Republic of the Philippines

SUPREME COURT
SECOND DIVISION
G.R. No. 145022 September 23, 2005
ARMAND NOCUM and THE PHILIPPINE DAILY INQUIRER, INC., Petitioners,
vs.
vs.
LUCIO TAN, Respondent.
DECISION
CHICO-NAZARIO, J.:
Assailed in a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure are the decision1 of the Court of Appeals dated 19 April 2000 that affirmed the
order of the Regional Trial Court (RTC) of Makati City, Branch 56, in Civil Case No. 982288, dated 19 April 1999, admitting respondent Lucio Tans Amended Complaint for
Damages for the alleged malicious and defamatory imputations against him in two (2)
articles of the Philippine Daily Inquirer, and its Resolution2 dated 15 September 2000
denying petitioners Armand Nocum and The Philippine Daily Inquirer, Inc.s motion for
reconsideration.
The antecedents are summarized by the Court of Appeals.
On September 27, 1998, Lucio Tan filed a complaint against reporter Armand Nocum,
Capt. Florendo Umali, ALPAP and Inquirer with the Regional Trial Court of Makati,
docketed as Civil Case No. 98-2288,seeking moral and exemplary damages for the alleged
malicious and defamatory imputations contained in a news article.
INQUIRER and NOCUM filed their joint answer, dated October 27, 1998, wherein they
alleged that: (1) the complaint failed to state a cause of action; (2) the defamatory
statements alleged in the complaint were general conclusions without factual premises;
(3) the questioned news report constituted fair and true report on the matters of public
interest concerning a public figure and therefore, was privileged in nature; and (4) malice
on their part was negated by the publication in the same article of plaintiffs or PALs side
of the dispute with the pilots union.
ALPAP and UMALI likewise filed their joint answer, dated October 31, 1998, and alleged
therein that: (1) the complaint stated no cause of action; (2) venue was improperly laid;
and (3) plaintiff Lucio Tan was not a real party in interest. It appeared that the complaint
failed to state the residence of the complainant at the time of the alleged commission of
the offense and the place where the libelous article was printed and first published.
Thus, the Regional Trial Court of Makati issued an Order dated February 10, 1999,
dismissing the complaint without prejudice on the ground of improper venue.
Aggrieved by the dismissal of the complaint, respondent Lucio Tan filed an Omnibus
Motion dated February 24, 1999, seeking reconsideration of the dismissal and admission

of the amended complaint. Inpar. 2.01.1 of the amended complaint, it is alleged that "This
article was printed and first published in the City of Makati" (p. 53, Rollo, CA-G.R. SP No.
55192), and in par. 2.04.1, that "This caricature was printed and first published in the City
of Makati" (p. 55, id.).
The lower court, after having the case dismissed for improper venue, admitted the
amended complaint and deemed set aside the previous order of dismissal, supra,
stating, inter alia, that:
"The mistake or deficiency in the original complaint appears now to have been cured in
the Amended Complaint which can still be properly admitted, pursuant to Rule 10 of the
1997 Rules of Civil Procedure, inasmuch as the Order of dismissal is not yet final.
Besides, there is no substantial amendment in the Amended Complaint which would
affect the defendants defenses and their Answers. The Amendment is merely formal,
contrary to the contention of the defendants that it is substantial."
Dissatisfied, petitioners, together with defendants Capt. Florendo Umali and the Airline
Pilots Association of the Philippines, Inc. (ALPAP), appealed the RTC decision to the
Court of Appeals. Two petitions for certiorari were filed, one filed by petitioners which was
docketed as CA-G.R. SP No. 55192, and the other by defendants Umali and ALPAP which
was docketed as CA-G.R. SP No. 54894. The two petitions were consolidated.
On 19 April 2000, the Court of Appeals rendered its decision the dispositive portion of
which reads:
WHEREFORE, premises considered, the petition is hereby DENIED DUE COURSE and
DISMISSED for lack of merit. The Order of the court a quo is hereby AFFIRMED.
The motions for reconsideration filed by petitioners and by defendants Umali and ALPAP
were likewise denied in a resolution dated 15 September 2000.
Both petitioners and defendants Umali and ALPAP appealed to this Court. Under
consideration is the petition for review filed by petitioners.
On 11 December 2000, the Court required respondent Tan to comment on the petition filed
by petitioners.3
Respondent filed his comment on 22 January 20014 to which petitioners filed a reply on 26
April 2001.5
In a Manifestation filed on 19 February 2001, respondent stated that the petition 6 filed by
defendants Umali and ALPAP has already been denied by the Court in a resolution dated
17 January 2001.7
On 20 August 2003, the Court resolved to give due course to the petition and required the
parties to submit their respective memoranda within thirty (30) days from notice.8 Both
petitioners and respondent complied.9
Petitioners assigned the following as errors:
A. THE COURT OF APPEALS ERRED IN RULING (1) THAT THE LOWER COURT HAD
JURISDICTION OVER THE CASE (ON THE BASIS OF THE ORIGINAL COMPLAINT)

NOTWITHSTANDING THE FACT THAT THE LOWER COURT HAD EARLIER DISMISSED
THE ORIGINAL COMPLAINT FOR ITS FAILURE TO CONFER JURISDICTION UPON THJE
COURT; AND (2) THAT THE AMENDED COMPLAINT WAS PROPERLY ALLOWED OR
ADMITTED BECAUSE THE LOWER COURT WAS "NEVER DIVESTED" OF JURISDICTION
OVER THE CASE;
B. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE ORIGINAL COMPLAINT
OF RESPONDENT WAS AMENDED PURPOSELY TO CONFER UPON THE LOWER COURT
JURISDICTION OVER THE CASE.10
Petitioners state that Article 360 of the Revised Penal Code vests jurisdiction over all civil
and criminal complaints for libel on the RTC of the place: (1) where the libelous article
was printed and first published; or (2) where the complainant, if a private person, resides;
or (3) where the complainant, if a public official, holds office. They argue that since the
original complaint only contained the office address of respondent and not the latters
actual residence or the place where the allegedly offending news reports were printed and
first published, the original complaint, by reason of the deficiencies in its allegations,
failed to confer jurisdiction on the lower court.
The question to be resolved is: Did the lower court acquire jurisdiction over the civil case
upon the filing of the original complaint for damages?
We rule in the affirmative.
It is settled that jurisdiction is conferred by law based on the facts alleged in the
complaint since the latter comprises a concise statement of the ultimate facts constituting
the plaintiff's causes of action.11In the case at bar, after examining the original complaint,
we find that the RTC acquired jurisdiction over the case when the case was filed before it.
From the allegations thereof, respondents cause of action is for damages arising from
libel, the jurisdiction of which is vested with the RTC. Article 360 of the Revised Penal
Code provides that it is a Court of First Instance12 that is specifically designated to try a
libel case.13
Petitioners are confusing jurisdiction with venue. A former colleague, the Hon. Florenz D.
Regalado,14differentiated jurisdiction and venue as follows: (a) Jurisdiction is the authority
to hear and determine a case; venue is the place where the case is to be heard or tried; (b)
Jurisdiction is a matter of substantive law; venue, of procedural law; (c) Jurisdiction
establishes a relation between the court and the subject matter; venue, a relation between
plaintiff and defendant, or petitioner and respondent; and, (d) Jurisdiction is fixed by law
and cannot be conferred by the parties; venue may be conferred by the act or agreement
of the parties.
In the case at bar, the additional allegations in the Amended Complaint that the article and
the caricature were printed and first published in the City of Makati referred only to the
question of venue and not jurisdiction. These additional allegations would neither confer
jurisdiction on the RTC nor would respondents failure to include the same in the original
complaint divest the lower court of its jurisdiction over the case. Respondents failure to
allege these allegations gave the lower court the power, upon motion by a party, to
dismiss the complaint on the ground that venue was not properly laid.

In Laquian v. Baltazar,15 this Court construed the term "jurisdiction" in Article 360 of the
Revised Penal Code as referring to the place where actions for libel shall be filed or
"venue."
In Escribano v. Avila,16 pursuant to Republic Act No. 4363,17 we laid down the following
rules on the venue of the criminal and civil actions in written defamations.
1. General rule: The action may be filed in the Court of First Instance of the province or
city where the libelous article is printed and first published or where any of the offended
parties actually resides at the time of the commission of the offense.
2. If the offended party is a public officer with office in Manila at the time the offense was
committed, the venue is Manila or the city or province where the libelous article is printed
and first published.
3. Where an offended party is a public official with office outside of Manila, the venue is
the province or the city where he held office at the time of the commission of the offense
or where the libelous article is printed and first published.
4. If an offended party is a private person, the venue is his place of residence at the time
of the commission of the offense or where the libelous article is printed and first
published.
The common feature of the foregoing rules is that whether the offended party is a public
officer or a private person, he has always the option to file the action in the Court of First
Instance of the province or city where the libelous article is printed or first published.
We further restated18 the rules on venue in Article 360 as follows:
1. Whether the offended party is a public official or a private person, the criminal action
may be filed in the Court of First Instance of the province or city where the libelous article
is printed and first published.
2. If the offended party is a private individual, the criminal action may also be filed in the
Court of First Instance of the province where he actually resided at the time of the
commission of the offense.
3. If the offended party is a public officer whose office is in Manila at the time of the
commission of the offense, the action may be filed in the Court of First Instance of Manila.
4. If the offended party is a public officer holding office outside of Manila, the action may
be filed in the Court of First Instance of the province or city where he held office at the
time of the commission of the offense.
We fully agree with the Court of Appeals when it ruled:
We note that the amended complaint or amendment to the complaint was not intended to
vest jurisdiction to the lower court, where originally it had none. The amendment was
merely to establish the proper venue for the action. It is a well-established rule that venue
has nothing to do with jurisdiction, except in criminal actions. Assuming that venue were
properly laid in the court where the action was instituted, that would be procedural, not a
jurisdictional impediment. In fact, in civil cases, venue may be waived.

Consequently, by dismissing the case on the ground of improper venue, the lower court
had jurisdiction over the case. Apparently, the herein petitioners recognized this
jurisdiction by filing their answers to the complaint, albeit, questioning the propriety of
venue, instead of a motion to dismiss.
...
We so hold that dismissal of the complaint by the lower court was proper considering that
the complaint, indeed, on its face, failed to allege neither the residence of the complainant
nor the place where the libelous article was printed and first published. Nevertheless,
before the finality of the dismissal, the same may still be amended as in fact the amended
complaint was admitted, in view of the court a quosjurisdiction, of which it was never
divested. In so doing, the court acted properly and without any grave abuse of
discretion.19
It is elementary that objections to venue in CIVIL ACTIONS arising from libel may be
waived since they do not involve a question of jurisdiction. The laying of venue is
procedural rather than substantive, relating as it does to jurisdiction of the court over the
person rather than the subject matter. Venue relates to trial and not to jurisdiction. 20 It is a
procedural, not a jurisdictional, matter. It relates to the place of trial or geographical
location in which an action or proceeding should be brought and not to the jurisdiction of
the court.21 It is meant to provide convenience to the parties, rather than restrict their
access to the courts as it relates to the place of trial.22 In contrast, in criminal actions, it is
fundamental that venue is jurisdictional it being an essential element of jurisdiction.23
Petitioners argument that the lower court has no jurisdiction over the case because
respondent failed to allege the place where the libelous articles were printed and first
published would have been tenable if the case filed were a criminal case. The failure of the
original complaint to contain such information would be fatal because this fact involves
the issue of venue which goes into the territorial jurisdiction of the court. This is not to be
because the case before us is a civil action where venue is not jurisdictional.
The cases24 cited by petitioners are not applicable here. These cases involve amendments
on complaints that confer jurisdiction on courts over which they originally had none. This
is not true in the case at bar. As discussed above, the RTC acquired jurisdiction over the
subject matter upon the filing of the original complaint. It did not lose jurisdiction over the
same when it dismissed it on the ground of improper venue. The amendment merely laid
down the proper venue of the case.
WHEREFORE, the foregoing considered, the decision of the Court of Appeals dated 19
April 2000 is AFFIRMED in toto. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SPECIAL SECOND DIVISION
G.R. No. 179018

April 17, 2013

PAQLAUM MANAGEMENT & DEVELOPMENT CORP. and HEALTH MARKETING

TECHNOLOGIES, INC.,Petitioners,
vs.
UNION BANK OF THE PHILIPPINES, NOTARY PUBLIC JOHN DOE, and REGISTER OF
DEEDS of Cebu City and Cebu Province, Respondents,
J. KING & SONS CO., INC., Intervenor.
RESOLUTION
SERENO, CJ.:
Union Bank filed this Motion for Reconsideration from our Decision1 dated 18 June 2012. For the
first time, it raises three new arguments. First, it states that the 11 December 1998 Restructuring
Agreement is null and void, because the condition precedent - that the borrower should not be in
default- was not complied with. Thus, the nullity of the agreement revived the Real Estate
Mortgages, which have a different venue stipulation.2 Second, assuming arguendo that the
Restructuring Agreement is enforceable, it was only between Health Tech and Union Bank.
PAGLAUM was a party only to the Real Estate Mortgages dated 11 February 1994 and 22 April
1998, and not to the Restructuring Agreement. Therefore, the venue insofar as it is concerned is
exclusively in Cebu City pursuant to the venue stipulation in the mortgage contracts. 3 Third, the
Complaint being an accion reivindicatoria, the assessed value of the real property as stated
therein determines which court has exclusive jurisdiction over the case. Hence, as the Complaint
does not show on its face the assessed value of the parcels of land, the Regional Trial Court's
(RTC's) assumption of jurisdiction over the case was without basis.4
Union Bank also reiterates its argument in its Comment 5 that the Restructuring Agreement is
entirely separate and distinct from the Real Estate Mortgages. Accordingly, since the Complaint
relate exclusively to the mortgaged properties, the venue stipulation in the Real Estate
Mortgages should apply.6
We deny the Motion for Reconsideration.
Issues raised for the first time in a motion for reconsideration before this Court are deemed
waived, because these should have been brought up at the first opportunity.7 Nevertheless, there
is no cogent reason to warrant a reconsideration or modification of our 18 June 2012 Decision.
Union Bank raises three new issues that require a factual determination that is not within the
province of this Court.8 These questions can be brought to and resolved by the RTC as it is the
proper avenue in which to raise factual issues and to present evidence in support of these
claims.
Anent Union Bank's last contention, there is no need for the Court to discuss and revisit the
issue, being a mere rehash of what we have already resolved in our Decision.
1wphi1

WHEREFORE, in view of the foregoing, we DENY the Motion for Reconsideration with
FINALITY.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION
G.R. No. 186993

August 22, 2012

THEODORE and NANCY ANG, represented by ELDRIGE MARVIN B. ACERON, Petitioners,

vs.
SPOUSES ALAN and EM ANG, Respondents.
VELASCO, JR.,*
LEONARDO-DE CASTRO, **
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking
to annul and set aside the Decision1 dated August 28, 2008 and the Resolution2 dated February
20, 2009 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 101159. The assailed
decision annulled and set aside the Orders dated April 12, 2007 3 and August 27, 20074 issued by
the Regional Trial Court (RTC) of Quezon City, Branch 81 in Civil Case No. Q-06-58834.
The Antecedent Facts
On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in the amount
of Three Hundred Thousand U.S. Dollars (US$300,000.00) from Theodore and Nancy Ang
(petitioners). On even date, the respondents executed a promissory note 5 in favor of the
petitioners wherein they promised to pay the latter the said amount, with interest at the rate of ten
percent (10%) per annum, upon demand. However, despite repeated demands, the respondents
failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking them to
pay their outstanding debt which, at that time, already amounted to Seven Hundred Nineteen
Thousand, Six Hundred Seventy-One U.S. Dollars and Twenty-Three Cents (US$719,671.23),
inclusive of the ten percent (10%) annual interest that had accumulated over the years.
Notwithstanding the receipt of the said demand letter, the respondents still failed to settle their
loan obligation.
On August 6, 2006, the petitioners, who were then residing in Los Angeles, California, United
States of America (USA), executed their respective Special Powers of Attorney6 in favor of
Attorney Eldrige Marvin B. Aceron (Atty. Aceron) for the purpose of filing an action in court
against the respondents. On September 15, 2006, Atty. Aceron, in behalf of the petitioners, filed a
Complaint7 for collection of sum of money with the RTC of Quezon City against the respondents.
On November 21, 2006, the respondents moved for the dismissal of the complaint filed by the
petitioners on the grounds of improper venue and prescription.8 Insisting that the venue of the
petitioners action was improperly laid, the respondents asserted that the complaint against them
may only be filed in the court of the place where either they or the petitioners reside. They
averred that they reside in Bacolod City while the petitioners reside in Los Angeles, California,
USA. Thus, the respondents maintain, the filing of the complaint against them in the RTC of
Quezon City was improper.

The RTC Orders

On April 12, 2007, the RTC of Quezon City issued an Order9 which, inter alia, denied the
respondents motion to dismiss. In ruling against the respondents claim of improper venue, the
court explained that:
Attached to the complaint is the Special Power of Attorney x x x which clearly states that plaintiff
Nancy Ang constituted Atty. Eldrige Marvin Aceron as her duly appointed attorney-in-fact to
prosecute her claim against herein defendants. Considering that the address given by Atty.
Aceron is in Quezon City, hence, being the plaintiff, venue of the action may lie where he resides
as provided in Section 2, Rule 4 of the 1997 Rules of Civil Procedure. 10
The respondents sought reconsideration of the RTC Order dated April 12, 2007, asserting that
there is no law which allows the filing of a complaint in the court of the place where the
representative, who was appointed as such by the plaintiffs through a Special Power of Attorney,
resides.11
The respondents motion for reconsideration was denied by the RTC of Quezon City in its
Order12 dated August 27, 2007.
The respondents then filed with the CA a petition for certiorari13 alleging in the main that, pursuant
to Section 2, Rule 4 of the Rules of Court, the petitioners complaint may only be filed in the court
of the place where they or the petitioners reside. Considering that the petitioners reside in Los
Angeles, California, USA, the respondents assert that the complaint below may only be filed in
the RTC of Bacolod City, the court of the place where they reside in the Philippines.
The respondents further claimed that, the petitioners grant of Special Power of Attorney in favor
of Atty. Aceron notwithstanding, the said complaint may not be filed in the court of the place
where Atty. Aceron resides, i.e., RTC of Quezon City. They explained that Atty. Aceron, being
merely a representative of the petitioners, is not the real party in interest in the case below;
accordingly, his residence should not be considered in determining the proper venue of the said
complaint.
The CA Decision
On August 28, 2008, the CA rendered the herein Decision,14 which annulled and set aside the
Orders dated April 12, 2007 and August 27, 2007 of the RTC of Quezon City and, accordingly,
directed the dismissal of the complaint filed by the petitioners. The CA held that the complaint
below should have been filed in Bacolod City and not in Quezon City. Thus:
As maybe clearly gleaned from the foregoing, the place of residence of the plaintiffs attorney-infact is of no moment when it comes to ascertaining the venue of cases filed in behalf of the
principal since what should be considered is the residence of the real parties in interest, i.e., the
plaintiff or the defendant, as the case may be. Residence is the permanent home the place to
which, whenever absent for business or pleasure, one intends to return. Residence is vital when
dealing with venue. Plaintiffs, herein private respondents, being residents of Los Angeles,
California, U.S.A., which is beyond the territorial jurisdiction of Philippine courts, the case should
have been filed in Bacolod City where the defendants, herein petitioners, reside. Since the case
was filed in Quezon City, where the representative of the plaintiffs resides, contrary to Sec. 2 of
Rule 4 of the 1997 Rules of Court, the trial court should have dismissed the case for improper
venue.15

The petitioners sought a reconsideration of the Decision dated August 28, 2008, but it was
denied by the CA in its Resolution dated February 20, 2009.16
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit this lone issue for this Courts resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW
WHEN IT RULED THAT THE COMPLAINT MUST BE DISMISSED ON THE GROUND THAT
VENUE WAS NOT PROPERLY LAID.17
The Courts Ruling
The petition is denied.
Contrary to the CAs disposition, the petitioners maintain that their complaint for collection of sum
of money against the respondents may be filed in the RTC of Quezon City. Invoking Section 3,
Rule 3 of the Rules of Court, they insist that Atty. Aceron, being their attorney-in-fact, is deemed
a real party in interest in the case below and can prosecute the same before the RTC. Such
being the case, the petitioners assert, the said complaint for collection of sum of money may be
filed in the court of the place where Atty. Aceron resides, which is the RTC of Quezon City.
On the other hand, the respondents in their Comment 18 assert that the petitioners are proscribed
from filing their complaint in the RTC of Quezon City. They assert that the residence of Atty.
Aceron, being merely a representative, is immaterial to the determination of the venue of the
petitioners complaint.
The petitioners complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of personal actions are fixed for the convenience of
the plaintiffs and their witnesses. Equally settled, however, is the principle that choosing the
venue of an action is not left to a plaintiffs caprice; the matter is regulated by the Rules of
Court.19
The petitioners complaint for collection of sum of money against the respondents is a personal
action as it primarily seeks the enforcement of a contract. The Rules give the plaintiff the option
of choosing where to file his complaint. He can file it in the place (1) where he himself or any of
them resides, or (2) where the defendant or any of the defendants resides or may be found. The
plaintiff or the defendant must be residents of the place where the action has been instituted at
the time the action is commenced.20
However, if the plaintiff does not reside in the Philippines, the complaint in such case may only
be filed in the court of the place where the defendant resides. In Cohen and Cohen v. Benguet
Commercial Co., Ltd.,21 this Court held that there can be no election as to the venue of the filing
of a complaint when the plaintiff has no residence in the Philippines. In such case, the complaint
may only be filed in the court of the place where the defendant resides. Thus:

Section 377 provides that actions of this character "may be brought in any province where the
defendant or any necessary party defendant may reside or be found, or in any province where
the plaintiff or one of the plaintiffs resides, at the election of the plaintiff." The plaintiff in this
action has no residence in the Philippine Islands. Only one of the parties to the action resides
here. There can be, therefore, no election by plaintiff as to the place of trial. It must be in the
province where the defendant resides. x x x.22 (Emphasis ours)
Here, the petitioners are residents of Los Angeles, California, USA while the respondents reside
in Bacolod City. Applying the foregoing principles, the petitioners complaint against the
respondents may only be filed in the RTC of Bacolod City the court of the place where the
respondents reside. The petitioners, being residents of Los Angeles, California, USA, are not
given the choice as to the venue of the filing of their complaint.
Thus, the CA did not commit any reversible error when it annulled and set aside the orders of the
RTC of Quezon City and consequently dismissed the petitioners complaint against the
respondents on the ground of improper venue.
In this regard, it bears stressing that the situs for bringing real and personal civil actions is fixed
by the Rules of Court to attain the greatest convenience possible to the litigants and their
witnesses by affording them maximum accessibility to the courts.23 And even as the regulation of
venue is primarily for the convenience of the plaintiff, as attested by the fact that the choice of
venue is given to him, it should not be construed to unduly deprive a resident defendant of the
rights conferred upon him by the Rules of Court.24
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.
Contrary to the petitioners claim, Atty. Aceron, despite being the attorney-in-fact of the
petitioners, is not a real party in interest in the case below. Section 2, Rule 3 of the Rules of
Court 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. (Emphasis ours)
Interest within the meaning of the Rules of Court means material interest or an interest in issue to
be affected by the decree or judgment of the case, as distinguished from mere curiosity about the
question involved.25 A real party in interest is the party who, by the substantive law, has the right
sought to be enforced.26
Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest in the case
below as he does not stand to be benefited or injured by any judgment therein. He was merely
appointed by the petitioners as their attorney-in-fact for the limited purpose of filing and
prosecuting the complaint against the respondents. Such appointment, however, does not mean
that he is subrogated into the rights of petitioners and ought to be considered as a real party in
interest.
Being merely a representative of the petitioners, Atty. Aceron in his personal capacity does not
have the right to file the complaint below against the respondents. He may only do so, as what

he did, in behalf of the petitioners the real parties in interest. To stress, the right sought to be
enforced in the case below belongs to the petitioners and not to Atty. Aceron. Clearly, an
attorney-in-fact is not a real party in interest.27
The petitioners reliance on Section 3, Rule 3 of the Rules of Court to support their conclusion
that Atty. Aceron is likewise a party in interest in the case below is misplaced. Section 3, Rule 3
of the Rules of Court provides that:
Sec. 3. Representatives as parties. Where the action is allowed to be prosecuted and defended
by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included in
the title of the case and shall be deemed to be the real property in interest. A representative may
be a trustee of an expert trust, a guardian, an executor or administrator, or a party authorized by
law or these Rules. An agent acting in his own name and for the benefit of an undisclosed
principal may sue or be sued without joining the principal except when the contract involves
things belonging to the principal. (Emphasis ours)
Nowhere in the rule cited above is it stated or, at the very least implied, that the representative is
likewise deemed as the real party in interest. The said rule simply states that, in actions which
are allowed to be prosecuted or defended by a representative, the beneficiary shall be deemed
the real party in interest and, hence, should be included in the title of the case.
Indeed, to construe the express requirement of residence under the rules on venue as applicable
to the attorney-in-fact of the plaintiff would abrogate the meaning of a "real party in interest", as
defined in Section 2 of Rule 3 of the 1997 Rules of Court vis--vis Section 3 of the same Rule. 28
On this score, the CA aptly observed that:
As may be unerringly gleaned from the foregoing provisions, there is nothing therein that
expressly allows, much less implies that an action may be filed in the city or municipality where
either a representative or an attorney-in-fact of a real party in interest resides. Sec. 3 of Rule 3
merely provides that the name or names of the person or persons being represented must be
included in the title of the case and such person or persons shall be considered the real party in
interest. In other words, the principal remains the true party to the case and not the
representative. Under the plain meaning rule, or verba legis, if a statute is clear, plain and free
from ambiguity, it must be given its literal meaning and applied without interpretation.
xxx29 (Citation omitted)
At this juncture, it bears stressing that the rules on venue, like the other procedural rules, are
designed to insure a just and orderly administration of justice or the impartial and even-handed
determination of every action and proceeding. Obviously, this objective will not be attained if the
plaintiff is given unrestricted freedom to choose the court where he may file his complaint or
petition. The choice of venue should not be left to the plaintiff's whim or caprice. He may be
impelled by some ulterior motivation in choosing to file a case in a particular court even if not
allowed by the rules on venue.30
WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED. The
Decision dated August 28, 2008 and Resolution dated February 20, 2009 rendered by the Court
of Appeals in CA-G.R. SP No. 101159 are AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-27033

October 31, 1969

POLYTRADE CORPORATION, plaintiff-appellee,

vs.
VICTORIANO BLANCO, defendant-appellant.
Paredes, Poblador, Cruz and Nazareno for plaintiff-appellee.
Isidro T. Almeda and Mario T. Banzuela for defendant-appellant.
SANCHEZ, J.:
Suit before the Court of First Instance of Bulacan on four causes of action to recover the
purchase price of rawhide delivered by plaintiff to defendant. 1 Plaintiff corporation has its principal
office and place of business in Makati, Rizal. Defendant is a resident of Meycauayan, Bulacan.
Defendant moved to dismiss upon the ground of improper venue. He claims that by contract suit
may only be lodged in the courts of Manila. The Bulacan court overruled him. He did not answer
the complaint. In consequence, a default judgment was rendered against him on September 21,
1966, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant
ordering defendant to pay plaintiff the following amounts:

First Cause of Action

P60,845.67, with interest thereon at 1% a month from May 9, 1965 until the
full amount is paid.

Second Cause of
Action

P51,952.55, with interest thereon at 1% a month from March 30, 1965 until
the full amount is paid.

Third Cause of
Action

P53,973.07, with interest thereon at 1% a month from July 3, 1965 until the
full amount is paid.

Fourth Cause of
Action

P41,075.22, with interest thereon at 1% a month2 until the full amount is paid.

In addition, defendant shall pay plaintiff attorney's fees amounting to 25% of the principal
amount due in each cause of action, and the costs of the suit. The amount of P400.00
shall be deducted from the total amount due plaintiff in accordance with this judgment.
Defendant appealed.

1. The forefront question is whether or not venue was properly laid in the province of Bulacan
where defendant is a resident.
Section 2 (b), Rule 4 of the Rules of Court on venue of personal actions triable by courts of first
instance and this is one provides that such "actions may be commenced and tried where
the defendant or any of the defendants resides or may be found, or where the plaintiff or any of
the plaintiffs resides, at the election of the plaintiff." Qualifying this provision in Section 3 of the
same Rule which states that venue may be stipulated by written agreement "By written
agreement of the parties the venue of an action may be changed or transferred from one
province to another."
Defendant places his case upon Section 3 of Rule 4 just quoted. According to defendant, plaintiff
and defendant, by written contracts covering the four causes of action, stipulated that: "The
parties agree to sue and be sued in the Courts of Manila." This agreement is valid. 3 Defendant
says that because of such covenant he can only be sued in the courts of Manila. We are thus
called upon to shake meaning from the terms of the agreement just quoted.
But first to the facts. No such stipulation appears in the contracts covering the first two causes of
action. The general rule set forth in Section 2 (b), Rule 4, governs, and as to said two causes of
action, venue was properly laid in Bulacan, the province of defendant's residence.
The stipulation adverted to is only found in the agreements covering the third and fourth causes
of action. An accurate reading, however, of the stipulation, "The parties agree to sue and be sued
in the Courts of Manila," does not preclude the filing of suits in the residence of plaintiff or
defendant. The plain meaning is that the parties merely consented to be sued in Manila.
Qualifying or restrictive words which would indicate that Manila and Manila alone is the venue
are totally absent therefrom. We cannot read into that clause that plaintiff and defendant bound
themselves to file suits with respect to the last two transactions in question only or exclusively in
Manila. For, that agreement did not change or transfer venue. It simply is permissive. The parties
solely agreed to add the courts of Manila as tribunals to which they may resort. They did not
waive their right to pursue remedy in the courts specifically mentioned in Section 2(b) of Rule
4. Renuntiatio non praesumitur.
Illuminating on this point is Engel vs. Shubert Theatrical Co., 151 N.Y.S. 593, 594. And this,
became there the stipulation as to venue is along lines similar to the present. Said stipulation
reads: "In case of dispute, both contracting parties agree to submit to the jurisdiction of the
Vienna courts." And the ruling is: "By the clause in question the parties do not agree to submit
their disputes to the jurisdiction of the Viennese court, and to those courts only. There is nothing
exclusive in the language used. They do agree to submit to the Viennese jurisdiction, but they
say not a word in restriction of the jurisdiction of courts elsewhere; and whatever may be said on
the subject of the legality of contracts to submit controversies to courts of certain jurisdictions
exclusively, it is entirely plain that such agreements should be strictly construed, and should not
be extended by implication."
Venue here was properly laid.
2. Defendant next challenges the lower court's grant to plaintiff of interest at the rate of one per
centum per month. Defendant says that no such stipulation as to right of interest appears in the
sales confirmation orders which provided: "TERMS 60 days after delivery with interest
accruing on postdated cheques beyond 30 days." The flaw in this argument lies in that the
interest and the rate thereof are expressly covenanted in the covering trust receipts executed by
defendant in favor of plaintiff, as follows: "All obligations of the undersigned under this agreement
of trust shall bear interest at the rate of one per centum (1%) per month from the date due until
paid."
On this score, we find no error.

3. Defendant protests the award of attorneys' fees which totals P51,961.63, i.e., 25% of the total
principal indebtedness of P207,846.51 (exclusive of interest). Defendant's thesis is that the
foregoing sum is "exorbitant and unconscionable."
To be borne in mind is that the attorneys' fees here provided is not, strictly speaking, the
attorneys' fees recoverable as between attorney and client spoken of and regulated by the Rules
of Court. Rather, the attorneys' fees here are in the nature of liquidated damages and the
stipulation therefor is aptly called a penal clause. 4 It has been said that so long as such
stipulation does not contravene law, morals, or public order, it is strictly binding upon
defendant.5 The attorneys' fees so provided are awarded in favor of the litigant, not his counsel. It
is the litigant, not counsel, who is the judgment creditor entitled to enforce the judgment by
execution.6
The governing law then is Article 2227 of the Civil Code, viz.: "Liquidated damages, whether
intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or
unconscionable." For this reason, we do not really have to strictly view the reasonableness of the
attorneys' fees in the light of such factors as the amount and character of the services rendered,
the nature and importance of the litigation, and the professional character and the social standing
of the attorney. We do concede, however, that these factors may be an aid in the determination
of the iniquity or unconscionableness of attorneys' fees as liquidated damages.
May the attorneys' fees (P51,961.63) here granted be tagged as iniquitous or unconscionable?
Upon the circumstances, our answer is in the negative. Plaintiff's lawyers concededly are of high
standing. More important is that this case should not have gone to court. It could have been
easily avoided had defendant been faithful in complying with his obligations. It is not denied that
the rawhide was converted into leather and sold by defendant. He raises no defense. In fact, he
did not even answer the complaint in the lower court, and was thus declared in default. Nor does
he deny the principal liability. Add to all these the fact that the writ of attachment issued below
upon defendant's properties yielded no more than P400 and the picture is complete. The
continued maintenance by defendant of the suit is plainly intended for delay. The attorneys' fees
awarded cannot be called iniquitous or unconscionable.
In the very recent case of Universal Motors Corporation vs. Dy Hian Tat (1969), 28 SCRA 161,
170, we allowed attorneys' fees in the form of liquidated damages at the rate of 25% of the total
amount of the indebtedness. Here, the trial court has already reduced the attorneys' fees from
the stipulated 25% "of the total amount involved, principal and interest, then unpaid" to only 25%
of the principal amount due. There is no reason why such judgment should be disturbed.
FOR THE REASON GIVEN, the appealed judgment is hereby affirmed, except that interest
granted, in reference to the fourth cause of action, should start from March 24, 1965.
Costs against defendant-appellant. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and
Barredo, JJ.,concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-37750 May 19, 1978

SWEET LINES, INC., petitioner,

vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII,
LEOVIGILDO TANDOG, JR., and ROGELIO TIRO, respondents.
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.
Leovigildo Vallar for private respondents.

SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain
respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D.
Tandog, Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss
the complaint, and the Motion for Reconsideration of said order. 1
Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a
contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on December
31, 1971 at the branch office of petitioner, a shipping company transporting inter-island
passengers and cargoes, at Cagayan de Oro City. Respondents were to board petitioner's
vessel, M/S "Sweet Hope" bound for Tagbilaran City via the port of Cebu. Upon learning that the
vessel was not proceeding to Bohol, since many passengers were bound for Surigao, private
respondents per advice, went to the branch office for proper relocation to M/S "Sweet Town".
Because the said vessel was already filled to capacity, they were forced to agree "to hide at the
cargo section to avoid inspection of the officers of the Philippine Coastguard." Private
respondents alleged that they were, during the trip," "exposed to the scorching heat of the sun
and the dust coming from the ship's cargo of corn grits," and that the tickets they bought at
Cagayan de Oro City for Tagbilaran were not honored and they were constrained to pay for other
tickets. In view thereof, private respondents sued petitioner for damages and for breach of
contract of carriage in the alleged sum of P10,000.00 before respondents Court of First Instance
of Misamis Oriental. 2
Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was
premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which reads:
14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall be
filed in the competent courts in the City of Cebu. 3
The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but
no avail. 5 Hence, this instant petition for prohibition for preliminary injunction, 'alleging that the
respondent judge has departed from the accepted and usual course of judicial preoceeding" and "had
acted without or in excess or in error of his jurisdicton or in gross abuse of discretion. 6
In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding
further with the case and required respondent to comment. 7 On January 18, 1974, We gave due
course to the petition and required respondent to answer. 8 Thereafter, the parties submitted their
respesctive memoranda in support of their respective contentions. 9
Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of
first impression, to wit Is Condition No. 14 printed at the back of the petitioner's passage

tickets purchased by private respondents, which limits the venue of actions arising from the
contract of carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise
stated, may a common carrier engaged in inter-island shipping stipulate thru condition printed at
the back of passage tickets to its vessels that any and all actions arising out of the ocntract of
carriage should be filed only in a particular province or city, in this case the City of Cebu, to the
exclusion of all others?
Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents
acceded to tit when they purchased passage tickets at its Cagayan de Oro branch office and
took its vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol that the condition of the
venue of actions in the City of Cebu is proper since venue may be validly waived, citing
cases; 10 that is an effective waiver of venue, valid and binding as such, since it is printed in bold and
capital letters and not in fine print and merely assigns the place where the action sing from the
contract is institution likewise citing cases; 11 and that condition No. 14 is unequivocal and mandatory,
the words and phrases "any and all", "irrespective of where it is issued," and "shag" leave no doubt
that the intention of Condition No. 14 is to fix the venue in the City of Cebu, to the exclusion of other
places; that the orders of the respondent Judge are an unwarranted departure from established
jurisprudence governing the case; and that he acted without or in excess of his jurisdiction in is the
orders complained of. 12
On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is
not an essential element of the contract of carriage, being in itself a different agreement which
requires the mutual consent of the parties to it; that they had no say in its preparation, the
existence of which they could not refuse, hence, they had no choice but to pay for the tickets and
to avail of petitioner's shipping facilities out of necessity; that the carrier "has been exacting too
much from the public by inserting impositions in the passage tickets too burdensome to bear,"
that the condition which was printed in fine letters is an imposition on the riding public and does
not bind respondents, citing cases; 13 that while venue 6f actions may be transferred from one
province to another, such arrangement requires the "written agreement of the parties", not to be
imposed unilaterally; and that assuming that the condition is valid, it is not exclusive and does not,
therefore, exclude the filing of the action in Misamis Oriental, 14
There is no question that there was a valid contract of carriage entered into by petitioner and
private respondents and that the passage tickets, upon which the latter based their complaint,
are the best evidence thereof. All the essential elements of a valid contract, i.e., consent, cause
or consideration and object, are present. As held inPeralta de Guerrero, et al. v. Madrigal
Shipping Co., Inc., 15
It is a matter of common knowledge that whenever a passenger boards a ship for
transportation from one place to another he is issued a ticket by the shipper
which has all the elements of a written contract, Namely: (1) the consent of the
contracting parties manifested by the fact that the passenger boards the ship and
the shipper consents or accepts him in the ship for transportation; (2) cause or
consideration which is the fare paid by the passenger as stated in the ticket; (3)
object, which is the transportation of the passenger from the place of departure to
the place of destination which are stated in the ticket.
It should be borne in mind, however, that with respect to the fourteen (14) conditions one of
which is "Condition No. 14" which is in issue in this case printed at the back of the passage
tickets, these are commonly known as "contracts of adhesion," the validity and/or enforceability
of which will have to be determined by the peculiar circumstances obtaining in each case and the
nature of the conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a
contract come about after deliberate drafting by the parties thereto, ... there are certain contracts

almost all the provisions of which have been drafted only by one party, usually a corporation.
Such contracts are called contracts of adhesion, because the only participation of the party is the
signing of his signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of
make of lots on the installment plan fall into this category" 16
By the peculiar circumstances under which contracts of adhesion are entered into namely, that
it is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to
by the other party, in this instance the passengers, private respondents, who cannot change the
same and who are thus made to adhere thereto on the "take it or leave it" basis certain
guidelines in the determination of their validity and/or enforceability have been formulated in
order to that justice and fan play characterize the relationship of the contracting parties. Thus,
this Court speaking through Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock
Insurance Co., 17 and later through Justice Fernando in Fieldman Insurance v. Vargas, 18 held
The courts cannot ignore that nowadays, monopolies, cartels and concentration
of capital endowed with overwhelm economic power, manage to impose upon
parties d with them y prepared 'agreements' that the weaker party may not
change one whit his participation in the 'agreement' being reduced to the
alternative 'to take it or leave it,' labelled since Raymond Saleilles 'contracts by
adherence' (contracts d' adhesion) in contrast to those entered into by parties
bargaining on an equal footing. Such contracts (of which policies of insurance
and international bill of lading are prime examples) obviously cap for greater
strictness and vigilance on the part of the courts of justice with a view to
protecting the weaker party from abuses and imposition, and prevent their
becoming traps for the unwary.
To the same effect and import, and, in recognition of the character of contracts of this kind, the
protection of the disadvantaged is expressly enjoined by the New Civil Code
In all contractual property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts must be vigilant for his
protection. 19
Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in
the inter-island ship. ping industry in the country today, We find and hold that Condition No. 14
printed at the back of the passage tickets should be held as void and unenforceable for the
following reasons first, under circumstances obligation in the inter-island ship. ping industry, it is
not just and fair to bind passengers to the terms of the conditions printed at the back of the
passage tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition No.
14 subverts the public policy on transfer of venue of proceedings of this nature, since the same
will prejudice rights and interests of innumerable passengers in different s of the country who,
under Condition No. 14, will have to file suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of
and acute shortage in inter- island vessels plying between the country's several islands, and the
facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the piers
are congested with passengers and their cargo waiting to be transported. The conditions are
even worse at peak and/or the rainy seasons, when Passengers literally scramble to whatever
accommodations may be availed of, even through circuitous routes, and/or at the risk of their
safety their immediate concern, for the moment, being to be able to board vessels with the
hope of reaching their destinations. The schedules are as often as not if not more so
delayed or altered. This was precisely the experience of private respondents when they were

relocated to M/S "Sweet Town" from M/S "Sweet Hope" and then any to the scorching heat of the
sun and the dust coming from the ship's cargo of corn grits, " because even the latter was filed to
capacity.
Under these circumstances, it is hardly just and proper to expect the passengers to examine their
tickets received from crowded/congested counters, more often than not during rush hours, for
conditions that may be printed much charge them with having consented to the conditions, so
printed, especially if there are a number of such conditions m fine print, as in this case. 20
Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner,
respondents had no say in its preparation. Neither did the latter have the opportunity to take the
into account prior to the purpose chase of their tickets. For, unlike the small print provisions of
contracts the common example of contracts of adherence which are entered into by the
insured in his awareness of said conditions, since the insured is afforded the op to and co the
same, passengers of inter-island v do not have the same chance, since their alleged adhesion is
presumed only from the fact that they purpose chased the tickets.
It should also be stressed that slapping companies are franchise holders of certificates of public
convenience and therefore, posses a virtual monopoly over the business of transporting
passengers between the ports covered by their franchise. This being so, shipping companies,
like petitioner, engaged in inter-island shipping, have a virtual monopoly of the business of
transporting passengers and may thus dictate their terms of passage, leaving passengers with
no choice but to buy their tickets and avail of their vessels and facilities. Finally, judicial notice
may be taken of the fact that the bulk of those who board these inter-island vested come from
the low-income groups and are less literate, and who have little or no choice but to avail of
petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although
venue may be changed or transferred from one province to another by agreement of the parties
in writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid
where it practically negates the action of the claimants, such as the private respondents herein.
The philosophy underlying the provisions on transfer of venue of actions is the convenience of
the plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering the
expense and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in
the City of Cebu, he would most probably decide not to file the action at all. The condition will thus
defeat, instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or
offices in the respective ports of call of its vessels and can afford to litigate in any of these places.
Hence, the filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not
cause inconvenience to, much less prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do
that which has a tendency to be injurious to the public or against the public good ... 22 Under this
principle" ... freedom of contract or private dealing is restricted by law for the good of the
public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest, since
it will frustrate in meritorious cases, actions of passenger cants outside of Cebu City, thus placing
petitioner company at a decided advantage over said persons, who may have perfectly legitimate
claims against it. The said condition should, therefore, be declared void and unenforceable, as
contrary to public policy to make the courts accessible to all who may have need of their services.
WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on
November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.
Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur.

Antonio, J., reserves his vote.

Separate Opinions

BARREDO, J., concurring:

I concur in the dismissal of the instant petition.
Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R. No. L-44351,
promulgated May 18, 1978, We made it clear that although generally, agreements regarding
change of venue are enforceable, there may be instances where for equitable considerations
and in the better interest of justice, a court may justify the laying of, the venue in the place fixed
by the rules instead of following written stipulation of the parties.
In the particular case at bar, there is actually no written agreement as to venue between the
parties in the sense contemplated in Section 3 of Rule 4, which governs the matter. I take it that
the importance that a stipulation regarding change of the venue fixed by law entails is such that
nothing less than mutually conscious agreement as to it must be what the rule means. In the
instant case, as well pointed out in the main opinion, the ticket issued to private respondents by
petitioner constitutes at best a "contract of adhesion". In other words, it is not that kind of a
contract where the parties sit down to deliberate, discuss and agree specifically on all its terms,
but rather, one which respondents took no part at all in preparing, since it was just imposed upon
them when they paid for the fare for the freight they wanted to ship. It is common knowledge that
individuals who avail of common carriers hardly read the fine prints on such tickets to note
anything more than the price thereof and the destination designated therein.
Under these circumstances, it would seem that, since this case is already in respondent court
and there is no showing that, with its more or less known resources as owner of several interisland vessels plying between the different ports of the Philippines for sometime already,
petitioner would be greatly inconvenienced by submitting to the jurisdiction of said respondent
court, it is best to allow the proceedings therein to continue. I cannot conceive of any juridical
injury such a step can cause to anyone concerned. I vote to dismiss the petition.

Separate Opinions
BARREDO, J., concurring:
I concur in the dismissal of the instant petition.
Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R. No. L-44351,
promulgated May 18, 1978, We made it clear that although generally, agreements regarding
change of venue are enforceable, there may be instances where for equitable considerations

and in the better interest of justice, a court may justify the laying of, the venue in the place fixed
by the rules instead of following written stipulation of the parties.
In the particular case at bar, there is actually no written agreement as to venue between the
parties in the sense contemplated in Section 3 of Rule 4, which governs the matter. I take it that
the importance that a stipulation regarding change of the venue fixed by law entails is such that
nothing less than mutually conscious agreement as to it must be what the rule means. In the
instant case, as well pointed out in the main opinion, the ticket issued to private respondents by
petitioner constitutes at best a "contract of adhesion". In other words, it is not that kind of a
contract where the parties sit down to deliberate, discuss and agree specifically on all its terms,
but rather, one which respondents took no part at all in preparing, since it was just imposed upon
them when they paid for the fare for the freight they wanted to ship. It is common knowledge that
individuals who avail of common carriers hardly read the fine prints on such tickets to note
anything more than the price thereof and the destination designated therein.
Under these circumstances, it would seem that, since this case is already in respondent court
and there is no showing that, with its more or less known resources as owner of several interisland vessels plying between the different ports of the Philippines for sometime already,
petitioner would be greatly inconvenienced by submitting to the jurisdiction of said respondent
court, it is best to allow the proceedings therein to continue. I cannot conceive of any juridical
injury such a step can cause to anyone concerned. I vote to dismiss the petition.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 152154

July 15, 2003

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HONORABLE SANDIGANBAYAN (SPECIAL FIRST DIVISION), FERDINAND E. MARCOS
(REPRESENTED BY HIS ESTATE/HEIRS: IMELDA R. MARCOS, MARIA IMELDA [IMEE]
MARCOS-MANOTOC, FERDINAND R. MARCOS, JR. AND IRENE MARCOS-ARANETA) AND
IMELDA ROMUALDEZ MARCOS, respondents.
CORONA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking to (1) set aside the
Resolution dated January 31, 2002 issued by the Special First Division of the Sandiganbayan in
Civil Case No. 0141 entitledRepublic of the Philippines vs. Ferdinand E. Marcos, et. al., and (2)
reinstate its earlier decision dated September 19, 2000 which forfeited in favor of petitioner
Republic of the Philippines (Republic) the amount held in escrow in the Philippine National Bank
(PNB) in the aggregate amount of US$658,175,373.60 as of January 31, 2002.
BACKGROUND OF THE CASE
On December 17, 1991, petitioner Republic, through the Presidential Commission on Good
Government (PCGG), represented by the Office of the Solicitor General (OSG), filed a petition for
forfeiture before the Sandiganbayan, docketed as Civil Case No. 0141 entitled Republic of the
Philippines vs. Ferdinand E. Marcos, represented by his Estate/Heirs and Imelda R. Marcos,
pursuant to RA 13791 in relation to Executive Order Nos. 1,2 2,3 144 and 14-A.5

In said case, petitioner sought the declaration of the aggregate amount of US$356 million (now
estimated to be more than US$658 million inclusive of interest) deposited in escrow in the PNB,
as ill-gotten wealth. The funds were previously held by the following five account groups, using
various foreign foundations in certain Swiss banks:
(1) Azio-Verso-Vibur Foundation accounts;
(2) Xandy-Wintrop: Charis-Scolari-Valamo-Spinus- Avertina Foundation accounts;
(3) Trinidad-Rayby-Palmy Foundation accounts;
(4) Rosalys-Aguamina Foundation accounts and
(5) Maler Foundation accounts.
In addition, the petition sought the forfeiture of US$25 million and US$5 million in treasury notes
which exceeded the Marcos couple's salaries, other lawful income as well as income from
legitimately acquired property. The treasury notes are frozen at the Central Bank of the
Philippines, now Bangko Sentral ng Pilipinas, by virtue of the freeze order issued by the PCGG.
On October 18, 1993, respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M.
Araneta and Ferdinand R. Marcos, Jr. filed their answer.
Before the case was set for pre-trial, a General Agreement and the Supplemental
Agreements6 dated December 28, 1993 were executed by the Marcos children and then PCGG
Chairman Magtanggol Gunigundo for a global settlement of the assets of the Marcos family.
Subsequently, respondent Marcos children filed a motion dated December 7, 1995 for the
approval of said agreements and for the enforcement thereof.
The General Agreement/Supplemental Agreements sought to identify, collate, cause the
inventory of and distribute all assets presumed to be owned by the Marcos family under the
conditions contained therein. The aforementioned General Agreement specified in one of its
premises or "whereas clauses" the fact that petitioner "obtained a judgment from the Swiss
Federal Tribunal on December 21, 1990, that the Three Hundred Fifty-six Million U.S. dollars
(US$356 million) belongs in principle to the Republic of the Philippines provided certain
conditionalities are met x x x." The said decision of the Swiss Federal Supreme Court affirmed
the decision of Zurich District Attorney Peter Consandey, granting petitioner's request for legal
assistance.7 Consandey declared the various deposits in the name of the enumerated
foundations to be of illegal provenance and ordered that they be frozen to await the final verdict
in favor of the parties entitled to restitution.
Hearings were conducted by the Sandiganbayan on the motion to approve the
General/Supplemental Agreements. Respondent Ferdinand, Jr. was presented as witness for the
purpose of establishing the partial implementation of said agreements.
On October 18, 1996, petitioner filed a motion for summary judgment and/or judgment on the
pleadings. Respondent Mrs. Marcos filed her opposition thereto which was later adopted by
respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr.
In its resolution dated November 20, 1997, the Sandiganbayan denied petitioner's motion for
summary judgment and/or judgment on the pleadings on the ground that the motion to approve
the compromise agreement "(took) precedence over the motion for summary judgment."

Respondent Mrs. Marcos filed a manifestation on May 26, 1998 claiming she was not a party to
the motion for approval of the Compromise Agreement and that she owned 90% of the funds with
the remaining 10% belonging to the Marcos estate.
Meanwhile, on August 10, 1995, petitioner filed with the District Attorney in Zurich, Switzerland,
an additional request for the immediate transfer of the deposits to an escrow account in the PNB.
The request was granted. On appeal by the Marcoses, the Swiss Federal Supreme Court, in a
decision dated December 10, 1997, upheld the ruling of the District Attorney of Zurich granting
the request for the transfer of the funds. In 1998, the funds were remitted to the Philippines in
escrow. Subsequently, respondent Marcos children moved that the funds be placed in custodia
legis because the deposit in escrow in the PNB was allegedly in danger of dissipation by
petitioner. The Sandiganbayan, in its resolution dated September 8, 1998, granted the motion.
After the pre-trial and the issuance of the pre-trial order and supplemental pre-trial order dated
October 28, 1999 and January 21, 2000, respectively, the case was set for trial. After several
resettings, petitioner, on March 10, 2000, filed another motion for summary judgment pertaining
to the forfeiture of the US$356 million, based on the following grounds:
I
THE ESSENTIAL FACTS WHICH WARRANT THE FORFEITURE OF THE FUNDS
SUBJECT OF THE PETITION UNDER R.A. NO. 1379 ARE ADMITTED BY
RESPONDENTS IN THEIR PLEADINGS AND OTHER SUBMISSIONS MADE IN THE
COURSE OF THE PROCEEDING.
II
RESPONDENTS' ADMISSION MADE DURING THE PRE-TRIAL THAT THEY DO NOT
HAVE ANY INTEREST OR OWNERSHIP OVER THE FUNDS SUBJECT OF THE
ACTION FOR FORFEITURE TENDERS NO GENUINE ISSUE OR CONTROVERSY AS
TO ANY MATERIAL FACT IN THE PRESENT ACTION, THUS WARRANTING THE
RENDITION OF SUMMARY JUDGMENT.8
Petitioner contended that, after the pre-trial conference, certain facts were established,
warranting a summary judgment on the funds sought to be forfeited.
Respondent Mrs. Marcos filed her opposition to the petitioner's motion for summary judgment,
which opposition was later adopted by her co-respondents Mrs. Manotoc, Mrs. Araneta and
Ferdinand, Jr.
On March 24, 2000, a hearing on the motion for summary judgment was conducted.
In a decision9 dated September 19, 2000, the Sandiganbayan granted petitioner's motion for
summary judgment:
CONCLUSION
There is no issue of fact which calls for the presentation of evidence.
The Motion for Summary Judgment is hereby granted.
The Swiss deposits which were transmitted to and now held in escrow at the PNB are
deemed unlawfully acquired as ill-gotten wealth.
DISPOSITION

WHEREFORE, judgment is hereby rendered in favor of the Republic of the Philippines

and against the respondents, declaring the Swiss deposits which were transferred to and
now deposited in escrow at the Philippine National Bank in the total aggregate value
equivalent to US$627,608,544.95 as of August 31, 2000 together with the increments
thereof forfeited in favor of the State.10
Respondent Mrs. Marcos filed a motion for reconsideration dated September 26, 2000. Likewise,
Mrs. Manotoc and Ferdinand, Jr. filed their own motion for reconsideration dated October 5,
2000. Mrs. Araneta filed a manifestation dated October 4, 2000 adopting the motion for
reconsideration of Mrs. Marcos, Mrs. Manotoc and Ferdinand, Jr.
Subsequently, petitioner filed its opposition thereto.
In a resolution11 dated January 31, 2002, the Sandiganbayan reversed its September 19, 2000
decision, thus denying petitioner's motion for summary judgment:
CONCLUSION
In sum, the evidence offered for summary judgment of the case did not prove that the
money in the Swiss Banks belonged to the Marcos spouses because no legal proof
exists in the record as to the ownership by the Marcoses of the funds in escrow from the
Swiss Banks.
The basis for the forfeiture in favor of the government cannot be deemed to have been
established and our judgment thereon, perforce, must also have been without basis.
WHEREFORE, the decision of this Court dated September 19, 2000 is reconsidered and
set aside, and this case is now being set for further proceedings.12
Hence, the instant petition. In filing the same, petitioner argues that the Sandiganbayan, in
reversing its September 19, 2000 decision, committed grave abuse of discretion amounting to
lack or excess of jurisdiction considering that -I
PETITIONER WAS ABLE TO PROVE ITS CASE IN ACCORDANCE WITH THE
REQUISITES OF SECTIONS 2 AND 3 OF R.A. NO. 1379:
A. PRIVATE RESPONDENTS CATEGORICALLY ADMITTED NOT ONLY THE
PERSONAL CIRCUMSTANCES OF FERDINAND E. MARCOS AND IMELDA R.
MARCOS AS PUBLIC OFFICIALS BUT ALSO THE EXTENT OF THEIR
SALARIES AS SUCH PUBLIC OFFICIALS, WHO UNDER THE CONSTITUTION,
WERE PROHIBITED FROM ENGAGING IN THE MANAGEMENT OF
FOUNDATIONS.
B. PRIVATE RESPONDENTS ALSO ADMITTED THE EXISTENCE OF THE
SWISS DEPOSITS AND THEIR OWNERSHIP THEREOF:
1. ADMISSIONS IN PRIVATE RESPONDENTS' ANSWER;
2. ADMISSION IN THE GENERAL / SUPPLEMENTAL AGREEMENTS
THEY SIGNED AND SOUGHT TO IMPLEMENT;

3. ADMISSION IN A MANIFESTATION OF PRIVATE RESPONDENT

IMELDA R. MARCOS AND IN THE MOTION TO PLACE THE RES IN
CUSTODIA LEGIS; AND
4. ADMISSION IN THE UNDERTAKING TO PAY THE HUMAN RIGHTS
VICTIMS.
C. PETITIONER HAS PROVED THE EXTENT OF THE LEGITIMATE INCOME
OF FERDINAND E. MARCOS AND IMELDA R. MARCOS AS PUBLIC
OFFICIALS.
D. PETITIONER HAS ESTABLISHED A PRIMA FACIE PRESUMPTION OF
UNLAWFULLY ACQUIRED WEALTH.
II
SUMMARY JUDGMENT IS PROPER SINCE PRIVATE RESPONDENTS HAVE NOT
RAISED ANY GENUINE ISSUE OF FACT CONSIDERING THAT:
A. PRIVATE RESPONDENTS' DEFENSE THAT SWISS DEPOSITS WERE
LAWFULLY ACQUIRED DOES NOT ONLY FAIL TO TENDER AN ISSUE BUT IS
CLEARLY A SHAM; AND
B. IN SUBSEQUENTLY DISCLAIMING OWNERSHIP OF THE SWISS
DEPOSITS, PRIVATE RESPONDENTS ABANDONED THEIR SHAM DEFENSE
OF LEGITIMATE ACQUISITION, AND THIS FURTHER JUSTIFIED THE
RENDITION OF A SUMMARY JUDGMENT.
III
THE FOREIGN FOUNDATIONS NEED NOT BE IMPLEADED.
IV
THE HONORABLE PRESIDING JUSTICE COMMITTED GRAVE ABUSE OF
DISCRETION IN REVERSING HIMSELF ON THE GROUND THAT ORIGINAL COPIES
OF THE AUTHENTICATED SWISS DECISIONS AND THEIR "AUTHENTICATED
TRANSLATIONS" HAVE NOT BEEN SUBMITTED TO THE COURT, WHEN EARLIER
THE SANDIGANBAYAN HAS QUOTED EXTENSIVELY A PORTION OF THE
TRANSLATION OF ONE OF THESE SWISS DECISIONS IN HIS "PONENCIA" DATED
JULY 29, 1999 WHEN IT DENIED THE MOTION TO RELEASE ONE HUNDRED FIFTY
MILLION US DOLLARS ($150,000,000.00) TO THE HUMAN RIGHTS VICTIMS.
V
PRIVATE RESPONDENTS ARE DEEMED TO HAVE WAIVED THEIR OBJECTION TO
THE AUTHENTICITY OF THE SWISS FEDERAL SUPREME COURT DECISIONS.13
Petitioner, in the main, asserts that nowhere in the respondents' motions for reconsideration and
supplemental motion for reconsideration were the authenticity, accuracy and admissibility of the
Swiss decisions ever challenged. Otherwise stated, it was incorrect for the Sandiganbayan to
use the issue of lack of authenticated translations of the decisions of the Swiss Federal Supreme
Court as the basis for reversing itself because respondents themselves never raised this issue in
their motions for reconsideration and supplemental motion for reconsideration. Furthermore, this
particular issue relating to the translation of the Swiss court decisions could not be resurrected

anymore because said decisions had been previously utilized by the Sandiganbayan itself in
resolving a "decisive issue" before it.
Petitioner faults the Sandiganbayan for questioning the non-production of the authenticated
translations of the Swiss Federal Supreme Court decisions as this was a marginal and technical
matter that did not diminish by any measure the conclusiveness and strength of what had been
proven and admitted before the Sandiganbayan, that is, that the funds deposited by the
Marcoses constituted ill-gotten wealth and thus belonged to the Filipino people.
In compliance with the order of this Court, Mrs. Marcos filed her comment to the petition on May
22, 2002. After several motions for extension which were all granted, the comment of Mrs.
Manotoc and Ferdinand, Jr. and the separate comment of Mrs. Araneta were filed on May 27,
2002.
Mrs. Marcos asserts that the petition should be denied on the following grounds:
A.
PETITIONER HAS A PLAIN, SPEEDY, AND ADEQUATE REMEDY AT THE
SANDIGANBAYAN.
B.
THE SANDIGANBAYAN DID NOT ABUSE ITS DISCRETION IN SETTING THE CASE
FOR FURTHER PROCEEDINGS.14
Mrs. Marcos contends that petitioner has a plain, speedy and adequate remedy in the ordinary
course of law in view of the resolution of the Sandiganbayan dated January 31, 2000 directing
petitioner to submit the authenticated translations of the Swiss decisions. Instead of availing of
said remedy, petitioner now elevates the matter to this Court. According to Mrs. Marcos, a
petition for certiorari which does not comply with the requirements of the rules may be dismissed.
Since petitioner has a plain, speedy and adequate remedy, that is, to proceed to trial and submit
authenticated translations of the Swiss decisions, its petition before this Court must be
dismissed. Corollarily, the Sandiganbayan's ruling to set the case for further proceedings cannot
and should not be considered a capricious and whimsical exercise of judgment.
Likewise, Mrs. Manotoc and Ferdinand, Jr., in their comment, prayed for the dismissal of the
petition on the grounds that:
(A)
BY THE TIME PETITIONER FILED ITS MOTION FOR SUMMARY JUDGMENT ON 10
MARCH 2000, IT WAS ALREADY BARRED FROM DOING SO.
(1) The Motion for Summary Judgment was based on private respondents' Answer and
other documents that had long been in the records of the case. Thus, by the time the
Motion was filed on 10 March 2000, estoppel by laches had already set in against
petitioner.
(2) By its positive acts and express admissions prior to filing the Motion for Summary
Judgment on 10 March 1990, petitioner had legally bound itself to go to trial on the basis
of existing issues. Thus, it clearly waived whatever right it had to move for summary
judgment.
(B)

EVEN ASSUMING THAT PETITIONER WAS NOT LEGALLY BARRED FROM FILING
THE MOTION FOR SUMMARY JUDGMENT, THE SANDIGANBAYAN IS CORRECT IN
RULING THAT PETITIONER HAS NOT YET ESTABLISHED A PRIMA FACIE CASE
FOR THE FORFEITURE OF THE SWISS FUNDS.
(1) Republic Act No. 1379, the applicable law, is a penal statute. As such, its provisions,
particularly the essential elements stated in section 3 thereof, are mandatory in nature.
These should be strictly construed against petitioner and liberally in favor of private
respondents.
(2) Petitioner has failed to establish the third and fourth essential elements in Section 3 of
R.A. 1379 with respect to the identification, ownership, and approximate amount of the
property which the Marcos couple allegedly "acquired during their incumbency".
(a) Petitioner has failed to prove that the Marcos couple "acquired" or own the
Swiss funds.
(b) Even assuming, for the sake of argument, that the fact of acquisition has been
proven, petitioner has categorically admitted that it has no evidence showing how
much of the Swiss funds was acquired "during the incumbency" of the Marcos
couple from 31 December 1965 to 25 February 1986.
(3) In contravention of the essential element stated in Section 3 (e) of R.A. 1379,
petitioner has failed to establish the other proper earnings and income from
legitimately acquired property of the Marcos couple over and above their
government salaries.
(4) Since petitioner failed to prove the three essential elements provided in paragraphs
(c)15 (d),16 and (e)17 of Section 3, R.A. 1379, the inescapable conclusion is that the prima
facie presumption of unlawful acquisition of the Swiss funds has not yet attached. There
can, therefore, be no premature forfeiture of the funds.
(C)
IT WAS ONLY BY ARBITRARILY ISOLATING AND THEN TAKING CERTAIN
STATEMENTS MADE BY PRIVATE RESPONDENTS OUT OF CONTEXT THAT
PETITIONER WAS ABLE TO TREAT THESE AS "JUDICIAL ADMISSIONS"
SUFFICIENT TO ESTABLISH A PRIMA FACIE AND THEREAFTER A CONCLUSIVE
CASE TO JUSTIFY THE FORFEITURE OF THE SWISS FUNDS.
(1) Under Section 27, Rule 130 of the Rules of Court, the General and Supplemental
Agreements, as well as the other written and testimonial statements submitted in relation
thereto, are expressly barred from being admissible in evidence against private
respondents.
(2) Had petitioner bothered to weigh the alleged admissions together with the other
statements on record, there would be a demonstrable showing that no such "judicial
admissions" were made by private respondents.
(D)
SINCE PETITIONER HAS NOT (YET) PROVEN ALL THE ESSENTIAL ELEMENTS TO
ESTABLISH A PRIMA FACIE CASE FOR FORFEITURE, AND PRIVATE
RESPONDENTS HAVE NOT MADE ANY JUDICIAL ADMISSION THAT WOULD HAVE
FREED IT FROM ITS BURDEN OF PROOF, THE SANDIGANBAYAN DID NOT COMMIT

GRAVE ABUSE OF DISCRETION IN DENYING THE MOTION FOR SUMMARY

JUDGMENT. CERTIORARI, THEREFORE, DOES NOT LIE, ESPECIALLY AS THIS
COURT IS NOT A TRIER OF FACTS.18
For her part, Mrs. Araneta, in her comment to the petition, claims that obviously petitioner is
unable to comply with a very plain requirement of respondent Sandiganbayan. The instant
petition is allegedly an attempt to elevate to this Court matters, issues and incidents which should
be properly threshed out at the Sandiganbayan. To respondent Mrs. Araneta, all other matters,
save that pertaining to the authentication of the translated Swiss Court decisions, are irrelevant
and impertinent as far as this Court is concerned. Respondent Mrs. Araneta manifests that she is
as eager as respondent Sandiganbayan or any interested person to have the Swiss Court
decisions officially translated in our known language. She says the authenticated official English
version of the Swiss Court decisions should be presented. This should stop all speculations on
what indeed is contained therein. Thus, respondent Mrs. Araneta prays that the petition be
denied for lack of merit and for raising matters which, in elaborated fashion, are impertinent and
improper before this Court.
PROPRIETY OF PETITIONER'S ACTION FOR CERTIORARI
But before this Court discusses the more relevant issues, the question regarding the propriety of
petitioner Republic's action for certiorari under Rule 65 19 of the 1997 Rules of Civil Procedure
assailing the Sandiganbayan Resolution dated January 21, 2002 should be threshed out.
At the outset, we would like to stress that we are treating this case as an exception to the general
rule governing petitions for certiorari. Normally, decisions of the Sandiganbayan are brought
before this Court under Rule 45, not Rule 65.20 But where the case is undeniably ingrained with
immense public interest, public policy and deep historical repercussions, certiorari is allowed
notwithstanding the existence and availability of the remedy of appeal. 21
One of the foremost concerns of the Aquino Government in February 1986 was the recovery of
the unexplained or ill-gotten wealth reputedly amassed by former President and Mrs. Ferdinand
E. Marcos, their relatives, friends and business associates. Thus, the very first Executive Order
(EO) issued by then President Corazon Aquino upon her assumption to office after the ouster of
the Marcoses was EO No. 1, issued on February 28, 1986. It created the Presidential
Commission on Good Government (PCGG) and charged it with the task of assisting the
President in the "recovery of all ill-gotten wealth accumulated by former President Ferdinand E.
Marcos, his immediate family, relatives, subordinates and close associates, whether located in
the Philippines or abroad, including the takeover or sequestration of all business enterprises and
entities owned or controlled by them during his administration, directly or through nominees, by
taking undue advantage of their public office and/or using their powers, authority, influence,
connections or relationship." The urgency of this undertaking was tersely described by this Court
in Republic vs. Lobregat22:
surely x x x an enterprise "of great pith and moment"; it was attended by "great
expectations"; it was initiated not only out of considerations of simple justice but also out
of sheer necessity - the national coffers were empty, or nearly so.
In all the alleged ill-gotten wealth cases filed by the PCGG, this Court has seen fit to set
aside technicalities and formalities that merely serve to delay or impede judicious
resolution. This Court prefers to have such cases resolved on the merits at the
Sandiganbayan. But substantial justice to the Filipino people and to all parties concerned,
not mere legalisms or perfection of form, should now be relentlessly and firmly pursued.
Almost two decades have passed since the government initiated its search for and
reversion of such ill-gotten wealth. The definitive resolution of such cases on the merits is
thus long overdue. If there is proof of illegal acquisition, accumulation, misappropriation,
fraud or illicit conduct, let it be brought out now. Let the ownership of these funds and

other assets be finally determined and resolved with dispatch, free from all the delaying
technicalities and annoying procedural sidetracks.23
We thus take cognizance of this case and settle with finality all the issues therein.
ISSUES BEFORE THIS COURT
The crucial issues which this Court must resolve are: (1) whether or not respondents raised any
genuine issue of fact which would either justify or negate summary judgment; and (2) whether or
not petitioner Republic was able to prove its case for forfeiture in accordance with Sections 2 and
3 of RA 1379.
(1) THE PROPRIETY OF SUMMARY JUDGMENT
We hold that respondent Marcoses failed to raise any genuine issue of fact in their pleadings.
Thus, on motion of petitioner Republic, summary judgment should take place as a matter of right.
In the early case of Auman vs. Estenzo24, summary judgment was described as a judgment
which a court may render before trial but after both parties have pleaded. It is ordered by the
court upon application by one party, supported by affidavits, depositions or other documents, with
notice upon the adverse party who may in turn file an opposition supported also by affidavits,
depositions or other documents. This is after the court summarily hears both parties with their
respective proofs and finds that there is no genuine issue between them. Summary judgment is
sanctioned in this jurisdiction by Section 1, Rule 35 of the 1997 Rules of Civil Procedure:
SECTION 1. Summary judgment for claimant.- A party seeking to recover upon a claim,
counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with supporting affidavits, depositions
or admissions for a summary judgment in his favor upon all or any part thereof. 25
Summary judgment is proper when there is clearly no genuine issue as to any material fact in the
action.26 The theory of summary judgment is that, although an answer may on its face appear to
tender issues requiring trial, if it is demonstrated by affidavits, depositions or admissions that
those issues are not genuine but sham or fictitious, the Court is justified in dispensing with the
trial and rendering summary judgment for petitioner Republic.
The Solicitor General made a very thorough presentation of its case for forfeiture:
xxx
4. Respondent Ferdinand E. Marcos (now deceased and represented by his
Estate/Heirs) was a public officer for several decades continuously and without
interruption as Congressman, Senator, Senate President and President of the Republic
of the Philippines from December 31, 1965 up to his ouster by direct action of the people
of EDSA on February 22-25, 1986.
5. Respondent Imelda Romualdez Marcos (Imelda, for short) the former First Lady who
ruled with FM during the 14-year martial law regime, occupied the position of Minister of
Human Settlements from June 1976 up to the peaceful revolution in February 22-25,
1986. She likewise served once as a member of the Interim Batasang Pambansa during
the early years of martial law from 1978 to 1984 and as Metro Manila Governor in
concurrent capacity as Minister of Human Settlements. x x x
xxx

xxx

xxx

11. At the outset, however, it must be pointed out that based on the Official Report of the
Minister of Budget, the total salaries of former President Marcos as President form 1966
to 1976 was P60,000 a year and from 1977 to 1985, P100,000 a year; while that of the
former First Lady, Imelda R. Marcos, as Minister of Human Settlements from June 1976
to February 22-25, 1986 was P75,000 a year xxx.
ANALYSIS OF RESPONDENTS LEGITIMATE INCOME
xxx
12. Based on available documents, the ITRs of the Marcoses for the years 1965-1975
were filed under Tax Identification No. 1365-055-1. For the years 1976 until 1984, the
returns were filed under Tax Identification No. M 6221-J 1117-A-9.
13. The data contained in the ITRs and Balance Sheet filed by the "Marcoses are
summarized and attached to the reports in the following schedules:
Schedule A:
Schedule of Income (Annex "T" hereof);
Schedule B:
Schedule of Income Tax Paid (Annex "T-1" hereof);
Schedule C:
Schedule of Net Disposable Income (Annex "T-2" hereof);
Schedule D:
Schedule of Networth Analysis (Annex "T-3" hereof).
14. As summarized in Schedule A (Annex "T" hereof), the Marcoses reported
P16,408,442.00 or US$2,414,484.91 in total income over a period of 20 years from 1965
to 1984. The sources of income are as follows:

Official Salaries -

P 2,627,581.00 -

16.01%

Legal Practice

11,109,836.00 -

67.71%

Farm Income

149,700.00 -

.91%

Others

2,521,325.00 -

15.37%

Total

P16,408,442.00 - 100.00%

15. FM's official salary pertains to his compensation as Senate President in 1965 in the
amount of P15,935.00 and P1,420,000.00 as President of the Philippines during the
period 1966 until 1984. On the other hand, Imelda reported salaries and allowances only
for the years 1979 to 1984 in the amount of P1,191,646.00. The records indicate that the
reported income came from her salary from the Ministry of Human Settlements and
allowances from Food Terminal, Inc., National Home Mortgage Finance Corporation,
National Food Authority Council, Light Rail Transit Authority and Home Development
Mutual Fund.
16. Of the P11,109,836.00 in reported income from legal practice, the amount of
P10,649,836.00 or 96% represents "receivables from prior years" during the period 1967
up to 1984.
17. In the guise of reporting income using the cash method under Section 38 of the
National Internal Revenue Code, FM made it appear that he had an extremely profitable
legal practice before he became a President (FM being barred by law from practicing his
law profession during his entire presidency) and that, incredibly, he was still receiving
payments almost 20 years after. The only problem is that in his Balance Sheet attached
to his 1965 ITR immediately preceeding his ascendancy to the presidency he did not
show any Receivables from client at all, much less the P10,65-M that he decided to later
recognize as income. There are no documents showing any withholding tax certificates.
Likewise, there is nothing on record that will show any known Marcos client as he has no
known law office. As previously stated, his networth was a mere P120,000.00 in
December, 1965. The joint income tax returns of FM and Imelda cannot, therefore,
conceal the skeletons of their kleptocracy.
18. FM reported a total of P2,521,325.00 as Other Income for the years 1972 up to 1976
which he referred to in his return as "Miscellaneous Items" and "Various Corporations."
There is no indication of any payor of the dividends or earnings.
19. Spouses Ferdinand and Imelda did not declare any income from any deposits and
placements which are subject to a 5% withholding tax. The Bureau of Internal Revenue
attested that after a diligent search of pertinent records on file with the Records Division,
they did not find any records involving the tax transactions of spouses Ferdinand and
Imelda in Revenue Region No. 1, Baguio City, Revenue Region No.4A, Manila, Revenue
Region No. 4B1, Quezon City and Revenue No. 8, Tacloban, Leyte. Likewise, the Office
of the Revenue Collector of Batac. Further, BIR attested that no records were found on
any filing of capital gains tax return involving spouses FM and Imelda covering the years
1960 to 1965.
20. In Schedule B, the taxable reported income over the twenty-year period was
P14,463,595.00 which represents 88% of the gross income. The Marcoses paid income
taxes totaling P8,233,296.00 or US$1,220,667.59. The business expenses in the amount
of P861,748.00 represent expenses incurred for subscription, postage, stationeries and
contributions while the other deductions in the amount of P567,097.00 represents interest
charges, medicare fees, taxes and licenses. The total deductions in the amount of
P1,994,845.00 represents 12% of the total gross income.
21. In Schedule C, the net cumulative disposable income amounts to P6,756,301.00 or
US$980,709.77. This is the amount that represents that portion of the Marcoses income
that is free for consumption, savings and investments. The amount is arrived at by adding
back to the net income after tax the personal and additional exemptions for the years
1965-1984, as well as the tax-exempt salary of the President for the years 1966 until
1972.

22. Finally, the networth analysis in Schedule D, represents the total accumulated
networth of spouses, Ferdinand and Imelda. Respondent's Balance Sheet attached to
their 1965 ITR, covering the year immediately preceding their ascendancy to the
presidency, indicates an ending networth of P120,000.00 which FM declared as Library
and Miscellaneous assets. In computing for the networth, the income approach was
utilized. Under this approach, the beginning capital is increased or decreased, as the
case may be, depending upon the income earned or loss incurred. Computations
establish the total networth of spouses Ferdinand and Imelda, for the years 1965 until
1984 in the total amount of US$957,487.75, assuming the income from legal practice is
real and valid x x x.
G. THE SECRET MARCOS DEPOSITS IN SWISS BANKS
23. The following presentation very clearly and overwhelmingly show in detail how both
respondents clandestinely stashed away the country's wealth to Switzerland and hid the
same under layers upon layers of foundations and other corporate entities to prevent its
detection. Through their dummies/nominees, fronts or agents who formed those
foundations or corporate entities, they opened and maintained numerous bank accounts.
But due to the difficulty if not the impossibility of detecting and documenting all those
secret accounts as well as the enormity of the deposits therein hidden, the following
presentation is confined to five identified accounts groups, with balances amounting to
about $356-M with a reservation for the filing of a supplemental or separate forfeiture
complaint should the need arise.
H. THE AZIO-VERSO-VIBUR FOUNDATION ACCOUNTS
24. On June 11, 1971, Ferdinand Marcos issued a written order to Dr. Theo Bertheau,
legal counsel of Schweizeresche Kreditanstalt or SKA, also known as Swiss Credit Bank,
for him to establish the AZIO Foundation. On the same date, Marcos executed a power of
attorney in favor of Roberto S. Benedicto empowering him to transact business in behalf
of the said foundation. Pursuant to the said Marcos mandate, AZIO Foundation was
formed on June 21, 1971 in Vaduz. Walter Fessler and Ernst Scheller, also of SKA Legal
Service, and Dr. Helmuth Merling from Schaan were designated as members of the
Board of Trustees of the said foundation. Ferdinand Marcos was named first beneficiary
and the Marcos Foundation, Inc. was second beneficiary. On November 12, 1971, FM
again issued another written order naming Austrahil PTY Ltd. In Sydney, Australia, as the
foundation's first and sole beneficiary. This was recorded on December 14, 1971.
25. In an undated instrument, Marcos changed the first and sole beneficiary to CHARIS
FOUNDATION. This change was recorded on December 4, 1972.
26. On August 29, 1978, the AZIO FOUNDATION was renamed to VERSO
FOUNDATION. The Board of Trustees remained the same. On March 11, 1981, Marcos
issued a written directive to liquidated VERSO FOUNDATION and to transfer all its
assets to account of FIDES TRUST COMPANY at Bank Hofman in Zurich under the
account "Reference OSER." The Board of Trustees decided to dissolve the foundation on
June 25, 1981.
27. In an apparent maneuver to bury further the secret deposits beneath the thick layers
of corporate entities, FM effected the establishment of VIBUR FOUNDATION on May 13,
1981 in Vaduz. Atty. Ivo Beck and Limag Management, a wholly-owned subsidiary of
Fides Trust, were designated as members of the Board of Trustees. The account was
officially opened with SKA on September 10, 1981. The beneficial owner was not made
known to the bank since Fides Trust Company acted as fiduciary. However, comparison
of the listing of the securities in the safe deposit register of the VERSO FOUNDATION as

of February 27, 1981 with that of VIBUR FOUNDATION as of December 31, 1981 readily
reveals that exactly the same securities were listed.
28. Under the foregoing circumstances, it is certain that the VIBUR FOUNDATION is the
beneficial successor of VERSO FOUNDATION.
29. On March 18, 1986, the Marcos-designated Board of Trustees decided to liquidate
VIBUR FOUNDATION. A notice of such liquidation was sent to the Office of the Public
Register on March 21, 1986. However, the bank accounts and respective balances of the
said VIBUR FOUNDATION remained with SKA. Apparently, the liquidation was an
attempt by the Marcoses to transfer the foundation's funds to another account or bank
but this was prevented by the timely freeze order issued by the Swiss authorities. One of
the latest documents obtained by the PCGG from the Swiss authorities is a declaration
signed by Dr. Ivo Beck (the trustee) stating that the beneficial owner of VIBUR
FOUNDATION is Ferdinand E. Marcos. Another document signed by G. Raber of SKA
shows that VIBUR FOUNDATION is owned by the "Marcos Familie"
30. As of December 31, 1989, the balance of the bank accounts of VIBUR FOUNDATION
with SKA, Zurich, under the General Account No. 469857 totaled $3,597,544.00
I. XANDY-WINTROP: CHARIS-SCOLARIVALAMO-SPINUS-AVERTINA FOUNDATION ACCOUNTS
31. This is the most intricate and complicated account group. As the Flow Chart hereof
shows, two (2) groups under the foundation organized by Marcos dummies/nominees for
FM's benefit, eventually joined together and became one (1) account group under the
AVERTINA FOUNDATION for the benefit of both FM and Imelda. This is the biggest
group from where the $50-M investment fund of the Marcoses was drawn when they
bought the Central Bank's dollar-denominated treasury notes with high-yielding interests.
32. On March 20, 1968, after his second year in the presidency, Marcos opened bank
accounts with SKA using an alias or pseudonym WILLIAM SAUNDERS, apparently to
hide his true identity. The next day, March 21, 1968, his First Lady, Mrs. Imelda Marcos
also opened her own bank accounts with the same bank using an American-sounding
alias, JANE RYAN. Found among the voluminous documents in Malacaang shortly after
they fled to Hawaii in haste that fateful night of February 25, 1986, were accomplished
forms for "Declaration/Specimen Signatures" submitted by the Marcos couple. Under the
caption "signature(s)" Ferdinand and Imelda signed their real names as well as their
respective aliases underneath. These accounts were actively operated and maintained
by the Marcoses for about two (2) years until their closure sometime in February, 1970
and the balances transferred to XANDY FOUNDATION.
33. The XANDY FOUNDATION was established on March 3, 1970 in Vaduz. C.W.
Fessler, C. Souviron and E. Scheller were named as members of the Board of Trustees.
34. FM and Imelda issued the written mandate to establish the foundation to Markus
Geel of SKA on March 3, 1970. In the handwritten Regulations signed by the Marcos
couple as well as in the type-written Regulations signed by Markus Geel both dated
February 13, 1970, the Marcos spouses were named the first beneficiaries, the surviving
spouse as the second beneficiary and the Marcos children Imee, Ferdinand, Jr.
(Bongbong) and Irene as equal third beneficiaries.
35. The XANDY FOUNDATION was renamed WINTROP FOUNDATION on August 29,
1978. The Board of Trustees remained the same at the outset. However, on March 27,
1980, Souviron was replaced by Dr. Peter Ritter. On March 10. 1981, Ferdinand and
Imelda Marcos issued a written order to the Board of Wintrop to liquidate the foundation

and transfer all its assets to Bank Hofmann in Zurich in favor of FIDES TRUST
COMPANY. Later, WINTROP FOUNDATION was dissolved.
36. The AVERTINA FOUNDATION was established on May 13, 1981 in Vaduz with Atty.
Ivo Beck and Limag Management, a wholly-owned subsidiary of FIDES TRUST CO., as
members of the Board of Trustees. Two (2) account categories, namely: CAR and NES,
were opened on September 10, 1981. The beneficial owner of AVERTINA was not made
known to the bank since the FIDES TRUST CO. acted as fiduciary. However, the
securities listed in the safe deposit register of WINTROP FOUNDATION Category R as of
December 31, 1980 were the same as those listed in the register of AVERTINA
FOUNDATION Category CAR as of December 31, 1981. Likewise, the securities listed in
the safe deposit register of WINTROP FOUNDATION Category S as of December 31,
1980 were the same as those listed in the register of Avertina Category NES as of
December 31, 1981.Under the circumstances, it is certain that the beneficial successor of
WINTROP FOUNDATION is AVERTINA FOUNDATION. The balance of Category CAR
as of December 31, 1989 amounted to US$231,366,894.00 while that of Category NES
as of 12-31-83 was US$8,647,190.00. Latest documents received from Swiss authorities
included a declaration signed by IVO Beck stating that the beneficial owners of
AVERTINA FOUNDATION are FM and Imelda. Another document signed by G. Raber of
SKA indicates that Avertina Foundation is owned by the "Marcos Families."
37. The other groups of foundations that eventually joined AVERTINA were also
established by FM through his dummies, which started with the CHARIS FOUNDATION.
38. The CHARIS FOUNDATION was established in VADUZ on December 27, 1971.
Walter Fessler and Ernst Scheller of SKA and Dr. Peter Ritter were named as directors.
Dr. Theo Bertheau, SKA legal counsel, acted as founding director in behalf of FM by
virtue of the mandate and agreement dated November 12, 1971. FM himself was named
the first beneficiary and Xandy Foundation as second beneficiary in accordance with the
handwritten instructions of FM on November 12, 1971 and the Regulations. FM gave a
power of attorney to Roberto S. Benedicto on February 15, 1972 to act in his behalf with
regard to Charis Foundation.
39. On December 13, 1974, Charis Foundation was renamed Scolari Foundation but the
directors remained the same. On March 11, 1981 FM ordered in writing that the Valamo
Foundation be liquidated and all its assets be transferred to Bank Hofmann, AG in favor
of Fides Trust Company under the account "Reference OMAL". The Board of Directors
decided on the immediate dissolution of Valamo Foundation on June 25, 1981.
40 The SPINUS FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo
Beck and Limag Management, a wholly-owned subsidiary of Fides Trust Co., as
members of the Foundation's Board of Directors. The account was officially opened with
SKA on September 10, 1981. The beneficial owner of the foundation was not made
known to the bank since Fides Trust Co. acted as fiduciary. However, the list of securities
in the safe deposit register of Valamo Foundation as of December 31, 1980 are
practically the same with those listed in the safe deposit register of Spinus Foundation as
of December 31, 1981. Under the circumstances, it is certain that the Spinus Foundation
is the beneficial successor of the Valamo Foundation.
41. On September 6, 1982, there was a written instruction from Spinus Foundation to
SKA to close its Swiss Franc account and transfer the balance to Avertina Foundation. In
July/August, 1982, several transfers from the foundation's German marks and US dollar
accounts were made to Avertina Category CAR totaling DM 29.5-M and $58-M,
respectively. Moreover, a comparison of the list of securities of the Spinus Foundation as
of February 3, 1982 with the safe deposit slips of the Avertina Foundation Category CAR
as of August 19, 1982 shows that all the securities of Spinus were transferred to Avertina.

J. TRINIDAD-RAYBY-PALMY FOUNDATION ACCOUNTS

42. The Trinidad Foundation was organized on August 26, 1970 in Vaduz with C.W.
Fessler and E. Scheller of SKA and Dr. Otto Tondury as the foundation's directors. Imelda
issued a written mandate to establish the foundation to Markus Geel on August 26, 1970.
The regulations as well as the agreement, both dated August 28, 1970 were likewise
signed by Imelda. Imelda was named the first beneficiary and her children Imelda (Imee),
Ferdinand, Jr. (Bongbong) and, Irene were named as equal second beneficiaries.
43. Rayby Foundation was established on June 22, 1973 in Vaduz with Fessler, Scheller
and Ritter as members of the board of directors. Imelda issued a written mandate to Dr.
Theo Bertheau to establish the foundation with a note that the foundation's capitalization
as well as the cost of establishing it be debited against the account of Trinidad
Foundation. Imelda was named the first and only beneficiary of Rayby foundation.
According to written information from SKA dated November 28, 1988, Imelda apparently
had the intention in 1973 to transfer part of the assets of Trinidad Foundation to another
foundation, thus the establishment of Rayby Foundation. However, transfer of assets
never took place. On March 10, 1981, Imelda issued a written order to transfer all the
assets of Rayby Foundation to Trinidad Foundation and to subsequently liquidate Rayby.
On the same date, she issued a written order to the board of Trinidad to dissolve the
foundation and transfer all its assets to Bank Hofmann in favor of Fides Trust Co. Under
the account "Reference Dido," Rayby was dissolved on April 6, 1981 and Trinidad was
liquidated on August 3, 1981.
44. The PALMY FOUNDATION was established on May 13, 1981 in Vaduz with Dr. Ivo
Beck and Limag Management, a wholly-owned subsidiary of Fides Trust Co, as members
of the Foundation's Board of Directors. The account was officially opened with the SKA
on September 10, 1981. The beneficial owner was not made known to the bank since
Fides Trust Co. acted as fiduciary. However, when one compares the listing of securities
in the safe deposit register of Trinidad Foundation as of December 31,1980 with that of
the Palmy Foundation as of December 31, 1980, one can clearly see that practically the
same securities were listed. Under the circumstances, it is certain that the Palmy
Foundation is the beneficial successor of the Trinidad Foundation.
45. As of December 31, 1989, the ending balance of the bank accounts of Palmy
Foundation under General Account No. 391528 is $17,214,432.00.
46. Latest documents received from Swiss Authorities included a declaration signed by
Dr. Ivo Beck stating that the beneficial owner of Palmy Foundation is Imelda. Another
document signed by Raber shows that the said Palmy Foundation is owned by "Marcos
Familie".
K. ROSALYS-AGUAMINA FOUNDATION ACCOUNTS
47. Rosalys Foundation was established in 1971 with FM as the beneficiary. Its Articles of
Incorporation was executed on September 24, 1971 and its By-Laws on October 3, 1971.
This foundation maintained several accounts with Swiss Bank Corporation (SBC) under
the general account 51960 where most of the bribe monies from Japanese suppliers
were hidden.
48. On December 19, 1985, Rosalys Foundation was liquidated and all its assets were
transferred to Aguamina Corporation's (Panama) Account No. 53300 with SBC. The
ownership by Aguamina Corporation of Account No. 53300 is evidenced by an opening
account documents from the bank. J. Christinaz and R.L. Rossier, First Vice-President
and Senior Vice President, respectively, of SBC, Geneva issued a declaration dated
September 3, 1991 stating that the by-laws dated October 3, 1971 governing Rosalys

Foundation was the same by-law applied to Aguamina Corporation Account No. 53300.
They further confirmed that no change of beneficial owner was involved while transferring
the assets of Rosalys to Aguamina. Hence, FM remains the beneficiary of Aguamina
Corporation Account No. 53300.
As of August 30, 1991, the ending balance of Account No. 53300 amounted to
$80,566,483.00.
L. MALER FOUNDATION ACCOUNTS
49. Maler was first created as an establishment. A statement of its rules and regulations
was found among Malacaang documents. It stated, among others, that 50% of the
Company's assets will be for sole and full right disposal of FM and Imelda during their
lifetime, which the remaining 50% will be divided in equal parts among their children.
Another Malacaang document dated October 19,1968 and signed by Ferdinand and
Imelda pertains to the appointment of Dr. Andre Barbey and Jean Louis Sunier as
attorneys of the company and as administrator and manager of all assets held by the
company. The Marcos couple, also mentioned in the said document that they bought the
Maler Establishment from SBC, Geneva. On the same date, FM and Imelda issued a
letter addressed to Maler Establishment, stating that all instructions to be transmitted with
regard to Maler will be signed with the word "JOHN LEWIS". This word will have the
same value as the couple's own personal signature. The letter was signed by FM and
Imelda in their signatures and as John Lewis.
50. Maler Establishment opened and maintained bank accounts with SBC, Geneva. The
opening bank documents were signed by Dr. Barbey and Mr. Sunnier as authorized
signatories.
51. On November 17, 1981, it became necessary to transform Maler Establishment into a
foundation. Likewise, the attorneys were changed to Michael Amaudruz, et. al. However,
administration of the assets was left to SBC. The articles of incorporation of Maler
Foundation registered on November 17, 1981 appear to be the same articles applied to
Maler Establishment. On February 28, 1984, Maler Foundation cancelled the power of
attorney for the management of its assets in favor of SBC and transferred such power to
Sustrust Investment Co., S.A.
52. As of June 6, 1991, the ending balance of Maler Foundation's Account Nos. 254,508
BT and 98,929 NY amount SF 9,083,567 and SG 16,195,258, respectively, for a total of
SF 25,278,825.00. GM only until December 31, 1980. This account was opened by Maler
when it was still an establishment which was subsequently transformed into a foundation.
53. All the five (5) group accounts in the over-all flow chart have a total balance of about
Three Hundred Fifty Six Million Dollars ($356,000,000.00) as shown by Annex "R-5"
hereto attached as integral part hereof.
xxx

x x x.27

Respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and Ferdinand
Marcos, Jr., in their answer, stated the following:
xxx

xxx

xxx

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

5. Respondents specifically deny paragraph 5 of the Petition in so far as it states that

summons and other court processes may be served on Respondent Imelda R. Marcos at
the stated address the truth of the matter being that Respondent Imelda R. Marcos may
be served with summons and other processes at No. 10-B Bel Air Condominium 5022 P.
Burgos Street, Makati, Metro Manila, and ADMIT the rest.
xxx

xxx

xxx

10. Respondents ADMIT paragraph 11 of the Petition.

11. Respondents specifically DENY paragraph 12 of the Petition for lack of knowledge
sufficient to form a belief as to the truth of the allegation since Respondents were not
privy to the transactions and that they cannot remember exactly the truth as to the
matters alleged.
12. Respondents specifically DENY paragraph 13 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs and Balance Sheet.
13. Respondents specifically DENY paragraph 14 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.
14. Respondents specifically DENY paragraph 15 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.
15. Respondents specifically DENY paragraph 16 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.
16. Respondents specifically DENY paragraph 17 of the Petition insofar as it attributes
willful duplicity on the part of the late President Marcos, for being false, the same being
pure conclusions based on pure assumption and not allegations of fact; and specifically
DENY the rest for lack of knowledge or information sufficient to form a belief as to the
truth of the allegation since Respondents cannot remember with exactitude the contents
of the alleged ITRs or the attachments thereto.
17. Respondents specifically DENY paragraph 18 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.
18. Respondents specifically DENY paragraph 19 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs and that they are not
privy to the activities of the BIR.
19. Respondents specifically DENY paragraph 20 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.
20. Respondents specifically DENY paragraph 21 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.

21. Respondents specifically DENY paragraph 22 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.
22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents
clandestinely stashed the country's wealth in Switzerland and hid the same under layers
and layers of foundation and corporate entities for being false, the truth being that
Respondents aforesaid properties were lawfully acquired.
23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the
Petition for lack of knowledge or information sufficient to form a belief as to the truth of
the allegation since Respondents were not privy to the transactions regarding the alleged
Azio-Verso-Vibur Foundation accounts, except that as to Respondent Imelda R. Marcos
she specifically remembers that the funds involved were lawfully acquired.
24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36,37, 38, 39, 40, and
41 of the Petition for lack of knowledge or information sufficient to form a belief as to the
truth of the allegations since Respondents are not privy to the transactions and as to
such transaction they were privy to they cannot remember with exactitude the same
having occurred a long time ago, except that as to Respondent Imelda R. Marcos she
specifically remembers that the funds involved were lawfully acquired.
25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and 46, of the Petition for
lack of knowledge or information sufficient to form a belief as to the truth of the
allegations since Respondents were not privy to the transactions and as to such
transaction they were privy to they cannot remember with exactitude the same having
occurred a long time ago, except that as to Respondent Imelda R. Marcos she
specifically remembers that the funds involved were lawfully acquired.
26. Respondents specifically DENY paragraphs 49, 50, 51 and 52, of the Petition for lack
of knowledge or information sufficient to form a belief as to the truth of the allegations
since Respondents were not privy to the transactions and as to such transaction they
were privy to they cannot remember with exactitude the same having occurred a long
time ago, except that as to Respondent Imelda R. Marcos she specifically remembers
that the funds involved were lawfully acquired.
Upon careful perusal of the foregoing, the Court finds that respondent Mrs. Marcos and the
Marcos children indubitably failed to tender genuine issues in their answer to the petition for
forfeiture. A genuine issue is an issue of fact which calls for the presentation of evidence as
distinguished from an issue which is fictitious and contrived, set up in bad faith or patently lacking
in substance so as not to constitute a genuine issue for trial. Respondents' defenses of "lack of
knowledge for lack of privity" or "(inability to) recall because it happened a long time ago" or, on
the part of Mrs. Marcos, that "the funds were lawfully acquired" are fully insufficient to tender
genuine issues. Respondent Marcoses' defenses were a sham and evidently calibrated to
compound and confuse the issues.
The following pleadings filed by respondent Marcoses are replete with indications of a spurious
defense:
(a) Respondents' Answer dated October 18, 1993;
(b) Pre-trial Brief dated October 4, 1999 of Mrs. Marcos, Supplemental Pre-trial Brief
dated October 19, 1999 of Ferdinand, Jr. and Mrs. Imee Marcos-Manotoc adopting the
pre-trial brief of Mrs. Marcos, and Manifestation dated October 19, 1999 of Irene MarcosAraneta adopting the pre-trial briefs of her co- respondents;

(c) Opposition to Motion for Summary Judgment dated March 21, 2000, filed by Mrs.
Marcos which the other respondents (Marcos children) adopted;
(d) Demurrer to Evidence dated May 2, 2000 filed by Mrs. Marcos and adopted by the
Marcos children;
(e) Motion for Reconsideration dated September 26, 2000 filed by Mrs. Marcos; Motion
for Reconsideration dated October 5, 2000 jointly filed by Mrs. Manotoc and Ferdinand,
Jr., and Supplemental Motion for Reconsideration dated October 9, 2000 likewise jointly
filed by Mrs. Manotoc and Ferdinand, Jr.;
(f) Memorandum dated December 12, 2000 of Mrs. Marcos and Memorandum dated
December 17, 2000 of the Marcos children;
(g) Manifestation dated May 26, 1998; and
(h) General/Supplemental Agreement dated December 23, 1993.
An examination of the foregoing pleadings is in order.

Respondents' Answer dated October 18, 1993.

In their answer, respondents failed to specifically deny each and every allegation contained in the
petition for forfeiture in the manner required by the rules. All they gave were stock answers like
"they have no sufficient knowledge" or "they could not recall because it happened a long time
ago," and, as to Mrs. Marcos, "the funds were lawfully acquired," without stating the basis of
such assertions.
Section 10, Rule 8 of the 1997 Rules of Civil Procedure, provides:
A defendant must specify each material allegation of fact the truth of which he does not
admit and, whenever practicable, shall set forth the substance of the matters upon which
he relies to support his denial. Where a defendant desires to deny only a part of an
averment, he shall specify so much of it as is true and material and shall deny the
remainder. Where a defendant is without knowledge or information sufficient to form a
belief as to the truth of a material averment made in the complaint, he shall so state, and
this shall have the effect of a denial.28
The purpose of requiring respondents to make a specific denial is to make them disclose facts
which will disprove the allegations of petitioner at the trial, together with the matters they rely
upon in support of such denial. Our jurisdiction adheres to this rule to avoid and prevent
unnecessary expenses and waste of time by compelling both parties to lay their cards on the
table, thus reducing the controversy to its true terms. As explained in Alonso vs. Villamor,29
A litigation is not a game of technicalities in which one, more deeply schooled and skilled
in the subtle art of movement and position, entraps and destroys the other. It is rather a
contest in which each contending party fully and fairly lays before the court the facts in
issue and then, brushing aside as wholly trivial and indecisive all imperfections of form
and technicalities of procedure, asks that justice be done upon the merits. Lawsuits,
unlike duels, are not to be won by a rapier's thrust.
On the part of Mrs. Marcos, she claimed that the funds were lawfully acquired. However, she
failed to particularly state the ultimate facts surrounding the lawful manner or mode of acquisition
of the subject funds. Simply put, she merely stated in her answer with the other respondents that
the funds were "lawfully acquired" without detailing how exactly these funds were supposedly

acquired legally by them. Even in this case before us, her assertion that the funds were lawfully
acquired remains bare and unaccompanied by any factual support which can prove, by the
presentation of evidence at a hearing, that indeed the funds were acquired legitimately by the
Marcos family.
Respondents' denials in their answer at the Sandiganbayan were based on their alleged lack of
knowledge or information sufficient to form a belief as to the truth of the allegations of the
petition.
It is true that one of the modes of specific denial under the rules is a denial through a statement
that the defendant is without knowledge or information sufficient to form a belief as to the truth of
the material averment in the complaint. The question, however, is whether the kind of denial in
respondents' answer qualifies as the specific denial called for by the rules. We do not think so. In
Morales vs. Court of Appeals,30 this Court ruled that if an allegation directly and specifically
charges a party with having done, performed or committed a particular act which the latter did not
in fact do, perform or commit, a categorical and express denial must be made.
Here, despite the serious and specific allegations against them, the Marcoses responded by
simply saying that they had no knowledge or information sufficient to form a belief as to the truth
of such allegations. Such a general, self-serving claim of ignorance of the facts alleged in the
petition for forfeiture was insufficient to raise an issue. Respondent Marcoses should have
positively stated how it was that they were supposedly ignorant of the facts alleged. 31
To elucidate, the allegation of petitioner Republic in paragraph 23 of the petition for forfeiture
stated:
23. The following presentation very clearly and overwhelmingly show in detail how both
respondents clandestinely stashed away the country's wealth to Switzerland and hid the
same under layers upon layers of foundations and other corporate entities to prevent its
detection. Through their dummies/nominees, fronts or agents who formed those
foundations or corporate entities, they opened and maintained numerous bank accounts.
But due to the difficulty if not the impossibility of detecting and documenting all those
secret accounts as well as the enormity of the deposits therein hidden, the following
presentation is confined to five identified accounts groups, with balances amounting to
about $356-M with a reservation for the filing of a supplemental or separate forfeiture
complaint should the need arise.32
Respondents' lame denial of the aforesaid allegation was:
22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents
clandestinely stashed the country's wealth in Switzerland and hid the same under layers
and layers of foundations and corporate entities for being false, the truth being that
Respondents' aforesaid properties were lawfully acquired.33
Evidently, this particular denial had the earmark of what is called in the law on pleadings as
a negative pregnant, that is, a denial pregnant with the admission of the substantial facts in the
pleading responded to which are not squarely denied. It was in effect an admission of the
averments it was directed at.34 Stated otherwise, a negative pregnant is a form of negative
expression which carries with it an affirmation or at least an implication of some kind favorable to
the adverse party. It is a denial pregnant with an admission of the substantial facts alleged in the
pleading. Where a fact is alleged with qualifying or modifying language and the words of the
allegation as so qualified or modified are literally denied, has been held that the qualifying
circumstances alone are denied while the fact itself is admitted. 35
In the instant case, the material allegations in paragraph 23 of the said petition were not
specifically denied by respondents in paragraph 22 of their answer. The denial contained in

paragraph 22 of the answer was focused on the averment in paragraph 23 of the petition for
forfeiture that "Respondents clandestinely stashed the country's wealth in Switzerland and hid
the same under layers and layers of foundations and corporate entities." Paragraph 22 of the
respondents' answer was thus a denial pregnant with admissions of the following substantial
facts:
(1) the Swiss bank deposits existed and
(2) that the estimated sum thereof was US$356 million as of December, 1990.
Therefore, the allegations in the petition for forfeiture on the existence of the Swiss bank deposits
in the sum of about US$356 million, not having been specifically denied by respondents in their
answer, were deemed admitted by them pursuant to Section 11, Rule 8 of the 1997 Revised
Rules on Civil Procedure:
Material averment in the complaint, xxx shall be deemed admitted when not specifically
denied. xxx.36
By the same token, the following unsupported denials of respondents in their answer were
pregnant with admissions of the substantial facts alleged in the Republic's petition for forfeiture:
23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the
Petition for lack of knowledge or information sufficient to form a belief as to the truth of
the allegation since respondents were not privy to the transactions regarding the alleged
Azio-Verso-Vibur Foundation accounts, except that, as to respondent Imelda R. Marcos,
she specifically remembers that the funds involved were lawfully acquired.
24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41
of the Petition for lack of knowledge or information sufficient to form a belief as to the
truth of the allegations since respondents were not privy to the transactions and as to
such transactions they were privy to, they cannot remember with exactitude the same
having occurred a long time ago, except as to respondent Imelda R. Marcos, she
specifically remembers that the funds involved were lawfully acquired.
25. Respondents specifically DENY paragraphs 42, 43, 45, and 46 of the petition for lack
of knowledge or information sufficient to from a belief as to the truth of the allegations
since respondents were not privy to the transactions and as to such transaction they
were privy to, they cannot remember with exactitude, the same having occurred a long
time ago, except that as to respondent Imelda R. Marcos, she specifically remembers
that the funds involved were lawfully acquired.
26. Respondents specifically DENY paragraphs 49, 50, 51 and 52 of the petition for lack
of knowledge and information sufficient to form a belief as to the truth of the allegations
since respondents were not privy to the transactions and as to such transaction they
were privy to they cannot remember with exactitude the same having occurred a long
time ago, except that as to respondent Imelda R. Marcos, she specifically remembers
that the funds involved were lawfully acquired.
The matters referred to in paragraphs 23 to 26 of the respondents' answer pertained to the
creation of five groups of accounts as well as their respective ending balances and attached
documents alleged in paragraphs 24 to 52 of the Republic's petition for forfeiture. Respondent
Imelda R. Marcos never specifically denied the existence of the Swiss funds. Her claim that "the
funds involved were lawfully acquired" was an acknowledgment on her part of the existence of
said deposits. This only reinforced her earlier admission of the allegation in paragraph 23 of the
petition for forfeiture regarding the existence of the US$356 million Swiss bank deposits.

