CIVIL PROCEDURE CASE DIGESTS

I. BASIC CONCEPTS
Procedural Law v. Substantive Law
Bustos v Lucero, October 20, 1948
G.R. No. L-2068
TUASON, J.:
The petitioner herein, an accused in a criminal case, filed a
motion with the Court of First Instance of Pampanga after he
had been bound over to that court for trial, praying that the
record of the case be remanded to the justice of the peace
court of Masantol, the court of origin, in order that the
petitioner might cross-examine the complainant and her
witnesses in connection with their testimony, on the strength
of which warrant was issued for the arrest of the accused.
The motion was denied and that denial is the subject matter
of this proceeding.
According to the memorandum submitted by the petitioner's
attorney to the Court of First Instance in support of his
motion, the accused, assisted by counsel, appeared at the
preliminary investigation. In that investigation, the justice of
the peace informed him of the charges and asked him if he
pleaded guilty or not guilty, upon which he entered the plea
of not guilty. "Then his counsel moved that the complainant
present her evidence so that she and her witnesses could be
examined and cross-examined in the manner and form
provided by law." The fiscal and the private prosecutor
objected, invoking section 11 of rule 108, and the objection
was sustained. "In view thereof, the accused's counsel
announced his intention to renounce his right to present

evidence," and the justice of the peace forwarded the case to

the court of first instance.
Leaving aside the question whether the accused, after
renouncing his right to present evidence, and by reason of
that waiver he was committed to the corresponding court for
trial, is estopped, we are of the opinion that the respondent
judge did not act in excess of his jurisdiction or in abuse of
discretion in refusing to grant the accused's motion to return
the record for the purpose set out therein. In Dequito and
Saling Buhay vs. Arellano, G.R. No. L-1336, recently
promulgated, in which case the respondent justice of the
peace had allowed the accused, over the complaint's
objection, to recall the complainant and her witnesses at the
preliminary investigation so that they might be crossexamined, we sustained the justice of the peace's order. We
said that section 11 of Rule 108 does not curtail the sound
discretion of the justice of the peace on the matter. We said
that "while section 11 of Rule 108 defines the bounds of the
defendant's right in the preliminary investigation, there is
nothing in it or any other law restricting the authority,
inherent in a court of justice, to pursue a course of action
reasonably calculated to bring out the truth."
But we made it clear that the "defendant can not, as a
matter of right, compel the complaint and his witnesses to
repeat in his presence what they had said at the preliminary
examination before the issuance of the order of arrest." We
called attention to the fact that "the constitutional right of an
accused to be confronted by the witnesses against him does
not apply to preliminary hearings' nor will the absence of a
preliminary examination be an infringement of his right to
confront witnesses." As a matter of fact, preliminary
investigation may be done away with entirely without
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infringing the constitutional right of an accused under the

due process clause to a fair trial.
The foregoing decision was rendered by a divided court. The
minority went farther than the majority and denied even any
discretion on the part of the justice of the peace or judge
holding the preliminary investigation to compel the
complainant and his witnesses to testify anew.
Upon the foregoing considerations, the present petition is
dismissed with costs against the petitioner.
Moran, C.J., Paras, Pablo, Bengzon, and Briones, JJ., concur.

Separate Opinions

FERIA, J., dissenting:

I am sorry to dissent from the decision.
The petitioner in the present case appeared at the
preliminary investigation before the Justice of the Peace of
Masantol, Pampanga, and after being informed of the
criminal charges against him and asked if he pleaded guilty
or not guilty, pleaded not guilty. "Then the counsel for the
petitioner moved that the complainant present her evidence
so that her witnesses could be examined and cross-examined
in the manner and form provided by law." The fiscal and the
private prosecutor objected to petitioner's motion invoking
section 11, Rule 108, and the objection was sustained. In
view thereof, the accused refused to present his evidence,
and the case was forwarded to the Court of First Instance of
Pampanga.

The counsel for the accused petitioner filed a motion with the
Court of First Instance praying that the record of the case be
remanded to the justice of the peace of Masantol, in order
that the petitioner might cross-examine the complainant and
her witnesses in connection with their testimony. The motion
was denied, and for that reason the present special civil
action of mandamus was instituted.
It is evident that the refusal or waiver of the petitioner to
present his evidence during the investigation in the justice of
the peace, was not a waiver of his alleged right to be
confronted with and cross-examine the witnesses for the
prosecution, that is, of the preliminary investigation provided
for in General Order No. 58 and Act No. 194, to which he
claims to be entitled, as shown by the fact that, as soon as
the case was forwarded to the Court of First Instance, counsel
for the petitioner filed a motion with said court to remand the
case to the Justice of the Peace of Masantol ordering the
latter to make said preliminary investigation. His motion
having been denied, the petitioner has filed the present
action in which he squarely attacks the validity of the
provision of section 11, Rule 108, on the ground that it
deprives him of the right to be confronted with and crossexamine the witnesses for the prosecution, contrary to the
provision of section 13, Article VIII, of the Constitution.
In the case of Dequito and Saling Buhay vs. Arellano, No. L1336, we did not discuss and decide the question of validity
or constitutionality of said section 11 in connection with
section 1 of Rule 108, because that question was not raised
therein, and we merely construed the provisions on
preliminary investigation or Rule 108. In said case the writer
of this dissenting opinion said:

It may not be amiss to state that, modesty aside, the writer

of this dissenting opinion, then a practising attorney, was the
one who prepared the draft of the Rules of Court relating to
criminal procedure, and the provisions on preliminary
investigation in the draft were the same as those of the old
law, which gave the defendant the right to be confronted
with and to cross-examine the witnesses for the prosecution.
But the Supreme Court approved and adopted in toto the
draft, except the part referring to preliminary investigation
which it modified, by suppressing said right and enacting, in
its stead, the provisions of section 11 of Rule 108 in its
present form. I prefer the old to the new procedure. But I can
not subscribe to the majority decision, which is a judicial
legislation and makes the exercise of the right of a defendant
to be confronted, with and cross-examine the witnesses
against him, to depend entirely upon the whim or caprice of a
judge or officer conducting the preliminary investigation.
But now the question of the validity of said section 11, Rule
108, is squarely presented to this Court for decision, we have
perforce to pass upon it.
Section 13, Article VIII, of the Constitution prescribes that
"the Supreme Court shall have power to promulgate rules
concerning pleading, practice and procedure in all courts, but
said rules shall not diminish, increase or modify substantive
rights." The constitution added the last part of the abovequoted constitutional precept in order to emphasize that the
Supreme Court is not empowered, and therefore can not
enact or promulgate substantive laws or rules, for it is
obvious that rules which diminish, increase or modify
substantive rights, are substantive and not adjective laws or
rules concerning pleading, practice and procedure.

It does not require an elaborate arguments to show that the

right granted by law upon a defendant to be confronted with
and cross-examine the witnesses for the prosecuted in
preliminary investigation as well as in the trial of the case is
a substantive right. It is based on human experience,
according to which a person is not prone to tell a lie against
another in his presence, knowing fully well that the latter
may easily contradict him, and that the credibility of a person
or veracity of his testimony may be efficaciously tested by a
cross-examination. It is substantive right because by
exercising it, an accused person may show, even if he has no
evidence in his favor, that the testimonies of the witnesses
for the prosecution are not sufficient to indicate that there is
a probability that a crime has been committed and he is
guilty thereof, and therefore the accused is entitled to be
released and not committed to prison, and thus avoid an
open and public accusation of crime, the trouble, expense,
and anxiety of a public trial, and the corresponding anxiety or
moral suffering which a criminal prosecution always entails.
This right is not a constitutional but a statutory right granted
by law to an accused outside of the City of Manila because of
the usual delay in the final disposition of criminal cases in
provinces. The law does not grant such right to a person
charged with offenses triable by the Court of First Instance in
the City of Manila, because of the promptness, actual or
presumptive, with which criminal cases are tried and
disposed of in the Court of First Instance of said city. But this
right, though not a constitutional one, can not be modified,
abridged, or diminished by the Supreme Court, by virtue of
the rule making power conferred upon this Court by the
Constitution.

Since the provisions of section 11 of Rule 108 as construed

by this Court in several cases, (in which the question of
constitutionality or validity of said section had not been
squarely raised) do away with the defendant's right under
discussion, it follows that said section 11 diminishes the
substantive right of the defendant in criminal case, and this
Court has no power or authority to promulgate it and
therefore is null and void.
The fact that the majority of this Court has ruled in the above
cited case of Dequito and Saling Buhay vs. Arellano, that the
inferior or justice of the peace courts have discretion to grant
a defendant's request to have the witnesses for the
prosecution recalled to testify again in the presence of the
defendant and be cross-examined by the latter, does not
validate said provision; because to make the exercise of an
absolute right discretionary or dependent upon the will or
discretion of the court or officer making the preliminary
investigation, is evidently to diminish or modify it.
Petition is therefore granted.
PERFECTO, J., dissenting:
In our concurring and dissenting opinion in the case of
Dequito and Saling Buhay vs. Arellano, No. L-1336, we said:

Consequently, at the preliminary hearing contemplated by

said reglementary section, the defendant is entitled as a
matter of fundamental right to her the testimony of the
witnesses for the prosecution and to cross-examine them.
Although in such preliminary hearing the accused cannot
finally be convicted, he is liable to endure the ordeal
eloquently depicted in the decision, and the constitutional
guarantee protects defendants, not only from the jeopardy of
being finally convicted and punished, but also from the
physical, mental and moral sufferings that may unjustly be
visited upon him in any one of the stages of the criminal
process instituted against him. He must be afforded the
opportunities to have the charges against him quashed, not
only at the final hearing, but also at the preliminary
investigation, if by confronting the witnesses for the
prosecution he can convince the court that the charges are
groundless. There is no justice in compelling him to undergo
the troubles of a final hearing if at the preliminary hearing
the case can be terminated in his favor. Otherwise, the
preliminary investigation or hearing will be an empty gesture
that should not have a place within the framework of
dignified and solemn judicial proceedings.
On the strength of the above quoted opinion the opinion
should be granted and so we vote.
Petition dismissed.

In our opinion, section 11 of Rule 108 must be read,

interpreted, and applied in a way that will not contravene the
constitutional provision guaranteeing to all accused the right
"to meet the witnesses face to face." (Section 1 [17], Article
III.)

RESOLUTION
March 8, 1949
TUASON, J.:
This cause is now before us on a motion for reconsideration.
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In the decision sought to be reconsidered, we said, citing

Dequito and Saling Buhay vs. Arellano, G.R. No. L-1336: "The
constitutional right of an accused to be confronted by the
witnesses against him does not apply to preliminary
hearings; nor will the absence of a preliminary examination
be an infringement of his right to confront witness. As a
matter of fact, preliminary investigation may be done away
with entirely without infringing the constitutional right of an
accused under the due process clause to a fair trial." We took
this ruling to be ample enough to dispose the constitutional
question pleaded in the application for certiorari. Heeding the
wishes of the petitioner, we shall enlarge upon the subject.
It is contended that section 11 of Rule 108 of the Rules of
Court 1 infringes section 13, Article VIII, of the Constitution. 2
It is said that the rule in question deals with substantive
matters and impairs substantive rights.
We can not agree with this view. We are of the opinion that
section 11 of Rule 108, like its predecessors, is an adjective
law and not a substantive law or substantive right.
Substantive law creates substantive rights and the two terms
in this respect may be said to be synonymous. Substantive
rights is a term which includes those rights which one enjoys
under the legal system prior to the disturbance of normal
relations. (60 C.J., 980.) Substantive law is that part of the
law which creates, defines and regulates rights, or which
regulates the rights and duties which give rise to a cause of
action; that part of the law which courts are established to
administer; as opposed to adjective or remedial law, which
prescribes the method of enforcing rights or obtains redress
for their invasion. (36 C. J., 27; 52 C. J. S., 1026.)
As applied to criminal law, substantive law is that which
declares what acts are crimes and prescribes the punishment

for committing them, as distinguished from the procedural

law which provides or regulates the steps by which one who
commits a crime is to be punished. (22 C. J. S., 49.)
Preliminary investigation is eminently and essentially
remedial; it is the first step taken in a criminal prosecution.
As a rule of evidence, section 11 of Rule 108 is also
procedural. Evidence which is the "the mode and manner
of proving the competent facts and circumstances on which a
party relies to establish the fact in dispute in judicial
proceedings" is identified with and forms part of the
method by which, in private law, rights are enforced and
redress obtained, and, in criminal law, a law transgressor is
punished. Criminal procedure refers to pleading, evidence
and practice. (State vs. Capaci, 154 So., 419; 179 La., 462.)
the entire rules of evidence have been incorporated into the
Rules of Court. We can not tear down section 11 of Rule 108
on constitutional grounds without throwing out the whole
code of evidence embodied in these Rules.

In Beazell vs. Ohio, 269 U. S., 167, 70 Law. ed., 216, the
United States Supreme Court said:
Expressions are to be found in earlier judicial opinions to the
effect that the constitutional limitation may be transgressed
by alterations in the rules of evidence or procedure. See
Calder vs. Bull, 3 Dall. 386, 390, 1 L. ed., 648, 650;
Cummings vs. Missouri, 4 Wall. 277, 326, 18 L. ed., 356, 364;
Kring vs. Missouri, 107 U. S. 221, 228, 232, 27 L. ed., 507,
508, 510, 2 Ct. Rep., 443. And there may be procedural
changes which operate to deny to the accused a defense
available under the laws in force at the time of the
commission of his offense, or which otherwise affect him in
5

such a harsh and arbitrary manner as to fall within the

constitutional prohibition. Kring vs. Missouri, 107 U. S., 221,
27 L. ed., 507, 2 Sup. Ct. Rep., 443; Thompson vs. Utah, 170
U. S., 343, 42 L. ed., 1061, 18 Sup. Ct. Rep., 620. But it is not
well settled that statutory changes in the mode of trial or the
rules of evidence, which do not deprive the accused of a
defense and which operate only in a limited and
unsubstantial manner to his disadvantage, are not
prohibited. A statute which, after indictment, enlarges the
class of persons who may be witnesses at the trial, by
removing the disqualification of persons convicted of felony,
is not an ex post facto law. Hopt vs. Utah, 110 U. S., 575, 28
L. ed., 263, 4 Sup. Ct. Rep., 202, 4 Am. Crim. Rep. 417. Nor is
a statute which changes the rules of evidence after the
indictment so as to render admissible against the accused
evidence previously held inadmissible, Thompson vs.
Missouri, 171 U. S., 380, 43 L. ed., 204, 18 Sup. Ct. Rep., 922;
or which changes the place of trial, Gut. vs. Minnesota, 9
Wall. 35, 19 L. ed., 573; or which abolishes a court for
hearing criminal appeals, creating a new one in its stead. See
Duncan vs. Missouri, 152 U. S., 377, 382, 38 L. ed., 485, 487,
14 sup. Ct. Rep., 570.
Tested by this standard, we do not believe that the
curtailment of the right of an accused in a preliminary
investigation to cross-examine the witnesses who had given
evidence for his arrest is of such importance as to offend
against the constitutional inhibition. As we have said in the
beginning, preliminary investigation is not an essential part
of due process of law. It may be suppressed entirely, and if
this may be done, mere restriction of the privilege formerly
enjoyed thereunder can not be held to fall within the
constitutional prohibition.

