DOMINADOR B. BUSTOS, Petitioner, vs. ANTONIO G. LUCERO, Judge The foregoing decision was rendered by a divided court.
d by a divided court. The minority went
of First Instance of Pampanga, Respondent.
E. M. Banzali for petitioner.
Acting Provincial Fiscal Albino L. Figueroa and Assistant Provincial Fiscal
Marcelo L. Mallari for respondent
TUASON, J.: chanrobles virtual law library
The petitioner herein, an accused in a criminal case, filed a motion with
the Court of First Instance of Pampanga after he had been bound over
to that court for trial, praying that the record of the case be remanded
to the justice of the peace court of Masantol, the court of origin, in order
that the petitioner might cross-examine the complainant and her witnesses
in connection with their testimony, on the strength of which warrant was
issued for the arrest of the accused. The motion was denied and that denial
is the subject matter of this proceeding.chanroblesvirtualawlibrary
chanrobles virtual law library
According to the memorandum submitted by the petitioner's attorney to the
Court of First Instance in support of his motion, the accused, assisted by
counsel, appeared at the preliminary investigation. In that investigation, the
justice of the peace informed him of the charges and asked him if he
pleaded guilty or not guilty, upon which he entered the plea of not guilty.
"Then his counsel moved that the complainant present her evidence so
that she and her witnesses could be examined and cross-examined in the
manner and form provided by law." The fiscal and the private prosecutor
objected, invoking section 11 of rule 108, and the objection was sustained.
"In view thereof, the accused's counsel announced his intention to renounce
his right to present evidence," and the justice of the peace forwarded the
case to the court of first instance.chanroblesvirtualawlibrary chanrobles
virtual law library
Leaving aside the question whether the accused, after renouncing his right
to present evidence, and by reason of that waiver he was committed to
the corresponding court for trial, is estopped, we are of the opinion that
the respondent judge did not act in excess of his jurisdiction or in abuse
of discretion in refusing to grant the accused's motion to return the record
for the purpose set out therein. In Dequito and Saling Buhay vs. Arellano,
G.R. No. L-1336, recently promulgated, in which case the respondent
justice of the peace had allowed the accused, over the complaint's objection,
to recall the complainant and her witnesses at the preliminary investigation
so that they might be cross-examined, we sustained the justice of the
peace's order. We said that section 11 of Rule 108 does not curtail the
sound discretion of the justice of the peace on the matter. We said that
"while section 11 of Rule 108 defines the bounds of the defendant's right
in the preliminary investigation, there is nothing in it or any other law
restricting the authority, inherent in a court of justice, to pursue a course
of action reasonably calculated to bring out the truth."chanrobles virtual law
library
But we made it clear that the "defendant can not, as a matter of right,
compel the complaint and his witnesses to repeat in his presence what
they had said at the preliminary examination before the issuance of the
order of arrest." We called attention to the fact that "the constitutional right
of an accused to be confronted by the witnesses against him does not
apply to preliminary hearings' nor will the absence of a preliminary
examination be an infringement of his right to confront witnesses." As a
matter of fact, preliminary investigation may be done away with entirely
without infringing the constitutional right of an accused under the due
process clause to a fair trial.chanroblesvirtualawlibrary chanrobles virtual law
library
farther than the majority and denied even any discretion on the part of
the justice of the peace or judge holding the preliminary investigation to
compel the complainant and his witnesses to testify
anew.chanroblesvirtualawlibrary chanrobles virtual law library
Upon the foregoing considerations, the present petition is dismissed with
costs against the petitioner.
Moran, C.J., Paras, Pablo, Bengzon, and Briones, JJ., concur.
Separate Opinions
FERIA, J., dissenting:chanrobles virtual law library
I am sorry to dissent from the decision.chanroblesvirtualawlibrary chanrobles
virtual law library
The petitioner in the present case appeared at the preliminary investigation
before the Justice of the Peace of Masantol, Pampanga, and after being
informed of the criminal charges against him and asked if he pleaded guilty
or not guilty, pleaded not guilty. "Then the counsel for the petitioner moved
that the complainant present her evidence so that her witnesses could be
examined and cross-examined in the manner and form provided by law."
The fiscal and the private prosecutor objected to petitioner's motion invoking
section 11, Rule 108, and the objection was sustained. In view thereof,
the accused refused to present his evidence, and the case was forwarded
to the Court of First Instance of Pampanga.chanroblesvirtualawlibrary
chanrobles virtual law library
The counsel for the accused petitioner filed a motion with the Court of First
Instance praying that the record of the case be remanded to the justice
of the peace of Masantol, in order that the petitioner might cross-examine
the complainant and her witnesses in connection with their testimony. The
motion was denied, and for that reason the present special civil action of
mandamus was instituted.chanroblesvirtualawlibrary chanrobles virtual law
library
It is evident that the refusal or waiver of the petitioner to present his
evidence during the investigation in the justice of the peace, was not a
waiver of his alleged right to be confronted with and cross-examine the
witnesses for the prosecution, that is, of the preliminary investigation
provided for in General Order No. 58 and Act No. 194, to which he claims
to be entitled, as shown by the fact that, as soon as the case was forwarded
to the Court of First Instance, counsel for the petitioner filed a motion with
said court to remand the case to the Justice of the Peace of Masantol
ordering the latter to make said preliminary investigation. His motion having
been denied, the petitioner has filed the present action in which he squarely
attacks the validity of the provision of section 11, Rule 108, on the ground
that it deprives him of the right to be confronted with and cross-examine
the witnesses for the prosecution, contrary to the provision of section 13,
Article VIII, of the Constitution.chanroblesvirtualawlibrary chanrobles virtual
law library
In the case of Dequito and Saling Buhay vs. Arellano, No. L-1336, we
did not discuss and decide the question of validity or constitutionality of
said section 11 in connection with section 1 of Rule 108, because that
question was not raised therein, and we merely construed the provisions
on preliminary investigation or Rule 108. In said case the writer of this
dissenting opinion said:
 It may not be amiss to state that, modesty aside, the
writer of this dissenting opinion, then a practising
attorney, was the one who prepared the draft of the
Rules of Court relating to criminal procedure, and the
provisions on preliminary investigation in the draft were
the same as those of the old law, which gave the
defendant the right to be confronted with and to
cross-examine the witnesses for the prosecution. But
the Supreme Court approved and adopted in toto the
draft, except the part referring to preliminary
investigation which it modified, by suppressing said
right and enacting, in its stead, the provisions of
section 11 of Rule 108 in its present form. I prefer
the old to the new procedure. But I can not subscribe
to the majority decision, which is a judicial legislation
and makes the exercise of the right of a defendant
to be confronted, with and cross-examine the
witnesses against him, to depend entirely upon the
whim or caprice of a judge or officer conducting the
preliminary investigation.
But now the question of the validity of said section 11, Rule 108, is
squarely presented to this Court for decision, we have perforce to pass
upon it.chanroblesvirtualawlibrary chanrobles virtual law library
Section 13, Article VIII, of the Constitution prescribes that "the Supreme
Court shall have power to promulgate rules concerning pleading, practice
and procedure in all courts, but said rules shall not diminish, increase or
modify substantive rights." The constitution added the last part of the
above-quoted constitutional precept in order to emphasize that the Supreme
Court is not empowered, and therefore can not enact or promulgate
substantive laws or rules, for it is obvious that rules which diminish, increase
or modify substantive rights, are substantive and not adjective laws or rules
concerning pleading, practice and procedure.chanroblesvirtualawlibrary
chanrobles virtual law library
It does not require an elaborate arguments to show that the right granted
by law upon a defendant to be confronted with and cross-examine the
witnesses for the prosecuted in preliminary investigation as well as in the
trial of the case is a substantive right. It is based on human experience,
according to which a person is not prone to tell a lie against another in
his presence, knowing fully well that the latter may easily contradict him,
and that the credibility of a person or veracity of his testimony may be
efficaciously tested by a cross-examination. It is substantive right because
by exercising it, an accused person may show, even if he has no evidence
in his favor, that the testimonies of the witnesses for the prosecution are
not sufficient to indicate that there is a probability that a crime has been
committed and he is guilty thereof, and therefore the accused is entitled
to be released and not committed to prison, and thus avoid an open and
public accusation of crime, the trouble, expense, and anxiety of a public
trial, and the corresponding anxiety or moral suffering which a criminal
prosecution always entails.chanroblesvirtualawlibrary chanrobles virtual law
library
This right is not a constitutional but a statutory right granted by law to an
accused outside of the City of Manila because of the usual delay in the
final disposition of criminal cases in provinces. The law does not grant such
right to a person charged with offenses triable by the Court of First Instance
in the City of Manila, because of the promptness, actual or presumptive,
with which criminal cases are tried and disposed of in the Court of First
Instance of said city. But this right, though not a constitutional one, can
not be modified, abridged, or diminished by the Supreme Court, by virtue
of the rule making power conferred upon this Court by the
Constitution.chanroblesvirtualawlibrary chanrobles virtual law library
Since the provisions of section 11 of Rule 108 as construed by this Court
in several cases, (in which the question of constitutionality or validity of
said section had not been squarely raised) do away with the defendant's
right under discussion, it follows that said section 11 diminishes the
substantive right of the defendant in criminal case, and this Court has no
power or authority to promulgate it and therefore is null and
void.chanroblesvirtualawlibrary chanrobles virtual law library
The fact that the majority of this Court has ruled in the above cited case
of Dequito and Saling Buhay vs. Arellano, that the inferior or justice of
the peace courts have discretion to grant a defendant's request to have
the witnesses for the prosecution recalled to testify again in the presence
of the defendant and be cross-examined by the latter, does not validate
said provision; because to make the exercise of an absolute right
discretionary or dependent upon the will or discretion of the court or officer
making the preliminary investigation, is evidently to diminish or modify
it.chanroblesvirtualawlibrary chanrobles virtual law library
Petition is therefore granted.
PERFECTO, J., dissenting:chanrobles virtual law library
In our concurring and dissenting opinion in the case of Dequito and Saling
Buhay vs. Arellano, No. L-1336, we said:
In our opinion, section 11 of Rule 108 must be read,
interpreted, and applied in a way that will not
contravene the constitutional provision guaranteeing to
all accused the right "to meet the witnesses face to
face." (Section 1 [17], Article III.)chanrobles virtual
law library
Consequently, at the preliminary hearing contemplated
by said reglementary section, the defendant is entitled
as a matter of fundamental right to her the testimony
of the witnesses for the prosecution and to
cross-examine them.chanroblesvirtualawlibrary
chanrobles virtual law library
Although in such preliminary hearing the accused
cannot finally be convicted, he is liable to endure the
ordeal eloquently depicted in the decision, and the
constitutional guarantee protects defendants, not only
from the jeopardy of being finally convicted and
punished, but also from the physical, mental and moral
sufferings that may unjustly be visited upon him in any
one of the stages of the criminal process instituted
against him. He must be afforded the opportunities to
have the charges against him quashed, not only at the
final hearing, but also at the preliminary investigation,
if by confronting the witnesses for the prosecution he
can convince the court that the charges are groundless.
There is no justice in compelling him to undergo the
troubles of a final hearing if at the preliminary hearing
the case can be terminated in his favor. Otherwise,
the preliminary investigation or hearing will be an
empty gesture that should not have a place within the
framework of dignified and solemn judicial
proceedings.
On the strength of the above quoted opinion the opinion should be granted
and so we vote.chanroblesvirtualawlibrary chanrobles virtual law library
Petition dismissed.
R E S O L U T I O N
March 8, 1949
TUASON, J.: chanrobles virtual law library
This cause is now before us on a motion for
reconsideration.chanroblesvirtualawlibrary chanrobles virtual law library
In the decision sought to be reconsidered, we said, citing Dequito and
Saling Buhay vs. Arellano, G.R. No. L-1336: "The constitutional right of
an accused to be confronted by the witnesses against him does not apply
to preliminary hearings; nor will the absence of a preliminary examination
be an infringement of his right to confront witness. As a matter of fact,
preliminary investigation may be done away with entirely without infringing
the constitutional right of an accused under the due process clause to a
fair trial." We took this ruling to be ample enough to dispose the
constitutional question pleaded in the application for certiorari. Heeding the
wishes of the petitioner, we shall enlarge upon the
subject.chanroblesvirtualawlibrary chanrobles virtual law library
It is contended that section 11 of Rule 108 of the Rules of Court 1 infringes
section 13, Article VIII, of the Constitution. 2 It is said that the rule in
question deals with substantive matters and impairs substantive
rights.chanroblesvirtualawlibrary chanrobles virtual law library
We can not agree with this view. We are of the opinion that section 11
of Rule 108, like its predecessors, is an adjective law and not a substantive
law or substantive right. Substantive law creates substantive rights and the
two terms in this respect may be said to be synonymous. Substantive rights
is a term which includes those rights which one enjoys under the legal
system prior to the disturbance of normal relations. (60 C.J., 980.)
Substantive law is that part of the law which creates, defines and regulates
rights, or which regulates the rights and duties which give rise to a cause
of action; that part of the law which courts are established to administer;
as opposed to adjective or remedial law, which prescribes the method of
enforcing rights or obtains redress for their invasion. (36 C. J., 27; 52
C. J. S., 1026.)chanrobles virtual law library
As applied to criminal law, substantive law is that which declares what acts
are crimes and prescribes the punishment for committing them, as
distinguished from the procedural law which provides or regulates the steps
by which one who commits a crime is to be punished. (22 C. J. S., 49.)
Preliminary investigation is eminently and essentially remedial; it is the first
step taken in a criminal prosecution.chanroblesvirtualawlibrary chanrobles
virtual law library
As a rule of evidence, section 11 of Rule 108 is also procedural. Evidence
- which is the "the mode and manner of proving the competent facts and
circumstances on which a party relies to establish the fact in dispute in
judicial proceedings" - is identified with and forms part of the method by
which, in private law, rights are enforced and redress obtained, and, in
criminal law, a law transgressor is punished. Criminal procedure refers to
pleading, evidence and practice. (State vs. Capaci, 154 So., 419; 179
La., 462.) the entire rules of evidence have been incorporated into the
Rules of Court. We can not tear down section 11 of Rule 108 on
constitutional grounds without throwing out the whole code of evidence
embodied in these Rules.chanroblesvirtualawlibrary chanrobles virtual law
library
In Beazell vs. Ohio, 269 U. S., 167, 70 Law. ed., 216, the United States
Supreme Court said:
Expressions are to be found in earlier judicial opinions
to the effect that the constitutional limitation may be
transgressed by alterations in the rules of evidence or
procedure. See Calder vs. Bull, 3 Dall. 386, 390,
1 L. ed., 648, 650; Cummings vs. Missouri, 4 Wall.
277, 326, 18 L. ed., 356, 364; Kring vs. Missouri,
107 U. S. 221, 228, 232, 27 L. ed., 507, 508,
510, 2 Ct. Rep., 443. And there may be procedural
changes which operate to deny to the accused a
defense available under the laws in force at the time
of the commission of his offense, or which otherwise
affect him in such a harsh and arbitrary manner as
to fall within the constitutional prohibition. Kring vs.
Missouri, 107 U. S., 221, 27 L. ed., 507, 2 Sup.
Ct. Rep., 443; Thompson vs. Utah, 170 U. S., 343,
42 L. ed., 1061, 18 Sup. Ct. Rep., 620. But it is
not well settled that statutory changes in the mode of
trial or the rules of evidence, which do not deprive the
accused of a defense and which operate only in a
limited and unsubstantial manner to his disadvantage,
are not prohibited. A statute which, after indictment,
enlarges the class of persons who may be witnesses
at the trial, by removing the disqualification of persons
convicted of felony, is not an ex post facto law. Hopt
vs. Utah, 110 U. S., 575, 28 L. ed., 263, 4 Sup.
Ct. Rep., 202, 4 Am. Crim. Rep. 417. Nor is a
statute which changes the rules of evidence after the
indictment so as to render admissible against the
accused evidence previously held inadmissible,
Thompson vs. Missouri, 171 U. S., 380, 43 L. ed.,
204, 18 Sup. Ct. Rep., 922; or which changes the
place of trial, Gut. vs. Minnesota, 9 Wall. 35, 19 L.
ed., 573; or which abolishes a court for hearing
criminal appeals, creating a new one in its stead. See
Duncan vs. Missouri, 152 U. S., 377, 382, 38 L.
ed., 485, 487, 14 sup. Ct. Rep., 570.
Tested by this standard, we do not believe that the curtailment of the right
of an accused in a preliminary investigation to cross-examine the witnesses
who had given evidence for his arrest is of such importance as to offend
against the constitutional inhibition. As we have said in the beginning,
preliminary investigation is not an essential part of due process of law. It
may be suppressed entirely, and if this may be done, mere restriction of
the privilege formerly enjoyed thereunder can not be held to fall within the
constitutional prohibition.chanroblesvirtualawlibrary chanrobles virtual law
library
While section 11 of Rule 108 denies to the defendant the right to
cross-examine witnesses in a preliminary investigation, his right to present
his witnesses remains unaffected, and his constitutional right to be informed
of the charges against him both at such investigation and at the trial is
unchanged. In the latter stage of the proceedings, the only stage where
the guaranty of due process comes into play, he still enjoys to the full
extent the right to be confronted by and to cross-examine the witnesses
against him. The degree of importance of a preliminary investigation to an
accused may be gauged by the fact that this formality is frequently
waived.chanroblesvirtualawlibrary chanrobles virtual law library
The distinction between "remedy" and "substantive right" is incapable of
exact definition. The difference is somewhat a question of degree. (Dexter
vs. Edmands, 89 F., 467; Beazell vs. Ohio, supra.) It is difficult to draw
a line in any particular case beyond which legislative power over remedy
and procedure can pass without touching upon the substantive rights of
parties affected, as it is impossible to fix that boundary by general condition.
(State vs. Pavelick, 279 P., 1102.) This being so, it is inevitable that
the Supreme Court in making rules should step on substantive rights, and
the Constitution must be presumed to tolerate if not to expect such incursion
as does not affect the accused in a harsh and arbitrary manner or deprive
him of a defense, but operates only in a limited and unsubstantial manner
to his disadvantage. For the Court's power is not merely to compile, revise
or codify the rules of procedure existing at the time of the Constitution's
approval. This power is "to promulgate rules concerning pleading, practice,
and procedure in all courts," which is a power to adopt a general, complete
and comprehensive system of procedure, adding new and different rules
without regard to their source and discarding old
ones.chanroblesvirtualawlibrary chanrobles virtual law library
The motion is denied.
Moran, C.J., Paras, Pablo, Bengzon, Briones, and Montemayor, JJ.,
concur.
FERIA, J., dissenting:chanrobles virtual law library
I dissent.chanroblesvirtualawlibrary chanrobles virtual law library
The motion for reconsideration must be granted.chanroblesvirtualawlibrary
chanrobles virtual law library
According to the resolution, the right of a defendant to be confronted with
and cross-examine the witnesses for the prosecution in a preliminary
investigation granted by law or provided for in General Orders, No. 58,
as amended, in force prior to the promulgation of the Rules of Court, is
not a substantive right but a mere matter of procedure, and therefore this
Court can suppress it in section 11, Rule 108, of the Rules of Court,
for the following reasons:chanrobles virtual law library
First. Because "preliminary investigation is eminently and essentially
remedial; it is the first step taken in a criminal prosecution." . . . "As a
rule of evidence, section 11 of Rule 108 is also procedural." . . . "The
entire rules of evidence have been incorporated into the Rules of Court."
And therefore "we can not tear down section 11 of Rule 108 on
constitutional grounds without throwing out the whole Code of evidence
embodied in these rules."chanrobles virtual law library
Secondly. Because, "preliminary investigation is not an essential part of
due process of law. It may be suppressed entirely, and if this may be done,
mere restriction of the privilege formerly enjoyed thereunder can not be held
to fall within the constitutional prohibition."chanrobles virtual law library
Lastly. Because, "the distinction between remedy and 'substantive right' is
incapable of exact definition. The difference is somewhat a question of
degree" . . . It is difficult to draw a line in any particular case beyond
which legislative power over remedy and procedure can pass without
touching upon the substantive rights of parties affected, as it is impossible
to fix that boundary by general condition. . . . "This being so, it is inevitable
that the Supreme Court in making rules should step on substantive rights,
and the Constitution must be presumed to tolerate if not to expect such
incursion as does not affect the accused in a harsh and arbitrary manner
or deprive him of a defense, but operates only in a limited and unsubstantial
manner to his disadvantage."chanrobles virtual law library
Before proceeding it is necessary to distinguish substantive law from
procedure, for the distinction is not always well understood. Substantive
law is that part of the law which creates, defines, and regulates rights as
opposed to objective or procedural law which prescribes the method of
enforcing rights. What constitutes practice and procedure in the law is the
mode or proceeding by which a legal right is enforced, "that which regulates
the formal steps in an action or judicial proceedings; the course of
procedure in courts; the form, manner and order in which proceedings have
been, and are accustomed to be had; the form, manner and order of
carrying on and conducting suits or prosecutions in the courts through their
various sages according to the principles of law and the rules laid down
by the respective courts." 31 Cyc. Law and Procedure, p. 1153; id., 32,
section 405; Rapalje & Lawrence's Law Dictionary; Anderson Law
Dictionary; Bouvier's Law Dictionary.chanroblesvirtualawlibrary chanrobles
virtual law library
Substantive rights may be created or granted either in the Constitution or
in any branch of the law, civil, criminal, administrative or procedural law.
In our old Code of Civil Procedure, Act No. 190, as amended, there are
provisions which create, define and regulate substantive rights, and many
of those provisions such as those relating to guardianship, adoption,
evidence and many others are incorporated in the Rules of Court for the
sake of convenience and not because this Court is empowered to
promulgate them as rules of court. And our old law of Criminal Procedure
General Orders No. 58 grants the offended party the right to commence
a criminal action or file a complaint against the offender and to intervene
in the criminal prosecution against him, and grants the defendant in the
Court of First Instance (except in the City of Manila) the right to bail,
and to a preliminary investigation including his rights during said
investigation, and the rights at the trial, which are now reproduced or
incorporated in Rules 106, 108, 110, and 111 of the Rules of Court,
except the rights now in question. And all these, and others not necessary
for us to mention, are obviously substantive rights.chanroblesvirtualawlibrary
chanrobles virtual law library
(1) As to the first argument, the premise "the preliminary investigation
is eminently and essentially remedial is not correct. Undoubtedly the
majority means to say procedural, in line with the conclusion in the
resolution, because remedial law is one thing, and procedural law is another.
Obviously they are different branches of the law. "Remedial statute" is "a
statute providing a remedy for an injury as distinguished from a penal statute.
A statute giving a party a mode of remedy for a wrong where he had none
or a different one before. . . . Remedial statutes are those which are made
to supply such defects, and abridge such superfluities in the common law,
as arise either from the general imperfections of all human law, from change
of time and circumstances, from the mistakes and unadvised determination
of unlearned (or even learned) judges, or from any other cause
whatsoever." (Black's Law Dictionary, third edition, pp. 1525,
1526.)chanrobles virtual law library
It is also not correct to affirm that section 11 of Rule 108 relating to right
of defendant after arrest "is a rule of evidence and therefore is also
procedural." In the first place, the provisions of said section to the effect
that "the defendant, after the arrest and his delivery to the court has the
right to be informed of the complaint or information filed against him, and
also to be informed of the testimony and evidence presented against him,
and may be allowed to testify and present witnesses or evidence for him
if he so desires," are not rules of evidence; and in the second place, it
is evident that most of the rules of evidence, if not all, are substantive
laws that define, create or regulate rights, and not procedural. "Rules of
evidence are substantive rights found in common law chiefly and growing
out of reasoning, experience and common sense of lawyers and courts."
(State vs. Pavelich, et al., 279 P., 1102.) "It is true that weighing of
evidence and the rules of practice with respect thereto form part of the
law of procedure, but the classification of proofs is sometime determined
by the substantive law." (U. S. vs. Genato, 15 Phil., 170, 176.) How
can the law on judicial notice, conclusive as well as juris tantum
presumption, hearsay and best evidence rule, parol evidence rule,
interpretation of documents, competency of a person to testify as a witness
be considered procedural?chanrobles virtual law library
Therefore, the argumentative conclusion that "we can not tear down section
11 of Rule 108 on constitutional grounds without throwing out the whole
code of evidence embodied in these Rules," is evidently wrong, not only
for the reason just stated, but because our contention that the defendant
can not be deprived of his right to be confronted with and cross-examine
the witness of the prosecution is a preliminary investigation under
consideration would not, if upheld, necessarily tear down said section. Our
theory, is that said section 11 should be so construed as to be valid and
effective, that is, that if the defendant asks the court to recall the witness
or witnesses for the prosecution to testify again in his presence, and to
allow the former to cross-examine the latter, the court or officer making
the preliminary investigation is under obligation to grant the request. But
if the defendant does not so ask the court, he should be considered as
waiving his right to be confronted with and cross-examine the witness
against him.chanroblesvirtualawlibrary chanrobles virtual law library
(2) With respect to the second argument or reason, it is true that the
preliminary investigation as provided for in the General Orders, No. 58,
as amended, is not an essential part of due process of law, because "due
process of law" is not iron clad in its meaning; its does not necessarily
mean a particular procedure. Due process of law simply requires a
procedure that fully protects the life, liberty and property. For that reason
the investigation to be made by the City Fiscal of the City of Manila under
Act No. 612, now section 2465 of the Administrative Code, before filing
an information, was considered by this Court as sufficient to satisfy the
due process of law constitutional requirement (U. S. vs. Ocampo, 18 Phil.,
1; U. S. vs. Grant and Kennedy, 18 Phil., 122). But it is also true that
we have already and correctly held that: "The law having explicitly
recognized and established that no person charged with the commission
of a crime shall be deprived of his liberty or subjected to trial without prior
preliminary investigation (provided for in General orders, No. 58, as
amended) that shall show that there are reasonable grounds to believe
him guilty, there can be no doubt that the accused who is deprived of his
liberty, tried and sentenced without the proper preliminary investigation
having been made in his regard, is convicted without the process of law,"
(United States vs. Banzuela, 31 Phil., 564).chanroblesvirtualawlibrary
chanrobles virtual law library
The ruling in Beazell vs. Ohio, 269 U. S. 167, 70 Law. ed., 216, quoted
in the resolution, has no application to the present case, for the question
involved therein was the power of Congress to alter the rules of evidence
and procedure without violating the constitutional precept that prohibits the
passing of ex post facto law, while the question herein involved is the power
of the Supreme Court to promulgate rules of pleading, practice and
procedure, which diminish the substantive right of a defendant, expressly
prohibited by the same provision of the Constitution that confers upon this
Court the power to promulgate said rules.chanroblesvirtualawlibrary
chanrobles virtual law library
(3) The last reason or argument premised on the conclusion that "the
distinction between remedy and 'substantive right' is incapable of exact
definition;" indeed "the difference is somewhat a question of degree,"
(Dexter vs. Edmonds, 89 F 487), is immaterial, because, as we have
already said in refuting the majority's first reason, remedy and procedure
are two completely different things.chanroblesvirtualawlibrary chanrobles
virtual law library
As above defined, substantive law is clearly differentiated from procedural
law and practice. But even assuming arguendo that it is difficult to draw
the line in any particular case beyond which the power of the court over
procedure can not pass without touching upon the substantial right of the
parties, what this Court should do in that case would be to abstain from
promulgating such rule of procedure which many increase, diminish or
modify substantive right in order to avoid violating the constitutional
prohibition above referred to. Because as this Supreme Court is not
empowered by the Constitution to legislate on or abrogate substantive rights,
but only to promulgate rules of pleading, practice and procedure which
"shall not diminish, increase or modify substantive rights," this Court can
not step on them in making the rules, and the Constitution must be
presumed not to tolerate nor expect such incursion as would affect the
substantive rights of the accu sed in any manner.chanroblesvirtualawlibrary
chanrobles virtual law library
Besides, depriving an accused of his right to be confronted and
cross-examine the witness against him in a preliminary investigation would
affect the accused not in a limited and unsubstantial but in a harsh and
arbitrary manner. The testimony of a witness given in the absence of the
defendant and without an opportunity on the part of the latter to
cross-examine him is a hearsay evidence, and it should not be admitted
against the defendant in a preliminary investigation that is granted to the
latter as a protection against hasty, malicious and oppressive prosecutions
(U. S. vs. Grant and Kennedy, supra). Otherwise, an accused who is
innocent and should not be arrested, or if arrested should be released
immediately a short time after his arrest after the preliminary investigation,
would have to be held for trial and wait for a considerable period of time
until the case is tried and acquitted after trial by the Courts of First Instance
in provinces on account of the admission of such evidence in the preliminary
investigation, evidence not admissible at the trial.chanroblesvirtualawlibrary
chanrobles virtual law library
Therefore, the motion for reconsideration is granted, and after the necessary
proceedings the decision of the majority reversed or modified in accordance
with my dissenting opinion.
PERFECTO, J.: chanrobles virtual law library
We dissent. Our opinion in the Dequito case still stands. The motion for
reconsideration should be granted.
Endnotes:
TUASON, J.:
1 Rights of defendant after arrest.
- After the arrest of the defendant and his delivery
to the court, he shall be informed of the complaint or
information filed against him. He shall also be informed
of the substance of the testimony and evidence
presented against him, and, if he desires to testify or
to present witnesses or evidence in his favor, he may
be allowed to do so. The testimony of the witnesses
need not be reduced to writing but that of the
defendant shall be taken in writing and subscribed by
 him.chanroblesvirtualawlibrary chanrobles virtual law
library
2 The Supreme Court shall have
the power to promulgate rules concerning pleading,
practice, and procedure in all courts, and the
admission to the practice of law. Said rules shall be
uniform for all courts of the same grade and shall not
diminish, increase, or modify substantive rights. The
existing laws on pleading, practice, and procedure are
hereby repealed as statutes, and are declared Rules
of Courts, subject to the power of the Supreme Court
to alter and modify the same. The National Assembly
shall have the power to repeal, alter, or supplement
the rules concerning pleading, practice, and procedure,
and the admission to the practice of law in the
Philippines.
ROLEX RODRIGUEZ y OLAYRES, Petitioner, v. PEOPLE OF THE
PHILIPPINES and ALLIED DOMECQ SPIRITS AND WINES, represented by
ALLIED DOMECQ PHILS., INC., Respondents.
R E S O L U T I O N
VELASCO, JR., J.:
In this Petition for Review on Certiorari, petitioner assails the March 2,
2010 Decision1rll and June 29, 2010 Resolution2rll of the Court (15) days from promulgation of the judgment or from notice of the final
of Appeals (CA) in CA-G.R. SP No. 108789, which affirmed the April
14, 2009 Order3rll of the Regional Trial Court (RTC), Branch 24 in
Manila, denying due course to petitioners Notice of Appeal in Criminal Case
No. 02-206499.
The RTC convicted petitioner for Unfair Competition penalized under
Sections 155, 168, 160 in relation to Sec. 170 of Republic Act No.
8293 or the Intellectual Property Code of the Philippines, and sentenced
him to serve imprisonment of two (2) years, to pay a fine of PhP 50,
000 and actual damages of PhP 75,000.
The pertinent factual antecedents are undisputed.
After promulgation of the Decision in Criminal Case No. 02-206499
convicting him for unfair competition, petitioner filed a motion for
reconsideration before the RTC on the 15th or the last day of the
reglementary period to appeal. Fourteen (14) days after receipt of the
RTC Order denying his motion for reconsideration, petitioner filed his Notice
of Appeal.4rll Thus, the denial of his Notice of Appeal on the ground
of its being filed out of time under Sec. 6, Rule 122, Revised Rules of
Criminal Procedure. Before the RTC, the CA and now here, petitioner was
unwavering in his assertion of the applicability of the "fresh period rule"
as laid down in Neypes v. Court of Appeals.5rll
The rationale of the "fresh period rule" is:chanroblesvirtuallawlibrary
To standardize the appeal periods provided in the Rules and to afford
litigants fair opportunity to appeal their cases, the Court deems it practical
to allow a fresh period of 15 days within which to file the notice of appeal
in the Regional Trial Court, counted from receipt of the order dismissing
a motion for a new trial or motion for reconsideration.
Henceforth, this "fresh period rule" shall also apply to Rule 40 governing
appeals from the Municipal Trial Courts to the Regional Trial Courts; Rule
42 on petitions for review from the Regional Trial Courts to the Court of
Appeals; Rule 43 on appeals from quasi-judicial agencies to the Court
of Appeals and Rule 45 governing appeals by certiorari to the Supreme
Court. The new rule aims to regiment or make the appeal period uniform,
to be counted from receipt of the order denying the motion for new trial,
motion for reconsideration (whether full or partial) or any final order or
resolution.6rll
Neypes elucidates that the "fresh period rule" applies to appeals under Rule
40 (appeals from the Municipal Trial Courts to the RTC) and Rule 41
(appeals from the RTCs to the CA or this Court); Rule 42 (appeals from
the RTCs to the CA); Rule 43 (appeals from quasi-judicial agencies to
the CA); and Rule 45 (appeals by certiorari to this Court). 7rll A
scrutiny of the said rules, however, reveals that the "fresh period rule"
enunciated in Neypes need NOT apply to Rules 42, 43 and 45 as there
is no interruption in the 15-day reglementary period to appeal. It is explicit
in Rules 42, 43 and 45 that the appellant or petitioner is accorded a
fresh period of 15 days from the notice of the decision, award, judgment,
final order or resolution or of the denial of petitioners motion for new trial
or reconsideration filed.8rll
The pivotal question is whether the "fresh period rule" is applicable to
appeals from conviction in criminal cases governed by Sec. 6 of Rule 122
which pertinently provides:chanroblesvirtuallawlibrary
Sec. 6. When appeal to be taken. An appeal must be taken within fifteen
order appealed from. This period for perfecting an appeal shall be
suspended from the time a motion for new trial or reconsideration is filed
until notice of the order overruling the motion has been served upon the
accused or his counsel at which time the balance of the period begins to
run. (Emphasis supplied.)
While Neypes was silent on the applicability of the "fresh period rule" to
criminal cases, the issue was squarely addressed in Yu v. Tatad,9rll
which expanded the scope of the doctrine in Neypes to criminal cases in
appeals of conviction under Sec. 6, Rule 122 of the Revised Rules of
Criminal Procedure. Thus, the Court held in Yu:chanroblesvirtuallawlibrary
While Neypes involved the period to appeal in civil cases, the Courts
pronouncement of a "fresh period" to appeal should equally apply to the
period for appeal in criminal cases under Section 6 of Rule 122 of the
Revised Rules of Criminal Procedure x x x.10rll
x x x x
Were we to strictly interpret the "fresh period rule" in Neypes and make
it applicable only to the period to appeal in civil cases, we shall effectively
foster and encourage an absurd situation where a litigant in a civil case
will have a better right to appeal than an accused in a criminal casea
situation that gives undue favor to civil litigants and unjustly discriminates
against the accused-appellants. It suggests a double standard of treatment
when we favor a situation where property interests are at stake, as against
a situation where liberty stands to be prejudiced.
We must emphatically reject this double and unequal standard for being
contrary to reason. Over time, courts have recognized with almost pedantic
adherence that what is contrary to reason is not allowed in lawQuod est
inconveniens, aut contra rationem non permissum est in lege.
Thus, we agree with the OSGs view that if a delay in the filing of an appeal Builders, Inc), as seller, and respondent Ma. Cristina F. Bayang (Cristina),
may be excused on grounds of substantial justice in civil actions, with more as buyer, entered into a "contract to sell" of a sixty (60)-square meter
reason should the same treatment be accorded to the accused in seeking lot in Violago Homes Parkwoods Subdivision, located in Barangay Payatas,
the review on appeal of a criminal case where no less than the liberty Quezon City.
of the accused is at stake. The concern and the protection we must extend
to matters of liberty cannot be overstated.11rll (Emphasis supplied.) Upon full payment of the monthly amortizations on the purchased lot,
Cristina demanded from SLR Builders the execution of the deed of absolute
It is, thus, now settled that the fresh period rule is applicable in criminal sale and the lot's certificate of title but the latter failed to deliver, prompting
cases, like the instant case, where the accused files from a judgment of Cristina to file a complaint for specific performance and damages against
conviction a motion for new trial or reconsideration which is denied by the SLR Builders and its President, Oscar Violago (petitioners) before the
trial court. The accused will have a fresh 15-day period counted from Housing and Land Use Regulatory Board (HLURB).
receipt of such denial within which to file his or her notice of appeal.
In a decision3 dated February 16, 2004, Housing and Land Use Arbiter
Atty. Joselito F. Melchor ruled in Cristina's favor, to wit:
Verily, the application of the statutory privilege of appeal must not prejudice
an accused who must be accorded the same statutory privilege as litigants
in civil cases who are granted a fresh 15-day period within which to file WHEREFORE, premises considered, judgment is
an appeal from receipt of the denial of their motion for new trial or hereby rendered as follows:
reconsideration. It is indeed absurd and incongruous that an appeal from
a conviction in a criminal case is more stringent than those of civil cases. 1. Ordering the respondents (referring to the
If the Court has accorded litigants in civil casesunder the spirit and rationale petitioners) to execute the Deed of
in Neypesgreater leeway in filing an appeal through the "fresh period rule," Absolute Sale of the subject property in the
with more reason that it should equally grant the same to criminal cases name of the complainant (referring to the
which involve the accuseds "sacrosanct right to liberty, which is protected respondent) and deliver the title thereof free
by the Constitution, as no person should be deprived of life, liberty, or from all liens and encumbrances;
property without due process of law."12rll
2. In the alternative, in case of legal
Consequently, in light of the foregoing, we hold that petitioner seasonably and physical impossibility of the
filed his notice of appeal on February 2, 2009, within the fresh period respondents to perform the aforementioned
of 15 days, counted from January 19, 2009, the date of receipt of the acts in the preceding paragraph, respondent
RTC Order denying his motion for San Lorenzo Ruiz Builders and Developers
reconsideration.blrlllbrr Group, Incorporated is hereby ordered to
reimburse to the complainant the amount of
WHEREFORE, the instant petition is GRANTED. Accordingly, the April 14, THREE HUNDRED TWENTY FOUR
2009 Order of the RTC, Branch 24 in Manila and the assailed March THOUSAND EIGHT HUNDRED SIXTY
2, 2010 Decision and June 29, 2010 Resolution of the CA in CA-G.R. FIVE PESOS & 16/100 (P324,865.16)
SP No. 108789 are REVERSED and SET ASIDE. The Notice of Appeal with legal interest of twelve percent (12%)
of petitioner Rolex Rodriguez y Olayres dated January 29, 2009 is hereby per annum to be computed from the filing
GIVEN DUE COURSE. Let the case records be elevated by the RTC to of the complaint on November 04, 2002
the CA for the review of petitioners appeal with dispatch. No until fully paid; and
costs.rllbrr
3. Ordering respondent San Lorenzo Ruiz
SO ORDERED. Builders and Developers Group,
Incorporated to pay the following sums:
SAN LORENZO RUIZ BUILDERS AND DEVELOPERS GROUP, INC. AND
OSCAR VIOLAGO, Petitioners, v. MA. CRISTINA F. BAYANG, Respondent. 1. FIVE THOUSAND PESOS
(P5,000.00) as moral
damages;
D E C I S I O N
2. FIVE THOUSAND
PESOS (P5,000.00) as
BRION, J.: exemplary damages;
3. FIVE THOUSAND
This is a petition for review on certiorari assailing the July 23, 2010 PESOS (P5,000.00) as
decision1 and the December 2, 2010 resolution2 of the Court of Appeals attorney's fees;
(CA) in CA-G.R. SP No. 100332. The CA affirmed the resolutions dated 4. An administrative fine of TEN
November 17, 2006 and July 26, 2007 of the Office of President in THOUSAND PESOS
O.P. Case No. 06-D-160, which dismissed the appeal of petitioners San (P10,000.00) payable to this
Lorenzo Ruiz Builders and Developers Group, Inc. (SLR Builders) and Office fifteen (15) days upon
Oscar Violago for having been filed out of time. receipt of this decision, for
violation of Section 18 in relation
Facts to Section 38 of PD 957.

