G.R. No.

205179
July 18, 2014
GERVE MAGALLANES, Petitioner,
vs.
PALMER ASIA, INC., Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review that seeks to set aside the Decision1 dated 17 September 2012 of the Court of Appeals (CA) in CA-G.R. SP No. 111314 and the
Resolution2 dated 14 January 2013 which denied the Motion for Reconsideration dated 25 September 2012.
The Facts
Andrews International Product, Inc. (Andrews) is a domestic corporation that manufactures and sells fire extinguishers. Gerve Magallanes (Magallanes) was employed
by Andrews as a Sales Agent.3
Magallanes negotiated with three (3) prospective buyers of Andrews fire extinguishers: Cecile Arboleda, Jose Cruz, and Proceso Jarobilla, who all issued checks
payable to Andrews. These checks, however, bounced.4
Angel Palmiery (Palmiery), the President of Andrews, returned the bum checks to Magallanes. Desirous of obtaining his accrued commissions, and upon the advice of
Palmiery, Magallanes signed Sales Invoices covering the fire extinguishers that were intended to be sold to the prospective buyers, and he also issued five (5) checks
covering the purchase price of the items:
Bank

Check
number

Date of check

Date deposited

Amount

Citytrust Banking
Corp.

000721

28 July 1993

25 January 1994

P17,740.00

Citytrust Banking
Corp.

000743

2 September 1993

25 January 1994

P16,440.00

Prudential Bank

001579

7 January1994

7 January 1994

P49,230.00

Prudential Bank

001582

9 January1994

18 January 1994

P19,880.00

Prudential Bank

001585

15 January 1994

17 January 1994 P

Total

45,440.00
P148,800.20

However, Magallanes checks weredishonored upon presentment to the bank.

Sometime in 1995, Andrews and another corporation, Palmer Asia, Inc. (Palmer), entered into an agreement whereby all the business of Andrews was going to be
handled byPalmer. As explained by Palmer:
a change of name was in order to appeal to a bigger and more sophisticated market. Hence, Palmer Asia was born. Being a family corporation and since the change of
name was more of a marketing strategy, all legal niceties were dispensed with. Andrews x x x thus ceased to be active in the business. 5
Thus, Andrews remained to be existing, but not operational. It was neither dissolved nor liquidated. There was no transfer of assets and liabilities in the legal sense.
Palmer simply took over the business of Andrews.6
According to Magallanes, Andrews demanded payment of the value of the checks. Since the demands wereunheeded, Magallanes was charged with several counts of
violation of Batas Pambansa Bilang 22 (B.P. 22) under several informations all dated 28 March 1997. The cases were docketed as Criminal Case Nos. 211340-44 in
Branch 62 of the Metropolitan Trial Court of Makati City (MeTC Branch 62). Palmiery was authorized to file suiton behalf of Andrews. 7 Upon being arraigned on 13
November 1997, Magallanes pled not guilty.8
On 16 March 1998, Escudero Marasigan Sta. Ana & E.H. Villareal (EMSAVILL), the counsel of Andrews, entered its appearance as counsel for Palmer in Criminal
Case Nos. 217336-44 entitled Palmer Asia, Inc. v. Gerve Magallanes, filed before Branch 67 ofthe Metropolitan Trial Court of Makati City (MeTC Branch 67). The
docket numbers as stated in the Entry of Appearance differ fromthe docket numbers of the cases filed by Andrews. Also, the Entry of Appearance was filed before
Branch 67 of the MeTC and not Branch 62, where the cases were previously filed. Furthermore, there was no mention of the relationship between Andrews and Palmer.
Lastly, there was no registry receipt or stamp or signature or any other mark which could indicate that Magallanes was furnished a copy of the document. 9
On 10 August 2003, Palmiery appeared before the MeTC Branch 62 and explained that Andrews transferred its assets, and relinquished control of its operations to
Palmer. Thus, on 16September 2004, Magallanes filed an Omnibus Motion to Disqualify PrivateProsecutor and to Strike Out Testimony of Angel Palmiery (Omnibus
Motion). According to Magallanes, since the assets and credits of Andrews were transferred to Palmer, the real party in interest in this case is Palmer and not Andrews.
Therefore, the criminal case should have been instituted by Palmer. Magallanes also asserted that:
[i]ndeed the private prosecutor was hired by Palmer x x x solely for its own account and not by Andrews x x x for otherwise how can the Private Prosecutor explain the
alleged direct payment of Palmer x x x of its attorneys fees in the present case. The problem however is that Palmer x x x has no right to participate in the present case
as the recitals of the information refer to Andrews x x x. Hence, the private prosecutor should be thereupon disqualified x x x. 10
Thus, Palmer filed its Opposition to Magallanes motion, claiming that:
3.01.4 As a marketing strategy, Andrews Internationals business thus operated under the banner of Palmer Asia. Palmer Asia had exactly the same officers, occupied the
samebusiness office, retained all its employees and agents, had the same customers and sold the same products.
xxxx
3.01.6 Seen another way, Palmer Asiacan be seen as in effect, for purposes of this litigation, an agent of Andrews International. x x x [A]n agency can be constituted in
any form, even by sheer implication derived from the conduct of the parties.11
In its Joint Order dated 8 March 2005, the MeTC Branch 62 denied the motion filed by Magallanes for lack of merit. 12 It also acquitted Magallanes, but held him civilly
liable.The dispositive portion of the Joint Decision13 dated 10 December 2008 reads:
WHEREFORE, foregoing considered, the accused GERVE MAGALLANES is ACQUITTED of the offense charged for lack of proof beyond reasonable doubt in
Criminal Cases No. 211340, 211341, 211341, 211342, 211343 and 211344. He is ordered to pay the private complainant, the corresponding face value of the checks
subject of the Criminal Cases No. 211340, 211341, 211342, 211343 and 211344, by way of civil liability, with 12% interest per annum counted from June 10, 1994,
until the amount shall have been paid; attorneys fees at 10% of the total face value of the subject checks; and to pay the costs.
In case of execution of civil liability, the Clerk of Court is directed to determine and enforce collection of any unpaid docket or other lawful fees in accordance with
Rule 111, Sec. 1-b in relation to Rule 141.
SO ORDERED.14
Magallanes filed a Partial Appeal before Branch 61 of the Regional Trial Court of Makati (RTC Branch 61). According to Magallanes, the checks were not issued for
valuable consideration since the Sales Invoices, as well as the transactions reflectedin the invoices were simulated and fictitious. He also claimed that as a Sales Agent,
he is not liable for the bum checks issued by the prospective buyers of Andrews.15 Andrews, as the private complainant mentioned in the Joint Decision of MeTC
Branch 62, did not file any appeal.

When the parties were required by the RTC Branch 61 to submit their respective memoranda, the memorandum for the complainant was filed by Palmer, and not
Andrews. The memorandum was prepared by EMSAVILL16 and received by Magallanes on 9 March 2009.17
The RTC Branch 61, in its Decision18 dated 25 May 2009, held that Magallanes was not civilly liable for the value of the checks because "the x x x complaining
juridical entity has not fully established the existence of a debt by Mr. Magallanes in its favor." 19 Thus, Palmer filed a motion for reconsideration on 15 June
2009,20 which was denied by the RTC in its Resolution dated 14 October 2009.21 Andrews did not file a motion for reconsideration.
Thus, Palmer filed a petition for review under Rule 42 of the Rules of Civil Procedure before the CA. It alleged that the RTC erred in reversing the decision of the
MeTC Branch 62 and absolving Magallanes from civil liability. Andrews did not file a petition for review with the CA.
Magallanes then filed his Comments to Petition for Review (ad cautelam) with Motion to Dismiss Due to Finality of Judgment, wherein he alleged that:
The Decision of the Regional Trial Court of Makati City dated 25 May 2003 has already attained finalitythere being no appeal interposed by Andrews International
Products, Inc.
Petitioner Palmer Asia, Inc. is not, can not and has never been a party plaintiff litigant in the civil aspect of Criminal Case Nos. 211340, 211341, 211342, 211343,
21134[4] before the Metropolitan Trial Court of Makati, Branch 62 for alleged violation of Batas [Pambansa] Bilang 22 and in the appealed Criminal Cases 09-031 to
035 [before the] Regional Trial Court of Makati City, Branch 61.22
The Ruling of the CA
The CA ruled against Magallanes. It held that Magallanes issued the checks for a consideration because hederived pecuniary benefit from it (collection of accrued
commissions). According to the court a quo:
The Supreme Court [has] held thatupon issuance of a check, in the absence of evidence to the contray, it is presumed that the same was issued for valuable consideration
which may consist either in some right, interest, profit or benefit accruing to the party who makes the contract, or some forebearance, detriment, loss or some
responsibility, to act, or labor, or service given, suffered or undertaken by the other side. Under the Negotiable Instruments Law, it is presumed that every party to an
instrument acquires the same for a consideration or for value. In the instant case, respondent failed topresent convincing evidence to overthrow the presumption and
prove that the checks were indeed issued without valuable consideration. In fact, respondent categorically admitted that he issued the subject bum checks in order for
him to collect his pending commissions with petitioner.23
Aggrieved, Magallanes then filed the instant petition before this Court.
Issues
The petition alleges that the CA erred in not dismissing Palmers petition for review under Rule 42 based on lack of jurisdiction and finality of judgment of the RTCs
Joint Decision24 and in ruling that Magallanes failed to rebut the presumption of consideration in the issuance of the checks. 25 The Ruling of this Court
We grant the petition. The RTC Decision absolving Magallanes from civil liability has attained finality, since no appeal was interposed by the private complainant,
Andrews. WhilePalmer filed a petition for review before the CA, it is not the real party in interest; it was never a party to the proceedings at the trial court.
Under our procedural rules, "a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-ininterest, hence grounded on failure to
state a cause of action."26 In the instant case, Magallanes filed a motion to dismiss in accordance with the Rules of Court, wherein he claimed that:
x x x the obvious and only real party in interest in the filing and prosecution of the civil aspect impliedlyinstituted with x x x the filing of the foregoing Criminal Cases
for B.P. 22 is Andrews International Products, Inc.
The alleged bounced checks issued by x x x Magallanes were issued payable in the name of Andrews International Products, Inc. The [n]arration of [facts] in the several
Informations for violation of B.P. 22 filed against Magallanes solely mentioned the name of Andrews International Products, Inc. 27
The real party in this case is Andrews, not Palmer. Section 2 of Rule 3 of the Rules of Court provides: Sec. 2.Parties in interest. A real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every
action must be prosecuted or defended in the name of the real party in interest.
In Goco v. Court of Appeals,28 we explained that:
This provision has two requirements: 1) to institute an action, the plaintiff must be the real party in interest; and 2) the action must be prosecuted in the name of the real
party in interest. Interest within the meaning of the Rules of Court means material interest or an interest in issue to be affected by the decree or judgment of the case, as
distinguished from mere curiosity about the question involved. One having no material interest to protect cannot invoke the jurisdiction of the court as the plaintiff in an
action.
Parties who are not the real parties in interest may be included in a suit in accordance with the provisions of Section 3 of Rule 3 of the Rules of Court:
Sec. 3. Representatives as parties. Where the action is allowed to be prosecuted or defended by a representative or someone acting in a fiduciary capacity, the
beneficiary shall be included in the title of the case and shall be deemed to be the real party in interest. A representative may be a trustee of an express trust, a guardian,
an executor or administrator, or a party authorizedby law or these Rules. An agent acting in his own name and for the benefit of an undisclosed principal may sue or be
sued without joining the principal except when the contract involves things belonging to the principal.
The CA erred in stating that Palmer and Andrews are the same entity.29 These are two separate and distinct entities claiming civil liability against Magallanes. Andrews
was the payee of the bum checks, and the former employer of Magallanes. It filed the complaint for B.P. 22 before MeTC Branch 62. Thus when the MeTC Branch 62
ordered Magallanes to "pay the private complainant the corresponding face value of the checks x x x", 30 it was referring to Andrews, not Palmer.
Palmer, on the other hand, was first mentioned in an Entry of Appearance filed by its counsel EMSAVILL (also the counsel of Andrews) before MeTC Branch 67 in
connection with Palmer Asia, Inc. v. Gerve Magallanes.Palmer also filed the Memorandum required by the RTC.
Although Andrews relinquished control of its business to Palmer, it was never dissolved and thus remained existing. This was stated in Palmers Comment and
Opposition.31 Quoting the Order dated 8 March 2005 of the MeTC Branch 62 denying Magallanes Omnibus Motion, Palmer explained that:
Under the Corporation Code, specifically Sections 117, 118 120 and 121, a corporation can only be dissolved in two ways, voluntary and involuntary. In the case of
Andrews International, no document was presented that majority of its Board of Directors passed a [r]esolution terminationg its corporate life. No complaint was also
filed with the Securities and Exchange Commission to involuntarilyterminate the same, thus, for all intents and purposes, it is still existing although not
operational.32 (Emphasis in the original)
Given the foregoing facts, it is clear that the real party in interest here is Andrews. Following the Rules of Court, the action should be in the name of Andrews. As
previously mentioned, Andrews instituted the action before the MeTC Branch 62 but it was Palmer which filed a petition for review before the CA. In fact, the case at
the CA was entitled Palmer Asia, Inc. v. Gerve Magallanes.
In NM Rothschild & Sons (Australia) Limited v. Lepanto Consolidated Mining Company,33 NM Rothschild changed its name to Investec Australia Limited, in
accordance with Australian law, pending resolution of its petition before this Court. Thus, when we required the parties to file memoranda, NM Rothschild referred to
itself as Investec Australia Limited (formerly "NM Rothschild & Sons [Australia] Limited"). Lepanto sought the dismissal of the case because the petition was not filed
by the real party in interest. We held that:
[The] submissions of petitioner on the change of its corporate name [are] satisfactory and [we] resolve not to dismiss the present Petition for Review on the ground of
not being prosecuted under the name of the real party in interest. While we stand by our pronouncement in Philips Exporton the importance of the corporate name to the
very existence of corporations and the significance thereof in the corporations right to sue, we shall not go so far as to dismiss a case filed by the proper party using its
former name when adequate identification is presented. A real party in interest isthe party who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. There is no doubt in our minds thatthe party who filed the present Petition, having presented sufficient evidence of its identity and being
represented by the same counsel as that of the defendant in the case sought to be dismissed, is the entity that will be benefited if this Court grants the dismissal prayed
for.34
This case is different, however, because it involves two separate and distinct entities. The corporation thatinitiated the complaint for B.P. 22 is different from the
corporation that filed the memorandum at the RTC and the petition for review before the CA. It appears that Palmer is suing Magallanes in its own right, not as agent of
Andrews, the real party in interest.

Even assuming arguendothat Palmer is correct in asserting that it is the agent of Andrews, the latter should have been included in the title of the case, in accordance
withprocedural rules.
Admittedly, in his Omnibus Motion filed before the MeTC Branch 62, Magallanes concluded differently sayingthat the real party in interest is Palmer and not Andrews.
This conclusion was based on Palmierys testimony dated 10 August 2003 that Andrews transferred all its "assets and credits" to Palmer.35
Procedural rules forbid parties tochange the theory of the case on appeal. In Bote v. Spouses Veloso, 36 we defined the theory of the case as:
[a] comprehensive and orderly mental arrangement of principle and facts, conceived and constructed for the purpose of securing a judgment or decree of a court in favor
of a litigant; the particular line of reasoning of either party to a suit, the purpose being to bring together certain facts of the case in a logical sequence and to correlate
them in a way that produces in the decision makers minda definite result or conclusion favored by the advocate.
The rationale for this rule was discussed in the earlier case of Goyanko, Jr. v. United Coconut Planters Bank: 37
[Changing the theory of the case] violates basic rules of fair play, justice and due process.1wphi1 Our rulings are clear - "a party who deliberately adopts a certain
theory upon which the case was decided by the lower court will not be permitted to change [it] on appeal"; otherwise, the lower courts will effectively be deprived of
the opportunity todecide the merits of the case fairly. Besides, courts of justice are devoid of jurisdiction to resolve a question not in issue.
However, the change in Magallanesposture was due to the confusing testimony of Palmiery. We quote below portions of Palmierys testimony dated 16 September
2004, the same date the Omnibus Motion was filed:
Atty. Bermudez: Mr. Palmiery, the last hearing you undertook to bring before this Court the Deed of Assignment and Liabilities of Andrews to Palmer Asia, do you have
it with you now?
A: No, Sir.
Q: Why?
A: There is no assignment.
Q: There was no assignment?
A: Yes, because it was mentioned by our lawyer a while ago it was not a legal transfer, it was a marketing transfer because the owners, the office, the line of business
are exactly the same.38 (Emphasis supplied)
EMSAVILL, counsel for Palmer and Andrews, even clarified in their Opposition to Magallanes' Omnibus Motion that:
x x x [A]ccused loses sight of the fact that Mr. Palmiery is an ordinary layman, not versed with the technicalities of the law. Expectedly, ordinary laymen, such as Mr.
Palmiery, do not fully appeciate and understand the legal implications of x x x technicaJ and legal term[s] such as "transfer of assets and liabilities." 39
Thus, since Magallanes timely filed a motion to dismiss based on valid grounds, we rule that the CA erred in denying the said motion.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated 17 September 2012 and the Resolution dated 14 January 2013 are hereby
REVERSED and SET ASIDE. The Decision of the Makati Regional Trial Court, Branch 61, is hereby REINSTATED.
SO ORDERED.

G.R. No. 168979

December 2, 2013

REBECCA PACAA-CONTRERAS and ROSALIE PACAA, Petitioners,

vs.
ROVILA WATER SUPPLY, INC., EARL U KOKSENG, LILIA TORRES, DALLA P. ROMANILLOS and MARISSA GABUYA, Respondents.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari1 under Rule 4 of the Rules of Court seeking the reversal of the decision2 dated January 27, 2005 and the
resolution3 dated June 6, 2005 of the Courts of Appeals (CA) in CA-G.R. SP No. 71551. The CA set aside the orders dated February 28, 2002 4 and April 1, 20025 of the
Regional Trial Court (RTC), Branch 8, Cebu City, which denied the motion to dismiss for reconsideration respectively, of respondents Rovila Water Supply, Inc.
(Rovilla, Inc.), Earl U. Kokseng, Lialia Torres, Dalla P. Romanillos and Marissa Gabuya.
THE FACTUAL ANTECEDENTS
Petitioners Rebecca Pacaa-Contreras and Rosalie Pacaa, children of Lourdes Teves Pacaa and Luciano Pacaa, filed the present case against Rovila Inc., Earl, Lilia,
Dalla and Marisa for accounting and damages.6
The petitioners claimed that their family has long been known in the community to be engaged in the water supply business; they operated the "Rovila Water Supply"
from their family residence and were engaged in the distribution of water to customers in Cebu City. The petitioners alleged that Lilia was a former trusted employee in
the family business who hid business records and burned and ransacked the family files. Lilia also allegedly posted security guards and barred the members of the
Pacaa family from operating their business. She then claimed ownership over the family business through a corporation named "Rovila Water Supply, Inc." (Rovila
Inc.) Upon inquiry with the Securities and Exchange Commission (SEC), the petitioners claimed that Rovila Inc. was surreptitiously formed with the respondents as the
majority stockholders. The respondents did so by conspiring with one another and forming the respondent corporation to takeover and illegally usurp the family
business registered name.7
In forming the respondent corporation, the respondents allegedly used the name of Lourdes as one of the incorporators and made it appear in the SEC documents that
the family business was operated in a place other than the Pacaa residence. Thereafter, the respondents used the Pacaa familys receipts and the deliveries and sales
were made to appear as those of the respondent Rovila Inc. Using this scheme, the respondents fraudulently appropriated the collections and payments. 8
The petitioners filed the complaint in their own names although Rosalie was authorized by Lourdes through a sworn declaration and special power of attorney (SPA).
The respondents filed a first motion to dismiss on the ground that the RTC had no jurisdiction over an intra-corporate controversy.9

The RTC denied the motion. On September 26, 2000, Lourdes died10 and the petitioners amended their complaint, with leave of court, on October 2, 2000 to reflect this
development.11
They still attached to their amended complaint the sworn declaration with SPA, but the caption of the amended complaint remained the same. 12
On October 10, 2000, Luciano also died.13
The respondents filed their Answer on November 16, 2000.14
The petitioners sister, Lagrimas Pacaa-Gonzales, filed a motion for leave to intervene and her answer-in-intervention was granted by the trial court. At the subsequent
pre-trial, the respondents manifested to the RTC that a substitution of the parties was necessary in light of the deaths of Lourdes and Luciano. They further stated that
they would seek the dismissal of the complaint because the petitioners are not the real parties in interest to prosecute the case. The pre-trial pushed through as scheduled
and the RTC directed the respondents to put into writing their earlier manifestation. The RTC issued a pre-trial order where one of the issues submitted was whether the
complaint should be dismissed for failure to comply with Section 2, Rule 3 of the Rules of Court which requires that every action must be prosecuted in the name of the
real party in interest.15
On January 23, 2002,16 the respondents again filed a motion to dismiss on the grounds, among others, that the petitioners are not the real parties in interest to institute
and prosecute the case and that they have no valid cause of action against the respondents.
THE RTC RULING
The RTC denied the respondents motion to dismiss. It ruled that, save for the grounds for dismissal which may be raised at any stage of the proceedings, a motion to
dismiss based on the grounds invoked by the respondents may only be filed within the time for, but before, the filing of their answer to the amended complaint. Thus,
even granting that the defenses invoked by the respondents are meritorious, their motion was filed out of time as it was filed only after the conclusion of the pre-trial
conference. Furthermore, the rule on substitution of parties only applies when the parties to the case die, which is not what happened in the present case. 17
The RTC likewise denied the respondents motion for reconsideration.18
The respondents filed a petition for certiorari under Rule 65 of the Rules of Court with the CA, invoking grave abuse of discretion in the denial of their motion to
dismiss. They argued that the deceased spouses Luciano and Lourdes, not the petitioners, were the real parties in interest. Thus, the petitioners violated Section 16, Rule
3 of the Rules of Court on the substitution of parties.19
Furthermore, they seasonably moved for the dismissal of the case20 and the RTC never acquired jurisdiction over the persons of the petitioners as heirs of Lourdes and
Luciano.21
THE CA RULING
The CA granted the petition and ruled that the RTC committed grave abuse of discretion as the petitioners filed the complaint and the amended complaint as attorneysin-fact of their parents. As such, they are not the real parties in interest and cannot bring an action in their own names; thus, the complaint should be dismissed 22pursuant
to the Courts ruling in Casimiro v. Roque and Gonzales.23
Neither are the petitioners suing as heirs of their deceased parents. Pursuant to jurisprudence, 24 the petitioners should first be declared as heirs before they can be
considered as the real parties in interest. This cannot be done in the present ordinary civil case but in a special proceeding for that purpose. The CA agreed with the
respondents that they alleged the following issues as affirmative defenses in their answer: 1) the petitioners are not the real parties in interest; and 2) that they had no
legal right to institute the action in behalf of their parents.25
That the motion to dismiss was filed after the period to file an answer has lapsed is of no moment. The RTC judge entertained it and passed upon its merit. He was
correct in doing so because in the pre-trial order, one of the submitted issues was whether the case must be dismissed for failure to comply with the requirements of the
Rules of Court. Furthermore, in Dabuco v. Court of Appeals, 26 the Court held that the ground of lack of cause of action may be raised in a motion to dismiss at
anytime.27
The CA further ruled that, in denying the motion to dismiss, the RTC judge acted contrary to established rules and jurisprudence which may be questioned via a petition
for certiorari. The phrase "grave abuse of discretion" which was traditionally confined to "capricious and whimsical exercise of judgment" has been expanded to include
any action done "contrary to the Constitution, the law or jurisprudence[.]" 28
THE PARTIES ARGUMENTS
The petitioners filed the present petition and argued that, first, in annulling the interlocutory orders, the CA unjustly allowed the motion to dismiss which did not
conform to the rules.29

Specifically, the motion was not filed within the time for, but before the filing of, the answer to the amended complaint, nor were the grounds raised in the answer.
Citing Section 1, Rule 9 of the Rules of Court, the respondents are deemed to have waived these grounds, as correctly held by the RTC. 30
Second, even if there is non-joinder and misjoinder of parties or that the suit is not brought in the name of the real party in interest, the remedy is not outright dismissal
of the complaint, but its amendment to include the real parties in interest.31
Third, the petitioners sued in their own right because they have actual and substantial interest in the subject matter of the action as heirs or co-owners, pursuant to
Section 2, Rule 3 of the Rules of Court.32
Their declaration as heirs in a special proceeding is not necessary, pursuant to the Courts ruling in Marabilles, et al. v. Quito. 33
Finally, the sworn declaration is evidentiary in nature which remains to be appreciated after the trial is completed. 34
The respondents reiterated in their comment that the petitioners are not the real parties in interest. 35
They likewise argued that they moved for the dismissal of the case during the pre-trial conference due to the petitioners procedural lapse in refusing to comply with a
condition precedent, which is, to substitute the heirs as plaintiffs. Besides, an administrator of the estates of Luciano and Lourdes has already been appointed. 36
The respondents also argued that the grounds invoked in their motion to dismiss were timely raised, pursuant to Section 2, paragraphs g and i, Rule 18 of the Rules of
Court. Specifically, the nature and purposes of the pre-trial include, among others, the dismissal of the action, should a valid ground therefor be found to exist; and such
other matters as may aid in the prompt disposition of the action. Finally, the special civil action of certiorari was the proper remedy in assailing the order of the RTC. 37
THE COURTS RULING
We find the petition meritorious.
Petition for certiorari under Rule 65 is a proper remedy for a denial of a motion to dismiss attended by grave abuse of discretion
In Barrazona v. RTC, Branch 61, Baguio City,38 the Court held that while an order denying a motion to dismiss is interlocutory and non-appealable, certiorari and
prohibition are proper remedies to address an order of denial made without or in excess of jurisdiction. The writ of certiorari is granted to keep an inferior court within
the bounds of its jurisdiction or to prevent it from committing grave abuse of discretion amounting to lack or excess of jurisdiction.
The history and development of the ground "fails to state a cause of action" in the 1940, 1964 and the present 1997 Rules of Court Preliminarily, a suit that is not
brought in the name of the real party in interest is dismissible on the ground that the complaint "fails to state a cause of action." 39
Pursuant to jurisprudence,40 this is also the ground invoked when the respondents alleged that the petitioners are not the real parties in interest because: 1) the petitioners
should not have filed the case in their own names, being merely attorneys-in-fact of their mother; and 2) the petitioners should first be declared as heirs. A review of the
1940, 1964 and the present 1997 Rules of Court shows that the fundamentals of the ground for dismissal based on "failure to state a cause of action" have drastically
changed over time. A historical background of this particular ground is in order to preclude any confusion or misapplication of jurisprudence decided prior to the
effectivity of the present Rules of Court. The 1940 Rules of Court provides under Section 10, Rule 9 that:
Section 10. Waiver of defenses- Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived; except the defense of failure to
state a cause of action, which may be alleged in a later pleading, if one is permitted, or by motion for judgment on the pleadings, or at the trial on the merits; but in the
last instance, the motion shall be disposed of as provided in section 5 of Rule 17 in the light of any evidence which may have been received. Whenever it appears that
the court has no jurisdiction over the subject-matter, it shall dismiss the action. [underscoring supplied]
This provision was essentially reproduced in Section 2, Rule 9 of the 1964 Rules of Court, and we quote:
Section 2. Defenses and objections not pleaded deemed waived. Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed
waived; except the failure to state a cause of action which may be alleged in a later pleading, if one is permitted, or by motion for judgment on the pleadings, or at the
trial on the merits; but in the last instance, the motion shall be disposed of as provided in section 5 of Rule 10 in the light of any evidence which may have been
received. Whenever it appears that the court has no jurisdiction over the subject-matter, it shall dismiss the action. [underscoring supplied]
Under the present Rules of Court, this provision was reflected in Section 1, Rule 9, and we quote:
Section 1. Defenses and objections not pleaded. Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However,
when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim. [underscoring supplied]

