G.R. No. L-286 March 29, 1946 On November 28, 1945, Fredesvindo S.
On November 28, 1945, Fredesvindo S. Alvero was notified of said decision; and on December 27, 1945,
FREDESVINDO S. ALVERO, petitioner, vs.
M.L. DE LA ROSA, Judge of First Instance of Manila, JOSE R. VICTORIANO, and MARGARITA
VILLARICA,respondents.
This is an original petition for certiorari filed in this court.
The record shows that, on June 25, 1945, respondent Jose R. Victoriano had filed a complaint, in the
Court of First Instance of the City of Manila, against petitioner Fredesvindo S. Alvero and one Margarita
Villarica, alleging two causes of action, to wit, (1) to declare in force the contract of sale, made on
October 1, 1940, between said Jose R. Victoriano and Margarita Villarica, of two (2) parcels of land in the
Manotoc subdivision, Balintawak, in the barrio of Calaanan, municipality of Caloocan, Province of Rizal,
with a combined area of 480 square meters, which land was subsequently sold by said Villarica, in favor
of petitioner Fredesvindo S. Alvero, on December 31, 1944, for the sum of P100,000 in Japanese military
notes; and (2) to declare said subsequent sale null and void.
On July 7, 1945, Margarita Villarica filed an answer to said complaint, expressly admitting having sold
said land to Fresdesvindo S. Alvero, for P100,000, in December, 1944, due to the imperative necessity of
raising funds with which to provide for herself and family, and that she did not remember the previous
sale; at the same time, offering to repurchase said land from Fredesvindo S. Alvero in the sum of P5,000,
but that the latter refused to accept the offer.
On July 13, 1945, Fredesvindo S. Alvero, in answering said complaint, denied the allegations made
therein, and claimed exclusive ownership of the land in question, and at the same time set up a
counterclaim and crossclaim in his answer, demanding from Jose R. Victoriano a P200-monthly rent on
said property, beginning from February, 1945, plus P2,000 as damages.
On July 21, 1945, Jose R. Victoriano filed an answer to said counterclaim, denying Fredesvindo S.
Alvero's alleged ownership over said land, and the other allegations contained in Alvero's answer.
After the trial of the case before the Hon. Mariano L. de la Rosa, Judge of the Court of First Instance of
the City of Manila, one of the respondents in this case, on November 16, 1945, said respondent judge
rendered his decision, in which it was declared that the two (2) parcels of land in question, with a
combined area of 480 square meters had been sold by Margarita Villarica to Jose R. Victoriano, since
October 1, 1940, for the sum of P6,000, on the condition that the purchaser should make a down
payment of P1,700, and a monthly payment of P76.86 in 120 equal monthly installments; that Jose R.
Victoriano continued making said monthly payments until December, 1941, but that owing to the war-time
conditions then existing, Margarita Villarica agreed verbally to suspend such payments until the
restoration of peace; that immediately after said sale of said land to him, Jose R. Victoriano took
possession thereof and made improvements thereon to the amount of P800, and continued occupying
said property until December, 1944, when he abandoned the same to go to evacuation places, but
returned thereto in February, 1945; that Margarita Villarica, having forgotten the sale of said land to Jose
R. Victoriano, sold the same for P100,000 in Japanese military notes, on December 31, 1944, to
Fredesvindo S. Alvero, but afterwards offered to repurchase said property from him, for the sum of
P8,000 in genuine Philippine currency, after liberation; that Fredesvindo S. Alvero presented the deed of
sale, executed in his favor, to the Register of Deeds of the City of Manila, on January 3, 1945, and took
possession of said property in December, 1944, but afterwards found Jose R. Victoriano in the premises
in February, 1945; that in the contract of sale executed by Margarita Villarica, in favor of Jose R.
Victoriano, it was agreed that, upon failure of the purchaser to make payments of three (3) successive
mothly installments, the vendor would be free to sell the property again, forfeiting the payments made,
except in the case of force majeure; that there was really a verbal agreement between Margarita Villarica
and Jose Victoriano, made in February, 1942, for the suspension of the payment of the monthly
installments until the restoration of peace; and that although Jose R. Victoriano had presented the deed
of sale, executed in his favor, to the Register of Deeds, in Pasig, Rizal, like Fredesvindo S. Alvero, he had
also failed to secure the transfer of title to his name. And considering that Jose R. Victoriano's document
was older than that of Fredesvindo S. Alvero, and that he had taken possession of said property, since
October 1, 1940, the respondent judge rendered his decision in favor of Jose R. Victoriano, adjudging to
him the title over the property in question, including all the improvements existing thereon, and dismissed
the counterclaim.
he filed a petition for reconsideration and new trial, which was denied on January 3, 1946; and of said
order he was notified on January 7, 1946. On January 8, 1946, Fredesvindo S. Alvero filed his notice of
appeal and record on appeal simultaneously in the lower court, without filing the P60-appeal bond.
On January 14, 1946, Jose R. Victoriano filed a petition to dismiss the appeal, and at the same time,
asked for the execution of the judgment. On January 15, 1946, Fredesvindo S. Alvero filed an opposition
to said motion to dismiss, alleging that on the very same day, January 15, 1946, said appeal bond for P60
had been actually filed, and allege as an excuse, for not filing the said appeal bond, in due time, the
illness of his lawyer's wife, who died on January 10, 1946, and buried the following day.
On January 17, 1946, the respondent judge, Hon. Mariano L. de la Rosa, ordered the dismissal of the
appeal, declaring that, although the notice of appeal and record on appeal had been filed in due time, the
P60-appeal bond was filed too late. On January 23, 1946, Fredesvindo S. Alvero filed a petition for the
reconsideration of the said order dated January 17, 1946, dismissing his appeal; and said petition for
reconsideration was denied on January 29, 1946. Hence, this petition for certiorari.
On February 11, 1946, the respondents filed their answer to the petition for certiorari, alleging (1) that
said petition is defective in form as well as in substance; (2) that there has been no excusable
negligence, on the part of the petitioner, or grave abuse of discretion on the part of the respondent judge,
in the instant case.
As already stated, the decision rendered by the respondent judge, Hon. Mariano L. de la Rosa, was
dated November 16, 1945, of which counsel for Fredesvindo S. Alvero was notified on November 28,
1945; that his motion for reconsideration and new trial was filed on December 27, 1945, and denied on
January 3, 1946, and that said counsel for Alvero was notified of said order on January 7, 1946; and that
he filed his notice of appeal and record on appeal the following day, to wit, January 8, 1946, and that the
P60-appeal bond was filed only on January 15, 1946.
According to the computation erroneously made by the court, the last day for filing and perfecting the
appeal, in this case, was January 8, 1946, or which date, Fredesvindo S. Alvero should have filed his (1)
notice of appeal, (2) record on appeal, and (3) appeal bond. But the P60-appeal bond was filed only on
January 15, 1946.
Failure to perfect the appeal, within the time prescribed by the rules of court, will cause the judgment to
become final, and the certification of the record on appeal thereafter, cannot restore the jurisdiction which
has been lost. (Roman Catholic Bishop of Tuguegarao vs. Director of Lands, 34 Phil., 623; Estate of
Cordoba and Zarate vs.Alabado, 34 Phil., 920; and Bermudez vs. Director of Lands, 36 Phil., 774.)
The period within which the record on appeal and appeal bond should be perfected and filed may,
however, be extended by order of the court, upon application made, prior to the expiration of the original
period. (Layda vs.Legaspi, 39 Phil., 83.)
Rules of courts, promulgated by authority of law, have the force and effect of law; and rules of court
prescribing the time within which certain acts must be done, or certain proceedings taken, are considered
absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of
judicial business. (Shioji vs. Harvey, 43 Phil., 333.)
Strict compliance with the rules of court has been held mandatory and imperative, so that failure to pay
the docket fee in the Supreme Court, within the period fixed for that purpose, will cause the dismissal of
the appeal. (Salaveria vs. Albindo, 39Phil., 922.) In the same manner, on failure of the appellant in a civil
case to serve his brief, within the time prescribed by said rules, on motion of the appellee and notice to
the appellant, or on its own motion, the court may dismiss the appeal. (Shioji vs. Harvey, 43 Phil., 333.)
Counsel for the petitioner Fredesvindo Alvero alleges as an excuse, for his failure to perfect and file his
appeal, in due time, the illness of his wife, which ended in her death on January 10, 1946, and by which
he was greatly affected.
How little, indeed, does one realize that in life he lives in the midst of death; and that every that passes in
a step nearer towards eternity. Yet, notwithstanding the inexorable laws of human destiny, every mortal
fears death, and such fear is worse than death itself. That is perhaps the reason why those feeling its
approach, in their last moments, want to be surrounded by the ones dearest to their heart, to hear from
them words of tenderness and eternal truth, and thus receive as balm their love and the cheering
influence of the traditional faith, and the consolation of religious hope.
The virtuous and loving wife is the peculiar gift of heaven, and Mother is the name for God in the innocent
lips and hearts of adoring children. "She looketh well to the ways of her household, and eateth not the
bread of idleness." "And her daughters arise up and call her blessed." And when she dies in the bosom of
God, her children find solace in the contemplation of her eternal bliss, as mirrored in her tranquil beauty.
It is not, therefore, difficult to understand the state of mind of the attorney, and his intense devotion and
ardent affection towards his dying wife.
Unfortunately, counsel for petitioner has created a difficult situation. In his motion for reconsideration and
new trial, dated December 27, 1945, he did not point out specifically the findings or conclusions in the
judgment, are not supported by the evidence or which are contrary to law, making express reference to
the pertinent evidence or legal provisions, as expressly required by Rule 37, section 2, paragraph (c) of
the Rules of Court. Motions of that kind have been considered as motions pro forma intended merely to
delay the proceeding, and, as such, they cannot and will not interrupt or suspend the period of time for
the perfection of the appeal. (Valdez vs. Jugo, 74 Phil., 49, and Reyes vs. Court of Appeals and Bautista,
74 Phil., 235.) Hence, the period for perfecting herein petitioner's appeal commenced from November 28,
1945, when he was notified of the judgment rendered in the case, and expired on December 28, 1945;
and, therefore, his notice of appeal and record on appeal filed on January 8, 1946, were filed out of time,
and much more so his appeal bond, which was only filed on January 15, 1946.
It is futile to speak of hospitals, doctors and nurses to minister alone to the needs of the sick and the
dying, who are dearest to us, for our reasoning powers are of little avail when sorrow or despair rages
within. But human laws are inflexible and no personal consideration should stand in the way of
performing a legal duty.
The attorney for petitioner Fredesvindo S. Alvero could have asked for an extension of time, within which
to file and perfect his appeal, in the court below; but he had failed to do so, and he must bear the
consequences of his act. A strict observance of the rules of court, which have been considered
indispensable to the prevention of needless delays and to the orderly and speedy dispatch of judicial
business, is an imperative necessity.
It may not be amiss to state in this connection that no irreparable damage has been caused to the
petitioner Fredesvindo S. Alvero, as Margarita Villarica, the vendor to the two, of the land in question, has
shown readiness to repair the damage done.
No showing having been made that there had been merely excusable negligece, on the part of the
attorney for petitioner Fredesvindo S. Alvero, and that there had been gave abuse of sound judicial
discretion, on the part of the respondent judge, the petition for certiorari filed in this case, is, therefore,
hereby dismissed, without costs. So ordered.
G.R. No. L-6120 June 30, 1953
CIPRIANO P. PRIMICIAS, petitioner, vs.
FELICISIMO OCAMPO, as Judge-at-large presiding over Branch C of the Court of First Instance of
Manila and EUGENIO ANGELES, as City Fiscal of Manila, representing the PEOPLE OF THE
PHILIPPINES,respondents.
This is a petition which seeks to prohibit respondent Judge from proceeding with the trial of two criminal
cases which were then pending against petitioner without the assistance of assessors in accordance with
the provisions of section 49 of Republic Act No. 409 in relation to section 154 of Act No. 190, and as an
auxiliary remedy, to have a writ of preliminary injunction issued so that the trial may be held pending until
further orders of this court.
This petition was originally filed with the Court of Appeals, but was later certified to this court on the
ground that the main basis of the petition is section 49 of Republic Act No. 409, otherwise known as
Revised Charter of the City of Manila, approved on June 18, 1949, and respondents assail the
constitutionality of said section in that it contravenes the constitutional provision that the rules of court
"shall be uniform for all courts of the same grade . . . .(Section 13, Article VIII of the Constitution.).
Petitioner was charged before the Court of First Instance of Manila with two statutory offenses, namely,
(1) with a violation of Commonwealth Act No. 606, which was docketed as criminal case No. 18374, in
that he knowingly chartered a vessel of Philippine registry to an alien without the approval of the
President of the Philippines and (2) with a violation of section 129 in relation to section 2713 of the
Revised Administrative Code, which was docketed as Criminal Case No. 18375, in that he failed to
submit to the Collector of Customs the manifests and certain authenticated documents for the vessel
"Antarctic" and failed to obtain the necessary clearance from the Bureau of Customs prior to the
departure of said vessel for a foreign port.
On April 23, 1952, before the trial of said criminal cases, petitioner filed a motion praying that assessors
be appointed to assist the court in considering the questions of fact involved in said cases as authorized
by section 49 of Republic Act No. 409, otherwise known as Revised Charter of the City of Manila, which
provides that "the aid of assessors in the trial of any civil or criminal action in the Municipal Court, or the
Court of First Instance, within the City, may be invoked in the manner provided in the Code of Civil
Procedure." This motion was opposed by the City Fiscal who appeared for the People of the Philippines.
On April 28, 1952, the court issued an order denying the motion holding in effect that with the
promulgation of the Rules of Court by the Supreme Court, which became effective on July 1, 1940, all
rules concerning pleading, practice and procedure in all courts of the Philippines previously existing were
not only superseded but expressly repealed, that the Supreme Court, having been vested with the rule-
making power, expressly omitted the portions of the Code of Civil Procedure regarding assessors in said
Rules of Court, and that the reference to said statute by section 49 of Republic Act No. 409 on the
provisions regarding assessors should be deemed as a mere surplusage. Believing that this order is
erroneous, petitioner now comes to this court imputing abuse of discretion to the respondent Judge.
A brief summary of the historical background of the legislation regarding trial with the aid of assessors in
the Philippines may be of help in the determination of the issues posed by petitioner. The first provision
which allowed trial with the aid of assessors in civil cases in inferior courts and Courts of First Instance is
contained in Act No. 190 of the Philippine Commission, otherwise known as the Code of Civil Procedure,
which took effect on October 1, 1901 (Sections 58-62; 154-161). Almost simultaneously, or on October
17, 1901, the trial with the aid of assessors both in civil and criminal cases was allowed in the Manila
courts upon the enactment of Act No. 267, amending Act No. 183, the original Charter of Manila. In 1914,
the trial by assessors was allowed in criminal cases in the courts of first instance in the provinces with the
enactment of Act No. 2369. And in 1915, Act No. 2520 was passed extending the same trial by assessors
to the courts of first instance and justice of the peace courts in the Department of Mindanao and Sulu.
In connection with the use of assessors in Manila, section 44 of Act No. 183, the original Charter of
Manila, as amended by section 13 of Act No. 267, was reenacted as section 2449 of the Administrative
Code 1916, Act No. 2657. Section 2449 of the Administrative Code of 1916 became section 2477 of Act
No. 2711, otherwise known as the Revised Administrative Code of 1917. And section 2477 in turn
became section 49 of the Republic Act No. 409, which is the present Charter of the City of Manila. This
section 49 is the law now invoked by petitioner in support of his claim to a trial with the aid of assessors
in the two criminal cases now pending against him. Its pertinent provisions are quoted hereunder for
ready reference:.
A careful analysis of the above provisions is interesting. Their most salient features are: The aid of
assessors in the trial of any civil or criminal action in the Municipal Court or the Court of First Instance
may be invoked in the manner provided in the Code of Civil Procedure. The parties desiring to avail
themselves of the use of assessors "shall proceed as provided for by law or rules of court", and "the
method of summoning assessors, enforcing their attendance, excusing them from attendance, their
compensation, oath, duties, and effect of the dissent from the opinion of the judge shall be as provided in
those laws or rules." If we are to be guided merely by these provisions, the right to trial with the aid of
assessor would seem to be beyond dispute. These provisions are simple and clear and appear to be
mandatory. But where the difficulty arises is in their relation or bearing on the directive of the Constitution
which provides that "the existing laws on pleading, practice, and procedure are hereby repealed as
statutes, and are declared rules of courts subject to the power of the Supreme Court to alter and modify
the same." Pursuant to this rule-making power, the Supreme Court promulgated the present Rules of
Court, which became effective on July 1, 1940, but because it failed to incorporate therein the provisions
of the Code of Civil Procedure on assessors, respondents now contend that the right to trial with the aid
of assessors, with all its concomitant provisions, cannot now be invoked because, being procedural in
nature, the same must be deemed to have been impliedly eliminated.
This claim would be correct if we were to hold that the right to trial with the aid of assessors is not
substantive but procedural or adjective in nature. If it were merely procedural, not having been
incorporated in the Rules of Court, the logical conclusion is that the rule- making power has deemed wise
to eliminate it. But no such presumption, nor conclusion, can be drawn for the reason that the right to a
trial by assessors is substantive in the sense that it must created and defined by express enactment as
opposed to a mere remedy devised to enforce such right or obtain redress therefor. "Rules of procedure
should be distinguished from substantive law. A substantive law creates, defines or regulates rights
concerning life, liberty or property, or the powers of agencies or instrumentalities for the administration of
public affairs, whereas rules of procedure are provisions prescribing the method by which substantive
rights may be enforced in courts of justice." (Moran, Comments on the Rules of Court, Vol. I, 1952 ed.,
p.4.)
In Bustos vs. Lucero,* (46 Off. Gaz., January Supp., pp. 445, 448), this Court cited with approval the
following definitions of substantive law:
Substantive law creates substantive rights and the two terms in this respect may be said to be
synonymous. Substantive rights in a term which includes those rights which one enjoys under
the legal system prior to the disturbance of normal relations. (60 C.J. 980.)
Substantive law is that part of the law which creates, defines and regulates rights, or which
regulates the right and duties which give rise to a cause of action; that part of the law which
courts are established to administer; as opposed to adjective or remedial law, which
prescribes the method of enforcing rights or obtain redress for their invasions (36 C.J. 27; 52
C.J.S. 1026).
The trial with the aid of assessors as granted by section 154 of the Code of Civil Procedure and section
2477 of the old Charter of Manila are parts of substantive law and as such are not embraced by the rule-
making power of the Supreme Court. This is so because in said section 154 this matter is referred to as a
right given by law to a party litigant. Section 2477 of the Administrative Code of 1917 is couched is such a
manner that a similar right is implied when invoked by a party litigant. It says that the aid may be invoked
in the manner provided in the Code of Civil Procedure. And this right has been declared absolute and
substantial by this Court in several cases where the aid of assessors had been invoked (Berbari vs.
Concepcion, et al., 40 Phil., 320; Colegio de San Jose vs. Sison, 54 Phil., 344.) Thus, it was there said
that these provisions "necessarily lead to the conclusion that the intervention of the assessors is not an
empty formality which may be disregarded without violating either the letter or the spirit of the law. It is
another security given by the law to the litigants, and as such, it is a substantial right of which they cannot
be deprived without vitiating all the proceedings. Were we to agree that for one reason or another the trial
by assessors may be done away with, the same line of reasoning would force us to admit that the parties
litigant may be deprived of their right to be represented by counsel, to appear and be present at the
hearings, and so on, to the extent of omitting the trial in a civil case, and thus set at naught the essential
rights granted by the law to the parties, with consequent nullity of the proceedings." (Colegio de San Jose
vs. Sison, 54 Phil., 344, 349.)
Being substantive in nature, it is not difficult to see why the provisions concerning trial by assessors
embodied in the Code of Civil Procedure have not been incorporated by the Supreme Court in the
present Rules of Court. To have done so, it would have been a travesty of its rule-making power which,
by direct mandate of the Constitution, is limited to matters referring to pleading, practice and procedure.
The application that the respondents draw from the failure to incorporate these provisions in the present
Rules of Court to the effect that the intention was to eliminate them or repeal them all together cannot,
therefore, stand in the light of the observations and authorities we have above adverted to.
There is a point in the claim that the provisions concerning trial by assessors embodied in the Code of
Civil Procedure are not wholly substantive but portions thereof are remedial such as those which refer to
the method of summoning assessors, enforcing their attendance, excusing them from attendance, their
compensation, oath, duties and effect of dissent from the opinion of the judge, as to which no cogent
reason is seen for their non-incorporation if the intent is not to eliminate them from the Rules of Court.
This is true; but it is likewise true that because said remedial provisions are inextricably interwoven with
the substantive part, it must have been deemed wise and proper to leave them as they were for reasons
of coordination and expediency, it being a truism that the one cannot be detached from the other. Ubi jus
ibi remedium. Remedial measures are but implementary in character and they must be appended to the
portion of the law to which they belong. Mention should be made here that not all of the provisions
appearing in the Code of Civil Procedure are remedial in nature, such as those pertaining to prescription,
the requisites for making a will, and the succession of the estate of an adopted child, which are
admittedly substantive in character and for that reason were not incorporated in the Rules of Court. To
this group belong the provisions under consideration.
Granting arguendo that the provisions on assessors of the Code of Civil Procedure and even in the old
Charter of Manila are purely remedial in nature and because of the failure to incorporate them in the
Rules of Court they are deemed to have been impliedly repealed as claimed by respondents, we are of
the opinion that they can still be invoked by a litigant upon the theory that they had been reaffirmed and
reenacted by Republic Act No. 409, which was approved in 1949, or nine years after the Rules of Court
became effective. As already stated, section 49 of said Act states that the aid of assessors may be
invoked in the manner provided in the Code of Civil Procedure. It likewise states that the parties desiring
to avail themselves for the use of assessors shall proceed as provided for by law. The mention made of
the Code of Civil Procedure in said section indicates in itself a re-enactment or incorporation by reference
of the provisions concerning assessors contained in said law. Congress, whose members were mostly
lawyers, must be presumed to know that at the time said Act was approved the Rules of Court had
already been promulgated without incorporating therein the provisions concerning the aid to assessors,
and fully cognizant of this situation, and not desiring to omit this right granted to a litigant, they must have
deemed it wise and proper to re-enact them by reference in said section 49. This Congress can do, for,
while our Constitution has given the power to adopt rules of procedure to the Supreme Court, such grant
did not preclude Congress from enacting any procedural law or altering, amending, or supplementing any
of the rules that may be promulgated by the Supreme Court (Section 13, Article VIII, Philippine
Constitution).
The practice of making such reference has long been sanctioned. Our Congress did this not only in
connection with courts in the City of Manila. It also did it in connection with courts in Quezon City
(Republic Act No. 537). Statutes which refer to other statutes and make them applicable to the subject for
legislation are called "reference statutes". These statutes are frequently used "to avoid encumbering the
statute books by unnecessary repetition, and they have frequently been recognized as an approval
method of legislation, in the absence of constitutional restrictions." [50 Am. Jur. 57; Gruen vs. Tax
Commission, 211 P. (2d) (1949) 651, 666.].
Again, it has been held that "The adoption of an earlier statute by reference makes it as much as a part of
the latter act as though it had been incorporated at full length. This is true of a legislative act which refers
to another act for the procedure to be taken." (50 Am. Jur. 58.) The reference in Republic Act No. 409 to
the provisions on assessors must be deemed, therefore, to have incorporated therein the pertinent
provisions on the matter contained in the Code of Civil Procedure in much the same manner as if the
whole provisions had been reproduced. Consistent with this theory, we cannot but hold that the
observations made by respondents to the effect that the reference made to said provisions is section 49
is a mere surplusage, or was due to a mere oversight, has no legal basis, as such innuendo would be
tantamount to imputing lack of foresight, if not brazen negligence, to our legislative body.
It is finally contended that section 49 of Republic Act No. 409 is unconstitutional because it violates the
constitutional provisions that procedural rules "shall be uniform for all courts of the same grade" and,
therefore, it is a class legislation. This contention cannot be entertained: firstly, because it is raised for the
first time in this instance, a procedural defect which would bar any further discussion on the matter
following well-known precedents1 and, secondly, because it is not correct that at present only in Manila
trial with the aid of assessors may be invoked if we will sustain the theory that the promulgation of the
Rules of Court did not have the effect of repealing the provisions on assessors embodied in the Code of
Civil Procedure.
