1
Republic of the Philippines The RTC Orders
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 186993 August 22, 2012
THEODORE and NANCY ANG, represented by ELDRIGE
MARVIN B. ACERON, Petitioners,
vs.
SPOUSES ALAN and EM ANG, Respondents.
VELASCO, JR.,*
LEONARDO-DE CASTRO, **
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari under
Rule 45 of the Rules of Court seeking to annul and set aside
the Decision1 dated August 28, 2008 and the Resolution2
dated February 20, 2009 rendered by the Court of Appeals
(CA) in CA-G.R. SP No. 101159. The assailed decision
annulled and set aside the Orders dated April 12, 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 note5 in favor of the
petitioners wherein they promised to pay the latter the said
amount, with interest at the rate of ten percent (10%) per
annum, upon demand. However, despite repeated demands,
the respondents failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the
respondents a demand letter asking them to pay their
outstanding debt which, at that time, already amounted to
Seven Hundred Nineteen Thousand, Six Hundred Seventy-
One U.S. Dollars and Twenty-Three Cents (US$719,671.23),
inclusive of the ten percent (10%) annual interest that had
accumulated over the years. Notwithstanding the receipt of
the said demand letter, the respondents still failed to settle
their loan obligation.
On August 6, 2006, the petitioners, who were then residing in
Los Angeles, California, United States of America (USA),
executed their respective Special Powers of Attorney6 in favor
of Attorney Eldrige Marvin B. Aceron (Atty. Aceron) for the
purpose of filing an action in court against the respondents.
On September 15, 2006, Atty. Aceron, in behalf of the
petitioners, filed a Complaint7 for collection of sum of money
with the RTC of Quezon City against the respondents.
On November 21, 2006, the respondents moved for the
dismissal of the complaint filed by the petitioners on the
grounds of improper venue and prescription.8 Insisting that
the venue of the petitioners action was improperly laid, the
respondents asserted that the complaint against them may
only be filed in the court of the place where either they or the
petitioners reside. They averred that they reside in Bacolod
City while the petitioners reside in Los Angeles, California,
USA. Thus, the respondents maintain, the filing of the
complaint against them in the RTC of Quezon City was
improper.
On April 12, 2007, the RTC of Quezon City issued an Order9
which, inter alia, denied the respondents motion to dismiss.
In ruling against the respondents claim of improper venue,
the court explained that:
Attached to the complaint is the Special Power of Attorney x x
x which clearly states that plaintiff Nancy Ang constituted
Atty. Eldrige Marvin Aceron as her duly appointed attorney-in-
fact to prosecute her claim against herein defendants.
Considering that the address given by Atty. Aceron is in
Quezon City, hence, being the plaintiff, venue of the action
may lie where he resides as provided in Section 2, Rule 4 of
the 1997 Rules of Civil Procedure.10
The respondents sought reconsideration of the RTC Order
dated April 12, 2007, asserting that there is no law which
allows the filing of a complaint in the court of the place where
the representative, who was appointed as such by the
plaintiffs through a Special Power of Attorney, resides.11
The respondents motion for reconsideration was denied by
the RTC of Quezon City in its Order12 dated August 27, 2007.
The respondents then filed with the CA a petition for
certiorari13 alleging in the main that, pursuant to Section 2,
Rule 4 of the Rules of Court, the petitioners complaint may
only be filed in the court of the place where they or the
petitioners reside. Considering that the petitioners reside in
Los Angeles, California, USA, the respondents assert that the
complaint below may only be filed in the RTC of Bacolod City,
the court of the place where they reside in the Philippines.
The respondents further claimed that, the petitioners grant of
Special Power of Attorney in favor of Atty. Aceron
notwithstanding, the said complaint may not be filed in the
court of the place where Atty. Aceron resides, i.e., RTC of
Quezon City. They explained that Atty. Aceron, being merely
a representative of the petitioners, is not the real party in
interest in the case below; accordingly, his residence should
not be considered in determining the proper venue of the said
complaint.
The CA Decision
On August 28, 2008, the CA rendered the herein Decision, 14
which annulled and set aside the Orders dated April 12, 2007
and August 27, 2007 of the RTC of Quezon City and,
accordingly, directed the dismissal of the complaint filed by
the petitioners. The CA held that the complaint below should
have been filed in Bacolod City and not in Quezon City. Thus:
As maybe clearly gleaned from the foregoing, the place of
residence of the plaintiffs attorney-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
 2
The petitioners sought a reconsideration of the Decision
dated August 28, 2008, but it was denied by the CA in its
Resolution dated February 20, 2009.16
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit this lone issue
for this Courts resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR OF LAW WHEN IT RULED THAT THE
COMPLAINT MUST BE DISMISSED ON THE GROUND THAT
VENUE WAS NOT PROPERLY LAID.17
The Courts Ruling
The petition is denied.
Contrary to the CAs disposition, the petitioners maintain that
their complaint for collection of sum of money against the
respondents may be filed in the RTC of Quezon City. Invoking
Section 3, Rule 3 of the Rules of Court, they insist that Atty.
Aceron, being their attorney-in-fact, is deemed a real party in
interest in the case below and can prosecute the same before
the RTC. Such being the case, the petitioners assert, the said
complaint for collection of sum of money may be filed in the
court of the place where Atty. Aceron resides, which is the
RTC of Quezon City.
On the other hand, the respondents in their Comment 18
assert that the petitioners are proscribed from filing their
complaint in the RTC of Quezon City. They assert that the
residence of Atty. Aceron, being merely a representative, is
immaterial to the determination of the venue of the
petitioners complaint.
The petitioners complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of personal
actions are fixed for the convenience of the plaintiffs and their
witnesses. Equally settled, however, is the principle that
choosing the venue of an action is not left to a plaintiffs
caprice; the matter is regulated by the Rules of Court.19
The petitioners complaint for collection of sum of money
against the respondents is a personal action as it primarily
seeks the enforcement of a contract. The Rules give the
plaintiff the option of choosing where to file his complaint. He
can file it in the place (1) where he himself or any of them
resides, or (2) where the defendant or any of the defendants
resides or may be found. The plaintiff or the defendant must
be residents of the place where the action has been instituted
at the time the action is commenced.20
However, if the plaintiff does not reside in the Philippines, the
complaint in such case may only be filed in the court of the
place where the defendant resides. In Cohen and Cohen v.
Benguet Commercial Co., Ltd.,21 this Court held that there
can be no election as to the venue of the filing of a complaint
when the plaintiff has no residence in the Philippines. In such
case, the complaint may only be filed in the court of the place
where the defendant resides. Thus:
Section 377 provides that actions of this character "may be
brought in any province where the defendant or any
necessary party defendant may reside or be found, or in any
province where the plaintiff or one of the plaintiffs resides, at
the election of the plaintiff." The plaintiff in this action has no
residence in the Philippine Islands. Only one of the parties to
the action resides here. There can be, therefore, no election
by plaintiff as to the place of trial. It must be in the province
where the defendant resides. x x x.22 (Emphasis ours)
Here, the petitioners are residents of Los Angeles, California,
USA while the respondents reside in Bacolod City. Applying
the foregoing principles, the petitioners complaint against the
respondents may only be filed in the RTC of Bacolod City
the court of the place where the respondents reside. The
petitioners, being residents of Los Angeles, California, USA,
are not given the choice as to the venue of the filing of their
complaint.
Thus, the CA did not commit any reversible error when it
annulled and set aside the orders of the RTC of Quezon City
and consequently dismissed the petitioners complaint against
the respondents on the ground of improper venue.
In this regard, it bears stressing that the situs for bringing
real and personal civil actions is fixed by the Rules of Court to
attain the greatest convenience possible to the litigants and
their witnesses by affording them maximum accessibility to
the courts.23 And even as the regulation of venue is primarily
for the convenience of the plaintiff, as attested by the fact
that the choice of venue is given to him, it should not be
construed to unduly deprive a resident defendant of the rights
conferred upon him by the Rules of Court.24
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.
Contrary to the petitioners claim, Atty. Aceron, despite being
the attorney-in-fact of the petitioners, is not a real party in
interest in the case below. Section 2, Rule 3 of the Rules of
Court reads:
Sec. 2. Parties in interest. A real party in interest is the
party who stands to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the suit.
Unless otherwise authorized by law or these Rules, every
action must be prosecuted or defended in the name of the
real party in interest. (Emphasis ours)
Interest within the meaning of the Rules of Court means
material interest or an interest in issue to be affected by the
decree or judgment of the case, as distinguished from mere
curiosity about the question involved.25 A real party in interest
is the party who, by the substantive law, has the right sought
to be enforced.26
Applying the foregoing rule, it is clear that Atty. Aceron is not
a real party in interest in the case below as he does not stand
to be benefited or injured by any judgment therein. He was
merely appointed by the petitioners as their attorney-in-fact
for the limited purpose of filing and prosecuting the complaint
against the respondents. Such appointment, however, does
not mean that he is subrogated into the rights of petitioners
and ought to be considered as a real party in interest.
Being merely a representative of the petitioners, Atty. Aceron
in his personal capacity does not have the right to file the
complaint below against the respondents. He may only do so,
as what he did, in behalf of the petitioners the real parties
in interest. To stress, the right sought to be enforced in the
case below belongs to the petitioners and not to Atty. Aceron.
Clearly, an attorney-in-fact is not a real party in interest.27
 3

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)
Republic of the Philippines
Nowhere in the rule cited above is it stated or, at the very SUPREME COURT
least implied, that the representative is likewise deemed as Manila
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 SECOND DIVISION
in interest and, hence, should be included in the title of the
case. G.R. No. 193753 September 26, 2012

Indeed, to construe the express requirement of residence LIVING @ SENSE, INC., Petitioner,
under the rules on venue as applicable to the attorney-in-fact vs.
of the plaintiff would abrogate the meaning of a "real party in MALAYAN INSURANCE COMPANY, INC., Respondent.
interest", as defined in Section 2 of Rule 3 of the 1997 Rules
of Court vis--vis Section 3 of the same Rule.28 RESOLUTION

On this score, the CA aptly observed that: PERLAS-BERNABE, J.:

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.
This Petition for Review on Certiorari assails, on pure question
of law, the Orders dated April 8, 20101 and August 25, 20102
of the Regional Trial Court (RTC) of Parafiaque City, Branch
257 dismissing, without prejudice, the complaint for specific
performance and breach of contract filed by petitioner Living
@ Sense, Inc. (petitioner) for failure to implead Dou Mac, Inc.
(DMI) as an indispensable party.
The Factual Antecedents
Records show that petitioner was the main contractor of the
FOC Network Project of Globe Telecom in Mindanao. In
connection with the project, petitioner entered into a Sub-
Contract Agreement3 (Agreement) with DMI, under which the
latter was tasked to undertake an underground open-trench
work. Petitioner required DMI to give a bond, in the event
that DMI fails to perform its obligations under the Agreement.
Thus, DMI secured surety4 and performance5 bonds, both in
the amount of P 5,171,488.00, from respondent Malayan
Insurance Company, Inc. (respondent) to answer: (1) for the
unliquidated portion of the downpayment, and (2) for the loss
and damage that petitioner may suffer, respectively, should
DMI fail to perform its obligations under the Agreement.
Under the bonds, respondent bound itself jointly and severally
liable with DMI.6
During the course of excavation and restoration works, the
Department of Public Works and Highways (DPWH) issued a
work-stoppage order against DMI after finding the latters
work unsatisfactory. Notwithstanding the said order, however,
DMI still failed to adopt corrective measures, prompting
petitioner to terminate7 the Agreement and seek8
indemnification from respondent in the total amount of P
1,040,895.34.