While section 11 of Rule 108 denies to the defendant the

right to cross-examine witnesses in a preliminary
investigation, his right to present his witnesses remains
unaffected, and his constitutional right to be informed of the
charges against him both at such investigation and at the
trial is unchanged. In the latter stage of the proceedings, the
only stage where the guaranty of due process comes into
play, he still enjoys to the full extent the right to be
confronted by and to cross-examine the witnesses against
him. The degree of importance of a preliminary investigation
to an accused may be gauged by the fact that this formality
is frequently waived.
The distinction between "remedy" and "substantive right" is
incapable of exact definition. The difference is somewhat a
question of degree. (Dexter vs. Edmands, 89 F., 467; Beazell
vs. Ohio, supra.) It is difficult to draw a line in any particular
case beyond which legislative power over remedy and
procedure can pass without touching upon the substantive
rights of parties affected, as it is impossible to fix that
boundary by general condition. (State vs. Pavelick, 279 P.,
1102.) This being so, it is inevitable that the Supreme Court
in making rules should step on substantive rights, and the
Constitution must be presumed to tolerate if not to expect
such incursion as does not affect the accused in a harsh and
arbitrary manner or deprive him of a defense, but operates
only in a limited and unsubstantial manner to his
disadvantage. For the Court's power is not merely to compile,
revise or codify the rules of procedure existing at the time of
the Constitution's approval. This power is "to promulgate
rules concerning pleading, practice, and procedure in all
courts," which is a power to adopt a general, complete and
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comprehensive system of procedure, adding new and

different rules without regard to their source and discarding
old ones.
The motion is denied.
Moran, C.J., Paras, Pablo, Bengzon, Briones, and Montemayor,
JJ., concur.
FERIA, J., dissenting:
I dissent.
The motion for reconsideration must be granted.
According to the resolution, the right of a defendant to be
confronted with and cross-examine the witnesses for the
prosecution in a preliminary investigation granted by law or
provided for in General Orders, No. 58, as amended, in force
prior to the promulgation of the Rules of Court, is not a
substantive right but a mere matter of procedure, and
therefore this Court can suppress it in section 11, Rule 108,
of the Rules of Court, for the following reasons:
First. Because "preliminary investigation is eminently and
essentially remedial; it is the first step taken in a criminal
prosecution." . . . "As a rule of evidence, section 11 of Rule
108 is also procedural." . . . "The entire rules of evidence
have been incorporated into the Rules of Court." And
therefore "we can not tear down section 11 of Rule 108 on
constitutional grounds without throwing out the whole Code
of evidence embodied in these rules."
Secondly. Because, "preliminary investigation is not an
essential part of due process of law. It may be suppressed
entirely, and if this may be done, mere restriction of the

privilege formerly enjoyed thereunder can not be held to fall

within the constitutional prohibition."
Lastly. Because, "the distinction between remedy and
'substantive right' is incapable of exact definition. The
difference is somewhat a question of degree" . . . It is difficult
to draw a line in any particular case beyond which legislative
power over remedy and procedure can pass without touching
upon the substantive rights of parties affected, as it is
impossible to fix that boundary by general condition. . . .
"This being so, it is inevitable that the Supreme Court in
making rules should step on substantive rights, and the
Constitution must be presumed to tolerate if not to expect
such incursion as does not affect the accused in a harsh and
arbitrary manner or deprive him of a defense, but operates
only in a limited and unsubstantial manner to his
disadvantage."
Before proceeding it is necessary to distinguish substantive
law from procedure, for the distinction is not always well
understood. Substantive law is that part of the law which
creates, defines, and regulates rights as opposed to objective
or procedural law which prescribes the method of enforcing
rights. What constitutes practice and procedure in the law is
the mode or proceeding by which a legal right is enforced,
"that which regulates the formal steps in an action or judicial
proceedings; the course of procedure in courts; the form,
manner and order in which proceedings have been, and are
accustomed to be had; the form, manner and order of
carrying on and conducting suits or prosecutions in the
courts through their various sages according to the principles
of law and the rules laid down by the respective courts." 31
Cyc. Law and Procedure, p. 1153; id., 32, section 405; Rapalje

& Lawrence's Law Dictionary; Anderson Law Dictionary;

Bouvier's Law Dictionary.
Substantive rights may be created or granted either in the
Constitution or in any branch of the law, civil, criminal,
administrative or procedural law. In our old Code of Civil
Procedure, Act No. 190, as amended, there are provisions
which create, define and regulate substantive rights, and
many of those provisions such as those relating to
guardianship, adoption, evidence and many others are
incorporated in the Rules of Court for the sake of
convenience and not because this Court is empowered to
promulgate them as rules of court. And our old law of
Criminal Procedure General Orders No. 58 grants the
offended party the right to commence a criminal action or file
a complaint against the offender and to intervene in the
criminal prosecution against him, and grants the defendant
in the Court of First Instance (except in the City of Manila) the
right to bail, and to a preliminary investigation including his
rights during said investigation, and the rights at the trial,
which are now reproduced or incorporated in Rules 106, 108,
110, and 111 of the Rules of Court, except the rights now in
question. And all these, and others not necessary for us to
mention, are obviously substantive rights.
(1) As to the first argument, the premise "the preliminary
investigation is eminently and essentially remedial is not
correct. Undoubtedly the majority means to say procedural,
in line with the conclusion in the resolution, because remedial
law is one thing, and procedural law is another. Obviously
they are different branches of the law. "Remedial statute" is
"a statute providing a remedy for an injury as distinguished
from a penal statute. A statute giving a party a mode of
remedy for a wrong where he had none or a different one

before. . . . Remedial statutes are those which are made to

supply such defects, and abridge such superfluities in the
common law, as arise either from the general imperfections
of all human law, from change of time and circumstances,
from the mistakes and unadvised determination of unlearned
(or even learned) judges, or from any other cause
whatsoever." (Black's Law Dictionary, third edition, pp. 1525,
1526.)
It is also not correct to affirm that section 11 of Rule 108
relating to right of defendant after arrest "is a rule of
evidence and therefore is also procedural." In the first place,
the provisions of said section to the effect that "the
defendant, after the arrest and his delivery to the court has
the right to be informed of the complaint or information filed
against him, and also to be informed of the testimony and
evidence presented against him, and may be allowed to
testify and present witnesses or evidence for him if he so
desires," are not rules of evidence; and in the second place, it
is evident that most of the rules of evidence, if not all, are
substantive laws that define, create or regulate rights, and
not procedural. "Rules of evidence are substantive rights
found in common law chiefly and growing out of reasoning,
experience and common sense of lawyers and courts." (State
vs. Pavelich, et al., 279 P., 1102.) "It is true that weighing of
evidence and the rules of practice with respect thereto form
part of the law of procedure, but the classification of proofs is
sometime determined by the substantive law." (U. S. vs.
Genato, 15 Phil., 170, 176.) How can the law on judicial
notice, conclusive as well as juris tantum presumption,
hearsay and best evidence rule, parol evidence rule,
interpretation of documents, competency of a person to
testify as a witness be considered procedural?
8

Therefore, the argumentative conclusion that "we can not

tear down section 11 of Rule 108 on constitutional grounds
without throwing out the whole code of evidence embodied in
these Rules," is evidently wrong, not only for the reason just
stated, but because our contention that the defendant can
not be deprived of his right to be confronted with and crossexamine the witness of the prosecution is a preliminary
investigation under consideration would not, if upheld,
necessarily tear down said section. Our theory, is that said
section 11 should be so construed as to be valid and
effective, that is, that if the defendant asks the court to recall
the witness or witnesses for the prosecution to testify again
in his presence, and to allow the former to cross-examine the
latter, the court or officer making the preliminary
investigation is under obligation to grant the request. But if
the defendant does not so ask the court, he should be
considered as waiving his right to be confronted with and
cross-examine the witness against him.
(2) With respect to the second argument or reason, it is true
that the preliminary investigation as provided for in the
General Orders, No. 58, as amended, is not an essential part
of due process of law, because "due process of law" is not
iron clad in its meaning; its does not necessarily mean a
particular procedure. Due process of law simply requires a
procedure that fully protects the life, liberty and property. For
that reason the investigation to be made by the City Fiscal of
the City of Manila under Act No. 612, now section 2465 of the
Administrative Code, before filing an information, was
considered by this Court as sufficient to satisfy the due
process of law constitutional requirement (U. S. vs. Ocampo,
18 Phil., 1; U. S. vs. Grant and Kennedy, 18 Phil., 122). But it
is also true that we have already and correctly held that:
"The law having explicitly recognized and established that no

person charged with the commission of a crime shall be

deprived of his liberty or subjected to trial without prior
preliminary investigation (provided for in General orders, No.
58, as amended) that shall show that there are reasonable
grounds to believe him guilty, there can be no doubt that the
accused who is deprived of his liberty, tried and sentenced
without the proper preliminary investigation having been
made in his regard, is convicted without the process of law,"
(United States vs. Banzuela, 31 Phil., 564).
The ruling in Beazell vs. Ohio, 269 U. S. 167, 70 Law. ed.,
216, quoted in the resolution, has no application to the
present case, for the question involved therein was the
power of Congress to alter the rules of evidence and
procedure without violating the constitutional precept that
prohibits the passing of ex post facto law, while the question
herein involved is the power of the Supreme Court to
promulgate rules of pleading, practice and procedure, which
diminish the substantive right of a defendant, expressly
prohibited by the same provision of the Constitution that
confers upon this Court the power to promulgate said rules.
(3) The last reason or argument premised on the conclusion
that "the distinction between remedy and 'substantive right'
is incapable of exact definition;" indeed "the difference is
somewhat a question of degree," (Dexter vs. Edmonds, 89 F
487), is immaterial, because, as we have already said in
refuting the majority's first reason, remedy and procedure
are two completely different things.
As above defined, substantive law is clearly differentiated
from procedural law and practice. But even assuming
arguendo that it is difficult to draw the line in any particular
case beyond which the power of the court over procedure
can not pass without touching upon the substantial right of
9

the parties, what this Court should do in that case would be

to abstain from promulgating such rule of procedure which
many increase, diminish or modify substantive right in order
to avoid violating the constitutional prohibition above
referred to. Because as this Supreme Court is not empowered
by the Constitution to legislate on or abrogate substantive
rights, but only to promulgate rules of pleading, practice and
procedure which "shall not diminish, increase or modify
substantive rights," this Court can not step on them in
making the rules, and the Constitution must be presumed not
to tolerate nor expect such incursion as would affect the
substantive rights of the accused in any manner.
Besides, depriving an accused of his right to be confronted
and cross-examine the witness against him in a preliminary
investigation would affect the accused not in a limited and
unsubstantial but in a harsh and arbitrary manner. The
testimony of a witness given in the absence of the defendant
and without an opportunity on the part of the latter to crossexamine him is a hearsay evidence, and it should not be
admitted against the defendant in a preliminary investigation
that is granted to the latter as a protection against hasty,
malicious and oppressive prosecutions (U. S. vs. Grant and
Kennedy, supra). Otherwise, an accused who is innocent and
should not be arrested, or if arrested should be released
immediately a short time after his arrest after the preliminary
investigation, would have to be held for trial and wait for a
considerable period of time until the case is tried and
acquitted after trial by the Courts of First Instance in
provinces on account of the admission of such evidence in
the preliminary investigation, evidence not admissible at the
trial.

Therefore, the motion for reconsideration is granted, and

after the necessary proceedings the decision of the majority
reversed or modified in accordance with my dissenting
opinion.
PERFECTO, J.:
We dissent. Our opinion in the Dequito case still stands. The
motion for reconsideration should be granted.
Retroactive Application of Procedural Law: Fresh-Period Rule;
Neypes Doctrine
Rodriguez v. People, October 24, 2012
G.R. No. 192799
VELASCO, JR., J.:
In this Petition for Review on Certiorari, petitioner assails the
March 2, 2010 Decision1rll and June 29, 2010
Resolution2rll of the Court of Appeals (CA) in CA-G.R. SP
No. 108789, which affirmed the April 14, 2009 Order3rll
of the Regional Trial Court (RTC), Branch 24 in Manila,
denying due course to petitioners Notice of Appeal in
Criminal Case No. 02-206499.
The RTC convicted petitioner for Unfair Competition penalized
under Sections 155, 168, 160 in relation to Sec. 170 of
Republic Act No. 8293 or the Intellectual Property Code of the
Philippines, and sentenced him to serve imprisonment of two
(2) years, to pay a fine of PhP 50, 000 and actual damages of
PhP 75,000.
The pertinent factual antecedents are undisputed.

10

After promulgation of the Decision in Criminal Case No. 02206499 convicting him for unfair competition, petitioner filed
a motion for reconsideration before the RTC on the 15th or
the last day of the reglementary period to appeal. Fourteen
(14) days after receipt of the RTC Order denying his motion
for reconsideration, petitioner filed his Notice of
Appeal.4rll Thus, the denial of his Notice of Appeal on the
ground of its being filed out of time under Sec. 6, Rule 122,
Revised Rules of Criminal Procedure. Before the RTC, the CA
and now here, petitioner was unwavering in his assertion of
the applicability of the "fresh period rule" as laid down in
Neypes v. Court of Appeals.

Courts to the RTC) and Rule 41 (appeals from the RTCs to the
CA or this Court); Rule 42 (appeals from the RTCs to the CA);
Rule 43 (appeals from quasi-judicial agencies to the CA); and
Rule 45 (appeals by certiorari to this Court).7rll A scrutiny
of the said rules, however, reveals that the "fresh period rule"
enunciated in Neypes need NOT apply to Rules 42, 43 and 45
as there is no interruption in the 15-day reglementary period
to appeal. It is explicit in Rules 42, 43 and 45 that the
appellant or petitioner is accorded a fresh period of 15 days
from the notice of the decision, award, judgment, final order
or resolution or of the denial of petitioners motion for new
trial or reconsideration filed.