On April 15, 2000, petitioner SLR Builders (then known as Violago SO ORDERED.4
 rule" only covers judicial proceedings under the 1997 Rules of Civil
The petitioners appealed Arbiter Melchor's decision to the HLURB Board Procedure:
of Commissioners. The Board dismissed5 and denied,6 respectively, the
petitioners' appeal and subsequent motion for reconsideration. The The "fresh period rule" in Neypes declares:
petitioners then brought their case to the Office of the President (OP),
which was docketed as O.P. Case No. 06-D-160. To standardize the appeal
periods provided in the Rules and
In a resolution7 dated November 17, 2006, the OP dismissed the to afford litigants fair opportunity
petitioners' appeal for having been filed out of time. The OP's resolution to appeal their cases, the Court
stated: deems it practical to allow a fresh
period of 15 days within which to
A review of the records shows that the HLURB Decision file the notice of appeal in the
affirming the Arbiter's decision was received by the Regional Trial Court, counted
respondents/appellants (referring to the petitioners) from receipt of the order
on July 27, 2005. On that date, the 15-day dismissing a motion for a new
prescriptive period within which to file an appeal began trial or motion for reconsideration.
to run. Instead of preparing an appeal,
respondents-appellants opted to file a Motion for Henceforth, this "fresh period
Reconsideration on August 10, 2005. Their filing of rule" shall also apply to Rule 40
the said motion interrupted the period of appeal by that governing appeals from the
time, however, fourteen (14) days had already Municipal Trial Courts to the
elapsed. Regional Trial Courts; Rule 42
on petitions for review from the
On April 17, 2006, respondents-appellants received Regional Trial Courts to the Court
the Resolution denying their Motion for Reconsideration. of Appeals; Rule 43 on appeals
Following the above rules, respondents-appellants have from quasi-judicial agencies to
only one (1) day left, or until April 18, 2006, within the Court of Appeals; and Rule
which to file their notice of appeal to this Office. 45 governing appeals by
Unfortunately, they were able to do so only on April certiorari to the Supreme Court.
27, 2006, or nine (9) days late8 (Emphasis The new rule aims to regiment or
supplied.) make the appeal period uniform,
to be counted from receipt of the
order denying the motion for new
The petitioners moved to reconsider and argued that the "fresh period rule" trial, motion for reconsideration
enunciated in the case of Domingo Neypes, et at. v. Court of Appeals, (whether full or partial) or any
et al.9 should be applied to their case. final order or resolution.

The OP, in a resolution10 dated July 26, 2007, denied the petitioners' x x x x
motion with finality, stating that the "fresh period rule" applies only to judicial
appeals and not to administrative appeals, such as in petitioners' case. The
petitioners then appealed to the CA via petition for review under Rule 43 As reflected in the above-quoted
of the Rules of Court. portion of the decision in Neypes,
the "fresh period rule" shall apply
In its assailed decision, the CA denied the petitioners' petition for review. to Rule 40_(appeals from the
The CA, likewise, denied the petitioners' motion for reconsideration; hence, Municipal Trial Courts to the
the filing of the present petition for review on certiorari with this Court. Regional Trial Courts); Rule 41
(appeals from the Regional Trial
Issue Courts to the Court of Appeals or
Supreme Court); Rule 42
(appeals from the Regional Trial
Whether the "fresh period rule" in Neypes applies to administrative appeals, Courts to the Court of Appeals);
such as an appeal filed from a decision of the HLURB Board of Rule 43 (appeals from
Commissioners to the Office to the President. quasi-judicial agencies to the
Court of Appeals); and Rule 45
Our Ruling (appeals by certiorari to the
Supreme Court). Obviously,
these Rules cover judicial
We DENY the petition. It is settled that the "fresh period rule" in Neypes proceedings under the 1997
applies only to judicial appeals and not to administrative appeals. Rules of Civil Procedure.

