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.:
FACTS: 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 stopped
Issue: Did the respondent judge acted 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?
Held: Reiterating the case of Dequito and SalingBuhay vs.
Arellano, the Supreme Court held 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 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 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 cannot, 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

infringing the constitutional right of an accused under the due

process clause to a fair trial.
Upon the foregoing considerations, the present petition is
dismissed with costs against the petitioner.
DISSENTING OPINIONS OF J. Feria, J. Perfecto,
In the case of Dequito and SalingBuhay 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.
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 above-quoted
constitutional precept in order to emphasize that the
Supreme Court is not empowered, and therefore cannot
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.
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 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. 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 SalingBuhay 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.

R E S O L U T I O N; TUASON, J.:
This cause is now before us on a motion for reconsideration.
In the decision sought to be reconsidered, we said, citing
Dequito and SalingBuhay 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. 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. 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.
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. Preliminary
investigation is eminently and essentially remedial; it
is the first step taken in a criminal prosecution.
.
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. 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. 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 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.
DISSENTING OPINION OF J.FERIA, J. PERFECTO
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.
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.
(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."
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."
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
juristantum presumption, hearsay and best evidence rule,
parol evidence rule, interpretation of documents, competency
of a person to testify as a witness be considered procedural?
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 cross-examine
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.
5

(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. 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
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,"
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," 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 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. 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.
Retroactive Application of Procedural Law: Fresh-Period
Rule; Neypes Doctrine
RODRIGUEZ V. PEOPLE, OCTOBER 24, 2012
G.R. NO. 192799
VELASCO, JR., J.:
FACTS: The RTC convicted petitioner for Unfair Competition
penalized under 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.
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. 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.

ISSUE: Is the fresh period rule applicable on the said case?

HELD: 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.
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
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.
While Neypes was silent on the applicability of the "fresh
period rule" to criminal cases, the issue was squarely
addressed in Yu v. Tatad, 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 that:
x xxx
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.
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.

SAN LORENZO RUIZ BUILDERS V. BAYANG, APRIL 20, 2015

G.R. NO. 194702
BRION, J.:
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 damages against
SLR Builders and its President, Oscar Violago (petitioners)
before the Housing and Land Use Regulatory Board (HLURB).
In a decision dated February 16, 2004, Housing and Land Use
Arbiter Atty. Joselito F. Melchor ruled in Cristina's favor.
The petitioners appealed Arbiter Melchor's decision to the
HLURB Board of Commissioners. The Board dismissed and
denied, 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 resolution dated November 17, 2006, the OP dismissed
the petitioners' appeal for having been filed out of time.
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: Is the "fresh period rule" in Neypes applies to
administrative appeals?
HELD: It is settled that the "fresh period rule" in Neypes
applies only to judicial appeals and not to administrative
appeals.
In Panolino v. Tajala, 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 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.
x xxx
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

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)
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.
Concept of Liberal Construction of the Rules
CABRERA V. NG, MARCH 12, 2014

G.R. NO. 201601

REYES, J.:
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 him 3 dishonored
checks.
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.
On August 7, 2007, the RTC rendered a Decision, which
ordered the spouses Cabrera to pay the respondent.
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, 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, which set the said motion for
reconsideration for hearing on September 25, 2007.

10

On September 20, 2007, the respondent filed an opposition 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,which set the said motion for
reconsideration for hearing on October 26, 2007.
On October 26, 2007, the RTC issued an Order, 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 Order 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.
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 petitioner then filed a petition for certiorari 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.
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.
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.
ISSUE: Is the RTC and CA correct on denying the motion due to
the petitioners failure to file it within the reglementary
period?
HELD: The RTC erred in denying the spouses Cabrera's motion
for reconsideration based merely on their failure to comply
with the three-day notice requirement.

11

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

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 and
date of the hearing which must not be later than ten (10) days
after the filing of the motion.

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. "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. 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, 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.
.
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
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.

12

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,
NEGROS SLASHERS, INC., V. ALVAREZ, ET AL., FEBRUARY 22,
2012
G.R. NO. 187122
VILLARAMA, JR., J.:
FACTS: 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 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.
Teng executed with the Negros Slashers the Players Contract
of Employment
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. 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 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. 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.
On March 16, 2001, the management of Negros Slashers came
up with a decision, and through its General Manager,
petitioner Rodolfo Alvarez, wrote Teng informing him of his
termination from the team.

13

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.
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 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.
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.
ISSUE: Is NLRC correct in denying Tengs motion due to lapse
of reglementary period?
HELD:
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. In
Ong Lim Sing, Jr. v. FEB Leasing and Finance Corporation, 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.
x xx
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.

14

CEBU BIONIC BUILDERS SUPPLY V. DBP, NOVEMBER 17, 2010

G.R. NO. 154366
LEONARDO DE CASTRO, J.:
FACTS: On June 2, 1981, the spouses Rudy R. Robles, Jr. and
Elizabeth R. Robles entered into a mortgage contract 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. T- 47783 of the Register
of Deeds of Cebu, together with all the existing improvements,
and the commercial building to be constructed thereon
(subject properties). Upon completion, the commercial
building was named 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 above contract was not registered by the parties thereto
with the Registry of Deeds of Cebu.
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. On
February 6, 1987, DBP was the lone bidder in the foreclosure
sale and thereby acquired ownership of the mortgaged subject
properties. On October 13, 1988, a final Deed of Sale was
issued in favor of DBP.
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 and an offer of the

continuance of the commercial space lease
Thereafter, on November 14, 1989, a Certificate of Time
Deposit for P11,395.64 was issued in the name of Bonifacio
Sia and the same was allegedly remitted to DBP as advance
rental deposit.
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 publicized.
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 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

15

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.
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 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.
On February 15, 1991, respondent To Chip wrote a letter 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
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 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 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. ApolinarPanal, Jr., Chief of the Acquired Assets of DBP,
said documents.:
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 xx, 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.
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

16

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.
In its answer, DBP denied the existence of a contract of lease
between itself and petitioners. DBP countered that the letteroffer 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 letteroffer 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 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

17

[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
xx.
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 xx.
x xxx
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 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:
18

[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.
x xxx
[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 xx was a way of evading
[Cebu Bionics] right of first priority to buy the property under
the contract of lease. x xx 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:

the lease contract having been continued by [respondent] 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 xx.
WHEREFORE, THE FOREGOING
judgment is hereby rendered:

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:

From the foregoing facts on record, it is thus clear that

[petitioner] Cebu Bionic is the present lessee of the property,

19

We find nothing erroneous with the judgment rendered by the

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

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

20

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
continue on leasing the property x xx to come to the Bank for
the execution of a Contract of Lease, the salient conditions of
which are as follows:

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:

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

period of one (1) year;

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.

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;

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.

21

[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
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] isDISMISSED 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.

WHETHER OR NOT THE HON. COURT OF APPEALS

ERRED IN ADMITTING RESPONDENTS MOTION FOR

22

II.

III.

IV.

V.

VI.

VII.

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
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.

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 SecretarysCertificate[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, (Petitioners- Appellants)
versus THE DEVELOPMENT BANK OF THE PHILIPPINES, JOSE TO
CHIP, PATRICIO YAP and ROGER BALILA (RespondentsAppelles), docketed CA-G.R. NO. 57216.
Whereas, on mass unanimously motion of all members of
directors present hereby approved the appointment of LYDIA I.
SIA to act and sign all papers in connection of CA-G.R. NO.
57216.

The Court is not persuaded.

23

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
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

24

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
BonifacioSia, 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, 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 30-day 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

25

rentals and requesting for a 60-day period within which time

the parties will execute a new contract of lease.

upon the thing and the cause which are to constitute the
contract (See Article 1319, Civil Code). x

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.

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.

The Court rules that, indeed, no new contract of lease was

ever perfected between petitioners and DBP.

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.

In Metropolitan Manila Development Authority v. JANCOM

Environmental Corporation,[65] we emphasized that:
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 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

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:
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

26

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 above-mentioned 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 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

27

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
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.
SO ORDERED.

28

Power of Supreme Court to Suspend its Own Rules:

Grounds

2003 through a letter signed by GSIS Iloilo Field Office

Manager, Jesusa Ruby A. Teruel.5

GARCIA V. CA, JANUARY 28, 2013

G.R. NO. 169005
VILLARAMA, JR., J.:
Assailed in this petition for certiorari under Rule 65 are the
Decision1 dated April 11, 2005 and Resolution2 dated July 20,
2005 of the Court of Appeals (CA) in CA-G.R. SP No. 82751.
In February and March, 2003, the Government Service
Insurance System (GSIS) published an Invitation to Pre-Qualify
to Bid for the construction of the GSIS Iloilo City Field Office
(GSIS-ICFO) Building with an approved budget cost of
P57,000,000.00.3 Out of the eight (8) pre-qualified
contractors, only four submitted their financial bids, as follows:

Embrocal Builders, Inc.

P55,350,000.00

NelsonS. Lee Construction -

55,125,000.00

F. Gurrea Construction

53,503,013.33

H .S. Oaminal Construction -

51,307,146.30

After evaluation of the bids and post-qualification, the Bids and

Awards Committee (BAC) declared the bid of Embrocal
Builders, Inc. (Embrocal) as the "Lowest Calculated and
Responsive Bid." Subsequently, Atty. Henry S. Oaminal
requested that they be awarded the contract for having
submitted the lowest responsive bid, while Mr. Felix Gurrea
sought clarification of certain bid instructions. Said bidders
were informed of their disqualification only on December 10,

In its Resolution No. 01-03 dated November 4, 2003, the BAC

recommended to the Senior Vice-President of the Field
Operations Group (SVP-FOG), herein private respondent Rudy
C. Tesoro, that the proposed construction of the GSIS-ICFO
building be awarded to Embrocal in the amount of
P55,350,000.00 for a contract period of 300 days to be
reckoned 15 days from the date of Notice to Proceed. The
Notice of Award dated November 4, 2003 was signed by
Manager Teruel, Mateo E. Basa, Jr., VP Area II-FOG and private
respondent. On even date, the Contract for the Construction of
the GSIS-Iloilo Office Building was executed between GSIS
represented by private respondent and Embrocal represented
by its President Edgardo M. Brocal. In his letter dated
November 20, 2003, Mr. Brocal requested for the release of
the 15% mobilization fee pursuant to the terms of the
contract.6

On November 24, 2003, petitioner Winston F. Garcia, then

GSIS President and General Manager, issued Office Order No.
104-03 reassigning private respondent and designating him as
SVP, Corporate Services Group (SVP-CSG), while SVP-CSG
Enriqueta P. Disuanco was designated/reassigned to his post.
The said reassignment order, received by the Office of the
SVP-FOG on November 27, 2003, was to take effect
immediately. Meanwhile, private respondent had approved and
signed the Disbursement Voucher for the amount of
P7,430,737.50 as mobilization fee (net of taxes) for the GSISICFO building construction contract. Embrocal received the
check payment and issued the corresponding receipt on

29

November 27, 2003. However, due to several letters from

losing bidders and the protest filed by F. Gurrea Construction,
Inc. questioning the conduct of the bidding, SVP Disuanco
investigated the matter.7

The Report8 dated January 26, 2004 prepared by SVP-FOG

Disuanco and Alfredo B. Pineda II of the OSVP-FOG concluded
that the bidding process conducted by the BAC was flawed for
non-compliance with the strict provisions of Republic Act (R.A.)
No. 9184. It was further observed that the field office
committed oversights such as the presence of unofficial BAC
members with no defined roles and the BACs failure to comply
with the requirement of promptly replying to formal queries in
consonance with the provisions of R.A. No. 6713.

administrative sanctions shall be imposed upon them,

pursuant to Section 11 of the Uniform Rules on Administrative
Cases in the Civil Service (URACCS). Private respondent and
Mateo E. Basa, Jr. submitted their written explanation under
oath on February 11, 2004.10

On February 16, 2004, the GSIS Investigation Unit submitted

its Preliminary Investigation Report11 recommending that
administrative charges be filed against the following branch
officials and employees: private respondent, Basa, Jr., Teruel,
Branch Attorney Catherine Portia P. Corteza, Finance Division
Chief Adelaida J. Jamantoc, Senior General Insurance Specialist
Jose Ma. C. Capalla and Administrative Division Chief Lita L.
Sonalan. It was further recommended that said officials be
placed under preventive suspension.

On January 28, 2004, Ma. Josefina V. Rivas, Regional Cluster

Director, Commission on Audit (COA), GSIS-Iloilo City,
submitted her observations to Manager Teruel recommending
that her office explain the reason for the release of
mobilization fee to Embrocal despite non-issuance of the
Notice to Proceed, contrary to Section IB 10.10 (1) of
Presidential Decree (P.D.) No. 1594. Rivas also noted that per
their ocular inspection conducted in late December 2003 at
the project site, there was no discernible major construction
activity nor deliveries of construction materials or presence of
construction crew except for two security guards.9

On February 19, 2004, private respondent was formally

charged with Gross Neglect of Duty, Grave Misconduct and/or
Violation of Reasonable Office Rules and Regulations as
provided under Section 46, paragraphs (3), (4) and (12),
Chapter 6, Book V, Title I, Subtitle A of Executive Order No.
292, otherwise known as the "Administrative Code of 1987," in
relation to Section 52 (A), paragraphs (2) and (3), and (C),
paragraph (3), Rule IV of the Civil Service Commission
Resolution No. 99-1936 (URACCS). The Formal Charge12 reads
as follows:

Under Memorandum dated February 6, 2004, private

respondent along with other branch officers were directed by
the GSIS Investigation Unit to submit within three days from
receipt their Counter-Affidavit/Comment explaining why no

That on or about November 4, 2003, you approved the award

for the construction of the Government Service Insurance
System (GSIS) Iloilo City Field Office (ICFO) building to
Embrocal Builders, Inc. and thereafter entered into contract

30

with the same to the disadvantage of GSIS in view of the fact

that Embrocal Builders, Inc. had submitted the HIGHEST BID
during the bid opening conducted at the ICFO on September
19, 2003;

That on November 27, 2003 you approved the payment of

15% mobilization fee in the amount of Eight Million Three
Hundred Two Thousand Five Hundred Pesos (P8,302,500) to
Embrocal Builders, Inc. in excess and/or without authority and
contrary to the Manual on Signing Authorities for
Disbursement Voucher and Check approved by the Board of
Trustees of GSIS per Resolution No. 383 dated December 18,
2002. The records show that effective November 24, 2003 you
were already effectively reassigned to the Office of Corporate
Services pursuant to Office Order No. 104-03 dated November
24, 2003;

That you approved the payment of 15% mobilization fee to

Embrocal Builders, Inc. prior to the issuance of the Notice to
Proceed in violation of Section 30.5 of the Implementing Rules
and Regulations of E.O. 40; and

That you approved the payment of 15% mobilization fee to

Embrocal Builders, Inc. contrary to Section 91 of P.D. 1445,
otherwise known as the "Government Auditing Code of the
Philippines." It was shown that on November 27, 2003 you
were not anymore authorized to approve the payment in
behalf of the GSIS Field Operations Group.

