FIRST DIVISION

[G.R. No. 111080. April 5, 2000]

JOSE S. OROSA and MARTHA P. OROSA, petitioners, vs. HON. COURT OF

APPEALS, FCP CREDIT CORPORATION, respondents.francis

DECISION

YNARES_SANTIAGO, J.:

On December 6, 1984, private respondent FCP Credit Corporation filed a complaint

for replevin and damages in the Regional Trial Court of Manila against petitioner
[1]

Jose S. Orosa and one John Doe to recover possession of a 1983 Ford Laser 1.5
Sedan with Motor and Serial No. SUNKBT-14584. The complaint alleged that on
September 28, 1983, petitioner purchased the subject motor vehicle on installment
from Fiesta Motor Sales Corporation. He executed and delivered to Fiesta Motor
Sales Corp. a promissory note in the sum of P133,824.00 payable in monthly
installments. To secure payment, petitioner executed a chattel mortgage over the
[2]

subject motor vehicle in favor of Fiesta Motor Sales Corp. On September 28, 1983,
Fiesta Motor Sales assigned the promissory note and chattel mortgage to private
respondent FCP Credit Corporation. The complaint further alleged that petitioner
failed to pay part of the installment which fell due on July 28, 1984 as well as three
(3) consecutive installments which fell due on August 28, September 28, and
October 28, 1984. Consequently, private respondent FCP Credit Corporation
demanded from petitioner payment of the entire outstanding balance of the
obligation amounting to P106,154.48 with accrued interest and to surrender the
vehicle which petitioner was allegedly detaining. ella

After trial, the lower court dismissed private respondent's complaint in a Decision
dated March 25, 1988, the decretal portion of which reads:

WHEREFORE, judgment is rendered for the defendant, and against the plaintiff:

1) Dismissing the complaint for lack of merit;

2) Declaring that the plaintiff was not entitled to the Writ of Replevin, issued on
January 7,1985, and is now liable to the defendant for actual damages under the
Replevin bond it filed; nigel

1
3) On defendant's counter-claim, ordering the plaintiff to pay the defendant the sum
of P400,000.00 as moral damages, P100,000.00 as exemplary damages, and
P50,000.00 as, and for, attorney's fees;

4) Ordering the plaintiff to return to the defendant the subject 1983 Ford Laser
Sedan, with Motor or Serial No. SUNKBT-l4584, or its equivalent, in kind or value, in
cash, as of this date, and to pay the costs.

SO ORDERED. iska

The trial court ruled that private respondent FCP had no reason to file the present
action since petitioner already paid the installments for the months of July to
November 1984, which are the sole bases of the complaint. The lower court
declared that private respondent was not entitled to the writ of replevin, and was
liable to petitioner for actual damages under the replevin bond it filed.[3]

Ruling on petitioner's counterclaim, the trial court stated that there was no legal or
factual basis for the writ of replevin and that its enforcement by the sheriff was
"highly irregular, and unlawful, done, as it was, under shades of extortion, threats
and force." The trial court ordered private respondent to pay the sum
[4]

of P400,000.00 as moral damages; P100,000.00 as exemplary damages

and P50,000.00 as attorney's fees. Private respondent was also ordered to return to
petitioner the 1983 Ford Laser 1.5 Sedan, or its equivalent, in kind or value in cash,
as of date of judgment and to pay the costs of the suit. rodoflo
[5]

On June 7, 1988, a "Supplemental Decision" was rendered by the trial court

ordering private respondent's surety, Stronghold Insurance Co., Inc. to jointly and
severally [with private respondent] return to petitioner the 1983 Ford Laser 1.5
Sedan or its equivalent in kind or in cash and to pay the damages specified in the
main decision to the extent of the value of the replevin bond in the amount
of P210,000.00. [6]

The surety company filed with the Court of Appeals a petition for certiorari to annul
the Order of the trial court denying its motion for partial reconsideration, as well as
the Supplemental Decision. On the other hand, private respondent appealed the
decision of the RTC Manila to the Court of Appeals.

The surety company's petition for certiorari, docketed as CA-G.R. SP No. 14938,
was dismissed by the Court of Appeals' First Division which upheld the trial court's
order of execution pending appeal. On November 6, 1989, this Court affirmed the
[7]

Court of Appeals decision, but deleted the order for the issuance of a writ of
execution pending appeal. [8]

2
Meanwhile, in private respondent's appeal, the Court of Appeals' Eighth Division
partially affirmed the ruling of the trial court, in a Decision dated April 19, 1993, the
dispositive portion of which reads: [9]

WHEREFORE, the Decision of 25 March 1988 of the Regional Trial Court, Branch
3, Manila is hereby AFFIRMED with the following modifications: brando

(1) The award of moral damages, exemplary damages and attorney's fees is
DELETED;

(2) The order directing plaintiff-appellant FCP Credit Corporation to return to

defendant-appellee Jose S. Orosa the subject 1983 Ford Laser Sedan, with Motor
and Serial No. SUNKBT-14584, its equivalent, in kind or value in cash, as of 25
March 1988, and to pay the costs is DELETED; and;

(3) Plaintiff-appellant FCP Credit Corporation is ordered to pay defendant-appellee

Jose S. Orosa the amount equivalent to the value of the fourteen (14) monthly
installments made by the latter to the former on the subject motor vehicle, with
interest from the time of filing of the complaint or from 6 December 1984.

No costs. micks

SO ORDERED.

Hence, this petition for review, on the following assignments of error: [10]

(1) The Hon. Court of Appeals (former Eighth Division) acted without or in excess of
jurisdiction when it reversed a final decision dated September 9, 1988, of a co-equal
division of the Hon. Court of Appeals (Special First Division) promulgated in CA
G.R. No. 14938, and which was sustained by the Hon. Supreme Court in a final
decision promulgated in G.R. No. 84979 dated November 6, 1989 which cases have
the same causes of action, same set of facts, the same parties and the same
relief. novero

(2) The Hon. Court of Appeals (former Eighth Division) acted with grave abuse of
discretion and authority when it considered causes of actions not allege in the
complaint and which were raised for the first time on appeal in deciding this case.

(3) The Hon. Court of Appeals (former Eighth Division) committed serious error in
applying the case of Filinvest Credit Corporation vs. Ivans Mendez, 152 SCRA 598,
as basis in deciding this case when said case has a different set of facts from this
case.

3
In its first assignment of error, petitioner alleges that the Eighth Division of the Court
of Appeals had no jurisdiction to review the present case since the First Division of
the Court of Appeals already passed upon the law and the facts of the same.
Petitioner alleges that the present appeal involves the same causes of action, same
parties, same facts and same relief involved in the decision rendered by the First
Division and affirmed by this Court in G.R. No. 84979. [11]

Petitioner's argument is untenable. Jurisdiction is simply the power or authority to

hear a case. The appellate jurisdiction of the Court of Appeals to review decisions
and orders of lower courts is conferred by Batas Pambansa Blg. 129. More
importantly, petitioner cannot now assail the Court of Appeals' jurisdiction after
having actively participated in the appeal and after praying for affirmative relief.[12]

Neither can petitioner argue that res judicata bars the determination of the present
case. The two cases involve different subject matters, parties and seek different
reliefs. decision

The petition docketed as CA-G.R. SP No. 14938 was for certiorari with injunction,
brought by Stronghold Insurance Company, Inc. alleging that there was grave abuse
of discretion when the trial court adjudged it liable for damages without due process,
in violation of Rule 60, Section 10 in relation to Rule 57, Section 20, of the Rules of
Court. The surety also questioned the propriety of the writ of execution issued by the
trial court pending appeal.[13]

On the other hand, CA-G.R. CV No. 25929 was filed by petitioner Orosa under Rule
45 of the Revised Rules of Court raising alleged errors of law on the part of the trial
court. The subject of the appeal was the main decision, while the subject of the
petition in CA-G.R. SP No. 14938 was the Supplemental Decision.

We agree with the Court of Appeals that: [14]

The decisions of the Court of Appeals in CA-G.R. SP No. 14938 and the Supreme
Court in G.R. No. 84979 did not pass on the merits of this case. It merely ruled
on the issues of whether the surety, Stronghold Insurance Co., Inc., can be
held jointly and solidarily liable with plaintiff-appellant and whether execution
pending appeal is proper under the facts and circumstances of this case.
Consequently, this Court is not marinellaestopped from reviewing the conclusions
reached by the court a quo. (underscoring ours)

In its second assigned error, petitioner posits that the Court of Appeals committed
grave abuse of discretion when it considered causes of actions which were raised
for the first time on appeal.[15]

4
True, private respondent submitted issues to the Court of Appeals which were not
raised in the original complaint. Private respondent belatedly pointed out that: [16]

1.1. It is pertinent to note that Defendant-Appellee has waived prior notice and
demand in order to be rendered in default, as in fact the Promissory Note expressly
stipulates that the monthly installments shall be paid on the date they fall
due, without need of prior notice or demand. alonzo

1.2. Said Promissory Note likewise expressly stipulates that a late payment charge
of 2% per month shall be added on each unpaid installment from maturity thereof
until fully paid.

1.3. Of equal significance is the Acceleration Clause in the Promissory Note which
states that if default be made in the payment of any of the installments or late
payment charges thereon when the same became due and payable, the total
principal sum then remaining unpaid, together with the agreed late payment
charges thereon, shall at once become due and payable.

Private respondent argued that based on the provisions of the Promissory Note
itself, petitioner incurred in default since, even though there was actual payment of
the installments which fell due on July 28, 1984, as well as the three installments on
August 28 to October 28, 1984, the payments were all late and irregular. Private
[17]

respondent also argued that petitioner assigned the subject car to his daughter
without the written consent of the obligee, and hence, violated the terms of the
chattel mortgage. Meritorious as these arguments are, they come too late in the
[18]

day. Basic is the rule that matters not raised in the complaint cannot be raised for
the first time on appeal. calr

Contrary to petitioner's accusation, the Court of Appeals restricted the determination

of the case to matters alleged in the complaint and raised during trial. Citing
[19]

jurisprudence, the Court of Appeals held that "it would be offensive to the basic
[20]

rule of fair play, justice and due process" if it considered issue raised for the first
time on appeal. [21]

The Court of Appeals' statement that "under the terms and conditions of the chattel
mortgage, defendant-appellee Jose S. Orosa was already in default," was made
only to justify the deletion of the trial court's award of moral, exemplary damages
and attorney's fees, in consonance with its finding that private respondent was
motivated by a sincere belief that it had sufficient basis an acted in good faith when
it filed the claim. jojo
[22]

5
We now come to the matter of moral damages. Petitioner insists that he suffered
untold embarrassment when the complaint was filed against him. According to
petitioner, the car subject of this case was being used by his daughter, married to
Jose Concepcion III, a scion of a prominent family. Petitioner laments that he
assigned the car to his daughter so that she could "approximate without equaling
the status of her in-laws." This being the case, petitioner experienced anguish and
unquantifiable humiliation when he had to face his daughter's wealthy in-laws to
explain the "why and the whats of the subject case." Petitioner further insists that an
award of moral damages is especially justified since he is no ordinary man, but a
businessman of high social standing, a graduate of De La Salle University and
belongs to a well known family of bankers. [23]

We must deny the claim. The law clearly states that one may only recover moral
damages if they are the proximate result of the other party's wrongful act or
omission. Two elements are required. First, the act or omission must be the
[24]

proximate result of the physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and
similar injury. Second, the act must be wrongful. manikan

Petitioner maintains that embarrassment resulted when he had to explain the suit to
his daughter's in-laws. However, that could have been avoided had he not assigned
the car to his daughter and had he been faithful and prompt in paying the
installments required. Petitioner brought the situation upon himself and cannot now
complain that private respondent is liable for the mental anguish and humiliation he
suffered.

Furthermore, we agree with the appellate court that when private respondent
brought the complaint, it did so only to exercise a legal right, believing that it had a
meritorious cause of action clearly borne out by a mere perusal of the promissory
note and chattel mortgage. To constitute malicious prosecution, there must be proof
that the prosecution was prompted by a sinister design to vex and humiliate a
person, and that it was initiated deliberately, knowing that the charges were false
and groundless. Such was not the case when the instant complaint was filed. The
[25]

rule has always been that moral damages cannot be recovered from a person who
has filed a complaint against another in good faith. The law always presumes good
[26]

faith such that any person who seeks to be awarded damages due to acts of
another has the burden of proving that the latter acted in bad faith or with ill
motive. juris
[27]

Anent the award of exemplary damages, jurisprudence provides that where a party
is not entitled to actual or moral damages, an award of exemplary damages is
likewise baseless. [28]

6
In the matter of attorney's fees, petitioner avers that to prosecute and defend this
case in the lower court and in the appellate court, he incurred expenses amounting
to P50,000.00, and as such, attorney's fees should be granted. We deny the claim.
[29]

No premium should be placed on the right to litigate and not every winning party is
entitled to an automatic grant of attorney's fees. The party must show that he falls
[30]

under one of the instances enumerated in Article 2208 of the Civil Code. This,[31]

petitioner failed to do. Furthermore, where the award of moral and exemplary
damages is eliminated, so must the award for attorney's fees be deleted. [32]

We also agree with the Court of Appeals that the trial court erred when it ordered
private respondent to return the subject car or its equivalent considering that
petitioner had not yet fully paid the purchase price. Verily, to sustain the trial court's
decision would amount to unjust enrichment. The Court of Appeals was correct
when it instead ordered private respondent to return, not the car itself, but only the
amount equivalent to the fourteen installments actually paid with interest. criminal
[33]

WHEREFORE, above premises considered, the petition is DENIED, and the Court
of Appeals' Decision of April 19, 1993 and its Resolution of July 22, 1993 are
AFFIRMED in toto.

No costs.

SO ORDERED.

7
G.R. No. 148132 January 28, 2008

SMART COMMUNICATIONS, INC., petitioner,

vs.
REGINA M. ASTORGA, respondent.

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

G.R. No. 151079 January 28, 2008

SMART COMMUNICATIONS, INC., petitioner,

vs.
REGINA M. ASTORGA, respondent.

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

G.R. No. 151372 January 28, 2008

REGINA M. ASTORGA, petitioner,

vs.
SMART COMMUNICATIONS, INC. and ANN MARGARET V.
SANTIAGO, respondents.

DECISION

NACHURA, J.:

8
For the resolution of the Court are three consolidated petitions for review
on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails the February
28, 2000 Decision1 and the May 7, 2001 Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question the June 11, 2001
Decision3 and the December 18, 2001 Resolution4 in CA-G.R. SP. No. 57065.

Regina M. Astorga (Astorga) was employed by respondent Smart Communications,

Incorporated (SMART) on May 8, 1997 as District Sales Manager of the Corporate
Sales Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a
monthly salary of P33,650.00. As District Sales Manager, Astorga enjoyed additional
benefits, namely, annual performance incentive equivalent to 30% of her annual gross
salary, a group life and hospitalization insurance coverage, and a car plan in the
amount of P455,000.00.5

In February 1998, SMART launched an organizational realignment to achieve more

efficient operations. This was made known to the employees on February 27,
1998.6 Part of the reorganization was the outsourcing of the marketing and sales force.
Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed
SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales
and marketing work, SMART abolished the CSMG/FSD, Astorga’s division.

To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel
who would be recommended by SMART. SMART then conducted a performance
evaluation of CSMG personnel and those who garnered the highest ratings were
favorably recommended to SNMI. Astorga landed last in the performance evaluation,
thus, she was not recommended by SMART. SMART, nonetheless, offered her a
supervisory position in the Customer Care Department, but she refused the offer
because the position carried lower salary rank and rate.

Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on
March 3, 1998, SMART issued a memorandum advising Astorga of the termination of
her employment on ground of redundancy, effective April 3, 1998. Astorga received it
on March 16, 1998.7

The termination of her employment prompted Astorga to file a Complaint8 for illegal
dismissal, non-payment of salaries and other benefits with prayer for moral and
exemplary damages against SMART and Ann Margaret V. Santiago (Santiago). She
claimed that abolishing CSMG and, consequently, terminating her employment was
illegal for it violated her right to security of tenure. She also posited that it was illegal for
an employer, like SMART, to contract out services which will displace the employees,
especially if the contractor is an in-house agency.9

9
SMART responded that there was valid termination. It argued that Astorga was
dismissed by reason of redundancy, which is an authorized cause for termination of
employment, and the dismissal was effected in accordance with the requirements of the
Labor Code. The redundancy of Astorga’s position was the result of the abolition of
CSMG and the creation of a specialized and more technically equipped SNMI, which is
a valid and legitimate exercise of management prerogative.10

In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she
pay the current market value of the Honda Civic Sedan which was given to her under
the company’s car plan program, or to surrender the same to the company for proper
disposition.11 Astorga, however, failed and refused to do either, thus prompting SMART
to file a suit for replevin with the Regional Trial Court of Makati (RTC) on August 10,
1998. The case was docketed as Civil Case No. 98-1936 and was raffled to Branch
57.12

Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure
to state a cause of action; (iii) litis pendentia; and (iv) forum-shopping. Astorga posited
that the regular courts have no jurisdiction over the complaint because the subject
thereof pertains to a benefit arising from an employment contract; hence, jurisdiction
over the same is vested in the labor tribunal and not in regular courts.13

Pending resolution of Astorga’s motion to dismiss the replevin case, the Labor Arbiter
rendered a Decision14 dated August 20, 1998, declaring Astorga’s dismissal from
employment illegal. While recognizing SMART’s right to abolish any of its departments,
the Labor Arbiter held that such right should be exercised in good faith and for causes
beyond its control. The Arbiter found the abolition of CSMG done neither in good faith
nor for causes beyond the control of SMART, but a ploy to terminate Astorga’s
employment. The Arbiter also ruled that contracting out the functions performed by
Astorga to an in-house agency like SNMI was illegal, citing Section 7(e), Rule VIII-A of
the Rules Implementing the Labor Code.

Accordingly, the Labor Arbiter ordered:

WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be

illegal and unjust. [SMART and Santiago] are hereby ordered to:

1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position,

without loss of seniority rights and other privileges, with full backwages, inclusive of
allowances and other benefits from the time of [her] dismissal to the date of
reinstatement, which computed as of this date, are as follows:

(a) Astorga
BACKWAGES; (P33,650.00 x 4 months) = P134,600.00

10
 UNPAID SALARIES (February 15, 1998-April
3, 1998
February 15-28, 1998 = P 16,823.00
March 1-31, [1998] = P 33,650.00
April 1-3, 1998 = P 3,882.69
CAR MAINTENANCE ALLOWANCE = P 8,000.00
(P2,000.00 x 4)
FUEL ALLOWANCE = P 14,457.83
(300 liters/mo. x 4 mos. at P12.04/liter)
TOTAL
= P211,415.52

xxxx

3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and
exemplary damages in the amount of P300,000.00. x x x

4. Jointly and severally pay 10% of the amount due as attorney’s fees.

SO ORDERED.15

Subsequently, on March 29, 1999, the RTC issued an Order16 denying Astorga’s motion
to dismiss the replevin case. In so ruling, the RTC ratiocinated that:

Assessing the [submission] of the parties, the Court finds no merit in the motion to
dismiss.

As correctly pointed out, this case is to enforce a right of possession over a company
car assigned to the defendant under a car plan privilege arrangement. The car is
registered in the name of the plaintiff. Recovery thereof via replevin suit is allowed by
Rule 60 of the 1997 Rules of Civil Procedure, which is undoubtedly within the
jurisdiction of the Regional Trial Court.

In the Complaint, plaintiff claims to be the owner of the company car and despite
demand, defendant refused to return said car. This is clearly sufficient statement of
plaintiff’s cause of action.

Neither is there forum shopping. The element of litis penden[t]ia does not appear to
exist because the judgment in the labor dispute will not constitute res judicata to bar the
filing of this case.

WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.

11
SO ORDERED.17

Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.18

Astorga elevated the denial of her motion via certiorari to the CA, which, in its February
28, 2000 Decision,19reversed the RTC ruling. Granting the petition and, consequently,
dismissing the replevin case, the CA held that the case is intertwined with Astorga’s
complaint for illegal dismissal; thus, it is the labor tribunal that has rightful jurisdiction
over the complaint. SMART’s motion for reconsideration having been denied,20 it
elevated the case to this Court, now docketed as G.R. No. 148132.

Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the
illegal dismissal case to the National Labor Relations Commission (NLRC). In its
September 27, 1999 Decision,21 the NLRC sustained Astorga’s dismissal. Reversing
the Labor Arbiter, the NLRC declared the abolition of CSMG and the creation of SNMI
to do the sales and marketing services for SMART a valid organizational action. It
overruled the Labor Arbiter’s ruling that SNMI is an in-house agency, holding that it
lacked legal basis. It also declared that contracting, subcontracting and streamlining of
operations for the purpose of increasing efficiency are allowed under the law. The
NLRC further found erroneous the Labor Arbiter’s disquisition that redundancy to be
valid must be impelled by economic reasons, and upheld the redundancy measures
undertaken by SMART.

The NLRC disposed, thus:

WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside.
[Astorga] is further ordered to immediately return the company vehicle assigned to her.
[Smart and Santiago] are hereby ordered to pay the final wages of [Astorga] after [she]
had submitted the required supporting papers therefor.

SO ORDERED.22

Astorga filed a motion for reconsideration, but the NLRC denied it on December 21,
1999.23

Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a
Decision24 affirming with modification the resolutions of the NLRC. In gist, the CA
agreed with the NLRC that the reorganization undertaken by SMART resulting in the
abolition of CSMG was a legitimate exercise of management prerogative. It rejected
Astorga’s posturing that her non-absorption into SNMI was tainted with bad faith.
However, the CA found that SMART failed to comply with the mandatory one-month
notice prior to the intended termination. Accordingly, the CA imposed a penalty
equivalent to Astorga’s one-month salary for this non-compliance. The CA also set

12
aside the NLRC’s order for the return of the company vehicle holding that this issue is
not essentially a labor concern, but is civil in nature, and thus, within the competence of
the regular court to decide. It added that the matter had not been fully ventilated before
the NLRC, but in the regular court.

Astorga filed a motion for reconsideration, while SMART sought partial reconsideration,
of the Decision. On December 18, 2001, the CA resolved the motions, viz.:

WHEREFORE, [Astorga’s] motion for reconsideration is hereby PARTIALLY

GRANTED. [Smart] is hereby ordered to pay [Astorga] her backwages from 15
February 1998 to 06 November 1998. [Smart’s] motion for reconsideration is outrightly
DENIED.

SO ORDERED.25

Astorga and SMART came to us with their respective petitions for review assailing the
CA ruling, docketed as G.R Nos. 151079 and 151372. On February 27, 2002, this
Court ordered the consolidation of these petitions with G.R. No. 148132.26

In her Memorandum, Astorga argues:

THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGA’S

DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN
CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE,
CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR HER DISMISSAL.

II

SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE

APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES
ASTORGA TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.

III

THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL

TRIAL COURT HAS NO JURISDICTION OVER THE COMPLAINT FOR RECOVERY
OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic)
BENEFIT.27

On the other hand, Smart in its Memoranda raises the following issues:

I
13
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION
OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO
FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE
NOTICE REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE GROUND
OF REDUNDANCY.

II

WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE

DEPARTMENT OF LABOR AND EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE
WITH THE NOTICE REQUIREMENTS BEFORE TERMINATION.

III

WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR

RELATIONS COMMISSION FINDS APPLICATION IN THE CASE AT BAR
CONSIDERING THAT IN THE SERRANO CASE THERE WAS ABSOLUTELY NO
NOTICE AT ALL.28

IV

WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION

OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO
FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES NOT
HAVE JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY SMART
TO RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO
WAS LEGALLY DISMISSED.

WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE

THAT THE SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A
CAR PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR.

VI

14
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE
THAT ASTORGA CAN NO LONGER BE CONSIDERED AS AN EMPLOYEE OF
SMART UNDER THE LABOR CODE.29

The Court shall first deal with the propriety of dismissing the replevin case filed with the
RTC of Makati City allegedly for lack of jurisdiction, which is the issue raised in G.R.
No. 148132.

Replevin is an action whereby the owner or person entitled to repossession of goods or

chattels may recover those goods or chattels from one who has wrongfully distrained or
taken, or who wrongfully detains such goods or chattels. It is designed to permit one
having right to possession to recover property in specie from one who has wrongfully
taken or detained the property.30 The term may refer either to the action itself, for the
recovery of personalty, or to the provisional remedy traditionally associated with it, by
which possession of the property may be obtained by the plaintiff and retained during
the pendency of the action.31

That the action commenced by SMART against Astorga in the RTC of Makati City was
one for replevin hardly admits of doubt.

In reversing the RTC ruling and consequently dismissing the case for lack of
jurisdiction, the CA made the following disquisition, viz.:

[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the
employment package. We doubt that [SMART] would extend [to Astorga] the same car
plan privilege were it not for her employment as district sales manager of the company.
Furthermore, there is no civil contract for a loan between [Astorga] and [Smart].
Consequently, We find that the car plan privilege is a benefit arising out of employer-
employee relationship. Thus, the claim for such falls squarely within the original and
exclusive jurisdiction of the labor arbiters and the NLRC.32

We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed
jurisdiction over the suit and acted well within its discretion in denying Astorga’s motion
to dismiss. SMART’s demand for payment of the market value of the car or, in the
alternative, the surrender of the car, is not a labor, but a civil, dispute. It involves the
relationship of debtor and creditor rather than employee-employer relations.33 As such,
the dispute falls within the jurisdiction of the regular courts.

In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over the
replevin suit, explained:

Replevin is a possessory action, the gist of which is the right of possession in the
plaintiff. The primary relief sought therein is the return of the property in specie

15
wrongfully detained by another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property. The question of
whether or not a party has the right of possession over the property involved and if so,
whether or not the adverse party has wrongfully taken and detained said property as to
require its return to plaintiff, is outside the pale of competence of a labor tribunal and
beyond the field of specialization of Labor Arbiters.

xxxx

The labor dispute involved is not intertwined with the issue in the Replevin Case. The
respective issues raised in each forum can be resolved independently on the other. In
fact in 18 November 1986, the NLRC in the case before it had issued an Injunctive Writ
enjoining the petitioners from blocking the free ingress and egress to the Vessel and
ordering the petitioners to disembark and vacate. That aspect of the controversy is
properly settled under the Labor Code. So also with petitioners’ right to picket. But the
determination of the question of who has the better right to take possession of the
Vessel and whether petitioners can deprive the Charterer, as the legal possessor of the
Vessel, of that right to possess in addressed to the competence of Civil Courts.

In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of
jurisdiction as laid down by pertinent laws.

The CA, therefore, committed reversible error when it overturned the RTC ruling and
ordered the dismissal of the replevin case for lack of jurisdiction.

Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.

Astorga was terminated due to redundancy, which is one of the authorized causes for
the dismissal of an employee. The nature of redundancy as an authorized cause for
dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National Labor
Relations Commission,35 viz:

x x x redundancy in an employer’s personnel force necessarily or even ordinarily refers

to duplication of work. That no other person was holding the same position that private
respondent held prior to termination of his services does not show that his position had
not become redundant. Indeed, in any well organized business enterprise, it would be
surprising to find duplication of work and two (2) or more people doing the work of one
person. We believe that redundancy, for purposes of the Labor Code, exists where the
services of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number
of factors, such as overhiring of workers, decreased volume of business, or dropping of

16
a particular product line or service activity previously manufactured or undertaken by
the enterprise.

The characterization of an employee’s services as superfluous or no longer necessary

and, therefore, properly terminable, is an exercise of business judgment on the part of
the employer. The wisdom and soundness of such characterization or decision is not
subject to discretionary review provided, of course, that a violation of law or arbitrary or
malicious action is not shown.36

Astorga claims that the termination of her employment was illegal and tainted with bad
faith. She asserts that the reorganization was done in order to get rid of her. But except
for her barefaced allegation, no convincing evidence was offered to prove it. This Court
finds it extremely difficult to believe that SMART would enter into a joint venture
agreement with NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of
easing out a particular employee, such as Astorga. Moreover, Astorga never denied
that SMART offered her a supervisory position in the Customer Care Department, but
she refused the offer because the position carried a lower salary rank and rate. If
indeed SMART simply wanted to get rid of her, it would not have offered her a position
in any department in the enterprise.

Astorga also states that the justification advanced by SMART is not true because there
was no compelling economic reason for redundancy. But contrary to her claim, an
employer is not precluded from adopting a new policy conducive to a more economical
and effective management even if it is not experiencing economic reverses. Neither
does the law require that the employer should suffer financial losses before he can
terminate the services of the employee on the ground of redundancy. 37

We agree with the CA that the organizational realignment introduced by SMART, which
culminated in the abolition of CSMG/FSD and termination of Astorga’s employment was
an honest effort to make SMART’s sales and marketing departments more efficient and
competitive. As the CA had taken pains to elucidate:

x x x a careful and assiduous review of the records will yield no other conclusion than
that the reorganization undertaken by SMART is for no purpose other than its declared
objective – as a labor and cost savings device. Indeed, this Court finds no fault in
SMART’s decision to outsource the corporate sales market to SNMI in order to attain
greater productivity. [Astorga] belonged to the Sales Marketing Group under the Fixed
Services Division (CSMG/FSD), a distinct sales force of SMART in charge of selling
SMART’s telecommunications services to the corporate market. SMART, to ensure it
can respond quickly, efficiently and flexibly to its customer’s requirement, abolished
CSMG/FSD and shortly thereafter assigned its functions to newly-created SNMI
Multimedia Incorporated, a joint venture company of SMART and NTT of Japan, for the
reason that CSMG/FSD does not have the necessary technical expertise required for

17
the value added services. By transferring the duties of CSMG/FSD to SNMI, SMART
has created a more competent and specialized organization to perform the work
required for corporate accounts. It is also relieved SMART of all administrative costs –
management, time and money-needed in maintaining the CSMG/FSD. The
determination to outsource the duties of the CSMG/FSD to SNMI was, to Our mind, a
sound business judgment based on relevant criteria and is therefore a legitimate
exercise of management prerogative.

Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined
towards the worker and upheld his cause in most of his conflicts with his employer. This
favored treatment is consonant with the social justice policy of the Constitution. But
while tilting the scales of justice in favor of workers, the fundamental law also
guarantees the right of the employer to reasonable returns for his investment.38 In this
light, we must acknowledge the prerogative of the employer to adopt such measures as
will promote greater efficiency, reduce overhead costs and enhance prospects of
economic gains, albeit always within the framework of existing laws. Accordingly, we
sustain the reorganization and redundancy program undertaken by SMART.

However, as aptly found by the CA, SMART failed to comply with the mandated one (1)
month notice prior to termination. The record is clear that Astorga received the notice of
termination only on March 16, 199839 or less than a month prior to its effectivity on April
3, 1998. Likewise, the Department of Labor and Employment was notified of the
redundancy program only on March 6, 1998.40

Article 283 of the Labor Code clearly provides:

Art. 283. Closure of establishment and reduction of personnel. — The employer may
also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof x x x.

SMART’s assertion that Astorga cannot complain of lack of notice because the
organizational realignment was made known to all the employees as early as February
1998 fails to persuade. Astorga’s actual knowledge of the reorganization cannot
replace the formal and written notice required by the law. In the written notice, the
employees are informed of the specific date of the termination, at least a month prior to
the effectivity of such termination, to give them sufficient time to find other suitable
employment or to make whatever arrangements are needed to cushion the impact of
termination. In this case, notwithstanding Astorga’s knowledge of the reorganization,
she remained uncertain about the status of her employment until SMART gave her

18
formal notice of termination. But such notice was received by Astorga barely two (2)
weeks before the effective date of termination, a period very much shorter than that
required by law.

Be that as it may, this procedural infirmity would not render the termination of Astorga’s
employment illegal. The validity of termination can exist independently of the procedural
infirmity of the dismissal.41 In DAP Corporation v. CA,42 we found the dismissal of the
employees therein valid and for authorized cause even if the employer failed to comply
with the notice requirement under Article 283 of the Labor Code. This Court upheld the
dismissal, but held the employer liable for non-compliance with the procedural
requirements.

The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal and
at the same time, awarding indemnity for violation of Astorga's statutory rights.

However, we find the need to modify, by increasing, the indemnity awarded by the CA
to Astorga, as a sanction on SMART for non-compliance with the one-month mandatory
notice requirement, in light of our ruling in Jaka Food Processing Corporation v.
Pacot,43 viz.:

[I]f the dismissal is based on a just cause under Article 282 but the employer failed to
comply with the notice requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect, initiated by an act imputable
to the employee, and (2) if the dismissal is based on an authorized cause under Article
283 but the employer failed to comply with the notice requirement, the sanction should
be stiffer because the dismissal process was initiated by the employer’s exercise of his
management prerogative.

We deem it proper to increase the amount of the penalty on SMART to P50,000.00.

As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation
pay equivalent to at least one (1) month salary or to at least one (1) month’s pay for
every year of service, whichever is higher. The records show that Astorga’s length of
service is less than a year. She is, therefore, also entitled to separation pay equivalent
to one (1) month pay.

Finally, we note that Astorga claimed non-payment of wages from February 15, 1998.
This assertion was never rebutted by SMART in the proceedings a quo. No proof of
payment was presented by SMART to disprove the allegation. It is settled that in labor
cases, the burden of proving payment of monetary claims rests on the
employer.44 SMART failed to discharge the onus probandi. Accordingly, it must be held
liable for Astorga’s salary from February 15, 1998 until the effective date of her
termination, on April 3, 1998.

19
However, the award of backwages to Astorga by the CA should be deleted for lack of
basis. Backwages is a relief given to an illegally dismissed employee. Thus, before
backwages may be granted, there must be a finding of unjust or illegal dismissal from
work.45 The Labor Arbiter ruled that Astorga was illegally dismissed. But on appeal, the
NLRC reversed the Labor Arbiter’s ruling and categorically declared Astorga’s
dismissal valid. This ruling was affirmed by the CA in its assailed Decision. Since
Astorga’s dismissal is for an authorized cause, she is not entitled to backwages. The
CA’s award of backwages is totally inconsistent with its finding of valid dismissal.

WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED.

The February 28, 2000 Decision and the May 7, 2001 Resolution of the Court of
Appeals in CA-G.R. SP. No. 53831 are SET ASIDE. The Regional Trial Court of Makati
City, Branch 57 is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and
render its Decision with reasonable dispatch.

On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079
and 151372 are DENIED. The June 11, 2001 Decision and the December 18, 2001
Resolution in CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION. Astorga is
declared validly dismissed. However, SMART is ordered to pay Astorga P50,000.00 as
indemnity for its non-compliance with procedural due process, her separation pay
equivalent to one (1) month pay, and her salary from February 15, 1998 until the
effective date of her termination on April 3, 1998. The award of backwages
is DELETED for lack of basis.

SO ORDERED.

20
 SECOND DIVISION

KENNETH HAO, Complainant, A.M. No. P-07-2384

Present:

QUISUMBING, J., Chairperson,

- versus - TINGA,
REYES,
LEONARDO-DE CASTRO, and
BRION, JJ.
ABE C. ANDRES, Sheriff IV, Regional
Trial Court, Branch 16, Davao City, Promulgated:
Respondent.
June 18, 2008

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

RESOLUTION
QUISUMBING, J.:

Before us is an administrative complaint for gross neglect of duty, grave abuse of

authority (oppression) and violation of Republic Act No. 3019 [1] filed by complainant
Kenneth Hao against respondent Abe C. Andres, Sheriff IV of the Regional Trial Court
(RTC) of Davao City, Branch 16.

The antecedent facts are as follows:

Complainant Hao is one of the defendants in a civil case for replevin docketed as Civil
Case No. 31, 127-2005[2] entitled ZenaidaSilver, doing trade and business under the

21
name and style ZHS Commercial v. Loreto Hao, Atty. Amado Cantos, Kenneth Hao and
John Does, pending before the RTC of Davao City, Branch 16.

On October 17, 2005, Judge Renato A. Fuentes[3] issued an Order of Seizure[4] against 22
motor vehicles allegedly owned by the complainant. On the strength of the said order,
Andres was able to seize two of the subject motor vehicles on October 17, 2005; four
on October 18, 2005, and another three on October 19, 2005, or a total of nine motor
vehicles.[5]

In his Affidavit-Complaint[6] against Andres before the Office of the Court

Administrator (OCA), Hao alleged that Andres gave undue advantage to Zenaida Silver
in the implementation of the order and that Andres seized the nine motor vehicles in an
oppressive manner. Hao also averred that Andres was accompanied by unidentified
armed personnel on board a military vehicle which was excessive since there were no
resistance from them. Hao also discovered that the compound where the seized motor
vehicles were placed is actually owned by Silver.[7]

On October 21, 2005, in view of the approval of the complainants counter-

replevin bond, Judge Emmanuel C. Carpio[8]ordered Andres to immediately cease and
desist from further implementing the order of seizure, and to return the seized motor
vehicles including its accessories to their lawful owners.[9]

However, on October 24, 2005, eight of the nine seized motor vehicles were
reported missing. In his report,[10] Andres stated that he was shocked to find that the
motor vehicles were already missing when he inspected it on October 22, 2005. He
narrated that on October 21, 2005, PO3 Rodrigo Despe, one of the policemen guarding
the subject motor vehicles, reported to him that a certain Nonoy entered the compound
and caused the duplication of the vehicles keys.[11] But Andres claimed the motor
vehicles were still intact when he inspected it on October 21, 2005.

22
Subsequently, Hao reported that three of the carnapped vehicles were recovered by the
police.[12] He then accused Andres of conspiring and conniving with
Atty. Oswaldo Macadangdang (Silvers counsel) and the policemen in the carnapping of
the motor vehicles. Hao also accused Andres of concealing the depository receipts from
them and pointed out that the depository receipts show that Silver and
Atty. Macadangdang were the ones who chose the policemen who will guard the motor
vehicles.

In his Comment[13] dated March 3, 2006, Andres vehemently denied violating Rep. Act
No. 3019 and committing gross neglect of duty.

Andres denied implementing the Order of Seizure in an oppressive manner. He said he

took the vehicles because they were the specific vehicles ordered to be seized after
checking their engine and chassis numbers. Andres likewise denied that he was
accompanied by military personnel in the implementation of the order. He claimed that he
was merely escorted by policemen pursuant to the directive of Police Senior
Supt. Catalino S. Cuy, Chief of the Davao City Police Office. Andres also maintained that
no form of harassment or oppression was committed during the implementation of the
order, claiming that the presence of the policemen was only for the purpose of preserving
peace and order, considering there were 22 motor vehicles specified in the Order of
Seizure. Andres added that he exercised no discretion in the selection of the policemen
who assisted in the implementation of the order, much less of those who will guard the
seized motor vehicles.

Andres disputed the allegation that he neglected his duty to safeguard the seized vehicles
by pointing out that he placed all the motor vehicles under police watch. He added that
the policemen had control of the compound where the seized motor vehicles were kept.

Andres likewise contended that after the unauthorized duplication of the vehicles
keys was reported to him, he immediately advised the policemen on duty to watch the

23
motor vehicles closely.[14] He negated the speculations that he was involved in the
disappearance of the seized motor vehicles as he claims to be the one who reported the
incident to the court and the police.

As to the allegation of undisclosed depository receipts, Andres maintained that he never

denied the existence of the depository receipts.He said the existence of the depository
receipts was immediately made known on the same day that the subject motor vehicles were
discovered missing. He even used the same in the filing of the carnapping case against Silver
and her co-conspirators.

Finally, Andres insisted that the guarding of properties under custodia legis by policemen
is not prohibited, but is even adopted by the court. Hence, he prays that he be held not
liable for the loss of the vehicles and that he be relieved of his duty to return the
vehicles.[15]

After the OCA recommended that the matter be investigated, we referred the case to
Executive Judge Renato A. Fuentes for investigation, report and recommendation.[16]

In his Investigation Report[17] dated September 21, 2006, Judge Fuentes found Andres
guilty of serious negligence in the custody of the nine motor vehicles. He recommended
that Andres be suspended from office.

Judge Fuentes found numerous irregularities in the implementation of the writ

of replevin/order of seizure, to wit: (1) at the time of the implementation of the writ,
Andres knew that the vehicles to be seized were not in the names of any of the parties to
the case; (2) one vehicle was taken without the knowledge of its owner, a
certain Junard Escudero; (3) Andres allowed Atty. Macadangdangto get a keymaster to
duplicate the vehicles keys in order to take one motor vehicle; and (4) Andres admitted
that prior to the implementation of the writ of seizure, he consulted Silver and
Atty. Macadangdang regarding the implementation of the writ and was accompanied by

24
the latter in the course of the implementation. Judge Fuentes observed that the motor
vehicles were speedily seized without strictly observing fairness and regularity in its
implementation.[18]

Anent the safekeeping of the seized motor vehicles, Judge Fuentes pointed out several
instances where Andres lacked due diligence to wit: (1) the seized motor vehicles were
placed in a compound surrounded by an insufficiently locked see-through fence; (2) three
motor vehicles were left outside the compound; (3) Andres turned over the key of the
gate to the policemen guarding the motor vehicles; (4) Andres does not even know the
full name of the owner of the compound, who was merely known to him as Gloria; (5)
except for PO3 Despe and SPO4 Nelson Salcedo, the identities of the other policemen
tapped to guard the compound were unknown to Andres; (6) Andres also admitted that he
only stayed at least one hour each day from October 19-21, 2005 during his visits to the
compound; and (7) even after it was reported to him that a certain Nonoy entered the
compound and duplicated the keys of the motor vehicles, he did not exert his best effort
to look for that Nonoy and to confiscate the duplicated keys.[19]

Judge Fuentes also observed that Andres appeared to be more or less accommodating to
Silver and her counsel but hostile and uncooperative to the complainant. He pointed out
that Andres depended solely on Silver in the selection of the policemen who would guard
the seized motor vehicles. He added that even the depository receipts were not turned
over to the defendants/third-party claimants in the replevin case but were in fact
concealed from them. Andres also gave inconsistent testimonies as to whether he has in
his possession the depository receipts.[20]

The OCA disagreed with the observations of Judge Fuentes. It recommended that Andres
be held liable only for simple neglect of duty and be suspended for one (1) month and
one (1) day.[21]

We adopt the recommendation of the investigating judge.

25
Being an officer of the court, Andres must be aware that there are well-defined steps
provided in the Rules of Court regarding the proper implementation of a writ
of replevin and/or an order of seizure. The Rules, likewise, is explicit on the duty of the
sheriff in its implementation. To recapitulate what should be common knowledge to
sheriffs, the pertinent provisions of Rule 60, of the Rules of Court are quoted hereunder:
SEC. 4. Duty of the sheriff.Upon receiving such order, the sheriff must serve a copy
thereof on the adverse party, together with a copy of the application, affidavit and
bond, and must forthwith take the property, if it be in the possession of the
adverse party, or his agent, and retain it in his custody. If the property or any part
thereof be concealed in a building or enclosure, the sheriff must demand its delivery,
and if it be not delivered, he must cause the building or enclosure to be broken open
and take the property into his possession. After the sheriff has taken possession of
the property as herein provided, he must keep it in a secure place and shall be
responsible for its delivery to the party entitled thereto upon receiving his fees
and necessary expenses for taking and keeping the same.(Emphasis supplied.)

SEC. 6. Disposition of property by sheriff.If within five (5) days after the taking of
the property by the sheriff, the adverse party does not object to the sufficiency of the
bond, or of the surety or sureties thereon; or if the adverse party so objects and the court
affirms its approval of the applicants bond or approves a new bond, or if the adverse
party requires the return of the property but his bond is objected to and found
insufficient and he does not forthwith file an approved bond, the property shall be
delivered to the applicant. If for any reason the property is not delivered to the
applicant, the sheriff must return it to the adverse party. (Emphasis supplied.)

First, the rules provide that property seized under a writ of replevin is not to be delivered
immediately to the plaintiff.[22] In accordance with the said rules, Andres should have
waited no less than five days in order to give the complainant an opportunity to object to
the sufficiency of the bond or of the surety or sureties thereon, or require the return of the
seized motor vehicles by filing a counter-bond. This, he failed to do.

Records show that Andres took possession of two of the subject motor vehicles
on October 17, 2005, four on October 18, 2005, and another three on October 19,
2005. Simultaneously, as evidenced by the depository receipts, on October 18, 2005,

26
Silver received from Andres six of the seized motor vehicles, and three more motor
vehicles on October 19, 2005. Consequently, there is no question that Silver was already
in possession of the nine seized vehicles immediately after seizure, or no more than three
days after the taking of the vehicles. Thus, Andres committed a clear violation of Section
6, Rule 60 of the Rules of Court with regard to the proper disposal of the property.

It matters not that Silver was in possession of the seized vehicles merely for
safekeeping as stated in the depository receipts.The rule is clear that the property seized
should not be immediately delivered to the plaintiff, and the sheriff must retain custody
of the seized property for at least five days.[23] Hence, the act of Andres in delivering the
seized vehicles immediately after seizure to Silver for whatever purpose, without
observing the five-day requirement finds no legal justification.

In Pardo v. Velasco,[24] this Court held that

Respondent as an officer of the Court is charged with certain ministerial duties
which must be performed faithfully to the letter. Every provision in the Revised Rules
of Court has a specific reason or objective. In this case, the purpose of the five (5)
days is to give a chance to the defendant to object to the sufficiency of the bond
or the surety or sureties thereon or require the return of the property by filing
a counterbond.[25] (Emphasis supplied.)

In Sebastian v. Valino,[26] this Court reiterated that

Under the Revised Rules of Court, the property seized under a writ
of replevin is not to be delivered immediately to the plaintiff. The sheriff must
retain it in his custody for five days and he shall return it to the defendant, if the
latter, as in the instant case, requires its return and files a counterbond.[27] (Emphasis
supplied.)

Likewise, Andres claim that he had no knowledge that the compound is owned by
Silver fails to convince us. Regardless of who actually owns the compound, the fact
remains that Andres delivered the vehicles to Silver prematurely. It violates the rule
requiring him to safekeep the vehicles in his custody.[28] The alleged lack of facility to
27
store the seized vehicles is unacceptable considering that he should have deposited the
same in a bonded warehouse. If this was not feasible, he should have sought prior
authorization from the court issuing the writ before delivering the vehicles to Silver.

Second, it must be stressed that from the moment an order of delivery in replevin is
executed by taking possession of the property specified therein, such property is
in custodia legis. As legal custodian, it is Andres duty to safekeep the seized motor
vehicles. Hence, when he passed his duty to safeguard the motor vehicles to Silver, he
committed a clear neglect of duty.

Third, we are appalled that even after PO3 Despe reported the unauthorized
duplication of the vehicles keys, Andres failed to take extra precautionary measures to
ensure the safety of the vehicles. It is obvious that the vehicles were put at risk by the
unauthorized duplication of the keys of the vehicles. Neither did he immediately report
the incident to the police or to the court. The loss of the motor vehicles could have been
prevented if Andres immediately asked the court for an order to transfer the vehicles to
another secured place as soon as he discovered the unauthorized duplication. Under these
circumstances, even an ordinary prudent man would have exercised extra diligence. His
warning to the policemen to closely watch the vehicles was insufficient. Andres cannot
toss back to Silver or to the policemen the responsibility for the loss of the motor vehicles
since he remains chiefly responsible for their safekeeping as legal custodian
thereof. Indeed, Andres failure to take the necessary precaution and proper monitoring of
the vehicles to ensure its safety constitutes plain negligence.

Fourth, despite the cease and desist order, Andres failed to return the motor
vehicles to their lawful owners. Instead of returning the motor vehicles immediately as
directed, he opted to write Silver and demand that she put up an indemnity bond to secure
the third-party claims. Consequently, due to his delay, the eventual loss of the motor
vehicles rendered the order to return the seized vehicles ineffectual to the prejudice of the
complaining owners.

28
 It must be stressed that as court custodian, it was Andres responsibility to ensure
that the motor vehicles were safely kept and that the same were readily available upon
order of the court or demand of the parties concerned. Specifically, sheriffs, being
ranking officers of the court and agents of the law, must discharge their duties with great
care and diligence. In serving and implementing court writs, as well as processes and
orders of the court, they cannot afford to err without affecting adversely the proper
dispensation of justice. Sheriffs play an important role in the administration of justice and
as agents of the law, high standards of performance are expected of them. [29] Hence, his
failure to return the motor vehicles at the time when its return was still feasible
constitutes another instance of neglect of duty.

Fifth, as found by the OCA, we agree that Andres also disregarded the provisions
of Rule 141[30] of the Rules of Court with regard to payment of expenses.

Under Section 9,[31] Rule 141 of the Rules of Court, the procedure for the execution
of writs and other processes are: First, the sheriff must make an estimate of the expenses
to be incurred by him; Second, he must obtain court approval for such estimated
expenses; Third, the approved estimated expenses shall be deposited by the interested
party with the Clerk of Court and ex officiosheriff; Fourth, the Clerk of Court shall
disburse the amount to the executing sheriff; and Fifth, the executing sheriff shall
liquidate his expenses within the same period for rendering a return on the writ .

In this case, no estimate of sheriffs expenses was submitted to the court by

Andres. Without approval of the court, he also allowed Silver to pay directly to the
policemen the expenses for the safeguarding of the motor vehicles including their
meals.[32]Obviously, this practice departed from the accepted procedure provided in the
Rules of Court.

In view of the foregoing, there is no doubt that Andres failed to live up to the
standards required of his position. The number of instances that Andres strayed from the

29
regular course observed in the proper implementation of the orders of the court cannot be
countenanced. Thus, taking into account the numerous times he was found negligent and
careless of his duties coupled with his utter disregard of legal procedures, he cannot be
considered guilty merely of simple negligence. His acts constitute gross negligence.

As we have previously ruled:

Gross negligence refers to negligence characterized by the want of even slight
care, acting or omitting to act in a situation where there is a duty to act, not
inadvertently but willfully and intentionally, with a conscious indifference to
consequences in so far as other persons may be affected. It is the omission of that
care which even inattentive and thoughtless men never fail to take on their own
property.[33] (Emphasis supplied.)

Gross neglect, on the other hand, is such neglect from the gravity of the case, or
the frequency of instances, becomes so serious in its character as to endanger or
threaten the public welfare. The term does not necessarily include willful neglect or
intentional official wrongdoing.[34] (Emphasis supplied.)

Good faith on the part of Andres, or lack of it, in proceeding to properly execute
his mandate would be of no moment, for he is chargeable with the knowledge that being
an officer of the court tasked therefor, it behooves him to make due compliance. He is
expected to live up to the exacting standards of his office and his conduct must at all
times be characterized by rectitude and forthrightness, and so above suspicion and
mistrust as well.[35] Thus, an act of gross neglect resulting in loss of properties
in custodia legis ruins the confidence lodged by the parties to a suit or the citizenry in our
judicial process. Those responsible for such act or omission cannot escape the
disciplinary power of this Court.

Anent the allegation of grave abuse of authority (oppression), we likewise agree

with the observations of the investigating judge. Records show that Andres started
enforcing the writ of replevin/order of seizure on the same day that the order of seizure
was issued. He also admitted that he took the vehicles of persons who are not parties to

30
the replevin case.[36] He further admitted that he took one vehicle belonging to a
certain Junard Escudero without the latters knowledge and even caused the duplication of
its keys in order that it may be taken by Andres. [37] Certainly, these are indications that
Andres enforced the order of seizure with undue haste and without giving the
complainant prior notice or reasonable time to deliver the motor vehicles. Hence, Andres
is guilty of grave abuse of authority (oppression).

When a writ is placed in the hands of a sheriff, it is his duty, in the absence of any
instructions to the contrary, to proceed with reasonable celerity and promptness to
execute it according to its mandate. However, the prompt implementation of an order of
seizure is called for only in instances where there is no question regarding the right of the
plaintiff to the property.[38] Where there is such a question, the prudent recourse for
Andres is to desist from executing the order and convey the information to his judge and
to the plaintiff.

True, sheriffs must comply with their mandated ministerial duty to implement writs
promptly and expeditiously, but equally true is the principle that sheriffs by the nature of
their functions must at all times conduct themselves with propriety and decorum and act
above suspicion. There must be no room for anyone to conjecture that sheriffs and deputy
sheriffs as officers of the court have conspired with any of the parties to a case to obtain a
favorable judgment or immediate execution. The sheriff is at the front line as representative
of the judiciary and by his act he may build or destroy the institution.[39]

However, as to the charge of graft and corruption, it must be stressed that the same
is criminal in nature, thus, the resolution thereof cannot be threshed out in the instant
administrative proceeding. We also take note that there is a pending criminal case
for carnapping against Andres;[40] hence, with more reason that we cannot rule on the
allegation of graft and corruption as it may preempt the court in its resolution of the said
case.

31
 We come to the matter of penalties. The imposable penalty for gross neglect of
duty is dismissal. While the penalty imposable for grave abuse of authority (oppression)
is suspension for six (6) months one (1) day to one (1) year. [41] Section 55, Rule IV, of
the Uniform Rules on Administrative Cases in the Civil Service provides that if the
respondent is found guilty of two or more charges or counts, the penalty to be imposed
should be that corresponding to the most serious charge or count and the rest shall be
considered as aggravating circumstances.

In the instant case, the penalty for the more serious offense which is dismissal
should be imposed on Andres. However, following Sections 53[42] and 54,[43] Rule IV of
the Uniform Rules on Administrative Cases in the Civil Service, we have to consider that
Andres is a first-time offender; hence, a lighter penalty than dismissal from the service
would suffice. Consequently, instead of imposing the penalty of dismissal, the penalty of
suspension from office for one (1) year without pay is proper for gross neglect of duty,
and another six (6) months should be added for the aggravating circumstance of grave
abuse of authority (oppression).

WHEREFORE, the Court finds Abe C. Andres, Sheriff IV, RTC of Davao City,
Branch 16, GUILTY of gross neglect of duty and grave abuse of authority (oppression)
and is SUSPENDED for one (1) year and six (6) months without pay. He is also
hereby WARNED that a repetition of the same or similar offenses in the future shall be
dealt with more severely.

SO ORDERED.

32
SECOND DIVISION

33
ROGER V. NAVARRO, G.R. No. 153788
Petitioner,

Present:

CARPIO, J., Chairperson,

- versus -
LEONARDO-DE CASTRO,

BRION,

DEL CASTILLO, and

ABAD, JJ.

HON. JOSE L. ESCOBIDO, Presiding Judge,

RTC Branch 37, Cagayan de Oro City, and
KAREN T. GO, doing business underPromulgated:
the
name KARGO ENTERPRISES,

Respondents.
November 27, 2009

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

BRION, J.:

This is a petition for review on certiorari[1] that seeks to set aside the Court of
Appeals (CA) Decision[2] dated October 16, 2001 and Resolution[3] dated May 29, 2002 in
CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26, 2000[4] and March 7,

34
2001[5] orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City,
denying petitioner Roger V. Navarros (Navarro) motion to dismiss.

BACKGROUND FACTS

On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil
Case Nos. 98-599 (first complaint)[6] and 98-598 (second complaint),[7] before the RTC for
replevin and/or sum of money with damages against Navarro. In these complaints, Karen
Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in
Navarros possession.

The first complaint stated:

1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O.

GO, a resident of Cagayan de Oro City and doing business under the trade name
KARGO ENTERPRISES, an entity duly registered and existing under and by virtue of
the laws of the Republic of the Philippines, which has its business address at Bulua,
Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a
resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may be
served with summons and other processes of the Honorable Court; that defendant
JOHN DOE whose real name and address are at present unknown to plaintiff is
hereby joined as party defendant as he may be the person in whose possession and
custody the personal property subject matter of this suit may be found if the same is
not in the possession of defendant ROGER NAVARRO;

2. That KARGO ENTERPRISES is in the business of, among others, buying and
selling motor vehicles, including hauling trucks and other heavy equipment;
35
 3. That for the cause of action against defendant ROGER NAVARRO, it is
hereby stated that on August 8, 1997, the said defendant leased [from] plaintiff a
certain motor vehicle which is more particularly described as follows

Make/Type FUSO WITH MOUNTED CRANE

Serial No. FK416K-51680

Motor No. 6D15-338735

Plate No. GHK-378

as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by

and between KARGO ENTERPRISES, then represented by its Manager, the
aforementioned GLENN O. GO, and defendant ROGER NAVARRO xxx; that in
accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO
PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six (6) post-dated
checks each in the amount of SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE
& 33/100 PESOS (P66,333.33) which were supposedly in payment of the agreed
rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF
COMMUNICATIONS CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113,
respectively dated January 8, 1998 and February 8, 1998, were presented for
payment and/or credit, the same were dishonored and/or returned by the drawee
bank for the common reason that the current deposit account against which the said
checks were issued did not have sufficient funds to cover the amounts thereof; that
the total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-TWO
THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66) therefore
represents the principal liability of defendant ROGER NAVARRO unto plaintiff on the
basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO PURCHASE;
that demands, written and oral, were made of defendant ROGER NAVARRO to pay
the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX &
66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided
36
for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were,
and still are, in vain to the great damage and injury of herein plaintiff; xxx

4. That the aforedescribed motor vehicle has not been the subject of any tax
assessment and/or fine pursuant to law, or seized under an execution or an
attachment as against herein plaintiff;

xxx

8. That plaintiff hereby respectfully applies for an order of the Honorable Court for
the immediate delivery of the above-described motor vehicle from defendants unto
plaintiff pending the final determination of this case on the merits and, for that
purpose, there is attached hereto an affidavit duly executed and bond double the
value of the personal property subject matter hereof to answer for damages and
costs which defendants may suffer in the event that the order for replevin prayed for
may be found out to having not been properly issued.

The second complaint contained essentially the same allegations as the first complaint,
except that the Lease Agreement with Option to Purchase involved is dated October 1,
1997 and the motor vehicle leased is described as follows:

Make/Type FUSO WITH MOUNTED CRANE

Serial No. FK416K-510528

Motor No. 6D14-423403

37
The second complaint also alleged that Navarro delivered three post-dated checks,
each for the amount of P100,000.00, to Karen Go in payment of the agreed rentals;
however, the third check was dishonored when presented for payment.[8]

On October 12, 1998[9] and October 14, 1998,[10] the RTC issued writs of replevin for
both cases; as a result, the Sheriff seized the two vehicles and delivered them to the
possession of Karen Go.

In his Answers, Navarro alleged as a special affirmative defense that the two
complaints stated no cause of action, since Karen Go was not a party to the Lease
Agreements with Option to Purchase (collectively, the lease agreements) the
actionable documents on which the complaints were based.

On Navarros motion, both cases were duly consolidated on December 13, 1999.

In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints
did not state a cause of action.

In response to the motion for reconsideration Karen Go filed dated May 26,
2000,[11] the RTC issued another order dated July 26, 2000 setting aside the order of
dismissal. Acting on the presumption that Glenn Gos leasing business is a conjugal
property, the RTC held that Karen Go had sufficient interest in his leasing business to
file the action against Navarro. However, the RTC held that Karen Go should have
included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the
Rules of Court (Rules).[12] Thus, the lower court ordered Karen Go to file a motion for
the inclusion of Glenn Go as co-plaintiff.

38
When the RTC denied Navarros motion for reconsideration on March 7, 2001, Navarro
filed a petition for certiorari with the CA, essentially contending that the RTC
committed grave abuse of discretion when it reconsidered the dismissal of the case
and directed Karen Go to amend her complaints by including her husband Glenn Go as
co-plaintiff. According to Navarro, a complaint which failed to state a cause of action
could not be converted into one with a cause of action by mere amendment or
supplemental pleading.

On October 16, 2001, the CA denied Navarros petition and affirmed the RTCs
order.[13] The CA also denied Navarros motion for reconsideration in its resolution
of May 29, 2002,[14] leading to the filing of the present petition.

THE PETITION

Navarro alleges that even if the lease agreements were in the name of Kargo
Enterprises, since it did not have the requisite juridical personality to sue, the actual
parties to the agreement are himself and Glenn Go. Since it was Karen Go who filed the
complaints and not Glenn Go, she was not a real party-in-interest and the complaints
failed to state a cause of action.

Navarro posits that the RTC erred when it ordered the amendment of the
complaint to include Glenn Go as a co-plaintiff, instead of dismissing the complaint
outright because a complaint which does not state a cause of action cannot be
converted into one with a cause of action by a mere amendment or a supplemental

39
pleading. In effect, the lower court created a cause of action for Karen Go when there
was none at the time she filed the complaints.

Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff

drastically changed the theory of the complaints, to his great prejudice. Navarro claims
that the lower court gravely abused its discretion when it assumed that the leased
vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the
registered owner of Kargo Enterprises, the vehicles subject of the complaint are her
paraphernal properties and the RTC gravely erred when it ordered the inclusion of
Glenn Go as a co-plaintiff.

Navarro likewise faults the lower court for setting the trial of the case in the
same order that required Karen Go to amend her complaints, claiming that by issuing
this order, the trial court violated Rule 10 of the Rules.

Even assuming the complaints stated a cause of action against him, Navarro
maintains that the complaints were premature because no prior demand was made on
him to comply with the provisions of the lease agreements before the complaints for
replevin were filed.

Lastly, Navarro posits that since the two writs of replevin were issued based on
flawed complaints, the vehicles were illegally seized from his possession and should be
returned to him immediately.

40
 Karen Go, on the other hand, claims that it is misleading for Navarro to state that
she has no real interest in the subject of the complaint, even if the lease agreements
were signed only by her husband, Glenn Go; she is the owner of Kargo Enterprises and
Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises.
Moreover, Karen Go maintains that Navarros insistence that Kargo Enterprises is Karen
Gos paraphernal property is without basis. Based on the law and jurisprudence on the
matter, all property acquired during the marriage is presumed to be conjugal property.
Finally, Karen Go insists that her complaints sufficiently established a cause of action
against Navarro. Thus, when the RTC ordered her to include her husband as co-
plaintiff, this was merely to comply with the rule that spouses should sue jointly, and
was not meant to cure the complaints lack of cause of action.

THE COURTS RULING

We find the petition devoid of merit.

Karen Go is the real party-in-interest

The 1997 Rules of Civil Procedure requires that every action must be prosecuted
or defended in the name of the real party-in-interest, i.e., the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of
the suit.[15]

Interestingly, although Navarro admits that Karen Go is the registered owner of the
business name Kargo Enterprises, he still insists that Karen Go is not a real party-in-
interest in the case. According to Navarro, while the lease contracts were in Kargo
Enterprises name, this was merely a trade name without a juridical personality, so the

41
actual parties to the lease agreements were Navarro and Glenn Go, to the exclusion of
Karen Go.

As a corollary, Navarro contends that the RTC acted with grave abuse of
discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this in effect
created a cause of action for the complaints when in truth, there was none.

We do not find Navarros arguments persuasive.

The central factor in appreciating the issues presented in this case is the business
name Kargo Enterprises. The name appears in the title of the Complaint where the
plaintiff was identified as KAREN T. GO doing business under the name KARGO
ENTERPRISES, and this identification was repeated in the first paragraph of the
Complaint. Paragraph 2 defined the business KARGO ENTERPRISES
undertakes. Paragraph 3 continued with the allegation that the defendant leased from
plaintiff a certain motor vehicle that was thereafter described. Significantly, the
Complaint specifies and attaches as its integral part the Lease Agreement that underlies
the transaction between the plaintiff and the defendant. Again, the name KARGO
ENTERPRISES entered the picture as this Lease Agreement provides:

This agreement, made and entered into by and between:

GLENN O. GO, of legal age, married, with post office address at xxx, herein
referred to as the LESSOR-SELLER; representing KARGO ENTERPRISES as its
Manager,

xxx

thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go

represented. In other words, by the express terms of this Lease Agreement, Glenn Go

42
 did sign the agreement only as the manager of Kargo Enterprises and the latter is clearly
the real party to the lease agreements.

As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which

is neither a natural person, nor a juridical person, as defined by Article 44 of the Civil
Code:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose, created by
law; their personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which
the law grants a juridical personality, separate and distinct from that of each
shareholder, partner or member.

Thus, pursuant to Section 1, Rule 3 of the Rules,[16] Kargo Enterprises cannot be a

party to a civil action. This legal reality leads to the question: who then is the proper
party to file an action based on a contract in the name of Kargo Enterprises?

We faced a similar question in Juasing Hardware v. Mendoza,[17] where we said:

Finally, there is no law authorizing sole proprietorships like petitioner to bring

suit in court. The law merely recognizes the existence of a sole proprietorship as a
form of business organization conducted for profit by a single individual, and requires
the proprietor or owner thereof to secure licenses and permits, register the business
name, and pay taxes to the national government. It does not vest juridical or legal
personality upon the sole proprietorship nor empower it to file or defend an action in
court.

Thus, the complaint in the court below should have been filed in the name of
the owner of Juasing Hardware. The allegation in the body of the complaint would
show that the suit is brought by such person as proprietor or owner of the
business conducted under the name and style Juasing Hardware. The descriptive

43
words doing business as Juasing Hardware may be added to the title of the case, as is
customarily done.[18] [Emphasis supplied.]

This conclusion should be read in relation with Section 2, Rule 3 of the Rules,
which states:

SEC. 2. Parties in interest. A real party in interest is the party who stands to
be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit. Unless otherwise authorized by law or these Rules, every action
must be prosecuted or defended in the name of the real party in interest.

As the registered owner of Kargo Enterprises, Karen Go is the party who will
directly benefit from or be injured by a judgment in this case. Thus, contrary to
Navarros contention, Karen Go is the real party-in-interest, and it is legally incorrect to
say that her Complaint does not state a cause of action because her name did not appear
in the Lease Agreement that her husband signed in behalf of Kargo Enterprises. Whether
Glenn Go can legally sign the Lease Agreement in his capacity as a manager of Kargo
Enterprises, a sole proprietorship, is a question we do not decide, as this is a matter for
the trial court to consider in a trial on the merits.

Glenn Gos Role in the Case

We find it significant that the business name Kargo Enterprises is in the name of
Karen T. Go,[19] who described herself in the Complaints to be a Filipino, of legal age,
married to GLENN O. GO, a resident of Cagayan de Oro City, and doing business under
the trade name KARGO ENTERPRISES.[20] That Glenn Go and Karen Go are married to
each other is a fact never brought in issue in the case. Thus, the business name KARGO
ENTERPRISES is registered in the name of a married woman, a fact material to the side
issue of whether Kargo Enterprises and its properties are paraphernal or conjugal
properties. To restate the parties positions, Navarro alleges that Kargo Enterprises is
Karen Gos paraphernal property, emphasizing the fact that the business is registered
44
solely in Karen Gos name. On the other hand, Karen Go contends that while the
business is registered in her name, it is in fact part of their conjugal property.

The registration of the trade name in the name of one person a woman does not
necessarily lead to the conclusion that the trade name as a property is hers alone,
particularly when the woman is married. By law, all property acquired during the
marriage, whether the acquisition appears to have been made, contracted or registered in
the name of one or both spouses, is presumed to be conjugal unless the contrary is
proved.[21] Our examination of the records of the case does not show any proof that
Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only
the bare allegation of Navarro to this effect exists in the records of the case. As we
emphasized in Castro v. Miat:[22]

Petitioners also overlook Article 160 of the New Civil Code. It provides that
all property of the marriage is presumed to be conjugal partnership, unless it be
prove[n] that it pertains exclusively to the husband or to the wife. This article does
not require proof that the property was acquired with funds of the
partnership. The presumption applies even when the manner in which the property
was acquired does not appear.[23] [Emphasis supplied.]

Thus, for purposes solely of this case and of resolving the issue of whether Kargo
Enterprises as a sole proprietorship is conjugal or paraphernal property, we hold that it
is conjugal property.

Article 124 of the Family Code, on the administration of the conjugal property,
provides:

45
 Art. 124. The administration and enjoyment of the conjugal partnership
property shall belong to both spouses jointly. In case of disagreement, the husbands
decision shall prevail, subject to recourse to the court by the wife for proper remedy,
which must be availed of within five years from the date of the contract
implementing such decision.

xxx

This provision, by its terms, allows either Karen or Glenn Go to speak and act
with authority in managing their conjugal property, i.e., Kargo Enterprises. No need
exists, therefore, for one to obtain the consent of the other before performing an act
of administration or any act that does not dispose of or encumber their conjugal
property.

Under Article 108 of the Family Code, the conjugal partnership is governed by
the rules on the contract of partnership in all that is not in conflict with what is
expressly determined in this Chapter or by the spouses in their marriage
settlements. In other words, the property relations of the husband and wife shall be
governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family Code
and, suppletorily, by the spouses marriage settlement and by the rules on partnership
under the Civil Code. In the absence of any evidence of a marriage settlement between
the spouses Go, we look at the Civil Code provision on partnership for guidance.

A rule on partnership applicable to the spouses circumstances is Article 1811 of

the Civil Code, which states:

46
 Art. 1811. A partner is a co-owner with the other partners of specific partnership
property.

The incidents of this co-ownership are such that:

(1) A partner, subject to the provisions of this Title and to any agreement between the
partners, has an equal right with his partners to possess specific partnership
property for partnership purposes; xxx

Under this provision, Glenn and Karen Go are effectively co-owners of Kargo
Enterprises and the properties registered under this name; hence, both have an equal
right to seek possession of these properties. Applying Article 484 of the Civil Code,
which states that in default of contracts, or special provisions, co-ownership shall be
governed by the provisions of this Title, we find further support in Article 487 of the
Civil Code that allows any of the co-owners to bring an action in ejectment with respect
to the co-owned property.

While ejectment is normally associated with actions involving real property, we

find that this rule can be applied to the circumstances of the present case, following
our ruling in Carandang v. Heirs of De Guzman.[24] In this case, one spouse filed an
action for the recovery of credit, a personal property considered conjugal property,
without including the other spouse in the action. In resolving the issue of whether the
other spouse was required to be included as a co-plaintiff in the action for the recovery
of the credit, we said:

47
 Milagros de Guzman, being presumed to be a co-owner of the credits
allegedly extended to the spouses Carandang, seems to be either an indispensable or
a necessary party. If she is an indispensable party, dismissal would be proper. If she is
merely a necessary party, dismissal is not warranted, whether or not there was an
order for her inclusion in the complaint pursuant to Section 9, Rule 3.

Article 108 of the Family Code provides:

Art. 108. The conjugal partnership shall be governed by the rules on the
contract of partnership in all that is not in conflict with what is expressly
determined in this Chapter or by the spouses in their marriage settlements.

This provision is practically the same as the Civil Code provision it superseded:

Art. 147. The conjugal partnership shall be governed by the rules on the
contract of partnership in all that is not in conflict with what is expressly
determined in this Chapter.

In this connection, Article 1811 of the Civil Code provides that [a] partner is a
co-owner with the other partners of specific partnership property. Taken with the
presumption of the conjugal nature of the funds used to finance the four checks
used to pay for petitioners stock subscriptions, and with the presumption that the
credits themselves are part of conjugal funds, Article 1811 makes Quirino and
Milagros de Guzman co-owners of the alleged credit.

Being co-owners of the alleged credit, Quirino and Milagros de Guzman may
separately bring an action for the recovery thereof. In the fairly recent cases

48
of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-
owners may bring actions for the recovery of co-owned property without the
necessity of joining all the other co-owners as co-plaintiffs because the suit is
presumed to have been filed for the benefit of his co-owners. In the latter case
and in that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil
Code, which provides that any of the co-owners may bring an action for
ejectment, covers all kinds of action for the recovery of possession.

In sum, in suits to recover properties, all co-owners are real parties in

interest. However, pursuant to Article 487 of the Civil Code and relevant
jurisprudence, any one of them may bring an action, any kind of action, for the
recovery of co-owned properties. Therefore, only one of the co-owners, namely
the co-owner who filed the suit for the recovery of the co-owned property, is an
indispensable party thereto. The other co-owners are not indispensable parties.
They are not even necessary parties, for a complete relief can be accorded in the
suit even without their participation, since the suit is presumed to have been filed
for the benefit of all co-owners.[25][Emphasis supplied.]

Under this ruling, either of the spouses Go may bring an action against Navarro
to recover possession of the Kargo Enterprises-leased vehicles which they co-own. This
conclusion is consistent with Article 124 of the Family Code, supporting as it does the
position that either spouse may act on behalf of the conjugal partnership, so long as
they do not dispose of or encumber the property in question without the other
spouses consent.

On this basis, we hold that since Glenn Go is not strictly an indispensable party in
the action to recover possession of the leased vehicles, he only needs to be impleaded
as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules, which states:

49
Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except
as provided by law.

Non-joinder of indispensable parties not ground

to dismiss action

Even assuming that Glenn Go is an indispensable party to the action, we have

held in a number of cases[26] that the misjoinder or non-joinder of indispensable parties
in a complaint is not a ground for dismissal of action. As we stated in Macababbad v.
Masirag:[27]

Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor
nonjoinder of parties is a ground for the dismissal of an action, thus:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-
joinder of parties is ground for dismissal of an action. Parties may be dropped
or added by order of the court on motion of any party or on its own initiative
at any stage of the action and on such terms as are just. Any claim against a
misjoined party may be severed and proceeded with separately.

In Domingo v. Scheer, this Court held that the proper remedy when a party is
left out is to implead the indispensable party at any stage of the action. The court,
either motu proprio or upon the motion of a party, may order the inclusion of the

50
indispensable party or give the plaintiff opportunity to amend his complaint in
order to include indispensable parties. If the plaintiff to whom the order to include
the indispensable party is directed refuses to comply with the order of the court,
the complaint may be dismissed upon motion of the defendant or upon the court's
own motion. Only upon unjustified failure or refusal to obey the order to include or
to amend is the action dismissed.

In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her
husband as a party plaintiff is fully in order.

Demand not required prior

to filing of replevin action

In arguing that prior demand is required before an action for a writ of replevin is
filed, Navarro apparently likens a replevin action to an unlawful detainer.

For a writ of replevin to issue, all that the applicant must do is to file an affidavit and
bond, pursuant to Section 2, Rule 60 of the Rules, which states:

Sec. 2. Affidavit and bond.

The applicant must show by his own affidavit or that of some other person who
personally knows the facts:

51
(a) That the applicant is the owner of the property claimed, particularly describing
it, or is entitled to the possession thereof;

(b) That the property is wrongfully detained by the adverse party, alleging the cause
of detention thereof according to the best of his knowledge, information, and
belief;

(c) That the property has not been distrained or taken for a tax assessment or a fine
pursuant to law, or seized under a writ of execution or preliminary attachment, or
otherwise placed under custodia legis, or if so seized, that it is exempt from such
seizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the
value of the property as stated in the affidavit aforementioned, for the return of the
property to the adverse party if such return be adjudged, and for the payment to
the adverse party of such sum as he may recover from the applicant in the action.

We see nothing in these provisions which requires the applicant to make a prior
demand on the possessor of the property before he can file an action for a writ of
replevin. Thus, prior demand is not a condition precedent to an action for a writ of
replevin.

52
More importantly, Navarro is no longer in the position to claim that a prior demand is
necessary, as he has already admitted in his Answers that he had received the letters
that Karen Go sent him, demanding that he either pay his unpaid obligations or return
the leased motor vehicles. Navarros position that a demand is necessary and has not
been made is therefore totally unmeritorious.

WHEREFORE, premises considered, we DENY the petition for review for lack of
merit. Costs against petitioner Roger V. Navarro.

SO ORDERED.

G.R. No. 182963 June 3, 2013

SPOUSES DEO AGNER and MARICON AGNER, Petitioners,
vs.
BPI FAMILY SAVINGS BANK, INC., Respondent.
DECISION

53
PERALTA, J.:
This is a petition for review on certiorari assailing the April 30,
2007 Decision1 and May 19, 2008 Resolution2of the Court of
Appeals in CAG.R. CV No. 86021, which affirmed the August 11,
2005 Decision3 of the Regional Trial Court, Branch 33, Manila City.
On February 15, 2001, petitioners spouses Deo Agner and
Maricon Agner executed a Promissory Note with Chattel Mortgage
in favor of Citimotors, Inc. The contract provides, among others,
that: for receiving the amount of Php834, 768.00, petitioners shall
pay Php 17,391.00 every 15th day of each succeeding month until
fully paid; the loan is secured by a 2001 Mitsubishi Adventure
Super Sport; and an interest of 6% per month shall be imposed for
failure to pay each installment on or before the stated due date.4
On the same day, Citimotors, Inc. assigned all its rights, title and
interests in the Promissory Note with Chattel Mortgage to ABN
AMRO Savings Bank, Inc. (ABN AMRO), which, on May 31, 2002,
likewise assigned the same to respondent BPI Family Savings
Bank, Inc.5
For failure to pay four successive installments from May 15, 2002
to August 15, 2002, respondent, through counsel, sent to
petitioners a demand letter dated August 29, 2002, declaring the
entire obligation as due and demandable and requiring to pay
Php576,664.04, or surrender the mortgaged vehicle immediately
upon receiving the letter.6 As the demand was left unheeded,
respondent filed on October 4, 2002 an action for Replevin and
Damages before the Manila Regional Trial Court (RTC).
A writ of replevin was issued.7 Despite this, the subject vehicle was
not seized.8 Trial on the merits ensued. On August 11, 2005, the
Manila RTC Br. 33 ruled for the respondent and ordered

54
petitioners to jointly and severally pay the amount of
Php576,664.04 plus interest at the rate of 72% per annum from
August 20, 2002 until fully paid, and the costs of suit.
Petitioners appealed the decision to the Court of Appeals (CA), but
the CA affirmed the lower court’s decision and, subsequently,
denied the motion for reconsideration; hence, this petition.
Before this Court, petitioners argue that: (1) respondent has no
cause of action, because the Deed of Assignment executed in its
favor did not specifically mention ABN AMRO’s account receivable
from petitioners; (2) petitioners cannot be considered to have
defaulted in payment for lack of competent proof that they received
the demand letter; and (3) respondent’s remedy of resorting to
both actions of replevin and collection of sum of money is contrary
to the provision of Article 14849 of the Civil Code and the Elisco
Tool Manufacturing Corporation v. Court of Appeals10ruling.
The contentions are untenable.
With respect to the first issue, it would be sufficient to state that the
matter surrounding the Deed of Assignment had already been
considered by the trial court and the CA. Likewise, it is an issue of
fact that is not a proper subject of a petition for review under Rule
45. An issue is factual when the doubt or difference arises as to
the truth or falsehood of alleged facts, or when the query invites
calibration of the whole evidence, considering mainly the credibility
of witnesses, existence and relevancy of specific surrounding
circumstances, their relation to each other and to the whole, and
the probabilities of the situation.11 Time and again, We stress that
this Court is not a trier of facts and generally does not weigh anew
evidence which lower courts have passed upon.

55
As to the second issue, records bear that both verbal and written
demands were in fact made by respondent prior to the institution of
the case against petitioners.12 Even assuming, for argument’s
sake, that no demand letter was sent by respondent, there is really
no need for it because petitioners legally waived the necessity of
notice or demand in the Promissory Note with Chattel Mortgage,
which they voluntarily and knowingly signed in favor of
respondent’s predecessor-in-interest. Said contract expressly
stipulates:
In case of my/our failure to pay when due and payable, any sum
which I/We are obliged to pay under this note and/or any other
obligation which I/We or any of us may now or in the future owe to
the holder of this note or to any other party whether as principal or
guarantor x x x then the entire sum outstanding under this note
shall, without prior notice or demand, immediately become due
and payable. (Emphasis and underscoring supplied)
A provision on waiver of notice or demand has been recognized as
legal and valid in Bank of the Philippine Islands v. Court of
Appeals,13 wherein We held:
The Civil Code in Article 1169 provides that one incurs in delay or
is in default from the time the obligor demands the fulfillment of the
obligation from the obligee. However, the law expressly provides
that demand is not necessary under certain circumstances, and
one of these circumstances is when the parties expressly waive
demand. Hence, since the co-signors expressly waived demand in
the promissory notes, demand was unnecessary for them to be in
default.14
Further, the Court even ruled in Navarro v. Escobido15 that prior
demand is not a condition precedent to an action for a writ of
replevin, since there is nothing in Section 2, Rule 60 of the Rules
56
of Court that requires the applicant to make a demand on the
possessor of the property before an action for a writ of replevin
could be filed.
Also, petitioners’ representation that they have not received a
demand letter is completely inconsequential as the mere act of
sending it would suffice. Again, We look into the Promissory Note
with Chattel Mortgage, which provides:
All correspondence relative to this mortgage, including demand
letters, summonses, subpoenas, or notifications of any judicial or
extrajudicial action shall be sent to the MORTGAGOR at the
address indicated on this promissory note with chattel mortgage or
at the address that may hereafter be given in writing by the
MORTGAGOR to the MORTGAGEE or his/its assignee. The mere
act of sending any correspondence by mail or by personal delivery
to the said address shall be valid and effective notice to the
mortgagor for all legal purposes and the fact that any
communication is not actually received by the MORTGAGOR or
that it has been returned unclaimed to the MORTGAGEE or that
no person was found at the address given, or that the address is
fictitious or cannot be located shall not excuse or relieve the
MORTGAGOR from the effects of such notice.16 (Emphasis and
underscoring supplied)
The Court cannot yield to petitioners’ denial in receiving
respondent’s demand letter. To note, their postal address evidently
remained unchanged from the time they executed the Promissory
Note with Chattel Mortgage up to time the case was filed against
them. Thus, the presumption that "a letter duly directed and mailed
was received in the regular course of the mail"17 stands in the
absence of satisfactory proof to the contrary.

57
Petitioners cannot find succour from Ting v. Court of
Appeals18 simply because it pertained to violation of Batas
Pambansa Blg. 22 or the Bouncing Checks Law. As a higher
quantum of proof – that is, proof beyond reasonable doubt – is
required in view of the criminal nature of the case, We found
insufficient the mere presentation of a copy of the demand letter
allegedly sent through registered mail and its corresponding
registry receipt as proof of receiving the notice of dishonor.
Perusing over the records, what is clear is that petitioners did not
take advantage of all the opportunities to present their evidence in
the proceedings before the courts below. They miserably failed to
produce the original cash deposit slips proving payment of the
monthly amortizations in question. Not even a photocopy of the
alleged proof of payment was appended to their Answer or shown
during the trial. Neither have they demonstrated any written
requests to respondent to furnish them with official receipts or a
statement of account. Worse, petitioners were not able to make a
formal offer of evidence considering that they have not marked any
documentary evidence during the presentation of Deo Agner’s
testimony.19
Jurisprudence abounds that, in civil cases, 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.20 When the creditor is in possession of the
document of credit, proof of non-payment is not needed for it is
presumed.21 Respondent's possession of the Promissory Note with
Chattel Mortgage strongly buttresses its claim that the obligation
has not been extinguished. As held in Bank of the Philippine
Islands v. Spouses Royeca:22
x x x The creditor's possession of the evidence of debt is proof that
the debt has not been discharged by payment. A promissory note
58
in the hands of the creditor is a proof of indebtedness rather than
proof of payment. In an action for replevin by a mortgagee, it is
prima facie evidence that the promissory note has not been paid.
Likewise, an uncanceled mortgage in the possession of the
mortgagee gives rise to the presumption that the mortgage debt is
unpaid.23
Indeed, when the existence of a debt is fully established by the
evidence contained in the record, the burden of proving that it has
been extinguished by payment devolves upon the debtor who
offers such defense to the claim of the creditor.24 The debtor has
the burden of showing with legal certainty that the obligation has
been discharged by payment.25
Lastly, there is no violation of Article 1484 of the Civil Code and
the Court’s decision in Elisco Tool Manufacturing Corporation v.
Court of Appeals.26
In Elisco, petitioner's complaint contained the following prayer:
WHEREFORE, plaintiffs pray that judgment be rendered as
follows:
ON THE FIRST CAUSE OF ACTION
Ordering defendant Rolando Lantan to pay the plaintiff the sum of
₱39,054.86 plus legal interest from the date of demand until the
whole obligation is fully paid;
ON THE SECOND CAUSE OF ACTION
To forthwith issue a Writ of Replevin ordering the seizure of the
motor vehicle more particularly described in paragraph 3 of the
Complaint, from defendant Rolando Lantan and/or defendants
Rina Lantan, John Doe, Susan Doe and other person or persons in
59
whose possession the said motor vehicle may be found, complete
with accessories and equipment, and direct deliver thereof to
plaintiff in accordance with law, and after due hearing to confirm
said seizure and plaintiff's possession over the same;
PRAYER COMMON TO ALL CAUSES OF ACTION
1. Ordering the defendant Rolando Lantan to pay the plaintiff an
amount equivalent to twenty-five percent (25%) of his outstanding
obligation, for and as attorney's fees;
2. Ordering defendants to pay the cost or expenses of collection,
repossession, bonding fees and other incidental expenses to be
proved during the trial; and
3. Ordering defendants to pay the costs of suit.
Plaintiff also prays for such further reliefs as this Honorable Court
may deem just and equitable under the premises.27
The Court therein ruled:
The remedies provided for in Art. 1484 are alternative, not
cumulative. The exercise of one bars the exercise of the others.
This limitation applies to contracts purporting to be leases of
personal property with option to buy by virtue of Art. 1485. The
condition that the lessor has deprived the lessee of possession or
enjoyment of the thing for the purpose of applying Art. 1485 was
fulfilled in this case by the filing by petitioner of the complaint for
replevin to recover possession of movable property. By virtue of
the writ of seizure issued by the trial court, the deputy sheriff
seized the vehicle on August 6, 1986 and thereby deprived private
respondents of its use. The car was not returned to private
respondent until April 16, 1989, after two (2) years and eight (8)

60
months, upon issuance by the Court of Appeals of a writ of
execution.
Petitioner prayed that private respondents be made to pay the sum
of ₱39,054.86, the amount that they were supposed to pay as of
May 1986, plus interest at the legal rate. At the same time, it
prayed for the issuance of a writ of replevin or the delivery to it of
the motor vehicle "complete
with accessories and equipment." In the event the car could not be
delivered to petitioner, it was prayed that private respondent
Rolando Lantan be made to pay petitioner the amount of
₱60,000.00, the "estimated actual value" of the car, "plus accrued
monthly rentals thereof with interests at the rate of fourteen
percent (14%) per annum until fully paid." This prayer of course
cannot be granted, even assuming that private respondents have
defaulted in the payment of their obligation. This led the trial court
to say that petitioner wanted to eat its cake and have it too.28
In contrast, respondent in this case prayed:
(a) Before trial, and upon filing and approval of the bond, to
forthwith issue a Writ of Replevin ordering the seizure of the motor
vehicle above-described, complete with all its accessories and
equipments, together with the Registration Certificate thereof, and
direct the delivery thereof to plaintiff in accordance with law and
after due hearing, to confirm the said seizure;
(b) Or, in the event that manual delivery of the said motor vehicle
cannot be effected to render judgment in favor of plaintiff and
against defendant(s) ordering them to pay to plaintiff, jointly and
severally, the sum of ₱576,664.04 plus interest and/or late
payment charges thereon at the rate of 72% per annum from
August 20, 2002 until fully paid;

61
(c) In either case, to order defendant(s) to pay jointly and severally:
(1) the sum of ₱297,857.54 as attorney’s fees, liquidated
damages, bonding fees and other expenses incurred in the seizure
of the said motor vehicle; and
(2) the costs of suit.
Plaintiff further prays for such other relief as this Honorable Court
may deem just and equitable in the premises.29
Compared with Elisco, the vehicle subject matter of this case was
never recovered and delivered to respondent despite the issuance
of a writ of replevin. As there was no seizure that transpired, it
cannot be said that petitioners were deprived of the use and
enjoyment of the mortgaged vehicle or that respondent pursued,
commenced or concluded its actual foreclosure. The trial court,
therefore, rightfully granted the alternative prayer for sum of
money, which is equivalent to the remedy of "exacting fulfillment of
the obligation." Certainly, there is no double recovery or unjust
enrichment30 to speak of. 1âw phi1

All the foregoing notwithstanding, We are of the opinion that the

interest of 6% per month should be equitably reduced to one
percent (1%) per month or twelve percent (12%) per annum, to be
reckoned from May 16, 2002 until full payment and with the
remaining outstanding balance of their car loan as of May 15, 2002
as the base amount.
Settled is the principle which this Court has affirmed in a number of
cases that stipulated interest rates of three percent (3%) per month
and higher are excessive, iniquitous, unconscionable, and
exorbitant.31 While Central Bank Circular No. 905-82, which took
effect on January 1, 1983, effectively removed the ceiling on

62
interest rates for both secured and unsecured loans, regardless of
maturity, nothing in the said circular could possibly be read as
granting carte blanche authority to lenders to raise interest rates to
levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets.32 Since the stipulation on the interest
rate is void for being contrary to morals, if not against the law, it is
as if there was no express contract on said interest rate; thus, the
interest rate may be reduced as reason and equity demand.33
WHEREFORE, the petition is DENIED and the Court AFFIRMS
WITH MODIFICATION the April 30, 2007 Decision and May 19,
2008 Resolution of the Court of Appeals in CA-G.R. CV No.
86021. Petitioners spouses Deo Agner and Maricon Agner are
ORDERED to pay, jointly and severally, respondent BPI Family
Savings Bank, Inc. ( 1) the remaining outstanding balance of their
auto loan obligation as of May 15, 2002 with interest at one
percent ( 1 o/o) per month from May 16, 2002 until fully paid; and
(2) costs of suit.
SO ORDERED.

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