The rationale of the "fresh period rule"

The pivotal question is whether the "fresh period rule" is

applicable to appeals from conviction in criminal cases
governed by Sec. 6 of Rule 122 which pertinently

To standardize the appeal periods provided in the Rules and

to afford litigants fair opportunity to appeal their cases, the
Court deems it practical to allow a fresh period of 15 days
within which to file the notice of appeal in the Regional Trial
Court, counted from receipt of the order dismissing a motion
for a new trial or motion for reconsideration.
Henceforth, this "fresh period rule" shall also apply to Rule 40
governing appeals from the Municipal Trial Courts to the
Regional Trial Courts; Rule 42 on petitions for review from the
Regional Trial Courts to the Court of Appeals; Rule 43 on
appeals from quasi-judicial agencies to the Court of Appeals
and Rule 45 governing appeals by certiorari to the Supreme
Court. The new rule aims to regiment or make the appeal
period uniform, to be counted from receipt of the order
denying the motion for new trial, motion for reconsideration
(whether full or partial) or any final order or resolution.
Neypes elucidates that the "fresh period rule" applies to
appeals under Rule 40 (appeals from the Municipal Trial

Sec. 6. When appeal to be taken. An appeal must be taken

within fifteen (15) days from promulgation of the judgment or
from notice of the final order appealed from. This period for
perfecting an appeal shall be suspended from the time a
motion for new trial or reconsideration is filed until notice of
the order overruling the motion has been served upon the
accused or his counsel at which time the balance of the
period begins to run. (Emphasis supplied.)
While Neypes was silent on the applicability of the "fresh
period rule" to criminal cases, the issue was squarely
addressed in Yu v. Tatad,9rll which expanded the scope of
the doctrine in Neypes to criminal cases in appeals of
conviction under Sec. 6, Rule 122 of the Revised Rules of
Criminal Procedure. Thus, the Court held in
11

While Neypes involved the period to appeal in civil cases, the

Courts pronouncement of a "fresh period" to appeal should
equally apply to the period for appeal in criminal cases under
Section 6 of Rule 122 of the Revised Rules of Criminal
Procedure
xxxx
Were we to strictly interpret the "fresh period rule" in Neypes
and make it applicable only to the period to appeal in civil
cases, we shall effectively foster and encourage an absurd
situation where a litigant in a civil case will have a better
right to appeal than an accused in a criminal casea situation
that gives undue favor to civil litigants and unjustly
discriminates against the accused-appellants. It suggests a
double standard of treatment when we favor a situation
where property interests are at stake, as against a situation
where liberty stands to be prejudiced.
We must emphatically reject this double and unequal
standard for being contrary to reason. Over time, courts have
recognized with almost pedantic adherence that what is
contrary to reason is not allowed in lawQuod est
inconveniens, aut contra rationem non permissum est in
lege. Thus, we agree with the OSGs view that if a delay in the
filing of an appeal may be excused on grounds of substantial
justice in civil actions, with more reason should the same
treatment be accorded to the accused in seeking the review
on appeal of a criminal case where no less than the liberty of
the accused is at stake. The concern and the protection we
must extend to matters of liberty cannot be overstated.
It is, thus, now settled that the fresh period rule is applicable
in criminal cases, like the instant case, where the accused
files from a judgment of conviction a motion for new trial or

reconsideration which is denied by the trial court. The

accused will have a fresh 15-day period counted from receipt
of such denial within which to file his or her notice of appeal.
Verily, the application of the statutory privilege of appeal
must not prejudice an accused who must be accorded the
same statutory privilege as litigants in civil cases who are
granted a fresh 15-day period within which to file an appeal
from receipt of the denial of their motion for new trial or
reconsideration. It is indeed absurd and incongruous that an
appeal from a conviction in a criminal case is more stringent
than those of civil cases. If the Court has accorded litigants in
civil casesunder the spirit and rationale in Neypesgreater
leeway in filing an appeal through the "fresh period rule,"
with more reason that it should equally grant the same to
criminal cases which involve the accuseds "sacrosanct right
to liberty, which is protected by the Constitution, as no
person should be deprived of life, liberty, or property without
due process of law.
Consequently, in light of the foregoing, we hold that
petitioner seasonably filed his notice of appeal on February 2,
2009, within the fresh period of 15 days, counted from
January 19, 2009, the date of receipt of the RTC Order
denying his motion for reconsideration.
WHEREFORE, the instant petition is GRANTED. Accordingly,
the April 14, 2009 Order of the RTC, Branch 24 in Manila and
the assailed March 2, 2010 Decision and June 29, 2010
Resolution of the CA in CA-G.R. SP No. 108789 are REVERSED
and SET ASIDE. The Notice of Appeal of petitioner Rolex
Rodriguez y Olayres dated January 29, 2009 is hereby GIVEN
DUE COURSE. Let the case records be elevated by the RTC to
the CA for the review of petitioners appeal with dispatch. No
costs.
12

SO ORDERED.

damages against SLR Builders and its President, Oscar

Violago (petitioners) before the Housing and Land Use
Regulatory Board (HLURB).
In a decision3 dated February 16, 2004, Housing and Land
Use Arbiter Atty. Joselito F. Melchor ruled in Cristina's favor, to
wit:

San Lorenzo Ruiz Builders v. Bayang, April 20, 2015

G.R. No. 194702
BRION, J.:
This is a petition for review on certiorari assailing the July 23,
2010 decision1 and the December 2, 2010 resolution2 of the
Court of Appeals (CA) in CA-G.R. SP No. 100332. The CA
affirmed the resolutions dated November 17, 2006 and July
26, 2007 of the Office of President in O.P. Case No. 06-D-160,
which dismissed the appeal of petitioners San Lorenzo Ruiz
Builders and Developers Group, Inc. (SLR Builders) and Oscar
Violago for having been filed out of time.
Facts
On April 15, 2000, petitioner SLR Builders (then known as
Violago Builders, Inc), as seller, and respondent Ma. Cristina
F. Bayang (Cristina), as buyer, entered into a "contract to
sell" of a sixty (60)-square meter lot in Violago Homes
Parkwoods Subdivision, located in Barangay Payatas, Quezon
City.
Upon full payment of the monthly amortizations on the
purchased lot, Cristina demanded from SLR Builders the
execution of the deed of absolute sale and the lot's
certificate of title but the latter failed to deliver, prompting
Cristina to file a complaint for specific performance and

WHEREFORE, premises considered, judgment is hereby

rendered as follows:
Ordering the respondents (referring to the petitioners) to
execute the Deed of Absolute Sale of the subject property in
the name of the complainant (referring to the respondent)
and deliver the title thereof free from all liens and
encumbrances;
In the alternative, in case of legal and physical impossibility
of the respondents to perform the aforementioned acts in the
preceding paragraph, respondent San Lorenzo Ruiz Builders
and Developers Group, Incorporated is hereby ordered to
reimburse to the complainant the amount of THREE
HUNDRED TWENTY FOUR THOUSAND EIGHT HUNDRED SIXTY
FIVE PESOS & 16/100 (P324,865.16) with legal interest of
twelve percent (12%) per annum to be computed from the
filing of the complaint on November 04, 2002 until fully paid;
and
Ordering respondent San Lorenzo Ruiz Builders and
Developers Group, Incorporated to pay the following sums:
FIVE THOUSAND PESOS (P5,000.00) as moral damages;
FIVE THOUSAND PESOS (P5,000.00) as exemplary damages;
FIVE THOUSAND PESOS (P5,000.00) as attorney's fees;
13

An administrative fine of TEN THOUSAND PESOS

(P10,000.00) payable to this Office fifteen (15) days upon
receipt of this decision, for violation of Section 18 in relation
to Section 38 of PD 957.
SO ORDERED.
The petitioners appealed Arbiter Melchor's decision to the
HLURB Board of Commissioners. The Board dismissed5 and
denied,6 respectively, the petitioners' appeal and subsequent
motion for reconsideration. The petitioners then brought their
case to the Office of the President (OP), which was docketed
as O.P. Case No. 06-D-160.

In a resolution7 dated November 17, 2006, the OP dismissed

the petitioners' appeal for having been filed out of time. The
OP's resolution stated:
A review of the records shows that the HLURB Decision
affirming the Arbiter's decision was received by the
respondents/appellants (referring to the petitioners) on July
27, 2005. On that date, the 15-day prescriptive period within
which to file an appeal began to run. Instead of preparing an
appeal, respondents-appellants opted to file a Motion for
Reconsideration on August 10, 2005. Their filing of the said
motion interrupted the period of appeal by that time,
however, fourteen (14) days had already elapsed.
On April 17, 2006, respondents-appellants received the
Resolution denying their Motion for Reconsideration.
Following the above rules, respondents-appellants have only
one (1) day left, or until April 18, 2006, within which to file
their notice of appeal to this Office. Unfortunately, they were

able to do so only on April 27, 2006, or nine (9) days late8

(Emphasis supplied.)
The petitioners moved to reconsider and argued that the
"fresh period rule" enunciated in the case of Domingo
Neypes, et at. v. Court of Appeals, et al.9 should be applied
to their case.
The OP, in a resolution10 dated July 26, 2007, denied the
petitioners' motion with finality, stating that the "fresh period
rule" applies only to judicial appeals and not to
administrative appeals, such as in petitioners' case. The
petitioners then appealed to the CA via petition for review
under Rule 43 of the Rules of Court.
In its assailed decision, the CA denied the petitioners' petition
for review. The CA, likewise, denied the petitioners' motion
for reconsideration; hence, the filing of the present petition
for review on certiorari with this Court.

Issue: Whether the "fresh period rule" in Neypes applies to

administrative appeals, such as an appeal filed from a
decision of the HLURB Board of Commissioners to the Office
to the President.
Our Ruling
We DENY the petition. It is settled that the "fresh period rule"
in Neypes applies only to judicial appeals and not to
administrative appeals.
In Panolino v. Tajala,11 the Court was confronted with a
similar issue of whether the "fresh period rule" applies to an
appeal filed from the decision or order of the DENR regional
14

office to the DENR Secretary, an appeal which is

administrative in nature. We held in Panolino that the "fresh
period rule" only covers judicial proceedings under the 1997
Rules of Civil Procedure:
The "fresh period rule" in Neypes declares:
To standardize the appeal periods provided in the Rules and
to afford litigants fair opportunity to appeal their cases, the
Court deems it practical to allow a fresh period of 15 days
within which to file the notice of appeal in the Regional Trial
Court, counted from receipt of the order dismissing a motion
for a new trial or motion for reconsideration.
Henceforth, this "fresh period rule" shall also apply to Rule
40 governing appeals from the Municipal Trial Courts to the
Regional Trial Courts; Rule 42 on petitions for review from the
Regional Trial Courts to the Court of Appeals; Rule 43 on
appeals from quasi-judicial agencies to the Court of Appeals;
and Rule 45 governing appeals by certiorari to the Supreme
Court. The new rule aims to regiment or make the appeal
period uniform, to be counted from receipt of the order
denying the motion for new trial, motion for reconsideration
(whether full or partial) or any final order or resolution.
xxxx
As reflected in the above-quoted portion of the decision in
Neypes, the "fresh period rule" shall apply to Rule
40_(appeals from the Municipal Trial Courts to the Regional
Trial Courts); Rule 41 (appeals from the Regional Trial Courts
to the Court of Appeals or Supreme Court); Rule 42 (appeals
from the Regional Trial Courts to the Court of Appeals); Rule
43 (appeals from quasi-judicial agencies to the Court of
Appeals); and Rule 45 (appeals by certiorari to the Supreme

Court). Obviously, these Rules cover judicial proceedings

under the 1997 Rules of Civil Procedure.
Petitioner's present case is administrative in nature involving
an appeal from the decision or order of the DENR regional
office to the DENR Secretary. Such appeal is indeed governed
by Section 1 of Administrative Order No. 87, Series of 1990.
As earlier quoted, Section 1 clearly provides that if the
motion for reconsideration is denied, the movant shall
perfect his appeal "during the remainder of the period of
appeal, reckoned from receipt of the resolution of denial;"
whereas if the decision is reversed, the adverse party has a
fresh 15-day period to perfect his appeal. (Emphasis
supplied.)
In this case, the subject appeal, i.e., appeal from a decision
of the HLURB Board of Commissioners to the OP, is not
judicial but administrative in nature; thus, the "fresh period
rule" in Neypes does not apply.
As aptly pointed out by the OP, the rules and regulations
governing appeals from decisions of the HLURB Board of
Commissioners to the OP are Section 2, Rule XXI of HLURB
Resolution No. 765, series of 2004, in relation to Paragraph 2,
Section 1 of Administrative Order No. 18, series of 1987:
Section 2, Rule XXI of the HLURB Resolution No. 765, series of
2004, prescribing the rules and regulations governing
appeals from decisions of the Board of Commissioners to the
Office of the President, pertinently reads:
Section 2. Appeal. - Any party may, upon notice to the Board
and the other party, appeal a decision rendered by the Board
of Commissioners to the Office of the President within fifteen
15

(15) days from receipt thereof, in accordance with P.D. No.

1344 and A.O. No. 18 Series of 1987.
The pendency of the motion for reconsideration shall
suspend the running of the period of appeal to the Office of
the President.
Corollary thereto, paragraph 2, Section 1 of Administrative
Order No. 18, series of 1987, provides that in case the
aggrieved party files a motion for reconsideration from an
adverse decision of any agency/office, the said party has the
only remaining balance of the prescriptive period within
which to appeal, reckoned from receipt of notice of the
decision denying his/her motion for reconsideration.12
(Emphasis supplied.)
Thus, in applying the above-mentioned rules to the present
case, we find that the CA correctly affirmed the OP in
dismissing the petitioners' appeal for having been filed out of
time.
WHEREFORE, we DENY the present petition for review on
certiorari and AFFIRM the decision dated July 23, 2010 and
resolution dated December 2, 2010 of the Court of Appeals in
CA-G.R. SP No. 100332.
SO ORDERED.
Concept of Liberal Construction of the Rules
Cabrera v. Ng, March 12, 2014
G.R. No. 201601
REYES, J.:

Before this Court is a petition for review on certiorari1 under

Rule 45 of the Rules of Court seeking to annul and set aside
the Decision2 dated October 21, 2009 and the Resolution3
dated March 26, 2012 of the Court of Appeals (CA) in CA-G.R.
SP No. 03392. The CA denied the petition for certiorari filed
by Marylou Cabrera (petitioner), which assailed the Order4
dated December 19, 2007 of the Regional Trial Court (RTC) of
Mandaue City, Branch 56, in Civil Case No. MAN-4773.
The Facts: On February 14, 2004, Felix Ng (respondent) filed
a complaint for sum of money with the RTC against the
petitioner and her husband Marionilo Cabrera (spouses
Cabrera), alleging that the latter issued to him the following:
(1) Metrobank Check No. 0244694 dated June 30, 2002 for
the amount of Thirty-One Thousand Pesos (P31,000.00); (2)
Metrobank Check No. 0244674 dated August 9, 2002 for the
amount of Thirty-Eight Thousand Seventy-Four Pesos and
Seventy-Six Centavos (P38,074.76); and (3) Metrobank Check
No. 0244745 dated August 15, 2005 for Two Million Five
Hundred Thousand Pesos (P2,500,000.00). That when
presented for payment, the said checks were all dishonored
as the accounts from which they had been drawn were
already closed.
The spouses Cabrera admitted that they issued Metrobank
Check No. 0244694 and Metrobank Check No. 0244674 to
the respondent and that the same were dishonored when
presented for payment. However, they claimed that they paid
the respondent the amount represented by the said checks
through the latters son Richard Ng. Further, they deny
having issued Metrobank Check No. 0244745 to the
respondent, alleging that the said check was forcibly taken
from them by Richard Ng.

16

On August 7, 2007, the RTC rendered a Decision,5 which

ordered the spouses Cabrera to pay the respondent the
following: (1) Two Million Five Hundred Sixty-Nine Thousand
Seventy-Four Pesos (P2,569,074.00) plus legal interest from
inception of the obligation until fully paid; (2) moral damages
in the amount of Fifty Thousand Pesos (P50,000.00); (3)
attorneys fees of Twenty Thousand Pesos (P20,000.00); and
(4) litigation expenses in the amount of Ten Thousand Pesos
(P10,000.00).
On August 8, 2007, the spouses Cabrera received a copy of
the RTC Decision dated August 7, 2007. On August 14, 2007,
the spouses Cabrera filed with the RTC a motion for
reconsideration,6 which they set for hearing on August 17,
2007. On even date, the spouses Cabrera sent a copy of their
motion for reconsideration to the respondent thru registered
mail; it was actually received by the respondent on August
21, 2007.
The said motion for reconsideration, however, was not heard
on August 17, 2007 as the new acting presiding judge of the
said court had just assumed office. On August 28, 2007, the
RTC issued a notice,7 which set the said motion for
reconsideration for hearing on September 25, 2007.
On September 20, 2007, the respondent filed an opposition8
to the motion for reconsideration filed by the spouses
Cabrera. The respondent alleged that the said motion for
reconsideration is a mere scrap of paper since it violated the
three-day notice requirement. The respondent pointed out
that the spouses Cabrera sent to him a copy of their motion
for reconsideration, which was set for hearing on August 17,
2007, via registered mail on August 14, 2007; that he
actually received a copy thereof only on August 21, 2007
four days after the scheduled hearing thereon.