The contention of respondents — we reckon — is predicated on the assumption that the provisions on
assessors of the Code of Civil Procedure had been impliedly repealed. Such is not the case. We have
already pointed out that the basic provisions on the matter partake of the nature of substantive law and
as such they were left intact by the Supreme Court. The corollary to this conclusion is that this remedy
may be invoked out only in Manila but in all other places where it existed prior to the promulgation of the
Rules of Court. This is true in civil cases. With regard to criminal cases, we have already said that the
same remedy may be invoked in the cities of Cebu, Iloilo and Quezon, with the particularity that their
charters make express reference, either directly or indirectly, to the provisions of the code of Civil
Procedure. With this historical background, the claim that under the theory we have entertained the trial
with the aid of assessors can only be invoked in the City of Manila is certainly without merit.
In view of the foregoing, we hold that the provisions on assessors embodied in the Code of Civil
Procedure are still in force and that the same may still be invoked in the light of the provisions of section
49 of the Republic Act No. 409. It is therefore our opinion that the respondent Judge acted with abuse of
discretion in denying petitioner his right to the aid of assessors in the trial of the two criminal cases now
pending in the Court of First Instance of Manila. Wherefore, petition is hereby granted, without
pronouncement as to costs.
G.R. No. 180291 July 27, 2010
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS) and WINSTON F. GARCIA, in his capacity
as PRESIDENT and GENERAL MANAGER of the GSIS, Petitioners, vs.
DINNAH VILLAVIZA, ELIZABETH DUQUE, ADRONICO A. ECHAVEZ, RODEL RUBIO, ROWENA
THERESE B. GRACIA, PILAR LAYCO, and ANTONIO JOSE LEGARDA, Respondents.
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverse and set
aside the August 31, 2007 Decision1 of the Court of Appeals (CA), in CA-G.R. SP No. 98952, dismissing
the petition for certiorari of Government Service Insurance System (GSIS) assailing the Civil Service
Commission's Resolution No. 062177.
Petitioner Winston Garcia (PGM Garcia), as President and General Manager of the GSIS, filed separate
formal charges against respondents Dinnah Villaviza, Elizabeth Duque, Adronico A. Echavez, Rodel
Rubio, Rowena Therese B. Gracia, Pilar Layco, and Antonio Jose Legarda for Grave Misconduct and/or
Conduct Prejudicial to the Best Interest of the Service pursuant to the Rules of Procedure in
Administrative Investigation (RPAI) of GSIS Employees and Officials, III, D, (1, c, f) in relation to Section
52A (3), (20), Rule IV, of the Uniform Rules on Administrative Cases in the Civil Service (URACCS), in
accordance with Book V of the Administrative Code of 1987, committed as follows:
That on 27 May 2005, respondent, wearing red shirt together with some employees, marched to or
appeared simultaneously at or just outside the office of the Investigation Unit in a mass
demonstration/rally of protest and support for Messrs. Mario Molina and Albert Velasco, the latter having
surreptitiously entered the GSIS premises;
xxx xxx xxx
That some of these employees badmouthed the security guards and the GSIS management and defiantly
raised clenched fists led by Atty. Velasco who was barred by Hearing Officer Marvin R. Gatpayat in an
Order dated 24 May 2005 from appearing as counsel for Atty. Molina pursuant to Section 7 (b) (2) of R.A.
6713 otherwise known as the Code of Conduct and Ethical Standards for Public Officials and Employees;
That respondent, together with other employees in utter contempt of CSC Resolution No. 021316, dated
11 October 2002, otherwise known as Omnibus Rules on Prohibited Concerted Mass Actions in the
Public Sector caused alarm and heightened some employees and disrupted the work at the Investigation
Unit during office hours.2
This episode was earlier reported to PGM Garcia, through an office memorandum dated May 31, 2005,
by the Manager of the GSIS Security Department (GSIS-SD), Dennis Nagtalon. On the same day, the
Manager of the GSIS Investigation Unit (GSIS-IU), Atty. Lutgardo Barbo, issued a memorandum to each
of the seven (7) respondents requiring them to explain in writing and under oath within three (3) days why
they should not be administratively dealt with.3
Respondents Duque, Echavez, Rubio, Gracia, Layco, and Legarda, together with two others, submitted a
letter-explanation to Atty. Barbo dated June 6, 2005. Denying that there was a planned mass action, the
respondents explained that their act of going to the office of the GSIS-IU was a spontaneous reaction
after learning that their former union president was there. Aside from some of them wanting to show their
support, they were interested in that hearing as it might also affect them. For her part, respondent
Villaviza submitted a separate letter explaining that she had a scheduled pre-hearing at the GSIS-IU that
day and that she had informed her immediate supervisor about it, attaching a copy of the order of pre-
hearing. These letters were not under oath. 4
PGM Garcia then filed the above-mentioned formal charges for Grave Misconduct and/or Conduct
Prejudicial to the Best Interest of the Service against each of the respondents, all dated June 4, 2005.
Respondents were again directed to submit their written answers under oath within three (3) days from
receipt thereof. 5 None was filed.
On June 29, 2005, PGM Garcia issued separate but similarly worded decisions finding all seven (7)
respondents guilty of the charges and meting out the penalty of one (1) year suspension plus the
accessory penalties appurtenant thereto.
On appeal, the Civil Service Commission (CSC) found the respondents guilty of the lesser offense of
Violation of Reasonable Office Rules and Regulations and reduced the penalty to reprimand. The CSC
ruled that respondents were not denied their right to due process but there was no substantial evidence
to hold them guilty of Conduct Prejudicial to the Best Interest of the Service. Instead,
x x x. The actuation of the appellants in going to the IU, wearing red shirts, to witness a public hearing
cannot be considered as constitutive of such offense. Appellants' (respondents herein) assembly at the
said office to express support to Velasco, their Union President, who pledged to defend them against any
oppression by the GSIS management, can be considered as an exercise of their freedom of expression,
a constitutionally guaranteed right. 6x x x
PGM Garcia sought reconsideration but was denied. Thus, PGM Garcia went to the Court of Appeals via
a Petition for Review under Rule 43 of the Rules on Civil Procedure. 7 The CA upheld the CSC in this
wise:
The Civil Service Commission is correct when it found that the act sought to be punished hardly falls
within the definition of a prohibited concerted activity or mass action. The petitioners failed to prove that
the supposed concerted activity of the respondents resulted in work stoppage and caused prejudice to
the public service. Only about twenty (20) out of more than a hundred employees at the main office,
joined the activity sought to be punished. These employees, now respondents in this case, were
assigned at different offices of the petitioner GSIS. Hence, despite the belated claim of the petitioners
that the act complained of had created substantial disturbance inside the petitioner GSIS' premises
during office hours, there is nothing in the record that could support the claim that the operational
capacity of petitioner GSIS was affected or reduced to substantial percentage when respondents
gathered at the Investigation Unit. Despite the hazy claim of the petitioners that the gathering was
intended to force the Investigation Unit and petitioner GSIS to be lenient in the handling of Atty. Molina's
case and allow Atty. Velasco to represent Atty. Molina in his administrative case before petitioner GSIS,
there is likewise no concrete and convincing evidence to prove that the gathering was made to demand
or force concessions, economic or otherwise from the GSIS management or from the government. In
fact, in the separate formal charges filed against the respondents, petitioners clearly alleged that
respondents "marched to or appeared simultaneously at or just outside the office of the Investigation Unit
in a mass demonstration/rally of protest and support for Mssrs. Mario Molina and Albert Velasco, the
latter surreptitiously entered the GSIS premises." Thus, petitioners are aware at the outset that the only
apparent intention of the respondents in going to the IU was to show support to Atty. Mario Molina and
Albert Velasco, their union officers. The belated assertion that the intention of the respondents in going to
the IU was to disrupt the operation and pressure the GSIS administration to be lenient with Atty. Mario
Molina and Albert Velasco, is only an afterthought. 8
Not in conformity, PGM Garcia is now before us via this Petition for Review presenting the following:
STATEMENT OF THE ISSUES
I
WHETHER AN ADMINISTRATIVE TRIBUNAL MAY APPLY SUPPLETORILY THE PROVISIONS OF THE
RULES OF COURT ON THE EFFECT OF FAILURE TO DENY THE ALLEGATIONS IN THE
COMPLAINT AND FAILURE TO FILE ANSWER, WHERE THE RESPONDENTS IN THE
ADMINISTRATIVE PROCEEDINGS DID NOT FILE ANY RESPONSIVE PLEADING TO THE FORMAL
CHARGES AGAINST THEM.
II
WHETHER THE RULE THAT ADMINISTRATIVE DUE PROCESS CANNOT BE EQUATED WITH DUE
PROCESS IN JUDICIAL SENSE AUTHORIZES AN ADMINISTRATIVE TRIBUNAL TO CONSIDER IN
EVIDENCE AND GIVE FULL PROBATIVE VALUE TO UNNOTARIZED LETTERS THAT DID NOT FORM
PART OF THE CASE RECORD.
The Court finds no merit in the petition.
Petitioners primarily question the probative value accorded to respondents' letters of explanation in
response to the memorandum of the GSIS-IU Manager. The respondents never filed their answers to the
formal charges. The petitioners argue that there being no answers, the allegations in the formal charges
that they filed should have been deemed admitted pursuant to Section 11, Rule 8 of the Rules of Court
which provides:
SECTION 11. Allegations not specifically denied deemed admitted.- Material averment in the complaint,
other than those as to the amount of liquidated damages, shall be deemed admitted when not specifically
denied. Allegations of usury in a complaint to recover usurious interest are deemed admitted if not denied
specifically and under oath.
According to the petitioners, this rule is applicable to the case at bench pursuant to Rule 1, Section 4 of
the Rules of Court which reads:
SECTION 4. In what cases not applicable. - These Rules shall not apply to election cases, land
registration, cadastral, naturalization and insolvency proceedings, and other cases not herein provided
for, except by analogy or in a suppletory character and whenever practicable and
convenient. (underscoring supplied)
The Court does not subscribe to the argument of the petitioners. Petitioners' own rules, Rule XI, Section
4 of the GSIS' Amended Policy and Procedural Guidelines No. 178-04, specifically provides:
If the respondent fails to file his Answer within five (5) working days from receipt of the Formal Charge for
the supporting evidence, when requested, he shall be considered to have waived his right to file an
answer and the PGM or the Board of Trustees, in proper cases, shall render judgment, as may be
warranted by the facts and evidence submitted by the prosecution.
A perusal of said section readily discloses that the failure of a respondent to file an answer merely
translates to a waiver of "his right to file an answer." There is nothing in the rule that says that the
charges are deemed admitted. It has not done away with the burden of the complainant to prove the
charges with clear and convincing evidence.
It is true that Section 4 of the Rules of Court provides that the rules can be applied in a "suppletory
character." Suppletory is defined as "supplying deficiencies." 10 It means that the provisions in the Rules of
Court will be made to apply only where there is an insufficiency in the applicable rule. There is, however,
no such deficiency as the rules of the GSIS are explicit in case of failure to file the required answer. What
is clearly stated there is that GSIS may "render judgment as may be warranted by the facts and evidence
submitted by the prosecution."
Even granting that Rule 8, Section 11 of the Rules of Court finds application in this case, petitioners must
remember that there remain averments that are not deemed admitted by the failure to deny the same.
Among them are immaterial allegations and incorrect conclusions drawn from facts set out in the
complaint.11 Thus, even if respondents failed to file their answer, it does not mean that all averments
found in the complaint will be considered as true and correct in their entirety, and that the forthcoming
decision will be rendered in favor of the petitioners. We must not forget that even in administrative
proceedings, it is still the complainant, or in this case the petitioners, who have the burden of proving,
with substantial evidence, the allegations in the complaint or in the formal charges. 12
A perusal of the decisions of the CA and of the CSC will reveal that the case was resolved against
petitioners based, not on the absence of respondents' evidence, but on the weakness of that of the
petitioners. Thus, the CA wrote:
Petitioners correctly submitted the administrative cases for resolution without the respondents' respective
answer to the separate formal charges in accordance with Section 4, Rule XI of the RPAI. Being in full
control of the administrative proceeding and having effectively prevented respondents from further
submitting their responsive answer and evidence for the defense, petitioners were in the most
advantageous position to prove the merit of their allegations in the formal charges. When petitioner
Winston Garcia issued those similarly worded decisions in the administrative cases against the
respondents, it is presumed that all evidence in their favor were duly submitted and justly considered
independent of the weakness of respondent's evidence in view of the principle that ''the burden of proof
belongs to the one who alleges and not the one who denies." 13
On the merits, what needs to be resolved in the case at bench is the question of whether or not there was
a violation of Section 5 of CSC Resolution No. 02-1316. Stated differently, whether or not respondents'
actions on May 27, 2005 amounted to a "prohibited concerted activity or mass action." Pertinently, the
said provision states:
Section 5. As used in this Omnibus Rules, the phrase ''prohibited concerted activity or mass action'' shall
be understood to refer to any collective activity undertaken by government employees, by themselves or
through their employees organizations, with intent of effecting work stoppage or service disruption in
order to realize their demands of force concession, economic or otherwise, from their respective
agencies or the government. It shall include mass leaves, walkouts, pickets and acts of similar nature.
In this case, CSC found that the acts of respondents in going to the GSIS-IU office wearing red shirts to
witness a public hearing do not amount to a concerted activity or mass action proscribed above. CSC
even added that their actuations can be deemed an exercise of their constitutional right to freedom of
expression. The CA found no cogent reason to deviate therefrom.
As defined in Section 5 of CSC Resolution No. 02-1316 which serves to regulate the political rights of
those in the government service, the concerted activity or mass action proscribed must be coupled with
the "intent of effecting work stoppage or service disruption in order to realize their demands of force
concession." Wearing similarly colored shirts, attending a public hearing at the GSIS-IU office, bringing
with them recording gadgets, clenching their fists, some even badmouthing the guards and PGM Garcia,
are acts not constitutive of an (i) intent to effect work stoppage or service disruption and (ii) for the
purpose of realizing their demands of force concession.
Precisely, the limitations or qualifications found in Section 5 of CSC Resolution No. 02-1316 are there to rights. Measured against that definition, respondents' actuations did not amount to a prohibited concerted
temper and focus the application of such prohibition. Not all collective activity or mass undertaking of activity or mass action. The CSC and the CA were both correct in arriving at said conclusion.
government employees is prohibited. Otherwise, we would be totally depriving our brothers and sisters in
the government service of their constitutional right to freedom of expression.
WHEREFORE, the assailed August 31, 2007 Decision of the Court of Appeals as well as its October 16,
2007 Resolution in CA G.R. SP No. 98952 are hereby AFFIRMED.SO ORDERED.
Government workers, whatever their ranks, have as much right as any person in the land to voice out
their protests against what they believe to be a violation of their rights and interests. Civil Service does
not deprive them of their freedom of expression. It would be unfair to hold that by joining the government G.R. No. 172841 December 15, 2010
service, the members thereof have renounced or waived this basic liberty. This freedom can be
reasonably regulated only but can never be taken away.
RENATO REYES, represented by RAMON REYES, Petitioner,
vs.
A review of PGM Garcia's formal charges against the respondents reveals that he himself was not even LEOPOLDO BARRIOS, substituted by LUCIA MANALUS-BARRIOS, Respondent.
certain whether the respondents and the rest of the twenty or so GSIS employees who were at the GSIS-
IU office that fateful day marched there or just simply appeared there simultaneously. 14 Thus, the
This petition for review1 assails the 8 February 2006 Decision2 and the 29 May 2006 Resolution3 of the
petitioners were not even sure if the spontaneous act of each of the twenty or so GSIS employees on
Court of Appeals in CA-G.R. SP No. 90212. The Court of Appeals affirmed the 29 June 1998 Decision
May 27, 2005 was a concerted one. The report of Manager Nagtalon of the GSIS-SD which was the
and the 7 December 2004 Resolution of the Department of Agrarian Reform Adjudication Board (DARAB)
basis for PGM Garcia's formal charges reflected such uncertainty. Thus,
in DARAB Case No. 5504, declaring Leopoldo Barrios as bona fide tenant of the subject landholding. The
DARAB reversed the 31 October 1996 Decision of the Provincial Agrarian Reform Board (PARAD) of San
Of these red shirt protesters, only Mr. Molina has official business at the Investigation Unit during this Fernando, Pampanga.
time. The rest abandoned their post and duties for the duration of this incident which lasted until 10:55
A.M. It was also observed that the protesters, some of whom raised their clenched left fists, carefully
The Facts
planned this illegal action as evident in their behavior of arrogance, defiance and provocation, the
presence of various recording gadgets such as VCRs, voice recorders and digital cameras, the bad
mouthing of the security guards and the PGM, the uniformity in their attire and the collusion regarding the On 26 September 1995, petitioner Renato Reyes (petitioner) filed before the Department of Agrarian
anomalous entry of Mr. Albert Velasco to the premises as reported earlier. 15 Reform, Region III, PARAD of San Fernando, Pampanga, a complaint for ejectment against respondent
Leopoldo Barrios (respondent). The case was docketed as DARAB CASE No. 1089-P’95.
The said report of Nagtalon contained only bare facts. It did not show respondents' unified intent to effect
disruption or stoppage in their work. It also failed to show that their purpose was to demand a force The case involves a parcel of land measuring approximately 3.6 hectares (landholding) 4 which forms part
concession. of the property with an aggregate area of 527,695 square meters (property) 5 located at Mapaniqui,
Candaba, Pampanga covered by Transfer Certificate of Title (TCT) No. 14488. 6 The property was co-
owned by petitioner and his four sisters. 7 Petitioner claimed that the property became subject of the
In the recent case of GSIS v. Kapisanan ng mga Manggagawa sa GSIS, 16 the Court upheld the position
Operation Land Transfer under Presidential Decree No. 27 (PD 27), except the 3.6‒hectare landholding
of petitioner GSIS because its employees, numbering between 300 and 800 each day, staged a walkout
which was allegedly retained. In his Memorandum 8dated 18 September 2007, petitioner averred that he
and participated in a mass protest or demonstration outside the GSIS for four straight days. We cannot
and his sister Leticia V. Reyes are the co-owners of the landholding. Petitioner hired respondent as the
say the same for the 20 or so employees in this case. To equate their wearing of red shirts and going to
overseer of the farm and piggery on the landholding. However, petitioner contended that respondent
the GSIS-IU office for just over an hour with that four-day mass action in Kapisanan ng mga
never remitted the proceeds from the piggery business and the fruits from the landholding. 9
Manggagawa sa GSIS case and to punish them in the same manner would most certainly be unfair and
unjust.
On the other hand, respondent alleged that he was a tenant of the landholding since 1972 and he even
built his house on the subject landholding. Respondent also acted as the caretaker of the piggery
Recent analogous decisions in the United States, while recognizing the government's right as an
business on the landholding. Contrary to petitioner’s allegations, respondent stated that petitioner’s wife
employer to lay down certain standards of conduct, tend to lean towards a broad definition of "public
took all the proceeds from the piggery business, which later ceased operation due to an epidemic.
concern speech" which is protected by their First Amendment. One such case is that of Scott v.
Meters.17 In said case, the New York Transit Authority (NYTA), responsible for operation of New York
City's mass transit service, issued a rule prohibiting employees from wearing badges or buttons on their When respondent failed to appear during the scheduled hearings, petitioner moved to submit the case for
uniforms. A number of union members wore union buttons promoting their opposition to a collective decision on the basis of the evidence presented. Respondent alleged that his failure to attend the
bargaining agreement. Consequently, the NYTA tried to enforce its rule and threatened to subject these scheduled hearings was because he received the Notice for the 29 February 1996 hearing only on 6
union members to discipline. The court, though recognizing the government's right to impose reasonable March 1996. Respondent moved for the postponement of the hearing because he was bedridden due to
restrictions, held that the NYTA's rule was "unconstitutionally overboard." hypertension and heart ailment.10 However, the PARAD again heard the case ex-parte on 28 March 1996,
of which respondent alleged that he was still not notified.
In another case, Communication Workers of America v. Ector County Hospital District, 18 it was held that,
On 31 October 1996, the PARAD rendered a decision, the dispositive portion of which reads:
A county hospital employee's wearing of a "Union Yes" lapel pin during a union organization drive
constituted speech on a matter of public concern, and the county's proffered interest in enforcing the anti- WHEREFORE, premises considered, this Office renders judgment declaring that herein plaintiff [Renato
adornment provision of its dress code was outweighed by the employee's interest in exercising his First Reyes] is entitled to recover the possession of the property subject of this present litigation; ordering the
Amendment speech and associational rights by wearing a pro-union lapel button. 19 defendant [Leopoldo Barrios] or anyone claiming any right or authority under him to vacate the premises
in question and surrender possession thereof to the plaintiff; and ordering the defendant to pay the sum
of ₱3,000.00 to the plaintiff as attorney’s fees.
Thus, respondents' freedom of speech and of expression remains intact, and CSC's Resolution No. 02-
1316 defining what a prohibited concerted activity or mass action has only tempered or regulated these
Respondent appealed to the DARAB. Meanwhile, respondent passed away on 13 February 1997 12 and
was substituted by his spouse Lucia Manalus-Barrios.13
On 29 June 1998, the DARAB reversed the PARAD decision and held that respondent is a bona fide
tenant of the landholding and that he cannot be ejected from the landholding absent any justifiable cause.
The DARAB held:
It appears that Respondent-Appellant is listed as farmer-beneficiary of the land transfer program, as
evidenced by the Certification issued by the Officer-in-charge of Arayat-Sta. Ana-Candaba Agrarian
Reform Team. The fact of tenancy is buttressed by the joint statement dated March 5, 1989 of residents
of neighboring lots who attest to Respondent-Appellant’s cultivation of subject lot. As tenant thereon,
Respondent-Appellant, therefore, cannot just be ejected. The causes for extinguishment of Leasehold
Relation pursuant to Section 36, Republic Act No. 6657 are:
1. Abandonment of the landholding without the knowledge of the lessor;
2. Voluntary surrender of the landholding by the lessee, written notice of which shall be
served three (3) months in advance;
3. Absence of successor or qualified heir, in case of death or permanent incapacity of the
lessee;
4. Judicial ejectment of the lessee for causes provided under Sec. 36 of the Code;
5. Acquisition by the lessee of the landholding;
6. Termination of the leasehold under Sec. 38;
7. Mutual consent of the parties; and
8. Conversion of the landholding for non-agricultural purposes subject to the conditions
required by law.
The records are bereft of evidence showing the existence of any of the above-quoted circumstances to
justify ejectment of Respondent-Appellant from said landholding.
Under the prevailing circumstances, we hold that Respondent-Appellant Barrios is a bona fide tenant of
the landholding.
WHEREFORE, premises considered, the appealed decision is SET ASIDE,
Petitioner filed a Motion for Reconsideration, asking for the reversal of the DARAB decision and the
reinstatement of the PARAD decision. Respondent, substituted by his spouse Lucia Manalus-Barrios,
also filed a Motion for Partial Reconsideration, asking for the modification of the decision by declaring
respondent as a beneficiary under PD 27 and to issue an Emancipation Patent in favor of respondent’s
surviving spouse Lucia Manalus-Barrios.
In its 7 December 2004 Resolution, the DARAB denied petitioner’s Motion for Reconsideration for lack of
merit and granted respondent’s Motion for Partial Reconsideration, thus:
In the Motion for Partial Reconsideration, Movant alleged that this Board in its decision has declared that
the deceased Defendant-Appellant Leopoldo Barrios is a bona fide tenant on the subject landholding.
Moreover, Plaintiff-Appellee maintains that page three (3) of the decision rendered by this Board finds
and provides that "Operation Land Transfer (OLT) or Presidential Decree No. 27 was signed into law
decreeing the emancipation of tenants from the bondage of the soil, transferring to them the ownership of
the land they till and providing the instruments and mechanisms therefore." Hence, movant prayed that
an Emancipation Patent be issued in lieu of the Certificate of Agricultural Lease in consonance with the
findings of this Board and DAR Administrative Order No. 13, Series of 1988.
Acting on said motion, this Board finds that the appealed decision shows substantial appreciation that
deceased Defendant-Appellant was a bona fide tenant on the subject landholding. Likewise, this Board,
in the assailed decision sustained the provisions of Presidential Decree No. 27, providing "the
emancipation of tenants from the bondage of the soil . . ."
From the foregoing findings, the pronouncement of this Board specifically paragraph three (3) of the
decision seeks modification. In finding that deceased Defendant-Appellant was a bona fide tenant of the
subject landholding and declaring the emancipation of tenants from the bondage of the soil, the
subsequent issuance of a Certificate of Agricultural Lease as provided in the assailed decision is not in
consonance with the findings of the Board. Hence, this Board is constrained to modify or apply the
correct conclusions drawn from the facts of the case.
