C. PARTIES TO CIVIL ACTIONS
1. RELUCIO V. LOPEZ
Angelina Mejia Lopez (plaintiff below) filed a petition for APPOINTMENT AS SOLE
ADMINISTRATRIX OF CONJUGAL PARTNERSHIP OF PROPERTIES,
FORFEITURE, ETC., against defendant Alberto Lopez and petitioner Imelda Relucio
in the Regional Trial Court of Makati, In the petition, private-respondent alleged that
sometime in 1968, defendant Lopez, who is legally married to the private respondent,
abandoned the latter and their four legitimate children; that he arrogated unto himself
full and exclusive control and administration of the conjugal properties, spending and
using the same for his sole gain and benefit to the total exclusion of the private
respondent and their four children; that defendant Lopez, after abandoning his family,
maintained an illicit relationship and cohabited with herein petitioner since
1976.
In order to avoid defendant Lopez obligations as a father and husband, he excluded
the private respondent and their four children from sharing or benefiting from the
conjugal properties and the income or fruits there from. As such, defendant Lopez
either did not place them in his name or otherwise removed, transferred, stashed
away or concealed them from the private-respondent. He placed substantial portions
of these conjugal properties in the name of petitioner Relucio.
It was also averred that in the past twenty five years since defendant Lopez
abandoned the private-respondent, he has sold, disposed of, alienated, transferred,
assigned, canceled, removed or stashed away properties, assets and income
belonging to the conjugal partnership with the private-respondent and either spent the
proceeds thereof for his sole benefit and that of petitioner Relucio and their two
illegitimate children or permanently and fraudulently placed them beyond the reach of
the private-respondent and their four children.
On December 8, 1993, a Motion to Dismiss the Petition was filed by herein petitioner
on the ground that private respondent has no cause of action against her.
On May 31, 1996, the Court of Appeals promulgated a decision denying the petition.
ISSUE: Whether respondents petition for appointment as sole administratrix of the
conjugal property, accounting, etc. against her husband Alberto J. Lopez established
a cause of action against petitioner?
HELD: NO.
First issue: whether a cause of action exists against petitioner in the proceedings
below. A cause of action is an act or omission of one party the defendant in violation
of the legal right of the other.i[10] The elements of a cause of action are:
(1) a right in favor of the plaintiff by whatever means and under whatever law it
arises or is created;
(2) an obligation on the part of the named defendant to respect or not to violate
such right; and
(3) an act or omission on the part of such defendant in violation of the right of
the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff
for which the latter may maintain an action for recovery of damages.ii[11]
A cause of action is sufficient if a valid judgment may be rendered thereon if the
alleged facts were admitted or proved.iii[12]
In order to sustain a motion to dismiss for lack of cause of action, the complaint must
show that the claim for relief does not exist, rather than that a claim has been merely
defectively stated or is ambiguous, indefinite or uncertain.iv[13]
Hence, to determine the sufficiency of the cause of action alleged in Special
Proceedings M-3630, we assay its allegations.
In Part Two on the Nature of [the] Complaint, respondent Angelina Mejia Lopez
summarized the causes of action alleged in the complaint below.
The complaint is by an aggrieved wife against her husband.
Nowhere in the allegations does it appear that relief is sought against petitioner.
Respondents causes of action were all against her husband.
The first cause of action is for judicial appointment of respondent as administratrix of
the conjugal partnership or absolute community property arising from her marriage to
Alberto J. Lopez. Petitioner is a complete stranger to this cause of action. Article 128
of the Family Code refers only to spouses, to wit:
If a spouse without just cause abandons the other or fails to comply with his or her
obligations to the family, the aggrieved spouse may petition the court for receivership,
1
for judicial separation of property, or for authority to be the sole administrator of the
conjugal partnership property xxx
The administration of the property of the marriage is entirely between them, to the
exclusion of all other persons. Respondent alleges that Alberto J. Lopez is her
husband. Therefore, her first cause of action is against Alberto J. Lopez. There
is no right-duty relation between petitioner and respondent that can possibly
support a cause of action. In fact, none of the three elements of a cause of
action exists.
The second cause of action is for an accounting by respondent husband.v[14] The
accounting of conjugal partnership arises from or is an incident of marriage.