It appears that the scheduled hearing of the spouses

Cabreras motion for reconsideration on September 25, 2007
did not push through. Consequently, on September 26, 2007,
the RTC issued another notice,9 which set the said motion for
reconsideration for hearing on October 26, 2007.
On October 26, 2007, the RTC issued an Order,10 which
directed the parties to file their additional pleadings, after
which the motion for reconsideration filed by the spouses
Cabrera would be deemed submitted for resolution.
On December 19, 2007, the RTC issued an Order11 which
denied the motion for reconsideration filed by the spouses
Cabrera. The RTC pointed out that the spouses Cabrera
violated Section 4, Rule 15 of the Rules of Court, which
mandates that every motion required to be heard should be
served by the movant in such a manner as to ensure its
receipt by the other party at least three days before the date
of hearing. Thus:
After a meticulous scrutiny of the records of this case, the
court opines that the motion was filed beyond the
reglementary three (3)[-]day period.
As the records bear out, the instant motion was mailed to the
plaintiffs counsel on August 14[, 2007] and was set for
hearing on August 17, 2007. However, the copy of said
motion had reached plaintiffs side and a copy of which was
received by plaintiffs counsel only on August 17, 2007[,] four
(4) days late after it was supposed to be heard. Hence, a
clear blatant violations [sic] of the rule on notice and
hearing.12
The RTC further opined that a motion, which fails to comply
with the three-day notice requirement is a mere scrap of
17

paper; it is not entitled to judicial cognizance and would not

toll the running of the reglementary period for filing the
requisite pleadings. Accordingly, the RTC held, its Decision
dated August 7, 2007 had already become final for failure of
the spouses Cabrera to comply with the three-day notice
requirement.

Respondent court, therefore, correctly held that such motion

violated the three (3)-day notice rule; the essence of due
process. Respondent court had applied said rule to the given
situation, and of no doubt, mere adherence to the rules
cannot be considered grave abuse of discretion on the part of
the respondent court. x x x.15 (Citation omitted)

The petitioner then filed a petition for certiorari13 with the

CA, alleging that the RTC gravely abused its discretion in
denying her motion for reconsideration. The petitioner
pointed out that the RTC did not actually conduct a hearing
on her motion for reconsideration on August 17, 2007;that
her motion for reconsideration was actually heard on October
26, 2007, after the respondent had already filed his
opposition thereto. Thus, the petitioner claimed, the issue of
her failure to comply with the three-day notice requirement
had already been rendered moot. In any case, the petitioner
asserted, the RTC should have resolved her motion for
reconsideration on its merits rather than simply denying it on
mere technicality.

The petitioner sought a reconsideration of the Decision dated

October 21, 2009 but it was denied by the CA in its
Resolution16 dated March 26, 2012.

On October 21, 2009, the CA, by way of the assailed

Decision, denied the petition for certiorari filed by the
petitioner. The CA opined that the RTC did not abuse its
discretion in denying the motion for reconsideration filed by
the spouses Cabrera since it merely applied the three-day
notice requirement under Section 4, Rule 15 of the Rules of
Court. Thus:

Sections 4 and 5, Rule 15 of the Rules of Court provide that:

It appears that petitioners Motion for Reconsideration was

set for hearing on 17 August 2007. A copy thereof was
mailed to private respondent on 14 August 2007, and private
respondent actually received his copy only on 21 August
2007 or four (4) days after the set date of hearing; and thus,
depriving him of the opportunity to oppose the motion.

Hence, the instant petition.

The Issue: The sole issue to be resolved by the Court is
whether the CA erred in affirming the RTC Order dated
December 19, 2007, which denied the motion for
reconsideration filed by the spouses Cabrera.
The Courts Ruling
The petition is meritorious.

Sec. 4. Hearing of motion. Except for motions which the

court may act upon without prejudicing the rights of the
adverse party, every written motion shall be set for hearing
by the applicant.
Every written motion required to be heard and the notice of
the hearing thereof shall be served in such a manner as to
ensure its receipt by the other party at least three (3) days
before the date of hearing, unless the court for good cause
sets the hearing on shorter notice.
Sec. 5. Notice of hearing. The notice of hearing shall be
addressed to all parties concerned, and shall specify the time
18

and date of the hearing which must not be later than ten (10)
days after the filing of the motion. (Emphasis ours)
The general rule is that the three-day notice requirement in
motions under Sections 4 and 5 of the Rules of Court is
mandatory. It is an integral component of procedural due
process.17 "The purpose of the three-day notice requirement,
which was established not for the benefit of the movant but
rather for the adverse party, is to avoid surprises upon the
latter and to grant it sufficient time to study the motion and
to enable it to meet the arguments interposed therein."
"A motion that does not comply with the requirements of
Sections 4 and 5 of Rule 15 of the Rules of Court is a
worthless piece of paper which the clerk of court has no right
to receive and which the court has no authority to act
upon."19 "Being a fatal defect, in cases of motions to
reconsider a decision, the running of the period to appeal is
not tolled by their filing or pendency."
Nevertheless, the three-day notice requirement is not a hard
and fast rule. When the adverse party had been afforded the
opportunity to be heard, and has been indeed heard through
the pleadings filed in opposition to the motion, the purpose
behind the three-day notice requirement is deemed realized.
In such case, the requirements of procedural due process are
substantially complied with. Thus, in Preysler, Jr. v. Manila
Southcoast Development Corporation,21 the Court ruled that:

The three-day notice rule is not absolute. A liberal

construction of the procedural rules is proper where the lapse
in the literal observance of a rule of procedure has not
prejudiced the adverse party and has not deprived the court

of its authority. Indeed, Section 6, Rule 1 of the Rules of Court

provides that the Rules should be liberally construed in order
to promote their objective of securing a just, speedy and
inexpensive disposition of every action and proceeding. Rules
of procedure are tools designed to facilitate the attainment of
justice, and courts must avoid their strict and rigid
application which would result in technicalities that tend to
frustrate rather than promote substantial justice.
In Somera Vda. De Navarro v. Navarro, the Court held that
there was substantial compliance of the rule on notice of
motions even if the first notice was irregular because no
prejudice was caused the adverse party since the motion was
not
considered
and
resolved
until
after
several
postponements of which the parties were duly notified.
Likewise, in Jehan Shipping Corporation v. National Food
Authority, the Court held that despite the lack of notice of
hearing in a Motion for Reconsideration, there was
substantial compliance with the requirements of due process
where the adverse party actually had the opportunity to be
heard and had filed pleadings in opposition to the motion.
The Court held:
This Court has indeed held time and again, that under
Sections 4 and 5 of Rule 15 of the Rules of Court, mandatory
is the requirement in a motion, which is rendered defective
by failure to comply with the requirement. As a rule, a motion
without a notice of hearing is considered pro forma and does
not affect the reglementary period for the appeal or the filing
of the requisite pleading.
As an integral component of the procedural due process, the
three-day notice required by the Rules is not intended for the
benefit of the movant. Rather, the requirement is for the
19

purpose of avoiding surprises that may be sprung upon the

adverse party, who must be given time to study and meet
the arguments in the motion before a resolution of the court.
Principles of natural justice demand that the right of a party
should not be affected without giving it an opportunity to be
heard.
The test is the presence of opportunity to be heard, as well
as to have time to study the motion and meaningfully oppose
or controvert the grounds upon which it is based.
(Emphasis supplied and citations omitted)
It is undisputed that the hearing on the motion for
reconsideration filed by the spouses Cabrera was reset by the
RTC twice with due notice to the parties; it was only on
October 26, 2007 that the motion was actually heard by the
RTC. At that time, more than two months had passed since
the respondent received a copy of the said motion for
reconsideration on August 21, 2007. The respondent was
thus given sufficient time to study the motion and to enable
him to meet the arguments interposed therein. Indeed, the
respondent was able to file his opposition thereto on
September 20, 2007.
Notwithstanding that the respondent received a copy of the
said motion for reconsideration four days after the date set
by the spouses Cabrera for the hearing thereof, his right to
due process was not impinged as he was afforded the chance
to argue his position. Thus, the R TC erred in denying the
spouses Cabrera's motion for reconsideration based merely
on their failure to comply with the three-day notice
requirement.

WHEREFORE, in consideration of the foregoing disquisitions,

the instant petition is GRANTED. The Decision dated October
21, 2009 and the Resolution dated March 26, 2012 of the
Court of Appeals in CA-G.R. SP No. 03392, are hereby
REVERSED and SET ASIDE. The case is hereby REMANDED to
the Regional Trial Court of Mandaue City, Branch 56, to
resolve the Motion for Reconsideration filed by the spouses
Cabrera on the merits within five (5) days from the finality of
this Decision. SO ORDERED.
Negros Slashers, Inc., v. Alvarez, et al., February 22,
2012
G.R. NO. 187122
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari assailing the
Decision[1][1] dated September 17, 2008 and Resolution[2]
[2] dated February 11 2009 of the Court of Appeals (CA) in
CA-G.R. SP No. 00817. The appellate court had reversed and
set aside the September 10, 2004 Decision[3][3] and March
21, 2005 Resolution[4][4] of the National Labor Relations
Commission (NLRC) and reinstated with modification the
Decision[5][5] of the Labor Arbiter finding respondent to have
been illegally dismissed.
The facts are undisputed.
Respondent Alvin Teng is a professional basketball player who
started his career as such in the Philippine Basketball
Association and then later on played in the Metropolitan
Basketball Association (MBA).
On February 4, 1999, Teng signed a 3-year contract[6][6]
(which included a side contract and agreement for additional
20

benefits and bonuses) with the Laguna Lakers. Before the

expiration of his contract with the Laguna Lakers on
December 31, 2001, the Lakers traded and/or transferred
Teng to petitioner Negros Slashers, with the latter assuming
the obligations of Laguna Lakers under Tengs unexpired
contract, including the monthly salary of P250,000, P50,000
of which remained to be the obligation of the Laguna Lakers.
On March 28, 2000, the management of the Laguna Lakers
formally informed Teng of his transfer to the Negros Slashers.
[7][7] Teng executed with the Negros Slashers the Players
Contract of Employment.[8][8]
On Game Number 4 of the MBA Championship Round for the
year 2000 season, Teng had a below-par playing
performance. Because of this, the coaching staff decided to
pull him out of the game. Teng then sat on the bench, untied
his shoelaces and donned his practice jersey.
On the
following game, Game Number 5 of the Championship Round,
Teng called-in sick and did not play.
On November 21, 2000, Vicente Tan, Finance Head of Negros
Slashers, wrote[9][9] Teng requiring him to explain in writing
why no disciplinary action should be taken against him for his
precipitated absence during the crucial Game 5 of the
National Championship Round. He was further informed that
a formal investigation would be conducted on November 28,
2000. The hearing, however, did not push through because
Teng was absent on the said scheduled investigation.
Hearing was rescheduled for December 11, 2000. On said
date, the investigation proceeded, attended by Tengs
representatives, Atty. Arsenio Yulo and Atty. Jose Aspiras.[10]
[10] A subsequent meeting was also conducted attended by
the management, coaching staff and players of the Negros
Slashers team, wherein the team members and coaching

staff unanimously expressed their sentiments against Teng

and their opposition against the possibility of Teng joining
back the team.[11][11]
On March 16, 2001, the management of Negros Slashers
came up with a decision, and through its General Manager,
petitioner Rodolfo Alvarez, wrote[12][12] Teng informing him
of his termination from the team.
On July 28, 2001, Teng filed a complaint before the Office of
the Commissioner of the MBA pursuant to the provision of the
Uniform Players Contract which the parties had executed.
Subsequently, on November 6, 2001, Teng also filed an illegal
dismissal case with the Regional Arbitration Branch No. VI of
the NLRC.[13][13]
On July 16, 2002, the Labor Arbiter issued a decision finding
Tengs dismissal illegal and ordering petitioner Negros
Slashers, Inc. to pay Teng P2,530,000 representing his unpaid
salaries, separation pay and attorneys fees. The Labor
Arbiter ruled that the penalty of dismissal was not justified
since the grounds relied upon by petitioners did not
constitute serious misconduct or willful disobedience or
insubordination that would call for the extreme penalty of
dismissal from service. The dispositive portion of the Labor
Arbiters decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered declaring the dismissal of complainant illegal and
respondents Negros Slashers, Inc. are hereby ordered to PAY
complainant the total sum of TWO MILLION FIVE HUNDRED
THIRTY THOUSAND (P2,530,000.00) PESOS representing
complainants unpaid salaries, separation pay and attorneys
fee, the award to be deposited with this Office within ten (10)
days from receipt of this Decision.
21

All other claims are hereby DISMISSED for lack of merit.

SO ORDERED.[14][14]
The case was then appealed to the NLRC. On September 10,
2004, the NLRC issued a Decision setting aside the July 16,
2002 Decision of the Labor Arbiter and entering a new one
dismissing the complaint for being premature since the
arbitration proceedings before the Commissioner of the MBA
were still pending when Teng filed his complaint for illegal
dismissal. The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the decision of the
Executive Labor Arbiter a quo is hereby REVERSED and SET
ASIDE. A new one is entered, dismissing the instant case for
being premature.
SO ORDERED.[15][15]
Teng filed a motion for reconsideration, but it was denied for
being filed beyond the ten-day reglementary period provided
for in Section 15,[16][16] Rule VII of the NLRC Rules of
Procedure.
Aggrieved, Teng filed a petition for certiorari with the CA
assailing the NLRC Decision datedSeptember 10, 2004and
the Resolution datedMarch 21, 2005denying his motion for
reconsideration.
OnSeptember 17, 2008the CA rendered the assailed Decision
setting aside the September 10, 2004 Decision and March 21,
2005 Resolution of the NLRC and reinstating with
modification the Labor Arbiters Decision.
The CA reinstated the findings of the Labor Arbiter that Teng
was illegally dismissed because the grounds relied upon by

petitioners were not enough to merit the supreme penalty of

dismissal. The CA held that there was no serious misconduct
or willful disobedience or insubordination on Tengs part. On
the issue of jurisdiction, the CA ruled that the Labor Arbiter
had jurisdiction over the case notwithstanding the pendency
of arbitration proceedings in the Office of the Commissioner
of the MBA.
Petitioners sought reconsideration of the above ruling, but
their motion was denied by the CA in a Resolution[17][17]
datedFebruary 11, 2009.
Petitioners now come to this Court assailing the Decision
datedSeptember 17, 2008and Resolution datedFebruary 11,
2009of the CA.
Firstly, petitioners argue that respondent Teng and his
counsel committed a blatant violation of the rule against
forum shopping. Petitioners aver that onJuly 28, 2001, Teng
filed a complaint before the MBA pursuant to the voluntary
arbitration provision of the Uniform Players Contract he
executed with Negros Slashers, Inc. During the pendency of
said complaint, Teng filed another complaint for illegal
dismissal with the Labor Arbiter. It is petitioners position
that Teng lied by certifying under oath that there is no similar
case pending between him and Negros Slashers, Inc., when
in fact, months before he had filed a complaint with the MBA
alleging the same factual antecedents and raising the same
issues.
Secondly, petitioners argue that the CA erred in ruling that
Tengs offenses were just minor lapses and irresponsible
action not warranting the harsh penalty of dismissal.
Petitioners allege that the CA paid scant attention to two very
important pieces of evidence which would clearly show the
22

gravity and seriousness of the offenses committed by Teng.

