1
CVIL PROCEDURE ADDITIONAL CASES —This Court has held that the objective of the plaintiffs in accion publiciana is to
Supapo vs De Jesus
1. Same; Same; Same; Same; The concept of “conclusiveness of judgment” does
not require that there is identity of causes of action provided that there is identity of
issue and identity of parties.-
—The concept of “conclusiveness of judgment” does not require that there is
identity of causes of action provided that there is identity of issue and identity of
parties. Under this particular concept of res judicata, any right, fact, or matter in
issue directly adjudicated or necessarily involved in the determination of an action
before a competent court in which judgment is rendered on the merits is
conclusively settled by the judgment therein and cannot again be litigated between
the parties and their privies, whether or not the claim, demand, purpose, or subject
matter of the two actions is the same. As already explained, there is no identity of
parties between the criminal complaint under the Anti-Squatting law and the civil
action for accion publiciana. For this reason alone, “conclusiveness of judgment”
does not apply. Even if we assume, for the sake of argument, that there is identity
of parties, “conclusiveness of judgment” still does not apply because there is no
identity of issues. The issue in the criminal case is whether the respondents
(accused therein) committed the crime alleged in the information, while the only
issue in accion publiciana is whether the Spouses Supapo have a better right than
the respondents to possess and occupy the subject property.
2. Remedial Law; Civil Procedure; Accion Publiciana; Accion publiciana refers to
an ejectment suit filed after the expiration of one (1) year from the accrual of the
cause of action or from the unlawful withholding of possession of the realty.-
—Accion publiciana is an ordinary civil proceeding to determine the better right of
possession of realty independent of title. It refers to an ejectment suit filed after the
expiration of one year from the accrual of the cause of action or from the unlawful
withholding of possession of the realty.
3. Same; Same; Same; The Supreme Court (SC) has held that the objective of the
plaintiffs in accion publiciana is to recover possession only, not ownership.
However, where the parties raise the issue of ownership, the courts may pass upon
the issue to determine who between the parties has the right to possess the
property.-
recover possession only, not ownership. However, where the parties raise the issue
of ownership, the courts may pass upon the issue to determine who between the
parties has the right to possess the property. This adjudication is not a final
determination of the issue of ownership; it is only for the purpose of resolving the
issue of possession, where the issue of ownership is inseparably linked to the issue
of possession. The adjudication of the issue of ownership, being provisional, is not
a bar to an action between the same parties involving title to the property. The
adjudication, in short, is not conclusive on the issue of ownership.
4. Same; Same; Jurisdiction Courts; Metropolitan Trial Courts; Republic Act (RA)
No. 7691 diversed the Regional Trial Court (RTC) of a portion of its jurisdiction
and granted the Metropolitan Trial Courts (MeTCs), Municipal Trial Courts
(MTCs) and Municipal Circuit Trial Courts (MCTCs) the exclusive and original
jurisdiction to hear actions where the assessed value of the property does not
exceed Twenty Thousand Pesos (P20,000.00), or Fifty Thousand Pesos
(P50,000.00), if the property is located in Metro Manila.-
—Under Batas Pambansa Bilang 129, the jurisdiction of the RTC over actions
involving title to or possession of real property is plenary. RA No. 7691, however,
divested the RTC of a portion of its jurisdiction and granted the Metropolitan Trial
Courts, Municipal Trial Courts and Municipal Circuit Trial Courts the exclusive
and original jurisdiction to hear actions where the assessed value of the property
does not exceed Twenty Thousand Pesos (P20,000.00), or Fifty Thousand Pesos
(P50,000.00), if the property is located in Metro Manila.
5. Same; Same; Same; Jurisdiction over actions involving title to or possession of
real property is now determined by its assessed value.-
—Jurisdiction over actions involving title to or possession of real property is now
determined by its assessed value. The assessed value of real property is its fair
market value multiplied by the assessment level. It is synonymous to taxable value.
6. Same; Same; Same; The complaint must allege the assessed value of the real
property subject of the complaint or the interest thereon to determine which court
has jurisdiction over the action.-
—In this regard, the complaint must allege the assessed value of the real property
subject of the complaint or the interest thereon to determine which court has

jurisdiction over the action. This is required because the nature of the action and
the court with original and exclusive jurisdiction over the same is determined by
the material allegations of the complaint, the type of relief prayed for by the
plaintiff, and the law in effect when the action is filed, irrespective of whether the
plaintiffs are entitled to some or all of the claims asserted therein.
7. Civil Law; Land Titles and Deeds; Acquisitive Prescription; Lands covered by a
title cannot be acquired by prescription or adverse possession.-
—In a long line of cases, we have consistently ruled that lands covered by a title
cannot be acquired by prescription or adverse possession. We have also held that a
claim of acquisitive prescription is baseless when the land involved is a registered
land because of Article 1126 of the Civil Code in relation to Act 496 [now, Section
47 of Presidential Decree (PD) No. 1529].
8. Same; Same; Possession; In addition to the imprescriptibility, the person who
holds a Torrens Title over a land is also entitled to the possession thereof.-
—In addition to the imprescriptibility, the person who holds a Torrens Title over a
land is also entitled to the possession thereof. The right to possess and occupy the
land is an attribute and a logical consequence of ownership. Corollary to this rule is
the right of the holder of the Torrens Title to eject any person illegally occupying
their property. Again, this right is imprescriptible.
9. Same; Laches; Burden of Proof; The party alleging laches must adduce in court
evidence proving such allegation.-
—With respect to the respondents’ defense of laches, suffice it to say that the same
is evidentiary in nature and cannot be established by mere allegations in the
pleadings. In other words, the party alleging laches must adduce in court evidence
proving such allegation. This Court not being a trier of facts cannot rule on this
issue; especially so since the lower courts did not pass upon the same.
10. Remedial Law; Civil Procedure; Judgments; Res Judicata; Res judicata
embraces two (2) concepts: (1) bar by prior judgment as enunciated in Rule 39,
Section 47(b) of the Rules of Civil Procedure; and (2) conclusiveness of judgment
in Rule 39, Section 47(c).-
—Res judicata embraces two concepts: (1) bar by prior judgment as enunciated in
Rule 39, Section 47(b) of the Rules of Civil Procedure; and (2) conclusiveness of
2
judgment in Rule 39, Section 47(c). “Bar by prior judgment” means that when a
right or fact had already been judicially tried on the merits and determined by a
court of competent jurisdiction, the final judgment or order shall be conclusive
upon the parties and those in privity with them and constitutes an absolute bar to
subsequent actions involving the same claim, demand or cause of action. The
requisites for res judicata under the concept of bar by prior judgment are: (1) The
former judgment or order must be final; (2) It must be a judgment on the merits;
(3) It must have been rendered by a court having jurisdiction over the subject
matter and the parties; and (4) There must be between the first and second actions,
identity of parties, subject matter, and cause of action.
G.R. No. 198356, April 20, 2015
ESPERANZA SUPAPO AND THE HEIRS OF ROMEO SUPAPO, NAMELY:
ESPERANZA, REX EDWARD, RONALD TROY, ROMEO, JR., SHEILA
LORENCE, ALL SURNAMED SUPAPO, AND SHERYL FORTUNE SUPAPO-
SANDIGAN, Petitioners, v. SPOUSES ROBERTO AND SUSAN DE JESUS,
MACARIO BERNARDO, AND THOSE PERSONS CLAIMING RIGHTS
UNDER THEM, Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by petitioners Esperanza
Supapo and Romeo Supapo2 (Spouses Supapo) to assail the February 25, 2011
decision3 and August 25, 2011 resolution4 of the Court of Appeals (CA) in CA-
G.R. SP No. 111674.
Factual Antecedents
The Spouses Supapo filed a complaint5 for accion publiciana against Roberto and
Susan de Jesus (Spouses de Jesus), Macario Bernardo (Macario), and persons
claiming rights under them (collectively, the respondents), with the Metropolitan
Trial Court (MeTC) of Caloocan City.
The complaint sought to compel the respondents to vacate a piece of land located

in Novaliches, Quezon City, described as Lot 40, Block 5 (subject lot). The subject
lot is covered by Transfer Certificate of Title (TCT) No. C-284416 registered and
titled under the Spouses Supapo's names. The land has an assessed value of thirty-
nine thousand nine hundred eighty pesos (39,980.00) as shown in the Declaration
of Real Property Value (tax declaration) issued by the Office of the City Assessor
of Caloocan.7
The Spouses Supapo did not reside on the subject lot. They also did not employ an
overseer but they made sure to visit at least twice a year.8 During one of their visits
in 1992, they saw two (2) houses built on the subject lot. The houses were built
without their knowledge and permission. They later learned that the Spouses de
Jesus occupied one house while Macario occupied the other one.9
The Spouses Supapo demanded from the respondents the immediate surrender of
the subject lot by bringing the dispute before the appropriate Lupong
Tagapamayapa. The Lupon issued a Katibayan Upang Makadulog sa
Hukuman (certificate to file action) for failure of the parties to settle amicably.10
The Spouses Supapo then filed a criminal case11 against the respondents for
violation of Presidential Decree No. 772 or the Anti-Squatting Law.12 The trial
court convicted the respondents. The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, this Court finds accused ROBERTO
DE JESUS, SUSAN DE JESUS and MACARIO BERNARDO, GUILTY beyond
reasonable doubt for Violation of Presidential Decree No. 772, and each accused is
hereby ordered to pay a fine of ONE THOUSAND PESOS (P1,000.00), and to
vacate the subject premises.
SO ORDERED.13 (Emphasis supplied.)
The respondents appealed their conviction to the CA.14 While the appeal was
pending, Congress enacted Republic Act (RA) No. 8368, otherwise known as "An
Act Repealing Presidential Decree No. 772," which resulted to the dismissal of the
criminal case.15
On April 30, 1999, the CA's dismissal of the criminal case became final.16
3
Notwithstanding the dismissal, the Spouses Supapo moved for the execution of the
respondents' civil liability, praying that the latter vacate the subject lot. The
Regional Trial Court (RTC) granted the motion and issued the writ of execution.
The respondents moved for the quashal of the writ but the RTC denied the same.
The RTC also denied the respondents' motion for reconsideration.
The respondents thus filed with the CA a petition for certiorari to challenge the
RTC's orders denying the quashal of the writ and the respondent's motion for
reconsideration.17 The CA granted the petition and held that with the repeal of
the Anti-Squatting Law, the respondents' criminal and civil liabilities were
extinguished.18 The dispositive portion of the decision reads:
WHEREFORE, premises considered, the petition for certiorari with prayer for
injunction is GRANTED. The orders dated June 5, 2003 and July 24, 2003 of
Branch 131 of the Regional Trial Court of Caloocan City in Criminal Case No. C-
45610 are REVERSED and SET ASIDE. Said court is hereby
permanently ENJOINED from further executing or implementing its decision dated
March 18, 1996.
SO ORDERED.
The CA, however, underscored that the repeal of the Anti-Squatting Law does not
mean that people now have unbridled license to illegally occupy lands they do not
own, and that it was not intended to compromise the property rights of legitimate
landowners.19 In cases of violation of their property rights, the CA noted that
recourse may be had in court by filing the proper action for recovery of possession.
The Spouses Supapo thus filed the complaint for action publiciana.20
After filing their Answer,21 the respondents moved to set their affirmative
defenses for preliminary hearing22 and argued that: (1) there is another action
pending between the same parties; (2) the complaint for accion publiciana is barred
by statute of limitations; and (3) the Spouses Supapo's cause of action is barred by
prior judgment.
The MeTC Ruling23
 4

The MeTC denied the motion to set the affirmative defenses for preliminary The RTC denied the petitioners' motion for reconsideration.
hearing. It ruled that the arguments advanced by the respondents are evidentiary in
nature, which at best can be utilized in the course of the trial. The MeTC likewise It held that although the MeTC had jurisdiction based on the assessed value of the
denied the respondents' motion for reconsideration. subject lot, the Spouses Supapos' cause of action had already prescribed, the action
having been filed beyond the ten (l0)-year prescriptive period under Article 555 of
From the MeTC's ruling, the respondents filed a petition for certiorari with the the Civil Code.28 As it was not proven when the actual demand to vacate was
RTC.24 made, the RTC ruled that the reckoning period by which the ejectment suit should
have been filed is counted from the time the certificate to file action was issued.
The RTC Ruling25 The certificate to file action was issued on November 25, 1992, while the
complaint for accion publiciana was filed only on March 7, 2008, or more than ten
(10) years thereafter.
The RTC granted the petition for certiorari on two grounds, viz.: (i) the action has
prescribed; and (ii) accion publiciana falls within the exclusive jurisdiction of the
Dissatisfied with the RTC ruling, the Spouses Supapo appealed to the CA.29
RTC.
The CA Ruling30
It held that in cases where the only issue involved is possession, the MeTC has
jurisdiction if the action for forcible entry or unlawful detainer is filed within one
(1) year from the time to demand to vacate was made. Otherwise, the complaint for The CA dismissed the appeal and held that the complaint for accion
recovery of possession should be filed before the RTC. publiciana should have been lodged before the RTC and that the period to file the
action had prescribed.
The dispositive portion of the RTC decision reads:
The dispositive portion of the CA decision reads:
WHEREFORE, premises considered, the instant petition is hereby GRANTED.
WHEREFORE, the appeal is DENIED. The Decision dated June 30, 2009 and
The Orders dated October 24, 2008 and February 23, 2009 are hereby Order dated October 19, 2009 are AFFIRMED.
declared NULL and VOID.
SO ORDERED
The Public Respondent is hereby directed to DISMISS Civil Case No. 08-29245
for lack of jurisdiction.
The Spouses Supapo moved31 but failed32 to secure a reconsideration of the CA
SO ORDERED.26 decision; hence, they came to us through the present petition.

The Petition
In their motion for reconsideration,27 the Spouses Supapo emphasized that the
court's jurisdiction over an action involving title to or possession of land is
In seeking reversal of the CA's ruling, the Spouses Supapo essentially argue that:
determined by its assessed value; that the RTC does not have an exclusive
jurisdiction on all complaints for accion publiciana; and that the assessed value of (1) the MeTC exercises exclusive original jurisdiction over accion
the subject lot falls within MeTC's jurisdiction. publiciana where the assessed value of the property does not exceed
 5

P20,000.00, or P50,000.00 if the property is located in Metro Manila; and expiration of one year from the accrual of the cause of action or from the unlawful
that withholding of possession of the realty.34

(2) prescription had not yet set in because their cause of action is In the present case, the Spouses Supapo filed an action for the recovery of
imprescriptible under the Torrens system. possession of the subject lot but they based their better right of possession on a
claim of ownership.

The Respondents' Case33 This Court has held that the objective of the plaintiffs in accion publiciana is to
recover possession only, not ownership. However, where the parties raise the issue
of ownership, the courts may pass upon the issue to determine who between the
The respondents argue that the complaint for accion publiciana was (1) filed in the parties has the right to possess the property.35
wrong court; (2) barred by prescription; and (3) barred by res judicata.
This adjudication is not a final determination of the issue of ownership; it is only
Issues for the purpose of resolving the issue of possession, where the issue of ownership
is inseparably linked to the issue of possession. The adjudication of the issue of
ownership, being provisional, is not a bar to an action between the same parties
The issues for resolution are:
involving title to the property. The adjudication, in short, is not conclusive on the
Whether the MeTC properly acquired jurisdiction; issue of ownership.36

Whether the cause of action has prescribed; and Thus, while we will dissect the Spouses Supapo's claim of ownership over the
subject property, we will only do so to determine if they or the respondents should
Whether the complaint for accion publiciana is barred by res judicata. have the right of possession.

Having thus determined that the dispute involves possession over a real property,
Our Ruling we now resolve which court has the jurisdiction to hear the case.

Under Batas Pambansa Bilang 129,37 the jurisdiction of the RTC over actions
The petition is meritorious. involving title to or possession of real property is plenary.38

We hold that: (1) the MeTC properly acquired jurisdiction; (2) the cause of action RA No. 7691,39 however, divested the RTC of a portion of its jurisdiction and
has not prescribed; and (3) the complaint is not barred by res judicata. granted the Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts the exclusive and original jurisdiction to hear actions where
Accion Publiciana and the assessed value of the property does not exceed Twenty Thousand Pesos
the Jurisdiction of the (P20,000.00), or Fifty Thousand Pesos (P50,000.00), if the property is located in
MeTC Metro Manila.

Accion publiciana is an ordinary civil proceeding to determine the better right of Section 1 of RA No. 7691 states:
possession of realty independent of title. It refers to an ejectment suit filed after the
 6

Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the [D]oes the RTC have jurisdiction over all cases of recovery of possession
"Judiciary Reorganization Act of 1980," is hereby amended to read as follows: regardless of the value of the property involved?

Section. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise
exclusive original jurisdiction:
(2) In all civil actions which involve the title to, or possession of, real property, or
any interest therein, where the assessed value of the property involved exceeds
Twenty thousand pesos (P20,000.00) or, for civil actions in Metro Manila, where
such value exceeds Fifty thousand pesos (P50,000.00) x x x. (Emphasis supplied.)
The answer is no. The doctrine on which the RTC anchored its denial of
petitioner's Motion to Dismiss, as affirmed by the CA — that all cases of recovery
of possession or accion publiciana lies with the regional trial courts regardless of
the value of the property — no longer holds true. As tilings now stand, a distinction
must be made between those properties the assessed value of which is below
P20,000.00, if outside Metro Manila; and P50,000.00, if within.43 (Emphasis
supplied.)

Section 3 of the same law provides:
Section. 3. Section 33 of the same law is hereby amended to read as follows:
Section. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in Civil Cases. - Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to,
or possession of, real property, or any interest therein where the assessed value of
the property or interest therein does not exceed Twenty thousand pesos
(P20,000.00) or, in civil actions in Metro Manila, where such assessed value does
not exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages of
whatever kind, attorney's fees, litigation expenses and costs x x x. (Emphasis
supplied.)
In view of these amendments, jurisdiction over actions involving title to or
possession of real property is now determined by its assessed value.40 The
assessed value of real property is its fair market value multiplied by the assessment
level. It is synonymous to taxable value.41
In Quinagoran v. Court of Appeals,42 we explained:
In this regard, the complaint must allege the assessed value of the real property
subject of the complaint or the interest thereon to determine which court has
jurisdiction over the action. This is required because the nature of the action and
the court with original and exclusive jurisdiction over the same is determined by
the material allegations of the complaint, the type of relief prayed for by the
plaintiff, and the law in effect when the action is filed, irrespective of whether the
plaintiffs are entitled to some or all of the claims asserted therein.44
In the present case, the Spouses Supapo alleged that the assessed value of the
subject lot, located in Metro Manila, is P39,980.00. This is proven by the tax
declaration45 issued by the Office of the City Assessor of Caloocan. The
respondents do not deny the genuineness and authenticity of this tax declaration.
Given that the Spouses Supapo duly complied with the jurisdictional requirements,
we hold that the MeTC of Caloocan properly acquired jurisdiction over the
complaint for accion publiciana.
The cause of action
has not prescribed
The respondents argue that the complaint for accion publiciana is dismissible for
being filed out of time.
They invoke Article 555 of the Civil Code, which states: Art. 555. A possessor
may lose his possession:

xxxx
 7

(4) By the possession of another, subject to the provisions of Article 537, if the
new possession has lasted longer than one year. But the real right of possession is
not lost till after the lapse of ten years. (Emphasis supplied.)
The respondents point out that the Spouses Supapo filed the complaint for accion
publiciana on March 7, 2008 or more than ten (10) years after the certificate to file
action was issued on November 25, 1992. The respondents contend that the
Spouses Supapo may no longer recover possession of the subject property, the
complaint having been filed beyond the period provided by law.
Further, while the respondents concede that the Spouses Supapo hold a TCT over
the subject property, and assuming a Torrens title is imprescriptible and
indefeasible, they posit that the latter have lost their right to recover possession
because of laches.
On their part, the Spouses Supapo admit that they filed the complaint for accion
publiciana more than ten (10) years after the certificate to file action was issued.
Nonetheless, they argue that their cause of action is imprescriptible since the
subject property is registered and titled under the Torrens system.
In a long line of cases, we have consistently ruled that lands covered by a title
cannot be acquired by prescription or adverse possession. We have also held that a
claim of acquisitive prescription is baseless when the land involved is a registered
land because of Article 112649 of the Civil Code in relation to Act 496 [now,
Section 47 of Presidential Decree (PD) No. 152950].51
The Spouses Supapo (as holders of the TCT) enjoy a panoply of benefits under the
Torrens system. The most essential insofar as the present case is concerned is
Section 47 of PD No. 1529 which states:
Section 47. Registered land not subject to prescriptions. No title to registered land
in derogation of the title of the registered owner shall be acquired by prescription
or adverse possession.
In addition to the imprescriptibility, the person who holds a Torrens Title over a
land is also entitled to the possession thereof.52 The right to possess and occupy
the land is an attribute and a logical consequence of ownership.53 Corollary to this
rule is the right of the holder of the Torrens Title to eject any person illegally
occupying their property. Again, this right is imprescriptible.54

We rule that the Spouses Supapo's position is legally correct. In Bishop v. CA,55 we held that even if it be supposed that the holders of the
Torrens Title were aware of the other persons' occupation of the
At the core of this controversy is a parcel of land registered under the Torrens property, regardless of the length of that possession, the lawful owners have a right
system. The Spouses Supapo acquired the TCT on the subject lot in to demand the return of their property at any time as long as the possession was
1979.46 Interestingly, the respondents do not challenge the existence, authenticity unauthorized or merely tolerated, if at all.56
and genuineness of the Supapo's TCT.47
Even if the defendant attacks the Torrens Title because of a purported sale or
In defense, the respondents rest their entire case on the fact that they have allegedly transfer of the property, we still rule in favor of the holder of the Torrens Title if
been in actual, public, peaceful and uninterrupted possession of the subject the defendant cannot adduce, in addition to the deed of sale, a duly-registered
property in the concept of an owner since 1992. The respondents contend that they certificate of title proving the alleged transfer or sale.
built their houses on the subject lot in good faith. Having possessed the subject lot
for more than ten (10) years, they claim that they can no longer be disturbed in A case in point is Umpoc v. Mercado57 in which we gave greater probative weight
their possession.48 to the plaintiffs TCT vis-a-vis the contested unregistered deed of sale of the
defendants. Unlike the defendants in Umpoc, however, the respondents did not
Under the undisputed facts of this case, we find that the respondents' contentions adduce a single evidence to refute the Spouses Supapo's TCT. With more reason
have no legal basis. therefore that we uphold the indefeasibility and imprescriptibility of the Spouses
 8

Supapo's title.
By respecting the imprescriptibility and indefeasibility of the Spouses Supapo's
TCT, this Court merely recognizes the value of the Torrens System in ensuring the
stability of real estate transactions and integrity of land registration.
We reiterate for the record the policy behind the Torrens System, viz.:
The Government has adopted the Torrens system due to its being the most effective
measure to guarantee the integrity of land titles and to protect their indefeasibility
once the claim of ownership is established and recognized. If a person purchases a
piece of land on the assurance that the seller's title thereto is valid, he should not
run the risk of being told later that his acquisition was ineffectual after all, which
will not only be unfair to him as the purchaser, but will also erode public
confidence in the system and will force land transactions to be attended by
complicated and not necessarily conclusive investigations and proof of ownership.
The further consequence will be that land conflicts can be even more abrasive, if
not even violent.58
As a last-ditch effort to save their case, the respondents invoke res judicata. They
contend that the decision of the CA in CA-G.R. SP No. 78649 barred the filing of
the action publiciana.
To recall, CA-G.R. SP No. 78649 is the petition for certiorari filed by the
respondents to challenge the RTC's issuance of the writ enforcing their civil
liability (i.e., to vacate the subject property) arising from their conviction under the
Anti-Squatting Law. The CA granted the petition and permanently enjoined the
execution of the respondents' conviction because their criminal liability had been
extinguished by the repeal of the law under which they were tried and convicted. It
follows that their civil liability arising from the crime had also been erased.
The respondents' reliance on the principle of res judicata is misplaced.
Res judicata embraces two concepts: (1) bar by prior judgment as enunciated in
Rule 39, Section 47(b) of the Rules of Civil Procedure; and (2) conclusiveness of
judgment in Rule 39, Section 47(c).62

"Bar by prior judgment" means that when a right or fact had already been judicially
With respect to the respondents' defense59 of laches, suffice it to say that the same
tried on the merits and determined by a court of competent jurisdiction, the final
is evidentiary in nature and cannot be established by mere allegations in the
judgment or order shall be conclusive upon the parties and those in privity with
pleadings.60 In other words, the party alleging laches must adduce in court
them and constitutes an absolute bar to subsequent actions involving the same
evidence proving such allegation. This Court not being a trier of facts cannot rule
claim, demand or cause of action.63
on this issue; especially so since the lower courts did not pass upon the same.
The requisites64 for res judicata under the concept of bar by prior judgment are:
Thus, without solid evidentiary basis, laches cannot be a valid ground to deny the
Spouses Supapo's petition.61 On the contrary, the facts as culled from the records (1) The former judgment or order must be final;
show the clear intent of the Spouses Supapo to exercise their right over and recover
possession of the subject lot, viz.: (1) they brought the dispute to the appropriate (2) It must be a judgment on the merits;
Lupon; (2) they initiated the criminal complaint for squatting; and (3) finally, they
filed the action publiciana. To our mind, these acts negate the allegation of laches. (3) It must have been rendered by a court having jurisdiction over the subject
matter and the parties; and
With these as premises, we cannot but rule that the Spouses Supapo's right to
recover possession of the subject lot is not barred by prescription. (4) There must be between the first and second actions, identity of parties, subject
matter, and cause of action.
The action is not barred
by prior judgment
 9

reason alone, "collusiveness of judgment" does not apply.

Res judicata is not present in this case.
Even if we assume, for the sake of argument, that there is identity of parties,
While requisites one to three may be present, it is obvious that the there is no "conclusiveness of judgment" still does not apply because there is no identity of
identity of subject matter, parties and causes of action between the criminal issues. The issue in the criminal case is whether the respondents (accused therein)
case prosecuted under the Anti-Squatting Law and the civil action for the recovery committed the crime alleged in the information, while the only issue in accion
of the subject property. publiciana is whether the Spouses Supapo have a better right than the respondents
to possess and occupy the subject property.
First, there is no identity of parties. The criminal complaint, although initiated by
the Spouses Supapo, was prosecuted in the name of the people of the Philippines. For all these reasons, the defense of res judicata is baseless.
The accion publiciana, on the other hand, was filed by and in the name of the
Spouses Supapo. Final Note

Second, there is no identity of subject matter. The criminal case involves the As a final note, we stress that our ruling in this case is limited only to the issue of
prosecution of a crime under the Anti-Squatting Law while the accion publiciana is determining who between the parties has a better right to possession. This
an action to recover possession of the subject property. adjudication is not a final and binding determination of the issue of ownership. As
such, this is not a bar for the parties or even third persons to file an action for the
And third, there is no identity of causes of action. The people of the Philippines determination of the issue of ownership.
filed the criminal case to protect and preserve governmental interests by
prosecuting persons who violated the statute. The Spouses Supapo filed the accion WHEREFORE, premises considered, we GRANT the petition, and
publiciana to protect their proprietary interests over the subject property and consequently REVERSE and SET ASIDE the February 25, 2011 decision and
recover its possession. August 25, 2011 resolution of the Court of Appeals in CA-G.R. SP No. 111674.

Even casting aside the requirement of identity of causes of action, the defense
of res judicata has still no basis.

The concept of "conclusiveness of judgment" does not require that there is identity Trayvilla vs Sejas
of causes of action provided that there is identity of issue and identity of parties.65

Under this particular concept of res judicata, any right, fact, or matter in issue
directly adjudicated or necessarily involved in the determination of an action 1. Taxation; Docket Fees; Rule 141 of the Rules of Court, as amended by A.M. No.
before a competent court in which judgment is rendered on the merits is 04-2-04-SC and Supreme Court (SC) Amended Administrative Circular No. 35-
conclusively settled by the judgment therein and cannot again be litigated between 2004 shall be the basis for the computation of the docket fees to be paid.-
the parties and their privies, whether or not the claim, demand, purpose, or subject
—The CA failed to consider that in determining jurisdiction, it could rely on the
matter of the two actions is the same.66
declaration made in the Amended Complaint that the property is valued at
P6,000,00. The handwritten document sued upon and the pleadings indicate that
As already explained, there is no identity of parties between the criminal complaint
the property was purchased by petitioners for the price of P6,000.00. For purposes
under the Anti-Squatting law and the civil action for accion publiciana. For this

of filing the civil case against respondents, this amount should be the stated value
of the property in the absence of a current tax declaration or zonal valuation of the
BIR. Rule 141 of the Rules of Court, as amended by A.M. No. 04-2-04-SC and
Supreme Court Amended Administrative Circular No. 35-2004, provides that — a)
For filing an action or a permissive OR COMPULSORY counterclaim, CROSS-
CLAIM, or money claim against an estate not based on judgment, or for filing a
third party, fourth party, etc. complaint, or a complaint-in-intervention, if the total
sum claimed, INCLUSIVE OF INTERESTS, PENALTIES, SURCHARGES,
DAMAGES OF WHATEVER KIND, AND ATTORNEY’S FEES, LITIGATION
EXPENSES AND COSTS and/or in cases involving property, the FAIR MARKET
value of the REAL property in litigation STATED IN THE CURRENT TAX
DECLARATION OR CURRENT ZONAL VALUATION OF THE BUREAU OF
INTERNAL REVENUE, WHICHEVER IS HIGHER, OR IF THERE IS NONE,
THE STATED VALUE OF THE PROPERTY IN LITIGATION OR THE
VALUE OF THE PERSONAL PROPERTY IN LITIGATION AS ALLEGED BY
THE CLAIMANT. x x x (Emphasis supplied) shall be the basis for the
computation of the docket fees to be paid. Since the value of the subject property
as stated in the Amended Complaint is just P6,000.00, then the RTC did not have
jurisdiction over petitioners’ case in the first instance; it should have dismissed
Civil Case No. 4633-2K5. But it did not. In continuing to take cognizance of the
case, the trial court clearly committed grave abuse of discretion.
2. Remedial Law; Civil Procedure; Courts; In the absence of the required
declaration of the fair market value as stated in the current tax declaration or zonal
valuation of the property, it cannot be determined whether the Regional Trial Court
(RTC) or first level court has original and exclusive jurisdiction over the
petitioners’ action, since the jurisdiction of these courts is determined on the basis
of the value of the property.-
—Since Civil Case No. 4633-2K5 is a real action made so by the Amended
Complaint later filed, petitioners should have observed the requirement under A.M.
No. 04-2-04-SC relative to declaring the fair market value of the property as stated
in the current tax declaration or zonal valuation of the Bureau of Internal Revenue
(BIR). Since no such allegation was made in the Amended Complaint, then the
value of the subject property as stated in the handwritten document sued upon and
restated in the Amended Complaint should be the basis for determining jurisdiction
and the amount of docket fees to be paid. The CA is correct in its general
observation that in the absence of the required declaration of the fair market value
10
as stated in the current tax declaration or zonal valuation of the property, it cannot
be determined whether the RTC or first level court has original and exclusive
jurisdiction over the petitioners’ action, since the jurisdiction of these courts is
determined on the basis of the value of the property.
G.R. No. 204970, February 01, 2016
SPOUSES CLAUDIO AND CARMENCITA
TRAYVILLA, Petitioners, v. BERNARDO SEJAS AND JUVY PAGLINAWAN,
REPRESENTED BY JESSIE PAGLINAWAN, Respondents.
DECISION
DEL CASTILLO, J.:
Assailed in this Petition for Review on Certiorari1 are the following dispositions of
the Court of Appeals (CA): 1) November 29, 2011 Decision2 in CA-G.R. SP No.
02315 which granted respondents' Petition for Certiorari and nullified the
September 3, 20073 and February 21, 20084 Orders of Branch 18 of the Regional
Trial Court (RTC), 9th Judicial Region, Pagadian City in Civil Case No. 4633-
2K5; and 2) November 19, 2012 Resolution5 denying the petitioners' motion for
reconsideration.
Factual Antecedents
In 2005, petitioners Claudio and Carmencita Trayvilla instituted before the RTC
Civil Case No. 4633-2K5 against respondent Bernardo Sejas (Sejas). In their
Complaint6 for specific performance and damages, petitioners claimed among
others that Sejas was the registered owner of a 434-square meter parcel of land in
Tukuran, Zamboanga del Sur covered by Transfer Certificate of Title No. T-
8,3377 (TCT T-8,337); that by virtue of a private handwritten document,8 Sejas
sold said parcel of land to them in 1982; that thereafter, they took possession of the
land and constructed a house thereon; that they resided in said house and continued
to reside therein; that Sejas later reasserted his ownership over said land and was
thus guilty of fraud and deceit in so doing; and that they caused the annotation of
an adverse claim. They prayed that Sejas be ordered to execute a final deed of sale
over the property and transfer the same to them, and that they be awarded the sum
 11

of P30,000.00 as attorney's fees plus P1,500.00 per court appearance of counsel. assailed Decision, which contained the following
pronouncement:ChanRoblesVirtualawlibrary
In an Amended Complaint,9 this time for specific performance, reconveyance, and
damages, petitioners impleaded respondent Juvy Paglinawan (Paglinawan) as The petition is meritorious.
additional defendant, claiming that Sejas subsequently sold the subject property to
her, after which she caused the cancellation of TCT T-8,337 and the issuance of a Jurisdiction is defined as the authority to hear and determine a cause or the right to
new title - TCT T-46,627 - in her name. Petitioners prayed that Sejas be ordered to act in a case. In addition to being conferred by the Constitution and the law, the
execute a final deed of sale in their favor and transfer the property to them; that rule is settled that a court's jurisdiction over the subject matter is determined by the
Paglinawan's TCT T-46,627 be canceled and the property be reconveyed to them; relevant allegations in the complaint, the law in effect when the action is filed, and
and that they be awarded P50,000.00 in moral damages, in addition to the the character of the relief sought irrespective of whether the plaintiff is entitled to
P30,000.00 attorney's fees and P1,500.00 per court appearance of counsel all or some of the claims asserted.
originally prayed for in the Complaint.
Consistent with Section 1, Rule 141 of the Revised Rules of Court which provides
However, the additional docket fees for the moral damages prayed for in the that the prescribed fees shall be paid in full "upon the filing of the pleading or other
Amended Complaint were not paid.10 Likewise, for the additional causes of application which initiates an action or proceeding", the well-entrenched rule is to
action, no docket fees were charged and paid. the effect that a court acquires jurisdiction over a case only upon the payment of
the prescribed filing and docket fees.
Respondents moved for dismissal of the case, claiming lack of jurisdiction over the
subject matter and prescription. The RTC denied the motion in a September 3, Rule 141 of the Rules of Court, as amended by A.M. No. 04-2-G4-SC and
2007 Order.11chanroblesvirtuallawlibrary Supreme Court Amended Administrative Circular No, 35-2004, provides
that:ChanRoblesVirtualawlibrary
Respondents filed a Motion for Reconsideration,12 arguing that petitioners' case
SEC. 7. Clerks of Regional Trial Courts. -
was not for specific performance but was in reality a real action or one involving
title to and possession of real property, in which case the value of the property
should be alleged in the complaint in order that the proper filing fee may be (a) For filing an action or a permissive OR COMPULSORY counterclaim,
computed and paid; that since the value of the land was not alleged in the Amended CROSSCLAIM, or money claim against an estate not based on judgment, or
Complaint, the proper filing fee was not paid, and for this reason the case should be for filing a third-party, fourth-party, etc, complaint, or a compldnt-in-
dismissed; and that petitioners' cause of action is barred by prescription since the intervention, if the total sum claimed, INCLUSIVE OF INTERESTS,
10-year period to sue upon the handwritten contract - counted from their purchase PENALTIES, SURCHARGES, DAMAGES OF WHATEVER KIND, AND
of the land in 1982 - had already lapsed when they filed the case in 2005. However, ATTORNEY'S FEES, LITIGATION EXPENSES AND COSTS and/or in
in a February 21, 2008 Order,13 the RTC denied the motion, stating among others cases involving property, the FAIR MARKET value of the REAL property in
that petitioners' case is not a real action but indeed one for specific performance litigation STATED IN THE CURRENT TAX DECLARATION OR
and thus one which is incapable of pecuniary estimation. CURRENT ZONAL VALUATION OF THE BUREAU OF INTERNAL
REVENUE, WHICHEVER IS HIGHER, OR IF THERE IS NONE, THE
Ruling of the Court of Appeals STATED VALUE OF THE PROPERTY IN LITIGATION OR THE
VALUE OF THE PERSONAL PROPERTY IN LITIGATION X X X AS
Respondents filed an original Petition for Certiorari14 before the CA, which was ALLEGED BY THE CLAIMANT, is:
docketed as CA-G.R. SP No. 02315, On November 29, 2011, the CA issued the

[Table of fees omitted.]
If the action involves both a money claim and relief pertaining to property, then
THE fees will be charged on both the amounts claimed and value of property based
on the formula prescribed in this paragraph a.
(b) For filing:
Actions where the value of the subject matter cannot be estimated
Special civil actions, except judicial foreclosure of mortgage, EXPROPRIATION
PROCEEDINGS, PARTITION AND QUIETING OF TITLE which will [sic]
All other actions not involving property [Table of fees omitted.]
The docket fees under Section 7(a), Rule 141. in cases involving real property
depend on the fair market value of the same: the higher the value of the real
property, the higher the docket fees due. In contrast, Section 7(b)(1), Rule 141
imposes a fixed or flat rate of docket fees on actions incapable of pecuniary
estimation.
x x x x
As can be gleaned from the records, the Amended Complaint was styled as one for
'Specific Performance and Damages,' whereby private respondents15 sought to
compel petitioner Sejas to execute fee deed of sale over the subject land in their
favor on the premise that they bought the said land from petitioner Sejas through a
private document. They declared themselves to be the true and real owners of the
subject land and had in fact taken possession over it to the exclusion of others
including petitioner Sejas.
While it may appear that the suit filed is one for specific performance, hence an
aption incapable of pecuniary estimation, a closer look at the allegations and reliefs
prayed for in the Complaint, however, shows that private respondents were not
merely seeking the execution of the deed of sale in their favor. They were also
asking the lower court earnestly to cancel TCT No. T-46,627 which was allegedly
issued to petitioner Pagljnawan through fraudulent means and have the same
reconveyed to them as the owners of the subject land, The ultimate purpose then of
12
private respondents in filing the complaint before the RTC is to secure their
vaunted ownership and title to the subject land which they claimed was purchased
from petitioner Sejas. Their cause of action clearly springs from their right as
purchaser of the subject land, Under these circumstances, the suit before the RTC
is a real action, affecting as it did title to the real property sought to be reconveyed.
A real action is one in which the plaintiff seeks the recovery of real property; or, as
indicated in what is now Section 1, Rule 4 of the Rules of Court, a real action is an
action affecting title to or recovery of possession of real property.
Section 7, Rule 141 of the Rules of Court, prior to its amendment by A.M. No. 04-
2-04-SC, had a specific paragraph governing the assessment of the docket fees for
real action, to wit:ChanRoblesVirtualawlibrary
In a real action, the assessed value of the property, or if there is none, the estimated
value thereof shall be alleged by the claimant and shall be the basis in computing
the fees.
But it is important to note that, with the amendments introduced by A.M. No. 04-2-
04-SC, which became effective on 16 August 2004, the paragraph in Section 7,
Rule 141 of the Rules of Court, pertaining specifically to the basis for the
computation of docket fees for real actions was deleted. Instead, Section 7(1) of
Rule 141, as amended, provides that 'in cases involving real property, the FAIR
MARKET value of the REAL property in litigation STATED IN THE CURRENT
TAX DECLARATION OR CURRENT ZONAL VALUATION OF THE
BUREAU OF INTERNAL REVENUE, WHICH [sic] IS HIGHER, OR IF THERE
IS NONE, THE STATED VALUE OF THE PROPERTY IN LITIGATION x x x'
shall be the basis for the computation of the docket fees.
Unfortunately, private respondents never alleged in their Amended Complaint,
much less in the prayer portion thereof, the fair market value of the subject res as
stated in the Tax Declaration or current zonal valuation of the Bureau of Internal
Revenue, which [sic] is higher, or if there is none, the stated value thereof, to serve
as basis for the receiving clerk in computing and arriving at the proper amount of
filing fee due? thereon. In the absence of such allegation, it cannot be determined
whether the RTC or the MTC has original and exclusive jurisdiction over the
petitioners' action. There is therefore no showing on the face of the complaint that
the RTC has exclusive jurisdiction over the action of the private respondents.
Hence, the RTC erred in taking cognizance of the case despite private respondents'
 13

non-payment of the correct docket fees which must be computed in accordance thereof. x x x
with Section 7(1), Rule 141 of the Rules of Court, as amended.
x x x x
The consistent rule is that 'a case is deemed filed only upon payment of the docket
fee regardless of the actual date of filing in court,' and that jurisdiction over any In fine, We rule and so hold that the RTC never acquired jurisdiction over Civil
case is acquired only upon the payment of the prescribed docket fee which is both Case No. 4633-2K5, hence, its act of taking cognizance of the subject Complaint
mandatory and jurisdictional. x x x was tainted with grave abuse of discretion amounting to lack or excess of
jurisdiction. Grave abuse of discretion is defined as capricious and whimsical
x x x x exercise of judgment as is equivalent to lack of jurisdiction.

This case at bench bears similarity to Gochan v. Gochan,16 where the Supreme Given the foregoing, this Court finds it unnecessary to dwell on the issue of
Court held that although the caption of the complaint filed by therein respondents prescription raised by petitioners.
Mercedes Gochan, et al. with the RTC was denominated as one for 'specific
performance and damages,' the relief sought was the conveyance or transfer of real WHEREFORE, premises considered, the instant Petition is hereby GRANTED.
property, or ultimately, the execution of deeds of conveyance in their favor of the The Orders dated 03 September 2007 and 21 February 2008, respectively, of the
real properties enumerated in the provisional memorandum of agreement. Under Regional Trial Court (RTC), 9th Judicial Region, Branch 18, Pagadian City, are
these circumstances, the case before the RTC was actually a real action, affecting DECLARED NULL and VOID for having been issued without jurisdiction, The
as it did title to or possession of real property. Consequently, the basis for Amended Complaint filed [sic] private respondents docketed as Civil Case No.
determining the correct docket fees shall be the assessed value of the property, or 4633-2K5 is hereby DISMISSED.
the estimated value thereof as alleged in the complaint. But since Mercedes
Gochan failed to allege in their complaint the value of the real properties, the Court SO ORDERED.19chanroblesvirtuallawlibrary
found that the RTC did not acquire jurisdiction over the same for non-payment of
the correct docket fees. Petitioners filed a Motion for Reconsideration,20 which the CA denied in its
assailed November 19, 2012 Resolution. Hence, the present Petition.
More to the point is Huguete v. Embudo,17 There, petitioners argued that a
complaint for annulment of a deed of sale and partition is incapable of pecuniary In a March 19, 2014 Resolution,21 the Court resolved to give due course to the
estimation, and thus falls within the exclusive jurisdiction of the RTC. However, instant Petition.chanRoblesvirtualLawlibrary
the Supreme Court ruled that 'the nature of an action is not determined by what is
Issues
stated in the caption of the complaint but by the allegations of the complaint and
the reliefs prayed for. Where the ultimate objective of the plaintiffs, like petitioners
herein, is to obtain title to real property, it should be filed in the proper court Petitioners raise the following issues:ChanRoblesVirtualawlibrary
having jurisdiction over the assessed value of the property subject thereof.'
1. Did the Court of Appeals ruled [sic] correctly when it dismissed the complaint
Likewise, in Siapno v. Manalo,18 the Supreme Court disregarded the by reason of Petitioner-Appellants' alleged non-payment of the correct dockets
title/denomination of therein plaintiff Manalo's amended petition as one for [sic] fees due to its [sic] failure to alleged [sic] the fair market value or the stated
Mandamus with Revocation of Title and Damages; and adjudged the same to be a value of the subject property in the amended complaint?
real action, the filing fees for which should have been computed based on the
assessed value of the subject property or, if there was none, the estimated value 2. Did the filing of the amended complaint sufficiently divested [sic] and ousted
 14

[sic] the trial court of its jurisdiction over the case that had initially validly attached for the denial of the Petition, with double costs against
by virtue of the Original complaint for specific petitioners.chanRoblesvirtualLawlibrary
performance?22chanroblesvirtuallawlibrary
Our Ruling
Petitioners' Arguments

In praying that the assailed CA dispositions be set aside and that their Amended The Court denies the Petition.
Complaint in Civil Case No. 4633-2K5 be reinstated, petitioners contend in their
Petition and Reply23 that it was error for the CA to order the dismissal of their As correctly ruled by the CA, while petitioners' Amended Complaint was
Amended Complaint simply because additional causes of action were alleged and denominated as one mainly for specific performance, they additionally prayed for
new reliefs were prayed for, and the additional docket fees therefor were not paid; reconveyance of the property, as well as the cancellation of Paglinawan's TCT T-
that while reconveyance was sought in the Amended Complaint, the principal 46,627. In other words, petitioners' aim in filing Civil Case No. 4633-2K5 was to
action was still for specific performance, and the reconveyance prayed for was secure their claimed ownership and title to the subject property, which qualifies
merely incidental thereto; that since the trial court acquired jurisdiction over the their case as a real action. Pursuant to Section 1, Rule 4 of the 1997 Rules of Civil
case with the filing of the original Complaint, it did not lose the same as a result of Procedure,27 a real action is one that affects title to or possession of real property,
the filing of the Amended Complaint; that jurisdiction continued to attach even or an interest therein.
with the submission of the Amended Complaint; that their failure to pay the
additional docket fees required for the Amended Complaint does not result in loss Since Civil Case No. 4633-2K5 is a real action made so by the Amended
of jurisdiction over the case - instead, the Amended Complaint is simply not Complaint later filed, petitioners should have observed the requirement under A.M.
admitted and the original Complaint remains;24 that instead of dismissing the case, No. 04-2-04-SC28 relative to declaring the fair market value of the property as
the Amended Complaint should have been disregarded, or petitioners should have stated in the current tax declaration or zonal valuation of the Bureau of Internal
been ordered to pay the deficiency in docket fees within a reasonable period of Revenue (BIR), Since no such allegation was made in the Amended Complaint,
time; that "the rule now is that the court may allow a reasonable time for the then the value of the subject property as stated in the handwritten document sued
payment of the prescribed fees, or the balance thereof, and upon such payment, the upon and restated in the Amended Complaint should be the basis for determining
defect is cured and the court may properly take cognizance of the action, unless in jurisdiction and the amount of docket fees to be paid.
the meantime prescription has set in and consequently barred the right of
action;"25 and that the rules of procedure should be liberally applied in their case, The CA is correct in its general observation that in the absence of the required
as there is no intention to evade the payment of additional docket fees, as is shown declaration of the fair market value as stated in the current tax declaration or zonal
by the payment of the original filing fees when the case was instituted. valuation of the property, it cannot be determined whether the RTC or first level
court has original and exclusive jurisdiction over the petitioners' action, since the
Respondents' Arguments jurisdiction of these courts is determined on the basis of the value of the property.
Under applicable rules,
Respondents, on the other hand, argue in their Comment26 that the CA was correct
Jurisdiction of RTCs, as may be relevant to the instant petition, is provided in Sec.
in ruling that Civil Case No. 4633-2K5 should be dismissed; that while the
19 of BP 129,29 which reads;
complaint is for specific performance, the relief prayed for includes reconveyance,
which is a real action - in which case the assessed value of the property should Sec. 19. Jurisdiction in civil cases. — Regional Trial Courts shall exercise
have been alleged for the proper computation of the docket fees. Thus, they pray exclusive original jurisdiction:

1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;
2) In all civil actions which involve the title to, or possession of, real property, or
any interest therein, where the assessed value of the property involved exceeds
Twenty thousand pesos (P20,000.00) or, for civil actions in Metro Manila, where
such value exceeds Fifty thousand pesos (P50,000.00) except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts.
On the other hand, jurisdiction of first level courts is prescribed in Sec. 33 of BP
129, which provides:ChanRoblesVirtualawlibrary
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in civil cases.—Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:
x x x x
3) Exclusive original jurisdiction in all civil actions which involve title to, or
possession of, real property, or any interest therein where the assessed value of the
property or interest therein does not exceed Twenty thousand pesos (P20,000.00)
or, in civil actions in Metro Manila, where such assessed value does not exceed
Fifty thousand pesos (950,000.00) exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses and costs: Provided, That in cases of land not
declared for taxation purposes, the value of such property shall be determined by
the assessed value of the adjacent lots.30chanroblesvirtuallawlibrary
However, the CA failed to consider that in determining jurisdiction, it could rely on
the declaration made in the Amended Complaint that the property is valued at
P6,000.00. The handwritten document sued upon and the pleadings indicate that
the property was purchased by petitioners for the price of P6,000.00. For purposes
of filing the civil case against respondents, this amount should be the stated value
of the property in the absence of a current tax declaration or zonal valuation of the
BIR. Rule 141 of the Rules of Court, as amended by A.M. No. 04-2-04-SC and
Supreme Court Amended Administrative Circular No. 35-2004, provides that -
15
a) For filing an action or a permissive OR COMPULSORY counterclaim, CROSS-
CLAIM, or money claim against an estate not based on judgment, or for filing a
third-party, fourth-party, etc. complaint, or a complaint-in-intervention, if the total
sum claimed, INCLUSIVE OF INTERESTS, PENALTIES, SURCHARGES,
DAMAGES OF WHATEVER KIND, AND ATTORNEY'S FEES, LITIGATION
EXPENSES AND COSTS and/or in cases involving property, the FAIR MARKET
value of the REAL property in litigation STATED IN THE CURRENT TAX
DECLARATION OR CURRENT ZONAL VALUATION OF THE BUREAU OF
INTERNAL REVENUE, WHICHEVER IS HIGHER, OR IF THERE IS NONE,
THE STATED VALUE OF THE PROPERTY IN LITIGATION OR THE
VALUE OF THE PERSONAL PROPERTY IN LITIGATION AS ALLEGED BY
THE CLAIMANT x x x (Emphasis supplied)
shall be the basis for the computation of the docket fees to be paid. Since the value
of the subject property as stated in the Amended Complaint is just P6,000.00, then
the RTC did not have jurisdiction over petitioners' case in the first instance; it
should have dismissed Civil Case No. 4633-2K5. But it did not. In continuing to
take cognizance of the case, the trial court clearly committed grave abuse of
discretion.
WHEREFORE, the Petition is DENIED, The assailed November 29, 2011
Decision and November 19, 2012 Resolution of the Court of Appeals in CA-G.R.
SP No. 02315 are AFFIRMED.
Cabling vs Dangcalan
1. Same; Same; Petition for Review on Certiorari; The Supreme Court (SC)
resolves only questions of law; It does not try facts; Exceptions.-
—We resolve only questions of law; We do not try facts or examine testimonial or
documentary evidence on record. We may have at times opted for the relaxation of
the application of procedural rules, but We have resorted to this option only under
exceptional circumstances, such as when: (a) the findings are grounded entirely on
speculation, surmises, or conjectures; (b) the inference made is manifestly
 16

mistaken, absurd, or impossible; (c) there is grave abuse of discretion; (d) the
judgment is based on a misapprehension of facts; (e) the findings of fact are
conflicting; (f) in making its findings, the CA went beyond the issues of the case,
or its findings are contrary to the admissions of both the appellant and the appellee;
(g) the CA’s findings are contrary to those of the trial court; (h) the findings are
conclusions without a citation of the specific evidence on which they are based; (i)
the facts set forth in the petition, as well as in the petitioner’s main and reply briefs,
are not disputed by the respondent; (j) the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record; or (k)
the CA manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion.
2. Same; Same; Same; Dismissal of Actions; If the assessed value is not alleged in
the complaint, the action should be dismissed for lack of jurisdiction.-
exercised its exclusive and original jurisdiction in finding for petitioner as the
plaintiff. On the other hand, the appeal of respondent, as the defendant, properly
fell under the appellate jurisdiction of the RTC, under Section 22 of B.P. Blg. 129
as amended. Hence, neither decision can be struck down for being a total nullity.
4. Same; Same; Appeals; The test of whether a question is one of law or of fact is
whether the appellate court can determine the issue raised without reviewing or
evaluating the evidence.-
—Suffice it to say that the errors ascribed by petitioner to the RTC Decision are
factual issues that properly belong to the jurisdiction of the CA. The test of whether
a question is one of law or of fact is whether the appellate court can determine the
issue raised without reviewing or evaluating the evidence. If so, it is a question of
law; otherwise it is a question of fact.

—To determine which court has jurisdiction over the action, the complaint must
allege the assessed value of the real property subject of the complaint. The Court
G.R. No. 187696, June 15, 2016
explained further in Penta Pacific Realty Corporation v. Ley Construction and
Development Corporation, 741 SCRA 426 (2014), that its jurisdiction would now FILOMENA CABLING, Petitioner, v. RODRIGO DANGCALAN, Respondent.
be determined by the assessed value of the disputed land, or of the adjacent lots if it
is not declared for taxation purposes. If the assessed value is not alleged in the DECISION
complaint, the action should be dismissed for lack of jurisdiction. The reason
behind this rule is that the trial court is not afforded the means of determining from SERENO, C.J.:
the allegations of the basic pleading whether jurisdiction over the subject matter of
Before this Court is a Petition for Review on Certiorari assailing the Court of
the action pertains to it or to another court. After all, courts cannot take judicial
Appeals (CA) Decision1declaring void for lack jurisdiction the Decision2 issued
notice of the assessed or market value of lands.
by the 2nd Municipal Circuit Trial Court (MCTC) of Malitbog-Tomas Oppus,
3. Same; Same; Same; Jurisdiction over the subject matter of a case is conferred by Southern Leyte, as well as the Decision3 rendered by Branch 25, Regional Trial
law and determined by the allegations in the complaint, as well as by the character Court (RTC) of Maasin City, Southern Leyte.
of the reliefs sought.-
Antecedent Facts
—Jurisdiction over the subject matter of a case is conferred by law and determined
by the allegations in the complaint, as well as by the character of the reliefs sought.
This case stemmed from the Complaint for recovery of possession and damages
Once it is vested by the allegations in the complaint, jurisdiction remains vested in
filed by Filomena Cabling (petitioner) against Rodrigo Dangcalan (respondent)
the trial court irrespective of whether or not the plaintiff is entitled to recover upon
over respondent's alleged encroachment on petitioner's property.
all or some of the claims asserted therein. As the CA has correctly held, the
allegations in the Complaint filed by petitioner sufficiently made out a case for
In her Complaint,4 petitioner alleged that she owned a 125-square-meter parcel of
recovery of possession or accion publiciana. The same cannot be said, however, of
land located at San Vicente, Malitbog, Southern Leyte. It was denominated as Lot
the ultimate outcome of her appeal from the RTC Decision. The MCTC correctly

No. 5056 and had an assessed value of P2,100. Adjoining her property was a parcel
of land that respondent had bought from her brother, Gerardo Montajes. Despite
knowing the boundaries of their respective properties, however, respondent
constructed a perimeter fence that encroached on petitioner's land. After several
unheeded demands for respondent to remove the encroachment and a failed
conference before the Lupong Tagapamayapa, petitioner filed the Complaint
before the MCTC in May 2001.5chanrobleslaw
Respondent denied any encroachment on petitioner's property and raised
prescription as an affirmative defense.6 He claimed that he had constructed the
perimeter fence together with his house way back in 1987, and that petitioner knew
about it. She had actually observed some phases of the construction to ensure that it
would not exceed their property boundaries. Yet, petitioner filed her Complaint
only in 2001, which was beyond the 10-year period for acquisitive prescription
under Article 1134 of the New Civil Code.7chanrobleslaw
Rulings of the MCTC and the RTC
After trial, the MCTC rendered judgment in favor of petitioner. Relying on the
sketch plan and the testimony of the court-appointed commissioner, it ruled that
respondent's perimeter fence had indeed encroached on some 13 square meters of
petitioner's property. The court further ruled that respondent was a builder in bad
faith, because he did not verify the actual boundaries of the lot that he had
purchased from petitioner's brother. Respondent had the lot titled under his name in
1988, but it was surveyed only in August 2001.8chanrobleslaw
The dispositive portion of the MCTC Decision reads:ChanRoblesVirtualawlibrary
WHEFORE, in the light of the foregoing considerations, the Court hereby renders
judgment in favor of the plaintiff, ordering the defendant of the following to
wit:ChanRoblesVirtualawlibrary
Surrendering the defendant's possession of the portion of land in question to
plaintiff, the true owner of the portion of land, and as defendant is a builder in bad
faith loses what was built on said portion without right to indemnity. (Art. 448,
Civil Code of the Philippines);
17
To pay the plaintiff of the monthly rental at P50.00 per month for the possession of
said portion in question starting from the time the defendant demanded by the
plaintiff to vacate up to the time the former actually vacate; and cralawlawlibrary
To pay the plaintiff for moral damages in the amount of P20,000, exemplary
damages in the amount of P10,000 and actual damages in the amount of P2,000.00
and
To pay the costs of suit.9
Upon appeal by respondent, however, the RTC ruled differently. Unlike the
MCTC, it did not give credence to the commissioner's sketch plan. The RTC noted
that the sketch plan had no accompanying Commissioner's Report, and that the
basis of the survey was not clear. It also ruled that the MCTC should have first
ruled on the issue of prescription because respondent had raised it in a timely
manner, albeit via an Amended Answer.10chanrobleslaw
The dispositive portion of the RTC Decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, judgment is hereby rendered reversing the decision of the lower
court declaring:
That the action has already prescribed and/or that plaintiff was already in laches
when this action was filed in 1990, and defendant has already acquired the portion
in litigation by prescription;
That when defendant built the concrete perimeter fence on the lot in litigation in
August 1987, he was a builder in good faith;
No pronouncement as to damages and costs.11
CA Ruling
Petitioner then filed a Petition for Review under Rule 42 before the CA,12 raising
the following issues:ChanRoblesVirtualawlibrary
I
WHETHER THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT
 18

OF THE PETITIONER ON THE GROUND OF ACQUISITIVE PRESCRIPTION

AND EXTINCTIVE PRESCRIPTION. The only legal issue We shall resolve is whether the CA erred in f nullifying the
RTC and the MCTC Decisions on the ground that the MCTC had no jurisdiction
II over petitioner's Complaint for accion publiciana.

Court Ruling
WHETHER THE TRIAL COURT ERRED IN DECLARING THAT THE
COMPLAINT OF THE PETITIONER IS BARRED BY LACHES.
We GRANT the petition.
III
It is no longer good law that all cases for recovery of possession or accion
publiciana lie with the RTC, regardless of the value of the
WHETHER THE TRIAL COURT ERRED IN DECLARING THAT THE
property.18chanrobleslaw
RESPONDENT IS A BUILDER IN GOOD FAITH.13chanroblesvirtuallawlibrary

On 24 January 2008, the CA denied the Petition and annulled both the RTC and As early as 2001, this Court had already declared that all cases involving title to or
MCTC Decisions for lack of jurisdiction.14 Instead of ruling on the issues possession of real property with an assessed value of less than P20,000, if outside
presented by petitioner, the appellate court held that the threshold question was Metro Manila, fall under the original jurisdiction of the municipal trial
whether the MCTC had jurisdiction over petitioner's complaint. After examining court.19 This pronouncement was based on Republic Act No. 7691,20which was
the averments therein, the CA ruled that the MCTC had no jurisdiction because the approved by Congress on 25 March 1994.
Complaint was clearly an accion publiciana. As such, it was a plenary action for
the recovery of the real right of possession, which properly fell under the RTC's Jurisdiction over civil actions involving title to or possession of real property or
jurisdiction. Accordingly, all proceedings in petitioner's Complaint, including her interest therein, as set forth in Sections 19 (2) and 33 (3) of Batas Pambansa
appeal before the RTC, were invalid and the decisions rendered thereon could be Bilang (B.P. Blg.) 129,21 as amended by Republic Act No. 7691, is as
struck down at any time.15chanrobleslaw follows:ChanRoblesVirtualawlibrary

SECTION 19. Jurisdiction in civil cases. — Regional Trial Courts shall exercise
The dispositive portion of the CA Decision reads:ChanRoblesVirtualawlibrary
exclusive original jurisdiction:
WHEREFORE, the petition is DENIED. The Decision of the 2nd Municipal
Circuit Trial Court (MCTC) of Malitbog-Tomas Oppus, Southern Leyte dated June chanRoblesvirtualLawlibraryx x x x
2, 2004 and the January 17. 2005 Decision of the Regional Trial Court, 8th Judicial
Region, Branch 25, Maasin City reversing the Decision of the MCTC are BOTH
declared NULL and VOID for lack of jurisdiction, and the instant Complaint for (2) In all civil actions which involve the title to, or possession of, real property,
recovery of possession with damages is DISMISSED without or any interest therein, where the assessed value of the property involved
prejudice.16chanroblesvirtuallawlibrary exceeds [t]wenty thousand pesos (P20,000.00) or for civil actions in Metro
Manila, where such value exceeds Fifty thousand pesos (P50,000.00) except
On 1 April 2009, the CA denied petitioner's Motion for Reconsideration.17 Hence, actions for forcible entry into and unlawful detainer of lands or buildings,
this Petition. original jurisdiction over which is conferred upon Metropolitan Trial Courts,
Issue

Municipal Trial Courts, and Municipal Circuit Trial Courts;
SECTION 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts in civil cases. - Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:
chanRoblesvirtualLawlibrary
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, or
possession of, real property, or any interest therein where the assessed value
of the property or interest therein does not exceed [t]wenty thousand pesos
(P20,000.00) or, in civil actions in Metro Manila, where such assessed value
does not exceed Fifty thousand pesos (P50,000.00) exclusive of interest,
damages of whatever kind, attorney's fees, litigation expenses and costs:
Provided, That value of such property shall be determined by the assessed
value of the adjacent lots.
In Laresma v. Abellana,22 We clarified that the actions envisaged in the
aforequoted provisions are accion publiciana and reivindicatoria. To determine
which court has jurisdiction over the action, the complaint must allege the assessed
value of the real property subject of the complaint. The Court explained further
in Penta Pacific Realty Corporation v. Ley Construction and Development
Corporation23that its jurisdiction would now be determined by the assessed value
of the disputed land, or of the adjacent lots if it is not declared for taxation
purposes. If the assessed value is not alleged in the complaint, the action should be
dismissed for lack of jurisdiction. The reason behind this rule is that the trial court
is not afforded the means of determining from the allegations of the basic pleading
whether jurisdiction over the subject matter of the action pertains to it or to another
court. After all, courts cannot take judicial notice of the assessed or market value of
lands.24chanrobleslaw
Clearly, the CA erred in nullifying both the RTC and the MCTC decisions.
Jurisdiction over the subject matter of a case is conferred by law and determined by
the allegations in the complaint, as well as by the character of the reliefs sought.
19
Once it is vested by the allegations in the complaint, jurisdiction remains vested in
the trial court irrespective of whether or not the plaintiff is entitled to recover upon
all or some of the claims asserted therein.25cralawred As the CA has correctly
held, the allegations in the Complaint filed by petitioner sufficiently made out a
case for recovery of possession or accion publiciana. The same cannot be said,
however, of the ultimate outcome of her appeal from the RTC Decision. The
MCTC correctly exercised its exclusive and original jurisdiction in finding for
petitioner as the plaintiff. On the other hand, the appeal of respondent, as the
defendant, properly fell under the appellate jurisdiction of the RTC, under Section
22 of B.P. Blg. 129 as amended. Hence, neither decision can be struck down for
being a total nullity.
Petitioner now argues that the CA's dismissal of her Complaint without prejudice
to the filing of another case before the RTC, would only force her to re-litigate the
same issues that the MCTC has already thoroughly considered. Additionally, she
contends that the RTC Decision was not in accord with the applicable provisions of
the New Civil Code. She claims that respondent cannot be deemed a builder in
good faith, because he failed to verify the actual boundaries of his property prior to
the construction of his perimeter fence. Further, neither prescription
nor laches applies, because petitioner filed her Complaint in 2001, which was well
within the 30-year prescriptive period set forth in Article 1141 of the New Civil
Code for real actions over immovables.26 For these reasons, she urges us to
reinstate the MCTC Decision.27chanrobleslaw
Respondent, on the other hand, has not filed any comment despite Our repeated
directives to his counsel on record.28chanrobleslaw
Suffice it to say that the errors ascribed by petitioner to the RTC Decision are
factual issues that properly belong to the jurisdiction of the CA. The test of whether
a question is one of law or of fact is whether the appellate court can determine the
issue raised without reviewing or evaluating the evidence. If so, it is a question of
law; otherwise it is a question of fact.29chanrobleslaw
Good faith is a question of fact that must be proved.30 Similarly, the question of
prescription of an action involves the ascertainment of factual matters, such as the
date when the period to bring the action commenced to run.31chanrobleslaw
We resolve only questions of law; We do not try facts or examine testimonial or

documentary evidence on record.32 We may have at times opted for the relaxation
of the application of procedural rules, but We have resorted to this option only
under exceptional circumstances, such as when: (a) the findings are grounded
entirely on speculation, surmises, or conjectures; (b) the inference made is
manifestly mistaken, absurd, or impossible; (c) there is grave abuse of discretion;
(d) the judgment is based on a misapprehension of facts; (e) the findings of fact are
conflicting; (f) in making its findings, the CA went beyond the issues of the case,
or its findings are contrary to the admissions of both the appellant and the appellee;
(g) the CA's findings are contrary to those of the trial court; (h) the findings are
conclusions without a citation of the specific evidence on which they are based; (i)
the facts set forth in the petition, as well as in the petitioner's main and reply briefs,
are not disputed by the respondent; (j) the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record; or (k)
the CA manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different
conclusion.33chanrobleslaw
None of the above circumstances, however, are extant in this case. The simple
reason is that the CA opted to gloss over the factual issues raised by petitioner on
the wrong premise that the decisions of the trial courts were void.
WHEREFORE, premises considered, the Petition for Review on Certiorari
is GRANTED. The Court of Appeals Decision dated 24 January 2008 and
Resolution dated 1 April 2009 in CA-G.R. SP No. 88408 are REVERSED and SET
ASIDE. The case is REMANDED to the Court of Appeals for the prompt
resolution of the case on the merits.
Bautista vs Lindo
G.R. No. 208232, March 10, 2014
20
SURVIVING HEIRS OF ALFREDO R. BAUTISTA, NAMELY: EPIFANIA G.
BAUTISTA AND ZOEY G. BAUTISTA, Petitioners, v. FRANCISCO LINDO
AND WELHILMINA LINDO; AND HEIRS OF FILIPINA DAQUIGAN,
NAMELY: MA. LOURDES DAQUIGAN, IMELDA CATHERINE DAQUIGAN,
IMELDA DAQUIGAN AND CORSINO DAQUIGAN, REBECCA QUIAMCO
AND ANDRES QUIAMCO, ROMULO LORICA AND DELIA LORICA,
GEORGE CAJES AND LAURA CAJES, MELIDA BAÑEZ AND FRANCISCO
BAÑEZ, MELANIE GOFREDO, GERVACIO CAJES AND ISABEL CAJES,
EGMEDIO SEGOVIA AND VERGINIA SEGOVIA, ELSA N. SAM, PEDRO M.
SAM AND LINA SAM, SANTIAGO MENDEZ AND MINA MENDEZ, HELEN
M. BURTON AND LEONARDO BURTON, JOSE JACINTO AND
BIENVENIDA JACINTO, IMELDA DAQUIGAN, LEO MATIGA AND ALICIA
MATIGA, FLORENCIO ACEDO JR., AND LYLA VALERIO, Respondents.
DECISION
VELASCO JR., J.:
The Case
This is a Petition for Review on Certiorari under Rule 45 assailing the April 25,
2013 Order of the Regional Trial Court (RTC) in Civil Case No. (1798)-021 as
well as its Order of July 3, 2013 denying reconsideration.
The Facts
Alfredo R. Bautista (Bautista), petitioner’s predecessor, inherited in 1983 a free-
patent land located in Poblacion, Lupon, Davao Oriental and covered by Original
Certificate of Title (OCT) No. (1572) P-6144. A few years later, he subdivided the
property and sold it to several vendees, herein respondents, via a notarized deed of
absolute sale dated May 30, 1991. Two months later, OCT No. (1572) P-6144 was
canceled and Transfer Certificates of Title (TCTs) were issued in favor of the
vendees.1crallawlibrary
Three years after the sale, or on August 5, 1994, Bautista filed a complaint for
repurchase against respondents before the RTC, Branch 32, Lupon, Davao
Oriental, docketed as Civil Case No. 1798,2anchoring his cause of action on
 21

Section 119 of Commonwealth Act No. (CA) 141, otherwise known as the “Public RTC Ruling5
Land Act,” which reads:chanRoblesVirtualawlibrary

SECTION 119. Every conveyance of land acquired under the free patent or Acting on the motion, the RTC issued the assailed order dismissing the complaint
homestead provisions, when proper, shall be subject to repurchase by the applicant, for lack of jurisdiction. The trial court found that Bautista failed to allege in his
his widow, or legal heirs, within a period of five years from the date of the complaint that the value of the subject property exceeds 20 thousand pesos.
conveyance. Furthermore, what was only stated therein was that the total and full refund of the
purchase price of the property is PhP 16,500. This omission was considered by the
RTC as fatal to the case considering that in real actions, jurisdictional amount is
Respondents, in their Answer, raised lack of cause of action, estoppel, prescription, determinative of whether it is the municipal trial court or the RTC that has
and laches, as defenses. jurisdiction over the case.

