Rule 6 (Outline, Case Digest & Full Text)

Outline: Rule 6 - Kinds of Pleadings CIVIL PROCEDURE
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Lesson for August 19, 2014
Tuesday
Judge Mike Asuncion

Kinds of Pleadings

1. Kinds of pleadings - Rule 6
a) Complaint - Sec. 3, Rule 6
b) Answer - Sec. 4, Rule 6
i. Negative defenses - Sec. 5(a), Rule 6
ii. Negative pregnant
- Republic v. Sandiganbayan, G.R. No. 152154, July 15, 2003
iii. Affirmative defenses - Sec. 5(b), Rule 6
c) Counterclaims - Sec. 6, Rule 6
i. Compulsory counterclaim - Sec. 7, Rule 6
- Financial Building Corp. v. Forbes Park Assoc. Inc., G.R. No. 133119, August 7, 2000
- Cruz-Agana v. Hon. Santiago-Lagman, G.R. No. 139018, April 11, 2005
ii. Permissive counterclaim -
- Alday v. FGU Insurance Corp., G.R. No. 138822, January 23, 2001
iii. Effect on the counterclaim when the complaint is dismissed
- International Container Terminal Services Inc. v. CA, G.R. No. 90530, October 7, 1992
d) Cross-claims - Sec. 8, Rule 6
- Ruiz v. CA, G.R. No. 101566, August 17, 1992
- Ruiz v. CA, G.R. No. 101566, March 26, 1993 - Resolution on Reconsideration
e) Third (fourth, etc.) party complaints - Sec. 11, Rule 6
f) Complaint-in-intervention - Sec. 3, Rule 19
- Clariza v. Rosales, G.R. No. L-15364, May 31, 1961
g) Reply - Sec. 10, Rule 6
2. Pleadings allowed in small claim cases and cases covered by the Rules on Summary Procedure
a) A.M. No. 08-8-7-SC - Secs. 5, 11, 14
b) 1991 Revised Rules of Summary Procedure - Secs. 3, 19

Case Digest: Rule 6 - Kinds of Pleadings CIVIL PROCEDURE

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Negative Pregnant
REPUBLIC vs SANDIGANBAYAN
G.R. No. 152154, July 15, 2003

Facts:
Republic (petitioner), through the Presidential
Commission on Good Government (PCGG), represented by the
Office of the Solicitor General (OSG), filed a petition for forfeiture
before the Sandiganbayan pursuant to RA 1379. Declaration of
the aggregate amount of US$ 356M deposited in escrow in the
PNB, as ill-gotten wealth.
The funds were previously held by 5 account groups,
using various foreign foundations in certain Swiss banks.
In addition, the Republic sought the forfeiture of US$25
million and US$5 million in treasury notes which exceeded the
Marcos couple's salariesi ii iii iv, other lawful income as well as
income from legitimately acquired property. The treasury notes
are frozen at the Central Bank of the Philippines, now Bangko
Sentral ng Pilipinas, by virtue of the freeze order issued by the
PCGG.
Before the case was set for pre-trial, a General
Agreement and the Supplemental Agreement dated December
28, 1993 were executed by the Marcos children and then PCGG
Chairman Magtanggol Gunigundo for a global settlement of the
assets of the Marcos family.
The General Agreement/Supplemental Agreements
sought to identify, collate, cause the inventory of and distribute
all assets presumed to be owned by the Marcos family under the
conditions contained therein. The General Agreement specified
in one of its premises or "whereas clauses" the fact that
petitioner "obtained a judgment from the Swiss Federal Tribunal
on December 21, 1990, that the Three Hundred Fifty-six Million
U.S. dollars (US$356 million) belongs in principle to the Republic
of the Philippines provided certain conditionalities are met x x
x."
Hearings were conducted by the Sandiganbayan on the
motion to approve the General/Supplemental Agreements.
In a resolution dated 31 January 2002, the
Sandiganbayan denied the Republic's motion for summary
judgment.
"The evidence offered for summary judgment of the
case did not prove that the money in the Swiss Banks belonged
to the Marcos spouses because no legal proof exists in the record
as to the ownership by the Marcoses of the funds in escrow from
the Swiss Banks. The basis for the forfeiture in favor of the
government cannot be deemed to have been established and our
judgment thereon, perforce, must also have been without basis."
The Republic filed the petition for certiorari.

Issue:
Whether or not the respondents failed to specifically
deny each and every allegation contained in the petition for
forfeiture in the manner required by the rules. Yes
Whether or not the kind of denial in respondents
answer qualifies as the specific denial called for by the rules. No

Held:
In their answer, respondents failed to specifically deny
each and every allegation contained in the petition for forfeiture
in the manner required by the rules. All they gave were stock
answers like they have no sufficient knowledge or they could
not recall because it happened a long time ago, and, as to Mrs.
Marcos, the funds were lawfully acquired, without stating the
basis of such assertions.
Section 10, Rule 8 of the 1997 Rules of Civil Procedure,
provides: A defendant must specify each material allegation of
fact the truth of which he does not admit and, whenever
practicable, shall set forth the substance of the matters upon
which he relies to support his denial. Where a defendant desires
to deny only a part of an averment, he shall specify so much of it
as is true and material and shall deny the remainder. Where a
defendant is without knowledge or information sufficient to form
a belief as to the truth of a material averment made in the
complaint, he shall so state, and this shall have the effect of a
denial.
[

The purpose of requiring respondents to make a specific
denial is to make them disclose facts which will disprove the
allegations of petitioner at the trial, together with the matters
they rely upon in support of such denial. Our jurisdiction adheres
to this rule to avoid and prevent unnecessary expenses and
waste of time by compelling both parties to lay their cards on the
table, thus reducing the controversy to its true terms. As
explained in Alonso vs. Villamor,
A litigation is not a game of technicalities in which one,
more deeply schooled and skilled in the subtle art of movement
and position, entraps and destroys the other. It is rather a
contest in which each contending party fully and fairly lays
before the court the facts in issue and then, brushing aside as
wholly trivial and indecisive all imperfections of form and
technicalities of procedure, asks that justice be done upon the
merits. Lawsuits, unlike duels, are not to be won by a rapiers
thrust.
On the part of Mrs. Marcos, she claimed that the funds
were lawfully acquired. However, she failed to particularly state
the ultimate facts surrounding the lawful manner or mode of
acquisition of the subject funds. Simply put, she merely stated in
her answer with the other respondents that the funds were
lawfully acquired without detailing how exactly these funds
were supposedly acquired legally by them. Even in this case
before us, her assertion that the funds were lawfully acquired
remains bare and unaccompanied by any factual support which
can prove, by the presentation of evidence at a hearing, that
indeed the funds were acquired legitimately by the Marcos
family.
Respondents denials in their answer at the Sandiganbayan
were based on their alleged lack of knowledge or information
sufficient to form a belief as to the truth of the allegations of the
petition.
It is true that one of the modes of specific denial under the
rules is a denial through a statement that the defendant is
without knowledge or information sufficient to form a belief as
to the truth of the material averment in the complaint. The
question, however, is whether the kind of denial in respondents
answer qualifies as the specific denial called for by the rules. We
do not think so. InMorales vs. Court of Appeals,
[30]
this Court
ruled that if an allegation directly and specifically charges a party
with having done, performed or committed a particular act which

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the latter did not in fact do, perform or commit, a categorical and
express denial must be made.
Here, despite the serious and specific allegations against
them, the Marcoses responded by simply saying that they had no
knowledge or information sufficient to form a belief as to the
truth of such allegations. Such a general, self-serving claim of
ignorance of the facts alleged in the petition for forfeiture was
insufficient to raise an issue. Respondent Marcoses should have
positively stated how it was that they were supposedly ignorant
of the facts alleged.
To elucidate, the allegation of petitioner Republic in
paragraph 23 of the petition for forfeiture stated:
23. The following presentation very clearly and overwhelmingly
show in detail how both respondents clandestinely stashed away
the countrys wealth to Switzerland and hid the same under
layers upon layers of foundations and other corporate entities to
prevent its detection. Through their dummies/nominees, fronts
or agents who formed those foundations or corporate entities,
they opened and maintained numerous bank accounts. But due
to the difficulty if not the impossibility of detecting and
documenting all those secret accounts as well as the enormity of
the deposits therein hidden, the following presentation is
confined to five identified accounts groups, with balances
amounting to about $356-M with a reservation for the filing of a
supplemental or separate forfeiture complaint should the need
arise.
[32]

Respondents lame denial of the aforesaid allegation was:
22. Respondents specifically DENY paragraph 23 insofar as it
alleges that Respondents clandestinely stashed the countrys
wealth in Switzerland and hid the same under layers and layers
of foundations and corporate entities for being false, the truth
being that Respondents aforesaid properties were lawfully
acquired.
[33]

Evidently, this particular denial had the earmark of what is
called in the law on pleadings as a negative pregnant, that is, a
denial pregnant with the admission of the substantial facts in the
pleading responded to which are not squarely denied. It was in
effect an admission of the averments it was directed at.
[34]
Stated
otherwise, a negative pregnant is a form of negative expression
which carries with it an affirmation or at least an implication of
some kind favorable to the adverse party. It is a denial pregnant
with an admission of the substantial facts alleged in the pleading.
Where a fact is alleged with qualifying or modifying language and
the words of the allegation as so qualified or modified are
literally denied, has been held that the qualifying circumstances
alone are denied while the fact itself is admitted.
[35]

In the instant case, the material allegations in paragraph 23
of the said petition were not specifically denied by respondents
in paragraph 22 of their answer. The denial contained in
paragraph 22 of the answer was focused on the averment in
paragraph 23 of the petition for forfeiture that Respondents
clandestinely stashed the countrys wealth in Switzerland and hid
the same under layers and layers of foundations and corporate
entities. Paragraph 22 of the respondents answer was thus a
denial pregnant with admissions of the following substantial
facts:
(1) the Swiss bank deposits existed and
(2) that the estimated sum thereof was US$356
million as of December, 1990.
Therefore, the allegations in the petition for forfeiture on
the existence of the Swiss bank deposits in the sum of about
US$356 million, not having been specifically denied by
respondents in their answer, were deemed admitted by them
pursuant to Section 11, Rule 8 of the 1997 Revised Rules on Civil
Procedure:
Material averment in the complaint, xxx shall be deemed
admitted when not specifically denied. xxx
By the same token, the following unsupported denials of
respondents in their answer were pregnant with admissions of
the substantial facts alleged in the Republics petition for
forfeiture:
23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28,
29 and 30 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegation since
respondents were not privy to the transactions regarding the
alleged Azio-Verso-Vibur Foundation accounts, except that, as to
respondent Imelda R. Marcos, she specifically remembers that
the funds involved were lawfully acquired.
36, 37, 38, 39, 40, 41 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the
allegations since respondents were not privy to the transactions
and as to such transactions they were privy to, they cannot
remember with exactitude the same having occurred a long time
ago, except as to respondent Imelda R. Marcos, she specifically
remembers that the funds involved were lawfully acquired.
25. Respondents specifically DENY paragraphs 42, 43, 45, and 46
of the petition for lack of knowledge or information sufficient to
from a belief as to the truth of the allegations since respondents
were not privy to the transactions and as to such transaction
they were privy to, they cannot remember with exactitude, the
same having occurred a long time ago, except that as to
26. Respondents specifically DENY paragraphs 49, 50, 51 and 52
of the petition for lack of knowledge and information sufficient
to form a belief as to the truth of the allegations since
respondents were not privy to the transactions and as to such
transaction they were privy to they cannot remember with
exactitude the same having occurred a long time ago, except that
as to respondent Imelda R. Marcos, she specifically remembers
that the funds involved were lawfully acquired.
The matters referred to in paragraphs 23 to 26 of the
respondents answer pertained to the creation of five groups of
accounts as well as their respective ending balances and
attached documents alleged in paragraphs 24 to 52 of the
Republics petition for forfeiture. Respondent Imelda R. Marcos
never specifically denied the existence of the Swiss funds. Her
claim that the funds involved were lawfully acquired was an
acknowledgment on her part of the existence of said deposits.
This only reinforced her earlier admission of the allegation in
paragraph 23 of the petition for forfeiture regarding the
existence of the US$356 million Swiss bank deposits.
The allegations in paragraphs 47
[37]
and 48
[38]
of the
petition for forfeiture referring to the creation and amount of the
deposits of the Rosalys-Aguamina Foundation as well as the
averment in paragraph 52-a
[39]
of the said petition with respect
to the sum of the Swiss bank deposits estimated to be US$356

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million were again not specifically denied by respondents in their
answer. The respondents did not at all respond to the issues
raised in these paragraphs and the existence, nature and amount
of the Swiss funds were therefore deemed admitted by them. As
held in Galofa vs. Nee Bon Sing,
[40]
if a defendants denial is a
negative pregnant, it is equivalent to an admission.
Moreover, respondents denial of the allegations in the
petition for forfeiture for lack of knowledge or information
sufficient to form a belief as to the truth of the allegations since
respondents were not privy to the transactions was just a
pretense. Mrs. Marcos privity to the transactions was in fact
evident from her signatures on some of the vital
documents
[41]
attached to the petition for forfeiture which
Mrs. Marcos failed to specifically deny as required by the rules.

Compulsory counterclaim - Sec. 7, Rule 6
FINANCIAL BUILDING CORP. vs. FORBES PARK ASSOC. INC.
G.R. No. 133119, August 7, 2000

Facts:
The then Union of Soviet Socialist Republic (hereafter,
USSR) was the owner of residential lot located at No. 10, Narra
Place, Forbes Park Village in Makati City. USSR engaged the
services of Financial Building for the construction of a multi-level
office and staff apartment building at the said lot, which would
be used by the Trade Representative of the USSR.
[3]
Due to the
USSRs representation that it would be building a residence for
its Trade Representative, Forbes Park authorized its construction
and work began shortly thereafter.
Forbes Park reminded the USSR of existing
regulations
[4]
authorizing only the construction of a single-family
residential building in each lot within the village. It also elicited a
reassurance from the USSR that such restriction has been
complied with.
[5]
Promptly, the USSR gave its assurance that it
has been complying with all regulations of Forbes Park.
[6]
Despite
this, Financial Building submitted to the Makati City Government
a second building plan for the construction of a multi-level
apartment building, which was different from the first plan for
the construction of a residential building submitted to Forbes
Park.
Forbes Park discovered the second plan and subsequent
ocular inspection of the USSRs subject lot confirmed the
violation of the deed of restrictions. Thus, it enjoined further
construction work. Forbes Park suspended all permits of entry
for the personnel and materials of Financial Building in the said
construction site. The parties attempted to meet to settle their
differences but it did not push through.
Instead, Financial Building filed in the Regional Trial Court
of Makati, Metro Manila, a Complaint
[7]
for Injunction and
Damages with a prayer for Preliminary Injunction against Forbes
Park. The latter, in turn, filed a Motion to Dismiss on the ground
that Financial Building had no cause of action because it was not
the real party-in-interest.
TC issued a writ of preliminary injunction against Forbes
Park but the Court of Appeals nullified it and dismissed the
complaint altogether.
After Financial Buildings case, G.R. No. 79319, was
terminated with finality, Forbes Park sought to vindicate its rights
by filing with the Regional Trial Court of Makati a Complaint
[9]
for
Damages, against Financial Building, arising from the violation of
its rules and regulations. The damages claimed are in the
following amounts: (a) P3,000,000.00 as actual damages; (b)
P1,000,000.00 as moral damages; (c) P1,000,000.00 as exemplary
damages; and (d) P1,000,000.00 as attorneys fees. TC rendered
its Decision in favor of Forbes Park and against Financial Building.
The FB appealed to the CA, however it affirmed the decision of
the trial court. FB now appeal to the SC.

Issue:
Whether or not the alleged claims and causes of action
therein are barred by prior judgment and/or deemed waived for
its failure to interpose the same as compulsory counterclaim in
civil case.

Held:
Yes. The SC held that a counterclaim is one which arises
out of or is necessarily connected with the transaction or
occurrence that is the subject matter of matter of the opposing
party's claim. If it is within the jurisdiction of the court and it
does not require for its adjudication the presence of the third
parties over whom the court cannot acquire jurisdiction, such
compulsory counter claim is barred if it is not set up in the action
filed by the opposing party. As a result of controversy, FB seized
the initiative by filing prior injunction case, which was anchored
on the contention that Forbes Park's prohibition on the
construction in the subject premises was improper. The instant
case on the other hand, was initiated by Forbes park to compel
FB to remove the same structures it has erected in the same
premises involved in the prior case and it claims damages for
undertaking the said construction. Thus, it is logical relation
between the two cases is patent and it is obvious that
substantially the same evidence is involve in this case. The
compulsory counterclaim is now barred because Forbes Park
filed a motion to dismiss. A compulsory counterclaim is auxiliary
to the proceeding in the original suits and derives its jurisdiction
support therefrom. A counterclaim presupposes the existence of
a claim against the party filing counterclaim. Hence, where there
is no claim against the counterclaimant. The counterclaim is
improper and it must be dismissed, more so where the complaint
is dismissed at the instance of the counterclaimants. In other
words, if the dismissal of the main action result the dismissal of
counterclaim already filed, it stand to reason that the filing of a
motion to dismiss the complaint is an implied waiver of the
compulsory counterclaim because the grant of the motion
ultimately results in the dismissal of the counterclaim.


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Compulsory counterclaim - Sec. 7, Rule 6
CRUZ-AGANA vs. HON. SANTIAGO-LAGMAN
G.R. No. 139018, April 11, 2005

Facts:
Petitioner filed a Complaint for annulment of title with
prayer for preliminary mandatory injunction against
respondent. Petitioner claims that as the sole heir of one
Teodorico Cruz, she is the sole owner of a lot covered by
TCT. Petitioner further claims that the lot was fraudulently sold
to Eugenio Lopez, Jr. who later on transferred the lot to
respondent. The case was raffled to the RTC presided by Judge
Aurora Santiago-Lagman and docketed as Civil Case No. 210-M-
96.
Respondent seasonably filed its Answer with compulsory
counterclaim. Petitioner moved to dismiss respondents
counterclaim for lack of a certificate of non-forum shopping.
In an Order, the trial court denied petitioners motion to
dismiss respondents counterclaim. The trial court reasoned that
respondents counterclaim is compulsory and therefore excluded
from the coverage of Section 5, Rule 7 of the Rules of
Court. Petitioner moved that the trial court reconsider its Order
invoking the mandatory nature of a certificate of non-forum
shopping under Supreme Court Administrative Circular No. 04-
94. On the trial court reversed its Order and dismissed
respondents counterclaim for lack of a certificate of non-forum
shopping.
Respondent seasonably filed a motion for reconsideration
arguing that Administrative Circular No. 04-94 does not apply to
compulsory counterclaims following the ruling in Santo Tomas
University Hospital v. Surla.
3
TC again reversed itself and
recalled its Order dismissing respondents counterclaim.
The trial court found that respondents counterclaim is
compulsory in nature. The trial court ruled that the filing of a
compulsory counterclaim does not require a certificate of non-
forum shopping. On the effect of Santo Tomas on Administrative
Circular No. 04-94, the trial court explained: It is settled rule that
it is one of the inherent powers of the court to amend and
control its processes and orders so as to make them conformable
to law and justice. This power includes the right to reverse itself,
specially when in its honest opinion, it has committed an error or
mistake in judgment, and that to adhere to its decision will cause
injustice to a party litigant.

Issue:
Whether the trial court committed grave abuse
of discretion in refusing to dismiss respondents
counterclaim. No
Whether or not a compulsory counterclaim pleaded in an
Answer be dismissed on the ground of a failure to accompany it
with a certificate of non-forum shopping. No (A compulsory
counterclaim does not require a certificate of non-forum
shopping because a compulsory counterclaim is not an initiatory
pleading.)

Held:
No. The petition lacks merit.
Santo Tomas clarified the scope of Administrative Circular
No. 04-94 with respect to counterclaims. The Court pointed out
that this circular is intended primarily to cover an initiatory
pleading or an incipient application of a party asserting a claim
for relief. The distinction between a compulsory and a
permissive counterclaim is vital in the application of the
circular. The Court explained: It should not be too difficult, the
foregoing rationale of the circular aptly taken, to sustain the view
that the circular in question has not, in fact, been contemplated
to include a kind of claim which, by its very nature as being
auxiliary to the proceedings in the suit and as deriving its
substantive and jurisdictional support therefrom, can only be
appropriately pleaded in the answer and not remain outstanding
for independent resolution except by the court where the main
case pends. Prescinding from the foregoing, the proviso in the
second paragraph of Section 5, Rule 8 of the 1997 Rules of Civil
Procedure, i.e., that the violation of the anti-forum shopping rule
shall not be curable by mere amendment xxx but shall be cause
for the dismissal of the case without prejudice, being predicated
on the applicability of the need for a certification against forum-
shopping, obviously does not include a claim which cannot be
independently set up.
The Court reiterated this ruling in Ponciano v. Judge
Parentela, Jr. Administrative Circular No. 04-94 does not apply to
compulsory counterclaims. The circular applies to initiatory and
similar pleadings. A compulsory counterclaim set up in the
answer is not an initiatory or similar pleading. The initiatory
pleading is the plaintiffs complaint. A respondent has no choice
but to raise a compulsory counterclaim the moment the plaintiff
files the complaint. Otherwise, respondent waives the
compulsory counterclaim.
[5]
In short, the compulsory
counterclaim is a reaction or response, mandatory upon pain of
waiver, to an initiatory pleading which is the complaint.
Petitioners counsel fails or simply refuses to accept the
distinction between a permissive counterclaim and a compulsory
counterclaim. This distinction was the basis for the ruling
in Santo Tomas and Ponciano. The sole issue for resolution in
the present case is whether respondents counterclaim is
compulsory or permissive. If it is a permissive counterclaim, the
lack of a certificate of non-forum shopping is fatal. If it is a
compulsory counterclaim, the lack of a certificate of non-forum
shopping is immaterial.
A compulsory counterclaim is any claim for money or other
relief, which a defending party may have against an opposing
party, which at the time of suit arises out of, or is necessarily
connected with, the same transaction or occurrence that is the
subject matter of plaintiffs complaint.
[8]
It is compulsory in the
sense that it is within the jurisdiction of the court, does not
require for its adjudication the presence of third parties over
whom the court cannot acquire jurisdiction, and will be barred in
the future if not set up in the answer to the complaint in the
same case. Any other counterclaim is permissive.
Respondents counterclaim as set up in its answer states:
3. That because of the unwarranted, baseless, and unjustified
acts of the plaintiff, herein defendant has suffered and continue
to suffer actual damages in the sum of at least P400,000,000.00
which the law, equity, and justice require that to be paid by the
plaintiff and further to reimburse the attorneys fees
of P2,000,000.00;
[9]

It is clear that the counterclaim set up by respondent arises
from the filing of plaintiffs complaint. The counterclaim is so

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intertwined with the main case that it is incapable of proceeding
independently. The counterclaim will require a re-litigation of
the same evidence if the counterclaim is allowed to proceed in a
separate action. Even petitioner recognizes that respondents
counterclaim is compulsory.
[10]
A compulsory counterclaim does
not require a certificate of non-forum shopping because a
compulsory counterclaim is not an initiatory pleading.

Permissive counterclaim
ALDAY vs FGU INSURANCE CORP.,
G.R. No. 138822, January 23, 2001

Facts:
FGU Insurance Corporation (FGU) filed a complaint
before RTC alleging that Alday owed it P114,650.76, representing
unliquidated cash advances, unremitted costs of premiums and
other charges incurred by Alday in the course of her work as an
insurance agent for respondent, and prayed for payment of
exemplary damages, attorneys fees, and cost of suit.
In her Answer, and by way of counterclaim, she
asserted her right for the payment of P104,893.45, representing
direct commissions, profit commissions and contingent bonuses
earned from July to December 1986, and for the accumulated
premium reserves amounting to P500,000.00. She also prayed
for attorneys fees, litigation expenses, moral damages and
exemplary damages for the allegedly unfounded action filed by
respondent.
Respondent filed a Motion to Strike Out Answer with
Compulsory Counterclaim And to Declare Defendant in Default
because petitioners answer was allegedly filed out of time.
However, the trial court denied the said motion as well as its
motion for reconsideration. A few weeks later, respondent filed a
motion to dismiss petitioners counterclaim, contending that the
trial court never acquired jurisdiction over the same because of
non-payment of docket fees by petitioner. In response,
petitioner asked the trial court to declare her counterclaim as
exempt from payment of docket fees since it is compulsory and
that respondent be declared in default for having failed to
answer such counterclaim.
The trial court granted the motion to dismiss
petitioners counterclaim, and consequently, denied petitioners
motion. The court found petitioners counterclaim to be merely
permissive in nature and held that petitioners failure to pay
docket fees prevented the court from acquiring jurisdiction over
the same. The motion for reconsideration was likewise denied by
the trial court.
On appeal to CA, the CA sustained the trial court,
finding that petitioners admissions, as contained in her answer,
show that her counterclaim is merely permissive. Her motion for
reconsideration was also denied by CA, hence, the present
petition.

Issue:
Whether or not the counterclaim of petitioner is
compulsory or permissive in nature.

Held:
A compulsory counterclaim is one which, being
cognizable by the regular courts of justice, arises out of or is
connected with the transaction or occurrence constituting the
subject matter of the opposing party's claim and does not require
for its adjudication the presence of third parties of whom the
court cannot acquire jurisdiction.

In Valencia v. Court of Appeals, this Court capsulized the
criteria or tests that may be used in determining whether a
counterclaim is compulsory or permissive, summarized as
follows:

1. Are the issues of fact and law raised by the claim and
counterclaim largely the same?

2. Would res judicata bar a subsequent suit on
defendant's claim absent the compulsory counterclaim
rule?

3. Will substantially the same evidence support or refute
plaintiff's claim as well s defendant's counterclaim?

4. Is there any logical relation between the claim and the
counterclaim?

Another test, applied in the more recent case of Quintanilla
v. Court of Appeals, is the "compelling test of compulsoriness"
which requires "a logical relationship between the claim and
counterclaim, that is, where conducting separate trials of the
respective claims of the parties would entail a substantial
duplication of effort and time by the parties and the court."
Tested against the abovementioned standards, petitioners
counterclaim for commissions, bonuses and accumulated
premium reserves is merely permissive.
The evidence required to prove petitioner's claims differs
from that needed to establish respondent's demands for the
recovery of cash accountabilities from petitioner, such as cash
advances and costs of premiums. The recovery of respondent's
claims is not contingent or dependent upon establishing
petitioner's counterclaim, such that conducting separate trials
will not result in the substantial duplication of the time and effort
of the court and the parties. One would search the records in
vain for a logical connection between the parties' claims.
This conclusion is further reinforced by petitioner's own
admissions since she declared in her answer that respondent's
cause of action, unlike her own, was not based upon the Special
Agent's Contract. However, petitioner's claims for damages,
allegedly suffered as a result of the filing by respondent of its
complaint, are compulsory.

There is no need for need for petitioner to pay docket fees
for her compulsory counterclaim.

On the other hand, in order for
the trial court to acquire jurisdiction over her permissive
counterclaim, petitioner is bound to pay the prescribed docket
fees.

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Petitioner asserts that the trial court should have declared
respondent in default for having failed to answer her
counterclaim. Insofar as the permissive counterclaim of
petitioner is concerned, there is obviously no need to file an
answer until petitioner has paid the prescribed docket fees for
only then shall the court acquire jurisdiction over such
claim. Meanwhile, the compulsory counterclaim of petitioner for
damages based on the filing by respondent of an allegedly
unfounded and malicious suit need not be answered since it is
inseparable from the claims of respondent. If respondent were to
answer the compulsory counterclaim of petitioner, it would
merely result in the former pleading the same facts raised in its
complaint.

WHEREFORE, the assailed Decision of the Court of Appeals
promulgated on 23 December 1998 and its 19 May 1999
Resolution are hereby MODIFIED. The compulsory counterclaim
of petitioner for damages filed in Civil Case No. 89-3816 is
ordered REINSTATED. Meanwhile, the Regional Trial Court of
Makati (Branch 134) is ordered to require petitioner to pay the
prescribed docket fees for her permissive counterclaim (direct
commissions, profit commissions, contingent bonuses and
accumulated premium reserves), after ascertaining that the
applicable prescriptive period has not yet set in.

Effect on the counterclaim when the complaint is dismissed
INTERNATIONAL CONTAINER TERMINAL SERVICES INC. vs CA
G.R. No. 90530, October 7, 1992

Facts:
February 10, 1998 - Private respondent CF Sharp, Inc.
(Sharp) filed before the RTC a complaint for prohibition with
prayer for preliminary injunction against the Sec. of
Transportation and Communications, the Philippine Ports
Authority (PPA), E. Razon, Inc. and the herein petitioner, ICTSI.
March 7, 1988 - The trial court issued a writ of
preliminary injunction upon the posting of a bond by Sharp in the
sum of P10M issued by Integrated Bonding and Insurance Co.
(Integrated).
On the same day, the petitioner filed an answer with
compulsory counterclaim against Sharp for its unfounded and
frivolous action. It also claimed that as a consequence of the
complaint and the writ of preliminary injunction it had suffered
injuries which if monetized would amount to more than P100M.
March 17, 1988 - The writ of preliminary injunction was
nullified by SC holding that Sharp was not a proper party to stop
the negotiation and awarding of the contract for the
development, management and operation of the Container
Terminal at the Port of Manila; and that the petition was
premature because Sharp did not exhaust administrative
remedies available from it.
March 25, 1988 PPA filed a motion to dismiss Sharps
complaint based on SC decision of March 17, 1988. ICTSI filed a
manifestation adopting said motion.
July 13, 1988 the trial court dismissed the complaint as
well as the counterclaim. ICTSI filed MR insofar as it dismissed its
counterclaim. However it was denied in an Order declaring in
part.
. . . indeed a compulsory counterclaim by the nature of its
nomenclature arises out of or is so intertwined with the
transaction or occurrence that is the subject matter of the
complaint so that by the dismissal of the latter, the same
has to be discarded, specially since the complaint was
dismissed without any trial.
On appeal, the CA upheld the lower court holding that
compulsory counterclaims for actual damages are not the claim
recoverable against the bond; and that the petitioners
manifestation did not contain any reservation. The counterclaim
for damages being compulsory in nature, for which no filing fee
has been paid, was correctly dismissed, hence, the present
petition.