In Panolino v. Tajala,11 the Court was confronted with a similar issue of Petitioner's present case is
whether the "fresh period rule" applies to an appeal filed from the decision administrative in nature involving
or order of the DENR regional office to the DENR Secretary, an appeal an appeal from the decision or
which is administrative in nature. We held in Panolino that the "fresh period order of the DENR regional office
to the DENR Secretary. Such
 appeal is indeed governed by
Section 1 of Administrative Order
No. 87, Series of 1990. As
earlier quoted, Section 1 clearly
provides that if the motion for
reconsideration is denied, the
movant shall perfect his appeal
"during the remainder of the
period of appeal, reckoned from
receipt of the resolution of
denial;" whereas if the decision is
reversed, the adverse party has
a fresh 15-day period to perfect
his appeal. (Emphasis
supplied.)
In this case, the subject appeal, i.e., appeal from a decision of the HLURB
Board of Commissioners to the OP, is not judicial but administrative in
nature; thus, the "fresh period rule" in Neypes does not apply.
As aptly pointed out by the OP, the rules and regulations governing appeals
from decisions of the HLURB Board of Commissioners to the OP are
Section 2, Rule XXI of HLURB Resolution No. 765, series of 2004, in
relation to Paragraph 2, Section 1 of Administrative Order No. 18, series
of 1987:
Section 2, Rule XXI of the HLURB Resolution No.
765, series of 2004, prescribing the rules and
regulations governing appeals from decisions of the
Board of Commissioners to the Office of the President,
pertinently reads:
Section 2. Appeal. - Any party
may, upon notice to the Board
and the other party, appeal a
decision rendered by the Board
of Commissioners to the Office of
the President within fifteen (15)
days from receipt thereof, in
accordance with P.D. No. 1344
and A.O. No. 18 Series of 1987.
The pendency of the motion for
reconsideration shall suspend the
running of the period of appeal to
the Office of the President.
Corollary thereto, paragraph 2, Section 1 of
Administrative Order No. 18, series of 1987, provides
that in case the aggrieved party files a motion for
reconsideration from an adverse decision of any
agency/office, the said party has the only remaining
balance of the prescriptive period within which to appeal,
reckoned from receipt of notice of the decision denying
his/her motion for reconsideration.12 (Emphasis
supplied.)
Thus, in applying the above-mentioned rules to the present case, we find
that the CA correctly affirmed the OP in dismissing the petitioners' appeal
for having been filed out of time.
WHEREFORE, we DENY the present petition for review on certiorari and
AFFIRM the decision dated July 23, 2010 and resolution dated December
2, 2010 of the Court of Appeals in CA-G.R. SP No. 100332.
SO ORDERED.
G.R. No. 201601 March 12, 2014
MARYLOU CABRERA, Petitioner,
vs.
FELIX NG, Respondent.
D E C I S I O N
REYES, J.:
Before this Court is a petition for review on certiorari1 under Rule 45 of
the Rules of Court seeking to annul and set aside the Decision2 dated
October 21, 2009 and the Resolution3 dated March 26, 2012 of the
Court of Appeals (CA) in CA-G.R. SP No. 03392. The CA denied the
petition for certiorari filed by Marylou Cabrera (petitioner), which assailed
the Order4 dated December 19, 2007 of the Regional Trial Court (RTC)
of Mandaue City, Branch 56, in Civil Case No. MAN-4773.
The Facts
On February 14, 2004, Felix Ng (respondent) filed a complaint for sum
of money with the RTC against the petitioner and her husband Marionilo
Cabrera (spouses Cabrera), alleging that the latter issued to him the
following: (1) Metrobank Check No. 0244694 dated June 30, 2002
for the amount of Thirty-One Thousand Pesos (P31,000.00); (2)
Metrobank Check No. 0244674 dated August 9, 2002 for the amount
of Thirty-Eight Thousand Seventy-Four Pesos and Seventy-Six Centavos
(P38,074.76); and (3) Metrobank Check No. 0244745 dated August
15, 2005 for Two Million Five Hundred Thousand Pesos
(P2,500,000.00). That when presented for payment, the said checks
were all dishonored as the accounts from which they had been drawn were
already closed.
The spouses Cabrera admitted that they issued Metrobank Check No.
0244694 and Metrobank Check No. 0244674 to the respondent and
that the same were dishonored when presented for payment. However, they
claimed that they paid the respondent the amount represented by the said
checks through the latters son Richard Ng. Further, they deny having
issued Metrobank Check No. 0244745 to the respondent, alleging that
the said check was forcibly taken from them by Richard Ng.
On August 7, 2007, the RTC rendered a Decision,5 which ordered the
spouses Cabrera to pay the respondent the following: (1) Two Million Five
Hundred Sixty-Nine Thousand Seventy-Four Pesos (P2,569,074.00)
plus legal interest from inception of the obligation until fully paid; (2) moral
damages in the amount of Fifty Thousand Pesos (P50,000.00); (3)
attorneys fees of Twenty Thousand Pesos (P20,000.00); and (4)
litigation expenses in the amount of Ten Thousand Pesos (P10,000.00).
On August 8, 2007, the spouses Cabrera received a copy of the RTC
Decision dated August 7, 2007. On August 14, 2007, the spouses
Cabrera filed with the RTC a motion for reconsideration,6 which they set
for hearing on August 17, 2007. On even date, the spouses Cabrera sent
a copy of their motion for reconsideration to the respondent thru registered
mail; it was actually received by the respondent on August 21, 2007.
The said motion for reconsideration, however, was not heard on August
17, 2007 as the new acting presiding judge of the said court had just
assumed office. On August 28, 2007, the RTC issued a notice,7 which
set the said motion for reconsideration for hearing on September 25, 2007.
On September 20, 2007, the respondent filed an opposition8 to the motion
for reconsideration filed by the spouses Cabrera. The respondent alleged
that the said motion for reconsideration is a mere scrap of paper since
it violated the three-day notice requirement. The respondent pointed out
that the spouses Cabrera sent to him a copy of their motion for
reconsideration, which was set for hearing on August 17, 2007, via
registered mail on August 14, 2007; that he actually received a copy
thereof only on August 21, 2007 four days after the scheduled hearing
thereon.
It appears that the scheduled hearing of the spouses Cabreras motion for
reconsideration on September 25, 2007 did not push through.
Consequently, on September 26, 2007, the RTC issued another notice,9
which set the said motion for reconsideration for hearing on October 26,
2007.
On October 26, 2007, the RTC issued an Order,10 which directed the
parties to file their additional pleadings, after which the motion for
reconsideration filed by the spouses Cabrera would be deemed submitted
for resolution.
On December 19, 2007, the RTC issued an Order11 which denied the
motion for reconsideration filed by the spouses Cabrera. The RTC pointed
out that the spouses Cabrera violated Section 4, Rule 15 of the Rules
of Court, which mandates that every motion required to be heard should
be served by the movant in such a manner as to ensure its receipt by
the other party at least three days before the date of hearing. Thus:
After a meticulous scrutiny of the records of this case, the court opines
that the motion was filed beyond the reglementary three (3)[-]day period.
As the records bear out, the instant motion was mailed to the plaintiffs
counsel on August 14[, 2007] and was set for hearing on August 17,
2007. However, the copy of said motion had reached plaintiffs side and
a copy of which was received by plaintiffs counsel only on August 17,
2007[,] four (4) days late after it was supposed to be heard. Hence,
a clear blatant violations [sic] of the rule on notice and hearing.12
The RTC further opined that a motion, which fails to comply with the
three-day notice requirement is a mere scrap of paper; it is not entitled
to judicial cognizance and would not toll the running of the reglementary
period for filing the requisite pleadings. Accordingly, the RTC held, its
Decision dated August 7, 2007 had already become final for failure of
the spouses Cabrera to comply with the three-day notice requirement.
The petitioner then filed a petition for certiorari13 with the CA, alleging
that the RTC gravely abused its discretion in denying her motion for
reconsideration. The petitioner pointed out that the RTC did not actually
conduct a hearing on her motion for reconsideration on August 17, 2007;
that her motion for reconsideration was actually heard on October 26,
2007, after the respondent had already filed his opposition thereto. Thus,
the petitioner claimed, the issue of her failure to comply with the three-day
notice requirement had already been rendered moot. In any case, the
petitioner asserted, the RTC should have resolved her motion for
reconsideration on its merits rather than simply denying it on mere
technicality.
On October 21, 2009, the CA, by way of the assailed Decision,14 denied
the petition for certiorari filed by the petitioner. The CA opined that the
RTC did not abuse its discretion in denying the motion for reconsideration
filed by the spouses Cabrera since it merely applied the three-day notice
requirement under Section 4, Rule 15 of the Rules of Court. Thus:
It appears that petitioners Motion for Reconsideration was set for hearing
on 17 August 2007. A copy thereof was mailed to private respondent
on 14 August 2007, and private respondent actually received his copy
only on 21 August 2007 or four (4) days after the set date of hearing;
and thus, depriving him of the opportunity to oppose the motion.
Respondent court, therefore, correctly held that such motion violated the
three (3)-day notice rule; the essence of due process. Respondent court
had applied said rule to the given situation, and of no doubt, mere
adherence to the rules cannot be considered grave abuse of discretion on
the part of the respondent court. x x x.15 (Citation omitted)
The petitioner sought a reconsideration of the Decision dated October 21,
2009 but it was denied by the CA in its Resolution16 dated March 26,
2012.
Hence, the instant petition.
The Issue
The sole issue to be resolved by the Court is whether the CA erred in
affirming the RTC Order dated December 19, 2007, which denied the
motion for reconsideration filed by the spouses Cabrera.
The Courts Ruling
The petition is meritorious.
Sections 4 and 5, Rule 15 of the Rules of Court provide that:
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.
Sec. 5. Notice of hearing. The notice of hearing shall be addressed to
all parties concerned, and shall specify the time and date of the hearing
which must not be later than ten (10) days after the filing of the motion.
(Emphasis ours)
The general rule is that the three-day notice requirement in motions under
Sections 4 and 5 of the Rules of Court is mandatory. It is an integral
component of procedural due process.17 "The purpose of the three-day
notice requirement, which was established not for the benefit of the movant
but rather for the adverse party, is to avoid surprises upon the latter and
to grant it sufficient time to study the motion and to enable it to meet the
arguments interposed therein."18
"A motion that does not comply with the requirements of Sections 4 and
5 of Rule 15 of the Rules of Court is a worthless piece of paper which
the clerk of court has no right to receive and which the court has no
authority to act upon."19 "Being a fatal defect, in cases of motions to
reconsider a decision, the running of the period to appeal is not tolled by
their filing or pendency."20
Nevertheless, the three-day notice requirement is not a hard and fast rule.
When the adverse party had been afforded the opportunity to be heard,
and has been indeed heard through the pleadings filed in opposition to
the motion, the purpose behind the three-day notice requirement is deemed
realized. In such case, the requirements of procedural due process are
substantially complied with. Thus, in Preysler, Jr. v. Manila Southcoast
Development Corporation,21 the Court ruled that:
The three-day notice rule is not absolute. A liberal construction of the
procedural rules is proper where the lapse in the literal observance of a
rule of procedure has not prejudiced the adverse party and has not deprived
the court of its authority. Indeed, Section 6, Rule 1 of the Rules of Court
provides that the Rules should be liberally construed in order to promote
their objective of securing a just, speedy and inexpensive disposition of
every action and proceeding. Rules of procedure are tools designed to
facilitate the attainment of justice, and courts must avoid their strict and
rigid application which would result in technicalities that tend to frustrate
rather than promote substantial justice.
In Somera Vda. De Navarro v. Navarro, the Court held that there was
substantial compliance of the rule on notice of motions even if the first
notice was irregular because no prejudice was caused the adverse party
since the motion was not considered and resolved until after several
postponements of which the parties were duly notified.
Likewise, in Jehan Shipping Corporation v. National Food Authority, the
Court held that despite the lack of notice of hearing in a Motion for
Reconsideration, there was substantial compliance with the requirements
of due process where the adverse party actually had the opportunity to
be heard and had filed pleadings in opposition to the motion. The Court
held:
This Court has indeed held time and again, that under Sections 4 and
5 of Rule 15 of the Rules of Court, mandatory is the requirement in a
motion, which is rendered defective by failure to comply with the
requirement. As a rule, a motion without a notice of hearing is considered
pro forma and does not affect the reglementary period for the appeal or
the filing of the requisite pleading.
As an integral component of the procedural due process, the three-day
notice required by the Rules is not intended for the benefit of the movant.
Rather, the requirement is for the purpose of avoiding surprises that may
be sprung upon the adverse party, who must be given time to study and
meet the arguments in the motion before a resolution of the court.1wphi1
Principles of natural justice demand that the right of a party should not
be affected without giving it an opportunity to be heard.
The test is the presence of 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. x x x22
(Emphasis supplied and citations omitted)
It is undisputed that the hearing on the motion for reconsideration filed by
the spouses Cabrera was reset by the RTC twice with due notice to the
parties; it was only on October 26, 2007 that the motion was actually
heard by the RTC. At that time, more than two months had passed since
the respondent received a copy of the said motion for reconsideration on
August 21, 2007. The respondent was thus given sufficient time to study
the motion and to enable him to meet the arguments interposed therein.
Indeed, the respondent was able to file his opposition thereto on September
20, 2007.
Notwithstanding that the respondent received a copy of the said motion
for reconsideration four days after the date set by the spouses Cabrera
for the hearing thereof, his right to due process was not impinged as he
was afforded the chance to argue his position. Thus, the R TC erred in
denying the spouses Cabrera's motion for reconsideration based merely on
their failure to comply with the three-day notice requirement.
WHEREFORE, in consideration of the foregoing disquisitions, the instant
petition is GRANTED. The Decision dated October 21, 2009 and the
Resolution dated March 26, 2012 of the Court of Appeals in CA-G.R.
SP No. 03392, are hereby REVERSED and SET ASIDE. The case is
hereby REMANDED to the Regional Trial Court of Mandaue City, Branch
56, to resolve the Motion for Reconsideration filed by the spouses Cabrera
on the merits within five (5) days from the finality of this Decision.
SO ORDERED.
NEGROS SLASHERS, INC., RODOLFO C. ALVAREZ AND G.R. No.
VICENTE TAN,
Present:
Petitioners,
CORONA
LEONARD
BERSAMI
- versus -
VILLARAM
PERLAS-
ALVIN L. TENG, Promulgat
Respondent. February
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DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari assailing the
Decision1[1] dated September 17, 2008 and Resolution2[2] dated
February 11 2009 of the Court of Appeals (CA) in CA-G.R. SP No.
00817. The appellate court had reversed and set aside the September
10, 2004 Decision3[3] and March 21, 2005 Resolution4[4] of the
National Labor Relations Commission (NLRC) and reinstated with
modification the Decision5[5] of the Labor Arbiter finding respondent to
have been illegally dismissed.
The facts are undisputed.
Respondent Alvin Teng is a professional basketball player who
started his career as such in the Philippine Basketball Association and then
later on played in the Metropolitan Basketball Association (MBA).
On February 4, 1999, Teng signed a 3-year contract6[6]
(which included a side contract and agreement for additional benefits and
bonuses) with the Laguna Lakers. Before the expiration of his contract with
the Laguna Lakers on December 31, 2001, the Lakers traded and/or
transferred Teng to petitioner Negros Slashers, with the latter assuming the
obligations of Laguna Lakers under Tengs unexpired contract, including the
monthly salary of P250,000, P50,000 of which remained to be the
obligation of the Laguna Lakers. On March 28, 2000, the management
of the Laguna Lakers formally informed Teng of his transfer to the Negros
Slashers. 7 [7] Teng executed with the Negros Slashers the Players
Contract of Employment.8[8]
On Game Number 4 of the MBA Championship Round for the
year 2000 season, Teng had a below-par playing performance. Because
of this, the coaching staff decided to pull him out of the game. Teng then
sat on the bench, untied his shoelaces and donned his practice jersey.
On the following game, Game Number 5 of the Championship Round, Teng
called-in sick and did not play.
On November 21, 2000, Vicente Tan, Finance Head of Negros
Slashers, wrote9[9] Teng requiring him to explain in writing why no
disciplinary action should be taken against him for his precipitated absence
during the crucial Game 5 of the National Championship Round. He was
further informed that a formal investigation would be conducted on
November 28, 2000. The hearing, however, did not push through because
Teng was absent on the said scheduled investigation. Hearing was
rescheduled for December 11, 2000. On said date, the investigation
proceeded, attended by Tengs representatives, Atty. Arsenio Yulo and Atty.
Jose Aspiras.10[10] A subsequent meeting was also conducted attended
by the management, coaching staff and players of the Negros Slashers
team, wherein the team members and coaching staff unanimously
expressed their sentiments against Teng and their opposition against the
possibility of Teng joining back the team.11[11]
On March 16, 2001, the management of Negros Slashers came
up with a decision, and through its General Manager, petitioner Rodolfo
Alvarez, wrote12[12] Teng informing him of his termination from the team.
On July 28, 2001, Teng filed a complaint before the Office of
the Commissioner of the MBA pursuant to the provision of the Uniform
Players Contract which the parties had executed. Subsequently, on
November 6, 2001, Teng also filed an illegal dismissal case with the
Regional Arbitration Branch No. VI of the NLRC.13[13]
 On July 16, 2002, the Labor Arbiter issued a decision finding
Tengs dismissal illegal and ordering petitioner Negros Slashers, Inc. to pay
Teng P2,530,000 representing his unpaid salaries, separation pay and
attorneys fees. The Labor Arbiter ruled that the penalty of dismissal was
not justified since the grounds relied upon by petitioners did not constitute
serious misconduct or willful disobedience or insubordination that would call
for the extreme penalty of dismissal from service. The dispositive portion
of the Labor Arbiters decision reads:
WHEREFORE, premises considered, judgment is
hereby rendered declaring the dismissal of complainant
illegal and respondents Negros Slashers, Inc. are
hereby ordered to PAY complainant the total sum of
TWO MILLION FIVE HUNDRED THIRTY THOUSAND
(P2,530,000.00) PESOS representing complainants
unpaid salaries, separation pay and attorneys fee, the
award to be deposited with this Office within ten (10)
days from receipt of this Decision.
All other claims are hereby DISMISSED for lack of
merit.
SO ORDERED.14[14]
The case was then appealed to the NLRC. On September 10,
2004, the NLRC issued a Decision setting aside the July 16, 2002
Decision of the Labor Arbiter and entering a new one dismissing the
complaint for being premature since the arbitration proceedings before the
Commissioner of the MBA were still pending when Teng filed his complaint
for illegal dismissal. The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the
decision of the Executive Labor Arbiter a quo is hereby
REVERSED and SET ASIDE. A new one is entered,
dismissing the instant case for being premature.
SO ORDERED.15[15]
Teng filed a motion for reconsideration, but it was denied for
being filed beyond the ten-day reglementary period provided for in Section
15,16[16] Rule VII of the NLRC Rules of Procedure.
Aggrieved, Teng filed a petition for certiorari with the CA assailing
the NLRC Decision dated September 10, 2004 and the Resolution dated
March 21, 2005 denying his motion for reconsideration.
On September 17, 2008 the CA rendered the assailed Decision
setting aside the September 10, 2004 Decision and March 21, 2005
Resolution of the NLRC and reinstating with modification the Labor Arbiters
Decision.
The CA reinstated the findings of the Labor Arbiter that Teng
was illegally dismissed because the grounds relied upon by petitioners were
not enough to merit the supreme penalty of dismissal. The CA held that
there was no serious misconduct or willful disobedience or insubordination
on Tengs part. On the issue of jurisdiction, the CA ruled that the Labor
Arbiter had jurisdiction over the case notwithstanding the pendency of
arbitration proceedings in the Office of the Commissioner of the MBA.
Petitioners sought reconsideration of the above ruling, but their
motion was denied by the CA in a Resolution17[17] dated February 11,
2009.
Petitioners now come to this Court assailing the Decision dated
September 17, 2008 and Resolution dated February 11, 2009 of the
CA.
Firstly, petitioners argue that respondent Teng and his counsel
committed a blatant violation of the rule against forum shopping. Petitioners
aver that on July 28, 2001, Teng filed a complaint before the MBA
pursuant to the voluntary arbitration provision of the Uniform Players
Contract he executed with Negros Slashers, Inc. During the pendency of
said complaint, Teng filed another complaint for illegal dismissal with the
Labor Arbiter. It is petitioners position that Teng lied by certifying under
oath that there is no similar case pending between him and Negros Slashers,
Inc., when in fact, months before he had filed a complaint with the MBA
alleging the same factual antecedents and raising the same issues.
Secondly, petitioners argue that the CA erred in ruling that Tengs
offenses were just minor lapses and irresponsible action not warranting the
harsh penalty of dismissal. Petitioners allege that the CA paid scant
attention to two very important pieces of evidence which would clearly show
the gravity and seriousness of the offenses committed by Teng. Petitioners
claim that these two documents, i.e., the minutes of the meeting18[18]
of players, management, and coordinating staff, and a petition19[19] by
the players to the management not to allow Teng to come back to the
team, would show that Teng should not have been treated as an ordinary
working man who merely absented himself by feigning sickness when
called upon to work. Petitioners argue that the nature of the work and team
atmosphere should have been considered and given credence. By
neglecting these two documents, the CA failed to appreciate the gravity
of the misconduct committed by Teng and the effects it had on the
basketball organization.
Petitioners also argue that respondents petition for certiorari with
the CA should have been dismissed outright because it was filed beyond
the reglementary period. Petitioners point out that Teng received the NLRC
Decision on October 15, 2004 and therefore had ten days20[20] or until
October 25, 2004 within which to file a motion for reconsideration. But
he filed his motion for reconsideration only on October 26, 2004 and said
motion was denied21[21] on March 21, 2005 for being filed late.
Thereafter he filed his petition for certiorari22[22] with the CA on June
20, 2005. Petitioners contend that the petition for certiorari was filed
beyond the period allowed by the Rules of Court because the 60-day
period to file the petition for certiorari should have started to run from the
receipt of the NLRC decision on October 15, 2004. And it should have
expired on December 14, 2004 because it was as if no motion for
reconsideration was filed in the NLRC. Further, petitioners argue that the
CA could not take cognizance of the case because it is a settled rule that
certiorari as a special civil action will not lie unless a motion for
reconsideration is first filed before the NLRC to allow it an opportunity to
correct its errors. In this case, since the motion for reconsideration was
filed late, it should have been treated as if no motion for reconsideration
was filed.
Teng, on the other hand, maintains that there is no violation of
the rule against forum shopping. He submits that he indeed filed his
complaint before the MBA as early as July 28, 2001. Unfortunately, for
more than three months, the supposed voluntary arbitration failed to yield
any result until the MBA itself was dissolved. It was only on November
2001, after exhausting the arbitration process, did he file his complaint
before the Labor Arbiter. In other words, it was only after the MBA failed
to come up with a resolution on the matter did he opt to seek legal redress
elsewhere.
On the merits, Teng relies on the reasoning of the Labor Arbiter
in finding that his alleged lapses and misconduct were too minor to justify
the extreme penalty of dismissal from service. In large part, he quotes the
Labor Arbiters decision, and emphasizes the Labor Arbiters statements that
(1) loosening of the shoe laces and the donning of the practice jersey
are not indicative of serious misconduct that would justify dismissal from
employment; (2) it cannot be concluded that he merely feigned sickness
when he informed the Coach of his inability to play during Game No. 5;
and (3) there is no showing of any bad faith or ill motive on his part
that would qualify his actions as serious, severe and grave as to warrant
termination from service.
Teng also argues that the CA aptly clarified and explained the
legal reason why the petition for certiorari was given due course despite
some procedural lapses regarding the motion for reconsideration with the
NLRC. Teng stresses that jurisprudence allows the relaxation of procedural
rules even of the most mandatory character in the interest of substantial
justice. In this particular case, justice and equity calls for the relaxation
of the reglementary period for filing a motion for reconsideration as well
as the rule prohibiting the filing of a petition for certiorari without first filing
a motion for reconsideration.
Simply put, the basic issues for our resolution are as follows:
(1) whether the CA erred in giving due course to respondent Tengs
petition for certiorari despite its late filing; (2) whether Teng violated the
rule on forum shopping when he filed a complaint for illegal dismissal with
the Regional Arbitration Branch of the NLRC while a similar complaint was
pending in the Office of the Commissioner of the MBA; and (3) whether
the CA erred in ruling that Tengs dismissal from the Negros Slashers Team
was unjustified and too harsh considering his misconduct.
The petition is bereft of merit.
On the first issue raised by petitioners, we rule that the CA did
not commit a reversible error in giving due course to Tengs petition for
certiorari although said petition was filed late. Ordinarily, rules of procedure
are strictly enforced by courts in order to impart stability in the legal system.
However, in not a few instances, we relaxed the rigid application of the
rules of procedure to afford the parties the opportunity to fully ventilate their
cases on the merits. This is in line with the time honored principle that
cases should be decided only after giving all the parties the chance to argue
their causes and defenses. In that way, the ends of justice would be better
served. For indeed, the general objective of procedure is to facilitate the
application of justice to the rival claims of contending parties, bearing always
in mind that procedure is not to hinder but to promote the administration
of justice.23[23] In Ong Lim Sing, Jr. v. FEB Leasing and Finance
Corporation,24[24] we ruled:
Courts have the prerogative to relax procedural rules
of even the most mandatory character, mindful of the
duty to reconcile both the need to speedily put an end
to litigation and the parties right to due process. In
numerous cases, this Court has allowed liberal
construction of the rules when to do so would serve
the demands of substantial justice and equity. x x x
Indeed the prevailing trend is to accord party litigants the amplest
opportunity for the proper and just determination of their causes, free from
the constraints of needless technicalities.
Here, besides the fact that a denial of the recourse to the CA
would serve more to perpetuate an injustice and violation of Tengs rights
under our labor laws, we find that as correctly held by the CA, no intent
to delay the administration of justice could be attributed to Teng. The CA
therefore did not commit reversible error in excusing Tengs one-day delay
in filing his motion for reconsideration and in giving due course to his
petition for certiorari.
As regards the second issue, we likewise find no merit in
petitioners claim that respondents act of filing a complaint with the Labor
Arbiter while the same case was pending with the Office of the
Commissioner of the MBA constituted forum shopping.
For forum shopping to exist, it is necessary that (a) there be
identity of parties or at least such parties that represent the same interests
in both actions; (b) there be identity of rights asserted and relief prayed
for, the relief being founded on the same facts; and (c) the identity of
the two preceding particulars is such that any judgment rendered in one
action will, regardless of which party is successful, amount to res judicata
in the other action.25[25]
Petitioners are correct as to the first two requisites of forum
shopping. First, there is identity of parties involved: Negros Slashers Inc.
and respondent Teng. Second, there is identity of rights asserted i.e., the
right of management to terminate employment and the right of an employee
against illegal termination. However, the third requisite of forum shopping
is missing in this case. Any judgment or ruling of the Office of the
Commissioner of the MBA will not amount to res judicata. As defined in
Agustin v. Delos Santos,26[26]
Res Judicata is defined as a matter adjudged; a
thing judicially acted upon or decided; a thing or
matter settled by judgment. According to the doctrine
of res judicata, an existing final judgment or decree
rendered on the merits, and without fraud or collusion,
by a court of competent jurisdiction, upon any matter
within its jurisdiction, is conclusive of the rights of the
parties or their privies, in all other actions or suits in
the same or any other judicial tribunal of concurrent
jurisdiction on the points and matters in issue in the
first suit. To state simply, a final judgment or decree
on the merits by a court of competent jurisdiction is
conclusive of the rights of the parties or their privies
in all later suits on all points and matters determined
in the former suit. (Emphasis supplied.)
To clarify, res judicata is defined in jurisprudence as to have four
basic elements: (1) the judgment sought to bar the new action must be
final; (2) the decision must have been rendered by a court having
jurisdiction over the subject matter and the parties; (3) the disposition of
the case must be a judgment on the merits; and (4) there must be as
between the first and second action, identity of parties, subject matter, and
causes of action.27[27]
Here, although contractually authorized to settle disputes, the
Office of the Commissioner of the MBA is not a court of competent
jurisdiction as contemplated by law with respect to the application of the
doctrine of res judicata. At best, the Office of the Commissioner of the
MBA is a private mediator or go-between as agreed upon by team
management and a player in the MBA Players Contract of
Employment.28[28] Any judgment that the Office of the Commissioner of
the MBA may render will not result in a bar for seeking redress in other
legal venues. Hence, respondents action of filing the same complaint in
the Regional Arbitration Branch of the NLRC does not constitute forum
shopping.
On the third issue, we find that the penalty of dismissal handed
out against Teng was indeed too harsh.
We understand petitioners in asserting that a basketball
organization is a team-based enterprise and that a harmonious working
relationship among team players is essential to the success of the
organization. We also take into account the petition of the other team
members voicing out their desire to continue with the team without Teng.
We note likewise the sentiments of the players and coaching staff during
the meeting of February 4, 2001 stating how they felt when Teng
abandoned them during a crucial Game Number 5 in the MBA
championship round.
Petitioners rely heavily on the alleged effects of Tengs actions on
the rest of the team. However, such reaction from team members is expected
after losing a game, especially a championship game. It is also not unlikely
that the team members looked for someone to blame after they lost the
championship games and that Teng happened to be the closest target of
the teams frustration and disappointment. But all these sentiments and
emotions from Negros Slashers players and staff must not blur the eyes of
the Court from objectively assessing Tengs infraction in order to determine
whether the same constitutes just ground for dismissal. The incident in
question should be clear: Teng had a below-par performance during Game
Number 4 for which he was pulled out from the game, and then he untied
his shoelaces and donned his practice jersey. In Game Number 5, he did
not play.
As an employee of the Negros Slashers, Teng was expected to
report for work regularly. Missing a team game is indeed a punishable
offense. Untying of shoelaces when the game is not yet finished is also
irresponsible and unprofessional. However, we agree with the Labor Arbiter
that such isolated foolishness of an employee does not justify the extreme
penalty of dismissal from service. Petitioners could have opted to impose
a fine or suspension on Teng for his unacceptable conduct. Other forms
of disciplinary action could also have been taken after the incident to impart
on the team that such misconduct will not be tolerated.
In Sagales v. Rustans Commercial Corporation, 29[29] this
Court ruled:
Truly, while the employer has the inherent right to
discipline, including that of dismissing its employees,
this prerogative is subject to the regulation by the State
in the exercise of its police power.
In this regard, it is a hornbook doctrine that
infractions committed by an employee should merit only
the corresponding penalty demanded by the
circumstance. The penalty must be commensurate with
the act, conduct or omission imputed to the employee
and must be imposed in connection with the disciplinary
authority of the employer. (Emphasis in the original.)
In the case at bar, the penalty handed out by the petitioners
was the ultimate penalty of dismissal. There was no warning or admonition
for respondents violation of team rules, only outright termination of his
services for an act which could have been punished appropriately with a
severe reprimand or suspension.
WHEREFORE, the petition for review on certiorari is DENIED for
lack of merit and the Decision of the Court of Appeals dated September
17, 2008 and Resolution dated February 11, 2009, in CA-G.R. SP No.
00817 are hereby AFFIRMED.
With costs against the petitioners.
SO ORDERED.
CEBU BIONIC BUILDERS SUPPLY, INC. and G.R. No. 154366
LYDIA SIA,
Petitioners,
Present:
CORONA, C.J.,
- versus - Chairperson,
VELASCO, JR.,
 LEONARDO-DEmotion
DEVELOPMENT BANK OF THE PHILIPPINES, JOSE
PERALTA,* and
TO CHIP, PATRICIO YAP and ROGER BALILA,
PEREZ, JJ.
Respondents.
Promulgated:
November 17, 2010
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D E C I S I O N
LEONARDO DE CASTRO, J.:
This Petition for Review on Certiorari30[1] under Rule 45 of the
Rules of Court assails the Resolution31[2] dated February 5, 2002 and
the Amended Decision32[3] dated July 5, 2002 of the Court of Appeals
in CA-G.R. CV No. 57216. In the Resolution dated February 5, 2002,
the Court of Appeals admitted the Motion for Reconsideration33[4] of
herein respondents Development Bank of the Philippines (DBP), Jose To
Chip, Patricio Yap and Roger Balila, notwithstanding the fact that the same
was filed more than six months beyond the reglementary period. Said
CASTRO,
prayed for the reversal of the Court of Appeals Decision34[5] dated
February 14, 2001, which affirmed the Decision35[6] dated April 25,
1997 of the Regional Trial Court (RTC) of Cebu, Branch 8, in Civil Case
No. CEB-10104 that ruled in favor of petitioners. In the Amended Decision
of July 5, 2002, the Court of Appeals reversed its previous Decision dated
February 14, 2001 and dismissed the petitioners complaint for lack of
merit.
The facts leading to the instant petition are as follows:
On June 2, 1981, the spouses Rudy R. Robles, Jr. and Elizabeth
R. Robles entered into a mortgage contract36[7] with DBP in order to
secure a loan from the said bank in the amount of P500,000.00. The
properties mortgaged were a parcel of land situated in Tabunoc, Talisay,
Cebu, which was then covered by Transfer Certificate of Title (TCT) No.
T- 47783 of the Register of Deeds of Cebu, together with all the existing
improvements, and the commercial building to be constructed thereon37[8]
(subject properties). Upon completion, the commercial building was named
the State Theatre Building.
On October 28, 1981, Rudy Robles executed a contract of lease
in favor of petitioner Cebu Bionic Builders Supply, Inc. (Cebu Bionic), a
domestic corporation engaged in the construction business, as well as the
sale of hardware materials. The contract pertinently provides:
CONTRACT OF LEASE
KNOW ALL MEN BY THESE PRESENTS:
This Lease Contract made and entered into, by and
between:
RUDY ROBLES, JR., Filipino, of legal age, married
and resident of 173 Maria Cristina Ext., Cebu City,
hereinafter referred to as the LESSOR,
- and -
 CEBU BIONIC BUILDER SUPPLY, represented by of the mortgaged subject properties.40[11] On October 13, 1988, a final
LYDIA SIA, Filipino, of legal age, married and with Deed of Sale41[12] was issued in favor of DBP.
address at 240 Magallanes St., Cebu City hereinafter
known as the LESSEE;

WITNESSETH:
Meanwhile, on June 18, 1987, DBP sent a letter to Bonifacio Sia,
The LESSOR is the owner of a commercial building the husband of petitioner Lydia Sia who was then President of Cebu Bionic,
along Tabunok, Talisay, Cebu, known as the State notifying the latter of DBPs acquisition of the State Theatre Building. Said
Theatre Building. letter reads:
The LESSOR agrees to lease unto the LESSEE and
the LESSEE accepts the lease from the LESSOR, a
portion of the ground floor thereof, consisting of one
(1) unit/store space under the following terms and June 18, 1987
conditions:
Mr. Bonifacio Sia
1. The LESSEE shall pay a monthly Bionic Builders Inc.
rental of One Thousand (P1,000.00) Pesos, State Theatre Bldg.
Philippine Currency. The rental is payable in advance Tabunok, Talisay, Cebu
within the first five (5) days of the month, without
need of demand;
Sir:
2. That the term of this agreement
shall start on November 1, 1981 and shall terminate This refers to the commercial space you are occupying
on the last day of every month thereafter; provided in the acquired property of the Bank, formerly owned
however that this contract shall be automatically by Rudy Robles, Jr.
renewed on a month to month basis if no notice, in
writing, is sent to the other party to terminate this Please be informed that said property has been
agreement after fifteen (15) days from receipt of said acquired through foreclosure on February 6, 1987.
notice; Considering thereat, we require you to remit the rental
due for June 1987.

