Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 173008

February 22, 2012

NENITA GONZALES, SPOUSES GENEROSA GONZALES and RODOLFO

FERRER, SPOUSES FELIPE GONZALES and CAROLINA SANTIAGO,
SPOUSES LOLITA GONZALES and GERMOGENES GARLITOS, SPOUSES
DOLORES GONZALES and FRANCISCO COSTIN, SPOUSES CONCHITA
GONZALES and JONATHAN CLAVE, and SPOUSES BEATRIZ GONZALES
and ROMY CORTES, REPRESENTED BY THEIR ATTORNEY-IN-FACT
and CO-PETITIONER NENITA GONZALES, Petitioners,
vs.
MARIANO BUGAAY AND LUCY BUGAAY, SPOUSES ALICIA BUGAAY
AND FELIPE BARCELONA, CONEY "CONIE" BUGAAY, JOEY GATAN,
LYDIA BUGAAY, SPOUSES LUZVIMINDA BUGAAY AND REY
PAGATPATAN AND BELEN BUGAAY, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this Petition for Review on Certiorari under Rule 45 is the Decision1 of
the Court of Appeals (CA) dated March 23, 2006 in CA-G.R. SP No. 91381 as well
as the Resolution2 dated June 2, 2006 dismissing petitioners' motion for
reconsideration. The CA reversed and set aside the assailed Orders 3 of the Regional
Trial Court (RTC) of Lingayen, Pangasinan, Branch 39, dated April 13, 2005 and
August 8, 2005, respectively, in Civil Case No. 16815, denying the demurrer to
evidence filed by herein respondents and instead dismissed petitioners' complaint.
The Facts
The deceased spouses Bartolome Ayad and Marcelina Tejada ("Spouses Ayad") had
five (5) children: Enrico, Encarnacion, Consolacion, Maximiano and Mariano. The
latter, who was single, predeceased his parents on December 4, 1943. Marcelina died
in September 1950 followed by Bartolome much later on February 17, 1964.
Enrico has remained single. Encarnacion died on April 8, 1966 and is survived by
her children, Nenita Gonzales, Generosa Gonzales, Felipe Gonzales, Lolita

Gonzales, Dolores Gonzales, Conchita Gonzales and Beatriz Gonzales, the

petitioners in this case. Consolacion, meanwhile, was married to the late Imigdio
Bugaay. Their children are Mariano Bugaay, Alicia Bugaay, Amelita Bugaay,
Rodolfo Bugaay, Letecia Bugaay, Lydia Bugaay, Luzviminda Bugaay and Belen
Bugaay, respondents herein. Maximiano died single and without issue on August 20,
1986. The spouses of petitioners, except Nenita, a widow, and those of the
respondents, except Lydia and Belen, were joined as parties in this case.
In their Amended Complaint4 for Partition and Annulment of Documents with
Damages dated February 5, 1991 against Enrico, Consolacion and the respondents,
petitioners alleged, inter alia, that the only surviving children of the Spouses Ayad
are Enrico and Consolacion, and that during the Spouses Ayad's lifetime, they owned
several agricultural as well as residential properties.
Petitioners averred that in 1987, Enrico executed fraudulent documents covering all
the properties owned by the Spouses Ayad in favor of Consolacion and respondents,
completely disregarding their rights. Thus, they prayed, among others, for the
partition of the Spouses Ayad's estate, the nullification of the documents executed by
Enrico, and the award of actual, moral and exemplary damages, as well as attorney's
fees.
As affirmative defenses5, Enrico, Consolacion and respondents claimed that
petitioners had long obtained their advance inheritance from the estate of the
Spouses Ayad, and that the properties sought to be partitioned are now individually
titled in respondents' names.
After due proceedings, the RTC rendered a Decision6 dated November 24, 1995,
awarding one-fourth () pro-indiviso share of the estate each to Enrico, Maximiano,
Encarnacion and Consolacion as the heirs of the Spouses Ayad, excluding Mariano
who predeceased them. It likewise declared the Deed of Extrajudicial Settlement and
Partition executed by Enrico and respondents, as well as all other documents and
muniments of title in their names, as null and void. It also directed the parties to
submit a project of partition within 30 days from finality of the Decision.
On December, 13, 1995,7 respondents filed a motion for reconsideration and/or new
trial from the said Decision. On November 7, 1996, the RTC, through Judge Eugenio
Ramos, issued an Order which reads: "in the event that within a period of one (1)
month from today, they have not yet settled the case, it is understood that the motion
for reconsideration and/or new trial is submitted for resolution without any further
hearing."8

Without resolving the foregoing motion, the RTC, noting the failure of the parties to
submit a project of partition, issued a writ of execution9 on February 17, 2003 giving
them a period of 15 days within which to submit their nominees for commissioner,
who will partition the subject estate.

Subsequently, the CA denied petitioners' motion for reconsideration in its

Resolution17 dated June 2, 2006.

Subsequently, the RTC, through then Acting Presiding Judge Emilio V. Angeles,
discovered the pendency of the motion for reconsideration and/or new trial and set
the same for hearing. In the Order10 dated August 29, 2003, Judge Angeles granted
respondents' motion for reconsideration and/or new trial for the specific "purpose of
receiving and offering for admission the documents referred to by the
[respondents]."11

In this petition for review, petitioners question whether the CA's dismissal of the
Amended Complaint was in accordance with law, rules of procedure and
jurisprudence.

However, instead of presenting the documents adverted to, consisting of the

documents sought to be annulled, respondents demurred12 to petitioners' evidence on
December 6, 2004 which the RTC, this time through Presiding Judge Dionisio C.
Sison, denied in the Order13 dated April 13, 2005 as well as respondents' motion for
reconsideration in the August 8, 2005 Order.14
Aggrieved, respondents elevated their case to the CA through a petition for certiorari,
imputing grave abuse of discretion on the part of the RTC in denying their demurrer
notwithstanding petitioners' failure to present the documents sought to be annulled.
On March 23, 2006, the CA rendered the assailed Decision reversing and setting
aside the Orders of the RTC disposing as follows:
"WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed
Orders of the trial court dated April 13, 2006 and August 8, 2005 are hereby both
SET ASIDE and in lieu thereof, another Order is hereby issued DISMISSING the
Complaint, as amended.
No pronouncement as to costs.
SO ORDERED."15
In dismissing the Amended Complaint, the appellate court ratiocinated in the
following manner:
"In the light of the foregoing where no sufficient evidence was presented to grant the
reliefs being prayed for in the complaint, more particularly the absence of the
documents sought to be annulled as well as the properties sought to be partitioned,
common sense dictates that the case should have been dismissed outright by the trial
court to avoid unnecessary waste of time, money and efforts."16

The Issues

The Ruling of the Court

The RTC Orders assailed before the CA basically involved the propriety of filing a
demurrer to evidence after a Decision had been rendered in the case.
Section 1, Rule 33 of the Rules of Court provides:
"SECTION 1. Demurrer to evidence. - After the plaintiff has completed the
presentation of his evidence, the defendant may move for dismissal on the ground
that upon the facts and the law the plaintiff has shown no right to relief. If his motion
is denied, he shall have the right to present evidence. If the motion is granted but on
appeal the order of dismissal was reversed he shall be deemed to have waived the
right to present evidence."
The Court has previously explained the nature of a demurrer to evidence in the case
of Celino v. Heirs of Alejo and Teresa Santiago18 as follows:
"A demurrer to evidence is a motion to dismiss on the ground of insufficiency of
evidence and is presented after the plaintiff rests his case. It is an objection by one of
the parties in an action, to the effect that the evidence which his adversary produced
is insufficient in point of law, whether true or not, to make out a case or sustain the
issue. The evidence contemplated by the rule on demurrer is that which pertains to
the merits of the case."
In passing upon the sufficiency of the evidence raised in a demurrer, the court is
merely required to ascertain whether there is competent or sufficient proof to sustain
the judgment.19 Being considered a motion to dismiss, thus, a demurrer to evidence
must clearly be filed before the court renders its judgment.
In this case, respondents demurred to petitioners' evidence after the RTC
promulgated its Decision.1wphi1 While respondents' motion for reconsideration
and/or new trial was granted, it was for the sole purpose of receiving and offering for
admission the documents not presented at the trial. As respondents never complied

with the directive but instead filed a demurrer to evidence, their motion should be
deemed abandoned. Consequently, the RTC's original Decision stands.
Accordingly, the CA committed reversible error in granting the demurrer and
dismissing the Amended Complaint a quo for insufficiency of evidence. The
demurrer to evidence was clearly no longer an available remedy to respondents and
should not have been granted, as the RTC had correctly done.
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of
the CA are SET ASIDE and the Orders of the RTC denying respondents' demurrer
are REINSTATED. The Decision of the RTC dated November 24, 1995 STANDS.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 131488 August 3, 1998

ESPIRITA N. ACOSTA, petitioner,
vs.
THE COMMISSION ON ELECTIONS, JUDGE GENOVEVA COCHING
MARAMBA, in her capacity as Presiding Judge of the Municipal Circuit Trial
Court, San Fabian/San Jacinto, Pangasinan and RAYMUNDO I.
RIVERA, respondents.

The parties herein were candidates for the position of Punong Barangay in Bgy.
Sobol, San Fabian, Pangasinan, during the May 12, 1997, barangay election. By a
winning margin of four votes, petitioner was proclaimed as the duly elected Punong
Barangay. On May 15, 1997, Rivera filed an election protest with the Municipal
Circuit Trial Court of San Fabian-San Jacinto, alleging that the votes cast for him in
Precincts No. 22-A, No. 22-A-1, No. 22-B, and No. 22-B-1 were not duly and
properly accounted for due to "misreading, non-reading, mistallying, and
misappreciation of ballots/votes," and praying for a recount of the votes. The
following day, the court a quosummoned Acosta who, on May 19, 1997, filed a
Motion for Time to File Answer. In an order dated May 21, 1997, the court denied
said motion and concluded that the election protest was sufficient in form and
substance. Furthermore, considering that from the allegations in the protest revision
of ballots was necessary, the court also ordered the COMELEC Election Registrar
and/or the Municipal Treasurer of San Fabian to bring to court the ballot boxes of
Bgy. Sobol, together with their keys, list of voters with voting records, book of
voters and other election documents.
On May 29, 1997, petitioner filed with the COMELEC a petition for certiorari and
prohibition with prayer for the issuance of a temporary restraining order and/or writ
of preliminary injunction, questioning the May 21, 1997, order of the MCTC. This
was docketed as SPR No. 13-97.
The following day, May 30th, after determining that Rivera should have garnered
408 votes, three votes more than Acosta's 405, the lower court rendered a decision
nullifying petitioner's proclamation and declaring Rivera as the duly elected Punong
Barangay of Bgy. Sobol. Petitioner filed a notice of appeal on June 11, 1997, which
respondent Judge granted in an order of even date. Said appeal was assigned UNDK
No. 5-97 before the COMELEC.
On December 2, 1997, the COMELEC issued an en banc Resolution in SPR No. 1397 dismissing the petition for lack of merit, and affirming the assailed order dated
May 21, 1997, as well as the trial court's decision dated May 20, 1997 (should be
May 30, 1997). Aggrieved by said ruling, petitioner went to this Court for relief.

ROMERO, J.:

The Court finds the instant petition meritorious.

For the Court's resolution is the instant petition for certiorari with prayer for the
issuance of a writ of preliminary injunction and/or temporary restraining order
assailing the December 2, 1997, resolution of the Commission on Elections
(COMELEC) En Banc in SPR No. 13-97, entitled "Espirita N. Acosta v. Hon.
Genoveva Coching-Maramba in her capacity as Presiding Judge, 4th Municipal
Circuit Trial Court, San Fabian-San Jacinto, Pangasinan, and Raymundo I. Rivera."

The COMELEC indeed exceeded the bounds of its authority when it affirmed the
trial court's decision when said judgment was not the subject of SPR No. 13-97, a
special civil action assailing an interlocutory order of the same lower court. The fact
that the decision was eventually elevated to the COMELEC on appeal does not cure
the defect since said appeal was not consolidated with SPR No. 13-97. In fact, it was

still undocketed at the time and the parties had not yet submitted any evidence
relating to the election protest.
Due process dictates that before any decision can be validly rendered in a case, the
following safeguards must be met: (a) the court or tribunal must be clothed with
judicial authority to hear and determine the matter before it; (b) it must have
jurisdiction over the person of the party or over the property subject of the
controversy; (c) the parties thereto must have been given an opportunity to adduce
evidence in their behalf, and (d) such evidence must be considered by the tribunal in
deciding the case. 1 While the COMELEC cannot be faulted for resolving the issue
raised by petitioner in SPR No. 13-97, namely, the propriety of the lower
court's order dated May 21, 1997, it exceeded its authority and thereby gravely
abused its discretion when, in the same resolution, it affirmed said court's decision
dated May 30, 1997, which was the subject of petitioner's appeal, UNDK No. 5-97.
Furthermore, the Court notes that the assailed resolution was issued by the
COMELEC en banc, again in excess of its jurisdiction. Under Article IX-C, Section
3 of the Constitution, the COMELEC must hear and decide election cases "in
division, provided that motions for reconsideration of decision shall be decided by
the Commission en banc." 2 This Constitutional mandate was clearly violated by the
COMELEC in the case at bar.
WHEREFORE, the instant petition for certiorari is GRANTED. The assailed
resolution of the COMELEC en bancdated December 2, 1997, is hereby
NULLIFIED and SET ASIDE, and the records of this case are ordered REMANDED
to a Division of the COMELEC for proper disposition of SPR No. 13-97 and UNDK
No. 5-97. No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-57455 January 18, 1990

EVELYN DE LUNA, ROSALINA DE LUNA, PRUDENCIO DE LUNA, JR.,
WILLARD DE LUNA, ANTONIO DE LUNA, and JOSELITO DE

LUNA, petitioners,
vs.
HON. SOFRONIO F. ABRIGO, Presiding Judge of the Court of First Instance
of Quezon, Branch IX, and LUZONIAN UNIVERSITY FOUNDATION,
INC., respondents.
Milberto B. Zurbano for petitioners.
Joselito E. Talabong for private respondent.