Issue:
Whether or not a compulsory counterclaim stands
upon the dismissal of the complaint

Held:
NO. It has been held that a counterclaim is compulsory
where: (1) it arises out of, or is necessarily connected with, the
opposing partys claim; (2) it does not require for its adjudication
the presence of third parties of whom the court cannot acquire
jurisdiction; and (3) the court has jurisdiction to entertain the
claim.
Tested by these requirements, the petitioners
counterclaim was clearly compulsory. The petitioner itself so
denominated it. There is no doubt that the same evidence
needed to sustain it would also refute the cause of action alleged
in the private respondents complaint; in other words, the
counterclaim would succeed only if the complaint did not. It is
obvious from the very nature of the counterclaim that it could
not remain pending for independent adjudication, that is,
without adjudication by the court of the complaint itself on
which the counterclaim was based.
All questions which are material to the main action or
which are incidental thereto but depending thereon should be
presented and litigated at the same time with the main action, so
as to avoid the necessity of subsequent litigation and consequent
loss of time and money.
However, there is no glossing away the fact that it was
the petitioner itself that caused the dismissal of its counterclaim
when it not only did not object to, but actually moved for, the
dismissal of the complaint. The petitioner cannot undo that act. If
it wanted the counterclaim to subsist, it should have objected to
the dismissal of the complaint or at least reserved its right to
prosecute it, assuming this would still be possible. It did neither
of these. The petitioner now claims that there is no law requiring
that reservation, but there is no law presuming it either. The
petitioner cannot simply say now that it intended all the time to
preserve its counterclaim when it knew that under Rule 17, Sec.
2 "if a counterclaim has been pleaded by a defendant prior to the
service upon him of a motion to dismiss, the action shall not be
dismissed against the defendants objection unless the

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counterclaim can remain pending for independent adjudication
by the Court."
The counterclaim was not permissive. A counterclaim is
permissive if it does not arise out of nor is it necessarily
connected with the subject matter of the opposing partys claim.
It is not barred even if not set up in the action. The petitioners
counterclaim was within the jurisdiction of the trial court. Most
importantly, it had no independent existence, being merely
ancillary to the main action. The petitioner knew all this and did
not object to the dismissal of the complaint. On the contrary, it
actually moved to dismiss that main action, and in so doing also
moved, in effect, for the dismissal of its counterclaim.
Had the counterclaim not been dismissed with the
dismissal of the complaint, the petitioner could have introduced
evidence to show that it was prejudiced by the filing of the
complaint and the obtention of the writ of preliminary injunction
by Sharp. But the petitioner itself aborted that effort when it
joined PPA in moving for the dismissal of Sharps complaint,
knowing that it was the basis of its own compulsory
counterclaim. For failing to object when it should have, to keep
its counterclaim alive, and instead moving to dismiss the
complaint from which the counterclaim derived its life, the
petitioner must now bear the consequences of its own
negligence.
WHEREFORE, the petition is DENIED, with costs against
the petitioner. It is so ordered.

Cross-claims - Sec. 8, Rule 6
RUIZ vs CA
G.R. No. 101566, August 17, 1992

Facts:
The Crisologo family donated an island to the Sent of
God Foundation on the condition inter alia that it would "be used
exclusively to provide a monastic life and experience according to
the Rule of St. Benedict and for such other religious and
charitable purposes as may be determined by the donee." This
was followed by a later donation of other lands, under the same
conditions. The subject properties were later transferred by the
Foundation to the S of G Foundation Inc., which introduced
improvements thereon that, it later demolished. Believing that
the conditions of the donations had been violated, the Crisologos
filed a complaint for revocation of the donations and the
recovery of the properties donated. Impleaded as defendants
were the Sent of God Foundation, the S of G Foundation, Inc.,
Raul G. Fores, Senen F. Valero, and Father Odon de Castro, the
last three as officers or the foundations. Also included were
Olegario Orbeta and his wife, Susana Rosario Orbeta, for their
role in facilitating the donations.
In their answer, the first-named defendants resisted
the allegations in the complaint and denied that the conditions of
the donations had been violated. For their part, the Orbeta
spouses confessed judgment in their answer but also filed a
cross-claim for damages against the other defendants for
involving them in the litigation.
The other defendants filed a motion to dismiss, the
complaint on the ground that it did not state a cause of action
and that only the S of G Foundation was a real party-in-interest.
A copy of the motion was furnished the Orbeta spouses. The trial
court issued an order dismissing the complaint for lack of a cause
of action. The cross-claim was also dismissed because it "had no
more leg to stand on."
The plaintiffs filed a motion for reconsideration, which
was adopted by the Orbeta spouses in an urgent ex parte
manifestation. This motion was denied. The Crisologos then
challenged the order of dismissal before the Court of Appeal in a
petition for certiorari under Rule 65 of the Rules of Court. It was
dismissed on the ground that the proper remedy was an ordinary
appeal.
The Orbeta spouses, who had not joined the Crisologos
filed their own petition for certiorari also with the Court of
Appeals. This petition prospered. The respondent court annulled
the dismissal of the complaint by the trial court and ordered its
reinstatement. Reconsideration of this decision was denied. The
petitioners then came to the Supreme Court.

Issue:
Whether the Orbeta spouses, as cross-claimants in the
original complaint, could still appeal its dismissal in their own
petition for review. No!

Held:
The most important reason is that the order of
dismissal issued by the trial court had already become final and
executory at the time it was sought to be reversed. The
reglementary period for appealing it had already lapsed when
the Crisologos filed their petition for certiorari under Rule 65.
This was correctly dismissed by the Court of Appeals on the
ground, as earlier stated, that the special civil action was not a
substitute for a lost appeal.
When the Orbetas filed their own petition on March 6,
1989, it was also after the order they were questioning had
already become unappealable. On this score alone, the present
petition must fail. Even as the petition of the plaintiffs
themselves had been earlier dismissed, similar treatment should
have been given to the petition of the Orbetas, who were
appealing only as cross-claimants.
A cross-claim is any claim by one party against a co-
party arising out of the transaction or occurrence that is the
subject matter either of the original action or of a counter-claim
therein. Such cross-claim may include a claim that the party
against whom it is asserted is or may be liable to the cross-
claimant for all or part of a claim asserted in the action against
the cross-claimant.
The cross-claim in this case stemmed from the alleged
unjust refusal of the donees to return the donated properties,
resulting in the Crisologos filing their complaint for revocation of
the donations. In their cross-claim, the Orbetas alleged that they
were dragged into the controversy because of the conduct of the
petitioners. Their contention was that they would not have been
sued at all were it not for the failure of the petitioners to comply
with the conditions of the donations.

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It is clear that the cross-claim arose from the complaint
of the Crisologos and was not separable from that main action. It
had no independent existence and was based entirely on that
complaint. The cross-claim was defensive in character because it
could prosper only if the plaintiffs succeeded. As the plaintiffs
failed to establish that the petitioners refusal was not justified, it
necessarily followed that the private respondents own cross-
claim, which was based on the same allegation, also had to fail.
The cross-claimants cannot claim more rights than the
plaintiffs themselves, on whose cause of action the cross-claim
depended. The dismissal of the complaint divested the cross-
claimants of whatever appealable interest they might have had
before and also made the cross-claim itself no longer viable.
A party has an appealable interest only when his
property may be diminished, his burdens increased or his rights
prejudiced by the order sought to be reviewed. In the case at
bar, the consequence of the dismissal of the complaint was the
cessation of the cross-claimants exposure to injury, which risk
would in fact have continued if the Crisologos appeal had
succeeded. It bears stressing that when the plaintiffs petition
was dismissed by the Court of Appeals, the cross-claim lost its
basis, which was the dismissed complaint itself. Earlier, in fact,
the dismissal of the cross-claim had already become
unappealable when the order dismissing the complaint became
final and executory.
It would be highly irregular to allow the reinstatement
of the appeal lost by the plaintiffs through another appeal made
by the cross-claimants. Not only was the cross-claim defensive in
character and therefore deemed dismissed with the complaint
but, as pointed out by the petitioners, the cross-claimants and
the plaintiffs were supposed to be opposing parties and not in
collusion with each other.
Supreme Courts ruling is that the Orbetas, as cross-
claimants, had no personality to pursue a remedy which properly
belonged to the Crisologos who, through their fault or
negligence, failed to employ it. Accordingly, the petition filed by
the Orbetas should have been dismissed outright by the
respondent court on the ground that the cross-claimants were
not proper parties to appeal the dismissal of the complaint.

Cross-claims - Sec. 8, Rule 6
RUIZ vs CA
G.R. No. 101566, March 26, 1993
- Resolution on Reconsideration

Facts:
The private respondents, spouses Olegario Orbeta and
Susana Rosario S. Orbeta, have filed a motion for reconsideration
of the decision the Supreme Court which reversed the decision of
the Court of Appeals granting the petition for certiorari in
"Spouses Olegario Orbeta and Susana Rosario S. Orbeta,
petitioners v. Hon. Florencio A. Ruiz, Jr., Et. Al." and upholding on
procedural grounds, the orders of the Regional Trial Court
dismissing the Crisologos complaint and the Orbetas answer
with cross claim, in civil case entitled "Carmeling P. Crisologo, Et
Al., v. Sent of God Foundation Inc., Et. Al."
This is a splinter case arising from the complaint filed
by Carmeling P. Crisologo and her children for revocation of two
(2) deeds of donation to the Sent of God Foundation, Inc., which
was represented in both transactions by Carmeling niece, Susana
Rosario Orbeta, and her husband, Olegario Orbeta, who were
members of the Sent of God Foundation, Inc., otherwise known
as the Caryana Movement, a religious cult headed by a
Benedictine monk, Father Odon de Castro, as the groups
spiritual director. The donations were subjected to three (3)
conditions imposed by the honors.
Ten years later, the Sent of God Foundation, Inc.,
represented by its chairman of the board of trustees, Dr. Raul
Flores, with the consent of the donors, transferred the Puro-
Salomague Island (renamed St. Benedict Island by Fr. Odon de
Castro) to the S of G Foundation, Inc., represented by Senen P.
Valero, subject to the same conditions as the original donation.
Unfortunately, the Caryana Movement was denied
canonical recognition and its spiritual director was himself
expelled from the Benedictine order and stripped of his priestly
functions by the Archbishop of Manila, Jaime Cardinal Sin.
One of the conditions of her donation to the
Movement was that the Island would be used "to provide a
monastic life and experience according to the rules of St.
Benedict" was violated. Mrs. Crisologo wrote letters to Dr. Fores
and Mrs. Crisologo, asking for the return of her island but
nothing happened. The Sent of God Foundation, Inc. and S of G
Foundation, Inc., abandoned Puro-Salomague Island. Their
agents destroyed and demolished almost all the improvements
thereon.
Mrs. Crisologo and her children filed a complaint with
the Regional Trial Court against the Sent of God Foundation, Inc.,
the S of G Foundation, Inc., Raul G. Fores, Senen P. Valero, Fr.
Odon de Castro and Spouses Olegario and Susana Rosario S.
Orbeta for the revocation of the donation and return of the
island to the doors.
In their answer, the defendants (except the Orbetas)
admitted the donations but denied that they had violated the
conditions thereof.
The Orbetas filed a separate Answer with Cross-claim,
making common cause with the plaintiffs. They alleged that Fr.
Odon de Castro instructed Mrs. Orbeta to look for an ideal place
in Ilocos Sur to house the monastery of the Caryana Movement,
so she thought of approaching her aunt, Mrs. Crisologo, who is a
devout Catholic and devotee of St. Benedict, and who is a
considered one of the biggest land owners in Ilocos Sur. Even if
had not met Fr. Odon, Dr. Fores, and Senen Valero, pillars of the
Sent of God Foundation, Inc., Mrs. Crisologo was persuaded by
Mrs. Orbeta to give her Puro-Salomague Island for the use of the
Caryana Movement. Upon inspection by Fr. Odon, the island was
found suitable for the purposes of the movement, but since the
Sent of God Foundation, Inc., did not have money to buy it, Mrs.
Orbeta persuaded her aunt to donate it to the Foundation
subject to certain conditions already mentioned in the complaint.
The Orbetas confirmed that the Foundation violated the
conditions of the donation when it was denied canonical
permission to teach the monastic life according to the rules of St.

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Benedict. The Orbetas joined the plaintiffs demand for the
reversion of the island to the donors.
The Orbetas asserted a cross claim against their co-
defendants for moral and exemplary damages and expenses of
litigation because the refusal of the Foundations to convey the
island to the Crisologos caused the Orbetas to be dragged into
this case, and has put them (Orbetas) "in a bad perspective".
They prayed that judgment be rendered for the plaintiffs and
that the Foundations and their co-defendants be ordered to pay
damages.
The Foundations, etc. filed motion to dismiss Orbetas
Crossclaim. The Foundations, etc. (except the Orbetas) filed a
"Motion to Dismiss and to Drop Defendants." Furthermore, the
original deeds of donation in favor of the Sent of God
Foundation, Inc., have already been cancelled by the execution of
a third deed of donation by the Sent of God Foundation, Inc. in
favor of the S and G Foundation, Inc., with the consent of the
plaintiffs.
Judge Florencio A. Ruiz, Jr. issued an order dismissing
the complaint and the Orbetas cross claim (it had "no more leg
to stand on"). The plaintiffs filed a motion for reconsideration,
which was adopted by the Orbetas in an urgent ex parte
manifestation. This motion was denied. The Crisologos then
sought a review of the order of dismissal by the Court of Appeals
through a petition for certiorari under Rule 65 of the Rules of
Court. It was dismissed on the ground that the proper remedy
was an ordinary appeal.
The Orbetas who had not joined the Crisologos filed
their own petition for certiorari in the Court of Appeals. Their
petition prospered. The Court of Appeals annulled Judge Ruizs of
dismissal and reinstated the complaint. Reconsideration of this
decision was denied. The Foundations, etc. appealed to Supreme
Court which reversed the Court of Appeals.
The Orbetas filed a motion for reconsideration of the
Supreme Courts decision. The court denied it by resolution.
However, the Orbetas filed a timely Motion to Recall that
resolution. They invited the courts attention to the fact that the
resolution denying their motion for reconsideration did not carry
the necessary votes of three (3) justices for only Justices Cruz and
Aquino voted on it as Justice Bellosillo took no part and Justice
Medialdea was on sick leave of absence, when the motion for
reconsideration was deliberate upon. Consequently, the Division
decided to refer the case to the Court En Banc which recalled the
resolution for lack of the necessary votes and constituted a
Special First Division to deliberate on the Orbetas motion for
reconsideration.

Held:
After a careful review and study of the records, the Court
finds merit in the motion for reconsideration. The Court of
Appeals did not commit a reversible error in setting aside the
orders of Judge Florencio A. Ruiz, Jr. granting the motion to
dismiss the complaint because:

xxx

(2) The Orbetas are proper parties-in-interest to seek a
review on certiorari of the trial courts order dismissing the
complaint.

The Orbetas had an interest in the subject matter of the
Crisologos suit for they were the conduit, through whom the
Crisologos effected the donation of their island to the Sent of
God Foundation, Inc. They were signatories of the deed of
donation of Puro-Salamague Island. Being instrumental in the
obtaining the donations from the Crisologos, they are de facto
plaintiffs with an actual interest in the enforcement of the
conditions of the donation and in the recovery of the donated
property on accountant of the donees violations of the
conditions of the donation.
Being de facto plaintiffs, the Orbetas could file in the
Court of Appeals a separate petition for review on certiorari of
the trial courts order dismissing their demand for the reversion
of the island to the donors.
The finality of the trial courts order dismissing the
Crisologos complaint was not an obstacle to the plaintiffs and
the Orbetas recourse to the Court of Appeals by a petition for
certiorari under Rule 65 of the Rules of Court for such a petition
may be filed "within a reasonable time," not within the time to
appeal.
Even if appeal should have been the proper remedy
against an oppressive and arbitrary order or decision of a lower
court, the aggrieved party may avail of the special civil action of
certiorari when appeal would not be a speedy and adequate
remedy. In this case, appeal would have been neither speedy nor
adequate for the plaintiffs and the Orbetas had not been given a
chance to prove their causes of action, hence, there was no
evidence in the records upon which to anchor a judgment by the
Appellate Court in their favor.
The Appellate Court can legally entertain the special civil
action of certiorari considering the broader and primordial
interests of justice which compel an occasional departure from
the general rule that the extraordinary writ of certiorari cannot
substitute for a lost appeal, the order having become final upon
the lapse of the reglementary period of appeal.
"Certiorari is one such remedy. Considered extraordinary,
it is made available only when there is no appeal, nor any plain,
speedy or adequate remedy in the ordinary course of the law
(Rule 65, Rules of Court, Section 1). The long line of decisions
denying the petition for certiorari, either before appeal was
availed of or specially in instances where the appeal period has
lapsed, for outnumbers the instances when certiorari was given
due course. The few significant exceptions were: when public
welfare and the advancement of public policy dictate: or when
the broader interests of justice so require, when the writs issued
are null, or when the questioned order amounts to an oppressive
exercise of judicial authority."
The Supreme Court granted the motion for
reconsideration and affirmed the Court of Appeals decision.
Judge Florencio A. Ruiz, Jr.s orders were annulled and set aside.
Said civil case should proceed to trial on the merits with all
reasonable dispatch.

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Complaint-in-intervention - Sec. 3, Rule 19
CLARIZA vs ROSALES
G.R. No. L-15364, May 31, 1961

Facts:
Appeal from an order of the Court of First Instance,
dismissing a "complaint in intervention and/or amended
complaint" filed by Felipe J. Zamora in civil case of said court,
entitled "Virginia Clareza, Et Al., plaintiffs, versus Benjamin A.
Rosales, Et Al., Defendants."
In said civil case, Virginia Clareza and her children claim
damages for the death of Juan Luno (Virginias husband and the
father of her children), caused by the reckless negligence of the
defendant Rosales in colliding with the taxicab driven by the
deceased. The defendants filed their answer, claiming that the
incident was due to the negligence of the deceased himself, and
praying for the dismissal of the complaint. By way of
counterclaim they asked for payment of damages to them.
Plaintiffs filed their answer to the counterclaim.
Felipe J. Zamora filed an urgent motion for leave to
intervene and/or be substituted for the plaintiffs attaching
thereto his complaint in intervention and/or amended complaint.
In his motion, he avers that he is the owner of the Golden
Taxicab that the deceased Juan Luno was driving at the time of
the collision; that he has paid P4,000.00 to the heirs of the
deceased as compensation under the Workmens Compensation
Act, and is therefore subrogated to their rights against the
defendants. In his complaint, the intervenor prays for actual,
compensatory, exemplary and moral damages, including the
P4,000.00 which he paid to the heirs.
The lower court admitted the complaint in intervention
and required the defendants to answer it and the defendants
filed a motion to dismiss the complaint as well as the complaint
in intervention. Defendants allege that inasmuch as plaintiffs
have already recovered compensation from the intervenor, they
have no cause of action against the defendants, and,
consequently, no basis for the intervention.
The lower court dismissed both the complaint and the
complaint in intervention. A motion for reconsideration of the
order of dismissal having been denied, intervenor Zamora has
prosecuted the appeal to the Supreme Court.

Issue:
Whether or not the lower court is correct when it
dismissed the complaint in intervention filed by Zamora. No!

Held:
Fundamentally, intervention is never an independent
action, but is ancillary and supplemental to an existing litigation.
Strictly speaking, as the right of the original plaintiffs to sue the
defendants has ceased to exist by virtue of the payment of
compensation to them by the intervenor, in accordance with the
provisions of Sec. 6, Act 3812, as amended by Republic Act No.
772, the said action of original plaintiffs may no longer be
allowed to continue. The right of an intervenor should merely be
in aid of the right of the original party, like the plaintiffs in this
case. As this right of the plaintiffs has ceased to exist, there is
nothing to aid or fight for. So the right of intervention has ceased
to exist.
However, the coming in of the intervenor may be
allowed under the provisions of Section 20 of Rule 3 of the Rules
of Court, which provides:

"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."

Under the provisions of Section 6 of the Workmens
Compensation Act, as amended, the employer who paid the
compensation to an employee "shall succeed the injured
employee to the right of recovery from such person what he
paid." Supreme Court held that the intervenor, the employer,
may well be substituted as party plaintiff. In the case at bar he
actually prayed the court to allow him to do so. Thereafter, he
presented the amendments to the original complaint, required
by the new circumstances surrounding the substituted partys
rights. Such a procedure subserves the policy of the Rules
avoiding multiplicity of suits. The right of the intervenor herein
being the same right of the original party injured by the
negligence of the defendant, which right has been transferred to
the intervenor, the latter should be allowed to be substituted for
the original plaintiff.

Full Text Cases: Rule 6 - Kinds of Pleadings CIVIL PROCEDURE

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[G.R. No. 152154. July 15, 2003.]

REPUBLIC OF THE PHILIPPINES, Petitioner, v. HONORABLE
SANDIGANBAYAN (SPECIAL FIRST DIVISION), FERDINAND E.
MARCOS (REPRESENTED BY HIS ESTATE/HEIRS: IMELDA R.
MARCOS, MARIA IMELDA [IMEE] MARCOS-MANOTOC,
FERDINAND R. MARCOS, JR. AND IRENE MARCOS-ARANETA)
AND IMELDA ROMUALDEZ MARCOS, Respondents.

D E C I S I O N

CORONA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court
seeking to (1) set aside the Resolution dated January 31, 2002
issued by the Special First Division of the Sandiganbayan in Civil
Case No. 0141 entitled Republic of the Philippines v. Ferdinand E.
Marcos, et. al., and (2) reinstate its earlier decision dated
September 19, 2000 which forfeited in favor of petitioner
Republic of the Philippines (Republic) the amount held in escrow
in the Philippine National Bank (PNB) in the aggregate amount of
US$658,175,373.60 as of January 31, 2002.chanrob1es virtua1
1aw 1ibrary

BACKGROUND OF THE CASE

On December 17, 1991, petitioner Republic, through the
Presidential Commission on Good Government (PCGG),
represented by the Office of the Solicitor General (OSG), filed a
petition for forfeiture before the Sandiganbayan, docketed as
Civil Case No. 0141 entitled Republic of the Philippines v.
Ferdinand E. Marcos, represented by his Estate/Heirs and Imelda
R. Marcos, pursuant to RA 1379 1 in relation to Executive Order
Nos. 1, 2 2, 3 14 4 and 14-A. 5

In said case, petitioner sought the declaration of the aggregate
amount of US$356 million (now estimated to be more than
US$658 million inclusive of interest) deposited in escrow in the
PNB, as ill-gotten wealth. The funds were previously held by the
following five account groups, using various foreign foundations
in certain Swiss banks:chanrob1es virtual 1aw library

(1) Azio-Verso-Vibur Foundation accounts;

(2) Xandy-Wintrop: Charis-Scolari-Valamo-Spinus-Avertina
Foundation accounts;

(3) Trinidad-Rayby-Palmy Foundation accounts;

(4) Rosalys-Aguamina Foundation accounts and

(5) Maler Foundation accounts.

In addition, the petition sought the forfeiture of US$25 million
and US$5 million in treasury notes which exceeded the Marcos
couples salaries, other lawful income as well as income from
legitimately acquired property. The treasury notes are frozen at
the Central Bank of the Philippines, now Bangko Sentral ng
Pilipinas, by virtue of the freeze order issued by the PCGG.

On October 18, 1993, respondents Imelda R. Marcos, Maria
Imelda M. Manotoc, Irene M. Araneta and Ferdinand R. Marcos,
Jr. filed their answer.

Before the case was set for pre-trial, a General Agreement and
the Supplemental Agreements 6 dated December 28, 1993 were
executed by the Marcos children and then PCGG Chairman
Magtanggol Gunigundo for a global settlement of the assets of
the Marcos family. Subsequently, respondent Marcos children
filed a motion dated December 7, 1995 for the approval of said
agreements and for the enforcement thereof.

The General Agreement/Supplemental Agreements sought to
identify, collate, cause the inventory of and distribute all assets
presumed to be owned by the Marcos family under the
conditions contained therein. The aforementioned General
Agreement specified in one of its premises or "whereas clauses"
the fact that petitioner "obtained a judgment from the Swiss
Federal Tribunal on December 21, 1990, that the Three Hundred
Fifty-six Million U.S. dollars (US$356 million) belongs in principle
to the Republic of the Philippines provided certain
conditionalities are met. . . ." The said decision of the Swiss
Federal Supreme Court affirmed the decision of Zurich District
Attorney Peter Consandey, granting petitioners request for legal
assistance. 7 Consandey declared the various deposits in the
name of the enumerated foundations to be of illegal provenance
and ordered that they be frozen to await the final verdict in favor
of the parties entitled to restitution.

Hearings were conducted by the Sandiganbayan on the motion
to approve the General/Supplemental Agreements. Respondent
Ferdinand, Jr. was presented as witness for the purpose of
establishing the partial implementation of said agreements.

On October 18, 1996, petitioner filed a motion for summary
judgment and/or judgment on the pleadings. Respondent Mrs.
Marcos filed her opposition thereto which was later adopted by
respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr.

In its resolution dated November 20, 1997, the Sandiganbayan
denied petitioners motion for summary judgment and/or
judgment on the pleadings on the ground that the motion to
approve the compromise agreement" (took) precedence over the
motion for summary judgment."cralaw virtua1aw library

Respondent Mrs. Marcos filed a manifestation on May 26, 1998
claiming she was not a party to the motion for approval of the
Compromise Agreement and that she owned 90% of the funds
with the remaining 10% belonging to the Marcos estate.

Meanwhile, on August 10, 1995, petitioner filed with the District
Attorney in Zurich, Switzerland, an additional request for the
immediate transfer of the deposits to an escrow account in the
PNB. The request was granted. On appeal by the Marcoses, the
Swiss Federal Supreme Court, in a decision dated December 10,
1997, upheld the ruling of the District Attorney of Zurich granting
the request for the transfer of the funds. In 1998, the funds were
remitted to the Philippines in escrow. Subsequently, respondent
Marcos children moved that the funds be placed in custodia legis
because the deposit in escrow in the PNB was allegedly in danger
of dissipation by petitioner. The Sandiganbayan, in its resolution
dated September 8, 1998, granted the motion.

After the pre-trial and the issuance of the pre-trial order and
supplemental pre-trial order dated October 28, 1999 and January
21, 2000, respectively, the case was set for trial. After several
resettings, Petitioner, on March 10, 2000, filed another motion
for summary judgment pertaining to the forfeiture of the US$356
million, based on the following grounds:chanrob1es virtual 1aw
library
I


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THE ESSENTIAL FACTS WHICH WARRANT THE FORFEITURE OF
THE FUNDS SUBJECT OF THE PETITION UNDER R.A. NO. 1379 ARE
ADMITTED BY RESPONDENTS IN THEIR PLEADINGS AND OTHER
SUBMISSIONS MADE IN THE COURSE OF THE PROCEEDING.
II

RESPONDENTS ADMISSION MADE DURING THE PRE-TRIAL THAT
THEY DO NOT HAVE ANY INTEREST OR OWNERSHIP OVER THE
FUNDS SUBJECT OF THE ACTION FOR FORFEITURE TENDERS NO
GENUINE ISSUE OR CONTROVERSY AS TO ANY MATERIAL FACT IN
THE PRESENT ACTION, THUS WARRANTING THE RENDITION OF
SUMMARY JUDGMENT. 8

Petitioner contended that, after the pre-trial conference, certain
facts were established, warranting a summary judgment on the
funds sought to be forfeited.chanrob1es virtua1 1aw 1ibrary

Respondent Mrs. Marcos filed her opposition to the petitioners
motion for summary judgment, which opposition was later
adopted by her co-respondents Mrs. Manotoc, Mrs. Araneta and
Ferdinand, Jr.

On March 24, 2000, a hearing on the motion for summary
judgment was conducted.

In a decision 9 dated September 19, 2000, the Sandiganbayan
granted petitioners motion for summary judgment:chanrob1es
virtual 1aw library

CONCLUSION

There is no issue of fact which calls for the presentation of
evidence.

The Motion for Summary Judgment is hereby granted.

The Swiss deposits which were transmitted to and now held in
escrow at the PNB are deemed unlawfully acquired as ill-gotten
wealth.

DISPOSITION

WHEREFORE, judgment is hereby rendered in favor of the
Republic of the Philippines and against the respondents,
declaring the Swiss deposits which were transferred to and now
deposited in escrow at the Philippine National Bank in the total
aggregate value equivalent to US$627,608,544.95 as of August
31, 2000 together with the increments thereof forfeited in favor
of the State. 10

Respondent Mrs. Marcos filed a motion for reconsideration
dated September 26, 2000. Likewise, Mrs. Manotoc and
Ferdinand, Jr. filed their own motion for reconsideration dated
October 5, 2000. Mrs. Araneta filed a manifestation dated
October 4, 2000 adopting the motion for reconsideration of Mrs.
Marcos, Mrs. Manotoc and Ferdinand, Jr.

Subsequently, petitioner filed its opposition thereto.

In a resolution 11 dated January 31, 2002, the Sandiganbayan
reversed its September 19, 2000 decision, thus denying
petitioners motion for summary judgment:chanrob1es virtual
1aw library

CONCLUSION

In sum, the evidence offered for summary judgment of the case
did not prove that the money in the Swiss Banks belonged to the
Marcos spouses because no legal proof exists in the record as to
the ownership by the Marcoses of the funds in escrow from the
Swiss Banks.

The basis for the forfeiture in favor of the government cannot be
deemed to have been established and our judgment thereon,
perforce, must also have been without basis.

WHEREFORE, the decision of this Court dated September 19,
2000 is reconsidered and set aside, and this case is now being set
for further proceedings. 12

Hence, the instant petition. In filing the same, petitioner argues
that the Sandiganbayan, in reversing its September 19, 2000
decision, committed grave abuse of discretion amounting to lack
or excess of jurisdiction considering that
I

PETITIONER WAS ABLE TO PROVE ITS CASE IN ACCORDANCE
WITH THE REQUISITES OF SECTIONS 2 AND 3 OF R.A. NO.
1379:chanrob1es virtual 1aw library

A. PRIVATE RESPONDENTS CATEGORICALLY ADMITTED NOT ONLY
THE PERSONAL CIRCUMSTANCES OF FERDINAND E. MARCOS
AND IMELDA R. MARCOS AS PUBLIC OFFICIALS BUT ALSO THE
EXTENT OF THEIR SALARIES AS SUCH PUBLIC OFFICIALS, WHO
UNDER THE CONSTITUTION, WERE PROHIBITED FROM
ENGAGING IN THE MANAGEMENT OF FOUNDATIONS.

B. PRIVATE RESPONDENTS ALSO ADMITTED THE EXISTENCE OF
THE SWISS DEPOSITS AND THEIR OWNERSHIP
THEREOF:chanrob1es virtual 1aw library

1. ADMISSIONS IN PRIVATE RESPONDENTS ANSWER;

2. ADMISSION IN THE GENERAL/SUPPLEMENTAL AGREEMENTS
THEY SIGNED AND SOUGHT TO IMPLEMENT;

3. ADMISSION IN A MANIFESTATION OF PRIVATE RESPONDENT
IMELDA R. MARCOS AND IN THE MOTION TO PLACE THE RES IN
CUSTODIA LEGIS; AND

4. ADMISSION IN THE UNDERTAKING TO PAY THE HUMAN
RIGHTS VICTIMS.

C. PETITIONER HAS PROVED THE EXTENT OF THE LEGITIMATE
INCOME OF FERDINAND E. MARCOS AND IMELDA R. MARCOS AS
PUBLIC OFFICIALS.