The allegations in paragraphs 4737 and 4838 of the petition for forfeiture referring to the creation
and amount of the deposits of the Rosalys-Aguamina Foundation as well as the averment in
paragraph 52-a39 of the said petition with respect to the sum of the Swiss bank deposits
estimated to be US$356 million were again not specifically denied by respondents in their
answer. The respondents did not at all respond to the issues raised in these paragraphs and the
existence, nature and amount of the Swiss funds were therefore deemed admitted by them. As
held in Galofa vs. Nee Bon Sing,40 if a defendant's denial is a negative pregnant, it is equivalent
to an admission.
Moreover, respondents' denial of the allegations in the petition for forfeiture "for lack of
knowledge or information sufficient to form a belief as to the truth of the allegations since
respondents were not privy to the transactions" was just a pretense. Mrs. Marcos' privity to the
transactions was in fact evident from her signatures on some of the vital documents 41 attached to
the petition for forfeiture which Mrs. Marcos failed to specifically deny as required by the rules. 42
It is worthy to note that the pertinent documents attached to the petition for forfeiture were even
signed personally by respondent Mrs. Marcos and her late husband, Ferdinand E. Marcos,
indicating that said documents were within their knowledge. As correctly pointed out by
Sandiganbayan Justice Francisco Villaruz, Jr. in his dissenting opinion:
The pattern of: 1) creating foundations, 2) use of pseudonyms and dummies, 3)
approving regulations of the Foundations for the distribution of capital and income of the
Foundations to the First and Second beneficiary (who are no other than FM and his
family), 4) opening of bank accounts for the Foundations, 5) changing the names of the
Foundations, 6) transferring funds and assets of the Foundations to other Foundations or
Fides Trust, 7) liquidation of the Foundations as substantiated by the Annexes U to U168, Petition [for forfeiture] strongly indicate that FM and/or Imelda were the real owners
of the assets deposited in the Swiss banks, using the Foundations as dummies. 43
How could respondents therefore claim lack of sufficient knowledge or information regarding the
existence of the Swiss bank deposits and the creation of five groups of accounts when Mrs.
Marcos and her late husband personally masterminded and participated in the formation and
control of said foundations? This is a fact respondent Marcoses were never able to explain.
Not only that. Respondents' answer also technically admitted the genuineness and due
execution of the Income Tax Returns (ITRs) and the balance sheets of the late Ferdinand E.
Marcos and Imelda R. Marcos attached to the petition for forfeiture, as well as the veracity of the
contents thereof.
The answer again premised its denials of said ITRs and balance sheets on the ground of lack of
knowledge or information sufficient to form a belief as to the truth of the contents thereof.
Petitioner correctly points out that respondents' denial was not really grounded on lack of
knowledge or information sufficient to form a belief but was based on lack of recollection. By
reviewing their own records, respondent Marcoses could have easily determined the
genuineness and due execution of the ITRs and the balance sheets. They also had the means
and opportunity of verifying the same from the records of the BIR and the Office of the President.
They did not.
When matters regarding which respondents claim to have no knowledge or information sufficient
to form a belief are plainly and necessarily within their knowledge, their alleged ignorance or lack
of information will not be considered a specific denial.44 An unexplained denial of information
within the control of the pleader, or is readily accessible to him, is evasive and is insufficient to
constitute an effective denial.45
The form of denial adopted by respondents must be availed of with sincerity and in good faith,
and certainly not for the purpose of confusing the adverse party as to what allegations of the

petition are really being challenged; nor should it be made for the purpose of delay.46 In the
instant case, the Marcoses did not only present unsubstantiated assertions but in truth attempted
to mislead and deceive this Court by presenting an obviously contrived defense.
Simply put, a profession of ignorance about a fact which is patently and necessarily within the
pleader's knowledge or means of knowing is as ineffective as no denial at all.47 Respondents'
ineffective denial thus failed to properly tender an issue and the averments contained in the
petition for forfeiture were deemed judicially admitted by them.
As held in J.P. Juan & Sons, Inc. vs. Lianga Industries, Inc.:
Its "specific denial" of the material allegation of the petition without setting forth the
substance of the matters relied upon to support its general denial, when such matters
were plainly within its knowledge and it could not logically pretend ignorance as to the
same, therefore, failed to properly tender on issue.48
Thus, the general denial of the Marcos children of the allegations in the petition for forfeiture "for
lack of knowledge or information sufficient to form a belief as to the truth of the allegations since
they were not privy to the transactions" cannot rightfully be accepted as a defense because they
are the legal heirs and successors-in-interest of Ferdinand E. Marcos and are therefore bound by
the acts of their father vis-a-vis the Swiss funds.

PRE-TRIAL BRIEF DATED OCTOBER 18, 1993

The pre-trial brief of Mrs. Marcos was adopted by the three Marcos children. In said brief, Mrs.
Marcos stressed that the funds involved were lawfully acquired. But, as in their answer, they
failed to state and substantiate how these funds were acquired lawfully. They failed to present
and attach even a single document that would show and prove the truth of their allegations.
Section 6, Rule 18 of the 1997 Rules of Civil Procedure provides:
The parties shall file with the court and serve on the adverse party, x x x their respective pre-trial
briefs which shall contain, among others:
xxx
(d) the documents or exhibits to be presented, stating the purpose thereof;
xxx
(f) the number and names of the witnesses, and the substance of their respective
testimonies.49
It is unquestionably within the court's power to require the parties to submit their pre-trial briefs
and to state the number of witnesses intended to be called to the stand, and a brief summary of
the evidence each of them is expected to give as well as to disclose the number of documents to
be submitted with a description of the nature of each. The tenor and character of the testimony of
the witnesses and of the documents to be deduced at the trial thus made known, in addition to
the particular issues of fact and law, it becomes apparent if genuine issues are being put forward
necessitating the holding of a trial. Likewise, the parties are obliged not only to make a formal
identification and specification of the issues and their proofs, and to put these matters in writing
and submit them to the court within the specified period for the prompt disposition of the action. 50
The pre-trial brief of Mrs. Marcos, as subsequently adopted by respondent Marcos children,
merely stated:

xxx
WITNESSES
4.1 Respondent Imelda will present herself as a witness and reserves the right to present
additional witnesses as may be necessary in the course of the trial.
xxx
DOCUMENTARY EVIDENCE
5.1 Respondent Imelda reserves the right to present and introduce in evidence
documents as may be necessary in the course of the trial.
Mrs. Marcos did not enumerate and describe the documents constituting her evidence. Neither
the names of witnesses nor the nature of their testimony was stated. What alone appeared
certain was the testimony of Mrs. Marcos only who in fact had previously claimed ignorance and
lack of knowledge. And even then, the substance of her testimony, as required by the rules, was
not made known either. Such cunning tactics of respondents are totally unacceptable to this
Court. We hold that, since no genuine issue was raised, the case became ripe for summary
judgment.

OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

DATED MARCH 21, 2000

The opposition filed by Mrs. Marcos to the motion for summary judgment dated March 21, 2000
of petitioner Republic was merely adopted by the Marcos children as their own opposition to the
said motion. However, it was again not accompanied by affidavits, depositions or admissions as
required by Section 3, Rule 35 of the 1997 Rules on Civil Procedure:
x x x The adverse party may serve opposing affidavits, depositions, or admissions at
least three (3) days before hearing. After hearing, the judgment sought shall be rendered
forthwith if the pleadings, supporting affidavits, depositions, and admissions on file, show
that, except as to the amount of damages, there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law.51
The absence of opposing affidavits, depositions and admissions to contradict the sworn
declarations in the Republic's motion only demonstrated that the averments of such opposition
were not genuine and therefore unworthy of belief.

Demurrer to Evidence dated May 2, 2000;52

Motions for Reconsideration;53 and Memoranda
of Mrs. Marcos and the Marcos children54

All these pleadings again contained no allegations of facts showing their lawful acquisition of the
funds. Once more, respondents merely made general denials without alleging facts which would
have been admissible in evidence at the hearing, thereby failing to raise genuine issues of fact.
Mrs. Marcos insists in her memorandum dated October 21, 2002 that, during the pre-trial, her
counsel stated that his client was just a beneficiary of the funds, contrary to petitioner Republic's
allegation that Mrs. Marcos disclaimed ownership of or interest in the funds.
This is yet another indication that respondents presented a fictitious defense because, during the
pre-trial, Mrs. Marcos and the Marcos children denied ownership of or interest in the Swiss funds:

PJ Garchitorena:
Make of record that as far as Imelda Marcos is concerned through the statement
of Atty. Armando M. Marcelo that the US$360 million more or less subject matter
of the instant lawsuit as allegedly obtained from the various Swiss Foundations
do not belong to the estate of Marcos or to Imelda Marcos herself. That's your
statement of facts?
Atty. MARCELO:
Yes, Your Honor.
PJ Garchitorena:
That's it. Okay. Counsel for Manotoc and Manotoc, Jr. What is your point here?
Does the estate of Marcos own anything of the $360 million subject of this case.
Atty. TECSON:
We joined the Manifestation of Counsel.
PJ Garchitorena:
You do not own anything?
Atty. TECSON:
Yes, Your Honor.
PJ Garchitorena:
Counsel for Irene Araneta?
Atty. SISON:
I join the position taken by my other compaeros here, Your Honor.
xxx
Atty. SISON:
Irene Araneta as heir do (sic) not own any of the amount, Your Honor.55
We are convinced that the strategy of respondent Marcoses was to confuse petitioner Republic
as to what facts they would prove or what issues they intended to pose for the court's resolution.
There is no doubt in our mind that they were leading petitioner Republic, and now this Court, to
perplexity, if not trying to drag this forfeiture case to eternity.

Manifestation dated May 26, 1998 filed by MRS.

Marcos; General/Supplemental Compromise
Agreement dated December 28, 1993

These pleadings of respondent Marcoses presented nothing but feigned defenses. In their earlier
pleadings, respondents alleged either that they had no knowledge of the existence of the Swiss

deposits or that they could no longer remember anything as it happened a long time ago. As to
Mrs. Marcos, she remembered that it was lawfully acquired.
In her Manifestation dated May 26, 1998, Mrs. Marcos stated that:
COMES NOW undersigned counsel for respondent Imelda R. Marcos, and before this
Honorable Court, most respectfully manifests:
That respondent Imelda R, Marcos owns 90% of the subject matter of the above-entitled
case, being the sole beneficiary of the dollar deposits in the name of the various
foundations alleged in the case;
That in fact only 10% of the subject matter in the above-entitled case belongs to the
estate of the late President Ferdinand E. Marcos.
In the Compromise/Supplemental Agreements, respondent Marcoses sought to implement the
agreed distribution of the Marcos assets, including the Swiss deposits. This was, to us, an
unequivocal admission of ownership by the Marcoses of the said deposits.
But, as already pointed out, during the pre-trial conference, respondent Marcoses denied
knowledge as well as ownership of the Swiss funds.
Anyway we look at it, respondent Marcoses have put forth no real defense. The "facts" pleaded
by respondents, while ostensibly raising important questions or issues of fact, in reality
comprised mere verbiage that was evidently wanting in substance and constituted no genuine
issues for trial.
We therefore rule that, under the circumstances, summary judgment is proper.
In fact, it is the law itself which determines when summary judgment is called for. Under the
rules, summary judgment is appropriate when there are no genuine issues of fact requiring the
presentation of evidence in a full-blown trial. Even if on their face the pleadings appear to raise
issue, if the affidavits, depositions and admissions show that such issues are not genuine, then
summary judgment as prescribed by the rules must ensue as a matter of law.56
In sum, mere denials, if unaccompanied by any fact which will be admissible in evidence at a
hearing, are not sufficient to raise genuine issues of fact and will not defeat a motion for
summary judgment.57 A summary judgment is one granted upon motion of a party for an
expeditious settlement of the case, it appearing from the pleadings, depositions, admissions and
affidavits that there are no important questions or issues of fact posed and, therefore, the movant
is entitled to a judgment as a matter of law. A motion for summary judgment is premised on the
assumption that the issues presented need not be tried either because these are patently devoid
of substance or that there is no genuine issue as to any pertinent fact. It is a method sanctioned
by the Rules of Court for the prompt disposition of a civil action where there exists no serious
controversy.58 Summary judgment is a procedural device for the prompt disposition of actions in
which the pleadings raise only a legal issue, not a genuine issue as to any material fact. The
theory of summary judgment is that, although an answer may on its face appear to tender issues
requiring trial, if it is established by affidavits, depositions or admissions that those issues are not
genuine but fictitious, the Court is justified in dispensing with the trial and rendering summary
judgment for petitioner.59
In the various annexes to the petition for forfeiture, petitioner Republic attached sworn
statements of witnesses who had personal knowledge of the Marcoses' participation in the illegal
acquisition of funds deposited in the Swiss accounts under the names of five groups or
foundations. These sworn statements substantiated the ill-gotten nature of the Swiss bank

deposits. In their answer and other subsequent pleadings, however, the Marcoses merely made
general denials of the allegations against them without stating facts admissible in evidence at the
hearing, thereby failing to raise any genuine issues of fact.
Under these circumstances, a trial would have served no purpose at all and would have been
totally unnecessary, thus justifying a summary judgment on the petition for forfeiture. There were
no opposing affidavits to contradict the sworn declarations of the witnesses of petitioner
Republic, leading to the inescapable conclusion that the matters raised in the Marcoses' answer
were false.
Time and again, this Court has encountered cases like this which are either only half-heartedly
defended or, if the semblance of a defense is interposed at all, it is only to delay disposition and
gain time. It is certainly not in the interest of justice to allow respondent Marcoses to avail of the
appellate remedies accorded by the Rules of Court to litigants in good faith, to the prejudice of
the Republic and ultimately of the Filipino people. From the beginning, a candid demonstration of
respondents' good faith should have been made to the court below. Without the deceptive
reasoning and argumentation, this protracted litigation could have ended a long time ago.
Since 1991, when the petition for forfeiture was first filed, up to the present, all respondents have
offered are foxy responses like "lack of sufficient knowledge or lack of privity" or "they cannot
recall because it happened a long time ago" or, as to Mrs. Marcos, "the funds were lawfully
acquired." But, whenever it suits them, they also claim ownership of 90% of the funds and allege
that only 10% belongs to the Marcos estate. It has been an incredible charade from beginning to
end.
In the hope of convincing this Court to rule otherwise, respondents Maria Imelda MarcosManotoc and Ferdinand R. Marcos Jr. contend that "by its positive acts and express admissions
prior to filing the motion for summary judgment on March 10, 2000, petitioner Republic had
bound itself to go to trial on the basis of existing issues. Thus, it had legally waived whatever
right it had to move for summary judgment."60
We do not think so. The alleged positive acts and express admissions of the petitioner did not
preclude it from filing a motion for summary judgment.
Rule 35 of the 1997 Rules of Civil Procedure provides:
Rule 35
Summary Judgment
Section 1. Summary judgment for claimant. - A party seeking to recover upon a claim,
counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with supporting affidavits,
depositions or admissions for a summary judgment in his favor upon all or any part
thereof.
Section 2. Summary judgment for defending party. - A party against whom a claim,
counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any
time, move with supporting affidavits, depositions or admissions for a summary judgment
in his favor as to all or any part thereof. (Emphasis ours)61
Under the rule, the plaintiff can move for summary judgment "at any time after the pleading in
answer thereto (i.e., in answer to the claim, counterclaim or cross-claim) has been served." No
fixed reglementary period is provided by the Rules. How else does one construe the phrase "any
time after the answer has been served?"

This issue is actually one of first impression. No local jurisprudence or authoritative work has
touched upon this matter. This being so, an examination of foreign laws and jurisprudence,
particularly those of the United States where many of our laws and rules were copied, is in order.
Rule 56 of the Federal Rules of Civil Procedure provides that a party seeking to recover upon a
claim, counterclaim or cross-claim may move for summary judgment at any time after the
expiration of 20 days from the commencement of the action or after service of a motion for
summary judgment by the adverse party, and that a party against whom a claim, counterclaim or
cross-claim is asserted may move for summary judgment at any time.
However, some rules, particularly Rule 113 of the Rules of Civil Practice of New York, specifically
provide that a motion for summary judgment may not be made until issues have been joined, that
is, only after an answer has been served.62 Under said rule, after issues have been joined, the
motion for summary judgment may be madeat any stage of the litigation.63 No fixed prescriptive
period is provided.
Like Rule 113 of the Rules of Civil Practice of New York, our rules also provide that a motion for
summary judgment may not be made until issues have been joined, meaning, the plaintiff has to
wait for the answer before he can move for summary judgment. 64 And like the New York rules,
ours do not provide for a fixed reglementary period within which to move for summary judgment.
This being so, the New York Supreme Court's interpretation of Rule 113 of the Rules of Civil
Practice can be applied by analogy to the interpretation of Section 1, Rule 35, of our 1997 Rules
of Civil Procedure.
Under the New York rule, after the issues have been joined, the motion for summary judgment
may be made at any stage of the litigation. And what exactly does the phrase "at any stage of the
litigation" mean? In Ecker vs. Muzysh,65 the New York Supreme Court ruled:
"PER CURIAM.
Plaintiff introduced her evidence and the defendants rested on the case made by the
plaintiff. The case was submitted. Owing to the serious illness of the trial justice, a
decision was not rendered within sixty days after the final adjournment of the term at
which the case was tried. With the approval of the trial justice, the plaintiff moved for a
new trial under Section 442 of the Civil Practice Act. The plaintiff also moved for summary
judgment under Rule 113 of the Rules of Civil Practice. The motion was opposed
mainly on the ground that, by proceeding to trial, the plaintiff had waived her right
to summary judgment and that the answer and the opposing affidavits raised triable
issues. The amount due and unpaid under the contract is not in dispute. The Special
Term granted both motions and the defendants have appealed.
The Special Term properly held that the answer and the opposing affidavits raised no
triable issue. Rule 113 of the Rules of Civil Practice and the Civil Practice Act
prescribe no limitation as to the time when a motion for summary judgment must
be made. The object of Rule 113 is to empower the court to summarily determine
whether or not a bona fide issue exists between the parties, and there is no
limitation on the power of the court to make such a determination at any stage of
the litigation." (emphasis ours)
On the basis of the aforequoted disquisition, "any stage of the litigation" means that "even if the
plaintiff has proceeded to trial, this does not preclude him from thereafter moving for summary
judgment."66

In the case at bar, petitioner moved for summary judgment after pre-trial and before its
scheduled date for presentation of evidence. Respondent Marcoses argue that, by agreeing to
proceed to trial during the pre-trial conference, petitioner "waived" its right to summary judgment.
This argument must fail in the light of the New York Supreme Court ruling which we apply by
analogy to this case. In Ecker,67 the defendant opposed the motion for summary judgment on a
ground similar to that raised by the Marcoses, that is, "that plaintiff had waived her right to
summary judgment" by her act of proceeding to trial. If, as correctly ruled by the New York court,
plaintiff was allowed to move for summary judgment even after trial and submission of the case
for resolution, more so should we permit it in the present case where petitioner moved for
summary judgment before trial.
Therefore, the phrase "anytime after the pleading in answer thereto has been served" in Section
1, Rule 35 of our Rules of Civil Procedure means "at any stage of the litigation." Whenever it
becomes evident at any stage of the litigation that no triable issue exists, or that the defenses
raised by the defendant(s) are sham or frivolous, plaintiff may move for summary judgment. A
contrary interpretation would go against the very objective of the Rule on Summary Judgment
which is to "weed out sham claims or defenses thereby avoiding the expense and loss of time
involved in a trial."68
In cases with political undertones like the one at bar, adverse parties will often do almost
anything to delay the proceedings in the hope that a future administration sympathetic to them
might be able to influence the outcome of the case in their favor. This is rank injustice we cannot
tolerate.
The law looks with disfavor on long, protracted and expensive litigation and encourages the
speedy and prompt disposition of cases. That is why the law and the rules provide for a number
of devices to ensure the speedy disposition of cases. Summary judgment is one of them.
Faithful therefore to the spirit of the law on summary judgment which seeks to avoid unnecessary
expense and loss of time in a trial, we hereby rule that petitioner Republic could validly move for
summary judgment any time after the respondents' answer was filed or, for that matter, at any
subsequent stage of the litigation. The fact that petitioner agreed to proceed to trial did not in any
way prevent it from moving for summary judgment, as indeed no genuine issue of fact was ever
validly raised by respondent Marcoses.
This interpretation conforms with the guiding principle enshrined in Section 6, Rule 1 of the 1997
Rules of Civil Procedure that the "[r]ules should be liberally construed in order to promote their
objective of securing a just, speedy and inexpensive disposition of every action and
proceeding."69
Respondents further allege that the motion for summary judgment was based on respondents'
answer and other documents that had long been in the records of the case. Thus, by the time the
motion was filed on March 10, 2000, estoppel by laches had already set in against petitioner.
We disagree. Estoppel by laches is the failure or neglect for an unreasonable or unexplained
length of time to do that which, by exercising due diligence, could or should have been done
earlier, warranting a presumption that the person has abandoned his right or declined to assert
it.70 In effect, therefore, the principle of laches is one of estoppel because "it prevents people who
have slept on their rights from prejudicing the rights of third parties who have placed reliance on
the inaction of the original parties and their successors-in-interest". 71
A careful examination of the records, however, reveals that petitioner was in fact never remiss in
pursuing its case against respondent Marcoses through every remedy available to it, including
the motion for summary judgment.

Petitioner Republic initially filed its motion for summary judgment on October 18, 1996. The
motion was denied because of the pending compromise agreement between the Marcoses and
petitioner. But during the pre-trial conference, the Marcoses denied ownership of the Swiss
funds, prompting petitioner to file another motion for summary judgment now under consideration
by this Court. It was the subsequent events that transpired after the answer was filed, therefore,
which prevented petitioner from filing the questioned motion. It was definitely not because of
neglect or inaction that petitioner filed the (second) motion for summary judgment years after
respondents' answer to the petition for forfeiture.
In invoking the doctrine of estoppel by laches, respondents must show not only unjustified
inaction but also that some unfair injury to them might result unless the action is barred. 72
This, respondents failed to bear out. In fact, during the pre-trial conference, the Marcoses
disclaimed ownership of the Swiss deposits. Not being the owners, as they claimed, respondents
did not have any vested right or interest which could be adversely affected by petitioner's alleged
inaction.
But even assuming for the sake of argument that laches had already set in, the doctrine of
estoppel or laches does not apply when the government sues as a sovereign or asserts
governmental rights.73 Nor can estoppel validate an act that contravenes law or public policy.74
As a final point, it must be emphasized that laches is not a mere question of time but is
principally a question of the inequity or unfairness of permitting a right or claim to be enforced or
asserted.75 Equity demands that petitioner Republic should not be barred from pursuing the
people's case against the Marcoses.
(2) The Propriety of Forfeiture
The matter of summary judgment having been thus settled, the issue of whether or not petitioner
Republic was able to prove its case for forfeiture in accordance with the requisites of Sections 2
and 3 of RA 1379 now takes center stage.
The law raises the prima facie presumption that a property is unlawfully acquired, hence subject
to forfeiture, if its amount or value is manifestly disproportionate to the official salary and other
lawful income of the public officer who owns it. Hence, Sections 2 and 6 of RA 1379 76 provide:
xxx

xxx

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

xxx

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

From the above-quoted provisions of the law, the following facts must be established in order that
forfeiture or seizure of the Swiss deposits may be effected:
(1) ownership by the public officer of money or property acquired during his incumbency,
whether it be in his name or otherwise, and
(2) the extent to which the amount of that money or property exceeds, i. e., is grossly
disproportionate to, the legitimate income of the public officer.
That spouses Ferdinand and Imelda Marcos were public officials during the time material to the
instant case was never in dispute. Paragraph 4 of respondent Marcoses' answer categorically
admitted the allegations in paragraph 4 of the petition for forfeiture as to the personal
circumstances of Ferdinand E. Marcos as a public official who served without interruption as
Congressman, Senator, Senate President and President of the Republic of the Philippines from
December 1, 1965 to February 25, 1986.77 Likewise, respondents admitted in their answer the
contents of paragraph 5 of the petition as to the personal circumstances of Imelda R. Marcos
who once served as a member of the Interim Batasang Pambansa from 1978 to 1984 and as
Metro Manila Governor, concurrently Minister of Human Settlements, from June 1976 to
February 1986.78
Respondent Mrs. Marcos also admitted in paragraph 10 of her answer the allegations of
paragraph 11 of the petition for forfeiture which referred to the accumulated salaries of
respondents Ferdinand E. Marcos and Imelda R. Marcos.79 The combined accumulated salaries
of the Marcos couple were reflected in the Certification dated May 27, 1986 issued by then
Minister of Budget and Management Alberto Romulo.80 The Certification showed that, from 1966
to 1985, Ferdinand E. Marcos and Imelda R. Marcos had accumulated salaries in the amount of
P1,570,000 and P718,750, respectively, or a total of P2,288,750:
Ferdinand E. Marcos, as President

1966-1976

at P60,000/year

P660,000

1977-1984

at P100,000/year

800,000

1985

at P110,000/year

110,000

P1,570,00

Imelda R. Marcos, as Minister

June 1976-1985

at P75,000/year

P718,000

In addition to their accumulated salaries from 1966 to 1985 are the Marcos couple's combined
salaries from January to February 1986 in the amount of P30,833.33. Hence, their total
accumulated salaries amounted to P2,319,583.33. Converted to U.S. dollars on the basis of the

corresponding peso-dollar exchange rates prevailing during the applicable period when said
salaries were received, the total amount had an equivalent value of $304,372.43.
The dollar equivalent was arrived at by using the official annual rates of exchange of the
Philippine peso and the US dollar from 1965 to 1985 as well as the official monthly rates of
exchange in January and February 1986 issued by the Center for Statistical Information of
the Bangko Sentral ng Pilipinas.
Prescinding from the aforesaid admissions, Section 4, Rule 129 of the Rules of Court provides
that:
Section 4. Judicial admissions An admission, verbal or written, made by a party in the
course of the proceedings in the same case does not require proof. The admission may
be contradicted only by showing that it was made through palpable mistake or that no
such admission was made.81
It is settled that judicial admissions may be made: (a) in the pleadings filed by the parties; (b) in
the course of the trial either by verbal or written manifestations or stipulations; or (c) in other
stages of judicial proceedings, as in the pre-trial of the case. 82 Thus, facts pleaded in the petition
and answer, as in the case at bar, are deemed admissions of petitioner and respondents,
respectively, who are not permitted to contradict them or subsequently take a position contrary to
or inconsistent with such admissions.83
The sum of $304,372.43 should be held as the only known lawful income of respondents since
they did not file any Statement of Assets and Liabilities (SAL), as required by law, from which
their net worth could be determined. Besides, under the 1935 Constitution, Ferdinand E. Marcos
as President could not receive "any other emolument from the Government or any of its
subdivisions and instrumentalities".84 Likewise, under the 1973 Constitution, Ferdinand E. Marcos
as President could "not receive during his tenure any other emolument from the Government or
any other source."85 In fact, his management of businesses, like the administration of foundations
to accumulate funds, was expressly prohibited under the 1973 Constitution:
Article VII, Sec. 4(2) The President and the Vice-President shall not, during their tenure,
hold any other office except when otherwise provided in this Constitution, nor may they
practice any profession, participate directly or indirectly in the management of any
business, or be financially interested directly or indirectly in any contract with, or in any
franchise or special privilege granted by the Government or any other subdivision,
agency, or instrumentality thereof, including any government owned or controlled
corporation.
Article VII, Sec. 11 No Member of the National Assembly shall appear as counsel
before any court inferior to a court with appellate jurisdiction, x x x. Neither shall he,
directly or indirectly, be interested financially in any contract with, or in any franchise or
special privilege granted by the Government, or any subdivision, agency, or
instrumentality thereof including any government owned or controlled corporation during
his term of office. He shall not intervene in any matter before any office of the
government for his pecuniary benefit.
Article IX, Sec. 7 The Prime Minister and Members of the Cabinet shall be subject to
the provision of Section 11, Article VIII hereof and may not appear as counsel before any
court or administrative body, or manage any business, or practice any profession, and
shall also be subject to such other disqualification as may be provided by law.
Their only known lawful income of $304,372.43 can therefore legally and fairly serve as basis for
determining the existence of a prima facie case of forfeiture of the Swiss funds.

Respondents argue that petitioner was not able to establish a prima facie case for the forfeiture
of the Swiss funds since it failed to prove the essential elements under Section 3, paragraphs (c),
(d) and (e) of RA 1379. As the Act is a penal statute, its provisions are mandatory and should
thus be construed strictly against the petitioner and liberally in favor of respondent Marcoses.
We hold that it was not for petitioner to establish the Marcoses' other lawful income or income
from legitimately acquired property for the presumption to apply because, as between petitioner
and respondents, the latter were in a better position to know if there were such other sources of
lawful income. And if indeed there was such other lawful income, respondents should have
specifically stated the same in their answer. Insofar as petitioner Republic was concerned, it was
enough to specify the known lawful income of respondents.
Section 9 of the PCGG Rules and Regulations provides that, in determining prima facie evidence
of ill-gotten wealth, the value of the accumulated assets, properties and other material
possessions of those covered by Executive Order Nos. 1 and 2 must be out of proportion to the
known lawful income of such persons. The respondent Marcos couple did not file any Statement
of Assets and Liabilities (SAL) from which their net worth could be determined. Their failure to file
their SAL was in itself a violation of law and to allow them to successfully assail the Republic for
not presenting their SAL would reward them for their violation of the law.
Further, contrary to the claim of respondents, the admissions made by them in their various
pleadings and documents were valid. It is of record that respondents judicially admitted that the
money deposited with the Swiss banks belonged to them.
We agree with petitioner that respondent Marcoses made judicial admissions of their ownership
of the subject Swiss bank deposits in their answer, the General/Supplemental Agreements, Mrs.
Marcos' Manifestation and Constancia dated May 5, 1999, and the Undertaking dated February
10, 1999. We take note of the fact that the Associate Justices of the Sandiganbayan were
unanimous in holding that respondents had made judicial admissions of their ownership of the
Swiss funds.
In their answer, aside from admitting the existence of the subject funds, respondents likewise
admitted ownershipthereof. Paragraph 22 of respondents' answer stated:
22. Respondents specifically DENY PARAGRAPH 23 insofar as it alleges that
respondents clandestinely stashed the country's wealth in Switzerland and hid the same
under layers and layers of foundations and corporate entities for being false, the truth
being that respondents' aforesaid properties were lawfully acquired. (emphasis
supplied)
By qualifying their acquisition of the Swiss bank deposits as lawful, respondents unwittingly
admitted their ownership thereof.
Respondent Mrs. Marcos also admitted ownership of the Swiss bank deposits by failing to deny
under oath the genuineness and due execution of certain actionable documents bearing her
signature attached to the petition. As discussed earlier, Section 11, Rule 886 of the 1997 Rules of
Civil Procedure provides that material averments in the complaint shall be deemed admitted
when not specifically denied.
The General87 and Supplemental88 Agreements executed by petitioner and respondents on
December 28, 1993 further bolstered the claim of petitioner Republic that its case for forfeiture
was proven in accordance with the requisites of Sections 2 and 3 of RA 1379. The whereas
clause in the General Agreement declared that:
WHEREAS, the FIRST PARTY has obtained a judgment from the Swiss Federal Tribunal
on December 21, 1990, that the $356 million belongs in principle to the Republic of the

Philippines provided certain conditionalities are met, but even after 7 years, the FIRST
PARTY has not been able to procure a final judgment of conviction against the PRIVATE
PARTY.
While the Supplemental Agreement warranted, inter alia, that:
In consideration of the foregoing, the parties hereby agree that the PRIVATE PARTY shall
be entitled to the equivalent of 25% of the amount that may be eventually withdrawn from
said $356 million Swiss deposits.
The stipulations set forth in the General and Supplemental Agreements undeniably indicated the
manifest intent of respondents to enter into a compromise with petitioner. Corollarily,
respondents' willingness to agree to an amicable settlement with the Republic only affirmed their
ownership of the Swiss deposits for the simple reason that no person would acquiesce to any
concession over such huge dollar deposits if he did not in fact own them.
Respondents make much capital of the pronouncement by this Court that the General and
Supplemental Agreements were null and void.89 They insist that nothing in those agreements
could thus be admitted in evidence against them because they stood on the same ground as an
accepted offer which, under Section 27, Rule 13090 of the 1997 Rules of Civil Procedure,
provides that "in civil cases, an offer of compromise is not an admission of any liability and is not
admissible in evidence against the offeror."
We find no merit in this contention. The declaration of nullity of said agreements was premised
on the following constitutional and statutory infirmities: (1) the grant of criminal immunity to the
Marcos heirs was against the law; (2) the PCGG's commitment to exempt from all forms of taxes
the properties to be retained by the Marcos heirs was against the Constitution; and (3) the
government's undertaking to cause the dismissal of all cases filed against the Marcoses pending
before the Sandiganbayan and other courts encroached on the powers of the judiciary. The
reasons relied upon by the Court never in the least bit even touched on the veracity and
truthfulness of respondents' admission with respect to their ownership of the Swiss funds.
Besides, having made certain admissions in those agreements, respondents cannot now deny
that they voluntarily admitted owning the subject Swiss funds, notwithstanding the fact that the
agreements themselves were later declared null and void.
The following observation of Sandiganbayan Justice Catalino Castaeda, Jr. in the decision
dated September 19, 2000 could not have been better said:
x x x The declaration of nullity of the two agreements rendered the same without legal
effects but it did not detract from the admissions of the respondents contained therein.
Otherwise stated, the admissions made in said agreements, as quoted above, remain
binding on the respondents.91
A written statement is nonetheless competent as an admission even if it is contained in a
document which is not itself effective for the purpose for which it is made, either by reason of
illegality, or incompetency of a party thereto, or by reason of not being signed, executed or
delivered. Accordingly, contracts have been held as competent evidence of admissions, although
they may be unenforceable.92
The testimony of respondent Ferdinand Marcos, Jr. during the hearing on the motion for the
approval of the Compromise Agreement on April 29, 1998 also lent credence to the allegations of
petitioner Republic that respondents admitted ownership of the Swiss bank accounts. We quote
the salient portions of Ferdinand Jr.'s formal declarations in open court:
ATTY. FERNANDO:

Mr. Marcos, did you ever have any meetings with PCGG Chairman Magtanggol
C. Gunigundo?
F. MARCOS, JR.:
Yes. I have had very many meetings in fact with Chairman.
ATTY. FERNANDO:
Would you recall when the first meeting occurred?
PJ GARCHITORENA:
In connection with what?
ATTY. FERNANDO:
In connection with the ongoing talks to compromise the various cases initiated by
PCGG against your family?
F. MARCOS, JR.:
The nature of our meetings was solely concerned with negotiations towards
achieving some kind of agreement between the Philippine government and the
Marcos family. The discussions that led up to the compromise agreement were
initiated by our then counsel Atty. Simeon Mesina x x x.93
xxx

xxx

xxx

ATTY. FERNANDO:
What was your reaction when Atty. Mesina informed you of this possibility?
F. MARCOS, JR.:
My reaction to all of these approaches is that I am always open, we are always
open, we are very much always in search of resolution to the problem of the
family and any approach that has been made us, we have entertained. And so
my reaction was the same as what I have always why not? Maybe this is the
one that will finally put an end to this problem.94
xxx

xxx

xxx

ATTY. FERNANDO:
Basically, what were the true amounts of the assets in the bank?
PJ GARCHITORENA:
So, we are talking about liquid assets here? Just Cash?
F. MARCOS, JR.:

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

xxx

xxx

PJ GARCHITORENA:
x x x What did you do in other words, after being apprised of this contract in
connection herewith?
F. MARCOS, JR.:
I assumed that we are beginning to implement the agreement because this was
forwarded through the Philippine government lawyers through our lawyers and
then, subsequently, to me. I was a little surprised because we hadn't really
discussed the details of the transfer of the funds, what the bank accounts, what
the mechanism would be. But nevertheless, I was happy to see that as far as the
PCGG is concerned, that the agreement was perfected and that we were
beginning to implement it and that was a source of satisfaction to me because I
thought that finally it will be the end.96
Ferdinand Jr.'s pronouncements, taken in context and in their entirety, were a confirmation of
respondents' recognition of their ownership of the Swiss bank deposits. Admissions of a party in
his testimony are receivable against him. If a party, as a witness, deliberately concedes a fact,
such concession has the force of a judicial admission. 97 It is apparent from Ferdinand Jr.'s
testimony that the Marcos family agreed to negotiate with the Philippine government in the hope
of finally putting an end to the problems besetting the Marcos family regarding the Swiss
accounts. This was doubtlessly an acknowledgment of ownership on their part. The rule is that
the testimony on the witness stand partakes of the nature of a formal judicial admission when a
party testifies clearly and unequivocally to a fact which is peculiarly within his own knowledge. 98
In her Manifestation99 dated May 26, 1998, respondent Imelda Marcos furthermore revealed the
following:
That respondent Imelda R. Marcos owns 90% of the subject matter of the above-entitled
case, being the sole beneficiary of the dollar deposits in the name of the various
foundations alleged in the case;
That in fact only 10% of the subject matter in the above-entitled case belongs to the
estate of the late President Ferdinand E. Marcos;
xxx

xxx

xxx

Respondents' ownership of the Swiss bank accounts as borne out by Mrs. Marcos' manifestation
is as bright as sunlight. And her claim that she is merely a beneficiary of the Swiss deposits is
belied by her own signatures on the appended copies of the documents substantiating her
ownership of the funds in the name of the foundations. As already mentioned, she failed to
specifically deny under oath the authenticity of such documents, especially those involving
"William Saunders" and "Jane Ryan" which actually referred to Ferdinand Marcos and Imelda
Marcos, respectively. That failure of Imelda Marcos to specifically deny the existence, much less
the genuineness and due execution, of the instruments bearing her signature, was tantamount to
a judicial admission of the genuineness and due execution of said instruments, in accordance
with Section 8, Rule 8100 of the 1997 Rules of Civil Procedure.

Likewise, in her Constancia101 dated May 6, 1999, Imelda Marcos prayed for the approval of the
Compromise Agreement and the subsequent release and transfer of the $150 million to the
rightful owner. She further made the following manifestations:
xxx

xxx

xxx

2. The Republic's cause of action over the full amount is its forfeiture in favor of the
government if found to be ill-gotten. On the other hand, the Marcoses defend that it is a
legitimate asset. Therefore, both parties have an inchoate right of ownership over the
account. If it turns out that the account is of lawful origin, the Republic may yield to the
Marcoses. Conversely, the Marcoses must yield to the Republic. (underscoring supplied)
xxx

xxx

xxx

3. Consistent with the foregoing, and the Marcoses having committed themselves to
helping the less fortunate, in the interest of peace, reconciliation and unity, defendant
MADAM IMELDA ROMUALDEZ MARCOS, in firm abidance thereby, hereby affirms her
agreement with the Republic for the release and transfer of the US Dollar 150 million for
proper disposition, without prejudice to the final outcome of the litigation respecting the
ownership of the remainder.
Again, the above statements were indicative of Imelda's admission of the Marcoses' ownership of
the Swiss deposits as in fact "the Marcoses defend that it (Swiss deposits) is a legitimate
(Marcos) asset."
On the other hand, respondents Maria Imelda Marcos-Manotoc, Ferdinand Marcos, Jr. and Maria
Irene Marcos-Araneta filed a motion102 on May 4, 1998 asking the Sandiganbayan to place the
res (Swiss deposits) in custodia legis:
7. Indeed, the prevailing situation is fraught with danger! Unless the aforesaid Swiss
deposits are placed in custodia legis or within the Court's protective mantle, its
dissipation or misappropriation by the petitioner looms as a distinct possibility.
Such display of deep, personal interest can only come from someone who believes that he has a
marked and intimate right over the considerable dollar deposits. Truly, by filing said motion, the
Marcos children revealed their ownership of the said deposits.
Lastly, the Undertaking103 entered into by the PCGG, the PNB and the Marcos foundations on
February 10, 1999, confirmed the Marcoses' ownership of the Swiss bank deposits. The subject
Undertaking brought to light their readiness to pay the human rights victims out of the funds held
in escrow in the PNB. It stated:
WHEREAS, the Republic of the Philippines sympathizes with the plight of the human
rights victims-plaintiffs in the aforementioned litigation through the Second Party, desires
to assist in the satisfaction of the judgment awards of said human rights victims-plaintiffs,
by releasing, assigning and or waiving US$150 million of the funds held in escrow under
the Escrow Agreements dated August 14, 1995, although the Republic is not obligated to
do so under final judgments of the Swiss courts dated December 10 and 19, 1997, and
January 8, 1998;
WHEREAS, the Third Party is likewise willing to release, assign and/or waive all its rights
and interests over said US$150 million to the aforementioned human rights victimsplaintiffs.

All told, the foregoing disquisition negates the claim of respondents that "petitioner failed to prove
that they acquired or own the Swiss funds" and that "it was only by arbitrarily isolating and taking
certain statements made by private respondents out of context that petitioner was able to treat
these as judicial admissions." The Court is fully aware of the relevance, materiality and
implications of every pleading and document submitted in this case. This Court carefully
scrutinized the proofs presented by the parties. We analyzed, assessed and weighed them to
ascertain if each piece of evidence rightfully qualified as an admission. Owing to the far-reaching
historical and political implications of this case, we considered and examined, individually and
totally, the evidence of the parties, even if it might have bordered on factual adjudication which,
by authority of the rules and jurisprudence, is not usually done by this Court. There is no doubt in
our mind that respondent Marcoses admitted ownership of the Swiss bank deposits.
We have always adhered to the familiar doctrine that an admission made in the pleadings cannot
be controverted by the party making such admission and becomes conclusive on him, and that
all proofs submitted by him contrary thereto or inconsistent therewith should be ignored, whether
an objection is interposed by the adverse party or not.104 This doctrine is embodied in Section 4,
Rule 129 of the Rules of Court:
SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the
course of the proceedings in the same case, does not require proof. The admission may
be contradicted only by showing that it was made through palpable mistake or that no
such admission was made.105
In the absence of a compelling reason to the contrary, respondents' judicial admission of
ownership of the Swiss deposits is definitely binding on them.
The individual and separate admissions of each respondent bind all of them pursuant to Sections
29 and 31, Rule 130 of the Rules of Court:
SEC. 29. Admission by co-partner or agent. The act or declaration of a partner or agent
of the party within the scope of his authority and during the existence of the partnership
or agency, may be given in evidence against such party after the partnership or agency is
shown by evidence other than such act or declaration. The same rule applies to the act
or declaration of a joint owner, joint debtor, or other person jointly interested with the
party.106
SEC. 31. Admission by privies. Where one derives title to property from another, the
act, declaration, or omission of the latter, while holding the title, in relation to the property,
is evidence against the former.107
The declarations of a person are admissible against a party whenever a "privity of estate" exists
between the declarant and the party, the term "privity of estate" generally denoting a succession
in rights.108 Consequently, an admission of one in privity with a party to the record is
competent.109 Without doubt, privity exists among the respondents in this case. And where
several co-parties to the record are jointly interested in the subject matter of the controversy, the
admission of one is competent against all.110
Respondents insist that the Sandiganbayan is correct in ruling that petitioner Republic has failed
to establish aprima facie case for the forfeiture of the Swiss deposits.
We disagree. The sudden turn-around of the Sandiganbayan was really strange, to say the least,
as its findings and conclusions were not borne out by the voluminous records of this case.
Section 2 of RA 1379 explicitly states that "whenever any public officer or employee has acquired
during his incumbency an amount of property which is manifestly out of proportion to his salary
as such public officer or employee and to his other lawful income and the income from

legitimately acquired property, said property shall be presumed prima facie to have been
unlawfully acquired. x x x"
The elements which must concur for this prima facie presumption to apply are:
(1) the offender is a public officer or employee;
(2) he must have acquired a considerable amount of money or property during his
incumbency; and
(3) said amount is manifestly out of proportion to his salary as such public officer or
employee and to his other lawful income and the income from legitimately acquired
property.
It is undisputed that spouses Ferdinand and Imelda Marcos were former public officers. Hence,
the first element is clearly extant.
The second element deals with the amount of money or property acquired by the public officer
during his incumbency. The Marcos couple indubitably acquired and owned properties during
their term of office. In fact, the five groups of Swiss accounts were admittedly owned by them.
There is proof of the existence and ownership of these assets and properties and it suffices to
comply with the second element.
The third requirement is met if it can be shown that such assets, money or property is manifestly
out of proportion to the public officer's salary and his other lawful income. It is the proof of this
third element that is crucial in determining whether a prima facie presumption has been
established in this case.
Petitioner Republic presented not only a schedule indicating the lawful income of the Marcos
spouses during their incumbency but also evidence that they had huge deposits beyond such
lawful income in Swiss banks under the names of five different foundations. We believe petitioner
was able to establish the prima facie presumption that the assets and properties acquired by the
Marcoses were manifestly and patently disproportionate to their aggregate salaries as public
officials. Otherwise stated, petitioner presented enough evidence to convince us that the
Marcoses had dollar deposits amounting to US $356 million representing the balance of the
Swiss accounts of the five foundations, an amount way, way beyond their aggregate legitimate
income of only US$304,372.43 during their incumbency as government officials.
Considering, therefore, that the total amount of the Swiss deposits was considerably out of
proportion to the known lawful income of the Marcoses, the presumption that said dollar deposits
were unlawfully acquired was duly established. It was sufficient for the petition for forfeiture to
state the approximate amount of money and property acquired by the respondents, and their
total government salaries. Section 9 of the PCGG Rules and Regulations states:
Prima Facie Evidence. Any accumulation of assets, properties, and other material
possessions of those persons covered by Executive Orders No. 1 and No. 2, whose
value is out of proportion to their known lawful income is prima facie deemed ill-gotten
wealth.
Indeed, the burden of proof was on the respondents to dispute this presumption and show by
clear and convincing evidence that the Swiss deposits were lawfully acquired and that they had
other legitimate sources of income. A presumption is prima facie proof of the fact presumed and,
unless the fact thus prima facie established by legal presumption is disproved, it must stand as
proved.111

Respondent Mrs. Marcos argues that the foreign foundations should have been impleaded as
they were indispensable parties without whom no complete determination of the issues could be
made. She asserts that the failure of petitioner Republic to implead the foundations rendered the
judgment void as the joinder of indispensable parties was a sine qua non exercise of judicial
power. Furthermore, the non-inclusion of the foreign foundations violated the conditions
prescribed by the Swiss government regarding the deposit of the funds in escrow, deprived them
of their day in court and denied them their rights under the Swiss constitution and international
law.112
The Court finds that petitioner Republic did not err in not impleading the foreign foundations.
Section 7, Rule 3 of the 1997 Rules of Civil Procedure, 113 taken from Rule 19b of the American
Federal Rules of Civil Procedure, provides for the compulsory joinder of indispensable parties.
Generally, an indispensable party must be impleaded for the complete determination of the suit.
However, failure to join an indispensable party does not divest the court of jurisdiction since the
rule regarding indispensable parties is founded on equitable considerations and is not
jurisdictional. Thus, the court is not divested of its power to render a decision even in the
absence of indispensable parties, though such judgment is not binding on the non-joined party.114
An indispensable party115 has been defined as one:
[who] must have a direct interest in the litigation; and if this interest is such that it cannot
be separated from that of the parties to the suit, if the court cannot render justice
between the parties in his absence, if the decree will have an injurious effect upon his
interest, or if the final determination of the controversy in his absence will be inconsistent
with equity and good conscience.
There are two essential tests of an indispensable party: (1) can relief be afforded the plaintiff
without the presence of the other party? and (2) can the case be decided on its merits without
prejudicing the rights of the other party?116 There is, however, no fixed formula for determining
who is an indispensable party; this can only be determined in the context and by the facts of the
particular suit or litigation.
In the present case, there was an admission by respondent Imelda Marcos in her May 26, 1998
Manifestation before the Sandiganbayan that she was the sole beneficiary of 90% of the subject
matter in controversy with the remaining 10% belonging to the estate of Ferdinand
Marcos.117 Viewed against this admission, the foreign foundations were not indispensable parties.
Their non-participation in the proceedings did not prevent the court from deciding the case on its
merits and according full relief to petitioner Republic. The judgment ordering the return of the
$356 million was neither inimical to the foundations' interests nor inconsistent with equity and
good conscience. The admission of respondent Imelda Marcos only confirmed what was already
generally known: that the foundations were established precisely to hide the money stolen by the
Marcos spouses from petitioner Republic. It negated whatever illusion there was, if any, that the
foreign foundations owned even a nominal part of the assets in question.
The rulings of the Swiss court that the foundations, as formal owners, must be given an
opportunity to participate in the proceedings hinged on the assumption that they owned a
nominal share of the assets.118 But this was already refuted by no less than Mrs. Marcos herself.
Thus, she cannot now argue that the ruling of the Sandiganbayan violated the conditions set by
the Swiss court. The directive given by the Swiss court for the foundations to participate in the
proceedings was for the purpose of protecting whatever nominal interest they might have had in
the assets as formal owners. But inasmuch as their ownership was subsequently repudiated by
Imelda Marcos, they could no longer be considered as indispensable parties and their
participation in the proceedings became unnecessary.
In Republic vs. Sandiganbayan,119 this Court ruled that impleading the firms which are the res of
the action was unnecessary:

"And as to corporations organized with ill-gotten wealth, but are not themselves guilty of
misappropriation, fraud or other illicit conduct in other words, the companies
themselves are not the object or thing involved in the action, the res thereof there is no
need to implead them either. Indeed, their impleading is not proper on the strength alone
of their having been formed with ill-gotten funds, absent any other particular wrongdoing
on their part
Such showing of having been formed with, or having received ill-gotten funds, however
strong or convincing, does not, without more, warrant identifying the corporations in
question with the person who formed or made use of them to give the color or
appearance of lawful, innocent acquisition to illegally amassed wealth at the least, not
so as place on the Government the onus of impleading the former with the latter in
actions to recover such wealth. Distinguished in terms of juridical personality and legal
culpability from their erring members or stockholders, said corporations are not
themselves guilty of the sins of the latter, of the embezzlement, asportation, etc., that
gave rise to the Government's cause of action for recovery; their creation or organization
was merely the result of their members' (or stockholders') manipulations and maneuvers
to conceal the illegal origins of the assets or monies invested therein. In this light, they
are simply the res in the actions for the recovery of illegally acquired wealth, and there is,
in principle, no cause of action against them and no ground to implead them as
defendants in said actions."
Just like the corporations in the aforementioned case, the foreign foundations here were set up
to conceal the illegally acquired funds of the Marcos spouses. Thus, they were simply the res in
the action for recovery of ill-gotten wealth and did not have to be impleaded for lack of cause of
action or ground to implead them.
Assuming arguendo, however, that the foundations were indispensable parties, the failure of
petitioner to implead them was a curable error, as held in the previously cited case of Republic
vs. Sandiganbayan:120
"Even in those cases where it might reasonably be argued that the failure of the
Government to implead the sequestered corporations as defendants is indeed a
procedural abberation, as where said firms were allegedly used, and actively cooperated
with the defendants, as instruments or conduits for conversion of public funds and
property or illicit or fraudulent obtention of favored government contracts, etc., slight
reflection would nevertheless lead to the conclusion that the defect is not fatal, but one
correctible under applicable adjective rules e.g., Section 10, Rule 5 of the Rules of
Court [specifying the remedy of amendment during trial to authorize or to conform to the
evidence]; Section 1, Rule 20 [governing amendments before trial], in relation to the rule
respecting omission of so-called necessary or indispensable parties, set out in Section
11, Rule 3 of the Rules of Court. It is relevant in this context to advert to the old familiar
doctrines that the omission to implead such parties "is a mere technical defect which can
be cured at any stage of the proceedings even after judgment"; and that, particularly in
the case of indispensable parties, since their presence and participation is essential to
the very life of the action, for without them no judgment may be rendered, amendments
of the complaint in order to implead them should be freely allowed, even on appeal, in
fact even after rendition of judgment by this Court, where it appears that the complaint
otherwise indicates their identity and character as such indispensable parties." 121
Although there are decided cases wherein the non-joinder of indispensable parties in fact led to
the dismissal of the suit or the annulment of judgment, such cases do not jibe with the matter at
hand. The better view is that non-joinder is not a ground to dismiss the suit or annul the
judgment. The rule on joinder of indispensable parties is founded on equity. And the spirit of the
law is reflected in Section 11, Rule 3122 of the 1997 Rules of Civil Procedure. It prohibits the
dismissal of a suit on the ground of non-joinder or misjoinder of parties and allows the

amendment of the complaint at any stage of the proceedings, through motion or on order of the
court on its own initiative.123
Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section 7, Rule
3124 on indispensable parties was copied, allows the joinder of indispensable parties even after
judgment has been entered if such is needed to afford the moving party full relief. 125 Mere delay in
filing the joinder motion does not necessarily result in the waiver of the right as long as the delay
is excusable.126 Thus, respondent Mrs. Marcos cannot correctly argue that the judgment rendered
by the Sandiganbayan was void due to the non-joinder of the foreign foundations. The court had
jurisdiction to render judgment which, even in the absence of indispensable parties, was binding
on all the parties before it though not on the absent party.127 If she really felt that she could not be
granted full relief due to the absence of the foreign foundations, she should have moved for their
inclusion, which was allowable at any stage of the proceedings. She never did. Instead she
assailed the judgment rendered.
In the face of undeniable circumstances and the avalanche of documentary evidence against
them, respondent Marcoses failed to justify the lawful nature of their acquisition of the said
assets. Hence, the Swiss deposits should be considered ill-gotten wealth and forfeited in favor of
the State in accordance with Section 6 of RA 1379:
SEC. 6. Judgment. If the respondent is unable to show to the satisfaction of the court
that he has lawfully acquired the property in question, then the court shall declare such
property forfeited in favor of the State, and by virtue of such judgment the property
aforesaid shall become property of the State x x x.
THE FAILURE TO PRESENT AUTHENTICATED TRANSLATIONS OF THE SWISS
DECISIONS
Finally, petitioner Republic contends that the Honorable Sandiganbayan Presiding Justice
Francis Garchitorena committed grave abuse of discretion in reversing himself on the ground that
the original copies of the authenticated Swiss decisions and their authenticated translations were
not submitted to the court a quo. Earlier PJ Garchitorena had quoted extensively from the
unofficial translation of one of these Swiss decisions in hisponencia dated July 29, 1999 when he
denied the motion to release US$150 Million to the human rights victims.
While we are in reality perplexed by such an incomprehensible change of heart, there might
nevertheless not be any real need to belabor the issue. The presentation of the authenticated
translations of the original copies of the Swiss decision was not de rigueur for the public
respondent to make findings of fact and reach its conclusions. In short, the Sandiganbayan's
decision was not dependent on the determination of the Swiss courts. For that matter, neither is
this Court's.
The release of the Swiss funds held in escrow in the PNB is dependent solely on the decision of
this jurisdiction that said funds belong to the petitioner Republic. What is important is our own
assessment of the sufficiency of the evidence to rule in favor of either petitioner Republic or
respondent Marcoses. In this instance, despite the absence of the authenticated translations of
the Swiss decisions, the evidence on hand tilts convincingly in favor of petitioner Republic.
WHEREFORE, the petition is hereby GRANTED. The assailed Resolution of the Sandiganbayan
dated January 31, 2002 is SET ASIDE. The Swiss deposits which were transferred to and are
now deposited in escrow at the Philippine National Bank in the estimated aggregate amount of
US$658,175,373.60 as of January 31, 2002, plus interest, are hereby forfeited in favor of
petitioner Republic of the Philippines.
SO ORDERED.

Davide, Jr., C.J., Bellosillo, Panganiban, Ynares-Santiago, Austria-Martinez, Carpio-Morales,

Callejo, Sr., Azcuna, and Tinga, JJ., concur.
Puno, and Vitug, JJ., in the result
Quisumbing, Sandoval-Gutierrez, J., on official leave.
Carpio, J., no part.
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 161909

April 25, 2012

PHILTRANCO SERVICE ENTERPRISES, INC., Petitioner,

vs.
FELIX PARAS AND INLAND TRAILWAYS, INC., AND HON. COURT OF
APPEALS, Respondents.
DECISION
BERSAMIN, J.:
In an action for breach of contract of carriage commenced by a passenger against his common
carrier, the plaintiff can recover damages from a third-party defendant brought into the suit by the
common carrier upon a claim based on tort or quasi-delict. The liability of the third-party
defendant is independent from the liability of the common carrier to the passenger.
Philtranco Service Enterprises, Inc. (Philtranco) appeals the affirmance with modifications by the
Court of Appeals (CA) of the decision of the Regional Trial Court (RTC) awarding moral, actual
and temperate damages, as well as attorneys fees and costs of suit, to respondent Felix Paras
(Paras), and temperate damages to respondent Inland Trailways, Inc. (Inland), respectively the
plaintiff and the defendant/third-party plaintiff in this action for breach of contract of carriage,
upon a finding that the negligence of the petitioner and its driver had caused the serious physical
injuries Paras sustained and the material damage Inlands bus suffered in a vehicular accident.
Antecedents
The antecedent facts, as summarized by the CA, are as follows:
Plaintiff-appellant [respondent] Felix Paras (Paras for brevity), who hails from Cainta, Rizal is
engaged in the buy and sell of fish products. Sometime on 08 February 1987, on his way home
to Manila from Bicol Region, he boarded a bus with Body No. 101 and Plate No. EVE 508,
owned and operated by Inland Trailways, Inc. (Inland for brevity) and driven by its driver Calvin
Coner (Coner for brevity).
At approximately 3:50 oclock in the morning of 09 February 1987, while the said bus was
travelling along Maharlika Highway, Tiaong, Quezon, it was bumped at the rear by another bus
with Plate No. EVB 259, owned and operated by Philtranco Service Enterprises, Inc. (Philtranco
for brevity). As a result of the strong and violent impact, the Inland bus was pushed forward and
smashed into a cargo truck parked along the outer right portion of the highway and the shoulder
thereof. Consequently, the said accident bought considerable damage to the vehicles involved

and caused physical injuries to the passengers and crew of the two buses, including the death of
Coner who was the driver of the Inland Bus at the time of the incident.
Paras was not spared from the pernicious effects of the accident. After an emergency treatment
at the San Pablo Medical Center, San Pablo City, Laguna, Paras was taken to the National
Orthopedic Hospital. At the latter hospital, he was found and diagnosed by Dr. Antonio
Tanchuling, Jr. to be affected with the following injuries: a) contusion/hematoma; b) dislocation of
hip upon fracture of the fibula on the right leg; c) fractured small bone on the right leg; and d)
close fracture on the tibial plateau of the left leg. (Exh. "A", p. 157, record)
On 04 March 1987 and 15 April 1987, Paras underwent two (2) operations affecting the fractured
portions of his body. (Exhs. "A-2" and "A-3", pp. 159 and 160 respectively, record)
Unable to obtain sufficient financial assistance from Inland for the costs of his operations,
hospitalization, doctors fees and other miscellaneous expenses, on 31 July 1989, Paras filed a
complaint for damages based on breach of contract of carriage against Inland.
In its answer, defendant Inland denied responsibility, by alleging, among others, that its driver
Coner had observed an utmost and extraordinary care and diligence to ensure the safety of its
passengers. In support of its disclaimer of responsibility, Inland invoked the Police Investigation
Report which established the fact that the Philtranco bus driver of [sic] Apolinar Miralles was the
one which violently bumped the rear portion of the Inland bus, and therefore, the direct and
proximate cause of Paras injuries.
On 02 March 1990, upon leave of court, Inland filed a third-party complaint against Philtranco
and Apolinar Miralles (Third Party defendants). In this third-party complaint, Inland, sought for
exoneration of its liabilities to Paras, asserting that the latters cause of action should be directed
against Philtranco considering that the accident was caused by Miralles lack of care, negligence
and reckless imprudence. (pp. 50 to 56, records).
After trial, the RTC (Branch 71) in Antipolo, Rizal rendered its judgment on July 18, 1997, 1 viz:
WHEREFORE, third-party defendant Philtranco and Apolinar Miralles are hereby ordered to pay
plaintiff jointly and severally, the following amounts:
1.P54,000.00 as actual damages;
2.P50,000.00 as moral damages;
3.P20,000.00 as attorneys fees and costs.
SO ORDERED.
All the parties appealed to the CA on different grounds.
On his part, Paras ascribed the following errors to the RTC, to wit:
I. THE TRIAL COURT ERRED IN HOLDING THAT ONLY THIRD-PARTY DEFENDANTAPPELLANT PHILTRANCO IS LIABLE FOR THE DAMAGES SUFFERED BY
APPELLANT PARAS.

II. THE TRIAL COURT ERRED IN NOT HOLDING APPELLANT INLAND TRAILWAYS
INC. TO BE JOINTLY AND SEVERALLY LIABLE FOR THE DAMAGES SUFFERED BY
PARAS.
III. THE TRIAL COURT ERRED IN NOT AWARDING UNEARNED INCOME AS
ADDITIONAL ACTUAL DAMAGES SUFFERED BY APPELLANT PARAS AS HIS
PHYSICAL DISABILITY IS PERMANENT IN NATURE.
IV. THE TRIAL COURT ERRED IN NOT AWARDING EXEMPLARY DAMAGES IN
FAVOR OF APPELLANT PARAS.
On the other hand, Inland assigned the following errors to the RTC, namely:
THE TRIAL COURT ERRED WHEN IT FAILED TO AWARD DAMAGES UNTO THE THIRD
PARTY PLAINTIFF NOTWITHSTANDING CLEAR FINDING THAT:
It is clear from the evidence that the plaintiff sustained injuries because of the reckless,
negligence, and lack of precaution of third party defendant Apolinar Miralles, an employee of
Philtranco.
AND, COMPLETELY DISREGARDED THE UNCONTROVERTED ORAL AND DOCUMENTARY
EVIDENCES ESTABLISHING THE EXTENT AND DEGREE OF DAMAGES SUSTAINED BY
THE THIRD PARTY PLAINTIFF.
Lastly, Philtranco stated that the RTC erred thuswise:
I
THE COURT A QUO MISERABLY ERRED IN AWARDING ACTUAL DAMAGES
GREATER THAN WHAT WAS ALLEGED IN THE COMPLAINT ITSELF, AND EVEN
MUCH MORE GREATER THAN WHAT WERE PROVED DURING THE TRIAL, HENCE,
PERPETUATING UNJUST ENRICHMENT.
II
THE COURT A QUO SERIOUSLY ERRED IN AWARDING MORAL DAMAGES TO A
CAUSE OF ACTION OF CULPA-CONTRACTUAL EVEN WITHOUT ANY EVIDENCE OF
GROSS BAD FAITH; HENCE, CONTRARY TO THE ESTABLISHED DOCTRINE IN THE
CASES OF PHIL. RABBIT BUS LINES VS. ESGUERRA; SOBERANO VS. BENGUET
AUTO LINE AND FLORES VS. MIRANDA.
III
THE COURT A QUO MISERABLY ERRED IN HOLDING THAT MIRALLES WAS THE
ONE AT FAULT MERELY ON THE STRENGHT OF THE TESTIMONY OF THE POLICE
INVESTIGATOR WHICH IS IN TURN BASED ON THE STATEMENTS OF ALLEGED
WITNESSES WHO WERE NEVER PRESENTED ON THE WITNESS STAND.
IV
THE COURT A QUO COMMITTED A GRIEVOUS ERROR IN DISREGARDING THE
TESTIMONY OF APPELLANTS WITNESSES WHO TESTIFIED AS TO THE DEFENSE

OF EXERCISE OF DUE DILIGENCE IN THE SELECTION AND SUPERVISION OF

EMPLOYEES PURSUANT TO ART. 2180, LAST PARAGRAPH, NEW CIVIL CODE.
On September 25, 2002, the CA promulgated its decision, 2 disposing:
WHEREFORE, in consideration of the foregoing premises, the assailed decision dated 18 July
19(9)7 is perforce affirmed with the following modifications:
1. Third party defendants-appellants Philtranco and Apolinar Miralles are ordered to pay
plaintiff-appellant Felix Paras jointly and severally the following amounts:
a) P1,397.95 as actual damages;
b) P50,000.00 as temperate damages;
c) P50,000.00 as moral damages; and
d) P20,000.00 as attorneys fees and costs of suit.
2. On the third party plaintiff-appellant Inlands claims, the third party defendantappellants Philtranco and Apolinar Miralles are hereby ordered to pay the former (Inland)
jointly and severally the amount ofP250,000.00 as and by way of temperate damages.
SO ORDERED.
The CA agreed with the RTCs finding that no trace of negligence at the time of the accident was
attributable to Inlands driver, rendering Inland not guilty of breach of contract of carriage; that
faulty brakes had caused Philtrancos bus to forcefully bump Inlands bus from behind, making it
hit the rear portion of a parked cargo truck; that the impact had resulted in considerable material
damage to the three vehicles; and that Paras and others had sustained various physical injuries.
Accordingly, the CA: (a) sustained the award of moral damages of P50,000.00 in favor of Paras
pursuant to Article 2219 of the Civil Code based on quasi-delict committed by Philtranco and its
driver; (b) reduced the actual damages to be paid by Philtranco to Paras from P54,000.00
to P1,397.95 because only the latter amount had been duly supported by receipts; (c) granted
temperate damages of P50,000.00 (in lieu of actual damages in view of the absence of
competent proof of actual damages for his hospitalization and therapy) to be paid by Philtranco
to Paras; and (d) awarded temperate damages of P250,000.00 under the same premise to be
paid by Philtranco to Inland for the material damage caused to Inlands bus.
Philtranco moved for reconsideration,3 but the CA denied its motion for reconsideration on
January 21, 2004.4
Issues
Hence, this appeal, in which the petitioner submits that the CA committed grave abuse of
discretion amounting to lack of jurisdiction in awarding moral damages to Paras despite the fact
that the complaint had been anchored on breach of contract of carriage; and that the CA
committed a reversible error in substituting its own judgment by motu proprio awarding
temperate damages of P250,000.00 to Inland and P50,000.00 to Paras despite the clear fact that
temperate damages were not raised on appeal by Paras and Inland.

Ruling
The appeal lacks merit.
The Court does not disturb the unanimous findings by the CA and the RTC on the negligence of
Philtranco and its driver being the direct cause of the physical injuries of Paras and the material
damage of Inland.
Nonetheless, we feel bound to pass upon the disparate results the CA and the RTC reached on
the liabilities of Philtranco and its driver.
1.
Paras can recover moral damages
in this suit based on quasi-delict
Philtranco contends that Paras could not recover moral damages because his suit was based on
breach of contract of carriage, pursuant to which moral damages could be recovered only if he
had died, or if the common carrier had been guilty of fraud or bad faith. It argues that Paras had
suffered only physical injuries; that he had not adduced evidence of fraud or bad faith on the part
of the common carrier; and that, consequently, Paras could not recover moral damages directly
from it (Philtranco), considering that it was only being subrogated for Inland.
The Court cannot uphold the petitioners contention.
As a general rule, indeed, moral damages are not recoverable in an action predicated on a
breach of contract. This is because such action is not included in Article 2219 of the Civil
Code5 as one of the actions in which moral damages may be recovered. By way of exception,
moral damages are recoverable in an action predicated on a breach of contract: (a) where the
mishap results in the death of a passenger, as provided in Article 1764,6 in relation to Article
2206, (3),7 of the Civil Code; and (b) where the common carrier has been guilty of fraud or bad
faith,8 as provided in Article 22209 of the Civil Code.
Although this action does not fall under either of the exceptions, the award of moral damages to
Paras was nonetheless proper and valid. There is no question that Inland filed its third-party
complaint against Philtranco and its driver in order to establish in this action that they, instead of
Inland, should be directly liable to Paras for the physical injuries he had sustained because of
their negligence. To be precise, Philtranco and its driver were brought into the action on the
theory of liability that the proximate cause of the collision between Inlands bus and Philtrancos
bus had been "the negligent, reckless and imprudent manner defendant Apolinar Miralles drove
and operated his driven unit, the Philtranco Bus with Plate No. 259, owned and operated by
third-party defendant Philtranco Service Enterprises, Inc."10 The apparent objective of Inland was
not to merely subrogate the third-party defendants for itself, as Philtranco appears to
suggest,11 but, rather, to obtain a different relief whereby the third-party defendants would be held
directly, fully and solely liable to Paras and Inland for whatever damages each had suffered from
the negligence committed by Philtranco and its driver. In other words, Philtranco and its driver
were charged here as joint tortfeasors who would be jointly and severally be liable to Paras and
Inland.
Impleading Philtranco and its driver through the third-party complaint filed on March 2, 1990 was
correct. The device of the third-party action, also known as impleader, was in accord with Section
12, Rule 6 of the Revised Rules of Court, the rule then applicable, viz:

Section 12. Third-party complaint. A third-party complaint is a claim that a defending party may,
with leave of court, file against a person not a party to the action, called the third-party defendant,
for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim. 12
Explaining the application of Section 12, Rule 6, supra, the Court said in Balbastro v. Court of
Appeals,13 to wit:
Section 12 of Rule 6 of the Revised Rules of Court authorizes a defendant to bring into a lawsuit
any person "not a party to the action . . . for contribution, indemnity, subrogation or any other
relief in respect of his opponent's claim." From its explicit language it does not compel the
defendant to bring the third-parties into the litigation, rather it simply permits the inclusion of
anyone who meets the standard set forth in the rule. The secondary or derivative liability of the
third-party is central whether the basis is indemnity, subrogation, contribution, express or
implied warranty or some other theory. The impleader of new parties under this rule is proper
only when a right to relief exists under the applicable substantive law. This rule is merely a
procedural mechanism, and cannot be utilized unless there is some substantive basis under
applicable law.
Apart from the requirement that the third-party complainant should assert a derivative or
secondary claim for relief from the third-party defendant there are other limitations on said partys
ability to implead. The rule requires that the third-party defendant is "not a party to the action" for
otherwise the proper procedure for asserting a claim against one who is already a party to the
suit is by means of counterclaim or cross-claim under sections 6 and 7 of Rule 6. In addition to
the aforecited requirement, the claim against the third-party defendant must be based upon
plaintiff's claim against the original defendant (third-party claimant). The crucial characteristic of a
claim under section 12 of Rule 6, is that the original "defendant is attempting to transfer to the
third-party defendant the liability asserted against him by the original plaintiff."
Accordingly, the requisites for a third-party action are, firstly, that the party to be impleaded must
not yet be a party to the action; secondly, that the claim against the third-party defendant must
belong to the original defendant; thirdly, the claim of the original defendant against the third-party
defendant must be based upon the plaintiffs claim against the original defendant; and, fourthly,
the defendant is attempting to transfer to the third-party defendant the liability asserted against
him by the original plaintiff.14
As the foregoing indicates, the claim that the third-party complaint asserts against the third-party
defendant must be predicated on substantive law. Here, the substantive law on which the right of
Inland to seek such other relief through its third-party complaint rested were Article 2176 and
Article 2180 of the Civil Code, which read:
Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this chapter. (1902a)
Article 2180. The obligation imposed by article 2176 is demandable not only for ones own acts
or omissions, but also for those of persons for whom one is responsible.
xxx

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.
xxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage. (1903a)
Paras cause of action against Inland (breach of contract of carriage) did not need to be the same
as the cause of action of Inland against Philtranco and its driver (tort or quasi-delict) in the
impleader. It is settled that a defendant in a contract action may join as third-party defendants
those who may be liable to him in tort for the plaintiffs claim against him, or even directly to the
plaintiff.15 Indeed, Prof. Wright, et al., commenting on the provision of the Federal Rules of
Procedure of the United States from which Section 12, supra, was derived, observed so, to wit: 16
The third-party claim need not be based on the same theory as the main claim. For example,
there are cases in which the third-party claim is based on an express indemnity contract and the
original complaint is framed in terms of negligence. Similarly, there need not be any legal
relationship between the third-party defendant and any of the other parties to the action.
Impleader also is proper even though the third partys liability is contingent, and technically does
not come into existence until the original defendants liability has been established. In addition,
the words is or may be liable in Rule 14(a) make it clear that impleader is proper even though
the third-party defendants liability is not automatically established once the third-party plaintiffs
liability to the original plaintiff has been determined.
Nor was it a pre-requisite for attachment of the liability to Philtranco and its driver that Inland be
first declared and found liable to Paras for the breach of its contract of carriage with him. 17 As the
Court has cogently discoursed in Samala v. Judge Victor: 18
Appellants argue that since plaintiffs filed a complaint for damages against the defendants on a
breach of contract of carriage, they cannot recover from the third-party defendants on a cause of
action based on quasi-delict. The third party defendants, they allege, are never parties liable with
respect to plaintiff s claim although they are with respect to the defendants for indemnification,
subrogation, contribution or other reliefs. Consequently, they are not directly liable to the
plaintiffs. Their liability commences only when the defendants are adjudged liable and not when
they are absolved from liability as in the case at bar.
Quite apparent from these arguments is the misconception entertained by appellants with
respect to the nature and office of a third party complaint.
Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint as a "claim that
a defending party may, with leave of court, file against a person not a party to the action, called
the third-party defendant, for contribution, indemnification, subrogation, or any other relief, in
respect of his opponents claim." In the case ofViluan vs. Court of Appeals, et al., 16 SCRA 742
[1966], this Court had occasion to elucidate on the subjects covered by this Rule, thus:
... As explained in the Atlantic Coast Line R. Co. vs. U.S. Fidelity & Guaranty Co., 52 F. Supp.
177 (1943:)

From the sources of Rule 14 and the decisions herein cited, it is clear that this rule, like the
admiralty rule, covers two distinct subjects, the addition of parties defendant to the main cause
of action, and the bringing in of a third party for a defendants remedy over. xxx
If the third party complaint alleges facts showing a third partys direct liability to plaintiff on the
claim set out in plaintiffs petition, then third party shall make his defenses as provided in Rule
12 and his counterclaims against plaintiff as provided in Rule 13. In the case of alleged direct
liability, no amendment (to the complaint) is necessary or required. The subject-matter of the
claim is contained in plaintiff's complaint, the ground of third partys liability on that claim is
alleged in third party complaint, and third partys defense to set up in his answer to plaintiff's
complaint. At that point and without amendment, the plaintiff and third party are at issue as to
their rights respecting the claim.
The provision in the rule that, The third-party defendant may assert any defense which the thirdparty plaintiff may assert to the plaintiffs claim, applies to the other subject, namely, the alleged
liability of third party defendant. The next sentence in the rule, The third-party defendant is
bound by the adjudication of the third party plaintiffs liability to the plaintiff, as well as of his own
to the plaintiff or to the third-party plaintiff applies to both subjects. If third party is brought in as
liable only to defendant and judgment is rendered adjudicating plaintiff's right to recover against
defendant and defendants rights to recover against third party, he is bound by both
adjudications.That part of the sentence refers to the second subject. If third party is brought in as
liable to plaintiff, then third party is bound by the adjudication as between him and plaintiff. That
refers to the first subject. If third party is brought in as liable to plaintiff and also over to
defendant, then third party is bound by both adjudications. xxx
Under this Rule, a person not a party to an action may be impleaded by the defendant either (a)
on an allegation of liability to the latter; (b) on the ground of direct liability to the plaintiff-; or, (c)
both (a) and (b). The situation in (a) is covered by the phrase "for contribution, indemnity or
subrogation;" while (b) and (c) are subsumed under the catch all "or any other relief, in respect of
his opponents claim."
The case at bar is one in which the third party defendants are brought into the action as directly
liable to the plaintiffs upon the allegation that "the primary and immediate cause as shown by the
police investigation of said vehicular collision between (sic) the above-mentioned three vehicles
was the recklessness and negligence and lack of imprudence (sic) of the third-party defendant
Virgilio (should be Leonardo) Esguerra y Ledesma then driver of the passenger bus." The effects
are that "plaintiff and third party are at issue as to their rights respecting the claim" and "the third
party is bound by the adjudication as between him and plaintiff." It is not indispensable in the
premises that the defendant be first adjudged liable to plaintiff before the third-party defendant
may be held liable to the plaintiff, as precisely, the theory of defendant is that it is the third party
defendant, and not he, who isdirectly liable to plaintiff. The situation contemplated by appellants
would properly pertain to situation (a) above wherein the third party defendant is being sued for
contribution, indemnity or subrogation, or simply stated, for a defendant's "remedy over". 19
It is worth adding that allowing the recovery of damages by Paras based on quasi-delict, despite
his complaint being upon contractual breach, served the judicial policy of avoiding multiplicity of
suits and circuity of actions by disposing of the entire subject matter in a single litigation. 20
2.
Award of temperate damages was in order

Philtranco assails the award of temperate damages by the CA considering that, firstly, Paras and
Inland had not raised the matter in the trial court and in their respective appeals; secondly, the
CA could not substitute the temperate damages granted to Paras if Paras could not properly
establish his actual damages despite evidence of his actual expenses being easily available to
him; and, thirdly, the CA gravely abused its discretion in granting motu proprio the temperate
damages of P250,000.00 to Inland although Inland had not claimed temperate damages in its
pleading or during trial and even on appeal.
The Court cannot side with Philtranco.
Actual damages, to be recoverable, must not only be capable of proof, but must actually be
proved with a reasonable degree of certainty. The reason is that the court "cannot simply rely on
speculation, conjecture or guesswork in determining the fact and amount of damages," but "there
must be competent proof of the actual amount of loss, credence can be given only to claims
which are duly supported by receipts."21
The receipts formally submitted and offered by Paras were limited to the costs of medicines
purchased on various times in the period from February 1987 to July 1989 (Exhibits E to E-35,
inclusive) totaling only P1,397.95.22 The receipts by no means included hospital and medical
expenses, or the costs of at least two surgeries as well as rehabilitative therapy. Consequently,
the CA fixed actual damages only at that small sum of P1,397.95. On its part, Inland offered no
definite proof on the repairs done on its vehicle, or the extent of the material damage except the
testimony of its witness, Emerlinda Maravilla, to the effect that the bus had been damaged
beyond economic repair.23 The CA rejected Inlands showing of unrealized income
worth P3,945,858.50 for 30 months (based on alleged average weekly income of P239,143.02
multiplied by its guaranteed revenue amounting to 55% thereof, then spread over a period of 30
months, the equivalent to the remaining 40% of the vehicles un-depreciated or net book value),
finding such showing arbitrary, uncertain and speculative. 24 As a result, the CA allowed no
compensation to Inland for unrealized income.
Nonetheless, the CA was convinced that Paras should not suffer from the lack of definite proof of
his actual expenses for the surgeries and rehabilitative therapy; and that Inland should not be
deprived of recourse to recover its loss of the economic value of its damaged vehicle. As the
records indicated, Paras was first rushed for emergency treatment to the San Pablo Medical
Center in San Pablo City, Laguna, and was later brought to the National Orthopedic Hospital in
Quezon City where he was diagnosed to have suffered a dislocated hip, fracture of the fibula on
the right leg, fracture of the small bone of the right leg, and closed fracture on the tibial plateau of
the left leg. He underwent surgeries on March 4, 1987 and April 15, 1987 to repair the
fractures.25 Thus, the CA awarded to him temperate damages of P50,000.00 in the absence of
definite proof of his actual expenses towards that end. As to Inland, Maravillas testimony of the
bus having been damaged beyond economic repair showed a definitely substantial pecuniary
loss, for which the CA fixed temperate damages of P250,000.00. We cannot disturb the CAs
determination, for we are in no position today to judge its reasonableness on account of the
lapse of a long time from when the accident occurred.26
In awarding temperate damages in lieu of actual damages, the CA did not err, because Paras
and Inland were definitely shown to have sustained substantial pecuniary losses. It would really
be a travesty of justice were the CA now to be held bereft of the discretion to calculate moderate
or temperate damages, and thereby leave Paras and Inland without redress from the wrongful
act of Philtranco and its driver.27 We are satisfied that the CA exerted effort and practiced great
care to ensure that the causal link between the physical injuries of Paras and the material loss of
Inland, on the one hand, and the negligence of Philtranco and its driver, on the other hand,
existed in fact. It also rejected arbitrary or speculative proof of loss. Clearly, the costs of Paras

surgeries and consequential rehabilitation, as well as the fact that repairing Inlands vehicle
would no longer be economical justly warranted the CA to calculate temperate damages
of P50,000.00 and P250,000.00 respectively for Paras and Inland.
There is no question that Article 2224 of the Civil Code expressly authorizes the courts to award
temperate damages despite the lack of certain proof of actual damages, to wit:
Article 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has
been suffered but its amount cannot, from the nature of the case, be proved with certainty.
The rationale for Article 2224 has been stated in Premiere Development Bank v. Court of
Appeals28 in the following manner:
Even if not recoverable as compensatory damages, Panacor may still be awarded damages in
the concept of temperate or moderate damages. When the court finds that some pecuniary loss
has been suffered but the amount cannot, from the nature of the case, be proved with certainty,
temperate damages may be recovered. Temperate damages may be allowed in cases where
from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the
court is convinced that the aggrieved party suffered some pecuniary loss.
The Code Commission, in explaining the concept of temperate damages under Article 2224,
makes the following comment:
In some States of the American Union, temperate damages are allowed. There are cases where
from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court
is convinced that there has been such loss. For instance, injury to ones commercial credit or to
the goodwill of a business firm is often hard to show with certainty in terms of money. Should
damages be denied for that reason? The judge should be empowered to calculate moderate
damages in such cases, rather than that the plaintiff should suffer, without redress from the
defendants wrongful act.
3.
Paras loss of earning capacity
must be compensated
In the body of its decision, the CA concluded that considering that Paras had a minimum monthly
income ofP8,000.00 as a trader he was entitled to recover compensation for unearned income
during the 3-month period of his hospital confinement and the 6-month period of his recovery and
rehabilitation; and aggregated his unearned income for those periods to P72,000.00.29 Yet, the
CA omitted the unearned income from the dispositive portion.
The omission should be rectified, for there was credible proof of Paras loss of income during his
disability. According to Article 2205, (1), of the Civil Code, damages may be recovered for loss or
impairment of earning capacity in cases of temporary or permanent personal injury. Indeed,
indemnification for damages comprehends not only the loss suffered (actual damages
or damnum emergens) but also the claimants lost profits (compensatory damages or lucrum
cessans).30 Even so, the formula that has gained acceptance over time has limited recovery to
net earning capacity; hence, the entire amount of P72,000.00 is not allowable. The premise is
obviously that net earning capacity is the persons capacity to acquire money, less the necessary
expense for his own living.31 To simplify the determination, therefore, the net earning capacity of

Paras during the 9-month period of his confinement, surgeries and consequential therapy is
pegged at only half of his unearned monthly gross income of P8,000.00 as a trader, or a total
of P36,000.00 for the 9-month period, the other half being treated as the necessary expense for
his own living in that period.
It is relevant to clarify that awarding the temperate damages (for the substantial pecuniary losses
corresponding to Parass surgeries and rehabilitation and for the irreparability of Inlands
damaged bus) and the actual damages to compensate lost earnings and costs of medicines give
rise to no incompatibility. These damages cover distinct pecuniary losses suffered by Paras and
Inland,32 and do not infringe the statutory prohibition against recovering damages twice for the
same act or omission.33
4.
Increase in award of attorneys fees
Although it is a sound policy not to set a premium on the right to litigate, 34 we consider the grant
to Paras and Inland of reasonable attorneys fees warranted. Their entitlement to attorneys fees
was by virtue of their having been compelled to litigate or to incur expenses to protect their
interests,35 as well as by virtue of the Court now further deeming attorneys fees to be just and
equitable.36
In view of the lapse of a long time in the prosecution of the claim, 37 the Court considers it
reasonable and proper to grant attorneys fees to each of Paras and Inland equivalent to 10% of
the total amounts hereby awarded to them, in lieu of only P20,000.00 for that purpose granted to
Paras.
5.
Legal interest on the amounts awarded
Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,38 legal interest at the rate of 6% per
annum accrues on the amounts adjudged reckoned from July 18, 1997, the date when the RTC
rendered its judgment; and legal interest at the rate of 12% per annum shall be imposed from the
finality of the judgment until its full satisfaction, the interim period being regarded as the
equivalent of a forbearance of credit.
WHEREFORE, the Court AFFIRMS WITH MODIFICATION the decision of the Court of Appeals
promulgated on September 25, 2002, by ordering PHILTRANCO SERVICE ENTERPRISES,
INC. and APOLINAR MIRALLES to pay, jointly and severally, as follows:
1. To Felix Paras:
(a) P1,397.95, as reimbursement for the costs of medicines purchased between
February 1987 and July 1989;
(b) P50,000.00 as temperate damages;
(c) P50,000.00 as moral damages;
(d) P36,000.00 for lost earnings;

(e) 10% of the total of items (a) to (d) hereof as attorneys fees; and
(f) Interest of 6% per annum from July 18, 1997 on the total of items (a) to (d)
hereof until finality of this decision, and 12% per annum thereafter until full
payment.
2. To Inland Trailways, Inc.:
(a) P250,000.00 as temperate damages;
(b) 10% of item (a) hereof; and
(c) Interest of 6% per annum on item (a) hereof from July 18, 1997 until finality of
this decision, and 12% per annum thereafter until full payment.
3. The petitioner shall pay the costs of suit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 192650

October 24, 2012

FELIX MARTOS, JIMMY ECLANA, RODEL PILONES, RONALDO NOVAL, JONATHAN

PAILAGO, ERNESTO MONTANO, DOYONG JOSE, DEO MAMALATEO, ROSELO MAGNO,
BONNIE SANTILLAN, ARSENIO GONZALES, ALEX EDRADAN, MICHAEL ERASCA,
MARLON MONTANO, VICENTE OLIVEROS, REYNALDO LAMBOSON, DOMINGO ROTA,
EDDIE ROTA, ZALDY OLIVEROS, ANTONIO NATIL, HERMIE BUISON, ROGER BUISON,
MARIANO LAZATE, JUAN VILLABER, LIMUEL LLANETA, LITO BANTILO, TERSO GARAY,
ROWEL BESTOLO, JERRY YORTAS, PASTOR PANTIG, GAVINO NICOLAS, RAFAEL VILLA,
FELIX YORTAS, MELVIN GARAY, NEIL DOMINGUEZ REYNALDO EVANGELISTA, JR., JOSE
RAMOS, ELVIN ROSALES, JUN GRANEHO, DANNY ASPARES, SALVEDOR TONLOC,
ROLANDO EVANGELISTA, RICKY M. FRANCISCO, EDUARDO ALEGRIA, SALVADOR
SANTOS, GREG BISONIA, RUFO CARBILLO, MARVIN MONTERO, DANILO BESSIRE,
ALLAN CABALLERO, ORLANDO LIMOS, EDGARDO BICLAR, MANDY MAMALATEO,
ALFRED GAJO, ERIC CASTRENCE, ANTHONY MOLINA, JAIME SALIM, ROY SILVA,
DANILO BEGORIE, PEPING CALISANA, ERIC RONDA, RUFO CARBANILLO, ROWEL
BATA, RICARDO TOLENTINO, ARNEL ARDINEZ, FERDINAND R. ARANDIA, ROMEO R.
GARBO, ANTONIO ROTA, REYNIELANDRE QUINTANILLA, JOSELITO HILARIO, JIMMY
CAMPANA, DANILO LIDO-AN, EMERSON PENAFLOR, CESAR PABALINAS, JONATHAN
MELCHOR, ALEX DAVID, EUTIQUIO ALCALA, MICHAEL CARANDANG, EDUARDO
MANUEL, RAMON EVANGELISTA, RUBEN MENDOZA, ERNESTO MENDOZA, RICKY
RAMOS, ROBERTO NOVELLA, RUBEN CONDE, DANILO POLISTICO, DOMINGO
MENDOZA, FERNANDO SAN GABRIEL, AND DOMINGO ROTO, Petitioners,
vs.
NEW SAN JOSE BUILDERS, INC., Respondent.
DECISION
MENDOZA, J.:

Questioned in this Petition for Review is the July 31, 2009 Decision 1 of the Court of Appeals (CA)
and its June 17, 2010 Resolution,2 which reversed and set aside the July 30, 2008 Decision 3 and
October 28, 2008, Resolution4of the National Labor Relations Commission (NLRC); and
reinstated the May 23, 2003 Decision5 of the Labor Arbiter (LA). The dispositive portion of the CA
Decision reads:
WHEREFORE, decision is hereby rendered, as follows:
1. Declaring the complainant Felix Martos was illegally dismissed and ordering respondent New
San Jose Builders, Inc. to pay him his separation pay, backwages, salary differentials, 13th
month pay, service incentive leave pay, and attorneys fees in the total amount of TWO
HUNDRED SIXTY THOUSAND SIX HUNDRED SIXTY ONE PESOS and 50/1000 (P260,
661.50).
The awards for separation pay, backwages and the corresponding attorneys fees are subject to
further computation until the decision in this case becomes final and executory; and
2. Dismissing the complaints/claim of the other complainants without prejudice.
SO ORDERED.6
The Facts
The factual and procedural antecedents were succinctly summarized by the CA as follows:
New San Jose Builders, Inc. (hereafter petitioner) is a domestic corporation duly organized and
existing under the laws of the Philippines and is engaged in the construction of road, bridges,
buildings, and low cost houses primarily for the government. One of the projects of petitioner is
the San Jose Plains Project (hereafter SJPP), located in Montalban, Rizal. SJPP, which is also
known as the "Erap City" calls for the construction of low cost housing, which are being turned
over to the National Housing Authority to be awarded to deserving poor families.
Private respondents alleged that, on various dates, petitioner hired them on different positions,
hereunder specified:
1wphi1

Names
1. Felix Martos

Date Employed

Date Dismissed

October 5, 1998

February 25, 2002

2. Jimmy Eclana

1999

July 2001

3. Rodel Pilones

February 1999

July 2001

6. Ernesto Montao

1998

2000

7. Doyong Jose

1996

July 2001

8. Deo Mamalateo

1999

July 2001

9. Roselo Magno

1994

November 2000

10. Bonnie Santillan

1998

July 2001

11. Arsenio Gonzales

1998

July 2001

4. Ronaldo Noval
5. Jonathan Pailago

12. Alex Edradan

1998

November 2001

13. Michael Erasca

1999

July 2001

14. Marlon Montao

1998

July 2001

15. Vicente Oliveros

April 5, 1998

July 2001

16. Reynaldo Lamboson

1999

July 2001

17. Domingo Rota

1998

18. Eddie Rota

1998

19. Zaldy Oliveros

1999

July 2001

20. Antonio Natel

1998

July 2001

21. Hermie Buison

1998

July 2001

22. Roger Buison

1998

2000

23. Mariano Lazate

24. Juan Villaber
25. Limuel Llaneta
26. Lito Bantilo
27. Terso Garay
28. Rowel Bestolo
29. Jerry Yortas
30. Pastor Pantig

February 19, 1995

January 10, 1997
March 5, 1994
May 1987
October 3, 1986
February 6, 1999
May 1994
April 11,1998

31. Gavino Nicolas

June 20, 1997

32. Rafael Villa

March 9, 1998

33. Felix Yortas

1992

34. Melvin Garay

35. Neil Dominguez

February 2, 1994
February 16, 1998

36. Reynaldo Evangelista, Jr.

October 10, 1998

37. Jose Ramos

October 10, 1998

38. Elvis Rosales

June 14, 1998

39. Jun Graneho

January 15, 1998

40. Danny Espares

April 1999

41. Salvador Tonloc

January 8, 1998

42. Rolando Evangelista

March 15, 1998

43. Ricky M. Francisco

September 28, 1991

44. Eduardo Alegria

May 2001

45. Salvador Santos

September 22, 2000

46. Greg Bisonia

March 28, 1993

47. Rufo Carbillo

March 28, 1993

48. Marvin Montero

1997

January 2001

49. Danilo Bessiri

1997

2002

50. Allan Caballero

1997

2002

51. Orlando Limos

1997

July 2001

52. Edgardo Biclar

1997

July 2001

53. Mandy Mamalatco

1989

2002

54. Alfred Gajo

1998

July 2001

55. Eric Castrence

1988

2002

56. Anthony Molina

1997

2002

58. Roy Silva

1997

2002

59. Danilo V. Begorie

1994

January 2001

60. Peping Celisana

1999

July 2001

61. Eric Ronda

1998

July 2001

62. Rufo Carbanillo

1998

July 2001

63. Rowel Batta

1999

July 2001

64. Ricardo Tolentino

1997

July 2001

65. Arnel Ardinez

1998

July 2001

66. Ferdinand P. Arandia

1998

1999

67. Romeo R. Garbo

1998

2000

68. Antonio Rota

1998

July 2001

February 28, 1998

2002

1998

2002

August 15, 1998

August 2001

57. Jaime Salin

69. Reynielande Quintanilla

70. Joselito Hilario
71. Jimmy Campana
72. Danilo Lido-An
73. Emerson Peaflor

September 8, 1998
August 8,1998

74. Cesar Pabalinas

75. Jonathan Melchor
76. Alex David
77. Eutiquio Alcala
78. Michael Carandang
79. Eduardo Nanuel
80. Ramon Evangelista
81. Ruben Mendoza

November 1998
1998
December 1999
June 2000
October 1999
February 15, 1998
1999

July 2001

82. Ernesto A. Mendoza

1998

July 2001

83. Ricky Ramos

1999

July 2001

84. Roberto Novella

1998

July 2001

85. Ruben Conde

1998

July 2001

86. Ramon Evangelista

1997

July 2001

87. Danilo Polistico

1999

July 2001

88. Domingo Mendoza

1999

July 2001

89. Fernando San Gabriel

1999

July 2001

90. Domingo Roto

1994

July 2001

Sometime in 2000, petitioner was constrained to slow down and suspend most of the works on
the SJPP project due to lack of funds of the National Housing Authority. Thus, the workers were
informed that many of them [would] be laid off and the rest would be reassigned to other projects.
Juan Villaber, Terso Garay, Rowell Batta, Pastor Pantig, Rafael Villa, and Melvin Garay were laid
off. While on the other hand, Felix Martos, Ariel Dominguez, Greg Bisonia, Allan Caballera,
Orlando Limos, Mandy Mamalateo, Eric Castrence, Anthony Molina, and Roy Silva were among
those who were retained and were issued new appointment papers to their respective
assignments, indicating therein that they are project employees. However, they refused to sign
the appointment papers as project employees and subsequently refused to continue to work.
On different dates, three (3) Complaints for Illegal Dismissal and for money claims were filed
before the NLRC against petitioner and Jose Acuzar, by private respondents who claimed to be
the former employees of petitioner, to wit:
1. Complaint dated March 11, 2002, entitled "Felix Martos, et al. vs. NSJBI", docketed as
NLRC-NCR Case No. 03-01639-2002;
2. Complaint dated July 9, 2002, entitled "Jimmy Campana, et al. vs. NSJBI," docketed
as NLRC-NCR Case No. 07-04969-2002;
3. Complaint dated July 4, 2002, entitled "Greg Bisonia, et al. vs. NSJBI", docketed as
NLRC-NCR Case No. 07-02888-2002.
Petitioner denies that private respondents were illegally dismissed, and alleged that they were
project employees, whose employments were automatically terminated upon completion of the
project for which they were hired. On the other hand, private respondents claim that petitioner
hired them as regular employees, continuously and without interruption, until their dismissal on
February 28, 2002.
Subsequently, the three Complaints were consolidated and assigned to Labor Arbiter Facundo
Leda.7
Ruling of the Labor Arbiter
As earlier stated, on May 23, 2003, the LA handed down a decision declaring, among others, that
petitioner Felix Martos (Martos) was illegally dismissed and entitled to separation pay,
backwages and other monetary benefits; and dismissing, without prejudice, the
complaints/claims of the other complainants (petitioners).
Ruling of The NLRC

Both parties appealed the LA decision to the NLRC. Petitioners appealed that part which
dismissed all the complaints, without prejudice, except that of Martos. On the other hand, New
San Jose Builders, Inc. (respondent) appealed that part which held that Martos was its regular
employee and that he was illegally dismissed.
On July 30, 2008, the NLRC resolved the appeal by dismissing the one filed by respondent and
partially granting that of the other petitioners. The dispositive portion of the NLRC decision reads
as follows:
WHEREFORE, premises considered, respondents appeal is DISMISSED for lack of merit. The
appeal of the complainants is, however, PARTIALLY GRANTED by modifying the 23 May 2003
Decision of the Labor Arbiter Facundo L. Leda, in that, respondents are ordered to reinstate all
the complainants to their former positions, without loss of seniority rights and with full
backwages, counted from the time their compensation was withheld from them until actual
reinstatement.
Respondents are likewise ordered to pay complainants their salary differentials, service incentive
leave pay, and 13th month pay, using, as basis, the computation made on the claims of
complainant Felix Martos.
In all other aspects, the Decision is AFFIRMED.
SO ORDERED.8
Ruling Of The CA
After the denial of its motion for reconsideration, respondent filed before the CA a petition for
certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, raising the following
issues:
I) The public respondent has committed grave abuse of discretion in holding that the
private respondents were regular employees and, thus, have been illegally dismissed.
II) The public respondent has committed grave abuse of discretion in reviving the
complaints of the other private respondents despite their failure to verify the same.
III) The public respondent has committed grave abuse of discretion when it upheld the
findings of the Labor Arbiter granting relief in favor of those supposed complainants who
did not even render service to the petitioner and, hence, are not on its payroll.
On July 31, 2009, the CA rendered a decision reversing and setting aside the July 30, 2008
Decision and the October 28, 2008 Resolution of the NLRC and reinstating the May 23, 2003
Decision of the LA. The dispositive portion of the CA decision reads:
WHEREFORE, premises considered, the present petition is hereby GRANTED. Accordingly, the
assailed Resolution dated October 28, 2008 of public respondent National Labor Relations
Commission is REVERSED and SET ASIDE, and the Decision dated May 23, 2003 of Labor
Arbiter Facundo L. Leda, is hereby ordered reinstated.
SO ORDERED.9
The CA explained that the NLRC committed grave abuse of discretion in reviving the complaints
of petitioners despite their failure to verify the same. Out of the 102 complainants, only Martos
verified the position paper and his counsel never offered any explanation for his failure to secure
the verification of the others. The CA also held that the NLRC gravely abused its discretion when

it took cognizance of petitioners appeal because Rule 41, Section 1(h) of the 1997 Rules of Civil
Procedure, as amended, which is suppletory, provides that no appeal may be taken from an
order dismissing an action without prejudice.
Nevertheless, the CA stated that the factual circumstances of Martos employment and his
dismissal from work could not equally apply to petitioners because they were not similarly
situated. The NLRC did not even bother to look at the evidence on record and inappropriately
granted monetary awards to petitioners who had either denied having filed a case or withdrawn
the case against respondent. According to the CA, the position papers should have covered only
those claims and causes of action raised in the complaint excluding those that might have been
amicably settled.
With respect to Martos, the CA ruled that he was a regular employee of respondent and his
termination was illegal. It explained that Martos should have been considered a regular
employee because there was no indication that he was merely a project employee when he was
hired. To show otherwise, respondent should have presented his employment contract for the
alleged specific project and the successive employment contracts for the different projects or
phases for which he was hired. In the absence of such document, he could not be considered
such an employee because his work was necessary and desirable to the respondents usual
business and that he was not required to sign any employment contract fixing a definite period or
duration of his engagement. Thus, Martos already attained the status of a regular employee.
Moreover, the CA noted that respondent did not report the termination of Martos supposed
project employment to the Department of Labor and Employment (DOLE), as required under
Department Order No. 19.
Being a regular employee, the CA concluded that he was constructively dismissed when he was
asked to sign a new appointment paper indicating therein that he was a project employee and
that his appointment would be co-terminus with the project.
Not in conformity with the CA decision, petitioners filed this petition anchored on the following
ASSIGNMENT OF ERRORS
A
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS AND THE LABOR
ARBITER BELOW GRAVELY ERRED IN DISMISSING THE COMPLAINTS OF THE
NINETY NINE (99) PETITIONERS DUE TO FAILURE OF THE LATTER TO VERIFY
THEIR POSITION PAPER WHEN, OBVIOUSLY, SUCH TECHNICALITY SHOULD NOT
HAVE BEEN RESORTED TO BY THEM AS IT WILL DEPRIVE THESE PETITIONERS
OF THEIR PROPERTY RIGHT TO WORK.
B
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS AND THE LABOR
ARBITER BELOW GRAVELY ERRED IN NOT ORDERING THE REINSTATEMENT OF
PETITIONER MARTOS AND THE OTHER 99 PETITIONERS WHEN, OBVIOUSLY, AND
AS FOUND BY THEM, THE DISMISSAL OF MARTOS IS ILLEGAL WHICH WOULD
WARRANT HIS REINSTATEMENT AND THE GRANT TO HIM OF FULL BACKWAGES
AND OTHER EMPLOYEES BENEFITS.
C

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN

NOT ORDERING THE RESPONDENTS TO PAY THE PETITIONERS ACTUAL, MORAL
AND EXEMPLARY DAMAGES.
Position of Petitioners
Petitioners basically argue that the CA was wrong in affirming the dismissal of their complaints
due to their failure to verify their position paper. They insist that the lack of verification of a
position paper is only a formal and not a jurisdictional defect. Hence, it was not fatal to their
cause of action considering that the CA could have required them to submit the needed
verification.
The CA overlooked the fact that all of them verified their complaints by declaring under oath
relevant and material facts such as their names, addresses, employment status, salary rates,
facts, causes of action, and reliefs common to all of them. The information supplied in their
complaints is sufficient to prove their status of employment and entitlement of their monetary
claims. In the adjudication of labor cases, the adherence to stringent technical rules may be
relaxed in the interest of the working man. Moreover, respondent failed to adduce evidence of
payment of their money claims.
Finally, petitioners argue that they and Martos were similarly situated. The award of separation
pay instead of reinstatement to an illegally dismissed employee was improper because the
strained relations between the parties was not clearly established. Moreover, they are entitled to
actual, moral and exemplary damages for respondents illegal act of violating labor standard
laws, the minimum wage law and the 13th month pay law.
Position of Respondents
On the other hand, respondent principally counters that the CA and the LA 1) did not err in
dismissing the complaints of the 88 petitioners who failed to verify their position paper, without
prejudice; 2) correctly ruled that Martos and the 88 petitioners concerned were not entitled to
reinstatement; and 3) correctly ruled that petitioners were not entitled to an award of actual,
moral and exemplary damages.
Petitioners have the propensity to disregard the mandatory provisions of the 2005 Revised Rules
of Procedure of the NLRC (NLRC Rules) which require the parties to submit simultaneously their
verified position papers with supporting documents and affidavits. In the proceedings before the
LA, the complaints of the 99 workers were dismissed because they failed to verify or affix their
signatures to the position paper filed with the LA.
While it is true that the NLRC Rules must be liberally construed and that the NLRC is not bound
by the technicalities of law and procedure, it should not be the first to arbitrarily disregard specific
provisions of the rules which are precisely intended to assist the parties in obtaining just,
expeditious and inexpensive settlement of labor disputes. It was only Felix Martos who verified
their position paper and their memorandum of appeal. It was only he alone who was vigilant in
looking after his interest and enforcing his rights. Petitioners should be considered to have
waived their rights and interests in the case for their consistent neglect and passive attitude.
Moreover, Martos was never authorized by any of his fellow complainants through a special
power of attorney or other document in the proceedings to represent them before the LA and the
NLRC. His acts and verifications were made only in his own personal capacity and did not bind
or benefit petitioners. There is only one logical reason why a majority of them failed to verify their
position paper, their appeal and now their petition: they were not in any way employees of the
respondent. They were total strangers to the respondent. They even refused to identify
themselves during the proceedings by their failure to appear thereat. Hence, it is too late for the
others to participate in the fruits, if any, of this litigation.

Finally, the reinstatement being sought by Martos and the others was no longer practicable
because of the strained relation between the parties. Petitioners can no longer question this fact.
This issue was never raised or taken up on appeal before the NLRC. It was only when the
petitioners lost in the appeal in the CA that they first raised the issue of strained relation.
Moreover, no proof of actual damages was presented by the petitioners. There is no clear and
convincing evidence on record showing that the termination of an employees services had been
carried out in an arbitrary, capricious or malicious manner.
The Courts Ruling
The Court is basically asked to resolve two (2) issues: 1 whether or not the CA was correct in
dismissing the complaints filed by those petitioners who failed to verify their position papers; and
2 whether or not Martos should be reinstated.
Regarding the first issue, the Court agrees with the respondent.
Sections 4 and 5 of Rule 7 of the 1997 Rules of Civil Procedure provide:
SEC. 4. Verification. Except when otherwise specifically required by law or rule, pleadings need
not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleadings and that the
allegations therein are true and correct of his personal knowledge or based on authentic records.
A pleading required to be verified which contains a verification based on "information and belief"
or upon "knowledge, information and belief" or lacks a proper verification, shall be treated as an
unsigned pleading.
SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify under
oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed any claim involving the same
issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other pending action or claim, a
complete statement of the present status thereof; and (c) if he should thereafter learn that the
same or similar action or claim has been filed or is pending, he shall report that fact within five (5)
days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of
the complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding administrative and criminal actions. If
the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and shall constitute direct contempt,
as well as a cause for administrative sanctions. x x x. [Emphases supplied]
The verification requirement is significant, as it is intended to secure an assurance that the
allegations in the pleading are true and correct and not the product of the imagination or a matter
of speculation, and that the pleading is filed in good faith.10 Verification is deemed substantially
complied with when, as in this case, one who has ample knowledge to swear to the truth of the
allegations in the complaint or petition signs the verification, and when matters alleged in the
petition have been made in good faith or are true and correct. 11

The absence of a proper verification is cause to treat the pleading as unsigned and dismissible. 12
The lone signature of Martos would have been sufficient if he was authorized by his copetitioners to sign for them. Unfortunately, petitioners failed to adduce proof that he was so
authorized. The complaints of the other parties in the case of Nellie Vda. De Formoso v. v.
PNB13 suffered a similar fate. Thus:
Admittedly, among the seven (7) petitioners mentioned, only Malcaba signed the verification and
certification of non-forum shopping in the subject petition. There was no proof that Malcaba was
authorized by his co-petitioners to sign for them. There was no special power of attorney shown
by the Formosos authorizing Malcaba as their attorney-in-fact in filing a petition for review on
certiorari. Neither could the petitioners give at least a reasonable explanation as to why only he
signed the verification and certification of non-forum shopping.
The liberal construction of the rules may be invoked in situations where there may be some
excusable formal deficiency or error in a pleading, provided that the same does not subvert the
essence of the proceeding and it at least connotes a reasonable attempt at compliance with the
rules. Besides, fundamental is the precept that rules of procedure are meant not to thwart but to
facilitate the attainment of justice; hence, their rigid application may, for deserving reasons, be
subordinated by the need for an apt dispensation of substantial justice in the normal course.
They ought to be relaxed when there is subsequent or even substantial compliance, consistent
with the policy of liberality espoused by Rule 1, Section 6.14 Not being inflexible, the rule on
verification allows for such liberality.15
Considering that the dismissal of the other complaints by the LA was without prejudice, the other
complainants should have taken the necessary steps to rectify their procedural mistake after the
decision of the LA was rendered. They should have corrected this procedural flaw by immediately
filing another complaint with the correct verification this time. Surprisingly, they did not even
attempt to correct this technical blunder. Worse, they committed the same procedural error when
they filed their appeal16 with the NLRC.
Under the circumstances, the Court agrees with the CA that the dismissal of the other complaints
were brought about by the own negligence and passive attitude of the complainants themselves.
In Formoso, the Court further wrote:
The petitioners were given a chance by the CA to comply with the Rules when they filed their
motion for reconsideration, but they refused to do so. Despite the opportunity given to them to
make all of them sign the verification and certification of non-forum shopping, they still failed to
comply. Thus, the CA was constrained to deny their motion and affirm the earlier resolution.
The Court can only do so much for them.
Most probably, as the list17 submitted is not complete with the information as to when each
started and when each was dismissed there must be some truth in the claim of respondent that
those complainants who failed to affix their signatures in the verification were either not
employees of respondent at all or they simply refused to prosecute their complaints. In its
position paper,18 respondent alleged that, aside from the four (4) complainants who withdrew their
complaints, only 17 out of the more or less 104 complainants appeared on its records as its
former project employees or at least known by it to have worked in one of its construction
projects. From the sworn statements executed by Felix Yortas,19 Marvin Batta,20
Lito Bantillo,21 Gavino Felix Nicolas,22 and Romeo Pangacian Martos,23 they already withdrew
their complaints against respondent. Their status and cause of action not being clear and proven,
it is just not right that these complaints be considered as similarly situated as Martos and entitled
to the same benefits.