WHEREFORE, premises considered, the herein Motion for Reconsideration dated September 30, 1995
is hereby DENIED for lack of merit. Whereas, the Motion for Partial Reconsideration dated October 5,
1998 is GRANTED and a new judgment is rendered, as follows:
Let records of this case be remanded to the Sala of the Honorable Provincial Adjudicator of Pampanga
for the immediate issuance of a writ of execution.
Petitioner filed another Motion for Reconsideration, which the DARAB denied in its Resolution dated 5
May 2005.16Petitioner then appealed to the Court of Appeals, which denied the petition for review in its 8
February 2006 Decision. The Court of Appeals likewise denied petitioner’s motion for reconsideration in
its 29 May 2006 Resolution.
Hence, this petition for review.
The Ruling of the Court of Appeals
The Court of Appeals concurred with the findings of the DARAB, thus:
But the petitioner insists that public respondent decided the case at bench against him in defiance of the
evidence on record. We do not agree. The DARAB based its findings on the certification dated December
7, 1982 of then Ministry of Agrarian Reform (now Department of Agrarian Reform) of Sta. Ana, Pampanga
finding Leopoldo Barrios as legitimate farmer-beneficiary over a four (4) hectare unirrigated land owned
by Renato Reyes, located at Mapaniqui, Candaba, Pampanga; on the certification issued by the Officer-
in-charge of Arayat-Sta. Ana-Candaba Agrarian Reform Team listing respondent-appellant as farmer-
beneficiary; and on the joint statement dated March 5, 1989 of residents of neighboring lots who attested
to respondent-appellant’s cultivation and occupation of the subject lot.
It bears stressing that in administrative proceedings, as in the case at bench, the quantum of evidence
required to sustain a judgment is only substantial evidence. It is such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if other minds equally reasonable might
conceivably opine differently. Thus, findings of fact of quasi-judicial agencies are generally accorded
respect, and even finality, by the appellate tribunal, if supported by substantial evidence, this in
recognition of their expertise on the specific matters under their consideration. 17
The Issues
In his petition, petitioner submits that:
 1. THE COURT OF APPEALS BY RULING IN ITS QUESTIONED DECISION (ANNEX "A")
THAT THE DARAB WAS CORRECT IN DECIDING THE CASE AGAINST HIM AS THIS IS
SUPPORTED BY THE CERTIFICATIONS ISSUED BY THE MINISTRY OF AGRARIAN
REFORM AND THE OFFICER-IN-CHARGE OF THE AGRARIAN REFORM TEAM OF
ARAYAT-STA. ANA-CANDABA, PAMPANGA DENIED PETITIONER HIS RIGHT TO DUE
PROCESS OF LAW AND COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION BECAUSE THE RECORD SHOWS THAT NOT
ONLY ARE THE EVIDENCE OF BARRIOS IRRELEVANT BUT THEY [ARE] ALSO MERE
MACHINE COPIES WHICH WERE NEVER PRESENTED IN A PROPER HEARING WHERE
THE PETITIONER CAN SCRUTINIZE THEM AND CROSS-EXAMINE PRIVATE
RESPONDENT ON THEM.
2. THE COURT OF APPEALS COMMITTED GRIEVOUS LEGAL ERROR AND/OR GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION BY
FAILING TO CORRECT THE DARAB IN NOT RECOGNIZING PETITIONER’S RIGHT OVER
HIS RETAINED AREA WHICH HAD ALREADY BEEN THE SUBJECT OF AN AWARD IN
CLAIM 83-144 OF LAND BANK OF THE PHILIPPINES.18
The Ruling of the Court
We partially grant the petition. We hold that respondent is a bona fide tenant of the subject landholding,
as stated in the 29 June 1998 DARAB Decision in DARAB Case No. 5504. However, the 7 December
2004 DARAB Resolution, modifying the 29 June 1998 DARAB Decision and directing the DAR Regional
Director to issue Emancipation Patent in favor of respondent or his heirs, should be set aside.
In this case, the DARAB ruling that respondent is a bona fide tenant is supported by evidence submitted
by respondent, which included: (1) certification dated 7 December 1982 of the Arayat-Sta. Ana-Candaba
Agrarian Reform Team, Ministry of Agrarian Reform, Region III, Pampanga District, stating that
respondent is a bona fide farmer-beneficiary under the Operation Land Transfer of the four (4)-hectare
farmholding owned by petitioner; 19 (2) joint statement ("Salaysay") dated 5 March 1989 of the former
farmworkers of the neighboring farmlots attesting to respondent’s occupation and cultivation of the
subject landholding;20 (3) pictures of the subject landholding which was planted with palay crops; 21 and
(4) picture of respondent’s house constructed on the subject landholding. 221avvphi1
Furthermore, in compliance with the Order 23 dated 30 September 2002 of the DARAB, the Provincial
Agrarian Reform Officer (PARO) of Pampanga forwarded to the DARAB the status report on the subject
landholding,24 which states:
Republic of the Philippines
DEPARTMENT OF AGRARIAN REFORM
Region III
Municipal Agrarian Reform Office
Candaba, Pampanga
Engr. Rodolfo S. Pangilinan
OIC-PARO
DARPO-Del Pilar,
City of San Fernando Pampanga
Sir:
This refers to the Order dated September 30, 2002 issued by DARCO Appeal Board with the instruction
to submit status report of the subject landholding owned by Renato Reyes located at Mapanique,
Candaba, Pampanga.
That the undersigned conducted ocular inspection/verification and reveal the following finding to wit:
1. That Renato Reyes the landowner and Leopoldo Barrios tenant are both deceased.
2. That the subject landholding was taken over by Renato Reyes since 1996 and it is being
administered by Antonio Manalus.
3. That at present the land in question is planted to palay by the administrator Antonio
Manalus with the used (sic) of farm labor and 30 mango tree[s] are existing of the subject
landholding.
4. That the house of Lucia Vda. De Barrios was constructed to the subject
landholdingwith an area of 450 square meters more or less.
5. That the qualified tenant beneficiaries [are] among the surviving heirs of Leopoldo
Barrios is the wife of (sic) Lucia Vda. M. Barrios.
In view of the foregoing facts and base[d] on the Order dated September 30, 2002[,] [t]he
undersigned schedule[d] mediation conference on November 18, 2002 in preparation of the
Certificate of Agricultural Leasehold.
Very truly yours,
(signed)
SALVADOR S. TOTAAN
M.A.R.O.25
Under Section 3, Rule I of the 1994 DARAB New Rules of Procedure (now Section 3, Rule I of the 2009
DARAB Rules of Procedure26), the Board and its Regional and Provincial Adjudicators are not bound by
technical rules of procedure and evidence, thus:
SECTION 3. Technical Rules Not Applicable. The Board and its Regional and Provincial Adjudicators
shall not be bound by technical rules of procedure and evidence as prescribed in the Rules of Court, but
shall proceed to hear and decide all agrarian cases, disputes or controversies in a most expeditious
manner, employing all reasonable means to ascertain the facts of every case in accordance with justice
and equity.
xxx
c) The provisions of the Rules of Court shall not apply even in suppletory character unless adopted
herein or by resolution of the Board. However, due process of law shall be observed and followed in all
instances.
Section 1, Rule VIII of the 1994 DARAB New Rules of Procedure (now Section 1, Rule X of the 2009
DARAB Rules of Procedure27) reiterates the non-applicability of technical rules regarding the admission
and sufficiency of evidence, thus:
SECTION 1. Nature of Proceedings. The proceedings before the Board or its Adjudicators shall be non-
litigious in nature. Subject to the essential requirements of due process, the technicalities of law and
procedures and the rules governing the admissibility and sufficiency of evidence obtained in the courts of
law shall not apply. x x x
Thus, in Reyes v. Court of Appeals,28 the Court held:
Finally, we rule that the trial court did not err when it favorably considered the affidavits of Eufrocina and
Efren Tecson (Annexes "B" and "C") although the affiants were not presented and subjected to cross-
examination. Section 16 of P.D. No. 946 provides that ‘Rules of Court shall not be applicable in agrarian
cases even in a suppletory character.’ The same provision states that ‘In the hearing, investigation and
determination of any question or controversy, affidavits and counter-affidavits may be allowed and are
admissible in evidence.’29
Besides, the DARAB Rules should be liberally construed to carry out the objectives of agrarian reform
and to promote just, expeditious, and inexpensive adjudication and settlement of agrarian cases,
disputes or controversies.30
Although we affirm the ruling of the DARAB that respondent is a bona fide tenant, we disagree with its
order for the issuance of an Emancipation Patent in favor of respondent’s heir, as provided in its
Resolution dated 7 December 2004. The records show that when the property was placed under the
Operation Land Transfer, respondent was not included in the list of tenant beneficiaries who were issued
Emancipation Patents, as noted on the title of the property, TCT No. 14488, which was partially canceled
in view of the issuance of the new TCTs in favor of the tenant beneficiaries. 31
The Primer on Agrarian Reform32 enumerates the steps in transferring the land to the tenant-tiller, thus:
a. First step: the identification of tenants, landowners, and the land covered by OLT.
b. Second step: land survey and sketching of the actual cultivation of the tenant to determine
parcel size, boundaries, and possible land use;
c. Third step: the issuance of the Certificate of Land Transfer (CLT). To ensure accuracy and
safeguard against falsification, these certificates are processed at the National Computer
Center (NCC) at Camp Aguinaldo;
d. Fourth step: valuation of the land covered for amortization computation;
e. Fifth step: amortization payments of tenant-tillers over fifteen (15) year period; and
f. Sixth step: the issuance of the Emancipation Patent. 33
Thus, there are several steps to be undertaken before an Emancipation Patent can be issued. As regards
respondent, the records are bereft of evidence indicating that this procedure has been followed.
Furthermore, there are several supporting documents which a tenant-farmer must submit before he can
receive the Emancipation Patent, such as:
a. Application for issuance of Emancipation Patent;
b. Applicant’s (owner’s) copy of Certificate of Land Transfer.
c. Certification of the landowner and the Land Bank of the Philippines that the applicant has
tendered full payment of the parcel of land as described in the application and as actually
tilled by him;
d. Certification by the President of the Samahang Nayon or by the head of farmers’
cooperative duly confirmed by the municipal district officer (MDO) of the Ministry of Local
Government and Community Development (MLGCD) that the applicant is a full-fledged
member of a duly registered farmers’ cooperative or a certification to these effect;
e. Copy of the technical (graphical) description of the land parcel applied for prepared by the
Bureau of Land Sketching Team (BLST) and approved by the regional director of the Bureau
of Lands;
f. Clearance from the MAR field team (MARFT)or the MAR District Office (MARDO) legal
officer or trial attorney; or in their absence, a clearance by the MARFT leader to the effect that
the land parcel applied for is not subject of adverse claim, duly confirmed by the legal officer
or trial attorney of the MAR Regional Office or, in their absence, by the regional director;
g. Xerox copy of Official Receipts or certification by the municipal treasurer showing that the
applicant has fully paid or has effected up-to-date payment of the realty taxes due on the land
parcel applied for; and
h. Certification by the MARFT leader whether applicant has acquired farm machineries from
the MAR and/or from other government agencies.34
Majority of these supporting documents are lacking in this case. Hence, it was improper for the DARAB to
order the issuance of the Emancipation Patent in favor of respondent without the required supporting
documents and without following the requisite procedure before an Emancipation Patent may be validly
issued.
Moreover, there was no sufficient evidence to prove that respondent has fully paid the value of the
subject landholding. As held in Mago v. Barbin,35 the laws mandate full payment of just compensation for
the lands acquired under PD 27 prior to the issuance of Emancipation Patents, thus:
In the first place, the Emancipation Patents and the Transfer Certificates of Title should not have been
issued to petitioners without full payment of the just compensation. Under Section 2 of Presidential
Decree No. 266, the DAR will issue the Emancipation Patents only after the tenant-farmers have fully
complied with the requirements for a grant of title under PD 27. Although PD 27 states that the tenant-
farmers are already deemed owners of the land they till, it is understood that full payment of the just
compensation has to be made first before title is transferred to them. Thus, Section 6 of EO 228 provides
that ownership of lands acquired under PD 27 may be transferred only after the agrarian reform
beneficiary has fully paid the amortizations. 36
Clearly, respondent is not entitled to be issued an Emancipation Patent considering that he has not fully
complied with the requirements for a grant of title under PD 27. 37
On the issue of petitioner’s claim that the subject landholding forms part of the retained area awarded to
him and his sisters, the Court notes that there was no sufficient evidence to substantiate petitioner’s
claim. Furthermore, as held by the Court of Appeals, only the Office of the Secretary of the Department of
Agrarian Reform (DAR) has the exclusive jurisdiction to resolve the issue of whether petitioner is entitled
to a retention area.38 Indeed, under Section 3 (3.5), Rule II of the DARAB 2003 Rules of Procedure, the
exercise of the right of retention by the landowner is under the exclusive prerogative of and cognizable by
the Office of the Secretary of the DAR. Besides, even if the subject landholding forms part of petitioner’s
retained area, petitioner landowner may still not eject respondent tenant absent any of the causes
provided under the law. The landowner cannot just terminate the leasehold relationship without valid
cause.
WHEREFORE, we PARTIALLY GRANT the petition. We SET ASIDE the 8 February 2006 Decision and
the 29 May 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 90212. We REINSTATE the 29
June 1998 Decision of the Department of Agrarian Reform Adjudication Board in DARAB Case No. 5504.
SO ORDERED.
G.R. No. 169466 May 9, 2007
DEPARTMENT OF BUDGET AND MANAGEMENT, represented by SECRETARY ROMULO L. NERI,
PHILIPPINE NATIONAL POLICE, represented by POLICE DIRECTOR GENERAL ARTURO L.
LOMIBAO, NATIONAL POLICE COMMISSION, represented by CHAIRMAN ANGELO T. REYES, AND
CIVIL SERVICE COMMISSION, represented by CHAIRPERSON KARINA C. DAVID, Petitioners,
vs.
MANILA’S FINEST RETIREES ASSOCIATION, INC., represented by P/COL. FELICISIMO G.
LAZARO (RET.), AND ALL THE OTHER INP RETIREES, Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this petition for review on certiorari under Rule 45 of the Rules of
Court are the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 78203, to wit:
1. Decision1 dated July 7, 2005 which affirmed in toto the decision of the Regional Trial Court
of Manila, Branch 32, in Civil Case No. 02-103702, a suit for declaratory relief, declaring the
herein respondents entitled to the same retirement benefits accorded upon retirees of the
Philippine National Police (PNP) under Republic Act (R.A.) No. 6975, as amended by R.A.
No. 8551, and ordering the herein petitioners to implement the proper adjustments on
respondents’ retirement benefits; and
2. Resolution2 dated August 24, 2005 which denied the petitioners’ motion for reconsideration.
The antecedent facts:
In 1975, Presidential Decree (P.D.) No. 765 was issued constituting the Integrated National Police (INP)
to be composed of the Philippine Constabulary (PC) as the nucleus and the integrated police forces as
components thereof. Complementing P.D. No. 765 was P.D. No. 1184 3 dated August 26, 1977 (INP Law,
hereinafter) issued to professionalize the INP and promote career development therein.
On December 13, 1990, Republic Act (R.A.) No. 6975, entitled "AN ACT ESTABLISHING THE
PHILIPPINE NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT OF THE INTERIOR AND
LOCAL GOVERNMENT, AND FOR OTHER PURPOSES," hereinafter referred to as PNP Law, was
enacted. Under Section 23 of said law, the Philippine National Police (PNP) would initially consist of the
members of the INP, created under P.D. No. 765, as well as the officers and enlisted personnel of the PC.
In part, Section 23 reads:
SEC. 23. Composition. – Subject to the limitation provided for in this Act, the Philippine National Police,
hereinafter referred to as the PNP, is hereby established, initially consisting of the members of the police
forces who were integrated into the Integrated National Police (INP) pursuant to Presidential Decree No.
765, and the officers and enlisted personnel of the Philippine Constabulary (PC).
A little less than eight (8) years later, or on February 25, 1998, R.A. No. 6975 was amended by R.A. No.
8551, otherwise known as the "PHILIPPINE NATIONAL POLICE REFORM AND REORGANIZATION
ACT OF 1998." Among other things, the amendatory law reengineered the retirement scheme in the
police organization. Relevantly, PNP personnel, under the new law, stood to collect more retirement
benefits than what INP members of equivalent rank, who had retired under the INP Law, received.
The INP retirees illustrated the resulting disparity in the retirement benefits between them and the PNP
retirees as follows:4
Retirement Rank Monthly Pension Difference
INP PNP INP PNP
Corporal SPO3 P 3,225.00 P 11,310.00 P 8,095.00
Captain P. Sr. Insp. P 5,248.00 P 15,976.00 P10,628.00
Brig. Gen. P. Chief Supt. P 10,054.24 P 18,088.00 P 8,033.76
Hence, on June 3, 2002, in the Regional Trial Court (RTC) of Manila, all INP retirees, spearheaded by the
Manila’s Finest Retirees Association, Inc., or the MFRAI (hereinafter collectively referred to as the INP
Retirees), filed a petition for declaratory relief, 5 thereunder impleading, as respondents, the Department
of Budget and Management (DBM), the PNP, the National Police Commission (NAPOLCOM), the Civil
Service Commission (CSC) and the Government Service Insurance System (GSIS). Docketed in the RTC
as Civil Case No. 02-103702, which was raffled to Branch 22 thereof, the petition alleged in gist that INP
retirees were equally situated as the PNP retirees but whose retirement benefits prior to the enactment of
R.A. No. 6975, as amended by R.A. No. 8551, were unconscionably and arbitrarily excepted from the
higher rates and adjusted benefits accorded to the PNP retirees. Accordingly, in their petition, the
petitioning INP retirees pray that a –
DECLARATORY JUDGMENT be rendered in their favor, DECLARING with certainty that they, as INP-
retirees, are truly absorbed and equally considered as PNP-retirees and thus, entitled to enjoy the SAME
or IDENTICAL retirement benefits being bestowed to PNP-retirees by virtue of said PNP Law or Republic
Act No. 6975, as amended by Republic Act 8551, with the corollary mandate for the respondents-
government agencies to effect the immediate adjustment on their previously received disparate
retirement benefits, retroactive to its effectivity, and with due payment thereof.
The GSIS moved to dismiss the petition on grounds of lack of jurisdiction and cause of action. On the
other hand, the CSC, DBM, NAPOLCOM and PNP, in their respective answers, asserted that the
petitioners could not claim the more generous retirement benefits under R.A. No. 6975 because at no
time did they become PNP members, having retired prior to the enactment of said law. DBM,
NAPOLCOM and PNP afterwards filed their respective pre-trial briefs.
The ensuing legal skirmish is not relevant to the disposition of the instant case. The bottom line is that, on
March 21, 2003, the RTC came out with its decision 6 holding that R.A. No. 6975, as amended, did not
abolish the INP but merely provided for the absorption of its police functions by the PNP, and accordingly
rendered judgment for the INP retirees, to wit:
WHEREFORE, this Court hereby renders JUDGMENT DECLARING the INP Retirees entitled to the
same or identical retirement benefits and such other benefits being granted, accorded and bestowed
upon the PNP Retirees under the PNP Law (RA No. 6975, as amended).
The respondents Government Departments and Agencies shall IMMEDIATELY EFFECT and
IMPLEMENT the proper adjustments on the INP Retirees’ retirement and such other benefits,
RETROACTIVE to its date of effectivity, and RELEASE and PAY to the INP Retirees the due payments of
the amounts.
SO ORDERED.
On April 2, 2003, the trial court issued what it denominated as Supplement to the Decision whereunder it
granted the GSIS’ motion to dismiss and thus considered the basic petition as withdrawn with respect to
the latter.
From the adverse decision of the trial court, the remaining respondents, namely, DBM, PNP, NAPOLCOM
and CSC, interposed an appeal to the CA whereat their appellate recourse was docketed as CA-G.R. CV
No. 78203.
As stated at the threshold hereof, the CA, in its decision of July 7, 2005, 7 affirmed that of the trial court
upholding the entitlement of the INP retirees to the same or identical retirement benefits accorded upon
PNP retirees under R.A. No. 6975, as amended.
Their motion for reconsideration having been denied by the CA in` its equally assailed resolution of
August 24, 2005,8 herein petitioners are now with this Court via the instant recourse on their singular
submission that -
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN LAW IN AFFIRMING THE DECISION
OF THE TRIAL COURT NOTWITHSTANDING THAT IT IS CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE.
We DENY.
In the main, it is petitioners’ posture that R.A. No. 6975 clearly abolished the INP and created in its stead
a new police force, the PNP. Prescinding therefrom, petitioners contend that since the PNP is an
organization entirely different from the INP, it follows that INP retirees never became PNP members.
Ergo, they cannot avail themselves of the retirement benefits accorded to PNP members under R.A. No.
6975 and its amendatory law, R.A. No. 8551.
Phase II – Approval of the table of organization and equipment of all bureaus and offices created under
this Act, preparation and filling up of their staffing pattern, transfer of assets to the [DILG] and
organization of the Commission, to be completed within twelve (12) months from the effectivity date
hereof. At the end of this phase, all personnel to be absorbed by the [DILG] shall have been issued
appointment papers, and the organized Commission and the PNP shall be fully operational.
The PC officers and enlisted personnel who have not opted to join the PNP shall be reassigned to the
Army, Navy or Air Force, or shall be allowed to retire under existing AFP rules and regulations. Any PC-
INP officer or enlisted personnel may, within the twelve-month period from the effectivity of this Act, retire
and be paid retirement benefits corresponding to a position two (2) ranks higher than his present grade,
subject to the conditions that at the time he applies for retirement, he has rendered at least twenty (20)
years of service and still has, at most, twenty-four (24) months of service remaining before the
compulsory retirement age as provided by existing law for his office.
Phase III – Adjustment of ranks and establishment of one (1) lineal roster of officers and another for non-
officers, and the rationalization of compensation and retirement systems; taking into consideration the
existing compensation schemes and retirement and separation benefit systems of the different
components of the PNP, to ensure that no member of the PNP shall suffer any diminution in basic
longevity and incentive pays, allowances and retirement benefits due them before the creations of the
PNP, to be completed within eighteen (18) months from the effectivity of this Act. xxx.

Upon the effectivity of this Act, the [DILG] Secretary shall exercise administrative supervision as well as
A flashback at history is proper.
operational control over the transferred, merged and/or absorbed AFP and INP units. The incumbent
Director General of the PC-INP shall continue to act as Director General of the PNP until … replaced ….
As may be recalled, R.A. No. 6975 was enacted into law on December 13, 1990, or just about four (4) (Emphasis and words in brackets supplied.)
years after the 1986 Edsa Revolution toppled down the dictatorship regime. Egged on by the current
sentiment of the times generated by the long period of martial rule during which the police force, the PC-
From the foregoing, it appears clear to us that the INP was never, as posited by the petitioners, abolished
INP, had a military character, being then a major service of the Armed Forces of the Philippines, and
or terminated out of existence by R.A. No. 6975. For sure, nowhere in R.A. No. 6975 does the words
invariably moved by a fresh constitutional mandate for the establishment of one police force which should
"abolish" or "terminate" appear in reference to the INP. Instead, what the law provides is for the
be national in scope and, most importantly, purely civilian in character, 9 Congress enacted R.A. No. 6975
"absorption," "transfer," and/or "merger" of the INP, as well as the other offices comprising the PC-INP,
establishing the PNP and placing it under the Department of Interior and Local Government. To
with the PNP. To "abolish" is to do away with, to annul, abrogate or destroy completely; 12 to "absorb" is to
underscore the civilian character of the PNP, R.A. No. 6975 made it emphatically clear in its declaration
assimilate, incorporate or to take in.13 "Merge" means to cause to combine or unite to become legally
of policy the following:
absorbed or extinguished by merger 14 while "transfer" denotes movement from one position to another.
Clearly, "abolition" cannot be equated with "absorption."
Section 2. Declaration of policy - It is hereby declared to be the policy of the State to promote peace and
order, ensure public safety and further strengthen local government capability aimed towards the effective
True it is that Section 9015 of R.A. No. 6975 speaks of the INP "[ceasing] to exist" upon the effectivity of
delivery of the basic services to the citizenry through the establishment of a highly efficient and
the law. It ought to be stressed, however, that such cessation is but the logical consequence of the INP
competent police force that is national in scope and civilian in character. xxx.
being absorbed by the PNP.1a\^/phi1.net

The police force shall be organized, trained and equipped primarily for the performance of police
Far from being abolished then, the INP, at the most, was merely transformed to become the PNP, minus
functions. Its national scope and civilian character shall be paramount. No element of the police force
of course its military character and complexion.
shall be military nor shall any position thereof be occupied by active members of the [AFP]. (Emphasis
and word in bracket supplied.)