Meanwhile, during the pendency of the case, Bautista died and was substituted by With respect to the belated filing of the motion, the RTC, citing Cosco Philippines
petitioner Epifania G. Bautista (Epifania). Shipping, Inc. v. Kemper Insurance Company,6 held that a motion to dismiss for
lack of jurisdiction may be filed at any stage of the proceedings, even on appeal,
Respondents Francisco and Welhilmina Lindo later entered into a compromise and is not lost by waiver or by estoppel. The dispositive portion of the assailed
agreement with petitioners, whereby they agreed to cede to Epifania a three Order reads:chanRoblesVirtualawlibrary
thousand two hundred and thirty square meter (3,230 sq.m.)-portion of the property
as well as to waive, abandon, surrender, and withdraw all claims and counterclaims WHEREFORE, the complaint for Repurchase, Consignation, with Preliminary
against each other. The compromise was approved by the RTC in its Decision Injunction and Damages is hereby dismissed for lack of jurisdiction.
dated January 27, 2011, the fallo of which reads:chanRoblesVirtualawlibrary
SO ORDERED.7crallawlibrary
WHEREFORE, a DECISION is hereby rendered based on the above-
quoted Compromise Agreement and the parties are enjoined to strictly comply with
the terms and conditions of the same.
Assignment of Errors
SO ORDERED.3

Their motion for reconsideration having been denied, petitioners now seek recourse
Other respondents, however, filed a Motion to Dismiss4 dated February 4, 2013, before this Court with the following assigned errors:chanRoblesVirtualawlibrary
alleging that the complaint failed to state the value of the property sought to be
I
recovered. Moreover, they asserted that the total selling price of all the properties is
only sixteen thousand five hundred pesos (PhP 16,500), and the selling price or
market value of a property is always higher than its assessed value. Since Batas THE PUBLIC RESPONDENT RTC ERRED IN ADMITTING THE MOTION TO
Pambansa Blg. (BP) 129, as amended, grants jurisdiction to the RTCs over civil DISMISS DATED FEBRUARY 4, 2013, BELATEDLY FILED BY THE
actions involving title to or possession of real property or interest therein where the PRIVATE RESPONDENTS IN THE CASE.
assessed value is more than PhP 20,000, then the RTC has no jurisdiction over the
complaint in question since the property which Bautista seeks to repurchase is II
below the PhP 20,000 jurisdictional ceiling.

THE PUBLIC RESPONDENT RTC ERRED IN HOLDING THAT THE
INSTANT CASE FOR REPURCHASE IS A REAL ACTION.8crallawlibrary
The Issue
Stated differently, the issue for the Court’s resolution is: whether or not the RTC
erred in granting the motion for the dismissal of the case on the ground of lack of
jurisdiction over the subject matter.
Arguments
Petitioners argue that respondents belatedly filed their Motion to Dismiss and are
now estopped from seeking the dismissal of the case, it having been filed nine (9)
years after the filing of the complaint and after they have actively participated in
the proceedings. Additionally, they allege that an action for repurchase is not a real
action, but one incapable of pecuniary estimation, it being founded on privity of
contract between the parties. According to petitioners, what they seek is the
enforcement of their right to repurchase the subject property under Section 119 of
CA 141.
Respondents, for their part, maintain that since the land is no longer devoted to
agriculture, the right of repurchase under said law can no longer be availed of,
citing Santana v. Mariñas.9 Furthermore, they suggest that petitioners intend to
resell the property for a higher profit, thus, the attempt to repurchase. This,
according to respondents, goes against the policy and is not in keeping with the
spirit of CA 141 which is the preservation of the land gratuitously given to
patentees by the State as a reward for their labor in cultivating the property. Also,
the Deed of Absolute Sale presented in evidence by Bautista was unilaterally
executed by him and was not signed by respondents. Lastly, respondents argue that
repurchase is a real action capable of pecuniary estimation.
Our Ruling
The petition is meritorious.
22
Jurisdiction of courts is granted by the Constitution and pertinent laws.
Jurisdiction of RTCs, as may be relevant to the instant petition, is provided in Sec.
19 of BP 129, which reads:chanRoblesVirtualawlibrary
Sec. 19. Jurisdiction in civil cases. — Regional Trial Courts shall exercise
exclusive original jurisdiction:chanRoblesVirtualawlibrary
1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;
2) In all civil actions which involve the title to, or possession of, real property, or
any interest therein, where the assessed value of the property involved exceeds
Twenty thousand pesos (P20,000.00) or, for civil actions in Metro Manila, where
such value exceeds Fifty thousand pesos (P50,000.00) except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts.
On the other hand, jurisdiction of first level courts is prescribed in Sec. 33 of BP
129, which provides:chanRoblesVirtualawlibrary
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in civil cases. — Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall
exercise:chanRoblesVirtualawlibrary
x x x x
3) Exclusive original jurisdiction in all civil actions which involve title to, or
possession of, real property, or any interest therein where the assessed value of the
property or interest therein does not exceed Twenty thousand pesos (P20,000.00)
or, in civil actions in Metro Manila, where such assessed value does not exceed
Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever kind,
attorney’s fees, litigation expenses and costs: Provided, That in cases of land not
declared for taxation purposes, the value of such property shall be determined by
the assessed value of the adjacent lots.
 23

The core issue is whether the action filed by petitioners is one involving title to or The Court finds that the instant cause of action to redeem the land is one for
possession of real property or any interest therein or one incapable of pecuniary specific performance.
estimation.
The facts are clear that Bautista sold to respondents his lots which were covered by
The course of action embodied in the complaint by the present petitioners’ a free patent. While the deeds of sale do not explicitly contain the stipulation that
predecessor, Alfredo R. Bautista, is to enforce his right to repurchase the lots he the sale is subject to repurchase by the applicant within a period of five (5) years
formerly owned pursuant to the right of a free-patent holder under Sec. 119 of CA from the date of conveyance pursuant to Sec. 119 of CA 141, still, such legal
141 or the Public Land Act. provision is deemed integrated and made part of the deed of sale as prescribed by
law. It is basic that the law is deemed written into every contract.15 Although a
The Court rules that the complaint to redeem a land subject of a free patent is a contract is the law between the parties, the provisions of positive law which
civil action incapable of pecuniary estimation. regulate contracts are deemed written therein and shall limit and govern the
relations between the parties.16 Thus, it is a binding prestation in favor of Bautista
It is a well-settled rule that jurisdiction of the court is determined by the allegations which he may seek to enforce. That is precisely what he did. He filed a complaint
in the complaint and the character of the relief sought.10 In this regard, the Court, to enforce his right granted by law to recover the lot subject of free patent. Ergo, it
in Russell v. Vestil,11 wrote that “in determining whether an action is one the is clear that his action is for specific performance, or if not strictly such action, then
subject matter of which is not capable of pecuniary estimation this Court has it is akin or analogous to one of specific performance. Such being the case, his
adopted the criterion of first ascertaining the nature of the principal action or action for specific performance is incapable of pecuniary estimation and
remedy sought. If it is primarily for the recovery of a sum of money, the claim is cognizable by the RTC.
considered capable of pecuniary estimation, and whether jurisdiction is in the
municipal courts or in the RTCs would depend on the amount of the claim.” But Respondents argue that Bautista’s action is one involving title to or possession of
where the basic issue is something other than the right to recover a sum of money, real property or any interests therein and since the selling price is less than PhP
where the money claim is purely incidental to, or a consequence of, the principal 20,000, then jurisdiction is lodged with the MTC. They rely on Sec. 33 of BP 129.
relief sought, this Court has considered such actions as cases where the subject of
the litigation may not be estimated in terms of money, and, hence, are incapable of Republic Act No. 769117 amended Sec. 33 of BP 129 and gave Metropolitan Trial
pecuniary estimation. These cases are cognizable exclusively by Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts exclusive
RTCs.12crallawlibrary original jurisdiction in all civil actions which involve title to, or possession of, real
property, or any interest therein where the assessed value of the property or interest
Settled jurisprudence considers some civil actions as incapable of pecuniary therein does not exceed twenty thousand pesos (PhP 20,000) or, in civil actions in
estimation, viz:chanRoblesVirtualawlibrary Metro Manila, where such assessed value does not exceed fifty thousand pesos
(PhP 50,000) exclusive of interest, damages of whatever kind, attorney’s fees,
1. Actions for specific performance; litigation expenses and costs.
2. Actions for support which will require the determination of the civil status;
3. The right to support of the plaintiff; At first blush, it appears that the action filed by Bautista involves title to or
4. Those for the annulment of decisions of lower courts; possession of the lots he sold to respondents. Since the total selling price is less
5. Those for the rescission or reformation of contracts;13crallawlibrary than PhP 20,000, then the MTC, not the RTC, has jurisdiction over the case. This
6. Interpretation of a contractual stipulation.14 proposition is incorrect for the re-acquisition of the lots by Bautista or herein
successors-in-interests, the present petitioners, is but incidental to and an offshoot
 24

of the exercise of the right by the latter to redeem said lots pursuant to Sec. 119 of By presenting their witness;21 and
CA 141. The reconveyance of the title to petitioners is solely dependent on the
exercise of such right to repurchase the lots in question and is not the principal or By submitting the compromise agreement for approval.22crallawlibrary
main relief or remedy sought. Thus, the action of petitioners is, in reality,
incapable of pecuniary estimation, and the reconveyance of the lot is merely the
Having fully participated in all stages of the case, and even invoking the RTC’s
outcome of the performance of the obligation to return the property conformably to
authority by asking for affirmative reliefs, respondents can no longer assail the
the express provision of CA 141.
jurisdiction of the said trial court. Simply put, considering the extent of their
participation in the case, they are, as they should be, considered estopped from
Even if we treat the present action as one involving title to real property or an
raising lack of jurisdiction as a ground for the dismissal of the action.
interest therein which falls under the jurisdiction of the first level court under Sec.
33 of BP 129, as the total selling price is only PhP 16,000 way below the PhP
WHEREFORE, premises considered, the instant petition is
20,000 ceiling, still, the postulation of respondents that MTC has jurisdiction will
hereby GRANTED. The April 25, 2013 and July 3, 2013 Orders of the Regional
not hold water. This is because respondents have actually participated in the
Trial Court in Civil Case No. (1798)-021 are hereby REVERSED and SET ASIDE.
proceedings before the RTC and aggressively defended their position, and by
virtue of which they are already barred to question the jurisdiction of the RTC
The Regional Trial Court, Branch 32 in Lupon, Davao Oriental is ORDERED to
following the principle of jurisdiction by estoppel.
proceed with dispatch in resolving Civil Case No. (1798)-021.
In Heirs of Jose Fernando v. De Belen, it was held that the party raising defenses to
No pronouncement as to costs.
the complaint, actively participating in the proceedings by filing pleadings,
presenting his evidence, and invoking its authority by asking for an affirmative
relief is deemed estopped from questioning the jurisdiction of the
court.18crallawlibrary

Here, we note that aside from the belated filing of the motion to dismiss--it having Julao vs de Jesus
been filed nine (9) years from the filing of the complaint--respondents actively
1. Civil Law; Land Titles; Article 434 of the Civil Code states that “in an action to
participated in the proceedings through the following
recover, the property must be identified, and the plaintiff must rely on the strength
acts:chanRoblesVirtualawlibrary
of his title and not on the weakness of the defendant’s claim.”+
By filing their Answer and Opposition to the Prayer for Injunction19 dated
2. Remedial Law; Civil Procedure; Jurisdiction; Since the assessed value of the
September 29, 1994 whereby they even interposed counterclaims, specifically: PhP
property was not alleged, it cannot be determined which trial court had original and
501,000 for unpaid survey accounts, PhP 100,000 each as litigation expenses, PhP
exclusive jurisdiction over the case.-
200,000 and PhP 3,000 per daily appearance by way of attorney’s fees, PhP
500,000 as moral damages, PhP 100,000 by way of exemplary damages, and costs —In this case, for the RTC to exercise jurisdiction, the assessed value of the
of suit; subject property must exceed P20,000.00. Since petitioners failed to allege in their
Complaint the assessed value of the subject property, the CA correctly dismissed
By participating in Pre-trial;
the Complaint as petitioners failed to establish that the RTC had jurisdiction over
By moving for the postponement of their presentation of evidence;20crallawlibrary it. In fact, since the assessed value of the property was not alleged, it cannot be
determined which trial court had original and exclusive jurisdiction over the case.

3. Same; Same; Same; Under Section 1, Rule 9 of the Revised Rules of Court,
defenses not pleaded either in a motion to dismiss or in the answer are deemed
waived, except for lack of jurisdiction, litis pendentia, res judicata, and
prescription, which must be apparent from the pleadings or the evidence on
record.-
—Contrary to the claim of petitioners, the issue of lack of jurisdiction was raised
by respondents in their Appellant’s Brief. And the fact that it was raised for the
first time on appeal is of no moment. Under Section 1, Rule 9 of the Revised Rules
of Court, defenses not pleaded either in a motion to dismiss or in the answer are
deemed waived, except for lack of jurisdiction, litis pendentia, res judicata, and
prescription, which must be apparent from the pleadings or the evidence on record.
In other words, the defense of lack of jurisdiction over the subject matter may be
raised at any stage of the proceedings, even for the first time on appeal. In fact, the
court may motu proprio dismiss a complaint at any time when it appears from the
pleadings or the evidence on record that lack of jurisdiction exists.
G.R. No. 176020, September 29, 2014
HEIRS OF TELESFORO JULAO, NAMELY, ANITA VDA. DE ENRIQUEZ,
SONIA J. TOLENTINO AND RODERICK JULAO, Petitioners, v. SPOUSES
ALEJANDRO AND MORENITA DE JESUS, Respondents.
DECISION
DEL CASTILLO, J.:
Jurisdiction over the subject matter is conferred by law and is determined by the
material allegations of the complaint.1 Thus, it cannot be acquired through, or
waived by, any act or omission of the parties;2nor can it be cured by their silence,
acquiescence, or even express consent.3cralawred
This Petition for Review on Certiorari4 under Rule 45 of the Rules of Court assails
the Decision5 dated December 4, 2006 of the Court of Appeals (CA) in CA-G.R.
CV No. 72845.
Factual Antecedents
25
Sometime in the 1960’s, Telesforo Julao (Telesforo)6 filed before the Department
of Environment and Natural Resources (DENR), Baguio City, two Townsite Sales
Applications (TSA), TSA No. V-2132 and TSA No. V-6667.7 Upon his death on
June 1, 1971, his applications were transferred to his heirs.8cralawred
On April 30, 1979,9 Solito Julao (Solito) executed a Deed of Transfer of
Rights, 10 transferring his hereditary share in the property covered by TSA No. V-
6667 to respondent spouses Alejandro and Morenita De Jesus. In 1983, respondent
spouses constructed a house on the property they acquired from Solito.11 In 1986,
Solito went missing.12cralawred
On March 15, 1996, the DENR issued an Order: Rejection and Transfer of Sales
Rights,13 to wit:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered and it appearing that herein applicant is a
holder of two (2) applications in violation with established policy in the disposition
[of] public lands in the City of Baguio, TSA V-6667 is hereby ordered dropped
from the records. Accordingly, it is henceforth ordered that TSA 2132 in the name
of TELESFORO JULAO be, as [it is] hereby transferred to the heirs of
TELESFORO JULAO, represented by ANITA VDA. DE ENRIQUEZ, and as thus
transferred, the same shall continue to be given due course. For convenience of
easy reference, it is directed that the [pertinent] records be consolidated in the
name of the latter.
SO ORDERED.14
Consequently, on December 21, 1998, Original Certificate of Title (OCT) No. P-
2446,15 covering a 641-square meter property, was issued in favor of the heirs of
Telesforo.16cralawred
On March 2, 1999, petitioners Anita Julao vda. De Enriquez, Sonia J. Tolentino
and Roderick Julao,17representing themselves to be the heirs of Telesforo, filed
before the Regional Trial Court (RTC), Baguio City, a Complaint for Recovery of
Possession of Real Property,18 docketed as Civil Case No. 4308-R,19against
respondent spouses. Petitioners alleged that they are the true and lawful owners of
a 641-square meter parcel of land located at Naguilian Road, Baguio City, covered
by OCT No. P-2446;20 that the subject property originated from TSA No. V-
 26

2132;21 that respondent spouses’ house encroached on 70 square meters of the
subject property;22 that on August 4, 1998, petitioners sent a demand letter to
respondent spouses asking them to return the subject property;23 that respondent
spouses refused to accede to the demand, insisting that they acquired the subject
property from petitioners’ brother, Solito, by virtue of a Deed of Transfer of
Rights;24 that in the Deed of Transfer of Rights, Solito expressly transferred in
favor of respondent spouses his hereditary share in the parcel of land covered by
TSA No. V-6667;25 that TSA No. V-6667 was rejected by the DENR;26 and that
respondent spouses have no valid claim over the subject property because it is
covered by a separate application, TSA No. V-2132.27cralawred
Respondent spouses filed a Motion to Dismiss28 on the ground of prescription,
which the RTC denied for lack of merit.29 Thus, they filed an
Answer30 contending that they are the true and lawful owners and possessors of
the subject property;31that they acquired the said property from petitioners’
brother, Solito;32 and that contrary to the claim of petitioners, TSA No. V-6667
and TSA No. V-2132 pertain to the same property.33cralawred
During the trial, petitioners disputed the validity of the Deed of Transfer of Rights
executed by Solito. They presented evidence to show that Telesforo submitted two
applications, TSA No. V-2132 and TSA No. V-6667.34 The first one, TSA No. V-
2132, resulted in the issuance of OCT No. P-2446 in favor of the heirs of
Telesforo, while the second one, TSA No. V-6667, was dropped from the
records.35 They also presented evidence to prove that Solito had no hereditary
share in the estate of Telesforo because Solito was not Telesforo’s biological son,
but his stepson, and that Solito’s real name was Francisco Bognot.36cralawred
After petitioners rested their case, respondent spouses filed a Motion for Leave of
Court to File a Demurrer to Evidence.37 The RTC, however, denied the
Motion.38cralawred
Francisco, the Officer-In-Charge of CENRO-Baguio City, stating that “ it can be
concluded that TSA No. V-2132 and TSA No. V-6667 referred to one and the
same application covering one and the same lot;”41 and (2) a letter42 dated
September 30, 1998 from the DENR stating that “the land applied for with
assigned number TSA No. V-2132 was renumbered as TSA No. V-6667 as per 2nd
Indorsement dated November 20, 1957 x x x.”43 They also presented two
affidavits,44 both dated August 31, 1994, executed by petitioners Sonia Tolentino
and Roderick Julao,45acknowledging that Solito was their co-heir and that he was
the eldest son of Telesforo.46cralawred
Ruling of the Regional Trial Court
On August 10, 2001, the RTC rendered a Decision47 in favor of petitioners. The
RTC found that although petitioners failed to prove their allegation that Solito was
not an heir of Telesforo,48 they were nevertheless able to convincingly show that
Telesforo filed with the DENR two applications, covering two separate parcels of
land, and that it was his first application, TSA No. V-2132, which resulted in the
issuance of OCT No. P-2446.49 And since what Solito transferred to respondent
spouses was his hereditary share in the parcel of land covered by TSA No. V-6667,
respondent spouses acquired no right over the subject property, which was derived
from a separate application, TSA No. V-2132.50 Thus, the RTC disposed of the
case in this wise:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
[petitioners] and against the [respondents] who are hereby ordered to restore the
possession of the land in question consisting of an area of 70 square meters, more
or less, which is a portion of the land covered by [OCT] No. P-2446. The
[respondents] are ordered to remove the house and/or other improvements that they
constructed over the said parcel of land and to vacate the same upon the finality of
this decision.

The heirs of Solito then moved to intervene and filed an Answer-In- SO ORDERED.51
Intervention,39 arguing that their father, Solito, is a legitimate son of Telesforo and
that Solito sold his hereditary share in the estate of his father to respondent spouses
Ruling of the Court of Appeals
by virtue of a Deed of Transfer of Rights.40cralawred
Aggrieved, respondent spouses elevated the case to the CA.
To refute the evidence presented by petitioners, respondent spouses presented two
letters from the DENR: (1) a letter dated April 27, 1999 issued by Amando I.
 27

On December 4, 2006, the CA reversed the ruling of the RTC. The CA found the
Complaint dismissible on two grounds: (1) failure on the part of petitioners to
identify the property sought to be recovered; and (2) lack of jurisdiction. The CA
noted that petitioners failed to pinpoint the property sought to be recovered.52 In
fact, they did not present any survey plan to show that respondent spouses actually
encroached on petitioners’ property.53 Moreover, the CA was not fully convinced
that the two applications pertain to two separate parcels of land since respondent
spouses were able to present evidence to refute such allegation.54 The CA likewise
pointed out that the Complaint failed to establish that the RTC had jurisdiction over
the case as petitioners failed to allege the assessed value of the subject
property.55 Thus:ChanRoblesVirtualawlibrary
At this juncture, it must be mentioned that in the Resolution58 dated March 19,
2007, we required respondent spouses to file their Comment to the Petition which
they failed to comply with. Thus, in the Resolution59 dated March 11, 2013, we
dispensed with the filing of respondent spouses’ Comment. At the same time, we
required petitioners to manifest whether they are willing to submit the case for
resolution based on the pleadings filed. To date, petitioners have not done so.
Our Ruling

WHEREFORE, premises considered, the appeal is GRANTED. The decision The Petition lacks merit.
appealed from is REVERSED and SET ASIDE. The complaint is DISMISSED.
The assessed value must be alleged
SO ORDERED.56cralawred in the complaint to determine which
court has jurisdiction over the action.

Jurisdiction as we have said is conferred by law and is determined by the

Issues allegations in the complaint, which contains the concise statement of the ultimate
facts of a plaintiff's cause of action.60cralawred

Hence, petitioners filed the instant Petition for Review on Certiorari, raising the
following errors:ChanRoblesVirtualawlibrary
I
THE [CA] COMMITTED REVERSIBLE ERROR IN RULING THAT
PETITIONERS FAILED TO PROVE THE IDENTITY OF THE PROPERTY IN
QUESTION.
II
THE [CA] COMMITTED REVERSIBLE ERROR IN RULING THAT THE
TRIAL COURT DID NOT ACQUIRE JURISDICTION OVER THE
COMPLAINT.57
Section 19(2) and Section 33(3) of Batas Pambansa Blg. 129, as amended by
Republic Act No. 7691, provide:ChanRoblesVirtualawlibrary
SEC. 19. Jurisdiction in Civil Cases. — Regional Trial Courts shall exercise
exclusive original jurisdiction:ChanRoblesVirtualawlibrary
x x x x
(2) In all civil actions which involve the title to, or possession of, real property, or
any interest therein, where the assessed value of the property involved exceeds
twenty thousand pesos (P20,000.00) or for civil actions in Metro Manila, where
such value exceeds Fifty thousand pesos (P50,000.00) except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts;

x x x x
 28

when it appears from the pleadings or the evidence on record that lack of
SEC. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and jurisdiction exists.65cralawred
Municipal Circuit Trial Courts in Civil Cases. — Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall In an action to recover, the
exercise:ChanRoblesVirtualawlibrary property must be identified.

x x x x
(3) Exclusive original jurisdiction in all civil actions which involve title to, or
possession of, real property, or any interest therein where the assessed value of the
property or interest therein does not exceed Twenty Thousand Pesos (P20,000.00)
or, in civil actions in Metro Manila, where such assessed value does not exceed
Fifty Thousand Pesos (P50,000.00) exclusive of interest, damages of whatever
kind, attorney's fees, litigation expenses and costs: Provided, That in cases of land
not declared for taxation purposes, the value of such property shall be determined
by the assessed value of the adjacent lots.
Based on the foregoing, it is clear that in an action for recovery of possession, the
assessed value of the property sought to be recovered determines the court’s
jurisdiction.61cralawred
In this case, for the RTC to exercise jurisdiction, the assessed value of the subject
property must exceed P20,000.00. Since petitioners failed to allege in their
Complaint the assessed value of the subject property, the CA correctly dismissed
the Complaint as petitioners failed to establish that the RTC had jurisdiction over
it. In fact, since the assessed value of the property was not alleged, it cannot be
determined which trial court had original and exclusive jurisdiction over the case.
Moreover, Article 434 of the Civil Code states that “[i]n an action to recover, the
property must be identified, and the plaintiff must rely on the strength of his title
and not on the weakness of the defendant’s claim.” The plaintiff, therefore, is
duty-bound to clearly identify the land sought to be recovered, in accordance with
the title on which he anchors his right of ownership.66 It bears stressing that the
failure of the plaintiff to establish the identity of the property claimed is fatal to his
case.67cralawred
In this case, petitioners failed to identify the property they seek to recover as they
failed to describe the location, the area, as well as the boundaries thereof. In fact,
as aptly pointed out by the CA, no survey plan was presented by petitioners to
prove that respondent spouses actually encroached upon the 70-square meter
portion of petitioners’ property.68 Failing to prove their allegation, petitioners are
not entitled to the relief prayed for in their Complaint.
All told, we find no error on the part of the CA in dismissing the Complaint for
lack of jurisdiction and for failing to identify the property sought to be recovered.
WHEREFORE, the Petition is hereby DENIED. The Decision dated December 4,
2006 of the Court of Appeals in CA-G.R. CV No. 72845 is hereby AFFIRMED.

Furthermore, contrary to the claim of petitioners, the issue of lack of jurisdiction

was raised by respondents in their Appellant’s Brief.62 And the fact that it was
Reterta vs Lopez
raised for the first time on appeal is of no moment. Under Section 1,63 Rule 9 of
the Revised Rules of Court, defenses not pleaded either in a motion to dismiss or in 1. Judgments; Appeals; Words and Phrases; “Final Judgment” and “Interlocutory
the answer are deemed waived, except for lack of jurisdiction, litis pendentia, res Order,” Distinguished.+
judicata, and prescription, which must be apparent from the pleadings or the
evidence on record. In other words, the defense of lack of jurisdiction over the 2. Certiorari; The term grave abuse of discretion connotes whimsical and
subject matter may be raised at any stage of the proceedings, even for the first time capricious exercise of judgment as is equivalent to excess, or lack of jurisdiction.-
on appeal. 64 In fact, the court may motu proprio dismiss a complaint at any time

—Given all the foregoing, the RTC committed grave abuse of discretion
amounting to lack of jurisdiction. The term grave abuse of discretion connotes
whimsical and capricious exercise of judgment as is equivalent to excess, or lack of
jurisdiction. The abuse must be so patent and gross as to amount to an evasion of a
positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at
all in contemplation of law as where the power is exercised in an arbitrary and
despotic manner by reason of passion or hostility.
3. Same; Same; Jurisdiction; The authority of Land Management Bureau (LMB)
under Act No. 1120, being limited to the administration and disposition of friar
lands, does not include an action for reconveyance-
—LMB ceases to have jurisdiction once the friar land is disposed of in favor of a
private person and title duly issues in the latter’s name.—As the provisions
indicate, the authority of LMB under Act No. 1120, being limited to the
administration and disposition of friar lands, did not include the petitioners’ action
for reconveyance. LMB ceases to have jurisdiction once the friar land is disposed
of in favor of a private person and title duly issues in the latter’s name. By ignoring
the petitioners’ showing of its plain error in dismissing Civil Case No. TM-983,
and by disregarding the allegations of the complaint, the RTC acted whimsically
and capriciously.
4. Same; Same; Reconveyance; There is no special ground for an action for
reconveyance, for it is enough that the aggrieved party asserts a legal claim in the
property superior to the claim of the registered owner, and that the property has not
yet passed to the hands of an innocent purchaser for value.+
5. Land Titles; Friar Lands; In order that a transfer of the rights of a holder of a
certificate of sale of friar lands may be legally effective, it is necessary that a
formal certificate of transfer be drawn up and submitted to the Chief of the Bureau
of Public Lands for his approval and registration+
6. Same; Verily, the instances in which certiorari will issue cannot be defined,
because to do so is to destroy the comprehensiveness and usefulness of the
extraordinary writ+
7. Certiorari; The requirement that there must be no appeal, or any plain speedy
and adequate remedy in the ordinary course of law admits of exceptions+
29
8. Same; Same; While Administrative Matter No. 07-7-12-SC, effective 27
December 2007, has amended Section 1, Rule 41, by deleting an order denying a
motion for new trial or motion for reconsideration from the enumeration of non-
appealable orders, and that such a revision of a procedural rule may be
retroactively applied, but to reverse the Court of Appeals on that basis would not
be right and proper, simply because the CA correctly applied the rule of procedure
in force at the time when it issued its assailed final order.+
9. Same; Appeals; By denying a motion for reconsideration, or by granting it only
partially, a trial court finds no reason either to reverse or to modify its judgment or
final order, and leaves the judgment or final order to stand+
HEIRS OF SPOUSES TEOFILO M. RETERTA AND ELISA RETERTA,
NAMELY: EDUARDO M. RETERTA, CONSUELO M. RETERTA, AND
AVELINA M. RETERTA, PETITIONERS, VS. SPOUSES LORENZO MORES
AND VIRGINIA LOPEZ, RESPONDENTS.
DECISION
BERSAMIN, J.:
The original and exclusive jurisdiction over a complaint for quieting of title and
reconveyance involving friar land belongs to either the Regional Trial Court (RTC)
or the Municipal Trial Court (MTC). Hence, the dismissal of such a complaint on
the ground of lack of jurisdiction due to the land in litis being friar land under the
exclusive jurisdiction of the Land Management Bureau (LMB) amounts to
manifest grave abuse of discretion that can be corrected through certiorari.
The petitioners, whose complaint for quieting of title and reconveyance the RTC
had dismissed, had challenged the dismissal by petition for certiorari, but the Court
of Appeals (CA) dismissed their petition on the ground that certiorari was not a
substitute for an appeal, the proper recourse against the dismissal. They now appeal
that ruling of the CA promulgated on April 25, 2003.[1]
 30

Antecedents to discuss the same.

IN VIEW OF THE FOREGOING, let this instant case be dismissed as it is hereby

On May 2, 2000, the petitioners commenced an action for quieting of title and dismissed.
reconveyance in the RTC in Trece Martires City (Civil Case No. TM-
983),[2] averring that they were the true and real owners of the parcel of land (the SO ORDERED.
land) situated in Trez Cruzes, Tanza, Cavite, containing an area of 47,708 square
meters, having inherited the land from their father who had died on July 11, 1983;
that their late father had been the grantee of the land by virtue of his occupation The petitioners then timely filed a motion for reconsideration, but the RTC denied
and cultivation; that their late father and his predecessors in interest had been in their motion for reconsideration on February 21, 2002.[4]
open, exclusive, notorious, and continuous possession of the land for more than 30
years; that they had discovered in 1999 an affidavit dated March 1, 1966 that their On May 15, 2002, therefore, the petitioners assailed the dismissal via petition
father had purportedly executed whereby he had waived his rights, interests, and for certiorari, but the CA dismissed the petition on April 25, 2003, holding: [5]
participation in the land; that by virtue of the affidavit, Sales Certificate No. V-769
had been issued in favor of respondent Lorenzo Mores by the then Department of Thus, the basic requisite for the special civil action of certiorari to lie is that there is
Agriculture and Natural Resources; and that Transfer Certificate of Title No. T- no appeal, nor any plain, speedy and adequate remedy in the ordinary course of
64071 had later issued to the respondents. law.

On August 1, 2000, the respondents, as defendants, filed a motion to In the case at bench, when the court rendered the assailed decision, the remedy of
dismiss, insisting that the RTC had no jurisdiction to take cognizance of Civil Case the petitioners was to have appealed the same to this Court. But petitioners did not.
No. TM-983 due to the land being friar land, and that the petitioners had no legal Instead they filed the present special civil action for certiorari on May 15, 2002
personality to commence Civil Case No. TM-983. after the decision of the court a quo has become final.

On October 29, 2001, the RTC granted the motion to dismiss, holding:[3]
Considering that plaintiffs in this case sought the review of the propriety of the
grant of lot 2938 of the Sta. Cruz de Malabon Friar Lands Estate by the Lands
Management Bureau of the defendant Lorenzo Mores through the use of the forged
Affidavit and Sales Certificate No. V-769 which eventually led to the issuance of
T.C.T. No. T-64071 to defendant Lorenzo Mores and wife Virginia Mores, and
considering further that the land subject of this case is a friar land and not land of
the public domain, consequently Act No. 1120 is the law prevailing on the matter
which gives to the Director of Lands the exclusive administration and disposition
of Friar Lands. More so, the determination whether or not fraud had been
committed in the procurement of the sales certificate rests to the exclusive power
of the Director of Lands. Hence this Court is of the opinion that it has no
jurisdiction over the nature of this action. On the second ground relied upon by the
defendants in their Motion To Dismiss, suffice it to state that the Court deemed not
The Order dismissing the case was issued by the court a quo on 29 October 2001,
which Order was received by the petitioners on November 16, 2001. Petitioners
filed a motion for reconsideration dated November 26, 2001 but the same was
denied by the court a quo on 21 February 2002. The Order denying the motion for
reconsideration was received by the petitioners on 20 March 2002.
Petitioners filed this petition for certiorari on May 15, 2002. Certiorari, however
cannot be used as a substitute for the lost remedy of appeal.
In Bernardo vs. Court of Appeals, 275 SCRA 423, the Supreme Court had the
following to say:
<BLOCKQUOTE>"We have time and again reminded members of the bench and
bar that a special civil action for certiorari under Rule 65 lies only when "there is
no appeal nor plain, speedy and adequate remedy in the ordinary course of
 31

law." Certiorari cannot be allowed when a party to a case fails to appeal a judgment
despite the availability of that remedy, certiorari not being a substitute for lost
appeal. The remedies of appeal and certiorari are mutually exclusive and not
alternative or successive."</BLOCKQUOTE>
WHEREFORE, in view of the foregoing, the instant petition is hereby
DISMISSED.
IT IS REVERSIBLE ERROR FOR THE HONORABLE COURT OF APPEALS
IN NOT FINDING THAT THE TRIAL JUDGE GRAVELY ABUSED ITS
DISCRETION WHEN IT DISMISSED THE COMPLAINT RULING THAT IT
HAS NO JURISDICTION OVER THE NATURE OF THE ACTION, AND IN
NOT FINDING THAT THE TRIAL JUDGE HAS JURISDICTION OVER THE
SAME.[7]

SO ORDERED.
Briefly stated, the issue is whether or not the CA erred in dismissing the petition
On September 9, 2003, the CA denied the petitioners' motion for for certiorari.
reconsideration.[6]
Ruling

Hence, this appeal.

The appeal is meritorious.
Issues
1.
Propriety of certiorari as remedy
The petitioners submit that: against dismissal of the action

I.
The CA seems to be correct in dismissing the petition for certiorari, considering
that the order granting the respondents' motion to dismiss was a final, as
IT IS REVERSIBLE ERROR OF THE HONORABLE COURT OF APPEALS TO distinguished from an interlocutory, order against which the proper remedy was an
DISREGARD THE PROVISIONS OF SECTION 1, RULE 41, SECOND appeal in due course. Certiorari, as an extraordinary remedy, is not substitute for
PARAGRAPH, SUBPARAGRAPH (a), AND SECTION 9, RULE 37, 1997 appeal due to its being availed of only when there is no appeal, or plain, speedy
RULES OF COURT; and adequate remedy in the ordinary course of law.[8]

II.
IT IS REVERSIBLE ERROR FOR THE HONORABLE COURT OF APPEALS
TO APPLY THE RULING IN THE CASE OF ROSETE vs. COURT OF
APPEALS, 339 SCRA 193, 199, NOTWITHSTANDING THE FACT THAT
THE 1997 RULES OF CIVIL PROCEDURE ALREADY TOOK EFFECT ON
JULY 1, 1997.
III.
Nonetheless, the petitioners posit that a special civil action for certiorari was their
proper remedy to assail the order of dismissal in light of certain rules of
procedure, specifically pointing out that the second paragraph of Section 1 of Rule
37 of the Rules of Court ("An order denying a motion for new trial or
reconsideration is not appealable, the remedy being an appeal from the judgment or
final order") prohibited an appeal of a denial of the motion for reconsideration, and
that the second paragraph of Section 1 of Rule 41 of the Rules of Court (
"No appeal may be taken from: xxx An order denying a motion for new trial or
reconsideration") expressly declared that an order denying a motion for
reconsideration was not appealable. They remind that the third paragraph of

Section 1 of Rule 41 expressly provided that in the instances "where the judgment
or final order is not appealable, the aggrieved party may file an appropriate special
civil action under Rule 65."
The petitioners' position has no basis.
For one, the order that the petitioners really wanted to obtain relief from was the
order granting the respondents' motion to dismiss, not the denial of the motion for
reconsideration. The fact that the order granting the motion to dismiss was a final
order for thereby completely disposing of the case, leaving nothing more for the
trial court to do in the action, truly called for an appeal, instead of certiorari, as the
correct remedy.
The fundamental distinction between a final judgment or order, on one hand, and
an interlocutory order, on the other hand, has been outlined in Investments, Inc. v.
Court of Appeals,[9] viz:
The concept of `final' judgment, as distinguished from one which has `become
final' (or `executory' as of right [final and executory]), is definite and settled. A
`final' judgment or order is one that finally disposes of a case, leaving nothing more
to be done by the Court in respect thereto, e.g., an adjudication on the merits
which, on the basis of the evidence presented at the trial declares categorically
what the rights and obligations of the parties are and which party is in the right; or
a judgment or order that dismisses an action on the ground, for instance, of res
judicata or prescription. Once rendered, the task of the Court is ended, as far as
deciding the controversy or determining the rights and liabilities of the litigants is
concerned. Nothing more remains to be done by the Court except to await the
parties' next move (which among others, may consist of the filing of a motion for
new trial or reconsideration, or the taking of an appeal) and ultimately, of course,
to cause the execution of the judgment once it becomes `final' or, to use the
established and more distinctive term, `final and executory.'
xxx
Conversely, an order that does not finally dispose of the case, and does not end the
Court's task of adjudicating the parties' contentions and determining their rights
and liabilities as regards each other, but obviously indicates that other things
remain to be done by the Court, is `interlocutory,' e.g., an order denying a motion
32
to dismiss under Rule 16 of the Rules, or granting a motion for extension of time to
file a pleading, or authorizing amendment thereof, or granting or denying
applications for postponement, or production or inspection of documents or
things, etc. Unlike a `final' judgment or order, which is appealable, as above
pointed out, an `interlocutory' order may not be questioned on appeal except only
as part of an appeal that may eventually be taken from the final judgment rendered
in the case.
Moreover, even Section 9 of Rule 37 of the Rules of Court, cited by the petitioners,
indicates that the proper remedy against the denial of the petitioners' motion for
reconsideration was an appeal from the final order dismissing the action upon the
respondents' motion to dismiss. The said rule explicitly states thusly:
<BLOCKQUOTE>Section 9. Remedy against order denying a motion for new trial
or reconsideration. - An order denying a motion for new trial or reconsideration is
not appealable, the remedy being an appeal from the judgment or final
order.</BLOCKQUOTE>
The restriction against an appeal of a denial of a motion for
reconsideration independently of a judgment or final order is logical and
reasonable. A motion for reconsideration is not putting forward a new issue, or
presenting new evidence, or changing the theory of the case, but is only seeking a
reconsideration of the judgment or final order based on the same issues,
contentions, and evidence either because: (a) the damages awarded are excessive;
or (b) the evidence is insufficient to justify the decision or final order; or (c) the
decision or final order is contrary to law.[10] By denying a motion for
reconsideration, or by granting it only partially, therefore, a trial court finds no
reason either to reverse or to modify its judgment or final order, and leaves the
judgment or final order to stand. The remedy from the denial is to assail the denial
in the course of an appeal of the judgment or final order itself.
The enumeration of the orders that were not appealable made in the 1997 version
of Section 1, Rule 41 of the Rules of Court - the version in force at the time when
the CA rendered its assailed decision on May 15, 2002 - included an order denying
a motion for new trial or motion for reconsideration, to wit:
 33

Section 1. Subject of appeal. -- An appeal may be taken from a judgment or final 2.

order that completely disposes of the case, or of a particular matter therein when RTC or MTC has jurisdiction over the action
declared by these Rules to be appealable.

No appeal may be taken from: The settled rule precluding certiorari as a remedy against the final order when
appeal is available notwithstanding, the Court rules that the CA should have given
(a) An order denying a motion for new trial or reconsideration; due course to and granted the petition for certiorari for two exceptional reasons,
namely: (a) the broader interest of justice demanded that certiorari be given due
(b) An order denying a petition for relief or any similar motion seeking relief from course to avoid the undeserved grossly unjust result that would befall the
judgment; petitioners otherwise; and (b) the order of the RTC granting the motion to
dismiss on ground of lack of jurisdiction over the subject matter
(c) An interlocutory order; evidently constituted grave abuse of discretion amounting to excess of jurisdiction.

(d) An order disallowing or dismissing an appeal; On occasion, the Court has considered certiorari as the proper remedy despite the
availability of appeal, or other remedy in the ordinary course of law. In Francisco
(e) An order denying a motion to set aside a judgment by consent, confession or Motors Corporation v. Court of Appeals,[11]the Court has declared that the
compromise on the ground of fraud, mistake or duress, or any other ground requirement that there must be no appeal, or any plain speedy and adequate remedy
vitiating consent; in the ordinary course of law admits of exceptions, such as: (a) when it is necessary
to prevent irreparable damages and injury to a party; (b) where the trial judge
(f) An order of execution; capriciously and whimsically exercised his judgment; (c) where there may be
danger of a failure of justice; (d) where an appeal would be slow, inadequate, and
(g) A judgment or final order for or against one or more of several parties or in insufficient; (e) where the issue raised is one purely of law; (f) where public
separate claims, counterclaims, cross-claims and third-party complaints, while the interest is involved; and (g) in case of urgency.
main case is pending, unless the court allows an appeal therefrom; and
Specifically, the Court has held that the availability of appeal as a remedy does not
(h) An order dismissing an action without prejudice. constitute sufficient ground to prevent or preclude a party from making use
of certiorari if appeal is not an adequate remedy, or an equally beneficial, or speedy
In all the above instances where the judgment or final order is not appealable, the remedy. It is inadequacy, not the mere absence of all other legal remedies and the
aggrieved party may file an appropriate special civil action under Rule 65. (n) danger of failure of justice without the writ, that must usually determine the
propriety of certiorari.[12] A remedy is plain, speedy and adequate if it will
promptly relieve the petitioner from the injurious effects of the judgment, order, or
It is true that Administrative Matter No. 07-7-12-SC, effective December 27, 2007, resolution of the lower court or agency.[13] It is understood, then, that a litigant
has since amended Section 1, Rule 41, supra, by deleting an order denying need not mark time by resorting to the less speedy remedy of appeal in order to
a motion for new trial or motion for reconsideration from the enumeration of non- have an order annulled and set aside for being patently void for failure of the trial
appealable orders, and that such a revision of a procedural rule may be court to comply with the Rules of Court.[14]
retroactively applied. However, to reverse the CA on that basis would not be right
and proper, simply because the CA correctly applied the rule of procedure in force Nor should the petitioner be denied the recourse despite certiorari not being
at the time when it issued its assailed final order. available as a proper remedy against an assailed order, because it is better on
 34

balance to look beyond procedural requirements and to overcome the ordinary title from him upon his death. By law, therefore, should the execution of the deed
disinclination to exercise supervisory powers in order that a void order of a lower in favor of the respondents be held invalid, the interests of Teofilo Reterta should
court may be controlled to make it conformable to law and justice.[15] Verily, the descend to the petitioners and the deed should issue in their favor. Adding
instances in which certiorari will issue cannot be defined, because to do so is to significance to the petitioners' claim was their allegation in the complaint that they
destroy the comprehensiveness and usefulness of the extraordinary writ. The wide were in possession of the land. Moreover, as alleged in the
breadth and range of the discretion of the court are such that authority is not petitioners' opposition to the motion to dismiss of the respondents, Teofilo Reterta
wanting to show that certiorari is more discretionary than either prohibition had partially paid the price of the land.[21]
or mandamus, and that in the exercise of superintending control over inferior
courts, a superior court is to be guided by all the circumstances of each particular Given the foregoing, the petitioners' complaint made out a good case for
case "as the ends of justice may require." Thus, the writ will be granted whenever reconveyance or reversion, and its allegations, if duly established, might well
necessary to prevent a substantial wrong or to do substantial justice.[16] warrant the reconveyance of the land from the respondents to the petitioners. It did
not matter that the respondents already held a certificate of title in their names. In
The petitioners' complaint - self-styled as being for the "quieting of title and essence, an action for reconveyance respects the incontrovertibility of the decree of
reconveyance, declaration of nullity of affidavit & Sales Certificate, reconveyance registration but seeks the transfer of the property to its rightful and legal owner on
and damages" - would challenge the efficacy of the respondents' certificate of title the ground of its having been fraudulently or mistakenly registered in another
under the theory that there had been no valid transfer or assignment from the person's name. There is no special ground for an action for reconveyance, for it is
petitioners' predecessor in interest to the respondents of the rights or interests in the enough that the aggrieved party asserts a legal claim in the property superior to the
land due to the affidavit assigning such rights and interests being a forgery and claim of the registered owner, and that the property has not yet passed to the hands
procured by fraud. of an innocent purchaser for value.[22] On this score, it is also worthy to stress that
the title of a piece of a friar land obtained by a grantee from the Government
The petitioners' cause of action for reconveyance has support in jurisprudence without conforming with the requirements set by the law may be assailed and
bearing upon the manner by which to establish a right in a piece of friar land. nullified.
According to Arayata v. Joya,[17] in order that a transfer of the rights of a holder
of a certificate of sale of friar lands may be legally effective, it is necessary that a Was the petitioners' action for reconveyance within the jurisdiction of the regular
formal certificate of transfer be drawn up and submitted to the Chief of the Bureau court?
of Public Lands for his approval and registration. The law authorizes no other way
of transferring the rights of a holder of a certificate of sale of friar lands. In other We answer the query in the affirmative.
words, where a person considered as a grantee of a piece of friar land transfers his
rights thereon, such transfer must conform to certain requirements of the law. The law governing jurisdiction is Section 19 (2) of Batas Pambansa Blg.
Under Director of Lands v. Rizal,[18] the purchaser in the sale of friar lands under 129,[23] as amended by Republic Act No. 7691,[24] which provides:
Act No. 1120 is already treated by law as the actual owner of the lot
purchased even before the payment of the full payment price and before the Section 19. Jurisdiction in Civil Cases. -- Regional Trial Courts shall
execution of the final deed of conveyance, subject to the obligation to pay in full exercise exclusive original jurisdiction: xxx
the purchase price, the role or position of the Government becoming that of a mere
xxx
lien holder or mortgagee.[19]

Thus, pursuant to Section 16 of Act No. 1120,[20] had grantee Teofilo Reterta (2) In all civil actions which involve the title to, or possession of, real property, or
perfected his title, the petitioners as his heirs would have succeeded him and taken any interest therein, where the assessed value of the property involved exceeds

Twenty thousand pesos (P20,000.00) or for civil actions in Metro Manila, where
such value exceeds Fifty thousand pesos (P50,000.00) except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts;
xxx
Conformably with the provision, because an action for reconveyance or to remove
a cloud on one's title involves the title to, or possession of, real property, or any
interest therein, exclusive original jurisdiction over such action pertained to the
RTC, unless the assessed value of the property did not exceed P20,000.00 (in
which instance the MTC having territorial jurisdiction would have exclusive
original jurisdiction). Determinative of which regular court had jurisdiction would
be the allegations of the complaint (on the assessed value of the property) and the
principal relief thereby sought.[25]
The respondents' reliance on Section 12 and Section 18 of Act No. 1120 to sustain
their position that the Bureau of Public Lands (now LMB) instead had exclusive
jurisdiction was without basis. The provisions read:
Section 12. xxx the Chief of the Bureau of Public Lands shall give the said settler
and occupant a certificate which shall set forth in detail that the Government has
agreed to sell to such settler and occupant the amount of land so held by him, at the
price so fixed, payable as provided in this Act at the office of the Chief of Bureau
of Public Lands xxx and that upon the payment of the final installment together
with all accrued interest the Government will convey to such settler and occupant
the said land so held by him by proper instrument of conveyance, which shall be
issued and become effective in the manner provided in section one hundred and
twenty-two of the Land Registration Act xxx.
Section 18. No lease or sale made by Chief of the Bureau of Public Lands under
the provisions of this Act shall be valid until approved by the Secretary of the
Interior.
As the provisions indicate, the authority of LMB under Act No. 1120, being
35
limited to the administration and disposition of friar lands, did not include the
petitioners' action for reconveyance. LMB ceases to have jurisdiction once the friar
land is disposed of in favor of a private person and title duly issues in the latter's
name. By ignoring the petitioners' showing of its plain error in dismissing Civil
Case No. TM-983, and by disregarding the allegations of the complaint, the RTC
acted whimsically and capriciously.
Given all the foregoing, the RTC committed grave abuse of discretion amounting
to lack of jurisdiction. The term grave abuse of discretion connotes whimsical and
capricious exercise of judgment as is equivalent to excess, or lack of
jurisdiction.[26] The abuse must be so patent and gross as to amount to an evasion
of a positive duty or to a virtual refusal to perform a duty enjoined by law, or to act
at all in contemplation of law as where the power is exercised in an arbitrary and
despotic manner by reason of passion or hostility.[27]
The dismissal of Civil Case No. TM-983, unless undone, would leave the
petitioners bereft of any remedy to protect their substantial rights or interests in the
land. As such, they would suffer grave injustice and irreparable damage. In
that situation, the RTC's dismissal should be annulled through certiorari, for the
task of the remedy was to do justice to the unjustly aggrieved.[28]
WHEREFORE, the Court grants the petition for certiorari; sets aside the decision
the Court of Appeals promulgated on April 25, 2003; and directs Branch 23 of the
Regional Trial Court in Trece Martires City to resume the proceedings in Civil
Case No. TM-983 with dispatch.
Catedrialla vs Lauron
1. Remedial Law; Special Civil Actions; Ejectment; Petitioner can file the action
for ejectment without impleading his co-owners; A co-owner may bring such an
action, without the necessity of joining all the other co-owners as co-plaintiffs,
because the suit is deemed to be instituted for the benefit of all.-
—Petitioner can file the action for ejectment without impleading his co-owners. In
Wee v. De Castro, 562 SCRA 695 (2008), wherein petitioner therein argued that

the respondent cannot maintain an action for ejectment against him, without
joining all his co-owners, we ruled in this wise: Article 487 of the New Civil Code
is explicit on this point: ART. 487. Any one of the co-owners may bring an action
in ejectment. This article covers all kinds of action for the recovery of possession,
i.e., forcible entry and unlawful detainer (accion interdictal), recovery of
possession (accion publiciana), and recovery of ownership (accion de
reivindicacion). As explained by the renowned civilest, Professor Arturo M.
Tolentino: A co-owner may bring such an action, without the necessity of joining
all the other co-owners as co-plaintiffs, because the suit is deemed to be instituted
for the benefit of all. If the action is for the benefit of the plaintiff alone, such that
he claims possession for himself and not for the co-ownership, the action will not
prosper.
2. Same; Special Civil Actions; Unlawful Detainer; Possession by Tolerance; A
person who occupies the land of another at the latter’s tolerance or permission,
without any contract between them, is bound by an implied promise that he will
vacate the same upon demand, failing which a summary action for ejectment is the
proper remedy against him.-
—In ejectment cases, the only issue to be resolved is who is entitled to the physical
or material possession of the property involved, independent of any claim of
ownership set forth by any of the party-litigants. In an action for unlawful detainer,
the real party-in-interest as party-defendant is the person who is in possession of
the property without the benefit of any contract of lease and only upon the
tolerance and generosity of its owner. Well settled is the rule that a person who
occupies the land of another at the latter’s tolerance or permission, without any
contract between them, is bound by an implied promise that he will vacate the
same upon demand, failing which a summary action for ejectment is the proper
remedy against him. His status is analogous to that of a lessee or tenant whose term
of lease has expired but whose occupancy continued by tolerance of the owner.
REY CASTIGADOR CATEDRILLA, Petitioner, v. MARIO and
MARGIE1 LAURON, Respondents.
DECISION
PERALTA, J.:
36
Assailed in this petition for review on certiorari is the Decision2 dated February
28, 2007 of the Court of Appeals ((A) in CA-G.R. SP No. 00939, as well as its
Resolution3dated July 11, 2007 which denied petitioner's motion for
reconsideration.
On February 12, 2003, petitioner Rey Castigador Catedrilla filed with the
Municipal Trial Court (MTC) of Lambunao, Iloilo a Complaint4 for ejectment
against the spouses Mario and Margie Lauron alleging as follows: that Lorenza
Lizada is the owner of a parcel of land known as Lot 183, located in Mabini Street,
Lambunao, Iloilo, which was declared for taxation purposes in her name under Tax
Declaration No. 0363;5 that on February 13, 1972, Lorenza died and was
succeeded to her properties by her sole heir Jesusa Lizada Losañes, who was
married to Hilarion Castigador (Castigador); that the spouses Jesusa and Hilarion
Castigador had a number of children, which included Lilia Castigador (Lilia), who
was married to Maximo Catedrilla (Maximo); that after the death of the spouses
Castigador, their heirs agreed among themselves to subdivide Lot 183 and,
pursuant to a consolidation subdivision plan6 dated January 21, 1984, the parcel of
lot denominated as Lot No. 5 therein was to be apportioned to the heirs of Lilia
since the latter already died on April 9, 1976; Lilia was succeeded by her heirs, her
husband Maximo and their children, one of whom is herein petitioner; that
petitioner filed the complaint as a co-owner of Lot No. 5; that sometime in 1980,
respondents Mario and Margie Lauron, through the tolerance of the heirs of Lilia,
constructed a residential building of strong materials on the northwest portion of
Lot No. 5 covering an area of one hundred square meters; that the heirs of Lilia
made various demands for respondents to vacate the premises and even exerted
earnest efforts to compromise with them but the same was unavailing; and that
petitioner reiterated the demand on respondents to vacate the subject lot on January
15, 2003, but respondents continued to unlawfully withhold such possession.
In their Answer,7 respondents claimed that petitioner had no cause of action
against them, since they are not the owners of the residential building standing on
petitioner's lot, but Mildred Kascher (Mildred), sister of respondent Margie, as
shown by the tax declaration in Mildred's name;8 that in 1992, Mildred had already
paid P10,000.00 as downpayment for the subject lot to Teresito Castigador;9 that
there were several instances that the heirs of Lilia offered the subject Lot 183 for
sale to respondents and Mildred and demanded payment, however, the latter was
only interested in asking money without any intention of delivering or registering
the subject lot; that in 1998, Maximo, petitioner's father, and respondent Margie

entered into an amicable settlement10 before the Barangay Lupon of Poblacion
Ilawod, Lambunao, Iloilo wherein Maximo offered the subject lot to the spouses
Alfons and Mildred Kascher in the amount of P90,000.00 with the agreement that
all documents related to the transfer of the subject lot to Maximo and his children
be prepared by Maximo, but the latter failed to comply; and that the amicable
settlement should have the force and effect of a final judgment of a court, hence,
the instant suit is barred by prior judgment. Respondents counterclaimed for
damages.
On November 14, 2003, the MTC rendered its Decision,11 the dispositive portion
of which reads:chanroblesvirtualawlibrary
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of
the plaintiff ordering the defendants:chanroblesvirtualawlibrary
1. To vacate the lot in question and restore possession to the plaintiff;cralawlibrary
2. To pay plaintiff in the reduced amount of TWENTY THOUSAND PESOS
(P20,000.00) as Atty's fees, plus ONE THOUSAND (P1,000.00) per Court
appearance;cralawlibrary
3. To pay plaintiff reasonable compensation for the use of the lot in question ONE
THOUSAND (P1,000.00) pesos yearly counted from the date of
demand;cralawlibrary
4. To pay the cost of litigation.
No award of moral and exemplary damages.
Defendants' counterclaim is hereby dismissed for lack of sufficient
evidence.12chanroblesvirtualawlibrary
The MTC found that from the allegations and evidence presented, it appeared that
petitioner is one of the heirs of Lilia Castigador Catedrilla, the owner of the subject
lot and that respondents are occupying the subject lot; that petitioner is a party who
may bring the suit in accordance with Article 48713 of the Civil Code; and as a co-
owner, petitioner is allowed to bring this action for ejectment under Section 1, Rule
7014 of the Rules of Court; that respondents are also the proper party to be sued as
they are the occupants of the subject lot which they do not own; and that the MTC
assumed that the house standing on the subject lot has been standing thereon even
37
before 1992 and only upon the acquiescence of the petitioner and his predecessor-
in-interest.
The MTC found that respondents would like to focus their defense on the ground
that Mildred is an indispensable party, because she is the owner of the residential
building on the subject lot and that there was already a perfected contract to sell
between Mildred and Maximo because of an amicable settlement executed before
the Office of the Punong Barangay.
However, the MTC, without dealing on the validity of the document and its
interpretation, ruled that it was clear that respondent Margie was representing her
parents, Mr. and Mrs. Bienvenido Loraña, in the dispute presented with the Punong
Barangay. It also found that even Mildred's letter to petitioner's father Maximo
recognized the title of petitioner's father over the subject lot and that it had not been
established by respondents if Teresito Castigador, the person who signed the
receipt evidencing Mildred's downpayment of P10,000.00 for the subject lot, is
also one of the heirs of Lilia. The MTC concluded that respondents could not be
allowed to deflect the consequences of their continued stay over the property,
because it was their very occupation of the property which is the object of
petitioner's complaint; that in an action for ejectment, the subject matter is material
possession or possession de facto over the real property, and the side issue of
ownership over the subject lot is tackled here only for the purpose of determining
who has the better right of possession which is to prove the nature of possession;
that possession of Lot 183 should be relinquished by respondents to petitioner, who
is a co-owner, without foreclosing other remedies that may be availed upon by
Mildred in the furtherance of her supposed rights.
Respondents filed their appeal with the Regional Trial Court (RTC) of Iloilo City,
raffled off to Branch 26. On March 22, 2005, the RTC rendered its Order,15 the
dispositive portion of which reads:chanroblesvirtualawlibrary
WHEREFORE, circumstances herein-above considered, the decision of the court
dated November 14, 2003 is hereby AFFIRMED, except for the payment
of P20,000.00 as attorney's fees.
SO ORDERED.16chanroblesvirtualawlibrary
The RTC found that petitioner, being one of the co-owners of the subject lot, is the
proper party in interest to prosecute against any intruder thereon. It found that the

amicable settlement signed and executed by the representatives of the registered
owner of the premises before the Lupon is not binding and unenforceable between
the parties. It further ruled that even if Mildred has her name in the tax declaration
signifying that she is the owner of the house constructed on the subject lot, tax
declarations are not evidence of ownership but merely issued to the declarant for
purposes of payment of taxes; that she cannot be considered as an indispensable
party in a suit for recovery of possession against respondents; that Mildred should
have intervened and proved that she is an indispensable party because the records
showed that she was not in actual possession of the subject lot. The RTC deleted
the attorney's fees, since the MTC decision merely ordered the payment of
attorney's fees without any basis.
Respondents' motion for reconsideration was denied in an Order17 dated June 8,
2005.
Dissatisfied, respondents filed with the CA a petition for review. Petitioner filed
his Comment thereto.
On February 28, 2007, the CA issued its assailed decision, the dispositive portion
of which reads:chanroblesvirtualawlibrary
IN LIGHT OF ALL THE FOREGOING, this petition for review is GRANTED.
The assailed decision of the Regional Trial Court, Br. 26, Iloilo City, dated March
22, 2005, that affirmed the MTC Decision dated November 14, 2003, is
REVERSED and SET ASIDE.
Consequently, the complaint for ejectment of the respondent is
DISMISSED.18chanroblesvirtualawlibrary
The CA found that only petitioner filed the case for ejectment against respondents
and ruled that the other heirs should have been impleaded as plaintiffs citing
Section 1,19 Rule 7 and Section 7,20 Rule 3 of the Rules of Court; that the
presence of all indispensable parties is a condition sine qua non for the exercise of
judicial power; that when an indispensable party is not before the court, the action
should be dismissed as without the presence of all the other heirs as plaintiffs, the
trial court could not validly render judgment and grant relief in favor of the
respondents.
The CA also ruled that while petitioner asserted that the proper parties to be sued
are the respondents as they are the actual possessors of the subject lot and not
38
Mildred, petitioner still cannot disclaim knowledge that it was to Mildred to whom
his co-owners offered the property for sale, thus, he knew all along that the real
owner of the house on the subject lot is Mildred and not respondents; that Mildred
even paid P10,000.00 out of the total consideration for the subject lot and required
respondents' relatives to secure the documents that proved their ownership over the
subject lot; that Maximo and Mildred had previously settled the matter regarding
the sale of the subject lot before the Barangay as contained in an amicable
settlement signed by Maximo and respondent Margie. Thus, the question in this
case extends to mere possessory rights and non-inclusion of indispensable parties
made the complaint fatally defective. From the facts obtaining in this case,
ejectment being a summary remedy is not the appropriate action to file against the
alleged deforciant of the property.
Hence, this petition for review wherein petitioner raises the following
issues:chanroblesvirtualawlibrary
I
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS
DISCRETION WHEN IT HELD THAT THE DECISION OF THE TRIAL
COURT WAS A NULLITY .
II
THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS
DISCRETION WHEN IT HELD THAT PETITIONER KNEW ALL ALONG
THAT MILDRED KASCHER, AND NOT RESPONDENTS, WERE THE REAL
OWNERS OF THE RESIDENTIAL BUILDING.21chanroblesvirtualawlibrary
The CA found that petitioner's co-heirs to the subject lot should have been
impleaded as co-plaintiffs in the ejectment case against respondents, since without
their presence, the trial court could not validly render judgment and grant relief in
favor of petitioner.
We do not concur.
Petitioner can file the action for ejectment without impleading his co-owners. In
Wee v. De Castro,22wherein petitioner therein argued that the respondent cannot
maintain an action for ejectment against him, without joining all his co-owners, we
ruled in this wise:chanroblesvirtualawlibrary

Article 487 of the New Civil Code is explicit on this
point:chanroblesvirtualawlibrary
ART. 487. Any one of the co-owners may bring an action in ejectment.
This article covers all kinds of action for the recovery of possession, i.e., forcible
entry and unlawful detainer (accion interdictal), recovery of possession (accion
publiciana), and recovery of ownership (accion de reivindicacion). As explained by
the renowned civilest, Professor Arturo M. Tolentino:chanroblesvirtualawlibrary
A co-owner may bring such an action, without the necessity of joining all the other
co-owners as co-plaintiffs, because the suit is deemed to be instituted for the
benefit of all. If the action is for the benefit of the plaintiff alone, such that he
claims possession for himself and not for the co-ownership, the action will not
prosper.
In the more recent case of Carandang v. Heirs of De Guzman, this Court declared
that a co-owner is not even a necessary party to an action for ejectment, for
complete relief can be afforded even in his absence,
thus:chanroblesvirtualawlibrary
In sum, in suits to recover properties, all co-owners are real parties in interest.
However, pursuant to Article 487 of the Civil Code and the relevant jurisprudence,
any one of them may bring an action, any kind of action for the recovery of co-
owned properties. Therefore, only one of the co-owners, namely the co-owner who
filed the suit for the recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are not even
necessary parties, for a complete relief can be afforded in the suit even without
their participation, since the suit is presumed to have been filed for the benefit of
all co-owners.23chanroblesvirtualawlibrary
In this case, although petitioner alone filed the complaint for unlawful detainer, he
stated in the complaint that he is one of the heirs of the late Lilia Castigador, his
mother, who inherited the subject lot, from her parents. Petitioner did not claim
exclusive ownership of the subject lot, but he filed the complaint for the purpose of
recovering its possession which would redound to the benefit of the co-owners.
Since petitioner recognized the existence of a co-ownership, he, as a co-owner, can
bring the action without the necessity of joining all the other co-owners as co-
plaintiffs.
39
Petitioner contends that the CA committed a reversible error in finding that
Mildred Kascher is an indispensable party and that her non-inclusion as a party
defendant in the ejectment case made the complaint fatally defective, thus, must be
dismissed.
We agree with petitioner.
The CA based its findings that Mildred is an indispensable party because it found
that petitioner knew all along that Mildred is the owner of the house constructed on
the subject lot as shown in the affidavits24 of Maximo and petitioner stating that
petitioner's co-owners had offered for sale the subject lot to Mildred, and that
Maximo, petitioner's father, and Mildred had previously settled before the
Barangay the matter regarding the sale of the subject lot to the latter as contained in
the amicable settlement.
We find that the affidavits of Maximo and petitioner merely stated that the lot was
offered for sale to Mildred, but nowhere did it admit that Mildred is the owner of
the house constructed on the subject lot.
Also, it appears that the amicable settlement25 before the Barangay wherein it was
stated that Maximo will sell the subject lot to the spouses Alfons and Mildred
Kascher was signed by Maximo on behalf of his children and respondent Margie
on behalf of Mr. and Mrs. Bienvenido Loraña. Thus, there is no basis for the CA's
conclusion that it was Mildred and Maximo who had previously settled the sale of
the subject lot.
Moreover, it appears however, that while there was a settlement, Liah C.
Catedrilla, one of petitioner's co-heirs, wrote a letter26 dated October 30, 2002, to
the Spouses Loraña and respondent Margie stating that the latter had made a
change on the purchase price for the subject lot which was different from that
agreed upon in the amicable settlement. Records neither show that respondent
Margie had taken steps to meet with Liah or any of her co-heirs to settle the matter
of the purchase price nor rebut such allegation in the letter if it was not true. The
letter27 dated July 5, 2003 of respondent Margie's counsel addressed to petitioner's
counsel, stating that his client is amenable in the amount as proposed in the
amicable settlement, would not alter the fact of respondents' non-compliance with
the settlement since the letter was sent after the ejectment case had already been
filed by petitioner.