As to Martos, the Court agrees that the reinstatement being sought by him was no longer
practicable because of strained relation between the parties. Indeed, he can no longer question
this fact. This issue was never raised or taken up on appeal before the MLRC. It was only after
he lost the appeal in the CA that he raised it.
Thus, the Court deems it fair to award separation pay in lieu of reinstatement. In addition to his
separation pay. Martos is also entitled to payment of full backwages, 13th month pay, service
incentive leave pay, and attorneys fees.
1wphi1

The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is
no longer practical or in the best interest of the parties. Separation pay in lieu of reinstatement
may likewise be awarded if the employee decides not to be reinstated.
Under the doctrine of stained relations, the payment of separation pay is considered an
acceptable alternative to reinstatement when the latter opinion is no longer desirable or viable.
On one hand, such payment liberates the employee from what could be highly oppressive work
environment. On the other hand, it release the employer from the grossly unpalatable obligation
of maintaining in its employ a worker it could no longer trust.24
WHEREFORE, the petition is DENIED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 144880

November 17, 2004

PASCUAL AND SANTOS, INC., petitioner,

vs.
THE MEMBERS OF THE TRAMO WAKAS NEIGHBORHOOD ASSOCIATION, INC.
represented by DOMINGA MAGNO, respondents.

DECISION

CARPIO MORALES, J.:

At bar is a petition for review on certiorari assailing the May 17, 2000 and August 8, 2000
Resolutions1 of the Court of Appeals (CA) in CA-G.R. No. 57274 which respectively, dismissed
the appeal instituted by petitioner Pascual and Santos, Inc. (petitioner) and denied its motion for
reconsideration.
The Members of Tramo Wakas Neighborhood Association, represented by Dominga Magno
(respondents), lodged before the Presidential Action Center a petition dated January 12, 1994
praying that ownership over three (3) parcels of land situated in Barangay San Dionisio,
Paraaque, Metro Manila, identified as Lot Nos. 4087, 4088 and 5003, Psu-118886, Cad. 229

with an aggregate area of 35,195 square meters be awarded to them. In their petition,
respondents alleged that petitioner claims ownership of the subject lots which they have openly,
peacefully and continuously occupied since 1957.
The petition was referred to the Land Management Bureau (LMB) where it was docketed as LMB
Case No. 2-96, for investigation and hearing.
By Decision2 of February 21, 1996, Director Abelardo G. Palad, Jr. of the LMB found for
respondents. The dispositive portion of the decision reads, quoted verbatim:
WHEREFORE, it is ordered that the claim of Pascual and Santos, Inc., over Lot 4087,
Lot 4088 and Lot 5003, situated at Brgy. San Dionisio, Paraaque, Metro Manila be, as
hereby it is, dismissed. The individual members of TRAMO WAKAS NEIGHBORHOOD
ASSOCIATION, now represented by Dominga Magno, if qualified may file appropriate
public land applications over the land they actually possessed and occupied. An
individual survey shall be conducted on the land at their own expense and after approval
of the said survey the same shall be given due course.
SO ORDERED.3
Its Motion for Reconsideration having been denied by Order of June 26, 1996, petitioner lodged
an appeal before the Office of the Department of Environment and Natural Resources (DENR)
Secretary, docketed as DENR Case No. 7816.
By Decision4 of November 25, 1997, then DENR Secretary Victor O. Ramos dismissed the
appeal for lack of merit and affirmed in toto the decision of the Director of the LMB. Petitioner's
Motion for Reconsideration of the decision having been denied by Order 5 of May 18, 1998, it filed
an appeal before the Office of the President (OP), docketed as O.P. Case No. 98-F-8459, which
was likewise dismissed for lack of merit by Decision6 of January 20, 2000. The November 25,
1997 DENR decision was affirmed in toto.
Petitioner received a copy of the OP's dismissal of its appeal on February 1, 2000, 7 following
which or on February 16, 2000, it filed a "Petition for Time" 8 before the CA for an additional period
of fifteen days or until March 2, 2000 within which to file its petition for review.
By Resolution9 of February 21, 2000, the CA granted petitioner's Petition for Time, giving it a nonextendible period of fifteen days from February 16, 2000 or until March 2, 2000 within which to
file the petition.
Petitioner subsequently filed its Petition for Review10 dated March 2, 2000 with the CA, praying
that judgment be rendered (1) reversing and setting aside the January 20, 2000 OP Decision and
the November 25, 1997 DENR Decision and May 18, 1998 Order, and (2) declaring the subject
lots as no longer forming part of the public domain and have been validly acquired by petitioner;
or in the alternative, (1) allowing it to present additional evidence in support of its claim to the
subject lots, (2) reversing and setting aside the aforementioned Decisions and Order of the OP
and the DENR, and (3) declaring the subject lots as no longer forming part of the public domain
and have been validly acquired by petitioner.11
By Resolution of May 17, 2000, the CA dismissed the appeal due to infirm Verification and
Certification of non-forum shopping and belated filing.
For one, the Verification and Certification of non-forum shopping was signed merely by
Estela Lombos and Anita Pascual who allege that they are the duly authorized
representatives of petitioner corporation, without showing any proof whatsoever of such
authority.

For another, and importantly, the petition for review was filed a day after the period
petitioner corporation expressly sought. As indicated in its "Petition for Time," petitioner
corporation asked for an additional fifteen (15) days, or until March 2, 2000, within which
to file its petition, which was granted by the Court per Resolution dated February 21,
2000. However, despite the foregoing, petitioner corporation filed the same only on
MARCH 3, 2000 as indicated by the date stamped on the envelope which contains the
petition for review.12 (Citations omitted; underscoring supplied)
On June 14, 2000, petitioner filed a Motion for Reconsideration13 of the CA May 17, 2000
Resolution, arguing that there was no showing that the persons acting on its behalf were not
authorized to do so and that its petition was filed within the additional 15-day period granted by
the CA. Attached to the Motion was a Secretary's Certificate14 dated June 14, 2000 showing that
petitioner's Board of Directors approved a Resolution on February 11, 2000 appointing Estela
Lombos and Anita Pascual, incumbent directors of the corporation, as its duly authorized
representatives who may sign all papers, execute all documents, and do such other acts as may
be necessary to prosecute the petition for review that it would file with the CA assailing the
decision rendered in OP Case No. 98-G-8459.15
By Resolution of August 23, 2000, the CA denied petitioner's Motion for Reconsideration for lack
of merit.
xxx It must be stressed that any person who claims authority to sign, in behalf of another,
the Certificate of Non-Forum Shopping, as required by the rules, must show sufficient
proof thereof. Bare allegations are not proof, and the representation of one who acts in
behalf of another cannot, by itself, serve as proof of his authority to act as agent or of the
extent of his authority as agent. Thus, absent such clear proof, the Court cannot accept
at face value, such authority to sign in behalf of the corporation.
xxx
Another perusal of the registry return receipts attached to the petition for review (Nos.
182, 183 and 184) shows that copies of the Manifestation and Petition for Review were
served to private respondent's (sic) counsel, the Office of the President, and the
Department of Environment and Natural Resources, on March 2, 2000. However, it does
not indicate therein when the petition for review was filed with the Court. The registry
return receipts (No. 185, 186, 187 and 188) being referred to by petitioner shows (sic) the
date March 2, 2000 only on that numbered 188, and does (sic) not show the dates on
those numbered 185-187. In fact, said receipts do not even indicate which pertain to the
copy filed with the Court.
Moreover, the Court cannot sustain petitioner's supposition that a post office employee
might have stamped the wrong date, March 3, 2000, without any proof whatsoever of
such error. The date stamped on the envelope which contained the Manifestation and
Petition for Review clearly shows that the same was filed on March 3, 2000, and
petitioner having failed to rebut the presumption of regularity in the performance of official
functions, the same must prevail.16 (Citations omitted; emphasis in the original;
underscoring supplied)
Petitioner thus filed on September 27, 2000 before this Court a "Petition For Time" to file its
petition for review.
On October 30, 2000, petitioner filed a Petition for Review on Certiorari raising the following
issues:
I

WHETHER OR NOT THE PERSONS WHO EXECUTED THE VERIFICATION AND

CERTIFICATION OF NON-FORUM SHOPPING ATTACHED TO PSI'S
MANIFESTATION/PETITION FOR REVIEW FILED WITH THE COURT OF APPEALS
WERE AUTHORIZED TO DO SO.
II
WHETHER OR NOT PSI'S MANIFESTATION/PETITION FOR REVIEW WAS FILED
WITHIN THE REGLEMENTARY PERIOD.17
By Resolution18 of December 6, 2000, this Court denied the Petition for Review in view of
petitioner's failure to submit a valid affidavit of service pursuant to Section 13 of Rule 13 and
Sections 3 and 5 of Rule 45 in relation to Section 5 (d) of Rule 56 of the Rules of Court and
attach to the petition a duplicate original or certified true copy of the assailed CA resolutions
pursuant to Sections 4 (d) and 5 of Rule 45 in relation to Section 5 (d) of Rule 56 of the Rules of
Court.
Petitioner filed a Motion for Reconsideration,19 averring that it had already attached certified true
copies of the assailed resolutions of the CA in its "Petition for Time" filed before this Court on
September 27, 2000, and while it was the affidavit before the CA which was inadvertently
attached to its petition before this Court, the messengerial staff of petitioner's counsel did in fact
serve copies of the petition on counsel for respondents, the DENR, the OP and the court a quo
as evidenced by registry receipts and return cards20 which it attached to its Motion for
Reconsideration.
By Resolution21 of March 7, 2001, this Court, finding petitioner's explanation satisfactory, granted
the Motion for Reconsideration and reinstated the petition, now the subject of this Decision.
The petition is impressed with merit.
Section 6 (d) of Rule 43 in relation to Section 2 of Rule 42 of the Rules of Court mandates that a
petition for review shall contain a sworn certification against forum shopping in which the
petitioner shall attest that he has not commenced any other action involving the same issues in
this Court, the Court of Appeals or different divisions thereof, or any other tribunal or agency; if
there is such other action or proceeding, he must state the status of the same; and if he should
thereafter learn that a similar action or proceeding has been filed or is pending before this Court,
the Court of Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes
to promptly inform the aforesaid courts and other tribunal or agency thereof within five days
therefrom.
For failure to comply with this mandate, Section 7 of Rule 43 provides:
SEC. 7. Effect of failure to comply with requirements. The failure of the petitioner to
comply with any of the foregoing requirements regarding the payment of the docket and
other lawful fees, the deposit for costs, proof of service of the petition, and the contents of
and the documents which should accompany the petition shall be sufficient ground for
the dismissal thereof.
The requirement that the petitioner should sign the certificate of non-forum shopping applies
even to corporations, considering that the mandatory directives of the Rules of Court make no
distinction between natural and juridical persons. 22
In the case at bar, the CA dismissed the petition before it on the ground that Lombos and
Pascual, the signatories to the verification and certification on non-forum shopping, failed to show
proof that they were authorized by petitioner's board of directors to file such a petition.

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. 23 Thus, its
power to sue and be sued in any court is lodged with the board of directors that exercises its
corporate powers.24 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.25
It is undisputed that when the petition for certiorari was filed with the CA, there was no proof
attached thereto that Lombos and Pascual were authorized to sign the verification and non-forum
shopping certification. Subsequent to the CA's dismissal of the petition, however, petitioner filed
a motion for reconsideration to which it attached a certificate issued by its board secretary stating
that on February 11, 2000 or prior to the filing of the petition, Lombos and Pascual had been
authorized by petitioner's board of directors to file the petition before the CA.
This Court has ruled that the subsequent submission of proof of authority to act on behalf of a
petitioner corporation justifies the relaxation of the Rules for the purpose of allowing its petition to
be given due course.26
Thus, in Shipside Incorporated v. Court of Appeals,27 this Court held:
xxx Moreover, in Loyola, Roadway and Uy, the Court excused non-compliance with the
requirement as to the certificate of non-forum shopping. With more reason should we
allow the instant petition since petitioner herein did submit a certification on non-forum
shopping, failing only to show proof that the signatory was authorized to do so. That
petitioner subsequently submitted a secretary's certificate attesting that Balbin was
authorized to file an action on behalf of petitioner likewise mitigates this oversight.
It must also be kept in mind that while the requirement of the certificate of non-forum shopping is
mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat the
objective of preventing the undesirable practice of forum shopping. 28
As for the timeliness of the filing of its petition for review before the CA, petitioner maintains in
the affirmative.
Sections 3 and 12 of Rule 13 of the Rules of Court provide:
SEC. 3. Manner of filing. The filing of pleadings, appearances, motions, notices, orders,
judgments and all other papers shall be made by presenting the original copies thereof,
plainly indicated as such, personally to the clerk of court or by sending them by
registered mail. In the first case, the clerk of court shall endorse on the pleading the date
and hour of filing. In the second case, the date of the mailing of motions, pleadings, or
any other papers or payments or deposits, as shown by the post office stamp on the
envelope or the registry receipt, shall be considered as the date of their filing, payment,
or deposit in court. The envelope shall be attached to the record of the case.
SEC. 12. Proof of filing. The filing of a pleading or paper shall be proved by its
existence in the record of the case. If it is not in the record, but is claimed to have been
filed personally, the filing shall be proved by the written or stamped acknowledgment of
its filing by the clerk of court on a copy of the same; if filed by registered mail, by the
registry receipt and by the affidavit of the person who did the mailing, containing a full
statement of the date and place of depositing the mail in the post office in a sealed
envelope addressed to the court, with postage fully prepaid, and with instructions to the
postmaster to return the mail to the sender after ten (10) days if not delivered.

Registry Receipt Nos. 185-188 covering the envelopes bearing the copies of the petition which
were sent to the CA indicate that such copies were filed by registered mail at the Domestic
Airport Post Office (DAPO) on March 2, 2000.29
The Affidavit of Service30 filed by the person who did the mailing of the petition in behalf of
petitioner states that such petition was filed by registered mail by depositing seven copies thereof
in four separate sealed envelopes and mailing the same to the Clerk of Court of the CA through
the DAPO on March 2, 2000. The affidavit likewise states that on even date, the petition was
served on counsel for respondents, the DENR and the OP by depositing copies of the same in
sealed envelopes and mailing them to said parties' respective addresses through the DAPO.
And in the Certification31 dated October 26, 2000 issued by Postmaster Cesar A. Felicitas of the
DAPO, he states that the registered mail matter covered by Registry Receipt Nos. 185-188
addressed to the Clerk of Court of the CA was posted at their office for mailing on March 2, 2000,
but that it was "dispatched to the CMEC on March 3, 2000 for proper disposition." This could very
well explain why the latter date was stamped on the envelope received by the CA containing the
petition.
At all events, strict adherence to rules of procedure must give way to considerations of equity
and substantial justice where, as in this case, there is evidence showing that the appeal was filed
on time.32
WHEREFORE, the petition is GRANTED. The Resolutions dated May 17, 2000 and August 23,
2000 of the Court of Appeals are SET ASIDE. The case, CA-G.R. SP No. 57274, is REMANDED
to the appellate court which is hereby directed to give due course to the appeal of petitioner.
No costs.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur.
Corona, J., on leave.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 186720

February 8, 2012

ELSA D. MEDADO, Petitioner,

vs.
HEIRS OF THE LATE ANTONIO CONSING, as represented by DR. SOLEDAD
CONSING, Respondents.
DECISION
REYES, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
which seeks to annul and set aside the following issuances of the Court of Appeals (CA) in the
case docketed as CA-G.R. SP No. 02660, entitled "Heirs of the Late Antonio Consing as
represented by Dra. Soledad Consing v. Hon. Renato D. Muez, Presiding Executive Judge,

Regional Trial Court, Branch 60, Cadiz City, Spouses Meritus Rey Medado, the Sheriff IV,
Balbino B. Germinal, Regional Trial Court, Branch 60, Cadiz City and Land Bank of the
Philippines":
(1) the Decision1 dated September 26, 2008, reversing and setting aside the order 2 of the
Regional Trial Court (RTC), Branch 60, Cadiz City, in Civil Case No. 797-C, an action for
injunction; and
(2) the Resolution3 dated January 21, 2009, denying the motion for reconsideration of the
decision dated September 26, 2008.
The Factual Antecedents
Sometime in 1996, petitioner Meritus Rey Medado and Elsa Medado (Spouses Medado) and the
estate of the late Antonio Consing (Estate of Consing), as represented by Soledad Consing
(Soledad), executed Deeds of Sale with Assumption of Mortgage for the former's acquisition from
the latter of the property in Cadiz City identified as Hacienda Sol. Records indicate that the sale
included the parcels of land covered by OCT No. P-498, TCT No. T-31275, TCT No. T-31276 and
TCT No. T-31277. As part of the deal, Spouses Medado undertook to assume the estate's loan
with Philippine National Bank (PNB).
Subsequent to the sale, however, the Estate of Consing offered the subject lots to the
government via the Department of Agrarian Reform's Voluntary Offer to Sell (VOS) program. On
November 22, 2000, the Estate of Consing also instituted with the RTC, Branch 44 of Bacolod
City an action for rescission and damages, docketed as Civil Case No. 00-11320 against
Spouses Medado, PNB and the Register of Deeds of Cadiz City, due to the alleged failure of the
spouses to meet the conditions in their agreement.
In the meantime that Civil Case No. 00-11320 for rescission was pending, Land Bank of the
Philippines (LBP) issued in favor of the Estate of Consing a certificate of deposit of cash and
agrarian reform bonds, as compensation for the lots covered by the VOS. Spouses Medado
feared that LBP would release the full proceeds thereof to the Estate of Consing. They claimed to
be the ones entitled to the proceeds considering that they had bought the properties through the
Deeds of Sale with Assumption of Mortgage which they and the Estate of Consing had earlier
executed.
The foregoing prompted Spouses Medado to institute Civil Case No. 797-C, an action for
injunction with prayer for the issuance of a temporary restraining order, with the RTC, Branch 60
of Cadiz City. They asked that the following be issued by the trial court: (a) writ of prohibitory
injunction to restrain LBP from releasing the remaining amount of the VOS proceeds of the lots
offered by the Estate of Consing, and restraining the Estate of Consing from receiving these
proceeds; and (b) writ of mandatory injunction to compel LBP to release the remaining amount of
the VOS to the spouses.
On March 9, 2007, the RTC of Cadiz City issued an Order4 granting Spouses Medado's
application for the issuance of writs of preliminary prohibitory and mandatory injunction. The
order's dispositive portion reads:
WHEREFORE, finding the application for the issuance of a writ of preliminary prohibitory
injunction and preliminary mandatory injunction of the plaintiffs to be MERITORIOUS, the same
is hereby GRANTED.

Let therefore a Writ of Preliminary Prohibitory and Mandatory Injunction be issued against
defendant Land Bank, its agents, lawyers and all other persons acting in its behalf to cease and
desist from releasing the balance of the VOS Proceeds to defendant Heirs of the Late Antonio
Consing as represented by Dra. Soledad Consing and restraining said defendant Consing, her
agents, lawyers, successors-in-interest, and all other persons acting in its behalf from receiving
the same and to maintain the STATUS QUO ANTE BELLUM while defendant Land Bank of the
Philippines is hereby ordered to release and pay the whole of the remaining balance of the VOS
Proceeds held by the said defendant to the plaintiffs after the posting of a bond by the plaintiffs in
the amount of FIVE MILLION PESOS (P5,000,000.00) executed in favor of the defendants
conditioned upon the payment to the said defendants by the plaintiffs [of] all damages which the
former may sustain by reason of the issuance of the writ of preliminary prohibitory and
mandatory injunction in case this Court should finally decide that the plaintiffs are not entitled
thereto.
Furnish copies of this Order to all counsels and parties.
SO ORDERED.5
Feeling aggrieved, the heirs of the late Antonio Consing (Consing) questioned the RTC's order
via a petition forcertiorari filed with the CA, against Hon. Renato D. Muez, Presiding Executive
Judge, RTC, Branch 60 of Cadiz City, Spouses Medado, Sheriff IV Balbino B. Germinal of RTC,
Branch 60 of Cadiz City and LBP. They sought, among other reliefs, the dismissal of the
complaint for injunction for violation of the rules on litis pendentia and forum shopping. On the
matter of the absence of a motion for reconsideration of the trial court's order before resorting to
a petition for certiorari, the heirs explained that the implementation of the questioned writs
through LBP's release of the VOS proceeds' balance to the sheriff on March 29, 2007,
notwithstanding: (a) the pendency of motions for reconsideration and dissolution of the writs filed
by the heirs, and (b) the fact that the writs were immediately implemented even if a hearing on
the motions was already scheduled for March 30, 2007, prompted the heirs' withdrawal of their
motions for being already moot and academic. The heirs argued that their case was within the
exceptions to the general rule that a petition under Rule 65 will not lie unless a motion for
reconsideration is first filed before the lower court.
In their comment on the petition, Spouses Medado questioned, among other matters, the
authority of Soledad to sign the petition's certification of non-forum shopping on behalf of her copetitioners.
The Ruling of the CA
On September 26, 2008, the CA rendered the assailed decision, 6 the dispositive portion of which
reads:
WHEREFORE, the petition being impressed with merit is GRANTED. The assailed Order dated
March 9, 2007 isNULLIFIED and SET ASIDE and the complaint in Civil Case No. 797C DISMISSED. Private respondents are directed to return P3,743,825.88 to Land Bank of the
Philippines to await a final ruling in Civil Case No. 00-1320.
No costs.
SO ORDERED.7

The CA ruled that the RTC gravely abused its discretion in taking cognizance of Civil Case No.
797-C for injunction during the pendency of Civil Case No. 00-11320 for rescission and damages
as this violates the rule against forum shopping.
Spouses Medado's motion for reconsideration of the decision of September 26, 2008 was denied
by the CA via its Resolution8 dated January 21, 2009. Hence, this petition.
The Present Petition
This petition was instituted by petitioner Elsa Medado without naming her husband as copetitioner, due to their alleged separation de facto.9 It presents the following issues for this
Court's determination:
I. Whether or not the CA correctly admitted the petition for certiorari filed before it,
notwithstanding alleged deficiencies in its verification and certification against forum
shopping;
II. Whether or not the CA correctly admitted the petition for certiorari filed before it even if
no motion for reconsideration of the RTCs Order dated March 9, 2007 was filed with the
lower court; and
III. Whether or not the CA correctly held that the rule against forum shopping was violated
by the filing of the complaint for injunction during the pendency of the action for
rescission and damages.
In their comment on the petition, the respondents also raise as an issue the failure of the
petitioner to join her husband as a party to the petition, considering that the action affects
conjugal property.
This Court's Ruling
After due study, this Court finds the petition bereft of merit.
The requirements for verification and certification against forum shopping in the CA
petition were substantially complied with, following settled jurisprudence.
Before us, the petitioner contended that the consolidated verification and certification against
forum shopping of the petition filed with the CA was defective: first, for being signed only by
Soledad, instead of by all the petitioners, and second, its jurat cites a mere community tax
certificate of Soledad, instead of a government-issued identification card required under the 2004
Rules on Notarial Practice. The second ground was never raised by herein petitioner in her
comment on the CA petition, thus, it cannot be validly raised by the petitioner at this stage.
As regards the first ground, records show that Soledad signed the verification and certification
against forum shopping on behalf of her co-petitioners by virtue of a Special Power of
Attorney10 (SPA) attached to the petition filed with the CA. The SPA, signed by her co-heirs Ma.
Josefa Consing Saguitguit, Ma. Carmela Consing Lopez, Ma. Lourdes Consing Gonzales and
Mary Rose Consing Tuason, provides that their attorney-in-fact Soledad is authorized:
To protect, sue, prosecute, defend and adopt whatever action necessary and proper relative and
with respect to our right, interest and participation over said properties, particularly those
described in previous titles under TCT No. T-498, TCT No. T-31275, TCT No. T-31276 and TCT

No. T-31277 of the [R]egister of Deeds, Cadiz City, covering a total area of 73.6814 square
meters, and declared in the name of said Antonio Consing and located in Brgy. Magsaysay,
Cadiz City, Negros Occidental, the same parcels of land are the subject of judicial litigation
before the [R]egional Trial [Court], Branch 44, Bacolod City, docketed as Civil [C]ase No. 11320,
entitled "Soledad T. Consing, for herself and as Administratix of the estate of Antonio Consing,
plaintiffs, versus, Spouses Meritus Rey and Elsa Medado, et.al., defendants," and Regional Trial
Court, Branch 60, Cadiz City and docketed as Civil Case No. 797-C, entitled, ["]Spouse[s]
Meritus Rey Medado and Elsa Medado, plaintiffs, versus, Land Bank of the Philippines and heirs
of the Late Antonio Consing as represented by Dra. Soledad Consing, defendants"; pending in
said court and which cases may at anytime be elevated to the Court of Appeals and/or Supreme
Court as the circumstances so warrant;11
As may be gleaned from the foregoing, the authority of Soledad includes the filing of an appeal
before the CA, including the execution of a verification and certification against forum shopping
therefor, being acts necessary "to protect, sue, prosecute, defend and adopt whatever action
necessary and proper" in relation to their rights over the subject properties.
In addition, the allegations and contentions embodied in the CA petition do not deviate from the
claims already made by the heirs in Civil Case Nos. 00-11320 and 797-C, both specifically
mentioned in the SPA. We emphasize that the verification requirement is simply intended to
secure an assurance that the allegations in the pleading are true and correct, and not the product
of the imagination or a matter of speculation, and that the pleading is filed in good faith. 12 We rule
that there was no deficiency in the petition's verification and certification against forum shopping
filed with the CA.
In any case, we reiterate that where the petitioners are immediate relatives, who share a
common interest in the property subject of the action, the fact that only one of the petitioners
executed the verification or certification of forum shopping will not deter the court from
proceeding with the action. In Heirs of Domingo Hernandez, Sr. v. Mingoa, Sr.,13 we held:
Even if only petitioner Domingo Hernandez, Jr. executed the Verification/Certification against
forum-shopping, this will not deter us from proceeding with the judicial determination of the
issues in this petition. As we ratiocinated inHeirs of Olarte v. Office of the President:
The general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs
in a case and the signature of only one of them is insufficient. However, the Court has also
stressed that the rules on forum shopping were designed to promote and facilitate the orderly
administration of justice and thus should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective. The rule of substantial compliance may be
availed of with respect to the contents of the certification. This is because the requirement of
strict compliance with the provisions regarding the certification of non-forum shopping merely
underscores its mandatory nature in that the certification cannot be altogether dispensed with or
its requirements completely disregarded. Thus, under justifiable circumstances, the Court has
relaxed the rule requiring the submission of such certification considering that although it is
obligatory, it is not jurisdictional.
In HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners
Association, it was held that the signature of only one of the petitioners in the certification against
forum shopping substantially complied with [the] rules because all the petitioners share a
common interest and invoke a common cause of action or defense.

The same leniency was applied by the Court in Cavile v. Heirs of Cavile, because the lone
petitioner who executed the certification of non-forum shopping was a relative and co-owner of
the other petitioners with whom he shares a common interest. x x x
xxx
Here, all the petitioners are immediate relatives who share a common interest in the land sought
to be reconveyed and a common cause of action raising the same arguments in support thereof.
There was sufficient basis, therefore, for Domingo Hernandez, Jr. to speak for and in behalf of
his co-petitioners when he certified that they had not filed any action or claim in another court or
tribunal involving the same issues. Thus, the Verification/Certification that Hernandez, Jr.
executed constitutes substantial compliance under the Rules.14(citations omitted)
Furthermore, we have consistently held that verification of a pleading is a formal, not a
jurisdictional, requirement intended to secure the assurance that the matters alleged in a
pleading are true and correct. Thus, the court may simply order the correction of unverified
pleadings or act on them and waive strict compliance with the rules. It is deemed substantially
complied with when one who has ample knowledge to swear to the truth of the allegations in the
complaint or petition signs the verification; and when matters alleged in the petition have been
made in good faith or are true and correct.15 It was based on this principle that this Court had also
allowed herein petitioner, via our Resolution16 dated April 22, 2009, a chance to submit a
verification that complied with Section 4, Rule 7 of the Rules of Court, as amended, instead of us
dismissing the petition outright.
There are recognized exceptions permitting resort to a special civil action
of certiorari even without first filing a motion for reconsideration.
On the second issue, the CA did not err in accepting the petition for certiorari even if the motion
for reconsideration of the RTC Order of March 9, 2007 was withdrawn by herein respondents
before the RTC could act thereon. It is settled that the requirement on the filing of a motion for
reconsideration prior to the institution of a petition for certiorari under Rule 65 of the Rules of
Court admits of several exceptions, such as when the filing of a motion appears to be useless
given the circumstances attending the action. Thus, we have repeatedly held:
The general rule is that a motion for reconsideration is a condition sine qua non before a petition
for certiorarimay lie, its purpose being to grant an opportunity for the court a quo to correct any
error attributed to it by re-examination of the legal and factual circumstances of the case. There
are, however, recognized exceptions permitting a resort to the special civil action
for certiorari without first filing a motion for reconsideration. In the case of Domdom v.
Sandiganbayan, it was written:
"The rule is, however, circumscribed by well-defined exceptions, such as where the order is a
patent nullity because the court a quo had no jurisdiction; where the questions raised in
the certiorari proceeding have been duly raised and passed upon by the lower court, or are the
same as those raised and passed upon in the lower court; where there is an urgent necessity for
the resolution of the question, and any further delay would prejudice the interests of the
Government or of the petitioner, or the subject matter of the action is perishable; where, under
the circumstances, a motion for reconsideration would be useless; where the petitioner was
deprived of due process and there is extreme urgency of relief; where, in a criminal case, relief
from an order of arrest is urgent and the grant of such relief by the trial court is improbable;
where the proceedings in the lower court are a nullity for lack of due process; where the
proceedings were ex parte or in which the petitioner had no opportunity to object; and where the

issue raised is one purely of law or where public interest is involved."17 (emphasis supplied, and
citations and underscoring omitted)
As correctly held by the CA, a motion for reconsideration, or the resolution of the trial court
thereon, had become useless given that the particular acts which the movants sought to prevent
by the filing of the motion were already carried out. Significantly, the heirs of the late Consing had
filed a motion for reconsideration of the RTC's order, but withdrew it only after the trial court had
decided to implement the writs notwithstanding the pendency of the motion and just a day before
the scheduled hearing on said motion.
Forum-shopping exists when the elements of litis pendentia concur.
On the third issue, there is forum shopping when the elements of litis pendentia are present, i.e.,
between actions pending before courts, there exist: (1) identity of parties, or at least such parties
as represent the same interests in both actions, (2) identity of rights asserted and relief prayed
for, the relief being founded on the same facts, and (3) the identity of the two preceding
particulars is such that any judgment rendered in the other action will, regardless of which party
is successful, amount to res judicata in the action under consideration; said requisites are also
constitutive of the requisites for auter action pendant or lis pendens.18 Applying the foregoing,
there was clearly a violation of the rule against forum shopping when Spouses Medado instituted
Civil Case No. 797-C for injunction notwithstanding the pendency of Civil Case No. 00-11320 for
rescission of contract and damages.
All elements of litis pendentia are present with the filing of the two cases. There is no dispute
that there is identity of parties representing the same interests in the two actions, both involving
the estate and heirs of the late Consing on one hand, and Spouses Medado on the other. The
rescission case names "Soledad T. Consing, for herself and as administratrix of the estate of
Antonio Consing" as plaintiff, with "Spouses Meritus Rey and Elsa Medado, [PNB] and the
Register of Deeds of Cadiz City" as respondents. The injunction case, on the other hand, was
instituted by Spouses Medado, against "(LBP) and the Heirs of the Late Antonio Consing, as
represented by Dra. Soledad Consing." The primary litigants in the two action, and their interests,
are the same.
1wphi1

The two other elements are likewise satisfied. There is an identity of rights asserted and reliefs
prayed for in the two cases, with the reliefs being founded on the same set of facts. In both
cases, the parties claim their supposed right as owners of the subject properties. They all anchor
their claim of ownership on the deeds of absolute sale which they had executed, and the law
applicable thereto. They assert their respective rights, with Spouses Medado as buyers and the
heirs as sellers, based on the same set of facts that involve the deeds of sale's contents and
their validity. Both actions necessarily involve a ruling on the validity of the same contract as
against the same parties. Thus, the identity of the two cases is such as would render the decision
in the rescission caseres judicata in the injunction case, and vice versa.
It does not even matter that one action is for the enforcement of the parties' agreements, while
the other action is for the rescission thereof. In the similar case of Victronics Computers, Inc. v.
RTC, Branch 63, Makati,19 we discussed:
Civil Case No. 91-2069 actually involves an action for specific performance; it thus upholds the
contract and assumes its validity. Civil Case No. 91-2192, on the other hand, is for the
nullification of the contract on the grounds of fraud and vitiated consent. While ostensibly the
cause of action in one is opposite to that in the other, in the final analysis, what is being
determined is the validity of the contract. x x x Thus, the identity of rights asserted cannot be
disputed. Howsoever viewed, it is beyond cavil that regardless of the decision that would be

promulgated in Civil Case No. 91-2069, the same would constitute res judicata on Civil Case No.
91-2192 and vice versa.20 (emphasis supplied)
This was further explained in Casil v. CA,21 where we ruled:
The Court of Appeals held that there can be no res adjudicata because there is no identity of
causes of action between the two cases. We do not agree. In the two cases, both petitioner and
private respondent brought to fore the validity of the agreement dated May 4, 1994. Private
respondent raised this point as an affirmative defense in her answer in the First Case. She
brought it up again in her complaint in the Second Case. A single issue cannot be litigated in
more than one forum. As held in Mendiola vs. Court of Appeals:
The similarity between the two causes of action is only too glaring. The test of identity of causes
of action lies not in the form of an action but on whether the same evidence would support and
establish the former and the present causes of action. The difference of actions in the aforesaid
cases is of no moment. In Civil Case No. 58713, the action is to enjoin PNB from foreclosing
petitioner's properties, while in Civil Case No. 60012, the action is one to annul the auction sale
over the foreclosed properties of petitioner based on the same grounds.Notwithstanding a
difference in the forms of the two actions, the doctrine of res judicata still applies considering that
the parties were litigating for the same thing, i.e. lands covered by TCT No. 27307, and more
importantly, the same contentions and evidence as advanced by herein petitioner in this case
were in fact used to support the former cause of action."22
The CA was then correct in ordering the dismissal of the complaint in Civil Case No. 797-C for
violation of the rule against forum shopping. The issue on the validity of the subject deeds of
absolute sale can best be addressed in the action for rescission, as against the case for
injunction filed by Spouses Medado. In a line of cases, we have set the relevant factors that
courts must consider when they have to determine which case should be dismissed, given the
pendency of two actions, to wit:
(1) the date of filing, with preference generally given to the first action filed to be retained;
(2) whether the action sought to be dismissed was filed merely to preempt the latter
action or to anticipate its filing and lay the basis for its dismissal; and
(3) whether the action is the appropriate vehicle for litigating the issues between the
parties.23
We emphasize that the rules on forum shopping are meant to prevent such eventualities as
conflicting final decisions.24 This Court has consistently held that the costly consequence of forum
shopping should remind the parties to ever be mindful against abusing court processes. 25 In
addition, the principle of res judicata requires that stability be accorded to judgments.
Controversies once decided on the merits shall remain in repose for there should be an end to
litigation which, without the doctrine, would be endless.26
Given the foregoing grounds already warranting the denial of this petition, we deem it no longer
necessary to take any action or to now rule on the issue of the non-joinder of the petitioner's
husband in the petition.
WHEREFORE, premises considered, the instant petition for review on certiorari is
hereby DENIED. Accordingly, the Court of Appeals Decision dated September 26, 2008, which

reversed and set aside the order of the Regional Trial Court, Branch 60, Cadiz City, dated March
09, 2007, is perforce AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 168208

June 13, 2012

VIVIAN T. RAMIREZ, ALBERTO B. DIGNO, DANILO M. CASQUITE, JUMADIYA A. KADIL,

FAUJIA SALIH, ANTONIO FABIAN, ROMEL DANAG, GINA PANTASAN, ARTHUR MATUGAS,
VIRGILIA OSARIO, ORLANDO EBRADA, ROSANA CABATO, WILFREDO LUNA, LILIA
BARREDO, ISABEL ALBERTO, NORA BONIAO, PILAR OSARIO, LYDIA ESLIT, AMMAN
SALI, AKMAD AKIL, ROGELIO LAZARO, ISABEL CONCILLADO, MARLON ABIAL,
HERMOCILLO NAPALCRUZ, WALTER BUHIAN, ELISEO AMATORIO, JOSE CASTRO,
JAMIL LAGBAY, MA. EVELYN SANTOS, LEDENIA T. BARON, ELSA AMATORIO, SARAH F.
BUCOY, EXPEDITO L. RELUYA, ARNULFO ALFARO, EDGARDO F. BORGONIA, DANILO R.
MANINGO, ABDUSAID H. DAMBONG, LORINDA M. MUTIA, DOMINADOR DEL ROSARIO,
JOEL E. TRONO, HUSSIN A. JAWAJI, JUL-ASNAM JAKARIA, LUZVIMINDA A. NOLASCO,
VILMA G. GASCO, MORITA S. MARMETO, PROCESA JUANICO, ANTONIO A.
MONDRAGON, JR., JESSICA F. QUIACHON, PACITA G. MEDINA, ARNEL S. SANTOS,
ANECITA T. TARAS, TOMINDAO T. TARAS, NULCA C. SABDANI, AKMAD A. SABDANI,
ROWENA J. GARCIA, LINA P. CASAS, MARLYN G. FRANCISCO, MERCEDITA
MAQUINANO, NICOLAS T. RIO, TERESITA A. CASINAS, VIRGILIO F. IB-IB, PANTALEON S.
ROJAS, JR., EVELYN V. BEATINGO, MATILDE G. HUSSIN, ESPERANZA I. LLEDO,
ADOLFINA DELA MERCED, LAURA E. SANTOS, ROGACIANA MAQUILING, ALELIE D.
SAMSON, SHIRLEY L. ALVAREZ, MAGDALENA A. MARCOS, VIRGINIA S. ESPINOSA,
ANTONIO C. GUEVARA, AUGUSTA S. DE JESUS, SERVILLA A. BANCALE, PROSERFINA
GATINAO, RASMA A. FABRIGA, ROLANDO D. GATINAO, ANALISA G. MEA, SARAH A.
SALCEDO, ALICIA M. JAYAG, FERNANDO G. CABEROY, ROMEO R. PONCE, EDNA S.
PONCE, TEODORA T. LUY, WALDERICO F. ARIO, MELCHOR S. BUCOY, EDITA H. CINCO,
RUDY I. LIMBAROC, PETER MONTOJO, MARLYN S. ATILANO, REGIDOR MEDALLO,
EDWIN O. DEMASUAY, DENNIS M. SUICANO, ROSALINA Q. ATILANO, ESTRELLA
FELICIANO, IMELDA T. DAGALEA, MARILYN RUFINO, JOSE AGUSTIN, EFREN RIVERA,
CRISALDO VALERO, SAFIA HANDANG, LUCENA R. MEDINA, DANNY BOY B. PANGASIAN,
ABDURASA HASIL, ROEL ALTA, JOBERT BELTRAN, EDNA FAUSTO, TAJMAHAR
HADJULA, ELENA MAGHANOY, ERIC B. QUITIOL, JESSE D. FLORES, GEMMA CANILLAS,
ERNITO CANILLAS, MARILOU JAVIER, MARGANI MADDIN, RICHARD SENA, FE D.
CANOY, GEORGE SALUD, EDGARDO BORGONIA, JR., ANTONIO ATILANO, JOSE
CASTRO, and LIBERATO BAGALANON, Petitioners,
vs.
MAR FISHING CO., INC., MIRAMAR FISHING CO., INC., ROBERT BUEHS AND JEROME
SPITZ. Respondents.
DECISION
SERENO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Court, seeking a review of the Court of Appeals (CA) 19 March 2004 and 12 May 2005
Resolutions in CA-G.R. SP NO. 82651. The appellate court had dismissed the Petition for
Review on the ground that it lacked a Verification and Certification against forum shopping.
The pertinent facts are as follows:
On 28 June 2001, respondent Mar Fishing Co., Inc. (Mar Fishing), engaged in the business of
fishing and canning of tuna, sold its principal assets to co-respondent Miramar Fishing Co., Inc.
(Miramar) through public bidding.1 The proceeds of the sale were paid to the Trade and
Investment Corporation of the Philippines (TIDCORP) to cover Mar Fishings outstanding
obligation in the amount of P 897,560,041.26.2 In view of that transfer, Mar Fishing issued a
Memorandum dated 23 October 2001 informing all its workers that the company would cease to
operate by the end of the month.3 On 29 October 2001 or merely two days prior to the months
end, it notified the Department of Labor and Employment (DOLE) of the closure of its business
operations.4
Thereafter, Mar Fishings labor union, Mar Fishing Workers Union NFL and Miramar entered
into a Memorandum of Agreement.5 The Agreement provided that the acquiring company,
Miramar, shall absorb Mar Fishings regular rank and file employees whose performance was
satisfactory, without loss of seniority rights and privileges previously enjoyed. 6
Unfortunately, petitioners, who worked as rank and file employees, were not hired or given
separation pay by Miramar.7 Thus, petitioners filed Complaints for illegal dismissal with money
claims before the Arbitration Branch of the National Labor Relations Commission (NLRC).
In its 30 July 2002 Decision, the Labor Arbiter (LA) found that Mar Fishing had necessarily closed
its operations, considering that Miramar had already bought the tuna canning plant. 8 By reason of
the closure, petitioners were legally dismissed for authorized cause. 9 In addition, even if Mar
Fishing reneged on notifying the DOLE within 30 days prior to its closure, that failure did not
make the dismissals void. Consequently, the LA ordered Mar Fishing to give separation pay to its
workers.10
The LA held thus:11
WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered in these
cases:
1. Ordering Mar Fishing Company, Inc., through its president, treasurer, manager or other
proper officer or representative, to pay the complainants their respective separation pay,
as computed in page 12 to 33 hereof, all totaling SIX MILLION THREE HUNDRED
THIRTY SIX THOUSAND FIVE HUNDRED EIGHTY SEVEN & 77/100 PESOS
(P 6,336,587.77);
2. Dismissing these case [sic] as against Miramar Fishing Company, Inc., as well as
against Robert Buehs and Jerome Spitz, for lack of cause of action;
3. Dismissing all other charges and claims of the complainants, for lack of merit.
SO ORDERED.

Aggrieved, petitioners pursued the action before the NLRC, which modified the LAs Decision.
Noting that Mar Fishing notified the DOLE only two days before the business closed, the labor
court considered petitioners dismissal as ineffectual.12 Hence, it awarded, apart from separation
pay, full back wages to petitioners from the time they were terminated on 31 October 2001 until
the date when the LA upheld the validity of their dismissal on 30 July 2002. 13
Additionally, the NLRC pierced the veil of corporate fiction and ruled that Mar Fishing and
Miramar were one and the same entity, since their officers were the same. 14 Hence, both
companies were ordered to solidarily pay the monetary claims.15
On reconsideration, the NLRC modified its ruling by imposing liability only on Mar Fishing. The
labor court held that petitioners had no cause of action against Miramar, since labor contracts
cannot be enforced against the transferee of an enterprise in the absence of a stipulation in the
contract that the transferee assumes the obligation of the transferor.16 Hence, the dispositive
portion reads:17
WHEREFORE, foregoing premises considered, the assailed resolution is MODIFIED in that only
Mar Fishing Company, Inc. through its responsible officers, is ordered to pay complainants their
separation pay, and full backwages from the date they were terminated from employment until 30
July 2002, subject to computation during execution stage of proceedings at the appropriate
Regional Arbitration Branch.
SO ORDERED.
Despite the award of separation pay and back wages, petitioners filed a Rule 65 Petition before
the CA. This time, they argued that both Mar Fishing and Miramar should be made liable for their
separation pay, and that their back wages should be up to the time of their actual reinstatement.
However, finding that only 3 of the 228 petitioners18signed the Verification and Certification
against forum shopping, the CA instantly dismissed the action for certiorari against the 225 other
petitioners without ruling on the substantive aspects of the case. 19
By means of a Manifestation with Omnibus Motion,20 petitioners submitted a Verification and
Certification against forum shopping executed by 161 signatories. In the said pleading,
petitioners asked the CA to reconsider by invoking the rule that technical rules do not strictly
apply to labor cases.21 Still, the CA denied petitioners contentions and held thus:22
Anent the liberality in application of the rules, as alleged by petitioners, the same deserves scant
consideration. x x x.
xxx. While litigation is not a game of technicalities, and that the rules of procedure should not be
enforced strictly at the cost of substantial justice, still it does not follow that the Rules of Court
may be ignored at will and at random to the prejudice of the orderly presentation, assessment
and just resolution of the issues. xxx.
Before this Court, 124 petitioners raise the issue of whether the CA gravely erred in dismissing
their Petition for Review on the ground that their pleading lacked a Verification and Certification
against forum shopping.23
The Rules of Court provide that a petition for certiorari must be verified and accompanied by a
sworn certification of non-forum shopping.24 Failure to comply with these mandatory requirements
shall be sufficient ground for the dismissal of the petition.25 Considering that only 3 of the 228

named petitioners signed the requirement, the CA dismissed the case against them, as they did
not execute a Verification and Certification against forum shopping.
Petitioners invoke substantial compliance with procedural rules when their Manifestation already
contains a Verification and Certification against forum shopping executed by 161 signatories.
They heavily rely on Jaro v. Court of Appeals,26 citing Piglas-Kamao v. National Labor Relations
Commission and Cusi-Hernandez v. Diaz, in which we discussed that the subsequent
submission of the missing documentary attachments with the Motion for Reconsideration
amounted to substantial compliance.
However, this very case does not involve a failure to attach the Annexes. Rather, the procedural
infirmity consists of omission the failure to sign a Verification and Certification against forum
shopping. Addressing this defect squarely, we have already resolved that because of
noncompliance with the requirements governing the certification of non-forum shopping, no error
could be validly attributed to the CA when it ordered the dismissal of the special civil action for
certiorari.27 The lack of certification against forum shopping is not curable by mere amendment of
a complaint, but shall be a cause for the dismissal of the case without prejudice. 28 Indeed, the
general rule is that subsequent compliance with the requirements will not excuse a party's failure
to comply in the first instance.29 Thus, on procedural aspects, the appellate court correctly
dismissed the case.
However, this Court has recognized that the merit of a case is a special circumstance or
compelling reason that justifies the relaxation of the rule requiring verification and certification of
non-forum shopping.30 In order to fully resolve the issue, it is thus necessary to determine
whether technical rules were brushed aside at the expense of substantial justice. 31 This Court will
then delve into the issue on (1) the solidary liability of Mar Fishing and Miramar to pay petitioners
monetary claims and (2) the reckoning period for the award of back wages.
For a dismissal based on the closure of business to be valid, three (3) requirements must be
established. Firstly, the cessation of or withdrawal from business operations must be bona fide in
character. Secondly, there must be payment to the employees of termination pay amounting to at
least one-half (1/2) month pay for each year of service, or one (1) month pay, whichever is
higher. Thirdly, the company must serve a written notice on the employees and on the DOLE at
least one (1) month before the intended termination. 32
In their Petition for Review on Certiorari, petitioners did not dispute the conclusion of the LA and
the NLRC that Mar Fishing had an authorized cause to dismiss its workers. Neither did
petitioners challenge the computation of their separation pay.
Rather, they questioned the holding that only Mar Fishing was liable for their monetary claims. 33
Basing their conclusion on the Memorandum of Agreement and Supplemental Agreement
between Miramar and Mar Fishings labor union, as well as the General Information Sheets and
Company Profiles of the two companies, petitioners assert that Miramar simply took over the
operations of Mar Fishing. In addition, they assert that these companies are one and the same
entity, given the commonality of their directors and the similarity of their business venture in tuna
canning plant operations.34
At the fore, the question of whether one corporation is merely an alter ego of another is purely
one of fact generally beyond the jurisdiction of this Court.35 In any case, given only these bare
reiterations, this Court sustains the ruling of the LA as affirmed by the NLRC that Miramar and
Mar Fishing are separate and distinct entities, based on the marked differences in their stock

ownership.36 Also, the fact that Mar Fishings officers remained as such in Miramar does not by
itself warrant a conclusion that the two companies are one and the same. As this Court held in
Sesbreo v. Court of Appeals, the mere showing that the corporations had a common director
sitting in all the boards without more does not authorize disregarding their separate juridical
personalities.37
Neither can the veil of corporate fiction between the two companies be pierced by the rest of
petitioners submissions, namely, the alleged take-over by Miramar of Mar Fishings operations
and the evident similarity of their businesses. At this point, it bears emphasizing that since
piercing the veil of corporate fiction is frowned upon, those who seek to pierce the veil must
clearly establish that the separate and distinct personalities of the corporations are set up to
justify a wrong, protect a fraud, or perpetrate a deception.38 This, unfortunately, petitioners have
failed to do. In Indophil Textile Mill Workers Union vs. Calica, we ruled thus: 39
In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that the
creation of the corporation is a devi[c]e to evade the application of the CBA between petitioner
Union and private respondent company. While we do not discount the possibility of the
similarities of the businesses of private respondent and Acrylic, neither are we inclined to apply
the doctrine invoked by petitioner in granting the relief sought. The fact that the businesses of
private respondent and Acrylic are related, that some of the employees of the private respondent
are the same persons manning and providing for auxiliary services to the units of Acrylic, and
that the physical plants, offices and facilities are situated in the same compound, it is our
considered opinion that these facts are not sufficient to justify the piercing of the corporate veil of
Acrylic. (Emphasis supplied.)
Having been found by the trial courts to be a separate entity, Mar Fishing and not Miramar is
required to compensate petitioners. Indeed, the back wages and retirement pay earned from the
former employer cannot be filed against the new owners or operators of an enterprise. 40
Evidently, the assertions of petitioners fail on both procedural and substantive
aspects. Therefore, no special reasons exist to reverse the CAs dismissal of the case due to
their failure to abide by the mandatory procedure for filing a petition for review on certiorari.
Given the correctness of the appellate courts ruling and the lack of appropriate remedies, this
Court will no longer dwell on the exact computation of petitioners claims for back wages, which
have been sufficiently threshed out by the LA and the NLRC. Judicial review of labor cases does
not go beyond an evaluation of the sufficiency of the evidence upon which labor officials' findings
rest.41
1wphi1

While we sympathize with the situation of the workers in this case, we cannot disregard, absent
compelling reasons, the factual determinations and the legal doctrines that support the findings
of the courts a quo. Generally, the findings of fact and the conclusion of the labor courts are not
only accorded great weight and respect, but are even clothed with finality and deemed binding
on this Court, as long as they are supported by substantial evidence. 42
On a final note, this Court reminds the parties seeking the ultimate relief of certiorari to observe
the rules, since nonobservance thereof cannot be brushed aside as a "mere
technicality."43 Procedural rules are not to be belittled or simply disregarded, for these prescribed
procedures ensure an orderly and speedy administration of justice. 44
IN VIEW THEREOF, the assailed 19 March 2004 and 12 May 2005 Resolutions of the Court of
Appeals in CA-GR SP NO. 82651 are AFFIRMED. Hence, the 04 July 2005 Petition for Review
filed by petitioners is hereby denied for lack of merit.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171219

September 3, 2012

ATTY. FE Q. PALMIANO-SALVADOR, Petitioner,

vs.
CONSTANTINO ANGELES, substituted by LUZ G. ANGELES*, Respondent.
DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying
that the Decision1of the Court of Appeals (CA) promulgated on September 16, 2005 dismissing
the petition before it, and its Resolution2 dated January 13, 2006, denying petitioner's Motion for
Reconsideration, be reversed and set aside.
The records reveal the CA's narration of facts to be accurate, to wit:
xxxx
Respondent-appellee ANGELES is one of the registered owners of a parcel of land located at
1287 Castanos Street, Sampaloc, Manila, evidenced by Transfer Certificate of Title No. 150872.
The subject parcel of land was occupied by one Jelly Galiga (GALIGA) from 1979 up to 1993, as
a lessee with a lease contract. Subsequently, Fe Salvador (SALVADOR) alleged that she bought
on September 7, 1993 the subject parcel of land from GALIGA who represented that he was the
owner, being one in possession. Petitioner-appellant SALVADOR remained in possession of said
subject property from November 1993 up to the present.
On November 18, 1993, the registered owner, the respondentappellee ANGELES, sent a letter to
petitioner-appellant SALVADOR demanding that the latter vacate the subject property, which was
not heeded by petitioner-appellant SALVADOR. Respondent-appellee ANGELES, thru one
Rosauro Diaz, Jr. (DIAZ), filed a complaint for ejectment on October 12, 1994 with the
Metropolitan Trial Court [MeTC] of Manila, Branch 16, docketed as Civil Case No. 146190-CV.
The Assailed Decision of the Trial Courts
The [MeTC] rendered its decision on November 29, 1999 in favor of herein respondent-appellee
ANGELES, the dispositive portion of which reads, to wit:
WHEREFORE, judgment is hereby rendered for the plaintiff and against the defendant ordering
the latter and all persons claiming under her to:
1) vacate the parcel of land located at 1287 Castanos Street, Sampaloc, Manila, and
surrender the same to the plaintiff;

2) pay the plaintiff the sum of Php1,000.00 monthly as reasonable compensation for her
use and occupancy of the above parcel of land beginning November 1993 up to the time
she has actually vacated the premises;
3) pay the plaintiff the sum of Php5,000.00 as attorney's fees and the cost of suit.
SO ORDERED.
In the appeal filed by petitioner-appellant SALVADOR, she alleged, among others, that DIAZ,
who filed the complaint for ejectment, had no authority whatsoever from respondent-appellee
ANGELES at the time of filing of the suit. Petitioner-appellant SALVADOR's appeal was denied
by the [Regional Trial Court] RTC in a Decision dated March 12, 2003. The Motion for
Reconsideration filed by SALVADOR was denied in an Order dated March 16, 2004. 3
Petitioner elevated the case to the CA via a petition for review, but in a Decision dated
September 16, 2005, said petition was dismissed for lack of merit. The CA affirmed the factual
findings of the lower courts that Galiga, the person who supposedly sold the subject premises to
petitioner, was a mere lessee of respondent, the registered owner of the land in question. Such
being the case, the lower court ruled that Galiga could not have validly transferred ownership of
subject property to herein petitioner. It was ruled by the CA that there were no significant facts or
circumstances that the trial court overlooked or misinterpreted, thus, it found no reason to
overturn the factual findings of the MeTC and the RTC. A motion for reconsideration of said
Decision was denied in a Resolution dated January 13, 2006.
Hence, the present petition, where one of the important issues for resolution is the effect of
Rosauro Diaz's (respondent's representative) failure to present proof of his authority to represent
respondent (plaintiff before the MeTC) in filing the complaint. This basic issue has been ignored
by the MeTC and the RTC, while the CA absolutely failed to address it, despite petitioner's
insistence on it from the very beginning, i.e., in her Answer filed with the MeTC. This is quite
unfortunate, because this threshold issue should have been resolved at the outset as it is
determinative of the court's jurisdiction over the complaint and the plaintiff.
Note that the complaint before the MeTC was filed in the name of respondent, but it was one
Rosauro Diaz who executed the verification and certification dated October 12, 1994, alleging
therein that he was respondent's attorney-in-fact. There was, however, no copy of any document
attached to the complaint to prove Diaz's allegation regarding the authority supposedly granted
to him. This prompted petitioner to raise in her Answer and in her Position Paper, the issue of
Diaz's authority to file the case. On December 11, 1995, more than a year after the complaint
was filed, respondent attached to his Reply and/or Comment to Respondent's (herein petitioner)
Position Paper,4 a document entitled Special Power of Attorney (SPA)5 supposedly executed by
respondent in favor of Rosauro Diaz. However, said SPA was executed only on November 16,
1994, or more than a month after the complaint was filed, appearing to have been notarized
by one Robert F. McGuire of Santa Clara County. Observe, further, that there was no certification
from the Philippine Consulate General in San Francisco, California, U.S.A, that said person is
indeed a notary public in Santa Clara County, California. Verily, the court cannot give full faith
and credit to the official acts of said Robert McGuire, and hence, no evidentiary weight or value
can be attached to the document designated as an SPA dated November 16, 1994. Thus, there
is nothing on record to show that Diaz had been authorized by respondent to initiate the action
against petitioner.
1wphi1

What then, is the effect of a complaint filed by one who has not proven his authority to represent
a plaintiff in filing an action? In Tamondong v. Court of Appeals,6 the Court categorically stated
that "[i]f a complaint is filed for and in behalf of the plaintiff [by one] who is not authorized to do

so, the complaint is not deemed filed. An unauthorized complaint does not produce any legal
effect. Hence, the court should dismiss the complaint on the ground that it has no jurisdiction
over the complaint and the plaintiff."7 This ruling was reiterated in Cosco Philippines Shipping,
Inc. v. Kemper Insurance Company,8 where the Court went on to say that "[i]n order for the court
to have authority to dispose of the case on the merits, it must acquire jurisdiction over the subject
matter and the parties. Courts acquire jurisdiction over the plaintiffs upon the filing of the
complaint, and to be bound by a decision, a party should first be subjected to the court's
jurisdiction. Clearly, since no valid complaint was ever filed with the [MeTC], the same did not
acquire jurisdiction over the person of respondent [plaintiff before the lower court]." 9
Pursuant to the foregoing rulings, therefore, the MeTC never acquired jurisdiction over this case
and all proceedings before it were null and void. The courts could not have delved into the very
merits of the case, because legally, there was no complaint to speak of. The court's jurisdiction
cannot be deemed to have been invoked at all.
IN VIEW OF THE FOREGOING, the Petition is GRANTED. The Decision of the Metropolitan
Trial Court in Civil Case No. 146190, dated November 29, 1999; the Decision of the Regional
Trial Court in Civil Case No. 00-96344, dated March 12, 2003; and the Decision of the Court of
Appeals in CA-G.R. SP No. 83467, are SET ASIDE AND NULLIFIED. The complaint filed by
respondent before the Metropolitan Trial Court is hereby DISMISSED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 139539

February 5, 2002

CEROFERR REALTY CORPORATION, petitioner,

vs.
COURT OF APPEALS and ERNESTO D. SANTIAGO, respondents.
DECISION
PARDO, J.:
The Case
This is an appeal via certiorari1 from the decision of the Court of Appeals2 dismissing petitioners
appeal from the order3 of the Regional Trial Court, Branch 93, Quezon City, which dismissed
petitioners complaint for damages and injunction with preliminary injunction, as well as its
resolution4 denying reconsideration.5
The Facts
The facts, as found by the Court of Appeals,6 are as follows:
"On March 16, 1994, plaintiff (Ceroferr Realty Corporation) filed with the Regional Trial Court,
Quezon City, Branch 93, a complaint7 against defendant Ernesto D. Santiago (Santiago), for

"damages and injunction, with preliminary injunction." In the complaint, Ceroferr prayed that
Santiago and his agents be enjoined from - claiming possession and ownership over Lot No. 68
of the Tala Estate Subdivision, Quezon City, covered by TCT No. RT-90200 (334555); that
Santiago and his agents be prevented from making use of the vacant lot as a jeepney terminal;
that Santiago be ordered to pay Ceroferr P650.00 daily as lost income for the use of the lot until
possession is restored to the latter; and that Santiago be directed to pay plaintiff Ceroferr moral,
actual and exemplary damages and attorneys fees, plus expenses of litigation.
"In his answer, defendant Santiago alleged that the vacant lot referred to in the complaint was
within Lot No. 90 of the Tala Estate Subdivision, covered by his TCT No. RT-78 110 (3538); that
he was not claiming any portion of Lot No. 68 claimed by Ceroferr; that he had the legal right to
fence Lot No. 90 since this belonged to him, and he had a permit for the purpose; that Ceroferr
had no color of right over Lot No. 90 and, hence, was not entitled to an injunction to prevent
Santiago from exercising acts of ownership thereon; and that the complaint did not state a cause
of action.
"In the course of the proceedings, an important issue metamorphosed as a result of the
conflicting claims of the parties over the vacant lot actually used as a jeepney terminal the
exact identity and location thereof. There was a verification survey, followed by a relocation
survey, whereby it would appear that the vacant lot is inside Lot No. 68. The outcome of the
survey, however, was vigorously objected to by defendant who insisted that the area is inside his
lot. Defendant, in his manifestation dated November 2, 1994, adverted to the report of a geodetic
engineer. Mariano V. Flotildes, to the effect that the disputed portion is inside the boundaries of
Lot No. 90 of the Tala Estate Subdivision which is separate and distinct from Lot No. 68, and that
the two lots are separated by a concrete fence.
"Because of the competing claims of ownership of the parties over the vacant lot, it became
inevitable that the eye of the storm centered on the correctness of property boundaries which
would necessarily result in an inquiry as to the regularity and validity of the respective titles of the
parties. While both parties have been brandishing separate certificates of title, defendant
asserted a superior claim as against that of the plaintiff in that, according to defendant, his title
has been confirmed through judicial reconstitution proceedings, whereas plaintiffs title does not
carry any technical description of the property except only as it is designated in the title as Lot
No. 68 of the Tala Estate Subdivision.
"It thus became clear, at least from the viewpoint of defendant, that the case would no longer
merely involve a simple case of collection of damages and injunction which was the main
objective of the complaint - but a review of the title of defendant vis--vis that of plaintiff. At this
point, defendant filed a motion to dismiss the complaint premised primarily on his contention that
the trial court cannot adjudicate the issue of damages without passing over the conflicting claims
of ownership of the parties over the disputed portion.
"On May 14, 1996, the trial court issued the order now subject of this appeal which, as earlier
pointed out, dismissed the case for lack of cause of action and lack of jurisdiction. The court held
that plaintiff was in effect impugning the title of defendant which could not be done in the case for
damages and injunction before it. The court cited the hoary rule that a Torens certificate of title
cannot be the subject of collateral attack but can only be challenged through a direct proceeding.
It concluded that it could not proceed to decide plaintiffs claim for damages and injunction for
lack of jurisdiction because its judgment would depend upon a determination of the validity of
defendants title and the identity of the land covered by it.
"From this ruling, plaintiff appealed to this court insisting that the complaint stated a valid cause
of action which was determinable from the face thereof, and that, in any event, the trial court

could proceed to try and decide the case before it since, under present law, there is now no
substantial distinction between the general jurisdiction vested in a regional trial court and its
limited jurisdiction when acting as a land registration court, citing Ignacio v. Court of Appeals 246
SCRA 242 (1995)."
On March 26, 1999, the Court of Appeals promulgated a decision dismissing the appeal. 8 On
May 13, 1999, petitioner filed with the Court of Appeals a motion for reconsideration of the
decision.9 On July 29, 1999, the Court of Appeals denied petitioners motion for reconsideration
for lack of merit.10
Hence, this appeal.11
The Issues
The issues are: (1) whether Ceroferrs complaint states a sufficient cause of action and (2)
whether the trial court has jurisdiction to determine the identity and location of the vacant lot
involved in the case.
The Courts Ruling
We grant the petition.
The rules of procedure require that the complaint must state a concise statement of the ultimate
facts or the essential facts constituting the plaintiffs cause of action. A fact is essential if it cannot
be stricken out without leaving the statement of the cause of action inadequate. A complaint
states a cause of action only when it has its three indispensable elements, namely: (1) a right in
favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not to violate such right; and (3) an
act or omission on the part of such defendant violative of the right of plaintiff or constituting a
breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for
recovery of damages.12 If these elements are not extant, the complaint becomes vulnerable to a
motion to dismiss on the ground of failure to state a cause of action.13
These elements are present in the case at bar.
The complaint14 alleged that petitioner Ceroferr owned Lot 68 covered by TCT No. RT-90200
(334555).Petitioner Ceroferr used a portion of Lot 68 as a jeepney terminal.
The complaint further alleged that respondent Santiago claimed the portion of Lot 68 used as a
jeepney terminal since he claimed that the jeepney terminal was within Lot 90 owned by him and
covered by TCT No. RT-781 10 (3538) issued in his name.
Despite clarification from petitioner Ceroferr that the jeepney terminal was within Lot 68 and not
within Lot 90, respondent Santiago persisted in his plans to have the area fenced. He applied for
and was issued a fencing permit by the Building Official, Quezon City. It was even alleged in the
complaint that respondent- Santiago was preventing petitioner Ceroferr and its agents from
entering the property under threats of bodily harm and destroying existing structures thereon.
A defendant who moves to dismiss the complaint on the ground of lack of cause of action, as in
this case, hypothetically admits all the averments thereof. The test of sufficiency of the facts
found in a complaint as constituting a cause of action is whether or not admitting the facts
alleged the court can render a valid judgement upon the same in accordance with the prayer

thereof. The hypothetical admission extends to the relevant and material facts well pleaded in the
complaint and inferences fairly deducible therefrom. Hence, if the allegations in the complaint
furnish sufficient basis by which the complaint can be maintained, the same should not be
dismissed regardless of the defense that may be assessed by the defendants. 15
In this case, petitioner Ceroferrs cause of action has been sufficiently averred in the complaint. If
it were admitted that the right of ownership of petitioner Ceroferr to the peaceful use and
possession of Lot 68 was violated by respondent Santiagos act of encroachment and fencing of
the same, then petitioner Ceroferr would be entitled to damages.
On the issue of jurisdiction, we hold that the trial court has jurisdiction to determine the identity
and location of the vacant lot in question.
Jurisdiction over the subject matter is conferred by law and is determined by the allegations of
the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted
therein.16 The jurisdiction of a court over the subject matter is determined by the allegations of the
complaint and cannot be made to depend upon the defenses set up in the answer or pleadings
filed by the defendant.17
While the lack of jurisdiction of a court may be raised at any stage of an action, nevertheless, the
party raising such question may be estopped if he has actively taken part in the very proceedings
which he questions and he only objects to the courts jurisdiction because the judgment or the
order subsequently rendered is adverse to him.18
In this case, respondent Santiago may be considered estopped to question the jurisdiction of the
trial court for he took an active part in the case. In his answer, respondent Santiago did not
question the jurisdiction of the trial court to grant the reliefs prayed for in the complaint. His
geodetic engineers were present in the first and second surveys that the LRA conducted. It was
only when the second survey report showed results adverse to his case that he submitted a
motion to dismiss.
Both parties in this case claim that the vacant lot is within their property. This is an issue that can
be best resolved by the trial court in the exercise of its general jurisdiction.
1wphi1

After the land has been originally registered, the Court of Land Registration ceases to have
jurisdiction over contests concerning the location of boundary lines. In such case, the action in
personam has to be instituted before an ordinary court of general jurisdiction.19
The regional trial court has jurisdiction to determine the precise identity and location of the vacant
lot used as a jeepney terminal.
The Fallo
IN VIEW WHEREOF, we GRANT the petition. We REVERSE the decision of the Court of
Appeals20 and the order of the trial court21 dismissing the case. We remand the case to the
Regional Trial Court, Branch 93, Quezon City, for further proceedings.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 176949

June 27, 2012

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner,

vs.
LOURDES K. MENDOZA, Respondent.
DECISION
DEL CASTILLO, J.:
In civil cases, the party with the most convincing evidence prevails.
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the
Decision2 dated April 28, 2006 and the Resolution3 dated March 9, 2007 of the Court of Appeals
(CA) in CA-G.R. CV No. 69180.
Factual Antecedents
On January 6, 2000, respondent Lourdes K. Mendoza, sole proprietor of Highett Steel
Fabricators (Highett), filed before the Regional Trial Court (RTC) of Caloocan City, Branch 126, a
Complaint4 for a sum of money, docketed as Civil Case No. C-19100, against petitioner Asian
Construction and Development Corporation, a duly registered domestic corporation.
In the complaint, respondent alleged that from the period August 7, 1997 to March 4, 1998,
petitioner purchased from Highett various fabricated steel materials and supplies amounting
to P1,206,177.00, exclusive of interests;5that despite demand, petitioner failed and/or refused to
pay;6 and that due to the failure and/or refusal of petitioner to pay the said amount, respondent
was compelled to engage the services of counsel.7
Petitioner moved for a bill of particulars on the ground that no copies of the purchase orders and
invoices were attached to the complaint to enable petitioner to prepare a responsive pleading to
the complaint.8 The RTC, however, in an Order dated March 1, 2000, denied the
motion.9 Accordingly, petitioner filed its Answer with Counterclaim10 denying liability for the claims
and interposing the defense of lack of cause of action. 11
To prove her case, respondent presented the testimonies of (1) Artemio Tejero (Tejero), the
salesman of Highett who confirmed the delivery of the supplies and materials to petitioner, and
(2) Arvin Cheng, the General Manager of Highett.12
The presentation of evidence for petitioner, however, was deemed waived and terminated due to
the repeated non-appearance of petitioner and its counsel.13
Ruling of the Regional Trial Court
On December 1, 2000, the RTC rendered a Decision14 in favor of respondent, to wit:

WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering the [petitioner]
corporation to pay the [respondent] the following:
a. P1,206,177.00, representing the principal amount, which is the purchase price of the
materials and other supplies ordered by and delivered to [petitioner];
b. P244,288.59, representing the accrued interest as of August 31, 1999 plus xxx
additional interest to be computed at the rate of 12% per annum until the total
indebtedness is paid in full;
c. P150,000.00 for and as Attorneys fees; and
d. Cost of suit.
SO ORDERED.15
Ruling of the Court of Appeals
On appeal, the CA affirmed with modification the Decision of the RTC. The decretal portion of the
CA Decision16reads:
WHEREFORE, the assailed Decision of the RTC [Br. 126, Caloocan City] dated December 1,
2000 is herebyAFFIRMED with the MODIFICATION, in that the reckoning point for the
computation of the 1% monthly interest shall be 30 days from date of each delivery.
SO ORDERED.17
Petitioner sought reconsideration but the same was unavailing. 18
Issues
Hence, this petition raising the following issues:
I. WHETHER X X X THE CHARGE INVOICES ARE ACTIONABLE DOCUMENTS.
II. WHETHER X X X THE DELIVERY OF THE ALLEGED MATERIALS [WAS] DULY
PROVEN.
III. WHETHER X X X RESPONDENT IS ENTITLED TO ATTORNEYS FEES.19
Petitioners Arguments
Petitioner argues that a charge or sales invoice is not an actionable document; thus, petitioners
failure to deny under oath its genuineness and due execution does not constitute an admission
thereof.20 Petitioner likewise insists that respondent was not able to prove her claim as the
invoices offered as evidence were not properly authenticated by her witnesses. 21 Lastly, petitioner
claims that the CA erred in affirming the award of attorneys fees as the RTC Decision failed to
expressly state the basis for the award thereof.22
Respondents Arguments

Respondent, in her Comment,23 prays for the dismissal of the petition contending that the
arguments raised by petitioner are a mere rehash of those presented and already passed upon
by the CA.24 She maintains that charge invoices are actionable documents,25 and that these were
properly identified and authenticated by witness Tejero, who testified that upon delivery of the
supplies and materials, the invoices were stamped received by petitioners
employee.26 Respondent contends that the award of attorneys fees was justified as the basis for
the award was clearly established during the trial. 27
Our Ruling
The petition is partly meritorious.
The charge invoices are not actionable documents
Section 7 of Rule 8 of the Rules of Court states:
SEC. 7. Action or defense based on document. Whenever an action or defense is based upon
a written instrument or document, the substance of such instrument or document shall be set
forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an
exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be
set forth in the pleading. (Emphasis supplied.)
Based on the foregoing provision, a document is actionable when an action or defense is
grounded upon such written instrument or document. In the instant case, the Charge
Invoices28 are not actionable documents per se as these "only provide details on the alleged
transactions."29 These documents need not be attached to or stated in the complaint as these are
evidentiary in nature.30 In fact, respondents cause of action is not based on these documents but
on the contract of sale between the parties.
Delivery of the supplies and materials was duly proved
But although the Charge Invoices are not actionable documents, we find that these, along with
the Purchase Orders,31 are sufficient to prove that petitioner indeed ordered supplies and
materials from Highett and that these were delivered to petitioner.
Moreover, contrary to the claim of petitioner, the Charge Invoices were properly identified and
authenticated by witness Tejero who was present when the supplies and materials were
delivered to petitioner and when the invoices were stamped received by petitioners employee,
Roel Barandon.32
It bears stressing that in civil cases, only a preponderance of evidence or "greater weight of the
evidence" is required.33 In this case, except for a bare denial, no other evidence was presented
by petitioner to refute respondents claim. Thus, we agree with the CA that the evidence
preponderates in favor of respondent.
Basis for the award of Attorneys fees must be stated in the decision
However, with respect to the award of attorneys fees to respondent, we are constrained to
disallow the same as the rationale for the award was not stated in
the text of the RTC Decision but only in the dispositive portion. 34

1wphi1

WHEREFORE, the petition is hereby PARTLY GRANTED. The assailed Decision dated April 28,
2006 and the Resolution dated March 9, 2007 of the Court of Appeals in CA-G.R. CV No. 69180
are hereby AFFIRMED with MODIFICATION. The award of attorneys fees in the amount
of P150,000.00 is hereby DELETED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 183034

March 12, 2014

SPOUSES FERNANDO and MA. ELENA SANTOS, Petitioners,

vs.
LOLITA ALCAZAR, represented by her Attorney-in-Fact DELFIN CHUA, Respondent.
DECISION
DEL CASTILLO, J.:
The rule that the genuineness and due execution of the instrument shall be deemed admitted,
unless the adverse party specifically denies them under oath, applies only to parties to such
instrument.
Assailed in this Petition for Review on Certiorari are the September 27, 2007 Decision of the
Court of Appeals (CA) in CA-G.R. CV No. 87935, entitled "Lolita Alcazar, represented by her
Attorney-in-Fact, Delfin Chua, Plaintiff-Appellee, versus Spouses Fernando T. Santos,
Defendants-Appellants," and its May 23, 2008 Resolution denying petitioners' Motion for
Reconsideration.
1

Factual Antecedents
In February 2001, respondent Lolita Alcazar, proprietor of Legazpi Color Center (LCC), instituted
through her attorney-in-fact Delfin Chua a Complaint for sum of money against the petitioners,
spouses Fernando and Ma. Elena Santos, to collect the value of paint and construction materials
obtained by the latter from LCC amounting to P1,456,000.00, which remained unpaid despite
written demand. The case was docketed as Civil Case No. 9954 and assigned to Branch 5 of the
Regional Trial Court of Legazpi City. Respondents cause of action is based on a document
entitled "Acknowledgment" apparently executed by hand by petitioner Fernando, thus:
4

ACKNOWLEDGMENT
This is to certify that I acknowledge my obligation in the amount of One Million Four Hundred
Fifty Six Thousand (P1,456,000), Philippine Currency with LEGAZPI COLOR CENTER,
LEGAZPI CITY.
Signed at No. 32 Agno St. Banaue, Quezon City on December 12, 2000.
(signed)
FERNANDO T. SANTOS
Debtor

Signed in the presence of:

(signed)
TESS ALCAZAR
Proprietress
Legazpi Color Center
Witnesses in the signing:
(signed)
DELFIN A. CHUA

(signed)
AILEEN C. EDADES

Respondent alleged in her Complaint:

xxxx
4. That as part of the agreement, defendants also obligated themselves to pay plaintiff at
the rate of 3% interest per month based on the unpaid principal, to cover the cost of
money;
5. That as of December, 2000, the total obligation of defendants with plaintiff which
consists of principal and interest was P1,456,000.00, a copy of the document where
defendants acknowledged their unpaid obligation is hereto attached as Annex "B";
(referring to the above Acknowledgment)
6. That on January 5, 2001, plaintiff sent a final demand to defendants to pay the
indebtedness, but said demand fell on deaf ears and defendants did not even bother to
communicate with plaintiff, copy of the demand letter is hereto attached as Annex "C";
7

She thus prayed that judgment be rendered ordering petitioners to pay her the sum
of P1,456,000.00, with interest at the rate of 3% per month; attorneys fees in the amount
of P72,800.00, and P1,500.00 per court appearance; and costs of the suit.
In their Answer, petitioners sought the dismissal of the Complaint, alleging among others that
8

4. Paragraph 5 is specifically denied as the document which Defendant Fernando T.

Santos signed does not reflect the true contract or intention of the parties, the actionable
document is incorrect and has to be reformed to reflect the real indebtedness of the
defendants;
5. Paragraph 6 of the complaint is specifically denied as the same does not reflect the
correct amount. The defendants[] computation is that the amount of P600,000.00 is the
only amount due and the instrument used as the actionable document does not reflect
the correct substance of the transaction and indicates a reformation of the actionable
document;
6. Paragraph 7 is specifically denied as defendants are willing to pay the correct amount,
not the amount in the complaint as the same does not indicate the correct amount owing
to the plaintiff;
xxxx
VERIFICATION

I, Fernando T. Santos[,] of legal age, Filipino[,] married and resident of Banawe, Quezon City[,]
under oath declare:
1. That I am the defendant in the above entitled case;
2. That I have read and understood the contents thereof and affirm that the
allegations contained therein are true and correct of my personal knowledge[;]
3. That I have not commenced any other action or proceeding involving x x x the
same issues in the Supreme Court, Court of Appeals or any other
tribunal/agency[;]
4. That to the best of my knowledge, no such action or proceeding involving the
same issues in the Supreme Court, Court of Appeals or any other tribunal/agency
[is pending];
5. That if I should thereafter learn that a similar action or proceeding has been
filed or is pending before the Supreme Court, Court of Appeals or any other
tribunal/agency, I undertake to report the fact within 5 days therefrom to this
court.
IN WITNESS WHEREOF, I have hereunto set [my] hand this April 18, 2001 x x x.
(signed)
Fernando T. Santos
Defendant
9

Pre-trial was conducted. On September 26, 2005, the trial court issued its Pre-trial Order setting
forth the matters taken up during the pre-trial conference and the schedule of hearings. The
presentation of respondents evidence was set on October 10; November 8 and 21; and
December 6 and 13, 2005. Petitioners were scheduled to present their case on January 9 and
23; and February 6, 2006.
10

11

On November 8, 2005, respondent presented her evidence and testified in court as the lone
witness. On November 21, 2005, she made a formal offer of her evidence and rested her case.
On January 17, 2006, petitioners filed a Demurrer to Evidence, which respondent opposed.
Petitioners argued that the Acknowledgment respondents Exhibit "A" which was presented in
court was not an original copy and thus inadmissible; petitioners receipt of the written demand
was not proved; the alleged deliveries of paint and construction materials were not covered by
delivery receipts; and respondents testimony was merely hearsay and uncorroborated.
12

On January 26, 2006, the trial court issued an Order denying petitioners demurrer for lack of
merit. In the same Order, the trial court scheduled the presentation of petitioners evidence in the
morning and afternoon sessions of February 20, 2006.
13

Petitioners moved to reconsider the trial courts January 26, 2006 Order. On February 20, 2006,
the trial court issued an Order denying petitioners Motion for Reconsideration and scheduled
the presentation of evidence for the petitioners on March 20, 2006.
14

On March 15, 2006, petitioners moved to reset the March 20, 2006 scheduled hearing, on the
ground that on said date and time, their counsel was to appear in another scheduled case.
On March 20, 2006, or the day of the scheduled hearing, petitioners counsel failed to appear,
prompting the trial court to issue an Order 1) denying petitioners March 15, 2006 motion to
15

reset for lack of merit and for violating Section 4, Rule 15 of the 1997 Rules of Civil
Procedure; 2) declaring that petitioners have waived their right to present evidence; and 3)
declaring that Civil Case No. 9954 is deemed submitted for decision.
16

Petitioners went up to the CA on certiorari. Docketed as CA-G.R. SP. No. 93889, the Petition
questioned the denial of petitioners demurrer. Meanwhile, they filed a Motion for
Reconsideration of the March 20, 2006 Order denying their motion to reset, but the trial court
denied the same in an Order dated April 24, 2006.
17

18

The Decision of the Regional Trial Court

On June 27, 2006, the trial court rendered its Decision in Civil Case No. 9954, which contained
the following decretal portion:
19

WHEREFORE, Premises Considered, judgment is rendered ordering the defendants to pay the
plaintiff the following amounts, to wit:
1. The sum of 1,456,000 pesos plus interest thereon at the legal rate commencing from
the time the complaint was filed in court until such time such amount has been paid in
full;
2. The sum of 10,000 pesos as litigation expenses; and
3. The sum of 25,000 pesos as attorneys fees.
The defendants shall pay the costs of suit.
Needless to say, the counterclaim in the Answer is Dismissed.
SO ORDERED.

20

The trial court essentially held that petitioners, in their Answer, admitted that they entered into
transactions with the respondent for the delivery of paint and construction materials, which
remained unpaid; that from the Acknowledgment, Exhibit "A," signed by Fernando and duly
presented, authenticated, and identified by respondent during trial, petitioners admitted that their
unpaid obligation including interest amounted toP1,456,000.00; and that petitioners plea for
reformation has no basis.
Petitioners filed their Motion for Reconsideration, arguing that the trial court should not have
pre-empted CA-G.R. SP No. 93889, and instead should have awaited the resolution thereof; that
the Acknowledgment was signed by Fernando alone, and thus the judgment should not bind his
co-defendant and herein petitioner Ma. Elena Santos; that petitioners liability has not been
established since no delivery receipts, invoices and statements of account were presented
during trial to show delivery of paint and construction materials; that respondent was unable to
present the original of the Acknowledgment, which puts the Decision of the trial court declaring
that the original thereof was presented and authenticated by respondent in serious doubt; and
that there is no evidentiary basis to hold petitioners liable for P1,456,000.00.
21

In an Order dated August 8, 2006, the trial court denied petitioners Motion for Reconsideration.
22

The Assailed Court of Appeals Decision

Petitioners interposed an appeal with the CA. Docketed as CA-G.R. CV No. 87935, the ruling in
the appeal is the subject of the present Petition. Petitioners claimed that the trial court erred in
allowing respondent to present her evidence ex parte; the Acknowledgment has not been

authenticated; the adjudged liability in the amount ofP1,456,000.00 was not sufficiently proved by
respondent, as she failed to present receipts and statements of account which would show the
true amount of their obligation, including interest; the trial court based its findings on erroneous
conclusions, assumptions and inferences; and the trial court erred in declaring them to have
waived their right to present evidence.
Meanwhile, in CA-G.R. SP. No. 93889, the CA issued its Decision dated March 30, 2007,
dismissing petitioners certiorari petition and sustaining the trial courts denial of their demurrer.
The CA held that petitioners failed to deny specifically under oath the genuineness and due
execution of the Acknowledgment; consequently, 1) its genuineness and due execution are
deemed admitted, 2) there was thus no need to present the original thereof, and 3) petitioners
liability was sufficiently established. The CA added that under the circumstances, certiorari was
not the proper remedy; petitioners should have gone to trial and awaited the trial courts
Decision, which they could appeal if adverse.
23

24

The Decision became final and executory on April 27, 2007.

25

On September 27, 2007, the CA issued the herein assailed Decision in CA-G.R. CV No. 87935,
which held as follows:
WHEREFORE, the instant appeal is DENIED and consequently DISMISSED for lack of merit.
SO ORDERED.

26

The CA held that in their Answer, petitioners admitted that they owed respondent, albeit to the
extent ofP600,000.00; this judicial admission of liability required no further proof. And with this
admission of liability, the Acknowledgment which was duly authenticated and formally offered in
evidence was sufficient to establish their liability, and no further proof in the form of receipts and
statements of account was required. The appellate court stated that Fernandos categorical
admission of liability as contained in the Acknowledgment as well as petitioners admissions in
their Answer sufficed. It held further that respondent was competent to testify on the
Acknowledgment as she was a signatory therein.
The CA likewise held that since they failed to oppose the Acknowledgment in the court below as
a result of their having waived their right to present evidence, petitioners cannot now belatedly
question the document. Moreover, their claim of a lesser liability in the amount of P600,000.00
remained to be plain unsubstantiated allegations as a result of their failure to refute respondents
evidence and present their own.
Finally, the CA held that petitioners were not deprived of due process during trial; on the contrary,
they were afforded sufficient opportunity to participate in the proceedings by way of constant
strict reminders by the court and several continuances, but they failed to take part in the
proceedings.
Petitioners moved to reconsider, but in the second assailed May 23, 2008 disposition, the
appellate court stood its ground. Thus, the instant Petition seeking a reversal of the assailed CA
dispositions and the dismissal of the Complaint in Civil Case No. 9954.
Issues
Petitioners now raise the following issues for the Courts resolution:
IN THE RESOLUTION OF THE COURT OF APPEALS, THE ARGUMENT IN
PETITIONERS MOTION FOR RECONSIDERATION THAT RESPONDENT FAILED TO
PRODUCE AND PRESENT THE ORIGINAL COPY OF THE ACKNOWLEDGMENT

RECEIPT EXHIBIT "A" WHICH IS A VIOLATION OF THE BEST EVIDENCE RULE, WAS
NOT ACTED UPON AND CONSIDERED "REHASH".
THE COURT OF APPEALS FOUND THE NEED FOR RECEIPTS OF STATEMENTS
OF ACCOUNT TO BE PRESENTED REFLECTING THE ACTUAL OBLIGATION OF
PETITIONERS IN ITS DECISION DATED JULY 20, 2004 AND THUS SET ASIDE AND
REMANDED TO THE COURT A QUO THE CASE FOR FURTHER PROCEEDINGS BUT
THE SAME WAS COUNTERMANDED IN THE ASSAILED DECISION.
27

CONTRARY TO THE FINDINGS OF THE COURT OF APPEALS, PETITIONERS DID

NOT ADMIT IN THEIR ANSWER THAT THEY ARE INDEBTED TO RESPONDENT IN
THE AMOUNT OF P1,456,000.00.
THE COURT OF APPEALS FAILED TO RULE ON THE ABSENCE OF ANY RECORD
OF THE PROCEEDINGS OF THE PRE-TRIAL CONFERENCE HELD ON SEPTEMBER
26, 2005. THE COURT OF APPEALS SHOULD HAVE SERIOUSLY CONSIDERED
TACKLING THE ISSUE OF PRESUMPTIONS, INFERENCES, AND MISCONCEPTION
OF FACTS USED BY THE COURT A QUO [IN ARRIVING AT] ITS FINDINGS AND
CONCLUSIONS.
PETITIONERS WERE NOT DULY NOTIFIED OF THE NOVEMBER 8, 2005 HEARING
IN VIOLATION OF SECTIONS 4 AND 5 [OF RULE 15] OF THE RULES OF COURT
WHICH THE COURT OF APPEALS FAILED TO RULE.
PETITIONERS HAVE BEEN DEPRIVED OF THEIR DAY IN COURT WHEN THEY
WERE CONSIDERED TO HAVE WAIVED THEIR RIGHT TO PRESENT EVIDENCE
AND THE CASE SUBMITTED FOR DECISION, THE CONTRARY RULING OF THE
COURT OF APPEALS NOTWITHSTANDING.
28

Petitioners Arguments
Petitioners, in their Petition and Reply, assert that during the proceedings below, only a
photocopy of the Acknowledgment was presented and identified by respondent even as the
original was not lost, the same having been made part of the record of the case when
respondents evidence was first presented ex parte. For this reason, they argue that the
photocopy presented and offered in evidence is inadmissible and could not be the basis for
arriving at a finding of liability on their part, pursuant to the best evidence rule.
29

30

Petitioners further point out that in the first CA disposition, specifically in CA-G.R. CV No. 71187,
the appellate courts Thirteenth Division ruled that in establishing petitioners pecuniary liability,
receipts and statements of account reflecting the actual amount of their obligation and interest
thereon were necessary. Later on, in CA-G.R. CV No. 87935, the same division of the CA made
a complete turnaround, declaring that receipts and statements of account were no longer
necessary. For petitioners, this retraction by the CA was irregular.
Petitioners add that the pre-trial conference in Civil Case No. 9954 is a sham, as there are no
records to show that it was ever conducted. Consequently, this irregularity renders the
proceedings below including the assailed judgment null and void. They add that the trial court
irregularly proceeded to receive respondents evidence ex parte on November 8, 2005 despite
lack of notice of hearing.
Next, petitioners point out inconsistencies and erroneous assumptions made by the appellate
court which formed the basis of its decision, such as Ma. Elenas undue inclusion in the judgment
of liability, when it is evident from the Acknowledgment that it was executed and signed by
Fernando alone.

Finally, petitioners submit that in denying a continuance of the March 20, 2006 hearing and
declaring them to have waived their right to present evidence, the trial court deprived them of
their day in court.
Respondents Arguments
In her Comment, respondent counters that the Petition presents no valid cause for the Courts
exercise of its power of review; that the issues raised therein have been duly taken up and
conclusively resolved by the CA; that with the finality of the Decision in CA-G.R. SP No. 93889,
petitioners may no longer raise any issue pertaining to the Acknowledgment, the genuineness
and due execution of which they are considered to have admitted; and that with the resolution by
the CA of the issues revived in the Petition, petitioners are guilty of forum shopping.
31

Respondent adds that petitioners are bound by the proceedings taken during the pre-trial
conference, and may not pretend to be ignorant of the hearing dates agreed upon and set by the
trial court. Respondent argues that petitioners may not claim to be oblivious of the pre-trial
conference itself, since their representative was present all throughout the proceedings, and a
pre-trial order was issued thereafter which contained the matters taken up during pre-trial and the
hearing dates scheduled by the court.
Our Ruling
The Court denies the Petition.
Respondents failure to present the original copy of the Acknowledgment during the taking of her
testimony for the second time, and the presentation of a mere photocopy thereof at said hearing,
does not materially affect the outcome of the case. It was a mere procedural inadvertence that
could have been cured and did not affect petitioners cause in any manner. As conceded by them
and as held by the CA, the original exists and was made part of the records of the case when
respondents evidence was first taken. Though respondent now claims that she had lost the
original, the CA proclaimed that the document resides in the record. This would explain then why
respondent cannot find it in her possession; it is with the court as an exhibit. Besides, it evidently
appears that there is no question raised on the authenticity and contents of the photocopy that
was presented and identified in court; petitioners merely insist that the photocopy is inadmissible
as a result of respondents failure to present the original, which they nevertheless admit to exist
and is found and included in the record of the case.
While it is a basic rule of evidence that the original copy prevails over a mere photocopy, there
is no harm if in a case, both the original and a photocopy thereof are authenticated, identified
and formally offered in evidence by the party proponent.
32

More to the point is the fact that petitioners failed to deny specifically under oath the genuineness
and due execution of the Acknowledgment in their Answer. The effect of this is that the
genuineness and due execution of the Acknowledgment is deemed admitted. "By the admission
of the genuineness and due execution [of such document] is meant that the party whose
signature it bears admits that he signed it or that it was signed by another for him with his
authority; that at the time it was signed it was in words and figures exactly as set out in the
pleading of the party relying upon it; that the document was delivered; and that any formal
requisites required by law, such as a seal, an acknowledgment, or revenue stamp, which it lacks,
are waived by him. Hence, such defenses as that the signature is a forgery x x x; or that it was
unauthorized x x x; or that the party charged signed the instrument in some other capacity than
that alleged in the pleading setting it out x x x; or that it was never delivered x x x, are cut off by
the admission of its genuineness and due execution."
33

"There is no need for proof of execution and authenticity with respect to documents the
genuineness and due execution of which are admitted by the adverse party." With the
34

consequent admission engendered by petitioners failure to properly deny the Acknowledgment

in their Answer, coupled with its proper authentication, identification and offer by the respondent,
not to mention petitioners admissions in paragraphs 4 to 6 of their Answer that they are indeed
indebted to respondent, the Court believes that judgment may be had solely on the document,
and there is no need to present receipts and other documents to prove the claimed
indebtedness. The Acknowledgment, just as an ordinary acknowledgment receipt, is "valid and
binding between the parties who executed it, as a document evidencing the loan agreement they
had entered into." The absence of rebutting evidence occasioned by petitioners waiver of their
right to present evidence renders the Acknowledgment as the best evidence of the transactions
between the parties and the consequential indebtedness incurred. Indeed, the effect of the
admission is such that "a prima facie case is made for the plaintiff which dispenses with the
necessity of evidence on his part and entitles him to a judgment on the pleadings unless a
special defense of new matter, such as payment, is interposed by the defendant."
35

36

37

However, as correctly argued by petitioners, only Fernando may be held liable for the judgment
amount ofP1,456,000.00, since Ma. Elena was not a signatory to the Acknowledgment. She may
be held liable only to the extent of P600,000.00, as admitted by her and Fernando in paragraph 5
of their Answer; no case against her may be proved over and beyond such amount, in the
absence of her signature and an acknowledgment of liability in the Acknowledgment. The rule
that the genuineness and due execution of the instrument shall be deemed admitted, unless the
adverse party specifically denies them under oath, applies only to parties to the document.
38

As for petitioners claim that in CA-G.R. CV No. 87935, the same division of the CA made a
complete turnaround from its original pronouncement in CA-G.R. CV No. 71187 thus doing
away with the requirement of presenting receipts and statements of account which it originally
required in the latter case, the Court finds no irregularity in this. The admission of liability
resulting from petitioners admission of indebtedness in their Answer and other pleadings, their
failure to specifically deny under oath the genuineness and due execution of the
Acknowledgment, as well as their waiver of their right to present evidence all these did away
with the necessity of producing receipts and statements of account which would otherwise be
required under normal circumstances.
39

On the claim that they were denied their day in court, the Court notes that despite reminders and
admonitions by the trial court, petitioners caused several continuances of trial, which
understandably prompted the trial court to finally deny their March 15, 2006 motion to reset the
scheduled March 20 hearing and declare a waiver of their right to present evidence. Thus, as
found by the CA,

In its September 26, 2005 Pre-Trial Order, the trial court fixed the hearing dates with a
firm declaration that the same "shall be strictly followed and all postponements made by
the parties shall be deducted from such partys allotted time to present evidence.

When plaintiff-appellee finished her presentation of evidence ahead of schedule, the

appellants were again advised of their schedule for presentation of evidence i.e.,
December 6 and 13, 2005 and January 9 and 23 and February 6, 2006. Despite said
schedule, the appellants failed to appear in court.

On January 9, 2006, the lower court reiterated the scheduled hearing set on January 26,
2006 and included February 20, 2006 as an additional hearing date.

Instead of presenting their evidence, the appellants filed a Demurrer to Evidence on

January 17, 2006 which, however, was denied by the trial court in its Order dated
January 26, 2006.

On February 20, 2006, the trial court again allowed another hearing date March 20,
2006 to afford the appellants added opportunity to present their evidence.

The foregoing clearly show that not only were appellants given an opportunity to be heard, an
added mileage in due process was extended to them by the trial court.
40

Petitioners submit further that the trial courts subsequent denial of their motion for continuance
of the March 20, 2006 hearing was improper. Yet again, the Court does not subscribe to this
view. Petitioners filed their motion to reset the March 20, 2006 previously scheduled hearing, but
the trial court did not act on the motion. Instead of attending the March 20, 2006 hearing,
petitioners counsel proceeded to absent himself and attended the supposed hearing of another
case. This was improper. As we have held before,
[A] party moving for postponement should be in court on the day set for trial if the motion is not
acted upon favorably before that day. He has no right to rely either on the liberality of the court or
on the generosity of the adverse party. x x x
[A]n attorney retained in a case the trial of which is set for a date on which he knows he cannot
appear because of his engagement in another trial set previously on the same date, has no right
to presume that the court will necessarily grant him continuance. The most ethical thing for him to
do in such a situation is to inform the prospective client of all the facts so that the latter may
retain another attorney, If the client, having full knowledge of all the facts, still retain[s] the
attorney, he assumes the risk himself and cannot complain of the consequences if the
postponement is denied and finds himself without attorney to represent him at the trial.
41

The grant or denial of a motion for postponement rests on the courts sound discretion; it is a
matter of privilege, not a right. "A movant for postponement should not assume beforehand that
his motion will be granted. The grant or denial of a motion for postponement is a matter that is
addressed to the sound discretion of the trial court. Indeed, an order declaring a party to have
waived the right to present evidence for performing dilatory actions upholds the trial court's duty
to ensure that trial proceeds despite the deliberate delay and refusal to proceed on the part of
one party."
42

On the other questions raised by petitioners, specifically that the pre-trial conference is a sham
for lack of records of the proceedings, and that the November 8, 2005 hearing where
respondent's evidence was taken exparte was irregular for lack of a notice of hearing - the Court
finds them to be without merit. It is evident that a pre-trial conference was held, and that
petitioners' representative was present therein; moreover, the proceedings were covered by the
required pre-trial order, which may itself be considered a record of the pre-trial. In said order, the
November 8, 2005 pre-scheduled hearing was particularly specified. Thus, from the very start,
petitioners knew of the November 8 hearing; if they failed to attend, no fault may be attributed to
the trial court.
43

44

WHEREFORE, the Petition is DENIED. The September 27, 2007 Decision and May 23, 2008
Resolution of the Court of Appeals in CA-G.R. CV No. 87935 are AFFIRMED, with
MODIFICATION in that petitioner Ma. Elena Santos is held liable for the principal and interest
only to the extent of P600,000.00.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 89114 December 2, 1991

FRANCISCO S. TANTUICO, JR., petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT,
MATEO A. T. CAPARAS, AND THE SANDIGANBAYAN, respondents.
Kenny H. Tantuico for petitioner.

PADILLA, J.:p
In this petition for certiorari, mandamus and prohibition with a prayer for the issuance of a writ of
preliminary injunction and/or restraining order, the petitioner seeks to annul and set aside the
resolution of the Sandiganbayan, dated 21 April 1989, denying his motion for a bill of
particulars as well as its resolution, dated 29 May 1989, which denied his motion for
reconsideration; to compel the respondent PCGG to prepare and file a bill of particulars, or that
said respondent be ordered to exclude petitioner as defendant in Civil Case No. 0035 should
they fail to submit the said bill of particulars; and to enjoin the respondent Sandiganbayan from
further proceeding against petitioner until the bill of particulars is submitted, claiming that the
respondent Sandiganbayan acted with grave abuse of discretion amounting to lack of jurisdiction
in promulgating the aforesaid resolutions and that there is no appeal, nor any plain, speedy and
adequate remedy for him in the ordinary course of law other than the present petition.
As prayed for, this Court issued on 1 August 1989 a temporary restraining order "effective
immediately and continuing until further orders from this Court, ordering the respondent
Sandiganbayan to CEASE and DESIST from further proceeding in Civil Case No. 0035 (PCGG
35), entitled "Republic of the Philippines vs. Benjamin (Kokoy) Romualdez, et al." pending before
it. 1
The antecedents are as follows:
On 31 July 1987, the Republic of the Philippines, represented by the PCGG, and assisted by the
Office of the Solicitor General, filed with the Sandiganbayan Civil Case No. 0035, entitled
"Republic of the Philippines vs. Benjamin (Kokoy) Romualdez, et al." for reconveyance,
reversion, accounting, restitution and damages. 2
The principal defendants in the said Civil Case No. 0035 are Benjamin (Kokoy) Romualdez,
Ferdinand E. Marcos and Imelda R. Marcos.
Petitioner Francisco S. Tantuico, Jr. was included as defendant in Civil Case No. 0035 on the
theory that: (1) he acted in unlawful concert with the principal defendants in the misappropriation
and theft of public funds, plunder of the nation's wealth, extortion, blackmail, bribery,
embezzlement and other acts of corruption, betrayal of public trust and brazen abuse of
power; 3 (2) he acted as dummy, nominee or agent, by allowing himself to be incorporator, director, board member and/or
stockholder of corporations beneficially held and/or controlled by the principal defendants; 4 (3) he acted singly or collectively, and/or in
unlawful concert with one another, in flagrant breach of public trust and of their fiduciary obligations as public officers, with gross and
scandalous abuse of right and power and in brazen violation of the Constitution and laws of the Philippines, embarked upon a
systematic plan to accumulate ill-gotten wealth ; 5 (4) he (petitioner) taking undue advantage of his position as Chairman of the
Commission on Audit and with grave failure to perform his constitutional duties as such Chairman, acting in concert with defendants
Ferdinand E. Marcos and Imelda R. Marcos, facilitated and made possible the withdrawals, disbursements and questionable use of
government funds; 6 and (5) he acted as dummy, nominee and/or agent by allowing himself to be used as instrument in accumulating
ill-gotten wealth through government concessions, orders and/or policies prejudicial to plaintiff, or to be incorporator, director, or member
of corporations beneficially held and/or controlled by defendants Ferdinand E. Marcos, Imelda R. Marcos, Benjamin (Kokoy) Romualdez
and Juliette Gomez Romualdez in order to conceal and prevent recovery of assets illegally obtained. 7

On 11 April 1988, after his motion for production and inspection of documents

8 was denied by
respondent court in its resolution 9 dated 9 March 1988, petitioner filed a Motion for a Bill of Particulars, 10 alleging inter alia that he is
sued for acts allegedly committed by him as (a) a public officer-Chairman of the Commission on Audit, (b) as a private individual, and (c)
in both capacities, in a complaint couched in too general terms and shorn of particulars that would inform him of the factual and legal
basis thereof, and that to enable him to understand and know with certainty the particular acts allegedly committed by him and which he
is now charged with culpability, it is necessary that plaintiff furnish him the particulars sought therein relative to the averments in
paragraphs 2, 9(a), 15, 7 and 17 of the Second Amended Complaint so that he can intelligently prepare his responsive pleading and
prepare for trial. The particulars sought for in the said motion are as follows:

a. Relative to the averments in paragraphs 2, 9(a) and l5 of the Second Amended

Complaint:
i) What are the dates of the resolutions (if on appeal) or the acts
(if otherwise) issued or performed by herein defendant which
allowed the facilitation of, and made possible the, withdrawals,
disbursements and questionable use of government funds;
ii) What ministries or Departments, offices or agencies of the
government were involved in these questionable use of
government funds;
iii) What are the names of the auditors who had the original audit
jurisdiction over the said withdrawals, disbursements and
questionable use of government funds;
iv) How much government funds were involved in these
questionable-disbursements, individually and in totally?
v) Were the disbursements brought to herein defendant for action
on pre-audit, post-audit or otherwise or where they initiated and/or
allowed release by herein defendant alone, without them
undergoing usual governmental audit procedures, or in violation
thereof.?
vi) What were herein defendant's other acts or omission or
participation in the matter of allowing such disbursements and
questionable use of government funds, if any?
b. Relative to paragraphs 7 and 17 of the Second Amended Complaint:
i) In what particular contract, dealing, transaction and/or
relationship of any nature of Ferdinand E. Marcos, Imelda R.
Marcos, Juliette Gomez Romualdez or Benjamin T. Romualdez
did herein defendant act as dummy, nominee or agent? Please
specify the dealings, the dates, the corporations or entities
involved, the government offices involved and the private and
public documents, if any, showing herein defendant's complicity,
since he is not aware of any such instance. More basically, please
specify whether the defendant is a dummy or nominee or agent
and of which corporation or transaction?
ii) What particular government concession, order and/or policy
obtained by Ferdinand E. Marcos, or Imelda R. Marcos, or Juliette
Gomez Romualdez and/or Benjamin T. Romualdez allowed them
either singly or jointly to accumulate ill-gotten wealth by using
herein defendant as instrument for their accomplishment.
Likewise please identify the nature of the transactions, the dates

and the document showing complicity on the part of herein

defendant; he is not aware of any such instance.
iii) Please specify the name or denominate the particular
government concession, order and/or policy prejudicial to the
interest of the government which was obtained by either of the
above-named four defendants through the participation of herein
defendant as a dummy, nominee or agent of herein defendant.
Please likewise identify the government office involved, the dates
and other particulars, likewise defendant is not aware of any such
instance.
iv) Please name and specify the corporation whether stock or
non-stock, whether government or private, beneficially held and/or
controlled by either of the four above defendants, where herein
defendant is an incorporator, director or member and where his
inclusion as such incorporator, director or member of the
corporation was made in order to conceal and prevent recovery of
assets illegally obtained by the aforementioned four defendants,
how many shares are involved and what are their values, how
and when have they been acquired.
The Solicitor General, for and in behalf of respondents (except the respondent Sandiganbayan),
opposed the motion.11 After the petitioner had filed his reply 12 thereto, the respondent Sandiganbayan promulgated on 21
April 1990 a resolution 13 denying the petitioner's motion for a bill of particulars on the ground that the particulars sought by petitioner
are evidentiary in nature, the pertinent part of which resolution reads, as follows:

We are of the considered opinion that the allegations in the Expanded Complaint
are quite clear and sufficient enough for defendant-movant to know the nature
and scope of the causes of action upon which plaintiff seeks relief. They provide
the factual scenario which, coupled with other allegations set forth in the
"Common Averments" and further specified in the "Specific Averments" of herein
defendant-movant and his co-defendants' illegal acts which are within defendantmovant's peculiar and intimate knowledge as a government official and corporate
executive, will enable him to make the proper admission, denials or qualifications,
set out affirmative and/or special defenses and thereafter prepare for trial.
Evidentiary facts or matters are not essential in the pleading of the cause of
action, nor to details or probative value or particulars of evidence by which these
material evidence are to be established (Remitere vs. Yulu, 6 SCRA 251). The
matters which he seeks are evidentiary in nature and, being within his intimate or
personal knowledge, may be denied or admitted by him or if deemed necessary,
be the subject of other forms of discovery. 14
Petitioner moved for reconsideration 15 but this was denied by respondent Sandiganbayan in its resolution 16 dated 29
May 1990.

Hence, petitioner filed the present petition.

