G.R. No.

192048

DOUGLAS F. ANAMA, Petitioner,

vs.
CITIBANK, N.A. (formerly First National City Bank), Respondent.

DECISION

JARDELEZA, J.:

This is a petition for review on certiorari1 under Rule 45 of the Revised Rules of Court seeking
to reverse and set aside the Decision2 dated November 19, 2009 (assailed Decision) and the
Resolution3 dated April 20, 2010 (assailed Resolution) of the Court of Appeals (CA) in CA-G.R.
SP No. 1077 48, denying petitioner's action for revival of judgment.

In consideration for a loan obtained from respondent First National City Bank of New York (now
Citibank, N.A.) (Citibank), on November 10, 1972, petitioner Douglas F. Anama (Anama)
executed a promissory note in the amount of ₱418,000.00 in favor of Citibank.4 To secure
payment of the obligation, Anama also executed in favor of Citibank a chattel mortgage over
various industrial machineries and equipment located on his property at No. 1302, E. de los
Santos Avenue, Quezon City.5 For Anama's failure to pay the monthly installments due on the
promissory note starting January 1974, Citibank filed a complaint for sum of money and
replevin6 dated November 13, 1974 (docketed as Civil Case No. 95991) with the Court of First
Instance of Manila (now Regional Trial Court), Branch 11. Anama filed his answer with
counterclaim7 and his amended answer with counterclaim,8 alleging, among others, that his
failure to pay the monthly installments was due to the fault of Citibank as it refused to receive
the checks he issued, and that the chattel mortgage was defective and void.9

On December 2, 1974, the Regional Trial Court (RTC), upon proof of default of Anama in the
payment of his loan, issued an Order of Replevin over the machineries and equipment covered
by the chattel mortgage.10

On January 29, 1977, Citibank, alleging that the properties subject of the Order of Replevin
which were taken by the Sheriff under his custody were not delivered to it, filed a motion for
[issuance of] alias writ of seizure.11 Citibank prayed that an alias writ of seizure be issued
directing the Sheriff to seize the properties and to dispose them in accordance with Section 6,
Rule 60 of the Revised Rules of Court. The RTC granted the motion through its Resolution12
dated February 28, 1977. The Ex-Officio Sheriff of Quezon City issued three receipts for the
seized properties on March 1 7, 18, and 19, 1977.13 Anama filed a motion for reconsideration
but this was denied by the RTC in a Resolution14 dated March 18, 1977.

Anama then filed a petition for certiorari and prohibition with writ of preliminary injunction with
the CA on March 21, 1977 (docketed as CAG. R. SP No. 06499) on the ground that the above
resolutions of the trial court were issued in excess of jurisdiction and with grave abuse of
discretion because of the lack of evidence proving Citibank's right to possession over the
properties subject of the chattel mortgage.15

On July 30, 1982, the CA rendered a Decision16 (July 30, 1982 Decision) granting Anama's
petition for certiorari and prohibition and nullifying the RTC's orders of seizure, to wit:

WHEREFORE, the petition is granted. The questioned resolutions issued by the respondent
judge in Civil Case No. 95991, dated February 28, 1977, and March 18, 1977, together with the
writs and processes emanating or deriving therefrom, are hereby declared null and void ab
initio.

The respondent ex-of[f]icio sheriff of Quezon City and the respondent First National City Bank
are hereby ordered to return all the machineries and equipments with their accessories seized,
dismantled and hauled, to their original and respective places and positions in the shop flooring
of the petitioner's premises where these articles were, before they were dismantled, seized and
hauled at their own expense. The said respondents are further ordered to cause the repair of
the concrete foundations destroyed by them including the repair of the electrical wiring and
facilities affected during the seizure, dismantling and hauling.

The writ of preliminary injunction heretofore in effect is hereby made permanent. Costs against
the private respondents.

SO ORDERED.17

On August 25, 1982, Citibank filed its petition for review on certiorari with this Court (docketed
as G.R. No. 61508) assailing the July 30, 1982 Decision of the CA.18 On March 17, 1999, we
promulgated a Decision19 dismissing Citibank's petition for lack of merit and affirming the July
30, 1982 Decision of the CA. An Entry of Judgment20 was subsequently issued on April 12,
1999.

Meanwhile, on November 19, 1981, during the pendency of CA-G.R. SP No. 06499 in the CA,
the fourth floor of the Manila City Hall, where Branch 11 of the R TC of Manila and its records,
including the records of Civil Case No. 95991 were located, was destroyed by fire.21

On February 10, 1982, Anama filed a petition for reconstruction of record22 in the RTC, which
the latter granted in an Order23 dated May 3, 1982. On December 2, 1982, considering that
G.R. No. 61508 was already pending before this Court, the R TC issued an Order24 directing
that all pending incidents in Civil Case No. 95991 be suspended until G.R. No. 61508 has been
resolved.

On March 12, 2009, Anama filed a petition for revival of judgment with the CA (docketed as CA-
G.R. SP No. 107748).25 Anama sought to revive the CA's July 30, 1982 Decision in CA-G.R.
SP No. 06499 and argued that Citibank's failure to file an action for the reconstitution of the
records in the RTC in Civil Case No. 95991 constituted abandonment of its cause of action and
complaint against Anama.26 In addition to the revival of the CA's July 30, 1982 Decision in CA-
G.R. SP No. 06499, Anama sought to remand the case to the RTC for further proceedings in
Civil Case No. 95991, particularly his counterclaims against Citibank.27

In its comment, Citibank argued that the petition should be dismissed as an action for revival of
judgment is within the exclusive original jurisdiction of the RTC. It also argued that laches has
set in against Anama for having slept on his rights for almost 10 years. Lastly, Citibank claimed
that it did not abandon its money claim against Anama when it did not initiate the reconstitution
proceedings in the RTC.28

On November 19, 2009, the CA denied the petition for lack of jurisdiction. Pertinent portions of
the assailed Decision reads:

[W]e find that respondent bank correctly question (sic) this Court's jurisdiction to entertain the
instant petition to revive the July 30, 1982 decision in CA-G.R. SP No. 06499. While concededly
filed within 10 years from the April 12, 1999 entry of the decision rendered in G.R. No. 61508,
the petition should have been filed with the appropriate Regional Trial Court which has exclusive
original jurisdiction over all civil actions in which the subject of the litigation is incapable of
pecuniary estimation and/or all cases not within the exclusive jurisdiction of any court, tribunal,
person or body exercising judicial or quasijudicial functions. x x x29

Anama filed his motion for reconsideration which the CA denied through its assailed
Resolution30 dated April 20, 2010.

On June 10, 2010, Anama filed this petition31 and argued that his petition for revival of
judgment should be filed in the court that issued the judgment sought to be revived, the CA in
this case.32

In its comment,33 Citibank agrees with the CA that jurisdiction over actions for revival of
judgments is with the R TC.34 Citibank also argues that Anama's petition to revive judgment is
already barred by laches and that it did not waive or abandon its claim against Anama in Civil
Case No. 95991.35

On December 30, 2010, Anama filed his reply.36

On August 25, 2016, Anama filed a manifestation37 reiterating the arguments on his petition.
On February 17, 2017, Citibank filed its comment38 stressing that the CA did not err in
dismissing the petition to revive judgment on the ground of lack of jurisdiction. On March 16,
2017, Anama filed his reply.39

We deny the petition.

An action to revive a judgment is an action whose exclusive purpose is to enforce a judgment
which could no longer be enforced by mere motion.40 Section 6, Rule 39 of the Revised Rules
of Court provides:

Sec. 6. Execution by motion or by independent action. - A final and executory judgment or order
may be executed on motion within five (5) years from the date of its entry. After the lapse of
such time, and before it is barred by the statute of limitations, a judgment may be enforced by
action. The revived judgment may also be enforced by motion within five (5) years from the date
of its entry and thereafter by action before it is barred by the statute of limitations.

Section 6 is clear. Once a judgment becomes final and executory, the prevailing party can have
it executed as a matter of right by mere motion within five years from the date of entry of
judgment. If the prevailing party fails to have the decision enforced by a motion after the lapse of
five years, the said judgment is reduced to a right of action which must be enforced by the
institution of a complaint in a regular court within 10 years from the time the judgment becomes
final.41

Further, a revival suit is a new action, having for its cause of action the judgment sought to be
revived.42 It is different and distinct from the original judgment sought to be revived or
enforced.43 It is a new and independent action, wherein the cause of action is the decision itself
and not the merits of the action upon which the judgment sought to be enforced is rendered.
Revival of judgment is premised on the assumption that the decision to be revived, either by
motion or by independent action, is already final and executory.44

As an action for revival of judgment is a new action with a new cause of action, the rules on
instituting and commencing actions apply, including the rules on jurisdiction. Its jurisdictional
requirements are not dependent on the previous action and the petition does not necessarily
have to be filed in the same court which rendered judgment.45

Jurisdiction is defined as the power and authority of the courts to hear, try and decide cases.
What determines the jurisdiction of the court is the nature of the action pleaded as appearing
from the allegations in the complaint. The averments and the character of the relief sought are
the ones to be consulted.46

The principle is that jurisdiction over the subject matter of a case is conferred by law and
determined by the allegations in the complaint which comprise a concise statement of the
ultimate facts constituting the plaintiffs cause of action. The nature of an action, as well as which
court or body has jurisdiction over it, is determined based on the allegations contained in the
complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all
or some of the claims asserted.47 Jurisdiction being a matter of substantive law, the established
rule is that the statute in force at the time of the commencement of the action determines the
jurisdiction of the court.48
Batas Pambansa Bilang 129 (BP 129), otherwise known as the Judiciary Reorganization Act of
1980 and its amendments, is the law which confers jurisdiction to the courts. Section 19 of BP
129, as amended by Republic Act No. 7691,49 provides:

Sec. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive original
jurisdiction:

(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;

In determining the jurisdiction of an action whose subject is incapable of pecuniary estimation,

the nature of the principal action or remedy sought must first be ascertained. If it is primarily for
the recovery of a sum of money, the claim is considered capable of pecuniary estimation and
the jurisdiction of the court depends on the amount of the claim. But, where the primary issue is
something other than the right to recover a sum of money, where the money claim is purely
incidental to, or a consequence of, the principal relief sought, such are actions whose subjects
are incapable of pecuniary estimation, hence cognizable by the RTCs.50

As an action to revive judgment raises issues of whether the petitioner has a right to
have the final and executory judgment revived and to have that judgment enforced and
does not involve recovery of a sum of money, we rule that jurisdiction over a petition to
revive judgment is properly with the R TCs. Thus, the CA is correct in holding that it does
not have jurisdiction to hear and decide Anama's action for revival of judgment.

A reading of the CA's jurisdiction also highlights the conclusion that an action for revival of
judgment is outside the scope of jurisdiction of the CA. Section 9 of BP 129 provides:

Sec. 9. Jurisdiction. -The Court of Appeals shall exercise:

1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and
quo warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction;

2. Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial
Courts; and

3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commission,
including the Securities and Exchange Commission, the Social Security Commission, the
Employees Compensation Commission and the Civil Service Commission, except those falling
within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions
of this Act, and of subparagraph (1) of the third paragraph and subparagraph 4 of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.
The CA also has concurrent original jurisdiction over petitions for issuance of writ of amparo,51
writ of habeas data,52 and writ of kalikasan. 53

Not being one of the enumerated cases above, it is clear that the CA is without jurisdiction to
hear and decide an action for revival of judgment.

Anama's reliance on Aldeguer v. Gemelo54 to justify his filing with the CA is misplaced.1avvphi1
The issue in Aldeguer is not jurisdiction but venue. The issue was which between the RTC of
Iloilo and RTC of Negros Occidental was the proper court to hear the action.

However, venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred
by consent or waiver upon a court which otherwise would have no jurisdiction over the subject
matter of an action; but the venue of an action as fixed by statute may be changed by the
consent of the parties and an objection that the plaintiff brought his suit in the wrong county may
be waived by the failure of the defendant to make a timely objection. In either case, the court
may render a valid judgment. Rules as to jurisdiction can never be left to the consent or
agreement of the parties, whether or not a prohibition exists against their alteration.55 Venue is
procedural, not jurisdictional, and hence may be waived.56

As we have already ruled on jurisdiction, there is no more reason to discuss whether laches has
set in against Anama.

Considering, however, that the proceedings in Civil Case No. 95991 have been suspended and
remains pending since 1982, we deem it necessary to lift the order of suspension and instruct
the trial court to hear and try the case with deliberate dispatch.

WHEREFORE, the petition is DENIED. The Decision dated November 19, 2009 and Resolution
dated April 20, 2010 of the Court of Appeals in CA-G.R. SP No. 107748 are AFFIRMED.

We direct the trial court to proceed with the hearing and disposition in Civil Case No. 95991 with
all deliberate dispatch.

1. G.R. No. 145838. July 20, 2001]

NICASIO I. ALCANTARA, petitioner, vs. COMMISSION ON THE SETTLEMENT OF LAND
PROBLEMS, SECRETARY OF DEPARTMENT OF ENVIRONMENT AND NATURAL
RESOURCES ANTONIO CERILLES, THE DEPARTMENT OF ENVIRONMENT AND NATURAL
RESOURCES, ROLANDO PAGLANGAN, ET AL., respondents.

SO ORDERED.
HEIRS OF DATU ABDUL S. PENDATUN, REP. BY DATU NASSER B. PENDATUN, AL HAJ.,
HEIRS OF SABAL MULA, and GAWAN CLAN, REP. BY TRIBAL CHIEFTAIN LORETO
GAWAN, intervenors.

DECISION

KAPUNAN, J.:

This is a petition for review on certiorari assailing the Decision of the Court of Appeals dated
June 22, 2000 in CA-G.R. SP No. 53159[1] and its Resolution dated October 16, 2000 denying
petitioners motion for reconsideration.

The facts of the case are as follows:

Sometime in 1993, petitioner Nicasio Alcantara was granted Forest Land Grazing Lease
Agreement No. 542 (FLGLA No. 542) by the Department of Environment and Natural Resources
(DENR). Under said FLGLA, Alcantara was allowed to lease Nine Hundred Twenty-Three (923)
hectares of public forest land at Sitio Lanton, Barrio Apopong, General Santos City for grazing
purposes for a period of twenty-five (25) years to expire on 31 December 2018.

As early as 1990, however, private respondent Rolando Paglangan together with Esmael Sabel
and Lasid Acop filed a letter-complaint with the Commission on Settlement of Land Problems
(COSLAP) seeking the cancellation of FLGLA No. 542 and the reversion of the entire 923
hectares to the Blaan and Maguindanaoan tribes. The case was docketed as COSLAP Case
No. 98-052.

Petitioner filed his Answer questioning the jurisdiction of the COSLAP over the case, since the
dispute involved a claim for recovery of ancestral land. Petitioner claimed that the case should
have been filed with the DENR since it is the latter which has jurisdiction to administer and
dispose of public lands, including grazing lands.

Notwithstanding petitioners objection to the COSLAPs exercise of jurisdiction over the case,
said body continued the hearings thereon. Petitioner alleged that COSLAP did not conduct
formal hearings on the case, and that he was not notified nor given the opportunity to be present
and participate in the field interviews and ocular inspections conducted by COSLAP.[2]

On August 3, 1998, the COSLAP issued a Decision ordering the cancellation of FLGLA No. 542.
Petitioner appealed the same to the Court of Appeals by petition for review on certiorari.

The Court of Appeals dismissed the petition in its Decision dated June 22, 2000, and also
denied petitioners motion for reconsideration in a Resolution dated October 16, 2000.[3]

Hence, the present petition.

Petitioner contends that the Court of Appeals erred in ruling that he had earlier recognized the
jurisdiction of the COSLAP over the case. He stated further that the appellate court should have
considered that the COSLAP does not possess the historical, genealogical and anthropological
expertise to act on ancestral land claims, and that it is the National Commission on Indigenous
Peoples (NCIP), under the Indigenous Peoples Rights Act of 1997[4] which has jurisdiction over
such claims. Petitioner thus submits that the COSLAPs decision ordering the cancellation of
FLGLA No. 542 and declaring the area being claimed by private respondent as ancestral land is
void for having been issued by a body which does not have jurisdiction over said matters.[5]

In his Comment, private respondent Rolando Paglangan argued that the petition should be
dismissed since the petition for certiorari filed by petitioner in the Court of Appeals was filed out
of time.[6] He also contended that the COSLAP has the power to entertain cases involving
indigenous cultural communities when the DENR or the NCIP fails or refuses to act on a
complaint or grievance brought before them.[7] He alleged that the dispute between petitioner
and the Blaan tribe antedated the creation of the NCIP, hence, filing of the petition for
cancellation of the FLGLA with the COSLAP.[8]

On April 6, 2001, a Motion for Leave to Intervene and to File Complaint-in-Intervention was filed
with this Court by the Heirs of Datu Abdul S. Pendatun, represented by Datu Nasser B.
Pendatun, Al Haj; the Heirs of Sabal Mula, represented by Hadji Latip K. Mula; and the Gawan
Clan, represented by their Tribal Chieftain Loreto Gawan.

Subsequently, on May 24, 2001, they filed an Amended Motion for Leave to Intervene and to
File Amended Complaint-in-Intervention. In their Amended Complaint-in-Intervention, they allege
that the parcels of land in dispute form part of their ancestral lands, and that they have been in
open, continuous, exclusive and notorious possession under claim of ownership of the same.
They stated further that private respondent Rolando Paglangan acts only as agent of the Mula
clan, and not of the other intervenors.[9]

The Court finds no reason to disturb the ruling of the Court of Appeals.

The Court of Appeals did not commit any reversible error in the assailed decision. The Court
agrees with the appellate court that petitioner is estopped from questioning the jurisdiction of the
COSLAP since he participated actively in the proceedings before said body by filing an Answer,
a Motion for Reconsideration of the COSLAPs decision and a Supplement to Respondents
Motion for Reconsideration. The Court also notes the appellate courts observation that
petitioner began to question the jurisdiction of the COSLAP only when he realized that his
period to appeal the COSLAPs decision had already lapsed.[10] It has been repeatedly held by
this Court that the active participation of a respondent in the case pending against him before a
court or a quasi-judicial body is tantamount to a recognition of that courts or bodys recognition
and a willingness to abide by the resolution of the case and will bar said party from later on
impugning the courts or bodys jurisdiction.[11]
Moreover, Executive Order No. 561 creating the COSLAP, the law then prevailing when private
respondents filed their complaint for cancellation of FLGLA No. 542, provides in Section 3,
paragraph 2(a) thereof that said Commission may assume jurisdiction over land disputes
involving occupants of the land in question and pasture lease agreement holders:

Sec. 3. Powers and Functions. -- The Commission shall have the following powers and
functions:

xxx

2. Refer and follow-up for immediate action by the agency having appropriate jurisdiction any
land problem or dispute referred to the Commission: Provided, That the Commission, may, in
the following cases, assume jurisdiction and resolve land problems or disputes which are critical
and explosive in nature considering, for instance, the large number of the parties involved, the
presence or emergence of social tension or unrest, or other similar critical situations requiring
immediate action:

(a) Between occupants/squatters and pasture lease agreement holders or timber

concessionaires;

(b) Between occupants/squatters and government reservation grantees;

(c) Between occupants/squatters and public land claimants or applicants;

(d) Petitions for classification, release and/or subdivision of lands of the public domain; and

(e) Other similar land problems of grave urgency and magnitude.

The Commission shall promulgate such rules of procedure as will insure expeditious resolution
and action on the above cases. The resolution, order or decision of the Commission on any of
the foregoing cases shall have the force and effect of a regular administrative resolution, order
or decision and shall be binding upon the parties therein and upon the agency having
jurisdiction over the same. Said resolution, order or decision shall become final and executory
within thirty (30) days from its promulgation and shall be appealable by certiorari only to the
Supreme Court. (Emphasis supplied.)

The Court of Appeals also stated that based on the records, the the land area being claimed by
private respondents belongs to the Blaan indigenous cultural community since they have been
in possession of, and have been occupying and cultivating the same since time immemorial, a
fact has not been disputed by petitioner.[12] It was likewise declared by the appellate court that
FLGLA No. 542 granted to petitioner violated Section 1 of Presidential Decree No. 410[13]
which states that all unappropriated agricultural lands forming part of the public domain are
declared part of the ancestral lands of the indigenous cultural groups occupying the same, and
these lands are further declared alienable and disposable, to be distributed exclusively among
the members of the indigenous cultural group concerned.

The Court finds no reason to depart from such finding by the appellate court, it being a settled
rule that findings of fact of the Court of Appeals are binding and conclusive upon the Supreme
Court absent any showing that such findings are not supported by the evidence on record.[14]

WHEREFORE, the petition is hereby DENIED.

2.G.R. No. 102904

THIRD DIVISION
[ G.R. No. 102904, October 30, 1992 ]
PHILIPPINE INTERNATIONAL TRADING CORPORATION, PETITIONER, VS. M.V. ZILEENA,
ZILEENA NAVIGATION CO., S.A. AND MARINE MANNING AND MANAGEMENT
CORPORATION, RESPONDENTS.

DECISION
MELO, J.:

The legal query raised in the petition for review on certiorari before Us is whether the venue of
the collection case was properly laid in the Regional Trial Court of Makati, bearing in mind the
stipulation of the parties embodied in the agreement dated November 3, 1990 which reads:

"10. This Agreement shall be governed by and construed in accordance with Singapore Law
and all disputes arising hereunder shall be subject to the exclusive jurisdiction of the
High Court of Singapore." (p. 5, Agreement, p. 69, Rollo

When the bags of portland cement belonging to petitioner were supposedly lost or damaged
while the same were on board respondents' vessel for shipment from Lianyungang, China to
Manila, petitioner Philippine International Trading Corporation sued for recovery of the value
thereof. The complaint, with the corollary prayer for the issuance of the writ of preliminary
attachment, was raffled to Branch 138 of the Regional Trial Court of the National Capital Judicial
Region stationed at Makati whose presiding judge issued a writ of preliminary attachment
against M/V Zileena, the vessel of respondents on the same day the suit was initiated.

Six days thereafter, respondents as the defendants, moved to lift the writ of attachment (pp. 70-
76, Rollo) and on January 18, 1991 petitioner filed its amended complaint with an application for
the issuance of a new writ of attachment. The provisional relief sought by petitioner was
opposed by respondents to no avail. A new writ of preliminary attachment was issued.

On January 22, 1991, respondents moved to lift the writ of attachment (p. 8, Comment; p. 45,
Rollo; pp. 92-95, Rollo) and on January 25, 1991, the court a quo resolved to discharge the
attachment upon the filing of a counterbond by respondents. On January 28, 1991, the court of
origin ordered the discharge of the writ of attachment when respondents posted the requisite
counterbond.

Thereafter, respondents moved to dismiss the suit against them on three grounds, to wit:

"I.

VENUE HAS BEEN IMPROPERLY LAID CONSIDERING THAT THE PARTIES HAVE AGREED
TO SUBMIT THEIR CONTRACTUAL DISPUTES EXCLUSIVELY TO THE HIGH COURT OF
SINGAPORE IN ACCORDANCE WITH SINGAPORE LAW.
II.

THE CLAIM SET FORTH IN THE COMPLAINT HAS BEEN WAIVED, ABANDONED AND/OR
OTHERWISE EXTINGUISHED CONSIDERING THAT:
(A) BASED ON THE ACTIONABLE AGREEMENT ATTACHED TO THE COMPLAINT,
PLAINTIFF EXPRESSLY AGREED NOT TO ATTACH OR ARREST THE VESSEL WHILST SHE
WAS IN THE PHILIPPINES.

(B) UNDER THE AGREEMENT, PLAINTIFF'S CARGO WAS EXPRESSLY CARRIED UNDER
'FIOS' TERMS; THUS, THE RESPONSIBILITY FOR THE LOADING, HANDLING, STOWING
AND DISCHARGING THE CARGO RESTED WITH THE PLAINTIFF.

III.

PLAINTIFF HAS NO CAUSE OF ACTION AGAINST DEFENDANT MARINE MANNING AND

MANAGEMENT CORPORATION IN THAT THE SAID DEFENDANT IS NOT A REAL PARTY-IN-
INTEREST." (pp. 103-104, Rollo)
On November 26, 1991, the assailed order of dismissal was issued on the following
justification:

"But, whatever may be the correct interpretation of paragraph 7 of the Agreement, the Court
action calling for such an interpretation must be institu ted in the Courts of Singapore
pursuant to the agreement of the parties as to the venue of all court actions arising from
the agreement. This stipulation in the agreement is not a stipulation on jurisdiction as claimed
by the plaintiff but an agreement on the venue of all actions between the parties arising out of
the agreement. This is in accord with the ruling in the case of Lingner and Fiser GMBH vs.
Intermediate Appellate Court, 125 SCRA 522. In this case of Lingner, the provision of the
contract, involved, reads: 'All legal settlements within the compass of this Agreement shall fall
under the jurisdiction of Philippine Courts.' When sued, Lingner moved to dismiss the complaint
on the ground among others that it could not be sued in Philippine Courts because it was not
licensed to do business in the Philippines. In resolving this issue, the Supreme Court ruled as
follows:
'x x x Whether Lingner is or is not doing business in the Philippines will not matter because the
parties had expressly stipulated in the Agreement that all controversies based on the Agreement
shall fall under the jurisdiction of Philippine Courts. In other words there was a covenant on
venue to the effect that Lingner can be sued by Philcem before Philippine Courts in regards to a
controversy related to the AGREEMENT. (Supra p. 527. Underscoring ours.)

Thus, when plaintiff stipulated in its Agreement with 'Zileena' Navigation Co., S.A. that
'xxx all disputes arising hereunder shall be subject to the exclusive jurisdiction of the
High Court of Singapore' it simply agreed to sue and be sued only in the Courts of
Singapore." (pp. 24-25, Rollo)
In the petition at bar, petitioner insists that paragraph 10 of the covenant is an illegal agreement
on competencia because it deprives Philippine courts from handling any case that may arise
under the agreement. At any rate, petitioner asseverates that even granting arguendo that the
proviso in question is an agreement on venue, respondents are nonetheless estopped from
assailing the forum of the collection suit when respondents twice sought the lifting of the
attachment against their vessel and when they posted a counterbond for the discharge of the
writ of attachment.

Instead of directly responding to the basic points raised by petitioner, respondents mixed the
chaff and the grain, so to speak, by infusing the intrinsic worth of their exculpations into the
simple procedural backdrop of the legal tangle. Scattered on the face of the Comment to the
Petition are piecemeal but subtle defenses which should not now be addressed in as much as
they properly pertain to, and must be ventilated in, the court of origin.

While We perceive merit in the petition, it must be impressed upon petitioner that paragraph 10
of the Agreement may not be equated with competencia and neither does it suggest that
Philippine courts are divested of authority by reason of the parties' express preference to vest
jurisdiction in the High Court of Singapore. Indeed, it was emphasized in International Harvester
Co. vs. Hamburg American Line, (42 Phil. 845 [1918]):

"The only other point raised by the bill of exceptions, which we deem it necessary to notice, is
based on a provision in the bill of lading to the effect that all disputes arising under the contract
are, at the option of the defendant company, to be decided according to German law and
exclusively by the Hamburg courts. From this it is argued that the Court of First Instance erred in
assuming jurisdiction of the action and that the case should have been decided in accordance
with the principles of German law.
It can not be admitted that a provision of this character has the effect of ousting the jurisdiction
of the courts of the Philippine Islands in the matter now before it. An express agreement tending
to deprive a court of jurisdiction conferred on it by law is of no effect. (Molina vs. De la Riva, 6
Phil., 12.)" (p. 855)
In resolving this problem, which is analogous to the scenario that obtained in Atlas Developer
and Steel Industries, Inc. vs. Sarmiento Enterprises, Inc. (184 SCRA 153 [1990]), petitioner
must heed the reminder that:

"... Although it provides that the City Court of Manila shall have 'jurisdiction' over a legal action
arising from the contract, the parties must have intended to fix the venue only, for jurisdiction
over an action is conferred by law, and may not be changed by mere agreement of the parties
(Calimlim, et al. vs. Ramirez, et al., 118 SCRA 399; De Jesus, et al. vs. Garcia, et al., 19 SCRA
554)." (p. 155)
On the second point concerning the demeanor of respondents in invoking the authority of the
local court, We agree with petitioner's contention that respondents are indeed precluded from
interposing an objection via a motion to dismiss grounded on improper venue since the
actuations displayed by respondents before filing the bill of exception are tantamount to
voluntary submission to the jurisdiction of the lower court. The filing of two motions for the lifting
of the writ of attachment, the submission of a memorandum in support of the urgent motion to
discharge the writ of attachment (p. 77, Rollo), the posting of a counterbond to dissolve the writ
of attachment, the filing of a demurrer on an additional ground that petitioner has no cause of
action (p. 103, Rollo), the filing of a reply to petitioner's opposition to the motion to dismiss (p.
111, Rollo) -- all of these can but signify a waiver of respondent's objection to improper venue
(Marquez Lim Cay vs. Del Rosario, 55 Phil. 962 [1931]). Verily, venue involves no more and no
less than a personal privilege which may be lost by failure to assert it seasonably, by formal
submission in a cause, or by submission through conduct (56 Am. Jur. 44; 1 Francisco, Revised
Rules of Court in the Philippines 366 [2nd ed., 1973]).

Respondents rely on the pronouncement of this Court in Sy vs. Tyson Enterprises, Inc. (119
SCRA 367 [1982]) to the effect that the filing therein of a motion for a bill of particulars, or any
pleading for that matter, before submitting a motion to dismiss cannot be construed as a waiver
of objection to venue since Section 4, Rule 4 of the Revised Rules of Court does not provide
that improper venue should be challenged by a special appearance or before any pleading is
filed. Yet, the Sy case contained an implicit reference to, and recognition of the doctrine
announced in Marquez Lim Cay vs. Del Rosario (supra) relative to acts of a party which can
give rise to an effective waiver of objection based on improper venue, thus:

"The case of Marquez Lim Cay vs. Del Rosario, 55 Phil. 962, does not sustain the trial court's
order of denial because in that case the defendants, before filing a motion to dismiss on the
ground of improper venue, interposed a demurrer on the ground that the complaint does not
state a cause of action. Then, they filed a motion for the dissolution of an attachment, posted a
bond for its dissolution and later filed a motion for the assessment of the damages caused by
the attachment. All those acts constituted asubmission to the trial court's jurisdiction and a
waiver of the objection based on improper venue under Section 377 of the Code of Civil
Procedure." (p. 372)
Commenting on Sy, Justice Oscar M. Herrera succinctly says that even as said case held that
"the filing of a motion for bill of particulars is not a waiver, yet the filing of a demurrer on the
ground that the complaint did not state a cause of action, a motion for dissolution of an
attachment, posting of a bond for dissolution and motion for assessment of damages constituted
a submission to the trial court's jurisdiction and waiver of the objection based on venue." (1
Herrera, Remedial Law 166 [1990]).

In fine, respondents' objection grounded on improper venue may be deemed waived on

the basis of the following acts they did:
a) Filing of two motions for the lifting of the writ of attachment;
b) The submission of a memorandum in support of the urgent motion to discharge the
writ of attachment (p. 77, Rollo);
c) The posting of a counterbond to dissolve the writ of attachment;
d) The filing of a demurrer on an addi tional ground that petitioner has no cause of action
(p. 103, Rollo); and
e) The filing of a reply to petitioner's opposition to the motion to dismiss (p. 111, Rollo).
In view of the foregoing observations, We hereby hold that the lower court erred in confining its
discussions to the issue of whether paragraph 10 of the covenant refers to jurisdiction or venue,
without considering the more pivotal issue as to whether respondents, vis-a-vis the demeanor
they demonstrated, can still object to improper forum.

WHEREFORE, the petition is hereby GRANTED. The order date November 26, 1991 is SET
ASIDE and the case is hereby REMANDED to the court of origin for further proceedings.

SO ORDERED.

3. G.R. No. 127692 March 10, 2004

FORTUNATO GOMEZ and AURORA GOMEZ, petitioners,

vs.
COURT OF APPEALS, ADOLFO TROCINO and MARIANO TROCINO, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the decision1 of the Court of Appeals dated September 30, 1996, in CA-G.R. SP No.
40067, nullifying the decision and orders of the Regional Trial Court of Cebu City (Branch 10) in
Civil Case No. CEB-11103, for want of jurisdiction.

Civil Case No. CEB-11103 is an action for specific performance and/or rescission filed by herein
petitioners, spouses Fortunato and Aurora Gomez, against the heirs of Jesus J. Trocino, Sr.,
which include herein respondents and their mother Caridad Trocino.2

Filed on December 16, 1991, the complaint alleges: Some time in 1975, the spouses Jesus and
Caridad Trocino mortgaged two parcels of land covered by TCT Nos. 10616 and 31856 to Dr.
Clarence Yujuico. The mortgage was subsequently foreclosed and the properties sold at public
auction on July 11, 1988, and before the expiry of the redemption period, the spouses Trocino
sold the property to petitioners on December 12, 1989, who in turn, redeemed the same from
Dr. Yujuico. The spouses Trocino, however, refused to convey ownership of the properties to
petitioners, hence, the complaint.
On January 10, 1992, the trial court’s Process Server served summons on respondents, in the
manner described in his "Return of Service," to wit:

Respectfully returned to the Branch Clerk of Court, Regional Trial Court of Cebu, Branch 10, the
herein attached original summons issued in the above-entitled case with the information that on
January 8, 1992 summons and copies of the complaint were served to the defendants Jacob,
Jesus Jr., Adolfo, Mariano, Consolacion, Alice, Racheal thru defendant Caridad Trocino at their
given address at Maria Cristina Extension (besides Sacred Heart School for Girls), Cebu City,
evidence by her signature found at the lower portion of the original summons.3

WHEREFORE I, respectfully return the original summons duly served to the court of origin.

Cebu City, Philippines, January 10, 1992.

(signed)

DELFIN D. BARNIDO
RTC Process Server

On January 27, 1992, the defendants, through their counsel Atty. Expedito P. Bugarin, filed their
Answer. Defendant Caridad A. Trocino, respondents’ mother, verified said pleading.4

After trial on the merits, the RTC rendered its decision on March 1993, with the following
disposition:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against the defendants.

The latter are hereby ordered to jointly and severally execute a Deed of Sale in favor of the
plaintiffs and to deliver the owner’s duplicate copies of TCT Nos. 10616 and 31856, covering the
properties sold, to the plaintiffs within ten (10) days from the finality of the judgment, after which
plaintiffs shall pay in turn to the defendants the balance of ₱2,000,000.00. Otherwise, the sale is
rescinded and revoked and the defendants are directed to return to the plaintiffs the amount of
₱500,000.00, with interest of 12% per annum computed from December 6, 1989, until the full
amount is paid.

In addition thereto, defendants are to pay jointly and severally to the plaintiffs, the amount of
₱50,000.00 as moral damages; ₱20,000.00 as exemplary damages; ₱40,000.00 by way of
attorney’s fees; and ₱10,000.00 as litigation expenses.

SO ORDERED.5
Due to the defendants’ failure to deliver the owner’s duplicate of TCT Nos. 10616 and 31856,
the RTC issued an order on August 29, 1995 declaring said titles null and void, and ordering the
Register of Deeds of Cebu City to issue new titles in the name of herein petitioners.6

Thereafter, or on March 13, 1996, respondents Adolfo and Mariano Trocino filed with the Court
of Appeals, a petition for the annulment of the judgment rendered by the RTC-Cebu (Branch 10)
in Civil Case No. CEB-11103. Private respondents alleged that the trial court’s decision is
null and void on the ground that it did not acquire jurisdiction over their persons as they
were not validly served with a copy of the summons and the complaint. According to them,
at the time summons was served on them, Adolfo Trocino was already in Ohio, U.S.A., and has
been residing there for 25 years, while Mariano Trocino was in Talibon, Bohol, and has been
residing there since 1986. They also refuted the receipt of the summons by Caridad A. Trocino,
and the representation made by Atty. Bugarin in their behalf. Respondents also contended that
they have a meritorious defense.7 Petitioners filed their Comment/Answer to the petition.8

On September 30, 1996, the Court of Appeals issued the assailed Decision granting the
petition and annulling the decision of the RTC-Cebu (Branch 10). The decretal portion of the
decision reads:

WHEREFORE, the decision of the Regional Trial Court of Cebu City, Branch 10, in Civil Case
No. CEB-11103 as well as all Orders issued to implement the same are hereby ANNULLED
AND SET ASIDE. The Register of Deeds of Cebu City is hereby ENJOINED from cancelling
Transfer Certificates of Title Nos. 10616 and 31856. No pronouncement as to costs.

SO ORDERED.9

Their motion for reconsideration having been denied by the Court of Appeals, petitioners
filed the present petition, setting forth the following assignment of errors:

I. THE COURT OF APPEALS ERRED IN FINDING LACK OF PRIOR KNOWLEDGE ON THE

PART OF RESPONDENTS TROCINO, REGARDING THE PROCEEDINGS BEFORE THE RTC
OF CEBU CITY AND IN NOT DISMISSING THE PETITION FOR VIOLATION OF SUPREME
COURT CIRCULAR 04-94.

II. THE COURT OF APPEALS ERRED IN DECLARING THE NEED FOR PERSONAL AND/OR
EXTRATERRITORIAL SERVICE OF SUMMONS, DESPITE THE NATURE OF THE CAUSE OF
ACTION BEING ONE IN REM.

III. THE COURT OF APPEALS ERRED IN ANNULLING THE JUDGMENT, CAUSING

FURTHER USELESS LITIGATION AND UNNECESSARY EXPENSE ON PETITIONERS AND
RESPONDENTS, ESPECIALLY SINCE RESPONDENTS HAVE NOT SHOWN ANY VALID
DEFENSE AS GROUND FOR REVERSAL OF JUDGMENT OF THE RTC.
IV. THE COURT OF APPEALS ERRED IN RULING THAT ITS JUDGMENT IS APPLICABLE IN
FAVOR OF CARIDAD TROCINO.10

Summons is a writ by which the defendant is notified of the action brought against him. Service
of such writ is the means by which the court acquires jurisdiction over his person.11 Any
judgment without such service in the absence of a valid waiver is null and void.12

The resolution of the present petition hinges on the issue of whether or not summons was
effectively served on respondents. If in the affirmative, the trial court had validly acquired
jurisdiction over their persons and therefore its judgment is valid.

To resolve whether there was valid service of summons on respondents, the nature of the action
filed against them must first be determined. As the Court explained in Asiavest Limited vs. Court
of Appeals, it will be helpful to determine first whether the action is in personam, in rem,
or quasi in rem because the rules on service of summons under Rule 14 of the Rules of
Court of the Philippines apply according to the nature of the action.13

In actions in personam, summons on the defendant must be served by handing a copy

thereof to the defendant in person, or, if he refuses to receive it, by tendering it to him .
This is specifically provided in Section 7, Rule 14 of the Rules of Court,14 which states:

SEC. 7. Personal service of summons.-- The summons shall be served by handing a copy
thereof to the defendant in person or, if he refuses to receive it, by tendering it to him.