If you wish to continue on leasing the property, we

x x x x request you to come to the Bank for the execution of
a Contract of Lease, the salient conditions of which
9. Should the LESSOR decide to are as follows:
sell the property during the term of this lease contract
or immediately after the expiration of the lease, the
LESSEE shall have the first option to buy and shall
match offers from outside parties.38[9] (Emphases 1. The lease will be on month to month basis,
ours.) for a maximum period of one (1) year;

2. Deposit equivalent to two (2)

months rental and advance of
one (1) month rental, and the
remaining amount for one year
The above contract was not registered by the parties thereto with period (equivalent to 9 months
the Registry of Deeds of Cebu. rental) shall be secured by either
surety bond, cash bond or
assigned time deposit;

Subsequently, the spouses Robles failed to settle their loan 3. That in case there is a better
obligation with DBP. The latter was, thus, prompted to effect extrajudicial offer or if the property will be
foreclosure on the subject properties.39[10] On February 6, 1987, DBP subject of a purchase offer, within
was the lone bidder in the foreclosure sale and thereby acquired ownership the term, the lessor is given an
option of first refusal, otherwise
 he has to vacate the premises I sincerely hope that you will give due
within thirty (30) days from date course to this request.
of notice.
Thank you.
We consider, temporarily, the current monthly rental
based on the six-month receipts, which we require you T
to submit, until such time when we will fix the amount r
accordingly. ul
y
If the contract of lease is not executed within thirty (30) y
days from date hereof, it is construed that you are not o
interested in leasing the premises and will vacate within u
the said period. r
s,
Please be guided accordingly.
(SGD) ANASTACIO T.
Truly yours, MUNTUERTO, JR.43[14]

(SGD)LUCILO S.
REVILLAS
Branch Head42[13] Thereafter, on November 14, 1989, a Certificate of Time
(Emphases ours.)
Deposit44[15] for P11,395.64 was issued in the name of Bonifacio Sia
and the same was allegedly remitted to DBP as advance rental deposit.

On July 7, 1987, the counsel of Bonifacio Sia replied to the above

letter, to wit:

For reasons unclear, however, no written contract of lease was

executed between DBP and Cebu Bionic.
July 7, 1987

Mr. Lucilo S. Revillas

Branch Head
Development Bank of the Philippines
Dear Mr. Revillas,
This has reference to your letter of 18 June 1987
which you sent to my client, Mr. Bonifacio Sia of Cebu
Bionic Builders Supply the lessee of a commercial
space of the State Theatre Bldg., located at Tabunok,
Talisay, Cebu.
In the meantime, subsequent to the acquisition of the subject
properties, DBP offered the same for sale along with its other assets.
Pursuant thereto, DBP published a series of invitations to bid on such
properties, which were scheduled on January 19, 1989,45[16] February
23, 1989, 46 [17] April 13, 1989, 47 [18] and November 15,
1990.48[19] As no interested bidder came forward, DBP publicized an

My client is amenable to the terms contained in your

letter except the following:

1. In lieu of item no. 2 thereof, my

client will deposit with your bank the amount of
P10,000.00, as assigned time deposit;

2. The 30 days notice you

mentioned in your letter, (3), is too short. My client
is requesting for at least 60 days notice.
Invitation on Negotiated Sale/Offer, the relevant terms and conditions of proposal on a First-Come-First-Served
which stated: basis.

City of Cebu, Philippines, November 16, 1990.

(
S
INVITATION ON NEGOTIATED SALE/OFFER G
D
The DEVELOPMENT BANK OF THE PHILIPPINES, .)
Cebu Branch, will receive SEALED NEGOTIATED T
OFFERS/PURCHASE PROPOSALS tendered at its I
Branch Office, DBP Building, Osmea Boulevard, Cebu M
City for the sale of its acquired assets mentioned O
hereinunder within the 15-Day-Acceptance-Period T
starting from NOVEMBER 19, 1990 up to 12:00 E
oclock noon of DECEMBER 3, 1990. Sealed offers O
submitted shall be opened by the Committee on P.
Negotiated Offers at exactly 2:00 oclock in the O
afternoon of the last day of the acceptance period in L
order to determine the highest and/or most A
advantageous offer. R
T
Item No. Description/Location Starting Price E
B
ranch
x x x x Head49[20
]
(Emphases
ours.)
II Commercial land, Lot No. 3681-C-3, having an
area of 396 sq. m., situated in Tabunok, Talisay,
Cebu and covered by TCT No. T-65199 (DBP),
including the commercial building thereon. InP1,838,100.00
the morning of December 3, 1990, the last day for the acceptance
of negotiated offers, petitioners submitted through their representative, Judy
Garces, a letter-offer form, offering to purchase the subject properties for
x x x x
P1,840,000.00. Attached to the letter-offer was a copy of the Negotiated
A pre-numbered Acknowledgment Receipt duly signed Sale Rules and Procedures issued by DBP and a managers check for the
by at least two (2) of the Committee members shall amount of P184,000.00, representing 10% of the offered purchase price.
be issued to the offeror acknowledging receipt of such
offer. This offer of petitioners was not accepted by DBP, however, as the
corresponding deposit therefor was allegedly insufficient.
Negotiated offers may be made in CASH or TERMS,
the former requiring a deposit of 10% and the latter
20% of the starting price, either in the form of cash
or cashiers/managers check to be enclosed in the
sealed offer.
After the lapse of the above-mentioned 15-day acceptance
x x x x period, petitioners did not submit any other offer/proposal to purchase the
subject properties.
Interested negotiated offerors are requested to see Atty.
Apolinar K. Panal, Jr., Acquired Asset in Charge (Tel.
No. 9-63-25), in order to secure copies of the
Letter-Offer form and Negotiated Sale Rules and
Procedures.
On December 17, 1990, respondents To Chip, Yap and Balila
NOTE: If no offer is received during the above stated presented their letter-offer50[21] to purchase the subject properties on
acceptance period, the properties
described above shall be sold to the first
offeror who submits an acceptable
a cash basis for P1,838,100.00. Said offer was accompanied by a
downpayment of 10% of the offered purchase price, amounting to
P183,810.00. On even date, DBP acknowledged the receipt of and
accepted their offer. On December 28, 1990, respondents To Chip, Yap
and Balila paid the balance of the purchase price and DBP issued a Deed
of Sale51[22] over the subject properties in their favor.
On January 11, 1991, the counsel of respondents To Chip, Yap
and Balila sent a letter52[23] addressed to the proprietor of Cebu Bionic,
informing the latter of the transfer of ownership of the subject properties.
Cebu Bionic was ordered to vacate the premises within thirty (30) days
from receipt of the letter and directed to pay the rentals from January 1,
1991 until the end of the said 30-day period.
The counsel of Cebu Bionic replied53[24] that his client received
the above letter on January 11, 1991. He stated that he has instructed
Cebu Bionic to verify first the ownership of the subject properties since
it had the preferential right to purchase the same. He likewise requested
that he be furnished a copy of the deed of sale executed by DBP in favor
of respondents To Chip, Yap and Balila.
On February 15, 1991, respondent To Chip wrote a letter54[25]
to the counsel of Cebu Bionic, insisting that he and his co-respondents
Yap and Balila urgently needed the subject properties to pursue their
business plans. He also reiterated their demand for Cebu Bionic to vacate
the premises.
Shortly thereafter, on February 27, 1991, the counsel of
respondents To Chip, Yap and Balila sent its final demand letter55[26]
to Cebu Bionic, warning the latter to vacate the subject properties within
seven (7) days from receipt of the letter, otherwise, a case for ejectment
with damages will be filed against it.56[27]
Despite the foregoing notice, Cebu Bionic still paid57[28] to DBP,
on March 22, 1991, the amount of P5,000.00 as monthly rentals on
the unit of the State Theatre Building it was occupying for period of
November 1990 to March 1991.
On April 10, 1991, petitioners filed against respondents DBP, To
Chip, Yap and Balila a complaint 58 [29] for specific performance,
cancellation of deed of sale with damages, injunction with a prayer for the
issuance of a writ of preliminary injunction.59[30] The complaint was
docketed as Civil Case No. CEB-10104 in the RTC.
Petitioners alleged, inter alia, that Cebu Bionic was the lessee
and occupant of a commercial space in the State Theatre Building from
October 1981 up to the time of the filing of the complaint. During the
latter part of 1990, DBP advertised for sale the State Theatre Building
and the commercial lot on which the same was situated. In the prior
invitation to bid, the bidding was scheduled on November 15, 1990; while
in the next, under the 15-day acceptance period, the submission of
proposals was to be made from November 19, 1990 up to 12:00 noon
of December 3, 1990. Petitioners claimed that, at about 10:00 a.m. on
December 3, 1990, they duly submitted to Atty. Apolinar Panal, Jr., Chief
of the Acquired Assets of DBP, the following documents, namely:
6.1 Letter-offer form,
offering to purchase the property advertised, for the
price of P1,840,000, which was higher than the
starting price of P1,838,100.00 on cash basis. x x
x;
6.2 Negotiated Sale
Rules and Procedures, duly signed by plaintiff, x x x;
6.3 Managers check for
the amount of P184,000 representing 10% of the
deposit dated December 3, 1990 and issued by Allied
Banking Corp. in favor of the Development Bank of
the Philippines. x x x.60[31] (Emphasis ours.)
Petitioners asserted that the above documents were initially
accepted but later returned. DBP allegedly advised petitioners that there
was no urgent need for the same x x x, considering that the property will
necessarily be sold to [Cebu Bionic] for the reasons that there was no
other interested party and that [Cebu Bionic] was a preferred party being
the lessee and present occupant of the property subject of the
lease[.]61[32] Petitioners then related that, without their knowledge, DBP
sold the subject properties to respondents To Chip, Yap and Balila. The
sale was claimed to be simulated and fictitious, as DBP still received rentals
from petitioners until March 1991. By acquiring the subject properties,
petitioners contended that DBP was deemed to have assumed the contract
of lease executed between them and Rudy Robles. As such, DBP was
bound by the provision of the lease contract, which stated that:
9. Should the Lessor decide to sell the
property during the term of this lease contract or
immediately after the expiration of the lease, the
Lessee shall have the first option to buy and shall
match offers from outside parties.62[33]
Petitioners sought the rescission of the contract of sale between
DBP and respondents To Chip, Yap and Balila. Petitioners also prayed
for the issuance of a writ of preliminary injunction, restraining respondents
To Chip, Yap and Balila from registering the Deed of Sale in the latters
favor and from undertaking the ejectment of petitioners from the subject
properties. Likewise, petitioners entreated that DBP be ordered to execute
a deed of sale covering the subject properties in their name and to pay
damages and attorneys fees.
In its answer,63[34] DBP denied the existence of a contract
of lease between itself and petitioners. DBP countered that the letter-offer
of petitioners was actually not accepted as their offer to purchase was on
a term basis, which therefore required a 20% deposit. The 10% deposit
accompanying the petitioners letter-offer was declared insufficient. DBP
stated that the letter-offer form was not completely filled out as the Term
and Mode of Payment fields were left blank. DBP then informed petitioner
Lydia Sia of the inadequacy of her offer. After ascertaining that there was
no other offeror as of that time, Lydia Sia allegedly summoned back her
representative who did not leave a copy of the letter-offer and the attached
documents. DBP maintained that petitioners documents did not show that
the same were received and approved by any approving authority of the
bank. The letter-offer attached to the complaint, which indicated that the
mode of payment was on a cash basis, was allegedly not the document
shown to DBP. In addition, DBP argued that there was no assumption of
the lease contract between Rudy Robles and petitioners since it acquired
the subject properties through the involuntary mode of extrajudicial
foreclosure and its request to petitioners to sign a new lease contract was
simply ignored. DBP, therefore, insisted that petitioners occupancy of the
unit in the State Theatre Building was merely upon its acquiescence. The
petitioners payment of rentals on March 22, 1991 was supposedly made
in bad faith as they were made to a mere teller who had no knowledge
of the sale of the subject properties to respondents To Chip, Yap and Balila.
DBP, thus, prayed for the dismissal of the complaint and, by way of
counterclaim, asked that petitioners be ordered to pay damages and
attorneys fees.
 Respondents To Chip, Yap and Balila no longer filed a separate
answer, adopting instead the answer of DBP.64[35]
In an Order65[36] dated July 31, 1991, the RTC granted the
prayer of petitioners for the issuance of a writ of preliminary
injunction.66[37]
On April 25, 1997, the RTC rendered judgment in Civil Case
No. CEB-10104, finding meritorious the complaint of the petitioners.
Explained the trial court:
It is a fact on record that [petitioners] complied with
the requirements of deposit and advance rental as
conditions for constitution of lease between the parties.
[Petitioners] in complying with the requirements,
issued a time deposit in the amount of P11,395.64
and remitted faithfully its monthly rentals until April,
1991, which monthly rental was no longer accepted
by the DBP. Although there was no formal written
contract executed between [respondent] DBP and the
[petitioners], it is very clear that DBP opted to continue
the old and previous contract including the terms
thereon by accepting the requirements contained in
paragraph 2 of its letter dated June 18, 1987. It is
also a fact on record that under the lease contract
continued by the DBP on the [petitioners], it is
provided in paragraph 9 thereof that the lessee shall
have the first option to buy and shall match offers from
outside parties. And yet, [respondent] DBP never gave
[petitioners] the first option to buy or to match offers
from outside parties, more specifically [respondents] To
Chip, Balila and Yap. It is also a fact on record that
[respondent] DBP in its letter dated June 18, 1987
to [petitioners] wrote in paragraph 3 thereof, that in
case there is better offer or if a property will be subject
of purchase offer, within the term, the lessee is given
the option of first refusal, otherwise, he has to vacate
the premises within thirty (30) days. Yet, [respondent]
DBP never informed [petitioners] that there was an
interested party to buy the property, meaning,
[respondents To Chip, Yap and Balila], thus depriving
[petitioners] of the opportunity of first refusal promised
to them in its letter dated June 18, 1987. x x
x.67[38] (Emphases ours.)
As regards the offer of petitioners to purchase the subject properties
from DBP, the RTC gave more credence to the petitioners version of the
facts, to wit:
It is also a fact on record that when [respondent] DBP
offered the property for negotiated sale under the
15-day acceptance period[, which] ended at noon of
December 3, 1991, [Cebu Bionic] submitted its offer,
complete with [the required documents.] x x x.
x x x x
These requirements, however, were unceremoniously
returned by [respondent] bank with the assurance that
since there was no other bidder of the said property,
there was no urgency for the same and that [Cebu
Bionic] also, in all events, is entitled to first option
being the present lessee.
The declaration of Atty. Panal to the effect that Cebu
Bionic wanted to buy the property on installment terms,
such that the deposit of P184,000.00 was insufficient
being only 10% of the offer, could not be given much
credence as it is refuted by Exh. H which is the
negotiated offer to purchase form under the 15-day
acceptance period accomplished by [petitioners] which
shows clearly the written word Cash after the printed
words Term and Mode of Payment, Exhibit J, the
Managers check issued by Allied Banking Corporation
dated December 3, 1990 in the amount of
P184,000.00 representing 10% of the offer showing
the mode of payment is for cash; Exhibit K which is
the application for Managers check in the amount of
P184,000.00 dated December 3, 1990 showing the
beneficiary as DBP. If it is true that the offer of
[petitioners] was for installment payments, then in the
ordinary course of human behavior, it would not have
wasted effort in securing a Managers check in the
amount of P184,000.00 which was insufficient for 20%
deposit as required for installment payments. More
credible is the explanation [given by] witness Judy
Garces when she said that DBP through Atty. Panal
returned the documents submitted by her, saying that
there was no urgency for the same as there was no
other bidder of [the said] property and that Cebu Bionic
was entitled to a first option to buy being the present
lessee. In the letter also of [respondent] bank dated
June 18, 1987, it is important to note that aside from
requiring Cebu Bionic to comply with certain
requirements of time deposit and advance rental, as
condition for constitution of lease between the parties
 and which was complied by Cebu Bionic[,] said letter
further states in paragraph 3 thereof that in case there
is [a] better offer or if the property will be subject of
a purchase offer, within the term, the lessee is given
the option of first refusal, otherwise, he has to vacate
the premises within thirty days. In answer to the Courts
question, however, Atty. Panal admitted that he did not
tell [petitioners] that there was another party who was
willing to purchase the property, in violation of
[petitioners] right of first refusal.68[39] (Emphasis
ours.)
Likewise, the RTC found that respondents To Chip, Yap and Balila
were aware of the lease contract involving the subject properties before
they purchased the same from DBP. Thus:
[Respondent] Jose To Chip lamely pretends
ignorance that [petitioners] are lessees of the property,
subject matter of this case. He states that he and his
partners, the other [respondents], were given
assurances by Atty. Panal of the DBP that [Lydia Sia]
is not a lessee, although he knew that [petitioners]
were presently occupying the property and that it was
possessed by [petitioners] even before it was owned
by the DBP. x x x.
x x x x
[Respondent] Roger Balila, in his testimony, likewise
pretended ignorance that he knew that [Lydia Sia] was
a lessee of the property. x x x.
x x x x
Upon further questioning by the Court, he admitted
that [Lydia Sia] was not possessing the building freely;
that she was a lessee of Rudy Robles, the former
owner, but cleverly insisted in disowning knowledge
that [Lydia Sia] was a lessee, denying knowledge that
[Lydia Sia] was paying rentals to [respondent] bank.
His pretended ignorance x x x was a way of evading
[Cebu Bionics] right of first priority to buy the property
under the contract of lease. x x x The Court is
convinced that [respondents To Chip, Yap and Balila]
knew that [Cebu Bionic] was the present lessee of the
property before they bought the same from
[respondent] bank. Common observation, knowledge
and experience dictates that as a prudent businessman,
it was but natural that he ask Lydia Sia what her status
was in occupying the property when he went to talk
to her, that he ask her if she was a lessee. But he
said, all he asked her was whether she was interested
to buy the property. x x x.69[40]
The trial court, therefore, concluded that:
From the foregoing facts on record, it is thus clear
that [petitioner] Cebu Bionic is the present lessee of
the property, the lease contract having been continued
by [respondent] DBP when it received rental payments
up to March of 1991 as well as the advance rental
for one year represented by the assigned time deposit
which is still in [respondent] banks possession. The
provision, therefore, in the lease contract, on the right
of first option to buy and the right of first refusal
contained in [respondent] banks letter dated June 18,
1987, are still subsisting and binding up to the
present, not only on [respondent] bank but also on
[respondents To Chip, Yap and Balila]. x x x.
x x x x
WHEREFORE, THE FOREGOING PREMISES
CONSIDERED, judgment is hereby rendered:
(1) Rescinding the Deed of Sale dated
December 28, 1990 between
[respondent] Development Bank of the
Philippines and [respondents] Roger
Balila, Jose To Chip and Patricio Yap;
(2) Ordering the [respondent]
Development Bank of the Philippines
to execute a Deed of Sale over the
property, subject matter of this case
upon payment by [petitioners] of the
whole consideration involved and to
complete all acts or documents
necessary to have the title over said
property transferred to the name of
[petitioners];
(3) Costs against [respondents].70[41]
DBP forthwith filed a Notice of Appeal.71[42] Respondents To
Chip, Yap and Balila filed a Motion for Reconsideration72[43] of the above
decision, but the RTC denied the same in an Order73[44] dated July 4,
1997. Said respondents then filed their Notice of Appeal.74[45]
On February 14, 2001, the Court of Appeals promulgated its
Decision,75[46] pronouncing that:
We find nothing erroneous with the
judgment rendered by the trial court. Perforce, We
sustain it and dismiss the [respondents] submission.
The RTC determined, upon evidence on
record after a careful evaluation of the witnesses and
their testimonies during the trial that indeed [petitioners]
right of first option was violated and thus, rescission
of the sale made by DBP to [respondents To Chip,
Yap and Balila] are in order.
x x x x
Apparently, DBP accepted [the documents
submitted by petitioners] and thereafter, through Atty.
Panal (of DBP), returned all of it to the [petitioners]
with the assurance that since there was no other
bidder of the said property, there was no urgency for
the same and that [Cebu Bionic] also, in all events,
is entitled to first option being the present lessee.
[DBP] maintains that the return of the
documents [submitted by petitioners] was in order
since the [petitioners] offered to buy the property in
question on installment basis requiring a higher 20%
deposit. This, however, was correctly rejected by the
trial court[.] x x x
The binding effect of the lease agreement
upon the [respondents To Chip, Yap and Balila] must
be sustained since from existing jurisprudence cited by
the lower court, it was determined during trial that:
... [respondents To
Chip, Yap and Balila] knew that
[Cebu Bionic] was the present
lessee of the property before they
bought the same from
[respondent] bank. Common
observation, knowledge and
experience dictates that as a
prudent businessman, it was but
natural that he ask Lydia Sia what
her status was in occupying the
property when he went to talk to
her, that he ask her if she was a
lessee. But he said, all he asked
her was whether she was
interested to buy the property. x
x x.
Moreover, We find that the submissions
presented by the [respondents] in their respective
briefs argue against questions of facts as found and
determined by the lower court. The respondents
contentions consist of crude attempts to question the
assessment and evaluation of testimonies and other
evidence gathered by the trial court.
It must be remembered that findings of fact
as determined by the trial court are entitled to great
weight and respect from appellate courts and should
not be disturbed on appeal unless for [strong] and
cogent reasons. These findings generally, so long as
supported by evidence on record, are not to be
disturbed unless there are some facts or evidence
which the trial court has misappreciated or overlooked,
and which if considered would have altered the results
of the entire case. Sad to say for the [respondents],
We see no reason to depart from this well-settled
legal principle.
WHEREFORE, in view of the foregoing, the
judgment of the Regional Trial Court of Cebu City,
Branch 8, in Civil Case No. 10104 is hereby
AFFIRMED in toto.76[47]
On October 1, 2001, petitioners filed a Motion for Issuance of
Entry of Judgment.77[48] Petitioners stressed that, based on the records
of the case, respondents were served a copy of the Court of Appeals
Decision dated February 14, 2001 sometime on March 7, 2001. However,
petitioners discovered that respondents have not filed any motion for
reconsideration of the said decision within the reglementary period therefor,
nor was there any petition for certiorari or appeal filed before the Supreme
Court.

