for many years due to the illegal acts of the National Power
Corporation.
[31]


On the other hand, in their Complaint filed before the RTC on November 11,
1997, petitioners alleged that the construction of the tunnel by the respondent
caused danger to their lives and properties, and gave them sleepless nights, serious
anxiety and shock. The Court rules, however, that this claim of petitioners was
merely an afterthought and is barren of merit.

Petitioner Nasser Macabangkit testified before the trial court on December 1,
1998, and declared that only two of the petitioners, Edgar
and Sayana Macabangkit, resided in the property starting only in 1998:

Q Was there anyone of your brothers and sisters who have actually
visited/resided in this land in question?
A As of now, there is, Sir.

Q Will you tell us the name of your brother or sister who is now residing in
this land of yours?
A Edgar and Sayana Macabangkit.

Q Do you know when was it when they started residing in that land of yours?
A This year, Sir.

COURT:
Q This year 1998?
A Yes, Your Honor. (TSN, December 1, 1998, pp. 21-23)
[32]



What the Court cannot fathom is the fact that shortly after filing their
complaint on November 11, 1997, petitioners Edgar and Sayana Macabangkit still
dared to establish their residence in the property. Indeed, it is incredible that after
discovering the existence of the tunnel and finding the area very dangerous,
petitioners would still choose to live therein. If petitioners truly believed that the
tunnel posed danger to their property and their very lives, any decision to stay on
would be short of suicidal on their part.

Thus, the Court holds that the trial court committed grave abuse of discretion
when it ordered the execution of its Decision and Supplemental Decision pending
appeal, compelling respondent to remit P70,472,750.00 to petitioners simply
because petitioners Edgar and Sayana Macabangkit needed their share
(P11,353,370.00 each) just so they could buy land and establish their new homes.

Petitioners insist, however, that the good reasons cited by the trial court
for granting their motion for execution pending appeal are based on the trial courts
findings of facts, i.e, respondent acted in bad faith in constructing a three-kilometer
long tunnel underneath petitioners property without their knowledge and consent;
respondent had not compensated the petitioners for its use of the property since
1979; respondent profited from its use of their properties; the existence of the
tunnel rendered petitioners property unfit for industrial, residential or commercial
use due to the danger posed by it, and no one was willing to buy the property; and
the fair market value of the property had been amply proved by evidence.

For its part, respondent avers that, it acted in good faith based on Section
3(f) and (g) of Republic Act No. 6395,
[33]
as amended. Respondent posits that it is
incredible that petitioners failed to discover the tunnel when it was constructed in
1979; hence, petitioners slept on their rights for 18 years or so. It further averred
that the precise amount due to petitioners for the respondents use of the tunnel, by
way of compensation, is another contentious issue on appeal. Even assuming that
petitioners are entitled to compensation or reasonable rentals for the portion
appropriated by respondent, the appellate court still has to resolve the issue of
whether, as claimed by the respondent, petitioners claim is barred by Section
3(i)
[34]
of Republic Act No. 6395.

The well-established rule is that it is not for the trial court to determine the
merits of the decision it rendered and use the same as basis for its order allowing
execution pending appeal. The authority to determine the merits of the appeal and
the correctness of the findings and conclusions of the trial court is lodged in the
appellate court. The trial court cannot preempt the decision of the appellate court
and use its own decision as basis for affirming the trial courts order of execution
pending appeal.
[35]


Neither is the trial court justified to order execution pending appeal, on its
assertion that the appeal of the respondent is a dilatory tactic. As the Court held
in Manacop v. Equitable PCI Bank:
[36]


Besides, that the appeal is merely dilatory is not a good reason for granting
execution pending appeal. As held in BF Corporation v. Edsa Shangri-la Hotel:

it is not for the trial judge to determine the merit of a decision he
rendered as this is the role of the appellate court. Hence, it is not
within competence of the trial court, in resolving a motion for
execution pending appeal, to rule that the appeal is patently dilatory
and rely on the same as basis for finding good reasons to grant the
motion. Only an appellate court can appreciate the dilatory intent of
an appeal as an additional good reason in upholding an order for
execution pending appeal

Petitioners reliance on the ruling of the CA in National Power Corporation
v. Ibrahim,
[37]
is misplaced. We agree with the following ratiocination of the CA in
its decision:

We note that in support of its case, private respondents cited the case of
National Power Corporation v. Hon. Amer Ibrahim, et al. (CA-G.R. SP No.
41897) which was decided by the Special Seventeenth Division of this Court. In
the said case, the discretionary execution granted by the public respondent was
upheld. While we are not unmindful of the findings in the said case, it is our
opinion that based on the circumstances obtaining in this case, it would best serve
the ends of justice if the appeal on the merits of the case is first resolved without
any execution pending appeal, not only because the total amount involved is quite
substantial - ONE HUNDRED THIRTEEN MILLION FIVE HUNDRED
THIRTY-TWO THOUSAND AND FIVE HUNDRED PESOS
(P113,532,500.00), but also because of the other matters involved in the
appeal.(citation omitted)
[38]



IN LIGHT OF ALL THE FOREGOING, the petition is DENIED
for lack of merit. Costs against the petitioners.

SO ORDERED.


ROMEO J. CALLEJO, SR.
Associate Justice


WE CONCUR:


ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson



CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice Associate Justice





MINITA V. CHICO-NAZARIO
Associate Justice















SECOND DIVISION

BONIFACIO M. MEJILLANO,
Petitioner,

- versus -


ENRIQUE LUCILLO, HON.
GREGORIA B. CONSULTA, Presiding
Judge of RTC,Legaspi City, Branch 4,
Respondents.
G.R. No. 154717

Present:

QUISUMBING, J., Chairperson,
YNARES-SANTIAGO,

CHICO-NAZARIO,

LEONARDO-DE CASTRO,

and
BRION, JJ.

Promulgated:
June 19, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J .:
Assailed in the present petition for review on certiorari are the
Decision
[1]
dated March 14, 2002 and the Resolution
[2]
dated August 12, 2002 of
the Court of Appeals in CA-G.R. SP No. 62322. The Court of Appeals had
affirmed the Orders dated September 13, 2000
[3]
and October 23, 2000
[4]
of the
Regional Trial Court (RTC) of Legaspi City, Branch 4, in Civil Case No. 9879,
which dismissed petitioners appeal from the Decision
[5]
dated July 5, 2000 of the
Municipal Trial Court (MTC) of Daraga, Albay in Civil Case No. 945 and denied
his motion for reconsideration.
The factual antecedents of this petition are as follows:
Faustino Loteria died sometime in 1931 leaving two parcels of land, Lot
No. 9007 which contains an area of 6,628 square meters, and Lot No. 9014 which
contains an area of 4,904 square meters. During his lifetime, Faustino Loteria
begot six children. He sired three children by his first marriage to Ciriaca
Luciada, namely, Tranquilino, Antonia and Cipriano; and another three during his
subsequent marriage to Francisca Monreal, namely, Julita, Felix and Hospicio.
On May 25, 1959, the surviving children of Faustino Loteria with Ciriaca
Luciada, namely Tranquilino and Antonia, executed an Extrajudicial Settlement
and Cession.
[6]
In said agreement, Tranquilino and Antonia divided Lot No. 9007
equally between them and Antonia ceded her one-half (
1
/
2
) share in the property to
Tranquilino. On March 1, 1978, Tranquilino executed a Deed of Absolute
Sale
[7]
of Lot No. 9007 in favor of Jesus Lorente. Soon after, he modified the
agreement to include Lot No. 9014 in an Amended Deed of Absolute
Sale
[8]
dated September 11, 1978.
The conflict arose when the children of Faustino with Francisca Monreal,
namely Felix and Hospicio, claimed that Lot No. 9014 is their inheritance from
their late father. Hence, Jesus Lorente could not have validly bought it from
Tranquilino. The conflicting claims to occupy and use the disputed property led
Jesus Lorente to file an action for recovery of possession with the RTC of Legaspi
City. The RTC, in a Decision
[9]
dated September 20, 1985 in Civil Case No. 6005,
dismissed the complaint and declared that Felix and Hospicio Loteria are co-heirs
or co-owners of Lot No. 9014. As such, they are entitled to the possession of the
property, subject to the final determination of their rights as heirs of their late
father.
Thereafter, the heirs of Hospicio sold to respondent Enrique Lucillo their
one-half () share in Lot No. 9014 by way of an Extrajudicial Settlement
and Sale
[10]
on April 28, 1995. The remaining one-half (
1
/
2
) portion was also sold to
respondent Lucillo by Felix on August 7, 1995 by way of Deed of Absolute
Sale.
[11]

When respondent Lucillo was about to enter said property, however, he
discovered that petitioner was occupying Lot No. 9014. Respondent Lucillo wrote
petitioner a letter
[12]
requesting him to vacate said property, but petitioner refused to
surrender possession thereof claiming that he is the owner of Lot No. 9007 and Lot
No. 9014 by virtue of an Extrajudicial Partition and Sale executed in their favor by
the heirs of Jesus Lorente. Hence, on September 18, 1995, respondent Lucillo filed
an action for recovery of possession of real property against petitioner with the
MTC of Daraga, Albay.
[13]

In its Decision dated July 5, 2000 in Civil Case No. 945, the MTC decreed:
WHEREFORE, judgment is hereby rendered orde[r]ing defendant
Bonifacio Mejillano to relinquish possession of Lot No. 9014, situated at
Pandan, Daraga, Albay, and to turn-over the peaceful possession thereof
to plaintiff Enrique Lucillo. Costs against the defendant.

SO ORDERED.
[14]

Aggrieved, petitioner seasonably appealed the foregoing decision to the
RTC, but failed to file an appeal memorandum. Consequently, respondent judge
dismissed petitioners appeal on September 13, 2000:
For failure of appellant to file a memorandum pursuant to the
mandatory requirement of Rule 40, Sec. 7(b) of the 1997 Rules of
Civil Procedure, despite the lapse of the period therein given, the appeal
is hereby ordered DISMISSED.
SO ORDERED.
[15]

On October 9, 2000, petitioner, through new counsel, filed a motion for
reconsideration attaching thereto the appeal memorandum. Petitioner alleged that
his failure to file the required memorandum on time was due to ignorance, the
untimely demise of his former counsel and the mistaken notion that what was
needed in the appeal was merely a notice of appeal and nothing more.
[16]
In its
Order
[17]
dated October 23, 2000, the RTC of Legaspi City, ruled:
x x x x

The Court cannot accept [petitioners] claim of ignorance for
the records will show that he personally made the Answer to the
Complaint (Exp. pp. 9, 10, 11 & 12) and the Notice of Appeal (Exp. pp.
1-7).
Neither can the Court accept his claim of poverty because he
chose to be represented by the late Atty. Delfin De Vera, a lawyer of no
ordinary caliber and there is no indication on record that his services
were for free. But even assuming that the entry of Atty. Delfin de Vera
into the picture was financially excessive on him, why did he not seek
the services of the PAO before which he subscribed and swore the
Verification and Certification of his Answer on November 23, 1995?
In view of the foregoing, the Opposition to the Motion for
Reconsideration stands to be meritorious.
SO ORDERED.
Petitioner went to the Court of Appeals on a petition for certiorari. In a
Decision dated March 14, 2002, the Court of Appeals dismissed the petition, ruling
that respondent judge did not act with grave abuse of discretion in dismissing the
appeal. The fallo of said decision reads:
WHEREFORE, premises considered, the petition
is DISMISSED and the assailed orders are AFFIRMED.

SO ORDERED.
[18]

On August 12, 2002, the appellate court also denied his motion for
reconsideration. Hence, the instant appeal. Petitioner now raises the following
issues for our resolution:
I.
THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT
CONSIDERING PETITIONERS SUBSTANTIAL COMPLIANCE IN
FILING HIS APPEAL MEMORANDUM WITH THE REGIONAL
TRIAL COURT OF LEGASPI CITY IN THE INTEREST OF
SUBSTANTIAL JUSTICE DESPITE THE FACT THAT THE
RATHER BELATED FILING THEREOF BY PETITIONER WAS
UNINTENTIONAL AS SHOWN IN HIS AFFIDA[V]IT OF MERIT.
II.
THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT
CONSIDERING THE FACT THAT
THE SALE OF SUBJECT LAND TO PRIVATE RESPONDENT IS
NULL AND VOID.
III.
THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT
CONSIDERING THE MERITORIOUS CAUSE OF ACTION OF
PETITIONER AGAINST PRIVATE RESPONDENT.
[19]

Stated simply, the issue for our resolution is whether the appellate court
committed reversible error in affirming the order of the RTC dismissing petitioners
appeal for failure to file on time his memorandum on appeal.
Petitioner avers that his failure to file his memorandum on time was due to
his lawyers untimely death. He avers that he received the notice to file his
memorandum, but because he is not a lawyer, he did not fully understand the tenor
of such notice. It was only later after he talked with a Public Attorneys Office
district lawyer that he came to file, albeit belatedly, his appeal memorandum. He
insists on a liberal application of the rules, arguing that in a long line of cases, this
Court ruled that dismissals of appeals on purely technical grounds are frowned
upon and that rules of procedure are used only to help secure not override
substantial justice.
All circumstances in this case having been considered carefully, we now
find the petition bereft of merit.
Section 7 (b), Rule 40 of the Revised Rules of Court expressly states:
(b) Within fifteen (15) days from such notice, it shall be the duty
of the appellant to submit a memorandum which shall briefly
discuss the errors imputed to the lower court, a copy of which shall
be furnished by him to the adverse party. Within fifteen (15) days from
receipt of the appellants memorandum, the appellee may file his
memorandum. Failure of the appellant to file a memorandum shall be
a ground for dismissal of the appeal. [Emphasis supplied.]
The rule is clear. It is obligatory on the part of petitioner to file his
memorandum on appeal within fifteen days from receipt of the notice to file the
same; otherwise, his appeal will be dismissed. In Enriquez v. Court of
Appeals,
[20]
we ruled:
x x x The use of the word shall in a statute or rule expresses
what is mandatory and compulsory. Further, the Rule imposes upon an
appellant the duty to submit his memorandum. A duty is a legal or
moral obligation, mandatory act, responsibility, charge, requirement,
trust, chore, function, commission, debt, liability, assignment, role,
pledge, dictate, office, (and) engagement. Thus, under the express
mandate of said Rule, the appellant is duty-bound to submit his
memorandum on appeal. Such submission is not a matter of
discretion on his part. His failure to comply with this mandate or to
perform said duty will compel the RTC to dismiss his appeal.

In rules of procedure, an act which is jurisdictional, or of the
essence of the proceedings, or is prescribed for the protection or benefit
of the party affected is mandatory.
[21]
[Emphasis supplied.]
The raison d'tre for such necessity was equally clarified in the same case:
in appeals from inferior courts to the RTC, the appellants brief
is mandatory
[22]
since only errors specifically assigned and properly argued in the
appeal memorandum will be considered in the decision on the merits.
[23]

In this case, the fundamental cause of the dismissal of petitioners appeal
was his failure to file the obligatory appeal memorandum on time. Petitioner only
filed his memorandum on appeal when the dismissal of his appeal had already been
ordered. Resultantly, the trial court acted accordingly when it dismissed
petitioners appeal pursuant to the clear mandate of the Rules of Court.
Further, we cannot subscribe to petitioners tenacious insistence to relax the
application of the Rules of Court so as not to defeat his rights.
Time and again, we have ruled that procedural rules do not exist for the
convenience of the litigants.
[24]
Rules of Procedure exist for a purpose, and to
disregard such rules in the guise of liberal construction would be to defeat such
purpose.
[25]
Procedural rules were established primarily to provide order to and
enhance the efficiency of our judicial system.
[26]
It has been jurisprudentially held
that, while the rules of procedure are liberally construed, the provisions on
reglementary periods are strictly applied, indispensable as they are to the
prevention of needless delays, and are necessary to the orderly and speedy
discharge of judicial business.
[27]

Also, the right to appeal is neither a natural right nor a part of due process; it
is merely a statutory privilege, and may be exercised only in the manner and in
accordance with the provisions of law.
[28]
An appeal being a purely statutory right,
an appealing party must strictly comply with the requisites laid down in the Rules
of Court. In other words, he who seeks to avail of the right to appeal must play by
the rules.
[29]
This, the petitioner failed to do when he did not submit his
memorandum on appeal.
All told, we find that the Court of Appeals committed no reversible error in
upholding the order of dismissal of the RTC in Civil Case No. 9879
dated September 13, 2000 and its Order dated October 23, 2000 denying the
motion for reconsideration.
WHEREFORE, the instant petition is DENIED. The assailed Decision
dated March 14, 2002 and Resolution dated August 12, 2002 of the Court of
Appeals in CA-G.R. SP No. 62322 are AFFIRMED.
SO ORDERED.



















FIRST DIVISION

[G.R. No. 126462. November 12, 2002.]

NATALIA REALTY, INC., Petitioner, v. COURT OF APPEALS (Former Ninth Division), JUSTICE
ANGELINA SANDOVAL-GUTIERREZ, chairman, JUSTICE MA. ALICIA AUSTRIA-MARTINEZ and
JUSTICE RUBEN T. REYES, members, ANTONIO MARTINEZ, FELIPE PADUA, MARIO PERFECTO and
HERMITO SALODEGA, Respondents.

359-A MULTI PURPOSE COOPERATIVE, Intervenor.

D E C I S I O N


CARPIO, J.:


The Case


Before us is a petition for certiorari under Rule 65 of the Revised Rules of Court seeking to annul the
Resolution dated June 27, 1995 of the Former Ninth Division of the Court of Appeals for being issued in
excess of jurisdiction or with grave abuse of discretion. The questioned Resolution answered the letter of
Judge Francisco A. Querubin, then presiding judge of the Regional Trial Court, Branch 74, Antipolo, Rizal,
inquiring as to what orders and decision he should execute in Civil Case No. 359-A. Also assailed in the
instant petition are: (1) the Resolution of the Court of Appeals dated June 19, 1996 reiterating its Resolution
of June 27, 1995, and (2) the Resolution dated August 26, 1996 denying the motion for reconsideration filed
by petitioner.chanrob1es vi rtua1 1aw 1i brary

The Antecedent Facts

On January 24, 1984, Natalia Realty Inc. ("petitioner for brevity) filed with the Regional Trial Court, Branch
74, Antipolo, Rizal, an action for recovery of possession of two parcels of land situated in Sitio Banabas,
Antipolo, Rizal covered by TCT Nos. 31527 and 31528 ("subject property" for brevity). The case was
docketed as Civil Case No. 359-A. On January 30, 1984, the trial court issued a temporary restraining order
preventing private respondents from obstructing the work then being undertaken by petitioner on the
subject property.

The complaint 1 alleged that Antonio Martinez, Felipe Padua, Mario Perfecto and Hermito Salodega ("private
respondents" for brevity) were occupying and illegally squatting on certain portions of the subject property.
In their Answer, private respondents claimed that they are the owners of their respective houses and lots
that have been in their possession even before the outbreak of World War II.

On August 26, 1991, Judge Senecio O. Ortille issued an Order 2 dismissing the case for petitioners failure to
prosecute.

On April 20, 1992, the trial court issued another Order, 3 this time by Judge Sinforoso S. Nano, granting the
motions of private respondents to order petitioner to surrender possession of portions of the subject
property to private respondents.

On May 20, 1992, after the August 26, 1991 and April 20, 1992 orders had attained finality, petitioner
moved to set aside the orders claiming excusable oversight on the part of its counsel. On March 26, 1993,
the trial court through Judge Pablito M. Rojas denied petitioners motion for reconsideration. 4 The trial court
ruled that petitioners failure to move for reconsideration of the orders within the reglementary period
rendered the orders final and executory.

On April 23, 1993, petitioner filed with the Court of Appeals a petition for certiorari questioning the dismissal
of the case. The appeal was docketed as CA-G.R. SP No. 30787 and raffled to the Special Fifth Division.

On June 18, 1993, the Court of Appeals dismissed the petition for not having been filed within a reasonable
time and because the assailed orders have become final and executory. 5 On October 11, 1993, the Court of
Appeals denied petitioners motion for reconsideration. 6

On December 21, 1993 an entry of judgment was issued in CA-G.R. SP No. 30787 stating that the June 18,
1993 Resolution became final and executory on October 20, 1993. 7

On December 27, 1993, Felipe Navarro ("Navarro" for brevity), claiming to be the original counsel of private
respondents, filed with the trial court a motion for the issuance of a writ of execution. Navarro filed the
motion as a class suit on behalf of private respondents and on his own behalf as lien holder. Navarro sought
to enforce the orders of the trial court dated August 26, 1991 and April 20, 1992 that respectively referred
to (1) the dismissal of the complaint for failure to prosecute and (2) the surrender of possession of portions
of the subject property to private respondents. Petitioner opposed the motion of Navarro. Petitioner argued
that the complaint was not a class suit and the decision of the Supreme Court in Natalia Realty v.
Department of Agrarian Reform 8 dated August 12, 1993 is a supervening event that prevents the execution
of the judgment in Civil Case No. 359-A.

On March 7, 1994, Judge Querubin, then the presiding judge, denied the motion for execution of Navarro. 9
The trial court ruled that the complaint was not a class suit. The trial court also held that the dismissal of the
complaint for recovery of possession could not include a disposition restoring possession of portions of the
subject property to private respondents as it is presumed that the defendant in an action for recovery of
possession is already in possession of the subject property. The April 20, 1992 Order of the trial court
restoring possession of portions of the subject property to private respondents could not be enforced
because the trial court, in the exercise of its ministerial duty, could not go beyond its final Order of August
26, 1991 dismissing the complaint for recovery of possession. The trial court also ruled that to place private
respondents in possession of the property would violate the decision of the Supreme Court in Natalia Realty
v. Department of Agrarian Reform.

Navarro appealed to the Court of Appeals. The appeal was docketed as CA-G.R. CV No. 44915 and raffled to
the Ninth Division.

On June 13, 1994, Navarro filed an ancillary motion with the Fifth Division of the Court of Appeals in CA-
G.R. SP No. 30787 praying to set aside the order of the trial court dated March 7, 1994.

On July 15, 1994, the Fifth Division denied the ancillary motion of Navarro since his appeal from the March
7, 1994 order of the trial court was already with the Ninth Division of the Court of Appeals. 10

On February 6, 1995, the Ninth Division of the Court of Appeals dismissed the appeal of Navarro. The
appellate court ruled that Navarro is a disbarred lawyer and had no authority to file the appeal on behalf of
private respondents. 11 On February 21, 1995, an entry of judgment was issued in CA-G.R. CV No. 44915.
12

On March 15, 1995, private respondents filed with the trial court a motion for execution to enforce the final
orders and decisions as ordered by the Court of Appeals. Petitioner opposed the motion as it merely
reiterated the motion for execution dated December 27, 1993 which the trial court had already denied
because of a supervening event, the decision of the Supreme Court in Natalia Realty v. Department of
Agrarian Reform.

Instead of acting on the motion of private respondents, Judge Querubin wrote a letter 13 dated April 17,
1995 to the Ninth Division of the Court of Appeals in CA-G.R. CV No. 44915. Judge Querubin inquired as to
what final orders and decisions he should enforce in Civil Case No. 359-A.

On May 11, 1995, Judge Querubin issued an order holding in abeyance the resolution of the motion for
execution of private respondents pending action by the Court of Appeals on his letter.

On June 27, 1995, the Ninth Division of the Court of Appeals issued a Resolution 14 answering the letter of
Judge Querubin. The appellate court declared that the following orders and decision should be executed in
Civil Case No. 359-A: (1) the decision of the trial court dated August 26, 1991 dismissing the complaint; (2)
the order of the trial court dated April 20, 1992 ordering petitioner to surrender possession of the property;
and (3) the decision of the Fifth Division of the Court of Appeals in CA-G.R. SP No. 30787 dated June 18,
1993 dismissing the petition for certiorari filed by petitioner. The dispositive portion of the Resolution
reads:jgc:chanrobles.com.ph

"WHEREFORE, Judge Francisco A. Querubin is hereby ordered to enforce respondent Courts orders dated
August 26, 1991 and April 20, 1992 as well as Our decision dated June 18, 1993.

SO ORDERED." 15

On July 10, 1995, petitioner filed with the Court of Appeals a motion praying to set aside its Resolution
dated June 27, 1995. Petitioner contended that the personal letter of Judge Querubin to the appellate court
is not authorized by the Rules of Court and deprived the parties of the opportunity to comment on the
request.

On August 3, 1995, Judge Querubin issued two orders. The first order 16 granted the motion for execution
of private respondents pursuant to the Resolution of the Court of Appeals dated June 27, 1995. This order
directed the restoration to private respondents of possession of portions of the subject property that they
had occupied prior to the implementation of the temporary restraining order dated January 30, 1984. The
second order 17 denied the two motions filed by Navarro, (1) the Motion for Execution dated February 17,
1995 and (2) the Memorandum for Enforcement of the Supreme Court En Banc Order dated March 7, 1995.
The denial was based on the ground that the two motions merely reiterated the earlier motion filed also by
Navarro dated December 27, 1993 that the trial court had already denied in its Order dated March 7, 1994.
The appeal from the March 7, 1994 Order was eventually dismissed by the Court of Appeals for being
unauthorized and taken by a disbarred lawyer.

On September 12, 1995, petitioner filed a motion for reconsideration 18 of the two orders of the trial court
dated August 3, 1995. Perceiving an apparent conflict between the two orders, petitioner urged the trial
court to reconcile the first order granting the motion for execution of private respondents with the first order
denying the two motions of Navarro.

In an Order dated August 21, 1995, Judge Querubin inhibited himself from further acting on the case. The
case was re-raffled to Branch 71, Regional Trial Court of Antipolo, Rizal with Judge Felix S. Caballes ("Judge
Caballes" for brevity) as presiding judge.

On November 6, 1995, Judge Caballes granted the motion for reconsideration of petitioner citing the ruling
of the Supreme Court in Natalia Realty v. Department of Agrarian Reform as a supervening event. 19

On December 6, 1995, private respondents filed an "Urgent Manifestation with Prayer for Issuance of Writ of
Execution" 20 with the Former Ninth Division of the Court of Appeals. Private respondents claimed that the
November 6, 1995 order of Judge Caballes was a complete reversal of the orders and decisions of the Court
of Appeals. Private respondents asked the appellate court to issue a writ of execution in view of the
extraordinary circumstances of the case.

On June 19, 1996, the Court of Appeals issued a Resolution 21 reiterating its Resolution of June 27, 1995.
The Resolution also required Judge Caballes to explain why he should not be held in contempt of court for
disobeying the appellate courts lawful orders and decisions. The Resolution reads:jgc:chanrobles. com.ph

"Considering the following incidents:chanrob1es vi rtual 1aw library

1) Motion dated July 10, 1995, filed by counsel for plaintiff-appellee Natalia Realty, Inc.;

2) Comment of defendants a quo (except Salodega) dated July 20, 1995;

3) Comment dated August 21, 1995, filed by Felipe Navarro, for and in his own behalf;

4) Urgent manifestation with prayer for issuance of writ of execution dated December 6, 1995 filed by
counsel for the defendants-appellants; and

5) Comment dated March 21, 1996 filed by counsel for appellee Natalia Realty Co., Inc.; the Court
RESOLVED,

a) that in view of the resolution dated June 27, 1995 which is hereby REITERATED, the plaintiff-appellees
motion dated July 10, 1995 is NOTED, b) to REQUIRE Hon. Felix Caballes of RTC-Br. 71, Antipolo, Rizal to
COMMENT why he should not be held in contempt of court for disobeying the lawful orders, decisions of this
Court within 10 days from notice hereof." 22

On August 26, 1996, the Ninth Division denied petitioners motion for reconsideration. The dispositive
portion of the Resolution reads:jgc:chanrobles.com.ph

"ACCORDINGLY, plaintiff-appellees motion for reconsideration is DENIED and Judge Felix Caballes comment
(explanation) is NOTED with a caution to be guided by this Resolution.

SO ORDERED." 23

Hence, this petition.
The Issues


Petitioner anchors its petition on the following grounds:chanrob1es virtual 1aw li brary

I. THE COURT OF APPEALS ACTED IN EXCESS OF ITS JURISDICTION IN ENTERTAINING A LETTER-QUERY
OF JUDGE QUERUBIN, THEN PRESIDING JUDGE OF BRANCH 74, REGIONAL TRIAL COURT, ANTIPOLO,
RIZAL, BEFORE WHOM CIVIL CASE 359-A WAS PENDING, ASKING THE COURT OF APPEALS WHAT FINAL
ORDERS AND DECISION HE SHOULD ENFORCE IN COMPLIANCE WITH THE RESOLUTION OF THE COURT OF
APPEALS OF FEBRUARY 6, 1995.

II. THE COURT OF APPEALS ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION IN ORDERING JUDGE
QUERUBIN IN ITS RESOLUTION OF JUNE 27, 1995 TO ENFORCE NOT ONLY THE ORDERS OF THE TRIAL
COURT OF AUGUST 26, 1991 AND APRIL 20, 1992 BUT ALSO THE DECISION OF THE FIFTH DIVISION IN
CA-G.R. SP NO. 30787.

III. THE COURT OF APPEALS ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION IN ISSUING ITS
RESOLUTION DATED JUNE 19, 1996 REITERATING ITS RESOLUTION OF JUNE 27, 1995 WHICH AMONG
OTHERS HAD THE EFFECT OF NULLIFYING THE ORDER OF THE TRIAL COURT OF NOVEMBER 6, 1995, WHEN
THE PROPER REMEDY AGAINST SAID ORDER SHOULD BE AN APPEAL OR A PETITION FOR CERTIORARI.

IV. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION OR ACTED IN EXCESS OF OR WITHOUT
JURISDICTION IN MERELY NOTING PETITIONERS MOTION OF JULY 10, 1995 PRAYING FOR THE SETTING
ASIDE OF THE RESOLUTION OF JUNE 27, 1995 WHEN IT SHOULD HAVE SET ASIDE SAID RESOLUTION
WHICH WAS VIOLATIVE OF PETITIONERS RIGHT TO DUE PROCESS.

V. THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION OR IN EXCESS OF ITS
JURISDICTION IN ORDERING JUDGE CABALLES TO SHOW CAUSE WHY HE SHOULD NOT BE DECLARED IN
CONTEMPT OF COURT FOR ISSUING HIS ORDER OF NOVEMBER 6, 1995. 24

The Ruling of the Court

The petition is without merit.

Petitioners failure to appear during the presentation of its witness caused the dismissal of its complaint in
Civil Case No. 359-A. As a rule, the dismissal for failure to prosecute is an adjudication on the merits and is
with prejudice. 25 It is beyond dispute that the orders of the trial court dated August 26, 1991 and April 20,
1992 respectively dismissing the case and granting possession of portions of the subject property to private
respondents have long become final and executory.

It took petitioner almost nine months to move for the reconsideration of the order of dismissal and more
than a year to file an appeal. In dismissing the belatedly-filed appeal of petitioner in CA-G.R. SP No. 30787,
the Special Fifth Division of the Court of Appeals held that the assailed orders are already final and
executory and could no longer be the subject of an appeal. The June 18, 1993 Resolution of the appellate
court dismissing the appeal of petitioner has also attained finality as an entry of judgment has been issued.
26

The February 6, 1995 Resolution of the Special Former Ninth Division of the Court of Appeals in CA-G.R. CV
No. 44915 dismissing the appeal of Navarro is also final and executory as judgment has likewise been
entered. 27 This resolution recognized the finality of the August 26, 1991 and April 20, 1992 Orders of the
trial court and the June 18, 1993 Resolution of the Court of Appeals in CA-G.R. SP No. 30787. The February
6, 1995 Resolution further ordered the remand of the original records to the trial court "for enforcement of
the final Orders and Resolution" 28 in Civil Case No. 359-A.

The general rule is when a courts judgment or order becomes final and executory, it is the ministerial duty
of the trial court to issue a writ of execution to enforce the judgment or order. 29 In this case, because of
the innumerable delays, the enforcement of the final orders and decision has been long overdue. The delays
are partly attributable to the fact that the case went through a number of presiding judges. The filing of
unauthorized motions and appeal by Navarro complicated what was otherwise just a simple case of
enforcement of final judgment. But it was petitioners intolerable strategy of filing motions, some belatedly
filed, to thwart execution that caused this case to drag for more than a decade.

Judge Querubin could have ended the delays had he readily complied with the February 6, 1995 Resolution
of the Court of Appeals ordering him to execute the final orders and decision in Civil Case No. 359-A.
Instead, Judge Querubin wrote a letter to the Court of Appeals asking it to specify the final orders and
decision that should be enforced. In response to the query, the Court of Appeals issued another resolution
identifying these final orders and decision.

The execution of the final orders and decision again suffered another set back when the new presiding
judge, Judge Caballes, set aside the two orders issued by Judge Querubin on August 3, 1995. The two
orders were issued by Judge Querubin in compliance with the directive of the Court of Appeals to enforce the
August 26, 1991 and April 20, 1992 orders of the trial court and the June 18, 1993 Resolution of the Court
of Appeals in CA-G.R. SP No. 30787. Judge Caballes instead granted the motion for reconsideration of
petitioner invoking the principle of supervening event as a ground for setting aside the final orders and
decision in the case. On motion of private respondents, the Court of Appeals issued another resolution
reiterating the final orders and decision that should be enforced. The resolution also ordered Judge Caballes
to explain why he should not be cited for contempt of court.

Litigation must end at some point. Petitioner, however, remains undaunted and relentless in frustrating the
enforcement of the orders of execution. Now, petitioner implores the Court to set aside the final orders and
decision. Petitioner relies on these points: (1) the legality of the Court of Appeals resolution answering the
letter of Judge Querubin as to what final orders must be executed in Civil Case No. 359-A; (2) the
jurisdiction of the Ninth Division of the Court of Appeals in citing Judge Caballes in contempt of court and in
issuing the resolution reiterating the final orders and decision that Judge Caballes must execute in Civil Case
No. 359-A; (3) the existence of a supervening event, the ruling of the Court in Natalia Realty v. Department
of Agrarian Reform; and (4) the need to reconcile the two orders of Judge Querubin both dated August 3,
1995.

Petitioner claims that the letter of Judge Querubin is a personal inquiry or consulta to the appellate court.
The law and the Revised Rules of Court do not sanction such a procedure. Petitioner also claims that it was
denied due process when the appellate court failed to notify petitioner and afford it the opportunity to be
heard, considering that petitioner would be affected by the opinion or advice the appellate court would give
to Judge Querubin. Petitioner likens the letter of Judge Querubin to an action for declaratory relief, an action
that must be filed by an interested party. Judge Querubin, petitioner opines, is not an interested party.
Petitioner asserts that the letter of Judge Querubin is a personal letter to the appellate court which is
improper and unethical and both Judge Querubin and the appellate court could be held responsible for gross
ignorance of the law, if not judicial misconduct, and for grave abuse of discretion.

While we agree with petitioner that Judge Querubins query is not provided for in the Rules of Court, it is
nevertheless not prohibited. What is apparent from the rather unorthodox course of action taken by Judge
Querubin is his shallow comprehension of the case before him. As presiding judge, Judge Querubin is duty
bound to know the final orders and decision already issued in the case assigned to him. Moreover, the
February 6, 1995 Resolution of the Court of Appeals is unmistakably clear as to what final orders and
decisions must be enforced. These are the August 26, 1991 and April 20, 1992 orders of the trial court and
the June 18, 1993 Resolution of the Court of Appeals in CA-G.R. SP No. 30787. The clarity of the February
6, 1995 Resolution left no room for ambiguity that would have placed Judge Querubin in a quandary.

Judge Querubin claimed in his letter that the February 6, 1995 Resolution of the Court of Appeals dismissing
the appeal of Navarro had in effect rendered final his Order dated March 7, 1994. This Order denied the
motion for execution filed by Navarro on behalf of private respondents. Judge Querubin sought to clarify
which order he should enforce, the April 20, 1992 Order granting possession of portions of the subject
property to private respondents or the March 7, 1994 Order denying the motion for execution filed by
Navarro on behalf of private respondents. The answer should have been obvious to Judge Querubin.

The dismissal of Navarros appeal by the appellate court did not in any way affect the April 20, 1992 Order.
In its Resolution dated February 6, 1995 in CA G.R. CV No. 44915, the appellate court held that Navarro is a
disbarred lawyer and had no authority from private respondents to file the motion for execution on their
behalf before the trial court. Therefore, it follows that the March 7, 1994 Order of the trial court denying the
motion for execution filed by Navarro should not prejudice private respondents right to the issuance of a
writ of execution upon motion filed by a duly authorized lawyer. Private respondents right to possession had
been secured already in the earlier Order of the trial court dated April 20, 1992, one of the final orders that
Judge Querubin should have enforced.

Judge Querubins query is not an action for declaratory relief. Section 1 of Rule 64 of the Rules of Court 30
provides the requisites of an action for declaratory relief. In interpreting these requisites, the Court has
ruled that:jgc:chanrobles.com.ph

"Under this rule, only a person who is interested under a deed, will, contract or other written instrument,
and whose rights are affected by a statute or ordinance, may bring an action to determine any question of
construction or validity arising under the instrument or statute and for a declaration of his rights or duties
thereunder. This means that the subject matter must refer to a deed, will, contract or other written
instrument, or to a statute or ordinance, to warrant declaratory relief. Any other matter not mentioned
therein is deemed excluded. This is under the principle of expressio unius est exclusio alterius." 31

The letter of Judge Querubin pertained to final orders and decisions of the courts that are clearly not the
proper subjects of a petition for declaratory relief. Thus, the requisites prescribed by the Rules of Court in an
action for declaratory relief are not applicable to the letter of Judge Querubin.

The Court of Appeals did not act with grave abuse of discretion when it issued a resolution answering the
letter of Judge Querubin. The term grave abuse of discretion has a technical and set meaning. Grave abuse
of discretion is a capricious and whimsical exercise of judgment so patent and gross 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 an arbitrary and despotic manner because of passion or hostility. 32 The resolution issued by
the Court of Appeals merely specified the orders and decision that are to be enforced, orders that are
undoubtedly final and executory. Furthermore, the Court of Appeals had the bounden duty to facilitate the
prompt disposition of this case. To disregard the letter of Judge Querubin would have only prolonged the
delay in the execution of the final orders and decision.

Petitioners claim that it was denied due process is baseless. In this petition, petitioner acknowledges the
fact that on May 11, 1995, Judge Querubin issued an order holding in abeyance the resolution of the motion
for execution of private respondents pending action by the Court of Appeals on his letter. Judge Querubins
query was not at all clandestine. Petitioner and private respondents were duly notified. Petitioner therefore
cannot feign denial of due process since it was notified and had the opportunity to present its side. 33 The
suspension of the motion for execution because of Judge Querubins query was another needless delay that
actually worked in petitioners favor.

Petitioner, fully aware of the Court of Appeals impending action on the letter of Judge Querubin, again failed
to raise on time its objections against the letter. The Court of Appeals issued on June 27, 1995 its Resolution
answering Judge Querubins query. It was only on July 10, 1995 that petitioner filed its motion against the
letter. Private respondents, on the other hand, interposed their objections to the letter on June 9, 1995,
prior to the issuance of the Court of Appeals Resolution. Petitioner cannot now bewail the fact that its July
10, 1995 motion was merely noted by the Court of Appeals in its June 19, 1996 Resolution. The Court of
Appeals could only take note of the July 10, 1995 motion of petitioner, as the matter raised therein was
already a fait accompli.

Petitioner accuses the Ninth Division of the Court of Appeals of encroaching on the jurisdiction of the Fifth
Division when it ordered Judge Querubin to enforce not only the orders of the trial court but also the
decision of the Fifth Division in CA-G.R. SP No. 30787.

Petitioners allegation is untenable. To recall, the Ninth Division of the Court of Appeals came into the picture
when Navarro appealed from the March 7, 1994 Order of the trial court denying the motion for execution he
filed on behalf of private respondents. The appeal was docketed as CA-G.R. CV No. 44915. The records of
Civil Case No. 359-A were then transmitted to the Ninth Division. The appeal of Navarro was perfected after
the Special Fifth Divisions dismissal of the petition of petitioner in CA-G.R. SP No. 30787 had already
attained finality. In fact, when Navarro filed an ancillary motion with the Special Fifth Division in CA-G.R. SP
No. 30787, the Special Fifth Division merely took note of the ancillary motion. The Special Fifth Division
ruled that it no longer had jurisdiction to set aside an order issued subsequent to the finality of its decision
to dismiss the petition of petitioner in CA-G.R. SP No. 30787. The Special Fifth Division pointed out that the
proper remedy of Navarro was in the appeal he had already interposed in CA-G.R. CV No. 44915.

Clearly, the Ninth Division had jurisdiction over the appeal of Navarro. Based on the pleadings filed before it,
the Ninth Division was made aware of the finality of the August 26, 1991 and April 20, 1992 orders of the
trial court and of the June 18, 1993 Resolution of the Fifth Division in CA-G.R. SP No. 30787. The Ninth
Division dismissed the appeal of Navarro because he is a disbarred lawyer and he had no authority to file the
motion for execution and appeal on behalf of private respondents. The dismissal of the unauthorized appeal
therefore has no bearing on the finality of the orders and decision in Civil Case No. 359-A. It then became
the ministerial duty of the Court of Appeals to order the remand of the records of Civil Case No. 359-A to the
trial court for the enforcement of the trial courts final orders as well as the final decision of the Fifth Division
in CA-G.R. SP No. 30787.

Petitioner questions the jurisdiction of the Ninth Division of the Court of Appeals to set aside the order of
Judge Caballes granting the motion for reconsideration of petitioner. Petitioner believes that the proper
remedy against the order of Judge Caballes is an appeal or a petition for certiorari. Instead, private
respondents filed an "Urgent Manifestation with Prayer for Issuance of Writ of Execution" with the Ninth
Division of the Court of Appeals under the same case of CA-G.R. CV 44915. Petitioner insists that the
jurisdiction of the Ninth Division of the Court of Appeals in CA-G.R. CV 44915 had already been terminated
when its resolution dismissing the appeal of Navarro became final. The Ninth Division of the Court of Appeals
no longer had the authority to act on any cause of action such as to review the order of Judge Caballes,
much less to declare that Judge Caballes had disobeyed a lawful order of the appellate court.

Petitioners arguments are without basis. There is a distinction between the jurisdiction of a court to modify
its judgment and its jurisdiction to enforce its judgment. The jurisdiction of the court to amend, modify or
alter its judgment terminates when the judgment becomes final. 34 This is the principle of immutability of
final judgment that is subject to only few exceptions, 35 none of which is present in this case. On the other
hand, the jurisdiction of the court to execute its judgment continues even after the judgment has become
final for the purpose of enforcement of judgment. 36

Judge Caballes refusal to enforce the final orders and decision was not only in total disregard of his
ministerial duty, it was also in blatant defiance of the February 6, 1995 Resolution of the Court of Appeals
that has also long been final and executory. Judge Caballes also disobeyed the June 27, 1995 Resolution of
the Court of Appeals directing Judge Querubin to enforce the orders listed in the Resolution. Well settled is
the rule that the Regional Trial Court cannot impede the execution of the decision of a higher court. 37 For
the sole purpose of enforcing its final order, the Court of Appeals still had jurisdiction to command Judge
Caballes to comply with its order and to cite him in contempt in case he refused to do so. The Court of
Appeals retained the jurisdiction to enforce its final orders. An appeal or a petition for certiorari from the
order of Judge Caballes would have only further caused unwarranted delays when by mere motion, the Ninth
Division of the Court of Appeals in CA-G.R. CV No. 44915 could still exercise its jurisdiction over the
execution of its final order.

One of the exceptions to the principle of immutability of final judgments is the existence of supervening
events. Supervening events refer to facts which transpire after judgment has become final and executory or
to new circumstances which developed after the judgment has acquired finality, including matters which the
parties were not aware of prior to or during the trial as they were not yet in existence at that time. 38

Before an event can be considered a supervening event, justifying the modification or alteration of a final
judgment, the event must have transpired after the judgment has become final and executory. The decision
of the Court in Natalia Realty v. Department of Agrarian Reform was promulgated on August 12, 1993. True,
this decision was issued after the dismissal of Civil Case No. 359-A became final. However, the decision in
CA-G.R. SP No. 30787 39 became final and executory on October 20, 1993 while the entry of judgment in
CA-G.R. CV No. 44915 was issued on February 21, 1995. The ruling in Natalia Realty v. Department of
Agrarian Reform is evidently not a supervening event. It was already in existence even before the decisions
in the two appealed cases attained finality.

Petitioner was persistent in invoking Natalia Realty v. Department of Agrarian Reform as a supervening
event before the trial court. Strangely, petitioner was not equally so determined in raising this ground before
the appellate court. If petitioner is truly convinced that the ruling in Natalia Realty v. Department of
Agrarian Reform is indeed a supervening event, petitioner should have invoked it in CA-G.R. SP No. 30787
and CA-G.R. CV No. 44915 before the decisions of the appellate court in these cases became final. Petitioner
failed to do so. The Court has ruled in Pacific Mills, Inc. v. Padolina 40 that a partys failure to bring to the
attention of the appellate court, through the filing of proper motions, the existence of a supervening event,
is deemed a waiver of such defense. Petitioner must now accept the consequences of its inaction.

There is another compelling reason why the ruling in Natalia Realty v. Department of Agrarian Reform does
not qualify as a supervening event. A plain reading of the decision in that case will readily reveal that it is
not applicable to Civil Case No. 359-A. The sole issue in Natalia Realty v. Department of Agrarian Reform
was whether the land registered under the name of therein petitioner Natalia, covered by TCT No. 31527,
was within the coverage of the Comprehensive Agrarian Reform Law of 1988 ("CARL" for brevity). The Court
ruled that the Department of Agrarian Reform erred in including the land in question within the coverage of
CARL when this law only covers agricultural lands. The land in Natalia Realty v. Department of Agrarian
Reform was already converted to non-agricultural uses prior to the enactment of CARL and such conversion
bound the Department of Agrarian Reform.

The present case stemmed from a complaint for recovery of possession or accion publiciana filed by Natalia,
herein petitioner. Accion publiciana is a plenary action to recover possession. 41 When the cause of
dispossession is not among the grounds for forcible entry and unlawful detainer, or when possession has
been lost for more than one year and can no longer be maintained under Rule 70 of the Rules of Court, the
complaint should be for accion publiciana. 42 The objective of the parties in accion publiciana is to recover
possession only, not ownership. 43

The rights asserted and reliefs prayed for in Natalia Realty v. Department of Agrarian Reform and in this
case are very different. Natalia Realty v. Department of Agrarian Reform did not involve the question of
possession, not even the issue of ownership. The decision in that case merely resolved the issue of whether
the land covered by TCT No. 31527 should be placed under the coverage of CARL. The Court in Natalia
Realty v. Department of Agrarian Reform even underscored the fact that the question of possession is a
separate and distinct issue. This point can be gleaned from the Courts pronouncement in that case, to
wit:jgc:chanrobles.com.ph

"Anent the argument that there was failure to exhaust administrative remedies in the instant petition,
suffice it to say that the issues raised in the case filed by SAMBA members differ from those of petitioners.
The former involve possession; the latter, the propriety of including under the operation of CARL lands
already converted for residential use prior to its effectivity."cralaw virtua1aw library

Even assuming that the ruling in Natalia Realty v. Department of Agrarian Reform is a supervening event, an
absolute suspension of the writ of execution in the present case would have been unjust and erroneous. In
this case, what is in dispute is the possession of two parcels of land covered by TCT No. 31527 and TCT No.
31528. The land covered by TCT No. 31528 was not adjudicated upon in Natalia Realty v. Department of
Agrarian Reform. The only parcel of land in issue in that case is the one covered by TCT No. 31527. Clearly
then, the land covered by TCT No. 31528 could not have been bound by the ruling in Natalia Realty v.
Department of Agrarian Reform.

Petitioner urges the Court to reconcile the two orders issued by Judge Querubin on August 3, 1995. The first
order enforces the order of execution and is pursuant to the June 27, 1995 Resolution of the Court of
Appeals. The second order denies the motion for execution filed by Navarro. In denying the motion for
execution of Navarro, Judge Querubin cited the March 7, 1994 Order of the trial court and the February 6,
1995 Resolution of the Court of Appeals. According to petitioner, the two orders of Judge Querubin are
contradictory. Petitioner would like the Court to believe that the mere mention of the March 7, 1994 Order is
a recognition of the case of Natalia Realty v. Department of Agrarian Reform as a supervening event.

A perusal of the two orders dated August 3, 1995 in their entirety debunks petitioners claim. The August 3,
1995 Order denying the motion for execution of Navarro mentioned the March 7, 1994 Order only to
emphasize that the appeal of Navarro from the March 7, 1994 Order was dismissed by the Court of Appeals
and the dismissal had already attained finality. As explained in the August 3, 1995 Order, the Court of
Appeals dismissed the appeal because it "was unauthorized and taken by a disbarred attorney beyond the
reglementary period." 44 Reference to the March 7, 1994 Order was merely incidental. It was not made to
recognize the existence of a supervening event. This fact becomes all the more evident since there is
another Order issued on August 3, 1995 granting possession of portions of the subject property to private
respondents.