However, respondent effectively denied9 petitioners claim on

the ground that the liability of its principal, DMI, should first
be ascertained before its own liability as a surety attaches.
Hence, the instant complaint, premised on respondents
 4
liability under the surety and performance bonds secured by
DMI.
Seeking the dismissal10 of the complaint, respondent claimed
that DMI is an indispensable party that should be impleaded
and whose liability should first be determined before
respondent can be held liable.
On the other hand, petitioner asserted11 that respondent is a
surety who is directly and primarily liable to indemnify
petitioner, and that the bond is "callable on demand"12 in the
event DMI fails to perform its obligations under the
Agreement.
The RTCs Ruling
In its April 8, 2010 Order,13 the RTC dismissed the complaint
without prejudice, for failure to implead DMI as a party
defendant. It ruled that before respondent could be held
liable on the surety and performance bonds, it must first be
established that DMI, with whom petitioner had originally
contracted, had indeed violated the Agreement. DMI,
therefore, is an indispensable party that must be impleaded in
the instant suit.
On August 25, 2010, the RTC denied14 petitioners motion for
reconsideration for failure to set the same for hearing as
required under the rules.
The Issue Before The Court
The sole issue to be resolved by the Court is whether DMI is
an indispensable party in this case.
The Court's Ruling
Petitioner maintains that the rule on solidary obligations
permits it, as creditor, to proceed against any of the solidary
debtors, citing Article 1216 of the Civil Code which provides:
Article 1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously. The
demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others,
so long as the debt has not been fully collected.
The petition is meritorious.
Records show that when DMI secured the surety and
performance bonds from respondent in compliance with
petitioners requirement, respondent bound itself "jointly and
severally" with DMI for the damages and actual loss that
petitioner may suffer should DMI fail to perform its
obligations under the Agreement, as follows:
That we, DOU MAC INC. as Principal, and MALAYAN
INSURANCE CO., INC., x xx are held firmly bound unto
LIVING @ SENSE INC. in the sum of FIVE MILLION ONE
HUNDRED SEVENTY ONE THOUSAND FOUR HUNDRED
EIGHTY EIGHT AND 00/100 PESOS ONLY (PHP
***5,171,488.00), PHILIPPINE Currency, for the payment of
which sum, well and truly to be made, we bind ourselves, our
heirs, executors, administrators, successors and assigns,
jointly and severally, firmly by these presents xxx15 (Emphasis
Supplied)
The term "jointly and severally" expresses a solidary
obligation16 granting petitioner, as creditor, the right to
proceed against its debtors, i.e., respondent or DMI.
The nature of the solidary obligation under the surety does
not make one an indispensable party.17 An indispensable
party is a party-in-interest without whom no final
determination can be had of an action, and who shall be
joined mandatorily either as plaintiffs or defendants. The
presence of indispensable parties is necessary to vest the
court with jurisdiction, thus, without their presence to a suit
or proceeding, the judgment of a court cannot attain real
finality. 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.18
In this case, DMI is not an indispensable party because
petitioner can claim indemnity directly from respondent,
having made itself jointly and severally liable with DMI for the
obligation under the bonds. Therefore, the failure to implead
DMI is not a ground to dismiss the case, even if the same
was without prejudice.1wphi1
Moreover, even on the assumption that DMI was, indeed, an
indispensable party, the RTC committed reversible error in
dismissing the complaint. Failure to implead an indispensable
party is not a ground for the dismissal of an action, as the
remedy in such case is to implead the party claimed to be
indispensable, considering that 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.19
Accordingly, the Court finds that the RTC erred in holding that
DMI Is an indispensable party and, consequently, in
dismissing the complaint filed by petitioner without prejudice.
WHEREFORE, the assailed April 8, 2010 and August 25, 2010
Orders of the Regional Trial Court (RTC) of Paraaque City,
Branch 257 are hereby SET ASIDE. Petitioner's complaint is
ordered REINSTATED and the case remanded to the RTC for
further proceedings.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 190071 August 15, 2012
UNION BANK OF THE PHILIPPINES, Petitioner,
vs.
MAUNLAD HOMES, INC. and all other persons or
entities claiming rights under it, Respondents.
VILLARAMA, JR.,*
DECISION
BRION, J.:
Before the Court is the petition for review on certiorari1 under
Rule 45 of the Rules of Court filed by petitioner Union Bank of
the Philippines (Union Bank), assailing the decision dated
October 28, 20092 of the Court of Appeals (CA) in CA-G.R. SP
No. 107772.
THE FACTS
Union Bank is the owner of a commercial complex located in
Malolos, Bulacan, known as the Maunlad Shopping Mall.
Sometime in August 2002, Union Bank, as seller, and
respondent Maunlad Homes, Inc. (Maunlad Homes), as buyer,
 5
entered into a contract to sell3 involving the Maunlad
Shopping Mall. The contract set the purchase price at P 151
million, P 2.4 million of which was to be paid by Maunlad
Homes as down payment payable on or before July 5, 2002,
with the balance to be amortized over the succeeding 180-
month period.4 Under the contract, Union Bank authorized
Maunlad Homes to take possession of the property and to
build or introduce improvements thereon. The parties also
agreed that if Maunlad Homes violates any of the provisions
of the contract, all payments made will be applied as rentals
for the use and possession of the property, and all
improvements introduced on the land will accrue in favor of
Union Bank.5 In the event of rescission due to failure to pay
or to comply with the terms of the contract, Maunlad Homes
will be required to immediately vacate the property and must
voluntarily turn possession over to Union Bank.6
When Maunlad Homes failed to pay the monthly amortization,
Union Bank sent the former a Notice of Rescission of
Contract7 dated February 5, 2003, demanding payment of the
installments due within 30 days from receipt; otherwise, it
shall consider the contract automatically rescinded. Maunlad
Homes failed to comply. Hence, on November 19, 2003,
Union Bank sent Maunlad Homes a letter demanding payment
of the rentals due and requiring that the subject property be
vacated and its possession turned over to the bank. When
Maunlad Homes continued to refuse, Union Bank instituted an
ejectment suit before the Metropolitan Trial Court (MeTC) of
Makati City, Branch 64, on February 19, 2004. Maunlad
Homes resisted the suit by claiming, among others, that it is
the owner of the property as Union Bank did not reserve
ownership of the property under the terms of the contract.8
By virtue of its ownership, Maunlad Homes claimed that it has
the right to possess the property.
On May 18, 2005, the MeTC dismissed Union Banks
ejectment complaint.9 It found that Union Banks cause of
action was based on a breach of contract and that both
parties are claiming a better right to possess the property
based on their respective claims of ownership of the property.
The MeTC ruled that the appropriate action to resolve these
conflicting claims was an accion reivindicatoria, over which it
had no jurisdiction.
On appeal, the Regional Trial Court (RTC) of Makati City,
Branch 139, affirmed the MeTC in its decision dated July 17,
2008;10 it agreed with the MeTC that the issues raised in the
complaint extend beyond those commonly involved in an
unlawful detainer suit. The RTC declared that the case
involved a determination of the rights of the parties under the
contract. Additionally, the RTC noted that the property is
located in Malolos, Bulacan, but the ejectment suit was filed
by Union Bank in Makati City, based on the contract
stipulation that "the venue of all suits and actions arising out
or in connection with the Contract to Sell shall be in Makati
City."11 The RTC ruled that the proper venue for the
ejectment action is in Malolos, Bulacan, pursuant to the
second paragraph of Section 1, Rule 4 of the Rules of Court,
which states:
Section 1. Venue of real actions. - Actions affecting title to or
possession of real property, or interest therein, shall be
commenced and tried in the proper court which has
jurisdiction over the area wherein the real property involved,
or a portion thereof, is situated.
Forcible entry and detainer actions shall be commenced and
tried in the municipal trial court of the municipality or city
wherein the real property involved, or a portion thereof, is
situated. [emphasis ours]
The RTC declared that Union Bank cannot rely on the waiver
of venue provision in the contract because ejectment is not
an action arising out of or connected with the contract.
Union Bank appealed the RTC decision to the CA through a
petition for review under Rule 42 of the Rules of Court. The
CA affirmed the RTC decision in its October 28, 2009
decision,12 ruling that Union Banks claim of possession is
based on its claim of ownership which in turn is based on its
interpretation of the terms and conditions of the contract,
particularly, the provision on the consequences of Maunlad
Homes breach of contract. The CA determined that Union
Banks cause of action is premised on the interpretation and
enforcement of the contract and the determination of the
validity of the rescission, both of which are matters beyond
the jurisdiction of the MeTC. Therefore, it ruled that the
dismissal of the ejectment suit was proper. The CA, however,
made no further ruling on the issue of venue of the action.
From the CAs judgment, Union Bank appealed to the Court
by filing the present petition for review on certiorari under
Rule 45 of the Rules of Court.
THE PARTIES ARGUMENTS
Union Bank disagreed with the CAs finding that it is claiming
ownership over the property through the ejectment action. It
claimed that it never lost ownership over the property despite
the execution of the contract, since only the right to possess
was conceded to Maunlad Homes under the contract; Union
Bank never transferred ownership of the property to Maunlad
Homes. Because of Maunlad Homes failure to comply with
the terms of the contract, Union Bank believes that it
rightfully rescinded the sale, which rescission terminated
Maunlad Homes right to possess the subject property. Since
Maunlad Homes failed to turn over the possession of the
subject property, Union Bank believes that it correctly
instituted the ejectment suit.
The Court initially denied Union Banks petition in its
Resolution dated March 17, 2010.13 Upon motion for
reconsideration filed by Union Bank, the Court set aside its
Resolution of March 17, 2010 (in a Resolution dated May 30,
201114) and required Maunlad Homes to comment on the
petition.
Maunlad Homes contested Union Banks arguments, invoking
the rulings of the lower courts. It considered Union Banks
action as based on the propriety of the rescission of the
contract, which, in turn, is based on a determination of
whether Maunlad Homes indeed failed to comply with the
terms of the contract; the propriety of the rescission,
however, is a question that is within the RTCs jurisdiction.
Hence, Maunlad Homes contended that the dismissal of the
ejectment action was proper.
THE COURTS RULING
We find the petition meritorious.
The authority of the MeTC to
interpret contracts in an unlawful
detainer action
In any case involving the question of jurisdiction, the Court is
guided by the settled doctrine that the jurisdiction of a court
is determined by the nature of the action pleaded by the
litigant through the allegations in his complaint.15
Unlawful detainer is an action to recover possession of real
property from one who unlawfully withholds possession after
the expiration or termination of his right to hold possession
under any contract, express or implied. The possession of the
 6
defendant in unlawful detainer is originally legal but became
illegal due to expiration or termination of the right to
possess.16 Under Section 1, Rule 70 of the Rules of Court, the
action must be filed "within one (1) year after the unlawful
deprivation or withholding of possession." Thus, to fall within
the jurisdiction of the MeTC, the complaint must allege that
1. the defendant originally had lawful possession of
the property, either by virtue of a contract or by
tolerance of the plaintiff; 2. eventually, the
defendants possession of the property becameillegal
or unlawful upon notice by the plaintiff to defendant
of the expiration or the termination of the
defendants right of possession;
3. thereafter, the defendant remained in possession
of the property and deprived the plaintiff the
enjoyment thereof; and
4. within one year from the unlawful deprivation or
withholding of possession, the plaintiff instituted the
complaint for ejectment.17
Contrary to the findings of the lower courts, all four
requirements were alleged in Union Banks Complaint. Union
Bank alleged that Maunlad Homes "maintained possession of
the subject properties" pursuant to the Contract to Sell.18
Maunlad Homes, however, "failed to faithfully comply with the
terms of payment," prompting Union Bank to "rescind the
Contract to Sell in a Notice of Rescission dated February 5,
2003."19 When Maunlad Homes "refused to turn over and
vacate the subject premises,"20 Union Bank sent another
Demand Letter on November 19, 2003 to Maunlad Homes
requiring it (1) "[t]o pay the equivalent rentals-in-arrears as
of October 2003 in the amount of P 15,554,777.01 and
monthly thereafter until the premises are fully vacated and
turned over" to Union Bank, and (2) to vacate the property
peacefully and turn over possession to Union Bank.21 As the
demand went unheeded, Union Bank instituted an action for
unlawful detainer before the MeTC on February 19, 2004,