D. PETITIONER HAS ESTABLISHED A PRIMA FACIE PRESUMPTION
OF UNLAWFULLY ACQUIRED WEALTH.
II

SUMMARY JUDGMENT IS PROPER SINCE PRIVATE RESPONDENTS
HAVE NOT RAISED ANY GENUINE ISSUE OF FACT CONSIDERING
THAT:chanrob1es virtual 1aw library

A. PRIVATE RESPONDENTS DEFENSE THAT SWISS DEPOSITS
WERE LAWFULLY ACQUIRED DOES NOT ONLY FAIL TO TENDER
AN ISSUE BUT IS CLEARLY A SHAM; AND


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B. IN SUBSEQUENTLY DISCLAIMING OWNERSHIP OF THE SWISS
DEPOSITS, PRIVATE RESPONDENTS ABANDONED THEIR SHAM
DEFENSE OF LEGITIMATE ACQUISITION, AND THIS FURTHER
JUSTIFIED THE RENDITION OF A SUMMARY JUDGMENT.
III

THE FOREIGN FOUNDATIONS NEED NOT BE IMPLEADED.
IV

THE HONORABLE PRESIDING JUSTICE COMMITTED GRAVE ABUSE
OF DISCRETION IN REVERSING HIMSELF ON THE GROUND THAT
ORIGINAL COPIES OF THE AUTHENTICATED SWISS DECISIONS
AND THEIR "AUTHENTICATED TRANSLATIONS" HAVE NOT BEEN
SUBMITTED TO THE COURT, WHEN EARLIER THE
SANDIGANBAYAN HAS QUOTED EXTENSIVELY A PORTION OF THE
TRANSLATION OF ONE OF THESE SWISS DECISIONS IN HIS
PONENCIA DATED JULY 29, 1999 WHEN IT DENIED THE
MOTION TO RELEASE ONE HUNDRED FIFTY MILLION US DOLLARS
($150,000,000.00) TO THE HUMAN RIGHTS VICTIMS.
V

PRIVATE RESPONDENTS ARE DEEMED TO HAVE WAIVED THEIR
OBJECTION TO THE AUTHENTICITY OF THE SWISS FEDERAL
SUPREME COURT DECISIONS. 13

Petitioner, in the main, asserts that nowhere in the respondents
motions for reconsideration and supplemental motion for
reconsideration were the authenticity, accuracy and admissibility
of the Swiss decisions ever challenged. Otherwise stated, it was
incorrect for the Sandiganbayan to use the issue of lack of
authenticated translations of the decisions of the Swiss Federal
Supreme Court as the basis for reversing itself because
respondents themselves never raised this issue in their motions
for reconsideration and supplemental motion for
reconsideration. Furthermore, this particular issue relating to the
translation of the Swiss court decisions could not be resurrected
anymore because said decisions had been previously utilized by
the Sandiganbayan itself in resolving a "decisive issue" before it.

Petitioner faults the Sandiganbayan for questioning the non-
production of the authenticated translations of the Swiss Federal
Supreme Court decisions as this was a marginal and technical
matter that did not diminish by any measure the conclusiveness
and strength of what had been proven and admitted before the
Sandiganbayan, that is, that the funds deposited by the Marcoses
constituted ill-gotten wealth and thus belonged to the Filipino
people.

In compliance with the order of this Court, Mrs. Marcos filed her
comment to the petition on May 22, 2002. After several motions
for extension which were all granted, the comment of Mrs.
Manotoc and Ferdinand, Jr. and the separate comment of Mrs.
Araneta were filed on May 27, 2002.

Mrs. Marcos asserts that the petition should be denied on the
following grounds:chanrob1es virtual 1aw library

A.

PETITIONER HAS A PLAIN, SPEEDY, AND ADEQUATE REMEDY AT
THE SANDIGANBAYAN.

B.

THE SANDIGANBAYAN DID NOT ABUSE ITS DISCRETION IN
SETTING THE CASE FOR FURTHER PROCEEDINGS. 14

Mrs. Marcos contends that petitioner has a plain, speedy and
adequate remedy in the ordinary course of law in view of the
resolution of the Sandiganbayan dated January 31, 2000
directing petitioner to submit the authenticated translations of
the Swiss decisions. Instead of availing of said remedy, petitioner
now elevates the matter to this Court. According to Mrs. Marcos,
a petition for certiorari which does not comply with the
requirements of the rules may be dismissed. Since petitioner has
a plain, speedy and adequate remedy, that is, to proceed to trial
and submit authenticated translations of the Swiss decisions, its
petition before this Court must be dismissed. Corollarily, the
Sandiganbayans ruling to set the case for further proceedings
cannot and should not be considered a capricious and whimsical
exercise of judgment.

Likewise, Mrs. Manotoc and Ferdinand, Jr., in their comment,
prayed for the dismissal of the petition on the grounds
that:chanrob1es virtual 1aw library

(A)

BY THE TIME PETITIONER FILED ITS MOTION FOR SUMMARY
JUDGMENT ON 10 MARCH 2000, IT WAS ALREADY BARRED
FROM DOING SO.

(1) The Motion for Summary Judgment was based on private
respondents Answer and other documents that had long been in
the records of the case. Thus, by the time the Motion was filed
on 10 March 2000, estoppel by laches had already set in against
petitioner.

(2) By its positive acts and express admissions prior to filing the
Motion for Summary Judgment on 10 March 1990, petitioner had
legally bound itself to go to trial on the basis of existing issues.
Thus, it clearly waived whatever right it had to move for
summary judgment.

(B)

EVEN ASSUMING THAT PETITIONER WAS NOT LEGALLY BARRED
FROM FILING THE MOTION FOR SUMMARY JUDGMENT, THE
SANDIGANBAYAN IS CORRECT IN RULING THAT PETITIONER HAS
NOT YET ESTABLISHED A PRIMA FACIE CASE FOR THE
FORFEITURE OF THE SWISS FUNDS.

(1) Republic Act No. 1379, the applicable law, is a penal statute.
As such, its provisions, particularly the essential elements stated
in section 3 thereof, are mandatory in nature. These should be
strictly construed against petitioner and liberally in favor of
private respondents.

(2) Petitioner has failed to establish the third and fourth essential
elements in Section 3 of R.A. 1379 with respect to the
identification, ownership, and approximate amount of the
property which the Marcos couple allegedly "acquired during
their incumbency" .

(a) Petitioner has failed to prove that the Marcos couple
"acquired" or own the Swiss funds.

(b) Even assuming, for the sake of argument, that the fact of
acquisition has been proven, petitioner has categorically

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admitted that it has no evidence showing how much of the Swiss
funds was acquired "during the incumbency" of the Marcos
couple from 31 December 1965 to 25 February 1986.

(3) In contravention of the essential element stated in Section 3
(e) of R.A. 1379, petitioner has failed to establish the other
proper earnings and income from legitimately acquired property
of the Marcos couple over and above their government salaries.

(4) Since petitioner failed to prove the three essential elements
provided in paragraphs (c) 15 (d) 16 and (e) 17 of Section 3, R.A.
1379, the inescapable conclusion is that the prima facie
presumption of unlawful acquisition of the Swiss funds has not
yet attached. There can, therefore, be no premature forfeiture of
the funds.

(C)

IT WAS ONLY BY ARBITRARILY ISOLATING AND THEN TAKING
CERTAIN STATEMENTS MADE BY PRIVATE RESPONDENTS OUT OF
CONTEXT THAT PETITIONER WAS ABLE TO TREAT THESE AS
"JUDICIAL ADMISSIONS" SUFFICIENT TO ESTABLISH A PRIMA
FACIE AND THEREAFTER A CONCLUSIVE CASE TO JUSTIFY THE
FORFEITURE OF THE SWISS FUNDS.

(1) Under Section 27, Rule 130 of the Rules of Court, the General
and Supplemental Agreements, as well as the other written and
testimonial statements submitted in relation thereto, are
expressly barred from being admissible in evidence against
private respondents.

(2) Had petitioner bothered to weigh the alleged admissions
together with the other statements on record, there would be a
demonstrable showing that no such judicial admissions were
made by private respondents.

(D)

SINCE PETITIONER HAS NOT (YET) PROVEN ALL THE ESSENTIAL
ELEMENTS TO ESTABLISH A PRIMA FACIE CASE FOR FORFEITURE,
AND PRIVATE RESPONDENTS HAVE NOT MADE ANY JUDICIAL
ADMISSION THAT WOULD HAVE FREED IT FROM ITS BURDEN OF
PROOF, THE SANDIGANBAYAN DID NOT COMMIT GRAVE ABUSE
OF DISCRETION IN DENYING THE MOTION FOR SUMMARY
JUDGMENT. CERTIORARI, THEREFORE, DOES NOT LIE, ESPECIALLY
AS THIS COURT IS NOT A TRIER OF FACTS. 18

For her part, Mrs. Araneta, in her comment to the petition,
claims that obviously petitioner is unable to comply with a very
plain requirement of respondent Sandiganbayan. The instant
petition is allegedly an attempt to elevate to this Court matters,
issues and incidents which should be properly threshed out at
the Sandiganbayan. To respondent Mrs. Araneta, all other
matters, save that pertaining to the authentication of the
translated Swiss Court decisions, are irrelevant and impertinent
as far as this Court is concerned. Respondent Mrs. Araneta
manifests that she is as eager as respondent Sandiganbayan or
any interested person to have the Swiss Court decisions officially
translated in our known language. She says the authenticated
official English version of the Swiss Court decisions should be
presented. This should stop all speculations on what indeed is
contained therein. Thus, respondent Mrs. Araneta prays that the
petition be denied for lack of merit and for raising matters which,
in elaborated fashion, are impertinent and improper before this
Court.chanrob1es virtua1 1aw 1ibrary

PROPRIETY OF PETITIONERS

ACTION FOR CERTIORARI

But before this Court discusses the more relevant issues, the
question regarding the propriety of petitioner Republics action
for certiorari under Rule 65 19 of the 1997 Rules of Civil
Procedure assailing the Sandiganbayan Resolution dated January
21, 2002 should be threshed out.

At the outset, we would like to stress that we are treating this
case as an exception to the general rule governing petitions
for certiorari. Normally, decisions of the Sandiganbayan are
brought before this Court under Rule 45, not Rule 65. 20 But
where the case is undeniably ingrained with immense public
interest, public policy and deep historical
repercussions,certiorari is allowed notwithstanding the existence
and availability of the remedy of appeal. 21

One of the foremost concerns of the Aquino Government in
February 1986 was the recovery of the unexplained or ill-gotten
wealth reputedly amassed by former President and Mrs.
Ferdinand E. Marcos, their relatives, friends and business
associates. Thus, the very first Executive Order (EO) issued by
then President Corazon Aquino upon her assumption to office
after the ouster of the Marcoses was EO No. 1, issued on
February 28, 1986. It created the Presidential Commission on
Good Government (PCGG) and charged it with the task of
assisting the President in the "recovery of all ill-gotten wealth
accumulated by former President Ferdinand E. Marcos, his
immediate family, relatives, subordinates and close associates,
whether located in the Philippines or abroad, including the
takeover or sequestration of all business enterprises and entities
owned or controlled by them during his administration, directly
or through nominees, by taking undue advantage of their public
office and/or using their powers, authority, influence,
connections or relationship." The urgency of this undertaking
was tersely described by this Court in Republic v. Lobregat 22
:chanrob1es virtual 1aw library

surely . . . an enterprise "of great pith and moment" ; it was
attended by "great expectations" ; it was initiated not only out of
considerations of simple justice but also out of sheer necessity
the national coffers were empty, or nearly so.

In all the alleged ill-gotten wealth cases filed by the PCGG, this
Court has seen fit to set aside technicalities and formalities that
merely serve to delay or impede judicious resolution. This Court
prefers to have such cases resolved on the merits at the
Sandiganbayan. But substantial justice to the Filipino people and
to all parties concerned, not mere legalisms or perfection of
form, should now be relentlessly and firmly pursued. Almost two
decades have passed since the government initiated its search
for and reversion of such ill-gotten wealth. The definitive
resolution of such cases on the merits is thus long overdue. If
there is proof of illegal acquisition, accumulation,
misappropriation, fraud or illicit conduct, let it be brought out
now. Let the ownership of these funds and other assets be finally
determined and resolved with dispatch, free from all the delaying
technicalities and annoying procedural sidetracks. 23

We thus take cognizance of this case and settle with finality all
the issues therein.

ISSUES BEFORE THIS COURT

The crucial issues which this Court must resolve are: (1) whether
or not respondents raised any genuine issue of fact which would
either justify or negate summary judgment; and (2) whether or
not petitioner Republic was able to prove its case for forfeiture in

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accordance with Sections 2 and 3 of RA 1379.

(1) The Propriety of Summary Judgment

We hold that respondent Marcoses failed to raise any genuine
issue of fact in their pleadings. Thus, on motion of petitioner
Republic, summary judgment should take place as a matter of
right.

In the early case of Auman v. Estenzo 24 , summary judgment
was described as a judgment which a court may render before
trial but after both parties have pleaded. It is ordered by the
court upon application by one party, supported by affidavits,
depositions or other documents, with notice upon the adverse
party who may in turn file an opposition supported also by
affidavits, depositions or other documents. This is after the court
summarily hears both parties with their respective proofs and
finds that there is no genuine issue between them. Summary
judgment is sanctioned in this jurisdiction by Section 1, Rule 35 of
the 1997 Rules of Civil Procedure:chanrob1es virtual 1aw library

SECTION 1. Summary judgment for claimant. A party seeking
to recover upon a claim, counterclaim, or cross-claim or to obtain
a declaratory relief may, at any time after the pleading in answer
thereto has been served, move with supporting affidavits,
depositions or admissions for a summary judgment in his favor
upon all or any part thereof.25cralaw:red

Summary judgment is proper when there is clearly no genuine
issue as to any material fact in the action. 26 The theory of
summary judgment is that, although an answer may on its face
appear to tender issues requiring trial, if it is demonstrated by
affidavits, depositions or admissions that those issues are not
genuine but sham or fictitious, the Court is justified in dispensing
with the trial and rendering summary judgment for petitioner
Republic.

The Solicitor General made a very thorough presentation of its
case for forfeiture:chanrob1es virtual 1aw library
x x x

4. Respondent Ferdinand E. Marcos (now deceased and
represented by his Estate/Heirs) was a public officer for several
decades continuously and without interruption as Congressman,
Senator, Senate President and President of the Republic of the
Philippines from December 31, 1965 up to his ouster by direct
action of the people of EDSA on February 22-25, 1986.

5. Respondent Imelda Romualdez Marcos (Imelda, for short) the
former First Lady who ruled with FM during the 14-year martial
law regime, occupied the position of Minister of Human
Settlements from June 1976 up to the peaceful revolution in
February 22-25, 1986. She likewise served once as a member of
the Interim Batasang Pambansa during the early years of martial
law from 1978 to 1984 and as Metro Manila Governor in
concurrent capacity as Minister of Human Settlements. . . .
x x x

11. At the outset, however, it must be pointed out that based on
the Official Report of the Minister of Budget, the total salaries of
former President Marcos as President from 1966 to 1976 was
P60,000 a year and from 1977 to 1985, P100,000 a year; while
that of the former First Lady, Imelda R. Marcos, as Minister of
Human Settlements from June 1976 to February 22-25, 1986 was
P75,000 a year. . . .

ANALYSIS OF RESPONDENTS

LEGITIMATE INCOME
x x x

12. Based on available documents, the ITRs of the Marcoses for
the years 1965-1975 were filed under Tax Identification No.
1365-055-1. For the years 1976 until 1984, the returns were filed
under Tax Identification No. M 6221-J 1117-A-9.

13. The data contained in the ITRs and Balance Sheet filed by the
"Marcoses are summarized and attached to the reports in the
following schedules:chanrob1es virtual 1aw library

Schedule A:chanrob1es virtual 1aw library

Schedule of Income (Annex "T" hereof);

Schedule B:chanrob1es virtual 1aw library

Schedule of Income Tax Paid (Annex "T-1" hereof);

Schedule C:chanrob1es virtual 1aw library

Schedule of Net Disposable Income (Annex "T-2" hereof);

Schedule D:chanrob1es virtual 1aw library

Schedule of Networth Analysis (Annex "T-3" hereof).

14. As summarized in Schedule A (Annex "T" hereof), the
Marcoses reported P16,408,442.00 or US$2,414,484.91 in total
income over a period of 20 years from 1965 to 1984. The sources
of income are as follows:chanrob1es virtual 1aw library

Official Salaries - P2,627,581.00 - 16.01%

Legal Practice - 11,109,836.00 - 67.71%

Farm Income - 149,700.00 - .91%

Others - 2,521,325.00 - 15.37%

Total P16,408,442.00 - 100.00%

15. FMs official salary pertains to his compensation as Senate
President in 1965 in the amount of P15,935.00 and
P1,420,000.00 as President of the Philippines during the period
1966 until 1984. On the other hand, Imelda reported salaries and
allowances only for the years 1979 to 1984 in the amount of
P1,191,646.00. The records indicate that the reported income
came from her salary from the Ministry of Human Settlements
and allowances from Food Terminal, Inc., National Home
Mortgage Finance Corporation, National Food Authority Council,
Light Rail Transit Authority and Home Development Mutual Fund.

16. Of the P11,109,836.00 in reported income from legal
practice, the amount of P10,649,836.00 or 96% represents
"receivables from prior years" during the period 1967 up to 1984.

17. In the guise of reporting income using the cash method under

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Section 38 of the National Internal Revenue Code, FM made it
appear that he had an extremely profitable legal practice before
he became a President (FM being barred by law from practicing
his law profession during his entire presidency) and that,
incredibly, he was still receiving payments almost 20 years after.
The only problem is that in his Balance Sheet attached to his
1965 ITR immediately preceding his ascendancy to the
presidency he did not show any Receivables from client at all,
much less the P10,65-M that he decided to later recognize as
income. There are no documents showing any withholding tax
certificates. Likewise, there is nothing on record that will show
any known Marcos client as he has no known law office. As
previously stated, his networth was a mere P120,000.00 in
December, 1965. The joint income tax returns of FM and Imelda
cannot, therefore, conceal the skeletons of their kleptocracy.

18. FM reported a total of P2,521,325.00 as Other Income for the
years 1972 up to 1976 which he referred to in his return as
"Miscellaneous Items" and "Various Corporations." There is no
indication of any payor of the dividends or earnings.

19. Spouses Ferdinand and Imelda did not declare any income
from any deposits and placements which are subject to a 5%
withholding tax. The Bureau of Internal Revenue attested that
after a diligent search of pertinent records on file with the
Records Division, they did not find any records involving the tax
transactions of spouses Ferdinand and Imelda in Revenue Region
No. 1, Baguio City, Revenue Region No. 4A, Manila, Revenue
Region No. 4B1, Quezon City and Revenue No. 8, Tacloban, Leyte.
Likewise, the Office of the Revenue Collector of Batac. Further,
BIR attested that no records were found on any filing of capital
gains tax return involving spouses FM and Imelda covering the
years 1960 to 1965.

20. In Schedule B, the taxable reported income over the twenty-
year period was P14,463,595.00 which represents 88% of the
gross income. The Marcoses paid income taxes totaling
P8,233,296.00 or US$1,220,667.59. The business expenses in the
amount of P861,748.00 represent expenses incurred for
subscription, postage, stationeries and contributions while the
other deductions in the amount of P567,097.00 represents
interest charges, medicare fees, taxes and licenses. The total
deductions in the amount of P1,994,845.00 represents 12% of
the total gross income.

21. In Schedule C, the net cumulative disposable income
amounts to P6,756,301.00 or US$980,709.77. This is the amount
that represents that portion of the Marcoses income that is free
for consumption, savings and investments. The amount is arrived
at by adding back to the net income after tax the personal and
additional exemptions for the years 1965-1984, as well as the
tax-exempt salary of the President for the years 1966 until 1972.

22. Finally, the networth analysis in Schedule D, represents the
total accumulated networth of spouses, Ferdinand and Imelda.
Respondents Balance Sheet attached to their 1965 ITR, covering
the year immediately preceding their ascendancy to the
presidency, indicates an ending networth of P120,000.00 which
FM declared as Library and Miscellaneous assets. In computing
for the networth, the income approach was utilized. Under this
approach, the beginning capital is increased or decreased, as the
case may be, depending upon the income earned or loss
incurred. Computations establish the total networth of spouses
Ferdinand and Imelda, for the years 1965 until 1984 in the total
amount of US$957,487.75, assuming the income from legal
practice is real and valid. . . .

G. THE SECRET MARCOS DEPOSITS

IN SWISS BANKS

arise.

H. THE AZIO-VERSO-VIBUR

FOUNDATION ACCOUNTS

24. On June 11, 1971, Ferdinand Marcos issued a written order to
Dr. Theo Bertheau, legal counsel of Schweizeresche Kreditanstalt
or SKA, also known as Swiss Credit Bank, for him to establish the
AZIO Foundation. On the same date, Marcos executed a power of
attorney in favor of Roberto S. Benedicto empowering him to
transact business in behalf of the said foundation. Pursuant to
the said Marcos mandate, AZIO Foundation was formed on June
21, 1971 in Vaduz. Walter Fessler and Ernst Scheller, also of SKA
Legal Service, and Dr. Helmuth Merling from Schaan were
designated as members of the Board of Trustees of the said
foundation. Ferdinand Marcos was named first beneficiary and
the Marcos Foundation, Inc. was second beneficiary. On
November 12, 1971, FM again issued another written order
naming Austrahil PTY Ltd. In Sydney, Australia, as the
foundations first and sole beneficiary. This was recorded on
December 14, 1971.

25. In an undated instrument, Marcos changed the first and sole
beneficiary to CHARIS FOUNDATION. This change was recorded
on December 4, 1972.

26. On August 29, 1978, the AZIO FOUNDATION was renamed to
VERSO FOUNDATION. The Board of Trustees remained the same.
On March 11, 1981, Marcos issued a written directive to
liquidated VERSO FOUNDATION and to transfer all its assets to
account of FIDES TRUST COMPANY at Bank Hofman in Zurich
under the account "Reference OSER." The Board of Trustees
decided to dissolve the foundation on June 25, 1981.

27. In an apparent maneuver to bury further the secret deposits
beneath the thick layers of corporate entities, FM effected the
establishment of VIBUR FOUNDATION on May 13, 1981 in Vaduz.
Atty. Ivo Beck and Limag Management, a wholly-owned
subsidiary of Fides Trust, were designated as members of the
Board of Trustees. The account was officially opened with SKA on
September 10, 1981. The beneficial owner was not made known
to the bank since Fides Trust Company acted as fiduciary.
However, comparison of the listing of the securities in the safe
deposit register of the VERSO FOUNDATION as of February 27,
1981 with that of VIBUR FOUNDATION as of December 31, 1981
readily reveals that exactly the same securities were listed.

28. Under the foregoing circumstances, it is certain that the
VIBUR FOUNDATION is the beneficial successor of VERSO
FOUNDATION.


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29. On March 18, 1986, the Marcos-designated Board of Trustees
decided to liquidate VIBUR FOUNDATION. A notice of such
liquidation was sent to the Office of the Public Register on March
21, 1986. However, the bank accounts and respective balances of
the said VIBUR FOUNDATION remained with SKA. Apparently, the
liquidation was an attempt by the Marcoses to transfer the
foundations funds to another account or bank but this was
prevented by the timely freeze order issued by the Swiss
authorities. One of the latest documents obtained by the PCGG
from the Swiss authorities is a declaration signed by Dr. Ivo Beck
(the trustee) stating that the beneficial owner of VIBUR
FOUNDATION is Ferdinand E. Marcos. Another document signed
by G. Raber of SKA shows that VIBUR FOUNDATION is owned by
the "Marcos Familie" .

30. As of December 31, 1989, the balance of the bank accounts
of VIBUR FOUNDATION with SKA, Zurich, under the General
Account No. 469857 totaled $3,597,544.00.

I. XANDY-WINTROP: CHARIS-SCOLARI-

VALAMO-SPINUS-AVERTINA

FOUNDATION ACCOUNTS

31. This is the most intricate and complicated account group. As
the Flow Chart hereof shows, two (2) groups under the
foundation organized by Marcos dummies/nominees for FMs
benefit, eventually joined together and became one (1) account
group under the AVERTINA FOUNDATION for the benefit of both
FM and Imelda. This is the biggest group from where the $50-M
investment fund of the Marcoses was drawn when they bought
the Central Banks dollar-denominated treasury notes with high-
yielding interests.

32. On March 20, 1968, after his second year in the presidency,
Marcos opened bank accounts with SKA using an alias or
pseudonym WILLIAM SAUNDERS, apparently to hide his true
identity. The next day, March 21, 1968, his First Lady, Mrs.
Imelda Marcos also opened her own bank accounts with the
same bank using an American-sounding alias, JANE RYAN. Found
among the voluminous documents in Malacaang shortly after
they fled to Hawaii in haste that fateful night of February 25,
1986, were accomplished forms for "Declaration/Specimen
Signatures" submitted by the Marcos couple. Under the caption
"signature(s)" Ferdinand and Imelda signed their real names as
well as their respective aliases underneath. These accounts were
actively operated and maintained by the Marcoses for about two
(2) years until their closure sometime in February, 1970 and the
balances transferred to XANDY FOUNDATION.

33. The XANDY FOUNDATION was established on March 3, 1970
in Vaduz. C.W. Fessler, C. Souviron and E. Scheller were named as
members of the Board of Trustees.

34. FM and Imelda issued the written mandate to establish the
foundation to Markus Geel of SKA on March 3, 1970. In the
handwritten Regulations signed by the Marcos couple as well as
in the type-written Regulations signed by Markus Geel both
dated February 13, 1970, the Marcos spouses were named the
first beneficiaries, the surviving spouse as the second beneficiary
and the Marcos children Imee, Ferdinand, Jr. (Bongbong) and
Irene as equal third beneficiaries.

35. The XANDY FOUNDATION was renamed WINTROP
FOUNDATION on August 29, 1978. The Board of Trustees
remained the same at the outset. However, on March 27, 1980,
Souviron was replaced by Dr. Peter Ritter. On March 10. 1981,
Ferdinand and Imelda Marcos issued a written order to the Board
of Wintrop to liquidate the foundation and transfer all its assets
to Bank Hofmann in Zurich in favor of FIDES TRUST COMPANY.
Later, WINTROP FOUNDATION was dissolved.

36. The AVERTINA FOUNDATION was established on May 13,
1981 in Vaduz with Atty. Ivo Beck and Limag Management, a
wholly-owned subsidiary of FIDES TRUST CO., as members of the
Board of Trustees. Two (2) account categories, namely: CAR and
NES, were opened on September 10, 1981. The beneficial owner
of AVERTINA was not made known to the bank since the FIDES
TRUST CO. acted as fiduciary. However, the securities listed in
the safe deposit register of WINTROP FOUNDATION Category R
as of December 31, 1980 were the same as those listed in the
register of AVERTINA FOUNDATION Category CAR as of
December 31, 1981. Likewise, the securities listed in the safe
deposit register of WINTROP FOUNDATION Category S as of
December 31, 1980 were the same as those listed in the register
of Avertina Category NES as of December 31, 1981. Under the
circumstances, it is certain that the beneficial successor of
WINTROP FOUNDATION is AVERTINA FOUNDATION. The balance
of Category CAR as of December 31, 1989 amounted to
US$231,366,894.00 while that of Category NES as of 12-31-83
was US$8,647,190.00. Latest documents received from Swiss
authorities included a declaration signed by IVO Beck stating that
the beneficial owners of AVERTINA FOUNDATION are FM and
Imelda. Another document signed by G. Raber of SKA indicates
that Avertina Foundation is owned by the "Marcos
Families."cralaw virtua1aw library

37. The other groups of foundations that eventually joined
AVERTINA were also established by FM through his dummies,
which started with the CHARIS FOUNDATION.

38. The CHARIS FOUNDATION was established in VADUZ on
December 27, 1971. Walter Fessler and Ernst Scheller of SKA and
Dr. Peter Ritter were named as directors. Dr. Theo Bertheau, SKA
legal counsel, acted as founding director in behalf of FM by virtue
of the mandate and agreement dated November 12, 1971. FM
himself was named the first beneficiary and Xandy Foundation as
second beneficiary in accordance with the handwritten
instructions of FM on November 12, 1971 and the Regulations.
FM gave a power of attorney to Roberto S. Benedicto on
February 15, 1972 to act in his behalf with regard to Charis
Foundation.

39. On December 13, 1974, Charis Foundation was renamed
Scolari Foundation but the directors remained the same. On
March 11, 1981 FM ordered in writing that the Valamo
Foundation be liquidated and all its assets be transferred to Bank
Hofmann, AG in favor of Fides Trust Company under the account
"Reference OMAL." The Board of Directors decided on the
immediate dissolution of Valamo Foundation on June 25, 1981.

40. The SPINUS FOUNDATION was established on May 13, 1981
in Vaduz with Atty. Ivo Beck and Limag Management, a wholly-
owned subsidiary of Fides Trust Co., as members of the
Foundations Board of Directors. The account was officially
opened with SKA on September 10, 1981. The beneficial owner
of the foundation was not made known to the bank since Fides
Trust Co. acted as fiduciary. However, the list of securities in the
safe deposit register of Valamo Foundation as of December 31,
1980 are practically the same with those listed in the safe deposit
register of Spinus Foundation as of December 31, 1981. Under
the circumstances, it is certain that the Spinus Foundation is the
beneficial successor of the Valamo Foundation.

41. On September 6, 1982, there was a written instruction from

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Spinus Foundation to SKA to close its Swiss Franc account and
transfer the balance to Avertina Foundation. In July/August,
1982, several transfers from the foundations German marks and
US dollar accounts were made to Avertina Category CAR totaling
DM 29.5-M and $58-M, respectively. Moreover, a comparison of
the list of securities of the Spinus Foundation as of February 3,
1982 with the safe deposit slips of the Avertina Foundation
Category CAR as of August 19, 1982 shows that all the securities
of Spinus were transferred to Avertina.

J. TRINIDAD-RAYBY-PALMY

FOUNDATION ACCOUNTS

42. The Trinidad Foundation was organized on August 26, 1970 in
Vaduz with C.W. Fessler and E. Scheller of SKA and Dr. Otto
Tondury as the foundations directors. Imelda issued a written
mandate to establish the foundation to Markus Geel on August
26, 1970. The regulations as well as the agreement, both dated
August 28, 1970 were likewise signed by Imelda. Imelda was
named the first beneficiary and her children Imelda (Imee),
Ferdinand, Jr. (Bongbong) and, Irene were named as equal
second beneficiaries.

43. Rayby Foundation was established on June 22, 1973 in Vaduz
with Fessler, Scheller and Ritter as members of the board of
directors. Imelda issued a written mandate to Dr. Theo Bertheau
to establish the foundation with a note that the foundations
capitalization as well as the cost of establishing it be debited
against the account of Trinidad Foundation. Imelda was named
the first and only beneficiary of Rayby foundation. According to
written information from SKA dated November 28, 1988, Imelda
apparently had the intention in 1973 to transfer part of the
assets of Trinidad Foundation to another foundation, thus the
establishment of Rayby Foundation. However, transfer of assets
never took place. On March 10, 1981, Imelda issued a written
order to transfer all the assets of Rayby Foundation to Trinidad
Foundation and to subsequently liquidate Rayby. On the same
date, she issued a written order to the board of Trinidad to
dissolve the foundation and transfer all its assets to Bank
Hofmann in favor of Fides Trust Co. Under the account
"Reference Dido," Rayby was dissolved on April 6, 1981 and
Trinidad was liquidated on August 3, 1981.

44. The PALMY FOUNDATION was established on May 13, 1981 in
Vaduz with Dr. Ivo Beck and Limag Management, a wholly-owned
subsidiary of Fides Trust Co, as members of the Foundations
Board of Directors. The account was officially opened with the
SKA on September 10, 1981. The beneficial owner was not made
known to the bank since Fides Trust Co. acted as fiduciary.
However, when one compares the listing of securities in the safe
deposit register of Trinidad Foundation as of December 31,1980
with that of the Palmy Foundation as of December 31, 1980, one
can clearly see that practically the same securities were listed.
Under the circumstances, it is certain that the Palmy Foundation
is the beneficial successor of the Trinidad Foundation.

45. As of December 31, 1989, the ending balance of the bank
accounts of Palmy Foundation under General Account No.
391528 is $17,214,432.00.

