JOSEFINA RUBIO DE LARENA, plaintiff-appellant vs. HERMENEGILDO VILLANUEVA, defendant-appellee.

G.R. No. L-29155 November 5, 1928

The case at bar is a sequel to case G. R. No. 21706, Josefina Rubio de Larena vs. Hermenegildo Villanueva, decided on
March 26, 1924. 1 In that case we affirmed a decision of the Court of First Instance ordering the rescission of a lease
of the Tacgajan Sugar Plantation and the payment by the defendant-lessee of the unpaid balance of the rent for the
agricultural year 1920-1922 in the sum of P5,949.28 with interest from August 26, 1922, an for P8,000 in rent for the
agricultural year 1921-1923. The decision also provided that the possession of the leased land be delivered to the
plaintiff.
Shortly after the record was returned to the court below, a writ of execution was issued, but before levy was made
the parties came to an agreement, under which the money judgment was to be satisfied by the payment of P10,500
in cash and the transfer to the plaintiff of a dwelling house situated in the municipality of Bais. The agreement was
carried out in accordance with its terms, and on September 30, 1924, the following document was executed by the
plaintiff:
“Having reached an agreement between the undersigned, performer, in civil case No. 67 decided by the Supreme
Court, and the executed, Mr. Hermenegildo Villanueva, I hereby declare to have received from the Provincial Sheriff
of Negros Oriental, and my entire satisfaction the sum of ten thousand five hundred pesos (P10,500), plus a
residential house with its lot, located in the plaza of the Municipality of Bais, Province of Negros Oriental, whose
descriptions appear in a separate document, for the import of the ejection issued by the Justices of Negros Oriental
to May 14, 1924, in the wake of a decision of the Supreme Court. With this is definitely completed this execution.
And for the record, I sign the present in the Municipality of Bais, Province of Negros Oriental, I. F., before the
Provincial Sheriff of this Province of Negros Oriental and the Public Notary Mr. Francisco Romero, who ratifies this
commitment.”
(Fda.) JOSEFINA RUBIO, Vda. OF LARENA
Signed in the presence of:
(Fdos.) BRAULIO RUBIO FRANCISCO PINERO (ACKNOWLEDGMENT)
In the meantime, the defendant had harvested the sugarcane crop produced in the agricultural year 1922-1924, and
after having satisfied the aforesaid money judgment, he also continued in possession of the plantation long enough
to appropriate to himself the following ratoon cane crop.
The present action was brought on April 13, 1925, but the last amended complaint, setting forth three causes of
action, was not filed until June 17, 1927. As her first cause of action the plaintiff, after a preliminary statement of the
origin of the controversy, alleges that while case G. R. No. 21706 was on appeal to the Supreme Court, the defendant
knew positively that the aforesaid lease was declared rescinded by the Court of First Instance on September 8, 1923,
and that he, the defendant, also knew that he thereafter was not entitled to the possession of the aforesaid
hacienda; that he, nevertheless, in bad faith continued in such possession during the agricultural year 1922-1924 and
appropriated to himself the cane harvest for that year, which after deducting the share of the sugar central, produced
1,679.02 piculs for his own benefit, which sugar was sold by him for the sum of P13 a picul; that the plaintiff has
demanded payment to her of the total value of said 1,679.02 piculs, amounting to P21,827.26, but that the
defendant refuses to pay. The plaintiff, therefore, asks judgment for the sum of P21,827.26 upon the first cause of
action.
For the second cause of action the plaintiff alleges that under the contract of lease of the Tacgajan Hacienda, one of
the obligations assumed by the defendant was that he would use the care of a good father of the family in conserving
the tools, agricultural implements, draft animals, and other effects enumerated in an inventory made at the time the
defendant entered in possession under the lease; that he was further obligated to return said property to the
plaintiff, but that he return said property to the plaintiff, but that he returned only a part that he returned only a part
thereof and failed to returned only a part thereof and failed to return 4 carabaos, 4 vacunos, 1 corn mill, 4 wagons,
106 steel rails, 14 plows, 1 table, 1 scale, an 1 telephone, the total value of the property enumerated being P3,596 for
which amount, plus P500 in damages, the plaintiff asks judgment under her second cause of action.
As a third cause of action the plaintiff alleges that the harvest of sugar cane illegally made by the defendant in 1924
left ratoon sugar cane in the fields of the hacienda, which sugar can was the property of the plaintiff, and that during
the year 1925, the defendant illegally harvested said ratoon cane together with some recently planted cane, which
harvested after deducting the share of the sugar central, produced 1,613.25 piculs of sugar, which the defendant sold
for his own benefit at the price of P13 per picul, the total amount received by him being P20,962.25 for which the
plaintiff demands judgment. lawphi1.net
In his answer to the first and third causes of action, the defendants alleges that according to the pleadings in case G.
R. No. 21706, the two causes of action were included in that case and, therefore, must be considered res adjudicata.
In regard to the second cause of action the defendant pleads the general issue and sets up as a special defense that
assuming that the property referred to in said cause of action was missing, it loss was due to its total extinction by
ordinary use, for which the defendant could not be held responsible. For all three causes of action, the defendant
sets up as a special defense the document executed by the plaintiff on September 30, 1924, acknowledging the
satisfaction of the judgment in case G. R. No. 21706.
Upon trial the Court of First Instance sustained the defendant's special defense and absolved him from the complaint
with the cost against the plaintiff, whereupon the latter appealed to this court.
We do not think that the court below erred in absolving the defendant from liability upon the second cause of action.
It is not without significance that in her original complaint the plaintiff claimed only 5 plows, 6 carts, 3 carabaos an 4
vacunos, the total value of which was alleged to be P1,360; in the first amended complaint filed over two years later,
the same claim was made, but in the last amended complaint a number of other articles were included, thus
increasing the claim to P3,596. The court below found that the weight of the evidence showed that the missing draft
animals died from rinderpest and that the other personal property was turned over to the provincial sheriff for
delivery to the plaintiff before the writ of execution was returned to the court. If so, the action would lie against the
sheriff rather than against the defendant.
As to the first cause of action the defendant argues that it was included in the prayer of an amended complaint filed
in case G. R. No. 21706 and that, although no express determination thereof was made in the decision of the case, it
must, nevertheless, be regarded as res judicata. That such is not the case is very clear. The Code of Civil Procedure
says:
That only is deemed to have been so adjudged in a former judgment which appears upon its face to have
been so adjudged, or which was actually and necessarily included therein or necessary thereto. (Sec. 307,
Code of Civil Proc.)
But the defendant maintains that the plaintiff having had an opportunity to ventilate the matter in the former case,
she cannot now enforce the same cause of action in the present case. Properly speaking, this argument does not
involve the doctrine of res judicata but rests on the well-known an, in American law, firmly established principle that
a party will not be permitted to split up a single cause of action an make it the basis for several suits. But that is not
this case. The rule is well established that when a lease provides for the payment of the rent in separate installments,
each installment is an independent cause of action, though it has been held and is good law, that in an action upon
such a lease for the recovery of rent, the installments due at the time the action brought must be included in the
complaint an that failure to o so will constitute a bar to a subsequent action for the payment of that rent. The
aforesaid action, G. R. No. 21706, was brought on August 23, 1922, the plaintiff demanding payment of then sue rent
in addition to the rescission of the lease. On July 27, 1923, the plaintiff filed a motion for an amendment to
paragraph 6 of the complaint adding to that paragraph the following sentence:
Que tambien ha vencido ya el tercer ano el arrendamiento de la finca en cuestion y que tampoco ha pagado
el demandao el canon correspondiente a icho ano. [That the third year has also expired the lease of the
property in question and that has not paid the claim or the fee corresponding to that year.]
The plaintiff also amended the prayer of the complaint by asking judgment for rent for years subsequent to 1922. The
motion was granted, and the case came up for trial on July 30, 1923, and on September 8, 1923, the trial court
rendered its decision giving judgment for rent up to and including the rent for the agricultural year ending in 1923.
The lease did not provide for payment of rent in advance or at any definite time, an it appears plainly from the record
that the rent for an agricultural year was not considered due until the end of the corresponding year. It follows that
the rent for the agricultural year 1922-1924 ha not become sue time of the trial of the case and that consequently
the trial court could not render judgment therefore. The action referred to is, therefore, no bar to the first cause of
action in the present litigation.
The defendant places much weigh upon the document of September 30, 1924, hereinbefore quoted. The document
speaks for itself, and it will be readily seen that it is merely a receipt for the satisfaction of the money judgment in the
case G. R. No. L-21706 and has nothing to with the present case.
The only question in regard to the first cause of action relates to the amount of the damages. The plaintiff contends
that the defendant was a possessor in bad faith, and therefore, must pay the value of the fruits of the land in
accordance with article 455 of the Civil Code. Under the circumstances of the case, we cannot so hold. The defendant
held possession under the contract of lease until said contract was rescinded. The contract contained no special
provision for the procedure in effecting the rescission, and it follows that it could only be accompanied by a final
judgment of the court. The judgment in case G. R. No. L-210706 did not become final until March 27, 192, when our
decision on appeal was rendered. As that must have been close to the end of the harvest and milling of the sugar
crop for the period to which the first cause of action refers, we do not think that the defendant should be required to
pay more than the amount of the stipulated rent for the period, i. e., the sum of P8,000 with interest rent for that
period, i. e., the sum of P8,000 with interest. (Lerma vs. De la Cruz, 7 Phil., 581.)
The action for terminating the lease was brought under article 1124 of the Civil Code, an it may, perhaps, he said that
properly speaking, the subject matter of the action was a resolution of the contract an not a rescission. That may be
true, but it is a distinction without a difference; in their case a judicial declaration would be necessary for the
cancellation of the contract in the absence of a special agreement.
Very little need be said in regard to the third cause of action. It relates to a period subsequent to the complete
termination of the lease by final judicial order. The defendant had then no right whatever to the possession of the
land or to the fruits thereof, and in removing the fruits, he acted in bad faith. This being the case, he must pay for the
fruits received by him, less the necessary expenses of production. (Arts. 455 and 453 of the Civil Code.) As his bad
faith commence long before the fruits in question were produced, he is not entitled to any part of the net proceeds
of the crop. The evidence shows that the net ratoon crop of the year 1924-1925 was 1,613.25 piculs of sugar, and
according to the defendant's own statement, the market value of the sugar was in the neighborhood of P11 per picul
an the costs of production about P4.50. The net result is that under the third cause of action, the defendant must pay
to the plaintiff the sum of P10,486.13 with interest.
For the reason stated, the judgment of the court below is affirmed in regard to the second cause of action. It is
reversed as to the first and third causes of action, and it is hereby ordered that the plaintiff have and recover from
the defendant the sum of P18,486.13 with interest at the rate of 6 per cent per annum from April 13, 1925, the date
of the filing of the complaint. No costs will be allowed. So ordered.

ORDER AMENDING DECISION [December 10, 1928]

OSTRAND, J.:
In the motion filed by the defendant on November 14, 1928 our attention is called to a mathematical error in that
we, in discussing the plaintiff's third cause of action, failed to take into consideration the fact that one-half of the
gross ratoon crop produced on the land in question in the agricultural year 1924-1925 was ceded to the sugar central
as compensation for the milling of the cane and that the defendant paid the expenses of the production of the total
or gross crop. Page 8 of the aforesaid decision is therefore amended so as to read as follows:
Very little need be said in regard to the third cause of action. It relates to a period subsequent to complete
termination of the lease by final judicial order. The defendant had then no right whatever to the possession of the
land or to the fruits thereof, and in removing the fruits, he acted in bad faith. This being the case, he must pay for the
fruits received by him, less the necessary expenses of production (Arts. 455 and 453 of the Civil Code.) As his bad
faith commenced long before the fruits in question were produced, he is not entitled to any part of the net proceeds
of the crop. The evidence shows that the gross ratoon crop for the year 1924-1925 was 3,226.50 piculs of sugar, and
according to the defendant's own statement, the market value of the sugar was in the neighborhood of P11 per picul
and the cost of production about P4.50. The defendant received only one-half of the gross crop, the other half going
to the sugar central as compensation for the milling of the cane, but the defendant paid the cost of production both
of his share of the sugar and that of the sugar central. The net result is that under the third cause of action, the
defendant must pay to the plaintiff the sum of P3,226.50 with interest.
"For the reasons stated, the judgment of the court below is affirmed in regard to the second cause of action. It is
reversed as to the first an third causes of action, an it is hereby ordered that the plaintiff have and recover from the
defendant the sum of P11,226.50 with interest at the rate of 6 per cent per annum from April 13, 1925, the date of
the filing of the complaint. No costs will be allowed." So ordered.
BLOSSOM AND COMPANY, INC., plaintiff-appellant vs. MANILA GAS CORPORATION, defendant-appellee.
G.R. No. L-32958 November 8, 1930
In its complaint filed March 3, 1927, the plaintiff alleges that on September 10, 1918, it entered into a contract with
the defendant in which the plaintiff promised and undertook to purchase and receive from the defendant and the
defendant agreed to sell and deliver to the plaintiff, for a period of four years, three tons of water gas tar per month
from September to January 1, 1919 and twenty tons per month after January 1, 1919, for the remaining period of the
contract; one-half ton of coal gas tar a month from September to January 1, 1919, and six tons per month after
January 1, 1919, for the remainder of the contract, delivery to be made at the plant of the defendant in the City of
Manila, without containers and at the price of P65 per ton for each kind of gas tar, it being agreed that this price
should prevail only so long as the raw materials — coal and crude oil —used by the defendant in the manufacture of
gas should cost the defendant the same price as that prevailing at the time of the contract, and that in the event of
an increase or decrease in the cost of raw material there would be a corresponding increase or decrease in the price
of the tar. That on January 31, 1919, this contract was amended so that it should continue to remain in force for a
period of ten years from January 1, 1919, and it was agreed that the plaintiff should not be obliged to take the
qualities of the tars required during the year 1919, but that it might purchase tars in such quantities as it could use to
advantage at the stipulated price. That after the year 1919 the plaintiff would take at least the quantities specified in
the contract of September 10, 1918, to be taken from and after January 1, 1919, and that at its option it would have
the right to take any quantity of water gas tar in excess of the minimum quantity specified in that contract and up to
the total amount of output of that tar of defendant's plant and also to take any quantity of coal gas tar in excess of
the minimum quantity specified in that contract and up to 50 per cent of defendant's entire output of coal gas tar,
and that by giving the defendant ninety days' notice, it would have the right at its option to take the entire output of
defendant's coal gas tar, except such as it might need for its own use in and about its plant. That in consideration of
this modification of the contract of September 10, 1918, plaintiff agreed to purchase from the defendant of certain
piece of land lying adjacent to its plant at the price of P5 per square meter, the proof of which is evidenced by Exhibit
C. That pursuant to Exhibit C, defendant sold and conveyed the land to the plaintiff which in turn executed a
mortgage thereon to the defendant for P17,140.20, to secure the payment of the balance of the purchase price.
It is then alleged:
VIII. That about the last part of July, 1920 the defendant herein, the Manila Gas Corporation willfully, and
deliberately breached its said contract, Exhibit C, with the plaintiff by ceasing to deliver any coal and water
gas tar to it thereunder solely because of the increased price of its tar products and its desire to secure better
prices therefor than plaintiff was obliged to pay to it, notwithstanding the frequent and urgent demands
made by the plaintiff upon it to comply with its aforesaid contract by continuing to deliver the coal and water
gas tar to the plaintiff thereunder, but the said defendant flatly refused to make any deliveries under said
contract, and finally on November 23, 1923, the plaintiff was forced to commence action against the
defendant herein in the Court of First Instance of Manila, being case No. 25352, of that court entitled
'Blossom & Co., plaintiff,vs. Manila Gas Corporation, defendant,' to recover the damages which it had up to
that time suffered by reason of such flagrant violation of said contract on the part of the defendant herein,
and to obtain the specific performance of the said contract and after due trial of that action, judgment was
entered therein in favor of the plaintiff herein and against the said defendant, the Manila Gas Corporation,
for the sum of P26,119.08, as the damages suffered by this plaintiff by the defendant's breach of said
contract from July, 1920, up to and including September, 1923, with legal interest thereon from November
23, 1923, and for the costs but the court refused to order the said defendant to resume the delivery of the
coal and water gas tar to the plaintiff under said contract, but left the plaintiff with its remedy for damages
against said defendant for the subsequent breaches of said contract, which said decision, as shown by the
copy attached hereto as Exhibit G, and made a part hereof, was affirmed by our Supreme Court on March 3,
1926;
IX. That after the defendant had willfully and deliberately violated its said contract as herein-before alleged,
and the plaintiff suffered great damage by reason thereof, the plaintiff claimed the right to off- set its
damages against the balance due from it to said defendant on account of the purchase of said land from the
defendant, and immediately thereupon and notwithstanding said defendant was justly indebted to the
plaintiff at that time as shown by the judgment of the Court Exhibit G, in more that four times the amount
due to it from the plaintiff, the said defendant caused to be presented against the plaintiff a foreclosure
action, known as the Manila Gas Corporation versus Blossom & Company, No. 24267, of the Court of First
Instance of Manila, and obtained judgment therein ordering that Blossom & Company pay the last
installment and interest due on said land or else the land and improvements placed thereon by the plaintiff
 would be sold as provided by law in such cases to satisfy the same, and the said defendant proceeded with
the sale of said property under said judgment and did everything in its power to sell the same for the sole
purpose of crushing and destroying the plaintiff's business and thus rendering it impossible for the plaintiff
herein to continue with its said contract in the event that said defendant might in the future consider it more
profitable to resume performance of the same, but fortunately the plaintiff was able to redeem its property
as well as to comply with its contract and continued demanding that the defendant performed its said
contract and deliver to it the coal and water gas tar required thereby.
That the defendant made no deliveries under its contract, Exhibit C, from July, 1920 to March 26, 1926, or until after
the Supreme Court affirmed the judgment of the lower court for damages in the sum of P26, 119.08. 1
It is then alleged that:
. . . On March 26, 1926 the said defendant offered to resume delivery to the plaintiff from that date of the
minimum monthly quantities of tars stated in its contract ,and the plaintiff believing that the said defendant
was at least going to try to act in good faith in the further performance of its said contract, commenced to
accept deliveries of said tars from it, and at once ascertained that the said defendant was deliberately
charging it prices much higher than the contract price, and while the plaintiff accepted deliveries of the
minimum quantities of tars stated in said contract up to and including January, 1927, (although it had
demanded deliveries of larger quantities thereunder, as hereinafter alleged) and paid the increased prices
demanded by the defendant, in the belief that it was its duty to minimize the damages as much as possible
which the defendant would be required to pay to it by reason of its violation of said contract, it has in all
cases done so under protest and with the express reservation of the right to demand from the said
defendant an adjustment of the prices charged in violation of its contract, and the right to the payment of
the losses which it had and would suffer by reason of its refusal to make additional deliveries under said
contract, and it also has continuously demanded that the said defendant furnish to it statements supported
by its invoices showing the cost prices if its raw materials — coal and crude oil — upon which the contract
price of the tars in question is fixed, which is the only way the plaintiff has to calculate the true price of said
tars, but said defendant has and still refuses to furnish such information, and will continue to refuse to do so,
unless ordered to furnish such information to the plaintiff by the court, and the plaintiff believes from the
information which it now has and so alleges that the said defendant has overcharged it on the deliveries of
said tars mentioned in the sum of at least P10,000, all in violation of the rights of the plaintiff under its said
contract with the defendant.
That on January 31, 1926 and pursuant to Exhibit C. plaintiff notified the defendant in writing that commencing with
the month of August, 1926 it desired to take delivery of 50 per cent of defendant's coal tar production for that month
and that on November 1, 1926, it desired to take the entire output of defendant's coal gas tar, but that the defendant
refused and still refuses to make such deliveries unless plaintiff would take all of its water gas tar production with the
desired quantity of coal gas tar which refusal was a plain violation of the contract. That on January 29, 1927, and in
accord with Exhibit C, plaintiff notified the defendant in writing that within ninety days after the initial delivery to it
of its total coal gas tar production or in February, 1927, it would require 50 per cent of its total water gas tar
production and that in April 1927, it would require the total output of the defendant of both coal and water gas tars,
and that it refused to make either of such deliveries.
It is then alleged:
XIV. That as shown by the foregoing allegations of this complaint, it is apparent that notwithstanding the
plaintiff in this case has at all times faithfully performed all the terms and conditions of said contract, Exhibit
C, on its part of be performed, and has at all times and is now ready, able and willing to accept and pay for
the deliveries of said coal and water gas tars required by said contract and the notices given pursuant
thereto, the said defendant, the Manila Gas Corporation, does not intend to comply with its said contract,
Exhibit C, and deliver to the plaintiff at the times and under the terms and conditions stated therein the
quantities of coal and water gas tars required by said contract, and the several notices given pursuant
thereto, and that it is useless for the plaintiff to insist further upon its performance of the said contract, and
for that reason he only feasible course for the plaintiff to pursue is to ask the court for the rescission of said
contract and for the full damages which the plaintiff has suffered from September, 1923, and will suffer for
the remainder of said contract by reason of the defendant's failure and refusal to perform the same, and the
plaintiff has so notified the said defendant.
That since September, 1923, by reason of the bad faith of the defendant, the plaintiff has been damaged in the sum
of P300,000, for which it prays a corresponding judgment, and that the contract, Exhibit C, be rescinded and declared
void and without force and effect.
After the filing and overruling of its demurrer, the defendant filed an answer in the nature of a general and specific
denial and on April 10, 1928, and upon stipulation of the parties, the court appointed W. W. Larkin referee, "to take
the evidence and, upon completion of the trial, to report his findings of law and fact to the court."
July 18, 1928, the defendant filed an amended answer in which it alleged as an affirmative defense, first, that the
complaint does not state facts sufficient to constitute cause of action the reason that a prior adjudication has been
had of all the issues involved in this action, and, second, "that on or about the 16th day of June, 1925, in an action
brought in the Court of First Instance of the City on Manila, Philippine Islands, before the Honorable Geo. R. Harvey,
Judge, by Blossom & Company, plaintiff, vs. Manila Gas Corporation, defendant, being civil case No. 25353, of said
court, for the same cause of action as that set fourth in the complaint herein, said plaintiff recovered judgment upon
the merits thereof, against said defendant decreeing a breach of the contract sued upon herein, and awarding
damages therefor in the sum of P26,119.08 with legal interest from November 23, 1923, and costs of suit, which
judgment was upon appeal affirmed by the Supreme Court of the Philippine Islands, in case G. R. No. 24777 of said
court, on the 3d day of March, 1926 and reported in volume 48 Philippines Reports at page 848," and it prays that
plaintiff's complaint be dismissed with costs.
After the evidence was taken the referee made an exhaustive report of sixty-pages in which he found that the
plaintiff was entitled to P56,901.53 damages, with legal interest from the date of the filing on the complaint, to which
both parties filed numerous exceptions
In its decision the court says:
Incidental references have been made to the referee's report. It was admirably prepared. Leaving aside the
question of damages and the facts upon which the referee assessed them, the facts are not in dispute — at
least not in serious dispute. They appear in the documentary evidence and this decision is based upon
documents introduced into evidence by plaintiff. If I could have agreed with the referee in respect to the
question of law, I should have approved his report in toto. If defendant is liable for the damages accruing
from November 23, 1923, the date the first complaint was filed, to April 1st, 1926, the date of resumption of
relations; and if defendant, after such resumption of relations, again violated the contract, the damages
assessed by the referee, are, to my way of thinking, as fair as could be estimated. He went to tremendous
pains in figuring out the details upon which he based his decision. Unfortunately, I cannot agree with his legal
conclusions and the report is set aside except wherein specifically approved.
It is unnecessary to resolve specifically the many exceptions made by both partied to the referee's report. It
would take much time to do so. Much time has already been spent in preparing this decision. Since both
parties have informed me that in case of adverse judgment ,and appeal would be taken, I desire to conclude
the case so that delay will be avoided.
Let judgment be entered awarding damages to plaintiff in the sum of P2,219.60, with costs.
From which plaintiff only appealed and assigns twenty-four different errors, of which the following are material to
this opinion:
I. The trial court erred in holding that this suit in so far as the damages from November, 1923, to March 31,
1926, are concerned , is res adjudicata.
II. The trial court erred in holding that the defendant repudiated the contract in question as a whole, and that
the plaintiff when it brought its first suit to collect damages had already elected and consented to the
dissolution of the contract, and its choice once made, being final, it was estopped to claim that the contract
was alive when that suit was brought.
xxx xxx xxx
VII. The trial court erred in refusing to sustain plaintiff's third exception to the legal interpretation placed on
the contract in this case by the referee with reference to quantity of tars and his conclusion with respect to
the terms thereof that:
"1. Plaintiff must take and defendant must deliver either the minimum or maximum quantity of water gas tar
and not any quantity from the minimum to the maximum and/or
 "2. Plaintiff must take either the minimum and any quantity up to fifty per cent of entire output of coal gas
tar.
"3. With ninety days' notice by plaintiff to defendant the former must take and the latter must deliver total
output of both tars, except such as might be needed by defendant for use in and about its plants and not any
quantity from the minimum up to total output of both tars." (See page 47, Referee's report.)
And in holding that the option contained in said contract, taking into consideration the purposes of both
parties in entering into the contract, was a claimed by defendant: all the water gas tar and 50 per cent of the
coal gas tar upon immediate notice and all tars upon ninety day's notice.
VIII. The trial court erred in refusing to sustain plaintiff's fourth exception to the finding and conclusion of the
referee that from the correspondence between the parties it was apparent that plaintiff did not make a right
use of its option, and that the letter of June 25, 1926, and the subsequent demands, with exception of the
letter of July 31, 1926, were not made in pursuance to the terms of the contract, and that defendant had no
liability in refusing to comply therewith, and in allowing plaintiff damages only for the failure of the
defendant to deliver quantities shown in Exhibits Ref. 21 and 22. (See pages 51, 52, Referee's report.)
IX. The trial court erred in finding and holding that the demands of plaintiff for additional tars under its
contract with the defendant were extravagant and not made in good faith, and that when it wrote to
defendant that it desired maximum quantities of coal gas tars and only minimum of water gas tars, but with
the reservation of going back to minimum quantities of both at any time it chose, it announced its intention f
breaching the contract, and defendant was under no obligation to deliver maximum quantities of either tars,
and since this was the efficient cause of the failure of defendant to deliver or plaintiff to accept tars, the
blame is attribute to plaintiff, and it cannot recover for a rescission.
xxx xxx xxx
XXIII. The trial court erred in refusing to sustain plaintiff's seventeenth exception to the finding and
conclusion of the referee that the plaintiff is entitled to recover from the defendant only the following sums:

Water gas tar (Exhibit Ref. 21) P38,134.60

Coal gas tar (Exhibit Ref. 22) 16,547.33

Overcharges on deliveries (Exhibit Ref. 23) 2,219.60

or a total of 56,901.53

with interest, and in not awarding to the plaintiff as damages in this case the sum of P319,253.40, with legal
interest thereon from the date of filing the complaint in this case, in the manner and form computed but it,
and in awarding damages to the plaintiff for the sum of only P2,219.60. with costs.
xxx xxx xxx

JOHNS, J.:
In this action plaintiff seeks to recover damages from the defendant which it claims to have sustained after
September, 1923, arising from, and growing out of, its original contract of September 10, 1918, as modified on
January 1, 1919, to continue for a period of ten years from that date.
In paragraph VIII of its complaint, plaintiff alleges that about the last part of July, 1920, the defendant "willfully and
deliberately breached its said contract," and that it "flatly refused to make any deliveries under said contract, and
finally on November 23, 1923," it was forced to commence action in the Court of First Instance against the defendant
known as case No. 25352, to recover the damages which it had then sustained by reason of such flagrant violation of
said contract on the part of the defendant, in which judgment was rendered in favor of the plaintiff and against the
defendant for P26,1119.08, as damages suffered by this plaintiff by the defendant's breach of said contract from July
1920, up to and including September, 1923, with legal interest thereon from November 23, 1923, and for the costs,"
in which the court refused to order the defendant to resume the delivery of the coal and water gas tar to the plaintiff,
in accord with said contract, but left it with its remedy for damages against the defendant for any subsequent
breaches of the contract. A copy of that judgment, which was later affirmed by this court, is attached to, marked
Exhibit G, and made a part of, the complaint in this action.
In their respective briefs, opposing counsel have much to say about the purpose and intent of the judgment, and it is
vigorously asserted that it was never intended that it should be or become a bar to another action by the plaintiff to
recover any damages it may have sustained after September, 1923, during the remainder of the ten-year period of
that contract. Be that as it may, it must be conceded that the question as to what would be the legal force and effect
of that judgment in that case was never presented to, or decided by, the lower court or this court. In the very nature
of things, neither court in that case would have the power to pass upon or decided the legal force and effect of its
own judgment, for the simple reason that it would be premature and outside of the issues of any pleading, and could
not be raised or presented until after the judgment became final and then only by an appropriate plea, as in this
case.
Plaintiff specifically alleges that the defendant willfully and deliverately breached the contract and "flatly refused to
make any deliveries under said contract," by reason of. which it was forced to and commenced its former action in
which it was awarded P26,119.08 damages against the defendant by reason of its breach of the contract from July,
1920, to September, 1923.
In the final analysis, plaintiff in this action seeks to recover damages growing out of, and arising from, other and
different breaches of that same contract after November, 1923, for the remainder of the ten-year period, and the
question is thus squarely presented as to whether the rendition of the former judgment is a bar to the right of the
plaintiff to recover damages from and after September, 1923, arising from, and growing out of, breaches of the
original contract of September 10, 1918, as modified on January 1, 1919. That is to say, whether the plaintiff, in a
former action, having recovered judgment for the damages which it sustained by reason of a breach of its contract by
the defendant up to September, 1923, can now in this action recover damages it may have sustained after
September, 1923, arising from, and growing out of, a breach of the same contract, upon and for which it recovered its
judgment in the former action.
In the former action in which the judgment was rendered, it is alleged in the compliant:
"7. That about the last part of July or the first part of August, 1920, the Manila Gas Corporation, the
defendant herein, without any cause ceased delivering coal and water gas tar to the plaintiff herein; and that
from that time up to the present date, the plaintiff corporation, Blossom & Company, has frequently and
urgently demanded of the defendant, the Manila Gas Corporation, that it comply with its aforesaid contract
Exhibit A by continuing to deliver coal and water gas tar to this plaintiff — but that the said defendant has
refused and still refuses, to deliver to the plaintiff any coal and water gas tar whatsoever under the said
contract Exhibit A, since the said month of July 1920.
"9. That owing to the bad faith of the said Manila Gas Corporation, defendant herein, in not living up to its
said contract Exhibit A, made with this plaintiff, and refusing now to carry out the terms of the same, be
delivering to this plaintiff the coal and water gas tar mentioned in the said Exhibit A, has caused to this
plaintiff great and irreparable damages amounting to the sum total of one hundred twenty- four thousand
eight hundred forty eight pesos and seventy centavos (P124,848,70);and that the said defendant corporation
has refused, and still refuses, to pay to this plaintiff the whole or any part of the aforesaid sum.
"10. That the said contract Exhibit A, was to be in force until January 1, 1929, that is to say ten (10) years
counted from January 1, 1929; and that unless the defendant again commence to furnish and supply this
plaintiff with coal and water gas tar, as provided for in the said contract Exhibit A, the damages already
suffered by this plaintiff will continually increase and become larger and larger in the course of years
preceding the termination of the said contract on January 1, 1929."
In that action plaintiff prays for judgment against the defendant:
"(a) That upon trial of this this cause judgment be rendered in favor of the plaintiff and against the defendant
for the sum of P124,8484.70), with legal interest thereon from November 23, 1923;
"(b) That the court specifically order the defendant to resume the delivery of the coal and water gas tar to
the plaintiff under the terms of the said contract Exhibit A of this complaint."
In the final analysis, plaintiff must stand or fall on its own pleadings, and tested by that rule it must be admitted that
the plaintiff's original cause of action, in which it recovered judgment for damages, was founded on the ten-year
contract, and that the damages which it then recovered were recovered for a breach of that contract.
Both actions are founded on one and the same contract. By the terms of the original contract of September 10, 1018,
the defendant was to sell and the plaintiff was to purchase three tons of water gas tar per month form September to
January 1, 1919, and twenty tons of water gas tar per month after January 1, 1919, one-half ton of coal gas tar per
month from September to January 1, 1919, and six tons of coal gas tar per month after January 1, 1919. That from
and after January 1, 1919, plaintiff would take at least the quantities specified in the contract of September 10, 1918,
and that at its option, it would have the right to take the total output of water gas tar of defendant's plant and 50 per
cent of the gross output of its coal gas tar, and upon giving ninety days' notice, it would have the right to the entire
output of coal gas tar, except such as the defendant might need for its own use. That is to say, the contract provided
for the delivery to the plaintiff from month to month of the specified amounts of the different tars as ordered and
requested by the plaintiff. In other words, under plaintiff's own theory, the defendant was to make deliveries from
month to month of the tars during the period of ten years, and it is alleged in both complaints that the defendant
broke its contract, and in bad faith refused to make any more deliveries.
In 34 Corpus Juris, p. 839, it is said:
As a general rule a contract to do several things at several times in its nature, so as to authorize successive
actions; and a judgment recovered for a single breach of a continuing contract or covenant is no bar to a suit
for a subsequent breach thereof. But where the covenant or contract is entire, and the breach total, there
can be only one action, and plaintiff must therein recover all his damages.
In the case of Rhoelm vs, Horst, 178 U. U., 1; 44 Law. ed., 953, that court said:
An unqualified and positive refusal to perform a contract, though the performance thereof is not yet due,
may, if the renunciation goes to the whole contract, be treated as a complete breach which will entitle the
injured party to bring his action at once.
15 Ruling Case Law, 966, 967, sec. 441 says:
Similarly if there is a breach by the vendor of a contract for the sale of goods to be delivered and paid for in
installments, and the vendee maintains an action therefor and recovers damages, he cannot maintain a
subsequent action to recover for the failure to deliver later installments.
In Pakas vs. Hollingshead, 184 N. Y., 211; 77 N. E., 40; 3 L. R. A. (N. S.), 1024, the syllabus says:
Upon refusal, by the seller, after partial performance, longer to comply with his contract to sell and deliver a
quantity of articles in installments the buyer cannot keep the contract in force and maintain actions for
breaches as they occur but must recover all his damages in one suit.
And on page 1044 of its opinion, the court say:
The learned counsel for the plaintiff contends that the former judgment did not constitute a bar to the
present action but that the plaintiff had the right to elect to waive or disregard the breach, keep the contract
in force, and maintain successive actions for time to time as the installments of goods were to be delivered,
however numerous these actions might be. It is said that this contention is supported in reason and justice,
and has the sanction of authority at least in other jurisdictions. We do not think that the contention can be
maintained. There is not as it seems to us any judicial authority in this state that gives it any substantial
support. On the contrary, we think that the cases, so far as we have been able to examine them, are all the
other way, and are to the effect that, inasmuch as there was a total breach of the contract by the defendant's
refusal to deliver, the plaintiff cannot split up his demand and maintain successive actions, but must either
recover all his damages in the first suit or wait until the contract matured or the time for the delivery of all
the goods had arrived. In other words, there can be but one action for damages for a total breach of an
entire contract to deliver goods, and the fact that they were to be delivered in installment from time to time
does not change the general rule.
The case of L. Bucki & Son Lumber Co. vs. Atlantic Lumber Co. (109 Federal, 411), of the United States Circuit Court of
Appeals for the Fifth Circuit, is very similar.
The syllabus says:
1. CONTRACTS — CONSTRUCTION —ENTIRE CONTRACT. —A contract was made for the sale of a large
quantity of logs to be delivered in monthly installments during a period of eight years, payments to be made
also in installments at times having relation tot he deliveries. It contained stipulations as to such payments,
and guaranties as to the average size of the logs to be delivered in each installment. Held, that it was an
entire contract, and not a number of separate and independent agreements for the sale of the quantity to be
 delivered and paid for each month, although there might be breaches of the minor stipulations and
warranties with reference thereto which would warrant suits without a termination of the contract.
2. JUDGMENTS — MATTERS CONCLUDED —ACTION FOR BREACH OF INDIVISIBLE CONTRACT. — The seller
declared the contract terminated for alleged breaches by the purchaser, and brought suit for general and
special damages the latter covering payments due for installments of logs delivered. By way of set-off and
recoupment against this demand, the purchaser pleaded breaches of the warranty as to the size of the logs
delivered during the months for which payment had not been made. Held, that the judgment in such action
was conclusive as to all claims or demands or either party against the other growing out of the entire
contract, and was a bar to a subsequent suit brought by the purchaser to recover for other breaches of the
same warranty in relation to deliveries made in previous months.
On page 415 of the opinion, the court says:
When the contract was ended, the claims of each party for alleged breaches and damages therefor
constituted an indivisible demand; and when the same, or any part of the same, was pleaded, litigation had,
and final judgment rendered, such suit and judgment constitute a bar to subsequent demands which were or
might have been litigated (Baird vs. U. S., 96 U. S., 430; 24 L. ed., 703.)
In Watts vs. Weston (238 Federal, 149), Circuit Court of Appeals, Second Circuit, the syllabus says:
1. JUDGMENTS — 593 — JUDGMENT AS BAR — MATTERS CONCLUDED. — Where a continuing contract was
terminated by the absolute refusal of the party whose action was necessary to further perform, a claim for
damages on account of the breach constituted as indivisible demand, and when the same or any part of the
same was pleaded, litigated, and final judgment rendered, such suit and judgment constitute a bar to
subsequent demands which were or might have been litigated therein.
And on page 150 of the opinion, the court says:
It is enough to show the lack of merit in the present contention to point out as an inexorable rule of law that,
when Kneval's contract was discharged by his total repudiation thereof, Watt's claims for breaches and
damages therefor constituted an indivisible demand, and when the same, or any part of the same, was
pleaded, litigation had and final judgment rendered, such suit and judgment constitute a bar to subsequent
demands which were or might have been litigated." (Bucki, etc., Co. vs. Atlantic, etc., Co., 109 Fed. at page
415; 48 C. C. A., 459; Cf. Landon vs. Bulkley, 95 Fed., 344; 337 C. C. A., 96.)
The rule is usually applied in cases of alleged or supposed successive breaches, and consequently severable
demands for damages; but if the contract has been discharged by breach, if suit for damages is all that is left,
the rule is applicable, and every demand arising form that contract and possessed by any given plaintiff must
be presented (at least as against any given defendant) in one action; what the plaintiff does not advance he
foregoes by conclusive presumption.
Inn Abbott vs. 76 Land and Water Co. (118 Pac., 425; 161 Cal., 42), at page 428, the court said:
In Fish vs. Folley, 6 Hill (N. Y.), 54, it was held, in accord with the rule we have discussed, that, where the
defendant had covenanted that plaintiff should have a continual supply of water for his mill from a dam, and
subsequently totally failed to perform for nine years, and plaintiff brought an action for the breach and
recovered damages sustained by him to that time, the judgment was a bar to a second action arising from
subsequent failure to perform, on the theory that, although he covenant was a continuing one in one sense,
it was an entire contract, and a total breach put an end to it, and gave plaintiff the right to sue for an
equivalent in damages.
In such a case it is no warrant for a second action that the party may not be able to actually prove in the first
action all the items of the demand, or that all the damage may not then have been actually suffered. He is
bound to prove in the first action not only such damages as has been actually suffered, but also such
prospective damage by reason of the breach as he may be legally entitled to, for the judgment he recovers in
such action will be a conclusive adjudication as to the total damage on account of the breach.
It will thus be seen that, where there is a complete and total breach of a continuous contract for a term of years, the
recovery of a judgment for damages by reason of the breach is a bar to another action on the same contract for and
on account of the continuous breach.
In the final analysis is, there is no real dispute about any material fact, and the important and decisive question is the
legal construction of the pleadings in the former case and in this case, and of the contract between the plaintiff and
the defendant of January 1, 1920.
The complaint on the former case specifically alleges that the defendant "has refused and still refuses, to deliver to
the plaintiff any coal and water gas tar whatsoever under the said contract Exhibit A, since the said month of July,
1920." " That owing to the bad faith of the said Manila Gas Corporation, defendant herein, in not living up to its said
contract Exhibit A, made with this plaintiff, and refusing now to carry out the terms of the same." That is a specific
allegation not only a breach of the contract since the month of July, 1920, but of the faith of the defendant in its
continuous refusal to make deliveries of any coal and water gas tar. That amended complaint was filed on July 11,
1924, or four years after the alleged bad faith in breaking the contract.
Having recovered damages against it, covering a period of four years, upon the theory that the defendant broke the
contract, and in bad faith refused to make deliveries of either of the tars, how can the plaintiff now claim and assert
that the contract is still in fierce and effect? In the instant case the plaintiff alleges and relies upon the ten year
contract on January 11, 1920, which in bad faith was broken by the defendant. If the contract was then broken, how
can it be enforced in this action?
It is admitted that the defendant never made any deliveries of any tar from July, 1920, to April, 1936. Also that it
made nine deliveries to plaintiff of the minimum quantities of coal and water gas tar from April 7, 1926, to January 5,
1927.
Plaintiff contends that such deliveries were made under and in continuation of the old contract.
March 26, 1926, after the decision of this court affirming the judgment in the original action, plaintiff wrote the
defendant:
. . . It is our desire to take deliveries of at least the minimum quantities set forth therein and shall appreciate
to have you advise us how soon you will be in a position to make deliveries; . . .
. . . In view of the fact that you have only effected settlement up to November 23, 1923, please inform us
what adjustment you are willing to make for the period of time that has since elapsed without your
complying with the contract.
In response to which on March 31, 1926, the defendant wrote this letter to the plaintiff:
In reply to your letter of March 26th, 1926, in regard to tar, we beg to advise you that we are prepared to
furnish the minimum quantities of coal and water gas tars as per your letter, viz: twenty tons of water gas tar
and six tons of coal gas tar. The price figured on present costs of raw materials is P39.01 ) Thirty-nine and
01/100 Pesos) per ton of water gas and P33.59 (Thirty-three and 59/100 Pesos) per ton of coal tar.
We shall expect you to take delivery and pay for the above amount of tars at our factory on or before April
7th prox.
Thereafter we shall be ready to furnish equal amounts on the first of each month. Kindly make your
arrangements accordingly.
On January 29, 1927, the plaintiff wrote the defendant that:
On July 31st last, we made demand upon you, under the terms of our tar contract for 50 per cent of your
total coal tar production for that month and also served notice on you that beginning 90 days from August
1st we would require you total output of coal tar monthly; this in addition to the 20 tons of water gas tar
provided for in the contract to be taken monthly.
xxx xxx xxx
We are here again on your for your total output of coal tar immediately and the regular minimum monthly
quantity of water gas tar. In this connection we desire to advise you that within 90 days of your initial delivery
to us of your total coal tar output we will require 50 per cent of your total water gas tar output, and, further,
that two months thereafter we will require your total output of both tars.
February 2, 1927, the defendant wrote the plaintiff:
Replying to your letter of Jan. 29, we would sat that we have already returned to you the check enclosed
there with. As we have repeatedly informed you we disagree with you as to the construction of your contract
and insist that you take the whole output of both tars if you wish to secure the whole of the coal tar.
 With regard to your threat of further suits we presume that you will act as advised. If you make it necessary
we shall do the same.lawphil.net
From an analysis of these letters it clearly appears that the plaintiff then sought to reply upon and enforce the
contract of January 1, 1920, and that defendant denied plaintiff's construction of the contract, and insisted "that you
take the whole output of both tars if you wish to secure the whole of the coal tar."
February 28, 1927, the plaintiff wrote the defendant:
In view of your numerous violations of and repeated refusal and failure to comply with the terms and
provisions of our contract dated January 30-31, 1919, for the delivery to us of water and coal gas tars, etc.,
we will commence action," which it did.
The record tends to show that tars which the defendant delivered after April 7, 1926, were not delivered under the
old contract of January 1, 1920, and that at all times since July 1920, the defendant has consistently refused to make
any deliveries of any tars under that contract.
The referee found as a fact that plaintiff was entitled to P2,219.60 for and on account of overcharges which the
defendant made for the deliveries of fifty-four tons of coal gas tar, and one hundred eighty tons of water gas tar after
April, 1926, and upon that point the lower says:
The fourth charge that plaintiff makes is meritorious. The price was to be fixed on the basis of raw materials.
The charge for deliveries during 1926 were too high. In this I agree with entirely with the referee and adopt
his findings of fact and calculations. (See Referee's report, p. 83) The referee awarded for overcharge during
the period aforesaid, the sum of P2,219.60. The defendant was trying to discharge plaintiff from buying tars
and made the price of raw material appear as high as possible.
That finding is sustained upon the theory that the defendant broke its contract which it made with the plaintiff for
the sale and delivery of the tars on and after April, 1926.
After careful study of the many important questions presented on this appeal in the exhaustive brief of the appellant,
we are clearly of the opinion that, as found by the lower court, the plea of res judicata must be sustained. The
judgment of the lower court is affirmed. It is so ordered, with costs against the appellant.