Petitioner has nothing to do with the marriage between respondent Alberto J. Lopez.
Hence, no cause of action can exist against petitioner on this ground.
Respondents alternative cause of action is for forfeiture of Alberto J. Lopez share in
the co-owned property acquired during his illicit relationship and cohabitation with
[petitioner]vi[15] and for the dissolution of the conjugal partnership of gains between
him [Alberto J. Lopez] and the [respondent].
The third cause of action is essentially for forfeiture of Alberto J. Lopez share in
property co-owned by him and petitioner. It does not involve the issue of validity of
the co-ownership between Alberto J. Lopez and petitioner. The issue is whether there
is basis in law to forfeit Alberto J. Lopez share, if any there be, in property co-owned
by him with petitioner.
Respondents asserted right to forfeit extends to Alberto J. Lopez share alone. Failure
of Alberto J. Lopez to surrender such share, assuming the trial court finds in
respondents favor, results in a breach of an obligation to respondent and gives rise
to a cause of action.vii[16] Such cause of action, however, pertains to Alberto J.
Lopez, not petitioner.
The respondent also sought support. Support cannot be compelled from a stranger.
2. DECASTRO V CA
FACTS: private respondent Francisco Artigo (Artigo for brevity) sued
petitioners Constante A. De Castro (Constante for brevity) and Corazon A. De
Castro (Corazon for brevity) to collect the unpaid balance of his brokers
commission from the De Castros.
Appellantsviii[5] were co-owners of four (4) lots located at EDSA corner New
York and Denver Streets in Cubao, Quezon City. In a letter dated January 24,
1984 (Exhibit A-1, p. 144, Records), appelleeix[6] was authorized by appellants
to act as real estate broker in the sale of these properties for the amount of
P23,000,000.00, five percent (5%) of which will be given to the agent as
commission. It was appellee who first found Times Transit Corporation,
represented by its president Mr. Rondaris, as prospective buyer which desired
to buy two (2) lots only, specifically lots 14 and 15. Eventually, sometime in
May of 1985, the sale of lots 14 and 15 was consummated. Appellee received
from appellants P48,893.76 as commission.
It was then that the rift between the contending parties soon emerged. Appellee
apparently felt short changed because according to him, his total commission should
be P352,500.00 which is five percent (5%) of the agreed price of P7,050,000.00 paid
by Times Transit Corporation to appellants for the two (2) lots, and that it was he who
introduced the buyer to appellants and unceasingly facilitated the negotiation which
ultimately led to the consummation of the sale. Hence, he sued below to collect the
balance of P303,606.24 after having received P48,893.76 in advance.
The Court of Appeals affirmed in toto the decision of the trial court. The Court of
Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo to act as agent in
the sale of two lots in Cubao, Quezon City. The handwritten authorization letter signed
by Constante clearly established a contract of agency between Constante and Artigo.
Thus, Artigo sought prospective buyers and found Times Transit Corporation (Times
Transit for brevity). Artigo facilitated the negotiations which eventually led to the sale
of the two lots. Therefore, the Court of Appeals decided that Artigo is entitled to the
5% commission on the purchase price as provided in the contract of agency.
ISSUE: the complaint merits dismissal for failure to implead other co-owners as
indispensable parties
The De Castros argue that Artigos complaint should have been dismissed for failure
to implead all the co-owners of the two lots. The De Castros claim that Artigo always
2
knew that the two lots were co-owned by Constante and Corazon with their other
siblings Jose and Carmela whom Constante merely represented. The De Castros
contend that failure to implead such indispensable parties is fatal to the complaint
since Artigo, as agent of all the four co-owners, would be paid with funds co-owned
by the four co-owners.
The De Castros contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by the courts action in
the litigation, and without whom no final determination of the case can be had.x[7]
The joinder of indispensable parties is mandatory and courts cannot proceed without
their presence.xi[8] Whenever it appears to the court in the course of a proceeding
that an indispensable party has not been joined, it is the duty of the court to stop the
trial and order the inclusion of such party.xii[9]
However, the rule on mandatory joinder of indispensable parties is not applicable to
the instant case.