On January 13, 1997, while this case was pending before the Court, the 359-A Multi-purpose Cooperative
("Cooperative" for brevity) filed a Motion for Leave to Intervene. 45 The members of the Cooperative include
private respondents and the alleged original occupants of the subject property. The Cooperative anchors its
right to intervene on the Deed of Transfer/Assignment 46 executed by private respondents in favor of the
Cooperative. Private respondents have expressed their full consent to the motion for intervention. 47

The motion for intervention must be denied. Rule 12, Section 2 of the Rules of Court was then the
controlling provision on intervention. 48 It read:jgc:chanrobles. com.ph

"Sec. 2. Intervention. A person may, before or during a trial be permitted by the court, in its discretion,
to intervene in an action, if he has legal interest in the matter in litigation, or in the success of either of the
parties, or an interest against both, or when he is so situated as to be adversely affected by a distribution or
other disposition of property in the custody of the court or by an officer thereof."cralaw virtua1aw li brary

The Motion for Intervention was not seasonably filed as it was not filed before or during trial. Final judgment
has been in fact rendered in this case.

The purpose of intervention is to enable a stranger to an action to become a party to protect his interest and
the court incidentally to settle all conflicting claims. 49 The Cooperative is not a stranger to the action. Its
legal interest in this case springs from the "Deed of Transfer/Assignment." executed in its favor by private
respondents. As an assignee or transferee pendente lite, the Cooperative is a successor-in-interest of the
transferor, private respondents, who are parties to the action. The applicable provision then was Rule 3,
Section 20, governing transfers of interest pendente lite. It provided:jgc:chanrobles. com.ph

"Sec. 20. Transfer of interest. In case of any transfer of interest, the action may be continued by or
against the original party, unless the court upon motion directs the person to whom the interest is
transferred to be substituted in the action or joined with the original party."cralaw virtua1aw li brary

In Santiago Land Development Corporation v. Court of Appeals, 50 we have ruled that a transferee
pendente lite of the property in litigation does not have a right to intervene. We held that a transferee
stands exactly in the shoes of his predecessor-in-interest, bound by the proceedings and judgment in the
case before the rights were assigned to him. 51 It is not legally tenable for a transferee pendente lite to still
intervene. Essentially, the law already considers the transferee joined or substituted in the pending action,
commencing at the exact moment when the transfer of interest is perfected between the original party-
transferor and the transferee pendente lite. 52

The Court views with disfavor the unjustified delay in the enforcement of the final orders and decision in this
case. Once a judgment, becomes final and executory, the prevailing party should not be denied the fruits of
his victory by some subterfuge devised by the losing party. 53 The finality of the orders and decision in Civil
Case No. 359-A should have reduced this case to a simple case of enforcement of judgment. However,
petitioners dilatory tactics made this case confounding. Worse, petitioners maneuverings have prevented
the courts from discharging their duty of disposing cases with finality. The Court will not allow petitioner to
further forestall the execution of the final orders and decision in this case.

WHEREFORE, the petition is DISMISSED. The Regional Trial Court of Antipolo, Rizal, Branch 74, shall
forthwith issue and cause to be immediately enforced an ALIAS WRIT OF EXECUTION of the Order of August
3, 1995 granting possession to private respondents of portions of the parcels of land covered by TCT Nos.
31527 and 31528 (now No. N-67845). This decision is immediately executory. The Clerk of Court is directed
to remand the records of the case to the court of origin.chanrob1es virtua1 1aw 1ibrary

Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., Vitug, Ynares-Santiago and Azcuna, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 192217 March 2, 2011
DANILO L. PAREL, Petitioner,
vs.
HEIRS OF SIMEON PRUDENCIO, Respondents.
D E C I S I O N
VELASCO, JR., J .:
This Petition for Review on Certiorari under Rule 45 assails the February 4, 2010 Decision
1
and April
22, 2010 Resolution
2
of the Court of Appeals (CA) in CA-G.R. SP No. 105709, which affirmed the
Orders dated February 15, 2008 and July 31, 2008, respectively, of the Regional Trial Court (RTC),
Branch 60 in Baguio City, in Civil Case No. 2493-R for recovery of possession and damages.
The Facts
A complaint for recovery of possession and damages was filed by Simeon Prudencio (Simeon)
against Danilo Parel (Danilo) with the RTC in Baguio City.
Simeon alleged that he was the owner of a two-story house at No. 61 Forbes Park National
Reservation in Baguio City. Simeon allowed Danilo and his parents to live on the ground floor of the
house since his wife was the elder sister of Danilos father, Florentino.
3

In November 1985, Simeon needed the whole house back and thus informed Danilo and his parents
that they had to vacate the place. Danilos parents acceded to Simeons demand. Danilo, however,
remained in the house with his family despite repeated demands on him to surrender the premises.
This development drove Simeon to institute an action for recovery of possession and damages.
4

Danilo offered a different version of events. He maintained that the land on which Simeons house
was constructed was in his father Florentinos name. He explained that his father Florentino, who
had by then passed away, did not have enough funds to build a house and thus made a deal with
Simeon for them to just contribute money for the construction of a house on Florentinos land.
Florentino and Simeon were, thus, co-owners of the house of which Simeon claims sole ownership.
5

The Ruling of the Trial Court
On December 15, 1993, the RTC ruled in favor of Danilo. The dispositive portion of the RTC
Decision reads:
WHEREFORE, premises considered, the Court hereby declares that the house erected at [No.] 61
DPS Compound, Baguio City is owned in common by the late Florentino Parel and herein plaintiff
Simeon Prudencio and as such the plaintiff cannot evict the defendant as heirs of the deceased
Florentino Parel from said property, nor to recover said premises from herein defendant.
Likewise, the plaintiff is ordered to:
(a) pay the defendant in the total sum of P20,000.00 for moral and actual damages;
(b) pay the defendant P20,000.00 in Attorneys fees and P3,300 in appearance fees;
(c) pay the costs of this suit.
SO ORDERED.
6

The Ruling of the Appellate Court
On March 31, 2000, the CA, on Simeons appeal, rendered a Decision
7
reversing the RTC Decision
as follows:
WHEREFORE, the decision appealed from is hereby SET ASIDE and a new one is entered
declaring plaintiff-appellant as the new owner of the residential building at 61 Forbes Park National
Reservation, near DPD Compound, Baguio City; appellee is ordered to surrender possession of the
ground floor thereof to appellant immediately.
Further, appellee is hereby ordered to pay appellant P2,0000/month [sic] for use or occupancy
thereof from April 1988 until the former actually vacates the same, and the sum of P50,000.00 as
attorneys fees. And costs of suit.
SO ORDERED.
Danilo challenged the CA Decision before this Court via an appeal by certiorari under Rule 45 of the
Rules of Court.
On April 19, 2006, this Court issued its Decision
8
in G.R. No. 146556, affirming the CA Decision.
On May 9, 2007, Simeon sought to enforce this Courts April 19, 2006 Decision and thus filed a
Motion for Issuance of Writ of Execution.
9

On June 19, 2007, Danilo filed his Comment
10
on Simeons Motion for Issuance of Writ of Execution.
He prayed that the PhP 2,000 monthly rental he was ordered to pay be computed from April 1988 to
March 1994 only since he had vacated the premises by April 1994.
On February 15, 2008, the RTC ruled as quoted below:
WHEREFORE, premises considered, let a Writ of Execution be issued to enforce the decision of the
Court in the above-entitled case.
11

A Motion for Reconsideration of the February 15, 2008 RTC Order was filed by Danilo.
On July 31, 2008, the RTC issued another Order
12
denying the motion. The dispositive portion of the
Order is quoted below:
WHEREFORE, premises duly considered, the Motion for Reconsideration is hereby denied for lack
of merit. Let a Writ of Execution be issued to enforce the decision of the Court in the above-entitled
case.
SO ORDERED.
On February 5, 2009, the RTC ordered the following:
Furthermore, the decision in the above-entitled case has already become final and executory. To
reiterate, this Court, much less the defendant, cannot modify the decision of the higher courts which
has now become final and executory. The defendant is bound by the said decision and he cannot
alter the same nor substitute his own interpretation thereof.
WHEREFORE, the foregoing premises considered, the Motion filed by the defendant is DENIED.
The Court reiterates its order dated July 31, 2008 for the issuance of a Writ of Execution to enforce
the decision of the Court in the instant case.
SO ORDERED.
13

On February 23, 2009, Danilo filed a Supplemental Petition with Urgent Motion for Issuance of
Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the RTC from enforcing
the judgment against Danilo for him to pay PhP 2,000 in monthly rentals from April 1994 onwards.
On August 23, 2010, this Court issued a Resolution requiring Simeon to file his Comment on
Danilos Petition for Review on Certiorari.
On October 28, 2010, Simeon filed his Comment before Us. He argued that the RTC and CA
correctly ruled that the prayer for a reduction of back rentals should be denied, since Danilo never
turned over possession of the subject premises to him.
The Issues
I
Whether the CA committed an error of law in upholding the RTC Order dated February 15, 2008.
II
Whether the Court of Appeals committed an error of law in upholding the RTC Order dated July 31,
2008
The Ruling of This Court
Danilo questions the following order of the CA:
Further, appellee is hereby ordered to pay appellant P2,0000/month [sic] for use or occupancy
thereof from April 1988 until the former actually vacates the same, and the sum of P50,000.00 as
attorneys fees. And costs of suit.
14

We resolve to grant the petition.
Danilo argues that he vacated the subject premises in April 1994 and claims that he stated this fact
in his Comment on Simeons Motion for Issuance of Writ of Execution dated May 9, 2007 and in his
Motion for Reconsideration before this Court on June 12, 2006. He, thus, argues that the monthly
rentals he should pay should only be from April 1988 to March 1994. He alleges that the CA
committed an error in law in upholding the RTC Orders dated February 15, 2008 and July 31, 2008.
The questioned February 15, 2008 RTC Order stated:
x x x The defendant should have filed his comment on any appropriate pleading before the Court or
in the Supreme Court at the time when he actually vacated the premises, but he did not. Perhaps,
still hoping that the decision of the higher courts would be in his favor. All told, the defendant never
intended to surrender the premises to the plaintiff even after he vacated it in April 1994. For this
reason, he should now suffer the consequences.
It must be reiterated that this Court cannot now modify the decision of the higher courts which has
now become final and executory.
15

On July 31, 2008, the RTC ruled:
While the alleged supervening facts and circumstances which changed the situation of the parties in
the instant case occurred before finality of the judgment, as in Morta vs. Bagagnan, the factual
backdrop in the aforecited jurisprudence does not call for its application in the present case. In the
cited case, the complainants have been ousted from the subject premises pursuant to the decision
of the DARAB in two cases involving the same parcel of lot before the decision of the Supreme
Court attained finality. In the case at bar, defendant claims to have vacated the subject premises as
early as April 1994. This allegation however was belied by the fact that he did not turn[over] the
premises to the plaintiff, a fact which has been stipulated by the parties. Defendant did not effectively
and completely relinquish possession of the subject premises to the plaintiff thereby depriving the
latter of effective possession and beneficial use thereof. To reiterate, defendant never intended to
surrender the premises to the plaintiff even after he vacated it in 1994. Defendants failure to
seasonably bring to the attention of either the Court of Appeals or the Supreme Court of the
supposed change in the circumstances of the parties cannot be excused. Had the Court of Appeals
or the Supreme Court been seasonably informed of such fact, the appellate Courts would have
considered the same in their respective decisions. It must be noted that defendant had more than
enough time from April 1994 to June 2006, a total of 12 years, within which he could have informed
the two appellate Courts of the supposed change in the circumstances of the parties, but he did not.
He only belatedly informed the Supreme Court in its motion for reconsideration after the latter Court
issued it decision, in the hope of reducing the full payment of back rentals.
16
1avvphi1
It is true that Danilo should have brought to the Courts attention the date he actually left the subject
premises at an earlier time. The RTC is also correct in ruling that the judgment involved was already
final and executory. However, it would be inequitable to order him to pay monthly rentals "until he
actually vacates" when it has not been determined when he actually vacated the ground floor of
Simeons house. He would be paying monthly rentals indefinitely.
The RTC should have determined via hearing if Danilos allegation were true and accordingly
modified the period Danilo is to be held accountable for monthly rentals.
Unjustified delay in the enforcement of a judgment sets at naught the role of courts in disposing
justiciable controversies with finality.
17
Once a judgment becomes final and executory, all the issues
between the parties are deemed resolved and laid to rest. All that remains is the execution of the
decision which is a matter of right.
18

Banaga v. Majaducon,
19
however, enumerates the instances where a writ of execution may be
appealed:
1) the writ of execution varies the judgment;
2) there has been a change in the situation of the parties making execution inequitable or
unjust;
3) execution is sought to be enforced against property exempt from execution;
4) it appears that the controversy has never been subject to the judgment of the court;
5) the terms of the judgment are not clear enough and there remains room for interpretation
thereof; or
6) it appears that the writ of execution has been improvidently issued, or that it is defective in
substance, or is issued against the wrong party, or that the judgment debt has been paid or
otherwise satisfied, or the writ was issued without authority;
In these exceptional circumstances, considerations of justice and equity dictate that there be some
mode available to the party aggrieved of elevating the question to a higher court. That mode of
elevation may be either by appeal (writ of error or certiorari), or by a special civil action of certiorari,
prohibition, or mandamus.
The instant case falls under one of the exceptions cited above. The fact that Danilo has left the
property under dispute is a change in the situation of the parties that would make execution
inequitable or unjust.
Moreover, there are exceptions that have been previously considered by the Court as meriting a
relaxation of the rules in order to serve substantial justice. These are: (1) matters of life, liberty,
honor or property; (2) the existence of special or compelling circumstances; (3) the merits of the
case; (4) a cause not entirely attributable to the fault or negligence of the party favored by the
suspension of the rules; (5) a lack of any showing that the review sought is merely frivolous and
dilatory; and (6) the other party will not be unjustly prejudiced thereby.
20
We find that Danilos
situation merits a relaxation of the rules since special circumstances are involved; to determine if his
allegation were true would allow a final resolution of the case.
Applicable, too, is what Sec. 5, Rule 135 of the Rules of Court states as one of the powers of a
court:
Section 5. Inherent powers of the courts.3/4 Every court shall have power:
x x x x
(g) To amend and control its process and orders so as to make them conformable to law and justice.
Thus, the Court ruled in Mejia v. Gabayan:
21

x x x The inherent power of the court carries with it the right to determine every question of fact and
law which may be involved in the execution. The court may stay or suspend the execution of its
judgment if warranted by the higher interest of justice. It has the authority to cause a modification of
the decision when it becomes imperative in the higher interest of justice or when supervening events
warrant it. The court is also vested with inherent power to stay the enforcement of its decision based
on antecedent facts which show fraud in its rendition or want of jurisdiction of the trial court apparent
on the record. (Emphasis supplied.)
The writ of execution sought to be implemented does not take into consideration the circumstances
that merit a modification of judgment. Given that there is a pending issue regarding the execution of
judgment, the RTC should have afforded the parties the opportunity to adduce evidence to
determine the period within which Danilo should pay monthly rentals before issuing the writ of
execution in the instant case. Should Danilo be unable to substantiate his claim that he vacated the
premises in April 1994, the period to pay monthly rentals should be until June 19, 2007, the date he
informed the CA that he had already left the premises.
WHEREFORE, the petition is GRANTED. The CA Decision in CA-G.R. SP No. 105709 is hereby
SET ASIDE. The RTC, Branch 60 in Baguio City is ORDERED to determine the actual date
petitioner left the subject premises before issuing the writ of execution in Civil Case No. 2493-R that
will be based on the resolution of said issue.
SO ORDERED.
















SECOND DIVISION


SPOUSES ARSENIO and NIEVES S. REYES,
Petitioners,

- versus -


SOLEMAR DEVELOPMENT CORPORATION and
RENATO M. TANSECO,
Respondents.
x ------------------------------------------ x
SPOUSES ARSENIO and NIEVES S. REYES,
Petitioners,



- versus -



REPUBLIC OF THE PHILIPPINES,
Respondent.
G.R. No. 129247











G.R. No. 136270

Present:

PUNO, J.,
Chairperson,
SANDOVAL-
GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.

Promulgated:

March 3, 2006
x -------------------------------------------------------------------------------------- x

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

These two (2) consolidated petitions involve a parcel of land with an area of
66,787 square meters, more or less, identified as Lot 1 of subdivision plan Psd-
18002, being a portion of land described in Plan II-483 LRC (GLRO) Record No.
707, situated at Barangay San Dionisio, Municipality (now City) of Paraaque.
Petitioners in G.R. No. 129247 assail the Decision dated December 10,
1996 of the Court of Appeals in CA-G.R. SP No. 37467, entitled Solemar
Development Corporation and Renato M. Tanseco v. Hon. Omar U. Umin.
In G.R. No. 136270, petitioners, in their motion for reconsideration, seek the
reversal of our Resolution dated December 13, 1999 denying the petition on
grounds of res judicata and stability of judgments.

G.R. No. 129247

On January 14, 1992, spouses Arsenio and Nieves Reyes, petitioners, filed
with the Regional Trial Court (RTC), Branch 135, Makati City, a Complaint for
Damages and Preliminary Injunction with Prayer for a Temporary Restraining
Order (TRO) against respondent Solemar Development Corporation (Solemar),
represented by its president, Renato Tanseco, also a respondent, docketed as Civil
Case No. 92-109.
In their Complaint, petitioners alleged that they are the registered owners of
the property in question as evidenced by Transfer Certificate of Title (TCT) No.
31798 (40312) of the Registry of Deeds of Paraaque City. Sometime in
December 1991, they fenced the property and posted two (2) security guards to
prevent trespassers from entering the premises. OnJanuary 6, 1992, respondent
Renato Tanseco, accompanied by police officers, employing force and
intimidation, entered the premises and demolished its perimeter
fence. Respondent tried to eject them (petitioners) from their property thru the
unlawful and felonious illegal notice of demolition and permit. They thus prayed
for the issuance of a writ of preliminary injunction to prevent respondents from
ejecting them from the property without any court order.
In their Answer, respondents raised the defense that they own the disputed
property, asserting that petitioners title is of doubtful authenticity as found by the
Land Registration Authority (LRA) Verification Committee. Petitioners filed
their Reply thereto, after which they filed a Motion for Leave to File Amended
Complaint, impleading Solemars lessee, AMI (Philippines) Inc., as additional
defendant. They also included additional causes of action, praying among others,
that respondent Solemars titles be nullified.
Respondents filed an Opposition to petitioners motion arguing that (1) the
amendments will substantially change petitioners original cause of action or
theory of the case and that (2) their certificate of title will be subjected to collateral
attack.
On May 6, 1992, the RTC admitted petitioners Amended Complaint.
After their motion for reconsideration was denied on July 11, 1992,
respondents filed a Petition for Certiorari and Prohibition with the Court of
Appeals assailing the Order of the RTC admitting petitioners Amended
Complaint, docketed as CA G.R. SP No. 28364.
On March 11, 1993, the Appellate Court granted the petition and annulled
the RTC Order dated May 6, 1992 admitting petitioners Amended Complaint.
On September 6, 1993, petitioners filed a Motion for Reconsideration, but it was
denied.
Petitioners elevated the matter to this Court in a Petition for Review on
Certiorari, docketed as G.R. No. 111755. On January 26, 1994, we issued a
Resolution affirming the March 11, 1993 Decision of the Court of Appeals. Our
Resolution became final and executory after we denied with finality petitioners
motion for reconsideration on March 21, 1994.
Back to the RTC. Respondents filed a Motion to Dismiss the complaint in
Civil Case No. 92-109 on the ground of lack of jurisdiction considering that the
allegations therein clearly show that the action is one for forcible entry, which is
under the exclusive jurisdiction of the Municipal Trial Court (MTC). On March
30, 1995, the RTC denied the motion to dismiss, holding that it has jurisdiction
over the case since it is for recovery of damages and recovery of possession of
real property and, of necessary consequence, the issue of ownership thereof is
brought to fore.
On June 8, 1995, the RTC denied respondents motion for reconsideration.
Forthwith, respondents filed a Petition for Certiorari, Prohibition and
Mandamus with the Court of Appeals, docketed therein as CA-G.R. SP No.
37467. In a Decision dated December 10, 1996, the Appellate Court granted the
petition and ordered the RTC to dismiss the case for lack of jurisdiction, finding
that a careful reading of the allegations therein would show that the complaint for
damages, taken in its full context, was meant to restore private respondents to the
peaceful possession of the land and to prevent petitioners from further depriving
the former of the lawful occupation thereof. The Appellate Court further held:
It is thus clear that while private respondents may have valid
claims for indemnity for what they perceived were the result of wrongful
or illegal acts committed by petitioners, it is nevertheless unquestionable
that in filing their complaint, private respondents were asking the court
to determine their right, or the lack of it, to possess the subject
property. It follows, therefore, that the damages allegedly suffered by
private respondents are merely incidental to the issue of possession
which is the very heart of the parties dispute.

On May 7, 1997, the Court of Appeals denied petitioners motion for
reconsideration.
Hence, this Petition for Review on Certiorari where the issue for our
resolution is whether petitioners complaint is one for forcible entry falling under
the jurisdiction of the MTC or for the recovery of ownership falling under the
jurisdiction of the RTC.
We hold that the Court of Appeals did not err in ordering the RTC, Branch
135, Makati City, to dismiss petitioners complaint in Civil Case No. 92-
109. Jurisdiction of the court over the subject matter of the action is determined by
the allegations of the complaint, irrespective of whether or not the plaintiff is
entitled to recover upon all or some of the claims asserted therein.
[1]
It cannot be
made to depend on the exclusive characterization of the case by one of the
parties.
[2]
After reviewing carefully the allegations in petitioners complaint,
specifically paragraphs 4, 10, and 15,
[3]
we found no reason to deviate from the
finding of the Appellate Court that indeed the complaint is for forcible
entry. Significantly, the complaint was filed onJanuary 14, 1992, or within one (1)
year, specifically within eight (8) days, from the alleged forcible entry to the
property by respondent Tanseco on January 6, 1992.
[4]
While captioned as a
Complaint for Damages with Application for a TRO and Preliminary Injunction,
yet the allegations therein show that petitioners are asserting their right to the
peaceful possession of their property which is proper in an ejectment suit. All
ejectment cases are within the jurisdiction of the MTC.
[5]

Accordingly, the denial of the petition in this case is in order.
G.R. No. 136270
On July 29, 1992, the Republic of the Philippines, represented by the
Administrator of the LRA, herein respondent, filed with the RTC, Branch
60, Makati City, a Complaint for Declaration of Nullity and Cancellation of TCT
No. 31798 (40312) in the name of spouses Arsenio and Nieves Reyes, docketed as
Civil Case No. 92-2135. The complaint alleges that the land title of said spouses,
now petitioners, is of doubtful authenticity, having been obtained through fraud, as
found by the LRA Verification Committee. The Republic prayed that the same be
declared void and be cancelled by the Register of Deeds of Paraaque City.
In their Answer, petitioners maintained that their title is valid and that the so
called LRA Verification Committee Report appears to have been irregularly
issued. As compulsory counterclaim, they pleaded that their title to the property
be declared valid and their right to recover from the Assurance Fund be upheld in
the unlikely possibility that the same is nullified because of the negligence,
incompetence, inadvertence, let alone due to the anomalous practices of those
charged with the issuance of land titles. They prayed that the Republics
complaint be dismissed and that judgment be rendered on their counterclaim.
Solemar filed a Complaint for Quieting of Title against petitioners with the
RTC, Branch 61, Makati City, docketed as Civil Case No. 93-1566. On April 26,
1996, the RTC rendered a Decision declaring that TCT No. 31798 (40312)
in the name of herein petitioners, spouses Reyes, is spurious and directed the
Register of Deeds of Paraaque City to cancel the same. The RTC found that:
From the evidence presented to prove the validity of
SOLEMARs eight (8) titles, the Court finds an exhaustive and detailed
presentation of evidence tracing the historical origin of SOLEMARs
titles termed as TRACE BACK (Exhibit I), from the original
registration proceedings before the Court of First Instance of Rizal and
other administrative matters leading to the issuance of SOLEMARs
Titles.
Upon the other hand, the evidence consisting of public documents
to prove the nature of the REYES title, SOLEMAR submitted a detailed
origin of REYES title as shown in the Verification Committee Report
dated November 7, 1990 of the Land Registration Authority (LRA)
tracing the series of falsification and dubious source of REYES title and
their predecessors title which led the LRA to conclude that REYES
title is of doubtful validity and authenticity and includes its
recommendation to the Office of the Solicitor General for the filing of a
case for the cancellation of REYES title and requesting the National
Bureau of Investigation to prosecute the parties responsible for the
irregularities.
On the above findings on the evidence, the Court concludes that
SOLEMAR has duly established its case through overwhelming
preponderance of evidence on the validity of SOLEMARs titles. At the
same time, the evidence of SOLEMAR has likewise proven that
defendants REYES titles are fake and spurious and/or total nullity as
found by government agencies.

Petitioners filed a Motion for New Trial and/or Motion for Reconsideration
of the Decision. But the trial court denied the same. On September 16, 1996,
petitioners filed a Notice of Appeal, but it was not given due course. The trial
court ruled that the motion filed earlier, which is pro forma, did not suspend the
period to appeal, thus its Decision became final on May 19, 1996. On September
24, 1996, the trial court issued a writ of execution. Thereupon, the Register of
Deeds of Paraaque City cancelled petitioners TCT No. 31798 (40312).
Petitioners filed with the Court of Appeals a Petition for Certiorari,
Prohibition and Mandamus. In its Decision of July 30, 1997, the Appellate Court
denied the petition for having been filed out of time, prompting petitioners to file
with this Court a Petition for Review on Certiorari, docketed as G.R. No.
130888. In a Resolution dated January 28, 1998, we affirmed the Decision of the
Appellate Court. In a Resolution dated April 13, 1998, we denied with finality
petitioners motion for reconsideration. Thus, the RTC Decision in Civil Case No.
93-1566 for quieting of title in favor of respondents has been put to rest.
Since Solemars titles have been declared valid, the Solicitor General,
on April 29, 1997, filed a Motion to Withdraw the Republics Complaint in Civil
Case No. 92-2135 for declaration of nullity of petitioners land title. On June 19,
1997, the RTC denied the motion to withdraw the complaint on the grounds that
(a) a court may not grant plaintiffs motion to dismiss his complaint if the
defendant who pleaded a compulsory counterclaim objected thereto; and that (b)
the Decision of the RTC, Branch 61, Makati City, in Civil Case No. 93-1566 for
quieting of title in favor of Solemar does not constitute res judicata on Civil Case
No. 92-2135 wherein the Solicitor General filed a motion to withdraw the
Republics complaint.
The Solicitor General then filed a Motion for Reconsideration but it was
denied on January 12, 1998 by the RTC. This prompted the Solicitor General to
file with the Court of Appeals a Petition for Certiorari assailing the Resolution of
the RTC denying their motion to withdraw the complaint. The Appellate Court
granted the petition. It ordered the trial court to dismiss the Republics Complaint
and petitioners counterclaim, without prejudice for the latter to pursue their claim
against the Assurance Fund. They filed a Motion for Reconsideration, but it was
denied by the Appellate Court.
On January 6, 1999, petitioners filed with this Court the instant Petition for
Review on Certiorari, docketed as G.R. No. 136270, contending that the dismissal
of their complaint will deprive them the opportunity to recover damages from the
Assurance Fund.
The Republic filed a Manifestation and Motion (in lieu of Comment)
alleging that, (A)fter a thorough re-evaluation of the record of this case. it
would be to the best interest of the state that this case be remanded to the court a
quo for further proceedings on the following grounds: (a) that the Decision in Civil
Case No. 93-1566 for quieting of title cannot bind the Republic because it is not a
party to the case; and (b) the Republic would in effect be recognizing the
ownership of Solemar over the property.
Solemar filed a Motion for Leave to Intervene as respondent-intervenor. In
our Resolution dated July 14, 1999, we granted the motion. Solemar alleged that
(W)ith the denial with finality of petitioners motion for reconsideration and the
issuance of the corresponding Entry of Judgment by this Honorable Court, the
Decision of the RTC of Makati, Branch 61, in Civil Case No. 93-1566 declaring as
spurious TCT No. (31798) 40312 issued in the name of Nieves S. Reyes, married
to Arsenio Reyes and declaring as valid Solemars titles, can now be considered as
final, conclusive and entitled to full faith and credit. The matter cannot be
reopened anymore without violating the principle of res judicata.
On December 13, 1999, we issued a Resolution denying the instant petition
on the grounds of res judicata and stability of judgments, thus:
First, the order of dismissal of the Republics complaint is
proper. The complaint asserted that TCT No. (31798) 40312 is of
doubtful authenticity. This matter, however, was passed upon in Civil
Case No. 93-1566. In said case, petitioners were initially declared as in
default, but were later given several opportunities to present their
evidence, but this notwithstanding, they still failed to do so (pp. 279-280,
Rollo). After due proceedings, the trial court rendered a decision
quieting SOLEMARs titles, adjudging the same as valid and declaring
TCT No. (31798) 40312 spurious, and accordingly directing therein
defendant Register of Deeds of Paraaque, Metro Manila, to cancel the
same. Said decision was sustained on appeal in CA-GR SP No.
44779. The matter was finally disposed of by this Court when we
adversely resolved the petition in G.R. No. 130888 (First Division,
January 28, 1998) filed by petitioners. Petitioners motion for
reconsideration was denied with finality in our resolution dated April
13, 1998.
In his manifestation and motion in lieu of comment, the Solicitor
General posits that the aforestated decision in Civil Case No. 93-1566
which became final and executory is conclusive only between the parties
therein, that is, SOLEMAR and petitioners, and cannot bind respondent,
considering that suits to quiet title are not technically suits in rem, nor
are they in personam, but are against the person in respect of the res,
orquasi in rem; and that the dismissal of Civil Case No. 92-2135 on the
basis of the decision in Civil Case No. 93-1566 would in effect require
respondent Republic to recognize the ownership of SOLEMAR over the
subject property. This ratiocination is quite strained. A comparison of
the two civil cases will show that the requisites of res judicata are
present, viz: (a) the former judgment or order must be final; (b) it must
be a judgment or order on the merits; (c) it must have been rendered by a
court having jurisdiction over the subject matter and the parties; and (d)
there must be, between the first and the second actions, identity of
parties, of subject matter, and of cause of action (Ybaez v. Court of
Appeals, 253 SCRA 540 [1996]). The argument that there is no identity
of parties since the Republic was not impleaded in Civil Case No. 93-
1566 is also suspect. It has been repeatedly emphasized by the Court
that absolute identity of parties is not required in order for res judicata to
apply because substantial identity is sufficient. This means that the
parties in both cases need not be physically identical provided there is
privity between them. Notably, Civil Case No. 93-1566 was filed not
only against petitioners but also against the Register of Deeds of
Paraaque, Metro Manila, an officer of the Republic. Thus, the Republic
cannot be considered a stranger in said case, which clearly involves
rights of ownership of realty.
Another point. To allow the remand of the instant case to the
court a quo, as prayed for by the Solicitor General, will indeed violate
the principle of stability of judgments. To permit the same will
necessarily allow Branch 60 of
the Regional Trial Court of Makati City to pass upon issues already ruled
upon by a coordinate tribunal or court of law, whose decision and action
were in fact sustained by this Court.
Second, we find the order of dismissal of petitioners
counterclaim likewise proper. Primarily, it is significant to stress that a
compulsory counterclaim is essentially auxillary or ancillary to the main
controversy inasmuch as it arises out of or is necessarily connected with
the transaction or occurrence that is the subject matter of the complaint
(Herrera: Comments on the 1997 Rules of Civil Procedure, As
Amended, Vol. VII, p. 78). Hence, the ruling on the doubtful
authenticity of TCT No. (31798) 40312 already necessarily dismisses the
principal counterclaim insisted by petitioners, that is, a claim that the
subject title and its derivative titles be declared genuine, valid, and
authentic, since the counterclaim cannot subsist with the dismissal of the
main case (Moran, Comments on the Rules of Court, Vol. I, 1995 ed., p.
356). As regards petitioners alternative relief or their claim to be
compensated and/or declared entitled to recover from the Assurance
Fund, we agree with the Court of Appeals when it held that the dismissal
of the complaint and counterclaim in Civil Case No. 92-2135 is without
prejudice to the defendants pursuing their claim against the Assurance
Fund after impleading the proper parties.
An action for compensation from the Assurance Fund must be
filed against the Register of Deeds of the province or city where the land
is situated and the National Treasurer as defendants when such action is
brought to recover for loss or damage or for deprivation of land or any
estate or interest therein arising wholly through fraud, negligence,
omission, mistake or misfeasance of the court personnel, Register of
Deeds, his deputy, or other employees of the registry in the performance
of their respective duties. (Section 96, Presidential Decree No.
1529). If such action is brought to recover for loss or damage or for
deprivation of land or any interest therein arising through fraud,
negligence, mistake or misfeasance of persons other than court
personnel, the Register of Deeds, his deputy or other employees of the
registry, the action must be brought against the Register of Deeds, the
National Treasurer, as well as other persons as co-defendants.
The parties indispensable in a claim against the Assurance Fund,
particularly the Register of Deeds of Paraaque and the National
Treasurer should have been included in the action so that relief from the
Assurance Fund may be adjudged in the same proceeding. Further, the
one-paragraph counterclaim does not sufficiently allege facts that
constitute conditions justifying payment of damages from the Assurance
Fund such as factual allegations of fraud and negligence. Petitioners
may suitably comply with these requirements by filing a new action
specifically to recover from the fraud.

Petitioners filed a Motion for Reconsideration.
In our Resolution dated February 16, 2000, we found no cogent reason to
reverse or modify our December 13, 1999 Resolution; and held that the
arguments raised in the motion for reconsideration have been amply discussed and
we find no reason to disturb our earlier ruling. However, we disposed of
petitioners motion for reconsideration as follows:
WHEREFORE, the instant case (G.R. No. 132670) is hereby
ordered consolidated with G.R. No. 129247 (Arsenio Reyes, et al. v.
Court of Appeals, et al.) where the motion for reconsideration filed
herein (G.R. No. 136270) may be properly resolved.
SO ORDERED.

In the same dispositive portion, we should have also DENIED petitioners
motion for reconsideration in light of our ratiocination earlier quoted, instead of
merely ordering the consolidation of this case with G.R. No. 136270.

WHEREFORE, we DENY the petition in G.R. No. 129247.
Petitioners Motion for Reconsideration of our Resolution dated December
13, 1999 in G.R. No. 136270 is also DENIED.
Costs against petitioners.
SO ORDERED.











Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 196723 August 28, 2013
ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner,
vs.
SUMITOMO CORPORATION, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 196728
SUMITOMO CORPORATION, Petitioner,
vs.
ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, Respondent.
D E C I S I O N
PERLAS-BERNABE, J .:
Before the Court are consolidated petitions for review on certiorari which assail separate issuances
of the Court of Appeals (C A) in relation to the partial and final awards rendered by the Construction
Industry Arbitration Commission's (CIAC) Arbitral Tribunal (Arbitral Tribunal) in CIAC Case No. 28-
2008.
In particular, the petition in G.R. No. 196723
1
filed by Asian Construction and Development
Corporation (Asian Construction) seeks to annul and set aside the CAs Resolutions dated July 23,
2010
2
and April 18, 2011
3
in CA-G.R. SP No. 112127 which dismissed its appeal from the Arbitral
Tribunals Partial Award
4
dated December 15, 2009 (Partial Award) on the ground of forum
shopping; while the petition in G.R. No. 196728
5
filed by Sumitomo Corporation (Sumitomo) seeks to
annul and set aside the CAs Decision
6
dated January 26, 2011 and Resolution
7
dated April 29, 2011
in CA-G.R. SP No. 113828 which modified the Arbitral Tribunals Final Award
8
dated March 17, 2010
(Final Award) by way of deleting the award of attorneys fees in Sumitomos favor.
The Facts
On March 15, 1996, Asian Construction entered into a Civil Work Agreement
9
(Agreement) with
Sumitomo for the construction of a portion of the Light Rail Transit System along the Epifanio Delos
Santos Avenue, specifically, from Shaw Boulevard, Mandaluyong City to Taft Avenue, Pasay City for
a total cost of US$19,982,000.00 (Project).
10
The said Agreement provides that the "validity,
interpretation, enforceability, and performance of the same shall be governed by and construed in
accordance with the law of the State of New York, U.S.A. (New York State Law), without regard to,
or legal effect of, the conflicts of law provisions thereof"
11
and that any dispute, controversy or claim
arising therefrom "shall be solely and finally settled by arbitration."
12

In May 1996, Sumitomo paid Asian Construction the amount of US$2,997,300.00 as advance
payment to be recovered in accordance with the terms of the Agreement. Later, an additional
advance payment of US$1,998,200.00 was made in October 1997.
13
In all, Asian Construction
received from Sumitomo the amount of US$9,731,606.62, inclusive of the advance payments
(before withholding tax of US$97,308.44).
14

On September 1, 1998, Sumitomo informed Asian Construction that it was terminating the
Agreement effective September 5, 1998 due to the following reasons: (a) Asian Constructions
failure "to perform and complete the civil work for Notice to Proceed issued construction areas within
the duration of the Time Schedule in the Contract Specification of Civil and Architectural Works
(Station No. 8 to Station No. 13) x x x"; (b) Asian Constructions failure to "provide adequate traffic
management as required in the Scope of Works pursuant to subparagraph 5.2.4 of the Contract
Specification of Civil and Architectural Work"; and (c) Asian Constructions failure to "pay the
suppliers of certain materials and equipment used in the construction of the Project in violation of
paragraph 3.1.3, Article 3 of the Agreement."
15
In view of the foregoing, Sumitomo requested Asian
Construction to "make the necessary arrangements for the proper turnover of the Project x x
x."
16
Asian Construction, however, claimed that the accomplishments under Progress Billing No. (PB)
018
17
dated June 10, 1998 and PB 019
18
dated July 6, 1998, as well as other various claims, were
still left unpaid.
19
Hence, on December 22, 1998, it sent Sumitomo a letter,
20
demanding payment of
the total amount of US$6,371,530.89. This was followed by several correspondences between the
parties through 1999 to 2007 but no settlement was achieved.
21

The Proceedings Before the Arbitral Tribunal
On September 2, 2008, Asian Construction filed a complaint
22
with the CIAC, docketed as CIAC
Case No. 28-2008, seeking payment for its alleged losses and reimbursements amounting to
US$9,501,413.13, plus attorneys fees in the amount of P2,000,000.00.
23
As a matter of course, an
Arbitral Tribunal was constituted, with Alfredo F. Tadiar being designated as Chairman, and
Salvador P. Castro and Jesse B. Grove as Members.
24

For its part, Sumitomo filed a Motion to Dismiss,
25
questioning the CIACs jurisdiction over the
dispute on the ground that the arbitration should proceed in accordance with the Commercial
Arbitration Rules of Japan.26 However, the aforesaid motion was denied.
27
As such, Sumitomo filed
an Answer,
28
reiterating the CIACs alleged lack of jurisdiction and further asserting that the claim
was already time-barred. It added that had Asian Construction discharged its obligations under the
Agreement to itemize and justify its claims, the same could have been amicably settled years ago. In
this respect, it made a counterclaim for the unutilized portion of the advance payments, attorneys
fees and costs of litigation in the amount of at least P10,000,000.00.
29

Subsequently, the parties signed a TOR,
30
stipulating the admitted facts and defining the issues to
be determined in the arbitration proceedings.
On December 15, 2009, the Arbitral Tribunal rendered the Partial Award
31
which affirmed its
jurisdiction over the dispute but held that the parties were bound by their Agreement that the
substantive New York State Law shall apply in the resolution of the issues.
32
It proceeded to dismiss
both the claims and counterclaims of the parties on the ground that these had already prescribed
under New York State Laws six-year statute of limitations
33
and ruled that, in any case, were it to
resolve the same on the merits, "it would not produce an affirmative recovery for the claimant."
34

Aggrieved, Asian Construction filed before the CA, on January 5, 2010, a Rule 43 Petition for
Review,
35
docketed as CA-G.R. SP No. 112127 (First CA Petition), seeking the reversal of the Partial
Award.
Meanwhile, notwithstanding its dismissal of the claims and counterclaims, the Arbitral Tribunal
further directed the parties to itemize their respective claims for costs and attorneys fees and to
submit factual proof and legal bases for their entitlement thereto.
36
Pursuant to this directive,
Sumitomo submitted evidence to prove the costs it had incurred and paid as a result of the
arbitration proceedings.
37
Asian Construction, on the other hand, did not present any statement or
document to substantiate its claims but, instead, submitted an Opposition
38
dated March 8, 2010
(opposition) to Sumitomos claim for costs. The Arbitral Tribunal did not act upon the opposition
because it was treated, in effect, as a motion for reconsideration which was prohibited under the
CIAC Revised Rules of Procedure Governing Construction Arbitration (CIAC Revised Rules).
39

On March 17, 2010, the Arbitral Tribunal rendered the Final Award
40
which granted Sumitomos
claim for attorneys fees in the amount of US$200,000.00. It held that while the filing of the arbitration
suit cannot be regarded as "clearly unfounded" because of the two progress billings that were left
unpaid, Asian Constructions disregard of the Agreement to have the dispute resolved in accordance
with New York State Law had forced Sumitomo to incur attorneys fees in order to defend its
interest.
41
It further noted that if Asian Construction had accepted the settlement offered by
Sumitomo, then, the arbitration proceedings would have even been aborted.
42
On the other hand, a
similar claim for attorneys fees made by Asian Construction was denied by reason of the latters
failure to submit, as directed, proof of its entitlement thereto.
43
As to the matter of costs, the Arbitral
Tribunal declared Sumitomo relieved from sharing pro-rata in the arbitration costs and,
consequently, directed Asian Construction to shoulder the same costs in full and reimburse
Sumitomo the amount of P849,532.45. However, it ordered Sumitomo to bear all the expenses
related to the appointment of the foreign arbitrator considering that such service was secured upon
its own initiative and without the participation and consent of Asian Construction.
44

Dissatisfied with the Arbitral Tribunals ruling, Asian Construction filed another Rule 43 Petition for
Review
45
before the CA, on May 3, 2010, docketed as CA-G.R. SP No. 113828 (Second CA Petition),
this time, to set aside the Final Award. In this light, it claimed gross negligence and partiality on the
part of the Arbitral Tribunal and asserted, inter alia, that, apart from being a non-arbitrable issue, an
award of attorneys fees would be premature since the prevailing party can only be determined when
the case is decided with finality. Moreover, it maintained that both claims of Asian Construction and
the counterclaims of Sumitomo had already been dismissed for being time-barred.
46

The CA Ruling
On July 23, 2010, the CA rendered a Resolution
47
(July 23, 2010 Resolution), dismissing Asian
Constructions First CA Petition against the Partial Award on the ground of forum-shopping, after it
was shown that: (a) the aforesaid petition was filed while the arbitration case was still pending final
resolution before the Arbitral Tribunal; and (b) Asian Constructions opposition to Sumitomos claim
for costs filed before the Arbitral Tribunal had, in fact, effectively sought for the same relief and
stated the same allegations as those in its First CA Petition. The CA also noted Asian Constructions
premature resort to a petition for review because what was sought to be nullified was not a final
award, but only a partial one. The CA eventually denied Asian Constructions motion for
reconsideration in a Resolution
48
dated April 18, 2011. Hence, Asian Constructions petition before
the Court, docketed as G.R. No. 196723.
Meanwhile, the CA gave due course to Asian Constructions Second CA Petition assailing the Final
Award and rendered a Decision
49
on January 26, 2011, upholding the Arbitral Tribunals ruling
except the award of attorneys fees in favor of Sumitomo. The CA held that the fact that Asian
Construction initiated an action or refused to compromise its claims cannot be considered unjustified
or made in bad faith as to entitle Sumitomo to the aforesaid award. Consequently, Sumitomo moved
for reconsideration,
50
asserting that Asian Constructions Second CA Petition should have instead
been dismissed in its entirety considering their Agreement that the Arbitral Tribunals decisions and
awards would be final and non-appealable. However, in a Resolution
51
dated April 29, 2011, the CA
denied the motion for reconsideration. Thus, Sumitomos petition before the Court, docketed as G.R.
No. 196728.
The Issues Before the Court
The essential issues for the Courts resolution are as follows: (a) in G.R. No. 196723, whether or not
the CA erred in dismissing Asian Constructions First CA Petition on the ground of forum shopping;
and (b) in G.R. No. 196728, whether or not the CA erred in reviewing and modifying the Final Award
which Sumitomo insists to be final and unappealable.
The Courts Ruling
The petitions should be denied.
A. Dismissal of Asian
Constructions First CA
Petition; forum shopping.
Forum shopping is the act of a litigant who repetitively availed of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on the same transactions and the
same essential facts and circumstances, and all raising substantially the same issues, either
pending in or already resolved adversely by some other court, to increase his chances of obtaining a
favorable decision if not in one court, then in another. More particularly, forum shopping can be
committed in three ways, namely: (a) by filing multiple cases based on the same cause of action and
with the same prayer, the previous case not having been resolved yet (where the ground for
dismissal is litis pendentia); (b) by filing multiple cases based on the same cause of action and with
the same prayer, the previous case having been finally resolved (where the ground for dismissal is
res judicata); and (c) by filing multiple cases based on the same cause of action but with different
prayers (splitting of causes of action, where the ground for dismissal is also either litis pendentia or
res judicata).
52
Forum shopping is treated as an act of malpractice and, in this accord, constitutes a
ground for the summary dismissal of the actions involved.
53
To be sure, the rule against forum
shopping seeks to prevent the vexation brought upon the courts and the litigants by a party who
asks different courts to rule on the same or related causes and grant the same or substantially the
same reliefs and in the process creates the possibility of conflicting decisions being rendered by the
different fora upon the same issues.
54

In this case, the Court finds that the CA committed no reversible error in dismissing Asian
Constructions First CA Petition on the ground of forum shopping since the relief sought (i.e., the
reconsideration of the Partial Award) and the allegations stated therein are identical to its opposition
to Sumitomos claim for costs filed before the Arbitral Tribunal while CIAC Case No. 28-2008 was
still pending. These circumstances clearly square with the first kind of forum shopping which thereby
impels the dismissal of the First CA Petition on the ground of litis pendentia.
On this score, it is apt to point out that Asian Constructions argument that it merely complied with
the directive of the Arbitral Tribunal cannot be given any credence since it (as well as Sumitomo)
was only directed to submit evidence to prove the costs it had incurred and paid as a result of the
arbitration proceedings. However, at variance with the tribunals directive, Asian Construction, in its
opposition to Sumitomos claim for costs, proceeded to seek the reversal of the Partial Award in the
same manner as its First CA Petition. It cannot, therefore, be doubted that it treaded the course of
forum shopping, warranting the dismissal of the aforesaid petition.
In any case, the Court observes that the First CA Petition remains dismissible since the CIAC
Revised Rules provides for the resort to the remedy of a petition for review only against a final
arbitral award,
55
and not a partial award, as in this case.
In fine, the Court upholds the CAs dismissal of Asian Constructions petition in CA-G.R. SP No.
112127 (First CA Petition) and based on this, denies its petition in G.R. No. 196723.
B. Review and modification of the Final Award.
Sumitomo Corporation faults the CA for reviewing and modifying a final and non-appealable arbitral
award and insists that the Asian Constructions Second CA Petition should have been, instead,
dismissed outright. It mainly argues that by entering into stipulations in the arbitration clause which
provides that "the order or award of the arbitrators will be the sole and exclusive remedy between
the parties regarding any and all claims and counterclaims with respect to the matter of the
arbitrated dispute"
56
and that "the order or award rendered in connection with an arbitration shall be
final and binding upon the parties,"
57
Asian Construction effectively waived any and all appeals from
the Arbitral Tribunals decision or award.
Sumitomos argument is untenable.
A brief exegesis on the development of the procedural rules governing CIAC cases clearly shows
that a final award rendered by the Arbitral Tribunal is not absolutely insulated from judicial review.
To begin, Executive Order No. (EO) 1008,
58
which vests upon the CIAC original and exclusive
jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved
in construction in the Philippines, plainly states that the arbitral award "shall be final and
inappealable except on questions of law which shall be appealable to the Court."
59
Later, however,
the Court, in Revised Administrative Circular (RAC) No. 1-95,
60
modified this rule, directing that the
appeals from the arbitral award of the CIAC be first brought to the CA on "questions of fact, law or
mixed questions of fact and law." This amendment was eventually transposed into the present CIAC
Revised Rules which direct that "a petition for review from a final award may be taken by any of the
parties within fifteen (15) days from receipt thereof in accordance with the provisions of Rule 43 of
the Rules of Court."
61
Notably, the current provision is in harmony with the Courts pronouncement
that "despite statutory provisions making the decisions of certain administrative agencies final, the
Court still takes cognizance of petitions showing want of jurisdiction, grave abuse of discretion,
violation of due process, denial of substantial justice or erroneous interpretation of the law" and that,
in particular, "voluntary arbitrators, by the nature of their functions, act in a quasi-judicial capacity,
such that their decisions are within the scope of judicial review."
62

In this case, the Court finds that the CA correctly reviewed and modified the Arbitral Tribunals Final
Award insofar as the award of attorneys fees in favor of Sumitomo is concerned since the same
arose from an erroneous interpretation of the law.1wphi 1
To elucidate, jurisprudence dictates that in the absence of a governing stipulation, attorneys fees
may be awarded only in case the plaintiff's action or defendant's stand is so untenable as to amount
to gross and evident bad faith.
63
This is embodied in Article 2208 of the Civil Code which states:
Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:
x x x x
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's
64
plainly valid, just and demandable claim;
x x x x
In this case, the parties agreed that reasonable attorneys fees shall be paid by the defaulting party if
it fails to perform any of its obligations under the Agreement or by the party not prevailing, if any
dispute concerning the meaning and interpretation thereto arises.
65
However, since the parties
respective claims under the Agreement had already prescribed pursuant to New York State Law,
considering as well that the dispute was not regarding the meaning or construction of any provision
under the Agreement,
66
their stipulation on attorneys fees should remain inoperative. Therefore,
discounting the application of the foregoing stipulation, the Court proceeds to examine the matter
under the lens of bad faith pursuant to the above-discussed rules on attorneys fees.
After a careful scrutiny of the records, the Court observes that there was no gross and evident bad
faith on the part of Asian Construction in filing its complaint against Sumitomo since it was merely
seeking payment of its unpaid works done pursuant to the Agreement. Neither can its subsequent
refusal to accept Sumitomos offered compromise be classified as a badge of bad faith since it was
within its right to either accept or reject the same owing to its contractual nature.
67
Verily, absent any
other just or equitable reason to rule otherwise,
68
these incidents are clearly off-tangent with a finding
of gross and evident bad faith which altogether negates Sumitomos entitlement to attorneys fees.
Hence, finding the CAs review of the Final Award and its consequent deletion of the award of
attorneys fees to be proper, the Court similarly denies Sumitomos petition in G.R. No. 196728.
WHEREFORE, the petitions are DENIED. The Resolutions dated July 23, 2010 and April 18, 2011 of
the Court of Appeals in CA-G.R. SP No. 112127, as well as its Decision dated January 26, 2011 and
Resolution dated April 29, 2011 in CA-G.R. SP No. 113828 are hereby AFFIRMED.
SO ORDERED.









Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 188514 August 28, 2013
MARIA LOURDES D. CASTELLS and SHALIMAR CENTI-MANDANAS, Petitioners,
vs.
SAUDI ARABIAN AIRLINES, Respondent.
R E S O L U T I O N
PERLAS-BERNABE, J .:
Assailed in this petition for review on certiorari
1
are the Resolution
2
dated August 28, 2008 and June
16, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 101971 which dismissed the petition for
certiorari (subject petition) filed by petitioners Maria Lourdes D. Castells (Castells) and Shalimar
Centi-Mandanas (Centi-Mandanas), for being filed out of time.
The Facts
On August 24, 2004, respondent Saudi Arabian Airlines (SAUDIA) issued a memo regarding the
transfer of 10 flight attendants, including Castells and Centi-Mandanas (petitioners), from Manila to
Jeddah, Saudi Arabia (Jeddah) due to "operational requirements" (transfer order). Centi-Mandanas
complied with the transfer order while Castells did not.
3

Centi-Mandanas alleged that upon her arrival in Jeddah, she was told that her contract would no
longer be renewed and that she was asked to sign a pre-typed resignation letter. She averred that
while she never wished to resign, SAUDIA left her with no other viable choice as it would terminate
her services anyway. Thus, she filled out the resignation form handed to her.
4

For her part, Castells alleged that upon her non-compliance with the transfer order, she prepared a
resignation letter stating that she felt she was being forced to resign. She then alleged that the
SAUDIA Manila Office Manager told her to amend the same to state that she was voluntarily
resigning; this she reluctantly followed.
5

In view of the foregoing, petitioners, along with a co-flight attendant, Maria Joy Teresa O. Bilbao
(Bilbao), filed a complaint for illegal dismissal against SAUDIA, with prayer for reinstatement, full
backwages, moral and exemplary damages, and attorneys fees. They alleged that they have been
hearing stories that Jeddah-based flight attendants aged 39 to 40 years old, (the same age as them)
were already processing their respective resignations and that the transfer order was made so that
they would be terminated upon their arrival in Jeddah.
6

For their defense, SAUDIA maintained that the resignations were intelligently and voluntarily made.
It asserted, inter alia, that petitioners and Bilbaos resignation letters (subject letters) were penned
and duly signed by them and that they have voluntarily executed an undertaking (subject
undertaking) acknowledging receipt of various sums of money and irrevocably and unconditionally
releasing SAUDIA, its directors, stockholders, officers, and employees from any claim or demand
whatsoever in law or equity which they may have in connection with their employment with SAUDIA.
7

The LA Ruling
In a Decision
8
dated August 31, 2006, the Labor Arbiter (LA) held SAUDIA guilty of illegal dismissal
and ordered it to pay each of petitioners and Bilbao full backwages from the time of their illegal
dismissal until finality of the decision and separation pay of one month salary for every year of
service, less the amount they already received, including attorneys fees.
9
It found that petitioners
and Bilbao did not voluntarily resign and that SAUDIA forced them to do so only because of their
"old" age, as evidenced by its scheme of "transferring" them to Jeddah and by eventually coercing
them to resign under the pain of actual termination. It further held that the subject undertaking, which
was akin to a quitclaim, did not bar petitioners and Bilbao from filing a case against SAUDIA.
However, it noted that their acceptance of the benefits pursuant thereto would merely result in the
deduction of the monetary awards due to them.
10

Dissatisfied, SAUDIA appealed to the National Labor Relations Commission (NLRC).
The NLRC Ruling
In a Resolution
11
dated June 25, 2007, the NLRC reversed and set aside the LAs ruling and thereby
dismissed the illegal dismissal complaint against SAUDIA.
12
Contrary to the findings of the LA, the
NLRC held that the presence of words of gratitude in the subject letters negates the claim that they
were products of any form of coercion or threat on SAUDIAs part. It equally held that the subject
undertaking executed by petitioners and Bilbao was valid, observing that they were well-educated
individuals and, hence, cannot be easily tricked or inveigled into signing it. Likewise, it noted that
they have received "a more than sufficient consideration" upon execution of the same.
13

Consequently, petitioners and Bilbao filed their respective motions for reconsideration which were all
denied in a Resolution
14
dated October 26, 2007. Aggrieved, they separately elevated the matter to
the CA.
The CA Proceedings
On January 16, 2008, petitioners filed with the CA a Motion for Extension to File a Petition for
Certiorari,
15
praying that they be given a period of 15 days from January 18, 2008, or until February
2, 2008, within which to file the subject petition. The said motion was granted in a Resolution
16
dated
January 29, 2008. Since February 2, 2008 was a Saturday, petitioners filed the subject petition on
the next working day, or on February 4, 2008, and the CA admitted the same.
On even date, SAUDIA filed a Motion for Reconsideration,
17
primarily contending that A.M. No. 07-7-
12-SC,
18
which took effect on December 27, 2007, no longer allowed the filing of an extension of time
to file a petition for certiorari; thus, the CA should not have admitted the subject petition. In a
Resolution
19
dated August 28, 2008, the CA reconsidered its earlier resolution and granted
SAUDIAs motion. It deemed the subject petition not admitted due to petitioners non-compliance
with the reglementary period prescribed by Section 4, Rule 65 of the Rules of Court (Rules), as
amended by A.M. No. 07-7-12-SC. Hence, it considered the case closed and terminated.
Petitioners filed a Motion for Reconsideration
20
dated September 26, 2008, which was, however,
denied in a Resolution
21
dated June 16, 2009, prompting them to institute the instant petition.1wphi1
The Issue Before the Court
The primordial issue raised for the Courts resolution is whether or not the CA correctly refused
admission of the subject petition.
Petitioners argue that despite the wording of A.M. No. 07-7-12-SC, it did not explicitly remove the
courts discretion to grant extensions to file petitions for certiorari, especially when compelling
reasons are present.
22

On the other hand, SAUDIA maintains that by virtue of A.M. No. 07-7-12-SC, motions for extension
to file petitions for certiorari are no longer allowed and, as such, the CA correctly refused admission
of the subject petition and considered the case closed and terminated.
23

The Courts Ruling
The petition is meritorious.
It is well-settled that procedural rules should be treated with utmost respect and due regard, since
they are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in
the resolution of rival claims and in the administration of justice. From time to time, however, the
Court has recognized exceptions to the strict application of such rules, but only for the most
compelling reasons where stubborn obedience to the Rules would defeat rather than serve the ends
of justice.
24
These exceptions, as enumerated in the case of Labao v. Flores,
25
are as follows:
x x x (1) most persuasive and weighty reasons; (2) to relieve a litigant from an injustice not
commensurate with his failure to comply with the prescribed procedure; (3) good faith of the
defaulting party by immediately paying within a reasonable time from the time of the default; (4) the
existence of special or compelling circumstances; (5) the merits of the case; (6) a cause not entirely
attributable to the fault or negligence of the party favored by the suspension of the rules; (7) a lack of
any showing that the review sought is merely frivolous and dilatory; (8) the other party will not be
unjustly prejudiced thereby; (9) fraud, accident, mistake, or excusable negligence without appellants
fault; (10) peculiar legal and equitable circumstances attendant to each case; (11) in the name of
substantial justice and fair play; (12) importance of the issues involved; and (13) exercise of sound
discretion by the judge guided by all the attendant circumstances. x x x.
26
(Citations omitted)
In view of the foregoing, despite the rigid wording of Section 4, Rule 65 of the Rules, as amended by
A.M. No. 07-7-12-SC
27
which now disallows an extension of the 60-day reglementary period to file
a petition for certiorari courts may nevertheless extend the same, subject to its sound discretion.
As instructively held in Republic v. St. Vincent de Paul Colleges, Inc.:
28

To reiterate, under Section 4, Rule 65 of the Rules of Court as amended by A.M. No. 07-7-12-SC x x
x, the general rule is that a petition for certiorari must be filed within sixty (60) days from notice of the
judgment, order, or resolution sought to be assailed. Under exceptional circumstances, however,
and subject to the sound discretion of the Court, said period may be extended x x x.
29
(Emphasis and
underscoring supplied)
In this case, the CA had already exercised its sound discretion in granting the extension to file the
subject petition thru a Resolution dated January 29, 2008. Consequently, it could not renege on such
grant by rendering another issuance almost seven months later, i.e., Resolution dated August 28,
2008, which resulted in the refusal to admit the same petition. Such course of action is clearly
antithetical to the tenets of fair play, not to mention the undue prejudice to petitioners' rights. Verily,
the more appropriate course of action would have been to admit the subject petition and resolve the
case on the merits. Thus, in order to rectify this lapse, the Court deems it prudent to have the case
remanded to tf1e CA for its proper resolution.
WHEREFORE, the petition is GRANTED. The Resolutions dated August 28, 2008 and June 16,
2009 of the Court of Appeals in CA-G.R. SP No. 101971 are REVERSED and SET ASIDE and the
instant case is hereby REMANDED to the same court for further proceedings.
SO ORDERED.






















Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178031 August 28, 2013
VIRGINIA M. VENZON, Petitioner,
vs.
RURAL BANK OF BUENAVISTA (AGUSAN DEL NORTE), INC., represented by LOURDESITA
E. PARAJES,Respondent.
D E C I S I O N
DEL CASTILLO, J .:
Before us is a Petition for Review on Certiorari
1
questioning the December 14, 2006 Resolution
2
of
the Court of Appeals (CA) in CA-G.R. SP No. 01341-MIN which dismissed the Petition in said case,
as well as its May 7, 2007 Resolution
3
denying reconsideration thereof.
Factual Antecedents
On January 28, 2005, petitioner Virginia M. Venzon filed a Petition
4
to nullify foreclosure proceedings
and Tax Declaration Nos. 96-GR-06-003-7002-R and 96-GR-06-7003-R issued in the name of
respondent Rural Bank of Buenavista (Agusan del Norte), Inc. The case
5
was docketed as Civil
Case No. 5535 and raffled to Branch 5 of the Regional Trial Court (RTC) of Butuan City. Petitioner
alleged that in 1983 she and her late spouse, George F. Venzon, Sr., obtained a P5,000.00 loan
from respondent against a mortgage on their house and lot in Libertad, Butuan City, covered by Tax
Declaration Nos. 28289 and 42710 issued in their names, which were later on replaced with Tax
Declaration Nos. 96 GR-06-003-2884-R and 96 GR-06-003-2885-R; that she was able to
payP2,300.00, thus leaving an outstanding balance of only P2,370.00; that sometime in March 1987,
she offered to pay the said balance in full, but the latter refused to accept payment, and instead
shoved petitioner away from the bank premises; that in March 1987, respondent foreclosed on the
mortgage, and the property was sold at auction for P6,472.76 to respondent, being the highest
bidder; that the foreclosure proceedings are null and void for lack of notice and publication of the
sale, lack of sheriffs final deed of sale and notice of redemption period; and that she paid
respondent P6,000.00 on October 9, 1995, as evidenced by respondents Official Receipt No.
410848
6
issued on October 9, 1995.
In its Answer with Counterclaims,
7
respondent claimed that petitioner did not make any payment on
the loan; that petitioner never went to the bank in March 1987 to settle her obligations in full; that
petitioner was not shoved and driven away from its premises; that the foreclosure proceedings were
regularly done and all requirements were complied with; that a certificate of sale was issued by the
sheriff and duly recorded in the Registry of Deeds; that petitioners claim that she paid P6,000.00 on
October 9, 1995 is utterly false; that petitioners cause of action has long prescribed as the case was
filed only in 2005 or 18 years after the foreclosure sale; and that petitioner is guilty of laches.
Respondent interposed its counterclaim for damages and attorneys fees as well.
In her Reply,
8
petitioner insisted that the foreclosure proceedings were irregular and that prescription
and laches do not apply as the foreclosure proceedings are null and void to begin with.
Ruling of the Regional Trial Court
On July 13, 2006, the trial court issued a Resolution
9
dismissing Civil Case No. 5535. It held that
The plaintiff, however, may have erroneously relied the [sic] mandatorily [sic] requirement of the
aforestated provision of law upon failure to consider that the other party is a Rural Bank. Under the
R.A. No. 720 as amended, (Rural Bank Act) property worth exceeding P100,000.00 [sic] is exempt
from the requirement of publication. This may have been the reason why the foreclosure prosper
[sic] without the observance of the required publication. Moreover, neither in the said applicable laws
provide [sic] for the impairment of the extrajudicial foreclosure and the subsequent sale to the public.
The Court ruled in Bonnevie, et al. vs. CA, et al. that Act No. 3135 as amended does not require
personal notice to the mortgagor. In the same view, lack of final demand or notice of redemption are
[sic] not considered indispensable requirements and failure to observe the same does not render the
extrajudicial foreclosure sale a nullity.
10

In other words, the trial court meant that under the Rural Banks Act, the foreclosure of mortgages
covering loans granted by rural banks and executions of judgments thereon involving real properties
levied upon by a sheriff shall be exempt from publication where the total amount of the loan,
including interests due and unpaid, does not exceed P10,000.00.
11
Since petitioners outstanding
obligation amounted to just over P6,000.00 publication was not necessary.
Petitioner moved for reconsideration,
12
but in the September 6, 2006 Resolution,
13
the trial court
denied the same.
Ruling of the Court of Appeals
Petitioner went up to the CA via an original Petition for Certiorari.
14
On December 14, 2006, the CA
issued the first assailed Resolution
15
dismissing the Petition. It held that petitioners remedy should
have been an appeal under Rule 41 of the Rules of Court since the July 13, 2006 Resolution is a
final order of dismissal. Petitioner received the Resolution denying her Motion for Reconsideration
on September 18, 2006;
16
but she filed the Petition for Certiorari on October 25, 2006 when she
should have interposed an appeal on or before October 3, 2006. Having done so, her Petition may
not even be treated as an appeal for the same was belatedly filed.
The CA added that the Petition does not provide a sufficient factual background of the case as it
merely alleges a chronology of the legal remedies she took before the trial court which does not
comply with the requirement under Section 3 of Rule 46.
17

Petitioner moved for reconsideration
18
by submitting a rewritten Petition. However, in a Resolution
dated May 7, 2007, the CA denied the same, hence the present Petition.
Issues
Petitioner submits the following assignment of errors:
I
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN
DISMISSING THE PETITION FOR CERTIORARI THEREBY PREVENTING THE COURT FROM
FINDING OUT THAT ACTUALLY NO EXTRAJUDICIAL FORECLOSURE WAS CONDUCTED BY
THE OFFICE OF THE PROVINCIAL SHERIFF ON PETITIONERS PROPERTY AT THE
INSTANCE OF THE PRIVATE RESPONDENT.
II
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN NOT
DISREGARDING TECHNICALITIES IN ORDER TO ADMINISTER SUBSTANTIAL JUSTICE TO
THE PETITIONER.
19

Petitioners Arguments
Petitioner claims that no extrajudicial foreclosure proceedings ever took place, citing a February 2,
2005 Certification issued by the Office of the Clerk of Court of Butuan City stating that the record
pertaining to the foreclosure proceedings covering her property "could not be found in spite of
diligent efforts to find the same."
20
And because no foreclosure proceedings took place, there could
not have been notice and publication of the sale, and no sheriffs certificate of sale. For this reason,
she claims that the CA erred in dismissing her case.
Petitioner adds that, technicalities aside, a Petition for Certiorari is available to her in order to
prevent the denial of her substantial rights. She also argues that her payment to respondent of the
amount of P6,000.00 in 1995 should be considered as a valid redemption of her property.
Respondents Arguments
For its part, respondent merely validates the pronouncements of the CA by citing and echoing the
same, and holding petitioner to a strict observance of the rules for perfecting an appeal within the
reglementary period, as it claims they are necessary for the orderly administration of justice,
21
as well
as that which requires that only questions of law may be raised in a Petition for Review on Certiorari.
Our Ruling
The Court denies the Petition.
The Court finds no error in the CAs treatment of the Petition for Certiorari. The trial courts July 13,
2006 Resolution dismissing the case was indeed to be treated as a final order, disposing of the issue
of publication and notice of the foreclosure sale which is the very core of petitioners cause of
action in Civil Case No. 5535 and declaring the same to be unnecessary pursuant to the Rural
Banks Act, as petitioners outstanding obligation did not exceed P10,000.00, and thus leaving
petitioner without basis to maintain her case. This constitutes a dismissal with the character of
finality. As such, petitioner should have availed of the remedy under Rule 41, and not Rule 65.
The Court is not prepared to be lenient in petitioners case, either. Civil Case No. 5535 was instituted
only in 2005, while the questioned foreclosure proceedings took place way back in 1987. Petitioners
long inaction and commission of a procedural faux pas certainly cannot earn the sympathy of the
Court.
Nor can the Court grant the Petition on the mere allegation that no foreclosure proceedings ever
took place. The February 2, 2005 Certification issued by the Office of the Clerk of Court of Butuan
City to the effect that the record of the foreclosure proceedings could not be found is not sufficient
ground to invalidate the proceedings taken. Petitioner herself attached the Sheriffs Certificate of
Sale
22
as Annex "A" of her Petition in Civil Case No. 5535; this should belie the claim that no record
exists covering the foreclosure proceedings. Besides, if petitioner insists that no foreclosure
proceedings took place, then she should not have filed an action to annul the same since there was
no foreclosure to begin with. She should have filed a different action.
However, petitioner is entitled to a return of the P6,000.00 she paid to respondent in 1995. While this
may not be validly considered as a redemption of her property as the payment was made long after
the redemption period expired, respondent had no right to receive the amount. In its Answer with
Counterclaims in Civil Case No. 5535, respondent simply alleged therein that
10. Defendant DENIES the allegations under paragraph 10 of the petition for being utterly false,
highly self-serving and patently speculative, the truth being ---
Assumption cannot be had that there was an alleged foreclosure of the then property of the
petitioner for the truth of the matter is that a foreclosure proceeding was duly conducted, which fact
remains undisputable for so many years now.
Without necessarily admitting that payment of P6,000.00 was made, the same however could
hardly and could never be considered as redemption price for the following reasons ---
The redemption period had long lapsed when the payment of P6,000.00 was allegedly made.
Thus, there is no point talking about redemption price when the redemption period had long been
gone at the time the alleged payment was made.
Even x x x granting, without conceding, that the amount of P6,000.00 was a redemption price, said
amount, however, could not constitute as a legal redemption price since the same was not enough
to cover the entire redemption price as mandated by the rules and laws.
23
(Emphases supplied)
Interestingly, respondent did not deny being the issuer of Official Receipt No. 410848. Instead, it
averred that petitioners payment to it of P6,000.00 was false and self-serving, but in the same
breath argued that, without necessarily admitting that payment of P6,000.00 was made, the same
cannot be considered as redemption price.
By making such an ambiguous allegation in its Answer with Counterclaims, respondent is deemed to
have admitted receiving the amount of P6,000.00 from petitioner as evidenced by Official Receipt
No. 410848, which amount under the circumstances it had no right to receive. "If an allegation is not
specifically denied or the denial is a negative pregnant, the allegation is deemed admitted."
24
"Where
a fact is alleged with some qualifying or modifying language, and the denial is conjunctive, a
negative pregnant exists, and only the qualification or modification is denied, while the fact itself is
admitted."
25
"A denial in the form of a negative pregnant is an ambiguous pleading, since it cannot be
ascertained whether it is the fact or only the qualification that is intended to be denied."
26
"Profession
of ignorance about a fact which is patently and necessarily within the pleader's knowledge, or means
of knowing as ineffectual, is no denial at all."
27
In fine, respondent failed to refute petitioners claim of
having paid the amount of P6,000.00.
Since respondent was not entitled to receive the said amount, as it is deemed fully paid from the
foreclosure of petitioners property since its bid price at the auction sale covered all that petitioner
owed it by way of principal, interest, attorneys fees and charges,
28
it must return the same to
petitioner. "If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises."
29
Moreover, pursuant to Circular No. 799, series of
2013 of the Bangko Sentral ng Pilipinas which took effect July 1, 2013, the amount of P6,000.00
shall earn interest at the rate of 6% per annum computed from the filing of the Petition in Civil Case
No. 5535 up to its full satisfaction.
WHEREFORE, premises considered, the Petition is DENIED. The December 14, 2006 and May 7,
2007 Resolutions of the Court of Appeals in CA-G.R. SP No. 01341-MIN are AFFIRMED.
However, respondent Rural Bank of Buenavista (Agusan del Norte), Inc. is ORDERED to return to
petitioner Virginia M. Venzon or her assigns the amount of P6,000.00, with interest at the rate of 6%
per annum computed from the filing of the Petition in Civil Case No. 5535 up to its full satisfaction.
SO ORDERED.






















Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 163431 August 28, 2013
NATHANIEL N. DONGON, PETITIONER,
vs.
RAPID MOVERS AND FORWARDERS CO., INC., AND/OR NICANOR E. JAO,
JR., RESPONDENTS.
D E C I S I O N
BERSAMIN, J .:
The prerogative of the employer to dismiss an employee on the ground of willful disobedience to
company policies must be exercised in good faith and with due regard to the rights of labor.
The Case
By petition for review on certiorari, petitioner appeals the adverse decision promulgated on October
24, 2003,
1
whereby the Court of Appeals (CA) set aside the decision dated June 17, 2002 of the
National Labor Relations Commission (NLRC) in his favor.
2
The NLRC had thereby reversed the
ruling dated September 10, 2001 of the Labor Arbiter dismissing his complaint for illegal dismissal.
3

Antecedents
The following background facts of this case are stated in the CAs assailed decision, viz:
From the records, it appears that petitioner Rapid is engaged in the hauling and trucking business
while private respondent Nathaniel T. Dongon is a former truck helper leadman.
Private respondents area of assignment is the Tanduay Otis Warehouse where he has a job of
facilitating the loading and unloading [of the] petitioners trucks. On 23 April 2001, private respondent
and his driver, Vicente Villaruz, were in the vicinity of Tanduay as they tried to get some goods to be
distributed to their clients.
Tanduays security guard called the attention of private respondent as to the fact that Mr. Villaruz[s]
was not wearing an Identification Card (I.D. Card). Private respondent, then, assured the guard that
he will secure a special permission from the management to warrant the orderly release of goods.
Instead of complying with his compromise, private respondent lent his I.D. Card to Villaruz; and by
reason of such misrepresentation , private respondent and Mr. Villaruz got a clearance from
Tanduay for the release of the goods. However, the security guard, who saw the misrepresentation
committed by private respondent and Mr. Villaruz, accosted them and reported the matter to the
management of Tanduay.
On 23 May 2001, after conducting an administrative investigation, private respondent was dismissed
from the petitioning Company.
On 01 June 2001, private respondent filed a Complaint for Illegal Dismissal. x x x
4

In his decision, the Labor Arbiter dismissed the complaint, and ruled that respondent Rapid Movers
and Forwarders Co., Inc. (Rapid Movers) rightly exercised its prerogative to dismiss petitioner,
considering that: (1) he had admitted lending his company ID to driver Vicente Villaruz; (2) his act
had constituted mental dishonesty and deceit amounting to breach of trust; (3) Rapid Movers
relationship with Tanduay had been jeopardized by his act; and (4) he had been banned from all the
warehouses of Tanduay as a result, leaving Rapid Movers with no available job for him.
5

On appeal, however, the NLRC reversed the Labor Arbiter, and held that Rapid Movers had not
discharged its burden to prove the validity of petitioners dismissal from his employment. It opined
that Rapid Movers did not suffer any pecuniary damage from his act; and that his dismissal was a
penalty disproportionate to the act of petitioner complained of. It awarded him backwages and
separation pay in lieu of reinstatement, to wit:
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE and a new one
ENTERED ordering the payment of his backwages from April 25, 2001 up to the finality of this
decision and in lieu of reinstatement, he should be paid his separation pay from date of hire on May
2, 1994 up to the finality hereof.
SO ORDERED.
6

Rapid Movers brought a petition for certiorari in the CA, averring grave abuse of discretion on the
part of the NLRC, to wit:
I.
x x x IN STRIKING DOWN THE DISMISSAL OF THE PRIVATE RESPONDENT [AS] ILLEGAL
ALLEGEDLY FOR BEING GROSSLY DISPROPORTIONATE TO THE OFFENSE COMMITTED IN
THAT NEITHER THE PETITIONERS NOR ITS CLIENT TANDUAY SUFFERED ANY PECUNIARY
DAMAGE THEREFROM THEREBY IMPLYING THAT FOR A DISHONEST ACT/MISCONDUCT TO
BE A GROUND FOR DISMISSAL OF AN EMPLOYEE, THE SAME MUST AT LEAST HAVE
RESULTED IN PECUNIARY DAMAGE TO THE EMPLOYER;
II.
x x x IN EXPRESSING RESERVATION ON THE GUILT OF THE PRIVATE RESPONDENT IN THE
LIGHT OF ITS PERCEIVED CONFLICTING DATES OF THE LETTER OF TANDUAY TO RAPID
MOVERS (JANUARY 25, 2001) AND THE OCCURRENCE OF THE INCIDENT ON APRIL 25, 2001
WHEN SAID CONFLICT OF DATES CONSIDERING THE EVIDENCE ON RECORD, WAS MORE
APPARENT THAN REAL.
7

Ruling of the CA
On October 24, 2003, the CA promulgated its assailed decision reinstating the decision of the Labor
Arbiter, and upholding the right of Rapid Movers to discipline its workers, holding thusly:
There is no dispute that the private respondent lent his I.D. Card to another employee who used the
same in entering the compound of the petitioner customer, Tanduay. Considering that this amounts
to dishonesty and is provided for in the petitioning Companys Manual of Discipline, its imposition is
but proper and appropriate.
It is basic in any enterprise that an employee has the obligation of following the rules and regulations
of its employer. More basic further is the elementary obligation of an employee to be honest and
truthful in his work. It should be noted that honesty is one of the foremost criteria of an employer
when hiring a prospective employee. Thus, we see employers requiring an NBI clearance or police
clearance before formally accepting an applicant as their employee. Such rules and regulations are
necessary for the efficient operation of the business.
Employees who violate such rules and regulations are liable for the penalties and sanctions so
provided, e.g., the Companys Manual of Discipline (as in this case) and the Labor Code.
The argument of the respondent commission that no pecuniary damage was sustained is off-tangent
with the facts of the case. The act of lending an ID is an act of dishonesty to which no pecuniary
estimate can be ascribed for the simple reason that no monetary equation is involved. What is
involved is plain and simple adherence to truth and violation of the rules. The act of uttering or the
making of a falsehood does not need any pecuniary estimate for the act to gestate to one punishable
under the labor laws. In this case, the illegal use of the I.D. Card while it may appear to be initially
trivial is of crucial relevance to the petitioners customer, Tanduay, which deals with drivers and
leadmen withdrawing goods and merchandise from its warehouse. For those with criminal intentions
can use anothers ID to asport goods and merchandise.
Hence, while it can be conceded that there is no pecuniary damage involved, the fact remains that
the offense does not only constitute dishonesty but also willful disobedience to the lawful order of the
Company, e.g., to observe at all time the terms and conditions of the Manual of Discipline. Article
282 of the Labor Code provides:
"Termination by Employer An employer may terminate an employment for any of the following
causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or representative in connection with his work;
x x x." (Emphasis, supplied)
The constitutional protection afforded to labor does not condone wrongdoings by the employee; and
an employers power to discipline its workers is inherent to it. As honesty is always the best policy,
the Court is convinced that the ruling of the Labor Arbiter is more in accord with the spirit of the
Labor Code. "The Constitutional policy of providing full protection to labor is not intended to oppress
or destroy management (Capili vs. NLRC, 270 SCRA 488[1997]." Also, in Atlas Fertilizer Corporation
vs. NLRC, 273 SCRA 549 [1997], the Highest Magistrate declared that "The law, in protecting the
rights of the laborers, authorizes neither oppression nor self-destruction of the employer."
WHEREFORE, premises considered, the Petition is GRANTED. The assailed 17 June 2002
Decision of respondent Commission in NLRC CA-029937-01 is hereby SET ASIDE and the 10
September 2001 Decision of Labor Arbiter Vicente R. Layawen is ordered REINSTATED. No costs.
SO ORDERED.
8

Petitioner moved for a reconsideration, but the CA denied his motion on March 22, 2004.
9

Undaunted, the petitioner is now on appeal.
Issue
Petitioner still asserts the illegality of his dismissal, and denies being guilty of willful disobedience.
He contends that:
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN SUSTAINING
THE DECISION DATED 10 SEPTEMBER 2001 OF LABOR ARBITER VICENTE R. LAYAWEN
WHERE THE LATTER RULED THAT BY LENDING HIS ID TO VILLARUZ, PETITIONER
(COMPLAINANT) COMMITTED MISREPRESENTATION AND DECEIT CONSTITUTING MENTAL
DISHONESTY WHICH CANNOT BE DISCARDED AS INSIGNIFICANT OR TRIVIAL.
10

Petitioner argues that his dismissal was discriminatory because Villaruz was retained in his
employment as driver; and that the CA gravely abused its discretion in disregarding his showing that
he did not violate Rapid Movers rules and regulations but simply performed his work in line with the
duties entrusted to him, and in not appreciating his good faith and lack of any intention to willfully
disobey the companys rules.
In its comment,
11
Rapid Movers prays that the petition for certiorari be dismissed for being an
improper remedy and apparently resorted to as a substitute for a lost appeal; and insists that the CA
did not commit grave abuse of discretion.1wphi 1
In his reply,
12
petitioner submits that his dismissal was a penalty too harsh and disproportionate to
his supposed violation; and that his dismissal was inappropriate due to the violation being his first
infraction that was even committed in good faith and without malice.
Based on the parties foregoing submissions, the issues to be resolved are, firstly: Was the petition
improper and dismissible?; and, secondly: If the petition could prosper, was the dismissal of
petitioner on the ground of willful disobedience to the company regulation lawful?
Ruling
The petition has merit.
1.
Petition should not be dismissed
In St. Martin Funeral Home v. National Labor Relations Commission,
13
the Court has clarified that
parties seeking the review of decisions of the NLRC should file a petition for certiorari in the CA on
the ground of grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the
NLRC. Thereafter, the remedy of the aggrieved party from the CA decision is an appeal via petition
for review on certiorari.
14

The petition filed here is self-styled as a petition for review on certiorari, but Rapid Movers points out
that the petition was really one for certiorari under Rule 65 of the Rules of Court due to its basis
being the commission by the CA of a grave abuse of its discretion and because the petition was filed
beyond the reglementary period of appeal under Rule 45. Hence, Rapid Movers insists that the
Court should dismiss the petition because certiorari under Rule 65 could not be a substitute of a lost
appeal under Rule 45.
Ordinarily, an original action for certiorari will not prosper if the remedy of appeal is available, for an
appeal by petition for review on certiorari under Rule 45 of the Rules of Court and an original action
for certiorari under Rule 65 of the Rules of Court are mutually exclusive, not alternative nor
successive, remedies.
15
On several occasions, however, the Court has treated a petition for certiorari
as a petition for review on certiorari when: (a) the petition has been filed within the 15-day
reglementary period;
16
(b) public welfare and the advancement of public policy dictate such
treatment; (c) the broader interests of justice require such treatment; (d) the writs issued were null
and void; or (e) the questioned decision or order amounts to an oppressive exercise of judicial
authority.
17

The Court deems it proper to allow due course to the petition as one for certiorari under Rule 65 in
the broader interest of substantial justice, particularly because the NLRCs appellate adjudication
was set aside by the CA, and in order to put at rest the doubt that the CA, in so doing, exercised its
judicial authority oppressively. Whether the petition was proper or not should be of less importance
than whether the CA gravely erred in undoing and setting aside the determination of the NLRC as a
reviewing forum vis--vis the Labor Arbiter. We note in this regard that the NLRC had declared the
dismissal of petitioner to be harsh and not commensurate to the infraction committed. Given the
spirit and intention underlying our labor laws of resolving a doubtful situation in favor of the working
man, we will have to review the judgment of the CA to ascertain whether the NLRC had really
committed grave abuse of its discretion. This will settle the doubts on the propriety of terminating
petitioner, and at the same time ensure that justice is served to the parties.
18

2.
Petitioner was not guilty of willful disobedience; hence, his dismissal was illegal
Petitioner maintains that willful disobedience could not be a ground for his dismissal because he had
acted in good faith and with the sole intention of facilitating deliveries for Rapid Movers when he
allowed Villaruz to use his company ID.
Willful disobedience to the lawful orders of an employer is one of the valid grounds to terminate an
employee under Article 296 (formerly Article 282) of the Labor Code.
19
For willful disobedience to be
a ground, it is required that: (a) the conduct of the employee must be willful or intentional; and (b) the
order the employee violated must have been reasonable, lawful, made known to the employee, and
must pertain to the duties that he had been engaged to discharge.
20
Willfulness must be attended by
a wrongful and perverse mental attitude rendering the employees act inconsistent with proper
subordination.
21
In any case, the conduct of the employee that is a valid ground for dismissal under
the Labor Code constitutes harmful behavior against the business interest or person of his
employer.
22
It is implied that in every act of willful disobedience, the erring employee obtains undue
advantage detrimental to the business interest of the employer.
Under the foregoing standards, the disobedience attributed to petitioner could not be justly
characterized as willful within the contemplation of Article 296 of the Labor Code. He neither
benefitted from it, nor thereby prejudiced the business interest of Rapid Movers. His explanation that
his deed had been intended to benefit Rapid Movers was credible. There could be no wrong or
perversity on his part that warranted the termination of his employment based on willful
disobedience.
Rapid Movers argues, however, that the strict implementation of company rules and regulations
should be accorded respect as a valid exercise of its management prerogative. It posits that it had
the prerogative to terminate petitioner for violating its following company rules and regulations, to wit:
(a) "Pagpayag sa paggamit ng iba o paggamit ng maling rekord ng kumpanya kaugnay sa
operations, maintenance or materyales o trabaho" (Additional Rules and Regulations No. 2);
and
(b) "Pagkutsaba sa pagplano o pagpulong sa ibang tao upang labagin ang anumang
alituntunin ng kumpanya" (Article 5.28).
23

We cannot sustain the argument of Rapid Movers.
It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad
discretion includes the implementation of company rules and regulations and the imposition of
disciplinary measures on its employees. But the exercise of a management prerogative like this is
not limitless, but hemmed in by good faith and a due consideration of the rights of the worker.
24
In
this light, the management prerogative will be upheld for as long as it is not wielded as an implement
to circumvent the laws and oppress labor.
25

To us, dismissal should only be a last resort, a penalty to be meted only after all the relevant
circumstances have been appreciated and evaluated with the goal of ensuring that the ground for
dismissal was not only serious but true. The cause of termination, to be lawful, must be a serious
and grave malfeasance to justify the deprivation of a means of livelihood. This requirement is in
keeping with the spirit of our Constitution and laws to lean over backwards in favor of the working
class, and with the mandate that every doubt must be resolved in their favor.
26

Although we recognize the inherent right of the employer to discipline its employees, we should still
ensure that the employer exercises the prerogative to discipline humanely and considerately, and
that the sanction imposed is commensurate to the offense involved and to the degree of the
infraction. The discipline exacted by the employer should further consider the employees length of
service and the number of infractions during his employment.
27
The employer should never forget that
always at stake in disciplining its employee are not only his position but also his livelihood,
28
and that
he may also have a family entirely dependent on his earnings.
29

Considering that petitioners motive in lending his company ID to Villaruz was to benefit Rapid
Movers as their employer by facilitating the loading of goods at the Tanduay Otis Warehouse for
distribution to Rapid Movers clients, and considering also that petitioner had rendered seven long
unblemished years of service to Rapid Movers, his dismissal was plainly unwarranted. The NLRCs
reversal of the decision of the Labor Arbiter by holding that penalty too harsh and disproportionate to
the wrong attributed to him was legally and factually justified, not arbitrary or whimsical.
Consequently, for the CA to pronounce that the NLRC had thereby gravely abused its discretion was
not only erroneous but was itself a grave abuse of discretion amounting to lack of jurisdiction for not
being in conformity with the pertinent laws and jurisprudence. We have held that a conclusion or
finding derived from erroneous considerations is not a mere error of judgment but one tainted with
grave abuse of discretion.
30

WHEREFORE, the Court GRANTS the petition; REVERSES and SETS ASIDE the decision
promulgated by the Court of Appeals on October 24, 2003; REINSTATES the decision of the
National Labor Relations Commission rendered on June 17, 2002; and ORDERS respondents to
pay the costs of suit.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 193415 April 18, 2012
SPOUSES DAISY and SOCRATES M. AREVALO, Petitioners,
vs.
PLANTERS DEVELOPMENT BANK and THE REGISTER OF DEEDS OF PARAAQUE
CITY, Respondents.
D E C I S I O N
SERENO, J .:
This is a Rule 45 Petition for Review, which seeks to reverse the Decision dated 24 March 2010
1
and
Resolution dated 05 August 2010
2
of the Court of Appeals (CA) in CA-G.R. SP No. 110806. The CA
affirmed the trial courts Decision not to grant petitioners application for a writ of preliminary
injunction.
As stated, this case involves the trial courts refusal to issue a writ of preliminary injunction in favor of
petitioner Spouses Daisy and Socrates M. Arevalo (Spouses Arevalo) based on their failure to
comply with Section 2 of the Procedure in Extra-Judicial or Judicial Foreclosure of Real Estate
Mortgages (Procedure on Foreclosure)
3
issued by this Court. This procedure required them to pay
twelve percent (12%) per annum interest on the amount of the principal obligation, as stated in the
application for foreclosure sale, before an injunctive writ may issue against the extra-judicial
foreclosure of real estate mortgage.
4

We deny the instant Petition for the following reasons: (1) the Petition is moot, because the trial court
has already dismissed the Complaint dated 07 April 2009 (the First Complaint),
5
upon which
petitioners application for the provisional remedy of preliminary injunction was based; and (2)
petitioners are guilty of forum-shopping.
The conflict between the parties arose from a Loan Agreement
6
petitioners executed with respondent
Planters Development Bank (Bank). Petitioners obtained from respondent Bank a P 2,100,000 loan
secured by a mortgage on their property situated in Muntinlupa. Due to their failure to pay the loaned
amount, the Bank undertook to extra-judicially foreclose the mortgage. The Clerk of Court issued a
Notice of Sheriffs Sale and set the auction sale on 21 and 28 April 2009.
7

Petitioners thereafter filed the First Complaint wherein they asked for the nullification of interests,
penalties and other charges, as well as for specific performance with an application for a temporary
restraining order (TRO) and writ of preliminary injunction to enjoin the then impending auction sale of
their Muntinlupa property. They alleged that it was respondent Bank who breached its obligations
under the loan agreement; and that the auction sale was premature, arbitrary and confiscatory, as
their inability to pay the loan was caused and aggravated by the Banks illegal schemes.
8

During the hearing of petitioners application for preliminary injunction, the trial court ruled that, as a
precondition for the issuance of the writ and pursuant to the Procedure on Foreclosure, petitioners
were directed to pay 12% per annum interest on the principal obligation as stated in the application
for foreclosure sale. Otherwise, the writ shall not issue.
9
The trial court further ruled that the
evidence in support of their application was evidentiary in nature and should thus be presented
during trial.
10

Petitioner Spouses Arevalo sought to clarify the trial courts Order,
11
inquiring whether they should be
required to pay 12% per annum interest. They argue that the rule requiring the payment of 12%
interest as a condition for the issuance of an injunctive writ against an impending foreclosure sale
was applicable only when applicant alleges that the interest rate is unconscionable.
12
According to
petitioners, nowhere in the Complaint did they allege that the interest charges were
unconscionable.
13
Instead, what they raised in the First Complaint as their principal cause of action
was the Banks deliberate withholding of loan releases on various pretexts and the propriety of the
acts of the Bank charging them with interests and penalties due to the delay caused by the Bank
itself.
14
The trial court, however, affirmed its earlier ruling.
15

Petitioners moved for reconsideration,
16
but their motion was denied.
17
Consequently, they did not
pay the required interest; thus, no writ of preliminary injunction was issued in their favor.
Aggrieved, petitioner Spouses Arevalo filed a Rule 65 Petition
18
with the CA to assail the Orders of
the trial court involving the non-issuance of the injunctive writ.
19

Meanwhile, proceedings for the First Complaint ensued at the trial court. Acting on the Motion to
Dismiss filed by respondent Bank, the trial court granted the motion and dismissed the First
Complaint for lack of cause of action.
20
Petitioner Spouses Arevalo then proceeded again to the CA
to appeal
21
the dismissal of the main case. The record does not reveal the status of the case.
With regard to the Rule 65 Petition to the CA questioning the non-issuance of the writ, respondent
Bank filed its Comment
22
thereon. Subsequently, the CA rendered the present assailed Decision
dated 24 March 2010, affirming the applicability of Section 2 of the Procedure on Foreclosure. It
ruled that the trial court was correct in refusing to issue the writ due to petitioners inexplicable failure
and even stubborn refusal to pay the accrued interest at 12% per annum.
23
The CA held that the
words used by petitioners in their First Complaint, such as "manifestly unjust," "purely potestative
condition," "void ab initio," "clearly contravenes morals, good customs and public policy,"
"whimsical," "capricious violation of the legal and inherent principles of mutuality of contracts,"
"illegal, invalid, unilateral impositions"all of which pertained to interest imposed by the Bank
undeniably meant that petitioners were challenging the interest for being unconscionable, while
opting to use other words of similar import.
24

Petitioners moved for reconsideration, but the CA denied their motion.
25

Aggrieved, they filed the instant Rule 45 Petition to assail the Decision of the CA affirming the non-
issuance of the injunctive writ.
There are thus two (2) cases arising from similar facts and circumstances; more particularly, the
instant Rule 45 Petition and the appeal of the dismissal of the main case with the CA.
26
It appears on
record also that on 12 November 2010, petitioners filed yet another Complaint dated 11 November
2010
27
(Second Complaint) with the trial court. This time, they prayed for the nullification of the real
estate mortgage, the extra-judicial foreclosure sale, and the subsequent proceedings, with a prayer
for preliminary injunction and TRO.
With regard to the instant Rule 45 Petition, petitioners assail the Decision and Resolution of the CA
based on the following grounds:
28
(1) they were deprived of the opportunity to present evidence on
their application for a writ of preliminary injunction; and (2) the CA erred when it required them to pay
12% interest per annum based on Section 2 of the Procedure on Foreclosure, when the core of their
First Complaint was not excessiveness of the interest but the Banks supposed breach of their
obligations in the loan agreement.
29

Respondent Bank, on the other hand, countered as follows:
30
(1) petitioner Spouses Arevalo were
not denied due process, since they were accorded several opportunities to be heard on their
application for the issuance of an injunctive writ; (2) the CA correctly required petitioners to pay the
interest; and (3) petitioner Spouses Arevalo were guilty of forum-shopping when they filed their
Second Complaint. For forum-shopping, respondent Bank likewise moved to hold them in
contempt,
31
arguing that they had sought similar reliefs in their Second Complaint with the trial court
as in the present Petition.
Petitioners filed their Reply
32
and Comment
33
to the charges on contempt.
Based on the parties submissions, the following issues are presented for the resolution of this Court:
1. Whether the requirement to pay 12% interest per annum before the issuance of an
injunctive writ to enjoin an impending foreclosure sale is applicable to the instant case; and
2. Whether petitioner Spouses Arevalo are guilty of forum-shopping and should consequently
be punished for contempt.
RULING OF THE COURT
I. The issue of the applicability to this case of the requirement to pay 12% interest per annum before
the issuance of an injunctive writ to enjoin an impending foreclosure sale is moot.
The Court rules that upon dismissal of the First Complaint by the trial court on 27 October
2009,
34
the issue of whether the writ of injunction should issue has become moot. Although both
parties failed to raise this particular argument in their submissions, we deny the instant Petition on
this ground.
A case becomes moot and academic when there is no more actual controversy between the parties
or useful purpose that can be served in passing upon the merits.
35

There remains no actual controversy in the instant Petition because the First Complaint has already
been dismissed by the trial court. Upon its dismissal, the question of the non-issuance of a writ of
preliminary injunction necessarily died with it.
A writ of preliminary injunction is a provisional remedy. It is auxiliary to, an adjunct of, and subject to
the outcome of the main case.
36
Thus, a writ of preliminary injunction is deemed lifted upon dismissal
of the main case, any appeal therefrom notwithstanding,
37
as this Court emphasized in Buyco v.
Baraquia
38
from which we quote:
The writ is provisional because it constitutes a temporary measure availed of during the pendency of
the action and it is ancillary because it is a mere incident in and is dependent upon the result of the
main action.
It is well-settled that the sole object of a preliminary injunction, whether prohibitory or mandatory, is
to preserve the status quo until the merits of the case can be heard. It is usually granted when it is
made to appear that there is a substantial controversy between the parties and one of them is
committing an act or threatening the immediate commission of an act that will cause irreparable
injury or destroy the status quo of the controversy before a full hearing can be had on the merits of
the case.
x x x x x x x x x
The present case having been heard and found dismissible as it was in fact dismissed, the writ of
preliminary injunction is deemed lifted, its purpose as a provisional remedy having been served, the
appeal therefrom notwithstanding.
Unionbank v. Court of Appeals enlightens:
xxx a dismissal, discontinuance or non-suit of an action in which a restraining order or temporary
injunction has been granted operates as a dissolution of the restraining order or temporary
injunction," regardless of whether the period for filing a motion for reconsideration of the order
dismissing the case or appeal therefrom has expired. The rationale therefor is that even in cases
where an appeal is taken from a judgment dismissing an action on the merits, the appeal does not
suspend the judgment, hence the general rule applies that a temporary injunction terminates
automatically on the dismissal of the action. (Emphases supplied.)
39

There will be no practical value in resolving the question of the non-issuance of an injunctive writ in
this case. Setting aside the assailed Orders is manifestly pointless, considering that the First
Complaint itself has already been dismissed, and there is nothing left to enjoin. The reversal of the
assailed Orders would have a practical effect only if the dismissal were set aside and the First
Complaint reinstated.
40
In this case, however, petitioner Spouses Arevalo admitted to the
impossibility of the reinstatement of the First Complaint when they filed their Second Complaint.
41