Private respondent was also placed on preventive suspension

for a period of ninety (90) days. On February 23, 2004, he filed
his Answer to the charges, in addition to the previous joint
explanation dated February 9, 2004 submitted to the
Investigation Unit.

However, on March 15, 2004 during the pendency of formal

investigation being conducted by GSIS, private respondent
filed before the CA a Petition With Prayer for Temporary
Restraining Order and/or Writ of Preliminary Injunction (CAG.R. SP No. 82751)13 In his petition, private

respondent questioned the legality of the formal charge which

he claimed was issued without going through the process of
preliminary investigation. He thus prayed that petitioner be
permanently enjoined from "enforcing and implementing the
said illegally issued Formal Charge with the order of preventive
suspension."14

On May 24, 2004, petitioner rendered his Decision15 finding

private respondent administratively liable, as follows:

WHEREFORE, premises considered, respondent RUDY C.

TESORO, is hereby found GUILTY OF GROSS NEGLECT OF DUTY
and GRAVE MISCONDUCT pursuant to Section 46 (b) (3) and
(4), Chapter 7, Book V, Title I, Subtitle A of Executive Order No.
292, otherwise known as the "Administrative Code of 1987", in
relation to Section 52 (A)(2) and (3), Rule IV of the Uniform
Rules on Administrative Cases in the Civil Service (URACCS).
Consequently, respondent is hereby meted the penalty of
31

DISMISSAL FROM THE SERVICE, WITH PERPETUAL PROHIBITION

FROM REEMPLOYMENT IN THE GOVERNMENT SERVICE,
FORFEITURE OF RETIREMENT BENEFITS AND CANCELLATION
OF HIS ELIGIBILITY.

SO ORDERED.16

The Board of Trustees of GSIS through Resolution No. 118

dated May 26, 2004, approved the draft decision. Copy of the
decision was served on private respondent on June 2, 2004 but
was returned to the Investigation Unit because private
respondent has not reported for work since June 1, 2004.17

On June 28, 2004, private respondent filed a motion for

reconsideration from the May 24, 2004 Decision but it was
denied by petitioner in his Resolution dated July 5, 2004.18

In his Comment19 filed before the CA on June 11, 2004,

petitioner contended that private respondents petition for
certiorari is already moot and academic with the rendition of
the decision in the administrative case. Petitioner also pointed
out that private respondent is misleading the appellate court
when the petition alleged that the Formal Charge was issued
without any preliminary investigation. Further, petitioner
asserted that private respondent violated the principle of
exhaustion of administrative remedies when he filed the
petition for certiorari despite the availability of appeal.

Private respondent filed his Reply to which a Rejoinder was

filed by the petitioner.

Aside from the petition filed in the CA, private respondent also
appealed the order of preventive suspension, as well as the
Decision dated May 24, 2004 finding him administratively
liable for gross neglect of duty and grave misconduct and
imposing the penalty of dismissal from service, to the Civil
Service Commission (CSC).20

In the meantime, upon reevaluation the GSIS Physical

Resources Bids and Awards Committee (PRBAC) declared a
"failure of bidding" pursuant to Section 41 of the Implementing
Rules and Regulations (IRR) of R.A. 9184. Embrocal and its
counsel were advised that the contract for the construction of
the GSIS-ICFO building entered into with private respondent
was null and void ab initio, and hence Embrocal should return
the amount of mobilization fees illegally released to it.21 The
COA Regional Legal and Adjudication Office later issued a
Notice of Disallowance of the amount released to Embrocal as
mobilization fee. Private respondent along with Teruel,
Jamantoc, Corteza, Sonalan, Capalla and Basa, Jr. were all
found liable for the disallowed sum. Private respondent has
not filed any motion for reconsideration of the said
disallowance.22

On April 11, 2005, the CA rendered the assailed Decision23

which decreed, as follows:

32

WHEREFORE, in view of the foregoing premises, the assailed

Formal Charge dated 19 February 2004 of the respondent, and
his Decision dated 24 May 2004, are hereby MODIFIED as
follows:

petitioner is further sternly warned that a repetition of the

same or similar acts shall be dealt with more severely.

SO ORDERED.24
(a) The administrative offense of gross neglect of duty and
grave misconduct and/or violation of reasonable office rules
and regulations for which petitioner is charged is hereby set
aside, and modified to the lower administrative offense of
SIMPLE NEGLECT OF DUTY.

(b) The Decision dated 24 May 2004 of herein respondent, the

dispositive portion of which reads:

Petitioner received a copy of the above decision on April 22,

2005, and thus had only until May 7, 2005 within which to file
a motion for reconsideration. However, on May 4, 2005, it filed
a Motion for Extension of Time to File the Motion for
Reconsideration alleging that the lawyer in charge of the case,
Atty. Violeta C.F. Quintos of the Investigation Unit, had to
immediately take a flight to Cebu City on April 24, 2005
because her father died; she is expected to report for work on
May 5, 2005. The motion for reconsideration was filed on May
16, 2005.25

xxxx

is hereby set aside, and a new one is hereby rendered, finding

the petitioner RUDY C. TESORO, GUILTY OF SIMPLE NEGLECT
OF DUTY pursuant to Section 52 (B) (I), Rule IV, Uniform Rules
on Administrative Cases in the Civil Service (URACCS).
Consequently, petitioner is hereby meted the penalty of
suspension for six (6) months, without pay, the period for
which he was preventively suspended and subsequently
dismissed shall be credited for the purpose of serving the
penalty hereof. Accordingly, the respondent is directed to
immediately reinstate the petitioner to his last position,
without loss of seniority rights and other privileges with
payment of backwages inclusive of allowances and other
benefits from the time of his suspension and dismissal
exceeding six (6) months until actual reinstatement. The

Private respondent filed a Motion for Entry of Judgment and

Writ of Execution asserting that the decision had attained
finality for failure of petitioner to file a timely motion for
reconsideration or appeal.26 He likewise filed a Manifestation
and Motion to Withdraw Appeal in CSC Adm. Case No. 04-001
(Preventive Suspension and Illegal Dismissal)27

By Resolution dated July 20, 2005, the CA, citing the case of
Habaluyas Enterprises, Inc. v. Japson28 denied petitioners
motion for extension to file a motion for reconsideration and
merely noted private respondents motion.

33

The present petition filed on August 10, 2005 alleges that

A. The Court of Appeals acted with grave abuse of discretion

amounting to lack or excess of jurisdiction when it ruled on the
merits of the case despite the fact that it did not have the
complete records of the case thus depriving petitioner of due
process;

B. The Honorable Court of Appeals acted with grave abuse of

discretion amounting to lack or excess of jurisdiction when it
went beyond the Petition for Certiorari filed by respondent and
proceeded to rule on the formal charge and the merits of the
case;

C. Factual errors and misapplication of law were committed by

the Honorable Court of Appeals even as the evidence does not
support the decision;

D. Petitioners notice to the Court of Appeals of the Decision in

the administrative case rendered the Petition for Certiorari
filed by respondent moot and academic;

E. The Honorable Court of Appeals gravely erred in failing to

appreciate and apply the principle of Exhaustion of
Administrative Remedies when it gave due course to the
Petition for Certiorari filed by respondent;

F. There is no plain, adequate and speedy remedy available to

petitioner.29

In his Comment,30 private respondent argues that with the

denial by the CA of petitioners motion for extension to file a
motion for reconsideration, the April 11, 2005 Decision of the
CA is already final and executory. Hence, he prays for the
outright dismissal of the present petition.

As to the issue of non-exhaustion of administrative remedies,

private respondent contends that this case falls under the
recognized exceptions to the said rule considering the purely
legal issue involved and the violation of his right to due
process. He further asserts that no grave abuse of discretion
was committed by the CA when it modified the charge against
him considering that: (1) there was no document or evidence
showing that he received the November 24, 2003
reassignment order on the date he signed the disbursement
voucher (November 25, 2003) for the release of the 15%
mobilization fee to Embrocal; (2) even assuming he was
informed immediately on November 24, 2003 regarding his
transfer, his act of signing the check and disbursement
voucher was still valid and legal since he has not assumed the
duties of the new position (SVP-CSG) at that time; (3) he was
not in a position to overturn the decision and recommendation
of the BAC and the previous signatories to the check and
voucher; (4) he cannot be charged with gross neglect of duty
in relying on the expert recommendation of the BAC members
and his subordinates.

34

Petitioner counters that the private respondent may not

deprive this Court of appellate jurisdiction over the CAs April
11, 2005 Decision, citing Barnes v. Padilla.31 He reiterates
that the CA gravely abused its discretion when it ruled on the
merits of the administrative case despite the absence of
complete records and transformed the petition for certiorari
filed by private respondent into an appeal. The CA also
ignored the more than substantial evidence showing that
private respondent was guilty of gross neglect of duty and
grave misconduct that would justify the imposition of a higher
penalty.

Petitioner stresses that contrary to private respondents

assertions, he was the final approving authority who could
accept, modify or completely disregard the BACs
recommendation after evaluation of the bidding process. The
CA decision, in fact, had confirmed petitioners finding that
private respondent was really remiss in his job and is actually
to be blamed for the anomalous award to the highest bidder.
Moreover, BAC members were not appointed for their
expertise in the bidding process but are employees designated
to said committee by virtue of their positions in the Iloilo City
Field Office Department (ICFOD). Private respondents
supervision over the ICFOD-BAC, as SVP-FOG, includes
authority over their recommendations. On his continuing claim
that he signed the disbursement voucher and check on
November 25, 2003 prior to his receipt of the transfer order,
petitioner cites the affidavit of Manager Teruel stating that the
disbursement voucher and check were hand-carried from the
Iloilo City Field Office to the OSVP-FOG for private respondents
signature on November 27, 2003.

The assailed CA resolution upheld the general rule that the

filing of a motion for extension of time to file a motion for
reconsideration in the CA does not toll the fifteen-day period
to appeal, citing Habaluyas Enterprises, Inc. v. Japson.32
However, in previous cases we suspended this rule in order to
serve substantial justice.33

In Barnes v. Padilla,34 we exempted from the operation of the

general rule the petitioner whose motion for extension of time
to file a motion for reconsideration was denied by the CA. In
the Resolution denying the motion for reconsideration of our
Decision dated September 30, 2004, we held that:

A suspension of the Rules is warranted in this case since the

procedural infirmity was not entirely attributable to the fault or
negligence of the petitioner. Petitioners counsel was
understandably confused with the absence of an explicit
prohibition in the 2002 Internal Rules of the Court of Appeals
(IRCA) that the period of filing a motion for reconsideration is
non-extendible, which was expressly stated in the Revised
Internal Rules of the Court of Appeals that was in effect prior
to the IRCA. The lawyers negligence without any participatory
negligence on the part of the petitioner is a sufficient reason
to set aside the resolution of the CA.

More significantly, a careful study of the merits of the case

and the lack of any showing that the review sought is merely
frivolous and dilatory, dictated the setting aside of the
resolutions of the CA in CA-G.R. SP No. 69573 and Branch 215
in Civil Case No. Q-99-37219, as both are patently erroneous.
xxx

35

Furthermore, the private respondents will not be unjustly

prejudiced by the suspension of the rules. What is subject of
the appeal is only a question of law, involving the issue of
forum-shopping, and not a factual matter involving the merits
of each partys respective claims and defenses relating to the
enforcement of the MOA, wherein petitioner was given an
option to purchase the subject property. Litigations should, as
much as possible, be decided on their merits and not on mere
technicalities. Every party-litigant should be afforded the
amplest opportunity for the proper and just disposition of his
cause, freed from the constraints of technicalities.35
(Emphases supplied)

After a conscientious review, we hold that a suspension of the

Rules is warranted in this case since the delay of one week
and two days in the filing of the motion for reconsideration
was not occasioned by negligence on the part of petitioners
lawyer in charge of the case, the latter having a valid excuse
to immediately take leave of absence in view of her fathers
sudden demise. Additionally, the merits of the case impel us to
adopt a more liberal stance. There is likewise no showing that
the review sought is merely frivolous and dilatory. As we said
in Barnes v. Padilla:36

Invariably, rules of procedure should be viewed as mere tools

designed to facilitate the attainment of justice. Their strict and
rigid application, which would result in technicalities that tend
to frustrate rather than promote substantial justice, must
always be eschewed. Even the Rules of Court reflects this
principle. The power to suspend or even disregard rules can be

so pervasive and compelling as to alter even that which this

Court itself had already declared to be final.

xxxx

Indeed, the emerging trend in the rulings of this Court is to

afford every party litigant the amplest opportunity for the
proper and just determination of his cause, free from the
constraints of technicalities.

While private respondent filed his answer to the Formal

Charge issued by petitioner, he filed a petition for certiorari in
the CA questioning its validity and the order of preventive
suspension, even before the hearing proper was conducted.
The CA found no jurisdictional ground to invalidate the Formal
Charge, and did not make any ruling on the issue of whether
grave abuse of discretion attended the imposition of the
preventive suspension order. However, the CA proceeded to
review the merits of the administrative charge against private
respondent, concurring with petitioners finding that private
respondent was remiss in his duties and responsibilities but
declaring private respondent liable for the lesser offense of
Simple Neglect and imposing on him the lower penalty
therefor. The CA thus exceeded its certiorari jurisdiction when
it reviewed the alleged errors of the disciplining authority not
only in finding a prima facie case against the private
respondent but also in determining his guilt. This despite the
fact that the rendition of the decision in Adm. Case No. 04-001
by the disciplining authority (GSIS) was earlier brought to the
attention of the CA.

36

A certiorari proceeding is limited in scope and narrow in

character. The special civil action for certiorari lies only to
correct acts rendered without jurisdiction, in excess of
jurisdiction, or with grave abuse of discretion. Certiorari will
issue only to correct errors of jurisdiction, not errors of
procedure or mistakes in the findings or conclusions of the
lower court.37 As long as the court acts within its jurisdiction,
any alleged errors committed in the exercise of its discretion
will amount to nothing more than mere errors of judgment,
correctible by an appeal or a petition for review under Rule 43
of the Rules of Court,38 and not a petition for certiorari.

Considering that the CA did not declare any act of the

petitioner to have been exercised without or in excess of
jurisdiction, or with grave abuse of discretion, the grant of
relief to private respondent by sentencing him to a lower
offense with reduced penalty cannot be sustained. Whether
the private respondent may be held liable for Gross Neglect of
Duty as stated in the Formal Charge or for the lower offense of
Simple Neglect of Duty should be properly threshed out in
Adm. Case No. 04-001 and thereafter in a timely appeal to the
Civil Service Commission, not in the certiorari proceedings
before the CA seeking nullification of the Formal Charge and
preventive suspension order.