The principal issue to be resolved in the case at bar is whether or not the respondent
Sandiganbayan acted with grave abuse of discretion in issuing the disputed resolutions.
Petitioner argues that the allegations of the Second Amended Complaint in Civil Case No. 0035
(PCGG 35) pertaining to him state only conclusions of fact and law, inferences of facts from facts
not pleaded and mere presumptions, not ultimate facts as required by the Rules of Court.
On the other hand, the respondent Sandiganbayan, by and through the Solicitor General,
contends that the essential elements of an action for recovery of ill-gotten wealth are: (1) an

accumulation of assets, properties and other possessions; (2) of former President Ferdinand E.
Marcos, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business
associates, dummies, agents, or nominees; and (3) whose value is out of proportion to their
known lawful income, and that the ultimate facts establishing these three (3) essential elements
of an action for recovery of ill-gotten wealth are sufficiently alleged in the complaint. Hence,
petitioner is not entitled to a bill of particulars.
A complaint is defined as a concise statement of the ultimate facts constituting the plaintiff's
cause or causes of action.17 Like all other pleadings allowed by the Rules of Court, 18 the complaint shall contain in a
methodical and logical form a plain, concise and direct statement of the ultimate facts on which the plaintiff relies for his claim, omitting
the statement of mere evidentiary
facts. 19 Its office, purpose or function is to inform the defendant clearly and definitely of the claims made against him so that he may be
prepared to meet the issues at the trial. The complaint should inform the defendant of all the material facts on which the plaintiff relies to
support his demand; it should state the theory of a cause of action which forms the bases of the plaintiff's claim of liability. 20

The rules on pleading speak of two (2) kinds of facts: the first, the "ultimate facts", and the
second, the "evidentiary facts." In Remitere vs. Vda. de Yulo, 21 the term "ultimate facts" was defined and
explained as follows:

The term "ultimate facts" as used in Sec. 3, Rule 3 of the Rules of Court, means
the essential facts constituting the plaintiffs cause of action. A fact is essential if it
cannot be stricken out without leaving the statement of the cause of action
insufficient. . . . (Moran, Rules of Court, Vol. 1, 1963 ed., p. 213).
Ultimate facts are important and substantial facts which either directly form the
basis of the primary right and duty, or which directly make up the wrongful acts or
omissions of the defendant. The term does not refer to the details of probative
matter or particulars of evidence by which these material elements are to be
established. It refers to principal, determinate, constitutive facts, upon the
existence of which, the entire cause of action rests.
while the term "evidentiary fact" has been defined in the following tenor:
Those facts which are necessary for determination of the ultimate facts; they are
the premises upon which conclusions of ultimate facts are based. Womack
v. Industrial Comm., 168 Colo. 364,451 P. 2d 761, 764. Facts which furnish
evidence of existence of some other fact. 22
Where the complaint states ultimate facts that constitute the three (3) essential elements of a
cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or omission of the defendant in violation of said legal right, the
complaint states a cause of action, otherwise, the complaint must succumb to a motion to
dismiss on that ground of failure to state a cause of action. 23 However, where the allegations of the complaint
are vague, indefinite, or in the form of conclusions, the proper recourse would be, not a motion to dismiss, but a motion for a bill of
particulars. 24 Thus, Section 1, Rule 12 of the Rules of Court provides:

Before responding to a pleading or, if no responsive pleading is permitted by

these rules, within ten (10) days after service of the pleading upon him, a party
may move for a more definite statement or for a bill of particulars of any matter
which is not averred with sufficient definiteness or particularity to enable him
properly to prepare his responsive pleading or to prepare for trial. Such motion
shall point out the defects complained of and the details desired.
In this connection, the following allegations have been held as mere conclusions of law,
inferences from facts not alleged or opinion of the pleader: (a) the allegations that defendants
appellees were "actuated by ulterior motives, contrary to law and morals, with abuse of their
advantageous position as employers, in gross and evident bad faith and without giving
plaintiff . . . his due, wilfully, maliciously, unlawfully, and in summary and arbitrary manner", are

conclusions of law, inferences from facts not alleged and expressions of opinion unsupported by
factual premises; 25 (b) an allegation of duty in terms unaccompanied by a statement of facts showing the existence of the duty,
is a mere conclusion of law, unless there is a relation set forth from which the law raises the duty; 26 (c) an averment . . . that an act
was "unlawful" or "wrongful" is a mere legal conclusion or opinion of the pleader; 27 (d) the allegation that there was a violation of trust
was plainly a conclusion of law, for "a mere allegation that it was the duty of a party to do this or that, or that he was guilty of a breach of
duty, is a statement of a conclusion, not of a fact;" 28 (e) an allegation that a contract is valid or void, is a mere conclusion of law; 29 (f)
the averment in the complaint that "defendant usurped the office of Senator of the Philippines" is a conclusion of law not a statement
of fact inasmuch as the particular facts on which the alleged usurpation is predicated are not set forth therein; 30 and (g) the
averment that "with intent of circumventing the constitutional prohibition that 'no officer or employee in the civil service shall be removed
or suspended except for cause as provided by law', respondents maliciously and illegally for the purpose of political persecution and
political vengeance, reverted the fund of the salary item . . . and furthermore eliminated or abolished the said position effective 1 July
1960" is a mere conclusion of law unsupported by factual premises. 31

Bearing in mind the foregoing rules on pleading and case law, let us now examine the allegations
of the Second Amended Complaint against the petitioner to determine whether or no they were
averred with sufficient definiteness or particularity to enable him properly to prepare his
responsive pleading or to prepare for trial. If the allegations of the said complaint are vague,
indefinite or in the form of conclusions, then petitioner is entitled to a bill of particulars.
The allegations in the complaint pertaining to the alleged culpable and unlawful acts of herein
petitioner are quoted hereunder as follows:
GENERAL AVERMENTS
OF
DEFENDANTS' ILLEGAL ACTS
9. (a) From the early years of his presidency, Defendant Ferdinand E. Marcos
took undue advantage of his powers as President. All throughout the period from
September 21, 1972 to February 25, 1986, he gravely abused his powers under
martial law and ruled as Dictator under the 1973 Marcos-promulgated
Constitution. Defendant Ferdinand E. Marcos, together with other Defendants,
acting singly or collectively, and/or in unlawful concert with one another, in
flagrant breach of public trust and of their fiduciary obligations as public officers,
with gross and scandalous abuse of right and power and in brazen violation of
the Constitution and laws of the Philippines, embarked upon a systematic plan to
accumulate ill-gotten wealth;
(b) Upon his unfettered discretion, and sole authority, for the purpose of
implementing the plan referred to above, Defendant Ferdinand E. Marcos
ordered and caused, among others:
(b-i) the massive and unlawful withdrawal of funds, securities,
reserves and other assets and property from the National
Treasury, the Central Bank, the other financial institutions and
depositories of Plaintiff;
(b-ii) the transfer of such funds, securities, reserves and other
assets and property to payees or transferees of his choice and
whether and in what manner such transactions should be
recorded in the books and records of these institutions and other
depositories of Plaintiff;
10. Among others, in furtherance of the plan and acting in the manner referred to
above, in unlawful concerted with one another and with gross abuse of power
and authority, Defendants Ferdinand E. Marcos and Imelda R. Marcos;

xxx xxx xxx

b. Converted government-owned and controlled corporations into
private enterprises and appropriated them and/or their assets for
their own benefit and enrichment;
c. Awarded contracts with the Government to their relatives,
business associates, dummies, nominees, agents or persons who
were beholden to said Defendants, under terms and conditions
grossly and manifestly disadvantageous to the Government;
d. Misappropriated, embezzled and/or converted to their own use
funds of Government financial institutions, particularly those
allocated to the Office of the President and other ministries and
agencies of the Government including, those conveniently
denominated as intelligence or counter-insurgency funds, as well
as funds provided to Plaintiff by foreign countries, multinationals,
public and private financial institutions;
e. Raided Government financial and banking institutions of billions
of pesos in loans, guarantees and other types of financial
accommodations to finance dubious and/or overpriced projects of
favored corporations or individuals and misused and/or converted
to their own use and benefit deposits found therein to the financial
ruin of Plaintiff and the Filipino people;
xxx xxx xxx
h. Sold, conveyed and/or transferred Government property, real
and/or personal, to corporations beneficially held and/ or
controlled by them or through third persons, under such terms
and conditions grossly and manifestly disadvantageous to the
Government;
i. Engaged in other illegal and improper acts and practices
designed to defraud Plaintiff and the Filipino people, or otherwise
misappropriated and converted to their own use, benefit and
enrichment the lawful patrimony and revenues of Plaintiff and the
Filipino people.
11. Among the assets acquired by Defendants in the manner above-described
and discovered by the Commission in the exercise of its official responsibilities
are funds and other property listed in Annex "A" hereof and made an integral part
of this Complaint.
12. Defendants, acting singly or collectively, and/or in unlawful concert with one
another, for the purpose of preventing disclosure and avoiding discovery of their
unmitigated plunder of the National Treasury and of their other illegal acts, and
employing the services of prominent lawyers, accountants, financial experts,
businessmen and other persons, deposited, kept and invested funds, securities
and other assets estimated at billions of US dollars in various banks, financial
institutions, trust or investment companies and with persons here and abroad.
V

SPECIFIC AVERMENTS
OF
DEFENDANTS' ILLEGAL ACTS
xxx xxx xxx
14. Defendants Benjamin (Kokoy) Romualdez and Juliette Gomez Romualdez,
acting by themselves and/or in unlawful concert with Defendants Ferdinand E.
Marcos and Imelda R. Marcos, and taking undue advantage of their relationship,
influence and connection with the latter Defendant spouses, engaged in devices,
schemes and strategems to unjustly enrich themselves at the expense of Plaintiff
and the Filipino people, among others:
(a) obtained, with the active collaboration of Defendants Senen J. Gabaldon,
Mario D. Camacho, Mamerto Nepomuceno, Carlos J. Valdes, Delia Tantuico,
Jovencio F. Cinco, Cesar C. Zalamea andFrancisco Tantuico, control of some of
the biggest business enterprises in the Philippines, such as, the Manila Electric
Company (MERALCO), Benguet Consolidated Mining Corporation (BENGUET)
and the Pilipinas Shell Corporation, by employing devious financial schemes and
techniques calculated to require the massive infusion and hemmorrhage of
government funds with minimum or negligible "cashout" from Defendant
Benjamin Romualdez. The following are the general features of a classic takeover bid by Defendant Benjamin Romualdez:
xxx xxx xxx
(ii) The shares were held in the name of corporations which were
organized soldely (sic) for the purpose of holding title to them.
These corporations did not have any operating history nor any
financial track record. Projected cash flow consisted almost solely
of future and contingent dividends on the shares held. In spite of
these limitations, these companies enjoyed excellent credit lines
from banks and other financial institutions, as evidenced by the
millions of pesos in loan and guarantees outstanding in their
books;
(iii) The "seed money" used to wrest control came from
government and taxpayers' money in the form of millions of pesos
in loans, guarantees and standby L/C's from government financial
institutions, notably the DBP and PNB, which were in turn
rediscounted with the Central Bank;
(iv) Additional funding was provided from the related interests;
and
(v) This intricate (sic) skein of inter-corporate dealings was
controlled and administered by an exclusive and closely knit
group of interlocking directorate and officership
xxx xxx xxx
(g) Secured, in a veiled attempt to justify MERALCO's anomalous acquisition of
the electric cooperatives, with the active collaborations of Defendants Cesar E. A.

Virata, Juanita R. Remulla, Isidro Rodriguez, Jose C. Hernandez, Pedro Dumol,

Ricardo C. Galing, Francisco C. Gatmaitan, Mario D. Camacho and the rest of
the Defendants, the approval by Defendant Ferdinand E. Marcos and his cabinet
of the so-called "Three-Year Program for the Extension of MERALCO's Services
to Areas Within The 60-kilometer Radius of Manila", which required government
capital investment amounting to millions of pesos;
xxx xxx xxx
(1) Caused the National Investment and Development Corporation (NIDC) to
dispose of its interest in the oil plants located in Tanauan, Leyte, which were
owned and operated by its subsidiary, the NIDC Oil Mills, Inc., in favor of the
SOLO II, Inc., a corporation beneficially held and controlled by Defendant
Benjamin Romualdez, with the active collaboration of Defendants Jose
Sandejas,Francisco Tantuico and Dominador G. Ingco, under terms and
conditions grossly disadvantageous to NIDC, to the grave and irreparable
damage of Plaintiff and the Filipino people.
(2) Defendant Francisco Tantuico, taking undue advantage of his position as
Chairman of the Commission on Audit and with grave failure to perform his
constitutional duties as such Chairman, acting in concert with Defendants
Ferdinand E. Marcos and Imelda R. Marcos, facilitated and made possible the
withdrawals, disbursements and questionable use of government funds as stated
in the foregoing paragraphs to the grave and irreparable damage and injury of
Plaintiff and the entire Filipino people.
xxx xxx xxx
17. The following Defendants acted as dummies, nominees and/ or agents by
allowing themselves (i) to be used as instruments in accumulating ill-gotten
wealth through government concessions, orders and/or policies prejudicial to
Plaintiff, or (ii) to be incorporators, directors, or members of corporations held
and/or controlled by Defendants Ferdinand E. Marcos, Imelda R. Marcos,
Benjamin (Kokoy) Romualdez, and Juliette Gomez Romualdez in order conceal
(sic) and prevent recovery of assets illegally obtained: Francisco Tantuico . . .
17.a. THE NAMES OF SOME OF THE CORPORATIONS BENEFICALLY HELD
AND/OR CONTROLLED BY THE DEFENDANTS BENJAMIN (KOKOY)
ROMUALDEZ, FERDINAND E. MARCOS AND IMELDA R. MARCOS WHERE
THE POSITIONS/PARTICIPATIONS AND/OR INVOLVEMENTS OF SOME OF
THE DEFENDANTS AS DUMMIES, NOMINEES AND/OR AGENTS ARE
INDICATED ARE LISTED IN ANNEX "B" HEREOF AND MADE AN INTEGRAL
PART OF THIS COMPLAINT.
xxx xxx xxx
18. The acts of Defendants, singly or collectively, and/or in unlawful concert with
one another, constitute gross abuse of official position and authority, flagrant
breach of public trust and fiduciary obligations, acquisition of unexplained wealth,
brazen abuse of official position and authority, flagrant breach of public trust and
fiduciary obligations, acquisition of unexplained wealth, brazen abuse of right and
power, unjust enrichment, violation of the Constitution and laws of the Republic of
the Philippines, to the grave and irreparable damage of Plaintiff and the Filipino
people. (Emphasis supplied)

Let us now analyze and discuss the allegations of the complaint in relation to which the petitioner
pleads for a bill of particulars.
As quoted above, paragraph 9(a) of the complaint alleges that "Defendant Ferdinand E. Marcos,
together with other Defendants, acting singly or collectively, and/or in unlawful concert with one
another, in flagrant breach of public trust and of their fiduciary obligations as public officers, with
gross and scandalous abuse of right and power and in brazen violation of the Constitution and
laws of the Philippines, embarked upon a systematic plan to accumulate ill-gotten wealth." In the
light of the rules on pleading and case law cited above, the allegations that defendant Ferdinand
E. Marcos, together with the other defendants "embarked upon a systematic plan to accumulate
ill-gotten wealth" and that said defendants acted "in flagrant breach of public trust and of their
fiduciary obligations as public officers, with gross and scandalous abuse of right and in brazen
violation of the Constitution and laws of the Philippines", are conclusions of law unsupported by
factual premises.
Nothing is said in the complaint about the petitioner's acts in execution of the alleged "systematic
plan to accumulate ill-gotten wealth", or which are supposed to constitute "flagrant breach of
public trust", "gross and scandalous abuse of right and power", and "violations of the Constitution
and laws of the Philippines". The complaint does not even allege what duties the petitioner failed
to perform, or the particular rights he abused.
Likewise, paragraph 15 avers that "defendant Francisco Tantuico, taking undue advantage of his
position as Chairman of the Commission on Audit and with grave failure to perform his
constitutional duties as such Chairman, acting in concert with Defendants Ferdinand E. Marcos
and Imelda R. Marcos facilitated and made possible the withdrawals, disbursements and
questionable use of government funds as stated in the foregoing paragraphs to the grave and
irreparable damage and injury of Plaintiff and the entire Filipino people." In like manner, the
allegation that petitioner "took undue advantage of his position as Chairman of the Commission
on Audit," that he "failed to perform his constitutional duties as such Chairman," and acting in
concert with Ferdinand E. Marcos and Imelda R. Marcos, "facilitated and made possible the
withdrawals, disbursements, and questionable use of government funds as stated in the
foregoing paragraphs, to the grave and irreparable damage and injury of plaintiff and the entire
Filipino people", are mere conclusions of law. Nowhere in the complaint is there any allegation as
to how such duty came about, or what petitioner's duties were, with respect to the alleged
withdrawals and disbursements or how petitioner facilitated the alleged withdrawals,
disbursements, or conversion of public funds and properties, nor an allegation from where the
withdrawals and disbursements came from, except for a general allegation that they came from
the national treasury. On top of that, the complaint does not even contain any factual allegation
which would show that whatever withdrawals, disbursements, or conversions were made, were
indeed subject to audit by the COA.
In this connection, it may well be stated that the Commission on Audit (COA) is an independent,
constitutional commission, which has no power or authority to withdraw, disburse, or use funds
and property pertaining to other government offices or agencies. This is done by the agency or
office itself, the chief or head of which is primarily and directly responsible for the funds and
property pertaining to such office or agency. 32 The COA is merely authorized to audit, examine and settle accounts of
the various government offices or agencies, and this task is performed not by the Chairman of the COA but by the COA auditors
assigned to the government office or agency subject to COA audit.

Thus, in each agency of the government, there is an auditing unit headed by an auditor, whose
duty is to audit and settle the accounts, funds, financial transactions, and resources of the
agency under his audit jurisdiction. 33The decision of the auditor is appealable to the Regional Director, 34 whose
decision, is in turn, appealable to the COA Manager. 35 Any party dissatisfied with the decision of the COA Manager may bring the
matter on appeal to the Commission proper, a collegiate body exercising quasi-judicial functions, composed of three (3) COA
Commissioners, with the COA Chairman as presiding officer. 36 It is only at this stage that the COA Chairman would come to know of
the matter and be called upon to act on the same, and only if an aggrieved party brings the matter on appeal.

In other words, the Chairman of the COA does not participate or personally audit all
disbursements and withdrawals of government funds, as well as transactions involving
government property. The averments in the particular paragraph of the complaint merely assume
that petitioner participated in or personally audited alldisbursements and withdrawals of
government funds, and all transactions involving government property. Hence, the alleged
withdrawals, disbursements and questionable use of government funds could not have been, as
held by respondent Sandiganbayan, "within the peculiar and intimate knowledge of petitioner as
Chairman of the COA."
The complaint further avers in paragraph 17 that "(t)he following Defendants acted as dummies,
nominees and/or agents by allowing themselves (i) to be instruments in accumulating ill-gotten
wealth through government concessions, order and/or policies prejudicial to Plaintiff, or (ii) to be
incorporators, directors, or members of corporations beneficially held and/or controlled by
Defendant Ferdinand E. Marcos, Imelda R. Marcos, Benjamin (Kokoy) T. Romualdez and Juliette
Gomez Romualdez in order to conceal and prevent recovery of assets illegally obtained:
Francisco Tantuico . . ." 37 Again, the allegation that petitioner acted as dummy, nominee, or agent by allowing himself "to be
used as instrument in accumulating ill-gotten wealth through government concessions, orders and/or policies prejudicial to Plaintiff" or
"to be (an) incorporator, director, or member of corporations beneficially held and/or controlled" by the Marcoses and Romualdezes, is a
conclusion of law without factual basis.

The complaint does not contain any allegation as to how petitioner became, or why he is
perceived to be, a dummy, nominee or agent. Besides, there is no averment in the complaint how
petitioner allowed himself to be used as instrument in the accumulation of ill-gotten wealth, what
the concessions, orders and/or policies prejudicial to plaintiff are, why they are prejudicial, and
what petitioner had to do with the granting, issuance, and or formulation of such concessions,
orders, and/or policies. Moreover, Annex "A" of the complaint lists down sixty-one (61)
corporations which are supposed to be beneficially owned or controlled by the Marcoses and
Romualdezes. However, the complaint does not state which corporations petitioner is supposed
to be a stockholder, director, member, dummy, nominee and/or agent. More significantly, the
petitioner's name does not even appear in Annex "B" of the complaint, which is a listing of the
alleged "Positions and Participations of Some Defendants".
The allegations in the complaint, above-referred to, pertaining to petitioner are, therefore,
deficient in that they merely articulate conclusions of law and presumptions unsupported by
factual premises. Hence, without the particulars prayed for in petitioner's motion for a bill of
particulars, it can be said the petitioner can not intelligently prepare his responsive pleading and
for trial.
Furthermore, the particulars prayed for, such as, names of persons, names of corporations,
dates, amounts involved, specification of property for identification purposes, the particular
transactions involving withdrawals and disbursements, and a statement of other material facts as
would support the conclusions and inferences in the complaint, are not evidentiary in nature. On
the contrary, those particulars are material facts that should be clearly and definitely averred in
the complaint in order that the defendant may, in fairness, be informed of the claims made
against him to the end that he may be prepared to meet the issues at the trial.
Thus, it has been held that the purpose or object of a bill of particulars is
. . . to amplify or limit a pleading, specify more minutely and particularly a claim or
defense set up and pleaded in general terms, give information, not contained in
the pleading, to the opposite party and the court as to the precise nature,
character, scope, and extent of the cause of action or defense relied on by the
pleader, and apprise the opposite party of the case which he has to meet, to the
end that the proof at the trial may be limited to the matters specified, and in order
that surprise at, and needless preparation for, the trial may be avoided, and that
the opposite party may be aided in framing his answering pleading and preparing
for trial. It has also been stated that it is the function or purpose of a bill of

particulars to define, clarify, particularize, and limit or circumscribe the issues in

the case, to expedite the trial, and assist the court. A general function or purpose
of a bill of particulars is to prevent injustice or do justice in the case when that
cannot be accomplished without the aid of such a bill. 38
Anent the contention of the Solicitor General that the petitioner is not entitled to a bill of
particulars because the ultimate facts constituting the three (3) essential elements of a cause of
action for recovery of ill-gotten wealth have been sufficiently alleged in the complaint, it would
suffice to state that in a motion for a bill of particulars, the only question to be resolved is whether
or not the allegations of the complaint are averred with sufficient definiteness or particularity to
enable the movant properly to prepare his responsive pleading and to prepare for trial. As
already discussed, the allegations of the complaint pertaining to the herein petitioner are
deficient because the averments therein are mere conclusions of law or presumptions,
unsupported by factual premises.
In the light of the foregoing, the respondent Sandiganbayan acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in promulgating the questioned resolutions.
WHEREFORE, the petition is GRANTED and the resolutions dated 21 April 1989 and 29 May
1989 are hereby ANNULLED and SET ASIDE. The respondents are hereby ordered to
PREPARE and FILE a Bill of Particulars containing the facts prayed for by petitioner within
TWENTY (20) DAYS from notice, and should they fail to submit the said Bill of Particulars,
respondent Sandiganbayan is ordered TO EXCLUDE the herein petitioner as defendant in Civil
Case No. 0035.
SO ORDERED.
Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Bidin, Grio-Aquino,
Medialdea, Regalado and Davide, Jr., JJ., concur.
Romero, J., took no part.
Fernan, C.J., is on leave.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 189496

February 1, 2012

D.M. FERRER & ASSOCIATES CORPORATION, Petitioner,

vs.
UNIVERSITY OF SANTO TOMAS, Respondent.
DECISION
SERENO, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court.
Petitioner assails the Court of Appeals (CA) Resolution1 promulgated on 26 June 2009
dismissing the formers Petition for Certiorari, and the Resolution 2 dated 3 September 2009
denying the subsequent Motion for Reconsideration.

The facts are undisputed:

On 25 November 2005, petitioner and University of Santo Tomas Hospital, Inc. (USTHI) entered
into a Project Management Contract for the renovation of the 4th and 5th floors of the Clinical
Division Building, Nurse Call Room and Medical Records, Medical Arts Tower, Diagnostic
Treatment Building and Pay Division Building.
On various dates, petitioner demanded from USTHI the payment of the construction costs
amounting toP17,558,479.39. However, on 16 April 2008, the University of Santo Tomas (UST),
through its rector, Fr. Rolando V. Dela Rosa, wrote a letter informing petitioner that its claim for
payment had been denied, because the Project Management Contract was without the required
prior approval of the board of trustees. Thus, on 23 May 2008, petitioner filed a Complaint 3 for
sum of money, breach of contract and damages against herein respondent UST and USTHI
when the latter failed to pay petitioner despite repeated demands.
In impleading respondent UST, petitioner alleged that the former took complete control over the
business and operation of USTHI, as well as the completion of the construction project.
It also pointed out that the Articles of Incorporation of USTHI provided that, upon dissolution, all
of the latters assets shall be transferred without any consideration and shall inure to the benefit
of UST. It appears that USTHI passed a Resolution on 10 January 2008 dissolving the
corporation by shortening its corporate term of existence from 16 March 2057 to 31 May 2008.
Finally, petitioner alleged that respondent, through its rector, Fr. Dela Rosa, O.P., verbally
assured the former of the payment of USTHIs outstanding obligations.
Thus, petitioner posited in part that UST may be impleaded in the case under the doctrine of
"piercing the corporate veil," wherein respondent UST and USTHI would be considered to be
acting as one corporate entity, and UST may be held liable for the alleged obligations due to
petitioner.
Subsequently, respondent filed its Motion to Dismiss dated 12 June 2008. 4 It alleged that the
Complaint failed to state a cause of action, and that the claim was unenforceable under the
provisions of the Statute of Frauds.
On 4 August 2008, Judge Bernelito R. Fernandez of Branch 97 of the Regional Trial Court (RTC)
of Quezon City granted the motion and dismissed the Complaint insofar as respondent UST was
concerned.5
First, basing its findings on the documents submitted in support of the Complaint, the RTC held
that respondent was not a real party-in-interest, and that it was not privy to the contract executed
between USTHI and petitioner. Second, the court pointed out that the alleged verbal assurances
of Fr. Dela Rosa should have been in writing to make these assurances binding and
demandable.
Petitioner sought a reconsideration of the RTC Order and asserted that only allegations of the
Complaint, and not the attached documents, should have been the basis of the trial courts ruling,
consistent with the rule that the cause of action can be determined only from the facts alleged in
the Complaint. It also insisted that the Statute of Frauds was inapplicable, since USTHIs
obligation had already been partially executed. 6
On 5 October 2008, petitioner filed an Urgent Motion for Voluntary Inhibition 7 on the ground that
Judge Fernandez was an alumnus of respondent UST.

Thereafter, Judge Fernandez issued an Order8 inhibiting himself from the case, which was
consequently re-raffled to Branch 76 presided by Judge Alexander S. Balut.
On 16 April 2009, Judge Balut dismissed the Motion for Reconsideration filed by
petitioner,9 upholding the initial findings of Judge Fernandez declaring that respondent UST was
not a real party-in-interest, and that Fr. Dela Rosas alleged assurances of payment were
unenforceable.
Subsequently, petitioner filed a Petition for Certiorari under Rule 65 with the CA. 10 Petitioner
alleged that the trial court committed grave abuse of discretion when it granted respondents
Motion to Dismiss on the basis of the documents submitted in support of the Complaint, and not
solely on the allegations stated therein. Petitioner pointed out that the allegations raised
questions of fact and law, which should have been threshed out during trial, when both parties
would have been given the chance to present evidence supporting their respective allegations.
However, on 26 June 2009, the CA issued the assailed Resolution and dismissed the Petition on
the ground that a petition under Rule 65 is the wrong remedy to question the RTCs Order that
completely disposes of the case. Instead, petitioner should have availed itself of an appeal under
Rule 41 of the Rules of Court.
Petitioner moved for a reconsideration of the Resolution. 11 It pointed out that the present case
falls under the enumerated exceptions of Rule 41, in particular, while the main case is still
pending, no appeal may be made from a judgment or final order for or against one or more of
several parties or in separate claims, counterclaims, cross-claims and third-party complaints.
On 3 September 2009, the CA denied the Motion for Reconsideration through its second assailed
Resolution, holding that the motion raised no new issues or substantial grounds that would merit
the reconsideration of the court.
Hence this Petition.
Petitioner raises two grounds in the present Petition: first, whether the CA erred in dismissing the
Petition for Certiorari by failing to consider the exception in Sec. 1(g) of Rule 41 of the Rules of
Court; second, whether the trial court committed grave abuse of discretion when it held that the
Complaint stated no cause of action.
We rule for petitioner.
Respondent insists that petitioner should have first filed a notice of appeal before the RTC, and
the appeal should have been subsequently denied before recourse to the CA was made. This
contention holds no water.
In Jan-Dec Construction Corp. v. Court of Appeals,12 we held that a petition for certiorari under
Rule 65 is the proper remedy to question the dismissal of an action against one of the parties
while the main case is still pending. This is the general rule in accordance with Rule 41, Sec.
1(g). In that case, ruled thus:
Evidently, the CA erred in dismissing petitioner's petition for certiorari from the Order of the RTC
dismissing the complaint against respondent. While Section 1, Rule 41 of the 1997 Rules of Civil
Procedure states that an appeal may be taken only from a final order that completely disposes of
the case, it also provides several exceptions to the rule, to wit: (a) an order denying a motion for
new trial or reconsideration; (b) an order denying a petition for relief or any similar motion
seeking relief from judgment; (c) an interlocutory order; (d) an order disallowing or dismissing an
appeal; (e) an order denying a motion to set aside a judgment by consent, confession or
compromise on the ground of fraud, mistake or duress, or any other ground vitiating consent; (f)

an order of execution; (g) a judgment or final order for or against one or more of several parties
or in separate claims, counterclaims, cross-claims and third-party complaints, while the main
case is pending, unless the court allows an appeal therefrom; and (h) an order dismissing an
action without prejudice. In the foregoing instances, the aggrieved party may file an appropriate
special civil action for certiorari under Rule 65.
In the present case, the Order of the RTC dismissing the complaint against respondent is
a final order because it terminates the proceedings against respondent but it falls within
exception (g) of the Rule since the case involves two defendants, Intermodal and herein
respondent and the complaint against Intermodal is still pending. Thus, the remedy of a
special civil action for certiorari availed of by petitioner before the CA was proper and the
CA erred in dismissing the petition. (Emphasis supplied)
Clearly, in the case at bar, the CA also erred when it dismissed the Petition filed before it.
Anent the second issue, we also agree with petitioner that the Complaint states a cause of action
against respondent UST. In Abacan v. Northwestern University, Inc., 13 we said:
It is settled that the existence of a cause of action is determined by the allegations in the
complaint. In resolving a motion to dismiss based on the failure to state a cause of action, only
the facts alleged in the complaint must be considered. The test is whether the court can render a
valid judgment on the complaint based on the facts alleged and the prayer asked for. Indeed, the
elementary test for failure to state a cause of action is whether the complaint alleges facts which
if true would justify the relief demanded. Only ultimate facts and not legal conclusions or
evidentiary facts, which should not be alleged in the complaint in the first place, are
considered for purposes of applying the test. (Emphasis supplied)
1wphi1

While it is admitted that respondent UST was not a party to the contract, petitioner posits that the
former is nevertheless liable for the construction costs. In support of its position, petitioner
alleged that (1) UST and USTHI are one and the same corporation; (2) UST stands to benefit
from the assets of USTHI by virtue of the latters Articles of Incorporation; (3) respondent controls
the business of USTHI; and (4) USTs officials have performed acts that may be construed as an
acknowledgement of respondents liability to petitioner.
Obviously, these issues would have been best resolved during trial. The RTC therefore
committed grave abuse of discretion when it dismissed the case against respondent for lack of
cause of action. The trial court relied on the contract executed between petitioner and USTHI,
when the court should have instead considered merely the allegations stated in the Complaint.
WHEREFORE, in view of the foregoing, the Petition is GRANTED. Branch 76 of the Regional
Trial Court of Quezon City is hereby ordered to REINSTATE respondent University of Santo
Tomas as a defendant in C.C. No. 0862635.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-20761

July 27, 1966

LA MALLORCA, petitioner,
vs.
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., respondents.
G. E. Yabut, R. Monterey and M.C. Lagman for petitioner.
Ahmed Garcia for respondents.
BARRERA, J.:
La Mallorca seeks the review of the decision of the Court of Appeals in CA-G.R. No. 23267-R,
holding it liable for quasi-delict and ordering it to pay to respondents Mariano Beltran, et al.,
P6,000.00 for the death of his minor daughter Raquel Beltran, plus P400.00 as actual damages.
The facts of the case as found by the Court of Appeals, briefly are:
On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with
their minor daughters, namely, Milagros, 13 years old, Raquel, about 4 years old, and
Fe, over 2 years old, boarded the Pambusco Bus No. 352, bearing plate TPU No. 757
(1953 Pampanga), owned and operated by the defendant, at San Fernando, Pampanga,
bound for Anao, Mexico, Pampanga. At the time, they were carrying with them four
pieces of baggages containing their personal belonging. The conductor of the bus, who
happened to be a half-brother of plaintiff Mariano Beltran, issued three tickets (Exhs. A,
B, & C) covering the full fares of the plaintiff and their eldest child, Milagros. No fare was
charged on Raquel and Fe, since both were below the height at which fare is charged in
accordance with the appellant's rules and regulations.
After about an hour's trip, the bus reached Anao whereat it stopped to allow the
passengers bound therefor, among whom were the plaintiffs and their children to get off.
With respect to the group of the plaintiffs, Mariano Beltran, then carrying some of their
baggages, was the first to get down the bus, followed by his wife and his children.
Mariano led his companions to a shaded spot on the left pedestrians side of the road
about four or five meters away from the vehicle. Afterwards, he returned to the bus in
controversy to get his other bayong, which he had left behind, but in so doing, his
daughter Raquel followed him, unnoticed by her father. While said Mariano Beltran was
on the running board of the bus waiting for the conductor to hand him his bayong which
he left under one of its seats near the door, the bus, whose motor was not shut off while
unloading, suddenly started moving forward, evidently to resume its trip, notwithstanding
the fact that the conductor has not given the driver the customary signal to start, since
said conductor was still attending to the baggage left behind by Mariano Beltran.
Incidentally, when the bus was again placed into a complete stop, it had travelled about
ten meters from the point where the plaintiffs had gotten off.
Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the
running board without getting his bayong from the conductor. He landed on the side of
the road almost in front of the shaded place where he left his wife and children. At that
precise time, he saw people beginning to gather around the body of a child lying
prostrate on the ground, her skull crushed, and without life. The child was none other
than his daughter Raquel, who was run over by the bus in which she rode earlier together
with her parents.
For the death of their said child, the plaintiffs commenced the present suit against the
defendant seeking to recover from the latter an aggregate amount of P16,000 to cover
moral damages and actual damages sustained as a result thereof and attorney's fees.
After trial on the merits, the court below rendered the judgment in question.

On the basis of these facts, the trial court found defendant liable for breach of contract of
carriage and sentenced it to pay P3,000.00 for the death of the child and P400.00 as
compensatory damages representing burial expenses and costs.
On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of
contract in the case, for the reason that when the child met her death, she was no longer a
passenger of the bus involved in the incident and, therefore, the contract of carriage had already
terminated. Although the Court of Appeals sustained this theory, it nevertheless found the
defendant-appellant guilty of quasi-delict and held the latter liable for damages, for the
negligence of its driver, in accordance with Article 2180 of the Civil Code. And, the Court of
Appeals did not only find the petitioner liable, but increased the damages awarded the plaintiffsappellees to P6,000.00, instead of P3,000.00 granted by the trial court.
In its brief before us, La Mallorca contends that the Court of Appeals erred (1) in holding it liable
for quasi-delict, considering that respondents complaint was one for breach of contract, and (2) in
raising the award of damages from P3,000.00 to P6,000.00 although respondents did not appeal
from the decision of the lower court.
Under the facts as found by the Court of Appeals, we have to sustain the judgement holding
petitioner liable for damages for the death of the child, Raquel Beltran. It may be pointed out that
although it is true that respondent Mariano Beltran, his wife, and their children (including the
deceased child) had alighted from the bus at a place designated for disembarking or unloading of
passengers, it was also established that the father had to return to the vehicle (which was still at
a stop) to get one of his bags or bayong that was left under one of the seats of the bus. There
can be no controversy that as far as the father is concerned, when he returned to the bus for
hisbayong which was not unloaded, the relation of passenger and carrier between him and the
petitioner remained subsisting. For, the relation of carrier and passenger does not necessarily
cease where the latter, after alighting from the car, aids the carrier's servant or employee in
removing his baggage from the car.1 The issue to be determined here is whether as to the child,
who was already led by the father to a place about 5 meters away from the bus, the liability of the
carrier for her safety under the contract of carriage also persisted.
It has been recognized as a rule that the relation of carrier and passenger does not cease at the
moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the
point of destination, but continues until the passenger has had a reasonable time or a reasonable
opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay
within this rule is to be determined from all the circumstances. Thus, a person who, after alighting
from a train, walks along the station platform is considered still a passenger.2 So also, where a
passenger has alighted at his destination and is proceeding by the usual way to leave the
company's premises, but before actually doing so is halted by the report that his brother, a fellow
passenger, has been shot, and he in good faith and without intent of engaging in the difficulty,
returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus
continues to be a passenger entitled as such to the protection of the railroad and company and
its agents.3
In the present case, the father returned to the bus to get one of his baggages which was not
unloaded when they alighted from the bus. Raquel, the child that she was, must have followed
the father. However, although the father was still on the running board of the bus awaiting for the
conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had
to jump down from the moving vehicle. It was at this instance that the child, who must be near
the bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier's
agent had exercised the "utmost diligence" of a "very cautions person" required by Article 1755 of
the Civil Code to be observed by a common carrier in the discharge of its obligation to transport
safely its passengers. In the first place, the driver, although stopping the bus, nevertheless did
not put off the engine. Secondly, he started to run the bus even before the bus conductor gave
him the signal to go and while the latter was still unloading part of the baggages of the

passengers Mariano Beltran and family. The presence of said passengers near the bus was not
unreasonable and they are, therefore, to be considered still as passengers of the carrier, entitled
to the protection under their contract of carriage.
But even assuming arguendo that the contract of carriage has already terminated, herein
petitioner can be held liable for the negligence of its driver, as ruled by the Court of Appeals,
pursuant to Article 2180 of the Civil Code. Paragraph 7 of the complaint, which reads
That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs'
daughter, was caused by the negligence and want of exercise of the utmost diligence of a
very cautious person on the part of the defendants and their agent, necessary to
transport plaintiffs and their daughter safely as far as human care and foresight can
provide in the operation of their vehicle.
is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while
incompatible with the other claim under the contract of carriage, is permissible under Section 2 of
Rule 8 of the New Rules of Court, which allows a plaintiff to allege causes of action in the
alternative, be they compatible with each other or not, to the end that the real matter in
controversy may be resolved and determined.4
The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated
when it was alleged in the complaint that "the death of Raquel Beltran, plaintiffs' daughter, was
caused by the negligence and want of exercise of the utmost diligence of a very cautious person
on the part of the defendants and their agent." This allegation was also proved when it was
established during the trial that the driver, even before receiving the proper signal from the
conductor, and while there were still persons on the running board of the bus and near it, started
to run off the vehicle. The presentation of proof of the negligence of its employee gave rise to the
presumption that the defendant employer did not exercise the diligence of a good father of the
family in the selection and supervision of its employees. And this presumption, as the Court of
Appeals found, petitioner had failed to overcome. Consequently, petitioner must be adjudged
peculiarily liable for the death of the child Raquel Beltran.
The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals,
however, cannot be sustained. Generally, the appellate court can only pass upon and consider
questions or issues raised and argued in appellant's brief. Plaintiffs did not appeal from that
portion of the judgment of the trial court awarding them on P3,000.00 damages for the death of
their daughter. Neither does it appear that, as appellees in the Court of Appeals, plaintiffs have
pointed out in their brief the inadequacy of the award, or that the inclusion of the figure P3,000.00
was merely a clerical error, in order that the matter may be treated as an exception to the general
rule.5 Herein petitioner's contention, therefore, that the Court of Appeals committed error in
raising the amount of the award for damages is, evidently, meritorious.
1wph1.t

Wherefore, the decision of the Court of Appeals is hereby modified by sentencing, the petitioner
to pay to the respondents Mariano Beltran, et al., the sum of P3,000.00 for the death of the child,
Raquel Beltran, and the amount of P400.00 as actual damages. No costs in this instance. So
ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Bengzon, J.P., Zaldivar, Sanchez and Castro,
JJ., concur.
Makalintal, J., concurs in the result.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 200868

November 12, 2012

ANITA A. LEDDA, Petitioner,

vs.
BANK OF THE PHILIPPINE ISLANDS, Respondent.
DECISION
CARPIO, J.:
The Case
This petition for rebiew1 assails the 15 July 2011 Decision2 and 9 February 2012 Resolution3 of
the Court of Appeals in CA-G.R. CV No. 93747. The Court of Appeals partially granted the
appeal filed by petitioner Anita A. Ledda (Ledda) and modified the 4 June 2009 Decision 4 of the
Regional Trial Court, Makati City, Branch 61. The Court of Appeals denied the motion for
reconsideration.
The Facts
This case arose from a collection suit filed by respondent Bank of the Philippine Islands (BPI)
against Ledda for the latters unpaid credit card obligation.
BPI, through its credit card system, extends credit accommodations to its clientele for the
purchase of goods and availment of various services from accredited merchants, as well as to
secure cash advances from authorized bank branches or through automated teller machines.
As one of BPIs valued clients, Ledda was issued a pre-approved BPI credit card under
Customer Account Number 020100-9-00-3041167. The BPI Credit Card Package, which included
the Terms and Conditions governing the use of the credit card, was delivered at Leddas
residence on 1 July 2005. Thereafter, Ledda used the credit card for various purchases of goods
and services and cash advances.
Ledda defaulted in the payment of her credit card obligation, which BPI claimed in their complaint
amounted to P548,143.73 per Statement of Account dated 9 September 2007. 5 Consequently,
BPI sent letters6 to Ledda demanding the payment of such amount, representing the principal
obligation with 3.25% finance charge and 6% late payment charge per month.
Despite BPIs repeated demands, Ledda failed to pay her credit card obligation constraining BPI
to file an action for collection of sum of money with the Regional Trial Court, Makati City, Branch
61. The trial court declared Ledda in default for failing to file Answer within the prescribed period,
despite receipt of the complaint and summons. Upon Leddas motion for reconsideration, the trial
court lifted the default order and admitted Leddas Answer Ad Cautelam.
While she filed a Pre-Trial Brief, Ledda and her counsel failed to appear during the continuation
of the Pre-Trial. Hence, the trial court allowed BPI to present its evidence ex-parte.
In its Decision of 4 June 2009, the trial court ruled in favor of BPI, thus:
WHEREFORE, premises duly considered, the instant "Complaint" of herein plaintiff Bank of the
Philippine Islands (BPI) is hereby given DUE COURSE/GRANTED.
Accordingly, judgment is hereby rendered against herein defendant ANITA A. LEDDA and in favor
of the plaintiff.

Ensuably, the herein defendant ANITA A. LEDDA is hereby ordered to pay the herein plaintiff
Bank of the Philippine Islands (BPI) the following sums, to wit:
1. Five Hundred Forty-Eight Thousand One Hundred Forty-Three Pesos and Seventy-Three
Centavos (P548,143.73) as and for actual damages, with finance and late-payment charges at
the rate of three and one-fourth percent (3.25%) and six percent (6%) per month, respectively, to
be counted from 19 October 2007 until the amount is fully paid;
2. Attorneys fees equivalent to twenty-five percent (25%) of the total obligation due and
demandable, exclusive of appearance fee for every court hearing, and
3. Costs of suit.
SO ORDERED.7 (Emphasis in the original)
The Ruling of the Court of Appeals
The Court of Appeals rejected Leddas argument that the document containing the Terms and
Conditions governing the use of the BPI credit card is an actionable document contemplated in
Section 7, Rule 8 of the 1997 Rules of Civil Procedure. The Court of Appeals held that BPIs
cause of action is based on "Leddas availment of the banks credit facilities through the use of
her credit/plastic cards, coupled with her refusal to pay BPIs outstanding credit for the cost of the
goods, services and cash advances despite lawful demands."
Citing Macalinao v. Bank of the Philippine Islands,8 the Court of Appeals held that the interest
rates and penalty charges imposed by BPI for Leddas non-payment of her credit card obligation,
totalling 9.25% per month or 111% per annum, are exorbitant and unconscionable. Accordingly,
the Court of Appeals reduced the monthly finance charge to 1% and the late payment charge to
1%, or a total of 2% per month or 24% per annum.
The Court of Appeals recomputed Leddas total credit card obligation by deducting P226,000.15,
representing interests and charges, from P548,143.73, leaving a difference of P322,138.58 as
the principal amount, on which the reduced interest rates should be imposed.
The Court of Appeals awarded BPI P10,000 attorneys fees, pursuant to the ruling in Macalinao.
The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, premises considered, the appeal is PARTLY GRANTED, and accordingly the
herein assailed June 4, 2009 Decision of the trial court is hereby MODIFIED, ordering defendantappellant Anita Ledda to pay plaintiff-appellee BPI the amount of Php322,138.58, with 1%
monthly finance charges from date of availment of the plaintiffs credit facilities, and penalty
charge at 1% per month of the amount due from the date the amount becomes due and payable,
until full payment. The award of attorneys fees is fixed at Php10,000.00.
SO ORDERED.9 (Emphasis in the original)
The Issues
Ledda raises the following issues:
1. Whether the Court of Appeals erred in holding that the document containing the Terms
and Conditions governing the issuance and use of the credit card is not an actionable
document contemplated in Section 7, Rule 8 of the 1997 Rules of Civil Procedure.

2. Whether the Court of Appeals erred in applying Macalinao v. Bank of the Philippine
Islands instead of Alcaraz v. Court of Appeals10 as regards the imposition of interest and
penalty charges on the credit card obligation.
3. Whether the Court of Appeals erred in awarding attorneys fees in favor of BPI.
The Ruling of the Court
The petition is partially meritorious.
I.
Whether the document containing the
Terms and Conditions is an actionable document.
Section 7, Rule 8 of the 1997 Rules of Civil Procedure provides:
SEC. 7. Action or defense based on document. Whenever an action or defense is based upon
a written instrument or document, the substance of such instrument or document shall be set
forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an
exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be
set forth in the pleading.
Clearly, the above provision applies when the action is based on a written instrument or
document.
In this case, the complaint is an action for collection of sum of money arising from Leddas
default in her credit card obligation with BPI. BPIs cause of action is primarily based on Leddas
(1) acceptance of the BPI credit card, (2) usage of the BPI credit card to purchase goods, avail
services and secure cash advances, and (3) non-payment of the amount due for such credit card
transactions, despite demands.11 In other words, BPIs cause of action is not based only on the
document containing the Terms and Conditions accompanying the issuance of the BPI credit
card in favor of Ledda. Therefore, the document containing the Terms and Conditions governing
the use of the BPI credit card is not an actionable document contemplated in Section 7, Rule 8 of
the 1997 Rules of Civil Procedure. As such, it is not required by the Rules to be set forth in and
attached to the complaint.
At any rate, BPI has sufficiently established a cause of action against Ledda, who admits having
received the BPI credit card, subsequently used the credit card, and failed to pay her obligation
arising from the use of such credit card.12
II.
Whether Alcaraz v. Court of Appeals,
instead of Macalinao v. BPI, is applicable.
Ledda contends that the case of Alcaraz v. Court of Appeals,13 instead of Macalinao v. Bank of
the Philippine Islands14 which the Court of Appeals invoked, is applicable in the computation of
the interest rate on the unpaid credit card obligation. Ledda claims that similar to Alcaraz, she
was a "pre-screened" client who did not sign any credit card application form or terms and
conditions prior to the issuance of the credit card. Like Alcaraz, Ledda asserts that the provisions
of the Terms and Conditions, particularly on the interests, penalties and other charges for nonpayment of any outstanding obligation, are not binding on her as such Terms and Conditions
were never shown to her nor did she sign it.
We agree with Ledda. The ruling in Alcaraz v. Court of Appeals15 applies squarely to the present
case. In Alcaraz, petitioner there, as a pre-screened client of Equitable Credit Card Network, Inc.,

did not submit or sign any application form or document before the issuance of the credit card.
There is no evidence that petitioner Alcaraz was shown a copy of the terms and conditions
before or after the issuance of the credit card in his name, much less that he has given his
consent thereto.
In this case, BPI issued a pre-approved credit card to Ledda who, like Alcaraz, did not sign any
credit card application form prior to the issuance of the credit card. Like the credit card issuer in
Alcaraz, BPI, which has the burden to prove its affirmative allegations, failed to establish Leddas
agreement with the Terms and Conditions governing the use of the credit card. It must be noted
that BPI did not present as evidence the Terms and Conditions which Ledda allegedly received
and accepted.16 Clearly, BPI failed to prove Leddas conformity and acceptance of the stipulations
contained in the Terms and Conditions. Therefore, as the Court held in Alcaraz, the Terms and
Conditions do not bind petitioner (Ledda in this case) "without a clear showing that x x x
petitioner was aware of and consented to the provisions of such document." 17
On the other hand, Macalinao v. Bank of the Philippine Islands,18 which the Court of Appeals
cited, involves a different set of facts. There, petitioner Macalinao did not challenge the existence
of the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card and her
consent to its provisions, including the imposition of interests and other charges on her unpaid
BPI credit card obligation. Macalinao simply questioned the legality of the stipulated interest rate
and penalty charge, claiming that such charges are iniquitous. In fact, one of Macalinaos
assigned errors before this Court reads: "The reduction of interest rate, from 9.25% to 2%,
should be upheld since the stipulated rate of interest was unconscionable and iniquitous, and
thus illegal."19 Therefore, there is evidence that Macalinao was fully aware of the stipulations
contained in the Terms and Conditions Governing the Issuance and Use of the Credit Card,
unlike in this case where there is no evidence that Ledda was aware of or consented to the
Terms and Conditions for the use of the credit card.
Since there is no dispute that Ledda received, accepted and used the BPI credit card issued to
her and that she defaulted in the payment of the total amount arising from the use of such credit
card, Ledda is liable to pay BPI P322,138.58 representing the principal amount of her unpaid
credit card obligation.20
Consistent with Alcaraz, Ledda must also pay interest on the total unpaid credit card amount at
the rate of 12% per annum since her credit card obligation consists of a loan or forbearance of
money.21 In Eastern Shipping Lines, Inc. v. Court of Appeals,22 the Court explained:
1. When an obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
We reject Leddas contention that, since there was no written agreement to pay a higher interest
rate, the interest rate should only be 6%. Ledda erroneously invokes Article 2209 of the Civil
Code.23 Article 2209 refers to indemnity for damages and not interest on loan or forbearance of
money, which is the case here. In Sunga-Chan v. Court of Appeals,24 the Court held:
Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the
applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only
to loans or forbearance of money, goods, or credits, as well as to judgments involving such loan
or forbearance of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil
Code applies "when the transaction involves the payment of indemnities in the concept of
damage arising from the breach or a delay in the performance of obligations in general," with the
application of both rates reckoned "from the time the complaint was filed until the adjudged

amount is fully paid." In either instance, the reckoning period for the commencement of the
running of the legal interest shall be subject to the condition "that the courts are vested with
discretion, depending on the equities of each case, on the award of interest. (Emphasis supplied)
In accordance with Eastern Shipping Lines, Inc., the 12% legal interest shall be reckoned from
the date BPI extrajudicially demanded from Ledda the payment of her overdue credit card
obligation. Thus, the 12% legal interest shall be computed from 2 October 2007, when Ledda,
through her niece Sally D. Gancea,25 received BPIs letter26 dated 26 September 2007
demanding the payment of the alleged overdue amount of P548,143.73.
III.
Whether the award of attorneys fees is proper.
Ledda assails the award of attorneys fees in favor of BPI on the grounds of (1) erroneous
reliance by the Court of Appeals on the case of Macalinao and (2) failure by the trial court to state
the reasons for the award of attorneys fees.
Settled is the rule that the trial court must state the factual, legal or equitable justification for the
award of attorneys fees.27 The matter of attorneys fees cannot be stated only in the dispositive
portion of the decision.28The body of the courts decision must state the reasons for the award of
attorneys fees.29 In Frias v. San Diego-Sison,30 the Court held:
Article 2208 of the New Civil Code enumerates the instances where such may be awarded and,
in all cases, it must be reasonable, just and equitable if the same were to be granted. Attorneys
fees as part of damages are not meant to enrich the winning party at the expense of the losing
litigant. They are not awarded every time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate. The award of attorneys fees is the exception
rather than the general rule. As such, it is necessary for the trial court to make findings of facts
and law that would bring the case within the exception and justify the grant of such award. The
matter of attorneys fees cannot be mentioned only in the dispositive portion of the decision. They
must be clearly explained and justified by the court in the body of its decision. On appeal, the CA
is precluded from supplementing the bases for awarding attorneys fees when the trial court
failed to discuss in its Decision the reasons for awarding the same. Consequently, the award of
attorneys fees should be deleted.
1wphi1

1wphi1

In this case, the trial court failed to state in the body of its decision the factual or legal reasons for
the award of attorneys fees in favor of BPI. Therefore, the same must be deleted.
WHEREFORE, we GRANT the petition IN PART. Petitioner Anita A. Ledda is ORDERED to pay
respondent Bank of the Philippine Islands the amount of .P322, 138.58, representing her unpaid
credit card obligation, with interest thereon at the rate of 12% per annum to be computed from 2
October 2007, until full payment thereof. The award of attorney's fees is DELETED for lack of
basis.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 133119

August 17, 2000

FINANCIAL BUILDING CORPORATION, petitioner,

vs.
FORBES PARK ASSOCIATION, INC., respondent.
DECISION
DE LEON, JR., J.:
Before us is petition for review on certiorari of the Decision1 dated March 20, 1998 of the Court of
Appeals2 in CA-GR CV No. 48194 entitled "Forbes Park Association, Inc. vs. Financial Building
Corporation", finding Financial Building Corporation (hereafter, Financial Building) liable for
damages in favor of Forbes Park Association, Inc. (hereafter, Forbes Park), for violating the
latters deed of restrictions on the construction of buildings within the Forbes Park Village,
Makati.
The pertinent facts are as follows:
The then Union of Soviet Socialist Republic (hereafter, USSR) was the owner of a 4,223 square
meter residential lot located at No. 10, Narra Place, Forbes Park Village in Makati City. On
December 2, 1985, the USSR engaged the services of Financial Building for the construction of a
multi-level office and staff apartment building at the said lot, which would be used by the Trade
Representative of the USSR.3 Due to the USSRs representation that it would be building a
residence for its Trade Representative, Forbes Park authorized its construction and work began
shortly thereafter.
On June 30, 1986, Forbes Park reminded the USSR of existing regulations 4 authorizing only the
construction of a single-family residential building in each lot within the village. It also elicited a
reassurance from the USSR that such restriction has been complied with. 5 Promptly, the USSR
gave its assurance that it has been complying with all regulations of Forbes Park. 6 Despite this,
Financial Building submitted to the Makati City Government a second building plan for the
construction of a multi-level apartment building, which was different from the first plan for the
construction of a residential building submitted to Forbes Park.
Forbes Park discovered the second plan and subsequent ocular inspection of the USSRs
subject lot confirmed the violation of the deed of restrictions. Thus, it enjoined further
construction work. On March 27, 1987, Forbes Park suspended all permits of entry for the
personnel and materials of Financial Building in the said construction site. The parties attempted
to meet to settle their differences but it did not push through.
Instead, on April 9, 1987, Financial Building filed in the Regional Trial Court of Makati, Metro
Manila, a Complaint7for Injunction and Damages with a prayer for Preliminary Injunction against
Forbes Park docketed as Civil Case No. 16540. The latter, in turn, filed a Motion to Dismiss on
the ground that Financial Building had no cause of action because it was not the real party-ininterest.
On April 28, 1987, the trial court issued a writ of preliminary injunction against Forbes Park but
the Court of Appeals nullified it and dismissed the complaint in Civil Case No. 16540 altogether.
We affirmed the said dismissal in our Resolution,8 promulgated on April 6, 1988, in G.R. No.
79319 entitled "Financial Building Corporation, et al. vs. Forbes Park Association, et al."
After Financial Buildings case, G.R. No. 79319, was terminated with finality, Forbes Park sought
to vindicate its rights by filing on October 27, 1989 with the Regional Trial Court of Makati a
Complaint9 for Damages, against Financial Building, docketed as Civil Case No. 89-5522, arising
from the violation of its rules and regulations. The damages claimed are in the following amounts:
(a) P3,000,000.00 as actual damages; (b) P1,000,000.00 as moral damages; (c) P1,000,000.00
as exemplary damages; and (d) P1,000,000.00 as attorneys fees.10 On September 26, 1994, the

trial court rendered its Decision11 in Civil Case No. 89-5522 in favor of Forbes Park and against
Financial Building, the dispositive portion of which reads, to wit:
"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the
plaintiff and against the defendant:
(1) Ordering the defendant to remove/demolish the illegal structures within three (3)
months from the time this judgment becomes final and executory, and in case of failure of
the defendant to do so, the plaintiff is authorized to demolish/remove the structures at the
expense of the defendant;
(2) Ordering the defendant to pay damages, to wit:
(a) P3,000,000.00 as actual damages by way of demolition expenses;
(b) P1,000,000.00 as exemplary damages;
(c) P500,000.00 as attorneys fees;
(d) the costs of suit.
SO ORDERED."
Financial Building appealed the said Decision of the trial court in Civil Case No. 89-5522 by way
of a petition for review on certiorari12 entitled "Financial Building Corporation vs. Forbes Park
Association, Inc." to the Court of Appeals and docketed therein as CA-GR CV No. 48194.
However, the Court of Appeals affirmed it in its Decision13 dated March 20, 1998, the dispositive
portion of which reads:
"WHEREFORE, the Decision dated September 26, 1994 of the Regional Trial Court of Makati is
AFFIRMED with the modification that the award of exemplary damages, as well as attorneys
fees, is reduced to fifty thousand pesos (P50,000.00) each."
Hence, this petition, wherein Financial Building assigns the following errors:
I. "THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE
COMPLAINT FILED BY RESPONDENT FPA DESPITE THE FACT THAT ITS ALLEGED
CLAIMS AND CAUSES OF ACTION THEREIN ARE BARRED BY PRIOR JUDGMENT
AND/OR ARE DEEMED WAIVED FOR ITS FAILURE TO INTERPOSE THE SAME AS
COMPULSORY COUNTERCLAIMS IN CIVIL CASE NO. 16540;
II. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE
COMPLAINT FILED BY RESPONDENT FPA AGAINST PETITIONER FBC SINCE
RESPONDENT FPA HAS NO CAUSE OF ACTION AGAINST PETITIONER FBC;
III. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING DAMAGES IN FAVOR
OF RESPONDENT FPA DESPITE THE FACT THAT ON THE BASIS OF THE
EVIDENCE ON RECORD, RESPONDENT FPA IS NOT ENTITLED THERETO AND
PETITIONER FBC IS NOT LIABLE THEREFOR;
IV. THE COURT OF APPEALS ERRED IN ORDERING THE DEMOLITION OF THE
ILLEGAL STRUCTURES LOCATED AT NO. 10 NARRA PLACE, FORBES PARK,
MAKATI CITY, CONSIDERING THAT THE SAME ARE LOCATED ON DIPLOMATIC
PREMISES"14

We grant the petition.

First. The instant case is barred due to Forbes Parks failure to set it up as a compulsory
counterclaim in Civil Case No. 16540, the prior injunction suit initiated by Financial Building
against Forbes Park.
A compulsory counterclaim is one which arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the opposing partys claim. 15 If it is within
the jurisdiction of the court and it does not require for its adjudication the presence of third parties
over whom the court cannot acquire jurisdiction, such compulsory counterclaim is barred if it is
not set up in the action filed by the opposing party.16
Thus, a compulsory counterclaim cannot be the subject of a separate action but it should instead
be asserted in the same suit involving the same transaction or occurrence, which gave rise to
it.17 To determine whether a counterclaim is compulsory or not, we have devised the following
tests: (1) Are the issues of fact or law raised by the claim and the counterclaim largely the same?
(2) Would res judicata bar a subsequent suit on defendants claim absent the compulsory
counterclaim rule? (3) Will substantially the same evidence support or refute plaintiffs claim as
well as the defendants counterclaim? and (4) Is there any logical relation between the claim and
the counterclaim? Affirmative answers to the above queries indicate the existence of a
compulsory counterclaim.18
Undoubtedly, the prior Civil Case No. 16540 and the instant case arose from the same
occurrence the construction work done by Financial Building on the USSRs lot in Forbes Park
Village. The issues of fact and law in both cases are identical. The factual issue is whether the
structures erected by Financial Building violate Forbes Parks rules and regulations, whereas the
legal issue is whether Financial Building, as an independent contractor working for the USSR,
could be enjoined from continuing with the construction and be held liable for damages if it is
found to have violated Forbes Parks rules.
As a result of the controversy, Financial Building seized the initiative by filing the prior injunction
case, which was anchored on the contention that Forbes Parks prohibition on the construction
work in the subject premises was improper. The instant case on the other hand was initiated by
Forbes Park to compel Financial Building to remove the same structures it has erected in the
same premises involved in the prior case and to claim damages for undertaking the said
construction. Thus, the logical relation between the two cases is patent and it is obvious that
substantially the same evidence is involved in the said cases.
Moreover, the two cases involve the same parties. The aggregate amount of the claims in the
instant case is within the jurisdiction of the regional trial court, had it been set up as a
counterclaim in Civil Case No. 16540. Therefore, Forbes Parks claims in the instant case should
have been filed as a counterclaim in Civil Case No. 16540.
Second. Since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing
compulsory counterclaim at that time is now barred.
A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its
jurisdictional support therefrom.19 A counterclaim presupposes the existence of a claim against
the party filing the counterclaim. Hence, where there is no claim against the counterclaimant, the
counterclaim is improper and it must dismissed, more so where the complaint is dismissed at the
instance of the counterclaimant.20 In other words, if the dismissal of the main action results in the
dismissal of the counterclaim already filed, it stands to reason that the filing of a motion to
dismiss the complaint is an implied waiver of the compulsory counterclaim because the grant of
the motion ultimately results in the dismissal of the counterclaim.

Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are
incompatible remedies. In the event that a defending party has a ground for dismissal and a
compulsory counterclaim at the same time, he must choose only one remedy. If he decides to file
a motion to dismiss, he will lose his compulsory counterclaim. But if he opts to set up his
compulsory counterclaim, he may still plead his ground for dismissal as an affirmative defense in
his answer.21 The latter option is obviously more favorable to the defendant although such fact
was lost on Forbes Park.
1wphi1

The ground for dismissal invoked by Forbes Park in Civil Case No. 16540 was lack of cause of
action. There was no need to plead such ground in a motion to dismiss or in the answer since the
same was not deemed waived if it was not pleaded. 22 Nonetheless, Forbes Park still filed a
motion to dismiss and thus exercised bad judgment in its choice of remedies. Thus, it has no one
to blame but itself for the consequent loss of its counterclaim as a result of such choice.
Inasmuch as the action for damages filed by Forbes Park should be as it is hereby dismissed for
being barred by the prior judgment in G.R. No. 79319 (supra) and/or deemed waived by Forbes
Park to interpose the same under the rule on compulsory counterclaims, there is no need to
discuss the other issues raised by the herein petitioner.
WHEREFORE, the instant petition is hereby GRANTED and the Decision dated March 20, 1998
of the Court of Appeals in CA-G.R. CV No. 48194 is hereby REVERSED and SET ASIDE.
Costs against respondent Forbes Park Association, Inc. .
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing and Buena, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 178789

November 14, 2012

NATIVIDAD LIM, Petitioner,

vs.
NATIONAL POWER CORPORATION, SPOUSES ROBERTO LL. ARCINUE and ARABELA
ARCINUE,Respondents.
DECISION
ABAD, J.:
This case is about the consequence of a party's failure to explain in his motion why he served a
copy of it on the adverse party by registered mail rather than by personal service.
The Facts and the Case
On February 8, 1995 respondent National Power Corporation (NPC) filed an expropriation
suit1 against petitioner Natividad B. Lim (Lim) before the Regional Trial Court (RTC) of Lingayen,
Pangasinan, Branch 37 in Civil Case 17352 covering Lots 2373 and 2374 that the NPC needed
for its Sual Coal-Fired Thermal Power Project. Since Lim was residing in the United States, the
court caused the service of summons on her on February 20, 1995 through her tenant, a certain

Wilfredo Tabongbong.2 On March 1, 1995, upon notice to Lim and the deposit of the provisional
value of the property, the RTC ordered the issued writ of possession in NPCs favor that would
enable it to cause the removal of Lim from the land.3
On April 24, 1995, however, Lim, represented by her husband Delfin, filed an omnibus motion to
dismiss the action and to suspend the writ of possession, 4 questioning the RTCs jurisdiction over
Lims person and the nature of the action. She also assailed the failure of the complaint to state a
cause of action. The RTC denied the motions.5
On December 6, 1996 respondent spouses Roberto and Arabela Arcinue (the Arcinues) filed a
motion for leave to admit complaint in intervention, 6 alleging that they owned and were in
possession of Lot 2374, one of the two lots subject of the expropriation. On January 7, 1997 the
RTC granted the Arcinues motion and required both the NPC and Lim to answer the complaintin-intervention within 10 days from receipt of its order.7
When Lim and the NPC still did not file their answers to the complaint-in-intervention after 10
months, on December 7, 1998 the Arcinues filed a motion for judgment by default. 8 Lim sought to
expunge the motion on the ground that it lacked the requisite explanation why the Arcinues
resorted to service by registered mail rather than to personal service. At the scheduled hearing of
the motion, Lims counsel did not appear. The NPC for its part manifested that it did not file an
answer since its interest lay in determining who was entitled to just compensation.
On March 1, 1999 the RTC issued an order of default9 against both Lim and the NPC. The RTC
pointed out that the Arcinues failure to explain their resort to service by registered mail had
already been cured by the manifestation of Lims counsel that he received a copy of the Arcinues
motion on December 7, 1998 or 10 days before its scheduled hearing. Lim filed a motion for
reconsideration10 to lift the default order but the Court denied the motion, 11 prompting Lim to file a
petition for certiorari12 before the Court of Appeals (CA) in CA-G.R. SP 52842.
On March 23, 2007 the CA rendered a decision13 that affirmed the RTCs order of default. Lim
filed a motion for reconsideration14 but the CA denied it,15 prompting her to file the present petition
for review.16 On September 24, 2007 the Court initially denied Lims petition17 but on motion for
reconsideration, the Court reinstated the same.18
Issue Presented
The only issue presented in this case is whether or not the CA gravely abused its discretion in
affirming the order of default that the RTC entered against Lim.
Ruling of the Court
Lim points out that an answer-in-intervention cannot give rise to default since the filing of such an
answer is only permissive. But Section 4, Rule 1919 of the 1997 Rules of Civil Procedure requires
the original parties to file an answer to the complaint-in-intervention within 15 days from notice of
the order admitting the same, unless a different period is fixed by the court. This changes the
procedure under the former rule where such an answer was regarded as optional. 20 Thus, Lims
failure to file the required answer can give rise to default.
The trial court had been liberal with Lim. It considered her motion for reconsideration as a motion
to lift the order of default and gave her an opportunity to explain her side. The court set her
motion for hearing but Lims counsel did not show up in court. She remained unable to show that
her failure to file the required answer was due to fraud, accident, mistake, or excusable
negligence. And, although she claimed that she had a meritorious defense, she was unable to
specify what constituted such defense.21

Lim points out that the RTC should have ordered the Arcinues motion for judgment by default
expunged from the records since it lacked the requisite explanation as to why they resorted to
service by registered mail in place of personal service.
There is no question that the Arcinues motion failed to comply with the requirement of Section
11, Rule 13 of the 1997 Rules of Civil Procedure which provides:
SECTION 11. Priorities in modes of service and filing. Whenever practicable, the service and
filing of pleadings and other papers shall be done personally. Except with respect to papers
emanating from the court, a resort to other modes must be accompanied by a written
explanation, why the service or filing was not done personally. A violation of this Rule may be
cause to consider the paper as not filed.
But the above does not provide for automatic sanction should a party fail to submit the required
explanation. It merely provides for that possibility considering its use of the term "may." The
question is whether or not the RTC gravely abused its discretion in not going for the sanction of
striking out the erring motion.
1wphi1

The Court finds no such grave abuse of discretion here. As the RTC pointed out, notwithstanding
that the Arcinues' failed to explain their resort to service by registered mail rather than by
personal service, the fact is that Lim's counsel expressly admitted having received a copy of the
Arcinues' motion for judgment by default on December 7, 1998 or I 0 days before its scheduled
hearing. This means that the Arcinues were diligent enough to file their motion by registered mail
long before the scheduled hearing.
Personal service is required precisely because it often happens that hearings do not push
through because, while a copy of the motion may have been served by registered mail before the
date of the hearing, such is received by the adverse party already after the hearing. Thus, the
rules prefer personal service. But it does not altogether prohibit service by registered mail when
such service, when adopted, ensures as in this case receipt by the adverse party.
WHEREFORE, the Court DENIES the petition and AFFIRMS the Court of Appeals Decision in
CA-G.R. SP 52842 dated March 23, 2007 and Resolution dated July 5, 2007 that upheld the
orders of the Regional Trial Court in Civil Case 17352. The Court DIRECTS the RTC to proceed
with its hearing and adjudication of the case.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 195592

September 5, 2012

MAGDIWANG REALTY CORPORATION, RENATO P. DRAGON and ESPERANZA

TOLENTINO, Petitioners,
vs.
THE MANILA BANKING CORPORATION, substituted by FIRST SOVEREIGN ASSET
MANAGEMENT (SPV-AMC), INC., Respondent.
DECISION
REYES, J.:

This resolves the petition for review on certiorari filed under Rule 45 of the Rules of Court which
questions. the Decision1 dated October 11, 201 0 and Resolution2 dated January 31, 2011 of the
Court of Appeals (CA) in CA-G .R. CV No. 90098 entitled The Manila Banking Corporation,
substituted by First Sovereign Asset Management, Inc., Plaintiff-Appellee, v. Magdiwang Realty
Corporation, Renata P. Dragon and Esperanza Tolentino, Defendants-Appellants.
The Factual Antecedents
The case stems from a complaint3 for sum of money filed on April 18, 2000 before the Regional
Trial Court (RTC), Makati City by herein respondent, The Manila Banking Corporation (TMBC),
against herein petitioners, Magdiwang Realty Corporation (Magdiwang), Renato P. Dragon
(Dragon) and Esperanza Tolentino (Tolentino), after said petitioners allegedly defaulted in the
payment of their debts under the five promissory notes4 they executed in favor of TMBC, which
contained the following terms:

Promissory Note No. 4953

Promissory Note No. 10045
Promissory Note No. 10046
Promissory Note No. 10047
Promissory Note No. 10048

Maturity Date
December 27, 1976
March 27, 1982
March 27, 1982
March 27, 1982
March 27, 1982

Amount
Php500,000.00
Php500,000.00
Php500,000.00
Php500,000.00
Php500,000.00

All promissory notes included stipulations on the payment of interest and additional charges in
case of default by the debtors. Despite several demands for payment made by TMBC, the
petitioners allegedly failed to heed to the banks demands, prompting the filing of the complaint
for sum of money. The case was docketed as Civil Case No. 00-511 and raffled to Branch 148 of
the RTC of Makati City.
Instead of filing a responsive pleading with the trial court, the petitioners filed on October 12,
2000, which was notably beyond the fifteen (15)-day period allowed for the filing of a responsive
pleading, a Motion for Leave to Admit Attached Motion to Dismiss 5 and a Motion to
Dismiss,6 raising therein the issues of novation, lack of cause of action against individuals
Dragon and Tolentino, and the impossibility of the novated contract due to a subsequent act of
the Congress. The motions were opposed by the respondent TMBC, via its Opposition7 which
likewise asked that the petitioners be declared in default for their failure to file their responsive
pleading within the period allowed under the law.
Acting on these incidents, the RTC issued an Order 8 on July 5, 2001 declaring the petitioners in
default given the following findings:
The record shows that as per Officers Return dated 19 September 2000, summons were served
on even date by way of substituted service. Summons were received by a certain LINDA G.
MANLIMOS, a person of sufficient age and discretion then working/residing at the address
indicated in the Complaint at No. 15 Tamarind St., Forbes Park, Makati City.
Consequently, in accordance with the Rules, defendants should have filed an Answer or Motion
to Dismiss or any responsive pleading for that matter within the reglementary period, which is
fifteen (15) days from receipt of Summons and a copy of the complaint with attached annexes.
Accordingly, defendants should have filed their responsive pleading on October 2, 2000 but no
pleading was filed on the aforesaid date, not even a Motion for Extension of Time. Instead,
defendants Motion to Dismiss found its way into the court only on the 13th day of October,
clearly beyond the period contemplated by the Rules. A perusal of the Motion for Leave to Admit
the Motion to Dismiss filed by defendants reveals that the case, as claimed by the counsel for
defendants, was just referred to the counsel only on October 10, and further insinuated that the
Motion to Dismiss was only filed on the said date in view of the complicated factual and legal

issues involved. While this Court appreciates the efforts and tenacity shown by defendants
counsel for having prepared a [lengthy] pleading for his clients in so short a time, the Court will
have to rule that the Motion to Dismiss was nonetheless filed out of time, hence, there is
sufficient basis to declare defendants in default. x x x. 9
The decretal portion of the Order then reads:
WHEREFORE, premises considered, defendants Motion to Dismiss is hereby treated as a
pleading which has not been filed at all and cannot be ruled upon by the Court anymore for the
same has been filed out of time. Plaintiffs prayer to declare defendants in default is
hereby GRANTED, and as a consequence, defendants are hereby declared in DEFAULT.
SO ORDERED.10
The petitioners motion for reconsideration was denied by the trial court in its Order 11 dated
August 2, 2005. The ex parte presentation of evidence by the bank before the trial courts
Presiding Judge was scheduled in the same Order.
Unsatisfied with the RTC orders, the petitioners filed with the CA a petition for certiorari, which
was docketed as CA-G.R. SP No. 91820. In a Decision12 dated December 2, 2006, the CA
affirmed the RTC orders after ruling that the trial court did not commit grave abuse of discretion
when it declared herein petitioners in default. The denial of petitioners motion for reconsideration
prompted the filing of a petition for review on certiorari before this Court, which, through its
Resolutions dated March 5, 200813 and June 25, 2008,14 denied the petition for lack of merit.
In the meantime, TMBCs presentation of evidence ex parte proceeded before Presiding Judge
Oscar B. Pimentel of the RTC of Makati City.
The Ruling of the RTC
On May 20, 2007, the RTC rendered its Decision15 in favor of TMBC and against herein
petitioners. The decisions dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff as
against:
1. Defendant Magdiwang Realty Corporation, requiring said defendant to pay plaintiff the sum
of P 500,000.00 as indicated in Promissory Note No. 4953;
2. Requiring defendant Magdiwang Realty Corporation to pay the plaintiff interest to the principal
loan at the rate of 14% per annum from 27 December 1976 until the amount is paid;
3. Requiring the defendant Magdiwang Realty Corporation to pay plaintiff penalty charges of 4%
per annum from December 27, 1976 until the whole amount is paid; and
4. Requiring defendant Magdiwang Realty Corporation to pay plaintiff attorneys fees equivalent
to 10% of the total outstanding obligation.
Further, judgment is rendered in favor of plaintiff and against defendants Magdiwang Realty
Corporation, Renato Dragon and Esperanza Tolentino ordering said defendants to jointly and
severally pay the plaintiff the following:
1. The principal amount of P 500,000.00 as indicated in Promissory Note No.
10045;

2. To pay the principal amount of P 500,000.00 as indicated in Promissory Note

No. 10046;
3. To pay the principal amount of P 500,000.00 as indicated in Promissory Note
No. 10047;
4. To pay the principal amount of P 500,000.00 as indicated in Promissory Note
No. 10048;
5. To pay interest in the principal loan at the rate of sixteen (16%) percent per
annum as stipulated in PN Nos. 10045, 10046, 10047 and 10048 from March 27,
1981 until the whole amount is paid;
6. To pay penalty at the rate of one percent a month (1%) on the principal amount
[of] loan plus unpaid interest at the rate of 16% per annum in PN Nos. 10045,
10046, 10047 and 10048 starting from March 27, 1981 until the whole amount is
paid; and
7. To pay 10% of the total amount due and outstanding under PN Nos. 10045,
10046, 10047 and 10048 as attorneys fees.
Costs against the defendants.
SO ORDERED.16
The petitioners motion for reconsideration was denied by the trial court via its Order 17 dated
November 5, 2007. Feeling aggrieved, the petitioners appealed to the CA, imputing error on the
part of the trial court in: (1) not declaring that TMBCs cause of action was already barred by the
statute of limitations; (2) declaring herein petitioners liable to pay TMBC despite the alleged
novation of the subject obligations; (3) declaring TMBC entitled to its claims despite the alleged
failure of the bank to substantiate its claims; (4) declaring TMBC entitled to attorneys fees and
litigation expenses; and (5) declaring herein petitioners in default.
While appeal was pending before the appellate court, TMBC and First Sovereign Asset
Management (SPV-AMC), Inc. (FSAMI) filed a Joint Motion for Substitution, asking that TMBC be
substituted by FSAMI after the former executed in favor of the latter a Deed of Assignment
covering all of its rights, title and interest over the loans subject of the case.
The Ruling of the CA
On October 11, 2010, the CA rendered its Decision18 dismissing the petitioners appeal. The
decisions dispositive portion reads:
WHEREFORE, in view of the foregoing premises, the appeal filed in this case is
hereby DENIED and, consequently, DISMISSED. The assailed Decision dated May 20, 2007 and
Order dated November 5, 2007 of the Regional Trial Court, Branch 148, in Makati City in Civil
Case No. 00-511 are herebyAFFIRMED.
SO ORDERED.19
On the issue of prescription, the CA cited the rule that the prescriptive period is interrupted in any
of the following instances: (1) when an action is filed before the court; (2) when there is a written
extrajudicial demand by the creditors; and (3) when there is any written acknowledgment of the
debt by the debtor. The appellate court held:

As shown by the evidence, we arrived at the conclusion that the prescriptive period was legally
interrupted on September 19, 1984 when the defendants-appellants, through several letters,
proposed for the restructuring of their loans until the plaintiff-appellee sent its final demand letter
on September 10, 1999. Indeed, the period during which the defendants-appellants were seeking
reconsideration for the non-settlement of their loans and proposing payment schemes of the
same should not be reckoned against it. When prescription is interrupted, all the benefits
acquired so far from the lapse of time cease and, when prescription starts anew, it will be entirely
a new one. This concept should not be equated with suspension where the past period is
included in the computation being added to the period after prescription is resumed.
Consequently, when the plaintiff-appellee sent its final demand letter to the defendants
appellants, thus, foreclosing all possibilities of reaching a settlement of the loans which could be
favorable to both parties, the period of ten years within which to enforce the five promissory
notes under Article 1142 of the New Civil Code began to run again and, therefore, the action filed
on April 18, 2000 to compel the defendants-appellants to pay their obligations under the
promissory notes had not prescribed. The written communications of the defendants-appellants
proposing for the restructuring of their loans and the repayment scheme are, in our view,
synonymous to an express acknowledgment of the obligation and had the effect of interrupting
the prescription. x x x.20 (Citation omitted)
The defense of novation was also rejected by the CA, citing the absence of two requirements for
a valid novation, namely: (1) the clear and express release of the original debtor from the
obligation upon the assumption by the new debtor of the obligation; and (2) the consent of the
creditor thereto.
A motion for reconsideration filed by the petitioners was denied by the CA in its
Resolution21 dated January 31, 2011. Hence, the present petition for review on certiorari.
The Present Petition
The petitioners present the following grounds to support their petition:
1. THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE PRESCRIPTIVE PERIOD
WAS LEGALLY INTERRUPTED ON 19 SEPTEMBER 1984 WHEN PETITIONERS, THROUGH
SEVERAL LETTERS, PROPOSED FOR THE RESTRUCTURING OF THEIR LOANS UNTIL
THE RESPONDENT SENT ITS FINAL DEMAND LETTER ON 10 SEPTEMBER 1999.
2. THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE PRINCIPLE OF NOVATION
BY THE SUBSTITUTION OF DEBTORS WAS ERRONEOUSLY EMPLOYED BY THE
PETITIONERS TO EXTRICATE THEMSELVES FROM THEIR OBLIGATION TO RESPONDENT.
3. THE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE TRIAL COURTS RULING
HOLDING THAT PETITIONERS ARE LIABLE FOR ATTORNEYS FEES. 22
This Courts Ruling
The petition is dismissible.
At the outset, we explain that based on the issues being raised by the petitioners, together with
the arguments and the evidence being invoked in support thereof, we hold that the petition
involves questions of fact that are beyond the ambit of a petition for review on certiorari. Section
1, Rule 45 of the Rules of Court, as amended, reads:
Sec. 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorari from a
judgment, final order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax
Appeals, the Regional Trial Court or other courts, whenever authorized by law, may file with the

Supreme Court a verified petition for review on certiorari. The petition may include an application
for a writ of preliminary injunction or other provisional remedies and shall raise only questions of
law, which must be distinctly set forth. The petitioner may seek the same provisional remedies by
verified motion filed in the same action or proceeding at any time during its pendency. (Emphasis
ours)
Section 1, Rule 45 then categorically states that a petition for review on certiorari 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.23
On the first issue of prescription, the petitioners argue that there was no written extrajudicial
demand by the creditor TMBC that could have validly interrupted the ten (10)-year prescriptive
period.24 They claim, among other things, that the bank failed to prove that it sent the demand
letter dated September 10, 1999 to the petitioners, and that it was actually received by said
petitioners. The petitioners also question the several other letters supposedly exchanged
between the parties. These contentions are now being raised even after the trial court that
admitted the evidence of the respondent has categorically declared in its Decision dated May 20,
2007 the fact of the respondents service, and the petitioners receipt, of the demands. 25 In its
Order dated November 5, 2007, the trial court had also cited the several other correspondences
exchanged between the parties, including the letters of November 14, 1984, March 24, 1987,
February 14, 1990 and September 10, 1999 that negated the defenses of prescription and
novation.26
On appeal, these factual findings were even affirmed by the CA, which again cited the several
letters exchanged between the parties in relation to the subject debts, and which
correspondences were declared to have effectively interrupted the running of the prescriptive
period to initiate the action for sum of money against the petitioners.
Applying the guidelines laid down by jurisprudence on the criteria for distinguishing a question of
law from a question of fact, it is clear that the petitioners are now asking this Court to determine a
question of fact, as their arguments delve on the truth or falsity of the trial and appellate courts
factual findings, the existence and authenticity of the respondents documentary evidence, as
well as the truth or falsity of the TMBCs narration of facts in their complaint and the testimonial
evidence presented before the Presiding Judge in support of said allegations.
Similarly, the issue of the alleged novation involves a question of fact, as it necessarily requires a
factual determination on the existence of the following requisites of novation: (1) there must be a
previous valid obligation; (2) the parties concerned must agree to a new contract; (3) the old
contract must be extinguished; and (4) there must be a valid new contract. 27 Needless to say, the
respondents entitlement to attorneys fees also depends upon the questioned factual findings.
The settled rule is that conclusions and findings of fact of the trial court are entitled to great
weight on appeal and should not be disturbed unless for strong and cogent reasons because the
trial court is in a better position to examine real evidence, as well as observe the demeanor of the
witnesses while testifying in the case. The fact that the CA adopted the findings of fact of the trial
court makes the same binding upon this Court.28 The Supreme Court is not a trier of facts. It is
not our function to review, examine and evaluate or weigh the probative value of the evidence
presented. A question of fact would arise in such event.29 Although jurisprudence admits of
several exceptions to the foregoing rules, the present case does not fall under any of them.

Even granting that the issues being raised by the petitioners may still be validly entertained by
this Court through the instant petition for review on certiorari, we hold that their arguments and
defenses are bound to fail for lack of merit.
Significantly, the petitioners failed to file their answer to TMBCs complaint within the
reglementary period allowed under the Rules of Court. The validity of the trial courts declaration
of their default is a settled matter, following the denial of the petitions previously brought by the
petitioners before the CA and this Court questioning it. As correctly stated by the CA in the
Decision dated October 11, 2010:
At the outset, it behooves this Court to accentuate that the Order of the trial court declaring the
defendants-appellants in default for their failure to file their responsive pleading to the complaint
within the period prescribed under Section 3 of Rule 9 of the Revised Rules of Court had been
declared final and beyond review already by the Supreme Court through its Resolution dated
March 5, 2008 and June 25, 2008. Judicial decisions of the Supreme Court, as the final arbiter of
any justiciable controversy, assume the same authority as the law itself. Thus, the issue raised
by the defendants-appellants questioning the wisdom of the trial courts decision in declaring
them in default is now rendered moot and academic by the aforecited Supreme Court
resolutions.30
The petitioners default by their failure to file their answer led to certain consequences. Where
defendants before a trial court are declared in default, they thereby lose their right to object to the
reception of the plaintiffs evidence establishing his cause of action. 31 This is akin to a failure to,
despite due notice, attend in court hearings for the presentation of the complainants evidence,
which absence would amount to the waiver of such defendants right to object to the evidence
presented during such hearing, and to cross-examine the witnesses presented therein. 32
Taking into consideration the banks allegations in its complaint and the totality of the evidence
presented in support thereof, coupled with the said circumstance that the petitioners, by their
own inaction, failed to make their timely objection or opposition to the evidence, both
documentary and testimonial, presented by TMBC to support its case, we find no cogent reason
to reverse the trial and appellate courts findings. We stress that in civil cases, the party having
the burden of proof must establish his case only by a preponderance of evidence.
Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either
side and is usually considered to be synonymous with the term "greater weight of evidence" or
"greater weight of the credible evidence." Preponderance of evidence is a phrase which, in the
last analysis, means probability to truth. It is evidence which is more convincing to the court as
worthier of belief than that which is offered in opposition thereto. 33
We agree with the trial and appellate courts, for as the records bear, that the ten (10)-year
prescriptive period to file an action based on the subject promissory notes was interrupted by the
several letters exchanged between the parties. This is in conformity with the second and third
circumstances under Article 1155 of the New Civil Code (NCC) which provides that the
prescription of actions is interrupted when: (1) they are filed before the court; (2) there is a written
extrajudicial demand by the creditors; and (3) there is any written acknowledgment of the debt by
the debtor. In TMBCs complaint against the petitioners, the bank sufficiently made the
allegations on its service and the petitioners receipt of the subject demand letters, even
attaching thereto copies thereof for the trial courts consideration. Thus, the complaint states in
part:
23. However, despite numerous demands by plaintiff for the payment of the loan obligations
obtained by defendants and evidenced by the five Promissory Notes, defendants MAGDIWANG,
Dragon and Tolentino failed to settle their obligations with plaintiff.
Copies of plaintiffs demand letters with respect to the five Promissory Notes (PN Nos. 4953,
10045, 10046, 10047, 10048) duly received by defendants, as well as defendants letters in reply

to the demand letters and requesting for restructuring of loan or extension of time to pay the
same are herewith attached as Annexes "F" to "O", respectively, and made integral parts of this
Complaint.34
During the banks presentation of evidence ex parte, the testimony of witness Mr. Megdonio
Isanan was also offered to further support the claim on the demand made by the bank upon the
petitioners. In the absence of a timely objection from the petitioners on these claims, no error can
be imputed on the part of the trial court, and even the appellate court, in taking due consideration
thereof.
1wphi1

As against the bare denial belatedly made by the petitioners of their receipt of the written
extrajudicial demands made by TMBC, especially of the letter of September 10, 1999 which was
the written demand sent closest in time to the institution of the civil case, the appreciation of
evidence and pronouncements of the trial court in its Order dated November 5, 2007 shall stand,
to wit:
In the 14 November 1984 Letter of Kalilid Wood Industries, Inc., through Mr. Uriel Balboa, the
counter-offer of the plaintiff was acknowledged but Kalilid, while manifesting that the counter offer
is acceptable, made some reservations and other conditions which likewise constitute as counter
offers. Hence, no meeting of the minds happened regarding the restructuring of the loan.
Likewise, based on this letter, the debt was also acknowledged. Another letter dated 24 March
1987 was issued and a repayment plan has been proposed by the Magdiwang Realty
Corporation. There was also a correspondence dated February 14, 1990 from defendant Renato
P. Dragons Office regarding the obligation. While a demand letter dated September 1999 was
given by the plaintiff to the defendants. Hence, from all indications, the prescription of the
obligation does not set in.35
In addition to these, we take note that letters prior to the letter of September 1999 also form part
of the case records, and the existence of said letters were not directly denied by the petitioners.
The following letters that form part of the complaint and included in TMBCs formal offer of
exhibits were correctly claimed by the respondents in their Comment 36 as also containing the
petitioners acknowledgment of their debts and TMBCs demand to its debtors: (1) Exhibit "M-29",
which is a letter dated January 4, 1995 requesting for an updated Statement of Account of the
corporations owned by petitioner Dragon, including the account of petitioner Magdiwang; and (2)
Exhibit "M-30", which is the letter dated January 12, 1995 from the Office of the Statutory
Receiver of TMBC and providing the Statements of Account requested for in the letter of January
4, 1995. Significantly, the petitioners failed to adequately negate the authority of the first letters
signatory to act for and on behalf of the petitioners, the reasonable conclusion being that said
signatory and the company it represented were designated by the petitioners, as the debtors in
the loans therein indicated, to deal with the TMBC.
On the issue of novation, no evidence was presented to adequately establish that such novation
ensued. What the letters being invoked by the petitioners as supposedly establishing novation
only indicate that efforts on a repayment scheme were exerted by the parties. However, nowhere
in the records is it indicated that such novation ever materialized.
1wphi1

Regarding the award of attorneys fees, the applicable provision is Article 2208(2) of the NCC
which allows the grant thereof when the defendants act or omission compelled the plaintiff to
litigate or to incur expenses to protect its interest. Considering the circumstances that led to the
filing of the complaint in court, and the clear refusal of the petitioners to satisfy their existing debt
to the bank despite the long period of time and the accommodations granted to it by the
respondent to enable them to satisfy their obligations, we agree that the respondent was
compelled by the petitioners' acts to litigate for the protection of the bank's interests, making the
award of attorney's fees proper.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision dated
October 11, 2010 and Resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. CV
No. 90098 are hereby AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 176628

March 19, 2012

PHILIPPINE TOURISM AUTHORITY, Petitioner,

vs.
PHILIPPINE GOLF DEVELOPMENT & EQUIPMENT, INC., Respondent.
RESOLUTION
BRION, J.:
Before this Court is a petition for certiorari, under Rule 65 of the 1997 Rules of Civil Procedure, to
annul the decision1 dated December 13, 2006 of the Court of Appeals (CA) in CA G.R. SP No.
90402. This CA decision dismissed the petition for annulment of judgment which sought to set
aside the decision2 of the Regional Trial Court (RTC) of Muntinlupa City, Branch 203, in Civil
Case No. 03-212. The RTC held the Philippine Tourism Authority (PTA) liable for its unpaid
obligation to Philippine Golf Development & Equipment, Inc. (PHILGOLF).
FACTUAL BACKGROUND
On April 3, 1996, PTA, an agency of the Department of Tourism, whose main function is to
bolster and promote tourism, entered into a contract with Atlantic Erectors, Inc. (AEI) for the
construction of the Intramuros Golf Course Expansion Projects (PAR 60-66) for a contract price
of Fifty-Seven Million Nine Hundred Fifty-Four Thousand Six Hundred Forty-Seven and 94/100
Pesos (P57,954,647.94).
The civil works of the project commenced. Since AEI was incapable of constructing the golf
course aspect of the project, it entered into a sub-contract agreement with PHILGOLF, a duly
organized domestic corporation, to build the golf course amounting to Twenty-Seven Million
Pesos (P27,000,000.00). The sub-contract agreement also provides that PHILGOLF shall submit
its progress billings directly to PTA and, in turn, PTA shall directly pay PHILGOLF.3
On October 2, 2003, PHILGOLF filed a collection suit against PTA amounting to Eleven Million
Eight Hundred Twenty Thousand Five Hundred Fifty and 53/100 Pesos (P11,820,550.53), plus
interest, for the construction of the golf course. Within the period to file a responsive pleading,
PTA filed a motion for extension of time to file an answer.
On October 30, 2003, the RTC granted the motion for extension of time. PTA filed another motion
for extension of time to file an answer. The RTC again granted the motion.
Despite the RTCs liberality of granting two successive motions for extension of time, PTA failed
to answer the complaint. Hence, on April 6, 2004, the RTC rendered a judgment of default, ruling
as follows:

WHEREFORE, judgment is hereby rendered, ordering the defendant to pay plaintiff:

1. The amount of Eleven Million, Eight Hundred Twenty Thousand, Five Hundred Fifty
Pesos and Fifty Three Centavos (P11,820,550.53), representing defendants outstanding
obligation, plus interest thereon of twelve percent (12%) per annum from the time the
unpaid billings of plaintiff were due for payment by the defendant, until they are fully paid.
2. The amount of Two Hundred Thousand Pesos (P200,000.00), as attorneys fees.
3. The amount of One Hundred Twenty Eight Thousand, Five Hundred Twenty Nine
Pesos and Fourteen Centavos (P128,529.14), as filing fees and other costs of litigation.
4. The amount of Three Hundred Thousand Pesos (P300,000.00), as moral damages.
5. The amount of One Hundred Fifty Thousand (Pesos (P150,000.00), as nominal
damages, and
6. The amount of Two Hundred Fifty Thousand Pesos (P250,000.00), as exemplary
damages.
SO ORDERED.4
On July 11, 2005, PTA seasonably appealed the case to the CA. But before the appeal of PTA
could be perfected, PHILGOLF already filed a motion for execution pending appeal with the RTC.
The RTC, in an Order dated June 2, 2004, granted the motion and a writ of execution pending
appeal was issued against PTA. On June 3, 2004, a notice of garnishment was issued against
PTAs bank account at the Land Bank of the Philippines, NAIA-BOC Branch to fully satisfy the
judgment.
PTA filed a petition for certiorari with the CA, imputing grave abuse of discretion on the part of the
RTC for granting the motion for execution pending appeal. The CA ruled in favor of PTA and set
aside the order granting the motion for execution pending appeal.
On July 11, 2005, PTA withdrew its appeal of the RTC decision and, instead, filed a petition 5 for
annulment of judgment under Rule 47 of the Rules of Court. The petition for annulment of
judgment was premised on the argument that the gross negligence of PTAs counsel prevented
the presentation of evidence before the RTC.
On December 13, 2006, the CA dismissed the petition for annulment of judgment for lack of
merit. PTA questions this CA action in the present petition for certiorari.
THE PETITION
The petition cites three arguments: first, that the negligence of PTAs counsel amounted to an
extrinsic fraud warranting an annulment of judgment; second, that since PTA is a government
entity, it should not be bound by the inactions or negligence of its counsel; and third, that there
were no other available remedies left for PTA but a petition for annulment of judgment.
OUR RULING
We find the petition unmeritorious.
The Rules of Court specifically provides for deadlines in actions before the court to ensure an
orderly disposition of cases. PTA cannot escape these legal technicalities by simply invoking the
negligence of its counsel. This practice, if allowed, would defeat the purpose of the Rules on

periods since every party would merely lay the blame on its counsel to avoid any liability. The
rule is that "a client is bound by the acts, even mistakes, of his counsel in the realm of procedural
technique[,]and unless such acts involve gross negligence that the claiming party can prove, the
acts of a counsel bind the client as if it had been the latters acts."6
In LBC Express - Metro Manila, Inc. v. Mateo,7 the Court held that "[g]ross negligence is
characterized by want of even slight care, acting or omitting to act in a situation where there is a
duty to act, not inadvertently but willfully and intentionally with a conscious indifference to
consequences insofar as other persons may be affected." This cannot be invoked in cases where
the counsel is merely negligent in submitting his required pleadings within the period that the
rules mandate.
It is not disputed that the summons together with a copy of the complaint was personally served
upon, and received by PTA through its Corporate Legal Services Department, on October 10,
2003.8 Thus, in failing to submit a responsive pleading within the required time despite sufficient
notice, the RTC was correct in declaring PTA in default.
There was no extrinsic fraud
"Extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which is
committed outside of the trial of the case, whereby the unsuccessful party has been prevented
from exhibiting fully his case, by fraud or deception practiced on him by his opponent." 9 Under
the doctrine of this cited case, we do not see the acts of PTAs counsel to be constitutive of
extrinsic fraud.
The records reveal that the judgment of default10 was sent via registered mail to PTAs counsel.
However, PTA never availed of the remedy of a motion to lift the order of default. 11 Since the
failure of PTA to present its evidence was not a product of any fraudulent acts committed outside
trial, the RTC did not err in declaring PTA in default.
Annulment of judgment is not the proper remedy
PTAs appropriate remedy was only to appeal the RTC decision. "Annulment of Judgment under
Rule 47 of the Rules of Court is a recourse equitable in character and allowed only in exceptional
cases where the ordinary remedies of new trial, appeal, petition for relief or other appropriate
remedies are no longer available through no fault of petitioner."12
In this case, appeal was an available remedy. There was also no extraordinary reason for a
petition for annulment of judgment, nor was there any adequate explanation on why the remedy
for new trial or petition for relief could not be used. The Court is actually at a loss why PTA had
withdrawn a properly filed appeal and substituted it with another petition, when PTA could have
merely raised the same issues through an ordinary appeal.
PTA was acting in a proprietary character
PTA also erred in invoking state immunity simply because it is a government entity. The
application of state immunity is proper only when the proceedings arise out of sovereign
transactions and not in cases of commercial activities or economic affairs. The State, in entering
into a business contract, descends to the level of an individual and is deemed to have tacitly
given its consent to be sued.13
Since the Intramuros Golf Course Expansion Projects partakes of a proprietary character entered
into between PTA and PHILGOLF, PTA cannot avoid its financial liability by merely invoking
immunity from suit.

A special civil action for certiorari under Rule 65 is proper only when there is no other plain,
speedy, and adequate remedy
Lastly, a special civil action under Rule 65 of the Rules of Court is only available in cases when a
tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in
excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law. It is not a mode of appeal, and cannot also be made as a substitute for appeal. It
will not lie in cases where other remedies are available under the law.
1wphi1

In Land Bank of the Philippines v. Court of Appeals,14 the Court had the occasion to state:
The general rule is that a [certiorari] will not issue where the remedy of appeal is available to the
aggrieved party. The remedies of appeal in the ordinary course of law and that of certiorari under
Rule 65 of the Revised Rules of Court are mutually exclusive and not alternative or cumulative.
Hence, the special civil action for certiorari under Rule 65 is not and cannot be a substitute for an
appeal, where the latter remedy is available. xxx
xxxx
The proper recourse of the aggrieved party from a decision of the CA is a petition for review on
certiorari under Rule 45 of the Revised Rules of Court. On the other hand, if the error subject of
the recourse is one of jurisdiction, or the act complained of was perpetrated by a quasi-judicial
officer or agency with grave abuse of discretion amounting to lack or excess of jurisdiction, the
proper remedy available to the aggrieved party is a petition for certiorari under Rule 65 of the
said Rules. [emphases supplied; citations omitted]
In sum, PTA had the remedy of appealing the RTC decision to the CA and, thereafter, to us.
Under the circumstances, we find no adequate reason to justify the elevation of this case to the
CA and then to us, under Rule 65 of the Rules of Court.
WHEREFORE, premises considered, we hereby DISMISS the petition for certiorari. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173559

January 7, 2013

LETICIA DIONA, represented by her Attorney-in-Fact, MARCELINA DIONA, Petitioner,

vs.
ROMEO A. BALANGUE, SONNY A. BALANGUE, REYNALDO A. BALANGUE, and ESTEBAN
A. BALANGUE, JR., Respondents.
DECISION
DEL CASTILLO, J.:
The great of a relief neither sought by the party in whose favor it was given not supported by the
evidence presented violates the opposing partys right to due process and may be declared void
ab initio in a proper proceeding.

This Petition for Review on Certiorari1 assails the November 24, 2005 Resolution2 of the Court of
Appeals (CA) issued in G.R. SP No. 85541 which granted the Petition for Annulment of
Judgment3 filed by the respondents seeking to nullify that portion of the October 17, 2000
Decision4 of the Regional Trial Court (RTC), Branch 75, Valenzuela City awarding petitioner 5%
monthly interest rate for the principal amount of the loan respondent obtained from her.
This Petition likewise assails the CAs June 26, 2006 Resolution 5 denying petitioners Motion for
Reconsideration.
Factual Antecedents
The facts of this case are simple and undisputed.
On March 2, 1991, respondents obtained a loan of P45,000.00 from petitioner payable in six
months and secured by a Real Estate Mortgage6 over their 202-square meter property located in
Marulas, Valenzuela and covered by Transfer Certificate of Title (TCT) No. V-12296. 7 When the
debt became due, respondents failed to pay notwithstanding demand. Thus, on September 17,
1999, petitioner filed with the RTC a Complaint8 praying that respondents be ordered:
(a) To pay petitioner the principal obligation of P45,000.00, with interest thereon at the
rate of 12% per annum, from 02 March 1991 until the full obligation is paid.
(b) To pay petitioner actual damages as may be proven during the trial but shall in no
case be less thanP10,000.00; P25,000.00 by way of attorneys fee, plus P2,000.00 per
hearing as appearance fee.
(c) To issue a decree of foreclosure for the sale at public auction of the aforementioned
parcel of land, and for the disposition of the proceeds thereof in accordance with law,
upon failure of the respondents to fully pay petitioner within the period set by law the
sums set forth in this complaint.
(d) Costs of this suit.
Other reliefs and remedies just and equitable under the premises are likewise prayed
for.9 (Emphasis supplied)
Respondents were served with summons thru respondent Sonny A. Balangue (Sonny). On
October 15, 1999, with the assistance of Atty. Arthur C. Coroza (Atty. Coroza) of the Public
Attorneys Office, they filed a Motion to Extend Period to Answer. Despite the requested
extension, however, respondents failed to file any responsive pleadings. Thus, upon motion of
the petitioner, the RTC declared them in default and allowed petitioner to present her evidence
ex parte.10
Ruling of the RTC sought to be annulled.
In a Decision11 dated October 17, 2000, the RTC granted petitioners Complaint. The dispositive
portion of said Decision reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioner, ordering the respondents
to pay the petitioner as follows:
a) the sum of FORTY FIVE THOUSAND (P45,000.00) PESOS, representing the unpaid
principal loan obligation plus interest at 5% per month [sic] reckoned from March 2, 1991,
until the same is fully paid;

b) P20,000.00 as attorneys fees plus cost of suit;

c) in the event the [respondents] fail to satisfy the aforesaid obligation, an order of
foreclosure shall be issued accordingly for the sale at public auction of the subject
property covered by Transfer Certificate of Title No. V-12296 and the improvements
thereon for the satisfaction of the petitioners claim.
SO ORDERED.12 (Emphasis supplied)
Subsequently, petitioner filed a Motion for Execution,13 alleging that respondents did not interpose
a timely appeal despite receipt by their former counsel of the RTCs Decision on November 13,
2000. Before it could be resolved, however, respondents filed a Motion to Set Aside
Judgment14 dated January 26, 2001, claiming that not all of them were duly served with
summons. According to the other respondents, they had no knowledge of the case because their
co-respondent Sonny did not inform them about it. They prayed that the RTCs October 17, 2000
Decision be set aside and a new trial be conducted.
But on March 16, 2001, the RTC ordered15 the issuance of a Writ of Execution to implement its
October 17, 2000 Decision. However, since the writ could not be satisfied, petitioner moved for
the public auction of the mortgaged property,16 which the RTC granted.17 In an auction sale
conducted on November 7, 2001, petitioner was the only bidder in the amount of P420,000.00.
Thus, a Certificate of Sale18 was issued in her favor and accordingly annotated at the back of
TCT No. V-12296.
Respondents then filed a Motion to Correct/Amend Judgment and To Set Aside Execution
Sale19 dated December 17, 2001, claiming that the parties did not agree in writing on any rate of
interest and that petitioner merely sought for a 12% per annum interest in her Complaint.
Surprisingly, the RTC awarded 5% monthly interest (or 60% per annum) from March 2, 1991 until
full payment. Resultantly, their indebtedness inclusive of the exorbitant interest from March 2,
1991 to May 22, 2001 ballooned from P124,400.00 to P652,000.00.
In an Order20 dated May 7, 2002, the RTC granted respondents motion and accordingly modified
the interest rate awarded from 5% monthly to 12% per annum. Then on August 2, 2002,
respondents filed a Motion for Leave To Deposit/Consign Judgment Obligation 21 in the total
amount of P126,650.00.22
Displeased with the RTCs May 7, 2002 Order, petitioner elevated the matter to the CA via a
Petition for Certiorari23 under Rule 65 of the Rules of Court. On August 5, 2003, the CA rendered
a Decision24 declaring that the RTC exceeded its jurisdiction in awarding the 5% monthly interest
but at the same time pronouncing that the RTC gravely abused its discretion in subsequently
reducing the rate of interest to 12% per annum. In so ruling, the CA ratiocinated:
Indeed, We are convinced that the Trial Court exceeded its jurisdiction when it granted 5%
monthly interest instead of the 12% per annum prayed for in the complaint. However, the proper
remedy is not to amend the judgment but to declare that portion as a nullity. Void judgment for
want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of
any obligation (Leonor vs. CA, 256 SCRA 69). No legal rights can emanate from a resolution that
is null and void (Fortich vs. Corona, 312 SCRA 751).
From the foregoing, the remedy of the respondents is to have the Court declare the portion of the
judgment providing for a higher interest than that prayed for as null and void for want of or in
excess of jurisdiction. A void judgment never acquire[s] finality and any action to declare its nullity
does not prescribe (Heirs of Mayor Nemencio Galvez vs. CA, 255 SCRA 672).
WHEREFORE, foregoing premises considered, the Petition having merit, is hereby GIVEN DUE
COURSE. Resultantly, the challenged May 7, 2002 and September 5, 2000 orders of Public

Respondent Court are hereby ANNULLED and SET ASIDE for having been issued with grave
abuse of discretion amounting to lack or in excess of jurisdiction. No costs.
SO ORDERED.25 (Emphases in the original; italics supplied.)
Proceedings before the Court of Appeals
Taking their cue from the Decision of the CA in the special civil action for certiorari, respondents
filed with the same court a Petition for Annulment of Judgment and Execution Sale with
Damages.26 They contended that the portion of the RTC Decision granting petitioner 5% monthly
interest rate is in gross violation of Section 3(d) of Rule 9 of the Rules of Court and of their right
to due process. According to respondents, the loan did not carry any interest as it was the verbal
agreement of the parties that in lieu thereof petitioners family can continue occupying
respondents residential building located in Marulas, Valenzuela for free until said loan is fully
paid.
Ruling of the Court of Appeals
Initially, the CA denied due course to the Petition.27 Upon respondents motion, however, it
reinstated and granted the Petition. In setting aside portions of the RTCs October 17, 2000
Decision, the CA ruled that aside from being unconscionably excessive, the monthly interest rate
of 5% was not agreed upon by the parties and that petitioners Complaint clearly sought only the
legal rate of 12% per annum. Following the mandate of Section 3(d) of Rule 9 of the Rules of
Court, the CA concluded that the awarded rate of interest is void for being in excess of the relief
sought in the Complaint. It ruled thus:
WHEREFORE, respondents motion for reconsideration is GRANTED and our resolution dated
October 13, 2004 is, accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered
ordering the ANNULMENT OF:
(a) public respondents impugned October 17, 2000 judgment, insofar as it awarded 5%
monthly interest in favor of petitioner; and
(b) all proceedings relative to the sale at public auction of the property titled in
respondents names under Transfer Certificate of Title No. V-12296 of the Valenzuela
registry.
The judgment debt adjudicated in public respondents impugned October 17, 2000 judgment is,
likewise, ordered RECOMPUTED at the rate of 12% per annum from March 2, 1991. No costs.
SO ORDERED.28 (Emphases in the original.)
Petitioner sought reconsideration, which was denied by the CA in its June 26, 2006 Resolution. 29
Issues
Hence, this Petition anchored on the following grounds:
I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS
ERROR OF LAW WHEN IT GRANTED RESPONDENTS PETITION FOR ANNULMENT
OF JUDGMENT AS A SUBSTITUTE OR ALTERNATIVE REMEDY OF A LOST APPEAL.
II. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS
ERROR AND MISAPPREHENSION OF LAW AND THE FACTS WHEN IT GRANTED
RESPONDENTS PETITION FOR ANNULMENT OF JUDGMENT OF THE DECISION

OF THE REGIONAL TRIAL COURT OF VALENZUELA, BRANCH 75 DATED OCTOBER

17, 2000 IN CIVIL CASE NO. 241-V-99, DESPITE THE FACT THAT SAID DECISION
HAS BECOME FINAL AND ALREADY EXECUTED CONTRARY TO THE DOCTRINE
OF IMMUTABILITY OF JUDGMENT.30
Petitioners Arguments
Petitioner claims that the CA erred in partially annulling the RTCs October 17, 2000 Decision.
She contends that a Petition for Annulment of Judgment may be availed of only when the
ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no
longer available through no fault of the claimant. In the present case, however, respondents had
all the opportunity to question the October 17, 2000 Decision of the RTC, but because of their
own inaction or negligence they failed to avail of the remedies sanctioned by the rules. Instead,
they contented themselves with the filing of a Motion to Set Aside Judgment and then a Motion to
Correct/Amend Judgment and to Set Aside Execution Sale.
Petitioner likewise argues that for a Rule 47 petition to prosper, the same must either be based
on extrinsic fraud or lack of jurisdiction. However, the allegations in respondents Rule 47 petition
do not constitute extrinsic fraud because they simply pass the blame to the negligence of their
former counsel. In addition, it is too late for respondents to pass the buck to their erstwhile
counsel considering that when they filed their Motion to Correct/Amend Judgment and To Set
Aside Execution Sale they were already assisted by their new lawyer, Atty. Reynaldo A. Ruiz,
who did not also avail of the remedies of new trial, appeal, etc. As to the ground of lack of
jurisdiction, petitioner posits that there is no reason to doubt that the RTC had jurisdiction over
the subject matter of the case and over the persons of the respondents.
While conceding that the RTC patently made a mistake in awarding 5% monthly interest,
petitioner nonetheless invokes the doctrine of immutability of final judgment and contends that
the RTC Decision can no longer be corrected or modified since it had long become final and
executory. She likewise points out that respondents received a copy of said Decision on
November 13, 2000 but did nothing to correct the same. They did not even question the award of
5% monthly interest when they filed their Motion to Set Aside Judgment which they anchored on
the sole ground of the RTCs lack of jurisdiction over the persons of some of the respondents.
Respondents Arguments
Respondents do not contest the existence of their obligation and the principal amount thereof.
They only seek quittance from the 5% monthly interest or 60% per annum imposed by the RTC.
Respondents contend that Section (3)d of Rule 9 of the Rules of Court is clear that when the
defendant is declared in default, the court cannot grant a relief more than what is being prayed
for in the Complaint. A judgment which transgresses said rule, according to the respondents, is
void for having been issued without jurisdiction and for being violative of due process of law.
Respondents maintain that it was through no fault of their own, but through the gross negligence
of their former counsel, Atty. Coroza, that the remedies of new trial, appeal or petition for relief
from judgment were lost. They allege that after filing a Motion to Extend Period to Answer, Atty.
Coroza did not file any pleading resulting to their being declared in default. While the said lawyer
filed on their behalf a Motion to Set Aside Judgment dated January 26, 2001, he however took no
steps to appeal from the Decision of the RTC, thereby allowing said judgment to lapse into
finality. Citing Legarda v. Court of Appeals,31 respondents aver that clients are not always bound
by the actions of their counsel, as in the present case where the clients are to lose their property
due to the gross negligence of their counsel.
With regard to petitioners invocation of immutability of judgment, respondents argue that said
doctrine applies only to valid and not to void judgments.