If efforts to find defendant personally makes prompt service impossible, substituted service may
be effected by leaving copies of the summons at the defendant's dwelling house or residence
with some person of suitable age and discretion then residing therein, or by leaving the copies
at the defendant's office or regular place of business with some competent person in charge
thereof.15 In substituted service, it is mandated that the fact of impossibility of personal service
should be explained in the proof of service.16

When the defendant in an action in personam is a non-resident who does not voluntarily
submit himself to the authority of the court, personal service of summons within the
State is essential to the acquisition of jurisdiction over his person. This cannot be done if
the defendant is not physically present in the country, and thus, the court cannot acquire
jurisdiction over his person and therefore cannot validly try and decide the case against him.17
An exception was accorded in Gemperle vs. Schenker wherein service of summons through the
non-resident’s wife, who was a resident of the Philippines, was held valid, as the latter was his
representative and attorney-in-fact in a prior civil case filed by the non-resident, and the second
case was merely an offshoot of the first case.18

Meanwhile, in actions in rem or quasi in rem, jurisdiction over the person of the defendant
is not a prerequisite to confer jurisdiction on the court provided that the court acquires
jurisdiction over the res, although summons must be served upon the defendant in order
to satisfy the due process requirements.19 Thus, where the defendant is a non-resident who
is not found in the Philippines, and (1) the action affects the personal status of the plaintiff; (2)
the action relates to, or the subject matter of which is property in the Philippines in which
the defendant has or claims a lien or interest; (3) the action seeks the exclusion of the
defendant from any interest in the property located in the Philippines; or (4) the property of the
defendant has been attached in the Philippines, summons may be served extraterritorially by (a)
personal service out of the country, with leave of court; (b) publication, also with leave of court;
or (c) any other manner the court may deem sufficient.20

In the present case, petitioners’ cause of action in Civil Case No. CEB-11103 is anchored on the
claim that the spouses Jesus and Caridad Trocino reneged on their obligation to convey
ownership of the two parcels of land subject of their sale. Thus, petitioners pray in their
complaint that the spouses Trocino be ordered to execute the appropriate deed of sale and that
the titles be delivered to them (petitioners); or in the alternative, that the sale be revoked and
rescinded; and spouses Trocino ordered to return to petitioners their down payment in the
amount of P500,000.00 plus interests. The action instituted by petitioners affect the parties
alone, not the whole world. Hence, it is an action in personam, i.e., any judgment therein
is binding only upon the parties properly impleaded.21

Contrary to petitioners’ belief, the complaint they filed for specific performance and/or
rescission is not an action in rem. While it is a real action because it affects title to or
possession of the two parcels of land covered by TCT Nos. 10616 and 31856, it does not
automatically follow that the action is already one in rem. In Hernandez vs. Rural Bank of
Lucena, Inc., the Court made the following distinction:

In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a
contract or the recovery of damages. In a real action, the plaintiff seeks the recovery of real
property, or, as indicated in section 2(a) of Rule 4, a real action is an action affecting title to
real property or for the recovery of possession, or for partition or condemnation of, or
foreclosure of a mortgage on, real property.

An action in personam is an action against a person on the basis of his personal liability,
while an action in rem is an action against the thing itself, instead of against the person.
Hence, a real action may at the same time be an action in personam and not necessarily
an action in rem.

The objective sought in petitioners’ complaint was to establish a claim against

respondents for their alleged refusal to convey to them the title to the two parcels of land
that they inherited from their father, Jesus Trocino, who was one of the sellers of the
properties to petitioners. Hence, to repeat, Civil Case No. CEB-11103 is an action in
personam because it is an action against persons, namely, herein respondents, on the
basis of their personal liability. As such, personal service of summons upon the
defendants is essential in order for the court to acquire of jurisdiction over their
persons.23
A distinction, however, must be made with regard to service of summons on respondents Adolfo
Trocino and Mariano Trocino. Adolfo Trocino, as records show, is already a resident of
Ohio, U.S.A. for 25 years. Being a non-resident, the court cannot acquire jurisdiction over
his person and validly try and decide the case against him.

On the other hand, Mariano Trocino has been in Talibon, Bohol since 1986. To validly acquire
jurisdiction over his person, summons must be served on him personally, or through substituted
service, upon showing of impossibility of personal service. Such impossibility, and why efforts
exerted towards personal service failed, should be explained in the proof of service. The
pertinent facts and circumstances attendant to the service of summons must be stated in the
proof of service or Officer’s Return. Failure to do so would invalidate all subsequent proceedings
on jurisdictional grounds.24

In the present case, the process server served the summons and copies of the complaint on
respondents Jacob, Jesus, Jr., Adolfo, Mariano, Consolacion, Alice and Racheal,25 through
their mother, Caridad Trocino.26 The return did not contain any particulars as to the
impossibility of personal service on Mariano Trocino within a reasonable time. Such
improper service renders the same ineffective.

Due process of law requires personal service to support a personal judgment, and, when the
proceeding is strictly in personam brought to determine the personal rights and obligations of
the parties, personal service within the state or a voluntary appearance in the case is essential
to the acquisition of jurisdiction so as to constitute compliance with the constitutional
requirement of due process.27

Moreover, inasmuch as the sheriff’s return failed to state the facts and circumstances
showing the impossibility of personal service of summons upon respondents within a
reasonable time, petitioners should have sought the issuance of an alias summons.
Under Section 5, Rule 14 of the Rules of Court, alias summons may be issued when the
original summons is returned without being served on any or all of the defendants.28
Petitioners, however, did not do so, and they should now bear the consequences of their
lack of diligence.

The fact that Atty. Expedito Bugarin represented all the respondents without any
exception does not transform the ineffective service of summons into a valid one. It does
not constitute a valid waiver or even a voluntary submission to the trial court’s
jurisdiction. There was not even the slightest proof showing that respondents authorized
Atty. Bugarin’s appearance for and in their behalf. As found by the Court of Appeals:

While Caridad Trocino may have engaged the services of Atty. Bugarin, it did not
necessarily mean that Atty. Bugarin also had the authority to represent the defendant
heirs. The records show that in all the pleadings which required verification, only Caridad
Trocino signed the same. There was never a single instance where defendant heirs
signed the pleading. The fact that a pleading is signed by one defendant does not
necessarily mean that it is binding on a co-defendant. Furthermore, Caridad Trocino
represented herself as the principal defendant in her Motion to Withdraw Appeal. (Rollo,
p. 80)

Since the defendant heirs are co-defendants, the trial court should have verified the extent of
Atty. Bugarin’s authority when petitioners failed to appear as early as the pre-trial stage, where
the parties are required to appear. The absence of the defendant heirs should have prompted
the trial court to inquire from the lawyer whether he was also representing the other petitioners.
As co-defendant and co-heirs over the disputed properties, the defendant heirs had
every right to be present during the trial. Only Caridad Trocino appeared and testified on
her own behalf. All the defenses raised were her own, not the defendant heirs.29

Consequently, the judgment sought to be executed against respondents were rendered

without jurisdiction as there was neither a proper service of summons nor was there any
waiver or voluntary submission to the trial court’s jurisdiction. Hence, the same is void,
with regard to private respondents except Caridad Trocino.

It must be pointed out that while it was the spouses Jesus and Caridad Trocino who sold the
properties to petitioners, their right to proceed against Jesus Trocino when he died was passed
on to his heirs, which includes respondents and Caridad Trocino. Such transmission of right
occurred by operation of law, more particularly by succession, which is a mode of acquisition by
virtue of which the property, rights and obligations to the extent of the value of the inheritance of
a person are transmitted.30 When the process server personally served the summons on
Caridad Trocino, the trial court validly acquired jurisdiction over her person alone.
Hence, the trial court’s decision is valid and binding with regard to her, but only in
proportion to Caridad Trocino’s share. As aptly stated by the Court of Appeals:

This Court’s decision is therefore applicable to all the defendant heirs with the exception
of defendant Caridad Trocino considering that it was the latter who entered into the
alleged sale without the consent of her husband. She is therefore estopped from
questioning her own authority to enter into the questioned sale. Moreover, Caridad
Trocino was validly served with summons and was accorded due process.31

WHEREFORE, the petition for review is DENIED. The decision of the Court of Appeals in CA-
G.R. SP No. 40067 is AFFIRMED.

Costs against petitioners.

SO ORDERED.

4. G.R. No. 149351 March 17, 2004

SPEED DISTRIBUTING CORP., LITA MARCELO, IRENEO MARCELO and PEDRO AQUINO,
petitioners,
vs.
COURT OF APPEALS and RUFINA LIM, respondents
D E C I S I ON
CALLEJO, SR., J.:

This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. No. 52214 (CV)
reversing the November 21, 1995 Order2 of the Regional Trial Court of Quezon City, Branch
222, dismissing the complaint in Civil Case No. Q-95-24588, and its August 8, 2001 Resolution
denying the Motion for Reconsideration of the aforesaid decision.

The Antecedents

On September 20, 1953, Pastor Y. Lim married private respondent Rufina Luy Lim.3 During the
early part of their marriage, Pastor organized some family corporations using their conjugal
funds. Among these corporations was Skyline International Corporation (Skyline, for brevity)
which was engaged in the importation and sale of Hankook Brand Korean Tires and the
acquisition of real estate. The couple were incorporators and major stockholders of the
corporation and were also employed therein.

Pastor and the private respondent did not have a child. They decided to "adopt" Leonard Lim
and petitioner Lita Lim Marcelo, who were children of their distant poor relatives in Zamboanga
City. There was, however, no formal court adoption. Sometime thereafter, marital problems
arose, as a result of which the private respondent stopped working at Skyline. As the domestic
problems remained unresolved, Pastor and the private respondent jointly filed on August 13,
1968 a Petition before the Juvenile and Domestic Relations Court of Quezon City, for voluntary
dissolution of conjugal properties. As their differences worsened, the private respondent filed on
January 27, 1971 a petition for legal separation against Pastor on the ground of infidelity before
the then Juvenile and Domestic Relations Court of Quezon City. The petition was amended into
one for Support with Alimony and the case was docketed as Civil Case No. QE-0030.

On February 17, 1972, the court rendered a decision, awarding P3,000 monthly support to the
private respondent and the children, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:

1. Ordering defendant to pay plaintiff monthly support of P3,000.00 effective as of February,

1971;

2. Ordering defendant to pay plaintiff attorney’s fees in the sum of P2,000.00, plus the cost of
this suit. 4
On June 24, 1975, the private respondent filed a motion for execution. The court issued an
order granting the motion and the sheriff levied on the properties of Skyline. The latter filed, on
December 19, 1975, a third-party claim, alleging that the properties levied were its personal
properties and not those of Pastor, who was only one of its stockholders. The private
respondent filed a motion to quash Skyline’s claim, which the court granted.

Skyline filed a petition for certiorari with prayer for temporary restraining order before the Court
of Appeals for the nullification of the order of the trial court quashing the third-party claim. The
case was docketed as CA-G.R. No. 05312 (SP). The appellate court issued a temporary
restraining order on April 27, 1976. On June 23, 1976, the Court of Appeals rendered a decision
dismissing the petition, thus, lifting the restraining order.5 The appellate court ruled as follows:

While it is recognized as "lawful to obtain a corporation charter, even with a single substantial
stockholder, to engage in a specific activity, and such activity may co-exist with other private
activities of the stockholder" (Liddel & Co., Inc. vs. Collector of Internal Revenue, L-9687, June
30, 1961, 2 SCRA 632), the corporation’s distinct personality will be disregarded when it is so
"controlled and its affairs so conducted as to make it merely an instrumentality, agency or
conduit of another" (NAMARCO vs. Associated Finance Company, supra).

It is not disputed that petitioner Skyline International, Inc. was a conjugal enterprise (p. 2,
Decision) before its incorporation in December 1970 (p. 10, id.), when it was still a
proprietorship. Petitioner Skyline International, Inc. is still engaged in the sale of automotive
parts and dealership of Firestone Rubber and Tires which business it was already doing when it
was still a proprietorship. Respondent Court found that the only assets of petitioner corporation
are the conjugal properties. Thus, respondent Court concludes that "it is safe to assume that
Skyline International Corporation is another name for Mr. and Mrs. Pastor Y. Lim in person." In
fact, Pastor Y. Lim admitted that the other incorporators are their former employees and their
respective shares are nominal (Decision, pp. 14-15).

The above facts are more than enough justification for respondent Court to pierce the veil of
corporate fiction. Consequently, we find the questioned orders to be in order.6

Skyline, then, filed a petition for review before this Court, but the petition was dismissed in a
Resolution dated August 6, 1976.7

On August 21, 1987, the Speed Distributing Corporation (Speed, for brevity), was registered
with the Securities and Exchange Commission, with Pastor Lim as one of the incorporators. He
owned ten shares, valued at P100.00 per share. The following were the names of the
incorporators, the number of shares respectively subscribed to by them and the amount paid up:

Shares

Subscribed
Paid

Lita T. Lim

11,200

P 1,120,000.00

P 280,000.00

Leonard L. Lim

1,000

100,000.00

25,000.00

Lina S. Lim

150

15,000.00

3,750.00

Larry S. Lim

140

14,000.00

3,500.00

Pastor Y. Lim

10

1,000.00

250.00

12,500
P1,250,000.00

P 312,500.008

Petitioner Lita Lim-Marcelo was elected treasurer of the corporation.

On June 21, 1991, the Leslim Corporation (Leslim, for brevity), was registered with the
Securities and Exchange Commission with a capital stock of P12,000,000.00, divided into
120,000 shares at par value of P100.00 per share. Pastor Lim subscribed to 95,700 shares
valued at P9,570,000.00. The incorporators, the number of shares they subscribed to and the
amounts paid for were indicated in the articles of incorporation as follows:

Name

No. of Share

Amount Subscribed

Teresa T. Lim

24,000

P2,400,000.00

Leonard L. Lim

100

10,000.00

Larry S. Lim

100

10,000.00

Lina L. Lim

100

10,000.00

Pastor Y. Lim
 95,700

9,570,000.00

120,000

P12,000,000.00

The following persons have paid on the shares of the capital stock for which they have
subscribed the amount set after their names respectively:

Name

Amount Paid

Teresa T. Lim

P600,000.00

Leonard L. Lim

2,500.00

Larry S. Lim

2,500.00

Lina L. Lim

2,500.00

Pastor Y. Lim

P2,392,500.00

P3,000,000.009

Under the articles of incorporation, Pastor Lim was the treasurer-in-trust of the corporation.10
The Vice-President and Treasurer of the corporation was petitioner Lita Lim-Marcelo, now
married to petitioner Ireneo Marcelo.
On August 26, 1994, Leslim Corporation executed a deed of absolute sale in favor of the Speed,
represented by its Vice-President, petitioner Ireneo Marcelo, over the parcel of lot located at
Diliman Quezon City, covered by TCT No. 36617 for the price of P3,900,000.00.11 Petitioner
Lita Lim-Marcelo, the Vice-President of Leslim12 signed in the deed for and in behalf of the
corporation. She was authorized by the Board of Directors in a Resolution August 19, 1994 to
sign the said deed and to receive the purchase price for and in behalf of Leslim. The said
Resolution was certified by corporate secretary Pedro Aquino on August 22, 1994.13
Consequently, TCT No. 36617 which was in the name of Leslim, was cancelled and a new one,
TCT No. T-116716, was issued to and in the name of Speed.14

On June 11, 1994, Pastor Lim died intestate and was survived by his wife, the private
respondent. On March 17, 1995, the private respondent, through her nephew and attorney-in-
fact George Luy, filed a petition for the administration of the estate of her deceased husband
before the Regional Trial Court of Quezon City, docketed as Special Proceedings No. Q-95-
23334.15 The case was raffled to Branch 93. The private respondent filed a motion praying for
the annotation of a notice of lis pendens at the dorsal portion of all titles over the properties in
the name of Pastor. Included in the said properties were those registered in the name of other
corporations of which Pastor was a stockholder, including that parcel of land covered by TCT
No. T-116717 registered under the name of Speed. The court granted the motion. The affected
corporations, including Speed, filed motions to cancel the notices of lis pendens and motions for
exclusion of certain properties from Pastor’s estate. On June 8, 1995, the Court granted the
motions and ordered the exclusion of certain properties from the estate of Pastor and the
cancellation of the notices of lis pendens on properties registered in the name of the said
corporations, including that covered by TCT No. T-116716 under the name of Speed.

On June 27, 1995, the private respondent filed a verified amended petition in SP No. Q-95-
23334 alleging, among others, that during his lifetime, Pastor substantially owned the following
business entities: Skyline Sales Corporation, Speed Distributing, Inc., and Leslim Corporation:

5. That the following real properties, although registered in the name of the above entities, were
actually acquired by Pastor Y. Lim during his marriage with petitioner, to wit:

CORPORATION

TITLE

LOCATION

b. Leslim Corp.

TCT No. 36617

Quezon City
but now illegally transferred to and registered in the name of Speed Distributing, Inc. under TCT
No. 116716.16

On July 4, 1995, the probate court issued an Order setting aside its June 8, 1995 Order and
directed the Register of Deeds to reinstate the notice of lis pendens on TCT No. T-116716. The
court denied the motion for the reconsideration of the said order.

Speed filed a petition for certiorari with the Court of Appeals for the nullification of the July 4,
1995 and September 12, 1995 Orders of the trial court, docketed as CA-G.R. No. 38617 (SP).

Meanwhile, on August 1, 1995, the private respondent filed a complaint against Speed, and the
petitioners with the RTC of Quezon City, for the nullification of the Deed of Absolute Sale
executed by Leslim in favor of Speed over the property covered by TCT No. T-36617, and the
cancellation of TCT No. T-11676, with damages before the RTC of Quezon City. The case was
raffled to Branch 222, and was docketed as Q-95-24588. The private respondent alleged, inter
alia, that:

...

6. Plaintiff is the surviving spouse of the late Pastor Y. Lim who died intestate on June 11, 1994,
but leaving several properties, real and personal, situated in Quezon City, Makati City, Rizal
Province, Las Piñas, Valenzuela, Manila, Cavite, Masbate and other parts of the country. …

7. During the existence of the marriage of plaintiff and Pastor Y. Lim, the latter formed, among
others, Leslim Corporation, and he actually owned the same as in fact he had in his name
95,700 out of the 120,000 shares of the authorized capital stock. The remaining shares of
stocks were listed in the name of some persons who were actually his dummies, and were
made to appear as stockholders of Leslim Corporation only for purposes of registration with the
Securities and Exchange Commission….

8. Leslim Corporation, in turn, is a registered owner of a certain parcel of land located in

Diliman, Quezon City, as evidenced by TCT No. 36617, issued by defendant Register of Deeds,
copy of which is hereto attached as Annex "C."

9. Plaintiff initiated an intestate proceedings on the estate of her deceased husband in order to
lay claim on her conjugal share thereon. She then started to verify the various TCTs of the real
property in the name of her deceased husband, including those in the name of Leslim
Corporation, and she discovered that TCT No. 36617 had already been canceled and in lieu
thereof, TCT No. 116716 was issued by defendant Register of Deeds in the name of defendant
Corporation…

10. Upon further verification, plaintiff discovered that the basis of the cancellation of TCT No.
36617 in favor of TCT No. 116716 is a Deed of Sale signed and executed by defendant Lita
Marcelo who misrepresented herself as Vice President of Leslim Corporation and as such she
was purportedly authorized to dispose of the property in question in favor of defendant
corporation, which latter corporation was allegedly represented in the transaction by her
husband, herein defendant Ireneo Marcelo who claimed himself as the Vice President of
defendant corporation. …

11. To give a semblance of legality to the feigned transaction of sale, defendant Pedro Aquino,
misrepresenting himself as the corporate secretary of Leslim Corporation, executed a
simulated/falsified secretary’s certificate, wherein he stated that in an alleged special meeting of
the Board of Directors of Leslim Corporation held on August 19, 1994 in its office at 1006
Quezon Avenue, Quezon City, defendant Lita Marcelo was allegedly authorized by the Board to
enter into the transaction in question….

12. The transfer of the property from Leslim to defendant corporation is imaginary, the deed of
sale and the secretary’s certificate are simulated, hence, null and void, as shown below:

13. First of all, there was no such special meeting of the board of directors of Leslim Corporation
on August 19, 1994, contrary to the allegation in the secretary’s certificate. No notices to that
effect were ever sent to Pastor Lim, a director and owner of 79.75 per cent of the capital stock
of Leslim Corporation. Secondly, there was never a meeting of the stockholders wherein more
than two-thirds of the stocks were present in order to approve the sale of all or substantially all
of the assets consisting of real properties of Leslim Corporation. Indeed, no such meeting could
have been held because Pastor Lim, who owned practically two-thirds of the total capital stock,
had already died on June 11, 1994. The last meeting of stockholders of Leslim Corporation was
held in January, 1994. Since then up to the present, no other stockholder’s meeting, special or
otherwise, was ever held by Leslim Corporation.

14. Thirdly, the place of the alleged special stockholders meeting could not have occurred in the
place where it was purportedly held, namely, 1006 Quezon Avenue, Quezon City. This place is
the address of Accurate Distributing, Inc., which had been under the control of the group of
Estrelita Cabarles since August 1994 up to the present. On the other hand, defendants Lita
Marcelo, Ireneo Marcelo, and Pedro Aquino and their cohorts are the adversaries of Estrelita
Cabarles in several cases, civil and criminal, pending before various courts in Metro Manila and
suburbs. The control and possession by the group of Cabarles of the premises ineluctably
shows that no meeting was ever held thereon by their adversaries. Fourthly, there was never
any payment made to Leslim Corporation respecting the alleged purchase price.

15. As a consequence of the above, defendant Lita Marcelo could not have been the Vice
President of Leslim Corporation at the time the simulated deed of sale in question was
executed, contrary to her claim thereon. Besides, defendant Lita Marcelo has never been a
stockholder, much less a director of Leslim Corporation. Hence, it follows that the subject deed
of absolute sale and the secretary’s certificate are both simulated, and TCT No. 116716 of no
force and effect, necessitating as it does its cancellation. The imaginary transaction of sale was
clearly resorted to by defendants after the August 19, 1994 special stockholders’ meeting of
Accurate Distributing Inc., where in the ground of Estrelita Cabarles were elected as Board of
Directors and corporate officers and in order to deprive plaintiff of her conjugal share and the
other heirs of Pastor Y. Lim of their shares in his estate. In fact, all the real property registered in
the name of Leslim Corporation and in Nellmart Corporation wherein Pastor Lim is also the
majority stockholder had been transferred by defendants and their cohorts to themselves or to
entities controlled by them, all at practically the same time. Thus:

a. TCT No. 36617 – Deed of Sale dated August 22, 1994 – from Leslim to defendant
Corporation. Amount P3,400,000.00.

b. TCT No. 66001 – Deed of Sale dated August 26, 1994 – from Leslim to Auto Truck TBA.
Amount P10,500,000.00.

c. TCT No. 101730 – Deed of Sale dated August 26, 1994 – from Leslim to Skyline Sales
Corporation. Amount P15,500,00.00.

d. TCT No. T-48028 in the name of Nellmart but illegally transferred to defendant corporation
under TCT No. 116718.

e. TCT No. 236236 in the name of Nellmart but illegally transferred to Alliance Marketing, Inc.,
under TCT No. 285400.

f. TCT No. 236237 in the name of Nellmart but illegally transferred to Alliance Marketing, Inc.
under TCT No. 285399.

16. The same scheme was resorted to by defendants and their cohorts in divesting other
corporations of all real property, where Pastor Lim is the stockholder. Thus, the motives of
defendants in conspiracy with each other and with several other persons and entities are one
and the same, namely: to monopolize the control, possession, enjoyment and ownership of all
the estate of Pastor Lim, thereby depriving plaintiff of her conjugal share as well as her own
share in her husband’s own estate.

17. By reason of these acts of defendants, plaintiff was constrained to hire the services of
counsel for a fee of P50,000.00 and appearance fee of P1,500.00 per hearing. She likewise
suffered sleepless nights and wounded feelings, which if converted into its monetary equivalent
would be P100,000.00, more or less.

18. In order to prevent defendants from repeating the unlawful acts, they should be condemned
by pay exemplary damages in the amount of P100,000.00.17

The private respondent prayed that, after due proceedings, judgment be rendered in her favor,
thus :

WHEREFORE, premises considered, it is respectfully prayed of this Honorable Court that after
notice and hearing, judgment be rendered:
a. declaring the secretary’s certificate and the deed of sale under question null and void;

b. cancelling TCT No. 116716 issued in the name of defendant Speed Distributing Corporation
for being without basis in fact and in law;

c. ordering defendants to pay jointly and severally the amount of P100,000.00 exemplary
damages;

d. ordering defendants to play (sic) plaintiff jointly and severally the amount of P50,000.00
attorney’s fees and P1,000.00 appearance fee per hearing.

e. Ordering defendants to pay the cost of suit.18

In their answer with compulsory counterclaim, the petitioners specifically denied the material
allegations of the complaint, and by way of special and affirmative defenses, alleged that the
private respondent (the plaintiff therein), was not privy to the deed of sale executed by Leslim
and Speed. As such, she was not the real party-in-interest and had no cause of action against
the defendants. Pursuant to Presidential Decree No. 902-A, the SEC, not the RTC, had
jurisdiction over the complaint, as it was evident that the complaint involved an intra-
corporate controversy.19

In her reply, the private respondent alleged that even if she was not privy to the deed of sale
over the subject property, she was entitled to its income, and her right accrued at the time of
Pastor’s death on June 11, 1994.

On September 4, 1995, the RTC issued an Order in Special Proceedings No. 95-2334 granting
the petition and appointed the private respondent as the co-administrator of Miguel Lim, with
Atty. Donald Lee as special administrator.20

The court held a hearing on the special and affirmative defenses of the defendants (the
petitioners herein) in Civil Case No. 95-24588. On November 25, 1995, the RTC issued an
order dismissing the complaint, real party-in-interest. According to the court, she had no cause
of action against the petitioners as she was not privy to the contract of sale between Leslim and
Speed. Neither was she a stockholder of the defendant corporation; as such, she could not sue
for the corporation. According to the court, the private respondent could not file the complaint in
behalf of her deceased husband Pastor as she was unable to show that she was the authorized
representative of his estate; even if she was so authorized, her claim was limited to the shares
owned by Pastor, which could not extend to the properties of Leslim. The court also ruled that
the action involved intra-corporate controversies over which the SEC had original and exclusive
jurisdiction.
Aggrieved, the private respondent filed a motion for reconsideration of the order which was
denied on February 9, 1996.21 Dissatisfied, she appealed the order to the Court of Appeals,22
docketed as CA-G.R. CV No. 52214. She ascribed the following errors to the court a quo:

THE LOWER COURT ERRED IN RULING THAT THE PLAINTIFF-APPELLANT IS NOT A REAL
PARTY-IN-INTEREST TO FILE THE "COMPLAINT" BEFORE THE COURT A QUO.

II

THE LOWER COURT ERRED IN RULING THAT IT HAD NO JURISDICTION OVER THE
"COMPLAINT" IN CIVIL CASE NO. Q-95-24588.

III.

THE LOWER COURT ERRED IN DISMISSING THE PLAINTIFF-APPELLANT’S

"COMPLAINANT" IN CIVIL CASE NO. Q-95-24588.23

On April 18, 1996, the Court of Appeals rendered judgment in CA-G.R. SP No. 38617 nullifying
the assailed orders. The CA ruled that the private respondent failed to prove that Pastor Lim, not
Speed, owned the property. It also ruled that the finding of the probate court that the property
belonged to Pastor Lim was only provisional in nature. The private respondent then filed a
petition for review on certiorari with this Court, docketed as G.R. No. 124715. On January 24,
2000, this Court rendered a Decision dismissing the petition.

On September 15, 2000, the CA rendered a decision in CA-G.R. CV No. 52214 setting aside the
assailed orders and ordering the RTC to hear Civil Case No. Q-95-24588, thus:

WHEREFORE, premises considered, the Regional Trial Court, National Capital Judicial Region,
Quezon City, Branch 222 is hereby ORDERED to try Civil Case No. Q-95-24588 without costs
to plaintiff-appellant.24

The CA ruled that, as gleaned from the pleadings of the parties, the action involved intra-
corporate controversies as defined in Section 5 of Presidential Decree (PD) No. 902-A; as such,
the RTC had no jurisdiction over the action. However, in light of Rep. Act No. 8799 which
transferred to courts of general jurisdiction or the appropriate RTC cases over which the
SEC had jurisdiction, the CA ordered the remand of the case to the RTC, for the
determination, among others, of the resolution of the issue of whether or not the private
respondent was the real party-in-interest. The Court of Appeals stated, thus:

However, viewed in the light of Republic Act No. 8799, otherwise known as the Securities
Regulation Code, approved on July 19, 2000 which has effectively divested the Securities and
Exchange Commission of its quasi-judicial functions and transferred them to the Regional Trial
Court, We rule that the latter may take cognizance of the instant case so as not to roundabout
the judicial process, without prejudiced (sic) to its being ventilated as to whether or not appellant
The private respondent Lim is a real party in interest to be determined during the trial on the
merits before the appropriate court who has now the jurisdiction over the case at bar.25

The motion for reconsideration of the petitioners was denied by the CA, per its Resolution dated
August 8, 2001.

In their petition at bar, the petitioners argue that –

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL COURT
HAS JURISDICTION OVER THE SUBJECT CASE BY VIRTUE OF THE EFFECTIVITY OF RA
8799 KNOWN AS SECURITIES REGULATION CODE.26

The petitioners contend that the RTC had no jurisdiction over the private respondent’s
complaint because the case involved intra-corporate controversies. Since Rep. Act No.
8799 took effect only on August 8, 2000, while the private respondent’s appeal in the CA was
pending, it should not be given retroactive effect. Furthermore, Section 5.2 of RA 8799
proscribes the transfer of cases to the RTC; as such, the CA should have dismissed the private
respondent’s appeal without prejudice to her right to refile her complaint in the RTC. The
petitioners argue that the CA cannot order the case remanded to the RTC for the sake of
convenience.

For her part, the private respondent asserts that the complaint does not involve intra-corporate
controversies and the RTC had jurisdiction over the action and the issues raised by the parties
in their pleadings. The private respondent, likewise, opines that there is nothing wrong with the
CA’s ruling directing the RTC to hear the case to avoid any consequent delay.

The sole issue in this case is whether or not the CA erred in remanding the case to the RTC and
directing it to decide and hear the complaint on its merits, in view of Rep. Act No. 8799 which
took effect on August 8, 2000, during the pendency of the case before it, effectively transferring
jurisdiction over cases involving intra-corporate controversies from the SEC to the RTC.

The Private Respondent’s Action in the RTC Does Not Involve an Intra- Corporate
Dispute.

Jurisdiction over the subject matter is conferred by law.27 The nature of an action, as well as
which court or body has jurisdiction over it, is determined based on the allegations contained in
the complaint of the plaintiff, irrespective of whether or not plaintiff is entitled to recover upon all
or some of the claims asserted therein.28 It cannot depend on the defenses set forth in the
answer, in a motion to dismiss, or in a motion for reconsideration by the defendant.29

Section 5 of P.D. No. 902-A provides that the SEC shall have original and exclusive jurisdiction
over complaints, to hear and decide cases involving the following:
(a) Devices or schemes employed by or any acts of the board of directors, business associates,
its officers or partners, amounting to fraud and misrepresentation which may be detrimental to
the interest of the public and/or stockholders, partners, members of associations registered with
the Commission;

(b) Controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members, or associates; between any or all of them and the corporation,
partnership or association and the State insofar as it concerns their individual franchise or right
as such entity;

(c) Controversies in the election or appointment of directors, trustees, officers or managers of

such corporations, partnership or associations;

(d) Petitioners of corporations, partnerships or associations to be declared in the state of

suspension of payment in cases where the corporation, partnership or association possesses
sufficient property to cover all its debts but foresees the impossibility of meeting them when they
fall due or in cases where the corporation, partnership or assciation has no sufficient assets to
cover its liabilities but is under the management of a rehabilitation receiver or management
committee created pursuant to this Decree.30

However, Section 5.231 of Rep. Act No. 8799, transferred the erstwhile exclusive and original
jurisdiction of the SEC over actions involving intra-corporate controversies to the courts of
general jurisdiction, or the appropriate RTC. All intra-corporate cases pending in the SEC were
to be transferred to the appropriate RTC. Congress thereby recognized the expertise and
competence of the RTC to take cognizance of and resolve cases involving intra-corporate
controversies. In compliance with the law, the Court issued, on November 21, 2000 a Resolution
designating certain branches of the RTC in the National Capital Region to try and decide cases
enumerated in Section 5 of P.D. No. 902-A. For Quezon City cases, the Court designated
Branches 46 and 93 of the RTC. Branch 222 of the Quezon City RTC, which dismissed the
complaint of the private respondent, was not so designated by the Court. On March 13, 2001,
the Court approved the Interim Rules of Procedure for Intra-Corporate Controversies, which
took effect on April 1, 2001.

To determine whether a case involves an intra-corporate controversy, and is to be heard and

decided by the Branches of the RTC specifically designated by the Court to try and decide such
cases, two elements must concur: (a) the status or relationship of the parties; and (2) the nature
of the question that is the subject of their controversy.32

The first element requires that the controversy must arise out of intra-corporate or partnership
relations between any or all of the parties and the corporation, partnership or association of
which they are stockholders, members or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and the State insofar as
it concerns their individual franchises. The second element requires that the dispute among the
parties be intrinsically connected with the regulation of the corporation.33 If the nature of the
controversy involves matters that are purely civil in character, necessarily, the case does not
involve an intra-corporate controversy. The determination of whether a contract is simulated or
not is an issue that could be resolved by applying pertinent provisions of the Civil Code.34

In the present recourse, it is clear that the private respondent’s complaint in the RTC is not an
intra-corporate case. For one thing, the private respondent has never been a stockholder of
Leslim, or of Speed for that matter. The complaint is one for the nullification of the deed of
absolute sale executed by Leslim in favor of Speed over the property covered by TCT No. T-
36617 in the name of Leslim, the cancellation of TCT No. T-116716 in the name of Speed, as
well as the Secretary’s Certificate dated August 22, 1994. The private respondent alleged that
since her deceased husband, Pastor Lim, acquired the property during their marriage, the said
property is conjugal in nature, although registered under the name of Leslim under TCT No. T-
36617. She asserted that the petitioners connived to deprive the estate of Pastor Lim and his
heirs of their possession and ownership over the said property using a falsified Secretary’s
Certificate stating that the Board of Directors of Leslim had a meeting on August 19, 1995,
when, in fact, no such meeting was held. Petitioner Lita Lim was never a stockholder of Leslim
or a member of its Board of Directors; her husband, petitioner Ireneo Marcelo was the Vice-
President of Speed; and, petitioner Pedro Aquino was Leslim’s corporate secretary. The private
respondent further averred that the amount of P3,900,000.00, the purchase price of the property
under the deed of absolute sale, was not paid to Leslim, and that petitioners Spouses Marcelo
and petitioner Pedro Aquino contrived the said deed to consummate their devious scheme and
chicanery. The private respondent concluded that the Deed of Absolute Sale was simulated;
hence, null and void.

We are convinced that on the basis of the material allegations of the complaint, the court
a quo had jurisdiction over the case.

The Private Respondent is a Real Party-in-Interest as Plaintiff.

Rule 3, Section 2 of the Rules of Court, as amended, provides as follows:

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

The private respondent filed the complaint as one of the heirs of Pastor Lim, who died intestate
on June 11, 1994. She was, in fact, the surviving spouse of the deceased, a compulsory heir by
operation of law. The general rule under the law on succession is that successional rights are
transmitted from the moment of death of the decedent and compulsory heirs are called upon to
succeed by operation of law to the inheritance without the need of further proceedings. Under
Article 776 of the New Civil Code, inheritance includes all the properties, rights and obligations
of a party, not extinguished by his death.35 Although the private respondent was appointed by
the probate court as a special administratrix of the estate of Pastor Lim, she had the right, apart
from her being a special administratrix, to file the complaint against the petitioners for the
nullification of the deed of absolute sale, and TCT Nos. T-36617 and T-116716. Indeed, in
Emnace vs. Court of Appeals, et al.,36 we held that:

On the third issue, petitioner asserts that the surviving spouse of Vicente Tabanao has no legal
capacity to sue since she was never appointed as administratrix or executrix of his estate.
Petitioner’s objection in this regard is misplaced. The surviving spouse does not need to be
appointed as executrix or administratrix of the estate before she can file the action. She and her
children are complainants in their own right as successors of Vicente Tabanao. From the very
moment of Vicente Tabanao’s death, his rights insofar as the partnership was concerned were
transmitted to his heirs, for rights to the succession are transmitted from the moment of death of
the decedent.

Whatever claims and rights Vicente Tabanao had against the partnership and petitioner were
transmitted to respondents by operation of law, more particularly by succession, which is a
mode of acquisition by virtue of which the property, rights and obligations to the extent of the
value of the inheritance of a person are transmitted. Moreover, respondents became owners of
their respective hereditary shares from the moment Vicente Tabanao died.

A prior settlement of the estate, or even the appointment of Salvacion Tabanao as executrix or
administratrix, is not necessary for any of the heirs to acquire legal capacity to sue. As
successors who stepped into the shoes of their decedent upon his death, they can commence
any action originally pertaining to the decedent. From the moment of his death, his rights as a
partner and to demand fulfillment of petitioner’s obligations as outlined in their dissolution
agreement were transmitted to respondents. They, therefore, had the capacity to sue and seek
the court’s intervention to compel petitioner to fulfill his obligations.37

All the Compulsory Heirs of the Decedent and Leslim Corporation are Indispensable Parties.

In her complaint, the private respondent sought the nullification of the Deed of Absolute Sale
executed by Leslim Corporation in favor of Speed, as well as TCT No. T-36617 under its name.
Thus, Leslim Corporation is an indispensable party, and should be impleaded as a party-
defendant conformably to Section 7, Rule 3 of the Rules of Court, as amended.

SEC. 7. Compulsory joinder of indispensable parties.— Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.

As Leslim Corporation was a party to the deed, its interests in the subject of the action and the
outcome thereof is such that the trial court could not proceed without its presence. All actuations
of the trial court subsequent to the filing of the complaint are null and void, not only as to Leslim
Corporation, but also as to the present parties.38 All the compulsory heirs of the deceased must
also be impleaded as plaintiffs, being indispensable parties.39 Thus, the private respondent
needs to amend her complaint in the court a quo to include all indispensable parties; otherwise,
her claim would be dismissed.

IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. The records are remanded to
the Regional Trial Court of Quezon City, Branch 222, for further proceedings on the merits of the
case.

SO ORDERED.

5. G.R. No. 130991 March 11, 2004

DIMO REALTY & DEVELOPMENT, INC. AND LUZ M. DIZON, petitioners,

vs.
LEONARDO P. DIMACULANGAN, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision1 dated March 20, 1997 and the Resolution2
dated October 10, 1997, both rendered by the Court of Appeals in CA-G.R. SP No. 40963,
"Dimo Realty & Development Inc., and Spouses Gregorio and Luz Mojares Dizon vs. Hon.
Pedro T. Santiago, Presiding Judge of the Regional Trial Court (RTC) of Quezon City, Branch
101, and Leonardo P. Dimaculangan".

The factual antecedents as borne by the records are:

On February 14, 1995, Leonardo P. Dimaculangan, respondent, filed with the Regional Trial
Court, Branch 96, Quezon City, a complaint for specific performance against Dimo Realty &
Development, Inc. (Dimo Realty) and spouses Gregorio and Luz Mojares Dizon, petitioners,
docketed as Civil Case No. Q95-23006.