In Chavez v. Court of Appeals,28 we explained the nature of the amicable
settlement reached after a barangay conciliation, thus:chanroblesvirtualawlibrary
Indeed, the Revised Katarungang Pambarangay Law provides that an amicable
settlement reached after barangay conciliation proceedings has the force and effect
of a final judgment of a court if not repudiated or a petition to nullify the same is
filed before the proper city or municipal court within ten (10) days from its date. It
further provides that the settlement may be enforced by execution by the lupong
tagapamayapa within six (6) months from its date, or by action in the appropriate
city or municipal court, if beyond the six-month period. This special provision
follows the general precept enunciated in Article 2037 of the Civil Code,
viz.:chanroblesvirtualawlibrary
A compromise has upon the parties the effect and authority of res judicata; but
there shall be no execution except in compliance with a judicial compromise.
Thus, we have held that a compromise agreement which is not contrary to law,
public order, public policy, morals or good customs is a valid contract which is the
law between the parties themselves. It has upon them the effect and authority of res
judicata even if not judicially approved, and cannot be lightly set aside or disturbed
except for vices of consent and forgery.
However, in Heirs of Zari, et al. v. Santos, we clarified that the broad precept
enunciated in Art. 2037 is qualified by Art. 2041 of the same Code, which
provides:chanroblesvirtualawlibrary
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.
We explained, viz.:chanroblesvirtualawlibrary
Before the onset of the new Civil Code, there was no right to rescind compromise
agreements. Where a party violated the terms of a compromise agreement, the only
recourse open to the other party was to enforce the terms thereof.
When the new Civil Code came into being, its Article 2041 x x x created for the
first time the right of rescission. That provision gives to the aggrieved party the
right to "either enforce the compromise or regard it as rescinded and insist upon his
original demand." Article 2041 should obviously be deemed to qualify the broad
40
precept enunciated in Article 2037 that "a compromise has upon the parties the
effect and authority of res judicata.
In exercising the second option under Art. 2041, the aggrieved party 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. This is because he may regard the compromise as already rescinded by
the breach thereof of the other party.29chanroblesvirtualawlibrary
While the amicable settlement executed between Maximo and respondent Margie
before the Barangay had the force and effect of a final judgment of a court, it
appears that there was non-compliance thereto by respondent Margie on behalf of
her parents which may be construed as repudiation. The settlement is considered
rescinded in accordance with the provision of Article 2041 of the Civil Code. Since
the settlement was rescinded, petitioner, as a co-owner, properly instituted the
action for ejectment to recover possession of the subject lot against respondents
who are in possession of the same.
Even the receipt30 signed by a certain Teresito Castigador, acknowledging having
received from Mildred the amount of P10,000.00 as downpayment for the purchase
of the subject lot, would not also prove respondents' allegation that there was
already a perfected contract to sell the subject lot to Mildred, since the authority of
Teresito to sell on behalf of the heirs of Lilia Castigador was not established.
In ejectment cases, the only issue to be resolved is who is entitled to the physical or
material possession of the property involved, independent of any claim of
ownership set forth by any of the party-litigants.31In an action for unlawful
detainer, the real party-in-interest as party-defendant is the person who is in
possession of the property without the benefit of any contract of lease and only
upon the tolerance and generosity of its owner.32 Well settled is the rule that a
person who occupies the land of another at the latter's tolerance or permission,
without any contract between them, is bound by an implied promise that he will
vacate the same upon demand, failing which a summary action for ejectment is the
proper remedy against him.33 His status is analogous to that of a lessee or tenant
whose term of lease has expired but whose occupancy continued by tolerance of
the owner.34chanroblesvirtualawlibrary
Here, records show that the subject lot is owned by petitioner's mother, and
petitioner, being an heir and a co-owner, is entitled to the possession of the subject

lot. On the other hand, respondent spouses are the occupants of the subject lot
which they do not own. Respondents' possession of the subject lot was without any
contract of lease as they failed to present any, thus lending credence to petitioner's
claim that their stay in the subject lot is by mere tolerance of petitioner and his
predecessors. It is indeed respondents spouses who are the real parties-in-interest
who were correctly impleaded as defendants in the unlawful detainer case filed by
petitioner.
WHEREFORE, premises considered, the petition is hereby GRANTED. The
Decision dated February 28, 2007 and the Resolution dated July 11, 2007 of the
Court of Appeals are hereby REVERSED and SET ASIDE. The Order dated
March 22, 2005 of the Regional Trial Court, Branch 26, Iloilo City, in Civil Case
No. 04-27978, is hereby REINSTATED.
Miguel vs Montanez
1. Civil Law; Compromise Agreements; Amicable Settlements; Barangay
Conciliation; An amicable settlement reached at the barangay conciliation
proceedings, is binding between the contracting parties and, upon its perfection, is
immediately executory insofar as it is not contrary to law, good morals, good
customs, public order and public policy.-
—It is true that an amicable settlement reached at the barangay conciliation
proceedings, like the Kasunduang Pag-aayos in this case, is binding between the
contracting parties and, upon its perfection, is immediately executory insofar as it
is not contrary to law, good morals, good customs, public order and public policy.
This is in accord with the broad precept of Article 2037 of the Civil Code, viz.: A
compromise has upon the parties the effect and authority of res judicata; but there
shall be no execution except in compliance with a judicial compromise. Being a
by-product of mutual concessions and good faith of the parties, an amicable
settlement has the force and effect of res judicata even if not judicially approved. It
transcends being a mere contract binding only upon the parties thereto, and is akin
to a judgment that is subject to execution in accordance with the Rules. Thus,
under Section 417 of the Local Government Code, such amicable settlement or
arbitration award may be enforced by execution by the Barangay Lupon within six
41
(6) months from the date of settlement, or by filing an action to enforce such
settlement in the appropriate city or municipal court, if beyond the six-month
period.
2. Same; Same; Same; Same; 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.-
—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.
CRISANTA ALCARAZ MIGUEL, PETITIONER, VS. JERRY D. MONTANEZ,
RESPONDENT.
DECISION
REYES, J.:
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 Decision[1] and February 11, 2010
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 100544,
entitled "Jerry D. Montanez v. Crisanta Alcaraz Miguel."cralaw

Antecedent Facts
On February 1, 2001, respondent Jerry Montanez (Montanez) secured a loan of
One Hundred Forty-Three Thousand Eight Hundred Sixty-Four Pesos
(P143,864.00), payable in one (1) year, or until February 1, 2002, from the
petitioner. The respondent gave as collateral therefor his house and lot located at
Block 39 Lot 39 Phase 3, Palmera Spring, Bagumbong, Caloocan City.
Due to the respondent's 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 Kasunduang Pag-aayos wherein the
respondent agreed to pay his loan in installments in the amount of Two Thousand
Pesos (P2,000.00) per month, and in the event the house and lot given as collateral
is sold, the 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 of Sum of Money. In his
Answer with Counterclaim,[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.
After trial, on August 16, 2006, the MeTC rendered a Decision,[4] which disposes
as follows:
WHEREFORE, premises considered[,] judgment is hereby rendered ordering
defendant Jerry D. Montanez to pay plaintiff the following:
The amount of [Php147,893.00] representing the obligation with legal rate of
interest from February 1, 2002 which was the date of the loan maturity until the
account is fully paid;
The amount of Php10,000.00 as and by way of attorney's fees; and the costs.
SO ORDERED. [5]
42
On appeal to the Regional Trial Court (RTC) of Makati City, Branch 146, the
respondent raised the same issues cited in his Answer. In its March 14, 2007
Decision,[6] the RTC affirmed the MeTC Decision, disposing as follows:
WHEREFORE, finding no cogent reason to disturb the findings of the court a quo,
the appeal is hereby DISMISSED, and the DECISION appealed from is hereby
AFFIRMED in its entirety for being in accordance with law and evidence.
SO ORDERED.[7]
Dissatisfied, the respondent appealed to the CA raising two issues, namely, (1)
whether or not venue was improperly laid, and (2) whether or not the Kasunduang
Pag-aayos effectively novated the loan agreement. On September 17, 2009, the CA
rendered the assailed Decision, disposing as follows:
WHEREFORE, premises considered, the petition is hereby GRANTED. The
appealed Decision dated March 14, 2007 of the Regional Trial Court (RTC) of
Makati City, Branch 146, is REVERSED and SET ASIDE. A new judgment is
entered dismissing respondent's complaint for collection of sum of money, without
prejudice to her right to file the necessary action to enforce the Kasunduang Pag-
aayos.
SO ORDERED.[8]
Anent the issue of whether or not there is novation of the loan contract, the CA
ruled in the negative. It ratiocinated as follows:
Judging from the terms of the Kasunduang Pag-aayos, it is clear that no novation of
the old obligation has taken place. Contrary to petitioner's 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.
 43

In other words, the Kasunduang Pag-aayos merely supplemented the old
agreement.[9]
The CA went on saying that since the parties entered into a 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 ng Barangay, or by court action after the lapse
of such time.[10] Considering that more than six (6) months had elapsed from the
date of settlement, the CA ruled that the remedy of the petitioner was to file an
action for the execution of the Kasunduang Pag-aayos in court and not for
collection of sum of money.[11] Consequently, the CA deemed it unnecessary to
resolve the issue on venue.[12]
The petitioner now comes to this Court.
Issues
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 of action did not arise from the Kasunduang
Pag-aayos but on the respondent's breach of the original loan agreement.[15]
This Court agrees with the petitioner.
It is true that an amicable settlement reached at the barangay conciliation
proceedings, like the Kasunduang Pag-aayos in this case, is binding between the
contracting parties and, upon its perfection, is immediately executory insofar as it
is not contrary to law, good morals, good customs, public order and public
policy.[16] This is in accord with the broad precept of Article 2037 of the Civil
Code, viz:
A compromise has upon the parties the effect and authority of res judicata; but
there shall be no execution except in compliance with a judicial compromise.

(1) Whether or not a complaint for sum of money is the proper remedy for the Being a by-product of mutual concessions and good faith of the parties, an
petitioner, notwithstanding the Kasunduang Pag-aayos;[13] and amicable settlement has the force and effect of res judicata even if not judicially
approved.[17] It transcends being a mere contract binding only upon the parties
(2) Whether or not the CA should have decided the case on the merits rather than thereto, and is akin to a judgment that is subject to execution in accordance with
remand the case for the enforcement of the Kasunduang Pag-aayos.[14] the Rules.[18] Thus, under Section 417 of the Local Government Code,[19] such
amicable settlement or arbitration award may be enforced by execution by
Our Ruling
the Barangay Lupon within six (6) months from the date of settlement, or by filing
an action to enforce such settlement in the appropriate city or municipal court, if
beyond the six-month period.
Because the respondent failed to comply
with the terms of the Kasunduang Pag- Under the first remedy, the proceedings are covered by the Local Government
aayos, said agreement is deemed Code and the Katarungang Pambarangay Implementing Rules and Regulations.
rescinded pursuant to Article 2041 of the The Punong Barangay is called upon during the hearing to determine solely the fact
New Civil Code and the petitioner can of non-compliance of the terms of the settlement and to give the defaulting party
insist on his original demand. Perforce, another chance at voluntarily complying with his obligation under the settlement.
the complaint for collection of sum of Under the second remedy, the proceedings are governed by the Rules of Court, as
money is the proper remedy. amended. The cause of action is the amicable settlement itself, which, by operation
of law, has the force and effect of a final judgment.[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,[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".[22] (emphasis supplied)
As so well stated in the case of Chavez v. Court of Appeals,[23] a party's non-
compliance with the amicable settlement paved the way for the application of
44
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.[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-
compliance 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."[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.[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 respondent's 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
45
therefor.cralaw
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.
Chu vs Cunanan
1. Remedial Law; Actions; Compromise Agreements; Compromise agreement is a
contract whereby the parties, by making reciprocal concessions, avoid a litigation
or put an end to one already commenced.-
—A compromise agreement is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced.
It encompasses the objects specifically stated therein, although it may include other
objects by necessary implication, and is binding on the contracting parties, being
expressly acknowledged as a juridical agreement between them. It has the effect
and authority of res judicata upon the parties.
2. Same; Same; Same; It is settled that the absolute identity of parties was not a
condition sine qua non for res judicata to apply, because a shared identity of
interest sufficed; Mere substantial identity of parties, or even community of
interests between parties in the prior and subsequent cases, even if the latter were
not impleaded in the first case, was sufficient.-
—There is identity of parties when the parties in both actions are the same, or there
is privity between them, or they are successors-in-interest by title subsequent to the
commencement of the action litigating for the same thing and under the same title
and in the same capacity. The requirement of the identity of parties was fully met,
because the Chus, on the one hand, and the Cunanans, on the other hand, were the
parties in both cases along with their respective privies. The fact that the Carloses
and Benelda Estate, defendants in Civil Case No. 12251, were not parties in the
compromise agreement was inconsequential, for they were also the privies of the
Cunanans as transferees and successors-in-interest. It is settled that the absolute
identity of parties was not a condition sine qua non for res judicata to apply,
because a shared identity of interest sufficed. Mere substantial identity of parties,
 46

or even community of interests between parties in the prior and subsequent cases, actions upon them; A single cause of action or entire claim or demand cannot be
even if the latter were not impleaded in the first case, was sufficient. split up or divided in order to be made the subject of two or more different actions.-

3. Same; Same; Same; Requisites in order that res judicata may bar the institution —Apparently, the petitioners were guilty of splitting their single cause of action to
of a subsequent action.- enforce or rescind the deed of sale with assumption of mortgage. Splitting a single
cause of action is the act of dividing a single or indivisible cause of action into
—Yet, in order that res judicata may bar the institution of a subsequent action, the several parts or claims and instituting two or more actions upon them. A single
following requisites must concur: (a) the former judgment must be final; (b) it must cause of action or entire claim or demand cannot be split up or divided in order to
have been rendered by a court having jurisdiction of the subject matter and the be made the subject of two or more different actions.
parties; (c) it must be a judgment on the merits; and (d) there must be between the
first and second actions (i) identity of parties, (ii) identity of the subject matter, and
(iii) identity of cause of action.
DECISION
4. Same; Same; Same; Under the doctrine of res judicata, a final judgment or
decree on the merits rendered by a court of competent jurisdiction is conclusive of
the rights of the parties or their privies in all later suits and on all points and
BERSAMIN, J.:
matters determined in the previous suit.-

—Under the doctrine of res judicata, a final judgment or decree on the merits
rendered by a court of competent jurisdiction is conclusive of the rights of the If two or more suits are instituted on the basis of the same cause of action, the
parties or their privies in all later suits and on all points and matters determined in filing of one or a judgment upon the merits in any one is available as a ground for
the previous suit. The foundation principle upon which the doctrine rests is that the the dismissal of the others.[1]
parties ought not to be permitted to litigate the same issue more than once; that
when a right or fact has been judicially tried and determined by a court of
competent jurisdiction, so long as it remains unreversed, should be conclusive upon
the parties and those in privity with them in law or estate. We review the decision promulgated on November 19, 2002,[2] whereby the Court
of Appeals (CA) dismissed the petitioners amended complaint in Civil Case No.
5. Same; Same; Res Judicata; Words and Phrases; Res judicata means a matter 12251 of the Regional Trial Court, Branch 41, in San Fernando City, Pampanga
adjudged, a thing judicially acted upon or decided; a thing or matter settled by (RTC) for being barred by res judicata.
judgment.-

—Res judicata means a matter adjudged, a thing judicially acted upon or decided; a
thing or matter settled by judgment. The doctrine of res judicata is an old axiom of Antecedents
law, dictated by wisdom and sanctified by age, and founded on the broad principle
that it is to the interest of the public that there should be an end to litigation by the
same parties over a subject once fully and fairly adjudicated. On September 30, 1986, Spouses Manuel and Catalina Chu (Chus) executed a deed
of sale with assumption of mortgage[3] involving their five parcels of land situated
6. Same; Same; Splitting a single cause of action is the act of dividing a single or
in Saguin, San Fernando City, Pampanga, registered under Transfer Certificate of
indivisible cause of action into several parts or claims and instituting two or more
Title (TCT) No. 198470-R, TCT No. 198471-R, TCT No. 198472-R, TCT No.
 47

198473-R, and TCT No. 199556-R, all of the Office of the Registry of Deeds of Town Realty and Development Corporation (Cool Town Realty), and the Office of
the Province of Pampanga, in favor of Trinidad N. Cunanan (Cunanan) for the the Registry of Deeds of Pampanga as defendants in addition to the Cunanans.[7]
consideration ofP5,161,090.00. They also executed a so-called side
agreement, whereby they clarified that Cunanan had paid only P1,000,000.00 to the
Chus despite the Chus, as vendors, having acknowledged
Considering that the Carloses had meanwhile sold the two lots to Benelda Estate
receiving P5,161,090.00; that the amount of P1,600,000.00 was to be paid directly
Development Corporation (Benelda Estate) in 1995, the Chus further amended the
to Benito Co and to Security Bank and Trust Company (SBTC) in whose favor the
complaint in Civil Case No. G-1936 to implead Benelda Estate as additional
five lots had been mortgaged; and that Cunanan would pay the balance
defendant. In due course, Benelda Estate filed its answer with a motion to dismiss,
of P2,561.90.00 within three months, with a grace period of one month subject to
claiming, among others, that the amended complaint stated no cause of action
3%/month interest on any remaining unpaid amount. The parties further stipulated
because it had acted in good faith in buying the affected lots, exerting all efforts to
that the ownership of the lots would remain with the Chus as the vendors and
verify the authenticity of the titles, and had found no defect in them. After the RTC
would be transferred to Cunanan only upon complete payment of the total
denied its motion to dismiss, Benelda Estate assailed the denial on certiorari in the
consideration and compliance with the terms of the deed of sale with assumption of
CA, which annulled the RTCs denial for being tainted with grave abuse of
mortgage.[4]
discretion and dismissed Civil Case No. G-1936 as against Benelda Estate. On
March 1, 2001, the Court upheld the dismissal of Civil Case No. G-1936 in G.R.
No. 142313 entitled Chu, Sr. v. Benelda Estate Development Corporation.[8]
Thereafter, the Chus executed a special power of attorney authorizing Cunanan to
borrow P5,161,090.00 from any banking institution and to mortgage the five lots as
security, and then to deliver the proceeds to the Chus net of the balance of the
On December 2, 1999, the Chus, the Cunanans, and Cool Town Realty entered into
mortgage obligation and the downpayment.[5]
a compromise agreement,[9] whereby the Cunanans transferred to the Chus their
50% share in all the parcels of land situated in Saguin, San Fernando, Pampanga
registered in the name of Cool Town Realty for and in consideration of the full
Cunanan was able to transfer the title of the five lots to her name without the settlement of their case. The RTC approved the compromise agreement in a partial
knowledge of the Chus, and to borrow money with the lots as security without decision dated January 25, 2000.[10]
paying the balance of the purchase price to the Chus. She later transferred two of
the lots to Spouses Amado and Gloria Carlos (Carloses) on July 29, 1987. As a Thereafter, on April 30, 2001, the petitioners herein (i.e., Catalina Chu and her
result, on March 18, 1988, the Chus caused the annotation of an unpaid vendors children) brought another suit, Civil Case No. 12251, against the Carloses and
lien on three of the lots. Nonetheless, Cunanan still assigned the remaining three Benelda Estate,[11] seeking the cancellation of the TCTs of the two lots in the
lots to Cool Town Realty on May 25, 1989 despite the annotation.[6] name of Benelda Estate, and the issuance of new TCTs in their favor, plus
damages.

In February 1988, the Chus commenced Civil Case No. G-1936 in the RTC to
recover the unpaid balance from Spouses Fernando and Trinidad Cunanan The petitioners amended their complaint in Civil Case No. 12251 on February 4,
(Cunanans). Five years later, on April 19, 1993, the Chus amended the complaint 2002 to implead the Cunanans as additional defendants.[12]
to seek the annulment of the deed of sale with assumption of mortgage and of the
TCTs issued pursuant to the deed, and to recover damages. They impleaded Cool
 48

The Cunanans moved to dismiss the amended complaint based on two grounds,
namely: (a) bar by prior judgment, and (b) the claim or demand had been paid,
waived, and abandoned. Benelda Estate likewise moved to dismiss the amended
complaint, citing as grounds: (a) forum shopping; (b) bar by prior judgment, and
(c) failure to state a cause of action. On their part, the Carloses raised affirmative
defenses in their answer, namely: (a) the failure to state a cause of action; (b) res
judicata or bar by prior judgment; and (c) bar by statute of limitations.
WHEREFORE, premises considered, the present petition for certiorari is hereby
GIVEN DUE COURSE and the writ prayed for, accordingly GRANTED.
Consequently, the challenged Orders of the respondent court denying the motions
to dismiss are hereby ANNULLED and SET ASIDE and a new one is hereby
rendered DISMISSING the Amended Complaint in Civil Case No. 12251.

On April 25, 2002, the RTC denied both motions to dismiss,[13] holding that the No costs.
amended complaint stated a cause of action against all the defendants; that the
action was not barred by res judicata because there was no identity of parties and
subject matter between Civil Case No.12251 and Civil Case No. G-1936; and that SO ORDERED.[18]
the Cunanans did not establish that the petitioners had waived and abandoned their
claim or that their claim had been paid by virtue of the compromise agreement,
pointing out that the compromise agreement involved only the three parcels of land
registered in the name of Cool Town Realty.[14] Hence, this appeal.

The Cunanans sought reconsideration, but their motion was denied on May 31, Issue
2002.[15]

Was Civil Case No. 12251 barred by res judicata although the compromise
On September 2, 2002, the Cunanans filed a petition for certiorari in the CA (SP- agreement did not expressly include Benelda Estate as a party and although
72558), assailing the RTCs denial of their motion to dismiss and motion for the compromise agreement made no reference to the lots now registered in Benelda
reconsideration.[16] Estates name?

On November 19, 2002, the CA promulgated its decision,[17] granting the petition Ruling
for certiorari and nullifying the challenged orders of the RTC. The CA ruled that
the compromise agreement had ended the legal controversy between the parties
with respect to the cause of action arising from the deed of sale with assumption of We deny the petition for review.
mortgage covering all the five parcels of land; that Civil Case No. G-1936 and
Civil Case No.12251 involved the violation by the Cunanans of the same legal
right under the deed of sale with assumption of mortgage; and that the filing of
Civil Case No.12251 contravened the rule against splitting of a cause of action, and I
rendered Civil Case No.12251 subject of a motion to dismiss based on bar by res
judicata. The CA disposed thusly:

The petitioners contend that the compromise agreement did not apply or extend to
the Carloses and Benelda Estate; hence, their Civil Case No. 12251 was not barred
by res judicata.
We disagree.
A compromise agreement is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced.[19] It
encompasses the objects specifically stated therein, although it may include other
objects by necessary implication,[20] and is binding on the contracting parties,
being expressly acknowledged as a juridical agreement between them.[21] It has
the effect and authority of res judicata upon the parties.[22]
In the construction or interpretation of a compromise agreement, the intention of
the parties is to be ascertained from the agreement itself, and effect should be given
to that intention.[23] Thus, the compromise agreement must be read as a whole.
The following pertinent portions of the compromise agreement indicate that the
parties intended to thereby settle all their claims against each other, to wit:
1. That the defendants SPOUSES TRINIDAD N.CUNANAN and FERNANDO
C.CUNANAN for and in consideration of the full settlement of their case in the
above-entitled case, hereby TRANSFER, DELIVER, and CONVEY unto the
plaintiffs all their rights, interest, benefits, participation, possession and ownership
which consists of FIFTY (50%) percent share on all the parcels of land situated in
Saguin, San Fernando Pampanga now registered in the name of defendant, COOL
TOWN REALTY & DEVELOPMENT CORPORATION, as particularly
evidenced by the corresponding Transfer Certificates of Titles xxx
xxxx
49
6. That the plaintiffs and the defendant herein are waiving, abandoning,
surrendering, quitclaiming, releasing, relinquishing any and all their respective
claims against each other as alleged in the pleadings they respectively filed in
connection with this case.[24] (bold emphasis supplied)
The intent of the parties to settle all their claims against each other is expressed in
the phrase any and all their respective claims against each other as alleged in the
pleadings they respectively filed in connection with this case, which was broad
enough to cover whatever claims the petitioners might assert based on the deed of
sale with assumption of mortgage.
There is no question that the deed of sale with assumption of mortgage covered all
the five lots, to wit:
WHEREAS, the VENDORS are willing to sell the above-described properties and
the VENDEE is willing to buy the same at FIFTY FIVE (P55.00) PESOS,
Philippine Currency, per square meter, or a total consideration of FIVE MILLION
ONE HUNDRED SIXTY ONE THOUSAND and NINETY (P5,161,090.00)
PESOS, Philippine Currency.[25]
To limit the compromise agreement only to the three lots mentioned therein would
contravene the avowed objective of Civil Case No. G-1936 to enforce or to rescind
the entire deed of sale with assumption of mortgage. Such interpretation is akin to
saying that the Cunanans separately sold the five lots, which is not the truth. For
one, Civil Case No. G-1936 did not demand separate amounts for each of the
purchased lots. Also, the compromise agreement did not state that the value being
thereby transferred to the petitioners by the Cunanans corresponded only to that of
the three lots.

Apparently, the petitioners were guilty of splitting their single cause of action to
enforce or rescind the deed of sale with assumption of mortgage. Splitting a single
cause of action is the act of dividing a single or indivisible cause of action into
several parts or claims and instituting two or more actions upon them.[26] A single
cause of action or entire claim or demand cannot be split up or divided in order to
be made the subject of two or more different actions.[27] Thus, Section 4, Rule 2
of the Rules of Court expressly prohibits splitting of a single cause of action, viz:
Section 4. Splitting a single cause of action; effect of. If two or more suits are
instituted on the basis of the same cause of action, the filing of one or a judgment
upon the merits in any one is available as a ground for the dismissal of the others.
(4a)
The petitioners were not at liberty to split their demand to enforce or rescind
the deed of sale with assumption of mortgage and to prosecute piecemeal or
present only a portion of the grounds upon which a special relief was sought under
the deed of sale with assumption of mortgage, and then to leave the rest to be
presented in another suit; otherwise, there would be no end to litigation.[28] Their
splitting violated the policy against multiplicity of suits, whose primary objective
was to avoid unduly burdening the dockets of the courts. Their contravention of the
policy merited the dismissal of Civil Case No. 12251 on the ground of bar by res
judicata.
Res judicata means a matter adjudged, a thing judicially acted upon or decided; a
thing or matter settled by judgment.[29] The doctrine of res judicata is an old
axiom of law, dictated by wisdom and sanctified by age, and founded on the broad
principle that it is to the interest of the public that there should be an end to
litigation by the same parties over a subject once fully and fairly adjudicated. It has
been appropriately said that the doctrine is a rule pervading every well-regulated
system of jurisprudence, and is put upon two grounds embodied in various maxims
of the common law: the one, public policy and necessity, which makes it to the
interest of the State that there should be an end to litigation interest reipublicae ut
50
sit finis litium; the other, the hardship on the individual that he should be vexed
twice for one and the same cause nemo debet bis vexari pro una et eadem causa. A
contrary doctrine would subject the public peace and quiet to the will and neglect
of individuals and prefer the gratification of the litigious disposition on the part of
suitors to the preservation of the public tranquillity and happiness.[30]
Under the doctrine of res judicata, a final judgment or decree on the merits
rendered by a court of competent jurisdiction is conclusive of the rights of the
parties or their privies in all later suits and on all points and matters determined in
the previous suit.[31] The foundation principle upon which the doctrine rests is that
the parties ought not to be permitted to litigate the same issue more than once; that
when a right or fact has been judicially tried and determined by a court of
competent jurisdiction, so long as it remains unreversed, should be conclusive upon
the parties and those in privity with them in law or estate.[32]
Yet, in order that res judicata may bar the institution of a subsequent action, the
following requisites must concur: (a) the former judgment must be final; (b) it must
have been rendered by a court having jurisdiction of the subject matter and the
parties; (c) it must be a judgment on the merits; and (d) there must be between the
first and second actions (i) identity of parties, (ii) identity of the subject matter, and
(iii) identity of cause of action.[33]
The first requisite was attendant. Civil Case No. G-1936 was already terminated
under the compromise agreement, for the judgment, being upon a compromise, was
immediately final and unappealable. As to the second requisite, the RTC had
jurisdiction over the cause of action in Civil Case No. G-1936 for the enforcement
or rescission of the deed of sale with assumption of mortgage, which was an action
whose subject matter was not capable of pecuniary estimation. That
the compromise agreement explicitly settled the entirety of Civil Case No. G-1936
by resolving all the claims of the parties against each other indicated that the third
requisite was also satisfied.[34]

But was there an identity of parties, of subject matter, and of causes of action
between Civil Case No.G-1936 and Civil Case No. 12251?
There is identity of parties when the parties in both actions are the same, or there is
privity between them, or they are successors-in-interest by title subsequent to the
commencement of the action litigating for the same thing and under the same title
and in the same capacity.[35] The requirement of the identity of parties was fully
met, because the Chus, on the one hand, and the Cunanans, on the other hand, were
the parties in both cases along with their respective privies. The fact that the
Carloses and Benelda Estate, defendants in Civil Case No. 12251, were not parties
in the compromise agreement was inconsequential, for they were also the privies of
the Cunanans as transferees and successors-in-interest. It is settled that the absolute
identity of parties was not a condition sine qua non for res judicata to apply,
because a shared identity of interest sufficed.[36]Mere substantial identity of
parties, or even community of interests between parties in the prior and subsequent
cases, even if the latter were not impleaded in the first case, was sufficient.[37]
As to identity of the subject matter, both actions dealt with the properties involved
in the deed of sale with assumption of mortgage. Identity of the causes of action
was also met, because Case No. G-1936 and Civil Case No. 12251 were rooted in
one and the same cause of action the failure of Cunanan to pay in full the purchase
price of the five lots subject of the deed of sale with assumption of mortgage. In
other words, Civil Case No. 12251 reprised Civil Case No. G-1936, the only
difference between them being that the petitioners alleged in the former that
Benelda Estate was not also a purchaser for value and in good faith.[38]
In fine, the rights and obligations of the parties vis--vis the five lots were all
defined and governed by the deed of sale with assumption of mortgage, the only
contract between them. That contract was single and indivisible, as far as they were
concerned. Consequently, the Chus could not properly proceed against the
respondents in Civil Case No. 12251, despite the silence of the compromise
agreement as to the Carloses and Benelda Estate, because there can only be one
action where the contract is entire, and the breach total, and the petitioners must
51
therein recover all their claims and damages.[39] The Chus could not be permitted
to split up a single cause of action and make that single cause of action the basis of
several suits.[40]
WHEREFORE, we deny the petition for review on certiorari, and affirm the
decision promulgated in CA-G.R. SP No. 72558.
Stronghold Insurance vs Cuenca
1. Remedial Law; Civil Procedure; Parties; Actions; Dismissal of Actions; A
litigation should be disallowed immediately if it involves a person without any
interest at stake, for it would be futile and meaningless to still proceed and render a
judgment where there is no actual controversy to be thereby determined.-
—There is no question that a litigation should be disallowed immediately if it
involves a person without any interest at stake, for it would be futile and
meaningless to still proceed and render a judgment where there is no actual
controversy to be thereby determined. Courts of law in our judicial system are not
allowed to delve on academic issues or to render advisory opinions. They only
resolve actual controversies, for that is what they are authorized to do by the
Fundamental Law itself, which forthrightly ordains that the judicial power is
wielded only to settle actual controversies involving rights that are legally
demandable and enforceable.
2. Same; Same; Same; Same; The purposes of the requirement for the real party in
interest prosecuting or defending an action at law are: (a) to prevent the
prosecution of actions by persons without any right, title or interest in the case; (b)
to require that the actual party entitled to legal relief be the one to prosecute the
action; (c) to avoid a multiplicity of suits; and (d) to discourage litigation and keep
it within certain bounds, pursuant to sound public policy.-

—The purposes of the requirement for the real party in interest prosecuting or
defending an action at law are: (a) to prevent the prosecution of actions by persons
without any right, title or interest in the case; (b) to require that the actual party
entitled to legal relief be the one to prosecute the action; (c) to avoid a multiplicity
of suits; and (d) to discourage litigation and keep it within certain bounds, pursuant
to sound public policy. Indeed, considering that all civil actions must be based on a
cause of action, defined as the act or omission by which a party violates the right of
another, the former as the defendant must be allowed to insist upon being opposed
by the real party in interest so that he is protected from further suits regarding the
same claim. Under this rationale, the requirement benefits the defendant because
“the defendant can insist upon a plaintiff who will afford him a setup providing
good res judicata protection if the struggle is carried through on the merits to the
end.”
3. Same; Same; Same; Real Party in Interest; Words and Phrases; A real party in
interest is one who stands to be benefited or injured by the judgment in the suit, or
one who is entitled to the avails of the suit.-
—To ensure the observance of the mandate of the Constitution, Section 2, Rule 3
of the Rules of Court requires that unless otherwise authorized by law or the Rules
of Court every action must be prosecuted or defended in the name of the real party
in interest. Under the same rule, a real party in interest is one who stands to be
benefited or injured by the judgment in the suit, or one who is entitled to the avails
of the suit. Accordingly, a person, to be a real party in interest in whose name an
action must be prosecuted, should appear to be the present real owner of the right
sought to be enforced, that is, his interest must be a present substantial interest, not
a mere expectancy, or a future, contingent, subordinate, or consequential interest.
Where the plaintiff is not the real party in interest, the ground for the motion to
dismiss is lack of cause of action. The reason for this is that the courts ought not to
pass upon questions not derived from any actual controversy. Truly, a person
having no material interest to protect cannot invoke the jurisdiction of the court as
the plaintiff in an action. Nor does a court acquire jurisdiction over a case where
the real party in interest is not present or impleaded.
STRONGHOLD INSURANCE COMPANY, INC., Petitioner,
vs.
52
TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA, BRAMIE
T. TAYACTAC, and MANUEL D. MARANON, JR., Respondents.
DECISION
BERSAMIN, J.:
The personality of a corporation is distinct and separate from the personalities of its
stockholders. Hence, its stockholders are not themselves the real parties in interest
to claim and recover compensation for the damages arising from the wrongful
attachment of its assets. Only the corporation is the real party in interest for that
purpose.
The Case
Stronghold Insurance Company, Inc. (Stronghold Insurance), a domestic insurance
company, assails the decision promulgated on January 31, 2006,1 whereby the
Court of Appeals (CA) in CA-G.R. CV No. 79145 affirmed the judgment rendered
on April 28, 2003 by the Regional Trial Court in Parafiaque City (RTC) holding
Stronghold Insurance and respondent Manuel D. Marafion, Jr. jointly and solidarily
liable for damages to respondents Tomas Cuenca, Marcelina Cuenca, Milagros
Cuenca (collectively referred to as Cuencas), and Bramie Tayactac, upon the
latter’s claims against the surety bond issued by Stronghold Insurance for the
benefit of Marañon.2
Antecedents
On January 19, 1998, Marañon filed a complaint in the RTC against the Cuencas
for the collection of a sum of money and damages. His complaint, docketed as
Civil Case No. 98-023, included an application for the issuance of a writ of
preliminary attachment.3 On January 26, 1998, the RTC granted the application for
the issuance of the writ of preliminary attachment conditioned upon the posting of
a bond of ₱1,000,000.00 executed in favor of the Cuencas. Less than a month later,
Marañon amended the complaint to implead Tayactac as a defendant.4
On February 11, 1998, Marañon posted SICI Bond No. 68427 JCL (4) No. 02370
in the amount of ₱1,000,000.00 issued by Stronghold Insurance. Two days later,
the RTC issued the writ of preliminary attachment.5 The sheriff served the writ, the
summons and a copy of the complaint on the Cuencas on the same day. The service

of the writ, summons and copy of the complaint were made on Tayactac on
February 16, 1998.6
Enforcing the writ of preliminary attachment on February 16 and February 17,
1998, the sheriff levied upon the equipment, supplies, materials and various other
personal property belonging to Arc Cuisine, Inc. that were found in the leased
corporate office-cum-commissary or kitchen of the corporation.7 On February 19,
1998, the sheriff submitted a report on his proceedings,8 and filed an ex parte
motion seeking the transfer of the levied properties to a safe place. The RTC
granted the ex parte motion on February 23, 1998.9
On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to
Dismiss and to Quash Writ of Preliminary Attachment on the grounds that: (1) the
action involved intra-corporate matters that were within the original and exclusive
jurisdiction of the Securities and Exchange Commission (SEC); and (2) there was
another action pending in the SEC as well as a criminal complaint in the Office of
the City Prosecutor of Parañaque City.10
On March 5, 1998, Marañon opposed the motion.11
On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of
Preliminary Attachment, stating that the action, being one for the recovery of a sum
of money and damages, was within its jurisdiction.12
Under date of September 3, 1998, the Cuencas and Tayactac moved for the
reconsideration of the denial of their Motion to Dismiss and to Quash Writ of
Preliminary Attachment, but the RTC denied their motion for reconsideration on
September 16, 1998.
Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari
and prohibition to challenge the August 10, 1998 and September 16, 1998 orders of
the RTC on the basis of being issued with grave abuse of discretion amounting to
lack or excess of jurisdiction (C.A.-G.R. SP No. 49288).13
On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No.
49288,14 granting the petition. It annulled and set aside the challenged orders, and
dismissed the amended complaint in Civil Case No. 98-023 for lack of jurisdiction,
to wit:
53
WHEREFORE, the Orders herein assailed are hereby ANNULLED AND SET
ASIDE, and the judgment is hereby rendered DISMISSING the Amended
Complaint in Civil Case No. 98-023 of the respondent court, for lack of
jurisdiction.
SO ORDERED.
On December 27, 1999, the CA remanded to the RTC for hearing and resolution of
the Cuencas and Tayactac’s claim for the damages sustained from the enforcement
of the writ of preliminary attachment.15
On February 17, 2000,16 the sheriff reported to the RTC, as follows:
On the scheduled inventory of the properties (February 17, 2000) and to comply
with the Resolution of the Court of Appeals dated December 24, 1999 ordering the
delivery of the attached properties to the defendants, the proceedings thereon
being:
1. With the assistance for (sic) the counsel of Cuencas, Atty. Pulumbarit, Atty.
Ayo, defendant Marcelina Cuenca, and two Court Personnel, Robertson Catorce
and Danilo Abanto, went to the warehouse where Mr. Marañon recommended for
safekeeping the properties in which he personally assured its safety, at No. 14,
Marian II Street, East Service Road, Parañaque Metro Manila.
2. That to our surprise, said warehouse is now tenanted by a new lessee and the
properties were all gone and missing.
3. That there are informations (sic) that the properties are seen at Conti’s Pastry &
Bake Shop owned by Mr. Marañon, located at BF Homes in Parañaque City.
On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to
Deliver Attached Properties and to Set Case for Hearing,17 praying that: (1) the
Branch Sheriff be ordered to immediately deliver the attached properties to them;
(2) Stronghold Insurance be directed to pay them the damages being sought in
accordance with its undertaking under the surety bond for ₱1,000,0000.00; (3)
Marañon be held personally liable to them considering the insufficiency of the
amount of the surety bond; (4) they be paid the total of ₱1,721,557.20 as actual
damages representing the value of the lost attached properties because they, being
accountable for the properties, would be turning that amount over to Arc Cuisine,

Inc.; and (5) Marañon be made to pay ₱200,000.00 as moral damages, ₱100,000.00
as exemplary damages, and ₱100,000.00 as attorney’s fees.
Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the
Cuencas and Tayactac filed their reply on May 5, 2000.
On May 25, 2000, Marañon filed his own comment/opposition to the Motion to
Require Sheriff to Deliver Attached Properties and to Set Case for Hearing of the
Cuencas and Tayactac, arguing that because the attached properties belonged to
Arc Cuisine, Inc. 50% of the stockholding of which he and his relatives owned, it
should follow that 50% of the value of the missing attached properties constituted
liquidating dividends that should remain with and belong to him. Accordingly, he
prayed that he should be required to return only ₱100,000.00 to the Cuencas and
Tayactac.18
On June 5, 2000, the RTC commanded Marañon to surrender all the attached
properties to the RTC through the sheriff within 10 days from notice; and directed
the Cuencas and Tayactac to submit the affidavits of their witnesses in support of
their claim for damages.19
On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and
Compliance.20
Ruling of the RTC
After trial, the RTC rendered its judgment on April 28, 2003, holding Marañon and
Stronghold Insurance jointly and solidarily liable for damages to the Cuencas and
Tayactac,21 viz:
WHEREFORE, premises considered, as the defendants were able to
preponderantly prove their entitlement for damages by reason of the unlawful and
wrongful issuance of the writ of attachment, MANUEL D. MARAÑON, JR.,
plaintiff and defendant, Stronghold Insurance Company Inc., are found to be
jointly and solidarily liable to pay the defendants the following amount to wit:
(1) Ph₱1,000,000.00 representing the amount of the bond;
(2) PhP 100,000.00 as moral damages;
(3) PhP 50,000.00 as exemplary damages;
54
(4) Php 100,000.00 as attorney’s fees; and
(5) To pay the cost of suit.
SO ORDERED.
Ruling of the CA
Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145),
assigning the following errors to the RTC, to wit:
I.
THE LOWER COURT ERRED IN ORDERING SURETY-APPELLANT TO
PAY THE AMOUNT OF ₱1,000,000.00 REPRESENTING THE AMOUNT OF
THE BOND AND OTHER DAMAGES TO THE DEFENDANTS.
II.
THE LOWER COURT ERRED IN NOT TAKING INTO ACCOUNT THE
INDEMNITY AGREEMENT (EXH. "2-SURETY") EXECUTED BY MANUEL
D. MARAÑON, JR. IN FAVOR OF STRONGHOLD WHEREIN HE BOUND
HIMSELF TO INDEMNIFY STRONGHOLD OF WHATEVER AMOUNT IT
MAY BE HELD LIABLE ON ACCOUNT OF THE ISSUANCE OF THE
ATTACHMENT BOND.22
On January 31, 2006, the CA, finding no reversible error, promulgated its decision
affirming the judgment of the RTC.23
Stronghold Insurance moved for reconsideration, but the CA denied its motion for
reconsideration on June 22, 2006.
Issues
Hence, this appeal by petition for review on certiorari by Stronghold Insurance,
which submits that:
I.
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR
AND DECIDED QUESTIONS OF SUBSTANCE IN A WAY NOT IN

ACCORDANCE WITH LAW AND APPLICABLE DECISIONS OF THE
HONORABLE COURT CONSIDERING THAT THE COURT OF APPEALS
AFFIRMED THE ERRONEOUS DECISION OF THE TRIAL COURT
HOLDING RESPONDENT MARA[Ñ]ON AND PETITIONER STRONGHOLD
JOINTLY AND SOLIDARILY LIABLE TO PAY THE RESPONDENTS
CUENCA, et al., FOR PURPORTED DAMAGES BY REASON OF THE
ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE OF THE WRIT OF
ATTACHMENT, DESPITE THE FACT THAT:
A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF THE
PROPERTIES ATTACHED AND THUS, ARE NOT THE PROPER PARTIES
TO CLAIM ANY PURPORTED DAMAGES ARISING THEREFROM.
B) THE PURPORTED DAMAGES BY REASON OF THE ALLEGED
UNLAWFUL AND WRONGFUL ISSUANCE OF THE WRIT OF
ATTACHMENT WERE CAUSED BY THE NEGLIGENCE OF THE BRANCH
SHERIFF OF THE TRIAL COURT AND HIS FAILURE TO COMPLY WITH
THE PROVISIONS OF THE RULES OF COURT PERTAINING TO THE
ATTACHMENT OF PROPERTIES.
C) THE TRIAL COURT GRAVELY ERRED WHEN IT HELD PETITIONER
STRONGHOLD TO BE SOLIDARILY LIABLE WITH RESPONDENT
MARA[Ñ]ON TO RESPONDENTS CUENCA et al., FOR MORAL DAMAGES,
EXEMPLARY DAMAGES, ATTORNEY’S FEES AND COST OF SUIT
DESPITE THE FACT THAT THE GUARANTY OF PETITIONER
STRONGHOLD PURSUANT TO ITS SURETY BOND IS LIMITED ONLY TO
THE AMOUNT OF ₱1,000,000.00.
II
IN ANY EVENT, THE DECISION OF THE COURT APPEALS SHOULD
HAVE HELD RESPONDENT MARA[Ñ]ON TO BE LIABLE TO INDEMNIFY
PETITIONER STRONGHOLD FOR ALL PAYMENTS, DAMAGES, COSTS,
LOSSES, PENALTIES, CHARGES AND EXPENSES IT SUSTAINED IN
CONNECTION WITH THE INSTANT CASE, PURSUANT TO THE
INDEMNITY AGREEMENT ENTERED INTO BY PETITIONER
STRONGHOLD AND RESPONDENT MARA[Ñ]ON.24
On their part, the Cuencas and Tayactac counter:
55
A. Having actively participated in the trial and appellate proceedings of this case
before the Regional Trial Court and the Court of Appeals, respectively, petitioner
Stronghold is legally and effectively BARRED by ESTOPPEL from raising for the
first time on appeal before this Honorable Court a defense and/or issue not raised
below.25
B. Even assuming arguendo without admitting that the principle of estoppel is not
applicable in this instant case, the assailed Decision and Resolution find firm basis
in law considering that the writ of attachment issued and enforced against herein
respondents has been declared ILLEGAL, NULL AND VOID for having been
issued beyond the jurisdiction of the trial court.
C. There having been a factual and legal finding of the illegality of the issuance
and consequently, the enforcement of the writ of attachment, Maranon and his
surety Stronghold, consistent with the facts and the law, including the contract of
suretyship they entered into, are JOINTLY AND SEVERALLY liable for the
damages sustained by herein respondents by reason thereof.
D. Contrary to the allegations of Stronghold, its liability as surety under the
attachment bond without which the writ of attachment shall not issue and be
enforced against herein respondent if prescribed by law. In like manner, the
obligations and liability on the attachment bond are also prescribed by law and not
left to the discretion or will of the contracting parties to the prejudice of the persons
against whom the writ was issued.
E. Contrary to the allegations of Stronghold, its liability for the damages sustained
by herein respondents is both a statutory and contractual obligation and for which,
it cannot escape accountability and liability in favor of the person against whom
the illegal writ of attachment was issued and enforced. To allow Stronghold to
delay, excuse or exempt itself from liability is unconstitutional, unlawful, and
contrary to the basic tenets of equity and fair play.
F. While the liability of Stronghold as surety indeed covers the principal amount of
₱1,000,000.00, nothing in the law and the contract between the parties limit or
exempt Stronghold from liability for other damages. Including costs of suit and
interest.26
In his own comment,27

Marañon insisted that he could not be personally held liable under the attachment
bond because the judgment of the RTC was rendered without jurisdiction over the
subject matter of the action that involved an intra-corporate controversy among the
stockholders of Arc Cuisine, Inc.; and that the jurisdiction properly pertained to the
SEC, where another action was already pending between the parties.
Ruling
Although the question of whether the Cuencas and Tayactac could themselves
recover damages arising from the wrongful attachment of the assets of Arc Cuisine,
Inc. by claiming against the bond issued by Stronghold Insurance was not raised in
the CA, we do not brush it aside because the actual legal interest of the parties in
the subject of the litigation is a matter of substance that has jurisdictional impact,
even on appeal before this Court.
The petition for review is meritorious.
There is no question that a litigation should be disallowed immediately if it
involves a person without any interest at stake, for it would be futile and
meaningless to still proceed and render a judgment where there is no actual
controversy to be thereby determined. Courts of law in our judicial system are not
allowed to delve on academic issues or to render advisory opinions. They only
resolve actual controversies, for that is what they are authorized to do by the
Fundamental Law itself, which forthrightly ordains that the judicial power is
wielded only to settle actual controversies involving rights that are legally
demandable and enforceable.28
To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of
the Rules of Court requires that unless otherwise authorized by law or the Rules of
Court every action must be prosecuted or defended in the name of the real party in
interest.29 Under the same rule, a real party in interest is one who stands to be
benefited or injured by the judgment in the suit, or one who is entitled to the avails
of the suit. Accordingly, a person , to be a real party in interest in whose name an
action must be prosecuted, should appear to be the present real owner of the right
sought to be enforced, that is, his interest must be a present substantial interest, not
a mere expectancy, or a future, contingent, subordinate, or consequential
interest.30
56
Where the plaintiff is not the real party in interest, the ground for the motion to
dismiss is lack of cause of action.31The reason for this is that the courts ought not
to pass upon questions not derived from any actual controversy. Truly, a person
having no material interest to protect cannot invoke the jurisdiction of the court as
the plaintiff in an action.32 Nor does a court acquire jurisdiction over a case where
the real party in interest is not present or impleaded.
The purposes of the requirement for the real party in interest prosecuting or
defending an action at law are: (a) to prevent the prosecution of actions by persons
without any right, title or interest in the case; (b) to require that the actual party
entitled to legal relief be the one to prosecute the action; (c) to avoid a multiplicity
of suits; and (d) to discourage litigation and keep it within certain bounds, pursuant
to sound public policy.33 Indeed, considering that all civil actions must be based
on a cause of action,34 defined as the act or omission by which a party violates the
right of another,35 the former as the defendant must be allowed to insist upon
being opposed by the real party in interest so that he is protected from further suits
regarding the same claim.36 Under this rationale, the requirement benefits the
defendant because "the defendant can insist upon a plaintiff who will afford him a
setup providing good res judicata protection if the struggle is carried through on the
merits to the end."37
The rule on real party in interest ensures, therefore, that the party with the legal
right to sue brings the action, and this interest ends when a judgment involving the
nominal plaintiff will protect the defendant from a subsequent identical action.
Such a rule is intended to bring before the court the party rightfully interested in
the litigation so that only real controversies will be presented and the judgment,
when entered, will be binding and conclusive and the defendant will be saved from
further harassment and vexation at the hands of other claimants to the same
demand.38
But the real party in interest need not be the person who ultimately will benefit
from the successful prosecution of the action. Hence, to aid itself in the proper
identification of the real party in interest, the court should first ascertain the nature
of the substantive right being asserted, and then must determine whether the party
asserting that right is recognized as the real party in interest under the rules of
procedure. Truly, that a party stands to gain from the litigation is not necessarily
controlling.39

It is fundamental that the courts are established in order to afford reliefs to persons
whose rights or property interests have been invaded or violated, or are threatened
with invasion by others’ conduct or acts, and to give relief only at the instance of
such persons. The jurisdiction of a court of law or equity may not be invoked by or
for an individual whose rights have not been breached.40
The remedial right or the remedial obligation is the person’s interest in the
controversy. The right of the plaintiff or other claimant is alleged to be violated by
the defendant, who has the correlative obligation to respect the right of the former.
Otherwise put, without the right, a person may not become a party plaintiff;
without the obligation, a person may not be sued as a party defendant; without the
violation, there may not be a suit. In such a situation, it is legally impossible for
any person or entity to be both plaintiff and defendant in the same action, thereby
ensuring that the controversy is actual and exists between adversary parties. Where
there are no adversary parties before it, the court would be without jurisdiction to
render a judgment.41
There is no dispute that the properties subject to the levy on attachment belonged
to Arc Cuisine, Inc. alone, not to the Cuencas and Tayactac in their own right.
They were only stockholders of Arc Cuisine, Inc., which had a personality distinct
and separate from that of any or all of them.42 The damages occasioned to the
properties by the levy on attachment, wrongful or not, prejudiced Arc Cuisine, Inc.,
not them. As such, only Arc Cuisine, Inc. had the right under the substantive law to
claim and recover such damages. This right could not also be asserted by the
Cuencas and Tayactac unless they did so in the name of the corporation itself. But
that did not happen herein, because Arc Cuisine, Inc. was not even joined in the
action either as an original party or as an intervenor.
The Cuencas and Tayactac were clearly not vested with any direct interest in the
personal properties coming under the levy on attachment by virtue alone of their
being stockholders in Arc Cuisine, Inc. Their stockholdings represented only their
proportionate or aliquot interest in the properties of the corporation, but did not
vest in them any legal right or title to any specific properties of the corporation.
Without doubt, Arc Cuisine, Inc. remained the owner as a distinct legal person.43
Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas
and Tayactac lacked the legal personality to claim the damages sustained from the
levy of the former’s properties. According to Asset Privatization Trust v. Court of
Appeals,44 even when the foreclosure on the assets of the corporation was
57
wrongful and done in bad faith the stockholders had no standing to recover for
themselves moral damages; otherwise, they would be appropriating and
distributing part of the corporation’s assets prior to the dissolution of the
corporation and the liquidation of its debts and liabilities. Moreover, in Evangelista
v. Santos,45 the Court, resolving whether or not the minority stockholders had the
right to bring an action for damages against the principal officers of the corporation
for their own benefit, said:
As to the second question, the complaint shows that the action is for damages
resulting from mismanagement of the affairs and assets of the corporation by its
principal officer, it being alleged that defendant’s maladministration has brought
about the ruin of the corporation and the consequent loss of value of its stocks. The
injury complained of is thus primarily to the corporation, so that the suit for the
damages claimed should be by the corporation rather than by the stockholders (3
Fletcher, Cyclopedia of Corporation pp. 977-980). The stockholders may not
directly claim those damages for themselves for that would result in the
appropriation by, and the distribution among them of part of the corporate assets
before the dissolution of the corporation and the liquidation of its debts and
liabilities, something which cannot be legally done in view of section 16 of the
Corporation Law, which provides:
No shall corporation shall make or declare any stock or bond dividend or any
dividend whatsoever except from the surplus profits arising from its business, or
divide or distribute its capital stock or property other than actual profits among its
members or stockholders until after the payment of its debts and the termination of
its existence by limitation or lawful dissolution.
xxxx
In the present case, the plaintiff stockholders have brought the action not for the
benefit of the corporation but for their own benefit, since they ask that the
defendant make good the losses occasioned by his mismanagement and pay to
them the value of their respective participation in the corporate assets on the basis
of their respective holdings. Clearly, this cannot be done until all corporate debts, if
there be any, are paid and the existence of the corporation terminated by the
limitation of its charter or by lawful dissolution in view of the provisions of section
16 of the Corporation Law. (Emphasis ours)

It results that plaintiffs complaint shows no cause of action in their favor so that the
lower court did not err in dismissing the complaint on that ground.
While plaintiffs ask for remedy to which they are not entitled unless the
requirement of section 16 of the Corporation Law be first complied with, we note
that the action stated in their complaint is susceptible of being converted into a
derivative suit for the benefit of the corporation by a mere change in the prayer.
Such amendment, however, is not possible now, since the complaint has been filed
in the wrong court, so that the same has to be dismissed.46
That Marañon knew that Arc Cuisine, Inc. owned the properties levied on
attachment but he still excluded Arc Cuisine, Inc. from his complaint was of no
consequence now. The Cuencas and Tayactac still had no right of action even if the
affected properties were then under their custody at the time of the attachment,
considering that their custody was only incidental to the operation of the
corporation.
It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine,
Inc. a proper action to recover damages resulting from the attachment. Such action
would be one directly brought in the name of the corporation. Yet, that was not true
here, for, instead, the Cuencas and Tayactac presented the claim in their own
names.
In view of the outcome just reached, the Court deems it unnecessary to give any
extensive consideration to the remaining issues.
WHEREFORE, the Court GRANTS the petition for review; and REVERSES and
SETS ASIDE the decision of the Court of Appeals in CA-G.R. CV No. 79145
promulgated on January 31,2006.
Jose Roy vs Herbosa
4. Locus Standi; The personal and substantial interest that enables a party to have
legal standing is one that is both material and real.-
—The personal and substantial interest that enables a party to have legal standing
is one that is both material, an interest in issue and to be affected by the
government action, as distinguished from mere interest in the issue involved, or a
58
mere incidental interest, and real, which means a present substantial interest, as
distinguished from a mere expectancy or a future, contingent, subordinate, or
consequential interest.
5. Same; As to injury, the party must show that (1) he will personally suffer some
actual or threatened injury because of the allegedly illegal conduct of the
government; (2) the injury is fairly traceable to the challenged action; and (3) the
injury is likely to be redressed by a favorable action.+
6. Same; The locus standi requisite is not met by the expedient invocation of one’s
citizenship or membership in the bar who has an interest in ensuring that laws and
orders of the Philippine government are legally and validly issued as these
supposed interests are too general, which are shared by other groups and by the
whole citizenry.-
—The locus standi requisite is not met by the expedient invocation of one’s
citizenship or membership in the bar who has an interest in ensuring that laws and
orders of the Philippine government are legally and validly issued as these
supposed interests are too general, which are shared by other groups and by the
whole citizenry. Per their allegations, the personal interest invoked by petitioners
as citizens and members of the bar in the validity or invalidity of SEC-MC No. 8 is
at best equivocal, and totally insufficient.
7. Same; Taxpayer’s Suit; A taxpayer’s suit is allowed only when the petitioner has
demonstrated the direct correlation of the act complained of and the disbursement
of public funds in contravention of law or the Constitution, or has shown that the
case involves the exercise of the spending or taxing power of Congress.-
—As often reiterated by the Court, a taxpayer’s suit is allowed only when the
petitioner has demonstrated the direct correlation of the act complained of and the
disbursement of public funds in contravention of law or the Constitution, or has
shown that the case involves the exercise of the spending or taxing power of
Congress. SEC-MC No. 8 does not involve an additional expenditure of public
funds and the taxing or spending power of Congress.
8. Courts; Hierarchy of Courts; There being no special, important or compelling
reason that justified the direct filing of the petitions in the Court in violation of the
policy on hierarchy of courts, their outright dismissal on this ground is further
warranted.-

—Petitioners’ invocation of “transcendental importance” is hollow and does not
merit the relaxation of the rule on hierarchy of courts. There being no special,
important or compelling reason that justified the direct filing of the petitions in the
Court in violation of the policy on hierarchy of courts, their outright dismissal on
this ground is further warranted.
9. Indispensable Parties; Indispensable parties are those with such a material and
direct interest in the controversy that a final decree would necessarily affect their
rights, so that the court cannot proceed without their presence.-
—Under Section 3, Rule 7 of the Rules of Court, an indispensable party is a party-
in-interest without whom there can be no final determination of an action.
Indispensable parties are those with such a material and direct interest in the
controversy that a final decree would necessarily affect their rights, so that the
court cannot proceed without their presence. The interests of such indispensable
parties in the subject matter of the suit and the relief are so bound with those of the
other parties that their legal presence as parties to the proceeding is an absolute
necessity and a complete and efficient determination of the equities and rights of
the parties is not possible if they are not joined.
21. Doctrine of Finality of Judgments; At the core of the doctrine of finality of
judgments is that public policy and sound practice demand that, at the risk of
occasional errors, judgments of courts should become final at some definite date
fixed by law and the very objects for which courts were instituted was to put an
end to controversies.-
—Petitioners cannot, after Gamboa v. Teves, 652 SCRA 690 (2011), has attained
finality, seek a belated correction or reconsideration of the Court’s unequivocal
definition of the term “capital.” At the core of the doctrine of finality of judgments
is that public policy and sound practice demand that, at the risk of occasional
errors, judgments of courts should become final at some definite date fixed by law
and the very objects for which courts were instituted was to put an end to
controversies. Indeed, the definition of the term “capital” in the fallo of the
Gamboa Decision has acquired finality.
22. Same; Under the doctrine of finality and immutability of judgment, a decision
that has acquired finality becomes immutable and unalterable, and may no longer
59
be modified in any respect, even if the modification is meant to correct erroneous
conclusions of fact and law, and even if the modification is made by the court that
rendered it or by the Highest Court of the land.-
—Furthermore, as opined by Justice Bersamin during the deliberations, the
doctrine of immutability of judgment precludes the Court from re examining the
definition of “capital” under Section 11, Article XII of the Constitution. Under the
doctrine of finality and immutability of judgment, a decision that has acquired
finality becomes immutable and unalterable, and may no longer be modified in any
respect, even if the modification is meant to correct erroneous conclusions of fact
and law, and even if the modification is made by the court that rendered it or by the
Highest Court of the land. Any act that violates the principle must be immediately
stricken down.
29. Locus Standi; View that if the Court is to maintain the respect demanded by the
concept of separation of governmental powers, it must subject applications for
exemptions from the requirements of judicial review to the highest possible judicial
inquiry.-
—The liberality of the Court in bypassing the locus standi rule cannot, therefore,
be abused. If the Court is to maintain the respect demanded by the concept of
separation of governmental powers, it must subject applications for exemptions
from the requirements of judicial review to the highest possible judicial inquiry. In
the present case, the anemic allegations of the petitioner and petitioners-in-
intervention do not warrant the application of the exceptions rather than the rule on
locus standi.
30. Same; Courts; Hierarchy of Courts; View that while direct recourse to the court
has previously been allowed on exceptional grounds, the circumstances set forth in
the petition and petition-in-intervention do not justify the disregard of the
established policy.-
—While direct recourse to the court has previously been allowed on exceptional
grounds, the circumstances set forth in the petition and petition-in-intervention do
not justify the disregard of the established policy. Worse, petitioner’s allegation
that there is little value in presenting the petition to another court is demeaning and

less than fair to the lower courts. There is no reason to doubt our trial court’s
ability and competence to determine the existence of grave abuse of discretion.
35. Grave Abuse of Discretion; View that grave abuse of discretion means either
that the judicial or quasi-judicial power was exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, or that the respondent judge,
tribunal or board evaded a positive duty, or virtually refused to perform the duty
enjoined or to act in contemplation of law, such as when such judge, tribunal or
board exercising judicial or quasi-judicial powers acted in a capricious or
whimsical manner as to be equivalent to lack of jurisdiction.-
—Grave abuse of discretion means either that the judicial or quasi-judicial power
was exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, or that the respondent judge, tribunal or board evaded a positive duty, or
virtually refused to perform the duty enjoined or to act in contemplation of law,
such as when such judge, tribunal or board exercising judicial or quasi-judicial
powers acted in a capricious or whimsical manner as to be equivalent to lack of
jurisdiction. Mere abuse of discretion is not enough to warrant the issuance of the
writ.
36. Same; Certiorari; Prohibition; View that the remedies of certiorari and
prohibition respectively provided for in Section 1 and Section 2 of Rule 65 of the
Rules of Court are limited to the exercise of judicial or quasi-judicial functions by
the respondent tribunal, board or officer that acts without or in excess of
jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction.+
37. Constitutional Law; Jurisdiction; Judicial Review; Supreme Court; View that
the expanded jurisdiction of the Supreme Court (SC) was introduced in the 1987
Constitution precisely to impose the duty of judicial review as the means to
neutralize the avoidance or noninterference approach based on the doctrine of
political question whenever a controversy came before the Court.+
hereby redefine the concept of capital will unavoidably disregard the immutability
of the final judgment in Gamboa v. Teves, 652 SCRA 690 (2011). That is not
permissible.+
60
41. Same; View that under the doctrine of finality and immutability of judgment, a
decision that has acquired finality becomes immutable and unalterable, and may no
longer be modified in any respect, even if the modification is meant to correct
erroneous conclusions of fact and law, and even if the modification is made by the
court that rendered it or by the Highest Court of the land.+
42. Same; View that the only time when the immutable and final judgment may be
corrected or modified is when the correction or modification concerns: (1) merely
clerical errors; (2) the so-called nunc pro tunc entries that cause no prejudice to any
party; (3) void judgments; and (4) whenever circumstances transpire after the
finality of the decision rendering its execution unjust and inequitable.+
43. Courts; View that the dispositive portion or fallo prevails over body of the
resolution. It is really fundamental that the dispositive part or fallo of a judgment
that actually settles and declares the rights and obligations of the parties finally,
definitively, and authoritatively controls, regardless of the presence of inconsistent
statements in the body that may tend to confuse.-
—The supposed conflict between the dispositive portion or fallo of the resolution
promulgated on October 9, 2012 and the body of the resolution was not a sufficient
cause to disregard the doctrine of immutability. To begin with, the dispositive
portion or fallo prevails over body of the resolution. It is really fundamental that
the dispositive part or fallo of a judgment that actually settles and declares the
rights and obligations of the parties finally, definitively, and authoritatively
controls, regardless of the presence of inconsistent statements in the body that may
tend to confuse. Indeed, the dispositive part or fallo is the final order, while the
opinion is but a mere statement, ordering nothing.
44. Same; View that the only time when the body of the decision or resolution
should be controlling is when one can unquestionably find a persuasive showing in
the body of the decision or resolution that there was a clear mistake in the
dispositive portion.+
45. Certiorari; Prohibition; View that the special civil actions for certiorari and
prohibition under Rule 65 have been held by this Court as proper remedies through
which the question of grave abuse of discretion can be heard regardless of how the
assailed act has been exercised.+

46. Declaratory Relief; View that an action for declaratory relief presupposes that
there has been no actual breach of the instruments involved or of the rights arising
thereunder.+
47. Courts; Hierarchy of Courts; View that the invocation of the Supreme Court’s
(SC’s) original jurisdiction or plea for the dispensation of recourse to inferior
courts having concurrent jurisdiction to issue writs of certiorari has been allowed in
certain instances for special and important reasons.+
JOSE M. ROY III, Petitioner
vs.
CHAIRPERSON TERESITA HERBOSA, THE SECURITIES AND EXCHANGE
COMMISSION, and PHILIPPINE LONG DISTANCE TELEPHONE COMP
ANY,, Respondents
x-----------------------x
WILSON C. GAMBOA, JR., DANIEL V. CARTAGENA, JOHN WARREN P.
GABINETE, ANTONIO V. PESINA, JR., MODESTO MARTINY. MAMON III,
and GERARDO C. EREBAREN, Petitioners-in-Intervention,
x-----------------------x
PHILIPPINE STOCK EXCHANGE, INC. Respondent-in-Intervention,
x-----------------------x
SHAREHOLDERS' ASSOCIATION OF THE PHILIPPINES, INC., Respondent-
in-Intervention.
RESOLUTION
CAGUIOA, J.:
Before the Court is the Motion for Reconsideration dated January 19, 20171 (the
Motion) filed by petitioner Jose M. Roy III (movant) seeking the reversal and
setting aside of the Decision dated November 22, 20162 (the Decision) which
denied the movant's petition, and declared that the Securities and Exchange
Commission (SEC) did not commit grave abuse of discretion in issuing
61
Memorandum Circular No. 8, Series of 2013 (SEC-MC No. 8) as the same was in
compliance with, and in fealty to, the decision of the Court in Gamboa v. Finance
Secretary Teves,3(Gamboa Decision) and the resolution4 denying the Motion for
Reconsideration therein (Gamboa Resolution).
The Motion presents no compelling and new arguments to justify the
reconsideration of the Decision.
The grounds raised by movant are: (1) He has the requisite standing because this
case is one of transcendental importance; (2) The Court has the constitutional duty
to exercise judicial review over any grave abuse of discretion by any
instrumentality of government; (3) He did not rely on an obiter dictum; and (4) The
Court should have treated the petition as the appropriate device to explain the
Gamboa Decision.
The Decision has already exhaustively discussed and directly passed upon these
grounds. Movant's petition was dismissed based on both procedural and
substantive grounds.
Regarding the procedural grounds, the Court ruled that petitioners (movant and
petitioners-in-intervention) failed to sufficiently allege and establish the existence
of a case or controversy and locus standi on their part to warrant the Court's
exercise of judicial review; the rule on the hierarchy of courts was violated; and
petitioners failed to implead indispensable parties such as the Philippine Stock
Exchange, Inc. and Shareholders' Association of the Philippines, Inc. 5
In connection with the failure to implead indispensable parties, the Court's
Decision held:
Under Section 3, Rule 7 of the Rules of Court, an indispensable party is a party-in-
interest without whom there can be no final determination of an action.
Indispensable parties are those with such a material and direct interest in the
controversy that a final decree would necessarily affect their rights, so that the
court cannot proceed without their presence. The interests of such indispensable
parties in the subject matter of the suit and the relief are so bound with those of the
other parties that their legal presence as parties to the proceeding is an absolute
necessity and a complete and efficient determination of the equities and rights of
the parties is not possible if they are not joined.