SWAGMAN HOTELS AND TRAVEL, INC., Petitioners vs. COURT OF APPEALS, and NEAL CHRISTIAN, Respondents. G.R.
No. 161135. April 8, 2005
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 Court’s 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; ₱100,000 for moral damages; ₱50,000 for attorney’s 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 ₱1 million as moral damages; ₱500,000 as exemplary damages; and ₱100,000 as attorney’s 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 defendant’s 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 decision7 of 5 September 2003, the Court of Appeals denied petitioner’s 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 Swagman’s interpretation that the three (3) promissory notes have been novated by reason of appellee
Christian’s 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 Christian’s 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, 9the
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 respondent’s 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. Compañía 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 respondent’s
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 respondent’s summary of payments, lend credence to petitioner’s
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 petitioner’s 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 court’s 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 latter’s 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 respondent’s complaint for sum of money and damages, and its Resolution of 4 December 2003, which
denied petitioner’s 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.
LILIA ADA, LUZ B. ADANZA, FLORA BAYLON, REMO BAYLON, JOSE BAYLON, ERIC BAYLON, FLORENTINO BAYLON,
and MA. RUBY BAYLON, Petitioners vs. FLORANTE BAYLON, Respondent.
G.R. No. 182435 August 13, 2012
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set
aside the Decision1 dated October 26, 2007 rendered by the Court of Appeals (CA) in CA-G.R. CV No. 01746. The
assailed decision partially reversed and set aside the Decision 2 dated October 20, 2005 issued ~y the Regional Trial
Court (RTC), Tan jay City, Negros Oriental, Branch 43 in Civil Case No. 11657.
The Antecedent Facts
This case involves the estate of spouses Florentino Baylon and Maximina Elnas Baylon (Spouses Baylon) who died on
November 7, 1961 and May 5, 1974, respectively. 3 At the time of their death, Spouses Baylon were survived by their
legitimate children, namely, Rita Baylon (Rita), Victoria Baylon (Victoria), Dolores Baylon (Dolores), Panfila Gomez
(Panfila), Ramon Baylon (Ramon) and herein petitioner Lilia B. Ada (Lilia).
Dolores died intestate and without issue on August 4, 1976. Victoria died on November 11, 1981 and was survived by
her daughter, herein petitioner Luz B. Adanza. Ramon died intestate on July 8, 1989 and was survived by herein
respondent Florante Baylon (Florante), his child from his first marriage, as well as by petitioner Flora Baylon, his
second wife, and their legitimate children, namely, Ramon, Jr. and herein petitioners Remo, Jose, Eric, Florentino and
Ma. Ruby, all surnamed Baylon.
On July 3, 1996, the petitioners filed with the RTC a Complaint 4 for partition, accounting and damages against
Florante, Rita and Panfila. They alleged therein that Spouses Baylon, during their lifetime, owned 43 parcels of
land5all situated in Negros Oriental. After the death of Spouses Baylon, they claimed that Rita took possession of the
said parcels of land and appropriated for herself the income from the same. Using the income produced by the said
parcels of land, Rita allegedly purchased two parcels of land, Lot No. 4709 6 and half of Lot No. 4706,7 situated in
Canda-uay, Dumaguete City. The petitioners averred that Rita refused to effect a partition of the said parcels of land.
In their Answer,8 Florante, Rita and Panfila asserted that they and the petitioners co-owned 22 9 out of the 43 parcels
of land mentioned in the latter’s complaint, whereas Rita actually owned 10 parcels of land 10 out of the 43 parcels
which the petitioners sought to partition, while the remaining 11 parcels of land are separately owned by Petra
Cafino Adanza,11 Florante,12 Meliton Adalia,13 Consorcia Adanza,14 Lilia15 and Santiago Mendez.16 Further, they claimed
that Lot No. 4709 and half of Lot No. 4706 were acquired by Rita using her own money. They denied that Rita
appropriated solely for herself the income of the estate of Spouses Baylon, and expressed no objection to the
partition of the estate of Spouses Baylon, but only with respect to the co-owned parcels of land.
During the pendency of the case, Rita, through a Deed of Donation dated July 6, 1997, conveyed Lot No. 4709 and
half of Lot No. 4706 to Florante. On July 16, 2000, Rita died intestate and without any issue. Thereafter, learning of
the said donation inter vivos in favor of Florante, the petitioners filed a Supplemental Pleading 17 dated February 6,
2002, praying that the said donation in favor of the respondent be rescinded in accordance with Article 1381(4) of
the Civil Code. They further alleged that Rita was already sick and very weak when the said Deed of Donation was
supposedly executed and, thus, could not have validly given her consent thereto.
Florante and Panfila opposed the rescission of the said donation, asserting that Article 1381(4) of the Civil Code
applies only when there is already a prior judicial decree on who between the contending parties actually owned the
properties under litigation.18
The RTC Decision
On October 20, 2005, the RTC rendered a Decision, 19 the decretal portion of which reads:
Wherefore judgment is hereby rendered:
(1) declaring the existence of co-ownership over parcels nos. 1, 2, 3, 5, 7, 10, 13, 14, 16, 17, 18, 26, 29, 30,
33, 34, 35, 36, 40 and 41 described in the complaint;
(2) directing that the above mentioned parcels of land be partitioned among the heirs of Florentino Baylon
and Maximina Baylon;
(3) declaring a co-ownership on the properties of Rita Baylon namely parcels no[s]. 6, 11, 12, 20, 24, 27, 31,
32, 39 and 42 and directing that it shall be partitioned among her heirs who are the plaintiffs and defendant
in this case;
 (4) declaring the donation inter vivos rescinded without prejudice to the share of Florante Baylon to the
estate of Rita Baylon and directing that parcels nos. 1 and 2 paragraph V of the complaint be included in the
division of the property as of Rita Baylon among her heirs, the parties in this case;
(5) excluding from the co-ownership parcels nos. 20, 21, 22, 9, 43, 4, 8, 19 and 37.
Considering that the parties failed to settle this case amicably and could not agree on the partition, the parties are
directed to nominate a representative to act as commissioner to make the partition. He shall immediately take [his]
oath of office upon [his] appointment. The commissioner shall make a report of all the proceedings as to the
partition within fifteen (15) days from the completion of this partition. The parties are given ten (10) days within
which to object to the report after which the Court shall act on the commissioner report.
SO ORDERED.20 (Emphasis ours)
The RTC held that the death of Rita during the pendency of the case, having died intestate and without any issue, had
rendered the issue of ownership insofar as parcels of land which she claims as her own moot since the parties below
are the heirs to her estate. Thus, the RTC regarded Rita as the owner of the said 10 parcels of land and, accordingly,
directed that the same be partitioned among her heirs. Nevertheless, the RTC rescinded the donation inter vivos of
Lot No. 4709 and half of Lot No. 4706 in favor of Florante. In rescinding the said donation inter vivos, the RTC
explained that:
However, with respect to lot nos. 4709 and 4706 which [Rita] had conveyed to Florante Baylon by way of donation
inter vivos, the plaintiffs in their supplemental pleadings (sic) assailed the same to be rescissible on the ground that it
was entered into by the defendant Rita Baylon without the knowledge and approval of the litigants [or] of competent
judicial authority. The subject parcels of lands are involved in the case for which plaintiffs have asked the Court to
partition the same among the heirs of Florentino Baylon and Maximina Elnas.
Clearly, the donation inter vivos in favor of Florante Baylon was executed to prejudice the plaintiffs’ right to succeed
to the estate of Rita Baylon in case of death considering that as testified by Florante Baylon, Rita Baylon was very
weak and he tried to give her vitamins x x x. The donation inter vivos executed by Rita Baylon in favor of Florante
Baylon is rescissible for the reason that it refers to the parcels of land in litigation x x x without the knowledge and
approval of the plaintiffs or of this Court. However, the rescission shall not affect the share of Florante Baylon to the
estate of Rita Baylon.21
Florante sought reconsideration of the Decision dated October 20, 2005 of the RTC insofar as it rescinded the
donation of Lot No. 4709 and half of Lot No. 4706 in his favor. 22 He asserted that, at the time of Rita’s death on July
16, 2000, Lot No. 4709 and half of Lot No. 4706 were no longer part of her estate as the same had already been
conveyed to him through a donation inter vivos three years earlier. Thus, Florante maintained that Lot No. 4709 and
half of Lot No. 4706 should not be included in the properties that should be partitioned among the heirs of Rita.
On July 28, 2006, the RTC issued an Order 23 which denied the motion for reconsideration filed by Florante.
The CA Decision
24
On appeal, the CA rendered a Decision dated October 26, 2007, the dispositive portion of which reads:
WHEREFORE, the Decision dated October 20, 2005 and Order dated July 28, 2006 are REVERSEDand SET
ASIDE insofar as they decreed the rescission of the Deed of Donation dated July 6, 1997 and the inclusion of lot no.
4709 and half of lot no. 4706 in the estate of Rita Baylon. The case is REMANDED to the trial court for the
determination of ownership of lot no. 4709 and half of lot no. 4706.
SO ORDERED.25
The CA held that before the petitioners may file an action for rescission, they must first obtain a favorable judicial
ruling that Lot No. 4709 and half of Lot No. 4706 actually belonged to the estate of Spouses Baylon and not to Rita.
Until then, the CA asserted, an action for rescission is premature. Further, the CA ruled that the petitioners’ action for
rescission cannot be joined with their action for partition, accounting and damages through a mere supplemental
pleading. Thus:
If Lot No. 4709 and half of Lot No. 4706 belonged to the Spouses’ estate, then Rita Baylon’s donation thereof in favor
of Florante Baylon, in excess of her undivided share therein as co-heir, is void. Surely, she could not have validly
disposed of something she did not own. In such a case, an action for rescission of the donation may, therefore,
prosper.
If the lots, however, are found to have belonged exclusively to Rita Baylon, during her lifetime, her donation thereof
in favor of Florante Baylon is valid. For then, she merely exercised her ownership right to dispose of what legally
belonged to her. Upon her death, the lots no longer form part of her estate as their ownership now pertains to
Florante Baylon. On this score, an action for rescission against such donation will not prosper. x x x.
Verily, before plaintiffs-appellees may file an action for rescission, they must first obtain a favorable judicial ruling
that lot no. 4709 and half of lot no. 4706 actually belonged to the estate of Spouses Florentino and Maximina Baylon,
and not to Rita Baylon during her lifetime. Until then, an action for rescission is premature. For this matter, the
applicability of Article 1381, paragraph 4, of the New Civil Code must likewise await the trial court’s resolution of the
issue of ownership.
Be that as it may, an action for rescission should be filed by the parties concerned independent of the proceedings
below. The first cannot simply be lumped up with the second through a mere supplemental pleading. 26 (Citation
omitted)
The petitioners sought reconsideration27 of the Decision dated October 26, 2007 but it was denied by the CA in its
Resolution28 dated March 6, 2008.
Hence, this petition.
Issue
The lone issue to be resolved by this Court is whether the CA erred in ruling that the donation inter vivos of Lot No.
4709 and half of Lot No. 4706 in favor of Florante may only be rescinded if there is already a judicial determination
that the same actually belonged to the estate of Spouses Baylon.
The Court’s Ruling
The petition is partly meritorious.
Procedural Matters
Before resolving the lone substantive issue in the instant case, this Court deems it proper to address certain
procedural matters that need to be threshed out which, by laxity or otherwise, were not raised by the parties herein.
Misjoinder of Causes of Action
The complaint filed by the petitioners with the RTC involves two separate, distinct and independent actions –
partition and rescission. First, the petitioners raised the refusal of their co-heirs, Florante, Rita and Panfila, to
partition the properties which they inherited from Spouses Baylon. Second, in their supplemental pleading, the
petitioners assailed the donation inter vivos of Lot No. 4709 and half of Lot No. 4706 made by Rita in favor of
Florante pendente lite.
The actions of partition and
rescission cannot be joined in a
single action.
By a joinder of actions, or more properly, a joinder of causes of action is meant the uniting of two or more demands
or rights of action in one action, the statement of more than one cause of action in a declaration. It is the union of
two or more civil causes of action, each of which could be made the basis of a separate suit, in the same complaint,
declaration or petition. A plaintiff may under certain circumstances join several distinct demands, controversies or
rights of action in one declaration, complaint or petition. 29
The objectives of the rule or provision are to avoid a multiplicity of suits where the same parties and subject matter
are to be dealt with by effecting in one action a complete determination of all matters in controversy and litigation
between the parties involving one subject matter, and to expedite the disposition of litigation at minimum cost. The
provision should be construed so as to avoid such multiplicity, where possible, without prejudice to the rights of the
litigants.30
Nevertheless, while parties to an action may assert in one pleading, in the alternative or otherwise, as many causes
of action as they may have against an opposing party, such joinder of causes of action is subject to the condition,
inter alia, that the joinder shall not include special civil actions governed by special rules. 31
Here, there was a misjoinder of causes of action. The action for partition filed by the petitioners could not be joined
with the action for the rescission of the said donation inter vivos in favor of Florante. Lest it be overlooked, an action
for partition is a special civil action governed by Rule 69 of the Rules of Court while an action for rescission is an
ordinary civil action governed by the ordinary rules of civil procedure. The variance in the procedure in the special
civil action of partition and in the ordinary civil action of rescission precludes their joinder in one complaint or their
being tried in a single proceeding to avoid confusion in determining what rules shall govern the conduct of the
proceedings as well as in the determination of the presence of requisite elements of each particular cause of action. 32
A misjoined cause of action, if not
severed upon motion of a party or
by the court sua sponte, may be
adjudicated by the court together
with the other causes of action.
Nevertheless, misjoinder of causes of action is not a ground for dismissal. Indeed, the courts have the power, acting
upon the motion of a party to the case or sua sponte, to order the severance of the misjoined cause of action to be
proceeded with separately.33 However, if there is no objection to the improper joinder or the court did not motu
proprio direct a severance, then there exists no bar in the simultaneous adjudication of all the erroneously joined
causes of action. On this score, our disquisition in Republic of the Philippines v. Herbieto34 is instructive, viz:
This Court, however, disagrees with petitioner Republic in this regard. This procedural lapse committed by the
respondents should not affect the jurisdiction of the MTC to proceed with and hear their application for registration
of the Subject Lots.
xxxx
Considering every application for land registration filed in strict accordance with the Property Registration Decree as
a single cause of action, then the defect in the joint application for registration filed by the respondents with the MTC
constitutes a misjoinder of causes of action and parties. Instead of a single or joint application for registration,
respondents Jeremias and David, more appropriately, should have filed separate applications for registration of Lots
No. 8422 and 8423, respectively.
Misjoinder of causes of action and parties do not involve a question of jurisdiction of the court to hear and proceed
with the case. They are not even accepted grounds for dismissal thereof. Instead, under the Rules of Court, the
misjoinder of causes of action and parties involve an implied admission of the court’s jurisdiction. It acknowledges
the power of the court, acting upon the motion of a party to the case or on its own initiative, to order the severance
of the misjoined cause of action, to be proceeded with separately (in case of misjoinder of causes of action); and/or
the dropping of a party and the severance of any claim against said misjoined party, also to be proceeded with
separately (in case of misjoinder of parties).35 (Citations omitted)
It should be emphasized that the foregoing rule only applies if the court trying the case has jurisdiction over all of the
causes of action therein notwithstanding the misjoinder of the same. If the court trying the case has no jurisdiction
over a misjoined cause of action, then such misjoined cause of action has to be severed from the other causes of
action, and if not so severed, any adjudication rendered by the court with respect to the same would be a nullity.
Here, Florante posed no objection, and neither did the RTC direct the severance of the petitioners’ action for
rescission from their action for partition. While this may be a patent omission on the part of the RTC, this does not
constitute a ground to assail the validity and correctness of its decision. The RTC validly adjudicated the issues raised
in the actions for partition and rescission filed by the petitioners.
Asserting a New Cause of Action in a Supplemental Pleading
In its Decision dated October 26, 2007, the CA pointed out that the said action for rescission should have been filed
by the petitioners independently of the proceedings in the action for partition. It opined that the action for rescission
could not be lumped up with the action for partition through a mere supplemental pleading.
We do not agree.
A supplemental pleading may raise
a new cause of action as long as it
has some relation to the original
cause of action set forth in the
original complaint.
Section 6, Rule 10 of the Rules of Court reads:
Sec. 6. Supplemental Pleadings. – Upon motion of a party the court may, upon reasonable notice and upon such
terms as are just, permit him to serve a supplemental pleading setting forth transactions, occurrences or events
which have happened since the date of the pleading sought to be supplemented. The adverse party may plead
thereto within ten (10) days from notice of the order admitting the supplemental pleading.
In Young v. Spouses Sy,36 this Court had the opportunity to elucidate on the purpose of a supplemental pleading.
Thus:
As its very name denotes, a supplemental pleading only serves to bolster or add something to the primary pleading.
A supplement exists side by side with the original. It does not replace that which it supplements. Moreover, a
supplemental pleading assumes that the original pleading is to stand and that the issues joined with the original
pleading remained an issue to be tried in the action. It is but a continuation of the complaint. Its usual office is to set
up new facts which justify, enlarge or change the kind of relief with respect to the same subject matter as the
controversy referred to in the original complaint.
The purpose of the supplemental pleading is to bring into the records new facts which will enlarge or change the kind
of relief to which the plaintiff is entitled; hence, any supplemental facts which further develop the original right of
action, or extend to vary the relief, are available by way of supplemental complaint even though they themselves
constitute a right of action.37 (Citations omitted and emphasis ours)
Thus, a supplemental pleading may properly allege transactions, occurrences or events which had transpired after
the filing of the pleading sought to be supplemented, even if the said supplemental facts constitute another cause of
action.
Admittedly, in Leobrera v. Court of Appeals,38 we held that a supplemental pleading must be based on matters arising
subsequent to the original pleading related to the claim or defense presented therein, and founded on the same
cause of action. We further stressed therein that a supplemental pleading may not be used to try a new cause of
action.
However, in Planters Development Bank v. LZK Holdings and Development Corp., 39 we clarified that, while a matter
stated in a supplemental complaint should have some relation to the cause of action set forth in the original
pleading, the fact that the supplemental pleading technically states a new cause of action should not be a bar to its
allowance but only a matter that may be considered by the court in the exercise of its discretion. In such cases, we
stressed that a broad definition of "cause of action" should be applied.
Here, the issue as to the validity of the donation inter vivos of Lot No. 4709 and half of Lot No. 4706 made by Rita in
favor of Florante is a new cause of action that occurred after the filing of the original complaint. However, the
petitioners’ prayer for the rescission of the said donation inter vivos in their supplemental pleading is germane to,
and is in fact, intertwined with the cause of action in the partition case. Lot No. 4709 and half of Lot No. 4706 are
included among the properties that were sought to be partitioned.
The petitioners’ supplemental pleading merely amplified the original cause of action, on account of the gratuitous
conveyance of Lot No. 4709 and half of Lot No. 4706 after the filing of the original complaint and prayed for
additional reliefs, i.e., rescission. Indeed, the petitioners claim that the said lots form part of the estate of Spouses
Baylon, but cannot be partitioned unless the gratuitous conveyance of the same is rescinded. Thus, the principal
issue raised by the petitioners in their original complaint remained the same.
Main Issue: Propriety of Rescission
After having threshed out the procedural matters, we now proceed to adjudicate the substantial issue presented by
the instant petition.
The petitioners assert that the CA erred in remanding the case to the RTC for the determination of ownership of Lot
No. 4709 and half of Lot No. 4706. They maintain that the RTC aptly rescinded the said donation inter vivos of Lot No.
4709 and half of Lot No. 4706 pursuant to Article 1381(4) of the Civil Code.
In his Comment,40 Florante asserts that before the petitioners may file an action for rescission, they must first obtain a
favorable judicial ruling that Lot No. 4709 and half of Lot No. 4706 actually belonged to the estate of Spouses Baylon.
Until then, Florante avers that an action for rescission would be premature.
The petitioners’ contentions are well-taken.
The resolution of the instant dispute is fundamentally contingent upon a determination of whether the donation
inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante may be rescinded pursuant to Article 1381(4)
of the Civil Code on the ground that the same was made during the pendency of the action for partition with the
RTC.
Rescission is a remedy to address
the damage or injury caused to the
contracting parties or third
persons.
Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure the reparation
of damages caused to them by a contract, even if it should be valid, by means of the restoration of things to their
condition at the moment prior to the celebration of said contract. 41 It is a remedy to make ineffective a contract,
validly entered into and therefore obligatory under normal conditions, by reason of external causes resulting in a
pecuniary prejudice to one of the contracting parties or their creditors. 42
Contracts which are rescissible are valid contracts having all the essential requisites of a contract, but by reason of
injury or damage caused to either of the parties therein or to third persons are considered defective and, thus, may
be rescinded.
The kinds of rescissible contracts, according to the reason for their susceptibility to rescission, are the following: first,
those which are rescissible because of lesion or prejudice; 43 second, those which are rescissible on account of fraud
or bad faith;44 and third, those which, by special provisions of law, 45 are susceptible to rescission.46
Contracts which refer to things
subject of litigation is rescissible
pursuant to Article 1381(4) of the
Civil Code.
Contracts which are rescissible due to fraud or bad faith include those which involve things under litigation, if they
have been entered into by the defendant without the knowledge and approval of the litigants or of competent
judicial authority. Thus, Article 1381(4) of the Civil Code provides:
Art. 1381. The following contracts are rescissible:
xxxx
(4) Those which refer to things under litigation if they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent judicial authority.
The rescission of a contract under Article 1381(4) of the Civil Code only requires the concurrence of the following:
first, the defendant, during the pendency of the case, enters into a contract which refers to the thing subject of
litigation; and second, the said contract was entered into without the knowledge and approval of the litigants or of a
competent judicial authority. As long as the foregoing requisites concur, it becomes the duty of the court to order the
rescission of the said contract.
The reason for this is simple. Article 1381(4) seeks to remedy the presence of bad faith among the parties to a case
and/or any fraudulent act which they may commit with respect to the thing subject of litigation.
When a thing is the subject of a judicial controversy, it should ultimately be bound by whatever disposition the court
shall render. The parties to the case are therefore expected, in deference to the court’s exercise of jurisdiction over
the case, to refrain from doing acts which would dissipate or debase the thing subject of the litigation or otherwise
render the impending decision therein ineffectual.
There is, then, a restriction on the disposition by the parties of the thing that is the subject of the litigation. Article
1381(4) of the Civil Code requires that any contract entered into by a defendant in a case which refers to things under
litigation should be with the knowledge and approval of the litigants or of a competent judicial authority.
Further, any disposition of the thing subject of litigation or any act which tends to render inutile the court’s
impending disposition in such case, sans the knowledge and approval of the litigants or of the court, is unmistakably
and irrefutably indicative of bad faith. Such acts undermine the authority of the court to lay down the respective
rights of the parties in a case relative to the thing subject of litigation and bind them to such determination.
It should be stressed, though, that the defendant in such a case is not absolutely proscribed from entering into a
contract which refer to things under litigation. If, for instance, a defendant enters into a contract which conveys the
thing under litigation during the pendency of the case, the conveyance would be valid, there being no definite
disposition yet coming from the court with respect to the thing subject of litigation. After all, notwithstanding that
the subject thereof is a thing under litigation, such conveyance is but merely an exercise of ownership.
This is true even if the defendant effected the conveyance without the knowledge and approval of the litigants or of a
competent judicial authority. The absence of such knowledge or approval would not precipitate the invalidity of an
otherwise valid contract. Nevertheless, such contract, though considered valid, may be rescinded at the instance of
the other litigants pursuant to Article 1381(4) of the Civil Code.
Here, contrary to the CA’s disposition, the RTC aptly ordered the rescission of the donation inter vivos of Lot No. 4709
and half of Lot No. 4706 in favor of Florante. The petitioners had sufficiently established the presence of the
requisites for the rescission of a contract pursuant to Article 1381(4) of the Civil Code. It is undisputed that, at the
time they were gratuitously conveyed by Rita, Lot No. 4709 and half of Lot No. 4706 are among the properties that
were the subject of the partition case then pending with the RTC. It is also undisputed that Rita, then one of the
defendants in the partition case with the RTC, did not inform nor sought the approval from the petitioners or of the
RTC with regard to the donation inter vivos of the said parcels of land to Florante.
Although the gratuitous conveyance of the said parcels of land in favor of Florante was valid, the donation inter vivos
of the same being merely an exercise of ownership, Rita’s failure to inform and seek the approval of the petitioners or
the RTC regarding the conveyance gave the petitioners the right to have the said donation rescinded pursuant to
Article 1381(4) of the Civil Code.
Rescission under Article 1381(4) of
the Civil Code is not preconditioned
upon the judicial determination as
to the ownership of the thing
subject of litigation.
In this regard, we also find the assertion that rescission may only be had after the RTC had finally determined that the
parcels of land belonged to the estate of Spouses Baylon intrinsically amiss. The petitioners’ right to institute the
action for rescission pursuant to Article 1381(4) of the Civil Code is not preconditioned upon the RTC’s determination
as to the ownership of the said parcels of land.
It bears stressing that the right to ask for the rescission of a contract under Article 1381(4) of the Civil Code is not
contingent upon the final determination of the ownership of the thing subject of litigation. The primordial purpose of
Article 1381(4) of the Civil Code is to secure the possible effectivity of the impending judgment by a court with
respect to the thing subject of litigation. It seeks to protect the binding effect of a court’s impending adjudication vis-
à-vis the thing subject of litigation regardless of which among the contending claims therein would subsequently be
upheld. Accordingly, a definitive judicial determination with respect to the thing subject of litigation is not a condition
sine qua non before the rescissory action contemplated under Article 1381(4) of the Civil Code may be instituted.
Moreover, conceding that the right to bring the rescissory action pursuant to Article 1381(4) of the Civil Code is
preconditioned upon a judicial determination with regard to the thing subject litigation, this would only bring about
the very predicament that the said provision of law seeks to obviate. Assuming arguendo that a rescissory action
under Article 1381(4) of the Civil Code could only be instituted after the dispute with respect to the thing subject of
litigation is judicially determined, there is the possibility that the same may had already been conveyed to third
persons acting in good faith, rendering any judicial determination with regard to the thing subject of litigation
illusory. Surely, this paradoxical eventuality is not what the law had envisioned.
Even if the donation inter vivos is
validly rescinded, a determination
as to the ownership of the subject
parcels of land is still necessary.
Having established that the RTC had aptly ordered the rescission of the said donation inter vivos in favor of Florante,
the issue that has to be resolved by this Court is whether there is still a need to determine the ownership of Lot No.
4709 and half of Lot No. 4706.
In opting not to make a determination as to the ownership of Lot No. 4709 and half of Lot No. 4706, the RTC
reasoned that the parties in the proceedings before it constitute not only the surviving heirs of Spouses Baylon but
the surviving heirs of Rita as well. As intimated earlier, Rita died intestate during the pendency of the proceedings
with the RTC without any issue, leaving the parties in the proceedings before the RTC as her surviving heirs. Thus, the
RTC insinuated, a definitive determination as to the ownership of the said parcels of land is unnecessary since, in any
case, the said parcels of land would ultimately be adjudicated to the parties in the proceedings before it.
We do not agree.
Admittedly, whoever may be adjudicated as the owner of Lot No. 4709 and half of Lot No. 4706, be it Rita or Spouses
Baylon, the same would ultimately be transmitted to the parties in the proceedings before the RTC as they are the
only surviving heirs of both Spouses Baylon and Rita. However, the RTC failed to realize that a definitive adjudication
as to the ownership of Lot No. 4709 and half of Lot No. 4706 is essential in this case as it affects the authority of the
RTC to direct the partition of the said parcels of land. Simply put, the RTC cannot properly direct the partition of Lot
No. 4709 and half of Lot No. 4706 until and unless it determines that the said parcels of land indeed form part of the
estate of Spouses Baylon.
It should be stressed that the partition proceedings before the RTC only covers the properties co-owned by the
parties therein in their respective capacity as the surviving heirs of Spouses Baylon. Hence, the authority of the RTC
to issue an order of partition in the proceedings before it only affects those properties which actually belonged to the
estate of Spouses Baylon.
In this regard, if Lot No. 4709 and half of Lot No. 4706, as unwaveringly claimed by Florante, are indeed exclusively
owned by Rita, then the said parcels of land may not be partitioned simultaneously with the other properties subject
of the partition case before the RTC. In such case, although the parties in the case before the RTC are still co-owners
of the said parcels of land, the RTC would not have the authority to direct the partition of the said parcels of land as
the proceedings before it is only concerned with the estate of Spouses Baylon.
WHEREFORE, in consideration of the foregoing disquisitions, the petition is PARTIALLY GRANTED. The Decision dated
October 26, 2007 issued by the Court of Appeals in CA-G.R. CV No. 01746 is MODIFIED in that the Decision dated
October 20, 2005 issued by the Regional Trial Court, Tanjay City, Negros Oriental, Branch 43 in Civil Case No. 11657,
insofar as it decreed the rescission of the Deed of Donation dated July 6, 1997 is hereby REINSTATED. The case
is REMANDED to the trial court for the determination of the ownership of Lot No. 4709 and half of Lot No. 4706 in
accordance with this Decision.
SO ORDERED.
NORLINDA MARILAG, Petitioner vs. MARCELINO MARTINEZ, Respondent.
G.R. No. 201892 JULY 22, 2015
Assailed in this petition for review on certiorari 1 are the Decision2 dated November 4, 2011 and the Resolution 3dated
May 14, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 81258 which recalled and set aside the Orders dated
November 3, 2003 4 and January 14, 2004 5 of the Regional Trial Court (RTC) of Las Piñas City, Branch 202 (court a
quo) in Civil Case No. 980156, and reinstated the Decision 6 dated August 28, 2003 directing petitioner Norlinda S.
Marilag (petitioner) to return to respondent Marcelino B. Martinez (respondent) the latter's excess payment, plus
interest, and to pay attorney's fees and the costs of suit.
The Facts
On July 30, 1992, Rafael Martinez (Rafael), respondent's father, obtained- from petitioner a loan in the amount of
₱160,000.00, with a stipulated monthly interest of five percent ( 5% ), payable within a period of (6) months. The
loan was secured by a real estate mortgage over a parcel of land covered by Transfer Certificate of Title (TCT) No. T-
208400. Rafael failed'. to settle his obligation upon maturity and despite repeated demands, prompting petitioner to
file a Complaint for Judicial Foreclosure of Real Estate Mortgage before the RTC of Imus, Cavite, Branch 90 7(RTC-
lmus) on November 10, 1995, 8 docketed as Civil Case No. 1208-95 (judicial foreclosure case).
Rafael failed to file his answer and, upon petitioner's motion, was declared in default. After an ex parte presentation
of petitioner's evidence, the RTC-lmus issued a Decision 9 dated January 30, 1998, (January 30, 1998 Decision) in the
foreclosure case, declaring the stipulated 5% monthly interest to be usurious and reducing the same to 12% per
annum (p.a.). Accordingly, it ordered Rafael to pay petitioner the amount of ₱229,200.00, consisting of the principal
of ₱160,000.00 and accrued interest of ₱59,200.00 from July 30, 1992 to September 30, 1995. 10 Records do not
show that this Decision had already attained finality.
Meanwhile, prior to Rafael's notice of the above decision, respondent agreed to pay Rafael's obligation to petitioner
which was pegged at ₱689,000.00. After making a total payment of ₱400,000.00, 11 he executed a promissory
note 12 dated February 20, 1998 (subject PN), binding himself to pay on or before March 31, 1998 the amount of
₱289,000.00, "representing the balance of the agreed financial obligation of [his] father to [petitioner]." 13 After
learning of the January 30, 1998 Decision, respondent refused to pay the amount covered by the subject PN despite
demands, prompting petitioner to file a complaint 14 for sum of money and damages before the court a quo on July 2,
1998, docketed as Civil Case No. 98-0156 (collection case).
Respondent filed his answer, 15 contending that petitioner has no cause of action against him. He averred that he has
fully settled Rafael's obligation and that he committed a mistake in paying more than the amount due under the loan,
i.e., the amount of ₱229,200.00 as adjudged by the RTC-Imus in the judicial foreclosure case which, thus, warranted
the return of the excess payment. He therefore prayed for the dismissal of the complaint, and interposed a
compulsory counterclaim for the release of the mortgage, the return of the excess payment, and the payment of
moral and exemplary damages, attorney's fees and litigation expenses. 16
The Court A Quo's Ruling
17
In a Decision dated August 28, 2003 (August 28, 2003 Decision), the court a quo denied recovery on the subject PN.
It found that the consideration for its execution was Rafael's indebtedness to petitioner, the extinguishment of which
necessarily results in the consequent extinguishment of the cause therefore. Considering that the RTC-Imus had
adjudged Rafael liable to petitioner only for the amount of ₱229,200.00, for which a total of ₱400,000.00 had already
been paid, the court a quo found no valid or compelling reason to allow petitioner to recover further on the subject
PN. There being an excess payment of Pl 71,000.00, it declared that a quasi-contract (in the concept of solution
indebiti) exists between the parties and, accordingly, directed petitioner to return the said amount to respondent,
plus 6% interest p.a.18 reckoned from the date of judicial demand 19 on August 6, 1998 until fully paid, and to pay
attorney's fees and the costs of suit. 20
In an Order 21 dated November 3, 2003 (November 3, 2003 Order), however, the court a quo granted petitioner's
motion for reconsideration, and recalled and set aside its August 28, 2003 Decision. It declared that the causes of
action in the collection and foreclosure cases are distinct, and respondent's failure to comply with his obligation
under the subject PN justifies petitioner to seek judicial relief. It further opined that the stipulated 5% monthly
interest is no longer usurious and is binding on respondent considering the suspension of the Usury Law pursuant to
Central Bank Circular 905, series of 1982. Accordingly, it directed respondent to pay the amount of ₱289,000.00 due
under the subject PN, plus interest at the legal rate reckoned from the last extra judicial demand on May 15, 1998,
until fully paid, as well as attorney's fees and the costs of suit. 22
Aggrieved, respondent filed a motion for reconsideration 23 which was denied in an Order 24 dated January 14, 2004,
prompting him to elevate the matter to the CA. 25
The CA Ruling
In a Decision 26 dated November 4, 2011, the CA recalled and set aside the court a quo 's November 3, 2003 and
January 14, 2004 Orders, and reinstated the August 28, 2003 Decision. It held that the doctrine of res judicata finds
application in the instant case, 27 considering that both the judicial foreclosure and collection cases were filed as a
consequence of the non-payment of Rafael's loan, which was the principal obligation secured by the real estate
mortgage and the primary consideration for the execution of the subject PN. Since res judicata only requires
substantial, not actual, identity of causes of action and/or identity of issue, 28 it ruled that the judgment in the judicial
foreclosure case relating to Rafael's obligation to petitioner is final and conclusive on the collection case.
Petitioner's motion for reconsideration was denied in a Resolution 29 dated May 14, 2012; hence, this petition.
The Issue before the Court
The essential issue for the Court's resolution is whether or not the CA committed reversible error in upholding the
dismissal of the collection case.
The Court's Ruling
The petition lacks merit.
A case is barred by prior judgment or res judicata when the following elements concur: (a) the judgment sought to
bar the new action must be final; ( b) the decision must have been rendered by a court having jurisdiction over the
subject matter and the parties; (c) the disposition of the case must be a judgment on the merits; and ( d) there must
be as between the first and second action, identity of parties, subject matter, and causes of action. 30
After a punctilious review of the records, the Court finds the principle of res judicata to be inapplicable to the present
case. This is because the records are bereft of any indication that the August 28, 2003 Decision in the judicial
foreclosure case had already attained finality, evidenced, for instance, by a copy of the entry of judgment in the said
case. Accordingly, with the very first element of res judicata missing, said principle cannot be made to obtain.
This notwithstanding, the Court holds that petitioner's prosecution of the collection case was barred, instead, by the
principle of litis pendentia in view of the substantial identity of parties and singularity of the causes of action in the
foreclosure and collection cases, such that the prior foreclosure case barred petitioner's recourse to the subsequent
collection case.
To lay down the basics, litis pendentia, as a ground for the dismissal of a civil action, refers to that situation where
in another action is pending; between the same parties for the same cause of action, such that the second action
becomes unnecessary and vexatious. For the bar of litis pendentia to be invoked, the following requisites must
concur: (a) identity of parties, or at least such parties as represent the same interests in both actions; ( b) identity of
rights asserted and relief prayed for, the relief being founded on the same facts; and ( c) the identity of the two
preceding particulars is such that any judgment rendered in the pending case, regardless of which party is successful
would amount to res judicata in the other. 31 The underlying principle of litis pendentia is the theory that a party is
not allowed to vex another more than once regarding the same subject matter and for the same cause of action. This
theory is founded on the public policy that the same subject matter should not be the subject of controversy in
courts more than once, in order that possible conflicting judgments may be avoided for the sake of the stability of
the rights and status of persons, and also to avoid the costs and expenses incident to numerous
suits. 32 Consequently, a party will not be permitted to split up a single cause of action and make it a basis for several
suits as the whole cause must be determined in one action. 33 To be sure, splitting a cause of action is a mode of
forum shopping by filing multiple cases based on the same cause of action, but with different prayers, where the
~round of dismissal is litis pendentia (or res judicata, as the case may be). 34
In this relation, it must be noted that the question of whether a cause of action is single and entire or separate is not
always easy to determine and the same must often be resolved, not by the general rules, but by reference to the
facts and circumstances of the particular case. The true rule, therefore, is whether the entire amount arises from one
and the same act or contract which must, thus, be sued for in one action, or the several parts arise from distinct and
different acts or contracts, for which a party may maintain separate suits. 35
In loan contracts secured by a real estate mortgage, the rule is that the creditor-mortgagee has a single cause of
action against the debtor-mortgagor, i.e., to recover the debt, through the filing of a personal action for collection of
sum of money or the institution of a real action to foreclose on the mortgage security. The two remedies are
alternative,36 not cumulative or successive, 37 and each remedy is complete by itself. Thus, if the creditor-mortgagee
opts to foreclose the real estate mortgage, he waives the action for the collection of the unpaid debt, 38 except only
for the recovery of whatever deficiency may remain in the outstanding obligation of the debtor-mortgagor after
deducting the bid price in the public auction sale of the mortgaged properties. 39 Accordingly, a deficiency judgment
shall only issue after it is established that the mortgaged property was sold at public auction for an amount less than
the outstanding obligation.
In the present case, records show that petitioner, as creditor-mortgagee, instituted an action for judicial foreclosure
pursuant to the provisions of Rule 68 of the Rules of Court in order to recover on Rafael's debt. In light of the
foregoing discussion, the availment of such remedy thus bars recourse to the subsequent filing of a personal action
for collection of the same debt, in this case, under the principle of litis pendentia, considering that the foreclosure
case only remains pending as it was not shown to have attained finality.
While the ensuing collection case was anchored on the promissory note executed by respondent who was not the
original debtor, the same does not constitute a separate and distinct contract of loan which would have given rise to
a separate cause of action upon breach. Notably, records are bereft of any indication that respondent's agreement to
pay Rafael's loan obligation and the execution of the subject PN extinguished by novation 40 the contract of loan
between Rafael and petitioner, in the absence of express agreement or any act of equal import. Well-settled is the
rule that novation is never presumed, but must be clearly and unequivocally shown. Thus, in order for a new
agreement to supersede the old one, the parties to a contract must expressly agree that they are abrogating their old
contract in favor of a new one, 41 which was not shown here.
On the contrary, it is significant to point out that: (a) the consideration for the subject PN was the same consideration
that supported the original loan obligation of Rafael; (b) respondent merely assumed to pay Rafael's remaining
unpaid balance in the latter's behalf, i.e., as Rafael's agent or representative; 42 and (c) the subject PN was executed
after respondent had assumed to pay Rafael's obligation and made several payments thereon. Case law states that
the fact that the creditor accepts payments from a third person, who has assumed the obligation, will result merely
in the addition of debtors, not novation, and the creditor may enforce the obligation against both debtors. 43 for
ready reference, the subject PN reads in full:
February 20, 1998
PROMISSORY NOTE
₱289, 000.00
===========
I, MARCELINO B. MARTINEZ son of Mr. RAFAEL MARTINEZ, of legal age, Filipino, married and a resident of No. 091 Anabu I-A, Imus, Cavite, by
these presents do hereby specifically and categorically PROMISE, UNDERTAKE and bind myself in behalf of my father, to pay to Miss NORLINDA
S. MARILAG, Mortgagee-Creditor of my said father, the sum of TWO HUNDRED EIGHTY NINE THOUSAND PESOS (₱289,000.00), Philippine
Currency, on or before MARCH 31, 1998, representing the balance of the agreed financial obligation of my said father to her.
Executed at Pamplona I, Las Piñas City, Metro Manila, this 20th day of February, 1998.
Sgd. MARCELINO B. MARTINEZ (Promissory )