MEDIALDEA, J.:
This is a petition for review on certiorari of the Order dated July 7, 1981 of
respondent judge Sofronio F. Abrigo of the Court of First Instance of Quezon,
Branch IX in Civil Case No. 8624 dismissing the complaint of petitioners on the
ground of prescription of action.
The antecedent facts are as follows:
On January 24, 1965, Prudencio de Luna donated a portion of 7,500 square meters of
Lot No. 3707 of the Cadastral Survey of Lucena covered by Transfer Certificate of
Title No. 1-5775 to the Luzonian Colleges, Inc., (now Luzonian University
Foundation, Inc., herein referred to as the foundation). The donation, embodied in a
Deed of Donation Intervivos (Annex "A" of Petition) was subject to certain terms
and conditions and provided for the automatic reversion to the donor of the donated
property in case of violation or non-compliance (pars. 7 and 10 of Annex "A", p.
20, Rollo). The foundation failed to comply with the conditions of the donation. On
April 9, 1971, Prudencio de Luna "revived" the said donation in favor of the
foundation, in a document entitled "Revival of Donation Intervivos" (Annex "B" of
Petition) subject to terms and conditions which among others, required:
xxx xxx xxx
3. That the DONEE shall construct at its own expense a Chapel, a
Nursery and Kindergarten School, to be named after St. Veronica,
and other constructions and Accessories shall be constructed on the
land herein being donated strictly in accordance with the plans and
specifications prepared by the O.R. Quinto & Associates and made
part of this donation; provided that the flooring of the Altar and
parts of the Chapel shall be of granoletic marble.

4. That the construction of the Chapel, Nursery and Kindergarten

School shall start immediately and must be at least SEVENTY
(70) PER CENTUM finished by the end of THREE (3) YEARS
from the date hereof, however, the whole project as drawn in the
plans and specifications made parts of this donation must be
completed within FIVE (5) YEARS from the date hereon, unless
extensions are granted by the DONOR in writing;
. . . . (p. 23, Rollo)
As in the original deed of donation, the "Revival of Donation Intenrivos" also
provided for the automatic reversion to the donor of the donated area in case of
violation of the conditions thereof, couched in the following terms:
xxx xxx xxx.
11. That violation of any of the conditions herein provided shall
cause the automatic reversion of the donated area to the donor, his
heirs, assigns and representatives, without the need of executing
any other document for that purpose and without obligation
whatever on the part of the DONOR. (p. 24,Rollo).

In its answer (pp. 29-36, Rollo), respondent foundation claimed that it had partially
and substantially complied with the conditions of the donation and that the donor has
granted the foundation an indefinite extension of time to complete the construction
of the chapel. It also invoked the affirmative defense of prescription of action and
prayed for the dismissal of the complaint.
During the pre-trial of the case, the foundation moved for a preliminary hearing of its
affirmative defense of prescription of action which was opposed by the plaintiffs.
After the parties have filed their respective written motions, oppositions and
memoranda, an Order (pp., 40-43, Rollo) dated July 7, 1981 was issued dismissing
the complaint. The dispositive portion of the Order states:
In view of the foregoing considerations, this Court finds the
motion to dismiss deemed filed by the defendant on the ground of
prescription to be well-taken and the same is hereby GRANTED.
WHEREFORE, the instant complaint is hereby ordered
DISMISSED.
No pronouncement as to costs.
SO ORDERED. (pp. 42-43, Rollo)

The foundation, through its president, accepted the donation in the same document,
subject to all the terms and conditions stated in the donation (p. 24, Rollo). The
donation was registered and annotated on April 15, 1971 in the memorandum of
encumbrances as Entry No. 17939 of Transfer Certificate of Title No. T-5775 (p.
15, Rollo).

No motion for reconsideration was filed by petitioners.

On July 22, 1981, petitioners brought the instant petition for review with the
following assignments of error:

On August 3, 1971, Prudencio de Luna and the foundation executed a 'Deed of

Segregation" (Annex "C" of Petition) whereby the area donated which is now known
as Lot No. 3707-B of Subdivision Plan Psd-40392 was adjudicated to the foundation.
As a result, transfer certificate of title No. T-16152 was issued in the name of the
foundation. The remaining portion known as Lot No. 3707-A was retained by the
donor. (p. 16, Rollo).

I. THE LOWER COURT ERRED IN HOLDING THAT THE

DONEE'S CONSENT TO THE REVOCATION OF A
DONATION TO BE VALID MUST BE GIVEN SUBSEQUENT
TO THE EFFECTIVITY OF THE DONATION OR VIOLATION
OF (THE) ANY OF THE CONDITIONS IMPOSED THEREIN.

On September 23, 1980, herein petitioners, Evelyn, Rosalina, Prudencio, Jr., Willard,
Antonio and Joselito, all surnamed de Luna, who claim to be the children and only
heirs of the late Prudencio de Luna who died on August 18, 1980, filed a complaint
(pp. 14-17, Rollo) with the Regional Trial Court of Quezon alleging that the terms
and conditions of the donation were not complied with by the foundation. Among
others, it prayed for the cancellation of the donation and the reversion of the donated
land to the heirs. The complaint was docketed as Civil Case No. 8624.

II. THE LOWER COURT ERRED IN TREATING THE

COMPLAINT AS ONE FOR JUDICIAL DECREE OF
REVOCATION OF THE DONATION IN QUESTION AS
CONTEMPLATED IN ARTICLE 764 OF THE CIVIL CODE OF
THE PHILIPPINES AND WHICH PRESCRIBES IN FOUR (4)
YEARS AND IN NOT CONSIDERING IT AS AN ACTION TO
ENFORCE A WRITTEN CONTRACT WHICH PRESCRIBES IN
TEN (10) YEARS AS PROVIDED IN ARTICLE 1144, HENCE,

THE LOWER COURT ERRED IN DISMISSING THE

COMPLAINT.
III. THE LOWER COURT ERRED IN NOT RENDERING
JUDGMENT ON THE MERITS BY WAY OF JUDGMENT ON
THE PLEADINGS. (pp. 1-2, Petitioner's Brief)
We gave due course to the petition on August 3, 1981 (p. 45, Rollo). After the parties'
submission of their respective briefs, the Court resolved to consider the petition
submitted for decision on January 27, 1982 (p. 62,Rollo).
The assailed order of the trial court stated that revocation (of a donation) will be
effective only either upon court judgment or upon consent of the donee as held in the
case of Parks v. Province of Tarlac, No. 24190, July 13, 1926, 49 Phil. 143. The trial
court dismissed the claim of petitioners that the stipulation in the donation providing
for revocation in case of non-compliance of conditions in the donation is tantamount
to the consent of the donee, opining that the consent contemplated by law should be
such consent given by the donee subsequent to the effectivity of the donation or
violation of the conditions imposed therein. The trial court further held that, far from
consenting to the revocation, the donee claimed that it had already substantially
complied with the conditions of the donation by introducing improvements in the
property donated valued at more than the amount of the donated land. In view
thereof, a judicial decree revoking the subject donation is necessary. Accordingly,
under Article 764 of the New Civil Code, actions to revoke a donation on the ground
of non-compliance with any of the conditions of the donation shall prescribe in four
years counted from such non-compliance. In the instant case, the four-year period for
filing the complaint for revocation commenced on April 9, 1976 and expired on April
9, 1980. Since the complaint was brought on September 23, 1980 or more than five
(5) months beyond the prescriptive period, it was already barred by prescription.
On the other hand, petitioners argue that Article 764 of the New Civil Code was
adopted to provide a judicial remedy in case of non-fulfillment of conditions when
revocation of the donation has not been agreed upon by the parties. By way of
contrast, when there is a stipulation agreed upon by the parties providing for
revocation in case of non-compliance, no judicial action is necessary. It is then
petitioners' claim that the action filed before the Court of First Instance of Quezon is
not one for revocation of the donation under Article 764 of the New Civil Code
which prescribes in four (4) years, but one to enforce a written contract which
prescribes in ten (10) years.
The petition is impressed with merit.

From the viewpoint of motive, purpose or cause, donations may be 1) simple, 2)

remuneratory or 3) onerous. A simple donation is one the cause of which is pure
liberality (no strings attached). A remuneratory donation is one where the donee
gives something to reward past or future services or because of future charges or
burdens, when the value of said services, burdens or charges is less than the value of
the donation. An onerous donation is one which is subject to burdens, charges or
future services equal (or more) in value than that of the thing donated (Edgardo L.
Paras, Civil Code of the Philippines Annotated, 11 ed., Vol. 11, p. 726).
It is the finding of the trial court, which is not disputed by the parties, that the
donation subject of this case is one with an onerous cause. It was made subject to the
burden requiring the donee to construct a chapel, a nursery and a kindergarten school
in the donated property within five years from execution of the deed of donation.
Under the old Civil Code, it is a settled rule that donations with an onerous cause are
governed not by the law on donations but by the rules on contracts, as held in the
cases of Carlos v. Ramil, L-6736, September 5, 1911, 20 Phil. 183, Manalo vs. de
Mesa, L-9449, February 12, 1915, 29 Phil. 495. On the matter of prescription of
actions for the revocation of onerous donation, it was held that the general rules on
prescription applies. (Parks v. Province of Tarlac, supra.). The same rules apply
under the New Civil Code as provided in Article 733 thereof which provides:
Art. 733. Donations with an onerous cause shall be governed by
the rules on contracts, and remuneratory donations by the
provisions of the present Title as regards that portion which
exceeds the value of the burden imposed.
It is true that under Article 764 of the New Civil Code, actions for the revocation of a
donation must be brought within four (4) years from the non-compliance of the
conditions of the donation. However, it is Our opinion that said article does not apply
to onerous donations in view of the specific provision of Article 733 providing that
onerous donations are governed by the rules on contracts.
In the light of the above, the rules on contracts and the general rules on prescription
and not the rules on donations are applicable in the case at bar.
Under Article 1306 of the New Civil Code, the parties to a contract have the right "to
establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public
order or public policy." Paragraph 11 of the "Revival of Donation Intervivos, has
provided that "violation of any of the conditions (herein) shall cause the automatic
reversion of the donated area to the donor, his heirs, . . ., without the need of

executing any other document for that purpose and without obligation on the part of
the DONOR". Said stipulation not being contrary to law, morals, good customs,
public order or public policy, is valid and binding upon the foundation who
voluntarily consented thereto.
The validity of the stipulation in the contract providing for the automatic reversion of
the donated property to the donor upon non-compliance cannot be doubted. It is in
the nature of an agreement granting a party the right to rescind a contract unilaterally
in case of breach, without need of going to court. Upon the happening of the
resolutory condition of non-compliance with the conditions of the contract, the
donation is automatically revoked without need of a judicial declaration to that
effect. In the case of University of the Philippines v. de los Angeles, L-28602,
September 29, 1970, 35 SCRA 102-107, it was held:
. . . There is nothing in the law that prohibits the parties from
entering into agreement that violation of the terms of the contract
would cause cancellation thereof. even without court intervention.
In other words, it is not always necessary for the injured party to
resort to court for rescission of the contract (Froilan v. Pan Oriental
Shipping Co., et al.,
L-11897, 31 October 1964, 12 SCRA 276).

. . . since in every case, where the extrajudicial resolution is

contested, only the final award of the court of competent
jurisdiction can conclusively settle whether the resolution was
proper or not. It is in this sense that judicial action will be
necessary as without it, the extrajudicial resolution will remain
contestable and subject to judicial invalidation, unless attack
thereon should become barred by acquiescence, estoppel or
prescription.
It is clear, however, that judicial intervention is necessary not for purposes of
obtaining a judicial declaration rescinding a contract already deemed rescinded by
virtue of an agreement providing for rescission even without judicial intervention,
but in order to determine whether or not the recession was proper.
The case of Parks v. Province of Tarlac, supra, relied upon by the trial court, is not
applicable in the case at bar. While the donation involved therein was also onerous,
there was no agreement in the donation providing for automatic rescission, thus, the
need for a judicial declaration revoking said donation.
The trial court was therefore not correct in holding that the complaint in the case at
bar is barred by prescription under Article 764 of the New Civil Code because
Article 764 does not apply to onerous donations.

This was reiterated in the case of Angeles v. Calasanz, L-42283, March 18, 1985:
Well settled is, however, the rule that a judicial action for the
rescission of a contract is not necessary where the contract
provides that it may be revoked and cancelled for violation of any
of its terms and conditions (Lopez v. Commissioner of Customs,
37 SCRA 327, 334, and cases cited therein).
Resort to judicial action for rescission is obviously not
contemplated. The validity of the stipulation can not be seriously
disputed. It is in the nature of a facultative resolutory condition
which in many cases has been upheld, by this court. (Ponce Enrile
v. Court of Appeals, 29 SCRA 504)
However, in the University of the Philippines v. Angeles case, (supra), it was held
that in cases where one of the parties contests or denies the rescission, "only the final
award of the court of competent jurisdiction can conclusively settle whether the
resolution is proper or not." It was held, thus:

As provided in the donation executed on April 9, 1971, complaince with the terms
and conditions of the contract of donation, shall be made within five (5) years from
its execution. The complaint which was filed on September 23, 1980 was then well
within the ten (10) year prescriptive period to enforce a written contract (Article
1144[1], New Civil Code), counted from April 9, 1976.
Finally, considering that the allegations in the complaint on the matter of the donee's
non-compliance with the conditions of the donation have been contested by private
respondents who claimed that improvements more valuable than the donated
property had been introduced, a judgment on the pleadings is not proper. Moreover,
in the absence of a motion for judgment on the pleadings, the court cannot motu
proprio render such judgment. Section 1 of Rule 19 provides: "Where an answer
fails to tender an issue, or otherwise admits the material allegations of the adverse
party's pleading, the court may, on motion of that party, direct judgment on such
pleading." (Emphasis supplied)
ACCORDINGLY, the petition is GRANTED. Civil Case No. 8624 is hereby ordered
reinstated. Respondent judge is ordered to conduct a trial on the merits to determine
the propriety of the revocation of the subject donation.