Other than PLDT, the petitions failed to join or implead other public utility
corporations subject to the same restriction imposed by Section 11, Article XII of
the Constitution. These corporations are in danger of losing their franchise and
property if they are found not compliant with the restrictive interpretation of the
constitutional provision under review which is being espoused by petitioners. They
should be afforded due notice and opportunity to be heard, lest they be deprived of
their property without due process.
Not only are public utility corporations other than PLDT directly and materially
affected by the outcome of the petitions, their shareholders also stand to suffer in
case they will be forced to divest their shareholdings to ensure compliance with the
said restrictive interpretation of the term "capital". As explained by SHAREPHIL,
in five corporations alone, more than Php158 Billion worth of shares must be
divested by foreign shareholders and absorbed by Filipino investors if petitioners'
position is upheld.
Petitioners' disregard of the rights of these other corporations and numerous
shareholders constitutes another fatal procedural flaw, justifying the dismissal of
their petitions. Without giving all of them their day in court, they will definitely be
deprived of their property without due process of law. 6
This is highlighted to clear any misimpression that the Gamboa Decision
and Gamboa Resolution made a categorical ruling on the meaning of the word
"capital" under Section 11, Article XII of the Constitution only in respect of, or
only confined to, respondent Philippine Long Distance Telephone Company
(PLDT). Nothing is further from the truth. Indeed, a fair reading of
the Gamboa Decision and Gamboa Resolution shows that the Court's
pronouncements therein would affect all public utilities, and not just respondent
PLDT.
On the substantive grounds, the Court disposed of the issue on whether the SEC
gravely abused its discretion in ruling that respondent PLDT is compliant with the
limitation on foreign ownership under the Constitution and other relevant laws as
without merit. The Court reasoned that "in the absence of a definitive ruling by the
SEC on PLDT's compliance with the capital requirement pursuant to
the Gamboa Decision and Resolution, any question relative to the inexistent ruling
is premature."7
In resolving the other substantive issue raised by petitioners, the Court held that:
62
[E]ven if the resolution of the procedural issues were conceded in favor of
petitioners, the petitions, being anchored on Rule 65, must nonetheless fail because
the SEC did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction when it issued SEC-MC No. 8. To the contrary, the Court finds SEC-
MC No. 8 to have been issued in fealty to the Gamboa Decision and Resolution.8
To belabor the point, movant's petition is not a continuation of the Gamboa case as
the Gamboa Decision attained finality on October 18, 2012, and thereafter Entry of
Judgment was issued on December 11, 2012.9
As regards movant's repeated invocation of the transcendental importance of
the Gamboa case, this does not ipso facto accord locus standi to movant. Being a
new petition, movant had the burden to justify his locus standi in his own petition.
The Court, however, was not persuaded by his justification.
Pursuant to the Court's constitutional duty to exercise judicial review, the Court has
conclusively found no grave abuse of discretion on the part of SEC in issuing SEC-
MC No. 8.
The Decision has painstakingly explained why it considered as obiter dictum that
pronouncement in the Gamboa Resolution that the constitutional requirement on
Filipino ownership should "apply uniformly and across the board to all classes of
shares, regardless of nomenclature and category, comprising the capital of a
corporation."[[9-a]] The Court stated that:
[T]he fallo or decretal/dispositive portions of both the Gamboa Decision and
Resolution are definite, clear and unequivocal. While there is a passage in the body
of the Gamboa Resolution that might have appeared contrary to the fallo of
the Gamboa Decision x x x the definiteness and clarity of the fallo of
the Gamboa Decision must control over the obiter dictum in
the Gamboa Resolution regarding the application of the 60-40 Filipino-foreign
ownership requirement to "each class of shares, regardless of differences in voting
rights, privileges and restrictions." 10
To the Court's mind and, as exhaustively demonstrated in the Decision, the
dispositive portion of the Gamboa Decision was in no way modified by
the Gamboa Resolution.
The heart of the controversy is the interpretation of Section 11, Article XII of the
Constitution, which provides: "No franchise, certificate, or any other form of

authorization for the operation of a public utility shall be granted except to citizens
of the Philippines or to corporations or associations organized under the laws of the
Philippines at least sixty per centum of whose capital is owned by such citizens x x
x."
The Gamboa Decision already held, in no uncertain terms, that what the
Constitution requires is "[fJull [and legal] beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of the voting rights x x x must
rest in the hands of Filipino nationals x x x." 11 And, precisely that is what SEC-
MC No. 8 provides, viz.: "x x x For purposes of determining compliance [with the
constitutional or statutory ownership], the required percentage of Filipino
ownership shall be applied to BOTH (a) the total number of outstanding shares of
stock entitled to vote in the election of directors; AND (b) the total number of
outstanding shares of stock, whether or not entitled to vote x x x." 12
In construing "full beneficial ownership," the Implementing Rules and Regulations
of the Foreign Investments Act of 1991 (FIA-IRR) provides:
For stocks to be deemed owned and held by Philippine citizens or Philippine
nationals, mere legal title is not enough to meet the required Filipino equity. Full
beneficial ownership of the stocks, coupled with appropriate voting rights is
essential. Thus, stocks, the voting rights of which have been assigned or transferred
to aliens cannot be considered held by Philippine citizens or Philippine
nationals. 13
In turn, "beneficial owner" or "beneficial ownership" is defined in the
Implementing Rules and Regulations of the Securities Regulation Code (SRC-IRR)
as:
[A]ny person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting power (which
includes the power to vote or direct the voting of such security) and/or investment
returns or power (which includes the power to dispose of, or direct the disposition
of such security) x x x. 14
Thus, the definition of "beneficial owner or beneficial ownership" in the SRC-IRR,
which is in consonance with the concept of "full beneficial ownership" in the FIA-
IRR, is, as stressed in the Decision, relevant in resolving only the question of who
is the beneficial owner or has beneficial ownership of each "specific stock" of the
63
public utility company whose stocks are under review. If the Filipino has
the voting power of the "specific stock", i.e., he can vote the stock or direct another
to vote for him, or the Filipino has the investment power over the "specific
stock", i.e., he can dispose of the stock or direct another to dispose of it for him, or
both, i.e., he can vote and dispose of that "specific stock" or direct another to vote
or dispose it for him, then such Filipino is the "beneficial owner" of that "specific
stock." Being considered Filipino, that "specific stock" is then to be counted as part
of the 60% Filipino ownership requirement under the Constitution. The right to the
dividends, jus fruendi - a right emanating from ownership of that "specific stock"
necessarily accrues to its Filipino "beneficial owner."
Once more, this is emphasized anew to disabuse any notion that the dividends
accruing to any particular stock are determinative of that stock's "beneficial
ownership." Dividend declaration is dictated by the corporation's unrestricted
retained earnings. On the other hand, the corporation's need of capital for
expansion programs and special reserve for probable contingencies may limit
retained earnings available for dividend declaration. 15 It bears repeating here that
the Court in the Gamboa Decision adopted the foregoing definition of the term
"capital" in Section 11, Article XII of the 1987 Constitution in express recognition
of the sensitive and vital position of public utilities both in the national economy
and for national security, so that the evident purpose of the citizenship requirement
is to prevent aliens from assuming control of public utilities, which may be
inimical to the national interest. 16 This purpose prescinds from the
"benefits"/dividends that are derived from or accorded to the particular stocks held
by Filipinos vis-a-vis the stocks held by aliens. So long as Filipinos have
controlling interest of a public utility corporation, their decision to declare more
dividends for a particular stock over other kinds of stock is their sole prerogative -
an act of ownership that would presumably be for the benefit of the public utility
corporation itself. Thus, as explained in the Decision:
In this regard, it would be apropos to state that since Filipinos own at least 60% of
the outstanding shares of stock entitled to vote directors, which is what the
Constitution precisely requires, then the Filipino stockholders control the
corporation, i.e., they dictate corporate actions and decisions, and they have all the
rights of ownership including, but not limited to, offering certain preferred shares
that may have greater economic interest to foreign investors - as the need for
capital for corporate pursuits (such as expansion), may be good for the corporation

that they own. Surely, these "true owners" will not allow any dilution of their
ownership and control if such move will not be beneficial to them. 17
Finally, as to how the SEC will classify or treat certain stocks with voting rights
held by a trust fund that is created by the public entity whose compliance with the
limitation on foreign ownership under the Constitution is under scrutiny, and how
the SEC will determine if such public utility does, in fact, control how the said
stocks will be voted, and whether, resultantly, the trust fund would be considered
as Philippine national or not - lengthily discussed in the dissenting opinion of
Justice Carpio - is speculative at this juncture. The Court cannot engage in
guesswork. Thus, there is need of an actual case or controversy before the Court
may exercise its power of judicial review. The movant's petition is not that actual
case or controversy.
Thus, the discussion of Justice Carpio' s dissenting opinion as to the voting
preferred shares created by respondent PLDT, their acquisition by BTF Holdings,
Inc., which appears to be a wholly-owned company of the PLDT Beneficial Trust
Fund (BTF), and whether or not it is respondent PLDT's management that controls
BTF and BTF Holdings, Inc. - all these are factual matters that are outside the
ambit of this Court's review which, as stated in the beginning, is confined to
determining whether or not the SEC committed grave abuse of discretion in issuing
SEC-MC No. 8; that is, whether or not SEC-MC No. 8 violated the ruling of the
Court in Gamboa v. Finance Secretary Teves, 18 and the resolution in Heirs of
Wilson P. Gamboa v. Finance Sec. Teves19denying the Motion for
Reconsideration therein as to the proper understanding of "capital".
To be sure, it would be more prudent and advisable for the Court to await the
SEC's prior determination of the citizenship of specific shares of stock held in trust
- based on proven facts - before the Court proceeds to pass upon the legality of
such determination.
As to whether respondent PLDT is currently in compliance with the Constitutional
provision regarding public utility entities, the Court must likewise await the SEC's
determination thereof applying SEC-MC No. 8. After all, as stated in the Decision,
it is the SEC which is the government agency with the competent expertise and the
mandate of law to make such determination.
In conclusion, the basic issues raised in the Motion having been duly considered
and passed upon by the Court in the Decision and no substantial argument having
64
been adduced to warrant the reconsideration sought, the Court resolves
to DENY the Motion with FINALITY.
WHEREFORE, the subject Motion for Reconsideration is hereby DENIED WITH
FINALITY. No further pleadings or motions shall be entertained in this case. Let
entry of final judgment be issued immediately.
Sulpicio Lines vs Sesante
1. Same; Damages; Exemplary Damages; In contracts and quasi-contracts, the
Court has the discretion to award exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner.+
2. Civil Law; Substitution of Heirs; Due Process; Substitution by the heirs is not a
matter of jurisdiction, but a requirement of due process.-
—Substitution by the heirs is not a matter of jurisdiction, but a requirement of due
process. It protects the right of due process belonging to any party, that in the event
of death the deceased litigant continues to be protected and properly represented in
the suit through the duly appointed legal representative of his estate. The
application of the rule on substitution depends on whether or not the action
survives the death of the litigant. Section 1, Rule 87 of the Rules of Court
enumerates the following actions that survive the death of a party, namely: (1)
recovery of real or personal property, or an interest from the estate; (2)
enforcement of liens on the estate; and (3) recovery of damages for an injury to
person or property. On the one hand, Section 5, Rule 86 of the Rules of Court lists
the actions abated by death as including: (1) claims for funeral expenses and those
for the last sickness of the decedent; (2) judgments for money; and (3) all claims
for money against the deceased, arising from contract, express or implied.
3. Same; Common Carriers; Contract of Carriage; A contract of carriage generates
a relation attended with public duty, neglect or malfeasance of the carrier’s
employees and gives ground for an action for damages.+
4. Same; Same; Vicarious Liability; Article 1759 of the Civil Code does not
establish a presumption of negligence because it explicitly makes the common
 65

carrier liable in the event of death or injury to passengers due to the negligence or
fault of the common carrier’s employees.+
5. Same; Same; Presumption of Negligence; The presumption of negligence
applies so long as there is evidence showing that: (a) a contract exists between the
passenger and the common carrier; and (b) the injury or death took place during the
existence of such contract.+
6. Same; Same; Fortuitous Events; For a common carrier to be absolved from
liability in case of force majeure, it is not enough that the accident was caused by a
fortuitous event. The common carrier must still prove that it did not contribute to
the occurrence of the incident due to its own or its employees’ negligence.+
12. Same; Same; Diligence Required of Common Carriers; The petitioner, as a
common carrier, was required to observe extraordinary diligence in ensuring the
safety of its passengers and their personal belongings.+
SULPICIO LINES, INC., Petitioner, v. NAPOLEON SESANTE, NOW
SUBSTITUTED BY MARIBEL ATILANO, KRISTEN MARIE, CHRISTIAN
IONE, KENNETH KERRN AND KARISNA KATE, ALL SURNAMED
SESANTE, Respondent.
DECISION

7. Same; Same; Breach of Contracts; Damages; Moral Damages; Moral damages BERSAMIN, J.:
may be recovered in an action upon breach of contract of carriage only when: (a)
Moral damages are meant to enable the injured party to obtain the means,
death of a passenger results, or (b) it is proved that the carrier was guilty of fraud
diversions or amusements in order to alleviate the moral suffering. Exemplary
and bad faith, even if death does not result.+
damages are designed to permit the courts to reshape behavior that is socially
8. Same; Same; Contract of Carriage; Damages; Moral Damages; The totality of deleterious in its consequence by creating negative incentives or deterrents against
the negligence by the officers and crew of M/V Princess of the Orient, coupled such behavior.
with the seeming indifference of the petitioner to render assistance to Sesante,
The Case
warranted the award of moral damages.+

9. Same; Same; Diligence Required of Common Carriers; The law requires the
This appeal seeks to undo and reverse the adverse decision promulgated on June
common carrier to observe the same diligence as the hotel keepers in case the
27, 2005,1 whereby the Court of Appeals (CA) affirmed with modification the
baggage remains with the passenger;otherwise, extraordinary diligence must be
judgment of the Regional Trial Court (RTC), Branch 91, in Quezon City holding
exercised.+
the petitioner liable to pay temperate and moral damages due to breach of contract
10. Same; Same; Same; By allowing him to board the vessel with his belongings of carriage.2chanrobleslaw
without any protest, the petitioner became sufficiently notified of such belongings.
Antecedents
So long as the belongings were brought inside the premises of the vessel, the
petitioner was thereby effectively notified and consequently duty-bound to observe
the required diligence in ensuring the safety of the belongings during the voyage.+ On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a
passenger vessel owned and operated by the petitioner, sank near Fortune Island in
11. Same; Same; Damages; Temperate Damages; Temperate damages may be
Batangas. Of the 388 recorded passengers, 150 were lost.3 Napoleon Sesante, then
recovered when some pecuniary loss has been suffered but the amount cannot,
a member of the Philippine National Police (PNP) and a lawyer, was one of the
from the nature of the case, be proven with certainty.+
passengers who survived the sinking. He sued the petitioner for breach of contract
and damages.4chanrobleslaw
 66

Sesante alleged in his complaint that the M/V Princess of the Orient left the Port of Costs of suit.
Manila while Metro Manila was experiencing stormy weather; that at around 11:00
p.m., he had noticed the vessel listing starboard, so he had gone to the uppermost SO ORDERED.10chanroblesvirtuallawlibrary
deck where he witnessed the strong winds and big waves pounding the vessel; that
The RTC observed that the petitioner, being negligent, was liable to Sesante
at the same time, he had seen how the passengers had been panicking, crying for
pursuant to Articles 1739 and 1759 of the Civil Code; that the petitioner had not
help and frantically scrambling for life jackets in the absence of the vessel's
established its due diligence in the selection and supervision of the vessel crew;
officers and crew; that sensing danger, he had called a certain Vency Ceballos
that the ship officers had failed to inspect the stowage of cargoes despite being
through his cellphone to request him to inform the proper authorities of the
aware of the storm signal; that the officers and crew of the vessel had not
situation; that thereafter, big waves had rocked the vessel, tossing him to the floor
immediately sent a distress signal to the Philippine Coast Guard; that the ship
where he was pinned by a long steel bar; that he had freed himself only after
captain had not called for then "abandon ship" protocol; and that based on the
another wave had hit the vessel;5 that he had managed to stay afloat after the vessel
report of the Board of Marine Inquiry (BMI), the erroneous maneuvering of the
had sunk, and had been carried by the waves to the coastline of Cavite and
vessel by the captain during the extreme weather condition had been the immediate
Batangas until he had been rescued; that he had suffered tremendous hunger, thirst,
and proximate cause of the sinking.
pain, fear, shock, serious anxiety and mental anguish; that he had sustained
injuries,6 and had lost money, jewelry, important documents, police uniforms and
The petitioner sought reconsideration, but the RTC only partly granted its motion
the .45 caliber pistol issued to him by the PNP; and that because it had committed
by reducing the temperate damages from P500,000.00 to
bad faith in allowing the vessel to sail despite the storm signal, the petitioner
P300,000.00.11chanrobleslaw
should pay him actual and moral damages of P500,000.00 and P1,000,000.00,
respectively.7chanrobleslaw
Dissatisfied, the petitioner appealed.12 It was pending the appeal in the CA when
Sesante passed away. He was substituted by his heirs.13chanrobleslaw
In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of
the Orient due to its having been cleared to sail from the Port of Manila by the Judgment of the CA
proper authorities; that the sinking had been due to force majeure; that it had not
been negligent; and that its officers and crew had also not been negligent because
they had made preparations to abandon the vessel because they had launched life On June 27, 2005, the CA promulgated its assailed decision. It lowered the
rafts and had provided the passengers assistance in that regard.8chanrobleslaw temperate damages to P120,000.00, which approximated the cost of Sesante's lost
personal belongings; and held that despite the seaworthiness of the vessel, the
Decision of the RTC petitioner remained civilly liable because its officers and crew had been negligent
in performing their duties.14chanrobleslaw
On October 12, 2001, the RTC rendered its judgment in favor of the
Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the
respondent,9 holding as follows:ChanRoblesVirtualawlibrary
motion.15chanrobleslaw
WHEREFORE, judgment is hereby rendered in favor of plaintiff Napoleon Sesante
and against defendant Sulpicio Lines, Inc., ordering said defendant to pay plaintiff: Hence, this appeal.

Temperate damages in the amount of P400,000.00; Issues

Moral damages in the amount of One Million Pesos (P1,000,000.00);


The petitioner attributes the following errors to
wit:ChanRoblesVirtualawlibrary
I
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF
MORAL DAMAGES, AS THE INSTANT CASE IS FOR ALLEGED
PERSONAL INJURIES PREDICATED ON BREACH OF CONTRACT OF
CARRIAGE, AND THERE BEING NO PROOF OF BAD FAITH ON THE
PART OF SULPICIO
II
THE ASSAILED DECISION ERRED IN SUSTAINING THE AMOUNT OF
MORAL DAMAGES AWARDED, THE SAME BEING UNREASONABLE,
EXCESSIVE AND UNCONSCIONABLE, AND TRANSLATES TO UNJUST
ENRICHMENT AGAINST SULPICIO
III
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF
TEMPERATE DAMAGES AS THE SAME CANNOT SUBSTITUTE FOR A
FAILED CLAIM FOR ACTUAL DAMAGES, THERE BEING NO
COMPETENT PROOF TO WARRANT SAID AWARD
IV
THE AWARD OF TEMPERATE DAMAGES IS UNTENABLE AS THE
REQUISITE NOTICE UNDER THE LAW WAS NOT GIVEN TO SULPICIO IN
ORDER TO HOLD IT LIABLE FOR THE ALLEGED LOSS OF SESANTE'S
PERSONAL BELONGINGS
V Section 16. Death of party; duty of counsel. - Whenever a party to a pending action
67
the CA, to THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF
RESPONDENT SESANTE IN THE INSTANT CASE, THE SAME BEING A
PERSONAL ACTION WHICH DOES NOT SURVIVE
VI
THE ASSAILED DECISION ERRED IN APPLYING ARTICLE 1759 OF THE
NEW CIVIL CODE AGAINST SULPICIO SANS A CLEAR-CUT FINDING OF
SULPICIO'S BAD FAITH IN THE INCIDENT16chanroblesvirtuallawlibrary
In other words, to be resolved are the following, namely: (1) Is the complaint for
breach of contract and damages a personal action that does not survive the death of
the plaintiff?; (2) Is the petitioner liable for damages under Article 1759 of
the Civil Code?; and (3) Is there sufficient basis for awarding moral and temperate
damages?
Ruling of the Court
The appeal lacks merit.
I
An action for breach of contract of carriage survives the death of the plaintiff
The petitioner urges that Sesante's complaint for damages was purely personal and
cannot be transferred to his heirs upon his death. Hence, the complaint should be
dismissed because the death of the plaintiff abates a personal action.
The petitioner's urging is unwarranted.
Section 16, Rule 3 of the Rules of Court lays down the proper procedure in the
event of the death of a litigant, viz.:ChanRoblesVirtualawlibrary
dies, and the claim is not thereby extinguished, it shall be the duty of his counsel to
inform the court within thirty (30) days after such death of the fact thereof, and to

give the name and address of his legal representative or representatives. Failure of
counsel to comply with his duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased,
without requiring the appointment of an executor or administrator and the court
may appoint a guardian ad litem for the minor heirs.
xxxx
Substitution by the heirs is not a matter of jurisdiction, but a requirement of due
process.17 It protects the right of due process belonging to any party, that in the
event of death the deceased litigant continues to be protected and properly
represented in the suit through the duly appointed legal representative of his
estate.18chanrobleslaw
The application of the rule on substitution depends on whether or not the action
survives the death of the litigant. Section 1, Rule 87 of the Rules of
Court enumerates the following actions that survive the death of a party, namely:
(1) recovery of real or personal property, or an interest from the estate; (2)
enforcement of liens on the estate; and (3) recovery of damages for an injury to
person or property. On the one hand, Section 5, Rule 86 of the Rules of Court lists
the actions abated by death as including: (1) claims for funeral expenses and those
for the last sickness of the decedent; (2) judgments for money; and (3) all claims
for money against the deceased, arising from contract, express or implied.
A contract of carriage generates a relation attended with public duty, neglect or
malfeasance of the carrier's employees and gives ground for an action for
damages.19 Sesante's claim against the petitioner involved his personal injury
caused by the breach of the contract of carriage. Pursuant to the aforecited rules,
the complaint survived his death, and could be continued by his heirs following the
rule on substitution.
II
The petitioner is liable for breach of contract of carriage
The petitioner submits that an action for damages based on breach of contract of
carriage under Article 1759 of the Civil Code should be read in conjunction with
68
Article 2201 of the same code; that although Article 1759 only provides for a
presumption of negligence, it does not envision automatic liability; and that it was
not guilty of bad faith considering that the sinking of M/V Princess of the Orient
had been due to a fortuitous event, an exempting circumstance under Article 1174
of the Civil Code.
The submission has no substance.
Article 1759 of the Civil Code does not establish a presumption of negligence
because it explicitly makes the common carrier liable in the event of death or
injury to passengers due to the negligence or fault of the common carrier's
employees. It reads:ChanRoblesVirtualawlibrary
Article 1759. Common carriers are liable for the death or injuries to passengers
through the negligence or willful acts of the former's employees, although such
employees may have acted beyond the scope of their authority or in violation of the
orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of
their employees.
The liability of common carriers under Article 1759 is demanded by the duty of
extraordinary diligence required of common carriers in safely carrying their
passengers.20chanrobleslaw
On the other hand, Article 1756 of the Civil Code lays down the presumption of
negligence against the common carrier in the event of death or injury of its
passenger, viz.:ChanRoblesVirtualawlibrary
Article 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in Articles 1733 and 1755.
Clearly, the trial court is not required to make an express finding of the common
carrier's fault or negligence.21 Even the mere proof of injury relieves the
passengers from establishing the fault or negligence of the carrier or its
employees.22 The presumption of negligence applies so long as there is evidence
showing that: (a) a contract exists between the passenger and the common carrier;
 69

and (b) the injury or death took place during the existence of such contract.23 In The petitioner has attributed the sinking of the vessel to the storm notwithstanding
such event, the burden shifts to the common carrier to prove its observance of its position on the seaworthiness of M/V Princess of the Orient. Yet, the findings of
extraordinary diligence, and that an unforeseen event or force majeure had caused the BMI directly contradicted the petitioner's attribution, as
the injury.24chanrobleslaw follows:ChanRoblesVirtualawlibrary

Sesante sustained injuries due to the buffeting by the waves and consequent 7. The Immediate and the Proximate Cause of the Sinking
sinking of M/V Princess of the Orient where he was a passenger. To exculpate
itself from liability, the common carrier vouched for the seaworthiness of M/V The Captain's erroneous maneuvers of the M/V Princess of the Orient minutes
Princess of the Orient, and referred to the BMI report to the effect that the severe before she sunk [sic] had caused the accident. It should be noted that during the
weather condition - a force majeure - had brought about the sinking of the vessel. first two hours when the ship left North Harbor, she was navigating smoothly
towards Limbones Point. During the same period, the ship was only subjected to
The petitioner was directly liable to Sesante and his heirs. the normal weather stress prevailing at the time. She was then inside Manila Bar.
The waves were observed to be relatively small to endanger the safety of the ship.
A common carrier may be relieved of any liability arising from a fortuitous event It was only when the MV Princess of the Orient had cleared Limbones Pt. while
pursuant to Article 117425cralawred of the Civil Code. But while it may free a navigating towards the direction of the Fortune Island when this agonizing
common carrier from liability, the provision still requires exclusion of human misfortune struck the ship.
agency from the cause of injury or loss.26 Else stated, for a common carrier to be
absolved from liability in case of force majeure, it is not enough that the accident Initially, a list of three degrees was observed. The listing of the ship to her portside
was caused by a fortuitous event. The common carrier must still prove that it did had continuously increased. It was at this point that the captain had misjudged the
not contribute to the occurrence of the incident due to its own or its employees' situation. While the ship continuously listed to her portside and was battered by big
negligence.27 We explained in Schmitz Transport & Brokerage Corporation v. waves, strong southwesterly winds, prudent judgement [sic] would dictate that the
Transport Venture, Inc.,28 as follows:ChanRoblesVirtualawlibrary Captain should have considerably reduced the ship's speed. He could have
immediately ordered the Chief Engineer to slacken down the speed. Meanwhile,
In order to be considered a fortuitous event, however, (1) the cause of the the winds and waves continuously hit the ship on her starboard side. The waves
unforeseen and unexpected occurrence, or the failure of the debtor to comply with were at least seven to eight meters in height and the wind velocity was a[t] 25
his obligation, must be independent of human will; (2) it must be impossible to knots. The MV Princess of the Orient being a close-type ship (seven decks, wide
foresee the event which constitute the caso fortuito, or if it can be foreseen it must and high superstructure) was vulnerable and exposed to the howling winds and
be impossible to avoid; (3) the occurrence must be such as to render it impossible ravaging seas. Because of the excessive movement, the solid and liquid cargo
for the debtor to fulfill his obligation in any manner; and (4) the obligor must be below the decks must have shifted its weight to port, which could have contributed
free from any participation in the aggravation of the injury resulting to the creditor. to the tilted position of the ship.

[T]he principle embodied in the act of God doctrine strictly requires that the act Minutes later, the Captain finally ordered to reduce the speed of the ship to 14
must be occasioned solely by the violence of nature. Human intervention is to be knots. At the same time, he ordered to put ballast water to the starboard-heeling
excluded from creating or entering into the cause of the mischief. When the effect tank to arrest the continuous listing of the ship. This was an exercise in futility
is found to be in part the result of the participation of man, whether due to his because the ship was already listing between 15 to 20 degrees to her portside. The
active intervention or neglect or failure to act, the whole occurrence is then ship had almost reached the maximum angle of her loll. At this stage, she was
humanized and removed from the rules applicable to the acts of God.29 (bold about to lose her stability.
underscoring supplied for emphasis)

Despite this critical situation, the Captain executed several starboard maneuvers.
Steering the course of the Princess to starboard had greatly added to her tilting. In
the open seas, with a fast speed of 14 knots, advance maneuvers such as this would
tend to bring the body of the ship in the opposite side. In navigational terms, this
movement is described as the centripetal force. This force is produced by the water
acting on the side of the ship away from the center of the turn. The force is
considered to act at the center of lateral resistance which, in this case, is the
centroid of the underwater area of the ship's side away from the center of the turn.
In the case of the Princess, when the Captain maneuvered her to starboard, her
body shifted its weight to port. Being already inclined to an angle of 15 degrees,
coupled with the instantaneous movement of the ship, the cargoes below deck
could have completely shifted its position and weight towards portside. By this
time, the ship being ravaged simultaneously by ravaging waves and howling winds
on her starboard side, finally lost her grip.30chanroblesvirtuallawlibrary
Even assuming the seaworthiness of the MA/ Princess of the Orient, the petitioner
could not escape liability considering that, as borne out by the aforequoted findings
of the BMI, the immediate and proximate cause of the sinking of the vessel had
been the gross negligence of its captain in maneuvering the vessel.
The Court also notes that Metro Manila was experiencing Storm Signal No. 1
during the time of the sinking.31 The BMI observed that a vessel like the M/V
Princess of the Orient, which had a volume of 13.734 gross tons, should have been
capable of withstanding a Storm Signal No. 1 considering that the responding
fishing boats of less than 500 gross tons had been able to weather through the same
waves and winds to go to the succor of the sinking vessel and had actually rescued
several of the latter's distressed passengers.32chanrobleslaw
III
The award of moral damages and temperate damages is proper
The petitioner argues that moral damages could be meted against a common carrier
only in the following instances, to wit: (1) in the situations enumerated by Article
2201 of the Civil Code; (2) in cases of the death of a passenger; or (3)where there
was bad faith on the part of the common carrier. It contends that none of these
instances obtained herein; hence, the award should be deleted.
70
We agree with the petitioner that moral damages may be recovered in an action
upon breach of contract of carriage only when: (a) death of a passenger results, or
(b) it is proved that the carrier was guilty of fraud and bad faith, even if death does
not result.33 However, moral damages may be awarded if the contractual breach is
found to be wanton and deliberately injurious, or if the one responsible acted
fraudulently or with malice or bad faith.34chanrobleslaw
The CA enumerated the negligent acts committed by the officers and crew of M/V
Princess of the Orient, viz.:ChanRoblesVirtualawlibrary
x x x. [W]hile this Court yields to the findings of the said investigation report, yet
it should be observed that what was complied with by Sulpicio Lines were only the
basic and minimal safety standards which would qualify the vessel as seaworthy. In
the same report however it also revealed that the immediate and proximate cause of
the sinking of the M/V Princess of the Orient was brought by the following:
erroneous maneuvering command of Captain Esrum Mahilum and due to the
weather condition prevailing at the time of the tragedy. There is no doubt that
under the circumstances the crew of the vessel were negligent in manning it. In fact
this was clearly established by the investigation of the Board of Marine Inquiry
where it was found that:ChanRoblesVirtualawlibrary
The Chief Mate, when interviewed under oath, had attested that he was not able to
make stability calculation of the ship vis-a-vis her cargo. He did not even know the
metacentric height (GM) of the ship whether it be positive or negative.
As cargo officer of the ship, he failed to prepare a detailed report of the ship's cargo
stowage plan.
He likewise failed to conduct the soundings (measurement) of the ballast tanks
before the ship departed from port. He readily presumed that the ship was full of
ballast since the ship was fully ballasted when she left Cebu for Manila on 16
September 1998 and had never discharge[d] its contents since that time.
Being the officer-in-charge for emergency situation (sic) like this, he failed to
execute and supervise the actual abandonship (sic) procedure. There was no
announcement at the public address system of abandonship (sic), no orderly
distribution of life jackets and no orderly launching of life rafts. The witnesses
have confirmed this finding on their sworn statements.

There was miscalculation in judgment on the part of the Captain when he
erroneously navigated the ship at her last crucial moment. x x x
To aggravate his case, the Captain, having full command and responsibility of the
MV Princess of the Orient, had failed to ensure the proper execution of the actual
abandoning of the ship.
The deck and engine officers (Second Mate, Third Mate, Chief Engineers, Second
Engineer, Third Engineer and Fourth Engineer), being in charge of their respective
abandonship (sic) post, failed to supervise the crew and passengers in the proper
execution of abandonship (sic) procedure.
The Radio Officer (spark) failed to send the SOS message in the internationally
accepted communication network (VHF Channel 16). Instead, he used the Single
Side Band (SSB) radio in informing the company about the emergency situation. x
x x x35chanroblesvirtuallawlibrary
The aforestated negligent acts of the officers and crew of M/V Princess of the
Orient could not be ignored in view of the extraordinary duty of the common
carrier to ensure the safety of the passengers. The totality of the negligence by the
officers and crew of M/V Princess of the Orient, coupled with the seeming
indifference of the petitioner to render assistance to Sesante,36 warranted the
award of moral damages.
While there is no hard-and-fast rule in determining what is a fair and reasonable
amount of moral damages, the discretion to make the determination is lodged in the
trial court with the limitation that the amount should not be palpably and
scandalously excessive. The trial court then bears in mind that moral damages are
not intended to impose a penalty on the wrongdoer, or to enrich the plaintiff at the
expense of the defendant.37 The amount of the moral damages must always
reasonably approximate the extent of injury and be proportional to the wrong
committed.38chanrobleslaw
The Court recognizes the mental anguish, agony and pain suffered by Sesante who
fought to survive in the midst of the raging waves of the sea while facing the
immediate prospect of losing his life. His claim for moral and economic
vindication is a bitter remnant of that most infamous tragedy that left hundreds of
families broken in its wake. The anguish and moral sufferings he sustained after
71
surviving the tragedy would always include the memory of facing the prospect of
his death from drowning, or dehydration, or being preyed upon by sharks. Based
on the established circumstances, his survival could only have been a miracle
wrought by God's grace, by which he was guided in his desperate swim for the
safety of the shore. But even with the glory of survival, he still had to grapple with
not just the memory of having come face to face with almost certain death, but also
with having to answer to the instinctive guilt for the rest of his days of being
chosen to live among the many who perished in the tragedy.39chanrobleslaw
While the anguish, anxiety, pain and stress experienced by Sesante during and after
the sinking cannot be quantified, the moral damages to be awarded should at least
approximate the reparation of all the consequences of the petitioner's negligence.
With moral damages being meant to enable the injured party to obtain the means,
diversions or amusements in order to alleviate his moral and physical
sufferings,40 the Court is called upon to ensure that proper recompense be allowed
to him, through his heirs. For this purpose, the amount of P1,000,000.00, as
granted by the RTC and affirmed by the CA, is maintained.
The petitioner contends that its liability for the loss of Sesante's personal
belongings should conform with Article 1754, in relation to Articles 1998, 2000 to
2003 of the Civil Code, which provide:ChanRoblesVirtualawlibrary
Article 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's
baggage which is not in his personal custody or in that of his employees. As to
other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the
responsibility of hotel-keepers shall be applicable.
x x x x
Article 1998. The deposit of effects made by travellers in hotels or inns shall also
be regarded as necessary. The keepers of hotels or inns shall be responsible for
them as depositaries, provided that notice was given to them, or to their employees,
of the effects brought by the guests and that, on the part of the latter, they take the
precautions which said hotel-keepers or their substitutes advised relative to the care
and vigilance of their effects.
x x x x
 72

Article 2000. The responsibility referred to in the two preceding articles shall
include the loss of, or injury to the personal property of the guests caused by the
servants or employees of the keepers of hotels or inns as well as by strangers; but
not that which may proceed from any force majeure. The fact that travellers are
constrained to rely on the vigilance of the keeper of the hotel or inn shall be
considered in determining the degree of care required of him.
Article 2001. The act of a thief or robber, who has entered the hotel is not
deemed force majeure, unless it is done with the use of arms or through an
irresistible force.
Article 2002. The hotel-keeper is not liable for compensation if the loss is due to
the acts of the guest, his family, servants or visitors, or if the loss arises from the
character of the things brought into the hotel.
Article 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest. Any
stipulation to the contrary between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in Articles 1998 to 2001 is suppressed or
diminished shall be void.
common carrier attaches even if the loss or damage to the belongings resulted from
the acts of the common carrier's employees, the only exception being where such
loss or damages is due to force majeure.42chanrobleslaw
In YHT Realty Corporation v. Court of Appeals,43 we declared the actual delivery
of the goods to the innkeepers or their employees as unnecessary before liability
could attach to the hotelkeepers in the event of loss of personal belongings of their
guests considering that the personal effects were inside the hotel or inn because the
hotelkeeper shall remain accountable.44 Accordingly, actual notification was not
necessary to render the petitioner as the common carrier liable for the lost personal
belongings of Sesante. By allowing him to board the vessel with his belongings
without any protest, the petitioner became sufficiently notified of such belongings.
So long as the belongings were brought inside the premises of the vessel, the
petitioner was thereby effectively notified and consequently duty-bound to observe
the required diligence in ensuring the safety of the belongings during the voyage.
Applying Article 2000 of the Civil Code, the petitioner assumed the liability for
loss of the belongings caused by the negligence of its officers or crew. In view of
our finding that the negligence of the officers and crew of the petitioner was the
immediate and proximate cause of the sinking of the M/V Princess of the Orient,
its liability for Sesante's lost personal belongings was beyond question.

The petitioner denies liability because Sesante's belongings had remained in his The petitioner claims that temperate damages were erroneously awarded because
custody all throughout the voyage until the sinking, and he had not notified the Sesante had not proved pecuniary loss; and that the CA merely relied on his self-
petitioner or its employees about such belongings. Hence, absent such notice, serving testimony.
liability did not attach to the petitioner.
The award of temperate damages was proper.
Is notification required before the common carrier becomes liable for lost
belongings that remained in the custody of the passenger? Temperate damages may be recovered when some pecuniary loss has been suffered
but the amount cannot, from the nature of the case, be proven with
We answer in the negative. certainty.45 Article 222446 of the Civil Codeexpressly authorizes the courts to
award temperate damages despite the lack of certain proof of actual
The rule that the common carrier is always responsible for the passenger's baggage damages.47chanrobleslaw
during the voyage needs to be emphasized. Article 1754 of the Civil Code does not
exempt the common carrier from liability in case of loss, but only highlights the Indubitably, Sesante suffered some pecuniary loss from the sinking of the vessel,
degree of care required of it depending on who has the custody of the belongings. but the value of the loss could not be established with certainty. The CA, which can
Hence, the law requires the common carrier to observe the same diligence as the try facts and appreciate evidence, pegged the value of the lost belongings as
hotel keepers in case the baggage remains with the passenger; otherwise, itemized in the police report at P120,000.00. The valuation approximated the costs
extraordinary diligence must be exercised.41 Furthermore, the liability of the of the lost belongings. In that context, the valuation of P120,000.00 is correct, but

to be regarded as temperate damages.
In fine, the petitioner, as a common carrier, was required to observe extraordinary
diligence in ensuring the safety of its passengers and their personal belongings. It
being found herein short of the required diligence rendered it liable for the
resulting injuries and damages sustained by Sesante as one of its passengers.
Should the petitioner be further held liable for exemplary damages?
In contracts and quasi-contracts, the Court has the discretion to award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.48 Indeed, exemplary damages cannot be recovered as a matter
of right, and it is left to the court to decide whether or not to award them.49 In
consideration of these legal premises for the exercise of the judicial discretion to
grant or deny exemplary damages in contracts and quasi-contracts against a
defendant who acted in a wanton, fraudulent,' reckless, oppressive, or malevolent
manner, the Court hereby awards exemplary damages to Sesante.
First of all, exemplary damages did not have to be specifically pleaded or proved,
because the courts had the discretion to award them for as long as the evidence so
warranted. In Marchan v. Mendoza,50 the Court has relevantly
discoursed:ChanRoblesVirtualawlibrary
x x x. It is argued that this Court is without jurisdiction to adjudicate this
exemplary damages since there was no allegation nor prayer, nor proof, nor
counterclaim of error for the same by the appellees. It is to be observed however,
that in the complaint, plaintiffs "prayed for such other and further relief as this
Court may deem just and equitable." Now, since the body of the complaint sought
to recover damages against the defendant-carrier wherein plaintiffs prayed for
indemnification for the damages they suffered as a result of the negligence of said
Silverio Marchan who is appellant's employee; and since exemplary damages is
intimately connected with general damages, plaintiffs may not be expected to
single out by express term the kind of damages they are trying to recover against
the defendant's carrier. Suffice it to state that when plaintiffs prayed in their
complaint for such other relief and remedies that may be availed of under the
premises, in effect, therefore, the court is called upon to exercise and use its
discretion whether the imposition of punitive or exemplary damages even though
not expressly prayed or pleaded in the plaintiffs' complaint.
73
x x x It further appears that the amount of exemplary damages need not be proved,
because its determination depends upon the amount of compensatory damages that
may be awarded to the claimant. If the amount of exemplary damages need not be
proved, it need not also be alleged, and the reason is obvious because it is merely
incidental or dependent upon what the court may award as compensatory damages.
Unless and until this premise is determined and established, what may be claimed
as exemplary damages would amount to a mere surmise or speculation. It follows
as a necessary consequence that the amount of exemplary damages need not be
pleaded in the complaint because the same cannot be predetermined. One can
merely ask that it be determined by the court if in the use of its discretion the same
is warranted by the evidence, and this is just what appellee has done. (Bold
underscoring supplied for emphasis)
And, secondly, exemplary damages are designed by our civil law to "permit the
courts to reshape behavior that is socially deleterious in its consequence by
creating negative incentives or deterrents against such behavior."51 The nature and
purpose for this kind of damages have been well-stated in People v. Dalisay,52 to
wit:ChanRoblesVirtualawlibrary
Also known as 'punitive' or 'vindictive' damages, exemplary or corrective damages
are intended to serve as a deterrent to serious wrong doings, and as a vindication of
undue sufferings and wanton invasion of the rights of an injured or a punishment
for those guilty of outrageous conduct. These terms are generally, but not always,
used interchangeably. In common law, there is preference in the use of exemplary
damages when the award is to account for injury to feelings and for the sense of
indignity and humiliation suffered by a person as a result of an injury that has been
maliciously and wantonly inflicted, the theory being that there should be
compensation for the hurt caused by the highly reprehensible conduct of the
defendant - associated with such circumstances as willfulness, wantonness, malice,
gross negligence or recklessness, oppression, insult or fraud or gross fraud - that
intensifies the injury. The terms punitive or vindictive damages are often used to
refer to those species of damages that may be awarded against a person to punish
him for his outrageous conduct. In either case, these damages are intended in good
measure to deter the wrongdoer and others like him from similar conduct in the
future. (Bold underscoring supplied for emphasis)
The BMI found that the "erroneous maneuvers" during the ill-fated voyage by the
captain of the petitioner's vessel had caused the sinking. After the vessel had

cleared Limbones Point while navigating towards the direction of Fortune Island,
the captain already noticed the listing of the vessel by three degrees to the portside
of the vessel, but, according to the BMI, he did not exercise prudence as required
by the situation in which his vessel was suffering the battering on the starboard
side by big waves of seven to eight meters high and strong southwesterly winds of
25 knots. The BMI pointed out that he should have considerably reduced the speed
of the vessel based on his experience about the vessel - a close-type ship of seven
decks, and of a wide and high superstructure - being vulnerable if exposed to
strong winds and high waves. He ought to have also known that maintaining a high
speed under such circumstances would have shifted the solid and liquid cargo of
the vessel to port, worsening the tilted position of the vessel. It was only after a few
minutes thereafter that he finally ordered the speed to go down to 14 knots, and to
put ballast water to the starboard-heeling tank to arrest the continuous listing at
portside. By then, his moves became an exercise in futility because, according to
the BMI, the vessel was already listing to her portside between 15 to 20 degrees,
which was almost the maximum angle of the vessel's loll. It then became inevitable
for the vessel to lose her stability.
The BMI concluded that the captain had executed several starboard maneuvers
despite the critical situation of the vessel, and that the maneuvers had greatly added
to the tilting of the vessel. It observed:ChanRoblesVirtualawlibrary
x x x In the open seas, with a fast speed of 14 knots, advance maneuvers such as
this would tend to bring the body of the ship in the opposite side. In navigational
terms, this movement is described as the centripetal force. This force is produced
by the water acting on the side of the ship away from the center of the turn. The
force is considered to act at the center of lateral resistance which, in this case, is the
centroid of the underwater area of the ship's side away from the center of the turn.
In the case of the Princess, when the Captain maneuvered her to starboard, her
body shifted its weight to port. Being already inclined to an angle of 15 degrees,
coupled with the instantaneous movement of the ship, the cargoes below deck
could have completely shifted its position and weight towards portside. By this
time, the ship being ravaged simultaneously by ravaging waves and howling winds
on her starboard side, finally lost her grip.53chanroblesvirtuallawlibrary
Clearly, the petitioner and its agents on the scene acted wantonly and
recklessly. Wanton and recklessare virtually synonymous in meaning as respects
liability for conduct towards others.54Wanton means characterized by extreme
74
recklessness and utter disregard for the rights of others; or marked by or
manifesting arrogant recklessness of justice or of rights or feelings of
others.55 Conduct is reckless when it is an extreme departure from ordinary care,
in a situation in which a high degree of danger is apparent. It must be more than
any mere mistake resulting from inexperience, excitement, or confusion, and more
than mere thoughtlessness or inadvertence, or simple inattention.56chanrobleslaw
The actuations of the petitioner and its agents during the incident attending the
unfortunate sinking of the M/V Princess of the Orient were far below the standard
of care and circumspection that the law on common carriers demanded.
Accordingly, we hereby fix the sum of P1,000,000.00 in order to serve fully the
objective of exemplarity among those engaged in the business of transporting
passengers and cargo by sea. The amount would not be excessive, but proper. As
the Court put it in Pereña v. Zarate:57
Anent the P1,000,000.00 allowed as exemplary damages, we should not reduce the
amount if only to render effective the desired example for the public good. As a
common carrier, the Perenas needed to be vigorously reminded to observe their
duty to exercise extraordinary diligence to prevent a similarly senseless accident
from happening again. Only by an award of exemplary damages in that amount
would suffice to instill in them and others similarly situated like them the ever-
present need for greater and constant vigilance in the conduct of a business imbued
with public interest.58 (Bold underscoring supplied for emphasis)
WHEREFORE, the Court AFFIRMS the decision promulgated on June 27, 2005
with the MODIFICATIONS that: (a) the amount of moral damages is fixed at
P1,000,000.00; (b) the amount of P1,000,000.00 is granted as exemplary damages;
and (c) the sum of P120,000.00 is allowed as temperate damages, all to be paid to
the heirs of the late Napoleon Sesante. In addition, all the amounts hereby awarded
shall earn interest of 6% per annum from the finality of this decision until fully
paid. Costs of suit to be paid by the petitioner.
BPI Savings Bank vs Syjuco

1. Remedial Law; Civil Procedure; Venue; Personal Actions; In civil proceedings,
venue is procedural, not jurisdictional, and may be waived by the defendant if not
seasonably raised either in a motion to dismiss or in the answer.-
—We underscore that in civil proceedings, venue is procedural, not jurisdictional,
and may be waived by the defendant if not seasonably raised either in a motion to
dismiss or in the answer. Section 1, Rule 9 of the Rules of Court thus expressly
stipulates that defenses and objections not pleaded either in a motion to dismiss or
in the answer are deemed waived. As it relates to the place of trial, indeed, venue is
meant to provide convenience to the parties, rather than to restrict their access to
the courts. In other words, unless the defendant seasonably objects, any action may
be tried by a court despite its being the improper venue.
2. Actions; Real Actions; According to Section 1, Rule 4 of the Rules of Court, a
real action is one that affects title to or possession of real property, or an interest
therein.-
—It is basic that the venue of an action depends on whether it is a real or a
personal action. The determinants of whether an action is of a real or a personal
nature have been fixed by the Rules of Court and relevant jurisprudence.
According to Section 1, Rule 4 of the Rules of Court, a real action is one that
affects title to or possession of real property, or an interest therein. Thus, an action
for partition or condemnation of, or foreclosure of mortgage on, real property is a
real action. The real action is to be commenced and tried in the proper court having
jurisdiction over the area wherein the real property involved, or a portion thereof, is
situated, which explains why the action is also referred to as a local action. In
contrast, the Rules of Court declares all other actions as personal actions. Such
actions may include those brought for the recovery of personal property, or for the
enforcement of some contract or recovery of damages for its breach, or for the
recovery of damages for the commission of an injury to the person or property. The
venue of a personal action is the place where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the principal defendants resides,
or in the case of a nonresident defendant where he may be found, at the election of
the plaintiff, for which reason the action is considered a transitory one.
3. Same; Personal Actions; An action to recover the deficiency after the
extrajudicial foreclosure of the real property mortgage is a personal action, for it
does not affect title to or possession of real property, or any interest therein.-
75
—Based on the distinctions between real and personal actions, an action to recover
the deficiency after the extrajudicial foreclosure of the real property mortgage is a
personal action, for it does not affect title to or possession of real property, or any
interest therein.
BPI FAMILY SAVINGS BANK, INC., Petitioner, v. SPOUSES BENEDICTO &
TERESITA YUJUICO, Respondents.
DECISION
BERSAMIN, J.:
An action to recover the deficiency after extrajudicial foreclosure of a real property
mortgage is a personal action because it does not affect title to or possession of real
property, or any interest therein.
The Case
This appeal is taken by the petitioner to overturn the decision promulgated on
March 31, 2006,1 whereby the Court of Appeals (CA) set aside the orders issued
by the Regional Trial Court, Branch 60, in Makati City (Makati RTC) on October
17, 20032 and February 1, 20053 dismissing their action against the respondents to
recover the deficiency after the extrajudicial foreclosure of their mortgage (Civil
Case No. 03-450) on the ground of improper venue.
Antecedents
On August 22, 1996, the City of Manila filed a complaint against the respondents
for the expropriation of five parcels of land located in Tondo, Manila and
registered in the name of respondent Teresita Yujuico. Two of the parcels of land,
covered by Transfer Certificate of Title (TCT) No. 261331 and TCT No. 261332,
were previously mortgaged to Citytrust Banking Corporation, the petitioner’s
predecessor-in-interest, under a First Real Estate Mortgage Contract.4 On June 30,
2000, the Regional Trial Court in Manila (Manila RTC) rendered its judgment
declaring the five parcels of land expropriated for public use. The judgment
became final and executory on January 28, 2001 and was entered in the book of
 76

entries of judgment on March 23, 2001.5 The petitioner subsequently filed

a Motion to Intervene in Execution with Partial Opposition to Defendant’s Request
to Release, but the RTC denied the motion for having been “filed out of time.”
Hence, the petitioner decided to extrajudicially foreclose the mortgage constituted
on the two parcels of land subject of the respondents’ loan. After holding the public
auction, the sheriff awarded the two lots to the petitioner as the highest bidder at
P10,000,000.00.6redarclaw
Claiming a deficiency amounting to P18,522.155.42, the petitioner sued the
respondents to recover such deficiency in the Makati RTC (Civil Case No. 03-
450). The respondents moved to dismiss the complaint on several grounds, namely:
that the suit was barred by res judicata; that the complaint stated no cause of action;
and that the plaintiff’s claim had been waived, abandoned, or
extinguished.7redarclaw
In its order issued on October 17, 2003, the Makati RTC denied the respondents’
motion to dismiss, ruling that there was no res judicata; that the complaint stated a
sufficient cause of action to recover the deficiency; and that there was nothing to
support the claim that the obligation had been abandoned or extinguished apart
from the respondents’ contention that the properties had been subjected to
expropriation by the City of Manila.8redarclaw
On November 4, 2003, the respondents moved for reconsideration, reiterating their
grounds earlier made in their motion to dismiss.9redarclaw
ChanRoblesVirtualawlibrary
It would be improper for this Court to dismiss the plaintiff’s complaint on the
ground of improper venue, assuming that the venue is indeed improperly laid, since
the said ground was not raised in the defendant’s Motion to Dismiss. On this point,
it was held in the case of Malig, et al. vs. Bush, L-22761, May 31, 1969 that “an
action cannot be dismissed on a ground not alleged in the motion therefore even if
said ground, e.g., prescription, is provided in Rule 16.13
Decision of the CA
Not satisfied, the respondents assailed the orders dated October 17, 2003 and
February 1, 2005 by petition for certiorari.14 They submitted for consideration by
the CA the following issues, namely:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
x x x (WHETHER OR NOT) RESPONDENT TRIAL COURT COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT ISSUED ITS ASSAILED ORDERS CONSIDERING
THAT:LawlibraryofCRAlaw

In turn, the petitioner adopted its comment/opposition to the motion to A. THE COMPLAINT A QUO IS BARRED BY RES JUDICATA.
dismiss.10redarclaw
B. THE COMPLAINT STATED NO CAUSE OF ACTION.
The respondents then filed their reply,11 in which they raised for the first time their
objection on the ground of improper venue. They contended that the action for the C. PRIVATE RESPONDENT’S CLAIM HAS BEEN WAIVED, ABANDONED
recovery of the deficiency, being a supplementary action of the extrajudicial OR OTHERWISE EXTINGUISHED.
foreclosure proceedings, was a real action that should have been brought in the
Manila RTC because Manila was the place where the properties were D. VENUE WAS IMPROPERLY LAID.15
located.12redarclaw

On March 31, 2006, the CA granted the petition for certiorari of the respondents on
On February 1, 2005, the Makati RTC denied the respondents’ motion for
the basis of the fourth issue, opining:LawlibraryofCRAlaw
reconsideration for its lack of merit; and held on the issue of improper venue
that:LawlibraryofCRAlaw
 77

ChanRoblesVirtualawlibrary WHETHER OR NOT THE HONORABLE COURT OF APPEALS’ DENIAL OF

THE PETITIONER’S PARTIAL MOTION FOR RECONSIDERATION ON THE
x x x x GROUND OF IMPROPER VENUE AS A RESULT DISMISSED THE
COMPLAINT FOR SUM OF MONEY IS CONTRARY TO LAW.
Thus, a suit for recovery of the deficiency after the foreclosure of a mortgage is in
the nature of a mortgage action because its purpose is precisely to enforce the II.
mortgage contract; it is upon a written contract and upon an obligation of the
mortgage-debtor to pay the deficiency which is created by law. As such, the venue
of an action for recovery of deficiency must necessarily be the same venue as that WHETHER OR NOT THE HONORABLE COURT OF APPEALS[‘] ACT OF
of the extrajudicial foreclosure of mortgage. APPRECIATING THE ADDITIONAL GROUND OF IMPROPER VENUE,
ONLY RAISED IN THE MOTION FOR RECONSIDERATION FILED IN THE
x x x x LOWER COURT AFTER IT DENIED RESPONDENTS’ MOTION TO
DISMISS, IS CONTRARY TO LAW AND JURISPRUDENCE.19
In this regard, We take note that the parcels of land subject of the mortgage
contract are located in Tondo, Manila, under Transfer Certificates of Title Nos.
216331 and 216332. On the other hand, the extrajudicial foreclosure of the real Ruling of the Court
estate mortgage took place at the RTC of Manila on January 28, 2003. Thus, the
suit for judgment on the deficiency filed by respondent BPI against petitioners
Yujuico, being an action emanating from the foreclosure of the real estate We grant the petition for review on certiorari.
mortgage contract between them, must necessarily be filed also at the RTC of
Manila, not at the RTC of Makati. It is basic that the venue of an action depends on whether it is a real or a personal
action. The determinants of whether an action is of a real or a personal nature have
x x x x16 been fixed by the Rules of Court and relevant jurisprudence. According to Section
1, Rule 4 of the Rules of Court, a real action is one that affects title to or possession
of real property, or an interest therein. Thus, an action for partition or
The CA denied the respondents’ Motion for Partial Reconsideration and the condemnation of, or foreclosure of mortgage on, real property is a real
petitioner’s Partial Motion for Reconsideration on December 7, 2006.17redarclaw action.20 The real action is to be commenced and tried in the proper court having
jurisdiction over the area wherein the real property involved, or a portion thereof, is
Issues
situated, which explains why the action is also referred to as a local action. In
contrast, the Rules of Court declares all other actions as personal actions.21 Such
Hence, this appeal by the petitioner, to assail the CA’s dismissal of Civil Case No. actions may include those brought for the recovery of personal property, or for the
03-450 on the ground of improper venue upon the following enforcement of some contract or recovery of damages for its breach, or for the
grounds,18 namely:LawlibraryofCRAlaw recovery of damages for the commission of an injury to the person or
property.22 The venue of a personal action is the place where the plaintiff or any of
ChanRoblesVirtualawlibrary the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be
I. found, at the election of the plaintiff,23 for which reason the action is considered a

transitory one.
Based on the distinctions between real and personal actions, an action to recover
the deficiency after the extrajudicial foreclosure of the real property mortgage is a
personal action, for it does not affect title to or possession of real property, or any
interest therein.
It is true that the Court has said in Caltex Philippines, Inc. v. Intermediate
Appellate Court24 that “a suit for the recovery of the deficiency after the
foreclosure of a mortgage is in the nature of a mortgage action because its purpose
is precisely to enforce the mortgage contract.” However, the CA erred in holding,
upon the authority of Caltex Philippines, Inc., that the venue of Civil Case No. 03-
450 must necessarily be Manila, the same venue as that of the extrajudicial
foreclosure of mortgage. An examination of Caltex Philippines, Inc. reveals that
the Court was thereby only interpreting the prescriptive period within which to
bring the suit for the recovery of the deficiency after the foreclosure of the
mortgage, and was not at all ruling therein on the venue of such suit or on the
nature of such suit being either a real or a personal action.
Given the foregoing, the petitioner correctly brought Civil Case No. 03-450 in the
Makati RTC because Makati was the place where the main office of the petitioner
was located.
Moreover, the Makati RTC observed, and the observation is correct in our view,
that it would be improper to dismiss Civil Case No. 03-450 on the ground of
improper venue, assuming that the venue had been improperly laid, considering
that the respondents had not raised such ground in their Motion to Dismiss. As
earlier indicated, they came to raise the objection of improper venue for the first
time only in their reply to the petitioner’s comment on their Motion for
Reconsideration. They did so belatedly.
We underscore that in civil proceedings, venue is procedural, not jurisdictional,
and may be waived by the defendant if not seasonably raised either in a motion to
dismiss or in the answer.25 Section 1, Rule 9 of the Rules of Court thus expressly
stipulates that defenses and objections not pleaded either in a motion to dismiss or
in the answer are deemed waived. As it relates to the place of trial, indeed, venue is
meant to provide convenience to the parties, rather than to restrict their access to
the courts.26 In other words, unless the defendant seasonably objects, any action
78
may be tried by a court despite its being the improper venue.
WHEREFORE, we GRANT the petition for review
on certiorari; REVERSE and SET ASIDE the decision promulgated by the Court
of Appeals on March 31, 2006; REINSTATE the orders dated October 17, 2003
and February 1, 2005 of the Regional Trial Court, Branch 60, in Makati City;
and ORDER the respondents to pay the costs of suit.
Fairland Knitcraft vs Po
1. Same; Judicial Affidavit Rule; In the Judicial Affidavit Rule (JAR), the
attachments of documentary or object evidence to the affidavits is required when
there would be a pretrial or preliminary conference or the scheduled hearing.+
2. Remedial Law; Special Civil Actions; Unlawful Detainer; A complaint
sufficiently alleges a cause of action for unlawful detainer if it recites the
following: (1) initially, possession of the property by the defendant was by contract
with or by tolerance of the plaintiff; (2) eventually, such possession became illegal
upon notice by the plaintiff to the defendant of the termination of the latter’s right
of possession; (3) thereafter, the defendant remained in possession of the property,
and deprived the plaintiff of the enjoyment thereof; and (4) within one (1) year
from the last demand on defendant to vacate the property, the plaintiff instituted
the complaint for ejectment.-
—Stated differently, unlawful detainer is a summary action for the recovery of
possession of real property. This action may be filed by a lessor, vendor, vendee, or
other person from 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. The possession of the defendant was originally
legal, as his possession was permitted by the plaintiff on account of an express or
implied contract between them. The defendant’s possession, however, became
illegal when the plaintiff demanded that the defendant vacate the subject property
due to the expiration or termination of the right to possess under the contract, and
the defendant refused to heed such demand. A case for unlawful detainer must be
instituted one year from the unlawful withholding of possession. A complaint

sufficiently alleges a cause of action for unlawful detainer if it recites the
following: (1) initially, possession of the property by the defendant was by contract
with or by tolerance of the plaintiff; (2) eventually, such possession became illegal
upon notice by the plaintiff to the defendant of the termination of the latter’s right
of possession; (3) thereafter, the defendant remained in possession of the property,
and deprived the plaintiff of the enjoyment thereof; and (4) within one (1) year
from the last demand on defendant to vacate the property, the plaintiff instituted
the complaint for ejectment.
3. Same; Same; Same; Forcible Entry; Under Section 7, Rule 70 of the Rules of
Court, which governs the rules for forcible entry and unlawful detainer, if the
defendant fails to answer the complaint within the period provided, the court has
no authority to declare the defendant in default. Instead, the court, motu proprio or
on motion of the plaintiff, shall render judgment as may be warranted by the facts
alleged in the complaint and limited to what is prayed for.+
4. Same; Same; Same; Same; Summary Procedure; Forcible entry and unlawful
detainer cases are summary proceedings designed to provide for an expeditious
means of protecting actual possession or the right to possession of the property
involved; Thus, as a consequence of the defendant’s failure to file an answer, the
court is simply tasked to render judgment as may be warranted by the facts alleged
in the complaint and limited to what is prayed for therein.-
—These specific provisions under the Rules of Summary Procedure which are also
reflected in Rule 70 of the Rules of Court, serve their purpose to immediately settle
ejectment proceedings. “Forcible entry and unlawful detainer cases are summary
proceedings designed to provide for an expeditious means of protecting actual
possession or the right to possession of the property involved. It does not admit of
a delay in the determination thereof. It is a ‘time procedure’ designed to remedy the
situation.” Thus, as a consequence of the defendant’s failure to file an answer, the
court is simply tasked to render judgment as may be warranted by the facts alleged
in the complaint and limited to what is prayed for therein.
FAIRLAND KNITCRAFT CORPORATION, Petitioner, v. ARTURO LOO
PO, Respondent.
DECISION
79
MENDOZA, J.:
This is a petition for review on certiorari1 seeking to reverse and set aside the
October 31, 2014 Decision2and the March 6, 2015 Resolution3 of the Court of
Appeals (CA), in CA-G.R. SP No. 134701 which affirmed the September 16, 2013
Decision4 of the Regional Trial Court of Pasig City, Branch 67 (RTC) in SCA
Case No. 3831. The RTC decision, in turn, sustained the March 21, 2013
Decision5 of the Metropolitan Trial Court, Branch 72, Pasig City (MeTC), which
dismissed the unlawful detainer case filed by petitioner Fairland Knitcraft
Corporation (Fairland) against respondent Arturo Loo Po (Po) for failure to prove
its case by preponderance of evidence.
The Antecedents
In a complaint6 for unlawful detainer, docketed as Civil Case No. 19429, filed
before the MeTC, Fairland alleged that it was the owner of Condominium Unit No.
205 in Cedar Mansion II on Ma. Escriba Street, Pasig City. The said unit was
leased by Fairland to Po by verbal agreement, with a rental fee of P20,000.00 a
month, to be paid by Po at the beginning of each month. From March 2011, Po had
continuously failed to pay rent. For said reason, Fairland opted not to renew the
lease agreement anymore.
On January 30, 2012, Fairland sent a formal letter7 to Po demanding that he pay
the amount of P220,000.00, representing the rental arrears, and that he vacate the
leased premises within fifteen (15) days from the receipt of the letter. Despite
receipt of the demand letter and the lapse of the said 15-day period to comply, Po
neither tendered payment for the unpaid rent nor vacated the premises. Thus, on
December 12, 2012, Fairland was constrained to file the complaint for unlawful
detainer before the MeTC. Po had until January 7, 2013 to file his answer but he
failed to do so. Hence, on February 6, 2013, Fairland filed a motion to render
judgment.8
In its February 21, 2013 Order,9 the MeTC considered the case submitted for
decision.
On March 1, 2013, Po's counsel filed his Entry of Appearance with Motion for
Leave of Court to file Comment/Opposition to Motion to Render Judgment.10 In
the attached Comment/Opposition, Po denied the allegations against him and
 80

commented that there was no supporting document that would show that Fairland
owned the property; that there was no lease contract between them; that there were
no documents attached to the complaint which would show that previous demands
had been made and received by him; that the alleged unpaid rental was
P220,000.00, but the amount of damages being prayed for was P440,000.00; that
the issue in the case was one of ownership; and that it was the RTC which had
jurisdiction over the case.
defendant's acquiescence.
On July 18, 2013, Po filed his memorandum14 and countered that there was no
merit in Fairland's insistence that evidence was unnecessary when no answer had
been filed. The facts stated in the complaint did not warrant a rendition of
judgment in the plaintiffs favor. The court had the discretion to rule on the
pleadings based on its evaluation of the allegation of facts.