Petitioner's contention that the judicial foreclosure and collection cases enforce independent rights 45 must,
therefore, fail because the Deed of Real Estate Mortgage 46 and the subject PN both refer to one and the same
obligation, i.e., Rafael's loan obligation. As such, there exists only one cause of action for a single breach of that
obligation. Petitioner cannot split her cause of action on Rafael's unpaid loan obligation by filing a petition for the
judicial foreclosure of the real estate mortgage covering the said loan, and, thereafter, a personal action for the
collection of the unpaid balance of said obligation not comprising a deficiency arising from foreclosure, without
violating the proscription against splitting a single cause of action, where the ground for dismissal is either res
judicata or litis pendentia, as in this case.
47
As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. v. lcaranga!.
For non-payment of a note secured by mortgage, the creditor has a single cause of action against the debtor. This
single cause of action consists in the recovery of the credit with execution of the security. In other words, the creditor
in his action may make two demands, the payment of the debt and the foreclosure · of his mortgage. But both
demands arise from the same cause, the nonpayment of the debt, and, for that reason, they constitute a single cause
of action. Though the debt and the mortgage constitute separate agreements, the latter is subsidiary to the former,
and both refer to one and the same obligation. Consequently, there exists only one cause of action for a single breach
of that obligation. Plaintiff. then, by applying the rule above stated, cannot split up his single cause of action by filing
a complaint (or payment of the debt, and thereafter another complaint (or foreclosure of the mortgage. If he does
so, the filing of the first complaint will bar the subsequent complaint. By allowing the creditor to file two separate
complaints simultaneously or successively, one to recover his credit and another to foreclose his mortgage, we will, in
effect, be authorizing him plural redress for a single breach of contract at so much cost to the courts and with so
much vexation and oppression to the debtor. (Emphases and underscoring supplied)
Further on the point, the fact that no foreclosure sale appears to have been conducted is of no moment because the
remedy of foreclosure of mortgage is deemed chosen upon the filing of the complaint there for. 48 In Suico Rattan &
Buri Interiors, Inc. v. CA, 49 it was explained:
x x x x In sustaining the rule that prohibits mortgage creditors from pursuing both the remedies of a personal action
for debt or a real action to foreclose the mortgage, the Court held in the case of Bachrach Motor Co., Inc. v. Esteban
Icarangal, et al. that a rule which would authorize the plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the mortgaged property, would result not only in multiplicity of
suits so offensive to justice and obnoxious to law and equity, but also in subjecting the defendant to the vexation of
being sued in the place of his residence or of the residence of the plaintiff, and then again in the place where the
property lies. Hence, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the
complaint in an action for foreclosure of mortgage, pursuant to the provisions of Rule 68 of the Rules of Court. As to
extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the petition not
with any court of justice but with the office of the sheriff of the province where the sale is to be made, in accordance
with the provisions of Act No. 3135, as amended by Act No. 4118. (Emphases supplied)
As petitioner had already instituted judicial foreclosure proceedings over the mortgaged property, she is now
barred from availing herself of an ordinary action for collection, regardless of whether or not the decision in the
foreclosure case had attained finality. In fine, the dismissal of the collection case is in order. Considering, however,
that respondent's claim for return of excess payment partakes of the nature of a compulsory counterclaim and, thus,
survives the dismissal of petitioner's collection suit, the same should be resolved based on its own merits and
evidentiary support. 50
Records show that other than the matter of interest, the principal loan obligation and the payments made were not
disputed by the parties.1âwphi1 Nonetheless, the Court finds the stipulated 5% monthly interest to be excessive and
unconscionable. In a plethora of cases, the Court has affirmed that stipulated interest rates of three percent (3°/o)
per month and higher are excessive, iniquitous, unconscionable, and exorbitant, 51 hence, illegal 52 and void for being
contrary to morals.53 In Agner v. BPI Family Savings Bank, Inc., 54 the Court had the occasion to rule:
Settled is the principle which this Court has affirmed in a number of cases that stipulated interest rates of three
percent (3%) per month and higher are excessive, iniquitous, unconscionable, and exorbitant. While Central Bank
Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both
secured and unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting
carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead
to a hemorrhaging of their assets. Since the stipulation on the interest rate is void for being contrary to morals, if not
against the law, it is as if there was no express contract on said interest rate; thus, the interest rate may be reduced as
reason and equity demand. (Emphases supplied)
As such, the stipulated 5% monthly interest should be equitably reduced to l % per month or 12% p.a. reckoned from
the execution of the real estate mortgage on July 30, 1992. In order to determine whether there was any
overpayment as claimed by respondent, we first compute the interest until January 30, 1998 55 when he made a
payment in the amount of ₱300,000.00 on Rafael's loan obligation. Accordingly, the amount due on the loan as of the
latter date is hereby computed as follows:

Principal ₱160, 000.00

Add: Interest from 07/30/1992 to 01/30/1998

(₱160, 000.00 x 12% x 5.5 yrs.) 105,600.00

Amount due on the loan ₱265, 600.00

Less: Payment made on 01/30/98 (300,000.00)