In the case of People v. Court of Appeals,39 accusedrespondents were convicted by the Regional Trial Court (RTC)
of violation of Section 68 of P.D. No. 705 and accordingly
sentenced with the prescribed penalty of imprisonment.
Instead of appealing the RTC judgment after the denial of their
motion for reconsideration, respondents filed a petition for

certiorari under Rule 65 with the CA, praying for the reversal
of their conviction. The CA reviewed the trial courts
assessment of the evidence on record, its findings of facts,
and its conclusions based on the said findings. The CA
forthwith concluded that the said evidence was utterly
insufficient on which to anchor a judgment of conviction, and
acquitted one of the respondents of the crime charged.

On appeal by the People to this Court, we reversed and set

aside the CAs decision ordering a re-promulgation of the RTC
decision against the two respondents and acquitting one
respondent. Addressing the issue of whether the CA acted in
excess of its jurisdiction or without jurisdiction when it
acquitted one of the respondents in a petition for certiorari for
the nullification of the trial courts decision, we held:

x x x. However, instead of appealing the decision by writ of

error, the respondents filed their petition for certiorari with the
CA assailing the decision of the trial court on its merits. They
questioned their conviction and the penalty imposed on them,
alleging that the prosecution failed to prove their guilt for the
crime charged, the evidence against them being merely
hearsay and based on mere inferences. In fine, the
respondents alleged mere errors of judgment of the trial court
in their petition. It behooved the appellate court to have
dismissed the petition, instead of giving it due course and
granting it.

The CA reviewed the trial courts assessment of the evidence

on record, its findings of facts, and its conclusions based on
the said findings. The CA forthwith concluded that the said

37

evidence was utterly insufficient on which to anchor a

judgment of conviction, and acquitted respondent

the Formal Charge and the aforesaid May 24, 2004 Decision of
petitioner.1wphi1

Almuete of the crime charged.

In a petition for certiorari, the public respondent acts without

jurisdiction if it does not have the legal power to determine
the case; there is excess of jurisdiction where the respondent,
being clothed with the power to determine the case, oversteps
its authority as determined by law. There is grave abuse of
discretion where the public respondent acts in a capricious,
whimsical, arbitrary or despotic manner in the exercise of its
judgment as to be said to be equivalent to lack of jurisdiction.
Mere abuse of discretion is not enough.

The appellate court acted with grave abuse of its discretion

when it ventured beyond the sphere of its authority and
arrogated unto itself, in the certiorari proceedings, the
authority to review perceived errors of the trial court in the
exercise of its judgment and discretion, which are correctible
only by appeal by writ of error. Consequently, the decision of
the CA acquitting respondent Almuete of the crime charged is
a nullity. If a court is authorized by statute to entertain
jurisdiction in a particular case only, and undertakes to
exercise the jurisdiction conferred in a case to which the
statute has no application, the judgment rendered is void. The
lack of statutory authority to make a particular judgment is
akin to lack of subject-matter jurisdiction. In this case, the CA
is authorized to entertain and resolve only errors of jurisdiction
and not errors of judgment.40 (Emphasis supplied)

In this case, records showed that private respondent appealed

the May 24, 2004 Decision of petitioner finding him
administratively liable for gross neglect of duty and grave
misconduct and imposing the penalty of dismissal from
service, to the CSC. He also separately appealed the
preventive suspension order to the CSC. Later, however,
private respondent filed a Manifestation and Motion to
Withdraw Appeal (both the preventive suspension and illegal
dismissal cases) with the CSC on May 25, 2005, without
mentioning the April 11, 2005 Decision of the CA modifying

Excess of jurisdiction as distinguished from absence of

jurisdiction means that an act, though within the general
power of a tribunal, board or officer is not authorized, and
invalid with respect to the particular proceeding, because the
conditions which alone authorize the exercise of the general
power in respect of it are wanting.42 The supervisory
jurisdiction of the court to issue a certiorari writ cannot be
exercised in order to review the judgment of the lower court as
to its intrinsic correctness, either upon the law or the facts of
the case. In the absence of a showing that there is reason for
the Court to annul the decision of the concerned tribunal or to
substitute its own judgment, it is not the office of the Court in
a petition for certiorari to inquire into the correctness of the
assailed decision or resolution.43
Since petitioner is vested with the requisite legal authority to
issue the Formal Charge, after due investigation in accordance
with existing rules and regulations of the Civil Service, and to
commence administrative proceedings against the private
respondent,44 and in the absence of grave abuse of discretion
in the exercise of such powers, it behooved the CA to dismiss

38

the petition instead of giving it due course and granting it. In

resolving the merits of the decision rendered in the
administrative case despite the pendency of private
respondents appeal before the CSC assailing the correctness
of the same decision, the CA clearly exceeded its certiorari
jurisdiction.

WHEREFORE, the present petition is hereby GIVEN DUE

COURSE and the writ prayed for, accordingly GRANTED. The
Decision dated April 11, 2005 and Resolution dated July 20,
2005 of the Court of Appeals in CA-G.R. No. SP No. 82751 are
hereby ANNULLED AND SET ASIDE.
No pronouncement as to costs.
SO ORDERED.
Rule Making Power of the Supreme Court
GSIS V CABALLERO, OCTOBER 4, 2010
G.R. NOS. 158090
PERALTA, J.:
Before this Court is a petition for review on certiorari under
Rule 45 of the Rules of Court seeking to set aside the
Decision1 and the Resolution,2 dated December 17, 2002 and
April 29, 2003, respectively, of the Court of Appeals (CA) in
CA-G.R. CV. No. 49300.
The antecedents are as follows:
Respondent Fernando C. Caballero (Fernando) was the
registered owner of a residential lot designated as Lot No.
3355, Ts-268, covered by TCT No. T-16035 of the Register of
Deeds of Cotabato, containing an area of 800 square meters

and situated at Rizal Street, Mlang, Cotabato. On the said lot,

respondent built a residential/commercial building consisting
of two (2) stories.

On March 7, 1968, Fernando and his wife, Sylvia Caballero,

secured a loan from petitioner Government Service Insurance
System (GSIS) in the amount of P20,000.00, as evidenced by a
promissory note. Fernando and his wife likewise executed a
real estate mortgage on the same date, mortgaging the aforestated property as security.

Fernando defaulted on the payment of his loan with the GSIS.

Hence, on January 20, 1973, the mortgage covering the
subject property was foreclosed, and on March 26, 1973, the
same was sold at a public auction where the petitioner was
the only bidder in the amount of P36,283.00. For failure of
Fernando to redeem the said property within the designated
period, petitioner executed an Affidavit of Consolidation of
Ownership on September 5, 1975. Consequently, TCT No. T16035 was cancelled and TCT No. T-45874 was issued in the
name of petitioner.

On November 26, 1975, petitioner wrote a letter to Fernando,

informing him of the consolidation of title in its favor, and
requesting payment of monthly rental in view of Fernando's
continued occupancy of the subject property. In reply,
Fernando requested that he be allowed to repurchase the
same through partial payments. Negotiation as to the
repurchase by Fernando of the subject property went on for
several years, but no agreement was reached between the
parties.

39

On January 16, 1989, petitioner scheduled the subject

property for public bidding. On the scheduled date of bidding,
Fernando's daughter, Jocelyn Caballero, submitted a bid in the
amount of P350,000.00, while Carmelita Mercantile Trading
Corporation (CMTC) submitted a bid in the amount of
P450,000.00. Since CMTC was the highest bidder, it was
awarded the subject property. On May 16, 1989, the Board of
Trustees of the GSIS issued Resolution No. 199 confirming the
award of the subject property to CMTC for a total consideration
of P450,000.00. Thereafter, a Deed of Absolute Sale was
executed between petitioner and CMTC on July 27, 1989,
transferring the subject property to CMTC. Consequently, TCT
No. T-45874 in the name of GSIS was cancelled, and TCT No. T76183 was issued in the name of CMTC.

Due to the foregoing, Fernando, represented by his daughter

and attorney-in-fact, Jocelyn Caballero, filed with the Regional
Trial Court (RTC) of Kabacan, Cotabato a Complaint3 against
CMTC, the GSIS and its responsible officers, and the Register of
Deeds of Kidapawan, Cotabato. Fernando prayed, among
others, that judgment be rendered: declaring GSIS Board of
Trustees Resolution No. 199, dated May 16, 1989, null and
void; declaring the Deed of Absolute Sale between petitioner
and CMTC null and void ab initio; declaring TCT No. 76183 of
the Register of Deeds of Kidapawan, Cotabato, likewise, null
and void ab initio; declaring the bid made by Fernando in the
amount of P350,000.00 for the repurchase of his property as
the winning bid; and ordering petitioner to execute the
corresponding Deed of Sale of the subject property in favor of
Fernando. He also prayed for payment of moral damages,
exemplary damages, attorney's fees and litigation expenses.

In his complaint, Fernando alleged that there were

irregularities in the conduct of the bidding. CMTC
misrepresented itself to be wholly owned by Filipino citizens. It
misrepresented its working capital. Its representative
Carmelita Ang Hao had no prior authority from its board of
directors in an appropriate board resolution to participate in
the bidding. The corporation is not authorized to acquire real
estate or invest its funds for purposes other than its primary
purpose. Fernando further alleged that the GSIS allowed CMTC
to bid despite knowledge that said corporation has no
authority to do so. The GSIS also disregarded Fernando's prior
right to buy back his family home and lot in violation of the
laws. The Register of Deeds of Cotabato acted with abuse of
power and authority when it issued the TCT in favor of CMTC
without requiring the CMTC to submit its supporting papers as
required by the law.

Petitioner and its officers filed their Answer with Affirmative

Defenses and Counterclaim.4 The GSIS alleged that Fernando
lost his right of redemption. He was given the chance to
repurchase the property; however, he did not avail of such
option compelling the GSIS to dispose of the property by
public bidding as mandated by law. There is also no "prior
right to buy back" that can be exercised by Fernando. Further,
it averred that the articles of incorporation and other papers of
CMTC were all in order. In its counterclaim, petitioner alleged
that Fernando owed petitioner the sum of P130,365.81,
representing back rentals, including additional interests from
January 1973 to February 1987, and the additional amount of
P249,800.00, excluding applicable interests, representing
rentals Fernando unlawfully collected from Carmelita Ang Hao
from January 1973 to February 1988.

40

After trial, the RTC, in its Decision5 dated September 27, 1994,
ruled in favor of petitioner and dismissed the complaint. In the
same decision, the trial court granted petitioner's counterclaim
and directed Fernando to pay petitioner the rentals paid by
CMTC in the amount of P249,800.00. The foregoing amount
was collected by Fernando from the CMTC and represents
payment which was not turned over to petitioner, which was
entitled to receive the rent from the date of the consolidation
of its ownership over the subject property.

Fernando filed a motion for reconsideration, which was denied

by the RTC in an Order dated March 27, 1995.

Aggrieved by the Decision, respondent filed a Notice of

Appeal.6 The CA, in its Decision dated December 17, 2002,
affirmed the decision of the RTC with the modification that the
portion of the judgment ordering Fernando to pay rentals in
the amount of P249,800.00, in favor of petitioner, be deleted.
Petitioner filed a motion for reconsideration, which the CA
denied in a Resolution dated April 29, 2003. Hence, the instant
petition.

An Ex Parte Motion for Substitution of Party,7 dated July 18,

2003, was filed by the surviving heirs of Fernando, who died
on February 12, 2002. They prayed that they be allowed to be
substituted for the deceased, as respondents in this case.

Petitioner enumerated the following grounds in support of its

petition:

THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR

OF LAW IN HOLDING THAT GSIS' COUNTERCLAIM, AMONG
OTHERS,
OF
P249,800.00
REPRESENTING
RENTALS
COLLECTED BY PRIVATE RESPONDENT FROM CARMELITA
MERCANTILE TRADING CORPORATION IS IN THE NATURE OF A
PERMISSIVE COUNTERCLAIM WHICH REQUIRED THE PAYMENT
BY GSIS OF DOCKET FEES BEFORE THE TRIAL COURT CAN
ACQUIRE JURISDICTION OVER SAID COUNTERCLAIM.

II

THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR

OF LAW IN HOLDING THAT GSIS' DOCUMENTARY EVIDENCE
SUPPORTING ITS CLAIM OF P249,800.00 LACKS PROPER
IDENTIFICATION.8

The petition of the GSIS seeks the review of the CA's Decision
insofar as it deleted the trial court's award of P249,800.00 in
its favor representing rentals collected by Fernando from the
CMTC.

41

In their Memorandum, respondents claim that CMTC cannot

purchase real estate or invest its funds in any purpose other
than its primary purpose for which it was organized in the
absence of a corporate board resolution; the bid award, deed
of absolute sale and TCT No. T-76183, issued in favor of the
CMTC, should be nullified; the trial court erred in concluding
that GSIS personnel have regularly performed their official
duty when they conducted the public bidding; Fernando, as
former owner of the subject property and former member of
the GSIS, has the preemptive right to repurchase the
foreclosed property.

These additional averments cannot be taken cognizance by

the Court, because they were substantially respondents
arguments in their petition for review on certiorari earlier filed
before Us and docketed as G.R. No. 156609. Records show
that said petition was denied by the Court in a Resolution9
dated April 23, 2003, for petitioners (respondents herein)
failure to sufficiently show that the Court of Appeals
committed any reversible error in the challenged decision as
to warrant the exercise by this Court of its discretionary
appellate jurisdiction.10 Said resolution became final and
executory on June 9, 2003.11 Respondents attempt to relitigate claims already passed upon and resolved with finality
by the Court in G.R. No. 156609 cannot be allowed.

Going now to the first assigned error, petitioner submits that

its counterclaim for the rentals collected by Fernando from the
CMTC is in the nature of a compulsory counterclaim in the
original action of Fernando against petitioner for annulment of
bid award, deed of absolute sale and TCT No. 76183.
Respondents, on the other hand, alleged that petitioner's

counterclaim is permissive and its failure to pay the prescribed

docket fees results into the dismissal of its claim.

To determine whether a counterclaim is compulsory or not, the

Court has devised the following tests: (a) Are the issues of fact
and law raised by the claim and by the counterclaim largely
the same? (b) Would res judicata bar a subsequent suit on
defendants claims, absent the compulsory counterclaim rule?
(c) Will substantially the same evidence support or refute
plaintiffs claim as well as the defendants counterclaim? and
(d) Is there any logical relation between the claim and the
counterclaim? A positive answer to all four questions would
indicate that the counterclaim is compulsory.12

Tested against the above-mentioned criteria, this Court agrees

with the CA's view that petitioner's counterclaim for the
recovery of the amount representing rentals collected by
Fernando from the CMTC is permissive. The evidence needed
by Fernando to cause the annulment of the bid award, deed of
absolute sale and TCT is different from that required to
establish petitioner's claim for the recovery of rentals.