The MeTC treated the comment/opposition as Po's answer to the complaint. Further, all the statements in the complaint were mere allegations which were not
Considering, however, that the case fell under the Rules of Summary Procedure, substantiated by any competent evidence. Po asserted that there was no proof
the same was deemed filed out of time. Hence, the motion was denied.11 presented to show that the subject property was indeed owned by Fairland; that
there was no lease contract between the parties; that he never received the demand
The Ruling of the Metropolitan Trial Court letter, dated January 30, 2012; and that the amount stated in the prayer of the
complaint did not coincide with the amount of unpaid rent. Po also reiterated that
In its March 21, 2013 Decision, the MeTC dismissed the complaint for lack of the case involved an issue of ownership over the condominium unit he was
merit due to Fairland's failure to prove its claim by preponderance of evidence. The occupying.
MeTC explained that although the complaint sufficiently alleged a cause of action,
Fairland failed to prove that it was entitled to the possession of the subject The Ruling of the Regional Trial Court
property. There was no evidence presented to support its claim against Po either.
On September 16, 2013, the RTC affirmed the MeTC ruling and agreed that
Aggrieved, Fairland seasonably filed its appeal before the RTC under Rule 40 of Fairland failed to establish its case by preponderance of evidence. There was
the Rules of Court. Being an appealed case, the RTC required the parties to submit nothing on record that would establish Fairland's right over the property subject of
their respective memoranda. the complaint. Though it had been consistently ruled that the only issue for
resolution in an ejectment case was the physical or material possession of the
In its memorandum,12 Fairland argued that an unlawful detainer case was a special property involved, independent of any claim of ownership by any of the party-
civil action governed by summary procedure. In cases where a defendant failed to litigants, the court may go beyond the question of physical possession
file his answer, there was no need for a declaration of default. Fairland claimed that provisionally. The RTC concluded that even assuming that Po was not the lawful
the Rules stated that in such cases, judgment should be based on the "facts alleged owner, his actual physical possession of the subject property created the
in the complaint,"13 and that there was no requirement that judgment must be presumption that he was entitled to its possession thereof.
based on facts proved by preponderance of evidence. Considering that the
presentation of evidence was not required when a defendant in an ejectment case Fairland filed a motion for reconsideration15 attaching its condominium certificate
failed to appear in a preliminary conference, the same should be applied when no of title16 over the subject property, but it was denied by the RTC in its
answer had been filed. Order,17 dated February 24, 2014.

Fairland continued that the failure to file an answer in an ejectment case was Undaunted, Fairland filed a petition for review18 under Rule 42 of the Rules of
tantamount to an admission by the defendant of all the ultimate facts alleged in the Court before the CA.
complaint. There was no more need for evidence in such a situation as every
allegation of ultimate facts in the complaint was deemed established by the The Ruling of the Court of Appeals

In the assailed Decision, dated October 31, 2014, the CA dismissed the petition and
ruled that an action for unlawful detainer would not lie against Po. Notwithstanding
the abbreviated proceeding it ordained and the limited pleadings it allowed, the
Rules on Summary Procedure did not relax the rules on evidence. In order for an
action for recovery of possession to prosper, it was indispensable that he who
brought the action should prove not only his ownership but also the identity of the
property claimed. The CA concluded, however, that Fairland failed to discharge
such bounden duty.
Fairland filed its motion for reconsideration, but it was denied by the CA in its
assailed Resolution, dated March 6, 2015.
Hence, this petition.
ARGUMENTS/DISCUSSIONS
I The
IN AN EJECTMENT CASE WHEREIN NO ANSWER WAS SEASONABLY
FILED, IT IS AN ERROR OF LAW TO BASE JUDGMENT ON
PREPONDERANCE OF EVIDENCE
II
HOLDING THAT EVIDENCE IN AN EJECTMENT CASE SHOULD HAVE
BEEN ATTACHED TO THE COMPLAINT IS AN ERROR OF
LAW.19ChanRoblesVirtualawlibrary
Fairland argues that in ejectment cases, presentation of evidence was undertaken
through the submission of position papers but the same was dispensed with when
the defendant failed to file an answer or when either party failed to appear during
the preliminary conference. In an ejectment case, the scope of inquiry should be
limited to the sufficiency of the cause of action stated in the complaint when no
seasonable answer was filed. The attachment of documentary evidence to the
Complaint was not a requirement and was even proscribed by law.
In his Comment,20 Po countered that the present petition raised a question of fact.
81
Although couched in different words, the issues raised here were substantially the
same as the issues raised before the CA. There was no legal basis in Fairland's
assertion that evidence was dispensed with when no answer to the complaint had
been filed. Such argument would undermine the inherent authority of the courts to
resolve legal issues based on the facts of the case and on the rules on evidence.
Contrary to Fairland's position, the court decided the case on the basis of the
complaint which was found wanting in preponderance of evidence.
In its Reply,21 Fairland posited that the petition did not raise mere questions of fact
but one of law as what was being sought for review was the erroneous dismissal of
the ejectment case for lack of preponderance of evidence. Since no answer was
filed and the complaint sufficiently alleged a cause of action for unlawful detainer,
it became the duty of the MeTC to decide the case in its favor.
The Court's Ruling
petition is meritorious.
Complaint has a valid cause of action for Unlawful Detainer
Section 1 of Rule 70 of the Rules of Court lays down the requirements for filing a
complaint for unlawful detainer, to wit:
Section 1. - Who may institute proceedings, and when. - Subject to the provision 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 (l) 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.
Stated differently, unlawful detainer is a summary action for the recovery of
possession of real property. This action may be filed by a lessor, vendor, vendee, or
 82

other person from whom the possession of any land or building is unlawfully arrears beginning January 2011, and to vacate the leased premises, both within
withheld after the expiration or termination of the right to hold possession by virtue fifteen (15) days from receipt of said letter;
of any contract, express or implied. The possession of the defendant was originally
legal, as his possession was permitted by the plaintiff on account of an express or 7. Despite receipt of the aforesaid demand letter and lapse of the fifteen day period
implied contract between them. The defendant's possession, however, became given to comply with plaintiffs demand, defendant neither tendered payment for
illegal when the plaintiff demanded that the defendant vacate the subject property the unpaid rent nor vacated the leased premises. Worse, defendant has not been
due to the expiration or termination of the right to possess under the contract, and paying rent up to now;
the defendant refused to heed such demand. A case for unlawful detainer must be
instituted one year from the unlawful withholding of possession.22 x x x24ChanRoblesVirtualawlibrary

A complaint sufficiently alleges a cause of action for unlawful detainer if it recites The above-cited portions of the complaint sufficiently alleged that Fairland was the
the following: (1) initially, possession of the property by the defendant was by owner of the subject property being leased to Po by virtue of an oral agreement.
contract with or by tolerance of the plaintiff; (2) eventually, such possession There was a demand by Fairland for Po to pay rent and vacate before the complaint
became illegal upon notice by the plaintiff to the defendant of the termination of for unlawful detainer was instituted. The complaint was seasonably filed within the
the latter's right of possession; (3) thereafter, the defendant remained in possession one-year period prescribed by law. With all the elements present, there was clearly
of the property, and deprived the plaintiff of the enjoyment thereof; and (4) within a cause of action in the complaint for unlawful detainer.
one (1) year from the last demand on defendant to vacate the property, the plaintiff
instituted the complaint for ejectment.23 Under the Rules of Summary Procedure, the weight of evidence is not considered
when a judgment is rendered based on the complaint
There is no question that the complaint filed by Fairland adequately alleged a cause
of action for unlawful detainer. The pertinent portion of the said complaint reads: The question now is whether the MeTC correctly dismissed the case for lack of
preponderance of evidence. Fairland posits that judgment should have been
x x x rendered in its favor on the basis of the complaint itself and not on its failure to
adduce proof of ownership over the subject property.
3. Plaintiff is the owner of, and had been leasing to the defendant, the premises
mentioned above as the residence of the latter; The Court agrees with Fairland's position.

4. There is no current written lease contract between plaintiff and the defendant,
but the latter agreed to pay the former the amount of Php2o,ooo.oo as rent at the
beginning of each month. Thus, the term of the lease agreement is renewable on a
month-to-month basis;
5. Since March 2011, defendant has not been paying the aforesaid rent despite
plaintiffs repeated demands;
6. Due to defendant's continuous failure to pay rent, plaintiff reached a decision not
to renew the lease agreement. It sent a formal letter, x x x demanding defendant to
pay the amount of Php220,000.00, representing defendant's twelve month rental
The summons, together with the complaint and its annexes, was served upon Po on
December 28, 2012. This presupposes that the MeTC found no ground to dismiss
the action for unlawful detainer.25Nevertheless, Po failed to file his answer on
time and the MeTC had the option to render judgment motu proprio or on motion
of the plaintiff. In relation thereto, Sections 5 and 6 of the Rules on Summary
Procedure provide:
Sec. 5. Answer. - Within ten (10) days from service of summons, the defendant
shall file his answer to the complaint and serve a copy thereof on the plaintiff.
Affirmative and negative defenses not pleaded therein shall be deemed waived,
except for lack of jurisdiction over the subject matter. Cross-claims and
 83

compulsory counterclaims not asserted in the answer shall be considered barred.

The answer to counterclaims or cross-claims shall be filed and served within ten Failure to attach annexes is not fatal if the complaint alleges a sufficient cause of
(10) days from service of the answer in which they are pleaded. action; evidence need not be attached to the complaint

Sec. 6. Effect of failure to answer. - Should the defendant fail to answer the The lower courts erroneously dismissed the complaint of Fairland simply on the
complaint within the period above provided, the court, motu proprio or on motion ground that it failed to establish by preponderance of evidence its ownership over
of the plaintiff, shall render judgment as may be warranted by the facts alleged in the subject property. As can be gleaned above, the rules do not compel the plaintiff
the complaint and limited to what is prayed for therein. The court may in its to attach his evidence to the complaint because, at this inception stage, he only has
discretion reduce the amount of damages and attorney's fees claimed for being to file his complaint to establish his cause of action. Here, the court was only
excessive or otherwise unconscionable, without prejudice to the applicability of tasked to determine whether the complaint of Fairland alleged a sufficient cause of
Section 4, Rule 18 of the Rules of Court, if there are two or more defendants. action and to render judgment thereon.

[Emphasis supplied] Also, there was no need to attach proof of ownership in the complaint because the
allegations therein constituted a sufficient cause of action for unlawful detainer.
Section 6 is clear that in case the defendant failed to file his answer, the court shall
Only when the allegations in the complaint are insufficient to form a cause of
render judgment, either motu proprio or upon plaintiffs motion, based solely on the
action shall the attachment become material in the determination thereof. Even
facts alleged in the complaint and limited to what is prayed for. The failure of the
under Section 4 of the Rules of Summary Procedure,31 it is not mandatory to
defendant to timely file his answer and to controvert the claim against him
attach annexes to the complaint.
constitutes his acquiescence to every allegation stated in the complaint. Logically,
there is nothing to be done in this situation26 except to render judgment as may be
In the case of Lazaro v. Brewmaster32 (Lazaro), where judgment was rendered
warranted by the facts alleged in the complaint.27
based on the complaint due to the failure of the defendant to file an answer under
the Rules of Summary Procedure, it was written that:
Similarly, under Section 7, Rule 70 of the Rules of Court, which governs the rules
for forcible entry and unlawful detainer, if the defendant fails to answer the x x x To determine whether the complaint states a cause of action, all documents
complaint within the period provided, the court has no authority to declare the attached thereto may, in fact, be considered, particularly when referred to in the
defendant in default. Instead, the court, motu proprio or on motion of the plaintiff, complaint. We emphasize, however, that the inquiry is into the sufficiency, not the
shall render judgment as may be warranted by the facts alleged in the veracity of the material allegations in the complaint. Thus, consideration of the
complaint and limited to what is prayed for.28 annexed documents should only be taken in the context of ascertaining the
sufficiency of the allegations in the complaint.
This has been enunciated in the case of Don Tino Realty and Development
Corporation v. Florentino,29citing Bayog v. Natino,30 where the Court held that [Emphasis supplied]
there was no provision for an entry of default under the Rules of Summary
Procedure if the defendant failed to file his answer. In Lazaro, the assailed invalid invoices attached to the complaint were not
considered because the complaint already alleged a sufficient cause of action for
In this case, Po failed to file his answer to the complaint despite proper service of collection of sum of money. Those assailed documents were not the bases of the
summons. He also failed to provide a sufficient justification to excuse his lapses. plaintiffs action for sum of money, but were only attached to the complaint to
Thus, as no answer was filed, judgment must be rendered by the court as may be provide evidentiary details on the alleged transactions.
warranted by the facts alleged in the complaint.
Similarly, in the case at bench, there was no need for documentary attachments to
 84

prove Fairland's ownership over the subject property. First, the present action is an submit the affidavits of their witnesses and other evidence on the factual
action for unlawful detainer wherein only de facto or material possession is issues defined in the order, together with their position papers setting forth the law
required to be alleged. Evidently, the attachment of any deed of ownership to the and the facts relied upon by them.
complaint is not indispensable because an action for unlawful detainer does not
entirely depend on ownership. [Emphasis supplied]

Again, it is worth stressing that these provisions are exactly Sections 9 and 10
Second, Fairland sufficiently alleged ownership and superior right of possession
under Rule 70 of the Rules of Court.
over the subject property. These allegations were evidently manifest in the
complaint as Fairland claimed to have orally agreed to lease the property to Po.
Accordingly, it is only at this part of the proceedings that the parties will be
The Court is of the view that these allegations were clear and unequivocal and did
required to present and offer their evidence before the court to establish their
not need supporting attachments to be considered as having sufficiently established
causes and defenses. Before the issuance of the record of preliminary conference,
its cause of action. Even the MeTC conceded that the complaint of Fairland stated
the parties are not yet required to present their respective evidence.
a valid cause of action for unlawful detainer.33 It must be stressed that inquiry into
the attached documents in the complaint is for the sufficiency, not the veracity, of
These specific provisions under the Rules of Summary Procedure which are also
the material allegations in the complaint.
reflected in Rule 70 of the Rules of Court, serve their purpose to immediately settle
ejectment proceedings. "Forcible entry and unlawful detainer cases are summary
Third, considering that Po failed to file an answer within the prescribed period, he
proceedings designed to provide for an expeditious means of protecting actual
was deemed to have admitted all the allegations in the complaint including
possession or the right to possession of the property involved. It does not admit of
Fairland's claim of ownership. To reiterate, the failure of the defendant to timely
a delay in the determination thereof. It is a 'time procedure' designed to remedy the
file his answer and controvert the claim against him constituted his acquiescence to
situation.35 Thus, as a consequence of the defendant's failure to file an answer, the
every allegation stated in the complaint.
court is simply tasked to render judgment as may be warranted by the facts alleged
in the complaint and limited to what is prayed for therein.
In the Entry of Appearance with Motion for Leave of Court to file
Comment/Opposition to Motion to Render Judgment, which was belatedly filed
As the complaint contains a valid cause of action, a judgment can already be
and so was denied by the MeTC, Po merely denied the allegations against him
rendered
without even bothering to aver why he claimed to have a superior right of
possession of the subject property.34
In order to achieve an expeditious and inexpensive determination of unlawful
detainer cases, a remand of this case to the lower courts is no longer necessary and
Fourth, it is only at the later stage of the summary procedure when the affidavits of
the case can be determined on its merits by the Court.
witnesses and other evidence on factual issues shall be presented before the court.
Sections 8 and 9 of the Rules on Summary Procedure state:
To recapitulate, as Po failed to file his answer on time, judgment shall be rendered
Sec. 8. Record of preliminary conference. - Within five (5) days after the based only on the complaint of Fairland without the need to consider the weight of
termination of the preliminary conference, the court shall issue an order stating the evidence. As discussed above, the complaint of Fairland had a valid cause of action
matters taken up therein, x x x for unlawful detainer.

Sec. 9. Submission of affidavits and position papers. - Within ten (10) days from Consequently, there is no more need to present evidence to establish the allegation
receipt of the order mentioned in the next preceding section, the parties shall of Fairland of its ownership and superior right of possession over the subject
 85

property. Po's failure to file an answer constitutes an admission of his illegal

case of the complainant or the plaintiff, and as Exhibits 1, 2, 3, and so on in
occupation due to his non-payment of rentals, and of Fairland's rightful claim of
the case of the respondent or the defendant.
material possession. Thus, judgment must be rendered finding that Fairland has the
right to eject Po from the subject property.
(b) Should a party or a witness desire to keep the original document or object
The Judicial Affidavit Rule evidence in his possession, he may, after the same has been identified, marked as
exhibit, and authenticated, warrant in his judicial affidavit that the copy or
On a final note, the Court deems it proper to discuss the relevance of the Judicial reproduction attached to such affidavit is a faithful copy or reproduction of that
Affidavit Rule or A.M. No. 12-8-8-SC, where documentary or object evidence are original. In addition, the party or witness shall bring the original document or
required to be attached. To begin with, the rule is not applicable because such object evidence for comparison during the preliminary conference with the
evidence are required to be attached to a judicial affidavit, not to a complaint. attached copy, reproduction, or pictures, failing which the latter shall not be
Moreover, as the rule took effect only on January 1, 2013, it cannot be required in admitted.
this case because this was earlier filed on December 12, 2012.
This is without prejudice to the introduction of secondary evidence in place of the
Granting that it can be applied retroactively, the rule being essentially remedial, original when allowed by existing rules.
still it has no bearing on the ruling of this Court.
WHEREFORE, the petition is GRANTED. The October 31, 2014 Decision and the
March 6, 2015 Resolution of the Court of Appeals in CA-G.R. SP No. 134701 are
In the Judicial Affidavit Rule, the attachments of documentary or object evidence
hereby REVERSED and SET ASIDE. Respondent Arturo Loo Po is ORDERED
to the affidavits is required when there would be a pre-trial or preliminary
TO VACATE Condominium Unit No. 205 located in Cedar Mansion II on Ma.
conference or the scheduled hearing. As stated earlier, where a defendant fails to
Escriba Street, Pasig City.
file an answer, the court shall render judgment, either motu proprio or upon
plaintiffs motion, based solely on the facts alleged in the complaint and limited to
Respondent Po is further ORDERED TO PAY the rentals-in-arrears, as well as the
what is prayed for. Thus, where there is no answer, there is no need for a pre-trial,
rentals accruing in the interim until he vacates the property. The unpaid rentals
preliminary conference or hearing. Section 2 of the Judicial Affidavit Rule reads:
shall incur a legal interest of six percent (6%) per annum from January 30, 2012,
Section 2. Submission of Judicial Affidavits and Exhibits in lieu of direct when the demand to pay and to vacate was made, up to the finality of this decision.
testimonies. - (a) The parties shall file with the court and serve on the adverse Thereafter, an interest of six percent (6%) per annum shall be imposed on the total
party, personally or by licensed courier service, not later than five days before pre- amount due until full payment is made.
trial or preliminary conference or the scheduled hearing with respect to motions
and incidents, the following:
Go Tong Electrical vs BPI Family
(1) The judicial affidavits of their witnesses, which shall take the place of such
witnesses' direct testimonies; and 1. Same; Same; Suretyship; Although the contract of a surety is in essence
secondary only to a valid principal obligation, the surety becomes liable for the
debt or duty of another although it possesses no direct or personal interest over the
obligations nor does it receive any benefit therefrom.+
(2) The parties' documentary or object evidence, if any, which shall be attached
to the judicial affidavits and marked as Exhibits A, B, C, and so on in the

2. Remedial Law; Civil Procedure; General Denial; A general denial does not
become specific by the use of the word “specifically.”-
—A reading of the Answer shows that petitioners failed to specifically deny the
execution of the Credit Agreement, PN, and CSA under the auspices of the above
quoted rule. The mere statement in paragraph 4 of their Answer, i.e., that they
“specifically deny” the pertinent allegations of the Complaint “for being self-
serving and pure conclusions intended to suit plaintiff’s purposes,” does not
constitute an effective specific denial as contemplated by law. Verily, a denial is
not specific simply because it is so qualified by the defendant. Stated otherwise, a
general denial does not become specific by the use of the word “specifically.”
Neither does it become so by the simple expedient of coupling the same with a
broad conclusion of law that the allegations contested are “self-serving” or are
intended “to suit plaintiff’s purposes.”
3. Same; Evidence; Documentary Evidence; Case law enlightens that [t]he
admission of the genuineness and due execution of a document means that the
party whose signature it bears admits that he voluntarily signed the document or it
was signed by another for him and with his authority; that at the time it was signed
it was in words and figures exactly as set out in the pleading of the party relying
upon it; that the document was delivered; and that any formalities required by law,
such as a seal, an acknowledgment, or revenue stamp, which it lacks, are waived
by him.-
—Section 8, Rule 8 of the Rules further requires that the defendant “sets forth what
he claims to be the facts,” which requirement, likewise, remains absent from the
Answer in this case. Thus, with said pleading failing to comply with the “specific
denial under oath” requirement under Section 8, Rule 8 of the Rules, the proper
conclusion, as arrived at by the CA, is that petitioners had impliedly admitted the
due execution and genuineness of the documents evidencing their loan obligation
to respondent. To this, case law enlightens that “[t]he admission of the genuineness
and due execution of a document means that the party whose signature it bears
admits that he voluntarily signed the document or it was signed by another for him
and with his authority; that at the time it was signed it was in words and figures
exactly as set out in the pleading of the party relying upon it; that the document
was delivered; and that any formalities required by law, such as a seal, an
acknowledgment, or revenue stamp, which it lacks, are waived by him. Also, it
effectively eliminated any defense relating to the authenticity and due execution of
the document, e.g., that the document was spurious, counterfeit, or of different
86
import on its face as the one executed by the parties; or that the signatures
appearing thereon were forgeries; or that the signatures were unauthorized.”
4. Civil Law; Obligations; Payment; When the creditor is in possession of the
document of credit, proof of nonpayment is not needed for it is presumed.+
GO TONG ELECTRICAL SUPPLY CO., INC. AND GEORGE C.
GO, Petitioners, v. BPI FAMILY SAVINGS BANK, INC., SUBSTITUTED BY
PHILIPPINE INVESTMENT ONE [SPV-AMC], INC.,*Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated February
17, 2009 and the Resolution3 dated April 13, 2009 of the Court of Appeals (CA) in
CA-G.R. CV No. 86749 which affirmed the Decision4 dated September 6, 2005 of
the Regional Trial Court of Makati City, Branch 143 (RTC) in Civil Case No. 02-
1203, an action for collection of sum of money, rendered in favor of respondent
BPI Family Savings Bank, Inc. (respondent).
The Facts
On October 4, 2002, respondent filed a complaint5 against petitioners Go Tong
Electrical Supply Co., Inc. (Go Tong Electrical) and its President, George C. Go
(Go; collectively petitioners), docketed as Civil Case No. 02-1203, seeking that the
latter be held jointly and severally liable to it for the payment of their loan
obligation in the aggregate amount of P87,086,398.71, inclusive of the principal
sum, interests, and penalties as of May 28, 2002, as well as attorney's fees,
litigation expenses, and costs of suit.6 As alleged by respondent, as early as 1996,
Go Tong Electrical had applied for and was granted financial assistance by the then
Bank of South East Asia (BSA). Subsequently, DBS7 Bank of the Philippines, Inc.
(DBS) became the successor-in-interest of BSA. The application for financial
assistance was renewed on January 6, 1999 through a Credit Agreement.8 On even
date, Go Tong Electrical, represented by Go, among others, obtained a loan from
DBS in the principal amount of P40,491,051.65, for which Go Tong Electrical
executed Promissory Note No. 82-91 -00176-79 (PN) for the same amount in favor
 87

of DBS, maturing on February 5, 2000.10 Under the PN's terms, Go Tong PLUS
Electrical bound itself to pay a default penalty interest at the rate of one percent
(1%) per month in addition to the current interest rate,11 as well as attorney's fees UNPAID
P 1,805,507.21
equivalent to twenty-five percent (25%) of the amount sought to be INTEREST
recovered.12 As additional security, Go executed a Comprehensive Surety
UNPAID
Agreement13 (CSA) covering any and all obligations undertaken by Go Tong P 1,776,022.80
PENALTY
Electrical, including the aforesaid loan.14 Upon default of petitioners, DBS - and
later, its successor-in-interest, herein respondent15 - demanded payment from SUB-
petitioners,16but to no avail,17 hence, the aforesaid complaint. P122,983,424.21
TOTAL

In their Answer with Counterclaim18 (Answer), petitioners merely stated that they LESS:
- 1,877,286.08
"specifically deny"19the allegations under the complaint. Of particular note is their PAYMENTS
denial of the execution of the loan agreement, the PN, and the CSA "for being self-
serving and pure conclusions intended to suit [respondent's] purposes."20 By way P121,106.138.1326
of special and affirmative defenses, petitioners argued, among others, that: (a) the
On cross-examination, Suñio nonetheless admitted that he had no knowledge of
real party-in-interest should be DBS and not respondent; (b) no demand was made
how the PN was prepared, executed, and signed, nor did he witness its
upon them; and (c) Go cannot be held liable under the CSA since there was
signing.27ChanRoblesVirtualawlibrary
supposedly no solidarity of debtors.21 Petitioners further interposed counterclaims
for the payment of moral and exemplary damages, as well as litigation and
For their part, petitioners presented Go Tong Electrical's Finance Officer, Jocelyn
attorney's fees in the total amount of P1,250,000.00.22ChanRoblesVirtualawlibrary
Antonette Lim, who testified that Go Tong Electrical was able to pay its loan,
albeit partially. However, she admitted that she does not know how much
During trial, respondent presented Ricardo O. Suñio23 (Suñio), the Account
payments were made, nor does she have a rough estimate thereof, as these were
Officer handling petitioners' loan accounts, as its witness. Suñio attested to the
allegedly paid for in dollars.28ChanRoblesVirtualawlibrary
existence of petitioners' loan obligation in favor of respondent,24 and identified a
Statement of Account25 which shows the amount due as of June 16, 2004 as The RTC Ruling
follows:

SUMMARY In a Decision29 dated September 6, 2005, the RTC ruled in favor of respondent,
thereby ordering petitioners to jointly and severally pay the former: (a) the
PRINCIPAL P 40,491,051.65
principal sum of P40,491,051.65, with legal interest to be reckoned from the filing
PAST DUE of the Complaint; (b) penalty interest of one percent (1%) per month until the
P 31,437,800.28 obligation is fully paid; and (c) attorney's fees in the sum of
INTEREST
P50,000.00.30ChanRoblesVirtualawlibrary
PENALTY P 47,473,042.27
It found that respondent had amply demonstrated by competent evidence that it
SUB- was entitled to the reliefs it prayed for. Particularly, respondent's documentary
P119,401,894.20
TOTAL evidence - the authenticity of which the RTC observed to be undisputed - showed
the existence of petitioners' valid and demandable obligation. On the other hand,

petitioners failed to discharge the burden of proving that they had already paid the
same, even partially.31 Further, the RTC debunked petitioners' denial of the
demands made by respondent since, ultimately, the Credit Agreement, PN, and
CSA clearly stated that no demand was needed to render them in
default.32 Likewise, the argument that Go could not be held solidarity liable was
not sustained since he bound himself as a surety under the CSA, which was
executed precisely to induce respondent's predecessor-in-interest, DBS, to grant the
loan.33 Separately, the RTC found the penalty interest at three percent (3%) per
month sought by respondent to be patently iniquitous and unconscionable and thus,
was reduced to twelve percent (12%) per annum, or one percent (1%) per month.
Attorney's fees were also tempered to the reasonable amount of
P50,000.00.34ChanRoblesVirtualawlibrary
Unconvinced, petitioners appealed35 to the CA.
The CA Ruling
In a Decision36 dated February 17, 2009, the CA sustained the RTC's ruling in
toto, finding the following facts to be beyond cavil: (a) that Go Tong Electrical
applied for and was granted a loan accommodation from DBS in the amount of
P40,491,051.65 after the execution of the Credit Agreement and the PN dated
January 6, 1999, maturing on February 5, 2000; (b) that as additional security, Go
executed the CSA binding himself jointly and severally to pay the obligation of Go
Tong Electrical; and (c) that petitioners failed to pay the loan obligation upon
maturity, despite written demands from then DBS, now, herein respondent.37 In
this relation, the CA discredited petitioners' argument that respondent's sole
witness, Sufiio, was incompetent to testify on the documentary evidence presented
as he had no personal knowledge of the loan documents' execution,38 given that
petitioners, in their Answer, did not deny under oath the genuineness and due
execution of the PN and CSA and, hence, are deemed admitted under Section 8,
Rule 8 of the Rules of Court (Rules).39 Besides, the CA observed that, despite the
aforesaid admission, respondent still presented the testimony of Suñio who, having
informed the court that the loan documents were in his legal custody as the
designated Account Officer when DBS merged with herein respondent, had
personal knowledge of the existence of the loan documents.40 It added that,
although he was not privy to the execution of the same, it does not significantly
matter as their genuineness and due execution were already
88
admitted.41ChanRoblesVirtualawlibrary
Petitioners filed a motion for reconsideration,42 which was, however, denied in a
Resolution43 dated April 13, 2009, hence, this petition.
The Issue Before The Court
The issue for the Court's resolution is whether or not the CA erred in upholding the
RTC's ruling.
The Court's Ruling
The petition lacks merit.
The Court concurs with the CA Decision holding that the genuineness and due
execution of the loan documents in this case were deemed admitted by petitioners
under the parameters of Section 8, Rule 8 of the Rules which provides:
chanRoblesvirtualLawlibrary
SEC. 8. How to contest such documents. — When an action or defense is founded
upon a written instrument, copied in or attached to the corresponding pleading as
provided in the preceding Section, the genuineness and due execution of the
instrument shall be deemed admitted unless the adverse party, under oath,
specifically denies them, and sets forth what he claims to be the facts; but the
requirement of an oath does not apply when the adverse party does not appear to be
a party to the instrument or when compliance with an order for an inspection of the
original instrument is refused. (Emphasis supplied)
chanroblesvirtuallawlibrary
A reading of the Answer shows that petitioners failed to specifically deny the
execution of the Credit Agreement, PN, and CSA under the auspices of the above-
quoted rule. The mere statement in paragraph 4 of their Answer, i.e., that they
"specifically deny" the pertinent allegations of the Complaint "for being self-
serving and pure conclusions intended to suit plaintiffs purposes,"44 does not
constitute an effective specific denial as contemplated by law.45 Verily, a denial is
not specific simply because it is so qualified by the defendant. Stated otherwise, a
general denial does not become specific by the use of the word

"specifically."46 Neither does it become so by the simple expedient of coupling the
same with a broad conclusion of law that the allegations contested are "self-
serving" or are intended "to suit plaintiffs purposes."
In Permanent Savings & Loan Bank v. Velarde47 (Permanent Savings & Loan
Bank), citing the earlier case of Songco v. Sellner,48 the Court expounded on how
to deny the genuineness and due execution of an actionable document, viz.:
chanRoblesvirtualLawlibrary
This means that the defendant must declare under oath that he did not sign the
document or that it is otherwise false or fabricated. Neither does the statement of
the answer to the effect that the instrument was procured by fraudulent
representation raise any issue as to its genuineness or due execution. On the
contrary such a plea is an admission both of the genuineness and due execution
thereof, since it seeks to avoid the instrument upon a ground not affecting
either.49 (Emphasis supplied)
chanroblesvirtuallawlibrary
To add, Section 8, Rule 8 of the Rules further requires that the defendant "sets
forth what he claims to be the facts," which requirement, likewise, remains absent
from the Answer in this case.
Thus, with said pleading failing to comply with the "specific denial under oath"
requirement under Section 8, Rule 8 of the Rules, the proper conclusion, as arrived
at by the CA, is that petitioners had impliedly admitted the due execution and
genuineness of the documents evidencing their loan obligation to respondent.
To this, case law enlightens that "[t]he admission of the genuineness and due
execution of a document means that the party whose signature it bears admits that
he voluntarily signed the document or it was signed by another for him and with
his authority; that at the time it was signed it was in words and figures exactly as
set out in the pleading of the party relying upon it; that the document was
delivered; and that any formalities required by law, such as a seal, an
acknowledgment, or revenue stamp, which it lacks, are waived by him. Also, it
effectively eliminated any defense relating to the authenticity and due execution of
the document, e.g., that the document was spurious, counterfeit, or of different
import on its face as the one executed by the parties; or that the signatures
appearing thereon were forgeries; or that the signatures were
89
unauthorized."50ChanRoblesVirtualawlibrary
Accordingly, with petitioners' admission of the genuineness and due execution of
the loan documents as above-discussed, the competence of respondent's witness
Suñio to testify in order to authenticate the same is therefore of no moment. As the
Court similarly pointed out in Permanent Savings & Loan Bank, "[w]hile Section
[20],51 Rule 132 of the [Rules] requires that private documents be proved of their
due execution and authenticity before they can be received in evidence, i.e.,
presentation and examination of witnesses to testify on this fact; in the present
case, there is no need for proof of execution and authenticity with respect to the
loan documents because of respondent's implied admission
thereof."52ChanRoblesVirtualawlibrary
The Court clarifies that while the "[f]ailure to deny the genuineness and due
execution of an actionable document does not preclude a party from arguing
against it by evidence of fraud, mistake, compromise, payment, statute of
limitations, estoppel and want of consideration [nor] bar a party from raising the
defense in his answer or reply and prove at the trial that there is a mistake or
imperfection in the writing, or that it does not express the true agreement of the
parties, or that the agreement is invalid or that there is an intrinsic ambiguity in the
writing,"53 none of these defenses were adequately argued or proven during the
proceedings of this case.
Of particular note is the affirmative defense of payment raised during the
proceedings a quo. While petitioners insisted that they had paid, albeit partially,
their loan obligation to respondent, the fact of such payment was never established
by petitioners in this case. Jurisprudence abounds that, in civil cases, one who
pleads payment has the burden of proving it; the burden rests on the defendant, i.e.,
petitioners, to prove payment, rather than on the plaintiff, i.e., respondent, to prove
non-payment. When the creditor is in possession of the document of credit, proof
of non-payment is not needed for it is presumed.54 Here, respondent's possession
of the Credit Agreement, PN, and CSA, especially with their genuineness and due
execution already having been admitted, cements its claim that the obligation of
petitioners has not been extinguished. Instructive too is the Court's disquisition
in Jison v. CA55 on the evidentiary burdens attendant in a civil proceeding, to wit:
chanRoblesvirtualLawlibrary

Simply put, he who alleges the affirmative of the issue has the burden of proof, and
upon the plaintiff in a civil case, the burden of proof never parts. However, in the
course of trial in a civil case, once plaintiff makes out a prima facie case in his
favor, the duty or the burden of evidence shifts to defendant to controvert
plaintiffs prima facie case, otherwise, a verdict must be returned in favor of
plaintiff. Moreover, in civil cases, the party having the burden of proof must
produce a preponderance of evidence thereon, with plaintiff having to rely on the
strength of his own evidence and not upon the weakness of the defendant's. The
concept of "preponderance of evidence" refers to evidence which is of greater
weight, or more convincing, that which is offered in opposition to it; at bottom, it
means probability of truth.56
chanroblesvirtuallawlibrary
Finally, the Court finds as untenable petitioners' theory on Go's supposed non-
liability. As established through the CSA, Go had clearly bound himself as a surety
to Go Tong Electrical's loan obligation. Thus, there is no question that Go's
liability thereto is solidary with the former. As provided in Article 204757 of the
Civil Code, "the surety undertakes to be bound solidarity with the principal obligor.
That undertaking makes a surety agreement an ancillary contract as it presupposes
the existence of a principal contract. Although the contract of a surety is in essence
secondary only to a valid principal obligation, the surety becomes liable for the
debt or duty of another although it possesses no direct or personal interest over the
obligations nor does it receive any benefit therefrom. Let it be stressed that
notwithstanding the fact that the surety contract is secondary to the principal
obligation, the surety assumes liability as a regular party to the undertaking,"58 as
Go in this case.
However, while petitioners' liability has been upheld in this case, the Court finds it
proper to modify the RTC's ruling, as affirmed by the CA, with respect to the
following:
First, the partial payment made by Go Tong Electrical on June 16, 2004 in the
amount of P1,877,286.08, as admitted by respondent through a Statement of
Account,59 formally offered as Exhibit "G" and duly identified by Suñio during
trial, should be deducted from the principal amount of P40,491,051.65 due
respondent.
Second, with respect to the interests and penalties:
90
(a) petitioners should be held liable for the twenty percent (20%) per annum
stipulated interest rate reckoned 31 days from January 6, 1999, as agreed upon in
the PN,60 until its maturity date on February 5, 2000, which period is regarded as
the initial period in said PN. Said interest rate should be upheld as this was
stipulated by the parties, and the rate cannot be considered unconscionable.61 The
same shall be computed based on the entire principal amount due, i.e.,
P40,491,051.65, since the records disclose that the admitted partial payment of
P1,877,286.08 was still unpaid before the complaint was filed on October 4,
2002,62 or before the February 5, 2000 maturity date; and
(b) the reduced interest rate of one percent (1%) per month and penalty rate of one
percent (1%) per month are upheld,63 but should accrue from the PN's February 5,
2000 maturity date64 until June 16, 2004, or the date when the partial payment of
P1,877,286.08 has been made by Go Tong Electrical, and computed based on the
entire principal amount of P40,491,051.65. Interest and penalty, at the same
reduced rate, due thereafter (i.e., from June 17, 2004 until full payment) shall be
computed based on the net amount of P38,613,765.57 (i.e., the amount arrived at
after deducting the partial payment of P1,877,286.08 from the principal amount of
P40,491,051.65).
WHEREFORE, the petition is DENIED. The Decision dated February 17, 2009
and the Resolution dated April 13, 2009 of the Court of Appeals in CA-G.R. CV
No. 86749 are hereby AFFIRMED with the above-stated MODIFICATIONS.
Equitable Cardnetwork vs Capistrano
1. Remedial Law; Civil Procedure; Three Modes of Specific Denial; An answer to
the complaint may raise a negative defense which consists in defendant’s specific

denial of the material fact that plaintiff alleges in his complaint, which fact is
essential to the latter’s cause of action.-
—An answer to the complaint may raise a negative defense which consists in
defendant’s specific denial of the material fact that plaintiff alleges in his
complaint, which fact is essential to the latter’s cause of action. Specific denial has
three modes. Thus: 1) The defendant must specify each material allegation of fact
the truth of which he does not admit and whenever practicable set forth the
substance of the matters on which he will rely to support his denial; 2) When the
defendant wants to deny only a part or a qualification of an averment in the
complaint, he must specify so much of the averment as is true and material and
deny the remainder; and 3) When the defendant is without knowledge and
information sufficient to form a belief as to the truth of a material averment made
in the complaint, he shall so state and this shall have the effect of a denial.
2. Same; Same; The trial court may reject evidence that a party adduces to
contradict a judicial admission he made in his pleading since such admission is
conclusive as to him.-
—True, issues not raised by the pleadings may be tried with the implied consent of
the parties as when one of them fails to object to the evidence adduced by the other
concerning such unimpleaded issues. But the CA fails to reckon with the rule that a
party’s admissions in the course of the proceedings, like an admission in the
answer of the genuineness and true execution of the plaintiff’s actionable
documents, can only be contradicted by showing that defendant made such
admission through palpable mistake. Here, Mrs. Capistrano never claimed palpable
mistake in the answer she filed. It is of no moment that plaintiff ECI failed to
object to Mrs. Capistrano’s evidence at the trial that the subject documents were
forgeries. As the Court ruled in Elayda v. Court of Appeals, 199 SCRA 349 (1991),
the trial court may reject evidence that a party adduces to contradict a judicial
admission he made in his pleading since such admission is conclusive as to him. It
does not matter that the other party failed to object to the contradictory evidence so
adduced.
3. Same; Evidence; Manner of Contesting Documents Attached to the Complaint.-
—But the rule that applies when the defendant wants to contest the documents
attached to the claimant’s complaint which are essential to his cause of action is
found in Section 8, Rule 8 of the Rules of Court, which provides: SECTION 8.
91
How to contest such documents.—When an action or defense is founded upon a
written instrument, copied in or attached to the corresponding pleading as provided
in the preceding Section, the genuineness and due execution of the instrument shall
be deemed admitted unless the adverse party, under oath, specifically denies them,
and sets forth what he claims to be the facts; but the requirement of an oath does
not apply when the adverse party does not appear to be a party to the instrument or
when compliance with an order for an inspection of the original instrument is
refused.
DECISION
ABAD, J.:
This case is about the sufficiency of the defendants allegations in the answer
denying the due execution and genuineness of the plaintiffs actionable documents
and the kind of evidence needed to prove forgery of signature.
The Facts and the Case
Petitioner Equitable Cardnetwork, Inc. (ECI) alleged in its complaint that in
September 1997 respondent Josefa B. Capistrano (Mrs. Capistrano) applied for
membership at the Manila Yacht Club (MYC) under the latters widow-membership
program. Since the MYC and ECI had a credit card sponsorship agreement in
which the Club would solicit for ECI credit card enrollment among its members
and dependents, Mrs. Capistrano allegedly applied for and was granted a Visa
Credit Card by ECI.
ECI further alleged that Mrs. Capistrano authorized her daughter, Valentina C.
Redulla (Mrs. Redulla), to claim from ECI her credit card and ATM application

form.[1] Mrs. Redulla signed the acknowledgment receipt[2] on behalf of her
mother, Mrs. Capistrano. After Mrs. Capistrano got hold of the card, she
supposedly started using it. On November 24, 1997 Mrs. Redulla personally issued
a P45,000.00 check as partial payment of Mrs. Capistranos account with ECI. But
Mrs. Redullas check bounced upon deposit.
Because Mrs. Capistrano was unable to settle her P217,235.36 bill, ECI demanded
payment from her. But she refused to pay, prompting ECI to file on February 30,
1998 a collection suit against her before the Regional Trial Court (RTC)
of Cebu City.
Answering the complaint, Mrs. Capistrano denied ever applying for MYC
membership and ECI credit card; that Mrs. Redulla was not her daughter; and that
she never authorized her or anyone to claim a credit card for her. Assuming she
applied for such a card, she never used it. Mrs. Redulla posed as Mrs. Capistrano
and fooled ECI into issuing the card to her. Consequently, the action should have
been brought against Mrs. Redulla. Mrs. Capistrano asked the court to hold ECI
liable to her for moral and exemplary damages, attorneys fees, and litigation
expenses.
After trial, the RTC[3] ruled that, having failed to deny under oath the genuineness
and due execution of ECIs actionable documents that were attached to the
complaint, Mrs. Capistrano impliedly admitted the genuineness and due execution
of those documents. In effect she admitted: 1) applying for membership at the
MYC;[4] 2) accomplishing the MYC membership information sheet[5] which
contained a request for an ECI Visa card; 3) holding herself liable for all
obligations incurred in the use of such card; 4)authorizing Mrs. Redulla to receive
the Visa card issued in her name;[6] 5) applying for an ATM Card with
ECI; [7] and 6) using the credit card in buying merchandise worth P217,235.36 as
indicated in the sales slips.
92
The RTC said that when an action is founded upon written documents, their
genuineness and due execution shall be deemed admitted unless the defendant
specifically denies them under oath and states what he claims to be the facts.[8] A
mere statement that the documents were procured by fraudulent representation
does not raise any issue as to their genuineness and due execution.[9] The RTC
rejected Mrs. Capistranos argument that, having verified her answer, she should be
deemed to have denied those documents under oath. The RTC reasoned that she
did not, in her verification, deny signing those documents or state that they were
false or fabricated.
The RTC added that respondent Mrs. Capistrano could no longer raise the defense
of forgery since this had been cut-off by her failure to make a specific
denial. Besides, said the RTC, Mrs. Capistrano failed to present strong and
convincing evidence that her signatures on the document had been forged. She did
not present a handwriting expert who could attest to the forgery. The trial court
ordered Mrs. Capistrano to pay ECIs claim of P217,235.36 plus interests, attorneys
fees and litigation expenses. Mrs. Capistrano appealed the decision to the Court of
Appeals (CA).
On May 10, 2007 the CA reversed the trial courts decision and dismissed ECIs
complaint.[10] The CA ruled that, although Mrs. Capistranos answer was
somewhat infirm, still she raised the issue of the genuineness and due execution of
ECIs documents during trial by presenting evidence that she never signed any of
them. Since ECI failed to make a timely objection to its admission, such evidence
cured the vagueness in her answer. Further, the CA ruled that Mrs. Capistrano
sufficiently proved by evidence that her signatures had been forged.
The Issues Presented
The issues presented are:

1. Whether or not the CA correctly ruled that, although Mrs. Capistrano failed to
make an effective specific denial of the actionable documents attached to the
complaint, she overcame this omission by presenting parol evidence to which ECI
failed to object; and
2. Whether or not the CA correctly ruled that Mrs. Capistrano presented clear and
convincing evidence that her signatures on the actionable documents had been
forged.
Ruling of the Court
One. An answer to the complaint may raise a negative defense which consists in
defendants specific denial of the material fact that plaintiff alleges in his complaint,
which fact is essential to the latters cause of action.[11] Specific denial has three
modes. Thus:
1) The defendant must specify each material allegation of fact the truth of which he
does not admit and whenever practicable set forth the substance of the matters on
which he will rely to support his denial;
2) When the defendant wants to deny only a part or a qualification of an averment
in the complaint, he must specify so much of the averment as is true and material
and deny the remainder; and
3) When the defendant is without knowledge and information sufficient to form a
belief as to the truth of a material averment made in the complaint, he shall so state
and this shall have the effect of a denial.
93
But the rule that applies when the defendant wants to contest the documents
attached to the claimants complaint which are essential to his cause of action is
found in Section 8, Rule 8 of the Rules of Court, which provides:
SECTION 8. How to contest such documents. When an action or defense is
founded upon a written instrument, copied in or attached to the corresponding
pleading as provided in the preceding Section, the genuineness and due
execution of the instrument shall be deemed admitted unless the adverse party,
under oath, specifically denies them, and sets forth what he claims to be the facts;
but the requirement of an oath does not apply when the adverse party does not
appear to be a party to the instrument or when compliance with an order for an
inspection of the original instrument is refused.
To determine whether or not respondent Mrs. Capistrano effectively denied the
genuineness and due execution of ECIs actionable documents as provided above,
the pertinent averments of the complaint and defendant Capistranos answer are
here reproduced.
ECIs complaint:
3. That sometime in 1997, defendant applied for membership, as widow of a
deceased member of the Manila Yacht Club;
4. That in connection with her application for membership in the Manila Yacht
Club, defendant applied for and was granted a Manila Yacht Club Visa Card in
accordance with Credit Card Sponsorship Agreement entered into between the
plaintiff and the Manila Yacht Club wherein Manila Yacht Club shall solicit
applications for the Manila Yacht Club Visa Cards from Manila Yacht Club
members and dependents. Copy of the Manila Yacht Club Information Sheet is
hereto attached as Annex A;
 94

Mrs. Capistranos answer:
3. She specifically denies paragraph[s] 3 and 4 of the complaint for want of
sufficient knowledge to form a belief as to the veracity of the allegations contained
therein and for the reasons stated in her special and affirmative defenses.
who pays first the said obligations and later at a stated period every month, the
plaintiff will send a statement of account to defendant showing how much she
owes the plaintiff for the payments it previously made on her behalf. Copy of the
monthly statement of accounts for the months of November and December 1997
are hereto attached as Annexes E and F, respectively;
Mrs. Capistranos answer:

5. She specifically denies paragraph 6 of the complaint for want of sufficient

knowledge to form a belief as to the veracity of the allegations contained therein
xxxx
and for the reasons as stated in her special and affirmative defenses.

ECIs complaint:
xxxx
5. That defendant authorized her daughter, Mrs. Valentina Redulla to get the said
credit card including her ATM application form from the plaintiff which enabled
the defendant to avail of the cash advance facility with the use of said card; Copy ECIs complaint:
of the authorization letter, application form and acknowledgment receipt showing
that Valentina C. Redulla received the said credit card are hereto attached as 7. That it is the agreement of the parties that in the event that an account is
Annexes B, C, and D, respectively; overdue, interest at 1.75% per month and service charge at 1.25% will be charged
to the defendant;
Mrs. Capistranos answer:

4. She specifically denies paragraph 5 of the complaint for want of sufficient

knowledge to form a belief as to the allegations contained therein. She never Mrs. Capistranos answer:
authorized any person to get her card.Valentina Redulla is not her daughter.
6. She specifically denies paragraph 7 of the complaint for want of sufficient
knowledge to form a belief as to the veracity of the allegations contained therein.

xxxx

xxxx

ECIs complaint:

6. That with the use of the said Manila Yacht Club Visa Card, defendant could ECIs complaint:
purchase goods and services from local and accredited stores and establishments on
credit and could make cash advances from ATM machines since it is the plaintiff

8. That on November 24, 1997, defendants daughter, Mrs. Valentina C. Redulla
issued Solidbank Check No. 0127617 dated November 24, 1997 in the amount
of P45,000.00 in partial payment of defendants account with the plaintiff;
9. That when the said check was deposited in the bank, the same was dishonored
for the reason Account Closed. Copy of said said check is hereto attached as Annex
G;
Mrs. Capistranos answer:
7. She denies paragraph[s] 8 and 9 for want of sufficient knowledge to form a
belief as to the veracity of the allegations contained therein and for the reasons
aforestated. It is quite peculiar that herein defendants alleged account would be
paid with a personal check of somebody not related to her.
xxxx
ECIs complaint:
10. That defendant has an unpaid principal obligation to the plaintiff in the amount
of P217,235.326;
Mrs. Capistranos answer:
8. She denies paragraph 10 for want of sufficient knowledge as to the veracity of
the allegations contained therein and for the reasons stated in her special and
affirmative defenses. Granting ex gratia argumenti that defendant did indeed apply
for a card, still, she vehemently denies using the same to purchase goods from any
establishment on credit.
95
xxxx
ECIs complaint
11. That plaintiff made demands on the defendant to pay her obligation but despite
said demands, defendant has failed and refused to pay her obligation and still fails
and refuses to pay her obligation to the plaintiff and settle her obligation, thus,
compelling the plaintiff to file the present action and hire the services of counsel
for the amount of P53,998.84 and incur litigation expenses in the amount
of P30,000.00;
12. That it is further provided as one of the terms and conditions in the issuance of
the Manila Yacht Club Card that in the event that collection is enforced through
court action, 25% of the amount due of P53,998.84 will be charged as attorneys
fees and P53,998.84 will be charged as liquidated damages;
Mrs. Capistranos answer
9. She denies paragraph[s] 11 and 12 for want of sufficient knowledge to form a
belief as to the veracity of the allegations therein. If ever there was any demand
sent to herein defendant the same would have been rejected on valid and lawful
grounds. Therefore, any damage or expense, real or imaginary, incurred or
sustained by the plaintiff should be for its sole and exclusive account.
xxxx
Further, Mrs. Capistranos special and affirmative defenses read as follows:

10. Defendant repleads by reference all the foregoing allegations which are
relevant and material hereto.
11. Defendant denies having applied for membership with the Equitable
Cardnetwork, Inc. as a widow of a deceased member of the Manila Yacht Club.
12. She has never authorized anyone to get her alleged card for the preceding
reason. Therefore, being not a member, she has no obligation, monetary or
otherwise to herein plaintiff.
13. Plaintiff has no cause of action against herein answering defendant.
14. This Valentina C. Redulla is not her daughter. In all modesty, defendant being
a member of one of the prominent families of Cebu and being a board member of
the Borromeo Brothers Estate whose holdings include Honda Cars Cebu as well as
other prestigious establishments, it would be totally uncalled for if she would not
honor a valid obligation towards any person or entity.
15. She surmises that this Valentina Redulla has been posing as Josefa
Capistrano. Therefore, plaintiffs cause of action should have been directed towards
this Redulla.
16. Even granting for the sake of argument that herein answering defendant did
indeed authorized somebody to pick up her card, still, she never made any
purchases with the use thereof. She, therefore, vehemently denies having used the
card to purchase any merchandise on credit.
96
In substance, ECIs allegations, supported by the attached documents, are that Mrs.
Capistrano applied through Mrs. Redulla for a credit card and that the former used
it to purchase goods on credit yet Mrs. Capistrano refused to pay ECI for them. On
the other hand, Mrs. Capistrano denied these allegations for lack of knowledge as
to their truth.[12]This mode of denial is by itself obviously ineffectual since a
person must surely know if he applied for a credit card or not, like a person must
know if he is married or not. He must also know if he used the card and if he did
not pay the card company for his purchases. A persons denial for lack of
knowledge of things that by their nature he ought to know is not an acceptable
denial.
In any event, the CA ruled that, since ECI did not object on time to Mrs.
Capistranos evidence that her signatures on the subject documents were forged,
such omission cured her defective denial of their genuineness and due
execution. The CAs ruling on this point is quite incorrect.
True, issues not raised by the pleadings may be tried with the implied consent of
the parties as when one of them fails to object to the evidence adduced by the other
concerning such unimpleaded issues.[13] But the CA fails to reckon with the rule
that a partys admissions in the course of the proceedings, like an admission in the
answer of the genuineness and true execution of the plaintiffs actionable
documents, can only be contradicted by showing that defendant made such
admission through palpable mistake.[14]Here, Mrs. Capistrano never claimed
palpable mistake in the answer she filed.
It is of no moment that plaintiff ECI failed to object to Mrs. Capistranos evidence
at the trial that the subject documents were forgeries. As the Court ruled in Elayda
v. Court of Appeals,[15] the trial court may reject evidence that a party adduces to
contradict a judicial admission he made in his pleading since such admission is
conclusive as to him. It does not matter that the other party failed to object to the
contradictory evidence so adduced.
Notwithstanding the above, the Court holds that the CA correctly ordered the
dismissal of ECIs action since, contrary to the RTCs finding, Mrs. Capistrano

effectively denied the genuineness and due execution of ECIs actionable
documents. True, Mrs. Capistrano denied ECIs actionable documents merely for
lack of knowledge which denial, as pointed out above, is inadequate since by their
nature she ought to know the truth of the allegations regarding those
documents. But this inadequacy was cured by her quick assertion that she was also
denying the allegations regarding those actionable documents for the reasons as
stated in her special and affirmative defenses.
In the Special and Affirmative Defenses section of her answer, Mrs. Capistrano in
fact denied ECIs documented allegations that she applied for a credit card, was
given one, and used it. She said:
11. Defendant denies having applied for membership with the Equitable
Cardnetwork, Inc. as a widow of a deceased member of the Manila Yacht Club.
12. She has never authorized anyone to get her alleged card for the preceding
reason. Therefore, being not a member, she has no obligation, monetary or
otherwise to herein plaintiff.
Neither the RTC nor the CA can ignore Mrs. Capistranos above additional reasons
denying ECIs allegations regarding its actionable documents. Such reasons form
part of her answer. Parenthetically, it seems that, when Mrs. Capistrano denied the
transactions with ECI for lack of knowledge, it was her way of saying that such
transactions took place without her knowing. And, since Mrs. Capistrano in fact
verified her claim that she had no part in those transactions, she in effect denied
under oath the genuineness and due execution of the documents supporting
them. For this reason, she is not barred from introducing evidence that those
documents were forged.
97
Two. Here, apart from presenting an officer who identified its documents, ECI
presented no other evidence to support its claim that Mrs. Capistrano did business
with it. On the other hand, the evidence for the defense shows that it was not likely
for Mrs. Capistrano to have applied for a credit card since she was already 81 years
old, weak, bedridden, and suffering from senility at the time in question.[16] What
is more, she had been staying in Cagayan de Oro under the care of his son Mario;
whereas she made the alleged cash advances and purchases using the credit card in
different malls in Cebu City, Bohol, and Muntinlupa City.[17]
Further, as the CA found, Mrs. Capistranos specimen signatures on a Deed of
Sale,[18] an Extra-judicial Settlement of Estate of Deceased Person,[19] a Waiver
of Rights,[20]and a handwritten note,[21] executed at about the time in question,
clearly varied from the signatures found on ECIs documents.[22] The testimony of
a handwriting expert, while useful, is not indispensable in examining or comparing
handwritings or signatures.[23] The matter here is not too technical as to preclude
the CA from examining the signatures and ruling on whether or not they are
forgeries. The Court finds no reason to take exception from the CAs finding.
WHEREFORE, the Court DISMISSES the petition and AFFIRMS the order of the
Court of Appeals in CA-G.R. CV 79424 dated May 10, 2007 that directed the
dismissal of the complaint against respondent Josefa B. Capistrano.
Edron Construction vs Provincial Gov’t. of Surigao del Norte
[ G.R. No. 220211, June 05, 2017 ]
EDRON CONSTRUCTION CORPORATION AND EDMER Y. LIM,
PETITIONERS, V. THE PROVINCIAL GOVERNMENT OF SURIGAO DEL
SUR, REPRESENTED BY GOVERNOR VICENTE T. PIMENTEL, JR.,
RESPONDENT.
DECISION
PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari[1] are the Decision[2] dated
November 26, 2014 and the Resolution[3] dated September 8, 2015 of the Court of
Appeals (CA) in CA-G.R. CV No. 99539, which reversed and set aside the
Decision[4] dated December 28, 2010 and the Order[5]dated September 16, 2011
of the Regional Trial Court of Quezon City, Branch 77 (RTC) in Civil Case No. Q-
08-63154, and consequently, dismissed the complaint filed by petitioners Edron
Construction Corporation and Edmer Y. Lim (petitioners) against respondent the
Provincial Government of Surigao Del Sur, represented by Governor Vicente T.
Pimentel, Jr. (respondent).
The Facts
The instant petition stemmed from a Complaint[6] for specific performance and
damages filed by petitioners Edron Construction Corporation and Edmer Y. Lim
(Lim; collectively, petitioners) against respondent before the RTC. Petitioners
alleged that they entered into three (3) separate construction agreements[7] with
respondent for the construction of the Learning Resource Center of Tandag,
Tandag Bus/Jeepney Terminal, and Tandag Public Market. Petitioners claimed that
despite their completion and respondent's consequent acceptance of the works as
evidenced by Certificates of Final Acceptance,[8] the latter had yet to pay them the
aggregate amount of P8,870,729.67, despite numerous oral and written demands.
Thus, they filed the instant complaint to claim the aforesaid amount, plus
P500,000.00 as actual damages and P250,000.00 as attorney's fees.[9]
In its Answer with Counterclaim[10] dated January 6, 2009, respondent admitted
the existence of the aforesaid construction contracts. However, it nevertheless
maintained, inter alia, that: (a) there is no unpaid balance; (b) petitioners are in fact
liable for underruns and defective works; (c) petitioners had already waived or
abandoned their right to collect any amount on the ground of prescription; and (d)
petitioners are guilty of non-observance of the specifications indicated in the
construction contracts.[11]
More than a year after the filing of its Answer, respondent filed a Motion to
Dismiss[12] dated May 24, 2010 on the ground of failure to state a cause of action.
It argued that under Paragraph 4.3, Article IV of the construction agreements, final
payment to petitioners shall be made only after the submission of a sworn
statement attesting to the fact that all of the latter's obligations for labor and
materials under the contracts have been fully paid. In this regard, respondent
contended that since petitioners have yet to submit such sworn statement, then the
98
latter do not have a cause of action against it.[13] The motion was, however,
denied in an Order[14] dated August 11, 2010.
Meanwhile, during trial, Lim testified that: (a) petitioners referred the instant
matter to a Presidential Flagship Committee, which valued respondent's alleged
arrears at P4,326,174.50, and that the former accepted such valuation and agreed to
be paid such reduced amount, but respondent still failed to pay the same;[15] and
(b) petitioners no longer executed a separate affidavit referred to in Paragraph 4.3,
Article IV of the construction agreements, maintaining that everything that was
needed in claiming full payment from respondent were already attached in the final
billings they submitted to the latter.[16] On the other hand, witnesses for
respondent testified, among others, that respondent accepted the projects subject of
the construction agreements, free from major defects and deficiencies, but
nonetheless resisted making payments due to discrepancies in the valuations
arising from petitioners' alleged deviations from project specifications. [17]
The RTC Ruling
In a Decision[18] dated December 28, 2010, the RTC ruled in petitioners' favor,
and accordingly, ordered respondent to pay them: (a) P4,326,174.50 with interests
of six percent (6%) per annum computed from June 20, 2000, and thereafter,
twelve percent (12%) per annum from the filing of the complaint on August 5,
2008; (b) P50,000.00 as attorney's fees; and (c) the costs of suit.[19] The RTC
found that in light of respondent's admission that the construction works were
satisfactorily completed, free from major defects, and that it has accepted the same,
petitioners have amply proven their entitlement to the payment of their claim in the
reduced amount of P4,326,174.50 based on the Presidential Flagship Committee's
valuation, which petitioners had accepted. On the other hand, the RTC pointed out
that respondent's witnesses had not shown the alleged deviations, much less
submitted the list of defects and deficiencies on the projects subject of the
construction agreements, on which respondent justified its reason for non-payment
of petitioners' claims.[20]
Respondent moved for reconsideration[21] which was denied in an
Order[22] dated September 16, 2011. Aggrieved, respondent appealed to the
CA.[23]
The CA Ruling

In a Decision[24] dated November 26, 2014, the CA reversed and set aside the
RTC ruling, and consequently, dismissed the complaint for lack of cause of
action.[25] It held that by the very terms of the construction agreements,
specifically Paragraph 4.3, Article IV thereof, the contractor's submission of the
sworn statement attesting that all its obligations for labor and materials under the
contracts have been fully paid is a condition sine qua non in demanding final
payment from the owner. Hence, in view of petitioners': (a) admission in open
court that no such sworn statement was submitted; and (b) failure to submit
evidence showing that a sworn statement was submitted to respondents, petitioners
could not validly make a demand for final payment from respondent. In other
words, petitioners' cause of action against respondent has not yet accrued.[26]
Undaunted, petitioners moved for reconsideration,[27] which was, however, denied
in a Resolution[28] dated September 8, 2015; hence, this petition.
The Issue Before the Court
The primordial issue for the Court's resolution is whether or not the CA correctly
reversed and set aside the RTC ruling, and consequently, dismissed petitioners'
complaint for lack of cause of action.
The Court's Ruling
The petition is meritorious.
At the outset, the Court notes that the CA's dismissal of petitioners' complaint is
heavily-grounded on the latter's alleged non-submission of the sworn statement
required in Paragraph 4.3, Article IV[29] of the construction agreements.
Such reliance is misplaced.
Section 1, Rule 9 of the Rules of Court reads:
Section 1. Defenses and objections not pleaded. - Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the evidence on record that the
court has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the action is barred by
a prior judgment or by statute of limitations, the court shall dismiss the claim.
99
It may be gleaned from the said provision that except for the defenses of: (a) lack
of jurisdiction over the subject matter of the case; (b)litis pendentia; (c) res
judicata; and/or (d) prescription, other defenses must be invoked when an answer
or a motion to dismiss is filed in order to prevent a waiver thereof. Otherwise
stated, if a defendant fails to raise a defense not specifically excepted in Section 1,
Rule 9 of the Rules of Court either in a motion to dismiss or in the answer, such
defense shall be deemed waived, and consequently, defendant is already estopped
from relying upon the same in further proceedings.[30]
In the instant case, a judicious review of the records reveals that respondent's
Answer with Counterclaim[31] dated January 6, 2009 did not raise as an issue or as
a defense petitioners' non-execution of the sworn statement pertained to in
Paragraph 4.3, Article IV of the construction agreements. In fact, such matter was
only raised in its Motion to Dismiss[32] filed more than a year later after the
Answer, or on May 24, 2010, to support the ground relied upon in the said Motion,
which is failure to state a cause of action. However, it must be pointed out that the
Motion and the arguments supporting it can no longer be considered since it was
filed out of time as Section 1, Rule 16 of the Rules of Court explicitly provides that
motions to dismiss should be filed "[w]ithin the time for but before the filing the
answer to the complaint or pleading asserting a claim." More importantly, such
matter/defense raised in the motion does not fall within the exceptions laid down in
Section 1, Rule 9 of the Rules of Court. As such, respondent was already precluded
from raising such issue/defense. Hence, the RTC cannot be faulted in: (a) issuing
an Order[33] dated August 11, 2010 denying the Motion to Dismiss; and (b) not
including a discussion of said issue/defense in its Decision[34] dated December 28,
2010 and Order[35] dated September 16, 2011.
In light of the foregoing, the CA erred in dismissing petitioners' complaint on a
ground belatedly and improperly raised by respondent. Thus, the Court is
constrained to overturn said dismissal and in turn, uphold the RTC's finding of
liability on the part of respondents, especially considering that it issued Certificates
of Final Acceptance[36] essentially stating that the projects were satisfactorily
completed, free from major defects, and that it was formally accepting the same.
As a result, respondent is hereby adjudged to be liable to petitioners in the amount
of P4,326,174.50, which is the valuation of such liability according to the
Presidential Flagship Committee's valuation accepted by petitioners.
Finally and in line with prevailing jurisprudence, such amount shall earn legal
interest of twelve percent (12%) per annum, computed from first demand on June
 100

20, 2000 to June 30, 2013, and six percent (6%) per annum from July 1, 2013 until BERSAMIN, J.:
finality of the Decision. Said sum, as well as the other amounts awarded by the
RTC (i.e., P50,000.00 as attorney's fees and the costs of suit) shall then earn legal Injunction should not issue except upon a clear showing that the applicant has a
interest of six percent (6%) per annum from finality of the Decision until fully right in esse to be protected, and that the acts sought to be enjoined are violative of
paid.[37] such right. A preliminary injunction should not determine the merits of a case, or
decide controverted facts, for, being a preventive remedy, it
WHEREFORE, the petition is GRANTED. The Decision dated November 26, only seeks to prevent threatened wrong, further injury, and irreparable harm or
2014 and the Resolution dated September 8, 2015 of the Court of Appeals in CA- injustice until the rights of the parties can be settled.
G.R. CV No. 99539 are hereby REVERSED and SET ASIDE. Accordingly, the
Decision dated December 28, 2010 and the Order dated September 16, 2011 of the The Case
Regional Trial Court of Quezon City, Branch 77 in Civil Case No. Q-08-63154 are
hereby REINSTATED with MODIFICATION, in that respondent the Provincial
Under review at the instance of the defendant, now the petitioner herein, is the
Government of Surigao Del Sur, represented by Governor Vicente T. Pimentel, Jr.,
decision promulgated on July 9, 2002,1 whereby the Court of Appeals (CA) upheld
is liable to petitioners Edron Construction Corporation and Edmer Y. Lim for the
the order issued on July 5, 2001 in Civil Case No. CEB-26468 entitled Spouses
amounts of: (a) P4,326,174.50 plus legal interest of twelve percent (12%) per
Silverio & Zosima Borbon, et al. v. Bank of the Philippine Islands by the Regional
annum, computed from first demand on June 20, 2000 to June 30, 2013, and six
Trial Court (RTC), Branch 16, in Cebu City, presided by Hon. Judge Agapito L.
percent (6%) per annum from July 1, 2013 until finality of the Decision; (b)
Hontanosas, Jr.
P50,000.00 as attorney's fees; and (c) the costs of suit. Furthermore such amounts
shall earn an additional six percent (6%) per annum from finality of the Decision Antecedents
until fully paid.