46. Latest documents received from Swiss Authorities included a
declaration signed by Dr. Ivo Beck stating that the beneficial
owner of Palmy Foundation is Imelda. Another document signed
by Raber shows that the said Palmy Foundation is owned by
Marcos Familie.

K. ROSALYS-AGUAMINA

FOUNDATION ACCOUNTS

47. Rosalys Foundation was established in 1971 with FM as the
beneficiary. Its Articles of Incorporation was executed on
September 24, 1971 and its By-Laws on October 3, 1971. This
foundation maintained several accounts with Swiss Bank
Corporation (SBC) under the general account 51960 where most
of the bribe monies from Japanese suppliers were hidden.

48. On December 19, 1985, Rosalys Foundation was liquidated
and all its assets were transferred to Aguamina Corporations
(Panama) Account No. 53300 with SBC. The ownership by
Aguamina Corporation of Account No. 53300 is evidenced by an
opening account documents from the bank. J. Christinaz and R.L.
Rossier, First Vice-President and Senior Vice President,
respectively, of SBC, Geneva issued a declaration dated
September 3, 1991 stating that the by-laws dated October 3,
1971 governing Rosalys Foundation was the same by-law applied
to Aguamina Corporation Account No. 53300. They further
confirmed that no change of beneficial owner was involved while
transferring the assets of Rosalys to Aguamina. Hence, FM
remains the beneficiary of Aguamina Corporation Account No.
53300.

As of August 30, 1991, the ending balance of Account No. 53300
amounted to $80,566,483.00.

L. MALER FOUNDATION ACCOUNTS

49. Maler was first created as an establishment. A statement of
its rules and regulations was found among Malacaang
documents. It stated, among others, that 50% of the Companys
assets will be for sole and full right disposal of FM and Imelda
during their lifetime, which the remaining 50% will be divided in
equal parts among their children. Another Malacaang
document dated October 19, 1968 and signed by Ferdinand and
Imelda pertains to the appointment of Dr. Andre Barbey and Jean
Louis Sunier as attorneys of the company and as administrator
and manager of all assets held by the company. The Marcos
couple, also mentioned in the said document that they bought
the Maler Establishment from SBC, Geneva. On the same date,
FM and Imelda issued a letter addressed to Maler Establishment,
stating that all instructions to be transmitted with regard to
Maler will be signed with the word "JOHN LEWIS." This word will
have the same value as the couples own personal signature. The
letter was signed by FM and Imelda in their signatures and as
John Lewis.

50. Maler Establishment opened and maintained bank accounts
with SBC, Geneva. The opening bank documents were signed by
Dr. Barbey and Mr. Sunnier as authorized signatories.

51. On November 17, 1981, it became necessary to transform
Maler Establishment into a foundation. Likewise, the attorneys
were changed to Michael Amaudruz, Et. Al. However,
administration of the assets was left to SBC. The articles of
incorporation of Maler Foundation registered on November 17,
1981 appear to be the same articles applied to Maler
Establishment. On February 28, 1984, Maler Foundation
cancelled the power of attorney for the management of its assets
in favor of SBC and transferred such power to Sustrust
Investment Co., S.A.

52. As of June 6, 1991, the ending balance of Maler Foundations
Account Nos. 254,508 BT and 98,929 NY amount SF 9,083,567
and SG 16,195,258, respectively, for a total of SF 25,278,825.00.
GM only until December 31, 1980. This account was opened by

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Maler when it was still an establishment which was subsequently
transformed into a foundation.

53. All the five (5) group accounts in the over-all flow chart have
a total balance of about Three Hundred Fifty Six Million Dollars
($356,000,000.00) as shown by Annex "R-5" hereto attached as
integral part hereof.

x x x. 27

Respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene
M. Araneta and Ferdinand Marcos, Jr., in their answer, stated the
following:chanrob1es virtual 1aw library
x x x

4. Respondents ADMIT paragraphs 3 and 4 of the Petition.

5. Respondents specifically deny paragraph 5 of the Petition in so
far as it states that summons and other court processes may be
served on Respondent Imelda R. Marcos at the stated address
the truth of the matter being that Respondent Imelda R. Marcos
may be served with summons and other processes at No. 10-B
Bel Air Condominium 5022 P. Burgos Street, Makati, Metro
Manila, and ADMIT the rest.
x x x

10. Respondents ADMIT paragraph 11 of the Petition.

11. Respondents specifically DENY paragraph 12 of the Petition
for lack of knowledge sufficient to form a belief as to the truth of
the allegation since Respondents were not privy to the
transactions and that they cannot remember exactly the truth as
to the matters alleged.

for lack of knowledge or information sufficient to form a belief as
to the truth of the allegation since Respondents cannot
remember with exactitude the contents of the alleged ITRs and
Balance Sheet.

remember with exactitude the contents of the alleged ITRs.



insofar as it attributes willful duplicity on the part of the late
President Marcos, for being false, the same being pure
conclusions based on pure assumption and not allegations of
fact; and specifically DENY the rest for lack of knowledge or
allegation since Respondents cannot remember with exactitude
the contents of the alleged ITRs or the attachments thereto.


remember with exactitude the contents of the alleged ITRs and
that they are not privy to the activities of the BIR.




of foundation and corporate entities for being false, the truth
acquired.

Respondents were not privy to the transactions regarding the
alleged Azio-Verso-Vibur Foundation accounts, except that as to
Respondent Imelda R. Marcos she specifically remembers that

36, 37, 38, 39, 40, and 41 of the Petition for lack of knowledge or
allegations since Respondents are not privy to the transactions
and as to such transaction they were privy to they cannot
ago, except that as to Respondent Imelda R. Marcos she
specifically remembers that the funds involved were lawfully
acquired.

25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and
46, of the Petition for lack of knowledge or information sufficient
Respondents were not privy to the transactions and as to such
as to Respondent Imelda R. Marcos she specifically remembers

26. Respondents specifically DENY paragraphs 49, 50, 51 and 52,
of the Petition for lack of knowledge or information sufficient to
form a belief as to the truth of the allegations since Respondents
they were privy to they cannot remember with exactitude the
Respondent Imelda R. Marcos she specifically remembers that

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Upon careful perusal of the foregoing, the Court finds that
respondent Mrs. Marcos and the Marcos children indubitably
failed to tender genuine issues in their answer to the petition for
forfeiture. A genuine issue is an issue of fact which calls for the
presentation of evidence as distinguished from an issue which is
fictitious and contrived, set up in bad faith or patently lacking in
substance so as not to constitute a genuine issue for trial.
Respondents defenses of "lack of knowledge for lack of privity"
or" (inability to) recall because it happened a long time ago" or,
on the part of Mrs. Marcos, that "the funds were lawfully
acquired" are fully insufficient to tender genuine issues.
Respondent Marcoses defenses were a sham and evidently
calibrated to compound and confuse the issues.

The following pleadings filed by respondent Marcoses are replete
with indications of a spurious defense:chanrob1es virtual 1aw
library

(a) Respondents Answer dated October 18, 1993;

(b) Pre-trial Brief dated October 4, 1999 of Mrs. Marcos,
Supplemental Pre-trial Brief dated October 19, 1999 of
Ferdinand, Jr. and Mrs. Imee Marcos-Manotoc adopting the pre-
trial brief of Mrs. Marcos, and Manifestation dated October 19,
1999 of Irene Marcos-Araneta adopting the pre-trial briefs of her
co- respondents;

(c) Opposition to Motion for Summary Judgment dated March
21, 2000, filed by Mrs. Marcos which the other respondents
(Marcos children) adopted;

(d) Demurrer to Evidence dated May 2, 2000 filed by Mrs.
Marcos and adopted by the Marcos children;

(e) Motion for Reconsideration dated September 26, 2000 filed
by Mrs. Marcos; Motion for Reconsideration dated October 5,
2000 jointly filed by Mrs. Manotoc and Ferdinand, Jr., and
Supplemental Motion for Reconsideration dated October 9, 2000
likewise jointly filed by Mrs. Manotoc and Ferdinand, Jr.;

(f) Memorandum dated December 12, 2000 of Mrs. Marcos and
Memorandum dated December 17, 2000 of the Marcos children;

(g) Manifestation dated May 26, 1998; and

(h) General/Supplemental Agreement dated December 23, 1993.

An examination of the foregoing pleadings is in order.

Respondents Answer dated October 18, 1993.

In their answer, respondents failed to specifically deny each and
every allegation contained in the petition for forfeiture in the
manner required by the rules. All they gave were stock answers
like "they have no sufficient knowledge" or "they could not recall
because it happened a long time ago," and, as to Mrs. Marcos,
"the funds were lawfully acquired," without stating the basis of
such assertions.chanrob1es virtua1 1aw 1ibrary

Section 10, Rule 8 of the 1997 Rules of Civil Procedure,
provides:chanrob1es virtual 1aw library

A defendant must specify each material allegation of fact the
truth of which he does not admit and, whenever practicable,
shall set forth the substance of the matters upon which he relies
to support his denial. Where a defendant desires to deny only a
part of an averment, he shall specify so much of it as is true and
material and shall deny the remainder. Where a defendant is
without knowledge or information sufficient to form a belief as
to the truth of a material averment made in the complaint, he
shall so state, and this shall have the effect of a denial. 28

The purpose of requiring respondents to make a specific denial is
to make them disclose facts which will disprove the allegations of
petitioner at the trial, together with the matters they rely upon
in support of such denial. Our jurisdiction adheres to this rule to
avoid and prevent unnecessary expenses and waste of time by
compelling both parties to lay their cards on the table, thus
reducing the controversy to its true terms. As explained in Alonso
v. Villamor, 29

A litigation is not a game of technicalities in which one, more
deeply schooled and skilled in the subtle art of movement and
position, entraps and destroys the other. It is rather a contest in
which each contending party fully and fairly lays before the court
the facts in issue and then, brushing aside as wholly trivial and
indecisive all imperfections of form and technicalities of
procedure, asks that justice be done upon the merits. Lawsuits,
unlike duels, are not to be won by a rapiers thrust.

On the part of Mrs. Marcos, she claimed that the funds were
lawfully acquired. However, she failed to particularly state the
ultimate facts surrounding the lawful manner or mode of
acquisition of the subject funds. Simply put, she merely stated in
her answer with the other respondents that the funds were
"lawfully acquired" without detailing how exactly these funds
were supposedly acquired legally by them. Even in this case
before us, her assertion that the funds were lawfully acquired
remains bare and unaccompanied by any factual support which
can prove, by the presentation of evidence at a hearing, that
indeed the funds were acquired legitimately by the Marcos
family.

Respondents denials in their answer at the Sandiganbayan were
based on their alleged lack of knowledge or information
sufficient to form a belief as to the truth of the allegations of the
petition.

It is true that one of the modes of specific denial under the rules
is a denial through a statement that the defendant is without
truth of the material averment in the complaint. The question,
however, is whether the kind of denial in respondents answer
qualifies as the specific denial called for by the rules. We do not
think so. In Morales v. Court of Appeals, 30 this Court ruled that
if an allegation directly and specifically charges a party with
having done, performed or committed a particular act which the
latter did not in fact do, perform or commit, a categorical and
express denial must be made.

Here, despite the serious and specific allegations against them,
the Marcoses responded by simply saying that they had no
truth of such allegations. Such a general, self-serving claim of
ignorance of the facts alleged in the petition for forfeiture was
insufficient to raise an issue. Respondent Marcoses should have
positively stated how it was that they were supposedly ignorant
of the facts alleged. 31

To elucidate, the allegation of petitioner Republic in paragraph
23 of the petition for forfeiture stated:chanrob1es virtual 1aw
library


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arise. 32

Respondents lame denial of the aforesaid allegation
was:chanrob1es virtual 1aw library

acquired. 33

Evidently, this particular denial had the earmark of what is called
in the law on pleadings as a negative pregnant, that is, a denial
pregnant with the admission of the substantial facts in the
pleading responded to which are not squarely denied. It was in
effect an admission of the averments it was directed at. 34
Stated otherwise, a negative pregnant is a form of negative
expression which carries with it an affirmation or at least an
implication of some kind favorable to the adverse party. It is a
denial pregnant with an admission of the substantial facts alleged
in the pleading. Where a fact is alleged with qualifying or
modifying language and the words of the allegation as so
qualified or modified are literally denied, it has been held that
the qualifying circumstances alone are denied while the fact itself
is admitted. 35

In the instant case, the material allegations in paragraph 23 of
the said petition were not specifically denied by respondents in
paragraph 22 of their answer. The denial contained in paragraph
22 of the answer was focused on the averment in paragraph 23
of the petition for forfeiture that "Respondents clandestinely
stashed the countrys wealth in Switzerland and hid the same
under layers and layers of foundations and corporate entities."
Paragraph 22 of the respondents answer was thus a denial
pregnant with admissions of the following substantial
facts:chanrob1es virtual 1aw library

(1) that the Swiss bank deposits existed and

(2) that the estimated sum thereof was US$356 million as of
December, 1990.

Therefore, the allegations in the petition for forfeiture on the
existence of the Swiss bank deposits in the sum of about US$356
million, not having been specifically denied by respondents in
their answer, were deemed admitted by them pursuant to
Section 11, Rule 8 of the 1997 Revised Rules on Civil
Procedure:chanrob1es virtual 1aw library

Material averment in the complaint, . . . shall be deemed
admitted when not specifically denied. . . . 36

By the same token, the following unsupported denials of
respondents in their answer were pregnant with admissions of
the substantial facts alleged in the Republics petition for
forfeiture:chanrob1es virtual 1aw library

respondents were not privy to the transactions regarding the
alleged Azio-Verso-Vibur Foundation accounts, except that, as to

36, 37, 38, 39, 40, 41 of the Petition for lack of knowledge or
allegations since respondents were not privy to the transactions
and as to such transactions they were privy to, they cannot
ago, except as to respondent Imelda R. Marcos, she specifically
remembers that the funds involved were lawfully acquired.

25. Respondents specifically DENY paragraphs 42, 43, 45, and 46
of the petition for lack of knowledge or information sufficient to
from a belief as to the truth of the allegations since respondents
they were privy to, they cannot remember with exactitude, the

26. Respondents specifically DENY paragraphs 49, 50, 51 and 52
of the petition for lack of knowledge and information sufficient
respondents were not privy to the transactions and as to such
as to respondent Imelda R. Marcos, she specifically remembers

The matters referred to in paragraphs 23 to 26 of the
respondents answer pertained to the creation of five groups of
accounts as well as their respective ending balances and
attached documents alleged in paragraphs 24 to 52 of the
Republics petition for forfeiture. Respondent Imelda R. Marcos
never specifically denied the existence of the Swiss funds. Her
claim that "the funds involved were lawfully acquired" was an
acknowledgment on her part of the existence of said deposits.
This only reinforced her earlier admission of the allegation in
paragraph 23 of the petition for forfeiture regarding the
existence of the US$356 million Swiss bank deposits.chanrob1es
virtua1 1aw 1ibrary

The allegations in paragraphs 47 37 and 48 38 of the petition for
forfeiture referring to the creation and amount of the deposits of
the Rosalys-Aguamina Foundation as well as the averment in
paragraph 52-a 39 of the said petition with respect to the sum of
the Swiss bank deposits estimated to be US$356 million were
again not specifically denied by respondents in their answer. The
respondents did not at all respond to the issues raised in these
paragraphs and the existence, nature and amount of the Swiss
funds were therefore deemed admitted by them. As held in
Galofa v. Nee Bon Sing, 40 if a defendants denial is a negative
pregnant, it is equivalent to an admission.

Moreover, respondents denial of the allegations in the petition
for forfeiture "for lack of knowledge or information sufficient to
form a belief as to the truth of the allegations since respondents
were not privy to the transactions" was just a pretense. Mrs.
Marcos privity to the transactions was in fact evident from her
signatures on some of the vital documents 41 attached to the

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petition for forfeiture which Mrs. Marcos failed to specifically
deny as required by the rules. 42

It is worthy to note that the pertinent documents attached to the
petition for forfeiture were even signed personally by
respondent Mrs. Marcos and her late husband, Ferdinand E.
Marcos, indicating that said documents were within their
knowledge. As correctly pointed out by Sandiganbayan Justice
Francisco Villaruz, Jr. in his dissenting opinion:chanrob1es virtual
1aw library

The pattern of: 1) creating foundations, 2) use of pseudonyms
and dummies, 3) approving regulations of the Foundations for
the distribution of capital and income of the Foundations to the
First and Second beneficiary (who are no other than FM and his
family), 4) opening of bank accounts for the Foundations, 5)
changing the names of the Foundations, 6) transferring funds and
assets of the Foundations to other Foundations or Fides Trust, 7)
liquidation of the Foundations as substantiated by the Annexes U
to U-168, Petition [for forfeiture] strongly indicate that FM
and/or Imelda were the real owners of the assets deposited in
the Swiss banks, using the Foundations as dummies. 43

How could respondents therefore claim lack of sufficient
knowledge or information regarding the existence of the Swiss
bank deposits and the creation of five groups of accounts when
Mrs. Marcos and her late husband personally masterminded and
participated in the formation and control of said foundations?
This is a fact respondent Marcoses were never able to explain.

Not only that. Respondents answer also technically admitted the
genuineness and due execution of the Income Tax Returns (ITRs)
and the balance sheets of the late Ferdinand E. Marcos and
Imelda R. Marcos attached to the petition for forfeiture, as well
as the veracity of the contents thereof.

The answer again premised its denials of said ITRs and balance
sheets on the ground of lack of knowledge or information
sufficient to form a belief as to the truth of the contents thereof.
Petitioner correctly points out that respondents denial was not
really grounded on lack of knowledge or information sufficient to
form a belief but was based on lack of recollection. By reviewing
their own records, respondent Marcoses could have easily
determined the genuineness and due execution of the ITRs and
the balance sheets. They also had the means and opportunity of
verifying the same from the records of the BIR and the Office of
the President. They did not.

When matters regarding which respondents claim to have no
knowledge or information sufficient to form a belief are plainly
and necessarily within their knowledge, their alleged ignorance
or lack of information will not be considered a specific denial. 44
An unexplained denial of information within the control of the
pleader, or is readily accessible to him, is evasive and is
insufficient to constitute an effective denial. 45

The form of denial adopted by respondents must be availed of
with sincerity and in good faith, and certainly not for the purpose
of confusing the adverse party as to what allegations of the
petition are really being challenged; nor should it be made for
the purpose of delay. 46 In the instant case, the Marcoses did not
only present unsubstantiated assertions but in truth attempted
to mislead and deceive this Court by presenting an obviously
contrived defense.

Simply put, a profession of ignorance about a fact which is
patently and necessarily within the pleaders knowledge or
means of knowing is as ineffective as no denial at all. 47
Respondents ineffective denial thus failed to properly tender an
issue and the averments contained in the petition for forfeiture
were deemed judicially admitted by them.

As held in J.P. Juan & Sons, Inc. v. Lianga Industries,
Inc.:chanrob1es virtual 1aw library

Its "specific denial" of the material allegation of the petition
without setting forth the substance of the matters relied upon to
support its general denial, when such matters were plainly within
its knowledge and it could not logically pretend ignorance as to
the same, therefore, failed to properly tender on issue. 48

Thus, the general denial of the Marcos children of the allegations
in the petition for forfeiture "for lack of knowledge or
allegations since they were not privy to the transactions" cannot
rightfully be accepted as a defense because they are the legal
heirs and successors-in-interest of Ferdinand E. Marcos and are
therefore bound by the acts of their father vis-a-vis the Swiss
funds.chanrob1es virtua1 1aw 1ibrary

Pre-Trial Brief Dated October 18, 1993

The pre-trial brief of Mrs. Marcos was adopted by the three
Marcos children. In said brief, Mrs. Marcos stressed that the
funds involved were lawfully acquired. But, as in their answer,
they failed to state and substantiate how these funds were
acquired lawfully. They failed to present and attach even a single
document that would show and prove the truth of their
allegations. Section 6, Rule 18 of the 1997 Rules of Civil
Procedure provides:chanrob1es virtual 1aw library

The parties shall file with the court and serve on the adverse
party, . . . their respective pre-trial briefs which shall contain,
among others:chanrob1es virtual 1aw library
x x x

(d) the documents or exhibits to be presented, stating the
purpose thereof;
x x x

(f) the number and names of the witnesses, and the substance of
their respective testimonies. 49

It is unquestionably within the courts power to require the
parties to submit their pre-trial briefs and to state the number of
witnesses intended to be called to the stand, and a brief
summary of the evidence each of them is expected to give as
well as to disclose the number of documents to be submitted
with a description of the nature of each. The tenor and character
of the testimony of the witnesses and of the documents to be
deduced at the trial thus made known, in addition to the
particular issues of fact and law, it becomes apparent if genuine
issues are being put forward necessitating the holding of a trial.
Likewise, the parties are obliged not only to make a formal
identification and specification of the issues and their proofs, and
to put these matters in writing and submit them to the court
within the specified period for the prompt disposition of the
action. 50

The pre-trial brief of Mrs. Marcos, as subsequently adopted by

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respondent Marcos children, merely stated:chanrob1es virtual
1aw library
x x x

WITNESSES

4.1 Respondent Imelda will present herself as a witness and
reserves the right to present additional witnesses as may be
necessary in the course of the trial.
x x x

DOCUMENTARY EVIDENCE

5.1 Respondent Imelda reserves the right to present and
introduce in evidence documents as may be necessary in the
course of the trial.

Mrs. Marcos did not enumerate and describe the documents
constituting her evidence. Neither the names of witnesses nor
the nature of their testimony was stated. What alone appeared
certain was the testimony of Mrs. Marcos only who in fact had
previously claimed ignorance and lack of knowledge. And even
then, the substance of her testimony, as required by the rules,
was not made known either. Such cunning tactics of respondents
are totally unacceptable to this Court. We hold that, since no
genuine issue was raised, the case became ripe for summary
judgment.

Opposition to Motion for Summary Judgment dated March 21,
2000

The opposition filed by Mrs. Marcos to the motion for summary
judgment dated March 21, 2000 of petitioner Republic was
merely adopted by the Marcos children as their own opposition
to the said motion. However, it was again not accompanied by
affidavits, depositions or admissions as required by Section 3,
Rule 35 of the 1997 Rules on Civil Procedure:chanrob1es virtual
1aw library

. . . The adverse party may serve opposing affidavits, depositions,
or admissions at least three (3) days before hearing. After
hearing, the judgment sought shall be rendered forthwith if the
pleadings, supporting affidavits, depositions, and admissions on
file, show that, except as to the amount of damages, there is no
genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law. 51

The absence of opposing affidavits, depositions and admissions
to contradict the sworn declarations in the Republics motion
only demonstrated that the averments of such opposition were
not genuine and therefore unworthy of belief.

Demurrer to Evidence dated May 2, 2000; 52 Motions for
Reconsideration; 53 and Memoranda of Mrs. Marcos and the
Marcos Children 54

All these pleadings again contained no allegations of facts
showing their lawful acquisition of the funds. Once more,
respondents merely made general denials without alleging facts
which would have been admissible in evidence at the hearing,
thereby failing to raise genuine issues of fact.

Mrs. Marcos insists in her memorandum dated October 21, 2002
that, during the pre-trial, her counsel stated that his client was
just a beneficiary of the funds, contrary to petitioner Republics
allegation that Mrs. Marcos disclaimed ownership of or interest
in the funds.

This is yet another indication that respondents presented a
fictitious defense because, during the pre-trial, Mrs. Marcos and
the Marcos children denied ownership of or interest in the Swiss
funds:chanrob1es virtual 1aw library

PJ Garchitorena:chanrob1es virtual 1aw library

Make of record that as far as Imelda Marcos is concerned
through the statement of Atty. Armando M. Marcelo that the
US$360 million more or less subject matter of the instant lawsuit
as allegedly obtained from the various Swiss Foundations do not
belong to the estate of Marcos or to Imelda Marcos herself.
Thats your statement of facts?

Atty. MARCELO:chanrob1es virtual 1aw library

Yes, Your Honor.


Thats it. Okay. Counsel for Manotoc and Ferdinand, Jr. What is
your point here? Does the estate of Marcos own anything of the
$360 million subject of this case.

Atty. TECSON:chanrob1es virtual 1aw library

We joined the Manifestation of Counsel.


You do not own anything?

Atty. TECSON:chanrob1es virtual 1aw library

Yes, Your Honor.


Counsel for Irene Araneta?

Atty. SISON:chanrob1es virtual 1aw library

I join the position taken by my other compaeros here, Your
Honor.
x x x

Atty. SISON:chanrob1es virtual 1aw library

Irene Araneta as heir do (sic) not own any of the amount, Your
Honor. 55

We are convinced that the strategy of respondent Marcoses was
to confuse petitioner Republic as to what facts they would prove
or what issues they intended to pose for the courts resolution.
There is no doubt in our mind that they were leading petitioner
Republic, and now this Court, to perplexity, if not trying to drag
this forfeiture case to eternity.

Manifestation dated May 26, 1998 filed by Mrs. Marcos;
General/Supplemental Compromise Agreement dated December
28, 1993

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These pleadings of respondent Marcoses presented nothing but
feigned defenses. In their earlier pleadings, respondents alleged
either that they had no knowledge of the existence of the Swiss
deposits or that they could no longer remember anything as it
happened a long time ago. As to Mrs. Marcos, she remembered
that it was lawfully acquired.

In her Manifestation dated May 26, 1998, Mrs. Marcos stated

COMES NOW undersigned counsel for respondent Imelda R.
Marcos, and before this Honorable Court, most respectfully
manifests:chanrob1es virtual 1aw library

That respondent Imelda R, Marcos owns 90% of the subject
matter of the above-entitled case, being the sole beneficiary of
the dollar deposits in the name of the various foundations
alleged in the case;

That in fact only 10% of the subject matter in the above-entitled
case belongs to the estate of the late President Ferdinand E.
Marcos.

In the Compromise/Supplemental Agreements, respondent
Marcoses sought to implement the agreed distribution of the
Marcos assets, including the Swiss deposits. This was, to us, an
unequivocal admission of ownership by the Marcoses of the said
deposits.

But, as already pointed out, during the pre-trial conference,
respondent Marcoses denied knowledge as well as ownership of
the Swiss funds.

Anyway we look at it, respondent Marcoses have put forth no
real defense. The "facts" pleaded by respondents, while
ostensibly raising important questions or issues of fact, in reality
comprised mere verbiage that was evidently wanting in
substance and constituted no genuine issues for trial.

We therefore rule that, under the circumstances, summary
judgment is proper.

In fact, it is the law itself which determines when summary
judgment is called for. Under the rules, summary judgment is
appropriate when there are no genuine issues of fact requiring
the presentation of evidence in a full-blown trial. Even if on their
face the pleadings appear to raise issue, if the affidavits,
depositions and admissions show that such issues are not
genuine, then summary judgment as prescribed by the rules
must ensue as a matter of law. 56

In sum, mere denials, if unaccompanied by any fact which will be
admissible in evidence at a hearing, are not sufficient to raise
genuine issues of fact and will not defeat a motion for summary
judgment. 57 A summary judgment is one granted upon motion
of a party for an expeditious settlement of the case, it appearing
from the pleadings, depositions, admissions and affidavits that
there are no important questions or issues of fact posed and,
therefore, the movant is entitled to a judgment as a matter of
law. A motion for summary judgment is premised on the
assumption that the issues presented need not be tried either
because these are patently devoid of substance or that there is
no genuine issue as to any pertinent fact. It is a method
sanctioned by the Rules of Court for the prompt disposition of a
civil action where there exists no serious controversy. 58
Summary judgment is a procedural device for the prompt
disposition of actions in which the pleadings raise only a legal
issue, not a genuine issue as to any material fact. The theory of
summary judgment is that, although an answer may on its face
appear to tender issues requiring trial, if it is established by
affidavits, depositions or admissions that those issues are not
genuine but fictitious, the Court is justified in dispensing with the
trial and rendering summary judgment for petitioner. 59

In the various annexes to the petition for forfeiture, petitioner
Republic attached sworn statements of witnesses who had
personal knowledge of the Marcoses participation in the illegal
acquisition of funds deposited in the Swiss accounts under the
names of five groups or foundations. These sworn statements
substantiated the ill-gotten nature of the Swiss bank deposits. In
their answer and other subsequent pleadings, however, the
Marcoses merely made general denials of the allegations against
them without stating facts admissible in evidence at the hearing,
thereby failing to raise any genuine issues of fact.

Under these circumstances, a trial would have served no purpose
at all and would have been totally unnecessary, thus justifying a
summary judgment on the petition for forfeiture. There were no
opposing affidavits to contradict the sworn declarations of the
witnesses of petitioner Republic, leading to the inescapable
conclusion that the matters raised in the Marcoses answer were
false.

Time and again, this Court has encountered cases like this which
are either only half-heartedly defended or, if the semblance of a
defense is interposed at all, it is only to delay disposition and gain
time. It is certainly not in the interest of justice to allow
respondent Marcoses to avail of the appellate remedies
accorded by the Rules of Court to litigants in good faith, to the
prejudice of the Republic and ultimately of the Filipino people.
From the beginning, a candid demonstration of respondents
good faith should have been made to the court below. Without
the deceptive reasoning and argumentation, this protracted
litigation could have ended a long time ago.

Since 1991, when the petition for forfeiture was first filed, up to
the present, all respondents have offered are foxy responses like
"lack of sufficient knowledge or lack of privity" or "they cannot
recall because it happened a long time ago" or, as to Mrs.
Marcos, "the funds were lawfully acquired." But, whenever it
suits them, they also claim ownership of 90% of the funds and
allege that only 10% belongs to the Marcos estate. It has been an
incredible charade from beginning to end.

In the hope of convincing this Court to rule otherwise,
respondents Maria Imelda Marcos-Manotoc and Ferdinand R.
Marcos Jr. contend that "by its positive acts and express
admissions prior to filing the motion for summary judgment on
March 10, 2000, petitioner Republic had bound itself to go to
trial on the basis of existing issues. Thus, it had legally waived
whatever right it had to move for summary judgment." 60

We do not think so. The alleged positive acts and express
admissions of the petitioner did not preclude it from filing a
motion for summary judgment.

Rule 35 of the 1997 Rules of Civil Procedure provides:chanrob1es
virtual 1aw library

Rule 35

Summary Judgment

Section 1. Summary judgment for claimant. A party seeking to
recover upon a claim, counterclaim, or cross-claim or to obtain a

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declaratory relief may, at any time after the pleading in answer
thereto has been served, move with supporting affidavits,
depositions or admissions for a summary judgment in his favor
upon all or any part thereof.

Section 2. Summary judgment for defending party. A party
against whom a claim, counterclaim, or cross-claim is asserted or
a declaratory relief is sought may, at any time, move with
supporting affidavits, depositions or admissions for a summary
judgment in his favor as to all or any part thereof. (Emphasis
ours) 61

Under the rule, the plaintiff can move for summary judgment "at
any time after the pleading in answer thereto (i.e., in answer to
the claim, counterclaim or cross-claim) has been served." No
fixed reglementary period is provided by the Rules. How else
does one construe the phrase "any time after the answer has
been served?"

This issue is actually one of first impression. No local
jurisprudence or authoritative work has touched upon this
matter. This being so, an examination of foreign laws and
jurisprudence, particularly those of the United States where
many of our laws and rules were copied, is in order.

Rule 56 of the Federal Rules of Civil Procedure provides that a
party seeking to recover upon a claim, counterclaim or cross-
claim may move for summary judgment at any time after the
expiration of 20 days from the commencement of the action or
after service of a motion for summary judgment by the adverse
party, and that a party against whom a claim, counterclaim or
cross-claim is asserted may move for summary judgment at any
time.