Our Ruling
The petition must fail.
We agree with respondents that the award of 5% monthly interest violated their right to due
process and, hence, the same may be set aside in a Petition for Annulment of Judgment filed
under Rule 47 of the Rules of Court.
Annulment of judgment under Rule 47; an exception to the final judgment rule; grounds therefor.
A Petition for Annulment of Judgment under Rule 47 of the Rules of Court is a remedy granted
only under exceptional circumstances where a party, without fault on his part, has failed to avail
of the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies.
Said rule explicitly provides that it is not available as a substitute for a remedy which was lost due
to the partys own neglect in promptly availing of the same. "The underlying reason is traceable
to the notion that annulling final judgments goes against the grain of finality of judgment.
Litigation must end and terminate sometime and somewhere, and it is essential to an effective
administration of justice that once a judgment has become final, the issue or cause involved
therein should be laid to rest."32
While under Section 2, Rule 4733 of the Rules of Court a Petition for Annulment of Judgment may
be based only on the grounds of extrinsic fraud and lack of jurisdiction, jurisprudence recognizes
lack of due process as additional ground to annul a judgment.34 In Arcelona v. Court of
Appeals,35 this Court declared that a final and executory judgment may still be set aside if, upon
mere inspection thereof, its patent nullity can be shown for having been issued without
jurisdiction or for lack of due process of law.
Grant of 5% monthly interest is way beyond the 12% per annum interest sought in the Complaint
and smacks of violation of due process.
It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess of what is
being sought by the party. They cannot also grant a relief without first ascertaining the evidence
presented in support thereof. Due process considerations require that judgments must conform
to and be supported by the pleadings and evidence presented in court. In Development Bank of
the Philippines v. Teston,36 this Court expounded that:
Due process considerations justify this requirement. It is improper to enter an order which
exceeds the scope of relief sought by the pleadings, absent notice which affords the opposing
party an opportunity to be heard with respect to the proposed relief. The fundamental purpose of
the requirement that allegations of a complaint must provide the measure of recovery is to
prevent surprise to the defendant.
Notably, the Rules is even more strict in safeguarding the right to due process of a defendant
who was declared in default than of a defendant who participated in trial. For instance,
amendment to conform to the evidence presented during trial is allowed the parties under the
Rules.37 But the same is not feasible when the defendant is declared in default because Section
3(d), Rule 9 of the Rules of Court comes into play and limits the relief that may be granted by the
courts to what has been prayed for in the Complaint. It provides:
(d) Extent of relief to be awarded. A judgment rendered against a party in default shall not
exceed the amount or be different in kind from that prayed for nor award unliquidated damages.
The raison dtre in limiting the extent of relief that may be granted is that it cannot be presumed
that the defendant would not file an Answer and allow himself to be declared in default had he
known that the plaintiff will be accorded a relief greater than or different in kind from that sought

in the Complaint.38 No doubt, the reason behind Section 3(d), Rule 9 of the Rules of Court is to
safeguard defendants right to due process against unforeseen and arbitrarily issued judgment.
This, to the mind of this Court, is akin to the very essence of due process. It embodies "the
sporting idea of fair play"39 and forbids the grant of relief on matters where the defendant was not
given the opportunity to be heard thereon.
In the case at bench, the award of 5% monthly interest rate is not supported both by the
allegations in the pleadings and the evidence on record. The Real Estate Mortgage 40 executed by
the parties does not include any provision on interest. When petitioner filed her Complaint before
the RTC, she alleged that respondents borrowed from her "the sum of FORTY-FIVE THOUSAND
PESOS (P45,000.00), with interest thereon at the rate of 12% per annum"41 and sought payment
thereof. She did not allege or pray for the disputed 5% monthly interest. Neither did she present
evidence nor testified thereon. Clearly, the RTCs award of 5% monthly interest or 60% per
annum lacks basis and disregards due process. It violated the due process requirement because
respondents were not informed of the possibility that the RTC may award 5% monthly interest.
They were deprived of reasonable opportunity to refute and present controverting evidence as
they were made to believe that the complainant petitioner was seeking for what she merely
stated in her Complaint.
Neither can the grant of the 5% monthly interest be considered subsumed by petitioners general
prayer for "other reliefs and remedies just and equitable under the premises x x x." 42 To repeat,
the courts grant of relief is limited only to what has been prayed for in the Complaint or related
thereto, supported by evidence, and covered by the partys cause of action. 43 Besides, even
assuming that the awarded 5% monthly or 60% per annum interest was properly alleged and
proven during trial, the same remains unconscionably excessive and ought to be equitably
reduced in accordance with applicable jurisprudence. In Bulos, Jr. v. Yasuma, 44 this Court held:
In the case of Ruiz v. Court of Appeals, citing the cases of Medel v. Court of Appeals, Garcia v.
Court of Appeals, Spouses Bautista v. Pilar Development Corporation and the recent case of
Spouses Solangon v. Salazar, this Court considered the 3% interest per month or 36% interest
per annum as excessive and unconscionable. Thereby, the Court, in the said case, equitably
reduced the rate of interest to 1% interest per month or 12% interest per annum. (Citations
omitted)
It is understandable for the respondents not to contest the default order for, as alleged in their
Comment, "it is not their intention to impugn or run away from their just and valid
obligation."45 Nonetheless, their waiver to present evidence should never be construed as waiver
to contest patently erroneous award which already transgresses their right to due process, as
well as applicable jurisprudence.
Respondents former counsel was grossly negligent in handling the case of his clients;
respondents did not lose ordinary remedies of new trial, petition for relief, etc. through their own
fault.
Ordinarily, the mistake, negligence or lack of competence of counsel binds the client. This is
based on the rule that any act performed by a counsel within the scope of his general or implied
authority is regarded as an act of his client. A recognized exception to the rule is when the
lawyers were grossly negligent in their duty to maintain their clients cause and such amounted to
a deprivation of their clients property without due process of law.46 In which case, the courts must
step in and accord relief to a client who suffered thereby.47
1wphi1

The manifest indifference of respondents former counsel in handling the cause of his client was
already present even from the beginning. It should be recalled that after filing in behalf of his
clients a Motion to Extend Period to Answer, said counsel allowed the requested extension to
pass without filing an Answer, which resulted to respondents being declared in default. His
negligence was aggravated by the fact that he did not question the awarded 5% monthly interest

despite receipt of the RTC Decision on November 13, 2000.48 A simple reading of the dispositive
portion of the RTC Decision readily reveals that it awarded exorbitant and unconscionable rate of
interest. Its difference from what is being prayed for by the petitioner in her Complaint is so
blatant and very patent. It also defies elementary jurisprudence on legal rate of interests. Had the
counsel carefully read the judgment it would have caught his attention and compelled him to take
the necessary steps to protect the interest of his client. But he did not. Instead, he filed in behalf
of his clients a Motion to Set Aside Judgment49 dated January 26, 2001 based on the sole ground
of lack of jurisdiction, oblivious to the fact that the erroneous award of 5% monthly interest would
result to his clients deprivation of property without due process of law. Worse, he even allowed
the RTC Decision to become final by not perfecting an appeal. Neither did he file a petition for
relief therefrom. It was only a year later that the patently erroneous award of 5% monthly interest
was brought to the attention of the RTC when respondents, thru their new counsel, filed a Motion
to Correct/Amend Judgment and To Set Aside Execution Sale. Even the RTC candidly admitted
that it "made a glaring mistake in directing the defendants to pay interest on the principal loan at
5% per month which is very different from what was prayed for by the plaintiff." 50
"A lawyer owes entire devotion to the interest of his client, warmth and zeal in the maintenance
and defense of his rights and the exertion of his utmost learning and ability, to the end that
nothing can be taken or withheld from his client except in accordance with the law." 51 Judging
from how respondents former counsel handled the cause of his clients, there is no doubt that he
was grossly negligent in protecting their rights, to the extent that they were deprived of their
property without due process of law.
In fine, respondents did not lose the remedies of new trial, appeal, petition for relief and other
remedies through their own fault. It can only be attributed to the gross negligence of their
erstwhile counsel which prevented them from pursuing such remedies. We cannot also blame
respondents for relying too much on their former counsel. Clients have reasonable expectations
that their lawyer would amply protect their interest during the trial of the case. 52 Here,
"respondents are plain and ordinary people x x x who are totally ignorant of the intricacies and
technicalities of law and legal procedures. Being so, they completely relied upon and trusted their
former counsel to appropriately act as their interest may lawfully warrant and require." 53
As a final word, it is worth noting that respondents principal obligation was only P45,000.00. Due
to their former counsels gross negligence in handling their cause, coupled with the RTCs
erroneous, baseless, and illegal award of 5% monthly interest, they now stand to lose their
property and still owe petitioner a large amount of money. As aptly observed by the CA:
x x x If the impugned judgment is not, therefore, rightfully nullified, petitioners will not only end up
losing their property but will additionally owe private respondent the sum of P232,000.00 plus the
legal interest said balance had, in the meantime, earned. As a court of justice and equity, we
cannot, in good conscience, allow this unconscionable situation to prevail. 54
Indeed, this Court is appalled by petitioners invocation of the doctrine of immutability of
judgment. Petitioner does not contest as she even admits that the RTC made a glaring mistake
in awarding 5% monthly interest.55Amazingly, she wants to benefit from such erroneous award.
This Court cannot allow this injustice to happen.
WHEREFORE, the instant Petition is hereby DENIED and the assailed November 24, 2005 and
June 26, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 85541 are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC
G.R. No. 75919 May 7, 1987
MANCHESTER DEVELOPMENT CORPORATION, ET AL., petitioners,
vs.
COURT OF APPEALS, CITY LAND DEVELOPMENT CORPORATION, STEPHEN ROXAS,
ANDREW LUISON, GRACE LUISON and JOSE DE MAISIP, respondents.
Tanjuatco, Oreta and Tanjuatco for petitioners.
Pecabar Law Offices for private respondents.
RESOLUTION

GANCAYCO, J.:
Acting on the motion for reconsideration of the resolution of the Second Division of January
28,1987 and another motion to refer the case to and to be heard in oral argument by the
Court En Banc filed by petitioners, the motion to refer the case to the Court en banc is granted
but the motion to set the case for oral argument is denied.
Petitioners in support of their contention that the filing fee must be assessed on the basis of the
amended complaint cite the case of Magaspi vs. Ramolete. 1 They contend that the Court of Appeals erred in
that the filing fee should be levied by considering the amount of damages sought in the original complaint.

The environmental facts of said case differ from the present in that
1. The Magaspi case was an action for recovery of ownership and possession of a parcel of land
with damages. 2While the present case is an action for torts and damages and specific performance
with prayer for temporary restraining order, etc. 3
2. In the Magaspi case, the prayer in the complaint seeks not only the annulment of title of the
defendant to the property, the declaration of ownership and delivery of possession thereof to
plaintiffs but also asks for the payment of actual moral, exemplary damages and attorney's fees
arising therefrom in the amounts specified therein. 4 However, in the present case, the prayer is for
the issuance of a writ of preliminary prohibitory injunction during the pendency of the action against
the defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in
question, to attach such property of defendants that maybe sufficient to satisfy any judgment that
maybe rendered, and after hearing, to order defendants to execute a contract of purchase and sale of
the subject property and annul defendants' illegal forfeiture of the money of plaintiff, ordering
defendants jointly and severally to pay plaintiff actual, compensatory and exemplary damages as well
as 25% of said amounts as maybe proved during the trial as attorney's fees and declaring the tender
of payment of the purchase price of plaintiff valid and producing the effect of payment and to make the
injunction permanent. The amount of damages sought is not specified in the prayer although the body
of the complaint alleges the total amount of over P78 Million as damages suffered by plaintiff. 5
3. Upon the filing of the complaint there was an honest difference of opinion as to the nature of
the action in the Magaspi case. The complaint was considered as primarily an action for recovery
of ownership and possession of a parcel of land. The damages stated were treated as merely to
the main cause of action. Thus, the docket fee of only P60.00 and P10.00 for the sheriff's fee
were paid. 6

In the present case there can be no such honest difference of opinion. As maybe gleaned from
the allegations of the complaint as well as the designation thereof, it is both an action for
damages and specific performance. The docket fee paid upon filing of complaint in the amount
only of P410.00 by considering the action to be merely one for specific performance where the
amount involved is not capable of pecuniary estimation is obviously erroneous. Although the total
amount of damages sought is not stated in the prayer of the complaint yet it is spelled out in the
body of the complaint totalling in the amount of P78,750,000.00 which should be the basis of
assessment of the filing fee.
4. When this under-re assessment of the filing fee in this case was brought to the attention of this
Court together with similar other cases an investigation was immediately ordered by the Court.
Meanwhile plaintiff through another counsel with leave of court filed an amended complaint on
September 12, 1985 for the inclusion of Philips Wire and Cable Corporation as co-plaintiff and by
emanating any mention of the amount of damages in the body of the complaint. The prayer in the
original complaint was maintained. After this Court issued an order on October 15, 1985 ordering
the re- assessment of the docket fee in the present case and other cases that were investigated,
on November 12, 1985 the trial court directed plaintiffs to rectify the amended complaint by
stating the amounts which they are asking for. It was only then that plaintiffs specified the amount
of damages in the body of the complaint in the reduced amount of P10,000,000.00. 7 Still no
amount of damages were specified in the prayer. Said amended complaint was admitted.
On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay the amount of
P3,104.00 as filing fee covering the damages alleged in the original complaint as it did not
consider the damages to be merely an or incidental to the action for recovery of ownership and
possession of real property. 8 An amended complaint was filed by plaintiff with leave of court to
include the government of the Republic as defendant and reducing the amount of damages, and
attorney's fees prayed for to P100,000.00. Said amended complaint was also admitted. 9
In the Magaspi case, the action was considered not only one for recovery of ownership but also
for damages, so that the filing fee for the damages should be the basis of assessment. Although
the payment of the docketing fee of P60.00 was found to be insufficient, nevertheless, it was held
that since the payment was the result of an "honest difference of opinion as to the correct
amount to be paid as docket fee" the court "had acquired jurisdiction over the case and the
proceedings thereafter had were proper and regular." 10 Hence, as the amended complaint superseded the
original complaint, the allegations of damages in the amended complaint should be the basis of the computation of the filing fee.11

In the present case no such honest difference of opinion was possible as the allegations of the
complaint, the designation and the prayer show clearly that it is an action for damages and
specific performance. The docketing fee should be assessed by considering the amount of
damages as alleged in the original complaint.
As reiterated in the Magaspi case the rule is well-settled "that a case is deemed filed only upon
payment of the docket fee regardless of the actual date of filing in court . 12 Thus, in the present case the
trial court did not acquire jurisdiction over the case by the payment of only P410.00 as docket fee. Neither can the amendment of the
complaint thereby vest jurisdiction upon the Court. 13 For an legal purposes there is no such original complaint that was duly filed which
could be amended. Consequently, the order admitting the amended complaint and all subsequent proceedings and actions taken by the
trial court are null and void.

The Court of Appeals therefore, aptly ruled in the present case that the basis of assessment of
the docket fee should be the amount of damages sought in the original complaint and not in the
amended complaint.
The Court cannot close this case without making the observation that it frowns at the practice of
counsel who filed the original complaint in this case of omitting any specification of the amount of
damages in the prayer although the amount of over P78 million is alleged in the body of the
complaint. This is clearly intended for no other purpose than to evade the payment of the correct
filing fees if not to mislead the docket clerk in the assessment of the filing fee. This fraudulent
practice was compounded when, even as this Court had taken cognizance of the anomaly and

ordered an investigation, petitioner through another counsel filed an amended complaint,

deleting all mention of the amount of damages being asked for in the body of the complaint. It
was only when in obedience to the order of this Court of October 18, 1985, the trial court directed
that the amount of damages be specified in the amended complaint, that petitioners' counsel
wrote the damages sought in the much reduced amount of P10,000,000.00 in the body of the
complaint but not in the prayer thereof. The design to avoid payment of the required docket fee is
obvious.
The Court serves warning that it will take drastic action upon a repetition of this unethical
practice.
To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar
pleadings should specify the amount of damages being prayed for not only in the body of the
pleading but also in the prayer, and said damages shall be considered in the assessment of the
filing fees in any case. Any pleading that fails to comply with this requirement shall not bib
accepted nor admitted, or shall otherwise be expunged from the record.
The Court acquires jurisdiction over any case only upon the payment of the prescribed docket
fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the
Court, much less the payment of the docket fee based on the amounts sought in the amended
pleading. The ruling in the Magaspi case 14 in so far as it is inconsistent with this pronouncement is overturned and
reversed.

WHEREFORE, the motion for reconsideration is denied for lack of merit.

SO ORDERED.
Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano,
Bidin, Sarmiento and Cortes, JJ., concur.
Paras, J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. Nos. 79937-38 February 13, 1989
SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and D.J. WARBY, petitioners,
vs.
HON. MAXIMIANO C. ASUNCION, Presiding Judge, Branch 104, Regional Trial Court,
Quezon City and MANUEL CHUA UY PO TIONG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for petitioners.
Tanjuatco, Oreta, Tanjuatco, Berenguer & Sanvicente Law Offices for private respondent.

GANCAYCO, J.:
Again the Court is asked to resolve the issue of whether or not a court acquires jurisdiction over
a case when the correct and proper docket fee has not been paid.

On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint
with the Regional Trial Court of Makati, Metro Manila for the consignation of a premium refund on
a fire insurance policy with a prayer for the judicial declaration of its nullity against private
respondent Manuel Uy Po Tiong. Private respondent as declared in default for failure to file the
required answer within the reglementary period.
On the other hand, on March 28, 1984, private respondent filed a complaint in the Regional Trial
Court of Quezon City for the refund of premiums and the issuance of a writ of preliminary
attachment which was docketed as Civil Case No. Q-41177, initially against petitioner SIOL, and
thereafter including E.B. Philipps and D.J. Warby as additional defendants. The complaint
sought, among others, the payment of actual, compensatory, moral, exemplary and liquidated
damages, attorney's fees, expenses of litigation and costs of the suit. Although the prayer in the
complaint did not quantify the amount of damages sought said amount may be inferred from the
body of the complaint to be about Fifty Million Pesos (P50,000,000.00).
Only the amount of P210.00 was paid by private respondent as docket fee which prompted
petitioners' counsel to raise his objection. Said objection was disregarded by respondent Judge
Jose P. Castro who was then presiding over said case. Upon the order of this Court, the records
of said case together with twenty-two other cases assigned to different branches of the Regional
Trial Court of Quezon City which were under investigation for under-assessment of docket fees
were transmitted to this Court. The Court thereafter returned the said records to the trial court
with the directive that they be re-raffled to the other judges in Quezon City, to the exclusion of
Judge Castro. Civil Case No. Q-41177 was re-raffled to Branch 104, a sala which was then
vacant.
On October 15, 1985, the Court en banc issued a Resolution in Administrative Case No. 85-108752-RTC directing the judges in said cases to reassess the docket fees and that in case of
deficiency, to order its payment. The Resolution also requires all clerks of court to issue
certificates of re-assessment of docket fees. All litigants were likewise required to specify in their
pleadings the amount sought to be recovered in their complaints.
On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q-41177 was
temporarily assigned, issuedan order to the Clerk of Court instructing him to issue a certificate of
assessment of the docket fee paid by private respondent and, in case of deficiency, to include
the same in said certificate.
On January 7, 1984, to forestall a default, a cautionary answer was filed by petitioners. On
August 30,1984, an amended complaint was filed by private respondent including the two
additional defendants aforestated.
Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter assigned, after
his assumption into office on January 16, 1986, issued a Supplemental Order requiring the
parties in the case to comment on the Clerk of Court's letter-report signifying her difficulty in
complying with the Resolution of this Court of October 15, 1985 since the pleadings filed by
private respondent did not indicate the exact amount sought to be recovered. On January 23,
1986, private respondent filed a "Compliance" and a "Re-Amended Complaint" stating therein a
claim of "not less than Pl0,000,000. 00 as actual compensatory damages" in the prayer. In the
body of the said second amended complaint however, private respondent alleges actual and
compensatory damages and attorney's fees in the total amount of about P44,601,623.70.
On January 24, 1986, Judge Asuncion issued another Order admitting the second amended
complaint and stating therein that the same constituted proper compliance with the Resolution of
this Court and that a copy thereof should be furnished the Clerk of Court for the reassessment of
the docket fees. The reassessment by the Clerk of Court based on private respondent's claim of
"not less than P10,000,000.00 as actual and compensatory damages" amounted to P39,786.00
as docket fee. This was subsequently paid by private respondent.

Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order
of Judie Asuncion dated January 24, 1986.
On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim
of P20,000,000.00 as d.qmages so the total claim amounts to about P64,601,623.70. On
October 16, 1986, or some seven months after filing the supplemental complaint, the private
respondent paid the additional docket fee of P80,396.00. 1
On August 13, 1987, the Court of Appeals rendered a decision ruling, among others, as follows:
WHEREFORE, judgment is hereby rendered:
1. Denying due course to the petition in CA-G.R. SP No. 1, 09715 insofar as it
seeks annulment of the order
(a) denying petitioners' motion to dismiss the complaint, as amended, and
(b) granting the writ of preliminary attachment, but giving due course to the
portion thereof questioning the reassessment of the docketing fee, and requiring
the Honorable respondent Court to reassess the docketing fee to be paid by
private respondent on the basis of the amount of P25,401,707.00. 2
Hence, the instant petition.
During the pendency of this petition and in conformity with the said judgment of respondent
court, private respondent paid the additional docket fee of P62,432.90 on April 28, 1988. 3
The main thrust of the petition is that the Court of Appeals erred in not finding that the lower court
did not acquire jurisdiction over Civil Case No. Q-41177 on the ground of nonpayment of the
correct and proper docket fee. Petitioners allege that while it may be true that private respondent
had paid the amount of P182,824.90 as docket fee as herein-above related, and considering that
the total amount sought to be recovered in the amended and supplemental complaint is
P64,601,623.70 the docket fee that should be paid by private respondent is P257,810.49, more
or less. Not having paid the same, petitioners contend that the complaint should be dismissed
and all incidents arising therefrom should be annulled. In support of their theory, petitioners cite
the latest ruling of the Court in Manchester Development Corporation vs. CA, 4 as follows:
The Court acquires jurisdiction over any case only upon the payment of the
prescribed docket fee. An amendment of the complaint or similar pleading will not
thereby vest jurisdiction in the Court, much less the payment of the docket fee
based on the amounts sought in the amended pleading. The ruling in the
Magaspi Case in so far as it is inconsistent with this pronouncement is overturned
and reversed.
On the other hand, private respondent claims that the ruling in Manchester cannot apply
retroactively to Civil Case No. Q41177 for at the time said civil case was filed in court there was
no such Manchester ruling as yet. Further, private respondent avers that what is applicable is the
ruling of this Court in Magaspi v. Ramolete, 5wherein this Court held that the trial court acquired
jurisdiction over the case even if the docket fee paid was insufficient.
The contention that Manchester cannot apply retroactively to this case is untenable. Statutes
regulating the procedure of the courts will be construed as applicable to actions pending and
undetermined at the time of their passage. Procedural laws are retrospective in that sense and to
that extent. 6

In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full amount of the
docket fee is an indispensable step for the perfection of an appeal. In a forcible entry and detainer
case before the justice of the peace court of Manaoag, Pangasinan, after notice of a judgment
dismissing the case, the plaintiff filed a notice of appeal with said court but he deposited only P8.00
for the docket fee, instead of P16.00 as required, within the reglementary period of appeal of five (5)
days after receiving notice of judgment. Plaintiff deposited the additional P8.00 to complete the
amount of the docket fee only fourteen (14) days later. On the basis of these facts, this court held that
the Court of First Instance did notacquire jurisdiction to hear and determine the appeal as the appeal
was not thereby perfected.
In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to become a Filipino citizen
by sending it through registered mail to the Office of the Solicitor General in 1953 but the required
filing fee was paid only in 1956, barely 5V2 months prior to the filing of the petition for citizenship. This
Court ruled that the declaration was not filed in accordance with the legal requirement that such
declaration should be filed at least one year before the filing of the petition for citizenship.
Citing Lazaro, this Court concluded that the filing of petitioner's declaration of intention on October 23,
1953 produced no legal effect until the required filing fee was paid on May 23, 1956.
In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were applied. It was an
original petition for quo warranto contesting the right to office of proclaimed candidates which was
mailed, addressed to the clerk of the Court of First Instance, within the one-week period after the
proclamation as provided therefor by law. 10 However, the required docket fees were paid only after the
expiration of said period. Consequently, this Court held that the date of such payment must be
deemed to be the real date of filing of aforesaid petition and not the date when it was mailed.
Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee must be paid before
a court will act on a petition or complaint. However, we also held that said rule is not applicable when
petitioner seeks the probate of several wills of the same decedent as he is not required to file a
separate action for each will but instead he may have other wills probated in the same special
proceeding then pending before the same court.
Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is deemed filed only
upon payment of the docket fee regardless of the actual date of its filing in court. Said case involved a
complaint for recovery of ownership and possession of a parcel of land with damages filed in the
Court of First Instance of Cebu. Upon the payment of P60.00 for the docket fee and P10.00 for the
sheriffs fee, the complaint was docketed as Civil Case No. R-11882. The prayer of the complaint
sought that the Transfer Certificate of Title issued in the name of the defendant be declared as null
and void. It was also prayed that plaintiff be declared as owner thereof to whom the proper title should
be issued, and that defendant be made to pay monthly rentals of P3,500.00 from June 2, 1948 up to
the time the property is delivered to plaintiff, P500,000.00 as moral damages, attorney's fees in the
amount of P250,000.00, the costs of the action and exemplary damages in the amount of
P500,000.00.
The defendant then filed a motion to compel the plaintiff to pay the correct amount of the docket
fee to which an opposition was filed by the plaintiff alleging that the action was for the recovery of
a parcel of land so the docket fee must be based on its assessed value and that the amount of
P60.00 was the correct docketing fee. The trial court ordered the plaintiff to pay P3,104.00 as
filing fee.
The plaintiff then filed a motion to admit the amended complaint to include the Republic as the
defendant. In the prayer of the amended complaint the exemplary damages earlier sought was
eliminated. The amended prayer merely sought moral damages as the court may determine,
attorney's fees of P100,000.00 and the costs of the action. The defendant filed an opposition to
the amended complaint. The opposition notwithstanding, the amended complaint was admitted
by the trial court. The trial court reiterated its order for the payment of the additional docket fee
which plaintiff assailed and then challenged before this Court. Plaintiff alleged that he paid the
total docket fee in the amount of P60.00 and that if he has to pay the additional fee it must be
based on the amended complaint.

The question posed, therefore, was whether or not the plaintiff may be considered to have filed
the case even if the docketing fee paid was not sufficient. In Magaspi, We reiterated the rule that
the case was deemed filed only upon the payment of the correct amount for the docket fee
regardless of the actual date of the filing of the complaint; that there was an honest difference of
opinion as to the correct amount to be paid as docket fee in that as the action appears to be one
for the recovery of property the docket fee of P60.00 was correct; and that as the action is also
one, for damages, We upheld the assessment of the additional docket fee based on the
damages alleged in the amended complaint as against the assessment of the trial court which
was based on the damages alleged in the original complaint.
However, as aforecited, this Court overturned Magaspi in Manchester. Manchester involves an
action for torts and damages and specific performance with a prayer for the issuance of a
temporary restraining order, etc. The prayer in said case is for the issuance of a writ of
preliminary prohibitory injunction during the pendency of the action against the defendants'
announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question,
the attachment of such property of defendants that may be sufficient to satisfy any judgment that
may be rendered, and, after hearing, the issuance of an order requiring defendants to execute a
contract of purchase and sale of the subject property and annul defendants' illegal forfeiture of
the money of plaintiff. It was also prayed that the defendants be made to pay the plaintiff jointly
and severally, actual, compensatory and exemplary damages as well as 25% of said amounts as
may be proved during the trial for attorney's fees. The plaintiff also asked the trial court to declare
the tender of payment of the purchase price of plaintiff valid and sufficient for purposes of
payment, and to make the injunction permanent. The amount of damages sought is not specified
in the prayer although the body of the complaint alleges the total amount of over P78 Millon
allegedly suffered by plaintiff.
Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for the docket fee
based on the nature of the action for specific performance where the amount involved is not
capable of pecuniary estimation. However, it was obvious from the allegations of the complaint
as well as its designation that the action was one for damages and specific performance. Thus,
this court held the plaintiff must be assessed the correct docket fee computed against the
amount of damages of about P78 Million, although the same was not spelled out in the prayer of
the complaint.
Meanwhile, plaintiff through another counsel, with leave of court, filed an amended complaint on
September 12, 1985 by the inclusion of another co-plaintiff and eliminating any mention of the
amount of damages in the body of the complaint. The prayer in the original complaint was
maintained.
On October 15, 1985, this Court ordered the re-assessment of the docket fee in the said case
and other cases that were investigated. On November 12, 1985, the trial court directed the
plaintiff to rectify the amended complaint by stating the amounts which they were asking for. This
plaintiff did as instructed. In the body of the complaint the amount of damages alleged was
reduced to P10,000,000.00 but still no amount of damages was specified in the prayer. Said
amended complaint was admitted.
Applying the principle in Magaspi that "the case is deemed filed only upon payment of the docket
fee regardless of the actual date of filing in court," this Court held that the trial court did not
acquire jurisdiction over the case by payment of only P410.00 for the docket fee. Neither can the
amendment of the complaint thereby vest jurisdiction upon the Court. For all legal purposes there
was no such original complaint duly filed which could be amended. Consequently, the order
admitting the amended complaint and all subsequent proceedings and actions taken by the trial
court were declared null and void. 13
The present case, as above discussed, is among the several cases of under-assessment of
docket fee which were investigated by this Court together with Manchester. The facts and

circumstances of this case are similar toManchester. In the body of the original complaint, the
total amount of damages sought amounted to about P50 Million. In the prayer, the amount of
damages asked for was not stated. The action was for the refund of the premium and the
issuance of the writ of preliminary attachment with damages. The amount of only P210.00 was
paid for the docket fee. On January 23, 1986, private respondent filed an amended complaint
wherein in the prayer it is asked that he be awarded no less than P10,000,000.00 as actual and
exemplary damages but in the body of the complaint the amount of his pecuniary claim is
approximately P44,601,623.70. Said amended complaint was admitted and the private
respondent was reassessed the additional docket fee of P39,786.00 based on his prayer of not
less than P10,000,000.00 in damages, which he paid.
On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim
of P20,000,000.00 in damages so that his total claim is approximately P64,601,620.70. On
October 16, 1986, private respondent paid an additional docket fee of P80,396.00. After the
promulgation of the decision of the respondent court on August 31, 1987 wherein private
respondent was ordered to be reassessed for additional docket fee, and during the pendency of
this petition, and after the promulgation of Manchester, on April 28, 1988, private respondent
paid an additional docket fee of P62,132.92. Although private respondent appears to have paid a
total amount of P182,824.90 for the docket fee considering the total amount of his claim in the
amended and supplemental complaint amounting to about P64,601,620.70, petitioner insists that
private respondent must pay a docket fee of P257,810.49.
The principle in Manchester could very well be applied in the present case. The pattern and the
intent to defraud the government of the docket fee due it is obvious not only in the filing of the
original complaint but also in the filing of the second amended complaint.
However, in Manchester, petitioner did not pay any additional docket fee until] the case was
decided by this Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on the
government, this Court held that the court a quo did not acquire jurisdiction over the case and
that the amended complaint could not have been admitted inasmuch as the original complaint
was null and void.
In the present case, a more liberal interpretation of the rules is called for considering that, unlike
Manchester, private respondent demonstrated his willingness to abide by the rules by paying the
additional docket fees as required. The promulgation of the decision in Manchester must have
had that sobering influence on private respondent who thus paid the additional docket fee as
ordered by the respondent court. It triggered his change of stance by manifesting his willingness
to pay such additional docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering
the total amount of the claim. This is a matter which the clerk of court of the lower court and/or
his duly authorized docket clerk or clerk in-charge should determine and, thereafter, if any
amount is found due, he must require the private respondent to pay the same.
Thus, the Court rules as follows:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of
the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or
nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of
the docket fee, the court may allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third party claims and similar pleadings,
which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The
court may also allow payment of said fee within a reasonable time but also in no case beyond its
applicable prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading
and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not
specified in the pleading, or if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of
the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the
additional fee.
WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the court a
quo is hereby instructed to reassess and determine the additional filing fee that should be paid
by private respondent considering the total amount of the claim sought in the original complaint
and the supplemental complaint as may be gleaned from the allegations and the prayer thereof
and to require private respondent to pay the deficiency, if any, without pronouncement as to
costs.
SO ORDERED.
Fernan (C.J), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla, Bidin,
Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 125683 March 2, 1999

EDEN BALLATAN and SPS. BETTY MARTINEZ and CHONG CHY LING, petitioners,
vs.
COURT OF APPEALS, GONZALO GO, WINSTON GO, LI CHING YAO, ARANETA INSTITUTE
OF AGRICULTURE and JOSE N. QUEDDING, respondents.

PUNO, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals dated March 25,
1996 in CA-G.R. CV No. 32472 entitled "Eden Ballatan., et. al., plaintiffs-appellees v. Gonzalo Go
and Winston Go, appellants and third-party plaintiffs-appellants v. Li Ching Yao, et. al., third-party
defendants." 1
The instant case arose from a dispute over forty-two (42) square meters of residential land
belonging to petitioners. The parties herein are owners of adjacent lots located at Block No. 3,
Poinsettia Street, Araneta University Village, Malabon, Metro Manila. Lot No. 24, 414 square
meters in area, is registered in the name of petitioners Eden Ballatan and spouses Betty
Martinez and Chong Chy Ling. 2 Lots Nos. 25 and 26, with an area of 415 and 313 square meters
respectively, are registered in the name of respondent Gonzalo Go, Sr. 3 On Lot No. 25, respondent
Winston Go, son of Gonzalo Go, Sr., constructed his house. Adjacent to Lot No. 26 is Lot No. 27, 417
square meters in area, and is registered in the name of respondent Li Ching Yao. 4

In 1985, petitioner Ballatan constructed her house on Lot No. 24. During the construction, she
noticed that the concrete fence and side pathway of the adjoining house of respondent Winston
Go encroached on the entire length of the eastern side of her property. 5 Her building contractor
formed her that the area of her lot was actually less than that described in the title. Forthwith, Ballatan
informed respondent Go of this discrepancy and his encroachment on her property. Respondent Go,
however, claimed that his house, including its fence and pathway, were built within the parameters of
his father's lot; and that this lot was surveyed by Engineer Jose Quedding, the authorized surveyor of
the Araneta Institute of Agriculture (AIA), the owner-developer of the subdivision project.
Petitioner Ballatan called the attention of the IAI to the discrepancy of the land area in her title
and the actual land area received from them. The AIA authorized another survey of the land by
Engineer Jose N. Quedding.
In a report dated February 28, 1985, Engineer Quedding found that the lot area of petitioner
Ballatan was less by few meters and that of respondent Li Ching Yao, which was three lots away,
increased by two (2) meters. Engineer Quedding declared that he made a verification survey of
Lots Nos. 25 and 26 of respondents Go in 1983 and allegedly found the boundaries to have been
in their proper position. He, however, could not explain the reduction in Ballatan's area since he
was not present at the time respondents Go constructed their boundary walls. 6
On June 2, 1985, Engineer Quedding made a third relocation survey upon request of the parties.
He found that Lot No. 24 lost approximately 25 square meters on its eastern boundary that Lot
No. 25, although found to have encroached on Lot No. 24, did not lose nor gain any area; that
Lot No. 26 lost some three (3) square meters which, however, were gained by Lot No. 27 on its
western boundary. 7 In short, Lots Nos. 25, 26 and 27 moved westward to the eastern boundary of
Lot No. 24.
On the basis of this survey, on June 10, 1985, petitioner Ballatan made a written demand on
respondents Go to remove and dismantle their improvements on Lot No. 24. Respondents Go
refused. The parties including Li Ching Yao, however, met several times to reach an agreement
one matter.
Failing to agree amicably, petitioner Ballatan brought the issue before the barangay.
Respondents Go did not appear. Thus, on April 1, 1986, petitioner Ballatan instituted against
respondents Go Civil Case No. 772-MN for recovery of possession before the Regional Trial
Court, Malabon, Branch 169. The Go' s filed their "Answer with Third-Party Complaint"
impleading as third-party defendants respondents Li Ching Yao, the AIA and Engineer Quedding.
On August 23, 1990, the trial court decided in favor of petitioners. It ordered the Go's to vacate
the subject portion of Lot No. 24, demolish their improvements and pay petitioner Ballatan actual
damages, attorney's fees and the costs of the suit. It dismissed the third-party complaint against:
(1) AIA after finding that the lots sold to the parties were in accordance with the technical
description a verification plan covered by their respective titles; (2) Jose N. Quedding, there
being no privity of relation between him and respondents Go and his erroneous survey having
been made at the instance of AIA, not the parties; and (3) Li Ching Yao for failure to prove that he
committed any wrong in the subject encroachment. 8 The court made the following disposition:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against
the defendants, ordering the latter:
1. To demolish and remove all improvements existing and encroaching on
plaintiff's lot;

2. To clear, vacate and deliver possession of the encroached area to the plaintiffs;
3. To pay plaintiffs jointly and severally the following:
a) P7,800.00 for the expenses paid to the surveyors;
b) P5,000.00 for plaintiffs' transportation;
4. To pay plaintiffs, jointly and severally, attorney's fees equivalent to 25% of the
current market value of the subject matter in litigation at the time of execution;
and
5. To pay the costs of suit.
The third-party complaint filed by third-party plaintiff Gonzalo Go and Winston Go
against third-party defendants Araneta Institute of Agriculture, Jose N. Quedding
and Li Ching Yao is hereby DISMISSED, without pronouncement as to costs.
SO ORDERED.
Respondents Go appealed. On March 25, 1996, the Court of Appeals modified the decision of
the trial court. It affirmed the dismissal of the third-party complaint against the AIA but reinstated
the complaint against Li Ching Yao and Jose Quedding. Instead of ordering respondents Go to
demolish their improvements on the subject land, the appellate court ordered them to pay
petitioner Ballatan, and respondent Li Ching Yao to pay respondents Go, a reasonable amount
for that portion of the lot which they encroached, the value to be fixed at the time of taking. It also
ordered Jose Quedding to pay respondents Go attorney's fees of P5,000.00 for his erroneous
survey. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the decision appealed from is hereby
AFFIRMED insofar as the dismissal of the third-party complaint against Araneta
Institute of Agriculture is concerned but modified in all other aspects as follows:
1) Defendants-appellants are hereby ordered to pay plaintiffs-appellees the
reasonable value of the forty-two (42) square meters of their lot at the time of its
taking;
2) Third-party defendant Li Ching Yao is hereby ordered to pay defendantsappellants the reasonable value of the thirty-seven (37) square meters of the
latter's lot at the time of its taking; and
3) Third-party defendant Jose N. Quedding is hereby ordered to pay to
defendants-appellants the amount of P5,000.00 as attorney's fees.
LET THE RECORD of the case be remanded to the Regional Trial Court of
Malabon for further proceedings and reception of evidence for the determination
of the reasonable value of Lots Nos. 24 and 26.
SO ORDERED. 9
Hence, this petition. Petitioners allege that:

RESPONDENT COURT OF APPEALS ERRED ON QUESTIONS OF LAW AND

GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN:
1. IT APPLIED EQUITY OR EQUITABLE SOLUTIONS TO THE INSTANT CASE
IN UTTER DISREGARD AND IN VIOLATION OR GROSS IGNORANCE OF
EXISTING LAWS AND JURISPRUDENCE VESTING BASIC PROPERTY
RIGHTS TO HEREIN PETITIONERS. RESPONDENT COURT HAS NO POWER
TO APPLY/USE EQUITY IN THE PRESENCE OF EXISTING LAWS TO THE
CONTRARY.
2. UNDER THE GUISE OF APPLYING EQUITY BUT IN EFFECT A VERY
APPARENT PARTIALITY AND FAVOR TO RESPONDENTS GO, IT ORDERED
PAYMENT OF THE ENCROACHED AREA AT THE VALUE AT THE TIME OF ITS
TAKING AND NOT THE VALUE AT THE TIME OF PAYMENT, THEREBY
ENRICHING THE GO'S BUT DEPRIVING PETITIONERS OF THE FRUITS OR
INCREASE IN VALUE OF THEIR PROPERTY TO WHICH THEY ARE
ENTITLED UNDER THE LAW AS THE REGISTERED OWNERS WITH
TORRENS TITLE IN THEIR NAMES.
3. WHEN IT DID NOT DISMISS THE THIRD-PARTY COMPLAINT DUE TO
NON-PAYMENT OF ANY FILING OR DOCKET FEE.
4. WHEN IT DENIED PETITIONERS THE RECOVERY OF THE NECESSARY
EXPENSES IN PROTECTING THEIR RIGHTS IN THIS CASE. 10
Petitioners question the admission by respondent Court of Appeals of the third-party complaint
by respondents Go against the AIA, Jose Quedding and Li Ching Yao. Petitioners claim that the
third-party complaint should not have been considered by the Court of Appeals for lack of
jurisdiction due to third-party plaintiffs' failure to pay the docket and filing fees before the trial
court.
The third-party complaint in the instant case arose from the complaint of petitioners against
respondents Go. The complaint filed was for accion publiciana, i.e., the recovery of possession of
real property which is a real action. The rule in this jurisdiction is that when an action is filed in
court, the complaint must be accompanied the payment of the requisite docket and filing
fees. 11 In real actions, the docket and filing fees are based on the value of the property and the
amount of damages claimed, if any 12 If the complaint is filed but the fees are not paid at the time of
filing, the court acquires jurisdiction upon full payment of the fees within a reasonable time as the
court may grant, barring prescription. 13 Where the fees prescribed for the real action have been paid
but the fees of certain related damages are not, the court, although having jurisdiction over the real
action, may not have acquired jurisdiction over the accompnying claim for damages. 14 Accordingly,
the court may expunge those claims for damages, or allow, on motion, a reasonable time for
amendment of the complaint so as to allege the precise amount of damages and accept payment of
the requisite legal fee. 15 If there are unspecified claims, the determination of which may arise after the
filing of the complaint or similar pleading, the additional filing fee thereon shall constitute a lien on the
judgment award. 16 The same rule also applies to third-party claims and other similar pleadings. 17
In the case at bar, the third-party complaint filed by respondents Go was incorporated in their
answer to the complaint. The third-party complaint sought the same remedy as the principal
complaint but added a prayer for attorney's fees and costs without specifying their amounts, thus:
ON THE THIRD PARTY COMPLAINT

1. That summons be issued against Third-Party Defendants Araneta Institute of

Agriculture, Jose N. Quedding and Li Ching Yao;
2. That after hearing, they be sentenced to indemnify the Third-Party Plaintiffs for
whatever is adjudged against the latter in favor of the Plaintiffs;
3. That Third-Party Defendants be ordered to pay attorney's fees as may be
proved during trial;
4. That Third-Party Defendants be ordered to pay the costs.
Other just and equitable reliefs are also prayed for. 18
The Answer with Third-Party Complaint was admitted by the trial court without the requisite
payment of filing fees, particularly on the Go's prayer for damages. 19 The trial court did not award
the Go's any damages. It dismissed the third-party complaint. The Court of Appeals, however, granted
the third-party complaint in part by ordering third-party defendant Jose N. Quedding to pay the Go's
the sum of P5,000.00 as attorney's fees.
Contrary to petitioners' claim, the Court of Appeal did not err in awarding damages despite the
Go's failure to specify the amount prayed for and pay the corresponding additional filing fees
thereon. The claim for attorney's fees refers to damages arising after the filing of the complaint
against the Go's. The additional filing fee on this claim is deemed to constitute a lien on the
judgment award. 20
The Court of Appeals found that the subject portion is actually forty-two (42) square meters in
area, not forty-five (45), as initially found by the trial court; that this forty-two (42) square meter
portion is on the entire eastern side of Lot No. 24 belonging to petitioners; that this said portion is
found the concrete fence and pathway that extends from respondent Winston Go's house on
adjacent Lot No. 25; that inclusive of the subject portion, respondents Go did not gain nor lose
any portion of Lots Nos. 25 and 26; that instead, Lot No. 27, on which respondent Li Ching Yao
built his house, encroached on the land of respondents Go, gaining in the process thirty-seven
(37) square meters of the latter's land. 21
We hold that the Court of Appeals correctly dismissed the third-party complaint against AIA.. The
claim that the discrepancy in the lot areas was due to AIA's fault was not proved. The appellate
court, however, found that it was the erroneous survey by Engineer Quedding that triggered
these discrepancies. And it was this survey that respondent Winston Go relied upon in
constructing his house on his father's land. He built his house in the belief that it was entirely
within the parameters of his father's land. In short, respondents Go had no knowledge that they
encroached petitioners' lot. They are deemed builders in good faith 22 until the time petitioner
Ballatan informed them of their encroachment on her property. 23
Respondent Li Ching Yao built his house on his lot before any of the other parties did. 24 He
constructed his house in 1982, respondents Go in 1983, and petitioners in 1985. 25 There is no
evidence, much less, any allegation that respondent Li Ching Yao was aware that when he built his
house he knew that a portion thereof encroached on respondents Go's adjoining land. Good faith is
always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of
proof. 26
All the parties are presumed to have acted in good faith. Their rights must, therefore, be
determined in accordance with the appropriate provisions of the Civil Code on property.

Art. 448 of the Civil Code provides:

Art. 448. The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, 27 or
to oblige the one who built or planted to pay the price of the land, and the one who
sowed the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the terms of
the lease and in case of disagreement, the court shall fix the terms thereof.
The owner of the land on which anything has been built, sown or planted in good faith
shall have the right to appropriate as his own the building, planting or sowing, after
payment to the builder, planter or sower of the necessary and useful expenses, and in
the proper case, expenses for pure luxury or mere pleasure. The owner of the land may
also oblige the builder, planter or sower to purchase and pay the price of the land. If the
owner chooses to sell his land, the builder, planter or sower must purchase the land,
otherwise the owner may remove the improvements thereon. The builder, planter or
sower, however, is not obliged to purchase the land if its value considerably more than
the building, planting or sowing. In such case, the builder, planter or sower must pay rent
to the owner of the land. If the parties cannot come to terms over the conditions of the
lease, the court must fix the terms thereof. The right to choose between appropriating the
improvement or selling the land on which the improvement stands to the builder, planter
or sower, is given to the owner of the land. 28
Art. 448 has been applied to improvements or portions of improvements built by mistaken belief
on land belonging to the adjoining owner. 29 The facts of the instant case are similar to those
in Cabral v. Ibanez, 30 to wit:
[P]laintiffs Geronima Zabala and her husband Justino Bernardo, constructed their
house in the belief that it was entirely within the area of their own land without
knowing at that time that part of their house was occupying a 14-square meter
portion of the adjoining lot belonging to the defendants, and that the defendants
Bernardo M. Cabral and Mamerta M. Cabral were likewise unaware of the fact
that a portion of plaintiff's house was extending and occupying a portion of their
lot with an area of 14 square meters. The parties came to know of the fact that
part of the plaintiff's house was occupying part of defendant's land when the
construction of plaintiff's house was about to be finished, after a relocation of the
monuments of the two properties had been made by the U.S. Army through the
Bureau of Lands, according to their "Stipulation of Facts," dated August 17, 1951.
On the basis of these facts, we held that:
The court, therefore, concludes that the plaintiffs are builders in good faith and
the relative rights of the defendant Mamerta Cabral as owner of the land and of
the plaintiffs as owners of the building is governed by Article 361 of the Civil Code
(Co Tao v. Joaquin Chan Chico, 46 Off. Gaz.5514). Article 361 of the old Civil
Code has been reproduced with an additional provision in Article 448 of the new
Civil Code, approved June 18, 1949. 31
Similarly, in Grana and Torralba v. Court of Appeals, 32 we held that:

Although without any legal and valid claim over the land in question, petitioners,
however, were found by the Court of Appeals to have constructed a portion of
their house thereon in good faith. Under Article 361 of the old Civil Code (Article
448 of the new), the owner of the land on which anything has been built in good
faith shall have the right to appropriate as his own the building, after payment to
the builder of necessary or useful expenses, and in the proper case, expenses for
pure luxury or mere pleasure, or to oblige the builder to pay the price of the land.
Respondents, as owners of the land, have therefore the choice of either
appropriating the portion of petitioners' house which is on their land upon
payment of the proper indemnity to petitioners, or selling to petitioners that part of
their land on which stands the improvement. It may here be pointed out that it
would be impractical for respondents to choose to exercise the first
alternative, i.e., buy that portion of the house standing on their land, for in that
event the whole building might be rendered useless. The more workable solution,
it would seem, is for respondents to sell to petitioners that part of their land on
which was constructed a portion of the latter's house. If petitioners are unwilling
or unable to buy, then they must vacate the land and must pay rentals until they
do so. Of course, respondents cannot oblige petitioners to buy the land if its value
is considerably more than that of the aforementioned portion of the house. If such
be the case, then petitioners must pay reasonable rent. The parties must come to
an agreement as to the conditions of the lease, and should they fail to do so, then
the court shall fix the same. 33
In light of these rulings, petitioners, as owners of Lot No. 24, may choose to purchase the
improvement made by respondents Go on their land, or sell to respondents Go the subject
portion. If buying the improvement is impractical as it may render the Go's house useless, then
petitioners may sell to respondents Go that portion of Lot No. 24 on which their improvement
stands. If the Go's are unwilling or unable to buy the lot, then they must vacate the land and, until
they vacate, they must pay rent to petitioners. Petitioners, however, cannot compel respondents
Go to buy the land if its value is considerably more than the portion of their house constructed
thereon. If the value of the land is much more than the Go's improvement, the respondents Go
must pay reasonable rent. If they do not agree on the terms of the lease, then they may go to
court to fix the same.
In the event that petitioners elect to sell to respondents Go the subject portion of their lot, the
price must be fixed at the prevailing market value at the time of payment. The Court of Appeals
erred in fixing the price at the time of taking, which is the time the improvements were built on the
land. The time of taking is determinative of just compensation in expropriation proceedings. The
instant case is not for expropriation. It is not a taking by the state of private property for a public
purpose upon payment of just compensation. This is a case of an owner who has been paying
real estate taxes on his land but has been deprived of the use of a portion of this land for years. It
is but fair and just to fix compensation at the time of payment. 34
Art. 448 and the same conditions abovestated also apply to respondents Go as owners and
possessors of their land and respondent Li Ching Yao as builder of the improvement that
encroached on thirty-seven (37) square meters of respondents Go's land.
IN VIEW WHEREOF, the decision of respondent Court of Appeals is modified as follows:
(1) Petitioners are ordered to exercise within thirty (30) days from finality of this decision their
option to either buy the portion of respondents Go's improvement on their Lot No. 24, or sell to
said respondents the portion of their land on which the improvement stands. If petitioners elect to
sell the land or buy the improvement, the purchase price must be at the prevailing market price

at the time of payment. If buying the improvement will render respondents Go's house useless,
then petitioners should sell the encroached portion of their land to respondents Go. If petitioners
choose to sell the land but respondents Go are unwilling or unable to buy, then the latter must
vacate the subject portion and pay reasonable rent from the time petitioners made their choice
up to the time they actually vacate the premises. But if the value of the land is considerably more
than the value of the improvement, then respondents Go may elect to lease the land, in which
case the parties shall agree upon the terms, the lease. Should they fail to agree on said terms,
the court of origin is directed to fix the terms of the lease.
From the moment petitioners shall have exercised their option, respondents Go shall pay
reasonable monthly rent up to the time the parties agree on the terms of the lease or until the
court fixes such terms.
(2) Respondents Go are likewise directed to exercise their rights as owners of Lots Nos. 25 and
26, vis-a-visrespondent Li Ching Yao as builder of the improvement that encroached on thirty
seven (37) square meters of respondents Go 's land in accordance with paragraph one
abovementioned.
(3) The Decision of the Court of Appeals ordering Engineer Quedding, as third-party defendant,
to pay attorney's fees of P5,000.00 to respondents Go is affirmed. The additional filing fee on the
damages constitutes a lien on this award.
(4) The Decision of the Court of Appeals dismissing third-party complaint against Araneta
Institute of Agriculture is affirmed.
SO ORDERED.
Bellosillo, Mendoza, Quisumbing and Buena, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 151942

November 27, 2003

Spouses GREGORIO GO and JUANA TAN GO, petitioners,

vs.
JOHNSON Y. TONG; COURT OF APPEALS; and Honorable Judge JUAN NABONG of the
Regional Trial Court, Branch 32, Manila, respondents.
DECISION
PANGANIBAN, J.:
As a rule, docket fees should be paid upon the filing of the initiatory pleadings. However, for
cogent reasons to be determined by the trial judge, staggered payment thereof within a
reasonable period may be allowed. Unless grave abuse of discretion is demonstrated, the
discretion of the trial judge in granting staggered payment shall not be disturbed.
The Case

Petitioner assails the September 18, 2001 Decision1 and the January 21, 2002 Resolution2 of the
Court of Appeals (CA) in CA-GR SP No. 58942. The decretal portion of the Decision reads as
follows:
"WHEREFORE, the petition is hereby DENIED."3
The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts
The facts of the case are summarized by the CA in this wise:
"Petitioner Juana Tan Go (petitioner Juana) purchased a cashiers check dated September 13,
1996 from the Far East Bank and Trust Company (FEBTC) Lavezares, Binondo Branch in the
amount of P500,000.00, payable to Johnson Y. Tong (private respondent).
"On petitioner Juanas instruction, the cashiers check bore the words Final Payment/Quitclaim
after the name of payee private respondent allegedly to insure that private respondent would
honor his commitment that he would no longer ask for further payments for his interest in the
informal business partnership which he and she had earlier dissolved.
"After the check was delivered to private respondent, he deposited it with the words Final
Payment/Quitclaim already erased, hence, it was not honored.
"Private respondents counsel subsequently wrote the manager of FEBTC Lavezares Branch
informing that the words Final Payment/Quitclaim on the check had been inadvertently erased
without being initialed by your bank or the purchaser thereof and thus requesting that the check
be replaced with another payable to Johnson Tong-Final Settlement/Quitclaim with the same
amount, the bank charges therefor to be paid by his client-private respondent.
"FEBTC did not grant the request of private respondents counsel, hence, private respondent
filed a complaint against FEBTC and petitioner Juana and her husband Gregorio Go at the
Manila RTC, for sum of money, damages, and attorneys fees, subject of the case at bar.
"Answering the Complaint, therein defendants-herein petitioners Juana and her husband and
FEBTC alleged that the erasure of the words Final Payment/Quitclaim was intentional on private
respondents part, reflective of his intention to collect more from petitioner Juana, hence, the nonissuance of a replacement check was justified, unless private respondent was sincere in abiding
with the terms agreed upon.
"During the pendency of the case, petitioners son, George Tan Go, filed a criminal complaint
against private respondent for falsification of the check. The criminal complaint was dismissed,
however, by the Manila Prosecutors Office.
"On July 17, 1998, private respondent requested public respondent for leave to file Supplemental
Complaint. Acting on the request, public respondent suggested to him to file a Motion to admit
within fifteen (15) days, copy furnished petitioners who were given the same number of days
from receipt to file their Comment.
"On August 25, 1998, private respondent filed a Motion for Leave to File a Supplemental
Complaint and to Admit the Attached Supplemental Complaint which Supplemental Complaint
alleged that petitioners used their son to file the criminal complaint for falsification against him
which caused damages, hence, the prayer for an increase in the amount of moral and exemplary
damages sought to be recovered from P2.5 million to P55 million and praying for the award of

actual damages of P58,075.00. The motion was set for hearing on September 4, 1998. Copy of
the motion to petitioners was sent by registered mail.
"Public respondent, by Order of September 4, 1998, noting that petitioners had been furnished
copy of the Motion for Leave x x x but that there had been no comment thereon, granted the
motion and admitted the Supplemental Complaint.
"Petitioners and FEBTCs Comment-Opposition were subsequently filed.
"Petitioners and FEBTC filed their respective Motions for Reconsideration of the September 4,
1998 Order.
"On November 18, 1998, petitioners filed a Manifestation of Deposit and deposited to the RTC
Clerk of Court the amount of P500,000.00 representing the amount of the check, subject to the
condition that it shall remain deposited until the disposition of the case.
"Petitioners and FEBTCs separate Motions for Reconsideration of the September 4, 1998 Order
were later denied by Order of December 4, 1998, hence, petitioners filed their Answer dated
December 18, 1998 to the Supplemental Complaint with Counterclaim, alleging as Special
Affirmative defenses the following:
5. As already intimated, the defendants are not a party to the aforementioned criminal complaint,
but only their son George who took it upon himself to file it in his own right, without their
involvement in any way, hence, said incident cannot be pleaded as supplement to the original
complaint, much less as a new cause of action without impleading George Go as party
defendant.
6. Plaintiff cannot prosecute his Supplemental Complaint, and the same should be dismissed,
unless the corresponding docket fee and legal fees for the monetary claims in the amount
of P55,057,075.00 are paid for. x x x.
"On February 5, 1999, public respondent, acting on the verbal manifestation/motion of private
respondents counsel, allowed the release of petitioners P500,000.00 deposit to private
respondent.
"By order of November 17, 1999, public respondent, in the interest of justice and because of the
huge amount of outlay involved (the Court considers the business climate and the peso crunch
prevailing), allowed private respondent to first deposit P25,000.00 on or before December 15,
1999 and P20,000.00 every month thereafter until the full amount of docket fees is paid, and
only then shall the deposits be considered as payment of docket fees.
"Petitioners filed a Motion for Reconsideration of the November 17, 1999 Order which was, by
Order of April 11, 2000, denied.
"Thus arose the present petition filed on May 30, 2000 which ascribes to public respondent the
commission of grave abuse of discretion in issuing the Orders of February 5, 1999 (allowing the
release of the P500,000.00 deposit to private respondent), November 17, 1999 (allowing the
payment, on staggered basis, of the docket fees for the Supplemental Complaint) and April 11,
2000 (denying the Motion for Reconsideration of the November 17, 1999 Order)." 4
Ruling of the Court of Appeals
In their Petition for Certiorari before the CA, petitioners alleged that respondent judge committed
grave abuse of discretion when he issued the Orders dated February 5, 1999, 5 November 17,
19996 and April 11, 2000.7

According to the CA, petitioners failed to assail, within the prescribed period, respondent judges
February 5, 1999 Order allowing the release of the money deposited by them. It was only in their
May 30, 2000 Petition before the CA that they questioned the Order. Moreover, the appellate
court held that, anyway, private respondent was entitled to the deposit, which represented the
amount indicated on the check that belonged to him.
As to the November 17, 1999 Order allowing private respondent to pay the docket fee on a
staggered basis and the April 11, 2000 Order denying the Motion for Reconsideration thereof, the
CA held that "Sun Insurance Office Ltd. x x x permits the payment of the prescribed docket fee
within a reasonable period but in no case beyond the applicable prescriptive or regular
period."8 In that case, the court a quo opined that the docket fee payment scheme imposed by
the respondent judge "cannot be said to have been issued with grave abuse of discretion." 9
Hence, this Petition.10
The Issues
In their Memorandum,11 petitioners submit the following issues for our consideration:
"Whether or not the Honorable Court of Appeals committed grave and serious errors which [are]
tantamount to grave abuse of discretion when it upheld the validity of the Orders dated
Feb[ruary] 5, 1999, November 17, [1999] and April 11, 2000 issued by public respondent Hon.
Judge Juan Nabong of RTC Branch 32 of Manila, in Civil Case No. 97-81935.
"Whether or not public respondent Judge Juan Nabong committed grave abuse of discretion in
not suspending the proceedings pending appeal with the Honorable Court of Appeals, and in x x
x refusing to inhibit himself."12
The Courts Ruling
The Petition has no merit.
Preliminary Issue:
Mode of Appeal
Private respondent argues that the instant Petition should have been brought under Rule 45 of
the Revised Rules of Court and not under Rule 65. On the other hand, petitioners maintain that
their suit questions interlocutory orders issued by the RTC and thus falls within the ambit of Rule
65, under which questions of law and facts may be raised.
We clarify. A petition for certiorari under Rule 65 of the Revised Rules of Court may be filed under
the following condition:
"When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction, and there is no appeal, nor any plain, speedy, and adequate remedy in
the ordinary course of law x x x."13
On the other hand, Rule 45 prevails under this circumstance:
"A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of
Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by
law, may file with the Supreme Court a verified petition for review on certiorari. x x x." 14

Rule 45 of the Rules of Court specifically states that in all cases, the CAs decisions, final orders
or resolutions -- regardless of the nature of the action or proceedings involved -- may be
appealed to this Court through a petition for review, which is just a continuation of the appellate
process involving the original case.15 On the other hand, a special civil action under Rule 65 is an
independent suit based on the specific grounds provided therein. As a general rule, certiorari
cannot be availed of as a substitute for the lost remedy of an ordinary appeal, including that
under Rule 45.16
Very recently, in Fortune Guarantee and Insurance Corporation v. CA,17 this Court had the
occasion to discuss this matter. In that case, the petitioner alleged grave abuse of discretion on
the part of the respondent trial court judge when the latter issued the assailed Order granting a
Motion for Execution Pending Appeal. Said the Court in that case:
"[I]t must be pointed out that petitioner adopted the wrong mode of appeal in bringing this case
before us. The proper remedy of a party aggrieved by a decision of the Court of Appeals is a
petition for review under Rule 45 which is not similar to a petition for certiorari under Rule 65 of
the Rules of Court. x x x."18
In the present case, petitioners are appealing a final decision of the CA by resorting to Rule 65,
when their remedy should be based on Rule 45.19 When an error of judgment of the CA is
brought up to this Court for review, the action is properly designated as a petition for review and
not a special civil action.20 Thus, while the instant Petition is one for certiorari under Rule 65 of
the Rules of Court, the assigned errors are more properly addressed in a petition for review
under Rule 45.
Accordingly, when parties adopt an improper remedy, as in this case, their petitions may be
dismissed outright.21However, in the interest of substantial justice, we deem it wise to overlook
procedural technicalities in order to rule speedily on this case 22 and demonstrate that even
without the procedural infirmity, the Petition should be rejected due to its lack of merits.
First Issue:
Release of the Money Deposited
Petitioners argue that respondent judge committed grave abuse of discretion when he issued the
February 5, 1999 Order allowing the release of their P500,000 bank deposit. According to them,
he "demonstrated his capacity for abuse of judicial authority as the release of the money was
made in direct contravention of [their] condition thereto which was that the money shall remain
deposited until the disposition of this case."23
We disagree. As correctly found by the CA, there was a prior understanding between the parties
that petitioners would deposit P500,000, which private respondent could withdraw if he so
desired.24 Because petitioners claim that they deposited the money as a sign of good faith, we
see no reason why they should not abide by their earlier agreement with private respondent. In
fact, in their Manifestation of Deposit,25 they even referred to the earlier hearing during which the
deposit had been agreed upon. This Manifestation shows that the deposit was indeed made
pursuant to their earlier agreement.
The CA was likewise correct in finding that petitioners had failed to assail, within the prescribed
period, the Order allowing the release of the money.26 The Manifestation of Deposit was received
and approved by the RTC on November 18, 1998. On February 5, 1999, private respondent,
through his counsel, made his oral manifestation to withdraw the amount deposited. 27 It was only
on May 30, 2000, upon the filing of their Petition for Certiorari with the CA, when petitioners
questioned the Order allowing the withdrawal of the deposit.

If petitioners honestly believed that respondent judge had acted with grave abuse of discretion
when he issued the Order, why did they allow more than one year to lapse before assailing it? In
fact, they had not even filed a motion for reconsideration. Elementary is the rule that before
certiorari may be availed of, a petitioner must have filed with the lower court a motion for
reconsideration of the act or order complained of.28 This requirement enables the lower court to
pass upon and correct its mistakes in the first instance, without the intervention of the higher
tribunal.29 While there are exceptions to this rule,30 petitioners have not convinced this Court that
they are entitled thereto.
Petitioners claim that they learned of the existence of the Order only after more than one year
had passed, and of the withdrawal of the deposit only after their new counsel had appeared.
We are not persuaded. It is undeniable that petitioners actively prosecuted their case during the
period when they were allegedly still ignorant of the existence of the Order dated February 5,
1999. Whether such ignorance was due to negligence or mere oversight will not release them
from its effects.
More important, the CA was correct in holding that, ultimately, private respondent was entitled to
the deposit, because it represented the amount indicated on the check that undeniably belonged
to him. In all the pleadings they filed, petitioners never denied that the amount of P500,000
properly belonged to him. He correctly argued as follows:
"There is no question, and it is admitted by petitioners in their Manifestation of Deposit, dated
November 16, 1998 x x x that the amount of P500,000 deposited by them with the Regional Trial
Court of Manila, represented the amount covered by Far East Bank & Trust Company Cashiers
Check No. 041A-0000032561.
"It is likewise admitted by the parties that the said FEBTC Cashiers Check No. 041A0000032561 was paid (payable) to and belong to private respondent." 31
Second Issue:
Payment of Docket Fee
Petitioners argue that respondent judge and the CA erred in allowing private respondent to pay
the docket fee on a staggered basis. According to them, the Order dated November 17, 1999
was "unprecedented in the annals of the Philippine judicial system."32 They describe the allegedly
anomalous situation in this wise:
"Thus, we have perhaps x x x in the case at bar x x x the only known case in Philippine judicial
history where a supplemental complaint was admitted without the payment of the FULL docket
fees. And not only that, said fees were made payable over a mind-boggling, over-expanded
period of nearly two (2) years!"33
Petitioners make contradictory assertions when they aver that the circumstances in the present
case do not meet the parameters set by the Court in Sun Insurance Office Ltd. (SIOL) v.
Asuncion,34 then make a complete volte face by arguing that the former is inapplicable, because
there is no under-assessment of the docket fee in the instant case.
The Court clarified the rule in Sun Insurance thus:
"x x x. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment
of the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or
nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of

the docket fee, the court may allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period."35 (Italics supplied)
Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its
nonpayment at the time of filing does not automatically cause the dismissal of the case, as long
as the fee is paid within the applicable prescriptive or reglementary period; 36 more so when the
party involved demonstrates a willingness to abide by the rules prescribing such payment. 37
While the cause of action of private respondent was supposed to prescribe in four (4) years, 38 he
was allowed to pay; and he in fact paid the docket fee in a years time. 39 We do not see how this
period can be deemed unreasonable. Moreover, on his part there is no showing of any pattern or
intent to defraud the government of the required docket fee. We sustain the CAs findings
absolving respondent judge of any capricious or whimsical exercise of judgment equivalent to
lack of jurisdiction. Ruled the appellate court:
1wphi1

"The Sun Insurance Office Ltd. case permits the payment of the prescribed docket fee within a
reasonable period but in no case beyond the applicable prescriptive or regular period. Since the
prescriptive period to file the complaint subject of the present petition which is an action upon an
injury to the right of private respondent, is four years and the scheme of payment of the docket
fees in the amount of P252,503.50 given by public respondent called for an implementation
thereof within one year, as in fact private respondent manifested in his Rejoinder that he had fully
paid the said amount on December 12, 2000, then the assailed Orders of November 17, 1999
and April 11, 2000 cannot be said to have been issued with grave abuse of
discretion."40 (Citations omitted)
To be sure, for certiorari to lie against respondent judge, the abuse of discretion committed must
be grave, as when power is exercised arbitrarily or despotically by reason of passion or personal
hostility; and such exercise must be so patent and gross as to amount to an evasion of positive
duty, or to a virtual refusal to perform it or to act in contemplation of law.41 These conditions are
absolutely wanting in the present case.
Final Issue:
Inhibition and Suspension of Proceedings
Finally, petitioners ascribe grave abuse of discretion to respondent judge for not inhibiting himself
from this case and for not suspending the proceedings in the RTC pending the resolution of the
Petition for Certiorari before the appellate court.
We need not belabor these questions, because they were never raised before the CA. It is wellsettled that parties are not permitted to raise before this Court issues that were not taken up
below.42
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution
AFFIRMED. Costs against petitioners.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 123215 February 2, 1999

NATIONAL STEEL CORPORATION, petitioner,
vs.
COURT OF APPEALS, HON, ARSENIO J. MAGPALE, and JOSE MA. P.
JACINTO, respondents.

MENDOZA, J.:
This is a petition for review on certiorari of the decision, 1 dated September 11, 1995, of the Court
of Appeals, which dismissed the special civil action for certiorari filed by petitioner National Steel
Corporation (NSC) to set aside the order, dated April 6, 1994, of the Regional Trial Court, Branch LVII,
City of Makati. In the said order, the trial court denied the motion of petitioner NSC to dismiss the
complaint for recovery of personal property which private respondent Jose P. Jacinto had filed.
The facts are as follows:
Private respondent Jacinto was the former owner of record of 100 shares of stock of the Manila
Golf and Country Club (MGCC) now owned by and registered in the name of petitioner NSC. On
February 9, 1990, he filed a complaint 2 against the NSC, alleging that
4. In or about 1970, for valuable considerations, Manila Golf and Country Club,
Inc. (MGCCI) issued its Stock Certificate No. 1361 to plaintiff representing 100
shares of MGCCI.
5. From about 1972 up to the early part of February 1986, plaintiff was abroad
and could not return to the Philippines for reasons beyond his control.
6. When plaintiff returned to the philippines in 1986, he discovered that Stock
Certificate No. 1361 had been cancelled and a replacement Stock Certiftcate had
been issued in the name of NSC.
7 The cancellation and transfer of plaintiffs Stock Certificate No. 1361 is void for
the reasons that: there was no meeting of minds, there was no specific contract
between plaintiff and NSC or any party covering the alleged transfer nor was
there any consideration for the same.
8. Despite repeated demands upon NSC to return and re-transfer plaintiff's 100
shares in MGCCI formerly covered by said Stock Certificate No. 1361, NSC failed
and refused and still fails and refuses to comply with the same.
9. MGCCI's act in cancelling plaintiffs stock certificate No. 1361 and issuing a
replacement certificate in the name of NSC is without basis and illegal
considering that there was no valid document evidencing the assignment, sale or
transfer by plaintiff to NSC of MGCCI stock certificate No. 1361.
10. In consequence of NSC and MGCCI's illegal act in causing the cancellation
and transfer of plaintiff's Stock Certificate No. 1361 unto NSC's name:
10.1. Plaintiff suffered mental anguish for which an
award of moral damages of P1 Million is proper;

10.2. Plaintiff was constrained to litigate and

secure the services of counsel for a fee of
P100,000.00 and for which NSC and MGCCI
should be held liable.
Based on the foregoing allegations, Jacinto prayed:
PRAYER
WHEREFOREI it is respectfully prayed that judgment be rendered:
1. Ordering NSC to execute a deed of assignment re-transferring unto plaintiff the
MGCCI certificate issued to the former in replacement of Stock Certificate No.
1361 and to surrender said Deed of Assignment, together with the MGCCI
certificate issued to NSC (in replacement of Stock Certificate No. 1361) for
cancellation thereof and to order MGCCI to cancel said stock certificate and issue
a new one in the name of Jose Ma. P. Jacinto:
2. If for any reason whatsoever NSC fails or refuses to execute the deed of
assignment and surrender NSC's replacement stock certificate, MGCCI be
ordered to:
2.1 Cancel in its stock and transfer book the stock
certificate issued to NSC issued in replacement of
certificate No. 1361;
2.2 Issue a new stock certificate in the name of
NSC or the stock certificate that might have been
issued in replacement thereof;
2.3 Declare as lost and of no force and effect the
MGCCI stock certificate now outstanding and
registered in the name of NSC.
3. Ordering NSC and MGCCI to pay plaintiff, jointly and severally:
3.1 P1 Million as moral damages ; and
3.2 P100.000.00 as attorney's fees.
Other reliefs are also prayed for. 3
Petitioner NSC sought the dismissal of the complaint on the ground of prescription, but its motion
was denied by the trial court in an order, dated November 9, 1990. Petitioner NSC brought a
special civil action for certiorari in the Court of Appeals, but again its petition was dismissed by
the appellate court on August 30, 1991. Its attempt to secure review in this Court failed as its
petition was dismissed in a resolution, dated March 18, 1992.
Petitioner NSC then filed its answer, after which trial was held. It thereafter filed a motion 4 to
dismiss the complaint against it on the ground of lack of jurisdiction. It alleged:
Plaintiff paid docket and other fees totalling P4,040.00. The certification of Clerk
of Court Ma. Corazon Cecelia P. Cuba is attached as Annex A.

2 Under Sec. 7(a) of Rule 141, as amended by the Resolution of the Supreme
Court En Banc dated September 4, 1990, the docket fees "for filing an action . . . .
is P600 for the first P150,000.00 and P5.00 for each P1,000.00 in excess of
P150,000.00.
3. The actual value of the MGCCI share certificate as of February, 1990, when
the complaint was filed, was P5,511,000.00.
A certification issued by the MGCCI attesting to the fair market value of a MGCCI
share is attached as Annex B.
4. This means that the correct docket fee for the filing of plaintiff's complaint is
approximately P26,805.00 and not P4,040.00 which is the amount plaintiff
actually paid.
xxx xxx xxx
6. The failure of plaintiff to pay the correct filing fees on February 13, 1990 meant
that this court did not acquire jurisdiction over plaintiffs action. Under the ruling
of Sun Insurance, and as explained below, the plaintiff cannot now pay the
deficiency in the filing fees because it is already "beyond the applicable
prescriptive or reglementary period."
The trial court denied petitioner's motion in an order, dated April 6, 1994. Hence, the latter
brought a special civil action for certiorari in the Court of Appeals, but its petition was dismissed
on September 11, 1995.
The principal relief, or prayer in private respondent's complaint is specific, for the
"NSC to execute a deed of assignment re-transferring unto plaintiff the MGCCI
certificate . . . in replacement of stock certificate No. 1861 . . . .
There is no allegation in the complaint of any quantified amount and/or of the
actual value of the stock certificate in question.
There is also no separate cause of action and/or prayer in the face of the
complaint that private respondent, even in the alternative, prayed that if the
principal relief is unavailing, that defendants be ordered to pay him the actual or
equivalent value of the stock certificate, hence there is even no reason or basis to
move for a more definite statement or for a bill of particulars of any matter which
is not averred in the complaint with sufficient definiteness or particularity to
enable petitioner to properly prepare for a more responsive pleading or to
prepare for trial.
xxx xxx xxx
Perspicaciously, what should guide the office of the Clerk of Court, Regional Trial
Court, Makati, Metro Manila, in assessing the, correct docket fees for the filing of
the complaint in Civil Case No. 90-4051, when it was filed on February 13, 1990,
is what is alleged and prayed for in the complaint. It would be uncalled for and
baseless for the clerk of court to consider at that point in time the supposed
"actual value of the MGCCI share certificate as of February, 1990, . . . (in the
amount of) P5,511000.00", and then and there assess an additional docket fee of
P22,765.00 (P26,805.00 minus P4,040.00), precisely because the said sum of
"P5,511,000.00" is not alleged in the body of the complaint, and which is not also
sought to be recovered in the action.

There can be no divergence of opinion from the allegations, designation and the
reliefs prayed for, as clearly and definitely spelled out in the face of the complaint,
that private respondent's principal relief is for petitioner NSC "to execute a deed
of assignment re-transferring unto plaintiff the MGCCI certificate issued to the
former in replacement of stock certificate No. 1861 . . . . And there also appears
to be no hint of any intention on the part of private respondent to mislead the
clerk of court in assessing the correct fees, or to evade the payment of the
correct fees.
Hence, this petition raising the following assignment of errors:
Assignment of Errors
THE RESPONDENT COURT OF APPEALS ERRED IN CHARACTERIZING THE
NATURE OF PRIVATE RESPONDENT'S ACTION AS ONE FOR SPECIFIC
PERFORMANCE AND NOT ONE FOR RECOVERY OF PROPERTY.
THE RESPONDENT COURT OF APPEALS ERRED IN REFUSING TO TAKE
COGNIZANCE OF THE TACAY [v. Regional Trial Court, 180 SCRA 433 (1989)]
AND BPI CREDIT [v. Court of Appeals, 204 SCRA 601 (1991)] RULINGS.
THE RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT
THE LOWER COURT FAILED TO ACQUIRE JURISDICTION OVER PRIVATE
RESPONDENT'S COMPLAINT DUE TO NON-PAYMENT OF THE REQUIRED
FILING FEES.
Petitioner NSC correctly argues that the action in this case is for the recovery of property rather
than for specific performance and, hence, the docket fee should be based on the value of the
property sought to be recovered. It is similar to an action in which petitioner seeks the execution
of a deed of sale of a parcel of land in his favor. Such action has been held to be for the recovery
of the real property and nor for specific performance since his primary objective is to regain the
ownership and possession of the parcel of land. In Ruiz v. J.M. Tuason & Co., Inc., it was held: 5
Appellant contends that the present action is transitory because it is one for
specific performance and its object is to compel J. M. Tuason & Co., Inc, to
execute a final deed of sale of the property in question in favor of appellant
founded upon compliance with the compromise agreement wherein said
company recognized the sale made by Florencio Deudor of said property in favor
of Jose Dinglasan who, in the same agreement, was recognized by the company
as a purchaser who had already made partial payment of the purchased price of
the land.
This contention has no merit. Although appellant's complaint is entitled to be one
for specific performance, yet the fact that he asked that a deed of sale of a parcel
of land situated in Quezon City be issued in his favor and that a transfer
certiticate of title covering said land be issued to him shows that the primary
objective and nature of the action is to recover the parcel of land itself because to
execute in favor of appellant the conveyance requested there is need to make a
finding that he is the owner of the land which in the last analysis resolves itself
into an issue of ownership.
Similarly, if as in this case, plaintiff herein private respondent Jacinto, seeks the execution in his
favor of a deed of assignment of shares of stock, it follows that the action is for recovery of
personal property, the main purpose of which is to regain the ownership and possession of the
said shares of stock.

Accordingly, as petetioner NSC contends private respondent Jacinto should pay docket fees
based on the value of the shares of stock and the amount of damages he seeks to recover.
Under Rule 141, 7(a) of the Rules of Court as it stood at the time of the filing of the complaint
against petitioner, docket fees for ordinary civil actions should be based on the total sum claimed,
exclusive of interest, or the stated value of the property in litigation. 6Thus, the docket fees should
be computed on the basis on the value of the property and the amount of related damages claimed,
exclusive of interest. As we held in Tacay v. Regional Trial Court, 7 where the action involves real
property and a related claim for damages as well, the legal fees shall be assessed on the basis of
both (a) the value of the property and (b) the total amount of related damages sought. The Court
acquires jurisdiction over the action if the filing of the initiatory pleading is accompanied by the
payment of the requisite fees, or, if the fees are not paid at the time of the filing of the pleading, as of
the time of full payment of the fees within such reasonable time as the court may grant, unless, of
course, prescription has set in the meantime.
It does not follow, however, that the trial court should have dismissed the complaint for failure of
private respondent to pay the correct amount of docket fees. Although the payment of the proper
docket fees is a jurisdictional requirement, the trial court may allow the plaintif in an action to pay
the same within a reasonable time before the expiration of the applicable prescriptive or
reglementary period. 8 If the plaintiff fails to comply with this requirement, the defendant should timely
raise the issue of jurisdiction or else he would be considered in estoppel. In the latter case, the
balance between the appropriate docket fees and the amount actually paid by the plaintiff will be
considered a lien on any award he may obtain in his favor. Thus, in Pantranco North Express, Inc. v.
Court of Appeals, we held: 9
The petitioner raised the issue regarding jurisdiction for the first time in its Brief
filed with the public respondent in CA-G.R. CV No. 26220 on 2 February 1991.
After vigorously participating in all stages of the case before the trial court's
authority authority in order to ask for affirmative relief, the petitioner is effectively
barred by estoppel from challenging the trial court's jurisdiction. Although the
issue of jurisdiction may be raised at any stage of the proceedings as the same is
conferred by law, it is nonetheless settled that a party may be barred from raising
it on ground of laches or estoppel. The deficiency in the payment of the docket
fees must, however, be considered a lien on the judgment which must be
remitted to the clerk of court of the court a quo upon the execution of the
judgment.
In the case at bar, petitioner NSC filed in 1990 a motion to dismiss but did not raise this point.
Instead it based his motion on prescription. Upon the denial by the trial court of its motion to
dismiss, it filed an answer, submitted its pre-trial brief, and participated in the proceedings before
the trial court. It was only in 1993 more than three years after filing its motion to dismiss
that petitioner NSC again filed a motion to dismiss the action on the ground of lack of jurisdiction.
Clearly, petitioner is estopped from raising this issue. Indeed, while the lack of jurisdiction of a
court may be raised at any stage of an action, nevertheless, the party raising such question may
be estopped if he has actively taken part in the very proceedings which he questions and he only
objects to the court's jurisdiction because the judgment or the order subsequently rendered is
adversed to him. 10
WHEREFORE, the decision of the Court of Appeals, dated September 11, 1995, is AFFIRMED.
The deficiency in the payment of the docket fees shall be a lien on any judgment may be
rendered in favor of private respondent Jose P. Jacinto.
SO ORDERED.
Belosillo, Puno, Quisumbing and Buena, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 94677 October 15, 1991

ORIGINAL DEVELOPMENT AND CONSTRUCTION CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and HOME INSURANCE AND GUARANTY
CORPORATION, respondents.
K.V. Faylona & Associates and Jose V. Marcella for petitioner.
The Government Corporate Counsel for private respondent.

PARAS, J.:p
Assailed in this petition for certiorari is the decision * of the Court of Appeals dated dated July 31, 1990 in CA G.R.
SP No. 18462 entitled "Home Insurance and Guaranty Corporation v. Hon. Adriano R.. Osorio and Original Development and
Construction Corporation" ordering that the complaint in Civil Case No. 3020-V-89 be expunged from the record and declaring the
orders dated June 1 and 29, 1989 of the court a quo as null and void for having been issued without jurisdiction.

The factual background of the case appears undisputed, to wit:

On December 19, 1988, herein petitioner Original Development and Construction Corporation
(ODECOR for brevity) filed a complaint for breach of contract and damages against private
respondent Home Insurance and Guaranty Corporation (HIGC for short), National Home
Mortgage Finance Corporation (NHMFC for short) and Caloocan City Public School Teachers
Association (CCPSTA for brevity). The case was docketed as Civil Case No. 3020-V-89 and
assigned to Branch 171 of the Regional Trial Court in Valenzuela, Metro Manila.
The questioned allegations in the body of the complaint, among others, are as follows:
16. The organization, as earlier stated, of the Third District Public School
Teachers Homeowners Association, under the sponsorship and patronage of
HIGC, unjustly deprived ODECOR of not less than 10,000 committed buyers, and
as a consequence suffered a big financial loss;
17. As part of its scheme to destroy the viability of ODECOR's Housing project,
HIGC maliciously and unreasonably; (a) delayed action on ODECOR's request
for the issuance of Certificate of Completion of houses which have already been
completed; (b) froze ODECOR's requests for "take-out" appraisals of the value of
its houses and lots, instead, approved very low appraisal values; (c) refused to
allow ODECOR to construct smaller and cheaper house and lot packages, and
unreasonably required ODECOR to secure prior clearance from the National
Home Mortgage Finance Corp. before it (HIGC) will allow ODECOR to construct
smaller packages; and (d) delayed countersigning the checks, which were issued
by ODECOR to pay the suppliers of construction materials used in the project,
which delay resulted in the pilferage of valuable construction materials and (e)

delayed action of ODECOR's labor payrolls, thus, demoralizing the employees of

the ODECOR;
xxx xxx xxx
19. HIGC's aforementioned acts not only resulted in ODECOR's financial crises
and/or reversals, but also brought about almost the total loss of its market; and
such loss of market renders HIGC liable for the actual and consequential
damages suffered by ODECOR;
20. In order to prevent the total collapse of the Doa Helen Subdivision project, to
rescue ODECOR from its financial straits, and to enable the ODECOR to
continue its distressed operations, ODECOR's President, for the account of
ODECOR, had to secure personal loans from sympathetic friends, in which loans
ODECOR bound itself to pay monthly a high rate of interest; and accordingly, the
principal and the interests should be charged to or considered as a liability of the
HIGC, by way of reparation for actual and consequential damages, to ODECOR;
xxx xxx xxx
24. Notwithstanding insistent demands by ODECOR, NHMFC has delivered to
the former, is staggered and delayed installments in a period of five (5) years, the
amount of P5,366,727.80 only, which malicious delays have caused ODECOR to
incur unnecessary expenses in the form of interests on its loans, unexpected
administrative and operational requirements, which interest payments and other
expenses could have been avoided had the National Home Mortgage Finance
Corporation promptly paid over to ODECOR the moneys which it (NHMFC) had
guaranteed to pay;
25. Notwithstanding ODECOR's repeated demands on NHMFC for the latter to
effect payment and delivery to it of the remaining balance of the originating
banks' transmitted loan proceed in the amount of P2,272,193.10 which amount
represents the `take out' proceeds of twenty-two (22) House and lot buyers,
NHMFC has maliciously refused or rejected such demands; and this malicious
non-payment aggravated the financial difficulties and the deterioration of
ODECOR and forced it to curtail its development operations and to abandon its
program to construct 10,000 units;
26. NHMFC's aforestated unjust, if not illegal, acts subject NHMFC to liability to
pay ODECOR for actual, consequential and exemplary damages for the losses
and injuries which were sustained by it (plaintiff);
27. ODECOR, as a result of the aforedescribed illegal and unlawful acts
committed by the several defendants, and to protect its financial interests, good
name and reputation, and to recover its huge losses, has been needlessly
compelled to file this action in Court, and for this purpose, had to engage the
professional services of a reputable law counsel for which it agreed to pay 25% of
its total money claims as attorney's fees excluding trial honorarium of P3,000.00
per hearing.
xxx xxx xxx
(Emphasis supplied)
The prayer states:

WHEREFORE, the plaintiff to this Honorable Court respectfully prays that

judgment be rendered:
1. Adjudging all the defendants guilty of breach of contracts and/or bad faith
and/or unfair business practice and, accordingly, liable for their unlawful acts
which sabotaged and ruined the financial resources and housing development
enterprise of the plaintiff;
2. Adjudging all the defendants, solidarily liable to compensate the plaintiff for
actual, consequential, exemplary and moral damages, the amount of which will
be proved at the trial;
3. Requiring National Home Mortgage Finance Corporation to deliver and/or to
pay to the plaintiff the amount of P2,272,193.10 which sum is due and payable to
the plaintiff and is in its possession and custody;
4. Declaring the defendants liable to the plaintiff for attorney's fees and other
expenses of litigation and the costs of this suit; and
5. Granting to the plaintiff such other reliefs and remedies which are just and
equitable in the premises. (Emphasis supplied)
Simultaneous with the filing of the said complaint, ODECOR paid the following: P4,344.00 under
O.R. No. 1772201-H; P4,344.00 under O.R. No. 007830; and P86.00; based on the one
numerical figure appearing in the complaint as P2,272,193.10 for alleged "loan take out
proceeds" which the other defendant NHMFC allegedly failed to remit to ODECOR. The rest
appears to be an unspecified amount of damages which the trial court could not assess (Rollo, p.
71).
On March 4, 1989, HIGC filed a motion to dismiss on the ground that the court did not acquire
jurisdiction due to non-payment of the proper docket fees, citing the case of Manchester
Development Corporation vs. Court of Appeals (149 SCRA 56 [1987]). NHMFC, on the other
hand, filed its answer while CCPSTA was declared in default (Petition, Rollo, pp. 6-7). The court,
in its order dated June 1, 1989 denied the motion to dismiss and directed the Clerk of Court in
this wise:
... to issue the Certificate of Reassessment of the proper docket fee to include in
the Certificate the deficiency, if any. In case the payment is insufficient, plaintiff
must pay the deficiency within Five (5) days from receipt of the certificate of
reassessment to the Clerk of Court.
In the event that the judgment awards claim not specified in the complaint or such
claim left for determination by the court as proved at the trial, the additional filing
fee therefor shall constitute a lien in the judgment and the Clerk of Court or her
duly authorized deputy will enforce said liens and after assessment to collect the
additional fee.
xxx xxx xxx
SO ORDERED. (Annex "D" of the Petition, Rollo, p. 37).
Pursuant to the above order, the Clerk of Court filed an Ex-Parte motion dated June 6, 1989
(Rollo, pp. 38-39) stating that she has already issued the required certificate of reassessment but
the deficiency could not be included therein because the claim for attorney's fee manifested in
the body of the complaint was not reiterated in the prayer. Hence, the docket fees paid by

ODECOR did not include the demand for attorney's fees. The Clerk of Court, therefore, moved
that the complaint be amended accordingly. This prompted HIGC to move for a reconsideration
of the aforecited order of the court, praying that the complaint be dismissed or in the alternative,
to amend ODECOR's complaint to reflect the specific amount of damages both in the body as
well as in the prayer (Rollo, p. 43). But the same was denied in the subsequent order dated June
29, 1989. ODECOR thereafter filed its amended complaint dated July 6, 1989 containing
substantially all its allegations in the first complaint except that it specified its claim for attorney's
fees as equivalent to 25% of the total monthly liability and other expenses of litigation and costs
of the suit. Such amended complaint was admitted by the court on July 11, 1989. HIGC then filed
its answer thereto, but after the issues had been joined and the case had been set for pre-trial
conference, HIGC filed a petition for certiorari with the appellate court questioning the jurisdiction
of the lower court over the case on the same ground of failure to pay the proper docket fees. The
appellate court, in turn, restrained the lower court from taking further cognizance of the case and
on July 31, 1990, rendered its decision, the dispositive portion of which reads:
In view of the foregoing, We find and so hold that the respondent court did not
acquire jurisdiction over Civil Case No. 3020-V-89. The complaint in the said Civil
Case is ordered expunged from the record and the orders dated June 1 and 29,
1989 having been issued without jurisdiction, are declared null and void.
SO ORDERED. (Decision of the Court of Appeals, Rollo, p. 19).
ODECOR moved for a reconsideration of this decision but later withdrew the same and filed
instead the present petition.
The issue now at hand is whether the court acquires jurisdiction over a case even if the
complaint does not specify the amount of damages.
The petition is devoid of merit.
ODECOR's first complaint as well as its amended complaint vaguely asserted its claim for actual,
consequential, exemplary and moral damages, "the amount of which will be proved at the trial"
and the demand for attorney's fees as "equivalent to 25% of the total monetary liability and other
expenses of litigation and costs of this suit". Such terms are certainly not definite enough to
support the computation of the proper docket fees. While it is not required that the exact amounts
be stated, the plaintiff must ascertain, in his estimation, the sums he wants and the sums
required to determine the amount of such docket and other fees. Thus, it is evident that the
complaint did not state enough facts and sums to enable the Clerk of Court of the lower court to
compute the docket fees payable and left to the judge "mere guesswork" as to these amounts,
which is fatal. (Spouses Belen Gregorio v. The Honorable Judge Zosimo Z. Angeles, et al., G.R.
No. 85847, December 21, 1989, 180 SCRA 490). The intent to defraud the government appears
obvious, not only in the filing of the original complaint but also in the filing of the amended
complaint.
In any event, the requirement in Circular No. 7 that complaints, petitions, answers, and similar
pleadings should specify the amount of damages being prayed for not only in the body of the
pleadings but also in the prayer has not been altered (Tacay v. RTC of Tagum, Davao del Norte,
180 SCRA 443-444 [1989]).
What has been revised is the rule that subsequent amendment of the complaint or similar
pleading will not thereby vest jurisdiction on the Court, much less the payment of the docket fee
based on the amount sought in the amended pleading. The trial court now is authorized to allow
payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or
reglementary period (Ibid).

Thus, where a complaint purely for money or damages did not specify the amounts being
claimed, the Court may allow amendment of the pleading and payment of the proper fees or
where the pleading specified the amount of every claim but the fees paid are insufficient, the
defect may be cured and the Court may take cognizance of the action by payment of the proper
fees provided that in both cases, prescription has not set in the meantime. Similarly where the
action involves real property and a related claim for damages and the prescribed fees for an
action involving real property have been paid but the amounts of the unrelated damages are
unspecified, the Court undeniably has jurisdiction over the action on the real property but may
not have acquired jurisdiction over the accompanying claim for damages. Accordingly, the Court
may expunge the claims for damages or allow the amendment of the complaint so as to allege
the precise amount of each item of damages within the prescriptive period (Ibid.).
Coming back to the case at bar, it is readily evident that none of the foregoing requisites was
complied with.
Petitioners invoke the liberal interpretation of the rules as enumerated by this Court in the case
of Sun Insurance Office, Ltd. (SIOL) v. Asuncion 170 SCRA 284-285 [1989] which is not,
however, applicable as in said case, private respondent amended his complaint several times,
stating the amount claimed and paying each time the required docket fees. While it is true that
eventually the docket fees paid are still insufficient, he nevertheless manifested his willingness to
pay such additional docket fee as may be ordered.
The same is not true in the case at bar where in line with the foregoing pronouncements, the trial
court allowed the amendment of the complaint for the determination of the fees, but such
amendment did not, however, in anyway help in specifying the amount of damages claimed. At
most, the demand for attorney's fees was stated as 25% of the total monetary liability, another
unspecified amount which cannot be the basis of computation.
As to awards of claims not specified in the pleadings this Court had already clarified that they
refer only to damages arising after the filing of the complaint or similar pleading, to which the
additional filing fee 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.
The exception contemplated as to claims not specified or to claims although specified are left for
the 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 (Tacay v. RTC of Tagum, supra; Ayala Corporation, et al. v.
The Honorable Job Maddayag, et al., G.R. No. 88421, 181 SCRA 687 [1990]) (Emphasis
supplied).
PREMISES CONSIDERED, the petition is hereby DISMISSED and the decision appealed from is
AFFIRMED.
SO ORDERED.
Padilla and Regalado, JJ., concur.
Melencio-Herrera (Chairperson), is on leave.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
A.M. No. 12-2-03-0

March 13, 2012

RE: IN THE MATTER OF CLARIFICATION OF EXEMPTION FROM PAYMENT OF ALL

COURT AND SHERIFF'S FEES OF COOPERATIVES DULY REGISTERED IN ACCORDANCE
WITH REPUBLIC ACT NO. 9520 OTHERWISE KNOWN AS THE PHILIPPINE COOPERATIVE
CODE OF 2008,
PERPETUAL HELP COMMUNITY COOPERATIVE (PHCCI), Petitioner,
RESOLUTION
PEREZ, J.:
In a Petition1 dated 24 October 2011, Perpetual Help Community Cooperative (PHCCI), through
counsel, requests for the issuance of a court order to clarify and implement the exemption of
cooperatives from the payment of court and sheriffs fees pursuant to Republic Act No. 6938, as
amended by Republic Act No. 9520, otherwise known as the Philippine Cooperative Act of 2008.
PHCCI contends that as a cooperative it enjoys the exemption provided for under Section 6,
Article 61 of Republic Act No. 9520, which states:
(6) Cooperatives shall be exempt from the payment of all court and sheriffs fees payable to the
Philippine Government for and in connection with all actions brought under this Code, or where
such actions is brought by the Authority before the court, to enforce the payment of obligations
contracted in favor of the cooperative.
It claims that this was a reiteration of Section 62, paragraph 6 of Republic Act No. 6938, An Act to
Ordain a Cooperative Code of the Philippines,2 and was made basis for the Courts Resolution in
A.M. No. 03-4-01-0, as well as of Office of the Court Administrator (OCA) Circular No. 44-2007. 3
It avers that despite the exemptions granted by the aforesaid laws and issuances, PHCCI had
been continuously assessed and required to pay legal and other fees whenever it files cases in
court.
PHCCI reports that it filed with the Office of the Executive Judge of the Municipal Trial Court in
Cities (MTCC), Dumaguete City, Negros Oriental, a Motion to implement the exemption of
cooperatives from the payment of court and sheriffs fees in cases filed before the courts in his
jurisdiction, but the Executive Judge ruled that the matter is of national concern and should be
brought to the attention of the Supreme Court for it to come up with a straight policy and uniform
system of collection. In the meantime, the MTCC has continued the assessment of filing fees
against cooperatives.
Records reveal that on 21 September 2011, Executive Judge Antonio Estoconing (Executive
Judge Estoconing), MTCC, Dumaguete City, Negros Oriental, issued an Order treating the
motion filed by PHCCI as a mere consulta considering that no main action was filed in his court.
Executive Judge Estoconing submits that he had second thoughts in considering the exemption
in view of the guidelines laid down in the Rules. He reported that many cases filed by PHCCI are
small claims cases and under Section 8 of the Rule on Small Claims, the plaintiff is required to
pay docket fees and other related costs unless he is allowed to litigate the case as an indigent.
Hence, this Petition.
Before this Court is the issue on whether cooperatives are exempt from the payment of court and
sheriffs fees. The fees referred to are those provided for under Rule 141 (Legal Fees) of the
Rules of Court.
The term "all court fees" under Section 6, Article 61 of Republic Act No. 9520 refers to the totality
of "legal fees" imposed under Rule 141 of the Rules of Court as an incident of instituting an

action in court.4 These fees include filing or docket fees, appeal fees, fees for issuance of
provisional remedies, mediation fees, sheriffs fees, stenographers fees and commissioners
fees.5
With regard to the term "sheriffs fees," this Court, in an extended minute Resolution dated 1
September 2009, held that the exemptions granted to cooperatives under Section 2, paragraph 6
of Republic Act No. 6938; Section 6, Article 61 of Republic Act No. 9520; and OCA Circular No.
44-2007 clearly do not cover the amount required "to defray the actual travel expenses of the
sheriff, process server or other court-authorized person in the service of summons, subpoena
and other court processes issued relative to the trial of the case," 6 which are neither considered
as court and sheriffs fees nor are amounts payable to the Philippine Government. 7
In fine, the 1 September 2009 Resolution exempted the cooperatives from court fees but not
from sheriffs fees/expenses.
On 11 February 2010, however, the Supreme Court En Banc issued a Resolution in A.M. No. 082-01-0,8 which denied the petition of the Government Service Insurance System (GSIS) for
recognition of its exemption from payment of legal fees imposed under Section 22 of Rule 141 of
the Rules of Court. In the GSIS case, the Court citing Echegaray v. Secretary of
Justice,9 stressed that the 1987 Constitution molded an even stronger and more independent
judiciary; took away the power of Congress to repeal, alter, or supplement rules concerning
pleading, practice and procedure; and held that the power to promulgate these Rules is no
longer shared by the Court with Congress, more so, with the Executive, 10 thus:
Since the payment of legal fees is a vital component of the rules promulgated by this Court
concerning pleading, practice and procedure, it cannot be validly annulled, changed or modified
by Congress. As one of the safeguards of this Courts institutional independence, the power to
promulgate rules of pleading, practice and procedure is now the Courts exclusive domain. That
power is no longer shared by this Court with Congress, much less with the Executive. 11
xxxx
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 R.A. 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 Courts
independence - fiscal autonomy.12Fiscal autonomy recognizes the power and authority of the
Court to levy, assess and collect fees,13 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).14 The laws which established the JDF and SAJF15 expressly
declare the identical purpose of these funds to guarantee the independence of the Judiciary as
mandated by the Constitution and public policy.16 Legal fees therefore do not only constitute a
vital source of the Courts financial resources but also comprise an essential element of the
Courts 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 situation is constitutionally infirm for it impairs
the Courts guaranteed fiscal autonomy and erodes its independence. 17
In a decision dated 26 February 2010 in Baguio Market Vendors Multi-Purpose Cooperative
(BAMARVEMPCO) v. Cabato-Cortes,18 this Court reiterated its ruling in the GSIS case when it
denied the petition of the cooperative to be exempted from the payment of legal fees under

Section 7(c) of Rule 141 of the Rules of Court relative to fees in petitions for extra-judicial
foreclosure.
On 10 March 2010, relying again on the GSIS ruling, the Court En Banc issued a resolution
clarifying that the National Power Corporation is not exempt from the payment of legal fees. 19
With the foregoing categorical pronouncements of the Supreme Court, it is evident that the
exemption of cooperatives from payment of court and sheriffs fees no longer stands.
Cooperatives can no longer invoke Republic Act No. 6938, as amended by Republic Act No.
9520, as basis for exemption from the payment of legal fees.
WHEREFORE, in the light of the foregoing premises, the petition of PHCCI requesting for this
Court to issue an order clarifying and implementing the exemption of cooperatives from the
payment of court and sheriffs fees is hereby DENIED.
1wphi1

The Office of the Court Administrator is DIRECTED to issue a circular clarifying that cooperatives
are not exempt from the payment of the legal fees provided for under Rule 141 of the Rules of
Court.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 151898

March 14, 2012

RICARDO RIZAL, POTENCIANA RIZAL, SATURNINA RIZAL, ELENA RIZAL, and BENJAMIN
RIZAL,Petitioners,
vs.
LEONCIA NAREDO, ANASTACIO LIRIO, EDILBERTO CANTAVIEJA, GLORIA CANTAVIEJA,
CELSO CANTAVIEJA, and the HEIRS of MELANIE CANTAVIEJA, Respondents.
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Decision 1 of the Court
of Appeals (CA) dated July 13, 2001 in CA-G.R. CV No. 26109, affirming the decision of the
Regional Trial Court (RTC), Branch 36, Calamba, Laguna which dismissed the
Complaint,2 docketed as Civil Case No. 1153-87-C3 for "partition, recovery of shares with
damages" of Lot No. 252 on res judicata.
Factual Antecedents
Herein petitioners Ricardo, Potenciana, Elena, Saturnina and Benjamin, all surnamed Rizal,
commenced Civil Case No. 7836 against Matias Naredo (Matias), Valentin Naredo (Valentin) and
Juana de Leon (Juana) before the then Court of First Instance (CFI) of Laguna involving the
accretion of two (2) hectares of land to Lot No. 454 of the Calamba Estate. In a decision
rendered on May 22, 1947, the CFI ruled in favor of the petitioners. The CFI awarded the
ownership of the two-hectare accretion to the petitioners and ordered the defendants therein to
vacate the said land and to pay P500.00 a year from 1943 as reasonable rent for their
occupancy thereof. Both the CA and the Supreme Court upheld the decision.