Even petitioners plea that this Court give due course to the Petition for a ruling on the proper
application of the Procedure on Foreclosure
42
cannot compel us to resolve this issue.
The Constitution provides that judicial power "includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable."
43
The exercise of
judicial power requires an actual case calling for it. The courts have no authority to pass upon issues
through advisory opinions, or to resolve hypothetical or feigned problems or friendly suits collusively
arranged between parties without real adverse interests.
44
Furthermore, courts do not sit to
adjudicate mere academic questions to satisfy scholarly interest, however intellectually
challenging.
45
As a condition precedent to the exercise of judicial power, an actual controversy
between litigants must first exist.
46
An actual case or controversy involves a conflict of legal rights, an
assertion of opposite legal claims susceptible of judicial resolution, as distinguished from a
hypothetical or abstract difference or dispute.
47
There must be a contrariety of legal rights that can be
interpreted and enforced on the basis of existing law and jurisprudence.
48

This Court cannot issue a mere advisory opinion in relation to the applicability of the provisions of
the Procedure on Foreclosure.
II. Petitioners are guilty of forum-shopping.
Petitioners have committed two distinct acts of forum-shopping,
49
namely: (1) petitioners willfully and
deliberately went to different courts to avail themselves of multiple judicial remedies founded on
similar facts and raising substantially similar reliefs, and (2) they did not comply with their
undertaking to report the filing of the Second Complaint within five days from its filing.
A. Petitioners filed multiple suits based on similar facts while seeking similar reliefsacts proscribed
by the rules on forum-shopping.
We rule that petitioners were guilty of willful and deliberate forum-shopping when they filed their
Second Complaint with the trial court insofar as they undertook to obtain similar reliefs as those
sought in the instant Petition.
Respondent Bank argues that the rights asserted by petitioners, as well as the reliefs petitioners
seek in the instant Petition, are identical to those raised in their Second Complaint.
50

Petitioners, on the other hand, counter that the disparity between the two cases lies in the issue to
be resolved. More particularly, they allege that the issue in this Petition is the summary application of
the payment of 12% interest per annum as a precondition for the issuance of a writ, as opposed to
the issue in the Second Complaint involving the validity of the real estate mortgage and compliance
with the rules on the holding of the extrajudicial foreclosure sale.
51

Forum shopping is the act of litigants who repetitively avail themselves of multiple judicial remedies
in different fora, simultaneously or successively, all substantially founded on the same transactions
and the same essential facts and circumstances; and raising substantially similar issues either
pending in or already resolved adversely by some other court; or for the purpose of increasing their
chances of obtaining a favorable decision, if not in one court, then in another.
52
The rationale against
forum-shopping is that a party should not be allowed to pursue simultaneous remedies in two
different courts, for to do so would constitute abuse of court processes which tends to degrade the
administration of justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion
of the heavily burdened dockets of the courts.
53

In Yu v. Lim,
54
this Court enumerated the requisites of forum-shopping, as follows:
Forum-shopping exists when the elements of litis pendentia are present or where a final judgment in
one case will amount to res judicata in another. Litis pendentia requires the concurrence of the
following requisites: (1) identity of parties, or at least such parties as those representing the same
interests in both actions; (2) identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; and (3) identity with respect to the two preceding particulars in the two
cases, such that any judgment that may be rendered in the pending case, regardless of which party
is successful, would amount to res judicata in the other case.
55

What is essential in determining the existence of forum-shopping is the vexation caused the courts
and litigants by a party who asks different courts and/or administrative agencies to rule on similar or
related causes and/or grant the same or substantially similar reliefs, in the process creating the
possibility of conflicting decisions being rendered upon the same issues.
56

A comparison of the reliefs sought by petitioners in the instant Petition and in their Second
Complaint confirms that they are substantially similar on two points: (1) revocation and cancellation
of the Certificate of Sale and (2) permanent injunction on any transfer and/or consolidation of title in
favor of respondent Bank. These similarities undoubtedly create the possibility of conflicting
decisions from different courts:
Instant Petition Second Complaint
WHEREFORE, it is most respectfully prayed WHEREFORE, it is respectfully prayed of
that immediately upon filing of this petition,
the same be given due course, and an order
issue, ex parte:
(1) A Resolution be issued directing the Ex-
Officio Sheriff and his Assisting Sheriff to
undo, cancel, revoke the Certificate of Sale
they issued;
(2) Enjoining the Register of Deeds of
Paranaque (or any of her subordinates,
agents, representatives and persons acting in
their behalf to cease and desist from allowing
any transfer and/or consolidation of
respondents banks title to the property in
question and an order be issued directing the
Register of Deeds to undo, cancel and revoke
the registration of the Certificate of Sale on
November 13, 2009 and other proceedings
had thereafter, the petition be given due
course and judgment be rendered as follows:
1. Making the injunction permanent.
2. Issuing a writ of mandatory injunction for
the respondent Ex-Officio Sheriff to undo,
revoke and cancel the Certificate of Sale
issued and/or directing the Register of Deeds
to undo, revoke and cancel the registration of
the Certificate of Sale and/or defer any
consolidation of title in favor of respondent
bank pending final resolution of this petition.
3. Reversing and setting aside the Decision of
the Court of Appeals dated March 24, 2010
and Resolution dated August 5,
2010.
57
(Emphasis supplied.)
the Honorable Court that pending
consideration and hearing on the principal
reliefs herein prayed for, a Temporary
Restraining order (TRO) and/or Writ of
Preliminary Injunction be issued
immediately restraining and/or stopping the
defendants Ex-Officio Sheriff Atty. Jerry R.
Toledo and Deputy Sheriff Paulo Jose N.
Cusi from executing and issuing a final
deed of sale in favor of the defendant bank
and further ordering the defendant
Registrar of Deeds of Paranaque City to
hold in abeyance the registration of the final
deed of sale and other documents of
consolidation pending resolution of this
Honorable Court. Plaintiffs pray for the
following additional reliefs:
1. After hearing on the merits, the Real
Estate Mortgage be declared and rescinded
and/or null and void;
2. The Certificate of Sale [dated November
4, 2009] issued by the defendant Sheriffs
and its subsequent registration on
November 13, 2009 with the Registry of
Deeds be declared null and void;
3. After due hearing, the preliminary
injunction be declared permanent. x x
x
58
(Emphases supplied.)
As illustrated above, there is a clear violation of the rules on forum-shopping, as the Court is being
asked to grant substantially similar reliefs as those that may also be granted by the trial court, in the
process creating a possibility of conflicting decisions.
We emphasize that the grave evil sought to be avoided by the rule against forum-shopping is the
rendition by two competent tribunals of two separate and contradictory decisions.
59
To avoid any
confusion, this Court adheres strictly to the rules against forum shopping, and any violation of these
rules results in the dismissal of a case.
60
The acts committed and described herein can possibly
constitute direct contempt.
61

B. Petitioners did not report the filing of their Second Complaint within five (5) days, in violation of
their undertaking to do so.
Aside from the fact that petitioners sought substantially similar reliefs from different courts, they
likewise failed to disclose to this Court the filing of their Second Complaint within five (5) days from
its filing, in violation of their previous undertaking to do so.
62

Every litigant is required to notify the court of the filing or pendency of any other action or such other
proceeding involving the same or similar action or claim within five (5) days of learning of that
fact.
63
Petitioners claim that it was merely due to inadvertence that they failed to disclose the said
filing within five (5) days, contrary to their undertaking.
64
1wphi 1
This Court is not inclined to accept this self-serving explanation. We cannot disregard the glaring fact
that respondents had to call the attention of petitioners to the said requirement before the latter
admitted that they had indeed filed their Second Complaint.
As previously established, petitioners have violated two (2) components of forum-shopping, more
particularly: (1) petitioners willfully and deliberately went to different courts to avail themselves of
multiple judicial remedies founded on similar facts and raising substantially similar reliefs, an act
which may be punishable as direct contempt;
65
and (2) they did not comply with their undertaking to
report the filing of the Second Complaint within five days from its filing. The latter action may also
possibly be construed as a separate count for indirect contempt.
While in a limited sense, petitioners have already been given the chance to rebut the prayer to hold
them in contempt, We hereby provide sufficient avenue for them to explain themselves by requiring
them to show cause, within fifteen (15) days, why they should not be held in direct and indirect
contempt of court.
WHEREFORE, the instant Petition for Review filed by Spouses Daisy Arevalo and Socrates M.
Arevalo is hereby DENIED. The Decision dated 24 March 2010 and Resolution dated 05 August
2010 issued by the Court of Appeals in CA-G.R. SP No. 110806 are AFFIRMED.
Accordingly, petitioners are required to SHOW CAUSE, within fifteen (15) days from receipt of this
Decision, why they should not be held in contempt; more specifically: (a) for direct contempt of
courtfor availing of multiple judicial remedies founded on similar facts and raising substantially
similar reliefs from different courts; and (b) for indirect contempt of courtfor not complying with
their undertaking to report the filing of the Second Complaint within five days from its filing.
SO ORDERED.







Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 187801 September 13, 2012
HEIRS OF LEONARDO BANAAG, namely: MARTA R. BANAAG, TERESITA B. MENDOZA,
HONORATO R. BANAAG, IMELDA R. BANAAG, DIOSDADO R. BANAAG, PRECIOSA B.
POSADAS, and ANTONIO R. BANAAG, SPOUSES PEDRO MENDOZA and TERESITA
MENDOZA, and HONORATO R. BANAAG, Petitioners,
vs.
AMS FARMING CORPORATION and LAND BANK OF THE PHILIPPINES, Respondents.
D E C I S I O N
REYES, J .:
Before the Court is a petition
1
dated June 15, 2009 praying for the reversal of the Orders dated July
7, 2008
2
and March 23, 2009
3
of the Regional Trial Court (RTC), Tagum City, Davao Del Norte,
Branch 30, in Civil Case No. 3867 entitled Heirs of Leonardo Banaag, et al. v. AMS Farming
Corporation and Land Bank of the Philippines. The assailed Order dated July 7, 2008, dismissed the
complaint for the determination of ownership over the standing crops and improvements on several
parcels of agricultural land, on the ground of forum-shopping. The assailed Order dated March 23,
2009, on the other hand, denied reconsideration.
The Antecedent Facts
The petitioners were the owners and/or heirs of the owners of several parcels of land located at
Sampao, Kapalong, Davao Del Norte, detailed as follows:
Name of Landowner Transfer Certificate
of Title No.
Land Area
(in
hectares)
TERESITA MENDOZA T-9891 10
TERESITA MENDOZA T-7778 34
LEONARDO BANAAG (T-16604) T-7775 54.1748
TERESITA AND
PEDRO MENDOZA (T-16748) T-7894 10
HONORATO BANAAG (T-16605) T-7776 25.5123
4

From 1970 to 1995, the lands were leased to respondent AMS Farming Corporation (AMS), which
devoted and developed the same to the production of exportable Cavendish bananas, and
introduced thereon the necessary improvements and infrastructures for such purpose.
5
When the
lease contract expired, it appears that a Memorandum of Agreement (MOA) was executed by the
parties extending the term of the lease until September 30, 2002.
In 1999, the lands were placed under the coverage of the Compulsory Acquisition Scheme of the
Comprehensive Agrarian Reform Program (CARP). Pursuant to its mandate, the Land Bank of the
Philippines (LBP) determined the value of the raw lands as follows:
Transfer Certificate
of Title No.
Land Area
in hectares
LBP
Valuation
T-9891 10 P 689,865.6
2
T-7775 54.1748 3,880,041.73
T-7778 28.4207 1,798,523.29
T-7894 10 668,043.17
T-7776 19.1197 1,375,153.12
6

When the petitioners rejected the valuation, the matter was referred for summary administrative
proceedings for the fixing of just compensation to the Office of the Regional Agrarian Reform
Adjudicator (RARAD), Davao del Norte.
7
On July 31, 2000, the RARAD rendered a Decision
adopting the amount of just compensation determined by the LBP.
8

The present controversy arose when the petitioners, as landowners, and AMS, as lessee, both
demanded for just compensation over the standing crops and improvements planted and built on the
lands.
The Claim of AMS
In the same RARAD proceedings, AMS filed on June 10, 2003, an Urgent Motion to Value the
Standing Crops and Improvements
9
alleging that it is the owner of the crops and improvements on
the land by virtue of its MOA with the petitioners. On June 29, 2004, the RARAD issued an order
directing LBP to submit a valuation of the standing crops. In compliance therewith, LBP manifested
the amount of P 32,326,218.82.
10

The petitioners sought to intervene with their own claim for ownership but their Motion for Leave to
File Complaint-In-Intervention
11
was denied by the RARAD on July 8, 2004, for the reason that the
valuation of the standing crops in favor of AMS has long been resolved. However, the petitioners
were instructed to instead plead their claim for valuation of the improvements in an appropriate
initiatory proceeding.
12

On December 11, 2006, the RARAD issued a Consolidated Decision
13
setting aside its earlier
Decision dated July 31, 2000 and ruled anew on the just compensation, not only for the raw lands,
but for the standing crops and improvements thereon as well. Just compensation for the lands was
awarded to the petitioners as landowners, while just compensation for the crops and improvements
was awarded to AMS, thus:
WHEREFORE, premises considered, judgment is hereby rendered setting aside the previous
Decisions rendered in these cases and a new Consolidated Decision is rendered declaring the
amounts indicated below as the just compensation of the subject landholdings as follows:
1wphi1
Title No. Value of raw
Land
Value of the standing
Crops and other Improvements
T-9891 P 689,865.62 P 8,101,840.50
T-7775 3,880,041.73 44,379,299.00
T-7778 1,798,523.29 23,843,838.00
T-7894 688,043.17 7,695,784.80
T-7776 1,375,153.12 15,651,806.00
Directing LBP to pay AMS the value of the standing crops and other improvements and pay the
corresponding owners of the value of their landholdings.
SO ORDERED.
14

From this decision, the petitioners and LBP pursued an appeal before the Department of Agrarian
Reform Adjudication Board (DARAB) Central Office but, their notice of appeal was denied due
course for being an improper remedy. The denial was embodied in an Order
15
dated February 5,
2007. In so denying, the RARAD explained that an appeal from a RARAD decision must be filed with
the RTC acting as a Special Agrarian Court (SAC) pursuant to Section 11, Rule XIII of the 1994
DARAB Rules of Procedure. In the same order, the RARAD issued a writ of execution directing the
Department of Agrarian Reform (DAR) sheriffs
16
to execute the Consolidated Decision dated
December 11, 2006.
Conformably with the writ of execution, the DAR sheriffs sent a Request to Allocate and Release the
Amount of P99,672,568.30 from the Agrarian Reform Fund
17
to the President of LBP.
On March 28, 2007, LBP applied for an injunction
18
with the DARAB seeking, in the main, to restrain
the enforcement of the RARAD Consolidated Decision dated December 11, 2006 and to elevate its
appeal to the DARAB. In its Resolution
19
dated October 24, 2007, the DARAB granted the injunction.
The Claim of the Petitioners
Meanwhile, the petitioners filed on February 16, 2005, their claim of ownership over the standing
crops and improvements on the subject lands with the RARAD of Region XI, Ecoland, Davao
City.
20
The petitioners averred that the lease contract with AMS already expired in 1995 and thus
they automatically became the owners of the standing crops and the improvements constructed on
the subject lands. They alleged that pursuant to the lease contract, the only right or option of AMS is
to remove the buildings, facilities, equipment, machineries and similar structures and improvements
on the leased premises and since AMS failed to exercise such option, the petitioners now own the
standing crops and improvements. They denied signing a MOA and averred that a certain Martha
Banaag signed the same without their consent. They prayed that the just compensation for the
standing crops and improvements, after a determination made by the LBP, be awarded to them.
In its answer,
21
AMS insisted on the validity of the MOA. It also bolstered its claim of ownership by
averring that it registered the crops and improvements on the land in its name for taxation purposes.
In a Consolidated Decision
22
dated October 17, 2005, the RARAD dismissed the petitioners claim.
The ownership of the standing crops and improvements and just compensation therefor were
awarded to AMS, on the basis of these findings, viz: (1) the improvements were introduced and
constructed by AMS; (2) the right to remove the improvements accorded to AMS by the contract of
lease is a clear indication that it is the owner thereof; (3) AMS was, in effect, a planter in good faith
who must be indemnified for its works pursuant to Article 448 of the Civil Code; and (4) AMS
secured tax declarations and paid the corresponding realty taxes for the crops and improvements.
The petitioners sought reconsideration
23
but their motion was denied in the RARAD Resolution dated
February 2, 2006.
24

The petitioners filed a Notice of Appeal
25
with the RARAD expressing their desire to appeal its
Consolidated Decision dated October 17, 2005 to the DAR Secretary, but was denied due course in
an Order
26
dated March 23, 2006, on the ground of wrong venue and absence of a certification on
non-forum shopping. In the same Order, the RARAD granted the Motion for Entry of Final and
Executory Decision of AMS.
The petitioners moved for reconsideration but their motion was again denied in an Order
27
dated
June 8, 2006. Consequently, the Consolidated Decision dated October 17, 2005 was entered in the
books of entries of judgment on October 12, 2006.
28

Unrelenting, the petitioners filed on June 22, 2007, before the RTC of Tagum City, Davao Del Norte,
Branch 30, herein Civil Case No. 3867 against AMS for the determination of the rightful owner of the
standing crops and improvements planted and/or built on the subject lands.
29

Resisting the claim of the petitioners, AMS moved for the complaints dismissal on the following
grounds: (a) it is barred by the prior judgment of the DARAB; (b) the petitioners have no cause of
action against AMS; (c) the petitioners are guilty of forum-shopping; and (d) not all the petitioners
have signed the verification and certification of the complaint.
30

In the assailed Order dated July 7, 2008, the RTC granted the motion to dismiss. Upholding the
contentions of AMS, the RTC found the petitioners guilty of forum-shopping because the subject
matter and the parties before it were similarly involved in the proceedings before the DARAB. The
RTC also ruled that the petitioners should have appealed the DARABs findings with the RTC acting
as a SAC instead of initiating the herein civil suit.
The petitioners moved for reconsideration but the motion was denied in the assailed Order dated
March 23, 2009. From such denial, the petitioners directly interposed the present recourse.
The petitioners argue that no valid prior judgment bars their complaint before the RTC because the
DARAB had no jurisdiction over the issue of ownership on the standing crops and improvements on
the subject lands and as such, its Decisions dated October 17, 2005 and December 11, 2006 were
void. They anchor their contentions in the Courts pronouncement in the similar case of Land Bank of
the Philippines v. AMS Farming Corporation
31
promulgated on October 15, 2008.
In its Comment,
32
the LBP, through the Office of the Solicitor General (OSG), prayed for the
dismissal of the present petition on procedural and substantive grounds, to wit: (a) the petition was
filed only on June 16, 2009 or beyond the extension granted by the Court for the filing of the same
which expired on June 10, 2009; (b) factual issues, which necessitate a trial, must be initially
resolved before the legal issue on ownership of the standing crops and improvements can be
determined; and (c) the petitioners violated the rule against forum-shopping when they failed to
disclose that proceedings before the DARAB were conducted involving the similar issue of
ownership over the standing crops and improvements on the subject lands.
AMS, on the other hand, essentially re-pleads its contentions raised before the RTC and adds that
the petition ought to be dismissed since it does not indicate under what rule it was filed and that is
not sanctioned by any of the modes of appeal under the Rules of Court, specifically Rules 45 and 65
thereof.
33

The Ruling of the Court
The procedural issues hoisted by the respondents in entreating the outright dismissal of the petition
must be preliminarily resolved.
The petition is deemed filed under Rule 45 of the Rules of Court.
The fact that the present petition did not specify the rule by which it was filed does not ipso facto
merit its outright dismissal. As ruled in Mendoza v. Villas,
34
the Court has the discretion to determine
whether a petition was filed under Rule 45 or 65 of the Rules of Court in accordance with the liberal
spirit permeating the Rules of Court and in the interest of justice.
The Court cannot treat the instant petition as filed under Rule 65 of the Rules of Court as such would
breach the principle of hierarchy of courts, which espouses:
This Courts original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court
with Regional Trial Courts and with the Court of Appeals. This concurrence of jurisdiction is not,
however, to be taken as according to parties seeking any of the writs an absolute, unrestrained
freedom of choice of the court to which application therefor will be directed. There is after all a
hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also serves as a
general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming
regard for that judicial hierarchy most certainly indicates that petitions for the issuance of
extraordinary writs against first level ("inferior") courts should be filed with the Regional Trial Court,
and those against the latter, with the Court of Appeals. x x x This is an established policy. It is a
policy necessary to prevent inordinate demands upon the Courts time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the
Courts docket.
35
(Emphasis supplied)
While a direct invocation of the Courts power to issue a writ of certiorari may be allowed on special
and important reasons, none of such instances, however, are obtaining in the petition at hand.
Nonetheless, the petition may be considered pursued under Rule 45. Three (3) modes of appeal are
available to a party aggrieved by a decision of the RTC rendered in the exercise of its original
jurisdiction, to wit: (1) by ordinary appeal or appeal by writ of error under Rule 41 taken to the CA on
questions of fact or mixed questions of fact and law; (2) by petition for review under Rule 42 to the
CA on questions of fact, of law, or mixed questions of fact and law; and (3) by petition for review
on certiorari to the Supreme Court under Rule 45 only on questions of law.
36

Clearly, direct recourse to the Court, as in the instant case, is allowed for petitions filed under Rule
45 when only questions of law are raised.
There is a question of law if the issue raised is capable of being resolved without need of reviewing
the probative value of the evidence. The issue to be resolved must be limited to determining what
the law is on a certain set of facts.
37

A perusal of the arguments in the petition shows that the only question posed is with respect to the
jurisdiction of the DARAB over the determination of ownership of standing crops and improvements
introduced by the lessee of an agricultural land placed under CARP coverage. The question is
evidently one of law as it invites the examination and interpretation of the provisions of the
Comprehensive Agrarian Reform Law (CARL) and that of the Civil Code provisions on lease vis--
vis the lease contract between the petitioners and AMS. It does not require a calibration of any
evidence for its resolution.
Considerations of substantial
justice override the procedural
consequence of the belated filing of
the petition.
The petitioners received a copy of the RTC Order dated March 23, 2009 on May 11, 2009, which
means that they had fifteen (15) days or until May 26, 2009 to file a petition for review under Rule
45. On May 15, 2009, they requested for an extension of thirty (30) days or until June 10, 2009
within which to file a petition.1wphi 1 On June 16, 2009 or six (6) days from the expiration of the extended
period, the petitioners lodged the present petition. For such belated filing, LBP proffers that the
petition should be dismissed.
Again, the Court takes a liberal stance. Oft-repeated is the rule that being a few days late in the filing
of the petition for review does not automatically warrant the dismissal thereof.
38
Moreover, strong
considerations of substantial justice manifest in the petition deem it imperative for the Court to relax
the stringent application of technical rules in the exercise of its equity jurisdiction.
39
After all, the
policy of our judicial system is to encourage full adjudication of the merits of an appeal.
40
A definitive
settlement of the ownership over the contested crops and improvements is essential to the effective
implementation of the CARL particularly, the payment of just compensation. Such compensation
entails an enormous amount of money from the coffers of the government and it is only proper for
the Court to ensure that such amount is paid to the rightful owner.
Courts should not be so strict about procedural lapses that do not really impair the proper
administration of justice. The higher objective of procedural rule is to insure that the substantive
rights of the parties are protected. Litigations should, as much as possible, be decided on the merits
and not on technicalities.
41

The Court will now proceed to discuss the substantial merits of the petition.
Petitioners did not commit forum-shopping.
Forum-shopping is the "institution of two (2) or more actions or proceedings grounded on the same
cause on the supposition that one or the other court would make a favorable disposition" or "the act
of a party against whom an adverse judgment has been rendered in one forum, of seeking another
(and possibly favorable) opinion in another forum other than by appeal or the special civil action of
certiorari." The test to determine whether forum-shopping exists is whether the elements of litis
pendencia are present or where a final judgment in one case will amount to res judicata in the
other.
42

Res judicata, on the other hand, means a matter or thing adjudged, judicially acted upon or decided,
or settled by judgment. Its requisites are: (1) the former judgment or order must be final; (2) the
judgment or order must be one on the merits; (3) it must have been rendered by a court having
jurisdiction over the subject matter and parties; and (4) between the first and second actions, there
must be identity of parties, subject matter, and causes of action.
43

The third element of res judicata is palpably wanting in this case in view of the Courts
pronouncements in Land Bank.
44

In Land Bank, the same respondent AMS was the lessee of an agricultural land owned by Totco
Credit Corporation (TOTCO). AMS developed a banana plantation on the land and introduced
thereon necessary improvements and infrastructures. During the term of the lease, the land was
placed under the coverage of the CARP. The valuation for the just compensation of the land
awarded to TOTCO included the standing crops and the improvements thereon. The RTC, acting as
a SAC, found AMS to be the owner of the crops and improvements, hence, entitled to the value
thereof.
45

The Court held, however, that AMS had no right to just compensation under the CARL for the
standing crops and improvements it introduced as a lessee on the agricultural land of TOTCO. It
cannot claim just compensation from the LBP; instead, its remedy is to go after the lessor, TOTCO,
pursuant to their lease contract being a lessee deprived of the peaceful and adequate enjoyment of
the land during the lease period. The recourse of AMS was the Civil Code provisions on lease and
not the provisions of the CARL. As a mere lessee and not an owner of the sequestered agricultural
land, AMS had no right under the CARL to demand for just compensation for its standing crops and
improvements from the LBP. Its rights as a lessee are totally independent of and unaffected by any
judgment rendered in an agrarian case.
46

The Court further explained that the CARL does not contain any proviso recognizing the rights of a
lessee of a private agricultural land to just compensation for the crops it planted and improvements it
built. Just compensation for the produce and infrastructure of a private agricultural land logically
belongs to the landowner since the former are part and parcel of the latter, viz:
Even after an exhaustive scrutiny of the CARL, the Court could not find a provision therein on the
right of a lessee of a private agricultural land to just compensation for the crops it planted and
improvements it built thereon, which could be recognized separately and distinctly from the right of
the landowner to just compensation for his land. The standing crops and improvements are valued
simply because they are appurtenant to the land, and must necessarily be included in the final
determination of the just compensation for the land to be paid to the landowner. Standing crops and
improvements, if they do not come with the land, are totally inconsequential for CARP purposes.
x x x x
x x x The CARL does not specially govern lease contracts of private agricultural lands. So that for
the determination of the rights of AMS as a lessee in a lease contract terminated by the sale of the
leased property to a third person (regardless of the fact that the third person was the Republic and
the sale was made pursuant to the CARP), the Court resorts to the general provisions of the Civil
Code on lease contracts; and not the CARL.
47

The foregoing doctrines may be applied in interpreting the legal efficacy of the declarations made by
the DARAB in its Consolidated Decisions dated October 17, 2005 and December 11, 2006
notwithstanding that the same were decreed two (2) to three (3) years before Land Bank.
Judicial decisions, as part of the law they interpret, are covered by the rule on the prospective
application of statutes. Retroactivity is, however, permissible if the decision neither: (1) overrules a
previous doctrine; (2) adopts a different view; or (3) reverses an old construction,
48
none of which
characterize the pronouncement in Land Bank.
The DARAB, therefore, has no jurisdiction to pass upon the issue of ownership over standing crops
and improvements between a landowner and a lessee. This is the clear import of the above-stated
doctrines declaring that the right of a lessor and lessee over the improvements introduced by the
latter is not an agrarian dispute within the meaning of the CARL. Consequently, there is no doubt
that the DARAB cannot adjudicate the ownership over standing crops and improvements installed by
AMS in the subject agricultural parcels of land and as such, the DARAB Consolidated Decisions
dated October 17, 2005 and December 11, 2006 cannot serve as res judicata to Civil Case No. 3867
filed by the petitioners with the RTC.
Further, the subject DARAB decisions are not final determinations of the valuation made on the just
compensation for the raw lands and the standing crops and improvements thereon as these are only
preliminary in nature. Settled is the rule that only the RTC, sitting as a SAC, could make the final
determination of just compensation.
49
Moreover, it must be stressed that just compensation for the
crops and improvements is inseparable from the valuation of the raw lands as the former are part
and parcel of the latter. Even if separately valued, these must be awarded to the landowner
irrespective of the nature of ownership of the said crops and installations. Any valuation made by the
DARAB is limited only to that a mere valuation. The tribunal is not concerned with the nature of the
ownership of the crops and improvements.
In fine, the RTC erred in dismissing the complaint filed by the petitioners on the ground of forum-
shopping. The case must be remanded to the RTC for the reception of the parties respective
evidence on the issue of ownership of the crops and improvements on the subject lands. The rights
of AMS and the petitioners under their lease contract are beyond the ambit of the adjudicatory
powers of the DARAB. Since the lease contract is governed by the Civil Code provisions on lease, it
is the RTC, as a court of general jurisdiction that can resolve with finality the rights of a lessor and a
lessee over the improvements built by the latter.
WHEREFORE, premises considered, the petition is GRANTED. The Orders dated July 7, 2008 and
March 23, 2009 of the Regional Trial Court, Tagum City, Davao Del Norte, Branch 30 in Civil Case
No. 3867 are hereby ANNULED and SET ASIDE. Let the case be REMANDED to the said court for
further proceedings.
SO ORDERED.






Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 174669 September 19, 2012
BELLE CORPORATION, Petitioner,
vs.
ERLINDA DE LEON-BANKS, RHODORA DE LEON-TIATCO, BETTY DE LEON-TORRES,
GREGORIO DE LEON, ALBERTO DE LEON, EUFRONIO DE LEON,
*
and MARIA ELIZA DE
LEON-DE GRANO, Respondents.
D E C I S I O N
PERALTA, J .:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the Decision
1
of the Court of Appeals (CA), dated May 18,2006 in CA-G.R. CV
No. 74669. The assailed Decision nullified the Order of the Regional Trial Court (RTC) of Tanauan,
Batangas, Branch 6 in Civil Case No. T-1 046, which dismissed herein petitioner's Amended
Complaint. The petition also seeks to reverse and set aside the CAs Resolution denying petitioner's
Motion for Reconsideration.
The factual and procedural antecedents of the case, as summarized by the CA, are as follows:
Plaintiffs-appellants herein respondents Erlinda De Leon-Banks, Rhodora De Leon-Tiatco, Betty De
Leon-Torres, Gregorio De Leon, Alberto De Leon, Eufronio De Leon, Jr. and defendant-appellee
Nelia De Leon-Alleje were seven of the eight children of the late spouses Eufronio and Josefa De
Leon (LATE SPOUSES), while plaintiff Maria Eliza De Leon-De Grano also one of herein
respondents was the daughter and sole heir of the late Angelina De Leon-De Grano, the eighth
child.
Defendant-appellee Alfredo Alleje was the husband of Nelia De Leon-Alleje (both hereinafter
referred to as SPOUSES ALLEJE), both of whom were the principal stockholders and officers of
defendant-appellee Nelfred Properties Corporation (NELFRED). Meanwhile, defendantappellee
herein petitioner Belle Corporation BELLE was the purchaser of the disputed property.
The disputed property was a 13.29 hectare parcel of unregistered land originally belonging to the
late spouses Eufronio and Josefa De Leon. It is located at Paliparan, Talisay, Batangas and was
covered by various tax declarations.
On February 9, 1979, a Deed of Absolute Sale (1979 DEED) was executed between the LATE
SPOUSES and NELFRED, represented therein by defendant-appellee Nelia De Leon-Alleje,
wherein ownership of the property was conveyed to Nelia De Leon-Alleje for P 60,000.00. At that
time, the disputed property was covered by Tax Declarations No. 0359 and No. 0361.
On December 19, 1980, the 1979 DEED was registered with the Register of Deeds. As time passed,
several tax declarations over the disputed property were obtained by NELFRED in its own name.
On September 23, 1997, x x x herein petitioner BELLE, on one hand, and NELFRED and SPOUSES
ALLEJE on the other, executed a Contract to Sell covering the disputed property for the purchase
price of P 53,124,000.00 to be paid in four installments. When the final installment had been paid, a
Deed of Absolute Sale (1998 DEED) was executed on June 24, 1998 between BELLE and
NELFRED wherein the latter transferred ownership of the disputed property to the former.
Meanwhile, on January 19, 1998, x x x herein respondents filed a Complaint for "Annulment of Deed
of Sale, Reconveyance of Property with Prayer for Issuance of a Writ of Preliminary Injunction and
Damages" against the SPOUSES ALLEJE, NELFRED and BELLE] wherein they sought the
annulment of the Contract to Sell. They alleged that the 1979 DEED was simulated; that x x x
NELFRED paid no consideration for the disputed property; that the disputed property was to be held
in trust by x x x Nelia De Leon-Alleje, through, NELFRED, for the equal benefit of all of the LATE
SPOUSES' children x x x herein respondents and x x x Nelia De Leon-Alleje; that in the event of
any sale, notice and details shall be given to all the children who must consent to the sale and that
all amounts paid for the property shall be shared equally by the children; that on September 3, 1997,
x x x SPOUSES ALLEJE gave x x x herein respondents P 10,400,000.00 in cash, representing a
portion of the proceeds of the sale of the disputed property; that it was only then that they were given
notice of the sale; that their inquiries were ignored by the SPOUSES ALLEJE; that a final payment
was to be made by x x x BELLE to x x x SPOUSES ALLEJE sometime in January 1998; and that the
x x x SPOUSES ALLEJE had refused to compromise.
On February 2, 1998, x x x SPOUSES ALLEJE and NELFRED filed a Motion to Dismiss wherein
they alleged that herein respondents' cause of action, the existence of an implied trust between them
and NELFRED on the one hand and the LATE SPOUSES on the other, was barred by prescription
and laches because more than 10 years had passed since the execution of the 1979 DEED.
On February 9, 1998, x x x BELLE filed a Motion to Dismiss wherein it alleged that the Complaint
stated no cause of action against BELLE, which was an innocent purchaser for value; that assuming,
for the sake of argument, that herein respondents had a cause of action against BELLE, the claim on
which the Complaint is founded was unenforceable; and assuming that the cause of action was
based on an implied trust, the same had already been barred by laches.
On September 23, 1998, the RTC promulgated an Order that dismissed the Complaint against x x x
BELLE for failure to state a cause of action on the ground that there was no allegation in the
Complaint that BELLE was a purchaser in bad faith. Herein respondents then filed a Motion for
Reconsideration.
On November 11, 1998, pending the resolution of their Motion for Reconsideration of the September
23, 1998 Order, herein respondents filed a Manifestation/Motion to admit their Amended Complaint
wherein they added the allegations that x x x NELFRED did not effect the registration of the disputed
property, which remained unregistered land covered only by tax declarations; that at the time of the
execution of the 1997 Contract to Sell, the disputed property was still unregistered land and
remained unregistered; that a Deed of Absolute Sale (1998 DEED) had already been executed in
favor of x x x BELLE; that x x x BELLE purchased the land with the knowledge that it was being
claimed by other persons; and that x x x BELLE was in bad faith because when the 1998 DEED was
executed between it and NELFRED on June 24, 1998, the Complaint in the case at bench had
already been filed.
On April 29, 1999, the RTC reconsidered its Order of September 23, 1998 and lifted the dismissal
against BELLE. At the same time, the RTC admitted the Amended Complaint of the plaintiffs-
appellants.
On June 9, 1999, x x x BELLE filed a "Motion for Reconsideration or to Dismiss the Amended
Complaint" wherein it alleged that the claim in the Amended Complaint was unenforceable; that the
Amended Complaint still stated no cause of action against BELLE; and that the Amended Complaint
was barred by prescription.
x x x x x x x x x
On December 16, 1999, the RTC promulgated its assailed Order in Civil Case No. T-1046
dismissing the Amended Complaint.
2

Aggrieved by the Order of the RTC, herein respondents filed an appeal with the CA.
On May 18, 2006, the CA rendered its assailed Decision, the dispositive portion of which reads as
follows:
WHEREFORE, premises considered, appeal is hereby GRANTED and the assailed December 16,
1999 Order of the RTC of Tanauan, Batangas, Branch 6, in Civil Case No. T-1046, is
hereby REVERSED and SET ASIDE and defendant-appellee Belle Corporation is
hereby DIRECTED within fifteen (15) days from finality of this Decision, to file its Answer.
SO ORDERED.
3

Herein petitioner filed a Motion for Reconsideration, but the CA denied it in its Resolution dated
September 4, 2006.
Hence, the instant petition based on the following assignment of errors:
I
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT
PETITIONER HYPOTHETICALLY ADMITTED RESPONDENTS' ALLEGATIONS THAT IT
HAD FULL KNOWLEDGE OF THEIR CLAIM ON THE PROPERTY AND, THEREFORE,
PURCHASED THE SAME IN BAD FAITH.
II
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT THE
TRUST CREATED BY THE LATE SPOUSES IN FAVOR OF NELFRED WAS AN IMPLIED
TRUST INSTEAD OF AN EXPRESS TRUST.
III
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT THE
TEN-YEAR PRESCRIPTIVE PERIOD FOR AN IMPLIED TRUST SHOULD BE RECKONED
FROM THE EXECUTION OF THE DEED OF SALE BY NELFRED IN FAVOR OF
PETITIONER AND NOT FROM THE REGISTRATION OF THE SALE BETWEEN THE LATE
SPOUSES AND NELFRED WITH THE REGISTER OF DEEDS.
IV
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT
BECAUSE THE SUBJECT OF THE SALE IS UNREGISTERED LAND, PETITIONER'S
GOOD FAITH IS IMMATERIAL AND BOUGHT THE PROPERTY AT ITS OWN PERIL EVEN
AS RESPONDENTS WERE RESPONSIBLE FOR CREATING SUCH PERIL.
V
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT A
TRUST WAS CREATED WHEN ITS VERY PURPOSE WAS TO AVOID COMPLIANCE
WITH TAX LAWS AND THE COMPREHENSIVE AGRARIAN REFORM LAW.
4

The basic issue in the instant case is whether the CA was correct in reversing the Order of the RTC
which dismissed respondents' Amended Complaint on the ground of failure to state a cause of
action.
The Court rules in the affirmative.
Section 2, Rule 2 of the Rules of Court defines cause of action as the acts or omission by which a
party violates a right of another.
A cause of action is a formal statement of the operative facts that give rise to a remedial right.
5
The
question of whether the complaint states a cause of action is determined by its averments regarding
the acts committed by the defendant.
6
Thus, it must contain a concise statement of the ultimate or
essential facts constituting the plaintiffs cause of action.
7
Failure to make a sufficient allegation of a
cause of action in the complaint warrants its dismissal.
8

The essential elements of a cause of action are (1) a right in favor of the plaintiff by whatever means
and under whatever law it arises or is created; (2) an obligation on the part of the named defendant
to respect or not to violate such right; and (3) an act or omission on the part of such defendant in
violation of the right of the plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of damages or other appropriate
relief.
9

In determining whether a complaint states a cause of action, the RTC can consider all the pleadings
filed, including annexes, motions, and the evidence on record.
10
The focus is on the sufficiency, not
the veracity, of the material allegations.
11
Moreover, the complaint does not have to establish facts
proving the existence of a cause of action at the outset; this will have to be done at the trial on the
merits of the case.
12

Thus, the first paragraph of Section 1, Rule 8 of the Rules of Court provides that "every pleading
shall contain in a methodical and logical form, a plain, concise and direct statement of the ultimate
facts on which the party pleading relies for his claim or defense, as the case may be, omitting the
statement of mere evidentiary facts."
Ultimate facts mean the important and substantial facts which either directly form the basis of the
plaintiffs primary right and duty or directly make up the wrongful acts or omissions of the
defendant.
13
They refer to the principal, determinative, constitutive facts upon the existence of which
the cause of action rests.
14

In the instant case, pertinent portions of respondents' allegations in their Amended Complaint are as
follows:
x x x x
5. Plaintiffs herein respondents Erlinda De Leon-Banks, Rhodora De Leon-Tiatco, Betty De
Leon-Torres, Gregorio De Leon, Alberto De Leon and Eufronio De Leon, Jr. and defendant
Nelia De Leon-Alleje are seven (7) of the eight (8) children of the late spouses Eufronio and
Josefa De Leon, while plaintiff [also one of herein respondents] Maria Eliza De Leon-De
Grano is the daughter and sole heir of the late Angelina De Leon-De Grano, the eight[h]
child.
x x x x
9. During their lifetime, the late Eufronio and Josefa Acquired several tracts of land located in
the Province of Batangas, the City of Manila, Tagaytay City and Baguio City. The properties
acquired included a 13.29 hectare property located at Paliparan, Talisay, Batangas covered
by Tax Declaration Nos. 0359 and 0361 issued by the Provincial Assessor of Batangas,
Tanauan Branch ("Paliparan Property").
10. The spouses Eufronio and Josefa, to protect and to ensure during their lifetime the
interest of their children in the properties they acquired, planned and decided to transfer and
in fact transferred without consideration several properties to their children to be held in trust
by whoever the transferee is for the equal benefit of all of the late spouses' children with the
specific instruction in the event of any subsequent sale, that notice and details of the sale
shall be given to all the children who must consent to the sale and that all amounts paid for
the property shall be shared equally by the children and the late spouses during their lifetime.
x x x x
13. Sometime in 1979, in accordance with their already established plan and purpose of
property disposition, the late spouses, during their lifetime, transferred to their daughter,
defendant Nelia Alleje, the Paliparan Property, through NELFRED which was represented in
said act by defendant Nelia Alleje, under a Deed of Absolute Sale, x x x.
14. Defendant NELFRED paid no consideration for the transfer of the Paliparan Property
although the Deed of Absolute Sale mentioned P 60,000.00 as consideration for the alleged
transfer, as defendant Nelia Alleje knew fully well the nature and purpose of the transfer and
the condition that, as in the case of earlier transfers made by the decedent spouses, in the
event of a subsequent sale by defendant Nelia Alleje, through NELFRED, the proceeds
thereof shall be distributed equally among all the children, the herein plaintiffs and defendant
Nelia Alleje.
15. After the transfer in trust to defendant Nelia Alleje, through NELFRED, the late Eufronio
and Josefa continued to receive during their lifetime their share in the produce of the
Paliparan Property as landowner and likewise continued the payment of the real estate taxes
due thereon. In accordance with the transfer in trust to defendant Nelia Alleje,
N[ELFRED] did not effect the registration of the Paliparan Property in its name and the
same remained to be unregistered land covered only by tax declarations.
16. In flagrant violation of the trust reposed on her and with intent to defraud the plaintiffs of
their rightful share in the proceeds of the sale of the Paliparan Property, defendant Spouses
Alleje surreptitiously sold the Paliparan Property to defendant Belle Corporation. At the time
of the sale to Belle Corporation in September 1997, the Paliparan Property was
unregistered land covered only by tax declarations. Up to the present, the subject
property is unregistered.
x x x x
23. By their acts, defendant Spouses Alleje clearly acted and continues to act to deprive
herein plaintiffs of their lawful distributive share in the proceeds of the sale of the Paliparan
Property. Moreover, defendant Nelia Alleje repudiated the trust created over the
Paliparan Property when said property was sold to Belle Corporation in September
1997. Plaintiffs were put on notice of this act of repudiation only when defendant Nelia
Alleje tendered a total amount of P 10,400,000.00 to plaintiffs and their children on 3
September 1997. Said amount turned out to be part of the proceeds of the sale of the
Paliparan Property to Belle Corporation.
24. On the other hand, Belle Corporation knowingly purchased unregistered land
covered only by tax declarations and knew that persons other than the individual
defendants were paying for the land taxes. It should not have disregarded such
knowledge, as well as other circumstances which pointed to the fact that its vendors
were not the true owners of the property. Since the Paliparan Property is unregistered,
Belle Corporation should have inquired further into the true ownership of the
property.
25. Belle Corporation was likewise in bad faith when, despite having had notice of
plaintiffs' claim over the Paliparan Property on 19 January 1998 when it was
impleaded as a co-defendant in this civil case, Belle Corporation still entered into a
Deed of Absolute Sale with defendant Spouses Alleje and NELFRED on 24 June 1998.
Thus, Belle Corporation finalized its purchase of the subject property from its co
defendants with knowledge that some other persons are claiming and actually own
the same.
x x x x
15

It is evident from the above allegations in the Amended Complaint that respondents specifically
alleged that they are owners of the subject property being held in trust by their sister, Nelia Alleje,
and that petitioner acted in bad faith when it bought the property from their sister, through her
company, Nelfred, knowing that herein respondents claim ownership over it.
Assuming the above allegations to be true, respondents can, therefore, validly seek the nullification
of the sale of the subject property to petitioner because the same effectively denied them their right
to give or withhold their consent if and when the subject property is intended to be sold, which right
was also alleged by respondents to have been provided for in the trust agreement between their
parents and their sister, Nelia Alleje. The Court, thus, finds no error on the part of the CA in ruling
that the allegations in the complaint are sufficient to establish a cause of action for the nullification of
the sale of the subject property to herein petitioner.
Petitioner contends that "it may be held liable ONLY IF it is proven by preponderance of evidence
that [it] indeed acted in bad faith in dealing with the [subject] property."
16
Indeed, bad faith is a
question of fact and is evidentiary.
17
Bad faith has to be established by the claimant with clear and
convincing evidence, and this necessitates an examination of the evidence of all the parties.
18
This is
best passed upon after a full-blown trial on the merits.
Stated differently, the determination of whether or not petitioner is guilty of bad faith cannot be made
in a mere motion to dismiss. An issue that requires the contravention of the allegations of the
complaint, as well as the full ventilation, in effect, of the main merits of the case, should not be within
the province of a mere motion to dismiss.
19

The parties have gone to great lengths in discussing their respective positions on the merits of the
main case. However, there is yet no need to do so in the instant petition. There will be enough time
for these disputations in the lower court after responsive pleadings are filed and issues are joined for
eventual trial of the case.1wphi 1
Indeed, the other assigned errors in the instant petition dwell on issues which are matters of defense
on the part of petitioner. The questions of whether or not there is an implied or express trust and
whether the said trust is null and void are assertions that go into the merits of the main case and still
need to be proven or disproven by the parties and resolved by the RTC. In the same manner, the
issues on prescription and estoppel raised in petitioner's Opposition to Manifestation/Motion with
Supplemental Motion to Dismiss,
20
as well as in its Motion for Reconsideration or to Dismiss the
Amended Complaint,
21
are matters of defense not proper in a motion to dismiss for failure to state a
cause of action. They should be pleaded in the answer, to be resolved after the trial on the basis of
the arguments and evidence submitted by the parties. As jurisprudence holds, so rigid is the norm
prescribed that if the court should doubt the truth of the facts averred, it must not dismiss the
complaint but require an answer and proceed to hear the case on the merits.
22
This dictum is in line
with the policy that motions to dismiss should not be lightly granted where the ground invoked is not
indubitable, as in the present case.
23
In such a situation, the objections to the complaint must be
embodied in the answer as denials or special and affirmative defenses and threshed out in a full-
blown trial on the merits.
24

In sum, this Court finds that the CA did not commit error in reversing and setting aside the assailed
Order of the RTC.
WHEREFORE, the instant petition Is DENIED. The assailed Decision and Resolution of the Court of
Appeals, dated May 18, 2006 and September 4, 2006, respectively, in CA-G.R. CV No. 74669, are
AFFIRMED.
SO ORDERED.









Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 150731 September 14, 2007
CASENT REALTY DEVELOPMENT CORP., petitioner,
vs.
PHILBANKING CORPORATION, respondent.
D E C I S I O N
VELASCO, JR., J .:
On appeal to this Court through Rule 45 of the Rules of Court is the March 29, 2001 Decision
1
and
November 7, 2001 Resolution
2
of the Court of Appeals (CA) in CA-G.R. CV No. 63979
entitled Philbanking Corporation v. Casent Realty Development Corporation. The CA reversed the
May 12, 1999 Order
3
of the Makati City Regional Trial Court (RTC), Branch 145 in Civil Case No. 93-
2612, which granted petitioners demurrer to evidence and dismissed the complaint filed by
respondent.
The Facts
The facts according to the appellate court are as follows:
In 1984, petitioner Casent Realty Development Corporation executed two promissory notes in favor
of Rare Realty Corporation (Rare Realty) involving the amounts of PhP 300,000 (PN No. 84-04) and
PhP 681,500 (PN No. 84-05). It was agreed in PN No. 84-04 that the loan it covered would earn an
interest of 36% per annum and a penalty of 12% in case of non-payment by June 27, 1985, while the
loan covered by PN No. 84-05 would earn an interest of 18% per annum and 12% penalty if not paid
by June 25, 1985.
4
On August 8, 1986, these promissory notes were assigned to respondent
Philbanking Corporation through a Deed of Assignment.
5

Respondent alleged that despite demands, petitioner failed to pay the promissory notes upon
maturity such that its obligation already amounted to PhP 5,673,303.90 as of July 15, 1993.
Respondent filed on July 20, 1993 a complaint before the Makati City RTC for the collection of said
amount. In its Answer,
6
petitioner raised the following as special/affirmative defenses:
1. The complaint stated no cause of action or if there was any, the same was barred by
estoppel, statute of frauds, statute of limitations, laches, prescription, payment, and/or
release;
2. On August 27, 1986, the parties executed a Dacion en Pago
7
(Dacion) which ceded and
conveyed petitioners property in Iloilo City to respondent, with the intention of totally
extinguishing petitioners outstanding accounts with respondent. Petitioner presented a
Confirmation Statement
8
dated April 3, 1989 issued by respondent stating that petitioner had
no loans with the bank as of December 31, 1988.
3. Petitioner complied with the condition in the Dacion regarding the repurchase of the
property since the obligation was fully paid. Respondent sent confirmation statements in the
latter months of 1989, which showed that petitioner had no more outstanding loan; and
4. Assuming that petitioner still owed respondent, the latter was already estopped since in
October 1988, it reduced its authorized capital stock by 50% to wipe out a deficit of PhP
41,265,325.12.
9

Thus, petitioner, by way of compulsory counterclaim, alleged that it made an overpayment of
approximately PhP 4 million inclusive of interest based on Central Bank Reference Lending Rates
on dates of overpayment. Petitioner further claimed moral and exemplary damages and attorneys
fee, amounting to PhP 4.5 million plus the costs of suit as a consequence of respondents insistence
on collecting.
10

The parties failed to reach an amicable settlement during the pre-trial conference. Thereafter,
respondent presented its evidence and formally offered its exhibits. Petitioner then filed a Motion for
Judgment on Demurrer to the Evidence,
11
pointing out that the plaintiffs failure to file a Reply to the
Answer which raised the Dacion and Confirmation Statement constituted an admission of the
genuineness and execution of said documents; and that since the Dacion obliterated petitioners
obligation covered by the promissory notes, the bank had no right to collect anymore.
Respondent subsequently filed an Opposition
12
which alleged that: (1) the grounds relied upon by
petitioner in its demurrer involved its defense and not insufficiency of evidence; (2) the Dacion and
Confirmation Statement had yet to be offered in evidence and evaluated; and (3) since respondent
failed to file a Reply, then all the new matters alleged in the Answer were deemed controverted.
13

The trial court ruled in favor of petitioner and dismissed the complaint through the May 12, 1999
Order, the dispositive portion of which reads:
WHEREFORE, premises considered[,] finding defendants Motion For Judgment On
Demurrer To The Evidence to be meritorious[,] the same is hereby GRANTED.
Consequently, considering that the obligation of the defendant to the plaintiff having been
extinguish[ed] by a Dacion en Pago duly executed by said parties, the instant complaint is
hereby DISMISSED, with prejudice. Without Cost.
14

The Ruling of the Court of Appeals
On appeal, respondent alleged that the trial court gravely erred because the promissory notes were
not covered by the Dacion, and that respondent was able to prove its causes of action and right to
relief by overwhelming preponderance of evidence. It explained that at the time of execution of
the Dacion, the subject of the promissory notes was the indebtedness of petitioner to Rare Realty
and not to the "Bank"the party to the Dacion. It was only in 1989 after Rare Realty defaulted in its
obligation to respondent when the latter enforced the security provided under the Deed of
Assignment by trying to collect from petitioner, because it was only then that petitioner became
directly liable to respondent. It was also for this reason that the April 3, 1989 Confirmation Statement
stated that petitioner had no obligations to repondent as of December 31, 1988. On the other hand,
petitioner claimed that the Deed of Assignment provided that Rare Realty lost its rights, title, and
interest to directly proceed against petitioner on the promissory notes since these were transferred
to respondent. Petitioner reiterated that the Dacion covered all conceivable amounts including the
promissory notes.
15

The appellate court ruled that under the Rules of Civil Procedure, the only issue to be resolved in a
demurrer is whether the plaintiff has shown any right to relief under the facts presented and the law.
Thus, it held that the trial court erred when it considered the Answer which alleged the Dacion, and
that its genuineness and due execution were not at issue. It added that the court a quo should have
resolved whether the two promissory notes were covered by the Dacion, and that since petitioners
demurrer was granted, it had already lost its right to present its evidence.
16

The CA found that under the Deed of Assignment, respondent clearly had the right to proceed
against the promissory notes assigned by Rare Realty. Thus, the CA ruled, as follows:
WHEREFORE, premises considered, the Order dated May 12, 1999 of the Regional Trial
Court, National Capital Judicial Region, Branch 145, Makati City is
hereby REVERSED and SET ASIDE.
Judgment is hereby entered ORDERING [petitioner] Casent Realty [Development]
Corporation to:
1. pay [respondent] Philbanking Corporation the amount of P300,000.00 with an
interest of 36% per annum and a penalty of 12% for failure to pay the same on its
maturity date, June 27, 1985 as stipulated in Promissory Note No. 84-04;
2. pay [respondent] Philbanking Corporation the amount of P681,500.00 with an
interest of 18% per annum and a penalty of 12% for failure to pay the same on its
maturity date, June 25, 1985 as stipulated in Promissory Note No. 84-05; and
3. pay [respondent] Philbanking Corporation, the amount representing 25% of total
amount due as attorneys fee as stipulated in the promissory notes.
SO ORDERED.
17

Petitioner filed a Motion for Reconsideration
18
which was denied by the CA in its November 7, 2001
Resolution.
19

The Issues
WHETHER OR NOT THE COURT OF APPEALS ERRED IN EXCLUDING THE
PETITIONERS AFFIRMATIVE DEFENSES IN ITS ANSWER IN RESOLVING A
DEMURRER TO EVIDENCE; AND
WHETHER OR NOT PETITIONER IS LIABLE TO PAY THE RESPONDENT
In other words, the questions posed by this case are:
1. Does respondents failure to file a Reply and deny the Dacion and Confirmation Statement
under oath constitute a judicial admission of the genuineness and due execution of these
documents?
2. Should judicial admissions be considered in resolving a demurrer to evidence? If yes, are
the judicial admissions in this case sufficient to warrant the dismissal of the complaint?
Petitioner asserts that its obligation to pay under the promissory notes was already extinguished as
evidenced by the Dacion and Confirmation Statement. Petitioner submits that when it presented
these documents in its Answer, respondent should have denied the same under oath. Since
respondent failed to file a Reply, the genuineness and due execution of said documents were
deemed admitted, thus also admitting that the loan was already paid. On the other hand, respondent
states that while it failed to file a Reply, all the new matters were deemed controverted pursuant to
Section 10, Rule 6 of the Rules of Court. Also, the loan which was covered by the Dacionrefers to
another loan of petitioner amounting to PhP 3,921,750 which was obtained directly from the
respondent as of August 1986.
20
Furthermore, petitioner argued that assuming respondent admitted
the genuineness and due execution of the Dacion and Confirmation Statement, said admission was
not all-encompassing as to include the allegations and defenses pleaded in petitioners Answer.
The Courts Ruling
The petition is partly meritorious.
Rule 33, Section 1 of the 1997 Rules of Civil Procedure provides:
Section 1. Demurrer to evidence.After the plaintiff has completed the presentation of his
evidence, the defendant may move for dismissal on the ground that upon the facts and the
law the plaintiff has shown no right to relief. If his motion is denied, he shall have the right to
present evidence. If the motion is granted but on appeal the order of dismissal is reversed he
shall be deemed to have waived the right to present evidence.
In Gutib v. Court of Appeals, we defined a demurrer to evidence as "an objection by one of the
parties in an action, to the effect that the evidence which his adversary produced is insufficient in
point of law, whether true or not, to make out a case or sustain the issue."
21

What should be resolved in a motion to dismiss based on a demurrer to evidence is whether the
plaintiff is entitled to the relief based on the facts and the law. The evidence contemplated by the
rule on demurrer is that which pertains to the merits of the case, excluding technical aspects such as
capacity to sue.
22
However, the plaintiffs evidence should not be the only basis in resolving a
demurrer to evidence. The "facts" referred to in Section 8 should include all the means sanctioned by
the Rules of Court in ascertaining matters in judicial proceedings. These include judicial admissions,
matters of judicial notice, stipulations made during the pre-trial and trial, admissions, and
presumptions, the only exclusion being the defendants evidence.
Petitioner points out that the defense of Dacion and Confirmation Statement, which were submitted
in the Answer, should have been specifically denied under oath by respondent in accordance with
Rule 8, Section 8 of the Rules of Court:
Section 8. How to contest such documents.When an action or defense is founded upon a
written instrument, copied in or attached to the corresponding pleading as provided in the
preceding section, the genuineness and due execution of the instrument shall be deemed
admitted unless the adverse party, under oath, specifically denies them, and sets forth, what
he claims to be the facts; but the requirement of an oath does not apply when the adverse
party does not appear to be a party to the instrument or when compliance with an order for
an inspection of the original instrument is refused.
Since respondent failed to file a Reply, in effect, respondent admitted the genuineness and due
execution of said documents. This judicial admission should have been considered by the appellate
court in resolving the demurrer to evidence. Rule 129, Section 4 of the Rules of Court provides:
Section 4. Judicial admissions.An admission, verbal or written, made by a party in the
course of the proceeding in the same case, does not require proof. The admission may be
contradicted only by showing that it was made through palpable mistake or that no such
admission was made.
On appeal to the CA, respondent claimed that even though it failed to file a Reply, all the new
matters alleged in the Answer are deemed controverted anyway, pursuant to Rule 6, Section 10:
Section 10. Reply.A reply is a pleading, the office or function of which is to deny, or allege
facts in denial or avoidance of new matters alleged by way of defense in the answer and
thereby join or make issue as to such new matters. If a party does not file such reply, all the
new matters alleged in the answer are deemed controverted.
We agree with petitioner. Rule 8, Section 8 specifically applies to actions or defenses founded upon
a written instrument and provides the manner of denying it. It is more controlling than Rule 6, Section
10 which merely provides the effect of failure to file a Reply. Thus, where the defense in the Answer
is based on an actionable document, a Reply specifically denying it under oath must be made;
otherwise, the genuineness and due execution of the document will be deemed admitted.
23
Since
respondent failed to deny the genuineness and due execution of the Dacion and Confirmation
Statement under oath, then these are deemed admitted and must be considered by the court in
resolving the demurrer to evidence. We held in Philippine American General Insurance Co., Inc. v.
Sweet Lines, Inc. that "[w]hen the due execution and genuineness of an instrument are deemed
admitted because of the adverse partys failure to make a specific verified denial thereof, the
instrument need not be presented formally in evidence for it may be considered an admitted fact."
24

In any case, the CA found that:
From the facts of the case, the genuineness and due execution of the Dacion en Pago were
never put to issue. Genuineness merely refers to the fact that the signatures were not
falsified and/or whether there was no substantial alteration to the document. While due
execution refers to whether the document was signed by one with authority.
25

The more important issue now is whether the Dacion and Confirmation Statement sufficiently prove
that petitioners liability was extinguished. Respondent asserts that the admission of the
genuineness and due execution of the documents in question is not all encompassing as to include
admission of the allegations and defenses pleaded in petitioners Answer. In executing
the Dacion, the intention of the parties was to settle only the loans of petitioner with respondent, not
the obligation of petitioner arising from the promissory notes that were assigned by Rare Realty to
respondent.
We AGREE.
Admission of the genuineness and due execution of the Dacion and Confirmation Statement does
not prevent the introduction of evidence showing that the Dacion excludes the promissory notes.
Petitioner, by way of defense, should have presented evidence to show that the Dacion includes the
promissory notes.
The promissory notes matured in June 1985, and Rare Realty assigned these promissory notes to
respondent through a Deed of Assignment dated August 8, 1986. The Deed of Assignment provides,
thus:
Rare Realty Corporation, a corporation duly organized and existing in accordance with law,
with office at 8th Floor Philbanking Building, Ayala Ave., Makati, Metro Manila (herein called
Assignor) in consideration of the sum of THREE MILLION SEVEN HUNDRED NINETY
THOUSAND & 00/100 pesos [PhP 3,790,000.00] and as security fee or in the payment of the
sum, obtained or to be obtained as loan or credit accommodation of whatever form or nature
from the [PHILBANKING] CORPORATION, with office at Ayala Ave., Makati, Metro Manila
(herein called Assignee), including renewals or extensions of such loan or credit
accommodation, now existing or hereinafter incurred, due or to become due, whether
absolute or contingent, direct or indirect, and whether incurred by the Assignor as principal,
guarantor, surety, co-maker, or in any other capacity, including interest, charges, penalties,
fees, liquidated damage, collection expenses and attorneys fee, the Assignor hereby
assigns, transfers and conveys to Assignee all its rights, title and interest in and to: (a)
contracts under which monies are or will be due to Assignor, (b) moneys due or to be due
thereunder, or (c) letters of credit and/or proceeds or moneys arising from negotiations under
such credits, all which are herein called moneys or receivables assigned or assigned
moneys or receivables, and are attached, or listed and described in the Attached Annex A
(for contracts) or Annex B (for letters of credit).
26

It is clear from the foregoing deed that the promissory notes were given as security for the loan
granted by respondent to Rare Realty. Through the Deed of Assignment, respondent stepped into
the shoes of Rare Realty as petitioners creditor.
Respondent alleged that petitioner obtained a separate loan of PhP 3,921,750. Thus, when
petitioner and respondent executed the Dacion on August 27, 1986, what was then covered was
petitioners loan from the bank. The Dacion provides, thus:
NOW, THEREFORE, in consideration of the foregoing premises, the DEBTOR hereby
transfers and conveys in favor of the BANK by way of Dacion en Pago, the above-described
property in full satisfactionof its outstanding indebtedness in the amount of P3,921,750.00
to the BANK, subject to x x x terms and conditions.
27
(Emphasis supplied.)
The language of the Dacion is unequivocalthe property serves in full satisfaction of petitioners
own indebtedness to respondent, referring to the loan of PhP 3,921,750. For this reason, the bank
issued a Confirmation Statement saying that petitioner has no unpaid obligations with the bank as of
December 31, 1988.
In 1989, however, Rare Realty defaulted in its payment to respondent. Thus, respondent proceeded
against the security assigned to it, that is, the promissory notes issued by the petitioner. Under these
promissory notes, petitioner is liable for the amount of PhP 300,000 with an interest of 36% per
annum and a penalty of 12% for failure to pay on the maturity date, June 27, 1985; and for the
amount of PhP 681,500 with an interest of 18% per annum and a penalty of 12% for failure to pay on
the maturity date, June 25, 1985.
WHEREFORE, the March 29, 2001 Decision and November 7, 2001 Resolution of the CA
are AFFIRMED. Costs against petitioner.
SO ORDERED.


FIRST DIVISION


COMMISSIONER OF
INTERNAL REVENUE,
Petitioner,



- versus-



MIRANT
[1]
PAGBILAO
CORPORATION (formerly
SOUTHERN ENERGY
QUEZON, INC.),
Respondent.

G.R. No. 159593

Present:

PANGANIBAN, C.J.
Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.


Promulgated:

October 12, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

D E C I S I O N


CHICO-NAZARIO, J.:

Before this Court is a Petition for Review
[2]
under Rule 45 of the 1997 Rules
of Civil Procedure assailing the Decision,
[3]
dated 30 July 2003, of the Court of
Appeals in CA-G.R. SP No. 60783, which affirmed in toto the Decision,
[4]
dated 11
July 2000, of the Court of Tax Appeals (CTA) in CTA Case No. 5658. The CTA
partially granted the claim of herein respondent Mirant Pagbilao Corporation
(MPC) for the refund of the input Value Added Tax (VAT) on its purchase of
capital goods and services for the period 1 April 1996 to 31 December 1996, and
ordered herein petitioner Commissioner of the Bureau of Internal Revenue (BIR)
to issue a tax credit certificate in the amount of P28,744,626.95.

There is no dispute as to the following facts that gave rise to the claim for
refund of MPC, as found by the CTA
[5]


[MPC] is a domestic corporation duly organized and existing
under and by virtue of the laws of the Philippines with principal office
address in Pagbilao Grande Island, Pagbilao, Quezon. It is licensed by
the Securities and Exchange Commission to principally engage in the
business of power generation and subsequent sale thereof (Exh. A). It is
registered with the Bureau of Internal Revenue as a VAT registered
entity with Certificate of Registration bearing RDO Control No. 96-600-
002498, dated January 26, 1996.

For the period April 1, 1996 to December 31, 1996, [MPC]
seasonably filed its Quarterly VAT Returns reflecting an (sic)
accumulated input taxes in the amount of P39,330,500.85 (Exhs. B, C,
and D). These input taxes were allegedly paid by [MPC] to the suppliers
of capital goods and services for the construction and development of the
power generating plant and other related facilities
in Pagbilao, Quezon (TSN, November 16, 1998, p. 11).

Pursuant to the procedures prescribed under Revenue Regulations
No. 7-95, as amended, [MPC] filed on June 30, 1998, an application for
tax credit or refund of the aforementioned unutilized VAT paid on
capital goods (Exhibit E).

Without waiting for an answer from the [BIR Commissioner],
[MPC] filed the instant petition for review on July 10, 1998, in order to
toll the running of the two-year prescriptive period for claiming a refund
under the law.

In answer to the Petition, [the BIR Commissioner] advanced as
special and affirmative defenses that [MPC]s claim for refund is still
pending investigation and consideration before the office of [the BIR
Commissioner] accordingly, the filing of the present petition is
premature; well-settled is the doctrine that provisions in tax refund and
credit are construed strictly against the taxpayer as they are in the nature
of a tax exemption; in an action for refund or tax credit, the taxpayer has
the burden to show that the taxes paid were erroneously or illegally paid
and failure to sustain the said burden is fatal to the action for refund; it is
incumbent upon [MPC] to show that the claim for tax credit has been
filed within the prescriptive period under the Tax Code; and the taxes
allegedly paid by [MPC] are presumed to have been collected and
received in accordance with law and revenue regulations.[]

On July 14, 1998, while the case was pending trial, Revenue
Officer, Rosemarie M. Vitto, was assigned by Revenue District Officer,
Ma. Nimfa Penalosa-Asensi, of Revenue District No. 60 to investigate
[MPC]s application for tax credit or refund of input taxes (Exhs. 1 and
1-a). As a result, a memorandum report, dated August 27, 1998, was
submitted recommending a favorable action but in a reduced amount of
P49,616.40 representing unapplied input taxes on capital goods. (Exhs.
2, 2-a, 3, and 3-a).

[MPC], due to the voluminous nature of evidence to be presented,
availed of the services of an independent Certified Public Accountant
pursuant to CTA Circular No. 1-95, as amended. As a consequence, Mr.
Ruben R. Rubio, Partner of SGV & Company, was commissioned to
verify the accuracy of [MPC]s summary of input taxes (TSN, October
15, 1998, pp. 3-5). A report, dated March 8, 1999, was presented stating
the audit procedures performed and the finding that out of the total
claimed input taxes of P39,330,500.85, only the sum of P28,745,502.40
was properly supported by valid invoices and/or official receipts (Exh.
G; see also TSN, March 3, 1999, p. 12).


The CTA ruled in favor of MPC, and declared that MPC had
overwhelmingly proved, through the VAT invoices and official receipts it had
presented, that its purchases of goods and services were necessary in the
construction of power plant facilities which it used in its business of power
generation and sale. The tax court, however, reduced the amount of refund to
which MPC was entitled, in accordance with the following computation

Total amount of the claim for refund P39,330,500.85
Less: Disallowances
a. Per independent auditor P10,584,998.45
b. Per CTAs examination 875.45 10,585,873.90
P28,744,626.95
[6]



Thus, the dispositive portion of the CTA Decision,
[7]
dated 11 July 2000,
reads -

WHEREFORE, in view of the foregoing, [MPC]s claim for
refund is hereby partially GRANTED. [The BIR Commissioner]
is ORDERED to ISSUE A TAX CREDIT CERTIFICATE in the
amount of P28,744,626.95 representing input taxes paid on capital goods
for the period April 1, 1996 to December 31, 1996.


The CTA subsequently denied the BIR Commissioners Motion for
Reconsideration in a Resolution,
[8]
dated 31 August 2001.

Aggrieved, the BIR Commissioner filed with the Court of Appeals a Petition
for Review
[9]
of the foregoing Decision, dated 11 July 2000, and Resolution, dated
31 August 2001, of the CTA. Notably, the BIR Commissioner identified and
discussed as grounds
[10]
for its Petition arguments that were totally new and were
never raised before the CTA, to wit

1. RESPONDENT BEING AN ELECTRIC UTILITY, IT IS
SUBJECT TO FRANCHISE TAX UNDER THEN SECTION 117
(NOW SECTION 119) OF THE TAX CODE AND NOT TO VALUE
ADDED TAX (VAT).

2. SINCE RESPONDENT IS EXEMPT FROM VAT, IT IS
NOT ENTITLED TO THE REFUND OF INPUT VAT PURSUANT TO
SECTION 4.103-1 OF REVENUE REGULATIONS NO. 7-95.


The Court of Appeals found no merit in the BIR Commissioners Petition,
and in its Decision, dated 30 July 2003, it pronounced that: (1) The BIR
Commissioner cannot validly change his theory of the case on appeal; (2) The
MPC is not a public utility within the contemplation of law; (3) The sale by MPC
of its generated power to the National Power Corporation (NAPOCOR) is subject
to VAT at zero percent rate; and (4) The MPC, as a VAT-registered taxpayer, may
apply for tax credit. Accordingly, the decretal portion of the said Decision
[11]
reads
as follows

WHEREFORE, premises considered,
the Petition is DISMISSED for lack of merit and the assailed 11 July
2000 Decision of respondent Court in CTA Case No. 5658 is
hereby AFFIRMED in toto. No costs.


Refusing to give up his cause, the BIR Commissioner filed the present
Petition before this Court on the ground that the Court of Appeals committed
reversible error in affirming the Decision of the CTA holding respondent entitled
to the refund of the amount of P28,744,626.95, allegedly representing input VAT
on capital goods and services for the period 1 April 1996 to 31 December
1996. He argues that (1) The observance of procedural rules may be relaxed
considering that technicalities are not ends in themselves but exist to protect and
promote the substantive rights of the parties; and (2) A tax refund is in the nature
of a tax exemption which must be construed strictly against the taxpayer. He
reiterates his position before the Court of Appeals that MPC, as a public utility, is
exempt from VAT, subject instead to franchise tax and, thus, not entitled to a
refund of input VAT on its purchase of capital goods and services.

This Court finds no merit in the Petition at bar.

I

The general rule is that a party
cannot change his theory of the case
on appeal.

To recall, the BIR Commissioner raised in its Answer
[12]
before the CTA the
following special and affirmative defenses

3. [MPC]s claim for refund is still pending investigation and
consideration before the office of [the BIR
Commissioner]. Accordingly, the present petition is premature;

4. Well-settled is the doctrine that provisions in tax refund and credit
are construed strictly against the taxpayer as they are in the nature of a
tax exemption;

5. In an action for refund or tax credit, the taxpayer has the burden to
show that the taxes paid were erroneously or illegally paid and failure to
sustain the said burden is fatal to the action for refund;

6. It is incumbent upon [MPC] to show that the claim for tax credit has
been filed within the prescriptive period under the tax code;

7. The taxes allegedly paid by [MPC] are presumed to have been
collected and received in accordance with law and revenue regulations.


These appear to be general and standard arguments used by the BIR to oppose any
claim by a taxpayer for refund. The Answer did not posit any allegation or
contention that would defeat the particular claim for refund of MPC. Trial proper
ensued before the CTA, during which the MPC presented evidence of its
entitlement to the refund and in negation of the afore-cited defenses of the BIR
Commissioner. It was only after the CTA promulgated its Decision on 11 July
2000, which was favorable to MPC and adverse to the BIR Commissioner, that the
latter filed his Petition for Review before the Court of Appeals on 4 October 2000,
averring, for the very first time, that MPC was a public utility, subject to franchise
tax and not VAT; and since it was not paying VAT, it could not claim the refund of
input VAT on its purchase of capital goods and services.

There is a palpable shift in the BIR Commissioners defense against the
claim for refund of MPC and an evident change of theory. Before the CTA, the
BIR Commissioner admitted that the MPC is a VAT-registered taxpayer, but
charged it with the burden of proving its entitlement to refund. However, before
the Court of Appeals, the BIR Commissioner, in effect denied that the MPC is
subject to VAT, making an affirmative allegation that it is a public utility liable,
instead, for franchise tax. Irrefragably, the BIR Commissioner raised for the first
time on appeal questions of both fact and law not taken up before the tax court, an
actuality which the BIR Commissioner himself does not deny, but he argues that
he should be allowed to do so as an exception to the technical rules of procedure
and in the interest of substantial justice.

It is already well-settled in this jurisdiction that a party may not change his
theory of the case on appeal.
[13]
Such a rule has been expressly adopted in Rule 44,
Section 15 of the 1997 Rules of Civil Procedure, which provides

SEC. 15. Questions that may be raised on appeal. Whether or not the
appellant has filed a motion for new trial in the court below, he may include in his
assignment of errors any question of law or fact that has been raised in the court
below and which is within the issues framed by the parties.


Thus, in Carantes v. Court of Appeals,
[14]
this Court emphasized that

The settled rule is that defenses not pleaded in the answer may not
be raised for the first time on appeal. A party cannot, on appeal, change
fundamentally the nature of the issue in the case. When a party
deliberately adopts a certain theory and the case is decided upon that
theory in the court below, he will not be permitted to change the same on
appeal, because to permit him to do so would be unfair to the adverse
party.


In the more recent case of Mon v. Court of Appeals,
[15]
this Court again
pronounced that, in this jurisdiction, the settled rule is that a party cannot change
his theory of the case or his cause of action on appeal. It affirms that courts of
justice have no jurisdiction or power to decide a question not in issue. Thus, a
judgment that goes beyond the issues and purports to adjudicate something on
which the court did not hear the parties, is not only irregular but also extrajudicial
and invalid. The rule rests on the fundamental tenets of fair play.

The BIR Commissioner pleads with this Court not to apply the foregoing
rule to the instant case, for a rule on technicality should not defeat substantive
justice. The BIR Commissioner apparently forgets that there are specific reasons
why technical or procedural rules are imposed upon the courts, and that
compliance with these rules, should still be the general course of action. Hence,
this Court has expounded that

Procedural rules, we must stress, should be treated with utmost
respect and due regard since they are designed to facilitate the
adjudication of cases to remedy the worsening problem of delay in the
resolution of rival claims and in the administration of justice. The
requirement is in pursuance to the bill of rights inscribed in the
Constitution which guarantees that all persons shall have a right to the
speedy disposition of their cases before all judicial, quasi-judicial
and administrative bodies. The adjudicatory bodies and the parties to a
case are thus enjoined to abide strictly by the rules. While it is true that
a litigation is not a game of technicalities, it is equally true that every
case must be prosecuted in accordance with the prescribed procedure to
ensure an orderly and speedy administration of justice. There have been
some instances wherein this Court allowed a relaxation in the application
of the rules, but this flexibility was never intended to forge a bastion for
erring litigants to violate the rules with impunity. A liberal
interpretation and application of the rules of procedure can be resorted to
only in proper cases and under justifiable causes and circumstances.
[16]



The courts have the power to relax or suspend technical or procedural rules or to
except a case from their operation when compelling reasons so warrant or when the
purpose of justice requires it. What constitutes good and sufficient cause that
would merit suspension of the rules is discretionary upon the courts.
[17]


In his Petition and Memorandum before this Court, the BIR Commissioner
made no attempt to provide reasonable explanation for his failure to raise before
the CTA the issue of MPC being a public utility subject to franchise tax rather than
VAT. The BIR Commissioner argues, in a singular paragraph in his
Petition,
[18]
subsequently reproduced in his Memorandum,
[19]
that the Court of
Appeals should have taken cognizance of the said issue, although it was raised for
the first time on appeal, entirely on the basis of this Courts ruling inSy v. Court of
Appeals.
[20]
He contends that

The submission fails to take into account that although this Honorable Court
has repeatedly ruled that litigants cannot raise an issue for the first time on appeal,
as this would contravene the basic rules of justice and fair play, the observance of
procedural rules may be relaxed, noting that technicalities are not ends in
themselves but exist to protect and promote the substantive rights of the litigants
(Sy v. Court of Appeals, 330 SCRA 570 [2000]).


This Court is unconvinced. There is no sufficient cause to warrant the
relaxation of technical or procedural rules in the instant case. The general rules of
procedure still apply and the BIR Commissioner cannot be allowed to raise an
issue for the first time on appeal.

It should be emphasized that the BIR Commissioner is invoking a
suspension of the general rules of procedure or an exception thereto, thus, it is
incumbent upon him to present sufficient cause or justifiable circumstance that
would qualify his case for such a suspension or exception. That this Court had
previously allowed in another case such suspension of or exception to technical or
procedural rules does not necessarily mean that the same shall also be allowed in
the present case. The BIR Commissioner has the burden of persuading this Court
that the same causes or circumstances that justified the suspension of or exception
to the technical or procedural rules in the other case are also present in the case at
bar.

The Sy case, on which the BIR Commissioner fully anchored his claim for
suspension of or exception to the technical or procedural rules, is not even on all
fours with his case. It involves a petition for declaration of nullity of marriage
instituted by the therein petitioner Filipina Sy before the Regional Trial Court
(RTC) on the basis of the alleged psychological incapacity of her husband,
Fernando Sy. Her petition was denied by the RTC because it found that
Fernandos acts did not constitute psychological incapacity, a finding later
affirmed by the Court of Appeals. In an appeal by certiorari before this Court,
Filipina raised the issue that her marriage to Fernando was void from the very
beginning for lack of a marriage license at the time of the ceremony. This Court
took cognizance of the said issue, reversed the RTC and the Court of Appeals, and
ruled in favor of Filipina. Its ratiocination on the matter is reproduced in full
below

Petitioner, for the first time, raises the issue of the marriage being void for
lack of a valid marriage license at the time of its celebration. It appears that,
according to her, the date of the actual celebration of their marriage and the date
of issuance of their marriage certificate and marriage license are different and
incongruous.

Although we have repeatedly ruled that litigants cannot raise an issue for
the first time on appeal, as this would contravene the basic rules of fair play and
justice, in a number of instances, we have relaxed observance of procedural rules,
noting that technicalities are not ends in themselves but exist to protect and
promote substantive rights of litigants. We said that certain rules ought not to be
applied with severity and rigidity if by so doing, the very reason for their
existence would be defeated. Hence, when substantial justice plainly requires,
exempting a particular case from the operation of technicalities should not be
subject to cavil. In our view, the case at bar requires that we address the issue of
the validity of the marriage between Filipina and Fernando which petitioner
claims is void from the beginning for lack of a marriage license, in order to arrive
at a just resolution of a deeply seated and violent conflict between the
parties. Note, however, that here the pertinent facts are not disputed; and what
is required now is a declaration of their effects according to existing
law.
[21]
[Emphasis supplied.]


In the instant case, the conflict between the MPC and the BIR Commissioner
could be hardly described as deeply seated and violent, it remaining on a
professional level.

Moreover, this Court pointed out in the Sy case that the pertinent
facts, i.e., the dates of actual celebration of the marriage, issuance of the marriage
certificate, and issuance of the marriage license, were undisputed. The same
cannot be said in the case at bar. That MPC is a public utility is not an undisputed
fact; on the contrary, the determination thereof gives rise to a multitude of other
questions of fact and law. It is a mere deduction on the part of the BIR
Commissioner that since the MPC is engaged in the generation of power, it is a
public utility. The MPC contests this arguing that it is not a public utility because it
sells its generated power to NAPOCOR exclusively, and not to the general
public. It asserts that it is subject to VAT and that its sale of generated electricity
to NAPOCOR is subject to zero-rated VAT.

Substantial justice, in such a case, requires not the allowance of issues raised
for the first time on appeal, but that the issue of whether MPC is a public utility,
and the correlated issue of whether MPC is subject to VAT or franchise tax, be
raised and threshed out in the first opportunity before the CTA so that either party
would have fully presented its evidence and legal arguments in support of its
position and to contravene or rebut those of the opposing party.

In Atlas Consolidated Mining & Development Corp. v. Commissioner of
Internal Revenue,
[22]
this Court held that it was too late for the BIR Commissioner
to raise an issue of fact of payment for the first time in his memorandum in the
CTA and in his appeal to this Court. If raised earlier, the matter ought to have
been seriously delved into by the CTA. On this ground, this Court was of the
opinion that under all the attendant circumstances of the case, substantial justice
would be served if the BIR Commissioner be held as precluded from attempting to
raise the issue at this stage. Failure to assert a question within a reasonable time
warrants a presumption that the party entitled to assert it either has abandoned or
declined to assert it.

Therefore, the Court of Appeals correctly refused to consider the issues
raised by the BIR Commissioner for the first time on appeal. Its discussion on
whether the MPC is a public utility and whether it is subject to VAT or franchise
tax is nothing more than obiter dictum. It is best not at all to discuss these issues
for they do not simply involve questions of law, but also closely-related questions
of fact
[23]
which neither the Court of Appeals nor this Court could presume or
garner from the evidence on record.

II


I nput VAT on capital goods and
services may be the subject of a claim
for refund.

The MPC bases its claim for refund of its input VAT on Section 106(b) of
the Tax Code of 1986, as amended by Republic Act No. 7716,
[24]
which provides

Sec. 106. Refunds or tax credits of creditable input tax.

x x x x

(b) Capital goods. - A VAT-registered person may apply for the issuance
of a tax credit certificate or refund of input taxes paid on capital goods imported
or locally purchased, to the extent that such input taxes have not been applied
against output taxes. The application may be made only within two (2) years, after
the close of the taxable quarter when the importation or purchase was made.


Capital goods or properties, as defined in Revenue Regulations No. 7-95, the
implementing rules on VAT, are goods and properties with estimated useful life
greater than one year and which are treated as depreciable assets under Section
29(f), used directly or indirectly in the production or sale of taxable goods or
services.
[25]


Contrary to the argument of the BIR Commissioner, input VAT on capital
goods is among those expressly recognized as creditable input tax by Section
104(a) of the Tax Code of 1986, as amended by Rep. Act No. 7716,
[26]
to wit

Sec. 104. Tax Credits. - (a) Creditable input tax. - Any input tax
evidenced by a VAT invoice or official receipt issued in accordance with Section
108 hereof on the following transactions shall be creditable against the output
tax:

(1) Purchase or importation of goods:

(A) For sale; or

(B) For conversion into or intended to form part of a finished product
for sale including packing materials; or

(C) For use as supplies in the course of business; or

(D) For use as materials supplied in the sale of service; or

(E) For use in trade or business for which deduction for depreciation
or amortization is allowed under this Code, except automobiles, aircraft and
yachts. [Emphasis supplied.]


Thus, goods and properties used by the taxpayer in its VAT-taxable
business, subject to depreciation or amortization in accordance with the Tax Code,
are considered capital goods. Input VAT on the purchase of such capital goods is
creditable against the taxpayers output VAT. The taxpayer is further given the
option, under Section 106(b) of the Tax Code of 1986, as amended by Republic
Act No. 7716, to claim refund of the input VAT on its capital goods, but only to
the extent that the said input VAT has not been applied to its output VAT.

This Court, likewise, will not give credence to the BIR Commissioners
contention that the claim for refund of input VAT on capital goods by the MPC
should be denied for the latters failure to comply with the requirements for the
refund of input VAT credits on zero-rated sales provided in Section 16 of Revenue
Regulations No. 5-87, as amended by Revenue Regulations No. 3-88. The BIR
Commissioner is apparently confused. MPC is claiming refund of the input VAT
it has paid on the purchase of capital goods, it is not claiming refund of its input
VAT credits attributable to its zero-rated sales. These are two different input VAT
credits, arising from distinct transactions, although both may be the subject of
claims for refund by the taxpayer.
[27]
Indeed, the very same regulation invoked by
the BIR Commissioner, Revenue Regulations No. 5-87, as amended, distinguishes
between these two refundable input VAT credits and discusses them in two
separate paragraphs: Section 16(a) on zero-rated sales of goods and services, and
Section 16(b) on capital goods. It is also worth noting that Revenue Regulations
No. 7-95, issued on 9 December 1995, which consolidated all VAT regulations,
already superseded Revenue Regulations No. 5-87. Still, Revenue Regulations No.
7-95 maintains the distinction between these two input VAT credits, discussing the
zero-rated sales of goods or properties or services in Section 4.106-1(a), and
capital goods in Section 4.106-1(b).

Hence, the present claim for refund of input VAT on capital goods filed by
MPC need not comply with the requirements for refund of input VAT attributable
to zero-rated sales.

III


There is no reason for this Court to
disturb the findings of fact of the
CTA, as affirmed by the Court of
Appeals.

While it is true, as the BIR Commissioner alleges, that the MPC has the
burden of proving that it is entitled to the refund it is claiming for, both the CTA
and Court of Appeals had ruled that the MPC presented substantial evidence to
support its claim for refund of its input VAT on capital goods and services in the
amount of P28,744,626.95.

The CTA found that MPC is registered as a VAT-taxpayer, as evidenced by
its Certificate of Registration, issued by the BIR Revenue District Office (RDO)
No. 60, on 26 January 1996. The BIR Commissioner does not contest this fact,
and does not offer any explanation as to why the BIR RDO had approved the
registration of MPC as a VAT-taxpayer when, as the BIR Commissioner is now
asserting, the MPC is not subject to VAT but to franchise tax. The MPC had been
filing its VAT Quarterly Returns, including those for the period covered by its
claim for refund, 1 April 1996 to 31 December 1996, reporting and reflecting
therein the input VAT it had paid on its purchase of capital goods and
services. These capital goods and services were necessary in the construction of
the power plant facilities used by MPC in electric power generation.

The VAT invoices and receipts submitted by MPC, in support of its claim
for refund, had been examined and evaluated by an independent auditor, as well as
by the CTA itself. Thus, from the original amount of P39,330,500.85 claimed by
MPC for refund, the independent auditor, SGV & Co., found only the sum
of P28,745,502.40 sufficiently supported by valid invoices and/or official
receipts. Following its own examination and evaluation of the evidence submitted,
the CTA further reduced the amount refundable to P28,744,626.95 after
disallowing the input VAT on the purchase of xerox and office supplies which
cannot be capitalized and not necessary in the construction of power plant
facilities.
[28]


It is worth noting that the foregoing findings by the CTA were affirmed in
totality by the Court of Appeals. Likewise, this Court finds no reason to disturb
the foregoing findings of the tax court.

Another well-settled principle in this jurisdiction is that this Court is bound
by the findings of fact of the CTA. Only errors of law, and not rulings on the
weight of evidence, arereviewable by this Court. Findings of fact of the CTA are
not to be disturbed unless clearly shown to be unsupported by substantial
evidence.
[29]
Quite the reverse, the claim of MPC for refund of input VAT on its
purchase of capital goods and services in the present case is found to be supported
by substantial evidence, not just by the CTA, but also by the Court of
Appeals. The BIR Commissioner failed to convince this Court otherwise.

IV


The BI R should seriously study and
consider each and every application
for claim for refund pending before
it.

As a final point, this Court would like to call the attention of the BIR
Commissioner, as well as the responsible BIR officers, to seriously study and
consider each and every application for claim for refund filed before their office. It
is very obvious to this Court that the Answer filed by the BIR Commissioner
before the Court of Appeals, which it essentially reproduced as its Memorandum
before the same court, presented general and pro forma arguments. The BIR
Commissioner only raised belatedly before the Court of Appeals the issues of
whether MPC is a public utility and whether it is subject to franchise tax and not
VAT. Even then, his Petition for Review before the appellate court, numbering
only six pages, with only one page devoted to a discussion of the merits of his
Petition, left much to be desired and would hardly persuade any court. Since he
represents the interest of the government in tax cases, the BIR Commissioner
should exert more effort and exercise more diligence in preparing his pleadings
before any court; he should not wait to do so only upon appeal of his case to the
higher court. This Court may not always be inclined to allow him to remedy his
past laxity.

IN VIEW OF THE FOREGOING, the instant Petition is
hereby DENIED. The Decision, dated 30 July 2003, of the Court of Appeals in
CA-G.R. SP No. 60783, which affirmedin toto the Decision, dated 11 July 2000, of
the CTA in CTA Case No. 5658, is hereby AFFIRMED. The BIR Commissioner
is hereby ORDERED to issue in favor of MPC a tax credit certificate in the
amount of P28,744,626.95 representing input VAT paid on




capital goods and services for the period of 1 April 1996 to 31 December
1996. No pronouncement as to costs.

SO ORDERED.




A.M. No. RTJ-12-2321 October 3, 2012
SPOUSES JESUS G. CRISOLOGO and NANNETTE B . CRISOLOGO, Complainants,
vs.
JUDGE GEORGE E. OMELIO, Regional Trial Court, Branch 14, Davao City, Respondent.

FACTS:

PETITIONERS are plaintiffs in a collection suit raffled to RTC, Branch 15, Davao City. They obtained a
favorable judgment which had become final and executory on March 3, 2010. Accordingly, a Writ of
Execution dated June 15, 2010 was issued for the satisfaction of said final judgment. Subsequently, a
Notice of Sale was issued by Sheriff Robert M. Medialdea, Sheriff IV, Regional Trial Court on the subject
properties. However, the properties involved were already acquired by JEWM prior to the finality of
judgment. Aggrieved with the said decision, JEWM filed a complaint for Cancellation of Lien, with
Application for Writ of Preliminary Injunction against the Register of Deeds, Davao City, Sheriff Robert
Medialdea, JOHN and JANE DOES, and all persons acting under their directions on September 16, 2010.
JEWM also filed a complaint of an indirect contempt against Sheriff Medialdea and requiring the
Register of Deeds of City of Davao to cancel the auction sale annotated on the TCTs of the subject
properties in favor of the Sps. Crisologo. This case was granted by the respondent Judge and ordered the
Register of Deeds of City of Davao to cancel any registration or annotation of the subject Sheriffs
Certificates of Sale at the back of TCTs without notifying the Sps. Crisologo.


Service of summons was made only upon the Register of Deeds and Sheriff Robert Medialdea. The
notice of hearing for the preliminary injunction was likewise served only upon defendants Register of
Deeds and Sheriff Robert Medialdea. Sps. Crisologo, through their counsel, were pleading before Judge
Omelio to recognize their entry of appearance as real parties in interest under defendants John and Jane
Does in the hearing for preliminary injunction on 22 of September 2010. The case involved the
cancellation of several liens carried over in TCT Nos. T-325675 and T-325676, including the liens in favor
of Sps. Crisologo. However, Judge Omelio refused to recognize Sps. Crisologo due to lack of legal
standing. Judge Omelio bases his refusal to recognize Sps. Crisologo on the ground of lack of the proper
Motion to Intervene with Pleading-in-Intervention. Judge Omelio argues that Sps. Crisologo are not
indispensable parties because their participation is not indispensable in the determination of whether or
not the subsequent liens annotated on the titles of the subject properties may be properly cancelled.

Sps. Crisologo claim that the case should not have proceeded because no summons were made upon
the John and Jane Does impleaded in the complaint. Since defendants John and Jane Does are
unidentified persons, summons must be made with leave of court and by publication. Judge Omelio, on
the other hand, claims that the requirements for service of summons are not applicable where the
parties claiming entitlement to summons have already appeared in court during the hearing of the
petition.

Sps. Crisologo further claim that JEWM filed a Motion to Render Judgment Granting Plaintiff the Relief
Prayed for with Memorandum Attached on 6 December 2010. The motion, however, was heard on 8
December 2010, in violation of the three-day notice requirement.

The Spouses now charged the respondent Judge of gross ignorance of the law, grave abuse of discretion,
gross dereliction of duty and manifest bias for the acts showed by the latter.

ISSUE: Whether or not the respondent judge is guilty of the charges.

HELD:

YES. We find Judge Omelio guilty of gross ignorance of the law for the following acts: (a) refusing to
recognize Sps. Crisologo as indispensable party; (b) granting a contentious motion that was in violation
of the three-day notice rule; (c) not complying with the rules on summons; and (d) rendering a decision
in an indirect contempt case that cancels an annotation of a certificate of sale without notifying the
buyer, in violation of the latters right to due process.

Refusing to recognize Sps. Crisologo as indispensable party
Parties with liens annotated on the certificate of title are entitled to notice in an action for cancellation
of their liens.The cancellation of Sps. Crisologos liens without notice to them is a violation of their right
to due process.

Consistent with Southwestern University v. Laurente, Judge Omelio should be penalized for failing to
recognize Sps. Crisologo as indispensable parties and for requiring them to file a motion to intervene,
considering that a simple perusal of the certificates of title would show Sps. Crisologos adverse rights
because their liens are annotated at the back of the titles. For this reason, we find Judge Omelio guilty of
gross ignorance of the law for refusing to recognize Sps. Crisologo as indispensable parties in the
disputed case.

Granting a contentious motion that was in violation of the three-day notice rule:
Section 4, Rule 15 of the Rules of Court provides that notice of a motion shall be served by the applicant
to all parties concerned, at least three (3) days before the hearing thereof, together with a copy of the
motion, and of any affidavits and other papers accompanying it; and Section 5 of the same Rule requires
the notice to be directed to the parties concerned and to state the time and place for the hearing of the
motion. A motion which fails to comply with these requirements is nothing but a useless piece of paper.

It has been oft repeated that judges cannot be held to account or answer criminally, civilly or
administratively for an erroneous judgment or decision rendered by him in good faith, or in the absence
of fraud, dishonesty or corruption. However, it has also been held that when the law violated is
elementary, a judge is subject to disciplinary action. The principles of due notice and hearing are so basic
that respondents inability to accord a litigant their right thereto cannot be excused. In this case, we
believe that respondents actuations reek of malice and bad faith. Thus, we find respondent guilty of
gross ignorance of the law for violating the three-day notice rule and failing to give herein complainant
due notice and the opportunity to be heard on the matter as mandated by Section 12, Rule 57 of the
1997 Rules of Civil Procedure.

In this case, Judge Omelio granted a contentious motion which contained a defective notice of hearing.
The notice of hearing was defective because it was only served two (2) days before the hearing date,
instead of the mandatory three-day notice rule. Such motion should have been considered a mere scrap
of paper. Judge Omelio should have denied the motion on the ground that it violated the three-day
notice rule, without prejudice to JEWMs re-filing of said motion in accordance with the Rules. Judge
Omelio is considered guilty of gross ignorance of the law for granting the defective motion. The three-
day notice rule on motions is so elementary, that not knowing and observing it, especially in litigious and
contentious motions, constitute gross ignorance of the law.

Not complying with the rules on summons:
Judge Omelios failure to effect proper service of summons upon the defendants John and Jane Does in
the complaint constitutes gross ignorance of the law. The rules and procedures on summons are very
elementary, that non-observance and lack of knowledge on them constitute gross ignorance of the law,
especially for judges who are supposed to exhibit more than just a cursory acquaintance with the
procedural rules. For failing to cause the proper service of summons upon defendants John and Jane
Does and Sps. Crisologo, we find Judge Omelio guilty of gross ignorance of the law.

Rendering a decision in an indirect contempt case that cancels an annotation of a certificate of sale
without notifying the buyer, in violation of the latters right to due process.
Judge Omelios decision in the indirect contempt complaint ordered the cancellation in TCT Nos. T-
325675 and T-325676 of the annotation of the Sheriffs Certificate of Sale in favor of the Sps. Crisologo.
Although the case was an indirect contempt complaint, it can still be considered a petition to cancel
annotations because of its prayer. As provided in Section 112 of Act No. 496 and Southwestern
University v. Laurente, notice is required to be given to parties whose annotations appear on the back of
the certificate of title in an action for cancellation of annotations on the certificate of title. In this case,
however, no summons or notices were issued to Sps. Crisologo. Only the Register of Deeds and Sheriff
Medialdea were impleaded. Judge Omelio should have notified the Sps. Crisologo of the indirect
contempt complaint because it included the prayer for cancellation of the annotation of sale on the
subject titles, where the latter are buyers. Failure to notify the Sps. Crisologo constitutes gross ignorance
of the law.

We find Judge George E. Omelio GUILTY of four counts of the serious charge of gross ignorance of the
law for the following acts: (a) refusing to recognize Spouses Jesus G. Crisologo and Nannette B. Crisologo
as indispensable parties; (b) granting a contentious motion in violation of the three-day notice rule; (c)
non-compliance with the rules on summons; and (d) rendering a decision in an indirect contempt case
that cancels an annotation of a Sheriffs Certificate of Sale on two titles without notifying the buyer, in
violation of the latter's right to due process. Accordingly, we impose upon Judge George E. Omelio the
penalty of fine of Forty Thousand Pesos (P 40,000.00), with a warning that repetition of the same or
similar acts will be dealt with more severely.