There is no dispute that Constante appointed Artigo in a handwritten note dated
January 24, 1984 to sell the properties of the De Castros for P23 million at a 5 percent
commission. The authority was on a first come, first serve basis.
3. ORQUIOLA v CA
FACTS: Pura Kalaw Ledesma was the registered owner of Lot 689,
covered by TCT Nos. 111267 and 111266, in Tandang Sora, Quezon
City. This parcel of land was adjacent to certain portions of Lot 707 of
the Piedad Estates, namely, Lot 707-A and 707-B, registered in the
name of Herminigilda Pedro under TCT Nos. 16951 and 16952,
respectively. On October 29, 1964, Herminigilda sold Lot 707-A and
707-B to Mariano Lising who then registered both lots and Lot 707-C in
the name of M.B. Lising Realty and subdivided them into smaller lots.
Certain portions of the subdivided lots were sold to third persons
including herein petitioners, spouses Victor and Honorata Orquiola,
who purchased a portion of Lot 707-A-2, Lot 5, Block 1 of the
subdivision plan (LRC), Psd-42965. The parcel is now #33 Doa Regina
St., Regina Village, Tandang Sora, Quezon City. The other portions
were registered in the name of the heirs of Pedro, heirs of Lising, and
other third persons.
Sometime in 1969, Pura Kalaw Ledesma filed a complaint,
docketed as Civil Case No. Q-12918, with the Regional Trial Court of
Quezon City against Herminigilda Pedro and Mariano Lising for
allegedly encroaching upon Lot 689. During the pendency of the action,
Tandang Sora Development Corporation replaced Pura Kalaw
Ledesma as plaintiff by virtue of an assignment of Lot 689 made by
Ledesma in favor of said corporation. Trial continued for three decades.
On August 21, 1991, the trial court finally adjudged defendants Pedro and Lising
jointly and severally liable for encroaching on plaintiffs land
The Court of Appeals dismissed the petition on January 28, 1999. It
held that as buyers and successors-in-interest of Mariano Lising,
petitioners were considered privies who derived their rights from Lising
by virtue of the sale and could be reached by the execution order in
Civil Case No. Q-12918. Thus, for lack of merit, the petition was ordered
dismissed. [6]
Petitioners motion for reconsideration was denied.
(1) whether the alias writ of execution may be enforced against
petitioners; and (2) whether petitioners were innocent purchasers for
value and builders in good faith.
On the first issue, petitioners claim that the alias writ of execution
cannot be enforced against them. They argue that the appellate court
erred when it relied heavily on our ruling in Vda. de Medina vs. Cruz in [8]
holding that petitioners are successors-in-interest of Mariano Lising,
and as such, they can be reached by the order of execution in Civil
Case No. Q-12918 even though they were not impleaded as parties
thereto. Petitioners submit that Medina is not applicable in this case
3
because the circumstances therein are different from the
circumstances in the present case.
In Medina, the property in dispute was registered under Land
Registration Act No. 496 in 1916 and Original Certificate of Title No.
868 was issued in the name of Philippine Realty Corporation (PRC). In
1949, Benedicta Mangahas and Francisco Ramos occupied and built
houses on the lot without the PRCs consent. In 1959, PRC sold the lot
to Remedios Magbanua.Mangahas and Ramos opposed and instituted
Civil Case No. C-120 to annul the sale and to compel PRC to execute
a contract of sale in their favor. The trial court dismissed the complaint
and ordered Mangahas and Ramos to vacate the lot and surrender
possession thereof to Magbanua. The judgment became final and
executory. When Magbanua had paid for the land in full, PRC executed
a deed of absolute sale in her favor and a new title was consequently
issued in her name. Magbanua then sought the execution of the
judgment in Civil Case No. C-120.This was opposed by petitioner
Medina who alleged that she owned the houses and lot subject of the
dispute. She said that she bought the houses from spouses Ricardo
and Eufrocinia de Guzman, while she purchased the lot from the heirs
of the late Don Mariano San Pedro y Esteban. The latter held the land
by virtue of a Titulo de Composicion Con El Estado Num. 4136, dated
April 29, 1894. In opposing the execution, Medina argued that the trial
court did not acquire jurisdiction over her, claiming that she was not a
party in Civil Case No. C-120, thus, she could not be considered as a
person claiming under Ramos and Mangahas.