Even the petitioners’ effort at disclosing the legislative intent behind the enactment of R.A. No. 6975
cannot support their theory of abolition. Rather, the Senate and House deliberations on the bill that
Pursuant to Section 23, supra, of R.A. No. 6975, the PNP initially consisted of the members of the police
eventually became R.A. No. 6975 reveal what has correctly been held by the CA in its assailed decision:
forces who were integrated into the INP by virtue of P.D. No. 765, while Section 86 10 of the same law
that the PNP was precisely created to erase the stigma spawned by the militarization of the police force
provides for the assumption by the PNP of the police functions of the INP and its absorption by the
under the PC-INP structure. The rationale behind the passage of R.A. No. 6975 was adequately
former, including its appropriations, funds, records, equipment, etc., as well as its personnel. 11 And to
articulated by no less than the sponsor16 of the corresponding House bill in his sponsorship speech, thus:
govern the statute’s implementation, Section 85 of the Act spelled out the following absorption phases:

Phase I – Exercise of option by the uniformed members of the [PC], the PC elements assigned with the
Narcotics Command, CIS, and the personnel of the technical services of the AFP assigned with the PC to
include the regular CIS investigating agents and the operatives and agents of the NAPOLCOM
Inspection. Investigation and Intelligence Branch, and the personnel of the absorbed National Action
Committee on Anti-Hijacking (NACAH) of the Department of National Defense to be completed within six
(6) months from the date of the effectivity of this Act. At the end of this phase, all personnel from the INP,
PC, AFP Technical Services, NACAH, and NAPOLCOM Inspection, Investigation and Intelligence Branch
shall have been covered by official orders assigning them to the PNP, Fire and Jail Forces by their
respective units.
By removing the police force from under the control and supervision of military officers, the bill seeks to
restore and underscore the civilian character of police work - an otherwise universal concept that was
muddled up by the martial law years.
Indeed, were the legislative intent was for the INP’s abolition such that nothing would be left of it, the
word "abolish" or what passes for it could have easily found its way into the very text of the law itself,
what with the abundant use of the word during the legislative deliberations. But as can be gleaned from
said deliberations, the lawmakers’ concern centered on the fact that if the entire PC-INP corps join the
PNP, then the PC-INP will necessarily be abolished, for who then would be its members? Of more
consequence, the lawmakers were one in saying that there should never be two national police agencies
at the same time.
With the conclusion herein reached that the INP was not in fact abolished but was merely transformed to
become the PNP, members of the INP which include the herein respondents are, therefore, not excluded
from availing themselves of the retirement benefits accorded to PNP retirees under Sections 74 17 and
7518 of R.A. No. 6975, as amended by R.A. No. 8551. It may be that respondents were no longer in the
government service at the time of the enactment of R.A. No. 6975. This fact, however, without more,
would not pose as an impediment to the respondents’ entitlement to the new retirement scheme set forth
under the aforecited sections. As correctly ratiocinated by the CA to which we are in full accord:
For sure, R.A. No. 6975 was not a retroactive statute since it did not impose a new obligation to pay the
INP retirees the difference between what they received when they retired and what would now be due to
them after R.A. No. 6975 was enacted. Even so, that did not render the RTC’s interpretation of R.A. No.
6975 any less valid. The [respondents’] retirement prior to the passage of R.A. No. 6975 did not exclude
them from the benefits provided by R.A. No. 6975, as amended by R.A. No. 8551, since their
membership in the INP was an antecedent fact that nonetheless allowed them to avail themselves of the
benefits of the subsequent laws. R.A. No. 6975 considered them as PNP members, always referring to
their membership and service in the INP in providing for their retirement benefits. 19
Petitioners maintain, however, that NAPOLCOM Resolution No. 8, 20 particularly Section 1121 thereof, bars
the payment of any differential in retirement pay to officers and non-officers who are already retired prior
to the effectivity of R.A. No. 6975.
The contention does not commend itself for concurrence.
Under the amendatory law (R.A. No. 8551), the application of rationalized retirement benefits to PNP
members who have meanwhile retired before its (R.A. No. 8551) enactment was not prohibited. In fact,
its Section 3822 explicitly states that the rationalized retirement benefits schedule and program "shall
have retroactive effect in favor of PNP members and officers retired or separated from the time specified
in the law." To us, the aforesaid provision should be made applicable to INP members who had retired
prior to the effectivity of R.A. No. 6975. For, as afore-held, the INP was, in effect, merely absorbed by the
PNP and not abolished.
Indeed, to bar payment of retirement pay differential to INP members who were already retired before
R.A. No. 6975 became effective would even run counter to the purpose of NAPOLCOM Resolution No. 8
itself, as expressed in its preambulatory clause, which is to rationalize the retirement system of the PNP
taking into consideration existing retirement and benefit systems (including R.A. No. 6975 and P.D. No.
1184) of the different components thereof "to ensure that no member of the PNP shall suffer any
diminution in the retirement benefits due them before the creation of the PNP." 23
Most importantly, the perceived restriction could not plausibly preclude the respondents from asserting
their entitlement to retirement benefits adjusted to the level when R.A. No. 6975 took effect. Such
adjustment hews with the constitutional warrant that "the State shall, from time to time, review to upgrade
the pensions and other benefits due to retirees of both the government and private sectors," 24 and the
implementing mandate under the Senior Citizen’s Law 25 that "to the extent practicable and feasible,
retirement benefits xxx shall be upgraded to be at par with the current scale enjoyed by those in actual
service."1awphi1.nét
Certainly going for the respondents in their bid to enjoy the same retirement benefits granted to PNP
retirees, either under R.A. No. 6975 or R.A. No. 8551, is Section 34 of the latter law which amended
Section 75 of R.A. No. 6975 by adding thereto the following proviso:
Section 75. Retirement benefits. x x x: Provided, finally, That retirement pay of the officers/non-officers of
the PNP shall be subject to adjustments based on the prevailing scale of base pay of police personnel in
the active service.
Then, too, is the all familiar rule that:
Retirement laws should be liberally construed in favor of the retiree because their intention is to provide
for his sustenance and hopefully, even comfort, when he no longer has the stamina to continue earning
his livelihood. The liberal approach aims to achieve the humanitarian purposes of the law in order that
efficiency, security and well-being of government employees may be enhanced. 26
The petitioners parlay the notion of prospective application of statutes, noting in this regard that R.A. No.
6975, as amended, cannot be applied retroactively, there being no provision to that effect.
We are not persuaded.
As correctly found by the appellate court, R.A. No. 6975 itself contextually provides for its retroactive
application to cover those who had retired prior to its effectivity. In this regard, we invite attention to the
three (3) phases of implementation under Section 85 for the absorption and continuation in the service of,
among others, the INP members under the newly-established PNP.
In a further bid to scuttle respondents’ entitlement to the desired retirement benefits, the petitioners fault
the trial court for ordering the immediate adjustments of the respondents’ retirement benefits when the
basic petition filed before it was one for declaratory relief. To the petitioners, such petition does not
essentially entail an executory process, the only relief proper under that setting being a declaration of the
parties’ rights and duties.
Petitioners’ above posture is valid to a point. However, the execution of judgments in a petition for
declaratory relief is not necessarily indefensible. In Philippine Deposit Insurance Corporation[PDIC] v.
Court of Appeals,27 wherein the Court affirmed the order for the petitioners therein to pay the balance of
the deposit insurance to the therein respondents, we categorically ruled:
Now, there is nothing in the nature of a special civil action for declaratory relief that proscribes the filing of
a counterclaim based on the same transaction, deed or contract subject of the complaint. A special civil
action is after all not essentially different from an ordinary civil action, which is generally governed by
Rules 1 to 56 of the Rules of Court, except that the former deals with a special subject matter which
makes necessary some special regulation. But the identity between their fundamental nature is such that
the same rules governing ordinary civil suits may and do apply to special civil actions if not inconsistent
with or if they may serve to supplement the provisions of the peculiar rules governing special civil
actions.28
Similarly, in Matalin Coconut Co., Inc. v. Municipal Council of Malabang, Lanao del Sur: 29 the Court
upheld the lower court’s order for a party to refund the amounts paid by the adverse party under the
municipal ordinance therein questioned, stating:
x x x Under Sec. 6 of Rule 64, the action for declaratory relief may be converted into an ordinary action
and the parties allowed to file such pleadings as may be necessary or proper, if before the final
termination of the case "a breach or violation of an … ordinance, should take place." In the present case,
no breach or violation of the ordinance occurred. The petitioner decided to pay "under protest" the fees
imposed by the ordinance. Such payment did not affect the case; the declaratory relief action was still
proper because the applicability of the ordinance to future transactions still remained to be resolved,
although the matter could also be threshed out in an ordinary suit for the recovery of taxes paid …. In its
petition for declaratory relief, petitioner-appellee alleged that by reason of the enforcement of the
municipal ordinance by respondents it was forced to pay under protest the fees imposed pursuant to the
said ordinance, and accordingly, one of the reliefs prayed for by the petitioner was that the respondents
be ordered to refund all the amounts it paid to respondent Municipal Treasurer during the pendency of
the case. The inclusion of said allegation and prayer in the petition was not objected to by the
respondents in their answer. During the trial, evidence of the
payments made by the petitioner was introduced. Respondents were thus fully aware of the petitioner's
claim for refund and of what would happen if the ordinance were to be declared invalid by the court.
The Court sees no reason for treating this case differently from PDIC and Matalin.1awphi1.nét This
disposition becomes all the more appropriate considering that the respondents, as petitioners in the RTC,
pleaded for the immediate adjustment of their retirement benefits which, significantly, the herein
petitioners, as respondents in the same court, did not object to. Being aware of said prayer, the
petitioners then already knew the logical consequence if, as it turned out, a declaratory judgment is
rendered in the respondents’ favor.
At bottom then, the trial court’s judgment forestalled multiplicity of suits which, needless to stress, would
only entail a long and arduous process. Considering their obvious advanced years, the respondents can
hardly afford another protracted proceedings. It is thus for this Court to already write finis to this case.
WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the CA,
respectively dated July 7, 2005 and August 24, 2005, are AFFIRMED.
No costs.
G.R. No. 79981 April 2, 1991
ENGRACIA BACATE AMBERTI, petitioner,
vs.
HONORABLE COURT OF APPEALS, HONORABLE EFICIO B. ACOSTA, Presiding Judge of Branch
CLV, Regional Trial Court, Pasig, Metro Manila, and MARIA TERESA AMBERTI TALAG,
represented by her husband/attorney-in-fact WILFREDO M. TALAG, respondents.
Jose Oliver Cortes for petitioner.
Benjamin Quitoriano collaborating counsel for petitioner.
Nicolas M. De Guzman for private respondent.
FERNAN, C.J.:
For review is the decision dated September 16, 1987 of the Court of Appeals which dismissed Engracia
Bacate Amberti's petition for annulment of the orders of the Regional Trial Court, Branch 155 (Pasig)
dated January 10, 1986 and November 4, 1986, respectively in CA-G.R. SP No. 10991.
The case at bar is another lamentable instance of a mother and her only daughter clashing with each
other in bitter controversy over inheritance.
Pietro (Piero) Amberti, an Italian citizen, married petitioner Engracia V. Bacate on September 16, 1965.
They have one child, herein private respondent Maria Teresa Amberti, now married to Wilfredo M. Talag.
In June, 1970, Pietro, then a resident of Antipolo, Rizal, died in Torino, Italy, leaving behind considerable
properties in the Philippines and a holographic will designating Maria Teresa as his universal heir in
accordance with the laws of Italy. The will was subsequently admitted to probate in the Philippines on
August 2, 1971 and the widow Engracia was named the executrix, only to be removed after eight (8)
years by the same probate court for maladministration of the Amberti estate, failure to submit an
inventory or render an accounting for more than eight (8) years and to account for the money received by
the estate totalling more than P7,000,000.00. She was ordered replaced by her daughter, Maria Teresa,
upon the latter's motion.1
Petitioner then filed a petition for certiorari, prohibition and mandamus in the Appellate Court to protest
her removal and replacement.2 In its decision dated April 10, 1980, the Appellate Court noted the various
anomalies and irregularities committed by petitioner in her administration of her husband's estate
particularly her failure to render an accounting thereof for eight (8) years. Finding thus the probate court
to have acted properly, it dismissed the petition for lack of merit.
After payment of the estate and inheritance taxes due, private respondent Maria Teresa, as the new
administratrix, filed a motion with the probate court to terminate the administration proceedings and to
declare her as the universal heir of the deceased Pietro Amberti and the absolute owner of all the real
and personal properties of his estate. In compliance with the court's order of November 29, 1985, she
submitted an inventory listing of all the real and personal properties of the subject estate which disclosed,
among others, that petitioner had already sold one-half (1/2) of the 975-square meter West Avenue
(Quezon City) property and had disposed of the various mining equipment used in the once thriving
marble business of the deceased in the reported total amount of P687,500.00. 3
On January 10, 1986, the lower court rendered judgment in Special Proceedings No. 5958 awarding
ownership of the residue of the entire Amberti estate consisting of real and personal properties to the
decedent's universal heir, private respondent Maria Teresa.4
On April 14, 1986, petitioner moved for a reconsideration of the January 10, 1986 decision, questioning
for the first time the provisions of the holographic will and asserting her alleged right of usufruct over one-
half (1/2) of the estate. The trial court denied said motion on November 4, 1986 for having been filed long
after the judgment of January 10, 1986 had acquired finality. 5
Petitioner again sought recourse in the Court of Appeals, 6 this time to seek the annulment of the orders of
January 10, 1986 and November 4, 1986 on the ground that the notice of the January 10, 1986 order
sent by registered mail was not "actually" received by her counsel of record resulting in "deprivation of
due process."7 But before private respondent could comment on the petition, petitioner filed a motion to
withdraw CA-G.R. SP No. 10786 stating that she was no longer interested in pursuing her action.
Consequently, the Appellate Court dismissed CA-G.R. SP No. 10786 in its resolution of January 9, 1987
which read:
The petition is dismissed, petitioner having expressed that she is no longer pursuing it to
judgment.8
However, it would appear that petitioner had a change of heart for on January 12, 1987 she instituted
another action before the Court of Appeals9 to annul and reverse the orders dated January 10, 1986 and
November 4, 1986 of the Regional Trial Court, the very same orders subject of CA-G.R. SP No. 10786.
Petitioner claimed that the act of private respondent in furnishing petitioner with a copy of the motion to
terminate the administration proceedings through her former counsel (Atty. Rogelio Velarde) and not
through her new counsel of record (Atty. Antonio P. Coronel) constituted extrinsic fraud calculated to
deprive her of her day in court. She likewise sought the invalidation of the inventory submitted by her
daughter on the ground that said inventory included properties allegedly belonging to her exclusively or to
the conjugal partnership with the deceased Pietro Amberti.
On March 24, 1987, the Appellate Court issued another resolution declaring as final the dismissal of the
petition in CA-G.R. SP No. 10786:
Considering that the resolution dismissing the appeal dated January 9, 1987 has become
final as of January 31, 1987, the Court Resolved: Let the corresponding entry of judgment
issue and the case remanded to the court of origin for execution of judgment. 10
Finally, on September 16, 1987, the Court of Appeals rendered in CA-G.R. SP No. 10991 the decision
under review which reads in the main:
Significantly, and as the Comment filed by private respondent cited, the petition filed omitted
to mention the fact that on December 8, 1986, the same petitioner filed certiorari proceedings
with prayer for preliminary injunction in this Court, docketed as CA-G.R. SP No. 10786
against same respondents herein, to annul the judgment of January 10, 1986 and the order of
denial of November 4, 1986 on grounds of alleged lack of due process, or abuse of discretion.
...
xxx xxx xxx
 Although in the dismissal of CA-G.R. SP No. 10786, there was no opportunity for this Court to
go over the merits of the grounds alleged, since the petitioner filed a motion to withdraw
before private respondents can file their comment to the petition, the dismissal of the same is
binding on the petitioner. Certainly, she is now estopped from disputing the order of dismissal
by bringing another action and pretending that it is different from the other which was earlier
dismissed upon her instance. Indeed, such dismissal is with prejudice. To hold otherwise is to
allow petitioner to trifle with this Court and waste its precious time which could be utilized to
decide cases brought by other litigants who are more earnest and serious with their cases.
Certainly, the question of whether or not the decision of January 10, 1986 has been served on
petitioner's counsel of record can no longer be raised since by her withdrawal of CA-G.R. SP
No. 10786, petitioner is deemed to have waived any right to raise the issue.
xxx xxx xxx
WHEREFORE, the instant petition should be, as it is hereby DISMISSED. . . 11
The ultimate issue raised in this petition for review is whether or not the dismissal of CA-G.R. SP No.
10786 by respondent Appellate Court amounts to a dismissal with prejudice such that petitioner is now
precluded from bringing a second action (CA-G.R SP No. 10991) based on the same subject matter.
A careful scrutiny of the records shows that CA-G.R. SP No. 10786 is a special civil action
for certiorari with prayer for preliminary injunction under Rule 65 of the Revised Rules of Court which
petitioner filed on December 8, 1986 to annul the judgment of the trial court of January 10, 1986 and the
order of denial of petitioner's motion for reconsideration of November 4, 1986 on the grounds of lack of
due process and grave abuse of discretion.12 As above related, before respondents could submit their
comment, petitioner filed a motion to withdraw the petition stating that she was no longer interested in
pursuing the case. The motion was granted by the Appellate Court in its resolution of January 9, 1987.
On March 24, 1987, said resolution having become final, entry of judgment was issued and the case was
remanded to the court of origin for execution of judgment.
Section 1, Rule 62 of the Rules of Court under the heading SPECIAL CIVIL ACTIONS provides as
follows:
Sec. 1. Preceding rules applicable in special civil actions. — The provisions of the preceding
rules shall apply in special actions for interpleader, declaratory relief and similar
remedies, certiorari, prohibition, mandamus, quo warranto, eminent domain, foreclosure of
mortgage, partition, forcible entry and detainer, and contempt, which are not inconsistent with
or may serve to supplement the provisions of the rules relating to such special civil actions.
From the foregoing, it is clearly stated that in special civil actions the preceding rules are applicable in a
supplementary manner. More specifically, under Sections 2 and 4, Rule 50 of Rules of Court, relating to
DISMISSAL OF APPEAL in the Court of Appeals, the following are provided:
Sec. 2. Effect of dismissal. — Fifteen (15) days after the dismissal of an appeal the clerk shall
return to the court below the record on appeal with a certificate under the seal of the court
showing that the appeal has been dismissed. Upon the receipt of such certificate in the lower
court the case shall stand there as though no appeal had ever been taken, and the judgment
of the said court may be enforced with the additional costs allowed by the appellate court
upon dismissing the appeal.
Sec. 4. Withdrawal of appeal. — An appeal may be withdrawn as of right at any time before
the filing of appellee's brief.1âwphi1 After the brief is filed the withdrawal may be allowed by
the court in its discretion. The withdrawal of an appeal shall have the same effect as that of a
dismissal in accordance with Section 2 of this rule
Applying the foregoing rules in a supplementary manner, upon the withdrawal of a petition in a special
civil action before the answer or comment thereto has been filed, the case shall stand as though no
appeal has been taken, so that the judgment or order of the lower court being questioned becomes
immediately final and executory. Thus, a resolution granting the withdrawal of such a petition is with
prejudice and petitioner is precluded from bringing a second action based on the same subject matter.
The subsequent petition in CA-G.R. SP No. 10991 is an original action for annulment of judgment filed by
petitioner in the Court of Appeals in accordance with Section 9 of the Judiciary Reorganization Act of
1980 (B.P. Blg. 129) which vests upon the Intermediate Appellate Court (now Court of Appeals) the
original exclusive jurisdiction over actions for annulment of judgments of the Regional Trial Courts. No
doubt that second petition is barred by res judicata, as the dismissal of the earlier petition for certiorari in
C.A. G.R. SP No. 10786 was with prejudice and on the merits. It has not escaped this Court's attention
that these two petitions are based on the same ground of the alleged deprivation of due process and
sought the same reliefs, i.e., the annulment or setting aside of the January 10, 1986 judgment and
November 4, 1986 order of the trial court. A party cannot evade the effects of res judicata by varying the
form of his action or adopting a different method of presenting his case as petitioner attempted to do in
instituting an original action for annulment of judgment to obtain the same relief sought in the petition
for certiorariearlier withdrawn from the Court of Appeals. 13
This should now put an end to the travails of a daughter whose mother, after having dissipated so much
of the estate of her late husband, still proposes to share in what little is left of the inheritance of their
daughter.
WHEREFORE, the petition is dismissed, with costs against petitioner. This decision is immediately
executory.
SO ORDERED.
G. R. No. 76431 October 16, 1989
FORTUNE MOTORS, (PHILS.) INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, METROPOLITAN BANK and TRUST
COMPANY, respondents.
Quirante & Associates Law Office for petitioner.
Bautista, Cruz & Associates Law Offices for private respondent.
PARAS, J.:
This is a petition for review on certiorari seeking the reversal of: (a) the July 30, 1986 decision of the
Court of Appeals in AC-G.R. SP No. 09255 entitled "Metropolitan Bank & Trust Co. v. Hon. Herminio C.
Mariano, et al."dismissing Civil Case No. 8533218 entitled "Fortune Motors (Phils.) Inc. v. Metropolitan
Bank & Trust Co." filed in the Regional Trial Court of Manila, Branch IV for improper venue and (b) the
resolution dated October 30, 1986 denying petitioner's motion for reconsideration.
The undisputed facts of the case are as follows:
On March 29,1982 up to January 6,1984, private respondent Metropolitan Bank extended various loans
to petitioner Fortune Motors in the total sum of P32,500,000.00 (according to the borrower; or
P34,150,000.00 according to the Bank) which loan was secured by a real estate mortgage on the
Fortune building and lot in Makati, Rizal. (Rollo, pp. 60-62)
Due to financial difficulties and the onslaught of economic recession, the petitioner was not able to pay
the loan which became due. (Rollo, p. 62)
For failure of the petitioner to pay the loans, the respondent bank initiated extrajudicial foreclosure
proceedings. After notices were served, posted, and published, the mortgaged property was sold at
public auction for the price of P47,899,264.91 to mortgagee Bank as the highest bidder. (Rollo, p. 11)
The sheriff's certificate of sale was registered on October 24, 1984 with the one-year redemption period
to expire on October 24,1985. (Rollo, p. 12)
On October 21, 1985, three days before the expiration of the redemption period, petitioner Fortune
Motors filed a complaint for annulment of the extrajudicial foreclosure sale alleging that the foreclosure
was premature because its obligation to the Bank was not yet due, the publication of the notice of sale
was incomplete, there was no public auction, and the price for which the property was sold was
"shockingly low". (Rollo, pp. 60-68)
Before summons could be served private respondent Bank filed a motion to dismiss the complaint on the
ground that the venue of the action was improperly laid in Manila for the realty covered by the real estate
mortgage is situated in Makati, therefore the action to annul the foreclosure sale should be filed in the
Regional Trial Court of Makati. (Rollo, pp. 67-71-A )
The motion was opposed by petitioner Fortune Motors alleging that its action "is a personal action" and
that "the issue is the validity of the extrajudicial foreclosure proceedings" so that it may have a new one
year period to redeem. (Rollo, pp. 72-73)
On January 8, 1986 an order was issued by the lower court reserving the resolution of the Bank's motion
to dismiss until after the trial on the merits as the grounds relied upon by the defendant were not clear
and indubitable. (Rollo, p. 81)
The Bank filed a motion for reconsideration of the order dated January 8, 1986 but it was denied by the
lower court in its order dated May 28, 1986. (Rollo, Annex "L" pp. 93-96; Annex "N" p. 99)
On June 11, 1986 the respondent Bank filed a petition for certiorari and prohibition in the Court of
Appeals. (Rollo, Annex "O" pp. 100-115)
And on July 30, 1986, a decision was issued by the Court of Appeals, the dispositive part of which reads
as follows:
WHEREFORE, the petition for certiorari and prohibition is granted. The complaint
in the Civil Case No. 85-33218 is dismissed without prejudice to its being filed in
the proper venue. Costs against the private respondent.