SO ORDERED.

fail and refuse to comply with, despite demands made upon them, to the
damage and prejudice of plaintiff.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 176570

xxxx
WHEREFORE, premises considered, it is most respectfully prayed of this Honorable
Court that judgment be rendered in favor of plaintiff and against defendants by
ordering defendants to pay the sum of:

July 18, 2012

SPOUSES RAMON VILLUGA and MERCEDITA VILLUGA, Petitioners,

vs.
KELLY HARDWARE AND CONSTRUCTION SUPPLY INC., represented by
ERNESTO V. YU, Executive Vice-President and General Manager, Respondent.
DECISION

(1) P259,809.50 as principal obligation due plaintiff, plus interest due

thereon at 14% interest per annum, until all sums due are paid in full.
(2) P64,952.38 by way of reimbursements of attorney's fees plus P500.00
appearance fee in court.
(3) P26,000.00 for litigation and other related expenses.

PERALTA, J.:

And to pay the cost of suit.3

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to reverse and set aside the Decision1 and Resolution2 dated November
30, 2006 and February 8, 2007 of the Court of Appeals (CA) in CA-G.R. CV No.
69001. The CA Decision affirmed the Orders of the Regional Trial Court (RTC) of
Bacoor, Cavite, Branch 89, dated September 28, 1998 and May 6, 1999, while theCA
Resolution denied petitioners' Motion for Reconsideration.

In their Answer to Complaint,4 petitioners admitted having made purchases from

respondent, but alleged that they do not remember the exact amount thereof as no
copy of the documents evidencing the purchases were attached to the complaint.
Petitioners, nonetheless, claimed that they have made payments to the respondent on
March 4, 1994 and August 9, 1994 in the amounts of P110,301.80 and P20,000.00,
respectively, and they are willing to pay the balance of their indebtedness after
deducting the payments made and after verification of their account.

The factual and procedural antecedents of the case are as follows:

On March 3, 1995, herein respondent filed with the RTC of Bacoor, Cavite a
Complaint for a Sum of Money and Damages against herein petitioners alleging as
follows:
xxxx
(3) During the period of November 19, 1992 to January 5, 1993, defendants
[herein petitioners] made purchases of various construction materials from
plaintiff corporation [herein respondent] in the sum of P259,809.50, which
has not been paid up to the present time, both principal and stipulated
interests due thereon.
(4) Plaintiff made several demands, oral and written, for the same
defendants to pay all their obligations due plaintiff herein, but defendants

In a Manifestation5 dated July 18, 1995, petitioners stated that in order to buy peace,
they were willing to pay respondent the principal sum of P259,809.50, but without
interests and costs, and on installment basis.
In its Counter Manifestation,6 respondent signified that it was amenable to
petitioners' offer to pay the principal amount of P259,809.50. However, respondent
insisted that petitioners should also pay interests, as well as litigation expenses and
attorney's fees, and all incidental expenses.
Subsequently, on August 11, 1995, respondent filed a Motion for Partial Judgment on
the Pleadings7 contending that petitioners were deemed to have admitted in their
Answer that they owed respondent the amount of P259,809.50 when they claimed
that they made partial payments amounting to P130,301.80. Based on this premise,
respondent prayed that it be awarded the remaining balance of P129,507.70.
Petitioners filed their Opposition8 to the said Motion.

On September 11, 1995, the RTC issued an Order9 deferring resolution of

respondent's Motion for Partial Judgment on the ground that there is no clear and
specific admission on the part of petitioners as to the actual amount that they owe
respondent.
On January 30, 1996, respondent filed an Amended Complaint,10 with leave of court,
alleging that between October 1992 until January 5, 1993, petitioners purchased from
it (respondent) various construction materials and supplies, the aggregate value of
which is P279,809.50; that only P20,000.00 had been paid leaving a balance of
P259,809.50.
In their Answer to Amended Complaint,11 petitioners reiterated their allegations in
their Answer to Complaint.
On March 8, 1996, respondent filed a Request for Admission12 asking that petitioners
admit the genuineness of various documents, such as statements of accounts,
delivery receipts, invoices and demand letter attached thereto as well as the truth of
the allegations set forth therein.
Respondent basically asked petitioners to admit that the latter's principal obligation is
P279,809.50 and that only P20,000.00 was paid.
On June 3, 1996, respondent filed a Manifestation and Motion13 before the RTC
praying that since petitioners failed to timely file their comment to the Request for
Admission, they be considered to have admitted the genuineness of the documents
described in and exhibited with the said Request as well as the truth of the matters of
fact set forth therein, in accordance with the Rules of Court.
On June 6, 1996, petitioners filed their Comments on the Request for
Admission14 stating their objections to the admission of the documents attached to
the Request.
On January 24, 1997, respondent filed its Second Amended Complaint,15 again with
leave of court. The amendment modified the period covered by the complaint.
Instead of October 1992 to January 5, 1993, it was changed to July 29, 1992 until
August 10, 1994. The amendment also confirmed petitioners' partial payment in the
sum of P110,301.80 but alleged that this payment was applied to other obligations
which petitioners owe respondent. Respondent reiterated its allegation that, despite
petitioners' partial payment, the principal amount which petitioners owe remains
P259,809.50.

Petitioners filed their Answer to the Second Amended Complaint16 denying the
allegations therein and insisting that they have made partial payments.
On September 4, 1997, respondent filed a Motion to Expunge with Motion for
Summary Judgment17 claiming that petitioners' Comments on respondent's Request
for Admission is a mere scrap of paper as it was signed by petitioners' counsel and
not by petitioners themselves and that it was filed beyond the period allowed by the
Rules of Court. Respondent goes on to assert that petitioners, in effect, were deemed
to have impliedly admitted the matters subject of the said request. Respondent also
contended that it is already entitled to the issuance of a summary judgment in its
favor as petitioners not only failed to tender a genuine issue as to any material fact
but also did not raise any special defenses, which could possibly relate to any factual
issue.
In their Opposition to Motion to Expunge with Motion for Summary
Judgment,18 petitioners argued that respondent's request for admission is fatally
defective, because it did not indicate or specify a period within which to answer; that
verification by petitioners' counsel is sufficient compliance with the Rules of Court;
that petitioners' request for admission should be deemed dispensed with and no
longer taken into account as it only relates to the Amended Complaint, which was
already abandoned when the Second Amended Complaint was filed; and that
summary judgment is improper and without legal basis, as there exists a genuine
controversy brought about by petitioners' specific denials and defenses.
On September 28, 1998, the RTC issued an Order, the dispositive portion of which
reads as follows:
ACCORDINGLY, plaintiff's [herein respondent's] Motion to Expunge with Motion
for Summary Judgment is hereby GRANTED.
Defendants' Petitioners "Comments on the Request for Admission" dated 04 June
1996 is hereby expunged from the record for being contrary to the Rules of Court.
Judgment is hereby rendered in favor of the plaintiff and against the defendants as
follows:
Defendants are hereby ordered to pay, jointly and severally, plaintiff the sum of
TWO HUNDRED FIFTY-NINE [THOUSAND] EIGHT HUNDRED NINE PESOS
and 50/100 (P259,809.50), with legal interest due thereon until the whole amount is
paid.
SO ORDERED.19

Petitioners filed a Motion for Reconsideration, but it was denied by the RTC in its
Order dated May 6, 1999.

From the foregoing, it is clear that respondent's Request for Admission is not deemed
abandoned or withdrawn by the filing of the Second Amended Complaint.

Unyielding, petitioners filed an appeal with the CA.

The Court also finds no error when the CA ruled that petitioners' Comments on the
Request for Admission was filed out of time, and quotes with approval the
disquisition of the appellate court on this matter, to wit:

On November 30, 2006, the CA rendered its presently assailed Decision, affirming
the September 28, 1998 and May 6, 1999 Orders of the RTC.
Petitioners' Motion for Reconsideration was subsequently denied by the CA via its
Resolution dated February 8, 2007.
Hence, the instant petition for review on certiorari raising the following issues:
THE HONORABLE COURT SHOULD NOT HAVE DENIED DEFENDANTSAPPELLANTS' (PETITIONERS) COMMENT AND RULED THAT THERE WAS
IMPLIED ADMISSION CONTAINED IN THE REQUEST.
THERE SHOULD NOT HAVE BEEN A SUMMARY JUDGMENT AGAINST
DEFENDANTSAPPELLANTS (PETITIONERS).20
In their first assigned error, petitioners insist in arguing that respondent waived its
Request for Admission when it filed its Second Amended Complaint; that all motions
or requests based on the complaint, which was amended, should no longer be
considered. Petitioners also contend that the Request for Admission was not in the
form specified by the Rules of Court as it did not specify a period within which to
reply as required by Section 1, Rule 26 of the same Rules.
As to the second assignment of error, petitioners aver that the summary judgment
issued by the RTC is improper and without legal bases, considering that genuine
issues were raised in the pleadings filed by petitioners.
The petition lacks merit.
The Court agrees with the CA in holding that respondent's Second Amended
Complaint supersedes only its Amended Complaint and nothing more.
Section 8, Rule 10 of the Rules of Court provides:
Sec. 8. Effect of amended pleading. An amended pleading supersedes the pleading
that it amends. However, admissions in superseded pleadings may be received in
evidence against the pleader; and claims or defenses alleged therein not incorporated
in the amended pleading shall be deemed waived.

x x x Pursuant to the above-quoted Section 2 of Rule 26 of the Rules of Court, the

party to whom the request is directed must respond to the request within a period of
not less than ten (10) days after the service thereof, or upon such further time the
Court may allow on motion. In the instant case, the plaintiff-appellee's herein
respondent's "Request" failed to designate any period for the filing of the defendantsappellants' herein petitioners' response. Neither did the trial court fix the period for
the same upon motion of the parties. However, such failure to designate does not
automatically mean that the filing or the service of an answer or comment to the
"Request" would be left to the whims and caprices of defendants-appellants. It must
be reiterated that one of the main objectives of Rule 26 is to expedite the trial of the
case (Duque vs. Court of Appeals, 383,
SCRA 520, 527 2002 ). Thus, it is also provided in the second paragraph of Section 2
of Rule 26 of the Rules of Court that "[o]bjections on the ground of irrelevancy or
impropriety of the matter requested shall be promptly submitted to the court for
resolution."21
Nonetheless, the Court takes exception to the ruling of the CA that by reason of the
belated filing of petitioners' Comments on the Request for Admission, they are
deemed to have impliedly admitted that they are indebted to respondent in the
amount of P259,809.50.
A careful examination of the said Request for Admission shows that the matters of
fact set forth therein are simply a reiteration of respondent's main allegation in its
Amended Complaint and that petitioners had already set up the affirmative defense
of partial payment with respect to the above allegation in their previous pleadings.
This Court has ruled that if the factual allegations in the complaint are the very same
allegations set forth in the request for admission and have already been specifically
denied, the required party cannot be compelled to deny them anew.22 A request for
admission that merely reiterates the allegations in an earlier pleading is inappropriate
under Rule 26 of the Rules of Court, which as a mode of discovery, contemplates of
interrogatories that would clarify and tend to shed light on the truth or falsity of the
allegations in the pleading.23 Rule 26 does not refer to a mere reiteration of what has
already been alleged in the pleadings.24 Nonetheless, consistent with the

abovementioned Rule, the party being requested should file an objection to the effect
that the request for admission is improper and that there is no longer any need to
deny anew the allegations contained therein considering that these matters have
already been previously denied.

genuine issue as to any material fact and a moving party is entitled to a judgment as a
matter of law. A summary judgment is proper if, while the pleadings on their face
appear to raise issues, the affidavits, depositions, and admissions presented by the
moving party show that such issues are not genuine.28

The foregoing notwithstanding, the Court finds that the CA was correct in sustaining
the summary judgment rendered by the RTC.1wphi1

In the present case, it bears to note that in its original Complaint, as well as in its
Amended Complaint, respondent did not allege as to how petitioners' partial
payments of P110,301.80 and P20,000.00 were applied to the latter's obligations. In
fact, there is no allegation or admission whatsoever in the said Complaint and
Amended Complaint that such partial payments were made. Petitioners, on the other
hand, were consistent in raising their affirmative defense of partial payment in their
Answer to the Complaint and Answer to Amended Complaint. Having pleaded a
valid defense, petitioners, at this point, were deemed to have raised genuine issues of
fact.

Sections 1 and 3, Rule 35 of the Rules of Court provide as follows:

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 3. Motion and proceedings thereon. The motion shall be served at least ten
(10) days before the time specified for the hearing. The adverse party may serve
opposing affidavits, depositions, or admissions at least three (3) days before the
hearing. After the 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.
Summary judgment is a procedural device resorted to in order to avoid long drawn
out litigations and useless delays.25 Such judgment is generally based on the facts
proven summarily by affidavits, depositions, pleadings, or admissions of the
parties.26
In this respect, the Court's ruling in Nocom v. Camerino,27 is instructive, to wit:
x x x When the pleadings on file show that there are no genuine issues of fact to be
tried, the Rules of Court allow a party to obtain immediate relief by way of summary
judgment, that is, when the facts are not in dispute, the court is allowed to decide the
case summarily by applying the law to the material facts. Conversely, where the
pleadings tender a genuine issue, summary judgment is not proper. A "genuine issue"
is such issue of fact which requires the presentation of evidence as distinguished
from a sham, fictitious, contrived or false claim. Section 3 of [Rule 35 of the Rules
of Court] provides two (2) requisites for summary judgment to be proper: (1) there
must be no genuine issue as to any material fact, except for the amount of damages;
and (2) the party presenting the motion for summary judgment must be entitled to a
judgment as a matter of law. A summary judgment is permitted only if there is no

The situation became different, however, when respondent subsequently filed its
Second Amended Complaint admitting therein that petitioners, indeed, made partial
payments of P110,301.80 and P20,000.00. Nonetheless, respondent accounted for
such payments by alleging that these were applied to petitioners' obligations which
are separate and distinct from the sum of P259,809.50 being sought in the complaint.
This allegation was not refuted by petitioners in their Answer to Second Amended
Complaint. Rather, they simply insisted on their defense of partial payment while
claiming lack of knowledge or information to form a belief as to the truth of
respondent's allegation that they still owe the amount of P259,809.50 despite their
payments of P110,301.80 and P20,000.00. It is settled that the rule authorizing an
answer to the effect that the defendant has no knowledge or information sufficient to
form a belief as to the truth of an averment and giving such answer the effect of a
denial, does not apply where the fact as to which want of knowledge is asserted, is so
plainly and necessarily within the defendants knowledge that his averment of
ignorance must be palpably untrue.29 In the instant case, it is difficult to believe that
petitioners do not know how their payment was applied. Instead of denying
knowledge, petitioners could have easily asserted that their payments of P110,301.80
and P20,000.00 were applied to, and should have been deducted from, the sum
sought to be recovered by respondent, but they did not, leading the court to no other
conclusion than that these payments were indeed applied to their other debts to
respondent leaving an outstanding obligation of P259,809.50.
On the basis of the foregoing, petitioners' defense of partial payment in their Answer
to Second Amended Complaint, in effect, no longer raised genuine issues of fact that
require presentation of evidence in a full-blown trial. Hence, the summary judgment
of the RTC in favor of respondent is proper.