When Medina reached this Court, we held that the decision in Civil
Case No. C-120, which had long become final and executory, could be
enforced against petitioner even though she was not a party
thereto. We found that the houses on the subject lot were formerly
owned by Mangahas and Ramos who sold them to spouses de
Guzman, who in turn sold them to Medina. Under the circumstances,
petitioner was privy to the two judgment debtors Mangahas and
Ramos, and thus Medina could be reached by the order of execution
and writ of demolition issued against the two. As to the lot under
dispute, we sustained Magbanuas ownership over it, she being the
holder of a Torrens title. We declared that a Torrens title is generally
conclusive evidence of ownership of the land referred to therein, and a
strong presumption exists that a Torrens title was regularly issued and
valid. A Torrens title is incontrovertible against any informacion
possessoria, or other title existing prior to the issuance thereof not
annotated on the Torrens title. Moreover, persons dealing with property
covered by a Torrens certificate of title are not required to go beyond
what appears on its face.
Medina markedly differs from the present case on major
points. First, the petitioner in Medina acquired the right over the houses
and lot subject of the dispute after the original action was commenced
and became final and executory. In the present case, petitioners
acquired the lot before the commencement of Civil Case No. Q-
12918. Second, the right over the disputed land of the predecessors-
in-interest of the petitioner in Medina was based on a title of doubtful
authenticity, allegedly a Titulo de Composicion Con El Estado issued
by the Spanish Government in favor of one Don Mariano San Pedro y
Esteban, while the right over the land of the predecessors-in-interest of
herein petitioners is based on a fully recognized Torrens title.Third,
petitioners in this case acquired the registered title in their own names,
while the petitioner in Medina merely relied on the title of her
predecessor-in-interest and tax declarations to prove her alleged
ownership of the land.
We must stress that where a case like the present one involves a
sale of a parcel of land under the Torrens system, the applicable rule is
that a person dealing with the registered property need not go beyond
the certificate of title; he can rely solely on the title and he is charged
with notice only of such burdens and claims as are annotated on the
title. It is our view here that the petitioners, spouses Victor and
[9]
4
Honorata Orquiola, are fully entitled to the legal protection of their lot
by the Torrens system, unlike the petitioner in the Medina case who
merely relied on a mere Titulo de Composicion.
Coming now to the second issue, were petitioners purchasers in
good faith and for value? A buyer in good faith is one who buys the
property of another without notice that some other person has a right to
or interest in such property. He is a buyer for value if he pays a full and
fair price at the time of the purchase or before he has notice of the claim
or interest of some other person in the property. The determination of
[10]
whether one is a buyer in good faith is a factual issue which generally
is outside the province of this Court to determine in a petition for
review. An exception is when the Court of Appeals failed to take into
account certain relevant facts which, if properly considered, would
justify a different conclusion. The instant case is covered by this
[11]
exception to the general rule. As found by the Court of Appeals and not
refuted by private respondent, petitioners purchased the subject land in
1964 from Mariano Lising. Civil Case No. Q-12918 was commenced
[12]
sometime in 1969. The Court of Appeals overlooked the fact that the
purchase of the land took place prior to the institution of Civil Case No.
Q-12918. In other words, the sale to petitioners was made before Pura
Kalaw Ledesma claimed the lot. Petitioners could reasonably rely on
Mariano Lisings Certificate of Title which at the time of purchase was
still free from any third party claim. Hence, considering the
circumstances of this case, we conclude that petitioners acquired the
land subject of this dispute in good faith and for value.
The final question now is: could we consider petitioners builders
in good faith? We note that this is the first time that petitioners have
raised this issue. As a general rule, this could not be done. Fair play,
justice, and due process dictate that parties should not raise for the first
time on appeal issues that they could have raised but never did during
trial and even during proceedings before the Court of
Appeals. Nevertheless, we deem it proper that this issue be resolved
[13]
now, to avoid circuitous litigation and further delay in the disposition of
this case. On this score, we find that petitioners are indeed builders in
good faith.