Petitioners claim that these two documents, i.e., the minutes
of the meeting[18][18] of players, management, and
coordinating staff, and a petition[19][19] by the players to
the management not to allow Teng to come back to the
team, would show that Teng should not have been treated as
an ordinary working man who merely absented himself by
feigning sickness when called upon to work. Petitioners
argue that the nature of the work and team atmosphere
should have been considered and given credence.
By
neglecting these two documents, the CA failed to appreciate
the gravity of the misconduct committed by Teng and the
effects it had on the basketball organization.
Petitioners also argue that respondents petition for certiorari
with the CA should have been dismissed outright because it
was filed beyond the reglementary period. Petitioners point
out that Teng received the NLRC Decision on October 15,
2004and therefore had ten days[20][20] or until October 25,
2004 within which to file a motion for reconsideration. But he
filed his motion for reconsideration only on October 26, 2004
and said motion was denied[21][21] on March 21, 2005 for
being filed late.
Thereafter he filed his petition for
certiorari[22][22] with the CA on June 20, 2005. Petitioners
contend that the petition for certiorari was filed beyond the
period allowed by the Rules of Court because the 60-day
period to file the petition for certiorari should have started to
run from the receipt of the NLRC decision onOctober 15,
2004. And it should have expired onDecember 14, 2004
because it was as if no motion for reconsideration was filed in
the NLRC. Further, petitioners argue that the CA could not
take cognizance of the case because it is a settled rule that
certiorari as a special civil action will not lie unless a motion
for reconsideration is first filed before the NLRC to allow it an

opportunity to correct its errors. In this case, since the

motion for reconsideration was filed late, it should have been
treated as if no motion for reconsideration was filed.
Teng, on the other hand, maintains that there is no violation
of the rule against forum shopping. He submits that he
indeed filed his complaint before the MBA as early asJuly 28,
2001.
Unfortunately, for more than three months, the
supposed voluntary arbitration failed to yield any result until
the MBA itself was dissolved. It was only on November 2001,
after exhausting the arbitration process, did he file his
complaint before the Labor Arbiter. In other words, it was
only after the MBA failed to come up with a resolution on the
matter did he opt to seek legal redress elsewhere.
On the merits, Teng relies on the reasoning of the Labor
Arbiter in finding that his alleged lapses and misconduct were
too minor to justify the extreme penalty of dismissal from
service. In large part, he quotes the Labor Arbiters decision,
and emphasizes the Labor Arbiters statements that (1)
loosening of the shoe laces and the donning of the practice
jersey are not indicative of serious misconduct that would
justify dismissal from employment; (2) it cannot be
concluded that he merely feigned sickness when he informed
the Coach of his inability to play during Game No. 5; and (3)
there is no showing of any bad faith or ill motive on his part
that would qualify his actions as serious, severe and grave as
to warrant termination from service.
Teng also argues that the CA aptly clarified and explained the
legal reason why the petition for certiorari was given due
course despite some procedural lapses regarding the motion
for reconsideration with the NLRC.
Teng stresses that
jurisprudence allows the relaxation of procedural rules even
of the most mandatory character in the interest of
23

substantial justice. In this particular case, justice and equity

calls for the relaxation of the reglementary period for filing a
motion for reconsideration as well as the rule prohibiting the
filing of a petition for certiorari without first filing a motion for
reconsideration.
Simply put, the basic issues for our resolution are as follows:
(1) whether the CA erred in giving due course to respondent
Tengs petition for certiorari despite its late filing; (2) whether
Teng violated the rule on forum shopping when he filed a
complaint for illegal dismissal with the Regional Arbitration
Branch of the NLRC while a similar complaint was pending in
the Office of the Commissioner of the MBA; and (3) whether
the CA erred in ruling that Tengs dismissal from the Negros
Slashers Team was unjustified and too harsh considering his
misconduct.
The petition is bereft of merit.
On the first issue raised by petitioners, we rule that the CA
did not commit a reversible error in giving due course to
Tengs petition for certiorari although said petition was filed
late. Ordinarily, rules of procedure are strictly enforced by
courts in order to impart stability in the legal system.
However, in not a few instances, we relaxed the rigid
application of the rules of procedure to afford the parties the
opportunity to fully ventilate their cases on the merits. This
is in line with the time honored principle that cases should be
decided only after giving all the parties the chance to argue
their causes and defenses. In that way, the ends of justice
would be better served. For indeed, the general objective of
procedure is to facilitate the application of justice to the rival
claims of contending parties, bearing always in mind that
procedure is not to hinder but to promote the administration

of justice.[23][23] In Ong Lim Sing, Jr. v. FEB Leasing and

Finance Corporation,[24][24] we ruled:
Courts have the prerogative to relax procedural rules of even
the most mandatory character, mindful of the duty to
reconcile both the need to speedily put an end to litigation
and the parties right to due process. In numerous cases, this
Court has allowed liberal construction of the rules when to do
so would serve the demands of substantial justice and equity.
xxx
Indeed the prevailing trend is to accord party litigants the
amplest opportunity for the proper and just determination of
their causes, free from the constraints of needless
technicalities.
Here, besides the fact that a denial of the recourse to the CA
would serve more to perpetuate an injustice and violation of
Tengs rights under our labor laws, we find that as correctly
held by the CA, no intent to delay the administration of
justice could be attributed to Teng. The CA therefore did not
commit reversible error in excusing Tengs one-day delay in
filing his motion for reconsideration and in giving due course
to his petition for certiorari.
As regards the second issue, we likewise find no merit in
petitioners claim that respondents act of filing a complaint
with the Labor Arbiter while the same case was pending with
the Office of the Commissioner of the MBA constituted forum
shopping.
For forum shopping to exist, it is necessary that (a) there be
identity of parties or at least such parties that represent the
same interests in both actions; (b) there be identity of rights
asserted and relief prayed for, the relief being founded on the
24

same facts; and (c) the identity of the two preceding

particulars is such that any judgment rendered in one action
will, regardless of which party is successful, amount to res
judicata in the other action.[25][25]
Petitioners are correct as to the first two requisites of forum
shopping. First, there is identity of parties involved: Negros
Slashers Inc. and respondent Teng. Second, there is identity
of rights asserted i.e., the right of management to terminate
employment and the right of an employee against illegal
termination. However, the third requisite of forum shopping
is missing in this case. Any judgment or ruling of the Office
of the Commissioner of the MBA will not amount to res
judicata. As defined in Agustin v. Delos Santos.
Res Judicata is defined as a matter adjudged; a thing
judicially acted upon or decided; a thing or matter settled by
judgment. According to the doctrine of res judicata, an
existing final judgment or decree rendered on the merits, and
without fraud or collusion, by a court of competent
jurisdiction, upon any matter within its jurisdiction, is
conclusive of the rights of the parties or their privies, in all
other actions or suits in the same or any other judicial
tribunal of concurrent jurisdiction on the points and matters
in issue in the first suit. To state simply, a final judgment or
decree on the merits by a court of competent jurisdiction is
conclusive of the rights of the parties or their privies in all
later suits on all points and matters determined in the former
suit. (Emphasis supplied.)
To clarify, res judicata is defined in jurisprudence as to have
four basic elements: (1) the judgment sought to bar the new
action must be final; (2) the decision must have been
rendered by a court having jurisdiction over the subject
matter and the parties; (3) the disposition of the case must

be a judgment on the merits; and (4) there must be as

between the first and second action, identity of parties,
subject matter, and causes of action.[27][27]
Here, although contractually authorized to settle disputes,
the Office of the Commissioner of the MBA is not a court of
competent jurisdiction as contemplated by law with respect
to the application of the doctrine of res judicata. At best, the
Office of the Commissioner of the MBA is a private mediator
or go-between as agreed upon by team management and a
player in the MBA Players Contract of Employment.[28][28]
Any judgment that the Office of the Commissioner of the MBA
may render will not result in a bar for seeking redress in
other legal venues. Hence, respondents action of filing the
same complaint in the Regional Arbitration Branch of the
NLRC does not constitute forum shopping.
On the third issue, we find that the penalty of dismissal
handed out against Teng was indeed too harsh.
We understand petitioners in asserting that a basketball
organization is a team-based enterprise and that a
harmonious working relationship among team players is
essential to the success of the organization. We also take
into account the petition of the other team members voicing
out their desire to continue with the team without Teng. We
note likewise the sentiments of the players and coaching
staff during the meeting ofFebruary 4, 2001stating how they
felt when Teng abandoned them during a crucial Game
Number5 inthe MBA championship round.
Petitioners rely heavily on the alleged effects of Tengs
actions on the rest of the team. However, such reaction from
team members is expected after losing a game, especially a
championship game. It is also not unlikely that the team
25

members looked for someone to blame after they lost the

championship games and that Teng happened to be the
closest target of the teams frustration and disappointment.
But all these sentiments and emotions from Negros Slashers
players and staff must not blur the eyes of the Court from
objectively assessing Tengs infraction in order to determine
whether the same constitutes just ground for dismissal. The
incident in question should be clear: Teng had a below-par
performance during Game Number 4 for which he was pulled
out from the game, and then he untied his shoelaces and
donned his practice jersey. In Game Number 5, he did not
play.

corresponding penalty demanded by the circumstance. The

penalty must be commensurate with the act, conduct or
omission imputed to the employee and must be imposed in
connection with the disciplinary authority of the employer.
(Emphasis in the original.)

As an employee of the Negros Slashers, Teng was expected

to report for work regularly. Missing a team game is indeed a
punishable offense. Untying of shoelaces when the game is
not yet finished is also irresponsible and unprofessional.
However, we agree with the Labor Arbiter that such isolated
foolishness of an employee does not justify the extreme
penalty of dismissal from service. Petitioners could have
opted to impose a fine or suspension on Teng for his
unacceptable conduct. Other forms of disciplinary action
could also have been taken after the incident to impart on
the team that such misconduct will not be tolerated.

WHEREFORE, the petition for review on certiorari is DENIED

for lack of merit and the Decision of the Court of Appeals
dated September 17, 2008 and Resolution dated February
11, 2009, in CA-G.R. SP No. 00817 are hereby AFFIRMED.

In Sagales v. Rustans Commercial Corporation,[29][29] this

Court ruled:
Truly, while the employer has the inherent right to discipline,
including that of dismissing its employees, this prerogative is
subject to the regulation by the State in the exercise of its
police power.
In this regard, it is a hornbook doctrine that infractions
committed by an employee should merit only the

In the case at bar, the penalty handed out by the petitioners

was the ultimate penalty of dismissal. There was no warning
or admonition for respondents violation of team rules, only
outright termination of his services for an act which could
have been punished appropriately with a severe reprimand or
suspension.

With costs against the petitioners.

SO ORDERED.
Cebu Bionic Builders Supply v. DBP, November 17,
2010
G.R. No. 154366
LEONARDO DE CASTRO, J.:
This Petition for Review on Certiorari[1] under Rule 45 of the
Rules of Court assails the Resolution[2] dated February 5,
2002 and the Amended Decision[3] dated July 5, 2002 of the
Court of Appeals in CA-G.R. CV No. 57216. In the Resolution
dated February 5, 2002, the Court of Appeals admitted the
Motion for Reconsideration[4] of herein respondents
Development Bank of the Philippines (DBP), Jose To Chip,
26

Patricio Yap and Roger Balila, notwithstanding the fact that

the same was filed more than six months beyond the
reglementary period. Said motion prayed for the reversal of
the Court of Appeals Decision[5] dated February 14, 2001,
which affirmed the Decision[6] dated April 25, 1997 of the
Regional Trial Court (RTC) of Cebu, Branch 8, in Civil Case No.
CEB-10104 that ruled in favor of petitioners. In the Amended
Decision of July 5, 2002, the Court of Appeals reversed its
previous Decision dated February 14, 2001 and dismissed the
petitioners complaint for lack of merit.

This Lease Contract made and entered into, by and between:

The facts leading to the instant petition are as follows:

WITNESSETH:

On June 2, 1981, the spouses Rudy R. Robles, Jr. and

Elizabeth R. Robles entered into a mortgage contract[7] with
DBP in order to secure a loan from the said bank in the
amount of P500,000.00. The properties mortgaged were a
parcel of land situated in Tabunoc, Talisay, Cebu, which was
then covered by Transfer Certificate of Title (TCT) No. T47783 of the Register of Deeds of Cebu, together with all the
existing improvements, and the commercial building to be
constructed
thereon[8]
(subject
properties).
Upon
completion, the commercial building was named the State
Theatre Building.

The LESSOR is the owner of a commercial building along

Tabunok, Talisay, Cebu, known as the State Theatre Building.

On October 28, 1981, Rudy Robles executed a contract of

lease in favor of petitioner Cebu Bionic Builders Supply, Inc.
(Cebu Bionic), a domestic corporation engaged in the
construction business, as well as the sale of hardware
materials. The contract pertinently provides:
CONTRACT OF LEASE

RUDY ROBLES, JR., Filipino, of legal age, married and resident

of 173 Maria Cristina Ext., Cebu City, hereinafter referred to
as the LESSOR,
- and CEBU BIONIC BUILDER SUPPLY, represented by LYDIA SIA,
Filipino, of legal age, married and with address at 240
Magallanes St., Cebu City hereinafter known as the LESSEE;

The LESSOR agrees to lease unto the LESSEE and the LESSEE
accepts the lease from the LESSOR, a portion of the ground
floor thereof, consisting of one (1) unit/store space under the
following terms and conditions:
1.
The LESSEE shall pay a monthly rental of One Thousand
(P1,000.00) Pesos, Philippine Currency. The rental is payable
in advance within the first five (5) days of the month, without
need of demand;
2.
That the term of this agreement shall start on
November 1, 1981 and shall terminate on the last day of
every month thereafter; provided however that this contract
shall be automatically renewed on a month to month basis if
no notice, in writing, is sent to the other party to terminate
this agreement after fifteen (15) days from receipt of said
notice;
xxxx

KNOW ALL MEN BY THESE PRESENTS:

27

9.
Should the LESSOR decide to sell the property during
the term of this lease contract or immediately after the
expiration of the lease, the LESSEE shall have the first option
to buy and shall match offers from outside parties.[9]
(Emphases ours.)

Sir:

The above contract was not registered by the parties thereto

with the Registry of Deeds of Cebu.

Please be informed that said property has been acquired

through foreclosure on February 6, 1987. Considering
thereat, we require you to remit the rental due for June 1987.

Subsequently, the spouses Robles failed to settle their loan

obligation with DBP. The latter was, thus, prompted to effect
extrajudicial foreclosure on the subject properties.[10] On
February 6, 1987, DBP was the lone bidder in the foreclosure
sale and thereby acquired ownership of the mortgaged
subject properties.[11] On October 13, 1988, a final Deed of
Sale[12] was issued in favor of DBP.

If you wish to continue on leasing the property, we request

you to come to the Bank for the execution of a Contract of
Lease, the salient conditions of which are as follows:

Meanwhile, on June 18, 1987, DBP sent a letter to Bonifacio

Sia, the husband of petitioner Lydia Sia who was then
President of Cebu Bionic, notifying the latter of DBPs
acquisition of the State Theatre Building. Said letter reads:

June 18, 1987

Mr. Bonifacio Sia

Bionic Builders Inc.
State Theatre Bldg.
Tabunok, Talisay, Cebu

This refers to the commercial space you are occupying in the

acquired property of the Bank, formerly owned by Rudy
Robles, Jr.