WHEREFORE, the instant petition Is DENIED. The assailed Decision and

Resolution of the Court of Appeals are AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 161122

September 24, 2012

DARE ADVENTURE FARM CORPORATION, Petitioner,

vs.
HON. COURT OF APPEALS, MANILA, HON. AUGUSTINE VESTIL, as
Presiding Judge of RTC-CEBU, Br. 56, MANDAUE CITY, SPS. FELIX NG
AND NENITA NG, and SPS. MARTIN T. NG AND AZUCENA S. NG AND
AGRIPINA R. GOC-ONG, Respondents.
DECISION
BERSAMIN, J.:
A decision rendered on a complaint in a civil action or proceeding does not hind or
prejudice a person not impleaded therein, for no person shall he adversely affected
by the outcome of a civil action or proceeding in which he is not a party. 1 Hence,
such person cannot bring an action for the annulment of the judgment under Rule 47
of the 1997 Rules of Civil Procedure, except if he has been a successor in interest by
title subsequent to the commencement of the action, or the action or proceeding is in
rem the judgment in which is binding against him.

The petitioner later on discovered the joint affidavit executed on June 19, 1990 by
the Goc-ongs, whereby the Goc-ongs declared that they were the owners of the
property, and that they were mortgaging the property to Felix Ng, married to Nenita
N. Ng, and Martin T. Ng, married to Azucena S. Ng (collectively, the Ngs) to secure
their obligation amounting to P 648,000.00, subject to the condition that should they
not pay the stipulated 36-monthly installments, the Ngs would automatically become
the owners of the property.3
With the Goc-ongs apparently failing to pay their obligation to the Ngs as stipulated,
the latter brought on January 16, 1997 a complaint for the recovery of a sum of
money, or, in the alternative, for the foreclosure of mortgage in the Regional Trial
Court, Branch 56, in Mandaue City (RTC) only against respondent Agripina R. Gocong.4 The action was docketed as Civil Case No. MAN-2838.
With Agripina R. Goc-ong being declared in default for failing to file her answer in
Civil Case No. MAN-2838,5 the RTC rendered its Decision on October 16, 1997,
disposing:
In the light of the foregoing, judgment is hereby rendered:
1) Declaring herein Plaintiffs the owners of lot 7531-part, situated at San
Roque, Liloan, Cebu containing an area of Sixty Five Thousand One
Hundred (65,100) square meters and assessed for P 22,240.00 and
2) Directing Defendant to pay Plaintiff the sum of P 10,000.00 as attorneys
fees and
3) P 10,000.00 as litigation expenses.
SO ORDERED.6
Ruling of the Court of Appeals

Antecedents
The petitioner acquired a parcel of land with an area of 65,100 square meters situated
in San Roque, Lilo-an, Metro Cebu known as lot 7531-part (the property) through a
deed of absolute sale executed on July 28, 1994 between the petitioner, as vendee,
and Agripina R. Goc-ong (a respondent herein), Porferio Goc-ong, Diosdado Gocong, Crisostomo Goc-ong, Tranquilino Goc-ong, Naciancena Goc-ong and Avelino
Goc-ong (collectively, the Goc-ongs), as vendors.2

In 2001, the petitioner commenced in the Court of Appeals (CA) an action for the
annulment of the October 16, 1997 decision of the RTC.
On June 19, 2001, however, the CA dismissed the petition for annulment of
judgment, viz:
We are constrained to DISMISS OUTRIGHT the present petition for annulment of
judgment under Rule 47 of the 1997 Rules of Civil Procedure, as amended,
considering that nowhere therein is there an allegation on why "the ordinary

remedies of new trial, appeal, petition for relief or other appropriate remedies are no
longer available through no fault of the petitioner.["]7
The petitioner moved for the reconsideration of the outright dismissal, but the CA
denied its motion for reconsideration on October 24, 2003 on the basis that petitioner
did not show why it had not availed itself of the ordinary remedies of new trial,
appeal, petition for relief or other appropriate remedies as provided in Section 1,
Rule 47 of the Rules of Court.
Issues
Hence, the petitioner ascribes to the CA the following errors, to wit:
I.
THE RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
RULING THAT PETITIONER FAILED TO EXPLAIN WHY IT DID NOT
AVAIL OF THE OTHER REMEDIES ENUMERATED UNDER SECTION
1 RULE 47 OF THE 1997 RULES ON CIVIL PROCEDURE.
II.
THE RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
RULING THAT PETITIONER COULD HAVE ASSAILED THE DEED
OF SALE AND QUESTIONED THE FORECLOSURE PROCEEDINGS
OR SOUGHT THE QUIETING OF TITLE TO THE SUBJECT
PROPERTY.
The decisive query is whether the action for annulment of judgment under Rule 47
was a proper recourse for the petitioner to set aside the decision rendered in Civil
Case No. MAN-2838.
Ruling

fraud.8 Yet, the remedy, being exceptional in character, is not allowed to be

so easily and readily abused by parties aggrieved by the final judgments,
orders or resolutions.9 The Court has thus instituted safeguards by limiting
the grounds for the annulment to lack of jurisdiction and extrinsic fraud, and
by prescribing in Section 110 of Rule 47 of theRules of Court that the
petitioner should show that the ordinary remedies of new trial, appeal,
petition for relief or other appropriate remedies are no longer available
through no fault of the petitioner.11 A petition for annulment that ignores or
disregards any of the safeguards cannot prosper.
The attitude of judicial reluctance towards the annulment of a judgment,
final order or final resolution is understandable, for the remedy disregards
the time-honored doctrine of immutability and unalterability of final
judgments, a solid corner stone in the dispensation of justice by the courts.
The doctrine of immutability and unalterability serves a two-fold purpose,
namely: (a) to avoid delay in the administration of justice and thus,
procedurally, to make orderly the discharge of judicial business; and (b) to
put an end to judicial controversies, at the risk of occasional errors, which is
precisely why the courts exist.12 As to the first, a judgment that has acquired
finality becomes immutable and unalterable and is no longer to be modified
in any respect even if the modification is meant to correct an erroneous
conclusion of fact or of law, and whether the modification is made by the
court that rendered the decision or by the highest court of the land.13 As to
the latter, controversies cannot drag on indefinitely because fundamental
considerations of public policy and sound practice demand that the rights
and obligations of every litigant must not hang in suspense for an indefinite
period of time.14
II.
We uphold the CAs dismissal of the petitioners action for annulment of
judgment based on the foregoing considerations.
It is elementary that a judgment of a court is conclusive and binding only
upon the parties and those who are their successors in interest by title after
the commencement of the action in court.15 Section 47(b) of Rule 39 of
the Rules of Court explicitly so provides, to wit:

We deny the petition for review.

I.
A petition for annulment of judgment is a remedy in equity so exceptional
in nature that it may be availed of only when other remedies are wanting,
and only if the judgment, final order or final resolution sought to be
annulled was rendered by a court lacking jurisdiction or through extrinsic

Section 47. Effect of judgments or final orders .The effect of a judgment or final
order rendered by a court of the Philippines, having jurisdiction to pronounce the
judgment or final order, may be as follows:

xxxx
(b) In other cases, the judgment or final order is, with respect to the matter directly
adjudged or as to any other matter that could have been raised in relation
thereto, conclusive between the parties and their successors in interest by title
subsequent to the commencement of the action or special proceeding, litigating
for the same thing and under the same title and in the same capacity; xxx.
The principle that a person cannot be prejudiced by a ruling rendered in an action or
proceeding in which he has not been made a party conforms to the constitutional
guarantee of due process of law. The operation of this principle was illustrated
in Muoz v. Yabut, Jr.,16 where the Court declared that a person not impleaded and
given the opportunity to take part in the proceedings was not bound by the decision
declaring as null and void the title from which his title to the property had been
derived. We said there that the effect of a judgment could not be extended to nonparties by simply issuing an alias writ of execution against them, for no man should
be prejudiced by any proceeding to which he was a stranger. In the same manner, a
writ of execution could be issued only against a party, not against a person who did
not have his day in court.17
Accordingly, the petitioners resort to annulment of judgment under Rule 47 was
unnecessary if, after all, the judgment rendered in Civil Case No. MAN-2838 did not
prejudice it.
Moreover, Section 1 of Rule 47 extends the remedy of annulment only to a party in
whose favor the remedies of new trial, reconsideration, appeal, and petition for relief
from judgment are no longer available through no fault of said party. As such, the
petitioner, being a non-party in Civil Case No. MAN-2838, could not bring the
action for annulment of judgment due to unavailability to it of the remedies of new
trial, reconsideration, appeal, or setting the judgment aside through a petition for
relief.
The petitioner probably brought the action for annulment upon its honest belief that
the action was its remaining recourse from a perceived commission of extrinsic fraud
against it. It is worthwhile for the petitioner to ponder, however, that permitting it
despite its being a non-party in Civil Case No. MAN-2838 to avail itself of the
remedy of annulment of judgment would not help it in any substantial way. Although
Rule 47 would initially grant relief to it from the effects of the annulled judgment,
the decision of the CA would not really and finally determine the rights of the
petitioner in the property as against the competing rights of the original parties. To be
borne in mind is that the annulment of judgment is an equitable relief not because a
party-litigant thereby gains another opportunity to reopen the already-final judgment

but because a party-litigant is enabled to be discharged from the burden of being

bound by a judgment that was an absolute nullity to begin with.18
We agree with the CAs suggestion that the petitioners proper recourse was either an
action for quieting of title or an action for reconveyance of the property. It is timely
for the Court to remind that the petitioner will be better off if it should go to the
courts to obtain relief through the proper recourse; otherwise, it would waste its own
time and effort, aside from thereby unduly burdening the dockets of the courts.
The petitioner may vindicate its rights in the property through an action for quieting
of title, a common law remedy designed for the removal of any cloud upon, or doubt,
or uncertainty affecting title to real property. The action for quieting of title may be
brought whenever there is a cloud on title to real property or any interest in real
property by reason of any instrument, record, claim, encumbrance, or proceeding that
is apparently valid or effective, but is, in truth and in fact, invalid, ineffective,
voidable, or unenforceable, and may be prejudicial to said title. In the action, the
competent court is tasked to determine the respective rights of the plaintiff and the
other claimants, not only to put things in their proper places, and make the claimant,
who has no rights to the immovable, respect and not disturb the one so entitled, but
also for the benefit of both, so that whoever has the right will see every cloud of
doubt over the property dissipated, and he can thereafter fearlessly introduce any
desired improvements, as well as use, and even abuse the property.19
The other proper remedy the CA suggested was an action for reconveyance of
property.1wphi1 According to Vda. de Recinto v. Inciong,20 the remedy belongs to
the landowner whose property has been wrongfully or erroneously registered in
another persons name, and such landowner demands the reconveyance of the
property in the proper court of justice. If the property has meanwhile passed into the
hands of an innocent purchaser for value, the landowner may seek damages. In either
situation, the landowner respects the decree as incontrovertible and no longer open to
review provided the one-year period from the land coming under the operation of the
Torrens System of land registration already passed.
WHEREFORE the Court AFFIRMS the decision of the Court of Appeals
promulgated on June 19, 2001; andDIRECTS the petitioner to pay the costs of suit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION
G.R. No. 160758

loan, DBP required Guaria Corporation to put up a cash equity of P1,470,951.00 for
the construction of the buildings and other improvements on the resort complex.