Notably, in the present rules, there was a deletion of the ground of "failure to state a cause of action" from the list of those which may be waived if not invoked either in
a motion to dismiss or in the answer. Another novelty introduced by the present Rules, which was totally absent in its two precedents, is the addition of the period of
time within which a motion to dismiss should be filed as provided under Section 1, Rule 16 and we quote:
Section 1. Grounds. Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the
following grounds: xxx [underscoring supplied]
All these considerations point to the legal reality that the new Rules effectively restricted the dismissal of complaints in general, especially when what is being invoked
is the ground of "failure to state a cause of action." Thus, jurisprudence governed by the 1940 and 1964 Rules of Court to the effect that the ground for dismissal based
on failure to state a cause of action may be raised anytime during the proceedings, is already inapplicable to cases already governed by the present Rules of Court which
took effect on July 1, 1997. As the rule now stands, the failure to invoke this ground in a motion to dismiss or in the answer would result in its waiver. According to
Oscar M. Herrera,41 the reason for the deletion is that failure to state a cause of action may be cured under Section 5, Rule 10 and we quote:
Section 5. Amendment to conform to or authorize presentation of evidence. When issues not raised by the pleadings are tried with the express or implied consent of
the parties they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to
conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not effect the result
of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to
be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may
grant a continuance to enable the amendment to be made.
With this clarification, we now proceed to the substantial issues of the petition.
The motion to dismiss in the present case based on failure to state a cause of action was not timely filed and was thus waived
Applying Rule 16 of the Rules of Court which provides for the grounds for the dismissal of a civil case, the respondents grounds for dismissal fall under Section 1(g)
and (j), Rule 16 of the Rules of Court, particularly, failure to state a cause of action and failure to comply with a condition precedent (substitution of parties),
respectively. The first paragraph of Section 1,42
Rule 16 of the Rules of Court provides for the period within which to file a motion to dismiss under the grounds enumerated. Specifically, the motion should be filed
within the time for, but before the filing of, the answer to the complaint or pleading asserting a claim. Equally important to this provision is Section 1, 43
Rule 9 of the Rules of Court which states that defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived, except for the
following grounds: 1) the court has no jurisdiction over the subject matter; 2) litis pendencia; 3) res judicata; and 4) prescription. Therefore, the grounds not falling
under these four exceptions may be considered as waived in the event that they are not timely invoked. As the respondents motion to dismiss was based on the grounds
which should be timely invoked, material to the resolution of this case is the period within which they were raised. Both the RTC and the CA found that the motion to
dismiss was only filed after the filing of the answer and after the pre-trial had been concluded. Because there was no motion to dismiss before the filing of the answer,
the respondents should then have at least raised these grounds as affirmative defenses in their answer. The RTCs assailed orders did not touch on this particular issue
but the CA ruled that the respondents did, while the petitioners insist that the respondents did not. In the present petition, the petitioners reiterate that there was a blatant
non-observance of the rules when the respondents did not amend their answer to invoke the grounds for dismissal which were raised only during the pre-trial and,
subsequently, in the subject motion to dismiss.44
The divergent findings of the CA and the petitioners arguments are essentially factual issues. Time and again, we have held that the jurisdiction of the Court in a
petition for review on certiorari under Rule 45, such as the present case, is limited only to questions of law, save for certain exceptions. One of these is attendant herein,
which is, when the findings are conclusions without citation of specific evidence on which they are based. 45
In the petition filed with the CA, the respondents made a passing allegation that, as affirmative defenses in their answer, they raised the issue that the petitioners are not
the real parties in interest.46
On the other hand, the petitioners consistently argued otherwise in their opposition 47 to the motion to dismiss, and in their comment48 and in their memorandum49 on the
respondents petition before the CA. Our examination of the records shows that the CA had no basis in its finding that the respondents alleged the grounds as affirmative
defenses in their answer. The respondents merely stated in their petition for certiorari that they alleged the subject grounds in their answer. However, nowhere in the
petition did they support this allegation; they did not even attach a copy of their answer to the petition. It is basic that the respondents had the duty to prove by
substantial evidence their positive assertions. Considering that the petition for certiorari is an original and not an appellate action, the CA had no records of the RTCs
proceedings upon which the CA could refer to in order to validate the respondents claim. Clearly, other than the respondents bare allegations, the CA had no basis to
rule, without proof, that the respondents alleged the grounds for dismissal as affirmative defenses in the answer. The respondents, as the parties with the burden of
proving that they timely raised their grounds for dismissal, could have at least attached a copy of their answer to the petition. This simple task they failed to do. That the
respondents did not allege in their answer the subject grounds is made more apparent through their argument, both in their motion to dismiss 50 and in their
comment,51 that it was only during the pre-trial stage that they verbally manifested and invited the attention of the lower court on their grounds for dismissal. In order to
justify such late invocation, they heavily relied on Section 2(g) and (i), Rule 1852 of the Rules of Court that the nature and purpose of the pre-trial include, among others,
the propriety of dismissing the action should there be a valid ground therefor and matters which may aid in the prompt disposition of the action. The respondents are not
correct. The rules are clear and require no interpretation. Pursuant to Section 1, Rule 9 of the Rules of Court, a motion to dismiss based on the grounds invoked by the
respondents may be waived if not raised in a motion to dismiss or alleged in their answer. On the other hand, "the pre-trial is primarily intended to make certain that all

issues necessary to the disposition of a case are properly raised. The purpose is to obviate the element of surprise, hence, the parties are expected to disclose at the pretrial conference all issues of law and fact which they intend to raise at the trial, except such as may involve privileged or impeaching matter." 53
The issues submitted during the pre-trial are thus the issues that would govern the trial proper. The dismissal of the case based on the grounds invoked by the
respondents are specifically covered by Rule 16 and Rule 9 of the Rules of Court which set a period when they should be raised; otherwise, they are deemed waived.
The Dabuco ruling is inapplicable in the present case; the ground for dismissal "failure to state a cause of action" distinguished from "lack of cause of action"
To justify the belated filing of the motion to dismiss, the CA reasoned out that the ground for dismissal of "lack of cause of action" may be raised at any time during the
proceedings, pursuant to Dabuco v. Court of Appeals. 54
This is an erroneous interpretation and application of Dabuco as will be explained below.
First, in Dabuco, the grounds for dismissal were raised as affirmative defenses in the answer which is in stark contrast to the present case.
Second, in Dabuco, the Court distinguished between the dismissal of the complaint for "failure to state a cause of action" and "lack of cause of action." The Court
emphasized that in a dismissal of action for lack of cause of action, "questions of fact are involved, [therefore,] courts hesitate to declare a plaintiff as lacking in cause
of action. Such declaration is postponed until the insufficiency of cause is apparent from a preponderance of evidence.
Usually, this is done only after the parties have been given the opportunity to present all relevant evidence on such questions of fact." 55
In fact, in Dabuco, the Court held that even the preliminary hearing on the propriety of lifting the restraining order was declared insufficient for purposes of dismissing
the complaint for lack of cause of action. This is so because the issues of fact had not yet been adequately ventilated at that preliminary stage. For these reasons, the
Court declared in Dabuco that the dismissal by the trial court of the complaint was premature. In the case of Macaslang v. Zamora, 56 the Court noted that the incorrect
appreciation by both the RTC and the CA of the distinction between the dismissal of an action, based on "failure to state a cause of action" and "lack of cause of action,"
prevented it from properly deciding the case, and we quote:
Failure to state a cause of action and lack of cause of action are really different from each other. On the one hand, failure to state a cause of action refers to the
insufficiency of the pleading, and is a ground for dismissal under Rule 16 of the Rules of Court. On the other hand, lack of cause [of] action refers to a situation where
the evidence does not prove the cause of action alleged in the pleading. Justice Regalado, a recognized commentator on remedial law, has explained the distinction: xxx
What is contemplated, therefore, is a failure to state a cause of action which is provided in Sec. 1(g) of Rule 16. This is a matter of insufficiency of the pleading. Sec. 5
of Rule 10, which was also included as the last mode for raising the issue to the court, refers to the situation where the evidence does not prove a cause of action. This
is, therefore, a matter of insufficiency of evidence. Failure to state a cause of action is different from failure to prove a cause of action. The remedy in the first is to
move for dismissal of the pleading, while the remedy in the second is to demur to the evidence, hence reference to Sec. 5 of Rule 10 has been eliminated in this section.
The procedure would consequently be to require the pleading to state a cause of action, by timely objection to its deficiency; or, at the trial, to file a demurrer to
evidence, if such motion is warranted. [italics supplied]
Based on this discussion, the Court cannot uphold the dismissal of the present case based on the grounds invoked by the respondents which they have waived for failure
to invoke them within the period prescribed by the Rules. The Court cannot also dismiss the case based on "lack of cause of action" as this would require at least a
preponderance of evidence which is yet to be appreciated by the trial court. Therefore, the RTC did not commit grave abuse of discretion in issuing the assailed orders
denying the respondents motion to dismiss and motion for reconsideration. The Court shall not resolve the merits of the respondents grounds for dismissal which are
considered as waived.
Other heirs of the spouses Pacaa to be impleaded in the case.
It should be emphasized that insofar as the petitioners are concerned, the respondents have waived the dismissal of the complaint based on the ground of failure to state
a cause of action because the petitioners are not the real parties in interest. At this juncture, a distinction between a real party in interest and an indispensable party is in
order. In Carandang v. Heirs of de Guzman, et al.,57 the Court clarified these two concepts and held that "[a] real party in interest is the party who stands to be benefited
or injured by the judgment of the suit, or the party entitled to the avails of the suit. On the other hand, an indispensable party is a party in interest without whom no final
determination can be had of an action, in contrast to a necessary party, which is one who is not indispensable but who ought to be joined as a party if complete relief is
to be accorded as to those already parties, or for a complete determination or settlement of the claim subject of the action. xxx If a suit is not brought in the name of or
against the real party in interest, a motion to dismiss may be filed on the ground that the complaint states no cause of action. However, the dismissal on this ground
entails an examination of whether the parties presently pleaded are interested in the outcome of the litigation, and not whether all persons interested in such outcome are
actually pleaded. The latter query is relevant in discussions concerning indispensable and necessary parties, but not in discussions concerning real parties in interest.
Both indispensable and necessary parties are considered as real parties in interest, since both classes of parties stand to be benefited or injured by the judgment of the
suit."
At the inception of the present case, both the spouses Pacaa were not impleaded as parties-plaintiffs. The Court notes, however, that they are indispensable parties to
the case as the alleged owners of Rovila Water Supply. Without their inclusion as parties, there can be no final determination of the present case. They possess such an
interest in the controversy that a final decree would necessarily affect their rights, so that the courts cannot proceed without their presence. Their interest in the subject
matter of the suit and in the relief sought is inextricably intertwined with that of the other parties. 58

Jurisprudence on the procedural consequence of the inclusion or non-inclusion of an indispensable party is divided in our jurisdiction. Due to the non-inclusion of
indispensable parties, the Court dismissed the case in Lucman v. Malawi, et al.59 and Go v. Distinction Properties Development Construction, Inc.,60 while in Casals, et
al. v. Tayud Golf and Country Club et al.,61 the Court annulled the judgment which was rendered without the inclusion of the indispensable parties. In Arcelona et al. v.
Court of Appeals62 and Bulawan v. Aquende,63 and Metropolitan Bank & Trust Company v. Alejo et al.64 the Court ruled that the burden to implead or order the
impleading of an indispensable party rests on the plaintiff and on the trial court, respectively. Thus, the non-inclusion of the indispensable parties, despite notice of this
infirmity, resulted in the annulment of these cases. In Plasabas, et al. v. Court of Appeals, et al., 65 the Court held that the trial court and the CA committed reversible
error when they summarily dismissed the case, after both parties had rested their cases following a protracted trial, on the sole ground of failure to implead
indispensable parties. Non-joinder of indispensable parties is not a ground for the dismissal of an action. The remedy is to implead the non-party claimed to be
indispensable. However, in the cases of Quilatan, et al. v. Heirs of Quilatan, et al.66 and Lagunilla, et al. v. Monis, et al.,67 the Court remanded the case to the RTC for the
impleading of indispensable parties. On the other hand, in Lotte Phil. Co., Inc. v. Dela Cruz,68 PepsiCo, Inc. v. Emerald Pizza, 69 and Valdez Tallorin, v. Heirs of Tarona,
et al.,70 the Court directly ordered that the indispensable parties be impleaded. Mindful of the differing views of the Court as regards the legal effects of the noninclusion of indispensable parties, the Court clarified in Republic of the Philippines v. Sandiganbayan, et al., 71 that the failure to implead indispensable parties is a
curable error and the foreign origin of our present rules on indispensable parties permitted this corrective measure. This cited case held:
Even in those cases where it might reasonably be argued that the failure of the Government to implead the sequestered corporations as defendants is indeed a procedural
aberration xxx, slight reflection would nevertheless lead to the conclusion that the defect is not fatal, but one correctible under applicable adjective rules e.g., Section
10, Rule 5 of the Rules of Court [specifying the remedy of amendment during trial to authorize or to conform to the evidence]; Section 1, Rule 20 [governing
amendments before trial], in relation to the rule respecting omission of so-called necessary or indispensable parties, set out in Section 11, Rule 3 of the Rules of Court.
It is relevant in this context to advert to the old familiar doctrines that the omission to implead such parties "is a mere technical defect which can be cured at any stage
of the proceedings even after judgment"; and that, particularly in the case of indispensable parties, since their presence and participation is essential to the very life of
the action, for without them no judgment may be rendered, amendments of the complaint in order to implead them should be freely allowed, even on appeal, in fact
even after rendition of judgment by this Court, where it appears that the complaint otherwise indicates their identity and character as such indispensable parties."
Although there are decided cases wherein the non-joinder of indispensable parties in fact led to the dismissal of the suit or the annulment of judgment, such cases do not
jibe with the matter at hand. The better view is that non-joinder is not a ground to dismiss the suit or annul the judgment. The rule on joinder of indispensable parties is
founded on equity. And the spirit of the law is reflected in Section 11, Rule 3 of the 1997 Rules of Civil Procedure. It prohibits the dismissal of a suit on the ground of
non-joinder or misjoinder of parties and allows the amendment of the complaint at any stage of the proceedings, through motion or on order of the court on its own
initiative. Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section 7, Rule 3 on indispensable parties was copied, allows the joinder of
indispensable parties even after judgment has been entered if such is needed to afford the moving party full relief. Mere delay in filing the joinder motion does not
necessarily result in the waiver of the right as long as the delay is excusable.
In Galicia, et al. v. Vda. De Mindo, et al.,72 the Court ruled that in line with its policy of promoting a just and inexpensive disposition of a case, it allowed the
intervention of the indispensable parties instead of dismissing the complaint. Furthermore, in Commissioner Domingo v. Scheer,73 the Court cited Salvador, et al. v.
Court of Appeals, et al.74 and held that the Court has full powers, apart from that power and authority which are inherent, to amend the processes, pleadings, proceedings
and decisions by substituting as party-plaintiff the real party in interest. The Court has the power to avoid delay in the disposition of this case, and to order its
amendment in order to implead an indispensable party. With these discussions as premises, the Court is of the view that the proper remedy in the present case is to
implead the indispensable parties especially when their non-inclusion is merely a technical defect. To do so would serve proper administration of justice and prevent
further delay and multiplicity of suits. Pursuant to Section 9, Rule 3 of the Rules of Court, parties may be added by order of the court on motion of the party or on its
own initiative at any stage of the action. If the plaintiff refuses to implead an indispensable party despite the order of the court, then the court may dismiss the complaint
for the plaintiffs failure to comply with a lawful court order.75
The operative act that would lead to the dismissal of the case would be the refusal to comply with the directive of the court for the joinder of an indispensable party to
the case.76
Obviously, in the present case, the deceased Pacaas can no longer be included in the complaint as indispensable parties because of their death during the pendency of
the case. Upon their death, however, their ownership and rights over their properties were transmitted to their heirs, including herein petitioners, pursuant to Article
77477 in relation with Article 77778 of the Civil Code.
In Orbeta, et al. v. Sendiong,79 the Court acknowledged that the heirs, whose hereditary rights are to be affected by the case, are deemed indispensable parties who
should have been impleaded by the trial court. Therefore, to obviate further delay in the proceedings of the present case and given the Courts authority to order the
inclusion of an indispensable party at any stage of the proceedings, the heirs of the spouses Pacaa, except the petirioners who are already parties to the case are
Lagrimas Pacaa-Gonzalez who intervened in the case, are hereby ordered impleaded as parties-plaintiffs.
WHEREFORE, the petition is GRANTED. The decision dated January 27, 2005 and the resolution date June 6, 2005 of the Court of Appeals in CA-G.R. SP No. 71551
are REVERSED and SET ASIDE. The heirs of the spouses Luciano and Lourdes Pacaa, except herein petitioner and Lagrimas Pacaa-Gonzalez, are ORDERED
IMPLEADED as parties plaintiffs and the RTC is directed tp proceed with the trial of the case with DISPATCH.
SO ORDERED.

G.R. No. 189486

September 5, 2012
SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and the HEIRS OF THE LATE GRACE G. CHEU,Petitioners,
vs.
GILBERT G. GUY, Respondent.

x-----------------------x
G.R. No. 189699
SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and the HEIRS OF THE LATE GRACE G. CHEU,Petitioners,
vs.
THE HON. OFELIA C. CALO, in her capacity as Presiding Judge of the RTC -Mandaluyong City - Branch 211 and GILBERT G. GUY, Respondents.
DECISION
PEREZ, J.:
THE FACTS
With 519,997 shares of stock as reflected in Stock Certificate Nos. 004-014, herein respondent Gilbert G. Guy (Gilbert) practically owned almost 80 percent of the
650,000 subscribed capital stock of GoodGold Realty & Development Corporation (GoodGold),1 one of the multi-million corporations which Gilbert claimed to have
established in his 30s. GoodGolds remaining shares were divided among Francisco Guy (Francisco) with 130,000 shares, Simny Guy (Simny), Benjamin Lim and
Paulino Delfin Pe, with one share each, respectively. Gilbert is the son of spouses Francisco and Simny. Simny, one of the petitioners, however, alleged that it was she
and her husband who established GoodGold, putting the bulk of its shares under Gilberts name. She claimed that with their eldest son, Gaspar G. Guy (Gaspar), having
entered the Focolare Missionary in 1970s, renouncing worldly possessions, 2 she and Francisco put the future of the Guy group of companies in Gilberts hands. Gilbert
was expected to bring to new heights their family multi-million businesses and they, his parents, had high hopes in him.
Simny further claimed that upon the advice of their lawyers, upon the incorporation of GoodGold, they issued stock certificates reflecting the shares held by each
stockholder duly signed by Francisco as President and Atty. Emmanuel Paras as Corporate Secretary, with corresponding blank endorsements at the back of each
certificate including Stock Certificate Nos. 004-014 under Gilberts name.3 These certificates were all with Gilberts irrevocable endorsement and power of attorney to
have these stocks transferred in the books of corporation.4 All of these certificates were always in the undisturbed possession of the spouses Francisco and Simny,
including Stock Certificate Nos. 004-014.5
In 1999, the aging Francisco instructed Benjamin Lim, a nominal shareholder of GoodGold and his trusted employee, to collaborate with Atty. Emmanuel Paras, to
redistribute GoodGolds shareholdings evenly among his children, namely, Gilbert, Grace Guy-Cheu (Grace), Geraldine Guy (Geraldine), and Gladys Guy (Gladys),
while maintaining a proportionate share for himself and his wife, Simny.6
Accordingly, some of GoodGolds certificates were cancelled and new ones were issued to represent the redistribution of GoodGolds shares of stock. The new
certificates of stock were signed by Francisco and Atty. Emmanuel Paras, as President and Corporate Secretary, respectively.
The shares of stock were distributed among the following stockholders:
NAME

NO. OF SHARES

Francisco Guy

[husband]

195,000

Simny G. Guy

[wife]

195,000

Gilbert G. Guy

[son]

65,000

Geraldine G. Guy

[daughter]

65,000

Grace G.Cheu (or her heirs) [daughter]

65,000

Gladys G.Yao

[daughter]

65,000
Total

650,0007

In September 2004, or five years after the redistribution of GoodGolds shares of stock, Gilbert filed with the Regional Trial Court (RTC) of Manila, a Complaint for the
"Declaration of Nullity of Transfers of Shares in GoodGold and of General Information Sheets and Minutes of Meeting, and for Damages with Application for a
Preliminary Injunctive Relief," against his mother, Simny, and his sisters, Geraldine, Grace, and Gladys. 8 Gilbert alleged, among others, that no stock certificate ever
existed;9 that his signature at the back of the spurious Stock Certificate Nos. 004-014 which purportedly endorsed the same and that of the corporate secretary,
Emmanuel Paras, at the obverse side of the certificates were forged, and, hence, should be nullified. 10
Gilbert, however, withdrew the complaint, after the National Bureau of Investigation (NBI) submitted a report to the RTC of Manila authenticating Gilberts signature
in the endorsed certificates.11 The NBI report stated:
FINDINGS:
Comparative analysis of the specimens submitted under magnification using varied lighting process and with the aid of photographic
enlargements disclosed the presence of significant and fundamental similarities in the personal handwriting habits existing between the
questioned signatures of "GILBERT G. GUY" and "EMMANUEL C. PARAS," on one hand, and their corresponding standard
specimen/exemplar signatures, on the other hand, such as in:
- Basic design of letters/elements;
- Manner of execution/line quality;
- Minute identifying details.
CONCLUSION:
A. The questioned and the standard specimen/exemplar signatures of Gilbert G. Guy were written by one and the same person;
B. The questioned and the standard specimen/exemplar signatures of "EMMANUEL C. PARAS" were written by one and the same person.
(Emphasis supplied)12
The present controversy arose, when in 2008, three years after the complaint with the RTC of Manila was withdrawn, Gilbert again filed a complaint, this time, with the
RTC of Mandaluyong, captioned as "Intra-Corporate Controversy: For the Declaration of Nullity of Fraudulent Transfers of Shares of Stock Certificates, Fabricated
Stock Certificates, Falsified General Information Sheets, Minutes of Meetings, and Damages with Application for the Issuance of a Writ of Preliminary and Mandatory
Injunction," docketed as SEC-MC08-112, against his mother, Simny, his sisters, Geraldine, Gladys, and the heirs of his late sister Grace. 13
Gilbert alleged that he never signed any document which would justify and support the transfer of his shares to his siblings and that he has in no way, disposed,
alienated, encumbered, assigned or sold any or part of his shares in GoodGold.14 He also denied the existence of the certificates of stocks. According to him, "there were
no certificates of stocks under his name for the shares of stock subscribed by him were never issued nor delivered to him from the time of the inception of the
corporation."15
Gilbert added that the Amended General Information Sheets (GIS) of GoodGold for the years 2000 to 2004 which his siblings submitted to the Securities and Exchange
Commission (SEC) were spurious as these did not reflect his true shares in the corporation which supposedly totaled to 595,000 shares; 16 that no valid stockholders
annual meeting for the year 2004 was held, hence proceedings taken thereon, including the election of corporate officers were null and void; 17 and, that his siblings are
foreign citizens, thus, cannot own more than forty percent of the authorized capital stock of the corporation. 18
Gilbert also asked in his complaint for the issuance of a Writ of Preliminary and Mandatory Injunction to protect his rights. 19
In an Order dated 30 June 2008,20 the RTC denied Gilberts Motion for Injunctive Relief21 which constrained him to file a motion for reconsideration, and, thereafter, a
Motion for Inhibition against Judge Edwin Sorongon, praying that the latter recuse himself from further taking part in the case.
Meanwhile, Gilberts siblings filed a manifestation claiming that the complaint is a nuisance and harassment suit under Section 1(b), Rule 1 of the Interim Rules of
Procedure on Intra-Corporate Controversies.
In an Order dated 6 November 2008,22 the RTC denied the motion for inhibition. The RTC also dismissed the case, declaring it a nuisance and harassment suit, viz.:

WHEREFORE, the court resolves:

(1) To DENY as it is hereby DENIED respondents Motion for Inhibition;
(2) To DENY as it is hereby DENIED respondents Motion for Reconsideration of the June 30, 2008 Order; and,
(3) To declare as it is herby declared the instant case as a nuisance or harassment suit. Accordingly, pursuant to Section 1(b), Rule 1 of the Interim Rules of Procedure
for Intra-Corporate Dispute, the instant case is hereby DISMISSED. No pronouncement as to costs. 23
This constrained Gilbert to assail the above Order before the Court of Appeals (CA). The petition for review was docketed as CA-G.R. SP No. 106405.
In a Decision24 dated 27 May 2009, the CA upheld Judge Sorongons refusal to inhibit from hearing the case on the ground that Gilbert failed to substantiate his
allegation of Judge Sorongons partiality and bias.25
The CA, in the same decision, also denied Gilberts Petition for the Issuance of Writ of Preliminary Injunction for failure to establish a clear and unmistakable right that
was violated as required under Section 3, rule 58 of the 1997 Rules of Civil Procedure.26
The CA, however, found merit on Gilberts contention that the complaint should be heard on the merits. It held that:
A reading of the Order, supra, dismissing the respondents complaint for being a harassment suit revealed that the court a quo relied heavily on the pieces of
documentary evidence presented by the Petitioners to negate Respondents allegation of fraudulent transfer of shares of stock, fabrication of stock certificates and
falsification of General Information Sheets (GIS), inter alia. It bears emphasis that the Respondent is even questioning the genuiness and authenticity of the Petitioners
documentary evidence. To our mind, only a full-blown trial on the merits can afford the determination of the genuineness and authenticity of the documentary evidence
and other factual issues which will ultimately resolve whether there was indeed a transfer of shares of stock. 27
Hence, these consolidated petitions.
G.R. No. 189486 is a Petition for Review under Rule 45 of the Rules of Court filed by Simny, Geraldine, Gladys, and the heirs of the late Grace against Gilbert, which
prays that this Court declare Civil Case No. SEC-MC08-112, a harassment or nuisance suit.
Meanwhile, during the pendency of G.R. No. 189486, the trial court set the pre-trial conference on the case subject of this controversy, constraining the petitioners to
file a Motion to defer the pre-trial, which was, however, denied by the court a quo in an Order dated 11 September 2009, 28 viz.:
In a Resolution dated September 3, 2009, the Honorable Court of Appeals (CA) (Former Second Division) denied the Motion for Partial Reconsideration filed [by
petitioners] herein. Inasmuch as there is no longer any impediment to proceed with the instant case and the fact that this court was specifically directed by the May 27,
2009 Decision of the CA Second Division to proceed with the trial on the merits with dispatch, this court resolves to deny the motion under consideration.
WHEREFORE, premises considered, the Motion to Defer Pre-Trial Conference and Further Proceedings filed by petitioners is hereby DENIED. Set the pre-trial on
October 20, 2009, at 8:30 in the morning.
The denial of the petitioners motion to defer pre-trial, compelled them to file with this Court a Petition for Certiorari with Urgent Application for the Issuance of TRO
and/or A Writ of Preliminary Injunction, docketed asG.R. No. 189699. Because of the pendency of the G.R. No. 189486 before us, the petitioners deemed proper to
question the said denial before us as an incident arising from the main controversy.29
OUR RULING
Suits by stockholders or members of a corporation based on wrongful or fraudulent acts of directors or other persons may be classified into individual suits, class suits,
and derivative suits.30
An individual suit may be instituted by a stockholder against another stockholder for wrongs committed against him personally, and to determine their individual
rights31 this is an individual suit between stockholders. But an individual suit may also be instituted against a corporation, the same having a separate juridical
personality, which by its own may be sued. It is of course, essential that the suing stockholder has a cause of action against the corporation. 32
Individual suits against another stockholder or against a corporation are remedies which an aggrieved stockholder may avail of and which are recognized in our
jurisdiction as embedded in the Interim Rules on Intra-Corporate Controversy. Together with this right is the parallel obligation of a party to comply with the
compulsory joinder of indispensable parties whether they may be stockholders or the corporation itself.
The absence of an indispensable
party in a case renders all
subsequent actions of the court null
and void for want of authority to act,
not only as to the absent parties but
even as to those present.33
It bears emphasis that this controversy started with Gilberts complaint filed with the RTC of Mandaluyong City in his capacity as stockholder, director and VicePresident of GoodGold.34
Gilberts complaint essentially prayed for the return of his original 519,997 shares in GoodGold, by praying that the court declare that "there were no valid transfers of
the contested shares to defendants and Francisco."35 It baffles this Court, however, that Gilbert omitted Francisco as defendant in his complaint. While Gilbert could
have opted to waive his shares in the name of Francisco to justify the latters non-inclusion in the complaint, Gilbert did not do so, but instead, wanted everything back
and even wanted the whole transfer of shares declared fraudulent. This cannot be done, without including Francisco as defendant in the original case. The transfer of the
shares cannot be, as Gilbert wanted, declared entirely fraudulent without including those of Francisco who owns almost a third of the total number.
Francisco, in both the 2004 and 2008 complaints, is an indispensable party without whom no final determination can be had for the following reasons: (a) the complaint
prays that the shares now under the name of the defendants and Francisco be declared fraudulent; (b) Francisco owns 195,000 shares some of which, Gilbert prays be
returned to him; (c) Francisco signed the certificates of stocks evidencing the alleged fraudulent shares previously in the name of Gilbert. The inclusion of the shares of
Francisco in the complaint makes Francisco an indispensable party. Moreover, the pronouncement about the shares of Francisco would impact on the hereditary rights
of the contesting parties or on the conjugal properties of the spouses to the effect that Francisco, being husband of Simny and father of the other contesting parties, must
be included for, otherwise, in his absence, there cannot be a determination between the parties already before the court which is effective, complete, or equitable.
The definition in the Rules of Court, Section 7, Rule 3 thereof, of indispensable parties as "parties in interest without whom no final determination can be had of an
action" has been jurisprudentially amplified. In Sps. Garcia v. Garcia, et.al.,36 this Court held that:
An indispensable party is a party who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring
or affecting that interest, a party who has not only an interest in the subject matter of the controversy, but also has an interest of such nature that a final decree cannot be
made without affecting his interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good
conscience. It has also been considered that an indispensable party is a person in whose absence there cannot be a determination between the parties already before the
court which is effective, complete, or equitable. Further, an indispensable party is one who must be included in an action before it may properly go forward.
This was our pronouncements in Servicewide Specialists Inc. v. CA, 37 Arcelona v. CA,38 and Casals v. Tayud Golf and Country Club, Inc.39
Settled is the rule that joinder of indispensable parties is compulsory40 being a sine qua non for the exercise of judicial power,41 and, it is precisely "when an
indispensable party is not before the court that the action should be dismissed" for such absence renders all subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even as to those present.42
It bears emphasis that Gilbert, while suing as a stockholder against his co-stockholders, should have also impleaded GoodGold as defendant. His complaint also prayed
for the annulment of the 2004 stockholders annual meeting, the annulment of the 2004 election of the board of directors and of its officers, the annulment of 2004 GIS
submitted to the SEC, issuance of an order for the accounting of all monies and rentals of GoodGold, and the issuance of a writ of preliminary and mandatory
injunction. We have made clear that GoodGold is a separate juridical entity distinct from its stockholders and from its directors and officers. The trial court, acting as a
special commercial court, cannot settle the issues with finality without impleading GoodGold as defendant. Like Francisco, and for the same reasons, GoodGold is an
indispensable party which Gilbert should have impleaded as defendant in his complaint.