EN BANC
A.M. No. RTJ-11-2289 : October 2, 2012
(Formerly A.M. OCA lPI No. 11-3656-RTJ)
Re: Anonymous Letter dated August 12, 2010, complaining against Judge Ofelia T. Pinto,
Regional Trial Court, Branch 60, Angeles City, Pampanga.
D E C I S I O N
PER CURIAM:
An anonymous letter-complaint dated August 12, 2010 was filed before the Office of the Court Administrator
(OCA) against Judge Ofelia T. Pinto, Presiding Judge of the Regional Trial Court, Branch 60, Angeles City,
Pampanga. Judge Pinto was charged with dishonesty, violation of the Anti-Graft and Corrupt Practices Act,
Gross Misconduct in violation of the Code of Judicial Conduct, and knowingly rendering an unjust judgment
in connection with the reopening of a criminal case whose decision was already final and executory and
subject of an entry of judgment in the Court of Appeals (CA). The anonymous letter-complaint narrated that
despite the finality of the decision in Criminal Case No. 91-937, Judge Pinto granted the motion filed by the
convicted accused (at large) to reopen the case and to adduce evidence in his behalf.
Subsequently, the OCA required Judge Pinto to comment on the anonymous letter-complaint. Judge Pinto
alleged that the outright denial of the motion to reopen the case was improper, without violating the
accuseds opportunity to be heard, given the exculpatory evidence presented and considering the lack of
objection by the public prosecutor and the private complainant who were properly notified of the motion.
Judge Pinto also alleged that even granting that her acts were indeed erroneous, they were done in the
exercise of her adjudicative functions which cannot be made subject of a disciplinary, civil or criminal action
absent fraud, dishonesty and corruption on her part.
The Recommendation of the OCA
The OCA found the anonymous letter-complaint meritorious. The OCA observed that Judge Pinto misapplied
the law despite the clear wordings of Section 24, Rule 119 of the 2000 Revised Rules of Criminal Procedure.
The OCA also found that Judge Pinto subsequently disregarded the final and executory decision of the CA, a
higher court, when she dismissed the criminal case against the accused-movant. The OCA recommended,
thus
RECOMMENDATION: It is respectfully recommended for the consideration of the Honorable Court that:chanroblesvirtuallawlibrary
1. The Anonymous Complaint dated 12 August 2010 be RE-DOCKETED as a regular administrative matter;
and
2. Judge Ofelia T. Pinto, Regional Trial Court, Branch 60, Angeles City, Pampanga, beHELD GUILTY of
Gross Ignorance of the Law and Procedure and be SUSPENDED from service without salary and other
benefits for a period of Six (6) Months (Sec. 89, in relation to Sec. 11[A(2.)], Rule 140, id.) with a STERN
WARNING that a repetition of the same or similar infraction shall be dealt with utmost severity. [emphases
and italics supplied]
In the Resolution dated August 3, 2011, the Court re-docketed the anonymous letter-complaint and required
the parties to manifest if they were willing to submit the matter for resolution on the basis of the pleadings
filed. In response, Judge Pinto filed a Manifestation and a Supplemental Comment where she stressed her
good faith and honest intention to prevent a miscarriage of justice, which led her to disregard the
mandatory character of the rule on the reopening of criminal cases. She offered her sincere apologies to the
Court and pleaded for compassion and understanding.
The Courts Ruling
Except for the recommended penalty, we agree with the findings of the OCA.
"To be able to render substantial justice and maintain public confidence in the legal system, judges should
be embodiments of competence, integrity and independence."
1
rll Judges are also "expected to exhibit more
than just a cursory acquaintance with statutes and procedural rules and to apply them properly in all good
faith".
2
rl l Judges are "likewise expected to demonstrate mastery of the principles of law, keep abreast of
prevailing jurisprudence, and discharge their duties in accordance therewith."
3
rll The records clearly show
that the conduct exhibited by Judge Pinto deviated from these exacting standards.
Judge Pinto had no jurisdiction to entertain the motion filed by the accused-movant to reopen Criminal Case
No. 91-937 because the CAs decision, which affirmed the accused-movants conviction, had become final and
executory. Judge Pintos conduct was contrary to the clear language of Section 24, Rule 119 of the 2000
Revised Rules of Criminal Procedure which provides that the reopening of a criminal case may only be
availed of "at any time before finality of the judgment of conviction:"
Sec. 24. Reopening. At any time before finality of the judgment of conviction, the judge may, motu proprio
or upon motion, with hearing in either case, reopen the proceedings to avoid a miscarriage of justice. The
proceedings shall be terminated within thirty (30) days from the order granting it. [italics supplied]
In other words, a motion to reopen a criminal case is not the proper procedural recourse when there is
already a final judgment of conviction. This rule is consistent with the doctrine of finality of judgment which
Judge Pinto failed to apply. "The doctrine of finality of judgment, which is grounded on fundamental
considerations of public policy and sound practice, dictates that at the risk of occasional error, the
judgments of the courts must become final and executory at some definite date set by law."
4
rll In this case,
the final decision of the CA should have been given effect.
Moreover, Judge Pinto should have respected the final decision of a higher court, instead of replacing it with
her own decision.
5
rll We have previously ruled that a judge cannot amend a final decision, more so where the
decision was promulgated by an appellate court.
6
rll As aptly observed by the OCA:
Judge Pinto ought to know her place in the judicial ladder. In Lamberto P. Villaflor vs. Judge Romanito A.
Amatong (A.M. No. MTJ-00-1333, November 15, 2000), the High Court could not have been more emphatic,
thus: "Inferior courts must be modest enough to consciously realize the position that they occupy in the
interrelation and operation of the integrated judicial system of the nation. Occupying as (she) does a court
much lower in rank than the Court of Appeals, (Judge Ofelia Tuazon Pinto) owes respect to the latter and
should, of necessity, defer to the orders of the higher court. The appellate jurisdiction of a higher court
would be rendered meaningless if a lower court may, with impunity, disregard and disobey it.
7
rll (italics
supplied)
In the first place, even granting that there is an available procedural remedy to question the final decision of
the CA, such procedural recourse is beyond the scope of Judge Pintos judicial authority. The matter of the
accused-movants denial of due process, as the case may be, should have been brought up to the CA or with
the Court in an appropriate petition. Judge Pinto cannot relax mandatory rules to justify the award of judicial
reliefs that are beyond her judicial authority to give.
Even granting that Judge Pinto had been motivated by good intentions leading her to disregard the laws and
rules of procedure, these personal motivations cannot relieve her from the administrative consequences of
her actions as they affect her competency and conduct as a judge in the discharge of her official functions.
We have previously held that when a law or a rule is basic, judges owe it to their office to simply apply the
law.
8
rl l "Anything less is gross ignorance of the law."
9
rl l There is gross ignorance of the law when an error
committed by the judge was "gross or patent, deliberate or malicious."
10
rl l It may also be committed when a
judge ignores, contradicts or fails to apply settled law and jurisprudence because of bad faith, fraud,
dishonesty or corruption.
11
rll Gross ignorance of the law or incompetence cannot be excused by a claim of
good faith.
12
rl l
In this case, Judge Pintos utter disregard to apply settled laws and rules of procedure constitutes gross
ignorance of the law which merits administrative sanction. Section 8(9), Rule 140 of the Rules of Court
classifies gross ignorance as a serious charge with the following imposable penalties:
1. Dismissal from the service, forfeiture of all or part of the benefits as the Court may determine, and
disqualification from reinstatement or appointment to any public office, including government-owned or
controlled corporations. Provided, however, that the forfeiture of benefits shall in no case include accrued
leave credits;
2. Suspension from office without salary and other benefits for more than three (3) but not exceeding six
(6) months; or
3. A fine of more than P 20,000.00 but not exceeding P 40,000.00.
13
rl l
We note that this not the first time that we found Judge Pinto administratively liable. We found her liable in
two other administrative cases. In Pineda v. Pinto,
14
rll the Court reprimanded Judge Pinto for charges of gross
inefficiency and neglect of duty. In A1arcos v. Pinto,
15
rll we found Judge Pinto liable of simple misconduct and
imposed a fine in the amount of P 10,000.00 for charges of gross ignorance of the law, partiality and
knowingly rendering an unjust judgment/order.
In both cases, we sternly warned Judge Pinto that a repetition of the same or similar act shall be dealt with
more severely. Judge Pinto's continued failure to live up to the exacting standards of her office is
clear.
16
rll Her escalating violations, taken collectively, raise the question of her competency in continuing to
perform the functions of a magistrate.
17
rll Bearing this in mind and the warnings she earlier received from the
Court, we find the imposition of the supreme penalty of dismissal from the service justified.
WHEREFORE, premises considered, Judge Ofelia T. Pinto, Presiding Judge of the Regional Trial Court,
Branch 60, Angeles City, Pampanga, is found GUlLTY of Gross Ignorance of the Law and is
hereby DISMISSED FROM THE SERVICE, with forfeiture of all retirement benefits, except accrued leave
credits, and with prejudice to re-employment in any branch, agency or instrumentality of the government,
including government-owned or controlled corporations.rll brr
SO ORDERED.






SECOND DIVISION
[G.R. NO. 139596 - January 24, 2006]
CHARLES CU-UNJIENG, Petitioner, v. HON. COURT OF APPEALS
and UNI0N BANK OF THE PHILIPPINES, Respondents.
D E C I S I O N
GARCIA, J.:
By this Petition for Review on Certiorari, petitioner Charles Cu-
Unjieng seeks the reversal of the following issuances of the Court of
Appeals (CA) in CA-G.R. CV No. 8177-B-UDK, entitled Charles Cu-
Unjieng, plaintiff-appellant v. Union Bank of the Philippines, et al.,
defendants-appellees, to wit:
1. Resolution
1
dated May 10,1999, dismissing, for non-payment
of docket and other lawful fees, petitioner's appeal from an earlier
decision of the Regional Trial Court at Malolos, Bulacan which
dismissed his complaint for specific performance and damages
against respondent Union Bank of the Philippines and others; andcralawlibrary
2. Resolution
2
dated July 30, 1999 which denied petitioner's
Motion for Reconsideration and ordered expunged the appeal brief
thereto attached.
The facts:
Respondent Union Bank of the Philippines (UBP) is the owner of a
parcel of agricultural land with an area of 218,769 square meters
situated in Barangay Sta. Maria, San Miguel, Bulacan and registered
in its name under Transfer Certificate of Title (TCT) No. TC-1062 of
the Registry of Deeds of Bulacan.
Sometime in January 1994, UBP caused the posting on the bulletin
boards of its branch offices of a three-page list of acquired realty
assets available for sale to interested parties. Included in said list
was the aforementioned parcel of land, offered to be sold
for P2,200,000.00.
Petitioner, through a letter
3
dated April 11, 1994 and addressed to
Joselito P. Valera, manager of UBP's Acquired Assets Department,
offered to buy the subject property for a lesser amount
of P2,078,305.50, payable as follows: 50% as down payment with
the balance to be paid in equal monthly installments over a period
of two (2) years. Petitioner explained that his offer for an amount
lesser than UBP's asking price was on account of five (5) tenants
occupying the subject land who were allegedly
demandingP500,000.00 to voluntarily vacate the same.
As proof of his interest to buy theproperty, petitioner tendered PCIB
Check No. 565827 for P103,915.27, purportedly representing 10%
of the 50% down payment as earnest money or deposit. UBP
acknowledged receipt thereof by way of Union Bank Receipt No.
495081 dated April 11, 1994.
On August 30, 1994, petitioner wrote a follow-up letter to UBP
inquiring on the status of his offer to buy the subject premises.
4

Via a reply-letter dated August 31, 1994, the manager of UBP's
Acquired Assets Department advised petitioner that his offer to
purchase is yet to be acted upon because the bank was still awaiting
the opinion of its legal division regarding the sale of "CARPable"
agricultural assets acquired by the bank.
5

As it turned out, UBP rejected petitioner's offer as shown by the fact
that in another letter
6
dated December 19, 1994, the bank informed
petitioner that his offer could not be favorably acted upon on
account of the legal division's opinion that sales of lands covered by
the Comprehensive Agrarian Reform Law without prior Department
of Agrarian Reform (DAR) approval are considered null and void.
Accordingly, UBP advised petitioner to pick up the refund of
his P103,915.27 "earnest money" at the bank's disbursing unit.
Unable to accept UBP's rejection of his offer, petitioner, through
counsel, made a formal demand
7
for the bank to comply with its
obligation to transfer and deliver the title of the subject property to
him by executing the proper deed of conveyance, under the terms
and conditions set forth in his April 11, 1994 offer.
Responding thereto, UBP, thru its counsel, Atty. Luzano, in a
letter
8
dated July 19, 1995, reiterated the bank's rejection of
petitioner's offer as "the land being carpable could only be
disposed of by the bank either thru Voluntary Offer to Sell (VOS) or
compulsory acquisition, the procedure of which is outlined in Sec.
16" of Republic Act (RA) No. 6657.
It was against the foregoing backdrop of events that, on February 6,
1997, in the Regional Trial Court (RTC) at Malolos, Bulacan,
petitioner filed his complaint
9
in this case for Specific Performance
and Damages against UBP, impleading as co-defendant in the suit
the Register of Deeds of Bulacan. Docketed as Civil Case No. 80-M-
97 and raffled to Branch 9 of the court, the complaint principally
sought UBP's compliance with an alleged perfected contract of sale
between it and petitioner relative to the parcel of land in question.
More specifically, the complaint prays for a judgment ordering UBP
to:
a) accept payments from the plaintiff [petitioner] for the sale of the
Property in accordance with the terms and conditions of the letter
dated 11 April 1994;
b) execute a Deed of Absolute Sale over the Property covered by
TCT No. TC 1062 of the Registry of Deeds of the Province of Bulacan
upon the plaintiff's full payment of the amount of Two Million
Seventy Eight Thousand Three Hundred Five & 50/100
(P2,078,305.50), failing in which, the deputy sheriff should be
ordered to execute such deed and the Registry of Deeds to cancel
the title of the Bank and issue a new one in favor of the plaintiff;
c) pay plaintiff the sum of Five Hundred Thousand Pesos
(P500,000.00) as moral damages;
d) pay plaintiff the sum of Five Hundred Thousand Pesos
(P500,000.00) as exemplary damages;
e) pay plaintiff the sum of Four Hundred Thousand Pesos
(P400,000.00) as attorney's fees; andcralawlibrary
f) pay the costs of the suit.
Other reliefs, just and equitable under the premises, are likewise
respectfully prayed for.
After due proceedings, the trial court, in a decision dated
September 1, 1998,
10
upon a finding that no perfected contract of
sale transpired between the parties, dismissed petitioner's
complaint for lack of sufficient cause of action, thus:
WHEREFORE, on the basis of the evidence adduced and the
laws/jurisprudence applicable thereon, judgment is hereby rendered
DISMISSING the complaint in the above entitled case for want of
sufficient cause of action as well as the defendant's counterclaim for
damages and attorney's fees for lack of proof to warrant the same.
However, defendant Union Bank of the Philippines is ordered to
reimburse plaintiff Charles Cu-Unjieng the amount of P103,915.27
representing the face value of PCIBank Check No. 565827 tendered
by the latter to the former as purported "earnest money", with
interest thereon at the prevailing rates of interest periodically
bestowed by UBP to its savings depositors from April 11, 1994,
through the succeeding years, and until the full amount thereof
shall have been delivered to the plaintiff.
No pronouncement as to costs.
SO ORDERED.
With his motion for reconsideration having been denied, petitioner
filed with the trial court a Notice of Appeal
11
therein making known
that he is taking an appeal from the adverse decision to the CA.
Acting thereon, the trial court issued an Order
12
directing the
elevation of the records of the case to the CA, whereat petitioner's
appeal was docketed as CA-G.R. CV No. 8177-B-UDK.
As things would have it, in the herein first assailed Resolution
dated May 10, 1999, the CA dismissed petitioner's appeal for
nonpayment of the required docket and other lawful appeal fees, to
wit:
For failure of the appellant [petitioner] to pay the docket and other
lawful fees (Sec. 4, Rule 41, 1997 Rules of Civil Procedure), the
Court Resolved to DISMISS the appeal pursuant to Sec. 1(c), Rule
50 of the same Rule.
SO ORDERED.
13

Petitioner filed a Motion for Reconsideration, attaching thereto his
appellant's brief. However, in a subsequent Resolution dated July
30, 1999,
14
the appellate court denied the motion and even
expunged from the record the appellant's brief thereto attached:
Acting on the motion of the plaintiff-appellant [petitioner] for a
reconsideration of the Resolution of May 10, 1999, which dismissed
the appeal for the reason stated therein, and considering the
opposition interposed thereto by defendant-appellee [respondent]
Union Bank of the Philippines and it appearing that the filing of the
notice of appeal of November 5, 1988, was not accompanied by the
full and correct payment of the corresponding appellate court docket
and other lawful fees, and for such tardiness of more than four (4)
months, the Court resolved to DENY the motion for reconsideration
and the attached brief thereto ordered EXPUNGED.
In Pedrosa v. Hill, 257 SCRA 373, the Supreme Court, citing Rodillas
v. Commission on Elections (245 SCRA 702 aptly said:
xxx the mere filing of the notice of appeal was not enough. It should
be accompanied by the payment of the correct amount of appeal
fee. In other words, the payment of the full amount of the docket
fee is an indispensable step for the perfection of an appeal. In both
original and appellate cases, the court acquires jurisdiction over the
case only upon the payment of the prescribed docket fees. Well-
rooted is the principle that perfection of an appeal within the
statutory or reglementary period is not only mandatory but also
jurisdictional and failure to do so renders the questioned decision
final and executory, and deprives the appellate court or body of
jurisdiction to alter the final judgment much less to entertain the
appeal. This requirement of an appeal fee is by no means a mere
technicality of law or procedure. It is an essential requirement
without which the decision appealed from would become final and
executory, as if no appeal was filed at all.
SO ORDERED.
Undaunted, petitioner is now with us via the present recourse
seeking a relaxation of procedural rules and ultimately the reversal
and setting aside of the assailed twin resolutions of the appellate
court.
Petitioner would have the Court view his failure to pay the appeal
docket fees on time as a non-fatal lapse, or a non-jurisdictional
defect which the CA should have ignored in order to attain
substantial justice. Further, petitioner passes the blame to the RTC
clerk of court who allegedly made the erroneous computation of
docket fees.
We are not persuaded.
Doctrinally entrenched is the pronouncement that the right to
appeal is merely statutory and a party seeking to avail of that right
must comply with the statute or rules.
15

Rule 41, Section 4, of the 1997 Rules of Civil Procedure provides:
SEC. 4. Appellate court docket and other lawful fees. - Within the
period for taking an appeal, the appellant shall pay to the clerk of
the court which rendered the judgment or final order appealed from,
the full amount of the appellate court docket and other lawful fees.
Proof of payment of said fees shall be transmitted to the appellate
court together with the original record or the record on appeal.
Well-settled is the rule that payment of the docket and other legal
fees within the prescribed period is both mandatory and
jurisdictional,
16
noncompliance with which is fatal to an appeal. For,
to stress, appeal is not a matter of right, but a mere statutory
privilege.
17

An ordinary appeal from a decision or final order of the RTC to the
CA must be made within fifteen (15) days from notice.
18
And within
this period, the full amount of the appellate court docket and other
lawful fees must be paid to the clerk of the court which rendered the
judgment or final order appealed from.
Time and again, this Court has consistently held that full payment of
docket fees within the prescribed period is mandatory for the
perfection of an appeal. Without such payment, the appeal is not
perfected and the appellate court does not acquire jurisdiction to
entertain the appeal, thereby rendering the decision sought to be
appealed final and executory.
19

For sure, nonpayment of the appellate court docket and other lawful
fees within the reglementary period as provided under Section 4,
Rule 41, supra, is a ground for the dismissal of an appeal under
Section 1(c) of Rule 50, to wit:
SECTION 1. Grounds for dismissal of appeal. - An appeal may be
dismissed by the Court of Appeals, on its own motion or on that of
the appellee, on the following grounds:
x x x
c. Failure of the appellant to pay the docket and other lawful fees as
provided in section 4 of Rule 41; xxx
This Court has invariably sustained the CA's dismissal on technical
grounds under the aforequoted provision unless considerations of
equity and substantial justice present cogent reasons to hold
otherwise. True, the rules may be relaxed but only for persuasive
and weighty reasons, to relieve a litigant of an injustice
commensurate with his failure to comply with the prescribed
procedure.
20
So it is that in La Salette College v. Victor Pilotin,
21
we
held:
Notwithstanding the mandatory nature of the requirement of
payment of appellate docket fees, we also recognize that its strict
application is qualified by the following: first, failure to pay those
fees within the reglementary period allows only discretionary, not
automatic, dismissal; second, such power should be used by the
court in conjunction with its exercise of sound discretion in
accordance with the tenets of justice and fair play, as well as with a
great deal of circumspection in consideration of all attendant
circumstances
Then, too, in Mactan Cebu International Airport Authority (MCIAA)
v. Mangubat,
22
we held that late payment of docket fees may be
admitted when the party showed willingness to abide by the Rules
by immediately paying the required fees. Mactan,however, cannot
be a source of comfort for herein petitioner. For there, the appellate
docket fees were paid six (6) days after the timely filing of the
notice of appeal. Unlike in Mactan, payment of the appellate docket
fees in this case was effected by petitioner only after four (4)
months following the expiration of the reglementary period to take
an appeal.
With the reality obtaining in this case that payment of the appellate
docket fees was belatedly made four (4) months after the lapse of
the period for appeal, it appears clear to us that the CA did not
acquire jurisdiction over petitioner's appeal except to order its
dismissal,
23
as it rightfully did. Thus, the September 1, 1998
decision of the RTC has passed to the realm of finality and became
executory by operation of law.
We must emphasize that invocation of substantial justice is not a
magical incantation that will automatically compel this Court to
suspend procedural rules. Rules of procedure are not to be belittled
or dismissed simply because their non-observance may have
resulted in prejudice to a party's substantive rights. Like all rules,
they are required to be followed. So it must be here.
WHEREFORE, petition is DENIED and the assailed resolutions
dated May 10,1999 and July 30, 1999 of the Court of
Appeals AFFIRMED.
Costs against petitioner.
SO ORDERED.



SECOND DIVISION
G.R. No. 173559 : January 7, 2013
LETICIA DIONA, represented by her Attorney-in-Fact, MARCELINA
DIONA, Petitioner, v.ROMEO A. BALANGUE, SONNY A. BALANGUE, REYNALDO A. BALANGUE,
and ESTEBAN A. BALANGUE, JR., Respondent.
D E C I S I O N
DEL CASTILLO, J.:
The great of a relief neither sought by the party in whose favor it was given not supported by the
evidence presented violates the opposing partys right to due process and may be declared void ab
initio in a proper proceeding.
This Petition for Review on Certiorari
1
assails the November 24, 2005 Resolution
2
of the Court of
Appeals (CA) issued in G.R. SP No. 85541 which granted the Petition for Annulment of Judgment
3
filed
by the respondents seeking to nullify that portion of the October 17, 2000 Decision
4
of the Regional
Trial Court (RTC), Branch 75, Valenzuela City awarding petitioner 5% monthly interest rate for the
principal amount of the loan respondent obtained from her.
This Petition likewise assails the CAs June 26, 2006 Resolution
5
denying petitioners Motion for
Reconsideration.
Factual Antecedents
The facts of this case are simple and undisputed.
On March 2, 1991, respondents obtained a loan of P45,000.00 from petitioner payable in six months
and secured by a Real Estate Mortgage
6
over their 202-square meter property located in Marulas,
Valenzuela and covered by Transfer Certificate of Title (TCT) No. V-12296.
7
When the debt became
due, respondents failed to pay notwithstanding demand. Thus, on September 17, 1999, petitioner filed
with the RTC a Complaint
8
praying that respondents be ordered:cralawlibrary
(a) To pay petitioner the principal obligation of P45,000.00, with interest thereon at the rate of 12%
per annum, from 02 March 1991 until the full obligation is paid.
(b) To pay petitioner actual damages as may be proven during the trial but shall in no case be less
than P10,000.00; P25,000.00 by way of attorneys fee, plus P2,000.00 per hearing as appearance fee.
(c) To issue a decree of foreclosure for the sale at public auction of the aforementioned parcel of land,
and for the disposition of the proceeds thereof in accordance with law, upon failure of the respondents
to fully pay petitioner within the period set by law the sums set forth in this complaint.
(d) Costs of this suit.rbl rl l l brr
Other reliefs and remedies just and equitable under the premises are likewise prayed for.
9
(Emphasis
supplied)
Respondents were served with summons thru respondent Sonny A. Balangue (Sonny). On October 15,
1999, with the assistance of Atty. Arthur C. Coroza (Atty. Coroza) of the Public Attorneys Office, they
filed a Motion to Extend Period to Answer. Despite the requested extension, however, respondents
failed to file any responsive pleadings. Thus, upon motion of the petitioner, the RTC declared them in
default and allowed petitioner to present her evidence ex parte.
10
rl1
Ruling of the RTC sought to be annulled.
In a Decision
11
dated October 17, 2000, the RTC granted petitioners Complaint. The dispositive portion
of said Decision reads:cralawli brary
WHEREFORE, judgment is hereby rendered in favor of the petitioner, ordering the respondents to pay
the petitioner as follows:cralawlibrary
a) the sum of FORTY FIVE THOUSAND (P45,000.00) PESOS, representing the unpaid principal loan
obligation plus interest at 5% per month [sic] reckoned from March 2, 1991, until the same is fully
paid;
b) P20,000.00 as attorneys fees plus cost of suit;
c) in the event the [respondents] fail to satisfy the aforesaid obligation, an order of foreclosure shall
be issued accordingly for the sale at public auction of the subject property covered by Transfer
Certificate of Title No. V-12296 and the improvements thereon for the satisfaction of the petitioners
claim.rbl rl l l brr
SO ORDERED.
12
(Emphasis supplied)
Subsequently, petitioner filed a Motion for Execution,
13
alleging that respondents did not interpose a
timely appeal despite receipt by their former counsel of the RTCs Decision on November 13, 2000.
Before it could be resolved, however, respondents filed a Motion to Set Aside Judgment
14
dated
January 26, 2001, claiming that not all of them were duly served with summons. According to the
other respondents, they had no knowledge of the case because their co-respondent Sonny did not
inform them about it. They prayed that the RTCs October 17, 2000 Decision be set aside and a new
trial be conducted.
But on March 16, 2001, the RTC ordered
15
the issuance of a Writ of Execution to implement its October
17, 2000 Decision. However, since the writ could not be satisfied, petitioner moved for the public
auction of the mortgaged property,
16
which the RTC granted.
17
In an auction sale conducted on
November 7, 2001, petitioner was the only bidder in the amount of P420,000.00. Thus, a Certificate of
Sale
18
was issued in her favor and accordingly annotated at the back of TCT No. V-12296.
Respondents then filed a Motion to Correct/Amend Judgment and To Set Aside Execution Sale
19
dated
December 17, 2001, claiming that the parties did not agree in writing on any rate of interest and that
petitioner merely sought for a 12% per annum interest in her Complaint. Surprisingly, the RTC
awarded 5% monthly interest (or 60% per annum) from March 2, 1991 until full payment.
Resultantly, their indebtedness inclusive of the exorbitant interest from March 2, 1991 to May 22,
2001 ballooned from P124,400.00 toP652,000.00.
In an Order
20
dated May 7, 2002, the RTC granted respondents motion and accordingly modified the
interest rate awarded from 5% monthly to 12% per annum. Then on August 2, 2002, respondents
filed a Motion for Leave To Deposit/Consign Judgment Obligation
21
in the total amount
of P126,650.00.
22
rl1
Displeased with the RTCs May 7, 2002 Order, petitioner elevated the matter to the CA via a Petition
for Certiorari
23
under Rule 65 of the Rules of Court. On August 5, 2003, the CA rendered a
Decision
24
declaring that the RTC exceeded its jurisdiction in awarding the 5% monthly interest but at
the same time pronouncing that the RTC gravely abused its discretion in subsequently reducing the
rate of interest to 12% per annum. In so ruling, the CA ratiocinated:cralawlibrary
Indeed, We are convinced that the Trial Court exceeded its jurisdiction when it granted 5% monthly
interest instead of the 12% per annum prayed for in the complaint. However, the proper remedy is
not to amend the judgment but to declare that portion as a nullity. Void judgment for want of
jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation
(Leonor v. CA, 256 SCRA 69). No legal rights can emanate from a resolution that is null and void
(Fortich v. Corona, 312 SCRA 751).
From the foregoing, the remedy of the respondents is to have the Court declare the portion of the
judgment providing for a higher interest than that prayed for as null and void for want of or in excess
of jurisdiction. A void judgment never acquire[s] finality and any action to declare its nullity does not
prescribe (Heirs of Mayor Nemencio Galvez v. CA, 255 SCRA 672).
WHEREFORE, foregoing premises considered, the Petition having merit, is hereby GIVEN DUE
COURSE. Resultantly, the challenged May 7, 2002 and September 5, 2000 orders of Public Respondent
Court are hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion
amounting to lack or in excess of jurisdiction. No costs.
SO ORDERED.
25
(Emphases in the original; italics supplied.)
Proceedings before the Court of Appeals
Taking their cue from the Decision of the CA in the special civil action for certiorari, respondents filed
with the same court a Petition for Annulment of Judgment and Execution Sale with Damages.
26
They
contended that the portion of the RTC Decision granting petitioner 5% monthly interest rate is in gross
violation of Section 3(d) of Rule 9 of the Rules of Court and of their right to due process. According to
respondents, the loan did not carry any interest as it was the verbal agreement of the parties that in
lieu thereof petitioners family can continue occupying respondents residential building located in
Marulas, Valenzuela for free until said loan is fully paid.
Ruling of the Court of Appeals
Initially, the CA denied due course to the Petition.
27
Upon respondents motion, however, it reinstated
and granted the Petition. In setting aside portions of the RTCs October 17, 2000 Decision, the CA
ruled that aside from being unconscionably excessive, the monthly interest rate of 5% was not agreed
upon by the parties and that petitioners Complaint clearly sought only the legal rate of 12% per
annum. Following the mandate of Section 3(d) of Rule 9 of the Rules of Court, the CA concluded that
the awarded rate of interest is void for being in excess of the relief sought in the Complaint. It ruled
thus:cralawlibrary
WHEREFORE, respondents motion for reconsideration is GRANTED and our resolution dated October
13, 2004 is, accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered ordering the
ANNULMENT OF:cralawlibrary
(a) public respondents impugned October 17, 2000 judgment, insofar as it awarded 5% monthly
interest in favor of petitioner; and
(b) all proceedings relative to the sale at public auction of the property titled in respondents names
under Transfer Certificate of Title No. V-12296 of the Valenzuela registry.rbl rl l l brr
The judgment debt adjudicated in public respondents impugned October 17, 2000 judgment is,
likewise, ordered RECOMPUTED at the rate of 12% per annum from March 2, 1991. No costs.
SO ORDERED.
28
(Emphases in the original.)
Petitioner sought reconsideration, which was denied by the CA in its June 26, 2006 Resolution.
29
rl1
Issues
Hence, this Petition anchored on the following grounds:cralawl ibrary
I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR OF LAW WHEN IT
GRANTED RESPONDENTS PETITION FOR ANNULMENT OF JUDGMENT AS A SUBSTITUTE OR
ALTERNATIVE REMEDY OF A LOST APPEAL.
II. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR AND
MISAPPREHENSION OF LAW AND THE FACTS WHEN IT GRANTED RESPONDENTS PETITION FOR
ANNULMENT OF JUDGMENT OF THE DECISION OF THE REGIONAL TRIAL COURT OF VALENZUELA,
BRANCH 75 DATED OCTOBER 17, 2000 IN CIVIL CASE NO. 241-V-99, DESPITE THE FACT THAT SAID
DECISION HAS BECOME FINAL AND ALREADY EXECUTED CONTRARY TO THE DOCTRINE OF
IMMUTABILITY OF JUDGMENT.
30
rl1
Petitioners Arguments
Petitioner claims that the CA erred in partially annulling the RTCs October 17, 2000 Decision. She
contends that a Petition for Annulment of Judgment may be availed of only when the ordinary
remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available
through no fault of the claimant. In the present case, however, respondents had all the opportunity to
question the October 17, 2000 Decision of the RTC, but because of their own inaction or negligence
they failed to avail of the remedies sanctioned by the rules. Instead, they contented themselves with
the filing of a Motion to Set Aside Judgment and then a Motion to Correct/Amend Judgment and to Set
Aside Execution Sale.
Petitioner likewise argues that for a Rule 47 petition to prosper, the same must either be based on
extrinsic fraud or lack of jurisdiction. However, the allegations in respondents Rule 47 petition do not
constitute extrinsic fraud because they simply pass the blame to the negligence of their former
counsel. In addition, it is too late for respondents to pass the buck to their erstwhile counsel
considering that when they filed their Motion to Correct/Amend Judgment and To Set Aside Execution
Sale they were already assisted by their new lawyer, Atty. Reynaldo A. Ruiz, who did not also avail of
the remedies of new trial, appeal, etc. As to the ground of lack of jurisdiction, petitioner posits that
there is no reason to doubt that the RTC had jurisdiction over the subject matter of the case and over
the persons of the respondents.
While conceding that the RTC patently made a mistake in awarding 5% monthly interest, petitioner
nonetheless invokes the doctrine of immutability of final judgment and contends that the RTC Decision
can no longer be corrected or modified since it had long become final and executory. She likewise
points out that respondents received a copy of said Decision on November 13, 2000 but did nothing to
correct the same. They did not even question the award of 5% monthly interest when they filed their
Motion to Set Aside Judgment which they anchored on the sole ground of the RTCs lack of jurisdiction
over the persons of some of the respondents.
Respondents Arguments
Respondents do not contest the existence of their obligation and the principal amount thereof. They
only seek quittance from the 5% monthly interest or 60% per annum imposed by the RTC.
Respondents contend that Section (3)d of Rule 9 of the Rules of Court is clear that when the
defendant is declared in default, the court cannot grant a relief more than what is being prayed for in
the Complaint. A judgment which transgresses said rule, according to the respondents, is void for
having been issued without jurisdiction and for being violative of due process of law.
Respondents maintain that it was through no fault of their own, but through the gross negligence of
their former counsel, Atty. Coroza, that the remedies of new trial, appeal or petition for relief from
judgment were lost. They allege that after filing a Motion to Extend Period to Answer, Atty. Coroza did
not file any pleading resulting to their being declared in default. While the said lawyer filed on their
behalf a Motion to Set Aside Judgment dated January 26, 2001, he however took no steps to appeal
from the Decision of the RTC, thereby allowing said judgment to lapse into finality. Citing Legarda v.
Court of Appeals,
31
respondents aver that clients are not always bound by the actions of their counsel,
as in the present case where the clients are to lose their property due to the gross negligence of their
counsel.
With regard to petitioners invocation of immutability of judgment, respondents argue that said
doctrine applies only to valid and not to void judgments.
Our Ruling
The petition must fail.
We agree with respondents that the award of 5% monthly interest violated their right to due process
and, hence, the same may be set aside in a Petition for Annulment of Judgment filed under Rule 47 of
the Rules of Court.
Annulment of judgment under Rule 47; an exception to the final judgment rule; grounds therefor.
A Petition for Annulment of Judgment under Rule 47 of the Rules of Court is a remedy granted only
under exceptional circumstances where a party, without fault on his part, has failed to avail of the
ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies. Said rule
explicitly provides that it is not available as a substitute for a remedy which was lost due to the partys
own neglect in promptly availing of the same. "The underlying reason is traceable to the notion that
annulling final judgments goes against the grain of finality of judgment. Litigation must end and
terminate sometime and somewhere, and it is essential to an effective administration of justice that
once a judgment has become final, the issue or cause involved therein should be laid to rest."
32
rl1
While under Section 2, Rule 47
33
of the Rules of Court a Petition for Annulment of Judgment may be
based only on the grounds of extrinsic fraud and lack of jurisdiction, jurisprudence recognizes lack of
due process as additional ground to annul a judgment.
34
In Arcelona v. Court of Appeals,
35
this Court
declared that a final and executory judgment may still be set aside if, upon mere inspection thereof,
its patent nullity can be shown for having been issued without jurisdiction or for lack of due process of
law.
Grant of 5% monthly interest is way beyond the 12% per annum interest sought in the Complaint and
smacks of violation of due process.
It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess of what is
being sought by the party. They cannot also grant a relief without first ascertaining the evidence
presented in support thereof. Due process considerations require that judgments must conform to and
be supported by the pleadings and evidence presented in court. In Development Bank of the
Philippines v. Teston,
36
this Court expounded that:cralawl ibrary
Due process considerations justify this requirement. It is improper to enter an order which exceeds
the scope of relief sought by the pleadings, absent notice which affords the opposing party an
opportunity to be heard with respect to the proposed relief. The fundamental purpose of the
requirement that allegations of a complaint must provide the measure of recovery is to prevent
surprise to the defendant.
Notably, the Rules is even more strict in safeguarding the right to due process of a defendant who was
declared in default than of a defendant who participated in trial. For instance, amendment to conform
to the evidence presented during trial is allowed the parties under the Rules.
37
But the same is not
feasible when the defendant is declared in default because Section 3(d), Rule 9 of the Rules of Court
comes into play and limits the relief that may be granted by the courts to what has been prayed for in
the Complaint. It provides:cralawl ibrary
(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.
The raison dtre in limiting the extent of relief that may be granted is that it cannot be presumed that
the defendant would not file an Answer and allow himself to be declared in default had he known that
the plaintiff will be accorded a relief greater than or different in kind from that sought in the
Complaint.
38
No doubt, the reason behind Section 3(d), Rule 9 of the Rules of Court is to safeguard
defendants right to due process against unforeseen and arbitrarily issued judgment. This, to the mind
of this Court, is akin to the very essence of due process. It embodies "the sporting idea of fair
play"
39
and forbids the grant of relief on matters where the defendant was not given the opportunity to
be heard thereon.
In the case at bench, the award of 5% monthly interest rate is not supported both by the allegations
in the pleadings and the evidence on record. The Real Estate Mortgage
40
executed by the parties does
not include any provision on interest. When petitioner filed her Complaint before the RTC, she alleged
that respondents borrowed from her "the sum of FORTY-FIVE THOUSAND PESOS (P45,000.00), with
interest thereon at the rate of 12% per annum"
41
and sought payment thereof. She did not allege or
pray for the disputed 5% monthly interest. Neither did she present evidence nor testified thereon.
Clearly, the RTCs award of 5% monthly interest or 60% per annum lacks basis and disregards due
process. It violated the due process requirement because respondents were not informed of the
possibility that the RTC may award 5% monthly interest. They were deprived of reasonable
opportunity to refute and present controverting evidence as they were made to believe that the
complainant petitioner was seeking for what she merely stated in her Complaint.
Neither can the grant of the 5% monthly interest be considered subsumed by petitioners general
prayer for "other reliefs and remedies just and equitable under the premises x x x."
42
To repeat, the
courts grant of relief is limited only to what has been prayed for in the Complaint or related thereto,
supported by evidence, and covered by the partys cause of action.
43
Besides, even assuming that the
awarded 5% monthly or 60% per annum interest was properly alleged and proven during trial, the
same remains unconscionably excessive and ought to be equitably reduced in accordance with
applicable jurisprudence. In Bulos, Jr. v. Yasuma,
44
this Court held:cralawli brary
In the case of Ruiz v. Court of Appeals, citing the cases of Medel v. Court of Appeals, Garcia v. Court
of Appeals, Spouses Bautista v. Pilar Development Corporation and the recent case of Spouses
Solangon v. Salazar, this Court considered the 3% interest per month or 36% interest per annum as
excessive and unconscionable. Thereby, the Court, in the said case, equitably reduced the rate of
interest to 1% interest per month or 12% interest per annum. (Citations omitted)
It is understandable for the respondents not to contest the default order for, as alleged in their
Comment, "it is not their intention to impugn or run away from their just and valid
obligation."
45
Nonetheless, their waiver to present evidence should never be construed as waiver to
contest patently erroneous award which already transgresses their right to due process, as well as
applicable jurisprudence.
Respondents former counsel was grossly negligent in handling the case of his clients; respondents did
not lose ordinary remedies of new trial, petition for relief, etc. through their own fault.
Ordinarily, the mistake, negligence or lack of competence of counsel binds the client. This is based on
the rule that any act performed by a counsel within the scope of his general or implied authority is
regarded as an act of his client. A recognized exception to the rule is when the lawyers were grossly
negligent in their duty to maintain their clients cause and such amounted to a deprivation of their
clients property without due process of law.
46
In which case, the courts must step in and accord relief
to a client who suffered thereby.
47
rl1
The manifest indifference of respondents former counsel in handling the cause of his client was
already present even from the beginning. It should be recalled that after filing in behalf of his clients a
Motion to Extend Period to Answer, said counsel allowed the requested extension to pass without filing
an Answer, which resulted to respondents being declared in default. His negligence was aggravated by
the fact that he did not question the awarded 5% monthly interest despite receipt of the RTC Decision
on November 13, 2000.
48
A simple reading of the dispositive portion of the RTC Decision readily
reveals that it awarded exorbitant and unconscionable rate of interest. Its difference from what is
being prayed for by the petitioner in her Complaint is so blatant and very patent. It also defies
elementary jurisprudence on legal rate of interests. Had the counsel carefully read the judgment it
would have caught his attention and compelled him to take the necessary steps to protect the interest
of his client. But he did not. Instead, he filed in behalf of his clients a Motion to Set Aside
Judgment
49
dated January 26, 2001 based on the sole ground of lack of jurisdiction, oblivious to the
fact that the erroneous award of 5% monthly interest would result to his clients deprivation of
property without due process of law. Worse, he even allowed the RTC Decision to become final by not
perfecting an appeal. Neither did he file a petition for relief therefrom. It was only a year later that the
patently erroneous award of 5% monthly interest was brought to the attention of the RTC when
respondents, thru their new counsel, filed a Motion to Correct/Amend Judgment and To Set Aside
Execution Sale. Even the RTC candidly admitted that it "made a glaring mistake in directing the
defendants to pay interest on the principal loan at 5% per month which is very different from what
was prayed for by the plaintiff."
50
rl1
"A lawyer owes entire devotion to the interest of his client, warmth and zeal in the maintenance and
defense of his rights and the exertion of his utmost learning and ability, to the end that nothing can be
taken or withheld from his client except in accordance with the law."
51
Judging from how respondents
former counsel handled the cause of his clients, there is no doubt that he was grossly negligent in
protecting their rights, to the extent that they were deprived of their property without due process of
law.
In fine, respondents did not lose the remedies of new trial, appeal, petition for relief and other
remedies through their own fault. It can only be attributed to the gross negligence of their erstwhile
counsel which prevented them from pursuing such remedies. We cannot also blame respondents for
relying too much on their former counsel. Clients have reasonable expectations that their lawyer
would amply protect their interest during the trial of the case.
52
Here,
"respondents are plain and ordinary people x x x who are totally ignorant of the intricacies and
technicalities of law and legal procedures. Being so, they completely relied upon and trusted their
former counsel to appropriately act as their interest may lawfully warrant and require."
53
rl1
As a final word, it is worth noting that respondents principal obligation was only P45,000.00. Due to
their former counsels gross negligence in handling their cause, coupled with the RTCs erroneous,
baseless, and illegal award of 5% monthly interest, they now stand to lose their property and still owe
petitioner a large amount of money. As aptly observed by the CA:cralawl ibrary
x x x If the impugned judgment is not, therefore, rightfully nullified, petitioners will not only end up
losing their property but will additionally owe private respondent the sum ofP232,000.00 plus the legal
interest said balance had, in the meantime, earned. As a court of justice and equity, we cannot, in
good conscience, allow this unconscionable situation to prevail.
54
rl1
Indeed, this Court is appalled by petitioners invocation of the doctrine of immutability of judgment.
Petitioner does not contest as she even admits that the RTC made a glaring mistake in awarding 5%
monthly interest.
55
Amazingly, she wants to benefit from such erroneous award. This Court cannot
allow this injustice to happen.
WHEREFORE, the instant Petition is hereby DENIED and the assailed November 24, 2005 and June 26,
2006 Resolution of the Court of Appeals in CA-G.R. SP No. 85541 are AFFIRMED.
SO ORDERED.