1. The lease will be on month to month basis, for a maximum

period of one (1) year;
2. Deposit equivalent to two (2) months rental and advance
of one (1) month rental, and the remaining amount for one
year period (equivalent to 9 months rental) shall be secured
by either surety bond, cash bond or assigned time deposit;
3. That in case there is a better offer or if the property will be
subject of a purchase offer, within the term, the lessor is
given an option of first refusal, otherwise he has to vacate
the premises within thirty (30) days from date of notice.
We consider, temporarily, the current monthly rental based
on the six-month receipts, which we require you to submit,
until such time when we will fix the amount accordingly.
If the contract of lease is not executed within thirty (30) days
from date hereof, it is construed that you are not interested
in leasing the premises and will vacate within the said period.
28

Please be guided accordingly.

Truly yours,

Truly yours,

(SGD) ANASTACIO T. MUNTUERTO, JR.

(SGD)LUCILO S. REVILLAS

Thereafter, on November 14, 1989, a Certificate of Time

Deposit[15] for P11,395.64 was issued in the name of
Bonifacio Sia and the same was allegedly remitted to DBP as
advance rental deposit.

Branch Head
On July 7, 1987, the counsel of Bonifacio Sia replied to the
above letter, to wit:
July 7, 1987
Mr. Lucilo S. Revillas
Branch Head
Development Bank of the Philippines
Dear Mr. Revillas,
This has reference to your letter of 18 June 1987 which you
sent to my client, Mr. Bonifacio Sia of Cebu Bionic Builders
Supply the lessee of a commercial space of the State Theatre
Bldg., located at Tabunok, Talisay, Cebu.
My client is amenable to the terms contained in your letter
except the following:
1.
In lieu of item no. 2 thereof, my client will deposit with
your bank the amount of P10,000.00, as assigned time
deposit;
2.
The 30 days notice you mentioned in your letter, (3), is
too short. My client is requesting for at least 60 days notice.
I sincerely hope that you will give due course to this request.

For reasons unclear, however, no written contract of lease

was executed between DBP and Cebu Bionic.
In the meantime, subsequent to the acquisition of the subject
properties, DBP offered the same for sale along with its other
assets. Pursuant thereto, DBP published a series of
invitations to bid on such properties, which were scheduled
on January 19, 1989,[16] February 23, 1989,[17] April 13,
1989,[18] and November 15, 1990.[19] As no interested
bidder came forward, DBP publicized an Invitation on
Negotiated Sale/Offer, the relevant terms and conditions of
which stated:
INVITATION ON NEGOTIATED SALE/OFFER
The DEVELOPMENT BANK OF THE PHILIPPINES, Cebu Branch,
will receive SEALED NEGOTIATED OFFERS/PURCHASE
PROPOSALS tendered at its Branch Office, DBP Building,
Osmea Boulevard, Cebu City for the sale of its acquired
assets mentioned hereinunder within the 15-Day-AcceptancePeriod starting from NOVEMBER 19, 1990 up to 12:00 oclock
noon of DECEMBER 3, 1990. Sealed offers submitted shall be
opened by the Committee on Negotiated Offers at exactly
2:00 oclock in the afternoon of the last day of the acceptance
period in order to determine the highest and/or most
advantageous offer.

Thank you.
29

Item No.
Description/Location
Starting Price

NOTE: If no offer is received during the above stated

acceptance period, the properties described above shall be
sold to the first offeror who submits an acceptable proposal
on a First-Come-First-Served basis.
City of Cebu, Philippines, November 16, 1990.

xxxx

(SGD.) TIMOTEO P. OLARTE

II. Commercial land, Lot No. 3681-C-3, having an area of 396

sq. m., situated in Tabunok, Talisay, Cebu and covered by TCT
No. T-65199 (DBP), including the commercial building
thereon.

Branch Head[20] (Emphases ours.)

P1,838,100.00

xxxx
A pre-numbered Acknowledgment Receipt duly signed by at
least two (2) of the Committee members shall be issued to
the offeror acknowledging receipt of such offer.
Negotiated offers may be made in CASH or TERMS, the
former requiring a deposit of 10% and the latter 20% of the
starting
price,
either
in
the
form
of
cash
or
cashiers/managers check to be enclosed in the sealed offer.
Interested negotiated offerors are requested to see Atty.
Apolinar K. Panal, Jr., Acquired Asset in Charge (Tel. No. 9-6325), in order to secure copies of the Letter-Offer form and
Negotiated Sale Rules and Procedures.

In the morning of December 3, 1990, the last day for the

acceptance of negotiated offers, petitioners submitted
through their representative, Judy Garces, a letter-offer form,
offering to purchase the subject properties for P1,840,000.00.
Attached to the letter-offer was a copy of the Negotiated Sale
Rules and Procedures issued by DBP and a managers check
for the amount of P184,000.00, representing 10% of the
offered purchase price. This offer of petitioners was not
accepted by DBP, however, as the corresponding deposit
therefor was allegedly insufficient.
After the lapse of the above-mentioned 15-day acceptance
period, petitioners did not submit any other offer/proposal to
purchase the subject properties.
On December 17, 1990, respondents To Chip, Yap and Balila
presented their letter-offer[21] to purchase the subject
properties on a cash basis for P1,838,100.00. Said offer was
accompanied by a downpayment of 10% of the offered
purchase price, amounting to P183,810.00. On even date,
DBP acknowledged the receipt of and accepted their offer. On
December 28, 1990, respondents To Chip, Yap and Balila paid
the balance of the purchase price and DBP issued a Deed of
Sale[22] over the subject properties in their favor.
30

On January 11, 1991, the counsel of respondents To Chip, Yap

and Balila sent a letter[23] addressed to the proprietor of
Cebu Bionic, informing the latter of the transfer of ownership
of the subject properties. Cebu Bionic was ordered to vacate
the premises within thirty (30) days from receipt of the letter
and directed to pay the rentals from January 1, 1991 until the
end of the said 30-day period.
The counsel of Cebu Bionic replied[24] that his client
received the above letter on January 11, 1991. He stated that
he has instructed Cebu Bionic to verify first the ownership of
the subject properties since it had the preferential right to
purchase the same. He likewise requested that he be
furnished a copy of the deed of sale executed by DBP in favor
of respondents To Chip, Yap and Balila.
On February 15, 1991, respondent To Chip wrote a letter[25]
to the counsel of Cebu Bionic, insisting that he and his corespondents Yap and Balila urgently needed the subject
properties to pursue their business plans. He also reiterated
their demand for Cebu Bionic to vacate the premises.
Shortly thereafter, on February 27, 1991, the counsel of
respondents To Chip, Yap and Balila sent its final demand
letter[26] to Cebu Bionic, warning the latter to vacate the
subject properties within seven (7) days from receipt of the
letter, otherwise, a case for ejectment with damages will be
filed against it.
Despite the foregoing notice, Cebu Bionic still paid[28] to
DBP, on March 22, 1991, the amount of P5,000.00 as monthly
rentals on the unit of the State Theatre Building it was
occupying for period of November 1990 to March 1991.

On April 10, 1991, petitioners filed against respondents DBP,

To Chip, Yap and Balila a complaint[29] for specific
performance, cancellation of deed of sale with damages,
injunction with a prayer for the issuance of a writ of
preliminary injunction.
Petitioners alleged, inter alia, that Cebu Bionic was the lessee
and occupant of a commercial space in the State Theatre
Building from October 1981 up to the time of the filing of the
complaint. During the latter part of 1990, DBP advertised for
sale the State Theatre Building and the commercial lot on
which the same was situated. In the prior invitation to bid,
the bidding was scheduled on November 15, 1990; while in
the next, under the 15-day acceptance period, the
submission of proposals was to be made from November 19,
1990 up to 12:00 noon of December 3, 1990. Petitioners
claimed that, at about 10:00 a.m. on December 3, 1990, they
duly submitted to Atty. Apolinar Panal, Jr., Chief of the
Acquired Assets of DBP, the following documents, namely:
6.1
Letter-offer form, offering to purchase the
property advertised, for the price of P1,840,000, which was
higher than the starting price of P1,838,100.00 on cash basis.
x x x;

6.2
Negotiated Sale Rules and Procedures, duly
signed by plaintiff, x x x;
6.3
Managers check for the amount of P184,000
representing 10% of the deposit dated December 3, 1990
and issued by Allied Banking Corp. in favor of the
Development Bank of the Philippines. x x x.
31

Petitioners asserted that the above documents were initially

accepted but later returned. DBP allegedly advised
petitioners that there was no urgent need for the same x x x,
considering that the property will necessarily be sold to
[Cebu Bionic] for the reasons that there was no other
interested party and that [Cebu Bionic] was a preferred party
being the lessee and present occupant of the property
subject of the lease[.][32] Petitioners then related that,
without their knowledge, DBP sold the subject properties to
respondents To Chip, Yap and Balila. The sale was claimed to
be simulated and fictitious, as DBP still received rentals from
petitioners until March 1991. By acquiring the subject
properties, petitioners contended that DBP was deemed to
have assumed the contract of lease executed between them
and Rudy Robles. As such, DBP was bound by the provision of
the lease contract, which stated that:
9. Should the Lessor decide to sell the property during the
term of this lease contract or immediately after the
expiration of the lease, the Lessee shall have the first option
to buy and shall match offers from outside parties.
Petitioners sought the rescission of the contract of sale
between DBP and respondents To Chip, Yap and Balila.
Petitioners also prayed for the issuance of a writ of
preliminary injunction, restraining respondents To Chip, Yap
and Balila from registering the Deed of Sale in the latters
favor and from undertaking the ejectment of petitioners from
the subject properties. Likewise, petitioners entreated that
DBP be ordered to execute a deed of sale covering the
subject properties in their name and to pay damages and
attorneys fees.

offer of petitioners was actually not accepted as their offer to

purchase was on a term basis, which therefore required a
20% deposit. The 10% deposit accompanying the petitioners
letter-offer was declared insufficient. DBP stated that the
letter-offer form was not completely filled out as the Term
and Mode of Payment fields were left blank. DBP then
informed petitioner Lydia Sia of the inadequacy of her offer.
After ascertaining that there was no other offeror as of that
time, Lydia Sia allegedly summoned back her representative
who did not leave a copy of the letter-offer and the attached
documents. DBP maintained that petitioners documents did
not show that the same were received and approved by any
approving authority of the bank. The letter-offer attached to
the complaint, which indicated that the mode of payment
was on a cash basis, was allegedly not the document shown
to DBP. In addition, DBP argued that there was no assumption
of the lease contract between Rudy Robles and petitioners
since it acquired the subject properties through the
involuntary mode of extrajudicial foreclosure and its request
to petitioners to sign a new lease contract was simply
ignored. DBP, therefore, insisted that petitioners occupancy
of the unit in the State Theatre Building was merely upon its
acquiescence. The petitioners payment of rentals on March
22, 1991 was supposedly made in bad faith as they were
made to a mere teller who had no knowledge of the sale of
the subject properties to respondents To Chip, Yap and Balila.
DBP, thus, prayed for the dismissal of the complaint and, by
way of counterclaim, asked that petitioners be ordered to pay
damages and attorneys fees.
Respondents To Chip, Yap and Balila no longer filed a
separate answer, adopting instead the answer of DBP.[35]

In its answer, DBP denied the existence of a contract of lease

between itself and petitioners. DBP countered that the letter32

In an Order[36] dated July 31, 1991, the RTC granted the

prayer of petitioners for the issuance of a writ of preliminary
injunction.[37]

On April 25, 1997, the RTC rendered judgment in Civil Case

No. CEB-10104, finding meritorious the complaint of the
petitioners. Explained the trial court:
It is a fact on record that [petitioners] complied with the
requirements of deposit and advance rental as conditions for
constitution of lease between the parties. [Petitioners] in
complying with the requirements, issued a time deposit in
the amount of P11,395.64 and remitted faithfully its monthly
rentals until April, 1991, which monthly rental was no longer
accepted by the DBP. Although there was no formal written
contract executed between [respondent] DBP and the
[petitioners], it is very clear that DBP opted to continue the
old and previous contract including the terms thereon by
accepting the requirements contained in paragraph 2 of its
letter dated June 18, 1987. It is also a fact on record that
under the lease contract continued by the DBP on the
[petitioners], it is provided in paragraph 9 thereof that the
lessee shall have the first option to buy and shall match
offers from outside parties. And yet, [respondent] DBP never
gave [petitioners] the first option to buy or to match offers
from outside parties, more specifically [respondents] To Chip,
Balila and Yap. It is also a fact on record that [respondent]
DBP in its letter dated June 18, 1987 to [petitioners] wrote in
paragraph 3 thereof, that in case there is better offer or if a
property will be subject of purchase offer, within the term,
the lessee is given the option of first refusal, otherwise, he
has to vacate the premises within thirty (30) days. Yet,
[respondent] DBP never informed [petitioners] that there was

an interested party to buy the property, meaning,

[respondents To Chip, Yap and Balila], thus depriving
[petitioners] of the opportunity of first refusal promised to
them in its letter dated June 18, 1987. x x x.
As regards the offer of petitioners to purchase the subject
properties from DBP, the RTC gave more credence to the
petitioners version of the facts, to wit:
It is also a fact on record that when [respondent] DBP offered
the property for negotiated sale under the 15-day
acceptance period[, which] ended at noon of December 3,
1991, [Cebu Bionic] submitted its offer, complete with [the
required documents.] x x x.
xxxx
These requirements, however, were unceremoniously
returned by [respondent] bank with the assurance that since
there was no other bidder of the said property, there was no
urgency for the same and that [Cebu Bionic] also, in all
events, is entitled to first option being the present lessee.
The declaration of Atty. Panal to the effect that Cebu Bionic
wanted to buy the property on installment terms, such that
the deposit of P184,000.00 was insufficient being only 10% of
the offer, could not be given much credence as it is refuted
by Exh. H which is the negotiated offer to purchase form
under the 15-day acceptance period accomplished by
[petitioners] which shows clearly the written word Cash after
the printed words Term and Mode of Payment, Exhibit J, the
Managers check issued by Allied Banking Corporation dated
December 3, 1990 in the amount of P184,000.00
representing 10% of the offer showing the mode of payment
is for cash; Exhibit K which is the application for Managers
33

check in the amount of P184,000.00 dated December 3, 1990

showing the beneficiary as DBP. If it is true that the offer of
[petitioners] was for installment payments, then in the
ordinary course of human behavior, it would not have wasted
effort in securing a Managers check in the amount of
P184,000.00 which was insufficient for 20% deposit as
required for installment payments. More credible is the
explanation [given by] witness Judy Garces when she said
that DBP through Atty. Panal returned the documents
submitted by her, saying that there was no urgency for the
same as there was no other bidder of [the said] property and
that Cebu Bionic was entitled to a first option to buy being
the present lessee. In the letter also of [respondent] bank
dated June 18, 1987, it is important to note that aside from
requiring Cebu Bionic to comply with certain requirements of
time deposit and advance rental, as condition for constitution
of lease between the parties and which was complied by
Cebu Bionic[,] said letter further states in paragraph 3
thereof that in case there is [a] better offer or if the property
will be subject of a purchase offer, within the term, the lessee
is given the option of first refusal, otherwise, he has to
vacate the premises within thirty days. In answer to the
Courts question, however, Atty. Panal admitted that he did
not tell [petitioners] that there was another party who was
willing to purchase the property, in violation of [petitioners]
right of first refusal.[39] (Emphasis ours.)
Likewise, the RTC found that respondents To Chip, Yap and
Balila were aware of the lease contract involving the subject
properties before they purchased the same from DBP. Thus:
[Respondent] Jose To Chip lamely pretends ignorance that
[petitioners] are lessees of the property, subject matter of
this case. He states that he and his partners, the other

[respondents], were given assurances by Atty. Panal of the

DBP that [Lydia Sia] is not a lessee, although he knew that
[petitioners] were presently occupying the property and that
it was possessed by [petitioners] even before it was owned
by the DBP.
xxxx
[Respondent] Roger Balila, in his testimony, likewise
pretended ignorance that he knew that [Lydia Sia] was a
lessee of the property.
Upon further questioning by the Court, he admitted that
[Lydia Sia] was not possessing the building freely; that she
was a lessee of Rudy Robles, the former owner, but cleverly
insisted in disowning knowledge that [Lydia Sia] was a lessee,
denying knowledge that [Lydia Sia] was paying rentals to
[respondent] bank. His pretended ignorance x x x was a way
of evading [Cebu Bionics] right of first priority to buy the
property under the contract of lease. x x x The Court is
convinced that [respondents To Chip, Yap and Balila] knew
that [Cebu Bionic] was the present lessee of the property
before they bought the same from [respondent] bank.
Common observation, knowledge and experience dictates
that as a prudent businessman, it was but natural that he ask
Lydia Sia what her status was in occupying the property when
he went to talk to her, that he ask her if she was a lessee.
But he said, all he asked her was whether she was interested
to buy the property. x x x.[40]
The trial court, therefore, concluded that:
From the foregoing facts on record, it is thus clear that
[petitioner] Cebu Bionic is the present lessee of the property,
the lease contract having been continued by [respondent]
34

DBP when it received rental payments up to March of 1991 as

well as the advance rental for one year represented by the
assigned time deposit which is still in [respondent] banks
possession. The provision, therefore, in the lease contract, on
the right of first option to buy and the right of first refusal
contained in [respondent] banks letter dated June 18, 1987,
are still subsisting and binding up to the present, not only on
[respondent] bank but also on [respondents To Chip, Yap and
Balila]. x x x.