On May 22, 2001, respondents Spouses Silverio and Zosima Borbon, Spouses
Xerxes and Erlinda Facultad, and XM Facultad and Development Corporation
commenced Civil Case No. CEB-26468 to seek the declaration of the nullity of the
Monarco Import vs Villanueva promissory notes, real estate and chattel mortgages and continuing surety
agreement they had executed in favor of the petitioner. They further sought
damages and attorney’s fees, and applied for a temporary restraining order (TRO)
or writ of preliminary injunction to prevent the petitioner from foreclosing on the
BPI vs Hontanosas mortgages against their properties.

G.R. No. 157163, June 25, 2014

The complaint alleged that the respondents had obtained a loan from the petitioner,
BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. HON. JUDGE AGAPITO and had executed promissory notes binding themselves, jointly and severally, to
L. HONTANOSAS, JR., REGIONAL TRIAL COURT, BRANCH 16, CEBU pay the sum borrowed; that as security for the payment of the loan, they had
CITY, SILVERIO BORBON, SPOUSES XERXES AND ERLINDA constituted real estate mortgages on several parcels of land in favor of the
FACULTAD, AND XM FACULTAD & DEVELOPMENT petitioner; and that they had been made to sign a continuing surety agreement and a
CORPORATION, Respondents. chattel mortgage on their Mitsubishi Pajero.

DECISION It appears that the respondents’ obligation to the petitioner had reached

P17,983,191.49, but they had only been able to pay P13 Million because they had
been adversely affected by the economic turmoil in Asia in 1997. The petitioner
required them to issue postdated checks to cover the loan under threat of
foreclosing on the mortgages. Thus, the complaint sought a TRO or a writ of
preliminary injunction to stay the threatened foreclosure.
On June 6, 2001, the petitioner filed its answer with affirmative defenses and
counterclaim, as well as its opposition to the issuance of the writ of preliminary
injunction, contending that the foreclosure of the mortgages was within its legal
right to do.2cralawred
Also on June 6, 2001 the petitioner filed a motion to dismiss reiterating its
affirmative defenses, to wit:ChanRoblesVirtualawlibrary
I) THAT THE COMPLAINT SHOULD BE DISMISSED BECAUSE VENUE IS
IMPROPERLY LAID. (RULE 16, SECITON 1, PARAGRAPH (C);
II) THAT THE COURT HAS NOT ACQUIRED JURISDICTION OVER THE
SUBJECT MATTER OF THE CLAIM BECAUSE THE PROPER LEGAL FEES
HAS NOT BEEN PAID IN ACCORDANCE WITH RULE 14, OF THE RULES
OF COURT AND CIRCULAR NO. 7 OF THE SUPREME COURT, SERIES OF
1988;
III) THAT ZOSIMA BORBON’S COMPLAINT SHOULD BE DISMISSED
BECAUSE PLAINTIFF ZOSIMA BORBON HAS NO LEGAL PERSONALITY
TO SUE BEING DECEASED, SPOUSE OF PLAINTIFF SILVERIO BORBON.
(RULE 16, SECTION 1(d);
IV) THAT THE ESTATE OF ZOSIMA BORBON BEING AN INDISPENSABLE
PARTY, THE COMPLAINT SHOULD BE AMENDED TO INCLUDE THE
ESTATE OF ZOSIMA BORBON. (RULE 16, SECTION 1(j);
V) THAT THE COMPLAINT OF PLAINTIFF XM FACULTAD AND
DEVELOPMENT CORPORATION, SHOULD BE DISMISSED BECAUSE
THERE IS NO BOARD RESOLUTION AUTHORIZING THE FILING OF THIS
CASE. [RULE 16, SECTION 1 (d)];
101
VI) THAT THE PLEADING ASSERTING THE CLAIM STATES NO CAUSE
OF ACTION.3
On July 5, 2001, the RTC denied the petitioner’s motion to dismiss for being
unmeritorious,4 but granted the respondents’ application for preliminary
injunction,5 to wit:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, the application for preliminary injunction is
GRANTED. Upon filing by the plaintiff-applicants of a bond in the amount of
P2,000,000 in favor of defendant to the effect that applicants will pay to adverse
party all damages which it may sustain by reason of the injunction, let a writ of
preliminary injunction be issued directing the defendant and its agents or
representatives, to cease and desist from commencing foreclosure and sale
proceedings of the mortgaged properties; from taking possession of the Mitsubishi
Pajero subject of the chattel mortgage; and from using the questioned post-dated
checks as evidence for the filing of complaint against plaintiffs Facultad for
violation of Batas Pambansa Blg. 22, while the present case is pending litigation.
This writ of preliminary injunction shall continue until further orders from the
Court.
Notify the parties of this Order.
SO ORDERED.6cralawred
The RTC later denied the petitioner’s motion for reconsideration through its
order7 of August 22, 2001.
Ruling of the CA
Dissatisfied, the petitioner assailed the orders of the RTC by petition
for certiorari in the CA, submitting the lone issue of:ChanRoblesVirtualawlibrary
WHETHER OR NOT THE PUBLIC RESPONDENT COMMITTED GRAVE
ABUSE OF DISCRETION WHEN IT ISSUED AN ORDER DENYING THE
MOTION TO DISMISS AND GRANTING THE WRIT OF PRELIMINARY
MANDATORY INJUNCTION.
 102

Whether or not the issuance of the writ of preliminary injunction against the
On July 9, 2002, however, the CA rendered the adverse decision under review, to petitioner, its agents and representatives, was in order.
wit:ChanRoblesVirtualawlibrary

WHEREFORE, premises considered, the assailed order of the Regional Trial Court
(RTC) of Cebu City, Branch 16 dated July 5, 2001 and August 22, 2001 are Ruling of the Court
hereby AFFIRMED. Let the original records of this case be remanded
immediately to the court a quo for further proceedings.
The appeal is partly meritorious.
SO ORDERED.8 1.
Civil Case No. CEB-26468
was a personal action; hence,
The CA held that the petitioner’s averment of non-payment of the proper docket
venue was properly laid
fee by the respondents as the plaintiffs in Civil Case No. CEB-26468 was not
substantiated; that even if the correct docket fee was not in fact paid, the strict
application of the rule thereon could be mitigated in the interest of justice;9 and The CA and the RTC held that Civil Case No. CEB-26468, being for the
that Civil Case No. CEB-26468, being a personal action, was properly filed in declaration of the nullity of a contract of loan and its accompanying continuing
Cebu City where respondent XM Facultad and Development Corporation’s surety agreement, and the real estate and chattel mortgages, was a personal action;
principal office was located.10cralawred hence, its filing in Cebu City, the place of business of one of the plaintiffs, was
correct under Section 2, Rule 4 of the Rules of Court.
The CA further held that Zosima Borbon’s death rendered respondent Silverio
Borbon, her surviving spouse, the successor to her estate; that although there was a The petitioner contends, however, that Civil Case No. CEB-26468 was a real
valid transfer of interest pending the litigation, the dismissal of action that should be commenced and tried in the proper court having jurisdiction
the complaint would not be in order because it was permissible under the rules to over the area wherein the real property involved, or a portion thereof, was situated;
continue the action in the name of the original party;11 and that the RTC did not and that consequently the filing and docket fees for the complaint should be based
commit grave abuse of discretion in issuing the writ of preliminary injunction on the value of the property as stated in the certificate of sale attached thereto.
because it thereby only applied the pertinent law and jurisprudence.12cralawred
We sustain the lower courts’ holdings.
The CA denied the petitioner’s motion for reconsideration through its resolution of
February 12, 2003.13cralawred The determinants of whether an action is of a real or a personal nature have been
fixed by the Rules of Court and relevant jurisprudence. According to Section 1,
Issues
Rule 4 of the Rules of Court, a real action is one that affects title to or possession
of real property, or an interest therein. Such action is to be commenced and tried in
Hence, this appeal, with the petitioner positing as the proper court having jurisdiction over the area wherein the real property
follows:ChanRoblesVirtualawlibrary involved, or a portion thereof, is situated, which explains why the action is also
referred to as a local action. In contrast, the Rules of Court declares all other
Whether or not Civil Case No. CEB-26468 should be dismissed for (a) non- actions as personal actions.15 Such actions may include those brought for the
payment of the correct amount of docket fee; and (b) improper venue;14cralawred recovery of personal property, or for the enforcement of some contract or recovery
 103

of damages for its breach, or for the recovery of damages for the commission of an 3.6 Furthermore, the total obligation of plaintiffs is void and baseless because it is
injury to the person or property.16 The venue of a personal action is the place based on illegal impositions of exorbitant interest and excessive charges. Interest
where the plaintiff or any of the principal plaintiffs resides, or where the defendant was converted into principal which in turn earns interest. These illegal impositions
or any of the principal defendants resides, or in the case of a non-resident are considered by law and jurisprudence as null and void. These excessive interest
defendant where he may be found, at the election of the plaintiff,17 for which and charges should be applied to the principal unless there is application, defendant
reason the action is considered a transitory one. bank is enriching itself at the expense of plaintiffs.

The complaint in Civil Case No. CEB-26468 pertinently alleged as xxxx

follows:18cralawred

x x x x
3.1 Plaintiffs signed blank pre-printed forms of promissory note no. 501253-000,
continuing surety agreement, real estate mortgages, chattel mortgage which
violates the principle of mutuality of contracts. These contracts are in the nature of
contracts of adhesion with provisions favouring defendant bank and plaintiffs had
nothing to do except to sign the unjust stipulations which should be declared as
NULL AND VOID. These contracts do not reflect the real agreement of the
parties and the stipulations are tilted in favor of defendant bank.
Based on the aforequoted allegations of the complaint in Civil Case No. CEB-
26468, the respondents seek the nullification of the promissory notes, continuing
surety agreement, checks and mortgage agreements for being executed against their
will and vitiated by irregularities, not the recovery of the possession or title to the
properties burdened by the mortgages. There was no allegation that the possession
of the properties under the mortgages had already been transferred to the petitioner
in the meantime. Applying the determinants, Civil Case No. CEB-26468 was
unquestionably a personal action, for, as ruled in Chua v. Total Office Products and
Services (Topros), Inc.:19cralawred

3.2 Moreover, these real estate mortgages, chattel mortgages and continuing surety
agreement are securing specific amounts of obligation and upon the payment of
P13,000,000 to defendant bank, automatically, these became functus de oficio and
should be released immediately without the encumbrance.
3.3 As the chattel mortgage involving the Mitsubishi Pajero secured only
P600,000.00, upon liquidation of more than P800,000.00 principal payment, the
same became null and void, and defendant bank should be ordered to cancel the
mortgage and to be directed not to take any appropriate action to take possession.
3.4 In addition, Penbank Checks Nos. 11237 to 11242 with amounts of
P200,000.00 each and BPI Check Nos. 019098 & 019099 with amounts of
P400,000.00 each, issued against the will of plaintiffs Facultad and without any
consideration, should be declared null and void. Defendant bank should be
directed not to deposit the same for collection with the drawee bank.
x x x x
Well-settled is the rule that an action to annul a contract of loan and its accessory
real estate mortgage is a personal action. In a personal action, the plaintiff seeks
the recovery of personal property, the enforcement of a contract or the recovery of
damages. In contrast, in a real action, the plaintiff seeks the recovery of real
property, or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, a real
action is an action affecting title to real property or for the recovery of possession,
or for partition or condemnation of, or foreclosure of mortgage on, real property.
In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond
was assailed as fictitious for lack of consideration. We held that there being no
contract to begin with, there is nothing to annul. Hence, we deemed the action for
annulment of the said fictitious contract therein as one constituting a real action for
the recovery of the fishpond subject thereof.
We cannot, however, apply the foregoing doctrine to the instant case. Note that
inPascual, title to and possession of the subject fishpond had already passed to the
vendee. There was, therefore, a need to recover the said fishpond. But in the
instant case, ownership of the parcels of land subject of the questioned real estate

mortgage was never transferred to petitioner, but remained with TOPROS. Thus,
no real action for the recovery of real property is involved. This being the case,
TOPROS’ action for annulment of the contracts of loan and real estate mortgage
remains a personal action.
x x x x
The Court of Appeals finds that Hernandez v. Rural Bank of Lucena, Inc. provides
the proper precedent in this case. In Hernandez, appellants contended that the
action of the Hernandez spouses for the cancellation of the mortgage on their lots
was a real action affecting title to real property, which should have been filed in the
place where the mortgaged lots were situated. Rule 4, Section 2 (a), of the then
Rules of Court, was applied, to wit:
SEC. 2. Venue in Courts of First Instance. – (a) Real actions. – Actions affecting
title to, or for recovery of possession, or for partition or condemnation of, or
foreclosure of mortgage on, real property, shall be commenced and tried in the
province where the property or any part thereof lies.
The Court pointed out in the Hernandez case that with respect to mortgage, the rule
on real actions only mentions an action for foreclosure of a real estate mortgage. It
does not include an action for the cancellation of a real estate mortgage. Exclusio
unios est inclusio alterius. The latter thus falls under the catch-all provision on
personal actions under paragraph (b) of the above-cited section, to wit:
SEC. 2 (b) Personal actions. – All other actions may be commenced and tried
where the defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff.
In the same vein, the action for annulment of a real estate mortgage in the present
case must fall under Section 2 of Rule 4, to wit:
SEC. 2. Venue of personal actions. – All other actions may be commenced and
tried where the plaintiff or any of the principal plaintiffs resides, or where the
defendant or any of the principal defendants resides, or in the case of a non-
resident defendant where he may be found, at the election of the plaintiff.
Thus, Pasig City, where the parties reside, is the proper venue of the action to
nullify the subject loan and real estate mortgage contracts. The Court of Appeals
104
committed no reversible error in upholding the orders of the Regional Trial Court
denying petitioner’s motion to dismiss the case on the ground of improper venue.
Being a personal action, therefore, Civil Case No. CEB-26468 was properly
brought in the RTC in Cebu City, where respondent XM Facultad and
Development Corporation, a principal plaintiff, had its address.
Upon the same consideration, the petitioner’s contention that the filing and docket
fees for the complaint should be based on the assessed values of the mortgaged real
properties due to Civil Case No. CEB-26468 being a real action cannot be upheld
for lack of factual and legal bases.
2.
Respondents were not entitled
to the writ of preliminary injunction
In their application for the issuance of the writ of preliminary injunction, the
respondents averred that the nullity of the loan and mortgage agreements entitled
them to the relief of enjoining the petitioner from: (a) foreclosing the real estate
and chattel mortgages; (b) taking possession, by replevin, of the Mitsubishi Pajero;
and (c) depositing the postdated checks; that respondents Spouses Facultad would
suffer injustice and irreparable injury should the petitioner foreclose the mortgages
and file criminal complaints for violation of Batas Pambansa Blg. 22 against them;
and that such threatened acts, if done, would render ineffectual the judgment of the
trial court.20 They prayed that the petitioner be enjoined from doing acts that
would disturb their material possession of the mortgaged properties, manifesting
their willingness to post a bond for the issuance of the writ of preliminary
injunction.21cralawred
As mentioned, the RTC issued the writ of preliminary injunction on July 16, 2001
based on the foregoing allegations of the respondents’ application,22 and the CA
upheld the issuance in its assailed July 9, 2002 decision.23cralawred
The petitioner submits that the issuance of the writ of preliminary injunction
constituted a violation of Administrative Circular (AC) No. 07-99 dated June 25,
1999, and thus subjected respondent Judge to administrative sanction;24 that
injunction could not issue to enjoin the prosecution of the criminal offenses
 105

because such prosecution was imbued with public interest;25 and that the Judges should bear in mind that in Garcia v. Burgos (291 SCRA 546, 571-572
petitioner, as the mortgagee, could not be prohibited from exercising its legal right [1998]), this Court explicitly stated:
to foreclose the mortgages because foreclosure of the mortgages was its proper
remedy under the law.26cralawred Sec. 1 of PD 1818 distinctly provides that “[n]o court in the Philippines shall have
jurisdiction to issue any restraining order, preliminary injunction, or preliminary
AC No. 07-99 was issued as a guideline for lower court judges in the issuance of mandatory injunction in any case, dispute, or controversy involving an
TROs and writs of preliminary injunctions to prevent the implementation of infrastructure project . . . of the government, . . . to prohibit any person or persons,
infrastructure projects, or the seizure and forfeiture proceedings by the Bureau of entity or government official from proceeding with, or continuing the execution or
Customs, viz:ChanRoblesVirtualawlibrary implementation of any such project . . . or pursuing any lawful activity necessary
for such execution, implementation or operation.” At the risk of being repetitious,
ADMINISTRATIVE CIRCULAR NO. 07-99 June 25, 1999 we stress that the foregoing statutory provision expressly deprives courts of
jurisdiction to issue injunctive writs against the implementation or execution of an
infrastructure project.
TO: ALL JUDGES OF LOWER COURTS
Their attention is further invited to Circular No. 68-94, issued on 3 November 1994
RE: EXERCISE OF UTMOST CAUTION, PRUDENCE, AND by the OCA OIC Deputy Court Administrator Reynaldo L. Suarez, on the subject
JUDICIOUSNESS IN ISSUANCE OF TEMPORARY RESTRAINING ORDERS “Strict Observance of Section 1 of P.D. 1818 Envisioned by Circular No. 13-93
AND WRITS OF PRELIMINARY INJUNCTIONS dated March 5, 1993, and Circular No. 20-92 dated March 24, 1992.

Despite well-entrenched jurisprudence and circulars regarding exercise of Finally, judges should never forget what the Court categorically declared in Mison
judiciousness and care in the issuance of temporary restraining orders (TRO) or v. Natividad (213 SCRA 734, 742 [1992] that “[b]y express provision of law,
grant of writs of preliminary injunction, reports or complaints on abuses committed amply supported by well-settled jurisprudence, the Collector of Customs has
by trial judges in connection therewith persist. Some even intimated that exclusive jurisdiction over seizure and forfeiture proceedings, and regular courts
irregularities, including corruption, might have influenced the issuance of the TRO cannot interfere with his exercise thereof or stifle or put it to naught.”
or the writ of preliminary injunction.
The Office of the Court Administrator shall see to it that this circular is
No less than the President of the Philippines has requested this Court to issue a immediately disseminated and shall monitor implementation thereof.
circular reminding judges to respect P.D. No. 1818, which prohibits the issuance of
TROs in cases involving implementation of government infrastructure projects. STRICT OBSERVANCE AND COMPLIANCE of this Circular is hereby
The Office of the President has likewise brought to the attention of this Court enjoined.
orders of judges releasing imported articles under seizure and forfeiture
proceedings by the Bureau of Customs.
AC No. 07-99 was irrelevant herein, however, because Civil Case No. CEB-26468
Judges are thus enjoined to observe utmost caution, prudence and judiciousness in did not involve the implementation of infrastructure projects, or the seizure and
the issuance of TRO and in the grant of writs of preliminary injunction to avoid forfeiture proceedings by the Bureau of Customs. Consequently, the petitioner’s
any suspicion that its issuance or grant was for considerations other than the strict urging that respondent Judge be held administratively liable for violating AC No.
merits of the case. 07-99 was misplaced.

However, the RTC’s issuance of the writ of preliminary injunction to enjoin the

petitioner from proceeding with the foreclosure of the mortgages was plainly
erroneous and unwarranted.
A preliminary injunction is an order granted at any stage of an action prior to the
judgment or final order requiring a party or a court, agency or a person to refrain
from a particular act or acts.27 It is the “strong arm of equity,” an extraordinary
peremptory remedy that must be used with extreme caution, affecting as it does the
respective rights of the parties.28 The requirements for the issuance of a writ of
preliminary injunction or TRO are enumerated in Section 3, Rule 58 of the Rules
of Court, to wit:ChanRoblesVirtualawlibrary
Section 3. Grounds for issuance of preliminary injunction. - A preliminary
injunction may be granted when it is established:ChanRoblesVirtualawlibrary
(a) That the applicant is entitled to the relief demanded, and the whole or part of
such relief consists in restraining the commission or continuance of the act or acts
complained of, or in requiring the performance of an act or acts, either for a limited
period or perpetually;
(b) That the commission, continuance or non-performance of the act or acts
complained of during the litigation would probably work injustice to the applicant;
or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to
do, or is procuring or suffering to be done, some act or acts probably in violation of
the rights of the applicant respecting the subject of the action or proceeding, and
tending to render the judgment ineffectual.
In City Government of Butuan v. Consolidated Broadcasting System (CBS),
Inc.,29 the Court restated the nature and concept of a writ of preliminary
injunction, as follows:ChanRoblesVirtualawlibrary
A preliminary injunction is an order granted at any stage of an action or proceeding
prior to the judgment or final order requiring a party or a court, an agency, or a
person to refrain from a particular act or acts. It may also require the performance
of a particular act or acts, in which case it is known as a preliminary mandatory
injunction. Thus, a prohibitory injunction is one that commands a party to refrain
from doing a particular act, while a mandatory injunction commands the
106
performance of some positive act to correct a wrong in the past.
As with all equitable remedies, injunction must be issued only at the instance of a
party who possesses sufficient interest in or title to the right or the property sought
to be protected. It is proper only when the applicant appears to be entitled to the
relief demanded in the complaint, which must aver the existence of the right and
the violation of the right, or whose averments must in the minimum constitute
a prima facie showing of a right to the final relief sought. Accordingly, the
conditions for the issuance of the injunctive writ are: (a) that the right to be
protected exists prima facie; (b) that the act sought to be enjoined is violative of
that right; and (c) that there is an urgent and paramount necessity for the writ to
prevent serious damage. An injunction will not issue to protect a right not in esse,
or a right which is merely contingent and may never arise; or to restrain an act
which does not give rise to a cause of action; or to prevent the perpetration of an
act prohibited by statute. Indeed, a right, to be protected by injunction, means a
right clearly founded on or granted by law or is enforceable as a matter of law.
(Bold emphasis supplied)
Under the circumstances averred in the complaint in Civil Case No. CEB-26468,
the issuance of the writ of preliminary injunction upon the application of the
respondents was improper. They had admittedly constituted the real estate and
chattel mortgages to secure the performance of their loan obligation to the
petitioner, and, as such, they were fully aware of the consequences on their rights
in the properties given as collaterals should the loan secured be unpaid. The
foreclosure of the mortgages would be the remedy provided by law for the
mortgagee to exact payment.30 In fact, they did not dispute the petitioner’s
allegations that they had not fully paid their obligation, and that Civil Case No.
CEB-26468 was precisely brought by them in order to stave off the impending
foreclosure of the mortgages based on their claim that they had been compelled to
sign pre-printed standard bank loan forms and mortgage agreements.
It is true that the trial courts are given generous latitude to act on applications for
the injunctive writ for the reason that conflicting claims in an application for the
writ more often than not involve a factual determination that is not the function of
the appellate courts;31 and that the exercise of sound discretion by the issuing
courts in injunctive matters ought not to be interfered with except when there is
manifest abuse.32 Nonetheless, the exercise of such discretion must be sound, that

is, the issuance of the writ, though discretionary, should be upon the grounds and in
the manner provided by law.33 Judges should always bear in mind that the writ of
preliminary injunction is issued upon the satisfaction of two requisite conditions,
namely: (1) the right to be protected exists prima facie; and (2) the acts sought to
be enjoined are violative of that right.
According to Saulog v. Court of Appeals,34 the applicant must have a sufficient
interest or right to be protected, but it is enough that:-chanroblesvir tuallawlibrary
x x x for the court to act, there must be an existing basis of facts affording a present
right which is directly threatened by an act sought to be enjoined. And while a
clear showing of the right claimed is necessary, its existence need not be
conclusively established. In fact, the evidence to be submitted to justify
preliminary injunction at the hearing thereon need not be conclusive or complete
but need only be a “sampling” intended merely to give the court an idea of the
justification for the preliminary injunction pending the decision of the case on the
merits. This should really be so since our concern here involves only the propriety
of the preliminary injunction and not the merits of the case still pending with the
trial court.
Thus, to be entitled to the writ of preliminary injunction, the private respondent
needs only to show that it has the ostensible right to the final relief prayed for in its
complaint x x x.
It is also basic that the power to issue a writ of injunction is to be exercised only
where the reason and necessity therefor are clearly established, and only in cases
reasonably free from doubt.35 For, truly, a preliminary injunction should not
determine the merits of a case,36 or decide controverted
facts.37 As a preventive remedy, injunction only seeks to prevent threatened
wrong,38 further injury,39 and irreparable harm40 or injustice41 until the rights of
the parties can be settled. As an ancillary and preventive remedy, it may be
resorted to by a party to protect or preserve his rights during the pendency of the
principal action, and for no other purpose.42 Such relief will accordingly protect
the ability of the court to render a meaningful decision;43 it will further serve to
guard against a change of circumstances that will hamper or prevent the granting of
proper relief after a trial on the merits.44 Verily, its essential function is to preserve
the status quo between the parties until the merits of the case can be
107
heard.45cralawred
Moreover, the applicant must prove that the violation sought to be prevented would
cause an irreparable injustice.46 But the respondents failed to establish the
irreparable injury they would suffer should the writ of preliminary injunction not
be issued. They principally feared the loss of their possession and ownership of the
mortgaged properties, and faced the possibility of a criminal prosecution for the
post-dated checks they issued. But such fear of potential loss of possession and
ownership, or facing a criminal prosecution did not constitute the requisite
irreparable injury that could have warranted the issuance of the writ of injunction.
“An injury is considered irreparable,” according to Philippine National Bank v.
Castalloy Technology Corporation,47cralawred
x x x if it is of such constant and frequent recurrence that no fair or reasonable
redress can be had therefor in a court of law, or where there is no standard by
which their amount can be measured with reasonable accuracy, that is, it is not
susceptible of mathematical computation. The provisional remedy of preliminary
injunction may only be resorted to when there is a pressing necessity to avoid
injurious consequences which cannot be remedied under any standard of
compensation.
The injury being feared by the herein respondents is not of such nature. Ultimately,
the amount to which the mortgagee-bank shall be entitled will be determined by the
disposition of the trial court in the main issue of the case. We have explained
in Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc. that all is not lost for
defaulting mortgagors whose properties were foreclosed by creditors-
mortgagees. The respondents will not be deprived outrightly of their property,
given the right of redemption granted to them under the law. Moreover, in
extrajudicial foreclosures, mortgagors have the right to receive any surplus in the
selling price. Thus, if the mortgagee is retaining more of the proceeds of the sale
than he is entitled to, this fact alone will not affect the validity of the sale but will
give the mortgagor a cause of action to recover such surplus.
As a general rule, the courts will not issue writs of prohibition or injunction –
whether preliminary or final – in order to enjoin or restrain any criminal
prosecution.48 But there are extreme cases in which exceptions to the general rule
have been recognized, including: (1) when the injunction is necessary to afford

adequate protection to the constitutional rights of the accused; (2) when it is
necessary for the orderly administration of justice or to avoid oppression or
multiplicity of actions; (3) when there is a prejudicial question that is sub judice;
(4) when the acts of the officer are without or in excess of authority; (5) when the
prosecution is under an invalid law, ordinance or regulation; (6) when double
jeopardy is clearly apparent; (7) when the court has no jurisdiction over the
offense; (8) when it is a case of persecution rather than prosecution; (9) when the
charges are manifestly false and motivated by the lust for vengeance; and (10)
when there is clearly no prima facie case against the accused and a motion to quash
on that ground has been denied.49 However, the respondents did not sufficiently
show that Civil Case No. CEB-26468 came under any of the foregoing exceptions.
Hence, the issuance by the RTC of the writ of preliminary injunction to enjoin the
petitioner from instituting criminal complaints for violation of BP No. 22 against
the respondents was unwarranted.
Every court should remember that an injunction should not be granted lightly or
precipitately because it is a limitation upon the freedom of the defendant’s action.
It should be granted only when the court is fully satisfied that the law permits it
and the emergency demands it,50 for no power exists whose exercise is more
delicate, which requires greater caution and deliberation, or is more dangerous in a
doubtful case, than the issuance of an injunction.51cralawred
In view of the foregoing, the CA grossly erred in not declaring that the RTC
committed grave abuse of discretion in granting the application of the respondents
as the plaintiffs in Civil Case No. CEB-26468. The RTC apparently disregarded
the aforecited well-known norms and guidelines governing the issuance of the writ
of injunction. Thereby, the RTC acted capriciously and arbitrarily. Grave abuse of
discretion means either that the judicial or quasi-judicial power was exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, or that the
respondent judge, tribunal or board evaded a positive duty, or virtually refused to
perform the duty enjoined or to act in contemplation of law, such as when such
judge, tribunal or board exercising judicial or quasi-judicial powers acted in a
capricious or whimsical manner as to be equivalent to lack of
jurisdiction.52cralawred
WHEREFORE, the Court PARTIALLY GRANTS the petition for review
on certiorari; MODIFIES the decision promulgated on July 9, 2002 by annulling
and setting aside the writ of preliminary injunction in Civil Case No. CEB-26468
108
issued by the Regional Trial Court, Branch 16, in Cebu City for being devoid of
factual and legal bases; ORDERS the Regional Trial Court, Branch 16, in Cebu
City to proceed with dispatch in Civil Case No. CEB-26468; and DIRECTS the
respondents to pay the costs of suit.
Briones vs CA
1. Same; Civil Procedure; Venue; The general rule is that the venue of real actions
is the court which has jurisdiction over the area wherein the real property involved,
or a portion thereof, is situated; while the venue of personal actions is the court
which has jurisdiction where the plaintiff or the defendant resides, at the election of
the plaintiff.-
—The general rule is that the venue of real actions is the court which has
jurisdiction over the area wherein the real property involved, or a portion thereof, is
situated; while the venue of personal actions is the court which has jurisdiction
where the plaintiff or the defendant resides, at the election of the plaintiff. As an
exception, jurisprudence in Legaspi v. Rep. of the Phils., 559 SCRA 410 (2008),
instructs that the parties, thru a written instrument, may either introduce another
venue where actions arising from such instrument may be filed, or restrict the filing
of said actions in a certain exclusive venue.
2. Remedial Law; Special Civil Actions; Certiorari; Grave Abuse of
Discretion; The Supreme Court (SC) stresses that “[t]o justify the grant of the
extraordinary remedy of certiorari, [the petitioner] must satisfactorily show that the
court or quasi-judicial authority gravely abused the discretion conferred upon it.”-
—At the outset, the Court stresses that “[t]o justify the grant of the extraordinary
remedy of certiorari, [the petitioner] must satisfactorily show that the court or
quasi-judicial authority gravely abused the discretion conferred upon it. Grave
abuse of discretion connotes judgment exercised in a capricious and whimsical
manner that is tantamount to lack of jurisdiction. To be considered ‘grave,’
discretion must be exercised in a despotic manner by reason of passion or personal
hostility, and must be so patent and gross as to amount to an evasion of positive

duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law.”
VIRGILIO C. BRIONES, Petitioner, v. COURT OF APPEALS AND CASH ASIA
CREDIT CORPORATION, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for certiorari1 are the Decision2 dated March 5, 2012 and
the Resolution3 dated October 4, 2012 of the Court of Appeals(CA) in CA-G.R. SP
No. 117474, which annulled the Orders dated September 20, 20104 and October
22, 20105 of the Regional Trial Court of Manila, Branch 173 (RTC) in Civil Case
No. 10-124040, denying private respondent Cash Asia Credit Corporation’s (Cash
Asia) motion to dismiss on the ground of improper venue.cralawred
The Facts
The instant case arose from a Complaint6 dated August 2, 2010 filed by Virgilio C.
Briones (Briones) for Nullity of Mortgage Contract, Promissory Note, Loan
Agreement, Foreclosure of Mortgage, Cancellation of Transfer Certificate of Title
(TCT) No.290846, and Damages against Cash Asia before the RTC.7 In his
complaint, Briones alleged that he is the owner of a property covered by TCT No.
160689 (subject property),and that, on July 15, 2010, his sister informed him that
his property had been foreclosed and a writ of possession had already been issued
in favor of Cash Asia.8 Upon investigation, Briones discovered that: (a) on
December 6, 2007, he purportedly executed a promissory note,9 loan
agreement,10 and deed of real estate mortgage11covering the subject property
(subject contracts) in favor of Cash Asia in order to obtain a loan in the amount of
P3,500,000.00 from the latter;12 and (b) since the said loan was left unpaid, Cash
Asia proceeded to foreclose his property.13 In this relation, Briones claimed that
he never contracted any loans from Cash Asia as he has been living and working in
Vietnam since October 31, 2007. He further claimed that he only went back to the
Philippines on December 28, 2007 until January 3, 2008 to spend the holidays with
his family, and that during his brief stay in the Philippines, nobody informed him
of any loan agreement entered into with Cash Asia. Essentially, Briones assailed
109
the validity of the foregoing contracts claiming his signature to be
forged.14chanRoblesvirtualLawlibrary
For its part, Cash Asia filed a Motion to Dismiss15 dated August 25, 2010, praying
for the outright dismissal of Briones’s complaint on the ground of improper
venue.16 In this regard, Cash Asia pointed out the venue stipulation in the subject
contracts stating that “all legal actions arising out of this notice in connection with
the Real Estate Mortgage subject hereof shall only be brought in or submitted to
the jurisdiction of the proper court of Makati City.”17 In view thereof, it contended
that all actions arising out of the subject contracts may only be exclusively brought
in the courts of Makati City, and as such, Briones’s complaint should be dismissed
for having been filed in the City of Manila.18chanRoblesvirtualLawlibrary
In response, Briones filed an opposition,19 asserting, inter alia, that he should not
be covered by the venue stipulation in the subject contracts as he was never a party
therein. He also reiterated that his signatures on the said contracts were
forgeries.20chanRoblesvirtualLawlibrary
The RTC Ruling
In an Order21 dated September 20, 2010, the RTC denied Cash Asia’s motion to
dismiss for lack of merit. In denying the motion, the RTC opined that the parties
must be afforded the right to be heard in view of the substance of Briones’s cause
of action against Cash Asia as stated in the
complaint.22chanRoblesvirtualLawlibrary
Cash Asia moved for reconsideration23 which was, however, denied in an
Order24 dated October 22, 2010. Aggrieved, it filed a petition
for certiorari25 before the CA.cralawred
The CA Ruling
In a Decision26 dated March 5, 2012, the CA annulled the RTC Orders, and
accordingly, dismissed Briones’s complaint without prejudice to the filing of the
same before the proper court in Makati City.27 It held that the RTC gravely abused
its discretion in denying Cash Asia’s motion to dismiss, considering that the
subject contracts clearly provide that actions arising therefrom should be

exclusively filed before the courts of Makati City only.28 As such, the CA
concluded that Briones’s complaint should have been dismissed outright on the
ground of improper venue,29 this, notwithstanding Briones’s claim of forgery.
Dissatisfied, Briones moved for reconsideration,30 which was, however, denied in
a Resolution31 dated October 4, 2012, hence, this petition.
The Issue Before the Court
The primordial issue for the Court’s resolution is whether or not the CA gravely
abused its discretion in ordering the outright dismissal of Briones’s complaint on
the ground of improper venue.
The Court’s Ruling
The petition is meritorious.
At the outset, the Court stresses that “[t]o justify the grant of the extraordinary
remedy of certiorari, [the petitioner] must satisfactorily show that the court or
quasi-judicial authority gravely abused the discretion conferred upon it. Grave
abuse of discretion connotes judgment exercised in a capricious and whimsical
manner that is tantamount to lack of jurisdiction. To be considered ‘grave,’
discretion must be exercised in a despotic manner by reason of passion or personal
hostility, and must be so patent and gross as to amount to an evasion of positive
duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law.”32chanRoblesvirtualLawlibrary
Guided by the foregoing considerations, the Court finds that the CA gravely abused
its discretion in ordering the outright dismissal of Briones’s complaint against Cash
Asia, without prejudice to its re-filing before the proper court in Makati City.
Rule 4 of the Rules of Court governs the rules on venue of civil actions, to
wit:chanroblesvirtuallawlibrary
Rule 4 where actions arising from such instrument may be filed, or restrict the filing of
VENUE OF ACTIONS
110
SECTION 1. Venue of real actions. — Actions affecting title to or possession of
real property, or interest therein, shall be commenced and tried in the proper court
which has jurisdiction over the area wherein the real property involved, or a
portion thereof, is situated.
Forcible entry and detainer actions shall be commenced and tried in the municipal
trial court of the municipality or city wherein the real property involved, or a
portion thereof, is situated.
SEC. 2. Venue of personal actions. — All other actions may be commenced and
tried where the plaintiff or any of the principal plaintiffs resides, or where the
defendant or any of the principal defendants resides, or in the case of a non-
resident defendant where he may be found, at the election of the plaintiff.
SEC. 3. Venue of actions against nonresidents. — If any of the defendants does not
reside and is not found in the Philippines, and the action affects the personal status
of the plaintiff, or any property of said defendant located in the Philippines, the
action may be commenced and tried in the court of the place where the plaintiff
resides, or where the property or any portion thereof is situated or found.
SEC. 4. When Rule not applicable. — This Rule shall not apply –
(a) In those cases where a specific rule or law provides otherwise; or
(b) Where the parties have validly agreed in writing before the filing of the action
on the exclusive venue thereof.
Based therefrom, the general rule is that the venue of real actions is the court which
has jurisdiction over the area wherein the real property involved, or a portion
thereof, is situated; while the venue of personal actions is the court which has
jurisdiction where the plaintiff or the defendant resides, at the election of the
plaintiff. As an exception, jurisprudence in Legaspi v. Rep. of the Phils.33 instructs
that the parties, thru a written instrument, may either introduce another venue
said actions in a certain exclusive venue, viz.:chanroblesvirtuallawlibrary

The parties, however, are not precluded from agreeing in writing on an exclusive
venue, as qualified by Section 4 of the same rule. Written stipulations as to venue
may be restrictive in the sense that the suit may be filed only in the place agreed
upon, or merely permissive in that the parties may file their suit not only in the
place agreed upon but also in the places fixed by law. As in any other agreement,
what is essential is the ascertainment of the intention of the parties respecting the
matter.
As regards restrictive stipulations on venue, jurisprudence instructs that it must be
shown that such stipulation is exclusive. In the absence of qualifying or restrictive
words, such as “exclusively,” “waiving for this purpose any other venue,” “shall
only” preceding the designation of venue, “to the exclusion of the other courts,” or
words of similar import, the stipulation should be deemed as merely an agreement
on an additional forum, not as limiting venue to the specified place.34 (Emphases
and underscoring supplied)
In this relation, case law likewise provides that in cases where the complaint assails
only the terms, conditions, and/or coverage of a written instrument and not its
validity, the exclusive venue stipulation contained therein shall still be binding on
the parties, and thus, the complaint may be properly dismissed on the ground of
improper venue.35 Conversely, therefore, a complaint directly assailing the
validity of the written instrument itself should not be bound by the exclusive venue
stipulation contained therein and should be filed in accordance with the general
rules on venue.To be sure, it would be inherently consistent for a complaint of this
nature to recognize the exclusive venue stipulation when it, in fact, precisely
assails the validity of the instrument in which such stipulation is contained.
In this case, the venue stipulation found in the subject contracts is indeed restrictive
in nature, considering that it effectively limits the venue of the actions arising
therefrom to the courts of Makati City. However, it must be emphasized that
Briones’s complaint directly assails the validity of the subject contracts, claiming
forgery in their execution. Given this circumstance, Briones cannot be expected to
comply with the aforesaid venue stipulation, as his compliance therewith would
mean an implicit recognition of their validity. Hence, pursuant to the general rules
on venue, Briones properly filed his complaint before a court in the City of Manila
where the subject property is located.
111
In conclusion, the CA patently erred and hence committed grave abuse of
discretion in dismissing Briones’s complaint on the ground of improper
venue.chanrobleslaw
WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated March
5, 2012 and the Resolution dated October 4, 2012 of the Court of Appeals in CA-
G.R. SP No. 117474 are hereby ANNULLED and SET ASIDE. The Orders dated
September 20, 2010 and October 22, 2010 of the Regional Trial Court of Manila,
Branch 173 in Civil Case No. 10-124040 are REINSTATED.
Contreras vs Rovilla Water Supply
G.R. No. 168979, December 02, 2013
REBECCA PACAÑA–CONTRERAS AND ROSALIE
PACAÑA, Petitioners, v. ROVILA WATER SUPPLY, INC., EARL U.
KOKSENG, LILIA TORRES, DALLA P. ROMANILLOS AND MARISA
GABUYA, Respondents.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari1 under Rule 45 of the Rules
of Court seeking the reversal of the decision2 dated January 27, 2005 and the
resolution3 dated June 6, 2005 of the Court of Appeals (CA) in CA–G.R. SP No.
71551. The CA set aside the orders dated February 28, 20024 and April 1,
20025 of the Regional Trial Court (RTC), Branch 8, Cebu City, which denied the
motion to dismiss and the motion for reconsideration, respectively, of respondents
Rovila Water Supply, Inc. (Rovila Inc.), Earl U. Kokseng, Lilia Torres, Dalla P.
Romanillos and Marisa Gabuya.
THE FACTUAL ANTECEDENTS
Petitioners Rebecca Pacaña–Contreras and Rosalie Pacaña, children of Lourdes
Teves Pacaña and Luciano Pacaña, filed the present case against Rovila Inc., Earl,
Lilia, Dalla and Marisa for accounting and damages.6 The petitioners claimed that

their family has long been known in the community to be engaged in the water
supply business; they operated the “Rovila Water Supply” from their family
residence and were engaged in the distribution of water to customers in Cebu City.
The petitioners alleged that Lilia was a former trusted employee in the family
business who hid business records and burned and ransacked the family files. Lilia
also allegedly posted security guards and barred the members of the Pacaña family
from operating their business. She then claimed ownership over the family
business through a corporation named “Rovila Water Supply, Inc.” (Rovila Inc.)
Upon inquiry with the Securities and Exchange Commission (SEC), the petitioners
claimed that Rovila Inc. was surreptitiously formed with the respondents as the
majority stockholders. The respondents did so by conspiring with one another and
forming the respondent corporation to takeover and illegally usurp the family
business’ registered name.7cralawred
In forming the respondent corporation, the respondents allegedly used the name of
Lourdes as one of the incorporators and made it appear in the SEC documents that
the family business was operated in a place other than the Pacaña residence.
Thereafter, the respondents used the Pacaña family’s receipts and the deliveries
and sales were made to appear as those of the respondent Rovila Inc. Using this
scheme, the respondents fraudulently appropriated the collections and
payments.8cralawlawlibrary
The petitioners filed the complaint in their own names although Rosalie was
authorized by Lourdes through a sworn declaration and special power of attorney
(SPA). The respondents filed a first motion to dismiss on the ground that the RTC
had no jurisdiction over an intra–corporate controversy.9 The RTC denied the
motion.
On September 26, 2000, Lourdes died10 and the petitioners amended their
complaint, with leave of court, on October 2, 2000 to reflect this
development.11 They still attached to their amended complaint the sworn
declaration with SPA, but the caption of the amended complaint remained the
same.12 On October 10, 2000, Luciano also died.13
The respondents filed their Answer on November 16, 2000.14 The petitioners’
sister, Lagrimas Pacaña–Gonzales, filed a motion for leave to intervene and her
answer–in–intervention was granted by the trial court. At the subsequent pre–trial,
112
the respondents manifested to the RTC that a substitution of the parties was
necessary in light of the deaths of Lourdes and Luciano. They further stated that
they would seek the dismissal of the complaint because the petitioners are not the
real parties in interest to prosecute the case. The pre–trial pushed through as
scheduled and the RTC directed the respondents to put into writing their earlier
manifestation. The RTC issued a pre–trial order where one of the issues submitted
was whether the complaint should be dismissed for failure to comply with Section
2, Rule 3 of the Rules of Court which requires that every action must be prosecuted
in the name of the real party in interest.15
On January 23, 2002,16 the respondents again filed a motion to dismiss on the
grounds, among others, that the petitioners are not the real parties in interest to
institute and prosecute the case and that they have no valid cause of action against
the respondents.
THE RTC RULING
The RTC denied the respondents’ motion to dismiss. It ruled that, save for the
grounds for dismissal which may be raised at any stage of the proceedings, a
motion to dismiss based on the grounds invoked by the respondents may only be
filed within the time for, but before, the filing of their answer to the amended
complaint. Thus, even granting that the defenses invoked by the respondents are
meritorious, their motion was filed out of time as it was filed only after the
conclusion of the pre–trial conference. Furthermore, the rule on substitution of
parties only applies when the parties to the case die, which is not what happened in
the present case.17 The RTC likewise denied the respondents’ motion for
reconsideration.18
The respondents filed a petition for certiorari under Rule 65 of the Rules of Court
with the CA, invoking grave abuse of discretion in the denial of their motion to
dismiss. They argued that the deceased spouses Luciano and Lourdes, not the
petitioners, were the real parties in interest. Thus, the petitioners violated Section
16, Rule 3 of the Rules of Court on the substitution of parties.19 Furthermore, they
seasonably moved for the dismissal of the case20 and the RTC never acquired
jurisdiction over the persons of the petitioners as heirs of Lourdes and Luciano.21
THE CA RULING
 113

The CA granted the petition and ruled that the RTC committed grave abuse of
discretion as the petitioners filed the complaint and the amended complaint as
attorneys–in–fact of their parents. As such, they are not the real parties in interest
and cannot bring an action in their own names; thus, the complaint should be
dismissed22 pursuant to the Court’s ruling in Casimiro v. Roque and Gonzales.23
Neither are the petitioners suing as heirs of their deceased parents. Pursuant to
jurisprudence,24 the petitioners should first be declared as heirs before they can be
considered as the real parties in interest. This cannot be done in the present
ordinary civil case but in a special proceeding for that purpose.
The CA agreed with the respondents that they alleged the following issues as
affirmative defenses in their answer: 1) the petitioners are not the real parties in
interest; and 2) that they had no legal right to institute the action in behalf of their
parents.25 That the motion to dismiss was filed after the period to file an answer
has lapsed is of no moment. The RTC judge entertained it and passed upon its
merit. He was correct in doing so because in the pre–trial order, one of the
submitted issues was whether the case must be dismissed for failure to comply with
the requirements of the Rules of Court. Furthermore, in Dabuco v. Court of
Appeals,26 the Court held that the ground of lack of cause of action may be raised
in a motion to dismiss at anytime.27
The CA further ruled that, in denying the motion to dismiss, the RTC judge acted
contrary to established rules and jurisprudence which may be questioned via a
petition for certiorari. The phrase “grave abuse of discretion” which was
traditionally confined to “capricious and whimsical exercise of judgment” has been
expanded to include any action done “contrary to the Constitution, the law or
jurisprudence[.]”28
respondents are deemed to have waived these grounds, as correctly held by the
RTC.30
Second, even if there is non–joinder and misjoinder of parties or that the suit is not
brought in the name of the real party in interest, the remedy is not outright
dismissal of the complaint, but its amendment to include the real parties in
interest.31
Third, the petitioners sued in their own right because they have actual and
substantial interest in the subject matter of the action as heirs or co–owners,
pursuant to Section 2, Rule 3 of the Rules of Court.32Their declaration as heirs in a
special proceeding is not necessary, pursuant to the Court’s ruling in Marabilles, et
al. v. Quito.33 Finally, the sworn declaration is evidentiary in nature which
remains to be appreciated after the trial is completed.34
The respondents reiterated in their comment that the petitioners are not the real
parties in interest.35They likewise argued that they moved for the dismissal of the
case during the pre–trial conference due to the petitioners’ procedural lapse in
refusing to comply with a condition precedent, which is, to substitute the heirs as
plaintiffs. Besides, an administrator of the estates of Luciano and Lourdes has
already been appointed.36
The respondents also argued that the grounds invoked in their motion to dismiss
were timely raised, pursuant to Section 2, paragraphs g and i, Rule 18 of the Rules
of Court. Specifically, the nature and purposes of the pre–trial include, among
others, the dismissal of the action, should a valid ground therefor be found to exist;
and such other matters as may aid in the prompt disposition of the action. Finally,
the special civil action of certiorari was the proper remedy in assailing the order of
the RTC.37

THE PARTIES’ ARGUMENTS THE COURT’S RULING

The petitioners filed the present petition and argued that, first, in annulling the We find the petition meritorious.
interlocutory orders, the CA unjustly allowed the motion to dismiss which did not
conform to the rules.29 Specifically, the motion was not filed within the time for, Petition for certiorari under Rule 65 is a proper remedy for a denial of a motion to
but before the filing of, the answer to the amended complaint, nor were the grounds dismiss attended by grave abuse of discretion
raised in the answer. Citing Section 1, Rule 9 of the Rules of Court, the
 114

In Barrazona v. RTC, Branch 61, Baguio City,38 the Court held that while an order Section 2. Defenses and objections not pleaded deemed waived.— Defenses and
denying a motion to dismiss is interlocutory and non–appealable, certiorari and objections not pleaded either in a motion to dismiss or in the answer are deemed
prohibition are proper remedies to address an order of denial made without or in waived; except the failure to state a cause of action which may be alleged in a later
excess of jurisdiction. The writ of certiorari is granted to keep an inferior court pleading, if one is permitted, or by motion for judgment on the pleadings, or at the
within the bounds of its jurisdiction or to prevent it from committing grave abuse trial on the merits; but in the last instance, the motion shall be disposed of as
of discretion amounting to lack or excess of jurisdiction. provided in section 5 of Rule 10 in the light of any evidence which may have been
received. Whenever it appears that the court has no jurisdiction over the subject–
The history and development of the ground “fails to state a cause of action” in the matter, it shall dismiss the action. [underscoring supplied]
1940, 1964 and the present 1997 Rules of Court
Under the present Rules of Court, this provision was reflected in Section 1, Rule 9,
Preliminarily, a suit that is not brought in the name of the real party in interest is and we quote:
dismissible on the ground that the complaint “fails to state a cause of
action.”39 Pursuant to jurisprudence,40 this is also the ground invoked when the Section 1. Defenses and objections not pleaded. — Defenses and objections not
respondents alleged that the petitioners are not the real parties in interest because: pleaded either in a motion to dismiss or in the answer are deemed waived.
1) the petitioners should not have filed the case in their own names, being merely However, when it appears from the pleadings or the evidence on record that the
attorneys–in–fact of their mother; and 2) the petitioners should first be declared as court has no jurisdiction over the subject matter, that there is another action
heirs. 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.
A review of the 1940, 1964 and the present 1997 Rules of Court shows that the [underscoring supplied]
fundamentals of the ground for dismissal based on “failure to state a cause of
action” have drastically changed over time. A historical background of this Notably, in the present rules, there was a deletion of the ground of “failure to state
particular ground is in order to preclude any confusion or misapplication of a cause of action” from the list of those which may be waived if not invoked either
jurisprudence decided prior to the effectivity of the present Rules of Court. in a motion to dismiss or in the answer.

The 1940 Rules of Court provides under Section 10, Rule 9 Another novelty introduced by the present Rules, which was totally absent in its
that:chanRoblesvirtualLawlibrary
Section 10. Waiver of defenses – Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived; except the defense of
failure to state a cause of action, which may be alleged in a later pleading, if one is
permitted, or by motion for judgment on the pleadings, or at the trial on the merits;
but in the last instance, the motion shall be disposed of as provided in section 5 of
Rule 17 in the light of any evidence which may have been received. Whenever it
appears that the court has no jurisdiction over the subject–matter, it shall dismiss
the action. [underscoring supplied]
This provision was essentially reproduced in Section 2, Rule 9 of the 1964 Rules of
Court, and we quote:chanRoblesvirtualLawlibrary
two precedents, is the addition of the period of time within which a motion to
dismiss should be filed as provided under Section 1, Rule 16 and we
quote:chanRoblesvirtualLawlibrary
Section 1. Grounds. — Within the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made on any
of the following grounds: xxx [underscoring supplied]
All these considerations point to the legal reality that the new Rules effectively
restricted the dismissal of complaints in general, especially when what is being
invoked is the ground of “failure to state a cause of action.” Thus, jurisprudence
governed by the 1940 and 1964 Rules of Court to the effect that the ground for
dismissal based on failure to state a cause of action may be raised anytime during
the proceedings, is already inapplicable to cases already governed by the present

Rules of Court which took effect on July 1, 1997.
As the rule now stands, the failure to invoke this ground in a motion to dismiss or
in the answer would result in its waiver. According to Oscar M. Herrera,41 the
reason for the deletion is that failure to state a cause of action may be cured under
Section 5, Rule 10 and we quote:chanRoblesvirtualLawlibrary
Section 5. Amendment to conform to or authorize presentation of evidence. —
When issues not raised by the pleadings are tried with the express or implied
consent of the parties they shall be treated in all respects as if they had been raised
in the pleadings. Such amendment of the pleadings as may be necessary to cause
them to conform to the evidence and to raise these issues may be made upon
motion of any party at any time, even after judgment; but failure to amend does not
effect the result of the trial of these issues. If evidence is objected to at the trial on
the ground that it is not within the issues made by the pleadings, the court may
allow the pleadings to be amended and shall do so with liberality if the presentation
of the merits of the action and the ends of substantial justice will be subserved
thereby. The court may grant a continuance to enable the amendment to be made.
With this clarification, we now proceed to the substantial issues of the petition.
The motion to dismiss in the present case based on failure to state a cause of action
was not timely filed and was thus waived
Applying Rule 16 of the Rules of Court which provides for the grounds for the
dismissal of a civil case, the respondents’ grounds for dismissal fall under Section
1(g) and (j), Rule 16 of the Rules of Court, particularly, failure to state a cause of
action and failure to comply with a condition precedent (substitution of parties),
respectively.
The first paragraph of Section 1,42 Rule 16 of the Rules of Court provides for the
period within which to file a motion to dismiss under the grounds enumerated.
Specifically, the motion should be filed within the time for, but before the filing of,
the answer to the complaint or pleading asserting a claim. Equally important to this
provision is Section 1,43 Rule 9 of the Rules of Court which states that defenses
and objections not pleaded either in a motion to dismiss or in the answer are
deemed waived, except for the following grounds: 1) the court has no jurisdiction
over the subject matter; 2) litis pendencia; 3) res judicata; and 4) prescription.
115
Therefore, the grounds not falling under these four exceptions may be considered
as waived in the event that they are not timely invoked. As the respondents’ motion
to dismiss was based on the grounds which should be timely invoked, material to
the resolution of this case is the period within which they were raised.
Both the RTC and the CA found that the motion to dismiss was only filed after the
filing of the answer and after the pre–trial had been concluded. Because there was
no motion to dismiss before the filing of the answer, the respondents should then
have at least raised these grounds as affirmative defenses in their answer. The
RTC’s assailed orders did not touch on this particular issue but the CA ruled that
the respondents did, while the petitioners insist that the respondents did not. In the
present petition, the petitioners reiterate that there was a blatant non–observance of
the rules when the respondents did not amend their answer to invoke the grounds
for dismissal which were raised only during the pre–trial and, subsequently, in the
subject motion to dismiss.44
The divergent findings of the CA and the petitioners’ arguments are essentially
factual issues. Time and again, we have held that the jurisdiction of the Court in a
petition for review on certiorari under Rule 45, such as the present case, is limited
only to questions of law, save for certain exceptions. One of these is attendant
herein, which is, when the findings are conclusions without citation of specific
evidence on which they are based.45
In the petition filed with the CA, the respondents made a passing allegation that, as
affirmative defenses in their answer, they raised the issue that the petitioners are
not the real parties in interest.46 On the other hand, the petitioners consistently
argued otherwise in their opposition47 to the motion to dismiss, and in their
comment48 and in their memorandum49 on the respondents’ petition before the
CA.
Our examination of the records shows that the CA had no basis in its finding that
the respondents alleged the grounds as affirmative defenses in their answer. The
respondents merely stated in their petition for certiorari that they alleged the
subject grounds in their answer. However, nowhere in the petition did they support
this allegation; they did not even attach a copy of their answer to the petition. It is
basic that the respondents had the duty to prove by substantial evidence their
positive assertions. Considering that the petition for certiorari is an original and not

an appellate action, the CA had no records of the RTC’s proceedings upon which
the CA could refer to in order to validate the respondents’ claim. Clearly, other
than the respondents’ bare allegations, the CA had no basis to rule, without proof,
that the respondents alleged the grounds for dismissal as affirmative defenses in the
answer. The respondents, as the parties with the burden of proving that they timely
raised their grounds for dismissal, could have at least attached a copy of their
answer to the petition. This simple task they failed to do.
That the respondents did not allege in their answer the subject grounds is made
more apparent through their argument, both in their motion to dismiss50 and in
their comment,51 that it was only during the pre–trial stage that they verbally
manifested and invited the attention of the lower court on their grounds for
dismissal. In order to justify such late invocation, they heavily relied on Section
2(g) and (i), Rule 1852 of the Rules of Court that the nature and purpose of the
pre–trial include, among others, the propriety of dismissing the action should there
be a valid ground therefor and matters which may aid in the prompt disposition of
the action.
The respondents are not correct. The rules are clear and require no interpretation.
Pursuant to Section 1, Rule 9 of the Rules of Court, a motion to dismiss based on
the grounds invoked by the respondents may be waived if not raised in a motion to
dismiss or alleged in their answer. On the other hand, “the pre–trial is primarily
intended to make certain that all issues necessary to the disposition of a case are
properly raised. The purpose is to obviate the element of surprise, hence, the
parties are expected to disclose at the pre–trial conference all issues of law and fact
which they intend to raise at the trial, except such as may involve privileged or
impeaching matter.”53 The issues submitted during the pre–trial are thus the issues
that would govern the trial proper. The dismissal of the case based on the grounds
invoked by the respondents are specifically covered by Rule 16 and Rule 9 of the
Rules of Court which set a period when they should be raised; otherwise, they are
deemed waived.
The Dabuco ruling is inapplicable in the present case; the ground for dismissal
“failure to state a cause of action” distinguished from “lack of cause of action”
To justify the belated filing of the motion to dismiss, the CA reasoned out that the
ground for dismissal of “lack of cause of action” may be raised at any time during
the proceedings, pursuant to Dabuco v. Court of Appeals.54 This is an erroneous
116
interpretation and application of I>Dabuco as will be explained below.
First, in Dabuco, the grounds for dismissal were raised as affirmative defenses in
the answer which is in stark contrast to the present case. Second, in Dabuco, the
Court distinguished between the dismissal of the complaint for “failure to state a
cause of action” and “lack of cause of action.” The Court emphasized that in a
dismissal of action for lack of cause of action, “questions of fact are involved,
[therefore,] courts hesitate to declare a plaintiff as lacking in cause of action. Such
declaration is postponed until the insufficiency of cause is apparent from a
preponderance of evidence. Usually, this is done only after the parties have been
given the opportunity to present all relevant evidence on such questions of
fact.”55 In fact, in Dabuco, the Court held that even the preliminary hearing on the
propriety of lifting the restraining order was declared insufficient for purposes of
dismissing the complaint for lack of cause of action. This is so because the issues
of fact had not yet been adequately ventilated at that preliminary stage. For these
reasons, the Court declared in Dabuco that the dismissal by the trial court of the
complaint was premature.
In the case of Macaslang v. Zamora,56 the Court noted that the incorrect
appreciation by both the RTC and the CA of the distinction between the dismissal
of an action, based on “failure to state a cause of action” and “lack of cause of
action,” prevented it from properly deciding the case, and we
quote:chanRoblesvirtualLawlibrary
Failure to state a cause of action and lack of cause of action are really different
from each other. On the one hand, failure to state a cause of action refers to the
insufficiency of the pleading, and is a ground for dismissal under Rule 16 of
the Rules of Court. On the other hand, lack of cause [of] action refers to a situation
where the evidence does not prove the cause of action alleged in the pleading.
Justice Regalado, a recognized commentator on remedial law, has explained the
distinction:chanRoblesvirtualLawlibrary
xxx What is contemplated, therefore, is a failure to state a cause of action which is
provided in Sec. 1(g) of Rule 16. This is a matter of insufficiency of the pleading.
Sec. 5 of Rule 10, which was also included as the last mode for raising the issue to
the court, refers to the situation where the evidence does not prove a cause of
action. This is, therefore, a matter of insufficiency of evidence. Failure to state a
cause of action is different from failure to prove a cause of action. The remedy in

the first is to move for dismissal of the pleading, while the remedy in the second is
to demur to the evidence, hence reference to Sec. 5 of Rule 10 has been eliminated
in this section. The procedure would consequently be to require the pleading to
state a cause of action, by timely objection to its deficiency; or, at the trial, to file a
demurrer to evidence, if such motion is warranted. [italics supplied]
Based on this discussion, the Court cannot uphold the dismissal of the present case
based on the grounds invoked by the respondents which they have waived for
failure to invoke them within the period prescribed by the Rules. The Court cannot
also dismiss the case based on “lack of cause of action” as this would require at
least a preponderance of evidence which is yet to be appreciated by the trial court.
Therefore, the RTC did not commit grave abuse of discretion in issuing the
assailed orders denying the respondents’ motion to dismiss and motion for
reconsideration. The Court shall not resolve the merits of the respondents’ grounds
for dismissal which are considered as waived.
Other heirs of the spouses Pacaña to be impleaded in the case
It should be emphasized that insofar as the petitioners are concerned, the
respondents have waived the dismissal of the complaint based on the ground of
failure to state a cause of action because the petitioners are not the real parties in
interest.
At this juncture, a distinction between a real party in interest and an indispensable
party is in order. In Carandang v. Heirs of de Guzman, et al.,57 the Court clarified
these two concepts and held that “[a] real party in interest is the party who stands
to be benefited or injured by the judgment of the suit, or the party entitled to the
avails of the suit. On the other hand, an indispensable party is a party in interest
without whom no final determination can be had of an action, in contrast to
a necessary party, which is one who is not indispensable but who ought to be
joined as a party if complete relief is to be accorded as to those already parties, or
for a complete determination or settlement of the claim subject of the action. xxx If
a suit is not brought in the name of or against the real party in interest, a motion to
dismiss may be filed on the ground that the complaint states no cause of action.
However, the dismissal on this ground entails an examination of whether the
parties presently pleaded are interested in the outcome of the litigation,
and not whether all persons interested in such outcome are actually pleaded. The
117
latter query is relevant in discussions concerning indispensable and necessary
parties, but not in discussions concerning real parties in interest. Both
indispensable and necessary parties are considered as real parties in interest, since
both classes of parties stand to be benefited or injured by the judgment of the suit.”
At the inception of the present case, both the spouses Pacaña were not impleaded
as parties–plaintiffs. The Court notes, however, that they are indispensable parties
to the case as the alleged owners of Rovila Water Supply. Without their inclusion
as parties, there can be no final determination of the present case. They possess
such an interest in the controversy that a final decree would necessarily affect their
rights, so that the courts cannot proceed without their presence. Their interest in the
subject matter of the suit and in the relief sought is inextricably intertwined with
that of the other parties.58
Jurisprudence on the procedural consequence of the inclusion or non–inclusion of
an indispensable party is divided in our jurisdiction. Due to the non–inclusion of
indispensable parties, the Court dismissed the case in Lucman v. Malawi, et
al.59 and Go v. Distinction Properties Development Construction, Inc.,60while
in Casals, et al. v. Tayud Golf and Country Club et al.,61 the Court annulled the
judgment which was rendered without the inclusion of the indispensable parties.
In Arcelona et al. v. Court of Appeals62 and Bulawan v.
Aquende,63 and Metropolitan Bank & Trust Company v. Alejo et al.64 the Court
ruled that the burden to implead or order the impleading of an indispensable party
rests on the plaintiff and on the trial court, respectively. Thus, the non–inclusion of
the indispensable parties, despite notice of this infirmity, resulted in the annulment
of these cases.
In Plasabas, et al. v. Court of Appeals, et al.,65 the Court held that the trial court
and the CA committed reversible error when they summarily dismissed the case,
after both parties had rested their cases following a protracted trial, on the sole
ground of failure to implead indispensable parties. Non–joinder of indispensable
parties is not a ground for the dismissal of an action. The remedy is to implead the
non–party claimed to be indispensable.
However, in the cases of Quilatan, et al. v. Heirs of Quilatan, et
al.66 and Lagunilla, et al. v. Monis, et al.,67 the Court remanded the case to the
RTC for the impleading of indispensable parties. On the other hand, in Lotte Phil.