To satisfy the money judgment in Civil Case No. 7836, the provincial sheriff of Laguna levied
upon Lots Nos. 252 and 269 of the Calamba Estate, together with the house erected on Lot No.
252. This Lot No. 252, which is the subject of the controversy, was registered under Transfer
Certificate of Title (TCT) No. RT-488 (RT-3377 No. 12206) in the name of the "Legal Heirs of
Gervacia Cantillano," of Parian, Calamba, Laguna. Several third-party claims were filed, to wit:
(a) by Leoncia Naredo (Leoncia) and Marcela Naredo (Marcela), who are also heirs of Gervacia
Cantillano over Lot No. 252; (b) by Pedro Cantavieja, husband of Marcela over Lot No. 269; and
(c) by Teodoro Armesto over the house of mixed materials standing on Lot No. 252. After the
petitioners posted the required bond, the provincial sheriff proceeded with the auction sale on
April 7, 1951. The petitioners were declared the highest bidders. A final deed of sale was issued
to them on April 15, 1952.
On May 9, 1955, Marcela, Leoncia, Matias, Valentin, and Juana instituted Civil Case No. 9908
before the CFI Branch 1, Laguna, questioning the validity of the execution sale of Lots Nos. 252
and 269 and the house of mixed materials on Lot No. 252. They claimed that these properties
were exempt from execution.
On December 8, 1955, the CFI declared valid the execution sale of Lots Nos. 252 and 269 of the
Calamba Estate in favor of the petitioners, with a qualification that the petitioners only acquired
whatever rights, title or interests Matias, Valentin and Juana had in Lot No. 252. The sale of the
house of mixed materials in Lot No. 252 was set aside considering that a waiver was executed
by the petitioners in favor of Juana. Although the CFI ordered that the petitioners be placed in
possession of Lots Nos. 252 and 269 and Matias and Valentin be ejected therefrom, it did not
evict Marcela and Leoncia from Lot No. 252 since they were not parties to Civil Case No. 7836. 4
After the aforesaid judgment in Civil Case No. 9908, the petitioners filed Civil Case No. 36-C
against Marcela and Leoncia for partition, accounting and recovery of possession of Lot No. 252.
The parties then entered into a Compromise Agreement whereby the parties acknowledged that
they owned Lot No. 252 in common, with 3/5 thereof as the interest of the petitioners and the
other 2/5 belonging to therein defendants Marcela and Leoncia. Said Compromise Agreement
was approved by the CFI Branch VI, Laguna, in an Order dated December 1, 1971. 5 The
pertinent portions of the agreement read as follows:
5. That the plaintiffs (herein petitioners) and the defendants (herein respondents) agree
that said parcel of land (Lot 252) embraced in Transfer Certificate of Title 12206, and
registered in the names of the Legal Heirs of Gervacia Cantillano, is now owned in
common and in undivided shares of TWO-FIFTHS (2/5) for the defendants and THREEFIFTHS (3/5) for the plaintiffs;
6. That the plaintiffs and the defendants agree that the subject parcel of land be actually
partitioned as they have so caused the survey and partition of the same per the hereto
attached copy of the pertinent subdivision survey plan, marked as Annex "A" hereof and
made integral part of this compromise agreement;
7. That the plaintiffs and the defendants do hereby express their unqualified conformity to
the said partition and they hereby accept to their full and entire satisfaction their
respective determined shares in the subject parcel of land, and they agree to have their
respective determined portions, Two-Fifths (2/5) for defendants and Three-Fifths (3/5) for
plaintiffs, to be covered by independent and separate certificates of title in their
respective names.
8. That the plaintiffs agree to shoulder all the expenses incurred in the partition and to
pay all expenses and fees which may be entailed in the issuance of the independent
certificates of title in favor of the respective parties by the proper Registry of Deeds; 6

Ten years after or on August 11, 1981, Marcela and Leoncia, assisted by their husbands,
instituted Civil Case No. 299-83-C assailing the Compromise Agreement. They claimed that said
agreement was a forgery and that their lawyer was not duly authorized for the purpose. In an
Order dated July 6, 1984, the trial court dismissed the case without prejudice to the plaintiffs
failure to prosecute.
Thereafter, on September 26, 1984, Marcela and Leoncia instituted Civil Case No. 792-84-C, for
enforcement of judgment, partition and segregation of shares with damages over Lot No. 252.
On July 6, 1985, the trial court dismissed the complaint on the ground of prescription. No appeal
was taken therefrom.
On September 21, 1987, the petitioners filed a Complaint before the RTC for the immediate
segregation, partition and recovery of shares and ownership of Lot No. 252, with damages. This
was docketed as Civil Case No. 1153-87-C. However, on April 3, 1990, on the basis of the
pleadings and exhibits, the court a quo dismissed the complaint because of res judicata. The trial
court stated thus:
"A perusal of this instant case and Civil Case No. 792-84-C, (Exh. 1) will readily show that
between these causes of actions, there are (a) identity of parties; (b) identity of subject matter;
and (c) identity of cause of action. As admitted by the parties, the judgment in Civil Case No.
792-84-C is now final and executory. While there may appear a difference in the forms of action,
the same is irrelevant for purposes of determining res judicata. It is a firmly established rule that
a different remedy sought or a diverse form of action does not prevent the estoppel of the former
adjudication.
x x x."7
Aggrieved, the petitioners appealed to the CA, docketed as CA-G.R. CV No. 26109.
Unfortunately, the original records of the case were misplaced. After earnest efforts were made
for the reconstitution of the records of the case, the parties agreed to have the case submitted for
decision based on the documents submitted.8
In the now assailed decision,9 the CA dismissed the appeal. The CA found that the appellants
brief neither contained the required page references to the records, as provided in Section 13 of
Rule 44 of the Rules of Court; nor was it specified, both in the prayer and in the body of the
complaint, the specific amounts of the petitioners claim for actual, moral, exemplary and
compensatory damages, as enunciated in Manchester Development Corporation v. Court of
Appeals.10
As to the substantive issues raised in the complaint, the CA ruled that the action for partition has
been barred by res judicata. It also held that the petitioners no longer had any cause of action for
partition because the co-ownership of the parties over Lot No. 252 had ceased to exist by the
Order of the CFI Branch VI, Laguna on December 1, 1971.
Issues
In the case at bar, the petitioners submit the following issues for this Courts consideration, to wit:
A.
THE CA ERRED IN DISMISSING THE APPEAL ON THE GROUND THAT THE
PETITIONERS' APPEAL BRIEF FAILED TO MAKE PAGE REFERENCES TO THE
RECORD.
B.

THE CA ERRED IN APPLYING THE RULING IN THE MANCHESTER CASE

REGARDING DOCKET FEES.
C.
THE CA ERRED IN DISMISSING THE APPEAL ON THE GROUND OF PRESCRIPTION
AND RES JUDICATA.
D.
THE RTC ERRED IN DISMISSING THE ENTIRE CASE.11
Ruling and Discussions
We find no merit in the petition.
Failure to observe the requirements under Section 13(a), Rule 44 of the 1997 Rules of Court and
to pay the correct docket fees is fatal to the appeal.
The petitioners argue that the CA erred in dismissing their appeal for their failure to indicate the
page references to the records of the case pursuant to Section 13(a), Rule 44 12 of the Rules of
Court. They invoke Section 6, Rule 1 of the 1997 Rules of Civil Procedure which states that
"technical rules shall be liberally construed in order to promote a just, speedy and inexpensive
disposition of every action and proceeding." They cite the case of Pacific Life Assurance
Corporation v. Sison,13 where it was held that an appeal should not be dismissed on mere
technicality.
It is settled that technical rules of procedure are mere tools designed to facilitate the attainment
of justice. Their strict and rigid application should be relaxed when they hinder rather than
promote substantial justice. Cases should as much as possible be resolved on the merits, and
not on mere technicalities. The failure of the petitioners' appeal brief to contain page references
to the records is a formal defect which may be considered as minor, if not negligible. 14
However, while this Court may be lenient in some instances on formal defects of pleadings filed
with the court, it could not close its eyes when a litigant continuously ignores technical rules, to
the point of wanton disregard of the rationale behind those rules. In fact, this Court has
consistently affirmed the importance of complying with the requirements in Section 13(a), Rule
4415 of the Rules of Court in many of its decisions, particularly in Mendoza v. United Coconut
Planters Bank, Inc.,16 where the Court explicitly stated that:
Rule 44 and 50 of the 1997 Rules of Civil Procedure are designed for the proper and prompt
disposition of cases before the Court of Appeals Rules of Procedure exist for a noble purpose,
and to disregard such rules in the guise of liberal construction would be to defeat such purpose.
The Court of Appeals noted in its Resolution denying petitioners motion for reconsideration that
despite ample opportunity, petitioners never attempted to file an amended appellants brief
correcting the deficiencies of their brief, but obstinately clung to their argument that their
Appellants Brief substantially complied with the rules. Such obstinacy is incongruous with their
plea for liberality in construing the rules on appeal.
De Liano v. Court of Appeals held:
"Some may argue that adherence to these formal requirements serves but a meaningless
purpose, that these may be ignored with little risk in the smug certainty that liberality in the
application of procedural rules can always be relied upon to remedy the infirmities. This misses
the point. We are not martinets; in appropriate instances, we are prepared to listen to reason,

and to give relief as the circumstances may warrant. However, when the error relates to
something so elementary as to be inexcusable, our discretion becomes nothing more than an
exercise in frustration. It comes as an unpleasant shock to us that the contents of an appellants
brief should still be raised as an issue now. There is nothing arcane or novel about the provisions
of Section 13, Rule 44. The rule governing the contents of appellants briefs has existed since the
old Rules of Court, which took effect on July 1, 1940, as well as the Revised Rules of Court,
which took effect on January 1, 1964, until they were superseded by the present 1997 Rules of
Civil Procedure. The provisions were substantially preserved, with few revisions." 17
Moreover, the petitioners also failed to pay the correct docket fees; in which case, jurisdiction did
not vest in the trial court. In Siapno v. Manalo,18 this Court has made it abundantly clear that any
complaint, petition, answer and other similar pleading, which does not specify both in its body
and prayer the amount of damages being claimed, should not be accepted or admitted, or should
be expunged from the records, as may be the case. 19
The petitioners alleged in their complaint in Civil Case No. 1153-87-C20 that they suffered actual
loss from the time they had been deprived of their share of 3/5 on Lot No. 252 by the
respondents, as well as moral and exemplary damages, attorney's fees and litigation expenses.
However, the only claims they specified in their prayer were for the attorney's fees in the amount
of P30,000.00 and P500.00 for every court appearance of the counsel.
In Siapno,21 the complaint alleged in its body the aggregate sum of P4,500,000 in moral and
exemplary damages and attorney's fees, but the prayer portion did not mention these claims, nor
did it even pray for the payment of damages. This Court held that such a complaint should be
dismissed outright; or if already admitted, should be expunged from the records. The Court
explained that the rule requiring the amount of damages claimed to be specified not only in the
body of the pleading but also in its prayer portion was intended to put an end to the then
prevailing practice of lawyers where the damages prayed for were recited only in the body of the
complaint, but not in the prayer, in order to evade payment of the correct filing fees. As held by
the Court in Manchester:22
To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar
pleadings should specify the amount of damages being prayed for not only in the body of the
pleading but also in the prayer, and said damages shall be considered in the assessment of the
filing fees in any case. Any pleading that fails to comply with this requirement shall not be
accepted nor admitted, or shall otherwise be expunged from the record. 23
In Sun Insurance Office Ltd. v. Judge Asuncion,24 the Court laid down the following rules as
regards the payment of filing fees:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the
payment of the prescribed docket fee that vests a trial court with jurisdiction over the
subject matter or nature of the action. Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow payment of the fee
within a reasonable time but in no case beyond the applicable prescriptive or
reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. The court may also allow payment of said fee within a reasonable time
but also in no case beyond its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate
pleading and payment of the prescribed filing fee but, subsequently, the judgment awards
a claim not specified in the pleading, or if specified the same has been left for
determination by the court, the additional filing fee therefor shall constitute a lien on the

judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy
to enforce said lien and assess and collect the additional fee. 25
It cannot be gainsaid from the above guidelines that, with the exception of pauper
litigants,26 without the payment of the correct docket or filing fees within the reglementary period,
jurisdiction over the subject-matter or nature of the action will not vest in the trial court. In fact, a
pauper litigant may still have to pay the docket fees later, by way of a lien on the monetary or
property judgment that may accrue to him. Clearly, the flexibility or liberality of the rules sought
by the petitioners cannot apply in the instant case.
Action is dismissible for res judicata and lack of cause of action.
The petitioners vehemently deny that the partition of Lot No. 252 has already been settled in Civil
Case No. 36-C. They insist that the mere determination of the proportionate shares of the
parties, as well as their respective portions of the aforesaid lot in the Compromise Agreement is
not enough. They allege that Lot No. 252 is still covered by the old title, TCT No. 12206, in the
name of the heirs of Gervacia Cantillano. The finality of the decision in Civil Case No. 36-C did
not cause Lot No. 252 to divide itself in accordance with the subdivision plan. They assert that
there must be an actual and exclusive possession of their respective portions in the plan and
titles issued to each of them accordingly.27
The petitioners contentions are untenable.
Article 484 of the New Civil Code provides that there is co-ownership whenever the ownership of
an undivided thing or right belongs to different persons. Thus, on the one hand, a co-owner of an
undivided parcel of land is an owner of the whole, and over the whole he exercises the right of
dominion, but he is at the same time the owner of a portion which is truly abstract. On the other
hand, there is no co-ownership when the different portions owned by different people are already
concretely determined and separately identifiable, even if not yet technically described. 28
Pursuant to Article 494 of the Civil Code, no co-owner is obliged to remain in the co-ownership,
and his proper remedy is an action for partition under Rule 69 of the Rules of Court, which he
may bring at anytime in so far as his share is concerned. Article 1079 of the Civil Code defines
partition as the separation, division and assignment of a thing held in common among those to
whom it may belong. It has been held that the fact that the agreement of partition lacks the
technical description of the parties' respective portions or that the subject property was then still
embraced by the same certificate of title could not legally prevent a partition, where the different
portions allotted to each were determined and became separately identifiable. 29
The partition of Lot No. 252 was the result of the approved Compromise Agreement in Civil Case
No. 36-C, which was immediately final and executory. Absent any showing that said Compromise
Agreement was vitiated by fraud, mistake or duress, the court cannot set aside a judgment based
on compromise.30 It is axiomatic that a compromise agreement once approved by the court
settles the rights of the parties and has the force of res judicata. It cannot be disturbed except on
the ground of vice of consent or forgery.31
Of equal significance is the fact that the compromise judgment in Civil Case No. 36-C settled as
well the question of which specific portions of Lot No. 252 accrued to the parties separately as
their proportionate shares therein. Through their subdivision survey plan, marked as Annex
"A"32 of the Compromise Agreement and made an integral part thereof, the parties segregated
and separately assigned to themselves distinct portions of Lot No. 252. The partition was
immediately executory,33 having been accomplished and completed on December 1, 1971 when
judgment was rendered approving the same. The CA was correct when it stated that no coownership exist when the different portions owned by different people are already concretely
determined and separately identifiable, even if not yet technically described. 34

It bears to note that the parties even acknowledged in Paragraph 7 of the Compromise
Agreement that they had accepted their "respective determined shares in the subject parcel of
land, and they agree to have their respective determined portions, Two-Fifths (2/5) for
defendants and Three-Fifths (3/5) for plaintiffs, to be covered by independent and separate
certificates of title in their respective names."35
The petitioners slept on their rights under the partition agreement.
To recall, the petitioners obtained part ownership of Lot No. 252 as the highest bidders at the
execution sale of Lots Nos. 252 and 269 in Civil Case No. 7836, whereas respondents Marcela
and Leoncia as heirs of Gervacia Cantillano retained their 2/5 interest in Lot No. 252 since they
were not impleaded in the said case. As buyers of land, the petitioners had the right to pursue
their share therein all the way to the issuance of their separate title and recovery of possession of
their portion, beginning with the filing of Civil Case No. 36-C.
Concerning the registration with the Registry of Deeds of a judgment of partition of land, Section
81 of Presidential Decree (P.D.) No. 1529 provides that after the entry of the final judgment of
partition, a copy of such final judgment shall be filed and registered. If the land is set off to the
owner in severalty, each owner shall be entitled to have his certificate entered showing the share
set off to him in severalty, and to receive an owner's duplicate thereof.36
Accordingly, Paragraph 8 of the Compromise Agreement provided that the petitioners shall
"shoulder all the expenses incurred in the partition and to pay all expenses and fees which may
be incurred in the issuance of the independent certificates of title in favor of the respective parties
by the proper Registry of Deeds."37Unfortunately, the records do not disclose that the petitioners
neither filed and registered with the Register of Deeds a certified copy of the final judgment of
partition in Civil Case No. 36-C, nor did they perform or cause to be performed all further acts
requisite for the cancellation of TCT No. 12206 and the issuance of the parties' separate titles
over their assigned portions in Lot No. 252. The only entry in TCT No. 12206, 38 prior to the
recording on June 13, 1979 of the issuance to the petitioners of a second duplicate copy of TCT
No. 12206, is the annotation in April 1952 of the execution sale of Lot No. 252 to the petitioners.
Section 6, Rule 39 of the Rules of Court provides:
Sec. 6. Execution by motion or by independent action. A final and executory judgment or order
may be executed on motion within five (5) years from the date of its entry. After the lapse of such
time, and before it is barred by the statute of limitations, a judgment may be enforced by action.
The revived judgment may also be enforced by motion within five (5) years from the date of its
entry and thereafter by action before it is barred by the statute of limitations.
A final and executory judgment may be executed by the prevailing party as a matter of right by
mere motion within five (5) years from the entry of judgment, failing which the judgment is
reduced to a mere right of action which must be enforced by the institution of a complaint in a
regular court within ten (10) years from finality of the judgment. 39 In the instant case, there is no
showing that after the judgment in Civil Case No. 36-C, the petitioners filed a motion to execute
the same during the first five (5) years after its finality, or within the succeeding five (5) years, by
a civil action to revive the judgment, before it would have been barred by the statute of
limitations.40 An action for revival of judgment is governed by Articles 1144(3) and 1152 of the
Civil Code, and Section 6, Rule 39 of the Rules of Court. Articles 1144(3) and 1152 of the Code
state:
Art. 1144. The following actions must be brought within ten years from the time the right of action
accrues:
xxxx

(3) Upon a judgment

Art. 1152. The period for prescription of actions to demand the fulfillment of obligations declared
by a judgment commences from the time the judgment became final.
When the petitioners filed Civil Case No. 1153-87-C on September 21, 1987, it was not
purportedly to revive the judgment in Civil Case No. 36-C. It was apparently an action for
"Partition, Recovery of Shares with Damages," but nonetheless citing as basis of the
Compromise Agreement in Civil Case No. 36-C. The petitioners wanted to accomplish through
an entirely new action what was already adjudicated in Civil Case No. 36-C, rendered 17 years
earlier, but which they inexplicably failed to enforce. The petitioners do not allege that they tried
to execute the compromise judgment in Civil Case No. 36-C either by motion or by action to
revive judgment within the prescriptive period. Absent any proof that the respondents resorted to
dilatory schemes and maneuvers to prevent the execution of the Compromise Agreement, 41 and
contrary to the petitioners gratuitous assertion in paragraph VIII of their complaint in Civil Case
No. 1153-87-C, we fail to see how the mere filing by the respondents of Civil Case No. 299-83-C
on August 11, 1981 could have in any way prevented or impeded the petitioners from executing
the judgment in Civil Case No. 36-C.
We thus sustain the respondents' affirmative defenses of res judicata and lack of cause of action,
and uphold the appellate and trial courts' rejection of the petitioners' ostensible attempt to revive
the already stale judgment in Civil Case No. 36-C through an entirely new action for partition.
The Court agrees with the CA when it explained:
a. The judgment that effected res judicata is not so much the dismissal of the case due to
prescription in Civil Case No. 792-84-C. What more appropriately leads to res judicata to
this case is the final Compromise Judgment in Civil Case No. 36-C. All the elements of
res judicata are present, a final decision on the merits, between the same parties, on the
same subject matter and cause of action. x x x.
b. The present complaint states no cause of action. There is no doubt that appellants
prayer for partition is anchored on their supposed co-ownership of Lot No. 252 plus the
added fact that it is still covered by Transfer Certificate of Title No. 12206. However,
appellants must have lost track of the fact that at the time the present action was
commenced, partition was no longer an available remedy in their favor simply because
their pretended co-ownership had already ceased to exist. Their 3/5 shares had already
been segregated and determined in the subdivision plan mentioned in the Compromise
Judgment and have, in fact, accepted their share to their satisfaction. In De la Cruz vs.
Cruz, 32 SCRA 307 [1970], the Supreme Court, through Justice J.B.L. Reyes, said that
co-ownership no longer exists over the whole parcel of land where the portions owned by
the parties are already determined and identifiable. That said respective portions are not
technically described, or that said portions are still embraced in one and the same
certificate of title, does not make said portions less determinable, or identifiable, or
distinguishable, one from the other, nor that dominion over its portions rest exclusively in
their respective owners.42
Nonetheless, it must be made clear that nothing in this decision shall be understood to mean that
the petitioners have lost their title or interest in the subject property. The final ("definite") deed of
sale executed by the sheriff in favor of the petitioners pursuant to the execution sale in Civil Case
No. 7836, which was duly registered in TCT No. 12206 on April 15, 1952, constituted an effective
conveyance to the petitioners of the property sold therein and entitled them to possession
thereof,43 although in the subsequent decision in 1955 in Civil Case No. 9908, the respondents
2/5 interest in the property was recognized, thereby amending the extent of the petitioners title.
The said judgment has not been registered, and neither was the compromise judgment of
partition in Civil Case No. 36-C dated December 1, 1971, which established the parties
respective specific portions in Lot No. 252. Thus, as a prerequisite to the issuance of a new title

in the name of the petitioners over their 3/5 allocated portion, we believe that Section 81 44 of P.D.
No. 1529 does not bar the belated registration of the compromise judgment in Civil Case No. 36C.
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of
Appeals dated July 13, 2001 in CA-G.R. CV No. 26109 is AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 89070 May 18, 1992

BENGUET ELECTRlC COOPERATIVE, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PETER COSALAN and BOARD OF
DIRECTORS OF BENGUET ELECTRIC COOPERATIVE, INC., * respondents.
Raymundo W. Celino for respondent Peter Cosalan.
Reenan Orate for respondent Board of Directors of BENECO.

FELICIANO, J.:
Private respondent Peter Cosalan was the General Manager of Petitioner Benguet Electric
Cooperative, Inc. ("Beneco"), having been elected as such by the Board of Directors of Beneco,
with the approval of the National Electrification Administrator, Mr. Pedro Dumol, effective 16
October 1982.
On 3 November 1982, respondent Cosalan received Audit Memorandum No. 1 issued by the
Commission on Audit ("COA"). This Memorandum noted that cash advances received by officers
and employees of petitioner Beneco in the amount of P129,618.48 had been virtually written off
in the books of Beneco. In the Audit Memorandum, the COA directed petitioner Beneco to secure
the approval of the National Electrification Administration ("NEA") before writing off or condoning
those cash advances, and recommended the adoption of remedial measures.
On 12 November 1982, COA issued another Memorandum Audit Memorandum No. 2
addressed to respondent Peter Cosalan, inviting attention to the fact that the audit of per
diems and allowances received by officials and members of the Board of Directors of Beneco
showed substantial inconsistencies with the directives of the NEA. The Audit Memorandum once
again directed the taking of immediate action in conformity with existing NEA regulations.
On 19 May 1983, petitioner Beneco received the COA Audit Report on the financial status and
operations of Beneco for the eight (8) month period ended 30 September 1982. This Audit Report
noted and enumerated irregularities in the utilization of funds amounting to P37 Million released
by NEA to Beneco, and recommended that appropriate remedial action be taken.

Having been made aware of the serious financial condition of Beneco and what appeared to be
mismanagement, respondent Cosalan initiated implementation of the remedial measures
recommended by the COA. The respondent members of the Board of Beneco reacted by
adopting a series of resolutions during the period from 23 June to 24 July 1984. These Board
Resolutions abolished the housing allowance of respondent Cosalan; reduced his salary and his
representation and commutable allowances; directed him to hold in abeyance all pending
personnel disciplinary actions; and struck his name out as a principal signatory to transactions of
petitioner Beneco.
During the period from 28 July to 25 September 1984, the respondent Beneco Board members
adopted another series of resolutions which resulted in the ouster of respondent Cosalan as
General Manager of Beneco and his exclusion from performance of his regular duties as such,
as well as the withholding of his salary and allowances. These resolutions were as follows:
1. Resolution No. 91-4 dated 28 July 1984:
. . . that the services of Peter M. Cosalan as General Manager of
BENECO is terminated upon approval of the National
Electrification Administration;
2. Resolution No. 151-84 dated September 15, 1984;
. . . that Peter M. Cosalan is hereby suspended from his position
as General Manager of the Benguet Electric Cooperative, Inc.
(BENECO) effective as of the start of the office hours on
September 24, 1984, until a final decision has been reached by
the NEA on his dismissal;
. . . that GM Cosalan's suspension from office shall remain in full
force and effect until such suspension is sooner lifted, revoked or
rescinded by the Board of Directors; that all monies due him are
withheld until cleared;
3. Resolution No. 176-84 dated September 25, 1984;
. . . that Resolution No. 151-84, dated September 15, 1984 stands
as preventive suspension for GM Peter M. Cosalan. 1
Respondent Cosalan nevertheless continued to work as General Manager of Beneco, in the
belief that he could be suspended or removed only by duly authorized officials of NEA, in
accordance with provisions of P.D. No, 269, as amended by P.D. No. 1645 (the statute creating
the NEA, providing for its capitalization, powers and functions and organization), the loan
agreement between NEA and petitioner Beneco 2 and the NEA Memorandum of 2 July
1980. 3 Accordingly, on 5 October and 10 November 1984, respondent Cosalan requested petitioner
Beneco to release the compensation due him. Beneco, acting through respondent Board members,
denied the written request of respondent Cosalan.
Respondent Cosalan then filed a complaint with the National Labor Relations Commission
("NLRC") on 5 December 1984 against respondent members of the Beneco Board, challenging
the legality of the Board resolutions which ordered his suspension and termination from the
service and demanding payment of his salaries and allowances. On 18 February 1985, Cosalan
amended his complaint to implead petitioner Beneco and respondent Board members, the latter
in their respective dual capacities as Directors and as private individuals.
In the course of the proceedings before the Labor Arbiter, Cosalan filed a motion for
reinstatement which, although opposed by petitioner Beneco, was granted on 23 October 1987

by Labor Arbiter Amado T. Adquilen. Petitioner Beneco complied with the Labor Arbiter's order on
28 October 1987 through Resolution No. 10-90.
On 5 April 1988, the Labor Arbiter rendered a decision (a) confirming Cosalan's reinstatement;
(b) ordering payment to Cosalan of his backwages and allowances by petitioner Beneco and
respondent Board members, jointly and severally, for a period of three (3) years without
deduction or qualification, amounting to P344,000.00; and (3) ordering the individual Board
members to pay, jointly and severally, to Cosalan moral damages of P50,000.00 plus attorney's
fees of ten percent (10%) of the wages and allowances awarded him.
Respondent Board members appealed to the NLRC, and there filed a Memorandum on Appeal.
Petitioner Beneco did not appeal, but moved to dismiss the appeal filed by respondent Board
members and for execution of judgment. By this time, petitioner Beneco had a new set of
directors.
In a decision dated 21 November 1988, public respondent NLRC modified the award rendered
by the Labor Arbiter by declaring that petitioner Beneco alone, and not respondent Board
members, was liable for respondent Cosalan's backwages and allowances, and by ruling that
there was no legal basis for the award of moral damages and attorney's fees made by the Labor
Arbiter.
Beneco, through its new set of directors, moved for reconsideration of the NLRC decision, but
without success.
In the present Petition for Certiorari, Beneco's principal contentions are two-fold: first, that the
NLRC had acted with grave abuse of discretion in accepting and giving due course to
respondent Board members' appeal although such appeal had been filed out of time; and
second, that the NLRC had acted with grave abuse of discretion amounting to lack of jurisdiction
in holding petitioner alone liable for payment of the backwages and allowances due to Cosalan
and releasing respondent Board members from liability therefor.
We consider that petitioner's first contention is meritorious. There is no dispute about the fact that
the respondent Beneco Board members received the decision of the labor Arbiter on 21 April
1988. Accordingly, and because 1 May 1988 was a legal holiday, they had only up to 2 May 1988
within which to perfect their appeal by filing their memorandum on appeal. It is also not disputed
that the respondent Board members' memorandum on appeal was posted by registered mail on
3 May 1988 and received by the NLRC the following day. 4 Clearly, the memorandum on appeal
was filed out of time.
Respondent Board members, however, insist that their Memorandum on Appeal was filed on time
because it was delivered for mailing on 1 May 1988 to the Garcia Communications Company, a
licensed private letter carrier. The Board members in effect contend that the date of delivery to
Garcia Communications was the date of filing of their appeal memorandum.
Respondent Board member's contention runs counter to the established rule that transmission
through a private carrier or letter-forwarder instead of the Philippine Post Office is not a
recognized mode of filing pleadings.5 The established rule is that the date of delivery of pleadings to
a private letter-forwarding agency is not to be considered as the date of filing thereof in court, and that
in such cases, the date of actual receipt by the court, and not the date of delivery to the private carrier,
is deemed the date of filing of that pleading. 6
There, was, therefore, no reason grounded upon substantial justice and the prevention of serious
miscarriage of justice that might have justified the NLRC in disregarding the ten-day
reglementary period for perfection of an appeal by the respondent Board members. Accordingly,
the applicable rule was that the ten-day reglementary period to perfect an appeal is mandatory
and jurisdictional in nature, that failure to file an appeal within the reglementary period renders

the assailed decision final and executory and no longer subject to review. 7 The respondent Board
members had thus lost their right to appeal from the decision of the Labor Arbiter and the NLRC
should have forthwith dismissed their appeal memorandum.
There is another and more compelling reason why the respondent Board members' appeal
should have been dismissed forthwith: that appeal was quite bereft of merit. Both the Labor
Arbiter and the NLRC had found that the indefinite suspension and termination of services
imposed by the respondent Board members upon petitioner Cosalan was illegal. That illegality
flowed, firstly, from the fact that the suspension of Cosalan was continued long after expiration of
the period of thirty (30) days, which is the maximum period of preventive suspension that could
be lawfully imposed under Section 4, Rule XIV of the Omnibus Rules Implementing the Labor
Code. Secondly, Cosalan had been deprived of procedural due process by the respondent Board
members. He was never informed of the charges raised against him and was given no
opportunity to meet those charges and present his side of whatever dispute existed; he was kept
totally in the dark as to the reason or reasons why he had been suspended and effectively
dismissed from the service of Beneco Thirdly, respondent Board members failed to adduce any
cause which could reasonably be regarded as lawful cause for the suspension and dismissal of
respondent Cosalan from his position as General Manager of Beneco. Cosalan was, in other
words, denied due process both procedural and substantive. Fourthly, respondent Board
members failed to obtain the prior approval of the NEA of their suspension now dismissal of
Cosalan, which prior approval was required, inter alia, under the subsisting loan agreement
between the NEA and Beneco. The requisite NEA approval was subsequently sought by the
respondent Board members; no NEA approval was granted.
In reversing the decision of the Labor Arbiter declaring petitioner Beneco and respondent Board
members solidarily liable for the salary, allowances, damages and attorney's fees awarded to
respondent Cosalan, the NLRC said:
. . . A perusal of the records show that the members of the Board never acted in
their individual capacities. They were acting as a Board passing resolutions
affecting their general manager. If these resolutions and resultant acts
transgressed the law, to then BENECO for which the Board was acting in behalf
should bear responsibility. The records do not disclose that the individual Board
members were motivated by malice or bad faith, rather, it reveals an intramural
power play gone awry and misapprehension of its own rules and regulations. For
this reason, the decision holding the individual board members jointly and
severally liable with BENECO for Cosalan's backwages is untenable. The same
goes for the award of damages which does not have the proverbial leg to stand
on.
The Labor Arbiter below should have heeded his own observation in his decision

Respondent BENECO as an artificial person could not have, by

itself, done anything to prevent it. But because the former have
acted while in office and in the course of their official functions as
directors of BENECO, . . .
Thus, the decision of the Labor Arbiter should be modified conformably with all
the foregoing holding BENECO solely liable for backwages and releasing the
appellant board members from any individual liabilities. 8 (Emphasis supplied)
The applicable general rule is clear enough. The Board members and officers of a corporation
who purport to act for and in behalf of the corporation, keep within the lawful scope of their
authority in so acting, and act in good faith, do not become liable, whether civilly or otherwise, for
the consequences of their acts, Those acts, when they are such a nature and are done under

such circumstances, are properly attributed to the corporation alone and no personal liability is
incurred by such officers and Board members. 9
The major difficulty with the conclusion reached by the NLRC is that the NLRC clearly overlooked
or disregarded the circumstances under which respondent Board members had in fact acted in
the instant case. As noted earlier, the respondent Board members responded to the efforts of
Cosalan to take seriously and implement the Audit Memoranda issued by the COA explicitly
addressed to the petitioner Beneco, first by stripping Cosalan of the privileges and perquisites
attached to his position as General Manager, then by suspending indefinitely and finally
dismissing Cosalan from such position. As also noted earlier, respondent Board members offered
no suggestion at all of any just or lawful cause that could sustain the suspension and dismissal of
Cosalan. They obviously wanted to get rid of Cosalan and so acted, in the words of the NLRC
itself, "with indecent haste" in removing him from his position and denying him substantive and
procedural due process. Thus, the record showed strong indications that respondent Board
members had illegally suspended and dismissed Cosalan precisely because he was trying to
remedy the financial irregularities and violations of NEA regulations which the COA had brought
to the attention of Beneco. The conclusion reached by the NLRC that "the records do not
disclose that the individual Board members were motivated by malice or bad faith" flew in the
face of the evidence of record. At the very least, a strong presumption had arisen, which it was
incumbent upon respondent Board members to disprove, that they had acted in reprisal against
respondent Cosalan and in an effort to suppress knowledge about and remedial measures
against the financial irregularities the COA Audits had unearthed. That burden respondent Board
members did not discharge.
The Solicitor General has urged that respondent Board members may be held liable for damages
under the foregoing circumstance under Section 31 of the Corporation Code which reads as
follows:
Sec. 31. Liability of directors, trustees or officers. Directors or trustees who
willfully and knowingly vote for or assent to patently unlawful acts of the
corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict
with their duty as such directors or trustees shall be jointly liable and severally for
all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons . . . (Emphasis supplied)
We agree with the Solicitor General, firstly, that Section 31 of the Corporation Code is applicable
in respect of Beneco and other electric cooperatives similarly situated. Section 4 of the
Corporation Code renders the provisions of that Code applicable in a supplementary manner to
all corporations, including those with special or individual charters so long as those provisions
are not inconsistent with such charters. We find no provision in P.D. No. 269, as amended, that
would exclude expressly or by necessary implication the applicability of Section 31 of the
Corporation Code in respect of members of the boards of directors of electric cooperatives.
Indeed, P.D. No. 269 expressly describes these cooperatives as "corporations:"
Sec. 15. Organization and Purpose. Cooperative non-stock, non-profit
membership corporationsmay be organized, and electric cooperative
corporations heretofore formed or registered under the Philippine non-Agricultural
Co-operative Act may as hereinafter provided be converted, under this Decree for
the purpose of supplying, and of promoting and encouraging-the fullest use of,
service on an area coverage basis at the lowest cost consistent with sound
economy and the prudent management of the business of such
corporations. 10 (Emphasis supplied)
We agree with the Solicitor General, secondly, that respondent Board members were guilty of
"gross negligence or bad faith in directing the affairs of the corporation" in enacting the series of

resolutions noted earlier indefinitely suspending and dismissing respondent Cosalan from the
position of General Manager of Beneco. Respondent Board members, in doing so, acted belong
the scope of their authority as such Board members. The dismissal of an officer or employee in
bad faith, without lawful cause and without procedural due process, is an act that iscontra legem.
It cannot be supposed that members of boards of directors derive any authority to violate the
express mandates of law or the clear legal rights of their officers and employees by simply
purporting to act for the corporation they control.
We believe and so hold, further, that not only are Beneco and respondent Board members
properly held solidarily liable for the awards made by the Labor Arbiter, but also that petitioner
Beneco which was controlled by and which could act only through respondent Board members,
has a right to be reimbursed for any amounts that Beneco may be compelled to pay to
respondent Cosalan. Such right of reimbursement is essential if the innocent members of
Beneco are not to be penalized for the acts of respondent Board members which were both done
in bad faith and ultra vires. The liability-generating acts here are the personal and individual acts
of respondent Board members, and are not properly attributed to Beneco itself.
WHEREFORE, the Petition for Certiorari is GIVEN DUE COURSE, the comment filed by
respondent Board members is TREATED as their answer, and the decision of the National Labor
Relations Commission dated 21 November 1988 in NLRC Case No. RAB-1-0313-84 is hereby
SET ASIDE and the decision dated 5 April 1988 of Labor Arbiter Amado T. Adquilen hereby
REINSTATED in toto. In addition, respondent Board members are hereby ORDERED to
reimburse petitioner Beneco any amounts that it may be compelled to pay to respondent
Cosalan by virtue of the decision of Labor Arbiter Amado T. Adquilen. No pronouncement as to
costs.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 187188

June 27, 2012

SALVADOR O. MOJAR, EDGAR B. BEGONIA, Heirs of the late JOSE M. CORTEZ,

RESTITUTO GADDI, VIRGILIO M. MONANA, FREDDIE RANCES, and EDSON D.
TOMAS, Petitioners,
vs.
AGRO COMMERCIAL SECURITY SERVICE AGENCY, INC., et al.,1 Respondents.
DECISION
SERENO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to annul
the entire proceedings before the Court of Appeals (CA) in CA-G.R. SP No. 102201, in which it
issued its Decision dated 21 July 2008 and Resolution dated 16 March 2009. 2
Statement of Facts and of the Case

Petitioners were employed as security guards by respondent and assigned to the various
branches of the Bank of Commerce in Pangasinan, La Union and Ilocos Sur.
In separate Office Orders dated 23 and 24 May 2002, petitioners were relieved from their
respective posts and directed to report to their new assignments in Metro Manila effective 3 June
2002. They, however, failed to report for duty in their new assignments, prompting respondent to
send them a letter dated 18 June 2002. It required a written explanation why no disciplinary
action should be taken against them, but the letter was not heeded.
On 15 February 2005, petitioners filed a Complaint for illegal dismissal against respondent and
the Bank of Commerce, Dagupan Branch, before the National Labor Relations Commission
(NLRC). Petitioners claimed, among others, that their reassignment was a scheme to sever the
employer-employee relationship and was done in retaliation for their pressing their claim for
salary differential, which they had earlier filed against respondent and the Bank of Commerce
before the NLRC. They also contended that the transfer to Manila was inconvenient and
prejudicial, since they would incur additional expenses for board and lodging.
On 22 May 2006, the Labor Arbiter (LA) rendered a Decision3 finding that petitioners were
illegally dismissed. The dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondents to
reinstate all the complainants to their former assignment in Pangasinan with full backwages and
if reinstatement is no longer possible, to pay separation pay of one month for every year of
service each of the seven complainant security guards. (A detailed computation of the judgment
award is attached as Annex "A.")4 (Italicized in the original)
On appeal, the NLRC affirmed the LAs ruling, with the modification that the Complaint against
the Bank of Commerce was dismissed.5 The dispositive portion provides:
WHEREFORE, premises considered, the appeal of Agro Commercial Security Service Agency,
Inc. is hereby DISMISSED for lack of merit. The Appeal of Bank of Commerce is GRANTED for
being impressed with merit. Accordingly, judgment is hereby rendered MODIFYING the Decision
of the Labor Arbiter dated May 22, 2006 by DISMISSING the complaint against Bank of
Commerce-Dagupan. All other dispositions of the Labor Arbiter not so modified, STAYS. 6
On 23 January 2008, respondent filed a Motion for Extension to file a Petition for Certiorari
before the CA. In a Resolution dated 20 February 2008, the latter granted the Motion for
Extension, allowing respondent until 10 February 2008 within which to file its Petition. On 9
February 2008, respondent filed its Petition for Certiorari before the appellate court.
On 30 June 2008, the CA issued a Resolution noting that no comment on the Petition had been
filed, and stating that the case was now deemed submitted for resolution.
On 21 July 2008, the CA rendered its Decision. Finding merit in the Petition, it found the Orders
transferring petitioners to Manila to be a valid exercise of management prerogative. The records
were bereft of any showing that the subject transfer involved a diminution of rank or salaries.
Further, there was no showing of bad faith or ill motive on the part of the employer. Thus,
petitioners refusal to comply with the transfer orders constituted willful disobedience of a lawful
order of an employer and abandonment, which were just causes for termination under the Labor
Code. However, respondent failed to observe the due process requirements in terminating them.
The dispositive portion of the CA Decision provides:
WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Decision
and Resolution of the NLRC dated July 31, 2007 and October 31, 2007[,] respectively, in NLRC
NCR CA No. 046036-05 are REVERSED and SET ASIDE. The complaints of private
respondents for illegal dismissal are hereby DISMISSED. However, petitioner is ordered to pay

private respondents the sum of P 10,000.00 each for having violated the latters right to statutory
due process.7
On 1 August 2008, petitioner Mojar filed a Manifestation8 before the CA, stating that he and the
other petitioners had not been served a copy of the CA Petition. He also said that they were not
aware whether their counsel before the NLRC, Atty. Jose C. Espinas, was served a copy thereof,
since the latter had already been bedridden since December 2007 until his demise on "25
February 2008."9 Neither could their new counsel, Atty. Mario G. Aglipay, enter his appearance
before the CA, as petitioners failed to "get [the] folder from the office of Atty. Espinas, as the
folder can no longer be found."10
Thereafter, petitioners filed a Motion to Annul Proceedings11 dated 9 September 2008 before the
CA. They moved to annul the proceedings on the ground of lack of jurisdiction. They argued that
the NLRC Decision had already attained finality, since the Petition before the CA was belatedly
filed, and the signatory to the Certification of non-forum shopping lacked the proper authority.
In a Resolution dated 16 March 2009, the CA denied the Motion to Annul Proceedings.
Hence, this Petition.
The Petition raised the following arguments: (1) There was no proof of service attached to the
Motion for Extension to file a Petition for Certiorari before the CA; thus, both the Motion and the
Petition were mere scraps of paper. (2) Respondent purposely intended to exclude petitioners
from the proceedings before the CA by omitting their actual addresses in the CA Petition, a
mandatory requirement under Section 3, Rule 46; in relation to Section 1, Rule 65 of the Rules of
Court. Further, respondent failed to prove the valid service of its CA Petition upon petitioners
former counsel of record. (3) The CA was grossly ignorant of the law in ignoring jurisprudence,
which states that when the floating status of an employee lasts for more than six months, the
latter may be considered to have been constructively dismissed.
On 3 September 2009, respondent filed its Comment on the Petition, pursuant to this Courts 29
June 2009 Resolution. In its Comment, it argued that the CA Decision had already become final
and executory, inasmuch as the Motion to Annul Proceedings, a procedural approach not
provided for in the Rules, was filed some 44 days after the service of the CA Decision on the
counsel for petitioners. Further, Atty. Aglipay had then no legal standing to appear as counsel,
considering that there was still no substitution of counsel at the time he filed the Motion to Annul
Proceedings. In any case, petitioners are bound by the actions of their counsel, Atty. Espinas.
On 1 March 2010, this Court issued a Resolution requiring petitioners to file their reply, which
petitioners complied with on 26 April 2010. In their Reply, petitioners state among others that the
records of the CA case showed that there was a deliberate violation of their right to due process.
The CA Petition did not contain the required affidavit of service, which alone should have caused
the motu proprio dismissal thereof. Further, the instant Petition before this Court is an appropriate
mode to contest the CA Decision and Resolution, which petitioners contend are void judgments.
They also argue that there is no rule on the clients substitution in case of the death of counsel.
Instead, the reglementary period to file pleadings in that case must be suspended and made
more lenient, considering that the duty of substitution is transferred to a non-lawyer.
On 30 March 2011, respondent filed a Motion for Early Resolution of the case. Petitioners
likewise filed a Motion for Leave (For the Admission of the Instant Comment on Private
Respondents Motion for Early Resolution), stating that they were joining respondent in moving
for the early resolution of the case.
This Court will resolve the issues raised in seriatim.
Actual Addresses of Parties

Petitioners contend that the CA should not have taken cognizance of the Petition before it, as
their actual addresses were not indicated therein as required under Section 3, Rule 46 12 of the
Rules of Court, and pursuant to Cendaa v. Avila.13 In the 2008 case Cendaa, this Court ruled
that the requirement that a petition for certiorari must contain the actual addresses of all the
petitioners and the respondents is mandatory. The failure to comply with that requirement is a
sufficient ground for the dismissal of a petition.
This rule, however, is not absolute. In the 2011 case Santos v. Litton Mills Incorporated, 14 this
Court ruled that where the petitioner clearly mentioned that the parties may be served with the
courts notices or processes through their respective counsels, whose addresses have been
clearly specified as in this case, this act would constitute substantial compliance with the
requirements of Section 3, Rule 46. The Court further observed that the notice required by law is
notice to counsel if the party has already appeared by counsel, pursuant to Section 2, Rule 13 of
the Rules of Court.
In its Petition before the CA, respondent clearly indicated the following:
THE PARTIES
2.0. The petitioner AGRO COMMERCIAL SECURITY SERVICE AGENCY, INC. (hereafter
petitioner AGRO), is a corporation existing under Philippine laws, and may be served with
process thru counsel, at his address hereunder indicated; private respondents (1) SALVADOR O.
MOJAR; (2) EDGAR B. BEGONIA; (3) JOSE M. CORTEZ; (4) FREDDIE RANCES; (5) VIRGILIO
MONANA; (6) RESTITUTU [sic] GADDI; and, (7) EDSON D. TOMAS, are all of age, and during
the material period, were in the employ of petitioner AGRO as security guards; said respondents
may be served with process thru their common counsel, ATTY. JOSE C. ESPINAS at No. 51
Scout Tuazon, Quezon City; on the other hand, respondent National Labor Relations
Commission, 1st Division, Quezon City, is the agency having jurisdiction over labor disputes in
the Philippines and may be served with process at offices in Quezon City; 15
The foregoing may thus be considered as substantial compliance with Section 3, Rule 46. In any
case, and as will be discussed further below, the CA had sufficient reason to take cognizance of
the Petition.
Affidavit of Service
Section 3, Rule 46 provides that the petition for certiorari should be filed together with the proof
of service thereof on the respondent. Under Section 13, Rule 13 of the Rules of Court, if service
is made by registered mail, as in this case, proof shall be made by an affidavit of the person
mailing and the registry receipt issued by the mailing office. Section 3, Rule 46 further provides
that the failure to comply with any of the requirements shall be sufficient ground for the dismissal
of the petition.
Petitioners allege that no affidavit of service was attached to the CA Petition. Neither is there any
in the copy of the CA Petition attached to the instant Petition. In its Comment, respondent claims
that petitioners through their counsel, Atty. Aglipay can be charged with knowledge of the
pendency of the CA Petition. It says that on April 2008, Atty. Aglipay filed before the NLRC an
Entry of Appearance and Motion for Execution Pending Appeal. 16However, petitioners merely
indicated therein that they were "respectfully mov[ing] for the execution pending appeal of the
Labor Arbiters decision dated 22 May 2006 affirmed by the NLRC." 17 There was no indication
that they had been served a copy of the CA Petition. No other proof was presented by
respondent to show petitioners actual receipt of the CA Petition. In any case, this knowledge,
even if presumed, would not and could not take the place of actual service and proof of
service by respondent.

In Ferrer v. Villanueva,18 petitioner therein failed to append the proof of service to his Petition for
Certiorari. Holding that this failure was a fatal defect, the Court stated:
There is no question that petitioner herein was remiss in complying with the foregoing Rule. In
Cruz v. Court of Appeals, we ruled that with respect to motions, proof of service is a mandatory
requirement. We find no cogent reason why this dictum should not apply and with more reason to
a petition for certiorari, in view of Section 3, Rule 46 which requires that the petition shall be filed
"together with proof of service thereof." We agree with the Court of Appeals that the lack of proof
of service is a fatal defect. The utter disregard of the Rule cannot be justified by harking to
substantial justice and the policy of liberal construction of the Rules. Technical rules of procedure
are not meant to frustrate the ends of justice. Rather, they serve to effect the proper and orderly
disposition of cases and thus effectively prevent the clogging of court dockets. (Emphasis in the
original)
Indeed, while an affidavit of service is required merely as proof that service has been made on
the other party, it is nonetheless essential to due process and the orderly administration of
justice.19
Be that as it may, it does not escape the attention of this Court that in the CA Resolution dated 16
March 2009, the appellate court stated that their records revealed that Atty. Espinas, petitioners
counsel of record at the time, was duly served a copy of the following: CA Resolution dated 20
February 2008 granting respondents Motion for Extension of Time to file the CA Petition; CA
Resolution dated 24 April 2008 requiring petitioners to file their Comment on the CA Petition; and
CA Resolution dated 30 June 2008, submitting the case for resolution, as no comment was filed.
Such service to Atty. Espinas, as petitioners counsel of record, was valid despite the fact he was
already deceased at the time. If a party to a case has appeared by counsel, service of pleadings
and judgments shall be made upon his counsel or one of them, unless service upon the party is
specifically ordered by the court. It is not the duty of the courts to inquire, during the progress of a
case, whether the law firm or partnership representing one of the litigants continues to exist
lawfully, whether the partners are still alive, or whether its associates are still connected with the
firm.20
It is the duty of party-litigants to be in contact with their counsel from time to time in order to be
informed of the progress of their case. It is likewise the duty of parties to inform the court of the
fact of their counsels death.21Their failure to do so means that they have been negligent in the
protection of their cause.22 They cannot pass the blame to the court, which is not tasked to
monitor the changes in the circumstances of the parties and their counsel.
Substitution of Counsel
Petitioners claim that Atty. Espinas passed away on 8 February 2008. They further claim that he
was already bedridden as early as December 2007, and thus they "failed to get any information
whether [he] was served with a copy of the [CA Petition]." 23
Petitioners were negligent in the conduct of their litigation. Having known that Atty. Espinas was
already bedridden as early as December 2007, they should have already obtained new counsel
who could adequately represent their interests. The excuse that Atty. Aglipay could not enter his
appearance before the CA "because [petitioners] failed to get [their] folder from the office of Atty.
Espinas"24 is flimsy at best.
The requirements for a valid substitution of counsel have been jurisprudentially settled in this
wise:
Under Section 26, Rule 138 of the Rules of Court and established jurisprudence, a valid
substitution of counsel has the following requirements: (1) the filing of a written application for

substitution; (2) the client's written consent; (3) the consent of the substituted lawyer if such
consent can be obtained; and, in case such written consent cannot be procured, (4) a proof of
service of notice of such motion on the attorney to be substituted in the manner required by the
Rules. Where death of the previous attorney is the cause of substitution of the counsel, a verified
proof of the death of such attorney (usually a death certificate) must accompany the notice of
appearance of the new counsel.25
The fact that petitioners were unable to obtain their folder from Atty. Espinas is immaterial. Proof
of service upon the lawyer to be substituted will suffice where the lawyers consent cannot be
obtained. With respect to the records of the case, these may easily be reconstituted by obtaining
copies thereof from the various courts involved.
Petitioners allegedly went to the CA sometime prior to 31 July 2008, or the date of filing of their
Manifestation before the CA, to inquire about the status of their case. Allegedly, they "always
visited the Court of Appeals for [the] development of their case."26 It is doubtful that a person who
regularly follows up the status of his case before a court would not be told, first, that a petition
has been filed against him; and, second, that the courts resolutions have been sent to his
counsel. It is questionable why, knowing these matters, petitioners did not seek the replacement
of their counsel, if the latter was unable to pursue their case. Further, despite their manifestation
that, sometime prior to 31 July 2008, they were already aware that the case had been submitted
for resolution, they still waited until 9 September 2008 or until they allegedly had knowledge of
the CA Decision before they filed the Motion to Annul Proceedings.
In Ampo v. Court of Appeals,27 this Court explained the vigilance that must be exercised by a
party:
We are not persuaded by petitioners argument that he was not aware that his counsel had died
or that an adverse judgment had already been rendered until he received the notice of
promulgation from the RTC of Butuan City on April 20, 2005. Time and again we have stated that
equity aids the vigilant, not those who slumber on their rights. Petitioner should have taken it
upon himself to periodically keep in touch with his counsel, check with the court, and inquire
about the status of the case. Had petitioner been more prudent, he would have found out sooner
about the death of his counsel and would have taken the necessary steps to prevent his present
predicament.
xxx

xxx

xxx

Litigants who are represented by counsel should not expect that all they need to do is sit back,
relax and await the outcome of their cases. Relief will not be granted to a party who seeks
avoidance from the effects of the judgment when the loss of the remedy at law was due to his
own negligence. The circumstances of this case plainly show that petitioner only has himself to
blame. Neither can he invoke due process. The essence of due process is simply an opportunity
to be heard. Due process is satisfied when the parties are afforded a fair and reasonable
opportunity to explain their respective sides of the controversy. Where a party, such as petitioner,
was afforded this opportunity to participate but failed to do so, he cannot complain of deprivation
of due process. If said opportunity is not availed of, it is deemed waived or forfeited without
violating the constitutional guarantee.
In this case, petitioners must bear the fruits of their negligence in the handling of their case. They
may not decry the denial of due process, when they were indeed afforded the right to be heard in
the first place.
Substantive Issue: Illegal Dismissal
Petitioners argue that they were illegally dismissed, based on the 1989 case Agro Commercial
Security Services Agency, Inc. v. NLRC.,28 which holds that when the floating status of employees

lasts for more than six (6) months, they may be considered to have been illegally dismissed from
the service.
Unfortunately, the above-mentioned case is not applicable here. In Agro, the service contracts of
the security agency therein with various corporations and government agencies to which the
security guards were previously assigned were terminated, generally due to the sequestration
of the said offices. Accordingly, many of the security guards were placed on floating status.
"Floating status" means an indefinite period of time when one does not receive any salary or
financial benefit provided by law.29 In this case, petitioners were actually reassigned to new posts,
albeit in a different location from where they resided. Thus, there can be no floating status or
indefinite period to speak of. Instead, petitioners were the ones who refused to report for work in
their new assignment.
In cases involving security guards, a relief and transfer order in itself does not sever the
employment relationship between the security guards and their agency. Employees have the
right to security of tenure, but this does not give them such a vested right to their positions as
would deprive the company of its prerogative to change their assignment or transfer them where
their services, as security guards, will be most beneficial to the client. 30
An employer has the right to transfer or assign its employees from one office or area of operation
to another in pursuit of its legitimate business interest, provided there is no demotion in rank or
diminution of salary, benefits, and other privileges; and the transfer is not motivated by
discrimination or bad faith, or effected as a form of punishment or demotion without sufficient
cause.31
While petitioners may claim that their transfer to Manila will cause added expenses and
inconvenience, we agree with the CA that, absent any showing of bad faith or ill motive on the
part of the employer, the transfer remains valid.
WHEREFORE, the Petition is DENIED. The Court of Appeals Decision dated 21 July 2008 and
Resolution dated 16 March 2009 in CA-G.R. SP No. 102201 are hereby AFFIRMED.
SO ORDERED.

MA. MERCEDES L. BARBA, Petitioner, versus LICEO DE CAGA

Y AN UNIVERSITY, Respondent.
G.R. No. 193857 | 2012-11-28

FIRST DIVISION
DECISION
VILLARAMA, JR., J.:
Before the Court is a petition for review on certiorari assailing the March 29, 2010
Amended Decision1 and September 14, 2010 Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP No. 02508-MIN. The CA had reconsidered its earlier Decision3 dated October
22, 2009 and set aside the September 25, 2007 and June 30, 2008 Resolutions4 of the
National Labor Relations Commission (NLRC) as well as the September 29, 2006
Decision5 of the Labor Arbiter. The CA held that the Labor Arbiter and NLRC had no
jurisdiction over the illegal dismissal case filed by petitioner against respondent

petitioner's position as Dean of the College of Physical Therapy of

respondent is a corporate office.
because

The facts follow.

Petitioner Dr. Ma. Mercedes L. Barba was the Dean of the College of Physical Therapy of
respondent Liceo de Cagayan University, Inc., a private educational institution with
school campus located at Carmen, Cagayan de Oro City.
Petitioner started working for respondent on July 8, 1993 as medical officer/school
physician for a period of one school year or until March 31, 1994. In July 1994, she was
chosen by respondent to be the recipient of a scholarship grant to pursue a three-year
residency training in Rehabilitation Medicine at the Veterans Memorial Medical Center
(VMMC). The Scholarship Contract6 provides:
5. That the SCHOLAR after the duration of her study and training shall serve the
SCHOOL in whatever position the SCHOOL desires related to the SCHOLAR's studies for a
period of not less than ten (10) years;
After completing her residency training with VMMC in June 1997, petitioner returned to
continue working for respondent. She was appointed as Acting Dean of the College of
Physical Therapy and at the same time designated as Doctor-In-Charge of the
Rehabilitation Clinic of the Rodolfo N. Pelaez Hall, City Memorial Hospital.
On June 19, 2002, petitioner's appointment as Doctor-In-Charge of the Rehabilitation
Clinic was renewed and she was appointed as Dean of the College of Physical Therapy by
respondent's President, Dr. Jose Ma. R. Golez. The appointment letter7 reads:
xxxx
Dear Dr. Barba:
You are hereby re-appointed Dean of the College of Physical Therapy and Doctor-InCharge of the Rehabilitation Clinic at Rodolfo N. Pelaez Hall, City Memorial Hospital and
other rehabilitation clinics under the management of Liceo de Cagayan University for a
period of three years effective July 1, 2002 unless sooner revoked for valid cause or
causes.
Your position is one of trust and confidence and the appointment is subject to the
pertinent provisions of the University Administrative Personnel and Faculty Manuals, and
Labor Code.
xxxx
Petitioner accepted her appointment and assumed the position of Dean of the College of
Physical Therapy. In the school year 2003 to 2004, the College of Physical Therapy

suffered a dramatic decline in the number of enrollees from a total of 1,121 students in
the school year 1995 to 1996 to only 29 students in the first semester of school year
2003 to 2004. This worsened in the next year or in school year 2004 to 2005 where a
total of only 20 students enrolled.8

Due to the low number of enrollees, respondent decided to freeze the

operation of the College of Physical Therapy indefinitely. Respondent's
President Dr. Rafaelita Pelaez-Golez wrote petitioner a letter9 dated March
16, 2005 informing her that her services as dean of the said college will
end at the close of the school year. Thereafter, the College of Physical
Therapy ceased operations on March 31, 2005, and petitioner went on
leave without pay starting on April 9, 2005. Subsequently, respondent's
Executive Vice President, Dr. Mariano M. Lerin, through Dr. Glory S.
Magdale, respondent's Vice President for Academic Affairs, sent petitioner
a letter10 dated April 27, 2005 instructing petitioner to return to work on
June 1, 2005and report to Ma. Chona Palomares, the Acting Dean of the
College of Nursing, to receive her teaching load and assignment as a fulltime faculty member in that department for the school year 2005-2006.
In reply, petitioner informed Dr. Lerin that she had not committed to teach in the College
of Nursing and that as far as she can recall, her employment is not dependent on any
teaching load. She then requested for the processing of her separation benefits in view
of the closure of the College of Physical Therapy.11 She did not report to Palomares on
June 1, 2005.
On June 8, 2005, petitioner followed up her request for separation pay and other
benefits but Dr. Lerin insisted that she report to Palomares; otherwise, sanctions will be
imposed on her. Thus, petitioner through counsel wrote Dr. Golez directly, asking for her
separation pay and other benefits.
On June 21, 2005, Dr. Magdale wrote petitioner a letter12 directing her to report for
work and to teach her assigned subjects on or before June 23, 2005. Otherwise, she will
be dismissed from employment on the ground of abandonment. Petitioner, through
counsel, replied that teaching in the College of Nursing is in no way related to her
scholarship and training in the field of rehabilitation medicine. Petitioner added that
coercing her to become a faculty member from her position as College Dean is a great
demotion which amounts to constructive dismissal.13
Dr. Magdale sent another letter14 to petitioner on June 24, 2005 ordering her to report
for work as she was still bound by the Scholarship Contract to serve respondent for two
more years. But petitioner did not do so. Hence, on June 28, 2005, Dr. Magdale sent
petitioner a notice terminating her services on the ground of abandonment.
Meanwhile, on June 22, 2005, prior to the termination of her services, petitioner filed a
complaint before the Labor Arbiter for illegal dismissal, payment of separation pay and
retirement benefits against respondent, Dr. Magdale and Dr. Golez. She alleged that her

transfer to the College of Nursing as a faculty member is a demotion amounting to

constructive dismissal.
Respondent claimed that petitioner was not terminated and that it was only petitioner's
appointment as College Dean in the College of Physical Therapy that expired as a
necessary consequence of the eventual closure of the said college. Respondent further
averred that petitioner's transfer as fulltime professor in the College of Nursing does not
amount to constructive dismissal since the transfer was without loss of seniority rights
and without diminution of pay. Also, respondent added that pursuant to the Scholarship
Contract, petitioner was still duty bound to serve respondent until 2007 in whatever
position related to her studies the school desires.
Labor Arbiter's Ruling
In a Decision15 dated September 29, 2006, the Labor Arbiter found that respondent did
not constructively dismiss petitioner; therefore, she was not entitled to separation pay.
The Labor Arbiter held that petitioner's assignment as full-time professor in the College
of Nursing was not a demotion tantamount to constructive dismissal. The dispositive
portion of the Labor Arbiter's decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered dismissing the
complaint for illegal dismissal for utter lack of merit, but ordering the respondent Liceo
de Cagayan University to reinstate complainant to an equivalent position without loss of
seniority rights, but without back wages.
However, if reinstatement is no longer feasible or if there is no equivalent position to
which complainant may be reinstated, respondent may opt to pay complainant her
separation pay equivalent to one-half (1/2) month pay for every year of service or in the
sum of P195,000.00, subject to deduction for advances or accountabilities which
complainant may have had.
Other claims are ordered dismissed for lack of merit.
SO ORDERED.16
NLRC's Ruling
Petitioner appealed the above decision to the NLRC. On September 25, 2007, the NLRC
issued a Resolution17 reversing the Labor Arbiter's decision and holding that petitioner
was constructively dismissed. The NLRC held that petitioner was demoted when she was
assigned as a professor in the College of Nursing because there are functions and
obligations and certain allowances and benefits given to a College Dean but not to an
ordinary professor. The NLRC ruled:
WHEREFORE, in view of the foregoing, the assailed decision is hereby MODIFIED in that
complainant is hereby considered as constructively dismissed and thus entitled to

backwages and separation pay of one (1) month salary for every year of service, plus
attorney's fees, which shall be computed at the execution stage before the Arbitration
Branch of origin.
SO ORDERED.18
The NLRC denied respondent's motion for reconsideration in a Resolution19 dated June
30, 2008.
Ruling of the Court of Appeals
Respondent went to the CA on a petition for certiorari alleging that the NLRC committed
grave abuse of discretion when it declared that petitioner's transfer to the College of
Nursing as full-time professor but without diminution of salaries and without loss of
seniority rights amounted to constructive dismissal because there was a demotion
involved in the transfer and because petitioner was compelled to accept her new
assignment.
Respondent also filed a Supplemental Petition20raising for the first time the issue of lack
of jurisdiction of the Labor Arbiter and the NLRC over the case. Respondent claimed that
a College Dean is a corporate officer under its by-laws and petitioner was a corporate
officer of respondent since her appointment was approved by the board of directors.
Respondent posited that petitioner was a corporate officer since her office was created
by the by-laws and her appointment, compensation, duties and functions were approved
by the board of directors. Thus, respondent maintained that the jurisdiction over the
case is with the regular courts and not with the labor tribunals.
In its original Decision21 dated October 22, 2009, the CA reversed and set aside the
NLRC resolutions and reinstated the decision of the Labor Arbiter. The CA did not find
merit in respondent's assertion in its Supplemental Petition that the position of petitioner
as College Dean was a corporate office. Instead, the appellate court held that petitioner
was respondent's employee, explaining thus:
Corporate officers in the context of PD 902-A are those officers of a corporation who are
given that character either by the Corporation Code or by the corporation's By-Laws.
Under Section 25 of the Corporation Code, the "corporate officers" are the president,
secretary, treasurer and such other officers as may be provided for in the By-Laws.
True, the By-Laws of LDCU provides that there shall be a College Director. This means a
College Director is a corporate officer. However, contrary to the allegation of petitioner,
the position of Dean does not appear to be the same as that of a College Director.
Aside from the obvious disparity in name, the By-Laws of LDCU provides for
only one College Director. But as shown by LDCU itself,numerous persons have been
appointed as Deans. They could not be the College Director contemplated by the ByLaws inasmuch as the By-Laws authorize only the appointment of one not many. If it is

indeed the intention of LDCU to give its many Deans the rank of College
Director, then it exceeded the authority given to it by its By-Laws because only
one College Director is authorized to be appointed. It must amend its By-Laws.
Prior to such an amendment, the office of College Dean is not a corporate office.
Another telling sign that a College Director is not the same as a Dean is the manner of
appointment. A College Director is directly appointed by the Board of Directors.
However, a College Dean is appointed by the President upon the recommendation of
the Vice President for Academic Affairs and the Executive Vice President and approval of
the Board of Directors. There is a clear distinction on the manner of appointment
indicating that the offices are not one and the same.
xxxx
This shows that it was not the intention of LDCU to make Dr. Barba a corporate
officer as it was stated in her letter of appointment that the same shall be subject to the
provisions of the Labor Code. Otherwise, the appointment letter should have stated that
her appointment is governed by the Corporation Code. Thus, We find the arguments in
the Supplemental Petition on the matter of lack of jurisdiction of the Labor Arbiter and
the NLRC to be without merit. Dr. Barba, being a College Dean, was not a corporate
officer.22 (Emphasis not ours)
The CA further found that no constructive dismissal occurred nor has petitioner
abandoned her work. According to the CA, a transfer amounts to constructive dismissal
when the transfer is unreasonable, unlikely, inconvenient, impossible, or prejudicial to
the employee or it involves a demotion in rank or a diminution of salary and other
benefits. In the case of petitioner, the CA held that she was never demoted and her
transfer, being a consequence of the closure of the College of Physical Therapy, was
valid.
The CA also noted that petitioner's appointment as Dean of the College of Physical
Therapy was for a term of three years. Hence, when her appointment as College Dean
was no longer renewed on June 1, 2005 or after her three-year term had expired, it
cannot be said that there was a demotion or that she was dismissed. Her term as Dean
had expired and she can no longer claim to be entitled to the benefits emanating from
such office.
On the issue of alleged lack of jurisdiction, the CA observed that respondent never raised
the issue of jurisdiction before the Labor Arbiter and the NLRC and respondent even
actively participated in the proceedings below. Hence, respondent is estopped from
questioning the jurisdiction of the labor tribunals.
Unsatisfied, both petitioner and respondent sought reconsideration of the CA decision.
Petitioner prayed for the reversal of the ruling that there was no constructive dismissal.
Respondent meanwhile maintained that the labor tribunals have no jurisdiction over the
case, petitioner being a corporate officer.

On March 29, 2010, the CA issued the assailed Amended Decision23 setting aside its
earlier ruling. This time the CA held that the position of a College Dean is a corporate
office and therefore the labor tribunals had no jurisdiction over the complaint for
constructive dismissal. The CA noted that petitioner's appointment as Dean of the
College of Physical Therapy was approved by the respondent's board of directors thereby
concluding that the position of a College Dean is a corporate office. Also, the CA held
that the College Director mentioned in respondent's by-laws is the same as a College
Dean and no one has ever been appointed as College Director. The CA added that in the
Administrative Manual the words "college" and "department" were used in the same
context in the section on the Duties and Responsibilities of the College Dean, and that
there could not have been any other "head of department" being alluded to in the bylaws but the college dean.
The dispositive portion of the Amended Decision reads:
WHEREFORE, in view of the foregoing, We reconsider Our Decision on October [22],
2009, and declare that the position of College Dean is a corporate office of Petitioner
[Liceo de Cagayan University], thereby divesting the Labor Arbiter and the National
Labor Relations Commission of jurisdiction over the instant case. Hence, the Resolutions
of the Public Respondent dated September 25, 2007 and June 30, 2008 as well as that of
the Regional Labor Arbiter dated 29 September 2006 are VACATED and SET ASIDE as
they were rendered by tribunals that had no jurisdiction over the case.
SO ORDERED.24
Petitioner filed a motion for reconsideration from the above decision, but her motion was
denied by the CA in its Resolution25 dated September 14, 2010. Hence, petitioner filed
the present petition.
Petitioner argues that the CA erred in ruling that she was a corporate officer and asserts
that the CA's previous finding that she was respondent's employee is more in accord with
law and jurisprudence. Petitioner adds that the appellate court erred when it ruled that
the labor tribunals had no jurisdiction over her complaint for illegal dismissal against
respondent. She faults the CA for allowing respondent to raise the issue of jurisdiction in
a Supplemental Petition after respondent has actively participated in the proceedings
before the labor tribunals. Petitioner also asserts that the CA erred in denying her motion
for reconsideration from its Amended Decision on the ground that it is a second motion
for reconsideration which is a prohibited pleading. Lastly, petitioner claims that
respondent violated the rule against forum shopping when it failed to inform the CA of
the pendency of the complaint for breach of contract which it filed against petitioner
before the Regional Trial Court of Misamis Oriental, Branch 23.
Respondent, for its part, counters that the petition was filed out of time and petitioner's
motion for reconsideration from the Amended Decision was a prohibited pleading since

petitioner has already filed a motion for reconsideration from the original decision of the
CA. It is respondent's posture that an Amended Decision is not really a new decision but
the appellate court's own modification of its prior decision. More importantly, respondent
points out that the arguments raised by petitioner do not justify a reversal of the
Amended Decision of the appellate court. Respondent insists on the correctness of the
Amended Decision and quotes the assailed decision in its entirety.
Issue
The decisive issue in the present petition is whether petitioner was an employee or a
corporate officer of respondent university. Resolution of this issue resolves the question
of whether the appellate court was correct in ruling that the Labor Arbiter and the NLRC
had no jurisdiction over petitioner's complaint for constructive dismissal against
respondent.
Our Ruling
We grant the petition.
Prefatorily, we first discuss the procedural matter raised by respondent that the present
petition is filed out of time. Respondent claims that petitioner's motion for
reconsideration from the Amended Decision is a second motion for reconsideration

which is a prohibited pleading. Respondent's assertion, however, is

misplaced for it should be noted that the CA's Amended Decision totally
reversed and set aside its previous ruling. Section 2, Rule 52 of the 1997
Rules of Civil Procedure, as amended, provides that no second motion for
reconsideration of a judgment or final resolution by the same party shall
be entertained. This contemplates a situation where a second motion for
reconsideration is filed by the same party assailing the same judgment or
final resolution. Here, the motion for reconsideration of petitioner was
filed after the appellate court rendered an Amended Decision totally
reversing and setting aside its previous ruling. Hence, petitioner is not
precluded from filing another motion for reconsideration from the
Amended Decision which held that the labor tribunals lacked jurisdiction
over petitioner's complaint for constructive dismissal. The period to file an
appeal should be reckoned not from the denial of her motion for
reconsideration of the original decision, but from the date of petitioner's
receipt of the notice of denial of her motion for reconsideration from the
Amended Decision. And as petitioner received notice of the denial of her
motion for reconsideration from the Amended Decision on September 23,
2010 and filed her petition on November 8, 2010, or within the extension
period granted by the Court to file the petition, her petition was filed on
time.
Now on the main issue.

As a general rule, only questions of law may be allowed in a petition for review on
certiorari.26 Considering, however, that the CA reversed its earlier decision and made a
complete turnaround from its previous ruling, and consequently set aside both the
findings of the Labor Arbiter and the NLRC for allegedly having been issued without
jurisdiction, it is necessary for the Court to reexamine the records and resolve the
conflicting rulings.
After a careful review and examination of the records, we find that the CA's previous
ruling that petitioner was respondent's employee and not a corporate officer is supported
by the totality of the evidence and more in accord with law and prevailing jurisprudence.
Corporate officers are elected or appointed by the directors or stockholders, and are
those who are given that character either by theCorporation Code or by the corporation's
by-laws.27 Section 2528 of the Corporation Code enumerates corporate officers as the
president, the secretary, the treasurer and such other officers as may be provided for in
the by-laws. In Matling Industrial and Commercial Corporation v. Coros,29 the phrase
"such other officers as may be provided for in the by-laws" has been clarified, thus:
Conformably with Section 25, a position must be expressly mentioned in the ByLaws in order to be considered as a corporate office. Thus, the creation of an office
pursuant to or under a By-Law enabling provision is not enough to make a position a
corporate office. Guerrea v. Lezama, the first ruling on the matter, held that the only
officers of a corporation were those given that character either by the Corporation
Code or by the By-Laws; the rest of the corporate officers could be considered
only as employees of subordinate officials. Thus, it was held in Easycall
Communications Phils., Inc. v. King:
An "office" is created by the charter of the corporation and the officer is elected by
the directors or stockholders. On the other hand, an employee occupies no office and
generally is employed not by the action of the directors or stockholders but by the
managing officer of the corporation who also determines the compensation to
be paid to such employee. (Emphasis supplied)
In declaring petitioner a corporate officer, the CA considered respondent's by-laws and
gave weight to the certifications of respondent's secretary attesting to the resolutions of
the board of directors appointing the various academic deans for the School Years 19912002 and 2002-2005, including petitioner. However, an assiduous perusal of these
documents does not convince us that petitioner occupies a corporate office position in
respondent university.
The relevant portions of respondent's by-laws30 are hereby quoted as follows:
Article III
The Board of Directors

Sec. 3. The Board of Directors shall appoint a College Director, define his powers and
duties, and determine his compensation; approve or disapprove recommendations for
appointment or dismissal of teachers and employees submitted to it by the College
Director; and exercise other powers and perform such duties as may be required of it
hereafter for the proper functioning of the school.
xxxx
Article IV
Officers
Sec. 1. The officers of the corporation shall consist of
and a Secretary-Treasurer, who shall be chosen
directors themselves. They shall be elected annually at
immediately after their election, and shall hold office
successors are elected and qualified.

a President, a Vice President,

from the directors and by the
the first meeting of the directors
for one (1) year and until their

xxxx
Article V
Other Appointive Officials
Sec. 1. The Liceo de Cagayan shall have a College Director and such heads of
departments as may exist in the said college whose appointments, compensations,
powers and duties shall be determined by the Board of Directors.31 (Emphasis
supplied)

On the other hand, the pertinent portions of the two board resolutions
appointing the various academic deans in the university including
petitioner, read as follows:
xxxx
RESOLVE, as it is hereby resolved, that pursuant to Section 3[,] Article III and Section
1[,] Article V of the Corporation's By-laws, the various academic deans for the school
years 1999-2002 of the University, as recommended by the President of the Corporation,
are hereby appointed, whose names are enumerated hereunder and their respective
colleges and their honoraria are indicated opposite their names, all of them having a
three (3) year term, to wit:
Name and College

Honorarium

Ma. Mercedes Vivares

2,660.00

Physical Therapy
xxxx

RESOLVE, as it is hereby resolved, that pursuant to Section 3[,] Article III and Section
1[,] Article V of the Corporation's By-laws, the various academic deans for the school
years 2002-2005 of the University, as recommended by the President of the Corporation,
are hereby appointed, whose names are enumerated hereunder and their respective
colleges and their honoraria are indicated opposite their names, all of them having a
three (3) year term, to wit:
Name and College
Ma. Mercedes Vivares
Physical Therapy

Honorarium
2,450.00

x x x x32
In respondent's by-laws, there are four officers specifically mentioned, namely, a
president, a vice president, a secretary and a treasurer. In addition, it is provided that
there shall be other appointive officials, a College Director and heads of departments
whose appointments, compensations, powers and duties shall be determined by the
board of directors. It is worthy to note that a College Dean is not among the corporate
officers mentioned in respondent's by-laws. Petitioner, being an academic dean, also held
an administrative post in the university but not a corporate office as contemplated by
law. Petitioner was not directly elected nor appointed by the board of directors to any
corporate office but her appointment was merely approved by the board together with
the other academic deans of respondent university in accordance with the procedure
prescribed in respondent's Administrative Manual.33 The act of the board of directors

in approving the appointment of petitioner as Dean of the College of

Therapy did not make her a corporate officer of the corporation.
Moreover, the CA, in its amended decision erroneously equated the position of a College
Director to that of a College Dean thereby concluding that petitioner is an officer of
respondent.
It bears stressing that the appointive officials mentioned in Article V of respondent's bylaws are not corporate officers under the contemplation of the law. Though the board of
directors may create appointive positions other than the positions of corporate officers,
the persons occupying such positions cannot be deemed as corporate officers as
contemplated by Section 25 of the Corporation Code. On this point, the SEC Opinion
dated November 25, 1993 quoted in the case of Matling Industrial and Commercial
Corporation v. Coros,34is instructive:
Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are
the corporate officers enumerated in the by-laws are the exclusive Officers of the
corporation and the Board has no power to create other Offices without amending first
the corporate Bylaws. However, the Board may create appointive positions other
than the positions of corporate Officers, but the persons occupying such
positions are not considered as corporate officers within the meaning of Section

25 of the Corporation Code and are not empowered to exercise the functions of
the corporate Officers, except those functions lawfully delegated to them. Their
functions and duties are to be determined by the Board of Directors/Trustees.
But even assuming that a College Director may be considered a corporate officer of
respondent, a review of the records as well as the other documents submitted by the
parties fails to persuade that petitioner was the "College Director" mentioned in the bylaws of respondent. Nowhere in petitioner's appointment letter was it stated that
petitioner was designated as the College Director or that petitioner was to assume the
functions and duties of a College Director. Neither can it be inferred in respondent's
bylaws that a dean of a college is the same as a College Director of respondent.
Respondent's lone surviving incorporating director Yolanda Rollo even admitted that no
College Director has ever been appointed by respondent. In her affidavit, Yolanda also
explained the reason for the creation of the position of a College Director, to wit:
4. At the time we signed the By-Laws of the Corporation, we, as directors, did envision
to form only a college of law as that was the main thrust of our president, the late Atty.
Rodolfo N. Pelaez. The original plan then was to have a "College Director" as the head of
the college of law and below him within the college were heads of departments. The
appointments, remuneration, duties and functions of the "College Director" and the
heads of departments were to be approved by the Board of Directors. x x x35
Notably, the CA has sufficiently explained why petitioner could not be considered a
College Director in its previous decision. The appellate court explained:
True, the By-Laws of [Liceo de Cagayan University] provides that there shall be a College
Director. This means a College Director is a corporate officer. However, contrary to the
allegation of petitioner, the position of Dean does not appear to be the same as that of a
College Director.
Aside from the obvious disparity in name, the By-Laws of [Liceo de Cagayan University]
provides for only one College Director. But as shown by [Liceo de Cagayan University]
itself, numerous persons have been appointed as Deans. They could not be the College
Director contemplated by the By-Laws inasmuch as the By-Laws authorize only the
appointment of one not many. If it is indeed the intention of [Liceo de Cagayan
University] to give its many Deans the rank of College Director, then
it exceeded the authority given to it by its By-Laws because only one College
Director is authorized to be appointed. It must amend its By-Laws. Prior to such
amendment, the office of [the] College Dean is not a corporate office.
Another telling sign that a College Director is not the same as a Dean is the manner of
appointment. A College Director is directly appointed by the Board of
Directors. However, a College Dean is appointed by the President upon the
recommendation of the Vice President for Academic Affairs and the Executive Vice
President and approval of the Board of Directors. There is a clear distinction on the

manner of appointment indicating that the offices are not one and the same.36
(Additional emphasis supplied)
Undoubtedly, petitioner is not a College Director and she is not a corporate officer but an
employee of respondent. Applying the four-fold testconcerning (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4)
the employer's power to control the employee with respect to the means and methods
by which the work is to be accomplished, it is clear that there exists an employeremployee relationship between petitioner and respondent. Records show that petitioner
was appointed to her position as Dean by Dr. Golez, the university president and was
paid a salary of P32,500 plus transportation allowance. It was evident that respondent
had the power of control over petitioner as one of its deans. It was also the university
president who informed petitioner that her services as Dean of the College of Physical
Therapy was terminated effective March 31, 2005 and she was subsequently directed to
report to the Acting Dean of the College of Nursing for assignment of teaching load.
Thus, petitioner, being an employee of respondent, her complaint for illegal/constructive
dismissal against respondent was properly within the jurisdiction of the Labor Arbiter and
the NLRC. Article 217 of the Labor Code provides:
ART. 217. Jurisdiction of Labor Arbiters and the Commission.- (a) Except as
otherwise provided under this Code, the Arbiters shall have original and exclusive
jurisdiction to hear and decide xxx the following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wage, rates of pay, hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims arising from employeremployee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.

xxxx
Moreover, we agree with the CA's earlier pronouncement that since respondent actively
participated in the proceedings before the Labor Arbiter and the NLRC, it is already
estopped from belatedly raising the issue of lack of jurisdiction. In this case, respondent
filed position papers and other supporting documents to bolster its defense before the
labor tribunals but in all these pleadings, the issue of lack of jurisdiction was never
raised. It was only in its Supplemental Petition filed before the CA that respondent first
brought the issue of lack of jurisdiction. We have consistently held that while jurisdiction
may be assailed at any stage, a party's active participation in the proceedings will estop
such party from assailing its jurisdiction. It is an undesirable practice of a party
participating in the proceedings and submitting his case for decision and then accepting
the judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse.37
Under Section 6, Rule 10 of the 1997 Rules of Civil Procedure, as amended, governing
supplemental pleadings, the court "may" admit supplemental pleadings, such as the
supplemental petition filed by respondent before the appellate court, but the admission
of these pleadings remains in the sound discretion of the court. Nevertheless, we have
already found no credence in respondent's claim that petitioner is a corporate officer,
consequently, the alleged lack of jurisdiction asserted by respondent in the supplemental
petition is bereft of merit.
On the issue of constructive dismissal, we agree with the Labor Arbiter and the appellate
court's earlier ruling that petitioner was not constructively dismissed. Petitioner's letter
of appointment specifically appointed her as Dean of the College of Physical Therapy and
Doctor-in-Charge of the Rehabilitation Clinic "for a period of three years effective July 1,
2002 unless sooner revoked for valid cause or causes." Evidently,petitioner's
appointment as College Dean was for a fixed term, subject to reappointment and
revocation or termination for a valid cause. When respondent decided to close its College
of Physical Therapy due to drastic decrease in enrollees, petitioner's appointment as its
College Dean was validly revoked and her subsequent assignment to teach in the College
of Nursing was justified as it is still related to her scholarship studies in Physical Therapy.
As we observed in Brent School, Inc. v. Zamora,38 also cited by the CA, it is common
practice in educational institutions to have fixed-term contracts in administrative
positions, thus
Some familiar examples may be cited of employment contracts which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential
and natural appurtenance: overseas employment contracts, for one, to which,
whatever the nature of the engagement, the concept of regular employment with all that
it implies does not appear ever to have been applied, Article 280 of the Labor Code
notwithstanding; also appointments to the positions of dean, assistant dean,
college secretary, principal, and other administrative offices in educational
institutions, which are by practice or tradition rotated among the faculty

members, and where fixed terms are a necessity without which no reasonable
rotation would be possible. x x x (Emphasis supplied)
In constructive dismissal cases, the employer has the burden of proving that its conduct
and action or the transfer of an employee are for valid and legitimate grounds such as
genuine business necessity.39 Particularly, for a transfer not to be considered a
constructive dismissal, the employer must be able to show that such transfer is not
unreasonable, inconvenient, or prejudicial to the employee. In this case, petitioner's
transfer was not unreasonable, inconvenient or prejudicial to her. On the contrary, the
assignment of a teaching load in the College of Nursing was undertaken by respondent
to accommodate petitioner following the closure of the College of Physical Therapy.
Respondent further considered the fact that petitioner still has two years to serve the
university under the Scholarship Contract.
Petitioner's subsequent transfer to another department or college is not tantamount to
demotion as it was a valid transfer. There is therefore no constructive dismissal to speak
of. That petitioner ceased to enjoy the compensation, privileges and benefits as

College Dean was but a logical consequence of the valid revocation or

termination of such fixed-term position. Indeed, it would be absurd and
unjust for respondent to maintain a deanship position in a college or
department that has ceased to exist. Under the circumstances, giving
petitioner a teaching load in another College/Department that is related to
Physical Therapy -- thus enabling her to serve and complete her
remaining two years under the Scholarship Contract -- is a valid exercise
of management prerogative on the part of respondent.
Lastly, as to whether respondent was guilty of forum shopping when it failed to inform
the appellate court of the pendency of Civil Case No. 2009-320, a complaint for breach
of contract filed by respondent against petitioner, we rule in the negative. Forum
shopping exists when the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in another. Litis pendentia requires the
concurrence of the following requisites: (1) identity of parties, or at least such parties as
those representing the same interests in both actions; (2) identity of rights asserted and
reliefs prayed for, the reliefs being founded on the same facts; and (3) identity with
respect to the two preceding particulars in the two cases, such that any judgment that
may be rendered in the pending case, regardless of which party is successful, would
amount to res judicata in the other case.40
While there is identity of parties in the two cases, the causes of action and the reliefs
sought are different. The issue raised in the present case is whether there was
constructive dismissal committed by respondent. On the other hand, the issue in the civil
case pending before the RTC is whether petitioner was guilty of breach of contract.
Hence, respondent is not guilty of forum shopping.
WHEREFORE, the petition for review on certiorari is GRANTED. The Amended Decision
dated March 29, 2010 and Resolution dated September 14, 2010 of the Court of Appeals

in CA-G.R. SP No. 02508-MIN are hereby SET ASIDE. The earlier Decision dated
October 22, 2009 of the Court of Appeals in said case is REINSTATED and UPHELD.
No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 195619

September 5, 2012

PLANTERS DEVELOPMENT BANK, Petitioner,

vs.
JULIE CHANDUMAL, Respondent.
DECISION
REYES, J.:
In this petition for review under Rule 45 of the Rules of Court, Planters Development Bank (PDB)
questions the Decision1 dated July 27, 2010 of the Court of Appeals (CA), as well as its
Resolution2 dated February 16, 2011, denying the petitioner's motion for reconsideration in CAG.R. CV No. 82861. The assailed decision nullified the Decision 3 dated May 31, 2004 of the
Regional Trial Court (RTC), Las Pias City, Branch 255 in Civil Case No. LP-99-0137.
Antecedent Facts
The instant case stemmed from a contract to sell a parcel of land, together with improvements,
between BF Homes, Inc. (BF Homes) and herein respondent Julie Chandumal (Chandumal). The
property subject of the contract is located in Talon Dos, Las Pias City and covered by Transfer
Certificate of Title No. T-10779. On February 12, 1993, BF Homes sold to PDB all its rights,
participations and interests over the contract.
Chandumal paid her monthly amortizations from December 1990 until May 1994 when she
began to default in her payments. In a Notice of Delinquency and Rescission of Contract with
Demand to Vacate4 dated July 14, 1998, PDB gave Chandumal a period of thirty (30) days from
receipt within which to settle her installment arrearages together with all its increments;
otherwise, all her rights under the contract shall be deemed extinguished and terminated and the
contract declared as rescinded. Despite demand, Chandumal still failed to settle her obligation.
On June 18, 1999, an action for judicial confirmation of notarial rescission and delivery of
possession was filed by PDB against Chandumal, docketed as Civil Case No. LP-99-0137. PDB
alleged that despite demand, Chandumal failed and/or refused to pay the amortizations as they
fell due; hence, it caused the rescission of the contract by means of notarial act, as provided in
Republic Act (R.A.) No. 6552.5 According to PDB, it tried to deliver the cash surrender value of
the subject property, as required under R.A. No. 6552, in the amount of P 10,000.00; however,
the defendant was unavailable for such purpose. 6

Consequently, summons was issued and served by deputy sheriff Roberto T. Galing (Sheriff
Galing). According to his return, Sheriff Galing attempted to personally serve the summons upon
Chandumal on July 15, 19 and 22, 1999 but it was unavailing as she was always out of the
house on said dates. Hence, the sheriff caused substituted service of summons on August 5,
1999 by serving the same through Chandumals mother who acknowledged receipt thereof. 7
For her failure to file an answer within the prescribed period, PDB filed on April 24, 2000 an ex
parte motion to declare Chandumal in default. On January 12, 2001, the RTC issued an Order
granting the motion of PDB.8
On February 23, 2001, Chandumal filed an Urgent Motion to Set Aside Order of Default and to
Admit Attached Answer. She maintained that she did not receive the summons and/or was not
notified of the same. She further alleged that her failure to file an answer within the reglementary
period was due to fraud, mistake or excusable negligence. In her answer, Chandumal alleged the
following defenses: (a) contrary to the position of PDB, the latter did not make any demand for
her to pay the unpaid monthly amortization; and (b) PDB did not tender or offer to give the cash
surrender value of the property in an amount equivalent to fifty percent (50%) of the actual total
payment made, as provided for under Section 3(b) of R.A. No. 6552. Moreover, Chandumal
claimed that since the total payment she made amounts to P 782,000.00, the corresponding
cash surrender value due her should be P 391,000.00.9
Per Order10 dated August 2, 2001, the RTC denied Chandumals motion to set aside the order of
default. Her motion for reconsideration was also denied for lack of merit. 11 Conformably, the RTC
allowed PDB to present its evidence ex parte.12 On May 31, 2004, the RTC rendered a
Decision13 in favor of PDB, the dispositive portion of which reads:
WHEREFORE, the foregoing considered, judgment is hereby rendered in favor of the plaintiff
Planters Development Bank and against defendant Julie Chandumal as follows, to wit:
1. Declaring the notarial rescission of the Contract to Sell dated 03 January 1990 made by the
plaintiff per the Notice of Delinquency and Rescission of Contract with Demand to Vacate dated
14 July 1998 as judicially confirmed and ratified;
2. Requiring the plaintiff to deposit in the name of the defendant the amount of P 10,000.00
representing the cash surrender value for the subject property with the Land Bank of the
Philippines, Las Pi[]as City Branch in satisfaction of the provisions of R.A. No. 6552; and,
3. Ordering the defendant to pay the plaintiff the amount of P 50,000.00 as and by way of
attorneys fees, including the costs of suit.
SO ORDERED.14
From the foregoing judgment, Chandumal appealed to the CA.
On July 27, 2010, the CA, without ruling on the propriety of the judicial confirmation of the
notarial rescission, rendered the assailed decision nullifying the RTC decision due to invalid and
ineffective substituted service of summons. The dispositive portion of the CA decision provides:
WHEREFORE, premises considered, the decision of Branch 255 of the Regional Trial Court of
Las Pias City, dated May 31, 2004, in Civil Case No. LP-99-0137 is
hereby NULLIFIED and VACATED.
SO ORDERED.15

PDB filed a motion for reconsideration but it was denied by the CA in its Resolution dated
February 16, 2011.
Hence, this petition based on the following assignment of errors:
I
The Honorable Court of Appeals erred in reversing the decision of the trial court on the ground of
improper service of summons;
II
The decision of the trial court is valid as it duly acquired jurisdiction over the person of
respondent Chandumal through voluntary appearance; and
III
The trial court did not err in confirming and ratifying the notarial rescission of the subject contract
to sell.16
PDB contends that the RTC properly acquired jurisdiction over the person of
Chandumal. According to PDB, there was proper service of summons since the sheriff complied
with the proper procedure governing substituted service of summons as laid down in Section 7,
Rule 14 of the Rules of Court. PDB alleges that it is clear from the sheriffs return that there were
several attempts on at least three (3) different dates to effect personal service within a
reasonable period of nearly a month, before he caused substituted service of summons. The
sheriff likewise stated the reason for his failure to effect personal service and that on his fourth
attempt, he effected the service of summons through Chandumals mother who is unarguably, a
person of legal age and with sufficient discretion. PDB also argues that Chandumal voluntarily
submitted herself to the jurisdiction of the court when she filed an Urgent Motion to Set Aside
Order of Default and to Admit Attached Answer.
1wphi1

For her part, Chandumal asserts that she never received a copy of the summons or was ever
notified of it and she only came to know of the case sometime in July or August 2000, but she
was already in the United States of America by that time, and that the CA correctly ruled that
there was no valid service of summons; hence, the RTC never acquired jurisdiction over her
person.
Issues
1. Whether there was a valid substituted service of summons;
2. Whether Chandumal voluntarily submitted to the jurisdiction of the trial court; and
3. Whether there was proper rescission by notarial act of the contract to sell.
Our Ruling
The fundamental rule is that jurisdiction over a defendant in a civil case is acquired either
through service of summons or through voluntary appearance in court and submission to its
authority. If a defendant has not been properly summoned, the court acquires no jurisdiction over
its person, and a judgment rendered against it is null and void.17
Where the action is in personam18 and the defendant is in the Philippines, service of summons
may be made through personal service, that is, summons shall be served by handing to the

defendant in person a copy thereof, or if he refuses to receive and sign for it, by tendering it to
him.19 If the defendant cannot be personally served with summons within a reasonable time, it is
then that substituted service may be made.20 Personal service of summons should and always be
the first option, and it is only when the said summons cannot be served within a reasonable time
can the process server resort to substituted service.21
No valid substituted service of
summons
In this case, the sheriff resorted to substituted service of summons due to his failure to serve it
personally. In Manotoc v. Court of Appeals,22 the Court detailed the requisites for a valid
substituted service of summons, summed up as follows: (1) impossibility of prompt personal
service the party relying on substituted service or the sheriff must show that the defendant
cannot be served promptly or there is impossibility of prompt service; (2) specific details in the
return the sheriff must describe in the Return of Summons the facts and circumstances
surrounding the attempted personal service; (3) a person of suitable age and discretion the
sheriff must determine if the person found in the alleged dwelling or residence of defendant is of
legal age, what the recipients relationship with the defendant is, and whether said person
comprehends the significance of the receipt of the summons and his duty to immediately deliver
it to the defendant or at least notify the defendant of said receipt of summons, which matters
must be clearly and specifically described in the Return of Summons; and (4) a competent
person in charge, who must have sufficient knowledge to understand the obligation of the
defendant in the summons, its importance, and the prejudicial effects arising from inaction on the
summons.23 These were reiterated and applied in Pascual v. Pascual,24 where the substituted
service of summon made was invalidated due to the sheriffs failure to specify in the return the
necessary details of the failed attempts to effect personal service which would justify resort to
substituted service of summons.
In applying the foregoing requisites in the instant case, the CA correctly ruled that the sheriffs
return failed to justify a resort to substituted service of summons. According to the CA, the Return
of Summons does not specifically show or indicate in detail the actual exertion of efforts or any
positive step taken by the officer or process server in attempting to serve the summons
personally to the defendant. The return merely states the alleged whereabouts of the defendant
without indicating that such information was verified from a person who had knowledge
thereof.25 Indeed, the sheriffs return shows a mere perfunctory attempt to cause personal service
of the summons on Chandumal. There was no indication if he even asked Chandumals mother
as to her specific whereabouts except that she was "out of the house", where she can be
reached or whether he even tried to await her return. The "efforts" exerted by the sheriff clearly
do not suffice to justify substituted service and his failure to comply with the requisites renders
such service ineffective.26
Respondent voluntarily submitted
to the jurisdiction of the trial court
Despite that there was no valid substituted service of summons, the Court, nevertheless, finds
that Chandumal voluntarily submitted to the jurisdiction of the trial court.
Section 20, Rule 14 of the Rules of Court states:
Sec. 20. Voluntary appearance. The defendants voluntary appearance in the action shall be
equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside
from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary
appearance.
When Chandumal filed an Urgent Motion to Set Aside Order of Default and to Admit Attached
Answer, she effectively submitted her person to the jurisdiction of the trial court as the filing of a

pleading where one seeks an affirmative relief is equivalent to service of summons and vests the
trial court with jurisdiction over the defendants person. Thus, it was ruled that the filing of
motions to admit answer, for additional time to file answer, for reconsideration of a default
judgment, and to lift order of default with motion for reconsideration is considered voluntary
submission to the trial courts jurisdiction.27 The Court notes that aside from the allegation that
she did not receive any summons, Chandumals motion to set aside order of default and to admit
attached answer failed to positively assert the trial courts lack of jurisdiction. In fact, what was
set forth therein was the substantial claim that PDB failed to comply with the requirements of
R.A. No. 6552 on payment of cash surrender value,28 which already delves into the merits of
PDBs cause of action. In addition, Chandumal even appealed the RTC decision to the CA, an
act which demonstrates her recognition of the trial courts jurisdiction to render said judgment.
Given Chandumals voluntary submission to the jurisdiction of the trial court, the RTC, Las Pias
City, Branch 255, had all authority to render its Decision dated May 31, 2004. The CA, therefore,
erred in nullifying said RTC decision and dispensing with the resolution of the substantial issue
raised herein, i.e., validity of the notarial rescission. Instead, however, of remanding this case to
the CA, the Court will resolve the same considering that the records of the case are already
before us and in order to avoid any further delay.29
There is no valid rescission of the
contract to sell by notarial act
pursuant to Section 3(b), R.A. No. 6552
That the RTC had jurisdiction to render the decision does not necessarily mean, however, that its
ruling on the validity of the notarial rescission is in accord with the established facts of the case,
the relevant law and jurisprudence.
1wphi1

PDB claims that it has validly rescinded the contract by notarial act as provided under R.A. No.
6552. Basically, PDB instituted Civil Case No. LP-99-0137 in order to secure judicial confirmation
of the rescission and to recover possession of the property subject of the contract.
In Leao v. Court of Appeals,30 it was held that:
R. A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the contract upon non-payment of an installment by
the buyer, which is simply an event that prevents the obligation of the vendor to convey title from
acquiring binding force. The law also provides for the rights of the buyer in case of cancellation.
Thus, Sec. 3 (b) of the law provides that:
"If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty percent of the total payments made and, after five
years of installments, an additional five percent every year but not to exceed ninety percent of
the total payments made: Provided, That the actual cancellation of the contract shall take place
after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash surrender value to
the buyer."31 (Citation omitted and emphasis ours)
R.A. No. 6552 recognizes the right of the seller to cancel the contract but any such cancellation
must be done in conformity with the requirements therein prescribed. In addition to the notarial
act of rescission, the seller is required to refund to the buyer the cash surrender value of the
payments on the property. The actual cancellation of the contract can only be deemed to take
place upon the expiry of a thirty (30)-day period following the receipt by the buyer of the notice of
cancellation or demand for rescission by a notarial act and the full payment of the cash surrender
value.32

In this case, it is an admitted fact that PDB failed to give Chandumal the full payment of the cash
surrender value. In its complaint,33 PDB admitted that it tried to deliver the cash surrender value
of the subject property as required under R.A. No. 6552 but Chandumal was "unavailable" for
such purpose. Thus, it prayed in its complaint that it be ordered to "deposit with a banking
institution in the Philippines, for the account of Defendants (sic), the amount of Ten Thousand
Pesos (P 10,000.00), Philippine Currency, representing the cash surrender value of the subject
property; x x x."34 The allegation that Chandumal made herself unavailable for payment is not an
excuse as the twin requirements for a valid and effective cancellation under the law, i.e., notice of
cancellation or demand for rescission by a notarial act and the full payment of the cash surrender
value, is mandatory.35 Consequently, there was no valid rescission of the contract to sell by
notarial act undertaken by PDB and the RTC should not have given judicial confirmation over the
same.
WHEREFORE, the petition is DENIED. The Decision dated July 27, 2010 of the Court of
Appeals, as well as its Resolution dated February 16, 2011, denying the Motion for
Reconsideration in CA-G.R. CV No. 82861 areAFFIRMED in so far as there was no valid service
of summons. Further, the Court DECLARES that there was no valid rescission of contract
pursuant to R.A. No. 6552. Accordingly, the Decision dated May 31, 2004 of the Regional Trial
Court, Las Pias City, Branch 255 in Civil Case No. LP-99-0 137 is REVERSED and SET ASIDE,
and is therefore, DISMISSED for lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173379

December 1, 2010

ABUBAKAR A. AFDAL and FATIMA A. AFDAL, Petitioners,

vs.
ROMEO CARLOS, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 3 January 20052 and 16 June 20063 Orders of the Regional
Trial Court, Branch 25, Bian, Laguna (RTC) in Civil Case No. B-6721. In its 3 January 2005
Order, the RTC ordered the dismissal of petitioners Abubakar A. Afdal and Fatima A. Afdals
(petitioners) petition for relief from judgment. In its 16 June 2006 Order, the RTC denied
petitioners motion for reconsideration.
The Facts
On 18 December 2003, respondent Romeo Carlos (respondent) filed a complaint for unlawful
detainer and damages against petitioners, Zenaida Guijabar (Guijabar), John Doe, Peter Doe,
Juana Doe, and all persons claiming rights under them docketed as Civil Case No. 3719 before
the Municipal Trial Court, Bian, Laguna (MTC). Respondent alleged that petitioners, Guijabar,
and all other persons claiming rights under them were occupying, by mere tolerance, a parcel of
land in respondents name covered by Transfer Certificate of Title No. T-530139 4 in the Registry

of Deeds Calamba, Laguna. Respondent claimed that petitioner Abubakar Afdal (petitioner
Abubakar) sold the property to him but that he allowed petitioners to stay in the property. On 25
August 2003, respondent demanded that petitioners, Guijabar, and all persons claiming rights
under them turn over the property to him because he needed the property for his personal
use.5 Respondent further alleged that petitioners refused to heed his demand and he was
constrained to file a complaint before the Lupon ng Tagapamayapa (Lupon). According to
respondent, petitioners ignored the notices and the Lupon issued a "certificate to file
action."6 Then, respondent filed the complaint before the MTC.
According to the records, there were three attempts to serve the summons and complaint on
petitioners 14 January, 3 and 18 February 2004.7 However, petitioners failed to file an answer.
On 2 June 2004, respondent filed an ex-parte motion and compliance with position paper
submitting the case for decision based on the pleadings on record. 8
In its 23 August 2004 Decision,9 the MTC ruled in favor of respondent. The dispositive portion of
the 23 August 2004 Decision reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants as
follows:
1. Ordering defendants Abubakar Afdal, Zenaida Guijabar and all persons claiming rights
under them to vacate the subject property and peacefully turn-over possession of the
same to plaintiff;
2. Ordering defendants to pay plaintiff the amount of TEN THOUSAND PESOS
(P10,000.00) as rental arrears from August 25, 2003 up to the date of decision;
3. Ordering defendants to pay plaintiff the amount of TEN THOUSAND PESOS
(P10,000.00) a month thereafter, as reasonable compensation for the use of the subject
premises until they finally vacate the same;
4. Ordering defendants to pay plaintiff the amount of FIFTY THOUSAND PESOS
(P50,000.00) as and for attorneys fees plus ONE THOUSAND FIVE HUNDRED PESOS
(P1,500.00) appearance fee;
5. Ordering defendants to pay the costs of suit.
SO ORDERED.10
On 1 October 2004, the MTC issued a writ of execution. 11
On 30 October 2004, petitioners filed a petition for relief from judgment with the
MTC.12 Respondent filed a motion to dismiss or strike out the petition for relief. 13 Subsequently,
petitioners manifested their intention to withdraw the petition for relief after realizing that it was a
prohibited pleading under the Revised Rule on Summary Procedure. On 10 November 2004, the
MTC granted petitioners request to withdraw the petition for relief. 14
On 6 December 2004, petitioners filed the petition for relief before the RTC. 15 Petitioners alleged
that they are the lawful owners of the property which they purchased from spouses Martha D.G.
Ubaldo and Francisco D. Ubaldo. Petitioners denied that they sold the property to respondent.
Petitioners added that on 15 December 2003, petitioner Abubakar filed with the Commission on
Elections his certificate of candidacy as mayor in the municipality of Labangan, Zamboanga del
Sur, for the 10 May 2004 elections. Petitioners said they only learned of the MTCs 23 August
2004 Decision on 27 October 2004. Petitioners also pointed out that they never received

respondents demand letter nor were they informed of, much less participated in, the proceedings
before theLupon. Moreover, petitioners said they were not served a copy of the summons and
the complaint.
On 3 January 2005, the RTC issued the assailed Order dismissing the petition for relief. The RTC
said it had no jurisdiction over the petition because the petition should have been filed before the
MTC in accordance with Section 1 of Rule 38 of the Rules of Court which provides that a petition
for relief should be filed "in such court and in the same case praying that the judgment, order or
proceeding be set aside."
Petitioners filed a motion for reconsideration. In its 16 June 2006 Order, the RTC denied
petitioners motion.
Hence, this petition.
The Issue
Petitioners raise the sole issue of whether the RTC erred in dismissing their petition for relief
from judgment.
The Ruling of the Court
Petitioners maintain that the RTC erred in dismissing their petition for relief. Petitioners argue
that they have no other recourse but to file the petition for relief with the RTC. Petitioners allege
the need to reconcile the apparent inconsistencies with respect to the filing of a petition for relief
from judgment under Rule 38 of the Rules of Court and the prohibition under the Revised Rule
on Summary Procedure. Petitioners suggest that petitions for relief from judgment in forcible
entry and unlawful detainer cases can be filed with the RTC provided that petitioners have
complied with all the legal requirements to entitle him to avail of such legal remedy.
Section 13(4) of Rule 70 of the Rules of Court provides:
SEC. 13. Prohibited pleadings and motions. - The following petitions, motions, or pleadings shall
not be allowed: x x x
4. Petition for relief from judgment; x x x
Section 19(d) of the Revised Rule on Summary Procedure also provides:
SEC. 19. Prohibited pleadings and motions. - The following pleadings, motions, or petitions shall
not be allowed in the cases covered by this Rule: x x x
(d) Petition for relief from judgment; x x x
Clearly, a petition for relief from judgment in forcible entry and unlawful detainer cases, as in the
present case, is a prohibited pleading. The reason for this is to achieve an expeditious and
inexpensive determination of the cases subject of summary procedure. 16
Moreover, Section 1, Rule 38 of the Rules of Court provides:
SEC. 1. Petition for relief from judgment, order or other proceedings. - When a judgment or final
order is entered, or any other proceeding is thereafter taken against a party in any court through
fraud, accident, mistake or excusable negligence, he may file a petition in such court and in
the same case praying that the judgment, order or proceeding be set aside. (Emphasis
supplied)

A petition for relief from judgment, if allowed by the Rules and not a prohibited pleading, should
be filed with and resolved by the court in the same case from which the petition arose. 17
1avvphi1

In the present case, petitioners cannot file the petition for relief with the MTC because it is a
prohibited pleading in an unlawful detainer case. Petitioners cannot also file the petition for relief
with the RTC because the RTC has no jurisdiction to entertain petitions for relief from judgments
of the MTC. Therefore, the RTC did not err in dismissing the petition for relief from judgment of
the MTC.
The remedy of petitioners in such a situation is to file a petition for certiorari with the RTC under
Rule 6518 of the Rules of Court on the ground of lack of jurisdiction of the MTC over the person of
petitioners in view of the absence of summons to petitioners. Here, we shall treat petitioners
petition for relief from judgment as a petition for certiorari before the RTC.
An action for unlawful detainer or forcible entry is a real action and in personam because the
plaintiff seeks to enforce a personal obligation on the defendant for the latter to vacate the
property subject of the action, restore physical possession thereof to the plaintiff, and pay actual
damages by way of reasonable compensation for his use or occupation of the property.19 In an
action in personam, jurisdiction over the person of the defendant is necessary for the court to
validly try and decide the case.20 Jurisdiction over the defendant is acquired either upon a valid
service of summons or the defendants voluntary appearance in court. 21 If the defendant does not
voluntarily appear in court, jurisdiction can be acquired by personal or substituted service of
summons as laid out under Sections 6 and 7 of Rule 14 of the Rules of Court, which state:
Sec. 6. Service in person on defendant. - Whenever practicable, the summons shall be served by
handing a copy thereof to the defendant in person, or, if he refuses to receive and sign for it, by
tendering it to him.
Sec. 7. Substituted Service. - If, for justifiable causes, the defendant cannot be served within a
reasonable time as provided in the preceding section, service may be effected (a) by leaving
copies of the summons at the defendants residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at defendants office or regular place
of business with some competent person in charge thereof.
Any judgment of the court which has no jurisdiction over the person of the defendant is null and
void.22
The 23 August 2004 Decision of the MTC states:
Record shows that there were three attempts to serve the summons to the defendants. The first
was on January 14, 2004 where the same was unserved. The second was on February 3, 2004
where the same was served to one Gary Akob and the last was on February 18, 2004 where the
return was duly served but refused to sign.23
A closer look at the records of the case also reveals that the first indorsement dated 14 January
2004 carried the annotation that it was "unsatisfied/given address cannot be located." 24 The
second indorsement dated 3 February 2004 stated that the summons was "duly served as
evidenced by his signature of one Gary Acob25(relative)."26 While the last indorsement dated 18
February 2004 carried the annotation that it was "duly served but refused to sign" without
specifying to whom it was served.27
Service of summons upon the defendant shall be by personal service first and only when the
defendant cannot be promptly served in person will substituted service be availed
of.28 In Samartino v. Raon,29 we said:

We have long held that the impossibility of personal service justifying availment of substituted
service should be explained in the proof of service; why efforts exerted towards personal service
failed. The pertinent facts and circumstances attendant to the service of summons must be
stated in the proof of service or Officers Return; otherwise, the substituted service cannot be
upheld.30
In this case, the indorsements failed to state that prompt and personal service on petitioners was
rendered impossible. It failed to show the reason why personal service could not be made. It was
also not shown that efforts were made to find petitioners personally and that said efforts failed.
These requirements are indispensable because substituted service is in derogation of the usual
method of service. It is an extraordinary method since it seeks to bind the defendant to the
consequences of a suit even though notice of such action is served not upon him but upon
another whom the law could only presume would notify him of the pending proceedings. Failure
to faithfully, strictly, and fully comply with the statutory requirements of substituted service
renders such service ineffective.31
Likewise, nowhere in the return of summons or in the records of the case was it shown that Gary
Acob, the person on whom substituted service of summons was effected, was a person of
suitable age and discretion residing in petitioners residence. In Manotoc v. Court of
Appeals,32 we said:
If the substituted service will be effected at defendants house or residence, it should be left with
a person of "suitable age and discretion then residing therein." A person of suitable age and
discretion is one who has attained the age of full legal capacity (18 years old) and is considered
to have enough discernment to understand the importance of a summons. "Discretion" is defined
as "the ability to make decisions which represent a responsible choice and for which an
understanding of what is lawful, right or wise may be presupposed." Thus, to be of sufficient
discretion, such person must know how to read and understand English to comprehend the
import of the summons, and fully realize the need to deliver the summons and complaint to the
defendant at the earliest possible time for the person to take appropriate action. Thus, the person
must have the "relation of confidence" to the defendant, ensuring that the latter would receive or
at least be notified of the receipt of the summons. The sheriff must therefore determine if the
person found in the alleged dwelling or residence of defendant is of legal age, what the
recipients relationship with the defendant is, and whether said person comprehends the
significance of the receipt of the summons and his duty to immediately deliver it to the
defendant or at least notify the defendant of said receipt of summons. These matters must
be clearly and specifically described in the Return of Summons.33 (Emphasis supplied)
In this case, the process server failed to specify Gary Acobs age, his relationship to petitioners
and to ascertain whether he comprehends the significance of the receipt of the summons and his
duty to deliver it to petitioners or at least notify them of said receipt of summons.
In sum, petitioners were not validly served with summons and the complaint in Civil Case No.
3719 by substituted service. Hence, the MTC failed to acquire jurisdiction over the person of the
petitioners and, thus, the MTCs 23 August 2004 Decision is void. 34 Since the MTCs 23 August
2004 Decision is void, it also never became final.35
WHEREFORE, we GRANT the petition. We SET ASIDE the 3 January 2005 and 16 June 2006
Orders of the Regional Trial Court, Branch 25, Bian, Laguna. The 23 August 2004 Decision and
the 1 October 2004 Writ of Execution, as well as all acts and deeds incidental to the judgment in
Civil Case No. 3719, are declared VOID. WeREMAND the case to the Municipal Trial Court,
Bian, Laguna, for consolidation with the unlawful detainer case in Civil Case No. 3719 and for
the said Municipal Trial Court to continue proceedings thereon by affording petitioners Abubakar
A. Afdal and Fatima A. Afdal a chance to file their answer and present evidence in their defense,
and thereafter to hear and decide the case.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 152776

October 8, 2003

HENRY S. OAMINAL, petitioner,

vs.
PABLITO M. CASTILLO and GUIA S. CASTILLO, respondents.
DECISION
PANGANIBAN, J.:
In the instant case, the receipt of the summons by the legal secretary of the defendants -respondents herein -- is deemed proper, because they admit the actual receipt thereof, but
merely question the manner of service. Moreover, when they asked for affirmative reliefs in
several motions and thereby submitted themselves to the jurisdiction of the trial court, whatever
defects the service of summons may have had were cured.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the
March 26, 2002 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 66562. The assailed
Decision disposed thus:
"WHEREFORE, the [D]ecision dated 23 August 2001 is hereby NULLIFIED and SET ASIDE and
Civil Case No. OZC-00-13 ordered DISMISSED, without prejudice. Costs against [petitioner]."3
The Antecedents
The antecedents of the case were narrated by the CA as follows:
"On 09 March 2000, [Petitioner Henry Oaminal] filed a complaint for collection against
[Respondents Pablito and Guia Castillo] with the Regional Trial Court [RTC] of Ozamis
City (Branch 35) x x x. The complaint prayed that [respondents] be ordered to
pay P1,500,000.00 by way of liquidated damages andP150,000.00 as attorney's fees.
"On 30 May 2000, the summons together with the complaint was served upon Ester
Fraginal, secretary of [Respondent] Mrs. Castillo.
"On 06 June 2000, [respondents] filed their 'Urgent Motion to Declare Service of
Summons Improper and Legally Defective' alleging that the Sheriff's Return has failed to
comply with Section (1), Rule 14 of the Rules of Court or substituted service of summons.
"The scheduled hearing of the Motion on 14 July 2000 did not take place because x x x
[RTC] Judge [Felipe Zapatos] took a leave of absence from July 17 to 19, 2000[;]
hence[,] it was re-scheduled to 16 August 2000.
"On 19 October 2000, [petitioner] filed an Omnibus Motion to Declare [Respondents] in
Default and to Render Judgment because no answer [was] filed by [the latter].