A builder in good faith is one who builds with the belief that the
land he is building on is his, and is ignorant of any defect or flaw in his
title. As earlier discussed, petitioner spouses acquired the land in
[14]
question without knowledge of any defect in the title of Mariano
Lising. Shortly afterwards, they built their conjugal home on said land.
It was only in 1998, when the sheriff of Quezon City tried to execute the
judgment in Civil Case No. Q-12918, that they had notice of private
respondents adverse claim. The institution of Civil Case No. Q-12918
cannot serve as notice of such adverse claim to petitioners since they
were not impleaded therein as parties.
As builders in good faith and innocent purchasers for value,
petitioners have rights over the subject property and hence they are
proper parties in interest in any case thereon. Consequently, private
[15]
respondents should have impleaded them in Civil Case No. Q-
12918. Since they failed to do so, petitioners cannot be reached by the
decision in said case. No man shall be affected by any proceeding to
which he is a stranger, and strangers to a case are not bound by any
judgment rendered by the court. In the same manner, a writ of
execution can be issued only against a party and not against one who
did not have his day in court. Only real parties in interest in an action
are bound by the judgment therein and by writs of execution and
demolition issued pursuant thereto. In our view, the spouses Victor
[16]
and Honorata Orquiola have valid and meritorious cause to resist the
demolition of their house on their own titled lot, which is tantamount to
a deprivation of property without due process of law.
5
D. VENUE OF ACTIONS:
1. PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. v. SCHONFELD
Facts:
In 1997, Pacific Consultants International of Japan (PCIJ), a Japan-based company, decided
to set itself up in the Philippines. In October 1997, respondent (a Canadian citizen) was
employed by PCIJ, through its president, Henrichsen, as Sector Manager of (Pacicon
Philippines, Inc) PPI (PCIJ’s subsidiary in Phil) in its Water and Sanitation Department.
However, PCIJ assigned him as PPI sector manager in the Philippines. His salary was to be
paid partly by PPI and PCIJ. Henrichsen transmitted a letter of employment to respondent in
Canada, requesting him to accept the same and affix his conformity thereto. Respondent made
some revisions in the letter of employment and signed the contract, which he subsequently
sent to Henrichsen. Respondent arrived in the Philippines and assumed his position as
PPI Sector Manager. He was accorded the status of a resident alien. As required by Rule
XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor Code, PPI
applied for an Alien Employment Permit (Permit) for respondent before the Department
of Labor and Employment (DOLE). It appended respondent’s contract of employment
to the application.
On May 5, 1999, respondent received a letter from Henrichsen informing him that his
employment had been
terminated effective August 4, 1999 for the reason that PCIJ and PPI had not been
successful in the water and sanitation sector in the Philippines. However, on July 24, 1999,
Henrichsen, by electronic mail, requested respondent to stay put in his job after August 5, 1999,
until such time that he would be able to report on certain projects and discuss all the
opportunities he had developed. Respondent continued his work with PPI until October 1, 1999.
Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare
from Manila to Canada, and cost of shipment of goods to Canada.
PPI partially settled some of his claims (US$5,635.99), but refused to pay the rest.
Arguments: Petitioners contend that it was the PCIJ which employed respondent as an
employee; it merely seconded him to petitioner PPI in the Philippines, and assigned him to
work in Manila as Sector Manager. Petitioner PPI, being a wholly-owned subsidiary of PCIJ,
was never the employer of respondent. They insist that PCIJ paid respondent’s salaries and
only coursed the same through petitioner PPI. PPI, being its subsidiary, had supervision and
control over respondent’s work, and had the responsibilities of monitoring the "daily
administration" of respondent. Petitioners further contend that, although Henrichsen was both
a director of PCIJ and president of PPI, it was he who signed the termination letter of
respondent upon instructions of PCIJ. This is buttressed by the fact that PCIJ’s letterhead
was used to inform him that his employment was terminated. Petitioners further assert that all
work instructions came from PCIJ and that petitioner PPI only served as a "conduit."
Respondent averred that the absence or existence of a written contract of employment
is not decisive of whether he is an employee of PPI. He said that PPI, through its
president Henrichsen, directed his work/duties as Sector Manager of PPI. He emphasized
that as gleaned from Alien Employment Permit (AEP) No. M-029908-5017 issued to him by
DOLE on February 26, 1999, he is an employee of PPI. It was PPI president Henrichsen who
terminated his employment; PPI also paid his salary. The two corporations have separate and
distinct personalities.