10

Allegations of deceit, machination,

false pretenses, misrepresentation,
and threats are largely conclusions
of law that, without supporting
statements of the facts to which the
allegations of fraud refer, do not
sufficiently state an effective cause of
action.43
"In all averments of fraud or mistake, the circumstances constituting fraud or mistake must be stated with particularity" 44 to "appraise the other party of what he is to be
called on to answer, and so that it may be determined whether the facts and circumstances alleged amount to fraud." 45 These particulars would necessarily include the
time, place and specific acts of fraud committed.46 "The reason for this rule is that an allegation of fraud concerns the morality of the defendants conduct and he is
entitled to know fully the ground on which the allegations are made, so he may have every opportunity to prepare his case to clear himself at the trial." 47
The complaint of Gilbert states:
13. The said spurious Amended GIS for the years 2000, 2001, 2002, 2003, 2004 and also in another falsified GIS for the year 2004, the petitioners indicated the
following alleged stockholders of GOODGOLD with their respective shareholdings, to wit:
NAME

NO. OF SHARES

Francisco Guy Co Chia

195,000

Simny G. Guy

195,000

Gilbert G. Guy

65,000

Geraldine G. Guy

65,000

Grace G.-Cheu

65,000

Gladys G.Yao

65,000
Total

650,000

14. The above spurious GIS would show that form the original 519,997 shares of stocks owned by the respondent, which is equivalent to almost 80% of the total
subscriptions and/or the outstanding capital stock of GOODGOLD, respondents subscription was drastically reduced to only 65,000 shares of stocks which is merely
equivalent to only 10 percent of the outstanding capital stock of the corporation.
15. Based on the spurious GIS, shares pertaining to Benjamin Lim and Paulino Delfin Pe were omitted and the total corporate shares originally owned by incorporators
including herein respondent have been fraudulently transferred and distributed, as follows: x x x (Emphasis supplied)
xxxx
18. To date, respondent is completely unaware of any documents signed by him that would justify and support the foregoing transfer of his shares to the defendants.
Respondent strongly affirms that he has not in any way, up to this date of filing the instant complaint, disposed, alienated, encumbered, assigned or sold any or part of
the shares of stocks of GOODGOLD corporation owned by him and registered under his name under the books of the corporation.
19. Neither has respondent endorsed, signed, assigned any certificates of stock representing the tangible evidence of his stocks ownership, there being no certificates of
stocks issued by the corporation nor delivered to him since its inception on June 6, 1988. Considering that the corporation is merely a family corporation, plaintiff does
not find the issuance of stock certificates necessary to protect his corporate interest and he did not even demand for its issuance despite the fact that he was the sole
subscriber who actually paid his subscription at the time of incorporation.48
Tested against established standards, we find that the charges of fraud which Gilbert accuses his siblings are not supported by the required factual allegations. In Reyes
v. RTC of Makati,49 which we now reiterate, mutatis mutandis, while the complaint contained allegations of fraud purportedly committed by his siblings, these
allegations are not particular enough to bring the controversy within the special commercial courts jurisdiction; they are not statements of ultimate facts, but are mere
conclusions of law: how and why the alleged transfer of shares can be characterized as "fraudulent" were not explained and elaborated on. 50 As emphasized in Reyes:
Not every allegation of fraud done in a corporate setting or perpetrated by corporate officers will bring the case within the special commercial courts jurisdiction. To
fall within this jurisdiction, there must be sufficient nexus showing that the corporations nature, structure, or powers were used to facilitate the fraudulent device or
scheme.51 (Emphasis supplied)
Significantly, no corporate power or office was alleged to have facilitated the transfer of Gilberts shares. How the petitioners perpetrated the fraud, if ever they did, is
an indispensable allegation which Gilbert must have had alleged with particularity in his complaint, but which he failed to.
Failure to specifically allege the
fraudulent acts in intra-corporate
controversies is indicative of a
harassment or nuisance suit and may
be dismissed motu proprio.
In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute a ground for dismissal since such a defect can be cured by a bill of
particulars.52 Thus:
Failure to allege fraud or mistake with as much particularity as is desirable is not fatal if the general purport of the claim or defense is clear, since all pleadings should
be so construed as to do substantial justice. Doubt as to the meaning of the pleading may be resolved by seeking a bill of particulars.
A bill of particulars may be ordered as to a defense of fraud or mistake if the circumstances constituting fraud or mistake are not stated with the particularity required by
the rule.53
The above-stated rule, however, does not apply to intra-corporate controversies. In Reyes, 54 we pronounced that "in cases governed by the Interim Rules of Procedure
on Intra-Corporate Controversies a bill of particulars is a prohibited pleading. It is essential, therefore, for the complaint to show on its face what are claimed to be the
fraudulent corporate acts if the complainant wishes to invoke the courts special commercial jurisdiction." This is because fraud in intra-corporate controversies must be
based on "devises and schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation
which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association," as stated under
Rule 1, Section 1 (a)(1) of the Interim Rules. The act of fraud or misrepresentation complained of becomes a criterion in determining whether the complaint on its face
has merits, or within the jurisdiction of special commercial court, or merely a nuisance suit.
It did not escape us that Gilbert, instead of particularly describing the fraudulent acts that he complained of, just made a sweeping denial of the existence of stock
certificates by claiming that such were not necessary, GoodGold being a mere family corporation. 55 As sweeping and bereft of particulars is his claim that he "is
unaware of any document signed by him that would justify and support the transfer of his shares to herein petitioners." 56 Even more telling is the contradiction between
the denial of the existence of stock certificates and the denial of the transfer of his shares of stocks "under his name under the books of the corporations."
It is unexplained that while Gilbert questioned the authenticity of his signatures indorsing the stock certificates, and that of Atty. Emmanuel Paras, the corporate
secretary, he did not put in issue as doubtful the signature of his father which also appeared in the certificate as President of the corporation. Notably, Gilbert, during the
entire controversy that started with his 2004 complaint, failed to rebut the NBI Report which authenticated all the signatures appearing in the stock certificates.

11

Even beyond the vacant pleadings, its nature as nuisance is palpable. To recapitulate, it was only after five years following the redistribution of GoodGolds shares of
stock, that Gilbert filed with the RTC of Manila, a Complaint for the "Declaration of Nullity of Transfers of Shares in GoodGold and of General Information Sheets and
Minutes of Meeting, and for Damages with Application for a Preliminary Injunctive Relief," against his mother, Simny, and his sisters, Geraldine, Grace, and
Gladys.57 Gilbert alleged, among others, that no stock certificate ever existed; 58 that his signature at the back of the spurious Stock Certificate Nos. 004-014 which
purportedly endorsed the same and that of the corporate secretary, Emmanuel Paras, at the obverse side of the certificates were forged, and, hence, should be
nullified.59 Gilbert withdrew this complaint after the NBI submitted a report to the RTC of Manila authenticating Gilberts signature in the endorsed certificates. And, it
was only after three years from the withdrawal of the Manila complaint, that Gilbert again filed in 2008 a complaint also for declaration of nullity of the transfer of the
shares of stock, this time with the RTC of Mandaluyong. The caption of the complaint is "Intra-Corporate Controversy: For the Declaration of Nullity of Fraudulent
Transfers of Shares of Stock Certificates, Fabricated Stock Certificates, Falsified General Information Sheets, Minutes of Meetings, and Damages with Application for
the Issuance of a Writ of Preliminary and Mandatory Injunction," docketed as SEC-MC08-112, against his mother, Simny, his sisters, Geraldine, Gladys, and the heirs
of his late sister Grace.601wphi1
When a stock certificate is endorsed
in blank by the owner thereof, it
constitutes what is termed as "street
certificate," so that upon its face, the
holder is entitled to demand its
transfer his name from the issuing
corporation.
With Gilberts failure to allege specific acts of fraud in his complaint and his failure to rebut the NBI report, this Court pronounces, as a consequence thereof, that the
signatures appearing on the stock certificates, including his blank endorsement thereon were authentic. With the stock certificates having been endorsed in blank by
Gilbert, which he himself delivered to his parents, the same can be cancelled and transferred in the names of herein petitioners.
In Santamaria v. Hongkong and Shanghai Banking Corp.,61 this Court held that when a stock certificate is endorsed in blank by the owner thereof, it constitutes what is
termed as "street certificate," so that upon its face, the holder is entitled to demand its transfer into his name from the issuing corporation. Such certificate is deemed
quasi-negotiable, and as such the transferee thereof is justified in believing that it belongs to the holder and transferor.1wphi1
While there is a contrary ruling, as an exception to the general rule enunciated above, what the Court held in Neugene Marketing Inc., et al., v CA, 62 where stock
certificates endorsed in blank were stolen from the possession of the beneficial owners thereof constraining this Court to declare the transfer void for lack of delivery
and want of value, the same cannot apply to Gilbert because the stock certificates which Gilbert endorsed in blank were in the undisturbed possession of his parents who
were the beneficial owners thereof and who themselves as such owners caused the transfer in their names. Indeed, even if Gilberts parents were not the beneficial
owners, an endorsement in blank of the stock certificates coupled with its delivery, entitles the holder thereof to demand the transfer of said stock certificates in his
name from the issuing corporation.63
Interestingly, Gilbert also used the above discussed reasons as his arguments in Gilbert Guy v. Court of Appeals, et a.l, 64 a case earlier decided by this Court. In that
petition, Lincoln Continental, a corporation purportedly owned by Gilbert, filed with the RTC, Branch 24, Manila, a Complaint for Annulment of the Transfer of Shares
of Stock against Gilberts siblings, including his mother, Simny. The complaint basically alleged that Lincoln Continental owns 20,160 shares of stock of Northern
Islands; and that Gilberts siblings, in order to oust him from the management of Northern Islands, falsely transferred the said shares of stock in his sisters
names.65 This Court dismissed Gilberts petition and ruled in favor of his siblings viz:
One thing is clear. It was established before the trial court, affirmed by the Court of Appeals, that Lincoln Continental held the disputed shares of stock of Northern
Islands merely in trust for the Guy sisters. In fact, the evidence proffered by Lincoln Continental itself supports this conclusion. It bears emphasis that this factual
finding by the trial court was affirmed by the Court of Appeals, being supported by evidence, and is, therefore, final and conclusive upon this Court.
Article 1440 of the Civil Code provides that:
"ART. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as
the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary."
In the early case of Gayondato v. Treasurer of the Philippine Islands, this Court defines trust, in its technical sense, as "a right of property, real or personal, held by one
party for the benefit of another." Differently stated, a trust is "a fiduciary relationship with respect to property, subjecting the person holding the same to the obligation
of dealing with the property for the benefit of another person."
Both Lincoln Continental and Gilbert claim that the latter holds legal title to the shares in question. But record shows that there is no evidence to support their claim.
Rather, the evidence on record clearly indicates that the stock certificates representing the contested shares are in respondents' possession. Significantly, there is no
proof to support his allegation that the transfer of the shares of stock to respondent sisters is fraudulent. As aptly held by the Court of Appeals, fraud is never presumed
but must be established by clear and convincing evidence. Gilbert failed to discharge this burden. We agree with the Court of Appeals that respondent sisters own the
shares of stocks, Gilbert being their mere trustee. 66 (Underlining supplied).
This Court finds no cogent reason to divert from the above stated ruling, these two cases having similar facts.
WHEREFORE, premises considered, the petitions in G.R. Nos. 189486 and 189699 are hereby GRANTED. The Decision dated 27 May 2009 of the Court of
Appeals in CA-G .R. SP No. 106405 and its Resolution dated 03 September 2009 are REVERSED and SET ASIDE. The Court DECLARES that SEC-MC08-112
now pending before the Regional Trial Court, Branch 211, Mandaluyong City, is a nuisance suit and hereby ORDERS it toIMMEDIATELY DISMISS the same for
reasons discussed herein.
SO ORDERED.

.R. No. 102900 October 2, 1997

MARCELINO ARCELONA, TOMASA ARCELONA-CHIANG and RUTH ARCELONA, represented by their attorney-in-fact, ERLINDA PILE, petitioners,
vs.
COURT OF APPEALS, REGIONAL TRIAL COURT OF DAGUPAN CITY, Branch XL, and MOISES FARNACIO,respondents.

PANGANIBAN, J.:
What are the remedies and the grounds therefor to invalidate a final and executory judgment? May extraneous matters, not found in the records of the original case, be
used to void such final judgment? Procedurally, may an independent action for annulment of a decision filed in the Court of Appeals prosper in the face of a claim that
the remedy of intervention could have been availed of in the regional trial court during the original proceedings? Areall the co-owners pro indiviso of a real property

12

indispensable parties? Does the non-inclusion of some of such co-owners in a suit involving tenancy over said property constitute sufficient ground to nullify the final
decision rendered in such case?
The Case
These are the main questions raised in this petition for review of the Decision 1 in CA G.R. SP No. 24846 promulgated on July 16, 1991 by the Court of
Appeals 2 denying petitioners' plea for annulment of a final and executory judgment rendered by the Regional Trial Court of Dagupan City, Branch 40, in Civil Case No.
D-7240, and the Resolution 3promulgated on November 21, 1991 by the appellate court denying their motion for reconsideration.
The Facts
Petitioners Marcelino Arcelona, Tomasa Arcelona-Chiang and Ruth Arcelona are natural-born Filipinos who are now naturalized Americans residing in California,
U.S.A. Petitioner Ruth Arcelona is the surviving spouse and legal heir of the deceased Benedicto Arcelona, brother of Marcelino and Tomasa. Together with their three
sisters Pacita Arcelona-Olanday, Maria Arcelona-Arellano and Natividad Arcelona-Cruz (hereinafter collectively referred to as Olanday, et al.) petitioners are coowners pro-indiviso of a fishpond which they inherited from their deceased parents. 4 The six Arcelonas (two brothers and four sisters) are named as co-owners in
Transfer Certificate of Title No. 34341 which evidences ownership over the fishpond.
On March 4, 1978, a contract of lease over the fishpond was executed between Cipriano Tandoc and Olanday, et al. The lease contract was for a period of three (3) years
but was renewed up to February 2, 1984. 5
Private Respondent Moises Farnacio was appointed in turn by Tandoc as caretaker-tenant of the same fishpond, effective on the date the contract of lease was executed.
After the termination of the lease contract, the lessee (Tandoc) surrendered possession of the leased premises to the lessors, Olanday, et al.
Three days thereafter, on February 7, 1984, Private Respondent Farnacio instituted Civil Case D-7240 for "peaceful possession, maintenance of security of tenure plus
damages, with motion for the issuance of an interlocutory order" against Olanday, et al., before Respondent Regional Trial Court of Dagupan City, Branch 40. The case
was intended to maintain private respondent as tenant of the fishpond. 6
On October 31, 1984, the trial court rendered a decision in favor of private respondent, the dispositive portion of which reads: 7
WHEREFORE, in the light of the foregoing considerations, this Court hereby renders judgment as follows; to wit:
1. Declaring and recognizing Moises Farnacio as tenant-caretaker over the fishpond in question located at Lomboy District, Dagupan City;
2. Ordering the defendants to maintain plaintiff in the peaceful possession and cultivation of said fishpond, with all the rights accorded and obligations
imposed upon him by law;
3. Ordering the Branch Clerk of Court to withdraw and deliver to the plaintiff all the amounts deposited with this Court; and
4. All others claims of the parties are hereby denied for lack of merit.
Olanday, et al. elevated the decision to the then Intermediate Appellate Court (IAC) 8 which affirmed with slight modification the decision of the trial court on May 31,
1985. On appeal, this Court 9 sustained the IAC decision in G.R. No. 71217. On May 25, 1991, after remand of the case to the court of origin, private respondent was
placed in possession of the entire property covered by TCT 34341.
Petitioners then filed with Respondent Court of Appeals a petition for annulment of the aforesaid judgment against private respondent and the implementing
sheriff. 10 The case was docketed as CA GR SP No. 24846. On May 8, 1991, Respondent Court issued a resolution directing petitioners "to implead as party defendant
the Regional Trial Court of Dagupan City, Branch 50, Dagupan City." 11 Respondent Court promulgated in due course the assailed Decision and Resolution.
Dissatisfied, petitioners lodged this petition for review before us on May 10, 1992. On August 24, 1992, due course was granted to the petition, and the parties filed
their respective memoranda.
The Issues
In their Memorandum dated November 7, 1992, petitioners allege that Respondent Court of Appeals has committed the following errors: 12
I. The Respondent Court of Appeals erred in ruling that the sole and only ground for annulment of judgment is extrinsic fraud.
II. The Respondent Court of Appeals erred when it failed to consider that lack of due process and jurisdiction over the persons of the
petitioners are also valid grounds for annulment of judgment.

13

III. In annulment of judgment the grounds should be based solely on the records of the case. It is then an error for the Respondent
Court of Appeals to consider matters extraneous to the records of the case.
IV. The Respondent Court of Appeals erred in ruling that petitioners should have intervened in the proceedings for issuance of writ of
execution before the lower court.
V. The Respondent Court of Appeals erred in ruling that the petitioners are estopped or are guilty of laches in questioning the decision
of the lower court.
The Court believes that these five assigned errors may be condensed into three issues:
(1) May a final judgment be annulled on the ground of lack of jurisdiction (over the subject matter and/or over the person of
indispensable parties) and denial of due process, aside from extrinsic fraud?
(2) May extraneous matters, not found in the records of the original case, be used in voiding or defending the validity of such final
judgment?
(3) Procedurally, will an independent action for annulment of the decision of the regional trial court (which was affirmed both by the
Court of Appeals and the Supreme Court) filed before the Court of Appeals prosper, or is intervention before the court of origin the
only remedy?
The Court's Ruling
The petition is meritorious.
First Issue: Grounds for Annulment of Final Judgment
Petitioners contend that Respondent Court of Appeals erred in decreeing "the all-sweeping and categorical pronouncement that the sole and only ground for annulment
of judgment is extrinsic fraud," and in thereby ignoring various Supreme Court rulings that a final judgment may also be annulled for "a) lack of jurisdiction over the
subject matter; b) lack of jurisdiction over the persons of necessary or indispensable parties; and c) lack of due process." 13 Petitioners argue that, being co-owners of the
subject property, they are "indispensable parties." 14Inasmuch as they were not impleaded in Civil Case D-7240, "the questioned judgment of the lower court is void
insofar as the petitioners are concerned for want of jurisdiction over their persons and [for] lack of due process." 15 Petitioners "do not see any reason why a person who
was not made a party at all could not assail the same proceedings involving his property and affecting his rights and interests." 16
Petitioners further maintain that since "the case involves the personal status of the private respondent, or relates to, or the subject of which is property within the
Philippines, then the petitioners as non-residents" are entitled to extra-territorial service, 17 which is a "due process requirement." As they were never served with
summons, to "bar them [from] questioning the proceedings of the lower court will be compounding injustice . . . . If a party to a case can assail the proceedings for
defective service of summons," the same right should be afforded to a person who was not made a party at all. 18
Public respondent disposed of petitioners' above contention in this
wise: 19
First. Annulment of judgment, as the Supreme Court had occasion to rule, rests on a single ground: extrinsic fraud (Canlas vs. Court of Appeals, 170 [sic]
SCRA 160, 170). Islamic Da' Wah Council of the Phils. vs. Court of Appeals, 178, 186, citing Anuran vs. Aquino, 38 Phil. 29, emphatically announced that
there can be no question as to the right of any person adversely affected by a judgment to maintain an action to enjoin its enforcement and to have it declared
a nullity on the ground of fraud and collusion practiced in obtaining the judgment when such fraud is extrinsic or collateral to the matters involved in the
issues raised at the trial which resulted in such judgment.
xxx xxx xxx
Clearly, there is nothing in the petition that extrinsic fraud, as Macabingkil defines it, indeed vitiated the proceedings during the trial of Civil Case No. D7240.
The essence of the instant petition is worded by the petitioners as follows:
The common property involved in this case is covered by a Torrens Title, specifically mentioning the co-owners thereof. To bind the
entire property and the owners thereof, all the registered owners must be impleaded. The private respondent ONLY IMPLEADED the
three co-owners, excluding the petitioners herein. For the petitioners to be bound by the questioned decision, such would really be a
derogation of their constitutional right to due process. The questioned decision, too, suffers the fatal defect of utter want of
jurisdiction.

14

Accordingly, since the petition for annulment of judgment is not based on the ground of extrinsic fraud, the petition suffers from a basic and fundamental
infirmity that deprives petitioners of a valid cause of action against respondents herein.
We hold that the Court of Appeals erred in limiting the ground(s) for annulment of judgment to only one, namely, extrinsic fraud. While it is true that in the cited cases
of Canlas vs. CA 20 and Islamic Da' Wah Council of the Philippines vs. Court of Appeals, 21 this Court said that a judgment "may be annulled on the ground of extrinsic
or collateral fraud," 22 we should hasten to add that in Macabingkil vs. People's Homesite and Housing Corporation, 23 where the above ruling on annulment of judgment
was based, we held that there are really three ways by which a final judgment may be attacked: 24
Under existing rules, there are three (3) ways by which a final and executory judgment may be set aside. The first is by petition for relief from judgment
under Rule 38 of the Revised Rules of Court, when judgment has been taken against the party through fraud, accident, mistake or excusable negligence, in
which case the petition must be filed within sixty (60) days after the petitioner learns of the judgment, but not more than six (6) months after such judgment
was entered. The second is by direct action to annul and enjoin the enforcement of the judgment. This remedy presupposes that the challenged judgment is
not void upon its face, but is entirely regular in form, and the alleged defect is one which is not apparent upon its face or from the recitals contained in the
judgment.[fn: Abbain v. Chua, 22 SCRA 798; Cadano v. Cadano, 49 SCRA 33; Anuran v. Aquino, 38 Phil. 329] As explained in Banco Espaol-Filipino v.
Palanca, [fn: 37 Phil. 291, 949] "under accepted principles of law and practice, long recognized in American courts, the proper remedy in such case, after the
time for appeal or review has passed, is for the aggrieved party to bring an action enjoining the judgment, if not already carried into effect; or if the property
has already been disposed of, he may institute suit to recover it." The third is either a direct action, as certiorari, or by a collateral attack against the
challenged judgment (which is) is void upon its face, or that the nullity of the judgment is apparent by virtue of its own recitals. As aptly explained by Justice
Malcolm in his dissent in Banco Espaol-Filipino v.Palanca, supra, "A judgment which is void upon its face, and which requires only an inspection of the
judgment roll to demonstrate its want of vitality is a dead limb upon the judicial tree, which should be lopped off, if the power so to do exists."
Since the aforementioned decision in Civil Case No. Q-5866 is not void upon its face, it may only be annulled by direct action on the ground of fraud.
It is only extrinsic or collateral fraud, as distinguished from intrinsic fraud, however, that can serve as a basis for the annulment of judgment. [Aring v.
Original, 6 SCRA 1021, 1025; Velasco v. Velasco, 2 SCRA 736] Fraud has been regarded as extrinsic or collateral, within the meaning of the rule, "where it
is one the effect of which prevents a party from having a trial, or real contest, or from presenting all of his case to the court, or where it operates upon matters
pertaining, not to the judgment itself, but to the manner in which it was procured so that there is not a fair submission of the controversy." [46 Am. Jur. 913] .
...
It is clear then that to set aside a final and executory judgment, there are three remedies available to a litigant:first, a petition for relief from judgment under Rule 38 of
the Rules of Court 25 on grounds of fraud, accident, mistake and excusable negligence filed within sixty (60) days from the time petitioner learns of the judgment but not
more than six (6) months from the entry thereof; second, a direct action to annul the judgment on the ground of extrinsic fraud; and third, a direct action for certiorari or
collateral attack to annul a judgment that is void upon its face or void by virtue of its own recitals. Thus, Macabingkil did not preclude the setting aside of a decision
that is patently void where mere inspection of the judgment is enough to demonstrate its nullity on grounds of want of jurisdiction or non-compliance with due process
of law. This doctrine is recognized in other cases: 26
. . . . There is no question that a final judgment may be annulled. There are, however, certain requisites which must be established before a judgment can be
the subject of an action for annulment. "Under the present procedure, aside from the reliefs provided in these two sections (Secs. 1 & 2, Rule 38), there is no
other means whereby the defeated party may procure final and executory judgment to be a set aside with a view to the renewal of the litigation, unless (a) the
judgment is void for want of jurisdiction or for lack of due process of law, or (b) it has been obtained by fraud." (I Moran's Rule of Court 1950 Ed., 697,
citing Anuran v. Aquino, 38 Phil. 29; Banco Espaol-Filipino v. Palanca, 37 Phil. 921). Reason of public policy which favors the stability of judicial
decisions are (sic) mute in the presence of fraud which the law abhors (Garchitorena vs. Sotelo, 74 Phil. 25).
On the one hand, extrinsic fraud is the ground to annul a voidable final judgment; the declaration of nullity of a patently void final judgment, on the other, is based on
grounds other than extrinsic fraud. To say, then, that petitioners can avail themselves only of the ground of extrinsic fraud and no other is to fail to appreciate the true
meaning and ramifications of annulment/nullity.
Jurisdiction is conferred by law. Its exercise must strictly comply with the legal requisites; otherwise, a challenge on the ground of lack of jurisdiction may be brought
up anytime. Such jurisdiction normally refers to jurisdiction over the subject. As an example, in a case involving the issuance of a new owner's duplicate certificate of
title, the original of which was lost, stolen or destroyed, the court must strictly comply with the requisites of Section 109 of P.D. 1529; otherwise, its jurisdiction may be
attacked anytime. Thus, we ruled in New Durawood Co. Inc. vs. Court of Appeals: 27
In Demetriou vs. Court of Appeals, et al., [238 SCRA 158, at 162 (November 14, 1994)] this Court ruled:
In Serra Serra v. Court of Appeals (195 SCRA 482 [1991]), on facts analogous to those involved in this case, this Court already held
that if a certificate of title has not been lost but is in fact in the possession of another person, the reconstituted title is void and the
court rendering the decision has not acquired jurisdiction. Consequently the decision may be attacked any time.
In the instant case, the owner's duplicate certificates of title were in the possession of Dy Quim Pong, the petitioner's chairman of the board and whose
family controls the petitioner corporation. Since said certificates were not in fact "lost or destroyed," there was no necessity for the petition filed in the trial
court for the "Issuance of New Owner's Duplicate Certificates of Title . . . ," In fact, the said court never acquired jurisdiction to order the issuance of new
certificates. Hence, the newly issued duplicates are themselves null and void.