January 15, 2014

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner,

vs.
GUARIA AGRICULTURAL AND REALTY DEVELOPMENT
CORPORATION, Respondent.
DECISION
BERSAMIN, J.:
The foreclosure of a mortgage prior to the mortgagor's default on the principal
obligation is premature, and should be undone for being void and ineffectual. The
mortgagee who has been meanwhile given possession of the mortgaged property by
virtue of a writ of possession issued to it as the purchaser at the foreclosure sale may
be required to restore the possession of the property to the mortgagor and to pay
reasonable rent for the use of the property during the intervening period.
The Case
In this appeal, Development Bank of the Philippines (DBP) seeks the reversal of the
adverse decision promulgated on March 26, 2003 in C.A.-G.R. CV No.
59491,1 whereby the Court of Appeals (CA) upheld the judgment rendered on
January 6, 19982 by the Regional Trial Court, Branch 25, in Iloilo City (RTC)
annulling the extra-judicial foreclosure of the real estate and chattel mortgages at the
instance of DBP because the debtor-mortgagor, Guaria Agricultural and Realty
Development Corporation (Guaria Corporation), had not yet defaulted on its
obligations in favor of DBP.
Antecedents
In July 1976, Guaria Corporation applied for a loan from DBP to finance the
development of its resort complex situated in Trapiche, Oton, Iloilo. The loan, in the
amount of P3,387,000.00, was approved on August 5, 1976.3Guaria Corporation
executed a promissory note that would be due on November 3, 1988.4 On October 5,
1976, Guaria Corporation executed a real estate mortgage over several real
properties in favor of DBP as security for the repayment of the loan. On May 17,
1977, Guaria Corporation executed a chattel mortgage over the personal properties
existing at the resort complex and those yet to be acquired out of the proceeds of the
loan, also to secure the performance of the obligation.5 Prior to the release of the

The loan was released in several instalments, and Guaria Corporation used the
proceeds to defray the cost of additional improvements in the resort complex. In all,
the amount released totalled P3,003,617.49, from which DBP withheld P148,102.98
as interest.6
Guaria Corporation demanded the release of the balance of the loan, but DBP
refused. Instead, DBP directly paid some suppliers of Guaria Corporation over the
latter's objection. DBP found upon inspection of the resort project, its developments
and improvements that Guaria Corporation had not completed the construction
works.7In a letter dated February 27, 1978,8 and a telegram dated June 9, 1978,9 DBP
thus demanded that Guaria Corporation expedite the completion of the project, and
warned that it would initiate foreclosure proceedings should Guaria Corporation not
do so.10
Unsatisfied with the non-action and objection of Guaria Corporation, DBP initiated
extrajudicial foreclosure proceedings. A notice of foreclosure sale was sent to
Guaria Corporation. The notice was eventually published, leading the clients and
patrons of Guaria Corporation to think that its business operation had slowed down,
and that its resort had already closed.11
On January 6, 1979, Guaria Corporation sued DBP in the RTC to demand specific
performance of the latter's obligations under the loan agreement, and to stop the
foreclosure of the mortgages (Civil Case No. 12707).12However, DBP moved for the
dismissal of the complaint, stating that the mortgaged properties had already been
sold to satisfy the obligation of Guaria Corporation at a public auction held on
January 15, 1979 at the Costa Mario Resort Beach Resort in Oton, Iloilo.13 Due to
this, Guaria Corporation amended the complaint on February 6, 197914 to seek the
nullification of the foreclosure proceedings and the cancellation of the certificate of
sale. DBP filed its answer on December 17, 1979,15 and trial followed upon the
termination of the pre-trial without any agreement being reached by the parties.16
In the meantime, DBP applied for the issuance of a writ of possession by the RTC. At
first, the RTC denied the application but later granted it upon DBP's motion for
reconsideration. Aggrieved, Guaria Corporation assailed the granting of the
application before the CA on certiorari (C.A.-G.R. No. 12670-SP entitled Guaria
Agricultural and Realty Development Corporation v. Development Bank of the
Philippines). After the CA dismissed the petition for certiorari, DBP sought the
implementation of the order for the issuance of the writ of possession. Over Guaria
Corporation's opposition, the RTC issued the writ of possession on June 16, 1982.17

Judgment of the RTC

On January 6, 1998, the RTC rendered its judgment in Civil Case No. 12707,
disposing as follows:
WHEREFORE, premises considered, the court hereby resolves that the extra-judicial
sales of the mortgaged properties of the plaintiff by the Office of the Provincial
Sheriff of Iloilo on January 15, 1979 are null and void, so with the consequent
issuance of certificates of sale to the defendant of said properties, the registration
thereof with the Registry of Deeds and the issuance of the transfer certificates of title
involving the real property in its name.

AUTHORITY OF PARAGRAPH NO. 4 OF THE MORTGAGE CONTRACT AND

SECTION 2 OF P.D. 385 IN ADDITION TO THE QUESTIONED PAR. NO. 26
PRINTED AT THE BACK OF THE FIRST PAGE OF THE MORTGAGE
CONRACT.
III
THE TRIAL COURT ERRED IN HOLDING THE SALES OF THE MORTGAGED
PROPERTIES TO DBP AS INVALID UNDER ARTICLES 2113 AND 2141 OF
THE CIVIL CODE.
IV

It is also resolved that defendant give back to the plaintiff or its representative the
actual possession and enjoyment of all the properties foreclosed and possessed by it.
To pay the plaintiff the reasonable rental for the use of its beach resort during the
period starting from the time it (defendant) took over its occupation and use up to the
time possession is actually restored to the plaintiff.

THE TRIAL COURT GRAVELY ERRED AND COMMITTED [REVERSIBLE]

ERROR IN ORDERING DBP TO RETURN TO PLAINTIFF THE ACTUAL
POSSESSION AND ENJOYMENT OF ALL THE FORECLOSED PROPERTIES
AND TO PAY PLAINTIFF REASONABLE RENTAL FOR THE USE OF THE
FORECLOSED BEACH RESORT.

And, on the part of the plaintiff, to pay the defendant the loan it obtained as soon as it
takes possession and management of the beach resort and resume its business
operation.
Furthermore, defendant is ordered to pay plaintiff's attorney's fee of P50,000.00.

V
THE TRIAL COURT ERRED IN AWARDING ATTORNEY'S FEES AGAINST
DBP WHICH MERELY EXERCISED ITS RIGHTS UNDER THE MORTGAGE
CONTRACT.19

So ORDERED.18
Decision of the CA
On appeal (C.A.-G.R. CV No. 59491), DBP challenged the judgment of the RTC,
and insisted that:
I
THE TRIAL COURT ERRED AND COMMITTED REVERSIBLE ERROR IN
DECLARING DBP'S FORECLOSURE OF THE MORTGAGED PROPERTIES AS
INVALID AND UNCALLED FOR.

In its decision promulgated on March 26, 2003,20 however, the CA sustained the
RTC's judgment but deleted the award of attorney's fees, decreeing:
WHEREFORE, in view of the foregoing, the Decision dated January 6, 1998,
rendered by the Regional Trial Court of Iloilo City, Branch 25 in Civil Case No.
12707 for Specific Performance with Preliminary Injunction is hereby AFFIRMED
with MODIFICATION, in that the award for attorney's fees is deleted.
SO ORDERED.21
DBP timely filed a motion for reconsideration, but the CA denied its motion on
October 9, 2003.

II
Hence, this appeal by DBP.
THE TRIAL COURT GRIEVOUSLY ERRED IN HOLDING THE GROUNDS
INVOKED BY DBP TO JUSTIFY FORECLOSURE AS "NOT SUFFICIENT." ON
THE CONTRARY, THE MORTGAGE WAS FORECLOSED BY EXPRESS

Issues

DBP submits the following issues for consideration, namely:

WHETHER OR NOT THE DECISION OF THE COURT OF APPEALS DATED
MARCH 26, 2003 AND ITS RESOLUTION DATED OCTOBER 9, DENYING
PETITIONER'S MOTION FOR RECONSIDERATION WERE ISSUED IN
ACCORDANCE WITH LAW, PREVAILING JURISPRUDENTIAL DECISION
AND SUPPORTED BY EVIDENCE;

quality shall be paid.26 Loan is a reciprocal obligation, as it arises from the same
cause where one party is the creditor, and the other the debtor.27 The obligation of
one party in a reciprocal obligation is dependent upon the obligation of the other, and
the performance should ideally be simultaneous. This means that in a loan, the
creditor should release the full loan amount and the debtor repays it when it becomes
due and demandable.28
In its assailed decision, the CA found and held thusly:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ADHERED TO

THE USUAL COURSE OF JUDICIAL PROCEEDINGS IN DECIDING C.A.-G.R.
CV NO. 59491 AND THEREFORE IN ACCORDANCE WITH THE "LAW OF
THE CASE DOCTRINE."22
Ruling
The appeal lacks merit.
1.
Findings of the CA were supported by the
evidence as well as by law and jurisprudence
DBP submits that the loan had been granted under its supervised credit financing
scheme for the development of a beach resort, and the releases of the proceeds would
be subject to conditions that included the verification of the progress of works in the
project to forestall diversion of the loan proceeds; and that under Stipulation No. 26
of the mortgage contract, further loan releases would be terminated and the account
would be considered due and demandable in the event of a deviation from the
purpose of the loan,23 including the failure to put up the required equity and the
diversion of the loan proceeds to other purposes.24 It assails the declaration by the
CA that Guaria Corporation had not yet been in default in its obligations despite
violations of the terms of the mortgage contract securing the promissory note.
Guaria Corporation counters that it did not violate the terms of the promissory note
and the mortgage contracts because DBP had fully collected the interest
notwithstanding that the principal obligation did not yet fall due and become
demandable.25
The submissions of DBP lack merit and substance.
The agreement between DBP and Guaria Corporation was a loan. Under the law, a
loan requires the delivery of money or any other consumable object by one party to
another who acquires ownership thereof, on the condition that the same amount or

xxxx
x x x It is undisputed that appellee obtained a loan from appellant, and as security,
executed real estate and chattel mortgages. However, it was never established that
appellee was already in default. Appellant, in a telegram to the appellee reminded the
latter to make good on its construction works, otherwise, it would foreclose the
mortgage it executed. It did not mention that appellee was already in default. The
records show that appellant did not make any demand for payment of the promissory
note. It appears that the basis of the foreclosure was not a default on the loan but
appellee's failure to complete the project in accordance with appellant's standards. In
fact, appellant refused to release the remaining balance of the approved loan after it
found that the improvements introduced by appellee were below appellant's
expectations.
The loan agreement between the parties is a reciprocal obligation. Appellant in the
instant case bound itself to grant appellee the loan amount of P3,387,000.00
condition on appellee's payment of the amount when it falls due. Furthermore, the
loan was evidenced by the promissory note which was secured by real estate
mortgage over several properties and additional chattel mortgage. Reciprocal
obligations are those which arise from the same cause, and in which each party is a
debtor and a creditor of the other, such that the obligation of one is dependent upon
the obligation of the other (Areola vs. Court of Appeals, 236 SCRA 643). They are to
be performed simultaneously such that the performance of one is conditioned upon
the simultaneous fulfilment of the other (Jaime Ong vs. Court of Appeals, 310 SCRA
1). The promise of appellee to pay the loan upon due date as well as to execute
sufficient security for said loan by way of mortgage gave rise to a reciprocal
obligation on the part of appellant to release the entire approved loan amount. Thus,
appellees are entitled to receive the total loan amount as agreed upon and not an
incomplete amount.
The appellant did not release the total amount of the approved loan. Appellant
therefore could not have made a demand for payment of the loan since it had yet to

fulfil its own obligation. Moreover, the fact that appellee was not yet in default
rendered the foreclosure proceedings premature and improper.
The properties which stood as security for the loan were foreclosed without any
demand having been made on the principal obligation. For an obligation to become
due, there must generally be a demand. Default generally begins from the moment
the creditor demands the performance of the obligation. Without such demand,
judicial or extrajudicial, the effects of default will not arise (Namarco vs. Federation
of United Namarco Distributors, Inc., 49 SCRA 238; Borje vs. CFI of Misamis
Occidental, 88 SCRA 576).
xxxx
Appellant also admitted in its brief that it indeed failed to release the full amount of
the approved loan. As a consequence, the real estate mortgage of appellee becomes
unenforceable, as it cannot be entirely foreclosed to satisfy appellee's total debt to
appellant (Central Bank of the Philippines vs. Court of Appeals, 139 SCRA 46).
Since the foreclosure proceedings were premature and unenforceable, it only follows
that appellee is still entitled to possession of the foreclosed properties. However,
appellant took possession of the same by virtue of a writ of possession issued in its
favor during the pendency of the case. Thus, the trial court correctly ruled when it
ordered appellant to return actual possession of the subject properties to appellee or
its representative and to pay appellee reasonable rents.
However, the award for attorney's fees is deleted. As a rule, the award of attorney's
fees is the exception rather than the rule and counsel's fees are not to be awarded
every time a party wins a suit. Attorney's fees cannot be recovered as part of
damages because of the policy that no premium should be placed on the right to
litigate (Pimentel vs. Court of Appeals, et al., 307 SCRA 38).29
xxxx
We uphold the CA.

obligation under the loan. Indeed, if a party in a reciprocal contract like a loan does
not perform its obligation, the other party cannot be obliged to perform what is
expected of it while the other's obligation remains unfulfilled.30 In other words, the
latter party does not incur delay.31
Still, DBP called upon Guaria Corporation to make good on the construction works
pursuant to the acceleration clause written in the mortgage contract (i.e., Stipulation
No. 26),32 or else it would foreclose the mortgages.
DBP's actuations were legally unfounded. It is true that loans are often secured by a
mortgage constituted on real or personal property to protect the creditor's interest in
case of the default of the debtor. By its nature, however, a mortgage remains an
accessory contract dependent on the principal obligation,33 such that enforcement of
the mortgage contract will depend on whether or not there has been a violation of the
principal obligation. While a creditor and a debtor could regulate the order in which
they should comply with their reciprocal obligations, it is presupposed that in a loan
the lender should perform its obligation - the release of the full loan amount - before
it could demand that the borrower repay the loaned amount. In other words, Guaria
Corporation would not incur in delay before DBP fully performed its reciprocal
obligation.34
Considering that it had yet to release the entire proceeds of the loan, DBP could not
yet make an effective demand for payment upon Guaria Corporation to perform its
obligation under the loan. According to Development Bank of the Philippines v.
Licuanan,35 it would only be when a demand to pay had been made and was
subsequently refused that a borrower could be considered in default, and the lender
could obtain the right to collect the debt or to foreclose the
mortgage.1wphi1 Hence, Guaria Corporation would not be in default without the
demand.
Assuming that DBP could already exact from the latter its compliance with the loan
agreement, the letter dated February 27, 1978 that DBP sent would still not be
regarded as a demand to render Guaria Corporation in default under the principal
contract because DBP was only thereby requesting the latter "to put up the deficiency
in the value of improvements."36

To start with, considering that the CA thereby affirmed the factual findings of the
RTC, the Court is bound to uphold such findings, for it is axiomatic that the trial
court's factual findings as affirmed by the CA are binding on appeal due to the Court
not being a trier of facts.