The complaint alleges that sometime in 1967 to 1968, petitioners engaged the services of
respondent as geodetic surveyor to subdivide (into subdivision lots) two (2) parcels of land
situated in Barrio Namuco, Rosario, Batangas covered by Transfer Certificate of Titles (TCT)
Nos. T-25972 and T-24294 of the Registry of Deeds of that province. As payment for
respondent’s services, petitioner agreed to give him one (1) subdivision lot (Lot 19, Block 17
covered by TCT No. T-25972) at Villa Luz Subdivision and pay him P9,200.00 in cash. After the
completion of respondent’s work, petitioners paid him P9,200.00 in installments and delivered to
him possession of the lot. However, despite respondent’s demands, petitioners failed to deliver
the title of the lot, prompting him to file with the RTC a complaint for specific performance and
damages.

Instead of filing an answer, petitioners, on March 27, 1995, filed a motion to dismiss the
complaint on the following grounds: (1) the cause of action has prescribed or is barred by the
statute of limitations; (2) venue was improperly laid considering that the trial court has no
jurisdiction over the subject property situated in Batangas; (3) the claim is unenforceable under
the provisions of the statute of frauds; and (3) the complaint fails to state a sufficient cause of
action.

On June 27, 1995, the trial court issued an Order dismissing the complaint for improper
venue.

Respondent then filed a motion for reconsideration with motion for inhibition.

In an Order dated July 11, 1995, the trial court granted the motion for inhibition, hence, the case
was re-raffled to Branch 101 of the same RTC at Quezon City. On August 21, 1995, this Branch
issued an Order granting respondent’s motion for reconsideration of the Order dismissing the
complaint, thus:

"A close scrutiny of the allegations in the complaint indubitably show that the above-
captioned case is one for specific performance, and therefore, a personal action. The
complaint seeks not the recovery of the lot as plaintiff is already in possession thereof,
but the peaceful delivery of the title covering said lot. Even assuming for the sake of
argument that plaintiff likewise seeks the recovery of real property, this is, however,
merely an incident to the principal personal action which is for the enforcement of the
agreement between the parties.

"Hence, the above-captioned case being a personal action, the court in the place where the
plaintiff resides, i.e. Quezon City, is the proper venue of the action.

"WHEREFORE, premises considered, the Motion for Reconsideration filed by the plaintiff being
impressed with merit is hereby GRANTED.

"SO ORDERED."

From the said Order, petitioners filed a motion for reconsideration.

Meanwhile, petitioner Dimo Realty filed with the Municipal Trial Court (MTC) at Rosario,
Batangas two (2) separate complaints for unlawful detainer and forcible entry against Jose
Matibag and spouses Benjamin and Zenaida Dela Roca (lot buyers), docketed as Civil Cases
Nos. 796 and 797, respectively. This prompted respondent to file with the trial court (Branch
101) a motion for issuance of a temporary restraining order (TRO) and a preliminary injunction
against petitioner Dimo Realty and the MTC of Rosario, Batangas. Acting thereon, the trial
court, in an Order dated October 2, 1995, issued a TRO and subsequently, a writ of preliminary
injunction enjoining petitioner and the MTC "from proceeding with Civil Cases Nos. 796 and 797
pending hearing x x x."

Immediately, petitioners filed with the trial court a motion to lift the TRO and the writ of
preliminary injunction and an urgent motion for inhibition, but were denied in an Order dated
October 20, 1995.

On October 30, 1995, petitioners filed consolidated motions for reconsideration and for
resolution but were denied in an Order dated June 5, 1995. In the same Order, the trial court set
the case for pre-trial on July 3, 1996.

As a consequence, on June 18, 1996, petitioners filed with the Court of Appeals a petition for
certiorari, prohibition and mandamus (with prayer for issuance of a writ of preliminary injunction)
seeking (1) to nullify the trial court’s Order dated August 21, 1995 granting respondent’s motion
for reconsideration; Order of October 20, 1995 denying petitioners’ motion to lift the TRO and
the writ of preliminary injunction and motion for inhibition; and Order dated June 5, 1996
denying petitioners’ consolidated motions for reconsideration and for resolution; (2) to prohibit
the trial court from hearing Civil Case No. Q95-23006; and (3) to dismiss the complaint for
improper venue.

On March 20, 1997, the Appellate Court rendered a Decision, the dispositive portion of which
reads:

"WHEREFORE, the following orders are hereby ordered PARTIALLY NULLIFIED:

1. October 20, 1995 Order – only insofar as it ordered the issuance of the temporary restraining
order, and subsequently, the preliminary injunction;

2. June 5, 1996 Order – only insofar as it ordered the setting of the case for pre-trial;

"Consequently, as an incident to item number 2 above, the respondent judge is hereby ordered
to DESIST from further proceedings with Civil Case Q 95-23006, except to ISSUE an order
directing the petitioners herein to file their answer to the complaint. Until then, or after such time
for filing the answer has expired, the respondent judge may not as yet proceed with the case.

"On the other hand, the rest of the petitioners’ prayers are hereby ordered DENIED for lack of
merit.

"SO ORDERED."

The Court of Appeals ratiocinated as follows:

"After a careful study of the orders assailed in this petition, we conclude that the respondent
judge did not commit any grave abuse of discretion insofar as the order dated August 21, 1995
is concerned. Thus, we agree with his findings that the case filed by Dimaculangan is a personal
action involving as it does the mere delivery of the title to Lot 19, Block 17, which he,
undisputably, already holds possession thereof. It does not, in any way, involve the issue of
ownership over the particular property, as this is not disputed by the petitioners, that the same
property belongs to Dimaculangan.

"In an attempt to put in issue the ownership over the particular property, the petitioners
continuously rely on the doctrine in the case of Espineli v. Santiago. In Espineli, the issue is,
who as between Mrs. Ramirez, on the one hand, and the Espinelis on the other, has a better
right to the aforementioned Lot 34. Clearly, the ownership over the property has been put in
issue. However, in the case at bar, the petitioners do not deny the fact that Dimaculangan
is already in possession of the property. Thus, Espineli is somewhat misplaced. The case at
bar is one for specific performance for the delivery of the title to the property. As such, it is a
personal action. Consequently, venue has been property laid in the court of Quezon City, it
being the residence of Dimaculangan.

"Likewise, we do not find any grave abuse of discretion on the part of the respondent judge
when he issued the October 20, 1995 Order, at least insofar as the issue of inhibition is
concerned.

"Verily, a judge may, in the exercise of his sound discretion, inhibit himself voluntarily from sitting
in a case, but it should be based on good, sound or ethical grounds, or for just and valid
reasons. It is not enough that a party throws some tenuous allegations of partiality at the judge.
No less than imperative is that it is the judge’s sacred duty to administer justice without fear or
favor.

"However, we find that insofar as he ordered the issuance of a preliminary injunction in the
October 20, 1995 Order, the respondent judge exceeded his jurisdiction. It must be noted that
the injunction was directed against DIMO Realty and any other persons acting in their behalf, as
well as the MTC, Rosario, Batangas, Fourth Judicial Region, enjoining and restraining them
from proceeding with Civil Cases 796 and 797 pending before the MTC, Rosario, Batangas,
Fourth Judicial Region, pending hearing and resolution on whether a preliminary injunction
should issue. On the other hand, the regional trial court where the judge sits is located in
Quezon City, and as such, properly belongs to the National Capital Judicial Region. This
being the case, it is clear that the respondent judge has exceeded his jurisdiction
because an injunction issued by him may only be enforced in any part of the region.
Consequently, the temporary restraining order, and subsequently, the preliminary injunction
issued by the respondent judge are hereby ordered nullified, having been issued in excess of
his jurisdiction.

"But such error of the respondent judge does not necessarily warrant his inhibition in the
case. At most, it is only correctible by certiorari, as in this particular petition.
"Similarly, we do not find grave abuse of discretion on the part of the respondent judge insofar
as he denied in his Order of June 5, 1996, the Motion for Reconsideration filed by the spouses
and DIMO Realty. As we mentioned in the earlier part of this decision, we agree with the
findings of the respondent judge insofar as it ruled that the case filed by Dimaculangan
is a personal action. Hence, the respondent judge did not commit any grave abuse of
discretion when it denied the Motion for Reconsideration. We therefore uphold the
validity of this Order.

"With regard to the order of the respondent judge setting the case for pre-trial, we find
that the same was issued in grave abuse of his discretion. We agree with the observation
made by the petitioner that the issues have not yet been joined as the petitioners herein
have not yet filed an answer. On this score, the writs prayed for must be granted. The
respondent judge must order the petitioners herein to file their answer. Until then, or
after such time for filing the answer has expired, the respondent judge may not as yet
proceed with the case."

From the said Decision, both parties filed their motions for reconsideration but were denied.

Hence, this petition for review on certiorari.

For our resolution are the twin issues of whether the Court of Appeals erred (1) in holding
that respondent’s complaint is a personal action; and (2) in sustaining the trial court’s
Order denying petitioners’ motion for inhibition.

Basic as a hornbook principle is that jurisdiction over the subject matter of a case is
conferred by law and determined by the allegations in the complaint which comprise a
concise statement of the ultimate facts constituting the plaintiff’s cause of action. In
Deltaventures Resources, Inc. vs. Cabato,3 we held:

"Jurisdiction over the subject matter is determined upon the allegations made in the
complaint, irrespective of whether the plaintiff is entitled or not entitled to recover upon
the claim asserted therein – a matter resolved only after and as a result of the trial."

The nature of an action, as well as which court or body has jurisdiction over it, is determined
based on the allegations contained in the complaint of the plaintiff, irrespective of whether or not
the plaintiff is entitled to recover upon all or some of the claims asserted therein.4

Let us examine respondent’s allegations in his complaint. The pertinent allegations are quoted
as follows:

"x x x
"2. Sometime in 1967 to 1968, the services of plaintiff as geodetic surveyor was hired by the
defendants to subdivide into subdivision lots parcels of lands located at Rosario, Batangas, in
the name of defendant spouses which is covered by TCT T-25972 of the Registry of Deeds of
Batangas and TCT T-24294 in the name of Ruperto Rodelas x x x:

xxx

"3. It was the agreement of the parties that plaintiff’s services will be paid with one (1) lot of the
subdivision now called VILLA LUZ SUBDIVISION and originally covered by TCT T-25972,
designated as Lot 19, Block 17 of the subdivision plan plus the additional amount of P9,200.00
to be paid in cash with the understanding that upon accomplishment of the subdivision plan and
full payment of the agreed price, the corresponding title to said lot already transferred in the
name of the plaintiff be delivered to the plaintiff.

xxx

"4. On several occasions from 1968 to 1975, plaintiff paid the additional amount of P9,200.00 by
installments.

xxx

"5. Plaintiff has been making verbal demands upon defendants, every now and then, for the
delivery of the title to Lot 19, Block 17 of the subdivision already named VILLA LUZ
SUBDIVISION but defendant spouses have been giving the plaintiff a runaround.

xxx

"8. Verbal demands have been made upon defendants to deliver the title of the lot in question
but defendants refused and continued to refuse to deliver said lot to the plaintiff without any
valid reason at all.

x x x."

From the above allegations, it can easily be discerned that respondent is asserting that
petitioners violated the contract of services by refusing to deliver the title of the subject
lot to him and is thus demanding that they comply with their obligation.

It bears emphasis that respondent does not allege in his complaint that he is seeking to
recover the lot from petitioners. This is because he has been in possession thereof. In
fact, petitioner Dimo Realty even filed with the MTC of Rosario, Batangas two (2) separate
complaints for unlawful detainer and forcible entry against respondent’s buyers. It is
thus clear that what is being claimed by respondent is simply the delivery of the title to
him as payment for his services.
It follows that the complaint below is not a real action, but a personal action.

Sections 1 and 2, Rule 4 of the 1997 Rules of Civil Procedure, as amended, provide:

"SECTION 1. Venue of real actions. – Actions affecting title to or possession of real property, or
interest therein, shall be commenced and tried in the proper court which has jurisdiction over the
area wherein the real property involved, or a portion thereof, is situated.

x x x.

SECTION 2. Venue of personal actions. – All other actions may be commenced and tried where
the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident defendant where he may be found,
at the election of the plaintiff." 5

Considering that respondent’s complaint, being one for specific performance, we agree with
the Court of Appeals that the venue is in the RTC of Quezon City since respondent (then
plaintiff) resides at No. 8 Cavite Street, West Avenue, Quezon City.

Petitioners further claim that the Appellate Court should not have sustained the trial court’s
denial of petitioners’ motion for inhibition.

Suffice it to state that whether judges should inhibit themselves from a case rests on their own
"sound discretion." Otherwise stated, inhibition partakes of voluntariness on the part of the
judges themselves. This Court has to be shown acts or conduct of the judge clearly indicative of
arbitrariness or prejudice before the latter can be branded the stigma of being biased or partial.6
In a catena of cases, we held that "bias and prejudice, to be considered valid reasons for the
voluntary inhibition of judges, must be proved with clear and convincing evidence. Bare
allegations of partiality and prejudgment will not suffice. These cannot be presumed, especially
if weighed against the sacred obligation of judges whose oaths of office require them to
administer justice without respect to person and to do equal right to the poor and the rich."7

Here, petitioners merely alleged the arbitrary issuance of a temporary restraining order without
however showing bias or prejudice on the part of the trial judge. In fact, the Court of Appeals
held that "such error of the respondent judge does not necessarily warrant his inhibition in the
case."

WHEREFORE, the petition is DENIED. The assailed Decision dated March 20, 1997 and the
Resolution dated October 10, 1997 of the Court of Appeals in CA G.R. SP No. 40963 are hereby
AFFIRMED.

Costs against petitioners.

SO ORDERED.
6. G.R. No. 154295. July 29, 2005

METROMEDIA TIMES CORPORATION and/or ROBINA GOKONGWIE-PE, Petitioners,

vs.
Johnny Pastorin, Respondent.

DECISION

TINGA, J.:

At issue in this Petition for Review1 on certiorari under Rule 45 is whether or not lack of
jurisdiction over the subject matter of the case, heard and decided by the labor arbiter, may be
raised for the first time before the National Labor Relations Commission (NLRC) by a litigant
who had actively participated in the proceedings, which it belatedly questioned.

The facts, culled from the records, are as follows:

Johnny Pastorin (Respondent) was employed by Metromedia Times Corporation (Petitioner) on

10 December 1990 as a Field Representative/Collector. His task entailed the periodic collection
of receivables from dealers of petitioner's newspapers. Prior to the subject incident, respondent
claimed to have received a termination letter dated 7 May 1998 from management terminating
his services for tardiness effective 16 June 1988. Respondent, member of Metro Media Times
Employees Union, was not dismissed due to the intervention of the labor union, the collective
bargaining agent in the company.

In May 1998, he obtained a loan from one of the dealers whom he dealt with, Gloria A. de
Manuel (De Manuel), amounting to Nine Thousand Pesos (₱9,000.00). After paying One
Thousand One Hundred Twenty-five Pesos (₱1,125.00), respondent reneged on the balance of
his loan. De Manuel wrote a letter dated 6 July 1998 to petitioner, and seeking assistance for
collection on the remainder of the loan. She claimed that when respondent became remissed on
his personal obligation, he stopped collecting periodically the outstanding dues of De Manuel2

On 9 July 1998, petitioner sent a letter addressed to respondent, requiring an explanation for
the transaction with De Manuel, as well as for his failure to pay back the loan according to the
conditions agreed upon. In his reply letter3 dated 13 July 1998, respondent admitted having
incurred the loan, but offered no definitive explanation for his failure to repay the same.

Petitioner, through a Memorandum4 dated 24 August 1998, imposed the penalty of suspension
on respondent for 4 days, from 27 August to 1 September 1998, for violating Company Policy
No. 2.175 and ordered his transfer to the Administration Department.

On 2 September 1998, respondent wrote a letter6 to petitioner, stating that he wanted to sign a
transfer memo before assuming his new position.
On September 7, 1998, he was handed the Payroll Change Advice7 (PCA), indicating his new
assignment to the Traffic and Order Department of Metromedia. Nonetheless, respondent
stopped reporting for work. On 16 September 1998, he sent a letter8 to petitioner
communicating his refusal to accept the transfer.

Respondent duly filed a complaint for constructive dismissal, non-payment of backwages and
other money claims with the labor arbiter, a copy of which petitioner received on 28 September
1998. The complaint was resolved in favor of respondent. In a Decision9 dated 28 May 1999,
Labor Arbiter Manuel P. Asuncion concluded that respondent did not commit insubordination or
disobedience so as to warrant his transfer, and that petitioner was not aggrieved by
respondent’s failure to settle his obligation with De Manuel. The dispositive portion read:

WHEREFORE, the respondents are hereby ordered to reinstate the complainant to his former
position, with full backwages from the time his salary was withheld until he is actually reinstated.
As of this date, the complainant’s backwages has reached the sum of ₱97,324.17. The
respondents are further directed to pay the complainant his 13th month pay for 1998 in the sum
of ₱3,611.89. The claims for allowance and unpaid commission are dismissed for lack of
sufficient basis to make an award.

SO ORDERED.10

Petitioner lodged an appeal with the NLRC, raising as a ground the lack of jurisdiction of the
labor arbiter over respondent’s complaint. Significally, this issue was not raised by petitioner in
the proceedings before the Labor Arbiter. In its Decision11 dated 16 March 2001, the NLRC
reversed the Labor Arbiter on the ground that thee latter had no jurisdiction over the case, it
being a grievance issue properly cognizable by the voluntary arbitrator. The decretal portion of
the NLRC Decision reads:

WHEREFORE, the decision under review is REVERSED and SET ASIDE, and a new one
entered, DISMISSING the complaint for lack of jurisdiction.

SO ORDERED.12

The motion for reconsideration having been denied on 18 May 2001, respondent elevated the
case before the Court of Appeals (CA) through a petition for certiorari13 under Rule 65.

The CA Fifteenth Division reversed the Decision of NLRC, and reinstated the earlier ruling of the
Labor Arbiter. Adopting the doctrines by this Court in the cases of Alfredo Marquez v. Sec. of
Labor14 and ABS-CBN Supervisors Employees Union Members v. ABS-CBN Broadcasting
Corporation,15 the CA ruled that the active participation of the party against whom the
action was brought, coupled with his failure to object to the jurisdiction of the court or
quasi-judicial body where the action is pending, is tantamount to an invocation of that
jurisdiction and a willingness to abide by the resolution of the case and will bar said
party from later on impugning the court or body’s jurisdiction. The appellate court then
disposed the case in this wise:

WHEREFORE, foregoing premises considered, the petition having merit, in fact and in law, is
hereby GIVEN DUE COURSE. Accordingly, the challenged resolution/decision and orders of
public respondent NLRC are hereby REVERSED and SET ASIDE and the decision of the
Labor Arbiter dated May 28, 1999 REINSTATED with a slight modification, that the 13th month
pay be in the amount of ₱7,430.50. No costs.

SO ORDERED.16

Petitioner sought reconsideration17 of the above Decision18 but the CA denied the motion in
the assailed Resolution19 dated 27 June 2002. Hence, its recourse to this Court, elevating the
following issues:

I.

WHETHER OR NOT METROMEDIA IS ESTOPPED FROM QUESTIONING THE

JURISDICTION OF THE LABOR ARBITER OVER THE SUBJECT MATTER OF THE CASE
FOR THE FIRST TIME ONLY IN THEIR APPEAL BEFORE THE NLRC.

II.

WHETHER OR NOT THE AWARD OF 13TH MONTH PAY BY THE LABOR ARBITER MAY BE
MODIFIED, NOTWITHSTANDING THAT THE SAME WAS NEVER ASSIGNED AS AN ERROR.

Anent the first assignment of error, there are divergent jurisprudential doctrines touching on this
issue. On the one hand are the cases of Martinez v. Merced,20 Marquez v. Secretary of
Labor,21 Ducat v. Court of Appeals,22 Bayoca v. Nogales,23 Jimenez v. Patricia,24 Centeno v.
Centeno,25 and ABS-CBN Supervisors Employee Union Members v. ABS-CBN Broadcasting
Corporation,26 all adhering to the doctrine that a party’s active participation in the actual
proceedings before a court without jurisdiction will estop him from assailing such lack of
jurisdiction. Respondent heavily relies on this doctrinal jurisprudence.

On the other hand, the cases of Dy v. NLRC,27 La Naval Drug v. CA,28 De Rossi vs. CA29 and
Union Motors Corporation v. NLRC30 buttress the position of petitioner that jurisdiction is
conferred by law and lack of jurisdiction may be questioned at any time even on appeal.

The Court of Appeals adopted the principles in the cases of Martinez, Marquez and ABS-CBN in
resolving the jurisdictional issue presented for its resolution, to wit:

Indeed, we agree with petitioner that private respondent was estopped from raising the question
of jurisdiction before public respondent NLRC and the latter gravely abused its discretion in
addressing said question in private respondents’ favor. As early as Martinez vs. De la Merced,
174 SCRA 182, the Supreme Court has clearly ruled thus: "For it has been consistently held by
this Court that while lack of jurisdiction may be assailed at any stage, a party’s active
participation in the proceedings before a court without jurisdiction will estop such party from
assailing such lack of jurisdiction."

....

The same principle was adopted by the Highest Tribunal in the case of Alfredo Marquez vs. Sec.
of Labor, 171 SCRA 337 and quoted in the latter case of ABS-CBN Supervisors Employees
Union Members vs. ABS-CBN Broadcasting Corporation, 304 SCRA 497, where it was ruled
that: "The active participation of the party against whom the action was brought, coupled with
his failure to object to the jurisdiction of the court or quasi-judicial body where the action is
pending, is tantamount to an invocation of that jurisdiction and a willingness to abide by the
resolution of the case and will bar said party from later on impugning the court or body’s
jurisdiction."31

We rule differently. A cursory glance at these cases will lead one to the conclusion that a party
who does not raise the jurisdictional question at the outset will be estopped to raise it on appeal.
However, a more circumspect analysis would reveal that the cases cited by respondent do not
fall squarely within the issue and factual circumstances of the instant case. We proceed to
demonstrate.

The notion that the defense of lack of jurisdiction may be waived by estoppel on the
party invoking the same most prominently emerged in Tijam v. Sibonghanoy.32 Indeed,
the Marquez case relied upon by the CA is in turn grounded on Tijam, where We held that:

. . . a party can not invoke the jurisdiction of a court to secure affirmative relief against his
opponent and, after obtaining or failing to obtain such relief, repudiate or question that same
jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of
explaining the rule, it was further said that the question whether the court had jurisdiction either
of the subject-matter of the action or of the parties is barred from such conduct not because the
judgment or order of the court is valid and conclusive as an adjudication, but for the reason that
such a practice can not be tolerated—obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering an
adverse decision on the merits, it is too late for the loser to question the jurisdiction or power of
the court . . . And in Littleton vs. Burges, 16 Wyo, 58, the Court said that it is not right for a party
who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an
affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.33

However, Tijam represented an exceptional case wherein the party invoking lack of jurisdiction
did so only after fifteen (15) years, and at a stage when the proceedings had already been
elevated to the Court of Appeals. Even Marquez recognizes that Tijam stands as an exception,
rather than a general rule.34 The CA perhaps though felt comfortable citing Marquez owing to
the pronouncement therein that the Court would not hesitate to apply Tijam even absent the
extraordinary circumstances therein:

". . . where the entertainment of the jurisdictional issue at a belated stage of the proceedings will
result in a failure of justice and render nugatory the constitutional imperative of protection to
labor."35

In this case, jurisdiction of the labor arbiter was questioned as early as during appeal before the
NLRC, whereas in Marquez, the question of jurisdiction was raised for the first time only before
this Court. The viability of Marquez as controlling doctrine in this case is diminished owing to the
radically different circumstances in these two cases. A similar observation can be made as to
the Bayoca and Jimenez cases.36

Neither do the other like-minded cases squarely settle the issue in favor of the respondent. In
the case of Martinez, the issue is not jurisdiction by estoppel but waiver of preliminary
conference. In that case, we said:

As pointed out by petitioners, private respondents had at least three opportunities to raise the
question of lack of preliminary conference first, when private respondents filed a motion for
extension of time to file their position paper; second, at the time when they actually filed their
position paper in which they sought affirmative relief from the Metropolitan Trial Court; and third;
when they filed a motion for reconsideration of the order of the Metropolitan Trial Court
expunging from the records the position paper of private respondents, in which motion private
respondents even urged the court to sustain their position paper. And yet, in none of these
instances was the issue of lack of preliminary conference raised or even hinted at by private
respondents. In fine, these are acts amounting to a waiver of the irregularity of the proceedings.
For it has been consistently held by this Court that while lack of jurisdiction may be assailed at
any stage, a party's active participation in the proceedings before a court without jurisdiction will
estop such party from assailing such lack of jurisdiction.37

The case of Ducat was categorical in saying that if the parties acquiesced in submitting an issue
for determination by the trial court, they are estopped from questioning the jurisdiction of the
same court to pass upon the issue. But this should be taken in the context of the "agreement" of
the parties. We quote from said case:

Petitioner’s filing of a Manifestion and Urgent Motion to Set Parameters of Computation is

indicative of its conformity with the questioned order of the trial court referring the matter of
computation of the excess to SGV and simultaneously thereafter, the issuance of a writ of
possession. If petitioner thought that subject order was wrong, it could have taken recourse to
the Court of Appeals but petitioner did not. Instead he manifested his acquiescence in the said
order by seeking parameters before the trial court. It is now too late for petitioner to question
subject order of the trial court. Petitioner cannot be allowed to make a mockery of judicial
processes, by changing his position from one of the agreement to disagreement, to suit his
needs. If the parties acquiesced in submitting an issue for determination by the trial court, they
are estopped from questioning the jurisdiction of the same court to pass upon the issue.
Petitioner is consequently estopped from questioning subject order of the trial court.38

Centeno involved the question of jurisdiction of the Department of Agrarian Reform Arbitration
Board (DARAB). The Court did rule therein that "participation by certain parties in the
administrative proceedings without raising any objection thereto, bars them from any
jurisdictional infirmity after an adverse decision is rendered against them."39 Still, the Court did
recognize therein that the movants questioning jurisdiction had actually sought and litigated for
affirmative reliefs before the DARAB in support of a submitted counterclaim. No similar
circumstance obtains in this case concerning the petitioner.

Evidently, none of these cited precedents squarely operates as stare decisis on this case,
involving as they did different circumstances. The question now lies as to whether the
precedents cited by petitioner are more apropos to this case.

Petitioner seeks to convince this Court that the instant case falls squarely within the purview of
this Court’s ruling in the case of Dy. Admittedly, a different factual mileu was present insofar as
the questioned jurisdiction was alleged to have been properly lodged in the SEC instead of
NLRC. Yet the rationale employed by the Court therein warrants serious consideration. The
aforementioned case was ruled in this wise:

. . . .More importantly, estoppel cannot be invoked to prevent this Court from taking up the
question of jurisdiction, which has been apparent on the face of the pleadings since the start of
litigation before the Labor Arbiter. It is well settled that the decision of a tribunal not vested with
appropriate jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, this Court held:

"A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous
to cite is that the jurisdiction of a court over the subject matter of the action is a matter of
law and may not be conferred by consent or agreement of the parties. The lack of
jurisdiction of a court may be raised at any stage of the proceedings, even on appeal.
This doctrine has been qualified by recent pronouncements which stemmed principally from the
ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said
case had been applied to situations which were obviously not contemplated therein. The
exceptional circumstances involved in Sibonghanoy which justified the departure from the
accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a
blanket doctrine had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy
not as the exception, but rather the general rule, virtually overthrowing altogether the time
honored principle that the issue of jurisdiction is not lost by waiver or by estoppel.

....

"It is neither fair nor legal to bind a party by the result of a suit or proceeding which was taken
cognizance of in a court which lacks jurisdiction over the same irrespective of the attendant
circumstances. The equitable defense of estoppel requires knowledge or consciousness of the
facts upon which it is based. The same thing is true with estoppel by conduct which may be
asserted only when it is shown, among others, that the representation must have been made
with knowledge of the facts and that the party to whom it was made is ignorant of the truth of the
matter (De Castro vs. Gineta, 27 SCRA 623). The filing of an action or suit in a court that does
not possess jurisdiction to entertain the same may not be presumed to be deliberate and
intended to secure a ruling which could later be annulled if not favorable to the party who filed
such suit or proceeding in a court that lacks jurisdiction to take cognizance of the same, such
act may not at once be deemed sufficient basis of estoppel. It could have been te result of an
honest mistake or of divergent interpretation of doubtful legal provisions. If any fault is to be
imputed to a party taking such course of action, part of the blame should be placed on the court
which shall entertain the suit, thereby lulling the parties into believing that they pursued their
remedies in the correct forum. Under the rules, it is the duty of the court to dismiss an action
`whenever it appears that court has no jurisdiction over the subject matter.' (Section 2, Rule 9,
Rules of Court) Should the Court render a judgment without jurisdiction, such judgment may be
impeached or annulled for lack of jurisdiction (Sec. 30, Rule 132, Ibid), within ten (10) years
from the finality of the same (Art. 1144, par. 3, Civil Code)."40

The jurisdiction of the Labor Arbiter was assailed in the cases of De Rossi v. NLRC41 and
Union Motors Corporation v. NLRC42 during appeal to the NLRC. Since the same
circumstance obtains in this case, the rulings therein, favorable as they are to the
petitioner, are germane.

In De Rossi, this Court elucidated:

Petitioner maintains that MICC can not question now the issue of jurisdiction of the NLRC,
considering that MICC did not raise this matter until after the case had been brought on appeal
to the NLRC. However, it has long been established as a rule, that jurisdiction of a tribunal,
agency, or office, is conferred by law, and its lack of jurisdiction may be questioned at
any time even on appeal. In La Naval Drug Corporation vs. Court of Appeals, 236 SCRA
78, 90, this Court said:

"Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it
appears that the court has no jurisdiction over the subject matter, the action shall be dismissed.
This defense may be interposed at any time, during appeal or even after final judgment. Such is
understandable, as this kind of jurisdiction is conferred by law and not within the courts, let
alone the parties, to themselves determine or conveniently set aside."43

We held in the Union Motors Case:

The long-established rule is that jurisdiction over a subject matter is conferred by law. [Ilaw at
Buklod ng Manggaggawa v. NLRC, 219 SCRA 536 (1993); Atlas Developer & Steel Industries,
Inc. v. Sarmiento Enterprises, Inc., 184 SCRA 153 (1990); Tijam v. Sibonghanoy, 23 SCRA 29,
30 (1968)]. Estoppel does not apply to confer jurisdiction to a tribunal that has none over
a cause of action. Where it appears that the court or tribunal has no jurisdiction, then the
defense may be interposed at any time, even on appeal or even after final judgment.
Moreover, the principle of estoppel cannot be invoked to prevent this court from taking
up the question of jurisdiction.44

The rulings in Lozon v. NLRC45 addresses the issue at hand. This Court came up with a clear
rule as to when jurisdiction by estoppel applies and when it does not:

Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it
appears that the court has no jurisdiction over the subject matter, the action shall be
dismissed (Section 2, Rule 9, Rules of Court). This defense may be interposed at any
time, during appeal (Roxas vs. Rafferty, 37 Phil. 957) or even after final judgment (Cruzcosa
vs. Judge Concepcion, et al., 101 Phil. 146). Such is understandable, as this kind of
jurisdiction is conferred by law and not within the courts, let alone the parties, to
themselves determine or conveniently set aside. In People vs. Casiano (111 Phil. 73, 93-94),
this Court, on the issue of estoppel, held:

"The operation of the principle of estoppel on the question of jurisdiction seemingly

depends upon whether the lower court actually had jurisdiction or not. If it had no
jurisdiction, but the case was tried and decided upon the theory that it had jurisdiction,
the parties are not barred, on appeal, from assailing such jurisdiction, for the same 'must
exist as a matter of law, and may not be conferred by consent of the parties or by
estoppel' (5 C.J.S., 861-863). However, if the lower court had jurisdiction, and the case was
heard and decided upon a given theory, such, for instance, as that the court had no jurisdiction,
the party who induced it to adopt such theory will not be permitted, on appeal, to assume an
inconsistent position—that the lower court had jurisdiction. Here, the principle of estoppel
applies. The rule that jurisdiction is conferred by law, and does not depend upon the will of the
parties, has no bearing thereon.46 (Emphasis supplied)

Verily, Lozon, Union Motors, Dy and De Rossi aptly resolve the jurisdictional issue obtaining in
this case. Applying the guidelines in Lozon, the labor arbiter assumed jurisdiction when he
should not. In fact, the NLRC correctly reversed the labor arbiter’s decision and ratiocinated:

What appears at first blush to be an issue which pertains to the propriety of complainant’s
reassignment to another job on account of his having contracted a private loan, is one which
may be considered as falling within the jurisdiction of the Office of the Labor Arbiter.
Nevertheless, since the complainant is a union member, he should be bound by the covenants
provided for in the Collective Bargaining Agreement.47

....

Based on the foregoing considerations, it appears that the issue of validity of complainant’s
reassignment stemmed from the exercise of a management prerogative which is a matter apt
for resolution by a Grievance Committee, the parties having opted to consider such as a
grievable issue. Further, a review of the records would show that the matter of reassignment is
one not directly related to the charge of complainant’s having committed an act which is inimical
to respondents’ interest, since the latter had already been addressed to by complainant’s
service of a suspension order. The transfer, in effect, is one which properly falls under Section
1, Article IV of the Collective Bargaining Agreement and, as such, questions as to the
enforcement thereof is one which falls under the jurisdiction of the labor arbiter."48

In line with the cases cited above and applying the general rule that estoppel does not
confer jurisdiction, petitioner is not estopped from assailing the jurisdiction of the labor
arbiter before the NLRC on appeal.

Respondent relied solely on estoppel to oppose petitioner’s claim of lack of jurisdiction on the
part of the labor arbiter. He adduced no other legal ground in support of his contention that the
Labor Arbiter had jurisdiction over the case. Thus, his claim falls flat in light of our
pronouncement, and more so considering the NLRC’s correct observation that jurisdiction
over grievance issues, such as the propriety of the reassignment of a union member falls
under the jurisdiction of the voluntary arbitrator.

Since jurisdiction does not lie with the Labor Arbiter, it is futile to discuss about the
computation of the 13th month pay.

WHEREFORE, the questioned decision of the Labor Arbiter and the Court of Appeals are
hereby REVERSED and SET ASIDE, and the decision of the NLRC in dismissing the
complaint for lack of jurisdiction REINSTATED.

SO ORDERED.

7. G.R. No. 140954. April 12, 2005

HEIRS OF BERTULDO1 HINOG: Bertuldo Hinog II, Bertuldo Hinog III, Bertuldo Hinog, Jr.,
Jocelyn Hinog, Bertoldo Hinog IV, Bertoldo Hinog V, Edgardo Hinog, Milagros H. Pabatao, Lilian
H. King, Victoria H. Engracia, Terisita C. Hinog, Paz H. Besana, Roberto C. Hinog, Vicente C.
Hinog, Roel C. Hinog, Marilyn C. Hinog, Bebot C. Hinog, lordes C. Hinog, Pablo Chiong, Arlene
Lanasang (All respresented by Bertuldo Hinog III), Petitioners,
vs.
HON. ACHILLES MELICOR, in his capacity as Presiding Judge, RTC, Branch 4, 7th
Judicial Region, Tagbiliran City, Bohol, and CUSTODIO BALANE, RUFO BALANE,
HONORIO BALANE, and TOMAS BALANE, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:
Before us is a petition for certiorari and prohibition under Rule 65 of the Rules of Court
which assails the Orders dated March 22, 1999, August 13, 1999 and October 15, 1999 of the
Regional Trial Court, Branch 4, of Tagbilaran City, Bohol in Civil Case No. 4923.

The factual background of the case is as follows:

On May 21, 1991, private respondents Custodio, Rufo, Tomas and Honorio, all surnamed
Balane, filed a complaint for "Recovery of Ownership and Possession, Removal of Construction
and Damages" against Bertuldo Hinog (Bertuldo for brevity). They alleged that: they own a
1,399- square meter parcel of land situated in Malayo Norte, Cortes, Bohol, designated as Lot
No. 1714; sometime in March 1980, they allowed Bertuldo to use a portion of the said property
for a period of ten years and construct thereon a small house of light materials at a nominal
annual rental of ₱100.00 only, considering the close relations of the parties; after the expiration
of the ten-year period, they demanded the return of the occupied portion and removal of the
house constructed thereon but Bertuldo refused and instead claimed ownership of the entire
property.

Accordingly, private respondents sought to oust Bertuldo from the premises of the subject
property and restore upon themselves the ownership and possession thereof, as well as the
payment of moral and exemplary damages, attorney’s fees and litigation expenses "in amounts
justified by the evidence." 2

On July 2, 1991, Bertuldo filed his Answer. He alleged ownership of the disputed property
by virtue of a Deed of Absolute Sale dated July 2, 1980, executed by one Tomas Pahac
with the knowledge and conformity of private respondents.3

After the pre-trial, trial on the merits ensued. On November 18, 1997, private respondents
rested their case. Thereupon, Bertuldo started his direct examination. However, on June 24,
1998, Bertuldo died without completing his evidence.

On August 4, 1998, Atty. Sulpicio A. Tinampay withdrew as counsel for Bertuldo as his services
were terminated by petitioner Bertuldo Hinog III. Atty. Veronico G. Petalcorin then entered his
appearance as new counsel for Bertuldo.4

On September 22, 1998, Atty. Petalcorin filed a motion to expunge the complaint from the
record and nullify all court proceedings on the ground that private respondents failed to specify
in the complaint the amount of damages claimed so as to pay the correct docket fees; and that
under Manchester Development Corporation vs. Court of Appeals,5 non-payment of the correct
docket fee is jurisdictional.6

In an amended motion, filed on October 2, 1998, Atty. Petalcorin further alleged that the private
respondents failed to pay the correct docket fee since the main subject matter of the case
cannot be estimated as it is for recovery of ownership, possession and removal of
construction.7
Private respondents opposed the motion to expunge on the following grounds: (a) said motion
was filed more than seven years from the institution of the case; (b) Atty. Petalcorin has not
complied with Section 16, Rule 3 of the Rules of Court which provides that the death of the
original defendant requires a substitution of parties before a lawyer can have legal personality to
represent a litigant and the motion to expunge does not mention of any specific party whom he
is representing; (c) collectible fees due the court can be charged as lien on the judgment; and
(d) considering the lapse of time, the motion is merely a dilatory scheme employed by
petitioners.8

In their Rejoinder, petitioners manifested that the lapse of time does not vest the court with
jurisdiction over the case due to failure to pay the correct docket fees. As to the contention that
deficiency in payment of docket fees can be made as a lien on the judgment, petitioners argued
that the payment of filing fees cannot be made dependent on the result of the action taken.9

On January 21, 1999, the trial court, while ordering the complaint to be expunged from the
records and the nullification of all court proceedings taken for failure to pay the correct docket
fees, nonetheless, held:

The Court can acquire jurisdiction over this case only upon the payment of the exact
prescribed docket/filing fees for the main cause of action, plus additional docket fee for
the amount of damages being prayed for in the complaint, which amount should be
specified so that the same can be considered in assessing the amount of the filing fees.
Upon the complete payment of such fees, the Court may take appropriate action in the
light of the ruling in the case of Manchester Development Corporation vs. Court of
Appeals, supra.10

Accordingly, on January 28, 1999, upon payment of deficiency docket fee, private respondents
filed a manifestation with prayer to reinstate the case.11 Petitioners opposed the
reinstatement12 but on March 22, 1999, the trial court issued the first assailed Order reinstating
the case.13

On May 24, 1999, petitioners, upon prior leave of court,14 filed their supplemental pleading,
appending therein a Deed of Sale dated November 15, 1982.15 Following the submission of
private respondents’ opposition thereto,16 the trial court, in its Order dated July 7, 1999, denied
the supplemental pleading on the ground that the Deed of Absolute Sale is a new matter which
was never mentioned in the original answer dated July 2, 1991, prepared by Bertuldo’s original
counsel and which Bertuldo verified; and that such new document is deemed waived in the light
of Section 1, Rule 917 of the Rules of Court. The trial court also noted that no formal
substitution of the parties was made because of the failure of defendant’s counsel to give the
names and addresses of the legal representatives of Bertuldo, so much so that the supposed
heirs of Bertuldo are not specified in any pleading in the case. 18
On July 14, 1999, petitioners manifested that the trial court having expunged the
complaint and nullified all court proceedings, there is no valid case and the complaint
should not be admitted for failure to pay the correct docket fees; that there should be no
case to be reinstated and no case to proceed as there is no complaint filed.19

After the submission of private respondents’ opposition20 and petitioners’ rejoinder,21 the trial
court issued the second assailed Order on August 13, 1999, essentially denying petitioners’
manifestation/rejoinder. The trial court held that the issues raised in such manifestation/rejoinder
are practically the same as those raised in the amended motion to expunge which had already
been passed upon in the Order dated January 21, 1999. Moreover, the trial court observed that
the Order dated March 22, 1999 which reinstated the case was not objected to by petitioners
within the reglementary period or even thereafter via a motion for reconsideration despite
receipt thereof on March 26, 1999.22

On August 25, 1999, petitioners filed a motion for reconsideration23 but the same was denied
by the trial court in its third assailed Order dated October 15, 1999. The trial court held that the
Manchester rule was relaxed in Sun Insurance Office, Ltd. vs. Asuncion.24 Noting that there has
been no substitution of parties following the death of Bertuldo, the trial court directed Atty.
Petalcorin to comply with the provisions of Section 16, Rule 3 of the Rules of Court. The trial
court also reiterated that the Order dated March 22, 1999 reinstating the case was not assailed
by petitioners within the reglementary period, despite receipt thereof on March 26, 1999.25

On November 19, 1999, Atty. Petalcorin complied with the directive of the trial court to submit
the names and addresses of the heirs of Bertuldo.26

On November 24, 1999, petitioners filed before us the present petition for certiorari and
prohibition.27 They allege that the public respondent committed grave abuse of
discretion in allowing the case to be reinstated after private respondents paid the docket
fee deficiency since the trial court had earlier expunged the complaint from the record
and nullified all proceedings of the case and such ruling was not contested by the private
respondents. Moreover, they argue that the public respondent committed grave abuse of
discretion in allowing the case to be filed and denying the manifestation with motion to dismiss,
despite the defect in the complaint which prayed for damages without specifying the amounts, in
violation of SC Circular No. 7, dated March 24, 1988.