In response to the above motion, respondents To Chip, Yap and
Balila filed on October 8, 2001 a Motion to Admit Motion for
Reconsideration.78[49] Atty. Francis M. Zosa, the counsel for respondents
To Chip, Yap and Balila, explained that he sent copies of the motion for
reconsideration to petitioners and DBP via personal delivery. On the other
hand, the copies of the motion to be filed with the Court of Appeals were
purportedly sent to Mr. Domingo Tan, a friend of Atty. Zosa in Quezon
City, who agreed to file the same personally with the appellate court in
Manila. When Atty. Zosa inquired if the motion for reconsideration was
accordingly filed, Mr. Tan allegedly answered in the affirmative. To his
surprise, Atty. Zosa received a copy of petitioners Motion for Issuance of
Entry of Judgment. Atty. Zosa, thus, attributed the failure of his clients to
file a motion for reconsideration on the mistake, excusable negligence
and/or fraud committed by Mr. Tan.
In the assailed Resolution dated February 5, 2002, the Court
of Appeals granted the motion of respondents To Chip, Yap and Balila and
admitted the motion for reconsideration attached therewith in the higher
interest of substantial justice.79[50]
On July 5, 2002, the Court of Appeals reversed its original
Decision dated February 14, 2001, reasoning thus:
After a judicious review and reevaluation of
the evidence and facts on record, we are convinced
that DBP had terminated the Robles lease contract.
From its letter of June 18, 1987, DBP had expressly
notified [petitioners] that (I)f they wish to continue on
leasing the property x x x to come to the Bank for
the execution of a Contract of Lease, the salient
conditions of which are as follows:
1. The lease will be on a month to month
basis for a maximum period of one (1) year;
2. Deposit equivalent to two (2) months
rental and advance of one (1) month rental, and the
remaining amount for one year (equivalent to 9 months
rental) shall be secured by either surety bond, cash
bond or assigned time deposit;
3. That in case there is a better offer or if
the property will be subject of a purchase offer, within
the term, the lessor is given an option of first refusal,
otherwise he has to vacate the premises within thirty
(30) days from date of notice.
We consider, temporarily, the current
monthly rental based on the six-month receipts, which
we require you to submit, until such time when we will
fix the amount accordingly.
Evidently, except for the remittance of the
monthly rentals up to March 1991, the conditions
imposed by DBP have never been complied with.
[Petitioners] did not go to the Bank to sign any new
written contract of lease with DBP. [Petitioners] also
did not put up a surety bond nor cash bond nor assign
a time deposit to secure the payment of rental for nine
(9) months, although the [petitioners] opened a time
deposit but did not assign it to DBP.
But even with the remittance and
acceptance of the deposit made by [petitioners]
equivalent to two (2) months rental and advance of
one (1) month rental it does not necessarily follow
that DBP opted to continue with the Robles lease. This
is because the Robles contract provides:
That the term of the
agreement shall start on
November 1, 1981 and shall
terminate on the last day of every
month thereafter, provided
however, that this contract shall
be automatically renewed on a
month to month basis if no notice
in writing is sent to the other party
to determine to terminate this
agreement after fifteen (15)
days from the receipt of said
notice.
Here, a notice was sent to [petitioners] on June 18,
1987, informing them that if they wish to continue on
leasing the property, we request you to come to the
Bank for the execution of a Contract of Lease x x x.
[Petitioners] failed to enter into the contract
of lease required by DBP for it to continue occupying
the leased premises.
Because of [petitioners] failure to comply
with the conditions embodied in the 18 June 1987
letter, it cannot be said that [petitioners] entered into
a new contract with DBP where they were given the
first option to buy the leased property and to match
offers from outside parties.
x x x x
 Be that as it may, DBP continued to accept Without seeking a reconsideration of the above decision,
the monthly rentals based on the old Robles contract petitioners filed the instant petition. In their Comment, respondents opposed
despite the fact that the [petitioners] failed to enter
into a written lease contract with it. Corollarily, the the petition on both procedural and substantive grounds.
relations between the parties is now governed by
Article 1670 of the New Civil Code, thus:

Art. 1670. If at the

end of contract the lessee should In petitioners Memorandum, they summarized the issues to be
continue enjoying the thing
resolved in the present case as follows:
leased for fifteen days with the
acquiescence of the lessor, and
unless a notice to the contrary by
either party has previously been
given, it is understood that there
is an implied new lease, not for A) PRELIMINARY ISSUES:
the period of the original contract,
but for the time established in I
Articles 1682 and 1687. The
other terms of the original
contract shall be revived. WHETHER OR NOT THE VERIFICATION (AND CERTIFICATION OF
NON-FORUM SHOPPING) IN THE INSTANT PETITION WAS PROPER
x x x x AND VALID DESPITE ITS BEING SIGNED BY ONLY ONE OF THE TWO
PETITIONERS.
x x x [T]he acceptance by DBP of the
monthly rentals does not mean that the terms of the
Robles contract were revived. In the case of Dizon vs. II
Court of Appeals, the Supreme Court declared that:

The other terms of the

original contract of lease which WHETHER OR NOT ONLY QUESTIONS OF LAW AND NOT OF FACT
are revived in the implied new CAN BE RAISED IN THE INSTANT PETITION BEFORE THIS HON.
lease under Article 1670 of the SUPREME COURT.
New Civil Code are only those
terms which are germane to the
lessees right [of] continued
enjoyment of the property leased
an implied new lease does not B) MAIN AND PRINCIPAL ISSUES IN THE INSTANT PETITION:
ipso facto carry with it any
implied revival of any option to
purchase the leased premises. I
In view of the foregoing, it is clear that
[petitioners] had no right to file a case for rescission
of the deed of sale executed by DBP in favor of WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN
[respondents To Chip, Yap and Balila] because said ADMITTING RESPONDENTS MOTION FOR RECONSIDERATION
deed of sale did not violate their alleged first option DESPITE ITS BEING FILED OUT OF TIME
to buy or match offers from outside parties which is
legally non-existent and which was not impliedly
renewed under Article 1670 of the Civil Code.

WHEREFORE, premises considered, the

14 February 2001 Decision is hereby
RECONSIDERED and another one is issued II
REVERSING the 25 April 1997 Decision of the
Regional Trial Court, Branch 8, Cebu City in Civil
Case No. CEB-10104 and the complaint of
[petitioners] is DISMISSED for lack of merit.80[51] WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN
DECLARING THAT PETITIONERS DID NOT ENTER INTO CONTRACT
WITH RESPONDENT DBP CONTINUING THE TERMS OF THE ROBLES
CONTRACT

III
WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN
IT DECLARED THAT THE CONTINUATION BY RESPONDENT DBP OF
THE LEASE CONTRACT DID NOT CONTAIN THE RIGHT OF FIRST
REFUSAL
IV
WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN
IT DECLARED THAT THE LEASE CONTRACT IS GOVERNED BY ART.
1670 OF THE NEW CIVIL CODE
V
WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN
IT FAILED TO RECOGNIZE PETITIONERS RIGHT OF FIRST REFUSAL
TO WHICH RESPONDENTS WERE BOUND
VI
WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN
IT FAILED TO DECLARE THAT RESPONDENT DBP HAD VIOLATED
PETITIONERS RIGHTS
VII
WHETHER OR NOT THE HON. COURT OF
APPEALS ERRED IN REVERSING ITS OWN
JUDGMENT AND DISMISSING PETITIONERS
CLAIM FOR RESCISSION81[52]
We shall first resolve the preliminary issues.
Respondents To Chip, Yap and Balila argue that the instant petition
should be dismissed outright as the verification and certification of
non-forum shopping was executed only by petitioner Lydia Sia in her
personal capacity, without the participation of Cebu Bionic.
The Court is not persuaded.
Except for the powers which are expressly conferred on it by
the Corporation Code and those that are implied by or are incidental to
its existence, a corporation has no powers. It exercises its powers through
its board of directors and/or its duly authorized officers and agents. Thus,
its power to sue and be sued in any court is lodged with the board of
directors that exercises its corporate powers.82[53] Physical acts, like
the signing of documents, can be performed only by natural persons duly
authorized for the purpose by corporate by-laws or by a specific act of
the board of directors.83[54]
In this case, respondents To Chip, Yap and Balila obviously
overlooked the Secretarys Certificate84[55] attached to the instant petition,
which was executed by the Corporate Secretary of Cebu Bionic.
Unequivocally stated therein was the fact that the Board of Directors of
Cebu Bionic held a special meeting on July 26, 2002 and they thereby
approved a Resolution authorizing Lydia Sia to elevate the present case
to this Court in behalf of Cebu Bionic, to wit:
Whereas, the board appointed LYDIA I. SIA
to act and in behalf of the corporation to file the
CERTIORARI with the Supreme Court in relations to
the decision of the Court of Appeals dated July 5,
2002 which reversed its own judgment earlier
promulgated on February 14, 2001 entitled CEBU
BIONIC BUILDERS SUPPLY, INC. and LYDIA SIA,
(Petitioners- Appellants) versus THE
DEVELOPMENT BANK OF THE PHILIPPINES, JOSE
TO CHIP, PATRICIO YAP and ROGER BALILA
(Respondents- Appelles), docketed CA-G.R. NO.
57216.
Whereas, on mass unanimously motion of
all members of directors present hereby approved the
appointment of LYDIA I. SIA to act and sign all papers
in connection of CA-G.R. NO. 57216.
Resolved and it is hereby resolve to appoint
and authorized LYDIA I. SIA to sign and file with the
 SUPREME COURT in connection to decision of the
Court of Appeals as above mention.85[56]
Respondents To Chip, Yap and Balila next argue that the instant
petition raises questions of fact, which are not allowed in a petition for
review on certiorari. They, therefore, submit that the factual findings of the
Court of Appeals are binding on this Court.
Section 1, Rule 45 of the Rules of Court categorically states
that the petition filed thereunder shall raise only questions of law, which
must be distinctly set forth. A question of law arises when there is doubt
as to what the law is on a certain state of facts, while there is a question
of fact when the doubt arises as to the truth or falsity of the alleged facts.
For a question to be one of law, the same must not involve an examination
of the probative value of the evidence presented by the litigants or any
of them. The resolution of the issue must rest solely on what the law
provides on the given set of circumstances. Once it is clear that the issue
invites a review of the evidence presented, the question posed is one of
fact.86[57]
The above rule, however, admits of certain exceptions,87[58]
one of which is when the findings of the Court of Appeals are contrary
to those of the trial court. As will be discussed further, this exception is
attendant in the case at bar.
We now determine the principal issues put forward by petitioners.
First off, petitioners fault the Court of Appeals for admitting the
Motion for Reconsideration of its Decision dated February 14, 2001, which
was filed by respondents To Chip, Yap and Balila more than six months
after receipt of the said decision. The motion was eventually granted and
the Court of Appeals issued its assailed Amended Decision, ruling in favor
of respondents.
Indeed, the appellate courts Decision dated February 14, 2001
would have ordinarily attained finality for failure of respondents to
seasonably file their Motion for Reconsideration thereon. However, we agree
with the Court of Appeals that the higher interest of substantial justice will
be better served if respondents procedural lapse will be excused.
Verily, we had occasion to apply this liberality in the application
of procedural rules in Barnes v. Padilla88[59] where we aptly declared
that
The failure of the petitioner to file his motion for
reconsideration within the period fixed by law renders
the decision final and executory. Such failure carries
with it the result that no court can exercise appellate
jurisdiction to review the case. Phrased elsewise, a
final and executory judgment can no longer be
attacked by any of the parties or be modified, directly
or indirectly, even by the highest court of the land.
However, this Court has relaxed this rule in
order to serve substantial justice considering (a)
matters of life, liberty, honor or property, (b) the
existence of special or compelling circumstances, (c)
the merits of the case, (d) a cause not entirely
attributable to the fault or negligence of the party
favored by the suspension of the rules, (e) a lack
of any showing that the review sought is merely
frivolous and dilatory, and (f) the other party will not
be unjustly prejudiced thereby.89[60]
In this case, what are involved are the property rights of the
parties given that, ultimately, the fundamental issue to be determined is
who among the petitioners and respondents To Chip, Yap and Balila has
the better right to purchase the subject properties. More importantly, the
merits of the case sufficiently called for the suspension of the rules in order
to settle conclusively the rights and obligations of the parties herein.
In essence, the questions that must be resolved are: 1) whether
or not there was a contract of lease between petitioners and DBP; 2)
if in the affirmative, whether or not this contract contained a right of first
refusal in favor of petitioners; and 3) whether or not respondents To Chip,
Yap and Balila are likewise bound by such right of first refusal.
Petitioners contend that there was a contract of lease between
them and DBP, considering that they had been allowed to occupy the
premises of the subject property from 1987 up to 1991 and DBP received
their rental payments corresponding to the said period. Petitioners claim
that DBP were aware of their lease on the subject property when the latter
foreclosed the same and the acquisition of the subject properties through
foreclosure did not terminate the lease. Petitioners subscribe to the ruling
of the RTC that even if there was no written contract of lease, DBP chose
to continue the existing contract of lease between petitioners and Rudy
Robles by accepting the requirements set down by DBP on the letter dated
June 18, 1987. Petitioners likewise posit that the contract of lease
between them and Rudy Robles never expired, inasmuch as the contract
did not have a definite term and none of the parties thereto terminated
the same. In view of the continuation of the lease contract between
petitioners and Rudy Robles, petitioners submit that Article 1670 of the
Civil Code on implied lease is not applicable on the instant case.
We are not persuaded.
In Uy v. Land Bank of the Philippines,90[61] the Court held
that [i]n respect of the lease on the foreclosed property, the buyer at the
foreclosure sale merely succeeds to the rights and obligations of the
pledgor-mortgagor subject to the provisions of Article 1676 of the Civil
Code on its possible termination. This article provides that [t]he purchaser
of a piece of land which is under a lease that is not recorded in the Registry
of Property may terminate the lease, save when there is a stipulation to
the contrary in the contract of sale, or when the purchaser knows of the
existence of the lease. In short, the buyer at the foreclosure sale, as a
rule, may terminate an unregistered lease except when it knows of the
existence of the lease.
In the instant case, the lease contract between petitioners and
Rudy Robles was not registered.91[62] During trial, DBP denied having
any knowledge of the said lease contract.92[63] It asserted that the lease
was merely presumed in view of the existence of tenants in the subject
property.93[64] Nevertheless, DBP recognized and acknowledged this
lease contract in its letter dated June 18, 1987, which was addressed
to Bonifacio Sia, then President of Cebu Bionic. DBP even required Sia
to pay the monthly rental for the month of June 1987, thereby exercising
the right of the previous lessor, Rudy Robles, to collect the rental payments
from the lessee. In the same letter, DBP extended an offer to Cebu Bionic
to continue the lease on the subject property, outlining the provisions of
the proposed contract and specifically instructing the latter to come to the
bank for the execution of the same. DBP likewise gave Cebu Bionic a
30-day period within which to act on the said contract execution. Should
Cebu Bionic fail to do so, it would be deemed uninterested in continuing
with the lease. In that eventuality, the letter states that Cebu Bionic should
vacate the premises within the said period.
Instead of acceding to the terms of the aforementioned letter,
the counsel of Cebu Bionic sent a counter-offer to DBP dated July 7, 1987,
suggesting a different mode of payment for the rentals and requesting for
a 60-day period within which time the parties will execute a new contract
of lease.
The parties, however, failed to execute a written contract of lease.
Petitioners put the blame on DBP, asserting that no contract was signed
because DBP did not prepare it for them. DBP, on the other hand, counters
that it was petitioners who did not positively act on the conditions for the
execution of the lease contract. In view of the counter-offer of petitioners, waited for DBP to present the contract to them, despite being instructed
DBP and respondents To Chip, Yap and Balila argue that there was no to come to the bank for the execution of the same.96[67]
meeting of minds between DBP and petitioners, which would have given
rise to a new contract of lease.

Contrary to the ruling of the RTC, the Court is also not convinced
that DBP opted to continue the existing lease contract between petitioners
The Court rules that, indeed, no new contract of lease was ever and Rudy Robles.
perfected between petitioners and DBP.

The findings of the RTC that DBP supposedly accepted the

In Metropolitan Manila Development Authority v. JANCOM requirements the latter set forth in its letter dated June 18, 1987 is not
Environmental Corporation,94[65] we emphasized that: well taken. To recapitulate, the third paragraph of the letter reads:

Under Article 1305 of the Civil Code, [a] If you wish to continue on leasing the property, we
contract is a meeting of minds between two persons request you to come to the Bank for the execution of
whereby one binds himself, with respect to the other, a Contract of Lease, the salient conditions of which are
to give something or to render some service. A as follows:
contract undergoes three distinct stages preparation or
negotiation, its perfection, and finally, its
consummation. Negotiation begins from the time the 1. The lease will be on month to month basis,
prospective contracting parties manifest their interest for a maximum period of one (1) year;
in the contract and ends at the moment of agreement
of the parties. The perfection or birth of the contract
takes place when the parties agree upon the essential
2. Deposit equivalent to two (2)
elements of the contract. The last stage is the
months rental and advance of
consummation of the contract wherein the parties fulfill
one (1) month rental, and the
or perform the terms agreed upon in the contract,
remaining amount for one year
culminating in the extinguishment thereof (Bugatti vs.
period (equivalent to 9 months
CA, 343 SCRA 335 [2000]). Article 1315 of the
rental) shall be secured by either
Civil Code, provides that a contract is perfected by
surety bond, cash bond or
mere consent. Consent, on the other hand, is
assigned time deposit;
manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are
3. That in case there
to constitute the contract (See Article 1319, Civil
is a better offer or if the property
Code). x x x.95[66]
will be subject of a purchase offer,
within the term, the lessor is
given an option of first refusal,
otherwise he has to vacate the
In the case at bar, there was no concurrence of offer and premises within thirty (30) days
acceptance vis--vis the terms of the proposed lease agreement. In fact, from date of notice.97[68]
after the reply of petitioners counsel dated July 7, 1987, there was no
indication that the parties undertook any other action to pursue the execution
of the intended lease contract. Petitioners even admitted that they merely
 The so-called requirements enumerated in the above paragraph
are not really requirements to be complied with by the petitioners for the
execution of the proposed lease contract, as apparently considered by the
RTC and the petitioners. A close reading of the letter reveals that the items
enumerated therein were in fact the salient terms and conditions of the
proposed contract of lease, which the DBP and the petitioners were to
execute if the latter were so willing. Also, the Certificate of Time Deposit
in the amount of P11,395.64, which was allegedly paid to DBP as
advance rental deposit pursuant to the said requirements, was not even
clearly established as such since it was neither secured by a security bond
or a cash bond, nor was it assigned to DBP.
The contention that the lease contract between petitioners and
Rudy Robles did not expire, given that it did not have a definite term and
the parties thereto failed to terminate the same, deserves scant
consideration. To recall, the second paragraph of the terms and conditions
of the contract of lease between petitioners and Rudy Robles reads:
2. That the term of this agreement shall
start on November 1, 1981 and shall terminate on
the last day of every month thereafter; provided
however that this contract shall be automatically
renewed on a month to month basis if no notice, in
writing, is sent to the other party to terminate this
agreement after fifteen (15) days from receipt of said
notice.98[69] (Emphases ours.)
Crystal clear from the above provision is that the lease is on
a month-to-month basis. Relevantly, the well-entrenched principle is that
a lease from month-to-month is with a definite period and expires at the
end of each month upon the demand to vacate by the lessor.99[70] As
held by the Court of Appeals in the assailed Amended Decision, the
above-mentioned lease contract was duly terminated by DBP by virtue of
its letter dated June 18, 1987. We reiterate that the letter explicitly directed
the petitioners to come to the office of the DBP if they wished to enter
into a new lease agreement with the said bank. Otherwise, if no contract
of lease was executed within 30 days from the date of the letter, petitioners
were to be considered uninterested in entering into a new contract and
were thereby ordered to vacate the property. As no new contract was in
fact executed between petitioners and DBP within the 30-day period, the
directive to vacate, thus, took effect. DBPs letter dated June 18, 1987,
therefore, constituted the written notice that was required to terminate the
lease agreement between petitioners and Rudy Robles. From then on, the
petitioners continued possession of the subject property could be deemed
to be without the consent of DBP.
Thusly, petitioners assertion that Article 1670 of the Civil Code
is not applicable to the instant case is correct. The reason, however, is
not that the existing contract was continued by DBP, but because the lease
was terminated by DBP, which termination was accompanied by a demand
to petitioners to vacate the premises of the subject property.
Article 1670 states that [i]f at the end of the contract the lessee
should continue enjoying the thing leased for fifteen days with the
acquiescence of the lessor, and unless a notice to the contrary by either
party has previously been given, it is understood that there is an implied
new lease, not for the period of the original contract, but for the time
established in Articles 1682 and 1687. The other terms of the original
contract shall be revived. In view of the order to vacate embodied in the
letter of DBP dated June 18, 1987 in the event that no new lease contract
is entered into, the petitioners continued possession of the subject
properties was without the acquiescence of DBP, thereby negating the
constitution of an implied lease.
Contrary to the ruling of the RTC, DBPs acceptance of petitioners
rental payments of P5,000.00 for the period of November 1990 to March
1991 did not likewise give rise to an implied lease between petitioners
and DBP. In Tagbilaran Integrated Settlers Association (TISA)
Incorporated v. Court of Appeals,100[71] we held that the subsequent
acceptance by the lessor of rental payments does not, absent any
circumstance that may dictate a contrary conclusion, legitimize the unlawful
character of their possession. In the present case, the petitioners rental
payments to DBP were made in lump sum on March 22, 1991.
Significantly, said payments were remitted only after petitioners were notified
of the sale of the subject properties to respondents To Chip, Yap and Balila
and after the petitioners were given a final demand to vacate the properties.
These facts substantially weaken, if not controvert, the finding of the RTC petitioners. Neither were the said respondents bound by any right of first
and the argument of petitioners that the latter were faithfully remitting their refusal in favor of petitioners. Consequently, the sale of the subject
rental payments to DBP until the year 1991. properties to respondents was valid. Petitioners claim for rescission was
properly dismissed.

Thus, having determined that the petitioners and DBP neither

executed a new lease agreement, nor entered into an implied lease
contract, it follows that petitioners claim of entitlement to a right of first
refusal has no leg to stand on. Furthermore, even if we were to grant,
for the sake of argument, that an implied lease was constituted between
petitioners and the DBP, the right of first refusal that was contained in the
prior lease contract with Rudy Robles was not renewed therewith. This is
in accordance with the ruling in Dizon v. Magsaysay,101[72] which
involved the issue of whether a provision regarding a preferential right to
purchase is revived in an implied lease under Article 1670, to wit:
WHEREFORE, the Petition for Review on Certiorari under Rule
45 of the Rules of Court is DENIED. The Resolution dated February 5,
2002 and the Amended Decision dated July 5, 2002 of the Court of
Appeals in CA-G.R. CV No. 57216 are hereby AFFIRMED. No costs.
SO ORDERED.
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), G.R. Nos. 1

Petitioner, Present:

[T]he other terms of the original contract which are

revived in the implied new lease under Article 1670 VELASCO
are only those terms which are germane to the lessees
right of continued enjoyment of the property leased.
NACHURA
This is a reasonable construction of the provision,
which is based on the presumption that when the - versus -
lessor allows the lessee to continue enjoying Chairperso
possession of the property for fifteen days after the
expiration of the contract he is willing that such PERALTA
enjoyment shall be for the entire period corresponding
to the rent which is customarily paid in this case up MENDOZA
to the end of the month because the rent was paid
monthly. Necessarily, if the presumed will of the
SERENO,
parties refers to the enjoyment of possession the
presumption covers the other terms of the contract HEIRS OF FERNANDO F. CABALLERO, represented by his
related to such possession, such as the amount of daughter, JOCELYN G. CABALLERO,
rental, the date when it must be paid, the care of the
property, the responsibility for repairs, etc. But no such Respondents. Promulgated:
presumption may be indulged in with respect to special
agreements which by nature are foreign to the right October
of occupancy or enjoyment inherent in a contract of
lease.102[73]
x--------------------------------------------------------
---------------------------------x

DBP cannot, therefore, be accused of violating the rights of

petitioners when it offered the subject properties for sale, and eventually
sold the same to respondents To Chip, Yap and Balila, without first notifying