SO ORDERED. (Rollo, p. 15)
A motion for reconsideration was filed on August 11, 1986 on the said decision and on October 30, 1986
a resolution was issued denying such motion for reconsideration. (Rollo, Annex "O" pp. 121-123; Annex
"S" p. 129)
Hence, the petition for review on certiorari.
On June 10, 1987 the Court gave due course to the petition, required the parties to file their respective
memoranda within twenty (20) days from the notice hereof, and pay deposit for costs in the amount of
P80.40.
Both parties have filed their respective memoranda, and the case was submitted for Court's resolution in
the resolution dated December 14, 1987. (Rollo,Metrobank's Memorandum pp. 45-59; petitioner's
memorandum pp.130-136; Res. p. 138)
The only issue in this case is whether petitioner's action for annulment of the real estate mortgage
extrajudicial foreclosure sale of Fortune Building is a personal action or a real action for venue purposes.
In a real action, the plaintiff seeks the recovery of real property, or as indicated in Sec. 2 (a) of Rule 4, a
real action is an action affecting title to real property, or for the recovery of possession, or for the partition
or condemnation of, or foreclosure of a mortgage on real property. (Comments on the Rules of Court by
Moran, Vol. 1, p. 122)
Real actions or actions affecting title to, or for the recovery of possession, or for the partition or
condemnation of, or foreclosure of mortgage on real property, must be instituted in the Court of First
Instance of the province where the property or any part thereof lies. (Enriquez v. Macadaeg, 84 Phil.
674,1949; Garchitorena v. Register of Deeds, 101 Phil. 1207, 1957)
Personal actions upon the other hand, may be instituted in the Court of First Instance where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs
resides, at the election of the plaintiff (Sec. 1, Rule 4, Revised Rules of Court).
A prayer for annulment or rescission of contract does not operate to efface the true objectives and nature
of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)
An action for the annulment or rescission of a sale of real property is a real action. Its prime objective is
to recover said real property. (Gavieres v. Sanchez, 94 Phil. 760,1954)
An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private
sale of real property. (Munoz v. Llamas, 87 Phil. 737,1950)
While it is true that petitioner does not directly seek the recovery of title or possession of the property in
question, his action for annulment of sale and his claim for damages are closely intertwined with the
issue of ownership of the building which, under the law, is considered immovable property, the recovery
of which is petitioner's primary objective. The prevalent doctrine is that an action for the annulment or
rescission of a sale of real property does not operate to efface the fundamental and prime objective and
nature of the case, which is to recover said real property. It is a real action. Respondent Court, therefore,
did not err in dismissing the case on the ground of improper venue (Sec. 2, Rule 4) which was timely
raised (Sec. 1, Rule 16). (Punzalan, Jr. v. Vda. de Lacsamana, 121 SCRA 336, [1983]).
Thus, as aptly decided by the Court of Appeals in a decision penned by then Court of Appeals Associate
Justice now Associate Justice of the Supreme Court Carolina C. Griño-Aquino, the pertinent portion
reads: "Since an extrajudicial foreclosure of real property results in a conveyance of the title of the
property sold to the highest bidder at the sale, an action to annul the foreclosure sale is necessarily an
action affecting the title of the property sold. It is therefore a real action which should be commenced and
tried in the province where the property or part thereof lies."
PREMISES CONSIDERED, the instant petition is DENIED for lack of merit and the assailed decision of
the respondent Court of Appeals is AFFIRMED.
SO ORDERED.
G.R. No. 156759 June 5, 2013
ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO, LILY REYES, JANET BAY,
JESUS R. GALANG, AND RANDY HAGOS, Petitioners,
vs.
FRANCISCO R. CO, JR., Respondent.
DECISION
BERSAMIN, J.:
To warrant the substituted service of the summons and copy of the complaint, the serving officer must
first attempt to effect the same upon the defendant in person. Only after the attempt at personal service
has become futile or impossible within a reasonable time may the officer resort to substituted service.
The Case
Petitioners – defendants in a suit for libel brought by respondent – appeal the decision promulgated on
March 8, 20021 and the resolution promulgated on January 13, 2003, 2 whereby the Court of Appeals (CA)
respectively dismissed their petition for certiorari, prohibition and mandamus and denied their motion for
reconsideration. Thereby, the CA upheld the order the Regional Trial Court (RTC), Branch 51, in Manila
had issued on March 12, 2001 denying their motion to dismiss because the substituted service of the
summons and copies of the complaint on each of them had been valid and effective. 3
Antecedents
On July 3, 2000, respondent, a retired police officer assigned at the Western Police District in Manila,
sued Abante Tonite, a daily tabloid of general circulation; its Publisher Allen A. Macasaet; its Managing
Director Nicolas V. Quijano; its Circulation Manager Isaias Albano; its Editors Janet Bay, Jesus R. Galang
and Randy Hagos; and its Columnist/Reporter Lily Reyes (petitioners), claiming damages because of an
allegedly libelous article petitioners published in the June 6, 2000 issue of Abante Tonite. The suit,
docketed as Civil Case No. 00-97907, was raffled to Branch 51 of the RTC, which in due course issued
summons to be served on each defendant, including Abante Tonite, at their business address at Monica
Publishing Corporation, 301-305 3rd Floor, BF Condominium Building, Solana Street corner A. Soriano
Street, Intramuros, Manila.4
In the morning of September 18, 2000, RTC Sheriff Raul Medina proceeded to the stated address to
effect the personal service of the summons on the defendants. But his efforts to personally serve each
defendant in the address were futile because the defendants were then out of the office and unavailable.
He returned in the afternoon of that day to make a second attempt at serving the summons, but he was
informed that petitioners were still out of the office. He decided to resort to substituted service of the
summons, and explained why in his sheriff’s return dated September 22, 2005, 5 to wit:
SHERIFF’S RETURN
This is to certify that on September 18, 2000, I caused the service of summons together with copies of
complaint and its annexes attached thereto, upon the following:
1. Defendant Allen A. Macasaet, President/Publisher of defendant AbanteTonite, at Monica
Publishing Corporation, Rooms 301-305 3rd Floor, BF Condominium Building, Solana corner
A. Soriano Streets, Intramuros, Manila, thru his secretary Lu-Ann Quijano, a person of
sufficient age and discretion working therein, who signed to acknowledge receipt thereof.
That effort (sic) to serve the said summons personally upon said defendant were made, but
the same were ineffectual and unavailing on the ground that per information of Ms. Quijano
said defendant is always out and not available, thus, substituted service was applied;
2. Defendant Nicolas V. Quijano, at the same address, thru his wife Lu-Ann Quijano, who
signed to acknowledge receipt thereof. That effort (sic) to serve the said summons personally
upon said defendant were made, but the same were ineffectual and unavailing on the ground
that per information of (sic) his wife said defendant is always out and not available, thus,
substituted service was applied;
3. Defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos and Lily Reyes, at
the same address, thru Rene Esleta, Editorial Assistant of defendant AbanteTonite, a person
of sufficient age and discretion working therein who signed to acknowledge receipt thereof.
That effort (sic) to serve the said summons personally upon said defendants were made, but
the same were ineffectual and unavailing on the ground that per information of (sic) Mr. Esleta
said defendants is (sic) always roving outside and gathering news, thus, substituted service
was applied.
Original copy of summons is therefore, respectfully returned duly served.
Manila, September 22, 2000.
On October 3, 2000, petitioners moved for the dismissal of the complaint through counsel’s special
appearance in their behalf, alleging lack of jurisdiction over their persons because of the invalid and
ineffectual substituted service of summons. They contended that the sheriff had made no prior attempt to
serve the summons personally on each of them in accordance with Section 6 and Section 7, Rule 14 of
the Rules of Court. They further moved to drop Abante Tonite as a defendant by virtue of its being neither
a natural nor a juridical person that could be impleaded as a party in a civil action.
At the hearing of petitioners’ motion to dismiss, Medina testified that he had gone to the office address of
petitioners in the morning of September 18, 2000 to personally serve the summons on each defendant;
that petitioners were out of the office at the time; that he had returned in the afternoon of the same day to
again attempt to serve on each defendant personally but his attempt had still proved futile because all of
petitioners were still out of the office; that some competent persons working in petitioners’ office had
informed him that Macasaet and Quijano were always out and unavailable, and that Albano, Bay, Galang,
Hagos and Reyes were always out roving to gather news; and that he had then resorted to substituted
service upon realizing the impossibility of his finding petitioners in person within a reasonable time.
On March 12, 2001, the RTC denied the motion to dismiss, and directed petitioners to file their answers
to the complaint within the remaining period allowed by the Rules of Court, 6 relevantly stating:
Records show that the summonses were served upon Allen A. Macasaet, President/Publisher of
defendant AbanteTonite, through LuAnn Quijano; upon defendants Isaias Albano, Janet Bay, Jesus R.
Galang, Randy Hagos and Lily Reyes, through Rene Esleta, Editorial Assistant of defendant Abante
Tonite (p. 12, records). It is apparent in the Sheriff’s Return that on several occasions, efforts to served
(sic) the summons personally upon all the defendants were ineffectual as they were always out and
unavailable, so the Sheriff served the summons by substituted service.
Considering that summonses cannot be served within a reasonable time to the persons of all the
defendants, hence substituted service of summonses was validly applied. Secretary of the President who
is duly authorized to receive such document, the wife of the defendant and the Editorial Assistant of the
defendant, were considered competent persons with sufficient discretion to realize the importance of the
legal papers served upon them and to relay the same to the defendants named therein (Sec. 7, Rule 14,
1997 Rules of Civil Procedure).
WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby DENIED for lack of merit..
Accordingly, defendants are directed to file their Answers to the complaint within the period still open to
them, pursuant to the rules.
SO ORDERED.
Petitioners filed a motion for reconsideration, asserting that the sheriff had immediately resorted to
substituted service of the summons upon being informed that they were not around to personally receive
the summons, and that Abante Tonite, being neither a natural nor a juridical person, could not be made a
party in the action.
On June 29, 2001, the RTC denied petitioners’ motion for reconsideration. 7 It stated in respect of the
service of summons, as follows:
The allegations of the defendants that the Sheriff immediately resorted to substituted service of summons
upon them when he was informed that they were not around to personally receive the same is untenable.
During the hearing of the herein motion, Sheriff Raul Medina of this Branch of the Court testified that on
September 18, 2000 in the morning, he went to the office address of the defendants to personally serve
summons upon them but they were out. So he went back to serve said summons upon the defendants in
the afternoon of the same day, but then again he was informed that the defendants were out and
unavailable, and that they were always out because they were roving around to gather news. Because of
that information and because of the nature of the work of the defendants that they are always on field, so
the sheriff resorted to substituted service of summons. There was substantial compliance with the rules,
considering the difficulty to serve the summons personally to them because of the nature of their job
which compels them to be always out and unavailable. Additional matters regarding the service of
summons upon defendants were sufficiently discussed in the Order of this Court dated March 12, 2001.
Regarding the impleading of Abante Tonite as defendant, the RTC held, viz:
"Abante Tonite" is a daily tabloid of general circulation. People all over the country could buy a copy of
"Abante Tonite" and read it, hence, it is for public consumption. The persons who organized said
publication obviously derived profit from it. The information written on the said newspaper will affect the
person, natural as well as juridical, who was stated or implicated in the news. All of these facts imply that
"Abante Tonite" falls within the provision of Art. 44 (2 or 3), New Civil Code. Assuming arguendo that
"Abante Tonite" is not registered with the Securities and Exchange Commission, it is deemed a
corporation by estoppels considering that it possesses attributes of a juridical person, otherwise it cannot
be held liable for damages and injuries it may inflict to other persons.
Undaunted, petitioners brought a petition for certiorari, prohibition, mandamusin the CA to nullify the
orders of the RTC dated March 12, 2001 and June 29, 2001.
Ruling of the CA
On March 8, 2002, the CA promulgated its questioned decision, 8 dismissing the petition for certiorari,
prohibition, mandamus, to wit:
We find petitioners’ argument without merit. The rule is that certiorari will prosper only if there is a
showing of grave abuse of discretion or an act without or in excess of jurisdiction committed by the
respondent Judge. A judicious reading of the questioned orders of respondent Judge would show that the
same were not issued in a capricious or whimsical exercise of judgment. There are factual bases and
legal justification for the assailed orders. From the Return, the sheriff certified that "effort to serve the
summons personally xxx were made, but the same were ineffectual and unavailing xxx.
and upholding the trial court’s finding that there was a substantial compliance with the rules that allowed
the substituted service.
Furthermore, the CA ruled:
Anent the issue raised by petitioners that "Abante Tonite is neither a natural or juridical person who may
be a party in a civil case," and therefore the case against it must be dismissed and/or dropped, is
untenable.
The respondent Judge, in denying petitioners’ motion for reconsideration, held that:
xxxx
Abante Tonite’s newspapers are circulated nationwide, showing ostensibly its being a corporate entity,
thus the doctrine of corporation by estoppel may appropriately apply.
An unincorporated association, which represents itself to be a corporation, will be estopped from denying
its corporate capacity in a suit against it by a third person who relies in good faith on such representation.
There being no grave abuse of discretion committed by the respondent Judge in the exercise of his
jurisdiction, the relief of prohibition is also unavailable.
WHEREFORE, the instant petition is DENIED. The assailed Orders of respondent Judge are AFFIRMED.
On January 13, 2003, the CA denied petitioners’ motion for reconsideration. 10
The petition for review lacks merit.
Jurisdiction over the person, or jurisdiction in personam –the power of the court to render a personal
judgment or to subject the parties in a particular action to the judgment and other rulings rendered in the
action – is an element of due process that is essential in all actions, civil as well as criminal, except in
actions in rem or quasi in rem. Jurisdiction over the defendantin an action in rem or quasi in rem is not
required, and the court acquires jurisdiction over an actionas long as it acquires jurisdiction over the
resthat is thesubject matter of the action. The purpose of summons in such action is not the acquisition of
jurisdiction over the defendant but mainly to satisfy the constitutional requirement of due process. 12
The distinctions that need to be perceived between an action in personam, on the one hand, and an
action inrem or quasi in rem, on the other hand, are aptly delineated in Domagas v. Jensen, 13 thusly:
The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in
rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by
these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought
against the person and is based on the jurisdiction of the person, although it may involve his right to, or
the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a proceeding in personam is to impose,
through the judgment of a court, some responsibility or liability directly upon the person of the defendant.
Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a
pecuniary liability on him. An action in personam is said to be one which has for its object a judgment
against the person, as distinguished from a judgment against the property to determine its state. It has
been held that an action in personam is a proceeding to enforce personal rights or obligations; such
action is brought against the person. As far as suits for injunctive relief are concerned, it is well-settled
that it is an injunctive act in personam. In Combs v. Combs, the appellate court held that proceedings to
enforce personal rights and obligations and in which personal judgments are rendered adjusting the
rights and obligations between the affected parties is in personam. Actions for recovery of real property
are in personam.
On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the
property of such persons to the discharge of the claims assailed. In an action quasi in rem, an individual
is named as defendant and the purpose of the proceeding is to subject his interests therein to the
obligation or loan burdening the property. Actions quasi in rem deal with the status, ownership or liability
of a particular property but which are intended to operate on these questions only as between the
particular parties to the proceedings and not to ascertain or cut off the rights or interests of all possible
claimants. The judgments therein are binding only upon the parties who joined in the action.
As a rule, Philippine courts cannot try any case against a defendant who does not reside and is not found
in the Philippines because of the impossibility of acquiring jurisdiction over his person unless he
voluntarily appears in court; but when the case is an action in rem or quasi in rem enumerated in Section
15, Rule 14 of the Rules of Court, Philippine courts have jurisdiction to hear and decide the case because
they have jurisdiction over the res, and jurisdiction over the person of the non-resident defendant is not
essential. In the latter instance, extraterritorial service of summons can be made upon the defendant, and
such extraterritorial service of summons is not for the purpose of vesting the court with jurisdiction, but for
the purpose of complying with the requirements of fair play or due process, so that the defendant will be
informed of the pendency of the action against him and the possibility that property in the Philippines
belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff,
and he can thereby take steps to protect his interest if he is so minded. On the other hand, when the
defendant in an action in personam does not reside and is not found in the Philippines, our courts cannot
try the case against him because of the impossibility of acquiring jurisdiction over his person unless he
voluntarily appears in court.14
As the initiating party, the plaintiff in a civil action voluntarily submits himself to the jurisdiction of the court
by the act of filing the initiatory pleading. As to the defendant, the court acquires jurisdiction over his
person either by the proper service of the summons, or by a voluntary appearance in the action. 15
Upon the filing of the complaint and the payment of the requisite legal fees, the clerk of court forthwith
issues the corresponding summons to the defendant. 16 The summons is directed to the defendant and
signed by the clerk of court under seal. It contains the name of the court and the names of the parties to
the action; a direction that the defendant answers within the time fixed by the Rules of Court; and a notice
that unless the defendant so answers, the plaintiff will take judgment by default and may be granted the
relief applied for.17 To be attached to the original copy of the summons and all copies thereof is a copy of
the complaint (and its attachments, if any) and the order, if any, for the appointment of a guardian ad
litem.18
The significance of the proper service of the summons on the defendant in an action in personam cannot
be overemphasized. The service of the summons fulfills two fundamental objectives, namely: (a) to vest
in the court jurisdiction over the person of the defendant; and (b) to afford to the defendant the
opportunity to be heard on the claim brought against him. 19 As to the former, when jurisdiction in
personam is not acquired in a civil action through the proper service of the summons or upon a valid
waiver of such proper service, the ensuing trial and judgment are void. 20 If the defendant knowingly does
an act inconsistent with the right to object to the lack of personal jurisdiction as to him, like voluntarily
appearing in the action, he is deemed to have submitted himself to the jurisdiction of the court. 21 As to the
latter, the essence of due process lies in the reasonable opportunity to be heard and to submit any
evidence the defendant may have in support of his defense. With the proper service of the summons
being intended to afford to him the opportunity to be heard on the claim against him, he may also waive
the process.21 In other words, compliance with the rules regarding the service of the summons is as much
an issue of due process as it is of jurisdiction.23
Under the Rules of Court, the service of the summons should firstly be effected on the defendant himself
whenever practicable. Such personal service consists either in handing a copy of the summons to the
defendant in person, or, if the defendant refuses to receive and sign for it, in tendering it to him. 24 The rule
on personal service is to be rigidly enforced in order to ensure the realization of the two fundamental
objectives earlier mentioned. If, for justifiable reasons, the defendant cannot be served in person within a
reasonable time, the service of the summons may then be effected either (a) by leaving a copy of the
summons at his residence with some person of suitable age and discretion then residing therein, or (b)
by leaving the copy at his office or regular place of business with some competent person in charge
thereof.25 The latter mode of service is known as substituted service because the service of the summons
on the defendant is made through his substitute.
It is no longer debatable that the statutory requirements of substituted service must be followed strictly,
faithfully and fully, and any substituted service other than that authorized by statute is considered
ineffective.26 This is because substituted service, being in derogation of the usual method of service, is
extraordinary in character and may be used only as prescribed and in the circumstances authorized by
statute.27 Only when the defendant cannot be served personally within a reasonable time may substituted
service be resorted to. Hence, the impossibility of prompt personal service should be shown by stating
the efforts made to find the defendant himself and the fact that such efforts failed, which statement should
be found in the proof of service or sheriff’s return. 28 Nonetheless, the requisite showing of the
impossibility of prompt personal service as basis for resorting to substituted service may be waived by
the defendant either expressly or impliedly. 29
There is no question that Sheriff Medina twice attempted to serve the summons upon each of petitioners
in person at their office address, the first in the morning of September 18, 2000 and the second in the
afternoon of the same date. Each attempt failed because Macasaet and Quijano were "always out and
not available" and the other petitioners were "always roving outside and gathering news." After Medina
learned from those present in the office address on his second attempt that there was no likelihood of any
of petitioners going to the office during the business hours of that or any other day, he concluded that
further attempts to serve them in person within a reasonable time would be futile. The circumstances fully
warranted his conclusion. He was not expected or required as the serving officer to effect personal
service by all means and at all times, considering that he was expressly authorized to resort to
substituted service should he be unable to effect the personal service within a reasonable time. In that
regard, what was a reasonable time was dependent on the circumstances obtaining. While we are strict
in insisting on personal service on the defendant, we do not cling to such strictness should the
circumstances already justify substituted service instead. It is the spirit of the procedural rules, not their
letter, that governs.30
In reality, petitioners’ insistence on personal service by the serving officer was demonstrably superfluous.
They had actually received the summonses served through their substitutes, as borne out by their filing of
several pleadings in the RTC, including an answer with compulsory counterclaim ad cautelam and a pre-
trial brief ad cautelam. They had also availed themselves of the modes of discovery available under the
Rules of Court. Such acts evinced their voluntary appearance in the action.
Nor can we sustain petitioners’ contention that Abante Tonite could not be sued as a defendant due to its
not being either a natural or a juridical person. In rejecting their contention, the CA categorized Abante
Tonite as a corporation by estoppel as the result of its having represented itself to the reading public as a
corporation despite its not being incorporated. Thereby, the CA concluded that the RTC did not gravely
abuse its discretion in holding that the non-incorporation of Abante Tonite with the Securities and
Exchange Commission was of no consequence, for, otherwise, whoever of the public who would suffer
any damage from the publication of articles in the pages of its tabloids would be left without recourse. We
cannot disagree with the CA, considering that the editorial box of the daily tabloid disclosed that basis,
nothing in the box indicated that Monica Publishing Corporation had owned Abante Tonite.
WHEREFORE, the Court AFFIRMS the decision promulgated on March 8, 2002; and ORDERS
petitioners to pay the costs of suit. SO ORDERED.
G.R. No. 152808 September 30, 2005
ANTONIO T. CHUA, Petitioners,
vs.
TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC., Respondent.
For review on certiorari is the decision1 dated November 28, 2001 of the Court of Appeals and its
resolution2 of April 1, 2002 in CA-G.R. SP No. 62592. The assailed decision and resolution dismissed the
special civil action for certiorari against the orders of August 9, 20003 and October 6, 20004 issued by
Judge Lorifel Lacap Pahimna in Civil Case No. 67736.
The pertinent facts, based on the records, are as follows:
On December 28, 1999, respondent Total Office Products and Services, Inc., (TOPROS) lodged a
complaint for annulment of contracts of loan and real estate mortgage against herein petitioner Antonio T.
Chua before the Regional Trial Court of Pasig City. The case was docketed as Civil Case No. 67736 and
was raffled to the sala of Judge Lorifel Lacap Pahimna.
The said suit sought to annul a loan contract allegedly extended by petitioner to respondent TOPROS in
the amount of ten million four hundred thousand pesos (₱10,400,000) and the accessory real estate
mortgage contract covering two parcels of land situated in Quezon City as collateral.
It appeared on the face of the subject contracts that TOPROS was represented by its president John
Charles Chang, Jr. However, TOPROS alleged that the purported loan and real estate mortgage
contracts were fictitious, since it never authorized anybody, not even its president, to enter into said
transaction.
On February 28, 2000, petitioner filed a motion to dismiss on the ground of improper venue. He
contended that the action filed by TOPROS affects title to or possession of the parcels of land subject of
the real estate mortgage. He argued that it should thus have been filed in the Regional Trial Court of
Quezon City where the encumbered real properties are located, instead of Pasig City where the parties
reside.
On August 9, 2000, Judge Pahimna issued an order denying the motion to dismiss. She reasoned that
the action to annul the loan and mortgage contracts is a personal action and thus, the venue was
properly laid in the RTC of Pasig City where the parties reside.
Petitioner moved for a reconsideration of the said order, which Judge Pahimna denied in its order of
October 6, 2000. Hence, petitioner filed with the Court of Appeals a special civil action
for certiorari alleging:
THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING THE
RULING OF THE SUPREME COURT IN PASCUAL VS. PASCUAL REGARDING THE RULE ON
PROPER VENUE, AND CONSEQUENTLY ADJUDGING TO BE A PERSONAL ACTION A CIVIL
COMPLAINT FOR THE ANNULMENT OF AN ALLEGEDLY FICTITIOUS CONTRACT. 5
The Court of Appeals dismissed said petition in its decision dated November 28, 2001. It held that the
authorities relied upon by petitioner, namely Pascual v. Pascual6 and Banco Español-Filipino v.
Palanca,7 are inapplicable in the instant case. The appellate court instead applied Hernandez v. Rural
Bank of Lucena, Inc.8 wherein we ruled that an action for the cancellation of a real estate mortgage is a
personal action if the mortgagee has not foreclosed the mortgage and the mortgagor is in possession of
the premises, as neither the mortgagor’s title to nor possession of the property is disputed.