However, some rules, particularly Rule 113 of the Rules of Civil
Practice of New York, specifically provide that a motion for
summary judgment may not be made until issues have been
joined, that is, only after an answer has been served. 62 Under
said rule, after issues have been joined, the motion for summary
judgment may be made at any stage of the litigation. 63 No fixed
prescriptive period is provided.

Like Rule 113 of the Rules of Civil Practice of New York, our rules
also provide that a motion for summary judgment may not be
made until issues have been joined, meaning, the plaintiff has to
wait for the answer before he can move for summary judgment.
64 And like the New York rules, ours do not provide for a fixed
reglementary period within which to move for summary
judgment.

This being so, the New York Supreme Courts interpretation of
Rule 113 of the Rules of Civil Practice can be applied by analogy
to the interpretation of Section 1, Rule 35, of our 1997 Rules of
Civil Procedure.

Under the New York rule, after the issues have been joined, the
motion for summary judgment may be made at any stage of the
litigation. And what exactly does the phrase "at any stage of the
litigation" mean? In Ecker v. Muzysh, 65 the New York Supreme
Court ruled:jgc:chanrobles.com.ph

"PER CURIAM.

Plaintiff introduced her evidence and the defendants rested on
the case made by the plaintiff. The case was submitted. Owing to
the serious illness of the trial justice, a decision was not rendered
within sixty days after the final adjournment of the term at which
the case was tried. With the approval of the trial justice, the
plaintiff moved for a new trial under Section 442 of the Civil
Practice Act. The plaintiff also moved for summary judgment
under Rule 113 of the Rules of Civil Practice. The motion was
opposed mainly on the ground that, by proceeding to trial, the
plaintiff had waived her right to summary judgment and that the
answer and the opposing affidavits raised triable issues. The
amount due and unpaid under the contract is not in dispute. The
Special Term granted both motions and the defendants have
appealed.

The Special Term properly held that the answer and the opposing
affidavits raised no triable issue. Rule 113 of the Rules of Civil
Practice and the Civil Practice Act prescribe no limitation as to
the time when a motion for summary judgment must be made.
The object of Rule 113 is to empower the court to summarily
determine whether or not a bona fide issue exists between the
parties, and there is no limitation on the power of the court to
make such a determination at any stage of the litigation."
(Emphasis ours)

On the basis of the aforequoted disquisition, "any stage of the
litigation" means that "even if the plaintiff has proceeded to trial,
this does not preclude him from thereafter moving for summary
judgment." 66

In the case at bar, petitioner moved for summary judgment after
pre-trial and before its scheduled date for presentation of
evidence. Respondent Marcoses argue that, by agreeing to
proceed to trial during the pre-trial conference, petitioner
"waived" its right to summary judgment.

This argument must fail in the light of the New York Supreme
Court ruling which we apply by analogy to this case. In Ecker, 67
the defendant opposed the motion for summary judgment on a
ground similar to that raised by the Marcoses, that is, "that
plaintiff had waived her right to summary judgment" by her act
of proceeding to trial. If, as correctly ruled by the New York
court, plaintiff was allowed to move for summary judgment even
after trial and submission of the case for resolution, more so
should we permit it in the present case where petitioner moved
for summary judgment before trial.

Therefore, the phrase "anytime after the pleading in answer
thereto has been served" in Section 1, Rule 35 of our Rules of
Civil Procedure means "at any stage of the litigation." Whenever
it becomes evident at any stage of the litigation that no triable
issue exists, or that the defenses raised by the defendant(s) are
sham or frivolous, plaintiff may move for summary judgment. A
contrary interpretation would go against the very objective of
the Rule on Summary Judgment which is to "weed out sham
claims or defenses thereby avoiding the expense and loss of time
involved in a trial." 68

In cases with political undertones like the one at bar, adverse
parties will often do almost anything to delay the proceedings in
the hope that a future administration sympathetic to them might
be able to influence the outcome of the case in their favor. This is
rank injustice we cannot tolerate.

The law looks with disfavor on long, protracted and expensive
litigation and encourages the speedy and prompt disposition of
cases. That is why the law and the rules provide for a number of
devices to ensure the speedy disposition of cases. Summary
judgment is one of them.

Faithful therefore to the spirit of the law on summary judgment
which seeks to avoid unnecessary expense and loss of time in a
trial, we hereby rule that petitioner Republic could validly move

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for summary judgment any time after the respondents answer
was filed or, for that matter, at any subsequent stage of the
litigation. The fact that petitioner agreed to proceed to trial did
not in any way prevent it from moving for summary judgment, as
indeed no genuine issue of fact was ever validly raised by
respondent Marcoses.

This interpretation conforms with the guiding principle enshrined
in Section 6, Rule 1 of the 1997 Rules of Civil Procedure that the"
[r]ules should be liberally construed in order to promote their
objective of securing a just, speedy and inexpensive disposition
of every action and proceeding." 69

Respondents further allege that the motion for summary
judgment was based on respondents answer and other
documents that had long been in the records of the case. Thus,
by the time the motion was filed on March 10, 2000, estoppel by
laches had already set in against petitioner.

We disagree. Estoppel by laches is the failure or neglect for an
unreasonable or unexplained length of time to do that which, by
exercising due diligence, could or should have been done earlier,
warranting a presumption that the person has abandoned his
right or declined to assert it. 70 In effect, therefore, the principle
of laches is one of estoppel because "it prevents people who
have slept on their rights from prejudicing the rights of third
parties who have placed reliance on the inaction of the original
parties and their successors-in-interest." 71

A careful examination of the records, however, reveals that
petitioner was in fact never remiss in pursuing its case against
respondent Marcoses through every remedy available to it,
including the motion for summary judgment.

Petitioner Republic initially filed its motion for summary
judgment on October 18, 1996. The motion was denied because
of the pending compromise agreement between the Marcoses
and petitioner. But during the pre-trial conference, the Marcoses
denied ownership of the Swiss funds, prompting petitioner to file
another motion for summary judgment now under consideration
by this Court. It was the subsequent events that transpired after
the answer was filed, therefore, which prevented petitioner from
filing the questioned motion. It was definitely not because of
neglect or inaction that petitioner filed the (second) motion for
summary judgment years after respondents answer to the
petition for forfeiture.

In invoking the doctrine of estoppel by laches, respondents must
show not only unjustified inaction but also that some unfair
injury to them might result unless the action is barred. 72

This, respondents failed to bear out. In fact, during the pre-trial
conference, the Marcoses disclaimed ownership of the Swiss
deposits. Not being the owners, as they claimed, respondents did
not have any vested right or interest which could be adversely
affected by petitioners alleged inaction.

But even assuming for the sake of argument that laches had
already set in, the doctrine of estoppel or laches does not apply
when the government sues as a sovereign or asserts
governmental rights. 73 Nor can estoppel validate an act that
contravenes law or public policy. 74

As a final point, it must be emphasized that laches 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. 75 Equity demands that petitioner Republic should not
be barred from pursuing the peoples case against the
Marcoses.chanrob1es virtua1 1aw 1ibrary

(2) THE PROPRIETY OF FORFEITURE

The matter of summary judgment having been thus settled, the
issue of whether or not petitioner Republic was able to prove its
case for forfeiture in accordance with the requisites of Sections 2
and 3 of RA 1379 now takes center stage.

The law raises the prima facie presumption that a property is
unlawfully acquired, hence subject to forfeiture, if its amount or
value is manifestly disproportionate to the official salary and
other lawful income of the public officer who owns it. Hence,
Sections 2 and 6 of RA 1379 76 provide:chanrob1es virtual 1aw
library
x x x

Section 2. Filing of petition. Whenever any public officer or
employee has acquired during his incumbency an amount or
property which is manifestly out of proportion to his salary as
such public officer or employee and to his other lawful income
and the income from legitimately acquired property, said
property shall be presumed prima facie to have been unlawfully
acquired.
x x x

Sec. 6. Judgment. If the respondent is unable to show to the
satisfaction of the court that he has lawfully acquired the
property in question, then the court shall declare such property
in question, forfeited in favor of the State, and by virtue of such
judgment the property aforesaid shall become the property of
the State. Provided, That no judgment shall be rendered within
six months before any general election or within three months
before any special election. The Court may, in addition, refer this
case to the corresponding Executive Department for
administrative or criminal action, or both.

From the above-quoted provisions of the law, the following facts
must be established in order that forfeiture or seizure of the
Swiss deposits may be effected:chanrob1es virtual 1aw library

(1) ownership by the public officer of money or property
acquired during his incumbency, whether it be in his name or
otherwise, and

(2) the extent to which the amount of that money or property
exceeds, i.e., is grossly disproportionate to, the legitimate
income of the public officer.

That spouses Ferdinand and Imelda Marcos were public officials
during the time material to the instant case was never in dispute.
Paragraph 4 of respondent Marcoses answer categorically
admitted the allegations in paragraph 4 of the petition for
forfeiture as to the personal circumstances of Ferdinand E.
Marcos as a public official who served without interruption as
Congressman, Senator, Senate President and President of the
Republic of the Philippines from December 1, 1965 to February
25, 1986. 77 Likewise, respondents admitted in their answer the
contents of paragraph 5 of the petition as to the personal
circumstances of Imelda R. Marcos who once served as a
member of the Interim Batasang Pambansa from 1978 to 1984
and as Metro Manila Governor, concurrently Minister of Human
Settlements, from June 1976 to February 1986. 78

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Respondent Mrs. Marcos also admitted in paragraph 10 of her
answer the allegations of paragraph 11 of the petition for
forfeiture which referred to the accumulated salaries of
respondents Ferdinand E. Marcos and Imelda R. Marcos. 79 The
combined accumulated salaries of the Marcos couple were
reflected in the Certification dated May 27, 1986 issued by then
Minister of Budget and Management Alberto Romulo. 80 The
Certification showed that, from 1966 to 1985, Ferdinand E.
Marcos and Imelda R. Marcos had accumulated salaries in the
amount of P1,570,000 and P718,750, respectively, or a total of
P2,288,750:chanrob1es virtual 1aw library

Ferdinand E. Marcos, as President

1966-1976 at P60,000/year P660,000

1977-1984 at P100,000/year 800,000

1985 at P110,000/year 110,000

P1,570,00

Imelda R. Marcos, as Minister

June 1976-1985 at P75,000/year P718,000

In addition to their accumulated salaries from 1966 to 1985 are
the Marcos couples combined salaries from January to February
1986 in the amount of P30,833.33. Hence, their total
accumulated salaries amounted to P2,319,583.33. Converted to
U.S. dollars on the basis of the corresponding peso-dollar
exchange rates prevailing during the applicable period when said
salaries were received, the total amount had an equivalent value
of $304,372.43.chanrob1es virtua1 1aw 1ibrary

The dollar equivalent was arrived at by using the official annual
rates of exchange of the Philippine peso and the US dollar from
1965 to 1985 as well as the official monthly rates of exchange in
January and February 1986 issued by the Center for Statistical
Information of the Bangko Sentral ng Pilipinas.

Prescinding from the aforesaid admissions, Section 4, Rule 129 of
the Rules of Court provides that:chanrob1es virtual 1aw library

Section 4. Judicial admissions An admission, verbal or
written, made by a party in the course of the proceedings 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. 81

It is settled that judicial admissions may be made: (a) in the
pleadings filed by the parties; (b) in the course of the trial either
by verbal or written manifestations or stipulations; or (c) in other
stages of judicial proceedings, as in the pre-trial of the case. 82
Thus, facts pleaded in the petition and answer, as in the case at
bar, are deemed admissions of petitioner and respondents,
respectively, who are not permitted to contradict them or
subsequently take a position contrary to or inconsistent with
such admissions. 83

The sum of $304,372.43 should be held as the only known lawful
income of respondents since they did not file any Statement of
Assets and Liabilities (SAL), as required by law, from which their
net worth could be determined. Besides, under the 1935
Constitution, Ferdinand E. Marcos as President could not receive
"any other emolument from the Government or any of its
subdivisions and instrumentalities." 84 Likewise, under the 1973
Constitution, Ferdinand E. Marcos as President could "not
receive during his tenure any other emolument from the
Government or any other source." 85 In fact, his management of
businesses, like the administration of foundations to accumulate
funds, was expressly prohibited under the 1973
Constitution:chanrob1es virtual 1aw library

Article VII, Sec. 4(2) The President and the Vice-President shall
not, during their tenure, hold any other office except when
otherwise provided in this Constitution, nor may they practice
any profession, participate directly or indirectly in the
management of any business, or be financially interested directly
or indirectly in any contract with, or in any franchise or special
privilege granted by the Government or any other subdivision,
agency, or instrumentality thereof, including any government
owned or controlled corporation.

Article VII, Sec. 11 No Member of the National Assembly shall
appear as counsel before any court inferior to a court with
appellate jurisdiction, . . . . Neither shall he, directly or indirectly,
be interested financially in any contract with, or in any franchise
or special privilege granted by the Government, or any
subdivision, agency, or instrumentality thereof including any
government owned or controlled corporation during his term of
office. He shall not intervene in any matter before any office of
the government for his pecuniary benefit.

Article IX, Sec. 7 The Prime Minister and Members of the
Cabinet shall be subject to the provision of Section 11, Article VIII
hereof and may not appear as counsel before any court or
administrative body, or manage any business, or practice any
profession, and shall also be subject to such other
disqualification as may be provided by law.

Their only known lawful income of $304,372.43 can therefore
legally and fairly serve as basis for determining the existence of a
prima facie case of forfeiture of the Swiss funds.

Respondents argue that petitioner was not able to establish a
prima facie case for the forfeiture of the Swiss funds since it
failed to prove the essential elements under Section 3,
paragraphs (c), (d) and (e) of RA 1379. As the Act is a penal
statute, its provisions are mandatory and should thus be
construed strictly against the petitioner and liberally in favor of
respondent Marcoses.

We hold that it was not for petitioner to establish the Marcoses
other lawful income or income from legitimately acquired
property for the presumption to apply because, as between
petitioner and respondents, the latter were in a better position
to know if there were such other sources of lawful income. And if
indeed there was such other lawful income, respondents should
have specifically stated the same in their answer. Insofar as
petitioner Republic was concerned, it was enough to specify the
known lawful income of respondents.

Section 9 of the PCGG Rules and Regulations provides that, in
determining prima facie evidence of ill-gotten wealth, the value
of the accumulated assets, properties and other material
possessions of those covered by Executive Order Nos. 1 and 2
must be out of proportion to the known lawful income of such
persons. The respondent Marcos couple did not file any
Statement of Assets and Liabilities (SAL) from which their net
worth could be determined. Their failure to file their SAL was in
itself a violation of law and to allow them to successfully assail
the Republic for not presenting their SAL would reward them for

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their violation of the law.

Further, contrary to the claim of respondents, the admissions
made by them in their various pleadings and documents were
valid. It is of record that respondents judicially admitted that the
money deposited with the Swiss banks belonged to them.

We agree with petitioner that respondent Marcoses made
judicial admissions of their ownership of the subject Swiss bank
deposits in their answer, the General/Supplemental Agreements,
Mrs. Marcos Manifestation and Constancia dated May 5, 1999,
and the Undertaking dated February 10, 1999. We take note of
the fact that the Associate Justices of the Sandiganbayan were
unanimous in holding that respondents had made judicial
admissions of their ownership of the Swiss funds.

In their answer, aside from admitting the existence of the subject
funds, respondents likewise admitted ownership thereof.
Paragraph 22 of respondents answer stated:chanrob1es virtual
1aw library

22. Respondents specifically DENY PARAGRAPH 23 insofar as it
alleges that respondents clandestinely stashed the countrys
being that respondents aforesaid properties were lawfully
acquired. (Emphasis supplied)

By qualifying their acquisition of the Swiss bank deposits as
lawful, respondents unwittingly admitted their ownership
thereof.chanrob1es virtua1 law library

Respondent Mrs. Marcos also admitted ownership of the Swiss
bank deposits by failing to deny under oath the genuineness and
due execution of certain actionable documents bearing her
signature attached to the petition. As discussed earlier, Section
11, Rule 8 86 of the 1997 Rules of Civil Procedure provides that
material averments in the complaint shall be deemed admitted
when not specifically denied.

The General 87 and Supplemental 88 Agreements executed by
petitioner and respondents on December 28, 1993 further
bolstered the claim of petitioner Republic that its case for
forfeiture was proven in accordance with the requisites of
Sections 2 and 3 of RA 1379. The whereas clause in the General
Agreement declared that:chanrob1es virtual 1aw library

WHEREAS, the FIRST PARTY has obtained a judgment from the
Swiss Federal Tribunal on December 21, 1990, that the $356
million belongs in principle to the Republic of the Philippines
provided certain conditionalities are met, but even after 7 years,
the FIRST PARTY has not been able to procure a final judgment of
conviction against the PRIVATE PARTY.

While the Supplemental Agreement warranted, inter alia,

In consideration of the foregoing, the parties hereby agree that
the PRIVATE PARTY shall be entitled to the equivalent of 25% of
the amount that may be eventually withdrawn from said $356
million Swiss deposits.

The stipulations set forth in the General and Supplemental
Agreements undeniably indicated the manifest intent of
respondents to enter into a compromise with petitioner.
Corollarily, respondents willingness to agree to an amicable
settlement with the Republic only affirmed their ownership of
the Swiss deposits for the simple reason that no person would
acquiesce to any concession over such huge dollar deposits if he
did not in fact own them.

Respondents make much capital of the pronouncement by this
Court that the General and Supplemental Agreements were null
and void. 89 They insist that nothing in those agreements could
thus be admitted in evidence against them because they stood
on the same ground as an accepted offer which, under Section
27, Rule 130 90 of the 1997 Rules of Civil Procedure, provides
that "in civil cases, an offer of compromise is not an admission of
any liability and is not admissible in evidence against the
offeror."cralaw virtua1aw library

We find no merit in this contention. The declaration of nullity of
said agreements was premised on the following constitutional
and statutory infirmities: (1) the grant of criminal immunity to
the Marcos heirs was against the law; (2) the PCGGs
commitment to exempt from all forms of taxes the properties to
be retained by the Marcos heirs was against the Constitution;
and (3) the governments undertaking to cause the dismissal of
all cases filed against the Marcoses pending before the
Sandiganbayan and other courts encroached on the powers of
the judiciary. The reasons relied upon by the Court never in the
least bit even touched on the veracity and truthfulness of
respondents admission with respect to their ownership of the
Swiss funds. Besides, having made certain admissions in those
agreements, respondents cannot now deny that they voluntarily
admitted owning the subject Swiss funds, notwithstanding the
fact that the agreements themselves were later declared null and
void.

The following observation of Sandiganbayan Justice Catalino
Castaeda, Jr. in the decision dated September 19, 2000 could
not have been better said:chanrob1es virtual 1aw library

. . . The declaration of nullity of the two agreements rendered
the same without legal effects but it did not detract from the
admissions of the respondents contained therein. Otherwise
stated, the admissions made in said agreements, as quoted
above, remain binding on the respondents. 91

A written statement is nonetheless competent as an admission
even if it is contained in a document which is not itself effective
for the purpose for which it is made, either by reason of illegality,
or incompetency of a party thereto, or by reason of not being
signed, executed or delivered. Accordingly, contracts have been
held as competent evidence of admissions, although they may be
unenforceable. 92

The testimony of respondent Ferdinand Marcos, Jr. during the
hearing on the motion for the approval of the Compromise
Agreement on April 29, 1998 also lent credence to the allegations
of petitioner Republic that respondents admitted ownership of
the Swiss bank accounts. We quote the salient portions of
Ferdinand Jr.s formal declarations in open court:chanrob1es
virtual 1aw library

ATTY. FERNANDO:chanrob1es virtual 1aw library

Mr. Marcos, did you ever have any meetings with PCGG
Chairman Magtanggol C. Gunigundo?

F. MARCOS, JR.:chanrob1es virtual 1aw library

Yes. I have had very many meetings in fact with Chairman.



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Would you recall when the first meeting occurred?

PJ GARCHITORENA:chanrob1es virtual 1aw library

In connection with what?


In connection with the ongoing talks to compromise the various
cases initiated by PCGG against your family?


The nature of our meetings was solely concerned with
negotiations towards achieving some kind of agreement between
the Philippine government and the Marcos family. The
discussions that led up to the compromise agreement were
initiated by our then counsel Atty. Simeon Mesina . . .. 93
x x x


What was your reaction when Atty. Mesina informed you of this
possibility?


My reaction to all of these approaches is that I am always open,
we are always open, we are very much always in search of
resolution to the problem of the family and any approach that
has been made us, we have entertained. And so my reaction was
the same as what I have always . . . why not? Maybe this is the
one that will finally put an end to this problem. 94
x x x


Basically, what were the true amounts of the assets in the bank?


So, we are talking about liquid assets here? Just Cash?


Well, basically, any assets. Anything that was under the Marcos
name in any of the banks in Switzerland which may necessarily
be not cash. 95
x x x


. . . What did you do in other words, after being apprised of this
contract in connection herewith?


I assumed that we are beginning to implement the agreement
because this was forwarded through the Philippine government
lawyers through our lawyers and then, subsequently, to me. I
was a little surprised because we hadnt really discussed the
details of the transfer of the funds, what the bank accounts, what
the mechanism would be. But nevertheless, I was happy to see
that as far as the PCGG is concerned, that the agreement was
perfected and that we were beginning to implement it and that
was a source of satisfaction to me because I thought that finally
it will be the end. 96

Ferdinand Jr.s pronouncements, taken in context and in their
entirety, were a confirmation of respondents recognition of
their ownership of the Swiss bank deposits. Admissions of a party
in his testimony are receivable against him. If a party, as a
witness, deliberately concedes a fact, such concession has the
force of a judicial admission. 97 It is apparent from Ferdinand
Jr.s testimony that the Marcos family agreed to negotiate with
the Philippine government in the hope of finally putting an end
to the problems besetting the Marcos family regarding the Swiss
accounts. This was doubtlessly an acknowledgment of ownership
on their part. The rule is that the testimony on the witness stand
partakes of the nature of a formal judicial admission when a
party testifies clearly and unequivocally to a fact which is
peculiarly within his own knowledge. 98

In her Manifestation 99 dated May 26, 1998, respondent Imelda
Marcos furthermore revealed the following:chanrob1es virtual
1aw library

That respondent Imelda R. Marcos owns 90% of the subject
matter of the above-entitled case, being the sole beneficiary of
the dollar deposits in the name of the various foundations
alleged in the case;

That in fact only 10% of the subject matter in the above-entitled
case belongs to the estate of the late President Ferdinand E.
Marcos;
x x x

Respondents ownership of the Swiss bank accounts as borne out
by Mrs. Marcos manifestation is as bright as sunlight. And her
claim that she is merely a beneficiary of the Swiss deposits is
belied by her own signatures on the appended copies of the
documents substantiating her ownership of the funds in the
name of the foundations. As already mentioned, she failed to
specifically deny under oath the authenticity of such documents,
especially those involving "William Saunders" and "Jane Ryan"
which actually referred to Ferdinand Marcos and Imelda Marcos,
respectively. That failure of Imelda Marcos to specifically deny
the existence, much less the genuineness and due execution, of
the instruments bearing her signature, was tantamount to a
judicial admission of the genuineness and due execution of said
instruments, in accordance with Section 8, Rule 8 100 of the 1997
Rules of Civil Procedure.

Likewise, in her Constancia 101 dated May 6, 1999, Imelda
Marcos prayed for the approval of the Compromise Agreement
and the subsequent release and transfer of the $150 million to
the rightful owner. She further made the following
manifestations:chanrob1es virtual 1aw library
x x x

2. The Republics cause of action over the full amount is its
forfeiture in favor of the government if found to be ill-gotten. On
the other hand, the Marcoses defend that it is a legitimate asset.
Therefore, both parties have an inchoate right of ownership over

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the account. If it turns out that the account is of lawful origin, the
Republic may yield to the Marcoses. Conversely, the Marcoses
must yield to the Republic. (Emphasis supplied)
x x x

3. Consistent with the foregoing, and the Marcoses having
committed themselves to helping the less fortunate, in the
interest of peace, reconciliation and unity, defendant MADAM
IMELDA ROMUALDEZ MARCOS, in firm abidance thereby, hereby
affirms her agreement with the Republic for the release and
transfer of the US Dollar 150 million for proper disposition,
without prejudice to the final outcome of the litigation
respecting the ownership of the remainder.

Again, the above statements were indicative of Imeldas
admission of the Marcoses ownership of the Swiss deposits as in
fact "the Marcoses defend that it (Swiss deposits) is a legitimate
(Marcos) asset."cralaw virtua1aw library

On the other hand, respondents Maria Imelda Marcos-Manotoc,
Ferdinand Marcos, Jr. and Maria Irene Marcos-Araneta filed a
motion 102 on May 4, 1998 asking the Sandiganbayan to place
the res (Swiss deposits) in custodia legis:chanrob1es virtual 1aw
library

7. Indeed, the prevailing situation is fraught with danger! Unless
the aforesaid Swiss deposits are placed in custodia legis or within
the Courts protective mantle, its dissipation or misappropriation
by the petitioner looms as a distinct possibility.

Such display of deep, personal interest can only come from
someone who believes that he has a marked and intimate right
over the considerable dollar deposits. Truly, by filing said motion,
the Marcos children revealed their ownership of the said
deposits.

Lastly, the Undertaking 103 entered into by the PCGG, the PNB
and the Marcos foundations on February 10, 1999, confirmed the
Marcoses ownership of the Swiss bank deposits. The subject
Undertaking brought to light their readiness to pay the human
rights victims out of the funds held in escrow in the PNB. It
stated:chanrob1es virtual 1aw library

WHEREAS, the Republic of the Philippines sympathizes with the
plight of the human rights victims-plaintiffs in the
aforementioned litigation through the Second Party, desires to
assist in the satisfaction of the judgment awards of said human
rights victims-plaintiffs, by releasing, assigning and or waiving
US$150 million of the funds held in escrow under the Escrow
Agreements dated August 14, 1995, although the Republic is not
obligated to do so under final judgments of the Swiss courts
dated December 10 and 19, 1997, and January 8, 1998;

WHEREAS, the Third Party is likewise willing to release, assign
and/or waive all its rights and interests over said US$150 million
to the aforementioned human rights victims-plaintiffs.

All told, the foregoing disquisition negates the claim of
respondents that "petitioner failed to prove that they acquired or
own the Swiss funds and that "it was only by arbitrarily isolating
and taking certain statements made by private respondents out
of context that petitioner was able to treat these as judicial
admissions." The Court is fully aware of the relevance, materiality
and implications of every pleading and document submitted in
this case. This Court carefully scrutinized the proofs presented by
the parties. We analyzed, assessed and weighed them to
ascertain if each piece of evidence rightfully qualified as an
admission. Owing to the far-reaching historical and political
implications of this case, we considered and examined,
individually and totally, the evidence of the parties, even if it
might have bordered on factual adjudication which, by authority
of the rules and jurisprudence, is not usually done by this Court.
There is no doubt in our mind that respondent Marcoses
admitted ownership of the Swiss bank deposits.

We have always adhered to the familiar doctrine that an
admission made in the pleadings cannot be controverted by the
party making such admission and becomes conclusive on him,
and that all proofs submitted by him contrary thereto or
inconsistent therewith should be ignored, whether an objection
is interposed by the adverse party or not. 104 This doctrine is
embodied in Section 4, Rule 129 of the Rules of
Court:chanrob1es virtual 1aw library

SEC. 4. Judicial admissions. An admission, verbal or written,
made by a party in the course of the proceedings 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. 105

In the absence of a compelling reason to the contrary,
respondents judicial admission of ownership of the Swiss
deposits is definitely binding on them.

The individual and separate admissions of each respondent bind
all of them pursuant to Sections 29 and 31, Rule 130 of the Rules
of Court:chanrob1es virtual 1aw library

SEC. 29. Admission by co-partner or agent. The act or
declaration of a partner or agent of the party within the scope of
his authority and during the existence of the partnership or
agency, may be given in evidence against such party after the
partnership or agency is shown by evidence other than such act
or declaration. The same rule applies to the act or declaration of
a joint owner, joint debtor, or other person jointly interested
with the party. 106

SEC. 31. Admission by privies. Where one derives title to
property from another, the act, declaration, or omission of the
latter, while holding the title, in relation to the property, is
evidence against the former. 107

The declarations of a person are admissible against a party
whenever a "privity of estate" exists between the declarant and
the party, the term "privity of estate" generally denoting a
succession in rights. 108 Consequently, an admission of one in
privity with a party to the record is competent. 109 Without
doubt, privity exists among the respondents in this case. And
where several co-parties to the record are jointly interested in
the subject matter of the controversy, the admission of one is
competent against all. 110

Respondents insist that the Sandiganbayan is correct in ruling
that petitioner Republic has failed to establish a prima facie case
for the forfeiture of the Swiss deposits.

We disagree. The sudden turn-around of the Sandiganbayan was
really strange, to say the least, as its findings and conclusions
were not borne out by the voluminous records of this case.

Section 2 of RA 1379 explicitly states that "whenever any public
officer or employee has acquired during his incumbency an
amount of property which is manifestly out of proportion to his
salary as such public officer or employee and to his other lawful

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income and the income from legitimately acquired property, said
property shall be presumed prima facie to have been unlawfully
acquired. . . ."cralaw virtua1aw library

The elements which must concur for this prima facie
presumption to apply are:chanrob1es virtual 1aw library

(1) the offender is a public officer or employee;

(2) the must have acquired a considerable amount of money or
property during his incumbency; and

(3) said amount is manifestly out of proportion to his salary as
such public officer or employee and to his other lawful income
and the income from legitimately acquired property.

It is undisputed that spouses Ferdinand and Imelda Marcos were
former public officers. Hence, the first element is clearly
extant.chanrob1es virtua1 1aw 1ibrary

The second element deals with the amount of money or property
acquired by the public officer during his incumbency. The Marcos
couple indubitably acquired and owned properties during their
term of office. In fact, the five groups of Swiss accounts were
admittedly owned by them. There is proof of the existence and
ownership of these assets and properties and it suffices to
comply with the second element.

The third requirement is met if it can be shown that such assets,
money or property is manifestly out of proportion to the public
officers salary and his other lawful income. It is the proof of this
third element that is crucial in determining whether a prima facie
presumption has been established in this case.

Petitioner Republic presented not only a schedule indicating the
lawful income of the Marcos spouses during their incumbency
but also evidence that they had huge deposits beyond such
lawful income in Swiss banks under the names of five different
foundations. We believe petitioner was able to establish the
prima facie presumption that the assets and properties acquired
by the Marcoses were manifestly and patently disproportionate
to their aggregate salaries as public officials. Otherwise stated,
petitioner presented enough evidence to convince us that the
Marcoses had dollar deposits amounting to US $356 million
representing the balance of the Swiss accounts of the five
foundations, an amount way, way beyond their aggregate
legitimate income of only US$304,372.43 during their
incumbency as government officials.

Considering, therefore, that the total amount of the Swiss
deposits was considerably out of proportion to the known lawful
income of the Marcoses, the presumption that said dollar
deposits were unlawfully acquired was duly established. It was
sufficient for the petition for forfeiture to state the approximate
amount of money and property acquired by the respondents,
and their total government salaries. Section 9 of the PCGG Rules
and Regulations states:chanrob1es virtual 1aw library

Prima Facie Evidence. Any accumulation of assets, properties,
and other material possessions of those persons covered by
Executive Orders No. 1 and No. 2, whose value is out of
proportion to their known lawful income is prima facie deemed
ill-gotten wealth.