Co., Inc. v. Dela Cruz,68PepsiCo, Inc. v. Emerald Pizza,69 and Valdez–Tallorin, v.
Heirs of Tarona, et al.,70 the Court directly ordered that the indispensable parties
be impleaded.
Mindful of the differing views of the Court as regards the legal effects of the non–
inclusion of indispensable parties, the Court clarified in Republic of the Philippines
v. Sandiganbayan, et al.71 , that the failure to implead indispensable parties is
a curable error and the foreign origin of our present rules on indispensable parties
permitted this corrective measure. This cited case
held:chanRoblesvirtualLawlibrary
Even in those cases where it might reasonably be argued that the failure of the
Government to implead the sequestered corporations as defendants is indeed a
procedural aberration xxx, slight reflection would nevertheless lead to the
conclusion that the defect is not fatal, but one correctible under applicable adjective
rules – e.g., Section 10, Rule 5 of the Rules of Court [specifying the remedy of
amendment during trial to authorize or to conform to the evidence]; Section 1, Rule
20 [governing amendments before trial], in relation to the rule respecting omission
of so–called necessary or indispensable parties, set out in Section 11, Rule 3 of the
Rules of Court. It is relevant in this context to advert to the old familiar doctrines
that the omission to implead such parties “is a mere technical defect which can be
cured at any stage of the proceedings even after judgment” ; and that, particularly
in the case of indispensable parties, since their presence and participation is
essential to the very life of the action, for without them no judgment may be
rendered, amendments of the complaint in order to implead them should be freely
allowed, even on appeal, in fact even after rendition of judgment by this Court,
where it appears that the complaint otherwise indicates their identity and character
as such indispensable parties."
Although there are decided cases wherein the non–joinder of indispensable parties
in fact led to the dismissal of the suit or the annulment of judgment, such cases do
not jibe with the matter at hand. The better view is that non–joinder is not a ground
to dismiss the suit or annul the judgment. The rule on joinder of indispensable
parties is founded on equity. And the spirit of the law is reflected in Section 11,
Rule 3 of the 1997 Rules of Civil Procedure. It prohibits the dismissal of a suit on
the ground of non–joinder or misjoinder of parties and allows the amendment of
the complaint at any stage of the proceedings, through motion or on order of the
court on its own initiative.
118
Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section
7, Rule 3 on indispensable parties was copied, allows the joinder of indispensable
parties even after judgment has been entered if such is needed to afford the moving
party full relief. Mere delay in filing the joinder motion does not necessarily result
in the waiver of the right as long as the delay is excusable.
In Galicia, et al. v. Vda. De Mindo, et al.,72 the Court ruled that in line with its
policy of promoting a just and inexpensive disposition of a case, it allowed the
intervention of the indispensable parties instead of dismissing the complaint.
Furthermore, in Commissioner Domingo v. Scheer,73 the Court cited Salvador, et
al. v. Court of Appeals, et al.74 and held that the Court has full powers, apart from
that power and authority which are inherent, to amend the processes, pleadings,
proceedings and decisions by substituting as party–plaintiff the real party in
interest. The Court has the power to avoid delay in the disposition of this case, and
to order its amendment in order to implead an indispensable party.
With these discussions as premises, the Court is of the view that the proper remedy
in the present case is to implead the indispensable parties especially when their
non–inclusion is merely a technical defect. To do so would serve proper
administration of justice and prevent further delay and multiplicity of suits.
Pursuant to Section 9, Rule 3 of the Rules of Court, parties may be added by order
of the court on motion of the party or on its own initiative at any stage of the
action. If the plaintiff refuses to implead an indispensable party despite the order of
the court, then the court may dismiss the complaint for the plaintiff’s failure to
comply with a lawful court order.75 The operative act that would lead to the
dismissal of the case would be the refusal to comply with the directive of the court
for the joinder of an indispensable party to the case.76
Obviously, in the present case, the deceased Pacañas can no longer be included in
the complaint as indispensable parties because of their death during the pendency
of the case. Upon their death, however, their ownership and rights over their
properties were transmitted to their heirs, including herein petitioners, pursuant to
Article 77477 in relation with Article 77778 of the Civil Code. In Orbeta, et al. v.
Sendiong,79 the Court acknowledged that the heirs, whose hereditary rights are to
be affected by the case, are deemed indispensable parties who should have been
impleaded by the trial court.
 119

Therefore, to obviate further delay in the proceedings of the present case and given [Weslie T. Gatchalian] of Alay Buhay Party-List as its Party-List Representative in
the Court’s authority to order the inclusion of an indispensable party at any stage of the House of Representatives.
the proceedings, the heirs of the spouses Pacaña, except the petitioners who are
already parties to the case and Lagrimas Pacaña–Gonzalez who intervened in the The Facts
case, are hereby ordered impleaded as parties–plaintiffs.

On 28 August 2012, the Supreme Court affirmed COMELEC Resolution SPP 10-
WHEREFORE, the petition is GRANTED. The decision dated January 27, 2005
013, dated 11 October 2011, cancelling the certificate of registration of the
and the resolution dated June 6, 2005 of the Court of Appeals in CA–G.R. SP No.
Alliance of Barangay Concerns (ABC) Party-List which won in the party-list
71551 are REVERSED and SET ASIDE. The heirs of the spouses Luciano and
elections in the 2010 national elections. The disqualification of the ABC Party-List
Lourdes Pacaña, except herein petitioners and Lagrimas Pacaña–Gonzalez,
resulted in the re-computation of the party-list allocations in the House of
are ORDERED IMPLEADED as parties–plaintiffs and the RTC is directed to
Representatives, in which the COMELEC followed the formula outlined in the
proceed with the trial of the case with DISPATCH.
case of Barangay Association for National Advancement and Transparency
(BANAT) v. Commission on Elections.1cralawred

Association of Flood Victims vs COMELEC The COMELEC then issued Minute Resolution No. 12-0859, in which it
resolved:chanRoblesvirtualLawlibrary
G.R. No. 203775, August 05, 2014
1. TO GRANT the September 14, 2012 Urgent Motion for Proclamation of Alay
ASSOCIATION OF FLOOD VICTIMS AND JAIME AGUILAR Buhay Community Development Foundation, Inc. (Alay Buhay) Party-
HERNANDEZ, Petitioners, v.COMMISSION ON ELECTIONS, ALAY BUHAY List;chanroblesvirtuallawlibrary
COMMUNITY DEVELOPMENT FOUNDATION, INC., AND WESLIE TING
GATCHALIAN,, Respondents. 2. TO DENY the September 20, 2012 Very Very Urgent Ex-Parte Motion of
Coalition of Associations of Senior Citizens of the Philippines, Inc. (Senior
RESOLUTION
Citizens) Party-List;chanroblesvirtuallawlibrary
CARPIO, ACTING C.J.:
3. TO NOTE the September 24, 2012 Opposition to Senior Citizens Party-List’s
The Case “Very Very Urgent Ex-Parte Motion” of Alay Buhay Community Development
Foundation, Inc. (Alay Buhay) Party-List;chanroblesvirtuallawlibrary

This is a Petition for Certiorari and/or Mandamus under Rule 65 of the Rules of 4. TO CONFIRM the herein RE-COMPUTATION OF THE ALLOCATION OF
Court, assailing the Minute Resolution No. 12-0859 dated 2 October 2012 of the SEATS of the Party-List System of Representation in the House of Representatives
Commission on Elections (COMELEC). The COMELEC Minute Resolution No. in the May 10, 2010 Automated National and Local
12-0859, among others, (1) confirmed the re-computation of the allocation of seats Elections;chanroblesvirtuallawlibrary
of the Party-List System of Representation in the House of Representatives in the
10 May 2010 automated national and local elections, (2) proclaimed Alay Buhay 5. TO PROCLAIM Alay Buhay Community Development Foundation, Inc. (Alay
Community Development Foundation, Inc. (Alay-Buhay) Party-List as a winning Buhay) Party-List as a winning party-list group in the Party-List System of
party-list group in the 10 May 2010 elections, and (3) declared the first nominee Representation in the House of Representatives in the May 10, 2010 Automated
National and Local Elections; andChanRoblesVirtualawlibrary
 120

be benefited or injured by the judgment in the suit, or the party entitled to the avails
6. TO DECLARE the First (1st) NOMINEE of Alay Buhay Community of the suit. Unless otherwise authorized by law or these Rules, every action must
Development Foundation, Inc. (Alay Buhay) Party-List, as the FIRST (1st) be prosecuted or defended in the name of the real party in interest.
SITTING REPRESENTATIVE in the Party-List System of Representation in the
House of Representatives in accordance with the Order of Nominees per the List
appearing in its March 17, 2010 Certificate of Nomination.2
Under Sections 1 and 2 of Rule 3, only natural or juridical persons,or entities
authorized by law may be parties in a civil action, which must be prosecuted or
On 25 October 2012, petitioners Association of Flood Victims and Jaime Aguilar defended in the name of the real party in interest. Article 44 of the Civil Code lists
Hernandez (Hernandez) filed with this Court a special civil action for certiorari the juridical persons with capacity to sue, thus:chanRoblesvirtualLawlibrary
and/or mandamus under Rule 65 of the Rules of Court. Petitioners assert that the
COMELEC committed grave abuse of discretion when it issued Minute Resolution Art. 44. The following are juridical persons:
No. 12-0859. Furthermore, petitioners pray for the issuance of a writ of mandamus (1) The State and its political subdivisions;
to compel publication of the COMELEC Minute Resolution No. 12-0859. (2) Other corporations, institutions and entities for public interest or purpose,
created by law; their personality begins as soon as they have been constituted
The Issues according to law;
(3) Corporations, partnerships and associations for private interest or purpose to
which the law grants a juridical personality, separate and distinct from that of each
The issues raised in this case are: (1) whether the COMELEC committed grave shareholder, partner or member. (Emphasis supplied)
abuse of discretion in issuing Minute Resolution No. 12-0859, and (2) whether the
COMELEC may be compelled through mandamus to publish Minute Resolution
No. 12-0859. Section 4, Rule 8 of the Rules of Court mandates that “[f]acts showing the capacity
of a party to sue or be sued or the authority of a party to sue or be sued in a
The Ruling of the Court representative capacity or the legal existence of an organized association of persons
that is made a party, must be averred.”

We dismiss the petition.

In their petition, it is stated that petitioner Association of Flood Victims “is a non-
profit and non-partisan organization in the process of formal incorporation, the
Petitioners do not have legal capacity to sue. Sections 1 and 2, Rule 3 of the 1997
primary purpose of which is for the benefit of the common or general interest of
Rules of Civil Procedure read:chanRoblesvirtualLawlibrary
many flood victims who are so numerous that it is impracticable to join all as
SECTION 1. Who may be parties; plaintiff and defendant. – Only natural or parties,” and that petitioner Hernandez “is a Tax Payer and the Lead Convenor of
juridical persons, or entities authorized by law may be parties in a civil action. The the Association of Flood Victims.”3 Clearly, petitioner Association of Flood
term “plaintiff” may refer to the claiming party, the counter-claimant, the cross- Victims, which is still in the process of incorporation, cannot be considered a
claimant, or the third (fourth, etc.) -party plaintiff. The term “defendant” may refer juridical person or an entity authorized by law, which can be a party to a civil
to the original defending party, the defendant in a counterclaim, the cross- action.4cralawred
defendant, or the third (fourth, etc.) -party defendant.
Petitioner Association of Flood Victims is an unincorporated association not
SECTION 2. Parties in interest. – A real party in interest is the party who stands to endowed with a distinct personality of its own. An unincorporated association, in
the absence of an enabling law, has no juridical personality and thus, cannot sue in

the name of the association.5 Such unincorporated association is not a legal entity
distinct from its members. If an association, like petitioner Association of Flood
Victims, has no juridical personality, then all members of the association must be
made parties in the civil action.6 In this case, other than his bare allegation that he
is the lead convenor of the Association of Flood Victims, petitioner Hernandez
showed no proof that he was authorized by said association. Aside from petitioner
Hernandez, no other member was made signatory to the petition. Only petitioner
Hernandez signed the Verification and Sworn Certification Against Forum
Shopping,7 stating that he caused the preparation of the petition. There was no
accompanying document showing that the other members of the Association of
Flood Victims authorized petitioner Hernandez to represent them and the
association in the petition.
In Dueñas v. Santos Subdivision Homeowners Association,8 the Court held that
the Santos Subdivision Homeowners Association (SSHA), which was an
unincorporated association, lacks capacity to sue in its own name, and that the
members of the association cannot represent the association without valid
authority, thus:chanRoblesvirtualLawlibrary
There is merit in petitioner's contention. Under Section 1, Rule 3 of the Revised
Rules of Court, only natural or juridical persons or entities authorized by law may
be parties in a civil action. Article 44 of the Civil Code enumerates the various
classes of juridical persons. Under said Article, an association is considered a
juridical person if the law grants it a personality separate and distinct from that of
its members. The records of the present case are bare of any showing by SSHA that
it is an association duly organized under Philippine law. It was thus error for the
HLURB-NCR Office to give due course to the complaint in HLURB Case No.
REM-070297-9821, given SSHA's lack of capacity to sue in its own name. Nor
was it proper for said agency to treat the complaint as a suit by all the parties who
signed and verified the complaint. The members cannot represent their association
in any suit without valid and legal authority. Neither can their signatures confer on
the association any legal capacity to sue. Nor will the fact that SSHA belongs to
the Federation of Valenzuela Homeowners Association, Inc., suffice to endow
SSHA with the personality and capacity to sue. Mere allegations of membership in
a federation are insufficient and inconsequential. The federation itself has a
separate juridical personality and was not impleaded as a party in HLURB Case
No. REM-070297-9821 nor in this case. Neither was it shown that the federation
was authorized to represent SSHA. Facts showing the capacity of a party to sue or
121
be sued or the authority of a party to sue or be sued in a representative capacity or
the legal existence of an organized association of persons that is made a party, must
be averred. Hence, for failing to show that it is a juridical entity, endowed by law
with capacity to bring suits in its own name, SSHA is devoid of any legal capacity,
whatsoever, to institute any action.9
More so in this case where there is no showing that petitioner Hernandez is validly
authorized to represent petitioner Association of Flood Victims.
Since petitioner Association of Flood Victims has no legal capacity to sue,
petitioner Hernandez, who is filing this petition as a representative of the
Association of Flood Victims, is likewise devoid of legal personality to bring an
action in court. Neither can petitioner Hernandez sue as a taxpayer because he
failed to show that there was illegal expenditure of money raised by taxation10 or
that public funds are wasted through the enforcement of an invalid or
unconstitutional law.11cralawred
Besides, petitioners have no locus standi or legal standing. Locus standi or legal
standing is defined as:chanRoblesvirtualLawlibrary
x x x a personal and substantial interest in the case such that the party has sustained
or will sustain a direct injury as a result of the governmental act that is being
challenged. The term “interest” means a material interest, an interest in issue
affected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. The gist of the question of standing is
whether a party alleges such personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of issues upon
which the court depends for illumination of difficult constitutional questions.12
In this case, petitioners failed to allege personal or substantial interest in the
questioned governmental act which is the issuance of COMELEC Minute
Resolution No. 12-0859, which confirmed the re-computation of the allocation of
seats of the Party-List System of Representation in the House of Representatives in
the 10 May 2010 Automated National and Local Elections. Petitioner Association
of Flood Victims is not even a party-list candidate in the 10 May 2010 elections,
and thus, could not have been directly affected by COMELEC Minute Resolution
No. 12-0859.

In view of our holding that petitioners do not have legal capacity to sue and have
no standing to file the present petition, we shall no longer discuss the issues raised
in this petition.
WHEREFORE, we DISMISS the petition.
Padilla vs Globe Asiatique
G.R. No. 207376, August 06, 2014
AIDA PADILLA, Petitioner, v. GLOBE ASIATIQUE REALTY HOLDINGS
CORPORATION, FILMAL REALTY CORPORATION, DELFIN S. LEE AND
DEXTER L. LEE, Respondents.
DECISION
VILLARAMA, JR., J.:
Assailed in this petition for review under Rule 45 are the Orders1 dated November
12, 2012 denying the motion to set the counterclaim for pre-trial and May 8, 2013
denying petitioner’s motion for reconsideration, issued by the Regional Trial Court
(RTC) of Pasig City, Branch 155 in Civil Case No. 73132.
Factual Antecedents
From the years 2005 to 2008, Philippine National Bank (PNB) entered into several
Contracts to Sell (CTS) Facility Agreements2 with respondents Globe Asiatique
Realty Holdings Corporation (Globe Asiatique) and Filmal Realty Corporation
(Filmal) represented by Delfin S. Lee and Dexter L. Lee, President and Vice-
President, respectively, of the two corporations. PNB thereby agreed to make
available to Globe Asiatique and Filmal CTS Facility in the amount not exceeding
122
Two Hundred Million Pesos (P200,000,000.00) to finance the purchase of certain
Accounts Receivables or the in-house installment receivables of respondents
arising from the sale of subdivision houses in their real estate/housing projects as
evidenced by contracts to sell. These availments were later increased to a total
amount of One Billion Two Hundred Million Pesos
(P1,200,000,000.00).3cralawred
Pursuant to and as a condition for the CTS Facility availments, respondents
executed in favor of PNB several Deeds of Assignment4 covering accounts
receivables in the aggregate amount of One Billion One Hundred Ninety-Five
Million Nine Hundred Twenty-Six Thousand Three Hundred Ninety Pesos and
Seventy-two centavos (P1,195,926,390.72). In the said instruments, respondents
acknowledged the total amount of One Billion Three Hundred Ninety Five Million
Six Hundred Sixty-Five Thousand Five Hundred Sixty-Four Pesos and Sixty-nine
centavos (P1,395,665,564.69) released to them by PNB in consideration of the
aforesaid accounts receivables.5cralawred
Sometime in the first quarter of 2010, respondents defaulted in the payment of their
outstanding balance and delivery to PNB of transfer certificates of title
corresponding to the assigned accounts receivables, for which PNB declared them
in default under the CTS Facility Agreements. Subsequently, respondents made
partial payments and made proposals for paying in full its obligation to PNB as
shown in the exchange of correspondence between respondents and PNB.
In a letter dated August 5, 2010,6 PNB made a formal and final demand upon
respondents to pay/settle the total amount of P974,377,159.10 representing their
outstanding obligation. In the course of credit monitoring and verification, PNB
claimed it discovered 231 out of 240 Contracts to Sell to have either inexistent
addresses of buyers or the names of the buyers are non-existent or both.
Thereafter, PNB instituted Civil Case No. R-PSY-10-04228-CV (Philippine
National Bank v. Globe Asiatique Realty Holdings Corporation, Filmal Realty
Corporation, Delfin S. Lee and Dexter L. Lee) for recovery of sum of money and
damages with prayer for writ of preliminary attachment before the RTC of Pasay
City.
In their complaint, PNB alleged in detail the fraudulent acts and misrepresentations
committed by respondents in obtaining PNB’s conformity to the CTS Facility

Agreements and the release of various sums to respondents in the total amount of
P974,377,159.10. PNB accused respondents of falsely representing that they have
valid and subsisting contracts to sell, which evidently showed they had no intention
to pay their loan obligations. The Verification and Certification of Non-Forum
Shopping attached to the complaint was signed by PNB’s Senior Vice-president of
the Remedial Management Group, Aida Padilla, who likewise executed an
“Affidavit in Support of the Application for the Issuance of the Writ of Preliminary
Attachment.”
Proceedings in the Pasay
City RTC (Civil Case No.
R-PSY-10-04228-CV)
On August 25, 2010, the Pasay City RTC issued an Order7 granting PNB’s
application for issuance of preliminary attachment after finding that defendants
Globe Asiatique and Filmal “through the active participation or
connivance/conspiracy of defendants Delfin and Dexter Lee from the revealing
evidence presented by plaintiff are guilty of fraud in contracting their outstanding
loan applications to plaintiff Philippine National Bank (PNB).”8 The writ of
preliminary attachment was accordingly issued on August 27, 2010 after PNB
complied with the posting of attachment bond as ordered by the court.9cralawred
Defendants Delfin Lee and Dexter Lee filed their Answer with Counterclaim with
motion to dismiss, arguing that PNB has no cause of action against them as there is
nothing in the CTS Facility Agreements that suggest they are personally liable or
serve as guarantors for Globe Asiatique and Filmal, and that they were just sued as
signatories of the CTS Facility Agreements. They likewise filed a motion to
discharge preliminary attachment.10cralawred
Defendants Globe Asiatique and Filmal also filed their Answer with Counterclaim
denying PNB’s allegations of fraud and misrepresentation particularly after PNB
had accepted payments from the corporations. In their motion to discharge
preliminary attachment, Globe Asiatique and Filmal asserted that the allegations of
fraud in the complaint are without basis and no proof was presented by plaintiff on
the existence of preconceived fraud and lack of intention to pay their obligations,
citing their timely payments made to PNB. They further assailed the affidavit
executed by Aida Padilla who they claimed has no personal knowledge of the
subject transactions and there being no allegation of threat or possibility that
123
defendant corporations will dispose of their properties in fraud of their
creditors.11cralawred
In its Order12 dated April 29, 2011, the Pasay City RTC denied defendants’
motion to dismiss, motions to discharge preliminary attachment and to expunge or
suspend proceedings, as well as PNB’s motion to expunge.
In succession, the parties in Civil Case No. R-PSY-10-04228-CV filed the
following motions:chanRoblesvirtualLawlibrary
1) Defendants’ Motion for Reconsideration of the Order dated April 29, 2011
filed on May 27, 2011;
2) Plaintiff’s Motion to Set Case for Pre-trial Conference filed on June 8, 2011;
3) Plaintiff’s Motion for Summary Judgment filed on June 28, 2011;
4) Defendants’ Motion for Leave to Admit Attached Amended Answer with
Compulsory Counterclaim filed on July 12, 2011;
5) Defendants’ Omnibus Motion (a) to discharge the writ of attachment on the
ground of newly discovered evidence; (b) set preliminary hearing on
affirmative defenses pleaded in the amended answer; (c) issue preliminary
attachment against plaintiff on account of fraud in incurring the obligation as
alleged in the amended answer; and (d) render partial summary judgment on
the compulsory counterclaim, filed on July 26, 2011;
6) Defendants’ Motion for Reconsideration of the Order dated July 29, 2011, with
Motion to Continue with the Proceedings Involving Defendants’ Omnibus
Motion, filed on August 31, 2011;
7) Defendants’ Motion to Set for Hearing their earlier motion to discharge the
writ of attachment filed on January 24, 2012; and
8) Plaintiff’s Motion to Expunge defendants’ Reply (on defendants’ motion to set
hearing) filed on April 30, 2012.
Meanwhile, and before the Pasay City RTC could act upon the foregoing motions,
defendants Globe Asiatique, Filmal, Delfin S. Lee and Dexter L. Lee filed on
 124

August 10, 2011 a complaint13 for Damages in the RTC of Pasig City, Branch 155 Facility Agreements with PNB, respondents alleged that these were already
docketed as Civil Case No. 73132. novated by the parties who agreed upon a term loan starting May 31, 2010 and to
expire on April 30, 2012. But despite her knowledge of such novation and that the
On May 18, 2012, the Pasay City RTC issued an Order14 resolving the pending obligation was not yet due and demandable, petitioner with malice and evident bad
motions, as follows:chanRoblesvirtualLawlibrary faith still executed a “perjured” Affidavit in support of the application for writ of
preliminary attachment before the Pasay City RTC.
WHEREFORE, the motion for reconsideration of the Order dated 27 May 2011 is
denied insofar as the prayer to reconsider denial of the motion to dismiss. Respondents likewise sought to hold Judge Gutierrez personally liable for issuing
However, the prayer to expunge the Manifestation filed on 26 November 2010 is the writ of preliminary attachment in favor of PNB notwithstanding that the
granted thus, the Manifestation is expunged. obligation subject of PNB’s complaint was sufficiently secured by the value of real
properties sold to it by virtue of the CTS Facility Agreements and deeds of
The motion for leave and to admit amended answer is denied. The motion for assignment of accounts receivables. They further contended that Judge Gutierrez
reconsideration of the Order dated 29 July 2011 is likewise denied. The other blindly approved the attachment bond offered by PNB’s sister company, PNB
prayers in the omnibus motion to set preliminary hearing of affirmative defenses in General Insurers Company, Inc. despite the fact that from its submitted documents,
the amended answer, issuance of preliminary attachment based thereon and for said insurer’s authorized capital stock is only P400 million while its paid-up capital
partial summary judgment on the compulsory counterclaims in the amended is only P312.6 million, which is way below the P974,377,159.10 attachment bond
answer are denied. Plaintiff’s motion to expunge defendants’ reply is likewise it issued.
denied.
Respondents thus prayed for a judgment ordering petitioner and Judge Gutierrez to
Hearing on plaintiff’s motion for summary judgment is set on 19 June 2012 at 8:30 pay moral damages, exemplary damages, litigation expenses, attorney’s fees and
a.m., while hearing on defendants’ motion to discharge the writ of preliminary cost of suit.
attachment is set on 26 June 2012 at 8:30 a.m.
Judge Gutierrez moved to dismiss16 the complaint against him on the following
Action on plaintiff’s motion to set the case for pre-trial is deferred until after grounds: (1) respondents have no cause of action against him; and (2) the Pasig
resolution of the motion for summary judgment. City court has no jurisdiction over the case and his person, movant being of co-
equal and concurrent jurisdiction.
SO ORDERED.15chanrobleslaw
Petitioner filed her Answer With Compulsory Counterclaims,17 praying for the
dismissal of respondents’ complaint on the following grounds: (1) submission of a
Pasig City RTC Case
false certification of non-forum shopping by respondents and their blatant
(Civil Case No. 73132)
commission of willful, deliberate and contumacious forum shopping (respondents
failed to disclose a criminal complaint entitled “Tbram Cuyugan v. Aida Padilla
In their Complaint against Judge Pedro De Leon Gutierrez and Aida Padilla (both
and Members of the Board of Directors of PNB”, docketed as I.S. No. XV-13-
sued in their personal capacity), respondents claimed that Globe Asiatique and
INV-11-H-01208 pending before the office of the City Prosecutor of Pasay City);
Filmal are well-known and successful real estate developers whose projects were
(2) litis pendentia; (3) respondents’ failure to attach the alleged actionable
“being continuously supported by various banks and other financial institutions
document, i.e. the supposed “new term loan”, in violation of Section 7, Rule 8 of
prior to the malicious and devastating unfounded civil action” filed by Aida Padilla
the Rules of Court; (4) failure to state a cause of action against petitioner; and (5)
(petitioner) which wrought havoc to their businesses and lives. As to the CTS
petitioner cannot be held personally liable for her official acts done for and in

behalf of PNB.
On January 5, 2012, petitioner filed a motion for preliminary hearing on
affirmative defenses, contending that respondents are parroting the very same
arguments raised and relying on the same evidence they presented before the Pasay
City RTC to establish the alleged novation and purported insufficiency of the
attachment bond, which issues are still pending in the said court. It was thus
stressed that respondents are evidently guilty of forum shopping.18cralawred
Respondents filed their Comment/Opposition,19 arguing that there is nothing in
their complaint that would slightly suggest they are asking the Pasig City RTC to
issue any injunction or otherwise issue an order setting aside the writ of
preliminary attachment issued by the Pasay City RTC, and neither did they ask for
a ruling on whether said writ is illegal or whether Judge Gutierrez committed a
grave abuse of discretion. They asserted that what they seek from the Pasig City
RTC is to allow them to recover damages from Judge De Leon for his tortious
action in approving PNB’s attachment bond. They also insisted that forum
shopping and litis pendentia are absent in this case, contrary to petitioner’s claims.
Respondents likewise opposed20 the motion to dismiss filed by Judge Gutierrez,
citing this Court’s ruling in J. King & Sons Company, Inc. v. Judge Agapito L.
Hontanosas, Jr.21 in support of their position that the separate complaint before
another forum against the judge for his actionable wrong in a pending case before
him can proceed independently without necessarily interfering with the court’s
jurisdiction, as what happened in the said case where the judge was merely
penalized for gross misconduct and gross ignorance of the law without actually
invalidating the judge’s order approving the counter-bond without reviewing the
documents presented.
In her Reply,22 petitioner reiterated her previous arguments and additionally
contended that in any event, there is no basis for respondents’ claim for damages
arising from the issuance of the writ of preliminary attachment before the Pasay
City RTC considering that PNBGEN Bond No. SU-JC14-HO-10-0000001-00 is
valid and sufficient to secure and answer for whatever damages respondents may
have suffered by reason of such issuance should it be finally decided that PNB was
not entitled to the said bond.
On April 2, 2012, the RTC of Pasig City issued an Order23 dismissing Civil Case
No. 73132 for lack of jurisdiction.
125
On May 7, 2012, petitioner filed a Motion to Set Counterclaims for Pre-Trial
Conference.24cralawred
On October 22, 2012, the Pasig City RTC denied respondents’ motion for
reconsideration of the April 2, 2012 Order dismissing their
complaint.25 Respondents filed a Notice of Appeal26 under Section 1(a), Rule 41
of the Rules of Court.
On November 12, 2012, the Pasig City RTC issued the first questioned Order,
which reads:chanRoblesvirtualLawlibrary
x x x x
Records show that this Court, through then Acting Presiding Judge Amorfina
Cerrado-Cezar, issued an Order dated April 2, 2012, dismissing the case on the
ground that issues involved in this case already impinge upon the validity of the
Order dated August 25, 2010 and Writ of Attachment dated August 27, 2010 issued
by the Regional Trial Court, Branch 119, Pasay City, a court of concurrent and
coordinate jurisdiction, in Civil Case No. R-PSY-10-04228 entitled “Philippine
National Bank vs. Globe Asiatique Realty Holdings Corp. et al.” The ruling in said
Order dated April 2, 2012, was affirmed by this Court per its Order dated October
22, 2012, whereby it reiterated that acting on the plaintiffs’ Complaint is a brazen
violation of the principle of judicial stability, which essentially states that the
judgment or order of a court of competent jurisdiction may not be interfered with
by any court of concurrent jurisdiction for the simple reason that the power to
open, modify or vacate the said order is not only possessed but is restricted to the
court in which the judgment or order is rendered or issued. (Cojuangco vs.
Villegas, 184 SCRA 374)
The foregoing principles are equally applicable to the counterclaims of Aida
Padilla. Indeed,to hear the counterclaims of defendant Aida Padilla will open the
door, so to speak, for the plaintiffs to interpose as ostensible defenses its claims
regarding the alleged illegality of the aforesaid orders and writ of attachment
issued by the RTC of Pasay City. In effect this Court will be forced to dwell upon
issues involving the pending civil case in the RTC Branch 199, Pasay City, thereby
interfering, albeit indirectly, with said issues. This is precisely the very evil which
the Court sought to avoid when it dismissed the plaintiffs’ complaint. Therefore,
 126

upholding once more the principle of judicial stability, this Court is impelled to National Bank vs. Globe Asiatique Realty Holdings Corp. et al.” Hence, whatever
refuse to hear the counterclaims of defendant Padilla. ruling this Court may arrive at on said issues would inevitably impinge upon
matters already pending before the RTC Branch 119, Pasay City.
WHEREFORE, premises considered, the instant Motion filed by defendant Aida
Padilla is DENIED without prejudice to the re-filing of defendant Aida Padilla’s Once more, under the principle of juridical stability, the Court is constrained to
causes of action against herein plaintiffs after final resolution of Civil Case No. R- refuse to hear defendant Padilla’s counterclaims. Verily, this Court cannot allow
PSY-10-04228 entitled “Philippine National Bank vs. Globe Asiatique Realty itself to interfere – either directly, as desired by plaintiff, or indirectly, as defendant
Holdings Corp, et al.” Padilla would have it – with the acts of a co-equal court.

SO ORDERED. (Emphasis supplied.)chanrobleslaw WHEREFORE, premises considered, the instant Motion for Reconsideration filed
by defendant Aida Padilla is hereby DENIED without prejudice to the re-filing of
defendant Aida Padilla’s causes of action against herein plaintiffs after resolution
Petitioner’s motion for reconsideration was likewise denied under the second of Civil Case No. R-PSY-10-04228 entitled “Philippine National Bank vs. Globe
assailed Order27 dated May 8, 2013, as follows:chanRoblesvirtualLawlibrary Asiatique Realty Holdings Corp. et al.”

x x x x
SO ORDERED. (Emphasis supplied.)chanrobleslaw

Defendant Padilla argues that this Court has jurisdictional competence and
authority to resolve her counterclaims notwithstanding the dismissal of the
Complaint dated August 10, 2011 for violation of the principle of judicial stability. The Petition
The resolution of her compulsory counterclaims will not require this Court to look
into or pass upon the validity of the acts of the Regional Trial Court of Pasay City,
Branch 119 in issuing the Writ of Attachment dated August 27, 2010. Defendant Petitioner came directly to this Court raising the primordial legal issue of whether
Padilla’s counterclaims arose directly from the malicious filing by the plaintiffs of or not a court can take cognizance of a compulsory counterclaim despite the fact
the Complaint and are compulsory counterclaims which must be raised and that the corresponding complaint was dismissed for lack of jurisdiction.
resolved in the same action as the Complaint.
The present petition was de-consolidated from seven other petitions involving
The Court remains unpersuaded of the propriety of proceeding to hear defendant respondents and their transactions with Home Development Mutual Fund, as well
Padilla’s counterclaims. as the pending criminal complaints arising therefrom.28cralawred

The Court’s Ruling

As movant herself stated, the grant of her counterclaim calls for the determination
of the issue of whether or not herein plaintiffs had maliciously filed the above-
entitled Complaint against defendants. Necessarily, the Court in threshing out such Before we resolve the legal question presented, we first address the issue of
issue would be constrained to rule on whether the plaintiffs filed their complaint propriety of petitioner’s resort to Rule 45.
with a sinister design knowing fully well that their cause of action was baseless.
Thus, the Court would have to pass upon the veracity or genuineness of plaintiffs’ Respondents are incorrect in arguing that petitioner adopted the wrong mode of
claims that they were unjustly injured by the orders and processes issued by RTC appeal, stating that the remedy from the dismissal of her counterclaims without
Branch 119, Pasay City, in Civil Case No. R-PSY-10-04228 entitled “Philippine prejudice is a petition for certiorari under Rule 65 and not an appeal under Rule 45.

There is no dispute with respect to the fact that when an appeal raises only pure
questions of law, this Court has jurisdiction to entertain the same.29 Section 1,
Rule 45 of the 1997 Rules of Civil Procedure, as amended,
provides:chanRoblesvirtualLawlibrary
SECTION 1. Filing of petition with Supreme Court. – A party desiring to appeal
by certiorari from a judgment or final order or resolution of the Court of Appeals,
the Sandiganbayan, the Regional Trial Court or other courts whenever authorized
by law, may file with the Supreme Court a verified petition for review on
certiorari. The petition shall raise only questions of law which must be distinctly
set forth.
In Republic v. Sunvar Realty Development Corporation,30 this Court
held:chanRoblesvirtualLawlibrary
Respondent Sunvar argued that petitioners’ resort to a Rule 45 Petition for Review
on Certiorari before this Court is an improper mode of review of the assailed RTC
Decision. Allegedly, petitioners should have availed themselves of a Rule 65
Petition instead, since the RTC Decision was an order of dismissal of the
Complaint, from which no appeal can be taken except by a certiorari petition.
The Court is unconvinced of the arguments of respondent Sunvar and holds that the
resort by petitioners to the present Rule 45 Petition is perfectly within the bounds
of our procedural rules.
As respondent Sunvar explained, no appeal may be taken from an order of the RTC
dismissing an action without prejudice, but the aggrieved party may file
a certioraripetition under Rule 65. Nevertheless, the Rules do not prohibit any of
the parties from filing a Rule 45 Petition with this Court, in case only questions of
law are raised or involved. This latter situation was one that petitioners found
themselves in when they filed the instant Petition to raise only questions of law.
In Republic v. Malabanan, the Court clarified the three modes of appeal from
decisions of the RTC, to wit: (1) by ordinary appeal or appeal by writ of error
under Rule 41, whereby judgment was rendered in a civil or criminal action by the
RTC in the exercise of its original jurisdiction; (2) by a petition for review under
Rule 42, whereby judgment was rendered by the RTC in the exercise of its
127
appellate jurisdiction; and (3) by a petition for review on certiorari before the
Supreme Court under Rule 45. “The first mode of appeal is taken to the [Court of
Appeals] on questions of fact or mixed questions of fact and law. The second mode
of appeal is brought to the CA on questions of fact, of law, or mixed questions of
fact and law. The third mode of appeal is elevated to the Supreme Court only on
questions of law.” (Emphasis supplied.)
There is a question of law when the issue does not call for an examination of the
probative value of the evidence presented or of the truth or falsehood of the facts
being admitted, and the doubt concerns the correct application of law and
jurisprudence on the matter. The resolution of the issue must rest solely on what
the law provides on the given set of circumstances.
In the instant case, petitioners raise only questions of law with respect to the
jurisdiction of the RTC to entertain a certiorari petition filed against the
interlocutory order of the MeTC in an unlawful detainer suit. At issue in the
present case is the correct application of the Rules on Summary Procedure; or,
more specifically, whether the RTC violated the Rules when it took cognizance and
granted the certiorari petition against the denial by the MeTC of the Motion to
Dismiss filed by respondent Sunvar. This is clearly a question of law that involves
the proper interpretation of the Rules on Summary Procedure. Therefore, the
instant Rule 45 Petition has been properly lodged with this Court.
In this case, petitioner raises the lone issue of whether the Pasig City RTC was
correct in refusing to hear her counterclaims after the dismissal of respondents’
complaint for lack of jurisdiction. Said issue involves the proper interpretation of
the 1997 Rules of Civil Procedure, as amended, specifically on whether the
dismissal of the complaint automatically results in the dismissal of counterclaims
pleaded by the defendant. Since this is clearly a question of law, petitioner
appropriately filed in this Court a Rule 45petition.
On the lone issue raised in the petition, we rule for the petitioner.
A counterclaim is any claim which a defending party may have against an
opposing party.31 It is in the nature of a cross-complaint; a distinct and
independent cause of action which, though alleged in the answer, is not part of the
answer.32cralawred

Counterclaims may be either compulsory or permissive. Section 7, Rule 6 of the
1997 Rules of Civil Procedure provides:chanRoblesvirtualLawlibrary
SEC. 7. Compulsory counterclaim. – A compulsory counterclaim is one which,
being cognizable by the regular courts of justice, arises out of or is connected with
the transaction or occurrence constituting the subject matter of the opposing party’s
claim and does not require for its adjudication the presence of third parties of
whom the court cannot acquire jurisdiction. Such a counterclaim must be within
the jurisdiction of the court both as to the amount and the nature thereof, except
that in an original action before the Regional Trial Court, the counterclaim may be
considered compulsory regardless of the amount.chanrobleslaw
In this case, petitioner’s counterclaim for damages raised in her answer before the
Pasig City RTC is compulsory, alleging suffering and injury caused to her as a
consequence of the unwarranted filing of the baseless complaint filed by
respondents. Said court, however, dismissed her counterclaim upon the same
ground of lack of jurisdiction as its resolution supposedly would entail passing
upon the validity of orders and processes still pending before the Pasay City RTC.
In Metals Engineering Resources Corp. v. Court of Appeals,33 we reversed the
trial court’s order allowing private respondent to proceed with the presentation of
his evidence in support of his counterclaim after the complaint was dismissed for
not paying the correct docket fee and hence the trial court did not acquire
jurisdiction over the case. We held that if the court does not have jurisdiction to
entertain the main action of the case and dismisses the same, then the compulsory
counterclaim, being ancillary to the principal controversy, must likewise be
dismissed since no jurisdiction remained for any grant of relief under the
counterclaim.34cralawred
Under the 1997 Rules of Civil Procedure, it is now explicitly provided that the
dismissal of the complaint due to failure of the plaintiff to prosecute his case is
“without prejudice to the right of the defendant to prosecute his counterclaim in the
same or in a separate action.”35 The effect of this amendment on previous rulings
on whether the dismissal of a complaint carries with it the dismissal of the
counterclaims as well, was discussed in the case of Pinga v. The Heirs of German
Santiago,36 thus:chanRoblesvirtualLawlibrary
128
Similarly, Justice Feria notes that “the present rule reaffirms the right of the
defendant to move for the dismissal of the complaint and to prosecute his
counterclaim, as stated in the separate opinion [of Justice Regalado in BA
Finance.] Retired Court of Appeals Justice Herrera pronounces that the amendment
to Section 3, Rule 17 settles that “nagging question” whether the dismissal of the
complaint carries with it the dismissal of the counterclaim, and opines that by
reason of the amendments, the rulings in Metals Engineering, International
Container, and BA Finance “may be deemed abandoned.” On the effect of
amendment to Section 3, Rule 17, the commentators are in general agreement,
although there is less unanimity of views insofar as Section 2, Rule 17 is
concerned.
To be certain, when the Court promulgated the 1997 Rules of Civil Procedure,
including the amended Rule 17, those previous jural doctrines that were
inconsistent with the new rules incorporated in the 1997 Rules of Civil Procedure
were implicitly abandoned insofar as incidents arising after the effectivity of the
new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a
counterclaim may be necessarily dismissed along with the complaint, clearly
conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA Finance
as doctrine extends as far back as 1997, when the Court adopted the new Rules of
Civil Procedure. … we thus rule that the dismissal of a complaint due to fault of
the plaintiff is without prejudice to the right of the defendant to prosecute any
pending counterclaims of whatever nature in the same or separate action. We
confirm that BA Finance and all previous rulings of the Court that are inconsistent
with this present holding are now abandoned. (Emphasis supplied.)
Subsequently, in Perkin Elmer Singapore Pte Ltd. v. Dakila Trading
Corporation37 this Court held that while the declaration in Pinga refers to instances
covered by Section 3, Rule 17 on dismissal of complaints due to the fault of
plaintiff, it does not preclude the application of the same rule when the dismissal
was upon the instance of defendant who correctly argued lack of jurisdiction over
its person. Further, in stark departure from Metals Engineering, we declared that
the court’s jurisdiction over respondent’s complaint is not to be confused with
jurisdiction over petitioner’s counterclaim, viz:chanRoblesvirtualLawlibrary
….Petitioner seeks to recover damages and attorney’s fees as a consequence of
the unfounded suit filed by respondent against it. Thus, petitioner’s compulsory

counterclaim is only consistent with its position that the respondent wrongfully
filed a case against it and the RTC erroneously exercised jurisdiction over its
person.
Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of the
RTC over respondent’s complaint and over petitioner’s counterclaim – while it
may have no jurisdiction over the former, it may exercise jurisdiction over the
latter. The compulsory counterclaim attached to petitioner’s Answer ad
cautelam can be treated as a separate action, wherein petitioner is the plaintiff
while respondent is the defendant. Petitioner could have instituted a separate action
for the very same claims but, for the sake of expediency and to avoid multiplicity
of suits, it chose to demand the same in Civil Case No. MC99-605. Jurisdiction of
the RTC over the subject matter and the parties in the counterclaim must thus be
determined separately and independently from the jurisdiction of the same court in
the same case over the subject matter and the parties in respondent’s
complaint.38 (Emphasis supplied.)
Still anchored on the pronouncement in Pinga, we then categorically ruled that a
counterclaim arising from the unfounded suit may proceed despite the dismissal of
the complaint for lack of jurisdiction over the person of defendant-counterclaimant,
thus:chanRoblesvirtualLawlibrary
Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the
situation wherein the very filing of the complaint by the plaintiff against the
defendant caused the violation of the latter’s rights. As to whether the dismissal of
such a complaint should also include the dismissal of the counterclaim, the Court
acknowledged that said matter is still debatable, viz:
Whatever the nature of the counterclaim, it bears the same integral characteristics
as a complaint; namely a cause (or causes) of action constituting an act or omission
by which a party violates the right of another. The main difference lies in that the
cause of action in the counterclaim is maintained by the defendant against the
plaintiff, while the converse holds true with the complaint. Yet, as with a
complaint, a counterclaim without a cause of action cannot survive.
x x x if the dismissal of the complaint somehow eliminates the cause(s) of the
counterclaim, then the counterclaim cannot survive. Yet that hardly is the case,
especially as a general rule. More often than not, the allegations that form the
129
counterclaim are rooted in an act or omission of the plaintiff other than the
plaintiff’s very act of filing the complaint. Moreover, such acts or omissions
imputed to the plaintiff are often claimed to have occurred prior to the filing of the
complaint itself. The only apparent exception to this circumstance is if it is alleged
in the counterclaim that the very act of the plaintiff in filing the complaint precisely
causes the violation of the defendant’s rights. Yet even in such an instance, it
remains debatable whether the dismissal or withdrawal of the complaint is
sufficient to obviate the pending cause of action maintained by the defendant
against the plaintiff.
Based on the aforequoted ruling of the Court, if the dismissal of the complaint
somehow eliminates the cause of the counterclaim, then the counterclaim cannot
survive. Conversely, if the counterclaim itself states sufficient cause of action then
it should stand independently of and survive the dismissal of the complaint. Now,
having been directly confronted with the problem of whether the compulsory
counterclaim by reason of the unfounded suit may prosper even if the main
complaint had been dismissed, we rule in the affirmative.
It bears to emphasize that petitioner’s counterclaim against respondent is for
damages and attorney’s fees arising from the unfounded suit. While respondent’s
Complaint against petitioner is already dismissed, petitioner may have very well
already incurred damages and litigation expenses such as attorney’s fees since it
was forced to engage legal representation in the Philippines to protect its rights and
to assert lack of jurisdiction of the courts over its person by virtue of the improper
service of summons upon it. Hence, the cause of action of petitioner’s counterclaim
is not eliminated by the mere dismissal of respondent’s complaint.
It may also do well to remember that it is this Court which mandated that claims
for damages and attorney’s fees based on unfounded suit constitute compulsory
counterclaim which must be pleaded in the same action or, otherwise, it shall be
barred. It will then be iniquitous and the height of injustice to require the petitioner
to make the counterclaim in the present action, under threat of losing his right to
claim the same ever again in any other court, yet make his right totally dependent
on the fate of the respondent’s complaint.
If indeed the Court dismisses petitioner’s counterclaim solely on the basis of the
dismissal of respondent’s Complaint, then what remedy is left for the petitioner? It
can be said that he can still file a separate action to recover the damages and

attorney’s fees based on the unfounded suit for he cannot be barred from doing so
since he did file the compulsory counterclaim in the present action, only that it was
dismissed when respondent’s Complaint was dismissed. However, this reasoning is
highly flawed and irrational considering that petitioner, already burdened by the
damages and attorney’s fees it may have incurred in the present case, must again
incur more damages and attorney’s fees in pursuing a separate action, when, in the
first place, it should not have been involved in any case at all.
Since petitioner’s counterclaim is compulsory in nature and its cause of action
survives that of the dismissal of respondent’s complaint, then it should be resolved
based on its own merits and evidentiary support.39 (Additional emphasis supplied.)
The above ruling was applied in Rizal Commercial Banking Corporation v. Royal
Cargo Corporation40where we granted petitioner’s prayer for attorney’s fees under
its Compulsory Counterclaim notwithstanding the dismissal of the complaint.
In the present case, the RTC of Pasig City should have allowed petitioner’s
counterclaim to proceed notwithstanding the dismissal of respondents’ complaint,
the same being compulsory in nature and with its cause not eliminated by such
dismissal. It bears stressing that petitioner was hailed to a separate court (Pasig
City RTC) even while the dispute between PNB and respondents was still being
litigated, and she already incurred expenses defending herself, having been sued by
respondents in her personal capacity. The accusations hurled against her were
serious (perjury and misrepresentation in executing the affidavit in support of the
application for writ of attachment before the Pasay City RTC) – with hints at
possible criminal prosecution apart from that criminal complaint already lodged in
the Pasig City Prosecutor’s Office. The Pasig City RTC clearly erred in refusing to
hear the counterclaims upon the same ground for dismissal of the complaint, i.e.,
lack of jurisdiction in strict observance of the policy against interference with the
proceedings of a co-equal court.
Respondents contend that if petitioner is allowed to prove her counterclaims before
the Pasay City RTC, they have no choice but to justify their action in filing their
case before the Pasig City RTC by going back to the allegations in their complaint
that they are merely vindicating themselves against the perjured affidavit executed
by petitioner which led to the issuance of the illegal orders of the Pasay City RTC
that resulted to the damage and injury sustained by respondents. Obviously,
130
respondents are invoking the same principle of judicial stability which we find
inapplicable insofar as petitioner’s counterclaim arising from respondents’
unfounded suit.
As petitioner set forth in her Compulsory Counterclaim, there is actually no
necessity for the Pasig City RTC, in ruling on the merits of the counterclaim, to
pass upon the validity of the writ of attachment and related orders issued by the
Pasay City RTC. Precisely, petitioner faulted the respondents in prematurely, and
in a contumacious act of forum shopping, filing a separate damage suit when there
is no final judicial determination yet of any irregularity in the attachment
proceedings before the Pasay City RTC.
5.95. In this regard, it must be noted that in filing the present suit, plaintiffs’ goal is
to have the Honorable Court reexamine and review the pronouncements made by
defendant Judge Gutierrez in the Pasay case. With all due respect, the Honorable
Court certainly has no such power over the Pasay Court which is a co-equal court.
While the power to determine whether or not a judgment or order is unjust is a
judicial function, the hierarchy of courts should be respected:
“To belabor the obvious, the determination of whether or not a judgment or order is
unjust – or was (or was not) rendered within the scope of the issuing judge’s
authority, or that the judge had exceeded his jurisdiction and powers or maliciously
delayed the disposition of a case – is an essentially judicial function, lodged by
existing law and immemorial practice in a hierarchy of courts and ultimately in the
highest court of the land. To repeat, no other entity or official of the Government,
not the prosecution or investigation service or any other branch, nor any
functionary thereof, has competence to review a judicial order or decision –
whether final and executory or not – and pronounce it erroneous so as to lay the
basis for a criminal or administrative complaint for rendering an unjust judgment
or order. That prerogative belongs to the courts alone.” [Emphasis supplied]
5.96. Accordingly, since there is no “final judicial pronouncement” yet on whether
the filing of the PNB Complaint and the issuance of the writ of preliminary
attachment violate any law, neither is there any basis for defendant Padilla to be
held liable for damages on account of her official acts as Head of the Remedial
Management Group of PNB.
5.97. Clearly, the filing of this baseless, if not contemptuous, suit is nothing but a
continuation of plaintiffs’ fraudulent attempt to evade the payment of undeniably

due and demandable obligations. Accordingly, the complaint against defendant
Padilla should be dismissed for utter lack of merit.41 (Emphasis supplied.)
Ironically, while it is the respondents who erroneously and maliciously asked the
Pasig City RTC to pass upon these issues still pending in a co-equal court, for
which reason the said court dismissed their complaint, petitioner was not allowed
to prove her counterclaim by reason of the unfounded suit in the same case as
purportedly it will entail verifying respondents’ claim that they were prejudiced by
the orders and processes in the Pasay City RTC. This situation exemplifies the
rationale in Perkin Elmer Singapore Pte Ltd.42 on requiring the petitioner to make
the counterclaim in the present action, under threat of losing such right to claim the
same ever again any other court, yet make such right of the petitioner totally
dependent on the fate of the respondents’ complaint.
As fittingly expressed by petitioner in her Reply:chanRoblesvirtualLawlibrary
Pertinently, it is relevant to note that respondents never denied in
their Comment that the institution of the case a quo was premature and violated the
principle of judicial stability. Stated otherwise, respondents admit that they are the
ones who have invited the court a quo to interfere with the rulings of the Pasay
Court, which fortunately, the former refused to do so. To allow the respondents to
cite their own unlawful actions as a shield against the harm that they have inflicted
upon petitioner Padilla would indubitably allow the respondents to profit from their
own misdeeds. With due respect, this cannot be countenanced by the Honorable
Court.43chanrobleslaw
WHEREFORE, the petition is GRANTED. The Orders dated November 12, 2012
and May 8, 2013 of the Regional Trial Court of Pasig City, Branch 155 in Civil
Case No. 73132 are hereby REVERSED and SET ASIDE. Said court is hereby
directed to proceed with the presentation of evidence in support of the compulsory
counterclaim of petitioner Aida Padilla.
MBTC vs CPR Promotions and Marketing
131
1. Same; Special Civil Actions; Extrajudicial Foreclosure of Mortgage; In
extrajudicial foreclosure of mortgage, where the proceeds of the sale are
insufficient to pay the debt, the mortgagee has the right to recover the deficiency
from the debtor.+
2. Remedial Law; Civil Procedure; Counterclaims; Compulsory
Counterclaims; Requisites of.-
—Accordingly, a counterclaim is compulsory if: (a) it arises out of or is necessarily
connected with the transaction or occurrence which is the subject matter of the
opposing party’s claim; (b) it does not require for its adjudication the presence of
third parties of whom the court cannot acquire jurisdiction; and (c) the court has
jurisdiction to entertain the claim both as to its amount and nature, except that in an
original action before the RTC, the counterclaim may be considered compulsory
regardless of the amount.
3. Same; Same; Same; Same; It is elementary that a defending party’s compulsory
counterclaim should be interposed at the time he files his Answer, and that failure
to do so shall effectively bar such claim.-
—It is elementary that a defending party’s compulsory counterclaim should be
interposed at the time he files his Answer, and that failure to do so shall effectively
bar such claim. As it appears from the records, what respondents initially claimed
herein were moral and exemplary damages, as well as attorney’s fees. Then,
realizing, based on its computation, that it should have sought the recovery of the
excess bid price, respondents set up another counterclaim, this time in their
Appellant’s Brief filed before the CA. Unfortunately, respondents’ belated
assertion proved fatal to their cause as it did not cure their failure to timely raise
such claim in their Answer. Consequently, respondents’ claim for the excess, if
any, is already barred. With this, We now resolve the substantive issues of this
case.
4. Same; Same; Appeals; Petition for Review on Certiorari; Basic is the rule that a
Petition for Review on Certiorari under Rule 45 of the Rules of Court should only
cover questions of law.-
—Basic is the rule that a Petition for Review on Certiorari under Rule 45 of the
Rules of Court should only cover questions of law. Moreover, findings of fact of
the CA are generally final and conclusive and this Court will not review them on
 132

appeal. This rule, however, admits of several exceptions, such as when the findings 1. 277894 (BDS-143/97) February 7, 1997 P 6,50,0,000.00
of fact are conflicting, manifestly mistaken, unsupported by evidence or the result
of a misapprehension of acts, or when the findings are contrary to that of the trial 2. 281728 (BD-216/97) July 21, 1997 P 959,034.20
court, as in this case.
3. 281735 (BD-222/97) July 31, 1997 P 508,580.83

4. 281736 (BD-225/97) August 12, 1997 P 291,732.50

METROPOLITAN BANK AND TRUST COMPANY, Petitioner, v. CPR
PROMOTIONS AND MARKETING, INC. AND SPOUSES CORNELIO P. 5. 281737 (BD-226/97) August 12, 1997 P 157,173.12
REYNOSO, JR. AND LEONIZA* F. REYNOSO, Respondents.
6. 281745 (BD-229/97) August 22, 1997 P 449,812.25
DECISION
281747 (BDS-
VELASCO JR., J.: 7. September 3, 1997 P 105,000.00
94854.696.00.999)
The Case
8. 281749 (BD-236/97) September 11, 1997 P 525,233.93

9. 281750 (BD-238/97) September 12, 1997 P 1,310,099.36

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court assailing the September 28, 2011 Decision1 and February 13, 2012
10. 473410 (BD-239/97) September 19, 1997 P 251,725.00
Resolution2 of the Court of Appeals (CA) rendered in CA-G.R. CV No. 91424.
Said rulings dismissed petitioner Metropolitan Banking and Trust Company's 11. 473414 (BD-240/97) September 19, 1997 P 288,975.66
(MBTC's) claim for deficiency payment upon foreclosing respondents' mortgaged
properties and ordered the bank, instead, to return to respondent mortgagors the 12. 473412 (BD-244/97) September 26, 1997 P 62,982.53
excess amount of PhP 722,602.22.
13. 473411 (BD-245/97) September 26, 1997 P 156,038.85
The Facts
14. 473413 (BD-251/97) October 3, 1997 P 767,512.30

The facts of the case, as culled from the records, are as 15. 473431 (BD-252/97) October 6, 1997 P 557,497.45
follows:ChanRoblesVirtualawlibrary
TOTAL PRINCIPAL AMOUNT 12,891,397.78
From February to October 1997, respondent CPR Promotions and Marketing, Inc.
(CPR Promotions) obtained loans from petitioner MBTC. These loans were To secure the loans, the spouses Reynoso executed two deeds of real estate
covered by fifteen (15) promissory notes (PNs) all signed by respondents, spouses mortgage on separate dates. The first mortgage, securing the amount of PhP
Leoniza F. Reynoso and Cornelio P. Reynoso, Jr. (spouses Reynoso), as Treasurer 6,500,000, was executed on February 2, 1996 over real estate covered by Transfer
and President of CPR Promotions, respectively. The issued PNs are as follows: Certificate of Title (TCT) No. 624835;3 the other was executed on July 18, 1996
over properties covered by TCT Nos. 565381,4 263421,5 and 2746826 to secure
PN No. Date Amount the amount of PhP 2,500,000. All of the mortgaged properties are registered under
the spouses Reynoso's names, except for TCT No. 565381, which is registered
 133

under CPR Promotions.7chanrobleslaw Sale on July 15 and 16, 1998, covering the properties subjected to the first and
second public auctions, respectively.
Thereafter, on December 8, 1997, the spouses Reynoso executed a continuing
surety agreement8binding themselves solidarity with CPR Promotions to pay any Notwithstanding the foreclosure of the mortgaged properties for the total amount of
and all loans CPR Promotions may have obtained from petitioner MBTC, PhP 13,614,000, petitioner MBTC alleged that there remained a deficiency balance
including those covered by the said PNs, but not to exceed PhP 13,000,000. of PhP 2,628,520.73, plus interest and charges as stipulated and agreed upon in the
PNs and deeds of real estate mortgages. Despite petitioner's repeated demands,
Upon maturity of the loans, respondents defaulted, prompting MBTC to file a however, respondents failed to settle the alleged deficiency. Thus, petitioner filed
petition for extra-judicial foreclosure of the real estate mortgages, pursuant to Act an action for collection of sum of money against respondents, docketed as Civil
No. 3135,9 as amended. MBTC's request for foreclosure,10 dated March 6, 1998, Case No. 99-230, entitled Metropolitan Bank and Trust Company v. CPR
pertinently reads:chanRoblesvirtualLawlibrary Promotions and Marketing, Inc. and Spouses Cornelio Reynoso, Jr. and Leoniza F.
Reynoso.
We have the honor to request your good Office to conduct/undertake extra-judicial
foreclosure sale proceedings under Act No. 3135, as amended, and other applicable Ruling of the Regional Trial Court
laws on the properties covered by two Real Estate Mortgages executed by CPR
PROMOTIONS & MARKETING INC., represented by its President Mr. Cornelio
P. Reynoso and Treasurer Leoniza F. Reynoso and SPOUSES CORNELIO P. In its Decision13 dated October 11, 2007, the Regional Trial Court, Branch 59 in
REYNOSO, JR., AND LEONIZA F. REYNOSO in favour of the mortgagee, Makati City (RTC) ruled in favor of petitioner that there, indeed, was a balance of
METROPOLITAN BANK AND TRUST COMPANY, to secure fifteen (15) loans PhP 2,628,520.73, plus interest and charges, as of September 18, 1998, and that
with a total principal amount of TWELVE MILLION EIGHT HUNDRED respondents are liable for the said amount, as part of their contractual
NINETY ONE THOUSAND THREE HUNDRED NINETY SEVEN PESOS obligation.14 The court disposed of the case in this
AND SEVENTY EIGHT CENTAVOS (P12,891,397.78), for breach of the terms wise:chanRoblesvirtualLawlibrary
of said mortgage.11chanrobleslaw
WHEREFORE, premises considered, judgment is hereby rendered ordering
[respondents], jointly and severally, to pay [petitioner] Metro bank, as
x x x x
follows:ChanRoblesVirtualawlibrary
As Annex "R", a copy of the Statement of Account, showing that the total amount
a] the amount of PhP 2,628,520.73 plus stipulated interest and penalty charges
due on the loans of the borrowers/mortgagers which remains unpaid and
stipulated in the Promissory Notes marked as Exhibits A to O until full payment
outstanding as of February 10, 1998 was ELEVEN MILLION TWO HUNDRED
thereof; and
SIXTEEN THOUSAND SEVEN HUNDRED EIGHTY TRHEE PESOS AND
NINETY NINE CENTAVOS (Pll,216,783.99) x x x.12 (emphasis in the original)
b] the costs of the suit.
Subsequently, on May 5, 1998, the mortgaged properties covered by TCT Nos.
624835 and 565381 were sold at a public auction sale. MBTC participated therein SO ORDERED.chanroblesvirtuallawlibrary
and submitted the highest bid in the amount of PhP 10,374,000. The day after, on
Respondents timely moved for reconsideration of the RTC's Decision, which was
May 6, 1998, petitioner again participated and won in the public auction sale of the
denied through the trial court's February 7, 2008 Order. Aggrieved, respondents
remaining mortgaged properties, having submitted the highest bid amounting to
elevated the case to the CA.
PhP 3,240,000. As a result, petitioner was issued the corresponding Certificates of

Ruling of the Court of Appeals
The appellate court, through the assailed Decision, reversed the court a quo and
ruled in favor of respondents. The fallo of the said Decision
reads:chanRoblesvirtualLawlibrary
Wherefore, in view of the foregoing, the decision appealed from is reversed, and
the plaintiff-appellee Metrobank is ordered to refund or return to the defendants-
appellants Cornelio and Leoniza Reynoso the amount of PhP 722,602.22
representing the remainder of the proceeds of the foreclosure sale, with legal
interest of six percent per annum from the date of filing of the answer with
counterclaim on March 26, 1999, until paid.
SO ORDERED.15
Supporting the reversal is the CA's finding that there was a sudden change in the
terminology used, from "total amount due" to "principal amount."16 According to
the CA, from February to May 1998, the amount sought to be collected ballooned
from PhP 11,216,783.99 to PhP 12,891,397.78. From this apparently unexplained
increase, the CA deduced that the increased amount must mean the principal and
interest and other charges. Furthermore, the appellate court found that petitioner
failed to prove that there was a deficiency, since the records failed to corroborate
the claimed amount. As noted by the CA, "[Petitioner] did not even introduce the
continuing surety agreement on which the trial court gratuitously based its
decision."
On October 24, 2011, petitioner filed a motion for reconsideration of the assailed
Decision, which the appellate court denied in its assailed February 13, 2012
Resolution.
The Issues
Hence this recourse, on the following issues:ChanRoblesVirtualawlibrary
Whether or not the CA gravely abused its discretion when it failed to consider the
continuing surety agreement presented in evidence and in ruling that petitioner
MBTC failed to prove that the spouses Reynoso are solidarity liable with
134
respondent CPR Promotions.
Whether or not the CA gravely abused its discretion when it grossly
misappreciated the promissory notes, real estate mortgages, petition for
extrajudicial foreclosure of mortgage, certificates of sale and statement of account
marked in evidence and ruled that petitioner MBTC failed to prove that a
deficiency balance resulted after conducting the extrajudicial foreclosure sales of
the mortgaged properties.
The Arguments
Anent the first issue, MBTC faults the appellate court for finding that it did not
introduce the continuing surety agreement on which the RTC based its ruling that
respondent spouses are solidarity liable with respondent CPR
Promotions.17chanrobleslaw
As regards the second issue, petitioner asserts that the CA's grant of a refund
valued at PhP 722,602.22 plus legal interest of six percent (6%) in favor of
respondents is erroneous for two reasons: first, respondents never set up a
counterclaim for refund of any amount;18 and second, the total outstanding
obligation as of February 10, 1998, to which the full amount of the bid prices was
applied, is PhP 11,216,783.99 and not PhP 12,891,397.78, which was used by the
CA in its computation.19chanrobleslaw
Lastly, petitioner claims that respondents should be made to answer for certain
specific expenses connected with the foreclosure, i.e., filing fees, publication
expense, Sheriffs Commission on Sale, stipulated attorney's fee, registration fee for
the Certificate of Sale, insurance premium and other miscellaneous expenses, in the
amounts of PhP 1,373,238 and PhP 419,166.67 for the first and second foreclosure
sales, respectively.20chanrobleslaw
In their Comment,21 respondents maintained the propriety of the CA's grant of a
refund, arguing that in their Answer with Compulsory Counterclaim, they laid-
down in detail the excess of the prices of the foreclosed properties over their
obligation.22 Respondents then went on and argued that "from the beginning of the
instant case in the trial court, [they] have already raised in issue the fact of
[petitioner's] taking-over of [their] lands with values over and above the latter's
 135

financial liabilities."23Thus, they postulate that the CA did right when it touched In determining whether a counterclaim is compulsory or permissive, We have, in
on the issue and ruled thereon.24chanrobleslaw several cases, utilized the following tests:28chanrobleslaw

Furthermore, respondents insist that there is actually no difference between the PhP (1) Are the issues of fact or law raised by the claim and the counterclaim largely
12,891,397.78 and the PhP 11,261,783.99 amounts except for the accumulated the same?
interest, penalties, and other charges.25Too, according to them, this is the reason
why what respondent CPR owed petitioner at that time increased substantially from (2) Would res judicata bar a subsequent suit on defendant's claims, absent the
that on February 10, 1998, when the amount was just PhP compulsory counterclaim rule?
11,216,783.99.26chanrobleslaw
(3) Will substantially the same evidence support or refute plaintiffs claim as well as
The Court's Ruling the defendant's counterclaim?