The issue in the main action, i.e., the nullity or validity of the
bid award, deed of absolute sale and TCT in favor of CMTC, is
entirely different from the issue in the counterclaim, i.e.,
whether petitioner is entitled to receive the CMTC's rent
payments over the subject property when petitioner became
the owner of the subject property by virtue of the
consolidation of ownership of the property in its favor.

42

The rule in permissive counterclaims is that for the trial court

to acquire jurisdiction, the counterclaimant is bound to pay the
prescribed docket fees.13 This, petitioner did not do, because
it asserted that its claim for the collection of rental payments
was a compulsory counterclaim. Since petitioner failed to pay
the docket fees, the RTC did not acquire jurisdiction over its
permissive counterclaim. The judgment rendered by the RTC,
insofar as it ordered Fernando to pay petitioner the rentals
which he collected from CMTC, is considered null and void. Any
decision rendered without jurisdiction is a total nullity and may
be struck down at any time, even on appeal before this
Court.14

Petitioner further argues that assuming that its counterclaim is

permissive, the trial court has jurisdiction to try and decide the
same, considering petitioner's exemption from all kinds of
fees.

In In Re: Petition for Recognition of the Exemption of the

Government Service Insurance System from Payment of Legal
Fees,15 the Court ruled that the provision in the Charter of the
GSIS, i.e., Section 39 of Republic Act No. 8291, which exempts
it from "all taxes, assessments, fees, charges or duties of all
kinds," cannot operate to exempt it from the payment of legal
fees. This was because, unlike the 1935 and 1973
Constitutions, which empowered Congress to repeal, alter or
supplement the rules of the Supreme Court concerning
pleading, practice and procedure, the 1987 Constitution
removed this power from Congress. Hence, the Supreme Court
now has the sole authority to promulgate rules concerning
pleading, practice and procedure in all courts.

In said case, the Court ruled that:

The separation of powers among the three co-equal branches

of our government has erected an impregnable wall that keeps
the power to promulgate rules of pleading, practice and
procedure within the sole province of this Court. The other
branches trespass upon this prerogative if they enact laws or
issue orders that effectively repeal, alter or modify any of the
procedural rules promulgated by this Court. Viewed from this
perspective, the claim of a legislative grant of exemption from
the payment of legal fees under Section 39 of RA 8291
necessarily fails.

Congress could not have carved out an exemption for the GSIS
from the payment of legal fees without transgressing another
equally important institutional safeguard of the Court's
independence fiscal autonomy. Fiscal autonomy recognizes
the power and authority of the Court to levy, assess and
collect fees, including legal fees. Moreover, legal fees under
Rule 141 have two basic components, the Judiciary
Development Fund (JDF) and the Special Allowance for the
Judiciary Fund (SAJF). The laws which established the JDF and
the SAJF expressly declare the identical purpose of these funds
to "guarantee the independence of the Judiciary as mandated
by the Constitution and public policy." Legal fees therefore do
not only constitute a vital source of the Court's financial
resources but also comprise an essential element of the
Court's fiscal independence. Any exemption from the payment
of legal fees granted by Congress to government-owned or
controlled corporations and local government units will
necessarily reduce the JDF and the SAJF. Undoubtedly, such

43

situation is constitutionally infirm for it impairs the Court's

guaranteed fiscal autonomy and erodes its independence.

Petitioner also invoked our ruling in Sun Insurance Office, Ltd.

v. Judge Asuncion,16 where the Court held that:

xxxx

3. Where the trial court acquires jurisdiction over a claim by

the filing of the appropriate pleading and payment of the
prescribed filing fee but, subsequently, the judgment awards a
claim not specified in the pleading, or if specified the same
has been left for determination by the court, the additional
filing fee therefor shall constitute a lien on the judgment. It
shall be the responsibility of the Clerk of Court or his duly
authorized deputy to enforce said lien and assess and collect
the additional fee.

In Ayala Corporation v. Madayag,17 the Court, in interpreting

the third rule laid down in Sun Insurance Office, Ltd. v. Judge
Asuncion regarding awards of claims not specified in the
pleading, held that the same refers only to damages arising
after the filing of the complaint or similar pleading as to which
the additional filing fee therefor shall constitute a lien on the
judgment.

The amount of any claim for damages, therefore, arising on or

before the filing of the complaint or any pleading should be

specified. While it is true that the determination of certain

damages as exemplary or corrective damages is left to the
sound discretion of the court, it is the duty of the parties
claiming such damages to specify the amount sought on the
basis of which the court may make a proper determination,
and for the proper assessment of the appropriate docket fees.
The exception contemplated as to claims not specified or to
claims although specified are left for determination of the
court is limited only to any damages that may arise after the
filing of the complaint or similar pleading for then it will not be
possible for the claimant to specify nor speculate as to the
amount thereof. (Emphasis supplied.)1avvphi1

Petitioner's claim for payment of rentals collected by Fernando

from the CMTC did not arise after the filing of the complaint;
hence, the rule laid down in Sun Insurance finds no application
in the present case.

Due to the non-payment of docket fees on petitioner's

counterclaim, the trial court never acquired jurisdiction over it
and, thus, there is no need to discuss the second issue raised
by petitioner.

WHEREFORE, the petition is DENIED. The Decision and the

Resolution, dated December 17, 2002 and April 29, 2003,
respectively, of the Court of Appeals in CA-G.R. CV. No. 49300,
are AFFIRMED.

SO ORDERED.

44

Katarungang Pambarangay Law; Purpose

AQUIONO V. AURE, FEBRUARY 18, 2008

consideration for the sale of the subject property, they refused

to vacate the same.9

G.R. NO. 153567

CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari2 under
Rule 45 of the Revised Rules of Court filed by petitioner
Librada M. Aquino (Aquino), seeking the reversal and the
setting aside of the Decision3 dated 17 October 2001 and the
Resolution4 dated 8 May 2002 of the Court of Appeals in CAG.R. SP No. 63733. The appellate court, in its assailed Decision
and Resolution, reversed the Decision5 of the Regional Trial
Court (RTC) of Quezon City, Branch 88, affirming the Decision6
of the Metropolitan Trial Court (MeTC) of Quezon City, Branch
32, which dismissed respondent Ernesto Aures (Aure)
complaint for ejectment on the ground, inter alia, of failure to
comply with barangay conciliation proceedings.

The subject of the present controversy is a parcel of land

situated in Roxas District, Quezon City, with an area of 449
square meters and covered by Transfer Certificate of Title
(TCT) No. 205447 registered with the Registry of Deeds of
Quezon City (subject property).7

Aure and E.S. Aure Lending Investors, Inc. (Aure Lending) filed
a Complaint for ejectment against Aquino before the MeTC
docketed as Civil Case No. 17450. In their Complaint, Aure and
Aure Lending alleged that they acquired the subject property
from Aquino and her husband Manuel (spouses Aquino) by
virtue of a Deed of Sale8 executed on 4 June 1996. Aure
claimed that after the spouses Aquino received substantial

In her Answer,10 Aquino countered that the Complaint in Civil

Case No. 17450 lacks cause of action for Aure and Aure
Lending do not have any legal right over the subject property.
Aquino admitted that there was a sale but such was governed
by the Memorandum of Agreement11 (MOA) signed by Aure.
As stated in the MOA, Aure shall secure a loan from a bank or
financial institution in his own name using the subject property
as collateral and turn over the proceeds thereof to the spouses
Aquino. However, even after Aure successfully secured a loan,
the spouses Aquino did not receive the proceeds thereon or
benefited therefrom.

On 20 April 1999, the MeTC rendered a Decision in Civil Case

No. 17450 in favor of Aquino and dismissed the Complaint for
ejectment of Aure and Aure Lending for non-compliance with
the barangay conciliation process, among other grounds. The
MeTC observed that Aure and Aquino are residents of the
same barangay but there is no showing that any attempt has
been made to settle the case amicably at the barangay level.
The MeTC further observed that Aure Lending was improperly
included as plaintiff in Civil Case No. 17450 for it did not stand
to be injured or benefited by the suit. Finally, the MeTC ruled
that since the question of ownership was put in issue, the
action was converted from a mere detainer suit to one
"incapable of pecuniary estimation" which properly rests
within the original exclusive jurisdiction of the RTC. The
dispositive portion of the MeTC Decision reads:

45

WHEREFORE, premises considered, let this case be, as it is,

hereby ordered DISMISSED. [Aquinos] counterclaim is likewise
dismissed.12

On appeal, the RTC affirmed the dismissal of the Complaint on

the same ground that the dispute was not brought before the
Barangay Council for conciliation before it was filed in court. In
a Decision dated 14 December 2000, the RTC stressed that the
barangay conciliation process is a conditio sine qua non for the
filing of an ejectment complaint involving residents of the
same barangay, and failure to comply therewith constitutes
sufficient cause for the dismissal of the action. The RTC
likewise validated the ruling of the MeTC that the main issue
involved in Civil Case No. 17450 is incapable of pecuniary
estimation and cognizable by the RTC. Hence, the RTC ruled:

WHEREFORE, finding no reversible error in the appealed

judgment, it is hereby affirmed in its entirety.13

Aures Motion for Reconsideration was denied by the RTC in an

Order14 dated 27 February 2001.

Undaunted, Aure appealed the adverse RTC Decision with the

Court of Appeals arguing that the lower court erred in
dismissing his Complaint for lack of cause of action. Aure
asserted that misjoinder of parties was not a proper ground for
dismissal of his Complaint and that the MeTC should have only
ordered the exclusion of Aure Lending as plaintiff without
prejudice to the continuation of the proceedings in Civil Case
No. 17450 until the final determination thereof. Aure further

asseverated that mere allegation of ownership should not

divest the MeTC of jurisdiction over the ejectment suit since
jurisdiction over the subject matter is conferred by law and
should not depend on the defenses and objections raised by
the parties. Finally, Aure contended that the MeTC erred in
dismissing his Complaint with prejudice on the ground of noncompliance with barangay conciliation process. He was not
given the opportunity to rectify the procedural defect by going
through the barangay mediation proceedings and, thereafter,
refile the Complaint.15

On 17 October 2001, the Court of Appeals rendered a

Decision, reversing the MeTC and RTC Decisions and
remanding the case to the MeTC for further proceedings and
final determination of the substantive rights of the parties. The
appellate court declared that the failure of Aure to subject the
matter to barangay conciliation is not a jurisdictional flaw and
it will not affect the sufficiency of Aures Complaint since
Aquino failed to seasonably raise such issue in her Answer.
The Court of Appeals further ruled that mere allegation of
ownership does not deprive the MeTC of jurisdiction over the
ejectment case for jurisdiction over the subject matter is
conferred by law and is determined by the allegations
advanced by the plaintiff in his complaint. Hence, mere
assertion of ownership by the defendant in an ejectment case
will not oust the MeTC of its summary jurisdiction over the
same. The decretal part of the Court of Appeals Decision
reads:

WHEREFORE, premises considered, the petition is hereby

GRANTED - and the decisions of the trial courts below
REVERSED and SET ASIDE. Let the records be remanded back

46

to the court a quo for further proceedings for an eventual

decision of the substantive rights of the disputants.16

In a Resolution dated 8 May 2002, the Court of Appeals denied

the Motion for Reconsideration interposed by Aquino for it was
merely a rehash of the arguments set forth in her previous
pleadings which were already considered and passed upon by
the appellate court in its assailed Decision.

Aquino is now before this Court via the Petition at bar raising
the following issues:

I.

WHETHER OR NOT NON-COMPLIANCE WITH THE BARANGAY

CONCILIATION PROCEEDINGS IS A JURISDICTIONAL DEFECT
THAT WARRANTS THE DISMISSAL OF THE COMPLAINT.

II.

WHETHER OR NOT ALLEGATION OF OWNERSHIP OUSTS THE

MeTC OF ITS JURISDICTION OVER AN EJECTMENT CASE.

The barangay justice system was established primarily as a

means of easing up the congestion of cases in the judicial

courts. This could be accomplished through a proceeding

before the barangay courts which, according to the conceptor
of the system, the late Chief Justice Fred Ruiz Castro, is
essentially arbitration in character, and to make it truly
effective, it should also be compulsory. With this primary
objective of the barangay justice system in mind, it would be
wholly in keeping with the underlying philosophy of
Presidential Decree No. 1508, otherwise known as the
Katarungang Pambarangay Law, and the policy behind it
would be better served if an out-of-court settlement of the
case is reached voluntarily by the parties.17

The primordial objective of Presidential Decree No. 1508 is to

reduce the number of court litigations and prevent the
deterioration of the quality of justice which has been brought
by the indiscriminate filing of cases in the courts.18 To ensure
this objective, Section 6 of Presidential Decree No. 150819
requires the parties to undergo a conciliation process before
the Lupon Chairman or the Pangkat ng Tagapagkasundo as a
precondition to filing a complaint in court subject to certain
exceptions20 which are inapplicable to this case. The said
section has been declared compulsory in nature.21

Presidential Decree No. 1508 is now incorporated in Republic

Act No. 7160, otherwise known as The Local Government
Code, which took effect on 1 January 1992.

The pertinent provisions of the Local Government Code

making conciliation a precondition to filing of complaints in
court, read:

47

SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint

in court. No complaint, petition, action, or proceeding
involving any matter within the authority of the lupon shall be
filed or instituted directly in court or any other government
office for adjudication, unless there has been a confrontation
between the parties before the lupon chairman or the pangkat,
and that no conciliation or settlement has been reached as
certified by the lupon secretary or pangkat secretary as
attested to by the lupon chairman or pangkat chairman or
unless the settlement has been repudiated by the parties
thereto.

(b) Where parties may go directly to court. The parties may

go directly to court in the following instances:

(1) Where the accused is under detention;

(2) Where a person has otherwise been deprived of personal

liberty calling for habeas corpus proceedings;

(3) Where actions are coupled with provisional remedies such

as preliminary injunction, attachment, delivery of personal
property, and support pendente lite; and

(4) Where the action may otherwise be barred by the statute

of limitations.

(c) Conciliation among members of indigenous cultural

communities. The customs and traditions of indigenous
cultural communities shall be applied in settling disputes
between members of the cultural communities.

SEC. 408. Subject Matter for Amicable Settlement; Exception

Therein. The lupon of each barangay shall have authority to
bring together the parties actually residing in the same city or
municipality for amicable settlement of all disputes except:

(a) Where one party is the government or any subdivision or

instrumentality thereof;

(b) Where one party is a public officer or employee, and the

dispute relates to the performance of his official functions;

(c) Offenses punishable by imprisonment exceeding one (1)

year or a fine exceeding Five thousand pesos (P5,000.00);

(d) Offenses where there is no private offended party;

(e) Where the dispute involves real properties located in

different cities or municipalities unless the parties thereto
agree to submit their differences to amicable settlement by an
appropriate lupon;

48

(f) Disputes involving parties who actually reside in barangays

of different cities or municipalities, except where such
barangay units adjoin each other and the parties thereto agree
to submit their differences to amicable settlement by an
appropriate lupon;

(g) Such other classes of disputes which the President may

determine in the interest of justice or upon the
recommendation of the Secretary of Justice.