Under the circumstances, DBP's foreclosure of the mortgage and the sale of the
mortgaged properties at its instance were premature, and, therefore, void and
ineffectual.37

Secondly, by its failure to release the proceeds of the loan in their entirety, DBP had
no right yet to exact on Guaria Corporation the latter's compliance with its own

Being a banking institution, DBP owed it to Guaria Corporation to exercise the

highest degree of diligence, as well as to observe the high standards of integrity and

performance in all its transactions because its business was imbued with public
interest.38 The high standards were also necessary to ensure public confidence in the
banking system, for, according to Philippine National Bank v. Pike: 39 "The stability
of banks largely depends on the confidence of the people in the honesty and
efficiency of banks." Thus, DBP had to act with great care in applying the
stipulations of its agreement with Guaria Corporation, lest it erodes such public
confidence. Yet, DBP failed in its duty to exercise the highest degree of diligence by
prematurely foreclosing the mortgages and unwarrantedly causing the foreclosure
sale of the mortgaged properties despite Guaria Corporation not being yet in
default. DBP wrongly relied on Stipulation No. 26 as its basis to accelerate the
obligation of Guaria Corporation, for the stipulation was relevant to an Omnibus
Agricultural Loan, to Guaria Corporation's loan which was intended for a project
other than agricultural in nature.
Even so, Guaria Corporation did not elevate the actionability of DBP's negligence
to the CA, and did not also appeal the CA's deletion of the award of attorney's fees
allowed by the RTC.1wphi1 With the decision of the CA consequently becoming
final and immutable as to Guaria Corporation, we will not delve any further on
DBP's actionable actuations.
2.
The doctrine of law of the case
did not apply herein
DBP insists that the decision of the CA in C.A.-G.R. No. 12670-SP already
constituted the law of the case. Hence, the CA could not decide the appeal in C.A.G.R. CV No. 59491 differently.
Guaria Corporation counters that the ruling in C.A.-G.R. No. 12670-SP did not
constitute the law of the case because C.A.-G.R. No. 12670-SP concerned the issue
of possession by DBP as the winning bidder in the foreclosure sale, and had no
bearing whatsoever to the legal issues presented in C.A.-G.R. CV No. 59491.
Law of the case has been defined as the opinion delivered on a former appeal, and
means, more specifically, that whatever is once irrevocably established as the
controlling legal rule of decision between the same parties in the same case continues
to be the law of the case, whether correct on general principles or not, so long as the
facts on which such decision was predicated continue to be the facts of the case
before the court.40
The concept of law of the case is well explained in Mangold v. Bacon,41 an American
case, thusly:

The general rule, nakedly and boldly put, is that legal conclusions announced on a
first appeal, whether on the general law or the law as applied to the concrete facts,
not only prescribe the duty and limit the power of the trial court to strict obedience
and conformity thereto, but they become and remain the law of the case in all other
steps below or above on subsequent appeal. The rule is grounded on convenience,
experience, and reason. Without the rule there would be no end to criticism,
reagitation, reexamination, and reformulation. In short, there would be endless
litigation. It would be intolerable if parties litigants were allowed to speculate on
changes in the personnel of a court, or on the chance of our rewriting propositions
once gravely ruled on solemn argument and handed down as the law of a given case.
An itch to reopen questions foreclosed on a first appeal would result in the
foolishness of the inquisitive youth who pulled up his corn to see how it grew. Courts
are allowed, if they so choose, to act like ordinary sensible persons. The
administration of justice is a practical affair. The rule is a practical and a good one of
frequent and beneficial use.
The doctrine of law of the case simply means, therefore, that when an appellate court
has once declared the law in a case, its declaration continues to be the law of that
case even on a subsequent appeal, notwithstanding that the rule thus laid down may
have been reversed in other cases.42 For practical considerations, indeed, once the
appellate court has issued a pronouncement on a point that was presented to it with
full opportunity to be heard having been accorded to the parties, the pronouncement
should be regarded as the law of the case and should not be reopened on remand of
the case to determine other issues of the case, like damages.43 But the law of the case,
as the name implies, concerns only legal questions or issues thereby adjudicated in
the former appeal.
The foregoing understanding of the concept of the law of the case exposes DBP's
insistence to be unwarranted.
To start with, the ex parte proceeding on DBP's application for the issuance of the
writ of possession was entirely independent from the judicial demand for specific
performance herein. In fact, C.A.-G.R. No. 12670-SP, being the interlocutory appeal
concerning the issuance of the writ of possession while the main case was pending,
was not at all intertwined with any legal issue properly raised and litigated in C.A.G.R. CV No. 59491, which was the appeal to determine whether or not DBP's
foreclosure was valid and effectual. And, secondly, the ruling in C.A.-G.R. No.
12670-SP did not settle any question of law involved herein because this case for
specific performance was not a continuation of C.A.-G.R. No. 12670-SP (which was
limited to the propriety of the issuance of the writ of possession in favor of DBP),
and vice versa.

3.
Guarifia Corporation is legally entitled to the
restoration of the possession of the resort complex
and payment of reasonable rentals by DBP

upholding the liability of Eastern Shipping Lines, Inc. (ESLI) but absolving Asian
Terminals, Inc. (ATI) from liability and deleting the award of attorney's fees.

Having found and pronounced that the extrajudicial foreclosure by DBP was
premature, and that the ensuing foreclosure sale was void and ineffectual, the Court
affirms the order for the restoration of possession to Guarifia Corporation and the
payment of reasonable rentals for the use of the resort. The CA properly held that the
premature and invalid foreclosure had unjustly dispossessed Guarifia Corporation of
its properties. Consequently, the restoration of possession and the payment of
reasonable rentals were in accordance with Article 561 of the Civil Code, which
expressly states that one who recovers, according to law, possession unjustly lost
shall be deemed for all purposes which may redound to his benefit to have enjoyed it
without interruption.

On 29 December 2004, BPI/MS Insurance Corporation (BPI/MS) and Mitsui

Sumitomo Insurance Company Limited (Mitsui) filed a Complaint3 before the RTC
of Makati City against ESLI and ATI to recover actual damages amounting to
US$17,560.48 with legal interest, attorneys fees and costs of suit.

WHEREFORE, the Court AFFIRMS the decision promulgated on March 26, 2003;
and ORDERS the petitioner to pay the costs of suit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 182864

January 12, 2015

EASTERN SHIPPING LINES, INC., Petitioner,

vs.
BPI/MS INSURANCE CORP., & MITSUI SUMITOMO INSURANCE CO.,
LTD., Respondents.
DECISION
PEREZ, J.:
Before this Court is a Petition for Review on Certiorari 1 of the Decision2 of the
Second Division of the Court of Appeals in CA-G.R. CV No. 88744 dated 31
January 2008, modifying the Decision of the Regional Trial Court (RTC) by

The facts gathered from the records follow:

In their complaint, BPI/MS and Mitsui alleged that on 2 February 2004 at

Yokohama, Japan, Sumitomo Corporation shipped on board ESLIs vessel M/V
"Eastern Venus 22" 22 coils of various Steel Sheet weighing 159,534 kilograms in
good order and condition for transportation to and delivery at the port of Manila,
Philippines in favor of consignee Calamba Steel Center, Inc. (Calamba Steel) located
in Saimsim, Calamba, Laguna as evidenced by a Bill of Lading with Nos.
ESLIYMA001. The declared value of the shipment was US$83,857.59 as shown by
an Invoice with Nos. KJGE-03-1228-NT/KE3. The shipment was insured with the
respondents BPI/MS and Mitsui against all risks under Marine Policy No. 103GG03448834.
On 11 February 2004, the complaint alleged that the shipment arrived at the port of
Manila in an unknown condition and was turned over to ATI for safekeeping. Upon
withdrawal of the shipment by the Calamba Steels representative, it was found out
that part of the shipment was damaged and was in bad order condition such that there
was a Request for Bad Order Survey. It was found out that the damage amounted to
US$4,598.85 prompting Calamba Steel to reject the damaged shipment for being
unfit for the intended purpose.
On 12 May 2004 at Kashima, Japan, Sumitomo Corporation again shipped on board
ESLIs vessel M/V "Eastern Venus 25" 50 coils in various Steel Sheet weighing
383,532 kilograms in good order and condition for transportation to and delivery at
the port of Manila, Philippines in favor of the same consignee Calamba Steel
asevidenced by a Bill of Lading with Nos. ESLIKSMA002. The declared value of
the shipment was US$221,455.58 as evidenced by Invoice Nos. KJGE-04-1327NT/KE2. The shipment was insured with the respondents BPI/MS and Mitsui against
all risks under Marine Policy No. 104-GG04457785.
On 21 May 2004, ESLIs vessel withthe second shipment arrived at the port of
Manila partly damaged and in bad order. The coils sustained further damage during
the discharge from vessel to shore until its turnover to ATIs custody for safekeeping.

Upon withdrawal from ATI and delivery to Calamba Steel, it was found out that the
damage amounted to US$12,961.63. As it did before, Calamba Steel rejected the
damaged shipment for being unfit for the intended purpose.

4. Parties likewise admitted the existence of the Marine Cargo Policy issued
by the Mitsui Sumitomo Insurance Company, Limited, copy of which was
attached to the Complaint as Annex C;

Calamba Steel attributed the damages on both shipments to ESLI as the carrier and
ATI as the arrastre operator in charge of the handling and discharge of the coils and
filed a claim against them. When ESLI and ATI refused to pay, Calamba Steel filed
an insurance claim for the total amount of the cargo against BPI/MS and Mitsuias
cargo insurers. As a result, BPI/MS and Mitsui became subrogated in place of and
with all the rights and defenses accorded by law in favor of Calamba Steel.

5. [ATI] admitted the existence and due execution of the Request for Bad
Order Survey dated February 13, 2004, attached to the Complaint as Annex
D;

Opposing the complaint, ATI, in itsAnswer, denied the allegations and insisted that
the coils in two shipments were already damaged upon receipt from ESLIs vessels.
It likewise insisted that it exercised due diligence in the handling of the shipments
and invoked that in case of adverse decision, its liability should not
exceed P5,000.00 pursuant to Section 7.01, Article VII4 of the Contract for Cargo
Handling Services between Philippine Ports Authority (PPA) and ATI. 5 A cross-claim
was also filed against ESLI.
On its part, ESLI denied the allegations of the complainants and averred that the
damage to both shipments was incurred while the same were in the possession and
custody of ATI and/or of the consignee or its representatives. It also filed a crossclaim against ATI for indemnification in case of liability.6
To expedite settlement, the case was referred to mediation but it was returned to the
trial court for further proceedings due tothe parties failure to resolve the legal issues
as noted inthe Mediators Report dated 28 June 2005.7
On 10 January 2006, the court issued a Pre-Trial Order wherein the following
stipulations wereagreed upon by the parties:
1. Parties admitted the capacity of the parties to sue and be sued;
2. Parties likewise admitted the existence and due execution of the Bill of
Lading covering various steel sheets in coil attached to the Complaint as
Annex A;
3. Parties admitted the existence of the Invoiceissued by Sumitomo
Corporation, a true and faithful copy of which was attached to the
Complaint as Annex B;

6. Insofar as the second cause of action, [ESLI] admitted the existence and
due execution of the document [Bill of Lading Nos. ESLIKSMA002,
Invoice with Nos. KJGE-04-1327-NT/KE2 and Marine Cargo Policy
against all risks on the second shipment] attachedto the Complaint as
Annexes E, F and G;
7. [ATI] admitted the existence of the Bill of Lading together with the
Invoices and Marine Cargo Policy. [It] likewise admitted by [ATI] are the
Turn Over Survey of Bad Order Cargoes attached to the Complaint as
Annexes H, H-1 and J.8
The parties agreed that the procedural issue was whether there was a valid
subrogation in favor of BPI/MS and Mitsui; and that the substantive issues were,
whether the shipments suffered damages, the cause of damage, and the entity liable
for reparation of the damages caused.9 Due to the limited factual mattersof the case,
the parties were required to present their evidence through affidavits and documents.
Upon submission of these evidence, the case was submitted for resolution.10
BPI/MS and Mitsui, to substantiate their claims, submitted the Affidavits of (1)
Mario A. Manuel (Manuel),11 the Cargo Surveyor of Philippine Japan Marine
Surveyors and Sworn Measurers Corporation who personally examined and
conducted the surveys on the two shipments; (2) Richatto P. Almeda, 12 the General
Manager of Calamba Steel who oversaw and examined the condition, quantity, and
quality of the shipped steel coils, and who thereafter filed formal notices and claims
against ESLI and ATI; and (3) Virgilio G. Tiangco, Jr.,13 the Marine Claims
Supervisor of BPI/MS who processed the insurance claims of Calamba Steel. Along
with the Affidavits were the Bills of Lading14 covering the two shipments,
Invoices,15 Notices of Loss of Calamba Steel,16 Subrogation Form,17 Insurance
Claims,18 Survey Reports,19 Turn Over Survey of Bad Order Cargoes20 and Request
for Bad Order Survey.21
ESLI, in turn, submitted the Affidavits of Captain Hermelo M. Eduarte,22 Manager of
the Operations Department of ESLI, who monitored in coordination with ATI the
discharge of the two shipments, and Rodrigo Victoria (Rodrigo),23 the Cargo

Surveyor of R & R Industrial and Marine Services, Inc., who personally surveyed the
subject cargoes on board the vessel as well as the manner the ATI employees
discharged the coils. The documents presented were the Bills of Lading, Secretarys
Certificate24 of PPA, granting ATI the duty and privilege to provide arrastre and
stevedoring services at South Harbor, Port of Manila, Contract for Cargo Handling
Services,25 Damage Report26 and Turn Over Report made by Rodrigo.27 ESLI also
adopted the Survey Reports submitted by BPI/MS and Mitsui.28

In its Decision,40 the Court of Appeals absolved ATI from liability thereby modifying
the decision of the trial court. The dispositive portions reads:

Lastly, ATI submitted the Affidavits of its Bad Order Inspector Ramon Garcia
(Garcia)29 and Claims Officer Ramiro De Vera.30 The documents attached to the
submissions were the Turn Over Surveys of Bad Cargo Order,31Requests for Bad
Order Survey,32 Cargo Gatepasses issued by ATI,33 Notices of Loss/Claims of
Calamba Steel34and Contract for Cargo Handling Services.35

Before this Court, ESLI seeks the reversal of the ruling on its liability.