"[Respondents] forthwith filed the following:

'a. Omnibus Motion Ad Cautelam to Admit Motion to Dismiss and Answer
with Compulsory Counter-claim dated 9 November 2000 which was set
for hearing on 27 November 2000 at 8:30 a.m.;
'b. x x x Urgent Motion to Dismiss also dated 9 November 2000 which
was also set for hearing on 27 November 2000 at 8:30 a.m. The said
motion was anchored on the premise that x x x [petitioner's] complaint
was barred by improper venue and litis pendentia; and
'c. Answer with Compulsory Counter-Claim dated 9 November 2000.'
"On 16 November 2000, x x x [the] judge denied [respondents'] Motion to Dismiss,
admitted [their] Answer, and set the pre-trial [on] 17 January 2001.
"On 24 November 2000, [respondents] filed an 'Urgent Motion to Inhibit Ad Cautelam'
against Judge [Zapatos], 'in the higher interest of substantial justice and the [r]ule of [l]aw
x x x.'
"On 27 December 2000, Judge [Zapatos] denied the motion and transferred the January
17th pre-trial to 19 February 2001.
"[Respondents] filed an 'Urgent Omnibus Motion for Reconsideration with the
Accompanying Plea to Reset' dated 22 January 2001. The motion requested that it be set
for consideration and approval by the trial court on 05 February 2001 at 8:30 a.m. Said
motion in the main prayed 'that an order be issued by the Honorable Court reconsidering
its adverse order dated 16 November 2000, by dismissing the case at bar on the ground
of improper venue or in the alternative, that the Honorable Presiding Judge reconsider
and set aside its order dated December 27, 2000 by inhibiting himself from the case at
hand.'
"On 22 May 2001, Judge [Zapatos] ruled that [respondents'] 'Omnibus Motion Ad
Cautelam to Admit Motion to Dismiss and Answer with Counterclaim' was filed outside
the period to file answer, hence he (1) denied the Motion to Admit Motion to Dismiss and
Answer; (2) declared [respondents] in default; and (3) ordered [petitioner] to present
evidence ex-parte within ten days from receipt of [the] order, [failing] which, the case will
be dismissed.
"On 23 August 2001, Judge [Zapatos] rendered a decision on the merits, with the
following dispositi[on]:
'WHEREFORE, finding by preponderance of evidence, judgment is hereby
rendered in favor of [petitioner], ordering [respondents] to pay x x x:
1) P1,500,000.00 by way of [l]iquidated [d]amages;
2) P20,000.00 as attorney's fees and litigation expenses; and
3) x x x cost[s].'"4
On September 11, 2001, respondents filed with the CA a Petition for certiorari, prohibition and
injunction, with a prayer for a writ of preliminary injunction or temporary restraining order (TRO).
In the main, they raised the issue of whether the trial court had validly acquired jurisdiction over
them.

On September 20, 2001, the appellate court issued a TRO to enjoin the lower court from issuing
a writ of execution to enforce the latter's decision.
Ruling of the Court of Appeals
The CA ruled that the trial court did not validly acquire jurisdiction over respondents, because the
summons had been improperly served on them. It based its finding on the Sheriff's Return, which
did not contain any averment that effort had been exerted to personally serve the summons on
them before substituted service was resorted to. Thus, the appellate court set aside the trial
court's Decision and dismissed, without prejudice, Civil Case No. OZC-00-13.
Hence, this Petition.5
Issues
Petitioner submits the following issues for our consideration:
"I
Whether respondents' recourse to a Petition for Certiorari [was] appropriate when the remedy of
appeal was available?
"II
Whether the Decision of the trial court attained finality?
"III
Whether the Honorable Third Division of the Court of Appeals [was] correct in entertaining and in
granting the Writ of Certiorari when the facts clearly establish[ed] that not only was [an] appeal
available, but x x x there were other plain, speedy and adequate remedies in the ordinary course
of law?
"IV
Whether the Honorable Third Division of the Court of Appeals had jurisdiction to nullify and set
aside the Decision of the trial court and dismiss the case?
"V
[Whether] receipt by a legal secretary of a summons [is deemed] receipt by a lawyer in
contemplation of law?"6
Simply stated, the issues boil down to the following: (1) whether the Petition for certiorari before
the CA was proper; and (2) whether the trial court acquired jurisdiction over respondents.
Since the Petition for certiorari was granted by the CA based on the trial court's alleged lack of
jurisdiction over respondents, the second issue shall be discussed ahead of the former.
The Court's Ruling
The present Petition is partly meritorious.
First Issue:

Jurisdiction over Defendants

Petitioner contends that the trial court validly acquired jurisdiction over the persons of
respondents, because the latter never denied that they had actually received the summons
through their secretary. Neither did they dispute her competence to receive it.
Moreover, he argues that respondents automatically submitted themselves to the jurisdiction of
the trial court when they filed, on November 9, 2000, an Omnibus Motion to Dismiss or Admit
Answer, a Motion to Dismiss on the grounds of improper venue and litis pendentia, and an
Answer with Counterclaim.
On the other hand, respondents insist that the substituted service of summons on them was
improper. Thus, they allege that the trial court did not have the authority to render its August 23,
2001 Decision.
We clarify.
Service of Summons
In civil cases, the trial court acquires jurisdiction over the person of the defendant either by the
service of summons or by the latter's voluntary appearance and submission to the authority of
the former. Where the action is in personam and the defendant is in the Philippines, the service
of summons may be made through personal or substituted service in the manner provided for by
Sections 6 and 7 of Rule 14 of the Revised Rules of Court, which read:
"Section 6. Service in person on defendant. - Whenever practicable, the summons shall
be served by handing a copy thereof to the defendant in person, or, if he refuses to
receive and sign for it, by tendering it to him.
"Section 7. Substituted service. - If, for justifiable causes, the defendant cannot be served
within a reasonable time as provided in the preceding section, service may be effected
(a) by leaving copies of the summons at the defendant's residence with some person of
suitable age and discretion then residing therein, or (b) by leaving the copies at
defendant's office or regular place of business with some competent person in charge
thereof."
Personal service of summons is preferred over substituted service. Resort to the latter is
permitted when the summons cannot be promptly served on the defendant in person and after
stringent formal and substantive requirements have been complied with. 7
For substituted service of summons to be valid, it is necessary to establish the following
circumstances: (a) personal service of summons within a reasonable time was impossible; (b)
efforts were exerted to locate the party; and (c) the summons was served upon a person of
sufficient age and discretion residing at the party's residence or upon a competent person in
charge of the party's office or regular place of business.8 It is likewise required that the pertinent
facts proving these circumstances are stated in the proof of service or officer's return.
In the present case, the Sheriff's Return9 failed to state that efforts had been made to personally
serve the summons on respondents. Neither did the Return indicate that it was impossible to do
so within a reasonable time. It simply stated:
1a\^/phi1.net

"THIS IS TO CERTIFY that on the 30th day of May 2000, copies of the summons
together with the complaint and annexes attached thereto were served upon the
defendants Pablito M. Castillo and Guia B. Castillo at their place of business at No. 7,
21st Avenue, Cubao, Quezon City thru MS. ESTER FREGINAL, secretary, who is

authorized to receive such kind of process. She signed in receipt of the original as
evidenced by her signature appearing on the original summons.
"That this return is submitted to inform the Honorable x x x Court that the same was duly
served."10
Nonetheless, nothing in the records shows that respondents denied actual receipt of the
summons through their secretary, Ester Fraginal. Their "Urgent Motion to Declare Service of
Summons Improper and Legally Defective"11 did not deny receipt thereof; it merely assailed the
manner of its service. In fact, they admitted in their Motion that the "summons, together with the
complaint, was served by the Sheriff on Ester Fraginal, secretary of the defendants at No. 7, 21st
Avenue, Cubao, Quezon City on 30 May 2000."12
That the defendants' actual receipt of the summons satisfied the requirements of procedural due
process had previously been upheld by the Court thus:
"x x x [T]here is no question that summons was timely issued and received by private
respondent. In fact, he never denied actual receipt of such summons but confined himself
to the argument that the Sheriff should prove that personal service was first made before
resorting to substituted service.
"This brings to the fore the question of procedural due process. In Montalban v. Maximo
(22 SCRA 1077 [1968]) the Court ruled that 'The constitutional requirement of due
process exacts that the service be such as may be reasonably expected to give the
notice desired. Once the service provided by the rules reasonably accomplishes that end,
the requirement of justice is answered; the traditional notions of fair play are satisfied;
due process is served.'"13
There is likewise no showing that respondents had heretofore pursued the issue of lack of
jurisdiction; neither did they reserve their right to invoke it in their subsequent pleadings. If at all,
what they avoided forfeiting and waiving -- both in their Omnibus Motion ad Cautelam to Admit
Motion to Dismiss and Answer with Compulsory Counter-Claim 14 and in their Motion to
Dismiss15 -- was their right to invoke the grounds of improper venue and litis pendentia. They
argued therein:
"3. x x x. To be sure, the [respondents] have already prepared a finalized draft of their
[M]otion to [D]ismiss the case at bar, based on the twin compelling grounds of 'improper
venue' and [the] additional fact that 'there exists a case between the parties involving the
same transaction/s covered by the plaintiff's cause of action.' x x x;
"4. That as things now stand, the [respondents] are confronted with the dilemma of filing
their [M]otion to [D]ismiss based on the legal grounds stated above and thus avoid
forfeiture and waiver of these rights as provided for by the Rules and also file the
corresponding [M]otion to [A]dmit x x x [A]nswer as mandated by the Omnibus Rule.
x x x x x x x x x"16
Verily, respondents did not raise in their Motion to Dismiss the issue of jurisdiction over their
persons; they raised only improper venue and litis pendentia. Hence, whatever defect there was
in the manner of service should be deemed waived.17
Voluntary Appearance and Submission
Assuming arguendo that the service of summons was defective, such flaw was cured and
respondents are deemed to have submitted themselves to the jurisdiction of the trial court when

they filed an Omnibus Motion to Admit the Motion to Dismiss and Answer with Counterclaim, an
Answer with Counterclaim, a Motion to Inhibit, and a Motion for Reconsideration and Plea to
Reset Pre-trial. The filing of Motions seeking affirmative relief -- to admit answer, for additional
time to file answer, for reconsideration of a default judgment, and to lift order of default with
motion for reconsideration -- are considered voluntary submission to the jurisdiction of the
court.18 Having invoked the trial court's jurisdiction to secure affirmative relief, respondents cannot
-- after failing to obtain the relief prayed for -- repudiate the very same authority they have
invoked.19
Second Issue:
Propriety of the Petition for Certiorari
Petitioner contends that the certiorari Petition filed by respondents before the CA was improper,
because other remedies in the ordinary course of law were available to them. Thus, he argues
that the CA erred when it took cognizance of and granted the Petition.
Well-settled is the rule that certiorari will lie only when a court has acted without or in excess of
jurisdiction or with grave abuse of discretion.20 As a condition for the filing of a petition
for certiorari, Section 1 of Rule 65 of the Rules of Court additionally requires that "no appeal nor
any plain, speedy and adequate remedy in the ordinary course of law" must be available. 21 It is
axiomatic that the availability of the right of appeal precludes recourse to the special civil action
for certiorari.22
Here, the trial court's judgment was a final Decision that disposed of the case. It was therefore a
fit subject of an appeal.23 However, instead of appealing the Decision, respondents filed a Petition
for certiorari on September 11, 2001.
Be that as it may, a petition for certiorari may be treated as a petition for review under Rule 45.
Such move is in accordance with the liberal spirit pervading the Rules of Court and in the interest
of substantial justice, especially (1) if the petition was filed within the reglementary period for
filing a petition for review;24 (2) errors of judgment are averred;25 and (3) there is sufficient reason
to justify the relaxation of the rules.26 Besides, it is axiomatic that the nature of an action is
determined by the allegations of the complaint or petition and the character of the relief
sought.27 The Court explained:
"x x x. It cannot x x x be claimed that this petition is being used as a substitute for appeal after
that remedy has been lost through the fault of petitioner. Moreover, stripped of allegations of
'grave abuse of discretion,' the petition actually avers errors of judgment rather than of
jurisdiction, which are the subject of a petition for review." 28
The present case satisfies all the above requisites. The Petition for certiorari before the CA was
filed within the reglementary period of appeal. A review of the records shows that respondents
filed their Petition on September 11, 2001 -- four days after they had received the RTC Decision.
Verily, there were still 11 days to go before the lapse of the period for filing an appeal. Aside from
charging grave abuse of discretion and lack of jurisdiction, they likewise assigned as errors the
order and the judgment of default as well as the RTC's allegedly unconscionable and iniquitous
award of liquidated damages.29 We find the latter issue particularly significant, considering that
the trial court awarded P1,500,000 as liquidated damages without the benefit of a hearing and
out of an obligation impugned by respondents because of petitioner's failure to pay.30 Hence,
there are enough reasons to treat the Petition for certiorari as a petition for review.
In view of the foregoing, we rule that the Petition effectively tolled the finality of the trial court
Decision.31Consequently, the appellate court had jurisdiction to pass upon the assigned errors.
The question that remains is whether it was correct in setting aside the Decision and in
dismissing the case.

Trial Court's Default Orders Erroneous

A review of the assailed Decision reveals that the alleged lack of jurisdiction of the trial court over
the defendants therein was the reason why the CA nullified the former's default judgment and
dismissed the case without prejudice. However, we have ruled earlier that the lower court had
acquired jurisdiction over them. Given this fact, the CA erred in dismissing the case; as a
consequence, it failed to rule on the propriety of the Order and the judgment of default. To avoid
circuitousness and further delay, the Court deems it necessary to now rule on this issue.
As much as possible, suits should be decided on the merits and not on technicalities. 32 For this
reason, courts have repeatedly been admonished against default orders and judgments that lay
more emphasis on procedural niceties at the expense of substantial justice. 33 Not being based
upon the merits of the controversy, such issuances may indeed amount to a considerable
injustice resulting in serious consequences on the part of the defendant. Thus, it is necessary to
examine carefully the grounds upon which these orders and judgments are sought to be set
aside.34
1vvphi1.nt

Respondents herein were declared in default by the trial court on May 22, 2001, purportedly
because of their delay in filing an answer. Its unexpected volte face came six months after it had
ruled to admit their Answer on November 16, 2000, as follows:
"That with respect to the Motion to Admit Answer, this Court is not in favor of terminating this
case on the basis of technicality for failure to answer on time, hence, as ruled in the case of
Nantz v. Jugo and Cruz, 43 O.G. No. 11, p. 4620, it was held:
'Lapses in the literal observance of a rule of procedure will be overlooked when they do not
involve public policy, when they arose from an honest mistake or unforeseen accident, when they
have not prejudiced the adverse party and have not deprived the court ot its authority. Conceived
in the best traditions of practical and moral justice and common sense, the Rules of Court frown
upon hairsplitting technicalities that do not square with their liberal tendency and with the ends of
justice unless something in the nature of the factors just stated intervene. x x x'
"WHEREFORE, x x x in the interest of justice, the Answer of the [respondents] is hereby
admitted."35
Indiana Aerospace University v. Commission on Higher Education 36 held that no practical
purpose was served in declaring the defendants in default when their Answer had already been
filed -- albeit after the 15-day period, but before they were declared as such. Applying that ruling
to the present case, we find that respondents were, therefore, imprudently declared in default.
1a\^/phi1.net

WHEREFORE, the Petition is hereby GRANTED IN PART, and the Decision of the Court of
Appeals MODIFIED. The trial court's Order of Default dated May 22, 2001 and Judgment of
Default dated August 23, 2001 are ANNULLED, and the case remanded to the trial court for
further proceedings on the merits. No costs.
SO ORDERED.
Puno, (Chairman), Sandoval-Gutierrez and Carpio Morales, JJ., concur.
Corona, J., on leave.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION
G.R. No. 183035

January 9, 2013

OPTIMA REALTY CORPORATION, Petitioner,

vs.
HERTZ PHIL. EXCLUSIVE CARS, INC., Respondent.
DECISION
SERENO, CJ.:
Before us is a Rule 45 Petition assailing the Decision1 and Resolution2 of the Court of Appeals
(CA) in CA-GR SP No. 99890, which reversed the Decision3 and Resolution4 of the Regional Trial
Court (RTC), Branch 13 7, Makati City in Civil Case No. 06-672. The RTC had affirmed in toto
the 22 May 2006 Decision5 of the Metropolitan Trial Court (MeTC), Branch 64, Makati City in Civil
Case No. 90842 evicting respondent Hertz Phil.
Exclusive Cars, Inc. (Hertz) and ordering it to pay back rentals and other arrearages to petitioner
Optima Realty Corporation (Optima).
Optima is engaged in the business of leasing and renting out commercial spaces and buildings
to its tenants. On 12 December 2002, it entered into a Contract of Lease with respondent over a
131-square-meter office unit and a parking slot in the Optima Building for a period of three years
commencing on 1 March 2003 and ending on 28 February 2006. 6 On 9 March 2004, the parties
amended their lease agreement by shortening the lease period to two years and five months,
commencing on 1 October 2003 and ending on 28 February 2006. 7
Renovations in the Optima Building commenced in January and ended in November 2005. 8 As a
result, Hertz alleged that it experienced a 50% drop in monthly sales and a significant decrease
in its personnels productivity. It then requested a 50% discount on its rent for the months of May,
June, July and August 2005.9
On 8 December 2005, Optima granted the request of Hertz. 10 However, the latter still failed to pay
its rentals for the months of August to December of 2005 and January to February 2006, 11 or a
total of seven months. In addition, Hertz likewise failed to pay its utility bills for the months of
November and December of 2005 and January and February of 2006, 12 or a total of four months.
On 8 December 2005, Optima wrote another letter to Hertz, 13 reminding the latter that the
Contract of Lease could be renewed only by a new negotiation between the parties and upon
written notice by the lessee to the lessor at least 90 days prior to the termination of the lease
period.14 As no letter was received from Hertz regarding its intention to seek negotiation and
extension of the lease contract within the 90-day period, Optima informed it that the lease would
expire on 28 February 2006 and would not be renewed.15
On 21 December 2005, Hertz wrote a letter belatedly advising Optima of the formers desire to
negotiate and extend the lease.16 However, as the Contract of Lease provided that the notice to
negotiate its renewal must be given by the lessee at least 90 days prior to the expiration of the
contract, petitioner no longer entertained respondents notice.
On 30 January 2006, Hertz filed a Complaint for Specific Performance, Injunction and Damages
and/or Sum of Money with prayer for the issuance of a Temporary Restraining Order (TRO) and
Writ of Preliminary Injunction (Complaint for Specific Performance) against Optima. In that
Complaint, Hertz prayed for the issuance of a TRO to enjoin petitioner from committing acts that
would tend to disrupt respondents peaceful use and possession of the leased premises; for a

Writ of Preliminary Injunction ordering petitioner to reconnect its utilities; for petitioner to be
ordered to renegotiate a renewal of the Contract of Lease; and for actual, moral and exemplary
damages, as well as attorneys fees and costs.
On 1 March 2006, Optima, through counsel, wrote Hertz a letter requiring the latter to surrender
and vacate the leased premises in view of the expiration of the Contract of Lease on 28 February
2006.17 It likewise demanded payment of the sum of 420,967.28 in rental arrearages, unpaid
utility bills and other charges.18 Hertz, however, refused to vacate the leased premises.19 As a
result, Optima was constrained to file before the MeTC a Complaint for Unlawful Detainer and
Damages with Prayer for the Issuance of a TRO and/or Preliminary Mandatory Injunction
(Unlawful Detainer Complaint) against Hertz.20
On 14 March 2006, Summons for the Unlawful Detainer Complaint was served on Henry Bobiles,
quality control supervisor of Hertz, who complied with the telephone instruction of manager Rudy
Tirador to receive the Summons.21
On 28 March 2006, or 14 days after service of the Summons, Hertz filed a Motion for Leave of
Court to file Answer with Counterclaim and to Admit Answer with Counterclaim (Motion for Leave
to File Answer).22 In that Motion, Hertz stated that, "in spite of the defective service of summons,
it opted to file the instant Answer with Counterclaim with Leave of Court." 23 In the same Motion, it
likewise prayed that, in the interest of substantial justice, the Answer with Counterclaim attached
to the Motion for Leave to File Answer should be admitted regardless of its belated filing, since
the service of summons was defective.24
On 22 May 2006, the MeTC rendered a Decision,25 ruling that petitioner Optima had established
its right to evict Hertz from the subject premises due to nonpayment of rentals and the expiration
of the period of lease.26 The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the Court hereby renders judgment for the plaintiff and
against the defendant, ordering:
1. the defendant corporation and all persons claiming rights from it to immediately vacate
the leased premises and to surrender possession thereof to the plaintiff;
2. the defendant corporation to pay the plaintiff the amount of Four Hundred Twenty
Thousand Nine Hundred Sixty Seven Pesos and 28/100 (P420,967.28) representing its
rentals arrearages and utility charges for the period of August 2005 to February 2006,
deducting therefrom defendants security deposit;
3. the defendant corporation to pay the amount of Fifty Four Thousand Two Hundred
Pesos (P54,200.00) as a reasonable monthly compensation for the use and occupancy
of the premises starting from March 2006 until possession thereof is restored to the
plaintiff; and
4. the defendant corporation to pay the amount of Thirty Thousand Pesos (P30,000.00)
as and for attorneys fees; and
5. the cost of suit.
SO ORDERED.27
Hertz appealed the MeTCs Decision to the RTC.28
Finding no compelling reason to warrant the reversal of the MeTCs Decision, the RTC affirmed it
by dismissing the appeal in a Decision29 dated 16 March 2007.

On 18 June 2007, the RTC denied respondents Motion for Reconsideration of its assailed
Decision.30
Hertz thereafter filed a verified Rule 42 Petition for Review on Certiorari with the CA. 31
On appeal, the CA ruled that, due to the improper service of summons, the MeTC failed to
acquire jurisdiction over the person of respondent Hertz. The appellate court thereafter reversed
the RTC and remanded the case to the MeTC to ensure the proper service of summons.
Accordingly, the CA issued its 17 March 2008 Decision, the fallo of which reads:
WHEREFORE, premises considered, the May 22, 2006 Decision of the Metropolitan Trial Court
of Makati City, Branch 64, in Civil Case No. 90842, and both the March 16, 2007 Decision, as
well as the June 18, 2007 Resolution, of the Regional Trial Court of Makati City, Branch 137, in
Civil Case No. 06-672, are hereby REVERSED, ANNULLED and SET ASIDE due to lack of
jurisdiction over the person of the defendant corporation HERTZ. This case is hereby
REMANDED to the Metropolitan Trial Court of Makati City, Branch 64, in Civil Case No. 90842,
which is DIRECTED to ensure that its Sheriff properly serve summons to only those persons
listed in Sec. 11, Rule 14 of the Rules of Civil Procedure in order that the MTC could acquire
jurisdiction over the person of the defendant corporation HERTZ.
SO ORDERED.32
Petitioners Motion for Reconsideration of the CAs Decision was denied in a Resolution dated 20
May 2008.33
Aggrieved by the ruling of the appellate court, petitioner then filed the instant Rule 45 Petition for
Review on Certiorari with this Court.34
THE ISSUES
As culled from the records, the following issues are submitted for resolution by this Court:
1. Whether the MeTC properly acquired jurisdiction over the person of respondent Hertz;
2. Whether the unlawful detainer case is barred by litis pendentia; and
3. Whether the ejectment of Hertz and the award of damages, attorneys fees and costs
are proper.
THE COURTS RULING
We grant the Petition and reverse the assailed Decision and Resolution of the appellate court.
I
The MeTC acquired jurisdiction over the person of respondent Hertz.
In civil cases, jurisdiction over the person of the defendant may be acquired either by service of
summons or by the defendants voluntary appearance in court and submission to its authority.35
In this case, the MeTC acquired jurisdiction over the person of respondent Hertz by reason of the
latters voluntary appearance in court.
In Philippine Commercial International Bank v. Spouses Dy,36 we had occasion to state:

Preliminarily, jurisdiction over the defendant in a civil case is acquired either by the coercive
power of legal processes exerted over his person, or his voluntary appearance in court. As a
general proposition, one who seeks an affirmative relief is deemed to have submitted to the
jurisdiction of the court. It is by reason of this rule that we have had occasion to declare that the
filing of motions to admit answer, for additional time to file answer, for reconsideration of a default
judgment, and to lift order of default with motion for reconsideration, is considered voluntary
submission to the court's jurisdiction. This, however, is tempered by the concept of conditional
appearance, such that a party who makes a special appearance to challenge, among others, the
court's jurisdiction over his person cannot be considered to have submitted to its authority.
Prescinding from the foregoing, it is thus clear that:
(1) Special appearance operates as an exception to the general rule on voluntary
appearance;
(2) Accordingly, objections to the jurisdiction of the court over the person of the defendant
must be explicitly made, i.e., set forth in an unequivocal manner; and
(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court,
especially in instances where a pleading or motion seeking affirmative relief is filed and
submitted to the court for resolution. (Emphases supplied)
In this case, the records show that the following statement appeared in respondents Motion for
Leave to File Answer:
In spite of the defective service of summons, the defendant opted to file the instant Answer with
Counterclaim with Leave of Court, upon inquiring from the office of the clerk of court of this
Honorable Court and due to its notice of hearing on March 29, 2005 application for
TRO/Preliminary Mandatory Injunction was received on March 26, 2006. (Emphasis supplied) 37
Furthermore, the Answer with Counterclaim filed by Hertz never raised the defense of improper
service of summons. The defenses that it pleaded were limited to litis pendentia, pari delicto,
performance of its obligations and lack of cause of action.38 Finally, it even asserted its own
counterclaim against Optima.39
Measured against the standards in Philippine Commercial International Bank, these actions lead
to no other conclusion than that Hertz voluntarily appeared before the court a quo. We therefore
rule that, by virtue of the voluntary appearance of respondent Hertz before the MeTC, the trial
court acquired jurisdiction over respondents.
II
The instant ejectment case is not barred by litis pendentia. Hertz contends that the instant case
is barred by litis pendentia because of the pendency of its Complaint for Specific Performance
against Optima before the RTC.
We disagree.
Litis pendentia requires the concurrence of the following elements:
(1) Identity of parties, or at least their representation of the same interests in both actions;
(2) Identity of rights asserted and reliefs prayed for, the relief being founded on the same
facts; and

(3) Identity with respect to the two preceding particulars in the two cases, such that any
judgment that may be rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other case. 40
Here, while there is identity of parties in both cases, we find that the rights asserted and the
reliefs prayed for under the Complaint for Specific Performance and those under the present
Unlawful Detainer Complaint are different. As aptly found by the trial court:
The Complaint for Specific Performance] seeks to compel plaintiff-appellee Optima to: (1)
renegotiate the contract of lease; (2) reconnect the utilities at the leased premises; and (3) pay
damages. On the other hand, the unlawful detainer case sought the ejectment of defendantappellant Hertz from the leased premises and to collect arrears in rentals and utility bills. 41
As the rights asserted and the reliefs sought in the two cases are different, we find that the
pendency of the Complaint for Specific Performance is not a bar to the institution of the present
case for ejectment.
III
The eviction of respondent and the award of damages,
attorneys fees and costs were proper.
We find that the RTCs ruling upholding the ejectment of Hertz from the building premises was
proper. First, respondent failed to pay rental arrearages and utility bills to Optima; and, second,
the Contract of Lease expired without any request from Hertz for a renegotiation thereof at least
90 days prior to its expiration.
On the first ground, the records show that Hertz failed to pay rental arrearages and utility bills to
Optima. Failure to pay timely rentals and utility charges is an event of default under the Contract
of Lease,42 entitling the lessor to terminate the lease.
Moreover, the failure of Hertz to pay timely rentals and utility charges entitles the lessor to
judicially eject it under the provisions of the Civil Code. 43
On the second ground, the records likewise show that the lease had already expired on 28
February 2006 because of Hertzs failure to request a renegotiation at least 90 days prior to the
termination of the lease period.
The pertinent provision of the Contract of Lease reads:
x x x. The lease can be renewed only by a new negotiation between the parties upon written
notice by the LESSEE to be given to the LESSOR at least 90 days prior to termination of the
above lease period.44
As the lease was set to expire on 28 February 2006, Hertz had until 30 November 2005 within
which to express its interest in negotiating an extension of the lease with Optima. However, Hertz
failed to communicate its intention to negotiate for an extension of the lease within the time
agreed upon by the parties. Thus, by its own provisions, the Contract of Lease expired on 28
February 2006.
1wphi1

Under the Civil Code, the expiry of the period agreed upon by the parties is likewise a ground for
judicial ejectment.45

As to the award of monthly compensation, we find that Hertz should pay adequate compensation
to Optima, since the former continued to occupy the leased premises even after the expiration of
the lease contract. As the lease price during the effectivity of the lease contract was P54,200 per
month, we find it to be a reasonable award.
Finally, we uphold the award of attorney's fees in the amount of P30,000 and judicial costs in the
light of Hertz's unjustifiable and unlawful retention of the leased premises, thus forcing Optima to
file the instant case in order to protect its rights and interest.
From the foregoing, we find that the MeTC committed no reversible error in its 22 May 2006
Decision, and that the RTC committed no reversible error either in affirming the MeTC's Decision.
WHEREFORE, in view of the foregoing, the instant Rule 45 Petition for Review is GRANTED.
The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 99890 are
hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court, Branch 13 7,
Makati City in Civil Case No. 06-672 affirming in toto the Decision of the Metropolitan Trial Court,
Branch 64, Makati City in Civil Case No. 90842 is hereby REINSTATED and AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 130974 August 16, 2006
MA. IMELDA M. MANOTOC, Petitioner,
vs.
HONORABLE COURT OF APPEALS and AGAPITA TRAJANO on behalf of the Estate of
ARCHIMEDES TRAJANO, Respondents.
DECISION
VELASCO, JR., J.:
The courts jurisdiction over a defendant is founded on a valid service of summons. Without a
valid service, the court cannot acquire jurisdiction over the defendant, unless the defendant
voluntarily submits to it. The defendant must be properly apprised of a pending action against
him and assured of the opportunity to present his defenses to the suit. Proper service of
summons is used to protect ones right to due process.
The Case
This Petition for Review on Certiorari 1 under Rule 45 presents the core issue whether there was
a valid substituted service of summons on petitioner for the trial court to acquire jurisdiction.
Petitioner Manotoc claims the court a quo should have annulled the proceedings in the trial court
for want of jurisdiction due to irregular and ineffective service of summons.
The Facts
Petitioner is the defendant in Civil Case No. 63337 entitled Agapita Trajano, pro se, and on
behalf of the Estate of Archimedes Trajano v. Imelda Imee R. Marcos-Manotoc 2 for Filing,
Recognition and/or Enforcement of Foreign Judgment. Respondent Trajano seeks the

enforcement of a foreign courts judgment rendered on May 1, 1991 by the United States District
Court of Honolulu, Hawaii, United States of America, in a case entitled Agapita Trajano, et al. v.
Imee Marcos-Manotoc a.k.a. Imee Marcos, Civil Case No. 86-0207 for wrongful death of
deceased Archimedes Trajano committed by military intelligence officials of the Philippines
allegedly under the command, direction, authority, supervision, tolerance, sufferance and/or
influence of defendant Manotoc, pursuant to the provisions of Rule 39 of the then Revised Rules
of Court.
Based on paragraph two of the Complaint, the trial court issued a Summons 3 on July 6, 1993
addressed to petitioner at Alexandra Condominium Corporation or Alexandra Homes, E2 Room
104, at No. 29 Meralco Avenue, Pasig City.
On July 15, 1993, the Summons and a copy of the Complaint were allegedly served upon (Mr.)
Macky de la Cruz, an alleged caretaker of petitioner at the condominium unit mentioned
earlier. 4 When petitioner failed to file her Answer, the trial court declared her in default through an
Order 5 dated October 13, 1993.
On October 19, 1993, petitioner, by special appearance of counsel, filed a Motion to Dismiss 6 on
the ground of lack of jurisdiction of the trial court over her person due to an invalid substituted
service of summons. The grounds to support the motion were: (1) the address of defendant
indicated in the Complaint (Alexandra Homes) was not her dwelling, residence, or regular place
of business as provided in Section 8, Rule 14 of the Rules of Court; (2) the party (de la Cruz),
who was found in the unit, was neither a representative, employee, nor a resident of the place;
(3) the procedure prescribed by the Rules on personal and substituted service of summons was
ignored; (4) defendant was a resident of Singapore; and (5) whatever judgment rendered in this
case would be ineffective and futile.
During the hearing on the Motion to Dismiss, petitioner Manotoc presented Carlos Gonzales,
who testified that he saw defendant Manotoc as a visitor in Alexandra Homes only two times. He
also identified the Certification of Renato A. de Leon, which stated that Unit E-2104 was owned
by Queens Park Realty, Inc.; and at the time the Certification was issued, the unit was not being
leased by anyone. Petitioner also presented her Philippine passport and the
Disembarkation/Embarkation Card 7 issued by the Immigration Service of Singapore to show that
she was a resident of Singapore. She claimed that the person referred to in plaintiffs Exhibits "A"
to "EEEE" as "Mrs. Manotoc" may not even be her, but the mother of Tommy Manotoc, and
granting that she was the one referred to in said exhibits, only 27 out of 109 entries referred to
Mrs. Manotoc. Hence, the infrequent number of times she allegedly entered Alexandra Homes
did not at all establish plaintiffs position that she was a resident of said place.
On the other hand, Agapita Trajano, for plaintiffs estate, presented Robert Swift, lead counsel for
plaintiffs in the Estate of Ferdinand Marcos Human Rights Litigation, who testified that he
participated in the deposition taking of Ferdinand R. Marcos, Jr.; and he confirmed that Mr.
Marcos, Jr. testified that petitioners residence was at the Alexandra Apartment, Greenhills. 8 In
addition, the entries 9 in the logbook of Alexandra Homes from August 4, 1992 to August 2, 1993,
listing the name of petitioner Manotoc and the Sheriffs Return, 10 were adduced in evidence.
On October 11, 1994, the trial court rejected Manotocs Motion to Dismiss on the strength of its
findings that her residence, for purposes of the Complaint, was Alexandra Homes, Unit E-2104,
No. 29 Meralco Avenue, Pasig, Metro Manila, based on the documentary evidence of respondent
Trajano. The trial court relied on the presumption that the sheriffs substituted service was made
in the regular performance of official duty, and such presumption stood in the absence of proof to
the contrary. 11
On December 21, 1994, the trial court discarded Manotocs plea for reconsideration for lack of
merit. 12

Undaunted, Manotoc filed a Petition for Certiorari and Prohibition 13 before the Court of Appeals
(CA) on January 20, 1995, docketed as CA-G.R. SP No. 36214 seeking the annulment of the
October 11, 1994 and December 21, 1994 Orders of Judge Aurelio C. Trampe.
Ruling of the Court of Appeals
On March 17, 1997, the CA rendered the assailed Decision, 14 dismissing the Petition for
Certiorari and Prohibition. The court a quo adopted the findings of the trial court that petitioners
residence was at Alexandra Homes, Unit E-2104, at No. 29 Meralco Avenue, Pasig, Metro
Manila, which was also the residence of her husband, as shown by the testimony of Atty. Robert
Swift and the Returns of the registered mails sent to petitioner. It ruled that the
Disembarkation/Embarkation Card and the Certification dated September 17, 1993 issued by
Renato A. De Leon, Assistant Property Administrator of Alexandra Homes, were hearsay, and
that said Certification did not refer to July 1993the month when the substituted service was
effected.
In the same Decision, the CA also rejected petitioners Philippine passport as proof of her
residency in Singapore as it merely showed the dates of her departure from and arrival in the
Philippines without presenting the boilerplates last two (2) inside pages where petitioners
residence was indicated. The CA considered the withholding of those pages as suppression of
evidence. Thus, according to the CA, the trial court had acquired jurisdiction over petitioner as
there was a valid substituted service pursuant to Section 8, Rule 14 of the old Revised Rules of
Court.
On April 2, 1997, petitioner filed a Motion for Reconsideration 15 which was denied by the CA in its
Resolution 16dated October 8, 1997.
Hence, petitioner has come before the Court for review on certiorari.
The Issues
Petitioner raises the following assignment of errors for the Courts consideration:
I. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR IN RENDERING
THE DECISION AND RESOLUTION IN QUESTION (ANNEXES A AND B) IN DEFIANCE OF
LAW AND JURISPRUDENCE IN RULING THAT THE TRIAL COURT ACQUIRED
JURISDICTION OVER THE PERSON OF THE PETITIONER THROUGH A SUBSTITUTED
SERVICE OF SUMMONS IN ACCORDANCE WITH SECTION 8, RULE 14 OF THE REVISED
RULES OF COURT.
II. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR WHEN IT RULED
THAT THERE WAS A VALID SERVICE OF SUMMONS ON AN ALLEGED CARETAKER OF
PETITIONERS RESIDENCE IN COMPLETE DEFIANCE OF THE RULING IN CASTILLO VS.
CFI OF BULACAN, BR. IV, G.R. NO. L-55869, FEBRUARY 20, 1984, 127 SCRA 632 WHICH
DEFINES THE PROPRIETY OF SUCH SERVICE UPON MERE OVERSEERS OF PREMISES
WHERE A PARTY SUPPOSEDLY RESIDES.
III. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR IN
CONCLUDING THAT THE RESIDENCE OF THE HUSBAND IS ALSO THE RESIDENCE OF
HIS WIFE CONTRARY TO THE RULING IN THE BANK OF THE PHILIPPINE ISLANDS VS. DE
COSTER, G.R. NO. 23181, MARCH 16, 1925, 47 PHIL. 594.
IV. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR IN FAILING TO
APPLY THE RULE ON EXTRA-TERRITORIAL SERVICE OF SUMMONS UNDER SECTIONS
17 AND 18, RULE 14 OF THE REVISED RULES OF COURT. 17

The assigned errors bring to the fore the crux of the disagreementthe validity of the substituted
service of summons for the trial court to acquire jurisdiction over petitioner.
The Courts Ruling
We GRANT the petition.
Acquisition of Jurisdiction
Jurisdiction over the defendant is acquired either upon a valid service of summons or the
defendants voluntary appearance in court. When the defendant does not voluntarily submit to
the courts jurisdiction or when there is no valid service of summons, "any judgment of the court
which has no jurisdiction over the person of the defendant is null and void." 18 In an action strictly
in personam, personal service on the defendant is the preferred mode of service, that is, by
handing a copy of the summons to the defendant in person. If defendant, for excusable reasons,
cannot be served with the summons within a reasonable period, then substituted service can be
resorted to. While substituted service of summons is permitted, "it is extraordinary in character
and in derogation of the usual method of service." 19 Hence, it must faithfully and strictly comply
with the prescribed requirements and circumstances authorized by the rules. Indeed,
"compliance with the rules regarding the service of summons is as much important as the issue
of due process as of jurisdiction." 20
Requirements for Substituted Service
Section 8 of Rule 14 of the old Revised Rules of Court which applies to this case provides:
SEC. 8. 21 Substituted service. If the defendant cannot be served within a reasonable time as
provided in the preceding section [personal service on defendant], service may be effected (a) by
leaving copies of the summons at the defendants residence with some person of suitable age
and discretion then residing therein, or (b) by leaving the copies at defendants office or regular
place of business with some competent person in charge thereof.
We can break down this section into the following requirements to effect a valid substituted
service:
(1) Impossibility of Prompt Personal Service
The party relying on substituted service or the sheriff must show that defendant cannot be served
promptly or there is impossibility of prompt service. 22 Section 8, Rule 14 provides that the plaintiff
or the sheriff is given a "reasonable time" to serve the summons to the defendant in person, but
no specific time frame is mentioned. "Reasonable time" is defined as "so much time as is
necessary under the circumstances for a reasonably prudent and diligent man to do,
conveniently, what the contract or duty requires that should be done, having a regard for the
rights and possibility of loss, if any[,] to the other party." 23 Under the Rules, the service of
summons has no set period. However, when the court, clerk of court, or the plaintiff asks the
sheriff to make the return of the summons and the latter submits the return of summons, then the
validity of the summons lapses. The plaintiff may then ask for an alias summons if the service of
summons has failed. 24 What then is a reasonable time for the sheriff to effect a personal service
in order to demonstrate impossibility of prompt service? To the plaintiff, "reasonable time" means
no more than seven (7) days since an expeditious processing of a complaint is what a plaintiff
wants. To the sheriff, "reasonable time" means 15 to 30 days because at the end of the month, it
is a practice for the branch clerk of court to require the sheriff to submit a return of the summons
assigned to the sheriff for service. The Sheriffs Return provides data to the Clerk of Court, which
the clerk uses in the Monthly Report of Cases to be submitted to the Office of the Court
Administrator within the first ten (10) days of the succeeding month. Thus, one month from the

issuance of summons can be considered "reasonable time" with regard to personal service on
the defendant.
Sheriffs are asked to discharge their duties on the service of summons with due care, utmost
diligence, and reasonable promptness and speed so as not to prejudice the expeditious
dispensation of justice. Thus, they are enjoined to try their best efforts to accomplish personal
service on defendant. On the other hand, since the defendant is expected to try to avoid and
evade service of summons, the sheriff must be resourceful, persevering, canny, and diligent in
serving the process on the defendant. For substituted service of summons to be available, there
must be several attempts by the sheriff to personally serve the summons within a reasonable
period [of one month] which eventually resulted in failure to prove impossibility of prompt service.
"Several attempts" means at least three (3) tries, preferably on at least two different dates. In
addition, the sheriff must cite why such efforts were unsuccessful. It is only then that impossibility
of service can be confirmed or accepted.
(2) Specific Details in the Return
The sheriff must describe in the Return of Summons the facts and circumstances surrounding
the attempted personal service. 25 The efforts made to find the defendant and the reasons behind
the failure must be clearly narrated in detail in the Return. The date and time of the attempts on
personal service, the inquiries made to locate the defendant, the name/s of the occupants of the
alleged residence or house of defendant and all other acts done, though futile, to serve the
summons on defendant must be specified in the Return to justify substituted service. The form on
Sheriffs Return of Summons on Substituted Service prescribed in the Handbook for Sheriffs
published by the Philippine Judicial Academy requires a narration of the efforts made to find the
defendant personally and the fact of failure. 26 Supreme Court Administrative Circular No. 5 dated
November 9, 1989 requires that "impossibility of prompt service should be shown by stating the
efforts made to find the defendant personally and the failure of such efforts," which should be
made in the proof of service.
(3) A Person of Suitable Age and Discretion
If the substituted service will be effected at defendants house or residence, it should be left with
a person of "suitable age and discretion then residing therein." 27 A person of suitable age and
discretion is one who has attained the age of full legal capacity (18 years old) and is considered
to have enough discernment to understand the importance of a summons. "Discretion" is defined
as "the ability to make decisions which represent a responsible choice and for which an
understanding of what is lawful, right or wise may be presupposed". 28 Thus, to be of sufficient
discretion, such person must know how to read and understand English to comprehend the
import of the summons, and fully realize the need to deliver the summons and complaint to the
defendant at the earliest possible time for the person to take appropriate action. Thus, the person
must have the "relation of confidence" to the defendant, ensuring that the latter would receive or
at least be notified of the receipt of the summons. The sheriff must therefore determine if the
person found in the alleged dwelling or residence of defendant is of legal age, what the
recipients relationship with the defendant is, and whether said person comprehends the
significance of the receipt of the summons and his duty to immediately deliver it to the defendant
or at least notify the defendant of said receipt of summons. These matters must be clearly and
specifically described in the Return of Summons.
(4) A Competent Person in Charge
If the substituted service will be done at defendants office or regular place of business, then it
should be served on a competent person in charge of the place. Thus, the person on whom the
substituted service will be made must be the one managing the office or business of defendant,
such as the president or manager; and such individual must have sufficient knowledge to
understand the obligation of the defendant in the summons, its importance, and the prejudicial

effects arising from inaction on the summons. Again, these details must be contained in the
Return.
Invalid Substituted Service in the Case at Bar
Let us examine the full text of the Sheriffs Return, which reads:
THIS IS TO CERTIFY that on many occasions several attempts were made to serve the
summons with complaint and annexes issued by this Honorable Court in the above entitled case,
personally upon the defendant IMELDA IMEE MARCOS-MANOTOC located at Alexandra
Condominium Corpration [sic] or Alexandra Homes E-2 Room 104 No. 29 Merlaco [sic] Ave.,
Pasig, Metro-Manila at reasonable hours of the day but to no avail for the reason that said
defendant is usually out of her place and/or residence or premises. That on the 15th day of July,
1993, substituted service of summons was resorted to in accordance with the Rules of Court in
the Philippines leaving copy of said summons with complaint and annexes thru [sic] (Mr) Macky
de la Cruz, caretaker of the said defendant, according to (Ms) Lyn Jacinto, Receptionist and
Telephone Operator of the said building, a person of suitable age and discretion, living with the
said defendant at the given address who acknowledged the receipt thereof of said processes but
he refused to sign (emphases supplied).
WHEREFORE, said summons is hereby returned to this Honorable Court of origin, duly served
for its record and information.
Pasig, Metro-Manila July 15, 1993. 29
A meticulous scrutiny of the aforementioned Return readily reveals the absence of material data
on the serious efforts to serve the Summons on petitioner Manotoc in person. There is no clear
valid reason cited in the Return why those efforts proved inadequate, to reach the conclusion that
personal service has become impossible or unattainable outside the generally couched phrases
of "on many occasions several attempts were made to serve the summons x x x personally," "at
reasonable hours during the day," and "to no avail for the reason that the said defendant is
usually out of her place and/or residence or premises." Wanting in detailed information, the
Return deviates from the rulingin Domagas v. Jensen 30 and other related cases 31that the
pertinent facts and circumstances on the efforts exerted to serve the summons personally must
be narrated in the Return. It cannot be determined how many times, on what specific dates, and
at what hours of the day the attempts were made. Given the fact that the substituted service of
summons may be assailed, as in the present case, by a Motion to Dismiss, it is imperative that
the pertinent facts and circumstances surrounding the service of summons be described with
more particularity in the Return or Certificate of Service.
Besides, apart from the allegation of petitioners address in the Complaint, it has not been shown
that respondent Trajano or Sheriff Caelas, who served such summons, exerted extraordinary
efforts to locate petitioner. Certainly, the second paragraph of the Complaint only states that
respondents were "informed, and so [they] allege" about the address and whereabouts of
petitioner. Before resorting to substituted service, a plaintiff must demonstrate an effort in good
faith to locate the defendant through more direct means. 32 More so, in the case in hand, when
the alleged petitioners residence or house is doubtful or has not been clearly ascertained, it
would have been better for personal service to have been pursued persistently.
In the case Umandap v. Sabio, Jr., 33 it may be true that the Court held that a Sheriffs Return,
which states that "despite efforts exerted to serve said process personally upon the defendant on
several occasions the same proved futile," conforms to the requirements of valid substituted
service. However, in view of the numerous claims of irregularities in substituted service which
have spawned the filing of a great number of unnecessary special civil actions of certiorari and
appeals to higher courts, resulting in prolonged litigation and wasteful legal expenses, the Court
rules in the case at bar that the narration of the efforts made to find the defendant and the fact of

failure written in broad and imprecise words will not suffice. The facts and circumstances should
be stated with more particularity and detail on the number of attempts made at personal service,
dates and times of the attempts, inquiries to locate defendant, names of occupants of the alleged
residence, and the reasons for failure should be included in the Return to satisfactorily show the
efforts undertaken. That such efforts were made to personally serve summons on defendant, and
those resulted in failure, would prove impossibility of prompt personal service.
Moreover, to allow sheriffs to describe the facts and circumstances in inexact terms would
encourage routine performance of their precise duties relating to substituted servicefor it would
be quite easy to shroud or conceal carelessness or laxity in such broad terms. Lastly, considering
that monies and properties worth millions may be lost by a defendant because of an irregular or
void substituted service, it is but only fair that the Sheriffs Return should clearly and convincingly
show the impracticability or hopelessness of personal service.
Granting that such a general description be considered adequate, there is still a serious
nonconformity from the requirement that the summons must be left with a "person of suitable age
and discretion" residing in defendants house or residence. Thus, there are two (2) requirements
under the Rules: (1) recipient must be a person of suitable age and discretion; and (2) recipient
must reside in the house or residence of defendant. Both requirements were not met. In this
case, the Sheriffs Return lacks information as to residence, age, and discretion of Mr. Macky de
la Cruz, aside from the sheriffs general assertion that de la Cruz is the "resident caretaker" of
petitioner as pointed out by a certain Ms. Lyn Jacinto, alleged receptionist and telephone
operator of Alexandra Homes. It is doubtful if Mr. de la Cruz is residing with petitioner Manotoc in
the condominium unit considering that a married woman of her stature in society would unlikely
hire a male caretaker to reside in her dwelling. With the petitioners allegation that Macky de la
Cruz is not her employee, servant, or representative, it is necessary to have additional
information in the Return of Summons. Besides, Mr. Macky de la Cruzs refusal to sign the
Receipt for the summons is a strong indication that he did not have the necessary "relation of
confidence" with petitioner. To protect petitioners right to due process by being accorded proper
notice of a case against her, the substituted service of summons must be shown to clearly
comply with the rules.
It has been stated and restated that substituted service of summons must faithfully and strictly
comply with the prescribed requirements and in the circumstances authorized by the rules. 34
Even American case law likewise stresses the principle of strict compliance with statute or rule
on substituted service, thus:
The procedure prescribed by a statute or rule for substituted or constructive service must be
strictly pursued. 35There must be strict compliance with the requirements of statutes authorizing
substituted or constructive service.36
Where, by the local law, substituted or constructive service is in certain situations authorized in
the place of personal service when the latter is inconvenient or impossible, a strict and literal
compliance with the provisions of the law must be shown in order to support the judgment based
on such substituted or constructive service. 37Jurisdiction is not to be assumed and exercised on
the general ground that the subject matter of the suit is within the power of the court. The inquiry
must be as to whether the requisites of the statute have been complied with, and such
compliance must appear on the record. 38 The fact that the defendant had actual knowledge of
attempted service does not render the service effectual if in fact the process was not served in
accordance with the requirements of the statute. 39
Based on the above principles, respondent Trajano failed to demonstrate that there was strict
compliance with the requirements of the then Section 8, Rule 14 (now Section 7, Rule 14 of the
1997 Rules of Civil Procedure).

Due to non-compliance with the prerequisites for valid substituted service, the proceedings held
before the trial court perforce must be annulled.
The court a quo heavily relied on the presumption of regularity in the performance of official duty.
It reasons out that "[t]he certificate of service by the proper officer is prima facie evidence of the
facts set out herein, and to overcome the presumption arising from said certificate, the evidence
must be clear and convincing." 40
The Court acknowledges that this ruling is still a valid doctrine. However, for the presumption to
apply, the Sheriffs Return must show that serious efforts or attempts were exerted to personally
serve the summons and that said efforts failed. These facts must be specifically narrated in the
Return. To reiterate, it must clearly show that the substituted service must be made on a person
of suitable age and discretion living in the dwelling or residence of defendant. Otherwise, the
Return is flawed and the presumption cannot be availed of. As previously explained, the Return
of Sheriff Caelas did not comply with the stringent requirements of Rule 14, Section 8 on
substituted service.
In the case of Venturanza v. Court of Appeals, 41 it was held that "x x x the presumption of
regularity in the performance of official functions by the sheriff is not applicable in this case where
it is patent that the sheriffs return is defective (emphasis supplied)." While the Sheriffs Return in
the Venturanza case had no statement on the effort or attempt to personally serve the summons,
the Return of Sheriff Caelas in the case at bar merely described the efforts or attempts in
general terms lacking in details as required by the ruling in the case of Domagas v. Jensen and
other cases. It is as if Caelas Return did not mention any effort to accomplish personal service.
Thus, the substituted service is void.
On the issue whether petitioner Manotoc is a resident of Alexandra Homes, Unit E-2104, at No.
29 Meralco Avenue, Pasig City, our findings that the substituted service is void has rendered the
matter moot and academic. Even assuming that Alexandra Homes Room 104 is her actual
residence, such fact would not make an irregular and void substituted service valid and effective.
IN VIEW OF THE FOREGOING, this Petition for Review is hereby GRANTED and the assailed
March 17, 1997 Decision and October 8, 1997 Resolution of the Court of Appeals and the
October 11, 1994 and December 21, 1994 Orders of the Regional Trial Court, National Capital
Judicial Region, Pasig City, Branch 163 are herebyREVERSED and SET ASIDE.No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 163584

December 12, 2006

REMELITA M. ROBINSON, petitioner,

vs.
CELITA B. MIRALLES, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:
Before us is the instant petition for review on certiorari assailing the Resolutions dated February
111 and May 11, 20042 of the Regional Trial Court (RTC), Branch 274, Paraaque City, in Civil
Case No. 00-0372.
On August 25, 2000, Celita Miralles, respondent, filed with the said court a complaint for sum of
money against Remelita Robinson, petitioner, docketed as Civil Case No. 00-0372. Respondent
alleged that petitioner borrowed from her US$20,054.00 as shown by a Memorandum of
Agreement they both executed on January 12, 2000.
Summons was served on petitioner at her given address. However, per return of service of
Sheriff Maximo Potente dated March 5, 2001, petitioner no longer resides at such address.
On July 20, 2001, the trial court issued an alias summons to be served at No. 19 Baguio St.,
Alabang Hills, Muntinlupa City, petitioners new address.
Again, the summons could not be served on petitioner. Sheriff Potente explained that:
The Security Guard assigned at the gate of Alabang Hills refused to let me go inside the
subdivision so that I could effect the service of the summons to the defendant in this
case. The security guard alleged that the defendant had given them instructions not to let
anybody proceed to her house if she is not around. I explained to the Security Guard that
I am a sheriff serving the summons to the defendant, and if the defendant is not around,
summons can be received by any person of suitable age and discretion living in the same
house. Despite of all the explanation, the security guard by the name of A.H. Geroche still
refused to let me go inside the subdivision and served (sic) the summons to the
defendant. The same thing happened when I attempted to serve the summons
previously.
Therefore, the summons was served by leaving a copy thereof together with the copy of
the complaint to the security guard by the name of A.H. Geroche, who refused to affix his
signature on the original copy thereof, so he will be the one to give the same to the
defendant.
Eventually, respondent filed a motion to declare petitioner in default for her failure to file an
answer seasonably despite service of summons.
On February 28, 2003, the trial court granted respondents motion declaring petitioner in default
and allowing respondent to present her evidence ex parte.
On June 20, 2003, the trial court issued an Order, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against
defendant ordering the defendant to pay the plaintiff as follows:
1. The sum of US$20,054.00 as the unpaid obligation, plus the stipulated interest of 3% a
month from May 2000 (date of default) until fully paid;
2. Php100,000.00 for moral damages;
3. Php50,000.00 plus Php1,500.00 per appearance as attorneys fees;

4. Costs of suit.
SO ORDERED.
A copy of the Order was sent to petitioner by registered mail at her new address.
Upon respondents motion, the trial court, on September 8, 2003, issued a writ of execution.
On September 26, 2003, petitioner filed with the trial court a petition for relief from the judgment
by default. She claimed that summons was improperly served upon her, thus, the trial court
never acquired jurisdiction over her and that all its proceedings are void.
On February 11, 2004, the trial court issued a Resolution denying the petition for relief. Petitioner
filed a motion for reconsideration, but it was denied by the trial court in a Resolution dated May
11, 2004.
Hence, the instant recourse.
The sole issue for our resolution is whether the trial court correctly ruled that a substituted
service of summons upon petitioner has been validly effected.
Summons is a writ by which the defendant is notified of the action brought against him or her.3 In
a civil action, service of summons is the means by which the court acquires jurisdiction over the
person of the defendant.4 Any judgment without such service, in the absence of a valid waiver, is
null and void.5 Where the action is in personamand the defendant is in the Philippines, the
service of summons may be made through personal or substituted service in the manner
provided for in Sections 6 and 7, Rule 14 of the 1997 Rules of Procedure, as amended, 6thus:
SEC. 6. Service in person on defendant. Whenever practicable, the summons shall be
served by handing a copy thereof to the defendant in person, or if he refuses to receive
and sign for it, by tendering it to him.
SEC. 7. Substituted service. If, for justifiable causes, the defendant cannot be served
within a reasonable time as provided in the preceding section, service may be effected
(a) by leaving copies of the summons at the defendants residence with some person of
suitable age and discretion then residing therein; or (b) by leaving the copies at the
defendants office or regular place of business with some competent person in charge
thereof.
Under our procedural rules, personal service is generally preferred over substituted service, the
latter mode of service being a method extraordinary in character.7 For substituted service to be
justified, the following circumstances must be clearly established: (a) personal service of
summons within a reasonable time was impossible; (b) efforts were exerted to locate the party;
and (c) the summons was served upon a person of sufficient age and discretion residing at the
partys residence or upon a competent person in charge of the partys office or place of
business.8 Failure to do so would invalidate all subsequent proceedings on jurisdictional
grounds.9
Petitioner contends that the service of summons upon the subdivision security guard is not in
compliance with Section 7, Rule 14 since he is not related to her or staying at her residence.
Moreover, he is not duly authorized to receive summons for the residents of the village. Hence,
the substituted service of summons is not valid and that the trial court never acquired jurisdiction
over her person.

We have ruled that the statutory requirements of substituted service must be followed strictly,
faithfully, and fully and any substituted service other than that authorized by the Rules is
considered ineffective.10 However, we frown upon an overly strict application of the Rules. It is the
spirit, rather than the letter of the procedural rules, that governs.
In his Return, Sheriff Potente declared that he was refused entry by the security guard in Alabang
Hills twice. The latter informed him that petitioner prohibits him from allowing anybody to proceed
to her residence whenever she is out. Obviously, it was impossible for the sheriff to effect
personal or substituted service of summons upon petitioner. We note that she failed to controvert
the sheriffs declaration. Nor did she deny having received the summons through the security
guard.
Considering her strict instruction to the security guard, she must bear its consequences. Thus,
we agree with the trial court that summons has been properly served upon petitioner and that it
has acquired jurisdiction over her.
WHEREFORE, we DENY the petition and we AFFIRM the assailed Orders of the RTC, Branch
274, Paraaque City, in Civil Case No. 00-0372. Costs against petitioner.
SO ORDERED.
Puno, C.J., Chairperson, Corona, Azcuna, and Garcia, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 136426

August 6, 1999

E. B. VILLAROSA & PARTNER CO., LTD., petitioner,

vs.
HON. HERMINIO I. BENITO, in his capacity as Presiding Judge, RTC, Branch 132, Makati
City
and IMPERIAL DEVELOPMENT CORPORATION, respondent.
GONZAGA-REYES, J.:
Before this Court is a petition for certiorari and prohibition with prayer for the issuance of a
temporary restraining order and/or writ of preliminary injunction seeking to annul and set aside
the Orders dated August 5, 1998 and November 20, 1998 of the public respondent Judge
Herminio I. Benito of the Regional Trial Court of Makati City, Branch 132 and praying that the
public respondent court be ordered to desist from further proceeding with Civil Case No. 98-824.
Petitioner E.B. Villarosa & Partner Co., Ltd. is a limited partnership with principal office address
at 102 Juan Luna St., Davao City and with branch offices at 2492 Bay View Drive, Tambo,
Paraaque, Metro Manila and Kolambog, Lapasan, Cagayan de Oro City. Petitioner and private
respondent executed a Deed of Sale with Development Agreement wherein the former agreed to
develop certain parcels of land located at Barrio Carmen, Cagayan de Oro belonging to the latter
into a housing subdivision for the construction of low cost housing units. They further agreed that
in case of litigation regarding any dispute arising therefrom, the venue shall be in the proper
courts of Makati.

On April 3, 1998, private respondent, as plaintiff, filed a Complaint for Breach of Contract and
Damages against petitioner, as defendant, before the Regional Trial Court of Makati allegedly for
failure of the latter to comply with its contractual obligation in that, other than a few unfinished low
cost houses, there were no substantial developments therein.1
Summons, together with the complaint, were served upon the defendant, through its Branch
Manager Engr. Wendell Sabulbero at the stated address at Kolambog, Lapasan, Cagayan de
Oro City2 but the Sheriff's Return of Service3 stated that the summons was duly served "upon
defendant E.B. Villarosa & Partner Co., Ltd. thru its Branch Manager Engr. WENDELL
SALBULBERO on May 5, 1998 at their new office Villa Gonzalo, Nazareth, Cagayan de Oro City,
and evidenced by the signature on the face of the original copy of the summons.
1wphi1.nt

On June 9, 1998, defendant filed a Special Appearance with Motion to Dismiss 4 alleging that on
May 6, 1998, "summons intended for defendant" was served upon Engr. Wendell Sabulbero, an
employee of defendant at its branch office at Cagayan de Oro City. Defendant prayed for the
dismissal of the complaint on the ground of improper service of summons and for lack of
jurisdiction over the person of the defendant. Defendant contends that the trial court did not
acquire jurisdiction over its person since the summons was improperly served upon its employee
in its branch office at Cagayan de Oro City who is not one of those persons named in Section 11,
Rule 14 of the 1997 Rules of Civil Procedure upon whom service of summons may be made.
Meanwhile, on June 10, 1998, plaintiff filed a Motion to Declare Defendant in Default 5 alleging
that defendant has failed to file an Answer despite its receipt allegedly on May 5, 1998 of the
summons and the complaint, as shown in the Sheriffs Return.
On June 22, 1998, plaintiff filed an Opposition to Defendant's Motion to Dismiss 6 alleging that the
records show that defendant, through its branch manager, Engr. Wendell Sabulbero actually
received the summons and the complaint on May 8, 1998 as evidenced by the signature
appearing on the copy of the summons and not on May 5, 1998 as stated in the Sheriffs Return
nor on May 6, 1998 as stated in the motion to dismiss; that defendant has transferred its office
from Kolambog, Lapasan, Cagayan de Oro to its new office address at Villa Gonzalo, Nazareth,
Cagayan de Oro; and that the purpose of the rule is to bring home to the corporation notice of
the filing of the action.
On August 5, 1998, the trial court issued an Order7 denying defendant's Motion to Dismiss as
well as plaintiffs Motion to Declare Defendant in Default. Defendant was given ten (10) days
within which to file a responsive pleading. The trial court stated that since the summons and copy
of the complaint were in fact received by the corporation through its branch manager Wendell
Sabulbero, there was substantial compliance with the rule on service of summons and
consequently, it validly acquired jurisdiction over the person of the defendant.
On August 19, 1998, defendant, by Special Appearance, filed a Motion for
Reconsideration8 alleging that Section 11, Rule 14 of the new Rules did not liberalize but, on the
contrary, restricted the service of summons on persons enumerated therein; and that the new
provision is very specific and clear in that the word "manager" was changed to "general
manager", "secretary" to "corporate secretary", and excluding therefrom agent and director.
On August 27, 1998, plaintiff filed an Opposition to defendant's Motion for
Reconsideration9 alleging that defendant's branch manager "did bring home" to the defendantcorporation the notice of the filing of the action and by virtue of which a motion to dismiss was
filed; and that it was one (1) month after receipt of the summons and the complaint that
defendant chose to file a motion to dismiss.
On September 4, 1998, defendant, by Special Appearance, filed a Reply 10 contending that the
changes in the new rules are substantial and not just general semantics.

Defendant's Motion for Reconsideration was denied in the Order dated November 20, 1998. 11
Hence, the present petition alleging that respondent court gravely abused its discretion
tantamount to lack or in excess of jurisdiction in denying petitioner's motions to dismiss and for
reconsideration, despite the fact that the trial court did not acquire jurisdiction over the person of
petitioner because the summons intended for it was improperly served. Petitioner invokes
Section 11 of Rule 14 of the 1997 Rules of Civil Procedure.
Private respondent filed its Comment to the petition citing the cases Kanlaon Construction
Enterprises Co., Inc.vs. NLRC12 wherein it was held that service upon a construction project
manager is valid and in Gesulgon vs.NLRC13 which held that a corporation is bound by the
service of summons upon its assistant manager.
The only issue for resolution is whether or not the trial court acquired jurisdiction over the person
of petitioner upon service of summons on its Branch Manager.
When the complaint was filed by Petitioner on April 3, 1998, the 1997 Rules of Civil Procedure
was already in force.14
Sec. 11, Rule 14 of the 1997 Rules of Civil Procedure provides that:
When the defendant is a corporation, partnership or association organized under the
laws of the Philippines with a juridical personality, service may be made on the president,
managing partner, general manager, corporate secretary, treasurer, or in-house counsel.
(emphasis supplied).
This provision revised the former Section 13, Rule 14 of the Rules of Court which provided that:
Sec. 13. Service upon private domestic corporation or partnership. If the defendant is
a corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier, agent, or
any of its directors. (emphasis supplied).
Petitioner contends that the enumeration of persons to whom summons may be served is
"restricted, limited and exclusive" following the rule on statutory construction expressio unios est
exclusio alterius and argues that if the Rules of Court Revision Committee intended to liberalize
the rule on service of summons, it could have easily done so by clear and concise language.
We agree with petitioner.
Earlier cases have uphold service of summons upon a construction project manager 15; a
corporation's assistant manager16; ordinary clerk of a corporation17; private secretary of corporate
executives18; retained counsel19; officials who had charge or control of the operations of the
corporation, like the assistant general manager 20; or the corporation's Chief Finance and
Administrative Officer21. In these cases, these persons were considered as "agent" within the
contemplation of the old rule.22 Notably, under the new Rules, service of summons upon an agent
of the corporation is no longer authorized.
The cases cited by private respondent are therefore not in point.
In the Kanlaon case, this Court ruled that under the NLRC Rules of Procedure, summons on the
respondent shall be served personally or by registered mail on the party himself; if the party is
represented by counsel or any other authorized representative or agent, summons shall be
served on such person. In said case, summons was served on one Engr. Estacio who managed
and supervised the construction project in Iligan City (although the principal address of the

corporation is in Quezon City) and supervised the work of the employees. It was held that as
manager, he had sufficient responsibility and discretion to realize the importance of the legal
papers served on him and to relay the same to the president or other responsible officer of
petitioner such that summons for petitioner was validly served on him as agent and authorized
representative of petitioner. Also in the Gesulgon case cited by private respondent, the summons
was received by the clerk in the office of the Assistant Manager (at principal office address) and
under Section 13 of Rule 14 (old rule), summons may be made upon the clerk who is regarded
as agent within the contemplation of the rule.
The designation of persons or officers who are authorized to accept summons for a domestic
corporation or partnership is now limited and more clearly specified in Section 11, Rule 14 of the
1997 Rules of Civil Procedure. The rule now states "general manager" instead of only
"manager"; "corporate secretary" instead of "secretary"; and "treasurer" instead of "cashier." The
phrase "agent, or any of its directors" is conspicuously deleted in the new rule.
The particular revision under Section 11 of Rule 14 was explained by retired Supreme Court
Justice Florenz Regalado, thus:23
. . . the then Sec. 13 of this Rule allowed service upon a defendant corporation to "be
made on the president, manager, secretary, cashier, agent or any of its directors." The
aforesaid terms were obviously ambiguous and susceptible of broad and sometimes
illogical interpretations, especially the word "agent" of the corporation. The Filoil case,
involving the litigation lawyer of the corporation who precisely appeared to challenge the
validity of service of summons but whose very appearance for that purpose was seized
upon to validate the defective service, is an illustration of the need for this revised section
with limited scope and specific terminology. Thus the absurd result in the Filoil case
necessitated the amendment permitting service only on the in-house counsel of the
corporation who is in effect an employee of the corporation, as distinguished from an
independent practitioner. (emphasis supplied).
Retired Justice Oscar Herrera, who is also a consultant of the Rules of Court Revision
Committee, stated that "(T)he rule must be strictly observed. Service must be made to one
named in (the) statute . . . .24
It should be noted that even prior to the effectivity of the 1997 Rules of Civil Procedure, strict
compliance with the rules has been enjoined. In the case of Delta Motor Sales Corporation
vs. Mangosing,25 the Court held:
A strict compliance with the mode of service is necessary to confer jurisdiction of the
court over a corporation. The officer upon whom service is made must be one who is
named in the statute; otherwise the service is insufficient. . . .
The purpose is to render it reasonably certain that the corporation will receive prompt and
proper notice in an action against it or to insure that the summons be served on a
representative so integrated with the corporation that such person will know what to do
with the legal papers served on him. In other words, "to bring home to the corporation
notice of the filing of the action." . . . .
The liberal construction rule cannot be invoked and utilized as a substitute for the plain
legal requirements as to the manner in which summons should be served on a domestic
corporation. . . . . (emphasis supplied).
Service of summons upon persons other than those mentioned in Section 13 of Rule 14 (old
rule) has been held as improper.26 Even under the old rule, service upon a general manager of a
firm's branch office has been held as improper as summons should have been served at the
firm's principal office. In First Integrated Bonding & Inc.Co., Inc. vs. Dizon,27 it was held that the

service of summons on the general manager of the insurance firm's Cebu branch was improper;
default order could have been obviated had the summons been served at the firm's principal
office.
And in the case of Solar Team Entertainment, Inc. vs. Hon. Helen Bautista Ricafort, et al.28 the
Court succinctly clarified that, for the guidance of the Bench and Bar, "strictest" compliance with
Section 11 of Rule 13 of the 1997 Rules of Civil Procedure (on Priorities in modes of service and
filing) is mandated and the Court cannot rule otherwise, lest we allow circumvention of the
innovation by the 1997 Rules in order to obviate delay in the administration of justice.
Accordingly, we rule that the service of summons upon the branch manager of petitioner at its
branch office at Cagayan de Oro, instead of upon the general manager at its principal office at
Davao City is improper. Consequently, the trial court did not acquire jurisdiction over the person
of the petitioner.
The fact that defendant filed a belated motion to dismiss did not operate to confer jurisdiction
upon its person. There is no question that the defendant's voluntary appearance in the action is
equivalent to service of summons.29 Before, the rule was that a party may challenge the
jurisdiction of the court over his person by making a special appearance through a motion to
dismiss and if in the same motion, the movant raised other grounds or invoked affirmative relief
which necessarily involves the exercise of the jurisdiction of the court. 30 This doctrine has been
abandoned in the case of La Naval Drug Corporation vs. Court of Appeals, et al.,31 which became
the basis of the adoption of a new provision in the former Section 23, which is now Section 20 of
Rule 14 of the 1997 Rules. Section 20 now provides that "the inclusion in a motion to dismiss of
other grounds aside from lack of jurisdiction over the person of the defendant shall not be
deemed a voluntary appearance." The emplacement of this rule clearly underscores the purpose
to enforce strict enforcement of the rules on summons. Accordingly, the filing of a motion to
dismiss, whether or not belatedly filed by the defendant, his authorized agent or attorney,
precisely objecting to the jurisdiction of the court over the person of the defendant can by no
means be deemed a submission to the jurisdiction of the court. There being no proper service of
summons, the trial court cannot take cognizance of a case for lack of jurisdiction over the person
of the defendant. Any proceeding undertaken by the trial court will consequently be null and
void.32
WHEREFORE, the petition is hereby GRANTED. The assailed Orders of the public respondent
trial court are ANNULLED and SET ASIDE. The public respondent Regional Trial Court of Makati,
Branch 132 is declared without jurisdiction to take cognizance of Civil Case No. 98-824, and all
its orders and issuances in connection therewith are hereby ANNULLED and SET ASIDE.
1wphi1.nt

SO ORDERED.
Melo, Vitug, Panganiban and Purisima, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171750

January 25, 2012

UNITED PULP AND PAPER CO., INC., Petitioner,

vs.
ACROPOLIS CENTRAL GUARANTY CORPORATION, Respondent.

DECISION
MENDOZA, J.:
This is a petition for review under Rule 45 praying for the annulment of the November 17, 2005
Decision1 and the March 2, 2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
89135 entitled Acropolis Central Guaranty Corporation (formerly known as the Philippine Pryce
Assurance Corp.) v. Hon. Oscar B. Pimentel, as Presiding Judge, RTC of Makati City, Branch
148 (RTC), and United Pulp and Paper Co., Inc.
The Facts
On May 14, 2002, United Pulp and Paper Co., Inc. (UPPC) filed a civil case for collection of the
amount ofP42,844,353.14 against Unibox Packaging Corporation (Unibox) and Vicente Ortega
(Ortega) before the Regional Trial Court of Makati, Branch 148 (RTC).3 UPPC also prayed for a
Writ of Preliminary Attachment against the properties of Unibox and Ortega for the reason that
the latter were on the verge of insolvency and were transferring assets in fraud of creditors. 4 On
August 29, 2002, the RTC issued the Writ of Attachment5 after UPPC posted a bond in the same
amount of its claim. By virtue of the said writ, several properties and assets of Unibox and Ortega
were attached.6
On October 10, 2002, Unibox and Ortega filed their Motion for the Discharge of
Attachment,7 praying that they be allowed to file a counter-bond in the amount of P42,844,353.14
and that the writ of preliminary attachment be discharged after the filing of such bond. Although
this was opposed by UPPC, the RTC, in its Order dated October 25, 2002, granted the said
motion for the discharge of the writ of attachment subject to the condition that Unibox and Ortega
file a counter-bond.8 Thus, on November 21, 2002, respondent Acropolis Central Guaranty
Corporation (Acropolis) issued the Defendants Bond for Dissolution of Attachment9 in the amount
ofP42,844,353.14 in favor of Unibox.
Not satisfied with the counter-bond issued by Acropolis, UPPC filed its Manifestation and Motion
to Discharge the Counter-Bond10 dated November 27, 2002, claiming that Acropolis was among
those insurance companies whose licenses were set to be cancelled due to their failure to put up
the minimum amount of capitalization required by law. For that reason, UPPC prayed for the
discharge of the counter-bond and the reinstatement of the attachment. In its December 10,
2002 Order,11 the RTC denied UPPCs Motion to Discharge Counter-Bond and, instead, approved
and admitted the counter-bond posted by Acropolis. Accordingly, it ordered the sheriff to cause
the lifting of the attachment on the properties of Unibox and Ortega.
On September 29, 2003, Unibox, Ortega and UPPC executed a compromise
agreement,12 wherein Unibox and Ortega acknowledged their obligation to UPPC in the amount
of P35,089,544.00 as of August 31, 2003, inclusive of the principal and the accrued interest, and
bound themselves to pay the said amount in accordance with a schedule of payments agreed
upon by the parties. Consequently, the RTC promulgated its Judgment 13 dated October 2, 2003
approving the compromise agreement.
For failure of Unibox and Ortega to pay the required amounts for the months of May and June
2004 despite demand by UPPC, the latter filed its Motion for Execution 14 to satisfy the remaining
unpaid balance. In the July 30, 2004 Order,15 the RTC acted favorably on the said motion and, on
August 4, 2004, it issued the requested Writ of Execution. 16
The sheriff then proceeded to enforce the Writ of Execution. It was discovered, however, that
Unibox had already ceased its business operation and all of its assets had been foreclosed by its
creditor bank. Moreover, the responses of the selected banks which were served with notices of
garnishment indicated that Unibox and Ortega no longer had funds available for garnishment.
The sheriff also proceeded to the residence of Ortega to serve the writ but he was denied entry

to the premises. Despite his efforts, the sheriff reported in his November 4, 2008 Partial
Return17 that there was no satisfaction of the remaining unpaid balance by Unibox and Ortega.
On the basis of the said return, UPPC filed its Motion to Order Surety to Pay Amount of CounterBond18 directed at Acropolis. On November 30, 2004, the RTC issued its Order 19 granting the
motion and ordering Acropolis to comply with the terms of its counter-bond and pay UPPC the
unpaid balance of the judgment in the amount ofP27,048,568.78 with interest of 12% per annum
from default.
Thereafter, on December 13, 2004, Acropolis filed its Manifestation and Very Urgent Motion for
Reconsideration,20 arguing that it could not be made to pay the amount of the counter-bond
because it did not receive a demand for payment from UPPC. Furthermore, it reasoned that its
obligation had been discharged by virtue of the novation of its obligation pursuant to the
compromise agreement executed by UPPC, Unibox and Ortega. The motion, which was set for
hearing on December 17, 2004, was received by the RTC and UPPC only on December 20,
2004.21 In the Order dated February 22, 2005, the RTC denied the motion for reconsideration for
lack of merit and for having been filed three days after the date set for the hearing on the said
motion.22
Aggrieved, Acropolis filed a petition for certiorari before the CA with a prayer for the issuance of a
Temporary Restraining Order and Writ of Preliminary Injunction.23 On November 17, 2005, the CA
rendered its Decision24granting the petition, reversing the February 22, 2005 Order of the RTC,
and absolving and relieving Acropolis of its liability to honor and pay the amount of its counterattachment bond. In arriving at said disposition, the CA stated that, firstly, Acropolis was able to
comply with the three-day notice rule because the motion it filed was sent by registered mail on
December 13, 2004, four days prior to the hearing set for December 17, 2004; 25 secondly, UPPC
failed to comply with the following requirements for recovery of a judgment creditor from the
surety on the counter-bond in accordance with Section 17, Rule 57 of the Rules of Court, to wit:
(1) demand made by creditor on the surety, (2) notice to surety and (3) summary hearing as to
his liability for the judgment under the counter-bond; 26 and, thirdly, the failure of UPPC to include
Acropolis in the compromise agreement was fatal to its case. 27
UPPC then filed a motion for reconsideration but it was denied by the CA in its Resolution dated
March 1, 2006.28
Hence, this petition.
The Issues
For the allowance of its petition, UPPC raises the following
GROUNDS
I.
The Court of Appeals erred in not holding respondent liable on its counter-attachment bond
which it posted before the trial court inasmuch as:
A. The requisites for recovering upon the respondent-surety were clearly complied with by
petitioner and the trial court, inasmuch as prior demand and notice in writing was made upon
respondent, by personal service, of petitioners motion to order respondent surety to pay the
amount of its counter-attachment bond, and a hearing thereon was held for the purpose of
determining the liability of the respondent-surety.

B. The terms of respondents counter-attachment bond are clear, and unequivocally provide that
respondent as surety shall jointly and solidarily bind itself with defendants to secure and pay any
judgment that petitioner may recover in the action. Hence, such being the terms of the bond, in
accordance with fair insurance practices, respondent cannot, and should not be allowed to,
evade its liability to pay on its counter-attachment bond posted by it before the trial court.
II.
The Court of Appeals erred in holding that the trial court gravely abused its discretion in denying
respondents manifestation and motion for reconsideration considering that the said motion failed
to comply with the three (3)-day notice rule under Section 4, Rule 15 of the Rules of Court, and
that it had lacked substantial merit to warrant a reversal of the trial courts previous order.29
Simply put, the issues to be dealt with in this case are as follows:
(1) Whether UPPC failed to make the required demand and notice upon Acropolis; and
(2) Whether the execution of the compromise agreement between UPPC and Unibox and Ortega
was tantamount to a novation which had the effect of releasing Acropolis from its obligation under
the counter-attachment bond.
The Courts Ruling
UPPC complied with the twin requirements of notice and demand
On the recovery upon the counter-bond, the Court finds merit in the arguments of the petitioner.
UPPC argues that it complied with the requirement of demanding payment from Acropolis by
notifying it, in writing and by personal service, of the hearing held on UPPCs Motion to Order
Respondent-Surety to Pay the Bond.30Moreover, it points out that the terms of the counterattachment bond are clear in that Acropolis, as surety, shall jointly and solidarily bind itself with
Unibox and Ortega to secure the payment of any judgment that UPPC may recover in the
action.31
Section 17, Rule 57 of the Rules of Court sets forth the procedure for the recovery from a surety
on a counter-bond:
Sec. 17. Recovery upon the counter-bond. When the judgment has become executory, the
surety or sureties on any counter-bond given pursuant to the provisions of this Rule to secure the
payment of the judgment shall become charged on such counter-bond and bound to pay the
judgment obligee upon demand the amount due under the judgment, which amount may be
recovered from such surety or sureties after notice and summary hearing on the same action.
From a reading of the abovequoted provision, it is evident that a surety on a counter-bond given
to secure the payment of a judgment becomes liable for the payment of the amount due upon:
(1) demand made upon the surety; and (2) notice and summary hearing on the same action.
After a careful scrutiny of the records of the case, the Court is of the view that UPPC indeed
complied with these twin requirements.
This Court has consistently held that the filing of a complaint constitutes a judicial
demand.32 Accordingly, the filing by UPPC of the Motion to Order Surety to Pay Amount of
Counter-Bond was already a demand upon Acropolis, as surety, for the payment of the amount
due, pursuant to the terms of the bond. In said bond, Acropolis bound itself in the sum
of P 42,844,353.14 to secure the payment of any judgment that UPPC might recover against
Unibox and Ortega.33

Furthermore, an examination of the records reveals that the motion was filed by UPPC on
November 11, 2004 and was set for hearing on November 19, 2004.34 Acropolis was duly notified
of the hearing and it was personally served a copy of the motion on November 11,
2004,35 contrary to its claim that it did not receive a copy of the motion.
On November 19, 2004, the case was reset for hearing on November 30, 2004. The minutes of
the hearing on both dates show that only the counsel for UPPC was present. Thus, Acropolis
was given the opportunity to defend itself. That it chose to ignore its day in court is no longer the
fault of the RTC and of UPPC. It cannot now invoke the alleged lack of notice and hearing when,
undeniably, both requirements were met by UPPC.
No novation despite compromise agreement; Acropolis still liable under the terms of the counterbond
UPPC argues that the undertaking of Acropolis is to secure any judgment rendered by the RTC
in its favor. It points out that because of the posting of the counter-bond by Acropolis and the
dissolution of the writ of preliminary attachment against Unibox and Ortega, UPPC lost its
security against the latter two who had gone bankrupt. 36 It cites the cases of Guerrero v. Court of
Appeals37 and Martinez v. Cavives38 to support its position that the execution of a compromise
agreement between the parties and the subsequent rendition of a judgment based on the said
compromise agreement does not release the surety from its obligation nor does it novate the
obligation.39
Acropolis, on the other hand, contends that it was not a party to the compromise agreement.
Neither was it aware of the execution of such an agreement which contains an acknowledgment
of liability on the part of Unibox and Ortega that was prejudicial to it as the surety. Accordingly, it
cannot be bound by the judgment issued based on the said agreement. 40 Acropolis also
questions the applicability of Guerrero and draws attention to the fact that in said case, the
compromise agreement specifically stipulated that the surety shall continue to be liable, unlike in
the case at bench where the compromise agreement made no mention of its obligation to
UPPC.41
On this issue, the Court finds for UPPC also.
The terms of the Bond for Dissolution of Attachment issued by Unibox and Acropolis in favor of
UPPC are clear and leave no room for ambiguity:
WHEREAS, the Honorable Court in the above-entitled case issued on _____ an Order dissolving
/ lifting partially the writ of attachment levied upon the defendant/s personal property, upon the
filing of a counterbond by the defendants in the sun of PESOS FORTY TWO MILLION EIGHT
HUNDRED FORTY FOUR THOUSAND THREE HUNDRED FIFTY THREE AND 14/100 ONLY
(P 42,844,353.14) Philippine Currency.
NOW, THEREFORE, we UNIBOX PACKAGING CORP. as Principal and PHILIPPINE PRYCE
ASSURANCE CORP., a corporation duly organized and existing under and by virtue of the laws
of the Philippines, as Surety, in consideration of the dissolution of said attachment, hereby
jointly and severally bind ourselves in the sum of FORTY TWO MILLION EIGHT HUNDRED
FORTY FOUR THOUSAND THREE HUNDRED FIFTY THREE AND 14/100 ONLY (P
42,844,353.14) Philippine Currency, in favor of the plaintiff to secure the payment ofany
judgment that the plaintiff may recover against the defendants in this action.42 [Emphasis
and underscoring supplied]
Based on the foregoing, Acropolis voluntarily bound itself with Unibox to be solidarily liable to
answer for ANY judgment which UPPC may recover from Unibox in its civil case for collection. Its
counter-bond was issued in consideration of the dissolution of the writ of attachment on the
properties of Unibox and Ortega. The counter-bond then replaced the properties to ensure

recovery by UPPC from Unibox and Ortega. It would be the height of injustice to allow Acropolis
to evade its obligation to UPPC, especially after the latter has already secured a favorable
judgment.
This issue is not novel. In the case of Luzon Steel Corporation v. Sia,43 Luzon Steel Corporation
sued Metal Manufacturing of the Philippines and Jose Sia for breach of contract and damages. A
writ of preliminary attachment was issued against the properties of the defendants therein but the
attachment was lifted upon the filing of a counter-bond issued by Sia, as principal, and Times
Surety & Insurance Co., as surety. Later, the plaintiff and the defendants entered into a
compromise agreement whereby Sia agreed to settle the plaintiffs claim. The lower court
rendered a judgment in accordance with the terms of the compromise. Because the defendants
failed to comply with the same, the plaintiff obtained a writ of execution against Sia and the
surety on the counter-bond. The surety moved to quash the writ of execution on the ground that it
was not a party to the compromise and that the writ was issued without giving the surety notice
and hearing. Thus, the court set aside the writ of execution and cancelled the counter-bond. On
appeal, this Court, speaking through the learned Justice J.B.L. Reyes, discussed the nature of
the liability of a surety on a counter-bond:
Main issues posed are (1) whether the judgment upon the compromise discharged the surety
from its obligation under its attachment counterbond and (2) whether the writ of execution could
be issued against the surety without previous exhaustion of the debtor's properties.
Both questions can be solved by bearing in mind that we are dealing with a counterbond filed to
discharge a levy on attachment. Rule 57, section 12, specifies that an attachment may be
discharged upon the making of a cash deposit or filing a counterbond "in an amount equal to the
value of the property attached as determined by the judge"; that upon the filing of the
counterbond "the property attached ... shall be delivered to the party making the deposit or giving
the counterbond, or the person appearing on his behalf, the deposit or counterbond aforesaid
standing in place of the property so released."
The italicized expressions constitute the key to the entire problem. Whether the judgment be
rendered after trial on the merits or upon compromise, such judgment undoubtedly may be made
effective upon the property released; and since the counterbond merely stands in the place of
such property, there is no reason why the judgment should not be made effective against the
counterbond regardless of the manner how the judgment was obtained.
xxx
As declared by us in Mercado v. Macapayag, 69 Phil. 403, 405-406, in passing upon the liability
of counter sureties in replevin who bound themselves to answer solidarily for the obligations of
the defendants to the plaintiffs in a fixed amount of P 912.04, to secure payment of the amount
that said plaintiff be adjudged to recover from the defendants,
the liability of the sureties was fixed and conditioned on the finality of the judgment
rendered regardless of whether the decision was based on the consent of the parties or on the
merits. A judgment entered on a stipulation is nonetheless a judgment of the court because
consented to by the parties.44
[Emphases and underscoring supplied]
The argument of Acropolis that its obligation under the counter-bond was novated by the
compromise agreement is, thus, untenable. In order for novation to extinguish its obligation,
Acropolis must be able to show that there is an incompatibility between the compromise
agreement and the terms of the counter-bond, as required by Article 1292 of the Civil Code,
which provides that:

Art. 1292. In order that an obligation may be extinguished by another which substitute the same,
it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations
be on every point incompatible with each other. (1204)
Nothing in the compromise agreement indicates, or even hints at, releasing Acropolis from its
obligation to pay UPPC after the latter has obtained a favorable judgment. Clearly, there is no
incompatibility between the compromise agreement and the counter-bond. Neither can novation
be presumed in this case. As explained inDugo v. Lopena:45
Novation by presumption has never been favored. To be sustained, it need be established that
the old and new contracts are incompatible in all points, or that the will to novate appears by
express agreement of the parties or in acts of similar import. 46
All things considered, Acropolis, as surety under the terms of the counter-bond it issued, should
be held liable for the payment of the unpaid balance due to UPPC.
Three-day notice rule, not a hard and fast rule
Although this issue has been obviated by our disposition of the two main issues, the Court would
like to point out that the three-day notice requirement is not a hard and fast rule and substantial
compliance is allowed.
Pertinently, Section 4, Rule 15 of the Rules of Court reads:
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 insure 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.
[Emphasis supplied]
1wphi1

The law is clear that it intends for the other party to receive a copy of the written motion at least
three days before the date set for its hearing. The purpose of the three (3)-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. 47 In Preysler, Jr. v. Manila Southcoast
Development Corporation,48 the Court restated the ruling that "the date of the hearing should be
at least three days after receipt of the notice of hearing by the other parties."
It is not, however, a hard and fast rule. Where a party has been given the opportunity to be
heard, the time to study the motion and oppose it, there is compliance with the rule. This was the
ruling in the case of Jehan Shipping Corporation v. National Food Authority,49 where it was
written:
Purpose Behind the
Notice Requirement
This Court has indeed held time and time again that, under Sections 4 and 5 of Rule 15 of the
Rules of Court, mandatory is the notice requirement in a motion, which is rendered defective by
failure to comply with the requirement. As a rule, a motion without a notice of hearing is
considered pro forma and does not affect the reglementary period for the appeal or the filing of
the requisite pleading.

As an integral component of 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 by 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 the 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. Considering the circumstances of the present case, we believe that the requirements of
procedural due process were substantially complied with, and that the compliance justified a
departure from a literal application of the rule on notice of hearing. 50[Emphasis supplied]
In the case at bench, the RTC gave UPPC sufficient time to file its comment on the motion. On
January 14, 2005, UPPC filed its Opposition to the motion, discussing the issues raised by
Acropolis in its motion. Thus, UPPCs right to due process was not violated because it was
afforded the chance to argue its position.
WHEREFORE, the petition is GRANTED. The November 17, 2005 Decision and the March 1,
2006 Resolution of the Court of Appeals, in CA-G.R. SP No. 89135, are hereby REVERSED and
SET ASIDE. The November 30, 2004 Order of the Regional Trial Court, Branch 148, Makati City,
ordering Acropolis to comply with the terms of its counter-bond and pay UPPC the unpaid
balance of the judgment in the amount of P27,048,568.78 with interest of 12% per annum from
default is REINSTATED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 185922

January 15, 2014

HEIRS OF DR. MARIANO FAVIS SR. represented by their co-heirs and Attorneys-in-Fact
MERCEDES A. FAVIS and NELLY FAVIS- VILLAFUERTE, Petitioners,
vs.
JUANA GONZALES, her son MARIANO G. FAVIS, MA. THERESA JOANA D. FAVIS, JAMES
MARK D. FAVIS, all minors represented herein by their parents SPS. MARIANO FAVIS and
LARCELITA D. FAVIS,Respondents.
DECISION
PEREZ, J.:
Before this Court is a petition for review assailing the 10 April 2008 Decision and 7 January 2009
Resolution of the Court of Appeals in CA-G.R. CV No. 86497 dismissing petitioners complaint
for annulment of the Deed of Donation for failure to exert earnest efforts towards a compromise.
1

Dr. Mariano Favis, Sr. (Dr. Favis) was married to Capitolina Aguilar (Capitolina) with whom he
had seven children named Purita A. Favis, Reynaldo Favis, Consolacion Favis-Queliza, Mariano
A. Favis, Jr., Esther F. Filart, Mercedes A. Favis, and Nelly Favis-Villafuerte. When Capitolina
died in March 1944, Dr. Favis took Juana Gonzales (Juana) as his common-law wife with whom
he sired one child, Mariano G. Favis (Mariano). When Dr. Favis and Juana got married in 1974,
Dr. Favis executed an affidavit acknowledging Mariano as one of his legitimate children. Mariano

is married to Larcelita D. Favis (Larcelita), with whom he has four children, named Ma. Theresa
Joana D. Favis, Ma. Cristina D. Favis, James Mark D. Favis and Ma. Thea D. Favis.
Dr. Favis died intestate on 29 July 1995 leaving the following properties:
1. A parcel of residential land located at Bonifacio St. Brgy. 1, Vigan, Ilocos Sur,
consisting an area of 898 square meters, more or less, bounded on the north by Salvador
Rivero; on the East by Eleutera Pena; on the South by Bonifacio St., and on the West by
Carmen Giron; x x x;
2. A commercial building erected on the aforesaid parcel of land with an assessed value
of P126,000.00; x x x;
3. A parcel of residential land located in Brgy. VII, Vigan, Ilocos Sur, containing an area of
154 sq. ms., more or less, bounded on the North by the High School Site; on the East by
Gomez St., on the South by Domingo [G]o; and on the West by Domingo Go; x x x;
4. A house with an assessed value of P17,600.00 x x x;
5. A parcel of orchard land located in Brgy. VI, Vigan, Ilocos Sur, containing an area of
2,257 sq. ma. (sic) more or less, bounded on the North by Lot 1208; on the East by
Mestizo River; on the South by Lot 1217 and on the West by Lot 1211-B, 1212 and 1215
x x x.
3

Beginning 1992 until his death in 1995, Dr. Favis was beset by various illnesses, such as kidney
trouble, hiatal hernia, congestive heart failure, Parkinsons disease and pneumonia. He died of
"cardiopulmonary arrest secondary to multi-organ/system failure secondary to sepsis secondary
to pneumonia."
4

On 16 October 1994, he allegedly executed a Deed of Donation transferring and conveying

properties described in (1) and (2) in favor of his grandchildren with Juana.
5

Claiming that said donation prejudiced their legitime, Dr. Favis children with Capitolina,
petitioners herein, filed an action for annulment of the Deed of Donation, inventory, liquidation
and partition of property before the Regional Trial Court (RTC) of Vigan, Ilocos Sur, Branch 20
against Juana, Spouses Mariano and Larcelita and their grandchildren as respondents.
In their Answer with Counterclaim, respondents assert that the properties donated do not form
part of the estate of the late Dr. Favis because said donation was made inter vivos, hence
petitioners have no stake over said properties.
6

The RTC, in its Pre-Trial Order, limited the issues to the validity of the deed of donation and
whether or not respondent Juana and Mariano are compulsory heirs of Dr. Favis.
7

In a Decision dated 14 November 2005, the RTC nullified the Deed of Donation and cancelled
the corresponding tax declarations. The trial court found that Dr. Favis, at the age of 92 and
plagued with illnesses, could not have had full control of his mental capacities to execute a valid
Deed of Donation. Holding that the subsequent marriage of Dr. Favis and Juana legitimated the
status of Mariano, the trial court also declared Juana and Mariano as compulsory heirs of Dr.
Favis. The dispositive portion reads:WHEREFORE, in view of all the foregoing considerations,
the Deed of Donation dated October 16, 1994 is hereby annulled and the corresponding tax
declarations issued on the basis thereof cancelled. Dr. Mariano Favis, Sr. having died without a
will, his estate would result to intestacy. Consequently, plaintiffs Heirs of Dr. Mariano Favis, Sr.,
namely Purita A. Favis, Reynaldo A. Favis, Consolacion F. Queliza, Mariano A. Favis, Jr., Esther
F. Filart, Mercedes A. Favis, Nelly F. Villafuerte and the defendants Juana Gonzales now

deceased and Mariano G. Favis, Jr. shall inherit in equal shares in the estate of the late Dr.
Mariano Favis, Sr. which consists of the following:
1. A parcel of residential land located at Bonifacio St. Brgy. 1, Vigan City, Ilocos Sur,
consisting an area of 89 sq. meters more or less, bounded on the north by Salvador
Rivero; on the East by Eleutera Pena; on the South by Bonifacio St., and on the West by
Carmen Giron;
2. A commercial building erected on the aforesaid parcel of land with an assessed value
of P126,000.00;
3. One-half (1/2) of the house located in Brgy. VI, Vigan City, Ilocos Sur[,] containing an
area of 2,257 sq. meters more or less, bounded on the north by Lot 1208; on the east by
Mestizo River; on the South by Lot 1217 and on the West by Lot 1211-B, 1212 and 1215.
4. The accumulated rentals of the new Vigan Coliseum in the amount of One Hundred
Thirty [Thousand] (P130,000.00) pesos per annum from the death of Dr. Mariano Favis,
Sr.
8

Respondents interposed an appeal before the Court of Appeals challenging the trial courts
nullification, on the ground of vitiated consent, of the Deed of Donation in favor of herein
respondents. The Court of Appeals ordered the dismissal of the petitioners nullification case.
However, it did so not on the grounds invoked by herein respondents as appellant.
The Court of Appeals motu proprio ordered the dismissal of the complaint for failure of petitioners
to make an averment that earnest efforts toward a compromise have been made, as mandated
by Article 151 of the Family Code. The appellate court justified its order of dismissal by invoking
its authority to review rulings of the trial court even if they are not assigned as errors in the
appeal.
Petitioners filed a motion for reconsideration contending that the case is not subject to
compromise as it involves future legitime.
The Court of Appeals rejected petitioners contention when it ruled that the prohibited
compromise is that which is entered between the decedent while alive and compulsory heirs. In
the instant case, the appellate court observed that while the present action is between members
of the same family it does not involve a testator and a compulsory heir. Moreover, the appellate
court pointed out that the subject properties cannot be considered as "future legitime" but are in
fact, legitime, as the instant complaint was filed after the death of the decedent.
Undaunted by this legal setback, petitioners filed the instant petition raising the following
arguments:
1. The Honorable Court of Appeals GRAVELY and SERIOUSLY ERRED in DISMISSING
the COMPLAINT.
2. Contrary to the finding of the Honorable Court of Appeals, the verification of the
complaint or petition is not a mandatory requirement.
3. The Honorable Court of Appeals seriously failed to appreciate that the filing of an
intervention by Edward Favis had placed the case beyond the scope of Article 151 of the
Family Code.
4. Even assuming arguendo without admitting that the filing of intervention by Edward
Favis had no positive effect to the complaint filed by petitioners, it is still a serious error

for the Honorable Court of Appeals to utterly disregard the fact that petitioners had
substantially complied with the requirements of Article 151 of the Family Code.
5. Assuming arguendo that petitioners cannot be construed as complying substantially
with Article 151 of the Family Code, still, the same should be considered as a non-issue
considering that private respondents are in estoppel.
6. The dismissal of the complaint by the Honorable Court of Appeals amounts to grave
abuse of discretion amounting to lack and excess of jurisdiction and a complete defiance
of the doctrine of primacy of substantive justice over strict application of technical rules.
7. The Honorable Court of Appeals gravely and seriuosly erred in not affirming the
decision of the Court a quo that the Deed of Donation is void.
9

In their Comment, respondents chose not to touch upon the merits of the case, which is the
validity of the deed of donation. Instead, respondents defended the ruling the Court of Appeals
that the complaint is dismissible for failure of petitioners to allege in their complaint that earnest
efforts towards a compromise have been exerted.
The base issue is whether or not the appellate court may dismiss the order of dismissal of the
complaint for failure to allege therein that earnest efforts towards a compromise have been
made. The appellate court committed egregious error in dismissing the complaint. The appellate
courts decision hinged on Article 151 of the Family Code, viz:
Art. 151. No suit between members of the same family shall prosper unless it should appear from
the verified complaint or petition that earnest efforts toward a compromise have been made, but
that the same have failed. If it is shown that no such efforts were in fact made, the case must be
dismissed.
This rule shall not apply to cases which may not be the subject of compromise under the Civil
Code.
The appellate court correlated this provision with Section 1, par. (j), Rule 16 of the 1997 Rules of
Civil Procedure, which provides:
Section 1. Grounds. Within the time for but before filing the answer to the complaint or
pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:
xxxx
(j) That a condition precedent for filing the claim has not been complied with.
The appellate courts reliance on this provision is misplaced. Rule 16 treats of the grounds for a
motion to dismiss the complaint. It must be distinguished from the grounds provided under
Section 1, Rule 9 which specifically deals with dismissal of the claim by the court motu proprio.
Section 1, Rule 9 of the 1997 Rules of Civil Procedure provides:
Section 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.
Section 1, Rule 9 provides for only four instances when the court may motu proprio dismiss the
claim, namely: (a) lack of jurisdiction over the subject matter; (b) litis pendentia ; (c) res judicata ;

and (d) prescription of action. Specifically in Gumabon v. Larin, cited in Katon v. Palanca,
Jr., the Court held:
10

11

12

x x x [T]he motu proprio dismissal of a case was traditionally limited to instances when the court
clearly had no jurisdiction over the subject matter and when the plaintiff did not appear during
trial, failed to prosecute his action for an unreasonable length of time or neglected to comply with
the rules or with any order of the court. Outside of these instances, any motu proprio dismissal
would amount to a violation of the right of the plaintiff to be heard. Except for qualifying and
expanding Section 2, Rule 9, and Section 3, Rule 17, of the Revised Rules of Court, the
amendatory 1997 Rules of Civil Procedure brought about no radical change. Under the new
rules, a court may motu proprio dismiss a claim when it appears from the pleadings or evidence
on record that it has no jurisdiction over the subject matter; when there is another cause of action
pending between the same parties for the same cause, or where the action is barred by a prior
judgment or by statute of limitations. x x x.
13

The error of the Court of Appeals is evident even if the consideration of the issue is kept within
the confines of the language of Section 1(j) of Rule 16 and Section 1 of Rule 9. That a condition
precedent for filing the claim has not been complied with, a ground for a motion to dismiss
emanating from the law that no suit between members from the same family shall prosper unless
it should appear from the verified complaint that earnest efforts toward a compromise have been
made but had failed, is, as the Rule so words, a ground for a motion to dismiss. Significantly, the
Rule requires that such a motion should be filed "within the time for but before filing the answer
to the complaint or pleading asserting a claim." The time frame indicates that thereafter, the
motion to dismiss based on the absence of the condition precedent is barred. It is so inferable
from the opening sentence of Section 1 of Rule 9 stating that defense and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived. There are, as just noted, only
four exceptions to this Rule, namely, lack of jurisdiction over the subject matter; litis pendentia ;
res judicata ; and prescription of action. Failure to allege in the complaint that earnest efforts at a
compromise has been made but had failed is not one of the exceptions. Upon such failure, the
defense is deemed waived.
It was in Heirs of Domingo Valientes v. Ramas cited in P.L. Uy Realty Corporation v. ALS
Management and Development Corporation where we noted that the second sentence of
Section 1 of Rule 9 does not only supply exceptions to the rule that defenses not pleaded either
in a motion to dismiss or in the answer are deemed waived, it also allows courts to dismiss cases
motu propio on any of the enumerated grounds. The tenor of the second sentence of the Rule is
that the allowance of a motu propio dismissal can proceed only from the exemption from the rule
on waiver; which is but logical because there can be no ruling on a waived ground.
14

15

Why the objection of failure to allege a failed attempt at a compromise in a suit among members
of the same family is waivable was earlier explained in the case of Versoza v. Versoza, a case
for future support which was dismissed by the trial court upon the ground that there was no such
allegation of infringement of Article 222 of the Civil Code, the origin of Article 151 of the Family
Code. While the Court ruled that a complaint for future support cannot be the subject of a
compromise and as such the absence of the required allegation in the complaint cannot be a
ground for objection against the suit, the decision went on to state thus:
16

The alleged defect is that the present complaint does not state a cause of action. The proposed
amendment seeks to complete it. An amendment to the effect that the requirements of Article 222
have been complied with does not confer jurisdiction upon the lower court. With or without this
amendment, the subject-matter of the action remains as one for support, custody of children, and
damages, cognizable by the court below.
To illustrate, Tamayo v. San Miguel Brewery, Inc., allowed an amendment which " merely
corrected a defect in the allegation of plaintiff-appellants cause of action, because as it then
stood, the original complaint stated no cause of action." We there ruled out as inapplicable the
17

holding in Campos Rueda Corporation v. Bautista, that an amendment cannot be made so as to

confer jurisdiction on the court x x x. (Italics supplied).
18

Thus was it made clear that a failure to allege earnest but failed efforts at a compromise in a
complaint among members of the same family, is not a jurisdictional defect but merely a defect in
the statement of a cause of action. Versoza was cited in a later case as an instance analogous to
one where the conciliation process at the barangay level was not priorly resorted to. Both were
described as a "condition precedent for the filing of a complaint in Court." In such instances, the
consequence is precisely what is stated in the present Rule. Thus:
19

x x x The defect may however be waived by failing to make seasonable objection, in a motion to
dismiss or answer, the defect being a mere procedural imperfection which does not affect the
jurisdiction of the court. (Underscoring supplied).
20

In the case at hand, the proceedings before the trial court ran the full course. The complaint of
petitioners was answered by respondents without a prior motion to dismiss having been filed.
The decision in favor of the petitioners was appealed by respondents on the basis of the alleged
error in the ruling on the merits, no mention having been made about any defect in the statement
of a cause of action. In other words, no motion to dismiss the complaint based on the failure to
comply with a condition precedent was filed in the trial court; neither was such failure assigned
as error in the appeal that respondent brought before the Court of Appeals.
Therefore, the rule on deemed waiver of the non-jurisdictional defense or objection is wholly
applicable to respondent. If the respondents as parties-defendants could not, and did not, after
filing their answer to petitioners complaint, invoke the objection of absence of the required
allegation on earnest efforts at a compromise, the appellate court unquestionably did not have
any authority or basis to motu propio order the dismissal of petitioners complaint.
1wphi1

Indeed, even if we go by the reason behind Article 151 of the Family Code, which provision as
then Article 222 of the New Civil Code was described as "having been given more teeth" by
Section 1(j), Rule 16 of the Rule of Court, it is safe to say that the purpose of making sure that
there is no longer any possibility of a compromise, has been served. As cited in commentaries on
Article 151 of the Family Code
21

This rule is introduced because it is difficult to imagine a sudden and more tragic spectacle than
a litigation between members of the same family. It is necessary that every effort should be made
towards a compromise before a litigation is allowed to breed hate and passion in the family. It is
known that a lawsuit between close relatives generates deeper bitterness than between
strangers.
22

The facts of the case show that compromise was never an option insofar as the respondents
were concerned. The impossibility of compromise instead of litigation was shown not alone by
the absence of a motion to dismiss but on the respondents insistence on the validity of the
donation in their favor of the subject properties. Nor could it have been otherwise because the
Pre-trial Order specifically limited the issues to the validity of the deed and whether or not
respondent Juana and Mariano are compulsory heirs of Dr. Favis. Respondents not only
confined their arguments within the pre-trial order; after losing their case, their appeal was based
on the proposition that it was error for the trial court to have relied on the ground of vitiated
consent on the part of Dr. Favis.
The Court of Appeals ignored the facts of the case that clearly demonstrated the refusal by the
respondents to compromise. Instead it ordered the dismissal of petitioners complaint on the
ground that it did not allege what in fact was shown during the trial. The error of the Court of
Appeals is patent.