Overpayment as of 01/30/98 (P 34,400.00) 56

Thus, as of January 30, 1998, only the amount of ₱265,600.00 was due under the loan contract, and the receipt of an
amount more than that renders petitioner liable for the return of the excess. Respondent, however, made further
payment in the amount of Pl 00,000.00 57 on the belief that the subject loan obligation had not yet been satisfied.
Such payments were, therefore, clearly made by mistake, giving rise to the quasi-contractual obligation of solutio
indebiti under Article 2154 58 in relation to Article 2163 59 of the Civil Code. Not being a loan or forbearance of money,
an interest of 6% p.a. should be imposed on the amount to be refunded and on the damages and attorney's fees
awarded, if any, computed from the time of demand 60 until its satisfaction. 61 Consequently, petitioner must return to
respondent the excess payments in the total amount of ₱134,400.00, with legal interest at the rate of 6% p.a. from
the filing of the Answer on August 6, 1998 62 interposing a counterclaim for such overpayment, until fully settled.
However, inasmuch as the court a quo failed to state in the body of its decision the factual or legal basis for the
award of attorney's fees to the respondent, as required under Article 2208 63 of the New Civil Code, the Court
resolves to delete the same. The rule is well-settled that the trial court must clearly state the reasons for awarding
attorney's fees in the body of its decision, not merely in its dispositive portion, as the appellate courts are precluded
from supplementing the bases for such award. 64
Finally, in the absence of showing that the court a quo 's award of the costs of suit in favor of respondent was
patently capricious, 65 the Court finds no reason to disturb the same.
WHEREFORE, the petition is DENIED. The Decision dated November 4, 2011 and the Resolution dated May 14, 2012
of the Court of Appeals in CA-G.R. CV No. 81258 reinstating the court a quo's Decision dated August 28, 2003 in Civil
Case No. 98-0156 are hereby AFFIRMED with the MODIFICATIONS: (a) directing petitioner Norlinda S. Marilag to
return to respondent Marcelino B. Martinez the latter's excess payments in the total amount of ₱134,400.00, plus
legal interest at the rate of 6% p.a. from the filing of the Answer on August 6, 1998 until full satisfaction; and (b)
deleting the award of attorney's fees.
SO ORDERED.
ATTY. SYLVIA BANDA, et. al.vs. EDUARDO ERMITA, in his capacity as Executive Secretary, The Director General of
the Philippine Information Agency and The National Treasurer G.R. No. 166620 . April 20, 2010
The present controversy arose from a Petition for Certiorari and prohibition challenging the constitutionality of
Executive Order No. 378 dated October 25, 2004, issued by President Gloria Macapagal Arroyo (President Arroyo).
Petitioners characterize their action as a class suit filed on their own behalf and on behalf of all their co-employees at
the National Printing Office (NPO).
The NPO was formed on July 25, 1987, during the term of former President Corazon C. Aquino (President Aquino), by
virtue of Executive Order No. 2851 which provided, among others, the creation of the NPO from the merger of the
Government Printing Office and the relevant printing units of the Philippine Information Agency (PIA). Section 6 of
Executive Order No. 285 reads:
SECTION 6. Creation of the National Printing Office. – There is hereby created a National Printing Office out of the
merger of the Government Printing Office and the relevant printing units of the Philippine Information Agency. The
Office shall have exclusive printing jurisdiction over the following:
a. Printing, binding and distribution of all standard and accountable forms of national, provincial, city and
municipal governments, including government corporations;
b. Printing of officials ballots;
c. Printing of public documents such as the Official Gazette, General Appropriations Act, Philippine Reports,
and development information materials of the Philippine Information Agency.
The Office may also accept other government printing jobs, including government publications, aside from those
enumerated above, but not in an exclusive basis.
The details of the organization, powers, functions, authorities, and related management aspects of the Office shall be
provided in the implementing details which shall be prepared and promulgated in accordance with Section II of this
Executive Order.
The Office shall be attached to the Philippine Information Agency.
On October 25, 2004, President Arroyo issued the herein assailed Executive Order No. 378, amending Section 6 of
Executive Order No. 285 by, inter alia, removing the exclusive jurisdiction of the NPO over the printing services
requirements of government agencies and instrumentalities. The pertinent portions of Executive Order No. 378, in
turn, provide:
SECTION 1. The NPO shall continue to provide printing services to government agencies and instrumentalities as
mandated by law. However, it shall no longer enjoy exclusive jurisdiction over the printing services requirements of
the government over standard and accountable forms. It shall have to compete with the private sector, except in the
printing of election paraphernalia which could be shared with the Bangko Sentral ng Pilipinas, upon the discretion of
the Commission on Elections consistent with the provisions of the Election Code of 1987.
SECTION 2. Government agencies/instrumentalities may source printing services outside NPO provided that:
2.1 The printing services to be provided by the private sector is superior in quality and at a lower cost than
what is offered by the NPO; and
2.2 The private printing provider is flexible in terms of meeting the target completion time of the government
agency.
SECTION 3. In the exercise of its functions, the amount to be appropriated for the programs, projects and activities of
the NPO in the General Appropriations Act (GAA) shall be limited to its income without additional financial support
from the government. (Emphases and underscoring supplied.)
Pursuant to Executive Order No. 378, government agencies and instrumentalities are allowed to source their printing
services from the private sector through competitive bidding, subject to the condition that the services offered by
the private supplier be of superior quality and lower in cost compared to what was offered by the NPO. Executive
Order No. 378 also limited NPO’s appropriation in the General Appropriations Act to its income.
Perceiving Executive Order No. 378 as a threat to their security of tenure as employees of the NPO, petitioners now
challenge its constitutionality, contending that: (1) it is beyond the executive powers of President Arroyo to amend or
repeal Executive Order No. 285 issued by former President Aquino when the latter still exercised legislative powers;
and (2) Executive Order No. 378 violates petitioners’ security of tenure, because it paves the way for the gradual
abolition of the NPO.
We dismiss the petition.
Before proceeding to resolve the substantive issues, the Court must first delve into a procedural matter. Since
petitioners instituted this case as a class suit, the Court, thus, must first determine if the petition indeed qualifies as
one. In Board of Optometry v. Colet,2 we held that "[c]ourts must exercise utmost caution before allowing a class suit,
which is the exception to the requirement of joinder of all indispensable parties. For while no difficulty may arise if
the decision secured is favorable to the plaintiffs, a quandary would result if the decision were otherwise as those
who were deemed impleaded by their self-appointed representatives would certainly claim denial of due process."
Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
Sec. 12. Class suit. – When the subject matter of the controversy is one of common or general interest to many
persons so numerous that it is impracticable to join all as parties, a number of them which the court finds to be
sufficiently numerous and representative as to fully protect the interests of all concerned may sue or defend for the
benefit of all. Any party in interest shall have the right to intervene to protect his individual interest.
From the foregoing definition, the requisites of a class suit are: 1) the subject matter of controversy is one of
common or general interest to many persons; 2) the parties affected are so numerous that it is impracticable to bring
them all to court; and 3) the parties bringing the class suit are sufficiently numerous or representative of the class
and can fully protect the interests of all concerned.
In Mathay v. The Consolidated Bank and Trust Company, 3 the Court held that:
An action does not become a class suit merely because it is designated as such in the pleadings. Whether the suit is
or is not a class suit depends upon the attending facts, and the complaint, or other pleading initiating the class action
should allege the existence of the necessary facts, to wit, the existence of a subject matter of common interest, and
the existence of a class and the number of persons in the alleged class, in order that the court might be enabled to
determine whether the members of the class are so numerous as to make it impracticable to bring them all before
the court, to contrast the number appearing on the record with the number in the class and to determine whether
claimants on record adequately represent the class and the subject matter of general or common interest. (Emphases
ours.)
Here, the petition failed to state the number of NPO employees who would be affected by the assailed Executive
Order and who were allegedly represented by petitioners. It was the Solicitor General, as counsel for respondents,
who pointed out that there were about 549 employees in the NPO. 4 The 67 petitioners undeniably comprised a small
fraction of the NPO employees whom they claimed to represent. Subsequently, 32 of the original petitioners
executed an Affidavit of Desistance, while one signed a letter denying ever signing the petition, 5 ostensibly reducing
the number of petitioners to 34. We note that counsel for the petitioners challenged the validity of the desistance or
withdrawal of some of the petitioners and insinuated that such desistance was due to pressure from people "close to
the seat of power."6 Still, even if we were to disregard the affidavit of desistance filed by some of the petitioners, it is
highly doubtful that a sufficient, representative number of NPO employees have instituted this purported class suit. A
perusal of the petition itself would show that of the 67 petitioners who signed the Verification/Certification of Non-
Forum Shopping, only 20 petitioners were in fact mentioned in the jurat as having duly subscribed the petition before
the notary public. In other words, only 20 petitioners effectively instituted the present case.
Indeed, in MVRS Publications, Inc. v. Islamic Da’wah Council of the Philippines, Inc., 7 we observed that an element of
a class suit or representative suit is the adequacy of representation. In determining the question of fair and adequate
representation of members of a class, the court must consider (a) whether the interest of the named party is
coextensive with the interest of the other members of the class; (b) the proportion of those made a party, as it so
bears, to the total membership of the class; and (c) any other factor bearing on the ability of the named party to
speak for the rest of the class.
Previously, we held in Ibañes v. Roman Catholic Church 8 that where the interests of the plaintiffs and the other
members of the class they seek to represent are diametrically opposed, the class suit will not prosper.
It is worth mentioning that a Manifestation of Desistance, 9 to which the previously mentioned Affidavit of
Desistance10 was attached, was filed by the President of the National Printing Office Workers Association (NAPOWA).
The said manifestation expressed NAPOWA’s opposition to the filing of the instant petition in any court. Even if we
take into account the contention of petitioners’ counsel that the NAPOWA President had no legal standing to file such
manifestation, the said pleading is a clear indication that there is a divergence of opinions and views among the
members of the class sought to be represented, and not all are in favor of filing the present suit. There is here an
apparent conflict between petitioners’ interests and those of the persons whom they claim to represent. Since it
cannot be said that petitioners sufficiently represent the interests of the entire class, the instant case cannot be
properly treated as a class suit.
As to the merits of the case, the petition raises two main grounds to assail the constitutionality of Executive Order
No. 378:
First, it is contended that President Arroyo cannot amend or repeal Executive Order No. 285 by the mere issuance of
another executive order (Executive Order No. 378). Petitioners maintain that former President Aquino’s Executive
Order No. 285 is a legislative enactment, as the same was issued while President Aquino still had legislative powers
under the Freedom Constitution;11 thus, only Congress through legislation can validly amend Executive Order No.
285.
Second, petitioners maintain that the issuance of Executive Order No. 378 would lead to the eventual abolition of the
NPO and would violate the security of tenure of NPO employees.
Anent the first ground raised in the petition, we find the same patently without merit.
It is a well-settled principle in jurisprudence that the President has the power to reorganize the offices and agencies
in the executive department in line with the President’s constitutionally granted power of control over executive
offices and by virtue of previous delegation of the legislative power to reorganize executive offices under existing
statutes.
In Buklod ng Kawaning EIIB v. Zamora,12 the Court pointed out that Executive Order No. 292 or the Administrative
Code of 1987 gives the President continuing authority to reorganize and redefine the functions of the Office of the
President. Section 31, Chapter 10, Title III, Book III of the said Code, is explicit:
Sec. 31. Continuing Authority of the President to Reorganize his Office. – The President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to
reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the
following actions:
(1) Restructure the internal organization of the Office of the President Proper, including the immediate
Offices, the President Special Assistants/Advisers System and the Common Staff Support System, by
abolishing, consolidating or merging units thereof or transferring functions from one unit to another;
(2) Transfer any function under the Office of the President to any other Department or Agency as well as
transfer functions to the Office of the President from other Departments and Agencies; and
(3) Transfer any agency under the Office of the President to any other department or agency as well as
transfer agencies to the Office of the President from other Departments or agencies. (Emphases ours.)
Interpreting the foregoing provision, we held in Buklod ng Kawaning EIIB, thus:
But of course, the list of legal basis authorizing the President to reorganize any department or agency in the
executive branch does not have to end here. We must not lose sight of the very source of the power – that which
constitutes an express grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise known as the
Administrative Code of 1987), "the President, subject to the policy in the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have the continuing authority to reorganize the administrative structure of
the Office of the President." For this purpose, he may transfer the functions of other Departments or Agencies to the
Office of the President. In Canonizado v. Aguirre [323 SCRA 312 (2000)], we ruled that reorganization "involves the
reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of
functions." It takes place when there is an alteration of the existing structure of government offices or units therein,
including the lines of control, authority and responsibility between them. The EIIB is a bureau attached to the
Department of Finance. It falls under the Office of the President. Hence, it is subject to the President’s continuing
authority to reorganize.13 (Emphasis ours.)
It is undisputed that the NPO, as an agency that is part of the Office of the Press Secretary (which in various times has
been an agency directly attached to the Office of the Press Secretary or as an agency under the Philippine
Information Agency), is part of the Office of the President. 14
Pertinent to the case at bar, Section 31 of the Administrative Code of 1987 quoted above authorizes the President (a)
to restructure the internal organization of the Office of the President Proper, including the immediate Offices, the
President Special Assistants/Advisers System and the Common Staff Support System, by abolishing, consolidating or
merging units thereof or transferring functions from one unit to another, and (b) to transfer functions or offices from
the Office of the President to any other Department or Agency in the Executive Branch, and vice versa.
Concomitant to such power to abolish, merge or consolidate offices in the Office of the President Proper and to
transfer functions/offices not only among the offices in the Office of President Proper but also the rest of the Office
of the President and the Executive Branch, the President implicitly has the power to effect less radical or less
substantive changes to the functional and internal structure of the Office of the President, including the modification
of functions of such executive agencies as the exigencies of the service may require.
In the case at bar, there was neither an abolition of the NPO nor a removal of any of its functions to be transferred to
another agency. Under the assailed Executive Order No. 378, the NPO remains the main printing arm of the
government for all kinds of government forms and publications but in the interest of greater economy and
encouraging efficiency and profitability, it must now compete with the private sector for certain government printing
jobs, with the exception of election paraphernalia which remains the exclusive responsibility of the NPO, together
with the Bangko Sentral ng Pilipinas, as the Commission on Elections may determine. At most, there was a mere
alteration of the main function of the NPO by limiting the exclusivity of its printing responsibility to election forms. 15
There is a view that the reorganization actions that the President may take with respect to agencies in the Office of
the President are strictly limited to transfer of functions and offices as seemingly provided in Section 31 of the
Administrative Code of 1987.
However, Section 20, Chapter 7, Title I, Book III of the same Code significantly provides:
Sec. 20. Residual Powers. – Unless Congress provides otherwise, the President shall exercise such other powers and
functions vested in the President which are provided for under the laws and which are not specifically enumerated
above, or which are not delegated by the President in accordance with law. (Emphasis ours.)
Pursuant to Section 20, the power of the President to reorganize the Executive Branch under Section 31 includes such
powers and functions that may be provided for under other laws. To be sure, an inclusive and broad interpretation of
the President’s power to reorganize executive offices has been consistently supported by specific provisions in
general appropriations laws.
In the oft-cited Larin v. Executive Secretary, 16 the Court likewise adverted to certain provisions of Republic Act No.
7645, the general appropriations law for 1993, as among the statutory bases for the President’s power to reorganize
executive agencies, to wit:
Section 48 of R.A. 7645 provides that:
"Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive Branch. — The heads of
departments, bureaus and offices and agencies are hereby directed to identify their respective activities which are no
longer essential in the delivery of public services and which may be scaled down, phased out or abolished, subject to
civil [service] rules and regulations. x x x. Actual scaling down, phasing out or abolition of the activities shall be
effected pursuant to Circulars or Orders issued for the purpose by the Office of the President."
Said provision clearly mentions the acts of "scaling down, phasing out and abolition" of offices only and does not
cover the creation of offices or transfer of functions. Nevertheless, the act of creating and decentralizing is included
in the subsequent provision of Section 62, which provides that:
"Sec. 62. Unauthorized organizational changes. — Unless otherwise created by law or directed by the President of
the Philippines, no organizational unit or changes in key positions in any department or agency shall be authorized in
their respective organization structures and be funded from appropriations by this Act."
The foregoing provision evidently shows that the President is authorized to effect organizational changes including
the creation of offices in the department or agency concerned.
The contention of petitioner that the two provisions are riders deserves scant consideration. Well settled is the rule
that every law has in its favor the presumption of constitutionality. Unless and until a specific provision of the law is
declared invalid and unconstitutional, the same is valid and binding for all intents and purposes. 17 (Emphases ours)
Buklod ng Kawaning EIIB v. Zamora,18 where the Court upheld as valid then President Joseph Estrada’s Executive
Order No. 191 "deactivating" the Economic Intelligence and Investigation Bureau (EIIB) of the Department of Finance,
hewed closely to the reasoning in Larin. The Court, among others, also traced from the General Appropriations
Act19 the President’s authority to effect organizational changes in the department or agency under the executive
structure, thus:
We adhere to the precedent or ruling in Larin that this provision recognizes the authority of the President to effect
organizational changes in the department or agency under the executive structure. Such a ruling further finds
support in Section 78 of Republic Act No. 8760. Under this law, the heads of departments, bureaus, offices and
agencies and other entities in the Executive Branch are directed (a) to conduct a comprehensive review of their
respective mandates, missions, objectives, functions, programs, projects, activities and systems and procedures; (b)
identify activities which are no longer essential in the delivery of public services and which may be scaled down,
phased-out or abolished; and (c) adopt measures that will result in the streamlined organization and improved
overall performance of their respective agencies. Section 78 ends up with the mandate that the actual streamlining
and productivity improvement in agency organization and operation shall be effected pursuant to Circulars or Orders
issued for the purpose by the Office of the President. x x x. 20 (Emphasis ours)
Notably, in the present case, the 2003 General Appropriations Act, which was reenacted in 2004 (the year of the
issuance of Executive Order No. 378), likewise gave the President the authority to effect a wide variety of
organizational changes in any department or agency in the Executive Branch. Sections 77 and 78 of said Act provides:
Section 77. Organized Changes. – Unless otherwise provided by law or directed by the President of the Philippines,
no changes in key positions or organizational units in any department or agency shall be authorized in their
respective organizational structures and funded from appropriations provided by this Act.
Section 78. Institutional Strengthening and Productivity Improvement in Agency Organization and Operations and
Implementation of Organization/Reorganization Mandated by Law. The Government shall adopt institutional
strengthening and productivity improvement measures to improve service delivery and enhance productivity in the
government, as directed by the President of the Philippines. The heads of departments, bureaus, offices, agencies,
and other entities of the Executive Branch shall accordingly conduct a comprehensive review of their respective
mandates, missions, objectives, functions, programs, projects, activities and systems and procedures; identify areas
where improvements are necessary; and implement corresponding structural, functional and operational
adjustments that will result in streamlined organization and operations and improved performance and productivity:
PROVIDED, That actual streamlining and productivity improvements in agency organization and operations, as
authorized by the President of the Philippines for the purpose, including the utilization of savings generated from
such activities, shall be in accordance with the rules and regulations to be issued by the DBM, upon consultation with
the Presidential Committee on Effective Governance: PROVIDED, FURTHER, That in the implementation of
organizations/reorganizations, or specific changes in agency structure, functions and operations as a result of
institutional strengthening or as mandated by law, the appropriation, including the functions, projects, purposes and
activities of agencies concerned may be realigned as may be necessary: PROVIDED, FINALLY, That any unexpended
balances or savings in appropriations may be made available for payment of retirement gratuities and separation
benefits to affected personnel, as authorized under existing laws. (Emphases and underscoring ours.)
Implicitly, the aforequoted provisions in the appropriations law recognize the power of the President to reorganize
even executive offices already funded by the said appropriations act, including the power to implement structural,
functional, and operational adjustments in the executive bureaucracy and, in so doing, modify or realign
appropriations of funds as may be necessary under such reorganization. Thus, insofar as petitioners protest the
limitation of the NPO’s appropriations to its own income under Executive Order No. 378, the same is statutorily
authorized by the above provisions.
In the 2003 case of Bagaoisan v. National Tobacco Administration, 21 we upheld the "streamlining" of the National
Tobacco Administration through a reduction of its personnel and deemed the same as included in the power of the
President to reorganize executive offices granted under the laws, notwithstanding that such streamlining neither
involved an abolition nor a transfer of functions of an office. To quote the relevant portion of that decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D. Zamora, in his capacity as the Executive
Secretary, et al., this Court has had occasion to also delve on the President’s power to reorganize the Office of the
President under Section 31(2) and (3) of Executive Order No. 292 and the power to reorganize the Office of the
President Proper. x x x
xxxx
The first sentence of the law is an express grant to the President of a continuing authority to reorganize the
administrative structure of the Office of the President. The succeeding numbered paragraphs are not in the nature
of provisos that unduly limit the aim and scope of the grant to the President of the power to reorganize but are to be
viewed in consonance therewith. Section 31(1) of Executive Order No. 292 specifically refers to the President’s power
to restructure the internal organization of the Office of the President Proper, by abolishing, consolidating or merging
units hereof or transferring functions from one unit to another, while Section 31(2) and (3) concern executive offices
outside the Office of the President Proper allowing the President to transfer any function under the Office of the
President to any other Department or Agency and vice-versa, and the transfer of any agency under the Office of the
President to any other department or agency and vice-versa.
In the present instance, involving neither an abolition nor transfer of offices, the assailed action is a mere
reorganization under the general provisions of the law consisting mainly of streamlining the NTA in the interest of
simplicity, economy and efficiency. It is an act well within the authority of the President motivated and carried out,
according to the findings of the appellate court, in good faith, a factual assessment that this Court could only but
accept.22 (Emphases and underscoring supplied.)
In the more recent case of Tondo Medical Center Employees Association v. Court of Appeals, 23 which involved a
structural and functional reorganization of the Department of Health under an executive order, we reiterated the
principle that the power of the President to reorganize agencies under the executive department by executive or
administrative order is constitutionally and statutorily recognized. We held in that case:
This Court has already ruled in a number of cases that the President may, by executive or administrative order, direct
the reorganization of government entities under the Executive Department. This is also sanctioned under the
Constitution, as well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he president shall have control of all executive
departments, bureaus and offices." Section 31, Book III, Chapter 10 of Executive Order No. 292, also known as the
Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize his Office - The President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to
reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the
following actions:
xxxx
In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the rationale behind the President’s continuing
authority under the Administrative Code to reorganize the administrative structure of the Office of the President. The
law grants the President the power to reorganize the Office of the President in recognition of the recurring need of
every President to reorganize his or her office "to achieve simplicity, economy and efficiency." To remain effective and
efficient, it must be capable of being shaped and reshaped by the President in the manner the Chief Executive deems
fit to carry out presidential directives and policies.
The Administrative Code provides that the Office of the President consists of the Office of the President Proper and
the agencies under it. The agencies under the Office of the President are identified in Section 23, Chapter 8, Title II of
the Administrative Code:
Sec. 23. The Agencies under the Office of the President.—The agencies under the Office of the President refer to
those offices placed under the chairmanship of the President, those under the supervision and control of the
President, those under the administrative supervision of the Office of the President, those attached to it for policy
and program coordination, and those that are not placed by law or order creating them under any specific
department.
xxxx
The power of the President to reorganize the executive department is likewise recognized in general appropriations
laws. x x x.
xxxx
Clearly, Executive Order No. 102 is well within the constitutional power of the President to issue. The President did
not usurp any legislative prerogative in issuing Executive Order No. 102. It is an exercise of the President’s
constitutional power of control over the executive department, supported by the provisions of the Administrative
Code, recognized by other statutes, and consistently affirmed by this Court. 24 (Emphases supplied.)
Subsequently, we ruled in Anak Mindanao Party-List Group v. Executive Secretary 25 that:
The Constitution’s express grant of the power of control in the President justifies an executive action to carry out
reorganization measures under a broad authority of law.
In enacting a statute, the legislature is presumed to have deliberated with full knowledge of all existing laws and
jurisprudence on the subject. It is thus reasonable to conclude that in passing a statute which places an agency under
the Office of the President, it was in accordance with existing laws and jurisprudence on the President’s power to
reorganize.
In establishing an executive department, bureau or office, the legislature necessarily ordains an executive agency’s
position in the scheme of administrative structure. Such determination is primary, but subject to the President’s
continuing authority to reorganize the administrative structure. As far as bureaus, agencies or offices in the executive
department are concerned, the power of control may justify the President to deactivate the functions of a particular
office. Or a law may expressly grant the President the broad authority to carry out reorganization measures. The
Administrative Code of 1987 is one such law. 26
The issuance of Executive Order No. 378 by President Arroyo is an exercise of a delegated legislative power granted
by the aforementioned Section 31, Chapter 10, Title III, Book III of the Administrative Code of 1987, which provides
for the continuing authority of the President to reorganize the Office of the President, "in order to achieve simplicity,
economy and efficiency." This is a matter already well-entrenched in jurisprudence. The reorganization of such an
office through executive or administrative order is also recognized in the Administrative Code of 1987. Sections 2 and
3, Chapter 2, Title I, Book III of the said Code provide:
Sec. 2. Executive Orders. - Acts of the President providing for rules of a general or permanent character in
implementation or execution of constitutional or statutory powers shall be promulgated in executive orders.
Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects of governmental operations in
pursuance of his duties as administrative head shall be promulgated in administrative orders. (Emphases supplied.)
To reiterate, we find nothing objectionable in the provision in Executive Order No. 378 limiting the appropriation of
the NPO to its own income. Beginning with Larin and in subsequent cases, the Court has noted certain provisions in
the general appropriations laws as likewise reflecting the power of the President to reorganize executive offices or
agencies even to the extent of modifying and realigning appropriations for that purpose.
Petitioners’ contention that the issuance of Executive Order No. 378 is an invalid exercise of legislative power on the
part of the President has no legal leg to stand on.
In all, Executive Order No. 378, which purports to institute necessary reforms in government in order to improve and
upgrade efficiency in the delivery of public services by redefining the functions of the NPO and limiting its funding to
its own income and to transform it into a self-reliant agency able to compete with the private sector, is well within
the prerogative of President Arroyo under her continuing delegated legislative power to reorganize her own office. As
pointed out in the separate concurring opinion of our learned colleague, Associate Justice Antonio T. Carpio, the
objective behind Executive Order No. 378 is wholly consistent with the state policy contained in Republic Act No.
9184 or the Government Procurement Reform Act to encourage competitiveness by extending equal opportunity to
private contracting parties who are eligible and qualified. 271avvphi1
To be very clear, this delegated legislative power to reorganize pertains only to the Office of the President and the
departments, offices and agencies of the executive branch and does not include the Judiciary, the Legislature or the
constitutionally-created or mandated bodies. Moreover, it must be stressed that the exercise by the President of the
power to reorganize the executive department must be in accordance with the Constitution, relevant laws and
prevailing jurisprudence.
In this regard, we are mindful of the previous pronouncement of this Court in Dario v. Mison 28 that:
Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. As a general
rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more
efficient. In that event, no dismissal (in case of a dismissal) or separation actually occurs because the position itself
ceases to exist. And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the "abolition,"
which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of
tenure, or otherwise not in good faith, no valid "abolition" takes place and whatever "abolition" is done, is void ab
initio. There is an invalid "abolition" as where there is merely a change of nomenclature of positions, or where claims
of economy are belied by the existence of ample funds. (Emphasis ours.)
Stated alternatively, the presidential power to reorganize agencies and offices in the executive branch of government
is subject to the condition that such reorganization is carried out in good faith.
If the reorganization is done in good faith, the abolition of positions, which results in loss of security of tenure of
affected government employees, would be valid. In Buklod ng Kawaning EIIB v. Zamora, 29 we even observed that
there was no such thing as an absolute right to hold office. Except those who hold constitutional offices, which
provide for special immunity as regards salary and tenure, no one can be said to have any vested right to an office or
salary.30
This brings us to the second ground raised in the petition – that Executive Order No. 378, in allowing government
agencies to secure their printing requirements from the private sector and in limiting the budget of the NPO to its
income, will purportedly lead to the gradual abolition of the NPO and the loss of security of tenure of its present
employees. In other words, petitioners avow that the reorganization of the NPO under Executive Order No. 378 is
tainted with bad faith. The basic evidentiary rule is that he who asserts a fact or the affirmative of an issue has the
burden of proving it.31
A careful review of the records will show that petitioners utterly failed to substantiate their claim. They failed to
allege, much less prove, sufficient facts to show that the limitation of the NPO’s budget to its own income would
indeed lead to the abolition of the position, or removal from office, of any employee. Neither did petitioners present
any shred of proof of their assertion that the changes in the functions of the NPO were for political considerations
that had nothing to do with improving the efficiency of, or encouraging operational economy in, the said agency.
In sum, the Court finds that the petition failed to show any constitutional infirmity or grave abuse of discretion
amounting to lack or excess of jurisdiction in President Arroyo’s issuance of Executive Order No. 378.
WHEREFORE, the petition is hereby DISMISSED and the prayer for a Temporary Restraining Order and/or a Writ of
Preliminary Injunction is hereby DENIED. No costs.
SO ORDERED.
ROGER NAVARRO vs. JOSE ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN GO, doing
business under the name KARGO ENTERPRISES [G.R. No. 153788. November 27, 2009]
This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA) Decision 2 dated October
16, 2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26,
20004 and March 7, 20015 orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying
petitioner Roger V. Navarro’s (Navarro) motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first
complaint)6 and 98-598 (second complaint),7 before the RTC for replevin and/or sum of money with damages against
Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor
vehicles in Navarro’s possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro
City and doing business under the trade name KARGO ENTERPRISES, an entity duly registered and existing
under and by virtue of the laws of the Republic of the Philippines, which has its business address at Bulua,
Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores
Street, Nazareth, Cagayan de Oro City, where he may be served with summons and other processes of the
Honorable Court; that defendant "JOHN DOE" whose real name and address are at present unknown to
plaintiff is hereby joined as party defendant as he may be the person in whose possession and custody the
personal property subject matter of this suit may be found if the same is not in the possession of defendant
ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including
hauling trucks and other heavy equipment;
3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997,
the said defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as
follows –
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO
ENTERPRISES, then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER NAVARRO
xxx; that in accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant
ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND
THREE HUNDRED THIRTY-THREE & 33/100 PESOS (₱66,333.33) which were supposedly in payment of the agreed
rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF COMMUNICATIONS – CAGAYAN DE ORO
BRANCH CHECKS NOS. 017112 and 017113, respectively dated January 8, 1998 and February 8, 1998, were presented
for payment and/or credit, the same were dishonored and/or returned by the drawee bank for the common reason
that the current deposit account against which the said checks were issued did not have sufficient funds to cover the
amounts thereof; that the total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-TWO
THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (₱132,666.66) therefore represents the principal liability of
defendant ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH
RIGHT TO PURCHASE; that demands, written and oral, were made of defendant ROGER NAVARRO to pay the amount
of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (₱132,666.66), or to return the
subject motor vehicle as also provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands
were, and still are, in vain to the great damage and injury of herein plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law,
or seized under an execution or an attachment as against herein plaintiff;
 xxx
8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the
above-described motor vehicle from defendants unto plaintiff pending the final determination of this case on the
merits and, for that purpose, there is attached hereto an affidavit duly executed and bond double the value of the
personal property subject matter hereof to answer for damages and costs which defendants may suffer in the event
that the order for replevin prayed for may be found out to having not been properly issued.
The second complaint contained essentially the same allegations as the first complaint, except that the Lease
Agreement with Option to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as
follows:
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount of
₱100,000.00, to Karen Go in payment of the agreed rentals; however, the third check was dishonored when
presented for payment.8
On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin for both cases; as a result, the Sheriff
seized the two vehicles and delivered them to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action,
since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements)
– the actionable documents on which the complaints were based.
On Navarro’s motion, both cases were duly consolidated on December 13, 1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of
action.
In response to the motion for reconsideration Karen Go filed dated May 26, 2000, 11 the RTC issued another order
dated July 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Go’s leasing business is
a conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against
Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based
on Section 4, Rule 3 of the Rules of Court (Rules). 12 Thus, the lower court ordered Karen Go to file a motion for the
inclusion of Glenn Go as co-plaintiff.1avvphi1
When the RTC denied Navarro’s motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari
with the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the
dismissal of the case and directed Karen Go to amend her complaints by including her husband Glenn Go as co-
plaintiff. According to Navarro, a complaint which failed to state a cause of action could not be converted into one
with a cause of action by mere amendment or supplemental pleading.
On October 16, 2001, the CA denied Navarro’s petition and affirmed the RTC’s order. 13 The CA also denied Navarro’s
motion for reconsideration in its resolution of May 29, 2002, 14 leading to the filing of the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the
requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was
Karen Go who filed the complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to
state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-
plaintiff, instead of dismissing the complaint outright because a complaint which does not state a cause of action
cannot be converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the
lower court created a cause of action for Karen Go when there was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the
complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed
that the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered
owner of Kargo Enterprises, the vehicles subject of the complaint are her paraphernal properties and the RTC gravely
erred when it ordered the inclusion of Glenn Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to
amend her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were
premature because no prior demand was made on him to comply with the provisions of the lease agreements before
the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were
illegally seized from his possession and should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the
subject of the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner
of Kargo Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises.
Moreover, Karen Go maintains that Navarro’s insistence that Kargo Enterprises is Karen Go’s paraphernal property is
without basis. Based on the law and jurisprudence on the matter, all property acquired during the marriage is
presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently established a cause of
action against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was merely to
comply with the rule that spouses should sue jointly, and was not meant to cure the complaints’ lack of cause of
action.
THE COURT’S RULING
We find the petition devoid of merit.
Karen Go is the real party-in-interest
The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real
party-in-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit.15
Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises,
he still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts
were in Kargo Enterprises’ name, this was merely a trade name without a juridical personality, so the actual parties to
the lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of
Glenn Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was
none.
We do not find Navarro’s arguments persuasive.
The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name
appears in the title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the
name KARGO ENTERPRISES," and this identification was repeated in the first paragraph of the Complaint. Paragraph 2
defined the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant
"leased from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint specifies
and attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the
defendant. Again, the name KARGO ENTERPRISES entered the picture as this Lease Agreement provides:
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSOR-SELLER;
representing KARGO ENTERPRISES as its Manager,
xxx
thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the
express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises
and the latter is clearly the real party to the lease agreements.
As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a
juridical person, as defined by Article 44 of the Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
 (2) Other corporations, institutions and entities for public interest or purpose, created by law; their
personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a
juridical personality, separate and distinct from that of each shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules, 16 Kargo Enterprises cannot be a party to a civil action. This legal
reality leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo
Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza, 17 where we said:
Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely
recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single
individual, and requires the proprietor or owner thereof to secure licenses and permits, register the business name,
and pay taxes to the national government. It does not vest juridical or legal personality upon the sole proprietorship
nor empower it to file or defend an action in court.
Thus, the complaint in the court below should have been filed in the name of the owner of Juasing Hardware. The
allegation in the body of the complaint would show that the suit is brought by such person as proprietor or owner of
the business conducted under the name and style Juasing Hardware. The descriptive words "doing business as
Juasing Hardware" may be added to the title of the case, as is customarily done. 18 [Emphasis supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:
SEC. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every
action must be prosecuted or defended in the name of the real party in interest.
As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a
judgment in this case. Thus, contrary to Navarro’s contention, Karen Go is the real party-in-interest, and it is legally
incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease
Agreement that her husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease
Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as
this is a matter for the trial court to consider in a trial on the merits.
Glenn Go’s Role in the Case
We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go, 19 who described herself
in the Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and
doing business under the trade name KARGO ENTERPRISES." 20 That Glenn Go and Karen Go are married to each other
is a fact never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of
a married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are paraphernal or
conjugal properties. To restate the parties’ positions, Navarro alleges that Kargo Enterprises is Karen Go’s paraphernal
property, emphasizing the fact that the business is registered solely in Karen Go’s name. On the other hand, Karen Go
contends that while the business is registered in her name, it is in fact part of their conjugal property.
The registration of the trade name in the name of one person – a woman – does not necessarily lead to the
conclusion that the trade name as a property is hers alone, particularly when the woman is married. By law, all
property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered
in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved. 21 Our examination of
the records of the case does not show any proof that Kargo Enterprises and the properties or contracts in its name
are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records of the case. As we
emphasized in Castro v. Miat:22
Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed
to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife." This
article does not require proof that the property was acquired with funds of the partnership. The presumption
applies even when the manner in which the property was acquired does not appear. 23 [Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship
is conjugal or paraphernal property, we hold that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal property, provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses
jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for
proper remedy, which must be availed of within five years from the date of the contract implementing such decision.
xxx
This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their
conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before
performing an act of administration or any act that does not dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of
partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their
marriage settlements. In other words, the property relations of the husband and wife shall be governed primarily by
Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses’ marriage settlement
and by the rules on partnership under the Civil Code. In the absence of any evidence of a marriage settlement
between the spouses Go, we look at the Civil Code provision on partnership for guidance.
A rule on partnership applicable to the spouses’ circumstances is Article 1811 of the Civil Code, which states:
Art. 1811. A partner is a co-owner with the other partners of specific partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right
with his partners to possess specific partnership property for partnership purposes; xxx
Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties
registered under this name; hence, both have an equal right to seek possession of these properties. Applying Article
484 of the Civil Code, which states that "in default of contracts, or special provisions, co-ownership shall be governed
by the provisions of this Title," we find further support in Article 487 of the Civil Code that allows any of the co-
owners to bring an action in ejectment with respect to the co-owned property.
While ejectment is normally associated with actions involving real property, we find that this rule can be applied to
the circumstances of the present case, following our ruling in Carandang v. Heirs of De Guzman. 24 In this case, one
spouse filed an action for the recovery of credit, a personal property considered conjugal property, without including
the other spouse in the action. In resolving the issue of whether the other spouse was required to be included as a
co-plaintiff in the action for the recovery of the credit, we said:
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang,
seems to be either an indispensable or a necessary party. If she is an indispensable party, dismissal would be proper.
If she is merely a necessary party, dismissal is not warranted, whether or not there was an order for her inclusion in
the complaint pursuant to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in
conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements.
This provision is practically the same as the Civil Code provision it superseded:
Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in
conflict with what is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the other partners of
specific partnership property." Taken with the presumption of the conjugal nature of the funds used to finance the
four checks used to pay for petitioners’ stock subscriptions, and with the presumption that the credits themselves are
part of conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the
recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-
ownership, co-owners may bring actions for the recovery of co-owned property without the necessity of joining all
the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners.
In the latter case and in that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code, which
provides that any of the co-owners may bring an action for ejectment, covers all kinds of action for the recovery of
possession.
In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of
the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery
of co-owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the
recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not indispensable
parties. They are not even necessary parties, for a complete relief can be accorded in the suit even without their
participation, since the suit is presumed to have been filed for the benefit of all co-owners. 25 [Emphasis supplied.]
Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo
Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code,
supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they
do not dispose of or encumber the property in question without the other spouse’s consent.
On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of
the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the
Rules, which states:
Section 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided by law.
Non-joinder of indispensable parties not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases 26 that the
misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated
in Macababbad v. Masirag:27
Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the
dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal
of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at
any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and
proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable
party at any stage of the action. The court, either motu proprio or upon the motion of a party, may order the
inclusion of the indispensable party or give the plaintiff opportunity to amend his complaint in order to include
indispensable parties. If the plaintiff to whom the order to include the indispensable party is directed refuses to
comply with the order of the court, the complaint may be dismissed upon motion of the defendant or upon the
court's own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is the action
dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is
fully in order.
Demand not required prior
to filing of replevin action
In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a
replevin action to an unlawful detainer.
For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2,
Rule 60 of the Rules, which states:
Sec. 2. Affidavit and bond.
The applicant must show by his own affidavit or that of some other person who personally knows the facts:
(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the
possession thereof;
(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof
according to the best of his knowledge, information, and belief;
(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or
seized under a writ of execution or preliminary attachment, or otherwise placed under custodia legis, or if so
seized, that it is exempt from such seizure or custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in
the affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for
the payment to the adverse party of such sum as he may recover from the applicant in the action.
We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the
property before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an
action for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already
admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his
unpaid obligations or return the leased motor vehicles. Navarro’s position that a demand is necessary and has not
been made is therefore totally unmeritorious.
WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against petitioner Roger
V. Navarro.
SO ORDERED.
ROSENDO BACALSO, et. al. vs. MAXIMO PADIGOS, et. al. G.R. No. 173192 April 14, 2008
The case at bar involves a parcel of land identified as Lot No. 3781 (the lot) located in Inayawan, Cebu, covered by
Original Certificate of Title No. RO-2649 (0-9092)1 in the name of the following 13 co-owners, their respective shares
of which are indicated opposite their names:
Fortunata Padigos (Fortunata) 1/8
Felix Padigos (Felix) 1/8
Wenceslao Padigos (Wenceslao) 1/8
Maximiano Padigos (Maximiano) 1/8
Geronimo Padigos (Geronimo) 1/8
Macaria Padigos 1/8
Simplicio Padigos (Simplicio) 1/8
Ignacio Padigos (Ignacio) 1/48
Matilde Padigos 1/48
Marcelo Padigos 1/48
Rustica Padigos 1/48
Raymunda Padigos 1/48
Antonino Padigos 1/48
Maximo Padigos (Maximo), Flaviano Mabuyo (Flaviano), Gaudencio Padigos (Gaudencio), Domingo Padigos
(Domingo), and Victoria P. Abarquez (Victoria), who are among the herein respondents, filed on April 17, 1995,
before the Regional Trial Court (RTC) of Cebu City, a Complaint, 2 docketed as Civil Case No. CEB-17326, against
Rosendo Bacalso (Rosendo) and Rodrigo Bacalso (Rodrigo) who are among the herein petitioners, for quieting of title,
declaration of nullity of documents, recovery of possession, and damages.
The therein plaintiffs-herein respondents Maximo and Flaviano claimed that they are children of the deceased co-
owner Simplicio; that respondents Gaudencio and Domingo are children of the deceased co-owner Ignacio; and that
respondent Victoria and respondent Lilia P. Gabison (Lilia) are grandchildren of the late co-owner Fortunata. 3
Respondents also alleged that the therein defendants-petitioners Rosendo and Rodrigo are heirs of Alipio Bacalso, Sr.
(Alipio, Sr.) who, during his lifetime, secured Tax Declaration Nos. L-078-02223 and L-078-02224 covering the lot
without any legal basis; that Rosendo and Rodrigo have been leasing portions of the lot to persons who built houses
thereon, and Rosendo has been living in a house built on a portion of the lot; 4 and that demands to vacate and
efforts at conciliation proved futile,5 prompting them to file the complaint at the RTC.
In their Answer6 to the complaint, petitioners Rosendo and Rodrigo claimed that their father Alipio, Sr. purchased via
deeds of sale the shares in the lot of Fortunata, Simplicio, Wenceslao, Geronimo, and Felix from their respective
heirs, and that Alipio, Sr. acquired the shares of the other co-owners of the lot by extraordinary acquisitive
prescription through continuous, open, peaceful, and adverse possession thereof in the concept of an owner since
1949.7
By way of Reply and Answer to the Defendants' Counterclaim, 8 herein respondents Gaudencio, Maximo, Flaviano,
Domingo, and Victoria alleged that the deeds of sale on which Rosendo and Rodrigo base their claim of ownership of
portions of the lot are spurious, but assuming that they are not, laches had set in against Alipio, Sr.; and that the
shares of the other co-owners of the lot cannot be acquired through laches or prescription.
Gaudencio, Maximo, Flaviano, Domingo, and Victoria, with leave of court, 9 filed an Amended Complaint10impleading
as additional defendants Alipio, Sr.'s other heirs, namely, petitioners Marceliana 11 Doblas, Terolio Bacalso, Alipio
Bacalso, Jr., Mario Bacalso, William Bacalso, Alipio Bacalso III, and Christine B. Bañes. 12 Still later, Gaudencio et al.
filed a Second Amended Complaint 13 with leave of court,14 impleading as additional plaintiffs the other heirs of
registered co-owner Maximiano, namely, herein respondents Timoteo Padigos, Perfecto Padigos, Frisca 15 Salarda,
Flora Quinto (sometimes rendered as "Guinto"), Benita Templa, Sotero Padigos, Andres Padigos, and Emilio Padigos. 16
In their Answer to the Second Amended Complaint, 17 petitioners contended that the Second Amended Complaint
should be dismissed in view of the failure to implead other heirs of the other registered owners of the lot who are
indispensable parties.18
A Third Amended Complaint19 was thereafter filed with leave of court20 impleading as additional plaintiffs the heirs of
Wenceslao, namely, herein respondents Demetrio Padigos, Jr., Wenceslao Padigos, and Nelly Padigos, and the heirs of
Felix, namely, herein respondents Expedito Padigos (Expedito), Henry Padigos, and Enrique P. Malazarte. 21
After trial, Branch 16 of the Cebu City RTC decided 22 in favor in the therein plaintiffs-herein respondents, disposing as
follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendants.
1. Declaring the plaintiffs to be entitled to the ownership and possession of the lot in litigation;
2. Declaring as null and void the Deeds of Absolute Sale in question;
3. Ordering the defendants to pay plaintiffs the sum of P50,000.00 as actual and compensatory damages[,]
the sum of P20,000.00 as attorney's fees, and P10,000.00 as litigation expenses.
4. Ordering the defendants to pay the costs of suit.
SO ORDERED.23 (Emphasis in the original; underscoring supplied)
The defendants-herein petitioners Bacalsos appealed. 24 Meanwhile, the trial court, on respondents' Motion for
Execution Pending Appeal,25 issued a writ of execution which was implemented by, among other things, demolishing
the houses constructed on the lot.26
By Decision27 of September 6, 2005, the Court of Appeals affirmed the trial court's decision. Their Motion for
Reconsideration28 having been denied,29 petitioners filed the present Petition for Review on Certiorari, 30 faulting the
Court of Appeals:
. . . when it ruled that the Second Amended Complaint is valid and legal, even if not all indispensable parties
are impleaded or joined . . .
. . . when [it] wittingly overlooked the most potent, unescapable and indubitable fact or circumstance which
proved the continuous possession of Lot No. 3781 by the defendants and their predecessors in interest,
Alipio Bacalso [Sr.] and/or when it sanctioned impliedly the glaring arbitrary RTC order of the demolition of
the over 40 years old houses, situated on Lot No. 3781 Cebu Cad., belonging to the old lessees, long allowed
to lease or stay thereat for many years, by Alipio Bacalso [Sr.], father and [predecessor] in interest of the
defendants, now the herein Petitioners. The said lessees were not even joined as parties in this case, much
less were they given a chance to air their side before their houses were demolished, in gross violation of the
due process clause provided for in Sec. 1[,] Art. III of the Constitution . . .
. . . in upholding as gospel truth the report and conclusion of Nimrod Vaño, the supposed handwriting
expert[,] that signatures and thumb marks appearing on all documents of sale presented by the defendants
are forgeries, and not mindful that Nimrod Vaño was not cross-examined thoroughly by the defense counsel
as he was prevented from doing so by the trial judge, in violation of the law more particularly Sec. 6, Rule
132, Rules of Court and/or the accepted and usual course of judicial proceedings and is therefore not
admissible in evidence.
. . . [when it] . . . wittingly or unwittingly, again overlooked the vital facts, the circumstances, the laws and
rulings of the Supreme Court, which are of much weight, substance and influence which, if considered
carefully, undoubtedly uphold that the defendants and their predecessors in interests, have long been in
continuous, open, peaceful and adverse, and notorious possession against the whole world of Lot No. 3781,
Cebu Cad., in concept of absolute owners for 46 years, a period more than sufficient to sustain or uphold the
defense of prescription, provided for in Art. 1137 of the Civil Code even without good faith. 31 (Emphasis and
underscoring in the original; italics supplied)
Respondents admit that Teodulfo Padigos (Teodulfo), an heir of Simplicio, was not impleaded. 32 They contend,
however, that the omission did not deprive the trial court of jurisdiction because Article 487 of the Civil Code states
that "[a]ny of the co-owners may bring an action in ejectment." 33
Respondents' contention does not lie. The action is for quieting of title, declaration of nullity of documents, recovery
of possession and ownership, and damages. Arcelona v. Court of Appeals34 defines indispensable parties under
Section 7 of Rule 3, Rules of Court as follows:
[P]arties-in-interest without whom there can be no final determination of an action. As such, they must be
joined either as plaintiffs or as defendants. The general rule with reference to the making of parties in a civil
 action requires, of course, the joinder of all necessary parties where possible, and the joinder of all
indispensable parties under any and all conditions, their presence being a sine qua non for the exercise of
judicial power. It is precisely "when an indispensable party is not before the court (that) the action should be
dismissed." The absence of an indispensable party renders all subsequent actions of the court null and
voidfor want of authority to act, not only as to the absent parties but even as to those present.
Petitioners are co-owners of a fishpond . . . The fishpond is undivided; it is impossible to pinpoint which
specific portion of the property is owned by Olanday, et. al. and which portion belongs to petitioners. x x x
Indeed, petitioners should have been properly impleaded as indispensable parties. x x x
x x x x35 (Underscoring supplied)
The absence then of an indispensable party renders all subsequent actions of a court null and void for want of
authority to act, not only as to the absent party but even as to those present. 36