We find nothing erroneous with the judgment rendered by

the trial court. Perforce, We sustain it and dismiss the
[respondents] submission.

WHEREFORE, THE FOREGOING

judgment is hereby rendered:

Apparently, DBP accepted [the documents submitted by

petitioners] and thereafter, through Atty. Panal (of DBP),
returned all of it to the [petitioners] with the assurance that
since there was no other bidder of the said property, there
was no urgency for the same and that [Cebu Bionic] also, in
all events, is entitled to first option being the present lessee.

PREMISES

CONSIDERED,

(1) Rescinding the Deed of Sale dated December 28, 1990

between [respondent] Development Bank of the Philippines
and [respondents] Roger Balila, Jose To Chip and Patricio Yap;
(2)
Ordering the [respondent] Development Bank of the
Philippines to execute a Deed of Sale over the property,
subject matter of this case upon payment by [petitioners] of
the whole consideration involved and to complete all acts or
documents necessary to have the title over said property
transferred to the name of [petitioners];
(3) Costs against [respondents].[41]
DBP forthwith filed a Notice of Appeal.[42] Respondents To
Chip, Yap and Balila filed a Motion for Reconsideration[43] of
the above decision, but the RTC denied the same in an
Order[44] dated July 4, 1997. Said respondents then filed
their Notice of Appeal.
On February 14, 2001, the Court of Appeals promulgated its
Decision,[46] pronouncing that:

The RTC determined, upon evidence on record after a careful

evaluation of the witnesses and their testimonies during the
trial that indeed [petitioners] right of first option was violated
and thus, rescission of the sale made by DBP to [respondents
To Chip, Yap and Balila] are in order.

[DBP] maintains that the return of the documents [submitted

by petitioners] was in order since the [petitioners] offered to
buy the property in question on installment basis requiring a
higher 20% deposit. This, however, was correctly rejected by
the trial court
The binding effect of the lease agreement upon the
[respondents To Chip, Yap and Balila] must be sustained since
from existing jurisprudence cited by the lower court, it was
determined during trial that:

... [respondents To Chip, Yap and Balila] knew that [Cebu

Bionic] was the present lessee of the property before they
bought the same from [respondent] bank. Common
observation, knowledge and experience dictates that as a
35

prudent businessman, it was but natural that he ask Lydia Sia

what her status was in occupying the property when he went
to talk to her, that he ask her if she was a lessee. But he said,
all he asked her was whether she was interested to buy the
property. x x x.
Moreover, We find that the submissions presented by the
[respondents] in their respective briefs argue against
questions of facts as found and determined by the lower
court. The respondents contentions consist of crude attempts
to question the assessment and evaluation of testimonies
and other evidence gathered by the trial court.
It must be remembered that findings of fact as determined
by the trial court are entitled to great weight and respect
from appellate courts and should not be disturbed on appeal
unless for [strong] and cogent reasons. These findings
generally, so long as supported by evidence on record, are
not to be disturbed unless there are some facts or evidence
which the trial court has misappreciated or overlooked, and
which if considered would have altered the results of the
entire case. Sad to say for the [respondents], We see no
reason to depart from this well-settled legal principle.
WHEREFORE, in view of the foregoing, the judgment of the
Regional Trial Court of Cebu City, Branch 8, in Civil Case No.
10104 is hereby AFFIRMED in toto.
On October 1, 2001, petitioners filed a Motion for Issuance of
Entry of Judgment.[48] Petitioners stressed that, based on
the records of the case, respondents were served a copy of
the Court of Appeals Decision dated February 14, 2001
sometime on March 7, 2001. However, petitioners discovered
that respondents have not filed any motion for
reconsideration of the said decision within the reglementary

period therefor, nor was there any petition for certiorari or

appeal filed before the Supreme Court.
In response to the above motion, respondents To Chip, Yap
and Balila filed on October 8, 2001 a Motion to Admit Motion
for Reconsideration.[49] Atty. Francis M. Zosa, the counsel for
respondents To Chip, Yap and Balila, explained that he sent
copies of the motion for reconsideration to petitioners and
DBP via personal delivery. On the other hand, the copies of
the motion to be filed with the Court of Appeals were
purportedly sent to Mr. Domingo Tan, a friend of Atty. Zosa in
Quezon City, who agreed to file the same personally with the
appellate court in Manila. When Atty. Zosa inquired if the
motion for reconsideration was accordingly filed, Mr. Tan
allegedly answered in the affirmative. To his surprise, Atty.
Zosa received a copy of petitioners Motion for Issuance of
Entry of Judgment. Atty. Zosa, thus, attributed the failure of
his clients to file a motion for reconsideration on the mistake,
excusable negligence and/or fraud committed by Mr. Tan.

In the assailed Resolution dated February 5, 2002, the Court

of Appeals granted the motion of respondents To Chip, Yap
and Balila and admitted the motion for reconsideration
attached therewith in the higher interest of substantial
justice.[50]
On July 5, 2002, the Court of Appeals reversed its original
Decision dated February 14, 2001, reasoning thus:
After a judicious review and reevaluation of the evidence and
facts on record, we are convinced that DBP had terminated
the Robles lease contract. From its letter of June 18, 1987,
DBP had expressly notified [petitioners] that (I)f they wish to
36

continue on leasing the property x x x to come to the Bank

for the execution of a Contract of Lease, the salient
conditions of which are as follows:
1. The lease will be on a month to month basis for a
maximum period of one (1) year;
2. Deposit equivalent to two (2) months rental and advance
of one (1) month rental, and the remaining amount for one
year (equivalent to 9 months rental) shall be secured by
either surety bond, cash bond or assigned time deposit;
3. That in case there is a better offer or if the property will be
subject of a purchase offer, within the term, the lessor is
given an option of first refusal, otherwise he has to vacate
the premises within thirty (30) days from date of notice.
We consider, temporarily, the current monthly rental based
on the six-month receipts, which we require you to submit,
until such time when we will fix the amount accordingly.

Evidently, except for the remittance of the monthly rentals

up to March 1991, the conditions imposed by DBP have never
been complied with. [Petitioners] did not go to the Bank to
sign any new written contract of lease with DBP. [Petitioners]
also did not put up a surety bond nor cash bond nor assign a
time deposit to secure the payment of rental for nine (9)
months, although the [petitioners] opened a time deposit but
did not assign it to DBP.

But even with the remittance and acceptance of the deposit

made by [petitioners] equivalent to two (2) months rental
and advance of one (1) month rental it does not necessarily
follow that DBP opted to continue with the Robles lease. This
is because the Robles contract provides:
That the term of the agreement shall start on November 1,
1981 and shall terminate on the last day of every month
thereafter, provided however, that this contract shall be
automatically renewed on a month to month basis if no
notice in writing is sent to the other party to determine to
terminate this agreement after fifteen (15) days from the
receipt of said notice.
Here, a notice was sent to [petitioners] on June 18, 1987,
informing them that if they wish to continue on leasing the
property, we request you to come to the Bank for the
execution of a Contract of Lease.
[Petitioners] failed to enter into the contract of lease required
by DBP for it to continue occupying the leased premises.
Because of [petitioners] failure to comply with the conditions
embodied in the 18 June 1987 letter, it cannot be said that
[petitioners] entered into a new contract with DBP where
they were given the first option to buy the leased property
and to match offers from outside parties.
Be that as it may, DBP continued to accept the monthly
rentals based on the old Robles contract despite the fact that
the [petitioners] failed to enter into a written lease contract
with it. Corollarily, the relations between the parties is now
governed by Article 1670 of the New Civil Code, thus:
Art. 1670. If at the end of contract the lessee should continue
enjoying the thing leased for fifteen days with the
37

acquiescence of the lessor, and unless a notice to the

contrary by either party has previously been given, it is
understood that there is an implied new lease, not for the
period of the original contract, but for the time established in
Articles 1682 and 1687. The other terms of the original
contract shall be revived.
The acceptance by DBP of the monthly rentals does not
mean that the terms of the Robles contract were revived. In
the case of Dizon vs. Court of Appeals, the Supreme Court
declared that:
The other terms of the original contract of lease which are
revived in the implied new lease under Article 1670 of the
New Civil Code are only those terms which are germane to
the lessees right [of] continued enjoyment of the property
leased an implied new lease does not ipso facto carry with it
any implied revival of any option to purchase the leased
premises.
In view of the foregoing, it is clear that [petitioners] had no
right to file a case for rescission of the deed of sale executed
by DBP in favor of [respondents To Chip, Yap and Balila]
because said deed of sale did not violate their alleged first
option to buy or match offers from outside parties which is
legally non-existent and which was not impliedly renewed
under Article 1670 of the Civil Code.
WHEREFORE, premises considered, the 14 February 2001
Decision is hereby RECONSIDERED and another one is issued
REVERSING the 25 April 1997 Decision of the Regional Trial
Court, Branch 8, Cebu City in Civil Case No. CEB-10104 and
the complaint of [petitioners] is DISMISSED for lack of merit.

Without seeking a reconsideration of the above decision,

petitioners filed the instant petition. In their Comment,
respondents opposed the petition on both procedural and
substantive grounds.
In petitioners Memorandum, they summarized the issues to
be resolved in the present case as follows:
A) PRELIMINARY ISSUES:

I.

II.

WHETHER OR NOT THE VERIFICATION (AND

CERTIFICATION OF NON-FORUM SHOPPING) IN THE
INSTANT PETITION WAS PROPER AND VALID
DESPITE ITS BEING SIGNED BY ONLY ONE OF THE
TWO PETITIONERS.
WHETHER OR NOT ONLY QUESTIONS OF LAW AND
NOT OF FACT CAN BE RAISED IN THE INSTANT
PETITION BEFORE THIS HON. SUPREME COURT.

B) MAIN AND PRINCIPAL ISSUES IN THE INSTANT PETITION:

I.

II.

WHETHER OR NOT THE HON. COURT OF APPEALS

ERRED IN ADMITTING RESPONDENTS MOTION FOR
RECONSIDERATION DESPITE ITS BEING FILED OUT
OF TIME
WHETHER OR NOT THE HON. COURT OF APPEALS
ERRED IN DECLARING THAT PETITIONERS DID NOT
ENTER INTO CONTRACT WITH RESPONDENT DBP
38

III.

IV.

V.

VI.

VII.

CONTINUING THE TERMS OF THE ROBLES

CONTRACT
WHETHER OR NOT THE HON. COURT OF APPEALS
ERRED
WHEN
IT
DECLARED
THAT
THE
CONTINUATION BY RESPONDENT DBP OF THE
LEASE CONTRACT DID NOT CONTAIN THE RIGHT OF
FIRST REFUSAL
WHETHER OR NOT THE HON. COURT OF APPEALS
ERRED WHEN IT DECLARED THAT THE LEASE
CONTRACT IS GOVERNED BY ART. 1670 OF THE
NEW CIVIL CODE
WHETHER OR NOT THE HON. COURT OF APPEALS
ERRED
WHEN
IT
FAILED
TO
RECOGNIZE
PETITIONERS RIGHT OF FIRST REFUSAL TO WHICH
RESPONDENTS WERE BOUND
WHETHER OR NOT THE HON. COURT OF APPEALS
ERRED WHEN IT FAILED TO DECLARE THAT
RESPONDENT DBP HAD VIOLATED PETITIONERS
RIGHTS
WHETHER OR NOT THE HON. COURT OF APPEALS
ERRED IN REVERSING ITS OWN JUDGMENT AND
DISMISSING PETITIONERS CLAIM FOR RESCISSION

We shall first resolve the preliminary issues.

Respondents To Chip, Yap and Balila argue that the instant
petition should be dismissed outright as the verification and
certification of non-forum shopping was executed only by
petitioner Lydia Sia in her personal capacity, without the
participation of Cebu Bionic.

The Court is not persuaded.

Except for the powers which are expressly conferred on it by

the Corporation Code and those that are implied by or are
incidental to its existence, a corporation has no powers. It
exercises its powers through its board of directors and/or its
duly authorized officers and agents. Thus, its power to sue
and be sued in any court is lodged with the board of directors
that exercises its corporate powers.[53] Physical acts, like
the signing of documents, can be performed only by natural
persons duly authorized for the purpose by corporate by-laws
or by a specific act of the board of directors.
In this case, respondents To Chip, Yap and Balila obviously
overlooked the Secretarys Certificate[55] attached to the
instant petition, which was executed by the Corporate
Secretary of Cebu Bionic. Unequivocally stated therein was
the fact that the Board of Directors of Cebu Bionic held a
special meeting on July 26, 2002 and they thereby approved
a Resolution authorizing Lydia Sia to elevate the present case
to this Court in behalf of Cebu Bionic, to wit:
Whereas, the board appointed LYDIA I. SIA to act and in
behalf of the corporation to file the CERTIORARI with the
Supreme Court in relations to the decision of the Court of
Appeals dated July 5, 2002 which reversed its own judgment
earlier promulgated on February 14, 2001 entitled CEBU
BIONIC BUILDERS SUPPLY, INC. and LYDIA SIA, (PetitionersAppellants) versus THE DEVELOPMENT BANK OF THE
PHILIPPINES, JOSE TO CHIP, PATRICIO YAP and ROGER BALILA
(Respondents- Appelles), docketed CA-G.R. NO. 57216.