D E C I S I O N
PERALTA, J.:
Before this Court is a petition for review on certiorari under Rule 45
of the Rules of Court seeking to set aside the Decision103[1] and the
Resolution,104[2] dated December 17, 2002 and April 29, 2003,
respectively, of the Court of Appeals (CA) in CA-G.R. CV. No. 49300.
The antecedents are as follows:
Respondent Fernando C. Caballero (Fernando) was the registered
owner of a residential lot designated as Lot No. 3355, Ts-268, covered
by TCT No. T-16035 of the Register of Deeds of Cotabato, containing
an area of 800 square meters and situated at Rizal Street, Mlang, Cotabato.
On the said lot, respondent built a residential/commercial building consisting
of two (2) stories.
On March 7, 1968, Fernando and his wife, Sylvia Caballero,
secured a loan from petitioner Government Service Insurance System
(GSIS) in the amount of P20,000.00, as evidenced by a promissory note.
Fernando and his wife likewise executed a real estate mortgage on the
same date, mortgaging the afore-stated property as security.
Fernando defaulted on the payment of his loan with the GSIS. Hence,
on January 20, 1973, the mortgage covering the subject property was
foreclosed, and on March 26, 1973, the same was sold at a public auction
where the petitioner was the only bidder in the amount of P36,283.00.
For failure of Fernando to redeem the said property within the designated
period, petitioner executed an Affidavit of Consolidation of Ownership on
September 5, 1975. Consequently, TCT No. T-16035 was cancelled and
TCT No. T-45874 was issued in the name of petitioner.
On November 26, 1975, petitioner wrote a letter to Fernando,
informing him of the consolidation of title in its favor, and requesting
payment of monthly rental in view of Fernando's continued occupancy of
the subject property. In reply, Fernando requested that he be allowed to
repurchase the same through partial payments. Negotiation as to the
repurchase by Fernando of the subject property went on for several years,
but no agreement was reached between the parties.
On January 16, 1989, petitioner scheduled the subject property for
public bidding. On the scheduled date of bidding, Fernando's daughter,
Jocelyn Caballero, submitted a bid in the amount of P350,000.00, while
Carmelita Mercantile Trading Corporation (CMTC) submitted a bid in the
amount of P450,000.00. Since CMTC was the highest bidder, it was
awarded the subject property. On May 16, 1989, the Board of Trustees
of the GSIS issued Resolution No. 199 confirming the award of the subject
property to CMTC for a total consideration of P450,000.00. Thereafter,
a Deed of Absolute Sale was executed between petitioner and CMTC on
July 27, 1989, transferring the subject property to CMTC. Consequently,
TCT No. T-45874 in the name of GSIS was cancelled, and TCT No.
T-76183 was issued in the name of CMTC.
Due to the foregoing, Fernando, represented by his daughter and
attorney-in-fact, Jocelyn Caballero, filed with the Regional Trial Court
(RTC) of Kabacan, Cotabato a Complaint105[3] against CMTC, the
GSIS and its responsible officers, and the Register of Deeds of Kidapawan,
Cotabato. Fernando prayed, among others, that judgment be rendered:
declaring GSIS Board of Trustees Resolution No. 199, dated May 16,
1989, null and void; declaring the Deed of Absolute Sale between
petitioner and CMTC null and void ab initio; declaring TCT No. 76183
of the Register of Deeds of Kidapawan, Cotabato, likewise, null and void
ab initio; declaring the bid made by Fernando in the amount of
P350,000.00 for the repurchase of his property as the winning bid; and
ordering petitioner to execute the corresponding Deed of Sale of the subject
property in favor of Fernando. He also prayed for payment of moral
damages, exemplary damages, attorney's fees and litigation expenses.
In his complaint, Fernando alleged that there were irregularities in
the conduct of the bidding. CMTC misrepresented itself to be wholly owned
by Filipino citizens. It misrepresented its working capital. Its representative
Carmelita Ang Hao had no prior authority from its board of directors in
an appropriate board resolution to participate in the bidding. The corporation
is not authorized to acquire real estate or invest its funds for purposes
other than its primary purpose. Fernando further alleged that the GSIS
allowed CMTC to bid despite knowledge that said corporation has no
authority to do so. The GSIS also disregarded Fernando's prior right to
buy back his family home and lot in violation of the laws. The Register
of Deeds of Cotabato acted with abuse of power and authority when it
issued the TCT in favor of CMTC without requiring the CMTC to submit
its supporting papers as required by the law.
Petitioner and its officers filed their Answer with Affirmative Defenses
and Counterclaim.106[4] The GSIS alleged that Fernando lost his right
of redemption. He was given the chance to repurchase the property;
however, he did not avail of such option compelling the GSIS to dispose
of the property by public bidding as mandated by law. There is also no
prior right to buy back that can be exercised by Fernando. Further, it
averred that the articles of incorporation and other papers of CMTC were
all in order. In its counterclaim, petitioner alleged that Fernando owed
petitioner the sum of P130,365.81, representing back rentals, including
additional interests from January 1973 to February 1987, and the
additional amount of P249,800.00, excluding applicable interests,
representing rentals Fernando unlawfully collected from Carmelita Ang Hao
from January 1973 to February 1988.
After trial, the RTC, in its Decision107[5] dated September 27,
1994, ruled in favor of petitioner and dismissed the complaint. In the same
decision, the trial court granted petitioner's counterclaim and directed
Fernando to pay petitioner the rentals paid by CMTC in the amount of
P249,800.00. The foregoing amount was collected by Fernando from the
CMTC and represents payment which was not turned over to petitioner,
which was entitled to receive the rent from the date of the consolidation
of its ownership over the subject property.
Fernando filed a motion for reconsideration, which was denied by the
RTC in an Order dated March 27, 1995.
Aggrieved by the Decision, respondent filed a Notice of
Appeal.108[6] The CA, in its Decision dated December 17, 2002,
affirmed the decision of the RTC with the modification that the portion of
the judgment ordering Fernando to pay rentals in the amount of
P249,800.00, in favor of petitioner, be deleted. Petitioner filed a motion
for reconsideration, which the CA denied in a Resolution dated April 29,
2003. Hence, the instant petition.
An Ex Parte Motion for Substitution of Party,109[7] dated July 18,
2003, was filed by the surviving heirs of Fernando, who died on February
12, 2002. They prayed that they be allowed to be substituted for the
deceased, as respondents in this case.
Petitioner enumerated the following grounds in support of its petition:
I
THE HONORABLE COURT OF APPEALS
COMMITTED AN ERROR OF LAW IN HOLDING
THAT GSIS' COUNTERCLAIM, AMONG OTHERS,
OF P249,800.00 REPRESENTING RENTALS
COLLECTED BY PRIVATE RESPONDENT FROM
CARMELITA MERCANTILE TRADING
CORPORATION IS IN THE NATURE OF A
 PERMISSIVE COUNTERCLAIM WHICH REQUIRED
THE PAYMENT BY GSIS OF DOCKET FEES
BEFORE THE TRIAL COURT CAN ACQUIRE
JURISDICTION OVER SAID COUNTERCLAIM.
II
THE HONORABLE COURT OF APPEALS
COMMITTED AN ERROR OF LAW IN HOLDING
THAT GSIS' DOCUMENTARY EVIDENCE
SUPPORTING ITS CLAIM OF P249,800.00 LACKS
PROPER IDENTIFICATION.110[8]
The petition of the GSIS seeks the review of the CA's Decision insofar
as it deleted the trial court's award of P249,800.00 in its favor
representing rentals collected by Fernando from the CMTC.
In their Memorandum, respondents claim that CMTC cannot purchase
real estate or invest its funds in any purpose other than its primary purpose
for which it was organized in the absence of a corporate board resolution;
the bid award, deed of absolute sale and TCT No. T-76183, issued in
favor of the CMTC, should be nullified; the trial court erred in concluding
that GSIS personnel have regularly performed their official duty when they
conducted the public bidding; Fernando, as former owner of the subject
property and former member of the GSIS, has the preemptive right to
repurchase the foreclosed property.
These additional averments cannot be taken cognizance by the Court,
because they were substantially respondents arguments in their petition for
review on certiorari earlier filed before Us and docketed as G.R. No.
156609. Records show that said petition was denied by the Court in a
Resolution111[9] dated April 23, 2003, for petitioners (respondents
herein) failure to sufficiently show that the Court of Appeals committed any
reversible error in the challenged decision as to warrant the exercise by
this Court of its discretionary appellate jurisdiction.112[10] Said resolution
became final and executory on June 9, 2003.113[11] Respondents
attempt to re-litigate claims already passed upon and resolved with finality
by the Court in G.R. No. 156609 cannot be allowed.
Going now to the first assigned error, petitioner submits that its
counterclaim for the rentals collected by Fernando from the CMTC is in
the nature of a compulsory counterclaim in the original action of Fernando
against petitioner for annulment of bid award, deed of absolute sale and
TCT No. 76183. Respondents, on the other hand, alleged that petitioner's
counterclaim is permissive and its failure to pay the prescribed docket fees
results into the dismissal of its claim.
To determine whether a counterclaim is compulsory or not, the Court
has devised the following tests: (a) Are the issues of fact and law raised
by the claim and by the counterclaim largely the same? (b) Would res
judicata bar a subsequent suit on defendants claims, absent the compulsory
counterclaim rule? (c) Will substantially the same evidence support or
refute plaintiffs claim as well as the defendants counterclaim? and (d)
Is there any logical relation between the claim and the counterclaim? A
positive answer to all four questions would indicate that the counterclaim
is compulsory.114[12]
Tested against the above-mentioned criteria, this Court agrees with
the CA's view that petitioner's counterclaim for the recovery of the amount
representing rentals collected by Fernando from the CMTC is
permissive. The evidence needed by Fernando to cause the annulment of
the bid award, deed of absolute sale and TCT is different from that required
to establish petitioner's claim for the recovery of rentals.
The issue in the main action, i.e., the nullity or validity of the bid
award, deed of absolute sale and TCT in favor of CMTC, is entirely different
from the issue in the counterclaim, i.e., whether petitioner is entitled to
receive the CMTC's rent payments over the subject property when petitioner
became the owner of the subject property by virtue of the consolidation
of ownership of the property in its favor.
The rule in permissive counterclaims is that for the trial court to
acquire jurisdiction, the counterclaimant is bound to pay the prescribed
docket fees.115[13] This, petitioner did not do, because it asserted that
its claim for the collection of rental payments was a compulsory counterclaim.
Since petitioner failed to pay the docket fees, the RTC did not acquire
jurisdiction over its permissive counterclaim. The judgment rendered by the
RTC, insofar as it ordered Fernando to pay petitioner the rentals which
he collected from CMTC, is considered null and void. Any decision rendered
without jurisdiction is a total nullity and may be struck down at any time,
even on appeal before this Court.116[14]
Petitioner further argues that assuming that its counterclaim is
permissive, the trial court has jurisdiction to try and decide the same,
considering petitioner's exemption from all kinds of fees.
In In Re: Petition for Recognition of the Exemption of the Government
Service Insurance System from Payment of Legal Fees,117[15] the Court
ruled that the provision in the Charter of the GSIS, i.e., Section 39 of
Republic Act No. 8291, which exempts it from all taxes, assessments,
fees, charges or duties of all kinds, cannot operate to exempt it from the
payment of legal fees. This was because, unlike the 1935 and 1973
Constitutions, which empowered Congress to repeal, alter or supplement
Petitioner also invoked our ruling in Sun Insurance Office, Ltd. v.
the rules of the Supreme Court concerning pleading, practice and procedure,
Judge Asuncion,118[16] where the Court held that:
the 1987 Constitution removed this power from Congress. Hence, the
Supreme Court now has the sole authority to promulgate rules concerning
pleading, practice and procedure in all courts.
In said case, the Court ruled that:
The separation of powers among the three
co-equal branches of our government has erected an
impregnable wall that keeps the power to promulgate
rules of pleading, practice and procedure within the
sole province of this Court. The other branches
trespass upon this prerogative if they enact laws or
issue orders that effectively repeal, alter or modify any
of the procedural rules promulgated by this Court.
Viewed from this perspective, the claim of a legislative
grant of exemption from the payment of legal fees
under Section 39 of RA 8291 necessarily fails.
Congress could not have carved out an
exemption for the GSIS from the payment of legal fees
without transgressing another equally important
institutional safeguard of the Court's independence
fiscal autonomy. Fiscal autonomy recognizes the
power and authority of the Court to levy, assess and
collect fees, including legal fees. Moreover, legal fees
under Rule 141 have two basic components, the
Judiciary Development Fund (JDF) and the Special
Allowance for the Judiciary Fund (SAJF). The laws
which established the JDF and the SAJF expressly
declare the identical purpose of these funds to
"guarantee the independence of the Judiciary as
mandated by the Constitution and public policy." Legal
fees therefore do not only constitute a vital source of
the Court's financial resources but also comprise an
essential element of the Court's fiscal independence.
Any exemption from the payment of legal fees granted
by Congress to government-owned or controlled
corporations and local government units will
necessarily reduce the JDF and the SAJF.
Undoubtedly, such situation is constitutionally infirm for
it impairs the Court's guaranteed fiscal autonomy and
erodes its independence.
x x x x
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 Petitioner, Presen
lien and assess and collect the additional fee.

In Ayala Corporation v. Madayag, 119 [17] the Court, in

interpreting the third rule laid down in Sun Insurance Office, Ltd. v. Judge YNARE
Asuncion regarding awards of claims not specified in the pleading, held
Chairp
that the same refers only to damages arising after the filing of the complaint
or similar pleading as to which the additional filing fee therefor shall AUSTR
constitute a lien on the judgment.
CHICO
The amount of any claim for damages,
therefore, arising on or before the filing of the - versus - NACH
complaint or any pleading should be specified. While
it is true that the determination of certain damages as REYES
exemplary or corrective damages is left to the sound
discretion of the court, it is the duty of the parties
claiming such damages to specify the amount sought
on the basis of which the court may make a proper
determination, and for the proper assessment of the
appropriate docket fees. The exception contemplated
as to claims not specified or to claims although Promu
specified are left for determination of the court is limited
only to any damages that may arise after the filing of
the complaint or similar pleading for then it will not be
possible for the claimant to specify nor speculate as Februa
to the amount thereof. (Emphasis supplied.) ERNEST S. AURE120[1],

Respondent.

Petitioner's claim for payment of rentals collected by Fernando from x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - -x
the CMTC did not arise after the filing of the complaint; hence, the rule
laid down in Sun Insurance finds no application in the present case.

Due to the non-payment of docket fees on petitioner's counterclaim,

the trial court never acquired jurisdiction over it and, thus, there is no need
D E C I S I O N
to discuss the second issue raised by petitioner.

WHEREFORE, the petition is DENIED. The Decision and the

CHICO-NAZARIO, J.:
Resolution, dated December 17, 2002 and April 29, 2003, respectively,
of the Court of Appeals in CA-G.R. CV. No. 49300, are AFFIRMED.

Before this Court is a Petition for Review on Certiorari121[2] under

SO ORDERED.
Rule 45 of the Revised Rules of Court filed by petitioner Librada M. Aquino
LIBRADA M. AQUINO, G.R. No. 153567
(Aquino), seeking the reversal and the setting aside of the
Decision122[3] dated 17 October 2001 and the Resolution123[4] dated
8 May 2002 of the Court of Appeals in CA-G.R. SP No. 63733. The
appellate court, in its assailed Decision and Resolution, reversed the
Decision124[5] of the Regional Trial Court (RTC) of Quezon City, Branch
88, affirming the Decision125[6] of the Metropolitan Trial Court (MeTC)
of Quezon City, Branch 32, which dismissed respondent Ernesto Aures
(Aure) complaint for ejectment on the ground, inter alia, of failure to
comply with barangay conciliation proceedings.
The subject of the present controversy is a parcel of land situated
in Roxas District, Quezon City, with an area of 449 square meters and
covered by Transfer Certificate of Title (TCT) No. 205447 registered with
the Registry of Deeds of Quezon City (subject property).126[7]
Aure and E.S. Aure Lending Investors, Inc. (Aure Lending) filed a
Complaint for ejectment against Aquino before the MeTC docketed as Civil
Case No. 17450. In their Complaint, Aure and Aure Lending alleged that
they acquired the subject property from Aquino and her husband Manuel
(spouses Aquino) by virtue of a Deed of Sale127[8] executed on 4 June
1996. Aure claimed that after the spouses Aquino received substantial
consideration for the sale of the subject property, they refused to vacate
the same.128[9]
In her Answer,129[10] Aquino countered that the Complaint in
Civil Case No. 17450 lacks cause of action for Aure and Aure Lending
do not have any legal right over the subject property. Aquino admitted that
there was a sale but such was governed by the Memorandum of
Agreement130[11] (MOA) signed by Aure. As stated in the MOA, Aure
shall secure a loan from a bank or financial institution in his own name
using the subject property as collateral and turn over the proceeds thereof
to the spouses Aquino. However, even after Aure successfully secured a
loan, the spouses Aquino did not receive the proceeds thereon or benefited
therefrom.
On 20 April 1999, the MeTC rendered a Decision in Civil Case
No. 17450 in favor of Aquino and dismissed the Complaint for ejectment
of Aure and Aure Lending for non-compliance with the barangay conciliation
process, among other grounds. The MeTC observed that Aure and Aquino
are residents of the same barangay but there is no showing that any attempt
has been made to settle the case amicably at the barangay level. The
MeTC further observed that Aure Lending was improperly included as
plaintiff in Civil Case No. 17450 for it did not stand to be injured or
benefited by the suit. Finally, the MeTC ruled that since the question of
ownership was put in issue, the action was converted from a mere detainer
suit to one incapable of pecuniary estimation which properly rests within
the original exclusive jurisdiction of the RTC. The dispositive portion of the
MeTC Decision reads:
WHEREFORE, premises considered, let
this case be, as it is, hereby ordered DISMISSED.
[Aquinos] counterclaim is likewise dismissed.131[12]
 On appeal, the RTC affirmed the dismissal of the Complaint on
the same ground that the dispute was not brought before the Barangay
Council for conciliation before it was filed in court. In a Decision dated
14 December 2000, the RTC stressed that the barangay conciliation
process is a conditio sine qua non for the filing of an ejectment complaint
involving residents of the same barangay, and failure to comply therewith
constitutes sufficient cause for the dismissal of the action. The RTC likewise
validated the ruling of the MeTC that the main issue involved in Civil Case
No. 17450 is incapable of pecuniary estimation and cognizable by the
RTC. Hence, the RTC ruled:
WHEREFORE, finding no reversible error in
the appealed judgment, it is hereby affirmed in its
entirety.132[13]
Aures Motion for Reconsideration was denied by the RTC in an
Order133[14] dated 27 February 2001.
Undaunted, Aure appealed the adverse RTC Decision with the
Court of Appeals arguing that the lower court erred in dismissing his
Complaint for lack of cause of action. Aure asserted that misjoinder of
parties was not a proper ground for dismissal of his Complaint and that
the MeTC should have only ordered the exclusion of Aure Lending as
plaintiff without prejudice to the continuation of the proceedings in Civil Case
No. 17450 until the final determination thereof. Aure further asseverated
that mere allegation of ownership should not divest the MeTC of jurisdiction
over the ejectment suit since jurisdiction over the subject matter is conferred
by law and should not depend on the defenses and objections raised by
the parties. Finally, Aure contended that the MeTC erred in dismissing his
Complaint with prejudice on the ground of non-compliance with barangay
conciliation process. He was not given the opportunity to rectify the
procedural defect by going through the barangay mediation proceedings and,
thereafter, refile the Complaint.134[15]
On 17 October 2001, the Court of Appeals rendered a Decision,
reversing the MeTC and RTC Decisions and remanding the case to the
MeTC for further proceedings and final determination of the substantive
rights of the parties. The appellate court declared that the failure of Aure
to subject the matter to barangay conciliation is not a jurisdictional flaw
and it will not affect the sufficiency of Aures Complaint since Aquino failed
to seasonably raise such issue in her Answer. The Court of Appeals further
ruled that mere allegation of ownership does not deprive the MeTC of
jurisdiction over the ejectment case for jurisdiction over the subject matter
is conferred by law and is determined by the allegations advanced by the
plaintiff in his complaint. Hence, mere assertion of ownership by the
defendant in an ejectment case will not oust the MeTC of its summary
jurisdiction over the same. The decretal part of the Court of Appeals
Decision reads:
WHEREFORE, premises considered, the
petition is hereby GRANTED - and the decisions of
the trial courts below REVERSED and SET ASIDE.
Let the records be remanded back to the court a quo
for further proceedings for an eventual decision of the
substantive rights of the disputants.135[16]
In a Resolution dated 8 May 2002, the Court of Appeals denied
the Motion for Reconsideration interposed by Aquino for it was merely a
rehash of the arguments set forth in her previous pleadings which were
already considered and passed upon by the appellate court in its assailed
Decision.
Aquino is now before this Court via the Petition at bar raising the
following issues:
I.
WHETHER OR NOT NON-COMPLIANCE WITH THE
BARANGAY CONCILIATION PROCEEDINGS IS A
JURISDICTIONAL DEFECT THAT WARRANTS THE
DISMISSAL OF THE COMPLAINT.
 II.
WHETHER OR NOT ALLEGATION OF OWNERSHIP
OUSTS THE MeTC OF ITS JURISDICTION OVER
AN EJECTMENT CASE.
The barangay justice system was established primarily as a
means of easing up the congestion of cases in the judicial courts. This
could be accomplished through a proceeding before the barangay courts
which, according to the conceptor of the system, the late Chief Justice Fred
Ruiz Castro, is essentially arbitration in character, and to make it truly
effective, it should also be compulsory. With this primary objective of the
barangay justice system in mind, it would be wholly in keeping with the
underlying philosophy of Presidential Decree No. 1508, otherwise known
as the Katarungang Pambarangay Law, and the policy behind it would be
better served if an out-of-court settlement of the case is reached voluntarily
by the parties.136[17]
The primordial objective of Presidential Decree No. 1508 is to reduce
the number of court litigations and prevent the deterioration of the quality
of justice which has been brought by the indiscriminate filing of cases in
the courts.137[18] To ensure this objective, Section 6 of Presidential
Decree No. 1508138[19] requires the parties to undergo a conciliation
process before the Lupon Chairman or the Pangkat ng Tagapagkasundo
as a precondition to filing a complaint in court subject to certain
exceptions139[20] which are inapplicable to this case. The said section
has been declared compulsory in nature.140[21]
Presidential Decree No. 1508 is now incorporated in Republic
Act No. 7160, otherwise known as The Local Government Code, which
took effect on 1 January 1992.
The pertinent provisions of the Local Government Code making
conciliation a precondition to filing of complaints in court, read:
SEC. 412. Conciliation.- (a)
Pre-condition to filing of complaint in court. No
complaint, petition, action, or proceeding involving any
matter within the authority of the lupon shall be filed
or instituted directly in court or any other government
office for adjudication, unless there has been a
confrontation between the parties before the lupon
chairman or the pangkat, and that no conciliation or
settlement has been reached as certified by the
lupon secretary or pangkat secretary as attested to by
the lupon chairman or pangkat chairman or unless the
settlement has been repudiated by the parties thereto.
(b) Where parties may go directly to court. The
parties may go directly to court in the following
instances:
(1) Where the accused is under detention;
(2) Where a person has otherwise been
deprived of personal liberty calling for habeas corpus
proceedings;
(3) Where actions are coupled with
provisional remedies such as preliminary injunction,
attachment, delivery of personal property, and support
pendente lite; and
(4) Where the action may otherwise be
barred by the statute of limitations.
(c) Conciliation among members of indigenous
cultural communities. The customs and traditions of
indigenous cultural communities shall be applied in
settling disputes between members of the cultural
communities.
SEC. 408. Subject Matter for Amicable
Settlement; Exception Therein. The lupon of each
barangay shall have authority to bring together the
parties actually residing in the same city or municipality
for amicable settlement of all disputes except:
(a) Where one party is the
government or any subdivision or instrumentality
thereof;
(b) Where one party is a public officer or
employee, and the dispute relates to the performance
of his official functions;

(c) Offenses punishable by imprisonment
exceeding one (1) year or a fine exceeding Five
thousand pesos (P5,000.00);
(d) Offenses where there is no private
offended party;
(e) Where the dispute involves real
properties located in different cities or municipalities
unless the parties thereto agree to submit their
differences to amicable settlement by an appropriate
lupon;
(f) Disputes involving parties who
actually reside in barangays of different cities or
municipalities, except where such barangay units
adjoin each other and the parties thereto agree to
submit their differences to amicable settlement by an
appropriate lupon;
(g) Such other classes of disputes
which the President may determine in the interest of
justice or upon the recommendation of the Secretary
of Justice.
There is no dispute herein that the present case was never
referred to the Barangay Lupon for conciliation before Aure and Aure
Lending instituted Civil Case No. 17450. In fact, no allegation of such
barangay conciliation proceedings was made in Aure and Aure Lendings
Complaint before the MeTC. The only issue to be resolved is whether
non-recourse to the barangay conciliation process is a jurisdictional flaw
that warrants the dismissal of the ejectment suit filed with the MeTC.
Aquino posits that failure to resort to barangay conciliation makes
the action for ejectment premature and, hence, dismissible. She likewise
avers that this objection was timely raised during the pre-trial and even
subsequently in her Position Paper submitted to the MeTC.
We do not agree.
It is true that the precise technical effect of failure to comply with
the requirement of Section 412 of the Local Government Code on barangay
conciliation (previously contained in Section 5 of Presidential Decree No.
1508) is much the same effect produced by non-exhaustion of
administrative remedies -- the complaint becomes afflicted with the vice
of pre-maturity; and the controversy there alleged is not ripe for judicial
determination. The complaint becomes vulnerable to a motion to
dismiss.141[22] Nevertheless, the conciliation process is not a jurisdictional
requirement, so that non-compliance therewith cannot affect the jurisdiction
which the court has otherwise acquired over the subject matter or over the
person of the defendant.142[23]
As enunciated in the landmark case of Royales v. Intermediate
Appellate Court143[24]:
Ordinarily, non-compliance with the
condition precedent prescribed by P.D. 1508 could
affect the sufficiency of the plaintiff's cause of action
and make his complaint vulnerable to dismissal on
ground of lack of cause of action or prematurity; but
the same would not prevent a court of competent
jurisdiction from exercising its power of adjudication
over the case before it, where the defendants, as in
this case, failed to object to such exercise of jurisdiction
in their answer and even during the entire proceedings
a quo.
While petitioners could have prevented the
trial court from exercising jurisdiction over the case by
seasonably taking exception thereto, they instead
invoked the very same jurisdiction by filing an answer
and seeking affirmative relief from it. What is more,
they participated in the trial of the case by
cross-examining respondent Planas. Upon this
premise, petitioners cannot now be allowed belatedly to
adopt an inconsistent posture by attacking the
jurisdiction of the court to which they had submitted
themselves voluntarily. x x x (Emphasis supplied.)
In the case at bar, we similarly find that Aquino cannot be allowed
to attack the jurisdiction of the MeTC over Civil Case No. 17450 after
having submitted herself voluntarily thereto. We have scrupulously examined
Aquinos Answer before the MeTC in Civil Case No. 17450 and there is
utter lack of any objection on her part to any deficiency in the complaint
which could oust the MeTC of its jurisdcition.

We thus quote with approval the disquisition of the Court of
Appeals:
Moreover, the Court takes note that the
defendant [Aquino] herself did not raise in defense the
aforesaid lack of conciliation proceedings in her
answer, which raises the exclusive affirmative defense
of simulation. By this acquiescence, defendant [Aquino]
is deemed to have waived such objection. As held in
a case of similar circumstances, the failure of a
defendant [Aquino] in an ejectment suit to specifically
allege the fact that there was no compliance with the
barangay conciliation procedure constitutes a waiver of
that defense. x x x.144[25]
By Aquinos failure to seasonably object to the deficiency in the
Complaint, she is deemed to have already acquiesced or waived any defect
attendant thereto. Consequently, Aquino cannot thereafter move for the
dismissal of the ejectment suit for Aure and Aure Lendings failure to resort
to the barangay conciliation process, since she is already precluded from
doing so. The fact that Aquino raised such objection during the pre-trial
and in her Position Paper is of no moment, for the issue of non-recourse
to barangay mediation proceedings should be impleaded in her Answer.
As provided under Section 1, Rule 9 of the 1997 Rules of Civil
Procedure:
Sec. 1. Defenses and objections not pleaded.
Defenses and objections not pleaded either in a motion
to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the
evidence on record that the court has no jurisdiction
over the subject matter, that there is another action
pending between the same parties for the same cause,
or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim.
(Emphasis supplied.)
While the aforequoted provision applies to a pleading (specifically,
an Answer) or a motion to dismiss, a similar or identical rule is provided
for all other motions in Section 8 of Rule 15 of the same Rule which
states:
Sec. 8. Omnibus Motion. - Subject to the provisions
of Section 1 of Rule 9, a motion attacking a pleading,
order, judgment, or proceeding shall include all
objections then available, and all objections not so
included shall be deemed waived.
The spirit that surrounds the foregoing statutory norm is to require
the party filing a pleading or motion to raise all available exceptions for
relief during the single opportunity so that single or multiple objections may
be avoided.145[26] It is clear and categorical in Section 1, Rule 9 of
the Revised Rules of Court that failure to raise defenses and objections
in a motion to dismiss or in an answer is deemed a waiver thereof; and
basic is the rule in statutory construction that when the law is clear and
free from any doubt or ambiguity, there is no room for construction or
interpretation.146[27] As has been our consistent ruling, where the law
speaks in clear and categorical language, there is no occasion for
interpretation; there is only room for application.147[28] Thus, although
Aquinos defense of non-compliance with Presidential Decree No. 1508
is meritorious, procedurally, such defense is no longer available for failure
to plead the same in the Answer as required by the omnibus motion rule.
Neither could the MeTC dismiss Civil Case No. 17450 motu proprio.
The 1997 Rules of Civil Procedure provide only three instances when the
court may motu proprio dismiss the claim, and that is when the pleadings
or evidence on the record show that (1) the court has no
jurisdiction over the subject matter; (2) there is another cause of action
pending between the same parties for the same cause; or (3) where the
action is barred by a prior judgment or by a statute of limitations. Thus,
it is clear that a court may not motu proprio dismiss a case on the ground
of failure to comply with the requirement for barangay conciliation, this
ground not being among those mentioned for the dismissal by the trial court
of a case on its own initiative.
Aquino further argues that the issue of possession in the instant case
cannot be resolved by the MeTC without first adjudicating the question of
ownership, since the Deed of Sale vesting Aure with the legal right over
the subject property is simulated.
Again, we do not agree. Jurisdiction in ejectment cases is
determined by the allegations pleaded in the complaint. As long as these
allegations demonstrate a cause of action either for forcible entry or for
unlawful detainer, the court acquires jurisdiction over the subject
matter. This principle holds, even if the facts proved during the trial do
not support the cause of action thus alleged, in which instance the court
-- after acquiring jurisdiction -- may resolve to dismiss the action for
insufficiency of evidence.
The necessary allegations in a Complaint for ejectment are set
forth in Section 1, Rule 70 of the Rules of Court, which reads:
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 by 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.
In the case at bar, the Complaint filed by Aure and Aure Lending
on 2 April 1997, alleged as follows:
already been issued in the name of [Aure] as shown
by a transfer Certificate of Title , a copy of which is
hereto attached and made an integral part hereof as
Annex A;
3. However, despite the sale thus transferring
ownership of the subject premises to [Aure and Aure
Lending] as above-stated and consequently
terminating [Aquinos] right of possession over the
subject property, [Aquino] together with her family, is
continuously occupying the subject premises
notwithstanding several demands made by [Aure and
Aure Lending] against [Aquino] and all persons
claiming right under her to vacate the subject premises
and surrender possession thereof to [Aure and Aure
Lending] causing damage and prejudice to [Aure and
Aure Lending] and making [Aquinos] occupancy
together with those actually occupying the subject
premises claiming right under her, illegal.148[29]
It can be inferred from the foregoing that Aure, together with Aure
Lending, sought the possession of the subject property which was never
surrendered by Aquino after the perfection of the Deed of Sale, which gives
rise to a cause of action for an ejectment suit cognizable by the MeTC.
Aures assertion of possession over the subject property is based on his
ownership thereof as evidenced by TCT No. 156802 bearing his name.
That Aquino impugned the validity of Aures title over the subject property
and claimed that the Deed of Sale was simulated should not divest the
MeTC of jurisdiction over the ejectment case.149[30]
As extensively discussed by the eminent jurist Florenz D. Regalado
in Refugia v. Court of Appeals150[31]:
As the law on forcible entry and unlawful detainer
cases now stands, even where the defendant raises
the question of ownership in his pleadings and the
question of possession cannot be resolved without
deciding the issue of ownership, the Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit

2. [Aure and Aure Lending] became the

owners of a house and lot located at No. 37 Salazar
Street corner Encarnacion Street, B.F. Homes,
Quezon City by virtue of a deed of absolute sale
executed by [the spouses Aquino] in favor of [Aure
and Aure Lending] although registered in the name of
x x x Ernesto S. Aure; title to the said property had
 Trial Courts nevertheless have the undoubted is necessary for a proper and complete adjudication of the issue of
competence to resolve the issue of ownership albeit possession.152[33]
only to determine the issue of possession.

x x x. The law, as revised, now provides instead that

when the question of possession cannot be resolved
without deciding the issue of ownership, the issue of
ownership shall be resolved only to determine the issue WHEREFORE, premises considered, the instant Petition is
of possession. On its face, the new Rule on Summary DENIED. The Court of Appeals Decision dated 17 October 2001 and its
Procedure was extended to include within the
Resolution dated 8 May 2002 in CA-G.R. SP No. 63733 are hereby
jurisdiction of the inferior courts ejectment cases which
likewise involve the issue of ownership. This does not AFFIRMED. Costs against the petitioner.
mean, however, that blanket authority to adjudicate the
issue of ownership in ejectment suits has been thus
conferred on the inferior courts.