There is no dispute herein that the present case was never

referred to the Barangay Lupon for conciliation before Aure
and Aure Lending instituted Civil Case No. 17450. In fact, no
allegation of such barangay conciliation proceedings was
made in Aure and Aure Lendings Complaint before the MeTC.
The only issue to be resolved is whether non-recourse to the
barangay conciliation process is a jurisdictional flaw that
warrants the dismissal of the ejectment suit filed with the
MeTC.

Aquino posits that failure to resort to barangay conciliation

makes the action for ejectment premature and, hence,
dismissible. She likewise avers that this objection was timely
raised during the pre-trial and even subsequently in her
Position Paper submitted to the MeTC.

We do not agree.

It is true that the precise technical effect of failure to comply

with the requirement of Section 412 of the Local Government
Code on barangay conciliation (previously contained in Section
5 of Presidential Decree No. 1508) is much the same effect
produced by non-exhaustion of administrative remedies -- the
complaint becomes afflicted with the vice of pre-maturity; and
the controversy there alleged is not ripe for judicial
determination. The complaint becomes vulnerable to a motion
to dismiss.22 Nevertheless, the conciliation process is not a
jurisdictional requirement, so that non-compliance therewith
cannot affect the jurisdiction which the court has otherwise
acquired over the subject matter or over the person of the
defendant.23

As enunciated in the landmark case of Royales v. Intermediate

Appellate Court24:

Ordinarily, non-compliance with the condition precedent

prescribed by P.D. 1508 could affect the sufficiency of the
plaintiff's cause of action and make his complaint vulnerable
to dismissal on ground of lack of cause of action or
prematurity; but the same would not prevent a court of
competent jurisdiction from exercising its power of
adjudication over the case before it, where the defendants, as
in this case, failed to object to such exercise of jurisdiction in
their answer and even during the entire proceedings a quo.

While petitioners could have prevented the trial court from

exercising jurisdiction over the case by seasonably taking

49

exception thereto, they instead invoked the very same

jurisdiction by filing an answer and seeking affirmative relief
from it. What is more, they participated in the trial of the case
by cross-examining respondent Planas. Upon this premise,
petitioners cannot now be allowed belatedly to adopt an
inconsistent posture by attacking the jurisdiction of the court
to which they had submitted themselves voluntarily. x x x
(Emphasis supplied.)

In the case at bar, we similarly find that Aquino cannot be

allowed to attack the jurisdiction of the MeTC over Civil Case
No. 17450 after having submitted herself voluntarily thereto.
We have scrupulously examined Aquinos Answer before the
MeTC in Civil Case No. 17450 and there is utter lack of any
objection on her part to any deficiency in the complaint which
could oust the MeTC of its jurisdcition.

We thus quote with approval the disquisition of the Court of

Appeals:

Moreover, the Court takes note that the defendant [Aquino]

herself did not raise in defense the aforesaid lack of
conciliation proceedings in her answer, which raises the
exclusive affirmative defense of simulation. By this
acquiescence, defendant [Aquino] is deemed to have waived
such objection. As held in a case of similar circumstances, the
failure of a defendant [Aquino] in an ejectment suit to
specifically allege the fact that there was no compliance with
the barangay conciliation procedure constitutes a waiver of
that defense. x x x.25

By Aquinos failure to seasonably object to the deficiency in

the Complaint, she is deemed to have already acquiesced or
waived any defect attendant thereto. Consequently, Aquino
cannot thereafter move for the dismissal of the ejectment suit
for Aure and Aure Lendings failure to resort to the barangay
conciliation process, since she is already precluded from doing
so. The fact that Aquino raised such objection during the pretrial and in her Position Paper is of no moment, for the issue of
non-recourse to barangay mediation proceedings should be
impleaded in her Answer.

As provided under Section 1, Rule 9 of the 1997 Rules of Civil

Procedure:

Sec. 1. Defenses and objections not pleaded. Defenses and

objections not pleaded either in a motion to dismiss or in the
answer are deemed waived. However, when it appears from
the pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another
action pending between the same parties for the same cause,
or that the action is barred by a prior judgment or by statute
of limitations, the court shall dismiss the claim. (Emphasis
supplied.)

While the aforequoted provision applies to a pleading

(specifically, an Answer) or a motion to dismiss, a similar or
identical rule is provided for all other motions in Section 8 of
Rule 15 of the same Rule which states:

50

Sec. 8. Omnibus Motion. - Subject to the provisions of Section

1 of Rule 9, a motion attacking a pleading, order, judgment, or
proceeding shall include all objections then available, and all
objections not so included shall be deemed waived.

The spirit that surrounds the foregoing statutory norm is to

require the party filing a pleading or motion to raise all
available exceptions for relief during the single opportunity so
that single or multiple objections may be avoided.26 It is clear
and categorical in Section 1, Rule 9 of the Revised Rules of
Court that failure to raise defenses and objections in a motion
to dismiss or in an answer is deemed a waiver thereof; and
basic is the rule in statutory construction that when the law is
clear and free from any doubt or ambiguity, there is no room
for construction or interpretation.27 As has been our
consistent ruling, where the law speaks in clear and
categorical language, there is no occasion for interpretation;
there is only room for application.28 Thus, although Aquinos
defense of non-compliance with Presidential Decree No. 1508
is meritorious, procedurally, such defense is no longer
available for failure to plead the same in the Answer as
required by the omnibus motion rule.

Neither could the MeTC dismiss Civil Case No. 17450 motu
proprio. The 1997 Rules of Civil Procedure provide only three
instances when the court may motu proprio dismiss the claim,
and that is when the pleadings or evidence on the record show
that (1) the court has no jurisdiction over the subject matter;
(2) there is another cause of action pending between the same
parties for the same cause; or (3) where the action is barred
by a prior judgment or by a statute of limitations. Thus, it is
clear that a court may not motu proprio dismiss a case on the

ground of failure to comply with the requirement for barangay

conciliation, this ground not being among those mentioned for
the dismissal by the trial court of a case on its own initiative.

Aquino further argues that the issue of possession in the

instant case cannot be resolved by the MeTC without first
adjudicating the question of ownership, since the Deed of Sale
vesting Aure with the legal right over the subject property is
simulated.

Again, we do not agree. Jurisdiction in ejectment cases is

determined by the allegations pleaded in the complaint. As
long as these allegations demonstrate a cause of action either
for forcible entry or for unlawful detainer, the court acquires
jurisdiction over the subject matter. This principle holds, even
if the facts proved during the trial do not support the cause of
action thus alleged, in which instance the court -- after
acquiring jurisdiction -- may resolve to dismiss the action for
insufficiency of evidence.

The necessary allegations in a Complaint for ejectment are set

forth in Section 1, Rule 70 of the Rules of Court, which reads:

SECTION 1. Who may institute proceedings, and when.

Subject to the provisions of the next succeeding section, a
person deprived of the possession of any land or building by
force, intimidation, threat, strategy, or stealth, or a lessor,
vendor, vendee, or other person against whom the possession
of any land or building is unlawfully withheld after the
expiration or termination of the right to hold possession, by
51

virtue of any contract, express or implied, or the legal

representatives or assigns of any such lessor, vendor, vendee,
or other person may at any time within one (1) year after such
unlawful deprivation or withholding of possession, bring an
action in the proper Municipal Trial Court against the person or
persons unlawfully withholding or depriving of possession, or
any person or persons claiming under them, for the restitution
of such possession, together with damages and costs.

In the case at bar, the Complaint filed by Aure and Aure

Lending on 2 April 1997, alleged as follows:

2. [Aure and Aure Lending] became the owners of a house and

lot located at No. 37 Salazar Street corner Encarnacion Street,
B.F. Homes, Quezon City by virtue of a deed of absolute sale
executed by [the spouses Aquino] in favor of [Aure and Aure
Lending] although registered in the name of x x x Ernesto S.
Aure; title to the said property had already been issued in the
name of [Aure] as shown by a transfer Certificate of Title , a
copy of which is hereto attached and made an integral part
hereof as Annex A;

3. However, despite the sale thus transferring ownership of

the subject premises to [Aure and Aure Lending] as abovestated and consequently terminating [Aquinos] right of
possession over the subject property, [Aquino] together with
her family, is continuously occupying the subject premises
notwithstanding several demands made by [Aure and Aure
Lending] against [Aquino] and all persons claiming right under
her to vacate the subject premises and surrender possession
thereof to [Aure and Aure Lending] causing damage and

prejudice to [Aure and Aure Lending] and making [Aquinos]

occupancy together with those actually occupying the subject
premises claiming right under her, illegal.29

It can be inferred from the foregoing that Aure, together with

Aure Lending, sought the possession of the subject property
which was never surrendered by Aquino after the perfection of
the Deed of Sale, which gives rise to a cause of action for an
ejectment suit cognizable by the MeTC. Aures assertion of
possession over the subject property is based on his
ownership thereof as evidenced by TCT No. 156802 bearing
his name. That Aquino impugned the validity of Aures title
over the subject property and claimed that the Deed of Sale
was simulated should not divest the MeTC of jurisdiction over
the ejectment case.30

As extensively discussed by the eminent jurist Florenz D.

Regalado in Refugia v. Court of Appeals31:

As the law on forcible entry and unlawful detainer cases now

stands, even where the defendant raises the question of
ownership in his pleadings and the question of possession
cannot be resolved without deciding the issue of ownership,
the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts nevertheless have the undoubted
competence to resolve the issue of ownership albeit only to
determine the issue of possession.

x x x. The law, as revised, now provides instead that when the

question of possession cannot be resolved without deciding
52

the issue of ownership, the issue of ownership shall be

resolved only to determine the issue of possession. On its
face, the new Rule on Summary Procedure was extended to
include within the jurisdiction of the inferior courts ejectment
cases which likewise involve the issue of ownership. This does
not mean, however, that blanket authority to adjudicate the
issue of ownership in ejectment suits has been thus conferred
on the inferior courts.

At the outset, it must here be stressed that the resolution of

this particular issue concerns and applies only to forcible entry
and unlawful detainer cases where the issue of possession is
intimately intertwined with the issue of ownership. It finds no
proper application where it is otherwise, that is, where
ownership is not in issue, or where the principal and main
issue raised in the allegations of the complaint as well as the
relief prayed for make out not a case for ejectment but one for
recovery of ownership.

Apropos thereto, this Court ruled in Hilario v. Court of

Appeals32:

Thus, an adjudication made therein regarding the issue of

ownership should be regarded as merely provisional and,
therefore, would not bar or prejudice an action between the
same parties involving title to the land. The foregoing doctrine
is a necessary consequence of the nature of forcible entry and
unlawful detainer cases where the only issue to be settled is
the physical or material possession over the real property, that
is, possession de facto and not possession de jure."

In other words, inferior courts are now "conditionally vested

with adjudicatory power over the issue of title or ownership
raised by the parties in an ejectment suit." These courts shall
resolve the question of ownership raised as an incident in an
ejectment case where a determination thereof is necessary for
a proper and complete adjudication of the issue of
possession.33

WHEREFORE, premises considered, the instant Petition is

DENIED. The Court of Appeals Decision dated 17 October 2001
and its Resolution dated 8 May 2002 in CA-G.R. SP No. 63733
are hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.

Exceptions to Referral to KatarungangPambarangay

Law
SUNBANUN V. GO, FEBRUARY 2, 2010
G.R. No. 163280
CARPIO, J.:
The Case
This petition for review on certiorari1 assails the 30 September
2003 Decision2 and the 18 March 2004 Resolution3 of the
Court of Appeals in CA-G.R. CV No. 67836.

53

The Facts

Petitioner Doris U. Sunbanun is the owner of a residential

house located at No. 68-F Junquera Street, Cebu City. On 7 July
1995, respondent Aurora B. Go leased the entire ground floor
of petitioners residential house for one year which was to
expire on 7 July 1996. As required under the lease contract,
respondent paid a deposit of P16,000 to answer for damages
and unpaid rent. To earn extra income, respondent accepted
lodgers, mostly her relatives, from whom she received a
monthly income of P15,000. Respondent paid the monthly
rental until March 1996 when petitioner drove away
respondents lodgers by telling them that they could stay on
the rented premises only until 15 April 1996 since she was
terminating the lease. The lodgers left the rented premises by
15 April 1996, and petitioner then padlocked the rooms
vacated by respondents lodgers.

On 10 May 1996, respondent filed an action for damages

against petitioner. Respondent alleged that she lost her
income from her lodgers for the months of April, May, and June
1996 totaling P45,000. Respondent, who worked in Hongkong,
also incurred expenses for plane fares and other travel
expenses in coming to the Philippines and returning to
Hongkong.

On the other hand, petitioner argued that respondent violated

the lease contract when she subleased the rented premises.
Besides, the lease contract was not renewed after its
expiration on 7 July 1996; thus, respondent had no more right
to stay in the rented premises. Petitioner also moved to

dismiss the complaint in the trial court for failure to comply

with prior barangay conciliation.

During the pre-trial, petitioner moved for the case to be

submitted for judgment on the pleadings considering that the
only disagreement between the parties was the correct
interpretation of the lease contract. Respondent did not object
to petitioners motion. The trial court then directed the parties
to submit their respective memoranda, after which the case
would be considered submitted for decision.4

In its decision dated 28 March 2000, the trial court held that
the case is not covered by the barangay conciliation process
since respondent is a resident of Hongkong. The trial court
noted that petitioner did not controvert respondents
allegation that petitioner ejected respondents lodgers
sometime in March 1996 even if the contract of lease would
expire only on 7 July 1996. The trial court found untenable
petitioners contention that subleasing the rented premises
violated the lease contract. The trial court held that
respondents act of accepting lodgers was in accordance with
the lease contract which allows the lessee "to use the
premises as a dwelling or as lodging house." Thus, the trial
court ordered petitioner to pay respondent actual damages of
P45,000 for respondents lost income from her lodgers for the
months of April, May, and June 1996, and attorneys fees of
P8,000.

Both parties appealed before the Court of Appeals. On 30

September 2003, the Court of Appeals rendered its decision in
favor of respondent and modified the trial courts decision.