Whereas, on mass unanimously motion of all members of

directors present hereby approved the appointment of LYDIA
39

I. SIA to act and sign all papers in connection of CA-G.R. NO.

57216.
Resolved and it is hereby resolve to appoint and authorized
LYDIA I. SIA to sign and file with the SUPREME COURT in
connection to decision of the Court of Appeals as above
mention.
Respondents To Chip, Yap and Balila next argue that the
instant petition raises questions of fact, which are not
allowed in a petition for review on certiorari. They, therefore,
submit that the factual findings of the Court of Appeals are
binding on this Court.
Section 1, Rule 45 of the Rules of Court categorically states
that the petition filed thereunder shall raise only questions of
law, which must be distinctly set forth. A question of law
arises when there is doubt as to what the law is on a certain
state of facts, while there is a question of fact when the
doubt arises as to the truth or falsity of the alleged facts. For
a question to be one of law, the same must not involve an
examination of the probative value of the evidence presented
by the litigants or any of them. The resolution of the issue
must rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review
of the evidence presented, the question posed is one of fact.
The above rule, however, admits of certain exceptions,[58]
one of which is when the findings of the Court of Appeals are
contrary to those of the trial court. As will be discussed
further, this exception is attendant in the case at bar.
We now determine the principal issues put forward by
petitioners.

First off, petitioners fault the Court of Appeals for admitting

the Motion for Reconsideration of its Decision dated February
14, 2001, which was filed by respondents To Chip, Yap and
Balila more than six months after receipt of the said decision.
The motion was eventually granted and the Court of Appeals
issued its assailed Amended Decision, ruling in favor of
respondents.
Indeed, the appellate courts Decision dated February 14,
2001 would have ordinarily attained finality for failure of
respondents
to
seasonably
file
their
Motion
for
Reconsideration thereon. However, we agree with the Court
of Appeals that the higher interest of substantial justice will
be better served if respondents procedural lapse will be
excused.
Verily, we had occasion to apply this liberality in the
application of procedural rules in Barnes v. Padilla[59] where
we aptly declared that
The failure of the petitioner to file his motion for
reconsideration within the period fixed by law renders the
decision final and executory. Such failure carries with it the
result that no court can exercise appellate jurisdiction to
review the case. Phrased elsewise, a final and executory
judgment can no longer be attacked by any of the parties or
be modified, directly or indirectly, even by the highest court
of the land.
However, this Court has relaxed this rule in order to serve
substantial justice considering (a) matters of life, liberty,
honor or property, (b) the existence of special or compelling
circumstances, (c) the merits of the case, (d) a cause not
entirely attributable to the fault or negligence of the party
favored by the suspension of the rules, (e) a lack of any
40

showing that the review sought is merely frivolous and

dilatory, and (f) the other party will not be unjustly prejudiced
thereby.[60]
In this case, what are involved are the property rights of the
parties given that, ultimately, the fundamental issue to be
determined is who among the petitioners and respondents To
Chip, Yap and Balila has the better right to purchase the
subject properties. More importantly, the merits of the case
sufficiently called for the suspension of the rules in order to
settle conclusively the rights and obligations of the parties
herein.
In essence, the questions that must be resolved are: 1)
whether or not there was a contract of lease between
petitioners and DBP; 2) if in the affirmative, whether or not
this contract contained a right of first refusal in favor of
petitioners; and 3) whether or not respondents To Chip, Yap
and Balila are likewise bound by such right of first refusal.
Petitioners contend that there was a contract of lease
between them and DBP, considering that they had been
allowed to occupy the premises of the subject property from
1987 up to 1991 and DBP received their rental payments
corresponding to the said period. Petitioners claim that DBP
were aware of their lease on the subject property when the
latter foreclosed the same and the acquisition of the subject
properties through foreclosure did not terminate the lease.
Petitioners subscribe to the ruling of the RTC that even if
there was no written contract of lease, DBP chose to continue
the existing contract of lease between petitioners and Rudy
Robles by accepting the requirements set down by DBP on
the letter dated June 18, 1987. Petitioners likewise posit that
the contract of lease between them and Rudy Robles never
expired, inasmuch as the contract did not have a definite

term and none of the parties thereto terminated the same. In

view of the continuation of the lease contract between
petitioners and Rudy Robles, petitioners submit that Article
1670 of the Civil Code on implied lease is not applicable on
the instant case.
We are not persuaded.
In Uy v. Land Bank of the Philippines,[61] the Court held that
[i]n respect of the lease on the foreclosed property, the buyer
at the foreclosure sale merely succeeds to the rights and
obligations of the pledgor-mortgagor subject to the provisions
of Article 1676 of the Civil Code on its possible termination.
This article provides that [t]he purchaser of a piece of land
which is under a lease that is not recorded in the Registry of
Property may terminate the lease, save when there is a
stipulation to the contrary in the contract of sale, or when the
purchaser knows of the existence of the lease. In short, the
buyer at the foreclosure sale, as a rule, may terminate an
unregistered lease except when it knows of the existence of
the lease.
In the instant case, the lease contract between petitioners
and Rudy Robles was not registered.[62] During trial, DBP
denied having any knowledge of the said lease contract.[63]
It asserted that the lease was merely presumed in view of the
existence of tenants in the subject property.[64]
Nevertheless, DBP recognized and acknowledged this lease
contract in its letter dated June 18, 1987, which was
addressed to Bonifacio Sia, then President of Cebu Bionic.
DBP even required Sia to pay the monthly rental for the
month of June 1987, thereby exercising the right of the
previous lessor, Rudy Robles, to collect the rental payments
from the lessee. In the same letter, DBP extended an offer to
Cebu Bionic to continue the lease on the subject property,
41

outlining the provisions of the proposed contract and

specifically instructing the latter to come to the bank for the
execution of the same. DBP likewise gave Cebu Bionic a 30day period within which to act on the said contract execution.
Should Cebu Bionic fail to do so, it would be deemed
uninterested in continuing with the lease. In that eventuality,
the letter states that Cebu Bionic should vacate the premises
within the said period.
Instead of acceding to the terms of the aforementioned
letter, the counsel of Cebu Bionic sent a counter-offer to DBP
dated July 7, 1987, suggesting a different mode of payment
for the rentals and requesting for a 60-day period within
which time the parties will execute a new contract of lease.
The parties, however, failed to execute a written contract of
lease. Petitioners put the blame on DBP, asserting that no
contract was signed because DBP did not prepare it for them.
DBP, on the other hand, counters that it was petitioners who
did not positively act on the conditions for the execution of
the lease contract. In view of the counter-offer of petitioners,
DBP and respondents To Chip, Yap and Balila argue that there
was no meeting of minds between DBP and petitioners,
which would have given rise to a new contract of lease.
The Court rules that, indeed, no new contract of lease was
ever perfected between petitioners and DBP.

preparation or negotiation, its perfection, and finally, its

consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the
contract and ends at the moment of agreement of the
parties. The perfection or birth of the contract takes place
when the parties agree upon the essential elements of the
contract. The last stage is the consummation of the contract
wherein the parties fulfill or perform the terms agreed upon
in the contract, culminating in the extinguishment thereof
(Bugatti vs. CA, 343 SCRA 335 [2000]). Article 1315 of the
Civil Code, provides that a contract is perfected by mere
consent. Consent, on the other hand, is manifested by the
meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract (See Article
1319, Civil Code). x
In the case at bar, there was no concurrence of offer and
acceptance vis--vis the terms of the proposed lease
agreement. In fact, after the reply of petitioners counsel
dated July 7, 1987, there was no indication that the parties
undertook any other action to pursue the execution of the
intended lease contract. Petitioners even admitted that they
merely waited for DBP to present the contract to them,
despite being instructed to come to the bank for the
execution of the same.

In Metropolitan Manila Development Authority v. JANCOM

Environmental Corporation,[65] we emphasized that:

Contrary to the ruling of the RTC, the Court is also not

convinced that DBP opted to continue the existing lease
contract between petitioners and Rudy Robles.

Under Article 1305 of the Civil Code, [a] contract is a meeting

of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render
some service. A contract undergoes three distinct stages

The findings of the RTC that DBP supposedly accepted the

requirements the latter set forth in its letter dated June 18,
1987 is not well taken. To recapitulate, the third paragraph of
the letter reads:
42

If you wish to continue on leasing the property, we request

you to come to the Bank for the execution of a Contract of
Lease, the salient conditions of which are as follows:
1. The lease will be on month to month basis, for a maximum
period of one (1) year;
2. Deposit equivalent to two (2) months rental and advance
of one (1) month rental, and the remaining amount for one
year period (equivalent to 9 months rental) shall be secured
by either surety bond, cash bond or assigned time deposit;
3.
That in case there is a better offer or if the
property will be subject of a purchase offer, within the term,
the lessor is given an option of first refusal, otherwise he has
to vacate the premises within thirty (30) days from date of
notice.[68]

The so-called requirements enumerated in the above

paragraph are not really requirements to be complied with by
the petitioners for the execution of the proposed lease
contract, as apparently considered by the RTC and the
petitioners. A close reading of the letter reveals that the
items enumerated therein were in fact the salient terms and
conditions of the proposed contract of lease, which the DBP
and the petitioners were to execute if the latter were so
willing. Also, the Certificate of Time Deposit in the amount of
P11,395.64, which was allegedly paid to DBP as advance
rental deposit pursuant to the said requirements, was not
even clearly established as such since it was neither secured
by a security bond or a cash bond, nor was it assigned to
DBP.

The contention that the lease contract between petitioners

and Rudy Robles did not expire, given that it did not have a
definite term and the parties thereto failed to terminate the
same, deserves scant consideration. To recall, the second
paragraph of the terms and conditions of the contract of
lease between petitioners and Rudy Robles reads:
2. That the term of this agreement shall start on November 1,
1981 and shall terminate on the last day of every month
thereafter; provided however that this contract shall be
automatically renewed on a month to month basis if no
notice, in writing, is sent to the other party to terminate this
agreement after fifteen (15) days from receipt of said notice.
[69] (Emphases ours.)
Crystal clear from the above provision is that the lease is on
a month-to-month basis. Relevantly, the well-entrenched
principle is that a lease from month-to-month is with a
definite period and expires at the end of each month upon
the demand to vacate by the lessor.[70] As held by the Court
of Appeals in the assailed Amended Decision, the abovementioned lease contract was duly terminated by DBP by
virtue of its letter dated June 18, 1987. We reiterate that the
letter explicitly directed the petitioners to come to the office
of the DBP if they wished to enter into a new lease
agreement with the said bank. Otherwise, if no contract of
lease was executed within 30 days from the date of the
letter, petitioners were to be considered uninterested in
entering into a new contract and were thereby ordered to
vacate the property. As no new contract was in fact executed
between petitioners and DBP within the 30-day period, the
directive to vacate, thus, took effect. DBPs letter dated June
18, 1987, therefore, constituted the written notice that was
required to terminate the lease agreement between
43

petitioners and Rudy Robles. From then on, the petitioners

continued possession of the subject property could be
deemed to be without the consent of DBP.
Thusly, petitioners assertion that Article 1670 of the Civil
Code is not applicable to the instant case is correct. The
reason, however, is not that the existing contract was
continued by DBP, but because the lease was terminated by
DBP, which termination was accompanied by a demand to
petitioners to vacate the premises of the subject property.
Article 1670 states that [i]f at the end of the contract the
lessee should continue enjoying the thing leased for fifteen
days with the acquiescence of the lessor, and unless a notice
to the contrary by either party has previously been given, it
is understood that there is an implied new lease, not for the
period of the original contract, but for the time established in
Articles 1682 and 1687. The other terms of the original
contract shall be revived. In view of the order to vacate
embodied in the letter of DBP dated June 18, 1987 in the
event that no new lease contract is entered into, the
petitioners continued possession of the subject properties
was without the acquiescence of DBP, thereby negating the
constitution of an implied lease.
Contrary to the ruling of the RTC, DBPs acceptance of
petitioners rental payments of P5,000.00 for the period of
November 1990 to March 1991 did not likewise give rise to
an implied lease between petitioners and DBP. In Tagbilaran
Integrated Settlers Association (TISA) Incorporated v. Court of
Appeals,[71] we held that the subsequent acceptance by the
lessor of rental payments does not, absent any circumstance
that may dictate a contrary conclusion, legitimize the
unlawful character of their possession. In the present case,
the petitioners rental payments to DBP were made in lump

sum on March 22, 1991. Significantly, said payments were

remitted only after petitioners were notified of the sale of the
subject properties to respondents To Chip, Yap and Balila and
after the petitioners were given a final demand to vacate the
properties. These facts substantially weaken, if not
controvert, the finding of the RTC and the argument of
petitioners that the latter were faithfully remitting their rental
payments to DBP until the year 1991.
Thus, having determined that the petitioners and DBP neither
executed a new lease agreement, nor entered into an implied
lease contract, it follows that petitioners claim of entitlement
to a right of first refusal has no leg to stand on. Furthermore,
even if we were to grant, for the sake of argument, that an
implied lease was constituted between petitioners and the
DBP, the right of first refusal that was contained in the prior
lease contract with Rudy Robles was not renewed therewith.
This is in accordance with the ruling in Dizon v. Magsaysay,
[72] which involved the issue of whether a provision
regarding a preferential right to purchase is revived in an
implied lease under Article 1670, to wit:
[T]he other terms of the original contract which are revived in
the implied new lease under Article 1670 are only those
terms which are germane to the lessees right of continued
enjoyment of the property leased. This is a reasonable
construction of the provision, which is based on the
presumption that when the lessor allows the lessee to
continue enjoying possession of the property for fifteen days
after the expiration of the contract he is willing that such
enjoyment shall be for the entire period corresponding to the
rent which is customarily paid in this case up to the end of
the month because the rent was paid monthly. Necessarily, if
the presumed will of the parties refers to the enjoyment of
44

possession the presumption covers the other terms of the

contract related to such possession, such as the amount of
rental, the date when it must be paid, the care of the
property, the responsibility for repairs, etc. But no such
presumption may be indulged in with respect to special
agreements which by nature are foreign to the right of
occupancy or enjoyment inherent in a contract of lease.
DBP cannot, therefore, be accused of violating the rights of
petitioners when it offered the subject properties for sale,
and eventually sold the same to respondents To Chip, Yap
and Balila, without first notifying petitioners. Neither were the
said respondents bound by any right of first refusal in favor
of petitioners. Consequently, the sale of the subject
properties to respondents was valid. Petitioners claim for
rescission was properly dismissed.
WHEREFORE, the Petition for Review on Certiorari under Rule
45 of the Rules of Court is DENIED. The Resolution dated
February 5, 2002 and the Amended Decision dated July 5,
2002 of the Court of Appeals in CA-G.R. CV No. 57216 are
hereby AFFIRMED. No costs.

Power of Supreme Court to Suspend its Own Rules: Grounds

Garcia v. CA, January 28, 2013
Rule Making Power of the Supreme Court
GSIS v Caballero, October 4, 2010
Katarungang Pambarangay Law; Purpose
Aquiono v. Laure, February 18, 2008
Exceptions to Referral to Katarungang Pambarangay Law
Sanbanun v. Go, February 2, 2010
Effect of Amicable Settlement at the Barangay Level
Miguel v. Montanez, January 25, 2012
Execution and Repudiation of Amicable Settlement
Vidal et al., v. Escueta, December 10, 2003

SO ORDERED.

45