within one year from the date of the last demand. These
allegations clearly demonstrate a cause of action for unlawful
detainer and vested the MeTC jurisdiction over Union Banks
action.
Maunlad Homes denied Union Banks claim that its possession
of the property had become unlawful. It argued that its
failure to make payments did not terminate its right to
possess the property because it already acquired ownership
when Union Bank failed to reserve ownership of the property
under the contract. Despite Maunlad Homes claim of
ownership of the property, the Court rules that the MeTC
retained its jurisdiction over the action; a defendant may not
divest the MeTC of its jurisdiction by merely claiming
ownership of the property.22 Under Section 16, Rule 70 of the
Rules of Court, "when the defendant raises the defense of
ownership in his pleadings and the question of possession
cannot be resolved without deciding the issue of ownership,
the issue of ownership shall be resolved only to determine the
issue of possession." Section 18, Rule 70 of the Rules of
Court, however, states that "the judgment x x x shall be
conclusive with respect to the possession only and shall in no
wise bind the title or affect the ownership of the land or
building."
The authority granted to the MeTC to preliminarily resolve the
issue of ownership to determine the issue of possession
ultimately allows it to interpret and enforce the contract or
agreement between the plaintiff and the defendant. To deny
the MeTC jurisdiction over a complaint merely because the
issue of possession requires the interpretation of a contract
will effectively rule out unlawful detainer as a remedy. As
stated, in an action for unlawful detainer, the defendants
right to possess the property may be by virtue of a contract,
express or implied; corollarily, the termination of the
defendants right to possess would be governed by the terms
of the same contract. Interpretation of the contract between
the plaintiff and the defendant is inevitable because it is the
contract that initially granted the defendant the right to
possess the property; it is this same contract that the plaintiff
subsequently claims was violated or extinguished, terminating
the defendants right to possess. We ruled in Sps. Refugia v.
CA23 that
where the resolution of the issue of possession hinges on a
determination of the validity and interpretation of the
document of title or any other contract on which the claim of
possession is premised, the inferior court may likewise pass
upon these issues.
The MeTCs ruling on the rights of the parties based on its
interpretation of their contract is, of course, not conclusive,
but is merely provisional and is binding only with respect to
the issue of possession.
Thus, despite the CAs opinion that Union Banks "case
involves a determination of the rights of the parties under the
Contract to Sell,"24 it is not precluded from resolving this
issue. Having acquired jurisdiction over Union Banks action,
the MeTC can resolve the conflicting claims of the parties
based on the facts presented and proved.
The right to possess the property was
extinguished when the contract to
sell failed to materialize
Maunlad Homes acquired possession of the property based on
its contract with Union Bank. While admitting that it
suspended payment of the installments,25 Maunlad Homes
contended that the suspension of payment did not affect its
right to possess the property because its contract with Union
Bank was one of sale and not to sell; hence, ownership of the
property has been transferred to it, allowing it to retain
possession notwithstanding nonpayment of installments. The
terms of the contract, however, do not support this
conclusion.
Section 11 of the contract between Union Bank and Maunlad
Homes provides that "upon payment in full of the Purchase
Price of the Property x x x, the SELLER shall execute and
deliver a Deed of Absolute Sale conveying the Property to the
BUYER."26 "Jurisprudence has established that where the
seller promises to execute a deed of absolute sale upon the
completion by the buyer of the payment of the price, the
contract is only a contract to sell."27 The presence of this
provision generally identifies the contract as being a mere
contract to sell.28 After reviewing the terms of the contract
between Union Bank and Maunlad Homes, we find no
reasonable ground to exempt the present case from the
general rule; the contract between Union Bank and Maunlad
Homes is a contract to sell.
In a contract to sell, the full payment of the purchase price is
a positive suspensive condition whose non-fulfillment is not a
breach of contract, but merely an event that prevents the
seller from conveying title to the purchaser. "The non-
payment of the purchase price renders the contract to sell
ineffective and without force and effect."29 Maunlad Homes
act of withholding the installment payments rendered the
contract ineffective and without force and effect, and
ultimately deprived itself of the right to continue possessing
Maunlad Shopping Mall.
The propriety of filing the unlawful
detainer action in Makati City
 7
pursuant to the venue stipulation in
the contract
Maunlad Homes questioned the venue of Union Banks
unlawful detainer action which was filed in Makati City while
the contested property is located in Malolos, Bulacan. Citing
Section 1, Rule 4 of the Rules of Court, Maunlad Homes
claimed that the unlawful detainer action should have been
filed with the municipal trial court of the municipality or city
where the real property involved is situated. Union Bank, on
the other hand, justified the filing of the complaint with the
MeTC of Makati City on the venue stipulation in the contract
which states that "the venue of all suits and actions arising
out of or in connection with this Contract to Sell shall be at
Makati City."30
While Section 1, Rule 4 of the Rules of Court states that
ejectment actions shall be filed in "the municipal trial court of
the municipality or city wherein the real property involved x x
x is situated," Section 4 of the same Rule provides that the
rule shall not apply "where the parties have validly agreed in
writing before the filing of the action on the exclusive venue
thereof." Precisely, in this case, the parties provided for a
different venue. In Villanueva v. Judge Mosqueda, etc., et
al.,31 the Court upheld the validity of a stipulation in a
contract providing for a venue for ejectment actions other
than that stated in the Rules of Court. Since the unlawful
detainer action is connected with the contract, Union Bank
rightfully filed the complaint with the MeTC of Makati City.
WHEREFORE, we hereby GRANT the petition and SET
ASIDE the decision dated October 28, 2009 of the Court of
Appeals in CA-G.R. SP No. 107772. Respondent Maunlad
Homes, Inc. is ORDERED TO VACATE the Maunlad
Shopping Mall, the property subject of the case, immediately
upon the finality of this Decision. Respondent Maunlad
Homes, Inc. is further ORDERED TO PAY the rentals-in-
arrears, as well as rentals accruing in the interim until it
vacates the property.
The case is REMANDED to the Metropolitan Trial Court of
Makati City, Branch 64, to determine the amount of rentals
due. In addition to the amount determined as unpaid rent,
respondent Maunlad Homes, Inc. is ORDERED TO PAY legal
interest of six percent (6o/o) per annum, from November 19,
2003, when the demand to pay and to vacate was made, up
to the finality of this Decision. Thereafter, an interest of
twelve percent ( 12%) per annum shall be imposed on the
total amount due until full payment is made.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 189496 February 1, 2012
D.M. FERRER & ASSOCIATES CORPORATION, Petitioner,
vs.
UNIVERSITY OF SANTO TOMAS, Respondent.
DECISION
SERENO, J.:
Before us is a Petition for Review on Certiorari under Rule 45
of the Revised Rules of Court. Petitioner assails the Court of
Appeals (CA) Resolution1 promulgated on 26 June 2009
dismissing the formers Petition for Certiorari, and the
Resolution2 dated 3 September 2009 denying the subsequent
Motion for Reconsideration.
The facts are undisputed:
On 25 November 2005, petitioner and University of Santo
Tomas Hospital, Inc. (USTHI) entered into a Project
Management Contract for the renovation of the 4th and 5th
floors of the Clinical Division Building, Nurse Call Room and
Medical Records, Medical Arts Tower, Diagnostic Treatment
Building and Pay Division Building.
On various dates, petitioner demanded from USTHI the
payment of the construction costs amounting to
P17,558,479.39. However, on 16 April 2008, the University of
Santo Tomas (UST), through its rector, Fr. Rolando V. Dela
Rosa, wrote a letter informing petitioner that its claim for
payment had been denied, because the Project Management
Contract was without the required prior approval of the board
of trustees. Thus, on 23 May 2008, petitioner filed a
Complaint3 for sum of money, breach of contract and
damages against herein respondent UST and USTHI when the
latter failed to pay petitioner despite repeated demands.
In impleading respondent UST, petitioner alleged that the
former took complete control over the business and operation
of USTHI, as well as the completion of the construction
project.
It also pointed out that the Articles of Incorporation of USTHI
provided that, upon dissolution, all of the latters assets shall
be transferred without any consideration and shall inure to
the benefit of UST. It appears that USTHI passed a
Resolution on 10 January 2008 dissolving the corporation by
shortening its corporate term of existence from 16 March
2057 to 31 May 2008.
Finally, petitioner alleged that respondent, through its rector,
Fr. Dela Rosa, O.P., verbally assured the former of the
payment of USTHIs outstanding obligations.
Thus, petitioner posited in part that UST may be impleaded in
the case under the doctrine of "piercing the corporate veil,"
wherein respondent UST and USTHI would be considered to
be acting as one corporate entity, and UST may be held liable
for the alleged obligations due to petitioner.
Subsequently, respondent filed its Motion to Dismiss dated 12
June 2008.4 It alleged that the Complaint failed to state a
cause of action, and that the claim was unenforceable under
the provisions of the Statute of Frauds.
On 4 August 2008, Judge Bernelito R. Fernandez of Branch 97
of the Regional Trial Court (RTC) of Quezon City granted the
motion and dismissed the Complaint insofar as respondent
UST was concerned.5
First, basing its findings on the documents submitted in
support of the Complaint, the RTC held that respondent was
not a real party-in-interest, and that it was not privy to the
contract executed between USTHI and petitioner. Second, the
court pointed out that the alleged verbal assurances of Fr.
Dela Rosa should have been in writing to make these
assurances binding and demandable.
Petitioner sought a reconsideration of the RTC Order and
asserted that only allegations of the Complaint, and not the
attached documents, should have been the basis of the trial
courts ruling, consistent with the rule that the cause of action
can be determined only from the facts alleged in the
Complaint. It also insisted that the Statute of Frauds was
 8
inapplicable, since USTHIs obligation had already been
partially executed.6
On 5 October 2008, petitioner filed an Urgent Motion for
Voluntary Inhibition7 on the ground that Judge Fernandez
was an alumnus of respondent UST.
Thereafter, Judge Fernandez issued an Order 8 inhibiting
himself from the case, which was consequently re-raffled to
Branch 76 presided by Judge Alexander S. Balut.
On 16 April 2009, Judge Balut dismissed the Motion for
Reconsideration filed by petitioner,9 upholding the initial
findings of Judge Fernandez declaring that respondent UST
was not a real party-in-interest, and that Fr. Dela Rosas
alleged assurances of payment were unenforceable.
Subsequently, petitioner filed a Petition for Certiorari under
Rule 65 with the CA.10 Petitioner alleged that the trial court
committed grave abuse of discretion when it granted
respondents Motion to Dismiss on the basis of the documents
submitted in support of the Complaint, and not solely on the
allegations stated therein. Petitioner pointed out that the
allegations raised questions of fact and law, which should
have been threshed out during trial, when both parties would
have been given the chance to present evidence supporting
their respective allegations.
However, on 26 June 2009, the CA issued the assailed
Resolution and dismissed the Petition on the ground that a
petition under Rule 65 is the wrong remedy to question the
RTCs Order that completely disposes of the case. Instead,
petitioner should have availed itself of an appeal under Rule
41 of the Rules of Court.
Petitioner moved for a reconsideration of the Resolution.11 It
pointed out that the present case falls under the enumerated
exceptions of Rule 41, in particular, while the main case is still
pending, no appeal may be made from a judgment or final
order for or against one or more of several parties or in
separate claims, counterclaims, cross-claims and third-party
complaints.
On 3 September 2009, the CA denied the Motion for
Reconsideration through its second assailed Resolution,
holding that the motion raised no new issues or substantial
grounds that would merit the reconsideration of the court.
Hence this Petition.
Petitioner raises two grounds in the present Petition: first,
whether the CA erred in dismissing the Petition for Certiorari
by failing to consider the exception in Sec. 1(g) of Rule 41 of
the Rules of Court; second, whether the trial court committed
grave abuse of discretion when it held that the Complaint
stated no cause of action.
We rule for petitioner.
Respondent insists that petitioner should have first filed a
notice of appeal before the RTC, and the appeal should have
been subsequently denied before recourse to the CA was
made. This contention holds no water.
In Jan-Dec Construction Corp. v. Court of Appeals,12 we held
that a petition for certiorari under Rule 65 is the proper
remedy to question the dismissal of an action against one of