On 17 September 2006, RTC Makati City rendered a decision finding both the ESLI
and ATI liable for the damages sustained by the two shipments. The dispositive
portion reads: WHEREFORE, judgment is hereby rendered in favor of [BPI/MS and
Mitsui] and against [ESLI Inc.] and [ATI], jointly and severally ordering the latter to
pay [BPI/MS and Mitsui] the following: 1. Actual damages amounting to
US$17,560.48 plus 6% legal interest per annum commencing from the filing of this
complaint, until the same is fully paid;
2. Attorneys fees in a sum equivalent to 20% of the amount claimed;
3. Costs of suit.36
Aggrieved, ESLI and ATI filed their respective appeals before the Court of Appeals
on both questions of fact and law.37
Before the appellate court, ESLI argued that the trial court erred when it found
BPI/MS has the capacity to sue and when it assumed jurisdiction over the case. It
also questioned the ruling on its liability since the Survey Reports indicated that the
cause ofloss and damage was due to the "rough handling of ATIs stevedores during
discharge from vessel to shore and during loading operation onto the trucks."It
invoked the limitation of liability of US$500.00 per package asprovided in
Commonwealth Act No. 65 or the Carriage of Goods by Sea Act (COGSA).38 On the
other hand, ATI questioned the capacity to sue of BPI/MS and Mitsui and the award
of attorneys fees despite its lack of justification in the body of the decision. ATI also
imputed error on the part of the trial court when it ruled that ATIs employees were
negligent in the ruling of the shipments. It also insisted on the applicability of the
provision of COGSA on limitation of liability.39

WHEREFORE, the appeal of ESLI is DENIED, while that of ATI is GRANTED.

The assailed Judgment dated September 17, 2006 of Branch 138, RTC of Makati
City inCivil Case No. 05-108 is hereby MODIFIED absolving ATI from liability and
deleting the award of attorneys fees. The rest of the decision is affirmed. 41

At the outset, and notably, ESLI included among its arguments the attribution of
liability to ATI but it failed to implead the latter as a party to the present petition.
This non-inclusion was raised by BPI/MS and Mitsui as an issue 42 in its
Comment/Opposition43 and Memorandum:44 For reasons known only to [ESLI],it did
not implead ATI as a party respondent in this case when it could have easily done so.
Considering the nature of the arguments raised by petitioner pointing to ATI as solely
responsible for the damages sustained by the subject shipments, it is respectfully
submitted that ATI is an indispensable party in this case. Without ATI being
impleaded, the issue of whether ATI is solely responsible for the damages could not
be determined with finality by this Honorable Court. ATI certainly deserves to be
heard on the issue but it could not defend itself because it was not impleaded before
this Court. Perhaps, this is the reason why [ESLI] left out ATI in this case so that it
could not rebut while petitioner puts it at fault.45
ESLI in its Reply46 put the blame for the non-exclusion of ATI to BPI/MS and
Mitsui:
[BPI/MS and Mitsui] claim that herein [ESLI] did not implead [ATI] as a party
respondent in the Petition for Review on Certiorari it had filed. Herein Petitioner
submits that it is not the obligation of [ESLI] to implead ATI as the same isalready
the look out of [BPI/MS and Mitsui]. If [BPI/MS and Mitsui] believe that ATI should
be made liable, they should have filed a Motion for Reconsideration with the
Honorable Court of Appeals. The fact that [BPI/MS and Mitsui] did not even lift a
finger to question the decision of the Honorable Court of Appeals goes to show that
[BPI/MS and Mitsui] are not interested as to whether or not ATI is indeed liable. 47
It is clear from the exchange that both [ESLI] and [BPI/MS and Mitsui] are aware of
the non-inclusion of ATI, the arrastre operator, as a party to this review of the
Decision of the Court of Appeals. By blaming each other for the exclusion of ATI,
[ESLI] and [BPI/MS and Mitsui] impliedly agree that the absolution of ATI from
liability isfinal and beyond review. Clearly, [ESLI] is the consequential loser. It alone
must bear the proven liability for the loss of the shipment. It cannot shift the blame to

ATI, the arrastreoperator, which has been cleared by the Court of Appeals. Neither
can it argue that the consignee should bear the loss.
Thus confined, we go to the merits of the arguments of ESLI.
First Issue: Liability of ESLI
ESLI bases of its non-liability onthe survey reports prepared by BPI/MS and Mitsuis
witness Manuel which found that the cause of damage was the rough handling on the
shipment by the stevedores of ATI during the discharging operations.48 However,
Manuel does not absolve ESLI of liability. The witness in fact includes ESLI in the
findings of negligence. Paragraphs 3 and 11 of the affidavit of witness Manuel
attribute fault to both ESLI and ATI.
3. The vessel M.V. "EASTERN VENUS" V 22-S carrying the said shipment of 22
coils of various steel sheets arrived at the port of Manila and discharged the said
shipment on or about 11 February 2004 to the arrastre operator [ATI]. I personally
noticed that the 22 coils were roughly handled during their discharging from the
vessel to the pier of [ATI] and even during the loading operations of these coils from
the pier to the trucks that will transport the coils to the consigneess warehouse.
During the aforesaid operations, the employees and forklift operators of [ESLI] and
[ATI] were very negligent in the handling of the subject cargoes.
xxxx
11. The vessel M.V. "EASTERN VENUS" V 25-S carrying the said shipment of 50
coils of various steel sheets arrived at the port of Manila and discharged the said
shipment on or about 21 May 2004 to the arrastre operator [ATI]. I personally
noticed that the 50 coils were roughly handled during their discharging from the
vessel to the pier of [ATI] and even during the loading operations of these coils from
the pier to the trucks that will transport the coils to the consigneess warehouse.
During the aforesaid operations, the employees and forklift operators of [ESLI] and
[ATI] were very negligent in the handling of the subject cargoes.49 (Emphasis
supplied).
ESLI cannot rely only on parts it chooses. The entire body of evidence should
determine the liability of the parties. From the statements of Manuel, [ESLI] was
negligent, whether solely or together with ATI.
To further press its cause, ESLI cites the affidavit of its witness Rodrigo who stated
that the cause of the damage was the rough mishandling by ATIs stevedores.

The affidavit of Rodrigo states that his functions as a cargo surveyor are, (1) getting
hold of a copy of the bill of lading and cargo manifest; (2) inspection and monitoring
of the cargo on-board, during discharging and after unloading from the vessel; and
(3) making a necessary report of his findings. Thus, upon arrival at the South Harbor
of Manila of the two vessels of ESLI on 11 February 2004 and on 21 May 2004,
Rodrigo immediately boarded the vessels to inspect and monitor the unloading of the
cargoes. In both instances, it was his finding that there was mishandling on the part
of ATIs stevedores which he reported as the cause of the damage.50 Easily seen,
however, is the absence of a crucial point in determining liability of either or both
ESLI and ATI lack of determination whether the cargo was in a good order
condition as described in the bills of lading at the time of his boarding. As Rodrigo
admits, it was also his duty to inspect and monitor the cargo on-board upon arrival of
the vessel. ESLI cannot invoke its non-liability solely on the manner the cargo was
discharged and unloaded. The actual condition of the cargoes upon arrival prior to
discharge is equally important and cannot be disregarded. Proof is needed that the
cargo arrived at the port of Manila in good order condition and remained as such
prior to its handling by ATI.
Common carriers, from the nature of their business and on public policy
considerations, are bound to observe extra ordinary diligence in the vigilance over
the goods transported by them. Subject to certain exceptions enumerated under
Article 173451 of the Civil Code, common carriers are responsible for the loss,
destruction, or deterioration of the goods. The extraordinary responsibility of the
common carrier lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them.52
In maritime transportation, a bill of lading is issued by a common carrier as a
contract, receipt and symbol of the goods covered by it.1wphi1 If it has no notation
of any defect ordamage in the goods, it is considered as a "clean bill of lading." A
clean bill of lading constitutes prima facie evidence of the receipt by the carrier of
the goods as therein described.53
Based on the bills of lading issued, it is undisputed that ESLI received the two
shipments of coils from shipper Sumitomo Corporation in good condition at the ports
of Yokohama and Kashima, Japan. However, upon arrival at the port of Manila, some
coils from the two shipments were partly dented and crumpled as evidenced by the
Turn Over Survey of Bad Order Cargoes No. 67982 dated 13 February 200454 and
Turn Over Survey of Bad Order Cargoes Nos. 6836355 and 6836556 both dated 24
May 2004 signed by ESLIs representatives, a certain Tabanao and Rodrigo together
with ATIs representative Garcia. According toTurn Over Survey of Bad Order
Cargoes No. 67982, four coils and one skid were partly dented and crumpled prior to

turnover by ESLI to ATIs possession while a total of eleven coils were partly dented
and crumpled prior to turnover based on Turn Over Survey Bad Order Cargoes Nos.
68363 and 68365.

destruction or deterioration.67 The Code takes precedence as the primary law over the
rights and obligations of common carriers with the Code of Commerce and COGSA
applying suppletorily.68

Calamba Steel requested for a re-examination of the damages sustained by the two
shipments. Based on the Requests for Bad Order Survey Nos. 5826757 and
5825458 covering the first shipment dated 13 and 17 February 2004, four coils were
damaged prior to turnover. The second Request for Bad Order Survey No.
5865859 dated 25 May 2004 also affirmed the earlier findings that elevencoils on the
second shipment were damaged prior to turnover.

The New Civil Code provides that a stipulation limiting a common carriers liability
to the value of the goods appearing in the bill of lading is binding, unless the shipper
or owner declares a greater value.69 In addition, a contract fixing the sum that may be
recovered by the owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances, and has been
fairly and freely agreed upon.70

In Asian Terminals, Inc., v. Philam Insurance Co., Inc.,60 the Court based its ruling on
liability on the Bad Order Cargo and Turn Over of Bad Order. The Receipt bore a
notation "B.O. not yet over to ATI," while the Survey stated that the said steel case
was not opened at the time of survey and was accepted by the arrastre in good order.
Based on these documents, packages in the Asian Terminals, Inc. case were found
damaged while in the custody of the carrier Westwind Shipping Corporation.

COGSA, on the other hand, provides under Section 4, Subsection 5 that an amount
recoverable in case ofloss or damage shall not exceed US$500.00 per package or per
customary freight unless the nature and value of such goods have been declared by
the shipper before shipment and inserted in the bill of lading.

Mere proof of delivery of the goods in good order to a common carrier and of their
arrival in bad order at their destination constitutes a prima faciecase of fault or
negligence against the carrier. If no adequate explanation is given as to how the
deterioration, loss, or destruction of the goods happened, the transporter shall be held
responsible.61 From the foregoing, the fault is attributable to ESLI. While no longer
an issue, it may be nonetheless state that ATI was correctly absolved of liability for
the damage.
Second Issue: Limitation of Liability
ESLI assigns as error the appellate courts finding and reasoning that the package
limitation under the COGSA62is inapplicable even if the bills of lading covering the
shipments only made reference to the corresponding invoices. Noticeably, the
invoices specified among others the weight, quantity, description and value of the
cargoes, and bore the notation "Freight Prepaid" and "As Arranged."63 ESLI argues
that the value of the cargoes was not incorporated in the bills of lading64 and that
there was no evidence that the shipper had presented to the carrier in writing prior to
the loading of the actual value of the cargo, and, that there was a no payment of
corresponding freight.65 Finally, despite the fact that ESLI admits the existence of the
invoices, it denies any knowledge either of the value declared or of any information
contained therein.66
According to the New Civil Code, the law of the country to which the goods are to
be transported shall govern the liability of the common carrier for their loss,

In line with these maritime law provisions, paragraph 13 of bills of lading issued by
ESLI to the shipper specifically provides a similar restriction:
The value of the goods, in calculating and adjusting any claims for which the Carrier
may be liable shall, to avoid uncertainties and difficulties in fixing value, be deemed
to the invoice value of the goods plus ocean freight and insurance, if paid,
Irrespective of whether any other value is greater or less, and any partial loss or
damage shall be adjusted pro rataon the basis of such value; provided, however, that
neither the Carrier nor the ship shall in any event be or become liable for any loss,
non-delivery or misdelivery of or damage or delay to, or in connection with the
custody or transportation of the goods in an amount exceeding $500.00 per package
lawful money of the United States, or in case of goods not shipped in packages, per
customary freight unit, unless the nature of the goods and a valuation higher than
$500.00 is declared in writing by the shipper on delivery to the Carrier and inserted
in the bill of lading and extra freight is paid therein as required by applicable tariffs
to obtain the benefit of such higher valuation. In which case even if the actual value
of the goods per package orunit exceeds such declared value, the value shall
nevertheless be deemed to be the declared value and any Carriers liability shall not
exceed such declared value and any partial loss or damage shall be adjusted pro-rata
on the basis thereof. The Carrier shall not be liable for any loss or profit or any
consequential or special damage and shall have the option of replacing any lost
goods and replacing o reconditioning any damage goods. No oral declaration or
agreement shall be evidence of a value different from that provided therein.71
xxxx