In their Comment, private respondents aver that no grave abuse of discretion was committed by
the trial court in reinstating the complaint upon the payment of deficiency docket fees because
petitioners did not object thereto within the reglementary period. Besides, Atty. Petalcorin
possessed no legal personality to appear as counsel for the heirs of Bertuldo until he complies
with Section 16, Rule 3 of the Rules of Court.28

At the outset, we note the procedural error committed by petitioners in directly filing the
instant petition before this Court for it violates the established policy of strict observance
of the judicial hierarchy of courts.
Although the Supreme Court, Court of Appeals and the Regional Trial Courts have
concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto,
habeas corpus and injunction, such concurrence does not give the petitioner
unrestricted freedom of choice of court forum.29 As we stated in People vs. Cuaresma:30

This Court's original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this
Court with Regional Trial Courts and with the Court of Appeals. This concurrence of jurisdiction
is not, however, to be taken as according to parties seeking any of the writs an absolute,
unrestrained freedom of choice of the court to which application therefor will be directed. There
is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals,
and also serves as a general determinant of the appropriate forum for petitions for the
extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that
petitions for the issuance of extraordinary writs against first level ("inferior") courts should be
filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A
direct invocation of the Supreme Court’s original jurisdiction to issue these writs should be
allowed only when there are special and important reasons therefor, clearly and specifically set
out in the petition. This is [an] established policy. It is a policy necessary to prevent inordinate
demands upon the Court’s time and attention which are better devoted to those matters within
its exclusive jurisdiction, and to prevent further over-crowding of the Court’s docket.31

The rationale for this rule is two-fold: (a) it would be an imposition upon the precious time of this
Court; and (b) it would cause an inevitable and resultant delay, intended or otherwise, in the
adjudication of cases, which in some instances had to be remanded or referred to the lower
court as the proper forum under the rules of procedure, or as better equipped to resolve the
issues because this Court is not a trier of facts.32

Thus, this Court will not entertain direct resort to it unless the redress desired cannot be
obtained in the appropriate courts, and exceptional and compelling circumstances, such as
cases of national interest and of serious implications, justify the availment of the extraordinary
remedy of writ of certiorari, calling for the exercise of its primary jurisdiction. Exceptional and
compelling circumstances were held present in the following cases: (a) Chavez vs. Romulo33
on citizens’ right to bear arms; (b) Government of the United States of America vs. Purganan34
on bail in extradition proceedings; (c) Commission on Elections vs. Quijano-Padilla35 on
government contract involving modernization and computerization of voters’ registration list; (d)
Buklod ng Kawaning EIIB vs. Zamora36 on status and existence of a public office; and (e)
Fortich vs. Corona37 on the so-called "Win-Win Resolution" of the Office of the President which
modified the approval of the conversion to agro-industrial area.

In this case, no special and important reason or exceptional and compelling

circumstance analogous to any of the above cases has been adduced by the petitioners
so as to justify direct recourse to this Court. The present petition should have been
initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy
of courts. Failure to do so is sufficient cause for the dismissal of the petition at bar.
In any event, even if the Court disregards such procedural flaw, the petitioners’ contentions on
the substantive aspect of the case fail to invite judgment in their favor.

The unavailability of the writ of certiorari and prohibition in this case is borne out of the fact that
petitioners principally assail the Order dated March 22, 1999 which they never sought
reconsideration of, in due time, despite receipt thereof on March 26, 1999. Instead, petitioners
went through the motion of filing a supplemental pleading and only when the latter was denied,
or after more than three months have passed, did they raise the issue that the complaint should
not have been reinstated in the first place because the trial court had no jurisdiction to do so,
having already ruled that the complaint shall be expunged.

After recognizing the jurisdiction of the trial court by seeking affirmative relief in their
motion to serve supplemental pleading upon private respondents, petitioners are
effectively barred by estoppel from challenging the trial court’s jurisdiction.38 If a party
invokes the jurisdiction of a court, he cannot thereafter challenge the court’s jurisdiction in the
same case.39 To rule otherwise would amount to speculating on the fortune of litigation, which
is against the policy of the Court.40

Nevertheless, there is a need to correct the erroneous impression of the trial court as well as the
private respondents that petitioners are barred from assailing the Order dated March 22, 1999
which reinstated the case because it was not objected to within the reglementary period or even
thereafter via a motion for reconsideration despite receipt thereof on March 26, 1999.

It must be clarified that the said order is but a resolution on an incidental matter which does not
touch on the merits of the case or put an end to the proceedings.41 It is an interlocutory order
since there leaves something else to be done by the trial court with respect to the merits of the
case.42 As such, it is not subject to a reglementary period. Reglementary period refers to the
period set by the rules for appeal or further review of a final judgment or order, i.e., one that
ends the litigation in the trial court.

Moreover, the remedy against an interlocutory order is generally not to resort forthwith to
certiorari, but to continue with the case in due course and, when an unfavorable verdict is
handed down, to take an appeal in the manner authorized by law.43 Only when the court issued
such order without or in excess of jurisdiction or with grave abuse of discretion and when the
assailed interlocutory order is patently erroneous and the remedy of appeal would not afford
adequate and expeditious relief will certiorari be considered an appropriate remedy to assail an
interlocutory order.44 Such special circumstances are absolutely wanting in the present case.

Time and again, the Court has held that the Manchester rule has been modified in Sun
Insurance Office, Ltd. (SIOL) vs. Asuncion45 which defined the following guidelines involving
the payment of docket fees:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of
the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or
nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of
the docket fee, the court may allow payment of the fees within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings,
which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The
court may also allow payment of said fee within a reasonable time but also in no case beyond
its applicable prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading
and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not
specified in the pleading, or if specified the same has been left for determination by the court,
the additional filing fee therefor shall constitute a lien on the judgment. It shall be the
responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess
and collect the additional fee.

Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its
non-payment at the time of filing does not automatically cause the dismissal of the case, as long
as the fee is paid within the applicable prescriptive or reglementary period, more so when the
party involved demonstrates a willingness to abide by the rules prescribing such payment.46
Thus, when insufficient filing fees were initially paid by the plaintiffs and there was no intention
to defraud the government, the Manchester rule does not apply.47

Under the peculiar circumstances of this case, the reinstatement of the complaint was just and
proper considering that the cause of action of private respondents, being a real action,
prescribes in thirty years,48 and private respondents did not really intend to evade the payment
of the prescribed docket fee but simply contend that they could not be faulted for inadequate
assessment because the clerk of court made no notice of demand or reassessment.49 They
were in good faith and simply relied on the assessment of the clerk of court.

Furthermore, the fact that private respondents prayed for payment of damages "in amounts
justified by the evidence" does not call for the dismissal of the complaint for violation of SC
Circular No. 7, dated March 24, 1988 which required that all complaints must specify the
amount of damages sought not only in the body of the pleadings but also in the prayer in order
to be accepted and admitted for filing. Sun Insurance effectively modified SC Circular No. 7 by
providing that filing fees for damages and awards that cannot be estimated constitute liens on
the awards finally granted by the trial court.50

Thus, while the docket fees were based only on the real property valuation, the trial court
acquired jurisdiction over the action, and judgment awards which were left for determination by
the court or as may be proven during trial would still be subject to additional filing fees which
shall constitute a lien on the judgment. It would then be the responsibility of the Clerk of Court of
the trial court or his duly authorized deputy to enforce said lien and assess and collect the
additional fees.51

It is worth noting that when Bertuldo filed his Answer on July 2, 1991, he did not raise the issue
of lack of jurisdiction for non-payment of correct docket fees. Instead, he based his defense on a
claim of ownership and participated in the proceedings before the trial court. It was only in
September 22, 1998 or more than seven years after filing the answer, and under the auspices of
a new counsel, that the issue of jurisdiction was raised for the first time in the motion to expunge
by Bertuldo’s heirs.

After Bertuldo vigorously participated in all stages of the case before the trial court and
even invoked the trial court’s authority in order to ask for affirmative relief, petitioners,
considering that they merely stepped into the shoes of their predecessor, are effectively
barred by estoppel from challenging the trial court’s jurisdiction. Although the issue of
jurisdiction may be raised at any stage of the proceedings as the same is conferred by
law, it is nonetheless settled that a party may be barred from raising it on ground of
laches or estoppel.52

Moreover, no formal substitution of the parties was effected within thirty days from date of death
of Bertuldo, as required by Section 16, Rule 353 of the Rules of Court. Needless to stress, the
purpose behind the rule on substitution is the protection of the right of every party to due
process. It is to ensure that the deceased party would continue to be properly represented in the
suit through the duly appointed legal representative of his estate.54 Non-compliance with the
rule on substitution would render the proceedings and judgment of the trial court infirm because
the court acquires no jurisdiction over the persons of the legal representatives or of the heirs on
whom the trial and the judgment would be binding.55 Thus, proper substitution of heirs must be
effected for the trial court to acquire jurisdiction over their persons and to obviate any future
claim by any heir that he was not apprised of the litigation against Bertuldo or that he did not
authorize Atty. Petalcorin to represent him.

The list of names and addresses of the heirs was submitted sixteen months after the death of
Bertuldo and only when the trial court directed Atty. Petalcorin to comply with the provisions of
Section 16, Rule 3 of the Rules of Court. Strictly speaking therefore, before said compliance,
Atty. Petalcorin had no standing in the court a quo when he filed his pleadings. Be that as it may,
the matter has been duly corrected by the Order of the trial court dated October 15, 1999.

To be sure, certiorari under Rule 6556 is a remedy narrow in scope and inflexible in character. It
is not a general utility tool in the legal workshop.57 It offers only a limited form of review. Its
principal function is to keep an inferior tribunal within its jurisdiction.58 It can be invoked only for
an error of jurisdiction, that is, one where the act complained of was issued by the court, officer
or a quasi-judicial body without or in excess of jurisdiction, or with grave abuse of discretion
which is tantamount to lack or in excess of jurisdiction,59 not to be used for any other
purpose,60 such as to cure errors in proceedings or to correct erroneous conclusions of law or
fact.61 A contrary rule would lead to confusion, and seriously hamper the administration of
justice.

Petitioners utterly failed to show that the trial court gravely abused its discretion in issuing the
assailed resolutions. On the contrary, it acted prudently, in accordance with law and
jurisprudence.

WHEREFORE, the instant petition for certiorari is DISMISSED for lack of merit.

No costs.

SO ORDERED.

8. G.R. No. 136325. July 29, 2005

MANUEL M. SERRANO, Petitioners,

vs.
EUGENIO C. DELICA, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

At bar is a petition for review on certiorari1 assailing the Decision2 dated September 30, 1998
and Resolution dated November 13, 1998 of the Court of Appeals in CA-G.R. SP No. 46632,
entitled "Manuel M. Serrano, petitioner, vs. Hon. Alberto L. Lerma, Presiding Judge, Regional
Trial Court, Branch 256, Muntinlupa City, and Eugenio C. Delica, respondents.

The petition stemmed from the following facts:

On June 30, 1997, Eugenio C. Delica, respondent, filed with the Regional Trial Court, Branch
256, Muntinlupa City, presided by Judge Alberto L. Lerma, a complaint for cancellation of Deeds
of Sale, Transfer Certificates of Title, Joint Venture Agreement, and damages, with prayer for the
issuance of a writ of preliminary injunction and temporary restraining order, docketed as Civil
Case No. 97-120. Impleaded as defendants were Manuel M. Serrano, now petitioner, Manuel P.
Blanco, MBJ Land, Inc., and MARILAQUE Land, Inc.

The complaint alleges inter alia that respondent is the registered owner of ten parcels of land
situated in Bagbagan, Muntinlupa City, with a total area of 2,062,475 square meters, more or
less, covered by ten Transfer Certificates of Title (TCT) Nos. S-12619 to S-12628 of the Registry
of Deeds, same city. On August 10, 1995, after having been "promised with financial bonanza"
by petitioner and Manuel Blanco, respondent executed in favor of the latter a special power of
attorney. Blanco then sold to MBJ Land, Inc. respondent’s three parcels of land covered by TCT
Nos. S-12625, S-12626 and S-12628. Thus, these titles were cancelled and in lieu thereof, TCT
Nos. 207282, 207283 and 207284 were issued in the name of MBJ Land, Inc.

On December 4, 1996, MBJ Land, Inc. entered into a Joint Venture Agreement with
MARILAQUE Land, Inc. involving the three parcels of land.

On December 23, 1996, petitioner Serrano again "unduly influenced, coerced and intimidated"
respondent into executing an affidavit wherein he confirmed that he sold his remaining seven
parcels of land, covered by TCT Nos. S-12619 to S-126124 and S-12627, to petitioners. Later,
respondent found that these seven titles were cancelled and new titles (TCT Nos. 209636 to
209642) were issued in petitioner’s name based on a spurious Deed of Absolute Sale.

Respondent thus prayed in his complaint that the special power of attorney, affidavit, the new
titles issued in the names of petitioner and MBJ Land, Inc., and contracts of sale be cancelled;
and that petitioner and his co-defendants be ordered to pay respondent, jointly and severally,
actual, moral and exemplary damages in the amount of ₱200,000.00, as well as attorney’s fee
of ₱200,000.00 and costs of litigation. Respondent likewise prayed that, pending trial on the
merits, a temporary restraining order and a writ of preliminary injunction be issued ordering the
defendants to immediately restore him to his possession of the parcels of land in question; and
that after trial, the writ of injunction be made permanent.

Petitioner then filed his answer with compulsory counterclaim, denying the material allegations
of the complaint.

Respondent later amended his complaint.

On August 5, 1997, the trial court issued a temporary restraining order and on September 8,
1997, a preliminary injunction directing petitioner and his co-defendants to immediately restore
respondent to his possession.

Petitioner then filed consolidated motions for reconsideration praying that the complaint be
dismissed for respondent’s failure to pay the required docket fee; and that Judge Lerma be
directed to inhibit himself from hearing the case.

The trial court, in its Order dated January 7, 1998, denied petitioner’s consolidated motions.

Petitioner seasonably filed with the Court of Appeals a petition for certiorari and prohibition with
application for a preliminary injunction and temporary restraining order assailing the trial court’s
twin Orders dated September 8, 1997 ordering the issuance of a writ of preliminary injunction;
and denying his consolidated motions dated January 7, 1998. Petitioner raised three issues: (a)
whether respondent paid the correct docket fee; (b) whether the trial court’s issuance of the writ
of preliminary injunction is in order; and (c) whether Judge Lerma should inhibit himself from
hearing the case.
On September 30, 1998, the Court of Appeals rendered a Decision partially granting the petition
by: (1) affirming the trial court’s ruling that the docket fee was correctly paid; (2) setting aside the
trial court’s Order directing the issuance of a writ of preliminary injunction; and (3) leaving the
matter of inhibition to the discretion of Judge Lerma.

Petitioner then filed a motion for partial reconsideration of the Court of Appeals’ ruling that
respondent correctly paid the docket fee and that the motion for inhibition should be addressed
to Judge Lerma’s sound discretion.

In a Resolution dated November 13, 1998, the Appellate Court denied the motion.

Hence the instant petition for review on certiorari.

The core issues for our resolution are:

1. Whether respondent paid the correct docket fee when he filed his complaint in Civil Case No.
97-120; and

2. Whether the matter of inhibition should be addressed to Judge Lerma’s discretion.

On the first issue, we cannot overemphasized the importance of paying the correct docket fees.
Such fees are intended to take care of court expenses in the handling of cases in terms of cost
of supplies, use of equipment, salaries and fringe benefits of personnel, etc., computed as to
man-hours used in the handling of each case. The payment of said fees, therefore, cannot be
made dependent on the result of the action taken, without entailing tremendous losses to the
government and to the judiciary in particular.3

Thus, the rule is that "upon the filing of the pleading or other application which initiates an action
or proceeding, the fees prescribed therefor shall be paid in full."4 However, a litigant who is a
pauper is exempt from the payment of the docket fees. But the fees shall be a lien on the
judgment rendered in favor of said pauper litigant, unless the court otherwise provides.5

It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of
the prescribed docket fees that vests a trial court with jurisdiction over the subject matter or
nature of the action.6

In the case at bar, petitioner impugns the Court of Appeals’ ruling that respondent’s complaint in
Civil Case No. 97-120 is not capable of pecuniary estimation and that, therefore, the docket fee
is fixed at ₱600.00 pursuant to Section 7(b)(1), Rule 141 of the Revised Rules of Court.

We agree with petitioner that the Court of Appeals erred in issuing such ruling. It should have
considered the allegations of the complaint and the character of the reliefs sought, the criteria in
determining the nature of an action.7
A careful examination of respondent’s complaint is that it is a real action. In Paderanga
vs. Buissan,8 we held that "in a real action, the plaintiff seeks the recovery of real
property, or, as stated in Section 2(a), Rule 4 of the Revised Rules of Court,9 a real action
is one ‘affecting title to real property or for the recovery of possession of, or for partition
or condemnation of, or foreclosure of a mortgage on a real property.’"

Obviously, respondent’s complaint is a real action involving not only the recovery of real
properties, but likewise the cancellation of the titles thereto.

Considering that respondent’s complaint is a real action, the Rule requires that "the
assessed value of the property, or if there is none, the estimated value thereof shall be
alleged by the claimant and shall be the basis in computing the fees."10

We note, however, that neither the "assessed value" nor the "estimated value" of the questioned
parcels of land were alleged by respondent in both his original and amended complaint. What
he stated in his amended complaint is that the disputed realties have a "BIR zonal valuation" of
₱1,200.00 per square meter. However, the alleged "BIR zonal valuation" is not the kind of
valuation required by the Rule. It is the assessed value of the realty.11 Having utterly failed to
comply with the requirement of the Rule that he shall allege in his complaint the
assessed value of his real properties in controversy, the correct docket fee cannot be
computed. As such, his complaint should not have been accepted by the trial court. We
thus rule that it has not acquired jurisdiction over the present case for failure of herein
respondent to pay the required docket fee. On this ground alone, respondent’s complaint
is vulnerable to dismissal.

Since the complaint is dismissible, the second issue on whether Judge Lerma should inhibit
himself from hearing the case has become moot and academic.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 46632 are hereby REVERSED. The complaint in Civil Case No. 97-
120 is ordered DISMISSED without prejudice.

SO ORDERED.

9. G.R. No. 143195 September 13, 2005

ANDREA CAMPOSAGRADO, VIRGINIA CAMPOSAGRADO, ESTER CAMPOSAGRADO,

Represented by her attorney-in-fact, FE C. MAGSAMBOL, and GUILLERMA
CAMPOSAGRADO, represented by her attorney-in-fact, RENATO S. CAMPOSAGRADO,
Petitioners,
vs.
PABLO S. CAMPOSAGRADO and The Hon. COURT OF APPEALS, Respondent.

DECISION
AUSTRIA-MARTINEZ, J.:

Before this Court is a petition for review under Rule 45 of the Rules of Court seeking the
reversal of the Resolution, dated June 17, 1999, issued by the Court of Appeals (CA) which
reads as follows:

Considering the report, dated May 24, 1999, of the Judicial Records Division (page 1 of the
Rollo) to the effect that the appellants failed to pay in full the required docket and other legal
fees, this Court resolved to DISMISS the appeal, pursuant to Section 4, Rule 41 in relation to
Section 1(c), Rule 50 of the 1997 Rules of Civil Procedure.

IT IS SO ORDERED.1

as well as the Resolution dated April 24, 2000, which reads:

Up for consideration is appellant’s motion for reconsideration (pages 11-12 of the Rollo) of this
Court’s resolution of June 17, 1999 (page 10 of the Rollo) dismissing the appeal for the reason
therein stated. Taking note of the report, dated February 24, 2000, of the Judicial Records
Division (page 1 of the Rollo) to the effect that the appellant still failed to pay the full amount of
the required docket fee, the same (motion) is hereby DENIED. The resolution of dismissal
stands.

IT IS SO ORDERED.2

The factual background of the case is as follows:

Petitioners and private respondent Pablo Camposagrado are legitimate children of Antonina and
Cresenciano Camposagrado. On April 16, 1975, Antonina died intestate leaving a parcel of land
with an area of around 3,879 square meters situated in Gen. Trias, Cavite and covered by
Transfer Certificate of Title No. (70-52) RT-6507. On August 26, 1975, Cresenciano sold one-
half of the said property to private respondent Pablo allegedly without the knowledge of
petitioners. On June 7, 1976, almost a year after Antonina’s death, Cresenciano also died
intestate.3

On September 10, 1991 or more than sixteen years after the death of Antonina, private
respondent Pablo filed a complaint before the Regional Trial Court (RTC) of Cavite, Trece
Martires City, against petitioners, docketed as Civil Case No. TM-329-A, for Partition, Recovery
of Possession with Damages, on the basis of the Deed of Sale executed by Cresenciano in his
favor. Private respondent Pablo prayed that one-half of the estate be transferred to him while
the remaining half be divided among petitioners and himself.4

In their Answer, herein petitioners contend that the subject lot was paraphernal property of the
late Antonina, thus Cresenciano cannot sell one-half portion thereof, his right thereto being
inchoate, the same not having been settled and partitioned among all the forced heirs of
Antonina.5 They then prayed that the complaint be dismissed and that private respondent be
ordered to pay damages.6

On October 30, 1998, the RTC rendered its decision the fallo of which reads:

ACCORDINGLY, let the property in dispute be partitioned between plaintiff and defendants so
that Pablo Camposagrado will receive double the share of each of the defendants; ordering
defendants to pay plaintiff the sum of ₱30,000.00 as attorney’s fees and ₱50,000.00 as moral
damages.

Costs against defendants.

SO ORDERED.7

Petitioners received said decision on December 28, 1998 and filed their Notice of Appeal the
following day; the collection officer of the RTC of Cavite, Trece Martires City, demanded and
collected from petitioners the appeal docket and other lawful fees as evidenced by Official
Receipt Nos. 9557982, 10392031, 7541241-B and 308968-Z on the same date; on June 17,
1999, the CA dismissed the appeal filed by petitioners on the ground that they failed to pay in
full the required docket and other legal fees; and on April 24, 2000, the CA denied petitioners’
motion for reconsideration.8

Thus, the present petition, where the following issues are being raised:

I. IN DISMISSING THE APPEAL FOR ALLEGED FAILURE TO PAY THE REQUIRED DOCKET
AND OTHER LEGAL FEES PURSUANT TO SECTION 4, RULE 44 (sic) IN RELATION TO
SECTION I (C), RULE 50 OF THE 1997 RULES OF CIVIL PROCEDURE, RESPONDENT
COURT ACTED NOT IN ACCORD WITH THE LAW AND APPLICABLE DECISIONS OF THIS
HONORABLE COURT RENDERING ITS ORDERS, APPENDICES "A" AND "B" HEREON,
CORRECTIBLE BY CERTIORARI.

II. IN DISMISSING THE APPEAL FOR ALLEGED FAILURE TO PAY THE REQUIRED DOCKET
AND OTHER LEGAL FEES, PAYABLE UNDER THE RULES, RESPONDENT COURT
GRAVELY ABUSED ITS DISCRETION TANTAMOUNT TO LACK OF JURISDICTION, OR
ACTED IN EXCESS OR WANT OF JURISDICTION RENDERING ITS ORDERS, APPENDICES
"A" AND "B" HEREON, CORRECTIBLE BY CERTIORARI.9

Petitioners argue that: they should not be faulted or penalized for the oversight of the collection
officer; when the collection officer asked from them to pay the amount indicated in the Official
Receipts in the total sum of ₱415.00, petitioners paid said amount in good faith; as ordinary
folks, they believed that the amount collected from them by the collection officer of the court is
what is mandated under the Rules; appeal being an essential part of our judicial system, the CA
should have proceeded with caution and notified petitioners that the amount collected from them
by the collection officer is deficient; petitioners were deprived of their right to due process by the
outright dismissal of their appeal; their appeal, being meritorious, must be considered and given
legal significance by the CA before resorting to technicality; petitioners have no intention to
delay the resolution of the case.10

Private respondent in his Comment contends that: petitioners are represented by private
counsel who is presumed to be competent and diligent in his task and is duty bound to know the
correct and full amount of docket and other lawful fees to be exacted by court personnel;
petitioners, acting through their agent, should exercise diligence in seeing to it that the full
amount of docket fee is paid within the reglementary period of appeal, failure of which is fatal to
their appeal in light of the proscription that the docket and other lawful fees should be paid in
full; this Court in Lazaro vs. Court of Appeals11 held that the right to appeal is a statutory right
and one who seeks to avail of that right must comply with the statute or rule; the CA in outrightly
dismissing the appeal of petitioners acted within the bounds of law and exercised sound
discretion; in any case, the present petition involves a pure question of fact, i.e., whether the
duty of paying the correct and full amount of docket and other legal fees devolves upon
petitioners, which this Court cannot take cognizance of.12

The sole issue that needs to be addressed in this petition is: Whether the CA correctly denied
the appeal filed by petitioners for their failure to pay the full amount of the docket fee.

We answer in the negative.

The general rule is that payment of docket fees within the prescribed period is mandatory for the
perfection of an appeal.13 This is pursuant to Sec. 4, Rule 41 of the 1997 Rules of Court which
provides that:

Sec. 4. Appellate court docket and other lawful fees. – Within the period for taking an appeal,
the appellant shall pay to the clerk of court which rendered the judgment or final order appealed
from, the full amount of the appellate court docket and other lawful fees. Proof of payment of
said fees shall be transmitted to the appellate court together with the original record or the
record on appeal.

There are instances however when the Court applied the rule with liberality.14 This is in
recognition of the importance of the remedy of appeal, which is an essential part of our judicial
system and the need to ensure that every party litigant is given the amplest opportunity for the
proper and just disposition of his cause freed from the constraints of technicalities.15

This Court on several occasions has pronounced that failure to pay the appellate docket fee
does not automatically result in the dismissal of an appeal, dismissal being discretionary on the
part of the appellate court.16 A party’s failure to pay the appellate court docket fee within the
reglementary period confers only a discretionary and not a mandatory power to dismiss the
proposed appeal.17 Such discretionary power should be used in the exercise of the court’s
sound judgment in accordance with the tenets of justice and fair play with great deal of
circumspection, considering all attendant circumstances and must be exercised wisely and
prudently, never capriciously, with a view to substantial justice.18

The records of this case show that the deficiency in the docket fee paid by petitioners is only
₱5.00.19 Petitioners claim that they merely relied on the assessment of the collecting officer as
to the amount of dockets fees that should be paid. As shown by the records, the assessment
made only totaled ₱415.00 which petitioners readily paid.20 These circumstances suggest that
petitioners never intended to circumvent the rules.21 The Court therefore resolves the petition in
their favor.

The Court takes note of the fact that petitioners, despite receipt of the Resolution dated June
17, 1999, still failed to remedy their mistake and failed to pay the deficiency in their docket fee.
Under different circumstances, such inaction would have an adverse effect on petitioners.
Considering however the meager amount which petitioners failed to pay in this case and more
significantly, the principal issue on appeal from the RTC Decision, that is, whether the trial court
committed a reversible error in ruling that private respondent Pablo is entitled to double the
share of each of his co-heirs, we find that the ends of justice would be better served by allowing
the appeal to proceed after due payment of the amount specified.

WHEREFORE, the petition is granted. The Resolutions of the Court of Appeals dated June 17,
1999 and April 24, 2000 are REVERSED and SET ASIDE. The Court of Appeals is ordered to
give due course to petitioners’ appeal UPON payment by petitioners of the amount of ₱5.00
which is the deficiency in their docket fee with said court, within five (5) days from finality of
herein Decision.

Let the records be remanded to the Court of Appeals for further proceedings.

SO ORDERED.

10. [G.R. No. 137489. May 29, 2002]

COOPERATIVE DEVELOPMENT AUTHORITY, petitioner, vs. DOLEFIL AGRARIAN REFORM

BENEFICIARIES COOPERATIVE, INC., ESMERALDO A. DUBLIN, ALICIA SAVAREZ, EDNA
URETA, ET AL., respondents.

DECISION

DE LEON, JR. J.

At the core of the instant petition for review on certiorari of the Decision[1] of the Court of
Appeals, 13th Division, in CA-G.R. SP. No. 47933 promulgated on September 9, 1998 and its
Resolution[2] dated February 9, 1999 is the issue of whether or not petitioner Cooperative
Development Authority (CDA for brevity) is vested with quasi-judicial authority to adjudicate
intra-cooperative disputes.
The record shows that sometime in the later part of 1997, the CDA received from certain
members of the Dolefil Agrarian Reform Beneficiaries Cooperative, Inc. (DARBCI for brevity), an
agrarian reform cooperative that owns 8,860 hectares of land in Polomolok, South Cotabato,
several complaints alleging mismanagement and/or misappropriation of funds of DARBCI by the
then incumbent officers and members of the board of directors of the cooperative, some of
whom are herein private respondents.

Acting on the complaints docketed as CDA-CO Case No. 97-011, CDA Executive Director
Candelario L. Verzosa, Jr. issued an order[3] dated December 8, 1997 directing the private
respondents to file their answer within ten (10) days from receipt thereof.

Before the private respondents could file their answer, however, CDA Administrator Alberto P.
Zingapan issued on December 15, 1997 an order,[4] upon the motion of the complainants in
CDA-CO Case No. 97-011, freezing the funds of DARBCI and creating a management
committee to manage the affairs of the said cooperative.

On December 18, 1991, the private respondents filed a Petition for Certiorari[5] with a prayer for
preliminary injunction, damages and attorneys fees against the CDA and its officers namely:
Candelario L. Verzosa, Jr. and Alberto P. Zingapan, including the DOLE Philippines Inc. before
the Regional Trial Court (RTC for brevity) of Polomolok, South Cotabato, Branch 39. The
petition which was docketed as SP Civil Case No. 25, primarily questioned the jurisdiction of the
CDA to resolve the complaints against the private respondents, specifically with respect to the
authority of the CDA to issue the freeze order and to create a management committee that
would run the affairs of DARBCI.

On February 24, 1998, CDA Chairman Jose C. Medina, Jr. issued an order[6] in CDA-CO Case
No. 97-011 placing the private respondents under preventive suspension, hence, paving the
way for the newly-created management committee[7] to assume office on March 10, 1998.

On March 27, 1998, the RTC of Polomolok, South Cotabato, Branch 39, issued a temporary
restraining order[8] (TRO), initially for seventy-two (72) hours and subsequently extended to
twenty (20) days, in an Order dated March 31, 1998. The temporary restraining order, in effect,
directed the parties to restore status quo ante, thereby enabling the private respondents to
reassume the management of DARBCI.

The CDA questioned the propriety of the temporary restraining order issued by the RTC of
Polomolok, South Cotabato on March 27, 1998 through a petition for certiorari before the Court
of Appeals, 12th Division, which was docketed as CA-G.R. SP No. 47318.

On April 21, 1998, the Court of Appeals, 12th Division, issued a temporary restraining order[9] in
CA-G.R. SP No. 47318 enjoining the RTC of Polomolok, South Cotabato, Branch 39, from
enforcing the restraining order which the latter court issued on March 27, 1998, and ordered that
the proceedings in SP Civil Case No. 25 be held in abeyance.
Consequently, the CDA continued with the proceedings in CDA-CO Case No. 97-011. On May
26, 1998 CDA Administrator Arcadio S. Lozada issued a resolution[10] which directed the
holding of a special general assembly of the members of DARBCI and the creation of an ad hoc
election committee to supervise the election of officers and members of the board of directors of
DARBCI scheduled on June 14, 1998.

The said resolution of the CDA, issued on May 26, 1998 prompted the private respondents to
file on June 8, 1998 a Petition for Prohibition[11] with a prayer for preliminary mandatory
injunction and temporary restraining order with the Court of Appeals, 13th Division, which was
docketed as CA-G.R. SP No. 47933. On June 10, 1998, the appellate court issued a
resolution[12] restraining the CDA and its administrator, Arcadio S. Lozada, the three (3)
members of the ad hoc election committee or any and all persons acting in their behalf from
proceeding with the election of officers and members of the board of directors of DARBCI
scheduled on June 14, 1998.

Incidentally, on the same date that the Court of Appeals issued a temporary restraining order in
CA-G.R. SP No. 47933 on June 10, 1998, a corporation by the name of Investa Land
Corporation (Investa for brevity) which allegedly executed a Lease Agreement with Joint
Venture with DARBCI filed a petition[13] with the RTC of Polomolok, South Cotabato, Branch
39, docketed as SP Civil Case No. 28, essentially seeking the annulment of orders and
resolutions issued by the CDA in CDA-CO Case No. 97-011 with a prayer for temporary
restraining order and preliminary injunction. On the following day, June 11, 1998, the trial court
issued a temporary restraining order[14] enjoining the respondents therein from proceeding with
the scheduled special general assembly and the elections of officers and members of the board
of directors of DARBCI on June 14, 1998. Thereafter, it also issued a writ of preliminary
injunction.

With the issuance of the two (2) restraining orders by the Court of Appeals, 13th Division, and
the RTC of Polomolok, South Cotabato, Branch 39, on June 10 and 11, 1998, respectively, the
scheduled special general assembly and the election of officers and members of the board of
directors of DARBCI on June 14, 1998 did not take place.

Nevertheless, on July 12, 1998, the majority of the 7,511 members of DARBCI, on their own
initiative, convened a general assembly and held an election of the members of the board of
directors and officers of the cooperative, thereby effectively replacing the private respondents.
Hence, the private respondents filed a Twin Motions for Contempt of Court and to Nullify
Proceedings[15] with the Court of Appeals in CA-G.R. SP No. 47933.

On September 9, 1998 the Court of Appeals, 13th Division, promulgated its subject appealed
Decision[16] granting the petition in CA-G.R. SP No. 47933, the dispositive portion of which
reads:
Wherefore, the foregoing considered, the Petition is hereby GRANTED. The Orders of the
respondent Cooperative Development Authority in CDA-CO case No. 97-011 dated 08
December 1997, 15 December 1997, 26 January 1998, 24 February 1998, 03 March 1998, and
the Resolution dated 26 May 1998, are hereby declared NULL AND VOID and of no legal force
and effect.

Further, the respondents are hereby ORDERED to perpetually CEASE AND DESIST from
taking any further proceedings in CDA-CO Case No. 97-011.

Lastly, the respondent CDA is hereby ORDERED to REINSTATE the Board of Directors of
DARBCI who were ousted by virtue of the questioned Orders, and to RESTORE the status quo
prior to the filing of CDA-CO Case No. 97-011.

SO ORDERED.

The CDA filed a motion for reconsideration[17] of the Decision in CA-G.R. SP No. 47933 but it
was denied by the Court of Appeals in its assailed Resolution[18] dated February 9, 1999, thus:

WHEREFORE, the Motion for Reconsideration is hereby DENIED for being patently without
merit.

MOREOVER, acting on petitioners Twin Motion, and in view of the Decision in this case dated
09, September 1998, the tenor of which gives it legal effect nunc pro tunc. We therefore hold the
12 July 1998 election of officers, the resolutions passed during the said assembly, and the
subsequent oath-taking of the officers elected therein, and all actions taken during the said
meeting, being in blatant defiance of a valid restraining order issued by this Court, to be NULL
AND VOID AB INITIO AND OF NO LEGAL FORCE AND EFFECT.

FURTHERMORE, the private respondents are hereby given thirty (30) days from receipt of this
Resolution within which to explain in writing why they should not be held in contempt of this
Court for having openly defied the restraining order dated 10 July 1998. The Hon. Jose C.
Medina of the CDA is given a like period to explain in writing why he should not be cited in
contempt for having administered the oath of the Board of Officers pending the effectivity of the
restraining order. The respondent Arcadio S. Lozada, Administrator of the CDA, is likewise given
the same period to explain why he should not be held in contempt for issuing a resolution on 21
July 1998 validating the proceedings of the assembly, and another resolution on 28 August 1998
confirming the election of the officers thereof.

SO ORDERED.

Hence, the instant petition[19] for review which raises the following assignments of error:

I
THE HONORABLE COURT OF APPEALS, IN NULLIFYING THE ORDERS AND
RESOLUTIONS OF THE COOPERATIVE DEVELOPMENT AUTHORITY IN CDA CO CASE
NO. 97-011, DECIDED A QUESTION OF SUBSTANCE THAT IS NOT IN ACCORD WITH LAW
AND APPLICABLE DECISIONS OF THE SUPREME COURT.

II

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE RULE ON

FORUM-SHOPPING.

III

THE HONORABLE COURT OF APPEALS ERRED IN RENDERING A DECISION ON THE

BASIS OF PURE CONJECTURES AND SURMISES AND HAS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS WHICH CALL FOR AN
EXERCISE OF THIS HONORABLE COURTS SUPERVISION.