Indeed, the burden of proof was on the respondents to dispute
this presumption and show by clear and convincing evidence that
the Swiss deposits were lawfully acquired and that they had
other legitimate sources of income. A presumption is prima facie
proof of the fact presumed and, unless the fact thus prima facie
established by legal presumption is disproved, it must stand as
proved. 111

Respondent Mrs. Marcos argues that the foreign foundations
should have been impleaded as they were indispensable parties
without whom no complete determination of the issues could be
made. She asserts that the failure of petitioner Republic to
implead the foundations rendered the judgment void as the
joinder of indispensable parties was a sine qua non exercise of
judicial power. Furthermore, the non-inclusion of the foreign
foundations violated the conditions prescribed by the Swiss
government regarding the deposit of the funds in escrow,
deprived them of their day in court and denied them their rights
under the Swiss constitution and international law. 112

The Court finds that petitioner Republic did not err in not
impleading the foreign foundations. Section 7, Rule 3 of the 1997
Rules of Civil Procedure, 113 taken from Rule 19b of the
American Federal Rules of Civil Procedure, provides for the
compulsory joinder of indispensable parties. Generally, an
indispensable party must be impleaded for the complete
determination of the suit. However, failure to join an
indispensable party does not divest the court of jurisdiction since
the rule regarding indispensable parties is founded on equitable
considerations and is not jurisdictional. Thus, the court is not
divested of its power to render a decision even in the absence of
indispensable parties, though such judgment is not binding on
the non-joined party. 114

An indispensable party 115 has been defined as one:chanrob1es
virtual 1aw library

[who] must have a direct interest in the litigation; and if this
interest is such that it cannot be separated from that of the
parties to the suit, if the court cannot render justice between the
parties in his absence, if the decree will have an injurious effect
upon his interest, or if the final determination of the controversy
in his absence will be inconsistent with equity and good
conscience.

There are two essential tests of an indispensable party: (1) can
relief be afforded the plaintiff without the presence of the other
party? and (2) can the case be decided on its merits without
prejudicing the rights of the other party? 116 There is, however,
no fixed formula for determining who is an indispensable party;
this can only be determined in the context and by the facts of the
particular suit or litigation.

In the present case, there was an admission by respondent
Imelda Marcos in her May 26, 1998 Manifestation before the
Sandiganbayan that she was the sole beneficiary of 90% of the
subject matter in controversy with the remaining 10% belonging
to the estate of Ferdinand Marcos. 117 Viewed against this
admission, the foreign foundations were not indispensable
parties. Their non-participation in the proceedings did not
prevent the court from deciding the case on its merits and
according full relief to petitioner Republic. The judgment
ordering the return of the $356 million was neither inimical to
the foundations interests nor inconsistent with equity and good
conscience. The admission of respondent Imelda Marcos only
confirmed what was already generally known: that the
foundations were established precisely to hide the money stolen
by the Marcos spouses from petitioner Republic. It negated
whatever illusion there was, if any, that the foreign foundations
owned even a nominal part of the assets in question.

The rulings of the Swiss court that the foundations, as formal

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owners, must be given an opportunity to participate in the
proceedings hinged on the assumption that they owned a
nominal share of the assets. 118 But this was already refuted by
no less than Mrs. Marcos herself. Thus, she cannot now argue
that the ruling of the Sandiganbayan violated the conditions set
by the Swiss court. The directive given by the Swiss court for the
foundations to participate in the proceedings was for the
purpose of protecting whatever nominal interest they might have
had in the assets as formal owners. But inasmuch as their
ownership was subsequently repudiated by Imelda Marcos, they
could no longer be considered as indispensable parties and their
participation in the proceedings became unnecessary.

In Republic v. Sandiganbayan, 119 this Court ruled that
impleading the firms which are the res of the action was
unnecessary:jgc:chanrobles.com.ph

"And as to corporations organized with ill-gotten wealth, but are
not themselves guilty of misappropriation, fraud or other illicit
conduct in other words, the companies themselves are not the
object or thing involved in the action, the res thereof there is
no need to implead them either. Indeed, their impleading is not
proper on the strength alone of their having been formed with
ill-gotten funds, absent any other particular wrongdoing on their
part . . .

Such showing of having been formed with, or having received ill-
gotten funds, however strong or convincing, does not, without
more, warrant identifying the corporations in question with the
person who formed or made use of them to give the color or
appearance of lawful, innocent acquisition to illegally amassed
wealth at the least, not so as place on the Government the
onus of impleading the former with the latter in actions to
recover such wealth. Distinguished in terms of juridical
personality and legal culpability from their erring members or
stockholders, said corporations are not themselves guilty of the
sins of the latter, of the embezzlement, asportation, etc., that
gave rise to the Governments cause of action for recovery; their
creation or organization was merely the result of their members
(or stockholders) manipulations and maneuvers to conceal the
illegal origins of the assets or monies invested therein. In this
light, they are simply the res in the actions for the recovery of
illegally acquired wealth, and there is, in principle, no cause of
action against them and no ground to implead them as
defendants in said actions."cralaw virtua1aw library

Just like the corporations in the aforementioned case, the foreign
foundations here were set up to conceal the illegally acquired
funds of the Marcos spouses. Thus, they were simply the res in
the action for recovery of ill-gotten wealth and did not have to
be impleaded for lack of cause of action or ground to implead
them.

Assuming arguendo, however, that the foundations were
indispensable parties, the failure of petitioner to implead them
was a curable error, as held in the previously cited case of
Republic v. Sandiganbayan: 120

"Even in those cases where it might reasonably be argued that
the failure of the Government to implead the sequestered
corporations as defendants is indeed a procedural aberration, as
where said firms were allegedly used, and actively cooperated
with the defendants, as instruments or conduits for conversion of
public funds and property or illicit or fraudulent obtention of
favored government contracts, etc., slight reflection would
nevertheless lead to the conclusion that the defect is not fatal,
but one correctible under applicable adjective rules e.g.,
Section 10, Rule 5 of the Rules of Court [specifying the remedy of
amendment during trial to authorize or to conform to the
evidence]; Section 1, Rule 20 [governing amendments before
trial], in relation to the rule respecting omission of so-called
necessary or indispensable parties, set out in Section 11, Rule 3
of the Rules of Court. It is relevant in this context to advert to the
old familiar doctrines that the omission to implead such parties
"is a mere technical defect which can be cured at any stage of
the proceedings even after judgment" ; and that, particularly in
the case of indispensable parties, since their presence and
participation is essential to the very life of the action, for without
them no judgment may be rendered, amendments of the
complaint in order to implead them should be freely allowed,
even on appeal, in fact even after rendition of judgment by this
Court, where it appears that the complaint otherwise indicates
their identity and character as such indispensable parties." 121

Although there are decided cases wherein the non-joinder of
indispensable parties in fact led to the dismissal of the suit or the
annulment of judgment, such cases do not jibe with the matter
at hand. The better view is that non-joinder is not a ground to
dismiss the suit or annul the judgment. The rule on joinder of
indispensable parties is founded on equity. And the spirit of the
law is reflected in Section 11, Rule 3 122 of the 1997 Rules of Civil
Procedure. It prohibits the dismissal of a suit on the ground of
non-joinder or misjoinder of parties and allows the amendment
of the complaint at any stage of the proceedings, through motion
or on order of the court on its own initiative. 123

Likewise, jurisprudence on the Federal Rules of Procedure, from
which our Section 7, Rule 3 124 on indispensable parties was
copied, allows the joinder of indispensable parties even after
judgment has been entered if such is needed to afford the
moving party full relief. 125 Mere delay in filing the joinder
motion does not necessarily result in the waiver of the right as
long as the delay is excusable. 126 Thus, respondent Mrs. Marcos
cannot correctly argue that the judgment rendered by the
Sandiganbayan was void due to the non-joinder of the foreign
foundations. The court had jurisdiction to render judgment
which, even in the absence of indispensable parties, was binding
on all the parties before it though not on the absent party. 127 If
she really felt that she could not be granted full relief due to the
absence of the foreign foundations, she should have moved for
their inclusion, which was allowable at any stage of the
proceedings. She never did. Instead she assailed the judgment
rendered.

In the face of undeniable circumstances and the avalanche of
documentary evidence against them, respondent Marcoses failed
to justify the lawful nature of their acquisition of the said assets.
Hence, the Swiss deposits should be considered ill-gotten wealth
and forfeited in favor of the State in accordance with Section 6 of
RA 1379:chanrob1es virtual 1aw library

SEC. 6. Judgment. If the respondent is unable to show to the
satisfaction of the court that he has lawfully acquired the
property in question, then the court shall declare such property
forfeited in favor of the State, and by virtue of such judgment the
property aforesaid shall become property of the State . . . .

THE FAILURE TO PRESENT AUTHENTICATED

TRANSLATIONS OF THE SWISS DECISIONS

Finally, petitioner Republic contends that the Honorable
Sandiganbayan Presiding Justice Francis Garchitorena committed
grave abuse of discretion in reversing himself on the ground that
the original copies of the authenticated Swiss decisions and their
authenticated translations were not submitted to the court a

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quo. Earlier PJ Garchitorena had quoted extensively from the
unofficial translation of one of these Swiss decisions in his
ponencia dated July 29, 1999 when he denied the motion to
release US$150 Million to the human rights victims.

While we are in reality perplexed by such an incomprehensible
change of heart, there might nevertheless not be any real need
to belabor the issue. The presentation of the authenticated
translations of the original copies of the Swiss decision was not
de rigueur for the public respondent to make findings of fact and
reach its conclusions. In short, the Sandiganbayans decision was
not dependent on the determination of the Swiss courts. For that
matter, neither is this Courts.

The release of the Swiss funds held in escrow in the PNB is
dependent solely on the decision of this jurisdiction that said
funds belong to the petitioner Republic. What is important is our
own assessment of the sufficiency of the evidence to rule in favor
of either petitioner Republic or respondent Marcoses. In this
instance, despite the absence of the authenticated translations
of the Swiss decisions, the evidence on hand tilts convincingly in
favor of petitioner Republic.

WHEREFORE, the petition is hereby GRANTED. The assailed
Resolution of the Sandiganbayan dated January 31, 2002 is SET
ASIDE. The Swiss deposits which were transferred to and are now
deposited in escrow at the Philippine National Bank in the
estimated aggregate amount of US$658,175,373.60 as of January
31, 2002, plus interest, are hereby forfeited in favor of petitioner
Republic of the Philippines.chanrob1es virtua1 1aw 1ibrary

SO ORDERED.


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[G.R. No. 133119. August 17, 2000]
FINANCIAL BUILDING CORPORATION, petitioner, vs. FORBES
PARK ASSOCIATION, INC., respondent.
D E C I S I O N
DE LEON, JR., J.:
Before us is petition for review on certiorari of the
Decision
[1]
dated March 20, 1998 of the Court of Appeals
[2]
in CA-
GR CV No. 48194 entitled Forbes Park Association, Inc. vs.
Financial Building Corporation, finding Financial Building
Corporation (hereafter, Financial Building) liable for damages in
favor of Forbes Park Association, Inc. (hereafter, Forbes Park), for
violating the latters deed of restrictions on the construction of
buildings within the Forbes Park Village, Makati.
The pertinent facts are as follows:
The then Union of Soviet Socialist Republic (hereafter,
USSR) was the owner of a 4,223 square meter residential lot
located at No. 10, Narra Place, Forbes Park Village in Makati
City. On December 2, 1985, the USSR engaged the services of
Financial Building for the construction of a multi-level office and
staff apartment building at the said lot, which would be used by
the Trade Representative of the USSR.
[3]
Due to the USSRs
representation that it would be building a residence for its Trade
Representative, Forbes Park authorized its construction and work
began shortly thereafter.
On June 30, 1986, Forbes Park reminded the USSR of
existing regulations
[4]
authorizing only the construction of a
single-family residential building in each lot within the village. It
also elicited a reassurance from the USSR that such restriction
has been complied with.
[5]
Promptly, the USSR gave its assurance
that it has been complying with all regulations of Forbes
Park.
[6]
Despite this, Financial Building submitted to the Makati
City Government a second building plan for the construction of a
multi-level apartment building, which was different from the first
plan for the construction of a residential building submitted to
Forbes Park.
Forbes Park discovered the second plan and subsequent
ocular inspection of the USSRs subject lot confirmed the
violation of the deed of restrictions. Thus, it enjoined further
construction work. On March 27, 1987, Forbes Park suspended
all permits of entry for the personnel and materials of Financial
Building in the said construction site. The parties attempted to
meet to settle their differences but it did not push through.
Instead, on April 9, 1987, Financial Building filed in the
Regional Trial Court of Makati, Metro Manila, a Complaint
[7]
for
Injunction and Damages with a prayer for Preliminary Injunction
against Forbes Park docketed as Civil Case No. 16540. The latter,
in turn, filed a Motion to Dismiss on the ground that Financial
Building had no cause of action because it was not the real party-
in-interest.
On April 28, 1987, the trial court issued a writ of
preliminary injunction against Forbes Park but the Court of
Appeals nullified it and dismissed the complaint in Civil Case No.
16540 altogether. We affirmed the said dismissal in our
Resolution,
[8]
promulgated on April 6, 1988, in G.R. No. 79319
entitled Financial Building Corporation, et al. vs. Forbes Park
Association, et al.
After Financial Buildings case, G.R. No. 79319, was
terminated with finality, Forbes Park sought to vindicate its rights
by filing on October 27, 1989 with the Regional Trial Court of
Makati a Complaint
[9]
for Damages, against Financial Building,
docketed as Civil Case No. 89-5522, arising from the violation of
its rules and regulations. The damages claimed are in the
following amounts: (a) P3,000,000.00 as actual damages; (b)
P1,000,000.00 as moral damages; (c) P1,000,000.00 as exemplary
damages; and (d) P1,000,000.00 as attorneys fees.
[10]
On
September 26, 1994, the trial court rendered its Decision
[11]
in
Civil Case No. 89-5522 in favor of Forbes Park and against
Financial Building, the dispositive portion of which reads, to wit:
WHEREFORE, in view of the foregoing, the Court hereby renders
judgment in favor of the plaintiff and against the defendant:
(1) Ordering the defendant to remove/demolish the
illegal structures within three (3) months from
the time this judgment becomes final and
executory, and in case of failure of the defendant
to do so, the plaintiff is authorized to
demolish/remove the structures at the expense
of the defendant;
(2) Ordering the defendant to pay damages, to wit:
(a) P3,000,000.00 as actual damages by
way of demolition expenses;
(b) P1,000,000.00 as exemplary damages;
(c) P500,000.00 as attorneys fees;
(d) the costs of suit.
SO ORDERED.
Financial Building appealed the said Decision of the trial
court in Civil Case No. 89-5522 by way of a petition for review
on certiorari
[12]
entitled Financial Building Corporation vs.
Forbes Park Association, Inc. to the Court of Appeals and
docketed therein as CA-GR CV No. 48194. However, the Court of
Appeals affirmed it in its Decision
[13]
dated March 20, 1998, the
dispositive portion of which reads:
WHEREFORE, the Decision dated September 26, 1994 of the
Regional Trial Court of Makati is AFFIRMED with the modification
that the award of exemplary damages, as well as attorneys fees,
is reduced to fifty thousand pesos (P50,000.00) each.
Hence, this petition, wherein Financial Building assigns the
following errors:
I. THE COURT OF APPEALS GRAVELY ERRED IN NOT
DISMISSING THE COMPLAINT FILED BY
RESPONDENT FPA DESPITE THE FACT THAT ITS
ALLEGED CLAIMS AND CAUSES OF ACTION
THEREIN ARE BARRED BY PRIOR JUDGMENT
AND/OR ARE DEEMED WAIVED FOR ITS FAILURE
TO INTERPOSE THE SAME AS COMPULSORY
COUNTERCLAIMS IN CIVIL CASE NO. 16540;
II. THE COURT OF APPEALS GRAVELY ERRED IN NOT
DISMISSING THE COMPLAINT FILED BY
RESPONDENT FPA AGAINST PETITIONER FBC
SINCE RESPONDENT FPA HAS NO CAUSE OF
ACTION AGAINST PETITIONER FBC;

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III. THE COURT OF APPEALS GRAVELY ERRED IN
AWARDING DAMAGES IN FAVOR OF
RESPONDENT FPA DESPITE THE FACT THAT ON
THE BASIS OF THE EVIDENCE ON RECORD,
RESPONDENT FPA IS NOT ENTITLED THERETO
AND PETITIONER FBC IS NOT LIABLE THEREFOR;
IV. THE COURT OF APPEALS ERRED IN ORDERING THE
DEMOLITION OF THE ILLEGAL STRUCTURES
LOCATED AT NO. 10 NARRA PLACE, FORBES PARK,
MAKATI CITY, CONSIDERING THAT THE SAME ARE
LOCATED ON DIPLOMATIC PREMISES
[14]

We grant the petition.
First. The instant case is barred due to Forbes Parks failure
to set it up as a compulsory counterclaim in Civil Case No. 16540,
the prior injunction suit initiated by Financial Building against
Forbes Park.
A compulsory counterclaim is one which arises out of or is
necessarily connected with the transaction or occurrence that is
the subject matter of the opposing partys claim.
[15]
If it is within
the jurisdiction of the court and it does not require for its
adjudication the presence of third parties over whom the court
cannot acquire jurisdiction, such compulsory counterclaim is
barred if it is not set up in the action filed by the opposing
party.
[16]

Thus, a compulsory counterclaim cannot be the subject of a
separate action but it should instead be asserted in the same suit
involving the same transaction or occurrence, which gave rise to
it.
[17]
To determine whether a counterclaim is compulsory or not,
we have devised the following tests: (1) Are the issues of fact or
law raised by the claim and the counterclaim largely the
same? (2) Would res judicata bar a subsequent suit on
defendants claim absent the compulsory counterclaim rule? (3)
Will substantially the same evidence support or refute plaintiffs
claim as well as the defendants counterclaim? and (4) Is there
any logical relation between the claim and the counterclaim?
Affirmative answers to the above queries indicate the existence
of a compulsory counterclaim.
[18]

Undoubtedly, the prior Civil Case No. 16540 and the instant
case arose from the same occurrence the construction work
done by Financial Building on the USSRs lot in Forbes Park
Village. The issues of fact and law in both cases are
identical. The factual issue is whether the structures erected by
Financial Building violate Forbes Parks rules and regulations,
whereas the legal issue is whether Financial Building, as an
independent contractor working for the USSR, could be enjoined
from continuing with the construction and be held liable for
damages if it is found to have violated Forbes Parks rules.
As a result of the controversy, Financial Building seized the
initiative by filing the prior injunction case, which was anchored
on the contention that Forbes Parks prohibition on the
construction work in the subject premises was improper. The
instant case on the other hand was initiated by Forbes Park to
compel Financial Building to remove the same structures it has
erected in the same premises involved in the prior case and to
claim damages for undertaking the said construction. Thus, the
logical relation between the two cases is patent and it is obvious
that substantially the same evidence is involved in the said cases.
Moreover, the two cases involve the same parties. The
aggregate amount of the claims in the instant case is within the
jurisdiction of the regional trial court, had it been set up as a
counterclaim in Civil Case No. 16540. Therefore, Forbes Parks
claims in the instant case should have been filed as a
counterclaim in Civil Case No. 16540.
Second. Since Forbes Park filed a motion to dismiss in Civil
Case No. 16540, its existing compulsory counterclaim at that
time is now barred.
A compulsory counterclaim is auxiliary to the proceeding in
the original suit and derives its jurisdictional support
therefrom.
[19]
A counterclaim presupposes the existence of a
claim against the party filing the counterclaim. Hence, where
there is no claim against the counterclaimant, the counterclaim is
improper and it must dismissed, more so where the complaint is
dismissed at the instance of the counterclaimant.
[20]
In other
words, if the dismissal of the main action results in the dismissal
of the counterclaim already filed, it stands to reason that the
filing of a motion to dismiss the complaint is an implied waiver of
the compulsory counterclaim because the grant of the motion
ultimately results in the dismissal of the counterclaim.
Thus, the filing of a motion to dismiss and the setting up of
a compulsory counterclaim are incompatible remedies. In the
event that a defending party has a ground for dismissal and a
compulsory counterclaim at the same time, he must choose only
one remedy. If he decides to file a motion to dismiss, he will lose
his compulsory counterclaim. But if he opts to set up his
compulsory counterclaim, he may still plead his ground for
dismissal as an affirmative defense in his answer.
[21]
The latter
option is obviously more favorable to the defendant although
such fact was lost on Forbes Park.
The ground for dismissal invoked by Forbes Park in Civil
Case No. 16540 was lack of cause of action. There was no need
to plead such ground in a motion to dismiss or in the answer
since the same was not deemed waived if it was not
pleaded.
[22]
Nonetheless, Forbes Park still filed a motion to
dismiss and thus exercised bad judgment in its choice of
remedies. Thus, it has no one to blame but itself for the
consequent loss of its counterclaim as a result of such choice.
Inasmuch as the action for damages filed by Forbes Park
should be as it is hereby dismissed for being barred by the prior
judgment in G.R. No. 79319 (supra) and/or deemed waived by
Forbes Park to interpose the same under the rule on compulsory
counterclaims, there is no need to discuss the other issues raised
by the herein petitioner.
WHEREFORE, the instant petition is hereby GRANTED and
the Decision dated March 20, 1998 of the Court of Appeals in CA-
G.R. CV No. 48194 is hereby REVERSED and SET ASIDE.
Costs against respondent Forbes Park Association, Inc. .
SO ORDERED.


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[G.R. No. 139018. April 11, 2005]
ESTHERLITA CRUZ-AGANA, petitioner, vs. HON. JUDGE AURORA
SANTIAGO-LAGMAN (In her capacity as Presiding
Judge of Regional Trial Court, Branch 77, Malolos,
Bulacan) and B. SERRANO ENTERPRISES,
INC., respondents.
D E C I S I O N
CARPIO, J.:
The Case
This petition for certiorari
[1]
seeks to reverse the Order of
the Regional Trial Court, Branch 77, Malolos, Bulacan (trial
court), dated 4 June 1999, recalling its previous Order dated 25
May 1999 dismissing B. Serrano Enterprises, Inc.s (respondent)
counterclaim upon a motion to dismiss filed by petitioner
Estherlita Cruz-Agana (petitioner).
Antecedent Facts
On 18 March 1996, petitioner filed a Complaint for
annulment of title with prayer for preliminary mandatory
injunction against respondent. Petitioner claims that as the sole
heir of one Teodorico Cruz, she is the sole owner of a lot covered
by Transfer Certificate of Title No. T-3907. Petitioner further
claims that the lot was fraudulently sold to Eugenio Lopez, Jr.
who later on transferred the lot to respondent. The case was
raffled to the Regional Trial Court, Branch 77, Malolos, Bulacan
presided by Judge Aurora Santiago-Lagman and docketed as Civil
Case No. 210-M-96.
Respondent seasonably filed its Answer with compulsory
counterclaim. Petitioner moved to dismiss respondents
counterclaim for lack of a certificate of non-forum shopping.
In an Order dated 11 March 1999, the trial court denied
petitioners motion to dismiss respondents counterclaim. The
trial court reasoned that respondents counterclaim is
compulsory and therefore excluded from the coverage of Section
5, Rule 7 of the Rules of Court. Petitioner moved that the trial
court reconsider its Order invoking the mandatory nature of a
certificate of non-forum shopping under Supreme Court
Administrative Circular No. 04-94.
[2]
On 25 May 1999, the trial
court reversed its 11 March 1999 Order and dismissed
respondents counterclaim for lack of a certificate of non-forum
shopping.
Respondent seasonably filed a motion for reconsideration
arguing that Administrative Circular No. 04-94 does not apply to
compulsory counterclaims following the ruling in Santo Tomas
University Hospital v. Surla.
3
On 4 June 1999, the trial court
again reversed itself and recalled its Order dismissing
respondents counterclaim.
Petitioner now comes before this Court through Rule 65 of
the 1997 Rules of Civil Procedure.
The Trial Courts Ruling
The trial court found that respondents counterclaim is
compulsory in nature. The trial court ruled that the filing of a
compulsory counterclaim does not require a certificate of non-
forum shopping. On the effect of Santo Tomas on Administrative
Circular No. 04-94, the trial court explained:
It is settled rule that it is one of the inherent powers of the court
to amend and control its processes and orders so as to make
them conformable to law and justice. This power includes the
right to reverse itself, specially when in its honest opinion, it has
committed an error or mistake in judgment, and that to adhere
to its decision will cause injustice to a party litigant.
The Issue
Petitioner raises the following issue:
WHETHER THE TRIAL COURT COMMITTED
GRAVE ABUSE OF DISCRETION IN REFUSING
TO DISMISS RESPONDENTS COUNTERCLAIM.
The Ruling of the Court
The petition lacks merit.
The issue presented is not novel. This Court has squarely
settled this issue in Santo Tomas University Hospital v.
Surla.
[3]
Writing for the Court, Justice Jose C. Vitug began
hisponencia thus:
Can a compulsory counterclaim pleaded in an Answer be
dismissed on the ground of a failure to accompany it with a
certificate of non-forum shopping? This question is the core issue
presented for resolution in the instant petition.
Santo Tomas clarified the scope of Administrative Circular
No. 04-94 with respect to counterclaims. The Court pointed out
that this circular is intended primarily to cover an initiatory
pleading or an incipient application of a party asserting a claim
for relief. The distinction between a compulsory and a
permissive counterclaim is vital in the application of the
circular. The Court explained:
It should not be too difficult, the foregoing rationale of the
circular aptly taken, to sustain the view that the circular in
question has not, in fact, been contemplated to include a kind of
claim which, by its very nature as being auxiliary to the
proceedings in the suit and as deriving its substantive and
jurisdictional support therefrom, can only be appropriately
pleaded in the answer and not remain outstanding for
independent resolution except by the court where the main case
pends. Prescinding from the foregoing, the proviso in the second
paragraph of Section 5, Rule 8 of the 1997 Rules of Civil
Procedure, i.e., that the violation of the anti-forum shopping rule
shall not be curable by mere amendment xxx but shall be cause
for the dismissal of the case without prejudice, being predicated
on the applicability of the need for a certification against forum-
shopping, obviously does not include a claim which cannot be
independently set up.

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The Court reiterated this ruling in Ponciano v. Judge Parentela,
Jr.
[4]

Administrative Circular No. 04-94 does not apply to
compulsory counterclaims. The circular applies to initiatory and
similar pleadings. A compulsory counterclaim set up in the
answer is not an initiatory or similar pleading. The initiatory
pleading is the plaintiffs complaint. A respondent has no choice
but to raise a compulsory counterclaim the moment the plaintiff
files the complaint. Otherwise, respondent waives the
[5]
In short, the compulsory
counterclaim is a reaction or response, mandatory upon pain of
waiver, to an initiatory pleading which is the complaint.
Petitioner argues, however, that the Courts rulings
in Santo Tomas and Ponciano are contrary to the mandate of
Administrative Circular No. 04-94 and other procedural laws.
[6]

Petitioner is mistaken.
The Constitution expressly bestows on this Court the
power to promulgate rules concerning the pleading, practice and
procedure in all courts.
[7]
Procedural matters are within the sole
jurisdiction of this Court to prescribe. Administrative Circular No.
04-94 is an issuance of this Court. It covers a matter of
procedure. Administrative Circular No. 04-94 is not an enactment
of the Legislature. This Court has the exclusive jurisdiction to
interpret, amend or revise the rules it promulgates, as long as the
rules do not diminish, increase, or modify substantive rights. This
is precisely the purpose of Santo Tomas as far as Administrative
Circular No. 04-94 is concerned.
Petitioners counsel fails or simply refuses to accept the
distinction between a permissive counterclaim and a compulsory
counterclaim. This distinction was the basis for the ruling
in Santo Tomas and Ponciano. The sole issue for resolution in
the present case is whether respondents counterclaim is
compulsory or permissive. If it is a permissive counterclaim, the
lack of a certificate of non-forum shopping is fatal. If it is a
compulsory counterclaim, the lack of a certificate of non-forum
shopping is immaterial.
A compulsory counterclaim is any claim for money or other
relief, which a defending party may have against an opposing
party, which at the time of suit arises out of, or is necessarily
connected with, the same transaction or occurrence that is the
subject matter of plaintiffs complaint.
[8]
It is compulsory in the
sense that it is within the jurisdiction of the court, does not
require for its adjudication the presence of third parties over
whom the court cannot acquire jurisdiction, and will be barred in
the future if not set up in the answer to the complaint in the
same case. Any other counterclaim is permissive.
Respondents counterclaim as set up in its answer states:
3. That because of the unwarranted, baseless, and unjustified
acts of the plaintiff, herein defendant has suffered and continue
to suffer actual damages in the sum of at least P400,000,000.00
which the law, equity, and justice require that to be paid by the
plaintiff and further to reimburse the attorneys fees
of P2,000,000.00;
[9]

It is clear that the counterclaim set up by respondent arises
from the filing of plaintiffs complaint. The counterclaim is so
intertwined with the main case that it is incapable of proceeding
independently. The counterclaim will require a re-litigation of
the same evidence if the counterclaim is allowed to proceed in a
separate action. Even petitioner recognizes that respondents
counterclaim is compulsory.
[10]
A compulsory counterclaim does
not require a certificate of non-forum shopping because a
compulsory counterclaim is not an initiatory pleading.
WHEREFORE, the instant petition is DENIED for lack of
merit. We AFFIRM the Order of the Regional Trial Court, Branch
77, Malolos Bulacan, dated 4 June 1999 recalling the Order dated
25 May 1999 which dismissed the compulsory counterclaim of
respondent B. Serrano Enterprises, Inc.
SO ORDERED.