Failure to implead indispensable parties aside, the resolution of the case hinges on a determination of the
authenticity of the documents on which petitioners in part anchor their claim to ownership of the lot. The
questioned documents are:
1. Exhibit "3" – a notarized Deed of Sale executed by Gaudencio, Domingo, a certain Hermenegilda Padigos,
and the heirs of Fortunata, in favor of Alipio, Sr. on June 8, 1959;
2. Exhibit "4" – a notarized Deed of Sale executed on September 9, 1957 by Gavino Padigos (Gavino), alleged
son of Felix, in favor of Alipio Gadiano;
3. Exhibit "5" – a private deed of sale executed in June 1957 by Macaria Bongalan, Marciano Padigos, and
Dominga Padigos, supposed heirs of Wenceslao, in favor of Alipio, Sr.;
4. Exhibit "6" – a notarized deed of sale executed on September 9, 1957 by Gavino and Rodulfo Padigos, heirs
of Geronimo, in favor of Alipio Gadiano;
5. Exhibit "7" – a notarized deed of sale executed on March 19, 1949 by Irenea Mabuyo, Teodulfo and
Maximo, heirs of Simplicio;
6. Exhibit "8" – a private deed of sale executed on May 3, 1950 by Candido Padigos, one of Simplicio's
children, in favor of Alipio, Sr.; and
7. Exhibit "9" – a notarized deed of sale executed on May 17, 1957 by Alipio Gadiano in favor of Alipio, Sr.
Exhibits "3," "4," "6," "7," and "8," which are notarized documents, have in their favor the presumption of
regularity.37
Forgery, as any other mechanism of fraud, must be proved clearly and convincingly, and the burden of proof lies on
the party alleging forgery.38
The trial court and the Court of Appeals relied on the findings of Nimrod Bernabe Vaño (Vaño), expert witness for
respondents, that Gaudencio's signature on Exhibit "3" (Deed of Absolute Sale covering Fortunata's share in the lot)
and Maximo's thumbprint on Exhibit "7" (Deed of Sale covering Simplicio's share in the lot) are spurious. 39 Vaño's
findings were presented by respondents to rebut those of Wilfredo Espina (Espina), expert witness for petitioners,
that Gaudencio's signature and Maximo's thumbprint are genuine. 40
Expert opinions are not ordinarily conclusive. They are generally regarded as purely advisory in character. 41 The
courts may place whatever weight they choose upon and may reject them, if they find them inconsistent with the
facts in the case or otherwise unreasonable. 42 When faced with conflicting expert opinions, courts give more weight
and credence to that which is more complete, thorough, and scientific. 43
The Court observes that in examining the questioned signatures of respondent Gaudencio, petitioners' expert
witness Espina used as standards 15 specimen signatures which have been established to be Gaudencio's, 44 and that
after identifying similarities between the questioned signatures and the standard signatures, he concluded that the
questioned signatures are genuine. On the other hand, respondents' expert witness Vaño used, as standards, the
questioned signatures themselves. 45 He identified characteristics of the signatures indicating that they may have
been forged. Vaño's statement of the purpose of the examination is revealing:
x x x [t]o x x x discover, classify and determine the authenticity of every document that for any reason
requires examination be [sic] scrutinized in every particular that may possibly throw any light upon its origin,
 its age or upon quality element or condition that may have a bearing upons [sic] its genuineness or
spuriousness.46(Emphasis supplied)
The Court also notes that Vaño also analyzed the signatures of the witnesses to the questioned documents, the
absence of standard specimens with which those signatures could be compared notwithstanding. 47 On the other
hand, Espina refrained from making conclusions on signatures which could not be compared with established
genuine specimens.48
Specifically with respect to Vaño's finding that Maximo's thumbprint on Exhibit "7" is spurious, the Court is not
persuaded, no comparison having been made of such thumbprint with a genuine thumbprint established to be
Maximo's.49
Vaño's testimony should be received with caution, the trial court having abruptly cut short his cross-examination
conducted by petitioners' counsel,50 thus:
COURT:
You are just delaying the proceedings in this case if you are going to ask him about the documents
one by one. Just leave it to the Court to determine whether or not he is a qualified expert witness.
The Court will just go over the Report of the witness. You do not have to ask the witness one by one
on the document,51
thereby depriving this Court of the opportunity to determine his credibility. Espina, on the other hand, withstood
thorough cross-examination, re-direct and re-cross examination. 52
The value of the opinion of a handwriting expert depends not upon his mere statements of whether a writing is
genuine or false, but upon the assistance he may afford in pointing out distinguishing marks, characteristics and
discrepancies in and between genuine and false specimens of writing which would ordinarily escape notice or
detection from an unpracticed observer. 53 While differences exist between Gaudencio's signatures appearing on
Exhibits "3"-"3-D" and his signatures appearing on the affidavits accompanying the pleadings in this case, 54 the gap of
more than 30 years from the time he affixed his signatures on the questioned document to the time he affixed his
signatures on the pleadings in the case could explain the difference. Thus Espina observed:
xxxx
4. Both questioned and standard signatures exhibited the same style and form of the movement impulses in
its execution;
5. Personal habits of the writer were established in both questioned and standard signatures such as
misalignment of the whole structure of the signature, heavy penpressure [sic] of strokes from initial to the
terminal, formation of the loops and ovals, poor line quality and spacing between letters are all repeated;
6. Both questioned and standard signatures [show] no radical change in the strokes and letter formation in
spite o[f] their wide difference in dates of execution considering the early writing maturity of the writer;
7. Variations in both writings questioned and standards were considered and properly evaluated.
xxxx
Fundamental similarities are observed in the following characteristics to wit:
xxxx
SIGNATURES
1. Ovals of "a" either rounded or angular at the base;
2. Ovals of "d" either narrow, rounded, or angular at the base;
3. Loop stems of "d" consistently tall and retraced in both specimens questioned and standards;
4. Base alignment of "e" and "i" are repeated with sameness;
5. Top of "c" either with a retrace, angular formation or an eyelet;
6. Terminal ending of "o" heavy with a short tapering formation;
7. Loop stem of "P" with wide space and angular;
8. Oval of "P" either rounded or multi-angular;
9. Base loop of "g" consistently short either a retrace, a blind loop or narrow space disproportionate to the
top oval;
10. Angular top of "s" are repeated with sameness;
11. Terminal ending of "s" short and heavy with blind loop or retrace at the base. 55
And Espina concluded
xxxx
[t]hat the four (4) questioned signatures over and above the typewritten name and word GAUDENCIO
PADIGOS Vendor on four copies of a DEED OF ABSOLUTE SALE (original and carbon) dated June 8, 1959
were written, signed, and prepared by the hand who wrote the standard specimens Exh. "G" and other
specimen materials collected from the records of this case that were submitted or comparison; a product of
one Mind and Brain hence GENUINE and AUTHENTIC.56 (Emphasis in the original; underscoring supplied)
Respondents brand Maximo's thumbmark on Exhibit "7" as spurious because, so they claim, Maximo did not affix his
signature thru a thumbmark, he knowing how to write. 57 Such conclusion is a non sequitur, however, for a person
who knows how to write is not precluded from signing by thumbmark.
In affirming the nullification by the trial court of Exhibits "3," "4," "5," "6," "7," and "8," the Court of Appeals held:
xxxx
First of all, facts about pedigree of the registered owners and their lawful heirs were convincingly testified to
by plaintiff-appellant Gaudencio Padigos and his testimony remained uncontroverted.
xxxx
Giving due weight to his testimony, we find that x x x the vendors in the aforesaid Deeds of Sale x x x were
not the legal heirs of the registered owners of the disputed land. x x x
xxxx
As for Exhibit "4," the vendor Gavino Padigos is not a legal heir of the registered owner Felix Padigos. The
latter's heirs are plaintiff-appellants Expedito Padigos, Henry Padigos and Enrique P. Malazarte.
Accordingly, Exhibit "4" is a patent nullity and did not vest title of Felix Padigos' share of Lot 3781 to Alipio
[Gadiano].
As for Exhibit "6," the vendors Gavino and Rodulfo Padigos are not the legal heirs of the registered
ownerGeronimo Padigos. Therefore, these fictitious heirs could not validly convey ownership in favor of
Alipio [Gadiano].
xxxx
As for Exhibit "8," the vendor Candido Padigos is not a legal heir of Simplicio Padigos. Therefore, the former
could not vest title of the land to Alipio Bacalso.
As for Exhibit "3," the vendors Gaudencio Padigos, Hermenegilda Padigos and Domingo Padigos are not the
legal heirs of registered owner Fortunata Padigos. Hermenegilda Padigos is not a known heir of any of the
other registered owners of the property.
On the other hand, plaintiffs-appellants Gaudencio and Domingo Padigos are only some of the collateral
grandchildren of Fortunata Padigos. They could not by themselves dispose of the share of Fortunata Padigos.
xxxx
As for Exhibit "5," the vendors in Exhibit "5" are not the legal heirs of Wenceslao Padigos. The children of
registered owner Wenceslao Padigos are: Wenceslao Padigos, Demetrio Padigos and Nelly Padigos.
Therefore, Exhibit "5" is null and void and could not convey the shares of the registered owner Wenceslao
Padigos in favor of Alipio Bacalso.
As for Exhibit "9," the Deed of Sale executed by Alipio [Gadiano] in favor of Alipio Bacalso is also void
because the shares of the registered owners Felix and Geronimo Padigos were not validly conveyed to
Alipio[Gadiano] because Exhibit "4" and "6" were void contracts. Thus, Exhibit "9" is also null and
void.58 (Italics in the original; underscoring supplied)
The evidence regarding the "facts of pedigree of the registered owners and their heirs" does not, however, satisfy
this Court. Not only is Gaudencio's self-serving testimony uncorroborated; it contradicts itself on material points. For
instance, on direct examination, he testified that Ignacio is his father and Fortunata is his grandmother. 59 On cross-
examination, however, he declared that his father Ignacio is the brother of Fortunata. 60 On direct examination, he
testified that his co-plaintiffs Victoria and Lilia are already dead. 61 On cross-examination, however, he denied
knowledge whether the two are already dead. 62 Also on direct examination, he identified Expedito, Henry, and
Enrique as the children of Felix.63 Expedito himself testified, however, that he is the son of a certain Mamerto
Padigos, the son of a certain Apolonio Padigos who is in turn the son of Felix. 64
At all events, respondents are guilty of laches – the negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it has either abandoned it or declined to assert it. 65While,
by express provision of law, no title to registered land in derogation of that of the registered owner shall be acquired
by prescription or adverse possession, it is an enshrined rule that even a registered owner may be barred from
recovering possession of property by virtue of laches. 66
Respondents insist, however, that they only learned of the deeds of sale in 1994, the year that Alipio, Sr. allegedly
commenced possession of the property. 67 The record shows, however, that although petitioners started renting out
the land in 1994, they have been tilling it since the 1950s, 68 and Rosendo's house was constructed in about
1985.69These acts of possession could not have escaped respondents' notice given the following unassailed
considerations, inter alia: Gaudencio testified that he lived on the lot from childhood until 1985, after which he
moved to a place three kilometers away, and after he moved, a certain Vicente Debelos lived on the lot with his
permission.70 Petitioners' witness Marina Alcoseba, their employee, 71 testified that Gaudencio and Domingo used to
cut kumpay planted by petitioners' tenant on the lot.72 The tax declarations in Alipio, Sr.'s name for the years 1967-
1980 covering a portion of the lot indicate Fortunata's share to be the north and east boundaries of Alipio,
Sr.'s;73 hence, respondents could not have been unaware of the acts of possession that petitioners exercised over the
lot.
Upon the other hand, petitioners have been vigilant in protecting their rights over the lot, which their predecessor-
in-interest Alipio, Sr. had declared in his name for tax purposes as early as 1960, and for which he had been paying
taxes until his death in 1994, by continuing to pay the taxes thereon. 74
Respondents having failed to establish their claim by preponderance of evidence, their action for quieting of title,
declaration of nullity of documents, recovery of possession, and damages must fail.
A final word. While petitioners' attribution of error to the appellate court's "implied sanction" of the trial court's
order for the demolition pending appeal of the houses of their lessees is well taken, the Court may not consider any
grant of relief to them, they not being parties to the case.
WHEREFORE, the petition is GRANTED. The September 6, 2005 decision of the Court of Appeals is REVERSEDand SET
ASIDE. Civil Case No. CEB-17326 of Branch 16 of the Regional Trial Court of Cebu City is DISMISSED.
SO ORDERED.
ANICIA VALDEZ-TALLORIN vs. HEIRS OF JUANITO TARONA, Represented by CARLOS TARONA, ROGELIO TARONA and
LOURDES TARONA G.R. No. 177429 November 24, 2009
This case is about a court’s annulment of a tax declaration in the names of three persons, two of whom had not been
impleaded in the case, for the reason that the document was illegally issued to them.
The Facts and the Case
On February 9, 1998 respondents Carlos, Rogelio, and Lourdes Tarona (the Taronas) filed an action before the
Regional Trial Court (RTC) of Balanga, Bataan, 1 against petitioner Anicia Valdez-Tallorin (Tallorin) for the cancellation
of her and two other women’s tax declaration over a parcel of land.
The Taronas alleged in their complaint that, unknown to them, in 1981, the Assessor’s Office of Morong in Bataan
cancelled Tax Declaration 463 in the name of their father, Juanito Tarona (Juanito), covering 6,186 square meters of
land in Morong, Bataan. The cancellation was said to be based on an unsigned though notarized affidavit that Juanito
allegedly executed in favor of petitioner Tallorin and two others, namely, Margarita Pastelero Vda. de Valdez and
Dolores Valdez, who were not impleaded in the action. In place of the cancelled one, the Assessor’s Office issued Tax
Declaration 6164 in the names of the latter three persons. The old man Tarona’s affidavit had been missing and no
copy could be found among the records of the Assessor’s Office. 2
The Taronas further alleged that, without their father’s affidavit on file, it followed that his tax declaration had been
illegally cancelled and a new one illegally issued in favor of Tallorin and the others with her. The unexplained
disappearance of the affidavit from official files, the Taronas concluded, covered-up the falsification or forgery that
caused the substitution.3 The Taronas asked the RTC to annul Tax Declaration 6164, reinstate Tax Declaration 463, and
issue a new one in the name of Juanito’s heirs.
On March 6, 1998 the Taronas filed a motion to declare petitioner Tallorin in default for failing to answer their
complaint within the allowed time.4 But, before the RTC could act on the motion, Tallorin filed a belated answer,
alleging among others that she held a copy of the supposedly missing affidavit of Juanito who was merely an
agricultural tenant of the land covered by Tax Declaration 463. He surrendered and waived in that affidavit his
occupation and tenancy rights to Tallorin and the others in consideration of ₱29,240.00. Tallorin also put up the
affirmative defenses of non-compliance with the requirement of conciliation proceedings and prescription.
On March 12, 1998 the RTC set Tallorin’s affirmative defenses for hearing 5 but the Taronas sought reconsideration,
pointing out that the trial court should have instead declared Tallorin in default based on their earlier motion. 6 On
June 2, 1998 the RTC denied the Taronas’ motion for reconsideration 7 for the reasons that it received Tallorin’s
answer before it could issue a default order and that the Taronas failed to show proof that Tallorin was notified of the
motion three days before the scheduled hearing. Although the presiding judge inhibited himself from the case on
motion of the Taronas, the new judge to whom the case was re-raffled stood by his predecessor’s previous orders.
By a special civil action for certiorari before the Court of Appeals (CA), 8 however, the Taronas succeeded in getting the
latter court to annul the RTC’s March 12 and June 2, 1998 orders. 9 The CA ruled that the RTC gravely abused its
discretion in admitting Tallorin’s late answer in the absence of a motion to admit it. Even if petitioner Tallorin had
already filed her late answer, said the CA, the RTC should have heard the Taronas’ motion to declare Tallorin in
default.
Upon remand of the case, the RTC heard the Taronas’ motion to declare Tallorin in default, 10 granted the same, and
directed the Taronas to present evidence ex parte. 11
On January 30, 2002 the RTC rendered judgment, a) annulling the tax declaration in the names of Tallorin, Margarita
Pastelero Vda. de Valdez, and Dolores Valdez; b) reinstating the tax declaration in the name of Juanito; and c)
ordering the issuance in its place of a new tax declaration in the names of Juanito’s heirs. The trial court also ruled
that Juanito’s affidavit authorizing the transfer of the tax declaration had no binding force since he did not sign
it.1avvphi1
Tallorin appealed the above decision to the CA, 12 pointing out 1) that the land covered by the tax declaration in
question was titled in her name and in those of her two co-owners; 2) that Juanito’s affidavit only dealt with the
surrender of his tenancy rights and did not serve as basis for canceling Tax Declaration 463 in his name; 3) that,
although Juanito did not sign the affidavit, he thumbmarked and acknowledged the same before a notary public; and
4) that the trial court erred in not dismissing the complaint for failure to implead Margarita Pastelero Vda. de Valdez
and Dolores Valdez who were indispensable parties in the action to annul Juanito’s affidavit and the tax declaration in
their favor.13
On May 22, 2006 the CA rendered judgment, affirming the trial court’s decision. 14 The CA rejected all of Tallorin’s
arguments. Since she did not assign as error the order declaring her in default and since she took no part at the trial,
the CA pointed out that her claims were in effect mere conjectures, not based on evidence of record. 15 Notably, the
CA did not address the issue Tallorin raised regarding the Taronas’ failure to implead Margarita Pastelero Vda. de
Valdez and Dolores Valdez as indispensable party-defendants, their interest in the cancelled tax declarations having
been affected by the RTC judgment.
Questions Presented
The petition presents the following questions for resolution by this Court:
1. Whether or not the CA erred in failing to dismiss the Taronas’ complaint for not impleading Margarita
Pastelero Vda. de Valdez and Dolores Valdez in whose names, like their co-owner Tallorin, the annulled tax
declaration had been issued;
2. Whether or not the CA erred in not ruling that the Taronas’ complaint was barred by prescription; and
3. Whether or not the CA erred in affirming the RTC’s finding that Juanito’s affidavit had no legal effect
because it was unsigned; when at the hearing of the motion to declare Tallorin in default, it was shown that
the affidavit bore Juanito’s thumbmark.
The Court’s Rulings
The first question, whether or not the CA erred in failing to dismiss the Taronas’ complaint for not impleading
Margarita Pastelero Vda. de Valdez and Dolores Valdez in whose names, like their co-owner Tallorin, the annulled tax
declaration had been issued, is a telling question.
The rules mandate the joinder of indispensable parties. Thus:
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 and defendants. 16
Indispensable parties are those with such an interest in the controversy that a final decree would necessarily affect
their rights, so that the courts cannot proceed without their presence. 17 Joining indispensable parties into an action is
mandatory, being a requirement of due process. Without their presence, the judgment of the court cannot attain real
finality.
Judgments do not bind strangers to the suit. The absence of an indispensable party renders all subsequent actions of
the court null and void. Indeed, it would have no authority to act, not only as to the absent party, but as to those
present as well. And where does the responsibility for impleading all indispensable parties lie? It lies in the plaintiff. 18
Here, the Taronas sought the annulment of the tax declaration in the names of defendant Tallorin and two others,
namely, Margarita Pastelero Vda. de Valdez and Dolores Valdez and, in its place, the reinstatement of the previous
declaration in their father Juanito’s name. Further, the Taronas sought to strike down as void the affidavit in which
Juanito renounced his tenancy right in favor of the same three persons. It is inevitable that any decision granting
what the Taronas wanted would necessarily affect the rights of such persons to the property covered by the tax
declaration.
The Court cannot discount the importance of tax declarations to the persons in whose names they are issued. Their
cancellation adversely affects the rights and interests of such persons over the properties that the documents cover.
The reason is simple: a tax declaration is a primary evidence, if not the source, of the right to claim title of ownership
over real property, a right enforceable against another person. The Court held in Uriarte v. People 19 that, although
not conclusive, a tax declaration is a telling evidence of the declarant’s possession which could ripen into ownership.
In Director of Lands v. Court of Appeals, 20 the Court said that no one in his right mind would pay taxes for a property
that he did not have in his possession. This honest sense of obligation proves that the holder claims title over the
property against the State and other persons, putting them on notice that he would eventually seek the issuance of a
certificate of title in his name. Further, the tax declaration expresses his intent to contribute needed revenues to the
Government, a circumstance that strengthens his bona fide claim to ownership. 21
Here, the RTC and the CA annulled Tax Declaration 6164 that belonged not only to defendant Tallorin but also to
Margarita Pastelero Vda. de Valdez and Dolores Valdez, which two persons had no opportunity to be heard as they
were never impleaded. The RTC and the CA had no authority to annul that tax declaration without seeing to it that all
three persons were impleaded in the case.
But the Taronas’ action cannot be dismissed outright. As the Court held in Plasabas v. Court of Appeals, 22 the non-
joinder of indispensable parties is not a ground for dismissal. Section 11, Rule 3 of the 1997 Rules of Civil Procedure
prohibits the dismissal of a suit on the ground of non-joinder or misjoinder of parties and allows the amendment of
the complaint at any stage of the proceedings, through motion or on order of the court on its own initiative. Only if
plaintiff refuses to implead an indispensable party, despite the order of the court, may it dismiss the action.
There is a need, therefore, to remand the case to the RTC with an order to implead Margarita Pastelero Vda. de
Valdez and Dolores Valdez as defendants so they may, if they so desire, be heard.
In view of the Court’s resolution of the first question, it would serve no purpose to consider the other questions that
the petition presents. The resolution of those questions seems to depend on the complete evidence in the case. This
will not yet happen until all the indispensable party-defendants are impleaded and heard on their evidence.
WHEREFORE, the Court GRANTS the petition and SETS ASIDE the decision of the Regional Trial Court of Balanga,
Bataan in Civil Case 6739 dated January 30, 2002 and the decision of the Court of Appeals in CA-G.R. CV 74762 dated
May 22, 2006. The Court REMANDS the case to the Regional Trial Court of Balanga, Bataan which is DIRECTED to have
Margarita Pastelero Vda. de Valdez and Dolores Valdez impleaded by the plaintiffs as party-defendants and,
afterwards, to hear the case in the manner prescribed by the rules.
SO ORDERED.
JESUS and NANETTE CRISOLOGO vs. JEWM AGRO-INDUSTRIAL CORPORATION [G.R. No. 196894. March 3, 2014]
This is a petition for review on certiorari under Rule 45 of the Rules of Court challenging the May 6, 2011 Decision 1of
the Court of Appeals (CA), in CA-G.R. SP No. 03896-MIN, which affirmed the September 27, 2010, 2 October 7,
20103 and November 9, 20104 Orders of the Regional Trial Court, Davao City, Branch 14 (RTC-Br. 14), in Civil Case No.
33,551-2010, an action for Cancellation of Lien. It is entitled "JEWM Agro-Industrial Corporation v. The Registry of
Deeds for the City of Davao. Sheriff Robert Medialdea. John & Jane Does. and all persons acting under their
directions.
This controversy stemmed from various cases of collection for sum of money filed against So Keng Kok, the owner of
various properties including two (2) parcels of land covered by TCT Nos. 292597 and 292600 (subject properties),
which were attached by various creditors including the petitioners in this case. As a result, the levies were annotated
on the back of the said titles.
Petitioners Jesus G. Crisologo and Nannette B. Crisologo (Spouses Crisologo) were the plaintiffs in two (2) collection
cases before RTC, Branch 15, Davao City (RTC-Br. 15), docketed as Civil Case Nos. 26,810-98 and 26,811-98, against
Robert Limso, So Keng Koc, et al. Respondent JEWM Agro-Industrial Corporation (JEWM) was the successor-in-
interest of one Sy Sen Ben, the plaintiff in another collection case before RTC, Branch 8, Davao City (RTC-Br. 8),
docketed as Civil Case No. 26,513-98, against the same defendants.
On October 19, 1998, RTC-Br. 8 rendered its decision based on a compromise agreement, dated October 15, 1998,
between the parties wherein the defendants in said case were directed to transfer the subject properties in favor of
Sy Sen Ben. The latter subsequently sold the subject properties to one Nilda Lam who, in turn, sold the same to
JEWM on June 1, 2000. Thereafter, TCT Nos. 325675 and 325676 were eventually issued in the name of JEWM, both
of which still bearing the same annotations as well as the notice of lis pendens in connection with the other pending
cases filed against So Keng Kok.
A year thereafter, Spouses Crisologo prevailed in the separate collection case filed before RTC-Br. 15 against Robert
Lim So and So Keng Koc (defendants). Thus, on July 1, 1999, the said defendants were ordered to solidarily pay the
Spouses Crisologo. When this decision attained finality, they moved for execution. On June 15, 2010, a writ was
eventually issued.
Acting on the same, the Branch Sheriff issued a notice of sale scheduling an auction on August 26, 2010. The notice
of sale included, among others, the subject properties covered by TCT Nos. 325675 and 325676, now, in the name of
JEWM.
In the same proceedings, JEWM immediately filed its Affidavit of Third Party Claim and the Urgent Motion Ad
Cautelam. It prayed for the exclusion of the subject properties from the notice of sale. In an order, dated August 26,
2010, however, the motion was denied. In turn, the Spouses Crisologo posted a bond in order to proceed with the
execution.
To protect its interest, JEWM filed a separate action for cancellation of lien with prayer for the issuance of a
preliminary injunction before RTC-Br. 14, docketed as Civil Case No. 33,551-2010. It prayed for the issuance of a writ
of preliminary injunction to prevent the public sale of the subject properties covered in the writ of execution issued
pursuant to the ruling of RTC-Br. 15; the cancellation of all the annotations on the back of the pertinent TCTs; and the
issuance of a permanent injunction order after trial on the merits. "The Register of Deeds of Davao City, Sheriff
Robert Medialdea, John and Jane Does and all persons acting under their direction" were impleaded as defendants.
At the scheduled hearing before RTC-Br. 14 on September 22, 2010, Spouses Crisologo’s counsel appeared and filed
in open court their Very Urgent Manifestation questioning the authority of the said court to restrain the execution
proceedings in RTC-Br. 15. JEWM opposed it on the ground that Spouses Crisologo were not parties in the case.
On September 24, 2010, Spouses Crisologo filed an Omnibus Motion praying for the denial of the application for writ
or preliminary injuction filed by JEWM and asking for their recognition as parties. No motion to intervene was,
however, filed as the Spouses Crisologo believed that it was unnecessary since they were already the John and Jane
Does named in the complaint.
In the Order, dated September 27, 2010, RTC-Br. 14 denied Spouses Crisologo’s Omnibus Motion and granted JEWM’s
application for a writ of preliminary injunction.
On October 1, 2010, Spouses Crisologo filed a Very Urgent Omnibus Motion before RTC-Br. 14 praying for
reconsideration and the setting aside of its September 27, 2010 Order. This was denied in the RTC Br.-14’s October 7,
2010 Order for lack of legal standing in court considering that their counsel failed to make the written formal notice
of appearance. The copy of this order was received by Spouses Crisologo on October 22, 2010. It must be noted,
however, that on October 27, 2010, they received another order, likewise dated October 7, 2010, giving JEWM time
to comment on their Very Urgent Omnibus Motion filed on October 1, 2010. In its Order, dated November 9, 2010,
however, RTC-Br. 14 again denied the Very Urgent Motion previously filed by Spouses Crisologo.
On November 12, 2010, JEWM moved to declare the "defendants" in default which was granted in an order given in
open court on November 19, 2010.
Spouses Crisologo then filed their Very Urgent Manifestation, dated November 30, 2010, arguing that they could not
be deemed as defaulting parties because they were not referred to in the pertinent motion and order of default.
On November 19, 2010, Spouses Crisologo filed with the CA a petition for certiorari 5 under Rule 65 of the Rules of
Court assailing the RTC-Br. 14 orders, dated September 27, 2010, October 7, 2010 and November 9, 2010, all of which
denied their motion to be recognized as parties. They also prayed for the issuance of a Temporary Restraining Order
(TRO) and/or a Writ of Preliminary Injunction.
In its Resolution, dated January 6, 2011, the CA denied the application for a TRO, but directed Spouses Crisologo to
amend their petition. On January 19, 2011, the Spouses Crisologo filed their Amended Petition 6 with prayers for the
issuance of a TRO and/or writ of preliminary injunction, the annulment of the aforementioned orders of RTC Br. 14,
and the issuance of an order dissolving the writ of preliminary injunction issued in favor of JEWM.
Pending disposition of the Amended Petition by the CA, JEWM filed a motion on December 6, 2010 before RTC-Br. 14
asking for the resolution of the case on the merits.
On January 10, 2011, RTC-Br. 14 ruled in favor of JEWM, with the dispositive portion of its Decision 7 stating as
follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the plaintiff as follows:
1. the preliminary writ of injunction issued on October 5, 2010 is hereby made permanent;
2. directing herein defendant Registry of Deeds of Davao City where the subject lands are located, to cancel
all existing liens and encumbrances on TCT No. T-325675 and T-325676 registered in the name of the plaintiff,
and pay the
3. cost of suit.
SO ORDERED.8
Spouses Crisologo then filed their Omnibus Motion Ex Abudanti ad Cautelam, asking RTC- Br. 14 to reconsider the
above decision. Because no motion for intervention was filed prior to the rendition of the judgment, a certificate,
dated March 17, 2011, was issued declaring the January 10, 2011 decision final and executory.
On May 6, 2011, the CA eventually denied the Amended Petition filed by Spouses Crisologo for lack of merit. It ruled
that the writ of preliminary injunction subject of the petition was already fait accompli and, as such, the issue of
grave abuse of discretion attributed to RTC-Br. 14 in granting the relief had become moot and academic. It further
held that the failure of Spouses Crisologo to file their motion to intervene under Rule 19 rendered Rule 65
inapplicable as a vehicle to ventilate their supposed right in the case. 9
Hence, this petition.
ISSUES
I. The Court of Appeals erred in holding that the action for Cancellation of Annotations may proceed even
without notice to and impleading the party/ies who caused the annotations, in clear contravention of the
rule on joinder of parties and basic due process.
II. The Court of Appeals erred in applying a very constrictive interpretation of the rules in holding that a
motion to intervene is the only way an otherwise real party in interest could participate.
III. The Court of Appeals erred in denying our application for the issuance of a temporary restraining order
and/or a writ of preliminary injunction.
 IV. The Court of Appeals erred in holding that the issues raised by petitioners before it [had] been mooted by
the January 10, 2011 decision of RTC Branch 14. 10
Spouses Crisologo submit as error the CA affirmation of the RTC- Br. 14 ruling that the action for cancellation may
proceed without them being impleaded. They allege deprivation of their right to due process when they were not
impleaded in the case before RTC-Br. 14 despite the claim that they stand, as indispensable parties, to be benefited
or injured by the judgment in the action for the cancellation of annotations covering the subject properties. They cite
Gonzales v. Judge Bersamin,11 among others, as authority. In that case, the Court ruled that pursuant to Section 108
of Presidential Decree (P.D.) No. 1529, notice must be given to all parties in interest before the court may hear and
determine the petition for the cancellation of annotations on the certificates of title.
The Spouses Crisologo also question the statement of the CA that their failure to file the motion to intervene under
Rule 19 before RTC-Br. 14 barred their participation in the cancellation proceedings. They put emphasis on the court’s
duty to, at the very least, suspend the proceedings before it and have such indispensable parties impleaded.
As to the ruling on the denial of their application for the issuance of a TRO or writ of preliminary injunction, Spouses
Crisologo claim that their adverse interest, evinced by the annotations at the back of the certificates of title,
warranted the issuance of a TRO or writ of preliminary injunction against JEWM’s attempt to cancel the said
annotations in violation of their fundamental right to due process.
Lastly, Spouses Crisologo cast doubt on the CA ruling that the issues presented in their petition were mooted by the
RTC-Br. 14 Decision, dated January 10, 2011. Having been rendered without impleading indispensable parties, the
said decision was void and could not have mooted their petition.
In their Comment,12 JEWM asserts that Spouses Crisologo’s failure to file a motion to intervene, pleadings-in-
intervention, appeal or annulment of judgment, which were plain, speedy and adequate remedies then available to
them, rendered recourse to Rule 65 as improper; that Spouses Crisologo lacked the legal standing to file a Rule 65
petition since they were not impleaded in the proceedings before RTC-Br. 14; and that Spouses Crisologo were not
indispensable parties since their rights over the properties had been rendered ineffective by the final and executory
October 19, 1998 Decision of RTC-Br. 8 which disposed unconditionally and absolutely the subject properties in favor
of its predecessor-in-interest.
JEWM further argues that, on the assumption that Section 108 of P.D. No. 1529 applies, no notice to Spouses
Crisologo was required because they were not real parties-in-interest in the case before RTC-Br. 14, or even if they
were, their non-participation in the proceedings was because of their failure to properly intervene pursuant to Rule
19; and, lastly, that the case before RTC-Br. 14 became final and executory because Spouses Crisologos did not
perfect an appeal therefrom, thus, rendering the issues in the CA petition moot and academic.
In their Reply,13 Spouses Crisologo restate the applicability of Section 108 of P.D. No. 1529 to the effect that any
cancellation of annotation of certificates of title must be carried out by giving notice to all parties-in-interest. This
they forward despite their recognition of the mootness of their assertion over the subject properties, to wit:
Again, we respect JAIC’s position that "the claims of subsequent attaching creditors (including petitioners’) have been
rendered moot and academic, and hence the entries in favor of said creditors have no more legal basis and therefore
must be cancelled." But we likewise at least ask a modicum of respect by at least being notified and heard. 14
The Ruling of the Court
The crux of this controversy is whether the CA correctly ruled that RTC-Br. 14 acted without grave abuse of discretion
in failing to recognize Spouses Crisologo as indispensable parties in the case for cancellation of lien.
In this respect, the Court agrees with Spouses Crisologo.
In an action for the cancellation of memorandum annotated at the back of a certificate of title, the persons
considered as indispensable include those whose liens appear as annotations pursuant to Section 108 of P.D. No.
1529,15 to wit:
Section 108. Amendment and alteration of certificates. -No erasure, alteration or amendment shall be made upon
the registration book after the entry of a certificate of title or of a memorandum thereon and the attestation of the
same by the Register of Deeds, except by order of the proper Court of First Instance. A registered owner or other
person having an interest in registered property, or, in proper cases, the Register of Deeds with the approval of the
Commissioner of Land Registration, may apply by petition to the court upon the ground that the registered interests
of any description, whether vested, contingent, expectant inchoate appearing on the certificate, have terminated and
ceased; or that new interest not appearing upon the certificates have arisen or been created; or that an omission or
error was made in entering a certificate or memorandum thereon, or on any duplicate certificate; x x x or upon any
other reasonable ground; and the court may hear and determine the petition after notice to all parties in interest,
and may order the entry or cancellation of a new certificate, the entry or cancellation of a memorandum upon a
certificate, or grant any other relief upon such terms and conditions, requiring security or bond if necessary, as it may
consider proper.
In Southwestern University v. Laurente, 16 the Court held that the cancellation of the annotation of an encumbrance
cannot be ordered without giving notice to the parties annotated in the certificate of title itself. It would, thus, be an
error for a judge to contend that no notice is required to be given to all the persons whose liens were annotated at
the back of a certificate of title.
Here, undisputed is the fact that Spouses Crisologo’s liens were indeed annotated at the back of TCT Nos. 325675
and 325676. Thus, as persons with their liens annotated, they stand to be benefited or injured by any order relative
to the cancellation of annotations in the pertinent TCTs. In other words, they are as indispensable as JEWM itself in
the final disposition of the case for cancellation, being one of the many lien holders.
As indispensable parties, Spouses Crisologo should have been joined as defendants in the case pursuant to Section 7,
Rule 3 of the Rules of Court, to wit:
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. 17
The reason behind this compulsory joinder of indispensable parties is the complete determination of all possible
issues, not only between the parties themselves but also as regards other persons who may be affected by the
judgment.18
In this case, RTC-Br. 14, despite repeated pleas by Spouses Crisologo to be recognized as indispensable parties, failed
to implement the mandatory import of the aforecited rule.
In fact, in Sps. Crisologo v. Judge George E. Omelio, 19 a related administrative case, the Court found the trial judge
guilty of gross ignorance of the law when it disregarded the claims of Spouses Crisologo to participate. In part, the
Court stated:
This is not the first time Judge Omelio has rendered a decision affecting third parties’ interests, without even
notifying the indispensable parties. In the first disputed case, JEWM Agro-Industrial Corporation v. Register of Deeds,
Sheriff Medialdea, John & Jane Does and all persons acting under their directions, Judge Omelio failed to cause the
service of proper summons upon the John and Jane Does impleaded in the complaint. Even when Sps. Crisologo
voluntarily appeared in court to be recognized as the John and Jane Does, Judge Omelio refused to acknowledge
their appearance and ordered the striking out of Sps. Crisologos' pleadings. For this reason, the Investigating Justice
recommended admonishing Judge Omelio for failing to recognize the Sps.Crisologo as indispensable parties in that
case.
xxx xxx xxx
Clearly, the cancellation of the annotation of the sale without notifying the buyers, Sps. Crisologo, is a violation of the
latter’s right to due process. Since this is the second time that Judge Omelio has issued an order which fails to notify
or summon the indispensable parties, we find Judge Omelio guilty of gross ignorance of the law, with a warning that
repetition of the same or similar act will merit a stiffer penalty in the future.
xxx
WHEREFORE, … We find Judge George E. Omelio GUILTY of four counts of the serious charge of gross ignorance of the
law for the following acts: (a) refusing to recognize Spouses Jesus G. Crisologo and Nannette B. Crisologo as
indispensable parties; … in violation of the latter's right to due process. Accordingly, we impose upon Judge George E.
Omelio the penalty of fine of Forty Thousand Pesos (₱40,000.00), with a warning that repetition of the same or
similar acts will be dealt with more severely.
SO ORDERED.20
The trial court should have exercised prudence in denying Spouses Crisologo’s pleas to be recognized as
indispensable parties. In the words of the Court, "Judge Omelio should be penalized for failing to recognize Sps.
Crisologo as indispensable parties and for requiring them to file a motion to intervene, considering that a simple
perusal of the certificates of title would show Sps. Crisologo’s adverse rights because their liens are annotated at the
back of the titles."21
This manifest disregard of the basic rules and procedures constitutes a grave abuse of discretion.
In State Prosecutors II Comilang and Lagman v. Judge Medel Belen, 22 the Court held as inexcusable abuse of authority
the trial judge’s "obstinate disregard of basic and established rule of law or procedure." Such level of ignorance is not
a mere error of judgment. It amounts to "evasion of a positive duty or to a virtual refusal to perform a duty enjoined
by law, or to act at all in contemplation of law," 23 or in essence, grave abuse of discretion amounting to lack of
jurisdiction.
Needless to say, judges are expected to exhibit more than just a cursory acquaintance with statutes and procedural
laws. They must know the laws and apply them properly in good faith as judicial competence requires no less. 24
Despite the clear existence of grave abuse of discretion on the part of RTC-Br. 14, JEWM asserts technical grounds on
why the CA did not err in dismissing the petition via Rule 65. It states that:
a) The Crisologos could have used other available remedies such as intervention under Rule 19, an appeal of
the judgment, or even an annulment of judgment, which are, by all means, plain, speedy and adequate
remedies in the ordinary course of law;
b) The Crisologos lack legal standing to file the Rule 65 petition since they were not impleaded in the Branch
14 case.
The rule is that a petition for certiorari under Rule 65 is proper only if there is no appeal, or any plain speedy, and
adequate remedy in the ordinary course of law.
In this case, no adequate recourse, at that time, was available to Spouses Crisologo, except resorting to Rule 65.
Although Intervention under Rule 19 could have been availed of, failing to use this remedy should not prejudice
Spouses Crisologo. It is the duty of RTC-Br. 14, following the rule on joinder of indispensable parties, to simply
recognize them, with or without any motion to intervene. Through a cursory reading of the titles, the Court would
have noticed the adverse rights of Spouses Crisologo over the cancellation of any annotations in the subject TCTs.
Neither will appeal prove adequate as a remedy since only the original parties to an action can appeal. 25 Here,
Spouses Crisologo were never impleaded. Hence, they could not have utilized appeal as they never possessed the
required legal standing in the first place.
And even if the Court assumes the existence of the legal standing to appeal, it must be remembered that the
questioned orders were interlocutory in character and, as such, Spouses Crisologo would have to wait, for the review
by appeal, until the rendition of the judgment on the merits, which at that time may not be coming as speedy as
practicable. While waiting, Spouses Crisologo would have to endure the denial of their right, as indispensable parties,
to participate in a proceeding in which their indispensability was obvious. Indeed, appeal cannot constitute an
adequate, speedy and plain remedy.
The same is also true if recourse to Annulment of Judgment under Rule 47 is made since this remedy presupposes a
final judgment already rendered by a trial court.
At any rate, the remedy against an interlocutory order, not subject of an appeal, is an appropriate special civil action
under Rule 65, provided that the interlocutory order is rendered without or in excess of jurisdiction or with grave
abuse of discretion. Only then is certiorari under Rule 65 allowed to be resorted to. 26
This takes particular relevance in this case where, as previously discussed, RTC-Br. 14 acted with grave abuse of
discretion in not recognizing Spouses Crisologo as indispensable parties to the pertinent action.
Based on the above, recourse to the CA via Rule 65 would have already been proper, except for one last issue, that is,
Spouses Crisologo’s legal standing to file the same. JEWM cites DBP v. COA 27 where the Court held:
The petition for certiorari under Rule 65, however, is not available to any person who feels injured by the decision of
a tribunal, board or officer exercising judicial or quasi judicial functions. The ‘person aggrieved’ under Section 1 of
Rule 65 who can avail of the special civil action of certiorari pertains only to one who was a party in the proceedings
before the court a quo, or in this case before the COA. To hold otherwise would open the courts to numerous and
endless litigations.
Under normal circumstances, JEWM would be correct in their averment that the lack of legal standing on the part of
Spouses Crisologo in the case before RTC-Br. 14 prevents the latter’s recourse via Rule 65.
This case, however, is an exception. In many instances, the Court has ruled that technical rules of procedures should
be used to promote, not frustrate the cause of justice. Rules of procedure are tools designed not to thwart but to
facilitate the attainment of justice; thus, their strict and rigid application may, for good and deserving reasons, have
to give way to, and be subordinated by, the need to aptly dispense substantial justice in the normal cause. 28
Be it noted that the effect of their non-participation as indispensable parties is to preclude the judgment, orders and
the proceedings from attaining finality. Time and again, the Court has ruled that 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 to those present. Consequently, the proceedings before RTC-Br. 14 were null and void including the
assailed orders, which may be "ignored wherever and whenever it exhibits its head." 29
To turn a blind eye to the said nullity and, in turn, rule as improper the recourse to Rule 65 by the lack of legal
standing is to prolong the denial of due process to the persons whose interests are indispensible to the final
disposition of the case. It will only result in a protracted litigation as Spouses Crisologo will be forced to rely on a
petition for the annulment of judgment before the CA (as the last remaining remedy), which may again reach this
Court.1âwphi1 To prevent multiplicity of suits and to expedite the swift administration of justice, the CA should have
applied liberality by striking down the assailed orders despite the lack of legal standing on the part of Spouses
Crisologo to file the Rule 65 petition before it. Besides, this lacking requirement, of which Spouses Crisologo were not
even at fault, is precisely the reason why this controversy arose.
All told, the CA erred in dismissing the amended petition filed before it and in not finding grave abuse of discretion
on the part of RTC-Br. 14.
WHEREFORE, the petition is GRANTED. The May 6, 2011 Decision of the Court of Appeals is NULLIFIED and SET ASIDE.
The September 27, 2010, October 7, 2010 and November 9, 2010 Orders of the Regional Trial Court, Branch 14,
Davao City, are likewise NULLIFIED and SET ASIDE. Civil Case No. 33,551-2010 is hereby REMANDED to the trial court
for further proceedings. The respondent is ordered to implead all parties whose annotations appear at the back of
Transfer Certificate of Title Nos. 325675 and 325676.
SO ORDERED.
POLICE SENIOR SUPERINTENDENT DIMAPINTO MACAWADIB vs. PNP DIRECTORATE FOR PERSONNEL AND RECORDS
MANAGEMENT [G.R. No. 186610. July 29, 2013]
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to nullify and set
aside the Decision1 and Resolution2 of the Court of Appeals (CA), dated December 17, 2008 and February 25, 2009,
respectively, in CA-G.R. SP No. 02120-MIN. The assailed CA judgment nullified the December 4, 2001 Decision 3 of the
Regional Trial Court (RTC) of Marawi City, Branch 8, in Spl. Proc. No. 782-01, while the questioned CA Resolution
denied petitioner's Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
Petitioner was a police officer with the rank of Police Senior Superintendent. On July 30, 2001, pursuant to the
provisions of Section 39 of Republic Act 6975, otherwise known as the "Department of the Interior and Local
Government Act of 1990," the Chief of Directorial Staff of the Philippine National Police (PNP) issued General Order
No. 1168, enumerating the names of commissioned officers who were subject to compulsory retirement on various
dates in the month of January 2002 by virtue of their attainment of the compulsory retirement age of 56. Among the
names included in the said Order was that of petitioner, who was supposed to retire on January 11, 2002, as the files
of the PNP Records Management Division indicate that he was born on January 11, 1946.
On September 3, 2001, petitioner filed an application for late registration of his birth with the Municipal Civil
Registrar's Office of Mulondo, Lanao del Sur. In the said application, petitioner swore under oath that he was born on
January 11, 1956. The application was, subsequently, approved.
On October 15, 2001, petitioner filed with the RTC of Marawi City, Branch 8, a Petition for Correction of Entry in the
Public Service Records Regarding the Birth Date. Pertinent portions of his allegations are as follows:
xxxx
1. That herein petitioner is 45 years old, married, Filipino citizen, PNP (Police Superintendent) by occupation
and resident of Camp Bagong Amai, Pakpak, Marawi City. x x x;
2. That on January 11, 1956, herein petitioner was born in Mulondo, Lanao del Sur, x x x, copy of his live birth
certificate is attached and marked as Annex "A", for ready reference;
3. That when petitioner herein joined with (sic) the government service, particularly the local police force
and later on the Integrated National Police, he honestly entered his birth date as January 11, 1946, while in
his (sic) Government Service Insurance System (GSIS, in short) and National Police Commission, he
erroneously entered his birth date as January 11, 1946, which entry are honestly based on estimation, as
Muslim (sic) in the south do not register their marriages and births before;
4. That herein petitioner has correctly entered his true and correct birth date, January 11, 1956, in his Service
Record at the National Headquarters, Philippine National Police, Directorate for Personnel and Records
Management, Camp Crame, Quezon City, copy of which is attached and marked as Annex "B", x x x;
5. That herein petitioner is submitting Joint Affidavit of two (2) disinterested person (sic) x x x;
6. That this petition is not intended to defraud anybody but to establish the true and correct birth date of
herein petitioner.
x x x x4
The petition was docketed as Spl. Proc. No. 782-01.
On December 4, 2001, the RTC rendered its Decision, disposing as follows:
WHEREFORE, judgment is hereby rendered in favor of petitioner DIMAPINTO BABAI MACAWADIB, to wit:
1. Ordering the Chief, Records Management, PNP NHQ, Camp Crame, Quezon City, to make a correction upon
the birth date of herein petitioner to January 11, 1956;
2. Ordering the Director, Personnel and Records Management Service, NAPOLCOM, Makati City, to make
correction upon the birth date of herein petitioner from January 11, 1946 to January 11, 1956; and
3. Ordering the Chief, Records of the Civil Service Commission, Manila and all other offices concern (sic), to
make the necessary correction in the Public Records of herein petitioner to January 11, 1956.
SO ORDERED.5
Subsequently, the RTC issued an Entry of Final Judgment 6 indicating therein that its December 4, 2001 Decision in Spl.
Proc. No. 782-01 has become final and executory on March 13, 2002.
On January 8, 2008, herein respondent filed a Petition for Annulment of Judgment with Prayer for the Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction with the CA, seeking to nullify the above-
mentioned Decision of the RTC on the ground that the trial court failed to acquire jurisdiction over the PNP, "an
unimpleaded indispensable party." 7
On December 17, 2008, the CA promulgated its assailed Decision with the following dispositive portion:
WHEREFORE, finding the instant petition impressed with merit, the same is hereby GRANTED. The assailed Decision
dated December 4, 2001 of the respondent court in Spl. Proc. No. 782-01 is NULLIFIED and SET ASIDE. Also, so as to
prevent further damage upon the PNP, let a permanent injunction issue in the meantime, barring the private
respondent Dimapinto Babai Macawadib from continuing and prolonging his tenure with the PNP beyond the
mandatory retirement age of fifty-six (56) years.
SO ORDERED.8
Petitioner filed a Motion for Reconsideration, 9 but the CA denied it in its Resolution 10 dated February 25, 2009.
Hence, the instant petition with the following Assignment of Errors:
1. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PNP-DPRM IS AN INDISPENSABLE PARTY IN
SPECIAL PROCEEDING NO. 782-01 AND THAT THE RTC HAVE (sic) NOT ACQUIRED JURISDICTION OVER THE
PERSON OF THE PNPDPRM.
2. THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING CA-G.R. SP NO. 02120-MIN DESPITE THE
FACT THAT THE ASSAILED RTC DECISION DATED DECEMBER 4, 2001 IN SPECIAL PROCEEDING NO. 782-01 HAS
LONG BECOME FINAL AND EXECUTORY AND WAS IN FACT FULLY AND COMPLETELY EXECUTED AFTER THE
PNP-DPRM CORRECTED THE DATE OF BIRTH OF THE PETITIONER FROM JANUARY 11, 1946 TO JANUARY 11,
1956.
3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PNP-DPRM IS NOT ESTOPPED FROM
ASSAILING THE VALIDITY OF THE RTC DECISION IN SPECIAL PROCEEDING NO. 782-01.
4. THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING CA-G.R. SP NO. 02120-MIN FOR BEING
INSUFFICIENT IN FORM AND SUBSTANCE.11
In his first assigned error, petitioner contends that respondent is not an indispensable party.1âwphi1 The Court is not
persuaded. On the contrary, the Court agrees with the ruling of the CA that it is the integrity and correctness of the
public records in the custody of the PNP, National Police Commission (NAPOLCOM) and Civil Service Commission
(CSC) which are involved and which would be affected by any decision rendered in the petition for correction filed by
herein petitioner. The aforementioned government agencies are, thus, required to be made parties to the
proceeding. They are indispensable parties, without whom no final determination of the case can be had. An
indispensable party is defined as 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. 12 In the fairly recent case of
Go v. Distinction Properties Development and Construction, Inc., 13 the Court had the occasion to reiterate the
principle that:
Under Section 7, Rule 3 of the Rules of Court, "parties in interest without whom no final determination can be had of
an action shall be joined as plaintiffs or defendants." If there is a failure to implead an indispensable party, any
judgment rendered would have no effectiveness.
It is "precisely ‘when an indispensable party is not before the court (that) an action should be dismissed.’ 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 to those present." The purpose of the rules on joinder of
indispensable parties is a complete determination of all issues not only between the parties themselves, but also as
regards other persons who may be affected by the judgment. A decision valid on its face cannot attain real finality
where there is want of indispensable parties. 14
Citing previous authorities, the Court also held in the Go case that:
The general rule with reference to the making of parties in a civil action requires the joinder of all indispensable
parties under any and all conditions, their presence being a sine qua non of the exercise of judicial power. (Borlasa v.
Polistico, 47 Phil. 345, 348) For this reason, our Supreme Court has held that when it appears of record that there are
other persons interested in the subject matter of the litigation, who are not made parties to the action, it is the duty
of the court to suspend the trial until such parties are made either plaintiffs or defendants. (Pobre, et al. v. Blanco, 17
Phil. 156). x x x Where the petition failed to join as party defendant the person interested in sustaining the
proceeding in the court, the same should be dismissed. x x x When an indispensable party is not before the court, the
action should be dismissed.15
The burden of procuring the presence of all indispensable parties is on the plaintiff. 16
In the instant case, there is a necessity to implead the PNP, NAPOLCOM and CSC because they stand to be adversely
affected by petitioner's petition which involves substantial and controversial alterations in petitioner's service
records. Moreover, as correctly pointed out by the
Office of the Solicitor General (OSG), if petitioner's service is extended by ten years, the government, through the
PNP, shall be burdened by the additional salary and benefits that would have to be given to petitioner during such
extension. Thus, aside from the OSG, all other agencies which may be affected by the change should be notified or
represented as the truth is best ascertained under an adversary system of justice.
As the above-mentioned agencies were not impleaded in this case much less given notice of the proceedings, the
decision of the trial court granting petitioner's prayer for the correction of entries in his service records, is void. As
mentioned above, 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. 17
On the question of whether or not respondent is estopped from assailing the decision of the RTC for failure of the
OSG, as government representative, to participate in the proceedings before the trial court or to file an opposition to
petitioner's petition for correction of entries in his service records, this Court rules that such an apparent oversight
has no bearing on the validity of the appeal which the petitioner filed before the CA. Neither can the State, as
represented by the government, be considered in estoppel due to the petitioner's seeming acquiescence to the
judgment of the RTC when it initially made corrections to some of petitioner's records with the PNP. This Court has
reiterated time and again that the absence of opposition from government agencies is of no controlling significance,
because the State cannot be estopped by the omission, mistake or error of its officials or agents. 18 Nor is the Republic
barred from assailing the decision granting the petition for correction of entries if, on the basis of the law and the
evidence on record, such petition has no merit. 19
As to the second and last assigned errors, suffice it to say that considering that the assailed decision of the RTC is null
and void, the same could not have attained finality. Settled is the rule that a void judgment cannot attain finality and
its execution has no basis in law.20
At this juncture, it may not be amiss to point out that, like the CA, this Court cannot help but entertain serious doubts
on the veracity of petitioner's claim that he was indeed born in 1956. The late registration of petitioner's certificate
of live birth on September 3, 2001 was made forty-five (45) years after his supposed birth and a mere 34 days after
the PNP's issuance of its Order for his compulsory retirement. He had all the time to make such registration but why
did he do it only when he was about to retire?
The Court, likewise, agrees with the observation of the OSG that, if petitioner was indeed born in 1956, he would
have been merely 14 years old in 1970 when he was appointed as Chief of Police of Mulondo, Lanao del Sur. This
would not have been legally tenable, considering that Section 9 of RA 4864, otherwise known as the Police Act of
1966, provides, among others, that a person shall not be appointed to a local police agency if he is less than twenty-
three years of age. Moreover, realistically speaking, it would be difficult to believe that a 14-year old minor would
serve as a police officer, much less a chief of police.
The Court also gives credence to the pronouncement made by the CA which took judicial notice that in the several
hearings of the petition before the appellate court where the petitioner was present, the CA observed that "in the
several hearings of this petition before Us where the private respondent was present, he does not really appear to be
52 years old but his old age of 62." 21
It can be argued that petitioner's belatedly registered certificate of live birth, as a public document, enjoys the
presumption of validity. However, petitioner merely relied on such presumption without presenting any other
convincing or credible evidence to prove that he was really born in 1956. On the contrary, the specific facts attendant
in the case at bar, as well as the totality of the evidence presented during the hearing of the case in the court a quo,
sufficiently negate the presumption of regularity accorded to petitioner's belatedly registered birth certificate.
In this regard, it is also apropos to mention that, in cases of correction or change of information based on belatedly
registered birth certificates, the CSC no longer requires a court order to warrant such correction or change of
information in its records. However, in an apparent move to safeguard its records, the CSC imposes the submission of
additional evidence that would prove the veracity of the entries in a belatedly registered birth certificate. Thus, the
CSC, in its Memorandum Circular No. 31, dated November 20, 2001, demands that, aside from the said birth
certificate, the person requesting the correction or change of information must submit other authenticated
supporting documents, such as baptismal certificate, affidavits of two disinterested witnesses, and "other
employment, personal or school records which would support the entry reflected in the delayed registered birth
certificate and which entry is requested to be reflected in the records of the Commission as the true and correct
entry." In the instant case, petitioner was only able to submit affidavits of two witnesses, who were not really proven
to be disinterested and whose testimonies were not even tested in the crucible of cross-examination. On the
contrary, the other pieces of documentary evidence on record, such as his marriage certificate, and his school and
service records, contradict his claims and show that he was, in fact, born in 1946.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated December 17, 2008 and the
Resolution dated February 25, 2009 of the Court of Appeals, in CA-G.R. SP No. 02120-MIN, are hereby AFFIRMED.
SO ORDERED.
REPUBLIC OF THE PHILIPPINES vs. DR. NORMA LUGSANAY UY [G.R. No. 198010. August 12, 2013]
Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court are the Court of Appeals
(CA)1Decision2 dated February 18, 2011 and Resolution3 dated July 27, 2011 in CA-G.R. CV No. 00238-MIN. The
assailed decision dismissed the appeal filed by petitioner Republic of the Philippines and, consequently, affirmed in
toto the June 28, 2004 Order4 of the Regional Trial Court (RTC), Branch 27, Gingoog City in Special Proceedings No.
230-2004 granting the Petition for Correction of Entry of Certificate of Live Birth filed by respondent Dr. Norma S.
Lugsanay Uy; while the assailed resolution denied petitioner's motion for reconsideration.
The facts of the case are as follows:
On March 8, 2004, respondent filed a Petition for Correction of Entry in her Certificate of Live Birth. 5 Impleaded as
respondent is the Local Civil Registrar of Gingoog City. She alleged that she was born on February 8, 1952 and is the
illegitimate daughter of Sy Ton and Sotera Lugsanay 6 Her Certificate of Live Birth7 shows that her full name is "Anita
Sy" when in fact she is allegedly known to her family and friends as "Norma S. Lugsanay." She further claimed that
her school records, Professional Regulation Commission (PRC) Board of Medicine Certificate, 8 and passport9 bear the
name "Norma S. Lugsanay." She also alleged that she is an illegitimate child considering that her parents were never
married, so she had to follow the surname of her mother. 10 She also contended that she is a Filipino citizen and not
Chinese, and all her siblings bear the surname Lugsanay and are all Filipinos. 11
Respondent allegedly filed earlier a petition for correction of entries with the Office of the Local Civil Registrar of
Gingoog City to effect the corrections on her name and citizenship which was supposedly granted. 12 However, the
National Statistics Office (NSO) records did not bear such changes. Hence, the petition before the RTC.
On May 13, 2004, the RTC issued an Order13 finding the petition to be sufficient in form and substance and setting the
case for hearing, with the directive that the said Order be published in a newspaper of general circulation in the City
of Gingoog and the Province of Misamis Oriental at least once a week for three (3) consecutive weeks at the expense
of respondent, and that the order and petition be furnished the Office of the Solicitor General (OSG) and the City
Prosecutor’s Office for their information and guidance. 14 Pursuant to the RTC Order, respondent complied with the
publication requirement.
On June 28, 2004, the RTC issued an Order in favor of respondent, the dispositive portion of which reads:
WHEREFORE, premises considered, the instant petition is hereby GRANTED. THE CITY CIVIL REGISTRAR OF GINGOOG
CITY, or any person acting in his behalf is directed and ordered to effect the correction or change of the entries in the
Certificate of Live Birth of petitioner’s name and citizenship so that the entries would be:

a) As to petitioner’s name :

First Name : NORMA

Middle Name : SY

Last Name : LUGSANAY

b) As to petitioner’s nationality/citizenship :
: FILIPINO

SO ORDERED.15
The RTC concluded that respondent’s petition would neither prejudice the government nor any third party. It also
held that the names "Norma Sy Lugsanay" and "Anita Sy" refer to one and the same person, especially since the Local
Civil Registrar of Gingoog City has effected the correction. Considering that respondent has continuously used and
has been known since childhood as "Norma Sy Lugsanay" and as a Filipino citizen, the RTC granted the petition to
avoid confusion.16
On February 18, 2011, the CA affirmed in toto the RTC Order. The CA held that respondent’s failure to implead other
indispensable parties was cured upon the publication of the Order setting the case for hearing in a newspaper of
general circulation for three (3) consecutive weeks and by serving a copy of the notice to the Local Civil Registrar, the
OSG and the City Prosecutor’s Office.17 As to whether the petition is a collateral attack on respondent’s filiation, the
CA ruled in favor of respondent, considering that her parents were not legally married and that her siblings’ birth
certificates uniformly state that their surname is Lugsanay and their citizenship is Filipino. 18 Petitioner’s motion for
reconsideration was denied in a Resolution dated July 27, 2011.
Hence, the present petition on the sole ground that the petition is dismissible for failure to implead indispensable
parties.
Cancellation or correction of entries in the civil registry is governed by Rule 108 of the Rules of Court, to wit:
SEC. 1. Who may file petition. – Any person interested in any act, event, order or decree concerning the civil status of
persons which has been recorded in the civil register, may file a verified petition for the cancellation or correction of
any entry relating thereto, with the Regional Trial Court of the province where the corresponding civil registry is
located.
SEC. 2. Entries subject to cancellation or correction. – Upon good and valid grounds, the following entries in the civil
register may be cancelled or corrected: (a) births; (b) marriages; (c) deaths; (d) legal separations; (e) judgments of
annulments of marriage; (f) judgments declaring marriages void from the beginning; (g) legitimations; (h) adoptions;
(i) acknowledgments of natural children; (j) naturalization; (k) election, loss or recovery of citizenship; (l) civil
interdiction; (m) judicial determination of filiation; (n) voluntary emancipation of a minor; and (o) changes of name.
SEC. 3. Parties. – When cancellation or correction of an entry in the civil register is sought, the civil registrar and all
persons who have or claim any interest which would be affected thereby shall be made parties to the proceeding.
SEC. 4. Notice and Publication. – Upon the filing of the petition, the court shall, by an order, fix the time and place for
the hearing of the same, and cause reasonable notice thereof to be given to the persons named in the petition. The
court shall also cause the order to be published once a week for three (3) consecutive weeks in a newspaper of
general circulation in the province.
SEC. 5. Opposition. – The civil registrar and any person having or claiming any interest under the entry whose
cancellation or correction is sought may, within fifteen (15) days from notice of the petition, or from the last date of
publication of such notice, file his opposition thereto.
SEC. 6. Expediting proceedings. – The court in which the proceeding is brought may make orders expediting the
proceedings, and may also grant preliminary injunction for the preservation of the rights of the parties pending such
proceedings.
SEC. 7. Order. – After hearing, the court may either dismiss the petition or issue an order granting the cancellation or
correction prayed for. In either case, a certified copy of the judgment shall be served upon the civil registrar
concerned who shall annotate the same in his record. 19
In this case, respondent sought the correction of entries in her birth certificate, particularly those pertaining to her
first name, surname and citizenship. She sought the correction allegedly to reflect the name which she has been
known for since childhood, including her legal documents such as passport and school and professional records. She
likewise relied on the birth certificates of her full blood siblings who bear the surname "Lugsanay" instead of "Sy" and
citizenship of "Filipino" instead of "Chinese." The changes, however, are obviously not mere clerical as they touch on
respondent’s filiation and citizenship. In changing her surname from "Sy" (which is the surname of her father) to
"Lugsanay" (which is the surname of her mother), she, in effect, changes her status from legitimate to illegitimate;
and in changing her citizenship from Chinese to Filipino, the same affects her rights and obligations in this country.
Clearly, the changes are substantial.
It has been settled in a number of cases starting with Republic v. Valencia 20 that even substantial errors in a civil
registry may be corrected and the true facts established provided the parties aggrieved by the error avail themselves
of the appropriate adversary proceeding.21 The pronouncement of the Court in that case is illuminating:
It is undoubtedly true that if the subject matter of a petition is not for the correction of clerical errors of a harmless
and innocuous nature, but one involving nationality or citizenship, which is indisputably substantial as well as
controverted, affirmative relief cannot be granted in a proceeding summary in nature. However, it is also true that a
right in law may be enforced and a wrong may be remedied as long as the appropriate remedy is used. This Court
adheres to the principle that even substantial errors in a civil registry may be corrected and the true facts established
provided the parties aggrieved by the error avail themselves of the appropriate adversary proceeding. x x x
What is meant by "appropriate adversary proceeding?" Black’s Law Dictionary defines "adversary proceeding" as
follows:
One having opposing parties; contested, as distinguished from an ex parte application, one of which the party
seeking relief has given legal warning to the other party, and afforded the latter an opportunity to contest it. Excludes
an adoption proceeding.22
In sustaining the RTC decision, the CA relied on the Court’s conclusion in Republic v. Kho, 23 Alba v. Court of
Appeals,24 and Barco v. Court of Appeals,25 that the failure to implead indispensable parties was cured by the
publication of the notice of hearing pursuant to the provisions of Rule 108 of the Rules of Court. In Republic v.
Kho,26 petitioner therein appealed the RTC decision granting the petition for correction of entries despite
respondents’ failure to implead the minor’s mother as an indispensable party. The Court, however, did not strictly
apply the provisions of Rule 108, because it opined that it was highly improbable that the mother was unaware of
the proceedings to correct the entries in her children’s birth certificates especially since the notices, orders and
decision of the trial court were all sent to the residence she shared with them. 27
In Alba v. Court of Appeals,28 the Court found nothing wrong with the trial court’s decision granting the petition for
correction of entries filed by respondent although the proceedings was not actually known by petitioner. In that case,
petitioner’s mother and guardian was impleaded in the petition for correction of entries, and notices were sent to
her address appearing in the subject birth certificate. However, the notice was returned unserved, because
apparently she no longer lived there. Thus, when she allegedly learned of the granting of the petition, she sought the
annulment of judgment which the Court denied. Considering that the petition for correction of entries is a
proceeding in rem, the Court held that acquisition of jurisdiction over the person of the petitioner is, therefore, not
required and the absence of personal service was cured by the trial court’s compliance with Rule 108 which requires
notice by publication.29
In Barco v. Court of Appeals,30 the Court addressed the question of whether the court acquired jurisdiction over
petitioner and all other indispensable parties to the petition for correction of entries despite the failure to implead
them in said case. While recognizing that petitioner was indeed an indispensable party, the failure to implead her
was cured by compliance with Section 4 of Rule 108 which requires notice by publication. In so ruling, the Court
pointed out that the petitioner in a petition for correction cannot be presumed to be aware of all the parties whose
interests may be affected by the granting of a petition. It emphasized that the petitioner therein exerted earnest
effort to comply with the provisions of Rule 108. Thus, the publication of the notice of hearing was considered to
have cured the failure to implead indispensable parties.
In this case, it was only the Local Civil Registrar of Gingoog City who was impleaded as respondent in the petition
below. This, notwithstanding, the RTC granted her petition and allowed the correction sought by respondent, which
decision was affirmed in toto by the CA.
We do not agree with the RTC and the CA.
This is not the first time that the Court is confronted with the issue involved in this case. Aside from Kho, Alba and
Barco, the Court has addressed the same in Republic v. Coseteng-Magpayo, 31 Ceruila v. Delantar,32 and Labayo-Rowe
v. Republic.33
In Republic v. Coseteng-Magpayo, 34 claiming that his parents were never legally married, respondent therein filed a
petition to change his name from "Julian Edward Emerson Coseteng Magpayo," the name appearing in his birth
certificate to "Julian Edward Emerson Marquez Lim Coseteng." The notice setting the petition for hearing was
published and there being no opposition thereto, the trial court issued an order of general default and eventually
granted respondent’s petition deleting the entry on the date and place of marriage of parties; correcting his surname
from "Magpayo" to "Coseteng"; deleting the entry "Coseteng" for middle name; and deleting the entry "Fulvio
Miranda Magpayo, Jr." in the space for his father. The Republic of the Philippines, through the OSG, assailed the RTC
decision on the grounds that the corrections made on respondent’s birth certificate had the effect of changing the
civil status from legitimate to illegitimate and must only be effected through an appropriate adversary proceeding.
The Court nullified the RTC decision for respondent’s failure to comply strictly with the procedure laid down in Rule
108 of the Rules of Court. Aside from the wrong remedy availed of by respondent as he filed a petition for Change of
Name under Rule 103 of the Rules of Court, assuming that he filed a petition under Rule 108 which is the appropriate
remedy, the petition still failed because of improper venue and failure to implead the Civil Registrar of Makati City
and all affected parties as respondents in the case.
In Ceruila v. Delantar,35 the Ceruilas filed a petition for the cancellation and annulment of the birth certificate of
respondent on the ground that the same was made as an instrument of the crime of simulation of birth and,
therefore, invalid and spurious, and it falsified all material entries therein. The RTC issued an order setting the case
for hearing with a directive that the same be published and that any person who is interested in the petition may
interpose his comment or opposition on or before the scheduled hearing. Summons was likewise sent to the Civil
Register of Manila. After which, the trial court granted the petition and nullified respondent’s birth certificate. Few
months after, respondent filed a petition for the annulment of judgment claiming that she and her guardian were not
notified of the petition and the trial court’s decision, hence, the latter was issued without jurisdiction and in violation
of her right to due process. The Court annulled the trial court’s decision for failure to comply with the requirements
of Rule 108, especially the non-impleading of respondent herself whose birth certificate was nullified.1âwphi1
In Labayo-Rowe v. Republic,36 petitioner filed a petition for the correction of entries in the birth certificates of her
children, specifically to change her name from Beatriz V. Labayu/Beatriz Labayo to Emperatriz Labayo, her civil status
from "married" to "single," and the date and place of marriage from "1953-Bulan" to "No marriage." The Court
modified the trial court’s decision by nullifying the portion thereof which directs the change of petitioner’s civil status
as well as the filiation of her child, because it was the OSG only that was made respondent and the proceedings taken
was summary in nature which is short of what is required in cases where substantial alterations are sought.
Respondent’s birth certificate shows that her full name is Anita Sy, that she is a Chinese citizen and a legitimate child
of Sy Ton and Sotera Lugsanay. In filing the petition, however, she seeks the correction of her first name and
surname, her status from "legitimate" to "illegitimate" and her citizenship from "Chinese" to "Filipino." Thus,
respondent should have impleaded and notified not only the Local Civil Registrar but also her parents and siblings as
the persons who have interest and are affected by the changes or corrections respondent wanted to make.
The fact that the notice of hearing was published in a newspaper of general circulation and notice thereof was served
upon the State will not change the nature of the proceedings taken. 37 A reading of Sections 4 and 5, Rule 108 of the
Rules of Court shows that the Rules mandate two sets of notices to different potential oppositors: one given to the
persons named in the petition and another given to other persons who are not named in the petition but
nonetheless may be considered interested or affected parties. 38 Summons must, therefore, be served not for the
purpose of vesting the courts with jurisdiction but to comply with the requirements of fair play and due process to
afford the person concerned the opportunity to protect his interest if he so chooses. 39
While there may be cases where the Court held that the failure to implead and notify the affected or interested
parties may be cured by the publication of the notice of hearing, earnest efforts were made by petitioners in bringing
to court all possible interested parties.40 Such failure was likewise excused where the interested parties themselves
initiated the corrections proceedings;41 when there is no actual or presumptive awareness of the existence of the
interested parties;42 or when a party is inadvertently left out. 43
It is clear from the foregoing discussion that when a petition for cancellation or correction of an entry in the civil
register involves substantial and controversial alterations, including those on citizenship, legitimacy of paternity or
filiation, or legitimacy of marriage, a strict compliance with the requirements of Rule 108 ofthe Rules of Court is
mandated.44 If the entries in the civil register could be corrected or changed through mere summary proceedings and
not through appropriate action wherein all parties who may be affected by the entries are notified or represented,
the door to fraud or other mischief would be set open, the consequence of which might be detrimental and far
reaching.45
WHEREFORE, premises considered, the petition is hereby GRANTED. The Court of Appeals Decision dated February
18, 2011 and Resolution dated July 27, 20011 in CA-G.R. CV No. 00238-MIN, are SET ASIDE. Consequently, the June
28, 2004 Order of the Regional Trial Court, Branch 27, Gingoog City, in Spl. Proc. No. 230-2004 granting the Petition
for Correction of Entry of Certificate of Live Birth filed by respondent Dr. Norma S. Lugsanay Uy, is NULLIFIED.
SO ORDERED.

G.R. No. 180771 April 21, 2015

RESIDENT MARINE MAMMALS OF THE PROTECTED SEASCAPE TAÑON STRAIT, e.g., TOOTHED WHALES, DOLPHINS,
PORPOISES, AND OTHER CETACEAN SPECIES, Joined in and Represented herein by Human Beings Gloria Estenzo
Ramos and Rose-Liza Eisma-Osorio, In Their Capacity as Legal Guardians of the Lesser Life-Forms and as
Responsible Stewards of God's Creations, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the Department of Energy (DOE), SECRETARY JOSE L.
ATIENZA, in his capacity as Secretary of the Department of Environment and Natural Resources (DENR),
LEONARDO R. SIBBALUCA, DENR Regional Director-Region VII and in his capacity as Chairperson of the Tañon Strait
Protected Seascape Management Board, Bureau of Fisheries and Aquatic Resources (BFAR), DIRECTOR MALCOLM
J. SARMIENTO, JR., BFAR Regional Director for Region VII ANDRES M. BOJOS, JAPAN PETROLEUM EXPLORATION
CO., LTD. (JAPEX), as represented by its Philippine Agent, SUPPLY OILFIELD SERVICES, INC. Respondents.
x-----------------------x
G.R. No. 181527
CENTRAL VISAYAS FISHERFOLK DEVELOPMENT CENTER (FIDEC), CERILO D. ENGARCIAL, RAMON YANONG,
FRANCISCO LABID, in their personal capacity and as representatives of the SUBSISTENCE FISHERFOLKS OF THE
MUNICIPALITIES OF ALOGUINSAN AND PINAMUNGAJAN, CEBU, AND THEIR FAMILIES, AND THE PRESENT AND
FUTURE GENERATIONS OF FILIPINOS WHOSE RIGHTS ARE SIMILARLY AFFECTED, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the Department of Energy (DOE), JOSE L. ATIENZA, in his
capacity as Secretary of the Department of Environment and Natural Resources (DENR), LEONARDO R. SIBBALUCA,
in his capacity as DENR Regional Director-Region VII and as Chairperson of the Tañon Strait Protected Seascape
Management Board, ALAN ARRANGUEZ, in his capacity as Director - Environmental Management Bureau-Region
VII, DOE Regional Director for Region VIII1 ANTONIO LABIOS, JAPAN PETROLEUM EXPLORATION CO., LTD. (JAPEX),
as represented by its Philippine Agent, SUPPLY OILFIELD SERVICES, INC., Respondents.
Before Us are two consolidated Petitions filed under Rule 65 of the 1997 Rules of Court, concerning Service Contract
No. 46 (SC-46), which allowed the exploration, development, and exploitation of petroleum resources within Tañon
Strait, a narrow passage of water situated between the islands of Negros and Cebu. 2
The Petition docketed as G.R. No. 180771 is an original Petition for Certiorari, Mandamus, and Injunction, which
seeks to enjoin respondents from implementing SC-46 and to have it nullified for willful and gross violation of the
1987 Constitution and certain international and municipal laws. 3
Likewise, the Petition docketed as G.R. No. 181527 is an original Petition for Certiorari, Prohibition, and Mandamus,
which seeks to nullify the Environmental Compliance Certificate (ECC) issued by the Environmental Management
Bureau (EMB) of the Department of Environment and Natural Resources (DENR), Region VII in connection with SC-46;
to prohibit respondents from implementing SC-46; and to compel public respondents to provide petitioners access to
the pertinent documents involving the Tañon Strait Oil Exploration Project. 4
ANTECEDENT FACTS AND PROCEEDINGS
Petitioners in G.R. No. 180771, collectively referred to as the "Resident Marine Mammals" in the petition, are the
toothed whales, dolphins, porpoises, and other cetacean species, which inhabit the waters in and around the Tañon
Strait. They are joined by Gloria Estenzo Ramos (Ramos) and Rose-Liza Eisma-Osorio (Eisma-Osorio) as their legal
guardians and as friends (to be collectively known as "the Stewards") who allegedly empathize with, and seek the
protection of, the aforementioned marine species. Also impleaded as an unwilling co-petitioner is former President
Gloria Macapagal-Arroyo, for her express declaration and undertaking in the ASEAN Charter to protect the Tañon
Strait, among others.5
Petitioners in G.R. No. 181527 are the Central Visayas Fisherfolk Development Center (FIDEC), a non-stock, non-
profit, non-governmental organization, established for the welfare of the marginal fisherfolk in Region VII; and Cerilo
D. Engarcial (Engarcial), Ramon Yanong (Yanong) and Francisco Labid (Labid), in their personal capacities and as
representatives of the subsistence fisherfolk of the municipalities of Aloguinsan and Pinamungajan, Cebu.
Named as respondents in both petitions are the late Angelo T. Reyes, as then Secretary of the Department of Energy
(DOE); Jose L. Atienza, as then Secretary of the DENR; Leonardo R. Sibbaluca, as then DENRRegional Director for
Region VII and Chairman of the Tañon Strait Protected Seascape Management Board; Japan Petroleum Exploration
Co., Ltd. (JAPEX), a company organized and existing under the laws of Japan with a Philippine branch office; and
Supply Oilfield Services, Inc. (SOS), as the alleged Philippine agent of JAPEX.
In G.R. No. 181527, the following were impleaded as additional public respondents: Alan C. Arranguez (Arranguez)
and Antonio Labios (Labios), in their capacities as then Director of the EMB, Region VII and then Regional Director of
the DOE, Region VII, respectively. 6
On June 13, 2002, the Government of the Philippines, acting through the DOE, entered into a Geophysical Survey and
Exploration Contract-I 02 (GSEC-102) with JAPEX. This contract involved geological and geophysical studies of the
Tañon Strait. The studies included surface geology, sample analysis, and reprocessing of seismic and magnetic data.
JAPEX, assisted by DOE, also conducted geophysical and satellite surveys, as well as oil and gas sampling in Tañon
Strait.7
On December 21, 2004, DOE and JAPEX formally converted GSEC-102 into SC-46 for the exploration, development,
and production of petroleum resources in a block covering approximately 2,850 square kilometers offshore the Tañon
Strait.8
From May 9 to 18, 2005, JAPEX conducted seismic surveys in and around the Tañon Strait. A multi-channel sub-
bottom profiling covering approximately 751 kilometers was also done to determine the area's underwater
composition.9
JAPEX committed to drill one exploration well during the second sub-phase of the project. Since the well was to be
drilled in the marine waters of Aloguinsan and Pinamungajan, where the Tañon Strait was declared a protected
seascape in 1988,10 JAPEX agreed to comply with the Environmental Impact Assessment requirements pursuant to
Presidential Decree No. 1586, entitled "Establishing An Environmental Impact Statement System, Including Other
Environmental Management Related Measures And For Other Purposes." 11
On January 31, 2007, the Protected Area Management Board 12 of the Tañon Strait (PAMB-Tañon Strait) issued
Resolution No. 2007-001,13 wherein it adopted the Initial Environmental Examination (IEE) commissioned by JAPEX,
and favorably recommended the approval of JAPEX's application for an ECC.
On March 6, 2007, the EMB of DENR Region VII granted an ECC to the DOE and JAPEX for the offshore oil and gas
exploration project in Tañon Strait.14 Months later, on November 16, 2007, JAPEX began to drill an exploratory well,
with a depth of 3,150 meters, near Pinamungajan town in the western Cebu Province. 15 This drilling lasted until
February 8, 2008.16
It was in view of the foregoing state of affairs that petitioners applied to this Court for redress, via two separate
original petitions both dated December 1 7, 2007, wherein they commonly seek that respondents be enjoined from
implementing SC-46 for, among others, violation of the 1987 Constitution.
On March 31, 2008, SOS filed a Motion to Strike 17 its name as a respondent on the ground that it is not the Philippine
agent of JAPEX. In support of its motion, it submitted the branch office application of JAPEX, 18 wherein the latter's
resident agent was clearly identified. SOS claimed that it had acted as a mere logistics contractor for JAPEX in its oil
and gas exploration activities in the Philippines.
Petitioners Resident Marine Mammals and Stewards opposed SOS' s motion on the ground that it was premature, it
was pro-forma, and it was patently dilatory. They claimed that SOS admitted that "it is in law a (sic) privy to JAPEX"
since it did the drilling and other exploration activities in Tañon Strait under the instructions of its principal, JAPEX.
They argued that it would be premature to drop SOS as a party as JAPEX had not yet been joined in the case; and that
it was "convenient" for SOS to ask the Court to simply drop its name from the parties when what it should have done
was to either notify or ask JAPEX to join it in its motion to enable proper substitution. At this juncture, petitioners
Resident Marine Mammals and Stewards also asked the Court to" implead JAPEX Philippines as a corespondent or as
a substitute for its parent company, JAPEX.19
On April 8, 2008, the Court resolved to consolidate G.R. No. 180771 and G.R. No. 181527.
On May 26, 2008, the FIDEC manifested 20 that they were adopting in toto the Opposition to Strike with Motion to
Implead filed by petitioners Resident Marine Mammals and Stewards in G.R. No. 180771.
On June 19, 2008, public respondents filed their Manifestation 21 that they were not objecting to SOS's Motion to
Strike as it was not JAPEX's resident agent. JAPEX during all this time, did not file any comment at all.
Thus, on February 7, 2012, this Court, in an effort to ensure that all the parties were given ample chance and
opportunity to answer the issues herein, issued a Resolution directing the Court's process servicing unit to again
serve the parties with a copy of the September 23, 2008 Resolution of the Court, which gave due course to the
petitions in G.R. Nos. 180771 and 181527, and which required the parties to submit their respective memoranda.
The February 7, 2012 Resolution 22 reads as follows:
G.R. No. 180771 (Resident Marine Mammals of the Protected Seascape Tañon Strait, e.g., Toothed Whales, Dolphins,
Porpoises and Other Cetacean Species, et al. vs. Hon. Angelo Reyes, in his capacity as Secretary of the Department of
Energy, et al.) and G.R. No. 181527 (Central Visayas Fisherfolk Development Center, et al. vs. Hon. Angelo Reyes, et
al.). - The Court Resolved to direct the Process Servicing Unit to RE-SEND the resolution dated September 23, 2008 to
the following parties and counsel, together with this resolution:

Atty. Aristeo O. Carino 20th Floor Pearlbank Centre

Counsel for Respondent Supply 146 Valero Street
Oilfield Services, Inc. Salcedo Village, Makati City

JAPEX Philippines Ltd. 20th Floor Pearlbank Centre

146 Valero Street
Salcedo Village, Makati City

JAPEX Philippines Ltd. 19th Floor Pearlbank Centre

c/o Atty. Maria Farah Z.G. 146 Valero Street
Nicolas-Suchianco Salcedo Village, Makati City

Atty. Maria Farah Z.G. Suite 2404 Discovery Centre

Nicolas-Suchianco 25 ADB Avenue
Resident Agent of JAPEX Ortigas Center, Pasig City
Philippines Ltd.