Petitioner CDA claims that it is vested with quasi-judicial authority to adjudicate cooperative
disputes in view of its powers, functions and responsibilities under Section 3 of Republic Act No.
6939.[20] The quasi-judicial nature of its powers and functions was confirmed by the
Department of Justice, through the then Acting Secretary of Justice Demetrio G. Demetria, in
DOJ Opinion No. 10, Series of 1995, which was issued in response to a query of the then
Chairman Edna E. Aberina of the CDA, to wit:

Applying the foregoing, the express powers of the CDA to cancel certificates of registration of
cooperatives for non-compliance with administrative requirements or in cases of voluntary
dissolution under Section 3(g), and to mandate and conciliate disputes within a cooperative or
between cooperatives under Section 8 of R.A. No. 6939, may be deemed quasi-judicial in
nature.

The reason is that in the performance of its functions such as cancellation of certificate of
registration, it is necessary to establish non-compliance or violation of administrative
requirement. To do so, there arises an indispensable need to hold hearings, investigate or
ascertain facts that possibly constitute non-compliance or violation and, based on the facts
investigated or ascertained, it becomes incumbent upon the CDA to use its official discretion
whether or not to cancel a cooperatives certificate of registration, thus, clearly revealing the
quasi-judicial nature of the said function. When the CDA acts as a conciliatory body pursuant to
Section 8 of R.A. No. 6939, it in effect performs the functions of an arbitrator. Arbitrators are by
the nature of their functions act in quasi-judicial capacity xxx.

The quasi-judicial nature of the foregoing functions is bolstered by the provisions of Sections
3(o) of R.A. No. 6939 which grants CDA on (sic) the exercise of other functions as may be
necessary to implement the provisions of cooperative laws, the power to summarily punish for
direct contempt any person guilty of misconduct in the presence thereof who seriously interrupts
any hearing or inquiry with a fine or imprisonment prescribed therein, a power usually granted to
make effective the exercise of quasi-judicial functions.[21]

Likewise, the Office of the President, through the then Deputy Executive Secretary, Hon.
Leonardo A. Quisumbing, espoused the same view in the case of Alberto Ang, et al. v. The
Board of Directors, Metro Valenzuela Transport Services Cooperative, Inc., O.P. Case No.
51111, when it declared and ruled that:

Concededly, Section 3(o) of R.A. No. 6939 and Article 35(4) of R.A. 6938, may not be relied
upon by the CDA as authority to resolve internal conflicts of cooperatives, they being general
provisions. Nevertheless, this does not preclude the CDA from resolving the instant case. The
assumption of jurisdiction by the CDA on matters which partake of cooperative disputes is a
logical, necessary and direct consequence of its authority to register cooperatives. Before a
cooperative can acquire juridical personality, registration thereof is a condition sine qua non,
and until and unless the CDA issues a certificate of registration under its official seal, any
cooperative for that matter cannot be considered as having been legally constituted. To our
mind, the grant of this power impliedly carries with it the visitorial power to entertain cooperative
conflicts, a lesser power compared to its authority to cancel registration certificates when, in its
opinion, the cooperative fails to comply with some administrative requirements (Sec. 2(g), R.A.
No. 6939). Evidently, respondents-appellants claim that the CDA is limited to conciliation and
mediation proceedings is bereft of legal basis. Simply stated, the CDA, in the exercise of such
other function and in keeping with the mandate of the law, could render the decisions and/or
resolutions as long as they pertain to the internal affairs of the public service cooperative, such
as the rights and privileges of its members, the rules and procedures for meetings of the general
assembly, Board of Directors and committees, election and qualifications of officers, directors
and committee members, and allocation and distribution of surpluses.[22]

The petitioner avers that when an administrative agency is conferred with quasi-judicial powers
and functions, such as the CDA, all controversies relating to the subject matter pertaining to its
specialization are deemed to be covered within the jurisdiction of said administrative agency.
The courts will not interfere in matters which are addressed to the sound discretion of
government agencies entrusted with the regulation of activities undertaken upon their special
technical knowledge and training.

The petitioner added that the decision in the case of CANORECO v. Hon. Ruben D. Torres,[23]
affirmed the adjudicatory powers and functions of CDA contrary to the view held by the Court of
Appeals, when the Supreme Court upheld therein the ruling of the CDA annulling the election of
therein respondents Norberto Ochoa, et al. as officers of the Camarines Norte Electric
Cooperative.

Petitioner CDA also claims that herein private respondents are guilty of forum-shopping by filing
cases in three (3) different fora seeking the same relief. Petitioner pointed out that private
respondents originally filed a petition with a prayer for preliminary injunction dated December
17, 1997 before the RTC of Polomolok, South Cotabato which was docketed as SP Civil Case
No. 25. Subsequently, the same private respondents filed another petition with a prayer for
preliminary injunction with the Court of Appeals, 13th Division, docketed as CA-G.R. SP No.
47933. Thereafter, Investa, also represented by the same counsel of private respondents, Atty.
Reni Dublin, filed another case with the RTC of Polomolok, South Cotabato, docketed as SP
Civil Case No. 28, likewise praying, among others, for the issuance of preliminary injunction and
an application for a temporary restraining order. In effect, petitioner was confronted with three
(3) TROs issued in three (3) separate actions enjoining it from enforcing its orders and
resolutions in CDA-CO Case No. 97-011.

In their Comment,[24] private respondents contend that the instant petition for review on
certiorari filed by CDA Administrator Alberto Zingapan should be dismissed and struck down as
a mere scrap of paper for lack of authority to file the same from the Office of the Solicitor
General and for having been filed without approval from the Board of Administrators of CDA.

The private respondents also contend that, contrary to the claim of the petitioner, the powers,
functions and responsibilities of the CDA show that it was merely granted regulatory or
supervisory powers over cooperatives in addition to its authority to mediate and conciliate
between parties involving the settlement of cooperative disputes.

Private respondents denied that they are guilty of forum-shopping. They clarified that the case
filed with the RTC of Polomolok, South Cotabato, Branch 39, docketed as SP Civil Case No. 25,
was a petition for certiorari. On the other hand, the case that they filed with the Court of
Appeals, 13th Division, docketed therein as CA-G.R. SP No. 47933, was a petition for
prohibition to stop the holding of a special general assembly and the election of a new set of
DARBCI officers on June 14, 1998 as ordered by the petitioner CDA on May 26, 1998, which
events have not yet occurred at the time the petition for certiorari was filed by the private
respondents with the RTC of Polomolok, South Cotabato, Branch 39.

Private respondents also denied that the filing by Investa of the petition for the declaration of
nullity of the orders and resolutions of petitioner CDA, with a prayer for temporary restraining
order with the RTC of Polomolok, South Cotabato, docketed therein as SP Civil Case No. 28,
constituted forum-shopping on their part. They pointed out that Investa has a separate juridical
personality from DARBCI and that, contrary to the claim of petitioner CDA, the former is not
represented by the lawyer of the private respondents.

By way of reply,[25] petitioner claims that Atty. Rogelio P. Madriaga was properly deputized,
among other lawyers, as Special Attorney by the Office of the Solicitor General to represent the
CDA in the instant petition pursuant to the letter[26] of Assistant Solicitor General Carlos N.
Ortega addressed to CDA Chairman Jose C. Medina, Jr. dated April 8, 1999. Likewise, the filing
of the instant petition was an official act of CDA Administrator Alberto P. Zingapan who was duly
appointed by the CDA Board of Administrators as chairman of the Oversight Committee on
Legal Matters per Resolution No. 201, S-1998.[27]
Meanwhile, on March 26, 1999, certain persons alleging to be incumbent officers and members
of the board of directors of DARBCI filed a motion to intervene in the instant petition which was
granted by this Court per its Resolution dated July 7, 1999.[28] In the same resolution, this
Court required both petitioner CDA and the private respondents in this case to file their
respective comments to the petition-in-intervention within ten (10) days from notice, but both
parties failed to comply to do so up to the present.

We note that the instant petition for review on certiorari suffers from a basic infirmity for lack of
the requisite imprimatur from the Office of the Solicitor General, hence, it is dismissible on that
ground. The general rule is that only the Solicitor General can bring or defend actions on behalf
of the Republic of the Philippines and that actions filed in the name of the Republic, or its
agencies and instrumentalities for that matter, if not initiated by the Solicitor General, will be
summarily dismissed.[29]

The authority of the Office of the Solicitor General to represent the Republic of the Philippines,
its agencies and instrumentalities, is embodied under Section 35(1), Chapter 12, Title III, Book
IV of the Administrative Code of 1987 which provides that:

SEC. 35. Powers and Functions.The Office of the Solicitor General shall represent the
Government of the Philippines, its agencies and intrumentalities and its officials and agents in
any litigation, proceeding, investigation or matter requiring the services of lawyers. When
authorized by the President or head of the office concerned, it shall also represent government
owned or controlled corporations. The Office of the Solicitor General shall constitute the law
office of the Government and, as such, shall discharge duties requiring the services of lawyers.
It shall have the following specific powers and functions:

(1) Represent the Government in the Supreme Court and the Court of Appeals in all criminal
proceedings; represent the Government and its officers in the Supreme Court, Court of Appeals,
and all other courts or tribunals in all civil actions and special proceedings in which the
Government or any officer thereof in his official capacity is a party.

The import of the above-quoted provision of the Administrative Code of 1987 is to impose upon
the Office of the Solicitor General the duty to appear as counsel for the Government, its
agencies and instrumentalites and its officials and agents before the Supreme Court, the Court
of Appeals, and all other courts and tribunals in any litigation, proceeding, investigation or matter
requiring the services of a lawyer. Its mandatory character was emphasized by this Court in the
case of Gonzales v. Chavez,[30] thus:

It is patent that the intent of the lawmaker was to give the designated official, the Solicitor
General, in this case, the unequivocal mandate to appear for the government in legal
proceedings. Spread out in the laws creating the office is the discernible intent which may be
gathered from the term shall, which is invariably employed, from Act No. 136 (1901) to the more
recent Executive Order No. 292 (1987).
xxx xxx xxx

The decision of this Court as early as 1910 with respect to the duties of the Attorney-General
well applies to the Solicitor General under the facts of the present case. The Court then
declared:

In this jurisdiction, it is the duty of the Attorney General to perform the duties imposed upon him
by law and he shall prosecute all causes, civil and criminal, to which the Government of the
Philippine Islands, or any officer thereof, in his official capacity, is a party xxx.

xxx xxx xxx

The Court is firmly convinced that considering the spirit and the letter of the law, there can be no
other logical interpretation of Sec. 35 of the Administrative Code than that it is, indeed,
mandatory upon the OSG to represent the Government of the Philippines, its agencies and
instrumentalities and its officials and agents in any litigation, proceeding, investigation or matter
requiring the services of a lawyer.

As an exception to the general rule, the Solicitor General, in providing legal representation for
the government, is empowered under Section 35(8), Chapter 12, Title III, Book IV of the
Administrative Code of 1987 to deputize legal officers of government departments, bureaus,
agencies and offices to assist the Solicitor General and appear or represent the Government in
cases involving their respective offices, brought before the courts and exercise supervision and
control over such legal officers with respect to such cases.

Petitioner claims that its counsel of record, Atty. Rogelio P. Madriaga, was deputized by the
Solicitor General to represent the CDA in the instant petition. To prove its claim, the petitioner
attached to its Reply to the Comment dated January 31, 2000, a photocopy of the alleged
deputation letter[31] from the Office of the Solicitor General signed by Hon. Carlos N. Ortega,
Assistant Solicitor General, addressed to CDA Chairman Jose C. Medina, Jr.

A close scrutiny of the alleged deputation letter from the Office of the Solicitor General shows,
however, that said counsel for the petitioner was only authorized to appear as counsel in all civil
cases in the lower courts (RTCs and MTCs) wherein the CDA is a party-litigant. Likewise, the
same letter appears to be dated April 8, 1999 while the Petition for Review on Certiorari filed by
the petitioner was dated February 26, 1999. Clearly then, when the petition was filed with this
Court on March 3, 1999, Atty. Rogelio P. Madriaga was not yet deputized by the Office of the
Solicitor General to represent the CDA.

Even on the assumption that the alleged letter from the Office of the Solicitor General was
intended to validate or ratify the authority of counsel to represent the petitioner in this case, the
same contains certain conditions, one of which is that petitioner shall submit to the Solicitor
General, for review, approval and signature, all important pleadings and motions, including
motions to withdraw complaints or appeals, as well as compromise agreements. Significantly,
one of the major pleadings filed subsequently by the petitioner in this case namely, the Reply to
the Respondents Comment on the Petition dated January 31, 2000, does not have any
indication that the same was previously submitted to the Office of the Solicitor General for
review or approval, much less bear the requisite signature of the Solicitor General as required in
the alleged deputation letter.

Nonetheless, in view of the novelty of the main issue raised in this petition concerning the
nature and scope of jurisdiction of the CDA in the settlement of cooperative disputes as well as
the long standing legal battle involving the management of DARBCI between two (2) opposing
factions that inevitably threatens the very existence of one of the countrys major cooperatives,
this Court has decided to act on and determine the merits of the instant petition.

Section 3 of R.A. No. 6939 enumerates the powers, functions and responsibilities of the CDA,
thus:

SEC. 3. Powers, Functions and Responsibilities.The Authority shall have the following powers,
functions and responsibilities:

(a) Formulate, adopt and implement integrated and comprehensive plans and programs on
cooperative development consistent with the national policy on cooperatives and the overall
socio-economic development plan of the Government;

(b) Develop and conduct management and training programs upon request of cooperatives that
will provide members of cooperatives with the entrepreneurial capabilities, managerial expertise,
and technical skills required for the efficient operation of their cooperatives and inculcate in
them the true spirit of cooperativism and provide, when necessary, technical and professional
assistance to ensure the viability and growth of cooperatives with special concern for agrarian
reform, fishery and economically depressed sectors;

(c) Support the voluntary organization and consensual development of activities that promote
cooperative movements and provide assistance to wards upgrading managerial and technical
expertise upon request of the cooperatives concerned;

(d) Coordinate the effects of the local government units and the private sector in the promotion,
organization, and development of cooperatives;

(e) Register all cooperatives and their federations and unions, including their division, merger,
consolidation, dissolution or liquidation. It shall also register the transfer of all or substantially all
of their assets and liabilities and such other matters as may be required by the Authority;

(f) Require all cooperatives, their federations and unions to submit their annual financial
statements, duly audited by certified public accountants, and general information sheets;
(g) Order the cancellation after due notice and hearing of the cooperatives certificate of
registration for non-compliance with administrative requirements and in cases of voluntary
dissolution;

(h) Assist cooperatives in arranging for financial and other forms of assistance under such terms
and conditions as are calculated to strengthen their viability and autonomy;

(i) Establish extension offices as may be necessary and financially viable to implement this Act.
Initially, there shall be extension offices in the Cities of Dagupan, Manila, Naga, Iloilo, Cebu,
Cagayan de Oro and Davao;

(j) Impose and collect reasonable fees and charges in connection with the registration of
cooperatives;

(k) Administer all grants and donations coursed through the Government for cooperative
development, without prejudice to the right of cooperatives to directly receive and administer
such grants and donations upon agreement with the grantors and donors thereof;

(l) Formulate and adopt continuing policy initiatives consultation with the cooperative sector
through public hearing;

(m) Adopt rules and regulations for the conduct of its internal operations;

(n) Submit an annual report to the President and Congress on the state of the cooperative
movement;

(o) Exercise such other functions as may be necessary to implement the provisions of the
cooperative laws and, in the performance thereof, the Authority may summarily punish for direct
contempt any person guilty of misconduct in the presence of the Authority which seriously
interrupts any hearing or inquiry with a fine of not more than five hundred pesos (P500.00) or
imprisonment of not more than ten (10) days, or both. Acts constituting indirect contempt as
defined under Rule 71 of the Rules of Court shall be punished in accordance with the said Rule.

It is a fundamental rule in statutory construction that when the law speaks in clear and
categorical language, there is no room for interpretation, vacillation or equivocation there is only
room for application.[32] It can be gleaned from the above-quoted provision of R.A. No. 6939
that the authority of the CDA is to discharge purely administrative functions which consist of
policy-making, registration, fiscal and technical assistance to cooperatives and implementation
of cooperative laws. Nowhere in the said law can it be found any express grant to the CDA of
authority to adjudicate cooperative disputes. At most, Section 8 of the same law provides that
upon request of either or both parties, the Authority shall mediate and conciliate disputes with a
cooperative or between cooperatives however, with a restriction that if no mediation or
conciliation succeeds within three (3) months from request thereof, a certificate of non-
resolution shall be issued by the commission prior to the filing of appropriate action before the
proper courts. Being an administrative agency, the CDA has only such powers as are expressly
granted to it by law and those which are necessarily implied in the exercise thereof.[33]

Petitioner CDA, however, insists that its authority to conduct hearings or inquiries and the
express grant to it of contempt powers under Section 3, paragraphs (g) and (o) of R. A. No.
6939, respectively, necessarily vests upon the CDA quasi-judicial authority to adjudicate
cooperative disputes. A review of the records of the deliberations by both chambers of Congress
prior to the enactment of R.A. No. 6939 provides a definitive answer that the CDA is not vested
with quasi-judicial authority to adjudicate cooperative disputes. During the house deliberations
on the then House Bill No. 10787, the following exchange transpired:

MR. AQUINO (A.). The response of the sponsor is not quite clear to this humble
Representation. Let me just point out other provisions under this particular section, which to the
mind of this humble Representation appear to provide this proposed Authority with certain
quasi-judicial functions. Would I be correct in this interpretation of paragraphs (f) and (g) under
this section which state that among the powers of the Authority are:

To administer the dissolution, disposal of assets and settlement of liabilities of any cooperative
that has been found to be inoperable, inactive or defunct.

To make appropriate action on cooperatives found to be in violation of any provision

It appears to the mind of this humble Representation that the proposed Authority may be called
upon to adjudicate in these particular instances. Is it therefore vested with quasi-judicial
authority?

MR. ROMUALDO. No, Mr. Speaker. We have to resort to the courts, for instance, for the
dissolution of cooperatives. The Authority only administers once a cooperative is dissolved. It is
also the CDA which initiates actions against any group of persons that may use the name of a
cooperative to its advantage, that is, if the word cooperative is merely used by it in order to
advance its intentions, Mr. Speaker.

MR. AQUINO (A.). So, is the sponsor telling us that the adjudication will have to be left to the
courts of law?

MR. ROMUALDO. To the courts, Mr. Speaker.[34]

xxx xxx xxx

MR. ADASA. One final question, Mr. Speaker. On page 4, line 33, it seems that one of the
functions given to the Cooperative Development Authority is to recommend the filing of legal
charges against any officer or member of a cooperative accused of violating the provisions of
this Act, existing laws and cooperative by-laws and other rules and regulations set forth by the
government. Would this not conflict with the function of the prosecuting fiscal?
MR. ROMUALDO. No, it will be the provincial fiscal that will file the case. The Authority only
recommends the filing of legal charges, that is, of course, after preliminary investigation
conducted by the provincial fiscal or the prosecuting arm of the government.

MR. ADASA. Does the Gentleman mean to say that the Cooperative Development Authority can
take the place of the private complainant or the persons who are the offended party if the latter
would not pursue the case?

MR. ROMULDO. Yes, Mr. Speaker. The Authority can initiate even the filing of the charges as
embraced and defined on line 33 of page 4 of this proposed bill.[35]

xxx xxx xxx

MR. CHIONGBIAN. xxx. Under the same section, line 28, subparagraph (g) says that the
Authority can take appropriate action on cooperatives found to be violating any provision of this
Act, existing laws and cooperative by-laws, and other rules and regulations set forth by the
government by way of withdrawal of Authority assistance, suspension of operation or
cancellation of accreditation.

My question is: If a cooperative, whose officers are liable for wrongdoing, is found violating any
of the provisions of this Act, are we going to sacrifice the existence of that cooperative just
because some of the officers have taken advantage of their positions and misused some of the
funds? It would be very unfair for the Authority to withdraw its assistance at the expense of the
majority. It is not clear as to what the liabilities of the members of these cooperatives are.

xxx xxx xxx

MR. ROMUALDO. Mr. Speaker, before this action may be taken by the Authority, there will be
due process. However, this provision is applicable in cases where the cooperative as a whole
violated the provisions of this Act as well as existing laws. In this case, punitive actions may be
taken against the cooperative as a body.

With respect to the officials, if they themselves should be punished, then Section (h) of this
chapter provides that legal charges shall be filed by the Cooperative Development Authority.[36]

In like manner, the deliberations on Senate Bill No. 485, which was the counterpart of House Bill
No. 10787, yield the same legislative intent not to grant quasi-judicial authority to the CDA as
shown by the following discussions during the period of amendments:

SEN. ALVAREZ. On page 3, between lines 5 and 6, if I may, insert the following as one of the
powers: CONDUCT INQUIRIES, STUDIES, HEARINGS AND INVESTIGATIONS AND ISSUE
ORDERS, DECISIONS AND CIRCULARS AS MAY BE NECESSARY TO IMPLEMENT ALL
LAWS, RULES AND REGULATIONS RELATING TO COOPERATIVES. THE AGENCY MAY
SUMMARILY PUNISH FOR CONTEMPT BY A FINE OF NOT MORE THAN TWO HUNDRED
PESOS (P200.00) OR IMPRISONMENT NOT EXCEEDING TEN (10) DAYS, OR BOTH, ANY
PERSONS GUILTY OF SUCH MISCONDUCT IN THE PRESENCE OF THE AGENCY WHICH
SERIOUSLY INTERRUPTS ANY HEARING OR INVESTIGATION, INCLUDING WILFULL
FAILURE OR REFUSAL, WITHOUT JUST CAUSE, COMPLY WITH A SUMMONS,
SUBPOENA, SUBPOENA DUCES TECUM, DECISION OR ORDER, RULE OR REGULATION,
OR, BEING PRESENT AT A HEARING OR INVESTIGATION, REFUSES TO BE SWORN IN AS
A WITNESS OR TO ANSWER QUESTIONS OR TO FURNISH INFORMATION REQUIRED BY
THE AGENCY. THE SHERIFF AND/OR POLICE AGENCIES OF THE PLACE WHERE THE
HEARING OR INVESTIGATION IS CONDUCTED SHALL, UPON REQUEST OF THE
AGENCY, ASSIST IT TO ENFORCE THE PENALTY.

THE PRESIDENT. That is quite a long amendment. Does the Gentleman have a written copy of
his amendment, so that the Members will have an opportunity to go over it and examine its
implications?

Anyway, why do we not hold in abeyance the proposed amendment? Do we have that?

xxx xxx xxx

SEN. ALVAREZ. Mr. President, this is almost an inherent power of a registering body. With the
tremendous responsibility that we have assigned to the Authority or the agencyfor it to be able
to function and discharge its mandateit will need this authority.

SEN. AQUINO. Yes, Mr. President, conceptually, we do not like the agency to have quasi-
judicial powers. And, we are afraid that if we empower the agency to conduct inquiries, studies,
hearings and investigations, it might interfere in the autonomous character of cooperatives. So, I
am sorry Mr. President, we dont accept the amendment.[37]

The decision to withhold quasi-judicial powers from the CDA is in accordance with the policy of
the government granting autonomy to cooperatives. It was noted that in the past 75 years
cooperativism failed to flourish in the Philippines. Of the 23,000 cooperatives organized under
P.D. No. 175, only 10 to 15 percent remained operational while the rest became dormant. The
dismal failure of cooperativism in the Philippines was attributed mainly to the stifling attitude of
the government toward cooperatives. While the government wished to help, it invariably wanted
to control.[38] Also, in its anxious efforts to push cooperativism, it smothered cooperatives with
so much help that they failed to develop self-reliance. As one cooperative expert put it, The
strong embrace of government ends with a kiss of death for cooperatives.[39]

But then, acknowledging the role of cooperatives as instruments of national development, the
framers of the 1987 Constitution directed Congress under Article XII, Section 15 thereof to
create a centralized agency that shall promote the viability and growth of cooperatives. Pursuant
to this constitutional mandate, the Congress approved on March 10, 1990 Republic Act No.
6939 which is the organic law creating the Cooperative Development Authority. Apparently
cognizant of the errors in the past, Congress declared in an unequivocal language that the state
shall maintain the policy of non-interference in the management and operation of cooperatives.
[40]

After ascertaining the clear legislative intent underlying R.A. No. 6939, effect should be given to
it by the judiciary.[41] Consequently, we hold and rule that the CDA is devoid of any quasi-
judicial authority to adjudicate intra-cooperative disputes and more particularly disputes as
regards the election of the members of the Board of Directors and officers of cooperatives. The
authority to conduct hearings or inquiries and the power to hold any person in contempt may be
exercised by the CDA only in the performance of its administrative functions under R.A. No.
6939.

The petitioners reliance on the case of CANORECO is misplaced for the reason that the central
issue raised therein was whether or not the Office of the President has the authority to supplant
or reverse the resolution of an administrative agency, specifically the CDA, that had long
became final and on which issue we ruled in the negative. In fact, this Court declared in the said
case that the CDA has no jurisdiction to adjudicate intra-cooperative disputes thus:[42]

xxx xxx xxx

Obviously there was a clear case of intra-cooperative dispute. Article 121 of the Cooperative
Code is explicit on how the dispute should be resolved; thus:

ART. 121. Settlement of Disputes. Disputes among members, officers, directors, and committee
members, and intra-cooperative disputes shall, as far as practicable, be settled amicably in
accordance with the conciliation or mediation mechanisms embodied in the by-laws of the
cooperative, and in applicable laws.

Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of
competent jurisdiction.

Complementing this Article is Section 8 of R.A. No. 6939, which provides:

SEC. 8. Mediation and Conciliation. Upon request of either or both or both parties, the [CDA]
shall mediate and conciliate disputes with the cooperative or between cooperatives: Provided,
That if no mediation or conciliation succeeds within three (3) months from request thereof, a
certificate of non-resolution shall be issued by the request thereof, a certificate of non-resolution
shall be issued by the commission prior to the filing of appropriate action before the proper
courts.

Likewise, we do not find any merit in the allegation of forum-shopping against the private
respondents. Forum-shopping exists where the elements of litis pendentia are present or where
a final judgment in one case will amount to res judicata in the other.[43] The requisites for the
existence of litis pendentia, in turn, are (1) identity of parties or at least such representing the
same interest in both actions; (2) identity of rights asserted as prayed for, the relief being
founded on the same facts; and (3) the identity in both cases is such that the judgment that may
be rendered in the pending case, regardless of which party is successful, would amount to res
judicata to the other case.[44]

While there may be identity of parties between SP Civil Case No. 25 filed with the RTC of
Polomolok, South Cotabato, Branch 39, and CA-G.R. SP No. 47933 before the Court of
Appeals, 13th Division, the two (2) other requisites are not present. The Court of Appeals
correctly observed that the case filed with the RTC of Polomolok, South Cotabato was a petition
for certiorari assailing the orders of therein respondent CDA for having been allegedly issued
without or in excess of jurisdiction. On the other hand, the case filed with the Court of Appeals
was a petition for prohibition seeking to restrain therein respondent from further proceeding with
the hearing of the case. Besides, the filing of the petition for prohibition with the Court of
Appeals was necessary after the CDA issued the Order dated May 26, 1998 which directed the
holding of a special general assembly for purposes of conducting elections of officers and
members of the board of DARBCI after the Court of Appeals, 12th Division, in CA-G.R. SP No.
47318 issued a temporary restraining order enjoining the proceedings in Special Civil Case No.
25 and for the parties therein to maintain the status quo. Under the circumstances, the private
respondents could not seek immediate relief before the trial court and hence, they had to seek
recourse before the Court of Appeals via a petition for prohibition with a prayer for preliminary
injunction to forestall the impending damage and injury to them in view of the order issued by
the petitioner on May 26, 1998.

The filing of Special Civil Case No. 28 with the RTC of Polomolok, South Cotabato does not
also constitute forum-shopping on the part of the private respondents. Therein petitioner
Investa, which claims to have a subsisting lease agreement and a joint venture with DARBCI, is
an entity whose juridical personality is separate and distinct from that of private respondent
cooperative or herein individual private respondents and that they have totally different interests
in the subject matter of the case. Moreover, it was incorrect for the petitioner to charge the
private respondents with forum-shopping partly based on its erroneous claim that DARBCI and
Investa were both represented by the same counsel. A charge of forum-shopping may not be
anchored simply on the fact that the counsel for different petitioners in two (2) cases is one and
the same.[45] Besides, a review of the records of this case shows that the counsel of record of
Investa in Special Civil Case No. 28 is a certain Atty. Ignacio D. Debuque, Jr. and not the same
counsel representing the private respondents.[46]

Anent the petition-in-intervention, the intervenors aver that the Resolution of the Court of
Appeals dated February 9, 1999 in CA-G.R. SP No. 47933 denying the motion for
reconsideration of herein petitioner CDA also invalidated the election of officers and members of
the board of directors of DARBCI held during the special general assembly on July 12, 1998,
thus adversely affecting their substantial rights including their right to due process. They claim
that the object of the order issued by the appellate court on June 10, 1998 was to restrain the
holding of the general assembly of DARBCI as directed in the order of CDA Administrator
Arcadio Lozada dated May 26, 1998. In compliance with the said order of the Court of Appeals,
no general assembly was held on June 14, 1998. However, due to the grave concern over the
alleged tyrannical administration and unmitigated abuses of herein private respondents, the
majority of the members of DARBCI, on their own initiative and in the exercise of their inherent
right to assembly under the law and the 1987 Constitution, convened a general assembly on
July 12, 1998. On the said occasion, the majority of the members of DARBCI unanimously
elected herein petitioners-in-intervention as new officers and members of the board of directors
of DARBCI,[47] and thereby resulting in the removal of the private respondents from their
positions in DARBCI.

Petitioners-in-intervention pointed out that the validity of the general assembly held on July 12,
1998 was never raised as an issue in CA-G.R. SP No. 47933. The petitioners-in-intervention
were not even ordered by the Court of Appeals to file their comment on the Twin Motions For
Contempt of Court and to Nullify Proceedings filed by the private respondents on July 29, 1998.

As earlier noted, the Court of Appeals issued a temporary restraining order[48] in CA-G.R. SP
No. 47933 on June 10, 1998, the pertinent portion of which reads:

Meanwhile, respondents or any and all persons acting in their behalf and stead are temporarily
restrained from proceeding with the election of officers and members of the board of directors of
the Dolefil Agrarian Reform Beneficiaries Cooperative, Inc. scheduled on June 14, 1998 and or
any other date thereafter.

It was also noted that as a consequence of the temporary restraining order issued by the
appellate court, the general assembly and the election of officers and members of the board of
directors of DARBCI, pursuant to the resolution issued by CDA Administrator Arcadio S. Lozada,
did not take place as scheduled on June 14, 1998. However, on July 12, 1998 the majority of
the members of DARBCI, at their own initiative, held a general assembly and elected a new set
of officers and members of the board of directors of the cooperative which resulted in the ouster
of the private respondents from their posts in the said cooperative.

The incident on July 12, 1998 prompted herein private respondents to file their Twin Motions for
Contempt of Court and to Nullify Proceedings on July 26, 1998. The twin motions prayed,
among others, that after due notice and hearing, certain personalities, including the petitioners-
in-intervention, be cited in indirect contempt for their participation in the subject incident and for
the nullification of the election on July 12, 1998 for being illegal, contrary to the by-laws of the
cooperative and in defiance of the injunctive processes of the appellate court.

On September 9, 1998, the Court of Appeals, 13th Division, rendered a Decision in CA-G.R. SP
No. 47933 which declared the CDA devoid of quasi-judicial jurisdiction to settle the dispute in
CDA-CO Case No. 97-011 without however, taking any action on the Twin Motions for Contempt
of Court and to Nullify Proceedings filed by the private respondents. As it turned out, it was only
in its Resolution dated February 9, 1999 denying petitioners motion for reconsideration of the
Decision in CA-G.R. SP No. 47933 that the Court of Appeals, 13th Division, acted on the Twin
Motions for Contempt of Court and to Nullify Proceedings by declaring as null and void the
election of the petitioners-in-intervention on July 12, 1998 as officers and members of the board
of directors of DARBCI.

We find, however, that the action taken by the Court of Appeals, 13th Division, on the Twin
Motions for Contempt of Court and to Nullify Proceedings insofar as it nullified the election of the
officers and members of the Board of Directors of DARBCI, violated the constitutional right of
the petitioners-in-intervention to due process. The requirement of due process is satisfied if the
following conditions are present, namely: (1) there must be a court or tribunal clothed with
judicial power to hear and determine the matter before it; (2) jurisdiction must be lawfully
acquired over the person of the defendant or over the property which is the subject of the
proceedings; (3) the defendant must be given an opportunity to be heard; and (4) judgment
must be rendered upon lawful hearing.[49] The appellate court should have first required the
petitioners-in-intervention to file their comment or opposition to the said Twin Motions For
Contempt Of Court And to Nullify Proceedings which also refers to the elections held during the
general assembly on July 12, 1998. It was precipitate for the appellate court to render judgment
against the petitioners-in-intervention in its Resolution dated February 9, 1999 without due
notice and opportunity to be heard. Besides, the validity of the general assembly held on July
12, 1998 was not raised as an issue in CA-G.R. SP No. 47933.

WHEREFORE, judgment is hereby rendered as follows:

1. The petition for review on certiorari is hereby DENIED for lack of merit. The orders,
resolutions, memoranda and any other acts rendered by petitioner Cooperative Development
Authority in CDA-CO Case No. 97-011 are hereby declared null and void ab initio for lack of
quasi-judicial authority of petitioner to adjudicate intra-cooperative disputes; and the petitioner is
hereby ordered to cease and desist from taking any further proceedings therein; and

2. In the interest of justice, the dispositive portion of the Resolution of the Court of Appeals,
dated February 9, 1999, in CA-G.R. SP No. 47933, insofar as it nullified the elections of the
members of the Board of Directors and Officers of DARBCI held during the general assembly of
the DARBCI members on July 12, 1998, is hereby SET ASIDE.

No pronouncement as to costs.

SO ORDERED

11. G.R. No. 137869

FIRST DIVISION

SPOUSES MARCIAL VARGAS G.R. No. 137869

and ELIZABETH VARGAS,

Petitioners,
- versus -

SPOUSES VISITACION and

JOSE CAMINAS,

SPOUSES JESUS and LORELEI GARCIA,

and SPOUSES RODOLFO and

ROSARIO ANGELES DE GUZMAN,

Respondents.

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

SPOUSES RODOLFO and G.R. No. 137940

ROSARIO ANGELES DE GUZMAN,

Petitioners, Present:

- versus - PUNO, C.J., Chairperson,

CARPIO,

CORONA,

SPOUSES VISITACION and AZCUNA, and

JOSE CAMINAS, LEONARDO-DE CASTRO, JJ.

and SPOUSES MARCIAL and

ELIZABETH VARGAS, Promulgated:

Respondents. June 12, 2008

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

DECISION

CARPIO, J.:
The Case
This is a petition for review[1] under Rule 45 of the 1997 Rules of Civil Procedure assailing the
Decision dated 2 September 1998 of the Court of Appeals in CA-G.R. CV No. 45050.[2] The
Court of Appeals set aside the Order dated 10 February 1994 of the Regional Trial Court of
Quezon City, Branch 101 in Civil Case Nos. Q-90-7224 and 90-7439.

The Facts
On 6 August 1988, spouses Jose and Visitacion Caminas (spouses Caminas) bought a 54-
square meter lot with a two-storey townhouse, designated as townhouse No. 8, from Trans-
American Sales and Exposition represented by its developer Jesus Garcia (Garcia). Townhouse
No. 8 is located at No. 65 General Lim Street, Heroes Hill, Quezon City and is on a portion of
the land covered by TCT No. 195187. Spouses Caminas paid Garcia P850,000 as evidenced by
a contract of sale[3] and provisional receipt.[4] According to spouses Caminas, they took
possession of townhouse No. 8 upon completion of its construction.

In December of 1988, Garcia bought from Marcial and Elizabeth Vargas (spouses Vargas)
various construction materials. As payment to spouses Vargas, Garcia executed an absolute
Deed of Sale over townhouse No. 12.[5] However, on 1 March 1990, spouses Vargas and
Garcia executed a Deed of Exchange with Addendum[6] whereby spouses Vargas transferred to
Garcia townhouse No. 12, and in exchange Garcia transferred to spouses Vargas townhouse
No. 8.

The contracts executed by Garcia with spouses Caminas and spouses Vargas were not
registered with the Register of Deeds. This was because TCT No. 195187 was still being
reconstituted and it was only on 17 August 1989 that TCT No. 7285 was issued in its stead.

On 10 May 1990, Garcia and his wife Lorelei (spouses Garcia) executed a Deed of Real Estate
Mortgage[7] over townhouse No. 8 in favor of spouses Rodolfo and Rosario Angeles De
Guzman (spouses De Guzman) as security for a loan. The mortgage was annotated at the back
of TCT No. 7285. As spouses Garcia failed to pay their indebtedness, spouses De Guzman
foreclosed the mortgage on 12 October 1990. At the public auction, spouses De Guzman were
the highest bidder.

On 13 November 1990, spouses Caminas filed a complaint[8] against spouses Garcia, spouses
De Guzman, and spouses Vargas before the Regional Trial Court of Quezon City, docketed as
Civil Case No. Q-90-7224 for the declaration of nullity of deed of mortgage and deed of sale, for
the declaration of absolute ownership, for the delivery of title or in the alternative for refund of
purchase price and damages.

On 6 December 1990, spouses Vargas filed a case against spouses Garcia and spouses De
Guzman, also before the Regional Trial Court of Quezon City, for specific performance,
declaration of nullity of the mortgage contract, damages or in the alternative for sum of money
and damages, docketed as Civil Case No. Q-90-7439.[9]
The two cases were consolidated before the Regional Trial Court, Branch 101, as they involved
interrelated issues.[10]

In their Rejoinder dated 27 February 1993, spouses Vargas raised the lack of jurisdiction of the
trial court on the ground that the subject matter falls within the exclusive jurisdiction of the
Housing and Land Use Regulatory Board (HLURB).[11] Spouses Vargas further stated that the
HLURB had already rendered a decision in HLURB Case No. REM-021291-4730 dated 28 June
1991 awarding the property in their favor.[12]

The Ruling of the Trial Court

On 20 April 1993, the trial court rendered a decision upholding the rights of the spouses
Caminas as the first buyer of the property:

WHEREFORE, premises above considered, judgment is hereby rendered in favor of plaintiffs

Visitacion Caminas and Jose V. Caminas against defendants Sps. Jesus Garcia and Lorelei A.
Garcia, Sps. Rosario Angeles K. de Guzman and Rodolfo de Guzman and Sps. Elizabeth and
Marcial Vargas, declaring said plaintiffs as the absolute owners of the subject property and
ordering the Register of Deeds of Quezon City to divest defendants spouses Rosario Angeles K.
de Guzman and Rodolfo P. de Guzman and spouses Elizabeth Vargas and Marcial Vargas of
the title to the subject property and to cancel Transfer Certificate of Title No. 72646 issued in the
name of spouses Rosario Angeles K. de Guzman and Rodolfo de Guzman and to invest title
thereto in favor of plaintiffs Visitacion Caminas and Jose V. Caminas by issuing another transfer
certificate of title in their names.

Ordering defendants Jesus Garcia and Lorelei A. Garcia to pay defendants Elizabeth Vargas
and Marcial Vargas the amount of P700,000.00 and defendants Rosario Angeles K. de Guzman
the amount of P562,500.00 with legal rate of interest thereof.