54

Aside from actual damages and attorneys fees, the Court of

Appeals also ordered petitioner to pay moral and exemplary
damages and the cost of the suit. The dispositive portion of
the Court of Appeals decision reads:

WHEREFORE, premises considered, the assailed Decision of

the trial court is hereby MODIFIED by ordering defendantappellant [Doris U. Sunbanun] to pay plaintiff-appellant
[Aurora B. Go] the following amounts:

1. P45,000.00 as compensation for actual damages;

2. P50,000.00 as moral damages;

3. P50,000.00 as exemplary damages;

4. P8,000.00 as Attorneys Fees;

The Court of Appeals held that petitioners act of forcibly

ejecting respondents lodgers three months prior to the
termination of the lease contract without valid reason
constitutes breach of contract. Petitioner also violated Article
1654 of the Civil Code which states that "the lessor is obliged
to maintain the lessee in the peaceful and adequate
enjoyment of the lease for the duration of the contract." The
Court of Appeals awarded P50,000 as moral damages to
respondent for breach of contract and for petitioners act of
pre-terminating the lease contract without valid reason, which
shows bad faith on the part of petitioner. The Court of Appeals
also awarded respondent P50,000 as exemplary damages for
petitioners oppressive act.

The Issues

Petitioner raises the following issues:

I. THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD

OF ACTUAL DAMAGES BY THE TRIAL COURT.

5. Cost of the suit.

SO ORDERED.5

II. THE COURT OF APPEALS ERRED IN MODIFYING THE

JUDGMENT OF THE TRIAL COURT AND AWARDING MORAL AND
EXEMPLARY DAMAGES AND COSTS OF SUIT IN FAVOR OF
RESPONDENT.

The Court of Appeals Ruling

55

III. THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD

OF ATTORNEYS FEES IN FAVOR OF RESPONDENT.6

This case is unusual because it was petitioner, and not the

claimant respondent, who moved for a judgment on the
pleadings during the pre-trial. This is clear from the trial
courts Order9 dated 7 October 1997 which reads:

The Ruling of the Court

ORDER
We find the petition without merit.

In this case, the trial court rendered a judgment on the

pleadings. Section 1, Rule 34 of the Rules of Court reads:

SECTION 1. Judgment on the pleadings. Where an answer

fails to tender an issue, or otherwise admits the material
allegations of the adverse partys pleading, the court may, on
motion of that party, direct judgment on such pleading.
However, in actions for declaration of nullity or annulment of
marriage or for legal separation, the material facts alleged in
the complaint shall always be proved.

The trial court has the discretion to grant a motion for

judgment on the pleadings filed by a party if there is no
controverted matter in the case after the answer is filed.7 A
judgment on the pleadings is a judgment on the facts as
pleaded,8 and is based exclusively upon the allegations
appearing in the pleadings of the parties and the
accompanying annexes.

When this case was called for pre-trial, parties appeared

together with counsel. Defendant [Doris U. Sunbanun] moved
that considering that there is no dispute as far as the contract
is concerned and the only disagreement between the parties is
on the interpretation of the contract so that the issue boils
down on to which of the parties are correct on their
interpretation. With the conformity of the plaintiff [Aurora B.
Go], this case is therefore considered closed and submitted for
judgment on the pleadings. x x x (Emphasis supplied)

Petitioner, in moving for a judgment on the pleadings without

offering proof as to the truth of her own allegations and
without giving respondent the opportunity to introduce
evidence, is deemed to have admitted the material and
relevant averments of the complaint, and to rest her motion
for judgment based on the pleadings of the parties.10 As held
in Tropical Homes, Inc. v. CA:111avvphi1

As to the amount of damages awarded as a consequence of

this violation of plaintiffs rights, the lower court based its
award from the allegations and prayer contained in the
complaint. The defendant, however, questions this award for
the reason that, according to the defendant, the plaintiff, in
56

moving for judgment on the pleadings, did not offer proof as to

the truth of his own allegations with respect to the damages
claimed by him, and gave no opportunity for the appellant to
introduce evidence to refute his claims. We find this objection
without merit. It appears that when the plaintiff moved to
have the case decided on the pleadings, the defendant
interposed no objection and has practically assented thereto.
The defendant, therefore, is deemed to have admitted the
allegations of fact of the complaint, so that there was no
necessity for plaintiff to submit evidence of his claim.

We likewise sustain the award of moral damages in favor of

respondent. In this case, moral damages may be recovered
under Article 2219 and Article 2220 of the Civil Code in
relation to Article 21. The pertinent provisions read:

Art. 2219. Moral damages may be recovered in the following

and analogous cases:

xxx
In this case, it is undisputed that petitioner ejected
respondents lodgers three months before the expiration of the
lease contract on 7 July 1996. Petitioner maintains that she
had the right to terminate the contract prior to its expiration
because respondent allegedly violated the terms of the lease
contract by subleasing the rented premises. Petitioners
assertion is belied by the provision in the lease contract12
which states that the lessee can "use the premises as a
dwelling or as lodging house." Furthermore the lease contract
clearly provides that petitioner leased to respondent the
ground floor of her residential house for a term of one year
commencing from 7 July 1995. Thus, the lease contract would
expire only on 7 July 1996. However, petitioner started
ejecting respondents lodgers in March 1996 by informing
them that the lease contract was only until 15 April 1996.
Clearly, petitioners act of ejecting respondents lodgers
resulted in respondent losing income from her lodgers. Hence,
it was proper for the trial court and the appellate court to
order petitioner to pay respondent actual damages in the
amount of P45,000.

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29,
30, 32, 34, and 35.

Art. 2220. Wilfull injury to property may be a legal ground for

awarding moral damages if the court should find that, under
the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith. (Emphasis supplied)

Art. 21. Any person who wilfully causes loss or injury to

another in a manner that is contrary to morals, good customs
or public policy shall compensate the latter for the damage.

We agree with the appellate court that petitioners act of

ejecting respondents lodgers three months before the lease
contract expired without valid reason constitutes bad faith.
What aggravates the situation was that petitioner did not

57

inform respondent, who was then working in Hongkong, about

petitioners plan to pre-terminate the lease contract and evict
respondents lodgers. Moral damages may be awarded when
the breach of contract was attended with bad faith.13

September 17, 2009 Decision1 and February 11, 2010

Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
100544, entitled "Jerry D. Montanez v. Crisanta Alcaraz
Miguel."

Furthermore, we affirm the award of exemplary damages and

attorneys fees. Exemplary damages may be awarded when a
wrongful act is accompanied by bad faith or when the
defendant acted in a wanton, fraudulent, reckless, oppressive,
or malevolent manner which would justify an award of
exemplary damages under Article 223214 of the Civil Code.15
Since the award of exemplary damages is proper in this case,
attorneys fees and cost of the suit may also be recovered as
provided under Article 220816 of the Civil Code.17

Antecedent Facts

WHEREFORE, the Court DENIES the petition. The Court

AFFIRMS the 30 September 2003 Decision and the 18 March
2004 Resolution of the Court of Appeals in CA-G.R. CV No.
67836.

SO ORDERED.
Effect of Amicable Settlement at the Barangay Level
MIGUEL V. MONTANEZ, JANUARY 25, 2012
G.R. NO. 191336

On February 1, 2001, respondent Jerry Montanez (Montanez)

secured a loan of One Hundred Forty-Three Thousand Eight
Hundred Sixty-Four Pesos (P143,864.00), payable in one (1)
year, or until February 1, 2002, from the petitioner. The
respondent gave as collateral therefor his house and lot
located at Block 39 Lot 39 Phase 3, Palmera Spring,
Bagumbong, Caloocan City.

Due to the respondents failure to pay the loan, the petitioner

filed a complaint against the respondent before the Lupong
Tagapamayapa of Barangay San Jose, Rodriguez, Rizal. The
parties entered into a Kasunduang Pag-aayos wherein the
respondent agreed to pay his loan in installments in the
amount of Two Thousand Pesos (P2,000.00) per month, and in
the event the house and lot given as collateral is sold, the
respondent would settle the balance of the loan in full.
However, the respondent still failed to pay, and on December
13, 2004, the Lupong Tagapamayapa issued a certification to
file action in court in favor of the petitioner.

REYES, J.:
Before this Court is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court. Petitioner Crisanta Alcaraz
Miguel (Miguel) seeks the reversal and setting aside of the

On April 7, 2005, the petitioner filed before the Metropolitan

Trial Court (MeTC) of Makati City, Branch 66, a complaint for
Collection of Sum of Money. In his Answer with Counterclaim,3
58

the respondent raised the defense of improper venue

considering that the petitioner was a resident of Bagumbong,
Caloocan City while he lived in San Mateo, Rizal.

After trial, on August 16, 2006, the MeTC rendered a

Decision,4 which disposes as follows:

WHEREFORE, premises considered[,] judgment is hereby

rendered ordering defendant Jerry D. Montanez to pay plaintiff
the following:

1. The amount of [Php147,893.00] representing the obligation

with legal rate of interest from February 1, 2002 which was the
date of the loan maturity until the account is fully paid;

2. The amount of Php10,000.00 as and by way of attorneys

fees; and the costs.

WHEREFORE, finding no cogent reason to disturb the findings

of the court a quo, the appeal is hereby DISMISSED, and the
DECISION appealed from is hereby AFFIRMED in its entirety for
being in accordance with law and evidence.

SO ORDERED.7

Dissatisfied, the respondent appealed to the CA raising two

issues, namely, (1) whether or not venue was improperly laid,
and (2) whether or not the Kasunduang Pag-aayos effectively
novated the loan agreement. On September 17, 2009, the CA
rendered the assailed Decision, disposing as follows:

WHEREFORE, premises considered, the petition is hereby

GRANTED. The appealed Decision dated March 14, 2007 of the
Regional Trial Court (RTC) of Makati City, Branch 146, is
REVERSED and SET ASIDE. A new judgment is entered
dismissing respondents complaint for collection of sum of
money, without prejudice to her right to file the necessary
action to enforce the Kasunduang Pag-aayos.

SO ORDERED. 5
SO ORDERED.8
On appeal to the Regional Trial Court (RTC) of Makati City,
Branch 146, the respondent raised the same issues cited in his
Answer. In its March 14, 2007 Decision,6 the RTC affirmed the
MeTC Decision, disposing as follows:

Anent the issue of whether or not there is novation of the loan

contract, the CA ruled in the negative. It ratiocinated as
follows:

59

Judging from the terms of the Kasunduang Pag-aayos, it is

clear that no novation of the old obligation has taken
place.1wphi1 Contrary to petitioners assertion, there was no
reduction of the term or period originally stipulated. The
original period in the first agreement is one (1) year to be
counted from February 1, 2001, or until January 31, 2002.
When the complaint was filed before the barangay on
February 2003, the period of the original agreement had long
expired without compliance on the part of petitioner. Hence,
there was nothing to reduce or extend. There was only a
change in the terms of payment which is not incompatible with
the old agreement. In other words, the Kasunduang Pag-aayos
merely supplemented the old agreement.9

The CA went on saying that since the parties entered into a

Kasunduang Pag-aayos before the Lupon ng Barangay, such
settlement has the force and effect of a court judgment, which
may be enforced by execution within six (6) months from the
date of settlement by the Lupon ng Barangay, or by court
action after the lapse of such time.10 Considering that more
than six (6) months had elapsed from the date of settlement,
the CA ruled that the remedy of the petitioner was to file an
action for the execution of the Kasunduang Pag-aayos in court
and not for collection of sum of money.11 Consequently, the
CA deemed it unnecessary to resolve the issue on venue.12

(1) Whether or not a complaint for sum of money is the proper

remedy for the petitioner, notwithstanding the Kasunduang
Pag-aayos;13 and

(2) Whether or not the CA should have decided the case on

the merits rather than remand the case for the enforcement of
the Kasunduang Pag-aayos.14

Our Ruling

Because the respondent failed to comply with the terms of the

Kasunduang Pag-aayos, said agreement is deemed rescinded
pursuant to Article 2041 of the New Civil Code and the
petitioner can insist on his original demand. Perforce, the
complaint for collection of sum of money is the proper remedy.

The petitioner contends that the CA erred in ruling that she

should have followed the procedure for enforcement of the
amicable settlement as provided in the Revised Katarungang
Pambarangay Law, instead of filing a collection case. The
petitioner points out that the cause of action did not arise from
the Kasunduang Pag-aayos but on the respondents breach of
the original loan agreement.15

The petitioner now comes to this Court.

This Court agrees with the petitioner.
Issues

60

It is true that an amicable settlement reached at the barangay

conciliation proceedings, like the Kasunduang Pag-aayos in
this case, is binding between the contracting parties and, upon
its perfection, is immediately executory insofar as it is not
contrary to law, good morals, good customs, public order and
public policy.16 This is in accord with the broad precept of
Article 2037 of the Civil Code, viz:

A compromise has upon the parties the effect and authority of

res judicata; but there shall be no execution except in
compliance with a judicial compromise.

Being a by-product of mutual concessions and good faith of

the parties, an amicable settlement has the force and effect of
res judicata even if not judicially approved.17 It transcends
being a mere contract binding only upon the parties thereto,
and is akin to a judgment that is subject to execution in
accordance with the Rules.18 Thus, under Section 417 of the
Local Government Code,19 such amicable settlement or
arbitration award may be enforced by execution by the
Barangay Lupon within six (6) months from the date of
settlement, or by filing an action to enforce such settlement in
the appropriate city or municipal court, if beyond the sixmonth period.

Under the first remedy, the proceedings are covered by the

Local Government Code and the Katarungang Pambarangay
Implementing Rules and Regulations. The Punong Barangay is
called upon during the hearing to determine solely the fact of
non-compliance of the terms of the settlement and to give the
defaulting party another chance at voluntarily complying with

his obligation under the settlement. Under the second remedy,

the proceedings are governed by the Rules of Court, as
amended. The cause of action is the amicable settlement
itself, which, by operation of law, has the force and effect of a
final judgment.20

It must be emphasized, however, that enforcement by

execution of the amicable settlement, either under the first or
the second remedy, is only applicable if the contracting parties
have not repudiated such settlement within ten (10) days from
the date thereof in accordance with Section 416 of the Local
Government Code. If the amicable settlement is repudiated by
one party, either expressly or impliedly, the other party has
two options, namely, to enforce the compromise in accordance
with the Local Government Code or Rules of Court as the case
may be, or to consider it rescinded and insist upon his original
demand. This is in accord with Article 2041 of the Civil Code,
which qualifies the broad application of Article 2037, viz:

If one of the parties fails or refuses to abide by the

compromise, the other party may either enforce the
compromise or regard it as rescinded and insist upon his
original demand.