Dissatisfied, petitioner filed a motion for reconsideration, which the Court of Appeals denied for lack of
merit in its resolution of April 1, 2002.
Undeterred, petitioner now comes to us on a petition for review raising the following issues:
WHETHER AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS
‘FICTITIOUS’FOR BEING WITH ABSOLUTELY NO CONSIDERATION IS A PERSONAL ACTION OR
REAL ACTION?
WHETHER IN AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED AS
‘FICTITIOUS’FOR BEING WITH ABSOLUTELY NO CONSIDERATION, THE PERSON ALLEGED TO
HAVE ‘[LACKED] AUTHORITY’ TO ENTER INTO SAID CONTRACTS IS AN INDISPENSABLE PARTY? 9
Petitioner contends that Hernandez should not be applied here because in the said case: (1) venue was
improperly laid at the outset; (2) the complaint recognized the validity of the principal contract involved;
and (3) the plaintiff sought to compel acceptance by the defendant of plaintiff’s payment of the latter’s
mortgage debt. He insists that the Pascual case should be applied instead. He invokes our
pronouncement in Pascual, to wit:
… It appearing, however, that the sale is alleged to be fictitious, with absolutely no consideration, it
should be regarded as a non-existent, not merely null, contract…. And there being no contract between
the deceased and the defendants, there is in truth nothing to annul by action. The action brought cannot
thus be for annulment of contract, but is one for recovery of a fishpond, a real action that should be, as it
has been, brought in Pampanga, where the property is located…. 10
Petitioner likewise cites the Banco Español-Filipino case, thus:
Where the defendant in a mortgage foreclosure lives out of the Islands and refuses to appear or
otherwise submit himself to the authority of the court, the jurisdiction of the latter is limited to the
mortgaged property, with respect to which the jurisdiction of the court is based upon the fact that the
property is located within the district and that the court, under the provisions of law applicable in such
cases, is vested with the power to subject the property to the obligation created by the mortgage. In such
case personal jurisdiction over the nonresident defendant is nonessential and in fact cannot be
acquired.11
Petitioner also alleges that John Charles Chang, Jr., the president of TOPROS, who allegedly entered
into the questioned loan and real estate mortgage contracts, is an indispensable party who has not been
properly impleaded.
TOPROS, however, maintains that the appellate court correctly sustained the lower court’s finding that
the instant complaint for annulment of loan and real estate mortgage contracts is a personal action.
TOPROS points out that a complaint for the declaration of nullity of a loan contract for lack of consent
and consideration remains a personal action even if the said action will necessarily affect the accessory
real estate mortgage.
TOPROS argues that Pascual is inapplicable because the subject contract therein was a contract of sale
of a parcel of land where title and possession were already transferred to the defendant. TOPROS further
contends that Banco Español-Filipino is also inapplicable since the personal action filed therein was one
which affected the personal status of a nonresident defendant.
Considering the facts and the submission of the parties, we find the petition bereft of merit.
Well-settled is the rule that an action to annul a contract of loan and its accessory real estate mortgage is
a personal action. In a personal action, the plaintiff seeks the recovery of personal property,
the enforcement of a contract or the recovery of damages.12 In contrast, in a real action, the plaintiff
seeks the recovery of real property, or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, a
real action is an action affecting title to real property or for the recovery of possession, or for partition or
condemnation of, or foreclosure of mortgage on, real property.13
In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond was assailed as
fictitious for lack of consideration. We held that there being no contract to begin with, there is nothing to
annul. Hence, we deemed the action for annulment of the said fictitious contract therein as one
constituting a real action for the recovery of the fishpond subject thereof.
We cannot, however, apply the foregoing doctrine to the instant case. Note that in Pascual, title to and
possession of the subject fishpond had already passed to the vendee. There was, therefore, a need to
recover the said fishpond. But in the instant case, ownership of the parcels of land subject of the
questioned real estate mortgage was never transferred to petitioner, but remained with TOPROS. Thus,
no real action for the recovery of real property is involved. This being the case, TOPROS’ action for
annulment of the contracts of loan and real estate mortgage remains a personal action.
Petitioner’s reliance on the Banco Español-Filipino case is likewise misplaced. That case involved a
foreclosure of real estate mortgage against a nonresident. We held therein that jurisdiction is determined
by the place where the real property is located and that personal jurisdiction over the nonresident
defendant is nonessential and, in fact, cannot be acquired.
Needless to stress, the instant case bears no resemblance to the Banco Español-Filipino case. In the first
place, this is not an action involving foreclosure of real estate mortgage. In the second place, none of the
parties here is a nonresident. We find no reason to apply here our ruling in Banco Español-Filipino.
The Court of Appeals finds that Hernandez v. Rural Bank of Lucena, Inc. provides the proper precedent in
this case. In Hernandez, appellants contended that the action of the Hernandez spouses for the
cancellation of the mortgage on their lots was a real action affecting title to real property, which should
have been filed in the place where the mortgaged lots were situated. Rule 4, Section 2 (a), of the then
Rules of Court, was applied, to wit:
SEC. 2. Venue in Courts of First Instance. – (a) Real actions. – Actions affecting title to, or for recovery of
possession, or for partition or condemnation of, or foreclosure of mortgage on, real property, shall be
commenced and tried in the province where the property or any part thereof lies.
The Court pointed out in the Hernandez case that with respect to mortgage, the rule on real actions only
mentions an action for foreclosure of a real estate mortgage. It does not include an action for
the cancellation of a real estate mortgage. Exclusio unios est inclusio alterius. The latter thus falls under
the catch-all provision on personal actions under paragraph (b) of the above-cited section, to wit:
SEC. 2 (b) Personal actions. – All other actions may be commenced and tried where the defendant or
any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff.
In the same vein, the action for annulment of a real estate mortgage in the present case must fall under
Section 2 of Rule 4, to wit:
SEC. 2. Venue of personal actions. – All other actions may be commenced and tried where the plaintiff or
any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides,
or in the case of a non-resident defendant where he may be found, at the election of the plaintiff. 14
Thus, Pasig City, where the parties reside, is the proper venue of the action to nullify the subject loan and
real estate mortgage contracts. The Court of Appeals committed no reversible error in upholding the
orders of the Regional Trial Court denying petitioner’s motion to dismiss the case on the ground of
improper venue.
Anent the second issue, Section 7, Rule 3 of the Revised Rules of Court provides:
SEC. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants. (Emphasis ours)
The presence of indispensable parties is necessary to vest the court with jurisdiction. The absence of an
indispensable party renders all subsequent actuations of the court null and void, because of that court’s
want of authority to act, not only as to the absent parties but even as to those present. 15 Thus, whenever
it appears to the court in the course of a proceeding that an indispensable party has not been joined, it is
the duty of the court to stop the trial and order the inclusion of such party. 16
A person is not an indispensable party, however, if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. 17
Is John Charles Chang, Jr., the president of TOPROS who allegedly entered into the disputed contracts
of loan and real estate mortgage, an indispensable party in this case?
We note that although it is Chang’s signature that appears on the assailed real estate mortgage contract,
his participation is limited to being a representative of TOPROS, allegedly without authority. The
document18 which constitutes as the contract of real estate mortgage clearly points to petitioner and
TOPROS as the sole parties-in-interest to the agreement as mortgagee and mortgagor therein,
respectively. Any rights or liabilities arising from the said contract would therefore bind only the petitioner
and TOPROS as principal parties. Chang, acting as mere representative of TOPROS, acquires no rights
whatsoever, nor does he incur any liabilities, arising from the said contract between petitioner and
TOPROS. Certainly, in our view, the only indispensable parties to the mortgage contract are petitioner
and TOPROS alone.
We thus hold that John Charles Chang, Jr., is not an indispensable party in Civil Case No. 67736. This is
without prejudice to any separate action TOPROS may institute against Chang, Jr., in a proper
proceeding.
WHEREFORE, the petition is DENIED. The assailed decision dated November 28, 2001 and resolution
dated April 1, 2002 of the Court of Appeals upholding the Orders of Judge Lorifel Lacap Pahimna
are AFFIRMED.
No pronouncement as to costs.
G.R. No. L-49475 September 28, 1993
JORGE C. PADERANGA, petitioner, vs.
Hon. DIMALANES B. BUISSAN, Presiding Judge, Court of First Instance of Zamboanga del Norte,
Branch III and ELUMBA INDUSTRIES COMPANY, represented by its General Manager, JOSE J.
ELUMBA, respondents.
We are called upon in this case to determine the proper venue of an action to fix the period of a contract
of lease which, in the main, also prays for damages.
Sometime in 1973, petitioner JORGE C. PADERANGA and private respondent ELUMBA INDUSTRIES
COMPANY, a partnership represented by its General Manager JOSE J. ELUMBA, entered into an oral
contract of lease for the use of a commercial space within a building owned by petition in Ozamiz
City.1 The lease was for an indefinite period although the rent of P150.00 per month was paid on a
month-to-month basis. ELUMBA INDUSTRIES COMPANY utilized the area under lease as the Sales
Office of Allied Air Freight in Ozamiz City.
On 4 April 1977, PADERANGA subdivided the leased premises into two (2) by constructing a partition
wall in between. He then took possession of the other half, which repossession was said to have been
undertaken with the acquiescence of the local manager of ELUMBA, 2 although private respondent
maintains that this is not the case. 3 At any rate, the validity of the repossession is not here in issue.
On 18 July 1977, private respondent instituted an action for damages 4 which, at the same time, prayed
for the fixing of the period of lease at five (5) years, before the then court of First Instance of Zamboanga
del Norte based in Dipolog City.5 Petitioner, a resident of Ozamiz City, moved for its dismissal contending
that the action was a real action which should have been filed with the Court of First Instance of Misamis
Occidental stationed in Ozamiz City where the property in question was situated.
On 6 November 1978, respondent Judge Dimalanes B. Buissan denied the Motion to Dismiss and held
that Civil Case No. 2901 merely involved the enforcement of the contract of lease, and while affecting a
portion of real property, there was no question of ownership raised. 6 Hence, venue was properly laid.
Petitioner pleaded for reconsideration of the order denying his Motion to Dismiss. He contended that
while the action did not involve a question of ownership, it was nevertheless seeking recovery of
possession; thus, it was a real action which, consequently, must be filed in Ozamiz City. 7
On 4 December 1978, respondent judge denied reconsideration. 8 While admitting that Civil Case No.
2901 did pray for recovery of possession, he nonetheless ruled that this matter was not the main issue at
hand; neither was the question of ownership raised. Not satisfied, petitioner instituted the present
recourse.
PADERANGA argues that inasmuch as ELUMBA seeks to recover possession of the portion surrendered
to him by the local manager of private respondent, as well as to fix the period of lease at five (5) years,
Dipolog City could not be the proper venue of the action. it being a real action, venue is laid in the court
having jurisdiction over the territory in which the property lies.
ELUMBA counters that the present action is chiefly for damages arising from an alleged breach in the
lease contract; hence, the issue of recovery of possession is merely incidental. ELUMBA further argues
that the action is one in personam and not in rem. Therefore venue may be laid in the place where
plaintiff or defendant resides at the option of plaintiff.
Private respondent appears to be confused over the difference between personal and real actions vis-a-
vis actions in personam and in rem. The former determines venue; the latter, the binding effect of a
decision the court may render over the party, whether impleaded or not.
In the case before us, it is indubitable that the action instituted by private respondent against petitioner
affects the parties alone, not the whole world. Hence, it is an action in personam, i.e., any judgment
therein is binding only upon the parties properly impleaded. 9 However, this does not automatically mean
that the action for damages and to fix the period of the lease contract is also a personal action. For, a
personal action may not at the same time be an action in rem. In Hernandez v. Rural Bank of Lucena,
Inc., 10 we held thus —
In a personal action, the plaintiff seeks the recovery of personal property, the
enforcement of a contract or the recovery of damages. In a real action, the plaintiff
seeks the recovery of real property, or, as indicated in section 2(a) of Rule 4, a
real action is an action affecting title to real property or for the recovery of
possession, or for partition or condemnation of, or foreclosure of a mortgage on,
real property.
An action in personam is an action against a person on the basis of his personal
liability, while an action in rem is an action against the thing itself, instead of
against the person. Hence, a real action may at the same time be an action in
personam and not necessarily an action in rem.
Consequently, the distinction between an action in personam and an action in rem for purposes of
determining venue is irrelevant. Instead, it is imperative to find out if the action filed is a personal action
or real action. After all, personal actions may be instituted in the Regional Trial Court (then Court of First
Instance) where the defendant or any of the defendants resides or may be found, or where the plaintiff or
any of the plaintiffs resides, at the election of the plaintiff. 11 On the other hand, real actions should be
brought before the Regional Trial Court having jurisdiction over the territory in which the subject property
or part thereof lies. 12
While the instant action is for damages arising from alleged breach of the lease contract, it likewise prays
for the fixing of the period of lease at five (5) years. If found meritorious, private respondent will be
entitled to remain not only as lessee for another five (5) years but also to the recovery of the portion
earlier taken from him as well. This is because the leased premises under the original contract was the
whole commercial space itself and not just the subdivided portion thereof.
While it may be that the instant complaint does not explicitly pray for recovery of possession, such is the
necessary consequence thereof. 13 The instant action therefore does not operate to efface the
fundamental and prime objective of the nature of the case which is to recover the one-half portion
repossessed by the lessor, herein petitioner. 14Indeed, where the ultimate purpose of an action involves
title to or seeks recovery of possession, partition or condemnation of, or foreclosure of mortgage on, real
property, 15 such an action must be deemed a real action and must perforce be commenced and tried in
the province where the property or any part thereof lies.
Respondent judge, therefore, in denying petitioner's Motion to Dismiss gravely abused his discretion
amounting to lack or excess of jurisdiction.
WHEREFORE, the Petition for Prohibition is GRANTED. The Orders of 6 November 1978 and 4
December 1978 of respondent Judge Dimalanes B. Buissan are SET ASIDE. The branch of the Regional
Trial Court of Dipolog City where Civil Case No. 2901 may be presently assigned is DIRECTED to
DISMISS the case for improper venue. This decision is immediately executory.
Costs against private respondent ELUMBA INDUSTRIES COMPANY.
G.R. No. L-5402 January 28, 1911
CAYETANO DE LA CRUZ, plaintiff-appellee, vs.
EL SEMINARIO DE LA ARCHIDIOCESIS DE MANILA, ET AL., defendants-appellants.
The appellee, Cayetano de la Cruz, was a member and the president of a Methodist Episcopal religious
association at Dinalupijan, Province of Bataan, Philippine Islands. The members of this association,
including Cayetano de la Cruz, having decided to lease a building site and erect thereon a chapel, made
voluntary contributions for that purpose, Cayetano de la Cruz being among those who contributed.
Cayetano de la Cruz, as such member and president, was then authorized by the association to lease a
certain building site and to use the funds contributed for the purpose of constructing a chapel. So on the
17th of May, 1907, he leased from one J. C. Miller, the agent of the appellant, His Grace Jeremiah J.
Harty, Archbishop of Manila and administrator of the hacienda of Dinalupijan, for a period of two years, a
certain lot or parcel of land, being a part of that hacienda and which is fully described in the written
contract of lease, agreeing to pay as rental P2 per year, the first year's rent to be paid in advance. On the
execution of this lease Cayetano de la Cruz, as member and president of the Methodist Episcopal
association, was placed in possession of this lot or building site and proceeded to construct thereon a
chapel for the use of the said religious association. About the time this chapel was completed an action of
forcible entry and detainer was commenced by one Raymundo Sinsuangco in the justice of the peace
court of Dinalupijan, in which Cayetano de la Cruz, as lessee of the lot upon which the chapel was
constructed, and J. C. Miller, as agent and representative of the appellants, who, in such capacity
executed said lease, as lessor, were made defendants. Judgment was rendered against the defendants
in the action. The appellants in the case at bar were duly notified of the judgment of the justice of the
peace and were requested to appeal to the Court of First Instance. No appeal was taken and the
judgment becoming final was executed in such a manner that the above-mentioned chapel was
completely destroyed. Subsequently thereto, and on the 21st of October, 1907, Cayetano de la Cruz
commenced this action in the Court of First Instance of the city of Manila against the appellants to
recover the sum of P2,000 as damages for a breach of the rental contract. To this complaint the
appellants, through their attorneys, presented a demurrer, based upon the following grounds: (1) That the
Court of First Instance of the city of Manila was without jurisdiction to try and determine this action for the
reason that damages for injuries caused to real property situated in the Province of Bataan is sought to
be recovered; and (2) the complaint fails to allege facts sufficient to constitute a cause of action. This
demurrer was overruled, the appellants duly noting their exception.
After all the evidence had been submitted by both parties, the appellee, after due notice to the appellants,
presented an amended complaint, to conform, as he alleged, with the agreed statement of facts and the
admissions made by the appellants in their answer. This amended complaint was admitted by the court
without objection on the part of the appellants. The amended complaint is the same as the original
complaint, with the following exceptions: (1) A number of unnamed person were made parties plaintiff; (2)
in paragraph 2 of the amended complaint it is alleged that Cayetano de la Cruz was the president, agent,
and member of the Methodist Episcopal religious association: and (3) a judgment for only P402 was
asked.
The court below on the 29th of March, 1909, rendered judgment in favor of the appellees and against the
appellants for the sum of P402, P2 being the rent for the first year paid in advance, and the P400 being
the agreed value of the chapel which was destroyed by the sheriff in executing the judgment rendered by
the justice of the peace.
The appellants after noting their exception to the judgment and making a motion for a new trial, which
motion was overruled and exception thereto noted, appealed to this court, and now insist:
1. That as this action is one for damages to real estate situated in the Province of Bataan, under the
provisions of section 377 of the Code of Civil Procedure the Court of First Instance of the city of Manila
had no jurisdiction;
2. The court below erred in admitting the amended complaint by which the other members of the religious
association, jointly interested with Cayetano de la Cruz, were made parties plaintiff; and,
3. That the appellants are not liable for the consequences of the judgment of the justice of the peace.
The demurrer was properly overruled. This is not an action to recover damages to real estate; it is an
action for breach of covenant in a lease. The fact that the damages to real estate are involved, as an
incident to the breach of the contract, does not change the character of the action. Such an action is
personal and transistory. The rule is well stated in the case of Neil vs. Owen (3 Tex., 145), wherein the
court said (p. 146):
If the action is founded on privity of contract between the parties, then the action whether debt
or covenant, is transitory. But if there is no privity of contract and the action is founded on
privity of estate only, such a covenant that runs with the land in the hands of the remote
grantees, then the action is local and must be brought in the country wherein the land lies.
In an action on a covenant contained in a lease, whether begun by the lessor against the
lessee, or by the lessee against the lessor, the action is transitory because it is founded on a
mere privity of contract. (Thursby vs. Plant, cited in vol. 5, Ency. Plead. & Prac., p. 362.)
In general, also, actions which are founded upon contracts are transitory. In an action upon a
lease for nonpayment of rent or other breach of covenants, when the action is founded on the
privity of contract it is transitory and the venue may laid in any county. (22 Ency. Plead. &
Prac., pp. 782-783.)
Therefore, section 377 of the Code of Civil Procedure, which provides, among other things, that actions
to recover damages for injuries to real estate shall be brought in the province where the land, or a part
thereof, is situated, is not applicable. (Molina vs. De la Riva, 6 Phil. Rep., 12.) The amended complaint
clearly states facts sufficient to constitute a cause of action. (Sec. 90, Code of Civil Procedure.)
The defendants in the second assignment of error assert that the plaintiff ought not to have been allowed
to amend his complaint so as to make him the representative of all the persons interested in the subject
matter of this action. We are of the opinion that such amendment was properly allowed. Section 110 of
the Code of Civil Procedure is exceedingly broad in its term and there is no disposition in this court to
narrow its term or meaning. We are also of the opinion that this is particularly the class of action to which
section 118 of the Code of Civil Procedure refers. It would be exceedingly difficult and expensive to
require that all persons interested be made parties plaintiff. To avoid this was the very purpose in
enacting section 118. The plaintiff, as appears from the record, is the person chosen by the members of
the association in question to look after and represent their interest and it is correspondingly appropriate
that he should represent and act for them in this action. In permitting this court is not thwarting their will or
endangering their interest, but, rather, is carrying out their desires and purposes as they have already
expressed them.
In the third assignment of error it is insisted that the appellants are not liable for the consequences of the
judgment of the justice of the peace, for the reason that according to that judgment the plaintiff, in
violation of the rights of Raymundo Sinsuangco, entered upon the lot in question. It is argued that the
plaintiff should not have entered into possession of this lot in violation of the rights of Sinsuangco, but that
he should have acquired possession by due judicial process, and that having entered into possession in
this manner he must suffer the consequences of his illegal acts. In this we can not agree. When this
rental contract was executed the lot in question was vacant. The agent, Miller, led the plaintiff to believe
that he could place him in legal possession of the lot. It was upon this theory that the plaintiff entered into
this contract and paid the rent for the first year. The record does not affirmatively show that Miller placed
the plaintiff in possession of this lot, but in the absence of proof to the contrary we think it fair to presume
that this occurred. Miller then placed the plaintiff in possession of this lot, but not in the legal possession
of same. He himself did not have the legal possession as was shown by the proof before the justice of
the peace. Sinsuangco was the person who was in the actual possession and Miller should have known
this and he should have known at the time he entered into the contract with the plaintiff that he could not
place the plaintiff in legal, peaceful, and quiet possession of this lot. The plaintiff took possession under
these circumstances and proceeded to construct the chapel, which was afterwards destroyed in the
execution of the judgment of the justice of the peace. In the contract entered into between Miller and the
plaintiff, it was Miller's duty to place the plaintiff legally in possession of this lot and maintain him in the
peaceful and quiet possession of the same during the entire period of the contract.
The rights and obligations of lessor and lessee are treated in articles 1554 to 1574, inclusive, of the Civil
Code. Article 1554 provides:
The lessor is obligated:
xxx xxx xxx
3. To maintain the lessee in the peaceful enjoyment of the premises for the entire period of
the contract.
Article 1568 is as follows:
If the thing leased is lost or any of the contracting parties do not comply with what has been
stipulated, the provisions of article 1182 and 1183 shall be respectively observed.
Article 1101 provides:
Those who in fulfilling their obligations are guilty of fraud, negligence, or delay, and those who
in any manner whatsoever act in contravention of the stipulations of the same, shall be
subject to indemnify for the losses and damages caused thereby.
Under this contract of lease it was the duty of the defendants to give the plaintiff the legal possession of
the premises. This they did not do.
The defendants failed in the performance of their contract, and, as we have seen by article 1101 of the
Civil Code, the person who fails in the performance of his obligations shall be subject to indemnify for the
losses and damages caused thereby. "The true measure of damages for the breach of such a contract is
what the plaintiff has lost by the breach." (Lock vs. Furze, L. R. 1, C. P., 441; Dexter vs. Manley, 4 Cush.
(Mass.), 14.)
The sum of P402, in our opinion, not being excessive damages for the injuries caused by the breach of
contract on the part of the defendants, the judgment should be and the same is hereby affirmed, with
costs against the appellants. So ordered.
G.R. No. 129184 February 28, 2001
EMERGENCY LOAN PAWNSHOP INCORPORATED and DANILO R. NAPALA, petitioners,
vs.
THE COURT OF APPEALS (Tenth Division) and TRADERS ROYAL BANK, respondents.
May an appeal be taken from a decision of the Regional Trial Court denying a motion to dismiss the
complaint on the ground of improper venue? If not, will certiorari lie?
The case before the Court is a petition for review on certiorari assailing the decision of the Court of
Appeals,1granting respondent's petition for certiorari and dismissing the complaint below on the ground of
improper venue.