SO ORDERED.[13]

Spouses De Guzman filed a Motion for Reconsideration. The trial court granted the motion for
reconsideration and issued an order[14] dated 10 February 1994, this time awarding ownership
of the property to spouses De Guzman:

IN VIEW OF THE FOREGOING, the decision of this Court dated April 20, 1993 is hereby
reconsidered and set aside and in lieu thereof, judgment is hereby rendered in favor of
defendants spouses Rosario Angeles K. de Guzman and Rodolfo de Guzman against plaintiffs
spouses Visitacion Caminas and Jose V. Caminas and plaintiffs spouses Elizabeth and Marcial
Vargas, declaring said defendants as the absolute owners of the subject property embraced in
TCT No. 72646.
Ordering defendants Jesus Garcia and Lorelei A. Garcia to pay plantiffs spouses Visitacion
Caminas and Jose V. Caminas the amount of P850,000.00 and plaintiffs Elizabeth Vargas and
Marcial Vargas the amount of P700,000.00 with legal interest thereof.

SO ORDERED.

Spouses Caminas and spouses Vargas filed an appeal before the Court of Appeals.

The Ruling of the Court of Appeals

In its decision dated 2 September 1998, the Court of Appeals set aside the order of the trial
court dated 10 February 1994. The appellate court reinstated the trial courts original decision
dated 20 April 1993 upholding the ownership of spouses Caminas:

Premises Considered, the Order of the Regional Trial Court dated February 10, 1994 is
REVERSED AND SET ASIDE, and the original decision dated April 20, 1993 is REINSTATED.

SO ORDERED.[15]

The appellate court stated that as between spouses Caminas and spouses Vargas, spouses
Caminas have a better right to the property. The appellate court ruled that as neither of the
sales were registered, spouses Caminas have a better right being the first possessor in good
faith. The appellate court likewise ruled that spouses Caminas have a better right than spouses
De Guzman over the property. According to the appellate court, the registration of the mortgage
cannot defeat the right of spouses Caminas since the mortgage was executed by one who was
no longer owner of the property. The appellate court further noted that spouses De Guzman
failed to prove that they were mortgagees in good faith.

On the issue of jurisdiction, the appellate court ruled that spouses Vargas are estopped from
raising the issue of jurisdiction since they filed the complaint and they took active part during the
trial of the case.

Hence, this appeal.

The Issues
The issues raised by the parties may be summarized as follows:

I. Whether the Court of Appeals committed reversible error in not setting aside the
decision and order of the Regional Trial Court since the case is within the exclusive jurisdiction
of the HLURB;

II. Whether the Court of Appeals committed reversible error in finding that spouses
Caminas have a superior right, over spouses Vargas, to the property being the first possessors
in good faith; and
III. Whether the Court of Appeals committed reversible error in finding that spouses
Caminas have a superior right over spouses De Guzman despite the registration of the
mortgage since the property was mortgaged by one who was no longer the owner of the
property.

The Ruling of the Court

We find the appeal meritorious.

Presidential Decree No. 1344 dated 2 April 1978 expanded the jurisdiction of the National
Housing Authority (NHA), the precursor of the HLURB, to include adjudication of the following
cases:

Sec. 1. In the exercise of its function to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing
Authority shall have exclusive jurisdiction to hear and decide cases of the following nature:

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or condominium unit
buyer against the project owner, developer, dealer, broker or salesman; and

C. Cases involving specific performance of contractual and statutory obligations filed by buyers
of subdivision lot or condominium unit against the owner, developer, broker or salesman.
(Emphasis ours)

Executive Order No. 648 created the Human Settlements Regulatory Commission (HSRC) to
assume the regulatory and adjudicatory functions of the NHA, among other purposes. Executive
Order No. 90 later renamed the HSRC the HLURB.

The HLURB has jurisdiction over cases arising from (1) unsound real estate business practices;
(2) claims for refund or other claims filed by subdivision lot or condominium unit buyers against
the project owner, developer, dealer, broker or salesman; and (3) demands for specific
performance of contractual and statutory obligations filed by buyers of subdivision lots or
condominium units against the owner, developer, broker, or salesman.[16]

The controversies in this case revolve around the following transactions:

1. The sale of townhouse No. 8 by spouses Garcia to spouses Caminas;

2. The sale of townhouse No. 8 by spouses Garcia to spouses Vargas; and

3. The mortgage of townhouse No. 8 by spouses Garcia to spouses De Guzman.

There is no dispute that spouses Garcia are in the real estate business under the name Trans-
American Sales and Exposition and that townhouse No. 8 is part of its Trans-American Sales
and Exposition II project. Clearly, the validity of the questioned transactions entered into by
spouses Garcia, as the owner and developer of Trans-American Sales and Exposition, falls
within the jurisdiction of the HLURB.

However, spouses De Guzman argue that (1) the HLURB has no jurisdiction over cases
involving the declaration of nullity of a mortgage contract filed against the mortgagee alone; and
(2) Section 18 of Presidential Decree No. 957 (PD 957) merely requires the project owner or
developer to seek prior authority from NHA before mortgaging the subdivision lot or
condominium unit but the law does not grant the HLURB the authority to invalidate the mortgage
contract if the requisite authority from the NHA is not obtained.

On the other hand, spouses Caminas contend that spouses Vargas are (1) estopped from
raising the issue of jurisdiction of the trial court since spouses Vargas filed the case and actively
participated in the proceedings before the trial court, and (2) guilty of forum shopping.

The Court finds no merit in the arguments raised by spouses De Guzman and spouses
Caminas.

The complaints filed before the trial court by spouses Caminas and spouses Vargas clearly
show that the cases are against spouses Garcia, the developer of townhouse No. 8. Hence, the
case filed before the trial court was not against the mortgagee alone. The mere fact that
spouses Garcia were declared in default does not change the parties to the case or the nature
of the action.

On spouses De Guzmans claim that Section 18 of PD 957 does not grant the HLURB the
authority to invalidate the mortgage contract if the requisite authority from the NHA is not
obtained, this Court has previously ruled that the HLURB has jurisdiction over cases involving
the annulment of a real estate mortgage constituted by the project owner without the consent of
the buyer and without the prior written approval of the NHA.

In Union Bank of the Philippines v. HLURB,[17] the Court held that a realty companys act of
mortgaging a condominium project without the knowledge and consent of the buyer of one of
the condominium units, and without obtaining the prior approval of the NHA, constitutes
unsound real estate business practice. Accordingly, the action for the annulment of such
mortgage and mortgage foreclosure sale falls within the exclusive jurisdiction of the HLURB,
thus:

Clearly, FRDCs act of mortgaging the condominium project to Bancom and FEBTC, without the
knowledge and consent of David as buyer of a unit therein, and without the approval of the NHA
(now HLURB) as required by P.D. No. 957, was not only an unsound real estate business
practice but also highly prejudicial to the buyer. David, who has a cause of action for annulment
of the mortgage, the mortgage foreclosure sale, and the condominium certificate of title that was
issued to the UBP and FEBTC as [the] highest bidders at the sale. The case falls within the
exclusive jurisdiction of the NHA (now HLURB) as provided in P.D. No. 957 of 1976 and P.D. No.
1344 of 1978.

The Court reiterated this ruling in Home Bankers Savings and Trust Co. v. Court of Appeals[18]
which involves a mortgage entered into by the same Trans-American Sales and Exposition that
is a party in this case, thus:

The CA did not err in affirming the decision of the Office of the President that HLURB has
jurisdiction to declare invalid the mortgage contract executed between Garcia/TransAmerican
and petitioner over the subject lots insofar as private respondents are concerned. It correctly
relied on Union Bank of the Philippines vs. HLURB, et al. where we squarely ruled on the
question of HLURBs jurisdiction to hear and decide a condominium buyers complaint for: (a)
annulment of a real estate mortgage constituted by the project owner without the consent of the
buyer and without the prior written approval of the NHA; (b) annulment of the foreclosure sale;
and (c) annulment of the condominium certificate of title that was issued to the highest bidder at
the foreclosure sale, x x x

On the contention that spouses Vargas are estopped from raising the issue of jurisdiction, the
well-settled rule is that the jurisdiction of a court may be questioned at any stage of the
proceedings. An examination of the records of the trial court will reveal that in its Rejoinder
dated 27 February 1993, spouses Vargas raised the issue of lack of jurisdiction of the trial court
since the case properly falls within the jurisdiction of the HLURB.

However, the trial court failed to address the issue of jurisdiction in its decision as well as in its
order granting the motion for reconsideration of spouses De Guzman.

Clearly, the trial court erred in not dismissing the case before it. Under the Rules of Court, it is
the duty of the court to dismiss an action whenever it appears that the court has no jurisdiction
over the subject matter.[19]

In De Rossi v. NLRC,[20] citing La Naval Drug Corporation v. Court of Appeals,[21] the Court
stated:

Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it appears
that the court has no jurisdiction over the subject matter, the action shall be dismissed. This
defense may be interposed at any time, during appeal or even after final judgment. Such is
understandable, as this kind of jurisdiction is conferred by law and not within the courts, let
alone the parties, to themselves determine or conveniently set aside.

In Mangaliag v. Catubig-Pastoral,[22] the Court ruled that a party who files a suit before a court
that lacks jurisdiction is not necessarily estopped from raising the issue of jurisdiction, thus:
It is neither fair nor legal to bind a party by the result of a suit or proceeding which was taken
cognizance of in a court which lacks jurisdiction over the same irrespective of the attendant
circumstances. The equitable defense of estoppel requires knowledge or consciousness of the
facts upon which it is based. The same thing is true with estoppel by conduct which may be
asserted only when it is shown, among others, that the representation must have been made
with knowledge of the facts and that the party to whom it was made is ignorant of the truth of the
matter (De Castro vs. Gineta, 27 SCRA 623). The filing of an action or suit in a court that does
not possess jurisdiction to entertain the same may not be presumed to be deliberate and
intended to secure a ruling which could later be annulled if not favorable to the party who filed
such suit or proceeding. Instituting such an action is not a one-sided affair. It can just as well be
prejudicial to the one who file the action or suit in the event that he obtains a favorable judgment
therein which could also be attacked for having been rendered without jurisdiction. The
determination of the correct jurisdiction of a court is not a simple matter. It can raise highly
debatable issues of such importance that the highest tribunal of the land is given the exclusive
appellate jurisdiction to entertain the same. The point simply is that when a party commits error
in filing his suit or proceeding in a court that lacks jurisdiction to take cognizance of the same,
such act may not at once be deemed sufficient basis of estoppel. It could have been the result
of an honest mistake or of divergent interpretations of doubtful legal provisions. If any fault is to
be imputed to a party taking such course of action, part of the blame should be placed on the
court which shall entertain the suit, thereby lulling the parties into believing that they pursued
their remedies in the correct forum. Under the rules, it is the duty of the court to dismiss an
action whenever it appears that court has no jurisdiction over the subject matter. (Section 2,
Rule 9, Rules of Court) Should the Court render a judgment without jurisdiction, such judgment
may be impeached or annulled for lack of jurisdiction (Sec. 30, Rule 132, Ibid.), within ten (10)
years from the finality of the same (Art. 1144, par. 3, Civil Code). (Emphasis supplied)

In Metromedia Times Corporation v. Pastorin,[23] the Court expounded on the issue of estoppel
on the question of jurisdiction:

The rulings in Lozon v. NLRC addresses the issue at hand. This Court came up with a clear rule
as to when jurisdiction by estoppel applies and when it does not:

Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it appears
that the court has no jurisdiction over the subject matter, the action shall be dismissed (Section
2, Rule 9, Rules of Court). This defense may be interposed at any time, during appeal (Roxas
vs. Rafferty, 37 Phil. 957) or even after final judgment (Cruzcosa vs. Judge Concepcion, et al.,
101 Phil. 146). Such is understandable, as this kind of jurisdiction is conferred by law and not
within the courts, let alone the parties, to themselves determine or conveniently set aside. In
People vs. Casiano (111 Phil. 73, 93-94), this Court, on the issue of estoppel, held:

The operation of the principle of estoppel on the question of jurisdiction seemingly depends
upon whether the lower court actually had jurisdiction or not. If it had no jurisdiction, but the
case was tried and decided upon the theory that it had jurisdiction, the parties are not barred, on
appeal, from assailing such jurisdiction, for the same must exist as a matter of law, and may not
be conferred by consent of the parties or by estoppel (5 C.J.S., 861-863). However, if the lower
court had jurisdiction, and the case was heard and decided upon a given theory, such, for
instance, as that the court had no jurisdiction, the party who induced it to adopt such theory will
not be permitted, on appeal, to assume an inconsistent position that the lower court had
jurisdiction. Here, the principle of estoppel applies. The rule that jurisdiction is conferred by law,
and does not depend upon the will of the parties, has no bearing thereon.

Verily, Lozon, Union Motors, Dy and De Rossi aptly resolve the jurisdictional issue obtaining in
this case. Applying the guidelines in Lozon, the labor arbiter assumed jurisdiction when he
should not. In fact, the NLRC correctly reversed the labor arbiters decision x x x. (Emphasis
supplied)

In this case, the trial court clearly had no jurisdiction over the subject matter. Hence, spouses
Vargas are not barred from assailing the jurisdiction of the trial court and the principle of
estoppel does not apply.

The appellate court, however, ruled that spouses Vargas are estopped from raising the issue of
jurisdiction based on the doctrine in Tijam v. Sibonghanoy.[24]

The Court finds that Tijam is not applicable in the present case. The general rule is that lack of
jurisdiction of a court may be raised at any stage of the proceedings. In Calimlim v. Ramirez,[25]
the Court stated that Tijam is an exception to the general rule because of the presence of
laches:

A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous
to cite is that the jurisdiction of a court over the subject matter of the action is a matter of law
and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a
court may be raised at any stage of the proceedings, even on appeal. This doctrine has been
qualified by recent pronouncements which stemmed principally from the ruling in the cited case
of [Tijam]. It is to be regretted, however, that the holding in said case had been applied to
situations which were obviously not contemplated therein. The exceptional circumstance
involved in [Tijam] which justified the departure from the accepted concept of non-waivability of
objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly
upheld that rendered the supposed ruling in [Tijam]not as the exception, but rather the general
rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is
not lost by waiver or by estoppel.

In Tijam, the lack of jurisdiction was raised for the first time in a motion to dismiss filed almost
fifteen (15) years after the questioned ruling had been rendered. Hence, the Court ruled that the
issue of jurisdiction may no longer be raised for being barred by laches.

The circumstances of the present case are different from Tijam. Spouses Vargas raised the
issue of jurisdiction before the trial court rendered its decision. They continued to raise the issue
in their appeal before the Court of Appeals and this Court. Hence, it cannot be said that laches
has set in. The exception in Tijam finds no application in this case and the general rule must
apply, that the question of jurisdiction of a court may be raised at any stage of the proceedings.
Spouses Vargas are therefore not estopped from questioning the jurisdiction of the trial court.

In any case, spouses Caminas cannot invoke the principle of estoppel to prevent the Court from
taking up the issue of jurisdiction.[26] In Dy v. NLRC,[27] the Court held:

The failure of the appellees to invoke anew the aforementioned solid ground of want of
jurisdiction of the lower court in this appeal should not prevent this Tribunal to take up that issue
as the lack of jurisdiction of the lower court is apparent upon the face of the record and it is
fundamental that a court of justice could only validly act upon a cause of action or subject matter
of a case over which it has jurisdiction and said jurisdiction is one conferred only by law; and
cannot be acquired through, or waived by, any act or omission of the parties; hence may be
considered by this court motu proprio. (citations omitted)

The Court shall no longer dwell on the issue of forum shopping. Even if spouses Vargas were
guilty of forum shopping, the fact remains that the trial court had no jurisdiction over the case.
Spouses Caminas only raised the issue of forum shopping in their opposition to the Motion for
Reconsideration (filed by the spouses Vargas) dated 22 October 1998 before the Court of
Appeals.[28] In Young v. Keng Seng,[29] the Court ruled that the violation of the rule on forum
shopping should be raised at the earliest opportunity in a motion to dismiss or a similar
pleading. The fact that spouses Vargas filed a case before the HLURB was made known to the
spouses Caminas before the trial court rendered its decision. Yet, spouses Caminas failed to
question the alleged forum shopping before the trial court or in their appeal brief before the
Court of Appeals.

Having concluded that it is the HLURB and not the trial court which has jurisdiction over the
present controversy, the Court deems it unnecessary to discuss the other issues raised by the
parties.

WHEREFORE, we SET ASIDE the Decision of the Court of Appeals dated 2 September 1998 in
CA-G.R. CV No. 45050. We DISMISS Civil Case Nos. Q-90-7224 and 90-7439 without
prejudice to the parties seeking relief, if so minded, in the proper forum.

SO ORDERED[G.R. No. 131686. March 18, 2002]

ROUEL AD. REYES, petitioner, vs. SPOUSES PEPITO and MARTA TORRES, HON. ELIEZER
R. DELOS SANTOS, Executive Judge, RTC, Angeles City, respondents.

DECISION

YNARES-SANTIAGO, J.:
This petition for certiorari originates from a case for ejectment with damages concerning a
parcel of land[1] located in Mabalacat, Pampanga. Sometime in 1993, petitioner Rouel AD.
Reyes purchased the subject property. At that time, the property was already occupied by
several tenants who had constructed their homes and commercial establishments thereon.
These residents were informed that petitioner had acquired the property and were asked to
vacate the same.

Respondent spouses Pepito and Marta Torres and Arcelli T. Manalo refused to vacate and
remove their structure. Moreover, they erected one more structure and leased the same to Lolita
Ticse for a monthly rental of One Thousand Pesos (P1,000.00). Several written demands[2] to
vacate addressed to the Torres couple and Manalo went unheeded, which prompted petitioner
Reyes to file a complaint before the Barangay Lupon for conciliation proceedings. When no
settlement was reached, a certificate to file action was issued to petitioner, who filed a case for
ejectment[3] against respondents and Manalo before the Municipal Circuit Trial Court of
Mabalacat and Magalang, Pampanga.

On May 29, 1997, the MCTC rendered a decision, disposing of the case as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against herein
defendants by ordering the latter:

1. To vacate the premises and to surrender the same peacefully to the plaintiff or to any of his
authorized representative/s;

2. To remove the structure/s standing on the premises;

3. To pay the plaintiff a rental of P1,000.00 a month commencing from the date of filing of the
complaint on July 22, 1996, up to the time defendants finally vacate the premises;

4. To pay the plaintiff the amount of P20,000.00 as attorneys fees and to pay the cost of this
suit.

Plaintiffs claims for moral damages and defendants counterclaim are hereby denied for lack of
proof.

SO ORDERED.[4]

The Torres couple and co-defendant Manalo appealed to the Regional Trial Court of Angeles
City and filed the required supersedeas bond. The case was docketed as Civil Case No. 8746.
On September 18, 1997, the RTC dismissed the appeal for failure to pay docket and other legal
fees.[5]

Respondents filed a motion for reconsideration,[6] averring that they had paid the proper docket
fees as early as August 27, 1997, annexing thereto the receipts. They manifested that it was the
Clerk of Court of the MCTC of Mabalacat and Magalang who neglected to attach the said
receipts to the records of the case. The motion for reconsideration was set for hearing at 2:00 in
the afternoon of October 3, 1997.

The day before the hearing, respondents filed a petition for certiorari and prohibition[7] with
Branch 62 of the Regional Trial Court of Angeles City, docketed as Civil Case No. 8794.
Respondents assailed the writ of execution issued by the MCTC on September 30, 1997
despite their filing of the supersedeas bond to stay execution of judgment pending appeal.
Nevertheless, the sheriff executed the writ and demolished respondents house and other
structure on the subject property.

Respondents failed to appear at the hearing of their motion for reconsideration before Branch
59 of the RTC. The motion for reconsideration was denied and its earlier order dismissing the
appeal was sustained.

The following day, respondents filed another motion for reconsideration[8] of the order denying
their first motion for reconsideration. They alleged that their counsel arrived late at the hearing
on October 3, 1997; that their counsel was at Branch 62 of the RTC Angeles City awaiting the
issuance of a temporary restraining order in Civil Case No. 8794, which was issued only a few
minutes before 2:00 oclock; that he thereafter rushed to Branch 59 to attend the hearing but
was delayed by heavy traffic due to a vehicular accident.

On November 17, 1997, the Regional Trial Court issued an Order,[9] ruling as follows:

Without necessarily touching on the issue as to whether the appeal was filed on time and it
appearing that indeed there was payment of the appellate docket fees as evidenced by Official
Receipt Nos. 5864393 and 6674615, the Branch Clerk of Court of the Municipal Circuit Trial
Court, Mabalacat-Magalang, Pampanga, is hereby ORDERED to immediately transmit the
entire records of this case to this Court for inclusion in the raffle.

SO ORDERED.

Petitioner filed a motion for reconsideration.[10] While his motion for reconsideration remained
unresolved, the case was raffled to Branch 57 of the Regional Trial Court of Angeles City.[11] On
December 5, 1997, said court issued an Order[12] directing the parties to submit their
respective memoranda, after which the case would be considered submitted for decision.

Hence, the instant petition for certiorari. Petitioner argues that respondent court had lost
jurisdiction when it dismissed the appeal and returned the records of the case to the Municipal
Circuit Trial Court; that respondent court erred in reinstating the appeal without first resolving the
motion for reconsideration; that respondent court erred in not citing private respondents in
contempt for forum-shopping; and that respondents motion for reconsideration of the dismissal
order was bereft of merit.
We find no grave abuse of discretion on the part of respondent court.

This Court is fully aware that procedural rules are not to be belittled or simply disregarded for
these prescribed procedures insure an orderly and speedy administration of justice. However, it
is equally true that litigation is not merely a game of technicalities. Time and again, courts have
been guided by the principle that the rules of procedure are not to be applied in a very rigid and
technical manner, as rules of procedure are used only to help secure and not to override
substantial justice.[13] The law and jurisprudence grant to courts the prerogative to relax
compliance with procedural rules of even the most mandatory character,[14] mindful of the duty
to reconcile both the need to put an end to litigation speedily and the parties right to an
opportunity to be heard.[15]

A more lenient interpretation is appropriate in this case especially because the dismissal of
respondents appeal for failure to pay docket fees was manifestly erroneous. Through no fault of
respondents, the clerk of court of the Municipal Circuit Trial Court failed to include and transmit
to respondent Regional Trial Court the receipts of payment. The records show that respondents
paid to the Clerk of Court of the Municipal Circuit Trial Court the corresponding amounts well
within the five (5) days granted by the respondent court in its order requiring such payment.[16]

Contrary to petitioners contention, there was nothing respondents could have done about the
situation since they had every right to rely on the presumption that the clerk of court would do
her bounden duty. Rule 40, Section 5 of the Rules of Court, as amended, provides:

Within the period for taking an appeal, the appellant shall pay to the clerk of the court which
rendered the judgment or final order appealed from the full amount of the appellate court docket
and other lawful fees. Proof of payment thereof shall be transmitted to the appellate court
together with the original record or the record on appeal, as the case may be. (Underscoring
ours)

Clearly then, it was the responsibility of the clerk of court to attach respondents proof of
payment to the original record. Respondent courts error in dismissing the appeal after having
been inadvertently misled to believe that respondents had failed to pay the docket fees was
rectifiable. Respondents endeavored to set this right through their first motion for
reconsideration.

It cannot be said that respondents second motion is strictly prohibited by the rules for the
matters raised in the first and second motions are not identical, since they challenged two
different orders of the respondent court.

To our mind, a strict application of the rule prohibiting a second motion for reconsideration in this
instance would be unreasonable. Both orders dismissing the appeal were based on
technicalities and not on the merits of the case. Recognizing that litigations should, as much as
possible, be resolved on the merits and not on technicality, the strict interpretation of this
exclusionary rule in this case would amount to a deprivation of the petitioners statutory right to
appeal. The Court has in innumerable instances held that the right of appeal is an essential part
of the judicial system; hence, courts should proceed with caution so as not to unduly and hastily
divest a party of the right to appeal.[17]

In the first place, were it not for the omission or negligence of the Clerk of the Municipal Court,
the appeal would not have been dismissed, and the same would have been resolved on the
merits. The final resolution of this case has been delayed because of procedural or technical
lapses. However, such procedural lapses on the part of respondents was neither intended to
delay nor did it result in prejudice to petitioner; hence, denying respondents appeal under the
circumstances would be putting a premium on technicalities at the expense of a just resolution
of the case.[18]

Whenever non-compliance with the rules is not intended to delay the final disposition of the
case, nor to cause prejudice to the adverse party, we have repeatedly held that the dismissal of
an appeal on mere technicalities may be stayed in the exercise of the courts equity jurisdiction.
[19] Thus, when respondent court set aside its earlier dismissal of respondents appeal, it did not
do so with grave abuse of discretion amounting to excess or lack of jurisdiction. Litigations
should, as much as possible, be decided on the merits and not on technicality.[20] It is the
courts policy to encourage hearings of appeals on the merits[21] so that every party-litigant is
afforded the amplest opportunity for the proper and just disposition of his cause, unhampered by
the constraints of technicalities.[22]

WHEREFORE, in view of all the foregoing, the petition is DISMISSED. The case is REMANDED
to the Regional Trial Court of Angeles City, Pampanga, which is directed to resume proceedings
in Civil Case No. 8746.

SO ORDERED

[G.R. No. 116695. June 20, 1997]

VICTORIA G. GACHON and ALEX GUEVARA, petitioners, vs. HON. NORBERTO C. DEVERA,
JR., Presiding Judge, Branch XXIV, RTC, Iloilo City; HON. JOSE R. ASTORGA, Presiding
Judge, Branch I, Municipal Trial Court in Cities, Iloilo City; and SUSANA GUEVARA,
represented by her attorney-in-fact, ROSALIE GUEVARA, respondents.

DECISION

PANGANIBAN, J.:

May the Rule on Summary Procedure be interpreted liberally to allow the admission of an
answer filed out of time due to alleged oversight?

This is the main legal question raised in this petition for review assailing the Decision of the
Regional Trial Court of Iloilo City, Branch 24,[1] which dismissed a special civil action for
certiorari and injunction filed by herein petitioners. The dispositive portion of the assailed RTC
Decision reads:[2]

WHEREFORE premises considered, the prayer for the issuance of a writ of preliminary
injunction is denied and, with respect to the merits, the instant case is hereby ordered
dismissed.

Double costs against petitioners.

Facts

The factual antecedents of this case as found by the Regional Trial Court are undisputed and
admitted as correct by the parties. A complaint for forcible entry[3] was filed by Private
Respondent Susana Guevara against Patricio Guevara and Petitioners Victoria Gachon and
Alex Guevara before the Municipal Trial Court for Cities (MTCC) of Iloilo City. Summons was
served on and received by petitioners on August 25, 1993, directing them to file an answer
within the reglementary period of ten (10) days. Patricio Guevara was abroad at that time;
hence, the MTCC did not acquire jurisdiction over him. On September 4, 1993, petitioners filed
with the MTCC an urgent motion for extension of time to file an answer.[4] On September 7,
1993, the MTCC denied the motion on the ground that it was a prohibited pleading under the
Rule on Summary Procedure.[5] On September 8, 1993, or more than ten days from their
receipt of the summons, petitioner submitted an urgent motion praying for the admission of their
answer,[6] which was attached thereto. Two days later, petitioners filed another motion pleading
for the admission of an amended answer. On September 23, 1993, the MTCC denied the
motions and considered the case submitted for resolution.[7] On October 27, 1993, the MTCC
also denied the petitioners motion for reconsideration.[8] Thereafter, on November 26, 1993, the
MTCC[9] issued a decision[10] resolving the complaint for forcible entry in favor of herein
private respondents.

Instead of filing an appeal, petitioners filed a petition for certiorari and injunction before the
Regional Trial Court (RTC) of Iloilo City,[11] Branch 24, praying mainly that the MTCC be
ordered to admit the amended answer and to conduct further proceedings in the civil case for
forcible entry. As prayed for, a temporary restraining order was issued by the RTC.

Thereafter, the RTC issued the assailed Decision[12] dismissing the petition. Respondent Judge
Norberto E. Devera, Jr., ratiocinated:[13]

Section 36 of Batas Pambansa Blg. 129, otherwise known as The Judiciary Reorganization Act
of 1980 provides, among others, as follows:

Sec. 36 - Summary Procedures in Special Cases x x x The Supreme Court shall adopt special
rules or procedures applicable to such cases in order to achieve an expeditions (sic) and
inexpensive determination thereof without regard to technical rules. Such simplified procedures
may provide that affidavits and counter-affidavits may be admitted in lieu of oral testimony and
that the periods for filing pleadings shall be non-extendible.

Pursuant to the aforequoted legislative mandate, the Supreme Court promulgated the Rule on
Summary Procedure, the pertinent provisions of which, as related to the issues raised in this
case, are hereunder set forth -

II - Civil Cases

Section 3 - Pleadings

A. (P)leadings allowed - The only pleadings allowed to be filed are the complaints, compulsory
counter-claims and cross-claims pleaded in the answer, and the answers thereto

xxxxxxxxx

Section 5 Answer - Within ten (10) days from service of summons, the defendant shall file his
answer to the complaint and serve a copy thereof on the plaintiff x x x

Section 6. Effect of Failure to answer - Should the defendant fail to answer the complaint within
the period above provided, the Court, motu proprio, or on motion of the plaintiff, shall render
judgment as may be warranted by the facts alleged in the complaint and limited to what is
prayed for therein: x x x

xxxxxxxxx

Section 19. Prohibited Pleadings and Motions - The following pleadings, motions, or petitions
shall not be allowed in the cases covered by this Rule:

(a) Motion for extension of time to file pleadings, affidavits or any other paper.

xxxxxxxxx

The foregoing should underscore quite clearly the reality that the ten-day-period to file an
answer reckoned from the date of the receipt of the summons is mandatory and no reason of
any kind is acceptable to operate as an excuse. The rule is explicit. It is addressed more, being
one of procedure, to counsels than to litigants. Counsels, therefore cannot assert the validity of
their clients cause to evade the mandate of the law.

Accordingly, the Court cannot fault the respondent judge [referring to Judge Jose R. Astorga] in
acting the way he did in Civil Case No. 130 (93) taking into account the admitted facts and
circumstances.

Hence, this petition directly filed before this Court.

The Issues

Petitioners submit for resolution the following questions of law:[14]

I. Are the provisions of the Rules on Summary Procedure on the period of pleadings to be
applied STRICTLY or LIBERALLY.

II. What is the legal effect of a belated answer under the Rules on Summary Procedure.

Petitioners argue that the technical rules of procedure must yield to the higher interest of justice.
Petitioners explain that they filed the motion for extension of time to file an answer, a prohibited
pleading under the Rule on Summary Procedure, because of oversight. That was why
immediately upon receipt of the denial of that motion, petitioners filed their motion to admit
answer which was later verified and had to be amended. All these (actions) were done in a
period of five (5) days from the lapse of the reglementary period to file an answer.[15]
Furthermore, petitioners contend that no prejudice to private respondent has been claimed or
alleged by reason of the delay in filing an answer.[16] Petitioners also argue that their defense in
the action for forcible entry is based on substantial grounds, because they were in prior physical
possession of the premises subject of the action and that their houses have long been standing
on the land in question because the land on which said houses are standing are (sic) the
common properties of the parties.

Citing Section 2, Rule 1[17] of the Rules of Court, petitioners pray that the provisions in the Rule
on Summary Procedure regarding prohibited pleadings and the period for filing an answer be
given liberal interpretation. Petitioners concede that said provisions appear to be couched in
mandatory language. They contend, however, that other similarly worded provisions in the
Rules of Court have nonetheless been liberally applied by this Court to promote substantial
justice.[18]

Private respondent, on the other hand, submits that the provisions in question have to be
strictly construed in order to avoid delay, considering that the Rule on Summary
Procedure is aimed at inexpensive, expeditious and summary determination of cases.[19]
Private respondent adds that the petition can also be dismissed on the ground of violation of
Revised Circular 28-91 on forum shopping, because three (3) months after the rendition of the
assailed Decision, a petition for quieting of title and partition, and damages, involving the same
parcel of residential land (Cadastral Lot No. 709 x x x ), was filed xxx docketed as Civil Case
No. 21618, by (Petitioner) Victoria Guevara-Gachon (x x x), Patricio Guevara (father of
Petitioner Alex Guevara), Lilia Guevara-Doreza and Fe Guevara-Burgos against herein private
respondent. Private respondent contends that the subsequent case is the appropriate forum
where ownership of the property in question may be threshed out.[20]

As observed at the outset, the issue to be resolved is whether, under the undisputed facts
of this case, the Rule on Summary Procedure may be liberally construed in order to allow
the admission of petitioners answer which unquestionably was filed beyond the
reglementary period.

Preliminary Matter

It bears noting that petitioners filed directly before this Court a petition for review assailing the
RTC Decision. This remedy is allowed under paragraph 2 of Circular 2-90[21] which provides:

Section 2. Appeals from Regional Trial Courts to the Supreme Court. -- Except in criminal cases
where the penalty imposed is life imprisonment or reclusion perpetua, judgments of regional trial
courts may be appealed to the Supreme Court only by petition for review on certiorari in
accordance with Rule 45 of the Rules of Court in relation to Section 17 of the Judiciary Act of
1948, as amended,[22] this being the clear intendment of the provision of the Interim Rules that
(a)ppeals to the Supreme Court shall be taken by petition for certiorari which shall be governed
by Rule 45 of the Rules of Court.

Petitioners ask the Court to interpret a provision of the Rule on Summary Procedure. This is a
pure question of law that may be properly raised in this petition for review

The Courts Ruling

The petition has no merit.

First Issue: Interpretation of the Period

The pertinent provisions of the Rule on Summary Procedure are as follows:

Section 5. Answer. - Within ten (10) days from service of summons, the defendant shall file his
answer to the complaint and serve a copy thereof on the plaintiff x x x

Section 6. Effect of failure to answer. - Should the defendant fail to answer the complaint within
the period above provided, the Court, motu proprio, or on motion of the plaintiff, shall render
judgment as may be warranted by the facts alleged in the complaint and limited to what is
prayed for therein: x x x

xxxxxxxxx

Section 19. Prohibited pleadings and motions. - The following pleadings, motions, or petitions
shall not be allowed in the cases covered by this Rule:

(a) Motion for extension of time to file pleadings, affidavits or any other paper.

x x x x x x x x x (Underscoring supplied.)
The word shall ordinarily connotes an imperative and indicates the mandatory character of a
statute.[23] This, however, is not an absolute rule in statutory construction. The import of the
word ultimately depends upon a consideration of the entire provision, its nature, object and the
consequences that would follow from construing it one way or the other.[24]

As a general principle, rules prescribing the time within which certain acts must be done, or
certain proceedings taken, are considered absolutely indispensable to the prevention of
needless delays and to the orderly and speedy discharge of judicial business. By their very
nature, these rules are regarded as mandatory.[25]

The Rule on Summary Procedure, in particular, was promulgated for the purpose of achieving
an expeditious and inexpensive determination of cases.[26] For this reason, the Rule frowns
upon delays and prohibits altogether the filing of motions for extension of time. Consistent with
this reasoning is Section 6 of the Rule which allows the trial court to render judgment, even
motu proprio, upon the failure of a defendant to file an answer within the reglementary period.

Indeed, the Judiciary Reorganization Act of 1980, mandating the promulgation of the Rule on
Summary Procedure, authorizes the Court to stipulate that the period for filing pleadings in
cases covered by the Rule on Summary Procedure shall be non-extendible.[27]

Furthermore, speedy resolution of unlawful detainer cases is a matter of public policy,[28] and
this rule should equally apply with full force in forcible entry cases where the possession of the
premises at the start is already illegal.

From the foregoing, it is clear that the use of the word shall in the Rule on Summary Procedure
underscores the mandatory character of the challenged provisions. Giving the provisions a
directory application would subvert the nature of the Rule on Summary Procedure and defeat its
objective of expediting the adjudication of suits. Indeed, to admit a late answer, as petitioners
suggest, is to put premium on dilatory maneuvers -- the very mischief that the Rule seeks to
redress. In this light, petitioners invocation of the general principle in Rule 1, Section 2 of the
Rules of Court is misplaced.

Other than a plea for the liberal interpretation of the Rule on Summary Procedure, petitioners do
not provide an adequate justification for the admission of their late answer. Oversight, which
they candidly cite as the reason for their filing a motion for extension of time to file an answer, is
not a justification. Oversight, at best, implies negligence; at worst, ignorance. The negligence
displayed by petitioners is clearly inexcusable; ignorance of so basic a rule, on the other hand,
can never be condoned. In either case, the directory application of the questioned provision is
not warranted.

Petitioners also cite Rosales vs. Court of Appeals[29] and Co Keng Kian vs. Intermediate
Appellate Court,[30] but these cases do not support their position.
In Rosales vs. Court of Appeals,[31] this Court applied the Rule on Summary Procedure liberally
when the defendant, instead of filing an answer, filed within the reglementary period a pleading
labeled as a motion to dismiss. In treating the motion to dismiss as an answer, the Court ruled:
[32]

Parenthetically, petitioner argues in the present petition that, notwithstanding its being labeled
as a motion to dismiss, said pleading should have been considered as his answer pursuant to
the liberal interpretation accorded the rules and inasmuch as the grounds involved therein also
qualify as defenses proper in an answer. In this instance the Court agrees. Indeed, the rule on
summary procedure was conceptualized to facilitate the immediate resolution of cases such as
the present one. Well-settled is the rule that forcible entry and detainer cases being summary in
nature and involving disturbance of social order, procedural technicalities should be carefully
avoided and should not be allowed to override substantial justice. With this premise in mind and
having insisted, however erroneously, on its jurisdiction over the case, it certainly would have
been more prudent for the lower court to have treated the motion to dismiss as the answer of
petitioner and examined the case on its merits. As will be shown shortly, the long drawn out
proceedings that took place would have been avoided.

Furthermore, the said case did not involve the question of extension in the period for filing
pleadings under the Rule on Summary Procedure.

In Co Keng Kian vs. Intermediate Appellate Court,[33] this Court allowed the notice to vacate,
served upon the tenant, by registered mail instead of personal service as required by the Rules
of Court. We thus ruled:[34]

At this juncture it bears repeating that actions for forcible entry and unlawful detainer are
summary in nature because they involve a disturbance a social order which must be abated as
promptly as possible without any undue reliance on technical and procedural rules which only
cause delays. In the ultimate analysis, it matters not how the notice to vacate was conveyed, so
long as the lessee or his agent has personally received the written demand, whether handed to
him by the lessor, his attorney, a messenger or even a postman. The undisputed facts in the
instant case show that the Manila Times Publishing Company, through its manager, had
informed petitioner that Plaza Arcade Inc. was the new owner of the subject building; that on
October 18, 1979, a demand letter was sent to petitioner advising him to leave the premises but
petitioner refused to receive the letter; that a second demand on January 12, 1981 elicited the
same reaction; that a final demand dated November 16, 1981 was sent to petitioner by
registered mail which he again refused. And even on the supposition that there was no personal
service as claimed by petitioner, this could only be due to petitioners blatant attempts at evasion
which compelled the new landlord to resort to registered mail. The Court cannot countenance
an unfair situation where the plaintiff in an eviction case suffers further injustice by the
unwarranted delay resulting from the obstinate refusal of the defendant to acknowledge the
existence of a valid demand.
In both cases, there was substantial compliance with the law, something that cannot be said of
herein petitioners.

Second Issue: Forum-Shopping

Private respondent assails petitioners for engaging in forum-shopping by pursuing the present
ejectment suit, notwithstanding the pendency of an action for quieting of title involving the same
property and parties. We are unable to find basis for this charge.