At the outset, it must here be stressed that SO ORDERED.

the resolution of this particular issue concerns and
applies only to forcible entry and unlawful detainer
cases where the issue of possession is intimately
intertwined with the issue of ownership. It finds no
proper application where it is otherwise, that is, whereDORIS U. SUNBANUN, G.R. No. 163280
ownership is not in issue, or where the principal and
main issue raised in the allegations of the complaintPetitioner,
as well as the relief prayed for make out not a case
for ejectment but one for recovery of ownership. Present:

CARPIO, J., Chairperson,

Apropos thereto, this Court ruled in Hilario v. Court of CORONA,*

Appeals151[32]:
BRION,

- versus - DEL CASTILLO, and

Thus, an adjudication made therein PEREZ, JJ.

regarding the issue of ownership should be regarded
as merely provisional and, therefore, would not bar or
prejudice an action between the same parties involving
title to the land. The foregoing doctrine is a necessary
consequence of the nature of forcible entry and
unlawful detainer cases where the only issue to be
settled is the physical or material possession over theAURORA B. GO,
real property, that is, possession de facto and not
possession de jure. Respondent. Promulgated:

February 2, 2010
In other words, inferior courts are now conditionally vested with
adjudicatory power over the issue of title or ownership raised by the parties
in an ejectment suit. These courts shall resolve the question of ownership
raised as an incident in an ejectment case where a determination thereof
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1996, and petitioner then padlocked the rooms vacated by respondents
- - - - - - - - - - - - - - - - - - - - - x lodgers.

On 10 May 1996, respondent filed an action for damages against

petitioner. Respondent alleged that she lost her income from her lodgers
D E C I S I O N for the months of April, May, and June 1996 totaling P45,000.
Respondent, who worked in Hongkong, also incurred expenses for plane
fares and other travel expenses in coming to the Philippines and returning
to Hongkong.

CARPIO, J.:

On the other hand, petitioner argued that respondent violated the

lease contract when she subleased the rented premises. Besides, the lease
contract was not renewed after its expiration on 7 July 1996; thus,
The Case respondent had no more right to stay in the rented premises. Petitioner
also moved to dismiss the complaint in the trial court for failure to comply
with prior barangay conciliation.

This petition for review on certiorari153[1] assails the 30

September 2003 Decision154[2] and the 18 March 2004 During the pre-trial, petitioner moved for the case to be submitted
for judgment on the pleadings considering that the only disagreement
Resolution155[3] of the Court of Appeals in CA-G.R. CV No. 67836.
between the parties was the correct interpretation of the lease contract.
Respondent did not object to petitioners motion. The trial court then directed
the parties to submit their respective memoranda, after which the case
would be considered submitted for decision.156[4]

The Facts
In its decision dated 28 March 2000, the trial court held that the
case is not covered by the barangay conciliation process since respondent
is a resident of Hongkong. The trial court noted that petitioner did not
controvert respondents allegation that petitioner ejected respondents lodgers
sometime in March 1996 even if the contract of lease would expire only
Petitioner Doris U. Sunbanun is the owner of a residential house
on 7 July 1996. The trial court found untenable petitioners contention that
located at No. 68-F Junquera Street, Cebu City. On 7 July 1995,
subleasing the rented premises violated the lease contract. The trial court
respondent Aurora B. Go leased the entire ground floor of petitioners
held that respondents act of accepting lodgers was in accordance with the
residential house for one year which was to expire on 7 July 1996. As
lease contract which allows the lessee to use the premises as a dwelling
required under the lease contract, respondent paid a deposit of P16,000
or as lodging house. Thus, the trial court ordered petitioner to pay
to answer for damages and unpaid rent. To earn extra income, respondent
respondent actual damages of P45,000 for respondents lost income from
accepted lodgers, mostly her relatives, from whom she received a monthly
her lodgers for the months of April, May, and June 1996, and attorneys
income of P15,000. Respondent paid the monthly rental until March 1996
fees of P8,000.
when petitioner drove away respondents lodgers by telling them that they
could stay on the rented premises only until 15 April 1996 since she was
terminating the lease. The lodgers left the rented premises by 15 April

Both parties appealed before the Court of Appeals. On 30 September

2003, the Court of Appeals rendered its decision in favor of respondent
and modified the trial courts decision. Aside from actual damages and
attorneys fees, the Court of Appeals also ordered petitioner to pay moral
and exemplary damages and the cost of the suit. The dispositive portion
of the Court of Appeals decision reads:
 WHEREFORE, premises considered, the I. THE COURT OF APPEALS ERRED IN
assailed Decision of the trial court is hereby AFFIRMING THE AWARD OF ACTUAL
MODIFIED by ordering defendant-appellant [Doris U. DAMAGES BY THE TRIAL COURT.
Sunbanun] to pay plaintiff-appellant [Aurora B. Go]
the following amounts:

1. P45,000.00 as compensation for actual damages;

II. THE COURT OF APPEALS ERRED IN
2. P50,000.00 as moral damages;MODIFYING THE JUDGMENT OF THE TRIAL
COURT AND AWARDING MORAL AND
EXEMPLARY DAMAGES AND COSTS OF
3. P50,000.00 as exemplary damages;SUIT IN FAVOR OF RESPONDENT.

4. P8,000.00 as Attorneys III.

Fees;
THE COURT OF APPEALS ERRED IN
AFFIRMING THE AWARD OF ATTORNEYS
5. Cost of the suit. FEES IN FAVOR OF RESPONDENT.158[6]

SO ORDERED.157[5] The Ruling of the Court

We find the petition without merit.

The Court of Appeals Ruling

In this case, the trial court rendered a judgment on the pleadings.

Section 1, Rule 34 of the Rules of Court reads:

The Court of Appeals held that petitioners act of forcibly ejecting

respondents lodgers three months prior to the termination of the lease
contract without valid reason constitutes breach of contract. Petitioner also
violated Article 1654 of the Civil Code which states that the lessor is
obliged to maintain the lessee in the peaceful and adequate enjoyment of
the lease for the duration of the contract. The Court of Appeals awarded
P50,000 as moral damages to respondent for breach of contract and for
petitioners act of pre-terminating the lease contract without valid reason,
which shows bad faith on the part of petitioner. The Court of Appeals also
awarded respondent P50,000 as exemplary damages for petitioners
oppressive act.
SECTION 1. Judgment on the pleadings. Where an
answer fails to tender an issue, or otherwise admits
the material allegations of the adverse partys pleading,
the court may, on motion of that party, direct judgment
on such pleading. However, in actions for declaration
of nullity or annulment of marriage or for legal
separation, the material facts alleged in the complaint
shall always be proved.

The Issues The trial court has the discretion to grant a motion for judgment
on the pleadings filed by a party if there is no controverted matter in the
case after the answer is filed.159[7] A judgment on the pleadings is a

Petitioner raises the following issues:

judgment on the facts as pleaded,160[8] and is based exclusively upon
the allegations appearing in the pleadings of the parties and the
accompanying annexes.
This case is unusual because it was petitioner, and not the
claimant respondent, who moved for a judgment on the pleadings during
the pre-trial. This is clear from the trial courts Order161[9] dated 7
October 1997 which reads:
ORDER
When this case was called for pre-trial, parties
appeared together with counsel. Defendant [Doris U.
Sunbanun] moved that considering that there is no
dispute as far as the contract is concerned and the only
disagreement between the parties is on the
interpretation of the contract so that the issue boils
down on to which of the parties are correct on their
interpretation. With the conformity of the plaintiff
[Aurora B. Go], this case is therefore considered
closed and submitted for judgment on the pleadings.
x x x (Emphasis supplied)
Petitioner, in moving for a judgment on the pleadings without
offering proof as to the truth of her own allegations and without giving
respondent the opportunity to introduce evidence, is deemed to have
admitted the material and relevant averments of the complaint, and to rest
her motion for judgment based on the pleadings of the parties.162[10]
As held in Tropical Homes, Inc. v. CA:163[11]
As to the amount of damages awarded as
a consequence of this violation of plaintiffs rights, the
lower court based its award from the allegations and
prayer contained in the complaint. The defendant,
however, questions this award for the reason that,
according to the defendant, the plaintiff, in moving for
judgment on the pleadings, did not offer proof as to
the truth of his own allegations with respect to the
damages claimed by him, and gave no opportunity for
the appellant to introduce evidence to refute his claims.
We find this objection without merit. It appears that
when the plaintiff moved to have the case decided on
the pleadings, the defendant interposed no objection
and has practically assented thereto. The defendant,
therefore, is deemed to have admitted the allegations
of fact of the complaint, so that there was no necessity
for plaintiff to submit evidence of his claim.
In this case, it is undisputed that petitioner ejected respondents
lodgers three months before the expiration of the lease contract on 7 July
1996. Petitioner maintains that she had the right to terminate the contract
prior to its expiration because respondent allegedly violated the terms of
the lease contract by subleasing the rented premises. Petitioners assertion
is belied by the provision in the lease contract164[12] which states that
the lessee can use the premises as a dwelling or as lodging house.
Furthermore the lease contract clearly provides that petitioner leased to
respondent the ground floor of her residential house for a term of one year
commencing from 7 July 1995. Thus, the lease contract would expire only
on 7 July 1996. However, petitioner started ejecting respondents lodgers
in March 1996 by informing them that the lease contract was only until
15 April 1996. Clearly, petitioners act of ejecting respondents lodgers
resulted in respondent losing income from her lodgers. Hence, it was proper
for the trial court and the appellate court to order petitioner to pay
respondent actual damages in the amount of P45,000.
We likewise sustain the award of moral damages in favor of
respondent. In this case, moral damages may be recovered under Article
2219 and Article 2220 of the Civil Code in relation to Article 21. The
pertinent provisions read:
Art. 2219. Moral damages may be
recovered in the following and analogous cases:
x x x
 (10) Acts and actions referred to in articles 21, 26, 27, 28, 29,
30, 32, 34, and 35.

WHEREFORE, the Court DENIES the petition. The Court AFFIRMS

Art. 2220. Wilfull injury to property may be the 30 September 2003 Decision and the 18 March 2004 Resolution of
a legal ground for awarding moral damages if the court
should find that, under the circumstances, such the Court of Appeals in CA-G.R. CV No. 67836.
damages are justly due. The same rule applies to
breaches of contract where the defendant acted
fraudulently or in bad faith. (Emphasis supplied)
SO ORDERED.
Art. 21. Any person who wilfully causes loss or injury to another CRISANTA ALCARAZ MIGUEL, G.R. No
in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage. Petitioner,

Present:

CARPIO

We agree with the appellate court that petitioners act of ejecting - versus - Chairper
respondents lodgers three months before the lease contract expired without
valid reason constitutes bad faith. What aggravates the situation was that PEREZ,
petitioner did not inform respondent, who was then working in Hongkong,
about petitioners plan to pre-terminate the lease contract and evict SERENO
respondents lodgers. Moral damages may be awarded when the breach
of contract was attended with bad faith.165[13]
REYES,

PERLAS
Furthermore, we affirm the award of exemplary damages and
attorneys fees. Exemplary damages may be awarded when a wrongful act
is accompanied by bad faith or when the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner which would justify JERRY D. MONTANEZ, Promulg
an award of exemplary damages under Article 2232166[14] of the Civil
Code.167[15] Since the award of exemplary damages is proper in this Respondent.
case, attorneys fees and cost of the suit may also be recovered as provided
under Article 2208168[16] of the Civil Code.169[17]
January

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

DECISION
REYES, J.: of Sum of Money. In his Answer with Counterclaim,172[3] the respondent
raised the defense of improper venue considering that the petitioner was
a resident of Bagumbong, Caloocan City while he lived in San Mateo, Rizal.

Before this Court is a Petition for Review on Certiorari under Rule

45 of the Rules of Court. Petitioner Crisanta Alcaraz Miguel (Miguel)
seeks the reversal and setting aside of the September 17, 2009 After trial, on August 16, 2006, the MeTC rendered a
Decision170[1] and February 11, 2010 Resolution171[2] of the Court Decision,173[4] which disposes as follows:
of Appeals (CA) in CA-G.R. SP No. 100544, entitled Jerry D. Montanez
v. Crisanta Alcaraz Miguel.

WHEREFORE, premises considered[,] judgment is

hereby rendered ordering defendant Jerry D. Montanez
to pay plaintiff the following:
Antecedent Facts
1. The amount of
[Php147,893.00]
representing the
obligation with legal rate
On February 1, 2001, respondent Jerry Montanez (Montanez) of interest from February
1, 2002 which was the
secured a loan of One Hundred Forty-Three Thousand Eight Hundred
date of the loan maturity
Sixty-Four Pesos (P143,864.00), payable in one (1) year, or until until the account is fully
February 1, 2002, from the petitioner. The respondent gave as collateral paid;
therefor his house and lot located at Block 39 Lot 39 Phase 3, Palmera 2. The amount of
Spring, Bagumbong, Caloocan City. Php10,000.00 as and
by way of attorneys fees;
and the costs.

SO ORDERED. 174[5]
Due to the respondents failure to pay the loan, the petitioner filed
a complaint against the respondent before the Lupong Tagapamayapa of
Barangay San Jose, Rodriguez, Rizal. The parties entered into a On appeal to the Regional Trial Court (RTC) of Makati City,
Kasunduang Pag-aayos wherein the respondent agreed to pay his loan Branch 146, the respondent raised the same issues cited in his Answer.
in installments in the amount of Two Thousand Pesos (P2,000.00) per In its March 14, 2007 Decision,175[6] the RTC affirmed the MeTC
month, and in the event the house and lot given as collateral is sold, the Decision, disposing as follows:
respondent would settle the balance of the loan in full. However, the
respondent still failed to pay, and on December 13, 2004, the Lupong
Tagapamayapa issued a certification to file action in court in favor of the
petitioner.

On April 7, 2005, the petitioner filed before the Metropolitan

Trial Court (MeTC) of Makati City, Branch 66, a complaint for Collection
 WHEREFORE, finding no cogent reason to Pag-aayos merely supplemented the old
disturb the findings of the court a quo, the appeal is agreement.178[9]
hereby DISMISSED, and the DECISION appealed
from is hereby AFFIRMED in its entirety for being in
accordance with law and evidence.
The CA went on saying that since the parties entered into a
SO ORDERED.176[7]
Kasunduang Pag-aayos before the Lupon ng Barangay, such settlement
has the force and effect of a court judgment, which may be enforced by
execution within six (6) months from the date of settlement by the Lupon
Dissatisfied, the respondent appealed to the CA raising two
ng Barangay, or by court action after the lapse of such time.179[10]
issues, namely, (1) whether or not venue was improperly laid, and (2)
Considering that more than six (6) months had elapsed from the date
whether or not the Kasunduang Pag-aayos effectively novated the loan
of settlement, the CA ruled that the remedy of the petitioner was to file
agreement. On September 17, 2009, the CA rendered the assailed
an action for the execution of the Kasunduang Pag-aayos in court and
Decision, disposing as follows:
not for collection of sum of money.180[11] Consequently, the CA deemed
it unnecessary to resolve the issue on venue.181[12]

WHEREFORE, premises considered, the

petition is hereby GRANTED. The appealed Decision
dated March 14, 2007 of the Regional Trial Court The petitioner now comes to this Court.
(RTC) of Makati City, Branch 146, is REVERSED
and SET ASIDE. A new judgment is entered
dismissing respondents complaint for collection of sum
of money, without prejudice to her right to file the
necessary action to enforce the Kasunduang Issues
Pag-aayos.

SO ORDERED.177[8]

(1) Whether or not a complaint for sum of money is the proper

Anent the issue of whether or not there is novation of the loan remedy for the petitioner, notwithstanding the Kasunduang
contract, the CA ruled in the negative. It ratiocinated as follows: Pag-aayos;182[13] and

Judging from the terms of the Kasunduang

Pag-aayos, it is clear that no novation of the old
obligation has taken place. Contrary to petitioners
assertion, there was no reduction of the term or period
originally stipulated. The original period in the first
agreement is one (1) year to be counted from
February 1, 2001, or until January 31, 2002. When
the complaint was filed before the barangay on
February 2003, the period of the original agreement
had long expired without compliance on the part of
petitioner. Hence, there was nothing to reduce or
extend. There was only a change in the terms of
payment which is not incompatible with the old
agreement. In other words, the Kasunduang
 (2) Whether or not the CA should have decided the case on of action did not arise from the Kasunduang Pag-aayos but on the
the merits respondents breach of the original loan agreement.184[15]
rather than remand the case for the enforcement of the Kasunduang
Pag-aayos.183[14]

This Court agrees with the petitioner.

Our Ruling

It is true that an amicable settlement reached at the barangay

conciliation proceedings, like the Kasunduang Pag-aayos in this case, is
Because the binding between the contracting parties and, upon its perfection, is
respondent immediately executory insofar as it is not contrary to law, good morals,
failed to
comply with good
the terms of customs, public order and public policy.185[16] This is in accord with the
the
Kasunduang broad precept of Article 2037 of the Civil Code, viz:
Pag-aayos,
said
agreement
is deemed
rescinded A compromise has upon the parties the
pursuant to effect and authority of res judicata; but there shall be
Article no execution except in compliance with a judicial
2041 of the compromise.
New Civil
Code and
the
petitioner Being a by-product of mutual concessions and good faith of the
can insist on
parties, an amicable settlement has the force and effect of res judicata even
his original
demand. if not judicially approved.186[17] It transcends being a mere contract
Perforce, binding only upon the parties thereto, and is akin to a judgment that is
the
complaint subject to execution in accordance with the Rules.187[18] Thus, under
for collection Section 417 of the Local Government Code,188[19] such amicable
of sum of
settlement or arbitration award may be enforced by execution by the
money is
the proper Barangay Lupon within six (6) months from the date of settlement, or by
remedy.

The petitioner contends that the CA erred in ruling that she

should have followed the procedure for enforcement of the amicable
settlement as provided in the Revised Katarungang Pambarangay Law,
instead of filing a collection case. The petitioner points out that the cause
filing an action to enforce such settlement in the appropriate city or municipal
court, if beyond the six-month period.
Under the first remedy, the proceedings are covered by the Local
Government Code and the Katarungang Pambarangay Implementing Rules
and Regulations. The Punong Barangay is called upon during the hearing
to determine solely the fact of non-compliance of the terms of the settlement
and to give the defaulting party another chance at voluntarily complying with
his obligation under the settlement. Under the second remedy, the
proceedings are governed by the Rules of Court, as amended. The cause
of action is the amicable settlement itself, which, by operation of law, has
the force and effect of a final judgment.189[20]
It must be emphasized, however, that enforcement by execution
of the amicable settlement, either under the first or the second remedy,
is only applicable if the contracting parties have not repudiated such
settlement within ten (10) days from the date thereof in accordance with
Section 416 of the Local Government Code. If the amicable settlement is
repudiated by one party, either expressly or impliedly, the other party has
two options, namely, to enforce the compromise in accordance with the
Local Government Code or Rules of Court as the case may be, or to
consider it rescinded and insist upon his original demand. This is in accord
with Article 2041 of the Civil Code, which qualifies the broad application
of Article 2037, viz:
If one of the parties fails or refuses to
abide by the compromise, the other party may either
enforce the compromise or regard it as rescinded
and insist upon his original demand.
In the case of Leonor v. Sycip,190[21] the Supreme Court (SC)
had the occasion to explain this provision of law. It ruled that Article 2041
does not require an action for rescission, and the aggrieved party, by the
breach of compromise agreement, may just consider it already rescinded,
to wit:
It is worthy of notice, in this connection, that,
unlike Article 2039 of the same Code, which speaks
of "a cause of annulment or rescission of the
compromise" and provides that "the compromise may
be annulled or rescinded" for the cause therein
specified, thus suggesting an action for annulment or
rescission, said Article 2041 confers upon the party
concerned, not a "cause" for rescission, or the right
to "demand" the rescission of a compromise, but the
authority, not only to "regard it as
rescinded", but, also, to "insist upon his original
demand". The language of this Article 2041,
particularly when contrasted with that of Article 2039,
denotes that no action for rescission is required in said
Article 2041, and that the party aggrieved by the
breach of a compromise agreement may, if he chooses,
bring the suit contemplated or involved in his original
demand, as if there had never been any compromise
agreement, without bringing an action for rescission
thereof. He need not seek a judicial declaration of
rescission, for he may "regard" the compromise
agreement already "rescinded".191[22] (emphasis
supplied)
As so well stated in the case of Chavez v. Court of
Appeals,192[23] a party's non-compliance with the amicable settlement
paved the way for the application of Article 2041 under which the other
party may either enforce the compromise, following the procedure laid out
in the Revised Katarungang Pambarangay Law, or consider it as rescinded
and insist upon his original demand. To quote:
In the case at bar, the Revised Katarungang
Pambarangay Law provides for a two-tiered mode of
enforcement of an amicable settlement, to wit: (a) by
execution by the Punong Barangay which is
quasi-judicial and summary in nature on mere motion
of the party entitled thereto; and (b) an action in
regular form, which remedy is judicial. However, the
mode of enforcement does not rule out the right of
rescission under Art. 2041 of the Civil Code. The
availability of the right of rescission is apparent from
the wording of Sec. 417 itself which provides that the
amicable settlement "may" be enforced by execution
by the lupon within six (6) months from its date or
by action in the appropriate city or municipal court, if
beyond that period. The use of the word "may" clearly
 makes the procedure provided in the Revised
Katarungang Pambarangay Law directory or merely
optional in nature.
Thus, although the "Kasunduan" executed by
petitioner and respondent before the Office of the
Barangay Captain had the force and effect of a final
judgment of a court, petitioner's non-compliance paved
the way for the application of Art. 2041 under which
respondent may either enforce the compromise,
following the procedure laid out in the Revised
Katarungang Pambarangay Law, or regard it as
rescinded and insist upon his original demand.
Respondent chose the latter option when he instituted
Civil Case No. 5139-V-97 for recovery of unrealized
profits and reimbursement of advance rentals, moral and
exemplary damages, and attorney's fees. Respondent
was not limited to claiming P150,000.00 because
although he agreed to the amount in the "Kasunduan,"
it is axiomatic that a compromise settlement is not an
admission of liability but merely a recognition that there
is a dispute and an impending litigation which the
parties hope to prevent by making reciprocal
concessions, adjusting their respective positions in the
hope of gaining balanced by the danger of losing.
Under the "Kasunduan," respondent was only required
to execute a waiver of all possible claims arising from
the lease contract if petitioner fully complies with his
obligations thereunder. It is undisputed that herein
petitioner did not.193[24] (emphasis supplied and
citations omitted)
In the instant case, the respondent did not comply with the terms
and conditions of the Kasunduang Pag-aayos. Such non-compliance may
be construed as repudiation because it denotes that the respondent did not
intend to be bound by the terms thereof, thereby negating the very purpose
for which it was executed. Perforce, the petitioner has the option either to
enforce the Kasunduang Pag-aayos, or to regard it as rescinded and insist
upon his original demand, in accordance with the provision of Article 2041
of the Civil Code. Having instituted an action for collection of sum of money,
the petitioner obviously chose to rescind the Kasunduang Pag-aayos. As
such, it is error on the part of the CA to rule that enforcement by execution
of said agreement is the appropriate remedy under the circumstances.
Considering
that the
Kasunduang
Pag-aayos
is deemed
rescinded by
the
non-complia
nce of the
respondent
of the terms
thereof,
remanding
the case to
the trial
court for the
enforcement
of said
agreement
is clearly
unwarranted
.
The petitioner avers that the CA erred in remanding the case
to the
trial court for the enforcement of the Kasunduang Pag-aayos as it prolonged
the process, thereby putting off the case in an indefinite pendency.194[25]
Thus, the petitioner insists that she should be allowed to ventilate her rights
before this Court and not to repeat the same proceedings just to comply
with the enforcement of the Kasunduang Pag-aayos, in order to finally
enforce her right to payment.195[26]
The CA took off on the wrong premise that enforcement of the
Kasunduang Pag-aayos is the proper remedy, and therefore erred in its
conclusion that the case should be remanded to the trial court. The fact
that the petitioner opted to rescind the Kasunduang Pag-aayos means that
she is insisting upon the undertaking of the respondent under the original
loan contract. Thus, the CA should have decided the case on the merits,
as an appeal before it, and not prolong the determination of the issues by
remanding it to the trial court. Pertinently, evidence abounds that the
respondent has failed to comply with his loan obligation. In fact, the
Kasunduang Pag-aayos is the well nigh incontrovertible proof of the
respondents indebtedness with the petitioner as it was executed precisely
to give the respondent a second chance to make good on his undertaking.
And since the respondent still reneged in paying his indebtedness, justice
demands that he must be held answerable therefor.