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[G.R. No. 138822. January 23, 2001] EVANGELINE
ALDAY, petitioner, vs. FGU INSURANCE
CORPORATION, respondent.
D E C I S I O N GONZAGA-REYES, J.:
On 5 May 1989, respondent FGU Insurance Corporation
filed a complaint with the Regional Trial Court of
Makati
[1]
alleging that petitioner Evangeline K. Alday owed it
P114,650.76, representing unliquidated cash advances,
unremitted costs of premiums and other charges incurred by
petitioner in the course of her work as an insurance agent for
respondent.
[2]
Respondent also prayed for exemplary damages,
attorneys fees, and costs of suit.
[3]
Petitioner filed her answer
and by way of counterclaim, asserted her right for the payment
of P104,893.45, representing direct commissions, profit
commissions and contingent bonuses earned from 1 July 1986 to
7 December 1986, and for accumulated premium reserves
amounting to P500,000.00. In addition, petitioner prayed for
attorneys fees, litigation expenses, moral damages and
exemplary damages for the allegedly unfounded action filed by
respondent.
[4]
On 23 August 1989, respondent filed a Motion to
Strike Out Answer With Compulsory Counterclaim And To
Declare Defendant In Default because petitioners answer was
allegedly filed out of time.
[5]
However, the trial court denied the
motion on 25 August 1989 and similarly rejected respondents
motion for reconsideration on 12 March 1990.
[6]
A few weeks
later, on 11 April 1990, respondent filed a motion to dismiss
petitioners counterclaim, contending that the trial court never
acquired jurisdiction over the same because of the non-payment
of docket fees by petitioner.
[7]
In response, petitioner asked the
trial court to declare her counterclaim as exempt from payment
of docket fees since it is compulsory and that respondent be
declared in default for having failed to answer such
counterclaim.
[8]

In its 18 September 1990 Order, the trial court
[9]
granted
respondents motion to dismiss petitioners counterclaim and
consequently, denied petitioners motion. The court found
petitioners counterclaim to be merely permissive in nature and
held that petitioners failure to pay docket fees prevented the
court from acquiring jurisdiction over the same.
[10]
The trial court
similarly denied petitioners motion for reconsideration on 28
February 1991.
On 23 December 1998, the Court of Appeals
[11]
sustained
the trial court, finding that petitioners own admissions, as
contained in her answer, show that her counterclaim is merely
permissive. The relevant portion of the appellate courts
decision
[12]
is quoted herewith
Contrary to the protestations of appellant, mere reading of the
allegations in the answer a quo will readily show that her
counterclaim can in no way be compulsory. Take note of the
following numbered paragraphs in her answer:
(14) That, indeed, FGUs cause of action which is not supported
by any document other than the self-serving Statement of
Account dated March 28, 1988 x x x
(15) That it should be noted that the cause of action of FGU is not
the enforcement of the Special Agents Contract but the alleged
cash accountabilities which are not based on written agreement
x x x.
x x x x
(19) x x x A careful analysis of FGUs three-page complaint will
show that its cause of action is not for specific performance or
enforcement of the Special Agents Contract rather, it is for the
payment of the alleged cash accountabilities incurred by
defendant during the period form [sic] 1975 to 1986 which claim
is executory and has not been ratified. It is the established rule
that unenforceable contracts, like this purported money claim of
FGU, cannot be sued upon or enforced unless ratified, thus it is
as if they have no effect. x x x.
To support the heading Compulsory Counterclaim in her
answer and give the impression that the counterclaim is
compulsory appellant alleged that FGU has unjustifiably failed
to remit to defendant despite repeated demands in gross
violation of their Special Agents Contract x x x. The reference to
said contract was included purposely to mislead. While on one
hand appellant alleged that appellees cause of action had
nothing to do with the Special Agents Contract, on the other
hand, she claim that FGU violated said contract which gives rise
of [sic] her cause of action. Clearly, appellants cash
accountabilities cannot be the offshoot of appellees alleged
violation of the aforesaid contract.
On 19 May 1999, the appellate court denied petitioners
motion for reconsideration,
[13]
giving rise to the present petition.
Before going into the substantive issues, the Court shall
first dispose of some procedural matters raised by the
parties. Petitioner claims that respondent is estopped from
questioning her non-payment of docket fees because it did not
raise this particular issue when it filed its first motion - the
Motion to Strike out Answer With Compulsory Counterclaim
And To Declare Defendant In Default with the trial court;
rather, it was only nine months after receiving petitioners
answer that respondent assailed the trial courts lack of
jurisdiction over petitioners counterclaims based on the latters
failure to pay docket fees.
[14]
Petitioners position is
unmeritorious. Estoppel by laches arises from the negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has
abandoned or declined to assert it.
[15]
In the case at bar,
respondent cannot be considered as estopped from assailing the
trial courts jurisdiction over petitioners counterclaim since this
issue was raised by respondent with the trial court itself the
body where the action is pending - even before the presentation
of any evidence by the parties and definitely, way before any
judgment could be rendered by the trial court.
Meanwhile, respondent questions the jurisdiction of the
Court of Appeals over the appeal filed by petitioner from the 18
September 1990 and 28 February 1991 orders of the trial
court. It is significant to note that this objection to the appellate
courts jurisdiction is raised for the first time before this Court;
respondent never having raised this issue before the appellate
court. Although the lack of jurisdiction of a court may be raised
at any stage of the action, a party may be estopped from raising
such questions if he has actively taken part in the very
proceedings which he questions, belatedly objecting to the
courts jurisdiction in the event that that the judgment or order
subsequently rendered is adverse to him.
[16]
In this case,
respondent actively took part in the proceedings before the
Court of Appeals by filing its appellees brief with the same.
[17]
Its
participation, when taken together with its failure to object to
the appellate courts jurisdiction during the entire duration of the
proceedings before such court, demonstrates a willingness to

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abide by the resolution of the case by such tribunal and
accordingly, respondent is now most decidedly estopped from
objecting to the Court of Appeals assumption of jurisdiction over
petitioners appeal.
[18]

The basic issue for resolution in this case is whether or not
the counterclaim of petitioner is compulsory or permissive in
nature. A compulsory counterclaim is one which, being
cognizable by the regular courts of justice, arises out of or is
connected with the transaction or occurrence constituting the
subject matter of the opposing partys claim and does not
require for its adjudication the presence of third parties of whom
the court cannot acquire jurisdiction.
[19]

In Valencia v. Court of Appeals,
[20]
this Court capsulized the
criteria or tests that may be used in determining whether a
counterclaim is compulsory or permissive, summarized as
follows:
1. Are the issues of fact and law raised by the claim and
counterclaim largely the same?
2. Would res judicata bar a subsequent suit on defendants claim
absent the compulsory counterclaim rule?
3. Will substantially the same evidence support or refute
plaintiffs claim as well as defendants counterclaim?
4. Is there any logical relation between the claim and the
counterclaim?
Another test, applied in the more recent case of Quintanilla v.
Court of Appeals,
[21]
is the compelling test of compulsoriness
which requires a logical relationship between the claim and
counterclaim, that is, where conducting separate trials of the
respective claims of the parties would entail a substantial
duplication of effort and time by the parties and the court.
As contained in her answer, petitioners counterclaims are
as follows:
(20) That defendant incorporates and repleads by reference all
the foregoing allegations as may be material to her Counterclaim
against FGU.
(21) That FGU is liable to pay the following just, valid and
legitimate claims of defendant:
(a) the sum of at least P104,893.45 plus maximum interest
thereon representing, among others, direct commissions, profit
commissions and contingent bonuses legally due to defendant;
and
(b) the minimum amount of P500,000.00 plus the maximum
allowable interest representing defendants accumulated
premium reserve for 1985 and previous years,
which FGU has unjustifiably failed to remit to defendant despite
repeated demands in gross violation of their Special Agents
Contract and in contravention of the principle of law that every
person must, in the exercise of his rights and in the performance
of his duties, act with justice, give everyone his due, and observe
honesty and good faith.
(22) That as a result of the filing of this patently baseless,
malicious and unjustified Complaint, and FGUs unlawful, illegal
and vindictive termination of their Special Agents Contract,
defendant was unnecessarily dragged into this litigation and to
defense [sic] her side and assert her rights and claims against
FGU, she was compelled to hire the services of counsel with
whom she agreed to pay the amount of P30,000.00 as and for
attorneys fees and stands to incur litigation expenses in the
amount estimated to at least P20,000.00 and for which FGU
should be assessed and made liable to pay defendant.
(23) That considering further the malicious and unwarranted
action of defendant in filing this grossly unfounded action,
defendant has suffered and continues to suffer from serious
anxiety, mental anguish, fright and humiliation. In addition to
this, defendants name, good reputation and business standing in
the insurance business as well as in the community have been
besmirched and for which FGU should be adjudged and made
liable to pay moral damages to defendant in the amount of
P300,000.00 as minimum.
(24) That in order to discourage the filing of groundless and
malicious suits like FGUs Complaint, and by way of serving [as]
an example for the public good, FGU should be penalized and
assessed exemplary damages in the sum of P100,000.00 or such
amount as the Honorable Court may deem warranted under the
circumstances.
[22]

Tested against the abovementioned standards, petitioners
counterclaim for commissions, bonuses, and accumulated
premium reserves is merely permissive. The evidence required
to prove petitioners claims differs from that needed to
establish respondents demands for the recovery of cash
accountabilities from petitioner, such as cash advances and costs
of premiums. The recovery of respondents claims is not
contingent or dependent upon establishing petitioners
counterclaim, such that conducting separate trials will not result
in the substantial duplication of the time and effort of the court
and the parties. One would search the records in vain for a
logical connection between the parties claims. This conclusion is
further reinforced by petitioners own admissions since she
declared in her answer that respondents cause of action, unlike
her own, was not based upon the Special Agents
Contract.
[23]
However, petitioners claims for damages, allegedly
suffered as a result of the filing by respondent of its complaint,
are compulsory.
[24]

There is no need for petitioner to pay docket fees for her
[25]
On the other hand, in order for the
trial court to acquire jurisdiction over her permissive
counterclaim, petitioner is bound to pay the prescribed docket
fees.
[26]
The rule on the payment of filing fees has been laid down
by the Court in the case of Sun Insurance Office, Ltd. v. Hon.
Maximiano Asuncion
[27]
-
1. It is not simply the filing of the complaint or appropriate
initiatory pleading, but the payment of the prescribed docket fee,
that vests a trial court with jurisdiction over the subject-matter
or nature of the action. Where the filing of the initiatory
pleading is not accompanied by payment of the docket fee, the
court may allow payment of the fee within a reasonable time but
in no case beyond the applicable prescriptive or reglementary
period.
2. The same rule applies to permissive counterclaims, third-party
claims and similar pleadings, which shall not be considered filed
until and unless the filing fee prescribed therefor is paid. The
court may allow payment of said fee within a reasonable time

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but also in no case beyond its applicable prescriptive or
reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the
filing of the appropriate pleading and payment of the prescribed
filing fee but, subsequently, the judgment awards a claim not
specified in the pleading, or if specified the same has been left
for determination by the court, the additional filing fee therefor
shall constitute a lien on the judgment. It shall be the
responsibility of the Clerk of Court or his duly authorized deputy
to enforce said lien and assess and collect the additional fee.
The above mentioned ruling in Sun Insurance has been
reiterated in the recent case of Suson v. Court of
Appeals.
[28]
In Suson, the Court explained that although the
payment of the prescribed docket fees is a jurisdictional
requirement, its non-payment does not result in the automatic
dismissal of the case provided the docket fees are paid within the
applicable prescriptive or reglementary period. Coming now to
the case at bar, it has not been alleged by respondent and there
is nothing in the records to show that petitioner has attempted
to evade the payment of the proper docket fees for her
permissive counterclaim. As a matter of fact, after respondent
filed its motion to dismiss petitioners counterclaim based on her
failure to pay docket fees, petitioner immediately filed a motion
with the trial court, asking it to declare her counterclaim as
compulsory in nature and therefore exempt from docket fees
and, in addition, to declare that respondent was in default for its
failure to answer her counterclaim.
[29]
However, the trial court
dismissed petitioners counterclaim. Pursuant to this Courts
ruling in Sun Insurance, the trial court should have instead given
petitioner a reasonable time, but in no case beyond the
applicable prescriptive or reglementary period, to pay the filing
fees for her permissive counterclaim.
Petitioner asserts that the trial court should have declared
respondent in default for having failed to answer her
counterclaim.
[30]
Insofar as the permissive counterclaim of
petitioner is concerned, there is obviously no need to file an
answer until petitioner has paid the prescribed docket fees for
only then shall the court acquire jurisdiction over such
claim.
[31]
Meanwhile, the compulsory counterclaim of petitioner
for damages based on the filing by respondent of an allegedly
unfounded and malicious suit need not be answered since it is
inseparable from the claims of respondent. If respondent were
to answer the compulsory counterclaim of petitioner, it would
merely result in the former pleading the same facts raised in its
complaint.
[32]

WHEREFORE, the assailed Decision of the Court of Appeals
promulgated on 23 December 1998 and its 19 May 1999
Resolution are hereby MODIFIED. The compulsory counterclaim
of petitioner for damages filed in Civil Case No. 89-3816 is
ordered REINSTATED. Meanwhile, the Regional Trial Court of
Makati (Branch 134) is ordered to require petitioner to pay the
prescribed docket fees for her permissive counterclaim (direct
commissions, profit commissions, contingent bonuses and
accumulated premium reserves), after ascertaining that the
applicable prescriptive period has not yet set in.
[33]

SO ORDERED.


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[G.R. No. 90530. October 7, 1992.]

INTERNATIONAL CONTAINER TERMINAL SERVICES,
INC., Petitioner, v. THE HON. COURT OF APPEALS, HON.
EDILBERTO G. SANDOVAL, Presiding Judge of Branch IX,
Regional Trial Court, National Capital Judicial Region, C.F.
SHARP, INC. and FIRST INTEGRATED BONDING & INSURANCE
CO., INC., Respondents.

Bautista, Picaso, Buyco, Tan & Fider for Petitioner.

Sinco, Valdez & Associates for C.P. Sharp, Inc.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; COMPULSORY
COUNTERCLAIM; REQUIREMENTS. We have consistently held
that a counterclaim is compulsory where: (1) it arises out of, or is
necessarily connected with, the transaction or occurrence that is
the subject matter of the opposing partys claim; (2) it does not
require for its adjudication the presence of third parties of whom
the court cannot acquire jurisdiction; and (3) the court has
jurisdiction to entertain the claim.

2. ID.; ID.; ID.; ID.; CASE AT BAR. The Court notes that, to begin
with, the petitioner itself joined the PPA in moving for the
dismissal of the complaint; or put passively, it did not object to
the dismissal of the private respondents complaint. Secondly,
the compulsory counterclaim was so interwined with the
complaint that it could not remain pending for independent
adjudication by the court after the dismissal of the complaint
which had provoked the counterclaim in the first place. As a
consequence, the dismissal of the complaint (on the petitioners
own motion) operated to also dismiss the counterclaim
questioning that complaint. The petitioner is correct in
contending that the claim for damages caused by the wrongful
issuance of a preliminary injunction can be made in the form of a
counterclaim.

3. ID.; ID.; ID.; ID.; RESERVATION OF RIGHT TO PROSECUTE
COUNTERCLAIM. However, there is no glossing away the fact
that it was the petitioner itself that caused the dismissal of its
counterclaim when it not only did not object to, but actually
moved for, the dismissal of the complaint. The petitioner cannot
undo that act. If it wanted the counterclaim to subsist, it should
have objected to the dismissal of the complaint or at least
reserved its right to prosecute it, assuming this would still be
possible. It did neither of these. The petitioner now claims that
there is no law requiring that reservation, but there is no law
presuming it either. The petitioner cannot simply say now that it
intended all the time to preserve its counterclaim when it knew
that under Rule 17, Sec. 2 "if a counterclaim has been pleaded by
a defendant prior to the service upon him of a motion to dismiss,
the action shall not be dismissed against the defendants
objection unless the counterclaim can remain pending for
independent adjudication by the Court."cralaw virtua1aw library

4. ID.; ID.; PERMISSIVE COUNTERCLAIM; NOT BARRED EVEN IF
NOT SET UP IN ACTION. A counterclaim is permissive if it does
not arise out of nor is it necessarily connected with the subject
matter of the opposing partys claim. It is not barred even if not
set up in the action. The petitioners counterclaim was within the
jurisdiction of the trial court. Most importantly, it had no
independent existence, being merely ancillary to the main action.

5. ID.; PROVISIONAL REMEDIES; PRELIMINARY INJUNCTION;
CLAIM FOR DAMAGES; RULES. The rules governing the
application for damages against the surety bond posted in
support of the application for a writ of preliminary attachment
are also applicable by analogy to preliminary injunction. (Sec. 20
of Rule 57 of the Rules of Court.) A long line of cases has held
that these rules are mandatory and failure to observe them
deprives the aggrieved party of the right to proceed against the
surety bond.

6. ID.; ID.; ID.; ID.; NOTICE TO ADVERSE PARTY AND SURETY,
INDISPENSABLE. Due notice to the adverse party and its surety
setting forth the facts supporting the applicants right to
damages and the amount thereof under the bond is
indispensable. No judgment for damages may be entered and
executed against the surety without giving it an opportunity to
be heard as to the reality or reasonableness of the damages
resulting from the wrongful issuance of the writ.

D E C I S I O N

CRUZ, J.:

What is the effect of the dismissal of a complaint ordered at the
instance of the defendant upon a compulsory counterclaim duly
raised in its answer?chanrobles virtual lawlibrary

On February 10, 1988, Sharp, Inc., the herein private respondent
filed a complaint for prohibition with prayer for preliminary
injunction against the Secretary of Transportation and
Communications, the Philippine Ports Authority (PPA), E. Razon,
Inc., and the International Container Terminal Services Inc., the
herein petitioner. The complaint was docketed as Civil Case No.
88-43616 in the Regional Trial Court of Manila, Branch 9.

On March 7, 1988, the trial court issued a writ of preliminary
injunction upon the posting by Sharp of a bond issued by the
Integrated Bonding and Insurance Co. in the sum of
P10,000,000.00.

On that same day, the petitioner filed an answer with a
compulsory counterclaim against Sharp for its "unfounded and
frivolous action." The petitioner claimed that as a consequence
of the complaint and the writ of preliminary injunction, it had
suffered injuries which "if monetized (would) amount to more
than P100,000,000.00."cralaw virtua1aw library

On March 17, 1988, the writ of preliminary injunction was
nullified by this Court in G.R. No. 82218. We held that Sharp was
not a proper party to stop the negotiation and awarding of the
contract for the development, management and operation of the
Container Terminal at the Port of Manila. Moreover, the petition
was premature because Sharp had not exhausted the
administrative remedies open to it from "the PPA, the Bidding
Committee, and the Office of the President."cralaw virtua1aw
library

On March 25, 1988, the PPA, taking its cue from this decision,
filed a motion to dismiss Sharps complaint on the above-stated
grounds. This motion was adopted by petitioner CCTSI in a
manifestation dated April 8, 1988.

On July 13, 1988, Judge Edilberto G. Sandoval dismissed the
complaint as well as the counterclaim.


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On August 13, 1988, CCTSI filed a motion for reconsideration of
the order insofar as it dismissed its counterclaim. Meanwhile, it
gave notice to the First Integrated Bonding and Insurance Co.,
Inc. that it was claiming damages against Sharp for the revoked
injunction.chanrobles virtual lawlibrary

On November 10, 1988, the motion for reconsideration was
denied. The trial court declared in part:chanrob1es virtual 1aw
library

. . . indeed a compulsory counterclaim by the nature of its
nomenclature arises out of or is so intertwined with the
complaint so that by the dismissal of the latter, the same has to
be discarded, specially since the complaint was dismissed
without any trial.

The dismissal of the counterclaim was appealed to the
respondent court, which upheld the lower court on the following
justifications:chanrob1es virtual 1aw library

(1) Compulsory counterclaims for actual damages are not the
claims recoverable against the bond.

(2) Petitioners manifestation adopting Philippine Ports
Authoritys motion to dismiss did not contain any reservation.
Hence, Sec. 2, Rule 17 of the Rules of Court will not apply. The
counterclaim for damages being compulsory in nature, for which
no filing fee has been paid, was correctly dismissed.

(3) Sec. 20 of Rule 57 of the Rules of Court specifically provides
that "such damages (recoverable against the bond) may be
awarded only upon application and after proper hearing, and
shall be included in the final judgment. The application must be
filed before the trial . . ., with due notice to the attaching creditor
and his surety or sureties, setting forth the facts showing his right
to damages and the amount thereof.

The application contemplated in Sec. 20 is distinct and separate
from the compulsory counterclaim asserted in the answer.

(4) The filing in court of claim against the injunction bond, with
copy thereof being furnished the surety, was not sufficient notice
to the latter of an application against it under this bond.

CCTSI has filed the present petition for review alleging that the
order of the trial court dismissing the counterclaim was issued
with grave abuse of discretion. Specifically, the petitioner
contends that the respondent court erred in sustaining the said
order because:chanrob1es virtual 1aw library

(1) Dismissal of the complaint upon defendants motion did not
necessarily entail dismissal of defendants compulsory
counterclaim.

(2) A claim for damages arising from a wrongfully obtained
injunction may be made in a counterclaim.

(3) There is no rule requiring a particular form of notice to the
surety of petitioners claim against the injunction bond.

For its part, the private respondent argues that the dismissal of
the compulsory counterclaim should be sustained
because:chanrob1es virtual 1aw library

(1) The dismissal of the complaint upon petitioners motion
necessarily entailed the dismissal of the compulsory
counterclaim.

(2) The compulsory counterclaim raised by petitioner in its
answer did not partake of the nature of a claim for damages
against the injunction bond.

(3) The notice given by the petitioner to the surety was fatally
defective and did not comply with the requirements of the Rule
of Court.

d. Appeal, not certiorari, was the proper remedy of petitioner.

The Court gave due course to this petition and required the
parties to submit simultaneous memoranda. After studying their
respective arguments and the pertinent law and jurisprudence,
we have come to the conclusion that the petition cannot
prosper.

The counterclaim for damages alleged that the delay in the
award of the MICT contract caused by Sharps complaint and writ
of preliminary injunction jeopardized the petitioners timetable
to attain the projected volumes in its winning bid and, as well,
caused it to incur litigation expenses, including attorneys fees.

We have consistently held that a counterclaim is compulsory
where: (1) it arises out of, or is necessarily connected with, the
opposing partys claim; (2) it does not require for its adjudication
the presence of third parties of whom the court cannot acquire
jurisdiction; and (3) the court has jurisdiction to entertain the
claim. 1

Tested by these requirements, the petitioners counterclaim was
clearly compulsory. The petitioner itself so denominated it. There
is no doubt that the same evidence needed to sustain it would
also refute the cause of action alleged in the private
respondents complaint; in other words, the counterclaim would
succeed only if the complaint did not. It is obvious from the very
nature of the counterclaim that it could not remain pending for
independent adjudication, that is, without adjudication by the
court of the complaint itself on which the counterclaim was
based.

Rule 17, Sec. 2 of the Rules of Court provides:chanrob1es virtual
1aw library

SECTION 2. Dismissal by order of the court. Except as provided
in the preceding section, an action shall not be dismissed at the
plaintiffs instance save upon order of the court and upon such
terms and conditions as the court may deem proper. If a
counterclaim has been pleaded by a defendant prior to the
service upon him of the plaintiffs motion to dismiss, the action
shall not be dismissed against the defendants objection unless
the counterclaim can remain pending for independent
adjudication by the court. Unless otherwise specified in the
order, a dismissal under this paragraph shall be without
prejudice.

The Court notes that, to begin with, the petitioner itself joined
the PPA in moving for the dismissal of the complaint; or put
passively, it did not object to the dismissal of the private
respondents complaint. Secondly, the compulsory counterclaim
was so interwined with the complaint that it could not remain
pending for independent adjudication by the court after the
dismissal of the complaint which had provoked the counterclaim
in the first place. As a consequence, the dismissal of the
complaint (on the petitioners own motion) operated to also
dismiss the counterclaim questioning that complaint.cralawnad


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The petitioner is correct in contending that the claim for
damages caused by the wrongful issuance of a preliminary
injunction can be made in the form of a counterclaim. As we held
in Raymundo v. Carpio: 2

It would seem that the proper practice to be followed in cases
where it is desired to obtain damages by reason of the wrongful
issuance of an attachment in favor of plaintiff that an issue would
be tendered on the subject by the defendant in his answer in the
main case. Such a tender would present the question squarely in
that court, and the parties having offered their evidence on the
subject, the trial court could dispose of it along with the principal
action. It is not necessary that the defendant wait until it is
determined by a final decision in the main action that the
plaintiff is not entitled to recover in order to present the
question of his right to damages. All questions which are material
to the main action or which are incidental thereto but depending
thereon should be presented and litigated at the same time with
the main action, so as to avoid the necessity of subsequent
litigation and consequent loss of time and money.

However, there is no glossing away the fact that it was the
petitioner itself that caused the dismissal of its counterclaim
when it not only did not object to, but actually moved for, the
dismissal of the complaint. The petitioner cannot undo that act. If
it wanted the counterclaim to subsist, it should have objected to
the dismissal of the complaint or at least reserved its right to
prosecute it, assuming this would still be possible. It did neither
of these. The petitioner now claims that there is no law requiring
that reservation, but there is no law presuming it either. The
petitioner cannot simply say now that it intended all the time to
preserve its counterclaim when it knew that under Rule 17, Sec.
2 "if a counterclaim has been pleaded by a defendant prior to the
service upon him of a motion to dismiss, the action shall not be
dismissed against the defendants objection unless the
counterclaim can remain pending for independent adjudication
by the Court."cralaw virtua1aw library

The counterclaim was not permissive. A counterclaim is
permissive if it does not arise out of nor is it necessarily
connected with the subject matter of the opposing partys claim.
It is not barred even if not set up in the action. 3 The petitioners
counterclaim was within the jurisdiction of the trial court. Most
importantly, it had no independent existence, being merely
ancillary to the main action. 4 The petitioner knew all this and did
not object to the dismissal of the complaint. On the contrary, it
actually moved to dismiss that main action, and in so doing also
moved, in effect, for the dismissal of its counterclaim.

The Court can stop at this point. For clarification of certain issues
raised by the parties, however, the following reminders are
made.

The rules governing the application for damages against the
surety bond posted in support of the application for a writ of
preliminary attachment are also applicable by analogy to
preliminary injunction. Sec. 20 of Rule 57 of the Rules of Court
reads as follows:chanrob1es virtual 1aw library

Claim for damages on account of illegal attachment. If the
judgment on the action be in favor of the party against whom
attachment was issued. he may recover, upon the bond given or
deposit made by the attaching creditor, any damages resulting
from the attachment. Such damages may be awarded only upon
application and after proper hearing, and shall be included in the
final judgment. The application must be filed before the trial or
before appeal is perfected or before the judgment becomes
executory, with due notice to the attaching creditor and his
surety or sureties, setting forth the facts showing his right to
damages and the amount thereof.chanrobles virtual lawlibrary

If the judgment of the appellate court be favorable to the party
against whom the attachment was issued, he must claim
damages sustained during the pendency of the appeal by filing
an application with notice to the party in whose favor the
attachment was issued or his surety or sureties, before the
judgment of the appellate court becomes executory. The
appellate court may allow the application to be heard and
decided by the trial court.

Interpreting this rule, the Court has laid down the following
principles:chanrob1es virtual 1aw library

(1) That damages resulting from preliminary attachment,
preliminary injunction, the appointment of a receiver, or the
seizure of personal property, the payment of which is secured by
judicial bond, must be claimed and ascertained in the same
action with due notice to the surety:chanrob1es virtual 1aw
library

(2) That if the surety is given such due notice, he is bound by the
judgment that may be entered against the principal, and writ of
execution may issue against said surety to enforce the obligation
of the bond; and

(3) That if no notice is given to the surety of the application for
damages, the judgment that may be entered against the principal
cannot be executed against the surety without giving the latter
an opportunity to be heard as to the reality or reasonableness of
the alleged damages. In such case, upon application of the
prevailing party, the court must order the surety to show cause
why the bond should not respond for the judgment for damages.
If the surety should contest the reality or reasonableness of the
damages claimed by the prevailing party, the court must set the
application and answer for hearing. The hearing will be summary
and will be limited to such new defense, not previously set up by
the principal, as the surety may allege and offer to prove. 5

A long line of cases has held that these rules are mandatory and
failure to observe them deprives the aggrieved party of the right
to proceed against the surety bond. 6

Due notice to the adverse party and its surety setting forth the
facts supporting the applicants right to damages and the amount
thereof under the bond is indispensable. No judgment for
damages may be entered and executed against the surety
without giving it an opportunity to be heard as to the reality or
reasonableness of the damages resulting from the wrongful
issuance of the writ.

The herein petitioner contends that it complied with the
requirements when it served the bonding company with notice
of its claim for damages on August 31, 1988. It is correct. No
particular form for such notice is required. The rule also clearly
says that the application for damages and the notice to the
surety may be made at any time before the judgment becomes
final and executory. CCTSI served the notice on the surety during
the pendency of the motion for reconsideration, before the
judgment dismissing the complaint and the counterclaim had
become final and executory.chanrobles virtual lawlibrary

Had the counterclaim not been dismissed with the dismissal of
the complaint, the petitioner could have introduced evidence to
show that it was prejudiced by the filing of the complaint and the
obtention of the writ of preliminary injunction by Sharp. But the
petitioner itself aborted that effort when it joined PPA in moving

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for the dismissal of Sharps complaint, knowing that it was the
basis of its own compulsory counterclaim. For failing to object
when it should have, to keep its counterclaim alive, and instead
moving to dismiss the complaint from which the counterclaim
derived its life, the petitioner must now bear the consequences
of its own negligence.

WHEREFORE, the petition is DENIED, with costs against the
petitioner. It is so ordered.

Grio-Aquino, Medialdea and Bellosillo, JJ., concur.


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[G.R. No. 101566. August 17, 1992.]

HON. FLORENCIO A. RUIZ, JR. SENT OF GOD FOUNDATION, INC.
S OF G FOUNDATION INC., RAUL G. FORES, SENEN P. VALERO
AND FATHER ODON DE CASTRO, Petitioners, v. COURT OF
APPEALS, SPOUSES OLEGARIO ORBETA AND SUSANA ROSARIO
S. ORBETA, Respondents.

Antonio P. Coronel, for Petitioners.

Eladio B. Samson for Private Respondents.

SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; NOT A
SUBSTITUTE FOR A LOST APPEAL. The order of dismissal issued
by the trial court had already become final and executory at the
time it was sought to be reversed. The reglementary period for
appealing it had already lapsed when the Crisologos filed their
petition for certiorari under Rule 65. This was correctly dismissed
by the Court of Appeals on the ground, as earlier stated, that the
special civil action was not a substitute for a lost appeal.

2. ID.; ID.; ID.; ID.; RULE APPLICABLE TO CROSS-CLAIMANTS; CASE
AT BAR. When the Orbetas filed their own petition on March
6, 1989, it was also after the order they were questioning had
already become unappealable. On this score alone, the present
petition must fail. Even as the petition of the plaintiffs
themselves had been earlier dismissed, similar treatment should
have been given to the petition of the Orbetas, who were
appealing only as cross-claimants.

3. ID.; CIVIL PROCEDURE; CROSS-CLAIM; CONSTRUED. A cross-
claim is any claim by one party against a co-party arising out of
the transaction or occurrence that is the subject matter either of
the original action or of a counter-claim therein. Such cross-claim
may include a claim that the party against whom it is asserted is
or may be liable to the cross-claimant for all or part of a claim
asserted in the action against the cross-claimant.

4. ID.; ID.; ID.; DEPENDENT ON THE MAIN ACTION HENCE COULD
NOT BE THE SUBJECT OF INDEPENDENT ADJUDICATION. It is
clear that the cross-claim arose from the complaint of the
Crisologos and was not separable from that main action. It had
no independent existence and was based entirely on that
In Torres v. Court of Appeals, this Court declared: The cross-claim
in this case was purely defensive in nature. It arose entirely out
of the complaint and could prosper only if the plaintiffs
succeeded. Hence, under the principle above enunciated, it could
not be the subject of independent adjudication once it lost the
nexus upon which its life depended. The cross-claimants cannot
claim more rights than the plaintiffs themselves, on whose cause
of action the cross-claim depended. The dismissal of the
complaint divested the cross-claimants of whatever appealable
interest they might have had before and also made the cross-
claim itself no longer viable.

5. ID.; ID.; ID.; CROSS-CLAIMANT, NOT A PROPER PARTY TO
APPEAL THE DISMISSAL OF THE COMPLAINT. Cross-claimants,
had no personality to pursue a remedy which properly belonged
to the Crisologos who, through their fault or negligence, failed to
employ it. Accordingly, the petition filed by the Orbetas should
have been dismissed outright by the respondent court on the
ground that the cross-claimants were not proper parties to
appeal the dismissal of the complaint.

D E C I S I O N

CRUZ, J.:

The petitioners fault the respondent court for reversing the
dismissal of a complaint by the trial court and remanding the
case for further proceedings. However, there is an important
antecedent question we must first resolve before we can go to
the merits of this case.