the parties while the main case is still pending. This is the
general rule in accordance with Rule 41, Sec. 1(g). In that
case, ruled thus:
Evidently, the CA erred in dismissing petitioner's petition for
certiorari from the Order of the RTC dismissing the complaint
against respondent. While Section 1, Rule 41 of the 1997
Rules of Civil Procedure states that an appeal may be taken
only from a final order that completely disposes of the case, it
also provides several exceptions to the rule, to wit: (a) an
order denying a motion for new trial or reconsideration; (b)
an order denying a petition for relief or any similar motion
seeking relief from judgment; (c) an interlocutory order; (d)
an order disallowing or dismissing an appeal; (e) an order
denying a motion to set aside a judgment by consent,
confession or compromise on the ground of fraud, mistake or
duress, or any other ground vitiating consent; (f) an order of
execution; (g) a judgment or final order for or against one or
more of several parties or in separate claims, counterclaims,
cross-claims and third-party complaints, while the main case
is pending, unless the court allows an appeal therefrom; and
(h) an order dismissing an action without prejudice. In the
foregoing instances, the aggrieved party may file an
appropriate special civil action for certiorari under Rule 65.
In the present case, the Order of the RTC dismissing
the complaint against respondent is a final order
because it terminates the proceedings against
respondent but it falls within exception (g) of the Rule
since the case involves two defendants, Intermodal
and herein respondent and the complaint against
Intermodal is still pending. Thus, the remedy of a
special civil action for certiorari availed of by
petitioner before the CA was proper and the CA erred
in dismissing the petition. (Emphasis supplied)
Clearly, in the case at bar, the CA also erred when it
dismissed the Petition filed before it.
Anent the second issue, we also agree with petitioner that the
Complaint states a cause of action against respondent UST.
In Abacan v. Northwestern University, Inc.,13 we said:
It is settled that the existence of a cause of action is
determined by the allegations in the complaint.1wphi1 In
resolving a motion to dismiss based on the failure to state a
cause of action, only the facts alleged in the complaint must
be considered. The test is whether the court can render a
valid judgment on the complaint based on the facts alleged
and the prayer asked for. Indeed, the elementary test for
failure to state a cause of action is whether the complaint
alleges facts which if true would justify the relief demanded.
Only ultimate facts and not legal conclusions or
evidentiary facts, which should not be alleged in the
complaint in the first place, are considered for
purposes of applying the test. (Emphasis supplied)
While it is admitted that respondent UST was not a party to
the contract, petitioner posits that the former is nevertheless
liable for the construction costs. In support of its position,
petitioner alleged that (1) UST and USTHI are one and the
same corporation; (2) UST stands to benefit from the assets
of USTHI by virtue of the latters Articles of Incorporation; (3)
respondent controls the business of USTHI; and (4) USTs
officials have performed acts that may be construed as an
acknowledgement of respondents liability to petitioner.
Obviously, these issues would have been best resolved during
trial. The RTC therefore committed grave abuse of discretion
when it dismissed the case against respondent for lack of
cause of action. The trial court relied on the contract
executed between petitioner and USTHI, when the court
should have instead considered merely the allegations stated
in the Complaint.
WHEREFORE, in view of the foregoing, the Petition is
GRANTED. Branch 76 of the Regional Trial Court of Quezon
 9
City is hereby ordered to REINSTATE respondent University
of Santo Tomas as a defendant in C.C. No. 0862635.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 161909 April 25, 2012
PHILTRANCO SERVICE ENTERPRISES, INC., Petitioner,
vs.
FELIX PARAS AND INLAND TRAILWAYS, INC., AND
HON. COURT OF APPEALS, Respondents.
DECISION
BERSAMIN, J.:
In an action for breach of contract of carriage commenced by
a passenger against his common carrier, the plaintiff can
recover damages from a third-party defendant brought into
the suit by the common carrier upon a claim based on tort or
quasi-delict. The liability of the third-party defendant is
independent from the liability of the common carrier to the
passenger.
Philtranco Service Enterprises, Inc. (Philtranco) appeals the
affirmance with modifications by the Court of Appeals (CA) of
the decision of the Regional Trial Court (RTC) awarding
moral, actual and temperate damages, as well as attorneys
fees and costs of suit, to respondent Felix Paras (Paras), and
temperate damages to respondent Inland Trailways, Inc.
(Inland), respectively the plaintiff and the defendant/third-
party plaintiff in this action for breach of contract of carriage,
upon a finding that the negligence of the petitioner and its
driver had caused the serious physical injuries Paras
sustained and the material damage Inlands bus suffered in a
vehicular accident.
Antecedents
The antecedent facts, as summarized by the CA, are as
follows:
Plaintiff-appellant [respondent] Felix Paras (Paras for brevity),
who hails from Cainta, Rizal is engaged in the buy and sell of
fish products. Sometime on 08 February 1987, on his way
home to Manila from Bicol Region, he boarded a bus with
Body No. 101 and Plate No. EVE 508, owned and operated by
Inland Trailways, Inc. (Inland for brevity) and driven by its
driver Calvin Coner (Coner for brevity).
At approximately 3:50 oclock in the morning of 09 February
1987, while the said bus was travelling along Maharlika
Highway, Tiaong, Quezon, it was bumped at the rear by
another bus with Plate No. EVB 259, owned and operated by
Philtranco Service Enterprises, Inc. (Philtranco for brevity). As
a result of the strong and violent impact, the Inland bus was
pushed forward and smashed into a cargo truck parked along
the outer right portion of the highway and the shoulder
thereof. Consequently, the said accident bought considerable
damage to the vehicles involved and caused physical injuries
to the passengers and crew of the two buses, including the
death of Coner who was the driver of the Inland Bus at the
time of the incident.
Paras was not spared from the pernicious effects of the
accident. After an emergency treatment at the San Pablo
Medical Center, San Pablo City, Laguna, Paras was taken to
the National Orthopedic Hospital. At the latter hospital, he
was found and diagnosed by Dr. Antonio Tanchuling, Jr. to be
affected with the following injuries: a) contusion/hematoma;
b) dislocation of hip upon fracture of the fibula on the right
leg; c) fractured small bone on the right leg; and d) close
fracture on the tibial plateau of the left leg. (Exh. "A", p. 157,
record)
On 04 March 1987 and 15 April 1987, Paras underwent two
(2) operations affecting the fractured portions of his body.
(Exhs. "A-2" and "A-3", pp. 159 and 160 respectively, record)
Unable to obtain sufficient financial assistance from Inland for
the costs of his operations, hospitalization, doctors fees and
other miscellaneous expenses, on 31 July 1989, Paras filed a
complaint for damages based on breach of contract of
carriage against Inland.
In its answer, defendant Inland denied responsibility, by
alleging, among others, that its driver Coner had observed an
utmost and extraordinary care and diligence to ensure the
safety of its passengers. In support of its disclaimer of
responsibility, Inland invoked the Police Investigation Report
which established the fact that the Philtranco bus driver of
[sic] Apolinar Miralles was the one which violently bumped
the rear portion of the Inland bus, and therefore, the direct
and proximate cause of Paras injuries.
On 02 March 1990, upon leave of court, Inland filed a third-
party complaint against Philtranco and Apolinar Miralles (Third
Party defendants). In this third-party complaint, Inland,
sought for exoneration of its liabilities to Paras, asserting that
the latters cause of action should be directed against
Philtranco considering that the accident was caused by
Miralles lack of care, negligence and reckless imprudence.
(pp. 50 to 56, records).
After trial, the RTC (Branch 71) in Antipolo, Rizal rendered its
judgment on July 18, 1997,1 viz:
WHEREFORE, third-party defendant Philtranco and Apolinar
Miralles are hereby ordered to pay plaintiff jointly and
severally, the following amounts:
1.P54,000.00 as actual damages;
2.P50,000.00 as moral damages;
3.P20,000.00 as attorneys fees and costs.
SO ORDERED.
All the parties appealed to the CA on different grounds.
On his part, Paras ascribed the following errors to the RTC, to
wit:
I. THE TRIAL COURT ERRED IN HOLDING THAT
ONLY THIRD-PARTY DEFENDANT-APPELLANT
PHILTRANCO IS LIABLE FOR THE DAMAGES
SUFFERED BY APPELLANT PARAS.
II. THE TRIAL COURT ERRED IN NOT HOLDING
APPELLANT INLAND TRAILWAYS INC. TO BE
JOINTLY AND SEVERALLY LIABLE FOR THE
DAMAGES SUFFERED BY PARAS.
III. THE TRIAL COURT ERRED IN NOT AWARDING
UNEARNED INCOME AS ADDITIONAL ACTUAL
DAMAGES SUFFERED BY APPELLANT PARAS AS HIS
PHYSICAL DISABILITY IS PERMANENT IN NATURE.
 10
IV. THE TRIAL COURT ERRED IN NOT AWARDING
EXEMPLARY DAMAGES IN FAVOR OF APPELLANT
PARAS.
On the other hand, Inland assigned the following errors to
the RTC, namely:
THE TRIAL COURT ERRED WHEN IT FAILED TO AWARD
DAMAGES UNTO THE THIRD PARTY PLAINTIFF
NOTWITHSTANDING CLEAR FINDING THAT:
It is clear from the evidence that the plaintiff sustained
injuries because of the reckless, negligence, and lack of
precaution of third party defendant Apolinar Miralles, an
employee of Philtranco.
AND, COMPLETELY DISREGARDED THE UNCONTROVERTED
ORAL AND DOCUMENTARY EVIDENCES ESTABLISHING THE
EXTENT AND DEGREE OF DAMAGES SUSTAINED BY THE
THIRD PARTY PLAINTIFF.
Lastly, Philtranco stated that the RTC erred thuswise:
I The CA agreed with the RTCs finding that no trace of
THE COURT A QUO MISERABLY ERRED IN
AWARDING ACTUAL DAMAGES GREATER THAN
WHAT WAS ALLEGED IN THE COMPLAINT ITSELF,
AND EVEN MUCH MORE GREATER THAN WHAT
WERE PROVED DURING THE TRIAL, HENCE,
PERPETUATING UNJUST ENRICHMENT.
II
THE COURT A QUO SERIOUSLY ERRED IN
AWARDING MORAL DAMAGES TO A CAUSE OF
ACTION OF CULPA-CONTRACTUAL EVEN WITHOUT
ANY EVIDENCE OF GROSS BAD FAITH; HENCE,
CONTRARY TO THE ESTABLISHED DOCTRINE IN
THE CASES OF PHIL. RABBIT BUS LINES VS.
ESGUERRA; SOBERANO VS. BENGUET AUTO LINE
AND FLORES VS. MIRANDA.
III
THE COURT A QUO MISERABLY ERRED IN HOLDING
THAT MIRALLES WAS THE ONE AT FAULT MERELY
ON THE STRENGHT OF THE TESTIMONY OF THE
POLICE INVESTIGATOR WHICH IS IN TURN BASED
ON THE STATEMENTS OF ALLEGED WITNESSES
WHO WERE NEVER PRESENTED ON THE WITNESS
STAND.
IV
THE COURT A QUO COMMITTED A GRIEVOUS
ERROR IN DISREGARDING THE TESTIMONY OF
APPELLANTS WITNESSES WHO TESTIFIED AS TO
THE DEFENSE OF EXERCISE OF DUE DILIGENCE IN
THE SELECTION AND SUPERVISION OF EMPLOYEES
PURSUANT TO ART. 2180, LAST PARAGRAPH, NEW
CIVIL CODE.
On September 25, 2002, the CA promulgated its decision,2
disposing:
WHEREFORE, in consideration of the foregoing premises, the
assailed decision dated 18 July 19(9)7 is perforce affirmed
with the following modifications:
1. Third party defendants-appellants Philtranco and
Apolinar Miralles are ordered to pay plaintiff-
appellant Felix Paras jointly and severally the
following amounts:
a) P1,397.95 as actual damages;
b) P50,000.00 as temperate damages;
c) P50,000.00 as moral damages; and
d) P20,000.00 as attorneys fees and costs
of suit.
2. On the third party plaintiff-appellant Inlands
claims, the third party defendant-appellants
Philtranco and Apolinar Miralles are hereby ordered
to pay the former (Inland) jointly and severally the
amount of P250,000.00 as and by way of temperate
damages.
SO ORDERED.
negligence at the time of the accident was attributable to
Inlands driver, rendering Inland not guilty of breach of
contract of carriage; that faulty brakes had caused
Philtrancos bus to forcefully bump Inlands bus from behind,
making it hit the rear portion of a parked cargo truck; that
the impact had resulted in considerable material damage to
the three vehicles; and that Paras and others had sustained
various physical injuries.
Accordingly, the CA: (a) sustained the award of moral
damages of P50,000.00 in favor of Paras pursuant to Article
2219 of the Civil Code based on quasi-delict committed by
Philtranco and its driver; (b) reduced the actual damages to
be paid by Philtranco to Paras from P54,000.00 to P1,397.95
because only the latter amount had been duly supported by
receipts; (c) granted temperate damages of P50,000.00 (in
lieu of actual damages in view of the absence of competent
proof of actual damages for his hospitalization and therapy)
to be paid by Philtranco to Paras; and (d) awarded temperate
damages of P250,000.00 under the same premise to be paid
by Philtranco to Inland for the material damage caused to
Inlands bus.
Philtranco moved for reconsideration,3 but the CA denied its
motion for reconsideration on January 21, 2004.4
Issues
Hence, this appeal, in which the petitioner submits that the
CA committed grave abuse of discretion amounting to lack of
jurisdiction in awarding moral damages to Paras despite the
fact that the complaint had been anchored on breach of
contract of carriage; and that the CA committed a reversible
error in substituting its own judgment by motu proprio
awarding temperate damages of P250,000.00 to Inland and
P50,000.00 to Paras despite the clear fact that temperate
damages were not raised on appeal by Paras and Inland.
Ruling
The appeal lacks merit.
The Court does not disturb the unanimous findings by the CA
and the RTC on the negligence of Philtranco and its driver
being the direct cause of the physical injuries of Paras and
the material damage of Inland.
 11
Nonetheless, we feel bound to pass upon the disparate
results the CA and the RTC reached on the liabilities of
Philtranco and its driver.
1.
Paras can recover moral damages
in this suit based on quasi-delict
Philtranco contends that Paras could not recover moral
damages because his suit was based on breach of contract of
carriage, pursuant to which moral damages could be
recovered only if he had died, or if the common carrier had
been guilty of fraud or bad faith. It argues that Paras had
suffered only physical injuries; that he had not adduced
evidence of fraud or bad faith on the part of the common
carrier; and that, consequently, Paras could not recover moral
damages directly from it (Philtranco), considering that it was
only being subrogated for Inland.
The Court cannot uphold the petitioners contention.
As a general rule, indeed, moral damages are not recoverable
in an action predicated on a breach of contract. This is
because such action is not included in Article 2219 of the Civil
Code5 as one of the actions in which moral damages may be
recovered. By way of exception, moral damages are
recoverable in an action predicated on a breach of contract:
(a) where the mishap results in the death of a passenger, as
provided in Article 1764,6 in relation to Article 2206, (3),7 of
the Civil Code; and (b) where the common carrier has been
guilty of fraud or bad faith,8 as provided in Article 22209 of
the Civil Code.
Although this action does not fall under either of the
exceptions, the award of moral damages to Paras was
nonetheless proper and valid. There is no question that
Inland filed its third-party complaint against Philtranco and its
driver in order to establish in this action that they, instead of
Inland, should be directly liable to Paras for the physical
injuries he had sustained because of their negligence. To be
precise, Philtranco and its driver were brought into the action
on the theory of liability that the proximate cause of the
collision between Inlands bus and Philtrancos bus had been
"the negligent, reckless and imprudent manner defendant
Apolinar Miralles drove and operated his driven unit, the
Philtranco Bus with Plate No. 259, owned and operated by
third-party defendant Philtranco Service Enterprises, Inc."10
The apparent objective of Inland was not to merely subrogate
the third-party defendants for itself, as Philtranco appears to
suggest,11 but, rather, to obtain a different relief whereby the
third-party defendants would be held directly, fully and solely
liable to Paras and Inland for whatever damages each had
suffered from the negligence committed by Philtranco and its
driver. In other words, Philtranco and its driver were charged
here as joint tortfeasors who would be jointly and severally
be liable to Paras and Inland.
Impleading Philtranco and its driver through the third-party
complaint filed on March 2, 1990 was correct. The device of
the third-party action, also known as impleader, was in
accord with Section 12, Rule 6 of the Revised Rules of Court,
the rule then applicable, viz:
Section 12. Third-party complaint. A third-party complaint is
a claim that a defending party may, with leave of court, file
against a person not a party to the action, called the third-
party defendant, for contribution, indemnity, subrogation or
any other relief, in respect of his opponents claim.12
Explaining the application of Section 12, Rule 6, supra, the
Court said in Balbastro v. Court of Appeals,13 to wit:
Section 12 of Rule 6 of the Revised Rules of Court authorizes
a defendant to bring into a lawsuit any person "not a party to
the action . . . for contribution, indemnity, subrogation or any
other relief in respect of his opponent's claim." From its
explicit language it does not compel the defendant to bring
the third-parties into the litigation, rather it simply permits the
inclusion of anyone who meets the standard set forth in the
rule. The secondary or derivative liability of the third-party is
central whether the basis is indemnity, subrogation,
contribution, express or implied warranty or some other
theory. The impleader of new parties under this rule is proper
only when a right to relief exists under the applicable
substantive law. This rule is merely a procedural mechanism,
and cannot be utilized unless there is some substantive basis
under applicable law.
Apart from the requirement that the third-party complainant
should assert a derivative or secondary claim for relief from
the third-party defendant there are other limitations on said
partys ability to implead. The rule requires that the third-
party defendant is "not a party to the action" for otherwise
the proper procedure for asserting a claim against one who is
already a party to the suit is by means of counterclaim or
cross-claim under sections 6 and 7 of Rule 6. In addition to
the aforecited requirement, the claim against the third-party
defendant must be based upon plaintiff's claim against the
original defendant (third-party claimant). The crucial
characteristic of a claim under section 12 of Rule 6, is that the
original "defendant is attempting to transfer to the third-party
defendant the liability asserted against him by the original
plaintiff."
Accordingly, the requisites for a third-party action are, firstly,
that the party to be impleaded must not yet be a party to the
action; secondly, that the claim against the third-party
defendant must belong to the original defendant; thirdly, the
claim of the original defendant against the third-party
defendant must be based upon the plaintiffs claim against
the original defendant; and, fourthly, the defendant is
attempting to transfer to the third-party defendant the liability
asserted against him by the original plaintiff.14
As the foregoing indicates, the claim that the third-party
complaint asserts against the third-party defendant must be
predicated on substantive law. Here, the substantive law on
which the right of Inland to seek such other relief through its
third-party complaint rested were Article 2176 and Article
2180 of the Civil Code, which read:
Article 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this chapter.
(1902a)
Article 2180. The obligation imposed by article 2176 is
demandable not only for ones own acts or omissions, but
also for those of persons for whom one is responsible.
xxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged
in any business or industry.
xxx
The responsibility treated of in this article shall cease when
the persons herein mentioned prove that they observed all
the diligence of a good father of a family to prevent damage.
(1903a)
 12
Paras cause of action against Inland (breach of contract of
carriage) did not need to be the same as the cause of action
of Inland against Philtranco and its driver (tort or quasi-delict)
in the impleader. It is settled that a defendant in a contract
action may join as third-party defendants those who may be
liable to him in tort for the plaintiffs claim against him, or
even directly to the plaintiff.15 Indeed, Prof. Wright, et al.,
commenting on the provision of the Federal Rules of
Procedure of the United States from which Section 12, supra,
was derived, observed so, to wit:16
The third-party claim need not be based on the same theory
as the main claim. For example, there are cases in which the
third-party claim is based on an express indemnity contract
and the original complaint is framed in terms of negligence.
Similarly, there need not be any legal relationship between
the third-party defendant and any of the other parties to the
action. Impleader also is proper even though the third partys
liability is contingent, and technically does not come into
existence until the original defendants liability has been
established. In addition, the words is or may be liable in Rule
14(a) make it clear that impleader is proper even though the
third-party defendants liability is not automatically
established once the third-party plaintiffs liability to the
original plaintiff has been determined.
Nor was it a pre-requisite for attachment of the liability to
Philtranco and its driver that Inland be first declared and
found liable to Paras for the breach of its contract of carriage
with him.17 As the Court has cogently discoursed in Samala v.
Judge Victor:18
Appellants argue that since plaintiffs filed a complaint for
damages against the defendants on a breach of contract of
carriage, they cannot recover from the third-party defendants
on a cause of action based on quasi-delict. The third party
defendants, they allege, are never parties liable with respect
to plaintiff s claim although they are with respect to the
defendants for indemnification, subrogation, contribution or
other reliefs. Consequently, they are not directly liable to the
plaintiffs. Their liability commences only when the defendants
are adjudged liable and not when they are absolved from
liability as in the case at bar.
Quite apparent from these arguments is the misconception
entertained by appellants with respect to the nature and
office of a third party complaint.
Section 16, Rule 6 of the Revised Rules of Court defines a
third party complaint as a "claim that a defending party may,
with leave of court, file against a person not a party to the
action, called the third-party defendant, for contribution,
indemnification, subrogation, or any other relief, in respect of
his opponents claim." In the case of Viluan vs. Court of
Appeals, et al., 16 SCRA 742 [1966], this Court had occasion
to elucidate on the subjects covered by this Rule, thus:
... As explained in the Atlantic Coast Line R. Co. vs. U.S.
Fidelity & Guaranty Co., 52 F. Supp. 177 (1943:)
From the sources of Rule 14 and the decisions herein cited, it
is clear that this rule, like the admiralty rule, covers two
distinct subjects, the addition of parties defendant to the
main cause of action, and the bringing in of a third party for a
defendants remedy over. xxx
If the third party complaint alleges facts showing a third
partys direct liability to plaintiff on the claim set out in
plaintiffs petition, then third party shall make his defenses
as provided in Rule 12 and his counterclaims against plaintiff
as provided in Rule 13. In the case of alleged direct liability,
no amendment (to the complaint) is necessary or required.
The subject-matter of the claim is contained in plaintiff's
complaint, the ground of third partys liability on that claim is
alleged in third party complaint, and third partys defense to
set up in his answer to plaintiff's complaint. At that point and
without amendment, the plaintiff and third party are at issue
as to their rights respecting the claim.
The provision in the rule that, The third-party defendant may
assert any defense which the third-party plaintiff may assert
to the plaintiffs claim, applies to the other subject, namely,
the alleged liability of third party defendant. The next
sentence in the rule, The third-party defendant is bound by
the adjudication of the third party plaintiffs liability to the
plaintiff, as well as of his own to the plaintiff or to the third-
party plaintiff applies to both subjects. If third party is
brought in as liable only to defendant and judgment is
rendered adjudicating plaintiff's right to recover against
defendant and defendants rights to recover against third
party, he is bound by both adjudications.That part of the
sentence refers to the second subject. If third party is
brought in as liable to plaintiff, then third party is bound by
the adjudication as between him and plaintiff. That refers to
the first subject. If third party is brought in as liable to
plaintiff and also over to defendant, then third party is bound
by both adjudications. xxx
Under this Rule, a person not a party to an action may be
impleaded by the defendant either (a) on an allegation of
liability to the latter; (b) on the ground of direct liability to the
plaintiff-; or, (c) both (a) and (b). The situation in (a) is
covered by the phrase "for contribution, indemnity or
subrogation;" while (b) and (c) are subsumed under the catch
all "or any other relief, in respect of his opponents claim."
The case at bar is one in which the third party defendants are
brought into the action as directly liable to the plaintiffs upon
the allegation that "the primary and immediate cause as
shown by the police investigation of said vehicular collision
between (sic) the above-mentioned three vehicles was the
recklessness and negligence and lack of imprudence (sic) of
the third-party defendant Virgilio (should be Leonardo)
Esguerra y Ledesma then driver of the passenger bus." The
effects are that "plaintiff and third party are at issue as to
their rights respecting the claim" and "the third party is bound
by the adjudication as between him and plaintiff." It is not
indispensable in the premises that the defendant be first
adjudged liable to plaintiff before the third-party defendant
may be held liable to the plaintiff, as precisely, the theory of
defendant is that it is the third party defendant, and not he,
who is directly liable to plaintiff. The situation contemplated
by appellants would properly pertain to situation (a) above
wherein the third party defendant is being sued for
contribution, indemnity or subrogation, or simply stated, for a
defendant's "remedy over".19
It is worth adding that allowing the recovery of damages by
Paras based on quasi-delict, despite his complaint being upon
contractual breach, served the judicial policy of avoiding
multiplicity of suits and circuity of actions by disposing of the
entire subject matter in a single litigation.20
2.
Award of temperate damages was in order
Philtranco assails the award of temperate damages by the CA
considering that, firstly, Paras and Inland had not raised the
matter in the trial court and in their respective appeals;
secondly, the CA could not substitute the temperate damages
granted to Paras if Paras could not properly establish his
actual damages despite evidence of his actual expenses being
easily available to him; and, thirdly, the CA gravely abused its
discretion in granting motu proprio the temperate damages of
P250,000.00 to Inland although Inland had not claimed
temperate damages in its pleading or during trial and even on
appeal.
 13