WHEREFORE, the petition is GRANTED. The assailed decision
of the Court of Appeals is SET ASIDE and the Decision of the Regional
Trial Court, Branch 146, Makati City, dated March 14, 2007 is
REINSTATED.
SO ORDERED.
MA. TERESA VIDAL, LULU MARQUEZ, and CARLOS SOBREMONTE,
petitioners, vs. MA. TERESA O. ESCUETA, represented by HERMAN O.
ESCUETA, respondent.
D E C I S I O N
CALLEJO, SR., J.:
This is a petition for review of the Decision196[1] dated July 23, 2002
of the Court of Appeals in CA-G.R. SP NO. 68895 which affirmed the
decision197[2] of the Regional Trial Court (RTC) of Mandaluyong City,
Branch 208, which reversed and set aside the decision198[3] of the
Metropolitan Trial Court of Mandaluyong City (MTC), Branch 60; and
granted the motion for execution filed by private respondent Ma. Teresa
O. Escueta in Civil Case No. 17520.
The petition at bar stemmed from the following antecedents:
When Abelardo Escueta died intestate on December 3, 1994, he was
survived by his widow Remedios Escueta and their six children, including
Ma. Teresa O. Escueta and her brother Herman O. Escueta. Part of his
estate was a parcel of land located at No. 14 Sierra Madre corner Kanlaon
Streets, Barangay Highway Hills, Mandaluyong City, covered by Transfer
Certificate of Title (TCT) No. (77083) - 27568, and the house thereon.
The property was leased to Rainier Llanera, who sublet the same to 25
persons. The heirs executed an extra-judicial settlement of estate over the
property. They also executed a special power of attorney authorizing Ma.
Teresa Escueta to sell the said property.199[4]
Sometime in 1999, Ma. Teresa Escueta, as a co-owner of the property,
filed an ejectment case against Llanera and the sub-lessees before the
Lupon of Barangay Highway Hills, docketed as Barangay Case No.
99-09.200[5]
In the meantime, on April 15, 1999, the heirs of Abelardo Escueta
executed a deed of conditional sale201[6] over the property including the
house thereon, to Mary Liza Santos for P13,300,000.00 payable as
follows:
Down payment ONE MILLION FIVE HUNDRED THOUSAND
(P1,500,000.00) which the HEIRS-SELLERS acknowledged receipt
thereof with complete and full satisfaction;
Second payment - TEN MILLION EIGHT HUNDRED THOUSAND
(P10,800,000.00) after publication of the Extra-Judicial Settlement of
the Estate of the late Abelardo Escueta and payment of the taxes with
the Bureau of Internal Revenue by the Attorney-in-Fact; and
The balance of ONE MILLION (P1,000,000.00) upon vacation of all
the occupants of the subject property within SIX (6) months from date
hereof.202[7]
The parties further agreed that:
Ms. Maria Teresa Escueta shall deliver unto the BUYER the Owners
Duplicate Copy of the title upon receipt of the down payment while the
original copies of the Special Power of Attorney shall be delivered upon
payment of the Second Payment stated above.
The ATTORNEY-IN-FACT-SELLER shall be responsible for the ejectment
of all the tenants in the said subject property.
The ATTORNEY-IN-FACT-SELLER shall pay the estate tax, capital gains
tax and documentary stamp tax including the telephone, water and Meralco
bills and the publication for the Extra-Judicial Settlement of the estate of
the late ABELARDO ESCUETA while the registration and transfer fees shall
be shouldered by the BUYER.203[8]
On May 5, 1999, Escueta and Llanera, and the sub-lessees, executed
an Amicable Settlement,204[9] where they agreed that (a) the owners
of the property would no longer collect the rentals due from the respondents
therein (lessee and sub-lessees) starting May 1999, with the concomitant
obligation of the respondents to vacate the property on or before December
1999; (b) time was the essence of the agreement, and that consequently,
if the lessee and sub-lessees fail or refuse to vacate the property on or
before December 1999, the barangay chairman was authorized without any
court order to cause the eviction and removal of all the respondents on
the property.205[10] The amicable settlement was attested by Pangkat
Chairman Jose Acong. The parties did not repudiate the amicable
settlement within ten days from the execution thereof. Neither did any of
the parties file any petition to repudiate the settlement.
The vendees having paid the down payment and second installment of the
price of the property, the vendors caused the cancellation on December
17, 1999, of TCT No. 27568 and the issuance of TCT No. 15324 to
and under the names of the vendees Mary Liza Santos, Susana Lim and
Johnny Lim.206[11] However, Escueta and the other vendors had yet to
receive the balance of the purchase price of P1,000,000.00 because the
respondents were still in the property.
Llanera vacated the leased premises. Later, twenty of the sub-lessees also
vacated the property. By January 2000, five sub-lessees, namely, Ma.
Teresa Vidal, Lulu Marquez, Marcelo Trinidad, Carlos
Sobremonte,207[12] and Jingkee Ang remained in the property, and
requested Escueta for extensions to vacate the property. Escueta agreed,
but despite the lapse of the extensions granted them, the five sub-lessees
refused to vacate the property.
Escueta opted not to have the sub-lessees evicted through the Punong
Barangay as provided for in the amicable settlement. Neither did she file
a motion with the Punong Barangay for the enforcement of the settlement.
Instead, she filed on May 12, 2000, a verified Motion for Execution against
the recalcitrant sub-lessees with the MTC for the enforcement of the
amicable settlement and the issuance of a writ of execution. The pleading
was docketed as Civil Case No. 17520, with Teresa Escueta as plaintiff,
and the sub-lessees as defendants.208[13]
The defendants opposed the motion209[14] alleging that they were
enveigled into executing the amicable settlement despite the fact that they
had not violated any of the terms and conditions of the verbal lease of
the property; they were coerced and forced to enter into such amicable
settlement as it was the only way of prolonging their stay in the leased
premises; and that they had been paying faithfully and religiously the
monthly rentals in advance.
They also contended that the plaintiff came to court with unclean hands,
as the property had been sold by the co-owners thereof on June 8, 1999,
without notifying them. The real parties-in-interest as plaintiffs, would be
the new owners of the property, and not the Escuetas. The defendants
further asserted that the amicable settlement was not elevated to or
approved by the MTC as required by Section 419 of the Local Government
Code (LGC), nor approved by a competent court; hence, there was no
judgment to enforce by a new motion for a writ of execution. As such,
the plaintiffs motion was premature and procedurally improper. The
defendants asserted that the plaintiff must first secure a certification to file
action from the barangay and thereafter, file an action for ejectment against
them as required by Section 417 of the LGC. The amicable settlement
of the parties before the Lupon cannot be a substitute for an action for
ejectment. Finally, they averred that they had been sub-lessees for more
than ten years already; hence, had the right of first refusal under Section
6 of the Urban Land Reform Law (P.D. No. 1517). For her part, the
plaintiff asserted that there having been no execution of the amicable
settlement on or before November 6, 1999 by the Lupon, the settlement
may now be enforced by action in the proper city or municipal court.
On February 22, 2001, the court issued an Order210[15] denying the
Motion for Execution. The court held that the plaintiff was not the real
party-in-interest as the subject property had already been sold and titled
to Susana Lim, Johnny Lim and Mary Liza Santos. Only the vendees had
the right to demand the ejectment of the defendants from the said property.
The court further ruled that the defendants had the right of first refusal
to purchase the property under Presidential Decree No. 1517. The MTC,
however, did not rule on the issue of whether or not the plaintiffs motion
for execution was premature.
Aggrieved, the plaintiff, now the appellant, appealed the order to the RTC
where she contended that:
THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE
ERROR IN FINDING AND IN CONCLUDING THAT PLAINTIFF IS NO
LONGER THE REAL PARTY-IN-INTEREST.
THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE
ERROR IN FINDING AND IN CONCLUDING THAT DEFENDANTS
CANNOT BE EJECTED AND CAN EXERCISE THE RIGHT OF FIRST
REFUSAL.
THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE
ERROR IN NOT FINDING AND IN NOT MAKING THE CONCLUSION
THAT DEFENDANTS HAVE VIOLATED THE FINAL AND EXECUTORY
THE WRITTEN AMICABLE SETTLEMENT BETWEEN PARTIES
EXECUTED IN THEIR BARANGAY CONFRONTATION.
THE METROPOLITAN TRIAL COURT COMMITTED THE REVERSIBLE
ERROR IN NOT ORDERING THE EJECTMENT OF THE DEFENDANTS
AND IN NOT ORDERING SAID DEFENDANTS TO PAY THEIR
ARREARAGES IN RENTAL PAYMENTS FROM MAY 1999 UP TO THE
DAY THEY ACTUALLY LEAVE THE PREMISES AS WELL AS
ATTORNEYS FEES AND DAMAGES.211[16]
On August 31, 2001, the RTC rendered a decision holding that the
plaintiff-appellant was still the owner of the property when the ejectment
case was filed in the office of the barangay captain, and, as such, was
the real party-in-interest as the plaintiff in the MTC. Moreover, under the
deed of conditional sale between her and the buyers, it was stipulated
therein that the purchase price of P1,000,000.00 would be delivered to
the vendors only upon the vacation of all the occupants of the subject
property within six (6) months from date hereof. She was duty-bound
to cause the eviction of the defendant from the property; hence, the
appellant, as a co-owner, had a substantial interest in the property. The
MTC further held that the sale, having been executed while the appellants
complaint was pending with the Lupon, the action in the MTC may be
continued by the plaintiff-appellant.
As to the right of first refusal being asserted by the appellees, the court
ruled that there was no showing that the land leased had been proclaimed
to be within a specific Urban Land Reform Zone. In fact, the Housing and
Land Use Regulatory Board had certified that the subject property was
outside the area for priority development; thus, the appellees may not claim
that they had been deprived of their preemptive right when no such right
existed in the first place. The court did not rule on the third and fourth
issues on the ground that the said issues were never raised by the parties.
The decretal portion of the RTC decision reads as follows:
PREMISES CONSIDERED, the appeal is GRANTED. The Order dated
February 2, 2001 issued by the Metropolitan Trial Court of Mandaluyong
City, Branch 60, in Civil Case No. 17520 is hereby REVERSED and SET
ASIDE, and a new one is entered granting the Motion for Execution.
Let the Record of this case be remanded to the court a quo for proper
disposition.
SO ORDERED.212[17]
A petition for review under Rule 42 was filed with the Court of Appeals
by three of the appellees, now petitioners Ma. Teresa Vidal, Lulu Marquez
and Carlos Sobremonte. The court, however, dismissed the petition on (1)
procedural grounds, and (2) for lack of merit. 213[18]
On procedural grounds, the CA ruled that the petitioners failed to indicate
the specific material dates, showing that their petition was filed on time
as required by the rules, and in declaring that they failed to justify their
failure to do so.
On the merits of the petition, the appellate court upheld the ruling of the
RTC. The decretal portion of the decision of the CA reads:
WHEREFORE, the instant petition is hereby DISMISSED. The assailed
Decision of the Regional Trial Court of Mandaluyong City, Branch 208,
rendered in Civil Case No. MC01-333-A, dated August 31, 2001 is
hereby AFFIRMED.
SO ORDERED.214[19]
In their petition at bar, the petitioners assert that the CA erred as follows:
(1) in not applying the rules of procedure liberally; (2) in declaring that
there was no need for the respondents to file an ejectment case for the
eviction of the petitioners; (3) that the real parties-in-interest as plaintiffs
in the MTC were the new owners of the property, Susana Lim, Johnny
Lim and Mary Liza Santos; (4) in not finding that the Amicable Settlement
was obtained through deceit and fraud; and (5) in ruling that the
petitioners had no right of first refusal in the purchase and sale of the
subject property under Presidential Decree No. 1517.
The petition is bereft of merit.
On the procedural issue, the CA dismissed the petition before it for the
petitioners failure to comply with Section 2, par. 1, Rule 42 of the 1997
Rules of Civil Procedure.215[20] The CA ratiocinated that there was no
justification for a relaxation of the Rules, thus:
Petitioners cited decisions of the Supreme Court where a relaxation of
procedural rules was allowed. However, a reading of those cases shows
that they are not exactly similar with the present case. In the case of Mactan
Cebu International Airport Authority vs. Francisco Cuizon Mangubat, the
Supreme Court allowed the late payment of docket fee by the Solicitor
General on the ground that the 1997 Rules of Civil Procedure regarding
payment of docket fees was still new at that time. The same cannot be
said in the present case. The petition was filed on February 28, 2002,
almost five years from the issuance of the 1997 Rules of Civil Procedure.
The circumstances of typhoon and holiday for failure to obtain a certified
true copy of the DOJs Decision, in the case of Hagonoy Market Vendor
Association vs. Municipality of Hagonoy, Bulacan, were present in the
instant petition. The case of Salazar vs. Court of Appeals is also not similar
with the present case.216[21]
The petitioners aver in this case that the failure of their counsel to include
the material dates in their petition with the CA was, as stated in their
Amended Manifestation, because the said counsel was suffering from a
slight heart attack. The Court finds the petitioners pretext flimsy. If the
petitioners counsel was able to prepare their petition despite her condition,
there was no valid reason why she failed to include the material dates
required under the Rules of Court. Besides, the petitioners stated in their
petition that they had appended a copy of their Amended Manifestation,
but failed to do so. If the rules were to be applied strictly, the CA could
not be faulted for dismissing the petition.
However, in order to promote their objective of securing a just, speedy and
inexpensive dispensation of every action and proceedings, the Rules are
to be liberally construed.217[22] Rules of procedure are intended to
promote, not to defeat substantial justice and, therefore, should not be
applied in a very rigid and technical sense. This Court ruled in Buenaflor
vs. Court of Appeals, et al.218[23] that appeal is an essential part of
our judicial system and trial courts and the Court of Appeals are advised
to proceed with caution so as not to deprive a party of the right to appeal
and that every party litigant should be afforded the amplest opportunity for
the proper and just disposition of his cause, free from the constraints of
technicalities. The Court has given due course to petitions where to do
so would serve the demands of substantial justice and in the exercise of
its equity jurisdiction.219[24] In this case, the Court opts to apply the
rules liberally to enable it to delve into and resolve the cogent substantial
issues posed by the petitioners.
We agree with the contention of the petitioners that under Section 416
of the LGC, the amicable settlement executed by the parties before the
Lupon on the arbitration award has the force and effect of a final judgment
of a court upon the expiration of ten (10) days from the date thereof,
unless the settlement is repudiated within the period therefor, where the
consent is vitiated by force, violence or intimidation, or a petition to nullify
the award is filed before the proper city or municipal court.220[25] The
repudiation of the settlement shall be sufficient basis for the issuance of
a certification to file a complaint.221[26]
We also agree that the Secretary of the Lupon is mandated to transmit
the settlement to the appropriate city or municipal court within the time frame
under Section 418 of the LGC and to furnish the parties and the Lupon
Chairman with copies thereof.222[27] The amicable settlement which is
not repudiated within the period therefor may be enforced by execution by
the Lupon through the Punong Barangay within a time line of six months,
and if the settlement is not so enforced by the Lupon after the lapse of
the said period, it may be enforced only by an action in the proper city
or municipal court as provided for in Section 417 of the LGC of 1991,
as amended, which reads:
SEC. 417. Execution. The amicable settlement or arbitration award may
be enforced by execution by the Lupon within six (6) months from the
date of the settlement. After the lapse of such time, the settlement may
be enforced by action in the proper city or municipal court. (Underlining
supplied).
Section 417 of the Local Government Code provides a mechanism for the
enforcement of a settlement of the parties before the Lupon. It provides
for a two-tiered mode of enforcement of an amicable settlement executed
by the parties before the Lupon, namely, (a) by execution of the Punong
Barangay which is quasi-judicial and summary in nature on mere motion
of the party/parties entitled thereto;223[28] and (b) by an action in
regular form, which remedy is judicial. Under the first remedy, the
proceedings are covered by the LGC and the Katarungang Pambarangay
Implementing Rules and Regulations. The Punong Barangay is called upon
during the hearing to determine solely the fact of non-compliance of the
terms of the settlement and to give the defaulting party another chance
at voluntarily complying with his obligation under the settlement. Under the
second remedy, the proceedings are governed by the Rules of Court, as
amended. The cause of action is the amicable settlement itself, which, by
operation of law, has the force and effect of a final judgment.
Section 417 of the LGC grants a party a period of six months to enforce
the amicable settlement by the Lupon through the Punong Barangay before
such party may resort to filing an action with the MTC to enforce the
settlement. The raison d etre of the law is to afford the parties during the
six-month time line, a simple, speedy and less expensive enforcement of
their settlement before the Lupon.
The time line of six months is for the benefit not only of the complainant,
but also of the respondent. Going by the plain words of Section 417 of
the LGC, the time line of six months should be computed from the date
of settlement. However, if applied to a particular case because of its peculiar
circumstance, the computation of the time line from the date of the
settlement may be arbitrary and unjust and contrary to the intent of the
law. To illustrate: Under an amicable settlement made by the parties before
the Lupon dated January 15, 2003, the respondents were obliged to
vacate the subject property on or before September 15, 2003. If the time
line of six months under Section 417 were to be strictly and literally
followed, the complainant may enforce the settlement through the Lupon
only up to July 15, 2003. But under the settlement, the respondent was
not obliged to vacate the property on or before July 15, 2003; hence,
the settlement cannot as yet be enforced. The settlement could be enforced
only after September 15, 2003, when the respondent was obliged to
vacate the property. By then, the six months under Section 417 shall have
already elapsed. The complainant can no longer enforce the settlement
through the Lupon, but had to enforce the same through an action in the
MTC, in derogation of the objective of Section 417 of the LGC. The law
should be construed and applied in such a way as to reflect the will of
the legislature and attain its objective, and not to cause an injustice. As
Justice Oliver Wendell Holmes aptly said, courts are apt to err by sticking
too closely to the words of the law where these words support a policy
that goes beyond them. The Court should not defer to the latter that killeth
but to the spirit that vivifieth.224[29]
In light of the foregoing considerations, the time line in Section 417 should
be construed to mean that if the obligation in the settlement to be enforced
is due and demandable on the date of the settlement, the six-month period
should be counted from the date of the settlement; otherwise, if the
obligation to be enforced is due and demandable on a date other than
the date of the settlement, the six-month period should be counted from
the date the obligation becomes due and demandable.
Parenthetically, the Katarungang Pambarangay Implementing Rules and
Regulations, Rule VII, Section 2 provides:
SECTION 2. Modes of Execution. - The amicable settlement or arbitration
award may be enforced by execution by the Lupon within six [6] months
from date of the settlement or date of receipt of the award or from the
date the obligation stipulated in the settlement or adjudged in the arbitration
award becomes due and demandable. After the lapse of such time, the
settlement or award may be enforced by the appropriate local trial court
pursuant to the applicable provisions of the Rules of Court . An amicable
settlement reached in a case referred by the Court having jurisdiction over
the case to the Lupon shall be enforced by execution by the said court.
(Underlining supplied).
By express provision of Section 417 of the LGC, an action for the
enforcement of the settlement should be instituted in the proper municipal
or city court. This is regardless of the nature of the complaint before the
Lupon, and the relief prayed for therein. The venue for such actions is
governed by Rule 4, Section 1 of the 1997 Rules of Civil Procedure,
as amended. An action for the enforcement of a settlement is not one of
those covered by the Rules on Summary Procedure in civil cases;225[30]
hence, the rules on regular procedure shall apply, as provided for in Section
1, Rule 5 of the Rules of Civil Procedure, as amended.226[31]
As to the requisite legal fees for the filing of an action in the first level
court under Section 417 of the Local Government Code, indigents-litigants
(a) whose gross income and that of their immediate family do not exceed
ten thousand (P10,000.00) pesos a month if residing in Metro Manila,
and five thousand (P5,000.00) pesos a month if residing outside Metro
Manila, and (b) who do not own real property with an assessed value
of more than fifty thousand (P50,000.00) pesos shall be exempt from
the payment of legal fees. Section 18, Rule 141 of the Revised Rules
of Court, as amended by A.M. No. 00-2-01-SC, is hereby further
amended accordingly.
In this case, the parties executed their Amicable Settlement on May 5,
1999. However, the petitioners were obliged to vacate the property only
in January 2000, or seven months after the date of the settlement; hence,
the respondent may enforce the settlement through the Punong Barangay
within six months from January 2000 or until June 2000, when the
obligation of the petitioners to vacate the property became due. The
respondent was precluded from enforcing the settlement via an action with
the MTC before June 2000. However, the respondent filed on May 12,
2000 a motion for execution with the MTC and not with the Punong
Barangay. Clearly, the respondent adopted the wrong remedy. Although the
MTC denied the respondents motion for a writ of execution, it was for a
reason other than the impropriety of the remedy resorted to by the
respondent. The RTC erred in granting the respondents motion for a writ
of execution, and the CA erred in denying the petitioners petition for review.
Normally, the Court would remand the case to the Punong Barangay for
further proceedings. However, the Court may resolve the issues posed by
the petitioners, based on the pleadings of the parties to serve the ends
of justice. It is an accepted rule of procedure for the Court to strive to
settle the existing controversy in a single proceeding, leaving no root or
branch to bear the seeds of future litigation.227[32]
In this case, there is no question that the petitioners were obliged under
the settlement to vacate the premises in January 2000. They refused,
despite the extensions granted by the respondent, to allow their stay in
the property. For the court to remand the case to the Lupon and require
the respondent to refile her motion for execution with the Lupon would be
an idle ceremony. It would only unduly prolong the petitioners unlawful
retention of the premises.228[33]
The RTC and the CA correctly ruled that the respondent is the real
party-in-interest to enforce amicable settlement. Rule 3, Section 2 of the
Rules of Court, as amended, reads:
SEC. 2. Parties in interest. - A real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. Unless otherwise authorized by law or
these Rules, every action must be prosecuted or defended in the name
of the real party in interest.
The party-in-interest applies not only to the plaintiff but also to the
defendant. Interest within the meaning of the rules means material interest,
an interest in issue and to be affected by the decree as distinguished from
mere interest in the question involved, or a mere incidental
interest.229[34] A real party in interest is one who has a legal
right.230[35] Since a contract may be violated only by the parties thereto
as against each other, in an action upon that contract, the real
parties-in-interest, either as plaintiff or as defendant, must be parties to
the said contract.231[36] The action must be brought by the person who,
by substantive law, possesses the right sought to be enforced.232[37]
In this case, the respondent was the party in the amicable settlement. She
is the real party-in-interest to enforce the terms of the settlement because
unless the petitioners vacate the property, the respondent and the other
vendors should not be paid the balance of P1,000,000.00 of the purchase
price of the property under the Deed of Conditional Sale.

The petitioners are estopped from assailing the amicable settlement on the
ground of deceit and fraud. First. The petitioners failed to repudiate the
settlement within the period therefor. Second. The petitioners were benefited
by the amicable settlement. They were allowed to remain in the property
without any rentals therefor until December 1998. They were even granted
extensions to continue in possession of the property. It was only when the
respondent filed the motion for execution that the petitioners alleged for
the first time that the respondents deceived them into executing the
amicable settlement.233[38]

On the petitioners claim that they were entitled to the right of first refusal
under P.D. No. 1517, we agree with the disquisition of the trial court,
as quoted by the Court of Appeals:

We likewise find no reversible error on the part of [the] RTC in rejecting

that the petitioners have a right of first refusal in the purchase and sale
of the subject property. As ratiocinated by the court:

xxx. Presidential Decree No. 1517 (The Urban Land Reform Law) does
not apply where there is no showing that the land leased has been
proclaimed to be within a specific Urban Land Reform Zone. In the instant
case, the annex attached to the Proclamation 1967 creating the areas
declared as priority development and urban land reform zone ... does not
indicate that the barangay where the subject property is located is included
therein. This is bolstered by the certification issued by the Housing and
Land Regulatory Board to the effect that the location of the property is
outside the area of Priority Development. It is therefore a reversible error
for the lower court to conclude that defendants-appellees were deprived
of their preemptive right when no right exists in the first place.

Indeed, before a preemptive right under PD 1517 can be exercised, the

disputed land should be situated in an area declared to be both an APD
(Areas for Priority Development) and a ULRZ (Urban Land Reform
Zones). Records show, and as not disputed by the petitioners, the disputed
property is not covered by the aforementioned areas and zones.234[39]

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The

petitioners and all those acting for and in their behalf are directed to vacate,
at their own expense, the property covered by Transfer Certificate of Title
No. 15324 of the Register of Deeds of Muntinlupa City and deliver
possession of the property to the vendees Mary Liza Santos, Susana Lim
and Johnny Lim. This is without prejudice to the right of the vendees to
recover from the petitioners reasonable compensation for their possession
of the property from January 2000 until such time that they vacate the
property. Costs against the petitioners.

SO ORDERED.