The facts relevant to this petition are briefly narrated.

On September 12, 1976, the Crisologo family donated an island
to the Sent of God Foundation on the condition inter alia that it
would "be used exclusively to provide a monastic life and
experience according to the Rule of St. Benedict and for such
other religious and charitable purposes as may be determined by
the donee." This was followed by a later donation of other lands,
under the same conditions. The subject properties were later
transferred by the Foundation to the S of G Foundation Inc.,
which introduced improvements thereon that, for reasons we do
not need to examine here, it later demolished. On July 29, 1988,
believing that the conditions of the donations had been violated,
the Crisologos filed a complaint for revocation of the donations
and the recovery of the properties donated. 1 Impleaded as
defendants were the Sent of God Foundation, the S of G
Foundation, Inc., Raul G. Fores, Senen F. Valero, and Father Odon
de Castro, the last three as officers or the foundations. Also
included were Olegario Orbeta and his wife, Susana Rosario
Orbeta, for their role in facilitating the
donations.chanrobles.com:cralaw:red

In their answer, the first-named defendants resisted the
allegations in the complaint and denied that the conditions of the
donations had been violated. 2 For their part, the Orbeta spouses
confessed judgment in their answer but also filed a cross-claim
for damages against the other defendants for involving them in
the litigation. 3

On December 5, 1988, the other defendants filed a motion to
dismiss, the complaint on the ground that it did not state a cause
of action and that only the S of G Foundation was a real party-in-
interest. A copy of the motion was furnished the Orbeta spouses.
On January 2, 1989, the trial court issued an order 4 dismissing
the complaint for lack of a cause of action. The cross-claim was
also dismissed because it "had no more leg to stand on."cralaw
virtua1aw library

On January 12, 1989, the plaintiffs filed a motion for
reconsideration, which was adopted by the Orbeta spouses in an
urgent ex parte manifestation dated February 7, 1989. This
motion was denied on February 8, 1989. The Crisologos then
challenged the order of dismissal before the Court of Appeal in a
petition for certiorari under Rule 65 of the Rules of Court.
Docketed as CA-GR No. 16837, it was dismissed on May 2, 1989,
on the ground that the proper remedy was an ordinary appeal.
The appellate court stressed that "since the petitioner did not
appeal from the questioned order of January 2, 1989, of
respondent court dismissing the complaint. said order had
become final and executory." 5 This decision became final on

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May 25, 1989, and entry of judgment was made on July 11, 1989.

The Orbeta spouses, who had not joined the Crisologos in CA-GR
No. 16837, filed their own petition for certiorari also with the
Court of Appeals. Docketed as CA-GR No. 17013, this petition
prospered. On September 28, 1990, the respondent court
annulled the dismissal of the complaint by the trial court and
ordered its reinstatement. 6 Reconsideration of this decision was
denied on August 27, 1991. The petitioners then came to this
Court, raising several issues which, as will appear presently, are
not decisive of this case.

The crucial question before us is whether the Orbeta spouses, as
cross-claimants in the original complaint, could still appeal its
dismissal in their own petition for review.

We think not.

The most important reason is that the order of dismissal issued
by the trial court had already become final and executory at the
time it was sought to be reversed. The reglementary period for
appealing it had already lapsed when the Crisologos filed their
petition for certiorariunder Rule 65. This was correctly dismissed
by the Court of Appeals on the ground, as earlier stated, that the
special civil action was not a substitute for a lost
appeal.chanroblesvirtualawlibrary

When the Orbetas filed their own petition on March 6, 1989, it
was also after the order they were questioning had already
become unappealable. On this score alone, the present petition
must fail. Even as the petition of the plaintiffs themselves had
been earlier dismissed, similar treatment should have been given
to the petition of the Orbetas, who were appealing only as cross-
claimants.

A cross-claim is any claim by one party against a co-party arising
out of the transaction or occurrence that is the subject matter
either of the original action or of a counter-claim therein. Such
cross-claim may include a claim that the party against whom it is
asserted is or may be liable to the cross-claimant for all or part of
a claim asserted in the action against the cross-claimant 7

The cross-claim in this case stemmed from the alleged unjust
refusal of the donees to return the donated properties, resulting
in the Crisologos filing their complaint for revocation of the
donations. In their cross-claim, the Orbetas alleged that they
were dragged into the controversy because of the conduct of the
petitioners. Their contention was that they would not have been
sued at all were it not for the failure of the petitioners to comply
with the conditions of the donations.

It is clear that the cross-claim arose from the complaint of the
Crisologos and was not separable from that main action. It had
no independent existence and was based entirely on that

In Torres v. Court of Appeals, 8 this Court declared:chanrob1es
virtual 1aw library

In any event, even viewing the situation in the light most
favorable to the Laicos, their cross-claim on Chivis warranty to
deliver title to them was so inextricably linked with and so utterly
dependent upon the success of the complaint of the Sierra for
the repurchase of the land that when the complaint was
dismissed, the cross-claim could not possibly survive. For as the
cross-claimants themselves alleged, the cross-defendants would
be liable on the warranty "should the plaintiffs finally obtain
favorable judgment in their favor" (sic). The warranty became
functus oficio after the Sierras, who turned out after all to have a
free patent title to the land issued way back in 1932, agreed to
transfer and did transfer said title to the Laicos first by the
deed of sale executed directly in their favor by the Sierras on
January 17, 1960, and again in the amicable settlement of the
case between them. The fact that the Laicos paid P10,000.00 to
the Sierras in that amicable settlement created no liability on the
part of the Chivis: first, because the latter neither knew nor
consented to such settlement; second, because the Laicos had
already acquired the land directly, from the Sierras by virtue of
the aforesaid sale of January 17, 1960; and third because the said
sum of P10,000.00 was not the subject of the cross-claim against
them.

Apropos is the following statement of the legal
principle:chanrobles virtual lawlibrary

"A cross-bill strictly speaking is one brought by a defendant in an
equity suit against . . . other defendants in the same suit,
touching the matters in question in the original bill. It is
considered as an auxiliary suit dependent upon the original bill,
and can be sustained only on matters growing out of the original
bill. There is a well-defined distinction between a cross-bill
merely defensive in character, and one seeking affirmative relief.
The dismissal of the original bill carries with it a purely defensive
cross-bill but not one seeking affirmative relief." (Osius v. Barton,
88 A.L.R. 394, 402)

The cross-claim in this case was purely defensive in nature. It
arose entirely out of the complaint and could prosper only if the
plaintiffs succeeded. Hence, under the principle above
enunciated, it could not be the subject of independent
adjudication once it lost the nexus upon which its life depended.

The cross-claimants cannot claim more rights than the plaintiffs
themselves, on whose cause of action the cross-claim depended.
The dismissal of the complaint divested the cross-claimants of
whatever appealable interest they might have had before and
also made the cross-claim itself no longer viable.

A party has an appealable interest only when his property may
be diminished, his burdens increased or his rights prejudiced by
the order sought to be reviewed. 9 In the case at bar, the
consequence of the dismissal of the complaint was the cessation
of the cross-claimants exposure to injury, which risk would in
fact have continued if the Crisologos appeal had succeeded. It
bears stressing that when the plaintiffs petition was dismissed
by the Court of Appeals, the cross-claim lost its basis, which was
the dismissed complaint itself. Earlier, in fact, the dismissal of the
cross-claim had already become unappealable when the order
dismissing the complaint became final and executory.

It would be highly irregular to allow the reinstatement of the
appeal lost by the plaintiffs through another appeal made by the
cross-claimants. Not only was the cross-claim defensive in
character and therefore deemed dismissed with the complaint
but, as pointed out by the petitioners, the cross-claimants and
the plaintiffs were supposed to be opposing parties and not in
collusion with each other.

Our ruling is that the Orbetas, as cross-claimants, had no
personality to pursue a remedy which properly belonged to the
Crisologos who, through their fault or negligence, failed to
employ it. Accordingly, the petition filed by the Orbetas should

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have been dismissed outright by the respondent court on the
ground that the cross-claimants were not proper parties to
appeal the dismissal of the complaint.

In view of the foregoing observations, the Court finds it
unnecessary to resolve the issues raised by the herein petitioners
in their assignment of errors.

WHEREFORE, the decision rendered by the respondent court on
September 28, 1990, and its resolution dated August 27, 1991,
are SET ASIDE and the dismissal of Civil Case No. 313-KC in the
Regional Trial Court of Ilocos Sur is AFFIRMED. No
costs.chanroblesvirtualawlibrary

SO ORDERED.


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[G.R. No. 101566. March 26, 1993.]

HON. FLORENCIO A. RUIZ, JR., SENT OF GOD FOUNDATION,
INC., S OF G FOUNDATION, INC., RAUL G. FORES, SENEN P.
VALERO and FATHER ODON DE CASTRO, Petitioners, v. THE
HON. COURT OF APPEALS, SPS OLEGARIO ORBETA and SUSAN
ROSARIO S. ORBETA,Respondents.

Antonio Coronel and Norberto L. Villarama, for Petitioners.

Eladio B. Samson for Private Respondents.

Antonio E. Escober collaborating counsel for Private
Respondents.

R E S O L U T I O N

GRIO-AQUINO, J.:

The private respondents, spouses Olegario Orbeta and Susana
Rosario S. Orbeta, have filed a motion for reconsideration of the
decision dated August 17, 1992 of this Court which reversed the
decision of the Court of Appeals 1 granting the petition
for certiorari in CA-G.R. SP No. 17013, "Spouses Olegario Orbeta
and Susana Rosario S. Orbeta, petitioners v. Hon. Florencio A.
Ruiz, Jr., Et. Al." and upholding on procedural grounds, the orders
of the Regional Trial Court of Ilocos Sur, dismissing the
Crisologos complaint and the Orbetas answer with cross claim,
in Civil Case No. 313-KC, entitled "Carmeling P. Crisologo, Et Al.,
v. Sent of God Foundation Inc., Et. Al."cralaw virtua1aw library

This is a splinter case arising from the complaint filed of July 29,
1988 by Carmeling P. Crisologo and her children for revocation of
two (2) deeds of donation: (a) the first was a donation made on
September 17, 1976, of a 100-hectare island in Cabugao, Ilocos
Sur; and (b) the second was a donation of two (2) lots in Guimod,
San Juan, Ilocos Sur, to the Sent of God Foundation, Inc., which
was represented in both transactions by Carmeling niece, Susana
Rosario Orbeta, and her husband, Olegario Orbeta, who were
members of the Sent of God Foundation, Inc., otherwise known
as the Caryana Movement, a religious cult headed by a
Benedictine monk, Father Odon de Castro, as the groups
spiritual director. The donations were subjected to three (3)
conditions imposed by the honors, to wit:chanrob1es virtual 1aw
library

(1) that the donated land shall be used exclusively to provides
monastic life and experience according to the rules of St.
Benedict, and for such other religious and charitable purposes as
may be determined by the donee;

(2) that the donee shall not sell, lease or allow the use of the
parcels of land donated or any part thereof for any other
purposes; and

(3) that in the remote event that the donee no longer needs the
property for its religious and charitable purposes, the same shall
revert to the donors or their heirs.

Ten years later, on November 7, 1986, the Sent of God
Foundation, Inc., represented by its chairman of the board of
trustees, Dr. Raul Flores, with the consent of the donors,
transferred the Puro-Salomague Island (renamed St. Benedict
Island by Fr. Odon de Castro) to the S of G Foundation, Inc.,
represented by Senen P. Valero, subject to the same conditions
as the original donation.

Unfortunately, the Caryana Movement was denied canonical
recognition and its spiritual director was himself expelled from
the Benedictine order and stripped of his priestly functions by
the Archbishop of Manila, Jaime Cardinal Sin.

Disturbed by these developments, for one of the conditions of
her donation to the Movement was that the Island would be
used "to provide a monastic life and experience according to the
rules of St. Benedict," Mrs. Crisologo wrote a letter on February
8, 1988 to Dr. Fores, asking for the return of her island. Dr. Fores
assured her that the papers would be prepared for that purpose.
On February 23, 1988, she wrote another letter to Dr. Fores
reminding him of his promise to return the Island and offering to
reimburse the Foundation for its improvements on the island. Dr.
Fores asked for a conference with Mrs. Crisologo to hasten the
return of the island to her. But shortly thereafter, in the same
month of February, 1988 and continuing up to March, the Sent of
God Foundation, Inc. and S of G Foundation, Inc., abandoned
Puro-Salomague Island. Their agents destroyed and demolished
almost all the improvements thereon.

A third letter dated March 9, 1988 was written by Mrs. Crisologo,
addressed to Mrs. Conception (Chit) Feria, a member of the Sent
of God Foundation, Inc., reiterating her request for the return of
the island, but nothing happened.

On July 29, 1988, Mrs. Crisologo and her children filed a
complaint (Civil Case No. 313-KC, Regional Trial Court, Branch 24,
of Cabugao, Ilocos Sur) against the Sent of God Foundation, Inc.,
the S of G Foundation, Inc., Raul G. Fores, Senen P. Valero, Fr.
Odon de Castro and Spouses Olegario and Susana Rosario S.
Orbeta for the revocation of the donation and return of the
island to the doors.

In their answer dated August 30, 1988, the defendants (except
the Orbetas) admitted the donations but denied that they had
violated the conditions thereof. They further alleged that the
Crisologos had no basis for revoking the donations because
canonical recognition with the rules of St. Benedict; that the
expulsion of Fr. Odon de Castro from his Order is pending review
by the authorities in Rome; and that the circular of the
Archdiocese of Manila disallowing him to perform priestly
functions was already known to the Crisologos when they gave
their consent to the donation of the island to the S of G
Foundation, Inc., to which the island was transferred because the
S of G Foundation is a qualified tax-exempt donee. They alleged
that they did not destroy, but only "dismantled," their
improvements on the island preparatory to the transfer of the
group to Sabang in order to avoid harassment by Susana Orbeta
who had been expelled by the Sent of God Foundation, Inc.,
allegedly for violating the rule of poverty of St. Benedict. They
admitted Dr. Fores promise to return the island to the Crisologos
but gave reasons for the delay in affecting the reconveyance,
among which was the legal problem allegedly raised by
dispossessed farmers. They denied that they abandoned the
island for they merely transferred from the upper portion thereof
to the lower portion where the rule of poverty may be more
properly observed. Their answer contained a counterclaim for
attorneys fees and expenses of litigation. They prayed that the
complaint be dismissed, or, in the alternative, that the Crisologos
and the Department of Agrarian Reform be compelled to
interplead their claims to the island.

Plaintiffs filed an answer to the counterclaim on September 22,
1988.


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The Orbetas filed a separate Answer with Cross-claim on
September 30, 1988, making common cause with the plaintiffs.
They alleged that in January 1976, Fr. Odon de Castro instructed
Mrs. Orbeta to look for an ideal place in Ilocos Sur to house the
monastery of the Caryana Movement, so she thought of
approaching her aunt, Mrs. Crisologo, who is a devout Catholic
and devotee of St. Benedict, and who is a considered one of the
biggest land owners in Ilocos Sur. Even if had not met Fr. Odon,
Dr. Fores, and Senen Valero, pillars of the Sent of God
Foundation, Inc., Mrs. Crisologo was persuaded by Mrs. Orbeta
to give her Puro-Salomague Island for the use of the Caryana
Movement. Upon inspection by Fr. Odon, the island was found
suitable for the purposes of the movement, but since the Sent of
God Foundation, Inc., did not have money to buy it, Mrs. Orbeta
persuaded her aunt to donate it to the Foundation subject to
certain conditions already mentioned in the complaint. The
Orbetas confirmed that the Foundation violated the conditions of
the donation when it was denied canonical permission to teach
the monastic life according to the rules of St. Benedict. The
Orbetas joined the plaintiffs demand for the reversion of the
island to the donors. The Orbetas further alleged that because of
the "misrepresentation,, deceptions, questionable practices and
heretical teaching of the defendant Fr. Odon de Castro, they
(Orbetas) disassociated themselves from the Caryana Movement;
that as the denial of church recognition for the Caryana
Movement and the dismissal of Fr. Odon de Castro, as a Catholic
monk of the Benedictine Order, violated the conditions of the
donations, the Orbetas alleged that they have a legal obligation
to return the island to the plaintiffs; and that the alleged protest
of the farmers is a concoction of the Foundations to delay the
return of the island to the Crisologos for the tenancy case
between some farmers and Mrs. Crisologo had been settled in
1980 yet, by an Order dated May 28, 1980 of the Minister of
Agrarian Reform.

The Orbetas asserted a cross claim against their co-defendants
for moral and exemplary damages and expenses of litigation
because the refusal of the Foundations to convey the island to
the Crisologos caused the Orbetas to be dragged into this case,
and has put them (Orbetas) "in a bad perspective" (p. 148, Rollo).
They prayed that judgment be rendered for the plaintiffs and
that the Foundations and their co-defendants be ordered to pay
damages.

On November 24, 1988, the Foundations etc. filed a "Motion to
Dismiss Crossclaim (of the Orbetas) and to Strike Out."cralaw
virtua1aw library

On December 5, 1988, the Foundations, etc. (except the Orbetas)
filed a "Motion to Dismiss and to Drop Defendants," alleging
that: (1) the complaint states no cause of action against the
Foundations because they did not violate the conditions of the
donations; and (2) the individual defendants (Fores, Valero and
Fr. De Castro) are not real parties in interest for they merely
acted for the Foundations which have legal personalities
separate from their officers. Furthermore, the original deeds of
donation in favor of the Sent of God Foundation, Inc., have
already been cancelled by the execution of a third deed of
donation by the Sent of God Foundation, Inc. in favor of the S
and G Foundation, Inc., with the consent of the plaintiffs. The
motion was set for hearing on December 16, 1988 at 2:00 p.m.

A copy of the motion to dismiss was received by the Secretary of
plaintiffs counsel, Attorney Eduardo Alcantara, on December 14,
1988, or one day short of the reglementary 3-day notice. On
January 2, 1989, Attorney Alcantara, who was in Manila when
the motion was received in his office in Vigan, filed an
"Explanation and Vigorous Opposition to the Motion to Dismiss
and Drop Defendants." However, on the same date, Judge
Florencio A. Ruiz, Jr. issued an Order overruling the Opposition
for "having been filed out of time" and dismissing the complaint
because "the grounds alleged in support thereof (are)
meritorious, even as no timely opposition to defendants motion
to had been filed by any of the adverse parties on or before the
scheduled date and time of hearing thereon . . ." The Orbetas
cross claim was also dismissed because it had "no more leg to
stand on." (p. 160, Rollo.)

On January 12, 1989, the plaintiffs filed a motion for
reconsideration, which was adopted by the Orbetas in an urgent
ex parte manifestation dated February 7, 1989. This motion was
denied on February 8, 1989. The Crisologos then sought a review
of the order of dismissal by the Court of Appeals through a
petition for certiorari under Rule 65 of the Rules of Court,
alleging grave abuse of discretion on the part of the trial court.
Docketed as CA-G.R. No. SP-16837, it was dismissed on May 2,
1989, 2 on the ground that the proper remedy was an ordinary
appeal. The appellate court ruled that "since the petitioner did
not appeal the questioned order of January 2, 1989, or
respondent court dismissing the complaint, said order had
become final and executory." (p. 42, Rollo.)

The Orbetas who had not joined the Crisologos in CA-G.R. No, SP-
16837, filed their own petition for certiorari in the Court of
Appeals where it was docketed as CA-G.R. No. SP No. 17013.
Their petition prospered. On September 28, 1990, the Court of
Appeals 3 annulled Judge Ruizs of dismissal and reinstated the
complaint. Reconsideration of this decision was denied on
August 27, 1991. The Foundations, etc. appealed to this Court
which, as previously stated, reversed the Court of Appeals.

The Orbetas filed a motion for reconsideration of our decision.
The Court denied it by resolution dated October 21, 1992.
However, the Orbetas filed a timely Motion to Recall that
resolution. They invited the courts attention to the fact that the
resolution denying their motion for reconsideration did not carry
the necessary votes of three (3) justices for only Justices Cruz and
Aquino voted on it as Justice Bellosillo took no part and Justice
Medialdea was on sick leave of absence, when the motion for
reconsideration was deliberate upon. 4 Consequently, the
Division decided to refer the case to the Court En Banc which
recalled the resolution for lack of the necessary votes and
constituted a Special First Division 5 to deliberate on the Orbetas
motion for reconsideration.

After a careful review and study of the records, the Court finds
merit in the motion for reconsideration. The Court of Appeals did
not commit a reversible error in setting aside the orders of Judge
Florencio A. Ruiz, Jr. granting the motion to dismiss the
complaint in Civil Case No. 313-KC because:chanrob1es virtual
1aw library

(1) Judge Ruiz gravely abused his discretion in proceeding to hear
and grant the motion to dismiss of the defendants (except the
Orbetas) without the requisite 3-day notice to the plaintiffs; and

(2) The Orbetas are proper parties-in-interest to seek a review
on certiorari of the trial courts order dismissing the complaint in
Civil Case No. 313-KC.

The trial court gravely abused its discretion in issuing the order of
dismissal because the plaintiffs were given only two (2) days
notice (the Orbetas none at all) of the hearing of the motion to
dismiss. The notice was received in the office of the plaintiffs
counsel (not by counsel himself) on December 14, 1988. The
motion was heard on December 16, 1988.

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The motion to dismiss was filed after the defendants had already
answered the complaint. Having already filed their answer, the
Foundations were estopped from filing a motion to dismiss the
complaint, for a motion to dismiss should be filed "within the
time for pleading," i.e., within the time to answer (Sec. 1, Rule
16, Rules of Court).

The allegation of the defendants (except the Orbetas) that the
complaint did not state a cause of action was not proper ground
to dismiss it for said defendants could not have joined issue upon
the material allegations of the complaint if the same did not
state a sufficient cause of action against them. A careful perusal
of the complaint of the Crisologos, and the Orbetas "answer,"
shows that the elements of a cause of action are pleaded therein.

While the Orbetas were impleaded as defendants in the action,,
together with the Foundations, Fr. Odon de Castro, Dr. Raul G.
Fores, and Senen Valero, they filed a separate answer making
common cause with the plaintiffs. Their answer included a cross
claim for damages against their co-defendants. Their answer with
cross claim was, in effect, a complaint against the Sent of God
Foundation, Inc. and the other defendants. This peculiarity of
their pleading could not have been missed by the trial court, for
the other defendants in fact accused them of collusion with the
plaintiffs. In view if that circumstance, the trial court should have
looked beyond the form, to the substance, of their pleading. In
the interest of justice and orderly procedure, the trial court
should have treated their answer as a complaint and should have
ordered them to disassociate themselves from the other
defendants and be joined as additional plaintiffs in the case, for
that is the side with which they have aligned themselves.

The Orbetas had an interest in the subject matter of the
Crisologos suit for they were the conduit, through whom the
Crisologos effected the donation of their island to the Sent of
God Foundation, Inc. They were signatories of the deed of
donation of Puro-Salamague Island. Being instrumental in the
obtaining the donations from the Crisologos, they are de facto
plaintiffs with an actual interest in the enforcement of the
conditions of the donation and in the recovery of the donated
property on accountant of the donees violations of the
conditions of the donation.

Being de facto plaintiffs, the Orbetas could file in the Court of
Appeals a separate petition for review on certiorari of the trial
courts order dismissing their demand for the reversion of the
island to the donors.

The finality of the trial courts order dismissing the Crisologos
complaint was not an obstacle to the plaintiffs and the Orbetas
recourse to the Court of Appeals by a petition for certiorariunder
Rule 65 of the Rules of Court for such a petition may be filed
"within a reasonable time," not within the time to appeal (Greta
Pacific Life Assurance Corporation v. NLRC, 188 SCRA 139;
Andaya v. NLRC, 188 SCRA 253).

Even if appeal should have been the proper remedy against an
oppressive and arbitrary order or decision of a lower court, the
aggrieved party may avail of the special civil action
ofcertiorari when appeal would not be a speedy and adequate
remedy. In this case, appeal would have been neither speedy nor
adequate for the plaintiffs and the Orbetas had not been given a
chance to prove their causes of action, hence, there was no
evidence in the records upon which to anchor a judgment by the
Appellate Court in their favor.chanrobles virtual lawlibrary

". . . the Appellate Court can legally entertain the special civil
action of certiorari in CA-G.R. No. 14821-SP considering the
broader and primordial interests of justice which compel an
occasional departure from the general rule that the
extraordinary writ of certiorari cannot substitute for a lost
appeal, the order of March 15, 1979 having become final upon
the lapse of the reglementary period of appeal." (Pachoco v.
Tumangday and Fernando, etc., 108 Phil. 239; Co Chuan Seng v.
CA, 128 SCRA 308; Destileria Limtuaco & Co. v. IAC, 157 SCRA
706; Del Pozo, Et. Al. v. Judge Penaco, 167 SCRA 577; Fernando
Pelagio, Et. Al. v. The Hon. Court of Appeals, Et Al., G.R. No.
63188, June 13, 1990; Emphasis supplied.)

" Certiorari is one such remedy. Considered extraordinary, it is
made available only when there is no appeal, nor any plain,
speedy or adequate remedy in the ordinary course of the law
(Rule 65, Rules of Court, Section 1). The long line of decisions
denying the petition forcertiorari, either before appeal was
availed of or specially in instances where the appeal period has
lapsed, for outnumbers the instances when certiorari was given
due course. The few significant exceptions were: when public
welfare and the advancement of public policy dictate: or when
the broader interests of justice so require, when the writs issued
are null (Yu Tirona v. Nanawa, No. L-22107, September 30, 1967,
21 SCRA 395, 4400; Director of Lands v. Santamaria, 44 Phil. 594,
596, cited in 3 Moran, Comments on the Rules of Court, 170-172
(1980), or when the questioned order amounts to an oppressive
exercise of judicial authority." (Acain v. IAC, 155 SCRA 100;
Sunbeam Convenience Foods Inc., Et. Al. v. Hon. Court of
Appeals, Et Al., 181 SCRA 443; Emphasis supplied.)

IN VIEW OF ALL THE FOREGOING, we GRANT the motion for
reconsideration and AFFIRM the decision dated September 28,
1990 of the Court of Appeals in CA-G.R. SP No. 17013. The orders
dated January 2, 1989 and February 8, 1989 of the herein
petitioner, Judge Florencio A. Ruiz, Jr., in Civil Case No. 313-KC
are hereby ANNULLED AND SET ASIDE. Said civil case should
proceed to trial on the merits with all reasonable dispatch. Costs
against the petitioners.

SO ORDERED.


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G.R. No. L-15364 May 31, 1961
VIRGINIA CLAREZA, ET AL., plaintiffs.
FELIPE J. ZAMORA, plaintiff-intervenor-appellant,
vs.
BENJAMIN A. ROSALES and AMADO A. DIMAYUGA, defendants-
appellees.
Antonio Barredo for plaintiffs and intervenor-appellant.
San Juan and Africa for defendants-appellees.
LABRADOR, J.:
Appeal from an order of the Court of First Instance of Manila,
dismissing a "complaint in intervention and/or amended
complaint" filed by Felipe J. Zamora in Civil Case No. 34997, of
said court, entitled "Virginia Clareza, et al., plaintiffs, versus
Benjamin A. Rosales, et al., defendants."
In said civil case, Virginia Clareza, and her children claim damages
for the death of Juan Luno (Virginia's husband and the father of
her children), caused by the reckless negligence of the defendant
Rosales in colliding with the taxicab driven by the deceased. On
February 10, 1958, the defendants filed their answer, claiming
that the incident was due to the negligence of the deceased
himself, and praying for the dismissal of the complaint. By way of
counterclaim they asked for payment of damages to them. On
February 12, 1958, plaintiffs filed their answer to the
counterclaim.
On January 21, 1959, Felipe J. Zamora filed an urgent motion for
leave to intervene and/or be substituted for the plaintiffs
attaching thereto his complaint in intervention and/or amended
complaint. In his motion, he avers that he is the owner of the
Golden Taxicab that the deceased Juan Luno was driving at the
time of the collision; that he has paid P4,000.00 to the heirs of
the deceased as compensation under the Workmen's
Compensation Act and is therefore subrogated to their rights
against the defendants. In his complaint, the intervenor prays for
actual, compensatory exemplary and moral damages including
the P4,000.00 which he paid to the heirs.
The lower court admitted the complaint in intervention and
required the defendants to answer it and on January 29, 1959,
the defendants filed a motion to dismiss the complaint as well as
the complaint in intervention. In support of their motion,
defendants allege that inasmuch as plaintiffs have already
recovered compensation from the intervenor, they have no more
cause of action against the defendants, and, consequently, there
is also no basis for the intervention.
Acting upon said motion to dismiss and for the reasons stated
therein, the lower court on February 7, 1959 dismissed both the
complaint and the complaint intervention. A motion for
reconsideration of the order of dismissal having been denied,
intervenor Zamora has prosecuted this appeal to this Court.
In this appeal, the right of intervenor Zamora to be subrogated to
the rights of the plaintiffs against the defendants is not disputed.
The only question refers to the correctness of the dismissal of
the complaint in intervention.
Fundamentally, intervention is never an independent action, but
is ancillary and supplemental to an existing litigation. (91 A.L.R.,
p. 592; Garcia v. David, et al., 67 Phil. 279). The above principle
was reiterated by Us in the case of Reliance Commercial
Enterprises, Inc. vs. Board of Tax Appeals, etc. L-6697, November
18, 1955, although in said case we sustained the resolution of the
Board of Tax Appeals dismissing the complaint in intervention
also because the intervenor had not intervened before the
Commissioner of Customs. It only did so in an appellate court.
Strictly speaking, as the right of the original plaintiffs to sue the
defendants has ceased to exist by virtue of the, payment of
compensation to them by the intervenor, in accordance with the
provisions of Sec. 6, Act 3812, as amended by Republic Act No.
772, the said action of original plaintiffs may no longer be
allowed to continue. The right of an intervenor should merely be
in aid of the right of the original party, like the plaintiffs in this
case. As this right of the plaintiffs has ceased to exist, there is
nothing to aid or fight for. So the right of intervention has ceased
to exist.
However the coming in of the intervenor may be allowed under
the provisions of Section 20 of Rule 3 of the Rules of Court, which
provides:
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.
Under the provisions of Section 6 of the Workmen's
Compensation Act, as amended, the employer who paid the
compensation to an employee "shall succeed the injured
employee to the right of recovery from such person what he
paid." We hold that the intervenor, the employer, may well be
substituted as party plaintiff. In the case at bar he actually prayed
the court to allow him to do so. Thereafter, he presented the
amendments to the original complaint, required by the new
circumstances surrounding the substituted party's rights. Such a
procedure subserves the policy of the Rules avoiding multiplicity
of suits. The right of the intervenor herein being the same right
of the original party injured by the negligence of the defendant,
which right has been transferred to the intervenor, the latter
should be allowed to be substituted for the original plaintiff..
WHEREFORE, the order appealed from is hereby set aside, the
intervenor Felipe J. Zamora is substituted for the original
plaintiffs Virginia Clareza and her children, and the complaint
filed by the intervenor admitted. Let this case be returned to the
lower court for further proceedings in accordance herewith. With
costs against the defendants-appellees.

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Outline: Rule 6 - Kinds of Pleadings CIVIL PROCEDURE

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Rule 6 (Outline, Case Digest &amp; Full Text)

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Outline: Rule 6 - Kinds of Pleadings CIVIL PROCEDURE

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Rule 6 (Outline, Case Digest & Full Text)

Rule 6 (Outline, Case Digest & Full Text)