On January 18, 1996, Traders Royal Bank (TRB for brevity) sold in favor of petitioner Emergency Loan
Pawnshop Incorporated (ELPI for brevity) a parcel of land located at Km. 3 Asin, Baguio City for Five
Hundred Thousand Pesos (P500,000.00). 2
At the time of the sale, TRB misrepresented to ELPI that the subject property was a vacant residential lot
valued at P600.00 to P800.00 per square meter, with a usable land area of 1,143.75 square meters
(approximately 75% of the land area of 1,525 sq.m.) without any illegal occupants or squatters, when it
truth the subject property was dominantly a public road with only 140 square meters usable
area.1âwphi1.nêt
ELPI, after having spent to fully ascertain the actual condition of the property, demanded from TRB the
rescission and cancellation of the sale of the property. TRB refused, hence, on April 16, 1996, ELPI filed
with the Regional Trial Court, Davao, Branch 17, a complaint for annulment of sale and damages against
TRB.3
On August 27, 1996, TRB filed a Motion to Dismiss 4 the complaint on the ground of improper venue. On
September 18, 1996 the trial court denied the motion to dismiss. 5 On October 21, 1996, TRB filed a
motion for reconsideration.6On November 14, 1996, the trial court denied the motion. 7
On January 15, 1997, TRB elevated the case to the Court of Appeals by petition for certiorari and
prohibition with preliminary injunction or temporary restraining order, contending that the trial court
committed a grave abuse of discretion in denying its motion to dismiss the complaint on the ground of
improper venue.8
After due proceedings, on March 11, 1997, the Court of Appeals promulgated its decision. Hence, this
petition.10
Petitioners seek to set aside the decision of the Court of Appeals alleging that:
1. The Court of Appeals erred in entertaining the petition for certiorari and prohibition, for lack
of jurisdiction;
2. The Court of Appeals erred in ruling that the Regional Trial Court erred in not dismissing
the complaint for improper venue.11
According to petitioners, the determination of whether the venue of an action was improperly laid was a
question of law, thus, the Court of Appeals had no jurisdiction to entertain the petition for certiorari and
prohibition, which involved pure questions of law.
Petitioners further alleged that an order denying a motion to dismiss is interlocutory in nature that can not
be the subject of an appeal and can not be even reviewed by a special civil action for certiorari.
We find the petition not meritorious.
The general rule is that the denial of a motion to dismiss a complaint is an interlocutory order and, hence,
cannot be appealed or questioned via a special civil action of certiorari until a final judgment on the merits
of the case is rendered.12
The remedy of the aggrieved party is to file an answer to the complaint and to interpose as defenses the
objections raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate
the entire case by appeal in due course. However, the rule is not ironclad. Under certain situations,
recourse to certiorari or mandamus is considered appropriate, that is, (a) when the trial court issued the
order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the trial
court; or, (c) appeal would not prove to be a speedy and adequate remedy as when an appeal would not
promptly relieve a defendant from the injurious effects of the patently mistaken order maintaining the
plaintiff's baseless action and compelling the defendant needlessly to go through a protracted trial and
clogging the court dockets by another futile case." 13
In the case at bar, we agree with the Court of Appeals that the trial court erred grievously amounting to
ousting itself of jurisdiction. The motion of respondent TRB was well founded because venue was clearly
improperly laid. The action in the Regional Trial Court was for annulment of sale involving a parcel of land
located at Km. 3 Asin Road, Baguio City. The venue of such action is unquestionably within the territorial
jurisdiction of the proper court where the real property or part thereof lies. 14 An action affecting title to real
property, or for recovery of, or foreclosure of mortgage on real property, shall be commenced and tried in
the proper court having jurisdiction over the area where the real property or any part thereof lies. 15
Hence, the case at bar clearly falls within the exceptions to the rule. The Regional Trial Court has
committed a palpable and grievous error amounting to lack or excess of jurisdiction in denying the motion
to dismiss the complaint on the ground of improper venue.
WHEREFORE, the Court denies the petition and affirms the decision of the Court of Appeals in CA-G.R.
SP No. 43095, in toto.
G.R. No. 172172 February 24, 2009
SPS. ERNESTO V. YU and ELSIE ONG YU, Petitioners,
vs.
BALTAZAR N. PACLEB, (Substituted by ANTONIETA S PACLEB, LORNA PACLEB-GUERRERO,
FLORENCIO C. PACLEB, and MYRLA C. PACLEB), Respondents.
Before the Court is a Petition filed under Rule 45 of the Rules of Court assailing: (i) the Decision 1 dated
August 31, 2005 of the Court of Appeals in CA-G.R. CV No. 78629 setting aside the Decision 2 dated
December 27, 2002 of the Regional Trial Court in Civil Case No. 1325-96; and (ii) the Resolution 3 dated
April 3, 2006 of the Court of Appeals denying reconsideration of the said decision.
The facts are well established.
Respondent Baltazar N. Pacleb and his late first wife, Angelita Chan, are the registered owners of an
18,000-square meter parcel of land in Barrio Langcaan, Dasmariñas, Cavite, covered by Transfer
Certificate of Title (TCT) No. T-1183754 (Langcaan Property).
In 1992, the Langcaan Property became the subject of three (3) documents purporting to transfer its
ownership. On February 27, 1992, a Deed of Absolute Sale 5 was entered into between Spouses Baltazar
N. Pacleb and Angelita Chan and Rebecca Del Rosario. On May 7, 1992, a Deed of Absolute Sale 6 was
entered into between Rebecca Del Rosario and Ruperto L. Javier (Javier). On November 10, 1992, a
Contract to Sell7 was entered into between Javier and petitioner spouses Ernesto V. Yu and Elsie Ong
Yu. In their contract, petitioner spouses Yu agreed to pay Javier a total consideration of ₱900,000. Six
hundred thousand pesos (₱600,000) (consisting of ₱200,000 as previous payment and ₱400,000 to be
paid upon execution of the contract) was acknowledged as received by Javier and ₱300,000 remained as
balance. Javier undertook to deliver possession of the Langcaan Property and to sign a deed of absolute
sale within thirty (30) days from execution of the contract.
All the aforementioned sales were not registered.
On April 23, 1993, petitioner spouses Yu filed with the Regional Trial Court of Imus, Cavite, a
Complaint8 for specific performance and damages against Javier, docketed as Civil Case No. 741-93, to
compel the latter to deliver to them ownership and possession, as well as title to the Langcaan Property.
In their Complaint, they alleged that Javier represented to them that the Langcaan Property was not
tenanted. However, after they already paid ₱200,000 as initial payment and entered into an Agreement
dated September 11, 1992 for the sale of the Langcaan Property, they discovered it was tenanted by
Ramon C. Pacleb (Ramon).9 Petitioner spouses demanded the cancellation of their agreement and the
return of their initial payment. Thereafter, petitioner spouses and Javier verified from Ramon if he was
willing to vacate the property and the latter was agreeable. Javier then promised to make arrangements
with Ramon to vacate the property and to pay the latter his disturbance compensation. Hence, they
proceeded to enter into a Contract to Sell canceling the Agreement mentioned. However, Javier failed to
comply with his obligations.
Javier did not appear in the proceedings and was declared in default. On September 8, 1994, the trial
court rendered a Decision,10 the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered for the plaintiff and against the defendant based on the sale
of subject parcel of land to the former who is entitled thereby to the ownership and possession thereof
from the said defendant who is further directed to pay damages of Thirty Thousand Pesos (₱30,000.00)
including attorney’s fees and expenses incurred by the plaintiff in this case as a consequence.
The defendant is further directed to deliver the certificate of title of the land to the plaintiff who is entitled
to it as transferee and new owner thereof upon payment by the plaintiff of his balance of the purchase
price in the sum of Three Hundred Thousand Pesos (₱300,000.00) with legal interest from date.
SO ORDERED.
The said Decision and its Certificate of Finality 11 were annotated on TCT No. T-118375 as Entry No.
2676-7512 and Entry No. 2677-75,13 respectively.
On March 10, 1995, petitioner spouses and Ramon and the latter’s wife, Corazon Bodino, executed a
"Kusangloob na Pagsasauli ng Lupang Sakahan at Pagpapahayag ng Pagtalikod sa Karapatan." 14 Under
the said agreement, petitioner spouses paid Ramon the amount of ₱500,000 in exchange for the waiver
of his tenancy rights over the Langcaan Property.
On October 12, 1995, respondent filed a Complaint15 for annulment of deed of sale and other documents
arising from it, docketed as Civil Case No. 1199-95. He alleged that the deed of sale purportedly
executed between him and his late first wife and Rebecca Del Rosario was spurious as their signatures
thereon were forgeries. Respondent moved to have summons served upon Rebecca Del Rosario by
publication since the latter’s address could not be found. The trial court, however, denied his
motion.16 Respondent then moved to dismiss the case, and the trial court granted the motion in its
Order17 dated April 11, 1996, dismissing the case without prejudice.
Meanwhile, on November 23, 1995, petitioner spouses filed an action for forcible entry against
respondent with the Municipal Trial Court (MTC). They alleged that they had prior physical possession of
the Langcaan Property through their trustee, Ramon, until the latter was ousted by respondent in
September 1995. The MTC ruled in favor of petitioner spouses, which decision was affirmed by the
Regional Trial Court.18 However, the Court of Appeals set aside the decisions of the lower courts and
found that it was respondent who had prior physical possession of the property as shown by his payment
of real estate taxes thereon.19
On May 29, 1996, respondent filed the instant case for removal of cloud from title with damages to cancel
Entry No. 2676-75 and Entry No. 2677-75, the annotated Decision in Civil Case No. 741-93 and its
Certificate of Finality, from the title of the Langcaan Property. 20 Respondent alleged that the deed of sale
between him and his late first wife and Rebecca Del Rosario, who is not known to them, could not have
been possibly executed on February 27, 1992, the date appearing thereon. He alleged that on said date,
he was residing in the United States 21 and his late first wife, Angelita Chan, died twenty (20) years
ago.221avvphi1
On May 28, 1997, during the pendency of the instant case before the trial court, respondent died without
having testified on the merits of his case. Hence, he was substituted by his surviving spouse, Antonieta
S. Pacleb, and Lorna Pacleb-Guerrero, Florencio C. Pacleb and Myrla C. Pacleb representing the
children with the first wife.23
On December 27, 2002, the trial court dismissed respondent’s case and held that petitioner spouses are
purchasers in good faith.24 The trial court ratiocinated that the dismissal of respondent’s complaint for
annulment of the successive sales at his instance "sealed the regularity of the purchase" 25 by petitioner
spouses and that he "in effect admits that the said sale…was valid and in order." 26 Further, the trial court
held that the Decision in Civil Case No. 741-93 on petitioner spouses’ action for specific performance
against Javier is already final and can no longer be altered. Accordingly, the trial court ordered the
cancellation of TCT No. T-118375 in the name of respondent and the issuance of a new title in the name
of petitioner spouses. The trial court also ordered the heirs of respondent and all persons claiming under
them to surrender possession of the Langcaan Property to petitioner spouses.
On appeal by respondent, the Court of Appeals reversed and set aside the decision of the trial
court.27 The Court of Appeals ruled that petitioner spouses are not purchasers in good faith and that the
Decision in Civil Case No. 741-93 did not transfer ownership of the Langcaan Property to them.
Accordingly, the appellate court ordered the cancellation of the annotation of the Decision in Civil Case
No. 741-93 on the title of the Langcaan Property. The Court of Appeals denied reconsideration of said
decision.28 Hence, this Petition.
Two issues are involved in the instant petition. The first is whether petitioner spouses are innocent
purchasers for value and in good faith. The second is whether ownership over the Langcaan Property
was properly vested in petitioner spouses by virtue of the Decision in Civil Case No. 741-93.
Petitioner spouses argue that they are purchasers in good faith. Further, they contend that the Court of
Appeals erred in finding that: "Ramon told him [Ernesto V. Yu] that the property is owned by his father,
Baltazar, and that he is the mere caretaker thereof" 29 since Ramon clarified that his father was the former
owner of the Langcaan Property. In support of their stance, they cite the following testimony of petitioner
Ernesto V. Yu:
Petitioner spouses conclude that based on their personal inspection of the property and the
representations of the registered tenant thereon, they had no reason to doubt the validity of the deeds of
absolute sale since these were duly notarized. Consequently, the alleged forgery of Angelita Chan’s
signature is of no moment since they had no notice of any claim or interest of some other person in the
property despite their diligent inquiry.
We find petitioner spouses’ contentions without merit.
At the outset, we note that in petitioner Ernesto V. Yu’s testimony, he stated that he inspected the
Langcaan Property and talked with the tenant, Ramon, before he purchased the same. However, in his
Complaint for specific performance and damages which he filed against Javier, he alleged that it was only
after he had entered into an Agreement for the sale of the property and his initial payment of ₱200,000
that he discovered that the property was indeed being tenanted by Ramon who lives in the said farm,
viz.:
8. Sometime on September 11, 1992, defendant came again to the Office of plaintiff reiterating his offer to
sell said Lot No. 6853-D, containing an area of 18,000 square meters, at ₱75.00 per square meters (sic).
Defendant manifested to the plaintiff that if his offer is acceptable to the plaintiff, he binds and obligates
himself to pay the capital gains of previous transactions with the BIR and register subject Lot No. 6853-D
in his name (defendant). On these conditions, plaintiff accepted the offer and made [the] initial payment of
Two Hundred Thousand Pesos (₱200,000.00) to defendant by issuance and delivery of plaintiff’s
personal check.
9. Sometime on September 11, 1992, plaintiff and defendant signed an AGREEMENT on the sale of Lot
No. 6853-D of the subdivision plan (LRC) Psd-282604, containing an area of 18,000 square meters,
more or less, located at Bo. Langcaan, Municipality of Dasmarinas, Province of Cavite, at a selling price
of ₱75.00 per square meter. A xerox copy of this AGREEMENT signed by the parties thereto is hereto
attached and marked as ANNEX "D" of this complaint.
10. Thereafter, however, plaintiff and defendant, with their surveyor discovered that subject Lot No. 6853-
D offered for sale to the plaintiff is indeed being tenanted by one RAMON PACLEB who lives in the said
farm.
11. In view of the foregoing developments, plaintiff informed defendant that he wanted the Agreement be
cancelled and for the defendant to return the sum of TWO HUNDRED THOUSAND PESOS
(₱200,000.00).31 (Emphasis supplied)
This inconsistency casts grave doubt as to whether petitioner spouses personally inspected the property
before purchasing it.
More importantly, however, several facts should have put petitioner spouses on inquiry as to the alleged
rights of their vendor, Javier, over the Langcaan Property.
First, it should be noted that the property remains to be registered in the name of respondent despite the
two (2) Deeds of Absolute Sale32 purporting to transfer the Langcaan Property from respondent and his
late first wife, Angelita Chan, to Rebecca Del Rosario then from the latter to Javier. Both deeds were not
even annotated in the title of the Langcaan Property.
Second, a perusal of the two deeds of absolute sale reveals that they were executed only about two (2)
months apart and that they contain identical provisions.
Third, it is undisputed that the Langcaan Property is in the possession of Ramon, the son of the
registered owner. Regardless of the representations given by the latter, this bare fact alone should have
made petitioner spouses suspicious as to the veracity of the alleged title of their vendor. Moreover, as
noted by the Court of Appeals, petitioner spouses could have easily verified the true status of the
Langcaan Property from Ramon’s wife, since the latter is their relative, as averred in paragraph 13 of
their Answer in Civil Case No. 1199-95. 33 The case law is well settled, viz.:
The law protects to a greater degree a purchaser who buys from the registered owner himself. Corollarily,
it requires a higher degree of prudence from one who buys from a person who is not the registered
owner, although the land object of the transaction is registered. While one who buys from the registered
owner does not need to look behind the certificate of title, one who buys from one who is not the
registered owner is expected to examine not only the certificate of title but all factual circumstances
necessary for him to determine if there are any flaws in the title of the transferor, or in his capacity to
transfer the land.
This Court has consistently applied the stricter rule when it comes to deciding the issue of good faith of
one who buys from one who is not the registered owner, but who exhibits a certificate of title. 34 (Emphasis
supplied)
Finally, as correctly pointed out by the Court of Appeals, the dismissal of Civil Case No. 1199-95 (the
action to annul the successive sales of the property) cannot serve to validate the sale to petitioner
spouses since the dismissal was ordered because Rebecca Del Rosario and Javier could no longer be
found. Indeed, the dismissal was without prejudice.
Based on the foregoing, therefore, petitioner spouses cannot be considered as innocent purchasers in
good faith.
We now go to the second issue.
Petitioner spouses argue that the decision of the Regional Trial Court in Civil Case No. 741-93 as to the
rightful owner of the Langcaan Property is conclusive and binding upon respondent even if the latter was
not a party thereto since it involved the question of possession and ownership of real property, and is
thus not merely an action in personam but an action quasi in rem.
In Domagas v. Jensen,35 we distinguished between actions in personam and actions quasi in rem.
The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in
rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by
these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought
against the person and is based on the jurisdiction of the person, although it may involve his right to, or
the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a proceeding in personam is to impose,
through the judgment of a court, some responsibility or liability directly upon the person of the defendant.
Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a
pecuniary liability on him. An action in personam is said to be one which has for its object a judgment
against the person, as distinguished from a judgment against the propriety (sic) to determine its state. It
has been held that an action in personam is a proceeding to enforce personal rights or obligations; such
action is brought against the person.
xxx
On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the
property of such persons to the discharge of the claims assailed. In an action quasi in rem, an individual
is named as defendant and the purpose of the proceeding is to subject his interests therein to the
obligation or loan burdening the property. Actions quasi in rem deal with the status, ownership or liability
of a particular property but which are intended to operate on these questions only as between the
particular parties to the proceedings and not to ascertain or cut off the rights or interests of all possible
claimants. The judgments therein are binding only upon the parties who joined in the action.
Civil Case No. 741-93 is an action for specific performance and damages filed by petitioner spouses
against Javier to compel performance of the latter’s undertakings under their Contract to Sell. As correctly
held by the Court of Appeals, its object is to compel Javier to accept the full payment of the purchase
price, and to execute a deed of absolute sale over the Langcaan Property in their favor. The obligations
of Javier under the contract to sell attach to him alone, and do not burden the Langcaan Property. 36
We have held in an unbroken string of cases that an action for specific performance is an action in
personam.37 In Cabutihan v. Landcenter Construction and Development Corporation, 38 we ruled that an
action for specific performance praying for the execution of a deed of sale in connection with an
undertaking in a contract, such as the contract to sell, in this instance, is an action in personam.
Being a judgment in personam, Civil Case No. 741-93 is binding only upon the parties properly
impleaded therein and duly heard or given an opportunity to be heard. 39 Therefore, it cannot bind
respondent since he was not a party therein. Neither can respondent be considered as privy thereto
since his signature and that of his late first wife, Angelita Chan, were forged in the deed of sale.
All told, we affirm the ruling of the Court of Appeals finding that, as between respondent and petitioner
spouses, respondent has a better right over the Langcaan Property as the true owner thereof. IN VIEW
WHEREOF, the petition is DENIED. The decision of the Court of Appeals is affirmed. Costs against
petitioners.
G.R. No. L-59731 January 11, 1990
ALFREDO CHING, petitioner,
vs.
THE HONORABLE COURT OF APPEALS & PEDRO ASEDILLO, respondents.
This is a petition for review on certiorari which seeks to nullify the decision of respondent Court of
Appeals (penned by Hon. Rodolfo A. Nocon with the concurrence of Hon. Crisolito Pascual and Juan A.
Sison) in CA-G.R. No. 12358-SP entitled Alfredo Ching v. Hon. M. V. Romillo, et al. which in effect
affirmed the decision of the Court of First Instance of Rizal, now Regional Trial Court (penned by Judge
Manuel V. Romillo, Jr. then District Judge, Branch XXVII Pasay City) granting ex-parte the cancellation of
title registered in the name of Ching Leng in favor of Pedro Asedillo in Civil Case No. 6888-P entitled
Pedro Asedillo v. Ching Leng and/or Estate of Ching Leng.
In May 1960, Decree No. N-78716 was issued to spouses Maximo Nofuente and Dominga Lumandan in
Land Registration Case No. N-2579 of the Court of First Instance of Rizal and Original Certificate of Title
No. 2433 correspondingly given by the Register of Deeds for the Province of Rizal covering a parcel of
land situated at Sitio of Kay-Biga Barrio of San Dionisio, Municipality of Paranaque, Province of Rizal,
with an area of 51,852 square meters (Exhibit "7", p. 80, CA, Rollo).
In August 1960, 5/6 portion of the property was reconveyed by said spouses to Francisco, Regina,
Perfects, Constancio and Matilde all surnamed Nofuente and Transfer Certificate of Title No. 78633 was
issued on August 10, 1960 accordingly (Exhibit "8", pp. 81 and 82, Ibid.).
By virtue of a sale to Ching Leng with postal address at No. 44 Libertad Street, Pasay City, Transfer
Certificate of Title No. 91137 was issued on September 18, 1961 and T.C.T. No. 78633 was deemed
cancelled. (Exhibit "5-2", pp. 76-77 and 83, Ibid.).
On October 19, 1965, Ching Leng died in Boston, Massachusetts, United States of America. His
legitimate son Alfredo Ching filed with the Court of First Instance of Rizal (now RTC) Branch III, Pasay
City a petition for administration of the estate of deceased Ching Leng docketed as Sp. Proc. No. 1956-P.
Notice of hearing on the petition was duly published in the "Daily Mirror", a newspaper of general
circulation on November 23 and 30 and December 7, 1965. No oppositors appeared at the hearing on
December 16, 1965, consequently after presentation of evidence petitioner Alfredo Ching was appointed
administrator of Ching Leng's estate on December 28, 1965 and letters of administration issued on
January 3, 1966 (pp. 51-53, Rollo). The land covered by T.C.T. No. 91137 was among those included in
the inventory submitted to the court (p. 75, Ibid.).
Thirteen (13) years after Ching Leng's death, a suit against him was commenced on December 27, 1978
by private respondent Pedro Asedillo with the Court of First Instance of Rizal (now RTC), Branch XXVII,
Pasay City docketed as Civil Case No. 6888-P for reconveyance of the abovesaid property and
cancellation of T.C.T. No. 91137 in his favor based on possession (p. 33, Ibid.). Ching Leng's last known
address is No. 44 Libertad Street, Pasay City which appears on the face of T.C.T. No. 91137
(not No. 441 Libertad Street, Pasay City, as alleged in private respondent's complaint). (Order dated May
29, 1980, p. 55, Ibid.). An amended complaint was filed by private respondent against Ching Leng and/or
Estate of Ching Leng on January 30, 1979 alleging "That on account of the fact that the defendant has
been residing abroad up to the present, and it is not known whether the defendant is still alive or dead,
he or his estate may be served by summons and other processes only by publication;" (p. 38, Ibid.).
Summons by publication to Ching Leng and/or his estate was directed by the trial court in its order dated
February 7, 1979. The summons and the complaint were published in the "Economic Monitor", a
newspaper of general circulation in the province of Rizal including Pasay City on March 5, 12 and 19,
1979. Despite the lapse of the sixty (60) day period within which to answer defendant failed to file a
responsive pleading and on motion of counsel for the private respondent, the court a quo in its order
dated May 25, 1979, allowed the presentation of evidence ex-parte. A judgment by default was rendered
on June 15, 1979, the decretal portion of which reads:
WHEREFORE, finding plaintiffs causes of action in the complaint to be duly substantiated by
the evidence, judgment is hereby rendered in favor of the plaintiff and against the defendant
declaring the former (Pedro Asedillo) to be the true and absolute owner of the property
covered by T.C.T. No. 91137; ordering the defendant to reconvey the said property in favor of
the plaintiff; sentencing the defendant Ching Leng and/or the administrator of his estate to
surrender to the Register of Deeds of the Province of Rizal the owner's copy of T.C.T. No.
91137 so that the same may be cancelled failing in which the said T.C.T. No. 91137 is hereby
cancelled and the Register of Deeds of the Province of Rizal is hereby ordered to issue, in
lieu thereof, a new transfer certificate of title over the said property in the name of the plaintiff
Pedro Asedillo of legal age, and a resident of Estrella Street, Makati, Metro Manila, upon
payment of the fees that may be required therefor, including the realty taxes due the
Government.
IT IS SO ORDERED. (pp. 42-44, Ibid.)
Said decision was likewise served by publication on July 2, 9 and 16, 1979 pursuant to Section 7 of Rule
13 of the Revised Rules of Court (CA Decision, pp. 83-84, Ibid.). The title over the property in the name of
Ching Leng was cancelled and a new Transfer Certificate of Title was issued in favor of Pedro Asedillo (p.
77, CA Rollo) who subsequently sold the property to Villa Esperanza Development, Inc. on September 3,
1979 (pp. 125-126, Ibid.).
On October 29, 1979 petitioner Alfredo Ching learned of the abovestated decision. He filed a verified
petition on November 10, 1979 to set it aside as null and void for lack of jurisdiction which was granted by
the court on May 29, 1980 (penned by Hon. Florentino de la Pena, Vacation Judge, pp. 54-59, Rollo).
On motion of counsel for private respondent the said order of May 29, 1980 was reconsidered and set
aside, the decision dated June 15, 1979 aforequoted reinstated in the order dated September 2, 1980.
(pp. 60-63, Ibid.)
On October 30, 1980, petitioner filed a motion for reconsideration of the said latter order but the same
was denied by the trial court on April 12, 1981 (pp. 77-79, Ibid.)