The Court cannot side with Philtranco.
Actual damages, to be recoverable, must not only be capable
of proof, but must actually be proved with a reasonable
degree of certainty. The reason is that the court "cannot
simply rely on speculation, conjecture or guesswork in
determining the fact and amount of damages," but "there
must be competent proof of the actual amount of loss,
credence can be given only to claims which are duly
supported by receipts."21
The receipts formally submitted and offered by Paras were
limited to the costs of medicines purchased on various times
in the period from February 1987 to July 1989 (Exhibits E to
E-35, inclusive) totaling only P1,397.95.22 The receipts by no
means included hospital and medical expenses, or the costs
of at least two surgeries as well as rehabilitative therapy.
Consequently, the CA fixed actual damages only at that small
sum of P1,397.95. On its part, Inland offered no definite
proof on the repairs done on its vehicle, or the extent of the
material damage except the testimony of its witness,
Emerlinda Maravilla, to the effect that the bus had been
damaged beyond economic repair.23 The CA rejected Inlands
showing of unrealized income worth P3,945,858.50 for 30
months (based on alleged average weekly income of
P239,143.02 multiplied by its guaranteed revenue amounting
to 55% thereof, then spread over a period of 30 months, the
equivalent to the remaining 40% of the vehicles un-
depreciated or net book value), finding such showing
arbitrary, uncertain and speculative.24 As a result, the CA
allowed no compensation to Inland for unrealized income.
Nonetheless, the CA was convinced that Paras should not
suffer from the lack of definite proof of his actual expenses
for the surgeries and rehabilitative therapy; and that Inland
should not be deprived of recourse to recover its loss of the
economic value of its damaged vehicle. As the records
indicated, Paras was first rushed for emergency treatment to
the San Pablo Medical Center in San Pablo City, Laguna, and
was later brought to the National Orthopedic Hospital in
Quezon City where he was diagnosed to have suffered a
dislocated hip, fracture of the fibula on the right leg, fracture
of the small bone of the right leg, and closed fracture on the
tibial plateau of the left leg. He underwent surgeries on March
4, 1987 and April 15, 1987 to repair the fractures.25 Thus, the
CA awarded to him temperate damages of P50,000.00 in the
absence of definite proof of his actual expenses towards that
end. As to Inland, Maravillas testimony of the bus having
been damaged beyond economic repair showed a definitely
substantial pecuniary loss, for which the CA fixed temperate
damages of P250,000.00. We cannot disturb the CAs
determination, for we are in no position today to judge its
reasonableness on account of the lapse of a long time from
when the accident occurred.26
There is no question that Article 2224 of the Civil Code
expressly authorizes the courts to award temperate damages
despite the lack of certain proof of actual damages, to wit:
Article 2224. Temperate or moderate damages, which are
more than nominal but less than compensatory damages,
may be recovered when the court finds that some pecuniary
loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty.
The rationale for Article 2224 has been stated in Premiere
Development Bank v. Court of Appeals28 in the following
manner:
Even if not recoverable as compensatory damages, Panacor
may still be awarded damages in the concept of temperate or
moderate damages. When the court finds that some
pecuniary loss has been suffered but the amount cannot,
from the nature of the case, be proved with certainty,
temperate damages may be recovered. Temperate damages
may be allowed in cases where from the nature of the case,
definite proof of pecuniary loss cannot be adduced, although
the court is convinced that the aggrieved party suffered some
pecuniary loss.
The Code Commission, in explaining the concept of temperate
damages under Article 2224, makes the following comment:
In some States of the American Union, temperate damages
are allowed. There are cases where from the nature of the
case, definite proof of pecuniary loss cannot be offered,
although the court is convinced that there has been such loss.
For instance, injury to ones commercial credit or to the
goodwill of a business firm is often hard to show with
certainty in terms of money. Should damages be denied for
that reason? The judge should be empowered to calculate
moderate damages in such cases, rather than that the
plaintiff should suffer, without redress from the defendants
wrongful act.
3.
Paras loss of earning capacity
must be compensated
In the body of its decision, the CA concluded that considering
that Paras had a minimum monthly income of P8,000.00 as a
trader he was entitled to recover compensation for unearned
income during the 3-month period of his hospital confinement
and the 6-month period of his recovery and rehabilitation;
and aggregated his unearned income for those periods to
P72,000.00.29 Yet, the CA omitted the unearned income from
the dispositive portion.

In awarding temperate damages in lieu of actual damages,

The omission should be rectified, for there was credible proof
the CA did not err, because Paras and Inland were definitely
of Paras loss of income during his disability. According to
shown to have sustained substantial pecuniary losses. It
Article 2205, (1), of the Civil Code, damages may be
would really be a travesty of justice were the CA now to be
recovered for loss or impairment of earning capacity in cases
held bereft of the discretion to calculate moderate or
of temporary or permanent personal injury. Indeed,
temperate damages, and thereby leave Paras and Inland
indemnification for damages comprehends not only the loss
without redress from the wrongful act of Philtranco and its
suffered (actual damages or damnum emergens) but also the
driver.27 We are satisfied that the CA exerted effort and
claimants lost profits (compensatory damages or lucrum
practiced great care to ensure that the causal link between
cessans).30 Even so, the formula that has gained acceptance
the physical injuries of Paras and the material loss of Inland,
over time has limited recovery to net earning capacity; hence,
on the one hand, and the negligence of Philtranco and its
the entire amount of P72,000.00 is not allowable. The
driver, on the other hand, existed in fact. It also rejected
premise is obviously that net earning capacity is the persons
arbitrary or speculative proof of loss. Clearly, the costs of
capacity to acquire money, less the necessary expense for his
Paras surgeries and consequential rehabilitation, as well as
own living.31 To simplify the determination, therefore, the net
the fact that repairing Inlands vehicle would no longer be
earning capacity of Paras during the 9-month period of his
economical justly warranted the CA to calculate temperate
confinement, surgeries and consequential therapy is pegged
damages of P50,000.00 and P250,000.00 respectively for
at only half of his unearned monthly gross income of
Paras and Inland.
P8,000.00 as a trader, or a total of P36,000.00 for the 9-
 14
month period, the other half being treated as the necessary
expense for his own living in that period.
It is relevant to clarify that awarding the temperate damages
(for the substantial pecuniary losses corresponding to Parass
surgeries and rehabilitation and for the irreparability of
Inlands damaged bus) and the actual damages to
compensate lost earnings and costs of medicines give rise to
no incompatibility. These damages cover distinct pecuniary
losses suffered by Paras and Inland,32 and do not infringe the
statutory prohibition against recovering damages twice for the
same act or omission.33
4.
Increase in award of attorneys fees
Although it is a sound policy not to set a premium on the
right to litigate,34 we consider the grant to Paras and Inland
of reasonable attorneys fees warranted. Their entitlement to
attorneys fees was by virtue of their having been compelled
to litigate or to incur expenses to protect their interests,35 as
well as by virtue of the Court now further deeming attorneys
fees to be just and equitable.36
In view of the lapse of a long time in the prosecution of the
claim,37 the Court considers it reasonable and proper to grant
attorneys fees to each of Paras and Inland equivalent to 10%
of the total amounts hereby awarded to them, in lieu of only
P20,000.00 for that purpose granted to Paras.
5.
Legal interest on the amounts awarded
Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,38
legal interest at the rate of 6% per annum accrues on the
amounts adjudged reckoned from July 18, 1997, the date
when the RTC rendered its judgment; and legal interest at
the rate of 12% per annum shall be imposed from the finality
of the judgment until its full satisfaction, the interim period
being regarded as the equivalent of a forbearance of credit.
WHEREFORE, the Court AFFIRMS WITH MODIFICATION the
decision of the Court of Appeals promulgated on September
25, 2002, by ordering PHILTRANCO SERVICE ENTERPRISES,
INC. and APOLINAR MIRALLES to pay, jointly and severally,
as follows:
1. To Felix Paras:
(a) P1,397.95, as reimbursement for the
costs of medicines purchased between
February 1987 and July 1989;
(b) P50,000.00 as temperate damages;
(c) P50,000.00 as moral damages;
(d) P36,000.00 for lost earnings;
(e) 10% of the total of items (a) to (d)
hereof as attorneys fees; and
(f) Interest of 6% per annum from July 18,
1997 on the total of items (a) to (d) hereof
until finality of this decision, and 12% per
annum thereafter until full payment.
2. To Inland Trailways, Inc.:
(a) P250,000.00 as temperate damages;
(b) 10% of item (a) hereof; and
(c) Interest of 6% per annum on item (a)
hereof from July 18, 1997 until finality of
this decision, and 12% per annum
thereafter until full payment.
3. The petitioner shall pay the costs of suit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 173326 December 15, 2010
SOUTH COTABATO COMMUNICATIONS CORPORATION
and GAUVAIN J. BENZONAN, Petitioners,
vs.
HON. PATRICIA A. STO. TOMAS, SECRETARY OF
LABOR AND EMPLOYMENT, ROLANDO FABRIGAR,
MERLYN VELARDE, VINCE LAMBOC, FELIPE GALINDO,
LEONARDO MIGUEL, JULIUS RUBIN, EDEL RODEROS,
MERLYN COLIAO and EDGAR JOPSON, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This a petition for review on certiorari under Rule 45 of the
Rules of Court with application for temporary restraining
order and/or writ of preliminary injunction seeking to set
aside the Resolution1 dated July 20, 2005 as well as its
related Resolution2 dated May 22, 2006 of the Court of
Appeals in CA-G.R. SP No. 00179-MIN. In essence, the same
petition likewise seeks to set aside the Order3 dated
November 8, 2004 and the Order4 dated February 24, 2005 of
public respondent Secretary Patricia A. Sto. Tomas of the
Department of Labor and Employment (DOLE) as well as the
Order5 dated May 20, 2004 of the Regional Director, DOLE
Regional XII Office.
The facts of this case, as culled from the Order dated
November 8, 2004 of DOLE Secretary Sto. Tomas, are as
follows:
On the basis of a complaint, an inspection was conducted at
the premises of appellant DXCP Radio Station on January 13,
2004, where the following violations of labor standards laws
were noted:
1. Underpayment of minimum wage;
2. Underpayment of 13th month pay;
3. Non-payment of five (5) days service incentive
leave pay;
4. Non-remittance of SSS premiums;
5. Non-payment of rest day premium pay of some
employee;
6. Non-payment of holiday premium pay; and
 15
7. Some employees are paid on commission basis
aside from their allowances.
A copy of the Notice of Inspection Results was explained to
and received by Tony Ladorna for appellants. Later on, or on
January 16, 200[4], another copy of the Notice of Inspection
Results was received by Felipe S. Galindo, Technical
Supervisor of appellant DXCP. The Notice of Inspection
Results required the appellants to effect restitution and/or
correction of the above violations within five (5) calendar
days from receipt of the Notice. Likewise, appellants were
informed that any questions on the findings should be
submitted within five (5) working days from receipts of the
Notice.
A summary investigation was scheduled on March 3, 2004,
where only appellees appeared, while appellants failed to
appear despite due notice. Another hearing was held on April
1, 2004, where appellees appeared, while a certain Nona Gido
appeared in behalf of Atty. Thomas Jacobo. Ms. Gido sought
to re-schedule the hearing, which the hearing officer denied.
On May 20, 2004, the Regional Director issued the assailed
Order, directing appellants to pay appellees the aggregate
amount of Seven Hundred Fifty Nine Thousand Seven
Hundred Fifty Two Pesos (Php759,752.00).6
The dispositive portion of the Order dated May 20, 2004 of
the Regional Director of the DOLE Region XII Office reads as
follows:
WHEREFORE, premises considered, respondent DXCP Radio
Station and/or Engr. Gauvain Benzonan, President, is hereby
ordered to pay the seven (7) affected workers of their Salary
Differential, Underpayment of 13th Month Pay, Five (5) days
Service Incentive Leave Pay, Rest Day Premium Pay and
Holiday Premium Pay in the total amount of SEVEN HUNDRED
FIFTY-NINE THOUSAND SEVEN HUNDRED FIFTY-TWO PESOS
(P759,752.00), Philippine Currency as indicated in the Annex
"A" hereof and to submit proof of compliance to the
Department of Labor and Employment, Regional Office No.
XII, Cotabato City within ten (10) calendar days from receipt
of this Order.7
Petitioners appealed their case to then DOLE Secretary Sto.
Tomas. However, this appeal was dismissed in an Order
dated November 8, 2004 wherein the Secretary ruled that,
contrary to their claim, petitioners were not denied due
process as they were given reasonable opportunity to present
evidence in support of their defense in the administrative
proceeding before the Regional Director of DOLE Region XII
Office. The dispositive portion of the said Order follows:
WHEREFORE, premises considered, the appeal by DXCP Radio
Station and Engr. Gauvain Benzonan is hereby DISMISSED for
lack of merit. The Order dated May 24, 2004 of the Regional
Director, directing appellants to pay the nine (9) appellees the
aggregate amount of Seven Hundred Fifty-Nine Thousand
Seven Hundred Fifty-Two Pesos (Php759,752.00),
representing their claims for wage differentials, 13th month
pay differentials, service incentive leave pay, holiday premium
and rest day premium, is AFFIRMED.8
Undeterred, petitioners filed a Motion for Reconsideration
with the DOLE Secretary but this was denied in an Order
dated February 24, 2005, the dispositive portion of which
states:
WHEREFORE, premises considered, the Motion for
Reconsideration filed by DXCP Radio Station and Engr.
Gauvain Benzonan, is hereby DENIED for lack of merit. Our
Order dated November 8, 2004, affirming the Order dated
May 20, 2004 of the OIC-Director, Regional Office No. 12,
directing appellants to pay Rolando Fabrigar and eight (8)
others, the aggregate amount of Seven Hundred Fifty-Nine
Thousand Seven Hundred Fifty-Two Pesos (Php759,752.00),
representing their claims for wage and 13th month pay
differentials, service incentive leave pay, holiday pay and rest
day premium, is AFFIRMED.9
In light of this setback, petitioners elevated their case to the
Court of Appeals but their petition was dismissed in the
assailed Court of Appeals Resolution dated July 20, 2005
because of several procedural infirmities that were explicitly
cited in the same, to wit:
1. The petition was not properly verified and the Certification
of Non-Forum Shopping was not executed by the plaintiff or
principal party in violation of Sections 4 and 5 of Rule 7 of the
1997 Rules of Civil Procedure, as the affiant therein was not
duly authorized to represent the corporation. Such procedural
lapse renders the entire pleading of no legal effect and is
dismissible. Sections 4 and 5 of Rule 7 of the 1997 Rules of
Civil Procedure provide:
SEC. 4. Verification. Except when otherwise specifically
required by law or rule, pleadings need not be under oath,
verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read
the pleadings and that the allegations therein are true and
correct of his personal knowledge or based on authentic
records.
A pleading required to be verified which contains a
verification based on "information and belief" or upon
"knowledge, information and belief" or lacks a proper
verification, shall be treated as an unsigned pleading. x x x.
SEC. 5. Certification against forum shopping. The plaintiff or
principal party shall certify under oath in the complaint or
other initiatory pleading asserting a claim for relief, or in a
sworn certification annexed thereto and simultaneously filed
therewith:
xxxx
Failure to comply with the foregoing requirements shall not
be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the
case without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings
therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly
constitute willful and deliberate forum shopping, the same
shall be ground for summary dismissal with prejudice and
shall constitute direct contempt, as well as a cause for
administrative sanctions. x x x.
2. Annexes A, B, C, E and its attachments and F are not
certified true copies contrary to Section 1, Rule 65 of the
1997 Rules of Civil Procedure which provides:
SECTION 1. Petition for Certiorari. x x x
xxxx
The petition shall be accompanied by a certified true copy of
the judgment, order or resolution subject thereof, copies of
all pleadings and documents relevant and pertinent thereto,
and a sworn certification of non-forum shopping as provided
in the third paragraph of section 3, Rule 46. x x x.
 16
3. Petitioners counsel failed to indicate the date of issue of
his IBP Official Receipt. As provided for under Bar Matter 287
dated September 26, 2000:
"All pleadings, motions and papers filed in court whether
personally or by mail shall bear counsels current IBP official
receipt number and date of issue otherwise, such pleadings,
motions and paper may not be acted upon by the court,
without prejudice to whatever disciplinary action the court
may take against the erring counsel who shall likewise be
required to comply with the such (sic) requirement within five
(5) days from notice. Failure to comply with such requirement
shall be ground for further disciplinary sanction and for
contempt of court." x x x.10
Petitioners then filed a Motion for Reconsideration and the
Court of Appeals ruled in its assailed Resolution dated May
22, 2006 that petitioners subsequent submission made them
substantially comply with the second and third procedural
errors that were mentioned in the Court of Appeals Resolution
dated July 20, 2005. However, the Court of Appeals also ruled
that, with regard to the first procedural error, petitioners
justification does not deserve merit reasoning that "[w]hile it
may be true that there are two (2) petitioners and that
petitioner Gauvain Benzonan signed the verification and the
certificate of non-forum shopping of the petition, the records
show that petitioner Gauvain Benzonan did not initiate the
petition in his own capacity to protect his personal interest in
the case but was, in fact, only acting for and in the
corporations behalf as its president."11 Thus, the Court of
Appeals noted that "[h]aving acted in the corporations
behalf, petitioner Benzonan should have been clothed with
the corporations board resolution authorizing him to institute
the petition."12
The Court of Appeals likewise ruled that petitioners
attachment of a "Secretarys Certificate" to their Motion for
Reconsideration (purportedly to remedy the first procedural
mistake in their petition for certiorari under Rule 65) was
insufficient since their submission merely authorized
petitioner Benzonan "to represent the corporation and cause
the preparation and filing of a Motion for Reconsideration
before the Court of Appeals."13
Consequently, petitioners filed the instant petition wherein
they raised the following issues:
a. Whether the Court of Appeals committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it
dismissed the Petition for Certiorari and denied the Motion for
Reconsideration on its finding that the petition was not
properly verified and the certification of non-forum shopping
was not executed by the principal party allegedly in violation
of Sections 4 and 5, Rule 7 of the 1997 Rules of Civil
Procedure?
b. Whether petitioners were denied due process of law in the
proceedings before the Regional Director and the Office of
the Secretary, both of the Department of Labor and
Employment?
c. Whether there was sufficient basis in the Order issued by
the Regional Director, DOLE, Regional Office No. XII, dated
May 20, 2004?14
Anent the first procedural issue, the Court had summarized
the jurisprudential principles on the matter in Cagayan Valley
Drug Corporation v. Commissioner of Internal Revenue.15 In
said case, we held that a President of a corporation, among
other enumerated corporate officers and employees, can sign
the verification and certification against of non-forum
shopping in behalf of the said corporation without the benefit
of a board resolution. We quote the pertinent portion of the
decision here:
It must be borne in mind that Sec. 23, in relation to Sec. 25
of the Corporation Code, clearly enunciates that all corporate
powers are exercised, all business conducted, and all
properties controlled by the board of directors. A corporation
has a separate and distinct personality from its directors and
officers and can only exercise its corporate powers through
the board of directors. Thus, it is clear that an individual
corporate officer cannot solely exercise any corporate power
pertaining to the corporation without authority from the board
of directors. This has been our constant holding in cases
instituted by a corporation.
In a slew of cases, however, we have recognized the
authority of some corporate officers to sign the verification
and certification against forum shopping. In Mactan-Cebu
International Airport Authority v. CA, we recognized the
authority of a general manager or acting general manager to
sign the verification and certificate against forum shopping; in
Pfizer v. Galan, we upheld the validity of a verification signed
by an "employment specialist" who had not even presented
any proof of her authority to represent the company; in
Novelty Philippines, Inc. v. CA, we ruled that a personnel
officer who signed the petition but did not attach the
authority from the company is authorized to sign the
verification and non-forum shopping certificate; and in
Lepanto Consolidated Mining Company v. WMC Resources
International Pty. Ltd. (Lepanto), we ruled that the
Chairperson of the Board and President of the Company can
sign the verification and certificate against non-forum
shopping even without the submission of the boards
authorization.
In sum, we have held that the following officials or employees
of the company can sign the verification and certification
without need of a board resolution: (1) the Chairperson of the
Board of Directors, (2) the President of a corporation, (3) the
General Manager or Acting General Manager, (4) Personnel
Officer, and (5) an Employment Specialist in a labor case.
While the above cases do not provide a complete listing of
authorized signatories to the verification and certification
required by the rules, the determination of the sufficiency of
the authority was done on a case to case basis. The rationale
applied in the foregoing cases is to justify the authority of
corporate officers or representatives of the corporation to
sign the verification or certificate against forum shopping,
being "in a position to verify the truthfulness and correctness
of the allegations in the petition."16 (Emphases
supplied.)lawp++il
It must be stressed, however, that the Cagayan ruling
qualified that the better procedure is still to append a board
resolution to the complaint or petition to obviate questions
regarding the authority of the signatory of the verification and
certification.17
Nonetheless, under the circumstances of this case, it bears
reiterating that the requirement of the certification of non-
forum shopping is rooted in the principle that a party-litigant
shall not be allowed to pursue simultaneous remedies in
different fora, as this practice is detrimental to an orderly
judicial procedure. However, the Court has relaxed, under
justifiable circumstances, the rule requiring the submission of
such certification considering that, although it is obligatory, it
is not jurisdictional. Not being jurisdictional, it can be relaxed
under the rule of substantial compliance.18
In the case at bar, the Court holds that there has been
substantial compliance with Sections 4 and 5, Rule 7 of the
1997 Revised Rules on Civil Procedure on the petitioners part
in consonance with our ruling in the Lepanto Consolidated
Mining Company v. WMC Resources International PTY LTD.19
that we laid down in 2003 with the rationale that the
President of petitioner-corporation is in a position to verify the
 17

truthfulness and correctness of the allegations in the petition.

Petitioner Benzonan clearly satisfies the aforementioned
jurisprudential requirement because he is the President of
petitioner South Cotabato Communications Corporation.
Moreover, he is also named as co-respondent of petitioner-
corporation in the labor case which is the subject matter of
the special civil action for certiorari filed in the Court of
Appeals.

Clearly, it was error on the part of the Court of Appeals to

dismiss petitioners special civil action for certiorari despite
substantial compliance with the rules on procedure. For
unduly upholding technicalities at the expense of a just
resolution of the case, normal procedure dictates that the
Court of Appeals should be tasked with properly disposing the
petition, a second time around, on the merits.

The Court is mindful of previous rulings which instructs us

that when there is enough basis on which a proper evaluation
of the merits can be made, we may dispense with the time-
consuming procedure in order to prevent further delays in the
disposition of the case.20 However, based on the nature of the
two remaining issues propounded before the Court which
involve factual issues and given the inadequacy of the
records, pleadings, and other evidence available before us to
properly resolve those questions, we are constrained to
refrain from passing upon them.

After all, the Court has stressed that its jurisdiction in a

petition for review on certiorari under Rule 45 of the Rules of
Court is limited to reviewing only errors of law, not of fact,
unless the findings of fact complained of are devoid of
support by the evidence on record, or the assailed judgment
is based on the misapprehension of facts.21

WHEREFORE, the petition is PARTIALLY GRANTED. The

assailed Resolutions of the Court of Appeals are REVERSED
and SET ASIDE. The case is REMANDED to the Court of
Appeals for proper disposition of CA-G.R. SP No. 00179-MIN.

SO ORDERED.