Unfortunately for respondents, they relied completely on the erroneous ruling of the Court of
Appeals even when petitioners came to us for review not just on the basis of such defective motu
propio action but also on the proposition that the trial court correctly found that the donation in
question is flawed because of vitiated consent. Respondents did not answer this argument. The
trial court stated that the facts are:
x x x To determine the intrinsic validity of the deed of donation subject of the action for
annulment, the mental state/condition of the donor Dr. Mariano Favis, Sr. at the time of its
execution must be taken into account. Factors such as his age, health and environment among
others should be considered. As testified to by Dr. Mercedes Favis, corroborated by Dr. Edgardo
Alday and Dra. Ofelia Adapon, who were all presented as expert witnesses, Dr. Mariano Favis,
Sr. had long been suffering from Hiatal Hernia and Parkinsons disease and had been taking
medications for years. That a person with Parkinsons disease for a long time may not have a
good functioning brain because in the later stage of the disease, 1/3 of death develop from this
kind of disease, and or dementia. With respect to Hiatal Hernia, this is a state wherein organs in
the abdominal cavity would go up to the chest cavity, thereby occupying the space for the lungs
causing the lungs to be compromised. Once the lungs are affected, there is less oxygenation to
the brain. The Hernia would cause the heart not to pump enough oxygen to the brain and the
effect would be chronic, meaning, longer lack of oxygenation to the brain will make a person not
in full control of his faculties. Dr. Alday further testified that during his stay with the house of Dr.
Mariano Favis, Sr. (1992-1994), he noticed that the latter when he goes up and down the stairs
will stop after few seconds, and he called this pulmonary cripple a very advanced stage
wherein the lungs not only one lung, but both lungs are compromised. That at the time he
operated on the deceased, the left and right lung were functioning but the left lung is practically
not even five (5%) percent functioning since it was occupied by abdominal organ. x x x.
Dr. Mariano Favis, Sr. during the execution of the Deed of Donation was already 92 years old;
living with the defendants and those years from 1993 to 1995 were the critical years when he
was sick most of the time. In short, hes dependent on the care of his housemates particularly the
members of his family. It is the contention of the defendants though that Dr. Mariano Favis, Sr.
had full control of his mind during the execution of the Deed of Donation because at that time, he
could go on with the regular way of life or could perform his daily routine without the aid of
anybody like taking a bath, eating his meals, reading the newspaper, watching television, go to
the church on Sundays, walking down the plaza to exercise and most importantly go to the
cockpit arena and bet. Dr. Ofelia Adapon, a neurology expert however, testified that a person
suffering from Parkinsons disease when he goes to the cockpit does not necessarily mean that
such person has in full control of his mental faculties because anyone, even a retarded person, a
person who has not studied and have no intellect can go to the cockpit and bet. One can do
everything but do not have control of his mind. x x x That Hiatal Hernia creeps in very insidiously,
one is not sure especially if the person has not complained and no examination was done. It
could be there for the last time and no one will know. x x x.
The Deed of Donation in favor of the defendants Ma. Theresa, Joana D. Favis, Maria Cristina D.
Favis, James Mark D. Favis and Maria Thea D. Favis, all of whom are the children of Mariano G.
Favis, Jr. was executed on [16 October] 1994, seven (7) months after Dra. Mercedes Favis left
the house of Dr. Favis, Sr. at Bonifacio St., Vigan City, Ilocos Sur, where she resided with the
latter and the defendants.
Putting together the circumstances mentioned, that at the time of the execution of the Deed of
Donation, Dr. Mariano Favis, Sr. was already at an advanced age of 92, afflicted with different
illnesses like Hiatal hernia, Parkinsons disease and pneumonia, to name few, which illnesses
had the effects of impairing his brain or mental faculties and the deed being executed only when
Dra. Mercedes Favis had already left his fathers residence when Dr. Mariano Favis, Sr. could
have done so earlier or even in the presence of Dra. Mercedes Favis, at the time he executed
the Deed of Donation was not in full control of his mental faculties. That although age of senility
varies from one person to another, to reach the age of 92 with all those medications and
treatment one have received for those illnesses, yet claim that his mind remains unimpaired,

would be unusual. The fact that the Deed of Donation was only executed after Dra. Mercedes
Favis left his father's house necessarily indicates that they don't want the same to be known by
the first family, which is an indicia of bad faith on the part of the defendant, who at that time had
influence over the donor.
23

The correctness of the finding was not touched by the Court of Appeals. The respondents opted
to rely only on what the appellate court considered, erroneously though, was a procedural
infirmity. The trial court's factual finding, therefore, stands unreversed; and respondents did not
provide us with any argument to have it reversed.
The issue of the validity of donation was fully litigated and discussed by the trial court. Indeed,
the trial court's findings were placed at issue before the Court of Appeals but the appellate court
chose to confine its review to the procedural aspect. The judgment of the Court of Appeals, even
if it dealt only with procedure, is deemed to have covered all issues including the correctness of
the factual findings of the trial court. Moreover, remanding the case to the Court of Appeals would
only constitute unwarranted delay in the final disposition of the case.
WHEREFORE, the Decision of the Court of Appeals is REVERSED and SET ASIDE and the
Judgment of the Regional Trial Court of Vigan, Ilocos Sur, Branch 20 is AFFIRMED.
SO ORDERED.

(REPUBLIC V SANDIGANBAYAN 540 SCRA 431- NOT HERE)

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 192975

November 12, 2012

REPUBLIC OF THE PHILIPPINES, represented by the Regional Executive Director of the

Department of Environment and Natural Resources, Regional Office No. 3, Petitioner,
vs.
ROMAN CATHOLIC ARCHBISHOP OF MANILA, Respondent.
x-----------------------x
G.R. No. 192994
SAMAHANG KABUHAYAN NG SAN LORENZO KKK, INC., represented by its Vice
President ZenaidaTurla,Petitioner,
vs.
ROMAN CATHOLIC ARCHBISHOP OF MANILA, Rerspondent.
DECISION
PERLAS-BERNABE, J.:
Before the Court are two separate petitions filed under Rule 45 of the Rules of Court seeking to
set aside the April 22, 2010 Decision1 and July 19, 2010 Resolution2 of the Court of Appeals (CA)
which ordered the Regional Trial Court (RTC), Branch 843 of Malolos, Bulacan to grant the
motion to dismiss filed by respondent Roman Catholic Archbishop of Manila (RCAM) and to
dismiss the complaint of petitioner Republic of the Philippines (Republic).

On November 22, 2010, respondent RCAM filed motion4 for consolidation of the two (2) cases on
the ground that they involve a common issue, have the same parties and assail the same
Decision and Resolution of the CA which was granted by the Court in its January 12, 2011
Resolution.5
The Facts
On January 30, 2007, petitioner Republic filed a complaint docketed as Civil Case No. 62-M2007 before the RTC of Malolos City, Bulacan, for cancellation of titles and reversion against
respondent RCAM and several others.6The complaint alleged, inter alia, that RCAM appears as
the registered owner of eight (8) parcels of land, Lot Nos. 43 to 50, with a total area of 39,790
square meters, situated in Panghulo, Obando, Bulacan under Original Certificate of Title (OCT)
No. 588 supposedly issued by the Register of Deeds of Bulacan on November 7, 1917. OCT No.
588 allegedly emanated from Decree No. 57486 issued on October 30, 1917 by the Chief of the
General Land Registration Office pursuant to a decision dated September 21, 1915 in Land
Registration Case No. 5, G.L.R.O. Record No. 9269 in favor of RCAM.A reading, however, of the
said decision reveals that it only refers to Lot Nos. 495, 496, 497, 498 and 638 and not to Lot
Nos. 43 to 50.In 1934, RCAM sold the said eight (8) parcels of land to the other named
defendants in the complaint resulting in the cancellation of OCT No.588 and issuance of transfer
certificates of title in the names of the corresponding transferees. Subsequently, the Lands
Management Bureau conducted an investigation and ascertained that the subject lots are
identical to Lot No. 2077, Cad-302-D and Lot Nos. 1293, 1306 and 1320, Cad-302-D with a total
area of 22,703 square meters. These parcels of land were certified by the Bureau of Forest
Development on January 17, 1983 as falling within the unclassified lands of the public domain
and it was only on May 8, 1984 that they were declared alienable and disposable per Forestry
Administrative Order No. 4-1776, with no public land application/ land patent. 7
On April 16, 2007, petitioner Republic received a copy of a motion for leave to intervene and to
admit complaint-in-intervention filed by the Samahang Kabuhayang San Lorenzo KKK, Inc.
(KKK),8occupants of the subject property, which was subsequently granted by the
RTC.9 Thenceforth, answers and various other pleadings were filed by the appropriate parties.
During the course of the pre-trial, RCAM filed a motion to dismiss assailing the jurisdiction 10 of the
RTC over the complaint. It alleged that the action for reversion of title was essentially one for
annulment of judgment of the then Court of First Instance (CFI) of Bulacan, acting as a Land
Registration Court,11 hence, beyond the competence of the RTC to act upon.
Ruling of the Trial Court
In its Orderdated January 27, 2009,12 the RTC denied RCAM's motion to dismiss for being
premature. It declaredthat while the decision of the CFI dated September 21, 1915 pertains only
to parcels 495, 496, 497 and 498 and did not mention Lot Nos. 43 & 50, an examination of OCT
No. 588 and Decree No. 57486 reveals that the subject lots were conferred on RCAM pursuant
to a decision in G.L.R.O Record No. 9269 promulgated on December 3, 1914. Hence, it found a
need to first ascertain the litigious issues of whether a separate prior decision was promulgated
on December 3, 1914 as stated in Decree No. 5748613and whether the issuance of the subject
decree and inclusion of Lot Nos. 43 to 50 were done in violation of such separate decision.
RCAM's motion for reconsideration having been denied, the matter was elevated to the CA on
certiorari alleging grave abuse of discretion on the part of the RTC.
Ruling of the Court of Appeals
In its assailed Decision,14 the CA held that while reversion suits are allowed under the law, the
same should be instituted before the CA because the RTC cannot nullify a decision rendered by
a co-equal land registration court. The CA further applied equitable estoppel against the State

and considered it barred from filing a reversion suit. It explained that the lots were already
alienated to innocent purchasers for value and the State failed to take action to contest the title
for an unreasonable length of time. Hence, the CA ordered the RTC to grant RCAM's motion to
dismiss.
Both petitioners separately moved for reconsideration which the CA denied in its July 12, 2010
Resolution. Hence, the present petitions.
Issue Before the Court
The consolidated cases raise the common issue of whether or not the RTC has jurisdiction over
the action filed by the Republic.
The Courts Ruling
The petitions are meritorious.
Petitioners insist that they do not seek the annulment of judgment of the RTC (then CFI) acting
as Land Registration Court but the nullification of the subject OCT No. 588 and the derivative
titles over Lot Nos. 43 to 50. They claim that these parcels of land could not have been validly
titled in 1917 because they were not the subject of Land Registration Case No. 5, G.L.R.O.
Record No. 9269. Moreover, these lots were not yet classified as alienable and disposable at that
time, having been declared as such only on May 8, 1984. On the other hand, the respondent
maintains that petitioners' suit essentially seeks the annulment of judgment of the RTC, hence,
jurisdiction lies with the CA under Rule 47 of the Rules of Court. Consequently, the RTC was
correctly ordered by the CA to grant the motion to dismiss.
An order denying a motion to dismiss is an interlocutory order which neither terminates nor finally
disposes of a case as it leaves something to be done by the court before the case is finally
decided on the merits.15 Thus, as a general rule, the denial of a motion to dismiss cannot be
questioned in a special civil action for certiorari which is a remedy designed to correct errors of
jurisdiction and not errors of judgment.16 However, when the denial of the motion to dismiss is
tainted with grave abuse of discretion, the grant of the extraordinary remedy of certiorari may be
justified.17 By grave abuse of discretion is meant such capricious and whimsical exercise of
judgment that is equivalent to lack of jurisdiction.18 The abuse of discretion must be grave as
where the power is exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, and must be so patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined by or to act at all in contemplation of law.19
Respondent's motion to dismiss assails the jurisdiction of the RTC over the nature of the action
before it. Hence, to determine whether the RTC gravely abused its discretion in denying the
motion to dismiss it is pertinent to first ascertain whether the RTC has jurisdiction over the case.
It is axiomatic that the nature of an action and whether the tribunal has jurisdiction over such
action are to be determined from the material allegations of the complaint, the law in force at the
time the complaint is filed, and the character of the relief sought irrespective of whether the
plaintiff is entitled to all or some of the claims averred.20 Jurisdiction is not affected by the pleas or
the theories set up by defendant in an answer to the complaint or a motion to dismiss the same. 21
In the present case, the material averments, as well as the character of the relief prayed for by
petitioners in the complaint before the RTC, show that their action is one for cancellation of titles
and reversion, not for annulment of judgment of the RTC. The complaint alleged that Lot Nos. 43
to 50, the parcels of land subject matter of the action, were not the subject of the CFIs judgment
in the relevant prior land registration case. Hence, petitioners pray that the certificates of title of
RCAM be cancelled which will not necessitate the annulment of said judgment. Clearly, Rule 47
of the Rules of Court on annulment of judgment finds no application in the instant case.
1wphi1

The RTC may properly take cognizance of reversion suits which do not call for an annulment of
judgment of the RTC22 acting as a Land Registration Court. Actions for cancellation of title and
reversion, like the present case, belong to the class of cases that "involve the title to, or
possession of, real property, or any interest therein"23 and where the assessed value of the
property exceeds P20,000.00,24 fall under the jurisdiction of the RTC.25Consequently, no grave
abuse of discretion excess of jurisdiction can be attributed to the RTC in denying RCAMs motion
to dismiss.
1wphi1

Moreover, it should be stressed that the only incident before the CA for resolution was the
propriety of RCAMs motion to dismiss, thus, it was premature for the CA at this stage to apply
the doctrine of equitable estoppel as the parties have not presented any evidence that would
support such finding.
WHEREFORE, the petitions are GRANTED. The assailed April 22, 2010 Decision and July 19,
2010 Resolution of the Court of Appeals are hereby ANNULLED and SET ASIDE. The Order of
the Regional Trial Court, Branch 84 of Malolos, Bulacan is AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 185922

January 15, 2014

HEIRS OF DR. MARIANO FAVIS SR. represented by their co-heirs and Attorneys-in-Fact
MERCEDES A. FAVIS and NELLY FAVIS- VILLAFUERTE, Petitioners,
vs.
JUANA GONZALES, her son MARIANO G. FAVIS, MA. THERESA JOANA D. FAVIS, JAMES
MARK D. FAVIS, all minors represented herein by their parents SPS. MARIANO FAVIS and
LARCELITA D. FAVIS,Respondents.
DECISION
PEREZ, J.:
Before this Court is a petition for review assailing the 10 April 2008 Decision and 7 January 2009
Resolution of the Court of Appeals in CA-G.R. CV No. 86497 dismissing petitioners complaint
for annulment of the Deed of Donation for failure to exert earnest efforts towards a compromise.
1

Dr. Mariano Favis, Sr. (Dr. Favis) was married to Capitolina Aguilar (Capitolina) with whom he
had seven children named Purita A. Favis, Reynaldo Favis, Consolacion Favis-Queliza, Mariano
A. Favis, Jr., Esther F. Filart, Mercedes A. Favis, and Nelly Favis-Villafuerte. When Capitolina
died in March 1944, Dr. Favis took Juana Gonzales (Juana) as his common-law wife with whom
he sired one child, Mariano G. Favis (Mariano). When Dr. Favis and Juana got married in 1974,
Dr. Favis executed an affidavit acknowledging Mariano as one of his legitimate children. Mariano
is married to Larcelita D. Favis (Larcelita), with whom he has four children, named Ma. Theresa
Joana D. Favis, Ma. Cristina D. Favis, James Mark D. Favis and Ma. Thea D. Favis.
Dr. Favis died intestate on 29 July 1995 leaving the following properties:
1. A parcel of residential land located at Bonifacio St. Brgy. 1, Vigan, Ilocos Sur,
consisting an area of 898 square meters, more or less, bounded on the north by Salvador

Rivero; on the East by Eleutera Pena; on the South by Bonifacio St., and on the West by
Carmen Giron; x x x;
2. A commercial building erected on the aforesaid parcel of land with an assessed value
of P126,000.00; x x x;
3. A parcel of residential land located in Brgy. VII, Vigan, Ilocos Sur, containing an area of
154 sq. ms., more or less, bounded on the North by the High School Site; on the East by
Gomez St., on the South by Domingo [G]o; and on the West by Domingo Go; x x x;
4. A house with an assessed value of P17,600.00 x x x;
5. A parcel of orchard land located in Brgy. VI, Vigan, Ilocos Sur, containing an area of
2,257 sq. ma. (sic) more or less, bounded on the North by Lot 1208; on the East by
Mestizo River; on the South by Lot 1217 and on the West by Lot 1211-B, 1212 and 1215
x x x.
3

Beginning 1992 until his death in 1995, Dr. Favis was beset by various illnesses, such as kidney
trouble, hiatal hernia, congestive heart failure, Parkinsons disease and pneumonia. He died of
"cardiopulmonary arrest secondary to multi-organ/system failure secondary to sepsis secondary
to pneumonia."
4

On 16 October 1994, he allegedly executed a Deed of Donation transferring and conveying

properties described in (1) and (2) in favor of his grandchildren with Juana.
5

Claiming that said donation prejudiced their legitime, Dr. Favis children with Capitolina,
petitioners herein, filed an action for annulment of the Deed of Donation, inventory, liquidation
and partition of property before the Regional Trial Court (RTC) of Vigan, Ilocos Sur, Branch 20
against Juana, Spouses Mariano and Larcelita and their grandchildren as respondents.
In their Answer with Counterclaim, respondents assert that the properties donated do not form
part of the estate of the late Dr. Favis because said donation was made inter vivos, hence
petitioners have no stake over said properties.
6

The RTC, in its Pre-Trial Order, limited the issues to the validity of the deed of donation and
whether or not respondent Juana and Mariano are compulsory heirs of Dr. Favis.
7

In a Decision dated 14 November 2005, the RTC nullified the Deed of Donation and cancelled
the corresponding tax declarations. The trial court found that Dr. Favis, at the age of 92 and
plagued with illnesses, could not have had full control of his mental capacities to execute a valid
Deed of Donation. Holding that the subsequent marriage of Dr. Favis and Juana legitimated the
status of Mariano, the trial court also declared Juana and Mariano as compulsory heirs of Dr.
Favis. The dispositive portion reads:WHEREFORE, in view of all the foregoing considerations,
the Deed of Donation dated October 16, 1994 is hereby annulled and the corresponding tax
declarations issued on the basis thereof cancelled. Dr. Mariano Favis, Sr. having died without a
will, his estate would result to intestacy. Consequently, plaintiffs Heirs of Dr. Mariano Favis, Sr.,
namely Purita A. Favis, Reynaldo A. Favis, Consolacion F. Queliza, Mariano A. Favis, Jr., Esther
F. Filart, Mercedes A. Favis, Nelly F. Villafuerte and the defendants Juana Gonzales now
deceased and Mariano G. Favis, Jr. shall inherit in equal shares in the estate of the late Dr.
Mariano Favis, Sr. which consists of the following:
1. A parcel of residential land located at Bonifacio St. Brgy. 1, Vigan City, Ilocos Sur,
consisting an area of 89 sq. meters more or less, bounded on the north by Salvador
Rivero; on the East by Eleutera Pena; on the South by Bonifacio St., and on the West by
Carmen Giron;

2. A commercial building erected on the aforesaid parcel of land with an assessed value
of P126,000.00;
3. One-half (1/2) of the house located in Brgy. VI, Vigan City, Ilocos Sur[,] containing an
area of 2,257 sq. meters more or less, bounded on the north by Lot 1208; on the east by
Mestizo River; on the South by Lot 1217 and on the West by Lot 1211-B, 1212 and 1215.
4. The accumulated rentals of the new Vigan Coliseum in the amount of One Hundred
Thirty [Thousand] (P130,000.00) pesos per annum from the death of Dr. Mariano Favis,
Sr.
8

Respondents interposed an appeal before the Court of Appeals challenging the trial courts
nullification, on the ground of vitiated consent, of the Deed of Donation in favor of herein
respondents. The Court of Appeals ordered the dismissal of the petitioners nullification case.
However, it did so not on the grounds invoked by herein respondents as appellant.
The Court of Appeals motu proprio ordered the dismissal of the complaint for failure of petitioners
to make an averment that earnest efforts toward a compromise have been made, as mandated
by Article 151 of the Family Code. The appellate court justified its order of dismissal by invoking
its authority to review rulings of the trial court even if they are not assigned as errors in the
appeal.
Petitioners filed a motion for reconsideration contending that the case is not subject to
compromise as it involves future legitime.
The Court of Appeals rejected petitioners contention when it ruled that the prohibited
compromise is that which is entered between the decedent while alive and compulsory heirs. In
the instant case, the appellate court observed that while the present action is between members
of the same family it does not involve a testator and a compulsory heir. Moreover, the appellate
court pointed out that the subject properties cannot be considered as "future legitime" but are in
fact, legitime, as the instant complaint was filed after the death of the decedent.
Undaunted by this legal setback, petitioners filed the instant petition raising the following
arguments:
1. The Honorable Court of Appeals GRAVELY and SERIOUSLY ERRED in DISMISSING
the COMPLAINT.
2. Contrary to the finding of the Honorable Court of Appeals, the verification of the
complaint or petition is not a mandatory requirement.
3. The Honorable Court of Appeals seriously failed to appreciate that the filing of an
intervention by Edward Favis had placed the case beyond the scope of Article 151 of the
Family Code.
4. Even assuming arguendo without admitting that the filing of intervention by Edward
Favis had no positive effect to the complaint filed by petitioners, it is still a serious error
for the Honorable Court of Appeals to utterly disregard the fact that petitioners had
substantially complied with the requirements of Article 151 of the Family Code.
5. Assuming arguendo that petitioners cannot be construed as complying substantially
with Article 151 of the Family Code, still, the same should be considered as a non-issue
considering that private respondents are in estoppel.

6. The dismissal of the complaint by the Honorable Court of Appeals amounts to grave
abuse of discretion amounting to lack and excess of jurisdiction and a complete defiance
of the doctrine of primacy of substantive justice over strict application of technical rules.
7. The Honorable Court of Appeals gravely and seriuosly erred in not affirming the
decision of the Court a quo that the Deed of Donation is void.
9

In their Comment, respondents chose not to touch upon the merits of the case, which is the
validity of the deed of donation. Instead, respondents defended the ruling the Court of Appeals
that the complaint is dismissible for failure of petitioners to allege in their complaint that earnest
efforts towards a compromise have been exerted.
The base issue is whether or not the appellate court may dismiss the order of dismissal of the
complaint for failure to allege therein that earnest efforts towards a compromise have been
made. The appellate court committed egregious error in dismissing the complaint. The appellate
courts decision hinged on Article 151 of the Family Code, viz:
Art. 151. No suit between members of the same family shall prosper unless it should appear from
the verified complaint or petition that earnest efforts toward a compromise have been made, but
that the same have failed. If it is shown that no such efforts were in fact made, the case must be
dismissed.
This rule shall not apply to cases which may not be the subject of compromise under the Civil
Code.
The appellate court correlated this provision with Section 1, par. (j), Rule 16 of the 1997 Rules of
Civil Procedure, which provides:
Section 1. Grounds. Within the time for but before filing the answer to the complaint or
pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:
xxxx
(j) That a condition precedent for filing the claim has not been complied with.
The appellate courts reliance on this provision is misplaced. Rule 16 treats of the grounds for a
motion to dismiss the complaint. It must be distinguished from the grounds provided under
Section 1, Rule 9 which specifically deals with dismissal of the claim by the court motu proprio.
Section 1, Rule 9 of the 1997 Rules of Civil Procedure provides:
Section 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.
Section 1, Rule 9 provides for only four instances when the court may motu proprio dismiss the
claim, namely: (a) lack of jurisdiction over the subject matter; (b) litis pendentia ; (c) res judicata ;
and (d) prescription of action. Specifically in Gumabon v. Larin, cited in Katon v. Palanca,
Jr., the Court held:
10

11

12

x x x [T]he motu proprio dismissal of a case was traditionally limited to instances when the court
clearly had no jurisdiction over the subject matter and when the plaintiff did not appear during
trial, failed to prosecute his action for an unreasonable length of time or neglected to comply with
the rules or with any order of the court. Outside of these instances, any motu proprio dismissal

would amount to a violation of the right of the plaintiff to be heard. Except for qualifying and
expanding Section 2, Rule 9, and Section 3, Rule 17, of the Revised Rules of Court, the
amendatory 1997 Rules of Civil Procedure brought about no radical change. Under the new
rules, a court may motu proprio dismiss a claim when it appears from the pleadings or evidence
on record that it has no jurisdiction over the subject matter; when there is another cause of action
pending between the same parties for the same cause, or where the action is barred by a prior
judgment or by statute of limitations. x x x.
13

The error of the Court of Appeals is evident even if the consideration of the issue is kept within
the confines of the language of Section 1(j) of Rule 16 and Section 1 of Rule 9. That a condition
precedent for filing the claim has not been complied with, a ground for a motion to dismiss
emanating from the law that no suit between members from the same family shall prosper unless
it should appear from the verified complaint that earnest efforts toward a compromise have been
made but had failed, is, as the Rule so words, a ground for a motion to dismiss. Significantly, the
Rule requires that such a motion should be filed "within the time for but before filing the answer
to the complaint or pleading asserting a claim." The time frame indicates that thereafter, the
motion to dismiss based on the absence of the condition precedent is barred. It is so inferable
from the opening sentence of Section 1 of Rule 9 stating that defense and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived. There are, as just noted, only
four exceptions to this Rule, namely, lack of jurisdiction over the subject matter; litis pendentia ;
res judicata ; and prescription of action. Failure to allege in the complaint that earnest efforts at a
compromise has been made but had failed is not one of the exceptions. Upon such failure, the
defense is deemed waived.
It was in Heirs of Domingo Valientes v. Ramas cited in P.L. Uy Realty Corporation v. ALS
Management and Development Corporation where we noted that the second sentence of
Section 1 of Rule 9 does not only supply exceptions to the rule that defenses not pleaded either
in a motion to dismiss or in the answer are deemed waived, it also allows courts to dismiss cases
motu propio on any of the enumerated grounds. The tenor of the second sentence of the Rule is
that the allowance of a motu propio dismissal can proceed only from the exemption from the rule
on waiver; which is but logical because there can be no ruling on a waived ground.
14

15

Why the objection of failure to allege a failed attempt at a compromise in a suit among members
of the same family is waivable was earlier explained in the case of Versoza v. Versoza, a case
for future support which was dismissed by the trial court upon the ground that there was no such
allegation of infringement of Article 222 of the Civil Code, the origin of Article 151 of the Family
Code. While the Court ruled that a complaint for future support cannot be the subject of a
compromise and as such the absence of the required allegation in the complaint cannot be a
ground for objection against the suit, the decision went on to state thus:
16

The alleged defect is that the present complaint does not state a cause of action. The proposed
amendment seeks to complete it. An amendment to the effect that the requirements of Article 222
have been complied with does not confer jurisdiction upon the lower court. With or without this
amendment, the subject-matter of the action remains as one for support, custody of children, and
damages, cognizable by the court below.
To illustrate, Tamayo v. San Miguel Brewery, Inc., allowed an amendment which " merely
corrected a defect in the allegation of plaintiff-appellants cause of action, because as it then
stood, the original complaint stated no cause of action." We there ruled out as inapplicable the
holding in Campos Rueda Corporation v. Bautista, that an amendment cannot be made so as to
confer jurisdiction on the court x x x. (Italics supplied).
17

18

Thus was it made clear that a failure to allege earnest but failed efforts at a compromise in a
complaint among members of the same family, is not a jurisdictional defect but merely a defect in
the statement of a cause of action. Versoza was cited in a later case as an instance analogous to
one where the conciliation process at the barangay level was not priorly resorted to. Both were

described as a "condition precedent for the filing of a complaint in Court." In such instances, the
consequence is precisely what is stated in the present Rule. Thus:
19

x x x The defect may however be waived by failing to make seasonable objection, in a motion to
dismiss or answer, the defect being a mere procedural imperfection which does not affect the
jurisdiction of the court. (Underscoring supplied).
20

In the case at hand, the proceedings before the trial court ran the full course. The complaint of
petitioners was answered by respondents without a prior motion to dismiss having been filed.
The decision in favor of the petitioners was appealed by respondents on the basis of the alleged
error in the ruling on the merits, no mention having been made about any defect in the statement
of a cause of action. In other words, no motion to dismiss the complaint based on the failure to
comply with a condition precedent was filed in the trial court; neither was such failure assigned
as error in the appeal that respondent brought before the Court of Appeals.
Therefore, the rule on deemed waiver of the non-jurisdictional defense or objection is wholly
applicable to respondent. If the respondents as parties-defendants could not, and did not, after
filing their answer to petitioners complaint, invoke the objection of absence of the required
allegation on earnest efforts at a compromise, the appellate court unquestionably did not have
any authority or basis to motu propio order the dismissal of petitioners complaint.
1wphi1

Indeed, even if we go by the reason behind Article 151 of the Family Code, which provision as
then Article 222 of the New Civil Code was described as "having been given more teeth" by
Section 1(j), Rule 16 of the Rule of Court, it is safe to say that the purpose of making sure that
there is no longer any possibility of a compromise, has been served. As cited in commentaries on
Article 151 of the Family Code
21

This rule is introduced because it is difficult to imagine a sudden and more tragic spectacle than
a litigation between members of the same family. It is necessary that every effort should be made
towards a compromise before a litigation is allowed to breed hate and passion in the family. It is
known that a lawsuit between close relatives generates deeper bitterness than between
strangers.
22

The facts of the case show that compromise was never an option insofar as the respondents
were concerned. The impossibility of compromise instead of litigation was shown not alone by
the absence of a motion to dismiss but on the respondents insistence on the validity of the
donation in their favor of the subject properties. Nor could it have been otherwise because the
Pre-trial Order specifically limited the issues to the validity of the deed and whether or not
respondent Juana and Mariano are compulsory heirs of Dr. Favis. Respondents not only
confined their arguments within the pre-trial order; after losing their case, their appeal was based
on the proposition that it was error for the trial court to have relied on the ground of vitiated
consent on the part of Dr. Favis.
The Court of Appeals ignored the facts of the case that clearly demonstrated the refusal by the
respondents to compromise. Instead it ordered the dismissal of petitioners complaint on the
ground that it did not allege what in fact was shown during the trial. The error of the Court of
Appeals is patent.
Unfortunately for respondents, they relied completely on the erroneous ruling of the Court of
Appeals even when petitioners came to us for review not just on the basis of such defective motu
propio action but also on the proposition that the trial court correctly found that the donation in
question is flawed because of vitiated consent. Respondents did not answer this argument. The
trial court stated that the facts are:
x x x To determine the intrinsic validity of the deed of donation subject of the action for
annulment, the mental state/condition of the donor Dr. Mariano Favis, Sr. at the time of its

execution must be taken into account. Factors such as his age, health and environment among
others should be considered. As testified to by Dr. Mercedes Favis, corroborated by Dr. Edgardo
Alday and Dra. Ofelia Adapon, who were all presented as expert witnesses, Dr. Mariano Favis,
Sr. had long been suffering from Hiatal Hernia and Parkinsons disease and had been taking
medications for years. That a person with Parkinsons disease for a long time may not have a
good functioning brain because in the later stage of the disease, 1/3 of death develop from this
kind of disease, and or dementia. With respect to Hiatal Hernia, this is a state wherein organs in
the abdominal cavity would go up to the chest cavity, thereby occupying the space for the lungs
causing the lungs to be compromised. Once the lungs are affected, there is less oxygenation to
the brain. The Hernia would cause the heart not to pump enough oxygen to the brain and the
effect would be chronic, meaning, longer lack of oxygenation to the brain will make a person not
in full control of his faculties. Dr. Alday further testified that during his stay with the house of Dr.
Mariano Favis, Sr. (1992-1994), he noticed that the latter when he goes up and down the stairs
will stop after few seconds, and he called this pulmonary cripple a very advanced stage
wherein the lungs not only one lung, but both lungs are compromised. That at the time he
operated on the deceased, the left and right lung were functioning but the left lung is practically
not even five (5%) percent functioning since it was occupied by abdominal organ. x x x.
Dr. Mariano Favis, Sr. during the execution of the Deed of Donation was already 92 years old;
living with the defendants and those years from 1993 to 1995 were the critical years when he
was sick most of the time. In short, hes dependent on the care of his housemates particularly the
members of his family. It is the contention of the defendants though that Dr. Mariano Favis, Sr.
had full control of his mind during the execution of the Deed of Donation because at that time, he
could go on with the regular way of life or could perform his daily routine without the aid of
anybody like taking a bath, eating his meals, reading the newspaper, watching television, go to
the church on Sundays, walking down the plaza to exercise and most importantly go to the
cockpit arena and bet. Dr. Ofelia Adapon, a neurology expert however, testified that a person
suffering from Parkinsons disease when he goes to the cockpit does not necessarily mean that
such person has in full control of his mental faculties because anyone, even a retarded person, a
person who has not studied and have no intellect can go to the cockpit and bet. One can do
everything but do not have control of his mind. x x x That Hiatal Hernia creeps in very insidiously,
one is not sure especially if the person has not complained and no examination was done. It
could be there for the last time and no one will know. x x x.
The Deed of Donation in favor of the defendants Ma. Theresa, Joana D. Favis, Maria Cristina D.
Favis, James Mark D. Favis and Maria Thea D. Favis, all of whom are the children of Mariano G.
Favis, Jr. was executed on [16 October] 1994, seven (7) months after Dra. Mercedes Favis left
the house of Dr. Favis, Sr. at Bonifacio St., Vigan City, Ilocos Sur, where she resided with the
latter and the defendants.
Putting together the circumstances mentioned, that at the time of the execution of the Deed of
Donation, Dr. Mariano Favis, Sr. was already at an advanced age of 92, afflicted with different
illnesses like Hiatal hernia, Parkinsons disease and pneumonia, to name few, which illnesses
had the effects of impairing his brain or mental faculties and the deed being executed only when
Dra. Mercedes Favis had already left his fathers residence when Dr. Mariano Favis, Sr. could
have done so earlier or even in the presence of Dra. Mercedes Favis, at the time he executed
the Deed of Donation was not in full control of his mental faculties. That although age of senility
varies from one person to another, to reach the age of 92 with all those medications and
treatment one have received for those illnesses, yet claim that his mind remains unimpaired,
would be unusual. The fact that the Deed of Donation was only executed after Dra. Mercedes
Favis left his father's house necessarily indicates that they don't want the same to be known by
the first family, which is an indicia of bad faith on the part of the defendant, who at that time had
influence over the donor.
23

The correctness of the finding was not touched by the Court of Appeals. The respondents opted
to rely only on what the appellate court considered, erroneously though, was a procedural

infirmity. The trial court's factual finding, therefore, stands unreversed; and respondents did not
provide us with any argument to have it reversed.
The issue of the validity of donation was fully litigated and discussed by the trial court. Indeed,
the trial court's findings were placed at issue before the Court of Appeals but the appellate court
chose to confine its review to the procedural aspect. The judgment of the Court of Appeals, even
if it dealt only with procedure, is deemed to have covered all issues including the correctness of
the factual findings of the trial court. Moreover, remanding the case to the Court of Appeals would
only constitute unwarranted delay in the final disposition of the case.
WHEREFORE, the Decision of the Court of Appeals is REVERSED and SET ASIDE and the
Judgment of the Regional Trial Court of Vigan, Ilocos Sur, Branch 20 is AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-58986 April 17, 1989
DANTE Y. GO, petitioner,
vs.
HON. FERNANDO CRUZ, Judge, etc., CITY SHERIFF OF CALOOCAN CITY, and
CALIFORNIA MANUFACTURING CO., INC., respondents.
De Santos, Balgos & Perez for petitioner.
Francisco N. Carreon, Jr. for respondents.

NARVASA, J.:
The dismissal of civil actions is always addressed to the sound judgment and discretion of the
court; this, whether the dismissal is sought after a trial has been completed or otherwise, 1 or
whether it is prayed for by a defending party 2 or by a plaintiff or claimant. 3 There is one instance however where the dismissal of an
action rests exclusively on the will of a plaintiff or claimant, to prevent which the defending party and even the court itself is powerless,
requiring in fact no action whatever on the part of the court except the acceptance and recording of the causative document. This is
dealt with in Section 1, Rule 17 of the Rules of Court, which reads as follows:

SECTION 1. Dismissal by the plaintiff. An action may be dismissed by the

plaintiff without order of court by filing a notice of dismissal at any time before
service of the answer or of a motion for summary judgment. Unless otherwise
stated in the notice, the dismissal is without prejudice, except that a notice
operates as an adjudication upon the merits when filed by a plaintiff who has
once dismissed in a competent court an action based on or including the same
claim. A class suit shall not be dismissed or compromised without approval of the
court.
It is this provision with which the proceedings at bar are chiefly concerned.
On October 26, 1981, California Manufacturing Co., Inc. (hereinafter, simply, California) brought
an action in the Court of First Instance of Manila against Dante Go, accusing him of unfair

competition. 4 The gravamen of California's complaint was that Dante Go, doing business under the name and style of "Sugarland
International Products," and engaged like California in the manufacture of spaghetti, macaroni, and other pasta was selling his products
in the open market under the brand name, "Great Italian," in packages which were in colorable and deceitful limitation of California's
containers bearing its own brand, "Royal." Its complaint contained an application for preliminary injunction commanding Dante Go to
immediately cease and desist from the further manufacture, sale and distribution of said products, and to retrieve those already being
offered for sale. 5

About two weeks later, however, or on November 12, 1981, California filed a notice of dismissal
with the Court reading as follows: 6
COMES NOW the plaintiff in the above-entitled case, through undersigned
counsel, and unto this Honorable Court most respectfully gives notice of
dismissal without prejudice pursuant to Sec. 1, Rule 17 of the Rules of Court.
WHEREFORE, it is respectfully prayed that the above-entitled case be
considered dismissed without prejudice conformably with Sec. 1, Rule 17 of the
Rules of Court.
Four days afterwards, or on November 16, 1981, California received by registered mail a copy of
Dante Go's answer with counterclaim dated November 6, 1981, which had been filed with the
Court on November 9, 1981. 7
On November 19, 1981 a fire broke out at the Manila City Hall destroying among others
the sala of Judge Tengco and the records of cases therein kept, including that filed by California
against Dante Go. 8
On December 1, 1981, California filed another complaint asserting the same cause of action
against Dante Go, this time with the Court of First Instance at Caloocan City. 9 This second suit was
docketed as Civil Case No. C-9702 and was assigned to the branch presided over by Judge Fernando A. Cruz.

On December 3, 1981, Judge Cruz issued an ex parte restraining order directing "the
defendant ... to immediately cease and desist from the further manufacture, sale, promotion and
distribution of spaghetti, macaroni and other pasta products contained in packaging boxes and
labels under the name 'GREAT ITALIAN,' which are similar to or copies of those of the plaintiff,
and ... recall ... all his spaghetti, macaroni and other pasta products using the brand, 'GREAT
ITALIAN.'" 10
On the day following the rendition of the restraining order, Dante Go filed the present petition
for certiorari, etc. with this Court praying for its nullification and perpetual inhibition. On
December 11, 1981, this Court, in turn issued a writ of preliminary injunction restraining
California, Judge Cruz and the City Sheriff from enforcing or implementing the restraining order
of December 3, 1981, and from continuing with the hearing on the application for preliminary
injunction in said Civil Case No. C-9702. The scope of the injunction was subsequently enlarged
by this Court's Resolution of April 14,1982 to include the City Fiscal of Manila, who was thereby
restrained from proceeding with the case of unfair competition filed in his office by California
against Dante Go. 11
Dante Go's thesis is that the case filed against him by California in the Manila Court remained
pending despite California's notice of dismissal. According to him, since he had already filed his
answer to the complaint before California sought dismissal of the action three (3) days
afterwards, such dismissal was no longer a matter of right and could no longer be effected by
mere notice in accordance with Section 1, Rule 17 of the Rules of Court, but only on plaintiff s
motion, and by order of the Court; hence, the Caloocan Court acted without jurisdiction over the
second action based on the same cause. He also accused California of forum shopping, of
selecting a sympathetic court for a relief which it had failed to obtain from another. 12

The petitioner is in error. What marks the loss by a plaintiff of the right to cause dismissal of the
action by mere notice is not the filing of the defendant's answer with the Court (either personally
or by mail) but the service on the plaintiff of said answer or of a motion for summary judgment.
This is the plain and explicit message of the Rules.13 "The filing of pleadings, appearances, motions, notices,
orders and other papers with the court," according to Section 1, Rule 13 of the Rules of Court, means the delivery thereof to the clerk of
the court either personally or by registered mail. Service, on the other hand, signifies delivery of the pleading or other paper to the
parties affected thereby through their counsel of record, unless delivery to the party himself is ordered by the court, 14 by any of the
modes set forth in the Rules, i.e., by personal service, 15 service by mail, 16 or substituted service. 17

Here, California filed its notice of dismissal of its action in the Manila Court after the filing of
Dante Go's answer but before service thereof. Thus having acted well within the letter and
contemplation of the afore-quoted Section 1 of Rule 17 of the Rules of Court, its notice ipso facto
brought about the dismissal of the action then pending in the Manila Court, without need of any
order or other action by the Presiding Judge. The dismissal was effected without regard to
whatever reasons or motives California might have had for bringing it about, and was, as the
same Section 1, Rule 17 points out, "without prejudice," the contrary not being otherwise "stated
in the notice" and it being the first time the action was being so dismissed.
There was therefore no legal obstacle to the institution of the second action in the Caloocan
Court of First Instance based on the same claim. The filing of the complaint invested it with
jurisdiction of the subject matter or nature of the action. In truth, and contrary to what petitioner
Dante Go obviously believes, even if the first action were still pending in the Manila Court, this
circumstance would not affect the jurisdiction of the Caloocan Court over the second suit. The
pendency of the first action would merely give the defendant the right to move to dismiss the
second action on the ground of auter action pendant or litis pendentia. 18
WHEREFORE, the petition is DISMISSED, with costs against petitioner. The temporary
restraining order of December 11, 1981, and the amendatory Resolution of April 14, 1982 are
SET ASIDE.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 170026

June 20, 2012

SHIMIZU PHILIPPINES CONTRACTORS, INC., Petitioner,

vs.
MRS. LETICIA B. MAGSALIN, doing business under the trade name "KAREN'S TRADING,"
FGU INSURANCE CORPORATION, GODOFREDO GARCIA, CONCORDIA GARCIA, and
REYNALDO BAETIONG,Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by Shimizu Philippines Contractors, Inc.
(petitioner) to challenge the twin resolutions of the Court of Appeals (CA)2 in CA-G.R. CV No.
83096 which dismissed the appeal of the petitioner on the ground of lack of jurisdiction 3 and
denied the petitioners subsequent motion for reconsideration. 4 The appeal in CA-G.R. CV No.
83096 had sought to nullify the December 16, 2003 order5 of the Regional Trial Court (RTC)
dismissing the petitioners complaint for sum of money and damages on the ground ofnon
prosequitur.

The Antecedents
The antecedent facts of the petition before us are not disputed.
An alleged breach of contract was the initial event that led to the present petition. The petitioner
claims that one Leticia Magsalin, doing business as "Karens Trading," had breached their
subcontract agreement for the supply, delivery, installation, and finishing of parquet tiles for
certain floors in the petitioners Makati City condominium project called "The Regency at
Salcedo." The breach triggered the agreements termination. When Magsalin also refused to
return the petitioners unliquidated advance payment and to account for other monetary liabilities
despite demand, the petitioner sent a notice to respondent FGU Insurance Corporation (FGU
Insurance) demanding damages pursuant to the surety and performance bonds the former had
issued for the subcontract.
On April 30, 2002, the petitioner filed a complaint docketed as Civil Case No. 02-488 against both
Magsalin and FGU Insurance. It was raffled to Branch 61 of the RTC of Makati City. The
complaint sought Two Million Three Hundred Twenty-Nine Thousand One Hundred Twenty Four
Pesos and Sixty Centavos (P2,329,124.60) as actual damages for the breach of contract.
FGU Insurance was duly served with summons. With respect to Magsalin, however, the
corresponding officers return declared that both she and "Karens Trading" could not be located
at their given addresses, and that despite further efforts, their new addresses could not be
determined.
In August 2002, FGU Insurance filed a motion to dismiss the complaint. The petitioner filed its
opposition to the motion. The motion to dismiss was denied as well as the ensuing motion for
reconsideration, and FGU Insurance was obliged to file an answer.
In October 2002, in an effort to assist the RTC in acquiring jurisdiction over Magsalin, the
petitioner filed a motion for leave to serve summons on respondent Magsalin by way of
publication. In January 2003, the petitioner filed its reply to FGU Insurances answer.
In February 2003, FGU Insurance filed a motion for leave of court to file a third-party complaint.
Attached to the motion was the subject complaint,6 with Reynaldo Baetiong, Godofredo Garcia
and Concordia Garcia named as third-party defendants. FGU Insurance claims that the three had
executed counter-guaranties over the surety and performance bonds it executed for the
subcontract with Magsalin and, hence, should be held jointly and severally liable in the event it is
held liable in Civil Case No. 02-488.
The RTC admitted the third-party complaint and denied the motion to serve summons by
publication on the ground that the action against respondent Magsalin was in personam.
In May 2003, the RTC issued a notice setting the case for hearing on June 20, 2003. FGU
Insurance filed a motion to cancel the hearing on the ground that the third-party defendants had
not yet filed their answer. The motion was granted.
In June 2003, Baetiong filed his answer to the third-party complaint. He denied any personal
knowledge about the surety and performance bonds for the subcontract with Magsalin. 7 Of the
three (3) persons named as third-party defendants, only Baetiong filed an answer to the thirdparty complaint; the officers returns on the summons to the Garcias state that both could not be
located at their given addresses. Incidentally, the petitioner claims, and Baetiong does not
dispute, that it was not served with a copy of Baetiongs answer. The petitioner now argues
before us that FGU Insurance, which is the plaintiff in the third-party complaint, had failed to exert
efforts to serve summons on the Garcias. It suggests that a motion to serve summons by
publication should have been filed for this purpose. The petitioner also asserts that the RTC

should have scheduled a hearing to determine the status of the summons to the third-party
defendants.8
The Order Of Dismissal
With the above procedural events presented by both parties as the only backdrop, on December
16, 2003 the RTC issued a tersely worded order9 dismissing Civil Case No. 02-488. For clarity,
we quote the dismissal order in full:
ORDER
For failure of [petitioner] to prosecute, the case is hereby DISMISSED.
SO ORDERED.
The RTC denied the petitioners motion for reconsideration,10 prompting the latter to elevate its
case to the CA via a Rule 41 petition for review.11
The Ruling of the Appellate Court
FGU Insurance moved for the dismissal of the appeal on the ground of lack of jurisdiction. It
argued that the appeal raised a pure question of law as it did not dispute the proceedings before
the issuance of the December 16, 2003 dismissal order.
The petitioner, on the other hand, insisted that it had raised questions of fact in the appeal. 12 Thus
While, the instant appeal does not involve the merits of the case, the same involves questions
of fact based on the records of the case. It must be emphasized that the lower courts
dismissal of the case based on alleged failure to prosecute on the part of plaintiff-appellant was
too sudden and precipitate. This being the case, the facts [sic] to be determined is whether
based on the records of the case, was there a definite inaction on the part of plaintiff-appellant? A
careful examination of all pleadings filed as well as the orders of the lower court vis--vis the
rules should now be made in order to determine whether there was indeed a "failure to
prosecute" on the part of plaintiff-appellant[.]13 (emphases supplied)
The CA agreed with FGU Insurance and dismissed the appeal, and denied as well the
subsequent motion for reconsideration.14 The petitioner thus filed the present petition for review
on certiorari.
The Present Petition
The petitioner pleads five (5) grounds to reverse the CAs resolutions and to reinstate Civil Case
No. 02-488. In an effort perhaps to make sense of the dismissal of the case (considering that the
trial court had not stated the facts that justify it), the petitioner draws this Courts attention to
certain facts and issues that we find to be of little materiality to the disposition of this petition:
Grounds/ Statement of Matters Involved
I. The Appellate Court has jurisdiction to determine the merits of the Appeal as the
matters therein involve both questions of law and fact.
II. The lower court erred in declaring that petitioner failed to prosecute the case despite
the fact that petitioner never received a copy of the Answer of Third-party defendantrespondent Reynaldo Baetiong.

III. The lower court erred in declaring that petitioner failed to prosecute the case despite
the fact that there is no joinder of indispensable parties and issues yet because
defendant-respondent Leticia B. Magsalin as well as third-party defendant-respondents
Godofredo and Concordia Garcias whereabouts were unknown, hence no service yet on
them of the copy of the summons and complaint with annexes[.]
IV. The lower court erred in declaring that Petitioner failed to prosecute the case despite
the fact that it was party respondent FGU which caused the cancellation of the hearing.
V. It is evident that the lower courts dismissal of the case is a clear denial of due
process.15
In our Resolution dated February 13, 2006,16 we required the respondents to comment. FGU
Insurances comment17 alleges that the present petition is "fatally defective" for being
unaccompanied by material portions of the record. It reiterates that the appeal in CA-G.R. CV
No. 83096 was improperly filed under Rule 41 and should have been filed directly with this Court
under Rule 45 of the Rules of Court. Baetiong, in his comment,18 asserts that the dismissal of the
appeal was in accord with existing laws and applicable jurisprudence.
The Ruling Of The Court
Preliminarily, we resolve the claim that the petition violates Rule 45 of the Rules of Court on the
attachment of material portions of the record. We note that FGU Insurance fails to discharge its
burden of proving this claim by not specifying the material portions of the record the petitioner
should have attached to the petition. At any rate, after a careful perusal of the petition and its
attachments, the Court finds the petition to be sufficient. In other words, we can judiciously
assess and resolve the present petition on the basis of its allegations and attachments.
After due consideration, we resolve to grant the petition on the ground that the December 16,
2003 dismissalorder is null and void for violation of due process. We are also convinced that the
appeal to challenge the dismissal order was properly filed under Rule 41 of the Rules of Court.
We further find that the dismissal of Civil Case No. 02-488 for failure to prosecute is not
supported by facts, as shown by the records of the case.
The Dismissal Order is Void
The nullity of the dismissal order is patent on its face. It simply states its conclusion that the case
should be dismissed for non prosequitur, a legal conclusion, but does not state the facts on
which this conclusion is based.
Dismissals of actions for failure of the plaintiff to prosecute is authorized under Section 3, Rule
17 of the Rules of Court. A plain examination of the December 16, 2003 dismissal order shows
that it is an unqualified order and, as such, is deemed to be a dismissal with prejudice.
"Dismissals of actions (under Section 3) which do not expressly state whether they are with or
without prejudice are held to be with prejudice[.]"19 As a prejudicial dismissal, the December 16,
2003 dismissal order is also deemed to be a judgment on the merits so that the petitioners
complaint in Civil Case No. 02-488 can no longer be refiled on the principle of res judicata.
Procedurally, when a complaint is dismissed for failure to prosecute and the dismissal is
unqualified, the dismissal has the effect of an adjudication on the merits. 20
As an adjudication on the merits, it is imperative that the dismissal order conform with Section 1,
Rule 36 of the Rules of Court on the writing of valid judgments and final orders. The rule states:
RULE 36
Judgments, Final Orders and Entry Thereof

Section 1. Rendition of judgments and final orders. A judgment or final order determining the
merits of the case shall be in writing personally and directly prepared by the judge, stating clearly
and distinctly the facts and the law on which it is based, signed by him, and filed with the clerk of
the court.
The December 16, 2003 dismissal order clearly violates this rule for its failure to disclose how
and why the petitioner failed to prosecute its complaint. Thus, neither the petitioner nor the
reviewing court is able to know the particular facts that had prompted the prejudicial dismissal.
Had the petitioner perhaps failed to appear at a scheduled trial date? Had it failed to take
appropriate actions for the active prosecution of its complaint for an unreasonable length of time?
Had it failed to comply with the rules or any order of the trial court? The December 16, 2003
dismissal order does not say.
We have in the past admonished trial courts against issuing dismissal orders similar to that
appealed in CA-G.R. CV No. 83096. A trial court should always specify the reasons for a
complaints dismissal so that on appeal, the reviewing court can readily determine the prima
facie justification for the dismissal.21 A decision that does not clearly and distinctly state the facts
and the law on which it is based leaves the parties in the dark and is especially prejudicial to the
losing party who is unable to point the assigned error in seeking a review by a higher tribunal. 22
We thus agree with the petitioner that the dismissal of Civil Case No. 02-488 constituted a denial
of due process. Elementary due process demands that the parties to a litigation be given
information on how the case was decided, as well as an explanation of the factual and legal
reasons that led to the conclusions of the court.23Where the reasons are absent, a decision (such
as the December 16, 2003 dismissal order) has absolutely nothing to support it and is thus a
nullity.24
For this same reason, we are not moved by respondent FGU Insurances statement that the
disposition of the present petition must be limited to the issue of whether the CA had correctly
dismissed the appeal in CA-G.R. CV No. 83096.25 This statement implies that we cannot properly
look into the validity of the December 16, 2003 dismissal order in this Rule 45 petition. A void
decision, however, is open to collateral attack. While we note that the validity of the dismissal
order with respect to Section 1, Rule 36 of the Rules of Court was never raised by the petitioner
as an issue in the present petition, the Supreme Court is vested with ample authority to review an
unassigned error if it finds that consideration and resolution are indispensable or necessary in
arriving at a just decision in an appeal.26 In this case, the interests of substantial justice warrant
the review of an obviously void dismissal order.
The appeal was properly filed
under Rule 41 of the Rules of Court
While the nullity of the December 16, 2003 dismissal order constitutes the ratio decidendi for this
petition, we nevertheless rule on the contention that the appeal was erroneously filed. 27
In dismissing the appeal, the CA relied on the premise that since the facts presented in the
petitioners appeal were admitted and not disputed, the appeal must thereby raise a pure
question of law proscribed in an ordinary appeal. This premise was effectively the legal principle
articulated in the case of Joaquin v. Navarro,28 cited by the CA in its April 8, 2005 resolution.
Respondent FGU Insurance thus contends that the proper remedy to assail the dismissal of Civil
Case No. 02-488 was an appeal filed under Rule 45 of the Rules of Court.
The reliance on Joaquin is misplaced as it is based on the conclusion the appellate court made in
its April 8, 2005 resolution i.e., that the pleading of undisputed facts is equivalent to a
prohibited appeal. The reliance is inattentive to both the averments of the subject appeal and to
the text of the cited case. The operative legal principle in Joaquin is this: "[W]here a case is
submitted upon an agreement of facts, or where all the facts are stated in the judgment and the

issue is the correctness of the conclusions drawn therefrom, the question is one of law which [is
properly subject to the review of this Court.]"29 In this case, as already pointed out above, the
facts supposedly supporting the trial courts conclusion of non prosequitur were not stated in the
judgment. This defeats the application of Joaquin.
At any rate, we believe that the filing of the appeal in CA-G.R. CV No. 83096 under Rule 41 of
the Rules of Court was proper as it necessarily involved questions of fact.
An authority material to this case is the case of Olave v. Mistas.30 Directly addressed
in Olave was the CAs jurisdiction over an ordinary appeal supported by undisputed facts and
seeking the review of a prejudicial order of dismissal. In this case, a complaint was filed before
the RTC in Lipa City to nullify an instrument titled "Affidavit of Adjudication By The Heirs of the
Estate of Deceased Persons With Sale." The RTC dismissed the complaint, with prejudice, after
the plaintiffs had moved to set the case for pre-trial only after more than three (3) months had
lapsed from the service and filing of the last pleading in the case. The plaintiffs thereafter went to
the CA on a Rule 41 petition, contending, among others, that the trial court had erred and abused
its discretion. As in the present case, the defendants moved to dismiss the appeal on the ground
that the issues therein were legal; they pointed out that the circumstances on record were
admitted.31 They argued that the proper remedy was a petition for review on certiorari under Rule
45 of the Rules of Court.
The CA denied the motion and entertained the appeal. It rendered a decision reinstating the
complaint on the ground that there was no evidence on record that the plaintiffs had deliberately
failed to prosecute their complaint.
When the case was elevated to this court on a Rule 45 petition, we squarely addressed the
propriety of the plaintiffs appeal. Though mindful that the circumstances pleaded in the appeal
were all admitted, we categorically held in Olave that the appeal was correctly filed. We observed
that despite undisputed records, the CA, in its review, still had to respond to factual questions
such as the length of time between the plaintiffs receipt of the last pleading filed up to the time
they moved to set the case for pre-trial, whether there had been any manifest intention on the
plaintiffs part not to comply with the Rules of Court, and whether the plaintiffs counsel was
negligent.
Significantly, in Olave, we agreed with the plaintiffs that among the critical factual questions was
whether, based on the records, there had been factual basis for the dismissal of the subject
complaint. This same question is particularly significant in the present case given that the order
appealed from in CA-G.R. CV No. 83096 does not even indicate the factual basis for the
dismissal of Civil Case No. 02-488. Due to the absence of any stated factual basis, and despite
the admissions of the parties, the CA, in CA-G.R. CV No. 83096, still had to delve into the
records to check whether facts to justify the prejudicial dismissal even exist. Since the dismissal
of Civil Case No. 02-488 appears to have been rendered motu proprio (as the December 16,
2003 dismissal order does not state if it was issued upon the respondents or the trial courts
motion), the facts to be determined by the CA should include the grounds specified under
Section 3, Rule 17 of the Rules of Court. A court could only issue a motu proprio dismissal
pursuant to the grounds mentioned in this rule and for lack of jurisdiction over the subject
matter.32 These grounds are matters of facts. Thus, given that the dismissal order does not
disclose its factual basis, we are thus persuaded that the petitioner had properly filed its appeal
from the dismissal order under Rule 41 of the Rules of Court.
The Dismissal of Civil Case No. 02-488 is not Supported by the Facts of the Case
We also find that the dismissal of Civil Case No. 02-488 is not warranted. Based on available
records and on the averments of the parties, the following events were chronologically proximate
to the dismissal of Civil Case No. 02-488: (a) on March 24, 2003, the court admitted FGU
Insurances third-party complaint; (b) the trial court cancelled the June 20, 2003 hearing upon

FGU Insurances motion; and (c) on June 16, 2003, Baetiong filed hisAnswer to the thirdparty complaint but did not serve it upon the petitioner.
None of these events square with the grounds specified by Section 3, Rule 17 of the Rules of
Court for the motu proprio dismissal of a case for failure to prosecute. These grounds are as
follows:
(a) Failure of the plaintiff, without justifiable reasons, to appear on the date of the
presentation of his evidence in chief;
(b) Failure of the plaintiff to prosecute his action for an unreasonable length of time;
(c) Failure of the plaintiff to comply with the Rules of Court; or
(d) Failure of the plaintiff to obey any order of the court.
In our view, the developments in the present case do not satisfy the stringent standards set in
law and jurisprudence for a non prosequitur.33 The fundamental test for non prosequitur is
whether, under the circumstances, the plaintiff is chargeable with want of due diligence in failing
to proceed with reasonable promptitude.34 There must be unwillingness on the part of the plaintiff
to prosecute.35
In this case, the parties own narrations of facts demonstrate the petitioners willingness to
prosecute its complaint. Indeed, neither respondents FGU Insurance nor Baetiong was able to
point to any specific act committed by the petitioner to justify the dismissal of their case.
1wphi1

While it is discretionary on the trial court to dismiss cases, dismissals of actions should be made
with care. The repressive or restraining effect of the rule amounting to adjudication upon the
merits may cut short a case even before it is fully litigated; a ruling of dismissal may forever bar a
litigant from pursuing judicial relief under the same cause of action. Hence, sound discretion
demands vigilance in duly recognizing the circumstances surrounding the case to the end that
technicality shall not prevail over substantial justice. 36
This court is thus of the opinion that the dismissal of Civil Case No. 02-488 is not warranted.
Neither facts, law or jurisprudence supports the RTCs finding of failure to prosecute on the part
of the petitioner.
Wherefore, premises considered, the instant petition is Granted. The resolutions of the Court of
Appeals dated April 8, 2005 and October 4, 2005 are REVERSED and SET ASIDE. The
order dated December 16, 2003 of the Regional Trial Court, Branch 61, Makati City, in Civil Case
No. 02-488 is declared NULL and VOID, and the petitioners complaint therein is
ordered REINSTATED for further proceedings. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 192716

June 13, 2012

ELOISA MERCHANDISING, INC. and TREBEL INTERNATIONAL, INC., Petitioners,

vs.

BANCO DE ORO UNIVERSAL BANK and ENGRACIO M. ESCASINAS, JR., in his capacity
as Ex-Officio Sheriff of the RTC of Makati City, Respondents.
DECISION
VILLARAMA, JR., J.:
Assailed in this petition for review on certiorari under Rule 45 are the Decision1 dated March 30,
2010 and Resolution2 dated June 15, 2010 of the Court of Appeals (CA) in CA-G.R. CV No.
89779. The CA affirmed the trial courts dismissal of petitioners complaint on the ground of
failure to prosecute.
On November 11, 1993, petitioner Eloisa Merchandising, Inc. (EMI) executed in favor of
respondent Banco de Oro Universal Bank (BDO) a real estate mortgage (REM) over its
properties located at No. 129 Neptune St., Bel-Air Village II, Makati City, Metro Manila and
covered by Transfer Certificate of Title Nos. 157092 and 157093. The REM was further amended
on May 16, 1996, December 23, 1996, September 16, 1998 and July 2, 1999 to secure the
principal obligation totalling Twenty-Nine Million Nine Hundred Thousand Pesos
(P29,900,000.00) drawn from the Credit Line Agreement of EMI and Term Loan Agreement of
Trebel International, Inc. (Trebel). EMI likewise executed a Continuing Suretyship in favor of BDO
to secure the credit accommodation extended by BDO to petitioners affiliate, Trebel. 3
On January 10, 2002, BDO initiated foreclosure proceedings by filing an application for
extrajudicial foreclosure before the Office of the Ex-Officio Sheriff of the Regional Trial Court
(RTC) of Makati City.4 Accordingly, respondent Engracio M. Escasinas, Jr. issued a notice setting
the auction sale of the mortgaged property on March 7, 2002.
On March 1, 2002, petitioners filed a Complaint5 for "annulment of Real Estate Mortgage,
Injunction & Damages With Prayer for Issuance of a Writ of Preliminary Injunction and/or
Temporary Restraining Order," docketed as Civil Case No. 02-245 of the RTC of Makati City,
Branch 59. Petitioners alleged the following as grounds for nullity of the REM: (1) the contract is
in the nature of a third-party mortgage to secure the loans of Trebel despite the fact that EMI is
not in the suretyship business; (2) after maturity of the loans, BDO granted Trebel extensions of
time to pay without notice to EMI, thus extinguishing the corporate guaranty or suretyship and
REM, pursuant to Art. 2079 of the Civil Code; (3) under the promissory notes, BDO unilaterally
fixed an adjustable, "floating" interest rate on each interest period as may be favorable to it, a
potestative condition which is null and void under Art. 1308 of the Civil Code; and (4) the penalty
of 3% per month or 36% per annum is exorbitant and excessive. Petitioners further claimed that
BDO acted with malice and evident bad faith in initiating the extrajudicial foreclosure
proceedings.
BDO filed a motion to dismiss6 on the ground of lack of cause of action which can be determined
from the facts alleged in the complaint and considering all annexes, motions and evidence on
record.
On May 7, 2002, petitioners filed an amended complaint7 which impleaded the Register of Deeds
and alleged that the mortgaged property was sold at a public auction on March 7, 2002.
On July 18, 2002, petitioners filed a "Motion for Leave to File and to Admit Second Amended
Complaint,"8 which averred that the Register of Deeds of Makati City has consolidated the titles
over the foreclosed properties and issued new titles in the name of BDO.
On November 28, 2002, the trial court issued an order 9 granting the motion to admit second
amended complaint and denying the motion to dismiss. BDO was directed to file a responsive
pleading.

On January 17, 2003, BDO filed its Answer10 traversing the allegations of the complaint and
asserting that: (1) there was only forbearance on BDOs part before filing the extrajudicial
foreclosure due to insistent request of petitioners who repeatedly promised to settle their
obligations, and for humanitarian reasons; (2) the loan documents clearly stated that no prior
demand is necessary before the entire obligation becomes due and demandable; (3) on June 22,
1999, Trebel obtained a "Term Loan Agreement" in addition to the previously
granted P5,000,000.00 Credit/Trust Receipts Line granted by BDO, from which Trebel availed
of P19,900,000.00, part of which was used to pay off EMIs loans; in consideration thereof, EMI
executed a Continuing Suretyship and the Fourth Amended REM to the extent of P29,900,000.00
in favor of BDO; (4) Trebel subsequently made several drawings from its own credit lines in the
total amount of P29,880,000.00 under Promissory Notes (PNs) executed on various dates; (5)
because Trebel failed to satisfy its loan obligations under the aforesaid PNs, BDO was compelled
to file an application for extrajudicial foreclosure of the REM on January 10, 2002, and BDO won
as the highest bidder during the public auction sale; (6) EMI was not a third-party mortgagor
considering that it secured its own obligations and Trebel has assumed its obligations in full; the
veil of corporate fiction maybe pierced in this case, and EMI is already estopped from raising the
issue of ultra vires act after Trebel had defaulted on its obligations; (7) with the execution of the
Continuing Suretyship, EMI bound itself solidarily with the principal debtor, Trebel, and the right
of BDO to proceed against EMI as surety exists independently of its right to proceed against
Trebel; EMI as surety is not even entitled to a notice of the principals default; (8) the Conforme
Letter dated June 14, 1999 sent by BDO to EMI showed the consent of Mr. Roberto L. Del
Rosario (President) and Ms. Emma M. Del Rosario (Finance Manager) who both signed the said
letter which provides for a floating interest rate based on the 364-day Treasury Bill Rates plus 4%
or the BDO Reference Rate plus 7.5%; T-Bill Rates are one of the most objective and generally
used standard for interest rates; and (9) the liquidated penalty was part of the parties agreement,
which will not accrue until Trebel defaults on its obligations with BDO.
In the Notice of Pre-Trial11 dated January 22, 2003, the trial court set the pre-trial conference on
February 27, 2003. In compliance with the trial courts directive, the parties submitted their
respective pre-trial briefs.
On March 13, 2003, petitioners filed a "Motion to Admit Supplemental Complaint" which further
alleged that BDOs petition for issuance of a writ of possession was granted by the RTC of
Makati City, Branch 143 in a Decision dated February 18, 2003. EMI reiterated that its rights as
surety-mortgagor were violated in the railroaded ex parte proceedings implementing the writ of
possession even as EMIs pending motion for reconsideration was still unresolved by Branch
143.12
In its Order13 dated June 19, 2003, the trial court denied the motion to admit supplemental
complaint on the ground that the matters raised in the supplemental complaint were improper as
they pertain to issuances by another branch in a separate petition for writ of possession.
At the scheduled pre-trial conference on June 26, 2003, on motion of petitioners, they were
allowed to present evidence exparte in view of the absence of BDO which was non-suited. In its
motion for reconsideration, BDOs counsel cited extraordinary and non-moving traffic as reason
for his failure to arrive on time for the pre-trial conference. The trial court, in an Order dated
August 27, 2003, granted the said motion, reinstated the case and set the case again for pre-trial
conference on September 26, 2003, later moved to November 10, 2003, and finally rescheduled
to January 12, 2004 by agreement of the parties.14
On July 16, 2003, petitioners filed a motion for reconsideration of the June 19, 2003 Order
denying their motion to admit supplemental complaint; BDO filed its opposition to the said
motion.
For failure of the petitioners to appear despite due notice at the scheduled pre-trial conference
on January 12, 2004, the case was ordered dismissed. 15 In their motion for reconsideration,

petitioners counsel claimed that his failure to attend was due to his accidental falling on the
stairs of his house in the morning of January 12, 2004, due to which he had to be attended by a
"hilot". In an Order dated May 7, 2004, the trial court reconsidered the dismissal and scheduled
anew the pre-trial conference on June 29, 2004, which date was subsequently reset to August 3,
2004 for lack of proof of service upon petitioners counsel. 16
Since petitioners again failed to appear on the re-scheduled pre-trial conference on August 3,
2004, the trial court issued the following Order:
When this case was called for pre-trial conference, only counsel for the defendants appeared.
There was no appearance on the part of the plaintiffs, despite the fact that as early as June 29,
2004, they were notified for todays hearing. The Court, however, is in receipt of a Motion to
Reset filed by counsel for the plaintiff, alleging among others, that he is to appear at the MTC of
San Jose, Batangas, which was set earlier than the hearing of this case. The Court finds the
ground not meritorious because counsel of plaintiffs in open Court on June 29, 2004 signed the
notification for the hearing of this case. Counsel could have objected to the chosen date if indeed
he was not available. Likewise, the records will show that on January 12, 2004, this case was
also dismissed for failure of the plaintiffs to appear for pre-trial conference. This should have
served as a warning to herein plaintiffs.
In view hereof, upon motion of the herein defendants, the above-entitled case is hereby ordered
dismissed pursuant to Section 5, Rule 18 of the Rules of Court.
SO ORDERED.17 (Italics supplied.)
Petitioners moved to reconsider the above order, their counsel alleging that he had misplaced or
lost his calendar book and could not have ascertained the availability of his schedule. Stressing
that he had no intention to ignore the hearing as in fact he filed a motion to reset the same six
days prior to the scheduled hearing, petitioners counsel pleaded for the kind indulgence of the
court.
On December 29, 2004, the trial court issued an Order 18 granting petitioners motion for
reconsideration "in the interest of justice" and reinstating the case. The trial court, however
directed petitioners to be "more circumspect in attending to this case."
In its Order19 dated September 20, 2005, the trial court dismissed the case for failure of
petitioners to prosecute their case. Citing the two previous dismissals on account of petitioners
non-appearance at the pre-trial conference, the trial court said that "[f]rom the date of its second
reconsideration of the order of dismissal on December 29, 2004 until today, plaintiffs did not do
anything to prosecute the instant case."
Petitioners filed a motion for reconsideration in which they averred that:
1. After the reconsideration of the Order of dismissal on December 29, 2004, the plaintiffs
counsel, Atty. Anselmo A. Marqueda, on several occasion, passed by the court and
diligently followed-up the hearing of this case. He was assured by an officer of the court
to just wait for the notice of hearing that they will issue in the instant case.
2. While waiting for the notice of hearing from this court, the respective counsels of the
parties negotiated in earnest for an amicable settlement of the case. During the last
telephone conversation with Atty. Roy P.R. Talao, the defendants bank counsel, and the
undersigned agree on some proposals for settlement which are however subject to final
confirmation of their respective clients. The plaintiff believe that the parties are very close
to agree and enter into an amicable settlement of this case.

3. Apart from the reliance of the undersigned counsel on the statement of the court officer
to just wait for the notice of hearing, the undersigned counsel suffered a handicap in
making a personal follow-up of this case because of his numerous travels and lengthy
sojourn in the province due to family conflict and death of a member of the family.
x x x x20
In its Order21 dated April 10, 2006, the trial court denied petitioners motion for reconsideration, as
follows:
x x x Records show that this case has been dismissed thrice (January 12, 2004; August 3, 2004
and September 20, 2005). The first two dismissals were due to the failure of the plaintiffs to
appear during the pre-trial conference despite notice. In both cases plaintiffs were admonished to
be more circumspect in attending to this case. This time the instant case was dismissed due to
inaction of herein plaintiffs for unreasonable length of time.
The Court has been lenient for quite sometime however, plaintiffs seemed inclined to abuse the
Courts leniency. Finding no compelling reason to reconsider the assailed order, motion is hereby
DENIED.
SO ORDERED.
Aggrieved, petitioners appealed to the CA arguing that the trial court erred in dismissing the case
for failure to prosecute considering that (1) the trial court has not yet resolved petitioners motion
for reconsideration of the order denying their motion to admit supplemental complaint; (2)
petitioners are very much interested to prosecute this case to protect their rights in the premises;
(3) petitioners have valid and meritorious causes of action; (4) petitioners may not be deprived of
their day in court by the negligence of their counsel; and (5) non-suit or default judgment is not
encouraged as it violates due process.22
By Decision dated March 30, 2010, the CA affirmed the trial courts dismissal of the case. The CA
said that petitioners cannot justify their prolonged inaction by belatedly raising as issue the
pending motion for reconsideration from the trial courts denial of their motion to admit the
supplemental complaint, when all along they were aware that the case was at the pre-trial stage
as in fact the case was twice dismissed for their failure to attend the pre-trial conference. Under
the circumstances stated in its September 20, 2005 Order, the CA held that the trial court cannot
be faulted for dismissing the case on the ground of petitioners failure to prosecute their action,
citing this Courts ruling in Olave v. Mistas.23
The CA also denied the motion for reconsideration filed by the petitioners.
Petitioners contend that the only reason for the trial courts dismissal of the case was the failure
of their counsel to move to set the case for pre-trial. However, Section 1, Rule 18 of the 1997
Rules of Civil Procedure, as amended, imposing upon the plaintiff the duty to promptly move to
set the case for pre-trial, had been repealed and amended by A.M. No. 03-1-09-SC which took
effect on August 16, 2004. This amendment to the rule on pre-trial now imposes on the clerk of
court the duty to issue a notice of pre-trial if the plaintiff fails to file a motion to set the case for
pre-trial conference.
Petitioners point out that the case was not yet ripe for pre-trial because of the unresolved
pending motion for reconsideration of the trial courts denial of the motion to admit supplemental
complaint. In any event, petitioners assert that they are very much interested to prosecute the
case as they have presented evidence in their application for the issuance of TRO and writ of
preliminary injunction, amended the complaint several times, their representatives have always
been attending as notified by their lawyers, and their counsel was following up the case but the
Clerk of Court could not set the case for pre-trial because of the pending motion. As to the prior

dismissals of the case, these should not be taken as badges of failure to prosecute because
these had been set aside on meritorious grounds. The circumstances that respondent BDO itself
had been declared in default for failure to appear at the pre-trial on June 26, 2003 and has asked
repeatedly for extensions of time from the court, the ongoing negotiations with BDO for amicable
settlement even at the appeal stage, and petitioners meritorious causes of action, justify a liberal
application of the rules so that petitioners will be given their day in court.
Respondent BDO, on the other hand, asserts that the failure of petitioners to move for the setting
of the case for pre-trial conference, coupled with their repeated violations of the Rules which
prompted the trial court to dismiss their complaint twice, are sufficient grounds for the trial court
to finally dismiss the complaint. A.M. No. 03-1-09-SC did not remove plaintiffs obligation to set
the case for pre-trial. Petitioners claim that they relied on a supposed assurance by a court
personnel to set the case for pre-trial is doubtful, aside from being contradictory to the admission
of petitioners counsel that he "suffered a handicap in making a personal follow-up of this case
because of [his] numerous travels and lengthy sojourn in the province due to family conflict and
death of a member of the family."
As to the alleged negotiations for an amicable settlement, respondent admitted there were talks
during court hearings and telephone calls but these were casual and at best, exploratory. No
serious offer was made by petitioners, much less concretized. At any rate, even if true, such talks
is not a ground to tarry and delay the prosecution of the case which had been pending with the
trial court for more than three years and had not even left the pre-trial stage. If indeed petitioners
were sincere in their desire to settle, they should have promptly moved for the setting of pre-trial
so that the case can be referred for mandatory mediation proceedings.
The petition has no merit.
Under Section 3,24 Rule 17 of the 1997 Rules of Civil Procedure, as amended, the failure on the
part of the plaintiff, without any justifiable cause, to comply with any order of the court or the
Rules, or to prosecute his action for an unreasonable length of time, may result in the dismissal
of the complaint either motu proprio or on motion by the defendant. The failure of a plaintiff to
prosecute the action without any justifiable cause within a reasonable period of time will give rise
to the presumption that he is no longer interested to obtain from the court the relief prayed for in
his complaint; hence, the court is authorized to order the dismissal of the complaint on its own
motion or on motion of the defendants. The presumption is not, by any means, conclusive
because the plaintiff, on a motion for reconsideration of the order of dismissal, may allege and
establish a justifiable cause for such failure.25 The burden to show that there are compelling
reasons that would make a dismissal of the case unjustified is on the petitioners. 26
Under Section 1, Rule 18 of the 1997 Rules of Civil Procedure, as amended, it is the duty of the
plaintiff, after the last pleading has been served and filed, to promptly move ex parte that the
case be set for pre-trial. On August 16, 2004, A.M. No. 03-1-09-SC (Re: Proposed Rule on
Guidelines to be Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-Trial
and Use of Deposition-Discovery Measures) took effect, which provides that:
Within five (5) days from date of filing of the reply, the plaintiff must promptly move ex parte that
the case be set for pre-trial conference. If the plaintiff fails to file said motion within the given
period, the Branch COC shall issue a notice of pre-trial.
We note that when the above guidelines took effect, the case was already at the pre-trial stage
and it was the failure of petitioners to set the case anew for pre-trial conference which prompted
the trial court to dismiss their complaint.
In Olave v. Mistas,27 this Court said that even if the plaintiff fails to promptly move for pre-trial
without any justifiable cause for such delay, the extreme sanction of dismissal of the complaint
might not be warranted if no substantial prejudice would be caused to the defendant, and there

are special and compelling reasons which would make the strict application of the rule clearly
unjustified. In the more recent case of Espiritu v. Lazaro, 28 this Court affirmed the dismissal of a
case for failure to prosecute, the plaintiff having failed to take the initiative to set the case for pretrial for almost one year from their receipt of the Answer. Although said case was decided prior to
the effectivity of A.M. No. 03-1-09-SC, the Court considered the circumstances showing
petitioners and their counsels lack of interest and laxity in prosecuting their case.
In this case, while there was no substantial prejudice caused to herein respondent, who has
already consolidated the ownership of petitioners properties, secured new titles in its name and
successfully implemented a writ of possession issued by another branch, there was neither
patent abuse in the trial courts dismissal of the complaint for the third time, the earlier two
dismissals having been precipitated by petitioners non-appearance at the pre-trial conference.
Contrary to petitioners assertion, the trial court did not find their offered excuses as meritorious
or justifiable; the trial court in the exercise of discretion simply reinstated the case "in the interest
of justice" but explicitly warned petitioners to be more circumspect in attending to the case.
However, despite the trial courts leniency and admonition, petitioners continued to exhibit laxity
and inattention in attending to their case. Assuming domestic problems had beset petitioners
counsel in the interregnum, with greater reason should he make proper coordination with the trial
court to ensure his availability on the date to be chosen by the trial court for the long-delayed
conduct of a pre-trial conference. Petitioners themselves did nothing to get the case moving for
nine months and set the case anew for pre-trial even as BDO was already seeking their judicial
ejectment with the implementation of the writ of possession issued by Branch 143. Such
circumstance also belies their pretense that the parties were then still negotiating for a
settlement. We have held that a party cannot blame his counsel when he himself was guilty of
neglect; and that the laws aid the vigilant, not those who slumber on their rights. Vigilantibus sed
non dormientibus jura subveniunt.29
We also agree with the CA that petitioners are belatedly raising as issue the unresolved motion
for reconsideration of the denial of petitioners motion to admit supplemental complaint.
Petitioners did not even file a motion to resolve the said pending incident which, in any event,
could have been brought to the trial courts attention had petitioners acted promptly to have the
case set anew for pre-trial conference soon after or within a reasonable time from the
reinstatement of the case on December 29, 2004.
While under the present Rules, it is now the duty of the clerk of court to set the case for pre-trial if
the plaintiff fails to do so within the prescribed period, this does not relieve the plaintiff of his own
duty to prosecute the case diligently. This case had been at the pre-trial stage for more than two
years and petitioners have not shown special circumstances or compelling reasons to convince
us that the dismissal of their complaint for failure to prosecute was unjustified.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated March 30,
2010 and Resolution dated June 15, 2010 of the Court of Appeals in CA-G.R. CV No. 89779 are
hereby AFFIRMED and UPHELD.
Costs against the petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 175862

October 13, 2010

REAL BANK, INC., Petitioner,

vs.
SAMSUNG MABUHAY CORPORATION, Respondent.
DECISION
PEREZ, J.:
This is a Petition for Review under Rule 45 of the Rules of Court filed by petitioner Real Bank,
Inc., assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 73188 dated 18 August
2006, which granted the Petition filed by herein respondent Samsung Mabuhay Corporation
(respondent Samsung) and set aside the Orders dated 5 June 2002 and 2 August 2002 of the
Regional Trial Court (RTC), Branch 20 of Manila, which dismissed Civil Case No. 97-86265 for
failure of respondent Samsung to appear at the scheduled mediation conference. Likewise
assailed is the Resolution2 of the appellate court dated 13 December 2006 denying petitioner
Real Bank, Inc.s Motion for Reconsideration.
The generative facts are:
On 27 November 1997, respondent Samsung filed a Complaint3 for damages against petitioner
Real Bank, Inc. docketed as Civil Case No. 97-86265. The case was originally raffled to the RTC,
Branch 9 of Manila. In its complaint, respondent Samsung alleged:
Plaintiff SAMSUNG MABUHAY ELECTRONIC CORPORATION is a joint venture corporation
between SAMSUNG ELECTRONICS CO. LTD., a foreign corporation duly organized and
existing under Korean laws, and plaintiff MABUHAY ELECTRONICS CORPORATION, a
corporation organized and existing under Philippine laws x x x.
As a result of the Joint Venture Agreement, Samsung Mabuhay Electronics Corporation became
the exclusive distributor for Samsung products in the Philippines. 4
xxxx
2.1. Sometime in December of 1996, Conpinco Trading, a regular dealer of [respondent]
Samsung Mabuhay Corporation in Davao City, issued five (5) postdated [United Coconut
Planters Bank] UCPB checks payable to the order of Samsung Mabuhay Corporation, to
wit:
Check No.

Date

Amount

1869863

December 31, 1996

P 363,750.00

1869864

December 31, 1996

400,000.00

1869865

January 30, 1997

800,000.00

1869866

February 28, 1997

800,000.00

1869867

March 30, 1997

599,093.20

These five (5) checks were picked-up by Reynaldo Senson, former Collection Supervisor
of Samsung Mabuhay Corporation for Visayas and Mindanao, at Conpinco Tradings
place of business at J.P. Laurel Avenue, Bajada Drive, Davao City last December 14,
1996. x x x.
2.1.1. All of the five (5) checks were denominated to the "PAYEES ACCOUNT"
only, the payee being Mabuhay Electronics Corporation although the proceeds of

the checks were actually intended for Samsung Mabuhay Corporation. After the
Joint Venture Agreement, Samsung dealers were duly requested by Samsung
Mabuhay Corporation to make all checks payable to the order of Samsung
Mabuhay Corporation instead of Mabuhay Electronics Corporation. Nevertheless,
some dealers, like Conpinco Trading, still made out checks payable to Mabuhay
Electronics Corporation.
2.1.2. Plaintiff Samsung Mabuhay Corporation continued to received checks from
its local dealers payable to the order of Mabuhay Electronics Corporation. Plaintiff
[Samsung Mabuhay Corporation] deposited the said checks to its bank account
with Far East Bank and Trust Company (FEBTC), Adriatico Branch under
Account No. 0113-26238-8. FEBTC accepted for deposit into Samsung Mabuhay
Corporations account therein all checks payable to Mabuhay Electronics
Corporation.
2.2. Two (2) of the five (5) checks picked-up by Reynaldo Senson were remitted to
Samsung Mabuhay Corporation. These checks [1869866 and 1869867] in the total
amount of P1,399,093.20 were cleared by the drawee bank, UCPB, and the amount
credited to the account of Samsung Mabuhay Corporation with FEBTC.
2.3. However, the three (3) remaining UCPB checks, i.e., check nos. 1869863, 1869864,
and 1869865 amounting to P1,563,750.00, were not remitted by Reynaldo Senson to
Samsung Mabuhay Corporation. Instead, Reynaldo Senson, using an alias name,
Edgardo Bacea, opened an account with defendant Real Bank, Malolos, Bulacan branch
under the account name of one Mabuhay Electronics Company, a business entity in no
way related to plaintiff Mabuhay Electronics Corporation. Mabuhay Electronics Company
is a single proprietorship owned and managed by Reynaldo Senson, alias Edgardo
Bacea.
2.4. Reynaldo Senson, alias Edgardo Bacea, opened an account with defendant [Real
Bank] by presenting an identification card bearing Mabuhay Electronics Company, the
alias name Edgardo Bacea identifying him as the General Manager of Mabuhay
Electronics Company, and the photograph of Reynaldo Senson, x x x. Reynaldo Senson
and Edgardo Bacea are one and the same person as shown in the identification card
issued by Samsung Mabuhay Corporation to Reynaldo Senson x x x.
2.5. Reynaldo Senson, alias Edgardo Bacea, through the negligence of defendant [Real
Bank], indorsed the checks and then deposited all the three (3) checks in the account of
Mabuhay Electronics Company under Savings Account No. 1102-01944-2. The dorsal
portion of the said checks (check nos. 1869863, 1869864, and 1869865) x x x and made
integral parts hereof.
2.6. Defendant [Real Bank] then sent the three (3) checks for clearing and for payment
through Far East Bank and Trust Company, Malolos, Bulacan Branch after stamping at
the back of the checks the usual endorsements: "ALL PRIOR ENDORSEMENT and/or
LACK OF ENDORSEMENT GUARANTEED." Conpinco Tradings account with the
drawee bank, UCPB, was eventually debited for the value of the three (3) checks and
Mabuhay Electronics Companys account with defendant [Real Bank] was credited for
the same amount although it was not the payee nor the person authorized by the payee.
2.7. Subsequently, Reynaldo Senson, alias Edgardo Bacea again through the negligence
of defendant bank, was able to withdraw the amount of P1,563,750.00. The value of the
three (3) checks were negligently credited by defendant [Real Bank] to the account of
Mabuhay Electronics Company, a single proprietorship, although the check was payable
only to Mabuhay Electronics Corporation, a juridical entity, and to no one else.

xxxx
2.9. Despite plaintiffs [Samsung Mabuhay Corporations] demands, defendant [Real
Bank] ignored and refused to reimburse them with the value of the three (3) checks.
Thus, plaintiffs were constrained to hire the legal services of the law firm of V.E. Del
Rosario and Partners.5
Petitioner Real Bank, Inc. filed its Answer6 on 23 February 1998, to which a Reply7 was filed by
respondent Samsung on 5 March 1998.
On 12 March 1998, respondent Samsung filed an Ex-Parte Motion To Set Case for Pre-Trial,
asking that the case be set for pre-trial.8 In a notice dated 24 March 1998, Judge Amelia TriaInfante (Judge Infante) of RTC, Br. 9 of Manila, set the case for pre-trial on 25 June 1998. 9
Meantime, petitioner Real Bank, Inc. filed on 26 May 1998 a Motion to Admit Third Party
Complaint against Reynaldo A. Senson alias Edgardo Bacea, to which was attached the Third
Party Complaint.
On 22 June 1998, respondent Samsung filed its Pre-trial Brief. The pre-trial was originally set on
25 June 1998 but was reset to 17 July 1998 upon motion of petitioner Real Bank, Inc. on the
ground that its Motion to Admit Third Party Complaint was still pending resolution. Thus, the pretrial was re-scheduled and reset to 10 September 1998. 10
Petitioner Real Bank, Inc. once again moved for the resetting of the pre-trial conference
scheduled on 10 September 199811 on the same ground that its Motion to Admit Third Party
Complaint has yet to be resolved.
On 22 February 1999, the trial court issued an Order granting petitioner Real Bank, Inc.s Motion
to Admit Third Party Complaint and also ordered that summons be issued to third-party
defendant Reynaldo A. Senson alias Edgardo Bacea.
On 25 May 1999, respondent Samsung filed a Motion to Dismiss the Third Party Complaint for
failure of petitioner Real Bank, Inc. to prosecute its case and Motion to Set the Case for PreTrial.12 On the other hand, petitioner Real Bank, Inc. filed a Motion to Serve Summons by
Publication on the third-party defendant Reynaldo A. Senson alias Edgardo Bacea.
Citing the undue delay of Presiding Judge Infante in resolving the several motions pending
before her, respondent Samsung filed a Motion for her inhibition of Judge Infante on 20
September 1999.
On 15 March 2000, the Presiding Judge of Branch 9 issued an Order 13 reading:
Before this Court are three (3) motions.
The Motion to Serve Summons by Publication is hereby GRANTED.
The Motion to Dismiss Third-Party Complaint is hereby DENIED and considering that this
Honorable Court can administer justice on this case with impartiality and without bias, the Motion
for Inhibition is likewise DENIED.
Let therefore, service of summons by publication be made on third-party defendant, Reynaldo
Senson alias Edgardo Bacea doing business under the name and style "Mabuhay Electronics
Company" in a newspaper of general circulation for three (3) consecutive weeks.

On 19 October 2000, the counsel of respondent Samsung, V.E. Del Rosario and Partners, filed a
Notice of Withdrawal of Appearance with the conformity of respondent Samsung. 14
For its part, petitioner Real Bank, Inc. filed a Motion To Declare Third-Party defendant Reynaldo
Senson in Default.
On 7 March 2001, the trial court issued an Order dated 17 March 2001 requiring both petitioner
Real Bank, Inc. and respondent Samsung to appear in a mediation proceeding set on 3 April
2001.15 This Order of the trial court was sent to respondent Samsungs former counsel, V.E. Del
Rosario and Partners which had at that time already filed a notice of withdrawal of appearance. 16
The mediation proceedings took place as scheduled on 3 April 2001 and Mediator Tammy Ann C.
Reyes, who handled the mediation proceedings submitted her report to the Court stating therein
that no action was taken on the case referred for mediation because respondent Samsung failed
to appear.17
On 4 June 2001, the new counsel of respondent Samsung (Ortega, Del Castillo, Bacorro, Odulio,
Calma and Carbonell) entered its appearance. This was filed and received by the court on 6
June 2001.18
Subsequently, RTC Branch 9 of Manila, where the case was pending was designated as a
Family Court. Hence, the case was re-raffled to RTC Judge Marivic Balisi-Umali (Judge Umali) of
RTC Branch 20 of Manila.
On 5 June 2002, an Order was issued by Judge Umali of Branch 20 dismissing the complaint of
respondent Samsung for failure to appear at the mediation conference previously scheduled by
the trial judge of Branch 9 in her Order dated 17 March 2001. 19
The Order of Judge Umali states:
This is a re-raffled case from Branch 9 of this Court, pursuant to Supreme Courts Resolution
A.M. 99-11-07 dated February 1, 2000 and August 22, 2000 designating the Branch as a Family
Court.
Perusal of the record reveals that in its order dated March 7, 2001, the Court referred the case
for mediation, per Sec. 29, Rule 18, 1997 Rules on Civil Procedure and the Guidelines of the
Supreme Court dated November 16, 1999. On April 3, 2001, Mediator Tammy Ann C. Reyes,
who handled the mediation proceedings, submitted her Report to the Court stating therein that
no action was taken for the case referred for mediation because the plaintiff failed to appear.
Mediation is part of pre-trial, Sec. 5, Rule 18, Rules of Court, explicitly provides that failure of the
plaintiff to appear at the pre-trial shall be ground for the dismissal of the action for non-suit.
Premises considered the above-entitled case is hereby DISMISSED for non-suit. 20
Respondent Samsungs new counsel challenged the Order dated 5 June 2002 in a Motion for
Reconsideration alleging that the dismissal is improper and inappropriate as it was not notified of
the scheduled mediation conference. Besides, the notice of the scheduled mediation was sent to
the previous counsel of respondent Samsung who had already withdrawn and not to the new
lawyers.21
Judge Umali denied the Motion for Reconsideration of respondent Samsung in her Order dated 2
August 2002.22
1avvphi1

Respondent Samsung then filed before the Court of Appeals a petition for certiorari under Rule
65 of the Rules of Court docketed as CA-G.R. SP No. 73188. The Court of Appeals rendered a
decision in favor of respondent Samsung dated 18 August 2006, the fallo of which reads:
WHEREFORE, in view of the foregoing, the Petition is hereby GRANTED. The Orders dated 5
June 2002 and 2 August 2002 are hereby REVERSED and SET ASIDE.23
The Court of Appeals explained its decision in this wise:
[R]espondent judge did not even peruse or verify the records of the case. Has she done so, she
would have discovered that the former counsel of petitioner to whom she sent the Notice of the
order had already withdrawn and that a new counsel for petitioner had already entered their
appearance. Likewise, she should have discovered that at that time the Order dated March 7,
2001 was issued by RTC Br. 9, petitioner was no longer holding office at its given address. This
fact is clearly indicated in the Order of March 7, 2001 itself. Clearly, therefore, respondent judge
committed grave abuse of discretion amounting to excess or lack of jurisdiction in issuing the
Order dated June 5, 2002. 24
Petitioner Real Bank, Inc.s Motion for Reconsideration was denied by the Court of Appeals in a
Resolution dated 13 December 2006.25
Hence, this petition.
Petitioner Real Bank, Inc. submits the following issues for our resolution.
I. WHETHER THE COURT OF APPEALS ERRED IN SETTING ASIDE THE ORDER OF
THE TRIAL COURT DISMISSING THE CASE BEFORE IT DUE TO THE FAILURE OF
RESPONDENT AND ITS COUNSEL TO ATTEND THE MEDIATION CONFERENCE.
II. WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT
WAS NOT NOTIFIED OF THE MEDIATION CONFERENCE.
III. WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT THE
WITHDRAWAL OF RESPONDENTS COUNSEL WAS SUFFICIENT
NOTWITHSTANDING THE FACT THAT THE SAID WITHDRAWAL WAS NOT
APPROVED BY THE TRIAL COURT, AND DESPITE THE FACT THAT AT THE TIME,
RESPONDENT HAS NOT YET ENGAGED THE SERVICES OF A NEW COUNSEL.
IV. WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT
GUILTY OF NEGLIGENCE IN FAILING TO INQUIRE ABOUT THE STATUS OF ITS
CASE AND TO ENGAGE THE SERVICES OF A NEW COUNSEL FOR A PERIOD OF
ALMOST EIGHT (8) MONTHS.26
In this petition, it is petitioner Real Bank, Inc.s position that RTC Branch 20 of Manila acted
properly in dismissing Civil Case No. 97-86265 for failure on the part of respondent Samsung to
appear on the scheduled mediation conference.
In Senarlo v. Judge Paderanga,27 this Court accentuated that mediation is part of pre-trial and
failure of the plaintiff to appear thereat merits sanction on the part of the absent party. This court
held:
A.M. No. 01-10-5-SC-PHILJA dated 16 October 2001, otherwise known as the Second Revised
Guidelines for the Implementation of Mediation Proceedings and Section 5, Rule 18 of the Rules
of Court grant judges the discretion to dismiss an action for failure of the plaintiff to appear at
mediation proceedings.

A.M. No. 01-10-5-SC-PHILJA considers mediation a part of pre-trial and provides sanctions for
the absent party:
12. Sanctions.
Since mediation is part of Pre-Trial, the trial court shall impose the appropriate sanction including
but not limited to censure, reprimand, contempt and such sanctions as are provided under the
Rules of Court for failure to appear for pre-trial, in case any or both of the parties absent
himself/themselves, or for abusive conduct during mediation proceedings.
Under Rule 18, Section 5 of the Rules of Court, failure of the plaintiff to appear at pre-trial shall
be cause for dismissal of the action:
Sec. 5. Effect of failure to appear. The failure of the plaintiff to appear when so required
pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal
shall be with prejudice, unless otherwise ordered by the court. A similar failure on the part of the
defendant shall be cause to allow the plaintiff to present his evidence ex parte and the court to
render judgment on the basis thereof.28
However, the ruling in Senarlo will not resolve the present case where the basic issue is whether
or not respondents Samsung non-appearance at the mediation proceedings is justifiable from
the records.
We sustain the ruling of the Court of Appeals.
Rule 138, section 26 of the Rules of Court outlines the procedure in case of withdrawal of
counsel. It states:
RULE 138
Attorneys and Admission to Bar
Sec. 26. Change of attorneys. An attorney may retire at any time from any action or special
proceeding, by the written consent of his client filed in court. He may also retire at any time from
an action or special proceeding, without the consent of his client, should the court, on notice to
the client and attorney, and on hearing, determine that he ought to be allowed to retire. In case of
substitution, the name of the attorney newly employed shall be entered on the docket of the court
in place of the former one, and written notice of the change shall be given to the adverse party.
Under the first sentence of Section 26, the withdrawal of counsel with the conformity of the client
is completed once the same is filed in court. No further action thereon by the court is needed
other than the mechanical act of the Clerk of Court of entering the name of the new counsel in
the docket and of giving written notice thereof to the adverse party.29
In this case, it is uncontroverted that the withdrawal of respondent Samsungs original counsel,
V.E. Del Rosario and Partners on 19 October 2000, was with the clients consent. Thus, no
approval thereof by the trial court was required because a courts approval is indispensable only
if the withdrawal is without the clients consent.30
It being daylight clear that the withdrawal of respondent Samsungs original counsel was
sufficient as the same carried the stamp of approval of the client, the notice of mediation sent to
respondent Samsungs original counsel was ineffectual as the same was sent at the time when
such counsel had already validly withdrawn its representation. Corollarily, the absence of
respondent Samsung during the scheduled mediation conference was excusable and justified.
Therefore, the trial court erroneously dismissed Civil Case No. 97-86265.

We cannot sustain petitioner Real Bank, Inc.s argument that respondent Samsung was
negligent in the conduct of its case.
The calendar of hearings document the fact that respondent Samsung has been willing and able
to prosecute its case. Except for the lone instance, reasonable as already shown, of absence
during the scheduled mediation conference on 3 April 2001, respondent Samsung had, till then,
promptly and religiously attended the hearings set by the RTC. In fact, respondent Samsung
exhibited diligence and dispatch in prosecuting its case against petitioner Real Bank, Inc. by
immediately moving to set the case for pre-trial after it had filed its reply and momently filing a
motion for reconsideration of the RTC Order dismissing Civil Case No. 97-86265.
The following observation of the Court of Appeals is worth noting:
As borne by the records, it is [petitioner] [Real Bank, Inc.] which asked for a resetting of the pretrial twice. On the other hand, the [respondent Samsung] was the one egging and repeatedly
requesting Presiding Judge Infante of Br. 9 to set the case for pre-trial. It has reached the point
that [respondent Samsung] got exasperated for the unreasonable delay of the judge of RTC, Br.
9 in resolving the incidents pending before her that it was constrained to file a motion for
inhibition.31
Herein respondent Samsung instituted Civil Case No. 97-86265 before the RTC, to recover the
amount it claims to have lost due to the negligence of petitioner Real Bank, Inc., clearly a
property right. The substantive right of respondent Samsung to recover a due and demandable
obligation cannot be diminished by an unwarranted strictness in the application of a rule of
procedure.32
In Calalang v. Court of Appeals,33 this Court underscored that unless a partys conduct is so
negligent, irresponsible, contumacious or dilatory as to provide substantial grounds for dismissal
for non-appearance, the court should consider lesser sanctions which would still amount into
achieving the desired end.
1avvphi1

In Bank of the Philippine Islands v. Court of Appeals, 34 we ruled that in the absence of a pattern
or scheme to delay the disposition of the case or a wanton failure to observe the mandatory
requirement of the rules, courts should decide to dispense rather than wield their authority to
dismiss.
While not at the fore of this case, it may be stated that the state of the court docket cannot justify
injudicious case dismissals. Inconsiderate dismissals, even without prejudice, do not constitute a
panacea or a solution to the congestion of court dockets; while they lend a deceptive aura of
efficiency to records of individual judges, they merely postpone the ultimate reckoning between
the parties. In the absence of clear lack of merit or intention to delay, justice is better served by a
brief continuance, trial on the merits, and final disposition of cases before the court. 35
Accordingly, the ends of justice and fairness would be best served if the parties in Civil Case No.
97-86265 are given the full opportunity to thresh out the real issues in a full blown trial. Besides,
petitioner Real Bank, Inc. would not be prejudiced should the RTC proceed with Civil Case No.
97-86265 as it is not stripped of any affirmative defenses nor deprived of due process of law.36
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the
Decision of the Court of Appeals in CA-G.R. SP No. 73188 dated 18 August 2006 and the
Resolution of the same court dated 13 December 2006 are AFFIRMED. This case is ordered
REMANDED to the RTC Manila, Branch 20 for continuation of proceedings until its conclusion
with utmost dispatch.
SO ORDERED.