THIRD DIVISION
[G.R. NO. 176667 : November 22, 2007]
ERICSSON TELECOMMUNICATIONS, INC., Petitioner, v. CITY
OF PASIG, represented by its City Mayor, Hon. Vicente P.
Eusebio, et al.
*
, Respondents.
D E C I S I O N
AUSTRIA-MARTINEZ, J.:
Ericsson Telecommunications, Inc. (petitioner), a corporation with
principal office in Pasig City, is engaged in the design, engineering,
and marketing of telecommunication facilities/system. In an
Assessment Notice dated October 25, 2000 issued by the City
Treasurer of Pasig City, petitioner was assessed a business tax
deficiency for the years 1998 and 1999 amounting to P9,466,885.00
and P4,993,682.00, respectively, based on its gross revenues as
reported in its audited financial statements for the years 1997 and
1998. Petitioner filed a Protest dated December 21, 2000, claiming
that the computation of the local business tax should be based
on gross receipts and not on gross revenue.
The City of Pasig (respondent) issued another Notice of Assessment
to petitioner on November 19, 2001, this time based on business
tax deficiencies for the years 2000 and 2001, amounting
to P4,665,775.51 and P4,710,242.93, respectively, based on its
gross revenues for the years 1999 and 2000. Again, petitioner filed
a Protest on January 21, 2002, reiterating its position that the local
business tax should be based on gross receipts and not gross
revenue.
Respondent denied petitioner's protest and gave the latter 30 days
within which to appeal the denial. This prompted petitioner to file a
Petition for Review
1
with the Regional Trial Court (RTC) of Pasig,
Branch 168, praying for the annulment and cancellation of
petitioner's deficiency local business taxes totaling P17,262,205.66.
Respondent and its City Treasurer filed a motion to dismiss on the
grounds that the court had no jurisdiction over the subject matter
and that petitioner had no legal capacity to sue. The RTC denied the
motion in an Order dated December 3, 2002 due to respondents'
failure to include a notice of hearing. Thereafter, the RTC declared
respondents in default and allowed petitioner to present evidence ex
- parte.
In a Decision
2
dated March 8, 2004, the RTC canceled and set aside
the assessments made by respondent and its City Treasurer. The
dispositive portion of the RTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and ordering defendants to CANCEL and SET
ASIDE Assessment Notice dated October 25, 2000 and Notice of
Assessment dated November 19, 2001.
SO ORDERED.
3

On appeal, the Court of Appeals (CA) rendered its Decision
4
dated
November 20, 2006, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby ordered SET
ASIDE and a new one entered DISMISSING the plaintiff/appellee's
complaint WITHOUT PREJUDICE.
SO ORDERED.
5

The CA sustained respondent's claim that the petition filed with the
RTC should have been dismissed due to petitioner's failure to show
that Atty. Maria Theresa B. Ramos (Atty. Ramos), petitioner's
Manager for Tax and Legal Affairs and the person who signed the
Verification and Certification of Non-Forum Shopping, was duly
authorized by the Board of Directors.
Its motion for reconsideration having been denied in a
Resolution
6
dated February 9, 2007, petitioner now comes before
the Court via a Petition for Review on Certiorari under Rule 45 of
the Rules of Court, on the following grounds:
(1) THE COURT OF APPEALS ERRED IN DISMISSING THE CASE FOR
LACK OF SHOWING THAT THE SIGNATORY OF THE VERIFICATION/
CERTIFICATION IS NOT SPECIFICALLY AUTHORIZED FOR AND IN
BEHALF OF PETITIONER.
(2) THE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO
RESPONDENT'S APPEAL, CONSIDERING THAT IT HAS NO
JURISDICTION OVER THE SAME, THE MATTERS TO BE RESOLVED
BEING PURE QUESTIONS OF LAW, JURISDICTION OVER WHICH IS
VESTED ONLY WITH THIS HONORABLE COURT.
(3) ASSUMING THE COURT OF APPEALS HAS JURISDICTION OVER
RESPONDENT'S APPEAL, SAID COURT ERRED IN NOT DECIDING ON
THE MERITS OF THE CASE FOR THE SPEEDY DISPOSITION
THEREOF, CONSIDERING THAT THE DEFICIENCY LOCAL BUSINESS
TAX ASSESSMENTS ISSUED BY RESPONDENT ARE CLEARLY
INVALID AND CONTRARY TO THE PROVISIONS OF THE PASIG
REVENUE CODE AND THE LOCAL GOVERNMENT CODE.
7

After receipt by the Court of respondent's complaint and petitioner's
reply, the petition is given due course and considered ready for
decision without the need of memoranda from the parties.
The Court grants the petition.
First, the complaint filed by petitioner with the RTC was erroneously
dismissed by the CA for failure of petitioner to show that its
Manager for Tax and Legal Affairs, Atty. Ramos, was authorized by
the Board of Directors to sign the Verification and Certification of
Non-Forum Shopping in behalf of the petitioner corporation.
Time and again, the Court, under special circumstances and for
compelling reasons, sanctioned substantial compliance with the rule
on the submission of verification and certification against non-forum
shopping.
8

In General Milling Corporation v. National Labor Relations
Commission,
9
the Court deemed as substantial compliance the
belated attempt of the petitioner to attach to the motion for
reconsideration the board resolution/secretary's certificate, stating
that there was no attempt on the part of the petitioner to ignore the
prescribed procedural requirements.
In Shipside Incorporated v. Court of Appeals,
10
the authority of the
petitioner's resident manager to sign the certification against forum
shopping was submitted to the CA only after the latter dismissed
the petition. The Court considered the merits of the case and the
fact that the petitioner subsequently submitted a secretary's
certificate, as special circumstances or compelling reasons that
justify tempering the requirements in regard to the certificate of
non-forum shopping.
11

There were also cases where there was complete non-compliance
with the rule on certification against forum shopping and yet the
Court proceeded to decide the case on the merits in order to serve
the ends of substantial justice.
12

In the present case, petitioner submitted a Secretary's Certificate
signed on May 6, 2002, whereby Atty. Ramos was authorized to file
a protest at the local government level and to "sign, execute and
deliver any and all papers, documents and pleadings relative to the
said protest and to do and perform all such acts and things as may
be necessary to effect the foregoing."
13

Applying the foregoing jurisprudence, the subsequent submission of
the Secretary's Certificate and the substantial merits of the petition,
which will be shown forthwith, justify a relaxation of the rule.
Second, the CA should have dismissed the appeal of respondent as
it has no jurisdiction over the case since the appeal involves a pure
question of law. The CA seriously erred in ruling that the appeal
involves a mixed question of law and fact necessitating an
examination and evaluation of the audited financial statements and
other documents in order to determine petitioner's tax base.
There is a question of law when the doubt or difference is on what
the law is on a certain state of facts. On the other hand, there is a
question of fact when the doubt or difference is on the truth or
falsity of the facts alleged.
14
For a question to be one of law, the
same must not involve an examination of the probative value of the
evidence presented by the litigants or any of them. The resolution
of the issue must rest solely on what the law provides on the given
set of circumstances. Once it is clear that the issue invites a review
of the evidence presented, the question posed is one of fact. Thus,
the test of whether a question is one of law or of fact is not the
appellation given to such question by the party raising the same;
rather, it is whether the appellate court can determine the issue
raised without reviewing or evaluating the evidence, in which case,
it is a question of law; otherwise it is a question of fact.
15

There is no dispute as to the veracity of the facts involved in the
present case. While there is an issue as to the correct amount of
local business tax to be paid by petitioner, its determination will not
involve a look into petitioner's audited financial statements or
documents, as these are not disputed; rather, petitioner's correct
tax liability will be ascertained through an interpretation of the
pertinent tax laws, i.e., whether the local business tax, as imposed
by the Pasig City Revenue Code (Ordinance No. 25-92) and the
Local Government Code of 1991, should be based on gross receipts,
and not on gross revenue which respondent relied on in computing
petitioner's local business tax deficiency. This, clearly, is a question
of law, and beyond the jurisdiction of the CA.
Section 2(c), Rule 41 of the Rules of Court provides that in all cases
where questions of law are raised or involved, the appeal shall be to
this Court by Petition for Review onCertiorari under Rule 45.
Thus, as correctly pointed out by petitioner, the appeal before the
CA should have been dismissed, pursuant to Section 5(f), Rule 56 of
the Rules of Court, which provides:
Sec. 5. Grounds for dismissal of appeal. - The appeal may be
dismissed motu proprio or on motion of the respondent on the
following grounds:
x x x
(f) Error in the choice or mode of appeal.
x x x
Third, the dismissal of the appeal, in effect, would have sustained
the RTC Decision ordering respondent to cancel the Assessment
Notices issued by respondent, and therefore, would have rendered
moot and academic the issue of whether the local business tax on
contractors should be based on gross receipts or gross revenues.
However, the higher interest of substantial justice dictates that this
Court should resolve the same, to evade further repetition of
erroneous interpretation of the law,
16
for the guidance of the bench
and bar.
As earlier stated, the substantive issue in this case is whether the
local business tax on contractors should be based on gross
receipts or gross revenue.
Respondent assessed deficiency local business taxes on petitioner
based on the latter's gross revenue as reported in its financial
statements, arguing that gross receipts is synonymous with gross
earnings/revenue, which, in turn, includes uncollected earnings.
Petitioner, however, contends that only the portion of the revenues
which were actually and constructively received should be
considered in determining its tax base.
Respondent is authorized to levy business taxes under Section 143
in relation to Section 151 of the Local Government Code.
Insofar as petitioner is concerned, the applicable provision is
subsection (e), Section 143 of the same Code covering contractors
and other independent contractors, to wit:
SEC. 143. Tax on Business. - The municipality may impose taxes on
the following businesses:
x x x
(e) On contractors and other independent contractors, in
accordance with the following schedule:
With gross receipts for the
preceding calendar year in
Amount of
Tax Per
Annum
the amount of:
x x x
(Emphasis supplied)
The above provision specifically refers to gross receipts which
is defined under Section 131 of the Local Government Code, as
follows:
x x x
(n) "Gross Sales or Receipts" include the total amount of money or
its equivalent representing the contract price, compensation or
service fee, including the amount charged or materials supplied with
the services and the deposits or advance payments actually or
constructively received during the taxable quarter for the services
performed or to be performed for another person excluding
discounts if determinable at the time of sales, sales return, excise
tax, and value-added tax (VAT);
x x x
The law is clear. Gross receipts include money or its equivalent
actually or constructively received in consideration of services
rendered or articles sold, exchanged or leased, whether actual or
constructive.
In Commissioner of Internal Revenue v. Bank of Commerce,
17
the
Court interpretedgross receipts as including those which were
actually or constructively received, viz.:
Actual receipt of interest income is not limited to physical
receipt. Actual receipt may either be physical receipt or
constructive receipt. When the depository bank withholds the
final tax to pay the tax liability of the lending bank, there is prior to
the withholding a constructive receipt by the lending bank of the
amount withheld. From the amount constructively received by the
lending bank, the depository bank deducts the final withholding tax
and remits it to the government for the account of the lending
bank. Thus, the interest income actually received by the lending
bank, both physically and constructively, is the net interest plus the
amount withheld as final tax.
The concept of a withholding tax on income obviously and
necessarily implies that the amount of the tax withheld comes from
the income earned by the taxpayer. Since the amount of the tax
withheld constitutes income earned by the taxpayer, then that
amount manifestly forms part of the taxpayer's gross receipts.
Because the amount withheld belongs to the taxpayer, he can
transfer its ownership to the government in payment of his tax
liability. The amount withheld indubitably comes from income of the
taxpayer, and thus forms part of his gross receipts. (Emphasis
supplied)cralawlibrary
Further elaboration was made by the Court in Commissioner of
Internal Revenue v. Bank of the Philippine Islands,
18
in this wise:
Receipt of income may be actual or constructive. We have held that
the withholding process results in the taxpayer's constructive
receipt of the income withheld, to wit:
By analogy, we apply to the receipt of income the rules
on actual andconstructive possession provided in Articles 531 and
532 of our Civil Code.
Under Article 531:
"Possession is acquired by the material occupation of a thing or the
exercise of a right, or by the fact that it is subject to the action of
our will, or by the proper acts and legal formalities established for
acquiring such right."
Article 532 states:
"Possession may be acquired by the same person who is to enjoy it,
by his legal representative, by his agent, or by any person without
any power whatever; but in the last case, the possession shall not
be considered as acquired until the person in whose name the act of
possession was executed has ratified the same, without prejudice to
the juridical consequences of negotiorum gestio in a proper case."
The last means of acquiring possession under Article 531 refers to
juridical acts'the acquisition of possession by sufficient title to which
the law gives the force of acts of possession. Respondent argues
that only items of income actually received should be included in its
gross receipts. It claims that since the amount had already been
withheld at source, it did not have actual receipt thereof.
We clarify. Article 531 of the Civil Code clearly provides that the
acquisition of the right of possession is through the proper acts and
legal formalities established therefor. The withholding process is one
such act. There may not be actual receipt of the income withheld;
however, as provided for in Article 532, possession by any person
without any power whatsoever shall be considered as acquired when
ratified by the person in whose name the act of possession is
executed.
In our withholding tax system, possession is acquired by the payor
as the withholding agent of the government, because the taxpayer
ratifies the very act of possession for the government. There is
thusconstructive receipt. The processes of bookkeeping and
accounting for interest on deposits and yield on deposit substitutes
that are subjected to FWT are indeed for legal purposes'tantamount
to delivery, receipt or remittance.
19

Revenue Regulations No. 16-2005 dated September 1,
2005
20
defined and gave examples of "constructive receipt", to wit:
SEC. 4. 108-4. Definition of Gross Receipts. - - x x x
"Constructive receipt" occurs when the money consideration or its
equivalent is placed at the control of the person who rendered the
service without restrictions by the payor. The following are
examples of constructive receipts:
(1) deposit in banks which are made available to the seller of
services without restrictions;
(2) issuance by the debtor of a notice to offset any debt or
obligation and acceptance thereof by the seller as payment for
services rendered; andcralawlibrary
(3) transfer of the amounts retained by the payor to the account of
the contractor.
There is, therefore, constructive receipt, when the consideration for
the articles sold, exchanged or leased, or the services rendered has
already been placed under the control of the person who sold the
goods or rendered the services without any restriction by the payor.
In contrast, gross revenue covers money or its equivalent actually
or constructively received, including the value of services
rendered or articles sold, exchanged or leased, the payment
of which is yet to be received. This is in consonance with the
International Financial Reporting Standards,
21
which
defines revenue as the gross inflow of economic benefits
(cash, receivables, and other assets) arising from the ordinary
operating activities of an enterprise (such as sales of goods, sales of
services, interest, royalties, and dividends),
22
which is measured at
the fair value of the consideration received or receivable.
23

As aptly stated by the RTC:
"[R]evenue from services rendered is recognized when services
have been performed and are billable." It is "recorded at the
amount received orexpected to be received." (Section E [17] of
the Statements of Financial Accounting Standards No. 1).
24

In petitioner's case, its audited financial statements reflect income
or revenue which accrued to it during the taxable period although
not yet actually or constructively received or paid. This is because
petitioner uses the accrual method of accounting, where income is
reportable when all the events have occurred that fix the taxpayer's
right to receive the income, and the amount can be determined with
reasonable accuracy; the right to receive income, and not the actual
receipt, determines when to include the amount in gross income.
25

The imposition of local business tax based on petitioner's gross
revenue will inevitably result in the constitutionally proscribed
double taxation - taxing of the same person twice by the same
jurisdiction for the same thing
26
- inasmuch as petitioner's revenue
or income for a taxable year will definitely include its gross receipts
already reported during the previous year and for which local
business tax has already been paid.
Thus, respondent committed a palpable error when it assessed
petitioner's local business tax based on its gross revenue as
reported in its audited financial statements, as Section 143 of the
Local Government Code and Section 22(e) of the Pasig Revenue
Code clearly provide that the tax should be computed based
on gross receipts.
WHEREFORE, the petition is GRANTED. The Decision dated
November 20, 2006 and Resolution dated February 9, 2007 issued
by the Court of Appeals are SET ASIDE, and the Decision dated
March 8, 2004 rendered by the Regional Trial Court of Pasig, Branch
168 is REINSTATED.
SO ORDERED.















THIRD DIVISION
[G.R. NO. 147406 : July 14, 2008]
VENANCIO FIGUEROA y CERVANTES,
1
Petitioner, v. PEOPLE OF
THE PHILIPPINES,Respondent.
D E C I S I O N
NACHURA, J.:
When is a litigant estopped by laches from assailing the jurisdiction
of a tribunal? This is the paramount issue raised in this Petition for
Review of the February 28, 2001 Decision
2
of the Court of Appeals
(CA) in CA-G.R. CR No. 22697.
Pertinent are the following antecedent facts and proceedings:
On July 8, 1994, an information
3
for reckless imprudence resulting
in homicide was filed against the petitioner before the Regional Trial
Court (RTC) of Bulacan, Branch 18.
4
The case was docketed as
Criminal Case No. 2235-M-94.
5
Trial on the merits ensued and on
August 19, 1998, the trial court convicted the petitioner as
charged.
6
In his appeal before the CA, the petitioner questioned,
among others, for the first time, the trial court's jurisdiction.
7

The appellate court, however, in the challenged decision, considered
the petitioner to have actively participated in the trial and to have
belatedly attacked the jurisdiction of the RTC; thus, he was already
estopped by laches from asserting the trial court's lack of
jurisdiction. Finding no other ground to reverse the trial court's
decision, the CA affirmed the petitioner's conviction but modified the
penalty imposed and the damages awarded.
8

Dissatisfied, the petitioner filed the instant Petition for Review
on Certiorari raising the following issues for our resolution:
A. Does the fact that the petitioner failed to raise the issue of
jurisdiction during the trial of this case, which was initiated and filed
by the public prosecutor before the wrong court, constitute laches in
relation to the doctrine laid down in Tijam v. Sibonghanoy,
notwithstanding the fact that said issue was immediately raised in
petitioner's appeal to the Honorable Court of Appeals? Conversely,
does the active participation of the petitioner in the trial of his case,
which is initiated and filed not by him but by the public prosecutor,
amount to estoppel?cralawred
b. Does the admission of the petitioner that it is difficult
to immediately stop a bus while it is running at 40 kilometers per
hour for the purpose of avoiding a person who unexpectedly crossed
the road, constitute enough incriminating evidence to warrant his
conviction for the crime charged?cralawred
c. Is the Honorable Court of Appeals justified in considering the
place of accident as falling within Item 4 of Section 35 (b) of the
Land Transportation and Traffic Code, and subsequently ruling that
the speed limit thereto is only 20 kilometers per hour, when no
evidence whatsoever to that effect was ever presented by the
prosecution during the trial of this case?cralawred
d. Is the Honorable Court of Appeals justified in convicting the
petitioner for homicide through reckless imprudence (the legally
correct designation is "reckless imprudence resulting to
homicide") with violation of the Land Transportation and Traffic
Code when the prosecution did not prove this during the trial and,
more importantly, the information filed against the petitioner does
not contain an allegation to that effect?cralawred
e. Does the uncontroverted testimony of the defense witness
Leonardo Hernal that the victim unexpectedly crossed the road
resulting in him getting hit by the bus driven by the petitioner not
enough evidence to acquit him of the crime charged?
9

Applied uniformly is the familiar rule that the jurisdiction of the
court to hear and decide a case is conferred by the law in force at
the time of the institution of the action, unless such statute provides
for a retroactive application thereof.
10
In this case, at the time the
criminal information for reckless imprudence resulting in homicide
with violation of the Automobile Law (now Land Transportation and
Traffic Code) was filed, Section 32(2) of Batas Pambansa (B.P.) Blg.
129
11
had already been amended by Republic Act No. 7691.
12
The
said provision thus reads:
Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in Criminal Cases. Except in
cases falling within the exclusive original jurisdiction of Regional
Trial Courts and the Sandiganbayan, the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall
exercise:
x x x
(2) Exclusive original jurisdiction over all offenses punishable with
imprisonment not exceeding six (6) years irrespective of the
amount of fine, and regardless of other imposable accessory or
other penalties, including the civil liability arising from such offenses
or predicated thereon, irrespective of kind, nature, value or amount
thereof: Provided, however, That in offenses involving damage to
property through criminal negligence, they shall have exclusive
original jurisdiction thereof.
As the imposable penalty for the crime charged herein is prision
correccional in its medium and maximum periods or imprisonment
for 2 years, 4 months and 1 day to 6 years,
13
jurisdiction to hear
and try the same is conferred on the Municipal Trial Courts (MTCs).
Clearly, therefore, the RTC of Bulacan does not have jurisdiction
over Criminal Case No. 2235-M-94.
While both the appellate court and the Solicitor General
acknowledge this fact, they nevertheless are of the position that the
principle of estoppel by laches has already precluded the petitioner
from questioning the jurisdiction of the RTC the trial went on for 4
years with the petitioner actively participating therein and without
him ever raising the jurisdictional infirmity. The petitioner, for his
part, counters that the lack of jurisdiction of a court over the
subject matter may be raised at any time even for the first time on
appeal. As undue delay is further absent herein, the principle of
laches will not be applicable.
To settle once and for all this problem of jurisdiction vis - -vis
estoppel by laches, which continuously confounds the bench and the
bar, we shall analyze the various Court decisions on the matter.
As early as 1901, this Court has declared that unless jurisdiction has
been conferred by some legislative act, no court or tribunal can act
on a matter submitted to it.
14
We went on to state in U.S. v. De La
Santa
15
that:
It has been frequently held that a lack of jurisdiction over the
subject-matter is fatal, and subject to objection at any stage of the
proceedings, either in the court below or on appeal (Ency. of Pl. &
Pr., vol. 12, p. 189, and large array of cases there cited), and
indeed, where the subject-matter is not within the jurisdiction, the
court may dismiss the proceeding ex mero motu. (4 Ill., 133; 190
Ind., 79; Chipman v. Waterbury, 59 Conn., 496.)
Jurisdiction over the subject-matter in a judicial proceeding is
conferred by the sovereign authority which organizes the court; it is
given only by law and in the manner prescribed by law and an
objection based on the lack of such jurisdiction can not be waived
by the parties. x x x
16

Later, in People v. Casiano,
17
the Court explained:
4. 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., 861-
863). 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. Thus, Corpus Juris Secundum says:
Where accused has secured a decision that the indictment is void,
or has been granted an instruction based on its defective character
directing the jury to acquit, he is estopped, when subsequently
indicted, to assert that the former indictment was valid. In such
case, there may be a new prosecution whether the indictment in the
former prosecution was good or bad. Similarly, where, after the jury
was impaneled and sworn, the court on accused's motion quashed
the information on the erroneous assumption that the court had no
jurisdiction, accused cannot successfully plead former jeopardy to a
new information. x x x (22 C.J.S., sec. 252, pp. 388-389; italics
ours.)
Where accused procured a prior conviction to be set aside on the
ground that the court was without jurisdiction, he is estopped
subsequently to assert, in support of a defense of previous
jeopardy, that such court had jurisdiction." (22 C.J.S. p. 378.)
18

But in Pindagan Agricultural Co., Inc. v. Dans,
19
the Court, in not
sustaining the plea of lack of jurisdiction by the plaintiff-appellee
therein, made the following observations:
It is surprising why it is only now, after the decision has been
rendered, that the plaintiff-appellee presents the question of this
Court's jurisdiction over the case. Republic Act No. 2613 was
enacted on August 1, 1959. This case was argued on January 29,
1960. Notwithstanding this fact, the jurisdiction of this Court was
never impugned until the adverse decision of this Court was handed
down. The conduct of counsel leads us to believe that they must
have always been of the belief that notwithstanding said enactment
of Republic Act 2613 this Court has jurisdiction of the case, such
conduct being born out of a conviction that the actual real value of
the properties in question actually exceeds the jurisdictional amount
of this Court (over P200,000). Our minute resolution in G.R. No. L-
10096, Hyson Tan, et al. v. Filipinas Compaa de Seguros, et al., of
March 23, 1956, a parallel case, is applicable to the conduct of
plaintiff-appellee in this case, thus:
x x x that an appellant who files his brief and submits his case to
the Court of Appeals for decision, without questioning the latter's
jurisdiction until decision is rendered therein, should be considered
as having voluntarily waived so much of his claim as would exceed
the jurisdiction of said Appellate Court; for the reason that a
contrary rule would encourage the undesirable practice of appellants
submitting their cases for decision to the Court of Appeals in
expectation of favorable judgment, but with intent of attacking its
jurisdiction should the decision be unfavorable: x x x
20

Then came our ruling in Tijam v. Sibonghanoy
21
that a party may be
barred by laches from invoking lack of jurisdiction at a late hour for
the purpose of annulling everything done in the case with the active
participation of said party invoking the plea. We expounded, thus:
A party may be estopped or barred from raising a question in
different ways and for different reasons. Thus, we speak of estoppel
in pais, of estoppel by deed or by record, and of estoppel by laches.
Laches, in a general sense, 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 it either has
abandoned it or declined to assert it.
The doctrine of laches or of "stale demands" is based upon grounds
of public policy which requires, for the peace of society, the
discouragement of stale claims and, unlike the statute of limitations,
is not a mere question of time but is principally a question of the
inequity or unfairness of permitting a right or claim to be enforced
or asserted.
It has been held that a party cannot invoke the jurisdiction of a
court to secure affirmative relief against his opponent and, after
obtaining or failing to obtain such relief, repudiate or question that
same jurisdiction (Dean v. Dean, 136 Or. 694, 86 A.L.R. 79). In the
case just cited, by way of explaining the rule, it was further said
that the question whether the court had jurisdiction either of the
subject matter of the action or of the parties was not important in
such cases because the party is barred from such conduct not
because the judgment or order of the court is valid and conclusive
as an adjudication, but for the reason that such a practice cannot be
tolerated obviously for reasons of public policy.
Furthermore, it has also been held that after voluntarily submitting
a cause and encountering an adverse decision on the merits, it is
too late for the loser to question the jurisdiction or power of the
court (Pease v. Rathbun-Jones etc., 243 U.S. 273, 61 L. Ed. 715, 37
S.Ct. 283; St. Louis etc. v. McBride, 141 U.S. 127, 35 L. Ed. 659).
And in Littleton v. Burgess, 16 Wyo. 58, the Court said that it is not
right for a party who has affirmed and invoked the jurisdiction of a
court in a particular matter to secure an affirmative relief, to
afterwards deny that same jurisdiction to escape a penalty.
Upon this same principle is what We said in the three cases
mentioned in the resolution of the Court of Appeals of May 20, 1963
(supra) to the effect that we frown upon the "undesirable practice"
of a party submitting his case for decision and then accepting the
judgment, only if favorable, and attacking it for lack of jurisdiction,
when adverse as well as in Pindagan etc. v. Dans et al., G.R. L-
14591, September 26, 1962; Montelibano et al. v. Bacolod-Murcia
Milling Co., Inc., G.R. L-15092; Young Men Labor Union etc. v. The
Court of Industrial Relations et al., G.R. L-20307, Feb. 26, 1965,
and Mejia v. Lucas, 100 Phil. p. 277.
The facts of this case show that from the time the Surety became a
quasi-party on July 31, 1948, it could have raised the question of
the lack of jurisdiction of the Court of First Instance of Cebu to take
cognizance of the present action by reason of the sum of money
involved which, according to the law then in force, was within the
original exclusive jurisdiction of inferior courts. It failed to do so.
Instead, at several stages of the proceedings in the court a quo, as
well as in the Court of Appeals, it invoked the jurisdiction of said
courts to obtain affirmative relief and submitted its case for a final
adjudication on the merits. It was only after an adverse decision
was rendered by the Court of Appeals that it finally woke up to raise
the question of jurisdiction. Were we to sanction such conduct on its
part, We would in effect be declaring as useless all the proceedings
had in the present case since it was commenced on July 19, 1948
and compel the judgment creditors to go up their Calvary once
more. The inequity and unfairness of this is not only patent but
revolting.
22

For quite a time since we made this pronouncement in
Sibonghanoy, courts and tribunals, in resolving issues that involve
the belated invocation of lack of jurisdiction, have applied the
principle of estoppel by laches. Thus, in Calimlim v. Ramirez,
23
we
pointed out that Sibonghanoy was developing into a general rule
rather than the exception:
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 in Sibonghanoy 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.
24

In Calimlim, despite the fact that the one who benefited from the
plea of lack of jurisdiction was the one who invoked the court's
jurisdiction, and who later obtained an adverse judgment therein,
we refused to apply the ruling in Sibonghanoy. The Court accorded
supremacy to the time-honored principle that the issue of
jurisdiction is not lost by waiver or by estoppel.
Yet, in subsequent cases decided after Calimlim, which by sheer
volume are too plentiful to mention, the Sibonghanoy doctrine, as
foretold in Calimlim, became the rule rather than the exception. As
such, in Soliven v. Fastforms Philippines, Inc.,
25
the Court ruled:
While it is true that jurisdiction may be raised at any time, "this rule
presupposes that estoppel has not supervened." In the instant case,
respondent actively participated in all stages of the proceedings
before the trial court and invoked its authority by asking for an
affirmative relief. Clearly, respondent is estopped from challenging
the trial court's jurisdiction, especially when an adverse judgment
has been rendered. In PNOCShipping and Transport Corporation v.
Court of Appeals, we held:
Moreover, we note that petitioner did not question at all the
jurisdiction of the lower court x x x in its answers to both the
amended complaint and the second amended complaint. It did so
only in its motion for reconsideration of the decision of the lower
court after it had received an adverse decision. As this Court held in
Pantranco North Express, Inc. v. Court of Appeals (G.R. No.
105180, July 5, 1993, 224 SCRA 477, 491), participation in all
stages of the case before the trial court, that included invoking its
authority in asking for affirmative relief, effectively barred petitioner
by estoppel from challenging the court's jurisdiction. Notably, from
the time it filed its answer to the second amended complaint on
April 16, 1985, petitioner did not question the lower court's
jurisdiction. It was only on December 29, 1989 when it filed its
motion for reconsideration of the lower court's decision that
petitioner raised the question of the lower court's lack of
jurisdiction. Petitioner thus foreclosed its right to raise the issue of
jurisdiction by its own inaction. (italics ours)
Similarly, in the subsequent case of Sta. Lucia Realty and
Development, Inc. v. Cabrigas, we ruled:
In the case at bar, it was found by the trial court in its 30
September 1996 decision in LCR Case No. Q-60161(93) that private
respondents (who filed the petition for reconstitution of titles) failed
to comply with both sections 12 and 13 of RA 26 and therefore, it
had no jurisdiction over the subject matter of the case. However,
private respondents never questioned the trial court's jurisdiction
over its petition for reconstitution throughout the duration of LCR
Case No. Q-60161(93). On the contrary, private respondents
actively participated in the reconstitution proceedings by filing
pleadings and presenting its evidence. They invoked the trial court's
jurisdiction in order to obtain affirmative relief - the reconstitution of
their titles. Private respondents have thus foreclosed their right to
raise the issue of jurisdiction by their own actions.
The Court has constantly upheld the doctrine that while jurisdiction
may be assailed at any stage, a litigant's participation in all stages
of the case before the trial court, including the invocation of its
authority in asking for affirmative relief, bars such party from
challenging the court's jurisdiction (PNOC Shipping and Transport
Corporation v. Court of Appeals, 297 SCRA 402 [1998]). A party
cannot invoke the jurisdiction of a court to secure affirmative relief
against his opponent and after obtaining or failing to obtain such
relief, repudiate or question that same jurisdiction (Asset
Privatization Trust v. Court of Appeals, 300 SCRA 579
[1998]; Province of Bulacan v. Court of Appeals, 299 SCRA 442
[1998]). The Court frowns upon the undesirable practice of a party
participating in the proceedings and submitting his case for decision
and then accepting judgment, only if favorable, and attacking it for
lack of jurisdiction, when adverse (Producers Bank of the Philippines
v. NLRC, 298 SCRA 517 [1998], citing Ilocos Sur Electric
Cooperative, Inc. v. NLRC, 241 SCRA 36 [1995]). (italics ours)
26

Noteworthy, however, is that, in the 2005 case of Metromedia
Times Corporation v. Pastorin,
27
where the issue of lack of
jurisdiction was raised only in the National Labor Relations
Commission (NLRC) on appeal, we stated, after examining the
doctrines of jurisdiction vis - -vis estoppel, that the ruling in
Sibonghanoy stands as an exception, rather than the general rule.
Metromedia, thus, was not estopped from assailing the jurisdiction
of the labor arbiter before the NLRC on appeal.
28
chanrobles vi rtual law library
Later, in Francel Realty Corporation v. Sycip,
29
the Court clarified
that:
Petitioner argues that the CA's affirmation of the trial court's
dismissal of its case was erroneous, considering that a full-blown
trial had already been conducted. In effect, it contends that lack of
jurisdiction could no longer be used as a ground for dismissal after
trial had ensued and ended.
The above argument is anchored on estoppel by laches, which has
been used quite successfully in a number of cases to thwart
dismissals based on lack of jurisdiction. Tijam v. Sibonghanoy, in
which this doctrine was espoused, held that a party may be barred
from questioning a court's jurisdiction after being invoked to secure
affirmative relief against its opponent. In fine, laches prevents the
issue of lack of jurisdiction from being raised for the first time on
appeal by a litigant whose purpose is to annul everything done in a
trial in which it has actively participated.
Laches is defined as the "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 it either has
abandoned it or declined to assert it."
The ruling in Sibonghanoy on the matter of jurisdiction is, however,
the exception rather than the rule.chanrobles vi rtual law library Estoppel by laches may be
invoked to bar the issue of lack of jurisdiction only in cases in which
the factual milieu is analogous to that in the cited case. In such
controversies, laches should be clearly present; that is, lack of
jurisdiction must have been raised so belatedly as to warrant the
presumption that the party entitled to assert it had abandoned or
declined to assert it. That Sibonghanoy applies only to exceptional
circumstances is clarified in Calimlim v. Ramirez, which we quote:
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 in Sibonghanoy 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.
Indeed, the general rule remains: a court's lack of jurisdiction may
be raised at any stage of the proceedings, even on appeal. The
reason is that jurisdiction is conferred by law, and lack of it affects
the very authority of the court to take cognizance of and to render
judgment on the action. Moreover, jurisdiction is determined by the
averments of the complaint, not by the defenses contained in the
answer.
30

Also, in Mangaliag v. Catubig-Pastoral,
31
even if the pleader of lack
of jurisdiction actively took part in the trial proceedings by
presenting a witness to seek exoneration, the Court, reiterating the
doctrine in Calimlim, said:
Private respondent argues that the defense of lack of jurisdiction
may be waived by estoppel through active participation in the trial.
Such, however, is not the general rule but an exception, best
characterized by the peculiar circumstances in Tijam v.
Sibonghanoy. In Sibonghanoy, the party invoking lack of jurisdiction
did so only after fifteen years and at a stage when the proceedings
had already been elevated to the CA.Sibonghanoy is an exceptional
case because of the presence of laches, which was defined therein
as 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 the 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.
32

And in the more recent Regalado v. Go,
33
the Court again
emphasized that laches should be clearly present for the
Sibonghanoy doctrine to be applicable, thus:
Laches is defined as the "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 length of time,
warranting a presumption that the party entitled to assert it either
has abandoned it or declined to assert it."
The ruling in People v. Regalario that was based on the landmark
doctrine enunciated in Tijam v. Sibonghanoy on the matter of
jurisdiction by estoppel is the exception rather than the
rule. Estoppel by laches may be invoked to bar the issue of lack of
jurisdiction only in cases in which the factual milieu is analogous to
that in the cited case. In such controversies, laches should have
been clearly present; that is, lack of jurisdiction must have been
raised so belatedly as to warrant the presumption that the party
entitled to assert it had abandoned or declined to assert it.
In Sibonghanoy, the defense of lack of jurisdiction was raised for
the first time in a motion to dismiss filed by the Surety almost 15
years after the questioned ruling had been rendered. At several
stages of the proceedings, in the court a quo as well as in the Court
of Appeals, the Surety invoked the jurisdiction of the said courts to
obtain affirmative relief and submitted its case for final adjudication
on the merits. It was only when the adverse decision was rendered
by the Court of Appeals that it finally woke up to raise the question
of jurisdiction.
Clearly, the factual settings attendant in Sibonghanoy are not
present in the case at bar. Petitioner Atty. Regalado, after the
receipt of the Court of Appeals resolution finding her guilty of
contempt, promptly filed a Motion for Reconsideration assailing the
said court's jurisdiction based on procedural infirmity in initiating
the action. Her compliance with the appellate court's directive to
show cause why she should not be cited for contempt and filing a
single piece of pleading to that effect could not be considered as an
active participation in the judicial proceedings so as to take the case
within the milieu of Sibonghanoy. Rather, it is the natural fear to
disobey the mandate of the court that could lead to dire
consequences that impelled her to comply.
34

The Court, thus, wavered on when to apply the exceptional
circumstance in Sibonghanoy and on when to apply the general rule
enunciated as early as in De La Santa and expounded at length in
Calimlim. The general rule should, however, be, as it has always
been, that the issue of jurisdiction may be raised at any stage of the
proceedings, even on appeal, and is not lost by waiver or by
estoppel. Estoppel by laches, to bar a litigant from asserting the
court's absence or lack of jurisdiction, only supervenes in
exceptional cases similar to the factual milieu of Tijam v.
Sibonghanoy. Indeed, the fact that a person attempts to invoke
unauthorized jurisdiction of a court does not estop him from
thereafter challenging its jurisdiction over the subject matter, since
such jurisdiction must arise by law and not by mere consent of the
parties. This is especially true where the person seeking to invoke
unauthorized jurisdiction of the court does not thereby secure any
advantage or the adverse party does not suffer any harm.
35

Applying the said doctrine to the instant case, the petitioner is in no
way estopped by laches in assailing the jurisdiction of the RTC,
considering that he raised the lack thereof in his appeal before the
appellate court. At that time, no considerable period had yet
elapsed for laches to attach. True, delay alone, though
unreasonable, will not sustain the defense of "estoppel by laches"
unless it further appears that the party, knowing his rights, has not
sought to enforce them until the condition of the party pleading
laches has in good faith become so changed that he cannot be
restored to his former state, if the rights be then enforced, due to
loss of evidence, change of title, intervention of equities, and other
causes.
36
In applying the principle of estoppel by laches in the
exceptional case of Sibonghanoy, the Court therein considered the
patent and revolting inequity and unfairness of having the judgment
creditors go up their Calvary once more after more or less 15
years.
37
The same, however, does not obtain in the instant case.
We note at this point that estoppel, being in the nature of a
forfeiture, is not favored by law. It is to be applied rarely only from
necessity, and only in extraordinary circumstances. The doctrine
must be applied with great care and the equity must be strong in its
favor.
38
When misapplied, the doctrine of estoppel may be a most
effective weapon for the accomplishment of injustice.
39
Moreover, a
judgment rendered without jurisdiction over the subject matter is
void.
40
Hence, the Revised Rules of Court provides for remedies in
attacking judgments rendered by courts or tribunals that have no
jurisdiction over the concerned cases. No laches will even attach
when the judgment is null and void for want of jurisdiction.
41
As we
have stated in Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs
of Alberto Cruz,
42

It is axiomatic that the jurisdiction of a tribunal, including a quasi-
judicial officer or government agency, over the nature and subject
matter of a petition or complaint is determined by the material
allegations therein and the character of the relief prayed for,
irrespective of whether the petitioner or complainant is entitled to
any or all such reliefs. Jurisdiction over the nature and subject
matter of an action is conferred by the Constitution and the law,
and not by the consent or waiver of the parties where the court
otherwise would have no jurisdiction over the nature or subject
matter of the action. Nor can it be acquired through, or waived by,
any act or omission of the parties. Moreover, estoppel does not
apply to confer jurisdiction to a tribunal that has none over the
cause of action. x x x
Indeed, the jurisdiction of the court or tribunal is not affected by the
defenses or theories set up by the defendant or respondent in his
answer or motion to dismiss. Jurisdiction should be determined by
considering not only the status or the relationship of the parties but
also the nature of the issues or questions that is the subject of the
controversy. x x x x The proceedings before a court or tribunal
without jurisdiction, including its decision, are null and void, hence,
susceptible to direct and collateral attacks.
43

With the above considerations, we find it unnecessary to resolve the
other issues raised in the petition.
WHEREFORE, premises considered, the Petition for Review
on Certiorari is GRANTED. Criminal Case No. 2235-M-94 is hereby
DISMISSED without prejudice.
SO ORDERED.




















FIRST DIVISION

[G.R. No. 195546 : March 14, 2012]

GOODLAND COMPANY, INC., PETITIONER, VS. ASIA UNITED BANK, CHRISTINE T. CHAN,
FLORANTE DEL MUNDO, ENGRACIO M. ESCASINAS, JR., IN HIS OFFICIAL CAPACITY AS
CLERK OF COURT & EX-OFFICIO SHERIFF IN THE REGIONAL TRIAL COURT OF MAKATI
CITY, NORBERTO B. MAGSAJO, IN HIS OFFICIAL CAPACITY AS SHERIFF IV OF THE
REGIONAL TRIAL COURT OF MAKATI CITY, AND RONALD A. ORTILE, IN HIS OFFICIAL
CAPACITY AS THE REGISTER OF DEEDS FOR MAKATI CITY, RESPONDENTS.

[G.R. NO. 195561]

GOODLAND COMPANY, INC., PETITIONER, VS. ASIA UNITED BANK, ABRAHAM CO, ATTY.
JOEL T. PELICANO AND THE REGISTER OF DEEDS OF MAKATI CITY, RESPONDENTS.

D E C I S I O N

VILLARAMA, JR., J.:

These consolidated petitions for review on certiorari filed under Rule 45 by one and the same party
(Goodland Company, Inc.) both assail the Decision
[1]
dated September 15, 2010 and
Resolution
[2]
dated January 31, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 90418.cralaw
Factual Antecedents

Sometime in July 1999, petitioner Goodland Company, Inc. (petitioner) mortgaged its two parcels
of land situated in Sta. Rosa, Laguna and covered by Transfer Certificate of Title (TCT) Nos.
321672 and 321673 (Laguna Properties). The Third Party Real Estate Mortgage (REM) secured
the loans extended by respondent Asia United Bank (AUB) to Radio Marine Network (Smartnet),
Inc. (RMNSI), doing business as Smartnet Philippines,
[3]
under the latters Php250 million Omnibus
Credit Line with AUB.

In addition to the aforesaid collaterals, petitioner executed a Third Party REM over its 5,801-
square meter property located at Pasong Tamo St., Makati City (Makati Property) covered by
TCT No. 114645. The REMs, both signed by Gilbert G. Guy, President of Goodland Company, Inc.,
were duly registered by AUB with the Registry of Deeds for Calamba, Laguna and Registry of
Deeds for Makati City, and annotated on the said titles.

Subsequently, however, petitioner repudiated the REMs by claiming that AUB and its officers
unlawfully filled up the blank mortgage forms and falsified the entries therein. The Laguna
properties were the subject of two suits filed by petitioner to forestall their imminent foreclosure,
and similar actions were likewise instituted by petitioner involving the Makati property which is the
subject of the present case.

Laguna Properties
[4]


On January 16, 2003, petitioner filed a complaint for annulment of mortgage before the Regional
Trial Court (RTC) of Bian, Laguna, Branch 25, docketed as Civil Case No. B-6242, on the
ground that said REM was falsified and in contravention of the parties agreement that the blank
mortgage form would merely serve as comfort document and not to be registered by AUB. While
said case was pending, RMNSI/Smartnet defaulted on its loan obligation, which prompted AUB to
exercise its right under the REM by filing on October 19, 2006 an application for extrajudicial

foreclosure of real estate mortgage under Act 3135, as amended, with the Office of the Executive
Judge of the RTC of Bian, Laguna. In the public auction sale, AUB emerged as the highest bidder
and was issued a Certificate of Sale which was registered with the Registry of Deeds of Calamba
on November 23, 2006.

Prior to the consolidation of title in the foreclosing mortgagee (AUB), petitioner commenced a
second suit on November 28, 2006 in the RTC of Bian, Branch 25, docketed as Civil Case No. B-
7110. The complaint sought to annul the foreclosure sale and enjoin the consolidation of title in
favor of AUB, on the ground of alleged falsification of the REM.

On December 11, 2006, respondents moved to dismiss Civil Case No. B-7110, calling the attention
of the RTC to petitioners forum shopping in view of the pendency of Civil Case No. B-6242. They
argued that the two cases were anchored on the alleged falsification of the REM as basis for the
reliefs sought. The RTC granted the said motion on March 15, 2007 and dismissed with prejudice
Civil Case No. B-7110 on grounds of forum shopping and litis pendentia. Said court explained that
the injunction case (B-7110) and annulment case (B-6242) were founded on the same
transactions, same essential facts and circumstances, and raise substantially the same
issues. That petitioner additionally prayed for a writ of preliminary injunction did not affect the
similarity of the two cases; petitioner could have prayed for injunctive relief as ancillary remedy in
the annulment case. It was also stated that the judgment in the annulment case on the validity of
the REM would constitute res judicata on the injunction case.

On March 15, 2007, the RTC granted AUB a writ of possession over the foreclosed properties. The
writ was issued on March 26, 2007 and AUB obtained possession of the properties on April 2,
2007.

On August 16, 2007, the RTC dismissed Civil Case No. B-6242 on motion of respondents. Said
court likewise noted that the allegations and reliefs sought by petitioner were identical with those
in Civil Case No. B-7110, and that petitioner did not inform the court that it filed Civil Case No. B-
7110.

Petitioner appealed both dismissals to the CA, the separate appeals it filed were docketed as CA-
G.R. CV No. 90114 (injunction case) and CA-G.R. CV No. 91269 (annulment case).

On June 5, 2009, the CA granted the appeal in CA-G.R. CV No. 90114 and reversed the RTCs
order dated March 15, 2007. It ordered the reinstatement of petitioners complaint in Civil Case
No. B-7110.
[5]
Respondents filed a motion for reconsideration which was denied in a
resolution
[6]
dated February 17, 2010.

In a decision dated August 11, 2009, petitioners appeal in CA-G.R. CV No. 91269 was likewise
granted, which effectively reinstated Civil Case No. B-6242. Respondents moved for
reconsideration but the same was denied in a resolution dated November 10, 2009.

Respondents elevated to this Court the CAs reversal of the RTCs dismissal orders, in separate
petitions for review under Rule 45, docketed as G.R. No. 190231 (CA-G.R. CV No. 91269)
and G.R. No. 191388 (CA-G.R. CV No. 90114).

On December 8, 2010, this Courts First Division granted the petition in G.R. No. 190231,
reversing and setting aside the decision dated August 11, 2009 and resolution dated November
10, 2009 of the CA, and reinstating the August 16, 2007 and December 5, 2007 orders of the RTC
which dismissed Civil Case No. B-6242. Petitioner filed a motion for reconsideration but the same
was denied with finality in the Courts Resolution
[7]
dated January 19, 2011.

On March 9, 2011, this Courts First Division likewise granted the petition in G.R. No.
191388 (CA-G.R. CV No. 90114), reversing and setting aside the decision dated June 5, 2009 and
resolution dated February 17, 2010 of the CA. The Court ordered the reinstatement of the March
15, 2007 order of the RTC dismissing Civil Case No. B-7110.

Makati Property

Petitioner filed the first suit assailing the REM over its property covered by TCT No. 114645 on
January 17, 2003, docketed as Civil Case No. 03-045 of the RTC of Makati City, Branch 56. The
Complaint
[8]
against AUB, Abraham Co (AUB President), Atty. Joel T. Pelicano and the Register of
Deeds of Makati City alleged that sometime in March 2000, in compliance with the requirements of
AUB, and by way of accommodation as security for the loan of Smartnet Philippines, Inc. (SPI),
Mr. Gilbert G. Guy signed the blank REM deed with the understanding that the document shall not
be completed and not to be registered with the Register of Deeds as it would only serve as comfort
document to prove petitioners willingness to execute a REM in the future if so demanded by AUB
and agreed upon by Smartnet. In contravention of such agreement and despite the fact that no
notary public was present when Mr. Guy signed the REM, AUB and its officers made it appear that
the REM dated February 29, 2000 with the stated consideration of Php202 million was duly
completed and notarized, and was subsequently registered with the Register of Deeds. Disparities
in the copy of the REM on file with the Office of the Clerk of Court of Pasig City were likewise
discovered by petitioner (community tax certificates used were issued in 2001). On January 29,
2002, petitioner sent its written objections to the spurious REM and demanded from AUB its
immediate cancellation. Upon request of petitioner, the National Bureau of Investigation also
investigated the falsification and found forgery in the signature of respondent Pelicano (Notary
Public).

Petitioner further claimed that it learned from Smartnet that the latter never obtained any peso-
denominated loan from AUB, as all its loans for working capital were in clean Japanese Yen
loans. Being a falsified document, the subsequent annotation of the REM on the title of petitioner
subjected the latter to an encumbrance never intended nor consented to by petitioner as owner,
and consequently to the risk of foreclosure at the behest of AUB. Petitioner also alleged bad faith
on the part of AUB and Co in the fraudulent execution and registration of the REM without its
knowledge and consent, while respondent Pelicanos acknowledgment on the spurious REM is a
violation of his duties as a notary public and made him a party to the fraudulent act.

Petitioner thus prayed for the following reliefs:
1. the Deed of Real Estate Mortgage dated February 29, 2000 be declared null and void, and
accordingly cancelled;

2. the annotation of real estate mortgage on TCT-114645 under Entry No. 53584 be cancelled,
and that defendants AUB and Co be ordered to surrender the said titles to plaintiff Goodland;

3. defendants AUB, Abraham Co, and Joel T. Pelicano be adjudged jointly and severally liable to
plaintiff Goodland the sum of PhP5,000,000.00 as actual damages, PhP1,000,000.00 as attorneys
fees and PhP1,000,000.00 as expenses of litigation;

4. defendants AUB and Abraham Co be adjudged jointly and severally liable to pay plaintiff
Goodland the sum of PhP2,000,000.00 as exemplary damages; and

5. defendant Joel T. Pelicano, be adjudged liable to pay plaintiff Goodland the sum of
P1,000,000.00 as exemplary damages;

Plaintiff prays for cost of suit and for such further or other reliefs and remedies just or equitable
under the premises.
[9]


On November 30, 2006, petitioner filed the second case against herein respondents AUB and its
officers Christine T. Chan, Florante Del Mundo, Engracio M. Escasinas, Jr. (RTC of Makati City Clerk
of Court and Ex-Officio Sheriff), Norberto B. Magsajo (Sheriff IV) and Ronald A. Ortile (Register of
Deeds for Makati City), docketed as Civil Case No. 06-1032 of RTC of Makati City, Branch
145. Whereas the earlier case (Civil Case No. 03-045) sought the annulment of the REM based on
alleged irregularities in its execution, Civil Case No. 06-1032 prayed for injunctive relief and/or
nullification of the extrajudicial foreclosure sale which petitioner alleged to be procedurally and
legally defective on account of the following:
1. The annotation of the falsified Third Party MORTGAGE was contrary to and in violation of
the express agreement of defendant AUB and plaintiff GOODLAND;
2. The Extra-Judicial Foreclosure is null and void as it is based on a null and void
registration/annotation of a falsified Real Estate Mortgage;
3. Defendant AUBs insistence on conducting the foreclosure despite the pendency of the
annulment case betrays the utter bad faith and malicious intent of defendant AUB;
4. The foreclosure is for an alleged unpaid obligation of RMNI which is not secured by the
subject Third Party MORTGAGE;
5. No demands for payment were made by defendant AUB on SPI;
6. The publication of the subject Notice of Sheriffs Sale in The Foreign Post, which is not
a newspaper of general circulation, is null and void as it does not comply with the strict
and mandatory requirements of the law (Section 3 Act No. 3135, as amended).
7. The provision on redemption in the General Banking Law of 2000 (R.A. No. 8791), that is,
Section 47 (par. 2) thereof, is unconstitutional on the ground that it violates the
constitutional right of plaintiff GOODLAND to equal protection of the laws under Sec. 1,
Art. III of the Constitution. It also violates the prohibition against impairment of the
obligations of contracts stipulated in Sec. 10, Art. III of the Constitution because it takes
away from plaintiff GOODLAND the vested one-year redemption period under the existing
law (Sec. 6 of Act No. 3135) at the time of the delivery of the subject Third Party
MORTGAGE to defendant AUB in June 1999. The one (1) year redemption period of
plaintiff GOODLAND under Sec. 6 of Act No. 3135 was drastically reduced to a
maximum of three (3) months only to as short as twenty-four (24) hours, as what
happened in the other foreclosure conducted by defendant AUB on the Sta. Rosa, Laguna
properties of plaintiff GOODLAND.
[10]
(Emphasis and italics in the original.)

In addition to the issuance of a temporary restraining order (TRO) and writ of preliminary
injunction to be made permanent after trial, petitioner specifically prayed that judgment be
rendered in its favor and against the respondents, as follows:
(1) Declaring the annotation and registration of the subject Third
Party MORTGAGE with the Registry of Deeds of Makati City as null
and void and of no legal force and effect;
(2) In the event that a valid and legal auction sale be already
conducted, declaring that the foreclosure proceeding/sale of the
subject mortgaged property and/or the Certificate of Sale issued
in favor of the winning bidder, as null and void and of no legal
force and effect;
(3) In the event that plaintiff GOODLANDs title to the subject
property be already cancelled and the title was already
consolidated or a new title already issued in favor of the winning
bidder, declaring the said cancellation of title and consolidation of
title and issuance of new title in the name of the winning bidder,
as null and void, and ordering the cancellation of the said invalidly
issued new title in the name of the winning bidder and likewise
ordering the issuance of new title in the name of plaintiff
GOODLAND;
(3) In the alternative, in the event that the Honorable Court finds the
foreclosure proceedings as proper, valid and legal, declaring that
Section 47 (par. 2) of the General Banking Law of 2000 (R.A. No.
8791) is unconstitutional, and granting plaintiff GOODLAND the
right to redeem the mortgaged properties in accordance with the
provisions of Sec. 6 of Act No. 3135;
(4) Ordering defendants AUB, Christine T. Chan and Florante del
Mundo to, jointly and severally, pay plaintiff GOODLAND the
following amounts, to wit:
(A) Actual and compensatory damages in the amount of not less
than Four Million Pesos (P4,000,000.00);
(B) Exemplary damages in the amount of not less than One Million
Pesos (P1,000,000.00);
(C) Attorneys fees in the amount of Five Hundred Thousand Pesos
(P500,000.00);
(D) Litigation expenses; and,
(E) Costs of suit.
[11]


On December 13, 2006, the RTC issued an Order
[12]
denying petitioners application for the
issuance of a writ of preliminary injunction, as well as respondents motion to dismiss based on
forum shopping, non-payment of correct docket fees and failure to state a cause of
action. However, the court reserved the issuance of the corresponding order requiring petitioner
to pay the appropriate docket fees after respondents shall have submitted what they believed
should have been the correct computation thereof.