Moreover, under Section 21 of the General Conditions for Employment incorporated in
respondents January 7, 1998 letter of employment, the dispute between respondent and PCIJ
should be settled by the court of arbitration of London. Petitioners claim that the words used
therein are sufficient to show the exclusive and restrictive nature of the stipulation on venue.
Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and
employers, while the Labor Code of the Philippines applies only to Filipino employers and
Philippine-based employers and their employees, not to PCIJ. In fine, the jurisdictions of the
NLRC and Labor Arbiter do not extend to foreign workers who executed employment
agreements with foreign employers abroad, although seconded to the Philippines.[25]
In his Comment,[26] respondent maintains that petitioners raised factual issues in their petition
which are proscribed under Section 1, Rule 45 of the Rules of Court. The finding of the CA that
he had been an employee of petitioner PPI and not of PCIJ is buttressed by his documentary
evidence which both the Labor Arbiter and the NLRC ignored; they erroneously opted to
dismiss his complaint on the basis of the letter of employment and Section 21 of the General
Conditions of Employment. In contrast, the CA took into account the evidence on record and
applied case law correctly.
Issue: Are the factors in determining the existence of an employer-employee relationship
between respondent and petitioner attendant in this case?
Held: Yes.
Ratio: The SC agreed with the conclusion of the CA that there was an employer-employee
relationship between petitioner PPI and respondent using the four-fold test. Jurisprudence is
firmly settled that whenever the existence of an employment relationship is in dispute, four
elements constitute the reliable yardstick:
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employer’s power to control the employee’s conduct.
It is the so-called "control test" which constitutes the most important index of the existence of
the employer-employee relationship– that is, whether the employer controls or has reserved
the right to control the employee not only as to the result of the work to be done but also as to
the means and methods by which the same is to be accomplished. Stated otherwise, an
employer-employee relationship exists where the person for whom the services are performed
6
reserves the right to control not only the end to be achieved but also the means to be used in
reaching such end. The SC quoted the CA: “There is, indeed, substantial evidence on record
which would erase any doubt that the respondent company is the true employer of petitioner.
In the case at bar, the power to control and supervise petitioner’s work performance devolved
upon the respondent company. Likewise, the power to terminate the employment
relationship was exercised by the President of the respondent company.
It is not the letterhead used by the company in the termination letter which controls, but the
person who exercised the power to terminate the employee. It is also inconsequential if
the second letter of employment executed in the Philippines was not signed by the
petitioner. An employer-employee relationship may indeed exist even in the absence of a
written contract, so long as the four elements are all present.
The settled rule on stipulations regarding venue, as held by this Court in the vintage case
of Philippine Banking Corporation v. Tensuan,[31] is that while they are considered valid and
enforceable, venue stipulations in a contract do not, as a rule, supersede the general rule set
forth in Rule 4 of the Revised Rules of Court in the absence of qualifying or restrictive words.
They should be considered merely as an agreement or additional forum, not as limiting venue
to the specified place. They are not exclusive but, rather permissive. If the intention of the
parties were to restrict venue, there must be accompanying language clearly and categorically
expressing their purpose and design that actions between them be litigated only at the place
named by them.[32]
In the instant case, no restrictive words like only, solely, exclusively in this court, in no other
court save , particularly, nowhere else but/except , or words of equal import were stated in the
contract.[33] It cannot be said that the court of arbitration in London is an exclusive venue to
bring forth any complaint arising out of the employment contract.
Petitioners contend that respondent should have filed his Complaint in his place of permanent
residence, or where the PCIJ holds its principal office, at the place where the contract of
employment was signed, in London as stated in their contract. By enumerating possible venues
where respondent could have filed his complaint, however, petitioners themselves admitted
that the provision on venue in the employment contract is indeed merely permissive.
Petitioners insistence on the application of the principle of forum non conveniens must be
rejected. The bare fact that respondent is a Canadian citizen and was a repatriate does not
warrant the application of the principle for the following reasons:
First. The Labor Code of the Philippines does not include forum non conveniens as a ground
for the dismissal of the complaint.[34]
2. BIACO V. COUNTRYSIDE RURAL BANK
Ernesto Biaco, husband of Teresa Biaco, acquired several loans from Philippine Countryside
Rural Bank (PCRB) from 1996 to 1998. To secure the loans, he mortgaged certain property in
favor of the bank. He was able to pay loans from 1996 to 1997 but he defaulted in loans
obtained in 1998 which amounted to more than a million pesos.
Eventually, PCRB filed a complaint for foreclosure against the spouses Biaco. Summons were
issued by the trial judge. The Sherriff served the summons to Ernesto at the latter’s office. No
summons was served to Teresa.
Ernesto did not file a responsive pleading (so did Teresa because she was not aware sans the
summons being served her). The case was heard ex-parte and the spouses were ordered to
satisfy the debt and failure to do so will authorize the Sheriff to auction the mortgaged the
property.
Eventually, the mortgaged property was auctioned for P150k which is not sufficient to cover the
P1 M+ debt. Upon motion by PCRB, a notice of levy was issued against the personal properties
of Teresa to satisfy the deficiency.
It was only at this point that Teresa learned of the previous ex parte proceedings. She then
sought to have the judgment annulled as she now claims that she was deprived of due process
when she did not receive summons; that it was only her husband who received the summons;
that there was extrinsic fraud because her husband deliberately hid the fact of the foreclosure
proceeding.
PRCB argued that the foreclosure proceeding is an action quasi in rem, hence Teresa’s
participation is not required so long as the court acquires jurisdiction over the res which is what
happened in the case at bar; that Teresa cannot invoke extrinsic fraud because such situation
cannot occur in her case because she is a co-defendant of Ernesto.
ISSUE: Whether or not the judgment of the trial court should be annulled.
HELD: Yes. It is admitted that the proceeding is a quasi in rem proceeding and that the
presence of Teresa is not required because the trial court was able to acquire
jurisdiction over the res (mortgaged property). HOWEVER, her constitutional right to
due process is superior over the procedural matters mentioned. Her right to due process
was violated when she did not receive summons. Teresa, as a resident defendant, who does
not voluntary appear in court must be personally served with summons as provided under
Section 6, Rule 14 of the Rules of Court. Even if the action is quasi in rem, personal service of
summons is essential in order to afford her due process. The substituted service made by the
sheriff at her husband’s office cannot be deemed proper service absent any explanation that
efforts had been made to personally serve summons upon her but that such efforts failed.
Further, the order of the trial court compelling Teresa to pay off the debt using her personal
property is a judgment in personam which the court cannot do because it only acquired
jurisdiction over the res and not over the person of Teresa.
7
On the issue of extrinsic fraud, the Court of Appeals, agreeing with PCRB, is correct that there
is none in the case at bar. Extrinsic fraud exists when there is a fraudulent act committed by
the prevailing party outside of the trial of the case, whereby the defeated party was prevented
from presenting fully his side of the case by fraud or deception practiced on him by
the prevailing party. Extrinsic fraud is present where the unsuccessful party had been
prevented from exhibiting fully his case, by fraud or deception practiced on him by
his opponent, as by keeping him away from court, a false promise of a compromise; or where
the defendant never had knowledge of the suit, being kept in ignorance by the acts of
the plaintiff; or where an attorney fraudulently or without authority assumes to represent a party
and connives at his defeat; or where the attorney regularly employed corruptly sells out his
client’s interest to the other side. The above is not applicable in the case of Teresa. It was not
PCRB which made any fraud. It should be noted that spouses Biaco were co-defendants in the
case and shared the same interest.
3. BPI SAVINGS BANK v. SPS. YUJUICO
FACTS:
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 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.
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.
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.
the Makati RTC denied the respondents’ motion for reconsideration for its lack of merit; and held on the
issue of improper venue.
The CA also affirmed the decision with regards to venue.
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 mortgage contract
between them, must necessarily be filed also at the RTC of Manila, not at the RTC of Makati.
ISSUE: Whether or not venue is waivable?
HELD: YES.
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.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 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 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.22 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 non-resident defendant where he may be 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.
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