1.Bernadette S. Bilag, et al. Vs. Estella Ay-ay, et al.; G.R.
No. 189950; April 24, 2017
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the
Decision[2] dated March 19, 2009 and the Resolution[3]dated
September 3, 2009 of the Court of Appeals (CA) in CA-G.R. CV
No. 86266, which set aside the Order[4] dated October 10, 2005 of
the Regional Trial Court of Baguio City, Branch 61 (RTC Br. 61),
and consequently, remanded the case to the latter court for trial.
The Facts
The instant case stemmed from a Complaint[5] dated August 12,
2004 for Quieting of Title with Prayer for Preliminary Injunction
filed by respondents Estela Ay-Ay, Andres Acop, Jr., Felicitas Ap-
Ap, Sergio Ap-Ap, John Napoleon A. Ramirez, Jr., and Ma. Teresa
A. Ramirez (respondents) against petitioners Bernadette S. Bilag,
Erlinda Bilag-Santillan, Dixon Bilag, Reynaldo B. Suello, Heirs of
Lourdes S. Bilag, Heirs of Leticia Bilag-Hanaoka, and Heirs of
Nellie Bilag before the RTC Br. 61, docketed as Civil Case No.
5881-R. Essentially, respondents alleged that Iloc Bilag,
petitioners’ predecessor-in-interest, sold to them separately
various portions of a 159,496-square meter parcel of land
designated by the Bureau of Lands as Approved Plan No. 544367,
Psu 189147 situated at Sitio Benin, Baguio City (subject lands),
and that they registered the corresponding Deeds of Sale[6] with
the Register of Deeds of Baguio City. According to respondents,
Iloc Bilag not only acknowledged full payment and guaranteed
that his heirs, successors-in-interest, and executors are to be
bound by such sales, but he also caused the subject lands to be
removed from the Ancestral Land Claims. Respondents further
alleged that they have been in continuous possession of the said
lands since 1976 when they were delivered to them and that they
have already introduced various improvements thereon. Despite
the foregoing, petitioners refused to honor the foregoing sales by
asserting their adverse rights on the subject lands. Worse, they
continued to harass respondents, and even threatened to
demolish their improvements and dispossess them thereof.
Hence, they filed the instant complaint to quiet their respective
titles over the subject lands and remove the cloud cast upon their
ownership as a result of petitioners’ refusal to recognize the
sales.[7]
For their part, petitioners filed a Motion to Dismiss[8] dated
November 4, 2004 on the grounds of lack of jurisdiction,
prescription/laches/estoppel, and res judicata. Anent the first
ground, petitioners averred that the subject lands are untitled,
unregistered, and form part of the Baguio Townsite Reservation
which were long classified as lands of the public domain. As such,
the RTC has no jurisdiction over the case as it is the Land
Management Bureau (formerly the Bureau of Lands) which is
vested with the authority to determine issues of ownership over
unregistered public lands.[9]
As to the second ground, petitioners argued that it is only now, or
more than 27 years from the execution of the Deeds of Sale, that
respondents seek to enforce said Deeds; thus, the present action
is already barred by prescription and/or laches.[10]
Regarding the final ground, petitioners pointed out that on
January 27, 1998, respondents had already filed a complaint
against them for injunction and damages, docketed as Civil Case
No. 3934-R before the Regional Trial Court of Baguio City, Branch
5 (RTC Br. 5), wherein they principally asserted their ownership
over the subject lands. However, RTC Br. 5 dismissed Civil Case
No. 3934-R for lack of merit on the ground of respondents’ failure
to show convincing proof of ownership over the same,[11] which
Order of dismissal was then affirmed by the CA on
appeal.[12] Eventually, the Court issued a Resolution dated
January 21, 2004[13] declaring the case closed and terminated for
failure to file the intended petition subject of the Motion for
Extension to file the same. In view of the foregoing, petitioners
contended that due to the final and executory ruling in Civil Case
No. 3934-R, the filing of Civil Case No. 5881-R seeking to establish
the ownership thereof is already barred by res judicata.[14]
The RTC Br. 61 Ruling
In an Order[15] dated October 10, 2005, the RTC Br. 61 ruled in
petitioners’ favor, and consequently, ordered the dismissal of Civil
Case No. 5881-R on the following grounds: (a) it had no authority
to do so; (b) the Deeds of Sale in respondents’ favor could not as
yet be considered title to the subject lands, noting the failure of
respondents to perfect their title or assert ownership and
possession thereof for the past 27 years; and (c) the filing of the
instant case is barred by res judicata considering the final and
executory Decision dismissing the earlier filed Civil Case No.
3934-R where respondents similarly sought to be declared the
owners of the subject lands.[16]
Aggrieved, respondents appealed to the CA.[17]
The CA Ruling
In a Decision[18] dated March 19, 2009, the CA set aside the
dismissal of Civil Case No. 5881-R, and accordingly, remanded the
case to the court a quo for trial.[19] It held that Civil Case No. 3934-
R was an action for injunction where respondents sought to enjoin
petitioners’ alleged entry into the subject lands and their
introduction of improvements thereat; whereas Civil Case No.
5881-R is an action to quiet title where respondents specifically
prayed, inter alia, for the removal of the cloud upon their
ownership and possession of the subject lands. In this light, the
CA concluded that while these cases may involve the same
properties, the nature of the action differs; hence, res judicata is
not a bar to the present suit. On the issue of laches, prescription
or estoppel, the CA pointed out that in view of respondents’
allegation that they have been in possession of the subject lands
since 1976, their action to quiet title is imprescriptible.[20]
Dissatisfied, petitioners moved for reconsideration[21] which was,
however, denied in a Resolution[22] dated September 3, 2009;
hence, this petition.
The Issue Before the Court
The issue for the Court’s resolution is whether or not the CA
correctly set aside the dismissal of Civil Case No. 5881-R, and
accordingly, remanded the case to the court a quo for trial.
The Court’s Ruling
The petition is meritorious.
At the outset, it must be stressed that in setting aside the Order of
dismissal of Civil Case No. 5881-R due to the inapplicability of the
grounds of res judicata and prescription/laches, the CA notably
omitted from its discussion the first ground relied upon by
petitioners, which is lack of jurisdiction.
Jurisprudence has consistently held that “[j]urisdiction is defined
as the power and authority of a court to hear, try, and decide a
case. In order for the court or an adjudicative body to have
authority to dispose of the case on the merits, it must acquire,
among others, jurisdiction over the subject matter. It is axiomatic
that jurisdiction over the subject matter is the power to hear and
determine the general class to which the proceedings in question
belong; it is conferred by law and not by the consent or
acquiescence of any or all of the parties or by erroneous belief of
the court that it exists. Thus, when a court has no jurisdiction over
the subject matter, the only power it has is to dismiss the
action.”[23] Perforce, it is important that a court or tribunal should
first determine whether or not it has jurisdiction over the subject
matter presented before it, considering that any act that it
performs without jurisdiction shall be null and void, and without
any binding legal effects. The Court’s pronouncement in Tan v.
Cinco,[24] is instructive on this matter, to wit:
A judgment rendered by a court without jurisdiction is null and
void and may be attacked anytime. It creates no rights and
produces no effect. It remains a basic fact in law that the choice of
the proper forum is crucial, as the decision of a court or tribunal
without jurisdiction is a total nullity. A void judgment for want of
jurisdiction is no judgment at all. All acts performed pursuant to
it and all claims emanating from it have no legal effect.[25]
Now, on the issue of jurisdiction, a review of the records shows
that the subject lands form part of a 159,496-square meter parcel
of land designated by the Bureau of Lands as Approved Plan No.
544367, Psu 189147 situated at Sitio Benin, Baguio City. Notably,
such parcel of land forms part of the Baguio Townsite Reservation,
a portion of which, or 146, 428 square meters, was awarded to Iloc
Bilag due to the reopening of Civil Reservation Case No. 1, GLRO
Record No. 211, as evidenced by a Decision[26] dated April 22, 1968
promulgated by the then-Court of First Instance of Baguio City.
In a catena of cases,[27] and more importantly, in Presidential
Decree No. (PD) 1271,[28] it was expressly declared that all orders
and decisions issued by the Court of First Instance of Baguio and
Benguet in connection with the proceedings for the reopening of
Civil Reservation Case No. 1, GLRO Record 211, covering lands
within the Baguio Townsite Reservation are null and void and
without force and effect. While PD 1271 provides for a means to
validate ownership over lands forming part of the Baguio
Townsite Reservation, it requires, among others, that a Certificate
of Title be issued on such lands on or before July 31, 1973.[29] In
this case, records reveal that the subject lands are unregistered
and untitled, as petitioners’ assertion to that effect was not
seriously disputed by respondents. Clearly, the award of lots 2 and
3 of the 159,496-square meter parcel of land designated by the
Bureau of Lands as Approved Plan No. 544367, Psu 189147 –
which includes the subject lands – to Iloc Bilag by virtue of the
reopening of Civil Reservation Case No. 1, GLRO Record 211, is
covered by the blanket nullification provided under PD 1271, and
consistently affirmed by the prevailing case law. In view of the
foregoing, it is only reasonable to conclude that the subject lands
should be properly classified as lands of the public domain as well.
Therefore, since the subject lands are untitled and unregistered
public lands, then petitioners correctly argued that it is the
Director of Lands who has the authority to award their
ownership.[30] Thus, the RTC Br. 61 correctly recognized its lack of
power or authority to hear and resolve respondents’ action for
quieting of title.[31] In Heirs of Pocdo v. Avila,[32] the Court ruled
that the trial court therein correctly dismissed an action to quiet
title on the ground of lack of jurisdiction for lack of authority to
determine who among the parties have better right over the
disputed property, which is admittedly still part of public domain
for being within the Baguio Townsite Reservation, viz.:
The DENR Decision was affirmed by the Office of the President
which held that lands within the Baguio Townsite
Reservation belong to the public domain and are no
longer registrable under the Land Registration Act. The
Office of the President ordered the disposition of the disputed
property in accordance with the applicable rules of procedure for
the disposition of alienable public lands within the Baguio
Townsite Reservation, particularly Chapter X of Commonwealth
Act No. 141 on Townsite Reservations and other applicable rules.
Having established that the disputed property is public
land, the trial court was therefore correct in dismissing
the complaint to quiet title for lack of jurisdiction. The
trial court had no jurisdiction to determine who among
the parties have better right over the disputed property
which is admittedly still part of the public domain. As held
in Dajunos v. Tandayag:
x x x The Tarucs’ action was for “quieting of title” and necessitated
determination of the respective rights of the litigants, both
claimants to a free patent title, over a piece of property, admittedly
public land. The law, as relied upon by jurisprudence, lodges “the
power of executive control, administration, disposition and
alienation of public lands with the Director of Lands subject, of
course, to the control of the Secretary of Agriculture and Natural
Resources.”
In sum, the decision rendered in civil case 1218 on October 28,
1968 is a patent nullity. The court below did not have power
to determine who (the Firmalos or the Tarucs) were
entitled to an award of free patent title over that piece of
property that yet belonged to the public domain. Neither
did it have power to adjudge the Tarucs as entitled to the “true
equitable ownership” thereof, the latter’s effect being the same:
the exclusion of the Firmalos in favor of the Tarucs.
In an action for quieting of title, the complainant is seeking for “an
adjudication that a claim of title or interest in property adverse to
the claimant is invalid, to free him from the danger of hostile
claim, and to remove a cloud upon or quiet title to land where stale
or unenforceable claims or demands exist.” Under Articles 476
and 477 of the Civil Code, the two indispensable requisites in an
action to quiet title are: (1) that the plaintiff has a legal or equitable
title to or interest in the real property subject of the action; and (2)
that there is a cloud on his title by reason of any instrument,
record, deed, claim, encumbrance or proceeding, which must be
shown to be in fact invalid or inoperative despite its prima
facie appearance of validity.
In this case, petitioners, claiming to be owners of the disputed
property, allege that respondents are unlawfully claiming the
disputed property by using void documents, namely the
“Catulagan” and the Deed of Waiver of Rights. However, the
records reveal that petitioners do not have legal or
equitable title over the disputed property, which forms
part of Lot 43, a public land within the Baguio Townsite
Reservation. It is clear from the facts of the case that
petitioners’ predecessors-in-interest, the heirs of Pocdo
Pool, were not even granted a Certificate of Ancestral
Land Claim over Lot 43, which remains public land.
Thus, the trial court had no other recourse but to dismiss
the case.[33] (Emphases and underscoring supplied)
In conclusion, RTC Br. 61 has no jurisdiction over Civil Case No.
5881-R as the plaintiffs therein (herein respondents) seek to quiet
title over lands which belong to the public domain. Necessarily,
Civil Case No. 5881-R must be dismissed on this ground. It should
be stressed that the court a quo’s lack of subject matter
jurisdiction over the case renders it without authority and
necessarily obviates the resolution of the merits of the case. To
reiterate, when a court has no jurisdiction over the subject matter,
the only power it has is to dismiss the action, as any act it performs
without jurisdiction is null and void, and without any binding legal
effects. In this light, the Court finds no further need to discuss the
other grounds relied upon by petitioners in this case.
WHEREFORE, the petition is GRANTED. The Decision dated
March 19, 2009 and the Resolution dated September 3, 2009 of
the Court of Appeals in CA-G.R. CV No. 86266 are
hereby REVERSED and SET ASIDE. Accordingly, Civil Case
No. 5881-R is DISMISSED on the ground of lack of jurisdiction
on the part of the Regional Trial Court of Baguio City, Branch 61.
SO ORDERED.
2. DEE v. HARVEST ALL INVESTMENT
JONATHAN Y. DEE versus et al. HARVEST ALL INVESTMENT LTD
et al.
G.R. No. 224834/G.R. No. 224871
March 15, 2017
Facts:
Harvest All Investment Ltd is a minority stock holder of Alliance Select
Food International. Jonathan Y. Dee is a majority stock holder of the
said company. Jonathan Y. Dee along with other Board Members
passed a Board Resolution to postpone the Annual Stockholder's
Meeting indefinitely with the company shares total of P1 billion. This
prompted Harvest All to file a complaint with a request for issuance of
writ of preliminary injunction and to nullify the Board Resolution of
the Board Members as this Board Resolution would deprive Harvest
All of their rights to vote on the Annual Stockholder's Meeting. The
complaint also includes Harvest All’s opinion that there may be an
intra-corporate controversy by B. RTC clerk of court assessed A with
filing fees of P8, 860 which A paid accordingly. B now contests the
validity of the complaint as A should have paid P20 million or so based
on the SRO of P1 billion as A’s complaint is about intra-corporate
controversy.
Issues:
Whether or not Harvest All paid the correct filing fees for the
complaint which Jonathan Y. Dee says should be based on the P1
billion SRO.
Held:

Yes. Harvest All paid the correct filing fees. In Cabrera v. Francisco,
the Court laid down the parameters in determining whether an action
is considered capable of pecuniary estimation or not: In determining
whether an action is one the subject matter of which is not capable of
pecuniary estimation this Court has adopted the criterion of first
ascertaining the nature of the principal action or remedy sought. If it
is primarily for the recovery of a sum of money, the claim is considered
capable of pecuniary estimation, and whether jurisdiction is in the
municipal courts or in the Courts of First Instance would depend on
the amount of the claim. However, where the basic issue is something
other than the right to recover a sum of money, where the money claim
is purely incidental to, or a consequence of, the principal 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 are
cognizable exclusively by Courts of First Instance.
Harvest All, et al.'s Complaint reveals that its main purpose is to have
Alliance hold its 2015 ASM on the date set in the corporation's bylaws,
or at the time when Alliance's SRO has yet to fully materialize, so that
their voting interest with the corporation would somehow be
preserved and the complaint does not involve the recovery of sum of
money. Therefore, Harvest All paid the correct filing fees.
3. KT CONSTRUCTION SUPPLY, INC., represented by
WILLIAM GO, Petitioner
vs.<
PHILIPPINE SAVINGS BANK, Respondent
DECISION
MENDOZA, J.:
This petition for review on certiorari seeks to reverse and set aside
the April 22, 2016 Decision1 and November 23, 2016
Resolution 2 of the Court of Appeals (CA) in CA-G.R. CV No.
103037, which affirmed with modification the June 11, 2014
Decision 3 of the Regional Trial Court, Branch 133,
Makati(RTC)City.
On October 12, 2006, petitioner KT Construction Supply,
Inc. (KTConstruction) obtained a loan from respondent
Philippine Savings Bank (PSBank) in the amount of ₱2.5 million.
The said loan was evidenced by aPromissory Note4 executed on
the same date. The said note was signed by William K. Go (Go) and
Nancy Go-Tan (Go-Tan) as Vice-President/General Manager and
Secretary/Treasurer of KT Construction, respectively. In addition,
both Go and Go-Tan signed the note in their personal capacities.
The promissory note stipulated that the loan was payable within a
period of sixty (60) months from November 12, 2006 to October
12, 2011. In addition, the said note provided for the payment of
attorney's fees in case of litigation.
On January 3, 2011, PSBank sent a demand letter to KT
Construction asking the latter to pay its outstanding obligation in
the amount of ₱725,438.81, excluding interest, penalties, legal
fees, and other charges. For its failure to pay despite demand,
PSBank filed a complaint for sum of money against KT
Construction.
The RTC Ruling
In its June 11, 2014 Decision, the RTC ruled in favor of PSBank. It
opined that the promissory note expressly declared that the entire
obligation shall immediately become due and payable upon
default in payment of any installment. The trial court,
nevertheless, reduced the interest rate and stipulated interest fees
for being unconscionable. Thus, it declared KT Construction, Go
and Go-Tan solidary liable and it ordered them to pay PSBank the
loan in the amount of ₱725,438.81 subject to twelve percent (12%)
interest per annum and ₱50,000.00 as attorney's fees. The
fallo reads:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff Philippine Savings Bank and against the defendant KT
Construction Supply, Inc., represented by William Go and Nancy
Go Tan, ordering the defendant to pay the plaintiff, jointly and
severally, the following:
1.) The amount of Seven Hundred Twenty Five Thousand Four
Hundred Thirty Eight Pesos and 81/100 (Php725,438.81) plus
twelve percent (12%) interest per annum from January 13, 2011
until fully paid.
2.) Php50,ooo.oo as and for attorney's fees.
SO ORDERED.5
Aggrieved, KT Construction appealed before the CA.
The CA Ruling
In its April 22, 2016 Decision, the CA affirmed the R TC decision.
It explained that due to the acceleration clause, the loan became
due and demandable upon KT Construction's failure to pay an
installment. In addition, the CA disagreed that the promissory
note was a contract of adhesion because KT Construction was not
in any way compelled to accept the terms of the promissory note.
The CA held that the trial court rightfully awarded attorney's fees
as the same was stipulated in the promissory note. It stated that
the award of attorney's fees was in the nature of a penal clause,
which was valid and binding between the parties. Likewise, the CA
agreed that Go and Go-Tan were solidarily liable with KT
Construction for the judgment amount because, when they signed
the promissory note in their personal capacities, they became co-
makers thereof. It added that the parties themselves stipulated in
the promissory note that their liability was solidary. The CA
disposed the case in this wise:
WHEREFORE, in view of the foregoing premises, the instant
appeal is DENIED. The Decision of Branch 133 of the Regional
Trial Court, Makati City, National Capital Judicial Region dated
June 11, 2014 in Civil Case No. 11-060, is hereby AFFIRMED with
the MODIFICATION that KT Construction, represented by
William K. Go and Nancy Go-Tan, is ordered to pay PS Bank the
amount equivalent to 6% per annum of the total of the monetary
awards from the finality of this Decision until full payment
thereof, as legal interest. In addition, the Clerk of Court of Branch
133 of the Regional Trial Court in Makati City, or his duly
authorized deputy is DIRECTED to assess and collect the
additional docket fees from Philippine Savings Bank as fees in lien
in accordance with Section 2, Rule 141 of the Rules of Court.
SO ORDERED.6
KT Construction moved for reconsideration, but its motion was
denied by the CA in its November 23, 2016 resolution.
Hence, this appeal instituted by KT Construction raising the
following errors:
ISSUES
I
THE COURT OF APPEALS GRAVELY AND PALPABLY ERRED,
AS DID THE LOWER COURT, IN HOLDING WILLIAM GO AND
NANCY GO TAN JOINTLY AND SEVERALLY LIABLE WITH
THE PETITIONER TO THE RESPONDENT BANK;
II
THE COURT OF APPEALS ERRED, AS DID THE LOWER
COURT, IN NOT FINDING THAT THE COMPLAINT IN THIS
CASE WAS PREMATURELY FILED;
III
THE COURT OF APPEALS ERRED, AS DID THE LOWER
COURT, IN FAILING TO DECLARE THE PROMISSORY NOTE
IN QUESTION AS NULL AND VOID FOR BEING A CONTRACT
OF ADHESION; AND
IV
THE COURT OF APPEALS ERRED, AS DID THE LOWER
COURT, IN AWARDING ATTORNEY'S FEES IN FAVOR OF THE
RESPONDENT BANK.7
KT Construction insists that Go and Go-Tan could not be held
solidarily liable for the judgment award because they were neither
impleaded nor served with summons. Moreover, they did not
voluntarily appear before the court. Thus, the courts never
acquired jurisdiction over their persons.
KT Construction further asserts that the complaint was premature
because it was not alleged that it had defaulted in paying any of
the installments due and that it had received a demand letter from
PSBank. It reiterates that the promissory note was null and void
for being a contract of adhesion. KT Construction also argues that
the award of attorney's fees was improper because it was contrary
to the policy that no premium should be placed on the right to
litigate.
In its Comment,8 dated March 3, 2017, PSBank countered that Go
and Go-Tan were solidarily liable with KT Construction because
they signed the promissory note in favor of PSBank as officers of
the corporation and in their personal capacities. It averred that the
obligation was already due and demandable in view of the
acceleration clause in the promissory note. Further, PSBank
pointed out that the promissory note was consensual as the parties
voluntarily signed the same. Finally, it claimed that attorney's fees
were rightfully awarded because the same formed part of the
terms and conditions of the loan agreement.
The Court's Ruling
The petition is partly meritorious.
It has long been settled that an acceleration clause is valid and
produces legal effects.9 In the case at bench, the promissory note
explicitly stated that default in any of the installments shall make
the entire obligation due and demandable notice even without or
demand. Thus, KT Construction was erroneous in saying that
PSBank's complaint was premature on the ground that the loan
was due only on October 12, 2011. KT Construction's entire loan
obligation became due and demandable when it failed to pay an
installment pursuant to the acceleration clause.
Moreover, KT Construction could not evade responsibility by
claiming that it had not received any demand letter for the
payment of the loan. PSBank had sent a demand letter, 10 dated
February 3, 2011, asking KT Construction to pay the remaining
obligation within five (5) days from receipt of the letter. More
importantly, even granting that KT Construction did not receive
the demand letter, the loan still became due and demandable
because the parties expressly waived the necessity of demand. 11
Further, KT Construction is mistaken that it could not be held
liable for the entire loan obligation because PSBank failed to prove
how many installments it had failed to pay. In Bognot
v.RR!Lending Corporation, 12 the Court explained that once the
indebtedness had been established, the burden is on the debtor to
prove payment, wit:
Jurisprudence tells us that one who pleads payment has the
burden of proving it; the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove non-payment.
Indeed, once the existence of an indebtedness is duly established
by evidence, the burden of showing with legal certainty that the
obligation has been discharged by payment rests on the debtor. 13
In the case at bench, KT Construction admitted that it obtained a
loan with PSBank. It, nevertheless, averred that it had been
regularly paying the loan. Thus, KT Construction could have easily
provided deposit slips and other documentary evidence to prove
the fact of payment. It, however, merely alleged that it religiously
paid its obligation without presenting any the evidence to
substantiate said obligation.
In a further attempt to absolve itself from the loan obligation, KT
Construction argued that the promissory note was null and void
because it was a contract of adhesion. It may be true that KT
Construction had no hand in its preparation. Still, it has been
ruled in a plethora of cases that a contract of adhesion is not
invalid per se. 14Contracts of adhesion, where one party imposes a
ready-made form of contract on the other, are not entirely
prohibited. The one who adheres to the contract is, in reality, free
to reject it entirely; if he adheres, he gives his consent. 15
KT Construction also claimed that attorney's fees should not be
awarded for lack of legal basis. The promissory note, however,
categorically provided for the payment of attorney's fees in case of
default. The said stipulation constituted a penal clause to which
the parties were bound, it being part of the contract between the
parties. 16 KT Construction was mistaken in relying on Article
2208 of the Civil Code because the same applies only when there
is no stipulation as to the payment of attorney's fees in case of
default.
Only parties to the case may be bound bythe court's decision
The courts a quo, however, erred in holding Go and Go-Tan
solidarily liable for the judgment award in PSBank's favor. In Guy
v. Gacott, 17 the Court ruled that a judgment binds only those who
were made parties in the case, to wit:
In relation to the rules of civil procedure, it is elementary that a
judgment of a court is conclusive and binding only upon the
parties and their successors-in-interest after the commencement
of the action in court. A decision rendered on a complaint in a civil
action or proceeding does not bind or prejudice a person not
impleaded therein, for no person shall be adversely affected by the
outcome of a civil action or proceeding in which he is not a party.
The principle that a person cannot be prejudiced by a ruling
rendered in an action or proceeding in which he has not been
made a party conforms to the constitutional guarantee of due
process of law.
In short, jurisdiction over the person of the parties must be
acquired so that the decision of the court would be binding upon
them. It is a fundamental rule that jurisdiction over a defendant is
acquired in a civil caseeither through service of summons or
voluntary appearance in court and submission to its authority. 18
In the case at bench, Go and Go-Tan were neither impleaded in
the Civil case nor served with summons. They merely acted as
representatives of KT Construction, which was impleaded as the
defendant in the complaint. It is for this reason that only KT
Construction filed an answer to the complaint. Thus, it is clear that
the trial court never acquired jurisdiction over Go and Go-Tan.
Consequently, it was improper for the trial court to declare in its
dispositive portion that Go and Go-Tan were jointly and severally
liable with KT Construction for the judgment award. It is
noteworthy that their liability as co-makers was never discussed
in the body of the decision and that their solidary liability was a
mere conclusion in the dispositive portion.
WHEREFORE, the April 22, 2016 Decision and November 23,
2016 Resolution of the Court of Appeals in CA-G.R. CV No.
103037, are AFFIRMED with MODIFICATION, in that, only
petitioner KT Construction Supply, Inc. is bound by the judgment
award.
SO ORDERED.
JOSE AUDIE ABAGATNAN, JOSEPHINE A. PARCE, JIMMY
ABAGATNAN, JOHN ABAGATNAN, JENALYN A.DELEON,
JOEY ABAGATNAN, JOJIE ABAGATNAN, and JOY
ABAGATNAN, Petitioners,
vs.
SPOUSES JONATHAN CLARITO and ELSA
CLARITO, Respondents,
DECISION
DEL CASTILLO, J.:
We resolve the Petition for Review on Certiorari under Rule 45 of the
Rules of Court, assailing the June 20, 2013 Decision1 and the February
3, 2014 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
03283 which dismissed, albeit without prejudice, the Complaint for
Unlawful Detainer and Damages3 filed by petitioners Jose Audie
Abagatnan, Josephine A. Paree, Jimmy Abagatnan, John Abagatnan,
Jenalyn A. De Leon, Joey Abagatnan, Jojie Abagatnan and Joy
Abagatnan against respondents spouses Jonathan Clarito and Elsa
Clarito, for failure to comply with the mandatory requirement of
resorting to prior barangay conciliation, as required under Section 412
of Republic Act No. 7160, or the Local Government Code (LGC).
The Antecedent Facts
Wenceslao Abagatnan (Wenceslao) and his late wife, Lydia Capote
(Lydia), acquired a parcel ofland designated as Lot 1472-B, with a total
land of 5,046 square meters, and located at Barangay Cogon, Roxas
City from Mateo Ambrad (Mateo) and Soterafia Clarito (Soterafia), by
virtue of a Deed of Absolute Sale4 executed on August 1, 1967.5
On October 4, 1999, Lydia died, leaving her children, who are
copetitioners in this case, to succeed into the ownership of her
conjugal share of said property.6
In 1990, respondents allegedly approached Wenceslao and asked for
permission to construct a residential house made oflight materials on
a 480-square meter portion of Lot 1472-B (subject property). Because
respondent Jonathan Clarito (Jonathan) is a distant relative,
Wenceslao allowed them to do so subject to the condition that
respondents will vacate the subject property should he need the same
for his own use.7
In September 2006, petitioners decided to sell portions of Lot 14 72-
B, including the subject property which was then still being occupied
by respondents. They offered to sell said portion to respondents, but
the latter declined.8
Consequently, petitioners sent respondents a Demand Letter9 dated
October 2, 2006 requiring the latter to vacate the subject property
within fifteen (15) days from receipt of the letter. The respondents,
however, refused to heed such demand.10
On November 10, 2006, petitioners filed a Complaint for Unlawful
Detainer and Damages11 against respondents before the Municipal
Trial Court in Cities (MTCC), Branch 2, Roxas City, where they
claimed to have been unlawfully deprived of the use and possession of
a portion of their land.
Notably, the Complaint alleged that prior barangay conciliation
proceedings are not required as a pre-condition for the filing of the
case in court, given that not all petitioners are residents of Roxas City.
Specifically, petitioner Jimmy C. Abagatnan (Jimmy) resided in
Laguna, while petitioner Jenalyn A. De Leon (Jenalyn) resided in
Pasig City.12
In their Answer with Counterclaim,13 respondents argued that
prior barangay conciliation is a mandatory requirement that cannot
be dispensed with, considering that Jimmy and J enalyn had already
executed a Special Power of Attomey14 (SPA) in favor of their co-
petitioner and sister, Josephine A. Paree (Josephine), who is a
resident of Roxas City.15
Respondents also insisted that Lot 14 72-B is only a portion of Lot 1472
which is covered by its mother title, Original Certificate of Title (OCT)
No. 9882, under the name of Nicolas Clarita, et al., Jonathan's
predecessors-in-interest. Unfortunately, said title was lost or
destroyed during the war, but a copy of the owner's duplicate copy was
presented before the trial court and made part of the records.16
The Municipal Trial Court in Cities Ruling
In its Decision17 dated August 17, 2007, the MTCC rendered judgment
in favor of petitioners and ordered respondents to remove the
structures they erected on the subject property and to vacate the same.
It also directed respondents to pay petitioners the amount of ₱500.00
per month as reasonable compensation for the use and occupancy of
the subject property from the date of the filing of the action up to and
until the structures on the property have been removed, as well as the
cost of suit.18
The MTCC ruled that by preponderance of evidence, petitioners have
a better right of material possession over the subject
property.1âwphi1 It gave merit to petitioners' proof of purchase of Lot
1472-B from Mateo and Soterafia, the Demand Letter dated October
2, 2006 that they sent to respondents, and respondents' refusal to
vacate the property.19
Respondents thereafter appealed the MTCC Decision to the Regional
Trial Court (RTC), Branch 19, Roxas City.1âwphi1
The Regional Trial Court Ruling
In its Decision20 dated January 15, 2008, the RTC denied the appeal
for lack of merit. It ruled that since the parties raised the issue of
ownership to justify their claims of possession, and the evidence of
ownership is preponderant on petitioners, the MTCC was justified in
ruling the case in the latter's favor.21
The RTC, too, held that the lack of barangay conciliation proceedings
cannot be brought on appeal because it was not made an issue in the
Pre-Trial Order.22
Following the denial, respondents filed a Petition for Review23 before
the CA, assailing the RTC's January 15, 2008 Decision.
The Court of Appeals Ruling
In its Decision dated June 20, 2013, the CA ruled that the findings of
fact of both the MTCC and the RTC are supported by the evidence on
record. It gave more probative value to the tax declarations and the
Deed of Absolute Sale submitted by petitioners, considering that only
a copy of OCT No. 9882 was presented by respondents in court and
said copy contained clouded and blurred characters. The name of the
alleged registered owner, Francisco Clarito (Jonathan's father), is also
not decipherable on the title.24
Nevertheless, the CA granted the Petition and dismissed the
petitioners' Complaint, albeit without prejudice, for lack of prior
referral to the Katarungang Pambarangay.25 It pointed out that
majority of petitioners actually resided in Barangay Cogon, Roxas
City, while the two non-residents of Roxas City already executed an SP
A in favor of Josephine, whom they authorized, among others, to enter
into an amicable settlement with respondents. Since respondents also
reside in the same barangay, the dispute between the parties is clearly
within the ambit of the Lupon Tagapamayapa's (Lupon) authority.26
The CA thus concluded that petitioners' Complaint had been
prematurely filed with the MTCC, as it should have been first brought
before the Lupon for mandatory conciliation to accord the parties the
chance for amicable settlement.27
Petitioners moved for reconsideration, but the CA denied the motion
in its Resolution dated February 3, 2014. As a consequence,
petitioners filed the present Petition for Review on Certiorari before
the Court on April 14, 2014, assailing the CA's June 20, 2013 Decision
and February 3, 2014 Resolution.
The Issue
Petitioners raise the sole issue of whether the CA correctly dismissed
the Complaint for failure to comply with the
prior barangay conciliation requirement under Section 412 of the
LGC, despite the fact that not all real parties in interest resided in the
same city or municipality.28
The Court's Ruling
The Petition is impressed with merit.
x x x Section 412(a) of the LGC requires the parties to undergo a
conciliation process before the LuponChairman or the Pangkat as a
pre-condition to the filing of a complaint in court, thus:
SECTION 412. Conciliation - (a) Pre-condition to Filing of
Complaint in Court. No complaint, petition, action, or
proceeding involving any matter within the authority
of the lupon shall be filed or instituted directly in court or
any other government office for adjudication, unless there has
been a confrontation between the parties before
the lupon chairman or the pangkat, and that no conciliation
or settlement has been reached as certified by
 the lupon or pangkat secretary and attested to by
the lupon or pangkat chairman [or unless the settlement has
been repudiated by the parties thereto. x x x]29 (Emphasis
supplied)
The LGC further provides that "the lupon of each barangay shall have
authority to bring together the parties actually residing in the same
city or municipality for amicable settlement of all disputes," subject to
certain exceptions enumerated in the law.30
One such exception is in cases where the dispute involves parties
who actually reside in barangays of different cities or
municipalities, unless said barangay units adjoin each other and
the parties thereto agree to submit their differences to amicable
settlement by an appropriate lupon.31
Thus, parties who do not actually reside in the same city or
municipality or adjoining barangays are not required to submit their
dispute to the lupon as a pre-condition to the filing of a complaint in
court.
In Pascual v. Pascual,32 the Court ruled that the express statutory
requirement of actual residency in the LGC pertains specifically to
the real parties in interest in the case. It further explained that said
requirement cannot be construed to apply to the attorney-in-fact of
the party-plaintiff, as doing so would abrogate the meaning of a "real
party in interest" as defined in Section 2,33 in relation to Section 3, of
Rule 3 of the Rules of Court.
The same ruling was reiterated in Banting v. Spouses
Maglapuz34 where the Court held that "the requirement under Section
412 of the [LGC] that a case be referred for conciliation before
the Lupon as a precondition to its filing in court applies only to those
cases where the real parties-in-interest actually reside in the
same city or municipality."
In the present case, the Complaint filed before the MTCC specifically
alleged that not all the real parties in interest in the case actually reside
in Roxas City:35 Jimmy resided in Poblacion, Siniloan, Laguna, while
Jenalyn resided in Brgy. de La Paz, Pasig City.36 As
such, the lupon has no jurisdiction over their dispute, and
prior referral of the case for barangay conciliation is not a
precondition to its filing in court.
This is true regardless of the fact that Jimmy and Jenalyn had already
authorized their sister and co-petitioner, Josephine, to act as their
attorney-in-fact in the ejectment proceedings before the MTCC. As
previously explained, the residence of the attorney-in-fact of a real
party in interest is irrelevant in so far as the "actual residence"
requirement under the LGC for prior barangay conciliation is
concerned.
Besides, as the RTC correctly pointed out, the lack
of barangay conciliation proceedings cannot be brought on
appeal because it was not included in the Pre-Trial
Order, which only enumerates the following issues to be resolved
during the trial:
The following issues to be resolved by plaintiffs:
1. Whether or not the defendants have unlawfully withheld the
portion of Lot 1472 over which were occupied by them,
particularly Lot 1472-B;
2. Whether or not the defendants can be lawfully ejected from
that portion of Lot 1472-B which are occupied by them.
3. Whether or not the prevailing parties can recover damages.
For the defendants, the issues to be resolved are as follows:
1. Whether or not the plaintiffs have a cause of action for
unlawful detainer against the defendants; and,
2. Whether or not the prevailing parties are entitled to an
award of damages.37
On this point, it is important to stress that the issues to be tried
between parties in a case is limited to those defined in the pre-trial
order38 as well as those which may be implied from those written in
the order or inferred from those listed by necessary implication.39
In this case, a cursory reading of the issues listed in the Pre-Trial Order
easily shows that the parties never agreed, whether expressly or
impliedly, to include the lack of prior barangay conciliation
proceedings in the list of issues to be resolved before the MTCC.
In effect, the non-inclusion of this issue in the Pre-Trial Order
barred its consideration during the trial. This is but consistent
with the rule that parties are bound by the delimitation of issues that
they agreed upon during the pre-trial proceedings.40
WHEREFORE, we GRANT the Petition for Review on Certiorari.
The Decision dated June 20, 2013 and the Resolution dated February
3, 2014 of the Court of Appeals in CA-G.R. SP No. 03283
are REVERSED and SETASIDE. The Decision dated January 15,
2008 of the Regional Trial Court, Branch 19, Roxas City in Civil Case
No. V-47-07 is REINSTATED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
SOCIETE DES PRODUITS, NESTLE, S.A., Petitioner
vs.
PUREGOLD PRICE CLUB, INC.,, Respondent
DECISION
CARPIO, Acting C.J.:
The Case
Before the Court is a petition for review on certiorari1 assailing the 15
May 2014 Resolution2 and the 14 October 2014 Resolution3 of the
Court of Appeals (CA) in CA-G.R. SP No. 134592.
The Facts
Petitioner Societe des Produits Nestle, S.A. (Nestle) is a corporation
organized and existing under the laws of Switzerland which is engaged
in the business of marketing and selling of coffee, ice cream,
chocolates, cereals, sauces, soups, condiment mixes, dairy and non-
dairy products, etc.4 Respondent Puregold Price Club, Inc. (Puregold)
is a corporation organized under Philippine law which is engaged in
the business of trading goods such as consumer goods on wholesale or
on retail basis.5
On 14 June 2007, Puregold filed an application6 for the registration of
the trademark "COFFEE MATCH" with the lqtellectual Property
Office (IPO). The registration was filed by Puregold for use on coffee,
tea, cocoa, sugar, artificial coffee, flour and preparations made from
cereals, bread, pastry and confectionery, and honey under Class 30 of
the International Classification of Goods.7
On 5 December 2008, Nestle filed an opposition8 against Puregold's
application for registration. Nestle alleged that it is the exclusive
owner of the "COFFEE-MATE" trademark and that there is confusing
similarity between the "COFFEE-MATE" trademark and Puregold's
"COFFEE MATCH" application.9 Nestle alleged that "COFFEE-
MATE" has been declared an internationally well-known mark and
Puregold's use of "COFFEE MATCH" would indicate a connection with
the goods covered in Nestle's "COFFEE-MATE" mark because of its
distinct similarity. Nestle claimed that it would suffer damages if the
application were granted since Puregold's "COFFEE MATCH" would
likely mislead the public that the mark originated from Nestle.10
The Decision of the Bureau of Legal Affairs-Intellectual
Property Office
In a Decision11 dated 16 April 2012, the Bureau of Legal Affairs
Intellectual Property Office (BLA-IPO) dismissed Nestle's opposition.
The BLA-IPO ruled that Nestle's opposition was defective because the
verification and certification against forum shopping attached to
Nestle's opposition did not include a board of directors' resolution or
secretary's certificate stating Mr. Dennis Jose R. Barot's (Barot)
authority to act on behalf of Nestle. The BLA-IPO ruled that the defect
in Nestle's opposition was sufficient ground to dismiss.12
The BLA-IPO held that the word "COFFEE" as a mark, or as part of a
trademark, which is used on coffee and similar or closely related
goods, is not unique or highly distinctive. Nestle combined the word
"COFFEE" with the word "-MATE," while Puregold combined the
word "COFFEE" with the word "MATCH." The BLA-IPO ruled that
while both Nestle's "-MATE" and Puregold's "MATCH" contain the
same first three letters, the last two in Puregold's mark rendered a
visual and aural character that makes it easily distinguishable from
Nestle's "COFFEE-MATE."13 Also, the letter "M" in Puregold's mark is
written as an upper case character and the eyes of a consumer would
not be confused or deceived by Nestle's "COFFEEMATE" where the
letter "M" is written in lower case. Consequently, the BLA-IPO held
that the consumer cannot mistake the mark and the products of Nestle
as those of Puregold's.14
The dispositive portion of the Decision states:
WHEREFORE, premises considered, the instant opposition is hereby
DISMISSED. Let the filewrapper of Trademark Application Serial No.
4-2007-006134 be returned, together with a copy of this DECISION,
to the Bureau of Trademarks for information and appropriate action.
SO ORDERED.15
On 11 June 2012, Nestle filed an appeal16 with the Office of the Director
General of the Intellectual Property Office (ODG-IPO).
The Decision of the ODG-IPO
In a Decision17 dated 7 February 2014, the Office of the ODG-IPO
dismissed Nestle's appeal. The ODG-IPO held that Barot's authority to
sign the certification against forum shopping was not sufficiently
proven by Nestle. The ODG-IPO ruled that Barot's authority, which
was contained in the power of attorney executed, should not be given
weight unless accompanied by proof or evidence of his authority from
Nestle.18 The ODG-IPO held that the competing marks are not
confusingly similar and that consumers would unlikely be deceived or
confused from Puregold's use of "COFFEE MATCH." The ODG-IPO
ruled that the common feature of "COFFEE" between the two marks
cannot be exclusively appropriated since it is generic or descriptive of
the goods in question. The ODG-IPO ruled that there is no visual,
phonetic, or conceptual similarity between the two marks. Visual
similarity is not present in the two marks, as Nestle's mark consists of
a hyphenated word with the paired word being "MATE" while
Puregold's mark consists of the paired word "MATCH." While it is true
that the first three letters "M," "A," and "T" are common in the two
marks, Puregold's mark, which are two separate words, with the
capitalization of the letters "C" and "M," is readily apparent when
"COFFEE MATCH" and "COFFEE-MATE" are compared side by
side.19
The dispositive portion of the Decision states:
WHEREFORE, premises considered, the appeal is hereby
DISMISSED. Let a copy of this Decision and the records of this case
be furnished and returned to the Director of Bureau of Legal Affairs
for appropriate action. Further, let also the Director of the Bureau of
Trademarks and the library of the Documentation, Information and
Technology Transfer Bureau be furnished a copy of this Decision for
information, guidance, and records purposes.
SO ORDERED.20
On 14 April 2014, Nestle filed a Petition for Review21 with the Court of
Appeals.
The Decision of the CA
In a Resolution dated 15 May 2014, the CA dismissed Nestle's petition
for review on procedural grounds.
The Resolution states:
A perusal of the Petition for Review shows that:
1. the title thereof does not bear the name of party respondent
Puregold Price Club, Inc.
2. there is no board resolution and/or secretary's certificate to prove
the authority of Dennis Jose R. Barnt to file the petition and to sign
the Verification/Certification of Non-Forum Shopping on behalf of
petitioner-corporation; and
3. certified true copies of material [portions] of the record which were
mentioned therein were not attached, such as respondent's trademark
application (rollo, p. 12), petitioner's Opposition thereto, Reply, the
parties' respective position papers, petitioner's appeal, respondent's
Comment, the parties' respective memoranda, etc. The above
considering, the Court RESOLVES to DISMISS the petition outright.22
On 13 June 2014, Nestle filed a Motion for Reconsideration23 which
was denied by the CA on 14 October 2014.24The Resolution of the CA
states: >>
We DENY the Motion for Reconsideration because it is without merit.
The petitioner filed the Petition beyond the 15-day reglementary
period.
Under Rule 43, Section 4 of the Rules of Court, a party may file an
appeal to this Court from quasi-judicial bodies like the Intellectual
Property Office, within 15 days from receipt of the assailed judgment,
order, or resolution.
Petitioner's counsel of record before the Intellectual Property Office
("IPO"), the Sapalo Velez Bundang & Bulilan Law Offices ("SVBB Law
Offices") received a copy of the assailed Decision on 19 February 2014.
Thus, petitioner had until 7 March 2014 to appeal. While the Bengzon
Negre & Untalan Law Offices ("Bengzon Law Offices") entered its
appearance before the IPO, no evidence was submitted before this
Court showing that the Bengzon Law Offices was properly substituted
as petitioner's counsel in place of SVBB Law Offices (petitioner's
counsel of record). Thus, the 15-day reglementary period started to
run from the date SVBB Law Offices received a copy of the Decision.
Clearly, when petitioner filed the Motion for Extension on 27 March
2014, and the Petition on 14 April 2014, the reglementary period had
already lapsed.
Further, the petitioner obstinately refuses to cure the procedural
infirmities we observed in the Resolution of 15 May 2014.
SO ORDERED.25
The Issues
Nestle presented the following issues in this petition:
1. The Honorable Court of Appeals erred in dismissing petitioner's
motion for reconsideration upon an erroneous appreciation of certain
antecedent facts, and similarly erred in dismissing the petition for
review onyrocedural grounds.
2. There is merit to the substantive issues raised by petitioner, which
deserves to be given due course and a final ruling.26
The Ruling of this Court
We deny the petition.
Before discussing the substantive issues, we shall first discuss the
procedural issues in this case.
Nestle filed its petition for review
within the period granted by the Court of Appeals.
The CA dismissed Nestle's petition for review on the ground that
Nestle filed its petition for review after the 15-day reglementary period
required by Section 4, Rule 43 of the Rules of Court.
The CA is wrong.
Section 4, Rule 43 of the Rules of Court states:
Section 4. Period of appeal. - The appeal shall be taken within fifteen
(15) days from notice of the award, judgment, final order or resolution,
or from the date of its last publication, if publication is required by law
for its effectivity, or of the denial of petitioner's motion for new trial or
reconsideration duly filed in accordance with the governing law of the
court or agency a quo. Only one (1) motion for reconsideration shall
be allowed. Upon proper motion and the payment of the full amount
of the docket fee before the expiration of the reglementary period, the
Court of Appeals may grant an additional period of fifteen (15) days
only within which to file the petition for review. No further extension
shall be granted except for the most compelling reason and in no case
to exceed fifteen (15) days.
During the proceedings in the ODG-IPO, Nestle substituted its
counsel, Sapalo, Velez, Bundang and Bulilan Law Offices, with
Bengzon, Negre and Untalan Law Offices (Nestle's substituted
counsel). On 20 September 2013, Nestle's substituted counsel entered
its appearance in the ODG-IP0.27 In an Order28 dated 1 October 2013,
the ODG-IPO noted the appearance of Nestle's substituted counsel
and included their appearance in the records of the case, to wit:
Wherefore, the APPEARANCE is hereby noted and included in the
records. Accordingly, let copies of all pleadings, orders, notices and
communications, be sent to the aforementioned address.
SO ORDERED.29
The Decision of the ODG-IPO was received by Nestle's substituted
counsel on 14 March 2014. On 27 March 2014, within the 15-day
reglementary period provided for by Section 4 of Rule 43, Nestle filed
a Motion for Extension of Time to file Verified Petition for
Review30 (motion for extension) with the CA. In a Resolution31 dated
3 April 2014, the CA granted Nestle's motion for extension and gave
Nestle until 13 April 2014 to file its petition for review. The resolution
states:
The Court GRANTS petitioner's Motion for Extension of Time to File
Verified Petition for Review and gives petitioner until April 13, 2014
within which to do so.32
Since 13 April 2014 fell on a Sunday, Nestle had until 14 April 2014,
which was the next working day, within which to file the petition for
review. Nestle did file the petition for review with the CA on 14 April
2014. Accordingly, the CA committed a grave error when it ruled that
Nestle's petition for review was filed beyond the prescribed period.
Nestle failed to properly execute a
certification against forum shopping
as required by Section 5, Rule 7
of the Rules of Court.
Section 5, Rule 7 of the Rules of Court provides:
Section 5. Certification against forum shopping. -The plaintiff or
principal party shall certify under oath in the complaint or other
initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith: (a)
that he has not theretofore commenced any action or filed any claim
involving the same issues in any court, tribunal or quasi-judicial
agency and, to the best of his knowledge, no such other action or claim
is pending therein; (b) if there is such other pending action or claim, a
complete statement of the present status thereof; and (c) ifhe should
thereafter learn that the same or similar action or claim has been filed
or is pending, he shall report that fact within five (5) days therefrom
to the court wherein his aforesaid complaint or initiatory pleading has
been filed.
Failure to comply with the foregoing requirements shall not
be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the
case without prejudice, unless otherwise provided, upon motion
and after hearing. The submission of a false certification or non-
compliance with any of the undertakings therein shall constitute
indirect contempt of court, without prejudice to the corresponding
administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and shall
constitute direct contempt, as well as a cause for administrative
sanctions. (Emphasis supplied)
In Zulueta v. Asia Brewery, Inc.,33 this Court ruled that the
requirements under the Rules of Court involving the certification
against forum shopping apply both to natural and juridical persons, to
wit: "[t]he requirement that the petitioner should sign the certificate
of non-forum shopping applies even to corporations, considering that
the mandatory directives of the Circular and the Rules of Court make
no distinction between natural and juridical persons."34
In Fuentebella v. Castro,35 this Court held that the certification against
forum shopping must be signed by the principal party. In case the
principal party cannot sign, the one signing on his or her behalf must
have been duly authorized, to wit: "the petitioner or the principal party
must execute the certification against forum shopping. The reason for
this is that the principal party has actual knowledge whether a petition
has previously been filed involving the same case or substantially the
same issues. If, for any reason, the principal party cannot sign the
petition, the one signing on his behalf must have been duly
authorized."36
Juridical persons, including corporations, that cannot personally sign
the certification against forum shopping, must act through an
authorized representative.1âwphi1 The exercise of corporate powers
including the power to sue is lodged with the board of directors which
acts as a body representing the stockholders. For corporations, the
authorized representative to sign the certification against forum
shopping must be selected or authorized collectively by the
board of directors. In Eslaban, Jr. v. Vda. de Onorio,37 this Court
ruled that if the real party in interest is a corporation, an officer of the
corporation acting alone has no authority to sign the certification
against forum shopping. An officer of the corporation can only validly
sign the certification against forum shopping if he or she is authorized
by the board of directors through a board resolution or secretary's
certificate. In Gonzales v. Climax Mining Ltd. ,38 this Court ruled that
a board resolution authorizing a corporate officer to execute the
certification against forum shopping is a necessary requirement under
the Rules. A certification signed by a person who was not duly
authorized by the board of directors renders the petition for review
subject to dismissal.39
The authority of the representative of a corporation to sign the
certification against forum shopping originates from the board of
directors through either a board of directors' resolution or secretary's
certificate which must be submitted together with the certification
against forum shopping. In Zulueta, this Court declared invalid a
petition for review with a certification against forum shopping signed
by the party's counsel which was not supported by a board resolution
or secretary's certificate proving the counsel's authority. This Court
dismissed the case and held: "[t]he signatory in the Certification of the
Petition before the CA should not have been respondents' retained
counsel, who would not know whether there were other similar cases
of the corporation. Otherwise, this requirement would easily be
circumvented by the signature of every counsel representing corporate
parties."40 Likewise, in Eslaban, this Court held that a certification
signed by counsel alone is defective and constitutes a valid cause for
the dismissal of the petition.41
Nestle, itself, acknowledged in this petition the absence of a board
resolution or secretary's certificate issued by the board of directors of
Nestle to prove the authority of Barot to sign the certification against
forum shopping on behalf of Nestle, to wit: "[t]hus, while there is
no board resolution and/or secretary's certificate to prove
the authority of Dennis Jose R. Barot to file the petition and
Verification/Certification of NonForum Shopping on behalf
of petitioner-corporation, there is a Power of Attorney evidencing
such authority."42 The power of attorney submitted by Nestle in favor
of Barot was signed by Celine Jorge. However, the authority of Celine
Jorge to sign the power of attorney on behalf of Nestle, allowing Barot
to represent Nestle, was not accompanied by a board resolution or
secretary's certificate from Nestle showing that Celine Jorge was
authorized by the board of directors of Nestle to execute the power of
attorney in favor of Barot. In Development Bank of the Philippines v.
Court of Appeals,43 this Court held that the failure to attach a copy of
a board resolution proving the authority of the representative to sign
the certification against forum shopping was fatal to its petition and
was sufficient ground to dismiss since the courts are not expected to
take judicial notice of board resolutions or secretary's certificates
issued by corporations, to wit:
What petitioners failed to explain, however, is their failure to attach a
certified true copy of Resolution No. 0912 to their petition
for certiorari in CA-G.R. SP No. 60838. Their omission is fatal to
their case. Courts are not, after all, expected to take judicial
notice of corporate board resolutions or a corporate
officer's authority to represent a corporation. To be sure,
petitioners' failure to submit proof that Atty. Demecillo has been
authorized by the DBP to file the petition is a "sufficient ground for the
dismissal thereof."44 (Emphasis supplied)
Accordingly, the CA did not err in ruling that the petition for review
should be dismissed due to the failure of Nestle to comply with the
proper execution of the certification against forum shopping required
by Section 5, Rule 7 of the Rules of Court.
Puregold's mark may be registered.
A trademark is any distinctive word, name~ symbol, emblem, sign, or
device, or any combination thereof, adopted and used by a
manufacturer or merchant on his goods to identify and distinguish
them from those manufactured, sold, or dealt by others.45 Section 123
of Republic Act No. 829346 (RA 8293) provides for trademarks which
cannot be registered, to wit:
Sec. 123. Registrability. -
123 .1 A mark47 cannot be registered if it:
xxxx
(d) Is identical with a registered mark belonging to a
different proprietor or a mark with an earlier filing or
priority date, in respect of:
(i) The same goods or services, or
(ii) Closely related goods or services, or
(iii) If it nearly resembles such a mark as to be likely
to deceive or cause confusion;
(e) Is identical with, or confusingly similar to, or constitutes a
translation of a mark which is considered by the competent authority
of the Philippines to be wellknown internationally and in the
Philippines, whether or not it is registered here, as being already the
mark of a person other than the applicant for registration, and used
for identical or similar goods or services: Provided, That in
determining whether a mark is well-known, account shall be taken of
the knowledge of the relevant sector of the public, rather than of the
public at large, including knowledge in the Philippines which has been
obtained as a result of the promotion of the mark;
(f) Is identical with, or confusingly similar to, or constitutes a
translation of a mark considered well-known in accordance with the
preceding paragraph, which is registered in the Philippines with
respect to goods or services which are not similar to those with respect
to which registration is applied for: Provided, That use of the mark in
relation to those goods or services would indicate a connection
between those goods or services, and the owner of the registered mark:
Provided further, That the interests of the owner of the registered
mark are likely to be damaged by such use;
(g) Is likely to mislead the public, particularly as to the nature, quality,
characteristics or geographical origin of the goods or services;
(h) Consists exclusively of signs that are generic for the goods or
services that they seek to identify; x x x x (Emphasis supplied)
In Coffee Partners, Inc. v. San Francisco & Roastery, Inc.,48 this Court
held that the gravamen of trademark infringement is the likelihood of
confusion. There is no absolute standard for the likelihood of
confusion. Only the particular, and sometimes peculiar,
circumstances of each case can determine its existence. Thus, in
infringement cases, precedents must be evaluated in the light of each
particular case.49
In determining similarity or likelihood of confusion, our
jurisprudence has developed two tests: the dominancy test and the
holistic test.50 The dominancy test focuses on the similarity of the
prevalent features of the competing trademarks that might cause
confusion and deception. If the competing trademark contains the
main, essential, and dominant features of another, and confusion or
deception is likely to result, likelihood of confusion exists. The
question is whether the use of the marks involved is likely to cause
confusion or mistake in the mind of the public or to deceive
consumers.51 In McDonald's Corporation v. L.C. Big Mak Burger,
lnc.,52 this Court gave greater weight to the similarity of the
appearance of the product arising from the adoption of the dominant
features of the registered mark, to wit: "[c]ourts will consider more the
aural and visual impressions created by the marks in the public mind,
giving little weight to factors like prices, quality, sales outlets and
market segments."53 The dominancy test is now incorporated into law
in Section 155.1 of RA 8293 which states:
SECTION 155. Remedies; Infringement. - Any person who shall,
without the consent of the owner of the registered mark:
155.l Use in commerce any reproduction, counterfeit, copy, or
colorable imitation of a registered mark or the same container or a
dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other
preparatory steps necessary to carry out the sale of any goods or
services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; (Emphasis supplied)
In contrast, the holistic test entails a consideration of the entirety of
the marks as applied to the products, including the labels and
packaging, in determining confusing similarity. The discerning eye of
the observer must focus not only on the predominant words but also
on the other features appearing on both marks in order that the
observer may draw his conclusion whether one is confusingly similar
to the other.54
The word "COFFEE" is the common dominant feature between
Nestle's mark "COFFEE-MATE" and Puregold's mark "COFFEE
MATCH." However, following Section 123, paragraph (h) of RA 8293
which prohibits exclusive registration of generic marks, the word
"COFFEE" cannot be exclusively appropriated by either Nestle or
Puregold since it is generic or descriptive of the goods they seek to
identify. In Asia Brewery, Inc. v. Court of Appeals,55 this Court held
that generic or descriptive words are not subject to registration and
belong to the public domain. Consequently, we must look at the word
or words paired with the generic or descriptive word, in this particular
case "-MATE" for Nestle's mark and "MATCH" for Puregold's mark, to
determine the distinctiveness and registrability of Puregold's mark
"COFFEE MATCH."
We agree with the findings of the BLA-IPO and ODG-IPO. The
distinctive features of both marks are sufficient to warn the purchasing
public which are Nestle's products and which are Puregold's products.
While both "-MATE" and "MATCH" contain the same first three
letters, the last two letters in Puregold's mark, "C" and "H," rendered
a visual and aural character that made it easily distinguishable from
Nestle's mark. Also, the distinctiveness of Puregold's mark with two
separate words with capital letters "C" and "M" made it
distinguishable from Nestle's mark which is one word with a
hyphenated small letter "-m" in its mark. In addition, there is a
phonetic difference in pronunciation between Nestle's "-MATE" and
Puregold's "MATCH." As a result, the eyes and ears of the consumer
would not mistake Nestle's product for Puregold's product.
Accordingly, this Court sustains the findings of the BLA-IPO and
ODG-IPO that the likelihood of confusion between Nestle's product
and Puregold's product does not exist and upholds the registration of
Puregold's mark.
WHEREFORE, we DENY the petition. We AFFIRM the 15 May
2014 Resolution and the 14 October 2014 Resolution of the Court of
Appeals in CA-G.R. SP No. 134592.
SO ORDERED. Registration Authority be impleaded. Moreover, Tujan-Militante
prayed for moral and exemplary damages, attorney’s fees, and costs of
ANTONIO T. CARPIO suit.
Acting Chief Justice
Issue: Whether or not the Special power of attorney notarized abroad
G.R. No. 209518 HAZELINA A. TUJAN-MILITANTE vs. ANA KARI is validly issued and can be used in the Philippines by Atty. Lucila on
CARMENCITA NUSTAD, as represented by ATTY. MARGUERITE behalf of Nustad under Rule 132 section 25.
THERESE L. LUCILA

Rulings: Yes. The requirements in Rule 132, Section 24 does not

apply.
Facts: On June 2, 2011, Respondent Ana Kari Carmencita Nustad
represented by Atty. Lucila filed a petition before the Regional Trial
In the Heirs of Spouses Arcilla v. Teodoro, this Court clarified that the
Court, Branch 55, Lucena City and prayed that Ma. Hazdina A. Tujan-
ruling in the Lopez case is inapplicable because the Rules of Evidence
Militante be ordered to surrender to the Register of Deeds of Lucena which were then effective were the old Rules, prior to their
City the owner’s duplicate copy of the Transfer Certificate of Title Nos.
amendment in 1989. When the Rules of Evidence were amended in
T-435798, T-436799, T- 387158 and T-387159, which ‘were all issued
1989, the introductory phrase “An official record or an entry therein ”
in Nustad’s name. She averred that Tujan-Militante has been was substituted by the phrase “The record of public documents
withholding the said titles.
referred to in paragraph (a) of Section 19, as found in the present
Rules. Also, Section 25 of the former Rules became Section 24 of the
Instead of filing an Answer, Tujan-Militante filed an Omnibus Motion present Rules.
to Dismiss and Annul Proceeding dated September 2, 2011. She
averred that the RTC did not acquire jurisdiction over her person as
On this note, the case of Heirs of Spouses Arcilla explained further:
she was not able to receive summons. Moreover, she argued that the
Order appeared to be a decision on the merits, as it already ruled with
certainty that she is in possession of the subject titles. It cannot be overemphasized that the required certification of an
officer in the foreign service under Section 24 refers only to the
documents enumerated in Section 19 (a), to wit: written official acts or
RTC denied Tujan-Militante’ s Motion and ruled that it has
records of the official acts of the sovereign authority, official bodies
jurisdiction over the case. Further the RTC stated that it has not yet
and tribunals, and public officers of the Philippines, or of a foreign
decided on the merits of the case when it ordered Tujan-Militante to
country. TheCourt agrees with the CA that had the Court intended to
surrender TCT Nos. T-435798, T-436799, T- 387.158 and T-387159
include notarial documents as one of the public documents
because it merely set the petition for a hearing.
contemplated by ·the provisions of Section 24, it should not have
specified only the documents referred to under paragraph (a) of
Tujan-Militante filed a Motion for Reconsideration and alleged that Section 19.
the Power of Attorney executed by Nustad in favor of Atty. Lucila is
void and non-existent. Tujan-Militante likewise averred that Atty.
As the Rules explicitly provide that the required certification of an
Lucila is representing a Norwegian, who is not allowed to own lands
officer in the foreign service refers only to written official acts or
in the Philippines. Aside from the dismissal of the case, petitioner
records of the official acts of the sovereign authority, official bodies
prayed that the Office of the Solicitor General and the Land
and tribunals, and public officers of the Philippines, or of a. foreign
country, as found in Section 19(a), Rule 132, such enumeration does
not include documents acknowledged before a notary public abroad.
With all these, We rule on the validity of the subject notarial
document. What is important is that Nustad certified before a
commissioned officer clothed with powers to administer an oath that
she is authorizing Atty. Lucila to institute the petition before the court
a quo on her behalf.
A notarized document has in its favor the presumption of regularity,
and to overcome the same, there must be evidence that is clear,
convincing and more than merely preponderant; otherwise, the
document should be upheld.
Lastly, Tujan-Militante’s contention that the TCTs under the name of
N ustad are invalid because of her citizenship constitutes a collateral
attack on the titles. The CA correctly ruled that the issue as to whether
an alien is or is not qualified to acquire the lands covered by the subject
titles can only be raised in an action expressly instituted for that
purpose.
EXPRESS PADALA (ITALIA) S.P.A., now BDO
REMITTANCE (ITALIA) S.P.A., Petitioner
vs.
HELEN M. OCAMPO, Respondent
DECISION
JARDELEZA, J.:
This is a petition for review on certiorari1 challenging the
Decision2 dated January 5, 2012 and Resolution3 dated June 27, 2012
of the Court of Appeals (CA) in CA-G.R. SP No. 113475. The CA granted
the petition for certiorarifiled by respondent Helen M. Ocampo
(Ocampo) and set aside the Decision4 dated September 14, 2009 of the
Regional Trial Court (RTC) in Civil Case No. MC08-3775 which
granted BDO Remittance (Italia) S.P.A. 's (BDO Remittance) petition
for recognition of foreign judgment.
The core issue being raised is whether service of summons was validly
effected upon respondent, who lives in Italy, through substituted
service.
BDO Remittance, a corporation with principal office in Italy, hired
respondent Ocampo as a remittance processor in September 2002.
She was dismissed in February 2004 for misappropriating the sum of
€24,035.60 by falsifying invoices of money payments relating to
customers' money transfer orders from February to December 2003.5
Accordingly, BDO Remittance filed a criminal complaint against
Ocampo for the same acts before the Court of Turin, Italy. Ocampo
pleaded guilty to the offense charged. On April 13, 2005, the
Honorable Court of Turin convicted and sentenced her to suffer
imprisonment of six months and a penalty of €300.00, but granted
her the benefit of suspension of the enforcement of sentence on
account of her guilty plea (the Court of Turin Decision).6
On September 22, 2008, BDO Remittance filed a petition for
recognition of foreign judgment7 with the RTC of Mandaluyong City.
BDO Remittance prayed for the recognition of the Court of Turin
Decision and the cancellation or restriction of Ocampo' s Philippine
passport by the Department of Foreign Affairs (DFA).8
On November 21, 2008, the sheriff attempted to personally serve the
summons on Ocampo in her local address alleged in the petition
located in San Bernardo Village, Darasa, Tanauan, Batangas.
However, since the address was incomplete, the sheriff sought the help
of barangay officials, who pointed him to the house belonging to
Ocampo's father, Nicasio Ocampo, Victor P. Macahia (Macahia), uncle
of Ocampo and present occupant, informed the sheriff that Ocampo
and her family were already in Italy, and that he was only a caretaker
of the house. The sheriff then proceeded to serve the summons upon
Macahia.9 After Ocampo failed to file an answer, BDO Remittance filed
a motion to declare Ocampo in default. The RTC granted the motion
and allowed BDO Remittance to present evidence ex parte.10
On September 14, 2009, the RTC rendered a Decision11 in favor of presented a decree20 from the High Court of Turin dated June 29, 2010
BDO Remittance (RTC Decision). It recognized as valid and binding which stated that her criminal liability has been extinguished.
in the Philippines the Court of Turin Decision and ordered the DFA to
cancel or restrict Ocampo's Philippine passport and not to allow its We deny the petition.
renewal until she has served her sentence.12
The general rule in this jurisdiction is that summons must be served
On February 11, 2010, Ocampo's mother, Laureana Macahia, received personally on the defendant. Section 6, Rule 14 of the Rules of Court
a copy of the RTC Decision and forwarded it to Ocampo.13 Not having provides:
been represented by counsel a quo, the period of appeal lapsed.
Ocampo was later able to engage the services of counsel who filed a
Sec. 6. Service in person on defendant. - Whenever practicable, the
petition for certiorari under Rule 65 with the CA on April 12,
summons shall be served by handing a copy thereof to the defendant
2010.14Ocampo principally argued that the RTC acted in grave abuse
in person, or, if he refuses to receive and sign for it, by tendering it to
of discretion in recognizing and ordering the enforcement of the Court
him.
of Turin Decision.15
For justifiable reasons, however, other modes of serving summons
In its now assailed Decision,16 the CA set aside the RTC Decision and
may be resorted to. When the defendant cannot be served personally
revoked the order to cancel or restrict Ocampo's Philippine passport
within a reasonable time after efforts to locate him have failed, the
(CA Decision). The CA first settled the issue of procedural due process,
rules allow summons to be served by substituted service. Substituted
particularly whether Ocampo was properly served with summons. It
service is effected by leaving copies of the summons at the defendant's
held that since Ocampo's whereabouts were unknown, summons
residence with some person of suitable age and discretion then
should have been served in accordance with Section 14, Rule 14 of the
residing therein, or by leaving the copies at defendant's office or
Rules of Civil Procedure. The sheriff however, erroneously effected the
regular place of business with some competent person in charge
substituted service of summons under Section 7 of Rule 14. Thus, the
thereof. 21
CA concluded that the RTC did not acquire jurisdiction over Ocampo,
and the RTC Decision against her is null and void. It also found that
the RTC acted in grave abuse of discretion when it recognized a foreign When the defendant's whereabouts are unknown, the rules allow
judgment of a criminal case and ordered the DFA to restrict or cancel service of summons by publication.22 As an exception to the preferred
Ocampo's passport.17 mode of service, service of summons by publication may only be
resorted to when the whereabouts of the defendant are not only
unknown, but cannot be ascertained by diligent inquiry. The diligence
After the CA denied its motion for reconsideration, BDO Remittance
requirement means that there must be prior resort to personal service
filed the present petition for review under Rule 45 arguing that: (1)
under Section 7 and substituted service under Section 8, and proof
Ocampo availed of the wrong remedy; and (2) the RTC did not gravely
that these modes were ineffective before summons by publication may
abuse its discretion in granting the petition for recognition of foreign
be allowed.23 This mode also requires the plaintiff to file a written
judgment and ordering the DFA to restrict or cancel Ocampo's
motion for leave of court to effect service of summons by publication,
passport.18
supported by affidavit of the plaintiff or some person on his behalf,
setting forth the grounds for the application.24
In her comment,19 Ocampo explained that BDO Remittance's
insistence on the enforcement of Court of Turin Decision is misleading
In the present case, the sheriff resorted to substituted service upon
because, by availing of the benefit of suspension of the enforcement,
Ocampo through her uncle, who was the caretaker of Ocampo's old
the penalty of confinement will not be enforced upon her. She also
family residence in Tanauan, Batangas. The CA held that substituted
service was improperly resorted to. It found that since Ocampo' s
"whereabouts are unknown and cannot be ascertained by diligent
inquiry x x x service may be effected only by publication in a
newspaper of general circulation."25
We agree with the CA that substituted service is improper under the
facts of this case. Substituted service presupposes that the place where
the summons is being served is the
defendant's current residence or office/regular place of
business. Thus, where the defendant neither resides nor holds office
in the address stated in the summons, substituted service cannot be
resorted to. As we explained in Keister v. Navarro: 26
Under the Rules, substituted service may be effect[ed] (a) by leaving
copies of the summons at the defendant's dwelling house or residence
with some person of suitable age and discretion then residing therein,
or (b) by leaving the copies at defendant's office or regular place of
business with some competent person in charge thereof. The terms
"dwelling house" or "residence" are generally held to refer to the time
of service, hence it is not sufficient "to leave the copy at defendant's
former dwelling house, residence, or place of abode, as the case may
be, after his removal therefrom." They refer to the place where the
person named in the summons is living at the time when the service is
made, even though he may be temporarily out of the country at the
time. Similarly, the terms "office" or "regular place of business" refer
to the office or place of business of defendant at the time of service.
Note that the rule designates the persons to whom copies of the
process may be left. The rule presupposes that such a relation of
confidence exists between the person with whom the copy is left and
the defendant and, therefore, assumes that such person will deliver the
process to defendant or in some way give him notice thereof.27 (Italics
in the original, citations omitted.)
Based on the sheriffs report, it is clear that Ocampo no longer resides
in San Bernardo Village, Darasa, Tanauan, Batangas. The report
categorically stated that "defendant Helen M. Ocampo and her family
were already in Italy,"28without, however, identifying any specific
address. Even BDO Remittance itself admitted in its petition for
recognition that Ocampo' s "whereabouts in Italy are no longer
certain."29 This, we note, is the reason why in alleging the two
addresses of Ocampo, one in Italy and one in the Philippines, BDO
Remittance used the phrase "last known [address ]"30 instead of the
usual "resident of." Not being a resident of the address where the
summons was served, the substituted service of summons is
ineffective. Accordingly, the RTC did not acquire jurisdiction over the
person of Ocampo.
BDO Remittance's reliance on Palma v. Galvez31 is misplaced for the
simple reason that the case involved service of summons to a person
who is temporarily out of the country. In this case, however, Ocampo's
sojourn in Italy cannot be classified as temporary considering that she
already resides there, albeit her precise address was not known. Modes
of service of summons must be strictly followed in order that the court
may acquire jurisdiction over the person of the defendant. The
purpose of this is to afford the defendant an opportunity to be heard
on the claim against him.32 BDO Remittance is not totally without
recourse, as the rules allow summons by publication and
extraterritorial service.33 Unlike substituted service, however, these
are extraordinary modes which require leave of court.
The service of summons is a vital and indispensable ingredient of a
defendant's constitutional right to due process. As a rule, if a
defendant has not been validly summoned, the court acquires no
jurisdiction over his person, and a judgment rendered against him is
void.34 Since the RTC never acquired jurisdiction over the person of
Ocampo, the judgment rendered by the court could not be considered
binding upon her.
Consequently, it is no longer necessary to delve into the other issues
raised in the petition. These issues can be resolved by the trial court
upon acquiring jurisdiction over Ocampo and giving her an
opportunity to be heard. It is in a better position to receive and assess
the evidence that may be presented by Ocampo, including the decree
dated June 29, 2010 issued by the High Court of Turin, to the effect
that her liability has been extinguished. While such claim would tend
to render the case moot, we refuse to consider the argument at the first
instance on two grounds: first, we are not a trier of facts; and second,
the document submitted has not been authenticated in accordance
with the rules on evidence.
WHEREFORE, the petition is DENIED. The Decision dated
January 5, 2012 and Resolution dated June 27, 2012 of the Court of
Appeals in CA-G.R. SP No. 113475 are AFFIRMED insofar as there
was no valid service of summons. The Decision dated September 14,
2009 of the Regional Trial Court, Branch 212, Mandaluyong City in
Civil Case No. MCOS-3775 is declared VOID.
SO ORDERED.
Republic vs. De Borja, G.R. No. 187448, January 9, 2017, Caguioa, J.
FACTS:
This started from a civil case filed by the Republic of the Philippines,
represented by the Presidential Commission on Good Governance
(PCGG), before the Sandiganbayan (Civil Case No. 0003 – Complaint
for “Accounting, Reconveyance, Forfeiture, Restitution, and
Damages”).
Respondents: (1) Geronimo Velasco [President, Chairman of the
Board of Directors of the Philippine National Oil Company (PNOC)];
(2) Alfredo De Borja (his nephew), (3) Marcos spouses; (3) Decision
Research Management Company (DRMC); and (4) others.
Purpose: To recover ill-gotten wealth amassed during Marcos’
administration.
Reasons: Regularly, PNOC would enter into charter contracts with
vessels and pursuant to industry practice, vessel owners would pay
“address commissions” to PNOC; however, during Velasco’s tenure,
no “address commissions” were remitted to PNOC. Instead, they were
remitted to DRMC. Likewise, Velasco allegedly diverted government
funds by entering transactions involving the purchase of crude oil
tankers and, by reason of which, he received bribes, kickbacks and
commissions for granting permits, licenses or charters to oil tankers
to service PNOC.
De Borja, herein respondent, allegedly acted as Velasco’s dummy,
nominee and/or agent and collected the “address commissions” in
behalf of Velasco.
Trial on the merits ensued. RP submitted its Formal Offer of
Evidence. De Borja filed a Demurrer to Evidence. RP opposed. SB
granted De Borja’s Demurrer to Evidence.
Grounds: RP failed to present sufficient evidence to hold De Borja
liable for damages; the envelopes that were delivered by witness
Verano to De Borja were sealed and the contents were not known;
Verano also did not deliver the envelopes personally to De Borja and
the former was not able to confirm that such envelopes reached the
latter.
RP filed an MR. SB denied the same.
RP filed this appeal by certiorari under Rule 45 solely with respect to
the liability of De Borja.
While RP’s petition was pending before this Court, SB dismissed Civil
Case No. 0003 with respect to the other respondents. RP appealed the
dismissal (G.R. No. 199323) but SC denied the same. Entry of
Judgment was made.
De Borja then filed a MTD this petition on the ground that it has been
rendered moot and academic by the dismissal of Civil Case No. 0003.
ISSUE/S: (1) Should the MTD be granted? (2) Did the SB correctly
grant the Demurrer to Evidence?
RULING:
(1) The MTD should not be granted.
It is axiomatic that a dismissal on the basis of a demurrer to evidence
is similar to a judgment; it is a final order ruling on the merits of a
case. Hence, when petitioner Republic brought the instant appeal
before this Court, the same was limited to respondent De Borja’s
liability alone. In this regard, the propriety of the SB’s granting of
respondent De Borja’s Demurrer to Evidence, which is the subject
matter of this case, is separate and distinct from the subject matter of
the appeal in G.R. No. 199323, i.e., liability of Velasco, et al.
It is of no moment that the SB dismissed Civil Case No. 0003 as the
same was merely with respect to the respondents other than
respondent De Borja who, by then, was already confronted with the
instant appeal brought by petitioner Republic.
(2) The SB correctly granted the Demurrer to Evidence
• What is a Demurrer to Evidence?
A demurrer to evidence is a motion to dismiss on the ground of
insufficiency of evidence. It is a remedy available to the defendant, to
the effect that the evidence produced by the plaintiff is insufficient in
point of law, whether true or not, to make out a case or sustain an
issue. The question in a demurrer to evidence is whether the plaintiff,
by his evidence in chief, had been able to establish a prima facie case.
• Petitioner RP was not able to adduce sufficient evidence to prove
the alleged complicity of De Borja with the required quantum of
evidence.
Case law has defined “burden of proof’ as the duty to establish the
truth of a given proposition or issue by such quantum of evidence as
the law demands in the case at which the issue arises.
In civil cases, the burden of proof is on the plaintiff to establish his
case by preponderance of evidence, i.e., superior weight of evidence
on the issues involved.
“Preponderance of evidence” means evidence which is of greater
weight, or more convincing than that which is offered in opposition to
it.
In a demurrer to evidence, however, it is premature to speak of
“preponderance of evidence” because it is filed prior to the defendant’s
presentation of evidence; it is precisely the office of a demurrer to
evidence to expeditiously terminate the case without the need of the
defendant’s evidence. Hence, what is crucial is the determination as to
whether the plaintiffs evidence entitles it to the relief sought.
The only evidence presented with respect to the liability of De Borja is
the testimony of Verano and the affidavit of one Jose M. Reyes who
failed to appear in court due to a heart attack 2 days prior to the
trial. Moreover, during Verano’ s cross-examination, it was revealed
that he was not knowledgeable of the contents of the envelopes and
that he also never confirmed whether respondent De Borja had
actually received them.
The Court joins and concurs in the SB’s observations pertaining to
Verano’s want of knowledge with respect to the contents of the
envelopes allegedly delivered to respondent De Borja’s office, which
remained sealed the entire time it was in Verano’s possession. As
admitted by Verano himself, he did not and could not have known
what was inside the envelopes when they were purportedly entrusted
to him for delivery. In the same vein, Verano did not even confirm
respondent De Borja’s receipt of the envelopes, despite numerous
opportunities to do so. Relatedly, it was further revealed during the
cross-examination of Verano that in the first place, Velasco did not
even deal directly with brokers.
All told, the Court finds that the evidence adduced is wholly
insufficient to support the allegations of the Complaint before the SB.
Thus, for failure of petitioner Republic to show any right to the relief
sought, the Court affirms the SB in granting the Demurrer to Evidence.
G.R. No. 219509, January 18, 2017
ILOILO JAR CORPORATION, Petitioner, v. COMGLASCO On June 28, 2004, Comglasco filed its Answer7 and raised an
CORPORATION/AGUILA GLASS, Respondent. affirmative defense, arguing that by virtue of Article 1267 of the Civil
Code (Article 1267),8 it was released from its obligation from the lease
DECISION contract. It explained that the consideration thereof had become so
difficult due to the global and regional economic crisis that had
plagued the economy. Likewise, Comglasco admitted that it had
MENDOZA, J.:
removed its stocks and merchandise but it did not refuse to pay the
rentals because the lease contract was already deemed terminated.
This petition for review on certiorari seeks to reverse and set aside the Further, it averred that though it received the demand letters, it did
January 30,2015 Decision1 and June 17,2015 Resolution2 of the Court not amount to a refusal to pay the rent because the lease contract had
of Appeals (CA) in CA-G.R. CV No. 01475, which overturned the been pre-terminated in the first place.
February 17, 2005 Amended Order3 of the Regional Trial Court,
Branch 37, Iloilo City (RTC).
On July 15, 2004, Iloilo Jar filed its Motion for Judgment on the
Pleadings9 arguing that Comglasco admitted all the material
The Antecedents: allegations in the complaint. It insisted that Comglasco's answer failed
to tender an issue because its affirmative defense was unavailing.
On August 16, 2000, petitioner Iloilo Jar Corporation (Iloilo Jar), as
lessor, and respondent Comglasco Corporation/Aguila Glass The RTC Order
(Comglasco), as lessee, entered into a lease contract over a portion of
a warehouse building, with an estimated floor area of 450 square
In its August 18, 2004 Order,10 the RTC granted the motion for
meters, located on a parcel of land identified as Lot 2-G-1-E-2 in
judgment on the pleadings. It opined that Comglasco's answer
Barangay Lapuz, La Paz District, Iloilo City. The term of the lease was
admitted the material allegations of the complaint and that its
for a period of three (3) years or until August 15, 2003.4
affirmative defense was unavailing because Article 1267 was
inapplicable to lease contracts.
On December 1, 2001, Comglasco requested for the pre-termination of
the lease effective on the same date. Iloilo Jar, however, rejected the
Comglasco moved for reconsideration but its motion was denied by
request on the ground that the pre-termination of the lease contract
the RTC in its January 24, 2005 Order.11 After formal defects in the
was not stipulated therein. Despite the denial of the request for pre-
original order were raised, the RTC issued the assailed February 17,
termination, Comglasco still removed all its stock, merchandise and
2005 Amended Order wherein the total amount of unpaid rentals to
equipment from the leased premises on January 15, 2002. From the
be paid was modified from P1,333,200.00 to P333,300.00. Further, it
time of the withdrawal of the equipment, and notwithstanding several
changed the following: (a) award of attorney's fees from P200,000.00
demand letters, Comglasco no longer paid all rentals accruing from
to P75,000.00; (b) litigation expenses from P50,000.00 to
the said date.5
P30,000.00; and (c) exemplary damages from P400,000.00 to
P200,000.00.
On September 14, 2003, Iloilo Jar sent a final demand letter to
Comglasco, but it was again ignored. Consequently, Iloilo Jar filed a
Aggrieved, Comglasco appealed before the CA.
civil action for breach of contract and damages before the RTC on
October 10, 2003.6
The CA Ruling
In its January 30, 2015 decision, the CA reversed the amended order
of the RTC. The appellate court was of the view that judgment on the
pleadings was improper as Comglasco's answer tendered an issue
considering that Iloilo Jar's material allegations were specifically
denied therein. Further, the CA opined that even if the same were not
specifically denied, the answer raised an affirmative issue which was
factual in nature. It disposed:
IN LIGHT OF ALL THE FOREGOING, the instant appeal is
GRANTED. The Order dated August 18, 2004; the Order dated
January 24, 2005; and the Order dated February 17, 2005 of the
Regional Trial Court, Branch 37, Iloilo City, in Civil Case No. 03-
27960, are REVERSED.
Let the records be REMANDED to the RTC for the conduct of further
proceedings.
SO ORDERED.12
Iloilo Jar moved for reconsideration, but its motion was denied by the
CA in its assailed June 17, 2015 resolution.
Hence, this petition.
ISSUES
I that the affirmative defense alleged therein was improper because
WHETHER OR NOT A DEFENSE RAISED IN THE ANSWER
THAT IS NOT APPLICABLE TO THE CASE AT BAR CAN BE
CONSIDERED AS APPROPRIATELY TENDERING AN
ISSUE THAT NEED TO BE TRIED BY THE TRIAL COURT;
AND
II
WHETHER OR NOT A JUDGMENT ON THE PLEADINGS IS
APPROPRIATE AND VALID WHEN THE DEFENSE
INTERPOSED BY THE DEFENDANT IN THE ANSWER IS
NOT APPLICABLE AS A DEFENSE TO THE CAUSE OF
ACTION AS STATED IN THE COMPLAINT.13
Iloilo Jar argues that Comglasco's answer materially admitted the
allegations of the former's complaint, particularly, that the latter had
removed its merchandise from the lease premises and failed to pay
subsequent rentals, after it had received the demand letters sent. It
points out that Comglasco brushed aside its obligation by merely
claiming that it was no longer bound by the lease contract because it
was terminated due to the financial difficulties it was experiencing in
light of the economic crisis. Iloilo Jar insisted that Comglasco cannot
rely on Article 1267 because it does not apply to lease contracts, which
involves an obligation to give, and not an obligation to do.
In its Comment,14 dated February 11, 2016, Comglasco countered that
its answer raised material defenses which rendered judgment on the
pleadings improper. It asserted that judgment on the pleadings may
be had only when the answer fails to tender an issue or otherwise
admits the material allegations of the adverse party's pleading.
Comglasco argued that even if the allegations in the complaint were
deemed admitted, the affirmative defenses it raised may give rise to
factual controversies or issues which should be subject to a trial.
In its Reply,15 dated September 28, 2016, Iloilo Jar reiterated that
judgment on the pleadings was warranted because Comglasco's
answer failed to specifically deny the allegation in the complaint, and
Article 1267 is inapplicable to a lease contract. As such, it stressed that
Comglasco's answer failed to tender an issue.
The Court's Ruling
The Court finds merit in the petition.
Rules of Procedure
strictly complied with;
Exceptions
It must be remembered that the right to appeal is not a natural right
but merely a statutory privilege; a party appealing is, thus, expected to
comply with the requirements of relevant rules otherwise he would
lose the statutory right to appeal.16
A review of the records reveals that Iloilo Jar received the Notice of
Resolution of the assailed CA resolution on July 9, 2015. Pursuant to
Section 2 Rule 45 of the Rules of Court,17 it had fifteen (15) days from
receipt of the resolution or until July 24, 2015 to file its petition for
review on certiorari before the Court.
On the said date, however, Iloilo Jar filed a motion for extension to file
the said petition. In its September 2, 2015 Resolution,18 the Court
granted that same and extended for thirty (30) days reckoned from the
expiration of the reglementary period within which to file the petition,
with a warning that it would be the last extension to be given. In other
words, Iloilo Jar had until August 23, 2015 to file its petition for review
on certiorari.
On August 24, 2015, Iloilo Jar again filed another motion for
extension19 requesting an additional thirty (30) days. In its November
25, 2015 Resolution,20 the Court again granted the same and gave
another 30- day extension reckoned from August 24, 2015. Thus, it
had until September 23, 2015 to file its petition.
Iloilo Jar, unfortunately, filed its petition for review only on
September 24, 2015,21 one day past the twice extended filing period.
Again, procedural rules are not lightly brushed aside as its strict
compliance is necessary for the orderly administration of justice.
Thus, even if the filing of the petition was merely late for a day, it is
still a violation of the rules on appeal, which generally leads to its
outright denial.
The tardy filing, notwithstanding, the Court may still entertain the
present appeal. Procedural rules may be disregarded by the Court to
serve the ends of substantial justice. When a petition for review is filed
a few days late, application of procedural rules may be relaxed, where
strong considerations of substantial justice are manifest in the
petition, in the exercise of the Court's equity jurisdiction.22 In CMTC
International Marketing Corporation v. Bhagis International
Trading Corporation,23 the Court did not strictly apply procedural
rules as it would serve the interest of justice, elucidating:
Time and again, this Court has emphasized that procedural rules
should be treated with utmost respect and due regard, since they are
designed to facilitate the adjudication of cases to remedy the
worsening problem of delay in the resolution of rival claims and in the
administration of justice. From time to time, however, we have
recognized exceptions to the Rules, but only for the most
compelling reasons where stubborn obedience to the Rules
would defeat rather than serve the ends of justice.
xxxx
Ergo, where strong considerations of substantive justice are
manifest in the petition, the strict application of the rules of
procedure may be relaxed, in the exercise of its equity
jurisdiction. Thus, a rigid application of the rules of procedure will
not be entertained if it will obstruct rather than serve the broader
interests of justice in the light of the prevailing circumstances in the
case under consideration.24 [Emphases supplied]
The merits of Iloilo Jar's petition for review warrant a relaxation of the
strict rules of procedure if only to attain justice swiftly. A denial of its
petition will cause the remand of the case, which based on the
circumstances, will unnecessarily delay the proceedings. Thus, the
Court deems it wise to let Iloilo Jar's procedural lapse pass.
Judgment on the
pleadings vis-a-vis
Summary Judgment
Section 1, Rule 34 of the Revised Rules of Court governs motions for
judgment on the pleadings. It reads:
SECTION 1. Judgment on the pleadings. - Where an answers
fails to tender an issue, or otherwise admits the material
allegations of the adverse party's pleading, the court may, on
motion of that party, direct judgment on such
pleading. However, in actions for declaration of nullity or annulment
of marriage or for legal separation, the material facts alleged in the
complaint shall always be proved. [Emphasis supplied]
On the other hand, under Rule 35 of the Rules of Court, a party may
move for summary judgment if there are no genuine issues raised.
In Basbas v. Sayson,25 the Court differentiated judgment on the
pleadings from summary judgment in that the former is appropriate if
the answer failed to tender an issue and the latter may be resorted to
if there are no genuine issues raised, to wit:
Simply stated, what distinguishes a judgment on the
pleadings from a summary judgment is the presence of
issues in the Answer to the Complaint. When the Answer fails to
tender any issue, that is, if it does not deny the material allegations in
the complaint or admits said material allegations of the adverse party's
pleadings by admitting the truthfulness thereof and/or omitting to
deal with them at all, a judgment on the pleadings is appropriate. On
the other hand, when the Answer specifically denies the
material averments of the complaint or asserts affirmative
defenses, or in other words raises an issue, a summary
judgment is proper provided that the issue raised is not
genuine. "A 'genuine issue' means an issue of fact which calls for the
presentation of evidence, as distinguished from an issue which is
fictitious or contrived or which does not constitute a genuine issue for
trial."
xxx
In this case, we note that while petitioners' Answer to respondents'
Complaint practically admitted all the material allegations therein, it
nevertheless asserts the affirmative defences that the action for revival
of judgment is not the proper action and that petitioners are not the
proper parties. As issues obviously arise from these
affirmative defenses, a judgment on the pleadings is clearly
improper in this case.26 [Emphases supplied]
In the case at bench, Comglasco interposed an affirmative defense in
its answer. While it admitted that it had removed its stocks from the
leased premises and had received the demand letter for rental
payments, it argued that the lease contract had been pre-terminated
because the consideration thereof had become so difficult to comply
in light of the economic crisis then existing. Thus, judgment on the
pleadings was improper considering that Comglasco's Answer raised
an affirmative defense.
Although resort to judgment on the pleadings might have been
improper, there was still no need to remand the case to the RTC for
further proceedings. In Wood Technology Corporation v. Equitable
Banking Corporation (Wood Technology),27 the Court ruled that
summary judgment may be availed if no genuine issue for trial is
raised, viz:
Summary judgment is a procedure aimed at weeding out sham claims
or defenses at an early stage of the litigation. The proper inquiry in this
regard would be whether the affirmative defenses offered by
petitioners constitute genuine issues of fact requiring a full-blown
trial. In a summary judgment, the crucial question is: are the issues
raised by petitioners not genuine so as to justify a summary
judgment? A "genuine issue" means an issue of fact which
calls for the presentation of evidence, as distinguished from
an issue which is fictitious or contrived, an issue that does
not constitute a genuine issue for trial.28 [Emphasis supplied]
It bears noting that in Wood Technology, the RTC originally rendered
a judgment on the pleadings but was corrected by the Court to be a
summary judgment because of the issue presented by the affirmative
defense raised therein. In the said case, the Court, nonetheless, ruled
in favor of the complainant therein because there was no genuine issue
raised.
Similar to Wood Technology, the judgment rendered by the RTC in
this case was a summary judgment, not a judgment on the pleadings,
because Comglasco's answer raised an affirmative defense.
Nevertheless, no genuine issue was raised because there is no issue of
fact which needs presentation of evidence, and the affirmative defense
Comglasco invoked is inapplicable in the case at bench.
A full blown trial would needlessly prolong the proceedings where a
summary judgment would suffice. It is undisputed that Comglasco
removed its merchandise from the leased premises and stopped
paying rentals thereafter. Thus, there remains no question of fact
which must be resolved in trial. What is to be resolved is whether
Comglasco was justified in treating the lease contract terminated due
to the economic circumstances then prevalent.
To evade responsibility, Comglasco explained that by virtue of Article
1267, it was released from the lease contract. It cited the existing global
and regional economic crisis for its inability to comply with its
obligation.
Comglasco's position fails to impress because Article 1267 applies only
to obligations to do and not to obligations to give. Thus, in Philippine
National Construction Corporation v. Court of Appeals,29 the Court
expounded:
Petitioner cannot, however, successfully take refuge in the
said article, since it is applicable only to obligations "to do,"
and not to obligations "to give." An obligation "to do" includes all
kinds of work or service; while an obligation "to give" is a prestation
which consists in the delivery of a movable or an immovable thing in
order to create a real right, or for the use of the recipient, or for its
simple possession, or in order to return it to its owner.
The obligation to pay rentals or deliver the thing in a
contract of lease falls within the prestation "to give"; xxx
The principle of rebus sic stantibus neither fits in with the facts of the
case. Under this theory, the parties stipulate in the light of certain
prevailing conditions, and once these conditions cease to exist, the
contract also ceases to exist. xxx
This article, which enunciates the doctrine of unforeseen events, is
not, however, an absolute application of the principle of rebus sic
stantibus, which would endanger the security of contractual relations.
The parties to the contract must be presumed to have assumed the
risks of unfavorable developments. It is therefore only in
absolutely exceptional changes of circumstances that equity
demands assistance for the debtor.30 [Emphases and
Underscoring supplied]
Considering that Comglasco's obligation of paying rent is not an
obligation to do, it could not rightfully invoke Article 1267 of the Civil
Code. Even so, its position is still without merit as financial struggles
due to an economic crisis is not enough reason for the courts to grant
reprieve from contractual obligations.
In COMGLASCO Corporation/Aguila Glass v. Santos Car Check
Center Corporation,31 the Court ruled that the economic crisis which
may have caused therein petitioner's financial problems is not an
absolute exceptional change of circumstances that equity demands
assistance for the debtor. It is noteworthy that Comglasco was also the
petitioner in the above-mentioned case, where it also involved Article
1267 to pre-terminate the lease contract.
Thus, the RTC was correct in ordering Comglasco to pay the unpaid
rentals because the affirmative defense raised by it was insufficient to
free it from its obligations under the lease contract. In addition, Iloilo
Jar is entitled to attorney's fees because it incurred expenses to protect
its interest. The trial court, however, erred in awarding exemplary
damages and litigation expenses.
Exemplary damages may be recovered in contractual obligations if the
defendant acted in wanton or fraudulent, reckless, oppressive or
malevolent manner.32 As discussed, Comglasco defaulted in its
obligation to pay the rentals by reason of its erroneous belief that the
lease contract was pre-terminated because of the economic crisis. The
same, however, does not prove that Comglasco acted in wanton or
fraudulent, reckless, oppressive or malevolent manner.33 On the other
hand, attorney's fees may be recovered in case the plaintiff was
compelled to incur expenses to protect his interest because of the
defendant's acts or omissions.
Further, the interest rate should be modified pursuant to recent
jurisprudence.34 The monetary awards shall be subject to 12%
interest per annum until June 30, 2013 and 6% per annum from July
1, 2013 until fully satisfied.
A Final Note
A lawyer, as an officer of the court, is expected to observe utmost
respect and deference to the Court. As such, he must ensure that he
faithfully complies with rules of procedure especially since they are in
place to aid in the administration of justice. This duty to be subservient
to the rules of procedure is manifested in numerous provisions35 of the
Code of Professional Responsibility.
The Court admonishes Iloilo Jar' counsel for repeatedly failing to
comply with the rules of procedure and court processes. First, he
belatedly filed the petition for review. Second, Iloilo Jar's counsel
failed to file its Reply within the time originally allotted prompting the
Court to require him to show cause why he should not be held in
contempt.36 Personal obligations, heavy workload does not excuse a
lawyer from complying with his obligations particularly in timely filing
the pleadings required by the Court.
WHEREFORE, the January 30, 2015 Decision and June 17, 2015
Resolution of the Court of Appeals are REVERSED and SET ASIDE.
The February 17, 2005 Amended Order of the Regional Trial Court,
Branch 37, Iloilo City, is AFFIRMED WITH MODIFCATION in
that the award of exemplary damages and litigation expenses
is DELETED. The monetary award shall be subject to 12% per
annum until June 30, 2013 and 6% per annum from July 1, 2013 until
fully satisfied.
Atty. Raleigh Silvino L. Manikan is ADMONISHED for his repeated
failure to observe the rules of procedure, with a WARNING that a
repetition to strictly comply with procedural rules shall be dealt with
more severely.
SO ORDERED.
Sps. Firmo S. Rosario and Agnes Annabelle Dean-Rosario Vs. Priscilla
P. Alvar; G.R. No. 212731; September 6, 2017
DECISION
DEL CASTILLO, J.:
“Under the doctrine of conclusiveness of judgment, facts and issues
actually and directly resolved in a former suit cannot again be raised
in any future case between the same parties, even if the latter suit may
involve a different claim or cause of action.”[1]
This Petition for Review on Certiorari[2] under Rule 45 of the Rules of
Court assails the May 27, 2014 Decision[3] of the Court of Appeals (CA)
in CA-G.R.CV No. 98928.
Factual Antecedents
On separate dates in 1989, petitioner Agnes Annabelle Dean-Rosario
(Agnes) borrowed from respondent Priscilla Alvar (Priscilla) a total of
P600,000.00, secured by real estate mortgages over two parcels of
land covered by Transfer Certificates of Title Nos. 167438 (residence
of petitioner spouses Agnes and Firmo Rosario) and 167439 (a five-
door rental apartment).[4]
In December 1990, the mortgages were discharged.[5]
On March 16, 1992 and July 17, 1992, Agnes executed two Deeds of
Absolute Sale over the two lots in favor of Priscilla’s daughter,
Evangeline Arceo (Evangeline), for the amount of P900,000.00
each.[6] Evangeline later sold the lots to Priscilla also for the price of
P900,000.00 each.[7]
On April 27, 1994, Priscilla sent a demand letter to petitioner spouses
Rosario asking them to vacate Lot 1.[8] This prompted petitioner
spouses Rosario to file before the Regional Trial Court (RTC) of Makati
City a Complaint for Declaration of Nullity of Contract of Sale and
Mortgage, Cancellation of Transfer Certificates of Title and Issuance
of new TCTs with Damages, docketed as Civil Case No. 94-1797,
against Priscilla.[9] Petitioner spouses Rosario alleged that Priscilla
deceived Agnes into signing the Deeds of Absolute Sale in favor of
Evangeline, as Agnes merely intended to renew the mortgages over the
two lots.[10]
Priscilla, in turn, filed with the RTC a Complaint for Recovery of
Possession, docketed as Civil Case No. 96-135.[11]She claimed that she
is the absolute owner of the subject lots and that Agnes sold the lots
because she was in dire need of money.[12]
The cases were consolidated and on April 4, 2003, the RTC rendered
a Decision granting Priscilla’s complaint for recoveiy of possession
while denying petitioner spouses Rosario’s complaint for declaration
of nullity of contract of sale.[13] The dispositive portion of the Decision
reads:
WHEREFORE, premises considered, Civil Case No. 94-1797 is
ordered dismissed for lack of merit Defendants’ counterclaims are also
ordered dismissed.
[Respondent] having proven her claim in Civil Case No. 96-135,
[petitioner spouses Rosario] are hereby ordered to vacate die bouse
and lot located at No. 2703 Apolinario comer General Capinpin
Streets, Bangkal, Makati City, covered by TCT No. 188995 and restore
possession thereof to its rightful owner, [respondent].
SO ORDERED.[14]
On appeal, the CA reversed the April 4, 2003 Decision of the RTC. In
its November 15, 2006 Decision,[15] the CA ruled that although the
transfers from Agnes to Priscilla were identified as absolute sales, the
contracts are deemed equitable mortgages pursuant to Article
1602[16] of the Civil Code.[17] Thus, the CA disposed of the case in this
wise:
In view of these, We resolve [petitioner spouses’] prayers in the
following manner:
Anent their prayer for the issuance of new certificates of titles, We hold
the cancellation of [petitioner Agnes’] title over the 2 lots was void.
Titles to the subject lots, which had supposedly been transferred to
[Evangeline] and later to [Priscilla], actually remained with
[petitioner Agnes], as owner-mortgagor, conformably with the well-
established doctrine that the mortgagee does not automatically
become the owner of the mortgaged property as the ownership thereof
remains with the mortgagor. Hence, it is not necessary for Us to order
the issuance of new titles under the name of [petitioner Agnes].
Accordingly, TCT No. 167438 and TCT No. 167439 issued under the
name of [petitioner Agnes] must be reinstated, while TCT No. 188920
and TCT No. 188995 issued in the name of [Priscilla] must be nullified.
Anent their prayer for the nullification of the Deeds of Absolute Sale
and the Mortgage, We resolve to deny the same. Although the subject
deeds of sale in favor of [Evangeline] were actually for mortgage, said
type of simulation of contracts does not result in the nullification of
the deeds but requires the reformation of the instrument, pursuant to
Article 1365 of the Civil Code.
Moreover, as [petitioner spouses Rosario] admitted they mortgaged
the 2 lots to [Priscilla] as security for the payment of their loans.
Absent any proof that [petitioner spouses Rosario] had fully paid their
loans to [Priscilla], [Priscilla] may seek the foreclosure of the 2 lots if
[petitioner spouses Rosario] failed to pay their loans of P1.8 Million,
the amounts appearing in the Deeds of Absolute Sale.
WHEREFORE, the Appeal is GRANTED. The assailed Decision dated
April 4, 2003 of the Regional Trial Court of Makati City, Branch 150,
in Civil Cases Nos. 94-1797 & 96-135, is hereby REVERSED and SET
ASIDE.
A new one is hereby entered ordering the reinstatement of TCT No.
167438 and TCT No. 167439 issued under the name of [petitioner]
Agnes Dean-Rosario aid ordering the cancellation of TCT No. 188920
and TCT No. 188995 issued under the name of [Priscilla].[18]
Since the parties did not file a motion for reconsideration or an appeal,
the CA Decision became final and executory.[19]
On October 17, 2007, Priscilla sent a letter to Agnes demanding the
payment of her outstanding obligation amounting to P1.8
million.[20] Due to the failure or refusal of petitioner spouses Rosario
to heed the demand, Priscilla filed before the RTC of Makati, Branch
148, a Complaint[21] for Judicial Foreclosure of Real Estate Mortgage,
docketed as Civil Case No. 07-997.[22]
Petitioner spouses Rosario moved for the dismissal of the Complaint,
but the RTC denied the same.[23]
They then filed a Petition for Certiorari before the CA, docketed as CA-
G.R. SP No. 107484, questioning the denial of their Motion to
Dismiss.[24]
On May 25, 2010, the CA rendered a Decision dismissing the Petition
for lack of merit.[25]
On September 5, 2011, the Supreme Court issued a Resolution denying
the Petition for Review on Certiorari filed by petitioner spouses
Rosario.[26]
Meanwhile, on May 5, 2009, Priscilla filed a Motion to Declare
Defendants in Default for the failure of petitioner spouses Rosario to
file an answer within the reglernentary period, which the RTC
granted.[27]
Ruling of the Regional Trial Court
On January 25, 2012, the RTC rendered a Decision[28] in favor of
Priscilla, the dispositive portion of which reads:
WHEREFORE, premises considered, decision is hereby rendered
ordering [petitioner] Spouses Firmo S. Rosario and Agnes Annabelle
Dean-Rosario to pay the [respondent] Priscilla Alvar, jointly and
severally, the following sums:
1. Php1,800,000.00 as the aggregate amount of [petitioner spouses
Agnes and Firmo Rosario’s] obligation to [Priscilla], plus 12% legal
interest per annum from the time of demand on October 18, 2007 until
the obligation is fully paid;
2. Php62,903.88 as reimbursement for payment of real property taxes
due on the subject lots;
3. Php200,000.00 as attorney’s fees and litigation expenses in the
amount of Php200,000.00
All the above must be paid within a period of not less than ninety (90)
days nor more than one hundred twenty (120) days from the entry of
judgment. In default of such payment, the two (2) parcels of land
covered by TCT Nos. 167438 and 167439 subject matter of the suit
including its improvements shall be sold to realize the mortgage debt
and costs, in the manner and under the regulations that govern sales
of real estate under execution.
SO ORDERED.[29]
Aggrieved, petitioner spouses Rosario appealed to the CA.
Ruling of the Court of Appeals
On May 27, 2014, the CA affirmed the January 25, 2012 Decision of
the RTC with modification that: (1) the interest rate imposed shall be
6% per annum in accordance with Bangko Sentral ng Pilipinas (BSP)
Circular No. 799, Series of 2013; and (2) the attorney’s fees and
litigation expenses shall be reduced to P50,000.00.[30]
Issues
Hence, petitioner spouses Rosario filed the instant Petition with the
following issues:
I.

WHETHER THE HONORABLE [CA] COMMITTED GRAVE ABUSE
OF DISCRETION IN HOLDING THAT A REFORMATION OF
INSTRUMENT BETWEEN THE PARTIES IS NO LONGER
NECESSARY DESPITE AN EARLIER RULING BY THE
HONORABLE [CA] THAT REFORMATION IS REQUIRED
ESPECIALLY BECAUSE:
A) [Respondent] had no personality to file a complaint for judicial
foreclosure. To allow this would violate the ruling of this
Honorable Court in Borromeo v. Court of Appeals, 550 SCRA 269
and Article 1311 of the New Civil Code.
B) The obligation of the petitioner [spouses Rosario] in the amount
of P1,800,000.00 has no legal and factual basis.
C) The original real estate mortgages between the parties have been
cancelled or discharged. The alleged new Deeds of Sale to the
daughter of the [respondent] are fake and simulated.
II.
WHETHER THE RULING OF THE [CA] IS CONTRARY TO THE
CASE OF GO V. BACARON, 472 SCRA 339.
III.
WHETHER THE HONORABLE [CA] COMMITTED GRAVE ABUSE
OF DISCRETION IN NOT HOLDING THAT A REFORMATION OF
THE INSTRUMENTS CAN BE MADE PRIOR TO FORECLOSURE
PROCEEDINGS (AS A RESULT OF THE RULING THAT THE
CONTRACT BETWEEN TOE PARTIES SHOULD BE TREATED AS
AN EQUITABLE MORTGAGE).[31]
Simply put, the issue is whether the CA erred in dismissing the appeal.
Petitioner spouses Rosario’s Arguments
Petitioner spouses Rosario contend that Priscilla had no legal
personality to institute the judicial foreclosure proceedings as the
Deeds of Absolute Sale, which were deemed equitable mortgages, were
executed by them in favor of Evangeline, not Priscilla.[32] They also
claim that the obligation in the amount of P1.8 million has no legal and
factual bases as the only loan they obtained was in the amount of
P600,000.00.[33] Lastly, they insist that before the subject lots can be
judicially foreclosed, a reformation of the fake and simulated Deeds of
Absolute Sale must first be done to enable them to present
documentary and parol evidence.[34]
Respondent’s Arguments
Priscilla, on the other hand, maintains that she has a legal personality
to institute the foreclosure proceedings pursuant to the November 15,
2006 Decision.[35] The indebtedness of petitioner spouses Rosario was
also established in the said Decision, which has long attained
finality.[36] She asseverates that the loan has not been paid and that the
judicial foreclosure is not based on the old mortgages that have been
discharged, but on the Deeds of Absolute Sale, which were considered
as equitable mortgages in the November 15, 2006 Decision.[37] As to
the reformation of the instruments, Priscilla asserts that there is no
need for such reformation as the declaration in the November 15, 2006
Decision is sufficient.[38]
Our Ruling
The Petition lacks merit.
There is conclusiveness of judgment as to the issues
pertaining to the existence of the loan and the legal
personality of Priscilla to file a case for judicial
foreclosure.
At the outset, it must be pointed out that the November 15, 2006
Decision of the CA in CA-G.R. CV No. 81350, from which this case
arose, has attained finality due to the failure of the parties to file a
motion for reconsideration or an appeal. As such, the factual findings
and conclusions in the November 15, 2006 Decision may no longer be
disputed by petitioner spouses Rosario as res judicata by
conclusiveness of judgment, which bars them from challenging the
same issues.
Unlike res judicata by prior judgment, where there is identity of
parties, subject matter, and causes of action, there is only identity of
parties and subject matter in res judicata by conclusiveness of
judgment.[39] Since there is no identity of cause of action, the judgment
in the first case is conclusive only as to those matters actually and
directly controverted and determined.[40] Thus, there is res judicata by
conclusiveness of judgment when all the following elements are
present:
(1) the judgment sought to bar the new action must be final;
(2) the decision must have been rendered by a court having
jurisdiction over the subject matter and the parties;
(3) the disposition of the case must be a judgment on the merits; and
(4) there must be as between the first and second action, identity of
parties, but not identity of causes of action.[41]
In this case, all the elements are present: first, the November 15, 2006
Decision has attained finality; second, the said decision was rendered
by a court having jurisdiction over the subject matter and the parties;
third, the said decision disposed of the case on the merits; and fourth,
there is, as between the previous case and the instant case, an identity
of parties.
Since there is conclusiveness of judgment in this case, petitioner
spouses Rosario are estopped from raising issues that were already
adjudged in the November 15, 2006 Decision as “the dictum laid down
in the earlier final judgment is conclusive and continues to be binding
between the parties, their privies and successors-in-interest, as long
as the facts on which that judgment was predicated continue to be the
facts of the case or incident before the court in a later case x x x.”[42] In
short, “the binding effect and enforceability of that earlier dictum can
no longer be re-litigated in a later case since the issue has already been
resolved and finally laid to rest in the earlier case.”[43]
Consequently, there is no need for Us to delve into the issues raised by
petitioner spouses Rosario pertaining to the existence of the loan and
the legal personality of Priscilla to file a case for judicial foreclosure as
the November 15, 2006 Decision already established the existence of
the loan in the amount of P1.8 million[44] and recognized the legal
personality of Priscilla to foreclose the subject property, as she was the
one who loaned spouses Rosario the amount of P1.8 million.[45]
The pronouncement in the November 15, 2006 Decision that
the parties’ intention was to execute an equitable mortgage
is sufficient reformation of such instrument.
The only issue left for us to determine is whether a reformation of the
contract is required before the subject lots may be foreclosed.
We rule in the negative.
Reformation of an instrument is a remedy in equity where a written
instrument already executed is allowed by law to be reformed or
construed to express or conform to the real intention of the
parties.[46] The rationale of the doctrine is that it would be unjust and
inequitable to allow the enforcement of a written instrument that does
not express or reflect the real intention of the parties.[47]
In the November 15, 2006 Decision, the CA denied petitioner spouses’
Complaint for declaration of nullity of contract of sale on the ground
that what was required was the reformation of the instruments,
pursuant to Article 1365[48] of the Civil Code.[49] In ruling that the
Deeds of Absolute Sale were actually mortgages,[50] the CA, in effect,
had reformed the instruments based on the true intention of the
parties. Thus, the filing of a separate complaint for reformation of
instrument is no longer necessary because it would only be redundant
and a waste of time.
Besides, in the November 15, 2006 Decision, the CA already declared
that absent any proof that petitioner spouses Rosario had fully paid
their obligation, respondent may seek the foreclosure of the subject
lots.[51]
In view of the foregoing, we find no error on the part of the CA in ruling
that a separate action for reformation of instrument is no longer
necessary as the declaration in the November 15, 2006 Decision that
the parties’ intention was to execute an equitable mortgage is
sufficient reformation of such instrument.
WHEREFORE, the Petition is hereby DENIED. The assailed May
27, 2014 Decision of the Court of Appeals in CA-G.R. CV No. 98928 is
hereby AFFIRMED.
ROBERTO A. TORRES v. ANTONIA F. ARUEGO, GR No. 201271,
2017-09-20
Facts:
On March 7, 1983, Antonia F. Aruego (Antonia) and Evelyn F. Aruego
(Evelyn), represented by their mother and guardian ad litem Luz M.
Fabian, filed a Complaint[4] with the Regional Trial Court (RTC) of
Manila for "Compulsory Recognition and Enforcement of
Successional Rights" against Jose E. Aruego, Jr. and the five minor
children of Gloria A. Torres, represented by their father and guardian
ad litem Justo M. Torres, Jr. (collectively defendants).
In their Complaint, Antonia and Evelyn alleged that they are the
illegitimate children of the deceased Jose M. Aruego (Aruego) who had
and maintained an amorous relationship with Luz Fabian, their
mother, up to the demise of Aruego on March 30, 1982.Alleging
further that they are in continuous possession of the status of children
of the deceased Aruego and not being aware of any intestate
proceeding having been filed in court for the settlement of the estate
of Aruego, they have thus filed this complex action for compulsory
acknowledgment and participation in said inheritance.
After trial on the merits, the court rendered a Decision[7] on June 15,
1992, disposing as follows:WHEREFORE, judgment is rendered -1.
Declaring Antonia Aruego as illegitimate daughter of Jose Aruego and
Luz Fabian;2. Evelyn Fabian is not an illegitimate daughter of Jose
Aruego with Luz Fabian;3. Declaring that, the estate of deceased Jose
Aruego are the following
Defendants filed a Motion for Partial Reconsideration[9] but it was
denied by the lower court in its Order[10] dated January 14, 1983.
They filed a Notice of Appeal[11] on February 12, 1993 but it was
denied due course by the lower court in its Order[12] dated February
26, 1993 on the ground that it was filed out of time.Subsequently,
defendants (now petitioners) filed with the CA a Petition for
Prohibition and Certiorari with Prayer for a Writ of Preliminary
Injunction.[13] On August 31, 1993, the CA dismissed the Petition for
lack of merit
On August 15, 1997, plaintiff Antonia (now respondent) filed a Motion
for Partition[19] with the court a quo alleging that its June 15, 1992
Decision became final and executory in view of the denial of the notice
of appeal filed by petitioners and the dismissal of their Petition for
Prohibition and Certiorari by the CA and the subsequent denial of
their appeal to the Supreme Court on March 13, 1996.
On December 12, 1998, petitioners filed a Verified Complaint[22] with
the RTC of Quezon City docketed as Civil Case No. Q-98-36300,
seeking to nullify the Deed of Absolute Sale[23] dated May 14, 1998
and the corresponding titles (TCT No. 188200[24] and TCT. No.
191257[25]) issued in relation thereto
On July 1, 1999, respondent filed anew a Motion for Partition[26]
dated June 28, 1999 praying for the implementation of the June 15,
1992 Decision of the court a quo.In view of the pendency of Civil Case
No. Q-98-36300, the court a quo in its Order[27] dated November 8,
1999 resolved to defer the resolution of respondent's Motion for
Partition dated June 28, 1999 on the ground that the controversy
involved in the Quezon City RTC case would constitute a prejudicial
question to the issue involved in the Motion for Partition.
Finding that no prejudicial question existed between the two cases
involved, the CA granted the Petition for Certiorari on March 23,
2004.[30] The CAs' Decision became final and executory for failure of
petitioners to appeal therefrom. Thereupon, respondent moved that
her Motion for Partition be given due course.
Petitioners opposed the motion arguing in the main that the partition
of the estate of Aruego could not take place by virtue of respondent's
mere motion considering that there was no conclusive adjudication of
the ownership of the properties declared as constituting the estate of
Jose M. Aruego and that all the identities of his heirs had yet to be
determined.
Unsatisfied, petitioners filed a Petition for Certiorari[36] with the CA.
It was docketed as CA-G.R. SP No. 113405. In a Resolution[37]
promulgated on September 12, 2011, the CA dismissed the petition for
lack of merit
Hence, this Petition for Review on Certiorari under Rule 45[40] filed
by petitioner
Issues:
whether or not the June 15, 1992 Decision of the court a quo, which
attained finality more than 20 years ago, may still be subject to review
and modification by the Court
Ruling:
The Petition is not meritorious.
The CA ruled that it cannot issue a writ of certiorari to allow parties to
present evidence in a case that has long attained finality.
We affirm the assailed Resolutions of the CA.
Nothing is more settled in the law than that 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 or law and whether it was made
by the court that rendered it or by the highest court of the land.[58]
The only recognized exceptions to the general rule are the correction
of clerical errors, the so-called nunc pro tunc entries which cause no
prejudice to any party, void judgments, and whenever circumstances
transpire after the finality of the decision rendering its execution
unjust and inequitable.
As correctly held by the court a quo in its Order dated July 23, 2009,
"[t]he question as to what properties have been deemed included in
the estate of Jose Aruego, Sr. has already been settled when the court
finally resolved the main controversy on June 15, 1992 and declared,
inter alia, that plaintiff, Antonia Aruego, is entitled to one-half of the
share of the legitimate children of Jose Aruego, Sr. xxx.
WHEREFORE, the Petition for Review on Certiorari is DENIED and
the assailed September 12, 2011 and March 26, 2012 Resolutions of
the Court of Appeals in CA-G.R. SP No. 113405 are AFFIRMED.
Principles:
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 or law
and whether it was made by the court that rendered it or by the highest
court of the land.[58] The only recognized exceptions to the general
rule are the correction of clerical errors, the so-called nunc pro tunc
entries which cause no prejudice to any party, void judgments, and
whenever circumstances transpire after the finality of the decision
rendering its execution unjust and inequitable.
Baclaran Marketing Corporation vs. Fernando C. Nieva and
Mamerto Sibulo, Jr., G.R. No. 189881, April 19, 2017
Case Digest. Remedial Law. An auction sale and a writ of execution are
not final orders. Thus, they cannot be nullified through an action for
annulment of judgment.
Meaning of Extrinsic Fraud.Extrinsic fraud refers to a fraud
committed to the unsuccessful party by his opponent preventing him
from fully exhibiting his case 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 when an attorney fraudulently or without authority
connives at his defeat.
 Baclaran Marketing Corporation vs. Fernando C. Nieva
and Mamerto Sibulo, Jr., G.R. No. 189884, April 19, 2017
Facts
The case stemmed from a vehicular collision in Taytay Rizal, between
a 10-wheeller truck owned by Petitioner BMC and driven by its
employee Ricardo Mendoza and a car owned and driven by Defendant
Sibulo. The Antipolo Court ruled that the damages suffered by
Defendant Sibulo were the result of his own reckless and imprudent
driving. On Appeal, the CA reversed the Antipolo Court and held that
Mendoza’s negligence caused the collision. It awarded Sibulo damages
and the Decision became final and executory. The Antipolo Court
issued a Writ of Execution. Petitioner BMC failed to redeem the
property within one year from the sale, Nieva consolidated ownership
over it.
A Petition for Issuance of a Writ of Possession over the property in
Paranaque City was granted.
In view of the Writ of Possession and Notice to Vacate issued against
Petitioner BMC, it filed a Petition for Annulment of Judgment before
CA. BMC alleged that Atty. Rizon, its own counsel, committed acts of
gross and inexcusable negligence constituting “extrinsic fraud” which
deprived it of due process and an opportunity to present its case. It
discovered the fraud only in December 2008 when its representatives
tried to pay the real estate tax on the property, only to learn that the
title to it had already been transferred to Defendant Nieva. BMC
averred that it did not know that Defendant Sibulo appealed the 1990
Decision which ended the controversy. Had BMC known of the appeal,
it could have opposed the proceedings or engaged the services of new
counsel.
The CA denied the Petition. It ruled that the remedy of annulment of
judgment is not available:
• Extrinsic fraud refers to a fraud perpetrated by the prevailing party,
not by unsuccessful party’s own counsel;
• BMC is bound by the negliegence of Atty. Rizon because it was
negligent for not checking on the status of the case. It did not also
inform the Antipolo Court of its change of address. Thus, BMC cannot
claim that it was denied due process;
• A writ of execution or auction sale are not in the nature of a final
judgment, order, or resolution, hence, they cannot be the subject of an
action to annul judgment.
Issues
1. Whether the CA erred in dismissing BMC’s petition for annulment of
judgment.
2. Whether or not there exists extrinsic fraud.
Held
1. In Guiang v. Co, the SC declared that an auction sale and a writ of
execution are not final orders. Thus, they cannot be nullified through
an action for annulment of judgment, to wit:
It bears stressing that Rule 47 of the Rules of Civil Procedure applies
only to a petition to annul a judgment or final order and resolution
in civil actions, on the ground of extrinsic fraud or lack of jurisdiction
or due process. A final order or resolution is one which is issued by a
court which disposes of the subject matter in its entirety or
terminates a particular proceeding or action, leaving nothing else to
be done but to enforce by execution what has been determined by the
court. The rule does not apply to an action to annul the levy
and sale at public auction of petitioner’s properties or the
certificate of sale executed by the deputy sheriff over said
properties. Neither does it apply to an action to nullify a
writ of execution because a writ of execution is not a final
order or resolution, but is issued to carry out the mandate
of the court in the enforcement of a final order or of a
judgment. It is a judicial process to enforce a final order or
judgment against the losing party. (Citations omitted,
emphasis supplied.)
Corollarily, an order implementing a writ of execution issued over
certain real properties is also not a final order as it merely enforces a
judicial process over an identified object. It does not involve an
adjudication on the merits or determination of the rights of the
parties.
Closely related to a writ of execution is a writ of possession. In LZK
Holdings and Development Corp. v. Planters Development Bank, the
SC explained that a writ of possession is a writ of execution employed
to enforce a judgment to recover the possession of land. It commands
the sheriff to enter the land and give its possession to the person
entitled under the judgment. Thus, similar to a writ of execution, a writ
of possession is not a final order which may be annulled under Rule
47. It is merely a judicial process to enforce a final order against the
losing party. For this reason the Decision of the Antipolo Court
ordering the issuance of writ of possession is also not amenable to an
action for annulment of judgment.
 In fine, only the Decision of the Paranaque Court ordering the
cancellation of BMC’s title over the property qualifies as a final
judgment. It is a judgment on the merits declaring who between Nieva
and BMC has the right over the title to the property. Therefore, it may
be the subject of an action for annulment of judgment. Be that as it
may, BMC failed to prove that any of the grounds for annulment are
present in this case.
1. No. Extrinsic fraud refers to a fraud committed to the unsuccessful
party by his opponent preventing him from fully exhibiting his case 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 when an attorney fraudulently
or without authority connives at his defeat.
In Pinausukan, the Sc held that a lawyer’s neglect in keeping track of
the case and his failure to apprise his client of the developments of the
case do not constitute extrinsic fraud. Fraud is not extrinsic if the
alleged fraudulent act was committed by petitioner’s own counsel. The
fraud must emanate from the act of the adverse party and must be of
such nature as to deprive petitioner of its day in court. Thus, in many
cases,the SC have held that a lawyer’s mistake or gross negligence does
not amount to extrinsic fraud that would grant a petition for
annulment of judgment.
In this case, the CA correctly found that BMC neither alleged nor
proved that the gross negligence of its former counsel was done in
connivance with Nieva or Sibulo. Therefore, it is not the extrinsic fraud
contemplated under Rule 47, Section 2.
Butuan Development Corporation (BDC) Vs. The Twenty-First
Division of the Honorable Court of Appeals, et al.; G.R. No. 197358;
April 5, 2017
DECISION
REYES, J.:
This is a petition for certiorari[1] under Rule 65 of the Rules of Court
seeking to annul and set aside the Decision[2] dated January 14, 2011
and Resolution[3]dated May 24, 2011 issued by the Court of Appeals
(CA) in CA-G.R. SP No. 01473.
The Facts
On March 31, 1966, Butuan Development Corporation (BDC), which
was then still in the process of incorporation, through its then
President Edmundo Satorre (Satorre), purchased from the Spouses
Jose and Socorro Sering (Spouses Sering) a 7.6923-hectare parcel of
land situated in Butuan City (subject property).[4] Thus, on January
28, 1969, the Registry of Deeds for Butuan City issued Transfer
Certificate of Title (TCT) No. RT-4724[5] in the name of BDC.[6]
On May 5, 1998, Max L. Arriola, Jr. (Max Jr.), representing himself as
the Chairman of BDC and armed with a duly notarized Resolution[7] of
the BDC Board of Directors therefor, mortgaged the subject property
to De Oro Resources, Inc. (DORI) and its President Louie A. Libarios
(Libarios).[8]
On May 13, 2002, Satorre, together with Ma. Laurisse Satorre-Gabor,
Liza Therese Satorre-Balansag, Edmundo C. Satorre II, and Leslie
Mae Satorre-King, executed the Articles of Incorporation[9] of BDC.
The Securities and Exchange Commission approved the Articles of
Incorporation and issued the Certificate of Incorporation[10] of BDC on
May 23, 2002.
On August 23, 2005, BDC filed a complaint for declaration of nullity
of real estate mortgage[11] (REM) with the Regional Trial Court (RTC)
of Agusan del Norte and Butuan City against Max Jr., Libarios, and
DORI (collectively, the respondents), and Casilda L. Arriola, Rebecca
J. Arriola, and Joseph L. Arriola. It alleged that, sometime in 2004, it
discovered that the owner’s duplicate copy of TCT No. RT-4724 was
missing and efforts to locate the same proved futile. However, it
subsequently discovered that the owner’s duplicate copy of TCT No.
RT-4724 was already in Libario’s possession, pursuant to the REM
executed by the Arriolas who misrepresented themselves as the
owners and directors of BDC.[12] Accordingly, claiming that the said
REM was a nullity, BDC prayed that the same be nullified.[13]
In their answer,[14] Libarios and DORI denied that the Arriolas
misrepresented themselves as the directors of BDC since, at the time
of the execution of the REM, the Arriolas had possession of the subject
property and the owner’s duplicate copy of TCT No. RT-
4724.[15] Further, the tax declaration over the subject property filed
with the Butuan City Assessor’s Office indicated that Max Arriola, Sr.
(Max Sr.) was the administrator of the subject property.[16]
As special and affirmative defense, Libarios and DORI claimed that
the complaint filed by BDC should be dismissed outright for failing to
state a cause of action since at the time of the execution of the REM on
May 5, 1998, BDC did not yet exist, having been incorporated only on
May 23, 2002, and, hence, could not have claimed ownership of the
subject property.[17]
Max Jr., in his Answer,[18] echoed the foregoing contentions set forth
by Libarios and DORI and, additionally, claimed that the owner’s
duplicate copy of TCT No. RT-4724, from the time it was issued on
January 28, 1969, had been in the possession of their family since it
was his father Max Sr. who actually paid for the acquisition of the
subject property.[19]
Ruling of the RTC
On February 22, 2006, the RTC heard the respondents’ special and
affirmative defense and, thereafter, directed the parties to submit their
respective memoranda.[20]
On August 11, 2006, the RTC issued an Order,[21] the decretal portion
of which reads:
WHEREFORE, in view of the foregoing, the special/affirmative
defenses put forward by the defendants cannot be given due
consideration for lack of merit.
SO ORDERED.[22]
The RTC opined that, taking into account BDC’s allegation that it
purchased the subject property while it was still in the process of
incorporation and, thus, obtained title to the same in its name, any act
which amounts to alienation of the subject property done by any
person other than the corporation itself, through its Board of
Directors, shall give rise to violation of BDC’s rights. The respondents
filed their respective motions for reconsideration[23] of the Order dated
August 11, 2006, but it was denied by the RTC in its Order[24] dated
November 24, 2006, the dispositive portion of which reads:
WHEREFORE, in the light of the foregoing, the motion for
reconsideration is hereby DENIED for lack of merit.
SO ORDERED.[25]
The respondents then filed a petition for certiorari[26] with the CA,
claiming that the RTC gravely abused its discretion in brushing aside
their special and affirmative defense. The respondents likewise prayed
for the issuance of a temporary restraining order and/or a writ of
preliminary injunction. The respondents maintained that BDC, at the
time of the execution of the REM, was not yet incorporated and, hence,
had no right to hold a property in its own name.
Ruling of the CA
Consequently, on January 14, 2011, the CA rendered the herein
assailed Decision;[27] which declared:
WHEREFORE, the instant petition is GRANTED. The assailed Orders
are SET ASIDE and a new one issued DISMISSING the Complaint for
failure to state a cause of action.
SO ORDERED.[28]
The CA opined that corporate existence begins only from the moment
a certificate of incorporation is issued, and, thus, BDC had no
corporate existence and juridical personality when it purchased the
subject property. Thus, the CA held that, having no right over the
subject property, no cause of action could have accrued in favor of BDC
when the subject property was mortgaged to Libarios and DORI.[29]
BDC sought a reconsideration[30] of the Decision dated January 14,
2011, but it was denied by the CA in its Resolution[31] dated May 24,
2011, thus:
ACCORDINGLY, the motion for reconsideration is hereby DENIED
for lack of merit.
SO ORDERED.[32]
Hence, this petition.
BDC maintains that it has a cause of action against the respondents
notwithstanding that it was not yet incorporated at the time of the
execution of the REM on May 5, 1998.[33] Further, BDC alleges that
Libarios and DORI are estopped from questioning the legal
personality of BDC; it claims that DORI and Libarios, at the time of
the execution of the REM, treated BDC as a corporation and may no
longer raise the fact that BDC was not yet incorporated at the time they
entered into the mortgage.[34]
On the other hand, the respondents, in their Comment,[35] maintain
that this petition for certiorari is not the proper remedy to assail the
CA’s Decision dated January 14, 2011 and Resolution dated May 24,
2011. They aver that BDC should have filed a petition for review on
certiorari under Rule 45 of the Rules of Court instead.[36] In any case,
the respondents claim that the CA did not commit any abuse of
discretion when it set aside, the RTC’s Orders dated August 11, 2006
and November 24, 2006.[37] They point out that BDC was not yet
incorporated at the time of the execution of the REM and, hence, could
not hold title to any property in its own name.[38]
Issue
Essentially, the issue set forth for the Court’s resolution is whether the
CA gravely abused its discretion when it set aside the RTC’s Orders
dated August 11, 2006 and November 24, 2006, ruling that BDC’s
complaint failed to state a cause of action.
Ruling of the Court
The petition is granted.
Prefatorily, there is a need to address the respondents’ claim that BDC
should have filed an appeal under Rule 45 of the Rules of Court instead
of filing this certiorari suit.
The CA’s disposition is a final judgment, as distinguished from an
interlocutory order, as the same finally disposed of the petition for
certiorari filed by the respondents and left nothing more to be done by
the CA in respect thereto. Sections 1 and 2 of Rule 45 essentially states
that a party desiring to appeal by certiorari from a judgment or a final
order of the CA may file with this Court a verified petition for review
on certiorari within 15 days from notice of the judgment or final order.
BDC’s counsel received a copy of the CA’s Resolution dated May 24,
2011, denying reconsideration of the Decision dated January 14, 2011,
on May 31, 2011.[39] Thus, BDC only had until June 15, 2011 within
which to file with this Court a petition for review on certiorari assailing
the CA’s Decision dated January 14, 2011 and Resolution dated May
24, 2011.
However, BDC failed to file a petition for review on certiorari within
the period to do so and, instead, opted to file a petition for certiorari
under Rule 65 with this Court on July 4, 2011. Evidently, this petition
for certiorari is merely being used by BDC as a substitute for the lost
remedy of appeal under Rule 45.
A party cannot substitute the special civil action of certiorari under
Rule 65 of the Rules of Court for the remedy of appeal. The existence
and availability of the right of appeal are antithetical to the availability
of the special civil action of certiorari.[40] Remedies of appeal
(including petitions for review) and certiorari are mutually exclusive,
not alternative or successive. Hence, certiorari is not and cannot be a
substitute for an appeal, especially if one’s own negligence or error in
one’s choice of remedy occasioned such loss or lapse. One of the
requisites of certiorari is that there be no available appeal or any plain,
speedy and adequate remedy. Where an appeal is available, certiorari
will not prosper, even if the ground therefor is grave abuse of
discretion.[41]
Nevertheless, the acceptance of a petition for certiorari, as well as the
grant of due course thereto is, generally, addressed to the sound
discretion of the court. The provisions of the Rules of Court, which are
technical rules, may be relaxed in certain exceptional
situations.[42] While a petition for certiorari is dismissible for being the
wrong remedy, there are exceptions to this rule, to wit: (a) when public
welfare and the advancement of public policy dictates; (b) when the
broader interest of justice so requires; (c) when the writs issued are
null and void; or (d) when the questioned order amounts to an
oppressive exercise of judicial authority.[43]
In view of the factual circumstances in this case, the dismissal of the
petition for certiorari would result in the miscarriage of justice. On
account of the CA’s unwarranted dismissal of its complaint, as will be
explained later, BDC was effectively denied due process as it was
unduly prevented from presenting evidence to prove its claim. The CA
arbitrarily directed the dismissal of BDC’s complaint on the ground
that the complaint failed to state a cause of action.
One of the grounds for the dismissal of a complaint is the failure of the
pleading asserting the claim to state a cause of action.[44] 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) 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 or other appropriate relief.[45]
In resolving whether the complaint states a cause of action or not, only
the facts alleged in the complaint are considered. The test is whether
the court can render a valid judgment on the complaint based on the
facts alleged and the prayer asked for. Only ultimate facts, not legal
conclusions or evidentiary facts, are considered for purposes of
applying the test.[46]
In this case, BDC’s complaint, inter alia, alleged that:
5. Sometime on March 31, 1996, while the [BDC] was still in the
process of incorporation, thru its then President and General
Manager, [SATORRE], purchased a parcel of land from the [Spouses
Sering], x x x as evidenced by a Deed of Absolute Sale, machine copy
of which is hereto attached as Annex “B” hereof;
6. Subsequent to the execution of Annex “B” hereof,[TCT] bearing No.
RT-4724 was issued unto and in favor of the [BDC] x x x;
7. [BDC], thru its legitimate officers, has been paying the real estate
taxes due on the aforesaid parcel of land, and not the “[ARRIOLAs]”
who are not in any way connected with the legitimate, genuine and
authentic plaintiff x x x;
xxxx
10. Sometime in the year 2004, [BDC] discovered that the owner’s
copy of[TCT] bearing No. RT-4724 was missing and efforts to locate
the same proved futile as it could nowhere be found, hence
[BDC] through counsel filed a petition in Court for issuance of the
owner’s copy of said title;
11. To [BDC’s] great surprise, it surfaced that the aforesaid certificate
of title is now in the possession of [Libarios] as it appears that the land
covered by said title was mortgaged to [DORI] by the defendant
“ARRIOLAs” who misrepresented themselves as owners and directors
of [BDC.][47] (Emphasis ours)
Based on the foregoing allegations, BDC’s complaint sufficiently
stated a cause of action for declaration of nullity of the REM. Basically,
BDC alleged in its complaint that it is the owner of the subject property
as evidenced by TCT No. RT-4724, which was issued in its name after
it purchased the subject property, through Satorre, from the Spouses
Sering on March 31, 1966. It bears stressing that a certificate of title
issued is an absolute and indefeasible evidence of ownership of the
property in favor of the person whose name appears therein.[48] BDC
further alleged that the subject property was mortgaged to DORI and
Libarios without their knowledge or consent and that the Arriolas
were not in any way connected with BDC.
What is clear is that the issues of whether the REM constituted over
the subject property is void and whether BDC has a right to the subject
property at the time of the execution of the REM would have been best
resolved during the trial.
The. respondents’ affirmative defense that BDC, at the time of the
execution of the REM, had no right to hold the subject property in its
name being merely an unincorporated association, if at all, amounts
to an allegation that BDC has no cause of action against the
respondents. However, failure to state a cause of action is different
from lack of cause of action. 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 action
refers to a situation where the evidence does not prove the cause of
action alleged in the pleading.[49] The remedy in the first is to move for
the dismissal of the pleading, while the remedy in the second is to
demur to the evidence.[50]
WHEREFORE, in consideration of the foregoing disquisitions, the
petition is GRANTED. The Decision dated January 14, 2011 and
Resolution dated May 24, 2011 of the Court of Appeals in CA-G.R. SP
No. 01473 are hereby REVERSEDand SET ASIDE. The Orders
dated August 11, 2006 and November 24, 2006 of the Regional Trial
Court of Agusan del Norte and Butuan City, Branch 5, in SP Civil Case
No. 1259 are REINSTATED. The case is remanded to the trial court
for further proceedings.
SO ORDERED.
Writ of preliminary injunction
Marcelo-Mendoza v. Peroxide Phils. Inc.,
G.R. No. 203492, April 24, 2017
REYES, J.
Facts:
MeTC of Valenzuela City
1) In an ejectment case against Peroxide Phils., Inc. (lessee in the
contract of lease), Pablo Marcelo (Pablo) and Pablina Marcelo-
Mendoza[Petitioners] were able to obtain a favorable decision.
Thereafter, the sheriff conducted a public auction and sold to Pablo,
as the highest bidder, the levied properties of PPI that were found
inside the subject property.
RTC of Quezon City
2) Aggrieved, third-party claimants (United Energy Corporation and
Springfield International, Inc.) filed a complaint with the RTC of
Quezon City to declare void the sheriffs sale and Certificate of Sale
with prayer for a temporary restraining order (TRO) and a writ of
preliminary injunction (WPI). [The third-party claimants added
PPI as a party-plaintiff and prayed further for the declaration of PPI's
ownership over the improvements erected and/or introduced on the
subject property.] The WPI was issued.
3) Pablo challenged the issuance of the WPI by petition for certiorari
before the CA and later before the Supreme Court in G.R. No.
127271, where the Court upheld the validity of the WPI. [By
virtue of the court’s order, the gate of the subject property was
padlocked. However, Pablo (on several occasions) forcibly opened the
gate and brought out dismantled machineries of PPI, and occupied
and took possession of the entire subject property.]
4) Pablo consistently refused to obey the orders of the court.
5) The RTC issued an Omnibus Order granting Pablo's motion to
remove padlock on the gate of the subject property. Aggrieved PPI
filed a motion for reconsideration. However, considering that no
resolution has yet been promulgated by the presiding judge after the
lapse of a considerable period of five months, PPI elevated the case
before the CA attributing grave abuse of discretion and abuse of
authority on the part of the Judge. CA granted the petition for
certiorari and ordered that the Omnibus Order be revoked and
vacated.
Issue:
Whether or not the CA erred in finding that the RTC committed grave
abuse of discretion in granting the petitioners' motion to remove the
padlock of the subject property
(propriety of the issuance of the WPI)
Ruling:
The Court finds the grant of injunction, as well as the order to padlock
and re-padlock the subject property, to be in order.
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, agency or a person to refrain from
a particular act or acts. 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. The sole purpose of which is to preserve the status
quo until the merits of the main case can be heard. It is usually
granted to prevent a party from committing an act, or
threatening the immediate commission of an act that will
cause irreparable injury or destroy the status quo.
Before a WPI may be issued, the concurrence of the following
essential requisites must be present, namely: (a) the invasion
of right sought to be protected is material and substantial; (b)
the right of the complainant is clear and unmistakable; and (c)
there is an urgent and paramount necessity for the writ to
prevent serious damage. While a clear showing of the right is
necessary, its existence need not be conclusively established.
Hence, to be entitled to the writ, it is sufficient that the
complainant shows that he has an ostensible right to the final
relief prayed for in his complaint.
Under the factual setting of this case, PPI was able to sufficiently
establish that it had a right over the properties which should be
protected while being litigated. PPI’s claimed ownership over the
improvements erected and/or introduced in the subject property was
then being violated by the petitioners who had started entering the
premises and started dismantling the improvements and machineries
thereon. Worse, the petitioners even opened the subject property as a
resort with swimming pools to the public for a fee and had portions of
the buildings inside the premises rented to several businesses. If not
lawfully stopped, such acts of the petitioners would certainly cause
irreparable damage to PPI and other claimants. As owner of the
improvements and machineries inside the subject property, PPI has
the right to be protected. Hence, the issuance by the lower courts of
the WPI and the order to padlock and re-padlock the subject property
to enjoin the petitioners from disposing the properties of PPI was
warranted.
[At the outset, the Court noted that Pablo had already challenged the
WPI before the CA and later before this Court in G.R. No. 127271,
where the Court sustained the validity of the WPI. The Court also
noted that the issue of possession of the subject property pending
litigation has been resolved by the lower court under different judges
in the Orders dated October 4, 2000, February 8, 2001, February 20,
2006, August 24, 2007 and June 19, 2009, all categorically
commanding that the gates of the subject property be padlocked.
Hence, the Court is convinced that a special reason, supported by facts
borne by the records of this case, exists to justify the injunction and its
subsequent orders in relation thereto.]
15 SY VS TOMLIN
SIY vs. Tomlin, G.R. No. 205998, April 24, 2017
Facts
Petitioner William Anghian Siy filed before the Regional Trial Court of
Quezon City (RTC) a Complaint for Recovery of Possession with
Prayer for Replevin against Tomlin et al.
In his Complaint, petitioner alleged that he is the owner of a 2007
model Range Rover with Plate Number ZMG 272 which he purchased
from Alberto Lopez III (Lopez) on July 22, 2009; that in 2010, he
entrusted the said vehicle to Ong, a businessman who owned a second-
hand car sales showroom (“Motortrend” in Katipunan, Quezon City)
after the latter claimed that he had a prospective buyer therefor; that
Ong failed to remit the proceeds of the purported sale nor return the
vehicle; that petitioner later found out that the vehicle had been
transferred to Chua; that in December, 2010, petitioner filed a
complaint before the Quezon City Police District’s Anti-Camapping
Section; that Ong, upon learning of the complaint, met with petitioner
to arrange the return of the vehicle
RTC issued the writ of replevin after posting a bond of 8 million.
Respondent filed an Omnibus Motion seeking to quash the Writ of
Replevin, dismiss the Complaint, and turn over or return the vehicle
to him. Respondent claimed that he is the lawful and registered owner
of the subject vehicle, having bought the same and caused registration
thereof in his name on March 7, 2011; that the Complaint should be
dismissed for failure to pay the correct amount of docket fees; that the
Complaint is defective for failing to allege the correct and material
facts as to ownership, possession/ detention by defendant, warranty
against distraint/ levy/ seizure, and actual value of the vehicle; and
that the implementation of the writ was attended by procedural
irregularities.
RTC Denied the Motion so Respondent filed a Petition for Certiorari
CA Granted the Petition.
Issue
Whether the writ of replevin is proper
Ruling
Petition must be denied.
“In a complaint for replevin, the claimant must convincingly show that
he is either the owner or clearly entitled to the possession of the object
sought to be recovered, and that the defendant, who is in actual or
legal possession thereof, wrongfully detains the same.” “Rule 60 x x
x allows a plaintiff, in an action for the recovery of
possession of personal property, to apply for a writ of
replevin if it can be shown that he is ‘the owner of the
property’ claimed … or is entitled to the possession thereof.’
The plaintiff need not be the owner so long as he is able to
specify his right to the possession of the property and his
legal basis therefor.”
In Filinvest Credit Corporation v. Court of Appeals,26 this Court
likewise held that –
x x x It is not only the owner who can institute a replevin suit. A person
“entitled to the possession” of the property also can, as provided in the
same paragraph cited by the trial court, which reads:
Sec. 2. Affidavit and bond. – Upon applying for such order the plaintiff
must show …
(a) That the plaintiff is the owner of the property claimed, particularly
describing it, or is entitled to the possession thereof; x x x
As correctly cited by respondent in his Comment:
x x x [A] party praying for the recovery of possession of personal
properly must show by his own affidavit or that of some other person
who personally knows the facts that he is the owner of the property
claimed, particularly describing it, or is entitled to the possession
thereof. It must be borne in mind that replevin is a possessory action
the gist of which focuses on the right of possession that, in turn, is
dependent on a legal basis that, not infrequently, looks to the
ownership of the object sought to be replevied. Wrongful detention by
the defendant of the properties sought in an action for replevin must
be satisfactorily established. If only a mechanistic averment thereof is
offered, the writ should not be issued.
Petitioner admits and claims in his pleadings that on July 22, 2009,
he purchased the subject vehicle from Lopez, who executed and signed
in blank a deed of sale and surrendered all documents of title to
him;29 that he did not register the sale in his favor, such that the
vehicle remained in the name of Lopez;30 that in September, 2010, he
delivered the subject vehicle, together with all its documents of title
and the blank deed of sale, to Ong, with the express intention of selling
the vehicle through the latter as broker/ second hand car dealer; that
Ong appears to have issued in his favor two guarantee checks
amounting to P4.95 million; and that these checks
bounced.31 Thereafter, Ong was able to sell the vehicle using the deed
of sale executed and signed in blank by Lopez to Chua, who secured a
certificate of registration in his name.32 Chua then sold the vehicle, via
a Deed of Sale of Motor Vehicle dated December 7, 2010, to
respondent, who caused registration of the vehicle in his name on
March 7, 2011.33 Apparently, Ong did not remit Chua’s payment to
petitioner, prompting the latter to file formal complaints/ charges
for 1) estafa and carnapping on May 18, 2011 before the Office of the
City Prosecutor of Quezon City, and 2)carnapping on June 15, 2011
before the PNP-HPG in Camp Crame, Quezon City against Ong and
Centeno.34 It appears as well that prior to the filing of these formal
complaints, or sometime in November, 2010, petitioner appeared
before the Quezon City Anti-Carnapping Unit based in Camp Karingal,
Quezon City and, claiming that the subject vehicle was carnapped,
filed a “Failed to Return Vehicle” report; that on February 23, 2011,
petitioner, respondent, Ong, and Chua appeared at Camp Karingal to
shed light on the claimed carnapping; that the parties were requested
to voluntarily surrender the subject vehicle, but the request proved
futile; and that petitioner was instead advised to file appropriate
charges and file a complaint with the PNP-HPG in order to include the
subject vehicle in the “hold order list”.
This Court is not unaware of the practice by many vehicle buyers and
second-hand car traders of not transferring registration and
ownership over vehicles purchased from their original owners, and
rather instructing the latter to execute and sign in blank deeds of sale
covering these vehicles, so that these buyers and dealers may freely
and readily trade or re-sell the vehicles in the second-hand car market
without difficulty. This way, multiple transfers, sales, or trades of the
vehicle using these undated deeds signed in blank become possible,
until the latest purchaser decides to actually transfer the certificate of
registration in his name. For many car owners-sellers, this is an easy
concession; so long as they actually receive the sale price, they will sign
sale deeds in blank and surrender them to the buyers or dealers; and
for the latter, this is convenient since they can “flip” or re-sell the
vehicles to the public many times over with ease, using these blank
deeds of sale.
In many cases as well, busy vehicle owners selling their vehicles
actually leave them, together with all the documents of title, spare
keys, and deeds of sale signed in blank, with second-hand car traders
they know and trust, in order for the latter to display these vehicles for
actual viewing and inspection by prospective buyers at their lots,
warehouses, garages, or showrooms, and to enable the traders to
facilitate sales on-the-spot, as-is-where-is, without having to
inconvenience the owners with random viewings and inspections of
their vehicles. For this kind of arrangement, an agency relationship is
created between the vehicle owners, as principals, and the car traders,
as agents. The situation is akin to an owner of jewelry who sells the
same through an agent, who receives the jewelry in trust and offers it
for sale to his/her regular clients; if a sale is made, the agent takes
payment under the obligation to remit the same to the jewelry owner,
minus the agreed commission or other compensation.
From petitioner’s own account, he constituted and appointed Ong as
his agent to sell the vehicle, surrendering to the latter the vehicle, all
documents of title pertaining thereto, and a deed of sale signed in
blank, with full understanding that Ong would offer and sell the same
to his clients or to the public. In return, Ong accepted the agency by
his receipt of the vehicle, the blank deed of sale, and documents of title,
and when he gave bond in the form of two guarantee checks worth
P4.95 million. All these gave Ong the authority to act for and in behalf
of petitioner. Under the Civil Code on agency,
Art. 1869. Agency may be express, or implied from the acts of
the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his
behalf without authority.
Agency may be oral, unless the law requires a specific form.
Art. 1870. Acceptance by the agent may also be express, or
implied from his acts which carry out the agency, or from his
silence or inaction according to the circumstances. (Emphasis and
underscoring supplied.
“The basis of agency is representation and the same may be
constituted expressly or impliedly. In an implied agency, the principal
can be bound by the acts of the implied agent.”35 The same is true with
an oral agency.
Acting for and in petitioner’s behalf by virtue of the implied or oral
agency, Ong was thus able to sell the vehicle to Chua, but he failed to
remit the proceeds thereof to petitioner; his guarantee checks bounced
as well. This entitled petitioner to sue for estafa through abuse of
confidence. This is exactly what petitioner did: on May 18, 2011, he
filed a complaint for estafa and carnapping against Ong before the
Quezon City Prosecutor’s Office.
Since Ong was able to sell the subject vehicle to Chua,
petitioner thus ceased to be the owner thereof. Nor is he
entitled to the possession of the vehicle; together with his
ownership, petitioner lost his right of possession over the
vehicle. His argument that respondent is a buyer in bad faith, when
the latter nonetheless proceeded with the purchase and registration of
the vehicle on March 7, 2011, despite having been apprised of
petitioner’s earlier November, 2010 ‘‘Failed to Return Vehicle” report
filed with the PNP-HPG, is unavailing. Petitioner had no right to file
said report, as he was no longer the owner of the vehicle at the time;
indeed, his right of action is only against Ong, for collection of the
proceeds of the sale.
Considering that he was no longer the owner or rightful
possessor of the subject vehicle at the time he filed Civil Case
No. Q-11-69644 in July, 2011, petitioner may not seek a
return of the same through replevin. Quite the contrary,
respondent, who obtained the vehicle from Chua and
registered the transfer with the Land Transportation Office,
is the rightful owner thereof, and as such, he is entitled to its
possession. For this reason, the CA was correct in decreeing the
dismissal of Civil Case No. Q-11-69644, although it erred in ordering
the return of the vehicle to the PNP-HPG, which had no further right
to hold the vehicle in its custody. As the registered and rightful owner
of the subject vehicle, the trial court must return the same to
respondent.
Petitioner cannot be allowed to cut his losses by ostensibly securing
the recovery of the subject vehicle in lieu of its price, which Ong failed
and continues to fail to remit. On the other hand, Ong’s declarations
contained in his Affidavit, to the effect that petitioner remains the
owner of the vehicle, and that Chua came into illegal possession and
ownership of the same by unlawfully appropriating the same for
himself without paying for it, are unavailing. Faced with a possible
criminal charge for estafa initiated by petitioner for failing or refusing
to remit the price for the subject vehicle, Ong’s declarations are
considered self-serving, that is, calculated to free himself from the
criminal charge. The premise is that by helping petitioner to actually
recover his vehicle by insisting that the same was unlawfully taken
from him, instead of remitting its price to petitioner, Ong expects that
he and petitioner may redeem themselves from their bad judgment;
for the petitioner, the mistake of bestowing his full faith and
confidence upon Ong, and blindly surrendering the vehicle, its
documents of title, and a deed of sale executed and signed in blank, to
the latter; and for Ong, his failure to remit the proceeds of the sale to
petitioner; and petitioner might then opt to desist from pursuing the
estafa and other criminal charges against him.
WHEREFORE, the Petition is DENIED.
G.R. No. 224022 Teodorico A. Zaragoza vs. Iloilo Santos
Truckers, Inc.
Facts: Petitioner Teodorico A. Zaragoza (petitioner) bought a 3,058-
square meter (sq. m.) parcel of land from his parents. Petitioner
claimed that unknown to him, his father leased a 1,000-sq. m. portion
of the land to respondent Iloilo Santos Truckers, Inc. This
notwithstanding, petitioner allowed the lease to subsist.
Petitioner claimed that when his father died, respondent stopped
paying rent. Respondent maintained that it was willing to pay rent, but
was uncertain as to whom payment should be made as it received
separate demands from Florentino’s heirs, including petitioner. Thus,
respondent filed an interpleader case.
The Regional Trial Court (RTC) dismissed the action for interpleader,
but at the same time, stating that respondent may avail of the remedy
of consignation in order to do away with unnecessary expenses and
delay.
Respondent informed petitioner that it had consigned the aggregate
amount of ₱521,396.89. This notwithstanding, petitioner sent
respondent a letter stating that granting without conceding the
propriety of consignation, the same did not extinguish the latter’s
obligation to pay rent because the amount consigned was insufficient
to cover the unpaid rentals plus interests from February 2007 to May
2011. Petitioner demanded that respondent pay said amount and at
the same time, vacate the subject land within fifteen (15) days from
receipt of the letter. Respondent reiterated that it had already paid
rent by consigning the amount representing monthly rentals from
February 2007 to March 2011.
As his demands went unheeded, petitioner filed a suit for unlawful
detainer against respondent before the Municipal Trial Court in Cities
(MTCC). The MTCC ruled in petitioner’s favor, and accordingly,
ordered respondent to: (a) vacate the subject land; and (b) pay
petitioner back rentals. The MTCC found that petitioner’s complaint
properly makes out a case for unlawful detainer as it alleged that
respondent defaulted in its rental payments from February 2007 to
May 2011. Further, the MTCC opined that respondent’s consignation
with RTC is void, and thus, did not serve to release respondent from
paying its obligation to pay rentals. The RTC reversed and set aside
the MTCC and ruled that respondent’s consignation of the rental
amounts was proper. The CA affirmed the RTC. It held, inter alia, that
while petitioner’s complaint for unlawful detainer sufficiently states a
cause of action on its face, petitioner, however, failed to substantiate
his allegation that respondent violated the terms and conditions of the
lease contract by intentionally failing to pay the monthly rentals.
Issue: Whether or not the CA correctly ruled that petitioner could not
eject respondent from the subject land as the latter fully complied with
its obligation to pay monthly rent thru consignation.
Ruling: No. In Spouses Manzanilla v. Waterfields Industries
Corporation, the Court discussed the requisites of an unlawful
detainer suit in instances where there is a subsisting lease contract
between the plaintiff-lessor and defendant-lessee, to wit:
For the purpose of bringing an unlawful detainer suit, two requisites
must concur: (1) there must be failure to pay rent or comply with the
conditions of the lease, and (2) there must be demand both to pay or
to comply and vacate. The first requisite refers to the existence of the
cause of action for unlawful detainer, while the second refers to the
jurisdictional requirement of demand in order that said cause of action
may be pursued. Implied in the first requisite, which is needed to
establish the cause of action of the plaintiff in an unlawful detainer
suit, is the presentation of the contract of lease entered into by the
plaintiff and the defendant, the same being needed to establish the
lease conditions alleged to have been violated. Thus, in Bachrach
Corporation v. Court of Appeals [(357 Phil. 483, 492 [1998])], the
Court held that the evidence needed to establish the cause of action in
an unlawful detainer case is (1) a lease contract and (2) the violation
of that lease by the defendant.
In other words, for an unlawful detainer suit to prosper, the plaintiff-
lessor must show that: first, initially, the defendant-lessee legally
possessed the leased premises by virtue of a subsisting lease contract;
second, such possession eventually became illegal, either due to the
latter’s violation of the provisions of the said lease contract or the
termination thereof; third, the defendant-lessee remained in
possession of the leased premises, thus, effectively depriving the
plaintiff-lessor enjoyment thereof; and fourth, there must be a
demand both to pay or to comply and vacate and that the suit is
brought within one (1) year from the last demand.
Thus, the crux of the controversy is whether or not the second
requisite has been satisfied, that is, whether or not respondent
violated the terms and conditions of the lease contract, specifically
with regard to the payment of monthly rentals. The amount consigned
with RTC represents monthly rentals only for the period of February
2007 to March 2011, which is two (2) whole months short of what was
being demanded by petitioner.
It appears that even assuming arguendo that respondent’s
consignation of its monthly rentals with RTC was made in accordance
with law, it still failed to comply with its obligation under the lease
contract to pay monthly rentals. It is apparent that at the time
petitioner filed the unlawful detainer suit respondent was not updated
in its monthly rental payments, as there is no evidence of such
payment for the months of April, May, and even June 2011.
Irrefragably, said omission constitutes a violation of the lease contract
on the part of respondent.
Considering that all the requisites of a suit for unlawful detainer have
been complied with, petitioner is justified in ejecting respondent from
the subject land.
ESTATE OF FERDINAND E. MARCOS v. REPUBLIC, GR No. 213027,
2017-01-18
Facts:
The 1991 Petition sought the recovery of the assets and properties
pertaining to the Marcoses, who acquired them directly or indirectly
through, or as a result of, the improper or illegal use of funds or
properties owned by the government.[12] The properties, subject of
other pending forfeiture cases before the Sandiganbayan, were
excluded; and the properties, subject of the 1991 Petition, were
specifically listed and accordingly clustered into 18 categories.
Some of the properties listed in the 1991 Petition were already
adjudged as ill-gotten wealth and consequently forfeited in favor of the
government.
The present consolidated petitions emanated from the same Civil Case
No. 0141, when the Republic filed a Motion for Partial Summary
Judgment[19] dated 24 June 2009 with respect to another property
listed in the 1991 Petition. By way of that motion, the Republic asked
the Sandiganbayan to render judgment declaring the pieces of jewelry,
known as the Malacañang Collection and specifically mentioned under
paragraph 9 (6) of the 1991 Petition, as ill-gotten; and to subsequently
cause this collection of jewelry to be declared forfeited in favor of the
Republic.[20] The latter categorized the pieces of jewelry recovered
from the Marcoses into three collections and singled out the
Malacañang Collection as the object of the motion
Hawaii Collection
Roumeliotes Collection
Based on the 1991 valuation of auction house Christie, Manson and
Woods International, Inc., the Roumeliotes, Malacañang and Hawaii
collections were worth between US$5,313.575 (low estimate) to
US$7,112,879 (high estimate), at the time of the filing of the petition.
(ANNEX "D")[27] The value of the Malacañang collection by itself was
US$110,055 (low estimate) to US$153,089 (high estimate).
In support of the motion, the Republic cited the letter[29] dated 25
May 2009 sent to the PCGG by Imelda Marcos, through counsel,
demanding "the immediate return of all her pieces of jewelry (i) taken
by PCGG from Malacañang Palace and (ii) those turned over to PCGG
by the U.S. Government."[30] The Republic argued that the letter
proved the claim of the Marcoses that they owned the Malacañang
Collection, including the Hawaii Collection.[31] It further argued that
in the 1991 Petition, they were deemed to have admitted the
allegations regarding the pieces of jewelry... the Republic stated that
their lawful income amounting to USD 304,372.43 was grossly
disproportionate to the value of the pieces of jewelry in 1991
On 3 July 2009, the Republic also filed a Request for Admission[38]
addressed to the Estate of Ferdinand Marcos, Imelda Marcos, Imelda
Marcos-Manotoc, and Irene Marcos Araneta
Imelda Marcos and Irene Marcos Araneta filed their Manifestation
and Preliminary Comments[50] dated 21 July 2009
Imelda Marcos and Irene Marcos Araneta then stated that the
Republic's Motion for Partial Summary Judgment was filed to justify
the possession by the PCGG of the pieces of jewelry, even if these were
not part of the forfeiture case - Civil Case No. 0141.[60] They based
their allegations on the pronouncements of the Sandiganbayan in its
Resolution[61] dated 25 October 1996 and Order[62] dated 19
November 2001 and on the Republic's omission of the collection in the
prayer[63] of the 1991 Petition
Imelda Marcos and Irene Marcos Araneta subsequently filed a
Manifestation and Motion to Expunge[66] dated 25 July 2009. They
specifically stated therein that they were adopting the same arguments
raised in their Comment,[67] as well as in their Motion for
Reconsideration[68] dated 5 May 2009, which was filed after the
Sandiganbayan Decision[69] dated 2 April 2009 granting the Motion
for Partial Summary Judgment on the Arelma account
Meanwhile, Ferdinand Marcos Jr. filed a Manifestation[76] that he
was adopting the Manifestation and Motion to Expunge filed by
Marcos and Irene Marcos Araneta
The Republic therefore claimed that by operation of law, the failure of
the Marcoses to respond resulted in their admission of the matters
contained in the request.[81]
In a Resolution[96] dated 2 August 2010, the Sandiganbayan denied
the Marcoses' Manifestation and Preliminary Comments and
Manifestation and Motion to Expunge. It ruled that (1) the
proceedings in this case had not been terminated;[97] (2) in filing
their objection, respondents were not deemed to have admitted the
matters in the Request for Admission;[98] and (3) the Republic's
Request for Admission was not inconsistent with the Motion for
Summary Judgment.[99] The Sandiganbayan further directed the
Marcoses to file and serve within 15 days their sworn answer to the
Request for Admission,[100] but they failed to comply with the
directive.[101]
Sandiganbayan issued a Partial Summary Judgment[103] dated 13
January 2014 ruling that (1) the Malacañang Collection was part and
subject of the forfeiture petition;[104] (2) the Motion for Summary
Judgment was proper;[105] and (3) the forfeiture of the Malacañang
Collection was justified pursuant to R.A. 1379.[106]
Motions for Reconsideration were filed by the Estate of Marcos on 29
January 2014[107] and by Imelda Marcos and Irene Marcos Araneta
on 30 January 2014.
In a Resolution[113] dated 11 June 2014, the Sandiganbayan denied
the Motions for Reconsideration for being mere rehashes of the
arguments of the Marcoses in their Comments and Opposition to the
Republic's Motion for Summary Judgment.[114]
Meanwhile, the Estate of Marcos filed a Motion for Extension of Time
on 09 July 2014 and a Manifestation on 8 August 2014, saying that its
other executor in solidum was no longer filing a separate petition for
review, but was adopting that which was filed by Imelda Marco
This Court issued a Resolution[118] on 17 November 2014 in G.R. No.
213027 granting the Motion for Extension and noting the
Manifestation of the Estate of Marcos that the latter was adopting the
petition for review filed by Imelda Marcos and Irene Marcos Araneta
in G.R. No. 213253. This Court also issued a Resolution[119] on 17
November 2014 in G.R. No. 213253 noting the Manifestation of
Imelda Marcos and Irene Marcos Araneta's counsels, who were
seeking the grant of their Motion for an Extension.[120] This Court
thereafter consolidated the petitions.[121]
Issues:
whether the Sandiganbayan has jurisdiction over the properties; (2)
whether the Malacañang Collection can be the subject of the forfeiture
case; (3) whether forfeiture is justitied under R.A. 1379; (4) whether
the Sandiganbayan correctly ruled that the Motion for Partial
Summary Judgment was not inconsistent with the Request for
Admission; and (5) whether the Sandiganbayan conectly declared that
the forfeiture was not a deprivation of petitioners' right to due process
of law.
Ruling:
The Sandiganbayan conectly acquired jurisdiction over the case... in
the absence of any compelling legal reason, there is no basis to
overturn, or carve an exception to, existing jurisprudence on the
matters raised in the present case.
Principles:
Rules of Court simply provides as follows:Section 1. In general. - Every
pleading shall contain in a methodical and logical form, a plain,
concise and direct statement of the ultimate facts on which the party
pleading relies for his claim or defense, as the case may be, omitting
the statement of mere evidentiary facts. If a defense relied on is based
on law, the pertinent provisions thereof and their applicability to him
shall be clearly and concisely stated.[128]
In determining whether an initiatory pleading states a cause of action,
the test is as follows: admitting the truth of the facts alleged, can the
court render a valid judgment in accordance with the prayer? To be
taken into account are only the material allegations in the complaint;
extraneous facts and circumstances or other matters aliunde are not
considered. The court may consider - in addition to the complaint - the
appended annexes or documents, other pleadings of the plaintiff, or
admissions in the records
Section 2 of R.A. 1379 provides that "[w]henever any public officer or
employee has acquired during his incumbency an amount of property
which is manifestly out of propmtion to his salary as such public
officer or employee and to his other lawful income and the income
from legitimately acquired property, said property shall be presumed
prima facie to have been unlawfully acquired." And in this regard, the
Sandiganbayan had taken judicial notice of the legitimate income of
the Marcoses during their incumbency as public officers for the period
1966-1986 which was pegged at USD 304,372.43... the Answer to the
1991 Petition the denial of the Marcoses cannot be considered a
specific denial because similar to their denial in the Arelma case, in
which insisted that they were not privy to the transactions, the
Marcoses gave "the same stock answer to the effect that [they] did not
engage in any illegal activities, and that all their properties were
lawfully acquired."[143] That they were not privy to the actual data in
the possession of the PCGG and the Solicitor General is simply a line
of defense which necessarily results in their failure to allege the
lawfulness of the mode of acquiring the property subject of forfeiture,
considering the amount of their lawful income.
a request for admission may even complement a summary judgment
in that the request for admission may be used as basis for filing a
summary judgment"
VELASCO JR., J.:
Nature of the Case
Before the Court are two consolidated petitions invariably assailing
the foreclosure sale of a property without properly serving the
summons upon its owners.
Factual Antecedents
Sometime in 1976, Eliseo Borlongan, Jr. (Eliseo) and his wife
Carmelita, acquired a real property located at No. 111, Sampaguita St.,
Valle Verde II, Pasig City covered by Transfer Certificate of Title (TCT)
No. 0421 (the subject property). In 2012, they went to the Registry of
Deeds of Pasig City to obtain a copy of the TCT in preparation for a
prospective sale of the subject property. To their surprise, the title
contained an annotation that the property covered thereby was the
subject of an execution sale in Civil Case (CC) No. 03-0713 pending
before Branch 134 of the Regional Trial Court of Makati City (Makati
RTC).
Petitioner immediately procured a copy of the records of CC No. 03-
0713 and found out that respondent Banco de Oro (BDO), formerly
Equitable PCI Bank, filed a complaint for sum of money against
Tancho Corporation, the principal debtor of loan obligations obtained
from the bank. Likewise impleaded were several persons, including
Carmelita, who supposedly signed four (4) security agreements
totaling P13,500,000 to guarantee the obligations of Tancho
Corporation.
It appears from the records of CC No. 03-0713 that on July 2, 2003,
the Makati RTC issued an Order directing the service of summons to
all the defendants at the business address of Tancho Corporation
provided by BDO: Fumakilla Compound, Amang Rodriguez Avenue,
Brgy. Dela Paz, Pasig City (Fumakilla Compound).
Parenthetically, the records of CC No. 03-0713 show that respondent
BDO already foreclosed the Fumakilla Compound as early as August
21, 2000, following Tancho Corporation's failure to pay its obligation,
and BDO already consolidated its ownership of the property on
November 16, 2001.
Understandably, on July 31, 2003, the process server filed an Officer's
Return stating that summons remained unserved as the "defendants
are no longer holding office at [Fumakilla Compound]."
On October 27, 2003, after the single attempt at personal service on
Carmelita and her co-defendants, BDO moved for leave to serve the
summons by publication. On October 28, 2003, the RTC granted the
motion.
On August 10, 2004, BDO filed an ex-parte Motion for the Issuance of
a Writ of Attachment against the defendants, including Carmelita.
During the hearing on the motion, BDO submitted a copy of the title
of the subject property. The Makati RTC thereafter granted BDO's
motion and a Writ of Attachment was issued against the defendants in
CC No. 03-0713, effectively attaching the subject property on behalf of
BDO.
On December 20, 2005, BDO filed an ex-parte motion praying, among
others, that the summons and the complaint be served against
Carmelita at the subject property. The Makati RTC granted the
motion. On February 9, 2006, the Sheriff filed a return stating that no
actual personal service was made as Carmelita "is no longer residing
at the given address and the said address is for 'rent,' as per
information gathered from the security guard on duty."
On May 30, 2006, however, BDO filed a manifestation stating that it
had complied with the October 28, 2003 Order of the Makati RTC
having caused the publication of the alias summons and the complaint
in People's Taliba on May 15, 2006.
Thereafter, upon BDO's motion, the Makati RTC declared the
defendants in CC No. 03-0713, including Carmelita, in default. BDO
soon after proceeded to present its evidence ex-parte.
On November 29, 2007, the Makati RTC rendered a Decision holding
the defendants in CC No. 03-0713 liable to pay BDO P32,543,856.33
plus 12% interest per annum from the time of the filing of the
complaint until fully paid and attorney's fees. The Makati RTC
decision was published on June 9, 2008.
On August 20, 2008, the Makati RTC issued a Writ of Execution upon
BDO's motion. The Order states that in the event that the judgment
obligors cannot pay all or part of the obligation, the sheriff shall levy
upon the properties of the defendants to satisfy the award.
On October 28, 2008, the Makati RTC's sheriff filed a Report stating
that he tried to serve the Writ of Execution upon the defendants at
Fumakilla Compound but he was not able to do so since the
defendants were no longer holding office thereat. The Sheriff also
reported that, on the same day, he went to the subject property to serve
the execution but likewise failed in his attempt since Carmelita was no
longer residing at the said address.
On November 11, 2008, BDO filed a Motion to Conduct Auction of the
subject property. The motion was granted by the Makati RTC on May
5, 2009 so that the subject property was sold to BDO, as the highest
bidder, on October 6, 2009.
Following the discovery of the sale of their property, Eliseo executed
an affidavit of adverse claim and, on January 21, 2013, filed a
Complaint for Annulment of Surety Agreements, Notice of Levy on
Attachment, Auction Sale and Other Documents, docketed as CC No.
73761, with the Regional Trial Court of Pasig City (Pasig RTC).[1]
He alleged in his Complaint that the subject property is a family home
that belongs to the conjugal partnership of gains he established with
his wife. He further averred that the alleged surety agreements upon
which the attachment of the property was anchored were signed by his
wife without his consent and did not redound to benefit their family.
Thus, he prayed that the surety agreements and all other documents
and processes, including the ensuing attachment, levy and execution
sale, based thereon be nullified.
BDO filed a Motion to Dismiss the Complaint, asserting that the Pasig
RTC has no jurisdiction to hear Eliseo's Complaint, the case was
barred by res judicata given the Decision and orders of the Makati
RTC, and, finally, the Complaint failed to state a cause of action.
In an Order dated May 31, 2013, the Pasig RTC dismissed the case
citing lack of jurisdiction. The RTC held that it could not pass upon
matters already brought before the RTC Makati and, citing Spouses
Ching v. Court of Appeals,[2] the husband of a judgment debtor is not
a stranger to a case who can file a separate and independent action to
determine the validity of the levy and sale of a property.
On a motion for reconsideration filed by Eliseo, the Pasig RTC
reinstated the case with qualification. Relying on Buado v. Court of
Appeals,[3] the Pasig RTC held that since majority of Eliseo's causes of
action were premised on a claim that the obligation contracted by his
wife has not redounded to their family, and, thus, the levy on their
property was illegal, his filing of a separate action is not an
encroachment on the jurisdiction of the Makati RTC, which ordered
the attachment and execution in the first place.
The Pasig RTC clarified, however, that it cannot annul the surety
agreements supposedly signed by Carmelita since Eliseo was not a
party to those agreements and the validity and efficacy of these
contracts had already been decided by the Makati RTC.
Both Eliseo and BDO referred the Pasig RTC's Decision to the Court of
Appeals (CA).
In its petition, docketed as CA-G.R. SP No. 133994, BDO contended
that it was an error for the Pasig RTC to apply Buado as it does not
apply squarely to the circumstances of the case and has not
superseded Ching. BDO maintained that by reinstating the complaint,
Pasig RTC has violated the rule prohibiting non-interference by one
court with the orders of a coequal court.
In its January 20, 2015 Decision,[4] the appellate court granted BDO's
petition and ordered the Pasig RTC to cease from hearing CC No.
73761 commenced by Eliseo. In so ruling, the CA held that Eliseo is
not a stranger who can initiate an action independent from the case
where the attachment and execution sale were ordered. Thus, the CA
concluded that in opting to review the validity of the levy and
execution sale of the subject property pursuant to the judgment of the
Makati RTC, the Pasig RTC acted without jurisdiction.
Eliseo moved for, but was denied, reconsideration by the appellate
court. Hence, he came to this Court via a Petition for Review on
Certiorari under Rule 45 of the Rules of Court, docketed as G.R. No.
218540.
On August 19, 2015, the Court issued a Resolution denying Eliseo's
petition. Eliseo begs to differ and takes exception from the said
holding in his motion for reconsideration dated October 5, 2015,
which is presently for Resolution by this Court.
Meanwhile, on an ex-parte omnibus motion filed by BDO, the Makati
RTC ordered the issuance of a Writ of Possession and the issuance of
a new TCT covering the subject property in favor of the respondent
bank.
Arguing that the Makati RTC had not acquired jurisdiction over her
person as the service of the summons and the other processes of the
court was defective, Carmelita filed a Petition for Annulment of
Judgment (With Urgent Prayer for Issuance of Temporary Restraining
Order and/or Writ of Preliminary Injunction) with the CA, docketed
as CA-G.R. SP No. 134664.
absolute."
Thus, on April 27, 2015, Carmelita filed a Petition for Review,
docketed as G.R. No. 217617, before this Court, ascribing to the
appellate court the commission of serious reversible errors. The Court
denied the petition on June 22, 2015. Hence, on September 1, 2015,
Carmelita interposed a Motion for Reconsideration urging the Court
to take a second hard look at the facts of the case and reconsider its
stance.
Considering that both cases originated from the same facts and
involved interrelated issues, on January 25, 2016, the Court resolved
to consolidate G.R. No. 218540 with G.R. No. 217617.
Issues
The question posed in G.R. No. 217617 is whether or not the CA erred
in refusing to issue a TRO and/or WPI stopping the consolidation of
BDO's ownership over the subject property. On the other hand, the
issue in G.R. No. 218540 revolves around whether the Pasig RTC has
jurisdiction to hear and decide a case filed by the non-debtor husband
to annul the levy and execution sale of the subject property ordered by
the Makati RTC against his wife.
Our Ruling

Before the CA can act on the Petition for Annulment, the Borlongans A reexamination of the antecedents and arguments in G.R. Nos.
found posted on the subject property a Writ of Possession dated 217617 and 218540 compels the reversal of the appellate court's
August 1, 2014 and a Notice to Vacate dated August 29, 2014. resolutions in both cases.

In its Resolution dated November 12, 2014,[5] the appellate court G.R. No. 217617
denied Carmelita's prayer for the issuance of a Temporary Restraining
Order (TRO) and/or Writ of Preliminary Injunction (WPI). The Issuance of a TRO/WPI is not a prejudgment of the main
case
Aggrieved, Carmelita interposed a motion for the reconsideration of
the CA's November 12, 2014 Resolution. On March 23, 2015, however, On the propriety of CA's refusal to issue a TRO/WPI, it is worthy to
the appellate court denied her motion for reconsideration, holding note that Section 3, Rule 58 of the Rules of Court provides the grounds
that "upon the expiration of the redemption period, the right of the for the issuance of a preliminary injunction, viz:
purchaser to the possession of the foreclosed property becomes
Section 3. Grounds for issuance of preliminary injunction. — A
preliminary injunction may be granted when it is established:
(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.
From the foregoing provision, it is clear that a writ of preliminary
injunction is warranted where there is a showing that there exists a
right to be protected and that the acts against which the writ is to be
directed violate an established right. Otherwise stated, for a court to
decide on the propriety of issuing a TRO and/or a WPI, it must only
inquire into the existence of two things: (1) a clear and unmistakable
right that must be protected; and (2) an urgent and paramount
necessity for the writ to prevent serious damage.
In Levi Strauss (Phils.) Inc. v. Vogue Traders Clothing
Company,[6] the Court already explained that the issuance of a TRO
is not conclusive of the outcome of the case as it requires but a
sampling of the evidence, viz:
Indeed, a writ of preliminary injunction is generally based solely on
initial and incomplete evidence adduced by the applicant (herein
petitioner). The evidence submitted during the hearing of the
incident is not conclusive, for only a "sampling" is needed to
give the trial court an idea of the justification for its issuance
pending the decision of the case on the merits. As such, the
findings of fact and opinion of a court when issuing the writ of
preliminary injunction are interlocutory in nature. Moreover, the
sole object of a preliminary injunction is to preserve the
status quo until the merits of the case can be heard. Since
Section 4 of Rule 58 of the Rules of Civil Procedure gives the trial
courts sufficient discretion to evaluate the conflicting claims in an
application for a provisional writ which often involves a factual
determination, the appellate courts generally will not interfere in the
absence of manifest abuse of such discretion. A writ of preliminary
injunction would become a prejudgment of a case only when
it grants the main prayer in the complaint or responsive
pleading, so much so that there is nothing left for the trial court to
try except merely incidental matters, (emphasis supplied)
Notably, the primary prayer of the Petition for Annulment before the
appellate court is the declaration of the nullity of the proceedings in
the RTC and its Decision dated November 29, 2007; it is not merely
confined to the prevention of the issuance of the writ of possession and
the consolidation of the ownership of the subject property in BDO's
name—the concerns of the prayer for the TRO and/or WPI.
Indeed, the petitioner's prayer for the issuance of a TRO and/or WPI
was intended to preserve the status quo ante,[7] and not to pre-empt
the appellate court's decision on the merits of her petition for
annulment. Thus, it was a grievous error on the part of the CA to deny
her of this provisional remedy.
The appellate court's error is readily apparent given the stark existence
of the grounds for the issuance of a writ of preliminary injunction.
On the first ground, petitioner has a clear and unmistakable right that
must be protected. This right is not just her proprietary rights over the
subject property but her constitutionally protected right to due
process before she can be deprived of her property. No less than
Section 1 of the Bill of Rights of the 1987 Constitution mandates that:
No person shall be deprived of life, liberty, or property without
due process of law, nor shall any person be denied the equal
protection of the laws, (emphasis supplied)
In its classic formulation, due process means that any person with
interest to the thing in litigation must be notified and given an
opportunity to defend that interest.[8] Thus, as the essence of due
process lies in the reasonable opportunity to be heard and to submit
any evidence the defendant may have in support of her defense, she
must be properly served the summons of the court. In other
words, the service of summons is a vital and indispensable ingredient
of due process[9] and compliance with the rules regarding the service in person, or, if he refuses to receive and sign for it, by tendering it to
of the summons is as much an issue of due process as it is of him.
jurisdiction.[10] Unfortunately, as will be discussed, it would seem that
the Constitutional right of the petitioner to be properly served the SEC. 7. Substituted service. - If, for justifiable causes, the defendant
summons and be notified has been disregarded by the officers of the cannot be served within a reasonable time as provided in the
trial court. preceding section, service may be effected (a) by leaving copies of the
summons at the defendant's residence with some person of suitable
At this very juncture, the existence of the second ground for the age and discretion then residing therein, or (b) by leaving the copies
issuance of a TRO and/or WPI is self-evident. Without a TRO at defendant's office or regular place of business with some competent
and/or WPI enjoining the respondent bank from continuing in the person in charge thereof.
possession and consolidating the ownership of the subject property,
petitioner's right to be afforded due process will unceasingly x x x x
be violated.
SEC. 14. Service upon defendant whose identity or whereabouts are
It need not be stressed that a continuous violation of constitutional unknown. - In any action where the defendant is designated as an
rights is by itself a grave and irreparable injury that this or any court unknown owner, or the like, or whenever his whereabouts are
cannot plausibly tolerate. unknown and cannot be ascertained by diligent inquiry, service may,
by leave of court, be effected upon him by publication in a newspaper
Without a doubt, the appellate court should have acted intrepidly and of general circulation and in such places and for such time as the court
issued the TRO and/or WPI posthaste to protect the constitutional may order.
rights of petitioner, as it is duty-bound to do. It is, therefore, proper to state that the hierarchy and rules in the
service of summons are as follows:
The performance of official duty was not regular
(1) Personal service;
Regrettably, the appellate court fell short in the fulfillment of its
mandate and instead relied on the disputable presumption that Substituted service, if for justifiable causes the defendant cannot
(2)
"official duty has been regularly performed." The Court cannot be served within a reasonable time; and
subscribe to the position taken by the appellate court.
Service by publication, whenever the defendant's whereabouts are
(3)
As a rule, summons should be personally served on a unknown and cannot be ascertained by diligent inquiry.
defendant.
Simply put, personal service of summons is the preferred mode. And,
When summons cannot be served personally within a reasonable the rules on the service of summons other than by personal
period of time, substituted service may be resorted to. Service of service may be used only as prescribed and only in the
summons by publication can be resorted to only if the defendant's circumstances authorized by statute.
"whereabouts are unknown and cannot be ascertained by diligent Thus, theimpossibility of prompt personal service must be
inquiry." The relevant sections of Rule 14 of the Rules of Court provide, shown by stating that efforts have been made to find the defendant
thus: personally and that such efforts have failed before substituted service
may be availed.[11] Furthermore, their rules must be followed strictly,
SEC. 6. Service in person on defendant. - Whenever practicable, the faithfully and fully as they are extraordinary in character and
summons shall be served by handing a copy thereof to the defendant considered in derogation of the usual method of service.

In Manotoc v. Court of Appeals,[12] the Court enumerated and
explained the requirements to effect a valid service of summons other
than by personal service, viz:
(1) Impossibility of Prompt Personal Service
x x x x
Sheriffs are asked to discharge their duties on the service of summons
with due care, utmost diligence, and reasonable promptness and
speed so as not to prejudice the expeditious dispensation of justice.
Thus, they are enjoined to try their best efforts to accomplish personal
service on defendant. On the other hand, since the defendant is
expected to try to avoid and evade service of summons, the sheriff
must be resourceful, persevering, canny, and diligent in serving the
process on the defendant. For substituted service of summons
to be available, there must be several attempts by the sheriff
to personally serve the summons within a reasonable period
[of one month] which eventually resulted in failure to prove
impossibility of prompt service. "Several attempts" means
at least three (3) tries, preferably on at least two different
dates. In addition, the sheriff must cite why such efforts
were unsuccessful. It is only then that impossibility of
service can be confirmed or accepted.
(2) Specific Details in the Return
The sheriff must describe in the Return of Summons the
facts and circumstances surrounding the attempted
personal service. The efforts made to find the defendant and
the reasons behind the failure must be clearly narrated in
detail in the Return. The date and time of the attempts on personal
service, the inquiries made to locate the defendant, the name/s of the
occupants of the alleged residence or house of defendant and all other
acts done, though futile, to serve the summons on defendant must be
specified in the Return to justify substituted service. The form on
Sheriffs Return of Summons on Substituted Service prescribed in the
Handbook for Sheriffs published by the Philippine Judicial Academy
requires a narration of the efforts made to find the defendant
personally and the fact of failure. Supreme Court Administrative
Circular No. 5 dated November 9, 1989 requires that "impossibility
of prompt service should be shown by stating the efforts
made to find the defendant personally and the failure of
such efforts," which should be made in the proof of service.
In the case now before Us, the summons was served on the petitioner
by publication. Yet, the circumstances surrounding the case do not
justify the resort.
Consider: in July 2003, the sheriff attempted to serve the summons
on the defendants, including petitioner Carmelita, at Fumakilla
Compound, i.e., at the property already foreclosed, acquired, and
possessed by the respondent bank as early as August 2001.
Immediately after this single attempt at personal service in July
2003, the respondent bank moved in October 2003 for leave to serve
the summons by publication (and not even substituted service), which
motion the RTC granted.
Clearly, there was no diligent effort made to find the petitioner
and properly serve her the summons before the service by publication
was allowed. Neither was it impossible to locate the residence of
petitioner and her whereabouts.
It should be noted that the principal obligor in CC No. 03-0713 was
Tancho Corporation and petitioner Carmelita was impleaded only
because she supposedly signed a surety agreement as a director. As a
juridical person, Tancho Corporation is required to file mandatory
corporate papers with the Securities and Exchange Commission
(SEC), such as its General Information Sheet (GIS). In 1997 and 2000,
the GIS filed by Tancho Corporation with the SEC provided the names
of its directors and their addresses. One of these directors included
petitioner Carmelita with her address listed at 41 Chicago St., Quezon
City. The GIS of Tancho Corporation was readily available to the public
including the RTC's process server and respondent bank.
Patently, it cannot be plausibly argued that it was impossible to find
the petitioner and personally serve her with summons. In like manner,
it can hardly be stated that the process server regularly performed his
duty.
The subject property was not foreclosed by the respondent
bank; right of BDO to the possession of the subject property
is questionable petitioners. This Court finds it an issue which requires pre-emptive
resolution. For if the respondent acquired no interest in the
Still unwilling to issue the TRO and/or WPI fervently prayed for by property by virtue of the levy and sale, then, he is not
petitioner, the appellate court held that "upon the expiration of the entitled to its possession.
redemption period, the right of the purchaser to the possession of the
foreclosed property becomes absolute." This Court cannot affirm the The respondent appellate court's emphasis on the failure of The
appellate court's ruling. petitioner to redeem the properties within the period required by law
is misplaced because redemption, in this case, is inconsistent
At the outset, it must be pointed out that the subject property was with the petitioner's claim of invalidity of levy and sale.
never mortgaged to, much less foreclosed by, the respondent bank. Redemption is an implied admission of the regularity of the
Thus, it was error for the CA to refer to the subject property as sale and would estop the petitioner from later impugning its
"foreclosed property." validity on that ground. (emphasis supplied)
Thus, even given the expiration of the redemption period, a TRO
Rather, as disclosed by the records, the possession of the subject and/or WPI is still obtainable and warranted where the validity of the
property was acquired by BDO through attachment and later by acquisition of the possession is afflicted by Constitutional and
execution sale. However, it is presumptive to state that the right of procedural infirmities.
BDO over the possession of the subject property is now absolute
considering that there is an action that questions the validity of the G.R. No. 218540
bank's acquisition over the same property.
Eliseo can file an independent action for the annulment of
In Cometa v. Intermediate Appellate Court,[13] we explained the attachment of their conjugal property
that the expiration of the redemption period does not automatically
vest in the auction purchaser an absolutely possessory right over the As to the question of the Pasig RTC's jurisdiction to hear Eliseo's
property, viz: complaint, we cannot subscribe to BDO's contention that Eliseo
cannot file a separate and independent action for the annulment of the
From the foregoing discussion, it can be seen that the writ of levy on their conjugal property.
possession may issue in favor of a purchaser in an execution sale when
the deed of conveyance has been executed and delivered to him after Section 16, Rule 39 of the Rules of Court allows third-party claimants
the period of redemption has expired and no redemption has been of properties under execution to vindicate their claims to the property
made by the judgment debtor. in a separate action with another court. It states, thus:

A writ of possession is complementary to a writ of execution (see Vda.
de Bogacki v. Inserto, 111 SCRA 356, 363), and in an execution sale, it
is a consequence of a writ of execution, a public auction sale, and the
fulfillment of several other conditions for conveyance set by law. The
issuance of a writ of possession is dependent on the valid execution of
the procedural stages preceding it. Any flaw afflicting any of its stages,
therefore, could affect the validity of its issuance.
In the case at bar, the validity of the levy and sale of the
properties is directly put in issue in another case by the
SECTION 16. Proceedings Where Property Claimed by Third Person.
— If the property levied on is claimed by any person other than the
judgment obligor or his agent, and such person makes an affidavit of
his title thereto or right to the possession thereof, stating the grounds
of such right or title, and serves the same upon the officer making the
levy and a copy thereof upon the judgment obligee, the officer shall
not be bound to keep the property, unless such judgment obligee, on
demand of the officer, files a bond approved by the court to indemnify
the third-party claimant in a sum not less than the value of the
property levied on. In case of disagreement as to such value, the same
shall be determined by the court issuing the writ of execution. No
claim for damages for the taking or keeping of the property may be
enforced against the bond unless the action therefor is filed within one
hundred twenty (120) days from the date of the filing of the bond.
The officer shall not be liable for damages for the taking or keeping of
the property, to any third-party claimant if such bond is
filed. Nothing herein contained shall prevent such claimant
or any third person from vindicating his claim to the
property in a separate action, or prevent the judgment obligee
from claiming damages in the same or a separate action against a
third-party claimant who filed a frivolous or plainly spurious claim,
(emphasis supplied)
Clearly, the availability of the remedy provided under the foregoing
provision requires only that that the claim is a third-party or a
"stranger" to the case. The poser then is this: is the husband, who was
not a party to the suit but whose conjugal property was executed on
account of the other spouse's debt, a "stranger" to the suit? In Buado
v. Court of Appeals,[14] this Court had the opportunity to clarify that,
to resolve the issue, it must first be determined whether the debt had
redounded to the benefit of the conjugal partnership or not. In the
negative, the spouse is a stranger to the suit who can file an
independent separate action, distinct from the action in which the writ
was issued. We held, thus:
A third-party claim must be filed [by] a person other than the
judgment debtor or his agent. In other words, only a stranger to the
case may file a third-party claim.
This leads us to the question: Is the husband, who was not a party to
the suit but whose conjugal property is being executed on account of
the other spouse being the judgment obligor, considered a "stranger?"
x x x x
Pursuant to Mariano however, it must further be settled whether
the obligation of the judgment debtor redounded to the
benefit of the conjugal partnership or not.
Petitioners argue that the obligation of the wife arising from her
criminal liability is chargeable to the conjugal partnership. We do not
agree.
There is no dispute that contested property is conjugal in nature.
Article 122 of the Family Code explicitly provides that payment of
personal debts contracted by the husband or the wife before or during
the marriage shall not be charged to the conjugal partnership except
insofar as they redounded to the benefit of the family.
x x x x
Parenthetically, by no stretch of imagination can it be concluded that
the civil obligation arising from the crime of slander committed by
Erlinda redounded to the benefit of the conjugal partnership.
To reiterate, conjugal property cannot be held liable for the
personal obligation contracted by one spouse, unless some
advantage or benefit is shown to have accrued to the
conjugal partnership.
x x x x
Hence, the filing of a separate action by respondent is proper and
jurisdiction is thus vested on Branch 21. (emphasis supplied)
In the present case, it is not disputed that the conjugal property was
attached on the basis of a surety agreement allegedly signed by
Carmelita for and in behalf of Tancho Corporation. In our 2004
Decision in Spouses Ching v. Court of Appeals,[15]we elucidated
that there is no presumption that the conjugal partnership is
benefited when a spouse enters into a contract of surety,
holding thusly:
In this case, the private respondent failed to prove that the conjugal
partnership of the petitioners was benefited by the petitioner-
husband's act of executing a continuing guaranty and suretyship
agreement with the private respondent for and in behalf of PBMCI.
The contract of loan was between the private respondent and the
PBMC1, solely for the benefit of the latter No presumption can be
inferred from the fact that when the petitioner-husband
entered into an accommodation agreement or a contract of
surety, the conjugal partnership would thereby be
benefited. The private respondent was burdened to
establish that such benefit redounded to the conjugal and the earlier Spouses Ching. Unlike in the present case, the debtor
partnership. in the case cited by BDO was properly informed of the collection suit
and his spouse had the opportunity to question the attachment of their
It could be argued that the petitioner-husband was a member of the conjugal property before the court that issued the levy on attachment,
Board of Directors of PBMCI and was one of its top twenty but simply refused to do so. Thus, to now deny Eliseo the opportunity
stockholders, and that the shares of stocks of the petitioner-husband to question the attachment made by the RTC Makati in a separate and
and his family would appreciate if the PBMCI could be rehabilitated independent action will be to, again, refuse him the due process of law
through the loans obtained; that the petitioner-husband's career before their property is taken. As this Court is duty-bound to protect
would be enhanced should PBMCI survive because of the infusion of and enforce Constitutional rights, this we cannot allow.
fresh capital. However, these are not the benefits contemplated by
Article 161 of the New Civil Code. The benefits must be those WHEREFORE, the petitions are GRANTED.
directly resulting from the loan. They cannot merely be a by-
product or a spin-off of the loan itself. (1) The January 20, 2015 Decision and May 26, 2015 Resolution of the
Court of Appeals in CA-G.R. SP No. 133994 are
This is different from the situation where the husband borrows money hereby REVERSED and SET ASIDE. The Regional Trial Court of
or receives services to be used for his own business or profession. In Pasig, Branch 155 is ordered to continue with the proceedings and
the Ayala case, we ruled that it is such a contract that is one within the decide Civil Case No. 73761 with reasonable dispatch.
term "obligation for the benefit of the conjugal partnership." Thus;
(2) The November 12, 2014 and March 23, 2015 Resolutions of the
x x x x appellate court in CA-G.R. SP No. 134664 are REVERSED and SET
ASIDE.
The Court held in the same case that the rulings of the Court in Cobb-
Perez and G-Tractors, Inc. are not controlling because the husband, Accordingly, let a Temporary Restraining Order (TRO) be issued
in those cases, contracted the obligation for his own business. In this enjoining, prohibiting, and preventing respondent Banco De Oro, its
case, the petitioner-husband acted merely as a surety for the loan assigns, transferees, successors, or any and all other persons acting on
contracted by the PBMCI from the private respondent, (emphasis its behalf from possessing, selling, transferring, encumbering or
supplied) otherwise exercising acts of ownership over the property subject of the
Furthermore, it is not apparent from the records of this case that BDO controversy. Said TRO shall remain valid and effective until such time
had established the benefit to the conjugal partnership flowing from as the rights and interests of the parties in CA-G.R. SP No. 134664
the surety agreement allegedly signed by Carmelita. Thus, Eliseo's shall have been determined and finally resolved.
claim over the subject property lodged with the RTC Pasig is proper,
with the latter correctly exercising jurisdiction thereon. SO ORDERED.

Besides, BDO's reliance on Spouses Ching v. Court of ASIA BREWERY v. EQUITABLE PCI BANK
Appeals[16] (2003) is improper. In the present case, Eliseo and his wife Asia Brewery, Inc. and Charlie S. Go Vs. Equitable PCI Bank
discovered the attachment of their conjugal property only after the G.R. No. 190432
finality of the decision by the RTC Makati. There was, therefore, no April 25, 2017
opportunity for Eliseo to intervene in the case before the RTC Makati
which attached the conjugal property, as a motion to intervene can
only be filed "at any time before rendition of judgment by the trial FACTS
court."[17] This spells the whale of difference between the case at bar
Within the period of September 1996 to July 1998, 10 checks and 16
demand drafts (collectively, “instruments”) were issued in the name
of Charlie Go. The instruments, with a total value of P3,785,257.38,
bore the annotation “endorsed by PCI Bank, Ayala Branch, All Prior
Endorsement And/Or Lack of Endorsement Guaranteed.” All the
demand drafts, except those issued by the Lucena City and Ozamis
branches of Allied Bank, were crossed.
In their Complaint, petitioners narrate:
10. None of the above checks and demand drafts set out under the
First, Second, Third, Fourth, Fifth, and Sixth Causes of Action reached
payee, co-plaintiff Charlie S. Go.
11. All of the above checks and demand drafts fell into the hands of a
certain Raymond U. Keh, then a Sales Accounting Manager of plaintiff
Asia Brewery, Inc., who falsely, willfully, and maliciously pretending
to be the payee, co-plaintiff Charlie S. Go, succeeded in opening
accounts with defendant Equitable PCI Bank in the name of Charlie
Go and thereafter deposited the said checks and demand drafts in said
accounts and withdrew the proceeds thereof to the damage and
prejudice of plaintiff Asia Brewery, Inc.
Raymond Keh was allegedly charged with and convicted of theft and
ordered to pay the value of the checks, but not a single centavo was
collected, because he jumped bail and left the country while the cases
were still being tried.
ISSUE
Petitioners argue that the trial court seriously erred in dismissing their
Complaint for lack of cause of action.
HELD
The Court believes that it need not delve into the issue of whether the
instruments have been delivered, because it is a matter of defense that
would have to be proven during trial on the merits. In Aquino v.
Quiazon, we held that if the allegations in a complaint furnish
sufficient basis on which the suit may be maintained, the complaint
should not be dismissed regardless of the defenses that may be raised
by the defendants. In other words, "[a]n affirmative defense, raising
the ground that there is no cause of action as against the defendants
poses a question of fact that should be resolved after the conduct of
the trial on the merits.”
RULING
WHEREFORE, the petition is GRANTED. The Order dated 30
January 2008 issued by Judge Benjamin T. Pozon and the Order dated
23 November 2009 issued by Judge Winlove Dumayas in Civil Case
No. 04336 are REVERSED and SET ASIDE. The Complaint is
REINSTATED, and the case is ordered REMANDED to the Regional
Trial Court of Makati City for further proceedings. Let the records of
the case be likewise remanded to the court a quo.
DEL CASTILLO, J.:
This Petition for Review on Certiorari[1] seeks to set aside the May 23,
2012 Decision[2] of the Court of Appeals (CA) in CA-G.R. CV. No.
92924 which affirmed the October 21, 2008 Decision[3] of the Regional
Trial Court (RTC) of Trece Martires City, Branch 23 in Civil Case No.
TMCV-0040-06.
Factual Antecedents
In 2006, respondents Jacinto G. Flores and Maximo G. Flores,
represented by their brother and attorney-in-fact Ramon G. Flores,
filed a Complaint[4] for Recovery of Possession against petitioners
Rodante F. Guyamin (Rodante), Lucinia F. Guyamin (Lucinia), and
Eileen G. Gatari (Eileen). The case was docketed as Civil Case No.
TMCV-0040-06 and assigned to Branch 23 of the RTC of Trece
Martires City.
Respondents alleged in their Complaint that they are the registered
owners of a 984-square meter lot in Barangay Santiago, General
Trias, Cavite covered by Transfer Certificate of Title No. T-308589
(the subject property);[5] that petitioners are their relatives who for
many years have been occupying the subject property by mere
tolerance of respondents' predecessors and parents, the original
owners of the same; that petitioners have been "reminded x x x to
vacate the premises"[6] because respondents have decided to sell the
property; that petitioners failed to vacate; that respondents made
several attempts to settle the matter through conciliation before
the Punong Barangay but the same proved futile; that the Punong
Barangay was constrained to issue a Certification To File
Action;[7] that respondents were thus compelled to file the Complaint
and incur legal expenses, for which they pray that petitioners be
ordered to vacate the subject property and pay P20,000.00 attorney's
fees, P5,000.00 litigation expenses, and costs.
On September 25, 2006, summons and a copy of the Complaint were
served upon petitioners through Eileen, who nonetheless refused to
sign and acknowledge receipt thereof. This fact was noted in the court
process server's Return of Summons dated September 26, 2006.[8]
On January 9, 2007, respondents filed a Motion to Declare
Defendants in Default, arguing that despite service of summons on
September 25, 2006, petitioners failed to file their answer.
On May 28, 2007, petitioners filed their Answer with Motion to
Dismiss.
On June 5, 2007, respondents filed their Reply to Answer, arguing that
petitioners' Answer was belatedly filed, which is why they filed a
motion to declare petitioners in default; and for this reason, they
prayed that the Answer be stricken off the record.
On December 26, 2007, the RTC issued an Order decreeing as follows:
WHEREFORE, for failure to file their responsive answer within the
reglementary period of fifteen (15) days, defendants are hereby
declared in default. The pleadings filed by the defendant on May 30,
2007 is [sic] hereby denied.[9]
Petitioners moved to reconsider, but the trial court was unmoved. It
proceeded to receive respondents' evidence ex parte.
Ruling of the Regional Trial Court
On October 21, 2008, the RTC issued a Decision[10] declaring as
follows:
The plaintiffs as represented by their attorney-in-fact, Ramon G.
Flores when presented in Court reiterated the allegations in the
complaint and presented in evidence the Transfer Certificate of Title
No. T-308589 in the names of Jacinto Flores and Maximo Flores
(Exhibit "B"); the tax declaration (Exhibit "C") of the property; and the
Certification (Exhibit "F") issued by Brgy. Justice Lito R. Sarte of
Barangay Santiago, Bayan ng Heneral Trias, Cavite.
x x x x
In the case at bar, by a preponderance of evidence, plaintiffs have
proven their case.
On September 26, 2006 the Return of Summons by the process server
of this Court, Rozanno L. Morabe, as certified, stated, to wit:
This is to certify that on September 25, 2006 the undersigned cause
[sic] the service of Summons together with a copy of the complaint
upon defendants x x x thru EILEEN GATARIN, one of the defendants,
who received a copy of the Summons for all the defendants who
refused to sign and acknowledge receipt of said summons.
This served as a proof of receipt by the defendants of the copy of the
complaint upon them. However defendants filed their answer with
motion to dismiss way beyond the reglementary period on May 28,
2007 which prompted this Court to deny their motion. Defendants, if
indeed having a good defense, could have been vigilant in this case
instead of resorting to delays in the prosecution thereof.
WHEREFORE, judgment is rendered in favor of the plaintiffs as
against the defendants herein and hereby orders, to wit:
1) Ordering the defendants and their respective families and or any
other persons claiming rights under them, to vacate subject parcel of
land and deliver the same peacefully to the possession of the plaintiffs;
2) Ordering the defendants to pay the plaintiffs the amount of
P10,000.00 as reasonable attorney's fees, P5,000.00 as litigation
expenses, plus the costs of suit.
SO ORDERED.[11]
Ruling of the Court of Appeals
Petitioners filed an appeal before the CA which was docketed as CA
G.R. CV. No. 92924. On May 23, 2012, the CA rendered the assailed
Decision containing the following pronouncement:
Aggrieved, the Guyamins filed this instant appeal raising the following
assignment of errors:
1. The trial court erred in not dismissing the complaint on the
ground of lack of cause of action or prematurity;
2. The trial court erred in declaring the defendants in default and
proceeding to receive plaintiffs' evidence ex-parte; and
3. The trial court erred and abused its discretion when it
rendered its Decision favorable to the plaintiffs prior or
without the filing of the plaintiffs' Formal Offer of Evidence.
x x x x
The Guyamins argue that the case should have been dismissed for
failure of the Floreses to give notice or demand to vacate and to
observe conciliation process in the barangay. They further argued that
based on the averments in the complaint the Floreses merely
reminded them to vacate but no actual demand to vacate has been
given.
In this jurisdiction, there are three kinds of actions for the recovery of
possession of real property and one is accion publiciana or the plenary
action for the recovery of the real right of possession, which should be
brought in the proper Regional Trial Court when the dispossession has
lasted for more than one year.
After a review of the averments of the complaint, we find that
the court-a-quo did not err in assuming jurisdiction over the case.
From the allegations of the complaint it appears that the land subject
of the case was originally owned by the Floreses' grandmother,
Damasa Vda. De Guzman and was later acquired by their mother,
Julia Guyamin who in turn transferred the ownership of the property
to them. Based on the attached Transfer Certificate of Title, the
property was transferred to the Floreses on May 10, 1991. The Floreses
averred in the complaint that since the time the ownership of the
property was transferred to them, they have been reminding the
Guyamins to vacate the premises because they wanted to sell the
property.
While it is true that the complaint uses the word "reminding" instead
of the word "demanding", it still does not mean that no demand to
vacate was made by the Floreses. It is clear on the records that the
Floreses filed a complaint for the Guyamins to vacate the premises
before Office of the Barangay Chairman of Barangay Santiago, General
Trias, Cavite. On the subject line of the complaint the following words
are clearly written: "Ukol sa: Pagpapaalis sa bahay na nakatirik sa lupa
na hindi naman kanila" which is clearly a demand to vacate.
On March 11, 2006 the Office of the Barangay Chairman issued a
certificate to file action because the parties were unable to settle their
dispute. Contrary to the argument of' the Guyamins, the records also
show that there was an attempt to settle the issues between the parties
before the Office of the Barangay Chairman.
Anent the second grow1d raised by the Guyamins, records will also
show that Return of Summons was filed by the Process Server,
Rozanno L. Morabe on September 25, 2006 certifying that a copy of
the summons was received on September 26, 2006 by one of the
defendants Eileen Gatarin, who received a copy for all the
defendants.[12] It was only on May 28, 2007 that the Guyamins filed an
Answer with a Motion to Dismiss, or more than 8 months after
receiving the summons, hence the court-a-quo did not commit any
error in declaring the Guyamins in default.
As to the last error raised, it is settled that for evidence to be
considered, the same must be formally offered. However, in People v.
Napat-a, the Supreme Court relaxed the foregoing rule and allowed
evidence not formally offered to be admitted and considered by the
trial court provided the following requirements are present, viz: first,
the same must have been duly identified by testimony duly recorded
and, second, the same must have been incorporated in the records of
the case.
In the instant case, we find that the requirements have been satisfied.
The exhibits were presented and marked during the ex-parte hearing
of August 7, 2008. Therefore, notwithstanding the fact that exhibits In their Petition and Reply,[16] petitioners insist that there is no
"A" to "F" were not formally offered prior to the rendition of the demand to vacate the subject property, and the lack of such demand
Decision in Civil Case No. TMCV-0040-06 by the court-a-quo, the renders the action against them premature; that the filing of a
trial court judge committed no error when he admitted and considered conciliation case before the barangay captain
them in the resolution of the case. (or barangay chairman) and the issuance of a certificate to file action
in court cannot take the place of the required notice to vacate; that
WHEREFORE, in view of the foregoing, the Decision dated October only Rodante was made respondent in the barangay conciliation
21, 2008 of the Regional Trial Court of Trece Martires City in Civil process when Lucinia and Eileen should have been impleaded as well;
Case No. TMCV-0040-06 is AFFIRMED. that the Return of Summons dated September 26, 2006 is a sham; that
summons was improperly served upon Rodante and Lucinia through
SO ORDERED.[13] (Citations omitted) Eileen or by substituted service; that it was impossible for Eileen to
Hence, the present Petition have received the summons and complaint at her residence on
September 25, 2006, as she was then teaching in school; that when
summons was served, Lucinia was then abroad, and so summons
Issues should have been made through publication; and that the filing of
their Answer prior to respondents' motion to declare them in default,
In an April 23, 2014 Resolution,[14] this Court resolved to give due and the latter's filing of a reply to their answer, cured the defective
course to the Petition, which contains the following assignment of answer.
errors:
Petitioners add that it was error for the lower courts to have ruled in
favor of respondents in spite of the fact that the latter made no formal
1. THE COURT OF APPEALS ERRED IN NOT RULING THAT offer of their evidence; that respondents' evidence cannot therefore be
THE REGIONAL TRIAL COURT COMMITTED A considered, since it is a settled maxim that "courts will only consider
REVERSIBLE ERROR IN NOT DISMISSING THE as evidence that which has been formally offered";[17]that the purposes
COMPLAINT ON THE GROUND OF LACK OF CAUSE OF of a formal offer are to 1) enable the trial court to know the purpose or
ACTION OR PREMATURITY. purposes for which the proponent is presenting the evidence, 2) allow
opposing parties to examine the evidence and object to its
2. THE COURT OF APPEALS ERRED IN FINDING THAT THE admissibility, and 3) facilitate review as the appellate court will not be
REGIONAL TRIAL COURT WAS CORRECT IN DECLARING required to review documents not previously scrutinized by the trial
THE PETITIONERS IN DEFAULT AND PROCEEDING TO court; and that the evidence presented ex parte is insufficient to prove
RECEIVE RESPONDENTS' EVIDENCE EX PARTE. respondents' case, as it failed to show how the latter came into
ownership of the subject property and it failed to prove the identity of
3. THE COURT OF APPEALS ERRED WHEN IT RULED THAT the property.
THE REGIONAL TRIAL COURT VALIDLY RENDERED ITS
DECISION FAVORABLE TO THE RESPONDENTS Petitioners thus pray that the CA Decision be reversed and set aside
WITHOUT THE FILING OF THE FORMAL OFFER OF and that a new judgment be rendered ordering the dismissal of Civil
EVIDENCE.[15] Case No. TMCV-0040-06.

Respondents' Argument
Petitioners' Arguments
Respondents simply point out in their single-page Comment[18] that
the arguments raised in the instant Petition have been adequately
passed upon by the lower courts; thus, there is no cogent reason to
reverse their decisions.
Our Ruling
The Court denies the Petition.
The Court notes that petitioners raise purely procedural questions and
nothing more. In other words, petitioners aim to win their case not on
the merit, but on pure technicality. But in order for this Court to even
consider their arguments, petitioners should have at least shown that
they have a substantial defense to respondents' claim. There must be
a semblance of validity in their resistance to respondents' Complaint.
However, there appears to be none at all. The fact remains that
respondents are the registered owners of the subject property, per
Transfer Certificate of Title No. T-308589 and the tax declaration in
their names;[19] that petitioners are respondents' relatives who have
been occupying the property by mere tolerance and liberality of the
latter; that several times in the past, they have been "reminded" to
vacate the property; and that they have failed and refused to do so,
even after the conduct of conciliation proceedings before
the Barangay Chairman.
As owners, respondents' substantive rights must be protected in the
first instance; they cannot be defeated by a resort to procedural
hairsplitting that gets the parties and this Court nowhere. The Court
will not pretend to engage in a useless discussion of the virtues of
adhering strictly to procedure, when to do so would promote a clear
injustice and violation of respondents' substantive rights. More so
when the result would be the same, that is, petitioners would
eventually and ultimately lose their case.
To be sure, while petitioners attached every other pleading filed and
order issued below to the instant Petition, they did not attach a copy
of their Answer to the Complaint if only to demonstrate to this Court
that they have a plausible and substantial defense against the
respondents' Complaint. To repeat, this Court will not waste its
precious time and energy in a futile exercise where the result would be
for naught; petitioners will not be indulged when it appears that they
have no valid claim in the first place. Quite the contrary, the Court
must give respondents the justice they deserve. As owners of the
subject property who have been deprived of the use thereof for so
many years owing to petitioners' continued occupation, and after all
these years of giving unconditionally to the petitioners who are their
relatives, respondents must now enjoy the fruits of their ownership.
Respondents have been more than cordial in dealing with petitioners;
they have shown only respect and reverence to the latter, even to the
extent of using less offensive language in their complaint for fear of
generating more enmity than is required. Thus, instead of using
"demand", respondents chose "'remind". The parties being relatives
and the context and circumstances being the way they are, the choice
of words is understandable. The Court will treat respondents' act as a
polite demand; indeed, the law never required a harsh or impolite
demand but only a categorical one.
With the clear realization that they are settling on land that they do
not own, occupants of registered private lands by mere tolerance of
the owners should always expect that one day, they would have to
vacate the same. Their time is merely borrowed; they have no right to
the property whatsoever, and their presence is merely tolerated and
under the good graces of the owners. As it were, they 1ive under
constant threat of being evicted; they cannot pretend that this threat
of eviction does not exist. It is never too much to ask them to give a
little leeway to the property owners; after all, they have benefited from
their tolerated use of the lands, while the owners have clearly lost by
their inability to use the same.
Thus, this Court need only reiterate the CA's pronouncement that
there could be no more categorical demand by respondents than the
filing of a case against petitioners before the Barangay Chairman to
cause the latter's eviction from the property. The fact that only
Rodante was made respondent in the conciliation process is of no
moment; given the context, relation, circumstances, lack of a visible
defense, and the above pronouncement, this claim of the petitioners
must be treated as undue hairsplitting. This Court's "duty is to dispel
any vestige of doubt rather than indulge in subtle distinctions."[20]
Regarding the claim of improper service of summons, the record
reveals that the contrary itrue. The court process servers Return of
Summons dated September 26, 2006 exists, and must be presumed
regular. The mere fact that the RTC, and even the respondents, keeping with the constitutional mandate to secure social
requested at different stages in the proceedings that summons be justice.[21] (Emphasis supplied)
served once more upon petitioners does not prove that the service By not attaching a copy of their Answer to their Petition, petitioners
thereof made on September 25, 2006 was invalid; it only means that are shielding themselves from a perusal of their defense; in a sense,
the court and parties desire the service of summons anew which was this is quite revealing of the merits of their claim, and in another, it is
clearly unnecessary. The claim that Lucinia was then abroad is of no an ingenious scheme that this Court censures. Indeed, they failed to
moment either; there is no evidence to support this self-serving claim. realize that this Court is not composed of machines that will
mindlessly and mechanically solve a problem at the touch of a button;
The filing of petitioners' answer prior to respondents' motion to it will not be forced into motion on petitioners' turn of a key. They
declare them in default, and the latter's filing of a reply, do not erase must be reminded that -
the fact that petitioners' answer is late. Respondents' reply filed
thereafter is, like the belated answer, a mere scrap of paper, as it The Rules of Court was conceived and promulgated to set
proceeds from the said answer. forth guidelines in the dispensation of justice, but not to
bind and chain the hand that dispenses it, for otherwise,
Finally, the Court supports the CA's pronouncement that since courts will be mere slaves to or robots of technical rules,
respondents' exhibits were presented and marked during the ex shorn of judicial discretion. That is precisely why courts, in
parte hearing of August 7, 2008, the trial com1 judge committed no rendering justice, have always been, as they in fact ought to be,
error when he admitted and considered them in the resolution of the conscientiously guided by the norm that on the
case notwithstanding that no formal offer of evidence was made. The balance, technicalities take a backseat to substantive rights,
pieces of evidence were identified during the ex parte hearing and and not the other way around. As applied to the instant case, in
marked as Exhibits "A" to "F" for respondents and were incorporated the language of then Chief Justice Querube
into the records of the case. As a matter of fact, the RTC Judge referred Makalintal, technicalities 'should give way to the realities of
to them in his October 21, 2008 Decision. If they were not included in the situation'.[22](Emphasis supplied)
the record, the RTC Judge could not have referred to them in arriving WHEREFORE, the Petition is DENIED. The May 23, 2012 Decision
at judgment. of the Court of Appeals in CA-G.R. CV. No. 92924 is AFFIRMED.

While it is true that the rules of procedure are intended to promote SO ORDERED.
rather than frustrate the ends of justice, and the swift unclogging of
court docket is a laudable objective, it nevertheless must not be met at
the expense of substantial justice. This Court has time and again EDRON CONSTRUCTION CORPORATION AND EDMER Y.
reiterated the doctrine that the rules of procedure are mere tools LIM, PETITIONERS, V. THE PROVINCIAL GOVERNMENT
aimed at facilitating the attainment of justice, rather than its OF SURIGAO DEL SUR, REPRESENTED BY GOVERNOR
frustration. A strict and rigid application of the rules must VICENTE T. PIMENTEL, JR., RESPONDENT.
always be eschewed when it would subvert the primary
objective of the rules, that is, to enhance fair trials and DECISION
expedite justice. Technicalities should never be used to PERLAS-BERNABE, J.:
defeat the substantive rights of the other party. Every party-
litigant must be afforded the amplest opportunity for the proper and Assailed in this petition for review on certiorari[1] are the
just determination of his cause, free from the constraints of Decision[2] dated November 26, 2014 and the Resolution[3] dated
technicalities. Considering that there was substantial compliance, September 8, 2015 of the Court of Appeals (CA) in CA-G.R. CV No.
a liberal interpretation of procedural rules in this x x x case is more in 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 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.
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 20, 2000 to June 30, 2013, and six percent (6%)
per annum from July 1, 2013 until 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 interest of six
percent (6%) per annum from finality of the Decision until fully
paid.[37]
WHEREFORE, the petition is GRANTED. The Decision dated
November 26, 2014 and the Resolution dated September 8, 2015 of
the Court of Appeals in CA-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 Regional Trial Court of Quezon City, Branch 77 in Civil Case No.
Q-08-63154 are hereby REINSTATEDwith MODIFICATION, in
that respondent the Provincial Government of Surigao Del Sur,
represented by Governor Vicente T. Pimentel, Jr., is liable to
petitioners Edron Construction Corporation and Edmer Y. Lim for the
amounts of: (a) P4,326,174.50 plus legal interest of twelve percent
(12%) per annum, computed from first demand on June 20, 2000 to
June 30, 2013, and six percent (6%) per annum from July 1, 2013 until
finality of the Decision; (b) 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 until fully paid.
SO ORDERED.
G.R. No. 190043 SANTOS-YLLANA REALTY CORPORATION vs.
SPOUSES RICARDO DEANG and FLORENTINA DEANG
Facts: Respondents are a former lessee of petitioner since 1975. Due
to the failure of respondent to pay rent, petitioner filed a Complaint
for Ejectment with Damages against respondents before the MTC of
Angeles City. MTC rendered a Decision based on a Compromise
Agreement that the parties executed.
Subsequently, the petitioner filed a Motion for Execution of the
Decision due to respondent’ s failure to comply with the terms of the
Compromise Agreement. Respondents objected, alleging that the
amount due to petitioner had already been paid in full. After resolving
the objections, the Angeles City MTC issued an Order granting the
issuance of the Writ of Execution and the same was accordingly issued.
Respondents moved to quash the Writ of Execution but Sheriff Allen
Sicat (Sheriff Sicat) of the Regional Trial Court (RTC) of Angeles City
implemented the Writ of Execution and padlocked respondents’ stall.
The stall, however, was ordered reopened by the MTC within the same
day due to the pendency of the Motion for Reconsideration.
Aggrieved by the implementation of the Writ of Execution,
respondents filed a Complaint for Damages with Prayer for Injunctive
Relief against petitioner and Sheriffs Sicat and Pangan before the
Manila RTC, Branch 44, alleging that the Writ of Execution was
illegally implemented. RTC held that the enforcement of the Writ was
tainted with malice and bad faith on the part of petitioner and
are jointly and severally liable for the damages with the Sheriff.
Issue: Whether or not the petitioner liability was established.
Rulings: NO. The Supreme Court ruled in the negative. When the
Petitioner clearly elected to exercise its right under the aforestated
provision; thus, its move to execute the MTC judgment enjoys the
disputable presumption under Sec. 3(ff), Rule 131 of the Revised
Rules on Evidence that it obeyed the applicable law and rules in doing
so. As such, it was incumbent upon respondents to overcome the
aforestated presumption and to prove that petitioner abused its rights
and willfully intended to inflict damage upon them before they can
claim damages from the former. Otherwise, having the sole
prerogative to move to execute the judgment, the disputable
presumption that petitioner is innocent of wrongdoing against
respondents prevails.
A reading of the RTC’s judgment shows that it was not conclusively
proved that petitioner committed bad faith or connived with the
sheriffs in the implementation of the Writ.
Moral damages are awarded to enable the injured party to obtain
means, diversions, or amusements that will serve to alleviate the
moral suffering he has undergone, by reason of the defendant’s
culpable action. For a claim for moral damages to prosper, the
claimant must prove that: (1) first, there must be an injury, whether
physical, mental or psychological, clearly sustained by the claimant;
(2) second, there must be culpable act or omission factually
established; (3) third, the wrongful act or omission of the defendant is
the proximate cause of the injury sustained by the claimant; and
(4) fourth, the award of damages is predicated on any of the cases
stated in Article 2219 of the Civil Code. The award of exemplary
damages is proper only if respondents showed their entitlement to
moral, temperate or compensatory damages; yet, similar to the moral
damages claimed, respondents were not able to establish their
entitlement. Anent the liability of petitioners for attorney’s fees and
cost of suit, the same must similarly be deleted in light of the reversal
of judgment as to them.
Abigail L. Mendiola Vs. Venerando P. Sangalang; G.R. No. 205283;
June 7, 2017
DECISION
TIJAM, J.:
Assailed in this Petition for Review[1] under Rule 45 are the
Decision[2] dated March 23, 2012 and Resolution[3]dated January 15,
2013 of the Court of Appeals[4] (CA) in CA-G.R. CV No. 91072 which
affirmed the Decision[5] of the Regional Trial Court (RTC)[6], Branch
218 in Quezon City, dismissing petitioner’s accion publiciana for
failure to prove the better right of possession.
The Antecedent Facts
The property subject of the instant controversy is a parcel of land
located at No. 104 Maginhawa Street, Brgy. Teachers Village East,
Diliman, Quezon City, on which a residential house and a four-door,
one-storey commercial building were built. Said property was
originally registered in the name of Honorata G. Sangalang
(Honorata).[7]
Honorata had two siblings, Sinforosa and Angel. Sinforosa had three
children, petitioner Abigail Mendiola, Vilma Aquino (Vilma) and
Azucena De Leon; while Angel begot four children, respondent
Venerando, Ma. Lourdes, Angelino and Fernando, all surnamed
Sangalang. Sinforosa and Angel predeceased Honorata, and on May
31, 1994, Honorata herself died intestate without any issue.[8]
While Honorata was still alive, one-half of the residential house of the
subject property was being used by petitioner and the other half by
Vilma’s son. The commercial building, on the other hand, was being
leased to third persons. This set-up continued until after Honorata’s
death.[9]
In 2003, respondent and his siblings discovered that the subject
property was already registered in the names of petitioner and Vilma.
Upon verification, they discovered that the title over the property had
been transferred in favor of petitioner and Vilma by virtue of a Deed
of Sale dated January 29, 1996 purportedly executed by Honorata in
their favor. Consequently, a new title, TCT No. N-148021[10], was
issued in the names[11] of petitioner and Vilma.
It was around this time, or in July 2003, after Vilma’s son left the
residential house, that respondent, allegedly without asking
permission from the petitioner or Vilma and with the use of force and
violence upon things, broke open the door of the unit and had since
detained the same.[12]
On April 11, 2005, petitioner and Vilma demanded that respondent
vacate the unit but the latter refused to do so.[13]The dispute was
referred to the barangay for conciliation but no settlement was
reached.[14] Consequently, on October 18, 2005, petitioner and Vilma
commenced their complaint[15] for accion publiciana against
respondent for the latter to return the illegally occupied unit and to
pay reasonable rental therefor.
In his Answer,[16] respondent claimed that as heirs of Honorata, they
all have become co-owners in equal undivided shares of the subject
property. Respondent further disputes the Deed of Sale through which
ownership over the property was transferred to the petitioner and
Vilma, since the same was executed only in 1996 after Honorata died
in 1994.
The Ruling of the RTC
On November 15, 2007, the RTC rendered its Decision[17] dismissing
the complaint. The trial court noted that since respondent raised the
defense of co-ownership, the case was converted from accion
publiciana to accion reivindicatoria. It further noted that since it is
undisputed that the parties are all heirs of Honorata, then they all have
an equal right thereto. Finally, the trial court noted that the resolution
of the criminal complaint for falsification lodged by respondent
against the petitioner and Vilma constitutes a prejudicial question to
the complaint.[18]
The RTC thus disposed:
WHEREFORE, finding that the plaintiffs failed to discharge their
burden of proof that they have better right to the property in dispute,
the complaint is hereby DISMISSED. However, plaintiffs are ordered
to pay, jointly and severally, the defendant, the amount of P10,000.00
as and by way of attorney’s fees.
SO ORDERED.[19]
Petitioner and Vilma’s motion for reconsideration was similarly
rebuffed by the trial court.[20] Undaunted, they elevated the case to the
CA on appeal raising as sole error the trial court’s conversion of the
complaint from accion publiciana to accion reivindicatoria and in
consequently ruling in favor of respondent. They insisted that they do
not seek to recover ownership of the subject property but merely its
possession.[21]
The Ruling of the CA
The CA denied the appeal.[22] While the appellate court disagreed with
the trial court when it converted the complaint to accion
reivindicatoria, it nevertheless agreed with the trial court when it
dismissed the complaint for accion publiciana, for failure to prove the
better right of possession. In provisionally passing upon the issue of
ownership to resolve the issue of possession, the CA held that the
parties, being co-owners pro indiviso of the subject property, have
equal right to possess the same.[23]
Accordingly, the CA disposed:
WHEREFORE, premises considered, the instant appeal
is DISMISSED. The decision of the RTC of Quezon City, Branch 218
dated 15 November 2007 is AFFIRMED, not because the case was
deemed converted to an accion reivindicatoria but for the reason that
plaintiffs-appellants failed to prove that they have the better right of
possession over the property.
SO ORDERED.[24]
Petitioner and Vilma’s motion for reconsideration suffered the same
rejection from the CA.[25] Hence, the instant petition filed solely by the
petitioner.
The Issue
The point of inquiry is whether the petitioner has the better right of
possession over the subject property as to successfully evict
respondent.
The Ruling of this Court
The petition is devoid of merit.
In arriving at its identical pronouncement that petitioner failed to
prove her better right of possession, the RTC and the CA passed upon
the parties’ respective claim of ownership, a procedure that is
sanctioned under Section 16,[26]Rule 70. It is settled that the issue of
ownership may be resolved only to determine the issue of possession.
To prove their right of possession, petitioner and Vilma harp on their
claim as registered owners while respondent claims entitlement
thereto as a co-heir. We find no error when the RTC and the CA
decided the case in favor of respondent.
In this case, it is undisputed that the Deed of Sale, through which
ownership over the property had been purportedly transferred to the
petitioner and Vilma, was executed in 1996. However, it is perfectly
obvious that Honorata could not have signed the same as she passed
away as early as 1994. If any, Honorata’s signature thereon could only
be a product of forgery. This makes the Deed of Sale void and as such,
produces no civil effect; and it does not create, modify, or extinguish a
juridical relation.
The Court cannot simply close its eyes against such patent defect on
the argument that registered owners of a property are entitled to its
possession.
While it is true that petitioner and Vilma have in their favor a Torrens
title over the property, it is nonetheless equally true that they acquired
no right under the void Deed of Sale. Indeed, when the instrument
presented is forged, even if accompanied by the owner’s duplicate
certificate of title, the registered owner does not thereby lose his title,
and neither does the assignee in the forged deed acquire any right or
title to the property.[27]
In Spouses Reyes v. Montemayor,[28] the Court explains:
Insofar as a person who fraudulently obtained a property is concerned,
the registration of the property in said person’s name would not be
sufficient to vest in him or her the title to the property. A certificate of
title merely confirms or records title already existing and vested. The
indefeasibility of the Torrens’ title should not be used as a means to
perpetrate fraud against the rightful owner of real property. Good faith
must concur with registration because, otherwise, registration would
be an exercise in futility. A Torrens title does not furnish a shield for
fraud, notwithstanding the long-standing rule that registration is a
constructive notice of title binding upon the whole world. The legal
principle is that if the registration of the land is fraudulent, the person
in whose name the land is registered holds it as a mere trustee.[29]
Neither can the argument that a certificate of title is not subject to
collateral attack would persuade Us to rule otherwise. With the
determination that petitioner and Vilma’s title is void, the issue as to
whether it is subject to direct or collateral attack is no longer relevant.
Settled is the rule that an action to declare the nullity of a void title
does not prescribe and is susceptible to direct, as well as to collateral
attack.[30] Hence, respondent is not precluded from questioning the
validity of the petitioner and Vilma’s title in the accion publiciana.[31]
A necessary and logical consequence of the foregoing pronouncements
is that, title over the property remained in the name of Honorata as
original registered owner thereof. By theory of succession, petitioner
and respondent are co-owners of the property and equally entitled to
possession thereof, either de facto or de jure. As such, petitioner and
Vilma had no right to exclude respondent from enjoying possession
thereof through a possessory action.
Finally, there being no further argument against the award of
attorney’s fees, We have no resort but to affirm the same.
WHEREFORE, the petition is DENIED. The Decision dated March
23, 2012 and Resolution dated January 15, 2013 of the Court of
Appeals in CA G.R. CV No. 91072 dismissing petitioner’s complaint
for accion publiciana and awarding attorney’s fees in respondent’s
favor are AFFIRMED in toto.
SO ORDERED.
SPOUSES SALVADOR ABELLA AND ALMA
ABELLA, Petitioners, v. SPOUSES ROMEO ABELLA AND
ANNIE ABELLA, Respondents.
DECISION
LEONEN, J.:
This resolves a Petition for Review on Certiorari under Rule 45 of the
Rules of Court praying that judgment be rendered reversing and
setting aside the September 30, 2010 Decision1 and the January 4,
2011 Resolution2 of the Court of Appeals Nineteenth Division in CA-
G.R. CV No. 01388. The Petition also prays that respondents Spouses
Romeo and Annie Abella be ordered to pay petitioners Spouses
Salvador and Alma Abella 2.5% monthly interest plus the remaining
balance of the amount loaned.
The assailed September 30, 2010 Decision of the Court of Appeals
reversed and set aside the December 28, 2005 Decision3 of the
Regional Trial Court, Branch 8, Kalibo, Aklan in Civil Case No. 6627.
It directed petitioners to pay respondents P148,500.00 (plus interest),
which was the amount respondents supposedly overpaid. The assailed
January 4, 2011 Resolution of the Court of Appeals denied petitioners'
Motion for Reconsideration.
The Regional Trial Court's December 28, 2005 Decision ordered
respondents to pay petitioners the supposedly unpaid loan balance of
P300,000.00 plus the allegedly stipulated interest rate of 30% per
annum, as well as litigation expenses and attorney's fees.4redarclaw
On July 31, 2002, petitioners Spouses Salvador and Alma Abella filed
a Complaint5 for sum of money and damages with prayer for
preliminary attachment against respondents Spouses Romeo and
Annie Abella before the Regional Trial Court, Branch 8, Kalibo, Aklan.
The case was docketed as Civil Case No. 6627.6redarclaw
In their Complaint, petitioners alleged that respondents obtained a
loan from them in the amount of P500,000.00. The loan was
evidenced by an acknowledgment receipt dated March 22, 1999 and
was payable within one (1) year. Petitioners added that respondents
were able to pay a total of P200,000.00—P100,000.00 paid on two
separate occasions—leaving an unpaid balance of
P300,000.00.7redarclaw
In their Answer8 (with counterclaim and motion to dismiss),
respondents alleged that the amount involved did not pertain to a loan
they obtained from petitioners but was part of the capital for a joint
venture involving the lending of money.9redarclaw
Specifically, respondents claimed that they were approached by
petitioners, who proposed that if respondents were to "undertake the
management of whatever money [petitioners] would give them,
[petitioners] would get 2.5% a month with a 2.5% service fee to
[respondents]."10 The 2.5% that each party would be receiving
represented their sharing of the 5% interest that the joint venture was
supposedly going to charge against its debtors. Respondents further
alleged that the one year averred by petitioners was not a deadline for
payment but the term within which they were to return the money
placed by petitioners should the joint venture prove to be not lucrative.
Moreover, they claimed that the entire amount of P500,000.00 was
disposed of in accordance with their agreed terms and conditions and
that petitioners terminated the joint venture, prompting them to
collect from the joint venture's borrowers. They were, however, able to
collect only to the extent of P200,000.00; hence, the P300,000.00
balance remained unpaid.11redarclaw
In the Decision12 dated December 28, 2005, the Regional Trial Court
ruled in favor of petitioners. It noted that the terms of the
acknowledgment receipt executed by respondents clearly showed that:
(a) respondents were indebted to the extent of P500,000.00; (b) this
indebtedness was to be paid within one (1) year; and (c) the
indebtedness was subject to interest. Thus, the trial court concluded
that respondents obtained a simple loan, although they later invested
its proceeds in a lending enterprise.13The Regional Trial Court
adjudged respondents solidarity liable to petitioners. The dispositive
portion of its Decision reads:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, judgment is hereby
rendered:LawlibraryofCRAlaw
1. Ordering the defendants jointly and severally to pay
the plaintiffs the sum of P300,000.00 with interest at
the rate of 30% per annum from the time the
complaint was filed on July 31, 2002 until fully
paid;chanRoblesvirtualLawlibrary
2. Ordering the defendants to pay the plaintiffs the sum
of P2,227.50 as reimbursement for litigation
expenses, and another sum of P5,000.00 as
attorney's fees.
For lack of legal basis, plaintiffs' claim for moral and exemplary
damages has to be denied, and for lack of merit the counter-claim is
ordered dismissed.14
In the Order dated March 13, 2006,15 the Regional Trial Court denied
respondents' Motion for Reconsideration.
On respondents' appeal, the Court of Appeals ruled that while
respondents had indeed entered into a simple loan with petitioners,
respondents were no longer liable to pay the outstanding amount of
P300,000.00.16redarclaw
The Court of Appeals reasoned that the loan could not have earned
interest, whether as contractually stipulated interest or as interest in
the concept of actual or compensatory damages. As to the loan's not
having earned stipulated interest, the Court of Appeals anchored its
ruling on Article 1956 of the Civil Code, which requires interest to be
stipulated in writing for it to be due.17 The Court of Appeals noted that
while the acknowledgement receipt showed that interest was to be
charged, no particular interest rate was specified.18 Thus, at the time
respondents were making interest payments of 2.5% per month, these
interest payments were invalid for not being properly stipulated by the
parties. As to the loan's not having earned interest in the concept of
actual or compensatory damages, the Court of Appeals, citing Eusebio-
Calderon v. People,19 noted that interest in the concept of actual or
compensatory damages accrues only from the time that demand
(whether judicial or extrajudicial) is made. It reasoned that since
respondents received petitioners' demand letter only on July 12, 2002,
any interest in the concept of actual or compensatory damages due
should be reckoned only from then. Thus, the payments for the 2.5%
monthly interest made after the perfection of the loan in 1999 but
before the demand was made in 2002 were invalid.20redarclaw
Since petitioners' charging of interest was invalid, the Court of Appeals
reasoned that all payments respondents made by way of interest
should be deemed payments for the principal amount of
P500,000.00.21redarclaw
The Court of Appeals further noted that respondents made a total
payment of P648,500.00, which, as against the principal amount of
P500,000.00, entailed an overpayment of P148,500.00. Applying the
principle of solutio indebiti, the Court of Appeals concluded that
petitioners were liable to reimburse respondents for the overpaid
amount of P148,500.00.22 The dispositive portion of the assailed
Court of Appeals Decision reads:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
WHEREFORE, the Decision of the Regional Trial Court is
hereby REVERSED and SET ASIDE, and a new one issued, finding
that the Spouses Salvador and Alma Abella are DIRECTED to jointly
and severally pay Spouses Romeo and Annie Abella the amount of
P148,500.00, with interest of 6% interest (sic) per annum to be
computed upon receipt of this decision, until full satisfaction thereof.
Upon finality of this judgment, an interest as the rate of 12% per
annum, instead of 6%, shall be imposed on the amount due, until full
payment thereof.23
In the Resolution24 dated January 4, 2011, the Court of Appeals denied
petitioners' Motion for Reconsideration.
Aggrieved, petitioners filed the present appeal25 where they claim that
the Court of Appeals erred in completely striking off interest despite
the parties' written agreement stipulating it, as well as in ordering
them to reimburse and pay interest to respondents.
In support of their contentions, petitioners cite Article 1371 of the Civil
Code,26 which calls for the consideration of the contracting parties'
contemporaneous and subsequent acts in determining their true
intention. Petitioners insist that respondents' consistent payment of
interest in the year following the perfection of the loan showed that
interest at 2.5% per month was properly agreed upon despite its not
having been expressly stated in the acknowledgment receipt. They add
that during the proceedings before the Regional Trial Court,
respondents admitted that interest was due on the loan.27redarclaw
In their Comment,28 respondents reiterate the Court of Appeals'
findings that no interest rate was ever stipulated by the parties and
that interest was not due and demandable at the time they were
making interest payments.29redarclaw
Articles 1933 and 1953 of the Civil Code provide the guideposts that
determine if a contractual relation is one of simple loan
or mutuum:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Art. 1933. By the contract of loan, one of the parties delivers to
another, either something not consumable so that the latter may use
the same for a certain time and return it, in which case the contract is
called a commodatum; or money or other consumable thing, upon the
condition that the same amount of the same kind and quality shall be
paid, in which case the contract is simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.