Accordingly, the issue whether or not ESLI has limited liability as a carrier is
determined by either absence or presence of proof that the nature and value of the
goods have been declared by Sumitomo Corporation and inserted in the bills of
lading.
ESLI contends that the invoices specifying the weight, quantity, description and
value of the cargo in reference to the bills of lading do not prove the fact that the
shipper complied with the requirements mandated by the COGSA. It contends that
there must be an insertion of this declaration in the bill of lading itself to fall outside
the statutory limitation of liability.
ESLI asserts that the appellate court erred when it ruled that there was compliance
with the declaration requirement even if the value of the shipment and fact of
payment were indicated on the invoice and not on the bill of lading itself.
There is no question about the declaration of the nature, weight and description of
the goods on the first bill of lading.
The bills of lading represent the formal expression of the parties rights, duties and
obligations. It is the best evidence of the intention of the parties which is to be
deciphered from the language used in the contract, not from the unilateral post facto
assertions of one of the parties, or of third parties who are strangers to the
contract.72Thus, when the terms of an agreement have been reduced to writing, it is
deemed to contain all the terms agreed upon and there can be, between the parties
and their successors in interest, no evidence of such terms other than the contents of
the written agreement.73
As to the non-declaration of the value of the goods on the second bill of lading, we
see no error on the part of the appellate court when it ruled that there was a
compliance of the requirement provided by COGSA. The declaration requirement
does not require that all the details must be written down on the very bill of lading
itself. It must be emphasized that all the needed details are in the invoice, which
"contains the itemized list of goods shipped to a buyer, stating quantities, prices,
shipping charges," and other details which may contain numerous
sheets.74 Compliance can be attained by incorporating the invoice, by way of
reference, to the bill of lading provided that the former containing the description of
the nature, value and/or payment of freight charges isas in this case duly admitted as
evidence.
In Unsworth Transport International(Phils.), Inc. v. Court of Appeals,75 the Court
held that the insertion of an invoice number does not in itself sufficiently and
convincingly show that petitioner had knowledge of the value of the cargo. However,

the same interpretation does not squarely apply if the carrier had been advised of the
value of the goods as evidenced by the invoice and payment of corresponding freight
charges. It would be unfair for ESLI to invoke the limitation under COGSA when the
shipper in fact paid the freight charges based on the value of the goods. In Adams
Express Company v. Croninger,76 it was said: "Neither is it conformable to plain
principles of justice that a shipper may understate the value of his property for the
purpose of reducing the rate, and then recover a larger value in case of loss. Nor does
a limitation based upon an agreed value for the purpose of adjusting the rate conflict
with any sound principle of public policy." Conversely, but for the same reason, it is
unjust for ESLI to invoke the limitation when it is informed that the shipper paid the
freight charges corresponding to the value of the goods.
Also, ESLI admitted the existence and due execution of the Bills of Lading and the
Invoice containing the nature and value of the goods on the second shipment. As
written in the Pre-Trial Order,77 the parties, including ESLI, admitted the existence
and due execution of the two Bills of Lading78 together with the Invoice on the
second shipment with Nos. KJGE-04-1327-NT/KE279 dated 12 May 2004. On the
first shipment, ESLI admitted the existence of the Invoice with Nos. KJGE-031228NT/KE380 dated 2 February 2004.
The effect of admission of the genuineness and due execution of a document means
that the party whose signature it bears admits that he voluntarily signed the document
or itwas signed by another for him and with his authority.81
A review of the bill of ladings and invoice on the second shipment indicates that the
shipper declared the nature and value of the goods with the corresponding payment
of the freight on the bills of lading. Further, under the caption "description of
packages and goods," it states that the description of the goods to be transported as
"various steel sheet in coil" with a gross weight of 383,532 kilograms (89.510
M3).On the other hand, the amount of the goods is referred in the invoice, the due
execution and genuineness of which has already been admitted by ESLI, is
US$186,906.35 as freight on board with payment of ocean freight of US$32,736.06
and insurance premium of US$1,813.17. From the foregoing, we rule that the nonlimitation of liability applies in the present case.
We likewise accord the same binding effect on the contents of the invoice on the first
shipment.1wphi1 ESLI contends that what was admitted and written on the pre-trial
order was only the existence of the first shipment invoice but not its contents and
due execution. It invokes admission of existence but renounces any knowledge of the
contents written on it.82

Judicial admissions are legally binding on the party making the admissions. Pre-trial
admission in civil cases is one of the instances of judicial admissions explicitly
provided for under Section 7,Rule 18 of the Rules of Court, which mandates that the
contents of the pre-trial order shall control the subsequent course of the action,
thereby, defining and limiting the issues to be tried. In Bayas v. Sandiganbayan,83 this
Court emphasized that:

WHEREFORE, we DENY the Petition for Review on Certiorari. The Decision dated
31 January 2008 and Resolution dated 5 May 2008 of the Second Division of the
Court of Appeals in CA-G.R. CV. No. 88744 are hereby AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

Once the stipulations are reduced into writing and signed by the parties and their
counsels, they become binding on the parties who made them. They become judicial
admissions of the fact or facts stipulated. Even if placed at a disadvantageous
position, a party may not be allowed to rescind them unilaterally, it must assume the
consequences of the disadvantage.84
Moreover, in Alfelor v. Halasan,85 this Court declared that:
A party who judicially admits a fact cannot later challenge that fact as judicial
admissions are a waiver of proof; production of evidence is dispensed with. A
judicial admission also removes an admitted fact from the field of controversy.
Consequently, an admission made in the pleadings cannot be controverted by the
party making such admission and are conclusive as to such party, and all proofs to
the contrary or inconsistent there with should be ignored, whether objection is
interposed by the party or not. The allegations, statements or admissions contained in
a pleading are conclusive as against the pleader. A party cannot subsequently take a
position contrary of or inconsistent with what was pleaded.86 (Citations omitted)
The admission having been made in a stipulation of facts at pre-trial by the parties, it
must be treated as a judicial admission. Under Section 4, of Rule 129 of the Rules of
Court, a judicial admission requires no proof.87
It is inconceivable that a shipping company with maritime experience and resource
like the ESLI will admit the existence of a maritime document like an invoice even if
it has no knowledge of its contents or without having any copy thereof.
ESLI also asserts that the notation "Freight Prepaid" and "As Arranged," does not
prove that there was an actual declaration made in writing of the payment of freight
as required by COGSA. ESLI did not as it could not deny payment of freight in the
amount indicated in the documents. Indeed, the earlier discussions on ESLI's
admission of the existence and due execution of the invoices, cover and disprove the
argument regarding actual declaration of payment. The bills of lading bore a notation
on the manner of payment which was "Freight Prepaid" and "As Arranged" while the
invoices indicated the amount exactly paid by the shipper to ESLI.

THIRD DIVISION
G.R. No. 131445

May 27, 2004

AMADO G. PEREZ (DECEASED) REPRESENTED BY HIS WIDOW

GUILLERMA T. PEREZ, MARIO S. FRANCISCO, RAFAEL P. ARGAME,
MIRASOL V. MENDOZA,GLORIA S. GONZALVO AND MARIA FE V.
BOMBASE, petitioners,
vs.
OFFICE OF THE OMBUDSMAN, MAYOR IGNACIO R. BUNYE, CARLOS
G. DOMINGUEZ, ROGELIO P. MADRIAGA, RECTO CORONADO,
TEODORA A. DIANG, TOMAS M. OSIAS, REYNALDO CAMILON AND
BENJAMIN BULOS, respondents.
DECISION
CORONA, J.:
This is an appeal by certiorari under Rule 45 from the November 13, 1997
resolution1 of the Court of Appeals (CA) in CA G.R. SP No. 45127, dismissing
petitioners motion for reconsideration of its September 9, 1997 resolution2 which in
turn dismissed, for lack of jurisdiction, petitioners petition
for certiorari and mandamus. The petition questioned the Office of the
Ombudsmans April 11, 1997 dismissal of their criminal complaint against Mayor
Ignacio R. Bunye.
Petitioners, members of the Kilusang Bayan ng mga Magtitinda ng Bagong
Pamilihang Bayan ng Muntinlupa, Inc.(KBMBPM), instituted two complaints at the
Office of the Ombudsman (docketed as OMB-0-89-0983 and OMB-0-89-1007)
against several respondents, one of whom was then Mayor Ignacio R. Bunye, for
violation of RA 3019 (also known as the "Anti-Graft and Corrupt Practices Act").
Respondents allegedly destroyed the doors of the KBMBPM office while serving on

petitioners the Take-Over Order of the KBMBPM management dated October 28,
1998 issued by then Agriculture Secretary Carlos G. Dominguez.
In disposing of said complaints on April 11, 1997, the Office of the Ombudsman
issued a resolution (hereinafter, "Ombudsman resolution")3 excluding respondent
Bunye from the criminal indictment. The petitioners assailed the exclusion in the CA
on September 1, 1997 through an original petition for certiorari and mandamus. The
CA, however, dismissed it for lack of jurisdiction supposedly in accordance with
Section 27 of RA 6770 (also known as the "Ombudsman Act of 1989"). Citing Yabut
vs. Ombudsman,4 Alba vs. Nitorreda,,,,,,,5 and Angchangco vs.Ombudsman,6 the CA
likewise denied petitioners motion for reconsideration.
Hence, this petition for review.
The CA was correct in dismissing the petition for certiorari and mandamus.
It is the nature of the case that determines the proper remedy to be filed and the
appellate court where such remedy should be filed by a party aggrieved by the
decisions or orders of the Office of the Ombudsman. If it is anadministrative case,
appeal should be taken to the Court of Appeals under Rule 43 of the Rules of
Court.7 If it is acriminal case, the proper remedy is to file with the Supreme Court an
original petition for certiorari under Rule 65.8
We find that, although the CA was correct in dismissing the petition for certiorari, it
erroneously invoked as ratio decidendi Section 27 of RA 67709 which applies in
administrative cases only, not criminal cases,10 such as the graft and corruption
charge at bar. In our en banc decision in Fabian vs. Desierto,11 which is still
controlling, we held that Section 27 applies only whenever an appeal
by certiorari under Rule 45 is taken from a decision in an administrative disciplinary
action. Nevertheless, we declared Section 27 unconstitutional for expanding the
Supreme Courts appellate jurisdiction without its advice and consent. We thus held
that all appeals from decisions of the Office of the Ombudsman in administrative
disciplinary cases should be taken to the Court of Appeals under Rule 43 of the 1997
Rules of Court.
As the present controversy pertained to a criminal case, the petitioners were correct
in availing of the remedy of petition for certiorari under Rule 65 but they erred in
filing it in the Court of Appeals. The procedure set out inKuizon vs.
Ombudsman12 and Mendoza-Arce vs. Ombudsman,13 requiring that petitions
for certiorari questioning the Ombudsmans orders or decisions in criminal cases
should be filed in the Supreme Court and not the Court of Appeals, is still the
prevailing rule.14

But even if the petition for certiorari had been filed in this Court, we would have
dismissed it just the same. First, petitioners should have filed a motion for
reconsideration of the Ombudsman resolution as it was the plain, speedy and
adequate remedy in the ordinary course of law, not filing a petition
for certiorari directly in the Supreme Court. Second, the Office of the Ombudsman
did not act without or in excess of its jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the Ombudsman resolution.
Grave abuse of discretion implies a capricious and whimsical exercise of judgment
tantamount to lack of jurisdiction. In other words, the exercise of power is in an
arbitrary or despotic manner by reason of passion or personal hostility. It must be so
patent and gross as to amount to an evasion of positive duty or a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law.15
In this case, there was no grave abuse of discretion on the part of the Office of the
Ombudsman in dismissing the complaint against respondent Bunye upon the factual
finding that:
xxx

xxx

xxx

Indeed no evidence is shown in the record that respondent Mayor Bunye

specifically participated in the violent implementation of Secretary
Dominguez Order of October 28, 1988. It was not shown with certainty by
complainant that the alleged presence of respondent Mayor Bunye at the
scene of the incident was an active participation thereof by the latter.
On the other hand, if the alleged presence of the respondent Mayor Bunye at the
scene were really true, such would not be improper because of the provision of
Article 87, par. 2 (VI) of the Local [G]overnment Code which states:
"x x x call upon the appropriate law enforcement agencies to
restore disorder, riot, lawless violence,rebellion or sedition or to apprehend
violators of the law when public interest so requires, and the municipal
police force are inadequate to cope with the situation or the violators."
(underlining supplied)
Anent the alleged letter dated August 8, 1988 of respondent Mayor Bunye,
the same seems only a request for the suspension of complainant. He did
not take it upon himself to issue any suspension of complainant. At that
point in time, the respondent Mayor Bunye reasonably believed that the
Order of Secretary Dominguez was valid. Besides, the facts and the
evidence on record do not show any interest personal or otherwise on the

part of respondent Mayor Bunye in the implementation of Secretary

Dominguez Order. Accordingly, the exclusion of respondent Mayor Bunye
from the criminal charge and the dismissal of the complaint against him are
in order.
Furthermore, if at the instance of complaint, respondents (sic) Secretary
Dominguez whose Order dated October 28, 1988 was questioned by the
complainant and Atty. Rogelio Madriaga, who allegedly orchestrated the
implementation of the said Order were dropped from the complaint, how
can respondent Bunye be liable for the same act, if as alleged, he was
merely standing in front of the KBS Building, New Muntinlupa Market?
It will be noted that at the time of the alleged implementation of the Order
on October 29, 1988 and the take-over of the Management and operation of
the KBMBPM cooperative, respondent Bunye apparently believed that the
said Order of Secretary Dominguez was valid.
Considering the earlier approval of the Honorable Ombudsman on the
memorandum of then SPO III, now Director Wendell E. Barreras-Sulit as
reiterated in the memorandum of the Honorable Assistant to the
Ombudsman re: the exclusion of respondent Bunye from criminal
indictment, undersigned respectfully concurs with the same.

xxx

xxx

x x x.16

We have consistently refrained from interfering with the investigatory and

prosecutorial powers of the Ombudsman absent any compelling reason. 17 This policy
is based on constitutional, statutory and practical considerations. We are mindful that
the Constitution and RA 6770 endowed the Office of the Ombudsman with a wide
latitude of investigatory and prosecutorial powers, virtually free from legislative,
executive or judicial intervention, in order to insulate it from outside pressure and
improper influence.18 Moreover, a preliminary investigation is in effect a realistic
judicial appraisal of the merits of the case. Sufficient proof of the guilt of the accused
must be adduced so that when the case is tried, the trial court may not be bound, as a
matter of law, to order an acquittal.19 Hence, if the Ombudsman, using professional
judgment, finds the case dismissible, the Court shall respect such findings, unless
clothed with grave abuse of discretion.20 Otherwise, the functions of the courts will
be grievously hampered by innumerable petitions assailing the dismissal of
investigatory proceedings conducted by the Office of the Ombudsman with regard to
complaints filed before it. In much the same way, the courts will be swamped with
cases if they will have to review the exercise of discretion on the part of fiscals or
prosecuting attorneys each time the latter decide to file an information in court or
dismiss a complaint by a private complainant.21
WHEREFORE, the petition is hereby DENIED for lack of merit.
SO ORDERED.