15

It is obvious that this lapse happened because private respondents and respondent judge failed to follow the procedure set forth in P.D. No. 1529 which, as
already stated, governs the issuance of new owner's duplicate certificates of title.
Section 109 of the said law provides, inter alia, that "due notice under oath" of the loss or theft of the owner's duplicate certificate "shall be sent by the
owner or by someone in his behalf to the Register of Deeds . . ." (emphasis supplied). In this case, while an affidavit of loss was attached to the petition in the
lower court, no such notice was sent to the Register of Deeds.
Private respondents tried to convince the Court that by their failure to locate Francis Dytiongsee, they had no other recourse but to file a petition for
reconstitution. Sec. 107 of the P.D. 1529, however, states that the remedy, in case of the refusal or failure of the holder in this case, the petitioner to
surrender the owner's duplicate certificate of title, is a "petition in court to compel surrender of the same to the Register of Deeds," and not a petition for
reconstitution.
Ineluctably, a judgment rendered without jurisdiction over the subject matter is void. As we elucidated in Leonor vs. CA: 28
Clearly and unequivocally, the summary procedure under Rule 108, and for that matter under Art. 412 of the Civil Code, cannot be used by Mauricio to
change his and Virginia's civil status from married to single and of their three children from legitimate to illegitimate. Neither does the trial court, under said
Rule, have any jurisdiction to declare their marriage null and void and as a result thereof, to order the local civil registrar to cancel the marriage entry in the
civil registry. Further, the respondent trial judge gravely and seriously abused his discretion in unceremoniously expanding his very limited jurisdiction
under such rule to hear evidence on such a controversial matter as nullity of a marriage under the Civil Code and/or Family Code, a process that is proper
only in ordinary adversarial proceedings under the Rules.
Jurisdiction over the Persons
of Indispensable Parties
True, the above dispositions refer to jurisdiction over the subject matter. Basic considerations of due process, however, impel a similar holding in cases involving
jurisdiction over the persons of indispensable parties which a court must acquire before it can validly pronounce judgments personal to said defendants. Courts acquire
jurisdiction over a party plaintiff upon the filing of the complaint. On the other hand, jurisdiction over the person of a party defendant is assured upon the service of
summons in the manner required by law or otherwise by his voluntary appearance. As a rule, if a defendant has not been summoned, the court acquires no jurisdiction
over his person, and a personal judgment rendered against such defendant is null and void. 29 A decision that is null and void for want of jurisdiction on the part of the
trial court is not a decision in the contemplation of law and, hence, it can never become final and executory. 30
Rule 3, Section 7 of the Rules of Court, defines indispensable parties as parties-in-interest without whom there can be no final determination of an action. As such, they
must be joined either as plaintiffs or as defendants. The general rule with reference to the making of parties in a civil action requires, of course, the joinder of all
necessary parties where possible, and the joinder of all indispensable parties under any and all conditions, their presence being a sine qua non for the exercise of judicial
power. 31 It is precisely "when an indispensable party is not before the court (that) the action should be dismissed." 32 The absence of an indispensable party renders all
subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present. 33
Petitioners are co-owners of a fishpond. Private respondent does not deny this fact, and the Court of Appeals did not make any contrary finding. The fishpond is
undivided; it is impossible to pinpoint which specific portion of the property is owned by Olanday, et al. and which portion belongs to petitioners. Thus, it is not
possible to show over which portion the tenancy relation of private respondent has been established and ruled upon in Civil Case D-7240. Indeed, petitioners should
have been properly impleaded as indispensable parties. Servicewide Specialists, Incorporated vs. Court of Appeals 34 held that no final determination of a case could be
made if an indispensable party is not impleaded:
. . . . An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final determination of the case
can be had. The party's interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties that his legal
presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of the parties before the court which
is effective, complete, or equitable.
Formerly, Article 487 of the old Civil Code provided that "any one of the co-owners may bring an action in ejectment." It was subsequently held that a co-owner could
not maintain an action in ejectment without joining all the other co-owners. Former Chief Justice Moran, an eminent authority on remedial law, explains: 35
. . . . As held by the Supreme Court, were the courts to permit an action in ejectment to be maintained by a person having merely an undivided interest in any
given tract of land, a judgment in favor of the defendants would not be conclusive as against the other co-owners not parties to the suit, and thus the
defendant in possession of the property might be harassed by as many succeeding actions of ejectment, as there might be co-owners of the title asserted
against him. The purpose of this provision was to prevent multiplicity of suits by requiring the person asserting a right against the defendant to include with
him, either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that the whole matter in dispute may be determined once and for
all in one litigation.
Contrariwise, it is logical that a tenant, in an action to establish his status as such, must implead all the pro-indiviso co-owners; in failing to do so, there can be no final
determination of the action. In other words, a tenant who fails to implead all the co-owners cannot establish with finality his tenancy over the entire co-owned land.

16

Co-owners in an action for the security of tenure of a tenant are encompassed within the definition of indispensable parties; thus, all of them must be impleaded. As
defined: 36
An indispensable party is a party who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence,
without injuring or affecting that interest, a party who has not only an interest in the subject matter of the controversy, but also has an interest of such nature
that a final decree cannot be made without affecting his interest or leaving the controversy in such a condition that its final determination may be wholly
inconsistent with equity and good conscience. It has also been considered that an indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is effective, complete, or equitable. Further, an indispensable party is one who must be
included in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the controversy or subject matter is separable from the interest of the other parties, so that it
will not necessarily be directly or injuriously affected by a decree which does complete justice between them. Also, a person is not an indispensable party if
his presence would merely permit complete relief between him and those already parties to the action, or if he has no interest in the subject matter of the
action. It is not a sufficient reason to declare a person to be an indispensable party that his presence will avoid multiple litigation.
Clearly, the decision in Civil Case D-7240 cannot bind petitioners and cannot adjudicate the entire co-owned property, not even that portion belonging to Olanday et al.,
ownership of the property being still pro-indiviso. Obviously, the failure to implead petitioners barred the lower court from making a final adjudication. Without the
presence of indispensable parties to a suit or proceeding, a judgment therein cannot attain finality. 37
Ergo, res inter alios judicatae nullum aliis praejudicarium faciunt. 38 Thus, the Court, through former Chief Justice Marcelo B. Fernan, held that a person who was not
impleaded in the complaint cannot be bound by the decision rendered therein, for no man shall be affected by a proceeding in which he is a stranger. 39
Admittedly, in this case, the want of jurisdiction of the trial court in rendering its decision in Civil Case No. D-7240 is not patent on the face of said judgment. However,
there were glaring documentary and testimonial pieces of evidence referred to by the trial court in its decision which should have prompted it to inquire further whether
there were other indispensable parties who were not impleaded. These facts and circumstances should have forewarned the trial court that it had not acquired
jurisdiction over a number of indispensable parties. In American jurisprudence, the nullity of a decision arising from lack of jurisdiction may be determined from the
record of the case, not necessarily from the face of the judgment only. 40 We believe that this rule should be applied to this case, considering that in the assailed trial
court's decision, referrals were made to crucial evidence which if scrutinized would readily reveal that there were indispensable parties omitted.
First, the decision referred to the subject property "as Lot No. 3312 of the Cadastral Survey." 41 This lot was particularly described in private respondent's Complaint
dated February 6, 1984 filed in Civil Case D-7240. 42 Obviously such description was copied by private respondent from the transfer certificate of title over the subject
fishpond issued on August 12, 1975 naming all the co-owners, including the herein petitioners and the fact of their foreign residences, thus: 43
IT IS HEREBY CERTIFIED that certain land situated in the City of Dagupan, formerly in the Province of Pangasinanbounded and described as follows:
A parcel of land (Lot 3312 of the Cadastral Survey of Dagupan), situated in the City of Dagupan . . . .
is registered in accordance with the provisions of the Land Registration Act in the name of PACITA ARCELONA, married to Miguel Ulanday; TOMASA
ARCELONA, married to Tung Ming Chiang;MARCELINO V. ARCELONA, married to Soledad Tiongco; MARIA V. ARCELONA, married to Oreste
Arellano; BENEDICTO V. ARCELONA, married to Ruth Suget; and NATIVIDAD ARCELONA, married to Agrimero Cruz; all of legal age, Filipinos, the
second and fifth named residents of Los Angeles, California, U.S.A., third & fourth of Manila; first of Villasis, Pangasinan & the last named of Lingayen,
Pangasinan as owner thereof in fee simple, subject to such of the incumbrances mentioned in Section 39 of said Act as may be subsisting, and to
xxx xxx xxx
Entered at the City of
Dagupan Philippines,
on the
12th day of August in
the year
nineteen hundred
and seventy
five at 4:00 p m.
(Emphasis supplied).
Considering that private respondent was suing to establish his status as a tenant over the subject fishpond, the responsibility for impleading all the indispensable parties
undeniably rested on him as provided under Rule 3 of the Rules of Court. Section 2 of Rule 3 requires that "every action must be prosecuted and defended in the name
of the real party in interest. All persons having an interest in the subject of the action and in obtaining the relief demanded shall be joined as plaintiffs." Further, Section
7 of the same rule states that "(p)arties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants."

17

Second, Respondent Court of Appeals ruled that private respondent "in his motion to dismiss (before said Court) alleged that petitioners knew of the lessee as revealed
by the testimony of Pacita Olanday, one of the defendants in Civil Case No. D-7240 and a sister of petitioners. (TSN, pp. 15-16, hearing of October 2, 1984, Civil Case
No. D-7240)." That being so, why did private respondent fail to include petitioners as defendants in the case below? It should be noted that the lease contract was
between Cipriano Tandoc and Olanday, et al. Private respondent, a caretaker-tenant of Tandoc, knew or should have known that there were co-owners other than
Olanlday, et al. And even conceding arguendo that petitioners had authorized Olanday, et al. to enter into a lease contract with Tandoc, this fact did not authorize the
latter to represent petitioners in the civil case he brought. Under Rule 9, Section 9 of the Rules of Court, the pleader is required to set forth the names, if known to him,
of persons who ought to be parties, if complete relief is to be accorded to those who are already parties but who are not joined; and to state why they have been omitted.
Surely, he brought suit to establish his status as a tenant. It is thus his responsibility to state the names of all the persons against whom he wants to establish his status as
tenant.
Third, both the private respondent and the trial court knew of the obvious omission of petitioners as party defendants. Telling is the fact that, by reciting part of the
transcript of stenographic notes, private respondent himself provided clear evidence in his memorandum that he knew of the existence of other co-owners who were not
impleaded in his case against Olanday et al.: 44
As admitted by Pacita Olanday, one of the defendants in Civil Case No. D-7240, the petitioners know of the lease with Cipriano Tandoc; they were
authorized to lease the shares of the petitioners. Here is the testimony of Pacita Olanday:
ATTY. VINLUAN:
Q. You made mentioned that you were authorized by your brothers and sister who are (sic) residing in the United States to enter into a
contract. Did these brothers and sister of yours make any special power of attorney authorizing you to that effect?
xxx xxx xxx
A. I talked with my brothers when they "balik-bayan", they said I will make an agreement. (tsn. October 2, 1984 pp. 15 and 16
CV# D-7240).
He also knew that in executing the lease, Pacita Olanday represented only her sisters (Maria and Natividad) who were residing in the Philippines. Definitely, at the time
of the execution of the contract, she had no brother residing in the Philippines because her only brothers, Marcelino and Benedicto Arcelona, (the latter now deceased
and represented in this case by Petitioner Ruth Arcelona) were living in California. This fact can be deduced from the recitals of the RTC decision: 45
It is undisputed in the records that the defendants (referring to Olanday, et al.) are co-owners and civil law lessors of a fishpond otherwise known as Lot No.
3312 of the Cadastral Survey of Dagupan City; that as owners, they entered into a Contract of Lease (Exh. "1") with one Cipriano Tandoc dated March 4,
1978 for a term of three (3) years from February 2, 1982, which contract was renewed for another two (2) years up to February 2, 1984. On the 31st of
January, 1984, Exhibit "3", an "Affidavit of Surrender of Rights and Possession of Lessee over a Fishpond" was executed between Cipriano Tandoc and
Pacita Olanday who signed for herself and in behalf of her two (2) sisters. Plaintiff Moises Farnacio was however, instituted as caretaker-tenant over the
same fishpond by Cipriano Tandoc on the date of the Contract of Lease was entered into between the owners-lessors and Cipriano Tandoc. The private
agreement (Exh. "D") signed by Cipriano Tandoc and Moises Farnacio is, however, assailed in a criminal case for falsification in the Fiscal's Office."
(Emphasis supplied).
In fact, only these co-owners who are residing in the Philippines were joined as defendants in Civil Case D-7240. But the mention of Pacita's relatives who were
residing abroad should have made the trial court aware of the existence of indispensable parties who were not yet impleaded.
Despite this knowledge of the apparent defect in the complaint and in its jurisdiction, the trial court did not take the initiative to implead petitioners as defendants or to
order private respondent to do so, contrary to the clear mandate of Rule 3, Sec. 11 of the Rules of Court 46 which provides:
Sec. 11. Misjoinder and non-joinder of parties. Misjoinder of parties is not ground for dismissal of an action. Parties may be dropped or added by order of
the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a party may be severed
and proceeded with separately.
The foregoing testimony on the existence of other co-owners was a clear signal that indispensable parties had not yet been impleaded. Indeed, this knowledge should
have put the private respondent and the trial court on guard. The burden to implead or to order the impleading of indispensable parties is placed on private respondent
and on the trial court, respectively. Since no evidence was presented to prove that petitioners were aware of the civil case filed against Olanday et al., they cannot be
faulted for not intervening therein.
In sum, we hold that the nullity of a judgment grounded on lack of jurisdiction may be shown not only by what patently appears on the face of such decision but also by
documentary and testimonial evidence found in the records of the case and upon which such judgment is based.
Before ending our discussion on the first issue, we must stress that the then Intermediate Appellate Court and this Court, in affirming the RTC decision in Civil Case
No. D-7240 which we here nullify, had not been given the occasion to rule on the issue of the trial court's jurisdiction over the persons of indispensable parties; verily,
this question had not been raised before the two appellate courts. The review of civil cases by appellate courts is confined only to the issues raised by the parties. Hence,

18

appellate courts do not have the privilege or the opportunity afforded the trial courts to consider matters beyond the specifically contested issues, e.g., jurisdiction over
indispensable parties, as in this case. Such lack of jurisdiction could not have been known by the appellate courts, including this Court, as it was not patent from the
documents or submissions filed before them. The issue raised before the then Intermediate Appellate Court and this Court was formulated in this wise: "(t)he validity of
private respondent's claim that he is a tenant of the petitioners' fishpond, with security of tenure as such assured under the law, is the basic question presented in this
appeal." 47 We underscore the fact that the issue of whether all the indispensable parties had been validly impleaded, if at all, had not been raised at that time. In any
event, whether the indispensable parties were actually impleaded and jurisdiction over them was acquired was a factual question for the trial court to determine.
Consistent with the basic doctrine that factual findings of lower courts are binding on appellate courts unless covered by the recognized exceptions, 48 appellate courts
must be able to rely on the implied affirmation of the trial court that jurisdiction had been acquired over indispensable parties, especially when this was not raised as an
issue on appeal. The responsibility for impleading indispensable parties for the exhaustive trial of a case cannot rest on this forum or on the then Intermediate Appellate
Court. Indeed, the Decision of this Court affirming the said trial court's decision is captioned only as "Pacita A. Olanday, Maria A. Arellano and Natividad A. Cruz,
petitioners, vs. Intermediate Appellate Court and Moises Farnacio, respondents", clearly indicating that petitioners herein had been omitted as indispensable parties in
the proceedings before the trial court and before the appellate tribunals. Substantial justice requires that this error be now rectified.
Second Issue: Estoppel and Laches
Apart from holding that there was only one ground to annul a judgment, namely, extrinsic fraud, the appellate court using extraneous evidence also found that
estoppel and laches had set in against petitioners, thereby barring them from asserting lack of jurisdiction over their persons. These "extraneous matters" are stated by
the Respondent Court in this wise:
. . . True, indeed, that petitioners were not original parties to the action and that the decision embraces half of the property in dispute belonging to petitioners
as co-owners thereof. But they cannot now complain they were denied due process. It will be recalled that the contract of lease was entered with one
Cipriano Tandoc on March 4, 1978 for a term of three years, which contract was renewed for another two years up to February 2, 1984. During all the years
of the existence of the lease contract, it would be incredulous for petitioners to assert that they never knew of such lease agreement from their three sisters,
the defendants herein. Petitioners raised no overt protest against the lease contract executed by their sisters with Cipriano Tandoc in 1978 and renewed in
1982. Petitioners took no direct action to promptly disavow or disaffirm the action taken by their sisters to lease the entire property to Tandoc.
It is likewise unbelievable that during all the years that the subject property (fishpond) is under litigation in Civil Case No. D-7240 from 1984 to 1991,
petitioners were not aware that their property is subject of the controversy. By their continued silence, they have permitted the acts of their sisters in leasing
the property and they cannot now be heard, after a prolonged period of time, to denounce such acts as done without their knowledge and consent. The rule of
acquiescence by silence has estopped petitioners to deny the reality of the state of things which they made to appear to exist and upon which others have
been led to reply. Parties must take the consequences of the position they assume. Sound ethics require that the apparent in its effects and consequences
should be as if it were real, and the law properly so regards. (Metro Manila Transit Corporation vs. Morales, 173 SCRA 629, 633).
In Santiago Syjuco, Inc. vs. Castro, 175 SCRA 171, 192, it was held, inter alia:
xxx xxx xxx
. . . . Likewise, in Criminal Case No. 16866 for falsification against respondent Farnacio before Branch 3 of the Municipal Trial Court of Dagupan City,
witness Juan Bernal testified that the petitioners herein Tomasa Arcelona, Marcelino Arcelona and Ben Arcelona authorized their sisters Natividad Cruz,
Corazon Arcelona, Pacita Olanday to lease the fishpond to Cipriano Tandoc. (TSN, pp. 5-6, hearing of August 10, 1987 in Criminal Case No. 16866). 49
Petitioners balk at these pronouncements, arguing that in annulment of judgments, "the grounds thereof must be based solely on the records of the case." They contend
that "to permit the court's record to be contradicted or varied by evidence dehors would render such records of no avail." Petitioners contend that Respondent Court of
Appeals erred in taking into account "the proceedings in Criminal Case No. 16866 to show alleged knowledge of the petitioners herein of the lease of the property to
Cipriano Tandoc." 50 Petitioners submit that the bone of contention in this case is
not knowledge of the petitioners of the Lease Contract executed by Pacita Olanday et al. and Cipriano Tandoc, but whether the petitioners knew of the case
filed by private respondent against Pacita Olanday et al. involving their common property.
Petitioners stress that Private Respondent Farnacio is "a total stranger" and has absolutely no privity of interest with them because it was Tandoc, not Farnacio, who
entered into a lease contract with Olanday, et al. 51
Petitioners deny any concealment or deception on their part that would constitute estoppel. They contend that in the transfer certificate of title, their names "were
specifically mentioned as co-owners of the property on which the private respondent sought to be installed in physical possession as tenant." 52 They aver that
Respondent Court of Appeals' finding that they had knowledge of the lease contract "is based on presumption not on clear and convincing evidence." Assuming,
according to petitioners, that they can be held in estoppel, it can only be as against Cipriano Tandoc, not private respondent who "was never a party to the lease
contract." 53
Since the judgment is void "insofar as the petitioner are concerned for lack of jurisdiction [over] their persons and for want of due process," and since they "were never
given the opportunity to institute any action to protect their interest," petitioners contend that to bar them now by laches and estoppel "will create an unfair and unjust
situation." For as petitioners candidly state, they "do not question the pronouncement that private respondent is the tenant of Pacita Olanday et al."; however, they

19

submit that the issue in this case is whether private respondent "is also the tenant of herein petitioners entitled to be placed in physical possession and cultivation of their
undetermined share in the property without [petitioners] being made parties in the case." 54
Private respondent counters that "Pacita Olanday . . . testified that she was authorized to lease the share of . . . petitioners." According to private respondent, while
petitioners were in the Philippines, they were informed of the appointment of private respondent as caretaker-tenant of the entire fishpond, and they did not object to
such appointment. 55 Further, private respondent contends that petitioners failed to intervene in the case before the writ of execution was granted on "May 5, 1991"
despite the "appearance . . . of their counsel, Atty. Marina Cruz, when the motion for issuance of said writ was heard." Private respondent adds that he was "impliedly
recognized" as a tenant when petitioners "received their corresponding shares [i]n the lease rental of the property from the private respondent, through Olanday, et al.
and their counsel, Atty. Marina Cruz." 56
As correctly put by petitioners, we hold that Respondent Court of Appeals, in deciding the petition to declare the judgment void, cannot consider extraneous matters to
vary what the records bear. In other words, the Court of Appeals cannot annul or declare null the assailed decision with such extraneous matters. The validity or nullity
of the said decision must stand or fall on its own face and the evidence on record.
In an action to declare a judgment void because of lack of jurisdiction over the parties or subject matter, onlyevidence found in the records of the case can justify the
annulment of the said judgment. Contrariwise, the nullity of the judgment due to lack of jurisdiction may be proved at most by the evidence on record but never by
extraneous evidence. Sen. Vicente J. Francisco aptly explains this in his treatise on the Rules of Court: 57
The validity of a final judgment may be attacked on the ground that the judgment or order is null and void, because the court had no power or authority to
grant the relief or no jurisdiction over the subject matter or over the parties or both. The aggrieved party may attack the validity of the final judgment by a
direct action or proceeding in order to annul the same, as certiorari, which is not incidental to, but is the main object of the proceeding. The validity of a
final judgment may also be attacked collaterally as when a party files a motion for the execution of the judgment and the adverse party resists the motion by
claiming that the court has no authority to pronounce the judgment and that the same is null and void for lack of jurisdiction over the subject matter or over
the parties.
In cases of collateral attack, the principles that apply have been stated as follows: "The legitimate province of collateral impeachment is void judgments.
There and there alone can it meet with any measure of success. Decision after decision bears this import: "In every case the field of collateral inquiry is
narrowed down to the single issue concerning the void character of the judgment and the assailant is called upon to satisfy the court that such is the fact. To
compass his purpose of overthrowing the judgment, it is not enough that he shows a mistaken or erroneous decision or a record disclosing non-jurisdictional
irregularities in the proceedings leading up to the judgment. He must go beyond this and show to the court, generally from the fact of the record itself, and
not by extraneous evidence that the judgment complained of is utterly void. If he can do that his attack will succeed for the cases leave no doubt respecting
the right of a litigant to collaterally impeach a judgment that he can prove to be void.
The reason for the rule of exclusion of extraneous proof to show that the judgment complained of is utterly void for lack of jurisdiction has been expressed in
the following words: "The doctrine that the question of jurisdiction is to be determined by the record alone, thereby excluding extraneous proof seems to be
the natural unavoidable result of that stamp of authenticity which, from the earliest times, was placed upon the "record," and which gave it such
"uncontrollable credit and verity that no plea, proof, or averment could be heard to the contrary." . . . Any rule, . . . would be disastrous in its results, since to
permit the court's record to be contradicted or varied by evidence dehors would render such records of no avail and definite sentences would afford but slight
protection to the rights of parties once solemnly adjudicated.
We should add, however, that where an action for annulment of judgment is grounded on extrinsic fraud, extraneous evidence is admitted. We have held that, although a
person need not be a party to the judgment sought to be annulled by reason of extrinsic fraud, he must prove his allegation that the judgment was obtained by the use of
fraud and collusion and that he would be adversely affected thereby. 58 Fraud must be extraneous, otherwise, there would be no end to litigation. Extrinsic fraud refers to
any fraudulent act committed by a prevailing party outside the trial of the case, whereby the defeated party has been prevented from fully exhibiting his side of the case,
because of fraud or deception practiced on him by his opponent. 59 As distinctly defined in Cosmic Lumber Corporation vs.Court of Appeals, et al.: 60
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is one the effect of which prevents a party from hearing a trial, or
real contest, or from presenting all of his case to the court, or where it operates upon matters, not pertaining to the judgment itself, but to the manner in
which it was procured so that there is not a fair submission of the controversy. In other words, extrinsic fraud refers to any fraudulent act of the prevailing
party in the litigation which is committed outside of the trial of the case, whereby the defeated party has been prevented from exhibiting fully his side of the
case by fraud or deception practiced on him by his opponent. (fn: Makabingkil v. PHHC, No. L-29080, 17 August 1976, 72 SCRA 326, 343-344) Fraud is
extrinsic where the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practiced on him by his opponent, as keeping
him away from court, a false promise of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the
plaintiff; or where an attorney fraudulently or without authority connives at his defeat; these and similar cases which show that there has never been a real
contest in the trial or hearing of the case are reasons for which a new suit may be sustained to set aside and annul the former judgment and open the case for
a new and fair hearing. (fn: Id., p. 344 citing U.S. v. Throckmorton, 25 L. Ed. 93, 95)
In deciding the "petition for annulment of judgment" which should be a "petition to declare judgment void" Respondent Court of Appeals should not have
considered the following matters which find no support from the records and are thus considered "extraneous": (1) the assumption that petitioners knew of the five-year
lease contract with private respondent and the pendency of Civil Case No. D-7240 from 1984 to 1991; and (2) the testimony of Juan Bernal in a separate criminal case
before another court concerning the authority granted to Olanday et al. and where petitioners were not parties. The rule is that the nullity of the decision arising from
want of jurisdiction and/or due process should appear from the records of the case. And the validity of the judgment cannot be anchored on mere suppositions or
speculations, as Respondent Court did.