Respondents filed their Answer Ad Cautelam
[13]
denying the allegations of the complaint regarding
the fraudulent execution and registration of the REM and the loan obligation it secured,
irregularities in the conduct of the extrajudicial foreclosure sale, and that their acts were done in
bad faith. They asserted that: (1) Based on representations by Mr. Gilbert Guy, RMNSI, Smartnet
Philippines and SPI operate under one and the same entity, all being businesses of Mr. Guy and
hence, Smartnet Philippines undoubtedly refers to RMNSI which has an authorized capital stock
of Php400 million and an Omnibus Credit Line with AUB, while SPI, a corporate shell created by
Mr. Guy, has an authorized capital stock of only Php1 million and has not been granted any credit
facility by AUB; (2) the mortgage deed states that the debtor is Smartnet Philippines, the DTI-
registered name of RMNSI, as also with the Secretarys Certificate of petitioner in connection with
the authority to use the Makati property as security for the loan obligation of RMNSI, and the
promissory notes involved in the foreclosure application; (3) There was never any understanding
not to complete or register the REM document as AUB would not have approved the loans if not for
the security offered by petitioner; Mr. Guy himself transmitted the REM he signed, which was not a
blank document, and petitioner knew from the start the registration of the REM was forthcoming
after its due execution by Mr. Guy, as the same would be in the normal course of business of AUB;
(4) The same facts obtain in connection with the mortgage of petitioners Laguna
Properties; (5) The REM was valid and binding, the property covered thereby may be validly
foreclosed; respondents have not performed any irregularity or violation of law, and have neither
engaged in any fraudulent, malicious and abusive conduct or transaction; it was petitioner and
Mr. Guy who had conspired to defraud AUB by, among others, denying the validity and due
execution of the REM; (6) AUB complied with the legal requirements for the extrajudicial
foreclosure of the subject property including the public auction held on December 4, 2006
conducted by Sheriff Magsajo in the presence of a representative of petitioner who did not bid, and
accordingly AUB consolidated its ownership over the foreclosed property sold to it as the highest
bidder, with the issuance of TCT No. 223120 in its name as the new absolute owner; and (7)
Considering that the extrajudicial foreclosure was admittedly an exercise by AUB of its right as an
unpaid and aggrieved creditor-mortgagee, the same may not legally rise to any liability for
damages in favor of petitioner, in the exercise of such right, AUB committed no irregularity, bad
faith, fraud or malicious action.

Respondents contended that petitioner is guilty of forum shopping, as it has previously filed a case
for the annulment of the REM (Civil Case No. 03-045) which is pending before Branch 56. Said
case was based on the same cause of action, that is, petitioners perceived irregularities in the
execution and registration of the REM. The injunctive relief sought by petitioner against the
foreclosure is properly a provisional and ancillary remedy in the annulment case; the institution of
the injunction case was therefore not compelled by respondents acts but by petitioners own
negligence and contempt.

The following affirmative and special defenses were likewise raised by respondents: (1) the RTC
has no jurisdiction over the subject matter considering petitioners fraudulent failure to pay the
correct amount of docket fees, as it deliberately concealed the fair market value of the subject
property; (2) without prejudice to other sanctions, the complaint should be summarily dismissed
considering that petitioner engaged in a willful, deliberate and contumacious act of forum
shopping; the certificate of non-forum shopping it submitted was false and perjurious; (3) the case
should also be dismissed on the ground of litis pendentia as the issues herein are already
subsumed in the annulment case pending with another branch; (4) the court has not validly
acquired jurisdiction over the persons of respondents for lack of service of summons, the Officers
Return dated December 4, 2006 clearly stated that the summons were unserved and which failed
to state the facts and circumstances showing the impossibility of personal service of summons
upon the respondents, and neither did petitioner seek the issuance of an alias summons; (5) the
case is already moot because title had already been consolidated in the name of AUB which may
no longer be restrained from exercising rights of ownership over the foreclosed property; the
pendency of a civil case for the nullity of the mortgage document is not a legal bar to foreclosure
by the creditor-mortgagee upon the default of the debtor-mortgagor; (6) even assuming there
was a defect in the notarization of the REM, it is not a ground to invalidate the foreclosure sale or
hold in abeyance the consolidation of title in favor of AUB; (7) based on the facts alleged in the
complaint, it is clear that AUB did not act in bad faith nor abused its rights when it caused the
foreclosure of the subject property; (8) petitioners claims that the unpaid obligations of RMNSI is
not secured by the REM and that no demand for payment was made on SPI, are both irrelevant
and downright perjurious and misleading; and (9) even on the basis of the allegations in the
complaint and its annexes, the same fail to state a cause of action, individual respondents cannot
be held liable for damages as they have not acted with bad faith or fraud in connection with the
REM; in any event, apart from the demand letter sent to RMNSI, a demand letter was also sent to
SPI at the address indicated by petitioner itself in the complaint, a copy of said demand letter
addressed to Radiomarine Network (Smartnet), Inc. doing business as Smartnet Philippines and
Smartnet Philippines, Inc. at Building 8359, Zambales Hi-way cor. Bataan Rd., Upper Cubi, Subic
Bay Freeport Zone.

Respondents further averred that contrary to petitioners allegation, The Foreign Post is a
newspaper of general circulation, having been accredited as such by the Office of the Executive
Judge in the Order dated June 17, 2002 issued by Executive Judge Leticia P. Morales. Mr. Dante
Ofianga, Circulation Manager of The Foreign Post, also testified during the hearing held on
December 8, 2006, that said publication is a weekly newspaper of general circulation, printed and
published in the City of Manila, Philippines.

Finally, respondents argued that the three (3) months period prescribed by the General Banking
Law of 2000 is a valid limitation on the right of redemption, which is the exception rather than the
general rule. This Court has already upheld the restriction on the exercise of the right of
redemption inLandrito, Jr. v. Court of Appeals
[14]
.

On motion of respondents, Civil Case No. 06-1032 was consolidated with Civil Case No. 03-
045. Prior to the consolidation, respondents moved to dismiss
[15]
with prejudice the two cases on
the grounds of forum shopping, and that no jurisdiction was acquired by the RTC in Civil Case No.
03-045 for failure to pay the proper docket and other legal fees.

In a Joint Order
[16]
dated July 10, 2007, the RTC (Branch 56) dismissed with prejudice the
complaints in both cases. Petitioner filed two separate motions for reconsideration, which the RTC
likewise denied on October 16, 2007.
[17]


Petitioner again filed separate appeals before the CA, which were docketed under only one case
(CA-G.R. CV No. 90418).

By Decision
[18]
dated September 15, 2010, the CAs Fifth Division dismissed petitioners appeal.
While the CA disagreed with the RTCs dismissal of Civil Case No. 06-1032 on the ground of non-
payment of correct docket fees, it nevertheless sustained the dismissal with prejudice of both Civil
Case No. 03-045 and Civil Case No. 06-1032 on the ground of forum shopping.

The CA found that the twin complaints asked for a common relief: nullification of the REM over the
Makati property, cancellation of its annotation, and return of the property to petitioner. It also
ruled that a decision in either Civil Case No. 03-045 and Civil Case No. 06-1032 will certainly
amount to res judicata in the other; both courts were called upon to rule on the issue of whether
the REM was falsified, thus rendering it and all related transactions and proceedings invalid. The
court to render a later judgment will find itself in an awkward predicament whether to decide on
said issue in the same way the court which first ruled on the same issue, or to decide it the other
way. The CA concluded that a malicious situation therefore presents itself because the twin fora
are being pitted against each other, hence a case of plain and simple forum shopping.

The CA also concurred with the RTC Branch 56 in finding that petitioner inexplicably failed to
inform said court of petitioners subsequent filing of Civil Case No. 06-1032 despite its undertaking
to do so in the first case (Civil Case No. 03-045), which fatal omission similarly reeks of forum
shopping which is deliberate and malicious. The appellate court further said that the supervening
event of the extrajudicial foreclosure did not justify the filing of a separate case, which on its face
simply reiterated the same facts. The foreclosure of the mortgage was a mere continuation of the
material facts presented in the first case, and thus petitioners remedy arising therefrom is
deemed subsumed in its prayer for nullification of the REM in the first case because such nullity of
the mortgage contract invalidates everything else including the extrajudicial foreclosure. The CA
opined that petitioner should have just amended its first complaint for the purpose of pleading the
supervening event of extrajudicial foreclosure and perhaps adding in its prayer the nullification of
the said foreclosure.

Petitioner filed two separate motions for reconsideration which the CA likewise denied in its
Resolution
[19]
dated January 31, 2011. The CA further noted this Courts decision in G.R. No.
190231 which reinstated the dismissal of Civil Case No. B-6242 involving exactly the same parties,
issues and subject matter.
The Consolidated Petitions and Parties Arguments

Petitioner filed before this Court two separate petitions through different counsels assailing the
same CA decision dismissing their two appeals and resolution denying their twin motions for
reconsideration.

The core issue presented is whether petitioner was guilty of forum shopping when it successively
filed Civil Case No. 03-045 and Civil Case No. 06-1032.

Petitioner argues that there was no forum shopping involved because contrary to the CAs view, a
judgment in either of the two cases will not amount to res judicata in the other, stating that there
are two probable outcomes for each case; thus, the REM may be declared either null and void or
valid, and the extrajudicial foreclosure may likewise be declared either null and void or
valid. Petitioner then posits that a judgment in Civil Case No. 03-045 that the REM is valid will not
preclude it from filing a separate case for the annulment of the foreclosure proceeding; petitioners
claims on the irregularities in the extrajudicial foreclosure when proven would still result in its
nullification, even if the REM is declared valid in the first case. Similarly, a judgment annulling the
extrajudicial foreclosure would not bar a separate complaint for the annulment of a spurious and
falsified mortgage.

Petitioner further notes that it did not fail to disclose as in fact it asserted the pendency of Civil
Case No. 03-045 in Civil Case No. 06-1032 when it alleged the surreptitious foreclosure by the
respondents during the pendency of Civil Case No. 03-045. The first case (Civil Case No. 03-045)
was also disclosed by petitioner in the Certificate of Non-Forum Shopping appended to its
complaint in Civil Case No. 06-1032. Moreover, petitioner pointed out that the consolidation of the
two cases has eliminated the possibility of conflicting decisions. The filing of the second case to
enjoin the foreclosure was justified since petitioner has no other sufficient and effective remedy
under the circumstances. In the absence of malicious intent in the mere filing of Civil Case No.
06-1032, petitioner contends that the CA erred in finding it guilty of forum shopping.

On the other hand, respondents maintain that the CA was correct in holding that petitioner is
guilty of forum shopping as any ruling of either court on the identical issue of falsity of the REM
would amount to res judicata in the other case. They also stress that forum shopping already
exists when the cases involve the same or related causes and the same or substantially the same
reliefs. Invoking stare decisis, respondents cite the final judgment rendered by this Court in G.R.
No. 190231 involving the Laguna Properties which also involved the same parties and transactions
as in the instant case. But even before the said ruling, respondents point out that it was already
settled that there is forum shopping if two actions boil down to a single issue, although the issues
and reliefs prayed for were stated differently, because the final disposition of one would constitute
res judicata in the other, citingPrubankers Association v. Prudential Bank & Trust
Company
[20]
. Another case
[21]
was cited by respondents holding that there is forum shopping when
the remedies sought by the petitioner had the possibility of resulting in conflicting rulings, which
supports the CAs observations.

Respondents underscore the deliberate and contumacious forum shopping committed by petitioner
not only before the trial courts but also before the CA and this Court. They called attention to
petitioners filing of two notices of appeal, institution of two appeals and submission of two appeal
briefs from one and the same RTC decision; two motions for reconsideration and; now, the
herein identical petitions filed in this Court against the same principal party, AUB. Just like in the
identical actions before the RTC, petitioner did not seasonably report the second petition in G.R.
No. 195561. In fact, G.R. No. 195546 was consolidated with G.R. No. 195561 because this Court
already found that they arose from the same essential facts and assail the same decision and
resolution of the Court of Appeals to avoid conflicting decisions.
[22]

The Courts Ruling

The petitions must fail.

There is forum shopping when the following elements are present: (a) identity of parties, or at
least such parties as represent the same interests in both actions[;] (b) identity of rights asserted
and relief prayed for, the relief being founded on the same facts[;] and (c) the identity of the two
preceding particulars[,] such that any judgment rendered in the other action will, regardless of
which party is successful, amount to res judicata in the action under consideration; said requisites
[are] also constitutive of the requisites for auter action pendant or lis pendens.
[23]
The essence of
forum shopping is the filing of multiple suits involving the same parties for the same cause of
action, either simultaneously or successively, for the purpose of obtaining a favorable judgment,
through means other than by appeal or certiorari.
[24]


All the foregoing elements are present in this case.

There can be no dispute that the prayer for relief in the two cases was based on the same
attendant facts in the execution of REMs over petitioners properties in favor of AUB. While the
extrajudicial foreclosure of mortgage, consolidation of ownership in AUB and issuance of title in the
latters name were set forth only in the second case (Civil Case No. 06-1032), these were simply
the expected consequences of the REM transaction in the first case (Civil Case No. 03-045). These
eventualities are precisely what petitioner sought to avert when it filed the first case. Undeniably
then, the injunctive relief sought against the extrajudicial foreclosure, as well as the cancellation of
the new title in the name of the creditor-mortgagee AUB, were all premised on the alleged nullity
of the REM due to its allegedly fraudulent and irregular execution and registration the same facts
set forth in the first case. In both cases, petitioner asserted its right as owner of the property
subject of the REM, while AUB invoked the rights of a foreclosing creditor-mortgagee.

There is also identity of parties notwithstanding that in the first case, only one bank officer (Co),
the notary public (Pelicano) and the Register of Deeds were impleaded along with AUB as
defendants, whereas in the second case, AUB and its two officers (Chan and Del Mundo), along
with the RTC Clerk of Court (Escasinas, Jr.), Sheriff (Magsajo) and the Register of Deeds of Makati
City (Ortile) were the named defendants. The parties in both cases are substantially the same as
they represent the same interests and offices/positions, and who were impleaded in their
respective capacities with corresponding liabilities/duties under the claims asserted.

With respect to identity of cause of action, a cause of action is defined in Section 2, Rule 2 of the
Rules of Court as the act or omission by which a party violates the right of another. This Court has
laid down the test in determining whether or not the causes of action in the first and second cases
are identical, to wit: would the same evidence support and establish both the present and former
cause of action? If so, the former recovery is a bar; if otherwise, it does not stand in the way of
the former action.
[25]


In the first case, petitioner alleged the fraudulent and irregular execution and registration of the
REM which violated its right as owner who did not consent thereto, while in the second case
petitioner cited further violation of its right as owner when AUB foreclosed the property,
consolidated its ownership and obtained a new TCT in its name. Considering that the aforesaid
violations of petitioners right as owner in the two cases both hinge on the binding effect of the
REM, i.e., both cases will rise or fall on the issue of the validity of the REM, it follows that the same
evidence will support and establish the first and second causes of action. The procedural
infirmities or non-compliance with legal requirements for extrajudicial foreclosure raised in the
second case were but additional grounds in support of the injunctive relief sought against the
foreclosure which was, in the first place, illegal on account of the mortgage contracts nullity.
Evidently, petitioner never relied solely on the alleged procedural irregularities in the extrajudicial
foreclosure when it sought the reliefs in the second case.

On this point, it is relevant to quote similar findings of this Court in G.R. No. 191388, which case
involved, contrary to petitioners asseveration and as clearly shown in the factual antecedents
herein set forth, the same parties, issues and causes of action founded on the same real estate
mortgage transaction albeit covering properties of petitioner located in another province (Laguna),
to wit:
The cause of action in the earlier Annulment Case is the alleged nullity of the REM (due to its
allegedly falsified or spurious nature) which is allegedly violative of Goodlands right to the
mortgaged property. It serves as the basis for the prayer for the nullification of the REM. The
Injunction Case involves the same cause of action, inasmuch as it also invokes the nullity of the
REM as the basis for the prayer for the nullification of the extrajudicial foreclosure and for
injunction against consolidation of title. While the main relief sought in the Annulment Case
(nullification of the REM) is ostensibly different from the main relief sought in the
Injunction Case (nullification of the extrajudicial foreclosure and injunction against
consolidation of title), the cause of action which serves as the basis for the said reliefs
remains the same the alleged nullity of the REM. Thus, what is involved here is the third
way of committing forum shopping, i.e., filing multiple cases based on the same cause of action,
but with different prayers. As previously held by the Court, there is still forum shopping even if the
reliefs prayed for in the two cases are different, so long as both cases raise substantially the same
issues.

There can be no determination of the validity of the extrajudicial foreclosure and the
propriety of injunction in the Injunction Case without necessarily ruling on the validity
of the REM, which is already the subject of the Annulment Case. The identity of the causes
of action in the two cases entails that the validity of the mortgage will be ruled upon in both, and
creates a possibility that the two rulings will conflict with each other. This is precisely what is
sought to be avoided by the rule against forum shopping.

The substantial identity of the two cases remains even if the parties should add different
grounds or legal theories for the nullity of the REM or should alter the designation or
form of the action. The well-entrenched rule is that a party cannot, by varying the form of
action, or adopting a different method of presenting his case, escape the operation of the principle
that one and the same cause of action shall not be twice litigated.
[26]
(Emphasis supplied.)

In the above-cited case, the Court also called attention to its earlier ruling in G.R. No. 190231
which involved substantially the same parties, and which constitutes another reason why the
petition must fail, stating that [t]he issue that Goodland committed deliberate forum shopping
when it successively filed the Annulment and Injunction Cases against AUB and its officer was
decided with finality therein. This ruling is conclusive on the petitioners and Goodland considering
that they are substantially the same parties in that earlier case.
[27]


Given the similar factual circumstances in the institution by herein petitioner of Civil Case Nos.
03-045 and 06-1032 (Makati Property case) before the RTC, with those two cases (Civil Case Nos.
B-6242 and B-7110) subject of the petitions in G.R. Nos. 190231 and 191388 involving the Laguna
Properties covered by the same real estate mortgage transaction between AUB and petitioner, the
findings and conclusion of this Court in G.R. No.190231 on the factual issue of whether the
petitioner engaged in willful and deliberate forum shopping should be controlling, to wit:
Rule 7, Section 5 of the Rules of Court requires every litigant to notify the court of the filing or
pendency of a complaint involving the same or similar action or claim within five days of learning
of that fact. While both Civil Case Nos. B-6242 and B-7110 were raffled to the same court, the RTC
of Bian, Laguna, Branch 25, respondent did not report the filing of Civil Case No. B-7110
in the proceedings of Civil Case No. 6242. This fact clearly established respondents
furtive intent to conceal the filing of Civil Case No. B-7110 for the purpose of securing a
favorable judgment. For this reason, Civil Case No. 6242 was correctly dismissed with
prejudice.
[28]
(Emphasis supplied.)

Petitioner, however, insists that the above ruling is inapplicable to it considering that the pendency
of Civil Case No. 06-1032 was in fact disclosed in the Verification and Certification of Non-Forum
Shopping appended to its complaint in Civil Case No. 06-1032. The said certification reads:
x x x x

3. The plaintiff has not heretofore commenced any other action or filed any claim,
involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of my
knowledge, no such other action or claim is pending therein. There are however pending cases
related to the instant case, namely: Goodland Company, Inc. vs. Asia United Bank, et al., Civil
Case No. 03-045, Regional Trial Court, Branch 133, Makati City; Goodland Company, Inc. vs. Asia
United Bank, et al.. Civil Case No. B-6242, Regional Trial Court, Branch 25,Bian, Laguna, People
of the Philippines vs. Christine Chan, et al., Crim. Case No. 332313 , Metropolitan Trial Court,
Branch 64, Makati City; and Rafael H. Galvez vs. Christine Chan, et al. , I.S. No. 03-73,
Department of Justice, Manila.

x x x x
[29]


We find that the above certification still fell short of the requirement of the rule on forum
shopping. While petitioner disclosed the pendency of Civil Case No. 03-045 it filed earlier, it
qualified the nature of the said case by lumping it together with other pending related
cases. Petitioners simultaneous attestation that it has not commenced any other action or filed
any claim, involving the same issues in any court implies that the pending related cases
mentioned therein do not involve the same issues as those raised by it in the subsequently filed
Civil Case No. 06-1032. Consequently, petitioner has filed a certificate that is partly
false and misleading because Civil Case No. 06-1032 squarely raised the issue of the nullity of the
REM, which was in fact the principal issue in Civil Case No. 03-045.

Moreover, there was no showing that petitioner promptly reported to the RTC Branch 133 in
which Civil Case No. 03-045 was pending, its subsequent filing of Civil Case No. 06-1032, as
required by the Rules. It was at the instance of AUB that the two cases were consolidated. This
fact did not escape the attention of the RTC which also found petitioners act of forum shopping
willful and deliberate, as stated in its Joint Order dated July 10, 2007, to wit:
On a last note, the Court cannot countenance plaintiffs violation of its undertaking as regards
compliance of the prohibition against forum shopping. In plaintiffs Certification as to Non-Forum
Shopping embodied in its Complaint in Civil Case No. 03-045, plaintiff is duty bound to report,
within five days from knowledge, the fact that a similar action or proceeding involving the same
issues have been filed or is pending. The records are barren of any showing that plaintiff
reported in Civil Case No. 03-045 the fact that it subsequently filed Civil Case No. 06-
1032. Under Section 5, Rule 7 of the 1997 Rules of Civil Procedure, the plaintiff is required under
oath to certify, among others, his undertaking to report to the court the fact of filing of a similar
case, failing which shall be cause for the dismissal of the case, to wit:
(c) if he should thereafter learn that the same or similar action or claim has been filed or is
pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.

non-compliance with any of the undertakings therein shall constitute indirect contempt of court,
without prejudice to the corresponding administrative and criminal actions. If the acts of the party
or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground
for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.

The totality of circumstances considered, plaintiffs forum shopping committed in
multifarious fashion cannot but be willful and deliberate. Hence, consistent with
established rule and jurisprudence, the same is punishable by and results in the summary
dismissal of the actions filed. Both Civil Case No. 03-045 and Civil Case No.06-1032 are
therefore dismissed with prejudice. x x x
[30]
(Emphasis supplied.)

The CA concurred with the RTC that petitioners act of forum shopping was deliberate and
malicious considering that it knowingly filed Civil Case No. 06-1032 despite the pendency of Civil
Case No. 03-045. The appellate court said that petitioner unscrupulously took advantage of the
availability of competent tribunals and tried its luck in different fora for a favorable result.

We concur with the CAs finding that a decision in either case will amount to res judicata in the
other considering that both courts were called upon to rule on the same issue of whether the REM
was falsified. Indeed, the possibility of conflicting rulings or decisions rendered by different courts
on such issue militates against petitioners posture that it never intended to conceal the
subsequent filing of Civil Case No. 06-1032.

Forum shopping exists where the elements of litis pendentia are present or where a final judgment
in one case will amount to res judicata in the action under consideration.
[31]
Litis pendentia is a
Latin term, which literally means a pending suit and is variously referred to in some decisions
as lis pendens and auter action pendant. As a ground for the dismissal of a civil action, it refers to
the situation where two actions are pending between the same parties for the same cause of
action, so that one of them becomes unnecessary and vexatious. It is based on the policy against
multiplicity of suits.
[32]
Litis pendentia requires the concurrence of the following requisites: (1)
identity of parties, or at least such parties as those representing the same interests in both
actions; (2) identity of rights asserted and reliefs prayed for, the reliefs being founded on the
same facts; and (3) identity with respect to the two preceding particulars in the two cases, such
that any judgment that may be rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other case.
[33]


All the elements of litis pendentia are present in this case. As correctly found by both RTC and CA,
any judgment rendered either in Civil Case No. 03-045 or Civil Case No. 06-1032 on the principal
issue regarding the validity of the REM would amount to res judicata on the other. Contrary to
petitioners submissions, a determination by the RTC of whether petitioner is entitled to the
injunctive relief in Civil Case No. 06-1032 necessarily entails a ruling on the validity of the REM
raised therein by petitioner, which pronouncement may run counter to the separate findings and
conclusion in Civil Case No. 03-045 on the same issue. In the same manner, the reliefs prayed
for in Civil Case No. 03-045 for the cancellation of the REM and its registration cannot be granted
without the court first ruling on the validity of the REM; if the court rules in the affirmative, it
would in turn defeat the injunctive relief sought in Civil Case No. 06-1032.

The foregoing scenario is precisely what the prohibition on forum shopping seeks to avoid. What is
truly important to consider in determining whether forum shopping exists or not is the vexation
caused the courts and parties-litigants by a party who asks different courts and/or administrative
agencies to rule on the same or related causes and/or grant the same or substantially the same
reliefs, in the process creating the possibility of conflicting decisions being rendered by the
differentfora upon the same issues.
[34]


The Court need not say more. Petitioners brazen and deliberate acts of repeated forum shopping
in all stages of litigation are written all over this case, as well as in the two other identical cases
already decided by this Court. No reversible error was thus committed by the CA when it affirmed
the RTCs joint order of dismissal with prejudice.cralaw

WHEREFORE, the petitions for review on certiorari in G.R. Nos. 195546 and 195561 are
bothDENIED. The Decision dated September 15, 2010 and Resolution dated January 31, 2011 of
the Court of Appeals in CA-G.R. CV No. 90418 are hereby AFFIRMED.

With double costs against the petitioner.

chanrobles.com - PHILIPPINE SUPREME COURT DECISIONS - ON-LINE

[G.R. No. 158239 : January 25, 2012] PRISCILLA ALMA JOSE, PETITIONER, VS. RAMON C.
JAVELLANA, ET AL., RESPONDENTS.



FIRST DIVISION

[G.R. No. 158239 : January 25, 2012]

PRISCILLA ALMA JOSE, PETITIONER, VS. RAMON C. JAVELLANA, ET AL., RESPONDENTS.

D E C I S I O N

BERSAMIN, J.:

The denial of a motion for reconsideration of an order granting the defending partys motion to
dismiss is not an interlocutory but a final order because it puts an end to the particular matter
involved, or settles definitely the matter therein disposed of, as to leave nothing for the trial court
to do other than to execute the order.[1] Accordingly, the claiming party has a fresh period of 15
days from notice of the denial within which to appeal the denial.[2]

Antecedents

On September 8, 1979, Margarita Marquez Alma Jose (Margarita) sold for consideration of
P160,000.00 to respondent Ramon Javellana by deed of conditional sale two parcels of land with
areas of 3,675 and 20,936 square meters located in Barangay Mallis, Guiguinto, Bulacan. They
agreed that Javellana would pay P80,000.00 upon the execution of the deed and the balance of
P80,000.00 upon the registration of the parcels of land under the Torrens System (the registration
being undertaken by Margarita within a reasonable period of time); and that should Margarita
become incapacitated, her son and attorney-in-fact, Juvenal M. Alma Jose (Juvenal), and her
daughter, petitioner Priscilla M. Alma Jose, would receive the payment of the balance and proceed
with the application for registration.[3]

After Margarita died and with Juvenal having predeceased Margarita without issue, the vendors
undertaking fell on the shoulders of Priscilla, being Margaritas sole surviving heir. However,
Priscilla did not comply with the undertaking to cause the registration of the properties under the
Torrens System, and, instead, began to improve the properties by dumping filling materials
therein with the intention of converting the parcels of land into a residential or industrial
subdivision.[4] Faced with Priscillas refusal to comply, Javellana commenced on February 10,
1997 an action for specific performance, injunction, and damages against her in the Regional Trial
Court in Malolos, Bulacan (RTC), docketed as Civil Case No. 79-M-97 entitled Ramon C. Javellana,
represented byAtty. Guillermo G. Blanco v. Priscilla Alma Jose.

In Civil Case No. 79-M-97, Javellana averred that upon the execution of the deed of conditional
sale, he had paid the initial amount of P80,000.00 and had taken possession of the parcels of land;
that he had paid the balance of the purchase price to Juvenal on different dates upon Juvenals
representation that Margarita had needed funds for the expenses of registration and payment of
real estate tax; and that in 1996, Priscilla had called to inquire about the mortgage constituted on
the parcels of land; and that he had told her then that the parcels of land had not been mortgaged
but had been sold to him.[5]

Javellana prayed for the issuance of a temporary restraining order or writ of preliminary injunction
to restrain Priscilla from dumping filling materials in the parcels of land; and that Priscilla be
ordered to institute registration proceedings and then to execute a final deed of sale in his
favor.[6]

Priscilla filed a motion to dismiss, stating that the complaint was already barred by prescription;
and that the complaint did not state a cause of action.[7]

The RTC initially denied Priscillas motion to dismiss on February 4, 1998.[8] However, upon her
motion for reconsideration, the RTC reversed itself on June 24, 1999 and granted the motion to
dismiss, opining that Javellana had no cause of action against her due to her not being bound to
comply with the terms of the deed of conditional sale for not being a party thereto; that there was
no evidence showing the payment of the balance; that he had never demanded the registration of
the land from Margarita or Juvenal, or brought a suit for specific performance against Margarita or
Juvenal; and that his claim of paying the balance was not credible.[9]

Javellana moved for reconsideration, contending that the presentation of evidence of full payment
was not necessary at that stage of the proceedings; and that in resolving a motion to dismiss on
the ground of failure to state a cause of action, the facts alleged in the complaint were
hypothetically admitted and only the allegations in the complaint should be considered in resolving
the motion.[10] Nonetheless, he attached to the motion for reconsideration the receipts showing
the payments made to Juvenal.[11] Moreover, he maintained that Priscilla could no longer
succeed to any rights respecting the parcels of land because he had meanwhile acquired absolute
ownership of them; and that the only thing that she, as sole heir, had inherited from Margarita
was the obligation to register them under the Torrens System.[12]

On June 21, 2000, the RTC denied the motion for reconsideration for lack of any reason to disturb
the order of June 24, 1999.[13]

Accordingly, Javellana filed a notice of appeal from the June 21, 2000 order,[14] which the RTC
gave due course to, and the records were elevated to the Court of Appeals (CA).

In his appeal (C.A.-G.R. CV No. 68259), Javellana submitted the following as errors of the
RTC,[15] to wit:

I

THE TRIAL COURT GRIEVOUSLY ERRED IN NOT CONSIDERING THE FACT THAT PLAINTIFF-
APELLANT HAD LONG COMPLIED WITH THE FULL PAYMENT OF THE CONSIDERATION OF THE SALE
OF THE SUBJECT PROPERTY AND HAD IMMEDIATELY TAKEN ACTUAL AND PHYSICAL POSSESSION
OF SAID PROPERTY UPON THE SIGNING OF THE CONDITIONAL DEED OF SALE;

II

THE TRIAL COURT OBVIOUSLY ERRED IN MAKING TWO CONFLICTING INTERPRETATIONS OF THE
PROVISION OF THE CIVIL [CODE], PARTICULARLY ARTICLE 1911, IN THE LIGHT OF THE TERMS
OF THE CONDITIONAL DEED OF SALE;

III

THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT-APPELLEE BEING NOT A PARTY TO THE
CONDITIONAL DEED OF SALE EXECUTED BY HER MOTHER IN FAVOR OF PLAINTFF-APPELLANT IS
NOT BOUND THEREBY AND CAN NOT BE COMPELLED TO DO THE ACT REQUIRED IN THE SAID
DEED OF CONDITIONAL SALE;

IV

THE TRIAL COURT ERRED IN DISMISSING THE AMENDED COMPLAINT WITHOUT HEARING THE
CASE ON THE MERITS.

Priscilla countered that the June 21, 2000 order was not appealable; that the appeal was not
perfected on time; and that Javellana was guilty of forum shopping.[16]

It appears that pending the appeal, Javellana also filed a petition for certiorari in the CA to assail
the June 24, 1999 and June 21, 2000 orders dismissing his complaint (C.A.-G.R. SP No. 60455).
On August 6, 2001, however, the CA dismissed the petition for certiorari,[17] finding that the RTC
did not commit grave abuse of discretion in issuing the orders, and holding that it only committed,
at most, an error of judgment correctible by appeal in issuing the challenged orders.

On November 20, 2002, the CA promulgated its decision in C.A.-G.R. CV No. 68259,[18]
reversing and setting aside the dismissal of Civil Case No. 79-M-97, and remanding the records to
the RTC for further proceedings in accordance with law.[19] The CA explained that the complaint
sufficiently stated a cause of action; that Priscilla, as sole heir, succeeded to the rights and
obligations of Margarita with respect to the parcels of land; that Margaritas undertaking under the
contract was not a purely personal obligation but was transmissible to Priscilla, who was
consequently bound to comply with the obligation; that the action had not yet prescribed due to
its being actually one for quieting of title that was imprescriptible brought by Javellana who had
actual possession of the properties; and that based on the

complaint, Javellana had been in actual possession since 1979, and the cloud on his title had come
about only when Priscilla had started dumping filling materials on the premises.[20]

On May 9, 2003, the CA denied the motion for reconsideration, [21] stating that it decided to give
due course to the appeal even if filed out of time because Javellana had no intention to delay the
proceedings, as in fact he did not even seek an extension of time to file his appellants brief; that
current jurisprudence afforded litigants the amplest opportunity to present their cases free from
the constraints of technicalities, such that even if an appeal was filed out of time, the appellate
court was given the discretion to nonetheless allow the appeal for justifiable reasons.

Issues

Priscilla then brought this appeal, averring that the CA thereby erred in not outrightly dismissing
Javellanas appeal because: (a) the June 21, 2000 RTC order was not appealable; (b) the notice of
appeal had been filed belatedly by three days; and (c) Javellana was guilty of forum shopping for
filing in the CA a petition for certiorari to assail the orders of the RTC that were the subject matter
of his appeal pending in the CA. She posited that, even if the CAs decision to entertain the appeal
was affirmed, the RTCs dismissal of the complaint should nonetheless be upheld because the
complaint stated no cause of action, and the action had already prescribed.

On his part, Javellana countered that the errors being assigned by Priscilla involved questions of
fact not proper for the Court to review through petition for review on certiorari; that the June 21,
2000 RTC order, being a final order, was appealable; that his appeal was perfected on time; and
that he was not guilty of forum shopping because at the time he filed the petition for certiorari the
CA had not yet rendered a decision in C.A.-G.R.

CV No. 68259, and because the issue of ownership raised in C.A.-G.R. CV No. 68259 was different
from the issue of grave abuse of discretion raised in C.A.-G.R. SP No. 60455.

Ruling

The petition for review has no merit.

I
Denial of the motion for reconsideration of the
order of dismissal was a final order and appealable

Priscilla submits that the order of June 21, 2000 was not the proper subject of an appeal
considering that Section 1 of Rule 41 of the Rules of Court provides that no appeal may be taken
from an order denying a motion for reconsideration.

Priscillas submission is erroneous and cannot be sustained.

First of all, the denial of Javellanas motion for reconsideration left nothing more to be done by the
RTC because it confirmed the dismissal of Civil Case No. 79-M-97. It was clearly a final order, not
an interlocutory one. The Court has distinguished between final and interlocutory orders in Pahila-
Garrido v. Tortogo,[22] thuswise:

The distinction between a final order and an interlocutory order is well known. The first disposes of
the subject matter in its entirety or terminates a particular proceeding or action, leaving nothing
more to be done except to enforce by execution what the court has determined, but the latter
does not completely dispose of the case but leaves something else to be decided upon. An
interlocutory order deals with preliminary matters and the trial on the merits is yet to be held and
the judgment rendered. The test to ascertain whether or not an order or a judgment is
interlocutory or final is: does the order or judgment leave something to be done in the trial court
with respect to the merits of the case? If it does, the order or judgment is interlocutory;
otherwise, it is final.

And, secondly, whether an order is final or interlocutory determines whether appeal is the correct
remedy or not. A final order is appealable, to accord with the final judgment rule enunciated in
Section 1, Rule 41 of the Rules of Court to the effect that 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;[23] but the remedy from an interlocutory one is not an appeal
but a special civil action for certiorari. The explanation for the differentiation of remedies given in
Pahila-Garrido v. Tortogo is apt:

xxx The reason for disallowing an appeal from an interlocutory order is to avoid multiplicity of
appeals in a single action, which necessarily suspends the hearing and decision on the merits of
the action during the pendency of the appeals. Permitting multiple appeals will necessarily delay
the trial on the merits of the case for a considerable length of time, and will compel the adverse
party to incur unnecessary expenses, for one of the parties may interpose as many appeals as
there are incidental questions raised by him and as there are interlocutory orders rendered or
issued by the lower court. An interlocutory order may be the subject of an appeal, but only after a
judgment has been rendered, with the ground for appealing the order being included in the appeal
of the judgment itself.

The remedy against an interlocutory order not subject of an appeal is an appropriate special civil
action under Rule 65, provided that the interlocutory order is rendered without or in excess of
jurisdiction or with grave abuse of discretion. Then is certiorari under Rule 65 allowed to be
resorted to.

Indeed, the Court has held that an appeal from an order denying a motion for reconsideration of a
final order or judgment is effectively an appeal from the final order or judgment itself; and has
expressly clarified that the prohibition against appealing an order denying a motion for

reconsideration referred only to a denial of a motion for reconsideration of an interlocutory
order.[24]

II
Appeal was made on time pursuant to Neypes v. CA

Priscilla insists that Javellana filed his notice of appeal out of time. She points out that he received
a copy of the June 24, 1999 order on July 9, 1999, and filed his motion for reconsideration on July
21, 1999 (or after the lapse of 12 days); that the RTC denied his motion for reconsideration
through the order of June 21, 2000, a copy of which he received on July 13, 2000; that he had
only three days from July 13, 2000, or until July 16, 2000, within which to perfect an appeal; and
that having filed his notice of appeal on July 19, 2000, his appeal should have been dismissed for
being tardy by three days beyond the expiration of the reglementary period.

Section 3 of Rule 41 of the Rules of Court provides:

Section 3. Period of ordinary appeal. The appeal shall be taken within fifteen (15) days from
notice of the judgment or final order appealed from. Where a record on appeal is required, the
appellant shall file a notice of appeal and a record on appeal within thirty (30) days from notice of
the judgment or final order.

The period of appeal shall be interrupted by a timely motion for new trial or reconsideration. No
motion for extension of time to file a motion for new trial or reconsideration shall be allowed. (n)

Under the rule, Javellana had only the balance of three days from July 13, 2000, or until July 16,
2000, within which to perfect an appeal due to the timely filing of his motion for reconsideration
interrupting the running of the period of appeal. As such, his filing of the notice of appeal only on
July 19, 2000 did not perfect his appeal on time, as Priscilla insists.

The seemingly correct insistence of Priscilla cannot be upheld, however, considering that the Court
meanwhile adopted the fresh period rule in Neypes v. Court of Appeals,[25] by which an aggrieved
party desirous of appealing an adverse judgment or final order is allowed a fresh period of 15 days
within which to file the notice of appeal in the RTC reckoned from receipt of the order denying a
motion for a new trial or motion for reconsideration, to wit:

The Supreme Court may promulgate procedural rules in all courts. It has the sole prerogative to
amend, repeal or even establish new rules for a more simplified and inexpensive process, and the
speedy disposition of cases. In the rules governing appeals to it and to the Court of Appeals,
particularly Rules 42, 43 and 45, the Court allows extensions of time, based on justifiable and
compelling reasons, for parties to file their appeals. These extensions may consist of 15 days or
more.

To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to
appeal their cases, the Court deems it practical to allow a fresh period of 15 days within which to
file the notice of appeal in the Regional Trial Court, counted from receipt of the order dismissing a
motion for a new trial or motion for reconsideration.

Henceforth, this fresh period rule shall also apply to Rule 40 governing appeals from the
Municipal Trial Courts to the Regional Trial Courts; Rule 42 on petitions for review from the
Regional Trial Courts to the Court of Appeals; Rule 43 on appeals from quasi-judicial agencies to
the Court of Appeals and Rule 45 governing appeals by certiorari to the Supreme Court. The new
rule aims to regiment or make the appeal period uniform, to be counted from receipt of the order
denying the motion for new trial, motion for reconsideration (whether full or partial) or any final
order or resolution.[26]

The fresh period rule may be applied to this case, for the Court has already retroactively extended
the fresh period rule to actions pending and undetermined at the time of their passage and this
will not violate any right of a person who may feel that he is adversely affected, inasmuch as there
are no vested rights in rules of procedure.[27] According to De los Santos v. Vda. de
Mangubat:[28]

Procedural law refers to the adjective law which prescribes rules and forms of procedure in order
that courts may be able to administer justice. Procedural laws do not come within the legal
conception of a retroactive law, or the general rule against the retroactive operation of statues
they may be given retroactive effect on actions pending and undetermined at the time of their
passage and this will not violate any right of a person who may feel that he is adversely affected,
insomuch as there are no vested rights in rules of procedure.

The fresh period rule is a procedural law as it prescribes a fresh period of 15 days within which
an appeal may be made in the event that the motion for reconsideration is denied by the lower
court. Following the rule on retroactivity of procedural laws, the "fresh period rule" should be
applied to pending actions, such as the present case.

Also, to deny herein petitioners the benefit of the fresh period rule will amount to injustice, if not
absurdity, since the subject notice of judgment and final order were issued two years later or in
the year 2000, as compared to the notice of judgment and final order in Neypes which were issued
in 1998. It will be incongruous and illogical that parties receiving notices of judgment and final
orders issued in the year 1998 will enjoy the benefit of the fresh period rule while those later
rulings of the lower courts such as in the instant case, will not.[29]

Consequently, we rule that Javellanas notice of appeal was timely filed pursuant to the fresh
period rule.

III
No forum shopping was committed

Priscilla claims that Javellana engaged in forum shopping by filing a notice of appeal and a petition
for certiorari against the same orders. As earlier noted, he denies that his doing so violated the
policy against forum shopping.

The Court expounded on the nature and purpose of forum shopping in In Re: Reconstitution of
Transfer Certificates of Title Nos. 303168 and 303169 and Issuance of Owners Duplicate
Certificates of Title In Lieu of Those Lost, Rolando Edward G. Lim, Petitioner:[30]

Forum shopping is the act of a party litigant against whom an adverse judgment has been
rendered in one forum seeking and possibly getting a favorable opinion in another forum, other
than by appeal or the special civil action of certiorari, or the institution of two or more actions or
proceedings grounded on the same cause or supposition that one or the other court would make a
favorable disposition. Forum shopping happens when, in the two or more pending cases, there is
identity of parties, identity of rights or causes of action, and identity of reliefs sought. Where the
elements of litis pendentia are present, and where a final judgment in one case will amount to res
judicata in the other, there is forum shopping. For litis pendentia to be a ground for the dismissal
of an action, there must be: (a) identity of the parties or at least such as to represent the same
interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being
founded on the same acts; and (c) the identity in the two cases should be such that the judgment
which may be rendered in one would, regardless of which party is successful, amount to res
judicata in the other.

For forum shopping to exist, both actions must involve the same transaction, same essential facts
and circumstances and must raise identical causes of action, subject matter and issues. Clearly, it
does not exist where different orders were questioned, two distinct causes of action and issues
were raised, and two objectives were sought.

Should Javellanas present appeal now be held barred by his filing of the petition for certiorari in
the CA when his appeal in that court was yet pending?

We are aware that in Young v. Sy,[31] in which the petitioner filed a notice of appeal to elevate
the orders concerning the dismissal of her case due to non-suit to the CA and a petition for
certiorari in the CA assailing the same orders four months later, the Court ruled that the
successive filings of the notice of appeal and the petition for certiorari to attain the same objective
of nullifying the trial courts dismissal orders constituted forum shopping that warranted the
dismissal of both cases. The Court said:

Ineluctably, the petitioner, by filing an ordinary appeal and a petition for certiorari with the CA,
engaged in forum shopping. When the petitioner commenced the appeal, only four months had
elapsed prior to her filing with the CA the Petition for Certiorari under Rule 65 and which
eventually came up to this Court by way of the instant Petition (re: Non-Suit). The elements of litis
pendentia are present between the two suits. As the CA, through its Thirteenth Division, correctly
noted, both suits are founded on exactly the same facts and refer to the same subject matterthe
RTC Orders which dismissed Civil Case No. SP-5703 (2000) for failure to prosecute. In both
cases, the petitioner is seeking the reversal of the RTC orders. The parties, the rights asserted,
the issues professed, and the reliefs prayed for, are all the same. It is evident that the judgment
of one forum may amount to res judicata in the other.

xxxx

The remedies of appeal and certiorari under Rule 65 are mutually exclusive and not alternative or
cumulative. This is a firm judicial policy. The petitioner cannot hedge her case by wagering two or
more appeals, and, in the event that the ordinary appeal lags significantly behind the others, she
cannot post facto validate this circumstance as a demonstration that the ordinary appeal had not
been speedy or adequate enough, in order to justify the recourse to Rule 65. This practice, if
adopted, would sanction the filing of multiple suits in multiple fora, where each one, as the
petitioner couches it, becomes a precautionary measure for the rest, thereby increasing the
chances of a favorable decision. This is the very evil that the proscription on forum shopping seeks
to put right. In Guaranteed Hotels, Inc. v. Baltao, the Court stated that the grave evil sought to be
avoided by the rule against forum shopping is the rendition by two competent tribunals of two
separate and contradictory decisions. Unscrupulous party litigants, taking advantage of a variety
of competent tribunals, may repeatedly try their luck in several different fora until a favorable
result is reached. To avoid the resultant confusion, the Court adheres strictly to the rules against
forum shopping, and any violation of these rules results in the dismissal of the case.[32]

The same result was reached in Zosa v. Estrella,[33] which likewise involved the successive filing
of a notice of appeal and a petition for certiorari to challenge the same orders, with the Court
upholding the CAs dismissals of the appeal and the petition for certiorari through separate
decisions.

Yet, the outcome in Young v. Sy and Zosa v. Estrella is unjust here even if the orders of the RTC
being challenged through appeal and the petition for certiorari were the same. The unjustness
exists because the appeal and the petition for certiorari actually sought different objectives. In his
appeal in C.A.-G.R. CV No. 68259, Javellana aimed to undo the RTCs erroneous dismissal of Civil
Case No. 79-M-97 to clear the way for his judicial demand for specific performance to be tried and
determined in due course by the RTC; but his petition for certiorari had the ostensible objective to
prevent (Priscilla) from developing the subject property and from proceeding with the ejectment
case until his appeal is finally resolved, as the CA explicitly determined in its decision in C.A.-G.R.
SP No. 60455.[34]

Nor were the dangers that the adoption of the judicial policy against forum shopping designed to
prevent or to eliminate attendant. The first danger, i.e., the multiplicity of suits upon one and the
same cause of action, would not materialize considering that the appeal was a continuity of Civil
Case No. 79-M-97, whereas C.A.-G.R. SP No. 60455 dealt with an independent ground of alleged
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the RTC. The
second danger, i.e., the unethical malpractice of shopping for a friendly court or judge to ensure a
favorable ruling or judgment after not getting it in the appeal, would not arise because the CA had
not yet decided C.A.-G.R. CV No. 68259 as of the filing of the petition for certiorari.

Instead, we see the situation of resorting to two inconsistent remedial approaches to be the result
of the tactical misjudgment by Javellanas counsel on the efficacy of the appeal to stave off his
caretakers eviction from the parcels of land and to prevent the development of them into a
residential or commercial subdivision pending the appeal. In the petition for certiorari, Javellana
explicitly averred that his appeal was inadequate and not speedy to prevent private respondent
Alma Jose and her transferee/assignee xxx from developing and disposing of the subject property
to other parties to the total deprivation of petitioners rights of possession and ownership over the
subject property, and that the dismissal by the RTC had emboldened private respondents to fully
develop the property and for respondent Alma Jose to file an ejectment case against petitioners
overseer xxx.[35] Thereby, it became far-fetched that Javellana brought the petition for certiorari
in violation of the policy against forum shopping.

WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision
promulgated on November 20, 2002; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED