FRANCISCO R. LLAMAS and G.R. No.

149588
CARMELITA C. LLAMAS,
Petitioners, Present:

CORONA, C.J.,
- versus - Chairperson,
NACHURA,
BRION,
THE HONORABLE COURT OF APPEALS, BRANCH 66 OF PERALTA, and
THEREGIONAL TRIAL COURT OFMAKATI CITY and THE PEOPLE OF VILLARAMA*, JJ.
THE PHILIPPINES,
Respondents. Promulgated:

August 16, 2010

NACHURA, J.:

Before this Court is a Motion for Reconsideration filed by herein petitioner-spouses Francisco R.
Llamas and Carmelita C. Llamas. On September 29, 2009, this Court promulgated a Decision[1] in the
above-captioned case, denying the petition for Annulment of Judgment and Certiorari, with Preliminary
Injunction filed by petitioners. Petitioners are assailing the decision of the Regional Trial Court (RTC)
of Makati City convicting them of the offense Other Forms of Swindling punishable under Article 316,
paragraph 2, of the Revised Penal Code (RPC).

Briefly, the antecedent facts are as follows:

On August 14, 1984, petitioners were charged before the Regional Trial Court (RTC) of Makati with, as
aforesaid, the crime of other forms of swindling in the Information, docketed as Criminal Case No. 11787,
which reads:

That on or about the 20th day of November, 1978, in the Municipality of Paraaque, Metro Manila,
Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, conspiring and
confederating together and mutually helping and aiding one another, well knowing that their parcel of land
known as Lot No. 11, Block No. 6 of the Subdivision Plan (LRC) Psd 67036, Cadastral Survey of
Paraaque, LRC Record No. N-26926, Case No. 4896, situated at Barrio San Dionisio, Municipality of
Paraaque, Metro Manila, was mortgaged to the Rural Bank of Imus, did then and there willfully, unlawfully
and feloniously sell said property to one Conrado P. Avila, falsely representing the same to be free from
all liens and encumbrances whatsoever, and said Conrado P. Avila bought the aforementioned property
for the sum of P12,895.00 which was paid to the accused, to the damage and prejudice of said Conrado
P. Avila in the aforementioned amount of P12,895.00.

Contrary to law.

After trial on the merits, the RTC rendered its Decision on June 30, 1994, finding petitioners
guilty beyond reasonable doubt of the crime charged and sentencing them to suffer the
penalty of imprisonment for two months and to pay the fine of P18,085.00 each.

On appeal, the Court of Appeals, in its February 19, 1999 Decision in CA-G.R. No. CR No.
18270, affirmed the decision of the trial court. In its December 22, 1999 Resolution, the
appellate court further denied petitioners motion for reconsideration.

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 Assailing the aforesaid issuances of the appellate court, petitioners filed before this Court,
on February 11, 2000, their petition for review, docketed as G.R. No. 141208. The Court,
however, on March 13, 2000, denied the same for petitioners failure to state the material
dates. Since it subsequently denied petitioners motion for reconsideration on June 28,
2000, the judgment of conviction became final and executory.

With the consequent issuance by the trial court of the April 19, 2001 Warrant of Arrest, the
police arrested, on April 27, 2001, petitioner Carmelita C. Llamas for her to serve her 2-
month jail term. The police, nevertheless, failed to arrest petitioner Francisco R. Llamas
because he was nowhere to be found.

On July 16, 2001, petitioner Francisco moved for the lifting or recall of the warrant of arrest,
raising for the first time the issue that the trial court had no jurisdiction over the offense
charged.

There being no action taken by the trial court on the said motion, petitioners instituted, on
September 13, 2001, the instant proceedings for the annulment of the trial and the appellate
courts decisions.

The Court initially dismissed on technical grounds the petition in the September 24, 2001
Resolution, but reinstated the same, on motion for reconsideration, in the October 22, 2001
Resolution. [2]

In its September 29, 2009 Decision, this Court held that, following the ruling in People v. Bitanga,[3] the
remedy of annulment of judgment cannot be availed of in criminal cases. The Court likewise rejected
petitioners contention that the trial court had no jurisdiction over the case.

Petitioners are now before this Court seeking the reversal of the September 29, 2009 Decision
and, consequently, the annulment of their conviction by the trial court. In their Verified Motion for
Reconsideration,[4] petitioners ask this Court to revisit and take a second look at the issues in the case
without being unduly hampered by any perceived technical shortfalls of a beleaguered innocent litigant. In
particular, they raise the following issues:

1.
WITH ALL DUE RESPECT, AND IN LIGHT OF THE CORRECT APPLICATIONS OF
DOCTRINAL JURISPRUDENCE, PETITIONERS HAD PURSUED THEIR MORE THAN
TWENTY FIVE (25) YEARS QUEST FOR JUSTICE AS INNOCENT MEN, AND HAD
HONESTLY MAINTAINED THAT THEIR RESORT TO REVERSE, SET ASIDE AND/OR
ANNUL, IS IN LINE WITH JURISPRUDENCE AND LAW, ANY TECHNICAL
SHORTFALLS [OR] DEFECTS NOTWITHSTANDING[;]

2.
WITH ALL DUE RESPECT, AGAIN IN LIGHT OF APPLICABLE JURISPRUDENCE ON
THE ISSUE OF JURISDICTION, PETITIONERS ARE NOT BARRED FROM RAISING
SUCH QUESTION OF JURISDICTION AT ANY TIME AND IN FACT MAINTAIN THAT
RESPONDNET COURTS HAD NO JURISDICTION IN LAW AND ENLIGHTENING
DOCTRINES TO TRY AND DECIDE THIS CASE;

3.
AGAIN WITH ALL DUE RESPECT AND UNFORTUNATELY, THE VERY JUSTIFYING
MERITS OF PETITIONERSAPPROPRIATE INSTANT REMEDY; HAD NOT
CONSEQUENTLY BEEN PASSED UPON, TO UPHOLD THE PARAMOUNT
CONSTITUTIONAL CHERISED MANDATE, THE PRESUMPTION OF INNOCENCE

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 MUST BE UPHELD, EXCEPT ONLY UPON ESTABLISHED AND ADMISSIBLE
EVIDENCE BEYOND REASONABLE DOUBT; AND

4.
PETITIONERS VERY HUMBLY BESEECH THIS HONORABLE COURTS HIGHEST
SENSE OF MAGNANIMITY, UNDERSTANDING, JUDICIOUS WISDOM AND
COMPASSION, SO THAT JUSTICE MAY TRULY AND JUSTLY BE RENDERED IN
FAVOR OF PETITIONERS AS IT MUST, GIVEN THE VERY UNIQUE AND COMPELLING
JUSTIFICATIONS HEREOF[.][5]

Petitioners likewise pray for a referral of the case to the Court En Banc for oral argument or to be
allowed to submit written supplementary pleadings for them to state the compelling reasons why their
motion for reconsideration should be allowed.

In the interest of justice and for humanitarian reasons, the Court deems it necessary to re-examine
this case.

Admittedly, petitioners took many procedural missteps in this case, from the time it was pending in the trial
court until it reached this Court, all of which could serve as enough basis to dismiss the present motion for
reconsideration. However, considering petitioners advanced age, the length of time this case has been
pending, and the imminent loss of personal liberty as a result of petitioners conviction, the Court resolves
to grant pro hac vice the motion for reconsideration.

This Court has, on occasion, suspended the application of technical rules of procedure where matters of
life, liberty, honor or property, among other instances, are at stake.[6] It has allowed some meritorious
cases to proceed despite inherent procedural defects and lapses on the principle that rules of procedure
are mere tools designed to facilitate the attainment of justice. The strict and rigid application of rules that
tend to frustrate rather than promote substantial justice must always be avoided. It is far better and more
prudent for the court to excuse a technical lapse and afford the parties a review of the case to attain the
ends of justice, rather than dispose of the case on technicality and cause grave injustice to the parties.[7]
This Court notes that the case was allowed to run its course as a petition for certiorari, such that in
its April 12, 2004 Resolution, it said Considering the allegations, issues and arguments adduced in the
petition for review on certiorari x x x. Likewise, in its February 10, 2003 Resolution,[8] the Court said, It
appearing that Atty. Francisco R. Llamas, in his own behalf and as counsel for petitioners, has failed to file
their reply to the Solicitor Generals comment on the petition for review on certiorari within the extended
period x x x.

Thus, the Court, at the first instance, had recognized that the petition, although captioned
differently, was indeed one forcertiorari.

Since we have resolved to treat the petition as one for certiorari, the doctrine in People v. Bitanga[9] no
longer finds application in this case.
Next, we proceed to resolve the substantive issues raised by petitioners.

Article 316 (2) of the Revised Penal Code states:

ART. 316. Other forms of swindling. The penalty of arresto mayor in its minimum and
medium periods and a fine of not less than the value of the damage caused and not more
than three times such value, shall be imposed upon:

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2. Any person who, knowing that real property is encumbered, shall
dispose of the same, although such encumbrance be not recorded;

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xxx

In every criminal prosecution, the State must prove beyond reasonable doubt all the elements of
the crime charged and the complicity or participation of the accused.[10]

For petitioners to be convicted of the crime of swindling under Article 316 (2) of the Revised Penal
Code, the prosecution had the burden to prove the confluence of the following essential elements of the
crime:

1. that the thing disposed of be real property;

2. that the offender knew that the real property was encumbered,
whether the encumbrance is recorded or not;
3. that there must be express representation by the offender that the real property is
free from encumbrance; and
4. that the act of disposing of the real property be made to the damage of another. [11]

One of the essential elements of swindling under Article 316, paragraph 2, is that the act of
disposing the encumbered real property is made to the damage of another. In this case, neither the trial
court nor the CA made any finding of any damage to the offended party. Nowhere in the Decision of the
RTC or that of the CA is there any discussion that there was damage suffered by complainant Avila, or
any finding that his rights over the property were prejudiced.

On the contrary, complainant had possession and control of the land even as the cases were being
heard. His possession and right to exercise dominion over the property was not disturbed. Admittedly,
there was delay in the delivery of the title. This, however, was the subject of a separate case, which was
eventually decided in petitioners favor.[12]

If no damage should result from the sale, no crime of estafa would have been committed by the
vendor, as the element of damage would then be lacking.[13] The inevitable conclusion, therefore, is that
petitioners should be acquitted of the crime charged.

WHEREFORE, the foregoing premises considered, the Motion for Reconsideration is GRANTED.
The assailed Decision dated September 29, 2009 is SET ASIDE and a new one is
entered ACQUITTING petitioners of the crime charged on the ground of the prosecutions failure to prove
their guilt beyond reasonable doubt.

SO ORDERED.

G.R. No. 167471 February 5, 2007

GLICERIA SARMIENTO, Petitioner,

vs.
EMERITA ZARATAN, Respondent.

DECISION

CHICO-NAZARIO, J.:

This petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to nullify the Court of
Appeals Decision1 in CA-G.R. SP No. 79001 entitled, "Emerita Zaratan v. Hon. Ramon A. Cruz, as
Presiding Judge of RTC, Quezon City, Branch 223, and Gliceria Sarmiento," dated 17 August 2004, which

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reversed and set side the Orders dated 19 June 2003 and 31 July 2003 of the Regional Trial Court (RTC)
of Quezon City in Civil Case No. Q-03-49437, dismissing respondent’s appeal for failure to file the
memorandum within the period provided for by law.

On 2 September 2002, petitioner Gliceria Sarmiento filed an ejectment case2 against respondent Emerita
Zaratan, in the Metropolitan Trial Court (MeTC) of Quezon City, Branch 36, docketed as Civil Case No.
29109.

On 31 March 2003, the MeTC rendered a decision in favor of petitioner, the dispositive portion of which
reads:

WHEREFORE, the Court finds that plaintiff has sufficiently established her causes against the defendant
and hereby order the defendant and all persons claiming rights under her:

1. to pay plaintiff the monthly rentals of P3,500.00 for the said premises from August 1, 2002 until
defendant vacates the premises;

2. to pay plaintiff the sum of P20,000.00 plus P1,500.00 per appearance of counsel in court, as and
for attorney’s fees; and

to pay the cost of suit.3

Respondent filed her notice of appeal.4 Thereafter, the case was raffled to the RTC of Quezon City,
Branch 223, docketed as Civil Case No. Q-03-49437.

In the Notice of Appealed Case,5 the RTC directed respondent to submit her memorandum in accordance
with the provisions of Section 7(b) of Rule 40 of the Rules of Court and petitioner to file a reply
memorandum within 15 days from receipt.

Respondent’s counsel having received the notice on 19 May 2003, he had until 3 June 2003 within which
to file the requisite memorandum. But on 3 June 2003, he filed a Motion for Extension of Time of five days
due to his failure to finish the draft of the said Memorandum. He cited as reasons for the delay of filing his
illness for one week, lack of staff to do the work due to storm and flood compounded by the grounding of
the computers because the wirings got wet.6 But the motion remained unacted.

On 9 June 2003, respondent filed her Memorandum. On 19 June 2003, the RTC dismissed the appeal as
follows:

Record shows that defendant-appellant received the Notice of Appealed Case, through counsel, on May
19, 2003 (Registry Return Receipt dated May 12, 2003, Record, back of p. 298). Thus, under Section
7(b), Rule 40 of the 1997 Rules of Civil Procedure, she had fifteen (15) days or until June 3, 2003 within
which to submit a memorandum on appeal. As further appears on record, however, the required
Memorandum was filed by defendant-appellant only on June 9, 2003 (Record, p. 623), or six (6) days
beyond the expiration of the aforesaid fifteen day period.

It should be stressed that while the rules should be liberally construed, the provisions on reglemenatry
periods are strictly applied as they are "deemed indispensable to the prevention of needless delays and
necessary to the orderly and speedy discharge of judicial business" (Legaspi-Santos vs. Court of Appeals,
G.R. No. 60577, October 11, 1983) and strict compliance therewith is mandatory and imperative (FJR
Garments Industries vs. Court of Appeals, G.R. No. L-49329, June 29, 1984). The same is true with
respect to the rules on the manner and periods for perfecting appeals (Gutierrez vs. Court of Appeals, L-
25972, November 26, 1968).

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Premises considered, the instant appeal is hereby DISMISSED. This renders academic defendant-
appellant’s application for a writ of preliminary injunction.7 1awphi1.net

On the basis of the above-quoted Order, petitioner filed a Motion for Immediate Execution, 8 while
respondent moved for the Reconsideration.9 Both motions were denied by the RTC on 31 July 2003. The
Order in part reads:

In the main, defendant-appellants Motion for Reconsideration is premised on the argument that she filed a
timely "Motion for Extension of Time To File Memorandum," dated and filed on June 3, 2003, but that her
motion was not acted upon by this Court. She adds that her appeal memorandum was filed well within the
period sought by her in her "Motion for Extension of Time to File Memorandum" so that her appeal should
not have been dismissed.

The argument is without merit. This Court did not take cognizance of defendant-appellant’s "Motion for
Extension of Time to File Memorandum," and rightly so, because it did not contain a notice of hearing as
required by Sections 4 and 5, Rule 15 of the Rules of Court, an omission for which it could offer no
explanation. As declared in the case of Gozon, et al. v. court of Appeals (G.R. No. 105781, June 17,
1993);

xxx

It is well-entrenched in this jurisdiction that a motion does not meet the requirements of Sections 4 and 5
of Rule 15 of the Rules of Court is considered a worthless piece of paper which the clerk has no right to
receive, and the court has no authority to act upon.

xxx

Moreover, parties and counsel should not assume that courts are bound to grant the time they pray for. A
motion that is not acted upon in due time is deemed denied (Orosa vs. Court of Appeals, 261 SCRA 376
[1996]). Thus, defendant-appellant’s appeal was properly dismissed on account of her failure to file an
appeal memorandum within the fifteen (15) day period provided under Section 7(b), Rule 40 of the 1997
Rules of Civil Procedure.

With regard to the "Motion for Immediate Execution," dated June 23, 2003, filed by plaintiff-appellee, the
rule is explicit that the execution of a judgment in an ejectment case, must be sought with the inferior court
which rendered the same. The appellate court which affirms a decision brought before it on appeal cannot
decree its execution in the guise of an execution of the affirming decision. The only exception is when said
appellate court grants an execution pending appeal, which is not the case herein (City of Manila vs. Court
of Appeals, 204 SCRA 362; Sy vs. Romero, 214 SCRA 187).10

Petitioner moved for reconsideration of the said Order, while respondent sought clarification on whether
the 31 July 2003 Order dismissing the appeal was anchored on Section (b), Rule 40 or Section 7(c) of the
same Rule.

On 27 August 2003, the RTC reconsidered its previous Order by granting petitioner’s motion for
Immediate Execution, but denied respondent’s Motion for Clarification, in this wise:

Section 21, Rule 70 of the Rules of Court provides that "the judgment of the Regional Trial Court against
the defendant shall be immediately executory, without prejudice to a further appeal that may be taken
therefrom. Pursuant to this Rule and taking into account the arguments of the plaintiff in her "Urgent
Motion for Reconsideration," the Court is inclined to grant the same. As further correctly argued by the
plaintiff, through counsel, during the hearing on her motion on August 15, 2003, the cases of City of
Manila v. Court of Appeals (204 SCRA 362) and Sy vs. Romero (214 SCRA 187) cited in the July 31,

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2003 Order refer to ejectment cases which has (sic) been decided with finality and hence, inapplicable to
this case where a further appeal is still available to the defendant. It should likewise be noted that while
the Supreme Court ruled in these cases that execution of a judgment in an ejectment case must be
sought with the inferior court which rendered the same, it likewise provided that for an exception to this
rule, that is, in cases where the appellate court grants an execution pending appeal, as the case herein.

With regard to defendant’s Motion for Clarification, contained in her Opposition, the Court notes that the
issues raised therein have already been squarely dealt with in the July 31, 2003 Order. The same must,
therefore, be denied.11

Aggrieved, respondent filed a Petition for Certiorari in the Court of Appeals, which was granted in a
decision dated 17 August 2004. The appellate court nullified and set aside the 19 June 2003 and 31 July
2003 Orders of the RTC and ordered the reinstatement of respondent’s appeal. Consequently,
respondent’s appeal memorandum was admitted and the case remanded to the RTC for further
proceedings.12

Petitioner filed a motion for reconsideration13 on 13 September 2004, followed by a Motion for
Inhibition14 of the members of the Eighth Division of the Court of Appeals on 20 September 2004. Both
motions were denied for lack of merit on 10 March 2005.15

Hence, this appeal by petitioner posing the following issues,16 thus:

1. Whether respondent’s petition for certiorari should have been dismissed in the first place;

2. Whether the trial court committed grave abuse of discretion in denying respondent’s motion for
extension;

3. Whether it is Section 19 of Rule 7 that applies, and not Section 21; and

4. Whether the Court of Appeals Justices should have inhibited themselves from further
proceeding with the subject case.

Stated otherwise, the main issue for resolution is whether the Court of Appeals committed a reversible
error of law in granting the Writ of Certiorari. In granting the petition, the Court of Appeals ruled that the
RTC erred in dismissing respondent’s appeal for failure to file the required Memorandum within the period
provided by law and in granting petitioner’s Motion for Immediate Execution of the MeTC decision.

Before resolving the substantive issues raised by petitioner, the Court will first address the procedural
infirmities ascribed by petitioner. Petitioner assails the correctness and propriety of the remedy resorted to
by respondent by filing a Petition for Certiorari in the Court of Appeals. According to petitioner, certiorari is
not appropriate and unavailing as the proper remedy is an appeal.

It must be noted that respondent’s appeal in the RTC was dismissed for failure to file the required
memorandum within the period allowed by law, as the Motion for Extension of Time to file Memorandum
was not acted upon for failure to attach a notice of hearing. From the said dismissal, respondent filed a
Petition for Certiorari in the Court of Appeals.

Respondent correctly filed said petition pursuant to Section 41 of the Rules of Court, which provides:

Section 1. Subject of appeal. An appeal may be taken from a judgment or final order that completely
disposes of the case, or of a particular matter therein when declared by these Rules to be appealable.

No appeal may be taken:

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 xxxx

(d) An order disallowing or dismissing an appeal;

xxxx

In all the above instances where the judgment or final order is not appealable, the aggrieved party may file
an appropriate civil action under Rule 65. (Underscoring supplied.)

Petitioner also contends that the Petition for Certiorari filed in the Court of Appeals should be dismissed
as the certification of non-forum shopping was defective. The verification in part reads:

I, EMERITA ZARATAN, of legal age, after having been duly sworn to, according to law, depose and say:

That I, Emerita Zaratan is one of the respondent (sic) in the above entitled case, hereby declare, that I
have caused the preparation and filing of the foregoing Comment on the Petition; that I have read all the
allegations therein, which are true and correct to the best of my own knowledge.

That as respondent, I further certify that I have not commenced any other action or proceeding involving
the same issues in the foregoing Petition in the Court of Appeals, the Supreme Court, or different
Divisions thereof, respectively, or any tribunal, or agency; and should it be known that a similar action or
proceeding has been filed or is pending in any of the abovementioned Courts or different Divisions
thereof, the petitioner shall notify the Honorable Court to which this certification is filed, within five (5) days
from such notice. (Underscoring ours.)

Petitioner avers that respondent by stating in the above-quoted certification that she was the respondent,
while in truth she was the petitioner and by stating that respondent caused the preparation of the
comment on the petition, instead of the petition itself, indicate that respondent did not understand what
she was signing. The defect of the verification all renders the petition in the Court of Appeals without legal
effect and constitutes ground for its dismissal.

The contention is baseless.

The purpose of requiring a verification is to secure an assurance that the allegations of the petition have
been made in good faith, or are true and correct, not merely speculative. This requirement is simply a
condition affecting the form of pleadings and non-compliance therewith does not necessarily render it
fatally defective.17 Perusal of the verification in question shows there was sufficient compliance with the
requirements of the Rules and the alleged defects are not so material as to justify the dismissal of the
petition in the Court of Appeals. The defects are mere typographical errors. There appears to be no
intention to circumvent the need for proper verification and certification, which are intended to assure the
truthfulness and correctness of the allegations in the petition and to discourage forum shopping. 18

Now, the substantial issues.

Corollary to the dismissal of the appeal by the RTC is the question of whether the lack of notice of hearing
in the Motion for Extension of Time to file Memorandum on Appeal is fatal, such that the filing of the
motion is a worthless piece of paper.

Petitioner avers that, because of the failure of respondent to include a Notice of Hearing in her Motion for
Extension of Time to file Memorandum on Appeal in the RTC, the latter’s motion is a worthless piece of
paper with no legal effect.

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It is not disputed that respondent perfected her appeal on 4 April 2003 with the filing of her Notice of
Appeal and payment of the required docket fees. However, before the expiration of time to file the
Memorandum, she filed a Motion for Extension of Time seeking an additional period of five days within
which to file her Memorandum, which motion lacked the Notice of Hearing required by Section 4, Rule 15
of the 1997 Rules of Court which provides:

SEC. 4. Hearing of Motion. - Except for motions which the court may act upon without prejudicing the
rights of the adverse party, every written motion shall be set for hearing by the applicant.

Every written motion required to be heard and the notice of the hearing thereof shall be served in such a
manner as to ensure its receipt by the other party at least three (3) days before the date of hearing, unless
the court for good cause sets the hearing on shorter notice.

As may be gleaned above and as held time and again, the notice requirement in a motion is mandatory.
As a rule, a motion without a Notice of Hearing is considered pro forma and does not affect the
reglementary period for the appeal or the filing of the requisite pleading. 19

As a general rule, notice of motion is required where a party has a right to resist the relief sought by the
motion and principles of natural justice demand that his right be not affected without an opportunity to be
heard.20 The three-day notice required by law is intended not for the benefit of the movant but to avoid
surprises upon the adverse party and to give the latter time to study and meet the arguments of the
motion.21 Principles of natural justice demand that the right of a party should not be affected without giving
it an opportunity to be heard.22

The test is the presence of the opportunity to be heard, as well as to have time to study the motion and
meaningfully oppose or controvert the grounds upon which it is based.23 Considering the circumstances of
the present case, we believe that procedural due process was substantially complied with.

There are, indeed, reasons which would warrant the suspension of the Rules: (a) the existence of special
or compelling circumstances, b) the merits of the case, (c) a cause not entirely attributable to the fault or
negligence of the party favored by the suspension of rules, (d) a lack of any showing that the review
sought is merely frivolous and dilatory, and (e) the other party will not be unjustly prejudiced
thereby.24 Elements or circumstances (c), (d) and (e) exist in the present case.

The suspension of the Rules is warranted in this case. The motion in question does not affect the
substantive rights of petitioner as it merely seeks to extend the period to file Memorandum. The required
extension was due to respondent’s counsel’s illness, lack of staff to do the work due to storm and flood,
compounded by the grounding of the computers. There is no claim likewise that said motion was
interposed to delay the appeal.25 As it appears, respondent sought extension prior to the expiration of the
time to do so and the memorandum was subsequently filed within the requested extended period. Under
the circumstances, substantial justice requires that we go into the merits of the case to resolve the issue
of who is entitled to the possession of the land in question.

Further, it has been held that a "motion for extension of time x x x is not a litigated motion where notice to
the adverse party is necessary to afford the latter an opportunity to resist the application, but an ex parte
motion made to the court in behalf of one or the other of the parties to the action, in the absence and
usually without the knowledge of the other party or parties." As a general rule, notice of motion is required
where a party has a right to resist the relief sought by the motion and principles of natural justice demand
that his rights be not affected without an opportunity to be heard. It has been said that "ex parte motions
are frequently permissible in procedural matters, and also in situations and under circumstances of
emergency; and an exception to a rule requiring notice is sometimes made where notice or the resulting
delay might tend to defeat the objective of the motion."26

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It is well to remember that this Court, in not a few cases, has consistently held that cases shall be
determined on the merits, after full opportunity to all parties for ventilation of their causes and defense,
rather than on technicality or some procedural imperfections. In so doing, the ends of justice would be
better served.27 Furthermore, this Court emphasized its policy that technical rules should accede to the
demands of substantial justice because there is no vested right in technicalities. Litigations, should, as
much as possible, be decided on their merits and not on technicality. Dismissal of appeals purely on
technical grounds is frowned upon, and the rules of procedure ought not to be applied in a very rigid,
technical sense, for they are adopted to help secure, not override, substantial justice, and thereby defeat
their very aims. As has been the constant rulings of this Court, every party-litigant should be afforded the
amplest opportunity for the proper and just disposition of his cause, free from constraints of
technicalities.28 Indeed, rules of procedure are mere tools designed to expedite the resolution of cases
and other matters pending in court. A strict and rigid application of the rules that would result in
technicalities that tend to frustrate rather than promote justice must be avoided. 29

The visible emerging trend is to afford every party-litigant the amplest opportunity for the proper and just
determination of his cause, free from constraints and technicalities.

Parenthetically, it must be noted also that when the appeal was dismissed on 19 June 2003, the
memorandum was already filed in court on 9 June 2003.

On the issue of immediate execution of judgment.

The applicable provision is Section 19, Rule 70 of the Rules of Court, which reads:

SEC. 19. Immediate Execution of judgment; how to stay the same.- If judgment is rendered against the
defendant, execution shall issue immediately upon motion, unless an appeal has been perfected and the
defendant to stay execution files a sufficient supersedeas bond, approved by the Municipal Trial Court
and executed in favor of the plaintiff to pay the rents, damages, and costs accruing down to the time of the
judgment appealed from, and unless, during the pendency of the appeal, he deposits with the appellate
court the amount of rent due from time to time under the contract, if any, as determined by the judgment
of the Municipal Trial Court. x x x.

To stay the immediate execution of judgment in ejectment proceedings, Section 19 requires that the
defendant-appellant must (a) perfect his appeal, (b) file a supersedeas bond, and (c) periodically deposit
the rentals falling due during the pendency of the appeal.

As correctly observed by the Court of Appeals, execution pending appeal was premature as respondent
had already filed a supersedeas bond and the monthly rental for the current month of the premises in
question.30

The invocation of petitioner of the provisions of Section 21, Rule 70 of the Rules of Court, which runs:

Sec. 21. Immediate execution on appeal to Court of Appeals or Supreme Court.- The judgment of the
Regional Trial Court against the defendant shall be immediately executory, without prejudice to a further
appeal that may be taken therefrom.

to justify the issuance of the writ of execution pending appeal in this case is misplaced.

A closer examination of the above-quoted provision reveals that said provision applies to decision of the
RTC rendered in its appellate jurisdiction, affirming the decision of the MeTC. In the case at bar, the RTC
order was an order dismissing respondent’s appeal based on technicality. It did not resolve substantive
matters delving on the merits of the parties’ claim in the ejectment case. Thus, the case brought to the

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Court of Appeals was the dismissal of the appeal for failure to file the required memorandum within the
period provided by law, and not on the merits of the ejectment case.

Lastly, petitioner posited the view that the Court of Appeals’ justices should have inhibited themselves
because of bias and partiality for deciding the case within eight months and for being very selective in
discussing the issues.

We reject the proposition.

Inhibition must be for just and valid causes. The mere imputation of bias and partiality is not enough
ground for judges to inhibit, especially when the charge is without basis. This Court has to be shown acts
or conduct clearly indicative of arbitrariness or prejudice before it can brand them with the stigma of bias
and partiality.31 This Court has invariably held that for bias and prejudice to be considered valid reasons
for the voluntary inhibition of judges, mere suspicion is not enough. Bare allegations of their partiality will
not suffice "in the absence of clear and convincing evidence to overcome the presumption that the judge
will undertake his noble role to dispense justice according to law and evidence and without fear and
favor."32

There is no factual support to petitioner’s charge of bias and partiality. A perusal of the records of the case
fails to reveal that any bias or prejudice motivated the Court of Appeals in granting respondent’s petition.
Neither did this Court find any questionable or suspicious circumstances leading to the issuance of the
questioned decision, as suggested by petitioner.

The fact alone that the Court of Appeals decided the case within eight months does not in any way
indicate bias and partiality against petitioner. It is within the constitutional mandate to decide the case
within 12 months.33

As to petitioner’s allegation that the Court of Appeals was selective in choosing what issues to resolve, it
bears to stress again that "a judge’s appreciation or misappreciation of the sufficiency of evidence x x x
adduced by the parties, x x x, without proof of malice on the part of respondent judge, is not sufficient to
show bias and partiality."34 We also emphasized that "repeated rulings against a litigant, no matter how
erroneously, vigorously and consistently expressed, do not amount to bias and prejudice which can be
bases for the disqualification of a judge."35

IN ALL, petitioner utterly failed to show that the appellate court erred in issuing the assailed decision. On
the contrary, it acted prudently in accordance with law and jurisprudence.

WHEREFORE, the instant petition is hereby DENIED for lack of merit. The Decision dated 17 August
2004 and the Resolution dated 10 March 2005 of the Court of Appeals in CA-G.R. SP No. 79001 are
hereby AFFIRMED. No costs.

SO ORDERED.

SECOND DIVISION

[G.R. No. 164668. February 14, 2005]

ASIAN SPIRIT AIRLINES (AIRLINE EMPLOYEES COOPERATIVE), petitioner, vs. SPOUSES

BENJAMIN AND ANNE MARIE BAUTISTA, KARL BAUTISTA and GLORIA
POMERA, respondents.

11 | P a g e
DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari of the Resolution[1] of the Court of Appeals (CA) dismissing
the appeal of the petitioner herein in CA-G.R. CV No. 79317 and its resolution in the same case denying
the petitioners motion for reconsideration of its first resolution.

The Antecedents

The Spouses Benjamin and Anna Marie Bautista filed a complaint, in behalf of their son Karl Bautista
and Gloria Pomera, against the Asian Spirit Airlines in the Regional Trial Court of Pasig City for breach of
contract and damages. After trial, the court rendered a decision on March 24, 2003 in favor of the plaintiffs
and against the defendant. The fallo of the decision reads:

WHEREFORE, judgment is hereby rendered IN FAVOR OF THE PLAINTIFFS and AGAINST THE
DEFENDANT ordering the latter to pay the former:

1. P5,000.00 as temperate damages;

2. P200,000.00 as moral damages;
3. P150,000.00 as exemplary damages;
4. P50,000.00 as attorneys fees;
5. P18,371.25 as litigation expenses.

Defendants counterclaim is DISMISSED.[2]

Its motion for the reconsideration of the decision having been denied by the trial court, [3] the
defendant appealed. The appeal was docketed as CA-G.R. CV No. 79317. On December 10, 2003, the
appellate court directed the defendant-appellant to file its brief as appellant within forty-five (45) days from
notice thereof.[4] The defendant-appellant received its copy of the resolution on December 17, 2003. Thus,
it had until January 31, 2004 within which to file its brief. However, the defendant-appellant failed to file its
appellants brief. On March 3, 2004, the plaintiffs-appellees filed a Manifestation and Motion[5] for the
dismissal of the appeal of the defendant-appellant for its failure to file its brief.
On March 10, 2004, the defendant-appellant filed an unverified Motion to Admit Attached Appellants
Brief.[6] The plaintiffs-appellees opposed the motion.[7] On April 23, 2004, the CA issued a
Resolution[8] denying the motion of the defendant-appellant and granting the motion of the plaintiffs-
appellees, and ordered the appeal of the defendant-appellant dismissed. The defendant-appellant filed a
motion for the reconsideration of the said resolution but on July 16, 2004, the appellate court denied the
said motion for lack of merit.[9]
The defendant-appellant, now the petitioner, filed a petition for review on certiorari with this Court
assailing the resolutions of the CA and asserting that:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN STRICTLY APPLYING THE

PROVISIONS OF THE RULES OF COURT ON DISMISSAL OF APPEAL TO HEREIN PETITIONERS
APPEAL WHICH IS CONTRARY TO THE MANDATED PRECEPT OF LIBERAL CONSTRUCTION
EXPLICITLY PROVIDED FOR IN THE RULES AND SANCTIONED BY JURISPRUDENTIAL
PRONOUNCEMENTS OF THIS HONORABLE SUPREME COURT, AND CONSIDERING THAT
PETITIONERS APPEAL BELOW IS BASED AND FOUNDED ON VERY MERITORIOUS GROUNDS
THE DENIAL OF WHICH WILL DEFINITELY RESULT TO PREJUDICE TO PETITIONERS
SUBSTANTIAL RIGHTS AND DENIAL TO IT OF ITS RIGHT TO DUE PROCESS.[10]

The petitioner avers that the late filing of its brief did not cause material injury or prejudice to the
respondents and the issues raised by it in its brief require an examination of the evidence on record.

12 | P a g e
 The petitioner prays that we set aside the assailed resolution of the CA and order the appellate court
to reinstate its appeal for further proceedings. In their comment on the petition, the respondents submit
that:

The Court of Appeals was evidently not satisfied with the explanation by the petitioner. Its action in this
regard is not subject to review, for the Supreme Court cannot interfere with the discretion of the Court of
Appeals.

It is necessary to impress upon litigants and their lawyers the necessity of a strict compliance with the
periods for performing certain acts incident to the appeal and the transgressions thereof, as a rule,
would not be tolerated; otherwise, those periods could be evaded by subterfuges and manufactured
excusesand would ultimately become inutile. (Don Lino Gutierrez & Sons, Inc. vs. CA, G.R. No. L-
39124, Nov. 15, 1974).

This Honorable Court will be setting a bad example if it accepts the excuse of the Petitioners counsel
that he instructed his secretary to file the motion for extension who, in turn, forgot to file it. Logic dictates
that the Secretary cannot release the request without the lawyers signature but still the basic and simple
prudence to follow it up by counsel leaves much to be desired. Every lawyer may soon adopt this
reasoning to justify non-filing of the brief on time.[11]

The petition has no merit.

Under Section 1(e), Rule 50 of the Rules of Court, as amended, an appeal may be dismissed by the
CA on its own motion or that of the appellee for failure of the appellant to file its brief within the time
provided by Section 7, Rule 44 of the said Rules. The petitioner had until January 31, 2004 within which to
file its brief but failed to do so. It was only on March 10, 2004, after receipt of respondents motion filed on
March 3, 2004, praying for the dismissal of the petitioners appeal for its failure to file its brief, that the
petitioner filed its brief appended to an unverified motion to admit the said brief. The only excuse of the
petitioner for its failure to file its brief was the claim of its counsel in the said Motion for Leave to Admit,
thus:

1. The filing of the Appellants Brief is due on January 31, 2004. The notice from the Honorable Court was
received on December 17, 2003 and because of the holiday season at that time, the undersigned counsel
gave instruction to his Secretary to file the usual Motion for Time asking for forty-five (45) days from
January 31, 2004 or until March 16, 2004.

2. The undersigned started to prepare the Appellants Brief bearing in mind the new deadline.

3. It was only when the undersigned received the Manifestation of plaintiffs on March 5, 2004 that he
inquired with his secretary if the Manifestation of counsel is true and she readily admitted that she failed to
prepare and file the Motion for Time.[12]

The excuse contrived by the petitioners counsel is totally unacceptable. We note that the motion of
the petitioner is unverified. Neither did the petitioner bother appending to its motion an affidavit of its
counsels secretary containing his/her explanation why he/she failed to file the said motion for extension if
there was such a motion in the first place. The petitioner did not even bother appending to its Motion to
Admit its motion for extension to file brief which its counsels secretary allegedly failed to file in the CA.
Blaming its counsels unidentified secretary for its abject failure to file its brief is a common practice for
negligent lawyers to cover up for their own negligence, incompetence, indolence, and ineptitude. Such
excuse is the most hackneyed and habitual subterfuge employed by litigants who fail to observe the
procedural requirements prescribed by the Rules of Court.[13] It bears stressing that it is the duty of
counsel to adopt and strictly maintain a system that insures that all pleadings should be filed and duly
served within the period therefor and, if he fails to do so, the negligence of his secretary or clerk to file
such pleading is imputable to the said counsel.[14]

13 | P a g e
 We agree with the petitioners contention that the rules of procedure may be relaxed for the most
persuasive reasons. But as this Court held in Galang v. Court of Appeals:[15]

Procedural rules are not to be belittled or dismissed simply because their non-observance may have
resulted in prejudice to a partys substantive rights. Like all rules, they are required to be followed except
only for the most persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not
commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed. [16]

In an avuncular case,[17] we emphasized that:

Procedural rules are tools designed to facilitate the adjudication of cases. Courts and litigants alike are,
thus, enjoined to abide strictly by the rules. And while the Court, in some instances, allows a relaxation in
the application of the rules, this, we stress, was never intended to forge a bastion for erring litigants to
violate the rules with impunity. The liberality in the interpretation and application of the rules applies only
in proper cases and under justifiable causes and circumstances. While it is true that litigation is not a
game of technicalities, it is equally true that every case must be prosecuted in accordance with the
prescribed procedure to insure an orderly and speedy administration of justice. The instant case is no
exception to this rule.

In the present case, we find no cogent reason to exempt the petitioner from the effects of its failure to
comply with the Rules of Court.
The right to appeal is a statutory right and the party who seeks to avail of the same must comply with
the requirements of the Rules. Failing to do so, the right to appeal is lost. More so, as in this case, where
petitioner not only neglected to file its brief within the stipulated time but also failed to seek an extension of
time for a cogent ground before the expiration of the time sought to be extended. [18]
In not a few instances, the Court relaxed the rigid application of the rules of procedure to afford the
parties the opportunity to fully ventilate their cases on the merits. This is in line with the time-honored
principle that cases should be decided only after giving all parties the chance to argue their causes and
defenses. Technicality and procedural imperfection should, thus, not serve as basis of decisions. In that
way, the ends of justice would be better served.[19] For, indeed, the general objective of procedure is to
facilitate the application of justice to the rival claims of contending parties, bearing always in mind that
procedure is not to hinder but to promote the administration of justice. [20] In this case, however,
such liberality in the application of rules of procedure may not be invoked if it will result in the
wanton disregard of the rules or cause needless delay in the administration of justice. It is equally
settled that, save for the most persuasive of reasons, strict compliance is enjoined to facilitate the orderly
administration of justice.[21]
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the
petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

CEBU BIONIC BUILDERS SUPPLY, INC. and G.R. No. 154366

LYDIA SIA,
Petitioners, Present:

CORONA, C.J.,
- versus - Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,

14 | P a g e
DEVELOPMENT BANK OF THE PHILIPPINES, PERALTA,* and
JOSE TO CHIP, PATRICIO YAP and ROGER PEREZ, JJ.
BALILA,
Respondents. Promulgated:

November 17, 2010

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

DECISION

LEONARDO DE CASTRO, J.:

This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the Resolution[2] dated
February 5, 2002 and the Amended Decision[3] dated July 5, 2002 of the Court of Appeals in CA-G.R. CV
No. 57216. In the Resolution dated February 5, 2002, the Court of Appeals admitted the Motion for
Reconsideration[4] of herein respondents Development Bank of the Philippines (DBP), Jose To Chip,
Patricio Yap and Roger Balila, notwithstanding the fact that the same was filed more than six months
beyond the reglementary period. Said motion prayed for the reversal of the Court of Appeals
Decision[5] dated February 14, 2001, which affirmed the Decision[6] dated April 25, 1997 of the Regional
Trial Court (RTC) of Cebu, Branch 8, in Civil Case No. CEB-10104 that ruled in favor of petitioners. In the
Amended Decision of July 5, 2002, the Court of Appeals reversed its previous Decision dated February
14, 2001 and dismissed the petitioners complaint for lack of merit.

The facts leading to the instant petition are as follows:

On June 2, 1981, the spouses Rudy R. Robles, Jr. and Elizabeth R. Robles entered into a mortgage
contract[7] with DBP in order to secure a loan from the said bank in the amount of P500,000.00. The
properties mortgaged were a parcel of land situated in Tabunoc, Talisay, Cebu, which was then covered
by Transfer Certificate of Title (TCT) No. T- 47783 of the Register of Deeds of Cebu, together with all the
existing improvements, and the commercial building to be constructed thereon[8] (subject properties).Upon
completion, the commercial building was named the State Theatre Building.

On October 28, 1981, Rudy Robles executed a contract of lease in favor of petitioner Cebu Bionic
Builders Supply, Inc. (Cebu Bionic), a domestic corporation engaged in the construction business, as well
as the sale of hardware materials. The contract pertinently provides:

CONTRACT OF LEASE

KNOW ALL MEN BY THESE PRESENTS:

This Lease Contract made and entered into, by and between:

RUDY ROBLES, JR., Filipino, of legal age, married and resident of 173 Maria Cristina Ext.,
Cebu City, hereinafter referred to as the LESSOR,

- and -

CEBU BIONIC BUILDER SUPPLY, represented by LYDIA SIA, Filipino, of legal age,
married and with address at 240 Magallanes St., Cebu City hereinafter known as the
LESSEE;

WITNESSETH:

15 | P a g e
 The LESSOR is the owner of a commercial building along Tabunok, Talisay, Cebu, known
as the State Theatre Building.

The LESSOR agrees to lease unto the LESSEE and the LESSEE accepts the lease from
the LESSOR, a portion of the ground floor thereof, consisting of one (1) unit/store space
under the following terms and conditions:

1. The LESSEE shall pay a monthly rental of One Thousand (P1,000.00) Pesos,
Philippine Currency. The rental is payable in advance within the first five (5) days of the
month, without need of demand;

2. That the term of this agreement shall start on November 1, 1981 and shall
terminate on the last day of every month thereafter; provided however that this
contract shall be automatically renewed on a month to month basis if no notice, in
writing, is sent to the other party to terminate this agreement after fifteen (15) days
from receipt of said notice;

xxxx

9. Should the LESSOR decide to sell the property during the term of this
lease contract or immediately after the expiration of the lease, the LESSEE shall have
the first option to buy and shall match offers from outside parties.[9] (Emphases ours.)

The above contract was not registered by the parties thereto with the Registry of Deeds of Cebu.

Subsequently, the spouses Robles failed to settle their loan obligation with DBP. The latter was,
thus, prompted to effect extrajudicial foreclosure on the subject properties.[10] On February 6, 1987, DBP
was the lone bidder in the foreclosure sale and thereby acquired ownership of the mortgaged subject
properties.[11] On October 13, 1988, a final Deed of Sale[12] was issued in favor of DBP.

Meanwhile, on June 18, 1987, DBP sent a letter to Bonifacio Sia, the husband of petitioner Lydia Sia who
was then President of Cebu Bionic, notifying the latter of DBPs acquisition of the State Theatre
Building. Said letter reads:

June 18, 1987

Mr. Bonifacio Sia

Bionic Builders Inc.
State Theatre Bldg.
Tabunok, Talisay, Cebu

Sir:

This refers to the commercial space you are occupying in the acquired property of the Bank,
formerly owned by Rudy Robles, Jr.

Please be informed that said property has been acquired through foreclosure on
February 6, 1987. Considering thereat, we require you to remit the rental due for June
1987.

If you wish to continue on leasing the property, we request you to come to the Bank
for the execution of a Contract of Lease, the salient conditions of which are as follows:

16 | P a g e
 1. The lease will be on month to month basis, for a maximum period of one (1) year;

2. Deposit equivalent to two (2) months rental and advance of one (1) month rental,
and the remaining amount for one year period (equivalent to 9 months rental)
shall be secured by either surety bond, cash bond or assigned time deposit;

3. That in case there is a better offer or if the property will be subject of a purchase
offer, within the term, the lessor is given an option of first refusal, otherwise
he has to vacate the premises within thirty (30) days from date of notice.

We consider, temporarily, the current monthly rental based on the six-month

receipts, which we require you to submit, until such time when we will fix the amount
accordingly.

If the contract of lease is not executed within thirty (30) days from date hereof, it is
construed that you are not interested in leasing the premises and will vacate within
the said period.

Please be guided accordingly.

Truly yours,

(SGD)LUCILO S. REVILLAS
Branch Head[13] (Emphases ours.)

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

July 7, 1987

Mr. Lucilo S. Revillas

Branch Head
Development Bank of the Philippines

Dear Mr. Revillas,

This has reference to your letter of 18 June 1987 which you sent to my client, Mr. Bonifacio
Sia of Cebu Bionic Builders Supply the lessee of a commercial space of the State Theatre
Bldg., located at Tabunok, Talisay, Cebu.

My client is amenable to the terms contained in your letter except the following:

1. In lieu of item no. 2 thereof, my client will deposit with your bank the amount of
P10,000.00, as assigned time deposit;

2. The 30 days notice you mentioned in your letter, (3), is too short. My client is
requesting for at least 60 days notice.

I sincerely hope that you will give due course to this request.

Thank you.

Truly yours,

17 | P a g e
 (SGD) ANASTACIO T. MUNTUERTO, JR.[14]

Thereafter, on November 14, 1989, a Certificate of Time Deposit [15] for P11,395.64 was issued in the
name of Bonifacio Sia and the same was allegedly remitted to DBP as advance rental deposit.

For reasons unclear, however, no written contract of lease was executed between DBP and Cebu Bionic.

In the meantime, subsequent to the acquisition of the subject properties, DBP offered the same for
sale along with its other assets. Pursuant thereto, DBP published a series of invitations to bid on such
properties, which were scheduled on January 19, 1989,[16] February 23, 1989,[17] April 13, 1989,[18] and
November 15, 1990.[19] As no interested bidder came forward, DBP publicized an Invitation on Negotiated
Sale/Offer, the relevant terms and conditions of which stated:

INVITATION ON NEGOTIATED SALE/OFFER

The DEVELOPMENT BANK OF THE PHILIPPINES, Cebu Branch, will receive SEALED
NEGOTIATED OFFERS/PURCHASE PROPOSALS tendered at its Branch Office, DBP
Building, Osmea Boulevard, Cebu City for the sale of its acquired assets mentioned
hereinunderwithin the 15-Day-Acceptance-Period starting from NOVEMBER 19, 1990
up to 12:00 oclock noon of DECEMBER 3, 1990. Sealed offers submitted shall be opened
by the Committee on Negotiated Offers at exactly 2:00 oclock in the afternoon of the last
day of the acceptance period in order to determine the highest and/or most advantageous
offer.

Item No. Description/Location Starting Price

xxxx

II Commercial land, Lot No. 3681-C-3, having an area of P1,838,100.00

396 sq. m., situated in Tabunok, Talisay, Cebu and
covered by TCT No. T-65199 (DBP), including the
commercial building thereon.

xxxx

A pre-numbered Acknowledgment Receipt duly signed by at least two (2) of the

Committee members shall be issued to the offeror acknowledging receipt of such
offer.

Negotiated offers may be made in CASH or TERMS, the former requiring a deposit of
10% and the latter 20% of the starting price, either in the form of cash or
cashiers/managers check to be enclosed in the sealed offer.

xxxx

Interested negotiated offerors are requested to see Atty. Apolinar K. Panal, Jr., Acquired
Asset in Charge (Tel. No. 9-63-25), in order to secure copies of the Letter-Offer form and
Negotiated Sale Rules and Procedures.

NOTE: If no offer is received during the above stated acceptance period, the
properties described above shall be sold to the first offeror who submits an
acceptable proposal on a First-Come-First-Served basis.

18 | P a g e
 City of Cebu, Philippines, November 16, 1990.

(SGD.) TIMOTEO P. OLARTE

Branch Head[20] (Emphases ours.)

In the morning of December 3, 1990, the last day for the acceptance of negotiated offers, petitioners
submitted through their representative, Judy Garces, a letter-offer form, offering to purchase the subject
properties for P1,840,000.00. Attached to the letter-offer was a copy of the Negotiated Sale Rules and
Procedures issued by DBP and a managers check for the amount of P184,000.00, representing 10% of
the offered purchase price. This offer of petitioners was not accepted by DBP, however, as the
corresponding deposit therefor was allegedly insufficient.

After the lapse of the above-mentioned 15-day acceptance period, petitioners did not submit any
other offer/proposal to purchase the subject properties.

On December 17, 1990, respondents To Chip, Yap and Balila presented their letter-offer[21] to purchase
the subject properties on a cash basis for P1,838,100.00. Said offer was accompanied by a downpayment
of 10% of the offered purchase price, amounting toP183,810.00. On even date, DBP acknowledged the
receipt of and accepted their offer. On December 28, 1990, respondents To Chip, Yap and Balila paid the
balance of the purchase price and DBP issued a Deed of Sale[22] over the subject properties in their favor.

On January 11, 1991, the counsel of respondents To Chip, Yap and Balila sent a letter[23] addressed to
the proprietor of Cebu Bionic, informing the latter of the transfer of ownership of the subject
properties. Cebu Bionic was ordered to vacate the premises within thirty (30) days from receipt of the
letter and directed to pay the rentals from January 1, 1991 until the end of the said 30-day period.

The counsel of Cebu Bionic replied[24] that his client received the above letter on January 11, 1991. He
stated that he has instructed Cebu Bionic to verify first the ownership of the subject properties since it had
the preferential right to purchase the same. He likewise requested that he be furnished a copy of the deed
of sale executed by DBP in favor of respondents To Chip, Yap and Balila.

On February 15, 1991, respondent To Chip wrote a letter[25] to the counsel of Cebu Bionic, insisting that
he and his co-respondents Yap and Balila urgently needed the subject properties to pursue their business
plans. He also reiterated their demand for Cebu Bionic to vacate the premises.

Shortly thereafter, on February 27, 1991, the counsel of respondents To Chip, Yap and Balila sent its final
demand letter[26] to Cebu Bionic, warning the latter to vacate the subject properties within seven (7) days
from receipt of the letter, otherwise, a case for ejectment with damages will be filed against it. [27]

Despite the foregoing notice, Cebu Bionic still paid[28] to DBP, on March 22, 1991, the amount
of P5,000.00 as monthly rentals on the unit of the State Theatre Building it was occupying for period of
November 1990 to March 1991.

On April 10, 1991, petitioners filed against respondents DBP, To Chip, Yap and Balila a complaint[29] for
specific performance, cancellation of deed of sale with damages, injunction with a prayer for the issuance
of a writ of preliminary injunction.[30] The complaint was docketed as Civil Case No. CEB-10104 in the
RTC.

Petitioners alleged, inter alia, that Cebu Bionic was the lessee and occupant of a commercial
space in the State Theatre Building from October 1981 up to the time of the filing of the complaint. During
the latter part of 1990, DBP advertised for sale the State Theatre Building and the commercial lot on
which the same was situated. In the prior invitation to bid, the bidding was scheduled on November 15,
1990; while in the next, under the 15-day acceptance period, the submission of proposals was to be made
from November 19, 1990 up to 12:00 noon of December 3, 1990. Petitioners claimed that, at about 10:00

19 | P a g e
a.m. on December 3, 1990, they duly submitted to Atty. Apolinar Panal, Jr., Chief of the Acquired Assets
of DBP, the following documents, namely:

6.1 Letter-offer form, offering to purchase the property advertised, for

the price of P1,840,000, which was higher than the starting price of P1,838,100.00
on cash basis. x x x;

6.2 Negotiated Sale Rules and Procedures, duly signed by plaintiff, x x x;

6.3 Managers check for the amount of P184,000 representing 10% of the
deposit dated December 3, 1990 and issued by Allied Banking Corp. in favor of the
Development Bank of the Philippines. x x x.[31] (Emphasis ours.)

Petitioners asserted that the above documents were initially accepted but later returned. DBP
allegedly advised petitioners that there was no urgent need for the same x x x, considering that the
property will necessarily be sold to [Cebu Bionic] for the reasons that there was no other interested party
and that [Cebu Bionic] was a preferred party being the lessee and present occupant of the property
subject of the lease[.][32] Petitioners then related that, without their knowledge, DBP sold the subject
properties to respondents To Chip, Yap and Balila. The sale was claimed to be simulated and fictitious, as
DBP still received rentals from petitioners until March 1991. By acquiring the subject properties,
petitioners contended that DBP was deemed to have assumed the contract of lease executed between
them and Rudy Robles. As such, DBP was bound by the provision of the lease contract, which stated that:

9. Should the Lessor decide to sell the property during the term of this lease contract
or immediately after the expiration of the lease, the Lessee shall have the first option to buy
and shall match offers from outside parties.[33]

Petitioners sought the rescission of the contract of sale between DBP and respondents To Chip,
Yap and Balila. Petitioners also prayed for the issuance of a writ of preliminary injunction, restraining
respondents To Chip, Yap and Balila from registering the Deed of Sale in the latters favor and from
undertaking the ejectment of petitioners from the subject properties. Likewise, petitioners entreated that
DBP be ordered to execute a deed of sale covering the subject properties in their name and to pay
damages and attorneys fees.

In its answer,[34] DBP denied the existence of a contract of lease between itself and
petitioners. DBP countered that the letter-offer of petitioners was actually not accepted as their offer to
purchase was on a term basis, which therefore required a 20% deposit.The 10% deposit accompanying
the petitioners letter-offer was declared insufficient. DBP stated that the letter-offer form was not
completely filled out as the Term and Mode of Payment fields were left blank. DBP then informed
petitioner Lydia Sia of the inadequacy of her offer. After ascertaining that there was no other offeror as of
that time, Lydia Sia allegedly summoned back her representative who did not leave a copy of the letter-
offer and the attached documents. DBP maintained that petitioners documents did not show that the same
were received and approved by any approving authority of the bank. The letter-offer attached to the
complaint, which indicated that the mode of payment was on a cash basis, was allegedly not the
document shown to DBP. In addition, DBP argued that there was no assumption of the lease contract
between Rudy Robles and petitioners since it acquired the subject properties through the involuntary
mode of extrajudicial foreclosure and its request to petitioners to sign a new lease contract was simply
ignored. DBP, therefore, insisted that petitioners occupancy of the unit in the State Theatre Building was
merely upon its acquiescence. The petitioners payment of rentals on March 22, 1991 was supposedly
made in bad faith as they were made to a mere teller who had no knowledge of the sale of the subject
properties to respondents To Chip, Yap and Balila. DBP, thus, prayed for the dismissal of the complaint
and, by way of counterclaim, asked that petitioners be ordered to pay damages and attorneys fees.

20 | P a g e
 Respondents To Chip, Yap and Balila no longer filed a separate answer, adopting instead the
answer of DBP.[35]

In an Order[36] dated July 31, 1991, the RTC granted the prayer of petitioners for the issuance of a
writ of preliminary injunction.[37]

On April 25, 1997, the RTC rendered judgment in Civil Case No. CEB-10104, finding meritorious
the complaint of the petitioners. Explained the trial court:

It is a fact on record that [petitioners] complied with the requirements of deposit and
advance rental as conditions for constitution of lease between the parties. [Petitioners] in
complying with the requirements, issued a time deposit in the amount of P11,395.64 and
remitted faithfully its monthly rentals until April, 1991, which monthly rental was no longer
accepted by the DBP. Although there was no formal written contract executed
between [respondent] DBP and the [petitioners], it is very clear that DBP opted to
continue the old and previous contract including the terms thereon by accepting the
requirements contained in paragraph 2 of its letter dated June 18, 1987. It is also a fact
on record that under the lease contract continued by the DBP on the [petitioners], it is
provided in paragraph 9 thereof that the lessee shall have the first option to buy and shall
match offers from outside parties. And yet, [respondent] DBP never gave [petitioners]
the first option to buy or to match offers from outside parties, more specifically
[respondents] To Chip, Balila and Yap. It is also a fact on record that [respondent] DBP in
its letter dated June 18, 1987 to [petitioners] wrote in paragraph 3 thereof, that in case there
is better offer or if a property will be subject of purchase offer, within the term, the lessee is
given the option of first refusal, otherwise, he has to vacate the premises within thirty (30)
days. Yet, [respondent] DBP never informed [petitioners] that there was an interested
party to buy the property, meaning, [respondents To Chip, Yap and Balila], thus
depriving [petitioners] of the opportunity of first refusal promised to them in its letter
dated June 18, 1987. x x x.[38](Emphases ours.)

As regards the offer of petitioners to purchase the subject properties from DBP, the RTC gave more
credence to the petitioners version of the facts, to wit:

It is also a fact on record that when [respondent] DBP offered the property for negotiated
sale under the 15-day acceptance period[, which] ended at noon of December 3, 1991,
[Cebu Bionic] submitted its offer, complete with [the required documents.] x x x.

xxxx

These requirements, however, were unceremoniously returned by [respondent] bank with

the assurance that since there was no other bidder of the said property, there was no
urgency for the same and that [Cebu Bionic] also, in all events, is entitled to first option
being the present lessee.

The declaration of Atty. Panal to the effect that Cebu Bionic wanted to buy the property on
installment terms, such that the deposit of P184,000.00 was insufficient being only 10% of
the offer, could not be given much credence as it is refuted by Exh. H which is the
negotiated offer to purchase form under the 15-day acceptance period accomplished by
[petitioners] which shows clearly the written word Cash after the printed words Term and
Mode of Payment, Exhibit J, the Managers check issued by Allied Banking Corporation
dated December 3, 1990 in the amount ofP184,000.00 representing 10% of the offer
showing the mode of payment is for cash; Exhibit K which is the application for Managers
check in the amount of P184,000.00 dated December 3, 1990 showing the beneficiary as
DBP. If it is true that the offer of [petitioners] was for installment payments, then in

21 | P a g e
 the ordinary course of human behavior, it would not have wasted effort in securing a
Managers check in the amount of P184,000.00 which was insufficient for 20% deposit
as required for installment payments. More credible is the explanation [given by]
witness Judy Garces when she said that DBP through Atty. Panal returned the
documents submitted by her, saying that there was no urgency for the same as there
was no other bidder of [the said] property and that Cebu Bionic was entitled to a first
option to buy being the present lessee. In the letter also of [respondent] bank dated June
18, 1987, it is important to note that aside from requiring Cebu Bionic to comply with certain
requirements of time deposit and advance rental, as condition for constitution of lease
between the parties and which was complied by Cebu Bionic[,] said letter further states in
paragraph 3 thereof that in case there is [a] better offer or if the property will be subject of a
purchase offer, within the term, the lessee is given the option of first refusal, otherwise, he
has to vacate the premises within thirty days. In answer to the Courts question, however,
Atty. Panal admitted that he did not tell [petitioners] that there was another party who was
willing to purchase the property, in violation of [petitioners] right of first refusal. [39] (Emphasis
ours.)

Likewise, the RTC found that respondents To Chip, Yap and Balila were aware of the lease contract
involving the subject properties before they purchased the same from DBP. Thus:

[Respondent] Jose To Chip lamely pretends ignorance that [petitioners] are lessees of the
property, subject matter of this case. He states that he and his partners, the other
[respondents], were given assurances by Atty. Panal of the DBP that [Lydia Sia] is not a
lessee, although he knew that [petitioners] were presently occupying the property and that it
was possessed by [petitioners] even before it was owned by the DBP. x x x.

xxxx

[Respondent] Roger Balila, in his testimony, likewise pretended ignorance that he knew that
[Lydia Sia] was a lessee of the property. x x x.

xxxx

Upon further questioning by the Court, he admitted that [Lydia Sia] was not possessing the
building freely; that she was a lessee of Rudy Robles, the former owner, but cleverly
insisted in disowning knowledge that [Lydia Sia] was a lessee, denying knowledge that
[Lydia Sia] was paying rentals to [respondent] bank. His pretended ignorance x x x was a
way of evading [Cebu Bionics] right of first priority to buy the property under the contract of
lease. x x x The Court is convinced that [respondents To Chip, Yap and Balila] knew that
[Cebu Bionic] was the present lessee of the property before they bought the same from
[respondent] bank. Common observation, knowledge and experience dictates that as a
prudent businessman, it was but natural that he ask Lydia Sia what her status was in
occupying the property when he went to talk to her, that he ask her if she was a lessee.But
he said, all he asked her was whether she was interested to buy the property. x x x.[40]

The trial court, therefore, concluded that:

From the foregoing facts on record, it is thus clear that [petitioner] Cebu Bionic is the
present lessee of the property, the lease contract having been continued by [respondent]
DBP when it received rental payments up to March of 1991 as well as the advance rental
for one year represented by the assigned time deposit which is still in [respondent] banks
possession. The provision, therefore, in the lease contract, on the right of first option to buy
and the right of first refusal contained in [respondent] banks letter dated June 18, 1987, are

22 | P a g e
 still subsisting and binding up to the present, not only on [respondent] bank but also on
[respondents To Chip, Yap and Balila]. x x x.

xxxx

WHEREFORE, THE FOREGOING PREMISES CONSIDERED, judgment is hereby

rendered:

(1) Rescinding the Deed of Sale dated December 28, 1990 between [respondent]
Development Bank of the Philippines and [respondents] Roger Balila, Jose To
Chip and Patricio Yap;

(2) Ordering the [respondent] Development Bank of the Philippines to execute a

Deed of Sale over the property, subject matter of this case upon payment by
[petitioners] of the whole consideration involved and to complete all acts or
documents necessary to have the title over said property transferred to the name
of [petitioners];

(3) Costs against [respondents].[41]

DBP forthwith filed a Notice of Appeal.[42] Respondents To Chip, Yap and Balila filed a Motion for
Reconsideration[43] of the above decision, but the RTC denied the same in an Order[44] dated July 4,
1997. Said respondents then filed their Notice of Appeal.[45]

On February 14, 2001, the Court of Appeals promulgated its Decision, [46] pronouncing that:

We find nothing erroneous with the judgment rendered by the trial court. Perforce,
We sustain it and dismiss the [respondents] submission.

The RTC determined, upon evidence on record after a careful evaluation of the
witnesses and their testimonies during the trial that indeed [petitioners] right of first option
was violated and thus, rescission of the sale made by DBP to [respondents To Chip, Yap
and Balila] are in order.

xxxx

Apparently, DBP accepted [the documents submitted by petitioners] and thereafter,

through Atty. Panal (of DBP), returned all of it to the [petitioners] with the assurance that
since there was no other bidder of the said property, there was no urgency for the same and
that [Cebu Bionic] also, in all events, is entitled to first option being the present lessee.

[DBP] maintains that the return of the documents [submitted by petitioners] was in
order since the [petitioners] offered to buy the property in question on installment basis
requiring a higher 20% deposit. This, however, was correctly rejected by the trial court[.] x x
x

The binding effect of the lease agreement upon the [respondents To Chip, Yap and
Balila] must be sustained since from existing jurisprudence cited by the lower court, it was
determined during trial that:

... [respondents To Chip, Yap and Balila] knew that [Cebu Bionic]
was the present lessee of the property before they bought the same from
[respondent] bank. Common observation, knowledge and experience

23 | P a g e
 dictates that as a prudent businessman, it was but natural that he ask
Lydia Sia what her status was in occupying the property when he went
to talk to her, that he ask her if she was a lessee. But he said, all he
asked her was whether she was interested to buy the property. x x x.

Moreover, We find that the submissions presented by the [respondents] in their

respective briefs argue against questions of facts as found and determined by the lower
court. The respondents contentions consist of crude attempts to question the assessment
and evaluation of testimonies and other evidence gathered by the trial court.

It must be remembered that findings of fact as determined by the trial court are
entitled to great weight and respect from appellate courts and should not be disturbed on
appeal unless for [strong] and cogent reasons. These findings generally, so long as
supported by evidence on record, are not to be disturbed unless there are some facts or
evidence which the trial court has misappreciated or overlooked, and which if considered
would have altered the results of the entire case. Sad to say for the [respondents], We see
no reason to depart from this well-settled legal principle.

WHEREFORE, in view of the foregoing, the judgment of the Regional Trial Court of
Cebu City, Branch 8, in Civil Case No. 10104 is hereby AFFIRMED in toto.[47]

On October 1, 2001, petitioners filed a Motion for Issuance of Entry of Judgment.[48] Petitioners
stressed that, based on the records of the case, respondents were served a copy of the Court of Appeals
Decision dated February 14, 2001 sometime on March 7, 2001. However, petitioners discovered that
respondents have not filed any motion for reconsideration of the said decision within the reglementary
period therefor, nor was there any petition for certiorari or appeal filed before the Supreme Court.

In response to the above motion, respondents To Chip, Yap and Balila filed on October 8, 2001 a
Motion to Admit Motion for Reconsideration.[49] Atty. Francis M. Zosa, the counsel for respondents To
Chip, Yap and Balila, explained that he sent copies of the motion for reconsideration to petitioners and
DBP via personal delivery. On the other hand, the copies of the motion to be filed with the Court of
Appeals were purportedly sent to Mr. Domingo Tan, a friend of Atty. Zosa in Quezon City, who agreed to
file the same personally with the appellate court in Manila. When Atty. Zosa inquired if the motion for
reconsideration was accordingly filed, Mr. Tan allegedly answered in the affirmative. To his surprise, Atty.
Zosa received a copy of petitioners Motion for Issuance of Entry of Judgment. Atty. Zosa, thus, attributed
the failure of his clients to file a motion for reconsideration on the mistake, excusable negligence and/or
fraud committed by Mr. Tan.

In the assailed Resolution dated February 5, 2002, the Court of Appeals granted the motion of
respondents To Chip, Yap and Balila and admitted the motion for reconsideration attached therewith in
the higher interest of substantial justice.[50]

On July 5, 2002, the Court of Appeals reversed its original Decision dated February 14, 2001,
reasoning thus:

After a judicious review and reevaluation of the evidence and facts on record, we are
convinced that DBP had terminated the Robles lease contract. From its letter of June 18,
1987, DBP had expressly notified [petitioners] that (I)f they wish to continue on leasing the
property x x x to come to the Bank for the execution of a Contract of Lease, the salient
conditions of which are as follows:

1. The lease will be on a month to month basis for a maximum period of one (1)
year;

24 | P a g e
 2. Deposit equivalent to two (2) months rental and advance of one (1) month
rental, and the remaining amount for one year (equivalent to 9 months rental) shall be
secured by either surety bond, cash bond or assigned time deposit;

3. That in case there is a better offer or if the property will be subject of a

purchase offer, within the term, the lessor is given an option of first refusal,
otherwise he has to vacate the premises within thirty (30) days from date of notice.

We consider, temporarily, the current monthly rental based on the six-month

receipts, which we require you to submit, until such time when we will fix the amount
accordingly.

Evidently, except for the remittance of the monthly rentals up to March 1991, the
conditions imposed by DBP have never been complied with. [Petitioners] did not go to the
Bank to sign any new written contract of lease with DBP. [Petitioners] also did not put up a
surety bond nor cash bond nor assign a time deposit to secure the payment of rental for
nine (9) months, although the [petitioners] opened a time deposit but did not assign it to
DBP.

But even with the remittance and acceptance of the deposit made by [petitioners]
equivalent to two (2) months rental and advance of one (1) month rental it does not
necessarily follow that DBP opted to continue with the Robles lease. This is because the
Robles contract provides:

That the term of the agreement shall start on November 1, 1981

and shall terminate on the last day of every month thereafter, provided
however, that this contract shall be automatically renewed on a month
to month basis if no notice in writing is sent to the other party to
determine to terminate this agreement after fifteen (15) days from the
receipt of said notice.

Here, a notice was sent to [petitioners] on June 18, 1987, informing them that if they wish to
continue on leasing the property, we request you to come to the Bank for the execution of a
Contract of Lease x x x.

[Petitioners] failed to enter into the contract of lease required by DBP for it to
continue occupying the leased premises.

Because of [petitioners] failure to comply with the conditions embodied in the 18

June 1987 letter, it cannot be said that [petitioners] entered into a new contract with DBP
where they were given the first option to buy the leased property and to match offers from
outside parties.

xxxx

Be that as it may, DBP continued to accept the monthly rentals based on the old
Robles contract despite the fact that the [petitioners] failed to enter into a written lease
contract with it. Corollarily, the relations between the parties is now governed by Article
1670 of the New Civil Code, thus:

Art. 1670. If at the end of contract the lessee should continue enjoying
the thing leased for fifteen days with the acquiescence of the lessor, and
unless a notice to the contrary by either party has previously been given, it is

25 | P a g e
 understood that there is an implied new lease, not for the period of the
original contract, but for the time established in Articles 1682 and 1687. The
other terms of the original contract shall be revived.

xxxx

x x x [T]he acceptance by DBP of the monthly rentals does not mean that the terms
of the Robles contract were revived. In the case ofDizon vs. Court of Appeals, the
Supreme Court declared that:

The other terms of the original contract of lease which are revived in
the implied new lease under Article 1670 of the New Civil Code are only
those terms which are germane to the lessees right [of] continued enjoyment
of the property leased an implied new lease does not ipso facto carry with it
any implied revival of any option to purchase the leased premises.

In view of the foregoing, it is clear that [petitioners] had no right to file a case
for rescission of the deed of sale executed by DBP in favor of [respondents To Chip, Yap
and Balila] because said deed of sale did not violate their alleged first option to buy or
match offers from outside parties which is legally non-existent and which was not impliedly
renewed under Article 1670 of the Civil Code.

WHEREFORE, premises considered, the 14 February 2001 Decision is

hereby RECONSIDERED and another one is issued REVERSING the 25 April 1997
Decision of the Regional Trial Court, Branch 8, Cebu City in Civil Case No. CEB-
10104 and the complaint of [petitioners] is DISMISSED for lack of merit.[51]
Without seeking a reconsideration of the above decision, petitioners filed the instant petition. In
their Comment, respondents opposed the petition on both procedural and substantive grounds.

In petitioners Memorandum, they summarized the issues to be resolved in the present case as
follows:

A) PRELIMINARY ISSUES:

WHETHER OR NOT THE VERIFICATION (AND CERTIFICATION OF NON-FORUM

SHOPPING) IN THE INSTANT PETITION WAS PROPER AND VALID DESPITE ITS
BEING SIGNED BY ONLY ONE OF THE TWO PETITIONERS.

II

WHETHER OR NOT ONLY QUESTIONS OF LAW AND NOT OF FACT CAN BE RAISED
IN THE INSTANT PETITION BEFORE THIS HON. SUPREME COURT.

B) MAIN AND PRINCIPAL ISSUES IN THE INSTANT PETITION:

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN ADMITTING

RESPONDENTS MOTION FOR RECONSIDERATION DESPITE ITS BEING FILED OUT
OF TIME

26 | P a g e
 II

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN DECLARING THAT

PETITIONERS DID NOT ENTER INTO CONTRACT WITH RESPONDENT DBP
CONTINUING THE TERMS OF THE ROBLES CONTRACT

III

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT DECLARED

THAT THE CONTINUATION BY RESPONDENT DBP OF THE LEASE CONTRACT DID
NOT CONTAIN THE RIGHT OF FIRST REFUSAL

IV

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT DECLARED

THAT THE LEASE CONTRACT IS GOVERNED BY ART. 1670 OF THE NEW CIVIL CODE

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT FAILED TO

RECOGNIZE PETITIONERS RIGHT OF FIRST REFUSAL TO WHICH RESPONDENTS
WERE BOUND

VI

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED WHEN IT FAILED TO

DECLARE THAT RESPONDENT DBP HAD VIOLATED PETITIONERS RIGHTS

VII

WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN REVERSING ITS OWN
JUDGMENT AND DISMISSING PETITIONERS CLAIM FOR RESCISSION[52]

We shall first resolve the preliminary issues.

Respondents To Chip, Yap and Balila argue that the instant petition should be dismissed outright as the
verification and certification of non-forum shopping was executed only by petitioner Lydia Sia in her
personal capacity, without the participation of Cebu Bionic.

The Court is not persuaded.

Except for the powers which are expressly conferred on it by the Corporation Code and those that
are implied by or are incidental to its existence, a corporation has no powers. It exercises its powers
through its board of directors and/or its duly authorized officers and agents. Thus, its power to sue and be
sued in any court is lodged with the board of directors that exercises its corporate powers. [53] Physical
acts, like the signing of documents, can be performed only by natural persons duly authorized for the
purpose by corporate by-laws or by a specific act of the board of directors.[54]

In this case, respondents To Chip, Yap and Balila obviously overlooked the Secretarys
Certificate[55] attached to the instant petition, which was executed by the Corporate Secretary of Cebu
Bionic. Unequivocally stated therein was the fact that the Board of Directors of Cebu Bionic held a special

27 | P a g e
meeting on July 26, 2002 and they thereby approved a Resolution authorizing Lydia Sia to elevate the
present case to this Court in behalf of Cebu Bionic, to wit:

Whereas, the board appointed LYDIA I. SIA to act and in behalf of the corporation to
file the CERTIORARI with the Supreme Court in relations to the decision of the Court of
Appeals dated July 5, 2002 which reversed its own judgment earlier promulgated on
February 14, 2001 entitled CEBU BIONIC BUILDERS SUPPLY, INC. and LYDIA SIA,
(Petitioners- Appellants) versus THE DEVELOPMENT BANK OF THE PHILIPPINES, JOSE
TO CHIP, PATRICIO YAP and ROGER BALILA (Respondents- Appelles), docketed CA-
G.R. NO. 57216.

Whereas, on mass unanimously motion of all members of directors present hereby

approved the appointment of LYDIA I. SIA to act and sign all papers in connection of CA-
G.R. NO. 57216.

Resolved and it is hereby resolve to appoint and authorized LYDIA I. SIA to sign and
file with the SUPREME COURT in connection to decision of the Court of Appeals as above
mention.[56]

Respondents To Chip, Yap and Balila next argue that the instant petition raises questions of fact,
which are not allowed in a petition for review on certiorari. They, therefore, submit that the factual findings
of the Court of Appeals are binding on this Court.

Section 1, Rule 45 of the Rules of Court categorically states that the petition filed thereunder shall
raise only questions of law, which must be distinctly set forth. A question of law arises when there is doubt
as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as
to the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by the litigants or any of them. The
resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once
it is clear that the issue invites a review of the evidence presented, the question posed is one of fact.[57]

The above rule, however, admits of certain exceptions,[58] one of which is when the findings of the
Court of Appeals are contrary to those of the trial court. As will be discussed further, this exception is
attendant in the case at bar.

We now determine the principal issues put forward by petitioners.

First off, petitioners fault the Court of Appeals for admitting the Motion for Reconsideration of its
Decision dated February 14, 2001, which was filed by respondents To Chip, Yap and Balila more than six
months after receipt of the said decision. The motion was eventually granted and the Court of Appeals
issued its assailed Amended Decision, ruling in favor of respondents.

Indeed, the appellate courts Decision dated February 14, 2001 would have ordinarily attained
finality for failure of respondents to seasonably file their Motion for Reconsideration thereon. However, we
agree with the Court of Appeals that the higher interest of substantial justice will be better served if
respondents procedural lapse will be excused.

Verily, we had occasion to apply this liberality in the application of procedural rules in Barnes v.
Padilla[59] where we aptly declared that

The failure of the petitioner to file his motion for reconsideration within the period fixed by
law renders the decision final and executory. Such failure carries with it the result that no
court can exercise appellate jurisdiction to review the case. Phrased elsewise, a final and

28 | P a g e
 executory judgment can no longer be attacked by any of the parties or be modified, directly
or indirectly, even by the highest court of the land.

However, this Court has relaxed this rule in order to serve substantial justice
considering (a) matters of life, liberty, honor or property, (b) the existence of special or
compelling circumstances, (c) the merits of the case, (d) a cause not entirely attributable to
the fault or negligence of the party favored by the suspension of the rules, (e) a lack of any
showing that the review sought is merely frivolous and dilatory, and (f) the other party will
not be unjustly prejudiced thereby.[60]

In this case, what are involved are the property rights of the parties given that, ultimately, the
fundamental issue to be determined is who among the petitioners and respondents To Chip, Yap and
Balila has the better right to purchase the subject properties. More importantly, the merits of the case
sufficiently called for the suspension of the rules in order to settle conclusively the rights and obligations of
the parties herein.

In essence, the questions that must be resolved are: 1) whether or not there was a contract of
lease between petitioners and DBP; 2) if in the affirmative, whether or not this contract contained a right of
first refusal in favor of petitioners; and 3) whether or not respondents To Chip, Yap and Balila are likewise
bound by such right of first refusal.

Petitioners contend that there was a contract of lease between them and DBP, considering that
they had been allowed to occupy the premises of the subject property from 1987 up to 1991 and DBP
received their rental payments corresponding to the said period. Petitioners claim that DBP were aware of
their lease on the subject property when the latter foreclosed the same and the acquisition of the subject
properties through foreclosure did not terminate the lease. Petitioners subscribe to the ruling of the RTC
that even if there was no written contract of lease, DBP chose to continue the existing contract of lease
between petitioners and Rudy Robles by accepting the requirements set down by DBP on the letter dated
June 18, 1987. Petitioners likewise posit that the contract of lease between them and Rudy Robles never
expired, inasmuch as the contract did not have a definite term and none of the parties thereto terminated
the same. In view of the continuation of the lease contract between petitioners and Rudy Robles,
petitioners submit that Article 1670 of the Civil Code on implied lease is not applicable on the instant case.

We are not persuaded.

In Uy v. Land Bank of the Philippines,[61] the Court held that [i]n respect of the lease on the
foreclosed property, the buyer at the foreclosure sale merely succeeds to the rights and obligations of the
pledgor-mortgagor subject to the provisions of Article 1676 of the Civil Code on its possible
termination. This article provides that [t]he purchaser of a piece of land which is under a lease that is not
recorded in the Registry of Property may terminate the lease, save when there is a stipulation to the
contrary in the contract of sale, or when the purchaser knows of the existence of the lease. In short, the
buyer at the foreclosure sale, as a rule, may terminate an unregistered lease except when it knows of the
existence of the lease.

In the instant case, the lease contract between petitioners and Rudy Robles was not
registered.[62] During trial, DBP denied having any knowledge of the said lease contract. [63] It asserted that
the lease was merely presumed in view of the existence of tenants in the subject
property.[64] Nevertheless, DBP recognized and acknowledged this lease contract in its letter dated June
18, 1987, which was addressed to Bonifacio Sia, then President of Cebu Bionic. DBP even required Sia to
pay the monthly rental for the month of June 1987, thereby exercising the right of the previous lessor,
Rudy Robles, to collect the rental payments from the lessee.In the same letter, DBP extended an offer to
Cebu Bionic to continue the lease on the subject property, outlining the provisions of the proposed
contract and specifically instructing the latter to come to the bank for the execution of the same. DBP

29 | P a g e
likewise gave Cebu Bionic a 30-day period within which to act on the said contract execution. Should
Cebu Bionic fail to do so, it would be deemed uninterested in continuing with the lease. In that eventuality,
the letter states that Cebu Bionic should vacate the premises within the said period.

Instead of acceding to the terms of the aforementioned letter, the counsel of Cebu Bionic sent a
counter-offer to DBP dated July 7, 1987, suggesting a different mode of payment for the rentals and
requesting for a 60-day period within which time the parties will execute a new contract of lease.

The parties, however, failed to execute a written contract of lease. Petitioners put the blame on
DBP, asserting that no contract was signed because DBP did not prepare it for them. DBP, on the other
hand, counters that it was petitioners who did not positively act on the conditions for the execution of the
lease contract. In view of the counter-offer of petitioners, DBP and respondents To Chip, Yap and Balila
argue that there was no meeting of minds between DBP and petitioners, which would have given rise to a
new contract of lease.

The Court rules that, indeed, no new contract of lease was ever perfected between petitioners and
DBP.

In Metropolitan Manila Development Authority v. JANCOM Environmental Corporation,[65] we

emphasized that:

Under Article 1305 of the Civil Code, [a] contract is a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or to
render some service. A contract undergoes three distinct stages preparation or negotiation,
its perfection, and finally, its consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the contract and ends at the
moment of agreement of the parties. The perfection or birth of the contract takes place
when the parties agree upon the essential elements of the contract. The last stage is the
consummation of the contract wherein the parties fulfill or perform the terms agreed upon in
the contract, culminating in the extinguishment thereof (Bugatti vs. CA, 343 SCRA 335
[2000]). Article 1315 of the Civil Code, provides that a contract is perfected by mere
consent. Consent, on the other hand, is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract (See Article
1319, Civil Code). x x x.[66]

In the case at bar, there was no concurrence of offer and acceptance vis--vis the terms of the
proposed lease agreement. In fact, after the reply of petitioners counsel dated July 7, 1987, there was no
indication that the parties undertook any other action to pursue the execution of the intended lease
contract. Petitioners even admitted that they merely waited for DBP to present the contract to them,
despite being instructed to come to the bank for the execution of the same.[67]

Contrary to the ruling of the RTC, the Court is also not convinced that DBP opted to continue the
existing lease contract between petitioners and Rudy Robles.

The findings of the RTC that DBP supposedly accepted the requirements the latter set forth in its
letter dated June 18, 1987 is not well taken. To recapitulate, the third paragraph of the letter reads:

If you wish to continue on leasing the property, we request you to come to the Bank
for the execution of a Contract of Lease, the salient conditions of which are as
follows:

1. The lease will be on month to month basis, for a maximum period of one (1) year;

30 | P a g e
 2. Deposit equivalent to two (2) months rental and advance of one (1) month rental,
and the remaining amount for one year period (equivalent to 9 months rental)
shall be secured by either surety bond, cash bond or assigned time deposit;

3. That in case there is a better offer or if the property will be subject of a

purchase offer, within the term, the lessor is given an option of first refusal,
otherwise he has to vacate the premises within thirty (30) days from date of
notice.[68]

The so-called requirements enumerated in the above paragraph are not really requirements to be
complied with by the petitioners for the execution of the proposed lease contract, as apparently
considered by the RTC and the petitioners. A close reading of the letter reveals that the items enumerated
therein were in fact the salient terms and conditions of the proposed contract of lease, which the DBP and
the petitioners were to execute if the latter were so willing. Also, the Certificate of Time Deposit in the
amount of P11,395.64, which was allegedly paid to DBP as advance rental deposit pursuant to the said
requirements, was not even clearly established as such since it was neither secured by a security bond or
a cash bond, nor was it assigned to DBP.

The contention that the lease contract between petitioners and Rudy Robles did not expire, given
that it did not have a definite term and the parties thereto failed to terminate the same, deserves scant
consideration. To recall, the second paragraph of the terms and conditions of the contract of lease
between petitioners and Rudy Robles reads:

2. That the term of this agreement shall start on November 1, 1981 and shall terminate on
the last day of every month thereafter; provided however that this contract shall be
automatically renewed on a month to month basis if no notice, in writing, is sent to
the other party to terminate this agreement after fifteen (15) days from receipt of said
notice.[69] (Emphases ours.)

Crystal clear from the above provision is that the lease is on a month-to-month basis. Relevantly,
the well-entrenched principle is that a lease from month-to-month is with a definite period and expires at
the end of each month upon the demand to vacate by the lessor. [70] As held by the Court of Appeals in the
assailed Amended Decision, the above-mentioned lease contract was duly terminated by DBP by virtue of
its letter dated June 18, 1987. We reiterate that the letter explicitly directed the petitioners to come to the
office of the DBP if they wished to enter into a new lease agreement with the said bank. Otherwise, if no
contract of lease was executed within 30 days from the date of the letter, petitioners were to be
considered uninterested in entering into a new contract and were thereby ordered to vacate the
property. As no new contract was in fact executed between petitioners and DBP within the 30-day period,
the directive to vacate, thus, took effect. DBPs letter dated June 18, 1987, therefore, constituted the
written notice that was required to terminate the lease agreement between petitioners and Rudy
Robles. From then on, the petitioners continued possession of the subject property could be deemed to
be without the consent of DBP.

Thusly, petitioners assertion that Article 1670 of the Civil Code is not applicable to the instant case
is correct. The reason, however, is not that the existing contract was continued by DBP, but because the
lease was terminated by DBP, which termination was accompanied by a demand to petitioners to vacate
the premises of the subject property.

Article 1670 states that [i]f at the end of the contract the lessee should continue enjoying the thing
leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by either
party has previously been given, it is understood that there is an implied new lease, not for the period of
the original contract, but for the time established in Articles 1682 and 1687. The other terms of the original

31 | P a g e
contract shall be revived. In view of the order to vacate embodied in the letter of DBP dated June 18, 1987
in the event that no new lease contract is entered into, the petitioners continued possession of the subject
properties was without the acquiescence of DBP, thereby negating the constitution of an implied lease.

Contrary to the ruling of the RTC, DBPs acceptance of petitioners rental payments of P5,000.00 for
the period of November 1990 to March 1991 did not likewise give rise to an implied lease between
petitioners and DBP. In Tagbilaran Integrated Settlers Association (TISA) Incorporated v. Court of
Appeals,[71] we held that the subsequent acceptance by the lessor of rental payments does not, absent
any circumstance that may dictate a contrary conclusion, legitimize the unlawful character of their
possession. In the present case, the petitioners rental payments to DBP were made in lump sum on
March 22, 1991. Significantly, said payments were remitted only after petitioners were notified of the sale
of the subject properties to respondents To Chip, Yap and Balila and after the petitioners were given a
final demand to vacate the properties. These facts substantially weaken, if not controvert, the finding of
the RTC and the argument of petitioners that the latter were faithfully remitting their rental payments to
DBP until the year 1991.

Thus, having determined that the petitioners and DBP neither executed a new lease agreement,
nor entered into an implied lease contract, it follows that petitioners claim of entitlement to a right of first
refusal has no leg to stand on. Furthermore, even if we were to grant, for the sake of argument, that an
implied lease was constituted between petitioners and the DBP, the right of first refusal that was
contained in the prior lease contract with Rudy Robles was not renewed therewith. This is in accordance
with the ruling in Dizon v. Magsaysay,[72] which involved the issue of whether a provision regarding a
preferential right to purchase is revived in an implied lease under Article 1670, to wit:

[T]he other terms of the original contract which are revived in the implied new lease under
Article 1670 are only those terms which are germane to the lessees right of continued
enjoyment of the property leased. This is a reasonable construction of the provision, which
is based on the presumption that when the lessor allows the lessee to continue enjoying
possession of the property for fifteen days after the expiration of the contract he is willing
that such enjoyment shall be for the entire period corresponding to the rent which is
customarily paid in this case up to the end of the month because the rent was paid
monthly. Necessarily, if the presumed will of the parties refers to the enjoyment of
possession the presumption covers the other terms of the contract related to such
possession, such as the amount of rental, the date when it must be paid, the care of the
property, the responsibility for repairs, etc. But no such presumption may be indulged in with
respect to special agreements which by nature are foreign to the right of occupancy or
enjoyment inherent in a contract of lease.[73]
DBP cannot, therefore, be accused of violating the rights of petitioners when it offered the subject
properties for sale, and eventually sold the same to respondents To Chip, Yap and Balila, without first
notifying petitioners. Neither were the said respondents bound by any right of first refusal in favor of
petitioners. Consequently, the sale of the subject properties to respondents was valid. Petitioners claim for
rescission was properly dismissed.

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court
is DENIED. The Resolution dated February 5, 2002 and the Amended Decision dated July 5, 2002 of the
Court of Appeals in CA-G.R. CV No. 57216 are herebyAFFIRMED. No costs.
SO ORDERED.
[27] On April 2, 1991, respondents To Chip, Yap and Balila filed an action for ejectment against Cebu
Bionic, which was docketed as Civil Case No. 616 before the Municipal Trial Court (MTC) of
Talisay, Cebu, Branch 001. On April 13, 1993, the MTC ruled in favor of respondents, ordering
Cebu Bionic to vacate the premises of the commercial space they were leasing in the subject
properties and to pay respondents the fair rental value for the use of the property until such time
that Cebu Bionic shall have vacated. (CA rollo, pp. 69-73.)On appeal by Cebu Bionic, the RTC

32 | P a g e
 affirmed the decision of the MTC in a Decision dated October 25, 1993. (CA rollo, pp. 74-78.) Cebu
Bionic, thereafter, filed a petition for review before the Court of Appeals. On March 9, 1994, the
Court of Appeals resolved to deny the petition as the same was filed out of time. (CA rollo, pp. 79-
80.)
[30] In the original complaint filed, only petitioners Cebu Bionic and Lydia Sia were named as

plaintiffs. During trial, the complaint was amended to include Bonifacio Sia as one of the plaintiffs.
(TSN, May 16, 1991, p. 2.)
Respondents filed a Motion for Reconsideration of the RTC Order dated July 31, 1991 (Records, pp. 166-
174), but the same was denied. Respondents filed a petition, elevating the matter to the Court of
Appeals, which was docketed as CA-G.R. SP No. 26349. In a Resolution dated December 10,
1992, the Court of Appeals affirmed the order of the RTC, granting the issuance of a writ of
preliminary injunction. (Records, pp. 224-232.)
[57] Velayo-Fong v. Velayo, G.R. No. 155488, December 6, 2006, 510 SCRA 320, 329-330.
[58] The well-established exceptions are: (a) when the conclusion is a finding grounded entirely on

speculation, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd
or impossible; (c) where there is a grave abuse of discretion; (d) when the judgment is based on a
misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the Court of
Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (g) when the findings of the Court of Appeals are
contrary to those of the trial court; (h) when the findings of fact are conclusions without citation of
specific evidence on which they are based; (i) when the facts set forth in the petition as well as in
the petitioners' main and reply briefs are nor disputed by the respondents; and (j) when the finding
of fact of the Court of Appeals is premised on the supposed absence of evidence and is
contradicted by the evidence on record. (Geronimo v. Court of Appeals, G.R. No. 105540, July 5,
1993, 224 SCRA 494, 498-499.)

DEVELOPMENT BANK OF THEPHILIPPINES, G.R. No. 163827

Petitioner,
Present:
CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
- versus - VILLARAMA, JR., and
SERENO,* JJ.

HON. SILVERIO Q. CASTILLO and Promulgated:

CRISTINA TRINIDADZARATE ROMERO,
Respondents. August 17, 2011

x--------------------------------------------------x
RESOLUTION
VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, seeking to set aside the July 21, 2003 Decision[1] of the Court of Appeals (CA) in CA-G.R.
SP No. 53825 dismissing petitioners petition for certiorari.

The antecedents follow:

33 | P a g e
 Corazon Zarate Romero and his brother Gonzalo Zarate co-owned a property covered by Transfer
Certificate of Title (TCT) No. 10070[2] of the Register of Deeds of Dagupan City. The subject property,
located in Dagupan City, Province of Pangasinan, is a 1,705-square-meter lot with a four-storey hotel
erected thereon.

It appears that sometime in 1975, Corazon and Gonzalo obtained a loan from petitioner
Development Bank of the Philippines (DBP). As collateral, they executed a real estate mortgage[3] over
the subject property in favor of DBP. On the alleged failure of the two borrowers to pay their amortizations,
DBP foreclosed the real estate mortgage on September 15, 1983. Purportedly, no redemption was made
within one year, and thus, DBP consolidated ownership over the subject property.

In March 1993, when Corazon passed away, her sole heir, her daughter respondent Cristina
Trinidad Zarate Romero, asserted ownership over the subject property to the extent of one-half
thereof. However, respondent discovered that the property was already registered as early as June 13,
1989 in the name of DBP under TCT No. 54142,[4] with TCT No 10070 in the names of her mother and
uncle already cancelled.

Respondent filed before the Regional Trial Court (RTC) of Dagupan City a complaint[5] for
reconveyance, quieting of title and damages with prayer for a temporary restraining order (TRO) and writ
of preliminary injunction to prevent DBP from conducting any auction sale on the subject property during
the pendency of the case. Respondent claimed that her uncle and DBP conspired in committing
fraudulent acts relative to their true transaction and concealed the same from her mother, thereby
depriving her of her right of redemption.

The RTC, after hearing, issued on November 24, 1998, a TRO[6] restraining DBP from proceeding
with its scheduled auction of the disputed property on November 25, 1998. The dispositive portion of the
trial courts order reads:

It appearing that plaintiff Cristina Trinidad Romero y Zarate is the sole heir of the late
Maria Corazon Zarate Romero[,] co-owner of the pro[-]indiviso of the property covered by
TCT No. 10070 which at present is carried in TCT No. 54142 in the name of DBP[,] and to
avoid irreparable damage that may arise [from] the auction sale (public bidding) scheduled
on November 25, 1998[,] this Court hereby issues a Temporary Restraining Order (TRO)
AGAINST DEFENDANT Development Bank of the Philippines, Makati, Metro Manila from
proceeding [with] the scheduled auction sale (public bidding) on November 25, 1998 at
defendants head office at SAM BCG for a period of twenty (20) days from receipt of this
order.

SO ORDERED.[7]

DBP moved to lift the TRO arguing that it violates Section 2[8] of Presidential Decree (P.D.) No.
385[9] which prohibits the issuance of a restraining order, temporary or permanent, against government
financing institutions like DBP to enjoin any action taken pursuant to the mandatory foreclosure clause of
the decree.[10]

On December 14, 1998, the RTC denied DBPs motion to lift the TRO and granted respondents
plea for an injunctive writ.[11]The pertinent portions of the trial courts order reads:

To the honest evaluation of this Court what is unrestrainable is the right of

government financial institutions to foreclose mandatorily all loans with arrearages including
interest and charges amounting to at least twenty (20%) percent of the total outstanding
obligation.

34 | P a g e
 xxxx

To allay the fears of the plaintiff and to avoid any irreparable damage that may arise
while the issues involved in the above case are still being resolved and determined by the
Court in the light of the evidence so f[a]r presented, [considering that] there is a tendency on
the part of the Development Bank of the Philippines of continuing the acts complained of
(auction sale/Public bidding) and considering further [that] there [should] be no advantage
given to one [party] to the prejudice of the other while this case is still pending in Court, it is
hereby ordered that a WRIT of Preliminary Injunction be issued against defendant
Development Bank of the Philippines from conducting any auction sale of the property
involved in the above case (formerly covered by TCT No. 10070 and at [present] covered by
TCT No. 54142), upon posting of a BOND by the plaintiff in the amount of P3 Million within
five (5) days from receipt of this Order.[12]

On even date, DBP moved to reconsider[13] the December 14, 1998 Order and at the same time
sought the dismissal of respondents complaint on the sole ground that the same states no cause of
action.[14]

On December 23, 1998, the writ of preliminary injunction[15] was issued in favor of respondent.

On March 8, 1999, the RTC denied DBPs motion for reconsideration of the denial of its motion for
the lifting of the TRO.The RTC likewise denied in the same order DBPs motion to dismiss the
complaint,[16] and ordered DBP to file an answer.

On March 23, 1999, DBP moved to reconsider the March 8, 1999 denial of its motion to
dismiss.[17] But even before the RTC could resolve said motion, DBP filed its Answer[18] on April 5, 1999. A
manifestation[19] was later filed by DBP indicating that the answer it filed was a mere cautionary measure
or what is known as an answer ad cautelam and thus without prejudice to any right of action it may take
and without any waiver of any of the grounds for the dismissal of the complaint and any favorable
resolution or order that a superior court may issue hereinafter.

On April 20, 1999, the RTC issued an order[20] denying DBPs motion for reconsideration of
its March 8, 1999 Order. The RTC in the same order emphasized that DBP already filed an answer
thereby rendering the motion to dismiss moot and academic.

On June 23, 1999, DBP filed a petition for certiorari[21] before the CA assailing the following
issuances of the RTC:

(1) TRO dated November 24, 1998 (received by DBP on November 24, 1998) issued
against DBP enjoining it from proceeding with the scheduled auction sale of the disputed
property;

(2) Order dated December 14, 1998 (received by DBP on December 16, 1998) denying its
motion to lift the TRO and granting the respondents prayer for a writ of preliminary
injunction;

(3) Order dated March 8, 1999 (received by DBP on March 18, 1999) denying DBPs motion
to dismiss and motion for reconsideration of the December 14, 1998 Order; and

(4) Order dated April 20, 1999 (received by DBP on April 23, 1999) denying DBPs motion
for reconsideration of the March 8, 1999 order.

35 | P a g e
 In its assailed decision, the CA dismissed the petition on procedural grounds. It held that the
petition questioning the first three orders was filed late as the petition should have been filed within 60
days from receipt of the assailed orders. The CA noted that as regards the third order, DBP was notified
of the denial of its motion for reconsideration of the December 14, 1998 Order on March 18, 1999 and
thus only had until May 17, 1999 to question the same. The CA further stated that DBPs subsequent filing
of its Answer to the complaint rendered its motion to dismiss moot and academic.

Hence, the present appeal.

DBP raises the following issues for this Courts consideration:

I. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ORDER

OF THE COURT A QUO DENYING DBPS MOTION TO DISMISS.

II. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE

ORDER OF THE COURT A QUO ISSUING THE TEMPORARY RESTRAINING
ORDER AND THE PRELIMINARY INJUNCTION AGAINST PETITIONER DBP.

III. WHETHER THE RULES OF PROCEDURE [SHOULD NOT] BE APPLIED IN A VERY

RIGID AND TECHNICAL SENSE SO AS NOT TO FRUSTRATE THE PROMOTION
OF SUBSTANTIAL JUSTICE.[22]

DBP insists that it is evident from the face of the complaint that respondent failed to state a cause
of action. DBP contends that respondents allegation of conspiracy between DBP and Gonzalo is bare and
has no factual basis to stand on. Further, DBP claims that respondent has no legal right over the subject
property as she did not inherit the same in the first place. At the time of death of respondents mother, the
property was not anymore owned by the latter and therefore not part of her estate. Thus, respondent has
no legal right over the property and has no cause of action against DBP. And because she had no right to
the property, the issuance of the TRO and injunctive writ were likewise improper. DBP also points to the
following provisions of P.D. No. 385 that were allegedly violated with the issuance of the TRO and
injunctive writ:

SECTION 1. It shall be mandatory for government financial institutions, after the

lapse of sixty (60) days from the issuance of this Decree, to foreclose the collaterals and/or
securities for any loan, credit, accommodation, and/or guarantees granted by them
whenever the arrearages on such account, including accrued interest and other charges,
amount to at least twenty percent (20%) of the total outstanding obligations, including
interest and other charges, as appearing in the books of account and/or related records of
the financial institution concerned. This shall be without prejudice to the exercise by the
government financial institutions of such rights and/or remedies available to them under
their respective contracts with their debtors, including the right to foreclose on loans, credits,
accommodations and/or guarantees on which the arrearages are less than twenty percent
(20%).

SEC. 2. No restraining order, temporary or permanent injunction shall be issued by

the court against any government financial institution in any action taken by such institution
in compliance with the mandatory foreclosure provided in Section 1 hereof, whether such
restraining order, temporary or permanent injunction is sought by the borrower(s) or any
third party or parties, except after due hearing in which it is established by the borrower and
admitted by the government financial institution concerned that twenty percent (20%) of the
outstanding arrearages has been paid after the filing of foreclosure proceedings.

xxxx

36 | P a g e
 Respondent, for her part, counters that the CA was correct in dismissing the petition for certiorari
for having been filed beyond the sixty (60)-day reglementary period. Also, respondent contends that the
provisions of P.D. No. 385 relating to the proscription against the issuance of injunctive writs enjoining
foreclosure sales are not applicable in the instant case. She points out that what the RTC enjoined is not
an auction sale arising from the foreclosure of mortgage as the subject property had long been foreclosed
and title thereto consolidated in the name of DBP. Rather, what the RTC enjoined was DBPs sale of the
subject property through ordinary public bidding which is not within the ambit of P.D. No. 385.

The petition should be denied.

As correctly ruled by the CA, the petition for certiorari assailing the orders pertaining to the grant of
the TRO and the writ of injunction were filed out of time. Notice of the issuance of the TRO was received
by DBP on the same day it was granted, November 24, 1998; thus, the petition for certiorari should have
been filed not later than January 23, 1999. The denial of the motion for reconsideration of the order
granting the writ of injunction, on the other hand, was received by DBP on March 18, 1999 and thus, it had
only until May 17, 1999 to file the petition for certiorari. DBP, however, filed its petition only on June 23,
1999.

As to DBPs motion to dismiss the complaint, we agree with the RTC and CA that the same should
be denied, but not for the reason cited by said courts that it has been rendered moot and academic by
DBPs filing of its answer but because the same lacks merit. Contrary to DBPs submission, a perusal of
the allegations of the complaint clearly reveals respondents cause of action against DBP. The complaint
states,

xxxx

1.1 Plaintiff is the sole heir and successor-in-interest of the late Ma.
Corazon Zarate-Romero, who died intestate on 6 March 1993.

xxxx

3. During her lifetime, plaintiffs predecessor-in-interest was the erstwhile owner pro-
indiviso of that parcel of land, together with improvements, located in Dagupan City, which
property used to be covered by Transfer Certificate of Title (TCT) No. 10070 of the Registry
of Deeds of Dagupan City.

4. In or about the year 1975, defendant Zarate, who was co-owner of the subject
property, secured various personal loan obligations from the defendant DBP in the
aggregate amount of P2,000,000.00.

4.1 To secure such putative loan obligations of the defendant Zarate,

the latter, who wielded moral ascendancy over his younger sister and herein
plaintiffs predecessor-in-interest -- Ma. Corazon Zarate-Romero, cajoled and
prevailed upon the latter to mortgage the entirety of the subject property in
favor of defendant DBP, including her one-half (1/2) pro-indiviso share in the
same.

4.2 Accordingly, defendant Zarate assured the plaintiffs predecessor-

in-interest that the mortgage would be for a brief period only and that he
(defendant Zarate) would forthwith pay and settle in full all his personal loan
obligations with the defendant DBP to ensure that said mortgage is cancelled
in the soonest time possible.

37 | P a g e
 5. At some point in time during the effectivity of the mortgage, however, defendant
Zarate apparently saw an opportunity to claim the entirety of the subject property for
himself, to the exclusion of plaintiffs predecessor-in-interest.

5.1 Emboldened by, and taking advantage of, the complete trust and
confidence reposed upon him by the plaintiffs predecessor-in-interest anent
the subject property, defendant Zarate conspired with the defendant DBP for
the ostensible foreclosure of the subject property, with the end in view,
however, of subsequently reacquiring the same for himself as sole owner.

6. Pursuant to such sinister plot hatched by defendants, defendant DBP foreclosed

the subject property in September of 1983 and, thereafter, bought the same for itself in the
sum of P2,253,101.00 during the auction sale conducted by the Deputy Sheriff of
Pangasinan.

7. Significantly enough, and even before the lapse of the mortgagors right of
redemption over the subject property, the herein defendants entered into a Deed of
Conditional Sale over the same, with the defendant DBP as seller, and the defendant
Zarate as buyer.

7.1 Needless to state, all the aforedescribed dealings, transactions

and proceedings concerning the subject property -- from its fraudulent
foreclosure up to the highly anomalous execution of the Deed of Conditional
Sale over the same -- were concealed from plaintiffs predecessor-in-interest
and even from the plaintiff herself after the death of her mother.

x x x x[23]

A cause of action is the act or omission by which a party violates a right of another. [24] A complaint
states a cause of action when it contains three essential elements: (1) a right in favor of the plaintiff by
whatever means and whatever law it arises; (2) the correlative obligation of the defendant to respect such
right; and (3) the act or omission of the defendant violates the right of the plaintiff. If any of these elements
is absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a
cause of action.[25]

Evidently, all the above elements of a cause of action are alleged in the complaint: (1) the legal
right of the respondent over the subject property foreclosed premised on the fact that she is the sole heir
of one of the owners who is entitled to the right of redemption; (2) the correlative obligation of defendant
DBP, as the foreclosing entity, to respect such right of redemption; and (3) the act or omission of the
defendant in violation of the legal right, i.e., the act of DBP and its co-defendant Zarate to cause the
ostensible foreclosure of the subject property and the subsequent execution of a deed of conditional sale
between the defendants even prior to the lapse of redemption period to deprive respondents mother of
her right over the property.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated July 21, 2003 of the
Court of Appeals in CA-G.R. SP No. 53825 is AFFIRMED.

No costs.

SO ORDERED.
[8] SEC. 2. No restraining order, temporary or permanent injunction shall be issued by the court against
any government financial institution in any action taken by such institution in compliance with the

38 | P a g e
 mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or
permanent injunction is sought by the borrower(s) or any third party or parties, except after due
hearing in which it is established by the borrower and admitted by the government financial institution
concerned that twenty percent (20%) of the outstanding arrearages has been paid after the filing of
foreclosure proceedings.
In case a restraining order or injunction is issued, the borrower shall nevertheless be legally obligated to
liquidate the remaining balance of the arrearages, paying ten percent (10%) of the arrearages
outstanding as of the time of foreclosure, plus interest and other charges, on every succeeding thirtieth
(30th) day after the issuance of such restraining order or injunction until the entire arrearages have
been liquidated. These shall be in addition to the payment of amortizations currently maturing. The
restraining order or injunction shall automatically be dissolved should the borrower fail to make any of
the above-mentioned payments on due dates, and no restraining order or injunction shall be issued
thereafter. This shall be without prejudice to the exercise by the government financial institutions of
such rights and/or remedies available to them under their respective charters and their respective
contracts with their debtors, nor should this provision be construed as restricting the government
financial institutions concerned from approving, solely at its own discretion, any restructuring,
recapitalization, or any other arrangement that would place the entire account on a current basis,
provided, however, that at least twenty percent (20%) of the arrearages outstanding at the time of the
foreclosure is paid.
All restraining orders and injunctions existing as of the date of this Decree on foreclosure proceedings
filed by said government financial institutions shall be considered lifted unless finally resolved by the
court within sixty (60) days from date hereof.

PHILIPPINE DAILY INQUIRER, ISAGANI G.R. No. 160604

YAMBOT, LETTY JIMENEZ-MAGSANOC,
PERGENITO B. BANDAYREL, JR.,
GOBLETH C. MOULIC, ESTANISLAO Present:
CALDEZ, and ZENAIDA CALDEZ, PUNO, C.J., Chairperson,
Petitioners, CARPIO,
CORONA,
AZCUNA, and
HON. ELMO M. ALAMEDA, in his capacity LEONARDO-DE CASTRO, JJ.
as the Presiding Judge of the REGIONAL
TRIAL COURT OF TUGUEGARAO CITY, Promulgated:
CAGAYAN, BRANCH 5, and LUZ CORTEZ
BABARAN, March 28, 2008
Respondents.

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

DECISION
AZCUNA, J.:

Before us is a petition for review on certiorari seeking the review, setting aside, and annulment of
the Resolution[1] of the Court of Appeals (CA) in CA-G.R. SP No. 79702 dated October 22,
2003 dismissing the petition for certiorari and prohibition filed by petitioners.

The antecedents are as follows:

The Philippine Daily Inquirer (PDI), in its August 1, 2000 issue, published an article with the
heading After Bong, whos next?[2] The article narrates the death of Expedito Bong Caldez, a photo
correspondent of the PDI in Cagayan. In said article, the family of the deceased correspondent laments
the death of their loved one due to the alleged erroneous diagnosis of Dr. Luz Babaran. [3]

39 | P a g e
 Later, in its September 29, 2000 issue, the PDI published another article with the heading DOH
orders probe of fotogs death.[4] In said article, it was reported that the regional Department of Health
(DOH) in Tuguegarao City has started investigating the death of Expedito Caldez following an order from
the DOHs Bureau of Licensing and Regulation.

On July 25, 2001, based on the two PDI column articles, Dr. Babaran filed a complaint for
Damages,[5] Civil Case No. 5850, against herein petitioners. In said complaint Dr. Babaran alleged,
among other things, that: after learning about the article published in the August 1, 2000 issue of the PDI,
she wrote a letter to the editor of the PDI but she never received any response from the latter; to
aggravate the matter, another article appeared in the September 29, 2000 issue of the PDI and she was
again singled out as having erroneously diagnosed the illness of Expedito Caldez; the Report[6] of the
DOH Fact-Finding Committee concluding that her diagnosis cannot be considered erroneous, was
suppressed and was never published by the PDI; the articles portrayed her as incompetent and one
whose alleged erroneous diagnosis caused the death of Expedito Caldez; and, in causing the articles to
be published, petitioners acted in bad faith.

On September 13, 2001, petitioners filed their Answer[7] with counterclaims. In said answer,
petitioners raised, among others, the following defenses: that the complaint states no cause of action
against them; that the complaint fails and omits to state the factual premises to support a conclusion that
there was malice on the part of the PDI in publishing the questioned news report; that private respondent
failed to allege actual malice on the part of the petitioners; that a case for actionable libel with claims for
damages has not been adequately stated in the complaint; and, that the complaint fails to establish the
basis of petitioners liability.[8]

Pre-trial was held and terminated, and petitioners thereafter filed a Motion for a Preliminary
Hearing on Affirmative Defense Raised in the Answer (which is also a ground for a motion to dismiss). [9] In
said motion, it was alleged that at the pre-trial onFebruary 19, 2003, the court noted that one of the
defenses raised by petitioners was that private respondent has not delineated the participation of each of
petitioners in the publication of the alleged libelous articles.[10] Thereupon, private respondents counsel
asked for a few days to determine whether the complaint should be amended to cure its
defects. However, private respondent had not moved to amend the complaint, hence, petitioners filed the
motion.[11]

In support thereof, petitioners contend that: in libel charges, the participation of each defendant
must be specifically alleged in the complaint, which private respondent failed to do; and the allegations of
the complaint are mere conclusions of law and opinions of the private respondent.[12] Petitioners ultimately
prayed that a preliminary hearing be conducted on their affirmative defense that the complaint failed to
state a cause of action; and that, thereafter, the complaint be dismissed. [13]

Subsequently, private respondent filed a Comment/Opposition to the Motion to Dismiss Based on

Affirmative Defense.[14] In said comment/opposition, private respondent averred that at the February 19,
2003 pre-trial, the issue of whether or not the complaint states a cause of action was not raised. As such,
it is no longer an issue to be litigated in the case. Private respondent prayed that the court deny
petitioners motion to dismiss.

On May 30, 2003, the Regional Trial Court (RTC) issued an Order[15] denying petitioners motion in
this wise:

With this finding and conclusion, the Court finds no further necessity in dwelling at
length on the other issues raised by the defendants.Consequently, the motion for a
Preliminary Hearing on Affirmative Defense Raised in the Answer (which is also a ground
for a motion to dismiss) is hereby DENIED. The initial presentation of plaintiffs evidence is
set on July 3, 2003, at 8:30 oclock in the morning.

40 | P a g e
 SO ORDERED.[16]

The RTC opined that private respondents allegations in her complaint, as well as her documentary
evidence, show that there is sufficient cause of action. It added that the documentary evidence discloses
facts which are sufficient to enable the court to go beyond the disclosures in the complaint. Considering
that the facts alleged in the complaint which make out the principal cause of action and relief are
sufficient, the case should not be dismissed.[17]

Petitioners filed a Motion for Reconsideration[18] but it was denied in the Order[19] dated July 29, 2003.

Aggrieved, petitioners filed a Petition for Certiorari and Prohibition (with Prayer for the Issuance of
Temporary Restraining Order and/or Preliminary Injunction)[20] with the CA, relying on the ground that:

THE RESPONDENT TRIAL JUDGE GRAVELY ABUSED HIS DISCRETION AND

EXCEEDED HIS JURISDICTION IN NOT DISMISSING THE COMPLAINT DESPITE ITS
FAILURE TO VALIDLY AND SUFFICIENTLY STATE A CAUSE OF ACTION FOR LIBEL
AGAINST THE PETITIONERS BECAUSE:

A) THE PARTICIPATION OF EACH DEFENDANT (PETITIONER) IN THE

WRITING, EDITING, PRINTING, AND PUBLICATION OF THE NEWS ARTICLES IN
QUESTION IS NOT SPECIFICALLY SET OUT IN THE COMPLAINT;

B) THE MATERIAL ALLEGATIONS OF THE COMPLAINT ARE PURELY LEGAL

CONCLUSIONS AND OPINIONS OF PRIVATE RESPONDENT, AND NOT
STATEMENTS OF ULTIMATE FACTS.[21]

Petitioners prayed among others: that the Orders of the RTC dated May 30, 2003 and July 29,
2003 be annulled and set aside for having been rendered with grave abuse of discretion and/or excess of
jurisdiction; and that Civil Case No. 5850 be dismissed for failure to state a cause of action. [22]

On October 22, 2003, the CA issued a Resolution[23] dismissing the petition for being insufficient in form
and substance and for presenting no justiciable issue needing serious consideration by the court. Also,
the CA noted that the Order dated May 30, 2003shows that the RTC had already ruled against petitioners
affirmative defense that the complaint states no cause of action.

Hence, this petition, raising the following issues:

WHETHER OR NOT A COMPLAINT WHICH FAILS TO VALIDLY AND

SUFFICIENTLY STATE A CAUSE OF ACTION FOR LIBEL BECAUSE:

A) THE PARTICIPATION OF EACH DEFENDANT (PETITIONER) IN THE

WRITING, EDITING, PRINTING, AND PUBLICATION OF THE NEWS ARTICLES IN
QUESTION IS NOT SPECIFICALLY SET OUT IN THE COMPLAINT;

B) THE MATERIAL ALLEGATIONS OF THE COMPLAINT ARE PURELY LEGAL

CONCLUSIONS AND OPINIONS OF PRIVATE RESPONDENT, AND NOT
STATEMENTS OF ULTIMATE FACTS; AND

C) THE COMPLAINT IS VIOLATIVE OF PETITIONERS CONSTITUTIONAL

RIGHTS TO FREE PRESS AND TO FREE SPEECH.

SHOULD BE DISMISSED UPON MOTION BY THE DEFENDANTS (PETITIONERS

HEREIN). [24]

41 | P a g e
 Petitioners argue that private respondents complaint failed to comply with the requirement in libel
cases that the participation of each defendant must be specifically alleged in the complaint. Petitioners
maintain that their divergent personal circumstances and different legal existence, not to mention the
absence of any professional relationship of two of petitioners with the rest of them, should have prompted
private respondent to specify the participation of each petitioner in the news gathering, reporting, editing,
publication, and circulation of the subject articles. As such it cannot be determined with certainty from the
allegations in the complaint whose acts and omissions are actually complained of. [25]

Also, petitioners added that the material allegations of the complaint are not statements of ultimate
facts but were mere conclusions of law and were merely private respondents opinions. [26]

Finally, petitioners contend that the complaint violates their constitutionally protected freedom of
speech and of the press.[27]

As defined in Section 2, Rule 2 of the Rules of Court, a cause of action is the act or omission by
which a party violates the right of another. In relation to a complaint, it is a formal statement of the
operative facts that give rise to a remedial right. The question of whether the complaint states a cause of
action is determined by its averments regarding the acts committed by the defendant.Thus, it must contain
a concise statement of the ultimate or essential facts constituting the plaintiff's cause of action. As such,
the failure to make a sufficient allegation of a cause of action in the complaint warrants its dismissal. [28] Its
essential elements are as follows:

1. A right in favor of the plaintiff by whatever means and under whatever law it arises or is created;

2. An obligation on the part of the named defendant to respect or not to violate such right; and

3. Act or omission on the part of such defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the latter
may maintain an action for recovery of damages or other appropriate relief.

Of the three, the most important is the last element since it is only upon the occurrence of the last
element that a cause of action arises, giving the plaintiff the right to maintain an action in court for
recovery of damages or other appropriate relief.[29] In determining whether an initiatory pleading states a
cause of action, the test is as follows: admitting the truth of the facts alleged, can the court render a valid
judgment in accordance with the prayer? To be taken into account are only the material allegations in the
complaint; extraneous facts and circumstances or other matters aliunde are not considered. The court
may however consider, in addition to the complaint, the appended annexes or documents, other pleadings
of the plaintiff, or admissions in the records.[30]

When a defendant seeks the dismissal of the complaint through a motion to dismiss, the
sufficiency of the motion should be tested on the strength of the allegations of facts contained in the
complaint and on no other basis.[31] The issue of whether or not the complaint failed to state a cause of
action, warranting its dismissal, must be passed upon on the basis of the allegations stated therein
assuming them to be true and the court cannot inquire into the truth of the allegations and declare them to
be false; otherwise, it would be a procedural error and a denial of due process to the plaintiff. [32]

This Court finds that petitioners raised the threshold question of whether the complaint sufficiently
alleges a cause of action.

Hence, the trial court should have granted petitioners motion for a preliminary hearing on the
affirmative defenses raised in the answer based on failure to state a cause of action. This procedure is

42 | P a g e
designed to prevent a tedious, if not traumatic, trial in case the complaint falls short of sufficiently alleging
a cause of action.

WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals dated October
22, 2003 isREVERSED, and the case is REMANDED to the Regional Trial Court of Tuguegarao City,
Cagayan, Branch 5, for the trial court to hear and resolve petitioners Affirmative Defenses Raised in the
Answer.

No costs.

SO ORDERED.

G.R. No. 123555 January 22, 1999

PROGRESSIVE DEVELOPMENT CORPORATION, INC., petitioner,

vs.
COURT OF APPEALS and WESTIN SEAFOOD MARKET, INC. respondents.

BELLOSILLO, J.:

May the lessee which instituted before the Metropolitan Trial Court an action for forcible entry with
damages against its lessor file a separate suit with the Regional Trial Court against the same lessor for
moral and exemplary damages plus actual and compensatory damages based on the same forcible
entry?

On grounds of litis pendencia and forum-shopping petitioner invokes established jurisprudence that a
party cannot by varying the form of action or adopting a different method of presenting his case evade the
principle that the same cause of action shall not be litigated twice between the same parties or their
privies. 1 Petitioner therefore prays for reversal of the decision of the Court of Appeals dated 27 May 1995,
as well as its Resolution dated 17 January 1996 denying reconsideration, which upheld the denial by the
Regional Trial Court of petitioner's motion to dismiss private respondent's damage suit.

The antecedents: On 27 May 1991 petitioner leased to private, respondent Westin Seafood Market, Inc., a
parcel of land with a commercial building thereon located at Aranet Center, Cubao, Quezon City, for a
period of nine (9) years and three (3) months, i.e., from 2 January 1989 to 30 April 1998, with a monhtly
rental of approximately P600,000.00. The contract contained, among others, the following pertinent terms
and conditions:

EFFECT OF VIOLATIONS

25. LESSEE hereby agrees that all the provisions contained in this Contract shall be
deemed as conditions, as-well as covenants, and that this Contract shall be automatically
terminated and cancelled without resorting to court action should LESSEE violate any or all
said conditions, including the payment of Rent, CUSA and other charges indicated in the
FLP when due within the time herein stipulated and in any such cases, LESSEE hereby
irrevocably appoints LESSOR, its authorized agents, employees and/or representatives as
his duly authorized attorney-in-fact, even after the termination, expiration or cancellation of
this Contract, with full power and authority to open, enter, repossess, secure, enclose, fence
and otherwise take full and complete physical possession and control of the leased
premises and its contents without resorting to court action and/or to summarily disconnect

43 | P a g e
 electrical and/or water services thereof, and that LESSEE hereby irrevocably empowers
LESSOR, his authorized agents, employees and/or representatives to take inventory and
possession of whatever equipment, furniture, articles, merchandise, appliances, etc., found
therein belonging to LESSEE, consignors and/or to any other persons and to place the
same in LESSOR's warehouse or any other place at LESSOR's discretion for safekeeping;
charging LESSEE the corresponding storage fees therefor; that in case LESSEE fails to
claim-said equipment, furniture, articles, merchandise, appliances, etc. from storage and
simultaneously liquidate any liability with LESSOR within seven (7) days from date of said
transfer to LESSOR's warehouse, LESSOR is likewise hereby expressly authorized and
empowered by LESSEE to dispose of said property/properties in a public sale through a
Notary Public of LESSOR's choice and to apply the proceeds thereof to whatever liability
and/or indebtedness LESSEE may have to LESSOR plus reasonable expenses for the
same, including storage fees, and the balance, if any, shall be turned over to LESSEE; that
LESSEE hereby expressly agrees that any or all acts performed by LESSOR, his
authorized agents, employees and/or representatives under the provisions of this Section
may not be the subject of any petition for a Writ of Preliminary Injunction or Mandatory
Injunction in court, and that LESSOR and/or his authorized agents, employees, and/or
representatives shall be free from any civil and/or criminal liability or responsibility
whatsoever therefor.

TERMINATION OF LEASE

26. Upon-the automatic termination of this lease contract, as the case may be, LESSEE
shall immediately vacate and redeliver physical possession of the leased premises,
including the keys appertaining thereto, to LESSOR in good, clean and sanitary condition,
reasonable wear and tear excepted, devoid of all occupants,. equipment, furnitures articles,
merchandise, etc., belonging to LESSEE or to any other person except those belonging to
LESSOR; that should LESSEE fail to comply with this provision, LESSOR is hereby given
the same rights and power to proceed against LESSEE as expressly granted in the
immediately; preceding section.

Private respondent failed to pay rentals despite several demands by petitioner. As of 19 October 1992 the
arrearages amounted to P8,608,284.66. Admittedly, non-payment of rentals constituted breach of their
contract; thus, pursuant to the express authority granted petitioner under the above-quoted Secs. 25 and
26 of the lease agreement, petitioner on 31 October 1992 repossessed the leased premises, inventoried
the movable properties found within and owned by private respondent and scheduled public auction for
the sale of the movables on 19 August 1993 with notice to private respondent.

On 26 November 1992 private respondent filed with the Metropolitan Trial Court of Quezon City a
complaint against petitioner for forcible entry with damages and a prayer for a temporary restraining order
and/or writ of preliminary injunction. 2 The case was raffled to Branch 40 presided over by Judge
Guillermo L. Loja Jr. who issued a temporary restraining order enjoining petitioner from selling private
respondent's properties at a public auction.

On 9 December 1992 Judge Loja inhibited himself from trying the case and directed its transfer to Branch
34 presided over by Judge Joselito SD Generoso. Soon after, petitioner filed an urgent motion for the
inhibition of Judge Generoso and the immediate reraffle of the case arguing that the summary transfer of
the case to Judge Generoso was irregular as it was not done by raffle.

The motion was granted and the case went to Branch 36 presided over by Judge Francisco D. Villanueva.
Thereafter, on 22 December 1992, at the continuation of the hearing on the issuance of a writ preliminary
mandatory injunction, the parties agreed, among others, on the following: (a) private respondent would
deposit with the Philippine Commercial and Industrial Bank in the name of the Metropolitan Trial Court,
Branch 36, the amount of P8,000,000.00 to guarantee the payment of its back rentals; (b) petitioner would

44 | P a g e
defer the sale of the personal properties of the Westin Seafood Market, Inc., until a final settlement of the
case had been arrived, at; (c) petitioner shall allow private respondent to retrieve all the perishable goods
from inside the leased premises like frozen meat, vegetables and fish, all properly receipted for; (d)
petitioner shall allow three (3) maintenance personnel of private respondent to enter the premises at
reasonable working hours to maintain the restaurant equipment; and (e) the parties shall negotiate for the
restoration of the premises to private respondent, and if no settlement be arrived at on or before January
8, 1993, the hearing on the merits of the case shall proceed and the disposition of the amount deposited
representing the rental arrearages shall be left to the. discretion of the court.

This agreement was incorporated in the order of the court dated 22 December 1992 3 which in effect
terminated for all intents and purposes the incident on the issuance of a preliminary writ of injunction.

Private respondent did not comply with its undertaking to deposit with the designated bank the amount
representing its back rentals. Instead, with the forcible entry case still pending with the MeTC, private
respondent instituted on 9 June 1993 another action for damages against petitioner with the Regional
Trial Court of Quezon City. The case was raffled to Branch 101 presided over by Judge Pedro T.
Santiago. 4

Petitioner filed a motion, to dismiss the damage suit on the ground of litis pendencia and forum
shopping. On 2 July 1993, instead of ruling on the motion, Judge Santiago issued an order archiving the
case pending the outcome of the forcible entry case being heard at the MeTC for the reason that "the
damages is (sic) principally anchored on whether or not the defendants (petitioner herein) have committed
forcible entry." 5 On 2 August 1993 petitioner moved for reconsideration of the order and reiterated its
motion to dismiss the suit for damages.

Before petitioner's motion to dismiss could be resolved, private respondent filed with the RTC on 18
August 1993 an amended complaint for damages. On 14 September 1993 it also filed an Urgent Ex-Parte
Motion for the Issuance of a Temporary Restraining Order and Motion for the Grant of a Preliminary
Prohibitory and Preliminary Mandatory Injunction. On the very same day, Judge Santiago issued an order
(a) denying petitioner's motion to dismiss, (b) admitting private respondent's amended complaint, and (c)
granting private respondent's application for a temporary restraining order against petitioner.

Thus, petitioner filed with the Court of Appeals a special civil action for certiorari and prohibition on the
ground that Judge Santjago acted in excess of his jurisdiction and/or committed grave abuse of discretion
amounting to lack of jurisdiction in admitting, the amended complaint of private respondent and issuing a
restraining order against petitioner; in allowing private respondent to engage in forum shopping; and,
taking cognizance of the action; for damages despite lack of jurisdiction. 6

But the Court of Appeals dismissed the petition due to the failure of petitioner to file a motion for
reconsideration of Judge Santiago's order of 14 September 1993 which, it explained, was a prerequisite to
the institution of a petition for certiorari and prohibition. It also found that the elements of litis
pendencia were lacking to justify the dismissal of the action for damages with the RTC because despite
the pendency of the forcible entry case with the MeTC the only damages recoverable thereat were those
caused by the loss of the use and occupation of the property and not the kind of damages being claimed
before the RTC which had no direct relation to loss of material possession. It clarified that since the
damages prayed for in the amended complaint with the RTC were those caused by the alleged high-
handed manner with which petitioner reacquired possession of the leased premises and the sale of
private respondent's movables found therein, the RTC and not the MeTC had jurisdiction over the action
of damages. 7

Petitioner, aggrieved by the decision of the appellate court, filed the instant petition for review
on certiorari under Rule 45 of the Rules of Court alleging that it erred in (a) finding that petitioner failed to
avail of its plain, speedy and adequate remedy of a prior motion for reconsideration with the RTC; (b)
ruling that, the trial judge did not act with grave abuse of discretion in taking cognizance of the action for
45 | P a g e
damages and injunction despite the pendency of the forcible entry case with the MeTC; and, (c) ruling that
private respondent did not commit forum shopping since the causes of action before the RTC and MeTC
were not identical with each other.

There is merit in the petition. While generally a motion for reconsideration must first be filed before
resorting tocertiorari in order to give the lower court an opportunity to correct the errors imputed to it 8 this
rule admits of exceptions and is not intended to be applied without considering the circumstances of the
case. 9 The filing of the motion for reconsideration before availing of the remedy of certiorari is not sine
qua non when the issue raised is one purely of law, 10 or where the error is patent or the disputed order is
void, 11 or the questions raised on certiorari are the same as those already squarely presented to and
passed upon by the lower court

In its motion for dismissal of the action for damages with the RTC petitioner raised the ground that another
action for forcible entry was pending at the MeTC between the same parties involving the same matter
and cause of action. Outrightly rejected by the RTC, the same issue was elevated by petitioner
on certiorari before the Court of Appeals. Clearly, under the prevailing circumstance, any motion for
reconsideration of the trial court would have been a pointless exercise. 12

We now turn to the issue of whether an action for damages filed with the Regional Trial Court by the
lessee against the lessor should be dismissed on the ground of pendency of another action for forcible
entry and damages earlier filed by the same lessee against the same lessor before the Metropolitan Trial
Court.

Sec. 1 of Rule 70 of the Rules of Court provides that any person deprived of the possession of any land or
building by force, indimidation, threat, strategy or stealth, or against whom thepossession of any land or
building is unlawfully withheld, may bring an action in the proper Municipal Trial Court against the person
or persons unlawfully withholding or depriving of possession, together with damages and costs. The
mandate under this rule is categorical: that all cases for forcible entry or unlawful detainer shall be filed
before the Municipal Trial Court which shall include not only the plea for restoration of possession but also
all claims for damages and costs arising therefrom. Otherwise expressed, no claim for damages arising
out of forcible entry or unlawful detainer may be filed separately and independently of the claim for
restoration of possession.

This is consistent with the principle laid down in Sec. 1, par. (e), of Rule 16 of the Rules of Court which
states that the pendency of another action between the same parties for the same cause is a ground for
dismissal of an action. Res adjudicata requires that there must be between the action sought to be
dismissed and the other action the following elements: (a) identity of parties or at least such as
representing the same interest in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and, (c) the identity in the two (2) preceding particulars should be
such that any judgment which may be rendered on the other action will, regardless of which party is
successful, amount to res adjudicata in the action under
consideration. 13

It is likewise basic under Sec. 3 of Rule 2 of the Revised Rules of Court, as amended, that a party may
not institute more than one suit for a single cause of action. Under Sec. 4 of the same Rule, if two or more
suits are instituted on the basis of the same cause of action, the filing of one or a judgment upon the
merits in any one is available as a ground for the dismissal of the other or others. "Cause of action" is
defined by Sec. 2 of Rule 2 as the act of omission by which a party violates a right of another. 14 These
premises obtaining, there is no question at all that private respondent's cause of action in the forcible
entry case and in the suit for damages is the alleged illegal retaking of possession of the leased premises
by the lessor, petitioner herein, from which all legal reliefs arise. Simply stated, the restoration of
possession and demand for actual damages in the case before the MeTC and the demand for damages
with the RTC both arise from the same cause of action, i.e., the forcible entry by petitioner into the least
premises.

46 | P a g e
A comparative study of the two (2) complaints filed by private respondent against petitioner before the two
(2) trial courts shows that not only are the elements of res adjudicata present, at least insofar as the claim
for actual and compensatory damages is concerned, but also that the claim for damages — moral and
exemplary in addition to actual and compensatory — constitutes splitting a single cause of action. Since
this runs counter to the rule against multiplicity of suits, the dismissal of the second action becomes
imperative.

The complaint for forcible entry contains the following pertinent allegations —

2.01 On 02 January 1989, plaintiff entered, into a contract of lease with defendant PDC over
a property designated as Ground Floor, Seafood Market (hereinafter "Subject Premises")
situated at the corner of EDSA, corner MacArthur Street, Araneta Center, Cubao, Quezon
City, for a period of ten (10) years from 02 January 1989 to 30 April 1998.

2.02 Immediately after having acquired actual physical possession of the Subject Premises,
plaintiff established and now operates thereon the now famous Seafood Market Restaurant.
Since then, plaintiff had been in actual, continuous, and peaceful physical possession of the
Subject Premises until 31 October 1992.

xxx xxx xxx

3.02 Plaintiff, being the lessee of the Subject Premises, is entitled to the peaceful
occupation and enjoyment of the Subject Premises to the exclusion of all others, including
defendants herein.

3.03 Defendants' resort to strong arms tactics to forcibly wrest possession of the Subject
Premises from plaintiff and maintain possession thereof through the use of force, threat,
strategy and intimidation by the use of superior number of men and arms amounts to the
taking of the law into their own hands.

3.04 Thus, defendants' act of unlawfully evicting out plaintiff from the Subject Premises it is
leasing from defendant PDC and depriving it of possession thereof through the use of force,
threat, strategy and intimidation should be condemned and declared illegal for being
contrary; to public order and policy.

3.05 Consequently, defendants should be enjoined from continuing with their illegal acts
and be ordered to vacate the Subject Premises and restore possession thereof, together
with its contents, to plaintiff.

xxx xxx xxx

4.07 Considering that defendants' act of forcibly grabbing possession of the Subject
Premises from plaintiff is illegal and null and void, defendant should be adjudged liable to
plaintiff for all the aforedescribed damages which plaintiff incurred as a result thereof.

The amended complaint for damages filed by private respondent alleges basically the same factual
circumstances and issues as bases for the relief prayed for, to wit:

4. On May 28, 1991, plaintiff and defendant PDC entered into a Contract of Lease for a
period of ten years or from January 2, 1989 up to April 30, 1998 over a property designated
as Ground Floor, Seafood Market (hereinafter referred to as Subject Premises) situated at
the corner of EDSA corner McArthur Street, Araneta Center, Cubao, Quezon City. A copy of
the lease contract is attached hereto as Annex "A".

47 | P a g e
 5. Immediately thereafter, plaintiff took over actual physical possession of Subject
Premises, and established thereon the now famous "Seafood Market Restaurant."

xxx xxx xxx

7 On October 31, 1992 at around 8:30 p.m., defendant PDC, without the benefit of any writ
of possession or any lawful court order and with the aid of approximately forty (40) armed
security guards and policemen under the supervision of defendant Tejam, forcibly entered
the subject premises through force, intimidation, threats and stealth and relying on brute
force and in a thunderboltish manner and against plaintiff's will, unceremoniously drew
away all of plaintiff's men out of the subject premises, thereby depriving herein plaintiff of its
actual, physical and natural possession of the subject premises. The illegal, high-handed
manner and gestapo like take-over by defendants of subject premises is more particularly
described as follows: . . .

8. To date, defendants continue to illegally possess and hold the Subject Premises,
including all the multi-million improvements, fixtures and equipment therein owned by
plaintiff, all to the damage and prejudice of plaintiff. The actuations of defendants constitute
an unlawful appropriation, seizure and taking of property against the will and consent of
plaintiff. Worse, defendants are threatening to sell at public auction and without the consent
of plaintiff and without lawful authority, the multi-million fixtures and equipment of plaintiff
and at prices way below the market value thereof. Plaintiff hereby attaches as Annex "B"
the letter from defendants dated August 6, 1993 addressed to plaintiff, informing the latter
that the former intends to sell at an auction on August 19, 1993 at 2:00 p.m. properties of
the plaintiff presently in defendants' possession.

xxx xxx xxx

12. Defendants' unlawful takeover of the premises constitutes a violation of its obligation
under Art. 1654 of the New Civil Code requiring the lessor to maintain the lessee in peaceful
and adequate enjoyment of the lease for the entire duration of the contract. Hence, plaintiff
has filed the present suit for the recovery of damages under Art. 1659 of the New Civil
Code. . . .

Restated in its bare essentials, the forcible entry case has one cause of action, namely, the alleged
unlawful entry by petitioner into the leased premises out of which three (3) reliefs (denominated by private
respondent as is causes of action) arose: (a) the restoration by the lessor (petitioner herein) of the
possession of the leased premises to the lessee; (b) the claim for actual damages due to the losses
suffered by private respondent such as the deterioration of perishable foodstuff stored inside the premises
and the deprivation of the use of the premises causing loss of expected profits; and, (c) the claim for
attoney's fees and cost of suit.

On the other hand, the complaint for damages prays for a monetary award consisting of (a) moral
damages of P500,000.00 and exemplary damages of another P500,000.00; (b) actual damages of
P20,000,000.00 and compensatory damages of P1,000,000.00 representing unrealized profits; and, (c)
P200,000.00 for attorney's fees and costs, all based on the alleged forcible takeover of the leased
premises by petitioner. Since actual and compensatory damages were already prayed for in the forcible
entry case before the MeTC, it is obvious that this cannot be relitigated in the damage suit before the RTC
by reason of res adjudicata.

The other claims for moral and exemplary damages cannot also succeed considering that these sprung
from the main incident being heard before the MeTC. Jurisprudence is unequivocal that when a single
delict or wrong is committed — like the unlawful taking or detention of the property of the another — there

48 | P a g e
is but one single cause of action regardless of the number of rights that may have been violated, and all
such rights should be alleged in a single complaint as constituting one single cause of action. 15 In a
forcible entry case, the real issue is the physical possession of the real property. The question of
damages is merely secondary or incidental, so much so that the amount thereof does not affect the
jurisdiction of the court. In other words, the unlawful act of a deforciant in taking possession of a piece of
land by means of force and intimidation against the rights of the party actually in possession thereof is a
delict or wrong, or a cause of action that gives rise to two (2) remedies, namely, the recovery of
possession and recovery of damages arising from the loss of possession, but only to one action. For
obvious reasons, both remedies cannot be the subject of two (2) separate and independent actions, one
for recovery of posssession only, and the other, for the recovery of damages. That would inevitably lead to
what is termed in law as splitting up a cause of action. 16 In David v. de la Cruz 17 we observed —

Herein tenants have but one cause of action against their landlord, their illegal ejectment or
removal from their landholdings, which cause of action however entitles them to two (2)
claims or remedies — for reinstatement of damages. As both claims arise from the same
cause of action, they should be alleged in a single complaint.

A claim cannot be divided in such a way that a part of the amount of damages may be recovered in one
case and the rest, in another. 18 In Bacharach v. Icarangal 19 we explained that the rule was aimed at
preventing repeated litigations betweent the same parties in regard to the same subject of the controversy
and to protect the defendant from unnecessary vexation. Nemo debet bis vexari pro una et eadem causa.

What then is the effect of the dismissal of the other action? Since the rule is that all such rights should be
alleged in a single complaint, it goes without saying that those not therein included cannot be the subject
of subsequent complaints for they are barred forever. 20 If a suit is brought for a part of a claim, a
judgment obtained in that action precludes the plaintiff from bringing a second action for the residue of the
claim, notwithstanding that the second form of action is not identical with the first or different grounds for
relief are set for the second suit. This principle not only embraces what was actually determined, but also
extends to every matter which the parties might have litigated in the case. 21 This is why the legal basis
upon which private respondent anchored its second claim for damages, i.e., Art. 1659 in relation to Art.
1654 of the Civil Code, 22 not otherwise raised and cited by private respondent in the forcible entry case,
cannot be used as justification for the second suit for damages. We note, not without some degree of
displeasure, that by filing a second suit for damages, private respondent was not only able to press a
claim for moral and exemplary damages which by its failure to allege the same in its suit before the MeTC
foreclosed its right to sue on it, but it was also able to obtain from the RTC, by way of another temporary
restraining order, a second reprieve from an impending public auction sale of its movables which could
not anymore secure from the MeTC before which the matter of the issuance of a preliminary writ of
injunction was already closed.

The foregoing discussions provide sufficient basis to petitioner's charge that private respondent and its
counsel in the trial courts committed forum shopping. In Crisostomo v. Securities and Exchange
Commission 23 we ruled —

There is forum-shopping whenever, as a result of an adverse opinion in one forum, party

seeks a favorable opinion (other than by appeal or certiorari) in another. The principle
applies . . . with respect to suits filed in the courts . . . in connection with litigations
commenced in the court . . . in anticipation of an unfavorable . . . ruling and a favorable case
where the court in which the second suit was brought, has no jurisdiction.

This Court likewise elucidated in New Pangasinan Review, Inc. v. National Labor Relations
Commission 24 that there is forum-shopping when the actions involve the same transactions, the same
essential facts and circumstances. The reason behind the proscription of forum shopping is obvious. This
unnecessarily burdens our courts with heavy caseloads, unduly taxes the manpower and financial
resources of the judiciary and trifles with and mocks our judicial processes, thereby adversely affecting

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the efficient administration of justice. This condemnable conduct has prompted the Court to issue
circulars 25 ordering among others that a violation thereof shall be cause for the dismissal of the case or
cases without prejudice to the taking of appropriate action against the counsel or party concerned.

The records ineluctably show that the complaint lodged, by private respondent with the Regional Trial
Court of Quezon City contained no certification of non-forum shopping. When petitioner filed a motion to
dismiss the case raising among others the ground of forum shopping it pointed out the absence of the
required certification. The amended complaint, as well as the second and third amended complaints,
attempted to rectify the error by invariably stating that there was no other action pending between the
parties involving the same causes of action although there was actually a forcible entry case pending
before the MTC of Quezon City. By its admission of a pending forcible entry case, it is obvious that private
respondent was indulging in forum shopping. While private respondent conveniently failed to inform the
RTC that it had likewise sought damages in the MTC on the basis of the same forcible entry, the fact
remains that it precisely did so, which stratagem was being duplicated in the second case. This is a
compelling reason to dismiss the second case.

WHEREFORE, the Petition is GRANTED. The questioned Decision of the Court of Appeals dated 27
September 1995 and the Order of the Regional Trial Court of Quezon City dated 24 September 1993 are
REVERSED and SET ASIDE. The Regional Trial Court of Quezon City is directed to dismiss Civil Case
No. Q-93-16409, "Westin Seafood Market, Inc. v. Progressive Development Corporation, et al.," and the
Metropolitan Trial Court of Quezon City to proceed with the proper disposition of Civil Case No. 6589,
"Westin Seafood Market, Inc. v. Progressive Development Corporation, et al.," with dispacth considering
the summary nature of the case. Treble costs against private respondent.1âwphi1.nêt

SO ORDERED.

Puno, Mendoza, Quisumbing and Buena, JJ., concur.

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