20

Equally important, the finding of estoppel and laches by Respondent Court is not supported by the evidence on record. The silence of petitioners can easily be explained
by the fact that they were not in the country during the pendency of the subject civil case. Such absence from the country was never rebutted by private respondent.
Even in the proceedings antecedent to this case before us now, petitioners were merely represented by their attorney-in-fact. 61 Moreover, they were not at all impleaded
as parties in the judgment sought to be voided. Neither were they properly served summons. The indelible fact is that they were completely ignored.
In any event, we ruled in Alabang Development Corporation vs. Valenzuela 62 that no laches attach when the judgment is null and void for want of jurisdiction:
The herein respondents attribute laches to the petitioners for not appealing from the order of the lower court denying their motion to intervene and motion for
new trial hence allowing the said order/decision to become final. There is no laches nor finality of any decision to speak of since the decision under question
is herein pronounced null and void for having been rendered without jurisdiction. Prescinding therefrom, as admitted by themselves in their comment, the
judgment of reconstitution is "ineffective" against the owners of lands covered thereby who were not joined as parties in the proceeding. As the Court ruled
in Bernal case on the matter of intervention [fn: 93 SCRA at pp. 247, 248] "a valid judgment cannot even be rendered where there is want of indispensable
parties' such as petitioners who hold subsisting Torrens Title to the properties in question and "this aspect of the case commands the joinder of indispensable
parties to allow them to uphold their interests based upon the Torrens titles they hold overrides any question of later intervention." Petitioners have precisely
availed of the proper, speedy and adequate remedy of the present special civil action of certiorari and prohibition to annul and set aside for want of
jurisdiction the decision and all proceedings of respondent judge.
On the other hand, the doctrine of estoppel is predicated on and finds its roots in equity which, broadly defined, is justice according to natural law and right. It is a
principle intended to prevent a clear case of injustice. The term is hardly separable from a waiver of right. Estoppel, like laches, must be intentional and unequivocal, for
when misapplied, it can easily become a most convenient and effective means of injustice. Estoppel is a principle that, as a rule, can be invoked only in highly
exceptional and legitimate cases. 63 In Cruz vs. Court of Appeals, 64 we reiterated the requisites of estoppel:
In Kalalo vs. Luz, [fn: 34 SCRA 337] We held that the essential elements of estoppel in respect to the party claiming it are: (a) lack of knowledge and of the
means of knowledge of the truth as the facts in question; (b) reliance, in good faith, upon the conduct or statements of the party to be estopped; and (c) action
or inaction based thereon of such character as to change the position or status of the party claiming the estoppel, to his injury, detriment, or prejudice.
The herein facts ineluctably show the absence of the first element in this case. Inasmuch as there is no proof that petitioners had knowledge of the pending tenancy case
filed by private respondent, it is only fair that they should not be held in estoppel for failing to intervene in and to question the jurisdiction of the trial court in Civil Case
No. D-7240. Thus, private respondent may not say that he was misled into believing that petitioners knew of the lease contract and of the litigation of Civil Case No. D7240. Undisputedly, from the evidence on record, petitioners had no such knowledge.
Petitioners' receipt of lease rentals cannot be used as proof of recognition of private respondent as a caretaker-tenant. This issue was not raised in the lower court and is
being alleged for the first time before us. Well-settled is the doctrine that questions not raised in the lower courts cannot be raised for the first time on appeal. 65
Third Issue: Intervention as a Remedy of Petitioners
Petitioners contend that Respondent Court of Appeals erred when it ruled that their only remedy was intervention during the execution stage of Civil Case No. D-7240.
Inasmuch as "annulment of judgment could be made either collaterally or directly," petitioners insist that their resort to "direct action in annulling the Decision of the
lower court should not be taken against them." 66 Moreover, petitioners argue that "in proceedings for execution of a final decision or judgment, it is the ministerial duty
of the court of origin to issue the writ." 67 Petitioners add that because their action would result in the "modification, alteration, and annulment of the judgment, the
specific provision of law that annulment of judgment of the Regional Trial Court is within the exclusive jurisdiction of the Court of Appeals should prevail." 68
Private respondent counters that petitioners deliberately did not intervene "to afford them opportunity to question, as they now question, the validity of any decision to
be rendered in said case, . . . in the event of an adverse decision." 69
We hold that intervention is not the only remedy to assail a void final judgment. There is no procedural rule prescribing that petitioners' intervention in the hearing for
the issuance of a writ is the only way to question a void final judgment. As already stated, petitioners were not aware of such hearing. Besides, as already discussed, a
direct action is available in assailing final judgments grounded on extrinsic fraud, while a direct or a collateral action may be used to show lack of jurisdiction.
The assailed Decision of Respondent Court of Appeals cites certain cases allowing intervention as follows: 70
A case in which an execution has been issued is regarded as still pending so that all proceedings in the execution are proceedings in the suit. There is no
question that the court which rendered the judgment has a general supervisory control over its process of execution and this power carries with it the right to
determine every question of fact and law which may be involved in the execution. (Suson vs. Court of Appeals, 172 SCRA 70, 75, citing Paman vs. Severis,
115 SCRA 709; Seavan Carrier vs. GTI Sportswear, 137 SCRA 580)
These cases, which require intervention of parties who may be adversely affected by the decision, are not applicable. In the cited Suson vs. Court of Appeals, 71 the
parties, though not impleaded, knew of the case and were in fact directed by the trial court to intervene, but they refused to do so. These particular facts are absent in the
instant case where, to repeat, petitioners were abroad when Civil Case D-7240 was prosecuted.

21

In any event, as earlier pointed out, jurisprudence upholds the soundness of an independent action to declare as null and void a judgment rendered without jurisdiction
as in this case. In Leonor vs. Court of Appeals, 72 Petitioner Virginia A. Leonor, through a "petition for certiorari, prohibition and mandamus . . . sought the nullification
of both the decision dated December 14, 1992 and the order dated February 24, 1993 of the trial court for having been issued in excess of jurisdiction and/or with grave
abuse of discretion." 73 We held in that case that: 74
A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All acts performed
pursuant to it and all claims emanating from it have no legal effect. Hence, it can never become final and any writ of execution based on it is void: ". . . it
may be said to be a lawless thing which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head."
WHEREFORE, the petition for certiorari is GRANTED. The Decision of Respondent Court of Appeals is hereby REVERSED and SET ASIDE. The decisions in Civil
Case No. D-7240, AC-G.R. SP-05237-CAR and G.R. No. L-71217 are ANNULLED and SET ASIDE for lack of jurisdiction. No costs.
SO ORDERED.

G.R. No. 194024

April 25, 2012

PHILIP L. GO, PACIFICO Q. LIM and ANDREW Q. LIM Petitioners,

vs.
DISTINCTION PROPERTIES DEVELOPMENT AND CONSTRUCTION, INC. Respondent.
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the March 17, 2010 Decision 1 and October 7, 2010
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 110013 entitled "Distinction Properties Development & Construction, Inc. v. Housing Land Use
Regulatory Board (NCR), Philip L. Go, Pacifico Q. Lim and Andrew Q. Lim."
Factual and Procedural Antecedents:
Philip L. Go, Pacifico Q. Lim and Andrew Q. Lim (petitioners) are registered individual owners of condominium units in Phoenix Heights Condominium located at H.
Javier/Canley Road, Bo. Bagong Ilog, Pasig City, Metro Manila.
Respondent Distinction Properties Development and Construction, Inc. (DPDCI) is a corporation existing under the laws of the Philippines with principal office at No.
1020 Soler Street, Binondo, Manila. It was incorporated as a real estate developer, engaged in the development of condominium projects, among which was the Phoenix
Heights Condominium.
In February 1996, petitioner Pacifico Lim, one of the incorporators and the then president of DPDCI, executed aMaster Deed and Declaration of
Restrictions (MDDR)3 of Phoenix Heights Condominium, which was filed with the Registry of Deeds. As the developer, DPDCI undertook, among others, the
marketing aspect of the project, the sale of the units and the release of flyers and brochures.
Thereafter, Phoenix Heights Condominium Corporation (PHCC) was formally organized and incorporated. Sometime in 2000, DPDCI turned over to PHCC the
ownership and possession of the condominium units, except for the two saleable commercial units/spaces:
1. G/F Level BAS covered by Condominium Certificate of Title (CCT) No. 21030 utilized as the PHCCs administration office, and
2. G/F Level 4-A covered by CCT No. PT-27396/C-136-II used as living quarters by the building administrator.
Although used by PHCC, DPDCI was assessed association dues for these two units.
Meanwhile, in March 1999, petitioner Pacifico Lim, as president of DPDCI, filed an Application for Alteration of Plan4 pertaining to the construction of 22 storage
units in the spaces adjunct to the parking area of the building. The application, however, was disapproved as the proposed alteration would obstruct light and ventilation.
In August 2004, through its Board,5 PHCC approved a settlement offer from DPDCI for the set-off of the latters association dues arrears with the assignment of title
over CCT Nos. 21030 and PT-27396/C-136-II and their conversion into common areas. Thus, CCT Nos. PT-43400 and PT-43399 were issued by the Registrar of Deeds
of Pasig City in favor of PHCC in lieu of the old titles. The said settlement between the two corporations likewise included the reversion of the 22 storage spaces into

22

common areas. With the conformity of PHCC, DPDCIs application for alteration (conversion of unconstructed 22 storage units and units GF4-A and BAS from
saleable to common areas) was granted by the Housing and Land Use Regulatory Board (HLURB). 6
In August 2008, petitioners, as condominium unit-owners, filed a complaint7 before the HLURB against DPDCI for unsound business practices and violation of the
MDDR. The case was docketed as REM- 080508-13906. They alleged that DPDCI committed misrepresentation in their circulated flyers and brochures as to the
facilities or amenities that would be available in the condominium and failed to perform its obligation to comply with the MDDR.
In defense, DPDCI denied that it had breached its promises and representations to the public concerning the facilities in the condominium. It alleged that the brochure
attached to the complaint was "a mere preparatory draft" and not the official one actually distributed to the public, and that the said brochure contained a disclaimer as
to the binding effect of the supposed offers therein. Also, DPDCI questioned the petitioners personality to sue as the action was a derivative suit.
After due hearing, the HLURB rendered its decision8 in favor of petitioners. It held as invalid the agreement entered into between DPDCI and PHCC, as to the alteration
or conversion of the subject units into common areas, which it previously approved, for the reason that it was not approved by the majority of the members of PHCC as
required under Section 13 of the MDDR. It stated that DPDCIs defense, that the brochure was a mere draft, was against human experience and a convenient excuse to
avoid its obligation to provide the facility of the project. The HLURB further stated that the case was not a derivative suit but one which involved contracts of sale of
the respective units between the complainants and DPDCI, hence, within its jurisdiction pursuant to Section 1, Presidential Decree (P.D.) No. 957 (The Subdivision and
Condominium Buyers Protective Decree), as amended. The decretal portion of the HLURB decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. Ordering respondent to restore/provide proper gym facilities, to restore the hallway at the mezzanine floor.
2. Declaring the conversion/alteration of 22 storage units and Units GF4-A and BAS as illegal, and consequently, and ordering respondent to continue paying
the condominium dues for these units, with interest and surcharge.
3. Ordering the Respondent to pay the sum of Php998,190.70, plus interests and surcharges, as condominium dues in arrears and turnover the
administration office to PHCC without any charges pursuant to the representation of the respondent in the brochures it circulated to the public with a
corresponding credit to complainants individual shares as members of PHCC entitled to such refund or reimbursements.
4. Ordering the Respondent to refund to the PHCC the amount of Php1,277,500.00, representing the cost of the deep well, with interests and surcharges with
a corresponding credit to complainants individual shares as members of PHCC entitled to such refund or reimbursements.
5. Ordering the Respondent to pay the complainants moral and exemplary damages in the amount of P10,000.00 and attorneys fees in the amount
of P 10,000.00.
All other claims and counterclaims are hereby dismissed accordingly.
IT IS SO ORDERED.9
Aggrieved, DPDCI filed with the CA its Petition for Certiorari and Prohibition 10 dated August 11, 2009, on the ground that the HLURB decision was a patent nullity
constituting an act without or beyond its jurisdiction and that it had no other plain, speedy and adequate remedy in the course of law.
On March 17, 2010, the CA rendered the assailed decision which disposed of the case in favor of DPDCI as follows:
WHEREFORE, in view of the foregoing, the petition is GRANTED. Accordingly, the assailed Decision of the HLURB in Case No. REM-0800508-13906 is
ANNULLED and SET ASIDE and a new one is entered DISMISSING the Complaint a quo.
IT IS SO ORDERED.11
The CA ruled that the HLURB had no jurisdiction over the complaint filed by petitioners as the controversy did not fall within the scope of the administrative agencys
authority under P.D. No. 957. The HLURB not only relied heavily on the brochures which, according to the CA, did not set out an enforceable obligation on the part of
DPDCI, but also erroneously cited Section 13 of the MDDR to support its finding of contractual violation.
The CA held that jurisdiction over PHCC, an indispensable party, was neither acquired nor waived by estoppel. Citing Carandang v. Heirs of De Guzman,12 it held that,
in any event, the action should be dismissed because the absence of PHCC, an indispensable party, rendered all subsequent actuations of the court void, for want of
authority to act, not only as to the absent parties but even as to those present.
Finally, the CA held that the rule on exhaustion of administrative remedies could be relaxed. Appeal was not a speedy and adequate remedy as jurisdictional questions
were continuously raised but ignored by the HLURB. In the present case, however, "[t]he bottom line is that the challenged decision is one that had been rendered in
excess of jurisdiction, if not with grave abuse of discretion amounting to lack or excess of jurisdiction." 13

23

Petitioners filed a motion for reconsideration14 of the said decision. The motion, however, was denied by the CA in its Resolution dated October 7, 2010.
Hence, petitioners interpose the present petition before this Court anchored on the following
GROUNDS
(1)
THE COURT OF APPEALS ERRED IN HOLDING THAT THE HLURB HAS NO JURISDICTION OVER THE INSTANT CASE;
(2)
THE COURT OF APPEALS ALSO ERRED IN FINDING THAT PHCC IS AN INDISPENSABLE PARTY WHICH WARRANTED THE DISMISSAL OF
THE CASE BY REASON OF IT NOT HAVING BEEN IMPLEADED IN THE CASE;
(3)
THE COURT OF APPEALS HAS LIKEWISE ERRED IN RELAXING THE RULE ON NON-EXHAUSTION OF ADMINISTRATIVE
REMEDIES BY DECLARING THAT THE APPEAL MAY NOT BE A SPEEDY AND ADEQUATE REMEDY WHEN JURISDICTIONAL
QUESTIONS WERE CONTINUOUSLY RAISED BUT IGNORED BY THE HLURB; and
(4)
THAT FINALLY, THE COURT A QUO ALSO ERRED IN NOT GIVING DUE RESPECT OR EVEN FINALITY TO THE FINDINGS OF THE
HLURB.15
Petitioners contend that the HLURB has jurisdiction over the subject matter of this case. Their complaint with the HLURB clearly alleged and demanded specific
performance upon DPDCI of the latters contractual obligation under their individual contracts to provide a back-up water system as part of the amenities provided for
in the brochure, together with an administration office, proper gym facilities, restoration of a hallway, among others. They point out that the violation by DPDCI of its
obligations enumerated in the said complaint squarely put their case within the ambit of Section 1, P.D. No. 957, as amended, enumerating the cases that are within the
exclusive jurisdiction of the HLURB. Likewise, petitioners argue that the case was not a derivative suit as they were not suing for and in behalf of PHCC. They were
suing, in their individual capacities as condominium unit buyers, their developer for breach of contract. In support of their view that PHCC was not an indispensable
party, petitioners even quoted the dispositive portion of the HLURB decision to show that complete relief between or among the existing parties may be obtained
without the presence of PHCC as a party to this case. Petitioners further argue that DPDCIs petition before the CA should have been dismissed outright for failure to
comply with Section 1, Rule XVI of the 2004 Rules of Procedure of the HLURB providing for an appeal to the Board of Commissioners by a party aggrieved by a
decision of a regional officer.
DPDCI, in its Comment,16 strongly objects to the arguments of petitioners and insists that the CA did not err in granting its petition. It posits that the HLURB has no
jurisdiction over the complaint filed by petitioners because the controversies raised therein are in the nature of "intra-corporate disputes." Thus, the case does not fall
within the jurisdiction of the HLURB under Section 1, P.D. No. 957 and P.D. No. 1344. According to DPDCI, petitioners sought to address the invalidation of the
corporate acts duly entered and executed by PHCC as a corporation of which petitioners are admittedly members of, and not the acts pertaining to their ownership of the
units. Such being the case, PHCC should have been impleaded as a party to the complaint. Its non-inclusion as an indispensable party warrants the dismissal of the case.
DPDCI further avers that the doctrine of exhaustion is inapplicable inasmuch as the issues raised in the petition with the CA are purely legal; that the challenged
administrative act is patently illegal; and that the procedure of the HLURB does not provide a plain, speedy and adequate remedy and its application may cause great
and irreparable damage. Finally, it claims that the decision of the HLURB Arbiter has not attained finality, the same having been issued without jurisdiction.
Essentially, the issues to be resolved are: (1) whether the HLURB has jurisdiction over the complaint filed by the petitioners; (2) whether PHCC is an indispensable
party; and (3) whether the rule on exhaustion of administrative remedies applies in this case.
The petition fails.
Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law and determined by the allegations in the complaint which
comprise a concise statement of the ultimate facts constituting the plaintiff's cause of action. The nature of an action, as well as which court or body has jurisdiction
over it, is determined based on the allegations contained in the complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or
some of the claims asserted therein. The averments in the complaint and the character of the relief sought are the ones to be consulted. Once vested by the allegations in
the complaint, jurisdiction also remains vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. 17 Thus, it
was ruled that the jurisdiction of the HLURB to hear and decide cases is determined by the nature of the cause of action, the subject matter or property involved and the
parties.18

24

Generally, the extent to which an administrative agency may exercise its powers depends largely, if not wholly, on the provisions of the statute creating or empowering
such agency.19 With respect to the HLURB, to determine if said agency has jurisdiction over petitioners cause of action, an examination of the laws defining the
HLURBs jurisdiction and authority becomes imperative. P.D. No. 957,20 specifically Section 3, granted the National Housing Authority (NHA) the "exclusive
jurisdiction to regulate the real estate trade and business." Then came P.D. No. 134421 expanding the jurisdiction of the NHA (now HLURB), as follows:
SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the
National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature:
(a) Unsound real estate business practices;
(b) Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and
(c) Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner,
developer, dealer, broker or salesman.
This provision must be read in light of the laws preamble, which explains the reasons for enactment of the law or the contextual basis for its interpretation. 22 A statute
derives its vitality from the purpose for which it is enacted, and to construe it in a manner that disregards or defeats such purpose is to nullify or destroy the law.23 P.D.
No. 957, as amended, aims to protect innocent subdivision lot and condominium unit buyers against fraudulent real estate practices. 24
The HLURB is given a wide latitude in characterizing or categorizing acts which may constitute unsound business practice or breach of contractual obligations in the
real estate trade. This grant of expansive jurisdiction to the HLURB does not mean, however, that all cases involving subdivision lots or condominium units
automatically fall under its jurisdiction. The CA aptly quoted the case of Christian General Assembly, Inc. v. Ignacio,25 wherein the Court held that:
The mere relationship between the parties, i.e., that of being subdivision owner/developer and subdivision lot buyer, does not automatically vest jurisdiction in the
HLURB. For an action to fall within the exclusive jurisdiction of the HLURB, the decisive element is the nature of the action as enumerated in Section 1 of P.D. 1344.
On this matter, we have consistently held that the concerned administrative agency, the National Housing Authority (NHA) before and now the HLURB, has
jurisdiction over complaints aimed at compelling the subdivision developer to comply with its contractual and statutory obligations. 26 [Emphases supplied]
In this case, the complaint filed by petitioners alleged causes of action that apparently are not cognizable by the HLURB considering the nature of the action and the
reliefs sought. A perusal of the complaint discloses that petitioners are actually seeking to nullify and invalidate the duly constituted acts of PHCC - the April 29, 2005
Agreement27 entered into by PHCC with DPDCI and its Board Resolution28 which authorized the acceptance of the proposed offsetting/settlement of DPDCIs
indebtedness and approval of the conversion of certain units from saleable to common areas. All these were approved by the HLURB. Specifically, the reliefs sought or
prayers are the following:
1. Ordering the respondent to restore the gym to its original location;
2. Ordering the respondent to restore the hallway at the second floor;
3. Declaring the conversion/alteration of 22 storage units and Units GF4-A and BAS as illegal, and consequently, ordering respondent to continue paying the
condominium dues for these units, with interest and surcharge;
4. Ordering the respondent to pay the sum of PHP998,190.70, plus interest and surcharges, as condominium dues in arrears and turnover the administration
office to PHCC without any charges pursuant to the representation of the respondent in the brochures it circulated to the public;
5. Ordering the respondent to refund to the PHCC the amount of PHP1,277,500.00, representing the cost of the deep well, with interests and surcharges;
6. Ordering the respondent to pay the complainants moral/exemplary damages in the amount of PHP100,000.00; and
7. Ordering the respondent to pay the complainant attorneys fees in the amount of PHP100,000.00, and PHP3,000.00 for every hearing scheduled by the
Honorable Office.29
As it is clear that the acts being assailed are those of PHHC, this case cannot prosper for failure to implead the proper party, PHCC.
An indispensable party is defined as one who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without
injuring or affecting that interest.30 In the recent case ofNagkakaisang Lakas ng Manggagawa sa Keihin (NLMK-OLALIA-KMU) v. Keihin Philippines
Corporation,31 the Court had the occasion to state that:
Under Section 7, Rule 3 of the Rules of Court, "parties in interest without whom no final determination can be had of an action shall be joined as plaintiffs or
defendants." If there is a failure to implead an indispensable party, any judgment rendered would have no effectiveness. It is "precisely when an indispensable party is

25

not before the court (that) an action should be dismissed. The absence of an indispensable party renders all subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even to those present." The purpose of the rules on joinder of indispensable parties is a complete determination of
all issues not only between the parties themselves, but also as regards other persons who may be affected by the judgment. A decision valid on its face cannot attain real
finality where there is want of indispensable parties.32 (Underscoring supplied)
Similarly, in the case of Plasabas v. Court of Appeals,33 the Court held that a final decree would necessarily affect the rights of indispensable parties so that the Court
could not proceed without their presence. In support thereof, the Court in Plasabas cited the following authorities, thus:
"The general rule with reference to the making of parties in a civil action requires the joinder of all indispensable parties under any and all conditions, their presence
being a sine qua non of the exercise of judicial power. (Borlasa v. Polistico, 47 Phil. 345, 348) For this reason, our Supreme Court has held that when it appears of
record that there are other persons interested in the subject matter of the litigation, who are not made parties to the action, it is the duty of the court to suspend the trial
until such parties are made either plaintiffs or defendants. (Pobre, et al. v. Blanco, 17 Phil. 156). x x x Where the petition failed to join as party defendant the person
interested in sustaining the proceeding in the court, the same should be dismissed. x x x When an indispensable party is not before the court, the action should be
dismissed. (People, et al. v. Rodriguez, et al., G.R. Nos. L-14059-62, September 30, 1959) (sic)
"Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. (Sec. 7, Rule 3, Rules of Court). The
burden of procuring the presence of all indispensable parties is on the plaintiff. (39 Amjur [sic] 885). The evident purpose of the rule is to prevent the multiplicity of
suits by requiring the person arresting a right against the defendant to include with him, either as co-plaintiffs or as co-defendants, all persons standing in the same
position, so that the whole matter in dispute may be determined once and for all in one litigation. (Palarca v. Baginsi, 38 Phil. 177, 178).
From all indications, PHCC is an indispensable party and should have been impleaded, either as a plaintiff or as a defendant, 34 in the complaint filed before the HLURB
as it would be directly and adversely affected by any determination therein. To belabor the point, the causes of action, or the acts complained of, were the acts of PHCC
as a corporate body. Note that in the judgment rendered by the HLURB, the dispositive portion in particular, DPDCI was ordered (1) to pay P 998,190.70, plus interests
and surcharges, as condominium dues in arrears and turnover the administration office to PHCC; and (2) to refund to PHCC P 1,277,500.00, representing the cost of the
deep well, with interests and surcharges. Also, the HLURB declared as illegal the agreement regarding the conversion of the 22 storage units and Units GF4-A and
BAS, to which agreement PHCC was a party.
Evidently, the cause of action rightfully pertains to PHCC. Petitioners cannot exercise the same except through a derivative suit. In the complaint, however, there was
no allegation that the action was a derivative suit. In fact, in the petition, petitioners claim that their complaint is not a derivative suit. 35 In the cited case of Chua v.
Court of Appeals,36 the Court ruled:
For a derivative suit to prosper, it is required that the minority stockholder suing for and on behalf of the corporation must allege in his complaint that he is suing on a
derivative cause of action on behalf of the corporation and all other stockholders similarly situated who may wish to join him in the suit. It is a condition sine qua non
that the corporation be impleaded as a party because not only is the corporation an indispensable party, but it is also the present rule that it must be served with process.
The judgment must be made binding upon the corporation in order that the corporation may get the benefit of the suit and may not bring subsequent suit against the
same defendants for the same cause of action. In other words, the corporation must be joined as party because it is its cause of action that is being litigated and because
judgment must be a res adjudicata against it. (Underscoring supplied)
Without PHCC as a party, there can be no final adjudication of the HLURBs judgment. The CA was, thus, correct in ordering the dismissal of the case for failure to
implead an indispensable party.
To justify its finding of contractual violation, the HLURB cited a provision in the MDDR, to wit:
Section 13. Amendment. After the corporation shall have been created, organized and operating, this MDDR may be amended, in whole or in part, by the affirmative
vote of Unit owners constituting at least fifty one (51%) percent of the Unit shares in the Project at a meeting duly called pursuant to the Corporation By Laws and
subject to the provisions of the Condominium Act.
This citation, however, is misplaced as the above-quoted provision pertains to the amendment of the MDDR. It should be stressed that petitioners are not asking for any
change or modification in the terms of the MDDR. What they are really praying for is a declaration that the agreement regarding the alteration/conversion is illegal.
Thus, the Court sustains the CAs finding that:
There was nothing in the records to suggest that DPDCI sought the amendment of a part or the whole of such MDDR. The cited section is somewhat consistent only
with the principle that an amendment of a corporationsArticles of Incorporation must be assented to by the stockholders holding more than 50% of the shares. The
MDDR does not contemplate, by such provision, that all corporate acts ought to be with the concurrence of a majority of the unit owners. 37
Moreover, considering that petitioners, who are members of PHCC, are ultimately challenging the agreement entered into by PHCC with DPDCI, they are assailing, in
effect, PHCCs acts as a body corporate. This action, therefore, partakes the nature of an "intra-corporate controversy," the jurisdiction over which used to belong to the
Securities and Exchange Commission (SEC), but transferred to the courts of general jurisdiction or the appropriate Regional Trial Court (RTC), pursuant to Section 5b
of P.D. No. 902-A,38 as amended by Section 5.2 of Republic Act (R.A.) No. 8799.39

26

An intra-corporate controversy is one which "pertains to any of the following relationships: (1) between the corporation, partnership or association and the public; (2)
between the corporation, partnership or association and the State in so far as its franchise, permit or license to operate is concerned; (3) between the corporation,
partnership or association and its stockholders, partners, members or officers; and (4) among the stockholders, partners or associates themselves." 40
Based on the foregoing definition, there is no doubt that the controversy in this case is essentially intra-corporate in character, for being between a condominium
corporation and its members-unit owners. In the recent case ofChateau De Baie Condominium Corporation v. Sps. Moreno,41 an action involving the legality of
assessment dues against the condominium owner/developer, the Court held that, the matter being an intra-corporate dispute, the RTC had jurisdiction to hear the same
pursuant to R.A. No. 8799.
As to the alleged failure to comply with the rule on exhaustion of administrative remedies, the Court again agrees with the position of the CA that the circumstances
prevailing in this case warranted a relaxation of the rule.
The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial system.1wphi1 The thrust of the rule is that courts must allow administrative
agencies to carry out their functions and discharge their responsibilities within the specialized areas of their respective competence. 42 It has been held, however, that the
doctrine of exhaustion of administrative remedies and the doctrine of primary jurisdiction are not ironclad rules. In the case of Republic of the Philippines v. Lacap,43 the
Court enumerated the numerous exceptions to these rules, namely: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged
administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively so small as to make the rule impractical and oppressive; (e) where the question involved is purely legal and
will ultimately have to be decided by the courts of justice; (f) where judicial intervention is urgent; (g) where the application of the doctrine may cause great and
irreparable damage; (h) where the controverted acts violate due process; (i) where the issue of non-exhaustion of administrative remedies has been rendered moot; (j)
where there is no other plain, speedy and adequate remedy; (k) where strong public interest is involved; and (l) in quo warranto proceedings. 44 [Underscoring supplied]
The situations (b) and (e) in the foregoing enumeration obtain in this case.
The challenged decision of the HLURB is patently illegal having been rendered in excess of jurisdiction, if not with grave abuse of discretion amounting to lack or
excess of jurisdiction. Also, the issue on jurisdiction is purely legal which will have to be decided ultimately by a regular court of law. As the Court wrote in Vigilar v.
Aquino:45
It does not involve an examination of the probative value of the evidence presented by the parties. There is a question of law when the doubt or difference arises as to
what the law is on a certain state of facts, and not as to the truth or the falsehood of alleged facts. Said question at best could be resolved only tentatively by the
administrative authorities. The final decision on the matter rests not with them but with the courts of justice. Exhaustion of administrative remedies does not apply,
because nothing of an administrative nature is to be or can be done. The issue does not require technical knowledge and experience but one that would involve the
interpretation and application of law.
Finally, petitioners faulted the CA in not giving respect and even finality to the findings of fact of the HLURB. Their reliance on the case of Dangan v.
NLRC,46 reiterating the well-settled principles involving decisions of administrative agencies, deserves scant consideration as the decision of the HLURB in this case is
manifestly not supported by law and jurisprudence.
Petitioners, therefore, cannot validly invoke DPDCIs failure to fulfill its obligation on the basis of a plain draft leaflet which petitioners were able to obtain, specifically
Pacifico Lim, having been a president of DPDCI. To accord petitioners the right to demand compliance with the commitment under the said brochure is to allow them to
profit by their own act. This, the Court cannot tolerate.
In sum, inasmuch as the HLURB has no jurisdiction over petitioners complaint, the Court sustains the subject decision of the CA that the HLURB decision is null and
void ab initio. This disposition, however, is without prejudice to any action that the parties may rightfully file in the proper forum.
WHEREFORE, the petition is DENIED.

10. GO v. DISTINCTION PROPERTIES DEVELOPMENT AND CONSTRUCTION INC.

Facts

Petitioners are registered individual owners of condominium units in Phoenix Heights Condominium developed by the respondent. In August 2008, petitioners, as condominium unit-owners, filed
a complaint before the HLURB against DPDCI for unsound business practices and violation of the MDDR, alleging that DPDCI committed misrepresentation in their
circulated flyers and brochures as to the facilities or amenities that would be available in the condominium and failed to perform its obligation to comply with the
MDDR.
In defense, DPDCI alleged that the brochure attached to the complaint was a mere preparatory draft

27

HLURB rendered its decision in favor of petitioners. DPDCI filed with the CA its Petition for Certiorari and Prohibition on the ground that HLURB acted without or
beyond its jurisdiction. The CA ruled that the HLURB had no jurisdiction over the complaint filed by petitioners as the controversy did not fall within the scope of the
administrative agencys authority.
Issues
1. Does the HLURB have jurisdiction over the complaint?
2. Is PHCC is an indispensable party?

Ruling
1. NO. Jurisdiction over the subject matter of a case is conferred by law and determined by the allegations in the complaint which comprise a concise statement of
the ultimate facts constituting the plaintiff's cause of action. The nature of an action, as well as which court or body has jurisdiction over it, is determined
based on the allegations contained in the complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the
claims asserted therein. The averments in the complaint and the character of the relief sought are the ones to be consulted. Once vested by the allegations in
the complaint, jurisdiction also remains vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted
therein. Thus, it was ruled that the jurisdiction of the HLURB to hear and decide cases is determined by the nature of the cause of action, the subject matter or property
involved and the parties. In this case, the complaint filed by petitioners alleged causes of action that apparently are not cognizable by the HLURB
considering the nature of the action and the reliefs sought.

The case at bar involved an intra-corporate controversy, which falls under the jurisdiction of the RTC.
2. YES. An indispensable party is defined as one who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or
affecting that interest. It is precisely when an indispensable party is not before the court (that) an action should be dismissed. The absence of an indispensable party
renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even to those present.
Evidently, the cause of action rightfully pertains to PHCC. Petitioners cannot exercise the same except through a derivative suit. Without PHCC as a party, there can be
no final adjudication of HLURBs judgment.
R. No. 186993

August 22, 2012

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

vs.
SPOUSES ALAN and EM ANG, Respondents.
VELASCO, JR.,*
LEONARDO-DE CASTRO, **
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Decision1 dated August 28, 2008 and the
Resolution2 dated February 20, 2009 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 101159. The assailed decision annulled and set aside the Orders dated
April 12, 20073 and August 27, 20074 issued by the Regional Trial Court (RTC) of Quezon City, Branch 81 in Civil Case No. Q-06-58834.
The Antecedent Facts
On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in the amount of Three Hundred Thousand U.S. Dollars (US$300,000.00) from
Theodore and Nancy Ang (petitioners). On even date, the respondents executed a promissory note 5 in favor of the petitioners wherein they promised to pay the latter the
said amount, with interest at the rate of ten percent (10%) per annum, upon demand. However, despite repeated demands, the respondents failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking them to pay their outstanding debt which, at that time, already amounted to Seven
Hundred Nineteen Thousand, Six Hundred Seventy-One U.S. Dollars and Twenty-Three Cents (US$719,671.23), inclusive of the ten percent (10%) annual interest that
had accumulated over the years. Notwithstanding the receipt of the said demand letter, the respondents still failed to settle their loan obligation.
On August 6, 2006, the petitioners, who were then residing in Los Angeles, California, United States of America (USA), executed their respective Special Powers of
Attorney6 in favor of Attorney Eldrige Marvin B. Aceron (Atty. Aceron) for the purpose of filing an action in court against the respondents. On September 15, 2006,
Atty. Aceron, in behalf of the petitioners, filed a Complaint 7 for collection of sum of money with the RTC of Quezon City against the respondents.

28

On November 21, 2006, the respondents moved for the dismissal of the complaint filed by the petitioners on the grounds of improper venue and prescription. 8 Insisting
that the venue of the petitioners action was improperly laid, the respondents asserted that the complaint against them may only be filed in the court of the place where
either they or the petitioners reside. They averred that they reside in Bacolod City while the petitioners reside in Los Angeles, California, USA. Thus, the respondents
maintain, the filing of the complaint against them in the RTC of Quezon City was improper.
The RTC Orders
On April 12, 2007, the RTC of Quezon City issued an Order9 which, inter alia, denied the respondents motion to dismiss. In ruling against the respondents claim of
improper venue, the court explained that:
Attached to the complaint is the Special Power of Attorney x x x which clearly states that plaintiff Nancy Ang constituted Atty. Eldrige Marvin Aceron as her duly
appointed attorney-in-fact to prosecute her claim against herein defendants. Considering that the address given by Atty. Aceron is in Quezon City, hence, being the
plaintiff, venue of the action may lie where he resides as provided in Section 2, Rule 4 of the 1997 Rules of Civil Procedure. 10
The respondents sought reconsideration of the RTC Order dated April 12, 2007, asserting that there is no law which allows the filing of a complaint in the court of the
place where the representative, who was appointed as such by the plaintiffs through a Special Power of Attorney, resides. 11
The respondents motion for reconsideration was denied by the RTC of Quezon City in its Order 12 dated August 27, 2007.
The respondents then filed with the CA a petition for certiorari 13 alleging in the main that, pursuant to Section 2, Rule 4 of the Rules of Court, the petitioners complaint
may only be filed in the court of the place where they or the petitioners reside. Considering that the petitioners reside in Los Angeles, California, USA, the respondents
assert that the complaint below may only be filed in the RTC of Bacolod City, the court of the place where they reside in the Philippines.
The respondents further claimed that, the petitioners grant of Special Power of Attorney in favor of Atty. Aceron notwithstanding, the said complaint may not be filed in
the court of the place where Atty. Aceron resides, i.e., RTC of Quezon City. They explained that Atty. Aceron, being merely a representative of the petitioners, is not the
real party in interest in the case below; accordingly, his residence should not be considered in determining the proper venue of the said complaint.
The CA Decision
On August 28, 2008, the CA rendered the herein Decision,14 which annulled and set aside the Orders dated April 12, 2007 and August 27, 2007 of the RTC of Quezon
City and, accordingly, directed the dismissal of the complaint filed by the petitioners. The CA held that the complaint below should have been filed in Bacolod City and
not in Quezon City. Thus:
As maybe clearly gleaned from the foregoing, the place of residence of the plaintiffs attorney-in-fact is of no moment when it comes to ascertaining the venue of cases
filed in behalf of the principal since what should be considered is the residence of the real parties in interest, i.e., the plaintiff or the defendant, as the case may be.
Residence is the permanent home the place to which, whenever absent for business or pleasure, one intends to return. Residence is vital when dealing with venue.
Plaintiffs, herein private respondents, being residents of Los Angeles, California, U.S.A., which is beyond the territorial jurisdiction of Philippine courts, the case should
have been filed in Bacolod City where the defendants, herein petitioners, reside. Since the case was filed in Quezon City, where the representative of the plaintiffs
resides, contrary to Sec. 2 of Rule 4 of the 1997 Rules of Court, the trial court should have dismissed the case for improper venue. 15
The petitioners sought a reconsideration of the Decision dated August 28, 2008, but it was denied by the CA in its Resolution dated February 20, 2009. 16
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit this lone issue for this Courts resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW WHEN IT RULED THAT THE COMPLAINT MUST BE
DISMISSED ON THE GROUND THAT VENUE WAS NOT PROPERLY LAID.17
The Courts Ruling
The petition is denied.
Contrary to the CAs disposition, the petitioners maintain that their complaint for collection of sum of money against the respondents may be filed in the RTC of Quezon
City. Invoking Section 3, Rule 3 of the Rules of Court, they insist that Atty. Aceron, being their attorney-in-fact, is deemed a real party in interest in the case below and
can prosecute the same before the RTC. Such being the case, the petitioners assert, the said complaint for collection of sum of money may be filed in the court of the
place where Atty. Aceron resides, which is the RTC of Quezon City.

29

On the other hand, the respondents in their Comment18 assert that the petitioners are proscribed from filing their complaint in the RTC of Quezon City. They assert that
the residence of Atty. Aceron, being merely a representative, is immaterial to the determination of the venue of the petitioners complaint.
The petitioners complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of personal actions are fixed for the convenience of the plaintiffs and their witnesses. Equally settled, however, is the
principle that choosing the venue of an action is not left to a plaintiffs caprice; the matter is regulated by the Rules of Court. 19
The petitioners complaint for collection of sum of money against the respondents is a personal action as it primarily seeks the enforcement of a contract. The Rules
give the plaintiff the option of choosing where to file his complaint. He can file it in the place (1) where he himself or any of them resides, or (2) where the defendant or
any of the defendants resides or may be found. The plaintiff or the defendant must be residents of the place where the action has been instituted at the time the action is
commenced.20
However, if the plaintiff does not reside in the Philippines, the complaint in such case may only be filed in the court of the place where the defendant resides. In Cohen
and Cohen v. Benguet Commercial Co., Ltd.,21 this Court held that there can be no election as to the venue of the filing of a complaint when the plaintiff has no
residence in the Philippines. In such case, the complaint may only be filed in the court of the place where the defendant resides. Thus:
Section 377 provides that actions of this character "may be brought in any province where the defendant or any necessary party defendant may reside or be found, or in
any province where the plaintiff or one of the plaintiffs resides, at the election of the plaintiff." The plaintiff in this action has no residence in the Philippine Islands.
Only one of the parties to the action resides here. There can be, therefore, no election by plaintiff as to the place of trial. It must be in the province where the defendant
resides. x x x.22 (Emphasis ours)
Here, the petitioners are residents of Los Angeles, California, USA while the respondents reside in Bacolod City. Applying the foregoing principles, the petitioners
complaint against the respondents may only be filed in the RTC of Bacolod City the court of the place where the respondents reside. The petitioners, being residents
of Los Angeles, California, USA, are not given the choice as to the venue of the filing of their complaint.
Thus, the CA did not commit any reversible error when it annulled and set aside the orders of the RTC of Quezon City and consequently dismissed the petitioners
complaint against the respondents on the ground of improper venue.
In this regard, it bears stressing that the situs for bringing real and personal civil actions is fixed by the Rules of Court to attain the greatest convenience possible to the
litigants and their witnesses by affording them maximum accessibility to the courts.23 And even as the regulation of venue is primarily for the convenience of the
plaintiff, as attested by the fact that the choice of venue is given to him, it should not be construed to unduly deprive a resident defendant of the rights conferred upon
him by the Rules of Court.24
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.
Contrary to the petitioners claim, Atty. Aceron, despite being the attorney-in-fact of the petitioners, is not a real party in interest in the case below. Section 2, Rule 3 of
the Rules of Court reads:
Sec. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest. (Emphasis ours)
Interest within the meaning of the Rules of Court means material interest or an interest in issue to be affected by the decree or judgment of the case, as distinguished
from mere curiosity about the question involved.25 A real party in interest is the party who, by the substantive law, has the right sought to be enforced. 26
Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest in the case below as he does not stand to be benefited or injured by any judgment
therein. He was merely appointed by the petitioners as their attorney-in-fact for the limited purpose of filing and prosecuting the complaint against the respondents.
Such appointment, however, does not mean that he is subrogated into the rights of petitioners and ought to be considered as a real party in interest.
Being merely a representative of the petitioners, Atty. Aceron in his personal capacity does not have the right to file the complaint below against the respondents. He
may only do so, as what he did, in behalf of the petitioners the real parties in interest. To stress, the right sought to be enforced in the case below belongs to the
petitioners and not to Atty. Aceron. Clearly, an attorney-in-fact is not a real party in interest. 27

30

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

Parties to Civil Actions

AngvsAng
G.R. No. 186993
August 22, 2012
Facts:
On September 2, 1992, spouses Alan and EmAng (respondents)
obtained a loan in the amount of Three Hundred Thousand U.S. Dollars
(US$300,000.00) from Theodore and Nancy Ang (petitioners). On even
date, the respondents executed a promissory note
in favor of the petitioners
wherein they promised to pay the latter the said amount, with interest at the
rate of ten percent (10%) per annum, upon demand. However, despite
repeated demands, the respondents failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the respondents a
demand letter asking them to pay their outstanding debt which, at that time,
already amounted to Seven Hundred Nineteen Thousand, Six Hundred
Seventy-One U.S. Dollars and Twenty-Three Cents (US$719,671.23),
inclusive of the ten percent (10%) annual interest that had accumulated over
the years. Notwithstanding the receipt of the said demand letter, the
respondents still failed to settle their loan obligation.
On August 6, 2006, the petitioners, who were then residing in Los
Angeles, California, United States of America (USA), executed their
respective Special Powers of Attorney6
in favor of Attorney Eldrige Marvin
B. Aceron (Atty. Aceron) for the purpose of filing an action in court against
the respondents. On September 15, 2006, Atty. Aceron, in behalf of the
petitioners, filed a Complaint7
for collection of sum of money with the RTC

31

of Quezon City against the respondents.

Issues:
WON Atty. Aceron, being merely a representative of the petitioners, is not the real party in interest in the case.
Held:
Atty. Aceron, despite being the attorney-in-fact of the petitioners, is not a real party in interest in the case below. Section 2, Rule 3 of the Rules of Court
reads:
Sec. 2.Parties in interest. A real party in interest is the party
who stands to be benefited or injured by the judgment in the suit, or
the party entitled to the avails of the suit. Unless otherwise authorized
by law or these Rules, every action must be prosecuted or defended in the
name of the real party in interest.
Interest within the meaning of the Rules of Court means material
interest or an interest in issue to be affected by the decree or judgment of the
case, as distinguished from mere curiosity about the question involved. A
real party in interest is the party who, by the substantive law, has the right
sought to be enforced.
Applying the foregoing rule, it is clear that Atty. Aceron is not a real
party in interest in the case below as he does not stand to be benefited or
injured by any judgment therein. He was merely appointed by the
petitioners as their attorney-in-fact for the limited purpose of filing and
prosecuting the complaint against the respondents. Such appointment,
however, does not mean that he is subrogated into the rights of petitioners
and ought to be considered as a real party in interest.
Being merely a representative of the petitioners, Atty. Aceron in his
personal capacity does not have the right to file the complaint below against
the respondents. He may only do so, as what he did, in behalf of the
petitioners the real parties in interest. To stress, the right sought to be enforced in the case below belongs to the petitioners and not to Atty.
Aceron. Clearly, an attorney-in-fact is not a real party in interest.

R. No. 178611

January 14, 2013

ESTRELLA ADUAN ORPIANO, Petitioner,

vs.
SPOUSES ANTONIO C. TOMAS and MYRNA U. TOMAS, Respondents.
DECISION
DEL CASTILLO, J.:
Considerations of expediency cannot justify a resort to procedural shortcuts. The end does not justify the means; a meritorious case cannot overshadow the condition
that the means employed to pursue it must be in keeping with the Rules.
Assailed in this Petition for Review on Certiorari1 are the May 7, 2007 Decision2 of the Court of Appeals (CA) which dismissed the petition in CA-G.R. SP No. 97341,
and its June 28, 2007 Resolution3 denying petitioner's motion for reconsideration.
Factual Antecedents
Petitioner Estrella Aduan Orpiano (Estrella) is the widow of Alejandro Orpiano (Alejandro). Part of their conjugal estate is an 809.5-square meter lot in Quezon City
covered by Transfer Certificate of Title (TCT) No. RT-23468 (the lot).
In 1979, a Decision was rendered by the defunct Juvenile and Domestic Relations Court (JDRC) of Quezon City declaring Estrella an absent/absentee spouse and
granting Alejandro the authority to sell the lot. The JDRC Decision was annotated on the back of TCT No. RT-23468.
On March 19, 1996, Alejandro sold the lot on installment basis to respondent spouses Antonio and Myrna Tomas (the Tomas spouses) for P12,170,283.00. That very
same day, a new title TCT No. N-152326 was issued in the name of the Tomas spouses despite the fact that the purchase price has not been paid in full, the spouses
having been given until December of that same year to complete their payment.

32

On October 28, 1996, Alejandro filed Civil Case No. Q-96-29261 (the collection case) in the Regional Trial Court (RTC) of Quezon City, Branch 226 (the collection
court), seeking collection of the balance of the price in the amount of P4,314,100.00 supposedly left unpaid by the Tomas spouses, with damages.[4]
During the pendency of the collection case, Alejandro passed away. His heirs, Estrella included, were substituted in his stead in the collection case. Estrella moved to
amend the Complaint to one for rescission/annulment of sale and cancellation of title, but the court denied her motion. She next moved to be dropped as party plaintiff
but was again rebuffed.
On June 11, 2005, Estrella filed Civil Case No. Q-05-56216 (the annulment case) for annulment of the March 1996 sale and cancellation of TCT No. N-152326, with
damages, against the Tomas spouses and the Register of Deeds of Quezon City which was impleaded as a nominal party.5 The case was raffled to Branch 97 of the
Quezon City RTC (the annulment court). In her Complaint, Estrella claimed that the 1979 declaration of her absence and accompanying authority to sell the lot were
obtained by Alejandro through misrepresentation, fraud and deceit, adding that the May 1979 JDRC Decision was not published as required by law and by the domestic
relations court. Thus, the declaration of absence and Alejandros authority to sell the lot are null and void. Correspondingly, the ensuing sale to the Tomas spouses
should be voided, and TCT No. N-152326 cancelled.
In their Answer to the annulment Complaint, the Tomas spouses prayed for the dismissal thereof on the ground of forum shopping, arguing that the filing of the
annulment case was prompted by the denial of Estrellas motion initiated in the collection case to amend the Complaint to one for annulment of sale. The annulment
case is Estrellas attempt at securing a remedy which she could not obtain in the collection case. The Tomas spouses added that the dismissal of the annulment case
would preclude the possibility that the two courts might render conflicting decisions.
After pre-trial in the annulment case, the court proceeded to tackle the issue of forum shopping. The parties submitted their respective memoranda touching on the sole
issue of whether Estrella is guilty of forum shopping.
Ruling of the Regional Trial Court
On September 25, 2006, the trial court issued an Order6 dismissing the annulment case. It sustained the view taken by the Tomas spouses that Estrella filed the
annulment case only because the collection court denied her motion to amend the case to one for annulment of the sale, and thus the annulment case was Estrellas
attempt at obtaining a remedy which she could not secure in the collection case. It added that because the two cases involve the same subject matter, issues, and parties,
there indeed is a possibility that conflicting decisions could be rendered by it and the collection court, the possibility made even greater because the two cases involve
antithetical remedies.
Estrella moved for reconsideration but the court was unmoved.
Ruling of the Court of Appeals
On December 27, 2006, Estrella filed with the CA a Petition for Certiorari7 questioning the September 25, 2006 Order of the annulment court. The appellate court,
however, could not be persuaded. Finding no grave abuse of discretion in the annulment court's dismissal of the annulment case, the CA found that Estrella was indeed
guilty of forum shopping in filing the annulment suit while the collection case was pending. Applying the test articulated in a multitude of decided cases that where a
final judgment in one case will amount to res judicata in another it follows that there is forum shopping. The CA held that a final judgment in the collection case
ordering the Tomas spouses to pay the supposed balance of the price will necessarily result in a finding that the sale between Alejandro and the Tomas spouses is a valid
sale. This then would prevent a declaration of nullity of the sale in the annulment case.
Accordingly, the CA dismissed Estrellas Petition for Certiorari. Her Motion for Reconsideration was likewise denied, hence the present Petition.
Issue
The sole issue to be resolved in this case is whether there is indeed forum shopping.
Petitioners Arguments
Estrella argues that it was Alejandro and not she who initiated the collection case, and that she, their two children, and Alejandros four illegitimate children were
merely substituted in the case as his heirs by operation of law; thus, she should not be bound by the collection case. She claims that in the first place, she was not privy
to Alejandros sale of the lot to the Tomas spouses. Having been unwillingly substituted in the collection case, she forthwith moved to amend the Complaint in order to
include, as one of the remedies sought therein, annulment of the sale insofar as her conjugal share in the lot is concerned. But the court denied her motion. Next, she
moved to be dropped or stricken out as plaintiff to the collection case, but again, the trial court rebuffed her.
Estrella maintains that on account of these repeated denials, she was left with no other alternative but to institute the annulment case. She claims that since the collection
case does not further her interest which is to seek annulment of the sale and recover her conjugal share and the collection court would not grant her motions to
amend and to be dropped or stricken out as party plaintiff therein, she thus has a right to maintain a suit to have the sale annulled. It is therefore erroneous for the CA to
state that she initiated the annulment suit only for the purpose of obtaining a favorable ruling in said court, which she could not achieve in the collection court.

33

She further adds that there is obviously no identity of parties, cause of action, or reliefs prayed for between the collection and annulment cases; the two involve
absolutely opposite reliefs. She stresses the fact that she is seeking annulment of the sale with respect only to her conjugal share, and not those of her co-heirs.
Respondents Arguments
The Tomas spouses, apart from echoing the trial court and the CA, emphasize that the rule prohibiting forum shopping precisely seeks to avoid the situation where the
two courts the collection court and the annulment court might render two separate and contradictory decisions. If the annulment case is allowed to proceed, then it
could result in a judgment declaring the sale null and void, just as a decision in the collection case could be issued ordering them to pay the balance of the price, which
is tantamount to a declaration that the sale is valid.
They add that Estrella could no longer question the 1979 JDRC Decision, having failed to challenge the same immediately upon obtaining notice thereof; she did not
even bother to have her declaration of absence lifted. They claim that after the lapse of 26 years, prescription has finally set in. They likewise argue that if both cases are
allowed to remain pending, a ridiculous situation could arise where, after having paid the balance as ordered by the collection court, they could lose not only the lot but
also their payments in case a decision in the annulment court is rendered nullifying and canceling the sale and ordering the return of the lot to Alejandros heirs, Estrella
included.
Our Ruling
The petition must be denied.
"Forum shopping is defined as an act of a party, against whom an adverse judgment or order has been rendered in one forum, of seeking and possibly getting a favorable
opinion in another forum, other than by appeal or special civil action for certiorari. It may also be the institution of two or more actions or proceedings grounded on the
same cause on the supposition that one or the other court would make a favorable disposition. x x x It is expressly prohibited x x x because it trifles with and abuses
court processes, degrades the administration of justice, and congests court dockets. A willful and deliberate violation of the rule against forum shopping is a ground for
summary dismissal of the case, and may also constitute direct contempt."8
Although the Court believes that Estrella was not prompted by a desire to trifle with judicial processes, and was acting in good faith in initiating the annulment case,
still the said case should be dismissed because it produces the same effect which the rule on forum shopping was fashioned to preclude. If the collection case is not
dismissed and it, together with the annulment case, proceeds to finality, not only do we have a possibility of conflicting decisions being rendered; an unfair situation, as
envisioned by the Tomas spouses, might arise where after having paid the balance of the price as ordered by the collection court, the cancellation of the TCT and return
of the property could be decreed by the annulment court. Besides, allowing the two cases to remain pending makes litigation simply a game of chance where parties
may hedge their position by betting on both sides of the case, or by filing several cases involving the same issue, subject matter, and parties, in the hope of securing
victory in at least one of them. But, as is already well known, the "trek to justice is not a game of chance or skill but rather a quest for truth x x x." 9
Moreover, allowing Estrella to proceed with the annulment case while the collection case is still pending is like saying that she may accept the deed of sale and question
it at the same time. For this is the necessary import of the two pending cases: joining as plaintiff in the collection case implies approval of the deed, while suing to
declare it null and void in the annulment court entails a denunciation thereof. This may not be done. "A person cannot accept and reject the same instrument" 10 at the
same time. It must be remembered that "the absence of the consent of one (spouse to a sale) renders the entire sale null and void, including the portion of the conjugal
property pertaining to the spouse who contracted the sale."11
The Court realizes the quandary that Estrella motivated by the solitary desire to protect her conjugal share in the lot from what she believes was Alejandros undue
interference in disposing the same without her knowledge and consent finds herself in. While raring to file the annulment case, she has to first cause the dismissal of
the collection case because she was by necessity substituted therein by virtue of her being Alejandros heir; but the collection court nonetheless blocked all her attempts
toward such end. The collection court failed to comprehend her predicament, her need to be dropped as party to the collection case in order to pursue the annulment of
the sale.
As plaintiff in the collection case, Estrella though merely succeeding to Alejandros rights was an indispensable party, or one without whom no final determination
can be had in the collection case.12 Strictly, she may not be dropped from the case. However, because of her dual identity, first as heir and second as owner of her
conjugal share, she has been placed in the unique position where she has to succeed to her husbands rights, even as she must protect her separate conjugal share from
Alejandros perceived undue disposition. She may not seek to amend the cause of action in the collection case to one for annulment of sale, because this adversely
affects the interests of her co-heirs, which is precisely to obtain payment of the supposed balance of the sale price.
Nor may Estrella simultaneously maintain the two actions in both capacities, as heir in the collection case and as separate owner of her conjugal share in the annulment
case. This may not be done, because, as was earlier on declared, this amounts to simultaneously accepting and rejecting the same deed of sale. Nor is it possible to
prosecute the annulment case simultaneously with the collection case, on the premise that what is merely being annulled is the sale by Alejandro of Estrellas conjugal
share. To repeat, the absence of the consent of one spouse to a sale renders the entire sale null and void, including the portion of the conjugal property pertaining to the
spouse who contracted the sale.
Undoubtedly, Estrella had the right to maintain the annulment case as a measure of protecting her conjugal share. There thus exists a just cause for her to be dropped as
party plaintiff in the collection case so that she may institute and maintain the annulment case without violating the rule against forum shopping. Unless this is done, she
stands to lose her share in the conjugal property. But the issue of whether the sale should be annulled is a different matter altogether.1wphi1

34

Under the Rules, parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as
are just.13 Indeed, it would have been just for the collection court to have allowed Estrella to prosecute her annulment case by dropping her as a party plaintiff in the
collection case, not only so that she could protect her conjugal share, but also to prevent the interests of her co-plaintiffs from being adversely affected by her
conflicting actions in the same case. By seeking to be dropped from the collection case, Estrella was foregoing collection of her share in the amount that may be due and
owing from the sale. It does not imply a waiver in any manner that affects the rights of the other heirs.
While Estrella correctly made use of the remedies available to her amending the Complaint and filing a motion to drop her as a party she committed a mistake in
proceeding to file the annulment case directly after these remedies were denied her by the collection court without first questioning or addressing the propriety of these
denials. While she may have been frustrated by the collection courts repeated rejection of her motions and its apparent inability to appreciate her plight, her proper
recourse nevertheless should have been to file a petition for certiorari or otherwise question the trial courts denial of her motion to be dropped as plaintiff, citing just
reasons which call for a ruling to the contrary. Issues arising from joinder or misjoinder of parties are the proper subject of certiorari. 14
In fine, we reiterate that considerations of expediency cannot justify a resort to procedural shortcuts. The end does not justify the means; a meritorious case cannot
overshadow the condition that the means employed to pursue it must be in keeping with the Rules.
WHEREFORE, premises considered, the Petition is DENIED for lack of merit.
SO ORDERED.

ORPIANO vsTOMAS (2013; DEL CASTILLO, J.)

FACTS: Petitioner EstrellaAduanOrpiano (Estrella) is the widow of Alejandro Orpiano (Alejandro). Part of their conjugal estate is an 809.5-square meter lot in Quezon
City covered by Transfer Certificate of Title (TCT) No. RT-23468 (the lot).In 1979 Estrella was declared an absent spouse, and Alejandro was granted the authority to
sell the lot.On March 19, 1996, Alejandro sold the lot on installment basis to the Tomas Spouses (respondents), the very same day a title was issued in the name of the
Tomas Spouses. They had until December to complete paying for the land. On Oct 28, 1996 Alejandro filed a case at the QC RTC, seeking collection of the amount
unpaid by the Tomas spouses, with damages.While the case was still pending Alejandro passed away, his heirs, including Estrella were substituted in his stead in the
case. Estrella moved to amend the complaint to one for annulment of sale and cancellation of title, but the court denied her motion. She moved to be dropped as a party
plantiff but was also denied.
On June 11, 2005 Estrella filed a case for annulment of sale and cancellation of title against the Tomas Spouses, claiming the declaration of absence and Alejandros
authority to sell the lot are null and void. The Tomas spouses prayed for the dismissal thereof on the ground of forum shopping. RTC ruled in favour of the Tomas
spouses and dismissed the annulment (of sale) case. CA affirmed the decision.
ISSUES: Whether there was forum shopping
HELD/RATIO: YES.Although the Court believes that Estrellawas not prompted by a desire to trifle with judicial processes, and was acting in good faith in
initiating the annulment case, still the said case should be dismissed because it produces the same effect which the rule on forum shopping was fashioned to
preclude. If the collection case is not dismissed and it, together with the annulment case, proceeds to finality, not only do we have a possibility of conflicting decisions
being rendered; an unfair situation, as envisioned by the Tomas spouses, might arise where after having paid the balance of the price as ordered by the collection court,
the cancellation of the TCT and return of the property could be decreed by the annulment court.
Court says thatthe absence of the consent of one (spouse to a sale) renders the entire sale null and void, including the portion of the conjugal property pertaining to the
spouse who contracted the sale. However whileEstrella is raring to file the annulment case, she has to first cause the dismissal of the collection case because she was
by necessity substituted therein by virtue of her being Alejandros heir; but the collection court nonetheless blocked all her attempts toward such end. There exists a just
cause for her to be dropped as party plaintiff in the collection case so that she may institute and maintain the annulment case without violating the rule against forum
shopping. Estrella had the right to maintain the annulment case as a measure of protecting her conjugal share (but the issue of whether the sale should be annulled is a
different matter altogether). Despite all these reasons, Estrella is still not allowed to take prodecural short cuts.
NOTES: In case maam asks, a summary of the parties contentions:
Estrella argues that were merely substituted in the case as his heirs by operation of law; thus, she should not be bound by the collection case.She further adds that there
is obviously no identity of parties, cause of action, or reliefs prayed for between the collection and annulment cases; the two involve absolutely opposite reliefs. She
stresses the fact that she is seeking annulment of the sale with respect only to her conjugal share, and not those of her co-heirs.
Tomas spouses emphasize that the rule prohibiting forum shopping precisely seeks to avoid the situation where the two courts the collection court and the annulment
court might render two separate and contradictory decisions. If the annulment case is allowed to proceed, then it could result in a judgment declaring the sale null and
void, just as a decision in the collection case could be issued ordering them to pay the balance of the price, which is tantamount to a declaration that the sale is valid.

G.R. No. 169706

February 5, 2010

SPOUSES WILLIAM GENATO and REBECCA GENATO, Petitioners,

vs.
RITA VIOLA, Respondent.
DECISION
DEL CASTILLO, J.:

35

When there is a conflict between the title of the case and the allegations in the complaint, the latter prevail in determining the parties to the action.
Jurisprudence directs us to look beyond the form and into the substance so as to render substantial justice to the parties and determine speedily and
inexpensively the actual merits of the controversy with least regard to technicalities.
In the present Petition for Review, petitioners assail the September 9, 2005 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 89466 which
affirmed the Decision of the Office of the President. The Office of the President affirmed the Decision of the Housing and Land Use Regulatory
Board (HLURB), First Division which granted the motion to quash the writ of execution issued in HLURB Case No. REM-102491-4959 (REM-A950426-0059).
Factual Antecedents
In October 1991, a complaint titled "VILLA REBECCA HOMEOWNERS ASSOCIATION, INC. versus MR. WILLIAM GENATO and spouse
REBECCA GENATO" was filed with the HLURB. The said complaint was verified by 34 individuals, including the respondent herein, who referred
to themselves as the "Complainants" who "caused the preparation of the foregoing Complaint". 2 The complaint stated that on various dates,
complainants executed Contracts to Sell and/or Lease Purchase Agreements with the Sps. Genato pertaining to housing units in Villa Rebecca Homes
Subdivision. Sometime thereafter the HLURB issued a cease and desist order (CDO) enjoining the collection of amortization payments. This CDO
was subsequently lifted. Thereafter, complainants went to the Sps. Genato with the intention of resuming their amortization payments. The latter
however refused to accept their payments and instead demanded for a lump sum payment of all the accrued amortizations which fell due during the
effectivity of the CDO.
From the disorganized, bordering on incomprehensible, complaint, it can be gleaned that the following reliefs are prayed for: 1) That Sps. Genato
accept the complainants' monthly amortization payments corresponding to the period of effectivity of the (subsequently lifted) CDO, without any
penalty; 2) That the computation of interest on delinquent payments be at 3% per month and not compounded; 3) That Sps. Genato be responsible for
correcting the deficiencies in the construction and replacement of sub-standard materials to conform with the plans and specifications; 4) That Sps.
Genato be held answerable/liable to make good their undertaking to provide individual deep wells for the homeowners; 5) That Sps. Genato be
responsible for maintaining the street lights and payment of the corresponding electric bills; 6) That Sps. Genato maintain the contract price of the
units for sale and not increase the prices; and 7) That Sps. Genato be made accountable for the unregistered dwelling units.
On March 8, 1995, the Housing Arbiter rendered a Decision, the dispositive portion of which states:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering complainants to resume payment of their monthly
amortization from date hereof pursuant to the agreement. Likewise, it is hereby ordered that respondents correct the deficiencies in the construction
of the complaining occupants' units so as to conform to that which is specified in the plans and specification of the buildings, as well as observe
proper drainage requirements pursuant to law. Likewise, respondents are hereby directed to immediately put up commercial wells and/or water
pumps or facilities in the Villa Rebecca Subdivision and to reimburse complainants and unit occupants of their total expenditures incurred for their
water supply.3
On appeal to the HLURB Board of Commissioners, the Decision was modified, inter alia, by the additional directive for the complainants to pay 3%
interest per month for the unpaid amortizations due from June 29, 1991. The dispositive portion of the Decision of the HLURB Board of
Commissioners states:
WHEREFORE, premises considered, the decision of the Arbiter is hereby MODIFIED to read as follows:
1. Ordering complainants to pay respondent the remaining balance of the purchase price. Complainant must pay 3% interest per month for
unpaid amortizations due from June 29, 1991. Thereafter complainant must pay its amortization in accordance with the original term of the
contract. These must be complied with upon finality of this decision.
2. Ordering the respondent to:
a. Accept the amortization payment;
b. Provide drainage outfall;
c. Provide the project with water facilities; and

36

d. Reimburse complainant the following:

d.1 Electric Bills in the amount of P3,146.66
d.2 Cost of construction of water supply to be determined by an appraiser mutually acceptable to the parties.
Number 2.d to 2.e [sic] must be complied with within thirty (30) days from finality of this decision.
SO ORDERED.4
This Decision, after being revised and then reinstated, subsequently became final and executory.
On May 26, 2000, Arbiter Marino Bernardo M. Torres issued the Writ of Execution. In connection therewith, the sheriff seized Rita Viola's two
delivery trucks and 315 sacks of rice. Respondent Viola then filed an Urgent Motion to Quash Execution, with Prayers for Issuance of Temporary
Restraining Order, Clarification and Computation of Correct Amount of Money Judgment and Allowance of Appeal.
After various incidents and pleadings by the opposing parties, the two trucks were ordered released. The 315 sacks of rice, however, were sold at
public auction to the highest bidder,5 petitioner Rebecca Genato in the amount of P189,000.00.6
On December 15, 2000, Arbiter Torres issued an Order denying respondent Viola's motion to quash the writ of execution and directed her to pay the
Sps. Genato the amount of P739,133.31. The dispositive portion of the Order reads:
WHEREFORE, premises considered, the motion to quash writ of execution is hereby DENIED.
Movant Rita Viola is hereby directed to pay to the respondents the amount of P739,133.31 in payment of their amortizations up to August 2000.
The bond posted by the movant in compliance with the directive of this Office is likewise ordered cancelled.
SO ORDERED.7
Viola appealed the said Order and on January 10, 2003, the HLURB, First Division rendered a Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the movants' respective Motions to Quash the Writ of Execution are hereby GRANTED. Accordingly, the
Orders dated December 15, [2000] are hereby SET ASIDE. The respondents are directed to credit as payment the value of the 315 sacks of rice in the
amount of P318,500.00, which were seized and auctioned to the account of movant Viola.
SO ORDERED.8
The Sps. Genato appealed the said Decision to the Office of the President. On November 8, 2004, the Office of the President affirmed in toto the
Decision of the HLURB, First Division. The motion for reconsideration filed by the Sps. Genato was denied. They thus elevated the case to the CA.
As previously mentioned, the CA affirmed the Decision of the Office of the President and disposed as follows:
WHEREFORE, premises considered, the petition is DENIED and the assailed decision dated November 4, 2004 and resolution dated March 31, 2005
of the Office of the President in O.P. Case No. 03-B-057 are hereby AFFIRMED.
SO ORDERED.9
The Sps. Genato no longer filed a motion for reconsideration, they instead filed the present petition for review.
Issues
Petitioners raise the following issues:

37

1. WHETHER THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE HLURB HAS NOT ACQUIRED JURISDICTION
OVER THE PERSON OF RESPONDENT RITA VIOLA.
2. WHETHER AFTER THE DECISION HAS BECOME FINAL AND EXECUTORY THE HLURB COULD STILL RULE ON THE LACK OF
JURISDICTION OVER THE PERSON OF RITA VIOLA.
3. WHETHER RESPONDENT VIOLA CAN CLAIM AN AMOUNT HIGHER THAN WHAT APPEARS ON SHERIFF'S CERTIFICATE OF
SALE.
4. WHETHER THE RULE THAT FINDINGS OF FACTS AND CONCLUSIONS OF ANY ADJUDICATIVE BODY SHOULD BE CONSIDERED
AS BINDING AND CONCLUSIVE ON THE APPELLATE COURT, IS APPLICABLE IN THE CASE AT BAR. 10
Petitioners' Arguments
Petitioners contend that the CA erred in applying the case of Duero v. Court of Appeals,11 which held that the lack of jurisdiction of the court over an
action cannot be waived. They submit that "jurisdiction of the court over an action" is different from "jurisdiction over the person". They say that the
latter was what the HLURB was referring to because it stated that Rita Viola was never impleaded. They contend that jurisdiction over the person can
be conferred by consent expressly or impliedly given, as in the case of Rita Viola.
Petitioners also assert that the HLURB Decision subject of the writ of execution has long been final and executory, hence, said Decision can no
longer be modified. They further assert that the execution of the said Decision is a ministerial duty of the HLURB.
Petitioners further argue that the best evidence of the value of the 315 sacks of rice seized and auctioned off is the Sheriff's Certificate of Sale; hence
the Board's ruling crediting to the account of Viola an amount other than that stated in the Certificate of Sale has no sound basis.
Finally, the petitioners contend that the findings and conclusions of an adjudicative body resulting from an erroneous application of law are not
binding on the appellate courts.
Respondent's Arguments
On the other hand, respondent contends that the HLURB did not acquire jurisdiction over her person since she was not a party to the case; hence, the
HLURB decision is a nullity as against her and therefore never acquired finality. With a void judgment, the resultant execution was likewise void.
She also argues that, since the levy and auction were illegal, the correct valuation of the 315 sacks of rice is not the price paid at the auction but its
actual value of P318,500.00.
Our Ruling
The petition has merit.
At the outset, it is worth mentioning that except for respondent Rita Viola, all the other individual members/buyers/owners of the respective housing
units have already paid and settled their obligations with Sps. Genato. 12 Hence, in the present case we only focus on the matters involving Rita Viola.
For a more orderly presentation, we address the fourth issue raised by petitioners first.
Non-applicability of the doctrine on the binding effect of findings of facts and conclusions of an adjudicative body
Indeed findings of fact and conclusions of an adjudicative body like the HLURB, which can be considered as a trier of facts on specific matters
within its field of expertise, should be considered as binding and conclusive upon the appellate courts. This is in addition to the fact that it was in a
better position to assess and evaluate the credibility of the contending parties and the validity of their respective evidence. However, these doctrines
hold true only when such findings and conclusions are supported by substantial evidence. 13
In the present case, we find it difficult to find sufficient evidential support for the HLURB's conclusion that it did not acquire jurisdiction over the
person of Viola. We are thus persuaded that there is ample justification to disturb the findings of the HLURB.

38

The HLURB acquired jurisdiction over Viola

It is not the caption of the pleading but the allegations therein that are controlling. 14 The inclusion of the names of all the parties in the title of a
complaint is a formal requirement under Section 3, Rule 7 of the Rules of Court. However, the rules of pleadings require courts to pierce the form
and go into the substance.15 The non-inclusion of one or some of the names of all the complainants in the title of a complaint, is not fatal to the case,
provided there is a statement in the body of the complaint indicating that such complainant/s was/were made party to such action. This is specially
true before the HLURB where the proceedings are summary in nature without regard to legal technicalities obtaining in the courts of law 16 and where
the pertinent concern is to promote public interest and to assist the parties in obtaining just, speedy and inexpensive determination of every action,
application or other proceedings.17
Respondent Viola, although her name did not appear in the title as a party, was one of the persons who caused the preparation of the complaint and
who verified the same. The allegations in the body of the complaint indicate that she is one of the complainants. She categorically considered, and
held out, herself as one of the complainants from the time of the filing of the complaint and up to the time the decision in the HLURB case became
final and executory. To repeat, the averments in the body of the complaint, not the title, are controlling. 18Hence, having been set forth in the body of
the complaint as a complainant, Viola was a party to the case.
For clarity, the complaint should have been amended to reflect in the title the individual complainants. There being a "defect in the designation of the
parties", its correction could be summarily made at any stage of the action provided no prejudice is caused thereby to the adverse party. 19 In the
present case, the specification of the individual complainants in the title of the case would not constitute a change in the identity of the parties. Only
their names were omitted in the title but they were already parties to the case, most importantly, they were heard through their counsel whom they
themselves chose to prepare the complaint and represent them in the case before the HLURB. No unfairness or surprise to the complainants,
including Viola, or to the Sps. Genato would result by allowing the amendment, the purpose of which is merely to conform to procedural rules or to
correct a technical error.20
It is now too late to dismiss this petition, and, in effect, nullify all proceedings had before the HLURB on the ground that Viola does not appear to
have been impleaded as a party. The error or defect is merely formal and not substantial and an amendment to cure such defect is expressly
authorized by Sec. 4, Rule 10 of the Rules of Court. 21
Moreover, it was only when the final and executory judgment of the HLURB was already being executed against Viola that she, for the first time,
reversed her position; and claimed that she was not a party to the case and that the HLURB did not acquire jurisdiction over her. Viola is
estopped22 from taking such inconsistent positions. Where a party, by his or her deed or conduct, has induced another to act in a particular manner,
estoppel effectively bars the former from adopting an inconsistent position, attitude or course of conduct that causes loss or injury to the latter. The
doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against
his own act, representations, or commitments to the injury of one to whom they were directed and who reasonably relied thereon. After petitioners
had reasonably relied on the representations of Viola that she was a complainant and entered into the proceedings before the HLURB, she cannot now
be permitted to impugn her representations to the injury of the petitioners.1avvphi1
At this point, it may be beneficial to elaborate on the matter of jurisdiction. Jurisdiction is defined as the power and authority of a court to hear, try
and decide a case.23 In order for the court or an adjudicative body to have authority to dispose of the case on the merits, it must acquire jurisdiction
over the subject matter and the parties. 24 Elementary is the distinction between jurisdiction over the subject matter and jurisdiction over the person.
Jurisdiction over the subject matter is conferred by the Constitution or by law. In contrast, jurisdiction over the person is acquired by the court by
virtue of the party's voluntary submission to the authority of the court or through the exercise of its coercive processes. Jurisdiction over the person is
waivable unlike jurisdiction over the subject matter which is neither subject to agreement nor conferred by consent of the parties. 25 In civil case,
courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while jurisdiction over the defendants is acquired either through the
service of summons upon them in the manner required by law or through their voluntary appearance in court and their submission to its authority. 26
The act of filing the complaint with the HLURB is unequivocally a voluntary submission by the complainants, including Viola, to the authority of the
HLURB. Clearly, the HLURB acquired jurisdiction over Viola, who was one of the complainants, upon the filing of their complaint.
Final and executory judgment may no longer be modified
The April 27, 1999 HLURB Resolution,27 reinstating the December 18, 1996 Decision,28 has long been final and executory. Nothing is more settled in
the law than that a decision that has acquired finality becomes immutable and unalterable and may no longer be modified in any respect even if the
modification is meant to correct erroneous conclusions of fact or law and whether it was made by the court that rendered it or by the highest court of
the land.29 The only recognized exceptions to the general rule are the correction of clerical errors, the so-called nunc pro tunc entries which cause no
prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and

39

inequitable.30 None of the exceptions is present in this case. The HLURB decision cannot be considered a void judgment, as it was rendered by a
tribunal with jurisdiction over the subject matter of the complaint and, as discussed above, with jurisdiction over the parties. Hence, the same can no
longer be modified.
Amount to be credited on account
of the sale of property levied upon
After a judgment has gained finality, it becomes the ministerial duty of the court or quasi-judicial tribunal to order its execution. 31 In the present case,
the final and executory HLURB decision was partially executed by the sale of the 315 sacks of rice belonging to Viola.
In determining the amount to be credited to the account of Viola, we look at the Sheriff's Partial Report and the Sheriff's Certificate of Sale. Both
documents state that in the auction sale of the 315 sacks of rice, Mrs. Rebecca Genato submitted the highest bid in the amount of P189,000.00.
Drawing from Section 19, Rule 39 of the Rules of Court which states that "all sales of property under execution must be made at public auction, to
the highest bidder," it naturally follows that the highest bid submitted is the amount that should be credited to the account of the judgment debtor.
WHEREFORE, the petition is GRANTED. The assailed September 9, 2005 Decision of the Court of Appeals isREVERSED and SET ASIDE and
the December 15, 2000 Order of Arbiter Marino Bernardo M. Torres isREINSTATED and AFFIRMED.
SO ORDERED.

R. No. 152272

March 5, 2012

JUANA COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C. BAUTISTA, BRIGIDO DIMACULANGAN, DOLORES P.
PRADO, IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M. MERCADO, LEOVINO C. DATARIO, AIDA A. ABAYON,
NAPOLEON M. DIMAANO, ROSITA G. ESTIGOY and NELSON A. LOYOLA, Petitioners,
vs.
FIL-ESTATE LAND, INC., FIL ESTATE ECOCENTRUM CORPORATION, LA PAZ HOUSING AND DEVELOPMENT
CORPORATION, WARBIRD SECURITY AGENCY, ENRIQUE RIVILLA, MICHAEL E. JETHMAL and MICHAEL
ALUNAN, Respondents.
x-----------------------x
G. R. No. 152397
FIL-ESTATE LAND, INC., FIL ESTATE ECOCENTRUM CORPORATION, LA PAZ HOUSING AND DEVELOPMENT
CORPORATION, WARBIRD SECURITY AGENCY, ENRIQUE RIVILLA, MICHAEL E. JETHMAL and MICHAEL
ALUNAN, Petitioners,
vs.
JUANA COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C. BAUTISTA, BRIGIDO DIMACULANGAN, DOLORES P.
PRADO, IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M. MERCADO, LEOVINO C. DATARIO, AIDA A. ABAYON,
NAPOLEON M. DIMAANO, ROSITA G. ESTIGOY and NELSON A. LOYOLA, Respondents.
DECISION
MENDOZA, J.:
Before the Court are two (2) consolidated petitions assailing the July 31, 2001 Decision 1 and February 21, 2002 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 60543, which annulled and set aside the March 3, 1999 Order 3 of the Regional Trial Court, Branch 25, Bian,
Laguna (RTC), granting the application for the issuance of a writ of preliminary injunction, and upheld the June 16, 2000 Omnibus Order 4 denying
the motion to dismiss.
The Facts:

40

On January 20, 1999, Juana Complex I Homeowners Association, Inc. (JCHA), together with individual residents of Juana Complex I and other
neighboring subdivisions (collectively referred as JCHA, et. al.), instituted a complaint5 for damages, in its own behalf and as a class suit representing
the regular commuters and motorists of Juana Complex I and neighboring subdivisions who were deprived of the use of La Paz Road, against FilEstate Land, Inc. (Fil-Estate), Fil-estate Ecocentrum Corporation (FEEC), La Paz Housing & Development Corporation (La Paz), and Warbird
Security Agency and their respective officers (collectively referred as Fil-Estate, et al.).
The complaint alleged that JCHA, et al. were regular commuters and motorists who constantly travelled towards the direction of Manila and
Calamba; that they used the entry and exit toll gates of South Luzon Expressway(SLEX) by passing through right-of-way public road known as La
Paz Road; that they had been using La Paz Road for more than ten (10) years; that in August 1998, Fil-estate excavated, broke and deliberately ruined
La Paz Road that led to SLEX so JCHA, et al. would not be able to pass through the said road; that La Paz Road was restored by the residents to
make it passable but Fil-estate excavated the road again; that JCHA reported the matter to the Municipal Government and the Office of the Municipal
Engineer but the latter failed to repair the road to make it passable and safe to motorists and pedestrians; that the act of Fil-estate in excavating La Paz
Road caused damage, prejudice, inconvenience, annoyance, and loss of precious hours to them, to the commuters and motorists because traffic was
re-routed to narrow streets that caused terrible traffic congestion and hazard; and that its permanent closure would not only prejudice their right to
free and unhampered use of the property but would also cause great damage and irreparable injury.
Accordingly, JCHA, et al. also prayed for the immediate issuance of a Temporary Restraining Order (TRO) or a writ of preliminary
injunction (WPI) to enjoin Fil-Estate, et al. from stopping and intimidating them in their use of La Paz Road.
On February 10, 1999, a TRO was issued ordering Fil-Estate, et al, for a period of twenty (20) days, to stop preventing, coercing, intimidating or
harassing the commuters and motorists from using the La Paz Road. 6
Subsequently, the RTC conducted several hearings to determine the propriety of the issuance of a WPI.
On February 26, 1999, Fil-Estate, et al. filed a motion to dismiss 7 arguing that the complaint failed to state a cause of action and that it was
improperly filed as a class suit. On March 5, 1999, JCHA, et al. filed their comment 8 on the motion to dismiss to which respondents filed a reply.9
On March 3, 1999, the RTC issued an Order 10 granting the WPI and required JCHA, et al. to post a bond.
On March 19, 1999, Fil-Estate, et al. filed a motion for reconsideration 11 arguing, among others, that JCHA, et al. failed to satisfy the requirements
for the issuance of a WPI. On March 23, 1999, JCHA, et al. filed their opposition to the motion. 12
The RTC then issued its June 16, 2000 Omnibus Order, denying both the motion to dismiss and the motion for reconsideration filed by Fil-Estate, et
al.
Not satisfied, Fil-Estate, et al. filed a petition for certiorari and prohibition before the CA to annul (1) the Order dated March 3, 1999 and (2) the
Omnibus Order dated June 16, 2000. They contended that the complaint failed to state a cause of action and that it was improperly filed as a class
suit. With regard to the issuance of the WPI, the defendants averred that JCHA, et al. failed to show that they had a clear and unmistakable right to
the use of La Paz Road; and further claimed that La Paz Road was a torrens registered private road and there was neither a voluntary nor legal
easement constituted over it.13
On July 31, 2001, the CA rendered the decision partially granting the petition, the dispositive portion of which reads:
WHEREFORE, the petition is hereby partially GRANTED. The Order dated March 3, 1999 granting the writ of preliminary injunction is hereby
ANNULLED and SET ASIDE but the portion of the Omnibus Order dated June 16, 2000 denying the motion to dismiss is upheld.
SO ORDERED.14
The CA ruled that the complaint sufficiently stated a cause of action when JCHA, et al. alleged in their complaint that they had been using La Paz
Road for more than ten (10) years and that their right was violated when Fil-Estate closed and excavated the road. It sustained the RTC ruling that the
complaint was properly filed as a class suit as it was shown that the case was of common interest and that the individuals sought to be represented
were so numerous that it was impractical to include all of them as parties. The CA, however, annulled the WPI for failure of JCHA, et al. to prove
their clear and present right over La Paz Road. The CA ordered the remand of the case to the RTC for a full-blown trial on the merits.
Hence, these petitions for review.

41

In G.R. No. 152272, JCHA, et al. come to this Court, raising the following issues:
(A)
THE HONORABLE COURT OF APPEALS, IN HOLDING THAT A FULL-BLOWN TRIAL ON THE MERITS IS REQUIRED TO DETERMINE
THE NATURE OF THE LA PAZ ROAD, HAD DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION.
(B)
THE HONORABLE COURT OF APPEALS, IN HOLDING THAT THE PETITIONERS FAILED TO SATISFY THE REQUIREMENTS FOR THE
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION, HAD DECIDED NOT IN ACCORD WITH LAW AND WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT.15
In G.R. No. 152397, on the other hand, Fil-Estate, et al. anchor their petition on the following issues:
I.
The Court of Appeals declaration that respondents Complaint states a cause of action is contrary to existing law and jurisprudence.
II.
The Court of Appeals pronouncement that respondents complaint was properly filed as a class suit is contrary to existing law and
jurisprudence.
III.
The Court of Appeals conclusion that full blown trial on the merits is required to determine the nature of the La Paz Road is contrary to
existing laws and jurisprudence.16
JCHA, et al. concur with the CA that the complaint sufficiently stated a cause of action. They, however, disagree with the CAs pronouncement that a
full-blown trial on the merits was necessary. They claim that during the hearing on the application of the writ of injunction, they had sufficiently
proven that La Paz Road was a public road and that commuters and motorists of their neighboring villages had used this road as their means of access
to the San Agustin Church, Colegio De San Agustin and to SLEX in going to Metro Manila and to Southern Tagalog particularly during the rush
hours when traffic at Carmona Entry/Exit and Susana Heights Entry/Exit was at its worst.
JCHA, et al. argue that La Paz Road has attained the status and character of a public road or burdened by an apparent easement of public right of way.
They point out that La Paz Road is the widest road in the neighborhood used by motorists in going to Halang Road and in entering the SLEX-Halang
toll gate and that there is no other road as wide as La Paz Road existing in the vicinity. For residents of San Pedro, Laguna, the shortest, convenient
and safe route towards SLEX Halang is along Rosario Avenue joining La Paz Road.
Finally, JCHA, et al. argue that the CA erred when it voided the WPI because the public nature of La Paz Road had been sufficiently proven and, as
residents of San Pedro and Bian, Laguna, their right to use La Paz Road is undeniable.
In their Memorandum,17 Fil-Estate, et al. explain that La Paz Road is included in the parcels of land covered by Transfer Certificates of
Title (TCT) Nos. T-120008, T-90321 and T-90607, all registered in the name of La Paz. The purpose of constructing La Paz Road was to provide a
passageway for La Paz to its intended projects to the south, one of which was the Juana Complex I. When Juana Complex I was completed, La Paz
donated the open spaces, drainage, canal, and lighting facilities inside the Juana Complex I to the Municipality of Bian. The streets within the
subdivisions were then converted to public roads and were opened for use of the general public. The La Paz Road, not being part of the Juana
Complex I, was excluded from the donation. Subsequently, La Paz became a shareholder of FEEC, a consortium formed to develop several real
properties in Bian, Laguna, known as Ecocentrum Project. In exchange for shares of stock, La Paz contributed some of its real properties to the
Municipality of Bian, including the properties constituting La Paz Road, to form part of the Ecocentrum Project.
Fil-Estate, et al. agree with the CA that the annulment of the WPI was proper since JCHA, et al. failed to prove that they have a clear right over La
Paz Road. Fil-Estate, et al. assert that JCHA, et al. failed to prove the existence of a right of way or a right to pass over La Paz Road and that the

42

closure of the said road constituted an injury to such right. According to them, La Paz Road is a torrens registered private road and there is neither a
voluntary nor legal easement constituted over it. They claim that La Paz Road is a private property registered under the name of La Paz and the
beneficial ownership thereof was transferred to FEEC when La Paz joined the consortium for the Ecocentrum Project.
Fil-Estate, et al., however, insist that the complaint did not sufficiently contain the ultimate facts to show a cause of action. They aver the bare
allegation that one is entitled to something is an allegation of a conclusion which adds nothing to the pleading.
They likewise argue that the complaint was improperly filed as a class suit for it failed to show that JCHA, et al. and the commuters and motorists
they are representing have a well-defined community of interest over La Paz Road. They claim that the excavation of La Paz Road would not
necessarily give rise to a common right or cause of action for JCHA, et al. against them since each of them has a separate and distinct purpose and
each may be affected differently than the others.
The Courts Ruling
The issues for the Courts resolution are: (1) whether or not the complaint states a cause of action; (2) whether the complaint has been properly filed
as a class suit; and (2) whether or not a WPI is warranted.
Section 2, Rule 2 of the Rules of Court defines a cause of action as an act or omission by which a party violates the right of another. A complaint
states a cause of action when it contains three (3) essential elements of a cause of action, namely:
(1) the legal right of the plaintiff,
(2) the correlative obligation of the defendant, and
(3) the act or omission of the defendant in violation of said legal right. 18
The question of whether the complaint states a cause of action is determined by its averments regarding the acts committed by the defendant. 19 Thus,
it must contain a concise statement of the ultimate or essential facts constituting the plaintiffs cause of action. 20 To be taken into account are only the
material allegations in the complaint; extraneous facts and circumstances or other matters aliunde are not considered.21
The test of sufficiency of facts alleged in the complaint as constituting a cause of action is whether or not admitting the facts alleged, the court could
render a valid verdict in accordance with the prayer of said complaint. 22 Stated differently, if the allegations in the complaint furnish sufficient basis
by which the complaint can be maintained, the same should not be dismissed regardless of the defense that may be asserted by the defendant. 23
In the present case, the Court finds the allegations in the complaint sufficient to establish a cause of action. First,JCHA, et al.s averments in the
complaint show a demandable right over La Paz Road. These are: (1) their right to use the road on the basis of their allegation that they had been
using the road for more than 10 years; and (2) an easement of a right of way has been constituted over the said roads. There is no other road as wide
as La Paz Road existing in the vicinity and it is the shortest, convenient and safe route towards SLEX Halang that the commuters and motorists may
use. Second, there is an alleged violation of such right committed by Fil-Estate, et al. when they excavated the road and prevented the commuters and
motorists from using the same. Third, JCHA, et al. consequently suffered injury and that a valid judgment could have been rendered in accordance
with the relief sought therein.
With respect to the issue that the case was improperly instituted as a class suit, the Court finds the opposition without merit.
Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
Sec. 12. Class suit. When the subject matter of the controversy is one of common or general interest to many persons so numerous that it is
impracticable to join all as parties, a number of them which the court finds to be sufficiently numerous and representative as to fully protect the
interests of all concerned may sue or defend for the benefit of all. Any party in interest shall have the right to intervene to protect his individual
interest.
The necessary elements for the maintenance of a class suit are: 1) the subject matter of controversy is one of common or general interest to many
persons; 2) the parties affected are so numerous that it is impracticable to bring them all to court; and 3) the parties bringing the class suit are
sufficiently numerous or representative of the class and can fully protect the interests of all concerned. 24

43

In this case, the suit is clearly one that benefits all commuters and motorists who use La Paz Road. As succinctly stated by the CA:
The subject matter of the instant case, i.e., the closure and excavation of the La Paz Road, is initially shown to be of common or general interest to
many persons. The records reveal that numerous individuals have filed manifestations with the lower court, conveying their intention to join private
respondents in the suit and claiming that they are similarly situated with private respondents for they were also prejudiced by the acts of petitioners in
closing and excavating the La Paz Road. Moreover, the individuals sought to be represented by private respondents in the suit are so numerous that it
is impracticable to join them all as parties and be named individually as plaintiffs in the complaint. These individuals claim to be residents of various
barangays in Bian, Laguna and other barangays in San Pedro, Laguna.
Anent the issue on the propriety of the WPI, Section 3, Rule 58 of the Rules of Court lays down the rules for the issuance thereof. Thus:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or
continuance of the acts complained of, or in the performance of an act or acts, either for a limited period or perpetually;
(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work
injustice to the applicant; or
(c) That a party, court, or agency or a person is doing, threatening, or attempting to do, or is procuring or suffering to be done, some act or
acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.
A writ of preliminary injunction is available to prevent a threatened or continuous irremediable injury to parties before their claims can be thoroughly
studied and adjudicated.25 The requisites for its issuance are: (1) the existence of a clear and unmistakable right that must be protected; and (2) an
urgent and paramount necessity for the writ to prevent serious damage. 26 For the writ to issue, the right sought to be protected must be a present right,
a legal right which must be shown to be clear and positive. 27 This means that the persons applying for the writ must show that they have an ostensible
right to the final relief prayed for in their complaint. 28
In the case at bench, JCHA, et al. failed to establish a prima facie proof of violation of their right to justify the issuance of a WPI. Their right to the
use of La Paz Road is disputable since they have no clear legal right therein. As correctly ruled by the CA:
Here, contrary to the ruling of respondent Judge, private respondents failed to prove as yet that they have a clear and unmistakable right over the La
Paz Road which was sought to be protected by the injunctive writ. They merely anchor their purported right over the La Paz Road on the bare
allegation that they have been using the same as public road right-of-way for more than ten years. A mere allegation does not meet the standard of
proof that would warrant the issuance of the injunctive writ. Failure to establish the existence of a clear right which should be judicially protected
through the writ of injunction is a sufficient ground for denying the injunction.
Consequently, the case should be further heard by the RTC so that the parties can fully prove their respective positions on the issues.1wphi1
Due process considerations dictate that the assailed injunctive writ is not a judgment on the merits but merely an order for the grant of a provisional
and ancillary remedy to preserve the status quo until the merits of the case can be heard. The hearing on the application for issuance of a writ of
preliminary injunction is separate and distinct from the trial on the merits of the main case. 29 The evidence submitted during the hearing of the
incident is not conclusive or complete for only a "sampling" is needed to give the trial court an idea of the justification for the preliminary injunction
pending the decision of the case on the merits. 30 There are vital facts that have yet to be presented during the trial which may not be obtained or
presented during the hearing on the application for the injunctive writ. 31 Moreover, the quantum of evidence required for one is different from that for
the other.32
WHEREFORE, the petitions are DENIED. Accordingly, the July 31, 2001 Decision and February 21, 2002 Resolution of the Court of Appeals in
CA-G.R. SP No. 60543 are AFFIRMED.
SO ORDERED.

FACTS:
Juana Complex I Homeowners Association, Inc. (JCHA), together with individual residents of Juana Complex I and other neighboring subdivisions, instituted a
complaint for damages, in its own behalf and as a class suit representing the regular commuters and motorists of Juana Complex I and neighboring subdivisions who
were deprived of the use of La Paz Road, against Fil-Estate Land, Inc.

44

Accordingly, JCHA, et al. also prayed for the immediate issuance of a Temporary Restraining Order (TRO) or a writ of preliminary injunction (WPI) to enjoin FilEstate, et al. from stopping and intimidating them in their use of La Paz Road. Fil-Estate, et al. filed a motion to dismiss arguing that the complaint failed to state a
cause of action and that it was improperly filed as a class suit.
They claim that the excavation of La Paz Road would not necessarily give rise to a common right or cause of action for JCHA, etal. against them since each of them has
a separate and distinct purpose and each may be affected differently than the others. With regard to the issuance of the WPI, the defendants averred that JCHA, et al.
failed to show that they had a clear and unmistakable right to the use of La Paz Road; and further claimed that La Paz Road was a torrens registered private road and
there was neither a voluntary nor legal easement constituted over it.
ISSUES:k/md
Whk/mdether or not the complaint was properly filed as a class suit?gk/mdgk/mdddd
HELD:
The necessary elements for the maintenance of a class suit are:1) the subject matter of controversy is one of common or general interest to many persons;2) the parties
affected are so numerous that it is impracticable to bring them all to court; and3) the parties bringing the class suit are sufficiently numerous or representative of the
class and can fully protect the interests of all concerned.
In this case, the suit is clearly one that benefits all commuters and motorists who use La Paz Road. The individuals sought to be represented by private respondents in
the suit are so numerous that it is impracticable to join them all as parties and be named individually as plaintiffs in the complaint.
NOTES:
Whether or not the complaint states a cause of action?
The question of whether the complaint states a cause of action is determined by its averments regarding the acts committed by the defendant. Thus, it must contain a
concise statement of the ultimate or essential facts constituting the plaintiffs cause of action. The test of sufficiency of facts alleged in the complaint as constituting a
cause of action is whether or not admitting the facts alleged, the court could render a valid verdict in accordance with the prayer of said complaint. In the present case,
the Court finds the allegations in the complaint sufficient to establish a cause of action
A writ of preliminary injunction is available to prevent a threatened or continuous irremediable injury to parties before their claims can be thoroughly studied and
adjudicated. The requisites for its issuance are: (1) the existence of a clear and unmistakable right that must be protected; and (2) an urgent and paramount necessity for
the writ to prevent serious damage. For the writ to issue, the right sought to be protected must be a present right, a legal right which must be shown to be clear and
positive. This means that the persons applying for the writ must show that they have an ostensible right to the final relief prayed for in their complaint.

R. No. L-63559 May 30, 1986

NEWSWEEK, INC., petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, and NATIONAL FEDERATION OF SUGARCANE PLANTERS INC., BINALBAGANISABELA PLANTERS ASSOCIATION, INC., ASOCIACION DE AGRICULTORES DE LA CARLOTA, LA CASTELLANA y
PONTEVEDRA, INC., DONEDCO PLANTERS ASSOCIATION INC., ARMANDO GUSTILO, ENRIQUE ROJAS, ALFREDO
MONTELIBANO, JR., PABLO SOLA, JOSE MONTALVO, VICENTE GUSTILO, JOSEPH MARANON, ROBERTO CUENCA, JOSE
SICANGCO, FLORENCIO ALONSO, MIGUEL GATUSLAO, PEDRO YULO, MARINO RUBIN and BENJAMIN
BAUTISTA, respondents.
San Juan, Africa, Gonzales & San Agustin Law Offices for private respondents.

FERIA, J.:
Petitioner, Newsweek, Inc., a foreign corporation licensed to do business in the Philippines, in this special action for certiorari, prohibition with
preliminary injunction, seeks to annul the decision of the Intermediate Appellate Court dated December 17, 1982 sustaining the Order of the then
Court of First Instance of Bacolod City which denied petitioner's Motion to Dismiss the complaint for libel filed by private respondents (Civil Case
No. 15812), and the Resolution dated March 10, 1983 which denied its Motion for Reconsideration.
It appears that on March 5, 1981, private respondents, incorporated associations of sugarcane planters in Negros Occidental claiming to have 8,500
members and several individual sugar planters, filed Civil Case No. 15812 in their own behalf and/or as a class suit in behalf of all sugarcane planters
in the province of Negros Occidental, against petitioner and two of petitioners' non-resident correspondents/reporters Fred Bruning and Barry Came.
The complaint alleged that petitioner and the other defendants committed libel against them by the publication of the article "An Island of Fear" in
the February 23, 1981 issue of petitioner's weekly news magazine Newsweek. The article supposedly portrayed the island province of Negros
Occidental as a place dominated by big landowners or sugarcane planters who not only exploited the impoverished and underpaid sugarcane
workers/laborers, but also brutalized and killed them with imprunity. Complainants therein alleged that said article, taken as a whole, showed a
deliberate and malicious use of falsehood, slanted presentation and/or misrepresentation of facts intended to put them (sugarcane planters) in bad
light, expose them to public ridicule, discredit and humiliation here in the Philippines and abroad, and make them objects of hatred, contempt and
hostility of their agricultural workers and of the public in general. They prayed that defendants be ordered to pay them PlM as actual and
compensatory damages, and such amounts for moral, exemplary and corrective damages as the court may determine, plus expenses of litigation,
attorney's fees and costs of suit. A photo copy of the article was attached to the complaint.

45

On November 5, 1981, petitioner filed a motion to dismiss on the grounds that (1) the printed article sued upon is not actionable in fact and in law;
and (2) the complaint is bereft of allegations that state, much less support a cause of action. It pointed out the non-libelous nature of the article and,
consequently, the failure of the complaint to state a cause of action. Private respondents filed an Opposition to the motion to dismiss and petitioner
filed a reply.
On March 17, 1982, the trial court denied the motion to dismiss, stating that the grounds on which the motion to dismiss are predicated are not
indubitable as the complaint on its face states a valid cause of action; and the question as to whether the printed article sued upon its actionable or not
is a matter of evidence. Petitioner's motion for reconsideration was denied on May 28, 1982.
On June 18, 1982, petitioner filed a petition for certiorari with respondent Court (CA-G. R. No. 14406) seeking the annulment of the aforecited trial
court's Orders for having been issued with such a grave abuse of discretion as amounting to lack of jurisdiction and praying for the dismissal of the
complaint for failure to state a cause of action.
As earlier stated, respondent Court affirmed the trial court's Orders in a Decision dated December 17, 1982 and ordered the case to be tried on the
merits on the grounds that -(1) the complaint contains allegations of fact which called for the presentation of evidence; and (2) certiorari under Rule
65 cannot be made to substitute for an appeal where an appeal would lie at a proper time. Subsequently, on March 10, 1983, the respondent Court
denied petitioner's Motion for Reconsideration of the aforesaid decision, hence this petition.
The proper remedy which petitioner should have taken from the decision of respondent Court is an appeal by certiorari under Rule 45 of the Rules of
Court and not the special civil action of certiorari and prohibition under Rule 65 of said Rules. However, since the petition was filed on time within
fifteen days from notice of the Resolution denying the motion for reconsideration, we shall treat the same as a petition for review on certiorari. The
two (2) issues raised in the petition are: (1) whether or not the private respondents' complaint failed to state a cause of action; and (2) whether or not
the petition for certiorari and prohibition is proper to question the denial of a motion to dismiss for failure to state a cause of action.
First, petitioner argues that private respondents' complaint failed to state a cause of action because the complaint made no allegation that anything
contained in the article complained of regarding sugarcane planters referred specifically to any one of the private respondents; that libel can be
committed only against individual reputation; and that in cases where libel is claimed to have been directed at a group, there is actionable defamation
only if the libel can be said to reach beyond the mere collectivity to do damage to a specific, individual group member's reputation.
We agree with petitioner.
In the case of Corpus vs. Cuaderno, Sr. (16 SCRA 807) this Court ruled that "in order to maintain a libel suit, it is essential that the victim be
identifiable (People vs. Monton, L-16772, November 30, 1962), although it is not necessary that he be named (19 A.L.R. 116)." In an earlier case,
this Court declared that" ... defamatory matter which does not reveal the Identity of the person upon whom the imputation is cast, affords no ground
of action unless it be shown that the readers of the libel could have Identified the personality of the individual defamed." (Kunkle vs. CablenewsAmerican and Lyons 42 Phil. 760).
This principle has been recognized to be of vital importance, especially where a group or class of persons, as in the case at bar, claim to have been
defamed, for it is evident that the larger the collectivity, the more difficult it is for the individual member to prove that the defamatory remarks apply
to him. (Cf. 70 ALR 2d. 1384).
In the case of Uy Tioco vs. Yang Shu Wen , 32 Phil. 624, this Court held as follows:
Defamatory remarks directed at a class or group of persons in general language only, are not actionable by individuals composing
the class or group unless the statements are sweeping; and it is very probable that even then no action would lie where the body is
composed of so large a number of persons that common sense would tell those to whom the publication was made that there was
room for persons connected with the body to pursue an upright and law abiding course and that it would be unreasonable and
absurd to condemn all because of the actions of a part. (supra p. 628).
It is evident from the above ruling that where the defamation is alleged to have been directed at a group or class, it is essential that the statement must
be so sweeping or all-embracing as to apply to every individual in that group or class, or sufficiently specific so that each individual in the class or
group can prove that the defamatory statement specifically pointed to him, so that he can bring the action separately, if need be.
We note that private respondents filed a "class suit" in representation of all the 8,500 sugarcane planters of Negros Occidental. Petitioner disagrees
and argues that the absence of any actionable basis in the complaint cannot be cured by the filing of a class suit on behalf of the aforesaid sugar
planters.

46

We find petitioner's contention meritorious.

The case at bar is not a class suit. It is not a case where one or more may sue for the benefit of all (Mathay vs. Consolidated Bank and Trust
Company, 58 SCRA 559) or where the representation of class interest affected by the judgment or decree is indispensable to make each member of
the class an actual party (Borlaza vs. Polistico, 47 Phil. 348). We have here a case where each of the plaintiffs has a separate and distinct reputation in
the community. They do not have a common or general interest in the subject matter of the controversy.
The disputed portion of the article which refers to plaintiff Sola and which was claimed to be libelous never singled out plaintiff Sola as a sugar
planter. The news report merely stated that the victim had been arrested by members of a special police unit brought into the area by Pablo Sola, the
mayor of Kabankalan. Hence, the report, referring as it does to an official act performed by an elective public official, is within the realm of privilege
and protected by the constitutional guarantees of free speech and press.
The article further stated that Sola and the commander of the special police unit were arrested. The Court takes judicial notice of this fact. (People vs.
Sola, 103 SCRA 393.)
The second issue to be resolved here is whether or not the special civil action of certiorari or prohibition is available to petitioner whose motion to
dismiss the complaint and subsequent motion for reconsideration were denied.
As a general rule, an order denying a motion to dismiss is merely interlocutory and cannot be subject of appeal until final judgment or order is
rendered. (Sec. 2 of Rule 4 1). The ordinary procedure to be followed in such a case is to file an answer, go to trial and if the decision is adverse,
reiterate the issue on appeal from the final judgment. The same rule applies to an order denying a motion to quash, except that instead of filing an
answer a plea is entered and no appeal lies from a judgment of acquittal.
This general rule is subject to certain exceptions. If the court, in denying the motion to dismiss or motion to quash, acts without or in excess of
jurisdiction or with grave abuse of discretion, then certiorari or prohibition lies. The reason is that it would be unfair to require the defendant or
accused to undergo the ordeal and expense of a trial if the court has no jurisdiction over the subject matter or offense, or is not the court of proper
venue, or if the denial of the motion to dismiss or motion to quash is made with grave abuse of discretion or a whimsical and capricious exercise of
judgment. In such cases, the ordinary remedy of appeal cannot be plain and adequate. The following are a few examples of the exceptions to the
general rule.
In De Jesus vs. Garcia (19 SCRA 554), upon the denial of a motion to dismiss based on lack of jurisdiction over the subject matter, this Court granted
the petition for certiorari and prohibition against the City Court of Manila and directed the respondent court to dismiss the case.
In Lopez vs. City Judge (18 SCRA 616), upon the denial of a motion to quash based on lack of jurisdiction over the offense, this Court granted the
petition for prohibition and enjoined the respondent court from further proceeding in the case.
In Enriquez vs. Macadaeg (84 Phil. 674), upon the denial of a motion to dismiss based on improper venue, this Court granted the petition for
prohibition and enjoined the respondent judge from taking cognizance of the case except to dismiss the same.
In Manalo vs. Mariano (69 SCRA 80), upon the denial of a motion to dismiss based on bar by prior judgment, this Court granted the petition for
certiorari and directed the respondent judge to dismiss the case.
In Yuviengco vs. Dacuycuy (105 SCRA 668), upon the denial of a motion to dismiss based on the Statute of Frauds, this Court granted the petition for
certiorari and dismissed the amended complaint.
In Tacas vs. Cariaso (72 SCRA 527), this Court granted the petition for certiorari after the motion to quash based on double jeopardy was denied by
respondent judge and ordered him to desist from further action in the criminal case except to dismiss the same.
In People vs. Ramos (83 SCRA 11), the order denying the motion to quash based on prescription was set aside on certiorari and the criminal case was
dismissed by this Court.
Respondent Court correctly stated the general rule and its exceptions. However, it ruled that none of the exceptions is present in the case at bar and
that the case appears complex and complicated, necessitating a full-blown trial to get to the bottom of the controversy.

47

Petitioner's motion to dismiss is based on the ground that the complaint states no cause of action against it by pointing out the non-libelous nature of
the article sued upon. There is no need of a trial in view of the conclusion of this Court that the article in question is not libelous. The specific
allegation in the complaint, to the effect that the article attributed to the sugarcane planters the deaths and brutalization of sugarcane workers, is not
borne out by a perusal of the actual text.
The complaint contains a recital of the favorable working conditions of the agricultural workers in the sugar industry and the various foundations and
programs supported by planters' associations for the benefit of their workers. Undoubtedly, the statements in the article in question are sweeping and
exaggerated; but, paraphrasing the ruling in the Uy Tioco case above quoted, it would be unreasonable and absurd to condemn the majority of the
sugarcane planters, who have at heart the welfare of their workers, because of the actions of a part. Nonetheless, articles such as the one in question
may also serve to prick the consciences of those who have but are not doing anything or enough for those who do not have.
On the other hand, petitioner would do well to heed the admonition of the President to media that they should check the sources of their information
to ensure the publication of the truth. Freedom of the press, like all freedoms, should be exercised with responsibility.
WHEREFORE, the decision of the Intermediate Appellate Court is reversed and the complaint in Civil Case No. 15812 of the Court of First Instance
of Negros Occidental is dismissed, without pronouncement as to costs.
SO ORDERED.

o
o

o
o
o

Facts:
"An Island of Fear" was published by Newsweek in its Feb 23, 1981. It allegedly portrayed the island province of Negros Occidental as a place dominated by big
landowners or sugarcane planters who not only exploited the impoverished workers, but also brutalized and killed them with impunity. #peachesdiaries
Newsweek filed a motion to dismiss on the grounds that
the printed article sued upon is not actionable in fact and in law;
the complaint is bereft of allegations that state, much less support a cause of action.
Trial court denied the motion to dismiss. Complaint on its face states a valid cause of action; and the question as to whether the printed article sued upon its
actionable or not is a matter of evidence.
Petitioner: Complaint failed to state a cause of action because:
Complaint made no allegation the article referred specifically to any one of the private respondents;
Libel can be committed only against individual reputation;
in cases where libel is claimed to have been directed at a group, there is actionable defamation only if the libel can be said to reach beyond the mere collectivity to do
damage to a specific, individual group member's reputation.
Issue: WON the complaint must be dismissed? YES.
Corpus vs. Cuaderno, Sr.:
"in order to maintain a libel suit, it is essential that the victim be identifiable, although it is not necessary that he be named (19 A.L.R. 116)."
Uy Tioco vs. Yang Shu Wen:
Defamatory remarks directed at a class or group of persons in general language only, are not actionable by individuals composing the class or group unless the statements
are sweeping.
The case at bar is not a class suit. It is not a case where one or more may sue for the benefit of all
We have here a case where each of the plaintiffs has a separate and distinct reputation in the community. They do not have a common or general interest in the subject
matter of the controversy.

G.R. No. 160426

January 31, 2008

CAPITOLINA VIVERO NAPERE, petitioner,

vs.
AMANDO BARBARONA and GERVACIA MONJAS BARBARONA, respondents.
RES OLUTIO N
NACHURA, J.:
Petitioner Capitolina Vivero Napere interposes this petition for review to assail the Court of Appeals Decision 1dated October 9, 2003, which upheld the validity of the
Regional Trial Courts decision despite failure to formally order the substitution of the heirs of the deceased defendant, petitioners husband.
The case stems from the following antecedents:
Respondent Amando Barbarona is the registered owner of Lot No. 3177, situated in Barangay San Sotero (formerly Tambis), Javier, Leyte and covered by Original
Certificate of Title (OCT) No. P-7350. Lot No. 3176, covered by OCT No. 1110 in the name of Anacleto Napere, adjoins said lot on the northeastern side. After
Anacleto died, his son, Juan Napere, and the latters wife, herein petitioner, planted coconut trees on certain portions of the property with the consent of his co-heirs.

48

In their complaint, respondents alleged that in April 1980, the spouses Napere, their relatives and hired laborers, by means of stealth and strategy, encroached upon and
occupied the northeastern portion of Lot No. 3177; that the Naperes harvested the coconut fruits thereon, appropriated the proceeds thereof, and, despite demands,
refused to turn over possession of the area; that in April 1992, a relocation survey was conducted which confirmed that the respondents property was encroached upon
by the Naperes; that on the basis of the relocation survey, the respondents took possession of this encroached portion of the lot and harvested the fruits thereon from
April 1993 to December 1993; but that in January 1994, the Naperes repeated their acts by encroaching again on the respondents property, harvesting the coconuts and
appropriating the proceeds thereof, and refusing to vacate the property on demand.
On November 10, 1995, while the case was pending, Juan Napere died. Their counsel informed the court of Juan Naperes death, and submitted the names and
addresses of Naperes heirs.
At the pre-trial, the RTC noted that the Naperes were not contesting the respondents right of possession over the disputed portion of the property but were demanding
the rights of a planter in good faith under Articles 445 and 455 of the Civil Code.
On October 17, 1996, the RTC rendered a Decision against the estate of Juan Napere, thus:
WHEREFORE, this Court finds in favor of the plaintiff and against the defendant, hereby declaring the following:
a) The estate of Juan Napere is liable to pay the amount of ONE HUNDRED SEVENTY-NINE THOUSAND TWO HUNDRED (P179,200.00) PESOS in
actual damages;
b) The estate of Juan Napere shall be liable to pay FIVE THOUSAND (P5,000.00) PESOS in litigation expenses, and the
c) Cost[s] of suit.
SO ORDERED.2
Petitioner appealed the case to the Court of Appeals (CA), arguing, inter alia, that the judgment of the trial court was void for lack of jurisdiction over the heirs who
were not ordered substituted as party-defendants for the deceased.
On October 9, 2003, the CA rendered a Decision affirming the RTC Decision.3 The appellate court held that failure to substitute the heirs for the deceased defendant
will not invalidate the proceedings and the judgment in a case which survives the death of such party.
Thus, this petition for review where the only issue is whether or not the RTC decision is void for lack of jurisdiction over the heirs of Juan Napere. Petitioner alleges
that the trial court did not acquire jurisdiction over the persons of the heirs because of its failure to order their substitution pursuant to Section 17, 4 Rule 3 of the Rule of
Court; hence, the proceedings conducted and the decision rendered by the trial court are null and void.
The petition must fail.
When a party to a pending case dies and the claim is not extinguished by such death, the Rules require the substitution of the deceased party by his legal representative
or heirs. In such case, counsel is obliged to inform the court of the death of his client and give the name and address of the latters legal representative.
The complaint for recovery of possession, quieting of title and damages is an action that survives the death of the defendant. Notably, the counsel of Juan Napere
complied with his duty to inform the court of his clients death and the names and addresses of the heirs. The trial court, however, failed to order the substitution of the
heirs. Nonetheless, despite this oversight, we hold that the proceedings conducted and the judgment rendered by the trial court are valid.
The Court has repeatedly declared that failure of the counsel to comply with his duty to inform the court of the death of his client, such that no substitution is effected,
will not invalidate the proceedings and the judgment rendered thereon if the action survives the death of such party.5 The trial courts jurisdiction over the case subsists
despite the death of the party.
Mere failure to substitute a deceased party is not sufficient ground to nullify a trial courts decision. The party alleging nullity must prove that there was an undeniable
violation of due process.6
Strictly speaking, the rule on substitution by heirs is not a matter of jurisdiction, but a requirement of due process. 7 The rule on substitution was crafted to protect every
partys right to due process.8 It was designed to ensure that the deceased party would continue to be properly represented in the suit through his heirs or the duly
appointed legal representative of his estate.9 Moreover, non-compliance with the Rules results in the denial of the right to due process for the heirs who, though not duly
notified of the proceedings, would be substantially affected by the decision rendered therein. 10 Thus, it is only when there is a denial of due process, as when the
deceased is not represented by any legal representative or heir, that the court nullifies the trial proceedings and the resulting judgment therein. 11
Formal substitution by heirs is not necessary when they themselves voluntarily appear, participate in the case, and present evidence in defense of the deceased. 12 In such
case, there is really no violation of the right to due process. The essence of due process is the reasonable opportunity to be heard and to submit any evidence available in

49

support of ones defense.13 When due process is not violated, as when the right of the representative or heir is recognized and protected, noncompliance or belated
formal compliance with the Rules cannot affect the validity of a promulgated decision.14
In light of these pronouncements, we cannot nullify the proceedings before the trial court and the judgment rendered therein because the petitioner, who was, in fact, a
co-defendant of the deceased, actively participated in the case. The records show that the counsel of Juan Napere and petitioner continued to represent them even after
Juans death. Hence, through counsel, petitioner was able to adequately defend herself and the deceased in the proceedings below. Due process simply demands an
opportunity to be heard and this opportunity was not denied petitioner.
Finally, the alleged denial of due process as would nullify the proceedings and the judgment thereon can be invoked only by the heirs whose rights have been violated.
Violation of due process is a personal defense that can only be asserted by the persons whose rights have been allegedly violated. 15 Petitioner, who had every
opportunity and who took advantage of such opportunity, through counsel, to participate in the trial court proceedings, cannot claim denial of due process.
WHEREFORE, premises considered, the petition is DENIED DUE COURSE. The Decision of the Court of Appeals, dated October 9, 2003, in CA-G.R. CV No.
56457, is AFFIRMED.
SO ORDERED.

50