(4) Is there any logical relation between the claim and the counterclaim, such that
We partially grant the petition. While We fully agree with the CA that MBTC was
the conduct of separate trials of the respective claims of the parties would entail a
not able to prove the amount claimed, We however, find that neither were
substantial duplication of effort and time by the parties and the court? This test is
respondents able to timely setup their claim for refund.
the "compelling test of compulsoriness."29chanrobleslaw

Respondents belatedly raised their compulsory counterclaim

Rule 6 of the Rules of Court defines a compulsory counterclaim
follows:chanRoblesvirtualLawlibrary
Section 7. Compulsory counterclaim. — A compulsory counterclaim is one which,
being cognizable by the regular courts of justice, arises out of or is connected with
the transaction or occurrence constituting the subject matter of the opposing party's
claim and does not require for its adjudication the presence of third parties of
whom the court cannot acquire jurisdiction. Such a counterclaim must be within
the jurisdiction of the court both as to the amount and the nature thereof, except
that in an original action before the Regional Trial Court, the counterclaim may be
considered compulsory regardless of the amount.chanroblesvirtuallawlibrary
Accordingly, a counterclaim is compulsory if: (a) it arises out of or is necessarily
connected with the transaction or occurrence which is the subject matter of the
opposing party's claim; (b) it does not require for its adjudication the presence of
third parties of whom the court cannot acquire jurisdiction; and (c) the court has
jurisdiction to entertain the claim both as to its amount and nature, except that in an
original action before the RTC, the counterclaim may be considered compulsory
regardless of the amount.27chanrobleslaw
Based on the above tests, it is evident that a claim for recovery of the excess in the
bid price vis-a-vis the amount due should be interposed as a compulsory
counterclaim in an action for recovery of a deficiency filed by the mortgagee
against the debtor-mortgagor. First, in both cases, substantially the same evidence
is needed in order to prove their respective claim. Second, adjudication in favor of
one will necessarily bar the other since these two actions are absolutely
incompatible with each other; a debt cannot be fully paid and partially unpaid at
the same time. Third, these two opposing claims arose from the same set of
transactions. And finally, if these two claims were to be the subject of separate
trials, it would definitely entail a substantial and needless duplication of effort and
time by the parties and the court, for said actions would involve the same parties,
the same transaction, and the same evidence. The only difference here would be in
the findings of the courts based on the evidence presented with regard to the issue
of whether or not the bid prices substantially cover the amounts due.
Having determined that a claim for recovery of an excess in the bid price should be
set up in the action for payment of a deficiency as a compulsory counterclaim, We
rule that respondents failed to timely raise the same.
It is elementary that a defending party's compulsory counterclaim should be
interposed at the time he files his Answer,30 and that failure to do so shall
 136

effectively bar such claim.31 As it appears from the records, what respondents In short, the CA concluded that the amount of PhP 12,891,397.78 is actually
initially claimed herein were moral and exemplary damages, as well as attorney's comprised of the PhP 11,216,783.99 due as of February 10, 1998, plus additional
fees.32 Then, realizing, based on its computation, that it should have sought the interest and other charges that became due from February 10, 1998 until the date of
recovery of the excess bid price, respondents set up another counterclaim, this time foreclosure on May 5, 1998.
in their Appellant's Brief filed before the CA.33 Unfortunately, respondents'
belated (assertion proved fatal to their cause as it did not cure their failure to timely The appellate court is mistaken.
raise such claim in their Answer. Consequently, respondents' claim for the excess,
if any, is already barred. With this, We now resolve the substantive issues of this By simply adding the figures stated in the PNs as the principal sum, it can readily
case. be seen that the amount of PhP 12,891,397.78 actually pertains to the aggregate
value of the fifteen (15) PNs, viz:chanRoblesvirtualLawlibrary
The CA erred in ruling that the total amount due was PhP 12,891,397.78
PN No. Amount
Basic is the rule that a Petition for Review on Certiorari under Rule 45 of the Rules
1. 277894 (BDS-143/97)38 P 6,500,000.00
of Court should only cover questions of law.34 Moreover, findings of fact of the
CA are generally final and conclusive and this Court will not review them on 2. 281728 (BD-216/97)39 P 959,034.20
appeal.35 This rule, however, admits of several exceptions,36 such as when the
findings of fact are conflicting, manifestly mistaken, unsupported by evidence or 3. 281735 (BD-222/97)40 P 508,580.83
the result of a misapprehension of acts, or when the findings are contrary to that of
the trial court, as in this case. 4. 281736 (BD-225/97)41 P 291,732.50

5. 281737 (BD-226/97)42 P 157,173.12

To recall, the CA, in its assailed Decision, made the following findings as regards
the amount due on the loan against which the proceeds from the auction sales are to 6. 281745 (BD-229/97)43 P 449,812.25
be applied:chanRoblesvirtualLawlibrary
7. 281747 (BDS-94854.696.00.999)44 P 105,000.00
In the application for extrajudicial foreclosure sale dated March 6, 1998, the total
amount due as of February 10, 1998 was stated to be P11,216,783.99. The plaintiff 8. 281749(BD-236/97)45 P 525,233.93
categorically declared that P11,216,783.99 was the total amount due on February
10, 1998. By the time the auction sales were conducted, in May 1998, as reflected 9. 281750 (BD-238/97)46 P 1,310,099.36
in the certificate of Sale, the principal amount was said to be P12,891,397.78. What
10. 473410 (BD-239/97)47 P 251,725.00
is the meaning of the change from total amount due to principal amount? If from
February to May 1998, a matter of three months, the amount sought to be collected 11. 473414 (BD-240/97)48 P 288,975.66
ballooned to P12,891,397.78, the increase could have resulted from no other source
than the interest and other charges under the promissory notes after the defendants 12. 473412 (BD-244/97)49 P 62,982.53
incurred in default. Thus, the amount of P12,891,397.78 as of May 1998, must
mean the principal and interest and other charges. The statement in the certificates 13. 473411 (BD-245/97)50 P 156,038.85
of sale that it is the principal amount is a subtle change in language, a legerdemain
14. 473413 (BD-251/97)51 P 767,512.30
to suggest that the amount does not include the interest and other
charges.37 (emphasis added, citations omitted)
 137

15. 473431 (BD-252/97)52 P 557,497.45 9 BD#236/97 497,649.70 56,135.10 38,070.20

TOTAL PRINCIPAL AMOUNT 12,891,397.78 10 BD#240/97 145,950.00 16,463.20 11,165.18

This belies the findings of the CA that PhP 12,891,397.78 is the resulting value of 11 BD#245/97 156,038.85 17,481.55 11,897.43
PhP 11,216,783.99 plus interest and other charges. Consequently, the CA's
conclusion that there is an excess of PhP 722,602.22, after deducting the amount of 12 BD#239/97 210,421.50 22,605.52 15,360.77
PhP 12,891,397.78 from the total bid price of PhP 13,614,000, is erroneous.
13 BD#251/97 572,470.15 64,574.86 38,232.57
Nevertheless, while the CA's factual finding as to the amount due is flawed,
petitioner, as discussed below, is still not entitled to the alleged deficiency balance 14 BD#252/97 557,497.45 47,896.46 31,110.63
of PhP 2,628,520.73.
16 BDS#143/97 6,500,000.00 573,681.89 336,818.28
MBTC failed to prove that there is a deficiency balance of PhP 2,628,520.73
17 BDS#218/97 1,800,000.00 93,536.05 74,401.15
To support its deficiency claim, petitioner presented a Statement of
18 Fire Insurance 49,238.69 0.00 1,698.73
Account,53 which refers to the amounts due as of May 5, 1998, the date of the first
foreclosure sale, to wit:chanRoblesvirtualLawlibrary
TOTAL 12,450,652.22 1,111,986.53 747,859.44
Statement of Account as of May 05, 1998
GRAND TOTAL 14,310,498.19
PN No. Principal Amt Outs. PDI Penalty
Applying the proceeds from the auction sales to the foregoing amount, according to
petitioner, would result in a deficiency balance of PhP 2,443,143.43. Afterwards,
1 BD#216/97 489,219.20 54,808.77 49,166.53
the said amount allegedly earned interest for four (4) months in the amount of PhP
2 BD#222/97 167,289.35 18,613.61 16,310.71 185,377.30,54 bringing petitioner's claim for deficiency judgment to a total of PhP
2,628,520.73.55chanrobleslaw
3 BD#225/97 291,732.50 32,683.72 27,422.86
We are not convinced.
4 BD#226/97 44,694.50 5,007.24 4,201.28
We have already ruled in several cases56 that in extrajudicial foreclosure of
5 BD#229/97 435,229.25 48,760.10 44,393.38 mortgage, where the proceeds of the sale are insufficient to pay the debt, the
mortgagee has the right to recover the deficiency from the debtor.57 In ascertaining
6 BD#238/97 365,238.55 40,918.83 33,236.71 the deficit amount, Sec. 4, Rule 68 of the Rules of Court is elucidating, to
wit:chanRoblesvirtualLawlibrary
7 BD#233/97 105,000.00 11,763.50 9,082.50
Section 4. Disposition of proceeds of sale. — The amount realized from the
8 BD#244/97 62,982.53 7,056.13 5,290.53 foreclosure sale of the mortgaged property shall, after deducting the costs of the
sale, be paid to the person foreclosing the mortgage, and when there shall be any
balance or residue, after paying off the mortgage debt due, the same shall be paid
 138

to junior encumbrancers in the order of their priority, to be ascertained by the Moreover, the amounts petitioner itself supplied would result in the following
court, or if there be no such encumbrancers or there be a balance or residue after computation:chanRoblesvirtualLawlibrary
payment to them, then to the mortgagor or his duly authorized agent, or to the
person entitled to it. (emphasis added) PhP
Total outstanding obligation as of February 10, 1998
11,216,783.99
Verily, there can only be a deficit when the proceeds of the sale is not sufficient to
cover (1) the costs of foreclosure proceedings; and (2) the amount due to the 1,373,238.04 Add: Alleged May 5, 1998 public auction sale expenses
creditor, inclusive of interests and penalties, if any, at the time of foreclosure.
(no ConsistentAdd: Additional interests and charges earned between February
data) 10, 1998 to May 5, 1998
a. Petitioner failed to prove the amount due at the time of foreclosure
(no consistent
Having alleged the existence of a deficiency balance, it behooved petitioner to Subtotal: Amount due as of May 5, 1998
data)
prove, at the very least, the amount due at the date of foreclosure against which the
proceeds from the auction sale would be applied. Otherwise, there can be no basis 10,374,000.00 Less: May 5 Bid Price to be applied to the amount due
for awarding the claimed deficiency balance. Unfortunately for petitioner, it failed
to substantiate the amount due as of May 5, 1998 as appearing in its Statement of 419,166.67 Add: Alleged May 6, 1998 public auction sale expenses
Account.
(no consisted
Add: Interests and charges earned from May 5 to 6, 1998
data)
To recall, MBTC admitted that the amount due as of February 10, 1998 is PhP
11,216,783.99, inclusive of interests and charges. As alleged in the 3,240,000.00 Less: May 6 Bid Price to be applied to the amount due
petition:chanRoblesvirtualLawlibrary
PhP Total: Deficiency reflected in the Statement of Account from May
57. Firstly, it should be noted that respondents' total unpaid obligations inclusive of 2,443,143.43 5 to September 18, 1998
interest and penalties as of 10 February 1998 amounted to Php 11,216,783.99. This
amount was the subject of petitioner Metrobank's Petitions for Extra]udicial As can be gleaned, petitioner failed to sufficiently explain during the proceedings
Foreclosure of Mortgage and NOT Php 12,891,397.78 which is the total principal how it came up with the alleged "deficiency" in the amount of PhP 2,443,143.43,
amount of respondents' loan obligations at the time when they obtained said loans as per the Statement of Account. Reversing the formula, petitioner's claim would
as shown in the Promissory Notes and the Certificates of Sale. After the execution only be mathematically possible if the missing interest and penalties for the three-
of the Promissory Notes, payments were made, although insufficient, which month period—from February 10, 1998 to May 6, 1998—amounted to PhP
resulted in the balance of PhP 11,216,783.99 as of February 1198 inclusive of 3,047,954,73,59 which is inconsistent with MBTC's declaration in its Statement of
interest and penalties.58 xxx Account as of May 5, 1998.60 Needless to say, this amount is not only
unconscionable, it also finds no support from any of the statement of accounts and
If the total amount due as of February 10, 1998 is PhP 11,216,783.99 is already loan stipulations agreed upon by the parties.
inclusive of interests and penalties, the principal amount, exclusive of interests and
charges, would naturally be lower than the PhP 11,216,783.99 threshold. How Given MBTC's conflicting, if not irreconcilable, allegations as to the amount due
petitioner made the determination in its Statement of Account that the principal as of the date of foreclosure—as noted in the statement of accounts, the petition for
amount due on the date of the auction sale is PhP 12,450,652.22 is then foreclosure, and the promissory notes—the computation offered by MBTC cannot
questionable, nay impossible, unless respondents contracted another loan anew. be accepted at face value. Consequently, there can then be no basis for determining
 139

the value of the additional interests and penalty charges that became due, and, more
importantly, whether or not there was indeed a deficiency balance at the time the
mortgaged properties were foreclosed.
In addition, it is noticeable that petitioner's presentation of the computation is
circuitous and needlessly lengthened. As a matter of fact, nowhere in the petition,
in its complaint,61 reply,62 pre-trial brief,63among others, did it make a simple
computation of respondents' obligation as well as the amounts to be applied to it, or
even a summary thereof, when it could have easily done so.
10. Statement of Account (Exhibit DD).chanroblesvirtuallawlibrary
Curiously, petitioner never offered as evidence receipts proving payment of filing
fees, publication expenses, Sheriffs Commission on Sale, attorney's fee,
registration fee for the Certificate of Sale, insurance premium and other
miscellaneous expenses, all of which MBTC claims that it incurred. Instead,
petitioner urges the Court to take judicial notice of the following
expenses:64cralawred

May 5, 1998 auction

b. Petitioner failed to prove the amount of expenses incurred in foreclosing the
sale expenses
mortgaged prop erties
Filing Fee PhP 52,084.00
Another obstacle against petitioner's claim for deficiency balance is the burden of
proving the amount of expenses incurred during the foreclosure sales. To recall, Publication Expenses 24,267.75
petitioner alleged that it incurred expenses totalling PhP 1,373,238.04 and PhP
419,166.67 for the first and second public auction sales, respectively. However, in Sheriffs Commission
207,560.00
claiming that there is a deficiency, petitioner only submitted the following pieces on Sale
of evidence, to wit:chanRoblesvirtualLawlibrary
Registration fee and
1. The fifteen (15) promissory notes (Exhibits A to O); other Miscellaneous 32,644.50
Expenses
2. Continuing Surety Agreement (Exhibit P);
Attorney's Fees (10%
of total amount 1,005,744.37
3. Real Estate Mortgage (Exhibits Q & R);
claimed)
4. Petition for Sale under Act. No. 3135, as amended (Exhibit S); Fire Insurance 50,937.42

5. Notices of Sheriff s Sale (Exhibits T & U); Sub-total PhP 1,373,238.04

6. Affidavits of Publication (Exhibits V & W);

May 6, 1998 auction

7. Certificates of Posting and a Xerox copy thereof (Exhibits X & Y);
sale expenses
8. Certificates of Sale (Exhibits Z & AA); Publication Expenses 24,267.75

9. Demand Letters (Exhibits BB & CC); and 64,880.00

Sheriffs Commission

on Sale
Registration fee and
other Miscellaneous 16,593.00
Expenses
Attorney's Fees (10%
of total amount 313,425.92
claimed)
Sub-total PhP 419,166.67
Petitioner's argument is untenable.
First, the Court cannot take judicial notice of the attorney's fees being claimed by
petitioner because although 10% was the rate agreed upon by the parties, We have,
in a line of cases, held that the percentage to be charged can still be fixed by the
Court. For instance, in Mambulao Lumber Company v. Philippine National
Bank,65 the Court held:chanRoblesvirtualLawlibrary
In determining the compensation of an attorney, the following circumstances
should be considered: the amount and character of the services rendered; the
responsibility imposed; the amount of money or the value of the property affected
by the controversy, or involved in the employment; the skill and experience called
for in the performance of the service; the professional standing of the attorney; the
results secured; and whether or not the fee is contingent or absolute, it being a
recognized rule that an attorney may properly charge a much larger fee when it is
to be contingent than when it is not. From the stipulation in the mortgage contract
earlier quoted, it appears that the agreed fee is 10% of the total indebtedness,
irrespective of the manner the foreclosure of the mortgage is to be effected. The
agreement is perhaps fair enough in case the foreclosure proceedings is prosecuted
judicially but, surely, it is unreasonable when, as in this case, the mortgage was
foreclosed extra-judicially, and all that the attorney did was to file a petition for
foreclosure with the sheriff concerned. x x x (emphasis added)
Similarly, in Bank of the Philippine Islands, Inc. v. Spouses Norman and Angelina
Yu,66 the Court reduced the claim for attorney's fees from 10% to 1% based on the
following reasons: (1) attorney's fee is not essential to the cost of borrowing, but a
mere incident of collection; (2) 1% is just and adequate because the mortgagee
140
bank had already charged foreclosure expenses; (3) attorney's fee of 10% of the
total amount due is onerous considering the rote effort that goes into extrajudicial
foreclosures.
Second, the Court cannot also take judicial notice of the expenses incurred by
petitioner in causing the publication of the notice of foreclosure and the cost of
insurance. This is so because there are no standard rates cited or mentioned by
petitioner that would allow Us to take judicial notice of such expenses. It is not
unthinkable that the cost of publication would vary from publisher to publisher,
and would depend on several factors, including the size of the publication space.
Insurance companies also have their own computations on the insurance premiums
to be paid by the insurer, which the courts cannot be expected to be knowledgeable
of. To be sure, in arguing for the Court to take judicial notice of the alleged
expenses, MBTC merely cited Sec. 3 of Act 3135 requiring publication and the
mortgage agreement provision on the insurance requirement, without more.67 Said
provisions never expressly provided for the actual cost of publication and
insurance, nor any formulae for determining the same. Thus, the claims for
publication and insurance expenses ought to be disallowed.
Third, the claims for registration fees and miscellaneous expenses were also never
substantiated by receipts.
In sum, given petitioner's failure to establish the sum due at the time the mortgaged
properties were foreclosed and sold via public auction, as well as the expenses
incurred in those foreclosure proceedings, it would be impossible for the Court to
determine whether or not there is, indeed, a deficiency balance petitioner would
have been entitled to.
Conclusion
In demanding payment of a deficiency in an extrajudicial foreclosure of mortgage,
proving that there is indeed one and what its exact amount is, is naturally a
precondition thereto. The same goes with a claim for reimbursement of foreclosure
expenses, as here. In this regard, it is elementary that the burden to prove a claim
rests on the party asserting such. Ei incumbit probatio qui dicit, non qui negat. He
who asserts, not he who denies, must prove.68 For having failed to adequately
substantiate its claims, We cannot sustain the finding of the trial court that

respondents are liable for the claimed deficiency, inclusive of foreclosure
expenses. Neither can We sustain the CA's finding that respondents are entitled to
the recovery of the alleged excess payment.
In light of the foregoing, the Court need not belabor the other assigned errors.
WHEREFORE, premises considered, the instant petition is hereby PARTIALLY
GRANTED. Accordingly, the Decision of the Court of Appeals dated September
28, 2011 in CA-G.R. CV No. 91424 and its February 13, 2012 Resolution are
hereby AFFIRMED with MODIFICATION. The award of refund in favor of
respondents in the amount of P722,602.22 with legal interest of six percent (6%)
per annum is hereby DELETED.
Heirs of Sotto vs Palicte
HEIRS OF MARCELO SOTTO, REPRESENTED BY: LOLIBETH SOTTO
NOBLE, DANILO C. SOTTO, CRISTINA C. SOTTO, EMMANUEL C. SOTTO
AND FILEMON C. SOTTO; AND SALVACION BARCELONA, AS HEIR OF
DECEASED MIGUEL BARCELONA, Petitioners, v. MATILDE S.
PALICTE, Respondent.
RESOLUTION
BERSAMIN, J.:
We now determine whether or not the petitioners’ counsel, Atty. Makilito B.
Mahinay, committed forum shopping.
There is forum shopping “when a party repetitively avails of several judicial
remedies in different courts, simultaneously or successively, all substantially
founded on the same transactions and the same essential facts and circumstances,
and all raising substantially the same issues either pending in or already resolved
adversely by some other court.”1 Forum shopping is an act of malpractice that is
prohibited and condemned because it trifles with the courts and abuses their
processes. It degrades the administration of justice and adds to the already
congested court dockets.2 An important factor in determining its existence is the
141
vexation caused to the courts and the parties–litigants by the filing of similar cases
to claim substantially the same reliefs.3
The test to determine the existence of forum shopping is whether the elements
of litis pendentia are present, or whether a final judgment in one case amounts
to res judicata in the other. Thus, there is forum shopping when the following
elements are present, namely: (a) identity of parties, or at least such parties as
represent the same interests in both actions; (b) identity of rights asserted and
reliefs prayed for, the relief being founded on the same facts; and (c) the identity of
the two preceding particulars, such that any judgment rendered in the other action
will, regardless of which party is successful, amounts to res judicata in the action
under consideration.
In our June 13, 2013 decision in this case,4 we directed Atty. Mahinay to show
cause “why he should not be sanctioned as a member of the Integrated Bar of the
Philippines for committing a clear violation of the rule prohibiting forum–shopping
by aiding his clients in asserting the same claims at least twice.” The directive was
called for by the following observations made in the decision, to wit:
We start this decision by expressing our alarm that this case is the fifth suit to reach
the Court dividing the several heirs of the late Don Filemon Y. Sotto (Filemon)
respecting four real properties that had belonged to Filemon’s estate (Estate of
Sotto).
The first case (Matilde S. Palicte v. Hon. Jose O. Ramolete, et al., No. L–55076,
September 21, 1987, 154 SCRA 132) held that herein respondent Matilde S. Palicte
(Matilde), one of four declared heirs of Filemon, had validly redeemed the four
properties pursuant to the assailed deed of redemption, and was entitled to have the
title over the four properties transferred to her name, subject to the right of the
three other declared heirs to join her in the redemption of the four properties within
a period of six months.
The second was the civil case filed by Pascuala against Matilde (Civil Case No.
CEB–19338) to annul the former’s waiver of rights, and to restore her as a co–
redemptioner of Matilde with respect to the four properties (G.R. No. 131722,
February 4, 1998).
The third was an incident in Civil Case No. R–10027 (that is, the suit brought by
the heirs of Carmen Rallos against the Estate of Sotto) wherein the heirs of Miguel

belatedly filed in November 1998 a motion for reconsideration praying that the
order issued on October 5, 1989 be set aside, and that they be still included as
Matilde’s co–redemptioners. After the trial court denied their motion for
reconsideration for its lack of merit, the heirs of Miguel elevated the denial to the
CA on certiorari and prohibition, but the CA dismissed their petition and upheld
the order issued on October 5, 1989. Thence, the heirs of Miguel came to the Court
on certiorari (G.R. No. 154585), but the Court dismissed their petition for being
filed out of time and for lack of merit on September 23, 2002.
The fourth was The Estate of Don Filemon Y. Sotto, represented by its duly
designated Administrator, Sixto Sotto Pahang, Jr. v. Matilde S. Palicte, et al. (G.R.
No. 158642, September 22, 2008, 566 SCRA 142), whereby the Court expressly
affirmed the ruling rendered by the probate court in Cebu City in Special
Proceedings No. 2706–R entitledIntestate Estate of the Deceased Don Filemon
Sotto denying the administrator’s motion to require Matilde to turn over the four
real properties to the Estate of Sotto.
The fifth is this case. It seems that the disposition by the Court of the previous
cases did not yet satisfy herein petitioners despite their being the successors–in–
interest of two of the declared heirs of Filemon who had been parties in the
previous cases either directly or in privity. They now pray that the Court undo the
decision promulgated on November 29, 2002, whereby the Court of Appeals (CA)
declared their action for the partition of the four properties as already barred by the
judgments previously rendered, and the resolution promulgated on August 5, 2003
denying their motion for reconsideration.
The principal concern here is whether this action for partition should still prosper
notwithstanding the earlier rulings favoring Matilde’s exclusive right over the four
properties.
xxxx
What we have seen here is a clear demonstration of unmitigated forum shopping on
the part of petitioners and their counsel. It should not be enough for us to just
express our alarm at petitioners’ disregard of the doctrine of res judicata. We do
not justly conclude this decision unless we perform one last unpleasant task, which
is to demand from petitioners’ counsel, Atty. Makilito B. Mahinay, an explanation
of his role in this pernicious attempt to relitigate the already settled issue regarding
Matilde’s exclusive right in the four properties. He was not unaware of the other
142
cases in which the issue had been definitely settled considering that his clients were
the heirs themselves of Marcelo and Miguel. Moreover, he had represented the
Estate of Sotto in G.R. No. 158642 (The Estate of Don Filemon Y. Sotto v.
Palicte). (Bold underscoring added for emphasis only)
On July 22, 2013, Atty. Mahinay submitted a so–called Compliance (With Humble
Motion for Reconsideration) containing his explanations, praying that he not be
sanctioned for violating the rule against forum shopping, as follows:
The first three cases did not resolve the issues raised in Civil Case No. CEB–
24393;
Marcelo Sotto’s cause of action arose only when respondent Palicte violated her
“hypothetically admitted” agreement with Marcelo Sotto;
He (Atty. Mahinay) was not the one who had prepared and signed the complaint in
Civil Case No. CEB–24393, although he assumed the responsibility as to its filing;
He (Atty. Mahinay) had filed a motion for referral or consolidation of Civil Case
No. CEB–24293 with the intestate proceedings of the Estate of Filemon Y. Sotto,
and
He (Atty. Mahinay) had acted in good faith in assisting the administrator of the
Estate of Filemon Y. Sotto in filing the Motion to Require Matilde Palicte To Turn
Over And/or Account Properties Owned by the Estate in Her Possession.5
The Court considers Atty. Mahinay’s explanations unsatisfactory.
First of all, Atty. Mahinay claims that he could not be deemed guilty of forum
shopping because the previous cases did not involve the issues raised in Civil Case
No. CEB–24293; hence, res judicata would not apply. He maintains that Civil Case
No. CEB–24293 was based on the agreement between Palicte and Marcelo Sotto
(as the then Administrator of the Estate) to the effect that Palicte would redeem the
properties under her name using the funds of the Estate, and she would thereafter
share the same properties equally with the Estate.
To establish the agreement between Palicte and Marcelo Sotto, Atty. Mahinay cites
Palicte’s filing of a motion to dismiss in Civil Case No. CEB–24293 on the ground,
among others, of the complaint failing to state a cause of action whereby
Palicte hypothetically admitted the complaint’s averment of the agreement. He

submits that a constructive trust between Palicte and the Estate was thereby
created; and argues that the issues in Civil Case No. CEB–24293 could not have
been raised in the earlier cases because the plaintiffs’ cause of action in Civil Case
No. CEB–24293 arose only after Palicte violated her agreement with Marcelo
Sotto.
Atty. Mahinay’s reliance on Palicte’s hypothetical admission of her agreement with
Marcelo Sotto to buttress his explanation here is unjustified. Such hypothetical
admission is only for the purpose of resolving the merits of the ground of
insufficiency of the complaint. This is because the test of the sufficiency of the
statement of the cause of action is whether or not, accepting the veracity of the
facts alleged, the court could render a valid judgment upon the same in accordance
with the prayer of the complaint.6 Even so, the filing of the motion to dismiss
assailing the sufficiency of the complaint does not hypothetically admit allegations
of which the court will take judicial notice of to be not true, nor does the rule of
hypothetical admission apply to legally impossible facts, or to facts inadmissible in
evidence, or to facts that appear to be unfounded by record or document included
in the pleadings.7
For the ground to be effective, the insufficiency of the complaint must appear on
the face of the complaint, and nowhere else. It will be unfair to the plaintiff,
indeed, to determine the sufficiency of his cause of action from facts outside of
those pleaded in the complaint. According to Moran: “A complaint should not be
dismissed for insufficiency unless it appears to a certainty, from the face of the
complaint, that plaintiff would be entitled to no relief under any state of facts
which could be proved within the facts alleged therein.”8 Thus, in Heirs of Juliana
Clavano v. Judge Genato,9 the Court disapproved the act the trial judge of setting a
preliminary hearing on the motion to dismiss based on the insufficiency of the
complaint, viz:
x x x We believe that the respondent Judge committed an error in conducting a
preliminary hearing on the private respondent’s affirmative defenses. It is a well–
settled rule that in a motion to dismiss based on the ground that the complaint fails
to state a cause of action, the question submitted to the court for determination is
the sufficiency of the allegations in the complaint itself. Whether those allegations
are true or not is beside the point, for their truth is hypothetically admitted by the
motion. The issue rather is: admitting them to be true, may the court render a valid
judgment in accordance with the prayer of the complaint? Stated otherwise, the
sufficiency of the cause of action must appear on the face of the complaint in order
143
to sustain a dismissal on this ground. No extraneous matter may be considered nor
facts not alleged, which would require evidence and therefore must be raised as
defenses and await the trial. In other words, to determine the sufficiency of the
cause of action, only the facts alleged in the complaint, and no others should be
considered.10
Should the trial court find that the statement of the cause of action in the complaint
cannot support a valid judgment in accordance with the prayer of the complaint,
the motion to dismiss is granted and the complaint is dismissed. But if the motion
to dismiss is denied, the defending party who has moved to dismiss is then called
upon to file an answer or other proper responsive pleading allowed by the rules of
procedure, and through such responsive pleading join issues by either admitting or
denying the factual averments of the complaint or initiatory pleading. The case
then proceeds upon the issues thus raised and joined by the exchange of pleadings.
To stress, the admission of the veracity of the facts alleged in the complaint, being
only hypothetical, does not extend beyond the resolution of the motion to dismiss,
because a defending party may effectively traverse the factual averments of the
complaint or other initiatory pleading only through the authorized responsive
pleadings like the answer. Clearly, Atty. Mahinay cannot bind Palicte to her
hypothetical admission of the agreement between her and Marcelo Sotto as the
Administrator of the Estate.
Given the foregoing, the complaint was properly dismissed because of res judicata.
There is no question that the ultimate objective of each of the actions was the
return of the properties to the Estate in order that such properties would be
partitioned among the heirs. In the other cases, the petitioners failed to attain the
objective because Palicte’s right in the properties had been declared exclusive.
There was between Civil Case No. CEB–24293 and the other cases a clear identity
of the parties, of subject matter, of evidence, and of the factual and legal issues
raised. The Court saw through the petitioners’ “ploy to countermand the previous
decisions’ sustaining Palicte’s rights over the properties.”
Secondly, Atty. Mahinay asserts good faith in the filing Civil Case No. CEB–
24293. He points out that an associate lawyer in his law office prepared and filed
the complaint without his law firm being yet familiar with the incidents in the
intestate proceedings involving the Estate, or with those of the previous three cases
mentioned in the decision of June 13, 2013.11 He posits that such lack of

knowledge of the previous cases shows his good faith, and rules out deliberate
forum shopping on his part and on the part of his law firm.
Rather than prove good faith, the filing of the complaint, “simply guided by the
facts as narrated and the documentary evidence submitted by
petitioners,”12 smacked of professional irresponsibility. It is axiomatic that a
lawyer shall not handle any legal matter without adequate preparation.13 He is
expected to make a thorough study and an independent assessment of the case he is
about to commence. As such, his claim of good faith was utterly baseless and
unfounded.
Moreover, laying the blame on the associate lawyer is not plausible. Any client
who employs a law firm undeniably engages the entire law firm,14 not a particular
member of it. Consequently, it was not only the associate lawyer but the entire law
firm, Atty. Mahinay included, who had presumably prepared the complaint. For
Atty. Mahinay to insist the contrary is the height of professional irresponsibility.
Even assuming that Atty. Mahinay did not himself prepare the complaint, it
remains that he subsequently personally handled the case. In so doing, he had
sufficient time to still become fully acquainted with the previous cases and their
incidents, and thereby learn in the due course of his professional service to the
petitioners that the complaint in Civil Case No. CEB–24293 was nothing but a
replication of the other cases. Under the circumstances, the Rules of Court and the
canons of professional ethics bound him to have his clients desist from pursuing
the case. Instead, he opted to re–litigate the same issues all the way up to this
Court.
Thirdly, Atty. Mahinay states that his filing of the Motion To Refer Or Consolidate
The Instant Case With The Proceedings In The Intestate Estate Of Filemon Sotto
Before RTC Branch XVI In SP Proc. No. 2706–R15 disproved deliberate forum
shopping on his part.
The Court disagrees. Atty. Mahinay’s filing of the Motion To Refer Or Consolidate
The Instant Case With The Proceedings In The Intestate Estate Of Filemon Sotto
Before RTC Branch XVI In SP Proc. No. 2706–Rindicated that he relentlessly
pursued the goal of taking away the properties from Palicte in disregard of the
rulings in the earlier cases. We note that the dismissal of the complaint in Civil
Case No. CEB–24293 on November 15, 199916 prompted Atty. Mahinay to file a
motion for reconsideration on December 3, 1999.17 But he did not await the
144
resolution of the motion for reconsideration, and instead filed the Motion To Refer
Or Consolidate The Instant Case With The Proceedings In The Intestate Estate Of
Filemon Sotto Before RTC Branch XVI In SP Proc. No. 2706–R on May 9, 2000
obviously to pre–empt the trial court’s denial of the motion.18 His actuations did
not manifest good faith on his part. Instead, they indicated an obsession to transfer
the case to another court to enable his clients to have another chance to obtain a
favorable resolution, and still constituted deliberate forum shopping.
And, lastly, Atty. Mahinay argues that his assisting the Administrator of the Estate
in filing the Motion to Require Matilde Palicte To Turn Over And/or Account
Properties Owned by the Estate in Her Possession, wherein he disclosed the
commencement of Civil Case No. CEB–24293, and extensively quoted the
allegations of the complaint, disproved any forum shopping. He insists that his
disclosure of the pendency of Civil Case No. CEB–24293 proved that forum
shopping was not in his mind at all.
The insistence cannot command belief. The disclosure alone of the pendency of a
similar case does not negate actual forum shopping. Had Atty. Mahinay been
sincere, the least he could have done was to cause the dismissal of the action that
replicated those already ruled against his clients. The records show otherwise. The
filing of the Motion to Require Matilde Palicte To Turn Over And/or Account
Properties Owned by the Estate in Her Possession on June 7, 2000, a day after the
trial court denied his motion for reconsideration in Civil Case No. CEB–24293,
was undeniably another attempt of the petitioners and Atty. Mahinay to obtain a
different resolution of the same claim. Needless to observe, the motion reiterated
the allegations in Civil Case No. CEB–24293, and was the subject of the petition
in The Estate of Don Filemon Y. Sotto vs. Palicte.19
The acts of a party or his counsel clearly constituting willful and deliberate forum
shopping shall be ground for the summary dismissal of the case with prejudice, and
shall constitute direct contempt, as well as be a cause for administrative sanctions
against the lawyer.20 Forum shopping can be committed in either of three ways,
namely: (1) filing multiple cases based on the same cause of action and with the
same prayer, the previous case not having been resolved yet (litis pendentia); (2)
filing multiple cases based on the same cause of action and the same prayer, the
previous case having been finally resolved (res judicata); or (3) filing multiple
cases based on the same cause of action but with different prayers (splitting of
causes of action, where the ground for dismissal is also either litis pendentia or res
judicata). If the forum shopping is not willful and deliberate, the subsequent cases

shall be dismissed without prejudice on one of the two grounds mentioned above.
But if the forum shopping is willful and deliberate, both (or all, if there are more
than two) actions shall be dismissed with prejudice.21
In view of the foregoing, Atty. Mahinay was guilty of forum shopping. Under
Revised Circular No. 28–91,22 any willful and deliberate forum shopping by any
party and his counsel through the filing of multiple petitions or complaints to
ensure favorable action shall constitute direct contempt of court. Direct contempt
of court is meted the summary penalty of fine not exceeding P2,000.00.23
WHEREFORE, the Court FINDS and PRONOUNCES ATTY. MAKILITO B.
MAHINAY guilty of forum shopping; and ORDERS him to pay to this Court,
through the Office of the Clerk of Court, a FINE of P2,000.00 within fifteen (15)
days from notice hereof.
UA vs Wallem Phils Shipping
1. Civil Procedure; Appeals; Certiorari; Power to review the evidence in view of
the conflicting findings of fact made by the trial court and the appellate court.-
Although this Court’s jurisdiction in a petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure is limited to the review of errors of law,
we are constrained to review the evidence in view of the conflicting findings of
fact made by the trial court and the appellate court.
WALLEM PHILIPPINES SHIPPING INC. and SEACOAST MARITIME
CORPORATION, petitioners, vs. PRUDENTIAL GUARANTEE &
ASSURANCE INC. and COURT OF APPEALS, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision, dated January 31, 2001,
and resolution, dated February 14, 2002, of the Court of Appeals,[1] which
145
reversed the decision, dated September 21, 1995, of the Regional Trial Court,
Branch 134, Makati City in Civil Case No. 91-1053, entitled Prudential Guarantee
& Assurance Inc. v. Wallem Philippines Shipping Inc. and Seacoast Maritime
Corporation.
The background of this case is as follows:
On April 17, 1991, private respondent Prudential Guarantee & Assurance Inc.
(Prudential) brought an action for damages and attorneys fees against Wallem
Philippines Shipping, Inc. (Wallem) and Seacoast Maritime Corporation
(Seacoast). The complaint was filed with the Regional Trial Court of Makati City,
where it was docketed as Civil Case No. 91-1053, and assigned to Branch 134
thereof. Private respondent Prudential sought the recovery of the sum
of P995,677.00, representing the amount it had paid to its insured, General Milling
Corporation (GMC), for alleged shortage incurred in the shipment of Indian
Toasted Soyabean Extraction Meal, Yellow, with 6% legal interest thereon from
the date of filing of the complaint up to and until the same is fully paid, and 25% of
the claim as attorneys fees.[2]
In its answer, Wallem denied liability for damage or loss to the shipment. It was
alleged that the complaint did not state a cause of action against it; that Prudential,
Wallem, and Seacoast were not the real parties-in-interest; that the action had
prescribed; that the damage or loss, if any, was due to the inherent vice or defect of
the goods, or to perils, dangers, and accidents of the sea, for which Wallem was not
liable; that the damage or loss to the shipment was due to an act or omission of
Prudential or the owner of the goods or their representative, or to pre-shipment
damage, for which Wallem was not liable; that the shipment was carried on a
shippers description of packages and contents, said to weigh, in bulk, and free out
basis; that based on the provisions of the bill of lading, Prudential had the burden
of proving the actual quantity of cargo loaded at the loading port; that Prudential
had no contract with Wallem, which acted as a mere agent of a disclosed principal;
that Wallem had observed the diligence required under the law in the care of the
shipment; that the shipment was discharged in the same quantity as when it was
loaded at the port of loading; that any loss incurred during and after discharge from
the vessel was no longer the responsibility of the carrier; that Wallem could not be
made liable for the loss or damage, if any, of the goods which happened whilst the
same were not in its possession and control; that Prudentials claim was excessive
and exaggerated; that Wallems liability, if any, should not exceed the invoice value

of the alleged loss or the applicable package limitation, whichever was lower, or
the limit of liability set in the bill of lading.
Wallem filed a compulsory counterclaim against Prudential as the complaint was
allegedly a clearly unfounded civil action. Wallem filed a crossclaim against its co-
defendant Seacoast, in the event that it was made liable to Prudential.[3] Upon
motion of Prudentials counsel, defendant Seacoast was declared in default.[4] After
termination of the pre-trial conference, this case was tried on the merits.
To prove its claim for indemnity, Prudential presented two witnesses: Josephine
Suarez and Alfredo Cunanan.
Josephine Suarez, the claims processor of Prudential, testified that in March 1991
she received a claim from GMC in connection with its shipment which arrived on
board M/V Gao Yang (Exh. A). Upon receipt of the claim and its supporting
papers, she referred the same to Tan-Gatue Adjustment Company, Inc. (Tan-
Gatue), which submitted a report (Exhs. G to G-8). Upon her recommendation,
Prudential paid GMC the sum of P995,677.09, as evidenced by receipts and a
voucher (Exhs. H, I, and K). GMC then issued a subrogation receipt to Prudential
(Exh. J), which in turn sent a demand letter to Wallem (Exh. L).
On cross-examination, Ms. Suarez admitted that she had no participation in the
preparation of the documents (Exhs. A to G) submitted to her, and that she had
based her recommendation to pay GMCs claim on said documents. She also
admitted that she did not do anything to verify the genuineness of Bill of Lading
BEDI/1(Exh. B) and Commercial Invoice No. 1401 (Exh. C). She said that GMC
had been paid 20% more than its alleged loss.[5]
Alfredo Cunanan, senior cargo surveyor of Tan-Gatue declared that he conducted
in March 1990 a survey of the shipment on board M/V Gao Yang at GMCs
warehouse at Tabangao, Batangas. Cunanan was present during the unloading of
the shipment. He saw the cargo discharged from the vessel by the use of a suction
device, wherein the cargo passed into a conveyor and weighed unto GMCs
automatic scale. The quantity recorded on GMCs scale was thereafter compared
with that indicated in the bill of lading. At that point a shortage was
discovered. The survey report prepared by Cunanan stated in pertinent part:
RECAPITULATION
1) Shipment Per Stowage Plan - 4,417.000 M/Tons
146
Outturn Per Consignees
Scale - 4,121.318 M/Tons
Shortage - 295.682 M/Tons
2) Shipment Per Bill of Lading - 4,415.350 M/Tons
Outturn Per Consignees
Scale - 4,121.318 M/Tons
Shortage - 294.032 M/Tons[6]
On cross-examination, Cunanan testified that no cargo was left on the M/V Gao
Yang after the discharging process. He admitted that his basis for determining the
weight of the shipment prior to unloading was the Certificate of Weight (Exh. F-3)
furnished by GMC, as to which preparation he did not participate. He further
explained that, as per the Certificate of Weight, the cargo had been packed in bags
at the port of origin. The bags were then conveyed to midstream in barges
alongside the vessel and hauled up onto the steamer. The bags were later cut open
at their mouths and the contents emptied onto the ships storage areas, specifically
Hatch Nos. One Lower Hold, One Tween Deck, Five Lower Hold, Five Tween
Deck, Two Tween Deck, and Four Tween Deck.[7] He also admitted that the lack
of a draft survey due to the absence of a surveyor appointed by Wallem was based
merely on information gathered from one of his surveyors.
In the course of the discharging and weighing operations, one of Tan-Gatues
assigned surveyors registered a protest as there were blurred notations on GMCs
weighing scale. They found that the scale had not been properly calibrated and that
it showed a discrepancy of approximately 130 metric tons. Upon recommendation
of Tan-Gatue, a reweighing was done on April 26, 1990 with the use of another
scale. Wallems representative was not notified of this reweighing, which was made
by loading the cargo on the truck for delivery to consignees receivers. Reloading
on the trucks was also made through the use of a suction tube. An alleged shortage
of 164.4 metric tons was found, which was significantly lower than the shortage
stated in the recapitulation above.[8]
Part of Cunanans report contained an opinion stating that the shortage may be
attributed to the spillage incurred during the transit and loading of the shipment to

the vessel at the port of origin for the following reasons: (1) the said shipment was
originally packed in bags prior to loading to carrier vessel; (2) the weighing of the
said shipment made prior to its loading to the carrier vessel became the basis of the
quantity stated in the bill of lading; and (3) the bagged shipment, after weighing
over the weighbridge scale, was conveyed to midstream in barges alongside the
vessel and hauled up onto the steamer, after which the mouths of the bags were cut
open and the contents emptied into ship hatches.[9]
After weighing in Batangas, the bagged shipment was delivered to GMCs
warehouse in Bo. Ugong, Pasig, Metro Manila, and to Filstream and Universal
Robina Corp., as direct receivers of GMC.[10] Because of the shortage, GMC filed
a claim against Prudential, being its insurer.
For its part, petitioner Wallem, as defendant below, presented three
witnesses: Romualdo De Belen, manager of its documentations department, Rio
Puriran, marine cargo surveyor of Oceanica Cargo Marine Surveyor (Oceanica),
and Edilberto Mendoza, Wallems operations manager.
Romualdo De Belen testified that he was the claims supervisor for Wallem from
January 1991 to August 1991. As such, he was tasked to gather all documents of a
claim and to submit them to the Protective and Indemnity Club (P&I), which in
turn handles all claims pertaining to a vessel which is a member thereof. In
connection with the claim subject matter of this case, De Belen collected the
pertinent documents, like the bill of lading (Exh. 1), the general statement of facts
(Exhs. 2 and 2-A), the survey certificate (Exhs. 3 and 3-A), and the inward foreign
manifest (Exh. 4).[11]
After his investigation, he found that the weight stated in the bill of lading was less
than what was actually discharged. The bill of lading stated that the weight of the
cargo was 4,415 metric tons, but the actual weight discharged was 4,418 metric
tons. The overage was based on the bill of lading, which contained the weight as
declared by the shipper, and the survey certificate, which contained the weight of
the total cargo discharged representing the difference between the initial and final
displacement of the vessel.[12]
De Belen noted that the bulk cargo declared in the bill of lading was said to weigh
4,415.35 metric tons. He explained that the phrase said to weigh means that
nobody really knows the actual weight of the cargo; the weight of the cargo written
147
on the bill of lading and on the manifest being based only on the declaration of the
shipper.[13]
On cross-examination, De Belen admitted that he collected the documents
respecting GMCs claim only upon receipt of the summons in this case. He also
stated that he based his finding of overage on the survey certificate (Exh. 3).[14]
Rio Puriran, an employee of Oceanica, described the procedure in preparing the
draft survey which would become the basis for the survey certificate. He testified
that the draft mark is taken and the known cargo weight is sounded so that the
displacement of the ship may be computed and the weight of the cargo unloaded
known. He identified the signatures of Cornelio Damaso, Oceanicas operations
manager, and Arnel Plaza, the surveyor assigned to the vessel on the survey
certificate (Exh. 3-A). On cross-examination, he admitted that he had no
participation in conducting the survey covered by the survey certificate marked as
Exhibits 3 to 3-A.[15]
Edilberto Mendoza, Wallems operations manager, declared that a representative
was sent to oversee the discharging of its cargo when the M/V Gao Yang arrived in
Batangas. He tendered a Notice of Readiness (Exh. 6) to GMC and assigned
Oceanica to conduct a draft survey and issue a survey certificate (Exhs. 3 to 3-
B). The unloading of the cargo was undertaken by GMC per the free out notation
on the bill of lading (Exh. 1-A). Mendoza stated that free out means that the vessel
is free from any expenses and discharging operations for the cargo. It is the cargo
receiver who has the responsibility to get their cargo. After discharge of the cargo,
Wallems representative prepared a general statement of facts (Exhs. 5 and 5-
A).[16]
On cross-examination, Mendoza admitted that he was not present when the cargo
was discharged from the vessel and that he had no participation in the preparation
of the general statement of facts (Exhs. 5 to 5-A) and the notice of readiness (Exh.
6).[17]
The trial court resolved whether there was indeed a shortage in the shipment and
whether Wallem could be held liable for the shortage.[18] The trial court ruled that
private respondent Prudential failed to prove by clear, convincing, and competent
evidence that there was a shortage in the shipment. The trial court said that private
respondent Prudential failed to establish by competent evidence the genuineness
and due execution of the bill of lading and, therefore, the true and exact weight of

the shipment when it was loaded unto the vessel. Hence, there was no way by
which a shortage could be determined. The trial court ruled that the shortage, if
any, could only have been incurred either before the loading of the shipment, as
stated in the final report (Exhs. G to G-8), or after the unloading of the shipment
from the vessel, the latter instance being admitted by Prudentials own witness, Mr.
Alfredo Cunanan. Accordingly, the trial court dismissed both the complaint and the
counterclaim.
On appeal, the Court of Appeals reversed. The dispositive portion of its decision
reads:
WHEREFORE, judgment is hereby rendered REVERSING the appealed
decision. A new one is entered ordering defendants-
appellees Wallem and Seacoast to pay, jointly and severally, plaintiff-
appellant Prudential the amount of P796,541.672, plus 6% interest from April 17,
1991, date of filing of the complaint, until fully paid, plus costs of the suit.
SO ORDERED.[19]
The Court of Appeals ruled that the bill of lading was prima facie evidence of the
goods therein described, both notations said to contain and weight unknown on the
bill of lading being inapplicable to shipments in bulk. Contrary to the opinion of
the trial court, it was ruled by the appeals court that losses were incurred during the
loading operations, and that these losses were the liability of the carrier. Finally,
the Court of Appeals held that the principle of indemnity is violated if the insured
is paid a benefit more than the loss incurred in the light of the admission of a 20%
mark-up on the indemnity paid to GMC.
Petitioner Wallem moved for reconsideration, but its motion was
denied.[20] Hence, this appeal.
Petitioner contends that the Court of Appeals erred-
I WHEN IT HELD THAT THE QUANTITY OF THE CARGO REFLECTED IN
THE BILL OF LADING IS CONCLUSIVE AS TO THE ACTUAL CARGO OF
THE CONSIGNEE NOTWITHSTANDING THE FACT THAT SAID CARGO
WAS SHIPPED ON A SAID TO WEIGH BASIS. SAID DECISION IS
CONTRARY TO ESTABLISHED PRINCIPLES IN MARITIME LAW AND
SEC. 11 OF THE CARRIAGE OF GOODS BY SEAS ACT WHERE IT IS
STATED THAT:
148
When under the custom of any trade the weight of any bulk cargo inserted in the
bill of lading is a weight ascertained or accepted by a third party other than the
carrier or the shipper and the fact that the weight as ascertained or accepted is
stated in the bill of lading, then notwithstanding anything in this Act, the bill of
lading shall not be deemed prima facie evidence against the carrier of the receipt of
goods of the weight so inserted in the bill of lading, and the accuracy thereof at the
time of shipment shall not be deemed to have been guaranteed by the shipper.
I.A IN DISREGARDING THE WELL ESTABLISHED PRINCIPLE IN
ADMIRALTY LAW THAT THE BURDEN OF PROOF RESTS ON THE
PLAINTIFF THAT THE WEIGHT OR QUANTITY ALLEGED HAD IN FACT
BEEN SHIPPED, OTHERWISE, THE DEFENDANT IS UNDER NO
OBLIGATION TO PROVE HIS EXCEPTION OR DEFENSE AS HELD IN THE
CASE OF BELEN VS. BELEN, 13 PHIL. 202.
I.B IN RULING THAT THE PRINCIPLE ON PRESUMED NEGLIGENCE IS
APPLICABLE IN THIS CASE CONSIDERING THAT THE FACT OF
SHORTAGE WAS NEVER DULY PROVEN. AS HELD IN PLANTERS
PRODUCTS, INC. VS. CA, 226 SCRA 476, IT IS ONLY AFTER THE SHIPPER
HAS ESTABLISHED LOSS OF CARGO WHILE IN THE CUSTODY OF THE
VESSEL WILL THE BURDEN OF PROOF SHIFT TO THE COMMON
CARRIER FOR IT TO PROVE THAT IT HAS EXERCISED
EXTRAORDINARY DILIGENCE IN THE TRANSPORTATION OF GOODS
OR THAT THE LOSS WAS UNDER THE EXCEPTIONS PROVIDED BY
LAW.
II. IN RULING THAT THE SHORTAGE WAS ATTRIBUTABLE TO THE
FAULT OF HEREIN PETITIONER CONTRARY TO THE EVIDENCE
PRESENTED WHICH WAS MADE AS BASIS FOR THE TRIAL COURTS
DECISION. MOREOVER, THE HONORABLE COURT OF APPEALS
GRAVELY ERRED WHEN IT STATED THAT THERE WAS NO LOSS THAT
OCCURRED DURING THE DISCHARGING OPERATIONS. AS CORRECTLY
POINTED OUT BY THE TRIAL COURT IN ITS DECISION, THE
SHORTAGE, IF ANY, WAS OCCASIONED DURING THE DISCHARGING
OPERATIONS CITING AS BASIS HEREIN RESPONDENTS OWN WITNESS.
III. IN GRANTING RELIEF TO RESPONDENT-INSURER WHEN THE
LATTER FAILED TO ESTABLISH HIS RIGHT OF ACTION AGAINST
HEREIN PETITIONER THROUGH CONVINCING AND COMPETENT

EVIDENCE AS THE ORIGINAL OF THE INSURANCE POLICY WAS NEVER
PRESENTED IN COURT. SAID RULING RUNS COUNTER TO THE CASE
OF HOME INSURANCE CORPORATION VS. CA, 225 SCRA 411 WHERE
THIS HONORABLE COURT HELD THAT:
The insurance contract has not been presented. It may be assumed for the sake of
argument that the subrogation receipt may nevertheless be used to establish the
relationship between the petitioner and the consignee and the amount paid to settle
the claim. But that is all the document can do. By itself alone, the subrogation
receipt is not sufficient to prove the petitioners claim x x x
It is curious that the petitioner disregarded this rule, knowing that the best evidence
of the insurance contract was its original copy, which was presumably in the
possession of Home itself.Failure to present this original (or even a copy of it), for
reasons the Court cannot comprehend, must prove fatal to this petition.
We find petitioners contentions to be meritorious.
First. Although this Courts jurisdiction in a petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure is limited to the review of errors of
law, we are constrained to review the evidence in view of the conflicting findings
of fact made by the trial court and the appellate court.[21]
The trial court held that private respondent Prudential failed to prove by clear,
convincing, and competent evidence that there was a shortage in the
shipment. Hence, petitioner Wallem could not be held liable for the indemnity paid
by Prudential to GMC. Prudentials own witnesses admitted that they had no
participation in the preparation of the documents upon which they base their
claim. They even testified that the loss, if indeed there was any, might have been
due to the loading process or by the unloading operations conducted by
GMC. However, the Court of Appeals ruled that on the basis of the weight stated
on the bill of lading, there was indeed a shortage, and held that the loss was caused
in the loading process alone.
We find that the Court of Appeals erred in finding that a shortage had taken
place. Josephine Suarez, Prudentials claims processor, merely identified the papers
submitted to her in connection with GMCs claim (Bill of Lading BEDI/1 (Exh. B),
Commercial Invoice No. 1401 issued by Toepfer International Asia Pte, Ltd. (Exh.
C), SGS Certificate of Quality (Exh. F-1), and SGS Certificate of Weight (Exh. F-
149
3)). Ms. Suarez had no personal knowledge of the contents of the said documents
and could only surmise as to the actual weight of the cargo loaded on M/V Gao
Yang. She admitted that she had no participation in the preparation of the papers
upon which Prudential based its cause of action against Wallem.
ATTY. DEL ROSARIO ON CROSS-EXAMINATION
Q Miss Witness, I would like to refer you to Exhibits A, B, C, will you please tell
us Madam Witness, if you have any participation in the preparation of these
documents?
A No sir.
Q How about Exhibits E, G, and F, did you have any participation in the
preparation of these documents?
A No sir.
Q And in fact these documents were just given to you, is that correct?
A Yes sir.
Q And based on these documents, you made a recommendation for the payment of
the claim of your assured, is that correct?
A Yes sir.[22]
Ms. Suarezs testimony regarding the contents of the documents is thus hearsay,
based as it is on the knowledge of another person not presented on the witness
stand.[23]
Nor has the genuineness and due execution of these documents been established. In
the absence of clear, convincing, and competent evidence to prove that the
shipment indeed weighed 4,415.35 metric tons at the port of origin when it was
loaded on the M/V Gao Yang, it cannot be determined whether there was a
shortage of the shipment upon its arrival in Batangas.
Second. The Court of Appeals erred in ruling that the contents of the bill of lading
cannot be controverted by evidence to the contrary because it was prima facie
evidence of the goods therein described. Wallems evidence casts doubt on the

veracity of the documents upon which Prudential bases its claim. As the Private
and Confidential Final Report, dated October 12, 1990 (Exhs. G to G-8), stated:
[W]e are of the opinion that [the] shortage may be attributed to the spillage
incurred during the transit/loading of the shipment to the vessel at the Port of
Origin for the following reasons:
1. The said shipment was originally packed in bags prior to loading to carrier
vessel.
2. The weighing was made prior to loading to carrier vessel which is the basis of
the Bill of Lading quantity.
3. The bag[ged] shipment, after weighing over [the] weighbridge scale, [was]
conveyed to midstream alongside vessel in barges, hauled up on the [steamer], cut
open the mouth[s] of the bags and [the] contents emptied into ship hatches.[24]
There could have been no spillage while the shipment was on board the vessel
because, according to Prudentials witness Cunanan, the hatches were
closed.[25] Moreover, it was shown that, after the shipment was unloaded from the
vessel, it was weighed with the use of GMCs weighing scale, which was later
found to be defective. Cunanan stated in his report:
During the course of discharging/weighing operation, we noted some minor
discrepancy on the weighing scale, hence, we registered our protest.
We suggest to the assured to conduct another reweighing to determine the correct
quantity of the soyabean meal unloaded from the vessel.[26]
Cunanan later testified:
Q And based on this blurred notations, you presumed that there was something
wrong in the weighing scale, is that correct?
A It is a minor discrepancy sir, on the weighing scale.
Q And by minor discrepancy, you are actually referring to about 130.000 metric
tons discrepancy?
A 130 metric tons discrepancy, more or less.
150
....
Q And how was the reweighing made Mr. Cunanan?
A The reweighing was made by truck because the cargo was unloaded from the
vessel, and it was stored in the big storage, storage of the consignee. Now, after
hearing our protest, that there are some minor discrepancy on the weighing scale,
we suggest for a reweighing.
The reweighing was made by loading this cargo on board the truck for delivery to
their receivers or to the consignees in Manila.
....
Q In the conveyors, did you see any spillages, on the sides, as far as these cargoes
are concerned?
A There were sir, but they were also removed and weighed.
Q And these spillages were also accumulated and made part of the cargo?
A Thats correct sir.
....
Q During the reweighing procedure, during loading to trucks, these trucks were
open?
A Yes sir, they were open.
Q And the tarpaulin placed only after the trucks are full?
A Thats correct, sir.[27]
Indeed, it is likely that there was again spillage of the shipment when it was
reweighed after its unloading in the same manner that there was spillage when the
shipment was unloaded from the vessel. It should also be noted that the reweighing
was conducted only on April 26, 1990, five days after the shipment was put in the
storage of the consignee.
 151

Indeed, as the bill of lading indicated that the contract of carriage was under a said
to weigh clause, the shipper is solely responsible for the loading while the carrier is
oblivious of the contents of the shipment.[28]

Third. Even if the shortage can be definitively determined, Wallem still cannot be
held liable because of the failure of Prudential to present the contract of insurance
or a copy thereof.Prudential claims that it is subrogated to the rights of GMC
pursuant to their insurance contract. For this purpose, it submitted a subrogation
receipt (Exh. J) and a marine cargo risk note (Exh. D). However, as the trial court
pointed out, this is not sufficient. As GMCs subrogee, Prudential can exercise only
those rights granted to GMC under the insurance contract. The contract of
insurance must be presented in evidence to indicate the extent of its coverage. As
there was no determination of rights under the insurance contract, this Courts
ruling in Home Insurance Corporation v. Court of Appeals[29] is applicable:

The insurance contract has not been presented. It may be assumed for the sake of
argument that the subrogation receipt may nevertheless be used to establish the
relationship between the petitioner [Home Insurance Corporation] and the
consignee [Nestl Phil.] and the amount paid to settle the claim. But that is all the
document can do. By itself alone, the subrogation receipt is not sufficient to prove
the petitioners claim holding the respondent [Mabuhay Brokerage Co., Inc.] liable
for the damage to the engine.

....

It is curious that the petitioner disregarded this rule, knowing that the best evidence
of the insurance contract was its original copy, which was presumably in the
possession of Home itself. Failure to present this original (or even a copy of it), for
reasons the Court cannot comprehend, must prove fatal to this petition.

WHEREFORE, the decision and resolution of the Court of Appeals is REVERSED

and the decision of the Regional Trial Court, Branch 134, Makati City, dismissing
the complaint and the counterclaim, is REINSTATED. No pronouncement as to
costs.