In the case of Leonor v. Sycip,21 the Supreme Court (SC) had

the occasion to explain this provision of law. It ruled that
Article 2041 does not require an action for rescission, and the
aggrieved party, by the breach of compromise agreement,
may just consider it already rescinded, to wit:

61

It is worthy of notice, in this connection, that, unlike Article

2039 of the same Code, which speaks of "a cause of
annulment or rescission of the compromise" and provides that
"the compromise may be annulled or rescinded" for the cause
therein specified, thus suggesting an action for annulment or
rescission, said Article 2041 confers upon the party concerned,
not a "cause" for rescission, or the right to "demand" the
rescission of a compromise, but the authority, not only to
"regard it as rescinded", but, also, to "insist upon his original
demand". The language of this Article 2041, particularly when
contrasted with that of Article 2039, denotes that no action for
rescission is required in said Article 2041, and that the party
aggrieved by the breach of a compromise agreement may, if
he chooses, bring the suit contemplated or involved in his
original demand, as if there had never been any compromise
agreement, without bringing an action for rescission thereof.
He need not seek a judicial declaration of rescission, for he
may
"regard"
the
compromise
agreement
already
"rescinded".22 (emphasis supplied)

As so well stated in the case of Chavez v. Court of Appeals,23

a party's non-compliance with the amicable settlement paved
the way for the application of Article 2041 under which the
other party may either enforce the compromise, following the
procedure laid out in the Revised Katarungang Pambarangay
Law, or consider it as rescinded and insist upon his original
demand. To quote:

In the case at bar, the Revised Katarungang Pambarangay Law

provides for a two-tiered mode of enforcement of an amicable
settlement, to wit: (a) by execution by the Punong Barangay
which is quasi-judicial and summary in nature on mere motion

of the party entitled thereto; and (b) an action in regular form,

which remedy is judicial. However, the mode of enforcement
does not rule out the right of rescission under Art. 2041 of the
Civil Code. The availability of the right of rescission is apparent
from the wording of Sec. 417 itself which provides that the
amicable settlement "may" be enforced by execution by the
lupon within six (6) months from its date or by action in the
appropriate city or municipal court, if beyond that period. The
use of the word "may" clearly makes the procedure provided
in the Revised Katarungang Pambarangay Law directory or
merely optional in nature.

Thus, although the "Kasunduan" executed by petitioner and

respondent before the Office of the Barangay Captain had the
force and effect of a final judgment of a court, petitioner's noncompliance paved the way for the application of Art. 2041
under which respondent may either enforce the compromise,
following the procedure laid out in the Revised Katarungang
Pambarangay Law, or regard it as rescinded and insist upon
his original demand. Respondent chose the latter option when
he instituted Civil Case No. 5139-V-97 for recovery of
unrealized profits and reimbursement of advance rentals,
moral and exemplary damages, and attorney's fees.
Respondent was not limited to claiming P150,000.00 because
although he agreed to the amount in the "Kasunduan," it is
axiomatic that a compromise settlement is not an admission of
liability but merely a recognition that there is a dispute and an
impending litigation which the parties hope to prevent by
making reciprocal concessions, adjusting their respective
positions in the hope of gaining balanced by the danger of
losing. Under the "Kasunduan," respondent was only required
to execute a waiver of all possible claims arising from the
lease contract if petitioner fully complies with his obligations

62

thereunder. It is undisputed that herein petitioner did not.24

(emphasis supplied and citations omitted)

In the instant case, the respondent did not comply with the
terms and conditions of the Kasunduang Pag-aayos. Such noncompliance may be construed as repudiation because it
denotes that the respondent did not intend to be bound by the
terms thereof, thereby negating the very purpose for which it
was executed. Perforce, the petitioner has the option either to
enforce the Kasunduang Pag-aayos, or to regard it as
rescinded and insist upon his original demand, in accordance
with the provision of Article 2041 of the Civil Code. Having
instituted an action for collection of sum of money, the
petitioner obviously chose to rescind the Kasunduang Pagaayos. As such, it is error on the part of the CA to rule that
enforcement by execution of said agreement is the
appropriate remedy under the circumstances.

The CA took off on the wrong premise that enforcement of the

Kasunduang Pag-aayos is the proper remedy, and therefore
erred in its conclusion that the case should be remanded to
the trial court. The fact that the petitioner opted to rescind the
Kasunduang Pag-aayos means that she is insisting upon the
undertaking of the respondent under the original loan
contract. Thus, the CA should have decided the case on the
merits, as an appeal before it, and not prolong the
determination of the issues by remanding it to the trial court.
Pertinently, evidence abounds that the respondent has failed
to comply with his loan obligation. In fact, the Kasunduang
Pag-aayos is the well nigh incontrovertible proof of the
respondents indebtedness with the petitioner as it was
executed precisely to give the respondent a second chance to
make good on his undertaking. And since the respondent still
reneged in paying his indebtedness, justice demands that he
must be held answerable therefor.

Considering that the Kasunduang Pag-aayos is deemed

rescinded by the non-compliance of the respondent of the
terms thereof, remanding the case to the trial court for the
enforcement of said agreement is clearly unwarranted.

WHEREFORE, the petition is GRANTED. The assailed decision

of the Court of Appeals is SET ASIDE and the Decision of the
Regional Trial Court, Branch 146, Makati City, dated March 14,
2007 is REINSTATED.
SO ORDERED.

The petitioner avers that the CA erred in remanding the case

to the trial court for the enforcement of the Kasunduang Pagaayos as it prolonged the process, "thereby putting off the
case in an indefinite pendency."25 Thus, the petitioner insists
that she should be allowed to ventilate her rights before this
Court and not to repeat the same proceedings just to comply
with the enforcement of the Kasunduang Pag-aayos, in order
to finally enforce her right to payment.26

Execution and Repudiation of Amicable Settlement

VIDAL ET AL., V. ESCUETA, DECEMBER 10, 2003
G.R. NO. 156228
CALLEJO, SR., J.:

63

This is a petition for review of the Decision1 dated July 23, 2002 of the
Court of Appeals in CA-G.R. SP NO. 68895 which affirmed the decision2 of
the Regional Trial Court (RTC) of Mandaluyong City, Branch 208, which
reversed and set aside the decision3 of the Metropolitan Trial Court of
Mandaluyong City (MTC), Branch 60; and granted the motion for
execution filed by private respondent Ma. Teresa O. Escueta in Civil Case
No. 17520.

The balance of ONE MILLION (P1,000,000.00) upon vacation of all the

occupants of the subject property within SIX (6) months from date
hereof."7

The parties further agreed that:

The petition at bar stemmed from the following antecedents:

When Abelardo Escueta died intestate on December 3, 1994, he was
survived by his widow Remedios Escueta and their six children, including
Ma. Teresa O. Escueta and her brother Herman O. Escueta. Part of his
estate was a parcel of land located at No. 14 Sierra Madre corner Kanlaon
Streets, Barangay Highway Hills, Mandaluyong City, covered by Transfer
Certificate of Title (TCT) No. (77083) - 27568, and the house thereon. The
property was leased to Rainier Llanera, who sublet the same to 25
persons. The heirs executed an extra-judicial settlement of estate over
the property. They also executed a special power of attorney authorizing
Ma. Teresa Escueta to sell the said property.
Sometime in 1999, Ma. Teresa Escueta, as a co-owner of the property,
filed an ejectment case against Llanera and the sub-lessees before the
Lupon of Barangay Highway Hills, docketed as Barangay Case No. 9909.5

In the meantime, on April 15, 1999, the heirs of Abelardo Escueta

executed a deed of conditional sale6 over the property including the
house thereon, to Mary Liza Santos for P13,300,000.00 payable as
follows:
"Down payment ONE MILLION FIVE HUNDRED THOUSAND
(P1,500,000.00) which the HEIRS-SELLERS acknowledged receipt thereof
with complete and full satisfaction;

Second payment - TEN MILLION EIGHT HUNDRED THOUSAND

(P10,800,000.00) after publication of the Extra-Judicial Settlement of the
Estate of the late Abelardo Escueta and payment of the taxes with the
Bureau of Internal Revenue by the Attorney-in-Fact; and

"Ms. Maria Teresa Escueta shall deliver unto the BUYER the Owners
Duplicate Copy of the title upon receipt of the down payment while the
original copies of the Special Power of Attorney shall be delivered upon
payment of the Second Payment stated above.

The ATTORNEY-IN-FACT-SELLER shall be responsible for the ejectment of

all the tenants in the said subject property.
The ATTORNEY-IN-FACT-SELLER shall pay the estate tax, capital gains tax
and documentary stamp tax including the telephone, water and Meralco
bills and the publication for the Extra-Judicial Settlement of the estate of
the late ABELARDO ESCUETA while the registration and transfer fees
shall be shouldered by the BUYER."8
On May 5, 1999, Escueta and Llanera, and the sub-lessees, executed an
"Amicable Settlement,"9 where they agreed that (a) the owners of the
property would no longer collect the rentals due from the respondents
therein (lessee and sub-lessees) starting May 1999, with the concomitant
obligation of the respondents to vacate the property on or before
December 1999; (b) time was the essence of the agreement, and that
consequently, if the lessee and sub-lessees fail or refuse to vacate the
property on or before December 1999, the barangay chairman was
authorized without any court order to cause the eviction and removal of
all the respondents on the property.10 The amicable settlement was
attested by Pangkat Chairman Jose Acong. The parties did not repudiate
the amicable settlement within ten days from the execution thereof.
Neither did any of the parties file any petition to repudiate the
settlement.
The vendees having paid the down payment and second installment of
the price of the property, the vendors caused the cancellation on

64

December 17, 1999, of TCT No. 27568 and the issuance of TCT No. 15324
to and under the names of the vendees Mary Liza Santos, Susana Lim
and Johnny Lim.11 However, Escueta and the other vendors had yet to
receive the balance of the purchase price of P1,000,000.00 because the
respondents were still in the property.

Llanera vacated the leased premises. Later, twenty of the sub-lessees

also vacated the property. By January 2000, five sub-lessees, namely,
Ma. Teresa Vidal, Lulu Marquez, Marcelo Trinidad, Carlos Sobremonte,12
and Jingkee Ang remained in the property, and requested Escueta for
extensions to vacate the property. Escueta agreed, but despite the lapse
of the extensions granted them, the five sub-lessees refused to vacate
the property.

Escueta opted not to have the sub-lessees evicted through the Punong
Barangay as provided for in the amicable settlement. Neither did she file
a motion with the Punong Barangay for the enforcement of the
settlement. Instead, she filed on May 12, 2000, a verified "Motion for
Execution" against the recalcitrant sub-lessees with the MTC for the
enforcement of the amicable settlement and the issuance of a writ of
execution. The pleading was docketed as Civil Case No. 17520, with
Teresa Escueta as plaintiff, and the sub-lessees as defendants.13

The defendants opposed the motion14 alleging that they were enveigled
into executing the amicable settlement despite the fact that they had not
violated any of the terms and conditions of the verbal lease of the
property; they were coerced and forced to enter into such amicable
settlement as it was the only way of prolonging their stay in the leased
premises; and that they had been paying faithfully and religiously the
monthly rentals in advance.

They also contended that the plaintiff came to court with unclean hands,
as the property had been sold by the co-owners thereof on June 8, 1999,
without notifying them. The real parties-in-interest as plaintiffs, would be
the new owners of the property, and not the Escuetas. The defendants

further asserted that the amicable settlement was not elevated to or

approved by the MTC as required by Section 419 of the Local
Government Code (LGC), nor approved by a competent court; hence,
there was no judgment to enforce by a new motion for a writ of
execution. As such, the plaintiffs motion was premature and
procedurally improper. The defendants asserted that the plaintiff must
first secure a certification to file action from the barangay and thereafter,
file an action for ejectment against them as required by Section 417 of
the LGC. The amicable settlement of the parties before the Lupon cannot
be a substitute for an action for ejectment. Finally, they averred that they
had been sub-lessees for more than ten years already; hence, had the
right of first refusal under Section 6 of the Urban Land Reform Law (P.D.
No. 1517). For her part, the plaintiff asserted that there having been no
execution of the amicable settlement on or before November 6, 1999 by
the Lupon, the settlement may now be enforced by action in the proper
city or municipal court.

On February 22, 2001, the court issued an Order15 denying the "Motion
for Execution." The court held that the plaintiff was not the real party-ininterest as the subject property had already been sold and titled to
Susana Lim, Johnny Lim and Mary Liza Santos. Only the vendees had the
right to demand the ejectment of the defendants from the said property.
The court further ruled that the defendants had the right of first refusal
to purchase the property under Presidential Decree No. 1517. The MTC,
however, did not rule on the issue of whether or not the plaintiffs motion
for execution was premature.

Aggrieved, the plaintiff, now the appellant, appealed the order to the RTC
where she contended that:

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR

IN FINDING AND IN CONCLUDING THAT PLAINTIFF IS NO LONGER THE
REAL PARTY-IN-INTEREST.

65

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR

IN FINDING AND IN CONCLUDING THAT DEFENDANTS CANNOT BE
EJECTED AND CAN EXERCISE THE RIGHT OF FIRST REFUSAL.

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR

IN NOT FINDING AND IN NOT MAKING THE CONCLUSION THAT
DEFENDANTS HAVE VIOLATED THE FINAL AND EXECUTORY THE WRITTEN
AMICABLE SETTLEMENT BETWEEN PARTIES EXECUTED IN THEIR
BARANGAY CONFRONTATION.

THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE ERROR

IN NOT ORDERING THE EJECTMENT OF THE DEFENDANTS AND IN NOT
ORDERING SAID DEFENDANTS TO PAY THEIR ARREARAGES IN RENTAL
PAYMENTS FROM MAY 1999 UP TO THE DAY THEY ACTUALLY LEAVE THE
PREMISES AS WELL AS ATTORNEYS FEES AND DAMAGES.16

appellees may not claim that they had been deprived of their preemptive
right when no such right existed in the first place. The court did not rule
on the third and fourth issues on the ground that the said issues were
never raised by the parties. The decretal portion of the RTC decision
reads as follows:

PREMISES CONSIDERED, the appeal is GRANTED. The Order dated

February 2, 2001 issued by the Metropolitan Trial Court of Mandaluyong
City, Branch 60, in Civil Case No. 17520 is hereby REVERSED and SET
ASIDE, and a new one is entered granting the Motion for Execution.

Let the Record of this case be remanded to the court a quo for proper
disposition.

SO ORDERED.17
On August 31, 2001, the RTC rendered a decision holding that the
plaintiff-appellant was still the owner of the property when the ejectment
case was filed in the office of the barangay captain, and, as such, was
the real party-in-interest as the plaintiff in the MTC. Moreover, under the
deed of conditional sale between her and the buyers, it was stipulated
therein that the purchase price of P1,000,000.00 would be delivered to
the vendors only "upon the vacation of all the occupants of the subject
property within six (6) months from date hereof." She was duty-bound to
cause the eviction of the defendant from the property; hence, the
appellant, as a co-owner, had a substantial interest in the property. The
MTC further held that the sale, having been executed while the
appellants complaint was pending with the Lupon, the action in the MTC
may be continued by the plaintiff-appellant.