In their Reply,30 petitioners argue that even though no interest rate In commodatum the bailor retains the ownership of the thing loaned,
was stipulated in the acknowledgment receipt, the case fell under the while in simple loan, ownership passes to the borrower.
exception to the Parol Evidence Rule. They also argue that there exists
convincing and sufficiently credible evidence to supplement the ....
imperfection of the acknowledgment receipt.31redarclaw
Art. 1953. A person who receives a loan of money or any other fungible
For resolution are the following issues:LawlibraryofCRAlaw thing acquires the ownership thereof, and is bound to pay to the
creditor an equal amount of the same kind and quality. (Emphasis
First, whether interest accrued on respondents' loan from petitioners, supplied)
If so, at what rate? On March 22, 1999, respondents executed an acknowledgment receipt
to petitioners, which states:LawlibraryofCRAlaw
Second, whether petitioners are liable to reimburse respondents for ChanRoblesVirtualawlibrary
the Litter's supposed excess payments and for interest. Batan, Aklan
March 22, 1999
I
This is to acknowledge receipt of the Amount of Five Hundred
As noted by the Court of Appeals and the Regional Trial Court, Thousand (P500,000.00) Pesos from Mrs. Alma R. Abella, payable
respondents entered into a simple loan or mutuum, rather than a joint within one (1) year from date hereof with interest.
venture, with petitioners.
Annie C. Abella (sgd.) Romeo M. Abella (sgd.)33
Respondents' claims, as articulated in their testimonies before the trial (Emphasis supplied)
court, cannot prevail over the clear terms of the document attesting to The text of the acknowledgment receipt is uncomplicated and
the relation of the parties. "If the terms of a contract are clear and leave straightforward. It attests to: first, respondents' receipt of the sum of
no doubt upon the intention of the contracting parties, the literal P500,000.00 from petitioner Alma Abella; second, respondents' duty
meaning of its stipulations shall control."32redarclaw to pay tack this amount within one (1) year from March 22, 1999; and
third, respondents' duty to pay interest. Consistent with what typifies
a simple loan, petitioners delivered to respondents with the
corresponding condition lat respondents shall pay the same amount
to petitioners within one (1) year.
II
Although we have settled the nature of the contractual relation
between petitioners and respondents, controversy persists over
respondents' duty to pay conventional interest, i.e., interest as the cost
of borrowing money.34redarclaw
Article 1956 of the Civil Code spells out the basic rule that "[n]o
interest shall be due unless it has been expressly stipulated in writing."
On the matter of interest, the text of the acknowledgment receipt is
simple, plain, and unequivocal. It attests to the contracting parties'
intent to subject to interest the loan extended by petitioners to
respondents. The controversy, however, stems from the
acknowledgment receipt's failure to state the exact rate of interest.
Jurisprudence is clear about the applicable interest rate if a written
instrument fails to specify a rate. In Spouses Toring v. Spouses
Olan,35 this court clarified the effect of Article 1956 of the Civil Code
and noted that the legal rate of interest (then at 12%) is to apply: "In a
loan or forbearance of money, according to the Civil Code, the interest
due should be that stipulated in writing, and in the absence thereof,
the rate shall be 12% per annum."36redarclaw
Spouses Toring cites and restates (practically verbatim) what this
court settled in Security Bank and Trust Company v. Regional Trial
Court of Makati, Branch 61: "In a loan or forbearance of money, the
interest due should be that stipulated in writing, and in the absence
thereof the rate shall be 12% per annum."37redarclaw
Security Bank also refers to Eastern Shipping Lines, Inc. v. Court of
Appeals, which, in turn, stated:38
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1. When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.39 (Emphasis supplied)
The rule is not only definite; it is cast in mandatory language.
From Eastern Shipping to Security Bank to Spouses Toring,
jurisprudence has repeatedly used the word "shall," a term that has
long been settled to denote something imperative or operating to
impose a duty.40 Thus, the rule leaves no room for alternatives or
otherwise does not allow for discretion. It requires the application of
the legal rate of interest.
Our intervening Decision in Nacar v. Gallery Frames41 recognized
that the legal rate of interest has been reduced to 6% per
annum:LawlibraryofCRAlaw
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Recently, however, the Bangko Sentral ng Pilipinas Monetary Board
(BSP-MB), in its Resolution No. 796 dated May 16, 2013, approved the
amendment of Section 2 of Circular No. 905, Series of 1982 and,
accordingly, issued Circular No. 799, Series of 2013, effective July 1,
2013, the pertinent portion of which reads:LawlibraryofCRAlaw
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The Monetary Board, in its Resolution No. 796 dated 16 May 2013,
approved the following revisions governing the rate of interest in the
absence of stipulation in loan contracts, thereby amending Section 2
of Circular No. 905, Series of 1982:LawlibraryofCRAlaw
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Section 1. The rate of interest for the loan or forbearance of any
money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of
Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of
the Manual of Regulations for Non-Bank Financial Institutions are
hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of an express stipulation as
to the rate of interest that would govern the parties, the rate of legal
interest for loans or forbearance of any money, goods or credits and
the rate allowed in judgments shall no longer be twelve percent (12%)
per annum — as reflected in the case of Eastern Shipping Lines and
Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations
for Non-Bank Financial Institutions, before its amendment by BSP-
MB Circular No. 799 — but will now be six percent (6%) per annum
effective July 1, 2013. It should be noted, nonetheless, that the new
rate could only be applied prospectively and not retroactively.
Consequently, the twelve percent (12%) per annum legal interest shall
apply only until June 30, 2013. Come July 1, 2013 the new rate of six
percent (6%) per annum shall be the prevailing rate of interest when
applicable.42(Emphasis supplied, citations omitted)
Nevertheless, both Bangko Sentral ng Pilipinas Circular No. 799,
Series of 2013 and Nacar retain the definite and mandatory framing of
the rule articulated in Eastern Shipping, Security Bank, and Spouses
Toring. Nacar even restates Eastern Shipping:LawlibraryofCRAlaw
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To recapitulate and for future guidance, the guidelines laid down in
the case of Eastern Shipping Lines are accordingly modified to
embody BSP-MB Circular No. 799, as follows:LawlibraryofCRAlaw
....
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a Joan or
forbearance of money, the interest due should be that
which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be
6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil
Code.43 (Emphasis supplied, citations omitted)
Thus, it remains that where interest was stipulated in writing by the
debtor and creditor in a simple loan or mutuum, but no exact interest
rate was mentioned, the legal rate of interest shall apply. At present,
this is 6% per annum, subject to Nacar's qualification on prospective
application.
Applying this, the loan obtained by respondents from petitioners is
deemed subjected to conventional interest at the rate of 12% per
annum, the legal rate of interest at the time the parties executed their
agreement. Moreover, should conventional interest still be due as of
July 1, 2013, the rate of 12% per annum shall persist as the rate
of conventional interest.
This is so because interest in this respect is used as a surrogate for the
parties' intent, as expressed as of the time of the execution of their
contract. In this sense, the legal rate of interest is an affirmation of the
contracting parties' intent; that is, by their contract's silence on a
specific rate, the then prevailing legal rate of interest shall be the cost
of borrowing money. This rate, which by their contract the parties
have settled on, is deemed to persist regardless of shifts in the legal
rate of interest. Stated otherwise, the legal rate of interest, when
applied as conventional interest, shall always be the legal rate at the
time the agreement was executed and shall not be susceptible to shifts
in rate.
Petitioners, however, insist on conventional interest at the rate of 2.5%
per month or 30% per annum. They argue that the acknowledgment
receipt fails to show the complete and accurate intention of the
contracting parties. They rely on Article 1371 of the Civil Code, which
provides that the contemporaneous and subsequent acts of the
contracting parties shall be considered should there be a need to
ascertain their intent.44 In addition, they claim that this case falls
under the exceptions to the Parol Evidence Rule, as spelled out in Rule
130, Section 9 of the Revised Rules on Evidence.45redarclaw
It is a basic precept in legal interpretation and construction that a rule
or provision that treats a subject with specificity prevails over a rule or
provision that treats a subject in general terms.46redarclaw
The rule spelled out in Security Bank and Spouses Toring is anchored
on Article 1956 of the Civil Code and specifically governs simple loans
or mutuum. Mutuum is a type of nominate contract that is specifically
recognized by the Civil Code and for which the Civil Code provides a
specific set of governing rules: Articles 1953 to 1961. In contrast,
Article 11371 is among the Civil Code provisions generally dealing with
contracts. As this case particularly involves a simple loan, the specific
rule spelled out in Security Bank and Spouses Toring finds
preferential application as against Article 1371.
Contrary to petitioners' assertions, there is no room for entertaining
extraneous (or parol) evidence. In Spouses Bonifacio and Lucia Paras
v. Kimwa Construction and Development Corporation,47 we spelled
out the requisites for the admission of parol
evidence:LawlibraryofCRAlaw
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In sum, two (2) things must be established for parol evidence to be
admitted: first, that the existence of any of the four (4) exceptions has
been put in issue in a party's pleading or has not been objected to by
the adverse party; and second, that the parol evidence sought to be
presented serves to form the basis of the conclusion proposed by the
presenting party.48
The issue of admitting parol evidence is a matter that is proper to the
trial, not the appellate, stage of a case. Petitioners raised the issue of
applying the exceptions to the Parol Evidence Rule only in the Reply
they filed before this court. This is the last pleading that either of the
parties has filed in the entire string of proceedings culminating in this
Decision. It is, therefore, too late for petitioners to harp on this rule.
In any case, what is at issue is not admission of evidence per se, but
the appreciation given to the evidence adduced by the parties. In the
Petition they filed before this court, petitioners themselves
acknowledged that checks supposedly attesting to payment of monthly
interest at the rate of 2.5% were admitted by the trial court (and
marked as Exhibits "2," "3," "4," "5," "6," "7," and "8").49 What
petitioners have an issue with is not the admission of these pieces of
evidence but how these have not been appreciated in a manner
consistent with the conclusions they advance.
Even if it can be shown that the parties have agreed to monthly interest
at the rate of 2.5%, this is unconscionable. As emphasized in Castro v.
Tan,50 the willingness of the parties to enter into a relation involving
an unconscionable interest rate is inconsequential to the validity of the
stipulated rate:LawlibraryofCRAlaw
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The imposition of an unconscionable rate of interest on a money debt,
even if knowingly and voluntarily assumed, is immoral and unjust. It
is tantamount to a repugnant spoliation and an iniquitous deprivation
of property, repulsive to the common sense of man. It has no support
in law, in principles of justice, or in the human conscience nor is there
any reason whatsoever which may justify such imposition as righteous
and as one that may be sustained within the sphere of public or private
morals.51
The imposition of an unconscionable interest rate is void ab initio for
being "contrary to morals, and the law."52redarclaw
In determining whether the rate of interest is unconscionable, the
mechanical application of pre-established floors would be wanting.
The lowest rates that have previously been considered unconscionable
need not be an impenetrable minimum. What is more crucial is a
consideration of the parties' contexts. Moreover, interest rates must
be appreciated in light of the fundamental nature of interest as
compensation to the creditor for money lent to another, which he or
she could otherwise have used for his or her own purposes at the time
it was lent. It is not the default vehicle for predatory gain. As such,
interest need only be reasonable. It ought not be a supine mechanism
for the creditor's unjust enrichment at the expense of another.
Petitioners here insist upon the imposition of 2.5% monthly or 30%
annual interest. Compounded at this rate, respondents' obligation
would have more than doubled—increased to 219.7% of the principal—
by the end of the third year after which the loan was contracted if the
entire principal remained unpaid. By the end of the ninth year, it
would have multiplied more than tenfold (or increased to 1,060.45%).
In 2015, this would have multiplied by more than 66 times (or
increased to 6,654.17%). Thus, from an initial loan of only
P500,000.00, respondents would be obliged to pay more than P33
million. This is grossly unfair, especially since up to the fourth year
from when the loan was obtained, respondents had been assiduously
delivering payment. This reduces their best efforts to satisfy their
obligation into a protracted servicing of a rapacious loan.
The legal rate of interest is the presumptive reasonable compensation
for borrowed money. While parties are free to deviate from this, any
deviation must be reasonable and fair. Any deviation that is far-
removed is suspect. Thus, in cases where stipulated interest is more
than twice the prevailing legal rate of interest, it is for the creditor to
prove that this rate is required by prevailing market conditions. Here,
petitioners have articulated no such justification.
In sum, Article 1956 of the Civil Code, read in light of established
jurisprudence, prevents the application of any interest rate other than
that specifically provided for by the parties in their loan document or,
in lieu of it, the legal rate. Here, as the contracting parties failed to
make a specific stipulation, the legal rate must apply. Moreover, the
rate that petitioners adverted to is unconscionable. The conventional
interest due on the principal amount loaned by respondents from
petitioners is held to be 12% per annum.
III
Apart from respondents' liability for conventional interest at the rate
of 12% per annum, outstanding conventional interest—if any is due
from respondents—shall itself earn legal interest from the time
judicial demand was made by petitioners, i.e., on July 31, 2002, when
they filed their Complaint. This is consistent with Article 2212 of the
Civil Code, which provides:LawlibraryofCRAlaw
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Art. 2212. Interest due shall earn legal interest from the time it is
judicially demanded, although the obligation may be silent upon this
point.
So, too, Nacar states that "the interest due shall itself earn legal
interest from the time it is judicially demanded."53redarclaw
Consistent with Nacar, as well as with our ruling in Rivera v. Spouses
Chua,54 the interest due on conventional interest shall be at the rate of
12% per annum from July 31, 2002 to June 30, 2013. Thereafter, or
starting July 1, 2013, this shall be at the rate of 6% per annum.
IV
Proceeding from these premises, we find that respondents made an
overpayment in the amount of P3,379.17.
As acknowledged by petitioner Salvador Abella, respondents paid a
total of P200,000.00, which was charged against the principal
amount of P500,000.00. The first payment of P100,000.00 was made
on June 30, 2001,55 while the second payment of P100,000.00 was
made on December 30, 2001.56redarclaw
The Court of Appeals' September 30, 2010 Decision stated that
respondents paid P6,000.00 in March 1999.57redarclaw
The Pre-Trial Order dated December 2, 2002,58 stated that the parties
admitted that "from the time the principal sum of P500,000.00 was
borrowed from [petitioners], [respondents] ha[d] been religiously
paying"59 what was supposedly interest "at the rate of 2.5% per
month."60redarclaw
From March 22, 1999 (after the loan was perfected) to June 22, 2001
(before respondents' payment of P100,000.00 on June 30, 2001,
which was deducted from the principal amount of P500,000.00), the
2.5% monthly "interest" was pegged to the principal amount of
P500,000.00. These monthly interests, thus, amounted to
P12,500.00 per month. Considering that the period from March 1999
to June 2001 spanned twenty-seven (27) months, respondents paid a
total of P337,500.00.61redarclaw
From June 22, 2001 up to December 22, 2001 (before respondents'
payment of another P100,000.00 on December 30, 2001, which was
deducted from the remaining principal amount of P400,000.00), the
2.5% monthly "interest" was pegged to the remaining principal
amount of P400,000.00. These monthly interests, thus, amounted to
P10,000.00 per month. Considering that this period spanned six (6)
months, respondents paid a total of P60,000.00.62redarclaw
From after December 22, 2001 up to June 2002 (when petitioners
filed their Complaint), the 2.5% monthly "interest" was pegged to the
remaining principal amount of P300,000.00. These monthly
interests, thus, amounted to P7,500.00 per month. Considering that
this period spanned six (6) months, respondents paid a total of
P45,000.00.63redarclaw
Applying these facts and the properly applicable interest rate (for
conventional interest, 12% per annum; for interest on conventional
interest, 12% per annum from July 31, 2002 up to June 30, 2013 and
6% per annum henceforth), the following conclusions may be
drawn:LawlibraryofCRAlaw
By the end of the first year following the perfection of the loan, or as
of March 21, 2000, P560,000.00 was due from respondents. This
consisted cf the principal of P500,000.00 and conventional interest of
P60,000.00. Within this third year, respondents paid a total of P320,000.00, as
follows:LawlibraryofCRAlaw
Within this first year, respondents made twelve (12) monthly
payments totalling P150,000.00 (P12,500.00 each from April 1999 to (a) Between March 22, 2001 and June 30, 2001, respondents
March 2000). This was in addition to their initial payment of completed three (3) monthly payments of P12,500.00 each,
P6,000.00 in March 999. totaling P37,500.00.

Application of payments must be in accordance with Article 1253 of (b) On June 30, 2001, respondents paid P100,000.00, which was
the Civil Code, which reads:LawlibraryofCRAlaw charged as principal payment.
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Art. 1253. If the debt produces interest, payment of the principal shall (c) Between June 30, 2001 and December 30, 2001, respondents
not be deemed to have been made until the interests have been delivered monthly payments of P10,000.00 each. At this point, the
covered. monthly payments no longer amounted to P12,500.00 each
Thus, the payments respondents made must first be reckoned as because the supposed monthly interest payments were pegged to
interest payments. Thereafter, any excess payments shall be charged the supposedly remaining principal of P400,000.00. Thus, during
against the principal. As respondents paid a total of P156,000.00 this period, they paid a total of six (6) monthly payments totaling
within the first year, the conventional interest of P60,000.00 must be P60,000.00.
deemed fully paid and the remaining amount that respondents paid
(i.e., P96,000.00) is to be charged against the principal. This yields a (d) On December 30, 2001, respondents paid P100,000.00, which,
balance of P404,000.00. like the June 30, 2001 payment, was charged against the principal.

By the end of the second year following the perfection of the loan, or (e) From the end of December 2002 to the end of February 2002,
as of March 21, 2001, P452,480.00 was due from respondents. This respondents delivered monthly payments of P7,500.00 each. At
consisted of the outstanding principal of P404,000.00 and this point, the supposed monthly interest payments were now
conventional interest of P48,480.00. pegged to the supposedly remaining principal of P300,000.00.
Thus, during this period, they delivered three (3) monthly
Within this second year, respondents completed another round of payments totaling P22,500.00.
twelve (12) monthly payments totaling P150,000.00.
Consistent with Article 1253 of the Civil Code, as respondents paid a
Consistent with Article 1253 of the Civil Code, as respondents paid a total of P320,000.00 within the third year, the conventional interest
total of P156,000.00 within the second year, the conventional interest of P36,927.50 must be deemed fully paid and the remaining amount
of P48,480.00 must be deemed fully paid and the remaining amount that respondents paid (i.e., P283,702.40) is to be charged against the
that respondents paid (i.e., P101,520.00) is to be charged against the principal. This yields a balance of P18,777.60.
principal. This yields a balance of P302,480.00.
By the end of the fourth year following the perfection of the loan, or as
By the end of the third year following the perfection of the loan, or as of March 21, 2003, P21,203.51 would have been due from
of March 21, 2002, P338,777.60 was due from respondents. This respondents. This consists of: (a) the outstanding principal of
consists of he outstanding principal of P302,480.00 and conventional P18,777.60, (b) conventional interest of P2,253.31, and (c) interest due
interest of P36,297.60. on conventional interest starting from July 31, 2002, the date of
judicial demand, in the amount of P172.60. The last (i.e., interest on
interest) must be pro-rated. There were only 233 days from July 31,
2002 (the date of judicial demand) to March 21, 2003 (the end of the
fourth year); this left 63.83% of the fourth year, within which interest
on interest might have accrued. Thus, the full annual interest on
interest of 12% per annum could not have been completed, and only
the proportional amount of 7.66% per annum may be properly
imposed for the remainder of the fourth year.
From the end of March 2002 to June 2002, respondents delivered
three (3) more monthly payments of P7,500.00 each. Thus, during
this period, they delivered three (3) monthly payments totalling
P22,500.00.
At this rate, however, payment would have been completed by
respondents even before the end of the fourth year. Thus, for
precision, it is more appropriate to reckon the amounts due
as against payments made on monthly, rather than an
annual, basis.
By April 21, 2002, P18,965.38 (i.e., remaining principal of P18,777.60
plus pro-rated monthly conventional interest at 1%, amounting to
P187.78) would have been due from respondents. Deducting the
monthly payment of P7,500.00 for the preceding month in a manner
consistent with Article 1253 of the Civil Code would yield a balance of
P11,465.38.
By May 21, 2002, P11,580.03 (i.e., remaining principal of P11,465.38
plus pro-rated monthly conventional interest at 1%, amounting to
P114.65) would have been due from respondents. Deducting the
monthly payment of P7,500.00 for the preceding month in a manner
consistent with Article 1253 of the Civil Code would yield a balance of
P4,080.03.
By June 21, 2002, P4,120.83 (i.e., remaining principal of P4,080.03
plus pro-rated monthly conventional interest at 1%, amounting to
P40.80) would have been due from respondents. Deducting the
monthly payment of P7,500.00 for the preceding month in a manner
consistent with Article 1253 of the Civil Code would yield a negative
balance of P3,379.17.
Thus, by June 21, 2002, respondents had not only fully paid the
principal and all the conventional interest that had accrued on their
loan. By this date, they also overpaid P3,379.17. Moreover, while
hypothetically, interest on conventional interest would not have run
from July 31, 2002, no such interest accrued since there was no longer
any conventional interest due from respondents by then.
V
As respondents made an overpayment, the principle of solutio
indebiti as provided by Article 2154 of the Civil Code64 applies. Article
2154 reads:LawlibraryofCRAlaw
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Article 2154. If something is received when there is no right to demand
it, and it was unduly delivered through mistake, the obligation to
return it arises.
In Moreno-Lentfer v. Wolff,65 this court explained the application of
solutio indebiti:LawlibraryofCRAlaw
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The quasi-contract of solutio indebiti harks back to the ancient
principle that no one shall enrich himself unjustly at the expense of
another. It applies where (1) a payment is made when there exists no
binding relation between the payor, who has no duty to pay, and the
person who received the payment, and (2) the payment is made
through mistake, and not through liberality or some other cause.66
As respondents had already fully paid the principal and all
conventional interest that had accrued, they were no longer obliged to
make further payments. Any further payment they made was only
because of a mistaken impression that they were still due. Accordingly,
petitioners are now bound by a quasi-contractual obligation to return
any and all excess payments delivered by respondents.
Nacar provides that "[w]hen an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the
rate of 6% per annum."67 This applies to obligations arising from
quasi-contracts such as solutio indebiti.
Further, Article 2159 of the Civil Code provides:LawlibraryofCRAlaw
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Art. 2159. Whoever in bad faith accepts an undue payment, shall pay
legal interest if a sum of money is involved, or shall be liable for fruits
received or which should have been received if the thing produces
fruits.

He shall furthermore be answerable for any loss or impairment of the

thing from any cause, and for damages to the person who delivered the
thing, until it is recovered.
Consistent however, with our finding that the excess payment made
by respondents were borne out of a mere mistake that it was due, we
find it in the better interest of equity to no longer hold petitioners
liable for interest arising from their quasi-contractual obligation.

Nevertheless, Nacar also provides:LawlibraryofCRAlaw

3. When the judgment of the court awarding a sum of money

becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2,
above, shall be 6% per annum from such finality until its
satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.68

Thus, interest at the rate of 6% per annum may be properly imposed

on the total judgment award. This shall be reckoned from the finality
of this Decision until its full satisfaction.

WHEREFORE, the assailed September 30, 2010 Decision and the

January 4, 2011 Resolution of the Court of Appeals Nineteenth
Division in CA-G.R. CV No. 01388 are SET ASIDE. Petitioners
Spouses Salvador and Alma Abella are DIRECTED to jointly and
severally reimburse respondents Spouses Romeo and Annie Abella the
amount of P3,379.17, which respondents have overpaid.

A legal interest of 6% per annum shall likewise be imposed on the total

judgment award from the finality of this Decision until its full
satisfaction.

SO ORDERED.cralawlawlibrary