Republic of the Philippines

Supreme Court

Manila

SECOND DIVISION

RAMON S. CHING AND PO WING PROPERTIES, INC., G.R. No. 192828

Petitioners,

Present:

- versus - CARPIO, J.,

Chairperson,

BRION,

HON. JANSEN R. RODRIGUEZ, in his capacity as PEREZ,

Presiding Judge of the Regional Trial Court of Manila,
ARANAL-SERENO, and
Branch 6, JOSEPH CHENG, JAIME CHENG, MERCEDES
IGNE AND LUCINA SANTOS, substituted by her son, REYES, JJ.
EDUARDO S. BALAJADIA,

Respondents.

Promulgated:

November 28, 2011

x------------------------------------------------------------------------------------x

RESOLUTION

REYES, J.:
The Case

Before us is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assailing the December 14, 2009
Decision[2] and July 8, 2010 Resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No. 99856. The dispositive portion of
the assailed Decision reads:

WHEREFORE, in view of all the foregoing premises, judgment is hereby rendered by us DENYING the petition filed in this
case and AFFIRMING the assailed Orders dated March 15, 2007 and May 16, 2007 issued by the respondent Judge of the
Regional Trial Court (RTC), Branch 6, in Manila in Civil Case No. 02-105251.[4]

The assailed Resolution denied the petitioners' Motion for Reconsideration.

The Factual Antecedents

Sometime between November 25, 2002 and December 3, 2002,[5] the respondents filed a Complaint[6] against the
petitioners and Stronghold Insurance Company, Global Business Bank, Inc. (formerly PhilBank), Elena Tiu Del Pilar, Asia
Atlantic Resources Ventures, Inc., Registers of Deeds of Manila and Malabon, and all persons claiming rights or titles
from Ramon Ching (Ramon) and his successors-in-interest.

The Complaint, captioned as one for "Disinheritance, Declaration of Nullity of Agreement and Waiver, Affidavit of Extra-
Judicial Settlement, Deed of Absolute Sale, Transfer Certificates of Title with Prayer for [the] Issuance of [a] Temporary
Restraining Order and [a] Writ of Preliminary Injunction," was docketed as Civil Case No. 02-105251 and raffled to
Branch 8 of the Regional Trial Court of Manila (RTC).

In the Complaint, the respondents alleged the following as causes of action:

First Cause of Action. They are the heirs of Lim San, also known as Antonio Ching / Tiong Cheng / Ching Cheng Suy
(Antonio). Respondents Joseph Cheng (Joseph) and Jaime Cheng (Jaime) are allegedly the children of Antonio with his
common-law wife, respondent Mercedes Igne (Mercedes). Respondent Lucina Santos (Lucina) claimed that she was also
a common-law wife of Antonio. The respondents averred that Ramon misrepresented himself as Antonio's and Lucina's
son when in truth and in fact, he was adopted and his birth certificate was merely simulated. On July 18, 1996, Antonio
died of a stab wound. Police investigators identified Ramon as the prime suspect and he now stands as the lone accused
in a criminal case for murder filed against him. Warrants of arrest issued against him have remained unserved as he is at
large. From the foregoing circumstances and upon the authority of Article 919[7] of the New Civil Code (NCC), the
respondents concluded that Ramon can be legally disinherited, hence, prohibited from receiving any share from the
estate of Antonio.
Second Cause of Action. On August 26, 1996, prior to the conclusion of the police investigations tagging Ramon as the
prime suspect in the murder of Antonio, the former made an inventory of the latter's estate. Ramon misrepresented
that there were only six real estate properties left by Antonio. The respondents alleged that Ramon had illegally
transferred to his name the titles to the said properties. Further, there are two other parcels of land, cash and jewelries,
plus properties in Hongkong, which were in Ramon's possession.

Third Cause of Action. Mercedes, being of low educational attainment, was sweet-talked by Ramon into surrendering to
him a Global Business Bank, Inc. (Global Bank) Certificate of Time Deposit of P4,000,000.00 in the name of Antonio, and
the certificates of title covering two condominium units in Binondo which were purchased by Antonio using his own
money but which were registered in Ramon's name. Ramon also fraudulently misrepresented to Joseph, Jaime and
Mercedes that they will promptly receive their complete shares, exclusive of the stocks in Po Wing Properties, Inc. (Po
Wing), from the estate of Antonio. Exerting undue influence, Ramon had convinced them to execute an
Agreement[8] and a Waiver[9] on August 20, 1996. The terms and conditions stipulated in the Agreement and Waiver,
specifically, on the payment by Ramon to Joseph, Jaime and Mercedes of the amount of P22,000,000.00, were not
complied with. Further, Lucina was not informed of the execution of the said instruments and had not received any
amount from Ramon. Hence, the instruments are null and void.

Fourth Cause of Action. Antonio's 40,000 shares in Po Wing, which constitute 60% of the latter's total capital stock,
were illegally transferred by Ramon to his own name through a forged document of sale executed after Antonio died. Po
Wing owns a ten-storey building in Binondo. Ramon's claim that he bought the stocks from Antonio before the latter
died is baseless. Further, Lucina's shares in Po Wing had also banished into thin air through Ramon's machinations.

Fifth Cause of Action. On October 29, 1996, Ramon executed an Affidavit of Extra-Judicial Settlement of
Estate[10] adjudicating solely to himself Antonio's entire estate to the prejudice of the respondents. By virtue of the said
instrument, new Transfer Certificates of Title (TCTs) covering eight real properties owned by Antonio were issued in
Ramon's name. Relative to the Po Wing shares, the Register of Deeds of Manila had required Ramon to post a Surety
Bond conditioned to answer for whatever claims which may eventually surface in connection with the said stocks. Co-
defendant Stronghold Insurance Company issued the bond in Ramon's behalf.

Sixth Cause of Action. Ramon sold Antonio's two parcels of land in Navotas to co-defendant Asia Atlantic Business
Ventures, Inc. Another parcel of land, which was part of Antonio's estate, was sold by Ramon to co-defendant Elena Tiu
Del Pilar at an unreasonably low price. By reason of Ramon's lack of authority to dispose of any part of Antonio's estate,
the conveyances are null and void ab initio.

Since Ramon is at large, his wife, Belen Dy Tan Ching, now manages Antonio's estate. She has no intent to convey to the
respondents their shares in the estate of Antonio.

The respondents thus prayed for the following in their Complaint:

1. x x x a temporary restraining order be issued restraining the defendant RAMON CHING and/or his attorney-in-fact
Belen Dy Tan Ching from disposing, selling or alienating any property that belongs to the estate of the deceased
ANTONIO CHING;
xxx

4. x x x

a.) Declaring that the defendant RAMON CHING who murdered his father ANTONIO CHING disqualified as heir and from
inheriting to (sic) the estate of his father;

b.) Declaring the nullity of the defendant RAMON CHING transfer (sic) of the six [6] parcels of land from the name of his
father ANTONIO CHING to his name covered by TCT No. x x x;

c.) Declaring the nullity of the AGREEMENT and WAIVER executed by plaintiffs x x x in favor of x x x RAMON CHING for
being patently immoral, invalid, illegal, simulated and (sic) sham;

d.) Declaring the nullity of the transfer of the shares of stocks at (sic) PO WING from the names of ANTONIO CHING and
LUCINA SANTOS to the defendant ANTONIOCHING's name for having been illegally procured through the falsification of
their signatures in the document purporting the transfer thereof;

e.) Declaring the nullity and to have no force and effect the AFFIDAVIT OF SETTLEMENT OF ESTATE executed by x x x
RAMON CHING for being contrary to law and existing jurisprudence;

f.) Declaring the nullity of the DEED OF SALES (sic) executed by x x x RAMON CHING (i) over two (2) parcels of land x x x
to defendant ASIA ATLANTIC BUSINESS VENTURES, Inc.; and (ii) one (1) parcel of land x x x sold to x x x ELENA TIU DEL
PILAR for having illegally procured the ownership and titles of the above properties;

x x x.[11]

The petitioners filed with the RTC a Motion to Dismiss[12] alleging forum shopping, litis pendentia, res judicata and the
respondents as not being the real parties in interest.

On July 30, 2004, the RTC issued an Omnibus Order[13] denying the petitioners' Motion to Dismiss.

The respondents filed an Amended Complaint[14] dated April 7, 2005 impleading Metrobank as the successor-in-interest
of co-defendant Global Bank. The Amended Complaint also added a seventh cause of action relative to the existence of
a Certificate of Premium Plus Acquisition (CPPA) in the amount of P4,000,000.00 originally issued by PhilBank to
Antonio. The respondents prayed that they be declared as the rightful owners of the CPPA and that it be immediately
released to them. Alternatively, the respondents prayed for the issuance of a hold order relative to the CPPA to preserve
it during the pendency of the case.

On April 22, 2005, the petitioners filed their Consolidated Answer with Counterclaim.[15]

On October 28, 2005, the RTC issued an Order[16] admitting the respondents' Amended Complaint. The RTC stressed that
Metrobank had already filed Manifestations admitting that as successor-in-interest of Global Bank, it now possesses
custody of Antonio's deposits. Metrobank expressed willingness to abide by any court order as regards the disposition of
Antonio's deposits. The petitioners' Motion for Reconsideration filed to assail the aforecited Order was denied by the
RTC on May 3, 2006.

On May 29, 2006, the petitioners filed their Consolidated Answer with Counterclaim to the respondents' Amended
Complaint.

On August 11, 2006, the RTC issued a pre-trial order.[17]

On January 18, 2007, the petitioners filed a Motion to Dismiss[18] the respondents' Amended Complaint on the alleged
ground of the RTC's lack of jurisdiction over the subject matter of the Complaint. The petitioners argued that since the
Amended Complaint sought the release of the CPPA to the respondents, the latter's declaration as heirs of Antonio, and
the propriety of Ramon's disinheritance, the suit partakes of the nature of a special proceeding and not an ordinary
action for declaration of nullity. Hence, jurisdiction pertains to a probate or intestate court and not to the RTC acting as
an ordinary court.

On March 15, 2007, the RTC issued an Order[19] denying the petitioners' Motion to Dismiss on grounds:

In the case at bar, an examination of the Complaint would disclose that the action delves mainly on the question of
ownership of the properties described in the Complaint which can be properly settled in an ordinary civil action. And
as pointed out by the defendants, the action seeks to declare the nullity of the Agreement, Waiver, Affidavit of Extra-
Judicial Settlement, Deed of Absolute Sale, Transfer Certificates of Title, which were all allegedly executed by defendant
Ramon Ching to defraud the plaintiffs. The relief of establishing the status of the plaintiffs which could have translated
this action into a special proceeding was nowhere stated in the Amended Complaint. With regard [to] the prayer to
declare the plaintiffs as the rightful owner[s] of the CPPA and that the same be immediately released to them, in itself
poses an issue of ownership which must be proved by plaintiffs by substantial evidence. And as emphasized by the
plaintiffs, the Amended Complaint was intended to implead Metrobank as a co-defendant.

As regards the issue of disinheritance, the court notes that during the Pre-trial of this case, one of the issues raised by
the defendants Ramon Ching and Po Wing Properties is: Whether or not there can be disinheritance in intestate
succession? Whether or not defendant Ramon Ching can be legally disinherited from the estate of his father? To the
mind of the Court, the issue of disinheritance, which is one of the causes of action in the Complaint, can be fully
settled after a trial on the merits. And at this stage, it has not been sufficiently established whether or not there is a
will.[20] (Emphasis supplied.)

The above Order, and a subsequent Order dated May 16, 2007 denying the petitioners' Motion for Reconsideration,
became the subjects of a petition for certiorari filed with the CA. The petition, docketed as CA-G.R. SP No. 99856, raised
the issue of whether or not the RTC gravely abused its discretion when it denied the petitioners' Motion to Dismiss
despite the fact that the Amended Complaint sought to establish the status or rights of the respondents which subjects
are within the ambit of a special proceeding.

On December 14, 2009, the CA rendered the now assailed Decision[21] denying the petition for certiorari on grounds:

Our in-depth assessment of the condensed allegations supporting the causes of action of the amended complaint
induced us to infer that nothing in the said complaint shows that the action of the private respondents should be
threshed out in a special proceeding, it appearing that their allegations were substantially for the enforcement of
their rights against the alleged fraudulent acts committed by the petitioner Ramon Ching. The private respondents
also instituted the said amended complaint in order to protect them from the consequence of the fraudulent acts of
Ramon Ching by seeking to disqualify Ramon Ching from inheriting from Antonio Ching as well as to enjoin him from
disposing or alienating the subject properties, including the P4 Million deposit with Metrobank. The intestate or
probate court has no jurisdiction to adjudicate such issues, which must be submitted to the court in the exercise of its
general jurisdiction as a regional trial court. Furthermore, we agree with the trial court that the probate court could
not take cognizance of the prayer to disinherit Ramon Ching, given the undisputed fact that there was no will to be
contested in a probate court.

The petition at bench apparently cavils the subject amended complaint and complicates the issue of jurisdiction by
reiterating the grounds or defenses set up in the petitioners' earlier pleadings. Notwithstanding, the jurisdiction of the
court over the subject matter is determined by the allegations of the complaint without regard to whether or not the
private respondents (plaintiffs) are entitled to recover upon all or some of the causes of action asserted therein. In
this regard, the jurisdiction of the court does not depend upon the defenses pleaded in the answer or in the motion to
dismiss, lest the question of jurisdiction would almost entirely depend upon the petitioners (defendants).[22] Hence,
we focus our resolution on the issue of jurisdiction on the allegations in the amended complaint and not on the defenses
pleaded in the motion to dismiss or in the subsequent pleadings of the petitioners.

In fine, under the circumstances of the present case, there being no compelling reason to still subject the action of the
petitioners in a special proceeding since the nullification of the subject documents could be achieved in the civil
case, the lower court should proceed to evaluate the evidence of the parties and render a decision thereon upon the
issues that it defined during the pre-trial in Civil Case No. 02-105251.[23] (emphasis supplied)

The petitioners' Motion for Reconsideration was denied by the CA through a Resolution[24] issued on July 8, 2010.
The Issue

The instant Petition for Review on Certiorari[25] is anchored on the issue of:

WHETHER OR NOT THE RTC SHOULD HAVE GRANTED THE MOTION TO DISMISS FILED BY THE PETITIONERS ON THE
ALLEGED GROUND OF THE RTC'S LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE AMENDED COMPLAINT, TO
WIT, (A) FILIATIONS WITH ANTONIO OF RAMON, JAIME AND JOSEPH; (B) RIGHTS OF COMMON-LAW WIVES, LUCINA
AND MERCEDES, TO BE CONSIDERED AS HEIRS OF ANTONIO; (C) DETERMINATION OF THE EXTENT OF ANTONIO'S
ESTATE; AND (D) OTHER MATTERS WHICH CAN ONLY BE RESOLVED IN A SPECIAL PROCEEDING AND NOT IN AN
ORDINARY CIVIL ACTION.

The petitioners argue that only a probate court has the authority to determine (a) who are the heirs of a decedent; (b)
the validity of a waiver of hereditary rights; (c) the status of each heir; and (d) whether the property in the inventory is
conjugal or the exclusive property of the deceased spouse.[26] Further, the extent of Antonio's estate, the status of the
contending parties and the respondents' alleged entitlement as heirs to receive the proceeds of Antonio's CPPA now in
Metrobank's custody are matters which are more appropriately the subjects of a special proceeding and not of an
ordinary civil action.

The respondents opposed[27] the instant petition claiming that the petitioners are engaged in forum shopping.
Specifically, G.R. Nos. 175507[28] and 183840,[29] both involving the contending parties in the instant petition were filed
by the petitioners and are currently pending before this Court. Further, in Mendoza v. Hon. Teh,[30] the SC declared that
whether a particular matter should be resolved by the RTC in the exercise of its general jurisdiction or its limited probate
jurisdiction, is not a jurisdictional issue but a mere question of procedure. Besides, the petitioners, having validly
submitted themselves to the jurisdiction of the RTC and having actively participated in the trial of the case, are already
estopped from challenging the RTC's jurisdiction over the respondents' Complaint and Amended Complaint.[31]

The Court's Ruling

We resolve to deny the instant petition.

The petitioners failed to comply with a lawful order of this Court directing them to file their reply to the respondents'
Comment/Opposition to the instant Petition. While the prescribed period to comply expired on March 15, 2011, the
petitioners filed their Manifestation that they will no longer file a reply only on October 10, 2011 or after the lapse of
almost seven months.

Further, no reversible errors were committed by the RTC and the CA when they both ruled that the denial of the
petitioners' second motion to dismiss Civil Case No. 02-105251 was proper.
Even without delving into the procedural allegations of the respondents that the petitioners engaged in forum shopping
and are already estopped from questioning the RTC's jurisdiction after having validly submitted to it when the latter
participated in the proceedings, the denial of the instant Petition is still in order. Although the respondents' Complaint
and Amended Complaint sought, among others, the disinheritance of Ramon and the release in favor of the respondents
of the CPPA now under Metrobank's custody, Civil Case No. 02-105251 remains to be an ordinary civil action, and not a
special proceeding pertaining to a settlement court.

An action for reconveyance and annulment of title with damages is a civil action, whereas matters relating to settlement
of the estate of a deceased person such as advancement of property made by the decedent, partake of the nature of a
special proceeding, which concomitantly requires the application of specific rules as provided for in the Rules of
Court.[32] A special proceeding is a remedy by which a party seeks to establish a status, a right, or a particular fact.[33] It is
distinguished from an ordinary civil action where a party sues another for the enforcement or protection of a right, or
the prevention or redress of a wrong.[34] To initiate a special proceeding, a petition and not a complaint should be filed.

Under Article 916 of the NCC, disinheritance can be effected only through a will wherein the legal cause therefor shall be
specified. This Court agrees with the RTC and the CA that while the respondents in their Complaint and Amended
Complaint sought the disinheritance of Ramon, no will or any instrument supposedly effecting the disposition of
Antonio's estate was ever mentioned. Hence, despite the prayer for Ramon's disinheritance, Civil Case No. 02-105251
does not partake of the nature of a special proceeding and does not call for the probate court's exercise of its limited
jurisdiction.

The petitioners also argue that the prayers in the Amended Complaint, seeking the release in favor of the respondents
of the CPPA under Metrobank's custody and the nullification of the instruments subject of the complaint, necessarily
require the determination of the respondents' status as Antonio's heirs.

It bears stressing that what the respondents prayed for was that they be declared as the rightful owners of the CPPA
which was in Mercedes' possession prior to the execution of the Agreement and Waiver. The respondents also prayed
for the alternative relief of securing the issuance by the RTC of a hold order relative to the CPPA to preserve Antonio's
deposits with Metrobank during the pendency of the case. It can thus be said that the respondents' prayer relative to
the CPPA was premised on Mercedes' prior possession of and their alleged collective ownership of the same, and not on
the declaration of their status as Antonio's heirs. Further, it also has to be emphasized that the respondents were parties
to the execution of the Agreement[35] and Waiver[36] prayed to be nullified. Hence, even without the necessity of being
declared as heirs of Antonio, the respondents have the standing to seek for the nullification of the instruments in the
light of their claims that there was no consideration for their execution, and that Ramon exercised undue influence and
committed fraud against them. Consequently, the respondents then claimed that the Affidavit of Extra-Judicial
Settlement of Antonios estate executed by Ramon, and the TCTs issued upon the authority of the said affidavit, are null
and void as well. Ramon's averment that a resolution of the issues raised shall first require a declaration of the
respondents' status as heirs is a mere defense which is not determinative of which court shall properly exercise
jurisdiction.

In Marjorie Cadimas v. Marites Carrion and Gemma Hugo,[37] the Court declared:
It is an elementary rule of procedural law that jurisdiction of the court over the subject matter is determined by the
allegations of the complaint irrespective of whether or not the plaintiff is entitled to recover upon all or some of the
claims asserted therein. As a necessary consequence, the jurisdiction of the court cannot be made to depend upon the
defenses set up in the answer or upon the motion to dismiss, for otherwise, the question of jurisdiction would almost
entirely depend upon the defendant. What determines the jurisdiction of the court is the nature of the action pleaded
as appearing from the allegations in the complaint. The averments in the complaint and the character of the relief
sought are the matters to be consulted.

In sum, this Court agrees with the CA that the nullification of the documents subject of Civil Case No. 02-105251 could
be achieved in an ordinary civil action, which in this specific case was instituted to protect the respondents from the
supposedly fraudulent acts of Ramon. In the event that the RTC will find grounds to grant the reliefs prayed for by the
respondents, the only consequence will be the reversion of the properties subject of the dispute to the estate of Antonio.
Civil Case No. 02-105251 was not instituted to conclusively resolve the issues relating to the administration, liquidation
and distribution of Antonio's estate, hence, not the proper subject of a special proceeding for the settlement of the estate
of a deceased person under Rules 73-91 of the Rules of Court.

The respondents' resort to an ordinary civil action before the RTC may not be strategically sound, because a settlement
proceeding should thereafter still follow, if their intent is to recover from Ramon the properties alleged to have been
illegally transferred in his name. Be that as it may, the RTC, in the exercise of its general jurisdiction, cannot be
restrained from taking cognizance of respondents' Complaint and Amended Complaint as the issues raised and the
prayers indicated therein are matters which need not be threshed out in a special proceeding.

WHEREFORE, the instant petition is DENIED. The petitioners' (a) Opposition to the respondents' Motion to Admit
Substitution of Party;[38] and (b) Manifestation[39]through counsel that they will no longer file a reply to the respondents'
Comment/Opposition to the instant petition are NOTED.

SO ORDERED.

BIENVENIDO L. REYES

Associate Justice

WE CONCUR:
 ANTONIO T. CARPIO

Associate Justice

ARTURO D. BRION JOSE P. PEREZ

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION

I attest that the conclusions in the above Resolution had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO

Associate Justice

Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA

Chief Justice

[1] Rollo, pp. 12-57.

[2] Penned by Associate Justice Isaias Dicdican, with Associate Justices Remedios A. Salazar-Fernando and Romeo F.
Barza, concurring; id. at 59-70.

[3] Id. at 72-73.

[4] Id. at 69.

[5] The copy of the Complaint filed with this Court was dated November 25, 2002 and stamped as received by the RTC
on December 3, 2002. However, the copy does not indicate if the Complaint was filed personally or by registered mail.

[6] Rollo, pp. 110-126.

[7] Art. 919. The following shall be sufficient causes for the disinheritance of children and descendants, legitimate as well
as illegitimate:

(1) When a child or descendant has been found guilty of an attempt against the life of the testator, his or her spouse,
descendants, or ascendants;

xxx
(6) Maltreatment of the testator by word or deed, by the child or descendant;

x x x.

[8] Rollo, p. 615.

[9] Id. at 616.

[10] Id. at 617-620.

[11] Id. at 122-123.

[12] Id. at 127-136.

[13] Id. at 137-143.

[14] Id. at 242-259.

[15] Id. at 191-229.

[16] Id. at 271-272.

[17] Id. at 327-339.

[18] Id. at 348-356.

[19] Id. at 414-419.

[20] Id. at 418-419.

[21] Id. at 59-70.

[22] Fort Bonifacio Development Corp. v. Hon. Edwin D. Sorongon, G.R. No. 176709, May 8, 2009, 587 SCRA 613, 619-
620, citing Caparros v. Court of Appeals, G.R. No. 56803, February 28, 1989, 170 SCRA 758, 761.

[23] Rollo, pp. 67-68.

[24] Id. at 72-73.

[25] Id. at 12-57.

[26] Citing Associate Justice Florenz Regalado, Remedial Law Compendium, Vol. 2, 9th Revised Ed., p. 11.

[27] Please see Comment/Opposition to the Petition for Certiorari, rollo, pp. 499-535. Lucina died on October 20, 2010,
hence, substituted by Eduardo Santos Balajadia who claims to be her son.

[28] Id. at 536-570. G.R. No. 175507 originated from the RTC Order (Id. at 632) issued on November 22, 2002 dismissing
Civil Case No. 02-103319 without prejudice. On the other hand, the petition now under this Court's consideration
originated from Civil Case No. 02-105251.

[29] Id. at 571-612. Although G.R. No. 183840 involves the same parties, it originated from the RTC Omnibus Order
issued on July 30, 2004 denying the petitioners' first motion to dismiss. The RTC Order issued on March 15, 2007 denying
the petitioners' second motion to dismiss is the origin of the instant petition now under this Court's consideration.

[30] 336 Phil 735, 740 (1997).

[31] Citing Tijam, et al. v. Sibonghanoy, et al., 131 Phil 556 (1968), Melendres, Jr. v. COMELEC, 377 Phil 275
(1999), Antiporda v. Garchitorena, 378 Phil 1166, 1174 (1999).

[32] Natcher v. Court of Appeals, et al., 418 Phil 669, 677 (2001).
[33] Rules of Court, Rule 1, Section 3.

[34] Reyes v. Enriquez, G.R. No. 162956, April 10, 2008, 551 SCRA 86, 92.

[35] Supra note 8.

[36] Supra note 9.

[37] G.R. No. 180394, September 29, 2008, 567 SCRA 101, 116, citing Serdoncillo v. Spouses Benolirao, 358 Phil. 83, 94-
95 (1998).

[38] Rollo, pp. 670-675.

[39] Id. at 676-680.

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Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 146089 December 13, 2001

VIRGINIA GOCHAN, LOUISE GOCHAN, LAPU-LAPU REAL ESTATE CORPORATION, FELIX GOCHAN AND SONS REALTY
CORPORATION, MACTAN REALTY DEVELOPMENT CORPORATION, petitioners,

vs.

MERCEDES GOCHAN, ALFREDO GOCHAN, ANGELINA GOCHAN-HERNAEZ, MA. MERCED GOCHAN GOROSPE, CRISPO
GOCHAN, JR., and MARLON GOCHAN, respondents.
YNARES-SANTIAGO, J.:

This is a petition for review seeking to set aside the decision of the Court of Appeals dated September 10, 1999 in CA-
G.R. SP No. 49084,1 as well as its Resolution2 dated November 22, 2000, denying the Motion for Reconsideration.

Respondents were stockholders of the Felix Gochan and Sons Realty Corporation and the Mactan Realty Development
Corporation. Sometime in 1996, respondents offered to sell their shares in the two corporations to the individual
petitioners, the heirs of the late Ambassador Esteban Gochan, for and in consideration of the sum of P200,000,000:00.
Petitioners accepted and paid the said amount to respondents. Accordingly, respondents issued to petitioners the
necessary "Receipts."3 In addition, respondents executed their respective "Release, Waiver and Quitclaim,"4 wherein
.they undertook that they would not initiate any suit, action or complaint against petitioners for whatever reason or
purpose.

In turn, respondents, through Crispo Gochan, Jr., required individual petitioners to execute a "promissory note,"5
undertaking not to divulge the actual consideration they paid for the shares of stock. For this purpose, Crispo Gochan, Jr.
drafted a document entitled "promissory note" in his own handwriting and had the same signed by Felix Gochan, III,
Louise Gochan and Esteban Gochan, Jr.

Unbeknown to petitioners, Crispo Gochan, Jr. inserted in the "promissory note" a phrase that says, "Said amount is in
partial consideration of the sale."6

On April 3, 1998, respondents filed a complaint against petitioners for specific performance and damages with the
Regional Trial Court of Cebu City, Branch 11, docketed as Civil Case No. CEB-21854. Respondents alleged that sometime
in November 1996, petitioner Louise Gochan, on behalf of all the petitioners, offered to buy their shares of stock,
consisting of 254 shares in the Felix Gochan and Sons Realty Corporation and 1,624 shares of stock in the Mactan Realty
Development Corporation; and that they executed a Provisional Memorandum of Agreement, wherein they enumerated
the following as consideration for the sale:

1. Pesos: Two Hundred Million Pesos (P200M)

2. Two (2) hectares more or less of the fishpond in Gochan Compound, Mabolo, Lot 4F-2-B

3. Lot 2, Block 9 with an area of 999 square meters in Gochan Compound, Mabolo, Cebu

4. Three Thousand (3,000) square meters of Villas Magallanes in Mactan, Cebu

5. Lot 423 New Gem Building with an area of 605 square meters.7
Accordingly, respondents claimed that they are entitled to the conveyance of the aforementioned properties, in addition
to the amount of P200,000,000.00, which they acknowledge to have received from petitioners. Further, respondents
prayed for moral damages of P15,000,000.00, exemplary damages of P2,000,000.00, attorney's fees of P14,000,000.00,
and litigation expenses of P2,000,000.00.

Petitioners filed their answer, raising the following affirmative defenses: (a) lack of jurisdiction by the trial court for non-
payment of the correct docket fees; (b) unenforceability of the obligation to convey real properties due to lack of a
written memorandum thereof, pursuant to the Statute of Frauds; (c) extinguishment of the obligation by payment; (d)
waiver, abandonment and renunciation by respondent of all their claims against petitioners; and (e) non-joinder of
indispensable parties.

On August 7, 1998, petitioners filed with the trial court a motion for a preliminary hearing on the affirmative defenses.
In an Order dated August 11, 1998, the trial court denied the motion, ruling as follows:

As the grant of said motion lies in the discretion of the court under Section 6 of Rule 16 of the 1997 Rules of Civil
Procedure, this Court in the exercise of its discretion, hereby denies the said motion because the matters sought to be
preliminarily heard do not appear to be tenable. For one, the statute of frauds does not apply in this case because the
contract which is the subject matter of this case is already an executed contract. The statute of frauds applies only to
executory contracts. According to Dr. Arturo M. Tolentino, a leading authority in civil law, since the statute of frauds was
enacted for the purpose of preventing frauds, it should not be made the instrument to further them. Thus, where one
party has performed his obligation under a contract, equity would agree that all evidence should be admitted to prove
the alleged agreement (PNB vs. Philippine Vegetable Oil Company, 49 Phil. 897). For another, the contention of the
defendants that the claims of the plaintiffs are already extinguished by full payment thereof does not appear to be
indubitable because the plaintiffs denied under oath the due execution and genuineness of the receipts which are
attached as Annexes 1-A, 1-B and 1-C of defendants' answer. This issue therefore has to be determined on the basis of
preponderance of evidence to be adduced by both parties. Then, still for another, the contention that the complaint is
defective because it allegedly has failed to implead indispensable parties appears to be wanting in merit because the
parties to the memorandum of agreement adverted to in the complaint are all parties in this case. Then the matter of
payment of docketing and filing fees is not a fatal issue in this case because the record shows that the plaintiffs had paid
at least P165,000.00 plus in the form of filing and docketing fees. Finally, regarding exerting earnest efforts toward a
compromise by the plaintiffs, the defendants cannot say that there is an absence of an allegation to this effect in the
complaint because paragraph 11 of the complaint precisely states that "before filing this case, earnest efforts toward a
compromise have been made."

Petitioners' motion for reconsideration of the above Order was denied by the trial court on September 11, 1998.

Petitioners thus filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 49084. On
September 10, 1999, the Court of Appeals rendered the appealed decision dismissing the petition on the ground that
respondent court did not commit grave abuse of discretion, tantamount to lack or in excess of jurisdiction in denying the
motion to hear the affirmative defenses.8

Again, petitioners filed a motion for reconsideration, but the same was denied by the Court of Appeals in its assailed
Resolution of November 22, 2000.9
Petitioners, thus, filed the instant petition for review anchored on the following grounds:

I.

THE COURT OF APPEALS COMMITTED GRAVE AND PALPABLE ERROR IN FINDING THAT THE CORRECT DOCKET FEES HAVE
BEEN PAID.

II.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN RULING THAT THE PMOA WAS A PARTIALLY EXECUTED
CONTRACT AND HENCE NOT COVERED BY THE STATUTE OF FRAUDS.

III.

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DECIDING THAT THE CLAIMS OF PRIVATE RESPONDENTS HAVE
NOT BEEN EXTINGUISHED BY PAYMENT OR FULL SETTLEMENT DESPITE THE PRESENCE OF RECEIPTS SIGNED BY THE
PRIVATE RESPONDENTS SHOWING THE CONTRARY.

IV.

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN RESOLVING THAT FELIX GOCHAN III AND ESTEBAN GOCHAN, JR.
ARE NOT INDISPENSABLE PARTIES AND THEREFORE NEED NOT BE IMPLEADED AS PARTIES.10

Respondents filed their Comment,11 arguing, in fine, that petitioners are guilty of forum-shopping when they filed two
petitions for certiorari with the Court of Appeals; and that the Court of Appeals did not err in dismissing the petition for
certiorari.

The instant petition has merit.

The rule is well-settled that the court acquires jurisdiction over any case only upon the payment of the prescribed
docket fees. In the case of Sun Insurance Office, Ltd. (SIOL) v. Asuncion,12 this Court held that it is not simply the filing of
the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee that vests a trial court
with jurisdiction over the subject matter or nature of the action.
Respondents maintain that they paid the correct docket fees in the amount of P165,000.00 when they filed the
complaint with the trial court. Petitioners, on the other hand, contend that the complaint is in the nature of a real action
which affects title to real properties; hence, respondents should have alleged therein the value of the real properties
which shall be the basis for the assessment of the correct docket fees.

The Court of Appeals found that the complaint was one for specific performance and incapable of pecuniary estimation.
We do not agree.

It is necessary to determine the true nature of the complaint in order to resolve the issue of whether or not respondents
paid the correct amount of docket fees therefor. In this jurisdiction, the dictum adhered to is that the nature of an
action is determined by the allegations in the body of the pleading or complaint itself, rather than by its title or
heading.13 The caption of the complaint below was denominated as one for "specific performance and damages." The
relief sought, however, is the conveyance or transfer of real property, or ultimately, the execution of deeds of
conveyance in their favor of the real properties enumerated in the provisional memorandum of agreement. Under these
circumstances, the case below was actually a real action, affecting as it does title to or possession of real property.

In the case of Hernandez v. Rural Bank of Lucena,14 this Court held that a real action is one where the plaintiff seeks the
recovery of real property or, as indicated in section 2(a) of Rule 4 (now Section 1, Rule 4 of the 1997 Rules of Civil
Procedure), a real action is an action affecting title to or recovery of possession of real property.

It has also been held that where a complaint is entitled as one for specific performance but nonetheless prays for the
issuance of a deed of sale for a parcel of land, its primary objective and nature is one to recover the parcel of land itself
and, thus, is deemed a real action. In such a case, the action must be filed in the proper court where the property is
located:

In this Court, the appellant insists that her action is one for specific performance, and, therefore, personal and transitory
in nature.

This very issue was considered and decided by this Court in the case of Manuel B. Ruiz vs. J.M. Tuason & Co., Inc. et al.,
L-18692, promulgated 31 January 1963. There the Court, by unanimous vote of all the Justices, held as follows:

'This contention has no merit. Although appellant's complaint is entitled to be one for specific performance, yet the fact
that he asked that a deed of sale of a parcel of land situated in Quezon City be issued in his favor and that a transfer
certificate of title covering said parcel of land be issued to him shows that the primary objective and nature of the action
is to recover the parcel of land itself because to execute in favor of appellant the conveyance requested there is need to
make a finding that he is the owner of the land which in the last analysis resolves itself into an issue of ownership.
Hence, the action must be commenced in the province where the property is situated pursuant to Section 3, Rule 5, of
the Rules of Court, which provides that actions affecting title to or recovery of possession of real property shall be
commenced and tried in the province where the property or any part thereof lies."15
In the case at bar, therefore, the complaint filed with the trial court was in the nature of a real action, although
ostensibly denominated as one for specific performance. Consequently, the basis for determining the correct docket
fees shall be the assessed value of the property, or the estimated value thereof as alleged by the claimant. Rule 141,
Section 7, of the Rules of Court, as amended by A.M. No. 00-2-01-SC, provides:

Section 7. Clerks of Regional Trial Courts. x x x

(b) xxx xxx xxx

In a real action, the assessed value of the property, or if there is none, the estimated value thereof shall be alleged by
the claimant and shall be the basis in computing the fees.

We are not unmindful of our pronouncement in the case of Sun Insurance,16 to the effect that in case the filing of the
initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable prescriptive period. However, the liberal interpretation of the
rules relating to the payment of docket fees as applied in the case of Sun Insurance cannot apply to the instant case as
respondents have never demonstrated any willingness to abide by the rules and to pay the correct docket fees. Instead,
respondents have stubbornly insisted that the case they filed was one for specific performance and damages and that
they actually paid the correct docket fees therefor at the time of the filing of the complaint. Thus, it was stated in the
case of Sun Insurance:17

The principle in Manchester could very well be applied in the present case. The pattern and the intent to defraud the
government of the docket fee due it is obvious not only in the filing of the original complaint but also in the filing of the
second amended complaint.

However, in Manchester, petitioner did not pay any additional docket fee until the case was decided by this Court on
May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this Court held that the court a quo
did not acquire jurisdiction over the case and that the amended complaint could not have been admitted inasmuch as
the original complaint was null and void.

In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester, private
respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as required. The
promulgation of the decision in Manchester must have had that sobering influence on private respondent who thus paid
the additional docket fee as ordered by the respondent court. It triggered his change of stance by manifesting his
willingness to pay such additional docket fee as may be ordered.

Respondents accuse petitioners of forum-shopping when they filed two petitions before the Court of Appeals.
Petitioners, on the other hand, contend that there was no forum-shopping as there was no identity of issues or identity
of reliefs sought in the two petitions.
We agree with petitioners that they are not guilty of forum-shopping. The deplorable practice of forum-shopping is
resorted to by litigants who, for the purpose of obtaining the same relief, resort to two different fora to increase his or
her chances of obtaining a favorable judgment in either one. In the case of Golangco v. Court of Appeals,18 we laid
down the following test to determine whether there is forum-shopping:

Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation
caused the courts and the parties-litigant by a person who asks different courts and/or administrative agencies to rule
on the same or related causes and/or grant the same or substantially the same reliefs, in the process creating the
possibility of conflicting decisions being rendered by the different fora upon the same issues.

In sum, two different orders were questioned, two distinct causes of action and issues were raised, and two objectives
were sought; thus, forum shopping cannot be said to exist in the case at bar.

Likewise, we do not find that there is forum-shopping in the case at bar. The first petition, docketed as CA-G.R. SP. No.
49084, which is now the subject of the instant petition, involved the propriety of the affirmative defenses relied upon by
petitioners in Civil Case No. CEB-21854. The second petition, docketed as CA-G.R. SP No. 54985, raised the issue of
whether or not public respondent Judge Dicdican was guilty of manifest partiality warranting his inhibition from further
hearing Civil Case No. CEB-21854.

More importantly, the two petitions did not seek the same relief from the Court of Appeals. In CA-G.R. SP. No. 49084,
petitioners prayed, among others, for the annulment of the orders of the trial court denying their motion for preliminary
hearing on the affirmative defenses in Civil Case No. CEB-21854. No such reliefs are involved in the second petition,
where petitioners merely prayed for the issuance of an order enjoining public respondent Judge Dicdican from further
trying the case and to assign a new judge in his stead.

True, the trial court has the discretion to conduct a preliminary hearing on affirmative defenses. In the case at bar,
however, the trial court committed a grave abuse of its discretion when it denied the motion for preliminary hearing. As
we have discussed above, some of these defenses, which petitioners invoked as grounds for the dismissal of the action,
appeared to be indubitable, contrary to the pronouncement of the trial court. Indeed, the abuse of discretion it
committed amounted to an evasion of positive duty or virtual refusal to perform a duty enjoined by law, or to act at all
in contemplation of law,19 which would have warranted the extraordinary writ of certiorari. Hence, the Court of
Appeals erred when it dismissed the petition for certiorari filed by petitioners.

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. This case is REMANDED to the Regional Trial
Court of Cebu City, Branch 11, which is directed to forthwith conduct the preliminary hearing on the affirmative
defenses in Civil Case No. CEB-21854.

SO ORDERED.

Davide, Jr., C.J.;Kapunan, and Pardo, JJ., concur.

DISSENTING OPINION

DAVIDE, JR., C.J.:

I respectfully make of record my dissent to both drafts of the decision penned by Mme. Justice Consuelo Y. Santiago.

I. The first draft

The first draft (1) sets aside the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 49084 and the Orders
of the Regional Trial Court of Cebu City, Branch 11, in Civil Case No. CEB-21854; and (2) orders of the dismissal of said
civil case.

I seriously doubt the propriety of this action, even if it is principally based on the non-payment of the deficiency of the
docket fee. Sun Life Insurance Office Ltd. v. Asuncion (170 SCRA 274 [1989]) is not the final word on deficiency of docket
fees. Tacay v. Regional Trial Court of Tagum, Davao del Norte, (180 SCRA 433, 443 [1989]) further liberalized the rule.
Thus:

Two situations may arise. One is where the complaint or similar pleading sets out a claim purely for money or damages
and there is no precise statement of the amounts being claimed. In this event the rule is that the pleading will 'not be
accepted nor admitted, or shall otherwise be expunged from the record.' In other words, the complaint or pleading may
be dismissed, or the claims as to which the amounts are unspecified may be expunged, although as aforestated the
Court may, on motion, permit amendment of the complaint and payment of the fees provided the claim has not in the
meantime become time-barred. The other is where the pleading does specify the amount of every claim, but the fees
paid are insufficient; and here again, the rule now is that the court may allow a reasonable time for the payment of the
prescribed fees, or the balance thereof, and upon such payment, the defect is cured and the court may properly take
cognizance of the action, unless in the meantime prescription has set in and consequently barred the right of action.

Where the action involves real property and a related claim for damages as well, the legal fees shall be assessed on the
basis of both (a) the value of the property and (b) the total amount of related damages sought. The Court acquires
jurisdiction over the action if the filing of the initiatory pleading is accompanied by the payment of the requisite fees, or,
if the fees are not paid at the time of the filing of the pleading, as of the time of full payment of the fees within such
reasonable time as the court may grant, unless, of course, prescription has set in in the meantime. But where as in
the case at bar the fees prescribed for an action involving real property have been paid, but the amounts of certain of
the related damages (actual, moral and nominal) being demanded are unspecified, the action may not be dismissed. The
Court undeniably has jurisdiction over the action involving the real property, acquiring it upon the filing of the complaint
or similar pleading and payment of the prescribed fee. And it is not divested of that authority by the circumstance that it
may not have acquired jurisdiction over the accompanying claims for damages because of lack of specification thereof.
What should be done is simply to expunge those claims for damages as to which no amounts are stated, which is what
the respondent Courts did, or allow, on motion, a reasonable time far the amendment of the complaints so as to allege
the precise amount of each item of damages and accept payment of the requisite fees therefor within the relevant
prescriptive period.

Even if we would still cling to Sun Life, the rule therein laid down would still be applicable to this case, contrary to the
assertion in the ponencia in question. The evil contemplated in Manchester case which prompted the pronouncement
therein does not exist in the instant case.

Verily, there is good faith on the part of the private respondents in insisting on what their cause of action is. Even the
Court of Appeals sustained their position in this issue.

Therefor, private respondents should only be required to pay the deficiency in docket fees.

II. The second draft

The second draft ponencia declares the trial court and the Court of Appeals as having acted with grave abuse of
discretion in denying the motion for a preliminary hearing on the affirmative defenses. The order of the trial court
denying the motion is an interlocutory order. There can be no appeal from such order of denial. A special civil action of
certiorari under Rule 65 of the Rules of Court may be resorted to, but there must be a clear showing that the court had
acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack of or in excess of abuse of
discretion means arbitrary and jurisdiction. Grave despotic action.

I submit that the trial court did not commit any grave abuse of discretion in denying the motion for a preliminary hearing
on the affirmative defenses on the ground that such defenses do not appear to be indubitable. The ponencia itself
admits that only some of the defenses appeared indubitable. The last paragraph of page 10 of the latest draft of the
ponencia reads:

True, the trial court has the discretion to conduct a preliminary hearing on affirmative defenses. In the case at bar,
however, the trial court committed a grave abuse of its discretion when it denied the motion for preliminary hearing. As
we have discussed above, some of these defenses, which petitioners invoked as grounds for the dismissal of the action,
appeared to be indubitable, contrary to the pronouncement of the trial court. Indeed, the abuse of discretion it
committed amounted to an evasion of positive duty or virtual refusal to perform a duty enjoined by law, or to act at all
in contemplation of law, which would have warranted the extraordinary writ of certiorari. Hence, the Court of Appeals
erred when it dismissed the petition for certiorari filed by petitioners. (Underscoring supplied for supplied)

Accordingly, since the orders of the trial court are not tainted with grave abuse of discretion, the Court of Appeals
committed no error in dismissing the petition for certiorari against said orders.
I then vote to deny due course to the petition.

Footnotes

1 Rollo, pp. 56-65; penned by Associate Justice Artemon D. Luna; concurred in by Associate Justices Conchita Carpio
Morales and Bernardo P. Abesamis.

2 Ibid., pp. 67-69; penned by Associate Justice Conchita Carpio Morales; concurred in by Associate Justices Bernardo P.
Abesamis and Jose L. Sabio, Jr.

3 Petition, Annexes "C", "D" and "E", Rollo pp. 70-72.

4 Ibid., Annexes "F", "G", "H", "I", "J" and "K", Rollo pp. 73-84.

5 Id., Annex "L", Rollo, p. 85.

6 Id., Annex "M", Rollo, p. 86.

7 Id., Annex "N", Rollo, pp. 87-88.

8 Op. cit., note 1.

9 Op. cit., note 2.

10 Rollo, p. 25.

11 Ibid., pp. 123-143.

12 170 SCRA 274 (1989).

13 David v. Malay, 318 SCRA 711 (1999).

14 81 SCRA 75 (1978).

15 Torres v. J.M. Tuason & Co., Inc., 12 SCRA 174 (1964).

16 Supra.

17 Ibid.

18 283 SCRA 493 (1997).

19 People v. Chavez, G.R. No. 140690, June 19, 2001.

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Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-29791 January 10, 1978

FRANCISCO S. HERNANDEZ and JOSEFA U. ATIENZA, plaintiffs-appellees,

vs.

RURAL BANK OF LUCENA, INC., CENTRAL BANK OF THE PHILIPPINES, in its capacity as Liquidator of Rural Bank of Lucena,
and JOSE S. MARTINEZ in his capacity as Receiver of Rural Bank of Lucena, defendants-appellants.

Ciceron B. Angeles & Fabian S. Lombos for appellants.

Tomas Yumol and Felipe Dimaculangan for appellees.

AQUINO, J.:

This case is about the propriety of a separate action to compel a distress rural bank. which is under Judicial liquidation,
to accept a check in payment of a mortgage debt. The fact are as follows:

On March 21, 1961 the spouses Francisco S. Hernandez and Josefa U. Atienza obtained from the Rural Bank of Lucena,
Inc. a loan of P6,000 which was payable on March 21, 1962. The loan was cured by a mortgage on their two lots situated
in Cubao, Quezon City with a total area of 600 square meters. The interest for one year was paid in advance.

About three months after that loan was obtained, the Lucena Bank became a distress bank. In a letter dated June 6,
1961 the Acting Governor of the Central Bank apprised the stockholders of the Lucena bank that the Monetary Board in
its Resolution No. 928, which was approved on June 13, 1961 allegedly after hearing the Lucena bank. found that its
officers, directors and employees had committed certain anomalies or had resorted to unsound and unsafe banking
practices which were prejudicial to the government, its depositors and creditors.

The Monetary Board advised the stockholders to reorganize the Lucena bank by electing a new board of directors and
directed that bank (a) not to grant new loans or renewals; (b) not to accept deposits from new depositors; (c) to service
only the existing deposit accounts and (d) not to issue drafts or make any disbursements without the prior approval of
Central Bank examiners.

The Monetary Board gave the warning that, if its directives were not obeyed, the Central Bank. would take over the
management of the Lucena bank.

The Central Bank Governor informed the Lucena bank that the chief examiner of the department of rural banks would
oversee the operations of the Lucena bank.
That letter of the Central Bank Governor was construed as a directive to the Lucena bank to suspend operations. The
Manila times in its issue of June 21, 1961 carried a news story with the heading "Bank told to suspend operations". The
story was accompanied by a picture of depositors who jammed the lobby of the bank trying to withdraw their money.

Instead of bowing to the will of the Monetary Board, the Lucena bank and its board of directors filed with the Court of
First Instance of Manila a complaint dated June 21, 1961 seeking to restrain the implementation of Resolution No. 928
(Civil Case No. 47345).

Before the expiration of the one-year term of the loan, or on August 22, 1961, Hernandez went to the Lucena bank and
offered to pay the loan by means of a check for P6,000 dated August 8, 1961 which was drawn against the bank by a
depositor, the San Pablo Colleges, and which was payable to Fernandez As the bank's executive vice president was not
available, the payment was not consummated.

At the time that the check was issued, the San Pablo Colleges, had a deposit in the Lucena bank amounting to
P11,890.16 (27 tsn April 25, 1966). Instead of withdrawing P6,000 from that deposit, the San Pablo Colleges chose to
issue a check for that amount w Hernandez. It is not clear whether in August, 1961 the San Pablo Colleges could make a
withdrawal from its deposit in the Lucena bank.

On the following day, August 23, Hernandez sent to the bank by registered mail a photostat of the check and a letter
inquiring whether the bank would honor the check and when he should go personally to the bank for that purpose. That
letter was received by the bank on August 29.

On August 30, the executive vice-president wrote to Hernandez and informed him that the check could not be honored
for the time being because of adverse events that had disrupted the bank's operations. What the vice-president meant
was that by reason of the letter of the Central Bank Governor dated June 16. 1961 the operations of the Lucena bank
were suspended (6 tsn August 15, 1966).

The vice-president explained that because there was a run the bank its assets were exhausted, and so the check sent by
Hernandez, which check was drawn against the Lucena bank, could not be accepted (16, 21-24 tsn August 15, 1966).

The vice-president said that when Hernandez presented the check, the Lucena bank was no longer in a position to honor
withdrawals and that had Hernandez paid cash, his payment would have been accepted. To honor the check would have
been tantamount to allowing a depositor (San Pablo Colleges) to make a withdrawal but the Lucena bank could not
entertain withdrawals without the consent of the Central Bank examiners (26-28 tsn). Payment by check was a
disbursement (31 tsn).

Apparently, the vice-president did not take the trouble of asking the Central Bank examiners whether the payment by
check made by Hernandez could be accepted. Hernandez himself who should have known that the bank was a
distressed bank which had suspended operations and which was under the supervision of Central Bank examiners, did
not bother to take up his problem with the said examiners.

Hernandez, in his letter of October 18, 1961, again asked the bank when he could deliver the check. The executive vice-
president, in his reply of October 24, told Hernandez that the bank could not yet honor the check because it had not
resumed its banking operations; that it was awaiting the outcome of a case filed by the bank against the Central Bank;
that it might reopen in January, 1962, and that, anyway, the loan would not be due until March 21, 1962.

Hernandez sent another letter dated February 1, 1962. Finally, he enclosed the original check (duly endorsed) with his
letter to the bank dated March 7, 1962, which was sent by registered mail and special delivery. That letter of March 7,
together with the check, was returned to Hernandez because the bank's manager was allegedly in Manila. Undeterred,
Hernandez again mailed the check to the bank on April 25, with the request that his mortgage be cancelled.

In the meantime, the Monetary Board had decided to liquidate the Lucena Bank. The Governor of the Central Bank in a
letter dated February 8, 1962 enjoined the Lucena bank from transacting business and advised it to turn over its assets,
documents and records to the chief bank examiner. The bank building was sealed.

The following notice was posted at the entrance of the building:

This bank is temporarily closed pending final decision of the courts as to its status. Payments of loans would be
accepted; meanwhile, no payments of withdrawals against deposits can be made. Please transact business with the
Central Bank's representatives only.

To head off the liquidation, the Lucena Bank filed with the Court of First Instance of Lucena City a complaint dated
February 12, 1962, praying that the Central Bank be enjoined from liquidating the said bank. On February 14, the court
issued an ex parte preliminary injunction which it dissolved ten days later (civil Case No. 6471; Rural Bank of Lucena, Inc.
vs. Arca, L-21146, September 20, 1965, 15 SCRA 66).

On February 14, 1962, the Manila court rendered a decision in Civil Case No. 47345, restraining the enforcement of the
Monetary Board resolution, which required the Lucena bank to undertake a reorganization and to curtail its operations.
The Central Bank appealed. (This Court reversed that decision and dismissed the complaint for injunction. Rural Bank of
Lucena, Inc. vs. Central Bank, L-19621, November 29, 1969, 30 SCRA 628).

To implement the resolution of the Monetary Board for the Liquidation of the Lucena bank, the Central Bank, pursuant
to section 29 of its charter and on the assumption that the Lucena bank was insolvent, filed with the Court of first
Instance of Manila a petition dated March 27, 1962 for assistance and supervision in the liquidation of the Lucena bank
(Civil Case No. 50019).
Acting on that petition, the Court of First Instance of Manila issued an order dated march 28, 1963, directing the Lucena
bank to turn over its assets to the Central Bank's authorized representative.

The Monetary Board in its Resolution No. 426 dated April 2, 1963 designated the Superintendent of Banks or his duly
authorized representative to take charge of the assets of the Lucena bank.

The Board in its resolution of November 27, 1963 ordered the Superintendent of Banks to convert the assets of the
Lucena bank to money. The Lucena bank, by means of certiorari sought to annul the liquidation proceeding . This Court
denied its petition (Rural Bank of Lucena, Inc. vs. Arca, L-21146, September 20, 1965, 15 SCRA 66).

Among the accounts receivable of the Lucena bank inventoried by the Central Bank's representative was the account of
Hernandez- In a letter dated October 29, 1963 Hernandez informed the Central Bank that he had sent to the Lucena
bank on April 25, 1962 the chock for P6,000. He again requested that his mortgage be cancelled.

The Associate Superintendent of Banks in his answer dated December 9, 1963 returned the chock to Hernandez and
informed him that, according to the Lucena bank's executive vice-president, the check could not be applied to the
payment of Hernandez' loan because the bank was already closed when he received the check. Moreover, the chock was
drawn against the current deposits of the San Pablo Colleges in the Lucena bank which was in the process of liquidation.
Hernandez was advised to settle his account by paying cash or by means of a chock drawn against a bank other than the
Lucena bank.

Disregarding that suggestion, Hernandez announced to the Associate Superintendent of Banks in his letter of December
16, 1963 that he was going to deposit the said check in the court of First Instance of Lipa City on or before December 26,
1963.

Instead of filing a consignation complaint, Hernandez enclosed the check with his letter dated January 2, 1964 to the
clerk of court of the Court of First Instance at Lipa City. That letter was received in court on January 6, 1964. Hernandez
wrote a letter dated January 11, 1964 informing the Associate Superintendent of Banks of the judicial deposit of the
check. Copies of that letter were furnished the Lucena bank and the San Pablo Colleges.

It was only on October 12, 1964 when Hernandez and his wife filed an action in the Court of First Instance at Lipa City to
compel the Rural Bank of Lucena, Inc., the Central Bank as liquidator, and Jose S. Martinez as receiver, to accept the
check and to execute the cancellation of the real estate mortgage. The Hernandez spouses also asked for moral damages
in the amount of P10.000 and attorney's fees of P3,000 (Civil Case No. 1615).

On October 20, 1964 the Central Bank filed a motion to dismiss. It contended that there was improper venue because,
as the action allegedly involved title to real property, it should have been instituted in Quezon City where the
encumbered lots are situated. It Mother contended that since the Lucena bank is under liquidation and is in the hands of
a receiver, its properties and assets are in custodia legis and may, therefore, be reached only by motion or petition in
Civil Case No. 50019 of the Court of First Instance of Manila. The motion was denied.
To complete the facts, it should be stated that the counsel for the Lucena bank on January 30, 1967 offered to
compromise the case by stipulating that the Central Bank would apply the check in question to the mortgage debt of
Hernandez if the balance of the deposit of the San Pablo Colleges would be enough to cover the amount of the check of
P6,000 and that, by virtue of that compromise, the complaint and counterclaim would be dismissed.

That conditional and equivocal compromise offer fizzled out, because the lawyers of Hernandez and the Central Bank did
not assent to it.

After trial, the lower court rendered an amended decision dated October 31, 1967, ordering the Lucena Bank or the
Central Bank, as liquidator, to accept the honor the check, to cancel the mortage, and to pay Hernandez spouses
(P25,000 as moral damages (not P10,000 as prayed for the complaint) plus P1,000 as attorney's fees.

The Lucena bank, the Central Bank and its employee, the receiver, appealed to this Court.

The Central Bank contends that the trial court erred (1) in not holding that the venue was improperly laid; (2) in not
holding that it had no jurisdiction because the Hernandez spouses should have ventilated their claim in the liquidation
proceeding pending in the Court of First Instance of Manila. instead of filing a separate action in the Court of First
Instance at Lipa City; (3) in not holding that there was no valid consignation, (4) in awarding moral damages and
attorney's fees, and (5) in ordering execution pending appeal in spite of the tact that the assets of the Lucena bank are in
custodia legis or in the custody of the liquidation court and the receiver appointed by it.

On the issue of venue, defendants-appellants contend that the action of the Hernandez spouses to compel them to
honor the check in question and to cancel the mortgage on their two lots is a real action affecting title to real property
which should have been filed in the Court of First Instance of Rizal at Quezon City where the mortgaged lots are situated.

Section 2(a), Rule 4 of the Rules of Court provides that "actions affecting title to, or for recovery of possession, or for
partition or condemnation of, or foreclosure of mortgage on, real property, shall be commenced and tried in the
province where the property or any part thereof lies".

Note that the rule mentions an action for foreclosure of a real estate mortgage but does not mention an action for the
cancellation of a real mortgage. In the instant case, the action is primarily to compel the mortgagee to accept payment
of the mortgage debt and to release the mortgage.

That action, which is not expressive included in the enumeration found in section 2(a) of Rule 4, does not involve the
title to the mortgage lots. It is a personal action and not a real action. The mortgagee has, not foreclosure the mortgage,
Plaintiffs' title is not in question. They are in possession of the mortgaged lots.
Hence, the venue of plaintiffs' personal action is the place where the defendant or any of the defendants resides or may
be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff (Sec. 2[b], Rule 4).

The plaintiffs in their brief confound a real action with an action in rem and a personal action with an action in
personam. They argue that their action is not an action in rem and, therefore, it could be brought in a place other than
the place where the mortgaged lots are located.

A real action is not the same as an action in rem and a personal action is not the same as an action in personam.

In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery
of damages. In a real action, the plaintiff seeks the recovery of real property. or, as indicated in section 2(a) of Rule 4, a
real action Is an action affecting tithe to real property or for the recovery of possession. or for partition or condemnation
of, or foreclosure of a mortage on, real property.

An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an
action against the thing itself, instead of against the person (1 C. J. S. 943-4), Hence, a real action may at the same time
be an action in personam and not necessary an action in rem.

In this case, the plaintiffs alleged in their complaint that they were residents of San Juan, Batangas, which in their brief
(They characterize as their legal residence and which appears to be their domicile of origin. On the other hand, it is
indicated in the promissory note and mortgage signed by them and in the Torrens title covering the mortgaged lots that
their residence is at 11 Chicago Street, Cubao, Quezon City, which apparently is the place where the said lots are
located, The plaintiffs did not testify during the trial. So, they have no testimony in the records as to their actual
residence.

We hold that the trial court should have dismissed the action because the venue thereof was improperly laid in
Batangas. The term "resides" in section 2[b] of Rule 4 refers to the place of actual residence or domicile.)

San Juan, Batangas might be the place where the plaintiffs have their domicile or legal residence but there is no question
that 11 Chicago Street, Cubao, Quezon City is their place of abode or the place where they actually reside. So, the action
in this case, which is a personal action to compel the defendants to honor the check in question and to Cancel the
mortgage, should have been filed in Quezon City if the plaintiffs intended to use their residence as the basis for their
choice of venue.

Thus, it was held that venue was improperly laid in a case where plaintiff Jose Coloma filed a complaint in the Court of
First Instance of Ilocos Norte, because he was allegedly a resident of San Nicolas, Ilocos Norte, where he was born and
reared, but his actual residence was at 57 K-6th Kamias, 486 Barangka Drive, Mandaluyong, Rizal (Koh vs. Court of
Appeals, L-40428, December 17, 1975; 70 SCRA 298).
In Gracia Fule vs. Court of Appeals, L-404502, November 29, 1976, 74 SCRA 189, it was held that an intestate
proceedings 9 for the settlement of the estate of the deceased Amado G. Garcia was improperly filed in the Court of
First Instance of Laguna. The deceased was allegedly domiciled in Calamba, Laguna. He was a delegate of the first district
of Laguna to the constitutional convention. However, at the time of his death he was actually a resident of Quezon City.
Hence. the proper venue of the intestate proceeding was Quezon City.

In the foregoing discussion. it is assumed that the plaintiff could bring a separate action to compel the defendants honor
the check in question in spite of the fact that the Lucena bank is under liquidation in Civil Case No. 50019 of the Court of
First Instance of Manila.

The Central Bank contends that such a separate action was not maintainable and that the Hernandez spouse should
have ventilated in the liquidation proceeding their claim that they had already paid their mortgage debt by means of the
check issued by the San Pablo Colleges and that their mortgage should be cancelled.

The Central Bank points out that the redemption action the Hernandez spouses would ultimately affect the funds and
property of the Lucena Bank. Hence, the liquidation court is the competent tribunal to pass upon the issue as to whether
the Hernandez spouses could validly pay their mortage debt by means of the check of the San Pablo Colleges.

On the other hand, the Hernandez spouses argue that their action in the Court of First Instance at Lipa City "deals with a
sum of money which is still not in the possession, custody, and administration" of the Central Bank and the receiver; that
their action had "nothing to do with the funds and property" held by the receiver; that the Lucena bank had not lost its
juridical personality after it was placed under liquidation, and that the issue as to whether the Lucena bank should have
accepted the chock in question was "not in anyway connected with the causes and grounds under which the liquidation
proceedings were instituted nor with the administration of the property and funds under liquidation"

Those contentions of the Hernandez spouse are untenable. The trial court did not rule squarely on the Jurisdictional
issue raised by the Central Bank and the receiver

We hold that the liquidation court or the Manila court has exclusive jurisdiction to entertain the claim of the Hernandez
spouses that their mortgage obligation had already been extinguished by means of their tender of the check issued by
the San Pablo Colleges.

At the time the Hernandez spouses filed in 1964 their consignation complaint the Lucena bank was already under
liquidation. The Manila court in its order of March 28,1963 had ordered the officers of the Lucena bank to turn over to
the Central Bank or to the receiver, the Superintendent of Banks, all of its assets, properties and papers. Among the
assets turned over to the receiver was the outstanding or unpaid account of the Hernandez spouses which appears in
the inventory as: "393. Hernandez, Francisco St., 11 Chicago St., Cubao, Q.C. TCT-34262 3/21/61, P6,000.00" (Exh. 4-
CB).
And among the papers or obligations turned over to the receiver was Ledger No. 056 evidencing the deposit of the San
Pablo Colleges in the Lucena bank in the sum of P11,890.16. against which the check for P6,000 was drawn. It was that
check which the Hernandez spouses had issued to pay the mortgage debt to the Lucena bank.

Under the section 29 of the Central Bank Act, republic Act No. 265, when the Monetary Board, upon information
submitted by the Superintendent of the Bank, finds a bank to be insolvent, it shall be forbid the bank to do the business
and it shall take care of its assets according to law.

In that case, if the Monetary Board finds out that the insolvent bank cannot resume business with safety to its creditors,
it shall through the Solicitor General, file a petition in the Court of First Instance, praying for the assistance and
supervision of the court in the liquidation of the bank's affairs. Thereafter, the Superintendent of Banks, upon order of
the Monetary Board and under the supervision of the court, shall convert to money the bank's assets. "Subido es que
uno de los deberes primordiales de un depositario es hacerse cargo immediatemente de todol el activo y pasivo de un
banco" (Luy Lam & Co. vs. Mercantile Bank of China, 71 Phil. 573, 576).

The fact the insolvent bank is forbidden to do business, that its assets are turn over to the Superintendent of Banks, as a
receiver, for conversation into cash, and that its liquidation is undertaken with judicial intervention means that, as far as
lawful and practicable, all claims against the insolvent bank and that the liquidation court should be filed in the
liquidation proceeding.

The judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank. The lawmaking body
contemplated that for convenience only one court, if possible, should pass upon the claims against the insolvent bank
and that the liquidation court should assist the Superintended of Banks and control his operations.

In the course of the liquidation, contentious cases might arise wherein a full-dress hearing would be required and legal
issues would have to be resolved. Hence, it would be necessary in justice to all concerned that a Court of First Instance
should assist and supervise the liquidation and should act umpire and arbitrator in the allowance and disallowance of
claims.

The judicial liquidation is a pragmatic arrangement designed to establish due process and orderliness in the liquidation
of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness.

Thus, in the liquidation before the war of the insolvement Mercantile Bank of china, various claims were adjudicated by
the liquidation Court, which was the court of First Instance of Manila, pursuant to section 1639 of the Revised
Administrative Code, from which section 29 pf the Central Bank Law was taken. (See In re Liquidation of Mercantile Bank
of China: Tan Tiong Tick vs. American Apothecaries Co., 65 Phil. 414; Pacific Coast Biscuit Co. vs Chinese Grocers
Association, 65 Phil. 375; Fletcher American National Bank vs. Ang cheng Lian, 65 Phil. 385; Pacific Commercial Co. vs.
American Apothecaries Co., 65 Phil. 429; Gopoco Grocery vs. Pacific Coast Biscuit co., 65 Phil. 443; Chinese Grocers'
Association vs. American Apothecaries Co., 65 Phil. 395; and Yu Ping Kun, 65 Phil. 410).
There is a ruling that, although the taking over of a bank by state officials for liquidation does not dissolve the bank, a
court has no jurisdiction (after such takeover) to entertain an action or to render a judgment against the bank (9 C.J.S.
852, note 38 citing Bushnell vs. F.W. Woolworth co., 241 Pac. 738. 112 Okl. 297; State vs. Quigley, 220 Pac. 918, 93 Okl.
296).

It has been held that an insolvent bank, which was under the control of the finance commissioner for liquidation, was
without power or capacity to sue or be sued, prosecute or defend or otherwise function except through the finance
commissioner or liquidator (Wauer vs. Bank of Pendleton, 65 S.W. 2nd 167 228 Mo. App. 1150).

Suits brought against a bank after the issuance of a notice that the finance commissioner has taken possession of the
bank should be dismissed or are barred for want of jurisdiction (Rouse vs. Bank of Darlington, 41 S.W. 2nd 159; Bartlett
vs. Mc Callister, 289 S.W. 814, 316 Mo. 129).

This Court has already held that after a savings bank was declared insolvent by the Monetary Board, a depositor could
not bring a separate action against it for the recovery of his time deposit. His remedy is to intervene in the liquidation
proceeding (Central Bank of the Philippines vs. Morfe, L-38427, March 12, 1975, 63 SCRA 144). *

In the instant case, the Hernandez spouses, after having become cognizant of the fact that the Lucena bank was under
liquidation, chose to file a separate action against that bank for redemption and damages. Although residents of Cubao,
Quezon City, where the mortgage lots are located and which was the address used by them in dealing with the Lucena
bank, they chose Lipa City as the venue of their action.

They ignored the liquidation court. Evidently, one of their objectives was to obtain against the Lucena bank a judgment
for moral damages which they surmised would not be granted by the Manila liquidation court. They attained more than
what they had originally desired because, instead of the moral damages of P10,00 indicated in their complaint, the trial
court generously awarded them P25,000.

Not only that. The trial court granted execution pending appeal although it was aware that eventually the claim of the
Hernandez spouses would have to be submitted to the liquidation court for allowance. The sheriff could not enforce the
writ of execution because the Lucena bank was under liquidation (p. 92, Rollo). Hence, the Hernandez spouses had to
file a claim with the liquidation court. That court has been pending since September, 1968.

Thus, much time, money and effort would have been saved if at the outset the Hernandez spouse filed their claim in the
liquidation court.

WHEREFORE, the trial court judgment is reversed and set aside. The case is dismissed without prejudice to the right of
the Hernandez spouses to take up with the liquidation court the settlement of their mortgage obligation. Costs against
the plaintiffs-appellees.
SO ORDERED.

Fernando, (Chairman), Barredo, Antonio and Concepcion, Jr., JJ., concur

Santos, J., is on leave.

Footnotes

* On the other hand, the receiver of an insolvent bank under judicial liquidation may in proper cases file separate
actions to recover the assets of the bank, such as foreclosure of mortgage or collection cases (De Jesus vs. go Quiolay, 65
Phil, 476; Garcia vs. Khu Yek Chiong, 65 Phil. 466; Mercantile Bank of China vs. Go Hiap, 65 Phil. 469; Garcia vs. Ty Camco
Sobrino, 67 Phil. 384; De Jesus vs. Cuan Bee Co., Inc 72 Phil. 464).

The Lawphil Project - Arellano Law Foundation

FIRST DIVISION

[G.R. No. 129184. February 28, 2001]

EMERGENCY LOAN PAWNSHOP INCORPORATED and DANILO R. NAPALA, petitioners, vs. THE COURT OF APPEALS (Tenth
Division) and TRADERS ROYAL BANK, respondents.

DECISION

PARDO, J.:

May an appeal be taken from a decision of the Regional Trial Court denying a motion to dismiss the complaint on the
ground of improper venue? If not, will certiorari lie?
The case before the Court is a petition for review on certiorari assailing the decision of the Court of Appeals,[1] granting
respondents petition for certiorari and dismissing the complaint below on the ground of improper venue.

On January 18, 1996, Traders Royal Bank (TRB for brevity) sold in favor of petitioner Emergency Loan Pawnshop
Incorporated (ELPI for brevity) a parcel of land located at Km. 3 Asin, Baguio City for Five Hundred Thousand Pesos
(P500,000.00).[2]

At the time of the sale, TRB misrepresented to ELPI that the subject property was a vacant residential lot valued at
P600.00 to P800.00 per square meters, with a usable land area of 1,143.75 square meters (approximately 75% of the
land area of 1,525 sq.m.) without any illegal occupants or squatters, when it truth the subject property was dominantly a
public road with only 140 square meters usable area.

ELPI, after having spent to fully ascertain the actual condition of the property, demanded from TRB the rescission and
cancellation of the sale of the property. TRB refused, hence, on April 16, 1996, ELPI filed with the Regional Trial Court,
Davao, Branch 17, a complaint for annulment of sale and damages against TRB.[3]

On August 27, 1996, TRB filed a Motion to Dismiss[4] the complaint on the ground of improper venue. On September 18,
1996 the trial court denied the motion to dismiss.[5] On October 21, 1996, TRB filed a motion for reconsideration.[6] On
November 14, 1996, the trial court denied the motion.[7]

On January 15, 1997, TRB elevated the case to the Court of Appeals by petition for certiorari and prohibition with
preliminary injunction or temporary restraining order, contending that the trial court committed a grave abuse of
discretion in denying its motion to dismiss the complaint on the ground of improper venue.[8]

After due proceedings, on March 11, 1997, the Court of Appeals promulgated its decision, the dispositive portion of
which reads:

WHEREFORE, finding merit in the petition, the Orders dated September 18,1996 and November 14, 1996 are hereby
ANNULED and SET ASIDE and Civil Case No. 24,317-96 is hereby DISMISSED on ground of improper venue.[9]

Hence, this petition.[10]

Petitioners seek to set aside the decision of the Court of Appeals alleging that:

1. The Court of Appeals erred in entertaining the petition for certiorari and prohibition, for lack of jurisdiction;
2. The Court of Appeals erred in ruling that the Regional Trial Court erred in not dismissing the complaint for improper
venue.[11]

According to petitioners, the determination of whether the venue of an action was improperly laid was a question of
law, thus, the Court of Appeals had no jurisdiction to entertain the petition for certiorari and prohibition, which involves
pure questions of law.

Petitioners further alleged that an order denying a motion to dismiss is interlocutory in nature that can not be the
subject of an appeal and can not be even reviewed by a special civil action for certiorari.

We find the petition not meritorious.

The general rule is that the denial of a motion to dismiss a complaint is an interlocutory order and, hence, cannot be
appealed or questioned via a special civil action of certiorari until a final judgment on the merits of the case is
rendered.[12]

The remedy of the aggrieved party is to file an answer to the complaint and to interpose as defenses the objections
raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate the entire case by appeal
in due course. However, the rule is not ironclad. Under certain situations, recourse to certiorari or mandamus is
considered appropriate, that is, (a) when the trial court issued the order without or in excess of jurisdiction; (b) where
there is patent grave abuse of discretion by the trial court; or, (c) appeal would not prove to be a speedy and adequate
remedy as when an appeal would not promptly relieve a defendant from the injurious effects of the patently mistaken
order maintaining the plaintiffs baseless action and compelling the defendant needlessly to go through a protracted trial
and clogging the court dockets by another futile case."[13]

In the case at bar, we agree with the Court of Appeals that the trial court erred grievously amounting to ousting itself of
jurisdiction. The motion of respondent TRB was well founded because venue was clearly improperly laid. The action in
the Regional Trial Court was for annulment of sale involving a parcel of land located at Km. 3 Asin Road, Baguio City. The
venue of such action is unquestionably within the territorial jurisdiction of the proper court where the real property or
part thereof lies.[14] An action affecting title to real property, or for recovery of, or foreclosure of mortgage on real
property, shall be commenced and tried in the proper court having jurisdiction over the area where the real property or
any part thereof lies.[15]

Hence, the case at bar clearly falls within the exceptions to the rule. The Regional Trial Court has committed a palpable
and grievous error amounting to lack or excess of jurisdiction in denying the motion to dismiss the complaint on the
ground of improper venue.

WHEREFORE, the Court denies the petition and affirms the decision of the Court of Appeals in CA-G. R. SP No. 43095, in
toto.
No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.

[1] In CA-G. R. SP No. 43095, promulgated on March 11, 1997, Alio-Hormachuelos, J., ponente, Gonzaga-Reyes and
Mabutas, Jr., JJ., concurring. Petition, Annex A, Rollo, pp. 18-22.

[2] Petition, Annex C [Annex A] Deed of Absolute Sale, Rollo, pp. 28-30.

[3] Docketed as Civil Case No. 24,317-96. Petition, Annex C, Rollo, pp. 23-27.

[4] Petition, Annex D, Rollo, pp. 33-34.

[5] Petition, Annex E, Rollo, p. 35. Judge Renato A. Fuentes, presiding.

[6] Docketed as CA-G. R. SP No. 43095, Petition, CA Rollo, pp. 5-18.

[7] Petition, Annex G, Rollo, pp. 41-42.

[8] Docketed as CA-G. R. SP No. 43095, Petition, CA Rollo, pp. 5-18.

[9] Petition, Annex A, Rollo, pp. 18-20. Alio-Hormachuelos, J., ponente, Gonzaga-Reyes and Mabutas, Jr., JJ., concurring.

[10] Petition filed by registered mail posted on May 13, 1997, Rollo, pp. 5-17.

[11] Petition, Rollo, p. 9.11 Gonzales v. Court of Appeals, G. R. No. 112876, June 8, 2000.

[12] Gonzales v. Court of Appeals, G. R. No. 112876, June 8, 2000.

[13] Far East Bank and Trust Company v. Court of Appeals, G. R. No. 135548, September 29, 2000, citing cases.
[14] Rule 4, Section 1, 1997 Rules of Civil Procedure, as amended. Paderanga v. Buissan, 226 SCRA 786 [1993].

[15] Fortune Motors (Phil.), Inc. v. Court of Appeals, 178 SCRA 564 [1989]; Commodities Storage and Ice Plant
Corporation v. Court of Appeals, 340 Phil. 551 [1997].

SECOND DIVISION

[G.R. No. 158407. January 17, 2005]

FILOMENA DOMAGAS, petitioner, vs. VIVIAN LAYNO JENSEN, respondent.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari, under Rule 45 of the Rules of Court, of the Decision[1] of the Court of Appeals
(CA) in CA-G.R. CV No. 73995, which affirmed the Decision[2] of the Regional Trial Court (RTC) of Dagupan City, Branch
44, in Civil Case No. 2000-0244-D, which declared null and void the decision of the Municipal Trial Court (MTC) of
Calasiao, Pangasinan in Civil Case No. 879.[3]

The antecedent facts follow.

On February 19, 1999, petitioner Filomena Domagas filed a complaint for forcible entry against respondent Vivian
Jensen before the MTC of Calasiao, Pangasinan. The petitioner alleged in her complaint that she was the registered
owner of a parcel of land covered by Original Certificate of Title (OCT) No. P-30980, situated in Barangay Buenlag,
Calasiao, Pangasinan, and with an area of 827 square meters. On January 9, 1999 the respondent, by means of force,
strategy and stealth, gained entry into the petitioners property by excavating a portion thereof and thereafter
constructing a fence thereon. As such, the petitioner was deprived of a 68-square meter portion of her property along
the boundary line. The petitioner prayed that, after due proceedings, judgment be rendered in her favor, thus:

3. And, after trial, judgment be rendered:

a) DECLARING the writ of Preliminary Mandatory Injunction and Writ of Preliminary Injunction permanent;

b) ORDERING defendant, his representatives, agents and persons acting under her, to vacate the portion of the property
of the plaintiff occupied by them and to desist from entering, excavating and constructing in the said property of the
plaintiff described in paragraph 2 hereof and/or from disturbing the peaceful ownership and possession of the plaintiff
over the said land, pending the final resolution of the instant action;
c) ORDERING defendant to pay reasonable rental at FIVE THOUSAND (P5,000.00) PESOS per month from January 9, 1999
up to the time she finally vacates and removes all constructions made by her in the property of the plaintiff and up to
the time she finally restores the said property in the condition before her illegal entry, excavation and construction in
the property of the plaintiff;

d) ORDERING defendant to pay actual damages in the amount of TWENTY THOUSAND (P20,000.00) PESOS; moral
damages in the amount of TWENTY THOUSAND (P20,000.00) PESOS; attorneys fees of THIRTY THOUSAND (P30,000.00)
PESOS in retainers fee and ONE THOUSAND FIVE HUNDRED (P1,500.00) PESOS per court appearance fee; exemplary
damages in the amount of TWENTY THOUSAND (P20,000.00) PESOS, and, costs.

Plaintiff further prays for other reliefs and remedies just and equitable in the premises.[4]

The case was docketed as Civil Case No. 879. The summons and the complaint were not served on the respondent
because the latter was apparently out of the country. This was relayed to the Sheriff by her (the respondents) brother,
Oscar Layno, who was then in the respondents house at No. 572 Barangay Buenlag, Calasiao, Pangasinan. The Sheriff left
the summons and complaint with Oscar Layno, who received the same.[5]

Nonetheless, on May 17, 1999, the court rendered judgment ordering the respondent and all persons occupying the
property for and in the latters behalf to vacate the disputed area and to pay monthly rentals therefor, including actual
damages, attorneys fees, and exemplary damages. The fallo of the decision reads:

1) Ordering the defendant, her representatives, agents and persons acting under her, to vacate the 68-square meters
which she encroached upon;

2) Ordering the defendant to pay a monthly rental of P1,000.00 to the plaintiff;

3) To pay plaintiff actual damages of P20,000.00; attorneys fees of P15,000.00 and exemplary damages in the amount of
P20,000.00 plus the costs.

SO ORDERED.[6]

The respondent failed to appeal the decision. Consequently, a writ of execution was issued on September 27, 1999.

On August 16, 2000, the respondent filed a complaint against the petitioner before the RTC of Dagupan City for the
annulment of the decision of the MTC in Civil Case No. 879, on the ground that due to the Sheriffs failure to serve the
complaint and summons on her because she was in Oslo, Norway, the MTC never acquired jurisdiction over her person.
The respondent alleged therein that the service of the complaint and summons through substituted service on her
brother, Oscar Layno, was improper because of the following: (a) when the complaint in Civil Case No. 879 was filed, she
was not a resident of Barangay Buenlag, Calasiao, Pangasinan, but of Oslo, Norway, and although she owned the house
where Oscar Layno received the summons and the complaint, she had then leased it to Eduardo Gonzales; (b) she was in
Oslo, Norway, at the time the summons and the complaint were served; (c) her brother, Oscar Layno, was merely
visiting her house in Barangay Buenlag and was not a resident nor an occupant thereof when he received the complaint
and summons; and (d) Oscar Layno was never authorized to receive the summons and the complaint for and in her
behalf.[7]

The respondent further alleged that the MTC had no jurisdiction over the subject matter of the complaint in Civil Case
No. 879 because the petitioner, the plaintiff therein, failed to show prior possession of the property. She further claimed
that the alleged forcible entry was simply based on the result of the survey conducted by Geodetic Engineer Leonardo
de Vera showing that the property of the respondent encroached on that of the petitioner.

The respondent filed a Manifestation dated August 31, 2000, and appended thereto the following: (a) a copy[8] of her
passport showing that she left the country on February 17, 1999; (b) a copy[9] of the Contract of Lease dated November
24, 1997, executed by her and Eduardo D. Gonzales over her house for a period of three (3) years or until November 24,
2000; (c) her affidavit[10] stating, inter alia, that she owned the house at Barangay Buenlag, Calasiao, Pangasinan, which
she leased to Eduardo Gonzales; that she was married to Jarl Jensen, a citizen of Norway, on August 23, 1987 and had
resided in Norway with her husband since 1993; that she arrived in the Philippines on December 31, 1998, but left on
February 17, 1999; she returned to the Philippines on July 30, 2000 and learned, only then, of the complaint against her
and the decision of the MTC in Civil Case No. 879; her brother Oscar Layno was not a resident of the house at Barangay
Buenlag; and that she never received the complaint and summons in said case; (d) the affidavit[11] of Oscar Layno
declaring that sometime in April 1999, he was in the respondents house to collect rentals from Eduardo Gonzales; that
the Sheriff arrived and served him with a copy of the summons and the complaint in Civil Case No. 879; and that he
never informed the respondent of his receipt of the said summons and complaint; (e) an affidavit[12] of Eduardo
Gonzales stating that he leased the house of the respondent and resided thereat; the respondent was not a resident of
the said house although he (Gonzales) allowed the respondent to occupy a room therein whenever she returned to the
Philippines as a balikbayan; and that Oscar Layno was not residing therein but only collected the rentals.

In her answer to the complaint, the petitioner alleged that the respondent was a resident of Barangay Buenlag, Calasiao,
Pangasinan and was the owner of the subject premises where Oscar Layno was when the Sheriff served the summons
and complaint; that the service of the complaint and summons by substituted service on the respondent, the defendant
in Civil Case No. 879, was proper since her brother Oscar Layno, a resident and registered voter of Barangay. Buenlag,
Calasiao, Pangasinan, received the complaint and summons for and in her behalf.

The petitioner appended the following to her answer: (a) a copy[13] of the Deed of Absolute Sale executed by Jose
Layno in her favor, dated August 26, 1992, showing that the respondent was a resident of Barangay Buenlag, Calasiao,
Pangasinan; (b) a Real Estate Mortgage[14] executed by the respondent, dated February 9, 1999 showing that she was a
resident of Barangay Buenlag, Calasiao, Pangasinan; (c) the Joint Affidavit[15] of Vicenta Peralta and Orlando Macalanda,
both residents of Barangay Buenlag, Calasiao, Pangasinan, declaring that the respondent and her brother Oscar Layno
were their neighbors; that the respondent and her brother had been residents of Barangay Buenlag since their
childhood; that although the respondent left the country on several occasions, she returned to the Philippines and
resided in her house at No. 572 located in the said barangay; and (d) the Voters Registration Record[16] of Oscar Layno,
approved on June 15, 1997.
After due proceedings, the trial court rendered a decision in favor of the respondent. The dispositive portion reads:

WHEREFORE, judgment is rendered in favor of plaintiff Vivian Layno Jensen and against defendant Filomena Domagas,
as follows:

1. The Decision of the Municipal Trial Court of Calasiao, Pangasinan in Civil Case No. 879, entitled Filomena Domagas
versus Vivian Layno Jensen is declared null and void, for lack of jurisdiction over the person of the plaintiff and the
subject matter.

2. Defendant Filomena Domagas is ordered to pay plaintiff, the following:

a.) Actual damages, representing litigation expenses in the amount of P50,000.00;

b.) Attorneys fees in the amount of P50,000.00;

c.) Moral Damages in the amount of P50,000.00;

d.) Exemplary Damages in the amount of P50,000.00; and

e.) Costs of suit.

SO ORDERED.[17]

The trial court declared that there was no valid service of the complaint and summons on the respondent, the defendant
in Civil Case No. 879, considering that she left the Philippines on February 17, 1999 for Oslo, Norway, and her brother
Oscar Layno was never authorized to receive the said complaint and summons for and in her behalf.

The petitioner appealed the decision to the CA which, on May 6, 2003, rendered judgment affirming the appealed
decision with modifications. The CA ruled that the complaint in Civil Case No. 879 was one for ejectment, which is an
action quasi in rem. The appellate court ruled that since the defendant therein was temporarily out of the country, the
summons and the complaint should have been served via extraterritorial service under Section 15 in relation to Section
16, Rule 14 of the Rules of Court, which likewise requires prior leave of court. Considering that there was no prior leave
of court and none of the modes of service prescribed by the Rules of Court was followed by the petitioner, the CA
concluded that there was really no valid service of summons and complaint upon the respondent, the defendant in Civil
Case No. 879.

Hence, the present petition.

The petitioner assails the decision of the CA, alleging that the appellate court erred in holding that the respondents
complaint for ejectment is an action quasi in rem. The petitioner insists that the complaint for forcible entry is an action
in personam; therefore, substituted service of the summons and complaint on the respondent, in accordance with
Section 7, Rule 14 of the Rules of Court, is valid. The petitioner, likewise, asserts that Oscar Layno is a resident and a
registered voter of Barangay Buenlag, Calasiao, Pangasinan; hence, the service of the complaint and summons on the
respondent through him is valid.

The respondent, on the other hand, asserts that the action for forcible entry filed against her was an action quasi in rem,
and that the applicable provision of the Rules of Court is Section 15 of Rule 14, which calls for extraterritorial service of
summons.

The sole issue is whether or not there was a valid service of the summons and complaint in Civil Case No. 879 on the
respondent herein who was the defendant in the said case. The resolution of the matter is anchored on the issue of
whether or not the action of the petitioner in the MTC against the respondent herein is an action in personam or quasi
in rem.

The ruling of the CA that the petitioners complaint for forcible entry of the petitioner against the respondent in Civil
Case No. 879 is an action quasi in rem, is erroneous. The action of the petitioner for forcible entry is a real action and
one in personam.

The settled rule is that the aim and object of an action determine its character.[18] Whether a proceeding is in rem, or in
personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only.[19] A proceeding
in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the
jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek
to compel him to control or dispose of it in accordance with the mandate of the court.[20] The purpose of a proceeding
in personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of
the defendant.[21] Of this character are suits to compel a defendant to specifically perform some act or actions to fasten
a pecuniary liability on him.[22] An action in personam is said to be one which has for its object a judgment against the
person, as distinguished from a judgment against the propriety to determine its state. It has been held that an action in
personam is a proceeding to enforce personal rights or obligations; such action is brought against the person. As far as
suits for injunctive relief are concerned, it is well-settled that it is an injunctive act in personam.[23] In Combs v.
Combs,[24] the appellate court held that proceedings to enforce personal rights and obligations and in which personal
judgments are rendered adjusting the rights and obligations between the affected parties is in personam. Actions for
recovery of real property are in personam.[25]

On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the property of such
persons to the discharge of the claims assailed.[26] In an action quasi in rem, an individual is named as defendant and
the purpose of the proceeding is to subject his interests therein to the obligation or loan burdening the property.[27]
Actions quasi in rem deal with the status, ownership or liability of a particular property but which are intended to
operate on these questions only as between the particular parties to the proceedings and not to ascertain or cut off the
rights or interests of all possible claimants. The judgments therein are binding only upon the parties who joined in the
action.[28]

Section 1, Rule 70 of the Rules of Court provides:

Section 1. Who may institute proceedings, and when. - Subject to the provisions of the next succeeding section, a person
deprived of the possession of any land or building in force, intimidation, threat, strategy, or stealth, or a lessor, vendor,
vendee, or other person against whom the possession of any land or building is unlawfully withheld after the expiration
or termination of the right to hold possession by virtue of any contract, express or implied, or the legal representatives
or assigns of any such lessor, vendor, vendee, or other person, may, at any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person or
persons unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the
restitution of such possession, together with damages and costs.

Under Section 15, Rule 70 of the said Rule, the plaintiff may be granted a writ of preliminary prohibition or mandatory
injunction:

Sec. 15. Preliminary Injunction. The court may grant preliminary injunction, in accordance with the provisions of Rule 58
hereof, to prevent the defendant from committing further acts of dispossession against the plaintiff.

A possessor deprived of his possession through forcible entry or unlawful detainer may, within five (5) days from the
filing of the complaint, present a motion in the action for forcible entry or unlawful detainer for the issuance of a writ of
preliminary mandatory injunction to restore him in his possession. The court shall decide the motion within thirty (30)
days from the filing thereof.

If, after due proceedings, the trial court finds for the plaintiff, it shall then render judgment in his or her favor, thus:

Sec. 17. Judgment. If, after trial, the court finds that the allegations of the complaint are true, it shall render judgment in
favor of the plaintiff for the restitution of the premises, the sum justly due as arrears of rent or as reasonable
compensation for the use and occupation of the premises, attorneys fees and costs. If it finds that said allegations are
not true, it shall render judgment for the defendant to recover his costs. If a counterclaim is established, the court shall
render judgment for the sum found in arrears from either party and award costs as justice requires.

From the aforementioned provisions of the Rules of Court and by its very nature and purpose, an action for unlawful
detainer or forcible entry is a real action and in personam because the plaintiff seeks to enforce a personal obligation or
liability on the defendant under Article 539 of the New Civil Code,[29] for the latter to vacate the property subject of the
action, restore physical possession thereof to the plaintiff, and pay actual damages by way of reasonable compensation
for his use or occupation of the property.[30]

As gleaned from the averments of the petitioners complaint in the MTC, she sought a writ of a preliminary injunction
from the MTC and prayed that the said writ be made permanent. Under its decision, the MTC ordered the defendant
therein (the respondent in this case), to vacate the property and pay a monthly rental of P1,000.00 to the plaintiff
therein (the petitioner in this case).
On the issue of whether the respondent was validly served with the summons and complaint by the Sheriff on April 5,
1999, the petitioner asserts that since her action of forcible entry against the respondent in Civil Case No. 879 was in
personam, summons may be served on the respondent, by substituted service, through her brother, Oscar Layno, in
accordance with Section 7, Rule 14 of the Rules of Court. The petitioner avers that Oscar Layno, a person of suitable age
and discretion, was residing in the house of the respondent on April 5, 1999. She avers that the fact that the house was
leased to and occupied by Eduardo Gonzales was of no moment. Moreover, the Sheriff is presumed to have performed
his duty of properly serving the summons on the respondent by substituted service.

The contention of the petitioner has no merit.

In Asiavest Limited v. Court of Appeals,[31] the Court had the occasion to state:

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and
decide the case. Jurisdiction over the person of a resident defendant who does not voluntarily appear in court can be
acquired by personal service of summons as provided under Section 7, Rule 14 of the Rules of Court. If he cannot be
personally served with summons within a reasonable time, substituted service may be made in accordance with Section
8 of said Rule. If he is temporarily out of the country, any of the following modes of service may be resorted to: (a)
substituted service set forth in Section 8; (2) personal service outside the country, with leave of court; (3) service by
publication, also with leave of court; or (4) any other manner the court may deem sufficient.[32]

Thus, any judgment of the court which has no jurisdiction over the person of the defendant is null and void.[33]

In the present case, the records show that the respondent, before and after his marriage to Jarl Jensen on August 23,
1987, remained a resident of Barangay Buenlag, Calasiao, Pangasinan. This can be gleaned from the Deed of Absolute
Sale dated August 26, 1992 in which she declared that she was a resident of said barangay. Moreover, in the Real Estate
Mortgage Contract dated February 9, 1999, ten days before the complaint in Civil Case No. 879 was filed, the petitioner
categorically stated that she was a Filipino and a resident of Barangay Buenlag, Calasiao, Pangasinan. Considering that
the respondent was in Oslo, Norway, having left the Philippines on February 17, 1999, the summons and complaint in
Civil Case No. 879 may only be validly served on her through substituted service under Section 7, Rule 14 of the Rules of
Court, which reads:

SEC. 7. Substituted service. If, for justifiable causes, the defendant cannot be served within a reasonable time as
provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendants
residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at
defendants office or regular place of business with some competent person in charge thereof.

Strict compliance with the mode of service is required in order that the court may acquire jurisdiction over the person of
the defendant.[34] The statutory requirement of substituted service must be followed faithfully and strictly and any
substituted service other than that authorized by the statute is rendered ineffective.[35] As the Court held in Hamilton v.
Levy:[36]
The pertinent facts and circumstances attendant to the service of summons must be stated in the proof of service or
Officers Return; otherwise, any substituted service made in lieu of personal service cannot be upheld. This is necessary
because substituted service is in derogation of the usual method of service. It is a method extraordinary in character and
hence may be used only as prescribed and in the circumstances authorized by statute. Here, no such explanation was
made. Failure to faithfully, strictly, and fully comply with the requirements of substituted service renders said service
ineffective.[37]

In Keister v. Narcereo,[38] the Court held that the term dwelling house or residence are generally held to refer to the
time of service; hence, it is not sufficient to leave the summons at the formers dwelling house, residence or place of
abode, as the case may be. Dwelling house or residence refers to the place where the person named in the summons is
living at the time when the service is made, even though he may be temporarily out of the country at the time. It is,
thus, the service of the summons intended for the defendant that must be left with the person of suitable age and
discretion residing in the house of the defendant. Compliance with the rules regarding the service of summons is as
much important as the issue of due process as of jurisdiction.[39]

The Return of Service filed by Sheriff Eduardo J. Abulencia on the service of summons reads:

Respectfully returned to the court of origin the herein summons and enclosures in the above-entitled case, the
undersigned caused the service on April 5, 1999.

Defendant Vivian Layno Jensen is out of the country as per information from her brother Oscar Layno, however, copy of
summons and enclosures was received by her brother Oscar Layno on April 5, 1999 as evidenced by his signature
appearing in the original summons.

Calasiao, Pangasinan, April 6, 1999.

(Sgd.)

EDUARDO J. ABULENCIA

Junior Process Server[40]

As gleaned from the said return, there is no showing that as of April 5, 1999, the house where the Sheriff found Oscar
Layno was the latters residence or that of the respondent herein. Neither is there any showing that the Sheriff tried to
ascertain where the residence of the respondent was on the said date. It turned out that the occupant of the house was
a lessor, Eduardo Gonzales, and that Oscar Layno was in the premises only to collect the rentals from him. The service of
the summons on a person at a place where he was a visitor is not considered to have been left at the residence or place
or abode, where he has another place at which he ordinarily stays and to which he intends to return.[41]

The Voters Registration Record of Oscar Layno dated June 15, 1997 wherein he declared that he was a resident of No.
572 Barangay Buenlag, Calasiao, Pangasinan, as well as the Joint Affidavit of Vicenta Peralta and Orlando Macasalda
cannot prevail over the Contract of Lease the respondent had executed in favor of Eduardo Gonzales showing that the
latter had resided and occupied the house of the respondent as lessee since November 24, 1997, and the affidavit of
Eduardo Gonzales that Oscar Layno was not residing in the said house on April 5, 1999.

In sum, then, the respondent was not validly served with summons and the complaint in Civil Case No. 879 on April 5,
1999, by substituted service. Hence, the MTC failed to acquire jurisdiction over the person of the respondent; as such,
the decision of the MTC in Civil Case No. 879 is null and void.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

[1] Penned by Associate Justice Conrado M. Vasquez, Jr. with Associate Justices Mercedes Gozo-Dadole and Rosmari D.
Carandang, concurring; Rollo, pp. 25-33.

[2] Penned by Judge Crispin C. Laron (Retired).

[3] Entitled Filomena Domagas v. Vivian Layno Jensen.

[4] Records, p. 13.

[5] Id. at 20.

[6] Id. at 79.

[7] Records, p. 2.

[8] Id. at 54-56.

[9] Id. at 57-58.

[10] Id. at 53.

[11] Id. at 60.

[12] Id. at 59.

[13] Id. at 46.

[14] Id. at 47.

[15] Id. at 50

[16] Exhibit 6.

[17] Records, p. 126.

[18] National Surety Co. v. Austin Machinery Corporation, 35 F.2d 842 (1929).

[19] Sandejas v. Robles, 81 Phil. 421 (1948).

[20] Id. at 424.

[21] Asiavest Ltd. v. Court of Appeals, 296 SCRA 539 (1998).

[22] Hughes v. Hughes, 278 S.W. 121 (1925).

[23] Green Oaks Apartments, Ltd. v. Cannon, 696 S.W. 2d 415 (1985).

[24] 60 S.W. 2d 368 (1933).

[25] PNB v. Court of Appeals, 153 SCRA 435 (1987).

[26] Freeman v. Alderson, 30 L.Ed.372 (1886).

[27] Banco do Brasil v. Court of Appeals, 333 SCRA 545 (2000).

[28] Perry v. Young, 182 S.W. 577 (1916).

[29] ART. 539. Every possessor has a right to be respected in his possession; and should he be disturbed therein he shall
be protected in or restored to said possession by the means established by the laws and the Rules of Court.

possessor deprived of his possession through forcible entry may within ten days from the filing of the complaint present
a motion to secure from the competent court, in the action for forcible entry, a writ of preliminary mandatory injunction
to restore him in his possession. The court shall decide the motion within thirty (30) days from the filing thereof.

[30] Progressive Development Corporation, Inc. v. Court of Appeals, 301 SCRA 637 (1999).

[31] 296 SCRA 539 (1998).

[32] Id. at 552-553.

[33] Lam v. Rosillosa, 86 Phil. 447 (1956).

[34] Venturanza v. Court of Appeals, 156 SCRA 305 (1987).

[35] Umandap v. Sabio, Jr., 339 SCRA 243 (2000).

[36] 344 SCRA 821 (2000).

[37] Id. at 829.

[38] 77 SCRA 209 (1977).

[39] Ang Ping v. Court of Appeals, 310 SCRA 343 (1999).

[40] Records, p. 20.

[41] John Hancock Mutual Life Insurance Co. v. Gooley, 118 ALR 1484 (1938); Albers v. Bramberg, 32 N.E. 2d 362 (1941).

SECOND DIVISION

[G.R. No. 127692. March 10, 2004]

FORTUNATO GOMEZ and AURORA GOMEZ, petitioners, vs. COURT OF APPEALS, ADOLFO TROCINO and MARIANO
TROCINO, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision[1] of the
Court of Appeals dated September 30, 1996, in CA-G.R. SP No. 40067, nullifying the decision and orders of the Regional
Trial Court of Cebu City (Branch 10) in Civil Case No. CEB-11103, for want of jurisdiction.

Civil Case No. CEB-11103 is an action for specific performance and/or rescission filed by herein petitioners, spouses
Fortunato and Aurora Gomez, against the heirs of Jesus J. Trocino, Sr., which include herein respondents and their
mother Caridad Trocino.[2]

Filed on December 16, 1991, the complaint alleges: Some time in 1975, the spouses Jesus and Caridad Trocino
mortgaged two parcels of land covered by TCT Nos. 10616 and 31856 to Dr. Clarence Yujuico. The mortgage was
subsequently foreclosed and the properties sold at public auction on July 11, 1988, and before the expiry of the
redemption period, the spouses Trocino sold the property to petitioners on December 12, 1989, who in turn, redeemed
the same from Dr. Yujuico. The spouses Trocino, however, refused to convey ownership of the properties to petitioners,
hence, the complaint.

On January 10, 1992, the trial courts Process Server served summons on respondents, in the manner described in his
Return of Service, to wit:

Respectfully returned to the Branch Clerk of Court, Regional Trial Court of Cebu, Branch 10, the herein attached original
summons issued in the above-entitled case with the information that on January 8, 1992 summons and copies of the
complaint were served to the defendants Jacob, Jesus Jr., Adolfo, Mariano, Consolacion, Alice, Racheal thru defendant
Caridad Trocino at their given address at Maria Cristina Extension (besides Sacred Heart School for Girls), Cebu City,
evidence by her signature found at the lower portion of the original summons.[3]

WHEREFORE I, respectfully return the original summons duly served to the court of origin.
Cebu City, Philippines, January 10, 1992.

(signed)

DELFIN D. BARNIDO

RTC Process Server

On January 27, 1992, the defendants, through their counsel Atty. Expedito P. Bugarin, filed their Answer. Defendant
Caridad A. Trocino, respondents mother, verified said pleading.[4]

After trial on the merits, the RTC rendered its decision on March 1993, with the following disposition:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants.

The latter are hereby ordered to jointly and severally execute a Deed of Sale in favor of the plaintiffs and to deliver the
owners duplicate copies of TCT Nos. 10616 and 31856, covering the properties sold, to the plaintiffs within ten (10) days
from the finality of the judgment, after which plaintiffs shall pay in turn to the defendants the balance of P2,000,000.00.
Otherwise, the sale is rescinded and revoked and the defendants are directed to return to the plaintiffs the amount of
P500,000.00, with interest of 12% per annum computed from December 6, 1989, until the full amount is paid.

In addition thereto, defendants are to pay jointly and severally to the plaintiffs, the amount of P50,000.00 as moral
damages; P20,000.00 as exemplary damages; P40,000.00 by way of attorneys fees; and P10,000.00 as litigation
expenses.

SO ORDERED.[5]

Due to the defendants failure to deliver the owners duplicate of TCT Nos. 10616 and 31856, the RTC issued an order on
August 29, 1995 declaring said titles null and void, and ordering the Register of Deeds of Cebu City to issue new titles in
the name of herein petitioners.[6]

Thereafter, or on March 13, 1996, respondents Adolfo and Mariano Trocino filed with the Court of Appeals, a petition
for the annulment of the judgment rendered by the RTC-Cebu (Branch 10) in Civil Case No. CEB-11103. Private
respondents alleged that the trial courts decision is null and void on the ground that it did not acquire jurisdiction over
their persons as they were not validly served with a copy of the summons and the complaint. According to them, at the
time summons was served on them, Adolfo Trocino was already in Ohio, U.S.A., and has been residing there for 25
years, while Mariano Trocino was in Talibon, Bohol, and has been residing there since 1986. They also refuted the
receipt of the summons by Caridad A. Trocino, and the representation made by Atty. Bugarin in their behalf.
Respondents also contended that they have a meritorious defense.[7] Petitioners filed their Comment/Answer to the
petition.[8]
On September 30, 1996, the Court of Appeals issued the assailed Decision granting the petition and annulling the
decision of the RTC-Cebu (Branch 10). The decretal portion of the decision reads:

WHEREFORE, the decision of the Regional Trial Court of Cebu City, Branch 10, in Civil Case No. CEB-11103 as well as all
Orders issued to implement the same are hereby ANNULLED AND SET ASIDE. The Register of Deeds of Cebu City is
hereby ENJOINED from cancelling Transfer Certificates of Title Nos. 10616 and 31856. No pronouncement as to costs.

SO ORDERED.[9]

Their motion for reconsideration having been denied by the Court of Appeals, petitioners filed the present petition,
setting forth the following assignment of errors:

I. THE COURT OF APPEALS ERRED IN FINDING LACK OF PRIOR KNOWLEDGE ON THE PART OF RESPONDENTS TROCINO,
REGARDING THE PROCEEDINGS BEFORE THE RTC OF CEBU CITY AND IN NOT DISMISSING THE PETITION FOR VIOLATION
OF SUPREME COURT CIRCULAR 04-94.

II. THE COURT OF APPEALS ERRED IN DECLARING THE NEED FOR PERSONAL AND/OR EXTRATERRITORIAL SERVICE OF
SUMMONS, DESPITE THE NATURE OF THE CAUSE OF ACTION BEING ONE IN REM.

III. THE COURT OF APPEALS ERRED IN ANNULLING THE JUDGMENT, CAUSING FURTHER USELESS LITIGATION AND
UNNECESSARY EXPENSE ON PETITIONERS AND RESPONDENTS, ESPECIALLY SINCE RESPONDENTS HAVE NOT SHOWN ANY
VALID DEFENSE AS GROUND FOR REVERSAL OF JUDGMENT OF THE RTC.

IV. THE COURT OF APPEALS ERRED IN RULING THAT ITS JUDGMENT IS APPLICABLE IN FAVOR OF CARIDAD TROCINO.[10]

Summons is a writ by which the defendant is notified of the action brought against him. Service of such writ is the means
by which the court acquires jurisdiction over his person.[11] Any judgment without such service in the absence of a valid
waiver is null and void.[12]

The resolution of the present petition hinges on the issue of whether or not summons was effectively served on
respondents. If in the affirmative, the trial court had validly acquired jurisdiction over their persons and therefore its
judgment is valid.

To resolve whether there was valid service of summons on respondents, the nature of the action filed against them
must first be determined. As the Court explained in Asiavest Limited vs. Court of Appeals, it will be helpful to determine
first whether the action is in personam, in rem, or quasi in rem because the rules on service of summons under Rule 14
of the Rules of Court of the Philippines apply according to the nature of the action.[13]
In actions in personam, summons on the defendant must be served by handing a copy thereof to the defendant in
person, or, if he refuses to receive it, by tendering it to him. This is specifically provided in Section 7, Rule 14 of the Rules
of Court,[14] which states:

SEC. 7. Personal service of summons.-- The summons shall be served by handing a copy thereof to the defendant in
person or, if he refuses to receive it, by tendering it to him.

If efforts to find defendant personally makes prompt service impossible, substituted service may be effected by leaving
copies of the summons at the defendant's dwelling house or residence with some person of suitable age and discretion
then residing therein, or by leaving the copies at the defendant's office or regular place of business with some
competent person in charge thereof.[15] In substituted service, it is mandated that the fact of impossibility of personal
service should be explained in the proof of service.[16]

When the defendant in an action in personam is a non-resident who does not voluntarily submit himself to the authority
of the court, personal service of summons within the State is essential to the acquisition of jurisdiction over his person.
This cannot be done if the defendant is not physically present in the country, and thus, the court cannot acquire
jurisdiction over his person and therefore cannot validly try and decide the case against him.[17] An exception was
accorded in Gemperle vs. Schenker wherein service of summons through the non-residents wife, who was a resident of
the Philippines, was held valid, as the latter was his representative and attorney-in-fact in a prior civil case filed by the
non-resident, and the second case was merely an offshoot of the first case.[18]

Meanwhile, in actions in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to
confer jurisdiction on the court provided that the court acquires jurisdiction over the res, although summons must be
served upon the defendant in order to satisfy the due process requirements.[19] Thus, where the defendant is a non-
resident who is not found in the Philippines, and (1) the action affects the personal status of the plaintiff; (2) the action
relates to, or the subject matter of which is property in the Philippines in which the defendant has or claims a lien or
interest; (3) the action seeks the exclusion of the defendant from any interest in the property located in the Philippines;
or (4) the property of the defendant has been attached in the Philippines, summons may be served extraterritorially by
(a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other
manner the court may deem sufficient.[20]

In the present case, petitioners cause of action in Civil Case No. CEB-11103 is anchored on the claim that the spouses
Jesus and Caridad Trocino reneged on their obligation to convey ownership of the two parcels of land subject of their
sale. Thus, petitioners pray in their complaint that the spouses Trocino be ordered to execute the appropriate deed of
sale and that the titles be delivered to them (petitioners); or in the alternative, that the sale be revoked and rescinded;
and spouses Trocino ordered to return to petitioners their down payment in the amount of P500,000.00 plus interests.
The action instituted by petitioners affect the parties alone, not the whole world. Hence, it is an action in personam, i.e.,
any judgment therein is binding only upon the parties properly impleaded.[21]

Contrary to petitioners belief, the complaint they filed for specific performance and/or rescission is not an action in rem.
While it is a real action because it affects title to or possession of the two parcels of land covered by TCT Nos. 10616 and
31856, it does not automatically follow that the action is already one in rem. In Hernandez vs. Rural Bank of Lucena, Inc.,
the Court made the following distinction:

In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery
of damages. In a real action, the plaintiff seeks the recovery of real property, or, as indicated in section 2(a) of Rule 4, a
real action is an action affecting title to real property or for the recovery of possession, or for partition or condemnation
of, or foreclosure of a mortgage on, real property.

An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an
action against the thing itself, instead of against the person. Hence, a real action may at the same time be an action in
personam and not necessarily an action in rem.[22]

The objective sought in petitioners complaint was to establish a claim against respondents for their alleged refusal to
convey to them the title to the two parcels of land that they inherited from their father, Jesus Trocino, who was one of
the sellers of the properties to petitioners. Hence, to repeat, Civil Case No. CEB-11103 is an action in personam because
it is an action against persons, namely, herein respondents, on the basis of their personal liability. As such, personal
service of summons upon the defendants is essential in order for the court to acquire of jurisdiction over their
persons.[23]

A distinction, however, must be made with regard to service of summons on respondents Adolfo Trocino and Mariano
Trocino. Adolfo Trocino, as records show, is already a resident of Ohio, U.S.A. for 25 years. Being a non-resident, the
court cannot acquire jurisdiction over his person and validly try and decide the case against him.

On the other hand, Mariano Trocino has been in Talibon, Bohol since 1986. To validly acquire jurisdiction over his
person, summons must be served on him personally, or through substituted service, upon showing of impossibility of
personal service. Such impossibility, and why efforts exerted towards personal service failed, should be explained in the
proof of service. The pertinent facts and circumstances attendant to the service of summons must be stated in the proof
of service or Officers Return. Failure to do so would invalidate all subsequent proceedings on jurisdictional grounds.[24]

In the present case, the process server served the summons and copies of the complaint on respondents Jacob, Jesus,
Jr., Adolfo, Mariano, Consolacion, Alice and Racheal,[25] through their mother, Caridad Trocino.[26] The return did not
contain any particulars as to the impossibility of personal service on Mariano Trocino within a reasonable time. Such
improper service renders the same ineffective.

Due process of law requires personal service to support a personal judgment, and, when the proceeding is strictly in
personam brought to determine the personal rights and obligations of the parties, personal service within the state or a
voluntary appearance in the case is essential to the acquisition of jurisdiction so as to constitute compliance with the
constitutional requirement of due process.[27]
Moreover, inasmuch as the sheriffs return failed to state the facts and circumstances showing the impossibility of
personal service of summons upon respondents within a reasonable time, petitioners should have sought the issuance
of an alias summons. Under Section 5, Rule 14 of the Rules of Court, alias summons may be issued when the original
summons is returned without being served on any or all of the defendants.[28] Petitioners, however, did not do so, and
they should now bear the consequences of their lack of diligence.

The fact that Atty. Expedito Bugarin represented all the respondents without any exception does not transform the
ineffective service of summons into a valid one. It does not constitute a valid waiver or even a voluntary submission to
the trial courts jurisdiction. There was not even the slightest proof showing that respondents authorized Atty. Bugarins
appearance for and in their behalf. As found by the Court of Appeals:

While Caridad Trocino may have engaged the services of Atty. Bugarin, it did not necessarily mean that Atty. Bugarin
also had the authority to represent the defendant heirs. The records show that in all the pleadings which required
verification, only Caridad Trocino signed the same. There was never a single instance where defendant heirs signed the
pleading. The fact that a pleading is signed by one defendant does not necessarily mean that it is binding on a co-
defendant. Furthermore, Caridad Trocino represented herself as the principal defendant in her Motion to Withdraw
Appeal. (Rollo, p. 80)

Since the defendant heirs are co-defendants, the trial court should have verified the extent of Atty. Bugarins authority
when petitioners failed to appear as early as the pre-trial stage, where the parties are required to appear. The absence
of the defendant heirs should have prompted the trial court to inquire from the lawyer whether he was also
representing the other petitioners. As co-defendant and co-heirs over the disputed properties, the defendant heirs had
every right to be present during the trial. Only Caridad Trocino appeared and testified on her own behalf. All the
defenses raised were her own, not the defendant heirs.[29]

Consequently, the judgment sought to be executed against respondents were rendered without jurisdiction as there was
neither a proper service of summons nor was there any waiver or voluntary submission to the trial courts jurisdiction.
Hence, the same is void, with regard to private respondents except Caridad Trocino.

It must be pointed out that while it was the spouses Jesus and Caridad Trocino who sold the properties to petitioners,
their right to proceed against Jesus Trocino when he died was passed on to his heirs, which includes respondents and
Caridad Trocino. Such transmission of right occurred by operation of law, more particularly by succession, which is a
mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance
of a person are transmitted.[30] When the process server personally served the summons on Caridad Trocino, the trial
court validly acquired jurisdiction over her person alone. Hence, the trial courts decision is valid and binding with regard
to her, but only in proportion to Caridad Trocinos share. As aptly stated by the Court of Appeals:

This Courts decision is therefore applicable to all the defendant heirs with the exception of defendant Caridad Trocino
considering that it was the latter who entered into the alleged sale without the consent of her husband. She is therefore
estopped from questioning her own authority to enter into the questioned sale. Moreover, Caridad Trocino was validly
served with summons and was accorded due process.[31]
WHEREFORE, the petition for review is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 40067 is
AFFIRMED.

Costs against petitioners.

SO ORDERED.

Quisumbing, (Acting Chairman), Callejo, Sr., and Tinga, JJ., concur.

Puno, (Chairman), J., on leave.

[1] Penned by Justice Consuelo Ynares-Santiago (now Associate Justice of the Supreme Court), and concurred in by
Justice Fidel P. Purisima (retired Associate Justice of the Supreme Court), and Justice Ruben T. Reyes.

[2] CA Rollo, p. 20, Annex A.

[3] Id., p. 25, Annex B.

[4] Id., p. 29, Annex C.

[5] Id., pp. 34-35, Annex D.

[6] Id., p. 49, Annex F.

[7] Id., pp. 2-13, Petition.

[8] Id., pp. 52-55.

[9] Id., p. 117.

[10] Rollo, p. 15.

[11] Licaros vs. Licaros, G.R. No. 150656, April 29, 2003.
[12] Umandap vs. Sabio, G.R. No. 140244, August 29, 2000, 339 SCRA 243-247.

[13] G.R. No. 128803, September 25, 1998, 296 SCRA 539, 552.

[14] Section 7, Rule 14 is now reproduced in Section 6, Rule 14 of the 1997 Rules of Civil Procedure.

[15] Section 8, Rule 14 of the Rules of Court.

[16] Supra, Asiavest Limited case.

[17] Banco de Brasil vs. Court of Appeals, G.R. Nos. 121576-78, June 16, 2000, 333 SCRA 545, 557.

[18] Supra., Asiavest Limited case.

[19] Ibid.

[20] Rule 14, Section 15 of the Rules of Court.

[21] Paderanga vs. Buissan, G.R. No. 49475, September 28, 1993, 226 SCRA 786, 790.

[22] G.R. No. L-29791, January 10, 1978, 81 SCRA 75, 84-85.

[23] Arcenas vs. Court of Appeals, G.R. No. 130401, December 4, 1998, 299 SCRA 733, 741.

[24] Madrigal vs. Court of Appeals, G.R. No. 129955, November 26, 1999, 319 SCRA 331, 336.

[25] Also referred to as Rachel in the pleadings.

[26] Supra., Note No. 3.

[27] Supra., Arcenas case.

[28] Rule 14, Section 5 of the Rules of Court provides:

If a summons is returned without being served on any or all of the defendants, the server shall also serve a copy of the
return on the plaintiffs counsel, stating the reasons for the failure of service, within (5) days therefrom. In such a case, or
if the summons has been lost, the clerk, on demand of the plaintiff, may issue an alias summons.

[29] Rollo, pp. 90-91.

[30] Emnace vs. Court of Appeals, G.R. No. 126334, November 23, 2001, 370 SCRA 431, 445.

[31] Rollo, p. 96.

FIRST DIVISION

EMERITA MUOZ,

Petitioner,

- versus -

ATTY. VICTORIANO R. YABUT, JR. and SAMUEL GO CHAN,

Respondents.

x------------------------x

EMERITA MUOZ,

Petitioner,

- versus -
SPOUSES SAMUEL GO CHAN and AIDA C. CHAN, and THE BANK OF THE PHILIPPINE ISLANDS,

Respondents.

G.R. No. 142676

G.R. No. 146718

Present:

CORONA, C.J.,

Chairperson,

VELASCO, JR.,

LEONARDO-DE CASTRO,

DEL CASTILLO, and

PEREZ, JJ.

Promulgated:

June 6, 2011

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION

LEONARDO-DE CASTRO, J.:

Before Us are the following consolidated petitions for review on certiorari under Rule 45 of the Rules of Court.

In G.R. No. 142676, Emerita Muoz (Muoz) is seeking the reversal, annulment, and setting aside of the Decision[1] dated
July 21, 1995 and Resolution[2] dated March 9, 2000 of the Court of Appeals in CA-G.R. SP No. 35322, which affirmed
the Orders[3] dated June 10, 1994 and August 5, 1994 of the Regional Trial Court, Branch 88 (RTC-Branch 88) of Quezon
City in Civil Case No. Q-94-20632. The RTC dismissed Civil Case No. 8286, the forcible entry case instituted by Muoz
against Atty. Victoriano R. Yabut, Jr. (Atty. Yabut) and Samuel Go Chan before the Metropolitan Trial Court (MeTC),
Branch 33 of Quezon City; and nullified the MeTC Order[4] dated May 16, 1994, granting Muozs prayer for the issuance
of a writ of preliminary mandatory injunction which restored possession of the subject property to Muoz.

In G.R. No. 146718, Muoz is praying for the reversal, setting aside, and nullification of the Decision[5] dated September
29, 2000 and Resolution[6] dated January 5, 2001 of the Court of Appeals in CA-G.R. SP No. 40019, which affirmed the
Orders[7] dated August 21, 1995 and October 3, 1995 of the Quezon City RTC, Branch 95 (RTC-Branch 95) in Civil Case
No. Q-28580 denying Muozs Motion for an Alias Writ of Execution and Application for Surrender of the Owners
Duplicate Copy of TCT No. 53297[8] against respondents Bank of the Philippine Islands (BPI) and the spouses Samuel Go
Chan and Aida C. Chan (spouses Chan).

FACTS

The subject property is a house and lot at No. 48 Scout Madrian St., Diliman, Quezon City, formerly owned by Yee L.
Ching. Yee L. Ching is married to Emilia M. Ching (spouses Ching), Muozs sister. Muoz lived at the subject property with
the spouses Ching. As consideration for the valuable services rendered by Muoz to the spouses Chings family, Yee L.
Ching agreed to have the subject property transferred to Muoz. By virtue of a Deed of Absolute Sale, seemingly
executed by Yee L. Ching in favor of Muoz,[9] the latter acquired a Transfer Certificate of Title (TCT) No. 186306 covering
the subject property in her name on December 22, 1972.[10] However, in a Deed of Absolute Sale dated December 28,
1972, Muoz purportedly sold the subject property to her sister, Emilia M. Ching. As a result, TCT No. 186306 was
cancelled and TCT No. 186366 was issued in Emilia M. Chings name. Emilia M. Ching, in a Deed of Absolute Sale dated
July 16, 1979, sold the subject property to spouses Go Song and Tan Sio Kien (spouses Go), hence, TCT No. 186366 was
cancelled and replaced by TCT No. 258977 in the spouses Gos names.
On October 15, 1979, Muoz registered her adverse claim to the subject property on TCT No. 258977 of the spouses Go.
The next day, on October 16, 1979, Muoz filed a complaint for the annulment of the deeds of absolute sale dated
December 28, 1972 and July 16, 1979, the cancellation of TCT No. 258977 in the spouses Gos names, and the restoration
and revival of TCT No. 186306 in Muozs name. The complaint was docketed as Civil Case No. Q-28580 and raffled to RTC-
Branch 95. On October 17, 1979, Muoz caused the annotation of a notice of lis pendens on TCT No. 258977 of the
spouses Go. In an Order dated December 17, 1979, the RTC-Branch 95 granted the spouses Gos motion for the issuance
of a writ of preliminary mandatory injunction and ordered the sheriff to put the spouses Go in possession of the subject
property. The writ was implemented by the sheriff on March 26, 1980, driving Muoz and her housemates away from the
subject property.

Muoz filed a petition for certiorari and prohibition before the Court of Appeals, assailing the issuance of the writ of
preliminary mandatory injunction, which was docketed as CA-G.R. SP No. 10148. The appellate court dismissed Muozs
petition on January 4, 1980. Yee L. Ching and his son Frederick M. Ching filed an urgent motion for leave to intervene in
CA-G.R. SP No. 10148 and for the issuance of a temporary restraining order (TRO). The Court of Appeals issued a TRO.
However, in a Resolution dated March 18, 1980, the appellate court denied the motion to intervene of Yee L. Ching and
Frederick M. Ching, and cancelled the TRO previously issued. Yee L. Ching and Frederick M. Ching challenged before this
Court, in G.R. No. 53463, the Resolution dated March 18, 1980 of the Court of Appeals. Eventually, in a Resolution dated
June 3, 1981, the Court dismissed the petition in G.R. No. 53463, for lack of merit and failure of Yee L. Ching and
Frederick M. Ching to substantially show that the RTC-Branch 95 and the Court of Appeals gravely abused their
discretion. In a subsequent Resolution dated June 21, 1982, the Court clarified that its Resolution of June 3, 1981 was
without prejudice to the continuation of the litigation in Civil Case No. Q-28580 still pending before the trial court, in
order that proper and final adjudication may be made of whether or not the deed of sale by Emerita L. Muoz in favor of
Emilia M. Ching is a real, genuine and authentic transaction, thereby to settle once and for all the issue of ownership of
the property herein in question.[11]

Trial in Civil Case No. Q-28580 proceeded before RTC-Branch 95.

In the meantime, Muozs adverse claim and notice of lis pendens on TCT No. 258977 was cancelled on October 28, 1982
on the basis of an alleged final judgment in favor of the spouses Go.[12] The spouses Go obtained a loan of P500,000.00
from BPI Family Savings Bank (BPI Family) and to secure the same, they constituted a mortgage on the subject property
on November 23, 1982.[13] When the spouses Go defaulted on the payment of their loan, BPI Family foreclosed the
mortgage. BPI Family was the highest bidder at the auction sale of the subject property. The spouses Go failed to
exercise their right of redemption within the prescribed period, thus, BPI Family was finally able to register the subject
property in its name on October 23, 1987 under TCT No. 370364.[14] Apparently, the original copy of TCT No. 370364
was among those razed in the fire at the Quezon City Register of Deeds on June 11, 1988. As a result of the
administrative reconstitution of the lost title, TCT No. RT-54376 (370364) was issued to BPI Family. On December 3,
1990, BPI Family executed in favor of the spouses Samuel Go Chan and Aida C. Chan (spouses Chan) a Deed of Absolute
Sale[15] covering the subject property for and in consideration of P3,350,000.00. Consequently, TCT No. RT-54376
(370364) in the name of BPI Family was cancelled and TCT No. 53297 was issued in the spouses Chans names on January
28, 1991.[16] The spouses Chan obtained a loan from BPI Family on October 2, 1992 for the construction of a building on
the subject property, and to secure the same, constituted a mortgage on the subject property in favor of BPI Family.[17]

On July 19, 1991, RTC-Branch 95 rendered its Decision[18] in Civil Case No. Q-28580, against Emilia M. Ching, Yee L.
Ching, and the spouses Go (Emilia M. Ching, et al.). It found that Muozs signature on the Deed of Absolute Sale dated
December 28, 1972 was forged; that Muoz never sold the subject property to her sister, Emilia M. Ching; and that the
spouses Go were not innocent purchasers for value of the subject property. The fallo of the said decision reads:

WHEREFORE, judgment is hereby rendered dismissing for lack of merit [Emilia M. Ching, et al.s] respective
counterclaims, cross-claims, and counter-cross-claim, declaring as null and void ab initio the following documents, to
wit: (a) Deed of Absolute Sale dated December 28, 1972, copy of which is marked in evidence as Exh. M; (b) TCT No.
186366 of the Registry of Deeds for Quezon City, copy of which is marked in evidence as Exh. N; (c) Deed of Absolute
Sale dated July 16, 1979, copy of which is marked in evidence as Exh. 3; and, (d) TCT No. 258977 of the Registry of Deeds
for Metro Manila District III, copy of which is marked in evidence as Exh. 4, and directing defendant Register of Deeds of
Quezon City to cancel from the records of the subject property the registrations of all the said documents and to restore
and revive, free from all liens and encumbrances, TCT No. 186306 of the Registry of Deeds for Quezon City, copy of
which is marked in evidence as Exh. L, as well as ordering defendants Emilia M. Ching, Go Song and Tan Sio Kien jointly
and severally to pay [Muoz] the sum of P50,000.00 as and for attorneys fees and to pay the costs of suit. The court also
hereby dismisses the rest of the claims in [Muozs] complaint, there being no satisfactory warrant therefor.[19]

Emilia M. Ching, et al.s, appeal of the foregoing judgment of the RTC-Branch 95 was docketed as CA-G.R. CV No. 33811
before the Court of Appeals. In its Decision[20] dated March 4, 1993, the appellate court not only affirmed the appealed
judgment, but also ordered the spouses Go and their successors-in-interest and assigns and those acting on their behalf
to vacate the subject property, to wit:

WHEREFORE, premises considered, the decision appealed from is AFFIRMED, with costs against [Emilia M. Ching, et al.].
The writ of preliminary mandatory injunction issued on December 17, 1979 is hereby set aside and declared dissolved.
Defendants-appellants Go and Tan, their successors-in-interest and assigns and those acting on their behalf, are ordered
to vacate the disputed premises and to deliver the same to [Muoz] immediately upon receipt of this decision.[21]

Emilia L. Ching, et al., filed before this Court a motion for extension of time to file their petition for review, which was
assigned the docket number G.R. No. 109260. However, they failed to file their intended petition within the extended
period which expired on April 23, 1993. In a Resolution[22] dated July 12, 1993, the Court declared G.R. No. 109260
terminated. The Resolution dated July 12, 1993 of the Court in G.R. No. 109260 became final and executory on July 15,
1993 and was entered in the Book of Entries of Judgments on even date.[23]

More than two months later, on September 20, 1993, the RTC-Branch 95 issued a writ of execution to implement the
judgment in Civil Case No. Q-28580.

The spouses Chan, who bought the subject property from BPI Family, then came forward and filed before the RTC-
Branch 95 on October 22, 1993 an Urgent Motion to Stop Execution as Against Spouses Samuel Go Chan and Aida
Chan,[24] opposing the writ of execution issued in Civil Case No. Q-28580. The spouses Chan asserted ownership and
possession of the subject property on the basis of a clean title registered in their names under TCT No. 53297. The
spouses Chan further contended that the final judgment in Civil Case No. Q-28580 could not be executed against them
since they were not parties to the said case; they were not successors-in-interest, assigns, or acting on behalf of the
spouses Go; and they purchased the subject property from BPI Family without any notice of defect in the latters title.
It was only at this point that Muoz, upon her own inquiry, discovered the cancellation on October 28, 1982 of her
adverse claim and notice of lis pendens annotated on the spouses Gos TCT No. 258977, and the subsequent events that
led to the transfer and registration of the title to the subject property from the spouses Go, to BPI Family, and finally, to
the spouses Chan.

In its Order[25] dated December 28, 1993, the RTC-Branch 95 denied the spouses Chans urgent motion to stop the
execution. According to the RTC-Branch 95, the photocopy of TCT No. 370364 in the name of BPI Family, submitted by
the spouses Chan with their motion, could hardly be regarded as satisfactory proof that Muozs adverse claim and notice
of lis pendens annotated therein were also missing from the original copy of said certificate of title. Muozs adverse claim
and notice of lis pendens were annotated on TCT No. 258977 in the spouses Gos names as P.E.-8078 and P.E.-8178,
respectively. So when TCT No. 258977 of the spouses Go was cancelled and TCT No. 370364 was issued to BPI Family, it
could be presumed that the Register of Deeds regularly performed his official duty by carrying over Muozs adverse claim
and notice of lis pendens to TCT No. 370364. In addition, the RTC-Branch 95 pointed out that in this jurisdiction, the
entry of the notice of lis pendens in the day book of the Register of Deeds was already sufficient notice to the whole
world of the dispute over the subject property, and there was no more need to annotate the same on the owners
duplicate of the certificate of title. Finally, the RTC-Branch 95 held that TCT No. RT-54376 (370364) of BPI Family and TCT
No. 53297 of the spouses Chan shall be subject to the reservation under Section 7 of Republic Act No. 26[26] [t]hat
certificates of title reconstituted extrajudicially, in the manner stated in sections five and six hereof, shall be without
prejudice to any party whose right or interest in the property was duly noted in the original, at the time it was lost or
destroyed, but entry or notation of which has not been made on the reconstituted certificate of title. Thus, the spouses
Chan were deemed to have taken the disputed property subject to the final outcome of Civil Case No. Q-28580.

On January 3, 1994, the RTC-Branch 95 issued an Alias Writ of Execution.[27] On January 10, 1994, the writ was
enforced, and possession of the subject property was taken from the spouses Chan and returned to Muoz.[28] In its
Orders dated April 8, 1994 and June 17, 1994, the RTC-Branch 95 denied the spouses Chans motion for reconsideration
and notice of appeal, respectively.[29]

G.R. No. 142676

Pending resolution by the RTC-Branch 95 of the spouses Chans motion for reconsideration and notice of appeal in Civil
Case No. Q-28580, Muoz instituted before the MeTC on February 4, 1994 a Complaint for Forcible Entry with Prayer for
Preliminary Mandatory Injunction[30] against Samuel Go Chan and Atty. Yabut, docketed as Civil Case No. 8286. Muoz
alleged in her complaint that she had been in actual and physical possession of the subject property since January 10,
1994. She hired a caretaker and two security guards for the said property. On February 2, 1994, Samuel Go Chan and
Atty. Yabut, along with 20 other men, some of whom were armed, ousted Muoz of possession of the subject property by
stealth, threat, force, and intimidation. Muoz prayed for the issuance of a writ of preliminary mandatory injunction
directing Samuel Go Chan and Atty. Yabut and all persons claiming right under them to vacate the subject property.
Muoz additionally prayed for judgment making the mandatory injunction permanent and directing Samuel Go Chan and
Atty. Yabut to pay Muoz: (1) compensation for the unlawful occupation of the subject property in the amount of
P50,000.00 per month, beginning February 2, 1994 until the said property is fully and completely turned over to Muoz;
(2) attorneys fees in the amount of P50,000.00, plus P1,500.00 per court appearance of Muozs counsel; and (3) costs of
suit.
Samuel Go Chan and Atty. Yabut denied Muozs allegations, insisting that Samuel Go Chan is the valid, lawful, and true
legal owner and possessor of the subject property. Samuel Go Chan and Atty. Yabut averred that the Turn-Over of
Possession and Receipt of Possession dated January 10, 1994 attached to Muozs complaint as proof that the subject
property had been placed in her possession is a falsified document. The Writ of Execution issued on September 20, 1993
in Civil Case No. Q-28580 had already expired and the Sheriffs Return on the Writ another document purporting to show
that possession of the subject property was turned-over to Muoz on January 10, 1994 was then being challenged in a
complaint before the Office of Deputy Court Administrator Reynaldo L. Suarez of the Supreme Court. Samuel Go Chans
possession of the subject property has never been interrupted. His sister, Cely Chan, resided at the subject property and
was never removed therefrom. On February 2, 1994, Atty. Yabut was at the subject property only to protect the rights
and interest of his client, Samuel Go Chan, and since the latters possession of the subject property had never been
interrupted, Atty. Yabut entered the same peacefully, without intimidation, force, or stealth. The other people at the
subject property on February 2, 1994 were there to attend the services at the Buddhist Temple which occupied the
fourth floor of the building erected by the spouses Chan on the subject property. Samuel Go Chan and Atty. Yabut, thus,
asked the MeTC to dismiss Muozs complaint for lack of merit and legal basis.[31]

The MeTC received evidence from the parties on whether a writ of preliminary injunction should be issued, as prayed for
by Muoz. In its Order dated May 16, 1994, the MeTC adjudged that the final judgment in Civil Case No. Q-28580 was
already executed against the spouses Chan and there was, indeed, a turn-over of possession of the subject property to
Muoz. Accordingly, the MeTC granted Muozs prayer for the issuance of a writ of preliminary mandatory injunction,
restoring possession of the subject property to Muoz.

Samuel Go Chan and Atty. Yabut questioned the foregoing MeTC order through a Petition for Certiorari with Prayer for
Temporary Restraining Order and Writ of Preliminary Injunction[32] before the RTC-Branch 88, which was docketed as
Civil Case No. Q-94-20632. They asserted that they were not bound by the execution of the final judgment of RTC-
Branch 95 in Civil Case No. Q-28580 as they were not parties to the said case. Muoz, on the other hand, argued that the
MeTC Order of May 16, 1994 was an interlocutory order, and under Section 19 of the Rules of Summary Procedure, a
petition for certiorari against an interlocutory order issued by the court is one of the prohibited pleadings and motions
in summary proceedings.

In its Order dated June 10, 1994, the RTC-Branch 88 issued a writ of preliminary injunction to enjoin the implementation
of the MeTC Order dated May 16, 1994.

On August 5, 1994, the RTC-Branch 88 issued another Order resolving Muozs motion to dismiss the petition for certiorari
in Civil Case No. Q-94-20632, motion for reconsideration of the Order dated June 10, 1994 of RTC-Branch 88 granting the
issuance of a writ of preliminary injunction, and motion to resolve with additional grounds for dismissal. According to
the RTC-Branch 88, the MeTC failed to distinguish the issue of finality of the judgment of the RTC-Branch 95 in Civil Case
No. Q-28580 from the assertions of Samuel Go Chan and Atty. Yabut that the spouses Chan are not covered by said final
judgment because they are not successors-in-interest, assigns, or privies of the spouses Go and they are purchasers of
the subject property in good faith. The issue of whether the final judgment in Civil Case No. Q-28580 extended to the
spouses Chan was then still being litigated in the same case before RTC-Branch 95, where the spouses Chans motion for
reconsideration of the denial of their notice of appeal was pending. The RTC-Branch 88 further found that the MeTC
committed grave abuse of discretion in not dismissing Muozs complaint for forcible entry on the ground of lis pendens,
as the issue as to who between Muoz and the spouses Chan had the better right to possession of the subject property
was the subject of the pending proceeding in Civil Case No. Q-28580 before the RTC-Branch 95. In the end, the RTC-
Branch 88 decreed:

WHEREFORE, premises considered, the Court renders judgment

(a) Denying the motion to dismiss of respondent Muoz for lack of merit;

(b) Denying the motion for reconsideration of respondent Muoz for the recall and/or setting aside of the writ of
preliminary injunction granted to petitioners;

(c) Declaring the Order dated May 16, 1994 of Public respondent Hon. Elsa de Guzman in Civil Case No. 8286 illegal and
therefore null and void; and

(d) Dismissing the ejectment suit in Civil Case No. 8286 on ground of lis pendens.

Without pronouncement as to costs.[33]

Muoz appealed the Orders dated June 10, 1994 and August 5, 1994 of RTC-Branch 88 before the Court of Appeals. Her
appeal was docketed as CA-G.R. SP No. 35322. Aside from the nullification of the two orders, Muoz additionally prayed
for the dismissal from the service of the RTC-Branch 88 presiding judge and the disbarment of Atty. Yabut.

The Court of Appeals, in its Decision dated July 21, 1995, sustained the appealed orders of RTC-Branch 88. The Court of
Appeals held that the MeTC should have dismissed the forcible entry case on the ground of lis pendens; that the spouses
Chan were not parties in Civil Case No. Q-28580, and impleading them only in the execution stage of said case vitiated
their right to due process; that the order of the RTC-Branch 95 involving the spouses Chan in Civil Case No. Q-28580 was
null and void, considering that they are strangers to the case, and they are innocent purchasers for value of the subject
property; that the notice of lis pendens was already cancelled from the spouses Gos certificate of title at the time they
mortgaged the subject property to BPI Family; and that the title to the subject property was already free of any and all
liens and encumbrances when the spouses Chan purchased the said property from BPI Family. The Court of Appeals, in
its Resolution dated March 9, 2000, denied Muozs motion for reconsideration.

G.R. No. 146718

Meanwhile, Muoz filed before the RTC-Branch 95 in Civil Case No. Q-28580 a Motion to Cite the Register of Deeds in
Contempt of Court for the failure of the Register of Deeds to restore Muozs TCT No. 186306 despite having been served
with a copy of the writ of execution on October 11, 1993. In its Judgment (on the Contempt Proceedings against the
Register of Deeds of Quezon City Samuel C. Cleofe)[34] dated March 18, 1994, the RTC-Branch 95 denied Muozs motion,
convinced that the Register of Deeds had a valid excuse for his inability to implement the served writ. The Register of
Deeds could not cancel the spouses Chans TCT No. 53297, the subsisting certificate of title over the subject property,
absent any authority or directive for him to do so. The directive in the final judgment in Civil Case No. Q-28580 and the
writ of execution for the same only pertained to the cancellation of the spouses Gos TCT No. 258977.

Thereafter, Muoz filed a Motion for Contempt against the spouses Chan and a Second Motion for Contempt against
Samuel Go Chan and Atty. Yabut. Muoz also filed a Motion for an Alias Writ of Execution and Application for Surrender
of the Owners Duplicate Copy of TCT No. 53297,[35] in which she prayed for the issuance of an alias writ of execution
directing the Register of Deeds not only to cancel TCT No. 258977 and all documents declared null and void ab initio in
the dispositive portion of the Decision[36] dated July 19, 1991 of RTC-Branch 95 in Civil Case No. Q-28580, and to restore
and revive, free from all liens and encumbrances Muozs TCT No. 186306, but likewise to cancel the present certificate of
title covering the subject property, TCT No. 53297.

In its Order dated August 21, 1995, the RTC-Branch 95 denied all of Muozs aforementioned motions. The RTC-Branch 95
was of the view that Samuel Go Chans title should be litigated in another forum, not in Civil Case No. Q-28580 where the
judgment had already become final and executory. The RTC-Branch 95 also stressed that since the judgment in Civil Case
No. Q-28580 had long become final and executory, it could no longer be changed or amended except for clerical error or
mistake. Accordingly, the RTC-Branch 95 resolved as follows:

1. Ordering, as it hereby orders, the denial of [Muozs] first and second motions for contempt and hereby absolves
respondents Samuel Go Chan, Celia Chan, Atty. Victoriano R. Yabut, Jr., and several John Does of the Contempt Charges
against them.

2. Ordering, as it hereby orders, the issuance of an alias writ of execution directing the Courts Deputy Sheriff:

(a) Defendants Go Song and Tan Sio Kien, their successors-in-interest and assigns and those acting on their
behalf to vacate the disputed premises and deliver the same to [Muoz];

(b) Defendant Register of Deeds of Quezon City to cancel from the records of the subject property the
registration of all the following documents, to wit: (1) Deed of Absolute Sale dated December 28, 1972; (2) Transfer
Certificate of Title (TCT) No. 186366 of the Register of Deeds of Quezon City; (3) Deed of Absolute Sale dated July 16,
1979; and (4) TCT No. 258977 of the Registry of Deeds for Metro Manila II, and to restore and revive, free from all liens
and encumbrances TCT No. 186306 of the Registry of Deeds for Quezon City; and

(c) Defendants Emilia M. Ching, Go Song and Tan Sio Kien jointly and severally to pay [Muoz] the sum of
P50,000.00 as and for attorneys fees and to pay the cost of suit.[37]
Unrelenting, Muoz filed a Motion for Clarificatory Order, pointing out that the spouses Chan are the present occupants
of the subject property. The Order dated August 21, 1995 of the RTC-Branch 95 directed the deputy sheriff to deliver the
subject property to Muoz, and this could not be done unless the spouses Chan are evicted therefrom. Resultantly, Muoz
prayed that a clarificatory order be made categorically stating that the spouses Samuel Go Chan and Aida C. Chan, and
all persons claiming right under them, are likewise evicted from the subject premises pursuant to the Order of 21 August
1995.[38]

Once more, the RTC-Branch 95 denied Muozs motion in its Order dated October 3, 1995. The RTC-Branch 95 reiterated
the rule that after the judgment had become final, only clerical errors, as distinguished from substantial errors, can be
amended by the court. Furthermore, when the decision or judgment sought to be amended is promulgated by an
appellate court, it is beyond the power of the trial court to change, amplify, enlarge, alter, or modify. Ultimately, the
RTC-Branch 95 pronounced that it was restrained x x x to consider as mere clerical error the exclusion of spouses Samuel
Go Chan and Aida C. Chan in the Decision of the Court dated July 19, 1991, a final judgment, which judgment cannot
now be made to speak a different language.[39]

Attributing grave abuse of discretion on the part of the RTC-Branch 95 in issuing its Orders dated August 21, 1995 and
October 3, 1995, Muoz filed before this Court a Petition for Certiorari and Mandamus, which was remanded to the Court
of Appeals in observance of the hierarchy of courts, where it was docketed as CA-G.R. SP No. 40019. The Court of
Appeals promulgated its Decision on September 29, 2000 dismissing Muozs petition. The Court of Appeals agreed with
the RTC-Branch 95 that the spouses Chan could not be covered by the alias writ of execution considering that they were
not impleaded in Civil Case No. Q-28580. The cancellation of TCT No. 53297 in the spouses Chans names could not be
done apart from a separate action exclusively for that matter. The spouses Chan are deemed buyers in good faith and
for value as the certificate of title delivered to them by BPI Family was free from any liens or encumbrances or any mark
that would have raised the spouses Chans suspicions. Every person dealing with registered lands may safely rely on the
correctness of the certificate of title of the vendor/transferor, and he is not required to go beyond the certificate and
inquire into the circumstances culminating in the vendors acquisition of the property. The Court of Appeals denied
Muozs motion for reconsideration in a Resolution dated January 5, 2001.

Muoz comes before this Court via the present consolidated petitions.

Muoz posits that the final judgment and writ of execution of RTC-Branch 95 in Civil Case No. Q-28580 bind not only
Emilia M. Ching and the spouses Go, but also their successors-in-interest, assigns, or persons acting on their behalf,
namely, BPI Family and spouses Chan. The spouses Chan cannot be deemed innocent purchasers for value of the
property since the cancellation of the adverse claim and notice of lis pendens on the spouses Gos TCT No. 258977 is
completely null and void.

Muoz further argues that the MeTC Order dated May 16, 1994 in Civil Case No. 8286 correctly ordered the issuance of a
writ of preliminary mandatory injunction restoring possession of the subject property to her, as she had already
acquired prior possession of the said property upon the execution of the final judgment in Civil Case No. Q-28580. Also,
the spouses Chans petition for certiorari before the RTC-Branch 88, docketed as Civil Case No. Q-94-20632, challenging
the Order dated May 16, 1994 of the MeTC in Civil Case No. 8286, is a prohibited pleading under the Rules of Summary
Procedure; and the RTC-Branch 88 and the Court of Appeals should be faulted for giving due course to the said petition
even in the absence of jurisdiction.
On the other hand, in their comments to the two petitions at bar, the spouses Chan, Atty. Yabut, and BPI Family assert
that given the peculiar factual circumstances of the case, RTC-Branch 88 was justified in taking cognizance of Samuel Go
Chan and Atty. Yabuts petition for certiorari in Civil Case No. Q-94-20632; that Muoz is estopped from questioning the
jurisdiction of RTC-Branch 88 after participating in the proceedings in Civil Case No. Q-94-20632; that the spouses Chans
title to the subject property is not affected by the final judgment of RTC-Branch 95 in Civil Case No. Q-28580, and the
said judgment cannot be executed against the spouses Chan since they are neither parties to the case, nor are they the
successors-in-interest, assigns, or persons acting on behalf of Emilia M. Ching or the spouses Go; that BPI Family and
consequently, the spouses Chan, obtained title to the subject property as innocent purchasers for value, there being no
notice of any infirmity in said title; and that Muoz is guilty of forum shopping for filing her petition in G.R. No. 146718
even while her petition in G.R. No. 142676 is still pending.

II

RULING

For the sake of expediency, we will be discussing first the merits of the petition in G.R. No. 146718.

G.R. No. 146718

Civil Case No. Q-28580 involved Muozs complaint for the annulment of the deeds of absolute sale dated December 28,
1972[40] and July 16, 1979,[41] the cancellation of the spouses Gos TCT No. 258977, and the restoration and revival of
Muozs TCT No. 186306. The final judgment of RTC-Branch 95 in Civil Case No. Q-28580 was in favor of Muoz and against
Emilia M. Ching and the spouses Go. The problem arose when during the pendency of the said case, title and possession
of the subject property were transferred from the spouses Go, to BPI Family, and finally, to the spouses Chan. BPI Family
and the spouses Chan were never impleaded as parties and were not referred to in the dispositive portion of the final
judgment in Civil Case No. Q-28580.

Muoz questions in G.R. No. 146718: (1) the Order dated August 21, 1995 denying her Motion for Contempt against the
spouses Chan, Second Motion for Contempt against Samuel Go Chan and Atty. Yabut, and Motion for an Alias Writ of
Execution and Application for Surrender of the Owners Duplicate Copy of TCT No. 53297; and (2) the Order dated
October 3, 1995 denying her Motion for Clarificatory Order, both issued by the RTC-Branch 95 in Civil Case No. Q-28580,
and upheld by the Court of Appeals in CA-G.R. SP No. 40019. In sum, Muoz was seeking in her aforementioned motions:
(1) a categorical order from the RTC-Branch 95 that the final judgment in Civil Case No. Q-28580 be executed against the
spouses Chan; and (2) the surrender and cancellation of the spouses Chans TCT No. 53297 and restoration of Muozs TCT
No. 186306.

There is no merit in Muozs petition in G.R. No. 146718.

Civil Case No. Q-28580 is an action for reconveyance of real property. In Heirs of Eugenio Lopez, Sr. v. Enriquez,[42] we
described an action for reconveyance as follows:
An action for reconveyance is an action in personam available to a person whose property has been wrongfully
registered under the Torrens system in anothers name. Although the decree is recognized as incontrovertible and no
longer open to review, the registered owner is not necessarily held free from liens. As a remedy, an action for
reconveyance is filed as an ordinary action in the ordinary courts of justice and not with the land registration court.
Reconveyance is always available as long as the property has not passed to an innocent third person for value. A notice
of lis pendens may thus be annotated on the certificate of title immediately upon the institution of the action in court.
The notice of lis pendens will avoid transfer to an innocent third person for value and preserve the claim of the real
owner.[43] (Emphases ours.)

The rule is that: (1) a judgment in rem is binding upon the whole world, such as a judgment in a land registration case or
probate of a will; and (2) a judgment in personam is binding upon the parties and their successors-in-interest but not
upon strangers. A judgment directing a party to deliver possession of a property to another is in personam; it is binding
only against the parties and their successors-in-interest by title subsequent to the commencement of the action. An
action for declaration of nullity of title and recovery of ownership of real property, or re-conveyance, is a real action but
it is an action in personam, for it binds a particular individual only although it concerns the right to a tangible thing. Any
judgment therein is binding only upon the parties properly impleaded.[44]

Since they were not impleaded as parties and given the opportunity to participate in Civil Case No. Q-28580, the final
judgment in said case cannot bind BPI Family and the spouses Chan. The effect of the said judgment cannot be extended
to BPI Family and the spouses Chan by simply issuing an alias writ of execution against them. No man shall be affected
by any proceeding to which he is a stranger, and strangers to a case are not bound by any judgment rendered by the
court. In the same manner, a writ of execution can be issued only against a party and not against one who did not have
his day in court. Only real parties in interest in an action are bound by the judgment therein and by writs of execution
issued pursuant thereto.[45]

A similar situation existed in Dino v. Court of Appeals,[46] where we resolved that:

As the registered owner of the subject property, petitioners are not bound by decision in Civil Case No. R-18073 for they
were never summoned in said case and the notice of lis pendens annotated on TCT No. 73069 was already cancelled at
the time petitioners purchased the subject property. While it is true that petitioners are indispensable parties in Civil
Case No. R-18073, without whom no complete relief could be accorded to the private respondents, the fact still remains
that petitioners were never actually joined as defendants in said case. Impleading petitioners as additional defendants
only in the execution stage of said case violated petitioners right to due process as no notice of lis pendens was
annotated on the existing certificate of title of said property nor were petitioners given notice of the pending case,
therefore petitioners remain strangers in said case and the Order of the trial court involving them is null and void,
considering that petitioners are innocent purchasers of the subject property for value.[47]

We further stress that Section 48 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree,
clearly provides that [a] certificate of title shall not be subject to collateral attack. It cannot be altered, modified or
cancelled except in a direct proceeding in accordance with law. Herein, several Torrens titles were already issued after
the cancellation of Muozs. Certificates of title had been successively issued to Emilia M. Ching, spouses Go, BPI Family,
and spouses Chan. Civil Case No. Q-28580, in which a final judgment had already been rendered, specifically challenged
the validity of the certificates of title of Emilia M. Ching and the spouses Go only. To have the present certificate of title
of the spouses Chan cancelled, Muoz must institute another case directly attacking the validity of the same.

The fact that the titles to the subject property of Emilia M. Ching and the spouses Go were already declared null and
void ab initio by final judgment in Civil Case No. Q-28580 is not enough, for it does not automatically make the
subsequent titles of BPI Family and the spouses Chan correspondingly null and void ab initio.

It has long been ingrained in our jurisprudence that a void title may become the root of a valid title if the derivative title
was obtained in good faith and for value. Following the principle of indefeasibility of a Torrens title, every person dealing
with registered lands may safely rely on the correctness of the certificate of title of the vendor/transferor, and he is not
required to go beyond the certificate and inquire into the circumstances culminating in the vendors acquisition of the
property. The rights of innocent third persons who relied on the correctness of the certificate of title and acquired rights
over the property covered thereby cannot be disregarded and the courts cannot order the cancellation of such
certificate for that would impair or erode public confidence in the Torrens system of land registration.[48]

Hence, we pronounced in Republic v. Agunoy, Sr.[49]:

Here, it bears stressing that, by petitioner's own judicial admission, the lots in dispute are no longer part of the public
domain, and there are numerous third, fourth, fifth and more parties holding Torrens titles in their favor and enjoying
the presumption of good faith. This brings to mind what we have reechoed in Pino v. Court of Appeals and the cases
therein cited:

[E]ven on the supposition that the sale was void, the general rule that the direct result of a previous illegal contract
cannot be valid (on the theory that the spring cannot rise higher than its source) cannot apply here for We are
confronted with the functionings of the Torrens System of Registration. The doctrine to follow is simple enough: a
fraudulent or forged document of sale may become the ROOT of a valid title if the certificate of title has already been
transferred from the name of the true owner to the name of the forger or the name indicated by the forger.[50]
(Emphases ours.)

Although the RTC-Branch 95 had declared with finality in Civil Case No. Q-28580 that the titles of Emilia M. Ching and the
spouses Go were null and void, there is yet no similar determination on the titles of BPI Family and the spouses Chan.
The question of whether or not the titles to the subject property of BPI Family and the spouses Chan are null and void,
since they are merely the successors-in-interest, assigns, or privies of Emilia M. Ching and the spouses Go, ultimately
depends on the issue of whether or not BPI Family and the spouses Chan obtained their titles to the subject property in
bad faith, i.e., with notice of Muozs adverse claim and knowledge of the pendency of Civil Case No. Q-28580. The latter
is a factual issue on which we cannot rule in the present petition, not only because we are not a trier of facts, but more
importantly, because it was not among the issues raised and tried in Civil Case No. Q-28580.

In support of her prayer for an alias writ of execution against BPI Family and the spouses Go, Muoz cites our ruling in
Calalang v. Register of Deeds of Quezon City,[51] in relation to De la Cruz v. De la Cruz.[52]

De la Cruz is an action for reconveyance of Lot 671 founded on breach of trust filed by Augustina de la Cruz, et al.,
against Lucia dela Cruz (Lucia) and Iglesia Ni Kristo (INK). We upheld the validity of the sale of Lot 671 by Lucia to INK,
and thereby validated the title of INK to the said property.

Calalang actually involved two petitions: (1) a special civil action for certiorari and prohibition originally filed by Virginia
Calalang (Calalang) before this Court, and (2) a petition for injunction with damages originally filed by Augusto M. de
Leon (De Leon), et al., before the RTC and docketed as Civil Case No. Q-45767. Calalang and De Leon, et al., assert titles
that were adverse to that of INK. De Leon, et al., in particular, claim that their titles to Lot 671 were derived from
Amando Clemente. Calalang and De Leon, et al., sought from the court orders enjoining INK from building a fence to
enclose Lot 671; requiring the Administrator of the National Land Titles and Deeds Registration Administration (NLTDRA)
to conduct an investigation of the anomaly regarding Lucias reconstituted title to Lot 671; and dismissing the
proceedings instituted by the Register of Deeds for the cancellation of their titles. We dismissed the petitions of Calalang
and De Leon, et al., on the ground of res judicata, the legality or validity of the title of INK over Lot 671 had been settled
with finality in De la Cruz. De la Cruz was applied to Calalang and De Leon, et al., since the facts on which such decision
was predicated continued to be the facts on which the petitions of Calalang and De Leon, et al., were based.

Muozs reliance on Calalang is misplaced. There are substantial differences in the facts and issues involved in Calalang
and the present case.

In Calalang, there is duplication or overlapping of certificates of title issued to different persons over the same property.
We already upheld in De la Cruz the validity of the certificate of title of INK over Lot 671, which effectively prevents us
from recognizing the validity of any other certificate of title over the same property. In addition, Lucia, the predecessor-
in-interest of INK, had her certificate of title judicially reconstituted. The judicial reconstitution of title is a proceeding in
rem, constituting constructive notice to the whole world. Hence, we rejected the petitions of Calalang and De Leon, et
al., to enjoin INK from building a fence enclosing Lot 671, and the concerned public authorities from instituting
appropriate proceedings to have all other certificates of title over Lot 671 annulled and cancelled.

In the instant case, there has been no duplication or overlapping of certificates of title. The subject property has always
been covered by only one certificate of title at a time, and at present, such certificate is in the spouses Chans names. As
we have previously discussed herein, Muoz cannot have the spouses Chans TCT No. 53297 cancelled by a mere motion
for the issuance of an alias writ of execution in Civil Case No. Q-28580, when the spouses Chan were not parties to the
case. Civil Case No. Q-28580 was a proceeding in personam, and the final judgment rendered therein declaring null and
void the titles to the subject property of Emilia M. Ching and the spouses Go should bind only the parties thereto.
Furthermore, despite the void titles of Emilia M. Ching and the spouses Go, the derivative titles of BPI Family and the
spouses Chan may still be valid provided that they had acquired the same in good faith and for value.
More in point with the instant petition is Pineda v. Santiago.[53] Pineda still involved Lot 671. INK sought from the RTC a
second alias writ of execution to implement the judgment in Calalang against Conrado Pineda (Pineda), et. al. In
opposing the issuance of such writ, Pineda, et al., asserted that they held titles to Lot 671 adverse to those of Lucia and
INK and that they were not parties in De la Cruz or in Calalang. In its assailed order, the RTC granted the second alias writ
of execution on the basis that the issue of ownership of Lot 671 was already determined with finality in favor of Lucia
and INK. The writ ordered the deputy sheriff to eject Pineda, et al., from Lot 671. When the matter was brought before
us, we annulled the assailed order as the writ of execution issued was against Pineda, et al., who were not parties to Civil
Case No. Q-45767, the ejectment suit instituted by De Leon, et al. We elaborated in Pineda that:

Being a suit for injunction, Civil Case No. Q-45767 partakes of an action in personam. In Domagas v. Jensen, we have
explained the nature of an action in personam and enumerated some actions and proceedings which are in personam,
viz:

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in
personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in
personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the
jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek
to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in
personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of the
defendant. Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a
pecuniary liability on him. An action in personam is said to be one which has for its object a judgment against the
person, as distinguished from a judgment against the propriety to determine its state. It has been held that an action in
personam is a proceeding to enforce personal rights or obligations; such action is brought against the person. As far as
suits for injunctive relief are concerned, it is well-settled that it is an injunctive act in personam. In Combs v. Combs, the
appellate court held that proceedings to enforce personal rights and obligations and in which personal judgments are
rendered adjusting the rights and obligations between the affected parties is in personam. Actions for recovery of real
property are in personam.

The respondent judge's jurisdiction is, therefore, limited to the parties in the injunction suit. To stress, the petition for
injunction, docketed as Civil Case No. Q-45767, was filed only by therein petitioners Augusto M. de Leon, Jose de Castro,
Jose A. Panlilio, Felicidad Vergara Vda. De Pineda, Fernando L. Vitug I, Fernando M. Vitug II, Fernando M. Vitug III, and
Faustino Tobia, and later amended to include Elena Ostrea and Feliza C. Cristobal-Generoso as additional petitioners
therein, against Bishop Erao Manalo, in his capacity as titular and spiritual head of I.N.K. Herein petitioners Conrado
Pineda, et al. never became parties thereto. Any and all orders and writs of execution, which the respondent judge may
issue in that case can, therefore, be enforced only against those parties and not against the herein petitioners Conrado
Pineda, et al. In issuing the assailed Order dated 22 April 1998, which directed the issuance of the 2nd Alias Writ of
Execution to eject non-parties (herein petitioners), the respondent judge clearly went out of bounds and committed
grave abuse of discretion.

The nature of the injunction suit Civil Case No. Q-45767 as an action in personam in the RTC remains to be the same
whether it is elevated to the CA or to this Court for review. An action in personam does not become an action in rem just
because a pronouncement confirming I.N.K.'s title to Lot 671 was made by this Court in the Calalang decision. Final
rulings may be made by this Court, as the Highest Court of the Land, in actions in personam but such rulings are binding
only as against the parties therein and not against the whole world. Here lies another grave abuse of discretion on the
part of the respondent judge when he relied on the Calalang decision in his assailed Order dated 07 May 1998 as if it
were binding against the whole world, saying:

After evaluating the arguments of both parties, decisive on the incident is the decision of the Supreme Court in favor of
the respondent I.N.K., represented by its titular and spiritual head Bishop Erao G. Manalo, sustaining its ownership over
the subject Lot 671. This Court could do no less but to follow and give substantial meaning to its ownership which shall
include all dominical rights by way of a Writ of Execution. To delay the issuance of such writ is a denial of justice due the
I.N.K.

As a final word, this decision shall not be misinterpreted as disturbing or modifying our ruling in Calalang. The final ruling
on I.N.K.'s ownership and title is not at all affected. Private respondent I.N.K., as the true and lawful owner of Lot 671 as
ruled by the Court in Calalang, simply has to file the proper action against the herein petitioners to enforce its property
rights within the bounds of the law and our rules. I.N.K.'s recourse of asking for the issuance of an alias writ of execution
against the petitioners in Civil Case No. Q-45767 and the respondent judge's orders in said case, granting I.N.K.'s prayer
and enforcing the alias writ of execution against the present petitioners, constitutes blatant disregard of very
fundamental rules and must therefore be stricken down.[54] (Emphases ours.)

Consistent with Pineda, and as appositely recommended by the RTC-Branch 95 and the Court of Appeals in the present
case, Muozs legal remedy is to directly assail in a separate action the validity of the certificates of title of BPI Family and
the spouses Chan.

G.R. No. 142676

G.R. No. 142676 is Muozs appeal of the dismissal of Civil Case No. 8286, the forcible entry case she instituted against
Samuel Go Chan and Atty. Yabut before the MeTC.

There is forcible entry or desahucio when one is deprived of physical possession of land or building by means of force,
intimidation, threat, strategy or stealth. In such cases, the possession is illegal from the beginning and the basic inquiry
centers on who has the prior possession de facto. In filing forcible entry cases, the law tells us that two allegations are
mandatory for the municipal court to acquire jurisdiction: first, the plaintiff must allege prior physical possession of the
property, and second, he must also allege that he was deprived of his possession by any of the means provided for in
Section 1, Rule 70 of the Rules of Court, i.e., by force, intimidation, threat, strategy, or stealth. It is also settled that in
the resolution thereof, what is important is determining who is entitled to the physical possession of the property.
Indeed, any of the parties who can prove prior possession de facto may recover such possession even from the owner
himself since such cases proceed independently of any claim of ownership and the plaintiff needs merely to prove prior
possession de facto and undue deprivation thereof.[55]

Title is never in issue in a forcible entry case, the court should base its decision on who had prior physical possession.
The main thing to be proven in an action for forcible entry is prior possession and that same was lost through force,
intimidation, threat, strategy, and stealth, so that it behooves the court to restore possession regardless of title or
ownership.[56]

We more extensively discussed in Pajuyo v. Court of Appeals[57] that:

Ownership or the right to possess arising from ownership is not at issue in an action for recovery of possession. The
parties cannot present evidence to prove ownership or right to legal possession except to prove the nature of the
possession when necessary to resolve the issue of physical possession. The same is true when the defendant asserts the
absence of title over the property. The absence of title over the contested lot is not a ground for the courts to withhold
relief from the parties in an ejectment case.

The only question that the courts must resolve in ejectment proceedings is - who is entitled to the physical possession of
the premises, that is, to the possession de facto and not to the possession de jure. It does not even matter if a partys
title to the property is questionable, or when both parties intruded into public land and their applications to own the
land have yet to be approved by the proper government agency. Regardless of the actual condition of the title to the
property, the party in peaceable quiet possession shall not be thrown out by a strong hand, violence or terror. Neither is
the unlawful withholding of property allowed. Courts will always uphold respect for prior possession.

Thus, a party who can prove prior possession can recover such possession even against the owner himself. Whatever
may be the character of his possession, if he has in his favor prior possession in time, he has the security that entitles
him to remain on the property until a person with a better right lawfully ejects him. To repeat, the only issue that the
court has to settle in an ejectment suit is the right to physical possession.[58] (Emphases ours.)

Based on the foregoing, we find that the RTC-Branch 88 erred in ordering the dismissal of Civil Case No. 8286 even
before completion of the proceedings before the MeTC. At the time said case was ordered dismissed by RTC-Branch 88,
the MeTC had only gone so far as holding a hearing on and eventually granting Muozs prayer for the issuance of a writ of
preliminary mandatory injunction.

Muoz alleges in her complaint in Civil Case No. 8286 that she had been in prior possession of the subject property since
it was turned-over to her by the sheriff on January 10, 1994, pursuant to the Alias Writ of Execution issued by the RTC-
Branch 95 to implement the final judgment in Civil Case No. Q-28580. The factual issue of who was in prior possession of
the subject property should be litigated between the parties regardless of whether or not the final judgment in Civil Case
No. Q-28580 extended to the spouses Chan. Hence, the pendency of the latter issue in Civil Case No. Q-28580 before the
RTC-Branch 95 did not warrant the dismissal of Civil Case No. 8286 before the MeTC on the ground of litis pendentia.
The two cases could proceed independently of one another.

Samuel Go Chan and Atty. Yabut aver that the spouses Chan have never lost possession of the subject property since
acquiring the same from BPI Family in 1990. This is a worthy defense to Muozs complaint for forcible entry, which
Samuel Go Chan and Atty. Yabut should substantiate with evidence in the continuation of the proceedings in Civil Case
No. 8286 before the MeTC.
In addition, Civil Case No. 8286, a forcible entry case, is governed by the Revised Rule on Summary Procedure, Section 19
whereof provides:

SEC. 19. Prohibited pleadings and motions. The following pleadings, motions, or petitions shall not be allowed in the
cases covered by this Rule:

xxxx

(g) Petition for certiorari, mandamus, or prohibition against any interlocutory order issued by the court.

The purpose of the Rule on Summary Procedure is to achieve an expeditious and inexpensive determination of cases
without regard to technical rules. Pursuant to this objective, the Rule prohibits petitions for certiorari, like a number of
other pleadings, in order to prevent unnecessary delays and to expedite the disposition of cases.[59]

Interlocutory orders are those that determine incidental matters that do not touch on the merits of the case or put an
end to the proceedings.[60] An order granting a preliminary injunction, whether mandatory or prohibitory, is
interlocutory and unappealable.[61]

The writ of preliminary mandatory injunction issued by the MeTC in its Order dated May 16, 1994, directing that Muoz
be placed in possession of the subject property during the course of Civil Case No. 8286, is an interlocutory order.
Samuel Go Chan and Atty. Yabut assailed the said order before the RTC-Branch 88 via a petition for certiorari, docketed
as Civil Case No. Q-94-20632. The RTC-Branch 88 gave due course to said petition, and not only declared the MeTC
Order dated May 16, 1994 null and void, but went further by dismissing Civil Case No. 8286.

The prohibition in Section 19(g) of the Revised Rule on Summary Procedure is plain enough. Its further exposition is
unnecessary verbiage.[62] The petition for certiorari of Samuel Go Chan and Atty. Yabut in Civil Case No. Q-94-20632 is
clearly covered by the said prohibition, thus, it should have been dismissed outright by the RTC-Branch 88. While the
circumstances involved in Muozs forcible entry case against Samuel Go Chan and Atty. Yabut are admittedly very
peculiar, these are insufficient to except the petition for certiorari of Samuel Go Chan and Atty. Yabut in Civil Case No. Q-
94-20632 from the prohibition. The liberality in the interpretation and application of the rules applies only in proper
cases and under justifiable causes and circumstances. While it is true that litigation is not a game of technicalities, it is
equally true that every case must be prosecuted in accordance with the prescribed procedure to insure an orderly and
speedy administration of justice.[63]

Nonetheless, even though the peculiar circumstances extant herein do not justify the dismissal of Civil Case No. 8286,
they do require limiting pro hac vice the reliefs the MeTC may accord to Muoz in the event that she is able to
successfully prove forcible entry by Samuel Go Chan and Atty. Yabut into the subject property (i.e., that the sheriff
actually turned-over to Muoz the possession of the subject property on January 10, 1994, and that she was deprived of
such possession by Samuel Go Chan and Atty. Yabut on February 2, 1994 by means of force, intimidation, threat,
strategy, and stealth). Taking into account our ruling in G.R. No. 146718 that the final judgment in Civil Case No. Q-28580
does not extend to the spouses Chan, who were not impleaded as parties to the said case the MeTC is precluded from
granting to Muoz relief, whether preliminary or final, that will give her possession of the subject property. Otherwise, we
will be perpetuating the wrongful execution of the final judgment in Civil Case No. Q-28580. Based on the same reason,
Muoz can no longer insist on the reinstatement of the MeTC Order dated May 16, 1994 granting a preliminary
mandatory injunction that puts her in possession of the subject property during the course of the trial. Muoz though
may recover damages if she is able to prove wrongful deprivation of possession of the subject property from February 2,
1994 until the finality of this decision in G.R. No. 146718.

WHEREFORE, in view of the foregoing, we:

(1) GRANT Emerita Muozs petition in G.R. No. 142676. We REVERSE and SET ASIDE the Decision dated July 21, 1995 and
Resolution dated March 9, 2000 of the Court of Appeals in CA-G.R. SP No. 35322, which affirmed the Orders dated June
10, 1994 and August 5, 1994 of the Regional Trial Court, Branch 88 of Quezon City in Civil Case No. Q-94-20632. We
DIRECT the Metropolitan Trial Court, Branch 33 of Quezon City to reinstate Emerita Muozs complaint for forcible entry in
Civil Case No. 8286 and to resume the proceedings only to determine whether or not Emerita Muoz was forcibly
deprived of possession of the subject property from February 2, 1994 until finality of this judgment, and if so, whether
or not she is entitled to an award for damages for deprivation of possession during the aforementioned period of time;
and

(2) DENY Emerita Munozs petition in G.R. No. 146718 for lack of merit, and AFFIRM the Decision dated September 29,
2000 and Resolution dated January 5, 2001 of the Court of Appeals in CA-G.R. SP No. 40019, which in turn, affirmed the
Orders dated August 21, 1995 and October 3, 1995 of the Regional Trial Court, Branch 95 of Quezon City in Civil Case No.
Q-28580.

No pronouncement as to costs.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice
WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

PRESBITERO J. VELASCO, JR.

Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA

Chief Justice

[1] Rollo (G.R. No. 142676), pp. 67-74; penned by Associate Justice Jainal D. Rasul with Associate Justices Eubulo G.
Verzola and Eugenio S. Labitoria, concurring.

[2] Id. at 101.

[3] Id. at 75-94.

[4] Id. at 95-100.

[5] Rollo (G.R. No. 146718), pp. 61-72; penned by Associate Justice Eubulo G. Verzola with Associate Justices Marina L.
Buzon and Edgardo P. Cruz, concurring.

[6] Id. at 73.

[7] Id. at 127-130.

[8] Id. at 111-126.

[9] According to Yee L. Chings Answer with Cross-Claim in Civil Case No. Q-28580, he was out of the country at the time
he supposedly executed the Deed of Absolute Sale in Muozs favor. Emilia M. Ching was somehow able to make it appear
that her husband, Yee L. Ching, signed the said Deed of Absolute Sale. When Yee L. Ching confronted Emilia M. Ching
regarding the papers, Emilia M. Ching abandoned him. Nonetheless, Yee L. Ching ratified the transfer of the subject
property to Muoz (Rollo [G.R. No. 142676], pp. 111-112).

[10] Rollo (G.R. No. 142676), p. 102.

[11] Id. at 113.

[12] Rollo (G.R. No. 146718), p. 101.

[13] Id.
[14] Id. at 102-103.

[15] Id. at 104-105.

[16] Id. at 106-108.

[17] Id.

[18] Rollo (G.R. No. 142676), pp. 102-106.

[19] Id. at 106.

[20] Id. at 107-123.

[21] Id. at 123.

[22] Id. at 124.

[23] Id. at 125-126.

[24] Rollo (G.R. No. 146718), pp. 98-100.

[25] Rollo (G.R. No. 142676), p. 127.

[26] An Act Providing a Special Procedure for the Reconstitution of Torrens Certificate of Title Lost or Destroyed.

[27] Rollo (G.R. No. 142676), pp. 128-129.

[28] Id. at 130-134.

[29] Id. at 185-186.

[30] Id. at 137-145.

[31] Id. at 178-184.

[32] Id. at 146-156.

[33] Id. at 94.

[34] Rollo (G.R. No. 146718), p. 110.

[35] Id. at 111-126.

[36] Rollo (G.R. No. 142676), pp. 102-106.

[37] Rollo (G.R. No. 146718), p. 128.

[38] Id. at 293.

[39] Id. at 130.

[40] Purported sale of the subject property by Muoz to Emilia M. Ching.

[41] Purported sale of the subject property by Emilia M. Ching to the spouses Go.

[42] G.R. No. 146262, January 21, 2005, 449 SCRA 173.

[43] Id. at 190.

[44] Alonso v. Cebu Country Club, Inc., 426 Phil. 61, 86-87 (2002).

[45] Orquiola v. Court of Appeals, 435 Phil. 323, 332-333 (2002).

[46] G.R. No. 95921, September 2, 1992, 213 SCRA 422.

[47] Id. at 432-433.

[48] Heirs of Severa P. Gregorio v. Court of Appeals, 360 Phil. 753, 765 (1998).

[49] 492 Phil. 118 (2005), citing Pino v. Court of Appeals, G.R. No. 94114, June 19, 1991, 198 SCRA 434, 445; Philippine
National Bank v. Court of Appeals, G.R. No. 43972, July 24, 1990, 187 SCRA 735, 741; Duran v. Intermediate Appellate
Court, 223 Phil. 88, 93-94 (1985).

[50] Republic v. Agunoy, Sr., id. at 137-138.

[51] G.R. No. 76265, April 22, 1992, 208 SCRA 215 and G.R. No. 76265, March 11, 1994, 231 SCRA 88.

[52] 215 Phil. 593 (1984).

[53] G.R. No. 143482, April 13, 2007, 521 SCRA 47.

[54] Id. at 64-67.

[55] Baes v. Lutheran Church of the Philippines, 511 Phil. 458, 479-480 (2005).

[56] Domalsin v. Valenciano, G.R. No. 158687, January 25, 2006, 480 SCRA 115, 132.

[57] G.R. No. 146364, June 3, 2004, 430 SCRA 492.

[58] Id. at 510-511.

[59] Go v. Court of Appeals, 358 Phil. 214, 224 (1998).

[60] Silverio, Jr. v. Filipino Business Consultants, Inc., 504 Phil. 150, 158 (2005).

[61] United Coconut Planters Bank v. United Alloy Philippines Corporation, 490 Phil. 353, 363 (2005).

[62] Bayview Hotel, Inc. v. Court of Appeals, G.R. No. 119337, June 17, 1997, 273 SCRA 540, 547-548.

[63] Don Tino Realty and Development Corporation v. Florentino, 372 Phil. 882, 890-891 (1999).

SECOND DIVISION

JESSE U. LUCAS,

Petitioner,

- versus -
JESUS S. LUCAS,

Respondent.

G.R. No. 190710

Present:

CARPIO, J.,

Chairperson,

NACHURA,

PERALTA,

ABAD, and

MENDOZA, JJ.

Promulgated:

June 6, 2011

x----------------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Is a prima facie showing necessary before a court can issue a DNA testing order? In this petition for review on certiorari,
we address this question to guide the Bench and the Bar in dealing with a relatively new evidentiary tool. Assailed in this
petition are the Court of Appeals (CA) Decision[1] dated September 25, 2009 and Resolution dated December 17, 2009.

The antecedents of the case are, as follows:

On July 26, 2007, petitioner, Jesse U. Lucas, filed a Petition to Establish Illegitimate Filiation (with Motion for the
Submission of Parties to DNA Testing)[2] before the Regional Trial Court (RTC), Branch 72, Valenzuela City. Petitioner
narrated that, sometime in 1967, his mother, Elsie Uy (Elsie), migrated to Manila from Davao and stayed with a certain
Ate Belen (Belen) who worked in a prominent nightspot in Manila. Elsie would oftentimes accompany Belen to work. On
one occasion, Elsie got acquainted with respondent, Jesus S. Lucas, at Belens workplace, and an intimate relationship
developed between the two. Elsie eventually got pregnant and, on March 11, 1969, she gave birth to petitioner, Jesse U.
Lucas. The name of petitioners father was not stated in petitioners certificate of live birth. However, Elsie later on told
petitioner that his father is respondent. On August 1, 1969, petitioner was baptized at San Isidro Parish, Taft Avenue,
Pasay City. Respondent allegedly extended financial support to Elsie and petitioner for a period of about two years.
When the relationship of Elsie and respondent ended, Elsie refused to accept respondents offer of support and decided
to raise petitioner on her own. While petitioner was growing up, Elsie made several attempts to introduce petitioner to
respondent, but all attempts were in vain.

Attached to the petition were the following: (a) petitioners certificate of live birth; (b) petitioners baptismal certificate;
(c) petitioners college diploma, showing that he graduated from Saint Louis University in Baguio City with a degree in
Psychology; (d) his Certificate of Graduation from the same school; (e) Certificate of Recognition from the University of
the Philippines, College of Music; and (f) clippings of several articles from different newspapers about petitioner, as a
musical prodigy.

Respondent was not served with a copy of the petition. Nonetheless, respondent learned of the petition to establish
filiation. His counsel therefore went to the trial court on August 29, 2007 and obtained a copy of the petition.

Petitioner filed with the RTC a Very Urgent Motion to Try and Hear the Case. Hence, on September 3, 2007, the RTC,
finding the petition to be sufficient in form and substance, issued the Order[3] setting the case for hearing and urging
anyone who has any objection to the petition to file his opposition. The court also directed that the Order be published
once a week for three consecutive weeks in any newspaper of general circulation in the Philippines, and that the
Solicitor General be furnished with copies of the Order and the petition in order that he may appear and represent the
State in the case.

On September 4, 2007, unaware of the issuance of the September 3, 2007 Order, respondent filed a Special Appearance
and Comment. He manifested inter alia that: (1) he did not receive the summons and a copy of the petition; (2) the
petition was adversarial in nature and therefore summons should be served on him as respondent; (3) should the court
agree that summons was required, he was waiving service of summons and making a voluntary appearance; and (4)
notice by publication of the petition and the hearing was improper because of the confidentiality of the subject
matter.[4]

On September 14, 2007, respondent also filed a Manifestation and Comment on Petitioners Very Urgent Motion to Try
and Hear the Case. Respondent reiterated that the petition for recognition is adversarial in nature; hence, he should be
served with summons.

After learning of the September 3, 2007 Order, respondent filed a motion for reconsideration.[5] Respondent averred
that the petition was not in due form and substance because petitioner could not have personally known the matters
that were alleged therein. He argued that DNA testing cannot be had on the basis of a mere allegation pointing to
respondent as petitioners father. Moreover, jurisprudence is still unsettled on the acceptability of DNA evidence.
On July 30, 2008, the RTC, acting on respondents motion for reconsideration, issued an Order[6] dismissing the case. The
court remarked that, based on the case of Herrera v. Alba,[7] there are four significant procedural aspects of a
traditional paternity action which the parties have to face: a prima facie case, affirmative defenses, presumption of
legitimacy, and physical resemblance between the putative father and the child. The court opined that petitioner must
first establish these four procedural aspects before he can present evidence of paternity and filiation, which may include
incriminating acts or scientific evidence like blood group test and DNA test results. The court observed that the petition
did not show that these procedural aspects were present. Petitioner failed to establish a prima facie case considering
that (a) his mother did not personally declare that she had sexual relations with respondent, and petitioners statement
as to what his mother told him about his father was clearly hearsay; (b) the certificate of live birth was not signed by
respondent; and (c) although petitioner used the surname of respondent, there was no allegation that he was treated as
the child of respondent by the latter or his family. The court opined that, having failed to establish a prima facie case,
respondent had no obligation to present any affirmative defenses. The dispositive portion of the said Order therefore
reads:

WHEREFORE, for failure of the petitioner to establish compliance with the four procedural aspects of a traditional
paternity action in his petition, his motion for the submission of parties to DNA testing to establish paternity and filiation
is hereby DENIED. This case is DISMISSED without prejudice.

SO ORDERED.[8]

Petitioner seasonably filed a motion for reconsideration to the Order dated July 30, 2008, which the RTC resolved in his
favor. Thus, on October 20, 2008, it issued the Order[9] setting aside the courts previous order, thus:

WHEREFORE, in view of the foregoing, the Order dated July 30, 2008 is hereby reconsidered and set aside.

Let the Petition (with Motion for the Submission of Parties to DNA Testing) be set for hearing on January 22, 2009 at
8:30 in the morning.

xxxx

SO ORDERED.[10]

This time, the RTC held that the ruling on the grounds relied upon by petitioner for filing the petition is premature
considering that a full-blown trial has not yet taken place. The court stressed that the petition was sufficient in form and
substance. It was verified, it included a certification against forum shopping, and it contained a plain, concise, and direct
statement of the ultimate facts on which petitioner relies on for his claim, in accordance with Section 1, Rule 8 of the
Rules of Court. The court remarked that the allegation that the statements in the petition were not of petitioners
personal knowledge is a matter of evidence. The court also dismissed respondents arguments that there is no basis for
the taking of DNA test, and that jurisprudence is still unsettled on the acceptability of DNA evidence. It noted that the
new Rule on DNA Evidence[11] allows the conduct of DNA testing, whether at the courts instance or upon application of
any person who has legal interest in the matter in litigation.
Respondent filed a Motion for Reconsideration of Order dated October 20, 2008 and for Dismissal of Petition,[12]
reiterating that (a) the petition was not in due form and substance as no defendant was named in the title, and all the
basic allegations were hearsay; and (b) there was no prima facie case, which made the petition susceptible to dismissal.

The RTC denied the motion in the Order dated January 19, 2009, and rescheduled the hearing.[13]

Aggrieved, respondent filed a petition for certiorari with the CA, questioning the Orders dated October 20, 2008 and
January 19, 2009.

On September 25, 2009, the CA decided the petition for certiorari in favor of respondent, thus:

WHEREFORE, the instant petition for certiorari is hereby GRANTED for being meritorious. The assailed Orders dated
October 20, 2008 and January 19, 2009 both issued by the Regional Trial Court, Branch 172 of Valenzuela City in SP.
Proceeding Case No. 30-V-07 are REVERSED and SET ASIDE. Accordingly, the case docketed as SP. Proceeding Case No.
30-V-07 is DISMISSED.[14]

The CA held that the RTC did not acquire jurisdiction over the person of respondent, as no summons had been served on
him. Respondents special appearance could not be considered as voluntary appearance because it was filed only for the
purpose of questioning the jurisdiction of the court over respondent. Although respondent likewise questioned the
courts jurisdiction over the subject matter of the petition, the same is not equivalent to a waiver of his right to object to
the jurisdiction of the court over his person.

The CA remarked that petitioner filed the petition to establish illegitimate filiation, specifically seeking a DNA testing
order to abbreviate the proceedings. It noted that petitioner failed to show that the four significant procedural aspects
of a traditional paternity action had been met. The CA further held that a DNA testing should not be allowed when the
petitioner has failed to establish a prima facie case, thus:

While the tenor [of Section 4, Rule on DNA Evidence] appears to be absolute, the rule could not really have been
intended to trample on the substantive rights of the parties. It could have not meant to be an instrument to promote
disorder, harassment, or extortion. It could have not been intended to legalize unwarranted expedition to fish for
evidence. Such will be the situation in this particular case if a court may at any time order the taking of a DNA test. If the
DNA test in compulsory recognition cases is immediately available to the petitioner/complainant without requiring first
the presentation of corroborative proof, then a dire and absurd rule would result. Such will encourage and promote
harassment and extortion.

xxxx

At the risk of being repetitious, the Court would like to stress that it sees the danger of allowing an absolute DNA testing
to a compulsory recognition test even if the plaintiff/petitioner failed to establish prima facie proof. x x x If at anytime,
motu proprio and without pre-conditions, the court can indeed order the taking of DNA test in compulsory recognition
cases, then the prominent and well-to-do members of our society will be easy prey for opportunists and extortionists.
For no cause at all, or even for [sic] casual sexual indiscretions in their younger years could be used as a means to harass
them. Unscrupulous women, unsure of the paternity of their children may just be taking the chances-just in case-by
pointing to a sexual partner in a long past one-time encounter. Indeed an absolute and unconditional taking of DNA test
for compulsory recognition case opens wide the opportunities for extortionist to prey on victims who have no stomach
for scandal.[15]

Petitioner moved for reconsideration. On December 17, 2009, the CA denied the motion for lack of merit.[16]

In this petition for review on certiorari, petitioner raises the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RESOLVED THE ISSUE OF LACK OF JURISDICTION OVER THE
PERSON OF HEREIN RESPONDENT ALBEIT THE SAME WAS NEVER RAISED IN THE PETITION FOR CERTIORARI.

I.A

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RULED THAT JURISDICTION WAS NOT ACQUIRED OVER THE
PERSON OF THE RESPONDENT.

I.B

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT FAILED TO REALIZE THAT THE RESPONDENT HAD ALREADY
SUBMITTED VOLUNTARILY TO THE JURISDICTION OF THE COURT A QUO.

I.C

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT ESSENTIALLY RULED THAT THE TITLE OF A PLEADING,
RATHER THAN ITS BODY, IS CONTROLLING.

II.

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT ORDERED THE DISMISSAL OF THE PETITION BY REASON OF
THE MOTION (FILED BY THE PETITIONER BEFORE THE COURT A QUO) FOR THE CONDUCT OF DNA TESTING.

II.A

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT ESSENTIALLY RULED THAT DNA TESTING CAN ONLY BE
ORDERED AFTER THE PETITIONER ESTABLISHES PRIMA FACIE PROOF OF FILIATION.

III.

WHETHER OR NOT THE COURT OF APPEALS ERRED WITH ITS MISPLACED RELIANCE ON THE CASE OF HERRERA VS. ALBA,
ESPECIALLY AS REGARDS THE FOUR SIGNIFICANT PROCEDURAL ASPECTS OF A TRADITIONAL PATERNITY ACTION.[17]

Petitioner contends that respondent never raised as issue in his petition for certiorari the courts lack of jurisdiction over
his person. Hence, the CA had no legal basis to discuss the same, because issues not raised are deemed waived or
abandoned. At any rate, respondent had already voluntarily submitted to the jurisdiction of the trial court by his filing of
several motions asking for affirmative relief, such as the (a) Motion for Reconsideration of the Order dated September 3,
2007; (b) Ex Parte Motion to Resolve Motion for Reconsideration of the Order dated November 6, 2007; and (c) Motion
for Reconsideration of the Order dated October 20, 2008 and for Dismissal of Petition. Petitioner points out that
respondent even expressly admitted that he has waived his right to summons in his Manifestation and Comment on
Petitioners Very Urgent Motion to Try and Hear the Case. Hence, the issue is already moot and academic.

Petitioner argues that the case was adversarial in nature. Although the caption of the petition does not state
respondents name, the body of the petition clearly indicates his name and his known address. He maintains that the
body of the petition is controlling and not the caption.

Finally, petitioner asserts that the motion for DNA testing should not be a reason for the dismissal of the petition since it
is not a legal ground for the dismissal of cases. If the CA entertained any doubt as to the propriety of DNA testing, it
should have simply denied the motion.[18] Petitioner points out that Section 4 of the Rule on DNA Evidence does not
require that there must be a prior proof of filiation before DNA testing can be ordered. He adds that the CA erroneously
relied on the four significant procedural aspects of a paternity case, as enunciated in Herrera v. Alba.[19] Petitioner
avers that these procedural aspects are not applicable at this point of the proceedings because they are matters of
evidence that should be taken up during the trial.[20]

In his Comment, respondent supports the CAs ruling on most issues raised in the petition for certiorari and merely
reiterates his previous arguments. However, on the issue of lack of jurisdiction, respondent counters that, contrary to
petitioners assertion, he raised the issue before the CA in relation to his claim that the petition was not in due form and
substance. Respondent denies that he waived his right to the service of summons. He insists that the alleged waiver and
voluntary appearance was conditional upon a finding by the court that summons is indeed required. He avers that the
assertion of affirmative defenses, aside from lack of jurisdiction over the person of the defendant, cannot be considered
as waiver of the defense of lack of jurisdiction over such person.

The petition is meritorious.

Primarily, we emphasize that the assailed Orders of the trial court were orders denying respondents motion to dismiss
the petition for illegitimate filiation. An order denying a motion to dismiss is an interlocutory order which neither
terminates nor finally disposes of a case, as it leaves something to be done by the court before the case is finally decided
on the merits. As such, the general rule is that the denial of a motion to dismiss cannot be questioned in a special civil
action for certiorari, which is a remedy designed to correct errors of jurisdiction and not errors of judgment. Neither can
a denial of a motion to dismiss be the subject of an appeal unless and until a final judgment or order is rendered. In a
number of cases, the court has granted the extraordinary remedy of certiorari on the denial of the motion to dismiss but
only when it has been tainted with grave abuse of discretion amounting to lack or excess of jurisdiction.[21] In the
present case, we discern no grave abuse of discretion on the part of the trial court in denying the motion to dismiss.

The grounds for dismissal relied upon by respondent were (a) the courts lack of jurisdiction over his person due to the
absence of summons, and (b) defect in the form and substance of the petition to establish illegitimate filiation, which is
equivalent to failure to state a cause of action.

We need not belabor the issues on whether lack of jurisdiction was raised before the CA, whether the court acquired
jurisdiction over the person of respondent, or whether respondent waived his right to the service of summons. We find
that the primordial issue here is actually whether it was necessary, in the first place, to serve summons on respondent
for the court to acquire jurisdiction over the case. In other words, was the service of summons jurisdictional? The
answer to this question depends on the nature of petitioners action, that is, whether it is an action in personam, in rem,
or quasi in rem.

An action in personam is lodged against a person based on personal liability; an action in rem is directed against the
thing itself instead of the person; while an action quasi in rem names a person as defendant, but its object is to subject
that person's interest in a property to a corresponding lien or obligation. A petition directed against the "thing" itself or
the res, which concerns the status of a person, like a petition for adoption, annulment of marriage, or correction of
entries in the birth certificate, is an action in rem.[22]

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and
decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court, provided that the latter has jurisdiction over the res. Jurisdiction over
the res is acquired either (a) by the seizure of the property under legal process, whereby it is brought into actual custody
of the law, or (b) as a result of the institution of legal proceedings, in which the power of the court is recognized and
made effective. [23]

The herein petition to establish illegitimate filiation is an action in rem. By the simple filing of the petition to establish
illegitimate filiation before the RTC, which undoubtedly had jurisdiction over the subject matter of the petition, the
latter thereby acquired jurisdiction over the case. An in rem proceeding is validated essentially through publication.
Publication is notice to the whole world that the proceeding has for its object to bar indefinitely all who might be
minded to make an objection of any sort to the right sought to be established.[24] Through publication, all interested
parties are deemed notified of the petition.

If at all, service of summons or notice is made to the defendant, it is not for the purpose of vesting the court with
jurisdiction, but merely for satisfying the due process requirements.[25] This is but proper in order to afford the person
concerned the opportunity to protect his interest if he so chooses.[26] Hence, failure to serve summons will not deprive
the court of its jurisdiction to try and decide the case. In such a case, the lack of summons may be excused where it is
determined that the adverse party had, in fact, the opportunity to file his opposition, as in this case. We find that the
due process requirement with respect to respondent has been satisfied, considering that he has participated in the
proceedings in this case and he has the opportunity to file his opposition to the petition to establish filiation.
To address respondents contention that the petition should have been adversarial in form, we further hold that the
herein petition to establish filiation was sufficient in form. It was indeed adversarial in nature despite its caption which
lacked the name of a defendant, the failure to implead respondent as defendant, and the non-service of summons upon
respondent. A proceeding is adversarial where the party seeking relief has given legal warning to the other party and
afforded the latter an opportunity to contest it.[27] In this petitionclassified as an action in remthe notice requirement
for an adversarial proceeding was likewise satisfied by the publication of the petition and the giving of notice to the
Solicitor General, as directed by the trial court.

The petition to establish filiation is sufficient in substance. It satisfies Section 1, Rule 8 of the Rules of Court, which
requires the complaint to contain a plain, concise, and direct statement of the ultimate facts upon which the plaintiff
bases his claim. A fact is essential if it cannot be stricken out without leaving the statement of the cause of action
inadequate.[28] A complaint states a cause of action when it contains the following elements: (1) the legal right of
plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said
legal right.[29]

The petition sufficiently states the ultimate facts relied upon by petitioner to establish his filiation to respondent.
Respondent, however, contends that the allegations in the petition were hearsay as they were not of petitioners
personal knowledge. Such matter is clearly a matter of evidence that cannot be determined at this point but only during
the trial when petitioner presents his evidence.

In a motion to dismiss a complaint based on lack of cause of action, the question submitted to the court for
determination is the sufficiency of the allegations made in the complaint to constitute a cause of action and not whether
those allegations of fact are true, for said motion must hypothetically admit the truth of the facts alleged in the
complaint.[30]

The inquiry is confined to the four corners of the complaint, and no other.[31] The test of the sufficiency of the facts
alleged in the complaint is whether or not, admitting the facts alleged, the court could render a valid judgment upon the
same in accordance with the prayer of the complaint.[32]

If the allegations of the complaint are sufficient in form and substance but their veracity and correctness are assailed, it
is incumbent upon the court to deny the motion to dismiss and require the defendant to answer and go to trial to prove
his defense. The veracity of the assertions of the parties can be ascertained at the trial of the case on the merits.[33]

The statement in Herrera v. Alba[34] that there are four significant procedural aspects in a traditional paternity case
which parties have to face has been widely misunderstood and misapplied in this case. A party is confronted by these so-
called procedural aspects during trial, when the parties have presented their respective evidence. They are matters of
evidence that cannot be determined at this initial stage of the proceedings, when only the petition to establish filiation
has been filed. The CAs observation that petitioner failed to establish a prima facie casethe first procedural aspect in a
paternity caseis therefore misplaced. A prima facie case is built by a partys evidence and not by mere allegations in the
initiatory pleading.
Clearly then, it was also not the opportune time to discuss the lack of a prima facie case vis--vis the motion for DNA
testing since no evidence has, as yet, been presented by petitioner. More essentially, it is premature to discuss whether,
under the circumstances, a DNA testing order is warranted considering that no such order has yet been issued by the
trial court. In fact, the latter has just set the said case for hearing.

At any rate, the CAs view that it would be dangerous to allow a DNA testing without corroborative proof is well taken
and deserves the Courts attention. In light of this observation, we find that there is a need to supplement the Rule on
DNA Evidence to aid the courts in resolving motions for DNA testing order, particularly in paternity and other filiation
cases. We, thus, address the question of whether a prima facie showing is necessary before a court can issue a DNA
testing order.

The Rule on DNA Evidence was enacted to guide the Bench and the Bar for the introduction and use of DNA evidence in
the judicial system. It provides the prescribed parameters on the requisite elements for reliability and validity (i.e., the
proper procedures, protocols, necessary laboratory reports, etc.), the possible sources of error, the available objections
to the admission of DNA test results as evidence as well as the probative value of DNA evidence. It seeks to ensure that
the evidence gathered, using various methods of DNA analysis, is utilized effectively and properly, [and] shall not be
misused and/or abused and, more importantly, shall continue to ensure that DNA analysis serves justice and protects,
rather than prejudice the public.[35]

Not surprisingly, Section 4 of the Rule on DNA Evidence merely provides for conditions that are aimed to safeguard the
accuracy and integrity of the DNA testing. Section 4 states:

SEC. 4. Application for DNA Testing Order. The appropriate court may, at any time, either motu proprio or on
application of any person who has a legal interest in the matter in litigation, order a DNA testing. Such order shall issue
after due hearing and notice to the parties upon a showing of the following:

(a) A biological sample exists that is relevant to the case;

(b) The biological sample: (i) was not previously subjected to the type of DNA testing now requested; or (ii) was
previously subjected to DNA testing, but the results may require confirmation for good reasons;

(c) The DNA testing uses a scientifically valid technique;

(d) The DNA testing has the scientific potential to produce new information that is relevant to the proper resolution of
the case; and

(e) The existence of other factors, if any, which the court may consider as potentially affecting the accuracy or integrity
of the DNA testing.
This Rule shall not preclude a DNA testing, without need of a prior court order, at the behest of any party, including law
enforcement agencies, before a suit or proceeding is commenced.

This does not mean, however, that a DNA testing order will be issued as a matter of right if, during the hearing, the said
conditions are established.

In some states, to warrant the issuance of the DNA testing order, there must be a show cause hearing wherein the
applicant must first present sufficient evidence to establish a prima facie case or a reasonable possibility of paternity or
good cause for the holding of the test. [36] In these states, a court order for blood testing is considered a search, which,
under their Constitutions (as in ours), must be preceded by a finding of probable cause in order to be valid. Hence, the
requirement of a prima facie case, or reasonable possibility, was imposed in civil actions as a counterpart of a finding of
probable cause. The Supreme Court of Louisiana eloquently explained

Although a paternity action is civil, not criminal, the constitutional prohibition against unreasonable searches and
seizures is still applicable, and a proper showing of sufficient justification under the particular factual circumstances of
the case must be made before a court may order a compulsory blood test. Courts in various jurisdictions have differed
regarding the kind of procedures which are required, but those jurisdictions have almost universally found that a
preliminary showing must be made before a court can constitutionally order compulsory blood testing in paternity
cases. We agree, and find that, as a preliminary matter, before the court may issue an order for compulsory blood
testing, the moving party must show that there is a reasonable possibility of paternity. As explained hereafter, in cases in
which paternity is contested and a party to the action refuses to voluntarily undergo a blood test, a show cause hearing
must be held in which the court can determine whether there is sufficient evidence to establish a prima facie case which
warrants issuance of a court order for blood testing.[37]

The same condition precedent should be applied in our jurisdiction to protect the putative father from mere harassment
suits. Thus, during the hearing on the motion for DNA testing, the petitioner must present prima facie evidence or
establish a reasonable possibility of paternity.

Notwithstanding these, it should be stressed that the issuance of a DNA testing order remains discretionary upon the
court. The court may, for example, consider whether there is absolute necessity for the DNA testing. If there is already
preponderance of evidence to establish paternity and the DNA test result would only be corroborative, the court may, in
its discretion, disallow a DNA testing.

WHEREFORE, premises considered, the petition is GRANTED. The Court of Appeals Decision dated September 25, 2009
and Resolution dated December 17, 2009 are REVERSED and SET ASIDE. The Orders dated October 20, 2008 and January
19, 2009 of the Regional Trial Court of Valenzuela City are AFFIRMED.

SO ORDERED.
ANTONIO EDUARDO B. NACHURA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

DIOSDADO M. PERALTA

Associate Justice

ROBERTO A. ABAD

Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.
ANTONIO T. CARPIO

Associate Justice

Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA

Chief Justice

[1] Penned by Associate Justice Pampio A. Abarintos, with Associate Justices Juan Q. Enriquez, Jr. and Francisco P.
Acosta, concurring; rollo, pp. 35-46.

[2] Id. at 50-59.

[3] Penned by Executive Judge Maria Nena J. Santos.

[4] Rollo, p. 76.

[5] Id. at 156-157.

[6] Penned by Acting Presiding Judge Ma. Belen Ringpis-Liban; id. at 61-64.

[7] 499 Phil. 185 (2005).

[8] Rollo, p. 64.

[9] Penned by Judge Nancy Rivas-Palmones; id. at 65-69.

[10] Id. at 69.

[11] A.M. No. 06-11-5-SC, October 15, 2007.

[12] Rollo, p. 161.

[13] Id. at 71.

[14] Id. at 46.

[15] Id. at 45-46.

[16] Id. at 49.

[17] Id. at 16-17.

[18] Id. at 23.

[19] Supra note 7.

[20] Rollo, p. 30.

[21] Lu Ym v. Nabua, 492 Phil. 397, 404 (2005).

[22] Alba v. Court of Appeals, 503 Phil. 451, 458-459 (2005).

[23] Id. at 459.

[24] Barco v. Court of Appeals, 465 Phil. 39, 57 (2004).

[25] Alba v. Court of Appeals, supra note 22, at 459.

[26] Ceruila v. Delantar, 513 Phil. 237, 252 (2005).

[27] Republic v. Capote, G.R. No. 157043, February 2, 2007, 514 SCRA 76, 85.

[28] Ceroferr Realty Corporation v. Court of Appeals, 426 Phil. 522, 528 (2002).

[29] Spouses Diaz v. Diaz, 387 Phil. 314, 329 (2000).

[30] Balo v. Court of Appeals, 508 Phil. 224, 231 (2005).

[31] Id.

[32] Id.

[33] Id.

[34] Supra note 7.

[35] Rationale of the Rule on DNA Evidence.

[36] State ex rel. Department of Justice and Division of Child Support v. Spring, 201 Or.App. 367, 120 P.3d 1 (2005); State
v. Shaddinger, 702 So.2d 965, (1998); State in the Interest of A.N.V. v. McCain, 637 So.2d 650 (1994); In the Interest of
J.M., 590 So.2d 565 (1991); Schenectady County Department of Social Services on Behalf of Maureen E. v. Robert J, 126
A.D. 2d 786, 510 N.Y.S. 2d 289 (1987); State ex rel. McGuire v. Howe, 44 Wash. App. 559, 723 P.2d 452 (1986)

[37] In the Interest of J.M., supra, at 568.

SECOND DIVISION

[G.R. No. 110263. July 20, 2001]

ASIAVEST MERCHANT BANKERS (M) BERHAD, petitioner, vs. COURT OF APPEALS and PHILIPPINE NATIONAL
CONSTRUCTION CORPORATION, respondents.

DECISION

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals dated May 19, 1993 in CA-G.R.
CV No. 35871 affirming the Decision[2] dated October 14, 1991 of the Regional Trial Court of Pasig, Metro Manila,
Branch 168 in Civil Case No. 56368 which dismissed the complaint of petitioner Asiavest Merchant Bankers (M) Berhad
for the enforcement of the money judgment of the High Court of Malaya in Kuala Lumpur against private respondent
Philippine National Construction Corporation.

The petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the laws of Malaysia while
private respondent Philippine National Construction Corporation is a corporation duly incorporated and existing under
Philippine laws.

It appears that sometime in 1983, petitioner initiated a suit for collection against private respondent, then known as
Construction and Development Corporation of the Philippines, before the High Court of Malaya in Kuala Lumpur entitled
Asiavest Merchant Bankers (M) Berhad v. Asiavest CDCP Sdn. Bhd. and Construction and Development Corporation of
the Philippines.[3]

Petitioner sought to recover the indemnity of the performance bond it had put up in favor of private respondent to
guarantee the completion of the Felda Project and the non-payment of the loan it extended to Asiavest-CDCP Sdn. Bhd.
for the completion of Paloh Hanai and Kuantan By-Pass Project.

On September 13, 1985, the High Court of Malaya (Commercial Division) rendered judgment in favor of the petitioner
and against the private respondent which is also designated therein as the 2nd Defendant. The judgment reads in full:

SUIT NO. C638 of 1983

Between

Asiavest Merchant Bankers (M) Berhad Plaintiffs

And

1. Asiavest-CDCP Sdn. Bhd.

2. Construction & Development

Corporation of the Philippines Defendant

JUDGMENT

The 2nd Defendant having entered appearance herein and the Court having under Order 14, rule 3 ordered that
judgment as hereinafter provided be entered for the Plaintiffs against the 2nd Defendant.

IT IS THIS DAY ADJUDGED that the 2nd defendant do pay the Plaintiffs the sum of $5,108,290.23 (Ringgit Five million one
hundred and eight thousand two hundred and ninety and Sen twenty-three) together with interest at the rate of 12%
per annum on: -

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and

(ii) the sum of $2,521,423.32 from the 11th day of March 1983 to the date of payment; and $350.00 (Ringgit Three
Hundred and Fifty) costs.

Dated the 13th day of September, 1985.

Senior Assistant Registrar,

High Court, Kuala Lumpur

This Judgment is filed by Messrs. Skrine & Co., 3rd Floor, Straits Trading Building, No. 4, Leboh Pasar, Besar, Kuala
Lumpur, Solicitors for the Plaintiffs abovenamed. (VP/Ong/81194.7/83)[4]

On the same day, September 13, 1985, the High Court of Malaya issued an Order directing the private respondent (also
designated therein as the 2nd Defendant) to pay petitioner interest on the sums covered by the said Judgment, thus:

SUIT NO. C638 OF 1983

Between
Asiavest Merchant Bankers (M) Berhad Plaintiffs

And

1. Asiavest-CDCP Sdn. Bhd.

2. Construction & Development

Corporation of the Philippines Defendants

BEFORE THE SENIOR ASSISTANT REGISTRAR

CIK SUSILA S. PARAM

THIS 13th DAY OF SEPTEMBER, 1985 IN CHAMBERS

ORDER

Upon the application of Asiavest Merchant Bankers (M) Berhad, the Plaintiffs in this action AND UPON READING the
Summons in Chambers dated the 16th day of August, 1984 and the Affidavit of Lee Foong Mee affirmed on the 14th day
of August 1984 both filed herein AND UPON HEARING Mr. T. Thomas of Counsel for the Plaintiffs and Mr. Khaw Chay Tee
of Counsel for the 2nd Defendant abovenamed on the 26th day of December 1984 IT WAS ORDERED that the Plaintiffs
be at liberty to sign final judgment against the 2nd Defendant for the sum of $5,108.290.23 AND IT WAS ORDERED that
the 2nd Defendant do pay the Plaintiffs the costs of suit at $350.00 AND IT WAS FURTHER ORDERED that the plaintiffs be
at liberty to apply for payment of interest AND upon the application of the Plaintiffs for payment of interest coming on
for hearing on the 1st day of August in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr.
Khaw Chay Tee of Counsel for the 2nd Defendant above-named AND UPON HEARING Counsel as aforesaid BY CONSENT
IT WAS ORDERED that the 2nd Defendant do pay the Plaintiffs interest at a rate to be assessed AND the same coming on
for assessment this day in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr. Khaw Chay
Tee of Counsel for the 2nd Defendant AND UPON HEARING Counsel as aforesaid BY CONSENT IT IS ORDERED that the
2nd Defendant do pay the Plaintiffs interest at the rate of 12% per annum on:

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and

(ii) the sum of $2,521,423.32 from the 11th day of March 1983 to the date of Payment.

Dated the 13th day of September, 1985.

Senior Assistant Registrar,

High Court, Kuala Lumpur.[5]

Following unsuccessful attempts[6] to secure payment from private respondent under the judgment, petitioner initiated
on September 5, 1988 the complaint before Regional Trial Court of Pasig, Metro Manila, to enforce the judgment of the
High Court of Malaya.[7]

Private respondent sought the dismissal of the case via a Motion to Dismiss filed on October 5, 1988, contending that
the alleged judgment of the High Court of Malaya should be denied recognition or enforcement since on its face, it is
tainted with want of jurisdiction, want of notice to private respondent, collusion and/or fraud, and there is a clear
mistake of law or fact.[8] Dismissal was, however, denied by the trial court considering that the grounds relied upon are
not the proper grounds in a motion to dismiss under Rule 16 of the Revised Rules of Court.[9]

On May 22, 1989, private respondent filed its Answer with Compulsory Counterclaim[10] and therein raised the grounds
it brought up in its motion to dismiss. In its Reply[11] filed on June 8, 1989, the petitioner contended that the High Court
of Malaya acquired jurisdiction over the person of private respondent by its voluntary submission to the courts
jurisdiction through its appointed counsel, Mr. Khay Chay Tee. Furthermore, private respondents counsel waived any
and all objections to the High Courts jurisdiction in a pleading filed before the court.

In due time, the trial court rendered its Decision dated October 14, 1991 dismissing petitioners complaint. Petitioner
interposed an appeal with the Court of Appeals, but the appellate court dismissed the same and affirmed the decision of
the trial court in a Decision dated May 19, 1993.

Hence, the instant petition which is anchored on two (2) assigned errors,[12] to wit:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE MALAYSIAN COURT DID NOT ACQUIRE PERSONAL JURISDICTION
OVER PNCC, NOTWITHSTANDING THAT (a) THE FOREIGN COURT HAD SERVED SUMMONS ON PNCC AT ITS MALAYSIA
OFFICE, AND (b) PNCC ITSELF APPEARED BY COUNSEL IN THE CASE BEFORE THAT COURT.

II

THE COURT OF APPEALS ERRED IN DENYING RECOGNITION AND ENFORCEMENT TO (SIC) THE MALAYSIAN COURT
JUDGMENT.

Generally, in the absence of a special compact, no sovereign is bound to give effect within its dominion to a judgment
rendered by a tribunal of another country;[13] however, the rules of comity, utility and convenience of nations have
established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are
reciprocally respected and rendered efficacious under certain conditions that may vary in different countries.[14]

In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate parties
and the underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity
for a full and fair hearing before a court of competent jurisdiction; that the trial upon regular proceedings has been
conducted, following due citation or voluntary appearance of the defendant and under a system of jurisprudence likely
to secure an impartial administration of justice; and that there is nothing to indicate either a prejudice in court and in
the system of laws under which it is sitting or fraud in procuring the judgment.[15]

A foreign judgment is presumed to be valid and binding in the country from which it comes, until a contrary showing, on
the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum. Under Section
50(b),[16] Rule 39 of the Revised Rules of Court, which was the governing law at the time the instant case was decided
by the trial court and respondent appellate court, a judgment, against a person, of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors in
interest by a subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact. In addition, under Section 3(n), Rule 131 of the
Revised Rules of Court, a court, whether in the Philippines or elsewhere, enjoys the presumption that it was acting in the
lawful exercise of its jurisdiction. Hence, once the authenticity of the foreign judgment is proved, the party attacking a
foreign judgment, is tasked with the burden of overcoming its presumptive validity.

In the instant case, petitioner sufficiently established the existence of the money judgment of the High Court of Malaya
by the evidence it offered. Vinayak Prabhakar Pradhan, presented as petitioners sole witness, testified to the effect that
he is in active practice of the law profession in Malaysia;[17] that he was connected with Skrine and Company as Legal
Assistant up to 1981;[18] that private respondent, then known as Construction and Development Corporation of the
Philippines, was sued by his client, Asiavest Merchant Bankers (M) Berhad, in Kuala Lumpur;[19] that the writ of
summons were served on March 17, 1983 at the registered office of private respondent and on March 21, 1983 on Cora
S. Deala, a financial planning officer of private respondent for Southeast Asia operations;[20] that upon the filing of the
case, Messrs. Allen and Gledhill, Advocates and Solicitors, with address at 24th Floor, UMBC Building, Jalan Sulaiman,
Kuala Lumpur, entered their conditional appearance for private respondent questioning the regularity of the service of
the writ of summons but subsequently withdrew the same when it realized that the writ was properly served;[21] that
because private respondent failed to file a statement of defense within two (2) weeks, petitioner filed an application for
summary judgment and submitted affidavits and documentary evidence in support of its claim;[22] that the matter was
then heard before the High Court of Kuala Lumpur in a series of dates where private respondent was represented by
counsel;[23] and that the end result of all these proceedings is the judgment sought to be enforced.

In addition to the said testimonial evidence, petitioner offered the following documentary evidence:

(a) A certified and authenticated copy of the Judgment promulgated by the Malaysian High Court dated September 13,
1985 directing private respondent to pay petitioner the sum of $5,108,290.23 Malaysian Ringgit plus interests from
March 1983 until fully paid;[24]
(b) A certified and authenticated copy of the Order dated September 13, 1985 issued by the Malaysian High Court in Civil
Suit No. C638 of 1983;[25]

(c) Computation of principal and interest due as of January 31, 1990 on the amount adjudged payable to petitioner by
private respondent;[26]

(d) Letter and Statement of Account of petitioners counsel in Malaysia indicating the costs for prosecuting and
implementing the Malaysian High Courts Judgment;[27]

(e) Letters between petitioners Malaysian counsel, Skrine and Co., and its local counsel, Sycip Salazar Law Offices,
relative to institution of the action in the Philippines;[28]

(f) Billing Memorandum of Sycip Salazar Law Offices dated January 2, 1990 showing attorneys fees paid by and due from
petitioner;[29]

(g) Statement of Claim, Writ of Summons and Affidavit of Service of such writ in petitioners suit against private
respondent before the Malaysian High Court;[30]

(h) Memorandum of Conditional Appearance dated March 28, 1983 filed by counsel for private respondent with the
Malaysian High Court;[31]

(i) Summons in Chambers and Affidavit of Khaw Chay Tee, counsel for private respondent, submitted during the
proceedings before the Malaysian High Court;[32]

(j) Record of the Courts Proceedings in Civil Case No. C638 of 1983;[33]

(k) Petitioners verified Application for Summary Judgment dated August 14, 1984;[34] and

(l) Letter dated November 6, 1985 from petitioners Malaysian counsel to private respondents counsel in Malaysia.[35]

Having thus proven, through the foregoing evidence, the existence and authenticity of the foreign judgment, said
foreign judgment enjoys presumptive validity and the burden then fell upon the party who disputes its validity, herein
private respondent, to prove otherwise.

Private respondent failed to sufficiently discharge the burden that fell upon it to prove by clear and convincing evidence
the grounds which it relied upon to prevent enforcement of the Malaysian High Court judgment, namely, (a) that
jurisdiction was not acquired by the Malaysian Court over the person of private respondent due to alleged improper
service of summons upon private respondent and the alleged lack of authority of its counsel to appear and represent
private respondent in the suit; (b) the foreign judgment is allegedly tainted by evident collusion, fraud and clear mistake
of fact or law; and (c) not only were the requisites for enforcement or recognition allegedly not complied with but also
that the Malaysian judgment is allegedly contrary to the Constitutional prescription that the every decision must state
the facts and law on which it is based.[36]

Private respondent relied solely on the testimony of its two (2) witnesses, namely, Mr. Alfredo N. Calupitan, an
accountant of private respondent, and Virginia Abelardo, Executive Secretary and a member of the staff of the
Corporate Secretariat Section of the Corporate Legal Division, of private respondent, both of whom failed to shed light
and amplify its defense or claim for non-enforcement of the foreign judgment against it.

Mr. Calupitans testimony centered on the following: that from January to December 1982 he was assigned in Malaysia
as Project Comptroller of the Pahang Project Package A and B for road construction under the joint venture of private
respondent and Asiavest Holdings;[37] that under the joint venture, Asiavest Holdings would handle the financial aspect
of the project, which is fifty-one percent (51%) while private respondent would handle the technical aspect of the
project, or forty-nine percent (49%);[38] and, that Cora Deala was not authorized to receive summons for and in behalf
of the private respondent.[39] Ms. Abelardos testimony, on the other hand, focused on the following: that there was no
board resolution authorizing Allen and Gledhill to admit all the claims of petitioner in the suit brought before the High
Court of Malaya,[40] though on cross-examination she admitted that Allen and Gledhill were the retained lawyers of
private respondent in Malaysia.[41]

The foregoing reasons or grounds relied upon by private respondent in preventing enforcement and recognition of the
Malaysian judgment primarily refer to matters of remedy and procedure taken by the Malaysian High Court relative to
the suit for collection initiated by petitioner. Needless to stress, the recognition to be accorded a foreign judgment is not
necessarily affected by the fact that the procedure in the courts of the country in which such judgment was rendered
differs from that of the courts of the country in which the judgment is relied on.[42] Ultimately, matters of remedy and
procedure such as those relating to the service of summons or court process upon the defendant, the authority of
counsel to appear and represent a defendant and the formal requirements in a decision are governed by the lex fori or
the internal law of the forum,[43] i.e., the law of Malaysia in this case.

In this case, it is the procedural law of Malaysia where the judgment was rendered that determines the validity of the
service of court process on private respondent as well as other matters raised by it. As to what the Malaysian procedural
law is, remains a question of fact, not of law. It may not be taken judicial notice of and must be pleaded and proved like
any other fact. Sections 24 and 25 of Rule 132 of the Revised Rules of Court provide that it may be evidenced by an
official publication or by a duly attested or authenticated copy thereof. It was then incumbent upon private respondent
to present evidence as to what that Malaysian procedural law is and to show that under it, the assailed service of
summons upon a financial officer of a corporation, as alleged by it, is invalid. It did not. Accordingly, the presumption of
validity and regularity of service of summons and the decision thereafter rendered by the High Court of Malaya must
stand.[44]

On the matter of alleged lack of authority of the law firm of Allen and Gledhill to represent private respondent, not only
did the private respondents witnesses admit that the said law firm of Allen and Gledhill were its counsels in its
transactions in Malaysia,[45] but of greater significance is the fact that petitioner offered in evidence relevant Malaysian
jurisprudence[46] to the effect that (a) it is not necessary under Malaysian law for counsel appearing before the
Malaysian High Court to submit a special power of attorney authorizing him to represent a client before said court, (b)
that counsel appearing before the Malaysian High Court has full authority to compromise the suit, and (c) that counsel
appearing before the Malaysian High Court need not comply with certain pre-requisites as required under Philippine law
to appear and compromise judgments on behalf of their clients before said court.[47]

Furthermore, there is no basis for or truth to the appellate courts conclusion that the conditional appearance of private
respondents counsel who was allegedly not authorized to appear and represent, cannot be considered as voluntary
submission to the jurisdiction of the High Court of Malaya, inasmuch as said conditional appearance was not premised
on the alleged lack of authority of said counsel but the conditional appearance was entered to question the regularity of
the service of the writ of summons. Such conditional appearance was in fact subsequently withdrawn when counsel
realized that the writ was properly served.[48]

On the ground that collusion, fraud and clear mistake of fact and law tainted the judgment of the High Court of Malaya,
no clear evidence of the same was adduced or shown. The facts which the trial court found intriguing amounted to mere
conjectures and specious observations. The trial courts finding on the absence of judgment against Asiavest-CDCP Sdn.
Bhd. is contradicted by evidence on record that recovery was also sought against Asiavest-CDCP Sdn. Bhd. but the same
was found insolvent.[49] Furthermore, even when the foreign judgment is based on the drafts prepared by counsel for
the successful party, such is not per se indicative of collusion or fraud. Fraud to hinder the enforcement within the
jurisdiction of a foreign judgment must be extrinsic, i.e., fraud based on facts not controverted or resolved in the case
where judgment is rendered,[50] or that which would go to the jurisdiction of the court or would deprive the party
against whom judgment is rendered a chance to defend the action to which he has a meritorious defense.[51] Intrinsic
fraud is one which goes to the very existence of the cause of action is deemed already adjudged, and it, therefore,
cannot militate against the recognition or enforcement of the foreign judgment.[52] Evidence is wanting on the alleged
extrinsic fraud. Hence, such unsubstantiated allegation cannot give rise to liability therein.

Lastly, there is no merit to the argument that the foreign judgment is not enforceable in view of the absence of any
statement of facts and law upon which the award in favor of the petitioner was based. As aforestated, the lex fori or the
internal law of the forum governs matters of remedy and procedure.[53] Considering that under the procedural rules of
the High Court of Malaya, a valid judgment may be rendered even without stating in the judgment every fact and law
upon which the judgment is based, then the same must be accorded respect and the courts in this jurisdiction cannot
invalidate the judgment of the foreign court simply because our rules provide otherwise.

All in all, private respondent had the ultimate duty to demonstrate the alleged invalidity of such foreign judgment, being
the party challenging the judgment rendered by the High Court of Malaya. But instead of doing so, private respondent
merely argued, to which the trial court agreed, that the burden lay upon petitioner to prove the validity of the money
judgment. Such is clearly erroneous and would render meaningless the presumption of validity accorded a foreign
judgment were the party seeking to enforce it be required to first establish its validity.[54]

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated May 19, 1993 in CA-G.R. CV
No. 35871 sustaining the Decision dated October 14, 1991 in Civil Case No. 56368 of the Regional Trial Court of Pasig,
Branch 168 denying the enforcement of the Judgment dated September 13, 1985 of the High Court of Malaya in Kuala
Lumpur is REVERSED and SET ASIDE, and another in its stead is hereby rendered ORDERING private respondent
Philippine National Construction Corporation to pay petitioner Asiavest Merchant Bankers (M) Berhad the amounts
adjudged in the said foreign Judgment, subject of the said case.

Costs against the private respondent.

SO ORDERED.

Bellosillo, (Chairman), Mendoza and Buena, JJ., concur.

Quisumbing, J., on official business.

[1] Penned by Associate Justice Segundino G. Chua and concurred in by Associate Justices Serafin V.C. Guingona and
Ramon Mabutas, Jr., Sixteenth Division, in C-A G.R. CV No. 35871, Rollo, pp. 31-37.

[2] Penned by Judge Benjamin V. Pelayo, Records, pp. 444-454.

[3] Docketed as Suit No. C638 of 1983.

[4] Records, pp. 126-127.

[5] Records, pp. 129-130.

[6] TSN, March 5, 1990, p. 31.

[7] Records, pp. 1-4.

[8] Records, pp. 17-25.

[9] Order dated February 8, 1989, Records, p. 49.

[10] Records, pp. 69-72.

[11] Records, pp. 73-74.

[12] Rollo, pp. 13-14.

[13] Cucullu v. Louisiana Insurance Co. (La) 5 Mart NS 464, 16 Am Dec 199.

[14] 30 Am Jur 2d Enforcement and Execution of Judgments 779; Hilton v. Guyot, 159 US 113, 40 L Ed 95, 16 S Ct 139.

[15] Private International Law, Jovito R. Salonga, 1995 Edition, p. 543; 30 Am Jur 2d Executions and Enforcement of
Judgments 780; Southern v. Southern, 43 NC App 159, 258 SE2d 422.

[16] Now Sec. 48, Rule 39 of the 1997 Rules of Civil Procedure.

Sec. 48. Effect of foreign judgments or final orders The effect of a judgment or final order of a tribunal of a foreign
country, having jurisdiction to render the judgment or final order is as follows:

xxx xxx xxx

(b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right
as between the parties and their successors in interest by a subsequent title.

In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.

[17] TSN, March 5, 1990, p. 3.

[18] TSN, March 5, 1990, p. 4.

[19] TSN, March 5, 1990, p. 4.

[20] TSNs, March 5, 1990, pp. 21-22; September 4, 1990, pp. 6-7.

[21] TSN, March 5, 1990, pp. 10, 23-26.

[22] TSN, March 5, 1990, pp. 10-11, 26-28.

[23] TSN, March 5, 1990, pp. 19-20, 28-30, 37.

[24] Exhibits A, A-1 and A-2, Records, pp. 125-127.

[25] Exhibits B, B-1 and B-2, Records, pp. 128-130.

[26] Exhibits C, C-1 and C-2, Records, pp. 131-133.

[27] Exhibits D, D-1 and D-2, Records, pp. 134-136.

[28] Exhibits E, E-1, E-2, E-4, E-5, E-6, E-7 and E-8, Records, pp. 137-144.

[29] Exhibits F and F-1, Records, pp. 147-148.

[30] Exhibits G, G-1 and G-2, Records, pp. 149-159.

[31] Exhibits H and H-1, Records, pp. 160-161.

[32] Exhibits I, I-1 and I-2, Records, pp. 162-167.

[33] Exhibits J, J-1 to J-4, Records, pp. 168-173.

[34] Exhibits K and K-1, Records, pp. 174-179.

[35] Exhibit L, Records, p. 217.

[36] Citing Article VIII, Section 14 of the 1987 Constitution.

[37] TSNs, July 30, 1990, pp. 4-5; September 4, 1990, p. 3.

[38] TSN, July 30, 1990, pp. 5-6, 8.

[39] TSN, July 30, 1990, p. 15.

[40] TSN, October 5, 1990, pp. 6-10.

[41] TSN, October 5, 1990, p. 11.

[42] 30 Am Jur Executions and Enforcement of Judgments 843; In re Osborne, 205 NC 716, 172 SE 491.

[43] Oil and Natural Gas Commission v. Court of Appeals, 293 SCRA 26, 45 [1998].

[44] Northwest Orient Airlines, Inc. v. Court of Appeals, 241 SCRA 192, 199 [1995].

[45] TSNs, September 4, 1990, p. 11; October 5, 1990, pp. 11-12.

[46] Matthews v. Munster XX QBD 141, 1887, Great Atlantic Insurance Co. v. Home Insurance Co. and others, 2 ALR 485
[1981]; Waugh and others v. H.B. Clifford and Sons Ltd. and others, 1 ALR 1095 [1982]; Exhibits M, M-1 and M-2,
Records, pp. 355-385.

[47] Also Sovereign General Insurance Sdn. Bhd. v. Koh Tian Bee, 1 MLJ 304 (1988), Exhibit M-3, Records, pp. 386-389.

[48] TSN, March 5, 1990, pp. 10, 23-26.

[49] TSN, March 5, 1990, pp. 22-25; Exhibits G, and G-2, Records, pp. 149-159.

[50] Labayen v. Talisay-Silay Mining Co., 40 O.G. 2nd Supp. No. 3, p. 109 .

[51] 30 Am Jur 2d Executions and Enforcement of Judgments 840; Pentz v. Kuppinger (2nd Dist) 31 Cal App 3d 590, 107
Cal Rptr 540.

[52] Private International Law, Jovito R. Salonga, 1995 Edition, p. 558; Beale, Conflict of Law, Vol. II, p. 1402; Abouloff v.
Oppenwhimer and Another [1852], 58 L.J. Q.B. 1.
[53] Northwest Orient Airlines, Inc. v. Court of Appeals, supra.

[54] Asiavest Limited v. Court of Appeals, 296 SCRA 539, 549 [1998].

SECOND DIVISION

MA. TERESA CHAVES BIACO, G.R. No. 161417

Petitioner,

Present:

QUISUMBING, J.,

Chairperson,

- versus - CARPIO,

CARPIO MORALES,

TINGA, and

VELASCO, JR., JJ.

PHILIPPINE COUNTRYSIDE RURAL

BANK,

Respondent. Promulgated:

February 8, 2007

x----------------------------------------------------------------------------x

DECISION

TINGA, J.:

Petitioner, Ma. Teresa Chaves Biaco, seeks a review of the Decision[1] of the Court of Appeals in CA-G.R. No. 67489
dated August 27, 2003, which denied her petition for annulment of judgment, and the Resolution[2] dated December
15, 2003 which denied her motion for reconsideration.

The facts as succinctly stated by the Court of Appeals are as follows:

Ernesto Biaco is the husband of petitioner Ma. Teresa Chaves Biaco. While employed in the Philippine Countryside Rural
Bank (PCRB) as branch manager, Ernesto obtained several loans from the respondent bank as evidenced by the
following promissory notes:

Feb. 17, 1998 P 65,000.00

Mar. 18, 1998 30,000.00

May 6, 1998 60,000.00

May 20, 1998 350,000.00

July 30, 1998 155,000.00

Sept. 8, 1998 40,000.00

Sept. 8, 1998 120,000.00

As security for the payment of the said loans, Ernesto executed a real estate mortgage in favor of the bank covering the
parcel of land described in Original Certificate of Title (OCT) No. P-14423. The real estate mortgages bore the signatures
of the spouses Biaco.

When Ernesto failed to settle the above-mentioned loans on its due date, respondent bank through counsel sent him a
written demand on September 28, 1999. The amount due as of September 30, 1999 had already reached ONE MILLION
EIGHTY THOUSAND SIX HUNDRED SEVENTY SIX AND FIFTY CENTAVOS (P1,080,676.50).

The written demand, however, proved futile.

On February 22, 2000, respondent bank filed a complaint for foreclosure of mortgage against the spouses Ernesto and
Teresa Biaco before the RTC of Misamis Oriental. Summons was served to the spouses Biaco through Ernesto at his
office (Export and Industry Bank) located at Jofelmor Bldg., Mortola Street, Cagayan de Oro City.

Ernesto received the summons but for unknown reasons, he failed to file an answer. Hence, the spouses Biaco were
declared in default upon motion of the respondent bank. The respondent bank was allowed to present its evidence ex
parte before the Branch Clerk of Court who was then appointed by the court as Commissioner.
Arturo Toring, the branch manager of the respondent bank, testified that the spouses Biaco had been obtaining loans
from the bank since 1996 to 1998. The loans for the years 1996-1997 had already been paid by the spouses Biaco,
leaving behind a balance of P1,260,304.33 representing the 1998 loans. The amount being claimed is inclusive of
interests, penalties and service charges as agreed upon by the parties. The appraisal value of the land subject of the
mortgage is only P150,000.00 as reported by the Assessors Office.

Based on the report of the Commissioner, the respondent judge ordered as follows:

WHEREFORE, judgment is hereby rendered ordering defendants spouses ERNESTO R. BIACO and MA. THERESA [CHAVES]
BIACO to pay plaintiff bank within a period of not less than ninety (90) days nor more than one hundred (100) days from
receipt of this decision the loan of ONE MILLION TWO HUNDRED SIXTY THOUSAND THREE HUNDRED FOUR PESOS and
THIRTY THREE CENTAVOS (P1,260,304.33) plus litigation expenses in the amount of SEVEN THOUSAND SIX HUNDRED
FORTY PESOS (P7,640.00) and attorneys fees in the amount of TWO HUNDRED FIFTY TWO THOUSAND THIRTY PESOS and
FORTY THREE CENTAVOS (P252,030.43) and cost of this suit.

In case of non-payment within the period, the Sheriff of this Court is ordered to sell at public auction the mortgaged Lot,
a parcel of registered land (Lot 35802, Cad. 237 {Lot No. 12388-B, Csd-10-002342-D}), located at Gasi, Laguindingan,
Misamis Oriental and covered by TCT No. P-14423 to satisfy the mortgage debt, and the surplus if there be any should
be delivered to the defendants spouses ERNESTO and MA. THERESA [CHAVES] BIACO. In the event however[,] that the
proceeds of the auction sale of the mortgage[d] property is not enough to pay the outstanding obligation, the
defendants are ordered to pay any deficiency of the judgment as their personal liability.

SO ORDERED.

On July 12, 2000, the sheriff personally served the above-mentioned judgment to Ernesto Biaco at his office at Export
and Industry Bank. The spouses Biaco did not appeal from the adverse decision of the trial court. On October 13, 2000,
the respondent bank filed an ex parte motion for execution to direct the sheriff to sell the mortgaged lot at public
auction. The respondent bank alleged that the order of the court requiring the spouses Biaco to pay within a period of
90 days had passed, thus making it necessary to sell the mortgaged lot at public auction, as previously mentioned in the
order of the court. The motion for execution was granted by the trial court per Order dated October 20, 2000.

On October 31, 2000, the sheriff served a copy of the writ of execution to the spouses Biaco at their residence in #92 9th
Street, Nazareth, Cagayan de Oro City. The writ of execution was personally received by Ernesto. By virtue of the writ of
execution issued by the trial court, the mortgaged property was sold at public auction in favor of the respondent bank in
the amount of ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00).

The amount of the property sold at public auction being insufficient to cover the full amount of the obligation, the
respondent bank filed an ex parte motion for judgment praying for the issuance of a writ of execution against the other
properties of the spouses Biaco for the full settlement of the remaining obligation. Granting the motion, the court
ordered that a writ of execution be issued against the spouses Biaco to enforce and satisfy the judgment of the court for
the balance of ONE MILLION THREE HUNDRED SIXTY NINE THOUSAND NINE HUNDRED SEVENTY FOUR PESOS AND
SEVENTY CENTAVOS (P1,369,974.70).
The sheriff executed two (2) notices of levy against properties registered under the name of petitioner Ma. Teresa
Chaves Biaco. However, the notices of levy were denied registration because Ma. Teresa had already sold the two (2)
properties to her daughters on April 11, 2001.[3]

Petitioner sought the annulment of the Regional Trial Court decision contending that extrinsic fraud prevented her from
participating in the judicial foreclosure proceedings. According to her, she came to know about the judgment in the case
only after the lapse of more than six (6) months after its finality. She claimed that extrinsic fraud was perpetrated
against her because the bank failed to verify the authenticity of her signature on the real estate mortgage and did not
inquire into the reason for the absence of her signature on the promissory notes. She moreover asserted that the trial
court failed to acquire jurisdiction because summons were served on her through her husband without any explanation
as to why personal service could not be made.

The Court of Appeals considered the two circumstances that kept petitioner in the dark about the judicial foreclosure
proceedings: (1) the failure of the sheriff to personally serve summons on petitioner; and (2) petitioners husbands
concealment of his knowledge of the foreclosure proceedings. On the validity of the service of summons, the appellate
court ruled that judicial foreclosure proceedings are actions quasi in rem. As such, jurisdiction over the person of the
defendant is not essential as long as the court acquires jurisdiction over the res. Noting that the spouses Biaco were not
opposing parties in the case, the Court of Appeals further ruled that the fraud committed by one against the other
cannot be considered extrinsic fraud.

Her motion for reconsideration having been denied, petitioner filed the instant Petition for Review,[4] asserting that
even if the action is quasi in rem, personal service of summons is essential in order to afford her due process. The
substituted service made by the sheriff at her husbands office cannot be deemed proper service absent any explanation
that efforts had been made to personally serve summons upon her but that such efforts failed. Petitioner contends that
extrinsic fraud was perpetrated not so much by her husband, who did not inform her of the judicial foreclosure
proceedings, but by the sheriff who allegedly connived with her husband to just leave a copy of the summons intended
for her at the latters office.

Petitioner further argues that the deficiency judgment is a personal judgment which should be deemed void for lack of
jurisdiction over her person.

Respondent PCRB filed its Comment,[5] essentially reiterating the appellate courts ruling. Respondent avers that service
of summons upon the defendant is not necessary in actions quasi in rem it being sufficient that the court acquire
jurisdiction over the res. As regards the alleged conspiracy between petitioners husband and the sheriff, respondent
counters that this is a new argument which cannot be raised for the first time in the instant petition.

We required the parties to file their respective memoranda in the Resolution[6] dated August 18, 2004. Accordingly,
petitioner filed her Memorandum[7] dated October 10, 2004, while respondent filed its Memorandum for
Respondent[8] dated September 9, 2004.
Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases as where there is no
available or other adequate remedy. Jurisprudence and Sec. 2, Rule 47 of the 1997 Rules of Civil Procedure (Rules of
Court) provide that judgments may be annulled only on grounds of extrinsic fraud and lack of jurisdiction or denial of
due process.[9]

Petitioner asserts that extrinsic fraud consisted in her husbands concealment of the loans which he obtained from
respondent PCRB; the filing of the complaint for judicial foreclosure of mortgage; service of summons; rendition of
judgment by default; and all other proceedings which took place until the writ of garnishment was served.[10]

Extrinsic fraud exists when there is a fraudulent act committed by the prevailing party outside of the trial of the case,
whereby the defeated party was prevented from presenting fully his side of the case by fraud or deception practiced on
him by the prevailing party.[11] Extrinsic fraud is present where the unsuccessful party had been prevented from
exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court, a
false promise of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the
acts of the plaintiff; or where an attorney fraudulently or without authority assumes to represent a party and connives
at his defeat; or where the attorney regularly employed corruptly sells out his clients interest to the other side. The
overriding consideration is that the fraudulent scheme of the prevailing litigant prevented a party from having his day in
court.[12]

With these considerations, the appellate court acted well in ruling that there was no fraud perpetrated by respondent
bank upon petitioner, noting that the spouses Biaco were co-defendants in the case and shared the same interest.
Whatever fact or circumstance concealed by the husband from the wife cannot be attributed to respondent bank.

Moreover, petitioners allegation that her signature on the promissory notes was forged does not evince extrinsic fraud.
It is well-settled that the use of forged instruments during trial is not extrinsic fraud because such evidence does not
preclude the participation of any party in the proceedings.[13]

The question of whether the trial court has jurisdiction depends on the nature of the action, i.e., whether the action is in
personam, in rem, or quasi in rem. The rules on service of summons under Rule 14 of the Rules of Court likewise apply
according to the nature of the action.

An action in personam is an action against a person on the basis of his personal liability. An action in rem is an action
against the thing itself instead of against the person. An action quasi in rem is one wherein an individual is named as
defendant and the purpose of the proceeding is to subject his interest therein to the obligation or lien burdening the
property.[14]

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and
decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res. Jurisdiction
over the res is acquired either (1) by the seizure of the property under legal process, whereby it is brought into actual
custody of the law; or (2) as a result of the institution of legal proceedings, in which the power of the court is recognized
and made effective.[15]

Nonetheless, summons must be served upon the defendant not for the purpose of vesting the court with jurisdiction but
merely for satisfying the due process requirements.[16]

A resident defendant who does not voluntarily appear in court, such as petitioner in this case, must be personally served
with summons as provided under Sec. 6, Rule 14 of the Rules of Court. If she cannot be personally served with summons
within a reasonable time, substituted service may be effected (1) by leaving copies of the summons at the defendants
residence with some person of suitable age and discretion then residing therein, or (2) by leaving the copies at
defendants office or regular place of business with some competent person in charge thereof in accordance with Sec. 7,
Rule 14 of the Rules of Court.

In this case, the judicial foreclosure proceeding instituted by respondent PCRB undoubtedly vested the trial court with
jurisdiction over the res. A judicial foreclosure proceeding is an action quasi in rem. As such, jurisdiction over the person
of petitioner is not required, it being sufficient that the trial court is vested with jurisdiction over the subject matter.

There is a dimension to this case though that needs to be delved into. Petitioner avers that she was not personally
served summons. Instead, summons was served to her through her husband at his office without any explanation as to
why the particular surrogate service was resorted to. The Sheriffs Return of Service dated March 21, 2000 states:

xxxx

That on March 16, 2000, the undersigned served the copies of Summons, complaint and its annexes to the defendants
Sps. Ernesto R. & Ma. Teresa Ch. Biaco thru Ernesto R. Biaco[,] defendant of the above-entitled case at his office EXPORT
& INDUSTRY BANK, Jofelmore Bldg.[,] Mortola St., Cagayan de Oro City and he acknowledged receipt thereof as
evidenced with his signature appearing on the original copy of the Summons.[17] [Emphasis supplied]

Without ruling on petitioners allegation that her husband and the sheriff connived to prevent summons from being
served upon her personally, we can see that petitioner was denied due process and was not able to participate in the
judicial foreclosure proceedings as a consequence. The violation of petitioners constitutional right to due process arising
from want of valid service of summons on her warrants the annulment of the judgment of the trial court.

There is more, the trial court granted respondent PCRBs ex-parte motion for deficiency judgment and ordered the
issuance of a writ of execution against the spouses Biaco to satisfy the remaining balance of the award. In short, the trial
court went beyond its jurisdiction over the res and rendered a personal judgment against the spouses Biaco. This cannot
be countenanced.

In Sahagun v. Court of Appeals,[18] suit was brought against a non-resident defendant, Abelardo Sahagun, and a writ of
attachment was issued and subsequently levied on a house and lot registered in his name. Claiming ownership of the
house, his wife, Carmelita Sahagun, filed a motion to intervene. For failure of plaintiff to serve summons
extraterritorially upon Abelardo, the complaint was dismissed without prejudice.

Subsequently, plaintiff filed a motion for leave to serve summons by publication upon Abelardo. The trial court granted
the motion. Plaintiff later filed an amended complaint against Abelardo, this time impleading Carmelita and Rallye as
additional defendants. Summons was served on Abelardo through publication in the Manila Evening Post. Abelardo
failed to file an answer and was declared in default. Carmelita went on certiorari to the Court of Appeals assailing as
grave abuse of discretion the declaration of default of Abelardo. The Court of Appeals dismissed the petition and denied
reconsideration.

In her petition with this Court, Carmelita raised the issue of whether the trial court acquired jurisdiction over her
husband, a non-resident defendant, by the publication of summons in a newspaper of general circulation in the
Philippines. The Court sustained the correctness of extrajudicial service of summons by publication in such newspaper.

The Court explained, citing El Banco Espaol-Filipino v. Palanca,[19] that foreclosure and attachment proceedings are
both actions quasi in rem. As such, jurisdiction over the person of the (non-resident) defendant is not essential. Service
of summons on a non-resident defendant who is not found in the country is required, not for purposes of physically
acquiring jurisdiction over his person but simply in pursuance of the requirements of fair play, so that he may be
informed of the pendency of the action against him and the possibility that property belonging to him or in which he has
an interest may be subjected to a judgment in favor of a resident, and that he may thereby be accorded an opportunity
to defend in the action, should he be so minded.

Significantly, the Court went on to rule, citing De Midgely v. Ferandos, et. al.[20] and Perkins v. Dizon, et al.[21] that in a
proceeding in rem or quasi in rem, the only relief that may be granted by the court against a defendant over whose
person it has not acquired jurisdiction either by valid service of summons or by voluntary submission to its jurisdiction, is
limited to the res.

Similarly, in this case, while the trial court acquired jurisdiction over the res, its jurisdiction is limited to a rendition of
judgment on the res. It cannot extend its jurisdiction beyond the res and issue a judgment enforcing petitioners personal
liability. In doing so without first having acquired jurisdiction over the person of petitioner, as it did, the trial court
violated her constitutional right to due process, warranting the annulment of the judgment rendered in the case.

WHEREFORE, the instant petition is GRANTED. The Decision dated August 27, 2003 and the Resolution dated December
15, 2003 of the Court of Appeals in CA-G.R. SP No. 67489 are SET ASIDE. The Judgment dated July 11, 2000 and Order
dated February 9, 2001 of the Regional Trial Court of Cagayan de Oro City, Branch 20, are likewise SET ASIDE.

SO ORDERED.
DANTE O. TINGA

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING

Associate Justice

Chairperson

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice
ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING

Associate Justice

Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified
that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

REYNATO S. PUNO

Chief Justice

[1]Rollo, pp. 28-35; Penned by Associate Justice Romeo A. Brawner and concurred in by Associate Justices Josefina
Guevara-Salonga and Arturo D. Brion.

[2]Id. at 38.

[3]Id. at 29-31.

[4]Id. at 3-23.
[5]Id. at 125-142.

[6]Id. at 144-145.

[7]Id. at 149-165.

[8]Id. at 167-181.

[9]National Housing Authority v. Evangelista, G.R. No. 140945, May 16, 2005, 458 SCRA 469, 477-478.

[10]CA rollo, p. 6; Petition (for Annulment of Judgment) dated October 29, 2001.

[11]Alba v. Court of Appeals, G.R. No. 164041, 29 July 2005, 265 SCRA 495, 508.

[12]Strait Times, Inc. v. Court of Appeals, 356 Phil. 217, 225-226 (1998), 294 SCRA 714, citing Palanca v. The American
Food Manufacturing Co., 24 SCRA 819, August 30, 1968, per Zaldivar, J., citing U.S. v. Throckmorton, 98 U.S. 93, 95, 25 L.
Ed. 93 (1878); See also Alaban v. Court of Appeals, G.R. No. 156021, September 23, 2005, 470 SCRA 697, 708.

[13]Id.

[14]Asiavest Limited v. Court of Appeals, 357 Phil. 536, 553 (1998).

[15]Alba v. Court of Appeals, G.R. No. 164041, July 29, 2005, 465 SCRA 495, 505.

[16]Id. at 506

[17]CA rollo, p. 32.

[18]G.R. No. 78328, June 3, 1991, 198 SCRA 44.

[19]37 Phil. 921 (1918).

[20]159-A Phil. 314, 326 (1975).

[21]69 Phil. 186, 193 (1939).

THIRD DIVISION

[G.R. No. 149011. June 28, 2005]

SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M. ADLA-ON, ALVIN C.
ALCALDE, CELANIO D. ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA, JOEL D. BALATERIA,
JOSEPH D. BALATERIA, JOSE JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO, SONNY V. BERONDO,
CHRISTOPHER D. BRIONES, MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE CABALIDA, DIOSCORO R. CAHINOD, ERNESTO
P. CAHINOD, RENANTE S. CAHINOD, RUDERICK R. CALIXTON, RONILO C. CALVEZ, PANCHO CAETE, JUNNY CASTEL, JUDY S.
CELESTE, ROMEO CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN D. DELFIN, RENELITO P.
DEON, ARNEL C. DE PEDRO, ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A. DESPI, ROLANDO L.
DINGLE, ANTONIO D. DOLORFINO, LARRY DUMA-OP, NOEL DUMOL, CHITO L. DUNGOG, RODERICK C. DUQUEZA,
ROMMEL ESTREBOR, RIC E. GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ, ROBERTLY Y. HOFILEA,
ROBERTO HOFILEA, VICENTE INDENCIO, JONATHAN T. INVENTOR, PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO,
RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES, LEONARD LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO,
ROBERTO E. MARTIL, HERNANDO MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM P. NAVARRO,
WILSON P. NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C. PAROCHILIN, REYNALDO C. PAROCHILIN,
RICKY PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA, EDWIN G. RIBON, RAUL A. RUBIO, HENRY S.
SAMILLANO, EDGAR SANTIAGO, ROLAND B. SANTILLANA, ROLDAN V. SAYAM, JOSEPH S. SAYSON, RENE SUARNABA,
ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE, WINIFREDO TALITE, CAMILO N. TEMPOROSA, JOSE TEMPOROSA,
RANDY TINGALA, TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A. TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL,
RONILO E. VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and the COURT OF APPEALS, respondents.

DECISION

CARPIO-MORALES, J.:

Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice President and Visayas Area Manager for
Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi-Purpose Cooperative (Sunflower), represented by the
Chairman of its Board of Directors Roy G. Asong, entered into a one-year Contract of Services[1] commencing on January
1, 1993, to be renewed on a month to month basis until terminated by either party. The pertinent provisions of the
contract read:

1. The cooperative agrees and undertakes to perform and/or provide for the company, on a non-exclusive basis for a
period of one year the following services for the Bacolod Shrimp Processing Plant:

A. Messengerial/Janitorial

B. Shrimp Harvesting/Receiving

C. Sanitation/Washing/Cold Storage[2]
2. To carry out the undertaking specified in the immediately preceding paragraph, the cooperative shall employ the
necessary personnel and provide adequate equipment, materials, tools and apparatus, to efficiently, fully and speedily
accomplish the work and services undertaken by the cooperative. xxx

3. In consideration of the above undertaking the company expressly agrees to pay the cooperative the following rates
per activity:

A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five Hundred Pesos Only (P19,500.00)

B. Harvesting/Shrimp Receiving. Piece rate of P0.34/kg. Or P100.00 minimum per person/activity whichever is higher,
with provisions as follows:

P25.00 Fixed Fee per person

Additional meal allowance P15.00 every meal time in case harvest duration exceeds one meal.

This will be pre-set every harvest based on harvest plan approved by the Senior Buyer.

C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.

One-half of the payment for all services rendered shall be payable on the fifteenth and the other half, on the end of each
month. The cooperative shall pay taxes, fees, dues and other impositions that shall become due as a result of this
contract.

The cooperative shall have the entire charge, control and supervision of the work and services herein agreed upon. xxx

4. There is no employer-employee relationship between the company and the cooperative, or the cooperative and any
of its members, or the company and any members of the cooperative. The cooperative is an association of self-
employed members, an independent contractor, and an entrepreneur. It is subject to the control and direction of the
company only as to the result to be accomplished by the work or services herein specified, and not as to the work herein
contracted. The cooperative and its members recognize that it is taking a business risk in accepting a fixed service fee to
provide the services contracted for and its realization of profit or loss from its undertaking, in relation to all its other
undertakings, will depend on how efficiently it deploys and fields its members and how they perform the work and
manage its operations.

5. The cooperative shall, whenever possible, maintain and keep under its control the premises where the work under
this contract shall be performed.

6. The cooperative shall have exclusive discretion in the selection, engagement and discharge of its member-workers or
otherwise in the direction and control thereof. The determination of the wages, salaries and compensation of the
member-workers of the cooperative shall be within its full control. It is further understood that the cooperative is an
independent contractor, and as such, the cooperative agrees to comply with all the requirements of all pertinent laws
and ordinances, rules and regulations. Although it is understood and agreed between the parties hereto that the
cooperative, in the performance of its obligations, is subject to the control or direction of the company merely as a (sic)
result to be accomplished by the work or services herein specified, and not as to the means and methods of
accomplishing such result, the cooperative hereby warrants that it will perform such work or services in such manner as
will be consistent with the achievement of the result herein contracted for.

xxx

8. The cooperative undertakes to pay the wages or salaries of its member-workers, as well as all benefits, premiums and
protection in accordance with the provisions of the labor code, cooperative code and other applicable laws and decrees
and the rules and regulations promulgated by competent authorities, assuming all responsibility therefor.

The cooperative further undertakes to submit to the company within the first ten (10) days of every month, a statement
made, signed and sworn to by its duly authorized representative before a notary public or other officer authorized by
law to administer oaths, to the effect that the cooperative has paid all wages or salaries due to its employees or
personnel for services rendered by them during the month immediately preceding, including overtime, if any, and that
such payments were all in accordance with the requirements of law.

xxx

12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall be for a period of one (1) year
commencing on January 1, 1993. Thereafter, this Contract will be deemed renewed on a month-to-month basis until
terminated by either party by sending a written notice to the other at least thirty (30) days prior to the intended date of
termination.

xxx[3] (Underscoring supplied)

Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMCs Bacolod
Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract was deemed renewed by the parties every month after its
expiration on January 1, 1994 and private respondents continued to perform their tasks until September 11, 1995.

In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI, Bacolod City,
praying to be declared as regular employees of SMC, with claims for recovery of all benefits and privileges enjoyed by
SMC rank and file employees.

Private respondents subsequently filed on September 25, 1995 an Amended Complaint[4] to include illegal dismissal as
additional cause of action following SMCs closure of its Bacolod Shrimp Processing Plant on September 15, 1995[5]
which resulted in the termination of their services.
SMC filed a Motion for Leave to File Attached Third Party Complaint[6] dated November 27, 1995 to implead Sunflower
as Third Party Defendant which was, by Order[7] of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon.

In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the Department of Labor
and Employment (DOLE) a Notice of Closure[8] of its aquaculture operations effective on even date, citing serious
business losses.

By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private respondents complaint for lack of merit,
ratiocinating as follows:

We sustain the stand of the respondent SMC that it could properly exercise its management prerogative to contract out
the preparation and processing aspects of its aquaculture operations. Judicial notice has already been taken regarding
the general practice adopted in government and private institutions and industries of hiring independent contractors to
perform special services. xxx

xxx

Indeed, the law allows job contracting. Job contracting is permissible under the Labor Code under specific conditions
and we do not see how this activity could not be legally undertaken by an independent service cooperative like the
third-party respondent herein.

There is no basis to the demand for regularization simply on the theory that complainants performed activities which are
necessary and desirable in the business of respondent. It has been held that the definition of regular employees as those
who perform activities which are necessary and desirable for the business of the employer is not always determinative
because any agreement may provide for one (1) party to render services for and in behalf of another for a consideration
even without being hired as an employee.

The charge of the complainants that third-party respondent is a mere labor-only contractor is a sweeping generalization
and completely unsubstantiated. xxx In the absence of clear and convincing evidence showing that third-party
respondent acted merely as a labor only contractor, we are firmly convinced of the legitimacy and the integrity of its
service contract with respondent SMC.

In the same vein, the closure of the Bacolod Shrimp Processing Plant was a management decision purely dictated by
economic factors which was (sic) mainly serious business losses. The law recognizes the right of the employer to close
his business or cease his operations for bonafide reasons, as much as it recognizes the right of the employer to
terminate the employment of any employee due to closure or cessation of business operations, unless the closing is for
the purpose of circumventing the provisions of the law on security of tenure. The decision of respondent SMC to close
its Bacolod Shrimp Processing Plant, due to serious business losses which has (sic) clearly been established, is a
management prerogative which could hardly be interfered with.
xxx The closure did affect the regular employees and workers of the Bacolod Processing Plant, who were accordingly
terminated following the legal requisites prescribed by law. The closure, however, in so far as the complainants are
concerned, resulted in the termination of SMCs service contract with their cooperative xxx[9] (Underscoring supplied)

Private respondents appealed to the NLRC.

By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of merit, it finding that third party respondent
Sunflower was an independent contractor in light of its observation that [i]n all the activities of private respondents,
they were under the actual direction, control and supervision of third party respondent Sunflower, as well as the
payment of wages, and power of dismissal.[10]

Private respondents Motion for Reconsideration[11] having been denied by the NLRC for lack of merit by Resolution of
September 10, 1999, they filed a petition for certiorari[12] before the Court of Appeals (CA).

Before the CA, SMC filed a Motion to Dismiss[13] private respondents petition for non-compliance with the Rules on
Civil Procedure and failure to show grave abuse of discretion on the part of the NLRC.

SMC subsequently filed its Comment[14] to the petition on March 30, 2000.

By Decision of February 7, 2001, the appellate court reversed the NLRC decision and accordingly found for private
respondents, disposing as follows:

WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby RENDERED: (1) REVERSING and SETTING ASIDE
both the 29 December 1998 decision and 10 September 1999 resolution of the National Labor Relations Commission
(NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as well as the 23 September 1997 decision of the labor
arbiter in RAB Case No. 06-07-10316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT petitioners:
(a) separation pay in accordance with the computation given to the regular SMC employees working at its Bacolod
Shrimp Processing Plant with full backwages, inclusive of allowances and other benefits or their monetary equivalent,
from 11 September 1995, the time their actual compensation was withheld from them, up to the time of the finality of
this decision; (b) differentials pays (sic) effective as of and from the time petitioners acquired regular employment status
pursuant to the disquisition mentioned above, and all such other and further benefits as provided by applicable
collective bargaining agreement(s) or other relations, or by law, beginning such time up to their termination from
employment on 11 September 1995; and ORDERING private respondent SMC to PAY unto the petitioners attorneys fees
equivalent to ten (10%) percent of the total award.

No pronouncement as to costs.

SO ORDERED.[15] (Underscoring supplied)

Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate court reasoned:

Although the terms of the non-exclusive contract of service between SMC and [Sunflower] showed a clear intent to
abstain from establishing an employer-employee relationship between SMC and [Sunflower] or the latters members, the
extent to which the parties successfully realized this intent in the light of the applicable law is the controlling factor in
determining the real and actual relationship between or among the parties.

xxx

With respect to the power to control petitioners conduct, it appears that petitioners were under the direct control and
supervision of SMC supervisors both as to the manner they performed their functions and as to the end results thereof.
It was only after petitioners lodged a complaint to have their status declared as regular employees of SMC that certain
members of [Sunflower] began to countersign petitioners daily time records to make it appear that they (petitioners)
were under the control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx

Even without these instances indicative of control by SMC over the petitioners, it is safe to assume that SMC would
never have allowed the petitioners to work within its premises, using its own facilities, equipment and tools, alongside
SMC employees discharging similar or identical activities unless it exercised a substantial degree of control and
supervision over the petitioners not only as to the manner they performed their functions but also as to the end results
of such functions.

xxx

xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as independent contractors. [Sunflower] and
the petitioners did not have substantial capital or investment in the form of tools, equipment, implements, work
premises, et cetera necessary to actually perform the service under their own account, responsibility, and method. The
only work premises maintained by [Sunflower] was a small office within the confines of a small carinderia or
refreshment parlor owned by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter (rollo,
pp. 525-525) and, the only assets it provided SMC were the bare bodies of its members, the petitioners herein (rollo, p.
523).

In addition, as shown earlier, petitioners, who worked inside the premises of SMC, were under the control and
supervision of SMC both as to the manner and method in discharging their functions and as to the results thereof.

Besides, it should be taken into account that the activities undertaken by the petitioners as cleaners, janitors,
messengers and shrimp harvesters, packers and handlers were directly related to the aquaculture business of SMC (See
Guarin vs. NLRC, 198 SCRA 267, 273). This is confirmed by the renewal of the service contract from January 1993 to
September 1995, a period of close to three (3) years.
Moreover, the petitioners here numbering ninety seven (97), by itself, is a considerable workforce and raises the
suspicion that the non-exclusive service contract between SMC and [Sunflower] was designed to evade the obligations
inherent in an employer-employee relationship (See Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA
249, 259).

Equally suspicious is the fact that the notary public who signed the by-laws of [Sunflower] and its [Sunflower] retained
counsel are both partners of the local counsel of SMC (rollo, p. 9).

xxx

With these observations, no other logical conclusion can be reached except that [Sunflower] acted as an agent of SMC,
facilitating the manpower requirements of the latter, the real employer of the petitioners. We simply cannot allow these
two entities through the convenience of a non-exclusive service contract to stipulate on the existence of employer-
employee relation. Such existence is a question of law which cannot be made the subject of agreement to the detriment
of the petitioners (Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500).

xxx

There being a finding of labor-only contracting, liability must be shouldered either by SMC or [Sunflower] or shared by
both (See Tabas vs. California Manufacturing, Inc., supra, p. 502). SMC however should be held solely liable for
[Sunflower] became non-existent with the closure of the aquaculture business of SMC.

Furthermore, since the closure of the aquaculture operations of SMC appears to be valid, reinstatement is no longer
feasible. Consistent with the pronouncement in Bustamante, et al., vs. NLRC, G.R. No. 111651, 28 November 1996,
petitioners are thus entitled to separation pay (in the computation similar to those given to regular SMC employees at
its Bacolod Shrimp Processing Plant) with full backwages, inclusive of allowances and other benefits or their monetary
equivalent, from the time their actual compensation was withheld from them up to the time of the finality of this
decision. This is without prejudice to differentials pays (sic) effective as of and from the time petitioners acquired regular
employment status pursuant to the discussion mentioned above, and all such other and further benefits as provided by
applicable collective bargaining agreement(s) or other relations, or by law, beginning such time up to their termination
from employment on 11 September 1995.[16] (Emphasis and underscoring supplied)

SMCs Motion for Reconsideration[17] having been denied for lack of merit by Resolution of July 11, 2001, it comes
before this Court via the present petition for review on certiorari assigning to the CA the following errors:

I
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND GRANTING RESPONDENTS PATENTLY DEFECTIVE
PETITION FOR CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED FROM THE ACCEPTED AND USUAL COURSE
OF JUDICIAL PROCEEDINGS.

II

THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE RESPONDENTS AS COMPLAINANTS IN THE CASE
BEFORE THE LABOR ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE IN A MANNER NOT IN ACCORD
WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT.

III

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS ARE EMPLOYEES OF SMC.

IV

THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF.
THE CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS BUSINESS LOSSES.[18]
(Underscoring supplied)

SMC bewails the failure of the appellate court to outrightly dismiss the petition for certiorari as only three out of the
ninety seven named petitioners signed the verification and certification against forum-shopping.

While the general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a
case and the signature of only one of them is insufficient,[19] this Court has stressed that the rules on forum shopping,
which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such
absolute literalness as to subvert its own ultimate and legitimate objective.[20] Strict compliance with the provisions
regarding the certificate of non-forum shopping merely underscores its mandatory nature in that the certification
cannot be altogether dispensed with or its requirements completely disregarded.[21] It does not, however, thereby
interdict substantial compliance with its provisions under justifiable circumstances.[22]

Thus in the recent case of HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners
Association,[23] this Court held:

Respondents (who were plaintiffs in the trial court) filed the complaint against petitioners as a group, represented by
their homeowners association president who was likewise one of the plaintiffs, Mr. Samaon M. Buat. Respondents
raised one cause of action which was the breach of contractual obligations and payment of damages. They shared a
common interest in the subject matter of the case, being the aggrieved residents of the poorly constructed and
developed Emily Homes Subdivision. Due to the collective nature of the case, there was no doubt that Mr. Samaon M.
Buat could validly sign the certificate of non-forum shopping in behalf of all his co-plaintiffs. In cases therefore where it
is highly impractical to require all the plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order not
to defeat the ends of justice, for one of the plaintiffs, acting as representative, to sign the certificate provided that xxx
the plaintiffs share a common interest in the subject matter of the case or filed the case as a collective, raising only one
common cause of action or defense.[24] (Emphasis and underscoring supplied)

Given the collective nature of the petition filed before the appellate court by herein private respondents, raising one
common cause of action against SMC, the execution by private respondents Winifredo Talite, Renelito Deon and Jose
Temporosa in behalf of all the other private respondents of the certificate of non-forum shopping constitutes substantial
compliance with the Rules.[25] That the three indeed represented their co-petitioners before the appellate court is, as it
correctly found, subsequently proven to be true as shown by the signatures of the majority of the petitioners appearing
in their memorandum filed before Us.[26]

Additionally, the merits of the substantive aspects of the case may also be deemed as special circumstance or
compelling reason to take cognizance of a petition although the certification against forum shopping was not executed
and signed by all of the petitioners.[27]

SMC goes on to argue that the petition filed before the CA is fatally defective as it was not accompanied by copies of all
pleadings and documents relevant and pertinent thereto in contravention of Section 1, Rule 65 of the Rules of Court.[28]

This Court is not persuaded. The records show that private respondents appended the following documents to their
petition before the appellate court: the September 23, 1997 Decision of the Labor Arbiter,[29] their Notice of Appeal
with Appeal Memorandum dated October 16, 1997 filed before the NLRC,[30] the December 29, 1998 NLRC
Decision,[31] their Motion for Reconsideration dated March 26, 1999 filed with the NLRC[32] and the September 10,
1999 NLRC Resolution.[33]

It bears stressing at any rate that it is the appellate court which ultimately determines if the supporting documents are
sufficient to make out a prima facie case.[34] It discerns whether on the basis of what have been submitted it could
already judiciously determine the merits of the petition.[35] In the case at bar, the CA found that the petition was
adequately supported by relevant and pertinent documents.

At all events, this Court has allowed a liberal construction of the rule on the accomplishment of a certificate of non-
forum shopping in the following cases: (1) where a rigid application will result in manifest failure or miscarriage of
justice; (2) where the interest of substantial justice will be served; (3) where the resolution of the motion is addressed
solely to the sound and judicious discretion of the court; and (4) where the injustice to the adverse party is not
commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed.[36]

Rules of procedure should indeed be viewed as mere tools designed to facilitate the attainment of justice. Their strict
and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice,
must always be eschewed.[37]
SMC further argues that the appellate court exceeded its jurisdiction in reversing the decisions of the labor arbiter and
the NLRC as findings of facts of quasi-judicial bodies like the NLRC are accorded great respect and finality, and that this
principle acquires greater weight and application in the case at bar as the labor arbiter and the NLRC have the same
factual findings.

The general rule, no doubt, is that findings of facts of an administrative agency which has acquired expertise in the
particular field of its endeavor are accorded great weight on appeal.[38] The rule is not absolute and admits of certain
well-recognized exceptions, however. Thus, when the findings of fact of the labor arbiter and the NLRC are not
supported by substantial evidence or their judgment was based on a misapprehension of facts, the appellate court may
make an independent evaluation of the facts of the case.[39]

SMC further faults the appellate court in giving due course to private respondents petition despite the fact that the
complaint filed before the labor arbiter was signed and verified only by private respondent Winifredo Talite; that private
respondents position paper[40] was verified by only six[41] out of the ninety seven complainants; and that their Joint-
Affidavit[42] was executed only by twelve[43] of the complainants.

Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts that it should not have been
considered by the appellate court in establishing the claims of those who did not sign the same, citing this Courts ruling
in Southern Cotabato Development and Construction, Inc. v. NLRC.[44]

SMCs position does not lie.

A perusal of the complaint shows that the ninety seven complainants were being represented by their counsel of choice.
Thus the first sentence of their complaint alleges: xxx complainants, by counsel and unto this Honorable Office
respectfully state xxx. And the complaint was signed by Atty. Jose Max S. Ortiz as counsel for the complainants.
Following Section 6, Rule III of the 1990 Rules of Procedure of the NLRC, now Section 7, Rule III of the 1999 NLRC Rules,
Atty. Ortiz is presumed to be properly authorized by private respondents in filing the complaint.

That the verification wherein it is manifested that private respondent Talite was one of the complainants and was
causing the preparation of the complaint with the authority of my co-complainants indubitably shows that Talite was
representing the rest of his co-complainants in signing the verification in accordance with Section 7, Rule III of the 1990
NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules, which states:

Section 7. Authority to bind party. Attorneys and other representatives of parties shall have authority to bind their
clients in all matters of procedure; but they cannot, without a special power of attorney or express consent, enter into a
compromise agreement with the opposing party in full or partial discharge of a clients claim. (Underscoring supplied)

As regards private respondents position paper which bore the signatures of only six of them, appended to it was an
Authority/Confirmation of Authority[45] signed by the ninety one others conferring authority to their counsel to file RAB
Case No. 06-07-10316-95, entitled Winifredo Talite et al. v. San Miguel Corporation presently pending before the sala of
Labor Arbiter Ray Alan Drilon at the NLRC Regional Arbitration Branch No. VI in Bacolod City and appointing him as their
retained counsel to represent them in the said case.

That there has been substantial compliance with the requirement on verification of position papers under Section 3,
Rule V of the 1990 NLRC Rules of Procedure[46] is not difficult to appreciate in light of the provision of Section 7, Rule V
of the 1990 NLRC Rules, now Section 9, Rule V of the 1999 NLRC Rules which reads:

Section 7. Nature of Proceedings. The proceedings before a Labor Arbiter shall be non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and procedure and the rules obtaining in the courts of law shall
not strictly apply thereto. The Labor Arbiter may avail himself of all reasonable means to ascertain the facts of the
controversy speedily, including ocular inspection and examination of well-informed persons. (underscoring supplied)

As regards private respondents Joint-Affidavit which is being assailed in view of the failure of some complainants to affix
their signatures thereon, this Court quotes with approval the appellate courts ratiocinations:

A perusal of the Southern Cotabato Development Case would reveal that movant did not quote the whole text of
paragraph 5 on page 865 of 280 SCRA. The whole paragraph reads:

Clearly then, as to those who opted to move for the dismissal of their complaints, or did not submit their affidavits nor
appear during trial and in whose favor no other independent evidence was adduced, no award for back wages could
have been validly and properly made for want of factual basis. There is no showing at all that any of the affidavits of the
thirty-four (34) complainants were offered as evidence for those who did not submit their affidavits, or that such
affidavits had any bearing at all on the rights and interest of the latter. In the same vein, private respondents position
paper was not of any help to these delinquent complainants.

The implication is that as long as the affidavits of the complainants were offered as evidence for those who did not
submit theirs, or the affidavits were material and relevant to the rights and interest of the latter, such affidavits may be
sufficient to establish the claims of those who did not give their affidavits.

Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97) complainants (petitioners herein)
would readily reveal that the affidavit was offered as evidence not only for the signatories therein but for all of the
complainants. (These ninety-seven (97) individuals were previously identified during the mandatory conference as the
only complainants in the proceedings before the labor arbiter) Moreover, the affidavit touched on the common interest
of all of the complainants as it supported their claim of the existence of an employer-employee relationship between
them and respondent SMC. Thus, the said affidavit was enough to prove the claims of the rest of the complainants.[47]
(Emphasis supplied, underscoring in the original)

In any event, SMC is reminded that the rules of evidence prevailing in courts of law or equity do not control proceedings
before the Labor Arbiter. So Article 221 of the Labor Code enjoins:
ART. 221. Technical rules not binding and prior resort to amicable settlement. In any proceeding before the Commission
or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is
the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law
or procedure, all in the interest of due process. xxx

As such, their application may be relaxed to serve the demands of substantial justice.[48]

On the merits, the petition just the same fails.

SMC insists that private respondents are the employees of Sunflower, an independent contractor. On the other hand,
private respondents assert that Sunflower is a labor-only contractor.

Article 106 of the Labor Code provides:

ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any shall be paid
in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of
the work performed under the contract, in the same manner and extent that he is liable to employees directly employed
by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the
rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and
placed by such person are performing activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly employed by him.

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18,
distinguishes between legitimate and labor-only contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or service between the principal and the contractor
or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there
are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor
or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance
of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the
job, work or service.

Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal, and any of the following elements are
present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal, or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.

Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor
in the performance or completion of the job, work or service contracted out.

The right to control shall refer to the right reserved to the person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that
end.

The test to determine the existence of independent contractorship is whether one claiming to be an independent
contractor has contracted to do the work according to his own methods and without being subject to the control of the
employer, except only as to the results of the work.[49]

In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure
that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job
contractor, only for the payment of the employees wages whenever the contractor fails to pay the same. Other than
that, the principal employer is not responsible for any claim made by the employees.[50]
In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to
prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by
the principal employer.[51]

The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an
employer-employee relationship between SMC and private respondents. The language of a contract is not, however,
determinative of the parties relationship; rather it is the totality of the facts and surrounding circumstances of the
case.[52] A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its
business, i.e., whether as labor-only contractor or job contractor, it being crucial that its character be measured in terms
of and determined by the criteria set by statute.[53]

SMC argues that Sunflower could not have been issued a certificate of registration as a cooperative if it had no
substantial capital.[54]

While indeed Sunflower was issued Certificate of Registration No. IL0-875[55] on February 10, 1992 by the Cooperative
Development Authority, this merely shows that it had at least P2,000.00 in paid-up share capital as mandated by Section
5 of Article 14[56] of Republic Act No. 6938, otherwise known as the Cooperative Code, which amount cannot be
considered substantial capitalization.

What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises and other materials to qualify it as an independent contractor.

On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized by private
respondents in carrying out their tasks were owned and provided by SMC. Consider the following uncontroverted
allegations of private respondents in the Joint Affidavit:

[Sunflower], during the existence of its service contract with respondent SMC, did not own a single machinery,
equipment, or working tool used in the processing plant. Everything was owned and provided by respondent SMC. The
lot, the building, and working facilities are owned by respondent SMC. The machineries and equipments (sic) like washer
machine, oven or cooking machine, sizer machine, freezer, storage, and chilling tanks, push carts, hydrolic (sic) jack,
tables, and chairs were all owned by respondent SMC. All the boxes, trays, molding pan used in the processing are also
owned by respondent SMC. The gloves and boots used by the complainants were also owned by respondent SMC. Even
the mops, electric floor cleaners, brush, hoose (sic), soaps, floor waxes, chlorine, liquid stain removers, lysol and the like
used by the complainants assigned as cleaners were all owned and provided by respondent SMC.

Simply stated, third-party respondent did not own even a small capital in the form of tools, machineries, or facilities
used in said prawn processing

xxx
The alleged office of [Sunflower] is found within the confines of a small carinderia or refreshment (sic) owned by the
mother of the Cooperative Chairman Roy Asong.

xxx In said . . . office, the only equipment used and owned by [Sunflower] was a typewriter. [57]

And from the job description provided by SMC itself, the work assigned to private respondents was directly related to
the aquaculture operations of SMC. Undoubtedly, the nature of the work performed by private respondents in shrimp
harvesting, receiving and packing formed an integral part of the shrimp processing operations of SMC. As for janitorial
and messengerial services, that they are considered directly related to the principal business of the employer[58] has
been jurisprudentially recognized.

Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract
according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role
having been merely to recruit persons to work for SMC.

Thus, it is gathered from the evidence adduced by private respondents before the labor arbiter that their daily time
records were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello,
and Stephen Palabrica, which fact shows that SMC exercised the power of control and supervision over its
employees.[59] And control of the premises in which private respondents worked was by SMC. These tend to disprove
the independence of the contractor.[60]

More. Private respondents had been working in the aqua processing plant inside the SMC compound alongside regular
SMC shrimp processing workers performing identical jobs under the same SMC supervisors.[61] This circumstance is
another indicium of the existence of a labor-only contractorship.[62]

And as private respondents alleged in their Joint Affidavit which did not escape the observation of the CA, no showing to
the contrary having been proffered by SMC, Sunflower did not cater to clients other than SMC,[63] and with the closure
of SMCs Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. This Courts ruling in San Miguel
Corporation v. MAERC Integrated Services, Inc.[64] is thus instructive.

xxx Nor do we believe MAERC to have an independent business. Not only was it set up to specifically meet the pressing
needs of SMC which was then having labor problems in its segregation division, none of its workers was also ever
assigned to any other establishment, thus convincing us that it was created solely to service the needs of SMC. Naturally,
with the severance of relationship between MAERC and SMC followed MAERCs cessation of operations, the loss of jobs
for the whole MAERC workforce and the resulting actions instituted by the workers.[65] (Underscoring supplied)

All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee
relationship between SMC and private respondents.
Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in the
aquaculture business of SMC, they should be deemed regular employees of the latter[66] and as such are entitled to all
the benefits and rights appurtenant to regular employment.[67] They should thus be awarded differential pay
corresponding to the difference between the wages and benefits given them and those accorded SMCs other regular
employees.

Respecting the private respondents who were tasked with janitorial and messengerial duties, this Court quotes with
approval the appellate courts ruling thereon:

Those performing janitorial and messengerial services however acquired regular status only after rendering one-year
service pursuant to Article 280 of the Labor Code. Although janitorial and messengerial services are considered directly
related to the aquaculture business of SMC, they are deemed unnecessary in the conduct of its principal business;
hence, the distinction (See Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 136-137 and Philippine Bank of
Communications v. NLRC, supra, p. 359).[68]

The law of course provides for two kinds of regular employees, namely: (1) those who are engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have
rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are
employed.[69]

As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second
category and are thus entitled to differential pay and benefits extended to other SMC regular employees from the day
immediately following their first year of service.[70]

Regarding the closure of SMCs aquaculture operations and the consequent termination of private respondents, Article
283 of the Labor Code provides:

ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of
any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year. (Underscoring supplied)
In the case at bar, a particular department under the SMC group of companies was closed allegedly due to serious
business reverses. This constitutes retrenchment by, and not closure of, the enterprise or the company itself as SMC has
not totally ceased operations but is still very much an on-going and highly viable business concern.[71]

Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to
faithful compliance with the substantive and procedural requirements laid down by law and jurisprudence.[72]

For retrenchment to be considered valid the following substantial requirements must be met: (a) the losses expected
should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended must be reasonably
imminent such as can be perceived objectively and in good faith by the employer; (c) the retrenchment must be
reasonably necessary and likely to effectively prevent the expected losses; and (d) the alleged losses, if already incurred,
and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.[73]

In the discharge of these requirements, it is the employer who has the onus, being in the nature of an affirmative
defense.[74]

Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit and
loss statements and annual income tax returns. The financial statements must be prepared and signed by independent
auditors failing which they can be assailed as self-serving documents.[75]

In the case at bar, company losses were duly established by financial documents audited by Joaquin Cunanan & Co.
showing that the aquaculture operations of SMCs Agribusiness Division accumulated losses amounting to
P145,848,172.00 in 1992 resulting in the closure of its Calatrava Aquaculture Center in Negros Occidental,
P11,393,071.00 in 1993 and P80,325,608.00 in 1994 which led to the closure of its San Fernando Shrimp Processing
Plant in Pampanga and the Bacolod Shrimp Processing Plant in 1995.

SMC has thus proven substantial business reverses justifying retrenchment of its employees.

For termination due to retrenchment to be valid, however, the law requires that written notices of the intended
retrenchment be served by the employer on the worker and on the DOLE at least one (1) month before the actual date
of the retrenchment,[76] in order to give employees some time to prepare for the eventual loss of their jobs, as well as
to give DOLE the opportunity to ascertain the verity of the alleged cause of termination.[77]

Private respondents, however, were merely verbally informed on September 10, 1995 by SMC Prawn Manager Ponciano
Capay that effective the following day or on September 11, 1995, they were no longer to report for work as SMC would
be closing its operations.[78]

Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to
comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employers
exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the
same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal
process was, in effect, initiated by an act imputable to the employee.[79]

In light of the factual circumstances of the case at bar, this Court awards P50,000.00 to each private respondent as
nominal damages.

The grant of separation pay as an incidence of termination of employment due to retrenchment to prevent losses is a
statutory obligation on the part of the employer and a demandable right on the part of the employee. Private
respondents should thus be awarded separation pay equivalent to at least one (1) month pay or to at least one-half
month pay for every year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation
pay awarded by SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending
on which is most beneficial to private respondents.

Considering that private respondents were not illegally dismissed, however, no backwages need be awarded. It is well
settled that backwages may be granted only when there is a finding of illegal dismissal.[80] The appellate court thus
erred in awarding backwages to private respondents upon the authority of Bustamante v. NLRC,[81] what was involved
in that case being one of illegal dismissal.

With respect to attorneys fees, in actions for recovery of wages or where an employee was forced to litigate and thus
incurred expenses to protect his rights and interests,[82] a maximum of ten percent (10%) of the total monetary
award[83] by way of attorneys fees is justifiable under Article 111 of the Labor Code,[84] Section 8, Rule VIII, Book III of
its Implementing Rules,[85] and paragraph 7, Article 2208 of the Civil Code.[86] Although an express finding of facts and
law is still necessary to prove the merit of the award, there need not be any showing that the employer acted
maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not
paid accordingly, as in this case.[87]

Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to Rule VIII-A, Section
19[88] of the Omnibus Rules Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all the
rightful claims of private respondents.

WHEREFORE, the petition is DENIED. The assailed Decision dated February 7, 2001 and Resolution dated July 11, 2001 of
the Court of Appeals are AFFIRMED with MODIFICATION.

Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are hereby ORDERED to jointly and
severally pay each private respondent differential pay from the time they became regular employees up to the date of
their termination; separation pay equivalent to at least one (1) month pay or to at least one-half month pay for every
year of service, whichever is higher, as mandated by Article 283 of the Labor Code or the separation pay awarded by
SMC to other regular SMC employees that were terminated as a result of the retrenchment, depending on which is most
beneficial to private respondents; and ten percent (10%) attorneys fees based on the herein modified award.
Petitioner San Miguel Corporation is further ORDERED to pay each private respondent the amount of P50,000.00,
representing nominal damages for non-compliance with statutory due process.

The award of backwages is DELETED.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.

[1] Rollo at 278-286.

[2] Annexed to the Service Contract is a detailed listing of the scope of the services to be provided to SMC:

A. Shrimp Receiving/Harvesting

- Assist in the crushing and loading of ice;

- Receive the raw materials and put them into the chilling tanks;

- Sort the shrimp according to standard quality specifications;

- Pack the raw materials into styropor boxes/containers and assist on the delivery of the harvested raw materials to the
processing plant;

- Prepare harvest materials and equipment and clean them after use and

- Perform other duties that the company may assign from time to time.

B. Janitorial and Messengerial Services

1. Maintain, sanitize and clean the following:

- Streets cemented and otherwise

- Canals and floor area

- Administration building offices and comfort rooms

- Logistics/materials/warehouse building

- Clinic and comfort room

- Plant grounds/lawn

2. Maintain and Water the plants and trees

3. Haul and dispose garbage daily from designated waste containers within the compound to an area outside and far
from the compound.

4. Perform messengerial activities within Bacolod City and other duties that may be assigned during office hours.

C. Sanitation/Washing Services

1. Wash and sanitize boxes, chilling tanks, trays and other harvesting materials.

2. Store harvesting materials in the designated area after washing.

3. Load and unload boxes, trays, chilling tanks and other harvesting materials to be used during harvest schedule.

[3] Rollo at 279-283.

[4] Id. at 114-117.

[5] Id. at 502.

[6] Id. at 118-120.

[7] Id. at 121.

[8] Id. at 340.

[9] Id. at 504-507.

[10] Id. at 553-557.

[11] Id. at 559-563.

[12] Id. at 574-587.

[13] CA Rollo at 74-82.

[14] Id. at 108-142.

[15] Rollo at 22.

[16] Id. at 15-21-a.

[17] Id. at 623-637.

[18] Id. at 57-58.

[19] Docena v. Lapesura, 355 SCRA 658, 667 (2001).

[20] Cavile v. Heirs of Clarita Cavile, 400 SCRA 255, 261-262 (2003) (citations omitted).

[21] HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners Association, 411 SCRA
504, 508 (2003).
[22] Cavile v. Heirs of Clarita Cavile, 400 SCRA 255, 262 (2003) (citation omitted).

[23] 411 SCRA 504 (2003).

[24] Id. at 509-510.

[25] Vide: Cavile v. Heirs of Clarita Cavile, 400 SCRA 255 (2003) where this Court found:

We find that the execution by Thomas George Cavile, Sr. in behalf of all the other petitioners of the certificate of non-
forum shopping constitutes substantial compliance with the Rules. All the petitioners, being relatives and co-owners of
the properties in dispute, share a common interest thereon. They also share a common defense in the complaint for
partition filed by the respondents. Thus, when they filed the instant petition, they filed it as a collective, raising only one
argument to defend their rights over the properties in question. There is sufficient basis, therefore, for Thomas George
Cavili, Sr. to speak for and in behalf of his co-petitioners that they have not filed any action or claim involving the same
issues in another court or tribunal, nor is there other pending action or claim in another court or tribunal involving the
same issues.

[26] Rollo at 28.

[27] Torres v. Specialized Packaging Development Corporation, 433 SCRA 455, 467 (2004), Cavile v. Heirs of Clarita
Cavile, 400 SCRA 255, 262 (2003) (citation omitted).

[28] SECTION 1. Petition for Certiorari. When any tribunal, board or officer exercising judicial or quasi-judicial functions
has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that
judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

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.

[29] CA Rollo at 16-31.

[30] Id. at 33-47.

[31] Id. at 48-61.

[32] Id. at 63-67.

[33] Id. at 68-69.

[34] Atillo v. Bombay, 351 SCRA 361, 369 (2001).

[35] Ibid.

[36] Manila Hotel Corporation v. Court of Appeals, 384 SCRA 520, 524 (2002) (citation omitted).

[37] Serrano v. Galant Maritime Services, Inc., 408 SCRA 523, 528 (2003) (citations omitted).

[38] Pepsi-Cola Distributors of the Philippines, Inc. v. NLRC, 272 SCRA 267, 276 (1997), Trendline Employees Association-
Southern Philippines Federation of Labor v. NLRC, 272 SCRA 172, 179 (1997) (citation omitted).

[39] EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 515-516 (2004) (citations omitted), Villar v. NLRC, 331 SCRA
686, 692 (2000) (citation omitted).

[40] Rollo at 124-136.

[41] Winifredo Talite, Camilo Temporosa, Arnel De Pedro, Jonathan Inventor, Ramie Despi and Roderick Duquesa.

[42] Rollo at 483-489.

[43] Winifredo Talite, Jerry Talite, Clifford Despi, Joey de la Cruz, Jonathan Inventor, Ramie Despi, Arnel De Pedro,
Leonardo Lemoncito, Camilo Temporosa, Renelito Deon, Jose Temporosa and Victor Despi.

[44] 280 SCRA 853 (1997).

[45] Rollo at 133-135.

[46] Section 3. Submission of Position Papers/Memorandum. Should the parties fail to agree upon an amicable
settlement, either in whole or in part, during the conferences, the Labor Arbiter shall issue an order stating therein the
matters taken up and agreed upon during the conferences and directing the parties to simultaneously file their
respective verified position papers.

These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those
that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of
their respective witnesses which shall take the place of the latters direct testimony. The parties shall thereafter not be
allowed to allege facts, or present evidence to prove facts, not referred to and any cause or causes of action not
included in the complaint or position papers, affidavits and other documents. Unless otherwise requested in writing by
both parties, the Labor Arbiter shall direct both parties to submit simultaneously their position papers/memorandum
with the supporting documents and affidavits within fifteen (15) calendar days from the date of the last conference,
with proof of having furnished each other with copies thereof.

[47] Rollo at 26.

[48] Havtor Management Phils., Inc. v. NLRC, 372 SCRA 271, 274 (2001) (citation omitted), Samahan ng Manggagawa sa
Moldex Products, Inc. v. NLRC, 324 SCRA 237, 252 (2000) (citation omitted).

[49] New Golden City Builders & Development Corporation v. Court of Appeals, 418 SCRA 411, 417 (2003), Vinoya v.
NLRC, 324 SCRA 469, 487 (2000) (citation omitted), Philippine Airlines, Inc. v. NLRC, 298 SCRA 430, 444 (1998) (citation
omitted).

[50] New Golden City Builders & Development Corporation v. Court of Appeals, 418 SCRA 411, 419 (2003) (citation
omitted), San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579, 596 (2003) (citation omitted).

[51] Manila Water Company, Inc. v. Pea, 434 SCRA 53, 61 (2004) (citation omitted), San Miguel Corporation v. MAERC
Integrated Services, Inc., 405 SCRA 579, 596 (2003), Philippine Airlines, Inc. v. NLRC, 298 SCRA 430, 447 (1998) (citation
omitted), Ponce v. NLRC, 293 SCRA 366, 375-376, (1998) (citations omitted), Tiu v. NLRC, 254 SCRA 1, 9 (1996) (citations
omitted), Ecal v. NLRC, 195 SCRA 224, 231 (1991) (citation omitted), Philippine Bank of Communications v. NLRC, 146
SCRA 347, 356 (1986).

[52] San Miguel Corporation v. MAERC Integrated Services, Inc, 405 SCRA 579, 589 (2003) (citation omitted), Bernardo v.
NLRC, 310 SCRA 186, 205 (1999) (citation omitted).

[53] De los Santos v. NLRC, 372 SCRA 723, 734 (2001).

[54] Rollo at 76.

[55] Id. at 287.

[56] (5) No cooperative shall be registered unless the articles of cooperation is accompanied with the bonds of the
accountable officers and a sworn statement of the treasurer elected by the subscribers showing that at least twenty-five
per centum (25%) of the authorized share capital has been subscribed and at least twenty-five per centum (25%) of the
total subscription has been paid: Provided, That in no case shall the paid-up share capital shall be less than Two
thousand pesos (P2,000.00).

[57] Rollo at 483-486.

[58] Coca Cola Bottlers Phils, Inc. v. NLRC, 307 SCRA 131, 137 (1999) (citation omitted), Neri v. NLRC, 224 SCRA 717, 722
(1993) (citation omitted), Guarin v. NLRC, 178 SCRA 267, 273 (1989) (citation omitted).

[59] De los Santos v. NLRC, 372 SCRA 723, 732 (2001).

[60] San Miguel Corporation v. MAERC Integrated Services, Inc., 405 SCRA 579, 590 (2003) (citation omitted).

[61] Rollo at 485.

[62] Vide: Philippine Bank of Communications v. NLRC (146 SCRA 347, 354) where this Court found:

Turning to the power to control Orpiadas conduct, it should be noted immediately that Orpiada performed his functions
within the banks premises, and not within the office premises of CESI. As such, Orpiada must have been subject to at
least the same control and supervision that the bank exercises over any other person physically within its premises and
rendering services to or for the bank, in other words, any employee or staff member of the bank. It seems unreasonable
to suppose that the bank would have allowed Orpiada and the other persons assigned to the bank by CESI to remain
within the banks premises and there render services to the bank, without subjecting them to a substantial measure of
control and supervision xxx

[63] Vide: Coca Cola Bottlers Phils., Inc. v. NLRC, 307 SCRA 131, 140 (1999).

[64] 405 SCRA 579 (2003).

[65] Id. at 595-596.

[66] Manila Water Company, Inc. v. Pena, 434 SCRA 53, 62 (2004).

[67] Ecal v. NLRC, 195 SCRA 224, 234 (1991) (citations omitted).

[68] Rollo at 21.

[69] Kimberly Independent Union v. Drilon, 185 SCRA 190, 203 (1990).

[70] Id. at 205.

[71] Catatista v. NLRC, 247 SCRA 46, 51 (1995), Construction & Development Corporation of the Philippines v. Leogardo,
Jr., 125 SCRA 863, 867 (1983).

[72] EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 511 (2004) (citation omitted).

[73] EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 508 (2004) (citation omitted), Philippine Tobacco Flue-Curing
& Redrying Corporation v. NLRC, 300 SCRA 37, 55-56 (1998) (citation omitted), Somerville Stainless Steel Corporation v.
NLRC, 287 SCRA 420, 430 (1998) (citation omitted), Edge Apparel, Inc., v. NLRC, 286 SCRA 302, 313 (1998) (citation
omitted), San Miguel Jeepney Service v. NLRC, 265 SCRA 35, 44 (1996) (citation omitted), Catatista v. NLRC, 247 SCRA 46,
52 (1995) (citation omitted).

[74] Somerville Stainless Steel Corporation v. NLRC, 287 SCRA 420, 432 (1998) (citation omitted), San Miguel Jeepney
Service v. NLRC, 265 SCRA 35, 45 (1996) (citation omitted), Guerrero v. NLRC, 261 SCRA 301, 306 (1996) (citation
omitted).

[75] Asian Alcohol Corporation v. NLRC, 305 SCRA 417 (1999) (citations omitted).

[76] EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 511-512 (2004) (citation omitted), San Miguel Corporation v.
MAERC Integrated Services, Inc., 405 SCRA 579, 596 (2003) (citations omitted), Guerrero v. NLRC, 261 SCRA 301, 307
(1996).

[77] EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 512 (2004) (citation omitted), Sebuguero v. NLRC, 248 SCRA
532, 545 (1995).

[78] Rollo at 126.

[79] JAKA Food Processing Corporation v. Pacot, G.R. No. 151378, March 28, 2005.

[80] J.A.T. General Services v. NLRC, 421 SCRA 78, 91 (2004) (citation omitted).

[81] 265 SCRA 61, 71 (1996).

[82] Manila Water v. Pena, 434 SCRA 53, 64-65 (2004) (citation omitted), Rasonable v. NLRC, 253 SCRA 815, 819 (1996)
(citations omitted).

[83] Reyes v. Court of Appeals, 409 SCRA 267, 284 (2003) (citations omitted), Marsaman Manning Agency, Inc. v. NLRC,
313 SCRA 88, 99 (1999).

[84] ART. 111. Attorneys fees. (a) In cases of unlawful withholding of wages the culpable party may be assessed
attorneys fees equivalent to ten percent of the amount of wages recovered. (b) It shall be unlawful for any person to
demand or accept, in any judicial or administrative proceedings for the recovery of the wages, attorneys fees which
exceed ten percent of the amount of wages recovered.

[85] SEC. 8. Attorneys fees. Attorneys fees in any judicial or administrative proceedings for the recovery of wages shall
not exceed 10% of the amount awarded. The fees may be deducted from the total amount due the winning party.

[86] ART. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot
be recovered, except: xxx (7) In actions for the recovery of wages of household helpers, laborers and skilled workers.

[87] Reyes v. Court of Appeals, 409 SCRA 267, 283 (2003) (citations omitted).

[88] SEC. 19. Solidary Liability. The principal shall be deemed as the direct employer of the contractual employees and
therefore, solidarily liable with the contractor or subcontractor for whatever monetary claims the contractual
employees may have against the former in the case of violations as provided for in Sections 5 (Labor-Only contracting), 6
(Prohibitions), 8 (Rights of Contractual Employees) and 16 (Delisting) of these Rules. In addition, the principal shall also
be solidarily liable in case the contract between the principal and contractor or subcontractor is preterminated for
reasons not attributed to the fault of the contractor or subcontractor.
FIRST DIVISION

BENGUET CORPORATION,

Petitioner,

- versus -

G.R. No. 155343

Present:

Davide Jr., C.J.,

(Chairman),

Quisumbing,

Ynares-Santiago,*

Carpio, and

Azcuna, JJ.

CORDILLERA CARABALLO MISSION, INC., herein represented by its Chairman, Greg Bernabe, Jr., TEOFILO BOY DICANG
and GREG BERNABE, JR.

Respondents.

Promulgated:

September 2, 2005

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:

This petition for review on certiorari seeks to set aside the Resolution[1] dated August 22, 2002 of the Court of Appeals
in CA-G.R. SP No. 72150 and the Decision[2] dated June 14, 2002 of the Regional Trial Court of La Trinidad, Benguet,
Branch VIII, in Civil Case No. 2K-CV-1698, and thus reinstate the Decision[3] dated December 21, 2001 of the Municipal
Trial Court of Itogon, Benguet in Civil Case No. 314.

Petitioner Benguet Corporation owns Pilo mineral claim covering several hectares of land in Virac, Itogon, Benguet. It
planted pine trees in compliance with the directive of the Department of Environment and Natural Resources (DENR)
and built roads, buildings and security gates in the covered area. Sometime in September 1997, petitioner discovered
that representatives of respondent Cordillera Caraballo Mission, Inc. (CCMI) bulldozed and leveled the grounds within its
Pilo mineral claim in preparation for the construction of a school. Despite petitioners demands to cease, respondents
continued with the construction activities.

Petitioner filed a complaint[4] for forcible entry against respondents in the Municipal Trial Court (MTC) of Itogon,
Benguet. The MTC ruled in favor of petitioners prior possession of the land since August 10, 1964, vis--vis CCMIs
possession which began only in 1994. The court ordered respondents to vacate the premises, restore complete
possession to the petitioner, and pay the cost. [5]

On appeal, the RTC reversed the judgment of the MTC and dismissed the complaint for failure to state a cause of action.
It found that the complaint did not state the means of dispossession and did not constitute an action for forcible
entry.[6]

Petitioner elevated the case to the Court of Appeals. The appellate court dismissed the petition for failure to attach (a)
the board resolution authorizing the affiant to file the complaint, and (b) the certified copies of other pleadings and
documents pertinent and relevant thereto.[7]

Petitioner now comes before us alleging that

The Honorable Court of Appeals committed reversible error

a) in denying due course the petition (sic);

b) in not considering the issues raised in the petition which are actually based on facts not controverted but even
stipulated by the parties;

c) in not disposing the issues which are not even factual but legal issues based on duly established facts at the trial
court.[8]

Simply stated, we are asked to resolve the following issues: (1) Is petitioners failure to attach the board resolution and
the copies of other pleadings an excusable mistake? (2) Does the complaint state a cause of action? and (3) If it does,
who should have possession?

On the first issue, petitioner claims to have substantially complied with the rules, and pleads for the liberal construction,
as a matter of substantive justice. It averred that affiant Marcelo A. Bolao was authorized by the board but copies of the
board resolution were in its Makati Office while its counsel was based in Baguio City. It maintains that the attached
complaint and decisions of the MTC and RTC were sufficient since the petition before the Court of Appeals was limited
to pure questions of law. It posits that the complaint itself is the best evidence to determine whether the allegations
therein sufficiently state a cause of action.

This Court has consistently held that the requirement regarding verification of a pleading is formal, not jurisdictional.[9]
Such requirement is a condition affecting the form of the pleading; non-compliance with this requirement does not
necessarily render the pleading fatally defective. Verification is simply intended to secure an assurance that the
allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation, and
that the pleading is filed in good faith.[10] Further, the purpose of the aforesaid certification is to prohibit and penalize
the evils of forum-shopping.[11] Considering that later on Mr. Bolaos authority to sign the verification and certificate of
non-forum shopping was ratified[12] by the board, there is no circumvention of these objectives.

On the necessity of other pleadings and documents, Section 2 of Rule 42 of the Rules of Court requires attachments if
these would support the allegations of the petition. We note that the facts alleged in the petition filed before the Court
of Appeals were the same facts found in the decisions of the MTC and RTC. Accordingly, we find no compelling need to
attach other portions of the records. Besides, the appellate court can always refer to the records transmitted[13] by the
clerk of the trial court if it wanted to verify the allegations.

The Rules of Civil Procedure should be applied with reason and liberality[14] to promote its objective of securing a just,
speedy and inexpensive disposition of every action and proceeding. Rules of procedure are used to help secure and not
override substantial justice. Thus, the dismissal of an appeal on a purely technical ground is frowned upon especially if it
will result in unfairness.[15] No such result happened here.

Anent the second issue, which goes to the merits of the instant controversy, petitioner asserts that it specifically alleged
the acts constituting forcible entry and it points to paragraphs 4, 5, and 6 of the complaint as well as to the annexed
photographs. For its part, the respondent defends the ruling of the RTC that petitioner failed to state sufficiently a cause
of action in the complaint before the MTC.

The pertinent portion of the complaint reads:

...

3. The plaintiff is the owner as well as lawful and peaceful possessor of a parcel of land covered by PILO Mineral Claim
shown in the approved plan hereto attached as Annex A hereof.

4. Sometime in the later part of September 1997, plaintiffs caretaker noticed an ongoing bulldozing and ground leveling
activities within Pilo Mineral Claim. His investigation revealed that the illegal activity was being undertaken by individual
defendants who were supervising the heavy equipment owned by one Pio Wasit. When confronted, said defendant
represented themselves to be representatives of defendant Cordillera Caraballo Mission, Inc. To this effect, hereto
attached.

5. The defendants were warned of their unlawful entry in the above-described property of the plaintiff but defendants
refused to stop to the damage and prejudice of the plaintiff herein. In fact, in the process of forcible entry in the
property, the defendants destroyed young and full grown pine trees alike which your plaintiff had been protecting and
spending considerable amount therefor.

6. The unlawful activities by the defendants and their refusal to stop despite demand prompted plaintiff to send them
demand letter dated October 1, 1997, copy of which is hereto attached as Annex G, but in spite of the receipt of said
letter, the defendants ignored it and continued in their activities dispossessing plaintiff of its peaceful possession over
the property. In fact, the defendants even proceeded in laying the foundation of the construction of a building as shown
in the photographs hereto attached as Annex H.[16]

In actions for forcible entry, it may be stressed, two allegations are mandatory for the municipal court to acquire
jurisdiction. First, the plaintiff must allege his prior physical possession of the property. Second, he must also allege that
he was deprived of his possession by any of the means provided for in Section 1, Rule 70 of the Rules of Court, namely,
force, intimidation, threat, strategy, and stealth.[17] If the alleged dispossession did not occur by any of these means,
the proper recourse is to file not an action for forcible entry but a plenary action to recover possession with the Regional
Trial Court.[18]

Nothing in the complaint before the MTC would show how the entry was effected nor how dispossession took place. The
complaint merely stated that petitioners caretaker noticed an ongoing bulldozing and leveling activities. The allegations
that these activities were illegal and that respondents entry was unlawful are not statements of bare facts but
conclusions of law. The complaint should have specified what made the activities illegal and the entry unlawful.[19]
Without these ultimate facts, the MTC did not acquire jurisdiction over the case. In view of the foregoing, the RTC
properly reversed the MTCs decision and then dismissed the complaint of petitioner for failure to state a cause of action.
The appellate court would not and did not commit a reversible error in sustaining in effect the RTCs decision of
dismissal.

WHEREFORE, the petition is DENIED for lack of merit. The Resolution dated August 22, 2002 of the Court of Appeals in
CA-G.R. SP No. 72150 and the Decision dated June 14, 2002 of the Regional Trial Court of La Trinidad, Benguet, Branch
VIII, in Civil Case No. 2K-CV-1698 are AFFIRMED.

SO ORDERED.

LEONARDO A. QUISUMBING

Associate Justice

WE CONCUR:

HILARIO G. DAVIDE, JR.

Chief Justice

Chairman

(On leave)

CONSUELO YNARES-SANTIAGO ANTONIO T. CARPIO

Associate Justice Associate Justice

ADOLFO S. AZCUNA

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

HILARIO G. DAVIDE, JR.

Chief Justice

* On leave.

[1] Rollo, pp. 124-125. Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices Conchita Carpio
Morales (now a Member of this Court), and Martin S. Villarama, Jr. concurring.

[2] Id. at 56-62.

[3] Id. at 49-55.

[4] Id. at 32-37.

[5] Id. at 55.

[6] Id. at 62.

[7] Rollo, pp. 124-125.

[8] Id. at 7.

[9] Uy v. Land Bank of the Philippines, G.R. No. 136100, 24 July 2000, 336 SCRA 419, 427.

[10] Shipside Incorporated v. Court of Appeals, G.R. No. 143377, 20 February 2001, 352 SCRA 334, 346.

[11] Bank of the Philippine Islands v. Court of Appeals, G.R. No. 146923, 30 April 2003, 402 SCRA 449, 454.

[12] The lone attached Secretarys Certificate shows that the board meeting, in which Mr. Bolao was authorized, was
held on August 12, 2002 or after the date of filing of the petition before the Court of Appeals. See Rollo p. 30.

[13] RULES OF COURT, Rule 41, Section 12.

SEC. 12. Transmittal. The clerk of the trial court shall transmit to the appellate court the original record or the approved
record on appeal within thirty (30) days from the perfection of the appeal, together with the proof of payment of the
appellate court docket and other lawful fees, a certified true copy of the minutes of the proceedings, the order of
approval, the certificate of correctness, the original documentary evidence referred to therein, and the original and
three (3) copies of the transcripts. Copies of the transcripts and certified true copies of the documentary evidence shall
remain in the lower court for the examination of the parties.

[14] Barnes v. Reyes, G.R. No. 144533, 23 September 2003, 411 SCRA 538, 543.

[15] Ace Navigation Co., Inc. v. Court of Appeals (Thirteenth Division), G.R. No. 140364, 15 August 2000, 338 SCRA 70,
76.

[16] Rollo, pp. 33-34.

[17] Tirona v. Alejo, G.R. No. 129313, 10 October 2001, 367 SCRA 17, 30.

[18] Ong v. Parel, G.R. No. 143173, 28 March 2001, 355 SCRA 691, 696.

[19] See G & S Transport Corporation v. Court of Appeals, G.R. No. 120287, 28 May 2002, 382 SCRA 262, 274.

FIRST DIVISION

MICRO SALES OPERATION NETWORK and WILLY BENDOL,

Petitioners,

G.R. No. 155279

- versus -

Present:

Davide, Jr., C.J.,

(Chairman),
Quisumbing,

Ynares-Santiago,

Carpio, and

Azcuna, JJ.

THE NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), LARRY HERMOSA, LEONARDO G. DE CASTRO and
RAMIL BASINILLO,

Respondents.

Promulgated:

October 11, 2005

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.:

For review on certiorari are the Resolutions[1] dated November 28, 2001 and September 3, 2002, respectively, of the
Court of Appeals, in CA-G.R. SP No. 67755. The said Resolutions dismissed petitioners special civil action for certiorari
against the National Labor Relations Commission (NLRC) Resolution,[2] which affirmed the Labor Arbiters Decision[3]
finding petitioners herein liable for illegal dismissal.

The antecedent facts are as follows:

Petitioner Micro Sales Operation Network (company for brevity) is a domestic corporation engaged in local
transportation of goods by land. Petitioner Willy[4] Bendol was the companys operations manager at the time of the
controversy.

Private respondents Larry Hermosa, Leonardo de Castro, and Ramil Basinillo were employed by the company as driver,
warehouseman, and helper, respectively. Hermosa was hired on November 17, 1997, de Castro on February 1, 1996, and
Basinillo on February 4, 1998.

Hermosa failed to promptly surrender the ignition key of the companys vehicle after discharging his duties. Such failure
was allegedly contrary to the companys standard operating procedure. Thus, he was asked to explain within 24 hours
why disciplinary action should not be meted on him. He explained that he kept the ignition key because the vehicle was
stalled when its battery broke down.[5] Unsatisfied with Hermosas explanation, the company dismissed him on January
9, 1999.

De Castro was suspected of firing a gun during the blessing of the companys warehouse on December 10, 1998. The next
day, he was placed under preventive suspension and temporarily banned from entering the companys premises. He was
also asked to explain within 24 hours why he should not be terminated. He explained that he had no knowledge of the
said incident.[6] As his suspension was indefinite and he received no recall order from petitioners, he no longer reported
for work.

Basinillo alleged that sometime in September 1998, the companys security guard scolded him for not wearing the
employee ID. On October 17, 1998, he was dismissed.

Thus, on February 10, 1999, Hermosa, de Castro, and Basinillo collectively filed a Complaint[7] for illegal dismissal before
the Regional Arbitration Branch No. IV, docketed as NLRC Case No. RAB-IV-2-10765-99-C.

In his Decision[8] dated February 21, 2000, Labor Arbiter Antonio R. Macam found that private respondents were
illegally dismissed. The fallo of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of all complainants herein
illegal and ordering respondents to reinstate them to their former or equivalent positions and to pay them full
backwages, plus ten percent (10%) attorneys fees, computed as follows:

LARRY HERMOSA

From January 9, 1999 to Feb. 21, 2000

= 1 yr. 1 mo. & 12 days or 13.36 mos.

P220.00 x 26 x 13.36 = P76,419.20

P76,419.20/12 = 6,368.27

P220.00 x 5 = 1,100.00 P83,887.47

----------------

LEONARDO DE CASTRO

From Dec. 12, 1998 to Feb. 21, 2000

= 1 yr. 2 mos. & 9 days or 14.30 mos.

P7,280.00 x 14.30 = P104,104.00

P104,104.00/12 = 8,675.33

P7,280.00/26 x 5 = 1,400.00 P114,179.33

----------------

RAMIL BASINILLO

From Oct. 17, 1998 to Feb. 21, 2000

= 1 yr., 4 mos. & 4 days or 16.13 mos.

P200.00 x 26 x 16.13 = P83,876.00

P83,876.00/12 = 6,989.67

P200.00 x 5 = 1,000.00 P 91,865.67

---------------- ---------------

Total Full Backwages = P289,932.47

Plus 10% Attorneys Fees = 28,993.25

---------------

GRAND TOTAL = P318,925.72

SO ORDERED.[9]

On appeal, the NLRC affirmed the Labor Arbiters decision. It also denied petitioners motion for reconsideration.

Undaunted, petitioners filed with the Court of Appeals a special civil action for certiorari. However, the appellate court
dismissed the petition for being defective in form. It found that only the company signed the verification and
certification on non-forum shopping. Petitioner Willy Bendol did not sign the same.

Petitioners motion for reconsideration was denied. The appellate court reasoned that even if petitioner Willy Bendol
was not impleaded as a real party in interest, records showed that he was impleaded as a co-respondent before the
Labor Arbiter. Thus, the appellate court ruled, his failure to sign the verification and certification on non-forum shopping
is a ground for the dismissal of the petition.

Hence, the instant petition anchored on the following grounds:

A. THE HONORABLE COURT OF APPEALS PLAINLY ERRED AND ACTED CONTRARY TO EXISTING LAW AND
JURISPRUDENCE IN DISMISSING THE PETITION FOR CERTIORARI ON A MERE TECHNICALITY CONSIDERING THAT WILLY
BENDOL WAS JOINED MERELY AS A NOMINAL PARTY TO THE PETITION.

B. MORE IMPORTANTLY, JUSTICE WOULD BE BEST SERVED IF THE PETITION WAS GIVEN DUE COURSE
CONSIDERING THAT THE PUBLIC RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE DECISION OF LABOR ARBITER MACAM CONSIDERING
THAT:

1. THERE IS NO FACTUAL OR EVIDENTIARY BASIS TO SUPPORT THE FINDING OF ILLEGAL DISMISSAL. DUE PROCESS
AND FAIR PLAY DICTATE THAT THE PUBLIC RESPONDENT COMMISSION POINT OUT THE PARTICULAR FACTUAL FINDING
OF THE LABOR ARBITER WHICH JUSTIFIED THE FINDING OF ILLEGAL DISMISSAL.

2. THE PUBLIC RESPONDENT COMMISSION IGNORED THE FACT THAT THE LABOR ARBITERS FINDING OF ILLEGAL
DISMISSAL RESTS ON PURE SPECULATION, CONJECTURE AND SURMISES.

3. PRIVATE RESPONDENT BASINILLO HIMSELF DENIED THAT HE WAS DISMISSED BY PETITIONERS.

4. THE ACTS OF HERMOSA CONSTITUTE WILLFUL DISOBEDIENCE JUSTIFYING HIS DISMISSAL.

5. THE HONORABLE COMMISSION COMPLETELY IGNORED THE FACT THAT PRIVATE RESPONDENTS SINGULAR CAUSE
OF ACTION IS THAT FOR ILLEGAL DISMISSAL. THUS, THE LABOR ARBITERS AWARD OF SEPARATION PAY AND ATTORNEYS
FEES WAS UTTERLY WITHOUT BASIS.[10]
Petitioners insist Willy Bendol was impleaded merely because he was the immediate supervisor of private respondents.
They argue that the real party in interest in this case is the company. In any case, petitioners point out that Bendol was
no longer connected with the company when the special civil action for certiorari was filed.

Private respondents, however, maintain that formal requirements must be strictly complied with. Thus, they posit, the
Court of Appeals correctly dismissed the petition for failure of one of the petitioners to sign the verification and
certification on non-forum shopping.

Further, petitioners contend that Hermosas omission constituted willful disobedience justifying his dismissal. With
respect to de Castro, petitioners claim that he was merely suspended. As for Basinillo, petitioners point to an unsworn
statement,[11] where he denied filing any complaint for illegal dismissal against the company.

Private respondents, however, counter that petitioners failed to prove willful disobedience as a just cause for Hermosas
termination. Moreover, they posit that de Castros preventive suspension constituted constructive dismissal because it
was for an indefinite period and no recall order was issued by the company. Private respondents also argue that
Basinillos purported unsworn statement has no probative value.

Lastly, petitioners contend the Labor Arbiter erroneously awarded separation pay and attorneys fees not prayed for. On
this point, private respondents quickly point out that, contrary to petitioners claim, separation pay was not awarded at
all. They also claim that the award of attorneys fees was in accordance with law.

We resolve to give due course to the petition.

The requirement regarding verification of a pleading is not jurisdictional. Such requirement is simply a condition
affecting the form of the pleading, non-compliance with which does not necessarily render the pleading fatally
defective.[12]

The Court of Appeals relied on Loquias v. Office of the Ombudsman,[13] which held that a certification on non-forum
shopping signed by only one of two or more petitioners is defective, unless he was duly authorized by his co-petitioner.
However, the said ruling applies when the co-parties are being sued in their individual capacities. Note that the
petitioners in Loquias[14] are the mayor, vice-mayor, and three members of the municipal board of San Miguel,
Zamboanga del Sur. The said co-parties were charged with violation of Republic Act No. 3019[15] in their various
capacities.

In the instant case, the petitioners are the company and its operations manager, Willy Bendol. The latter was impleaded
simply because he was a co-respondent in the illegal dismissal complaint. He has no interest in this case separate and
distinct from the company, which was the direct employer of private respondents. Any award of reinstatement,
backwages, and attorneys fees in favor of private respondents will be enforced against the company as the real party in
interest in an illegal dismissal case. Petitioner Bendol is clearly a mere nominal party in the case. His failure to sign the
verification and certification on non-forum shopping is not a ground for the dismissal of the petition. The appellate court
erred in dismissing outright petitioners special civil action for certiorari solely on that ground.

The logical course of action now is to direct the Court of Appeals to give due course to the special civil action for
certiorari. However, to obviate further delay in the resolution of this case, we shall bring the present controversy to rest.

After weighing the parties arguments and carefully reviewing the records of this case, we agree with the findings and
conclusions of the Labor Arbiter as affirmed by the NLRC.

Hermosa was unjustly dismissed. For willful disobedience to be a valid cause for dismissal, the following twin elements
must concur: (1) the employee's assailed conduct must have been willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee and must
pertain to the duties which he had been engaged to discharge.[16]

Both elements are lacking. We find no hint of perverse attitude in Hermosas written explanation.[17] On the contrary, it
appears that the alleged company procedure for leaving the ignition key of the companys vehicles within office premises
was not even made known to him.[18] Petitioners failed to prove Hermosa willfully disobeyed the said company
procedure. At any rate, dismissal was too harsh a penalty for the omission imputed to him.

De Castro was likewise unlawfully terminated. Contrary to petitioners claim, records show that de Castro was not merely
suspended. He was dismissed for alleged abandonment of work.[19] To constitute abandonment as a just cause for
dismissal, there must be: (a) absence without justifiable reason; and (b) a clear intention, as manifested by some overt
act, to sever the employer-employee relationship.[20]

Petitioners failed to prove that de Castro abandoned his job. A clear intention to end the employer-employee
relationship is missing. He did not report for work simply because he was indefinitely suspended. Moreover, the fact
that de Castro filed a case for illegal dismissal against petitioners belies abandonment.[21]

In the case of Basinillo, petitioners rely solely on his purported unsworn statement alleging he was never dismissed.
However, not having been sworn to, the said document has no probative value. While the Court is liberal in the conduct
of proceedings for labor cases, proof of authenticity as a condition for the admission of documents is nonetheless
required.[22]

Petitioners failed to present evidence of Basinillos continuous contribution to SSS or uninterrupted pay slips to prove he
remained under the companys employ. Hence, the complaint[23] for illegal dismissal filed by Basinillo stands and speaks
for itself. Once a case for illegal dismissal is filed, the burden is on the employer to prove that the termination was for
valid cause.[24] Petitioners failed to discharge this burden persuasively.

Finally, petitioners lament that the Labor Arbiter erred in granting respondents separation pay and attorneys fees. We
note, however, that separation pay was not awarded at all; thus, any discussion on this matter would be futile. On the
other hand, the award of attorneys fees, though not prayed for, is sanctioned by law[25] and must be upheld.

WHEREFORE, the assailed Resolutions dated November 28, 2001 and September 3, 2002, respectively, of the Court of
Appeals, in CA-G.R. SP No. 67755, are SET ASIDE. The NLRC Resolution affirming the Labor Arbiters Decision, finding
petitioners liable for illegal dismissal, is AFFIRMED. Costs against petitioners.

SO ORDERED.

LEONARDO A. QUISUMBING

Associate Justice

WE CONCUR:

HILARIO G. DAVIDE, JR.

Chief Justice

Chairman
CONSUELO YNARES-SANTIAGO ANTONIO T. CARPIO

Associate Justice Associate Justice

ADOLFO S. AZCUNA

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

HILARIO G. DAVIDE, JR.

Chief Justice

[1] Rollo, pp. 44-45 and 47-48. Penned by Associate Justice Conrado M. Vasquez, Jr., with Associate Justices Andres B.
Reyes, Jr., and Amelita G. Tolentino concurring.

[2] Id. at 132-139.

[3] Id. at 99-106.

[4] Sometimes Wilfredo in some parts of the records.

[5] Records, p. 80.

[6] Id. at 253.

[7] Id. at 1-2.

[8] Rollo, pp. 99-106.

[9] Id. at 105-106.

[10] Id. at 22-23.

[11] Id. at 63.

[12] Shipside Incorporated v. Court of Appeals, G.R. No. 143377, 20 February 2001, 352 SCRA 334, 345-346.

[13] G.R. No. 139396, 15 August 2000, 338 SCRA 62, 68.

[14] Ibid.

[15] Otherwise known as the Anti-Graft and Corrupt Practices Act.

[16] Bascon v. Court of Appeals, G.R. No. 144899, 5 February 2004, 422 SCRA 122, 131.

[17] Records, p. 80.

[18] Id. at 81.

[19] Id. at 254.

[20] Globe Telecom, Inc. v. Florendo-Flores, G.R. No. 150092, 27 September 2002, 390 SCRA 201, 212.

[21] Hyatt Taxi Services, Inc. v. Catinoy, G.R. No. 143204, 26 June 2001, 359 SCRA 686, 695.

[22] Asuncion v. National Labor Relations Commission, G.R. No. 129329, 31 July 2001, 362 SCRA 56, 63-64.

[23] Records, pp. 1-2.

[24] Sy v. Court of Appeals, G.R. No. 142293, 27 February 2003, 398 SCRA 301, 310.

[25] Civil Code, Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:

...

(7) In actions for the recovery of wages of laborers and skilled workers;

THIRD DIVISION

GLICERIA SARMIENTO,

Petitioner,
- versus -

EMERITA ZARATAN,

Respondent.

G.R. No. 167471

Present:

YNARES-SANTIAGO, J.,

Chairperson,

AUSTRIA-MARTINEZ,

CALLEJO, SR., and

CHICO-NAZARIO, JJ.

Promulgated:

February 5, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:
This petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to nullify the Court of Appeals
Decision[1] in CA-G.R. SP No. 79001 entitled, Emerita Zaratan v. Hon. Ramon A. Cruz, as Presiding Judge of RTC, Quezon
City, Branch 223, and Gliceria Sarmiento, dated 17 August 2004, which reversed and set side the Orders dated 19 June
2003 and 31 July 2003 of the Regional Trial Court (RTC) of Quezon City in Civil Case No. Q-03-49437, dismissing
respondents appeal for failure to file the memorandum within the period provided for by law.

On 2 September 2002, petitioner Gliceria Sarmiento filed an ejectment case[2] against respondent Emerita Zaratan, in
the Metropolitan Trial Court (MeTC) of Quezon City, Branch 36, docketed as Civil Case No. 29109.

On 31 March 2003, the MeTC rendered a decision in favor of petitioner, the dispositive portion of which reads:

WHEREFORE, the Court finds that plaintiff has sufficiently established her causes against the defendant and hereby
order the defendant and all persons claiming rights under her:

1. to pay plaintiff the monthly rentals of P3,500.00 for the said premises from August 1, 2002 until defendant
vacates the premises;

2. to pay plaintiff the sum of P20,000.00 plus P1,500.00 per appearance of counsel in court, as and for
attorneys fees; and

to pay the cost of suit.[3]

Respondent filed her notice of appeal.[4] Thereafter, the case was raffled to the RTC of Quezon City, Branch 223,
docketed as Civil Case No. Q-03-49437.

In the Notice of Appealed Case,[5] the RTC directed respondent to submit her memorandum in accordance with the
provisions of Section 7(b) of Rule 40 of the Rules of Court and petitioner to file a reply memorandum within 15 days
from receipt.

Respondents counsel having received the notice on 19 May 2003, he had until 3 June 2003 within which to file the
requisite memorandum. But on 3 June 2003, he filed a Motion for Extension of Time of five days due to his failure to
finish the draft of the said Memorandum. He cited as reasons for the delay of filing his illness for one week, lack of staff
to do the work due to storm and flood compounded by the grounding of the computers because the wirings got wet.[6]
But the motion remained unacted.

On 9 June 2003, respondent filed her Memorandum. On 19 June 2003, the RTC dismissed the appeal as follows:
Record shows that defendant-appellant received the Notice of Appealed Case, through counsel, on May 19, 2003
(Registry Return Receipt dated May 12, 2003, Record, back of p. 298). Thus, under Section 7(b), Rule 40 of the 1997
Rules of Civil Procedure, she had fifteen (15) days or until June 3, 2003 within which to submit a memorandum on
appeal. As further appears on record, however, the required Memorandum was filed by defendant-appellant only on
June 9, 2003 (Record, p. 623), or six (6) days beyond the expiration of the aforesaid fifteen day period.

It should be stressed that while the rules should be liberally construed, the provisions on reglemenatry periods are
strictly applied as they are deemed indispensable to the prevention of needless delays and necessary to the orderly and
speedy discharge of judicial business (Legaspi-Santos vs. Court of Appeals, G.R. No. 60577, October 11, 1983) and strict
compliance therewith is mandatory and imperative (FJR Garments Industries vs. Court of Appeals, G.R. No. L-49329,
June 29, 1984). The same is true with respect to the rules on the manner and periods for perfecting appeals (Gutierrez
vs. Court of Appeals, L-25972, November 26, 1968).

Premises considered, the instant appeal is hereby DISMISSED. This renders academic defendant-appellants application
for a writ of preliminary injunction.[7]

On the basis of the above-quoted Order, petitioner filed a Motion for Immediate Execution,[8] while respondent moved
for the Reconsideration.[9] Both motions were denied by the RTC on 31 July 2003. The Order in part reads:

In the main, defendant-appellants Motion for Reconsideration is premised on the argument that she filed a timely
Motion for Extension of Time To File Memorandum, dated and filed on June 3, 2003, but that her motion was not acted
upon by this Court. She adds that her appeal memorandum was filed well within the period sought by her in her Motion
for Extension of Time to File Memorandum so that her appeal should not have been dismissed.

The argument is without merit. This Court did not take cognizance of defendant-appellants Motion for Extension of Time
to File Memorandum, and rightly so, because it did not contain a notice of hearing as required by Sections 4 and 5, Rule
15 of the Rules of Court, an omission for which it could offer no explanation. As declared in the case of Gozon, et al. v.
court of Appeals (G.R. No. 105781, June 17, 1993);

xxx

It is well-entrenched in this jurisdiction that a motion does not meet the requirements of Sections 4 and 5 of Rule 15 of
the Rules of Court is considered a worthless piece of paper which the clerk has no right to receive, and the court has no
authority to act upon.

xxx
Moreover, parties and counsel should not assume that courts are bound to grant the time they pray for. A motion that is
not acted upon in due time is deemed denied (Orosa vs. Court of Appeals, 261 SCRA 376 [1996]). Thus, defendant-
appellants appeal was properly dismissed on account of her failure to file an appeal memorandum within the fifteen (15)
day period provided under Section 7(b), Rule 40 of the 1997 Rules of Civil Procedure.

With regard to the Motion for Immediate Execution, dated June 23, 2003, filed by plaintiff-appellee, the rule is explicit
that the execution of a judgment in an ejectment case, must be sought with the inferior court which rendered the same.
The appellate court which affirms a decision brought before it on appeal cannot decree its execution in the guise of an
execution of the affirming decision. The only exception is when said appellate court grants an execution pending appeal,
which is not the case herein (City of Manila vs. Court of Appeals, 204 SCRA 362; Sy vs. Romero, 214 SCRA 187).[10]

Petitioner moved for reconsideration of the said Order, while respondent sought clarification on whether the 31 July
2003 Order dismissing the appeal was anchored on Section (b), Rule 40 or Section 7(c) of the same Rule.

On 27 August 2003, the RTC reconsidered its previous Order by granting petitioners motion for Immediate Execution,
but denied respondents Motion for Clarification, in this wise:

Section 21, Rule 70 of the Rules of Court provides that the judgment of the Regional Trial Court against the defendant
shall be immediately executory, without prejudice to a further appeal that may be taken therefrom. Pursuant to this
Rule and taking into account the arguments of the plaintiff in her Urgent Motion for Reconsideration, the Court is
inclined to grant the same. As further correctly argued by the plaintiff, through counsel, during the hearing on her
motion on August 15, 2003, the cases of City of Manila v. Court of Appeals (204 SCRA 362) and Sy vs. Romero (214 SCRA
187) cited in the July 31, 2003 Order refer to ejectment cases which has (sic) been decided with finality and hence,
inapplicable to this case where a further appeal is still available to the defendant. It should likewise be noted that while
the Supreme Court ruled in these cases that execution of a judgment in an ejectment case must be sought with the
inferior court which rendered the same, it likewise provided that for an exception to this rule, that is, in cases where the
appellate court grants an execution pending appeal, as the case herein.

With regard to defendants Motion for Clarification, contained in her Opposition, the Court notes that the issues raised
therein have already been squarely dealt with in the July 31, 2003 Order. The same must, therefore, be denied.[11]

Aggrieved, respondent filed a Petition for Certiorari in the Court of Appeals, which was granted in a decision dated 17
August 2004. The appellate court nullified and set aside the 19 June 2003 and 31 July 2003 Orders of the RTC and
ordered the reinstatement of respondents appeal. Consequently, respondents appeal memorandum was admitted and
the case remanded to the RTC for further proceedings.[12]
Petitioner filed a motion for reconsideration[13] on 13 September 2004, followed by a Motion for Inhibition[14] of the
members of the Eighth Division of the Court of Appeals on 20 September 2004. Both motions were denied for lack of
merit on 10 March 2005.[15]

Hence, this appeal by petitioner posing the following issues,[16] thus:

1. Whether respondents petition for certiorari should have been dismissed in the first place;

2. Whether the trial court committed grave abuse of discretion in denying respondents motion for extension;

3. Whether it is Section 19 of Rule 7 that applies, and not Section 21; and

4. Whether the Court of Appeals Justices should have inhibited themselves from further proceeding with the
subject case.

Stated otherwise, the main issue for resolution is whether the Court of Appeals committed a reversible error of law in
granting the Writ of Certiorari. In granting the petition, the Court of Appeals ruled that the RTC erred in dismissing
respondents appeal for failure to file the required Memorandum within the period provided by law and in granting
petitioners Motion for Immediate Execution of the MeTC decision.

Before resolving the substantive issues raised by petitioner, the Court will first address the procedural infirmities
ascribed by petitioner. Petitioner assails the correctness and propriety of the remedy resorted to by respondent by filing
a Petition for Certiorari in the Court of Appeals. According to petitioner, certiorari is not appropriate and unavailing as
the proper remedy is an appeal.

It must be noted that respondents appeal in the RTC was dismissed for failure to file the required memorandum within
the period allowed by law, as the Motion for Extension of Time to file Memorandum was not acted upon for failure to
attach a notice of hearing. From the said dismissal, respondent filed a Petition for Certiorari in the Court of Appeals.

Respondent correctly filed said petition pursuant to Section 41 of the Rules of Court, which provides:

Section 1. Subject of appeal. An appeal may be taken from a judgment or final order that completely disposes of the
case, or of a particular matter therein when declared by these Rules to be appealable.

No appeal may be taken:

xxxx

(d) An order disallowing or dismissing an appeal;

xxxx

In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an
appropriate civil action under Rule 65. (Underscoring supplied.)

Petitioner also contends that the Petition for Certiorari filed in the Court of Appeals should be dismissed as the
certification of non-forum shopping was defective. The verification in part reads:

I, EMERITA ZARATAN, of legal age, after having been duly sworn to, according to law, depose and say:

That I, Emerita Zaratan is one of the respondent (sic) in the above entitled case, hereby declare, that I have caused the
preparation and filing of the foregoing Comment on the Petition; that I have read all the allegations therein, which are
true and correct to the best of my own knowledge.

That as respondent, I further certify that I have not commenced any other action or proceeding involving the same
issues in the foregoing Petition in the Court of Appeals, the Supreme Court, or different Divisions thereof, respectively,
or any tribunal, or agency; and should it be known that a similar action or proceeding has been filed or is pending in any
of the abovementioned Courts or different Divisions thereof, the petitioner shall notify the Honorable Court to which
this certification is filed, within five (5) days from such notice. (Underscoring ours.)

Petitioner avers that respondent by stating in the above-quoted certification that she was the respondent, while in truth
she was the petitioner and by stating that respondent caused the preparation of the comment on the petition, instead
of the petition itself, indicate that respondent did not understand what she was signing. The defect of the verification all
renders the petition in the Court of Appeals without legal effect and constitutes ground for its dismissal.

The contention is baseless.

The purpose of requiring a verification is to secure an assurance that the allegations of the petition have been made in
good faith, or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of
pleadings and non-compliance therewith does not necessarily render it fatally defective.[17] Perusal of the verification
in question shows there was sufficient compliance with the requirements of the Rules and the alleged defects are not so
material as to justify the dismissal of the petition in the Court of Appeals. The defects are mere typographical errors.
There appears to be no intention to circumvent the need for proper verification and certification, which are intended to
assure the truthfulness and correctness of the allegations in the petition and to discourage forum shopping.[18]

Now, the substantial issues.

Corollary to the dismissal of the appeal by the RTC is the question of whether the lack of notice of hearing in the Motion
for Extension of Time to file Memorandum on Appeal is fatal, such that the filing of the motion is a worthless piece of
paper.

Petitioner avers that, because of the failure of respondent to include a Notice of Hearing in her Motion for Extension of
Time to file Memorandum on Appeal in the RTC, the latters motion is a worthless piece of paper with no legal effect.

It is not disputed that respondent perfected her appeal on 4 April 2003 with the filing of her Notice of Appeal and
payment of the required docket fees. However, before the expiration of time to file the Memorandum, she filed a
Motion for Extension of Time seeking an additional period of five days within which to file her Memorandum, which
motion lacked the Notice of Hearing required by Section 4, Rule 15 of the 1997 Rules of Court which provides:

SEC. 4. Hearing of Motion. - Except for motions which the court may act upon without prejudicing the rights of the
adverse party, every written motion shall be set for hearing by the applicant.

Every written motion required to be heard and the notice of the hearing thereof shall be served in such a manner as to
ensure its receipt by the other party at least three (3) days before the date of hearing, unless the court for good cause
sets the hearing on shorter notice.

As may be gleaned above and as held time and again, the notice requirement in a motion is mandatory. As a rule, a
motion without a Notice of Hearing is considered pro forma and does not affect the reglementary period for the appeal
or the filing of the requisite pleading.[19]

As a general rule, notice of motion is required where a party has a right to resist the relief sought by the motion and
principles of natural justice demand that his right be not affected without an opportunity to be heard.[20] The three-day
notice required by law is intended not for the benefit of the movant but to avoid surprises upon the adverse party and
to give the latter time to study and meet the arguments of the motion.[21] Principles of natural justice demand that the
right of a party should not be affected without giving it an opportunity to be heard.[22]

The test is the presence of the opportunity to be heard, as well as to have time to study the motion and meaningfully
oppose or controvert the grounds upon which it is based.[23] Considering the circumstances of the present case, we
believe that procedural due process was substantially complied with.
There are, indeed, reasons which would warrant the suspension of the Rules: (a) the existence of special or compelling
circumstances, b) the merits of the case, (c) a cause not entirely attributable to the fault or negligence of the party
favored by the suspension of rules, (d) a lack of any showing that the review sought is merely frivolous and dilatory, and
(e) the other party will not be unjustly prejudiced thereby.[24] Elements or circumstances (c), (d) and (e) exist in the
present case.

The suspension of the Rules is warranted in this case. The motion in question does not affect the substantive rights of
petitioner as it merely seeks to extend the period to file Memorandum. The required extension was due to respondents
counsels illness, lack of staff to do the work due to storm and flood, compounded by the grounding of the computers.
There is no claim likewise that said motion was interposed to delay the appeal.[25] As it appears, respondent sought
extension prior to the expiration of the time to do so and the memorandum was subsequently filed within the requested
extended period. Under the circumstances, substantial justice requires that we go into the merits of the case to resolve
the issue of who is entitled to the possession of the land in question.

Further, it has been held that a motion for extension of time x x x is not a litigated motion where notice to the adverse
party is necessary to afford the latter an opportunity to resist the application, but an ex parte motion made to the court
in behalf of one or the other of the parties to the action, in the absence and usually without the knowledge of the other
party or parties. As a general rule, notice of motion is required where a party has a right to resist the relief sought by the
motion and principles of natural justice demand that his rights be not affected without an opportunity to be heard. It
has been said that ex parte motions are frequently permissible in procedural matters, and also in situations and under
circumstances of emergency; and an exception to a rule requiring notice is sometimes made where notice or the
resulting delay might tend to defeat the objective of the motion.[26]

It is well to remember that this Court, in not a few cases, has consistently held that cases shall be determined on the
merits, after full opportunity to all parties for ventilation of their causes and defense, rather than on technicality or
some procedural imperfections. In so doing, the ends of justice would be better served.[27] Furthermore, this Court
emphasized its policy that technical rules should accede to the demands of substantial justice because there is no vested
right in technicalities. Litigations, should, as much as possible, be decided on their merits and not on technicality.
Dismissal of appeals purely on technical grounds is frowned upon, and the rules of procedure ought not to be applied in
a very rigid, technical sense, for they are adopted to help secure, not override, substantial justice, and thereby defeat
their very aims. As has been the constant rulings of this Court, every party-litigant should be afforded the amplest
opportunity for the proper and just disposition of his cause, free from constraints of technicalities.[28] Indeed, rules of
procedure are mere tools designed to expedite the resolution of cases and other matters pending in court. A strict and
rigid application of the rules that would result in technicalities that tend to frustrate rather than promote justice must be
avoided.[29]

The visible emerging trend is to afford every party-litigant the amplest opportunity for the proper and just
determination of his cause, free from constraints and technicalities.

Parenthetically, it must be noted also that when the appeal was dismissed on 19 June 2003, the memorandum was
already filed in court on 9 June 2003.

On the issue of immediate execution of judgment.

The applicable provision is Section 19, Rule 70 of the Rules of Court, which reads:

SEC. 19. Immediate Execution of judgment; how to stay the same.- If judgment is rendered against the defendant,
execution shall issue immediately upon motion, unless an appeal has been perfected and the defendant to stay
execution files a sufficient supersedeas bond, approved by the Municipal Trial Court and executed in favor of the
plaintiff to pay the rents, damages, and costs accruing down to the time of the judgment appealed from, and unless,
during the pendency of the appeal, he deposits with the appellate court the amount of rent due from time to time under
the contract, if any, as determined by the judgment of the Municipal Trial Court. x x x.

To stay the immediate execution of judgment in ejectment proceedings, Section 19 requires that the defendant-
appellant must (a) perfect his appeal, (b) file a supersedeas bond, and (c) periodically deposit the rentals falling due
during the pendency of the appeal.

As correctly observed by the Court of Appeals, execution pending appeal was premature as respondent had already filed
a supersedeas bond and the monthly rental for the current month of the premises in question.[30]

The invocation of petitioner of the provisions of Section 21, Rule 70 of the Rules of Court, which runs:

Sec. 21. Immediate execution on appeal to Court of Appeals or Supreme Court.- The judgment of the Regional Trial
Court against the defendant shall be immediately executory, without prejudice to a further appeal that may be taken
therefrom.

to justify the issuance of the writ of execution pending appeal in this case is misplaced.

A closer examination of the above-quoted provision reveals that said provision applies to decision of the RTC rendered
in its appellate jurisdiction, affirming the decision of the MeTC. In the case at bar, the RTC order was an order dismissing
respondents appeal based on technicality. It did not resolve substantive matters delving on the merits of the parties
claim in the ejectment case. Thus, the case brought to the Court of Appeals was the dismissal of the appeal for failure to
file the required memorandum within the period provided by law, and not on the merits of the ejectment case.

Lastly, petitioner posited the view that the Court of Appeals justices should have inhibited themselves because of bias
and partiality for deciding the case within eight months and for being very selective in discussing the issues.

We reject the proposition.

Inhibition must be for just and valid causes. The mere imputation of bias and partiality is not enough ground for judges
to inhibit, especially when the charge is without basis. This Court has to be shown acts or conduct clearly indicative of
arbitrariness or prejudice before it can brand them with the stigma of bias and partiality.[31] This Court has invariably
held that for bias and prejudice to be considered valid reasons for the voluntary inhibition of judges, mere suspicion is
not enough. Bare allegations of their partiality will not suffice in the absence of clear and convincing evidence to
overcome the presumption that the judge will undertake his noble role to dispense justice according to law and
evidence and without fear and favor.[32]

There is no factual support to petitioners charge of bias and partiality. A perusal of the records of the case fails to reveal
that any bias or prejudice motivated the Court of Appeals in granting respondents petition. Neither did this Court find
any questionable or suspicious circumstances leading to the issuance of the questioned decision, as suggested by
petitioner.

The fact alone that the Court of Appeals decided the case within eight months does not in any way indicate bias and
partiality against petitioner. It is within the constitutional mandate to decide the case within 12 months.[33]

As to petitioners allegation that the Court of Appeals was selective in choosing what issues to resolve, it bears to stress
again that a judges appreciation or misappreciation of the sufficiency of evidence x x x adduced by the parties, x x x,
without proof of malice on the part of respondent judge, is not sufficient to show bias and partiality.[34] We also
emphasized that repeated rulings against a litigant, no matter how erroneously, vigorously and consistently expressed,
do not amount to bias and prejudice which can be bases for the disqualification of a judge.[35]

IN ALL, petitioner utterly failed to show that the appellate court erred in issuing the assailed decision. On the contrary, it
acted prudently in accordance with law and jurisprudence.

WHEREFORE, the instant petition is hereby DENIED for lack of merit. The Decision dated 17 August 2004 and the
Resolution dated 10 March 2005 of the Court of Appeals in CA-G.R. SP No. 79001 are hereby AFFIRMED. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO

Associate Justice
WE CONCUR:

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson, Third Division

CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairpersons Attestation, it is hereby certified
that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO

Chief Justice

[1] Penned by Associate Justice Rebecca De Guia-Salvador with Associate Justices Portia Alio-Hormachuelos and Aurora
Santiago-Lagman, concurring. Rollo, pp. 231-238.

[2] Records, Vol. I, pp. 2-4.

[3] Id. at 275.

[4] Id. at 283.

[5] Id. at 298.

[6] Id. at 321.

[7] Id. at 343.

[8] Id. at 345.

[9] Id. at 349.

[10] Id. at 387-388.

[11] Id. at 406-407.

[12] Rollo, pp. 108-115.

[13] Id. at 116-121.

[14] Id. at 122-123.

[15] Id. at 126-129.

[16] Id. at 10-11.

[17] Torres v. Specialized Packaging Development Corporation, G.R. No. 149634, 6 July 2004, 433 SCRA 455, 463-464.

[18] Pilipinas Shell Petroleum v. John Boardman Ltd. of Iloilo, Inc., G.R. No. 159831, 14 October 2005, 473 SCRA 151, 162.

[19] Tan v. Court of Appeals, 356 Phil. 1058, 1067-1068 (1998).

[20] Commercial Union Assurance Company Limited v. Lepanto Consolidated Mining Company, G.R. No. L-43342, 30
October 1978, 86 SCRA 79, 96; citing Amante v. Judge Suga, 159-A Phil. 476 (1975); Pimentel v. Court of Appeals, 159-A
Phil. 728 (1975).

[21] J.M. Tuason & Co., Inc. v. Magdangal, G.R. No. L-15539, 30 January 1962, 4 SCRA 84, 86.

[22] Gonzales v. Balikatan Kilusang Bayan sa Pananalapi, Inc., G.R. No. 150859, 28 March 2005, 454 SCRA 111, 117.

[23] Jehan Shipping Corporation v. National Food Authority, G.R. No. 159750, 14 December 2005, 477 SCRA 781, 789.

[24] Sanchez v. Court of Appeals, 452 Phil. 665, 674 (2003).

[25] Records, Vol. 1, p. 321.

[26] Amante v. Judge Suga, supra note 20 at 477.

[27] Durban Apartments Corporation v. Catacutan, G.R. No. 167136, 14 December 2005, 477 SCRA 801, 809.

[28] Fonseca v. Court of Appeals, G.R. No. L-36035, 30 August 1988, 165 SCRA 40, 46.

[29] Durban Apartments Corporation v. Catacutan, supra note 27 at 809.

[30] CA Decision, p. 7; rollo, p. 114.

[31] Gochan v. Gochan, 446 Phil. 433, 447 (2003).

[32] People v. Kho, G.R. No. 139381, 20 April 2001, 357 SCRA 290, 297.

[33] Section 15, Article 8 of the 1987 Constitution. All cases or matters filed after the effectivity of this Constitution must
be decided or resolved within x x x twelve months for all lower collegiate courts x x x.

[34] Republic v. Evangelista, G.R. No. 156015, 11 August 2005, 466 SCRA 544, 555.

[35] Id.

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Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION
G.R. No. 89070 May 18, 1992

BENGUET ELECTRlC COOPERATIVE, INC., petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION, PETER COSALAN and BOARD OF DIRECTORS OF BENGUET ELECTRIC
COOPERATIVE, INC., * respondents.

Raymundo W. Celino for respondent Peter Cosalan.

Reenan Orate for respondent Board of Directors of BENECO.

FELICIANO, J.:

Private respondent Peter Cosalan was the General Manager of Petitioner Benguet Electric Cooperative, Inc. ("Beneco"),
having been elected as such by the Board of Directors of Beneco, with the approval of the National Electrification
Administrator, Mr. Pedro Dumol, effective 16 October 1982.

On 3 November 1982, respondent Cosalan received Audit Memorandum No. 1 issued by the Commission on Audit
("COA"). This Memorandum noted that cash advances received by officers and employees of petitioner Beneco in the
amount of P129,618.48 had been virtually written off in the books of Beneco. In the Audit Memorandum, the COA
directed petitioner Beneco to secure the approval of the National Electrification Administration ("NEA") before writing
off or condoning those cash advances, and recommended the adoption of remedial measures.

On 12 November 1982, COA issued another Memorandum Audit Memorandum No. 2 addressed to respondent
Peter Cosalan, inviting attention to the fact that the audit of per diems and allowances received by officials and
members of the Board of Directors of Beneco showed substantial inconsistencies with the directives of the NEA. The
Audit Memorandum once again directed the taking of immediate action in conformity with existing NEA regulations.

On 19 May 1983, petitioner Beneco received the COA Audit Report on the financial status and operations of Beneco for
the eight (8) month period ended 30 September 1982. This Audit Report noted and enumerated irregularities in the
utilization of funds amounting to P37 Million released by NEA to Beneco, and recommended that appropriate remedial
action be taken.
Having been made aware of the serious financial condition of Beneco and what appeared to be mismanagement,
respondent Cosalan initiated implementation of the remedial measures recommended by the COA. The respondent
members of the Board of Beneco reacted by adopting a series of resolutions during the period from 23 June to 24 July
1984. These Board Resolutions abolished the housing allowance of respondent Cosalan; reduced his salary and his
representation and commutable allowances; directed him to hold in abeyance all pending personnel disciplinary actions;
and struck his name out as a principal signatory to transactions of petitioner Beneco.

During the period from 28 July to 25 September 1984, the respondent Beneco Board members adopted another series
of resolutions which resulted in the ouster of respondent Cosalan as General Manager of Beneco and his exclusion from
performance of his regular duties as such, as well as the withholding of his salary and allowances. These resolutions
were as follows:

1. Resolution No. 91-4 dated 28 July 1984:

. . . that the services of Peter M. Cosalan as General Manager of BENECO is terminated upon approval of the National
Electrification Administration;

2. Resolution No. 151-84 dated September 15, 1984;

. . . that Peter M. Cosalan is hereby suspended from his position as General Manager of the Benguet Electric
Cooperative, Inc. (BENECO) effective as of the start of the office hours on September 24, 1984, until a final decision has
been reached by the NEA on his dismissal;

. . . that GM Cosalan's suspension from office shall remain in full force and effect until such suspension is sooner lifted,
revoked or rescinded by the Board of Directors; that all monies due him are withheld until cleared;

3. Resolution No. 176-84 dated September 25, 1984;

. . . that Resolution No. 151-84, dated September 15, 1984 stands as preventive suspension for GM Peter M. Cosalan. 1

Respondent Cosalan nevertheless continued to work as General Manager of Beneco, in the belief that he could be
suspended or removed only by duly authorized officials of NEA, in accordance with provisions of P.D. No, 269, as
amended by P.D. No. 1645 (the statute creating the NEA, providing for its capitalization, powers and functions and
organization), the loan agreement between NEA and petitioner Beneco 2 and the NEA Memorandum of 2 July 1980. 3
Accordingly, on 5 October and 10 November 1984, respondent Cosalan requested petitioner Beneco to release the
compensation due him. Beneco, acting through respondent Board members, denied the written request of respondent
Cosalan.
Respondent Cosalan then filed a complaint with the National Labor Relations Commission ("NLRC") on 5 December 1984
against respondent members of the Beneco Board, challenging the legality of the Board resolutions which ordered his
suspension and termination from the service and demanding payment of his salaries and allowances. On 18 February
1985, Cosalan amended his complaint to implead petitioner Beneco and respondent Board members, the latter in their
respective dual capacities as Directors and as private individuals.

In the course of the proceedings before the Labor Arbiter, Cosalan filed a motion for reinstatement which, although
opposed by petitioner Beneco, was granted on 23 October 1987 by Labor Arbiter Amado T. Adquilen. Petitioner Beneco
complied with the Labor Arbiter's order on 28 October 1987 through Resolution No. 10-90.

On 5 April 1988, the Labor Arbiter rendered a decision (a) confirming Cosalan's reinstatement; (b) ordering payment to
Cosalan of his backwages and allowances by petitioner Beneco and respondent Board members, jointly and severally,
for a period of three (3) years without deduction or qualification, amounting to P344,000.00; and (3) ordering the
individual Board members to pay, jointly and severally, to Cosalan moral damages of P50,000.00 plus attorney's fees of
ten percent (10%) of the wages and allowances awarded him.

Respondent Board members appealed to the NLRC, and there filed a Memorandum on Appeal. Petitioner Beneco did
not appeal, but moved to dismiss the appeal filed by respondent Board members and for execution of judgment. By this
time, petitioner Beneco had a new set of directors.

In a decision dated 21 November 1988, public respondent NLRC modified the award rendered by the Labor Arbiter by
declaring that petitioner Beneco alone, and not respondent Board members, was liable for respondent Cosalan's
backwages and allowances, and by ruling that there was no legal basis for the award of moral damages and attorney's
fees made by the Labor Arbiter.

Beneco, through its new set of directors, moved for reconsideration of the NLRC decision, but without success.

In the present Petition for Certiorari, Beneco's principal contentions are two-fold: first, that the NLRC had acted with
grave abuse of discretion in accepting and giving due course to respondent Board members' appeal although such
appeal had been filed out of time; and second, that the NLRC had acted with grave abuse of discretion amounting to lack
of jurisdiction in holding petitioner alone liable for payment of the backwages and allowances due to Cosalan and
releasing respondent Board members from liability therefor.

We consider that petitioner's first contention is meritorious. There is no dispute about the fact that the respondent
Beneco Board members received the decision of the labor Arbiter on 21 April 1988. Accordingly, and because 1 May
1988 was a legal holiday, they had only up to 2 May 1988 within which to perfect their appeal by filing their
memorandum on appeal. It is also not disputed that the respondent Board members' memorandum on appeal was
posted by registered mail on 3 May 1988 and received by the NLRC the following day. 4 Clearly, the memorandum on
appeal was filed out of time.
Respondent Board members, however, insist that their Memorandum on Appeal was filed on time because it was
delivered for mailing on 1 May 1988 to the Garcia Communications Company, a licensed private letter carrier. The Board
members in effect contend that the date of delivery to Garcia Communications was the date of filing of their appeal
memorandum.

Respondent Board member's contention runs counter to the established rule that transmission through a private carrier
or letter-forwarder instead of the Philippine Post Office is not a recognized mode of filing pleadings. 5 The
established rule is that the date of delivery of pleadings to a private letter-forwarding agency is not to be considered as
the date of filing thereof in court, and that in such cases, the date of actual receipt by the court, and not the date of
delivery to the private carrier, is deemed the date of filing of that pleading. 6

There, was, therefore, no reason grounded upon substantial justice and the prevention of serious miscarriage of justice
that might have justified the NLRC in disregarding the ten-day reglementary period for perfection of an appeal by the
respondent Board members. Accordingly, the applicable rule was that the ten-day reglementary period to perfect an
appeal is mandatory and jurisdictional in nature, that failure to file an appeal within the reglementary period renders the
assailed decision final and executory and no longer subject to review. 7 The respondent Board members had thus lost
their right to appeal from the decision of the Labor Arbiter and the NLRC should have forthwith dismissed their appeal
memorandum.

There is another and more compelling reason why the respondent Board members' appeal should have been dismissed
forthwith: that appeal was quite bereft of merit. Both the Labor Arbiter and the NLRC had found that the indefinite
suspension and termination of services imposed by the respondent Board members upon petitioner Cosalan was illegal.
That illegality flowed, firstly, from the fact that the suspension of Cosalan was continued long after expiration of the
period of thirty (30) days, which is the maximum period of preventive suspension that could be lawfully imposed under
Section 4, Rule XIV of the Omnibus Rules Implementing the Labor Code. Secondly, Cosalan had been deprived of
procedural due process by the respondent Board members. He was never informed of the charges raised against him
and was given no opportunity to meet those charges and present his side of whatever dispute existed; he was kept
totally in the dark as to the reason or reasons why he had been suspended and effectively dismissed from the service of
Beneco Thirdly, respondent Board members failed to adduce any cause which could reasonably be regarded as lawful
cause for the suspension and dismissal of respondent Cosalan from his position as General Manager of Beneco. Cosalan
was, in other words, denied due process both procedural and substantive. Fourthly, respondent Board members failed
to obtain the prior approval of the NEA of their suspension now dismissal of Cosalan, which prior approval was required,
inter alia, under the subsisting loan agreement between the NEA and Beneco. The requisite NEA approval was
subsequently sought by the respondent Board members; no NEA approval was granted.

In reversing the decision of the Labor Arbiter declaring petitioner Beneco and respondent Board members solidarily
liable for the salary, allowances, damages and attorney's fees awarded to respondent Cosalan, the NLRC said:

. . . A perusal of the records show that the members of the Board never acted in their individual capacities. They were
acting as a Board passing resolutions affecting their general manager. If these resolutions and resultant acts
transgressed the law, to then BENECO for which the Board was acting in behalf should bear responsibility. The records
do not disclose that the individual Board members were motivated by malice or bad faith, rather, it reveals an
intramural power play gone awry and misapprehension of its own rules and regulations. For this reason, the decision
holding the individual board members jointly and severally liable with BENECO for Cosalan's backwages is untenable.
The same goes for the award of damages which does not have the proverbial leg to stand on.

The Labor Arbiter below should have heeded his own observation in his decision

Respondent BENECO as an artificial person could not have, by itself, done anything to prevent it. But because the former
have acted while in office and in the course of their official functions as directors of BENECO, . . .

Thus, the decision of the Labor Arbiter should be modified conformably with all the foregoing holding BENECO solely
liable for backwages and releasing the appellant board members from any individual liabilities. 8 (Emphasis supplied)

The applicable general rule is clear enough. The Board members and officers of a corporation who purport to act for and
in behalf of the corporation, keep within the lawful scope of their authority in so acting, and act in good faith, do not
become liable, whether civilly or otherwise, for the consequences of their acts, Those acts, when they are such a nature
and are done under such circumstances, are properly attributed to the corporation alone and no personal liability is
incurred by such officers and Board members. 9

The major difficulty with the conclusion reached by the NLRC is that the NLRC clearly overlooked or disregarded the
circumstances under which respondent Board members had in fact acted in the instant case. As noted earlier, the
respondent Board members responded to the efforts of Cosalan to take seriously and implement the Audit Memoranda
issued by the COA explicitly addressed to the petitioner Beneco, first by stripping Cosalan of the privileges and
perquisites attached to his position as General Manager, then by suspending indefinitely and finally dismissing Cosalan
from such position. As also noted earlier, respondent Board members offered no suggestion at all of any just or lawful
cause that could sustain the suspension and dismissal of Cosalan. They obviously wanted to get rid of Cosalan and so
acted, in the words of the NLRC itself, "with indecent haste" in removing him from his position and denying him
substantive and procedural due process. Thus, the record showed strong indications that respondent Board members
had illegally suspended and dismissed Cosalan precisely because he was trying to remedy the financial irregularities and
violations of NEA regulations which the COA had brought to the attention of Beneco. The conclusion reached by the
NLRC that "the records do not disclose that the individual Board members were motivated by malice or bad faith" flew
in the face of the evidence of record. At the very least, a strong presumption had arisen, which it was incumbent upon
respondent Board members to disprove, that they had acted in reprisal against respondent Cosalan and in an effort to
suppress knowledge about and remedial measures against the financial irregularities the COA Audits had unearthed.
That burden respondent Board members did not discharge.

The Solicitor General has urged that respondent Board members may be held liable for damages under the foregoing
circumstance under Section 31 of the Corporation Code which reads as follows:

Sec. 31. Liability of directors, trustees or officers. Directors or trustees who willfully and knowingly vote for or assent
to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of
the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees
shall be jointly liable and severally for all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons . . . (Emphasis supplied)
We agree with the Solicitor General, firstly, that Section 31 of the Corporation Code is applicable in respect of Beneco
and other electric cooperatives similarly situated. Section 4 of the Corporation Code renders the provisions of that Code
applicable in a supplementary manner to all corporations, including those with special or individual charters so long as
those provisions are not inconsistent with such charters. We find no provision in P.D. No. 269, as amended, that would
exclude expressly or by necessary implication the applicability of Section 31 of the Corporation Code in respect of
members of the boards of directors of electric cooperatives. Indeed, P.D. No. 269 expressly describes these cooperatives
as "corporations:"

Sec. 15. Organization and Purpose. Cooperative non-stock, non-profit membership corporations may be organized,
and electric cooperative corporations heretofore formed or registered under the Philippine non-Agricultural Co-
operative Act may as hereinafter provided be converted, under this Decree for the purpose of supplying, and of
promoting and encouraging-the fullest use of, service on an area coverage basis at the lowest cost consistent with sound
economy and the prudent management of the business of such corporations. 10 (Emphasis supplied)

We agree with the Solicitor General, secondly, that respondent Board members were guilty of "gross negligence or bad
faith in directing the affairs of the corporation" in enacting the series of resolutions noted earlier indefinitely suspending
and dismissing respondent Cosalan from the position of General Manager of Beneco. Respondent Board members, in
doing so, acted belong the scope of their authority as such Board members. The dismissal of an officer or employee in
bad faith, without lawful cause and without procedural due process, is an act that is contra legem. It cannot be
supposed that members of boards of directors derive any authority to violate the express mandates of law or the clear
legal rights of their officers and employees by simply purporting to act for the corporation they control.

We believe and so hold, further, that not only are Beneco and respondent Board members properly held solidarily liable
for the awards made by the Labor Arbiter, but also that petitioner Beneco which was controlled by and which could act
only through respondent Board members, has a right to be reimbursed for any amounts that Beneco may be compelled
to pay to respondent Cosalan. Such right of reimbursement is essential if the innocent members of Beneco are not to be
penalized for the acts of respondent Board members which were both done in bad faith and ultra vires. The liability-
generating acts here are the personal and individual acts of respondent Board members, and are not properly attributed
to Beneco itself.

WHEREFORE, the Petition for Certiorari is GIVEN DUE COURSE, the comment filed by respondent Board members is
TREATED as their answer, and the decision of the National Labor Relations Commission dated 21 November 1988 in
NLRC Case No. RAB-1-0313-84 is hereby SET ASIDE and the decision dated 5 April 1988 of Labor Arbiter Amado T.
Adquilen hereby REINSTATED in toto. In addition, respondent Board members are hereby ORDERED to reimburse
petitioner Beneco any amounts that it may be compelled to pay to respondent Cosalan by virtue of the decision of Labor
Arbiter Amado T. Adquilen. No pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

Footnotes

* The Board was composed of the following individuals: (1) Victor Laoyan; (2) Nicasio Aliping; (3) Abundio Awal;
(4) Antonio Sudang Pan; and (5) Lorenzo Pilando.

1 Decision of the National Labor Relations Commission, pp. 1-2; Rollo, pp. 19-20.

2 Records, p. 53.

3 Id., p. 150.

4 Records, p. 322.

5 Section 1, Rule 13, Rules of Court.

6 See, e.g., Eslabon v. Spouses Ramon Magbanua, G.R. No. 76571, Resolution dated 1 April 1987; Pelonio v.
Lebrillo, 83556, Resolution dated 8 November 1988.

7 E.g., Armigos v. Court of Appeals, 179 SCRA 1 (1989); Jocson v. Baguio, 179 SCRA 550 (1989); Chong Guan
Trading v. National Labor Relations Commission, 172 SCRA 831 (1989).

8 Rollo, p. 36.

9 See Pabalan, et al. v. National Labor Relations Commission, et al., 184 SCRA 495 (1990). See also Garcia v.
National Labor Relations Commission, 153 SCRA 639 (1987); Sunio v. National Labor Relations Commission, 127 SCRA
390 (1984); Mindanao Motors Line, Inc. v. Court of Industrial Relations, 6 SCRA 710 (1962).

10 See also Section 17 of P.D. No. 269, as amended, which requires the members of electric cooperatives to include
the abbreviation "Inc." (in the name of the cooperative). Section 18 refers to the organizers of a cooperative as
"Incorporators." Sections 19-27 of the same statute refer to "Articles of Incorporation of a Cooperative." Section 37
expressly incorporates the provision of limited liability of members (but not of directors or other officers) which is the
hallmark of corporations:

No member shall be liable or responsible for any debts of the cooperative and the property of the members shall not be
subject to execution therefor.
The legislative intent to make applicable to directors and officers of cooperatives generally (i.e., electric cooperatives,
agricultural cooperatives etc.) the provisions of Section 31 of the Corporation Code, was confirmed by Article 46 of the
Philippine Cooperative Code (R.A. No. 6938, approved 10 March 1990). Article 46 of the Cooperative Code reads as
follows:

Article 46. Liability of Directors, Officers and Committee Members. Directors, officers and committee members,
who willfully and knowingly vote for or assent to patently unlawful acts or who art guilty of gross negligence or bad faith
in directing the affairs of the cooperative or acquire any personal or pecuniary interest in conflict with their duty as such
directors, officers or committee members shall be liable jointly and severally for all damages or profits resulting
therefrom to the cooperative, members and other persons.

When a director, officer or committee member attempts to acquire or acquires, in violation of his duty, any interest or
equity adverse to the cooperative in respect to any matter which has been reposed in him in confidence, be shall, as a
trustee for the cooperative, be liable for damages and for double the profits which otherwise would have accrued to the
cooperative.

Article 122 of the Cooperative Code states that "[e]lectric cooperatives shall be covered by this Code. . . . Upon the other
hand, Article 127 of the same Code provides that electric cooperatives which qualify under this Code "shall fall under the
coverage of [P.D. No. 269 as amended]." The Cooperative Code is substantially a reproduction of the general provisions
of the Corporation Code.

The Lawphil Project - Arellano Law Foundation

SYLLABI/SYNOPSIS

SECOND DIVISION

[G.R. No. 125683. March 2, 1999]

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

DECISION

PUNO, J.:

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

In 1985, petitioner Ballatan constructed her house on Lot No. 24. During the construction, she noticed that the concrete
fence and side pathway of the adjoining house of respondent Winston Go encroached on the entire length of the
eastern side of her property.[5] Her building contractor informed her that the area of her lot was actually less than that
described in the title. Forthwith, Ballatan informed respondent Go of this discrepancy and his encroachment on her
property. Respondent Go, however, claimed that his house, including its fence and pathway, were built within the
parameters of his father's lot; and that this lot was surveyed by Engineer Jose Quedding, the authorized surveyor of the
Araneta Institute of Agriculture (AIA), the owner-developer of the subdivision project.

Petitioner Ballatan called the attention of the AIA to the discrepancy of the land area in her title and the actual land area
received from them. The AIA authorized another survey of the land by Engineer Jose N. Quedding.

In a report dated February 28, 1985, Engineer Quedding found that the lot area of petitioner Ballatan was less by a few
meters and that of respondent Li Ching Yao, which was three lots away, increased by two (2) meters. Engineer Quedding
declared that he made a verification survey of Lots Nos. 25 and 26 of respondents Go in 1983 and allegedly found the
boundaries to have been in their proper position. He, however, could not explain the reduction in Ballatan's area since
he was not present at the time respondents Go constructed their boundary walls.[6]

On June 2, 1985, Engineer Quedding made a third relocation survey upon request of the parties. He found that Lot No.
24 lost approximately 25 square meters on its eastern boundary, that Lot No. 25, although found to have encroached on
Lot No. 24, did not lose nor gain any area; that Lot No. 26 lost some three (3) square meters which, however, were
gained by Lot No. 27 on its western boundary.[7] In short, Lots Nos. 25, 26 and 27 moved westward to the eastern
boundary of Lot No. 24.

On the basis of this survey, on June 10, 1985, petitioner Ballatan made a written demand on respondents Go to remove
and dismantle their improvements on Lot No. 24. Respondents Go refused. The parties, including Li Ching Yao, however,
met several times to reach an agreement on the matter.

Failing to agree amicably, petitioner Ballatan brought the issue before the barangay. Respondents Go did not appear.
Thus, on April 1, 1986, petitioner Ballatan instituted against respondents Go Civil Case No. 772-MN for recovery of
possession before the Regional Trial Court, Malabon, Branch 169. The Go's filed their "Answer with Third-Party
Complaint" impleading as third-party defendants respondents Li Ching Yao, the AIA and Engineer Quedding.

On August 23, 1990, the trial court decided in favor of petitioners. It ordered the Go's to vacate the subject portion of
Lot No. 24, demolish their improvements and pay petitioner Ballatan actual damages, attorney's fees and the costs of
the suit. It dismissed the third-party complaint against: (1) AIA after finding that the lots sold to the parties were in
accordance with the technical description and verification plan covered by their respective titles; (2) Jose N. Quedding,
there being no privity of relation between him and respondents Go and his erroneous survey having been made at the
instance of AIA, not the parties; and (3) Li Ching Yao for failure to prove that he committed any wrong in the subject
encroachment.[8] The court made the following disposition:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering the latter:

1. To demolish and remove all improvements existing and encroaching on plaintiff's lot;

2. To clear, vacate and deliver possession of the encroached area to the plaintiffs;

3. To pay plaintiffs jointly and severally the following:

a) P7,800.00 for the expenses paid to the surveyors;

b) P5,000.00 for plaintiffs' transportation;

4. To pay plaintiffs, jointly and severally, attorney's fees equivalent to 25% of the current market value of the subject
matter in litigation at the time of execution; and

5. To pay the costs of suit.

The third-party complaint filed by third-party plaintiff Gonzalo Go and Winston Go against third-party defendants
Araneta Institute of Agriculture, Jose N. Quedding and Li Ching Yao is hereby DISMISSED, without pronouncement as to
costs.

SO ORDERED."

Respondents Go appealed. On March 25, 1996, the Court of Appeals modified the decision of the trial court. It affirmed
the dismissal of the third-party complaint against the AIA but reinstated the complaint against Li Ching Yao and Jose
Quedding. Instead of ordering respondents Go to demolish their improvements on the subject land, the appellate court
ordered them to pay petitioner Ballatan, and respondent Li Ching Yao to pay respondents Go, a reasonable amount for
that portion of the lot which they encroached, the value to be fixed at the time of taking. It also ordered Jose Quedding
to pay respondents Go attorney's fees of P5,000.00 for his erroneous survey. The dispositive portion of the decision
reads:
"WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED insofar as the dismissal of the
third-party complaint against Araneta Institute of Agriculture is concerned but modified in all other aspects as follows:

1) Defendants-appellants are hereby ordered to pay plaintiffs-appellees the reasonable value of the forty-two (42)
square meters of their lot at the time of its taking;

2) Third-party defendant Li Ching Yao is hereby ordered to pay defendants-appellants the reasonable value of the thirty-
seven (37) square meters of the latter's lot at the time of its taking; and

3) Third-party defendant Jose N. Quedding is hereby ordered to pay to defendants-appellants the amount of P5,000.00.
as attorney's fees.

LET THE RECORD of the case be remanded to the Regional Trial Court of Malabon for further proceedings and reception
of evidence for the determination of the reasonable value of Lots Nos. 24 and 26.

SO ORDERED."[9]

Hence, this petition. Petitioners allege that:

"RESPONDENT COURT OF APPEALS ERRED ON QUESTIONS OF LAW AND GRAVELY ABUSED ITS DISCRETION AMOUNTING
TO LACK OF JURISDICTION WHEN:

1. IT APPLIED EQUITY OR EQUITABLE SOLUTIONS TO THE INSTANT CASE IN UTTER DISREGARD AND IN VIOLATION OR
GROSS IGNORANCE OF EXISTING LAWS AND JURISPRUDENCE VESTING BASIC PROPERTY RIGHTS TO HEREIN
PETITIONERS. RESPONDENT COURT HAS NO POWER TO APPLY/USE EQUITY IN THE PRESENCE OF EXISTING LAWS TO THE
CONTRARY.

2. UNDER THE GUISE OF APPLYING EQUITY BUT IN EFFECT A VERY APPARENT PARTIALITY AND FAVOR TO RESPONDENTS
GO, IT ORDERED PAYMENT OF THE ENCROACHED AREA AT THE VALUE AT THE TIME OF ITS TAKING AND NOT THE VALUE
AT THE TIME OF PAYMENT, THEREBY ENRICHING THE GO'S BUT DEPRIVING PETITIONERS OF THE FRUITS OR INCREASE IN
VALUE OF THEIR PROPERTY TO WHICH THEY ARE ENTITLED UNDER THE LAW AS THE REGISTERED OWNERS WITH
TORRENS TITLE IN THEIR NAMES.

3. WHEN IT DID NOT DISMISS THE THIRD-PARTY COMPLAINT DUE TO NON-PAYMENT OF ANY FILING OR DOCKET FEE.

4. WHEN IT DENIED PETITIONERS THE RECOVERY OF THE NECESSARY EXPENSES IN PROTECTING THEIR RIGHTS IN THIS
CASE."[10]
Petitioners question the admission by respondent Court of Appeals of the third-party complaint by respondents Go
against the AIA, Jose Quedding and Li Ching Yao. Petitioners claim that the third-party complaint should not have been
considered by the Court of Appeals for lack of jurisdiction due to third-party plaintiffs' failure to pay the docket and filing
fees before the trial court.

The third-party complaint in the instant case arose from the complaint of petitioners against respondents Go. The
complaint filed was for accion publiciana, i.e., the recovery of possession of real property which is a real action. The rule
in this jurisdiction is that when an action is filed in court, the complaint must be accompanied by the payment of the
requisite docket and filing fees.[11] In real actions, the docket and filing fees are based on the value of the property and
the amount of damages claimed, if any.[12] If the complaint is filed but the fees are not paid at the time of filing, the
court acquires jurisdiction upon full payment of the fees within a reasonable time as the court may grant, barring
prescription.[13] Where the fees prescribed for the real action have been paid but the fees of certain related damages
are not, the court, although having jurisdiction over the real action, may not have acquired jurisdiction over the
accompanying claim for damages.[14] Accordingly, the court may expunge those claims for damages, or allow, on
motion, a reasonable time for amendment of the complaint so as to allege the precise amount of damages and accept
payment of the requisite legal fees.[15] If there are unspecified claims, the determination of which may arise after the
filing of the complaint or similar pleading, the additional filing fee thereon shall constitute a lien on the judgment
award.[16] The same rule also applies to third-party claims and other similar pleadings.[17]

In the case at bar, the third-party complaint filed by respondents Go was incorporated in their answer to the complaint.
The third-party complaint sought the same remedy as the principal complaint but added a prayer for attorney's fees and
costs without specifying their amounts, thus:

"ON THE THIRD PARTY COMPLAINT

1. That summons be issued against Third-Party Defendants Araneta Institute of Agriculture, Jose N. Quedding and Li
Ching Yao;

2. That after hearing, they be sentenced to indemnify the Third-Party Plaintiffs for whatever is adjudged against the
latter in favor of the Plaintiffs;

3. That Third-Party Defendants be ordered to pay attorney's fees as may be proved during trial;

4. That Third-Party Defendants be ordered to pay the costs.

Other just and equitable reliefs are also prayed for."[18]

The Answer with Third-Party Complaint was admitted by the trial court without the requisite payment of filing fees,
particularly on the Go's prayer for damages.[19] The trial court did not award the Go's any damages. It dismissed the
third-party complaint. The Court of Appeals, however, granted the third-party complaint in part by ordering third-party
defendant Jose N. Quedding to pay the Go's the sum of P5,000.00 as attorney's fees.

Contrary to petitioners' claim, the Court of Appeals did not err in awarding damages despite the Go's failure to specify
the amount prayed for and pay the corresponding additional filing fees thereon. The claim for attorney's fees refers to
damages arising after the filing of the complaint against the Go's. The additional filing fee on this claim is deemed to
constitute a lien on the judgment award.[20]

The Court of Appeals found that the subject portion is actually forty-two (42) square meters in area, not forty-five (45),
as initially found by the trial court; that this forty-two (42) square meter portion is on the entire eastern side of Lot No.
24 belonging to petitioners; that on this said portion is found the concrete fence and pathway that extends from
respondent Winston Go's house on adjacent Lot No. 25; that inclusive of the subject portion, respondents Go did not
gain nor lose any portion of Lots Nos. 25 and 26; that instead, Lot No. 27, on which respondent Li Ching Yao built his
house, encroached on the land of respondents Go, gaining in the process thirty-seven (37) square meters of the latter's
land.[21]

We hold that the Court of Appeals correctly dismissed the third-party complaint against AIA. The claim that the
discrepancy in the lot areas was due to AIA's fault was not proved. The appellate court, however, found that it was the
erroneous survey by Engineer Quedding that triggered these discrepancies. And it was this survey that respondent
Winston Go relied upon in constructing his house on his father's land. He built his house in the belief that it was entirely
within the parameters of his father's land. In short, respondents Go had no knowledge that they encroached on
petitioners' lot. They are deemed builders in good faith[22] until the time petitioner Ballatan informed them of their
encroachment on her property.[23]

Respondent Li Ching Yao built his house on his lot before any of the other parties did.[24] He constructed his house in
1982, respondents Go in 1983, and petitioners in 1985.[25] There is no evidence, much less, any allegation that
respondent Li Ching Yao was aware that when he built his house he knew that a portion thereof encroached on
respondents Go's adjoining land. Good faith is always presumed, and upon him who alleges bad faith on the part of a
possessor rests the burden of proof.[26]

All the parties are presumed to have acted in good faith. Their rights must, therefore, be determined in accordance with
the appropriate provisions of the Civil Code on property.

Article 448 of the Civil Code provides:

"Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and
548,[27] or to oblige the one who built or planted to pay the price of the land, and the one who sowed the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof."

The owner of the land on which anything has been built, sown or planted in good faith shall have the right to
appropriate as his own the building, planting or sowing, after payment to the builder, planter or sower of the necessary
and useful expenses, and in the proper case, expenses for pure luxury or mere pleasure. The owner of the land may also
oblige the builder, planter or sower to purchase and pay the price of the land. If the owner chooses to sell his land, the
builder, planter or sower must purchase the land, otherwise the owner may remove the improvements thereon. The
builder, planter or sower, however, is not obliged to purchase the land if its value is considerably more than the building,
planting or sowing. In such case, the builder, planter or sower must pay rent to the owner of the land. If the parties
cannot come to terms over the conditions of the lease, the court must fix the terms thereof. The right to choose
between appropriating the improvement or selling the land on which the improvement stands to the builder, planter or
sower, is given to the owner of the land.[28]

Article 448 has been applied to improvements or portions of improvements built by mistaken belief on land belonging to
the adjoining owner.[29] The facts of the instant case are similar to those in Cabral v. Ibanez,[30] to wit:

"[P]laintiffs Geronima Zabala and her husband Justino Bernardo, constructed their house in the belief that it was entirely
within the area of their own land without knowing at that time that part of their house was occupying a 14-square meter
portion of the adjoining lot belonging to the defendants, and that the defendants Bernardo M. Cabral and Mamerta M.
Cabral were likewise unaware of the fact that a portion of plaintiff's house was extending and occupying a portion of
their lot with an area of 14 square meters. The parties came to know of the fact that part of the plaintiff's house was
occupying part of defendant's land when the construction of plaintiff's house was about to be finished, after a relocation
of the monuments of the two properties had been made by the U.S. Army through the Bureau of Lands, according to
their 'Stipulation of Facts,' dated August 17, 1951.

On the basis of these facts, we held that:

"The Court, therefore, concludes that the plaintiffs are builders in good faith and the relative rights of the defendant
Mamerta Cabral as owner of the land and of the plaintiffs as owners of the building is governed by Article 361 of the Civil
Code (Co Tao v. Joaquin Chan Chico, 46 Off. Gaz.5514). Article 361 of the old Civil Code has been reproduced with an
additional provision in Article 448 of the new Civil Code, approved June 18, 1949."[31]

Similarly, in Grana and Torralba v. Court of Appeals,[32] we held that:

"Although without any legal and valid claim over the land in question, petitioners, however, were found by the Court of
Appeals to have constructed a portion of their house thereon in good faith. Under Article 361 of the old Civil Code
(Article 448 of the new), the owner of the land on which anything has been built in good faith shall have the right to
appropriate as his own the building, after payment to the builder of necessary or useful expenses, and in the proper
case, expenses for pure luxury or mere pleasure, or to oblige the builder to pay the price of the land. Respondents, as
owners of the land, have therefore the choice of either appropriating the portion of petitioners' house which is on their
land upon payment of the proper indemnity to petitioners, or selling to petitioners that part of their land on which
stands the improvement. It may here be pointed out that it would be impractical for respondents to choose to exercise
the first alternative, i.e., buy that portion of the house standing on their land, for in that event the whole building might
be rendered useless. The more workable solution, it would seem, is for respondents to sell to petitioners that part of
their land on which was constructed a portion of the latter's house. If petitioners are unwilling or unable to buy, then
they must vacate the land and must pay rentals until they do so. Of course, respondents cannot oblige petitioners to buy
the land if its value is considerably more than that of the aforementioned portion of the house. If such be the case, then
petitioners must pay reasonable rent. The parties must come to an agreement as to the conditions of the lease, and
should they fail to do so, then the court shall fix the same."[33]

In light of these rulings, petitioners, as owners of Lot No. 24, may choose to purchase the improvement made by
respondents Go on their land, or sell to respondents Go the subject portion. If buying the improvement is impractical as
it may render the Go's house useless, then petitioners may sell to respondents Go that portion of Lot No. 24 on which
their improvement stands. If the Go's are unwilling or unable to buy the lot, then they must vacate the land and, until
they vacate, they must pay rent to petitioners. Petitioners, however, cannot compel respondents Go to buy the land if
its value is considerably more than the portion of their house constructed thereon. If the value of the land is much more
than the Go's improvement, then respondents Go must pay reasonable rent. If they do not agree on the terms of the
lease, then they may go to court to fix the same.

In the event that petitioners elect to sell to respondents Go the subject portion of their lot, the price must be fixed at
the prevailing market value at the time of payment. The Court of Appeals erred in fixing the price at the time of taking,
which is the time the improvements were built on the land. The time of taking is determinative of just compensation in
expropriation proceedings. The instant case is not for expropriation. It is not a taking by the state of private property for
a public purpose upon payment of just compensation. This is a case of an owner who has been paying real estate taxes
on his land but has been deprived of the use of a portion of this land for years. It is but fair and just to fix compensation
at the time of payment.[34]

Article 448 and the same conditions abovestated also apply to respondents Go as owners and possessors of their land
and respondent Li Ching Yao as builder of the improvement that encroached on thirty-seven (37) square meters of
respondents Go's land.

IN VIEW WHEREOF, the decision of respondent Court of Appeals is modified as follows:

(1) Petitioners are ordered to exercise within thirty (30) days from finality of this decision their option to either buy the
portion of respondents Go's improvement on their Lot No. 24, or sell to said respondents the portion of their land on
which the improvement stands. If petitioners elect to sell the land or buy the improvement, the purchase price must be
at the prevailing market price at the time of payment. If buying the improvement will render respondents Go's house
useless, then petitioners should sell the encroached portion of their land to respondents Go. If petitioners choose to sell
the land but respondents Go are unwilling or unable to buy, then the latter must vacate the subject portion and pay
reasonable rent from the time petitioners made their choice up to the time they actually vacate the premises. But if the
value of the land is considerably more than the value of the improvement, then respondents Go may elect to lease the
land, in which case the parties shall agree upon the terms of the lease. Should they fail to agree on said terms, the court
of origin is directed to fix the terms of the lease.
From the moment petitioners shall have exercised their option, respondents Go shall pay reasonable monthly rent up to
the time the parties agree on the terms of the lease or until the court fixes such terms.

(2) Respondents Go are likewise directed to exercise their rights as owners of Lots Nos. 25 and 26, vis-a-vis respondent Li
Ching Yao as builder of the improvement that encroached on thirty seven (37) square meters of respondents Go's land
in accordance with paragraph one abovementioned.

(3) The Decision of the Court of Appeals ordering Engineer Quedding, as third-party defendant, to pay attorney's fees of
P5,000.00 to respondents Go is affirmed. The additional filing fee on the damages constitutes a lien on this award.

(4) The Decision of the Court of Appeals dismissing the third-party complaint against Araneta Institute of Agriculture is
affirmed.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

[1] Penned by Justice Celia Lipana-Reyes and concurred in by Justices Alfredo L. Benipayo and Corona Ibay-Somera.

[2] Exhibit "A," Folder of Plaintiffs' Exhibits.

[3] Exhibits "1" and "2," Folder of Defendants Go's Exhibits.

[4] Exhibit "1," Folder of Defendant Li Ching Yao's Exhibits; Exhibit "4-a," Folder of Exhibits of Araneta Institute of
Agriculture.

[5] Exhibit "D," Folder of Plaintiffs' Exhibits.

[6] Exhibit "1," Folder of Exhibits- Quedding.

[7] Exhibit "5," Folder of Defendants Go's Exhibits; Decision of the Court of Appeals, p. 3, Rollo, p. 25.

[8] Decision of the trial court, p. 11, Court of Appeals Rollo, p. 86.
[9] Rollo, p. 44.

[10] Petition, p. 4, Rollo, p. 6.

[11] Tacay v. RTC of Tagum, Davao del Norte, 180 SCRA 433, 444 [1989]; Sun Insurance Office, Ltd. (SIOL) v. Asuncion,
170 SCRA 274, 285 [1989]; see also Manchester Development Corporation v. Court of Appeals, 149 SCRA 562, 568-569
[1987].

[12] Tacay v. RTC of Tagum, Davao del Norte, supra, at 440, 444 -- a real action may be commenced or prosecuted
without an accompanying claim for damages.

[13] Id.

[14] Original Dev't. and Construction Corp. v. Court of Appeals, 202 SCRA 753, 760 [1991].

[15] Tacay, supra, at 444; Original Dev't. and Construction Corp. v. Court of Appeals, supra, at 760.

[16] Original Development Corporation v. Court of Appeals, supra, at 761.

[17] Tacay, supra, at 441-442; Sun Insurance Office Ltd. v. Asuncion, 170 SCRA 274, 285 [1989].

[18] Answer with Third Party Complaint, p. 7, Records, p. 37.

[19] Order dated May 30, 1986, Records, p. 49.

[20] In Sun Insurance Office, Ltd. (SIOL) v. Asuncion, supra, at 279, it was held that the Manchester rule and its
clarifications are procedural rules and may be applied retroactively to actions pending and undetermined at the time of
their passage. The instant case was pending at the time Manchester was promulgated in 1987.

[21] Decision of the Court of Appeals, pp. 15-16, Rollo, pp. 37-38.

[22] Article 526, Civil Code provides:

"Art. 526. He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition
any flaw that invalidates it."

[23] Article 528, Civil Code provides:

"Art. 528. Possession acquired in good faith does not lose this character except in the case and from the moment facts
exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully."

[24] Decision of the Court of Appeals, p. 16, Rollo, p. 38.

[25] Id., at pp. 16-17, Rollo, pp. 38-39.

[26] Article 527, Civil Code.

[27] Articles 546 and 548 provide:

"Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the
thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who
has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase
value which the thing may have acquired by reason thereof."

"Art. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may
remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his
successor in the possession does not prefer to refund the amount expended."

[28] Grana & Torralba v. Court of Appeals, 109 Phil. 260, 263 [1960]; Acuna v. Furukawa Plantation Co., 93 Phil. 957, 961
[1953]; Aringo v. Arena, 14 Phil. 263, 269 [1909].

[29] Grana and Torralba v. Court of Appeals, 109 Phil. 260, 263 [1960]; Miranda v. Fadullon, 97 Phil. 801 [1955]; Cabral v.
Ibanez, 98 Phil. 140 [1955].

[30] 98 Phil. 140 [1955].

[31] Id., at 142.

[32] 109 Phil. 260 [1960].

[33] Id., at 263-264.

[34] See Cabral v. Ibanez, supra, at 143, where this Court gave the owner of the land thirty days to elect either to
purchase the improvement or sell the land; and once having elected, the case was reset for admission of evidence on
the value of the improvement, or the value of the land. This implies that the price of the land or improvement was fixed
definitely not at the time of taking; see also Aringo v. Arena, supra, at 270.

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Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. 75919 May 7, 1987

MANCHESTER DEVELOPMENT CORPORATION, ET AL., petitioners,

vs.

COURT OF APPEALS, CITY LAND DEVELOPMENT CORPORATION, STEPHEN ROXAS, ANDREW LUISON, GRACE LUISON and
JOSE DE MAISIP, respondents.

Tanjuatco, Oreta and Tanjuatco for petitioners.

Pecabar Law Offices for private respondents.

RESOLUTION

GANCAYCO, J.:

Acting on the motion for reconsideration of the resolution of the Second Division of January 28,1987 and another
motion to refer the case to and to be heard in oral argument by the Court En Banc filed by petitioners, the motion to
refer the case to the Court en banc is granted but the motion to set the case for oral argument is denied.

Petitioners in support of their contention that the filing fee must be assessed on the basis of the amended complaint cite
the case of Magaspi vs. Ramolete. 1 They contend that the Court of Appeals erred in that the filing fee should be levied
by considering the amount of damages sought in the original complaint.

The environmental facts of said case differ from the present in that

1. The Magaspi case was an action for recovery of ownership and possession of a parcel of land with damages. 2
While the present case is an action for torts and damages and specific performance with prayer for temporary
restraining order, etc. 3

2. In the Magaspi case, the prayer in the complaint seeks not only the annulment of title of the defendant to the
property, the declaration of ownership and delivery of possession thereof to plaintiffs but also asks for the payment of
actual moral, exemplary damages and attorney's fees arising therefrom in the amounts specified therein. 4 However, in
the present case, the prayer is for the issuance of a writ of preliminary prohibitory injunction during the pendency of the
action against the defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in
question, to attach such property of defendants that maybe sufficient to satisfy any judgment that maybe rendered, and
after hearing, to order defendants to execute a contract of purchase and sale of the subject property and annul
defendants' illegal forfeiture of the money of plaintiff, ordering defendants jointly and severally to pay plaintiff actual,
compensatory and exemplary damages as well as 25% of said amounts as maybe proved during the trial as attorney's
fees and declaring the tender of payment of the purchase price of plaintiff valid and producing the effect of payment
and to make the injunction permanent. The amount of damages sought is not specified in the prayer although the body
of the complaint alleges the total amount of over P78 Million as damages suffered by plaintiff. 5

3. Upon the filing of the complaint there was an honest difference of opinion as to the nature of the action in the
Magaspi case. The complaint was considered as primarily an action for recovery of ownership and possession of a parcel
of land. The damages stated were treated as merely to the main cause of action. Thus, the docket fee of only P60.00 and
P10.00 for the sheriff's fee were paid. 6
In the present case there can be no such honest difference of opinion. As maybe gleaned from the allegations of the
complaint as well as the designation thereof, it is both an action for damages and specific performance. The docket fee
paid upon filing of complaint in the amount only of P410.00 by considering the action to be merely one for specific
performance where the amount involved is not capable of pecuniary estimation is obviously erroneous. Although the
total amount of damages sought is not stated in the prayer of the complaint yet it is spelled out in the body of the
complaint totalling in the amount of P78,750,000.00 which should be the basis of assessment of the filing fee.

4. When this under-re assessment of the filing fee in this case was brought to the attention of this Court together
with similar other cases an investigation was immediately ordered by the Court. Meanwhile plaintiff through another
counsel with leave of court filed an amended complaint on September 12, 1985 for the inclusion of Philips Wire and
Cable Corporation as co-plaintiff and by emanating any mention of the amount of damages in the body of the complaint.
The prayer in the original complaint was maintained. After this Court issued an order on October 15, 1985 ordering the
re- assessment of the docket fee in the present case and other cases that were investigated, on November 12, 1985 the
trial court directed plaintiffs to rectify the amended complaint by stating the amounts which they are asking for. It was
only then that plaintiffs specified the amount of damages in the body of the complaint in the reduced amount of
P10,000,000.00. 7 Still no amount of damages were specified in the prayer. Said amended complaint was admitted.

On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay the amount of P3,104.00 as filing fee
covering the damages alleged in the original complaint as it did not consider the damages to be merely an or incidental
to the action for recovery of ownership and possession of real property. 8 An amended complaint was filed by plaintiff
with leave of court to include the government of the Republic as defendant and reducing the amount of damages, and
attorney's fees prayed for to P100,000.00. Said amended complaint was also admitted. 9

In the Magaspi case, the action was considered not only one for recovery of ownership but also for damages, so that the
filing fee for the damages should be the basis of assessment. Although the payment of the docketing fee of P60.00 was
found to be insufficient, nevertheless, it was held that since the payment was the result of an "honest difference of
opinion as to the correct amount to be paid as docket fee" the court "had acquired jurisdiction over the case and the
proceedings thereafter had were proper and regular." 10 Hence, as the amended complaint superseded the original
complaint, the allegations of damages in the amended complaint should be the basis of the computation of the filing
fee. 11

In the present case no such honest difference of opinion was possible as the allegations of the complaint, the
designation and the prayer show clearly that it is an action for damages and specific performance. The docketing fee
should be assessed by considering the amount of damages as alleged in the original complaint.

As reiterated in the Magaspi case the rule is well-settled "that a case is deemed filed only upon payment of the docket
fee regardless of the actual date of filing in court . 12 Thus, in the present case the trial court did not acquire jurisdiction
over the case by the payment of only P410.00 as docket fee. Neither can the amendment of the complaint thereby vest
jurisdiction upon the Court. 13 For an legal purposes there is no such original complaint that was duly filed which could
be amended. Consequently, the order admitting the amended complaint and all subsequent proceedings and actions
taken by the trial court are null and void.
The Court of Appeals therefore, aptly ruled in the present case that the basis of assessment of the docket fee should be
the amount of damages sought in the original complaint and not in the amended complaint.

The Court cannot close this case without making the observation that it frowns at the practice of counsel who filed the
original complaint in this case of omitting any specification of the amount of damages in the prayer although the amount
of over P78 million is alleged in the body of the complaint. This is clearly intended for no other purpose than to evade
the payment of the correct filing fees if not to mislead the docket clerk in the assessment of the filing fee. This
fraudulent practice was compounded when, even as this Court had taken cognizance of the anomaly and ordered an
investigation, petitioner through another counsel filed an amended complaint, deleting all mention of the amount of
damages being asked for in the body of the complaint. It was only when in obedience to the order of this Court of
October 18, 1985, the trial court directed that the amount of damages be specified in the amended complaint, that
petitioners' counsel wrote the damages sought in the much reduced amount of P10,000,000.00 in the body of the
complaint but not in the prayer thereof. The design to avoid payment of the required docket fee is obvious.

The Court serves warning that it will take drastic action upon a repetition of this unethical practice.

To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadings should specify
the amount of damages being prayed for not only in the body of the pleading but also in the prayer, and said damages
shall be considered in the assessment of the filing fees in any case. Any pleading that fails to comply with this
requirement shall not bib accepted nor admitted, or shall otherwise be expunged from the record.

The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the
complaint or similar pleading will not thereby vest jurisdiction in the Court, much less the payment of the docket fee
based on the amounts sought in the amended pleading. The ruling in the Magaspi case 14 in so far as it is inconsistent
with this pronouncement is overturned and reversed.

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

SO ORDERED.

Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Bidin, Sarmiento and
Cortes, JJ., concur.

Paras, J., took no part.

Footnotes
1 115 SCRA 193.

2 Supra, p. 194.

3 P. 64, Rollo.

4 Magaspi vs. Ramolete, supra, pp. 114-115.

5 Pp. 65-66, Rollo.

6 Magaspi case, supra, p. 194. Pp.

7 121-122, Rollo.

8 Magaspi vs. Ramolete, supra, pp. 199-200.

9 Pp. 201-202, Rollo.

10 Supra, 115 SCRA 204-205.

11 Supra, 115 SCRA 205.

12 Supra,115 SCRA 204, citing Malimit vs. Degamo, G.R.No. L-17850, Nov. 28, 1964, 12 SCRA 450, 120 Phil 1247;
Lee vs. Republic, L-15027, Jan 31, 1964, 10 SCRA 65.

13 Gaspar vs. Dorado, L-17884, November 29,1965 15 SCRA 331; Tamayo vs. San Miguel Brewery,G.R.No. L-17449,
January 30, 1964; Rosario vs. Carandang, 96 Phil 845; Campos Rueda Corp. vs. Hon. Judge Bautista, et al., G.R. No. L-
18452, Sept. 29, 1962

14 Supra.
The Lawphil Project - Arellano Law Foundation

SECOND DIVISION

[G.R. No. 140162. November 22, 2000]

AYALA LAND, INC., petitioner, vs. SPOUSES MORRIS CARPO and SOCORRO CARPO, respondents.

DECISION

MENDOZA, J.:

This is a petition for review of the resolution[1] of the Court of Appeals, dated May 14, 1999, dismissing petitioners
appeal from the summary judgment of the Regional Trial Court, Branch 255, Las Pias City in Civil Case No. 96-0082 for its
failure to pay the full amount of docket fees as well as the appellate courts resolution, dated September 15, 1999,
denying petitioners motion for reconsideration.

The facts are undisputed.

On March 10, 1995, herein respondent spouses Morris and Socorro Carpo brought an action in the Makati Regional Trial
Court against Ayala Land Corporation and Property Ventures Corporation for quieting of title. In their complaint,
respondents claimed to be the true and lawful owners of a 171,309-square meter parcel of land in Las Pias registered
under Transfer Certificate of Title No. 296463 in their names. They sought the annulment of the following titles in the
defendants name: TCT Nos. T-125945, T-4366, T-4367, T-4368, and all other titles derived therefrom. Respondents later
amended their complaint by changing the name of Ayala Land Corporation to that of Ayala Land, Inc. (ALI).

The case was subsequently transferred to the Regional Trial Court of Las Pias where it was re-docketed as Civil Case No.
96-0082 and assigned to Branch 255.

On December 17, 1996, ALI moved for summary judgment. As its motion was denied, ALI filed a petition for certiorari
with the Court of Appeals which, on September 25, 1997, rendered a decision ordering the trial court to render
summary judgment. ALI took exception to the resolution of the Court of Appeals and asked that summary judgment be
rendered by it but the appellate court denied ALIs motion.

ALI filed a petition for review[2] with this Court assailing the Court of Appeals refusal to render summary judgment.
Respondents also filed a petition for review[3]with this Court assailing the Court of Appeals ruling that summary
judgment was proper. Both petitions were dismissed by this Court.
Accordingly, on December 22, 1998, the trial court rendered summary judgment finding respondents title superior to
that of ALI because the latter was based merely on a survey plan which was not approved by the Director of the Bureau
of Lands. The dispositive portion of its decision reads:[4]

WHEREFORE, in the light of the foregoing and the prevailing jurisprudence on the matter, judgment is hereby rendered:

(a) Declaring TCT No. 296463 in the name of the plaintiffs Spouses Morris G. Carpo and Socorro R. Carpio as valid and
legal, and superior to that of defendant Ayalas TCT No. T-5333;

(b) Declaring TCT No. T-5333, TCT No. 125945, TCT No. T-6055, TCT No. 4266, TCT No. 4367 and TCT No. 4368 and their
derivatives as null and void;

(c) Ordering the defendant Ayala Land, Inc. to pay the sum of P100,000.00 as attorneys fees;

(d) To pay the costs.

SO ORDERED.

On January 5, 1999, ALI filed with the trial court a notice of appeal. On the same date, it paid P415.00 for docket and
other lawful fees as assessed by the cash clerk of the trial court.[5]

On May 14, 1999, the Court of Appeals issued the first of its assailed resolutions dismissing ALIs appeal on the ground
that it failed to pay the full amount of the required docket fee. It appears that per its computation, the amount paid by
ALI was P5.00 short of the correct amount.

After paying P5.00 on June 7, 1999, ALI moved for reconsideration on June 8, 1999. But on September 15, 1999, the
Court of Appeals denied ALIs motion.

ALI, therefore, filed the instant petition for review on October 13, 1999.

On November 17, 1999, this Court denied ALIs petition for review. The resolution denying the petition for review
stated:[6]

Petitioner contends that the dismissal of its appeal by the Court of Appeals is too harsh a sanction for the P5.00
deficiency in the payment of the required legal fees. The contention has no merit. It is settled that the perfection of an
appeal within the reglementary period is not only mandatory but also jurisdictional. Failure to comply with the
requirement for the timely payment of full appeal fees renders the decision final since appeal is only a statutory
privilege and, therefore, it should be exercised in the manner provided by law. As correctly ruled by the Court of
Appeals, 1 of Rule 50, in relation to 4 of Rule 41, of the 1997 Rules of Civil Procedure authorizes the dismissal of the
appeal for failure to pay the full amount of the required docket and other lawful fees.

Moreover, even on the merits, the instant petition should be denied for failure to clearly show that the appeal from the
decision of the trial court is meritorious. There is no showing that the trial court erred in nullifying petitioners certificate
of title over the subject parcel of land. In Republic Cement Corp. v. Court of Appeals, 198 SCRA 734 (1991), it was held
that any title emanating from a survey plan, which is not approved by the Director of the Bureau of Lands, is irregular
and void. In the instant case, the trial court found that petitioner had admitted in its answer to the complaint that its
title and that of the respondents both originated from Decree No. 131141, issued on October 15, 1969, in the name of
Apolonio Sabater. Petitioner, however, failed to show that its certificate of title is based on a survey plan duly approved
by the Director of Bureau of Lands. The trial court also found that while respondents title indicated that the survey of
the subject parcel (of) land in their favor was made on January 4-6, 1927, petitioners title showed July 28, 1930 as the
date of survey. The trial court, therefore, rightly concluded that respondents predecessor-in-interest had claimed
ownership over the subject property earlier than petitioners predecessor-in-interest.

....

On December 13, 1999, ALI moved for a reconsideration arguing that (1) in similar cases where the error in computing
the amount of docketing fees was committed by officers of the courts, such as the clerk of court, this Court allowed
appeals on the principle that every citizen has the right to rely on the presumption of regularity in the performance by
public officers of their duties; and (2) the only issue in this case is whether the Court of Appeals correctly dismissed its
appeal on the ground that it failed to pay the required docket fees and not also the merits of the trial courts summary
judgment in Civil Case No. 96-0082.

On January 19, 2000, this Court granted ALIs motion for reconsideration and reinstated its petition for review.

The sole issue in the present case is whether or not the Court of Appeals erred in dismissing ALIs appeal for failure to pay
the correct amount of docket and other lawful fees.

In their Comment, respondents contend that payment of the full amount of the docket and other legal fees within the
prescriptive period of appeal is mandatory and jurisdictional under Rule 41, 4 of the 1997 Rules of Civil Procedure.[7]
They contend that it is improbable for ALIs counsel not to be familiar with the computation of the appellate courts
docket and other fees because it is a big law firm with a large clientele. It is thus patent error to blame the clerk of the
trial court for ALIs failure to pay the full amount of the docket fees.[8] They, therefore, pray that the instant petition for
review be denied. On the other hand, ALI prays that

the 14 May 1999 and 15 September 1999 Resolutions of the Court of Appeals in CA-G.R. CV No. 61784, dismissing the
appeal of petitioner from the 22 December 1998 Summary Judgment of the Regional Trial Court of Las Pias in Civil Case
No. 96-0082 [95-292] be set aside and such appeal be ordered reinstated for further proceedings.
The petition is meritorious.

To be sure, the remedy of appeal is a purely statutory right and one who seeks to avail thereof must comply with the
statute or rule.[9] For this reason, payment of the full amount of the appellate court docket and other lawful fees within
the reglementary period is mandatory and jurisdictional.[10] However, as we have ruled in Aranas v. Endona,[11] the
strict application of the jurisdictional nature of the above rule on payment of appellate docket fees may be mitigated
under exceptional circumstances to better serve the interest of justice. As early as 1946, in the case of Segovia v.
Barrios,[12] we ruled that where an appellant in good faith paid less than the correct amount for the docket fee because
that was the amount he was required to pay by the clerk of court, and he promptly paid the balance, it is error to dismiss
his appeal because

every citizen has the right to assume and trust that a public officer charged by law with certain duties knows his duties
and performs them in accordance with law. To penalize such citizen for relying upon said officer in all good faith is
repugnant to justice.[13]

The ruling in Segovia was applied by this Court in subsequent cases[14] where an appellants right to appeal was
threatened by the mistake of public officers in computing the correct amount of docket fee. Respondents draw
attention to Rule 41, 4 of the 1997 Rules of Civil Procedure which provides that the appellate court docket and other
lawful fees must be paid in full to the clerk of the court which rendered the judgment or final order appealed from
within the period for taking the appeal. They argue that this Rule has overruled the decision in Segovia.[15]

This contention is untenable. Rule 41, 4 must be read in relation to Rule 50, 1(c) which provides that:

An appeal may be dismissed by the Court of Appeals, on its own motion or on that of the appellee, on the following
grounds:

....

(c) Failure of the appellant to pay the docket and other lawful fees as provided in Section 4 of Rule 41.

....

With the exception of 1(b), which refers to the failure to file notice of appeal or the record on appeal within the period
prescribed by these Rules, the grounds enumerated in Rule 50, 1 are merely directory and not mandatory.[16] This is
plain from the use of the permissive may in the text of the statute. Despite the jurisdictional nature of the rule on
payment of docket fee, therefore, the appellate court still has the discretion to relax the rule in meritorious cases. The
ruling in Segovia is still good law which the appellate court, in the exercise of its discretion, must apply in circumstances
such as that in the present case where an appellant was, from the start, ready and willing to pay the correct amount of
docket fee, but was unable to do so due to the error of an officer of the court in computing the correct amount. To hold
otherwise would be unjust and unwarranted.

WHEREFORE, the decision appealed from is REVERSED and the case is REMANDED to the Court of Appeals for further
proceedings.

SO ORDERED.

Bellosillo, J., (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.

[1] Per Associate Justice Ramon Mabutas, Jr., with the concurrence of Associate Justices Presbitero J. Velasco, Jr. and
Teodoro P. Regino.

[2] Docketed as G.R. No. 132259.

[3] Docketed as G.R. No. 132440.

[4] RTC Decision, pp. 4-5; Rollo, pp. 31-32.

[5] In accordance with the following schedule and as evidenced by the following receipts:

Number Nature of Fee Date Amount

10068617 Docket Fee Jan. 5, 1999 P352.00

10069241 Docket Fee Jan. 5, 1999 48.00

3060769Z Legal Research Fund Jan. 5, 1999 10.00

7562799J Victim Compensation Jan. 5. 1999 5.00

Fund ________
Total: P415.00

[6] Resolution, pp. 1-2; Rollo, pp. 54-55 (citations omitted; emphasis added).

[7] Comment, pp. 1-3; Rollo, pp. 146-148.

[8] Id. at 149-150.

[9] Videogram Regulatory Board v. Court of Appeals, 256 SCRA 50 (1996).

[10] Lazaro v. Court of Appeals, G.R. No. 137761, April 6, 2000.

[11] 117 SCRA 753 (1982). See also Bank of America, NT & SA v. Gerochi, 230 SCRA 9 (1994).

[12] 75 Phil. 764 (1946).

[13] Id. at 767 (emphasis added).

[14] Bernido v. Balana, 124 Phil. 137 (1966); Tagulao v. Judge Padlan-Mundok, 108 Phil. 499 (1960); Gambol v.
Barcelona, 106 Phil. 328 (1959); Marasigan v. Palacio, 87 Phil. 839 (1950).

[15] Comment, pp. 3-4; Rollo, pp. 148-149.

[16] 1 F. Regalado, Remedial LAw Compendium 570 (1999).

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Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. Nos. 79937-38 February 13, 1989

SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and D.J. WARBY, petitioners,

vs.

HON. MAXIMIANO C. ASUNCION, Presiding Judge, Branch 104, Regional Trial Court, Quezon City and MANUEL CHUA UY
PO TIONG, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for petitioners. Tanjuatco, Oreta, Tanjuatco,
Berenguer & Sanvicente Law Offices for private respondent.

GANCAYCO, J.:

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

On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint with the Regional Trial
Court of Makati, Metro Manila for the consignation of a premium refund on a fire insurance policy with a prayer for the
judicial declaration of its nullity against private respondent Manuel Uy Po Tiong. Private respondent as declared in
default for failure to file the required answer within the reglementary period.

On the other hand, on March 28, 1984, private respondent filed a complaint in the Regional Trial Court of Quezon City
for the refund of premiums and the issuance of a writ of preliminary attachment which was docketed as Civil Case No.
Q-41177, initially against petitioner SIOL, and thereafter including E.B. Philipps and D.J. Warby as additional defendants.
The complaint sought, among others, the payment of actual, compensatory, moral, exemplary and liquidated damages,
attorney's fees, expenses of litigation and costs of the suit. Although the prayer in the complaint did not quantify the
amount of damages sought said amount may be inferred from the body of the complaint to be about Fifty Million Pesos
(P50,000,000.00).
Only the amount of P210.00 was paid by private respondent as docket fee which prompted petitioners' counsel to raise
his objection. Said objection was disregarded by respondent Judge Jose P. Castro who was then presiding over said case.
Upon the order of this Court, the records of said case together with twenty-two other cases assigned to different
branches of the Regional Trial Court of Quezon City which were under investigation for under-assessment of docket fees
were transmitted to this Court. The Court thereafter returned the said records to the trial court with the directive that
they be re-raffled to the other judges in Quezon City, to the exclusion of Judge Castro. Civil Case No. Q-41177 was re-
raffled to Branch 104, a sala which was then vacant.

On October 15, 1985, the Court en banc issued a Resolution in Administrative Case No. 85-10-8752-RTC directing the
judges in said cases to reassess the docket fees and that in case of deficiency, to order its payment. The Resolution also
requires all clerks of court to issue certificates of re-assessment of docket fees. All litigants were likewise required to
specify in their pleadings the amount sought to be recovered in their complaints.

On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q-41177 was temporarily assigned,
issuedan order to the Clerk of Court instructing him to issue a certificate of assessment of the docket fee paid by private
respondent and, in case of deficiency, to include the same in said certificate.

On January 7, 1984, to forestall a default, a cautionary answer was filed by petitioners. On August 30,1984, an amended
complaint was filed by private respondent including the two additional defendants aforestated.

Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter assigned, after his assumption into office
on January 16, 1986, issued a Supplemental Order requiring the parties in the case to comment on the Clerk of Court's
letter-report signifying her difficulty in complying with the Resolution of this Court of October 15, 1985 since the
pleadings filed by private respondent did not indicate the exact amount sought to be recovered. On January 23, 1986,
private respondent filed a "Compliance" and a "Re-Amended Complaint" stating therein a claim of "not less than
Pl0,000,000. 00 as actual compensatory damages" in the prayer. In the body of the said second amended complaint
however, private respondent alleges actual and compensatory damages and attorney's fees in the total amount of about
P44,601,623.70.

On January 24, 1986, Judge Asuncion issued another Order admitting the second amended complaint and stating therein
that the same constituted proper compliance with the Resolution of this Court and that a copy thereof should be
furnished the Clerk of Court for the reassessment of the docket fees. The reassessment by the Clerk of Court based on
private respondent's claim of "not less than P10,000,000.00 as actual and compensatory damages" amounted to
P39,786.00 as docket fee. This was subsequently paid by private respondent.

Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order of Judie Asuncion
dated January 24, 1986.

On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of P20,000,000.00 as
d.qmages so the total claim amounts to about P64,601,623.70. On October 16, 1986, or some seven months after filing
the supplemental complaint, the private respondent paid the additional docket fee of P80,396.00. 1
On August 13, 1987, the Court of Appeals rendered a decision ruling, among others, as follows:

WHEREFORE, judgment is hereby rendered:

1. Denying due course to the petition in CA-G.R. SP No. 1, 09715 insofar as it seeks annulment of the order

(a) denying petitioners' motion to dismiss the complaint, as amended, and

(b) granting the writ of preliminary attachment, but giving due course to the portion thereof questioning the
reassessment of the docketing fee, and requiring the Honorable respondent Court to reassess the docketing fee to be
paid by private respondent on the basis of the amount of P25,401,707.00. 2

Hence, the instant petition.

During the pendency of this petition and in conformity with the said judgment of respondent court, private respondent
paid the additional docket fee of P62,432.90 on April 28, 1988. 3

The main thrust of the petition is that the Court of Appeals erred in not finding that the lower court did not acquire
jurisdiction over Civil Case No. Q-41177 on the ground of nonpayment of the correct and proper docket fee. Petitioners
allege that while it may be true that private respondent had paid the amount of P182,824.90 as docket fee as herein-
above related, and considering that the total amount sought to be recovered in the amended and supplemental
complaint is P64,601,623.70 the docket fee that should be paid by private respondent is P257,810.49, more or less. Not
having paid the same, petitioners contend that the complaint should be dismissed and all incidents arising therefrom
should be annulled. In support of their theory, petitioners cite the latest ruling of the Court in Manchester Development
Corporation vs. CA, 4 as follows:

The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the
complaint or similar pleading will not thereby vest jurisdiction in the Court, much less the payment of the docket fee
based on the amounts sought in the amended pleading. The ruling in the Magaspi Case in so far as it is inconsistent with
this pronouncement is overturned and reversed.

On the other hand, private respondent claims that the ruling in Manchester cannot apply retroactively to Civil Case No.
Q41177 for at the time said civil case was filed in court there was no such Manchester ruling as yet. Further, private
respondent avers that what is applicable is the ruling of this Court in Magaspi v. Ramolete, 5 wherein this Court held
that the trial court acquired jurisdiction over the case even if the docket fee paid was insufficient.
The contention that Manchester cannot apply retroactively to this case is untenable. Statutes regulating the procedure
of the courts will be construed as applicable to actions pending and undetermined at the time of their passage.
Procedural laws are retrospective in that sense and to that extent. 6

In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full amount of the docket fee is an
indispensable step for the perfection of an appeal. In a forcible entry and detainer case before the justice of the peace
court of Manaoag, Pangasinan, after notice of a judgment dismissing the case, the plaintiff filed a notice of appeal with
said court but he deposited only P8.00 for the docket fee, instead of P16.00 as required, within the reglementary period
of appeal of five (5) days after receiving notice of judgment. Plaintiff deposited the additional P8.00 to complete the
amount of the docket fee only fourteen (14) days later. On the basis of these facts, this court held that the Court of First
Instance did notacquire jurisdiction to hear and determine the appeal as the appeal was not thereby perfected.

In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to become a Filipino citizen by sending it
through registered mail to the Office of the Solicitor General in 1953 but the required filing fee was paid only in 1956,
barely 5V2 months prior to the filing of the petition for citizenship. This Court ruled that the declaration was not filed in
accordance with the legal requirement that such declaration should be filed at least one year before the filing of the
petition for citizenship. Citing Lazaro, this Court concluded that the filing of petitioner's declaration of intention on
October 23, 1953 produced no legal effect until the required filing fee was paid on May 23, 1956.

In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were applied. It was an original petition for
quo warranto contesting the right to office of proclaimed candidates which was mailed, addressed to the clerk of the
Court of First Instance, within the one-week period after the proclamation as provided therefor by law. 10 However, the
required docket fees were paid only after the expiration of said period. Consequently, this Court held that the date of
such payment must be deemed to be the real date of filing of aforesaid petition and not the date when it was mailed.

Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee must be paid before a court will act on
a petition or complaint. However, we also held that said rule is not applicable when petitioner seeks the probate of
several wills of the same decedent as he is not required to file a separate action for each will but instead he may have
other wills probated in the same special proceeding then pending before the same court.

Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is deemed filed only upon payment of
the docket fee regardless of the actual date of its filing in court. Said case involved a complaint for recovery of
ownership and possession of a parcel of land with damages filed in the Court of First Instance of Cebu. Upon the
payment of P60.00 for the docket fee and P10.00 for the sheriffs fee, the complaint was docketed as Civil Case No. R-
11882. The prayer of the complaint sought that the Transfer Certificate of Title issued in the name of the defendant be
declared as null and void. It was also prayed that plaintiff be declared as owner thereof to whom the proper title should
be issued, and that defendant be made to pay monthly rentals of P3,500.00 from June 2, 1948 up to the time the
property is delivered to plaintiff, P500,000.00 as moral damages, attorney's fees in the amount of P250,000.00, the costs
of the action and exemplary damages in the amount of P500,000.00.

The defendant then filed a motion to compel the plaintiff to pay the correct amount of the docket fee to which an
opposition was filed by the plaintiff alleging that the action was for the recovery of a parcel of land so the docket fee
must be based on its assessed value and that the amount of P60.00 was the correct docketing fee. The trial court
ordered the plaintiff to pay P3,104.00 as filing fee.

The plaintiff then filed a motion to admit the amended complaint to include the Republic as the defendant. In the prayer
of the amended complaint the exemplary damages earlier sought was eliminated. The amended prayer merely sought
moral damages as the court may determine, attorney's fees of P100,000.00 and the costs of the action. The defendant
filed an opposition to the amended complaint. The opposition notwithstanding, the amended complaint was admitted
by the trial court. The trial court reiterated its order for the payment of the additional docket fee which plaintiff assailed
and then challenged before this Court. Plaintiff alleged that he paid the total docket fee in the amount of P60.00 and
that if he has to pay the additional fee it must be based on the amended complaint.

The question posed, therefore, was whether or not the plaintiff may be considered to have filed the case even if the
docketing fee paid was not sufficient. In Magaspi, We reiterated the rule that the case was deemed filed only upon the
payment of the correct amount for the docket fee regardless of the actual date of the filing of the complaint; that there
was an honest difference of opinion as to the correct amount to be paid as docket fee in that as the action appears to be
one for the recovery of property the docket fee of P60.00 was correct; and that as the action is also one, for damages,
We upheld the assessment of the additional docket fee based on the damages alleged in the amended complaint as
against the assessment of the trial court which was based on the damages alleged in the original complaint.

However, as aforecited, this Court overturned Magaspi in Manchester. Manchester involves an action for torts and
damages and specific performance with a prayer for the issuance of a temporary restraining order, etc. The prayer in
said case is for the issuance of a writ of preliminary prohibitory injunction during the pendency of the action against the
defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question, the
attachment of such property of defendants that may be sufficient to satisfy any judgment that may be rendered, and,
after hearing, the issuance of an order requiring defendants to execute a contract of purchase and sale of the subject
property and annul defendants' illegal forfeiture of the money of plaintiff. It was also prayed that the defendants be
made to pay the plaintiff jointly and severally, actual, compensatory and exemplary damages as well as 25% of said
amounts as may be proved during the trial for attorney's fees. The plaintiff also asked the trial court to declare the
tender of payment of the purchase price of plaintiff valid and sufficient for purposes of payment, and to make the
injunction permanent. The amount of damages sought is not specified in the prayer although the body of the complaint
alleges the total amount of over P78 Millon allegedly suffered by plaintiff.

Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for the docket fee based on the nature of
the action for specific performance where the amount involved is not capable of pecuniary estimation. However, it was
obvious from the allegations of the complaint as well as its designation that the action was one for damages and specific
performance. Thus, this court held the plaintiff must be assessed the correct docket fee computed against the amount
of damages of about P78 Million, although the same was not spelled out in the prayer of the complaint.

Meanwhile, plaintiff through another counsel, with leave of court, filed an amended complaint on September 12, 1985
by the inclusion of another co-plaintiff and eliminating any mention of the amount of damages in the body of the
complaint. The prayer in the original complaint was maintained.
On October 15, 1985, this Court ordered the re-assessment of the docket fee in the said case and other cases that were
investigated. On November 12, 1985, the trial court directed the plaintiff to rectify the amended complaint by stating
the amounts which they were asking for. This plaintiff did as instructed. In the body of the complaint the amount of
damages alleged was reduced to P10,000,000.00 but still no amount of damages was specified in the prayer. Said
amended complaint was admitted.

Applying the principle in Magaspi that "the case is deemed filed only upon payment of the docket fee regardless of the
actual date of filing in court," this Court held that the trial court did not acquire jurisdiction over the case by payment of
only P410.00 for the docket fee. Neither can the amendment of the complaint thereby vest jurisdiction upon the Court.
For all legal purposes there was no such original complaint duly filed which could be amended. Consequently, the order
admitting the amended complaint and all subsequent proceedings and actions taken by the trial court were declared
null and void. 13

The present case, as above discussed, is among the several cases of under-assessment of docket fee which were
investigated by this Court together with Manchester. The facts and circumstances of this case are similar to Manchester.
In the body of the original complaint, the total amount of damages sought amounted to about P50 Million. In the prayer,
the amount of damages asked for was not stated. The action was for the refund of the premium and the issuance of the
writ of preliminary attachment with damages. The amount of only P210.00 was paid for the docket fee. On January 23,
1986, private respondent filed an amended complaint wherein in the prayer it is asked that he be awarded no less than
P10,000,000.00 as actual and exemplary damages but in the body of the complaint the amount of his pecuniary claim is
approximately P44,601,623.70. Said amended complaint was admitted and the private respondent was reassessed the
additional docket fee of P39,786.00 based on his prayer of not less than P10,000,000.00 in damages, which he paid.

On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of P20,000,000.00 in
damages so that his total claim is approximately P64,601,620.70. On October 16, 1986, private respondent paid an
additional docket fee of P80,396.00. After the promulgation of the decision of the respondent court on August 31, 1987
wherein private respondent was ordered to be reassessed for additional docket fee, and during the pendency of this
petition, and after the promulgation of Manchester, on April 28, 1988, private respondent paid an additional docket fee
of P62,132.92. Although private respondent appears to have paid a total amount of P182,824.90 for the docket fee
considering the total amount of his claim in the amended and supplemental complaint amounting to about
P64,601,620.70, petitioner insists that private respondent must pay a docket fee of P257,810.49.

The principle in Manchester could very well be applied in the present case. The pattern and the intent to defraud the
government of the docket fee due it is obvious not only in the filing of the original complaint but also in the filing of the
second amended complaint.

However, in Manchester, petitioner did not pay any additional docket fee until] the case was decided by this Court on
May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this Court held that the court a quo
did not acquire jurisdiction over the case and that the amended complaint could not have been admitted inasmuch as
the original complaint was null and void.

In the present case, a more liberal interpretation of the rules is called for considering that, unlike Manchester, private
respondent demonstrated his willingness to abide by the rules by paying the additional docket fees as required. The
promulgation of the decision in Manchester must have had that sobering influence on private respondent who thus paid
the additional docket fee as ordered by the respondent court. It triggered his change of stance by manifesting his
willingness to pay such additional docket fee as may be ordered.

Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the total amount of
the claim. This is a matter which the clerk of court of the lower court and/or his duly authorized docket clerk or clerk in-
charge should determine and, thereafter, if any amount is found due, he must require the private respondent to pay the
same.

Thus, the Court rules as follows:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed
docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of
the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within
a reasonable time but in no case beyond the applicable prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third party claims and similar pleadings, which shall not be
considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee
within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period.

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

WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the court a quo is hereby instructed to
reassess and determine the additional filing fee that should be paid by private respondent considering the total amount
of the claim sought in the original complaint and the supplemental complaint as may be gleaned from the allegations
and the prayer thereof and to require private respondent to pay the deficiency, if any, without pronouncement as to
costs.

SO ORDERED.

Fernan (C.J), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla, Bidin, Sarmiento, Cortes, Grio-
Aquino, Medialdea and Regalado, JJ., concur.
Footnotes

1 Annexes 1, 1-A, 1-B of Comment of private respondent.

2 Page 34, Decision of the Court of Appeals; p. 57 Rollo.

3 Annex 2 to Memorandum of private respondent.

4 149 SCRA 562 (1987).

5 115 SCRA 193, 204 (1982).

6 People vs. Sumilang, 77 Phil. 764 (1946); Alday vs. Camilon, 120 SCRA 521 (1983) and Palomo Building Tenants
Association, Inc. vs. Intermediate Appellate Court, 133 SCRA 168 (1984).

7 57 Phil. 552 (1932).

8 SCRA 65 (1964).

9 12 SCRA 450 (1964).

10 Section 173, Revised Election Code.

11 28 SCRA 3301 (1969).

12 Supra.

13 Supra, pp. 567-568.

The Lawphil Project - Arellano Law Foundation

THIRD DIVISION

EDGARDO PINGA, G.R. No. 170354

Petitioner,

Present:

QUISUMBING, J.,

- versus - Chairperson,

CARPIO,

CARPIO MORALES,

THE HEIRS OF GERMAN TINGA, and

SANTIAGO represented by VELASCO, JR. JJ.,

FERNANDO SANTIAGO,

Respondents.

Promulgated:

June 30, 2006

x--------------------------------------------------------------------------------x

DECISION

TINGA, J.:

The constitutional faculty of the Court to promulgate rules of practice and procedure[1] necessarily carries the power to
overturn judicial precedents on points of remedial law through the amendment of the Rules of Court. One of the notable
changes introduced in the 1997 Rules of Civil Procedure is the explicit proviso that if a complaint is dismissed due to
fault of the plaintiff, such dismissal is without prejudice to the right of the defendant to prosecute his counterclaim in
the same or in a separate action.[2] The innovation was instituted in spite of previous jurisprudence holding that the fact
of the dismissal of the complaint was sufficient to justify the dismissal as well of the compulsory counterclaim.[3]
In granting this petition, the Court recognizes that the former jurisprudential rule can no longer stand in light of Section
3, Rule 17 of the 1997 Rules of Civil Procedure.

The relevant facts are simple enough. Petitioner Eduardo Pinga was named as one of two defendants in a complaint for
injunction[4] filed with Branch 29 of the Regional Trial Court (RTC)[5] of San Miguel, Zamboanga del Sur, by respondent
Heirs of German Santiago, represented by Fernando Santiago. The Complaint[6] dated 28 May 1998 alleged in essence
that petitioner and co-defendant Vicente Saavedra had been unlawfully entering the coco lands of the respondent,
cutting wood and bamboos and harvesting the fruits of the coconut trees therein. Respondents prayed that petitioner
and Saavedra be enjoined from committing acts of depredation on their properties, and ordered to pay damages.

In their Amended Answer with Counterclaim,[7] petitioner and his co-defendant disputed respondents ownership of the
properties in question, asserting that petitioners father, Edmundo Pinga, from whom defendants derived their interest
in the properties, had been in possession thereof since the 1930s.[8] They alleged that as far back as 1968, respondents
had already been ordered ejected from the properties after a complaint for forcible entry was filed by the heirs of
Edmundo Pinga. It was further claimed that respondents application for free patent over the properties was rejected by
the Office of the President in 1971. Defendants in turn prayed that owing to respondents forcible re-entry in the
properties and the irresponsible and reckless filing of the case, they be awarded various types of damages instead in
amounts totaling P2,100,000 plus costs of suit.[9]

By July of 2005, the trial of the case had not yet been completed. Moreover, respondents, as plaintiffs, had failed to
present their evidence. It appears that on 25 October 2004, the RTC already ordered the dismissal of the complaint after
respondents counsel had sought the postponement of the hearing scheduled then.[10] However, the order of dismissal
was subsequently reconsidered by the RTC in an Order dated 9 June 2005, which took into account the assurance of
respondents counsel that he would give priority to that case.[11]

At the hearing of 27 July 2005, plaintiffs counsel on record failed to appear, sending in his stead a representative who
sought the postponement of the hearing. Counsel for defendants (who include herein petitioner) opposed the move for
postponement and moved instead for the dismissal of the case. The RTC noted that it was obvious that respondents had
failed to prosecute the case for an unreasonable length of time, in fact not having presented their evidence yet. On that
ground, the complaint was dismissed. At the same time, the RTC allowed defendants to present their evidence ex-
parte.[12]

Respondents filed a Motion for Reconsideration[13] of the order issued in open court on 27 July 2005, opting however
not to seek that their complaint be reinstated, but praying instead that the entire action be dismissed and petitioner be
disallowed from presenting evidence ex-parte. Respondents claimed that the order of the RTC allowing petitioner to
present evidence ex-parte was not in accord with established jurisprudence. They cited cases, particularly City of Manila
v. Ruymann[14] and Domingo v. Santos,[15] which noted those instances in which a counterclaim could not remain
pending for independent adjudication.

On 9 August 2005, the RTC promulgated an order granting respondents Motion for Reconsideration and dismissing the
counterclaim, citing as the only ground therefor that there is no opposition to the Motion for Reconsideration of the
[respondents].[16] Petitioner filed a Motion for Reconsideration, but the same was denied by the RTC in an Order dated
10 October 2005.[17] Notably, respondents filed an Opposition to Defendants Urgent Motion for Reconsideration,
wherein they argued that the prevailing jurisprudential rule[18] is that compulsory counterclaims cannot be adjudicated
independently of plaintiffs cause of action, and a conversu, the dismissal of the complaint carries with it the dismissal of
the compulsory counterclaims.[19]

The matter was elevated to this Court directly by way of a Petition for Review under Rule 45 on a pure question of law,
the most relevant being whether the dismissal of the complaint necessarily carries the dismissal of the compulsory
counterclaim.

We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure, the dismissal of the complaint due to the
fault of plaintiff does not necessarily carry with it the dismissal of the counterclaim, compulsory or otherwise. In fact, the
dismissal of the complaint is without prejudice to the right of defendants to prosecute the counterclaim.

On a prefatory note, the RTC, in dismissing the counterclaim, did not expressly adopt respondents argument that the
dismissal of their complaint extended as well to the counterclaim. Instead, the RTC justified the dismissal of the
counterclaim on the ground that there is no opposition to [plaintiffs] Motion for Reconsideration [seeking the dismissal
of the counterclaim].[20] This explanation is hollow, considering that there is no mandatory rule requiring that an
opposition be filed to a motion for reconsideration without need for a court order to that effect; and, as posited by
petitioner, the failure to file an opposition to the Plaintiffs Motion for Reconsideration is definitely not one among the
established grounds for dismissal [of the counterclaim].[21] Still, the dismissal of the counterclaim by the RTC betrays at
very least a tacit recognition of respondents argument that the counterclaim did not survive the dismissal of the
complaint. At most, the dismissal of the counterclaim over the objection of the defendant (herein petitioner) on grounds
other than the merits of the counterclaim, despite the provisions under Rule 17 of the 1997 Rules of Civil Procedure,
constitutes a debatable question of law, presently meriting justiciability through the instant action. Indeed, in reviewing
the assailed orders of the RTC, it is inevitable that the Court consider whether the dismissal of the complaint, upon
motion of the defendant, on the ground of the failure to prosecute on plaintiffs part precipitates or carries with it the
dismissal of the pending counterclaims.

Our core discussion begins with Section 3, Rule 17 of the 1997 Rules of Civil Procedure, which states:

SEC. 3. Dismissal due to fault of plaintiff.If, for no justifiable cause, the plaintiff fails to appear on the date of the
presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length of time, or
to comply with these Rules or any order of the court, the complaint may be dismissed upon motion of defendant or
upon the court's own motion, without prejudice to the right of the defendant to prosecute his counterclaim in the same
or in a separate action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise declared
by the court.

The express qualification in the provision that the dismissal of the complaint due to the plaintiffs fault, as in the case for
failure to prosecute, is without prejudice to the right of the defendant to prosecute his counterclaim in the same or
separate action. This stands in marked contrast to the provisions under Rule 17 of the 1964 Rules of Court which were
superseded by the 1997 amendments. In the 1964 Rules, dismissals due to failure to prosecute were governed by
Section 3, Rule 17, to wit:
SEC. 3. Failure to prosecute. If plaintiff fails to appear at the time of the trial, or to prosecute his action for an
unreasonable length of time, or to comply with these rules or any order of the court, the action may be dismissed upon
motion of the defendant or upon the courts own motion. This dismissal shall have the effect of an adjudication upon the
merits, unless otherwise provided by court.

Evidently, the old rule was silent on the effect of such dismissal due to failure to prosecute on the pending
counterclaims. As a result, there arose what one authority on remedial law characterized as the nagging question of
whether or not the dismissal of the complaint carries with it the dismissal of the counterclaim.[22] Jurisprudence
construing the previous Rules was hardly silent on the matter.

In their arguments before the RTC on the dismissal of the counterclaim, respondents cited in support City of Manila v.

Ruymann,[23] Domingo v. Santos,[24] Belleza v. Huntington,[25] and Froilan v. Pan Oriental Shipping Co.,[26] all of
which were decided more than five decades ago. Notably though, none of the complaints in these four cases were
dismissed either due to the fault of the plaintiff or upon the instance of the defendant.[27]

The distinction is relevant, for under the previous and current incarnations of the Rules of Civil Procedure, it is Section 3,
Rule 17 that governs the dismissals due to the failure of the plaintiff to prosecute the complaint, as had happened in the
case at bar. Otherwise, it is Section 2, Rule 17, which then, and still is now, covered dismissals ordered by the trial court
upon the instance of the plaintiff.[28] Yet, as will be seen in the foregoing discussion, a discussion of Section 2 cannot be
avoided as the postulate behind that provision was eventually extended as well in cases that should have properly been
governed by Section 3.

Even though the cases cited by respondents involved different factual antecedents, there exists more appropriate
precedents which they could have cited in support of their claim that the counterclaim should have been dismissed even
if the dismissal of the complaint was upon the defendants motion and was predicated on the plaintiffs fault. BA Finance
Corp. v. Co[29] particularly stands out in that regard, although that ruling is itself grounded on other precedents as well.
Elucidation of these cases is in order.
On the general effect of the dismissal of a complaint, regardless of cause, on the pending counterclaims, previous
jurisprudence laid emphasis on whether the counterclaim was compulsory or permissive in character. The necessity of
such distinction was provided in the 1964 Rules itself, particularly Section 2, Rule 17, which stated that in instances
wherein the plaintiff seeks the dismissal of the complaint, if a counterclaim has been pleaded by a defendant prior to
the service upon him of the plaintiffs motion to dismiss, the action shall not be dismissed against the defendants
objection unless the counterclaim can remain pending for independent adjudication by the court.[30] The

vaunted commentaries of Chief Justice Moran, remarking on Section 2, Rule 17, noted that [t]here are instances in
which a counterclaim cannot remain pending for independent adjudication, as, where it arises out of, or is necessarily
connected with, the transaction or occurrence which is the subject matter of the opposing partys claim.[31]

This view expressed in Morans Commentaries was adopted by the Court in cases where the application of Section 2,
Rule 17 of the 1964 Rules of Court was called for, such as in Lim Tanhu v. Ramolete,[32] and Dalman v. City Court of
Dipolog City.[33] The latter case warrants brief elaboration. Therein, the plaintiff in a civil case for damages moved for
the withdrawal of her own case on the ground that the dispute had not been referred to the barangay council as
required by law. Over the objection of the defendant, who feared that her own counterclaim would be prejudiced by the
dismissal, plaintiffs motion was granted, the complaint and the counterclaim accordingly dismissed by the trial court.
The Court refused to reinstate the counterclaim, opining without elaboration, [i]f the civil case is dismissed, so also is the
counterclaim filed therein.[34] The broad nature of that statement gave rise to the notion that the mandatory

dismissal of the counterclaim upon dismissal of the complaint applied regardless of the cause of the complaints
dismissal.[35]

Notably, the qualification concerning compulsory counterclaims was provided in Section 2, Rule 17 of the 1964 Rules,
the provision governing dismissals by order of the court, and not Section 3, Rule 17. As stated earlier, Section 3, which
covered dismissals for failure to prosecute upon motion of the defendant or upon motu proprio action of the trial court,
was silent on the effect on the counterclaim of dismissals of such nature.

Spouses Sta. Maria, Jr. v. Court of Appeals,[36] decided in 1972, ostensibly supplied the gap on the effect on the
counterclaim of complaints dismissed under Section 3. The defendants therein successfully moved before the trial court
for the dismissal of the complaint without prejudice and their declaration in default on the counterclaim after plaintiffs
therein failed to attend the pre-trial. After favorable judgment was rendered on the counterclaim, plaintiffs interposed
an appeal, citing among other grounds, that the counterclaim could no longer have been heard after the dismissal of the
complaint. While the Court noted that the adjudication of the counterclaim in question does not depend upon the
adjudication of the claims made in the complaint since they were virtually abandoned by the non-appearance of the
plaintiffs themselves, it was also added that [t]he doctrine invoked is not available to plaintiffs like the petitioners, who
prevent or delay the hearing of their own claims and allegations.[37] The Court, through Justice JBL Reyes, noted:

The doctrine that the complaint may not be dismissed if the counterclaim cannot be independently adjudicated is not
available to, and was not intended for the benefit of, a plaintiff who prevents or delays the prosecution of his own
complaint. Otherwise, the trial of counterclaims would be made to depend upon the maneuvers of the plaintiff, and the
rule would offer a premium to vexing or delaying tactics to the prejudice of the counterclaimants. It is in the same spirit
that we have ruled that a complaint may not be withdrawn over the opposition of the defendant where the
counterclaim is one that arises from, or is necessarily connected with, the plaintiffs action and cannot remain pending
for independent adjudication.[38]

There is no doubt that under the 1964 Rules, the dismissal of a complaint due to the failure of the plaintiff to appear
during pre-trial, as what had happened in Sta. Maria, fell within the coverage of Section 3, Rule 17. On the other hand,
Section 2 was clearly limited in scope to those dismissals sustained at the instance of the plaintiff.[39] Nonetheless, by
the early 1990s, jurisprudence was settling on a rule that compulsory counterclaims were necessarily terminated upon
the dismissal of the complaint not only if such dismissal was upon motion of the plaintiff, but at the instance of the
defendant as well. Two decisions from that period stand out in this regard, Metals Engineering Resources Corp. v. Court
of Appeals[40] and International Container Terminal Services v. Court of Appeals.[41]

In Metals, the complaint was expunged from the record after the defendant had filed a motion for reconsideration of a
trial court order allowing the filing of an amended complaint that corrected a jurisdictional error in the original
complaint pertaining to the specification of the amount of damages sought. When the defendant was nonetheless
allowed to present evidence on the counterclaim, the plaintiff assailed such allowance on the ground that the
counterclaim was compulsory and could no longer remain pending for independent adjudication. The Court, in finding
for the plaintiff, noted that the counterclaim was indeed compulsory in nature, and as such, was auxiliary to the
proceeding in the original suit and derived its jurisdictional support therefrom.[42] It was further explained that the
doctrine was in consonance with the primary objective of a counterclaim, which was to avoid and prevent circuitry of
action by allowing the entire controversy between the parties to be litigated and finally determined in one action, and to
discourage multiplicity of suits.[43] Also, the Court noted that since the complaint was dismissed for lack of jurisdiction,
it was as if no claim was filed against the defendant, and there was thus no more leg for the complaint to stand on.[44]

In International Container, the defendant filed a motion to dismiss which was granted by the trial court. The defendants
counterclaim was dismissed as well. The Court summarized the key question as what is the effect of the dismissal of a
complaint ordered at the instance of the defendant upon a compulsory counterclaim duly raised in its answer.[45] Then
it ruled that the counterclaim did not survive such dismissal. After classifying the counterclaim therein as compulsory,
the Court noted that [i]t is obvious from the very nature of the counterclaim that it could not remain pending for
independent adjudication, that is, without adjudication by the court of the complaint itself on which the counterclaim
was based.[46]

Then in 1993, a divided Court ruled in BA Finance that the dismissal of the complaint for nonappearance of plaintiff at
the pre-trial, upon motion of the defendants, carried with it the dismissal of their compulsory counterclaim.[47] The
Court reiterated the rule that a compulsory counterclaim cannot remain pending for independent adjudication by the
court as it is auxiliary to the proceeding in the original suit and merely derives its jurisdictional support therefrom.[48]
Express reliance was made on Metals, International Container, and even Dalman in support of the majoritys thesis. BA
Finance likewise advised that the proper remedy for defendants desirous that their counterclaims not be dismissed
along with the main complaint was for them to move to declare the plaintiffs to be non-suited on their complaint and as
in default on their compulsory counterclaim, instead of moving for the dismissal of the complaint.[49]
Justice Regalado, joined by Chief Justice Narvasa, registered a strong objection to the theory of the majority. They
agreed that the trial court could no longer hear the counterclaim, but only on the ground that defendants motion to be
allowed to present evidence on the counterclaim was filed after the order dismissing the complaint had already become
final. They disagreed however that the compulsory counterclaim was necessarily dismissed along with the main
complaint, pointing out that a situation wherein the dismissal of the complaint was occasioned by plaintiffs failure to
appear during pre-trial was governed under Section 3, Rule 17, and not Section 2 of the same rule. Justice Regalado, who
ironically penned the decision in Metals cited by the majority, explained:

Turning back to Rule 17, it is readily apparent that Sections 2 and 3 thereof envisage different factual and adjective
situations. The dismissal of the complaint under Section 2 is at the instance of plaintiff, for whatever reason he is
minded to move for such dismissal, and, as a matter of procedure, is without prejudice unless otherwise stated in the
order of the court or, for that matter, in plaintiff's motion to dismiss his own complaint. By reason thereof, to curb any
dubious or frivolous strategy of plaintiff for his benefit or to obviate possible prejudice to defendant, the former may not
dismiss his complaint over the defendant's objection if the latter has a compulsory counterclaim since said counterclaim
would necessarily be divested of juridical basis and defendant would be deprived of possible recovery thereon in that
same judicial proceeding.

Section 3, on the other hand, contemplates a dismissal not procured by plaintiff, albeit justified by causes imputable to
him and which, in the present case, was petitioner's failure to appear at the pre-trial. This situation is also covered by
Section 3, as extended by judicial interpretation, and is ordered upon motion of defendant or motu proprio by the court.
Here, the issue of whether defendant has a pending counterclaim, permissive or compulsory, is not of determinative
significance. The dismissal of plaintiff's complaint is evidently a confirmation of the failure of evidence to prove his cause
of action outlined therein, hence the dismissal is considered, as a matter of evidence, an adjudication on the merits. This
does not, however, mean that there is likewise such absence of evidence to prove defendant's counterclaim although
the same arises out of the subject matter of the complaint which was merely terminated for lack of proof. To hold
otherwise would not only work injustice to defendant but would be reading a further provision into Section 3 and
wresting a meaning therefrom although neither exists even by mere implication. Thus understood, the complaint can
accordingly be dismissed, but relief can nevertheless be granted as a matter of course to defendant on his counterclaim
as alleged and proved, with or without any reservation therefor on his part, unless from his conduct, express or implied,
he has virtually consented to the concomitant dismissal of his counterclaim.[50]

Justice Regalado also adverted to Sta. Maria and noted that the objections raised and rejected by the Court therein were
the same as those now relied upon by the plaintiff. He pointed out that Dalman and International Container, both relied
upon by the majority, involved the application of Section 2, Rule 17 and not Section 3, which he insisted as the
applicable provision in the case at bar.[51]

The partial dissent of Justice Regalado in BA Finance proved opportune, as he happened then to be a member of the
Rules of Court Revision Committee tasked with the revision of the 1964 Rules of Court. Just a few months after BA
Finance was decided, Justice Regalado proposed before the Committee an amendment to Section 3, Rule 17 that would
explicitly provide that the dismissal of the complaint due to the fault of the plaintiff shall be without prejudice to the
right of the defendant to prosecute his counterclaim in the same or in a separate action. The amendment, which was
approved by the Committee, is reflected in the minutes of the meeting of the Committee held on 12 October 1993:
[Justice Regalado] then proposed that after the words upon the courts own motion in the 6th line of the draft in Sec. 3
of Rule 17, the following provision be inserted: without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. The Committee agreed with the proposed amendment of Justice
Regalado.

Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the action that is dismissed but the complaint. He
asked whether there is any distinction between complaint and action. Justice Regalado opined that the action of the
plaintiff is initiated by his complaint.

Justice Feria then suggested that the dismissal be limited to the complaint[.] Thus, in the 1st line of Sec. 1, the words An
action will be changed to a complaint; in the 2nd line of Sec. 2, the words an action will be changed to a complaint and in
Sec. 3, the word action on the 5th line of the draft will be changed to complaint. The Committee agreed with Justice
Ferias suggested amendments.

CA Pao believed that there is a need to clarify the counterclaim that the defendant will prosecute, whether it is
permissive or compulsory or all kinds of counterclaims.

Justice Regalado opined that there is no need of making a clarification because it is already understood that it covers
both counterclaims.[52]

It is apparent from these minutes that the survival of the counterclaim despite the dismissal of the complaint under
Section 3 stood irrespective of whether the counterclaim was permissive or compulsory. Moreover, when the Court
itself approved the revisions now contained in the 1997 Rules of Civil Procedure, not only did Justice Regalados
amendment to Section 3, Rule 17 remain intact, but the final version likewise eliminated the qualification formerly
offered under Section 2 on counterclaims that can remain pending for independent adjudication by the court.[53] At
present, even Section 2, concerning dismissals on motion of the plaintiff, now recognizes the right of the defendant to
prosecute the counterclaim either in the same or separate action notwithstanding the dismissal of the complaint, and
without regard as to the permissive or compulsory nature of the counterclaim.

In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado expounds on the effects of the amendments
to Section 2 and 3 of Rule 17:

2. Under this revised section [2], where the plaintiff moves for the dismissal of his complaint to which a counterclaim has
been interposed, the dismissal shall be limited to the complaint. Such dismissal shall be without prejudice to the right of
the defendant to either prosecute his counterclaim in a separate action or to have the same resolved in the same action.
Should he opt for the first alternative, the court should render the corresponding order granting and reserving his right
to prosecute his claim in a separate complaint. Should he choose to have his counterclaim disposed of in the same
action wherein the complaint had been dismissed, he must manifest such preference to the trial court within 15 days
from notice to him of plaintiffs motion to dismiss. These alternative remedies of the defendant are available to him
regardless of whether his counterclaim is compulsory or permissive. A similar alternative procedure, with the same
underlying reason therefor, is adopted in Sec. 6, Rule 16 and Sec. 3 of this Rule, wherein the complaint is dismissed on
the motion of the defendant or, in the latter instance, also by the court motu proprio.

xxxx

2. The second substantial amendment to [Section 3] is with respect to the disposition of the defendants counterclaim in
the event the plaintiffs complaint is dismissed. As already observed, he is here granted the choice to prosecute that
counterclaim in either the same or a separate action. x x x x

3. With the aforestated amendments in Secs. 2 and 3 laying down specific rules on the disposition of counterclaims
involved in the dismissal actions, the controversial doctrine in BA Finance Corporation vs. Co, et al., (G.R. No. 105751,
June 30, 1993) has been abandoned, together with the apparent confusion on the proper application of said Secs. 2 and
3. Said sections were distinguished and discussed in the authors separate opinion in that case, even before they were
clarified by the present amendments x x x.[54]

Similarly, Justice Feria notes that the present rule reaffirms the right of the defendant to move for the dismissal of the
complaint and to prosecute his counterclaim, as stated in the separate opinion [of Justice Regalado in BA Finance.][55]
Retired Court of Appeals Justice Herrera pronounces that the amendment to Section 3, Rule 17 settles that nagging
question whether the dismissal of the complaint carries with it the dismissal of the counterclaim, and opines that by
reason of the amendments, the rulings in Metals Engineering, International Container, and BA Finance may be deemed
abandoned.[56] On the effect of amendment to Section 3, Rule 17, the commentators are in general agreement,[57]
although there is less unanimity of views insofar as Section 2, Rule 17 is concerned.[58]

To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended Rule 17, those
previous jural doctrines that were inconsistent with the new rules incorporated in the 1997 Rules of Civil Procedure
were implicitly abandoned insofar as incidents arising after the effectivity of the new procedural rules on 1 July 1997. BA
Finance, or even the doctrine that a counterclaim may be necessarily dismissed along with the complaint, clearly
conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA Finance as doctrine extends as far back as
1997, when the Court adopted the new Rules of Civil Procedure. If, since then, such abandonment has not been affirmed
in jurisprudence, it is only because no proper case has arisen that would warrant express confirmation of the new rule.
That opportunity is here and now, and we thus rule that the dismissal of a complaint due to fault of the plaintiff is
without prejudice to the right of the defendant to prosecute any pending counterclaims of whatever nature in the same
or separate action. We confirm that BA Finance and all previous rulings of the Court that are inconsistent with this
present holding are now abandoned.

Accordingly, the RTC clearly erred when it ordered the dismissal of the counterclaim, since Section 3, Rule 17 mandates
that the dismissal of the complaint is without prejudice to the right of the defendant to prosecute the counterclaim in
the same or separate action. If the RTC were to dismiss the counterclaim, it should be on the merits of such
counterclaim. Reversal of the RTC is in order, and a remand is necessary for trial on the merits of the counterclaim.

It would be perfectly satisfactory for the Court to leave this matter at that. Still, an explanation of the reason behind the
new rule is called for, considering that the rationale behind the previous rule was frequently elaborated upon.
Under Act No. 190, or the Code of Procedure in Civil Actions promulgated in 1901, it was recognized in Section 127(1)
that the plaintiff had the right to seek the dismissal of the complaint at any time before trial, provided a counterclaim
has not been made, or affirmative relief sought by the cross-complaint or answer of the defendant.[59] Note that no
qualification was made then as to the nature of the counterclaim, whether it be compulsory or permissive. The
protection of the defendants right to prosecute the counterclaim was indeed unqualified. In City of Manila, decided in
1918, the Court explained:

By paragraph 1 [of Section 127], it will be seen that, where the defendant has interposed a counterclaim, or is seeking
affirmative relief by a cross-complaint, that then, and in that case, the plaintiff cannot dismiss the action so as to affect
the right of the defendant in his counterclaim or prayer for affirmative relief. The reason for that exception is clear.
When the answer sets up an independent action against the plaintiff, it then becomes an action by the defendant
against the plaintiff, and, of course, the plaintiff has no right to ask for a dismissal of the defendants action.[60]

Nonetheless, a new rule was introduced when Act No. 190 was replaced by the 1940 Rules of Court. Section 2, Rule 30
of the 1940 Rules specified that if a counterclaim is pleaded by a defendant prior to the service of the plaintiffs motion
to dismiss, the action shall not be dismissed against the defendants objection unless the counterclaim can remain
pending for independent adjudication by the court. This qualification remained intact when the 1964 Rules of Court was
introduced.[61] The rule referred only to compulsory counterclaims, or counterclaims which arise out of or are
necessarily connected with the transaction or occurrence that is the subject matter of the plaintiffs claim, since the
rights of the parties arising out of the same transaction should be settled at the same time.[62] As was evident in
Metals, International Container and BA Finance, the rule was eventually extended to instances wherein it was the
defendant with the pending counterclaim, and not the plaintiff, that moved for the dismissal of the complaint.

We should not ignore the theoretical bases of the rule distinguishing compulsory counterclaims from permissive
counterclaims insofar as the dismissal of the action is concerned. There is a particular school of thought that informs the
broad proposition in Dalman that if the civil case is dismissed, so also is the counterclaim filed therein,[63] or the more
nuanced discussions offered in Metals, International Container, and BA Finance. The most potent statement of the
theory may be found in Metals,[64] which proceeds from the following fundamental premisesa compulsory
counterclaim must be set up in the same proceeding or would otherwise be abated or barred in a separate or
subsequent litigation on the ground of auter action pendant, litis pendentia or res judicata; a compulsory counterclaim is
auxiliary to the main suit and derives its jurisdictional support therefrom as it arises out of or is necessarily connected
with the transaction or occurrence that is the subject matter of the complaint;[65] and that if the court dismisses the
complaint on the ground of lack of jurisdiction, the compulsory counterclaim must also be dismissed as it is merely
ancilliary to the main action and no jurisdiction remained for any grant of relief under the counterclaim.

The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court, while the two latter points are sourced from
American jurisprudence. There is no disputing the theoretical viability of these three points. In fact, the requirement
that the compulsory counterclaim must be set up in the same proceeding remains extant under the 1997 Rules of Civil
Procedure.[66] At the same time, other considerations rooted in actual practice provide a counterbalance to the above-
cited rationales.

Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint; namely a cause (or
causes) of action constituting an act or omission by which a party violates the right of another. The main difference lies
in that the cause of action in the counterclaim is maintained by the defendant against the plaintiff, while the converse
holds true with the complaint. Yet, as with a complaint, a counterclaim without a cause of action cannot survive.

It would then seemingly follow that if the dismissal of the complaint somehow eliminates the cause(s) of the
counterclaim, then the counterclaim cannot survive. Yet that hardly is the case, especially as a general rule. More often
than not, the allegations that form the counterclaim are rooted in an act or omission of the plaintiff other than the
plaintiffs very act of filing the complaint. Moreover, such acts or omissions imputed to the plaintiff are often claimed to
have occurred prior to the filing of the complaint itself. The only apparent exception to this circumstance is if it is alleged
in the counterclaim that the very act of the plaintiff in filing the complaint precisely causes the violation of the
defendants rights. Yet even in such an instance, it remains debatable whether the dismissal or withdrawal of the
complaint is sufficient to obviate the pending cause of action maintained by the defendant against the plaintiff.[67]

These considerations persist whether the counterclaim in question is permissive or compulsory. A compulsory
counterclaim arises out of or is connected with the transaction or occurrence constituting the subject matter of the
opposing partys claim, does not require for its adjudication the presence of third parties, and stands within the
jurisdiction of the court both as to the amount involved and the nature of the claim.[68] The fact that the culpable acts
on which the counterclaim is based are founded within the same transaction or occurrence as the complaint, is
insufficient causation to negate the counterclaim together with the complaint. The dismissal or withdrawal of the
complaint does not traverse the boundaries of time to undo the act or omission of the plaintiff against the defendant, or
vice versa. While such dismissal or withdrawal precludes the pursuit of litigation

by the plaintiff, either through his/her own initiative or fault, it would be iniquitous to similarly encumber the defendant
who maintained no such initiative or fault. If the defendant similarly moves for the dismissal of the counterclaim or
neglects to timely pursue such action, let the dismissal of the counterclaim be premised on those grounds imputable to
the defendant, and not on the actuations of the plaintiff.

The other considerations supplied in Metals are anchored on the premise that the jurisdictional foundation of the
counterclaim is the complaint itself. The theory is correct, but there are other facets to this subject that should be taken
into account as well. On the established premise that a counterclaim involves separate causes of action than the
complaint even if derived from the same transaction or series of transactions, the counterclaim could have very well
been lodged as a complaint had the defendant filed the action ahead of the complainant.[69] The terms ancillary or
auxiliary may mislead in signifying that a complaint innately possesses more credence than a counterclaim, yet there are
many instances wherein the complaint is trivial but the counterclaim is meritorious. In truth, the notion that a
counterclaim is, or better still, appears to be merely ancillary or auxiliary is chiefly the offshoot of an accident of
chronology, more than anything else.

The formalistic distinction between a complaint and a counterclaim does not detract from the fact that both of them
embody causes of action that have in their end the vindication of rights. While the distinction is necessary as a means to
facilitate order and clarity in the rules of procedure, it should be remembered that the primordial purpose of procedural
rules is to provide the means for the vindication of rights. A party with a valid cause of action against another party
cannot be denied the right to relief simply because the opposing side had the good fortune of filing the case first. Yet
this in effect was what had happened under the previous procedural rule and correspondent doctrine, which under their
final permutation, prescribed the automatic dismissal of the compulsory counterclaim upon the dismissal of the
complaint, whether upon the initiative of the plaintiff or of the defendant.
Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable disposition of the
counterclaims by ensuring that any judgment thereon is based on the merit of the counterclaim itself and not on the
survival of the main complaint. Certainly, if the counterclaim is palpably without merit or suffers jurisdictional flaws
which stand independent of the complaint, the trial court is not precluded from dismissing it under the amended rules,
provided that the judgment or order dismissing the counterclaim is premised on those defects. At the same time, if the
counterclaim is justified, the amended rules now unequivocally protect such counterclaim from peremptory dismissal by
reason of the dismissal of the complaint.

WHEREFORE, the petition is GRANTED. The Orders dated 9 August 2005 and 10 October 2005 of Branch 29, Regional
Trial Court of San Miguel, Zamboanga del Sur in Civil Case No. 98-012 are SET ASIDE. Petitioners counterclaim as
defendant in Civil Case. No. 98-012 is REINSTATED. The Regional Trial Court is ORDERED to hear and decide the
counterclaim with deliberate dispatch.

SO ORDERED.

DANTE O. TINGA

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING

Associate Justice

Chairperson
ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING

Associate Justice

Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified
that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.
REYNATO S. PUNO

Acting Chief Justice

[1]See CONSTITUTION, Art. VIII, Sec. 5(5).

[2]See 1997 RULES OF CIVIL PROCEDURE, Rule 17, Sec. 3.

[3]See e.g., BA Finance v. Co, infra.

[4]Docketed as Civil Case. No. 98-012.

[5]Presided by Judge Edilberto Absin, who promulgated all the rulings in this case, including those now assailed in the
present Petition.

[6]Rollo, pp. 34-36.

[7]Id. at 39-48.

[8]It was also alleged that Saavedra was not an heir of Edmundo Pinga but was in fact the caretaker of the properties. Id.
at 41.

[9]Id. at 48.

[10]Id. at 60.

[11]Id. at 63.

[12]Id. at 21.

[13]Id. at 23-24.
[14]37 Phil. 421 (1918).

[15]55 Phil. 361 (1930).

[16]Rollo, p. 25.

[17]Id. at 33.

[18]Citing in particular Belleza v. Huntington, 89 Phil. 689 (1951), and Froilan v. Pan Oriental Shipping Co., 95 Phil. 905
(1954).

[19]Rollo, p. 31.

[20]Id. at 25.

[21]Rollo, p. 27.

[22]O. HERRERA, I REMEDIAL LAW (2000 ed.), at 789.

[23]Supra note 14.

[24]Supra note 15.

[25]Supra note 18.

[26]Id.

[27]City of Manila and Belleza both involved a complaint dismissed upon the initiative of the plaintiffs. Domingo
concerned a complaint which was dismissed after a trial on the merits wherein the plaintiff failed to introduce any
evidence in his behalf. In Froilan, a complaint-in-intervention was dismissed motu proprio by the trial court after the
court was notified of a supervening event that satisfied the obligations of the defendant to the plaintiff-in-intervention.
[28]Unless the plaintiff initiates the dismissal of the complaint by way of notice at any time before service of the answer
or of a motion for summary judgment, in which case it is Section 1, Rule 17 that governs, whether under the 1964 or
1997 Rules.

[29]G.R. No. 105751, 30 June 1993, 224 SCRA 163.

[30]See RULES OF COURT, Rule 17, Sec. 2, which states in full:

Dismissal by order of the court. Except as provided in the preceding section, an action shall not be dismissed at the
plaintiffs instance save upon order of the court and upon such terms and conditions as the court deems proper. If a
counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiffs motion to dismiss, the
action shall not be dismissed against the defendants objection unless the counterclaim can remain pending for
independent adjudication by the court. Unless otherwise specified in the order, a dismissal under this paragraph shall be
without prejudice.

[31]M. MORAN, I COMMENTS ON THE RULES OF COURT WITH INTERIM RULES AND GUIDELINES AND RULE ON
SUMMARY PROCEDURE (1979 ed.), at 515.

[32]G.R. No. L-40098, 29 August 1975, 66 SCRA 425, 447.

[33]219 Phil. 214, 215-216 (1985).

[34]Id. at 216.

[35]Retired Court of Appeals Justice Oscar Herrera, for one, opines that the dispute as to whether the dismissal of the
complaint carries with it the dismissal of the counterclaim was brought about by the quoted pronouncement in Dalman.
See HERRERA, supra note 22 at 789.

[36]150-A Phil. 988 (1972).

[37]Id. at 994 -995.

[38]Id.

[39]See note 3.
[40]G.R. No. 95631, 28 October 1991, 203 SCRA 273.

[41]G.R. No. 90530, 7 October 1992, 214 SCRA 456.

[42]Metals Engineering Resources Corp. v. Court of Appeals, supra note 40 at 282.

[43]Id. at 282-283.

[44]Id. at 283.

[45]International Container Terminal Services v. Court of Appeals, supra note 41 at 458.

[46]Id. at 461.

[47]BA Finance Corporation v. Co, supra note 29. The decision was penned by Associate Justice Josue N. Bellosillo, and
concurred in by Associate Justices Isagani Cruz, Abdulwahid Bidin, Carolina Grio-Aquino, Flerida Ruth Romero, Rodolfo
Nocon and Jose Melo. Associate Justices Florentino Feliciano and Hilario G. Davide, Jr. joined in the result. Justice
Florenz Regalado wrote a Separate Opinion concurring in the result, infra, in which he was joined by Chief Justice Andres
Narvasa.

[48]BA Finance Corporation v. Co, supra note 29 at 167.

[49]Id. at 168.

[50]Id. at 171-172, J. Regalado, Separate Opinion. Emphasis supplied.

[51]Id. at 172-174.

[52]Minutes of the Meeting of the Rules of Court Revision Committee dated 12 October 1993, p. 7. Emphasis supplied.

[53]Section 2, Rule 17 of the 1997 Rules of Civil Procedure now reads: Dismissal upon motion of plaintiff. Except as
provided in the preceding section, a complaint shall not be dismissed at the plaintiffs instance save upon the approval of
the court and upon such terms and conditions as the court deems proper. If a counterclaim has been pleaded by a
defendant prior to the service upon him of the plaintiffs motion for dismissal, the dismissal shall be limited to the
complaint. The dismissal shall be without prejudice to the right of the defendant to prosecute his counterclaim in a
separate action unless within fifteen (15) days from notice of the motion he manifests his preference to have his
counterclaim resolved in the same action. Unless otherwise specified in the order, a dismissal under this paragraph shall
be without prejudice. A class suit shall not be dismissed or compromised without the approval of the court.

[54]F. REGALADO, I REMEDIAL LAW COMPENDIUM (7th ed., 1999), 270-272. Emphasis supplied.

[55]J. FERIA & M. C. NOCHE, I CIVIL PROCEDURE ANNOTATED (2001 ed.), at 465. Justice Feria also notes that under the
present Section 2, Rule 17, the dismissal is limited to the complaint and is without prejudice to the prosecution by the
defendant of the counterclaim in a separate action unless he manifests his preference to prosecute it in a separate
action.

[56]O. HERRERA, supra note 22 at 789.

[57]See also A. BAUTISTA, BASIC CIVIL PROCEDURE (2003 ed.), at 78; R. FRANCISCO, I CIVIL PROCEDURE: RULES OF
COURT IN THE PHILIPPINES (1st ed., 2001), at 584.

[58]Justice Francisco and Agpalo both opine that insofar as Section 2, Rule 17 is concerned, the distinction between
permissive and compulsory counterclaims should still be maintained, insofar as it relates to the option of the defendant
to pursue the counterclaim in either a separate or the same proceeding. Justice Francisco, citing pre-1997 jurisprudence,
submits that Section 2, Rule 17 refers only to compulsory counterclaims. See FRANCISCO, id. at 580. Agpalo , on the
other hand, suggests that what may be prosecuted in a separate action refers only to permissive counterclaim and not
compulsory counterclaim, which must be prosecuted in the same action and proved before the order dismissing the
action is issued. See R. AGPALO, HANDBOOK OF CIVIL PROCEDURE (2001 ed.), at 234. It should be noted though that
neither view on the 1997 amendments, which run contrary to Justice Regalados own views, supra note 54, have not
been adopted by the Court.

[59]See Act No. 190 (1901), Section 127(1) at 1 PUBLIC LAWS 308. See also City of Manila v. Ruymann, supra note 54 at
425.

[60]City of Manila v. Ruymann, supra note 14 at 426. Emphasis supplied, italics not ours.

[61]Supra note 30.

[62]V. FRANCISCO, I THE REVISED RULES OF COURT IN THE PHILIPPINES (2nd ed., 1973), p. 987.
[63]Supra note 34.

[64]Supra note 40 at 281-283.

[65]Hence giving rise to the rule, pronounced in Meliton v. Court of Appeals, G.R. No. 101883, 11 December 1992, 216
SCRA 485, that the jurisdictional requirement of the payment of filing fees by the defendant on the counterclaim is
required only if the counterclaim is permissive, since jurisdiction over the compulsory counterclaim is anchored on the
main complaint. Id. at 498.

[66]See 1997 RULES OF CIVIL PROCEDURE, Section 2, Rule 9 in relation to Section 7, Rule 6.

[67]For example, if the very filing of the complaint was sufficient to have caused injury to the defendant (as in the case
wherein the filing of the complaint is enough to hamper a business transaction, consequently affecting the value of
property or the profit derived therefrom), it then could be argued that the defendant had already sustained damage
even if the complaint was subsequently withdrawn or dismissed. Of course, such damage or injury is not present in all
counterclaims which pivot their respective causes of action on the act of the filing of the complaint. Therein precisely
lies the difficulty in prescribing the mandatory dismissal of counterclaims upon the dismissal/withdrawal of the
complaint, as such a step might negate the right of the defendant to vindicate the damage or injury sustained by reason
of the filing of the complaint itself.

[68]See 1997 RULES OF CIVIL PROCEDURE, Rule 6, Section 7, which further qualifies that in an original action before the
Regional Trial Court, the counterclaim may be considered compulsory regardless of the amount.

[69]Except perhaps in the circumstance discussed in note 67.

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Republic of the Philippines

SUPREME COURT

Manila
SECOND DIVISION

G.R. No. L-30683 May 31, 1977

CELESTINA GUMABAY, assisted by her husband, DIOSDADO MABBORANG, plaintiff-appellee,

vs.

JULIANA BARALIN, SANTIAGO BUNAGAN, LORETO BUNAGAN, BASILIO MAMBA, BALBINO CATABAY, ARCADIO MAGGAY,
LUPO GUIYAB and FRANCISCO CALIMARAN, defendants-appellants.

Ventura V. Perez & Pablo B. Bulan for appellants.

Teodoro B. Mallonga for appellee.

AQUINO, J.:

This is a litigation over a parcel of cornland with an area of seventeen thousand square meters located at Barrio Tanuru,
Enrile, Cagayan assessed in the name of Celestina Gumabay in the sum of three hundred pesos according to Tax
Declaration No. 17548-a dated August 24, 1956 (Exh. A). She paid the realty taxes on the said lot for the years 1948 to
1956 (Exh. B and B-1).

On March 3, 1960 Celestina Gumabay sued Juliana Baralin, Santiago Bunagan, Loreto Bunagan, Basilio Mamba, Balbino
Catabay, Arcadio Maggay, Lupo Guiyab and Francisco Calimaran in the Court of First Instance of Cagayan to recover
possession of the said land.

She alleged that the defendants forcibly entered the land on August 5, 1959. She asked that, being poor and without
means to pay the docket fee, she be allowed to sue as a pauper litigant. The lower court allowed her to sue in forma
pauperis (11 Record on Appeal).

The defendants moved to dismiss the complaint on the ground that, inasmuch as it alleged a cause of action for forcible
entry, which occurred within one year before the complaint was filed, the Court of First Instance had no jurisdiction over
the case. it should be filed the proper inferior court (See. 1, Rule 72, 1940 Rules of Court, now sec. 1, Rule 70; secs. 44
and 88, Judiciary Law; Art. 1147 [1], Civil Code).
Without awaiting the resolution of that motion, Celestina Gumabay filed an amended complaint wherein she alleged
that the defendants claimed to be the owners of the land. She transformed her forcible entry action into an action to
quiet title. A copy of that amended complaint was personally serve on defendants' counsel on March 23,1960 (28
Record on Appeal).

The lower court in its order of March 26, 1960 admitted the amended complaint, ordered the defendants to answer it,
and denied the motion to dismiss. However, a copy of that order was sent to the defendants' counsel on March 31, 1960
only by ordinary, mail.

Celestina in her motion of May 26, 1960 asked that the defendants be declared in default for not having answered her
amended complaint.

The defendants opposed the motion. They denied having received a copy of the court's order denying their motion to
dismiss. They prayed that the plaintiff be ordered to served upon them the amended complaint or that a period be fixed
within which they should answer it.

The lower court in its order of June 4, 1960 denied plaintiff's motion and directed the defendants to answer the
amended complaint. A copy of that order was served on defendants' counsel by registered mail on June 17, 1960 (32
Record on Appeal).

The defendants did not answer the amended complaint. At plaintiff's instance, the lower court in its order of August 6,
1960 declared them in default and commissioned the clerk of court to receive Celestina Gumabay's evidence.

At the ex parte hearing, Celestina testified that the land in question was donated to her by her father at the time of her
marriage; that her father had possessed that land since she was a child (she was forty-eight years old in 1960 when she
testified); that the land was cultivated by his tenants, Mateo Luyun and the latter's two sons; that the land was planted
to corn and tobacco; that on August 5, 1959 the defendants entered the land and harvested the corn crop over the
opposition of her tenants; that the defendants harvested five carts of corn and took four rolls of barbed wire, and that
the defendants persisted in working on the land.

The lower court in its decision declared Celestina Gumabay the owner of the land and ordered the defendants to vacate
it, restore its possession to her, and to pay her damages in the sum of P620 plus P250 as attorney's fees.

A copy of that decision was received by defendants' counsel on September 6, 1960. On October 5, 1960 defendants'
counsel filed a petition for relief praying that the order of default and judgment by default be set aside and that their
answer be admitted. They explained that their failure to answer the amended complaint was due to the mistake and
neglect of their two lawyers.
They attached to their motion a copy of Tax Declaration No. 18252- a in the name of Lucio Barlin (not a defendant
herein) dated September 30, 1957 which refers to a parcel of land with an area of twelve hectares located at Barrio
Maddarulug, Enrile (the disputed land is located at Barrio Tanuru and its area is only 1.76 hectares).

The lower court denied the petition for relief. The defendants appealed to the Court of Appeals. That Court in its
resolution of June 10, 1969 elevated the case to this Court because the appeal involves only legal issues (CA-G. R. No.
29202-R).

The defendants contend that the lower court erred in not dismissing the original complaint, in admitting the amended
complaint, in assuming that it acquired jurisdiction over their persons on the basis of the amended complaint even
without service of new summons, in declaring them in default, and in not granting them relief from the judgment by
default.

Those contentions cannot sustained. The original complaint for forcible entry contained the basic prayer "that the
plaintiff be declared the absolute owner of the land in question". That relief was retained in the amended complaint.
The only difference between the original and amended complaints is that the latter contained the additional allegation
that the "defendants are now asserting and claiming title and absolute ownership over the land in question which is
adverse and against the interest of the plaintiff".

The plaintiff explained that she had to amend her complaint in order that the "real matter in dispute", which is "the
question of ownership", may be "determined in a single proceeding, thereby avoiding multiplicity of suits" (16 Record on
Appeal).

We hold that the trial court's order admitting the amended complaints is in consonance with e object of the Rules of
Court to assist the parties in obtaining just, speedy and inexpensive determination of every action and proceeding (Sec.
2, Rule 1).

To dismiss the original complaint and to require the plaintiff to file another action to quiet title would have resulted in
circuitour, dilatory and expensive proceeding which, in the case of pauper litigant like Celestina Gumabay, should have
been avoided, as it was a prudently avoided by the trial court.

For the same reasons, defendants' theory that new summons shoud have been issued for the amended complaint is
untenable. The trial court ahd already acquired jurisdiction over the person of the defendants when they were served
with summons on the basis of the original complaint and when they appeared and filed a motion to dismiss.

They were personally served with a copy of the amended complaint. The trial court ordered them two times to answer
that complaint. Under those circumtances, there is no basis for defendants' contention that the trial court should have
oredered orf making of fetish of a technically. (See Ong Peng vs. Custodio, 111 Phil. 382, 385; Republic vs. Ker & Co.,
Ltd., 64 O.G. 3761, 18 SCRA 207).
Defendants' two lawyers were given plenty to time to answer the amended complaint. Their failure to answer was
inexcusable. The answer attached to their petition for relief form judgment does not contain any meritorious defense.

Therefore, to set aside the judgment by default and grant a new trial would be an Idle ceremony. Ther is no probability
that defendants; evidence would justify a reversal of the judgment by defauld. (Vda. de Yulo vs. Chua Chuco, 87 Phil.
448. 449; Gonzalez vs. Amon, 98 Phil. 587; Miranda vs. Legaspi, 92 Phil. 290; Baquiran vs Court of Appeals, 112 Phil. 764,
771).

WHERFORE, the lower court's judgment is affirmed with cost against the defendant-appellants.

SO ORDERED.

Fernando (Chairman), Barredo, and Martin, JJ., concur.

Antonio, J., concur in the result.

Concepcion Jr., J., is on leave.

Martin J., was designated to sit in the Second Division.

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Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-17983 May 30, 1963

LEONCIO SOLEDAD, plaintiff-appellee,

vs.

PAULO MAMAGUN, defendant-appellant.

Eugenio T. Estavillo for plaintiff-appellee.

Burgos and Sarte for defendant-appellant.

BAUTISTA ANGELO, J.:

Leoncio Solidad brought an action before the Municipal Court of Manila to recover the unpaid rentals on certain leased
premises at the rate of P180.00 a month and praying that Paulo Mamagun be ordered to vacate and surrender said
premises to plaintiff. In a written manifestation filed at a later date, plaintiff was allowed to verify the complaint.

On November 25, 1958, defendant filed a motion to dismiss alleging that the court has no jurisdiction over the case
because there is no allegation in the complaint that he was illegally withholding the possession of the property even if
there is a request in the prayer that he be ordered to vacate the premises and restore its possession to plaintiff, the
amount to be recovered being more than P2,000.00.

Before action therein could be taken, plaintiff filed an amended complaint wherein he included the requisite allegations
which would cure the defect pointed out by defendant. Defendant filed an opposition to the admission of the amended
complaint alleging that, not having acquired jurisdiction over the original complaint, the court "had neither the power
nor the jurisdiction to act on the motion for admission of the amended complaint, much less to allow such amendment
since it is elementary that the court must first acquire jurisdiction in order to validly act therein." The court denied the
motion to dismiss, as well as the opposition to the amended complaint, and thereafter allowed plaintiff to present his
evidence. Defendant did not participate in the hearing upon his belief that the court had no jurisdiction over the case.
And on the strength of the evidence presented the court rendered judgment ordering defendant to restore the property
to plaintiff and to pay him the sum of P2,520.00 as unpaid rentals from November 1, 1957 to December 31, 1958, plus
the rentals due from January 1, 1959 at the rate of P180.00 a month, and the sum of P100.00 as attorney's fees.

Defendant appealed to the court of first instance wherein he reiterated his motion to dismiss based on the same
grounds set forth in the motion to dismiss filed before the municipal court. The court again denied the motion to
dismiss. After defendant had filed his answer within the reglementary period wherein he averred once more his special
defense concerning want of jurisdiction, defendant brought the matter on certiorari before this Court, but the petition
was dismissed for lack of merit in a resolution entered on June 9, 1959.

On August 25, 1960, after the parties had agreed to submit the case on the pleadings, the court a quo rendered
judgment ordering defendant to pay to plaintiff the sum of P180.00 a month from November 1, 1957 until such date as
he may vacate the premises, plus the sum of P200.00 as attorney's fees and the costs of suit. This is an appeal from said
decision.

It is contended that the court a quo erred in not dismissing the complaint on the ground of want of jurisdiction for the
reason that the original complaint filed before the municipal court failed to aver that it was an action for unlawful
detainer and the amount being recovered was beyond the jurisdiction of that court. In other words, plaintiff insinuates
that the court a quo erred in not considering the original complaint filed by the plaintiff before the municipal court as
one simply for recovery of a sum of money which was beyond its jurisdiction even if later it was amended over the
opposition of defendant.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this
stipulation of facts. 1wph1.t

In overruling this argument the court a quo acted on the theory that appellee had the right to amend his complaint as a
matter of course considering that at the time he did it appellant has not yet interposed any responsive pleading. Thus,
the court said: "The amended complaint admitted by the Municipal Judge was filed before the defendant has entered
his answer. The defendant contends that since said amended complaint was filed after he has filed his motion to
dismiss, the first sentence of Section 1, Rule 17, (Supra) is not applicable. But this Court is of the opinion that a motion to
dismiss is not a responsive pleading, so that its filing would not deprive the plaintiff of his right to amend his complaint
at his pleasure."1

We agree to the above ruling for under the provision already above-referred to a party may amend his pleading once as
a matter of course at any time before a responsive pleading is served upon him. And it is a matter which cannot be
disputed that a motion to dismiss is not a responsive pleading.2 The contention that the court a quo also erred in
admitting the amended complaint not having jurisdiction to act on the motion for its admission is also untenable for
appellee being entitled to submit said amended complaint as a matter of course, there was no need for the court to
allow its admission, since appellee's right to do so cannot be disputed. Another proof that the court a quo did not act
improvidently in overruling the argument of appellant is the fact that the petition for certiorari be interposed against
action of the court a quo was dismissed by this Court on the ground that it had no merit.

WHEREFORE, the decision appealed from is affirmed, with costs against appellant.

Bengzon, C.J., Padilla, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.

Labrador, J., took no part.

Footnotes

1Pedro Paeste, et al., v. Rustico Juarigue, 50 O.G. 112.

2U.S. v. Newbury Mfg. Co., C.C.A. Mass. 1941, 123 F. 2d 543; Keene Lumber Co. v. Leventhal, C.C.A. Mass. 1948, 165 F.
2d 815; Porter v. Montaldo's D.C. Ohio, 1946, 71 F. Supp. 372; See also Lao, et al. v. Dee and Lao, L-2890, January 23,
1952.

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