For forum-shopping to exist, both actions must involve the same transactions, essential facts
and circumstances; and the actions must raise identical causes of action, subject matter, and
issues.[35] Suffice it to say that an action for quieting of title and partition has a different cause
of action than that in an ejectment suit. As private respondent herself contended, ownership of a
certain portion of the property which is determined in a case of partition does not necessarily
mean that the successful litigant has the right to possess the property adjudged in his favor. In
ejectment cases, the only issue for resolution is physical or material possession of the property
involved, independent of any claim of ownership set forth by any of the party litigants. Anyone of
them who can prove prior possession de facto may recover such possession even from the
owner himself. This rule holds true regardless of the character of a partys possession, provided
that he has in his favor priority of time which entitles him to stay on the property until he is
lawfully ejected by a person having a better right by either accion publiciana or accion
reivindicatoria.[36] It has even been ruled that the institution of a separate action for quieting of
title is not a valid reason for defeating the execution of the summary remedy of ejectment.[37]

WHEREFORE, in view of the foregoing, the petition is DENIED and the assailed Decision is
AFFIRMED in toto. Double costs against petitioners.

SO ORDERED
[G.R. No. 161135. April 8, 2005]

SWAGMAN HOTELS AND TRAVEL, INC., petitioner, vs. HON. COURT OF APPEALS, and
NEAL B. CHRISTIAN, respondents.

DECISION

DAVIDE, JR., C.J.:

May a complaint that lacks a cause of action at the time it was filed be cured by the accrual of a
cause of action during the pendency of the case? This is the basic issue raised in this petition
for the Courts consideration.

Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty. Leonor
L. Infante and Rodney David Hegerty, its president and vice-president, respectively, obtained
from private respondent Neal B. Christian loans evidenced by three promissory notes dated 7
August 1996, 14 March 1997, and 14 July 1997. Each of the promissory notes is in the amount
of US$50,000 payable after three years from its date with an interest of 15% per annum payable
every three months.[1] In a letter dated 16 December 1998, Christian informed the petitioner
corporation that he was terminating the loans and demanded from the latter payment in the total
amount of US$150,000 plus unpaid interests in the total amount of US$13,500.[2]

On 2 February 1999, private respondent Christian filed with the Regional Trial Court of Baguio
City, Branch 59, a complaint for a sum of money and damages against the petitioner
corporation, Hegerty, and Atty. Infante. The complaint alleged as follows: On 7 August 1996, 14
March 1997, and 14 July 1997, the petitioner, as well as its president and vice-president
obtained loans from him in the total amount of US$150,000 payable after three years, with an
interest of 15% per annum payable quarterly or every three months. For a while, they paid an
interest of 15% per annum every three months in accordance with the three promissory notes.
However, starting January 1998 until December 1998, they paid him only an interest of 6% per
annum, instead of 15% per annum, in violation of the terms of the three promissory notes. Thus,
Christian prayed that the trial court order them to pay him jointly and solidarily the amount of
US$150,000 representing the total amount of the loans; US$13,500 representing unpaid
interests from January 1998 until December 1998; P100,000 for moral damages; P50,000 for
attorneys fees; and the cost of the suit.[3]

The petitioner corporation, together with its president and vice-president, filed an Answer raising
as defenses lack of cause of action and novation of the principal obligations. According to them,
Christian had no cause of action because the three promissory notes were not yet due and
demandable. In December 1997, since the petitioner corporation was experiencing huge losses
due to the Asian financial crisis, Christian agreed (a) to waive the interest of 15% per annum,
and (b) accept payments of the principal loans in installment basis, the amount and period of
which would depend on the state of business of the petitioner corporation. Thus, the petitioner
paid Christian capital repayment in the amount of US$750 per month from January 1998 until
the time the complaint was filed in February 1999. The petitioner and its co-defendants then
prayed that the complaint be dismissed and that Christian be ordered to pay P1 million as moral
damages; P500,000 as exemplary damages; and P100,000 as attorneys fees.[4]

In due course and after hearing, the trial court rendered a decision[5] on 5 May 2000 declaring
the first two promissory notes dated 7 August 1996 and 14 March 1997 as already due and
demandable and that the interest on the loans had been reduced by the parties from 15% to 6%
per annum. It then ordered the petitioner corporation to pay Christian the amount of $100,000
representing the principal obligation covered by the promissory notes dated 7 August 1996 and
14 March 1997, plus interest of 6% per month thereon until fully paid, with all interest payments
already paid by the defendant to the plaintiff to be deducted therefrom.

The trial court ratiocinated in this wise:

(1) There was no novation of defendants obligation to the plaintiff. Under Article 1292 of the Civil
Code, there is an implied novation only if the old and the new obligation be on every point
incompatible with one another.

The test of incompatibility between the two obligations or contracts, according to an imminent
author, is whether they can stand together, each one having an independent existence. If they
cannot, they are incompatible, and the subsequent obligation novates the first (Tolentino, Civil
Code of the Philippines, Vol. IV, 1991 ed., p. 384). Otherwise, the old obligation will continue to
subsist subject to the modifications agreed upon by the parties. Thus, it has been written that
accidental modifications in an existing obligation do not extinguish it by novation. Mere
modifications of the debt agreed upon between the parties do not constitute novation. When the
changes refer to secondary agreement and not to the object or principal conditions of the
contract, there is no novation; such changes will produce modifications of incidental facts, but
will not extinguish the original obligation. Thus, the acceptance of partial payments or a partial
remission does not involve novation (id., p. 387). Neither does the reduction of the amount of an
obligation amount to a novation because it only means a partial remission or condonation of the
same debt.

In the instant case, the Court is of the view that the parties merely intended to change the rate
of interest from 15% per annum to 6% per annum when the defendant started paying $750 per
month which payments were all accepted by the plaintiff from January 1998 onward. The
payment of the principal obligation, however, remains unaffected which means that the
defendant should still pay the plaintiff $50,000 on August 9, 1999, March 14, 2000 and July 14,
2000.

(2) When the instant case was filed on February 2, 1999, none of the promissory notes was due
and demandable. As of this date however, the first and the second promissory notes have
already matured. Hence, payment is already due.

Under Section 5 of Rule 10 of the 1997 Rules of Civil Procedure, a complaint which states no
cause of action may be cured by evidence presented without objection. Thus, even if the plaintiff
had no cause of action at the time he filed the instant complaint, as defendants obligation are
not yet due and demandable then, he may nevertheless recover on the first two promissory
notes in view of the introduction of evidence showing that the obligations covered by the two
promissory notes are now due and demandable.

(3) Individual defendants Rodney Hegerty and Atty. Leonor L. Infante can not be held personally
liable for the obligations contracted by the defendant corporation it being clear that they merely
acted in representation of the defendant corporation in their capacity as General Manager and
President, respectively, when they signed the promissory notes as evidenced by Board
Resolution No. 1(94) passed by the Board of Directors of the defendant corporation (Exhibit 4).
[6]
In its decision[7] of 5 September 2003, the Court of Appeals denied petitioners appeal and
affirmed in toto the decision of the trial court, holding as follows:

In the case at bench, there is no incompatibility because the changes referred to by appellant
Swagman consist only in the manner of payment. . . .

Appellant Swagmans interpretation that the three (3) promissory notes have been novated by
reason of appellee Christians acceptance of the monthly payments of US$750.00 as capital
repayments continuously even after the filing of the instant case is a little bit strained
considering the stiff requirements of the law on novation that the intention to novate must
appear by express agreement of the parties, or by their acts that are too clear and unequivocal
to be mistaken. Under the circumstances, the more reasonable interpretation of the act of the
appellee Christian in receiving the monthly payments of US$750.00 is that appellee Christian
merely allowed appellant Swagman to pay whatever amount the latter is capable of. This
interpretation is supported by the letter of demand dated December 16, 1998 wherein appellee
Christian demanded from appellant Swagman to return the principal loan in the amount of
US$150,000 plus unpaid interest in the amount of US$13,500.00

...

Appellant Swagman, likewise, contends that, at the time of the filing of the complaint, appellee
Christian ha[d] no cause of action because none of the promissory notes was due and
demandable.

Again, We are not persuaded.

...

In the case at bench, while it is true that appellant Swagman raised in its Answer the issue of
prematurity in the filing of the complaint, appellant Swagman nonetheless failed to object to
appellee Christians presentation of evidence to the effect that the promissory notes have
become due and demandable.

The afore-quoted rule allows a complaint which states no cause of action to be cured either by
evidence presented without objection or, in the event of an objection sustained by the court, by
an amendment of the complaint with leave of court (Herrera, Remedial Law, Vol. VII, 1997 ed.,
p. 108).[8]

Its motion for reconsideration having been denied by the Court of Appeals in its Resolution of 4
December 2003,[9] the petitioner came to this Court raising the following issues:

I. WHERE THE DECISION OF THE TRIAL COURT DROPPING TWO DEFENDANTS HAS
BECOME FINAL AND EXECUTORY, MAY THE RESPONDENT COURT OF APPEALS STILL
STUBBORNLY CONSIDER THEM AS APPELLANTS WHEN THEY DID NOT APPEAL?
II. WHERE THERE IS NO CAUSE OF ACTION, IS THE DECISION OF THE LOWER COURT
VALID?

III. MAY THE RESPONDENT COURT OF APPEALS VALIDLY AFFIRM A DECISION OF THE
LOWER COURT WHICH IS INVALID DUE TO LACK OF CAUSE OF ACTION?

IV. WHERE THERE IS A VALID NOVATION, MAY THE ORIGINAL TERMS OF CONTRACT
WHICH HAS BEEN NOVATED STILL PREVAIL?[10]

The petitioner harps on the absence of a cause of action at the time the private respondents
complaint was filed with the trial court. In connection with this, the petitioner raises the issue of
novation by arguing that its obligations under the three promissory notes were novated by the
renegotiation that happened in December 1997 wherein the private respondent agreed to waive
the interest in each of the three promissory notes and to accept US$750 per month as
installment payment for the principal loans in the total amount of US$150,000. Lastly, the
petitioner questions the act of the Court of Appeals in considering Hegerty and Infante as
appellants when they no longer appealed because the trial court had already absolved them of
the liability of the petitioner corporation.

On the other hand, the private respondent asserts that this petition is a mere ploy to continue
delaying the payment of a just obligation. Anent the fact that Hegerty and Atty. Infante were
considered by the Court of Appeals as appellants, the private respondent finds it immaterial
because they are not affected by the assailed decision anyway.

Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil Procedure, is the act
or omission by which a party violates the right of another. 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.[11]

It is, thus, 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.

It is undisputed that the three promissory notes were for the amount of P50,000 each and
uniformly provided for (1) a term of three years; (2) an interest of 15 % per annum, payable
quarterly; and (3) the repayment of the principal loans after three years from their respective
dates. However, both the Court of Appeals and the trial court found that a renegotiation of the
three promissory notes indeed happened in December 1997 between the private respondent
and the petitioner resulting in the reduction not waiver of the interest from 15% to 6% per
annum, which from then on was payable monthly, instead of quarterly. The term of the principal
loans remained unchanged in that they were still due three years from the respective dates of
the promissory notes. Thus, at the time the complaint was filed with the trial court on 2 February
1999, none of the three promissory notes was due yet; although, two of the promissory notes
with the due dates of 7 August 1999 and 14 March 2000 matured during the pendency of the
case with the trial court. Both courts also found that the petitioner had been religiously paying
the private respondent US$750 per month from January 1998 and even during the pendency of
the case before the trial court and that the private respondent had accepted all these monthly
payments.

With these findings of facts, it has become glaringly obvious that when the complaint for a sum
of money and damages was filed with the trial court on 2 February 1999, no cause of action has
as yet existed because the petitioner had not committed any act in violation of the terms of the
three promissory notes as modified by the renegotiation in December 1997. Without a cause of
action, the private respondent had no right to maintain an action in court, and the trial court
should have therefore dismissed his complaint.

Despite its finding that the petitioner corporation did not violate the modified terms of the three
promissory notes and that the payment of the principal loans were not yet due when the
complaint was filed, the trial court did not dismiss the complaint, citing Section 5, Rule 10 of the
1997 Rules of Civil Procedure, which reads:

Section 5. Amendment to conform to or authorize presentation of evidence. When issues not

raised by the pleadings are tried with the express or implied consent of the parties, they shall be
treated in all respects as if they had been raised in the pleadings. Such amendment of the
pleadings as may be necessary to cause them to conform to the evidence and to raise these
issues may be made upon motion of any party at any time, even after judgment; but failure to
amend does not affect the result of the trial of these issues. If evidence is objected to at the trial
on the ground that it is not within the issues made by the pleadings, the court may allow the
pleadings to be amended and shall do so with liberality if the presentation of the merits of the
action and the ends of substantial justice will be subserved thereby. The court may grant a
continuance to enable the amendment to be made.

According to the trial court, and sustained by the Court of Appeals, this Section allows a
complaint that does not state a cause of action to be cured by evidence presented without
objection during the trial. Thus, it ruled that even if the private respondent had no cause of
action when he filed the complaint for a sum of money and damages because none of the three
promissory notes was due yet, he could nevertheless recover on the first two promissory notes
dated 7 August 1996 and 14 March 1997, which became due during the pendency of the case in
view of the introduction of evidence of their maturity during the trial.
Such interpretation of Section 5, Rule 10 of the 1997 Rules of Civil Procedure is erroneous.

Amendments of pleadings are allowed under Rule 10 of the 1997 Rules of Civil Procedure in
order that the actual merits of a case may be determined in the most expeditious and
inexpensive manner without regard to technicalities, and that all other matters included in the
case may be determined in a single proceeding, thereby avoiding multiplicity of suits.[12]
Section 5 thereof applies to situations wherein evidence not within the issues raised in the
pleadings is presented by the parties during the trial, and to conform to such evidence the
pleadings are subsequently amended on motion of a party. Thus, a complaint which fails to state
a cause of action may be cured by evidence presented during the trial.

However, the curing effect under Section 5 is applicable only if a cause of action in fact exists at
the time the complaint is filed, but the complaint is defective for failure to allege the essential
facts. For example, if a complaint failed to allege the fulfillment of a condition precedent upon
which the cause of action depends, evidence showing that such condition had already been
fulfilled when the complaint was filed may be presented during the trial, and the complaint may
accordingly be amended thereafter.[13] Thus, in Roces v. Jalandoni,[14] this Court upheld the
trial court in taking cognizance of an otherwise defective complaint which was later cured by the
testimony of the plaintiff during the trial. In that case, there was in fact a cause of action and the
only problem was the insufficiency of the allegations in the complaint. This ruling was reiterated
in Pascua v. Court of Appeals.[15]

It thus follows that a complaint whose cause of action has not yet accrued cannot be cured or
remedied by an amended or supplemental pleading alleging the existence or accrual of a cause
of action while the case is pending.[16] Such an action is prematurely brought and is, therefore,
a groundless suit, which should be dismissed by the court upon proper motion seasonably filed
by the defendant. The underlying reason for this rule is that a person should not be summoned
before the public tribunals to answer for complaints which are immature. As this Court
eloquently said in Surigao Mine Exploration Co., Inc. v. Harris:[17]

It is a rule of law to which there is, perhaps, no exception, either at law or in equity, that to
recover at all there must be some cause of action at the commencement of the suit. As
observed by counsel for appellees, there are reasons of public policy why there should be no
needless haste in bringing up litigation, and why people who are in no default and against whom
there is yet no cause of action should not be summoned before the public tribunals to answer
complaints which are groundless. We say groundless because if the action is immature, it
should not be entertained, and an action prematurely brought is a groundless suit.

It is true that an amended complaint and the answer thereto take the place of the originals which
are thereby regarded as abandoned (Reynes vs. Compaa General de Tabacos [1912], 21 Phil.
416; Ruyman and Farris vs. Director of Lands [1916], 34 Phil., 428) and that the complaint and
answer having been superseded by the amended complaint and answer thereto, and the
answer to the original complaint not having been presented in evidence as an exhibit, the trial
court was not authorized to take it into account. (Bastida vs. Menzi & Co. [1933], 58 Phil., 188.)
But in none of these cases or in any other case have we held that if a right of action did not exist
when the original complaint was filed, one could be created by filing an amended complaint. In
some jurisdictions in the United States what was termed an imperfect cause of action could be
perfected by suitable amendment (Brown vs. Galena Mining & Smelting Co., 32 Kan., 528;
Hooper vs. City of Atlanta, 26 Ga. App., 221) and this is virtually permitted in Banzon and
Rosauro vs. Sellner ([1933], 58 Phil., 453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935], 62
Phil., 683); and recently in Ramos vs. Gibbon (38 Off. Gaz., 241). That, however, which is no
cause of action whatsoever cannot by amendment or supplemental pleading be converted into a
cause of action: Nihil de re accrescit ei qui nihil in re quando jus accresceret habet.

We are therefore of the opinion, and so hold, that unless the plaintiff has a valid and subsisting
cause of action at the time his action is commenced, the defect cannot be cured or remedied by
the acquisition or accrual of one while the action is pending, and a supplemental complaint or an
amendment setting up such after-accrued cause of action is not permissible. (Emphasis ours).

Hence, contrary to the holding of the trial court and the Court of Appeals, the defect of lack of
cause of action at the commencement of this suit cannot be cured by the accrual of a cause of
action during the pendency of this case arising from the alleged maturity of two of the
promissory notes on 7 August 1999 and 14 March 2000.

Anent the issue of novation, this Court observes that the petitioner corporation argues the
existence of novation based on its own version of what transpired during the renegotiation of the
three promissory notes in December 1997. By using its own version of facts, the petitioner is, in
a way, questioning the findings of facts of the trial court and the Court of Appeals.

As a rule, the findings of fact of the trial court and the Court of Appeals are final and conclusive
and cannot be reviewed on appeal to the Supreme Court[18] as long as they are borne out by
the record or are based on substantial evidence.[19] The Supreme Court is not a trier of facts,
its jurisdiction being limited to reviewing only errors of law that may have been committed by the
lower courts. Among the exceptions is when the finding of fact of the trial court or the Court of
Appeals is not supported by the evidence on record or is based on a misapprehension of facts.
Such exception obtains in the present case.[20]

This Court finds to be contrary to the evidence on record the finding of both the trial court and
the Court of Appeals that the renegotiation in December 1997 resulted in the reduction of the
interest from 15% to 6% per annum and that the monthly payments of US$750 made by the
petitioner were for the reduced interests.

It is worthy to note that the cash voucher dated January 1998[21] states that the payment of
US$750 represents INVESTMENT PAYMENT. All the succeeding cash vouchers describe the
payments from February 1998 to September 1999 as CAPITAL REPAYMENT.[22] All these cash
vouchers served as receipts evidencing private respondents acknowledgment of the payments
made by the petitioner: two of which were signed by the private respondent himself and all the
others were signed by his representatives. The private respondent even identified and
confirmed the existence of these receipts during the hearing. [23] Significantly, cognizant of
these receipts, the private respondent applied these payments to the three consolidated
principal loans in the summary of payments he submitted to the court.[24]

Under Article 1253 of the Civil Code, if the debt produces interest, payment of the principal shall
not be deemed to have been made until the interest has been covered. In this case, the private
respondent would not have signed the receipts describing the payments made by the petitioner
as capital repayment if the obligation to pay the interest was still subsisting. The receipts, as
well as private respondents summary of payments, lend credence to petitioners claim that the
payments were for the principal loans and that the interests on the three consolidated loans
were waived by the private respondent during the undisputed renegotiation of the loans on
account of the business reverses suffered by the petitioner at the time.

There was therefore a novation of the terms of the three promissory notes in that the interest
was waived and the principal was payable in monthly installments of US$750. Alterations of the
terms and conditions of the obligation would generally result only in modificatory novation
unless such terms and conditions are considered to be the essence of the obligation itself.[25]
The resulting novation in this case was, therefore, of the modificatory type, not the extinctive
type, since the obligation to pay a sum of money remains in force.

Thus, since the petitioner did not renege on its obligation to pay the monthly installments
conformably with their new agreement and even continued paying during the pendency of the
case, the private respondent had no cause of action to file the complaint. It is only upon
petitioners default in the payment of the monthly amortizations that a cause of action would
arise and give the private respondent a right to maintain an action against the petitioner.

Lastly, the petitioner contends that the Court of Appeals obstinately included its President
Infante and Vice-President Hegerty as appellants even if they did not appeal the trial courts
decision since they were found to be not personally liable for the obligation of the petitioner.
Indeed, the Court of Appeals erred in referring to them as defendants-appellants; nevertheless,
that error is no cause for alarm because its ruling was clear that the petitioner corporation was
the one solely liable for its obligation. In fact, the Court of Appeals affirmed in toto the decision
of the trial court, which means that it also upheld the latters ruling that Hegerty and Infante were
not personally liable for the pecuniary obligations of the petitioner to the private respondent.

In sum, based on our disquisition on the lack of cause of action when the complaint for sum of
money and damages was filed by the private respondent, the petition in the case at bar is
impressed with merit.

WHEREFORE, the petition is hereby GRANTED. The Decision of 5 September 2003 of the
Court of Appeals in CA-G.R. CV No. 68109, which affirmed the Decision of 5 May 2000 of the
Regional Trial Court of Baguio, Branch 59, granting in part private respondents complaint for
sum of money and damages, and its Resolution of 4 December 2003, which denied petitioners
motion for reconsideration are hereby REVERSED and SET ASIDE. The complaint docketed as
Civil Case No. 4282-R is hereby DISMISSED for lack of cause of action.

No costs.

SO ORDERED.

Today is Tuesday, August 21, 2018

Custom Search

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 197380 October 8, 2014

ELIZA ZUNIGA-SANTOS,* represented by her Attorney-in Fact, NYMPHA Z. SALES,

Petitioners,
vs.
MARIA DIVINA GRACIA SANTOS-GRAN** and REGISTER OF DEEDS OF MARIKINA CITY,
Respondents.

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari1 assailing the Decision2 dated January 10,
2011 and the Resolution3 dated June 22, 2011 of the Court of Appeals (CA) in CA-G.R. CV No.
87849 which affirmed the Order4 dated July 6, 2006 of the Regional Trial Court of San Mateo,
Rizal, Branch 76 (RTC) in Civil Case No. 2018-06, dismissing the Amended Complaint for
annulment of sale and revocation of title on the ground of insufficiency of factual basis.

The Facts

On January 9, 2006, petitioner Eliza Zuñiga-Santos (petitioner), through her authorized

representative, Nympha Z. Sales,5 filed a Complaint6 for annulment of sale and revocation of
title against respondents Maria Divina Gracia Santos-Gran (Gran) and the Register of Deeds of
Marikina City before the RTC, docketed asCivil Case No. 2018-06. The said complaint was later
amended7 on March 10, 2006 (Amended Complaint).

In her Amended Complaint,8 petitioner alleged, among others, that: (a) she was the registered
owner of three (3) parcels of land located in the Municipality of Montalban, Province of Rizal,
covered by Transfer Certificate of Title (TCT) Nos. N-5500,9 224174,10 and N-423411 (subject
properties) prior to their transfer in the name of private respondent Gran; (b) she has a second
husband by the name ofLamberto C. Santos (Lamberto), with whom she did not have any
children; (c) she was forced to take care of Lamberto’s alleged daughter, Gran, whose birth
certificate was forged to make it appear that the latter was petitioner’s daughter; (d) pursuant to
void and voidable documents, i.e., a Deed of Sale, Lamberto succeeded in transferring the
subject properties in favor of and in the name of Gran; (e) despite diligent efforts, said Deed of
Sale could not be located; and (f) she discovered that the subject properties were transferred to
Gran sometime in November 2005. Accordingly, petitioner prayed, inter alia, that Gran surrender
to her the subject properties and pay damages, including costs of suit.12

For her part, Gran filed a Motion to Dismiss,13 contending, inter alia, that (a) the action filed by
petitioner had prescribed since an action upon a written contract must be brought within ten (10)
years from the time the cause of action accrues, or in this case, from the time of registration of
the questioned documents before the Registry of Deeds;14 and (b) the Amended Complaint
failed to state a cause of action as the void and voidable documents sought to be nullified were
not properly identified nor the substance thereof set forth, thus, precluding the RTC from
rendering a valid judgment in accordance withthe prayer to surrender the subject properties.15

The RTC Ruling

In an Order16 dated July 6, 2006, the RTC granted Gran’s motion and dismissed the Amended
Complaint for its failure to state a cause of action, considering that the deed of sale sought to be
nullified – an "essential and indispensable part of [petitioner’s] cause of action"17 – was not
attached. It likewise held that the certificates oftitle covering the subject properties cannot be
collaterally attacked and that since the action was based on a written contract, the same had
already prescribed under Article 1144 of the Civil Code.18

Dissatisfied, petitioner elevated the matter to the CA.

The CA Ruling

In a Decision19 dated January 10, 2011, the CA sustained the dismissal of petitioner’s Amended
Complaint buton the ground of insufficiency of factual basis. It disagreed with the RTC’s
findingthat the said pleading failed to state a cause of action since it had averred that: (a)
petitioner has a right over the subject properties being the registered owner thereof prior to their
transfer in the name of Gran; (b) Lamberto succeeded in transferring the subject properties to
his daughter, Gran, through void and voidable documents; and (c) the latter’s refusal and failure
to surrender to her the subject properties despite demands violated petitioner’s rights over
them.20 The CA likewise ruled that the action has not yet prescribed since an action for nullity of
void deeds of conveyance is imprescriptible.21 Nonetheless, it held that since the Deed of Sale
sought to be annulled was not attached to the Amended Complaint, it was impossible for the
court to determine whether petitioner’s signature therein was a forgery and thus, would have no
basis to order the surrender or reconveyance of the subject properties.22

Aggrieved, petitioner moved for reconsideration23 and attached, for the first time, a copy of the
questioned Deed of Sale24 which she claimed to have recently recovered, praying that the
order of dismissal be set aside and the case be remanded to the RTC for further proceedings.

In a Resolution25 dated June 22, 2011, the CA denied petitioner’s motion and held that the
admission of the contested Deed of Sale at this late stage would be contrary to Gran’s right to
due process.

Hence, the instant petition.

The Issue Before the Court

The primordial issue for the Court’s resolution is whether or not the dismissal of petitioner’s
Amended Complaint should be sustained.

The Court’s Ruling

Failure to state a cause of action and lack of cause of action are distinct grounds to dismiss a
particularaction. The former refers to the insufficiency of the allegations in the pleading, while
the latter to the insufficiency of the factual basis for the action. Dismissal for failure to state a
cause of action may be raised at the earliest stages of the proceedings through a motion to
dismiss under Rule16 of the Rules of Court, while dismissal for lack of cause of action may be
raised any time after the questions of fact have been resolved on the basis of stipulations,
admissions or evidence presented by the plaintiff.26 In Macaslang v. Zamora,27 the Court,
citing the commentary of Justice Florenz D. Regalado, explained:

Justice Regalado, a recognized commentator on remedial law, has explained the distinction:

x x x What is contemplated, therefore, is a failure to statea cause of action which is provided in

Sec. 1(g) of Rule 16. This is a matter of insufficiency of the pleading. Sec. 5 of Rule 10, which
was also included as the last mode for raising the issue to the court, refers to the situation
where the evidence does not provea cause of action. This is, therefore, a matter of insufficiency
of evidence. Failure to state a cause of action is different from failure to prove a cause of action.
The remedy in the first is to move for dismissal of the pleading, whilethe remedy in the second is
to demur to the evidence, hence reference to Sec. 5 of Rule 10 has been eliminated in this
section. The procedure would consequently be to require the pleading to state a cause of
action, by timely objection to its deficiency; or, at the trial, to file a demurrer to evidence, if such
motion is warranted.28
In the case at bar, both the RTC and the CA were one in dismissing petitioner’s Amended
Complaint, but varied on the grounds thereof – that is, the RTC held that there was failure
tostate a cause of action while the CA ruled that there was insufficiency of factual basis.

At once, it is apparent that the CA based its dismissal on an incorrect ground. From the
preceding discussion, it is clear that "insufficiency of factual basis" is not a ground for a motion
to dismiss. Rather, it is a ground which becomes available only after the questions of fact have
been resolved on the basis of stipulations, admissions or evidence presented by the plaintiff.
The procedural recourse to raise such ground is a demurrer to evidence taken only after the
plaintiff’s presentation of evidence. This parameter is clear under Rule 33 of the Rules of Court:
RULE 33

Demurrer to Evidence

Section 1. Demurrer to evidence. — After the plaintiff has completed the presentation of his
evidence, the defendant may move for dismissal on the ground that upon the facts and the law
the plaintiff has shown no right to relief. If his motion isdenied he shall have the right to present
evidence. If the motion is granted but on appeal the order of dismissal is reversed he shall be
deemed to have waived the right to present evidence.

At the preliminary stages of the proceedings, without any presentation of evidence even
conducted, it is perceptibly impossible to assess the insufficiency of the factual basis on which
the plaintiff asserts his cause of action, as in this case. Therefore, that ground could not be the
basis for the dismissal of the action.

However, the Amended Complaint is still dismissible but on the ground of failure to state a
cause of action, as correctly held by the RTC. Said ground was properly raised by Granin a
motion to dismiss pursuant to Section 1, Rule 16 of the Rules of Court:

RULE 16
Motion to Dismiss

Section 1. Grounds. — Within the time for but before filing the answer to the complaint or
pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:

xxxx

(g) That the pleading asserting the claim states no cause of action;

xxxx

A complaint states a cause of action if it sufficiently avers the existence of the three (3) essential
elements of a cause of action, namely: (a) a right in favor of the plaintiff by whatever means and
under whatever law it arises or is created; (b) an obligation on the part of the named defendant
to respect or not to violate such right; and (c) an act or omission on the part of the named
defendant violative of the right of the plaintiff or constituting a breach of the obligation of
defendant tothe plaintiff for which the latter may maintain an action for recovery of damages.29
If the allegations of the complaint do not state the concurrence of these elements, the complaint
becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.30

It is well to point out that the plaintiff’s cause of action should not merely be "stated" but,
importantly, the statement thereof should be "sufficient." This is why the elementarytest in a
motion to dismiss on such ground is whether or not the complaint alleges facts which if true
would justify the relief demanded.31 As a corollary, it has been held that only ultimate facts and
not legal conclusions or evidentiary facts are considered for purposes of applying the test.32
This is consistent with Section 1, Rule 8 of the Rules of Court which states that the complaint
need only allege the ultimate facts or the essential facts constituting the plaintiff’s cause of
action. A fact is essential if they cannot be stricken out without leaving the statement of the
cause of action inadequate.33 Since the inquiry is into the sufficiency, not the veracity, of the
material allegations, it follows that the analysis should be confined to the four corners of the
complaint, and no other.34

A judicious examination of petitioner’s Amended Complaint readily shows its failure to

sufficiently state a cause of action. Contrary to the findings of the CA, the allegations therein do
not proffer ultimate facts which would warrant an action for nullification of the sale and recovery
of the properties in controversy, hence,rendering the same dismissible.

While the Amended Complaint does allege that petitioner was the registered owner of the
subject properties in dispute, nothing in the said pleading or its annexes would show the basis
of that assertion, either through statements/documents tracing the rootof petitioner’s title or
copies of previous certificates of title registeredin her name. Instead, the certificates of title
covering the said properties that were attached to the Amended Complaint are in the name of
Gran. At best, the attached copies of TCT Nos. N-5500 and N-4234 only mention petitioner as
the representative of Gran at the time of the covered property’s registration when she was a
minor. Nothing in the pleading, however, indicates that the former had become any of the
properties’ owner. This leads to the logical conclusion that her right to the properties in question
– at least through the manner in which it was alleged in the Amended Complaint – remains
ostensibly unfounded. Indeed, while the facts alleged in the complaint are hypothetically
admitted for purposes of the motion, it must, nevertheless, be remembered that the hypothetical
admission extends only to the relevant and material facts well pleaded in the complaint as well
as toinferences fairly deductible therefrom.35 Verily, the filing of the motion to dismiss assailing
the sufficiency of the complaint does not hypothetically admit allegations of which the court will
take judicial notice ofto be not true, nor does the rule of hypothetical admission apply to
legallyimpossible facts, or to facts inadmissible in evidence, or to facts that appear to be
unfounded by record or document included in the pleadings.36
Aside from the insufficiency of petitioner’s allegations with respect to her right to the subject
properties sought to be recovered, the ultimate facts supposedly justifying the "annulment of
sale," by which the reconveyance of the subject properties is sought, were also insufficiently
pleaded. The following averments in the Amended Complaint betray no more than an
insufficient narration of facts:

6. That pursuant to a voidable [sic] and void documents, the second husband of the plaintiff
succeed [sic] in transferring the above TITLES in the name of MARIA DIVINAGRACIA SANTOS,
who is (sic) alleged daughter of LAMBERTO C. SANTOS in violation of Article 1409, Par. 2 of
the Civil Code;

7. That the said properties [were] transferred to the said defendant by a Deed of Sale (DOS) to
the said MARIA DIVINA GRACIA SANTOS through a void documents [sic] considering that the
seller is the alleged mother of defendant is also the buyer of the said properties in favor of
defendant;

8. x x x.

9. That the alleged sale and transfer of the said properties in favor of defendant was only
discovered by [plaintiff’s] daughter CYNTHIA BELTRAN-LASMARIAS when [plaintiff] has been
requesting for financial assistance, considering that the said mother of plaintiff [sic] has so many
properties which is now the subject of this complaint;

10. That plaintiff then return on [to] the Philippines sometime [in] November, 2005 and
discovered that all [plaintiff’s] properties [had] been transferred to defendant MARIA DIVINA
GRACIA SANTOS who is not a daughter either by consanguinity or affinity to the plaintiff mother
[sic];

11. That the titles that [were] issued in the name of MARIA DIVINAGRACIA SANTOS by virtue
of the said alleged voidable and void documents, should be annulled and cancelled as the basis
of the transfer is through void and voidable documents;

x x x x37

Clearly, the claim that the sale was effected through "voidable and void documents" partakes
merely of a conclusion of law that is not supported by any averment of circumstances that will
show why or how such conclusion was arrived at. In fact, what these "voidable and void
documents" are were not properly stated and/or identified. In Abad v. Court of First Instance of
Pangasinan,38 the Court pronounced that:

A pleading should state the ultimate facts essential to the rights of action or defense asserted,
as distinguished from mere conclusions of fact, or conclusions of law. General allegations thata
contract is valid or legal, or is just, fair, and reasonable, are mere conclusions of law. Likewise,
allegations that a contract is void, voidable, invalid, illegal, ultra vires, or against public policy,
without stating facts showing its invalidity, are mere conclusions of law.39 (Emphases supplied)

Hence, by merely stating a legal conclusion, the Amended Complaint presented no sufficient
allegation upon which the Court could grant the relief petitioner prayed for. Thus, said pleading
should be dismissed on the ground of failure to state cause of action, as correctly held by the
RTC.

That a copy of the Deed of Saleadverted to in the Amended Complaint was subsequently
submitted by petitioner does not warrant a different course of action.1âwphi1 The submission of
that document was made, as it was purportedly "recently recovered," only on reconsideration
before the CA which, nonetheless, ruled against the remand of the case. An examination of the
present petition, however, reveals no counter-argument against the foregoing actions; hence,
the Court considers any objection thereto as waived.

In any event, the Court finds the Amended Complaint’s dismissal to be in order considering that
petitioner’s cause of action had already prescribed.

It is evident that petitioner ultimately seeks for the reconveyance to her of the subject properties
through the nullification of their supposed sale to Gran. An action for reconveyance is one that
seeks to transfer property, wrongfully registered by another, to its rightful and legal owner.40
Having alleged the commission of fraud by Gran in the transfer and registration of the subject
properties in her name, there was, in effect, an implied trust created by operation of law
pursuant to Article 1456 of the Civil Code which provides:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.1âwphi1

To determine when the prescriptive period commenced in an action for reconveyance, the
plaintiff’s possession of the disputed property is material. If there is an actual need to reconvey
the property as when the plaintiff is not in possession, the action for reconveyance based on
implied trust prescribes in ten (10) years, the reference point being the date of registration of the
deed or the issuance of the title. On the other hand, if the real owner of the property remains in
possession of the property, the prescriptive period to recover titleand possession of the property
does not run against him and in such case,the action for reconveyance would be in the nature of
a suit for quieting of title which is imprescriptible.41

In the case at bar, a reading ofthe allegations of the Amended Complaint failed to show that
petitioner remained in possession of the subject properties in dispute. On the contrary, it can be
reasonably deduced that it was Gran who was in possession ofthe subject properties, there
being an admission by the petitioner that the property covered by TCT No. 224174 was being
used by Gran’s mother-in-law.42 In fact, petitioner’s relief in the Amended Complaint for the
"surrender" of three (3) properties to her bolsters such stance.43 And since the new titles tothe
subject properties in the name of Gran were issued by the Registry of Deeds of Marikina on the
following dates: TCT No. 224174 on July 27, 1992,44 TCT No. N-5500 on January 29, 1976,45
and TCT No. N-4234 on November 26, 1975,46 the filing of the petitioner’s complaint beforethe
RTC on January 9, 2006 was obviously beyond the ten-year prescriptive period, warranting the
Amended Complaint’s dismissal all the same.

WHEREFORE, the petition is DENIED. The Decision dated January 10, 2011 and the
Resolution dated June 22, 2011 of the Court of Appeals in CA-G.R. CV No. 87849 are hereby
AFFIRMEDwith MODIFICATION in that the Amended Complaint be dismissed on the grounds
of (a) failure to state a cause of action, and (b) prescription as herein discussed.

SO ORDERED.

[G.R. No. 166302. July 28, 2005]

LOTTE PHIL. CO., INC., petitioner, vs. ERLINDA DELA CRUZ, LEONOR MAMAUAG,
LOURDES CAUBA, JOSEPHINE DOMANAIS, ARLENE CAGAYAT, AMELITA YAM, VIVIAN
DOMARAIS, MARILYN ANTALAN, CHRISTOPHER RAMIREZ, ARNOLD SAN PEDRO,
MARISSA SAN PEDRO, LORELI JIMENEZ, JEFFREY BUENO, CHRISTOPHER CAGAYAT,
GERARD CABILES, JOAN ENRIQUEZ, JOSEPH DE LA CRUZ, NELLY CLERIGO, DULCE
NAVARETTE, ROWENA BELLO, DANIEL RAMIREZ, AILEEN BAUTISTA and BALTAZAR
FERRERA, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari[1] assails the July 9, 2004 decision[2] of the Court of
Appeals in CA-G.R. SP No. 72732 and its November 26, 2004 resolution[3] denying
reconsideration thereof.

The established facts of this case are as follows:

Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a domestic corporation.
Petitioners (respondents herein) are among those who were hired and assigned to the
confectionery facility operated by private respondent.

On December 14, 1995 and yearly thereafter until the year 2000 7J Maintenance and Janitorial
Services (7J) entered into a contract with private respondent to provide manpower for needed
maintenance, utility, janitorial and other services to the latter. In compliance with the terms and
conditions of the service contract, and to accommodate the needs of private respondent for
personnel/workers to do and perform piece works, petitioners, among others, were hired and
assigned to private respondent as repackers or sealers.
However, either in October, 1999 or on February 9, 2000, private respondent dispensed with
their services allegedly due to the expiration/termination of the service contract by respondent
with 7J. They were either told hwag muna kayong pumasok at tatawagan na lang kung may
gawa; or were asked to wait pag magrereport sila sa trabaho. Unfortunately, petitioners were
never called back to work again.