This Resolution was personally served to the above parties, at the above addresses on February 23, 2012. On March
20, 2012, JAPEX Philippines, Ltd. (JAPEX PH), by way of special appearance, filed a Motion to Admit 23 its Motion for
Clarification,24 wherein JAPEX PH requested to be clarified as to whether or not it should deem the February 7, 2012
Resolution as this Court's Order of its inclusion in the case, as it has not been impleaded. It also alleged that JAPEX
PH had already stopped exploration activities in the Taft. on Strait way back in 2008, rendering this case moot.
On March 22, 2012, JAPEX PH, also by special appearance, filed a Motion for Extension of Time 25 to file its
Memorandum. It stated that since it received the February 7, 2012 Resolution on February 23, 2012, it had until
March 22, 2012 to file its Memorandum. JAPEX PH then asked for an additional thirty days, supposedly to give this
Court some time to consider its Motion for Clarification.
On April 24, 2012, this Court issued a Resolution 26 granting JAPEX PH's Motion to Admit its Motion for Clarification.
This Court, addressing JAPEX PH's Motion for Clarification, held:
With regard to its Motion for Clarification (By Special Appearance) dated March 19, 2012, this Court considers JAPEX
Philippines, Ltd. as a real party-in-interest in these cases. Under Section 2, Rule 3 of the 1997 Rules of Court, 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. Contrary to JAPEX Philippines, Ltd. 's allegation that it is a completely distinct corporation,
which should not be confused with JAPEX Company, Ltd., JAPEX Philippines, Ltd. is a mere branch office, established
by JAPEX Company, Ltd. for the purpose of carrying out the latter's business transactions here in the Philippines.
Thus, JAPEX Philippines, Ltd., has no separate personality from its mother foreign corporation, the party impleaded in
this case.
Moreover, Section 128 of the Corporation Code provides for the responsibilities and duties of a resident agent of a
foreign corporation:
SECTION 128. Resident agent; service of process. - The Securities and Exchange Commission shall require as a
condition precedent to the issuance of the license to transact business in the Philippines by any foreign corporation
that such corporation file with the Securities and Exchange Commission a written power of attorney designating
some person who must be a resident of the Philippines, on whom any summons and other legal processes may be
served in all actions or other legal proceedings against such corporation, and consenting that service upon such
resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign
corporation at its home office. Any such foreign corporation shall likewise execute and file with the Securities and
Exchange Commission an agreement or stipulation, executed by the proper authorities of said corporation, in form
and substance as follows:
"The (name of foreign corporation) does hereby stipulate and agree, in consideration of its being granted by the
Securities and Exchange Commission a license to transact business in the Philippines, that if at any time said
corporation shall cease to transact business in the Philippines, or shall be without any resident agent in the
Philippines on whom any summons or other legal processes may be served, then in any action or proceeding arising
out of any business or transaction which occurred in the Philippines, service of any summons or other legal process
may be made upon the Securities and Exchange Commission and that such service shall have the same force and
effect as if made upon the duly-authorized officers of the corporation at its home office."
Whenever such service of summons or other process shall be made upon the Securities and Exchange Commission,
the Commission shall, within ten (10) days thereafter, transmit by mail a copy of such summons or other legal
process to the corporation at its home or principal office. The sending of such copy by the Commission shall be a
necessary part of and shall complete such service. All expenses incurred by the Commission for such service shall be
paid in advance by the party at whose instance the service is made.
In case of a change of address of the resident agent, it shall be his or its duty to immediately notify in writing the
Securities and Exchange Commission of the new address.
It is clear from the foregoing provision that the function of a resident agent is to receive summons or legal processes
that may be served in all actions or other legal proceedings against the foreign corporation. These cases have been
prosecuted in the name of JAPEX Company, Ltd., and JAPEX Philippines Ltd., as its branch office and resident agent,
had been receiving the various resolutions from this Court, as evidenced by Registry Return Cards signed by its
representatives.
And in the interest of justice, this Court resolved to grant JAPEX PH's motion for extension of time to file its
memorandum, and was given until April 21, 2012, as prayed for, within which to comply with the submission. 27
Without filing its Memorandum, JAPEX PH, on May 14, 2012, filed a motion, asking this Court for an additional thirty
days to file its Memorandum, to be counted from May 8, 2012. It justified its request by claiming that this Court's
April 24, 2012 Resolution was issued past its requested deadline for filing, which was on April 21, 2012. 28
On June 19, 2012, this Court denied JAPEX PH's second request for additional time to file its Memorandum and
dispensed with such filing.
Since petitioners had already filed their respective memoranda, 29 and public respondents had earlier filed a
Manifestation30 that they were adopting their Comment dated March 31, 2008 as their memorandum, this Court
submitted the case for decision.
Petitioners.' Allegations
Protesting the adverse ecological impact of JAPEX's oil exploration activities in the Tañon Strait, petitioners Resident
Marine Mammals and Stewards aver that a study made after the seismic survey showed that the fish catch was
reduced drastically by 50 to 70 percent. They claim that before the seismic survey, the average harvest per day would
be from 15 to 20 kilos; but after the activity, the fisherfolk could only catch an average of 1 to 2 kilos a day. They
attribute this "reduced fish catch" to the destruction of the ''payao," also known as the "fish aggregating device" or
"artificial reef."31 Petitioners Resident Marine Mammals and Stewards also impute the incidences of "fish
kill"32observed by some of the local fisherfolk to the seismic survey. And they further allege that the ECC obtained by
private respondent JAPEX is invalid because public consultations and discussions with the affected stakeholders, a
pre-requisite to the issuance of the ECC, were not held prior to the ECC's issuance.
In its separate petition, petitioner FIDEC confirms petitioners Resident Marine Mammals and Stewards' allegations of
reduced fish catch and lack of public consultations or discussions with the fisherfolk and other stakeholders prior to
the issuance of the ECC. Moreover, it alleges that during the seismic surveys and drilling, it was barred from entering
and fishing within a 7-kilometer radius from the point where the oilrig was located, an area greater than the 1.5-
kilometer radius "exclusion zone" stated in the IEE. 33 It also agrees in the allegation that public respondents DENR
and EMB abused their discretion when they issued an ECC to public respondent DOE and private respondent JAPEX
without ensuring the strict compliance with the procedural and substantive requirements under the Environmental
Impact Assessment system, the Fisheries Code, and their implementing rules and regulations. 34It further claims that
despite several requests for copies of all the documents pertaining to the project in Tañon Strait, only copies of the P
AMB-Tañon Strait Resolution and the ECC were given to the fisherfolk. 35
Public Respondents' Counter-Allegations
Public respondents, through the Solicitor General, contend that petitioners Resident Marine Mammals and Stewards
have no legal standing to file the present petition; that SC-46 does not violate the 1987 Constitution and the various
laws cited in the petitions; that the ECC was issued in accordance with existing laws and regulations; that public
respondents may not be compelled by mandamus to furnish petitioners copies of all documents relating to SC-46;
and that all the petitioners failed to show that they are entitled to injunctive relief. They further contend that the
issues raised in these petitions have been rendered moot and academic by the fact that SC-46 had been mutually
terminated by the parties thereto effective June 21, 2008. 36
ISSUES
The following are the issues posited by petitioners Resident Marine Mammals and Stewards in G.R. No. 180771:
I. WHETHER OR NOT PETITIONERS HAVE LOCUS STAND! TO FILE THE INSTANT PETITION;
II. WHETHER OR NOT SERVICE CONTRACT NO. 46 IS VIOLA T[IVE] OF THE 1987 PHILIPPINE CONSTITUTION
AND STATUTES;
III. WHETHER OR NOT THE ON-GOING EXPLORATION AND PROPOSED EXPLOITATION FOR OIL AND NATURAL
GAS AT, AROUND, AND UNDERNEATH THE MARINE WATERS OF THE TAÑON STRAIT PROTECTED SEASCAPE IS
INCONSISTENT WITH THE PHILIPPINE COMMITMENTS TO INTERNATIONAL ENVIRONMENTAL LAWS AND
INSTRUMENTS; AND
IV. WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE CERTIFICATE (ECC) IN
ENVIRONMENTALLY CRITICAL AREAS AND HABITATS OF MARINE WILDLIFE AND ENDANGERED SPECIES IS
LEGAL AND PROPER.37
Meanwhile, in G.R. No. 181527, petitioner FIDEC presented the following issues for our consideration:
I. WHETHER OR NOT SERVICE CONTRACT NO. 46 EXECUTED BETWEEN RESPONDENTS DOE AND JAPEX
SHOULD BE NULLIFIED AND SET ASIDE FOR BEING IN DIRECT VIOLATION OF SPECIFIC PROVISIONS OF THE
1987 PHILIPPINE CONSTITUTION AND APPLICABLE LAWS;
II. WHETHER OR NOT THE OFF-SHORE OIL EXPLORAT[I]ON CONTEMPLATED UNDER SERVICE CONTRACT NO.
46 ·IS LEGALLY PERMISSIBLE WITHOUT A LAW BEING DULY PASSED EXPRESSLY FOR THE PURPOSE;
III. WHETHER OR NOT THE OIL EXPLORATION BEING CONDUCTED WITHIN THE TAÑON STRAIT PROTECTED
SEASCAPE VIOLATES THE RIGHTS AND LEGAL PROTECTION GRANTED TO PETITIONERS UNDER THE
CONSTITUTION AND APPLICABLE LAWS.
IV. WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE CERTIFICATE (ECC) FOR SUCH
AN ENVIRONMENTALLY CRITICAL PROJECT INSIDE AN ENVIRONMENTALLY CRITICAL AREA SUCH AS THE
TAÑON STRAIT PROTECTED SEASCAPE CONFORMED TO LAW AND EXISTING RULES AND REGULATIONS ON
THE MATTER.
V. WHETHER OR NOT THE RESPONDENTS MAY BE COMPELLED BY MANDAMUS TO FURNISH PETITIONERS
WITH COPIES OF THE DOCUMENTS PERTAINING TO THE TAÑON STRAIT OIL EXPLORATION PROJECT. 38
In these consolidated petitions, this Court has determined that the various issues raised by the petitioners may be
condensed into two primary issues:
I. Procedural Issue: Locus Standi of the Resident Marine Mammals and Stewards, petitioners in G.R. No. 180771; and
II. Main Issue: Legality of Service Contract No. 46.
DISCUSSION
At the outset, this Court makes clear that the "'moot and academic principle' is not a magical formula that can
automatically dissuade the courts in resolving a case." Courts have decided cases otherwise moot and academic
under the following exceptions:
1) There is a grave violation of the Constitution;
2) The exceptional character of the situation and the paramount public interest is involved;
3) The constitutional issue raised requires formulation of controlling principles to guide the bench, the bar,
and the public; and
4) The case is capable of repetition yet evading review. 39
In this case, despite the termination of SC-46, this Court deems it necessary to resolve these consolidated petitions
as almost all of the foregoing exceptions are present in this case. Both petitioners allege that SC-46 is violative of the
Constitution, the environmental and livelihood issues raised undoubtedly affect the public's interest, and the
respondents' contested actions are capable of repetition.
Procedural Issues
Locus Standi of Petitioners Resident Marine Mammals and Stewards
The Resident Marine Mammals, through the Stewards, "claim" that they have the legal standing to file this action
since they stand to be benefited or injured by the judgment in this suit. 40 Citing Oposa v. Factoran, Jr.,41 they also
assert their right to sue for the faithful performance of international and municipal environmental laws created in
their favor and for their benefit. In this regard, they propound that they have the right to demand that they be
accorded the benefits granted to them in multilateral international instruments that the Philippine Government had
signed, under the concept of stipulation pour autrui. 42
For their part, the Stewards contend that there should be no question of their right to represent the Resident Marine
Mammals as they have stakes in the case as forerunners of a campaign to build awareness among the affected
residents of Tañon Strait and as stewards of the environment since the primary steward, the Government, had failed
in its duty to protect the environment pursuant to the public trust doctrine. 43
Petitioners Resident Marine Mammals and Stewards also aver that this Court may lower the benchmark in locus
standi as an exercise of epistolary jurisdiction. 44
In opposition, public respondents argue that the Resident Marine Mammals have no standing because Section 1,
Rule 3 of the Rules of Court requires parties to an action to be either natural or juridical persons, viz.:
Section 1. Who may be parties, plaintiff and defendant. - Only natural or juridical persons, or entities authorized by
law may be parties in a civil action. The term "plaintiff' may refer to the claiming party, the counter-claimant, the
cross-claimant, or the third (fourth, etc.)-party plaintiff. The term "defendant" may refer to the original defending
party, the defendant in a counterclaim, the cross-defendant, or the third (fourth, etc.)-party defendant.
The public respondents also contest the applicability of Oposa, pointing out that the petitioners therein were all
natural persons, albeit some of them were still unborn. 45
As regards the Stewards, the public respondents likewise challenge their claim of legal standing on the ground that
they are representing animals, which cannot be parties to an action. Moreover, the public respondents argue that the
Stewards are not the real parties-in-interest for their failure to show how they stand to be benefited or injured by the
decision in this case.46 Invoking the alter ego principle in political law, the public respondents claim that absent any
proof that former President Arroyo had disapproved of their acts in entering into and implementing SC-46, such acts
remain to be her own.47
The public respondents contend that since petitioners Resident Marine Mammals and Stewards' petition was not
brought in the name of a real party-in-interest, it should be dismissed for failure to state a cause of action. 48
The issue of whether or not animals or even inanimate objects should be given legal standing in actions before courts
of law is not new in the field o f animal rights and environmental law. Petitioners Resident Marine Mammals and
Stewards cited the 1972 United States case Sierra Club v. Rogers C.B. Morton, 49 wherein Justice William 0. Douglas,
dissenting to the conventional thought on legal standing, opined:
The critical question of "standing" would be simplified and also put neatly in focus if we fashioned a federal rule that
allowed environmental issues to be litigated before federal agencies or federal courts in the name of the inanimate
object about to be despoiled, defaced, or invaded by roads and bulldozers and where injury is the subject of public
outrage. x x x. Inanimate objects are sometimes parties in litigation. A ship has a legal personality, a fiction found
useful for maritime purposes. The corporation sole - a creature of ecclesiastical law - is an acceptable adversary and
large fortunes ride on its cases. The ordinary corporation is a "person" for purposes of the adjudicatory processes,
whether it represents proprietary, spiritual, aesthetic, or charitable causes.
So it should be as respects valleys, alpine meadows, rivers, lakes, estuaries, beaches, ridges, groves of trees,
swampland, or even air that feels the destructive pressures of modem technology and modem life. The river, for
example, is the living symbol of all the life it sustains or nourishes-fish, aquatic insects, water ouzels, otter, fisher,
deer, elk, bear, and all other animals, including man, who are dependent on it or who enjoy it for its sight, its sound,
or its life. The river as plaintiff speaks for the ecological unit of life that is part of it. Those people who have a
meaningful relation to that body of water-whether it be a fisherman, a canoeist, a zoologist, or a logger-must be able
to speak for the values which the river represents and which are threatened with destruction. 50 (Citations omitted.)
The primary reason animal rights advocates and environmentalists seek to give animals and inanimate objects
standing is due to the need to comply with the strict requirements in bringing a suit to court. Our own 1997 Rules of
Court demand that parties to a suit be either natural or juridical persons, or entities authorized by law. It further
necessitates the action to be brought in the name of the real party-in-interest, even if filed by a representative, viz.:
Rule 3
Parties to Civil Actions
Section 1. Who may be parties; plaintiff and defendant. - Only natural or juridical persons, or entities authorized by
law may be parties in a civil action. The term "plaintiff' may refer to the claiming party, the counter-claimant, the
cross-claimant, or the third (fourth, etc.)-party plaintiff. The term "defendant" may refer to the original defending
party, the defendant in a counterclaim, the cross-defendant, or the third (fourth, etc.)-party defendant.
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.
Sec. 3. Representatives as parties. - Where the action is allowed to be prosecuted or defended by a representative or
someone acting in a fiduciary capacity, the beneficiary shall be included in the title of the case and shall be deemed
to be the real party in interest. A representative may be a trustee of an express trust, a guardian, an executor or
administrator, or a party authorized by law or these Rules. An agent acting in his own name and for the benefit of an
undisclosed principal may sue or be sued without joining the principal except when the contract involves things
belonging to the principal.
It had been suggested by animal rights advocates and environmentalists that not only natural and juridical persons
should be given legal standing because of the difficulty for persons, who cannot show that they by themselves are
real parties-in-interests, to bring actions in representation of these animals or inanimate objects. For this reason,
many environmental cases have been dismissed for failure of the petitioner to show that he/she would be directly
injured or affected by the outcome of the case. However, in our jurisdiction, locus standi in environmental cases has
been given a more liberalized approach. While developments in Philippine legal theory and jurisprudence have not
progressed as far as Justice Douglas's paradigm of legal standing for inanimate objects, the current trend moves
towards simplification of procedures and facilitating court access in environmental cases.
Recently, the Court passed the landmark Rules of Procedure for Environmental Cases, 51 which allow for a "citizen
suit," and permit any Filipino citizen to file an action before our courts for violations of our environmental laws:
SEC. 5. Citizen suit. - Any Filipino citizen in representation of others, including minors or generations yet unborn, may
file an action to enforce rights or obligations under environmental laws. Upon the filing of a citizen suit, the court
shall issue an order which shall contain a brief description of the cause of action and the reliefs prayed for, requiring
all interested parties to manifest their interest to intervene in the case within fifteen (15) days from notice thereof.
The plaintiff may publish the order once in a newspaper of a general circulation in the Philippines or furnish all
affected barangays copies of said order.
Citizen suits filed under R.A. No. 8749 and R.A. No. 9003 shall be governed by their respective provisions. 52(Emphasis
ours.)
Explaining the rationale for this rule, the Court, in the Annotations to the Rules of Procedure for Environmental
Cases, commented:
Citizen suit. To further encourage the protection of the environment, the Rules enable litigants enforcing
environmental rights to file their cases as citizen suits. This provision liberalizes standing for all cases filed enforcing
environmental laws and collapses the traditional rule on personal and direct interest, on the principle that humans
are stewards of nature. The terminology of the text reflects the doctrine first enunciated in Oposa v. Factoran, insofar
as it refers to minors and generations yet unborn. 53 (Emphasis supplied, citation omitted.) Although this petition was
filed in 2007, years before the effectivity of the Rules of Procedure for Environmental Cases, it has been consistently
held that rules of procedure "may be retroactively applied to actions pending and undetermined at the time of their
passage and will not violate any right of a person who may feel that he is adversely affected, inasmuch as there is no
vested rights in rules of procedure."54
Elucidating on this doctrine, the Court, in Systems Factors Corporation v. National Labor Relations Commission 55held
that:
Remedial statutes or statutes relating to remedies or modes of procedure, which do not create new or take away
vested rights, but only operate in furtherance of the remedy or confirmation of rights already existing, do not come
within the legal conception of a retroactive law, or the general rule against retroactive operation of statutes. Statutes
regulating the procedure of the courts will be construed as applicable to actions pending and undetermined at the
time of their passage. Procedural laws are retroactive in that sense and to that extent. x x x.
Moreover, even before the Rules of Procedure for Environmental · Cases became effective, this Court had already
taken a permissive position on the issue of locus standi in environmental cases. In Oposa, we allowed the suit to be
brought in the name of generations yet unborn "based on the concept of intergenerational responsibility insofar as
the right to a balanced and healthful ecology is concerned." 56 Furthermore, we said that the right to a balanced and
healthful ecology, a right that does not even need to be stated in our Constitution as it is assumed to exist from the
inception of humankind, carries with it the correlative duty to refrain from impairing the environment. 57
In light of the foregoing, the need to give the Resident Marine Mammals legal standing has been eliminated by our
Rules, which allow any Filipino citizen, as a steward of nature, to bring a suit to enforce our environmental laws. It is
worth noting here that the Stewards are joined as real parties in the Petition and not just in representation of the
named cetacean species. The Stewards, Ramos and Eisma-Osorio, having shown in their petition that there may be
possible violations of laws concerning the habitat of the Resident Marine Mammals, are therefore declared to
possess the legal standing to file this petition.
Impleading Former President Gloria Macapagal-Arroyo
as an Unwilling Co-Petitioner
Petitioners Stewards in G.R. No. 180771 impleaded as an unwilling co-petitioner former President Gloria Macapagal-
Arroyo for the following reasons, which we quote:
Her Excellency Gloria Macapagal-Arroyo, also of legal age, Filipino and resident of Malacailang Palace, Manila
Philippines. Steward Gloria Macapagal-Arroyo happens to be the incumbent President of the Philippine Islands. She
is personally impleaded in this suit as an unwilling co-petitioner by reason of her express declaration and undertaking
under the recently signed ASEAN Charter to protect Your Petitioners' habitat, among others. She is meantime
dominated as an unwilling co-petitioner due to lack of material time in seeking her signature and imprimatur hereof
and due to possible legal complications that may hereafter arise by reason of her official relations with public
respondents under the alter ego principle in political law. 58 This is incorrect.
Section 10, Rule 3 of the Rules of Court provides:
Sec. 10. Unwilling co-plaintiff. - If the consent of any party who should be joined as plaintiff can not be obtained, he
may be made a defendant and the reason therefor shall be stated in the complaint.
Under the foregoing rule, when the consent of a party who should be joined as a plaintiff cannot be obtained, he or
she may be made a party defendant to the case. This will put the unwilling party under the jurisdiction of the Court,
which can properly implead him or her through its processes. The unwilling party's name cannot be simply included
in a petition, without his or her knowledge and consent, as such would be a denial of due process.
Moreover, the reason cited by the petitioners Stewards for including former President Macapagal-Arroyo in their
petition, is not sufficient to implead her as an unwilling co-petitioner. Impleading the former President as an
unwilling co-petitioner, for an act she made in the performance of the functions of her office, is contrary to the public
policy against embroiling the President in suits, "to assure the exercise of Presidential duties and functions free from
any hindrance or distraction, considering that being the Chief Executive of the Government is a job that, aside from
requiring all of the office holder's time, also demands undivided attention." 59
Therefore, former President Macapagal-Arroyo cannot be impleaded as one of the petitioners in this suit. Thus, her
name is stricken off the title of this case.
Main Issue:
Legality of Service Contract No. 46
Service Contract No. 46 vis-a-vis
Section 2, Article XII of the
1987 Constitution
Petitioners maintain that SC-46 transgresses the Jura Regalia Provision or paragraph 1, Section 2, Article XII of the
1987 Constitution because JAPEX is 100% Japanese-owned. 60 Furthermore, the FIDEC asserts that SC-46 cannot be
considered as a technical and financial assistance agreement validly executed under paragraph 4 of the same
provision.61 The petitioners claim that La Bugal-B'laan Tribal Association, Inc. v. Ramos 62 laid down the guidelines for a
valid service contract, one of which is that there must exist a general law for oil exploration before a service contract
may be entered into by the Government. The petitioners posit that the service contract in La Bugal is presumed to
have complied with the requisites of (a) legislative enactment of a general law after the effectivity of the 1987
Constitution (such as Republic Act No. 7942, or the Philippine Mining Law of 1995, governing mining contracts) and
(b) presidential notification. The petitioners thus allege that the ruling in La Bugal, which involved mining contracts
under Republic Act No. 7942, does not apply in this case. 63 The petitioners also argue that Presidential Decree No. 87
or the Oil Exploration and Development Act of 1972 cannot legally justify SC-46 as it is deemed to have been
repealed by the 1987 Constitution and subsequent laws, which enunciate new policies concerning the
environment.64 In addition, petitioners in G.R. No. 180771 claim that paragraphs 2 and 3 of Section 2, Article XII of
the 1987 Constitution mandate the exclusive use and enjoyment by the Filipinos of our natural resources, 65 and
paragraph 4 does not speak of service contracts but of FTAAs or Financial Technical Assistance Agreements. 66
The public respondents again controvert the petitioners' claims and asseverate that SC-46 does not violate Section 2,
Article XII of the 1987 Constitution. They hold that SC-46 does not fall under the coverage of paragraph 1 but instead,
under paragraph 4 of Section 2, Article XII of the 1987 Constitution on FTAAs. They also insist that paragraphs 2 and
3, which refer to the grant of exclusive fishing right to Filipinos, are not applicable to SC-46 as the contract does not
grant exclusive fishing rights to JAPEX nor does it otherwise impinge on the FIDEC's right to preferential use of
communal marine and fishing resources.67
Ruling of the Court
On the legality of Service Contract No. 46
vis-a-vis Section 2, Article XII of the 1987 Constitution
The petitioners insist that SC-46 is null and void for having violated Section 2, Article XII of the 1987 Constitution,
which reads as follows:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the
State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and supervision of the State. The
State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned
by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than
twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may
be the measure and limit of the grant.
The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic
zone, and reserve its use and enjoyment exclusively to Filipino citizens. The Congress may, by law, allow small-scale
utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence
fishermen and fishworkers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real contributions to the economic growth
and general welfare of the country. In such agreements, the State shall promote the development and use of local
scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty
days from its execution. (Emphases ours.)
This Court has previously settled the issue of whether service contracts are still allowed under the 1987 Constitution.
In La Bugal, we held that the deletion of the words "service contracts" in the 1987 Constitution did not amount to a
ban on them per se. In fact, in that decision, we quoted in length, portions of the deliberations of the members of
the Constitutional Commission (ConCom) to show that in deliberating on paragraph 4, Section 2, Article XII, they
were actually referring to service contracts as understood in the 1973 Constitution, albeit with safety measures to
eliminate or minimize the abuses prevalent during the martial law regime, to wit: Summation of the
ConCom Deliberations
At this point, we sum up the matters established, based on a careful reading of the Con Com deliberations, as follows:
In their deliberations on what was to become paragraph 4, the framers used the term service contracts in referring to
agreements x x x involving either technical or financial assistance.
They spoke of service contracts as the concept was understood in the 1973 Constitution.
It was obvious from their discussions that they were not about to ban or eradicate service contracts.
Instead, they were plainly crafting provisions to put in place safeguards that would eliminate or minimize the abuses
prevalent during the marital law regime. In brief, they were going to permit service contracts with foreign
corporations as contractors, but with safety measures to prevent abuses, as an exception to the general norm
established in the first paragraph of Section 2 of Article XII. This provision reserves or limits to Filipino citizens -- and
corporations at least 60 percent of which is owned by such citizens -- the exploration, development and utilization of
natural resources.
This provision was prompted by the perceived insufficiency of Filipino capital and the felt need for foreign
investments in the EDU of minerals and petroleum resources.
The framers for the most part debated about the sort of safeguards that would be considered adequate and
reasonable. But some of them, having more "radical" leanings, wanted to ban service contracts altogether; for them,
the provision would permit aliens to exploit and benefit from the nation's natural resources, which they felt should
be reserved only for Filipinos.
In the explanation of their votes, the individual commissioners were heard by the entire body. They sounded off their
individual opinions, openly enunciated their philosophies, and supported or attacked the provisions with fervor.
Everyone's viewpoint was heard.
In the final voting, the Article on the National Economy and Patrimony -- including paragraph 4 allowing service
contracts with foreign corporations as an exception to the general norm in paragraph 1 of Section 2 of the same
article --was resoundingly approved by a vote of 32 to 7, with 2 abstentions.
Agreements Involving Technical
Or Financial Assistance Are
Service Contracts with Safeguards
From the foregoing, we are impelled to conclude that the phrase agreements involving either technical or financial
assistance, referred to in paragraph 4, are in fact service contracts. But unlike those of the 1973 variety, the new ones
are between foreign corporations acting as contractors on the one hand; and on the other, the government as
principal or "owner" of the works. In the new service contracts, the foreign contractors provide capital, technology
and technical know-how, and managerial expertise in the creation and operation of large-scale mining/extractive
enterprises; and the government, through its agencies (DENR, MGB), actively exercises control and supervision over
the entire operation.68
In summarizing the matters discussed in the ConCom, we established that paragraph 4, with the safeguards in place,
is the exception to paragraph 1, Section 2 of Article XII. The following are the safeguards this Court enumerated in La
Bugal:
Such service contracts may be entered into only with respect to minerals, petroleum and other mineral oils. The
grant thereof is subject to several safeguards, among which are these requirements:
(1) The service contract shall be crafted in accordance with a general law that will set standard or uniform
terms, conditions and requirements, presumably to attain a certain uniformity in provisions and avoid the
possible insertion of terms disadvantageous to the country.
(2) The President shall be the signatory for the government because, supposedly before an agreement is
presented to the President for signature, it will have been vetted several times over at different levels to
ensure that it conforms to law and can withstand public scrutiny.
(3) Within thirty days of the executed agreement, the President shall report it to Congress to give that branch
of government an opportunity to look over the agreement and interpose timely objections, if any. 69
Adhering to the aforementioned guidelines, this Court finds that SC-46 is indeed null and void for noncompliance
with the requirements of the 1987 Constitution.
1. The General Law on Oil Exploration
The disposition, exploration, development, exploitation, and utilization of indigenous petroleum in the Philippines
are governed by Presidential Decree No. 87 or the Oil Exploration and Development Act of 1972. This was enacted by
then President Ferdinand Marcos to promote the discovery and production of indigenous petroleum through the
utilization of government and/or local or foreign private resources to yield the maximum benefit to the Filipino
people and the revenues to the Philippine Government. 70
Contrary to the petitioners' argument, Presidential Decree No. 87, although enacted in 1972, before the adoption of
the 1987 Constitution, remains to be a valid law unless otherwise repealed, to wit:
ARTICLE XVIII - TRANSITORY PROVISIONS
Section 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and other executive
issuances not inconsistent with this Constitution shall remain operative until amended, repealed, or revoked.
If there were any intention to repeal Presidential Decree No. 87, it would have been done expressly by Congress. For
instance, Republic Act No. 7160, more popularly known as the Local Government Code of 1991, expressly repealed a
number of laws, including a specific provision in Presidential Decree No. 87, viz.:
SECTION 534. Repealing Clause. - (a) Batas Pambansa Blg. 337, otherwise known as the "Local Government Code,"
Executive Order No. 112 (1987), and Executive Order No. 319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions, memoranda and
issuances related to or concerning the barangay are hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section 3, a (3)
and b (2) of Republic Act No. 5447 regarding the Special Education Fund; Presidential Decree No. 144 as
amended by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended; Presidential
Decree No. 436 as amended by Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464, 477,
526, 632, 752, and 1136 are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects.
(e) The following provisions are hereby repealed or amended insofar as they are inconsistent with the
provisions of this Code: Sections 2, 16 and 29 of Presidential Decree No. 704; Section 12 of Presidential
Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree No.
463, as amended; and Section 16 of Presidential Decree No. 972, as amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this
Code are hereby repealed or modified accordingly. (Emphasis supplied.)
This Court could not simply assume that while Presidential Decree No. 87 had not yet been expressly repealed, it had
been impliedly repealed. As we held in Villareña v. The Commission on Audit, 71 "[i]mplied repeals are not lightly
presumed." It is a settled rule that when laws are in conflict with one another, every effort must be exerted to
reconcile them. In Republic of the Philippines v. Marcopper Mining Corporation, 72 we said:
The two laws must be absolutely incompatible, and a clear finding thereof must surface, before the inference of
implied repeal may be drawn. The rule is expressed in the maxim, interpretare et concordare leqibus est optimus
interpretendi, i.e., every statute must be so interpreted and brought into accord with other laws as to form a uniform
system of jurisprudence. The fundament is that the legislature should be presumed to have known the existing laws
on the subject and not have enacted conflicting statutes. Hence, all doubts must be resolved against any implied
repeal, and all efforts should be exerted in order to harmonize and give effect to all laws on the subject. (Citation
omitted.)
Moreover, in cases where the statute seems to be in conflict with the Constitution, but a construction that it is in
harmony with the Constitution is also possible, that construction should be preferred. 73 This Court, in Pangandaman
v. Commission on Elections74 expounding on this point, pronounced:
It is a basic precept in statutory construction that a statute should be interpreted in harmony with the Constitution
and that the spirit, rather than the letter of the law determines its construction; for that reason, a statute must be
read according to its spirit and intent. x x x. (Citation omitted.)
Consequently, we find no merit in petitioners' contention that SC-46 is prohibited on the ground that there is no
general law prescribing the standard or uniform terms, conditions, and requirements for service contracts involving
oil exploration and extraction.
But note must be made at this point that while Presidential Decree No. 87 may serve as the general law upon which a
service contract for petroleum exploration and extraction may be authorized, as will be discussed below, the
exploitation and utilization of this energy resource in the present case may be allowed only through a law passed by
Congress, since the Tañon Strait is a NIPAS 75 area.
2. President was not the signatory to SC-46 and the same was not submitted to Congress
While the Court finds that Presidential Decree No. 87 is sufficient to satisfy the requirement of a general law, the
absence of the two other conditions, that the President be a signatory to SC-46, and that Congress be notified of
such contract, renders it null and void.
As SC-46 was executed in 2004, its terms should have conformed not only to the provisions of Presidential Decree
No. 87, but also to those of the 1987 Constitution. The Civil Code provides: ARTICLE 1306. The contracting parties
may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy. (Italics ours.)
In Heirs of San Miguel v. Court of Appeals, 76 this Court held that:
It is basic that the law is deemed written into every contract. Although a contract is the law between the parties, the
provisions of positive law which regulate contracts are deemed written therein and shall limit and govern the
relations between the parties. x x x. (Citations omitted.) Paragraph 4, Section 2, Article XII of the 1987 Constitution
requires that the President himself enter into any service contract for the exploration of petroleum. SC-46 appeared
to have been entered into and signed only by the DOE through its then Secretary, Vicente S. Perez, Jr., contrary to the
said constitutional requirement. Moreover, public respondents have neither shown nor alleged that Congress was
subsequently notified of the execution of such contract.
Public respondents' implied argument that based on the "alter ego principle," their acts are also that of then
President Macapagal-Arroyo's, cannot apply in this case. In Joson v. Torres, 77 we explained the concept of the alter
ego principle or the doctrine of qualified political agency and its limit in this wise:
Under this doctrine, which recognizes the establishment of a single executive, all executive and administrative
organizations are adjuncts of the Executive Department, the heads of the various executive departments are
assistants and agents of the Chief Executive, and, except in cases where the Chief Executive is required by the
Constitution or law to act in person or the exigencies of the situation demand that he act personally, the multifarious
executive and administrative functions of the Chief Executive are performed by and through the executive
departments, and the acts of the Secretaries of such departments, performed and promulgated in the regular course
of business, are, unless disapproved or reprobated by the Chief Executive presumptively the acts of the Chief
Executive. (Emphasis ours, citation omitted.)
While the requirements in executing service contracts in paragraph 4, Section 2 of Article XII of the 1987 Constitution
seem like mere formalities, they, in reality, take on a much bigger role. As we have explained in La Bugal, they are the
safeguards put in place by the framers of the Constitution to "eliminate or minimize the abuses prevalent during the
martial law regime."78 Thus, they are not just mere formalities, which will only render a contract unenforceable but
not void, if not complied with. They are requirements placed, not just in an ordinary statute, but in the fundamental
law, the non-observance of which will nullify the contract. Elucidating on the concept of a "constitution," this Court,
in Manila Prince Hotel v. Government Service Insurance System, 79 held:
A constitution is a system of fundamental laws for the governance and administration of a nation. It is supreme,
imperious, absolute and unalterable except by the authority from which it emanates. It has been defined as the
fundamental and paramount law of the nation. It prescribes the permanent framework of a system of government,
assigns to the different departments their respective powers and duties, and establishes certain fixed principles on
which government is founded. The fundamental conception in other words is that it is a supreme law to which all
other laws must conform and in accordance with which all private rights must be determined and all public authority
administered. Under the doctrine of constitutional supremacy, if a law or contract violates any norm of the
constitution that law or contract whether promulgated by the legislative or by the executive branch or entered into
by private persons for private purposes is null and void and without any force and effect. Thus, since the Constitution
is the fundamental, paramount and supreme law of the nation, it is deemed written in every statute and contract.
(Emphasis ours.)
As this Court has held in La Bugal, our Constitution requires that the President himself be the signatory of service
agreements with foreign-owned corporations involving the exploration, development, and utilization of our minerals,
petroleum, and other mineral oils. This power cannot be taken lightly.
In this case, the public respondents have failed to show that the President had any participation in SC-46. Their
argument that their acts are actually the acts of then President Macapagal-Arroyo, absent proof of her disapproval,
must fail as the requirement that the President herself enter into these kinds of contracts is embodied not just in any
ordinary statute, but in the Constitution itself. These service contracts involving the exploitation, development, and
utilization of our natural resources are of paramount interest to the present and future generations. Hence,
safeguards were put in place to insure that the guidelines set by law are meticulously observed and likewise to
eradicate the corruption that may easily penetrate departments and agencies by ensuring that the President has
authorized or approved of these service contracts herself.
Even under the provisions of Presidential Decree No. 87, it is required that the Petroleum Board, now the DOE,
obtain the President's approval for the execution of any contract under said statute, as shown in the following
provision:
SECTION 5. Execution of contract authorized in this Act. -Every contract herein authorized shall, subject to the
approval of the President, be executed by the Petroleum Board created in this Act, after due public notice pre-
qualification and public bidding or concluded through negotiations. In case bids are requested or if requested no bid
is submitted or the bids submitted are rejected by the Petroleum Board for being disadvantageous to the
Government, the contract may be concluded through negotiation.
In opening contract areas and in selecting the best offer for petroleum operations, any of the following alternative
procedures may be resorted to by the Petroleum Board, subject to prior approval of the President[.]
Even if we were inclined to relax the requirement in La Bugal to harmonize the 1987 Constitution with the
aforementioned provision of Presidential Decree No. 87, it must be shown that the government agency or
subordinate official has been authorized by the President to enter into such service contract for the government.
Otherwise, it should be at least shown that the President subsequently approved of such contract explicitly. None of
these circumstances is evident in the case at bar.
Service Contract No. 46 vis-a-vis Other Laws
Petitioners in G.R. No. 180771 claim that SC-46 violates Section 27 of Republic Act. No. 9147 or the Wildlife
Resources Conservation and Protection Act, which bans all marine exploration and exploitation of oil and gas
deposits. They also aver that Section 14 of Republic Act No. 7586 or the National Integrated Protected Areas System
Act of 1992 (NIPAS Act), which allows the exploration of protected areas for the purpose of information-gathering,
has been repealed by Section 27 of Republic Act No. 914 7. The said petitioners further claim that SC-46 is anathema
to Republic Act No. 8550 or the Philippine Fisheries Code of 1998, which protects the rights of the fisherfolk in the
preferential use of municipal waters, with the exception being limited only to research and survey activities. 80
The FIDEC, for its part, argues that to avail of the exceptions under Section 14 of the NIP AS Act, the gathering of
information must be in accordance with a DENR-approved program, and the exploitation and utilization of energy
resources must be pursuant to a general law passed by Congress expressly for that purpose. Since there is neither a
DENR approved program nor a general law passed by Congress, the seismic surveys and oil drilling operations were
all done illegally.81 The FIDEC likewise contends that SC-46 infringes on its right to the preferential use of the
communal fishing waters as it is denied free access within the prohibited zone, in violation not only of the Fisheries
Code but also of the 1987 Constitutional provisions on subsistence fisherfolk and social justice. 82 Furthermore, the
FIDEC believes that the provisions in Presidential Decree No. 87, which allow offshore drilling even in municipal
waters, should be deemed to have been rendered inoperative by the provisions of Republic Act No. 8550 and
Republic Act No. 7160, which reiterate the social justice provisions of the Constitution. 83
The public respondents invoke the rules on statutory construction and argue that Section 14 of the NIP AS Act is a
more particular provision and cannot be deemed to have been repealed by the more general prohibition in Section
27 of Republic Act No. 9147. They aver that Section 14, under which SC-46 falls, should instead be regarded as an
exemption to Section 27.84 Addressing the claim of petitioners in G.R. No. 180771 that there was a violation of
Section 27 of Republic Act No. 9147, the public respondents assert that what the section prohibits is the exploration
of minerals, which as defined in the Philippine Mining Act of 1995, exclude energy materials such as coal, petroleum,
natural gas, radioactive materials and geothennal energy. Thus, since SC-46 involves oil and gas exploration, Section
27 does not apply.85
The public respondents defend the validity of SC-46 and insist that it does not grant exclusive fishing rights to JAPEX;
hence, it does not violate the rule on preferential use of municipal waters. Moreover, they allege that JAPEX has not
banned fishing in the project area, contrary to the FIDEC's claim. The public respondents also contest the attribution
of the declining fish catch to the seismic surveys and aver that the allegation is unfounded. They claim that according
to the Bureau of Fisheries and Aquatic Resources' fish catch data, the reduced fish catch started in the 1970s due to
destructive fishing practices.86
Ruling of the Court
On the legality of Service Contract No. 46
vis-a-vis Other Laws
Although we have already established above that SC-46 is null and void for being violative of the 1987 Constitution, it
is our duty to still rule on the legality of SC-46 vis-a-vis other pertinent laws, to serve as a guide for the Government
when executing service contracts involving not only the Tafion Strait, but also other similar areas. While the
petitioners allege that SC-46 is in violation of several laws, including international ones, their arguments focus
primarily on the protected status of the Tañon Strait, thus this Court will concentrate on those laws that pertain
particularly to the Tañon Strait as a protected seascape.
The Tañon Strait is a narrow passage of water bounded by the islands of Cebu in the East and Negros in the West. It
harbors a rich biodiversity of marine life, including endangered species of dolphins and whales. For this reason,
former President Fidel V. Ramos declared the Tañon Strait as a protected seascape in 1998 by virtue of Proclamation
No. 1234 -Declaring the Tañon Strait situated in the Provinces of Cebu, Negros Occidental and Negros Oriental as a
Protected Area pursuant to the NIP AS Act and shall be known as Tañon Strait Protected Seascape. During former
President Joseph E. Estrada's time, he also constituted the Tañon Strait Commission via Executive Order No. 76 to
ensure the optimum and sustained use of the resources in that area without threatening its marine life. He followed
this with Executive Order No. 177,87 wherein he included the mayor of Negros Occidental Municipality/City as a
member of the Tañon Strait Commission, to represent the LGUs concerned. This Commission, however, was
subsequently abolished in 2002 by then President Gloria Macapagal-Arroyo, via Executive Order No. 72. 88
True to the constitutional policy that the "State shall protect and advance the right of the people to a balanced and
healthful ecology in accord with the rhythm and harmony of nature," 89 Congress enacted the NIP AS Act to secure the
perpetual existence of all native plants and animals through the establishment of a comprehensive system of
integrated protected areas. These areas possess common ecological values that were incorporated into a holistic plan
representative of our natural heritage. The system encompasses outstandingly remarkable areas and biologically
important public lands that are habitats of rare and endangered species of plants and animals, biogeographic zones
and related ecosystems, whether terrestrial, wetland, or marine. 90 It classifies and administers all the designated
protected areas to maintain essential ecological processes and life-support systems, to preserve genetic diversity, to
ensure sustainable use of resources found therein, and to maintain their natural conditions to the greatest extent
possible.91 The following categories of protected areas were established under the NIPAS Act:
a. Strict nature reserve;
b. Natural park;
c. Natural monument;
d. Wildlife sanctuary;
e. Protected landscapes and seascapes;
f. Resource reserve;
g. Natural biotic areas; and
h. Other categories established by law, conventions or international agreements which the Philippine
Government is a signatory. 92
Under Section 4 of the NIP AS Act, a protected area refers to portions of land and water, set aside due to their unique
physical and biological significance, managed to enhance biological diversity and protected against human
exploitation.
The Tañon Strait, pursuant to Proclamation No. 1234, was set aside and declared a protected area under the category
of Protected Seascape. The NIP AS Act defines a Protected Seascape to be an area of national significance
characterized by the harmonious interaction of man and land while providing opportunities for public enjoyment
through recreation and tourism within the normal lifestyle and economic activity of this areas; 93 thus a management
plan for each area must be designed to protect and enhance the permanent preservation of its natural
conditions.94 Consistent with this endeavor is the requirement that an Environmental Impact Assessment (EIA) be
made prior to undertaking any activity outside the scope of the management plan. Unless an ECC under the EIA
system is obtained, no activity inconsistent with the goals of the NIP AS Act shall be implemented. 95
The Environmental Impact Statement System (EISS) was established in 1978 under Presidential Decree No. 1586. It
prohibits any person, partnership or corporation from undertaking or operating any declared environmentally critical
project or areas without first securing an ECC issued by the President or his duly authorized representative. 96Pursuant
to the EISS, which called for the proper management of environmentally critical areas, 97 Proclamation No. 214698 was
enacted, identifying the areas and types of projects to be considered as environmentally critical and within the scope
of the EISS, while DENR Administrative Order No. 2003-30 provided for its Implementing Rules and Regulations (IRR).
DENR Administrative Order No. 2003-30 defines an environmentally critical area as "an area delineated as
environmentally sensitive such that significant environmental impacts are expected if certain types of proposed
projects or programs are located, developed, or implemented in it"; 99 thus, before a project, which is "any activity,
regardless of scale or magnitude, which may have significant impact on the environment," 100 is undertaken in it, such
project must undergo an EIA to evaluate and predict the likely impacts of all its stages on the environment. 101An EIA is
described in detail as follows:
h. Environmental Impact Assessment (EIA) - process that involves evaluating and predicting the likely impacts of a
project (including cumulative impacts) on the environment during construction, commissioning, operation and
abandonment. It also includes designing appropriate preventive, mitigating and enhancement measures addressing
these consequences to protect the environment and the community's welfare. The process is undertaken by, among
others, the project proponent and/or EIA Consultant, EMB, a Review Committee, affected communities and other
stakeholders.102
Under Proclamation No. 2146, the Tañon Strait is an environmentally critical area, having been declared as a
protected area in 1998; therefore, any activity outside the scope of its management plan may only be implemented
pursuant to an ECC secured after undergoing an EIA to determine the effects of such activity on its ecological system.
The public respondents argue that they had complied with the procedures in obtaining an ECC 103 and that SC-46 falls
under the exceptions in Section 14 of the NIP AS Act, due to the following reasons:
1) The Tañon Strait is not a strict nature reserve or natural park;
2) Exploration is only for the purpose of gathering information on possible energy resources; and 3)