As to the right of first refusal being asserted by the appellees, the court
ruled that there was no showing that the land leased had been
proclaimed to be within a specific Urban Land Reform Zone. In fact, the
Housing and Land Use Regulatory Board had certified that the subject
property was outside the area for priority development; thus, the

A petition for review under Rule 42 was filed with the Court of Appeals by
three of the appellees, now petitioners Ma. Teresa Vidal, Lulu Marquez
and Carlos Sobremonte. The court, however, dismissed the petition on
(1) procedural grounds, and (2) for lack of merit. 18

On procedural grounds, the CA ruled that the petitioners failed to

indicate the specific material dates, showing that their petition was filed
on time as required by the rules, and in declaring that they failed to
justify their failure to do so.

On the merits of the petition, the appellate court upheld the ruling of the
RTC. The decretal portion of the decision of the CA reads:

66

WHEREFORE, the instant petition is hereby DISMISSED. The assailed

Decision of the Regional Trial Court of Mandaluyong City, Branch 208,
rendered in Civil Case No. MC01-333-A, dated August 31, 2001 is hereby
AFFIRMED.

Procedure. The circumstances of typhoon and holiday for failure to obtain

a certified true copy of the DOJs Decision, in the case of Hagonoy Market
Vendor Association vs. Municipality of Hagonoy, Bulacan, were present in
the instant petition. The case of Salazar vs. Court of Appeals is also not
similar with the present case.21

SO ORDERED.19

In their petition at bar, the petitioners assert that the CA erred as follows:
(1) in not applying the rules of procedure liberally; (2) in declaring that
there was no need for the respondents to file an ejectment case for the
eviction of the petitioners; (3) that the real parties-in-interest as plaintiffs
in the MTC were the new owners of the property, Susana Lim, Johnny Lim
and Mary Liza Santos; (4) in not finding that the Amicable Settlement
was obtained through deceit and fraud; and (5) in ruling that the
petitioners had no right of first refusal in the purchase and sale of the
subject property under Presidential Decree No. 1517.

The petition is bereft of merit.

On the procedural issue, the CA dismissed the petition before it for the
petitioners failure to comply with Section 2, par. 1, Rule 42 of the 1997
Rules of Civil Procedure.20 The CA ratiocinated that there was no
justification for a relaxation of the Rules, thus:

Petitioners cited decisions of the Supreme Court where a relaxation of

procedural rules was allowed. However, a reading of those cases shows
that they are not exactly similar with the present case. In the case of
Mactan Cebu International Airport Authority vs. Francisco Cuizon
Mangubat, the Supreme Court allowed the late payment of docket fee by
the Solicitor General on the ground that the 1997 Rules of Civil Procedure
regarding payment of docket fees was still new at that time. The same
cannot be said in the present case. The petition was filed on February 28,
2002, almost five years from the issuance of the 1997 Rules of Civil

The petitioners aver in this case that the failure of their counsel to
include the material dates in their petition with the CA was, as stated in
their Amended Manifestation, because the said counsel was suffering
from a slight heart attack. The Court finds the petitioners pretext flimsy.
If the petitioners counsel was able to prepare their petition despite her
condition, there was no valid reason why she failed to include the
material dates required under the Rules of Court. Besides, the petitioners
stated in their petition that they had appended a copy of their Amended
Manifestation, but failed to do so. If the rules were to be applied strictly,
the CA could not be faulted for dismissing the petition.

However, in order to promote their objective of securing a just, speedy

and inexpensive dispensation of every action and proceedings, the Rules
are to be liberally construed.22 Rules of procedure are intended to
promote, not to defeat substantial justice and, therefore, should not be
applied in a very rigid and technical sense. This Court ruled in Buenaflor
vs. Court of Appeals, et al.23 that appeal is an essential part of our
judicial system and trial courts and the Court of Appeals are advised to
proceed with caution so as not to deprive a party of the right to appeal
and that every party litigant should be afforded the amplest opportunity
for the proper and just disposition of his cause, free from the constraints
of technicalities. The Court has given due course to petitions where to do
so would serve the demands of substantial justice and in the exercise of
its equity jurisdiction.24 In this case, the Court opts to apply the rules
liberally to enable it to delve into and resolve the cogent substantial
issues posed by the petitioners.

We agree with the contention of the petitioners that under Section 416 of
the LGC, the amicable settlement executed by the parties before the
Lupon on the arbitration award has the force and effect of a final

67

judgment of a court upon the expiration of ten (10) days from the date
thereof, unless the settlement is repudiated within the period therefor,
where the consent is vitiated by force, violence or intimidation, or a
petition to nullify the award is filed before the proper city or municipal
court.25 The repudiation of the settlement shall be sufficient basis for
the issuance of a certification to file a complaint.26

We also agree that the Secretary of the Lupon is mandated to transmit

the settlement to the appropriate city or municipal court within the time
frame under Section 418 of the LGC and to furnish the parties and the
Lupon Chairman with copies thereof.27 The amicable settlement which is
not repudiated within the period therefor may be enforced by execution
by the Lupon through the Punong Barangay within a time line of six
months, and if the settlement is not so enforced by the Lupon after the
lapse of the said period, it may be enforced only by an action in the
proper city or municipal court as provided for in Section 417 of the LGC
of 1991, as amended, which reads:

SEC. 417. Execution. The amicable settlement or arbitration award may

be enforced by execution by the Lupon within six (6) months from the
date of the settlement. After the lapse of such time, the settlement may
be enforced by action in the proper city or municipal court. (Underlining
supplied).

Section 417 of the Local Government Code provides a mechanism for the
enforcement of a settlement of the parties before the Lupon. It provides
for a two-tiered mode of enforcement of an amicable settlement
executed by the parties before the Lupon, namely, (a) by execution of
the Punong Barangay which is quasi-judicial and summary in nature on
mere motion of the party/parties entitled thereto;28 and (b) by an action
in regular form, which remedy is judicial. Under the first remedy, the
proceedings are covered by the LGC and the Katarungang Pambarangay
Implementing Rules and Regulations. The Punong Barangay is called
upon during the hearing to determine solely the fact of non-compliance
of the terms of the settlement and to give the defaulting party another
chance at voluntarily complying with his obligation under the settlement.

Under the second remedy, the proceedings are governed by the Rules of
Court, as amended. The cause of action is the amicable settlement itself,
which, by operation of law, has the force and effect of a final judgment.

Section 417 of the LGC grants a party a period of six months to enforce
the amicable settlement by the Lupon through the Punong Barangay
before such party may resort to filing an action with the MTC to enforce
the settlement. The raison d etre of the law is to afford the parties
during the six-month time line, a simple, speedy and less expensive
enforcement of their settlement before the Lupon.

The time line of six months is for the benefit not only of the complainant,
but also of the respondent. Going by the plain words of Section 417 of
the LGC, the time line of six months should be computed from the date
of settlement. However, if applied to a particular case because of its
peculiar circumstance, the computation of the time line from the date of
the settlement may be arbitrary and unjust and contrary to the intent of
the law. To illustrate: Under an amicable settlement made by the parties
before the Lupon dated January 15, 2003, the respondents were obliged
to vacate the subject property on or before September 15, 2003. If the
time line of six months under Section 417 were to be strictly and literally
followed, the complainant may enforce the settlement through the Lupon
only up to July 15, 2003. But under the settlement, the respondent was
not obliged to vacate the property on or before July 15, 2003; hence, the
settlement cannot as yet be enforced. The settlement could be enforced
only after September 15, 2003, when the respondent was obliged to
vacate the property. By then, the six months under Section 417 shall
have already elapsed. The complainant can no longer enforce the
settlement through the Lupon, but had to enforce the same through an
action in the MTC, in derogation of the objective of Section 417 of the
LGC. The law should be construed and applied in such a way as to reflect
the will of the legislature and attain its objective, and not to cause an
injustice. As Justice Oliver Wendell Holmes aptly said, "courts are apt to
err by sticking too closely to the words of the law where these words
support a policy that goes beyond them. The Court should not defer to
the latter that killeth but to the spirit that vivifieth."29

68

In light of the foregoing considerations, the time line in Section 417

should be construed to mean that if the obligation in the settlement to
be enforced is due and demandable on the date of the settlement, the
six-month period should be counted from the date of the settlement;
otherwise, if the obligation to be enforced is due and demandable on a
date other than the date of the settlement, the six-month period should
be counted from the date the obligation becomes due and demandable.

not exceed ten thousand (P10,000.00) pesos a month if residing in Metro

Manila, and five thousand (P5,000.00) pesos a month if residing outside
Metro Manila, and (b) who do not own real property with an assessed
value of more than fifty thousand (P50,000.00) pesos shall be exempt
from the payment of legal fees. Section 18, Rule 141 of the Revised Rules
of Court, as amended by A.M. No. 00-2-01-SC, is hereby further amended
accordingly.

Parenthetically, the Katarungang Pambarangay Implementing Rules and

Regulations, Rule VII, Section 2 provides:

In this case, the parties executed their Amicable Settlement on May 5,

1999. However, the petitioners were obliged to vacate the property only
in January 2000, or seven months after the date of the settlement;
hence, the respondent may enforce the settlement through the Punong
Barangay within six months from January 2000 or until June 2000, when
the obligation of the petitioners to vacate the property became due. The
respondent was precluded from enforcing the settlement via an action
with the MTC before June 2000. However, the respondent filed on May
12, 2000 a motion for execution with the MTC and not with the Punong
Barangay. Clearly, the respondent adopted the wrong remedy. Although
the MTC denied the respondents motion for a writ of execution, it was for
a reason other than the impropriety of the remedy resorted to by the
respondent. The RTC erred in granting the respondents motion for a writ
of execution, and the CA erred in denying the petitioners petition for
review.

SECTION 2. Modes of Execution. - The amicable settlement or arbitration

award may be enforced by execution by the Lupon within six [6] months
from date of the settlement or date of receipt of the award or from the
date the obligation stipulated in the settlement or adjudged in the
arbitration award becomes due and demandable. After the lapse of such
time, the settlement or award may be enforced by the appropriate local
trial court pursuant to the applicable provisions of the Rules of Court . An
amicable settlement reached in a case referred by the Court having
jurisdiction over the case to the Lupon shall be enforced by execution by
the said court. (Underlining supplied).

By express provision of Section 417 of the LGC, an action for the

enforcement of the settlement should be instituted in the proper
municipal or city court. This is regardless of the nature of the complaint
before the Lupon, and the relief prayed for therein. The venue for such
actions is governed by Rule 4, Section 1 of the 1997 Rules of Civil
Procedure, as amended. An action for the enforcement of a settlement is
not one of those covered by the Rules on Summary Procedure in civil
cases;30 hence, the rules on regular procedure shall apply, as provided
for in Section 1, Rule 5 of the Rules of Civil Procedure, as amended.31

As to the requisite legal fees for the filing of an action in the first level
court under Section 417 of the Local Government Code, indigentslitigants (a) whose gross income and that of their immediate family do

Normally, the Court would remand the case to the Punong Barangay for
further proceedings. However, the Court may resolve the issues posed by
the petitioners, based on the pleadings of the parties to serve the ends
of justice. It is an accepted rule of procedure for the Court to strive to
settle the existing controversy in a single proceeding, leaving no root or
branch to bear the seeds of future litigation.32

In this case, there is no question that the petitioners were obliged under
the settlement to vacate the premises in January 2000. They refused,
despite the extensions granted by the respondent, to allow their stay in
the property. For the court to remand the case to the Lupon and require
the respondent to refile her motion for execution with the Lupon would

69

be an idle ceremony. It would only unduly prolong the petitioners

unlawful retention of the premises.33

The RTC and the CA correctly ruled that the respondent is the real partyin-interest to enforce amicable settlement. Rule 3, Section 2 of the Rules
of Court, as amended, reads:

SEC. 2. Parties in interest. - A real party in interest is the party who

stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. Unless otherwise authorized by law or
these Rules, every action must be prosecuted or defended in the name of
the real party in interest.

The party-in-interest applies not only to the plaintiff but also to the
defendant.1wphi1 "Interest" within the meaning of the rules means
material interest, an interest in issue and to be affected by the decree as
distinguished from mere interest in the question involved, or a mere
incidental interest.34 A real party in interest is one who has a legal
right.35 Since a contract may be violated only by the parties thereto as
against each other, in an action upon that contract, the real parties-ininterest, either as plaintiff or as defendant, must be parties to the said
contract.36 The action must be brought by the person who, by
substantive law, possesses the right sought to be enforced.37 In this
case, the respondent was the party in the amicable settlement. She is
the real party-in-interest to enforce the terms of the settlement because
unless the petitioners vacate the property, the respondent and the other
vendors should not be paid the balance of P1,000,000.00 of the purchase
price of the property under the Deed of Conditional Sale.

The petitioners are estopped from assailing the amicable settlement on

the ground of deceit and fraud. First. The petitioners failed to repudiate
the settlement within the period therefor. Second. The petitioners were
benefited by the amicable settlement. They were allowed to remain in
the property without any rentals therefor until December 1998. They
were even granted extensions to continue in possession of the property.

It was only when the respondent filed the motion for execution that the
petitioners alleged for the first time that the respondents deceived them
into executing the amicable settlement.38

On the petitioners claim that they were entitled to the right of first
refusal under P.D. No. 1517, we agree with the disquisition of the trial
court, as quoted by the Court of Appeals:

We likewise find no reversible error on the part of [the] RTC in rejecting

that the petitioners have a right of first refusal in the purchase and sale
of the subject property. As ratiocinated by the court:

"xxx. Presidential Decree No. 1517 (The Urban Land Reform Law) does
not apply where there is no showing that the land leased has been
proclaimed to be within a specific Urban Land Reform Zone. In the
instant case, the annex attached to the Proclamation 1967 creating the
areas declared as priority development and urban land reform zone ...
does not indicate that the barangay where the subject property is
located is included therein. This is bolstered by the certification issued by
the Housing and Land Regulatory Board to the effect that the location of
the property is outside the area of Priority Development. It is therefore a
reversible error for the lower court to conclude that defendants-appellees
were deprived of their preemptive right when no right exists in the first
place."

Indeed, before a preemptive right under PD 1517 can be exercised, the

disputed land should be situated in an area declared to be both an APD
(Areas for Priority Development) and a ULRZ (Urban Land Reform
Zones).1wphi1 Records show, and as not disputed by the petitioners,
the disputed property is not covered by the aforementioned areas and
zones.39

70

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The petitioners

and all those acting for and in their behalf are directed to vacate, at their
own expense, the property covered by Transfer Certificate of Title No.
15324 of the Register of Deeds of Muntinlupa City and deliver possession
of the property to the vendees Mary Liza Santos, Susana Lim and Johnny
Lim. This is without prejudice to the right of the vendees to recover from
the petitioners reasonable compensation for their possession of the

property from January 2000 until such time that they vacate the property.
Costs against the petitioners.

SO ORDERED.

71