Aggrieved, petitioners lodged a labor complaint against both private respondent Lotte and 7J,
for illegal dismissal, regularization, payment of corresponding backwages and related
employment benefits, 13th month pay, service incentive leave, moral and exemplary damages
and attorneys fees based on total judgment award.[4]

On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr., rendered judgment[5] declaring
7J as employer of respondents.[6] The arbiter also found 7J guilty of illegal dismissal[7] and
ordered to reinstate respondents,[8] pay P2,374,710.00 as backwages, P713,648.00 as 13th
month pay and P117,000.00 as service incentive leave pay.[9]

Respondents appealed to the National Labor Relations Commission (NLRC) praying that Lotte
be declared as their direct employer because 7J is merely a labor-only contractor. In its
decision[10] dated April 24, 2002, the NLRC found no cogent reason to disturb the findings of
the labor arbiter and affirmed its ruling that 7J is the employer of respondents and solely liable
for their claims.

Respondents motion for reconsideration was denied by the NLRC in a resolution dated June 18,
2002.

Undaunted, they filed a petition for certiorari in the Court of Appeals[11] against the NLRC and
Lotte, insisting that their employer is Lotte and not 7J.

Lotte, however, denied that respondents were its employees. It prayed that the petition be
dismissed for failure to implead 7J who is a party interested in sustaining the proceedings in
court, pursuant to Section 3, Rule 46 of the Revised Rules of Civil Procedure.

On July 9, 2004, the Court of Appeals reversed and set aside the rulings of the Labor Arbiter
and the NLRC. In its decision, the Court of Appeals declared Lotte as the real employer of
respondents and that 7J who engaged in labor-only contracting was merely the agent of Lotte.
Respondents who performed activities directly related to Lottes business were its regular
employees under Art. 280 of the Labor Code. As such, they must be accorded security of tenure
and their services terminated only on just and authorized causes.

Lottes motion for reconsideration was denied, hence this petition, on the following issues:

8. Whether or not petitioner herein had the burden of proof to establish before the proceedings
in the Court of Appeals that 7J Maintenance and Janitorial Service was not a labor-only
contractor.
8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is dismissible for failure to comply
with Section 3, Rule 46 in relation to Section 5, Rule 65 of the 1997 Rules of Civil Procedure.
[12]

We first resolve the procedural issue raised by petitioner. Lotte asserts that 7J is an
indispensable party and should have been impleaded in respondents petition in the Court of
Appeals. It claims that the petition before the Court of Appeals was dismissible for failure to
comply with Section 3,[13] Rule 46 in relation to Section 5[14] of Rule 65 of the Revised Rules
of Civil Procedure.

Petitioners contention is tenable.

An indispensable party is a party in interest without whom no final determination can be had of
an action,[15] and who shall be joined either as plaintiffs or defendants.[16] The joinder of
indispensable parties is mandatory.[17] The presence of indispensable parties is necessary to
vest the court with jurisdiction, which is the authority to hear and determine a cause, the right to
act in a case.[18] Thus, without the presence of indispensable parties to a suit or proceeding,
judgment of a court cannot attain real finality.[19] The absence of an indispensable party
renders all subsequent actions of the court null and void for want of authority to act, not only as
to the absent parties but even as to those present.[20]

In the case at bar, 7J is an indispensable party. It is a party in interest because it will be affected
by the outcome of the case. The Labor Arbiter and the NLRC found 7J to be solely liable as the
employer of respondents. The Court of Appeals however rendered Lotte jointly and severally
liable with 7J who was not impleaded by holding that the former is the real employer of
respondents. Plainly, its decision directly affected 7J.

In Domingo v. Scheer,[21] we held that the non-joinder of indispensable parties is not a ground
for the dismissal of an action[22] and the remedy is to implead the non-party claimed to be
indispensable.[23] Parties may be added by order of the court on motion of the party or on its
own initiative at any stage of the action and/or such times as are just. If the petitioner refuses to
implead an indispensable party despite the order of the court, the latter may dismiss the
complaint/petition for the petitioner/plaintiffs failure to comply therefor.[24]

Although 7J was a co-party in the case before the Labor Arbiter and the NLRC, respondents
failed to include it in their petition for certiorari in the Court of Appeals. Hence, the Court of
Appeals did not acquire jurisdiction over 7J. No final ruling on this matter can be had without
impleading 7J, whose inclusion is necessary for the effective and complete resolution of the
case and in order to accord all parties with due process and fair play.

In light of the foregoing, the Court sees no need to discuss the second issue raised by
petitioner.
WHEREFORE, the July 9, 2004 decision of the Court of Appeals in CA-G.R. SP No. 72732 and
the November 26, 2004 resolution, are SET ASIDE. Let the case be REMANDED to the Court of
Appeals to include 7J Maintenance and Janitorial Services as an indispensable party to the
case for further proceedings.

SO ORDERED.

[G.R. No. 161955. August 31, 2005]

CELEDONIO MOLDES, ROSITA MOLDES and CAROLINA CEDIA, petitioners, vs. TIBURCIO
VILLANUEVA, APOLONIO VILLANUEVA, MANUEL VILLANUEVA, MARIANO DULLAVIN,
RONALDO DULLAVIN and TEODORA DULLAVIN, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) and its
Resolution[2] in CA-G.R. CV No. 47518.

The Antecedents

The spouses Juan Mollet and Silvina Del Monte were the owners of three parcels of land then
located in the Municipality of Taguig (now a part of Muntinlupa City) identified as Lot Nos. 589,
590 and 591. The lots had a total area of 3,600 square meters, covered by Transfer Certificate
of Title (TCT) No. 2180 issued by the Register of Deeds of Rizal. Their daughter, Josefa, died
intestate on November 24, 1918 at the age of 25. Juan Mollet died intestate on January 30,
1934 and his widow died also, intestate, on March 22, 1948. They were survived by their
daughter Romana Mollet, who married Andres Gelardo.[3] Romana and Andres were blessed
with five children, namely, Flaviana, Brigida, Maria, Isaac and Leonila, all surnamed Gelardo.[4]
Flaviana married Manuel Villanueva, and their marriage produced four offsprings, namely,
Apolinario, Tiburcio, Manuel and Juanita (now deceased), all surnamed Villanueva.[5] Juanita
married Cornelio Maritana. The couple begot five children, namely, Luis, Orlando, Normita,
Diego, and Julieta, all surnamed Maritima.

Brigida married Mariano Dullavin and they had two children, Rolando and Teodora, both
surnamed Dullavin.[6] Maria married Primo Tolentino and the couple had two children, Hermino
and Carolyn.[7] Leonila married Delfin Malacca and they had two sons, Gelardo and Marcial.[8]
Isaac died a bachelor and without any issue.[9]

On March 17, 1965, a document denominated as Deed of Extrajudicial Settlement with

Quitclaim[10] covering Lot Nos. 589, 590 and 591 was executed by Maria and Leonila,
surnamed Gelardo, Mariano Dullavin, Manuel, Juanita, Tiburcio and Apolonio, all surnamed
Villanueva, and Emeterio, Celedonio, Domingo, Rosita and Carolina, all surnamed Moldes.
Lot 589 was divided as follows: Maria Gelardo, share; Emeterio Moldes, Domingo Moldes,
Celedonio Moldes, Rosita Moldes, and Carolina Moldes Cedia, share. It appears that the
Villanueva siblings (Manuel, Tiburcio, Apolonio and Juanita) waived their share in favor of the
Moldeses and Carolina.

Lot 590 was adjudicated as follows: Lot 590-B entirely to Leonila Gelardo; Lot 590-C was
allotted to Emeterio Moldes, Domingo Moldes, Celedonio Moldes, Rosita Moldes, and Carolina
Moldes Cedia; Lot 590-D was given to Maria Gelardo, Leonila Gelardo, Mariano Dullavin,
Emeterio Moldes, Domingo Moldes, Celedonio Moldes, Rosita Moldes, and Carolina Moldes
Cedia.

It appears that Mariano Dullavin and the Villanueva siblings waived their respective shares in
Lot 590-B in favor of Leonila Gelardo; in Lot 590-C, to Emeterio Moldes, Domingo Moldes,
Celedonio Moldes, Rosita Moldes, and Carolina Moldes Cedia; and, again in Lot D in favor of
Maria Gelardo, Leonila Gelardo, Emeterio Moldes, Domingo Moldes, Celedonio Moldes, Rosita
Moldes, and Carolina Moldes Cedia.

Lot 591 was partitioned as follows: share of Lot 591-A to Leonila Gelardo; share of Lot 591-A to
Maria Gelardo; and Lot Nos. 591-B and 591-C to Celedonio Moldes.

It appears that Emeterio Moldes, Domingo Moldes, Rosita Moldes, Apolonio Moldes and
Carolina Moldes Cedia, the Villanueva siblings, and Mariano Dullavin waived all their respective
rights to the share of Lot 591-A given to Leonila Gelardo; to the share of Lot 591-A given to
Maria Gelardo; and to Lot Nos. 591-B and 591-C awarded to Celedonio Moldes.

On January 26, 1987, Manuel Villanueva and his children, namely, Tiburio and Apolonio, and
Mariano Dullavin and his children, namely, Rolando and Teodora, filed a Complaint with the
Regional Trial Court (RTC) of Makati against Celedonio, Rosita and Carolina Cedia, all
surnamed Moldes, to annul the Deed of Extrajudicial Settlement with Quitclaim. The complaint
contained the following prayer:

WHEREFORE, it is most respectfully prayed of this Honorable Court to:

1. Order the rescission of the Extrajudicial Settlement with Quitclaim (Annex B);

2. Order the defendants to pay plaintiffs the following:

a) Moral damages in the sum of P100,000;

b) Exemplary damages in the sum of P50,000;

c) Attorneys fee of P60,000 plus P450 per court appearance; and,

d) To pay the costs of suit.

Plaintiffs further pray for such other reliefs and remedies which are just and equitable under
premises.[11]

Plaintiffs Rolando and Teodora Dullavin also alleged that they never knew of any document
wherein they repudiated their share in the estate of their great-grandparents. In fact, in the past,
they had wanted to eject the Moldeses but their case was dismissed because of the questioned
deed, which incidentally was the very first time they saw it. They pointed out that by reckoning,
they were still minor when their father, Mariano, signed the questioned deed. Be that as it may, it
was of no moment, because their father had nothing to repudiate as he was not given any share
in the estate of the spouses Mollet.[12]

Plaintiffs Tiburio and Apolonio Villanueva alleged that they and their sister Juanita were
entrusted by their father to their aunt, Leonila Gelardo, when they were eight years old, six
years old and one year old, respectively; they lived with her until 1938 when they were married;
as a result, they developed a deep respect for their aunt, so much so that they signed the deed
believing that they would be getting their inheritance under the deed more expeditiously, not
knowing that because of their illiteracy, they had relinquished their rights over their inheritance.

Plaintiffs Tiburcio, Apolonio and Manuel further alleged that they were hoodwinked by their aunt
Leonila as well as Celedonio in parting with their inheritance. They claimed that being illiterate
and unlettered, they did not understand the contents and the legal effects of the questioned
deed. They explained that they signed the deed upon Leonilas representation and that what
they were signing was just a partition of the estate of their great-grandparents. As it turned out
and was revealed later, they were surprised to be excluded therefrom.[13]

The plaintiffs alleged, inter alia, that the deed was tainted with fraud because it included
Celedonio, Rosita and Carolina, who were not heirs of the spouses Mollet (whose estate was
partitioned). They denied the defendants allegation that they were Josefas descendants, the
latter having died single at the age of 25 and without issue.

In their answer, the defendants specifically denied that there was fraud or undue pressure in the
execution of the questioned deed. They maintained that they were the direct descendants of the
spouses Mollet, and successors-in-interest of Josefa Mollet from whom they derived their rights.
According to them, long before she died, their grandmother Josefa married one Florencio Diaz.
This matrimonial union begot Domingo Diaz and their mother, Dolores Diaz, who, in turn,
married their father, Emeterio Moldes.[14]

By way of special and affirmative defense, the defendants averred that the action had
prescribed because more than 20 years had elapsed from execution of the questioned deed.
[15] As counterclaim, they prayed that the plaintiffs be adjudged to pay them the amounts of
P100,000.00 for moral damages; P50,000.00, for exemplary damages; and P30,000.00, for
attorneys fees.[16]
The Ruling of the Regional Trial Court

On May 16, 1994, the RTC rendered a decision declaring that the Deed of Extra-judicial
Settlement with Quitclaim was void. The dispositive portion thereof, reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs. It is

the findings of this Court that since the consent of the plaintiffs were not freely given when they
signed the document of the parties which they did not understand, but was obtained thru fraud,
the Deed of Partition with Quitclaim is hereby ordered rescinded and voided.

The other great grandchildren, particularly the children of Brigida Mollet Gelardo, married to
Mariano Dullavin, being Rolando Dullavin and Teodora Dullavin, including the children of Maria
Mollet Gelardo married to Primo Tolentino, being Hermino and Carolyn, were not given their
share of their inheritance, all the more reason that this Deed of Partition with Waiver and
Quitclaim should be rescinded and partition effected among all of the Plaintiffs as they probably
are the only true heirs of spouses Juan Mollet and Silvina Del Monte.

Accordingly, the property should remain as the Estate of the late Spouses Juan Mollet and
Silvina Del Monte Mollet.

As plaintiffs were force to litigate, all Defendants are, jointly and solidarily, directed to pay the
Plaintiffs actual damages in the sum of P100,000.00.

Defendants, jointly and solidarily, must pay moral damages for the trouble and anxiety caused to
plaintiffs in the sum of P100,000.00 and as a deterrent to their propensity to covet what do not
belong to them, Defendants must, jointly and solidarily, pay Plaintiffs exemplary damages of
P100,000.00.

As Plaintiffs were forced to litigate thru counsel, Defendants must, jointly and in solidum, pay
Attorneys fees in the sum of P50,000.00, and,

The cost of this proceedings.

It is SO ORDERED.[17]

The RTC held that the Deed of Extrajudicial Settlement with Quitclaim was a sham. Through
deceit and machinations, the plaintiffs, being illiterate at that, were mislead, duped, railroaded
and bamboozled by the defendants in signing the deed and waiving their respective shares. In
fact, the defendants never filed it in the Office of the Register of Deeds, an act [giving] doubt to
[its] existence and validity.
The RTC further ruled that the evidence showed that the defendants were not heirs of the
spouses Mollet, whose estate was partitioned. According to the trial court, the defendants own
evidence belied their claim of heirship.

The defendants appealed the decision to the CA where they alleged, inter alia, that the RTC
erred (1) in ruling that they were not heirs of the spouses Juan Mollet and Silvina Del Monte
Mollet; (2) in voiding the Deed of Extrajudicial Settlement with Quitclaim on the ground of fraud;
and (3) in awarding damages against them.[18]

The Ruling of the Court of Appeals

On January 30, 2003, the CA affirmed with modification the decision of the RTC with this fallo:

WHEREFORE, the assailed decision dated 16 May 1994 is hereby AFFIRMED with
MODIFICATION deleting the award of damages and attorneys fees.

SO ORDERED.[19]

The CA affirmed the findings of the RTC that the plaintiffs-appellees were duped by the
defendants-appellants in signing the fraudulent deed. It amplified that the waivers, having no
consideration, were wangled from the very much gullible plaintiffs-appellees, who were not
given a copy by the defendants-appellants. In fact, the latter refused to give the plaintiffs-
appellees a copy of the deed when they requested one.

The appellate court further ratiocinated that as the subject deed included persons who were not
heirs of the person whose estate was partitioned, such deed is governed by Article 1105 of the
Civil Code.[20] Thus, since the partition deemed inexistent and void from the beginning, the
action seeking a declaration of its nullity could not prescribe.

The appellate court denied the motion for reconsideration of the defendants-appellants[21] who,
forthwith, filed the instant petition. They made the following allegations:

I. The Court of Appeals disregarded the basic rule that the respondents were the plaintiffs who
had the burden of proving the rescissability (sic) of the notarial deed in favor of the petitioners.

II. The Court of Appeals disregarded the incontestable and uncontested fact that petitioners
have been in possession of the property in the concept of owners fifty (50) years prior to the
execution of the deed that respondents sought to rescind.

III. The Court of Appeals disregarded the basic principle in the adjudication that when the
evidence of the parties in a civil case are in equipoise, the complaint must be dismissed for
failure of the plaintiff to prove his case by preponderant evidence.
IV. The Court of Appeals based its decision on evidence it itself pronounce as improbable,
compounding the error by completely disregarding the nature and consequence of a notarial
document.[22]

The Ruling of the Court

The Court grants the petition on the sole ground that the respondents, who were the plaintiffs in
the trial court, failed to implead indispensable parties.

The respondents herein, who were the plaintiffs in the court a quo, alleged in their complaint
that, as heirs of the spouses Mollet, they were co-owners of the subject property together with
the heirs of Maria and Leonila, namely, Primo Tolentino and their children, Hermino and Carolyn,
and Delfin Malacca and their sons Gelardo and Marcial. With the death of the respondents
sister Juanita Maritana, her heirs, (Cornelio Maritana and their children Luis, Orlando, Normita,
Diego, and Julieta) retained their right to inherit despite her death.[23] However, the
respondents failed to implead the aforementioned heirs as parties-plaintiffs. The respondents
also failed to implead the other signatories of the deed, namely, Emeterio and Domingo,
surnamed Moldes, who, under the deed, were deeded shares in the property.

This is fatal to the complaint. All heirs of the deceased are indispensable parties to the
respondents action to nullify the deed and the partition of the subject property among the
signatories therein.[24] All the parties to the deed are, likewise, indispensable parties.[25]

Section 7, Rule 3 of the Rules of Court provides:

SEC. 7. Compulsory joinder of indispensable parties. Parties-in-interest without whom no final

determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one who has such an interest in the controversy or subject matter that
a final adjudication cannot be made, in his absence, without injuring or affecting that interest. A
party who has not only an interest in the subject matter of the controversy, but also has an
interest of such nature that a final decree cannot be made without affecting his interest or
leaving the controversy in such a condition that its final determination may be wholly
inconsistent with equity and good conscience. He is a person in whose absence there cannot be
a determination between the parties already before the court which is effective, complete, or
equitable.[26] In Commissioner Andrea D. Domingo v. Herbert Markus Emil Scheer,[27] the
Court held that the joinder of indispensable parties is mandatory. Without the presence of
indispensable parties to the suit, the judgment of the court cannot attain real finality. Strangers
to a case are not bound by the judgment rendered by the court. The absence of an
indispensable party renders all subsequent actions of the court null and void, with no authority
to act not only as to the absent party but also as to those present. The responsibility of
impleading all the indispensable parties rests on the petitioner/plaintiff.
Likewise, in Metropolitan Bank and Trust Company v. Hon. Floro T. Alejo,[28] the Court ruled
that the evident aim and intent of the Rules regarding the joinder of indispensable and
necessary parties is a complete determination of all possible issues, not only between the
parties themselves but also as regards to other persons who may be affected by the judgment.
A valid judgment cannot even be rendered where there is want of indispensable parties.

WHEREFORE, the petition is GRANTED. The Decision of the Regional Trial Court and Decision
of the Court of Appeals in CA-G.R. CV No. 47518 are REVERSED and SET ASIDE. No costs.

SO ORDERED

February 21, 2017

G.R. No. 173399

CENTRAL BANK BOARD OF LIQUIDATORS, Petitioner

vs.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondent

DECISION

SERENO, CJ.:

Our ruling in this case is confined to the resolution of procedural issues pertaining to the
propriety of the admission of a Second Amended/Supplemental Complaint. The latter sought to
hold the Bangko Sentral ng Pilipinas (BSP) and its Monetary Board (MB) liable for causes of
action that arose almost 10 years after the original Complaint was filed against the now defunct
Central Bank of the Philippines (CB).

THE CASE

The Petition for Review on Certiorari1 under Rule 45 of the 1997 Revised Rules of Civil
Procedure now before us was filed by the Central Bank Board of Liquidators (CB-BOL). It seeks
to annul the Decision2 of the Court of Appeals (CA), which affirmed the Orders3 of the Regional
Trial Court, National Capital Judicial Region, Makati City-Branch 136 (RTC).

The assailed CA Decision affirmed the ruling of the RTC in consolidated Civil Case Nos. 8108,
9675, and 10183, which had admitted the Second Amended/Supplemental Complaint filed by
respondent Banco Filipino Savings and Mortgage Bank (Banco Filipino, or respondent).4 The
CB-BOL alleges that by admitting the complaint, the RTC erroneously included the BSP and its
MB as new parties to the consolidated civil cases and raised new causes of action not alleged in
the original Complaint.5
THE FACTS

The following are the pertinent facts of the case as gathered from its records.6

On 14 February 1963, the MB of the then CB issued MB Resolution No. 223 allowing
respondent Banco Filipino to operate as a savings bank. Respondent began formal operations
on 9 July 1964.7

However, on 27 July 1984, the CB issued MB Resolution No. 955 placing Banco Filipino under
conservatorship after granting the latter's loan applications worth billions of pesos.8 Respondent
bank filed with the RTC Makati a Complaint against the CB for the annulment of MB Resolution
No. 955.9 The case was docketed as Civil Case No. 8108 and raffled to Judge Ricardo
Francisco of Branch 136.10

Thereafter, on 25 January 1985, the CB issued MB Resolution No. 75 ordering the closure of
Banco Filipino and placing the latter under receivership. The Resolution stated that since
respondent had been found to be insolvent, the latter was forbidden to continue doing business
to prevent further losses to its depositors and creditors. The Resolution further provided for the
takeover of the assets and liabilities of Banco Filipino for the benefit of its depositors and
creditors, as well as for the termination of its conservatorship.11 On 2 February 1985, Banco
Filipino filed a Complaint with the RTC Makati against the MB, assailing the latter's act of
placing the bank under receivership.12 The case was docketed as Civil Case No. 9675 and
raffled to Judge Zoilo Aguinaldo of Branch 143.13

Because of its impending closure,14 Banco Filipino filed with the CA a Petition for Certiorari and
Mandamus on 28 February 1985, seeking the annulment of MB Resolution No. 75 on the
ground of grave abuse of discretion in the issuance of the Resolution.15 The Petition eventually
reached the Supreme Court, where it was docketed as G.R. No. 70054.

On 22 March 1985, the CB issued another Resolution placing Banco Filipino under Jiquidation.
Respondent then filed another Complaint with the RTC Makati to question the propriety of the
liquidation.16 The case was docketed as Civil Case No. 10183 and raffled to Judge Fernando
Agdamag of Branch 138.17

Meanwhile, this Court in G.R. No. 70054 promulgated on 29 August 1985 a Resolution directing,
among others, the consolidation in Branch 136 of the RTC Makati of the following cases: (1)
Civil Case No. 8108, the case for the annulment of the conservatorship order; (2) Civil Case No.
9675, the case seeking to annul the receivership order; and (3) Civil Case No. 10183, the case
seeking to annul the order for the liquidation of the bank.18

On 11 December 1991, this Court, in an En Banc Decision penned by Associate Justice Leo D.
Medialdea, nullified MB Resolution No. 75 and ordered the CB and its MB to reorganize the
bank and allow it to resume business.19
On 6 July 1993, during the pendency of the three consolidated cases, Republic Act (R.A.) No.
7653, or the New Central Bank Act of 1993, took effect. Under the new law, the CB was
abolished and, in its stead, the BSP was created. The new law also created the CB-BOL for the
purpose of administering and liquidating the CB's assets and liabilities,20 not all of which had
been transferred to the BSP.21

Pursuant to the Decision of this Court in G.R. No. 70054, the BSP reopened Banco Filipino and
allowed it to resume business on 1 July 1994.22

On 29 May 1995, pursuant to the recent development, Banco Filipino filed a Motion to Admit
Attached Amended/Supplemental Complaint23 in the three consolidated cases - Civil Case Nos.
8108, 9675, and 10183 - before the RTC. In its Amended/Supplemental Complaint, respondent
bank sought to substitute the CB-BOL for the defunct CB and its MB. Respondent also aimed to
recover at least ₱18 billion in actual damages, litigation expenses, attorney's fees, interests, and
costs of suit against petitioner and individuals who had allegedly acted with malice and evident
bad faith in placing the bank under conservatorship and eventually closing it down in 1985.24

The trial court, through an Order dated 29 March 1996, granted the Motion to Admit filed by
Banco Filipino and accordingly admitted the latter's Amended/Supplemental Complaint.
Consequently, the CB-BOL was substituted for the defunct CB in respondent's civil cases, which
are still pending with the RTC.25

On 25 September 2003, or more than 10 years from the enactment of R.A. 7653, Banco Filipino
again filed a Motion to Admit Second Amended/Supplemental Complaint26 in the consolidated
civil cases before the RTC. In that Second Amended/Supplemental Complaint,27 respondent
sought to include the BSP and its MB - "the purported successor-in-interest of the old CB"28 -
as additional defendants based on the latter's alleged acts or omissions as follows:

1. The BSP and the MB refused to grant Banco Filipino a universal banking license, unless it
complied with their stringent conditions intended to further deplete its resources, contrary to the
provisions of the Memorandum of Agreement the parties entered into on 20 December 1999.29

2. The BSP and the MB engaged in a smear campaign against Banco Filipino intended to
undermine the trust and confidence of its depositors and the public in general.30

3. With the objective of gaining control of respondent bank, the BSP disqualified a member of
the former' s board of directors.31

4. The BSP and its MB conspired with a group of minority stockholders of Banco Filipino to
institute a case against respondent and thereby place it under a state of receivership or
conservatorship or under a management committee.32
5. The demands of Banco Filipino for an out-of-court settlement of its damage claims against
the BSP have gone unheeded and have resulted in burgeoning litigation expenses and other
damages, for which respondent continues to suffer as a result of prolonged litigation.33

Banco Filipino claimed that the BSP employed "coercive measures"34 that forced respondent to
enter into a Memorandum of Agreement (MOA) regarding the collection of advances extended
to the latter by the defunct CB. In addition, respondent also alleged that its present dealings with
the BSP and the MB have become increasingly difficult, especially in obtaining favorable actions
on its requests and other official dealings.35

Banco Filipino's Motion to Admit its Second Amended/Supplemental Complaint was opposed by
the CB-BOL based on the following grounds:

1. Banco Filipino's Second Amended/Supplemental Complaint was not supported by a board

resolution that authorized it to file the amended or supplemental complaint.

2. The second supplemental complaint raised new and independent causes of action against a
new party- the BSP - which was not an original party.

3. The second supplemental complaint was violative of the rule on the joinder of causes of
action, because it alleged those that did not arise from the same contract, transaction or relation
between the parties - as opposed to those alleged in the complaint sought to be amended or
supplemented - and differed from the causes of action cited in the original Complaint.

4. The admission of the second supplemental complaint would expand the scope of the dispute
in the consolidated civil cases to include new causes of action against new parties like the BSP,
resulting in a delay in the resolution of the cases.36

On 27 January 2004, the RTC, through an Order penned by Presiding Judge Rebecca R.
Mariano, granted the Motion to Admit Banco Filipino's Second Amended/Supplemental
Complaint.37 The CB-BOL moved for the reconsideration of the trial court's Order,38 but the
motion was denied in an Order dated 20 July 2004.39

On 1 October 2004, petitioner CB-BOL filed with the CA a Petition for Certiorari under Rule 65,
docketed as CA-G.R. SP No. 86697.40 It questioned the propriety of the RTC's Order admitting
Banco Filipino's Second Amended/Supplemental Complaint and committing grave abuse of
discretion in the process. Reiterating the grounds stated in its Opposition to the Motion to Admit
the Second Amended/Supplemental Complaint, petitioner contended that the complaint
consisted of, among others, an improper joinder of parties and other issues that were entirely
different from those raised in the original complaint.41

On 27 January 2006, the CA dismissed the CB-BOL's Petition and affirmed in toto the trial
court's Order admitting the Second Amended/Supplemental Complaint.42
The appellate court ruled that the old CB continued to exist and remained a defendant in the
consolidated civil cases, albeit under a new name: CB-BOL.

It also ruled that, pursuant to R.A. 7653, the BSP was the successor-in-interest of the old CB.
Further, with the transfer of assets from the CB to the BSP during the pendency of the subject
civil cases, the latter now became a transferee pendente lite. Therefore, the CA concluded that
there were no new parties impleaded in the civil cases when the Second
Amended/Supplemental Complaint was admitted by the trial court.43

The CA further sustained the RTC's ruling that respondent Banco Filipino did not raise new
issues against petitioner CB-BOL or seek new reliefs or claim new damages from the latter.
Supposedly, respondent merely sought the addition of the BSP and its MB as parties-
defendants in the consolidated civil case, as they were the successors-in-interest of the defunct
CB and its MB.44

The assailed CA Decision also attributed to the CB-BOL the apparent delay in the resolution of
the current dispute, based on the number of certiorari cases the latter had filed with the CA and
the Supreme Court since the commencement of those cases.45

On 16 February 2006, petitioner filed a Motion for Reconsideration seeking the reversal of the
Decision dated 27 January 2006 in CA-G.R. SP No. 86697.46 On 27 June 2006, the CA denied
the Motion after finding no "plausible reason" to depart from its assailed Decision.47

Petitioner CB-BOL now comes to this Court via a Petition for Review on Certiorari. It assails the
Decision of the appellate court in CA-G.R. SP No. 86697, which affirmed in toto the trial court's
Order admitting the Second Amended/Supplemental Complaint of Banco Filipino. Specifically,
petitioner raises the following arguments:48

I.

THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S ORDER

ADMITTING RESPONDENT'S SECOND AMENDED/SUPPLEMENTAL COMPLAINT AGAINST
THE BSP, DESPITE THE FACT THAT THE PARTIES, SUBJECT MATTERAND CAUSES OF
ACTION ASSERTED THEREIN ARE DIFFERENT FROM AND TOTALLY UNRELATED TO
RESPONDENT'S CAUSES OF ACTION UNDER THE FIRST AMENDED SUPPLEMENTAL
COMPLAINT AGAINST THE DEFUNCT CB.

xxxx

II.

THE COURT OF APPEALS ERRED IN REDUCING THE ADMISSION OF THE SECOND

AMENDED/SUPPLEMENTAL COMPLAINT TO THE MERE AMENDMENT OF A PLEADING
"TO SUBSTITUTE OR JOIN A TRANSFEREE PENDENTE LITE" UNDER SEC. 19, RULE 3 OF
THE REVISED RULES OF COURT x x x.

xxxx

III.

THE COURT OF APPEALS ERRED IN UPHOLDING THE TRIAL COURT'S RULING THAT
THE OLD CB CONTINUES TO EXIST AS PETITIONER CB-BOL. PETITIONER IS A
SEPARATE, DISTINCT AND INDEPENDENT ENTITY FROM THE DEFUNCT CB WHICH HAS
BEEN ABOLISHED UPON THE ENACTMENT OF THE NEW CENTRAL BANK ACT.

IV.

PETITIONER'S PLEA AGAINST THE ADMISSION OF RESPONDENT'S SECOND

AMENDED/SUPPLEMENTAL COMPLAINT IS NOT A DILATORY TACTIC OR A MERE
RESORT TO TECHNICALITY; RATHER, IT IS AN EARNEST APPEAL FOR PETITIONER TO
BE FREE FROM A USELESS AND WASTEFUL LEGAL CONTEST WHICH SHOULD BE THE
SUBJECT OF A SEPARATE CASE SOLELY BETWEEN THE RESPONDENT AND THE BSP. IT
IS A PLEA BY PETITIONER TO SECURE A JUST, SPEEDY AND INEXPENSIVE
DETERMINATION OF RESPONDENT'S CASE AGAINST IT FOR ACTS SUPPOSEDLY
PERPETRATED BY THE OLD CB IN 1984-1985 FOR WHICH IT IS SUPPOSEDLY THE
SUCCESSOR-IN-INTEREST.

THE ISSUE

The crucial issue to be resolved here is whether the RTC erred in admitting Banco Filipino's
Second Amended/Supplemental Complaint in the consolidated civil cases before it.

OUR RULING

The Petition of the CB-BOL is impressed with merit.

It must be noted at this point that the BSP and its MB are not yet required to answer the RTC
Complaint, as the issue of their addition as parties is yet to be settled. Nevertheless, whether or
not the BSP and its MB are transferees or successors-in-interest of the CB and its MB, the
former's addition or substitution as parties to this case must comply with the correct procedure
and form prescribed by law.

The second amendment of the

Complaint was improper.

Rule 10 of the 1997 Revised Rules of Court allows the parties to amend their pleadings (a) by
adding or striking out an allegation or a party's name; or (b) by correcting a mistake in the name
of a party or rectifying a mistaken or an inadequate allegation or description in the pleadings for
the purpose of determining the actual merits of the controversy in the most inexpensive and
expeditious manner.49

The prevailing rule on the amendment of pleadings is one of liberality,50 with the end of
obtaining substantial justice for the parties. However, the option of a party-litigant to amend a
pleading is not without limitation. If the purpose is to set up a cause of action not existing at the
time of the filing of the complaint, amendment is not allowed. If no right existed at the time the
action was commenced, the suit cannot be maintained, even if the right of action may have
accrued thereafter.51

In the instant case, the causes of action subject of the Second Amended/Supplemental
Complaint only arose in 1994 - well after those subject of the original Complaint. The original
Complaint was based on the alleged illegal closure of Banco Filipino effected in 1985 by the
defunct CB and its MB.

On the other hand, the Second Amended/Supplemental Complaint stemmed from the alleged
oppressive and arbitrary acts committed by the BSP and its MB against Banco Filipino after
respondent bank was reopened in 1994. Since the acts or omissions allegedly committed in
violation of respondent's rights are different, they constitute separate causes of action.52

In its Comment53 on the present Petition, Banco Filipino contends, as the RTC and the CA
similarly ruled, that the Second Amended/Supplemental Complaint does not alter the substance
of the original demand, change the cause of action against the original defendants, or seek
additional or new reliefs.54 Rather, respondent contends that the only change sought is the
addition of the BSP and its MB as parties-defendants. Respondent further argues that what
petitioner erroneously views as new causes of action are merely demonstrations to show that
the BSP has come to adopt the same repressive and oppressive attitude of the latter's alleged
predecessor-in-interest.55

This contention is, however, belied by a closer examination of the Second

Amended/Supplemental Complaint, in which respondent asks the Court to order the defendants
to pay, among others, actual damages of at least ₱18.8 billion "as a consequence of the acts
herein complained of."56

The "acts complained of'' cover not just the conservatorship, receivership, closure, and
liquidation of Banco Filipino in 1984 and 1985, but also the alleged acts of harassment
committed by the BSP and its MB after respondent bank was reopened in 1994. These acts
constituted a whole new cause of action. In effect, respondent raised new causes of action and
asserted a new relief in the Second Amended/Supplemental Complaint. If it is admitted, the
RTC would need to look into the propriety of two entirely different causes of action. This is not
countenanced by law, as explained in the preceding paragraphs.
The second supplemental pleading
was improper.

Rule 10 of the 1997 Revised Rules of Court allows the parties to supplement their pleadings by
setting forth transactions, occurrences, or events that happened since the date of the pleading
sought to be supplemented.57

However, the option of a party-litigant to supplement a pleading is not without limitation. A

supplemental pleading only serves to bolster or add something to the primary pleading. Its usual
function is to set up new facts that justify, enlarge, or change the kind of relief sought with
respect to the same subject matter as that of the original complaint.58

This Court ruled in Leobrera v. CA59 that a supplemental complaint must be founded on the
same cause of action as that raised in the original complaint. Although in Planters Development
Bank v. LZK Holdings & Development Corporation,60 the Court clarified that the fact that a
supplemental pleading technically states a new cause of action should not be a bar to its
allowance, still, the matter stated in the supplemental complaint must have a relation to the
cause of action set forth in the original pleading. That is, the matter must be germane and
intertwined with the cause of action stated in the original complaint so that the principal and core
issues raised by the parties in their original pleadings remain the same.61

In the instant case, Banco Filipino, through the Second Amended/Supplemental Complaint,
attempted to raise new and different causes of action that arose only in 1994.1a\^/phi1 These
causes of action had no relation whatsoever to the causes of action in the original Complaint, as
they involved different acts or omissions, transactions, and parties. If the Court admits the
Second Amended/Supplemental Complaint under these circumstances, there will be no end to
the process of amending the Complaint. What indeed would prevent respondent from seeking
further amendments by alleging acts that may be committed in the future?

For these reasons, whether viewed as an amendment or a supplement to the original

Complaint, the Second Amended/Supplemental Complaint should not have been admitted.

The amendment/supplement violates

the rules on joinder of parties and
causes of action.

Moreover, the admission of the Second Amended/Supplemental Complaint is inappropriate

because it violates the rule on joinder of parties and causes of action. If its admission is upheld,
the causes of action set forth therein would be joined with those in the original Complaint. The
joinder of causes of action is indeed allowed under Section 5, Rule 2 of the 1997 Rules of
Court;62 but if there are multiple parties, the joinder is made subject to the rules on joinder of
parties under Section 6, Rule 3.63 Specifically, before causes of action and parties can be
joined in a complaint involving multiple parties, (1) the right to relief must arise out of the same
transaction or series of transactions and (2) there must be a question of law or fact common to
all the parties.64

In the instant case, Banco Filipino is seeking to join the BSP and its MB as parties to the
complaint. However, they have different legal personalities from those of the defunct CB and its
MB: firstly, because the CB was abolished by R.A. 7653, and the BSP created in its stead; and
secondly, because the members of each MB are natural persons. These factors make the BSP
and its MB different from the CB and its MB. Since there are multiple parties involved, the two
requirements mentioned in the previous paragraph must be present before the causes of action
and parties can be joined. Neither of the two requirements for the joinder of causes of action
and parties was met.

First, the reliefs for damages prayed for by respondent did not arise from the same transaction
or series of transactions. While the damages prayed for in the first Amended/Supplemental
Complaint arose from the closure of Banco Filipino by the defunct CB and its MB, the damages
prayed for in the Second Amended/Supplemental Complaint arose from the alleged acts of
oppression committed by the BSP and its MB against respondent.

Second, there is no common question of fact or law between the parties involved. The acts
attributed by Banco Filipino to the BSP and its MB pertain to events that transpired after this
Court ordered the respondent bank's reopening in 1994. These acts bear no relation to those
alleged in the original Complaint, which related to the propriety of the closure and liquidation of
respondent as a banking institution way back in 1985.

The only common factor in all these allegations is respondent bank itself as the alleged
aggrieved party. Since the BSP and its MB cannot be joined as parties, then neither can the
causes of action against them be joined.

This ruling is confined to

procedural issues.

As mentioned at the outset, the Court will confine its ruling on this Petition to procedural issues
pertaining to the propriety of the admission of the Second Amended/Supplemental Complaint.
We will not address the issues raised by petitioner with regard the findings of the trial and the
appellate court that the BSP is the successor-in-interest of the defunct CB65 and is considered
a transferee pendente lite66 in the civil cases. These findings relate to the BSP's potential
liability for the causes of action alleged in the original Complaint. At issue here is Banco
Filipino's attempt, through the Second Amended/Supplemental Complaint, to hold the BSP and
its MB liable for causes of action that arose in 1994. Respondent is not without any relief. If the
RTC finds that the BSP was indeed a transferee pendente lite, the failure to implead it would not
prevent the trial court from holding the BSP liable, should liability now attach for acts alleged in
the original Complaint.67
WHEREFORE, the Petition of the CB-BOL is GRANTED, and the Decision of the Court of
Appeals dated 27 January 2006 and Resolution dated 27 June 2006 in CA-G.R. SP No. 86697
are hereby REVERSED and SET ASIDE.

The RTC National Capital Judicial Region, Makati City, Branch 136 is hereby DIRECTED to
proceed with the trial of this case with utmost dispatch.

SO ORDERED.