Measures are undertaken to ensure that the exploration is being done with the least damage to surrounding
areas.104
We do not agree with the arguments raised by the public respondents.
Sections 12 and 14 of the NIPAS Act read:
SECTION 12. Environmental Impact Assessment. - Proposals for activities which are outside the scope of the
management plan for protected areas shall be subject to an environmental impact assessment as required by law
before they are adopted, and the results thereof shall be taken into consideration in the decision-making process.
No actual implementation of such activities shall be allowed without the required Environmental Compliance
Certificate (ECC) under the Philippine Environmental Impact Assessment (EIA) system. In instances where such
activities are allowed to be undertaken, the proponent shall plan and carry them out in such manner as will minimize
any adverse effects and the preventive and remedial action when appropriate. The proponent shall be liable for any
damage due to lack of caution or indiscretion.
SECTION 14. Survey for Energy Resources. - Consistent with the policies declared in Section 2 hereof, protected areas,
except strict nature reserves and natural parks, may be subjected to exploration only for the purpose of gathering
information on energy resources and only if such activity is carried out with the least damage to surrounding areas.
Surveys shall be conducted only in accordance with a program approved by the DENR, and the result of such surveys
shall be made available to the public and submitted to the President for recommendation to Congress. Any
exploitation and utilization of energy resources found within NIP AS areas shall be allowed only through a law passed
by Congress.
It is true that the restrictions found under the NIP AS Act are not without exceptions. However, while an exploration
done for the purpose of surveying for energy resources is allowed under Section 14 of the NIP AS Act, this does not
mean that it is exempt from the requirement to undergo an EIA under Section 12. In Sotto v. Sotto, 105 this Court
explained why a statute should be construed as a whole:
A statute is passed as a whole and not in parts or sections and is animated by one general purpose and intent.
Consequently each part or section should be construed in connection with every other part or section and so as to
produce a harmonious whole. It is not proper to confine the attention to the one section to be construed. It is always
an unsafe way of construing a statute or contract to divide it by a process of etymological dissection, into separate
words, and then apply to each, thus separated from its context, some particular definition given by lexicographers,
and then reconstruct the instrument upon the basis of these definitions. An instrument must always be construed as
a whole, and the particular meaning to be attached to any word or phrase is usually to be ascertained from the
context, the nature of the subject treated of and the purpose or intention of the parties who executed the contract,
or of the body which enacted or framed the statute or constitution. x x x.
Surveying for energy resources under Section 14 is not an exemption from complying with the EIA requirement in
Section 12; instead, Section 14 provides for additional requisites before any exploration for energy resources may be
done in protected areas.
The rationale for such additional requirements are incorporated m Section 2 of the NIP AS Act, to wit:
SECTION 2. Declaration of Policy - Cognizant of the profound impact of man's activities on all components of the
natural environment particularly the effect of increasing population, resource exploitation and industrial
advancement and recognizing the critical importance of protecting and maintaining the natural biological and
physical diversities of the environment notably on areas with biologically unique features to sustain human life and
development, as well as plant and animal life, it is hereby declared the policy of the State to secure for the Filipino
people of present and future generations the perpetual existence of all native plants and animals through the
establishment of a comprehensive system of integrated protected areas within the classification of national park as
provided for in the Constitution.
It is hereby recognized that these areas, although distinct in features, possess common ecological values that may be
incorporated into a holistic plan representative of our natural heritage; that effective administration of this area is
possible only through cooperation among national government, local government and concerned private
organizations; that the use and enjoyment of these protected areas must be consistent with the principles of
biological diversity and sustainable development.
To this end, there is hereby established a National Integrated Protected Areas System (NIPAS), which shall encompass
outstandingly remarkable areas and biologically important public lands that are habitats of rare and endangered
species of plants and animals, biogeographic zones and related ecosystems, whether terrestrial, wetland or marine,
all of which shall be designated as "protected areas."
The public respondents themselves admitted that JAPEX only started to secure an ECC prior to the second sub-phase
of SC-46, which required the drilling of an oil exploration well. This means that when the seismic surveys were done
in the Tañon Strait, no such environmental impact evaluation was done. Unless seismic surveys are part of the
management plan of the Tañon Strait, such surveys were done in violation of Section 12 of the NIPAS Act and Section
4 of Presidential Decree No. 1586, which provides:
Section 4. Presidential Proclamation of Environmentally Critical Areas and Projects. - The President of the Philippines
may, on his own initiative or upon recommendation of the National Environmental Protection Council, by
proclamation declare certain projects, undertakings or areas in the country as environmentally critical. No person,
partnership or corporation shall undertake or operate any such declared environmentally critical project or area
without first securing an Environmental Compliance Certificate issued by the President or his duly authorized
representative. For the proper management of said critical project or area, the President may by his proclamation
reorganize such government offices, agencies, institutions, corporations or instrumentalities including the re-
alignment of government personnel, and their specific functions and responsibilities.
For the same purpose as above, the Ministry of Human Settlements shall: (a) prepare the proper land or water use
pattern for said critical project(s) or area(s); (b) establish ambient environmental quality standards; (c) develop a
program of environmental enhancement or protective measures against calamitous factors such as earthquakes,
floods, water erosion and others, and (d) perform such other functions as may be directed by the President from
time to time.
The respondents' subsequent compliance with the EISS for the second sub-phase of SC-46 cannot and will not cure
this violation. The following penalties are provided for under Presidential Decree No. 1586 and the NIPAS Act.
Section 9 of Presidential Decree No. 1586 provides for the penalty involving violations of the ECC requirement:
Section 9. Penalty for Violation. - Any person, corporation or partnership found violating Section 4 of this Decree, or
the terms and conditions in the issuance of the Environmental Compliance Certificate, or of the standards, rules and
regulations issued by the National Environmental Protection Council pursuant to this Decree shall be punished by the
suspension or cancellation of his/its certificates and/or a fine in an amount not to exceed Fifty Thousand Pesos
(₱50,000.00) for every violation thereof, at the discretion of the National Environmental Protection Council.
(Emphasis supplied.)
Violations of the NIP AS Act entails the following fines and/or imprisonment under Section 21:
SECTION 21. Penalties. - Whoever violates this Act or any rules and regulations issued by the Department pursuant to
this Act or whoever is found guilty by a competent court of justice of any of the offenses in the preceding section
shall be fined in the amount of not less than Five thousand pesos (₱5,000) nor more than Five hundred thousand
pesos (₱500,000), exclusive of the value of the thing damaged or imprisonment for not less than one (1) year but not
more than six (6) years, or both, as determined by the court: Provided, that, if the area requires rehabilitation or
restoration as determined by the court, the offender shall be required to restore or compensate for the restoration to
the damages: Provided, further, that court shall order the eviction of the offender from the land and the forfeiture in
favor of the Government of all minerals, timber or any species collected or removed including all equipment, devices
and firearms used in connection therewith, and any construction or improvement made thereon by the offender. If
the offender is an association or corporation, the president or manager shall be directly responsible for the act of his
employees and laborers: Provided, finally, that the DENR may impose administrative fines and penalties consistent
with this Act. (Emphases supplied.) Moreover, SC-46 was not executed for the mere purpose of gathering information
on the possible energy resources in the Tañon Strait as it also provides for the parties' rights and obligations relating
to extraction and petroleum production should oil in commercial quantities be found to exist in the area. While
Presidential Decree No. 87 may serve as the general law upon which a service contract for petroleum exploration and
extraction may be authorized, the exploitation and utilization of this energy resource in the present case may be
allowed only through a law passed by Congress, since the Tañon Strait is a NIPAS area. 106Since there is no such law
specifically allowing oil exploration and/or extraction in the Tañon Strait, no energy resource exploitation and
utilization may be done in said protected seascape.
In view of the foregoing premises and conclusions, it is no longer necessary to discuss the other issues raised in these
consolidated petitions.
WHEREFORE, the Petitions in G.R. Nos. 180771 and 181527 are GRANTED, Service Contract No. 46 is hereby declared
NULL AND VOID for violating the 1987 Constitution, Republic Act No. 7586, and Presidential Decree No. 1586.
SO ORDERED.
CONCURRING OPINION
"Until one has loved an animal,
a part of one 's soul remains unawakened."
Anatole France
LEONEN, J.:
I concur in the result, with the following additional reasons.
I
In G.R. No. 180771, petitioners Resident Marine Mammals allegedly bring their case in their personal capacity,
alleging that they stand to benefit or be injured from the judgment on the issues. The human petitioners implead
themselves in a representative capacity "as legal guardians of the lesser life-forms and as responsible stewards of
God's Creations."1 They use Oposa v. Factoran, Jr.2 as basis for their claim, asserting their right to enforce
international and domestic environmental laws enacted for their benefit under the concept of stipulation pour
autrui.3As the representatives of Resident Marine Mammals, the human petitioners assert that they have the
obligation to build awareness among the affected residents of Tañon Strait as well as to protect the environment,
especially in light of the government's failure, as primary steward, to do its duty under the doctrine of public trust. 4
Resident Marine Mammals and the human petitioners also assert that through this case, this court will have the
opportunity to lower the threshold for locus standi as an exercise of "epistolary jurisdiction." 5
The zeal of the human petitioners to pursue their desire to protect the environment and to continue to define
environmental rights in the context of actual cases is commendable. However, the space for legal creativity usually
required for advocacy of issues of the public interest is not so unlimited that it should be allowed to undermine the
other values protected by current substantive and procedural laws. Even rules of procedure as currently formulated
set the balance between competing interests. We cannot abandon these rules when the necessity is not clearly and
convincingly presented.
The human petitioners, in G.R. No. 180771, want us to create substantive and procedural rights for animals through
their allegation that they can speak for them. Obviously, we are asked to accept the premises that (a) they were
chosen by the Resident Marine Mammals of Tañon Strait; (b) they were chosen by a representative group of all the
species of the Resident Marine Mammals; (c) they were able to communicate with them; and (d) they received clear
consent from their animal principals that they would wish to use human legal institutions to pursue their interests.
Alternatively, they ask us to acknowledge through judicial notice that the interests that they, the human petitioners,
assert are identical to what the Resident Marine Mammals would assert had they been humans and the legal
strategies that they invoked are the strategies that they agree with.
In the alternative, they want us to accept through judicial notice that there is a relationship of guardianship between
them and all the resident mammals in the affected ecology.
Fundamental judicial doctrines that may significantly change substantive and procedural law cannot be founded on
feigned representation.
Instead, I agree that the human petitioners should only speak for themselves and already have legal standing to sue
with respect to the issue raised in their pleading. The rules on standing have already been liberalized to take into
consideration the difficulties in the assertion of environmental rights. When standing becomes too liberal, this can be
the occasion for abuse.
II
Rule 3, Section 1 of the 1997 Rules of Civil Procedure, in part, provides:
SECTION 1. Who may be parties; plaintiff and defendant. - Only natural or juridical persons, or entities authorized by
law may be parties in a civil action.
The Rules provide that parties may only be natural or juridical persons or entities that may be authorized by statute
to be parties in a civil action.
Basic is the concept of natural and juridical persons in our Civil Code:
ARTICLE 37. Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in every natural
person and is lost only through death. Capacity to act, which is the power to do acts with legal effect, is acquired and
may be lost.
Article 40 further defines natural persons in the following manner:
ARTICLE 40. Birth determines personality; but the conceived child shall be considered born for all purposes that are
favorable to it, provided it be born later with the conditions specified 'in the following article.
Article 44, on the other hand, enumerates the concept of a juridical person:
ARTICLE 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose, created by law; their
personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a
juridical personality, separate and distinct from that of each shareholder, partner or member.
Petitioners in G.R. No. 180771 implicitly suggest that we amend, rather than simply construe, the provisions of the
Rules of Court as well as substantive law to accommodate Resident Marine Mammals or animals. This we cannot do.
Rule 3, Section 2 of the 1997 Rules of Civil Procedure further defines real party in interest:
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. (2a) 6
A litigant who stands to benefit or sustain an injury from the judgment of a case is a real party in interest. 7 When a
case is brought to the courts, the real party in interest must show that another party's act or omission has caused a
direct injury, making his or her interest both material and based on an enforceable legal right. 8
Representatives as parties, on the other hand, are parties acting in representation of the real party in interest, as
defined in Rule 3, Section 3 of the 1997 Rules of Civil Procedure:
SEC. 3. Representatives as parties. - Where the action is allowed to be prosecuted or defended by a representative or
someone acting in a fiduciary capacity, the beneficiary shall be included in the title of the case and shall be deemed
to be the real party in interest. A representative may be a trustee of an express rust, a guardian, an executor or
administrator, or a party authorized by law or these Rules. An agent acting in his own name and for the benefit of an
undisclosed principal may sue or be sued without joining the principal except when the contract involves things
belonging to the principal.(3a)9
The rule is two-pronged. First, it defines .a representative as a party who is not bound to directly or actually benefit
or suffer from the judgment, but instead brings a case in favor of an identified real party in interest. 10 The
representative is an outsider to the cause of action. Second, the rule provides a list of who may be considered as
"representatives." It is not an exhaustive list, but the rule limits the coverage only to those authorized by law or the
Rules of Court.11
These requirements should apply even in cases involving the environment, which means that for the Petition of the
human petitioners to prosper, they must show that (a) the Resident Marine Mammals are real parties in interest; and
(b) that the human petitioners are authorized by law or the Rules to act in a representative capacity.
The Resident Marine Mammals are comprised of "toothed whales, dolphins, porpoises, and other cetacean species
inhabiting Tañon Strait."12 While relatively new in Philippine jurisdiction, the issue of whether animals have legal
standing before courts has been the subject of academic discourse in light of the emergence of animal and
environmental rights.
In the United States, anim4l rights advocates have managed to establish a system which Hogan explains as the
"guardianship model for nonhuman animals": 13
Despite Animal Lovers, there exists a well-established system by which nonhuman animals may obtain judicial review
to enforce their statutory rights and protections: guardianships. With court approval, animal advocacy organizations
may bring suit on behalf of nonhuman animals in the same way court-appointed guardians bring suit on behalf of
mentally-challenged humans who possess an enforceable right but lack the ability to enforce it themselves.
In the controversial but pivotal Should Trees Have Standing?-Toward Legal Rights for Natural Objects, Christopher D.
Stone asserts that the environment should possess the right to seek judicial redress even though it is incapable of
representing itself. While asserting the rights of
speechless entities such as the environment or nonhuman animals certainly poses legitimate challenges - such as
identifying the proper spokesman -the American legal system is already well-equipped with a reliable mechanism by
which nonhumans may obtain standing via a judicially established guardianship. Stone notes that other speechless -
and nonhuman - entities such as corporations, states, estates, and municipalities have standing to bring suit on their
own behalf. There is little reason to fear abuses under this regime as procedures for removal and substitution,
avoiding conflicts of interest, and termination of a guardianship are well established.
In fact, the opinion in Animal Lovers suggests that such an arrangement is indeed possible. The court indicated that
AL VA might have obtained standing in its own right if it had an established history of dedication to the cause of the
humane treatment of animals. It noted that the Fund for Animals had standing and indicated that another more well-
known advocacy organization might have had standing as well. The court further concluded that an organization's
standing is more than a derivative of its history, but history is a relevant consideration where organizations are not
well-established prior to commencing legal action. ALVA was not the proper plaintiff because it could not identify
previous activities demonstrating its recognized activism for and commitment to the dispute independent of its
desire to pursue legal action. The court's analysis suggests that a qualified organization with a demonstrated
commitment to a cause could indeed bring suit on behalf of the speechless in the form of a court-sanctioned
guardianship.
This Comment advocates a shift in contemporary standing doctrine to empower non-profit organizations with an
established history of dedication to the cause and relevant expertise to serve as official guardians ad !item on behalf
of nonhuman animals interests. The American legal system has numerous mechanisms for representing the rights
and interests of nonhumans; any challenges inherent in extending these pre-existing mechanisms to nonhuman
animals are minimal compared to an interest in the proper administration of justice. To adequately protect the
statutory rights of nonhuman animals, the legal system must recognize those statutory rights independent of humans
and provide a viable means of enforcement. Moreover, the idea of a guardianship for speechless plaintiffs is not new
and has been urged on behalf of the natural environment. 'Such a model is even more compelling as applied to
nonhuman animals, because they are sentient beings with the ability to feel pain and exercise rational thought. Thus,
animals are qualitatively different from other legally protected nonhumans and therefore have interests deserving
direct legal protection.
Furthermore, the difficulty of enforcing the statutory rights of nonhuman animals threatens the integrity of the
federal statutes designed to protect them, essentially rendering them meaningless. Sensing that laws protecting
nonhuman animals would be difficult to enforce, Congress provided for citizen suit provisions: the most well-known
example is found in the Endangered Species Act (ESA). Such provisions are evidence of legislative intent to encourage
civic participation on behalf of nonhuman animals. Our law of standing should reflect this intent and its implication
that humans are suitable representatives of the natural environment, which includes nonhuman animals. 14 (Emphasis
supplied, citation omitted)
When a court allows guardianship as a basis of representation, animals are considered as similarly situated as
individuals who have enforceable rights but, for a legitimate reason (e.g., cognitive disability), are unable to bring suit
for themselves. They are also similar to entities that by their very nature are incapable of speaking for themselves
(e.g., corporations, states, and others).
In our jurisdiction, persons and entities are recognized both in law and the Rules of Court as having standing to sue
and, therefore, may be properly represented as real parties in interest. The same cannot be said about animals.
Animals play an important role in households, communities, and the environment. While we, as humans, may feel
the need to nurture and protect them, we cannot go as far as saying we represent their best interests and can,
therefore, speak for them before the courts. As humans, we cannot be so arrogant as to argue that we know the
suffering of animals and that we know what remedy they need in the face of an injury.
Even in Hogan's discussion, she points out that in a case before the United States District Court for the Central District
of California, Animal Lovers Volunteer Ass'n v. Weinberger, 15 the court held that an emotional response to what
humans perceive to be an injury inflicted on an animal is not within the "zone-of-interest" protected by law. 16Such
sympathy cannot stand independent of or as a substitute for an actual injury suffered by the claimant. 17 The ability to
represent animals was further limited in that case by the need to prove "genuine dedication" to asserting and
protecting animal rights:
What ultimately proved fatal to ALVA 's claim, however, was the court's assertion that standing doctrine further
required ALVA to differentiate its genuine dedication to the humane treatment of animals from the general disdain
for animal cruelty shared by the public at large. In doing so, the court found ALVA 's asserted organizational injury to
be abstract and thus relegated ALVA to the ranks of the "concerned bystander. "
....
In fact, the opinion in Animal Lovers suggests that such an arrangement is indeed possible. The court indicated that
ALVA might have obtained standing in its own right if it had an established history of dedication to the cause of the
humane treatment of animals. It noted that the Fund for Animals had standing and indicated that another more well-
known advocacy organization might have had standing as well. The court further concluded that an organization's
standing is more than a derivative of its history, but history is a relevant consideration where organizations are not
well-established prior to commencing legal action. ALVA was not the proper plaintiff because it could not identify
previous activities demonstrating its recognized activism for and commitment to the dispute independent of its
desire to pursue legal action. The court's analysis suggests that a qualified organization with a demonstrated
commitment to a cause could indeed bring suit on behalf of the speechless in the form of a court-sanctioned
guardianship.18(Emphasis supplied, citation omitted)
What may be argued as being parallel to this concept of guardianship is the principle of human stewardship over the
environment in a citizen suit under the Rules of Procedure for Environmental Cases. A citizen suit allows any Filipino
to act as a representative of a party who has enforceable rights under environmental laws before Philippine courts,
and is defined in Section 5: .
SEC. 5. Citizen suit. - Any Filipino citizen in representation of others, including minors or generations yet unborn, may
file an action to enforce rights or obligations under environmental laws. Upon the filing of a citizen suit, the court
shall issue an order which shall contain a brief description of the cause of action and the reliefs prayed for, requiring
all interested parties to manifest their interest to intervene in the case within fifteen (15) days from notice thereof.
The plaintiff may publish the order once in a newspaper of a general circulation in the Philippines or furnish all
affected barangays copies of said order.
There is no valid reason in law or the practical requirements of this case to implead and feign representation on
behalf of animals. To have done so betrays a very anthropocentric view of environmental advocacy. There is no way
that we, humans, can claim to speak for animals let alone present that they would wish to use our court system,
which is designed to ensure that humans seriously carry their responsibility including ensuring a viable ecology for
themselves, which of course includes compassion for all living things.
Our rules on standing are sufficient and need not be further relaxed.
In Arigo v. Swift,19 I posed the possibility of further reviewing the broad interpretation we have given to the rule on
standing. While representatives are not required to establish direct injury on their part, they should only be allowed
to represent after complying with the following: [I]t is imperative for them to indicate with certainty the injured
parties on whose behalf they bring the suit. Furthermore, the interest of those they represent must be based upon
concrete legal rights. It is not sufficient to draw out a perceived interest from a general, nebulous idea of a potential
"injury."20
I reiterate my position in Arigo v. Swift and in Paje v. Casiño 21 regarding this rule alongside the appreciation of legal
standing in Oposa v. Factoran22 for environmental cases. In Arigo, I opined that procedural liberality, especially in
cases brought by representatives, should be used with great caution:
Perhaps it is time to revisit the ruling in Oposa v. Factoran.
That case was significant in that, at that time, there was need to call attention to environmental concerns in light of
emerging international legal principles. While "intergenerational responsibility" is a noble principle, it should not be
used to obtain judgments that would preclude future generations from making their own assessment based on their
actual concerns. The present generation must restrain itself from assuming that it can speak best for those who will
exist at a different time, under a different set of circumstances. In essence, the unbridled resort to representative suit
will inevitably result in preventing future generations from protecting their own rights and pursuing their own
interests and decisions. It reduces the autonomy of our children and our children 's children. Even before they are
born, we again restricted their ability to make their own arguments.
It is my opinion that, at best, the use of the Oposa doctrine in environmental cases should be allowed only when a)
there is a clear legal basis for the representative suit; b) there are actual concerns based squarely upon an existing
legal right; c) there is no possibility of any countervailing interests existing within the population represented or
those that are yet to be born; and d) there is an absolute necessity for such standing because there is a threat of
catastrophe so imminent that an immediate protective measure is necessary. Better still, in the light of its costs and
risks, we abandon the precedent all together. 23 (Emphasis in the original)
Similarly, in Paje:
A person cannot invoke the court's jurisdiction if he or she has no right or interest to protect. He or she who invokes
the court's jurisdiction must be the "owner of the right sought to be enforced." In other words, he or she must have a
cause of action. An action may be dismissed on the ground of lack of cause of action if the person who instituted it is
not the real party in interest. 24 The term "interest" under the Rules of Court must refer to a material interest that is
not merely a curiosity about or an "interest in the question involved." The interest must be present and substantial. It
is not a mere expectancy or a future, contingent interest.
A person who is not a real party in interest may institute an action if he or she is suing as representative of a .real
party in interest. When an action is prosecuted or defended by a representative, that representative is not and does
not become the real party in interest. The person represented is deemed the real party in interest. The
representative remains to be a third party to the action instituted on behalf of another.
....
To sue under this rule, two elements must be present: "(a) the suit is brought on behalf of an identified party whose
right has been violated, resulting in some form of damage, and (b) the representative authorized by law or the Rules
of Court to represent the victim."
The Rules of Procedure for Environmental Cases allows filing of a citizen's suit. A citizen's suit under this rule allows
any Filipino citizen to file an action for the enforcement of environmental law on behalf of minors or generations yet
unborn. It is essentially a representative suit that allows persons who are not real parties in interest to institute
actions on behalf of the real party in interest.
The expansion of what constitutes "real party in interest" to include minors and generations yet unborn is a
recognition of this court's ruling in Oposa v. Factoran. This court recognized the capacity of minors (represented by
their parents) to file a class suit on behalf of succeeding generations based on the concept of intergenerational
responsibility to ensure the future generation's access to and enjoyment of [the] country's natural resources.
To allow citizen's suits to enforce environmental rights of others, including future generations, is dangerous for three
reasons:
First, they run the risk of foreclosing arguments of others who are unable to take part in the suit, putting into.
question its representativeness. Second, varying interests may potentially result in arguments that are bordering on
political issues, the resolutions of which do not fall upon this court. Third, automatically allowing a class or citizen's
suit on behalf of minors and generations yet unborn may result in the oversimplification of what may be a complex
issue, especially in light of the impossibility of determining future generation's true interests on the matter.
In citizen's suits, persons who may have no interest in the case may file suits for others. Uninterested persons will
argue for the persons they represent, and the court will decide based on their evidence and arguments. Any decision
by the court will be binding upon the beneficiaries, which in this case are the minors and the future generations. The
court's decision will be res judicata upon them and conclusive upon the issues presented. 25
The danger in invoking Oposa v. Factoran to justify all kinds of environmental claims lies in its potential to diminish
the value of legitimate environmental rights. Extending the application of "real party in interest" to the Resident
Marine Mammals, or animals in general, through a judicial pronouncement will potentially result in allowing
petitions based on mere concern rather than an actual enforcement of a right. It is impossible for animals to tell
humans what their concerns are. At best, humans can only surmise the extent of injury inflicted, if there be any.
Petitions invoking a right and seeking legal redress before this court cannot be a product of guesswork, and
representatives have the responsibility to ensure that they bring "reasonably cogent, rational, scientific, well-founded
arguments"26 on behalf of those they represent.
Creative approaches to fundamental problems should be welcome. However, they should be considered carefully so
that no unintended or unwarranted consequences should follow. I concur with the approach of Madame Justice
Teresita J. Leonardo-De Castro in her brilliant ponencia as it carefully narrows down the doctrine in terms of standing.
Resident Marine Mammals and the human petitioners have no legal standing to file any kind of petition.
However, I agree that petitioners in G.R. No. 181527, namely, Central Visayas Fisherfolk Development Center,.
Engarcial, Yanong, and Labid, have standing both as real parties in interest and as representatives of subsistence
fisherfolks of the Municipalities of Aloguinsan and Pinamungahan, Cebu, and their families, and the present and
future generations of Filipinos whose rights are similarly affected. The activities undertaken under Service Contract
46 (SC-46) directly affected their source of livelihood, primarily felt through the significant reduction of their fish
harvest.27 The actual, direct, and material damage they suffered, which has potential long-term effects transcending
generations, is a proper subject of a legal suit.
III
In our jurisdiction, there is neither reason nor any legal basis for the concept of implied petitioners, most especially
when the implied petitioner was a sitting President of the Republic of the Philippines. In G.R. No. 180771, apart from
adjudicating unto themselves the status of "legal guardians" of whales, dolphins, porpoises, and other cetacean
species, human petitioners also impleaded Former President Gloria Macapagal-Arroyo as "unwilling co-petitioner"
for "her express declaration and undertaking in the ASEAN Charter to protect Tañon Strait." 28
No person may implead any other person as a co-plaintiff or co-petitioner without his or her consent. In our
jurisdiction, only when there is a party that should have been a necessary party but was unwilling to join would there
be an allegation as to why that party has been omitted. In Rule 3, Section 9 of the 1997 Rules of Civil Procedure:
SEC. 9. Non-joinder of necessary parties to be pleaded. -Whenever in any pleading in which a claim is asserted a
necessary party is not joined, the pleader shall set forth his name, if known, and shall state why he is omitted. Should
the court find the reason for the omission unmeritorious, it may order the inclusion of the omitted necessary party if
jurisdiction over his person may be obtained.
The failure to comply with the order for his inclusion, without justifiable cause, shall be deemed a waiver of the claim
against such party.
The non-inclusion of a necessary party does not prevent the court from proceeding in the action, and the judgment
rendered therein shall be without prejudice to the rights of such necessary party. 29
A party who should have been a plaintiff or petitioner but whose consent cannot be obtained should be impleaded
as a defendant in the nature of an unwilling co-plaintiff under Rule 3, Section 10 of the 1997 Rules of Civil Procedure:
SEC. 10. Unwilling co-plaintiff. - If the consent of any party who should be joined as plaintiff can not be obtained, he
may be made a defendant and the reason therefor shall be stated in the complaint. 30
The reason for this rule is plain: Indispensable party plaintiffs who should be part of the action but who do not
consent should be put within the jurisdiction of the court through summons or other court processes. Petitioners.
should not take it upon themselves to simply imp lead any party who does not consent as a petitioner. This places the
unwilling co-petitioner at the risk of being denied due process.
Besides, Former President Gloria Macapagal-Arroyo cannot be a party to this suit. As a co-equal constitutional
department, we cannot assume that the President needs to enforce policy directions by suing his or her alter-egos.
The procedural situation caused by petitioners may have gained public attention, but its legal absurdity borders on
the contemptuous. The Former President's name should be stricken out of the title of this case.
IV
I also concur with the conclusion that SC-46 is both. illegal and unconstitutional.
SC-46 is illegal because it violates Republic Act No. ·7586 or the National Integrated Protected Areas System Act of
1992, and Presidential Decree No. 1234, 31 which declared Tañon Strait as a protected seascape. It is unconstitutional
because it violates the fourth paragraph of Article XII, Section 2 of the Constitution.
V
Petitioner Central Visayas Fisherfolk Development Center asserts that SC-46 violated Article XII, Section 2, paragraph
1 of the .1987 Constitution because Japan Petroleum Exploration Co., Ltd. (JAPEX) is 100% Japanese-owned. 32 It
further asserts that SC-46 cannot be validly classified as a technical and financial assistance agreement executed
under Article XII, Section 2, paragraph 4 of the 1987 Constitution. 33 Public respondents counter that SC-46 does not
fall under the coverage of paragraph 1, but is a validly executed contract under paragraph 4. 34· Public respondents
further aver that SC-46 neither granted exclusive fishing rights to JAPEX nor violated Central Visayas Fisherfolk
Development Center's right to preferential use of communal marine and fishing resources. 35
VI
Article XII, Section 2 of the 1987 Constitution states:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the
State. With the exception. of agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and supervision of the State. The
State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned
by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than
twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for
irrigation, water supply fisheries, or industrial uses other than the development of water power, beneficial use may
be the measure and limit of the grant.
The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic
zone, and reserve its use and enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative
fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real contributions to the economic growth
and general welfare of the country. In such agreements, the State shall promote the development and use of local
scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty
days from its execution. (Emphasis supplied)
I agree that fully foreign-owned corporations may participate in the exploration, development, and use of natural
resources, but only through either financial agreements or technical ones. This is the clear import of the words
"either financial or technical assistance agreements." This is also
the clear result if we compare the 1987 constitutional provision with the versions in the 1973 and 1935 Constitution:
1973 CONSTITUTION
ARTICLE XIV
THE NATIONAL ECONOMY AND THE PATRIMONY OF THE NATION
SEC. 9. The disposition, exploration, development, of exploitation, or utilization of any of the natural resources of the
Philippines shall be limited to citizens of the Philippines, or to corporations or association at least sixty per centum of
the capital of which is owned by such citizens. The Batasang Pambansa, in the national interest, may allow such
citizens, corporations, or associations to enter into service contracts for financial, technical, management, or other
forms of assistance with any foreign person or entity for the exploitation, development, exploitation, or utilization of
any of the natural resources. Existing valid and binding service contracts for financial, the technical, management, or
other forms of assistance are hereby recognized as such. (Emphasis supplied)
1935 CONSTITUTION
ARTICLE XIII
CONSERVATION AND UTILIZATION OF NATURAL RESOURCES
SECTION 1. All agricultural timber, and mineral. lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State,
and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to
corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any
existing right, grant, lease, or concession at the time of the inauguration of the Government established under this
Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license,
concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be granted
for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases
beneficial use may be the measure and the limit of the grant.
The clear text of the Constitution in light of its history prevails over any attempt to infer interpretation from the
Constitutional Commission deliberations. The constitutional texts are the product of a full sovereign act:
deliberations in a constituent assembly and ratification. Reliance on recorded discussion of Constitutional
Commissions, on the other hand, may result in dependence on incomplete authorship; Besides, it opens judicial
review to further subjectivity from those who spoke during the Constitutional Commission deliberations who may
not have predicted how their words will be used. It is safer that we use the words already in the Constitution. The
Constitution was their product. Its words were read by those who ratified it. The Constitution is what society relies
upon even at present.
SC-46 is neither a financial assistance nor a technical assistance agreement.
Even supposing for the sake of argument that it is, it could not be declared valid in light of the standards set forth in
La Bugal-B'laan Tribal Association, Inc. v. Ramos:36
Such service contracts may be entered into only with respect to minerals, petroleum and other mineral oils. The
grant thereof is subject to several safeguards, among which are these requirements:
(1) The service contract shall be crafted m accordance with a general law that will set standard or uniform
terms, conditions and requirements, presumably to attain a certain uniformity in provisions and avoid the
possible insertion of terms disadvantageous to the country.
(2) The President shall be the signatory for the government because, supposedly before an agreement is
presented to the President for signature, it will have been vetted several times over at different levels to
ensure that it conforms to law and can withstand public scrutiny.
(3) Within thirty days of the executed agreement, the President shall report it to Congress to give that branch
of government an opportunity to look over the agreement and interpose timely objections, if
any.37 (Emphasis in the original, citation omitted)
Based on the standards pronounced in La Bugal, SC-46' S validity must be tested against three important points: (a)
whether SC-46 was crafted in accordance with a general law that provides standards, terms, and conditions; (b)
whether SC-46 was signed by the President for and on behalf of the government; and (c) whether it was reported by
the President to Congress within 30 days of execution.
VII
The general law referred to as a possible basis for SC-46's validity is Presidential Decree No. 87 or the Oil Exploration
and Development Act of 1972.1âwphi1 It is my opinion that this law is unconstitutional in that it allows service
contracts, contrary to Article XII, Section 2 of the 1987 Constitution:
The President may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real contributions to the economic growth
and general welfare of the country. In such agreements, the State shall promote the development and use of local
scientific and technical resources. (Emphasis supplied)
The deletion of service contracts from the enumeration of the kind of agreements the President may enter into with
foreign-owned corporations for exploration and utilization of resources means that service contracts are no longer
allowed by the Constitution. Pursuant to Article XVIII, Section 3 of the 1987 Constitution, 38 this inconsistency renders
the law invalid and ineffective.
SC-46 suffers from the lack of a special law allowing its activities. The Main Opinion emphasizes an important point,
which is that SC-46 did not merely involve exploratory activities, but also provided the rights and obligations of the
parties should it be discovered that there is oil in commercial quantities in the area. The Tañon Strait being a
protected seascape under Presidential Decree No. 1234 39 requires that the exploitation and utilization of energy
resources from that area are explicitly covered by a law passed by Congress specifically for that purpose, pursuant to
Section 14 of Republic Act No. 7586 or the National Integrated Protected Areas System Act of 1992:
SEC. 14. Survey for Energy R6'sources. - Consistent with the policies declared in Section 2, hereof, protected areas,
except strict nature reserves and natural parks, may be subjected to exploration only for the purpose of gathering
information on energy resources and only if such activity is carried out with the least damage to surrounding areas.
Surveys shall be conducted only in accordance with a program approved by the DENR, and the result of such surveys
shall be made available to the public and submitted to the President for recommendation to Congress. Any
exploitation and utilization of energy resources found within NIP AS areas shall be allowed only through a law passed
by Congress.40 (Emphasis supplied)
No law was passed by Congress specifically providing the standards, terms, and conditions of an oil exploration,
extraction, and/or utilization for Tañon Strait and, therefore, no such activities could have been validly undertaken
under SC-46. The National Integrated Protected Areas System Act of 1992 is clear that exploitation and utilization of
energy resources in a protected seascape such as Tañon Strait shall only be allowed through a specific law.
VIII
Former President Gloria Macapagal-Arroyo was not the signatory to SC-46, contrary to the requirement set by
paragraph 4 of Article XII, Section 2 for service contracts involving the exploration of petroleum. SC-46 was entered
into by then Department of Energy Secretary Vicente S. Perez, Jr., on behalf of the government. I agree with the Main
Opinion that in cases where the Constitution or law requires the President to act personally on the matter, the duty
cannot be delegated to another public official. 41 La Bugal highlights the importance of the President's involvement,
being one of the constitutional safeguards against abuse and corruption, as not mere formality:
At this point, we sum up the matters established, based on a careful reading of the ConCom deliberations, as follows:
• In their deliberations on what was to become paragraph 4, the framers used the term service contracts in
referring to agreements x x x involving either technical or financial assistance. • They spoke of service
contracts as the concept was understood in the 1973 Constitution.
• It was obvious from their discussions that they were not about to ban or eradicate service contracts.
• Instead, they were plainly crafting provisions to. put in place safeguards that would eliminate or m
minimize the abuses prevalent during the marital law regime. 42 (Emphasis in the original)
Public respondents failed to show that. Former President Gloria Macapagal-Arroyo was involved in the signing or
execution of SC-46. The failure to comply with this constitutional requirement renders SC-46 null and void.
 IX
Public respondents also failed to show that Congress was subsequently informed of the execution and existence of
SC-46. The reporting requirement is an equally important requisite to the validity of any service contract involving the
exploration, development, and utilization of Philippine petroleum. Public respondents' failure to report to Congress
about SC-46 effectively took away any opportunity for the legislative branch to scrutinize its terms and conditions.
In sum, SC-46 was executed and implemented absent all the requirements provided under paragraph 4 of Article XII,
Section 2. It is, therefore, null and void.
X
I am of the view that SC-46, aside from not having complied with the 1987 Constitution, is also null and void for being
violative of environmental laws protecting Tañon Strait. In particular, SC-46 was implemented despite falling short of
the requirements of the National Integrated Protected Areas System Act of 1992.
As a protected seascape under Presidential Decree No. 1234, 43 Tañon Strait is covered by the National Integrated
Protected Areas System Act of 1992. This law declares as a matter of policy:
SEC. 2. Declaration of Policy. Cognizant of the profound impact of man's activities on all components of the natural
environment particularly the effect of increasing population, resource exploitation and industrial advancement and
recognizing the critical importance of protecting and maintaining the natural biological and physical diversities of the
environment notably on areas with biologically unique features to sustain human life and development, as well as
plant and animal life, it is hereby declared the policy of the State to secure for the Filipino people of present and
future generations the perpetual existence of all native plants and animals through the establishment of a
comprehensive system of integrated protected areas within the classification of national park as provided for in the
Constitution.
It is hereby recognized that these areas, although distinct in features, possess common ecological values that may be
incorporated into a holistic plan representative of our natural heritage; that effective administration of these areas is
possible only through cooperation among national government, local and concerned private organizations; that the
use and enjoyment of these protected areas must be consistent with the principles of biological diversity and
sustainable development.
To this end, there is hereby established a National Integrated Protected Areas System (NIPAS), which shall encompass
outstanding remarkable areas and biologically important public lands that are habitats of rare and endangered
species of plants and animals, biogeographic zones and related ecosystems, whether terrestrial, wetland or marine,
all of which shall be designated as "protected areas." 44 (Emphasis supplied)
Pursuant to this law, any proposed activity in Tañon Strait must undergo an Environmental Impact Assessment:
SEC. 12. Environmental Impact Assessment. - Proposals for activities which are outside the scope of the management
plan for protected areas shall be subject to an environmental impact assessment as required by law before they are
adopted, and the results thereof shall be taken into consideration in the decision-making process. 45(Emphasis
supplied)
The same provision further requires that an Environmental Compliance Certificate be secured under the Philippine
Environmental Impact Assessment System before arty project is implemented:
No actual implementation of such activities shall be allowed without the required Environmental Compliance
Certificate (ECC) under the Philippine Environment Impact Assessment (EIA) system. In instances where such
activities are allowed to be undertaken, the proponent shall plan and carry them out in such manner as will minimize
any adverse effects and take preventive and remedial action when appropriate. The proponent shall be liable for any
damage due to lack of caution or indiscretion. 46 (Emphasis supplied)
In projects involving the exploration or utilization of energy resources, the National Integrated Protected Areas
System Act of 1992 additionally requires that a program be approved by the Department of Environment and Natural
Resources, which shall be publicly accessible. The program shall also be submitted to the President, who in turn will
recommend the program to Congress. Furthermore, Congress must enact a law specifically allowing the exploitation
of energy resources found within a protected area such as Tañon Strait:
SEC. 14. Survey for Energy Resources. - Consistent with the policies declared in Section 2, hereof, protected areas,
except strict nature reserves and natural parks, may be subjected to exploration only for the purpose of gathering
information on energy resources and only if such activity is carried out with the least damage to surrounding areas.
Surveys shall be conducted only in accordance with a program approved by the DENR, and the result of such surveys
shall be made available to the public and submitted to the President for recommendation to Congress. Any
exploitation and utilization of energy resources found within NIPAS areas shall be allowed only through a taw passed
by Congress.47 (Emphasis supplied)
Public respondents argue that SC-46 complied with the procedural requirements of obtaining an Environmental
Compliance Certificate.48 At any rate, they assert that the activities covered by SC-46 fell under Section 14 of the
National Integrated Protected Areas System Act of 1992, which they interpret to be an exception to Section 12. They
argue that the Environmental Compliance Certificate is not a strict requirement for the validity of SC-46 since (a) the
Tañon Strait is not a nature' reserve or natural park; (b) the exploration was merely for gathering information; and ( c)
measures were in place to ensure that the exploration caused the least possible damage to the area. 49
Section 14 is not an exception to Section 12, but instead provides additional requirements for cases involving
Philippine energy resources. The National Integrated Protected Areas System Act of 1992 was enacted to recognize
the importance of protecting the environment in light of resource exploitation, among others. 50 Systems are put in
place to secure for Filipinos local resources under the most favorable conditions. With the status of Tañon Strait as a
protected seascape, the institution of additional legal safeguards is even more significant.
Public respondents did not validly obtain an Environmental Compliance Certificate for SC-46. Based on the records,
JAPEX commissioned an environmental impact evaluation only in the second subphase of its project, with the
Environmental Management .Bureau of Region
VII granting the project an Environmental Compliance Certificate on March 6, 2007. 51
Despite its scale, the seismic surveys from May 9 to 18, 2005 were conducted without any environmental assessment
contrary to Section 12 of the National Integrated Protected Areas System Act of 1992.
XI
Finally, we honor every living creature when we take care of our environment. As sentient species, we do not lack in
the wisdom or sensitivity to realize that we only borrow the resources that we use to survive and to thrive. We are
not incapable of mitigating the greed that is slowly causing the demise of our planet. Thus, there is no need for us to
feign representation of any other species or some imagined unborn generation in filing any action in our courts of
law to claim any of our fundamental rights to a healthful ecology. In this way and with candor and courage, we fully
shoulder the responsibility deserving of the grace and power endowed on our species.
ACCORDINGLY, I vote:
(a) to DISMISS G.R. No. 180771 for lack of standing and STRIKE OUT the name of Former President Gloria
Macapagal-Arroyo from the title of this case;
(b) to GRANT G.R. No. 181527; and
(c) to DECLARE SERVICE CONTRACT 46 NULL AND VOID for violating the 1987 Constitution, Republic Act No.
7586, and Presidential Decree No. 1234.
MARVIC M.V.F. LEONEN
Associate Justice