Petitioner filed an original petition for certiorari with the Court of Appeals but the same was dismissed on
September 30, 1981. His motion for reconsideration was likewise denied on February 10, 1982 (pp. 81-
90, Ibid.)
Private respondent Pedro Asedillo died on June 7, 1981 at Makati, Metro Manila during the pendency of
the case with the Court of Appeals (p. 106, CA Rollo). Hence, the instant petition.
Private respondent's comment was filed on June 1, 1982 (p. 117, Ibid.) in compliance with the resolution
dated April 26, 1982 (p. 109, Ibid.) Petitioner filed a reply to comment on June 18, 1982 (p. 159, Ibid ),
and the Court gave due course to the petition in the resolution of June 28, 1982 (p. 191, Ibid.)
Petitioner raised the following:
IV
WHETHER OR NOT THE TRIAL COURT ACQUIRED JURISDICTION OVER THE SUBJECT
MATTER AND THE PARTIES.
Petitioner's appeal hinges on whether or not the Court of Appeals has decided a question of substance in
a way probably not in accord with law or with the applicable decisions of the Supreme Court.
Petitioner avers that an action for reconveyance and cancellation of title is in personam and the court a
quo never acquired jurisdiction over the deceased Ching Leng and/or his estate by means of service of
summons by publication in accordance with the ruling laid down in Ang Lam v. Rosillosa et al., 86 Phil.
448 [1950].
On the other hand, private respondent argues that an action for cancellation of title is quasi in rem, for
while the judgment that may be rendered therein is not strictly a judgment in in rem, it fixes and settles
the title to the property in controversy and to that extent partakes of the nature of the judgment in rem,
hence, service of summons by publication may be allowed unto Ching Leng who on the face of the
complaint was a non-resident of the Philippines in line with the doctrine enunciated in Perkins v. Dizon,
69 Phil. 186 [1939].
The petition is impressed with merit.
An action to redeem, or to recover title to or possession of, real property is not an action in rem or an
action against the whole world, like a land registration proceeding or the probate of a will; it is an action in
personam, so much so that a judgment therein is binding only upon the parties properly impleaded and
duly heard or given an opportunity to be heard. Actions in personam and actions in rem differ in that the
former are directed against specific persons and seek personal judgments, while the latter are directed
against the thing or property or status of a person and seek judgments with respect thereto as against the
whole world. An action to recover a parcel of land is a real action but it is an action in personam, for it
binds a particular individual only although it concerns the right to a tangible thing (Ang Lam v.
Rosillosa, supra).
Private respondent's action for reconveyance and cancellation of title being in personam, the judgment in
question is null and void for lack of jurisdiction over the person of the deceased defendant Ching Leng.
Verily, the action was commenced thirteen (13) years after the latter's death. As ruled by this Court
in Dumlao v. Quality Plastic Products, Inc. (70 SCRA 475 [1976]) the decision of the lower court insofar
as the deceased is concerned, is void for lack of jurisdiction over his person. He was not, and he could
not have been validly served with summons. He had no more civil personality. His juridical personality,
that is fitness to be subject of legal relations, was lost through death (Arts. 37 and 42 Civil Code).
The same conclusion would still inevitably be reached notwithstanding joinder of Ching Leng's estate as
co-defendant. it is a well-settled rule that an estate can sue or be sued through an executor or
administrator in his representative capacity (21 Am. Jr. 872). Contrary to private respondent's claims,
deceased Ching Leng is a resident of 44 Libertad Street, Pasay City as shown in his death certificate
and T. C. T. No. 91137 and there is an on-going intestate proceedings in the same court, Branch III
commenced in 1965, and notice of hearing thereof duly published in the same year. Such misleading and
misstatement of facts demonstrate lack of candor on the part of private respondent and his counsel,
which is censurable.
The complaint for cancellation of Ching Leng's Torrens Title must be filed in the original land registration
case, RTC, Pasig, Rizal, sitting as a land registration court in accordance with Section 112 of the Land
Registration Act (Act No. 496, as amended) not in CFI Pasay City in connection with, or as a mere
incident in Civil Case No. 6888-P (Estanislao v. Honrado, 114 SCRA 748 [1982]).
Section 112 of the same law requires "notice to all parties in interest." Since Ching Leng was already in
the other world when the summons was published he could not have been notified at all and the trial
court never acquired jurisdiction over his person. The ex-parte proceedings for cancellation of title could
not have been held (Estanislao v. Honrado, supra).
The cited case of Perkins v. Dizon, supra is inapplicable to the case at bar since petitioner Perkins was a
non-resident defendant sued in Philippine courts and sought to be excluded from whatever interest she
has in 52,874 shares of stocks with Benguet Consolidated Mining Company. The action being a quasi in
rem summons by publication satisfied the constitutional requirement of due process.
The petition to set aside the judgment for lack of jurisdiction should have been granted and the amended
complaint of private respondent based on possession and filed only in 1978 dismissed outrightly. Ching
Leng is an innocent purchaser for value as shown by the evidence adduced in his behalf by petitioner
herein, tracing back the roots of his title since 1960, from the time the decree of registration was issued.
The sole remedy of the landowner whose property has been wrongfully or erroneously registered in
another's name—after one year from the date of the decree—is not to set aside the decree, but
respecting the decree as incontrovertible and no longer open to review, to bring an ordinary action in the
ordinary court of justice for damages if the property has passed unto the hands of an innocent purchaser
for value (Sy, Sr. v. Intermediate Appellate Court, G.R. No. 66742; Teoville Development Corporation v.
IAC, et al., G.R. No. 75011, June 16, 1988).
Failure to take steps to assert any rights over a disputed land for 19 years from the date of registration of
title is fatal to the private respondent's cause of action on the ground of laches. Laches is the failure or
neglect, for an unreasonable length of time to do that which by exercising due diligence could or should
have been done, earlier; it is negligence or omission to assert a right within a reasonable time warranting
a presumption that the party entitled to assert it either has abandoned it or declined to assert it (Bailon-
Casilao v. Court of Appeals, G.R. No. 78178, April 15, 1988; Villamor v. Court of Appeals, G.R. No.
41508, June 27, 1988).
The real purpose of the Torrens system is to quiet title to land and to stop forever any question as to its
legality. Once a title is registered, the owner may rest secure, without the necessity of waiting in the
portals of the court, or sitting on the "mirador su casa," to avoid the possibility of losing his land (National
Grains Authority v. IAC, 157 SCRA 388 [1988]).
A Torrens title is generally a conclusive evidence of the ownership of the land referred to therein (Section
49, Act 496). A strong presumption exists that Torrens titles are regularly issued and that they are valid. A
Torrens title is incontrovertible against any "information possessoria" or title existing prior to the issuance
thereof not annotated on the title (Salamat Vda. de Medina v. Cruz, G.R. No. 39272, May 4, 1988).
PREMISES CONSIDERED, (1) the instant petition is hereby GRANTED; (2) the appealed decision of the
Court of Appeals is hereby REVERSED and SET ASIDE; (3) the trial court's decision dated June 15,
1979 and the Order dated September 2, 1980 reinstating the same are hereby declared NULL and VOID
for lack of jurisdiction and (4) the complaint in Civil Case No. 6888-P is hereby DISMISSED. SO
ORDERED.
G.R. No. 150656 April 29, 2003
MARGARITA ROMUALDEZ-LICAROS, petitioner, vs.
ABELARDO B. LICAROS, respondent.
This is a petition for review on certiorari1 to annul the Decision2 dated 9 August 2001 of the Court of
Appeals in CA-G.R. SP No. 58487, as well as the Resolution dated 23 October 2001 denying the motion
for reconsideration. The Court of Appeals dismissed the petition to annul the following
decisions3 rendered by Branch 143 of the Regional Trial Court of Makati:
(1) The Decision dated 27 December 19904 granting the dissolution of the conjugal
partnership of gains of the spouses Abelardo B. Licaros and Margarita Romualdez-Licaros;
(2) The Decision dated 8 November 19915 declaring the marriage between the same spouses
null and void.
The antecedent facts as found by the Court of Appeals are as follows:
x x x Abelardo Licaros (Abelardo, for short) and Margarita Romualdez-Licaros (Margarita,
hereafter) were lawfully married on December 15, 1968. Out of this marital union were born
Maria Concepcion and Abelardo, Jr. Ironically, marital differences, squabbles and
irreconcilable conflicts transpired between the spouses, such that sometime in 1979, they
agreed to separate from bed and board.
In 1982, Margarita left for the United States and there, to settle down with her two (2)
children. In the United States, on April 26, 1989, Margarita applied for divorce before the
Superior Court of California, County of San Mateo (Annex "1", Rejoinder, pp. 164-165)
where she manifested that she does not desire counseling at that time (Quotation, p. 166,
Rollo). On August 6, 1990, Margarita was granted the decree of divorce (Annex 2, Answer,
p. 108, Rollo) together with a distribution of properties between her and Abelardo (pp. 167-
168, Rollo).
Not long after, on August 17, 1990, Abelardo and Margarita executed an "Agreement of
Separation of Properties" (pp. 60-64, Rollo). This was followed-up by a petition filed on
August 21, 1990 before the Regional Trial Court of Makati for the dissolution of the conjugal
partnership of gains of the spouses and for the approval of the agreement of separation of
their properties. This was docketed as Special Proceeding No. 2551. On December 27, 1990,
a decision was issued granting the petition and approving the separation of property
agreement.
For his part, on June 24, 1991, Abelardo commenced Civil Case No. 91-1757, for the
declaration of nullity of his marriage with Margarita, based on psychological incapacity under
the New Family Code. As Margarita was then residing at 96 Mulberry Lane, Atherton,
California, U.S.A., Abelardo initially moved that summons be served through the International
Express Courier Service. The court a quo denied the motion. Instead, it ordered that
summons be served by publication in a newspaper of general circulation once a week for
three (3) consecutive weeks, at the same time furnishing respondent a copy of the order, as
well as the corresponding summons and a copy of the petition at the given address in the
United States through the Department of Foreign Affairs, all at the expense of Abelardo.
Respondent was given sixty (60) days after publication to file a responsive pleading.
 On July 15, 1991, Process Server, Maximo B. Dela Rosa, submitted his Officer’s Return
quoted hereunder:
As required by law, the case was referred to Trial Prosecutor Bruselas, Jr. to find out any possible
collusion between the parties in the case. Thereafter, with the negative report of collusion, Abelardo was
allowed to present his evidence ex-parte. On November 8, 1991, the Decision (Annex "A", Petition) was
handed down in Civil Case No. 91-1757 declaring the marriage between Abelardo and Margarita null and
void.
Almost nine (9) years later, on April 28, 2000, the petition at bench was commenced when Margarita
received a letter dated November 18, 1991 from a certain Atty. Angelo Q. Valencia informing her that she
no longer has the right to use the family name "Licaros" inasmuch as her marriage to Abelardo had
already been judicially dissolved by the Regional Trial Court of Makati on November 8, 1991.
Asseverating to have immediately made some verifications and finding the information given to be true,
petitioner commenced the instant petition on the following grounds:
The Ruling of the Court of Appeals
The Court of Appeals debunked the claim of Margarita that there was extrinsic fraud in the preparation
and filing by Abelardo of the Petition for Dissolution of Conjugal Partnership of Gains and its annex,
the Agreement of Separation of Properties. The Court of Appeals stated:
x x x, the extrinsic fraud alluded to consists of Abelardo coercing Margarita into signing the
petition to dissolve their conjugal partnership of gains together with the agreement of
separation of properties, by threatening to cut-off all financial and material support of their
children then still studying in the United States; that petitioner had no hand directly or
indirectly in the preparation of the petition and agreement of separation of properties; that
petitioner never met the counsel for the petitioner, nor the notary public who notarized the
deed; and, petitioner never received any notice of the pendency of the petition nor a copy of
the decision.
Antithetically, a meticulous perusal of the controversial petition (Annex "B-1") and the
agreement of separation of properties (pp. 60-64, Rollo) readily shows that the same were
signed by the petitioner on the proper space after the prayer and on the portion for the
verification of the petition. The same is true with the agreement of separation of properties.
What is striking to note is that on August 6, 1990, Margarita appeared before Amado P.
Cortez, Consul of the Republic of the Philippines at the San Francisco, California, United
States Consulate Office, to affirm and acknowledge before said official that she executed the
agreement of separation of properties of her own free will and deed, after being informed of
the contents thereof. And yet, there is no showing that Abelardo was with her at the Philippine
Consulate Office in confirming the separation of property agreement. Moreover, on page 2 of
the same agreement, it is specifically stated that such property separation document shall be
"subject to approval later on by the proper court of competent jurisdiction." The clear import of
this is that the agreement must have to be submitted before the proper court for approval,
which explains and confirms petitioner’s signature on the petition filed in court.
In main, We see no indication nor showing of coercion or fraud from these facts, which could
very well be considered as extrinsic or collateral fraud to justify a petition under Rule 47. From
all indications, the pretended coerced documents were rather freely and voluntarily executed
by the parties therein knowing fully well the imports thereof. This conclusion finds more
weight if We consider the fact that the separation of property was fully implemented and
enforced, when apparently both parties correspondingly received the properties respectively
assigned to each of them under the said document. 7
The Court of Appeals also rejected Margarita’s claim that the trial court lacked jurisdiction to hear and
decide the Petition for Declaration of Nullity of Marriage for improper service of summons on her. The
case involves the marital status of the parties, which is an action in rem or quasi in rem. The Court of
Appeals ruled that in such an action the purpose of service of summons is not to vest the trial court with
jurisdiction over the person of the defendant, but "only" to comply with due process. The Court of Appeals
concluded that any irregularity in the service of summons involves due process which does not destroy
the trial court’s jurisdiction over the res which is the parties’ marital status. Neither does such irregularity
invalidate the judgment rendered in the case. Thus, the Court of Appeals dismissed the petition for
annulment of judgment, stating that:
At bar, the case involves the personal (marital) status of the plaintiff and the defendant. This
status is the resover which the Philippine court has acquired jurisdiction. This is also the kind
of action which the Supreme Court had ruled that service of summons may be served
extraterritorially under Section 15 (formerly Section 17) of Rule 14 and where such service
of summons is not for the purpose of vesting the trial court with jurisdiction over the person of
the defendant but only for the purpose of complying with the requirements of fair play and due
process. A fortiori, the court a quo had properly acquired jurisdiction over the person of
herein petitioner-defendant when summons was served by publication and a copy of the
summons, the complaint with annexes, together with the Order of June 28, 1991, was served
to the defendant through the Department of Foreign Affairs by registered mail and duly
received by said office to top it all. Such mode was upon instruction and lawful order of the
court and could even be treated as ‘any other manner the court may deem sufficient’. 8 Hence,
the instant petition.
I. Whether Margarita was validly served with summons in the case for declaration of
nullity of her marriage with Abelardo;
II. Whether there was extrinsic fraud in the preparation and filing by Abelardo of the
Petition for Dissolution of the Conjugal Partnership of Gains and its annex, the
Agreement of Separation of Properties.
The petition is bereft of merit.
First Issue: Validity of the Service of Summons on Margarita
Margarita insists that the trial court never acquired jurisdiction over her person in the petition for
declaration of nullity of marriage since she was never validly served with summons. Neither did she
appear in court to submit voluntarily to its jurisdiction.
On the other hand, Abelardo argues that jurisdiction over the person of a non-resident defendant in an
action in remor quasi in rem is not necessary. The trial and appellate courts made a clear factual finding
that there was proper summons by publication effected through the Department of Foreign Affairs as
directed by the trial court. Thus, the trial court acquired jurisdiction to render the decision declaring the
marriage a nullity.
Summons is a writ by which the defendant is notified of the action brought against him. Service of such
writ is the means by which the court acquires jurisdiction over his person. 9
As a rule, when the defendant does not reside and is not found in the Philippines, Philippine courts
cannot try any case against him because of the impossibility of acquiring jurisdiction over his person
unless he voluntarily appears in court. But when the case is one of actions in rem or quasi in
rem enumerated in Section 15,10 Rule 14 of the Rules of Court, Philippine courts have jurisdiction to hear
and decide the case. In such instances, Philippine courts have jurisdiction over the res, and jurisdiction
over the person of the non-resident defendant is not essential. 11
Actions in personam12 and actions in rem or quasi in rem differ in that actions in personam are directed
against specific persons and seek personal judgments. On the other hand, actions in rem or quasi in
rem are directed against the thing or property or status of a person and seek judgments with respect
thereto as against the whole world.13
At the time Abelardo filed the petition for nullity of the marriage in 1991, Margarita was residing in the
United States. She left the Philippines in 1982 together with her two children. The trial court considered
Margarita a non-resident defendant who is not found in the Philippines. Since the petition affects the
personal status of the plaintiff, the trial court authorized extraterritorial service of summons under Section
15, Rule 14 of the Rules of Court. The term "personal status" includes family relations, particularly the
relations between husband and wife.14
Under Section 15 of Rule 14, a defendant who is a non-resident and is not found in the country may be
served with summons by extraterritorial service in four instances: (1) when the action affects the
personal status of the plaintiff; (2) when the action relates to, or the subject of which is property within
the Philippines, in which the defendant has or claims a lien or interest, actual or contingent; (3) when the
relief demanded consists, wholly or in part, in excluding the defendant from any interest in property
located in the Philippines; or (4) when the property of the defendant has been attached within the
Philippines.
In these instances, extraterritorial service of summons may be effected under any of three modes: (1) by
personal service out of the country, with leave of court; (2) by publication and sending a copy of the
summons and order of the court by registered mail to the defendant’s last known address, also with leave
of court; or (3) by any other means the judge may consider sufficient.
Applying the foregoing rule, the trial court required extraterritorial service of summons to be effected on
Margarita in the following manner:
x x x, service of Summons by way of publication in a newspaper of general circulation once a
week for three (3) consecutive weeks, at the same time, furnishing respondent copy of this
Order as well as the corresponding Summons and copy of the petition at her given address at
No. 96 Mulberry Lane, Atherton, California, U.S.A., thru the Department of Foreign Affairs,
all at the expense of petitioner.15 (Emphasis ours)
The trial court’s prescribed mode of extraterritorial service does not fall under the first or second mode
specified in Section 15 of Rule 14, but under the third mode. This refers to "any other means that the
judge may consider sufficient."
The Process Server’s Return of 15 July 1991 shows that the summons addressed to Margarita together
with the complaint and its annexes were sent by mail to the Department of Foreign Affairs with
acknowledgment of receipt. The Process Server’s certificate of service of summons is prima
facie evidence of the facts as set out in the certificate. 16 Before proceeding to declare the marriage
between Margarita and Abelardo null and void, the trial court stated in its Decision dated 8 November
1991 that "compliance with the jurisdictional requirements hav(e)(sic) been duly established." We
hold that delivery to the Department of Foreign Affairs was sufficient compliance with the rule. After all,
this is exactly what the trial court required and considered as sufficient to effect service of summons
under the third mode of extraterritorial service pursuant to Section 15 of Rule 14.
Second Issue: Validity of the Judgment Dissolving the Conjugal Partnership of Gains
Margarita claims that Abelardo coerced her into signing the Petition for Dissolution of the Conjugal
Partnership of Gains ("Petition") and its annex, the Agreement of Separation of Properties ("Agreement").
Abelardo allegedly threatened to cut off all financial and material support to their children if Margarita did
not sign the documents.
The trial court did not find anything amiss in the Petition and Agreement that Abelardo filed, and thus the
trial court approved the same. The Court of Appeals noted that a meticulous perusal of the Petition and
Agreement readily shows that Margarita signed the same on the proper space after the prayer and on the
portion for the verification of the petition. The Court of Appeals observed further that on 6 August 1990,
Margarita appeared before Consul Amado Cortez in the Philippine Consulate Office in San Francisco,
California, to affirm that she executed the Agreement of her own free will. There was no showing that
Abelardo was at that time with her at the Philippine Consulate Office. Abelardo secured judicial approval
of the Agreement as specifically required in the Agreement.
The Court is bound by the factual findings of the trial and appellate courts that the parties freely and
voluntarily executed the documents and that there is no showing of coercion or fraud. As a rule, in an
appeal by certiorari under Rule 45, the Court does not pass upon questions of fact as the factual findings
of the trial and appellate courts are binding on the Court. The Court is not a trier of facts. The Court will
not examine the evidence introduced by the parties below to determine if the trial and appellate courts
correctly assessed and evaluated the evidence on record. 17
The due and regular execution of an instrument acknowledged before an officer authorized to administer
oaths cannot be overthrown by bare allegations of coercion but only by clear and convincing proof. 18 A
person acknowledging an instrument before an officer authorized to administer oaths acknowledges that
he freely and voluntarily executed the instrument, giving rise to a prima facie presumption of such fact.
In the instant case, Margarita acknowledged the Agreement before Consul Cortez. The certificate of
acknowledgment signed by Consul Cortez states that Margarita personally appeared before him and
"acknowledged before me that SHE executed the same of her own free will and deed."19 Thus, there is
a prima facie presumption that Margarita freely and voluntarily executed the Agreement. Margarita has
failed to rebut this prima faciepresumption with clear and convincing proof of coercion on the part of
Abelardo.
A document acknowledged before a notary public is prima facie evidence of the due and regular
execution of the document.20 A notarized document has in its favor the presumption of regularity in its
execution, and to contradict the same, there must be evidence that is clear, convincing and more than
merely preponderant.21
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 58487 dismissing the petition to
annul judgment is AFFIRMED. SO ORDERED.
G.R. No. 127692 March 10, 2004
FORTUNATO GOMEZ and AURORA GOMEZ, petitioners, vs.
COURT OF APPEALS, ADOLFO TROCINO and MARIANO TROCINO, respondents.
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
decision1 of the Court of Appeals dated September 30, 1996, in CA-G.R. SP No. 40067, nullifying the
decision and orders of the Regional Trial Court of Cebu City (Branch 10) in Civil Case No. CEB-11103, for
want of jurisdiction.
Civil Case No. CEB-11103 is an action for specific performance and/or rescission filed by herein
petitioners, spouses Fortunato and Aurora Gomez, against the heirs of Jesus J. Trocino, Sr., which
include herein respondents and their mother Caridad Trocino. 2
Filed on December 16, 1991, the complaint alleges: Some time in 1975, the spouses Jesus and Caridad
Trocino mortgaged two parcels of land covered by TCT Nos. 10616 and 31856 to Dr. Clarence Yujuico.
The mortgage was subsequently foreclosed and the properties sold at public auction on July 11, 1988,
and before the expiry of the redemption period, the spouses Trocino sold the property to petitioners on
December 12, 1989, who in turn, redeemed the same from Dr. Yujuico. The spouses Trocino, however,
refused to convey ownership of the properties to petitioners, hence, the complaint.
On January 10, 1992, the trial court’s Process Server served summons on respondents, in the manner
described in his "Return of Service," to wit:
Respectfully returned to the Branch Clerk of Court, Regional Trial Court of Cebu, Branch 10, the herein
attached original summons issued in the above-entitled case with the information that on January 8, 1992
summons and copies of the complaint were served to the defendants Jacob, Jesus Jr., Adolfo, Mariano,
Consolacion, Alice, Racheal thru defendant Caridad Trocino at their given address at Maria Cristina
Extension (besides Sacred Heart School for Girls), Cebu City, evidence by her signature found at the
lower portion of the original summons. 3
WHEREFORE I, respectfully return the original summons duly served to the court of origin.
On January 27, 1992, the defendants, through their counsel Atty. Expedito P. Bugarin, filed their Answer.
Defendant Caridad A. Trocino, respondents’ mother, verified said pleading. 4
After trial on the merits, the RTC rendered its decision on March 1993,
Due to the defendants’ failure to deliver the owner’s duplicate of TCT Nos. 10616 and 31856, the RTC
issued an order on August 29, 1995 declaring said titles null and void, and ordering the Register of Deeds
of Cebu City to issue new titles in the name of herein petitioners. 6
Thereafter, or on March 13, 1996, respondents Adolfo and Mariano Trocino filed with the Court of
Appeals, a petition for the annulment of the judgment rendered by the RTC-Cebu (Branch 10) in Civil
Case No. CEB-11103. Private respondents alleged that the trial court’s decision is null and void on the
ground that it did not acquire jurisdiction over their persons as they were not validly served with a copy of
the summons and the complaint. According to them, at the time summons was served on them, Adolfo
Trocino was already in Ohio, U.S.A., and has been residing there for 25 years, while Mariano Trocino
was in Talibon, Bohol, and has been residing there since 1986. They also refuted the receipt of the
summons by Caridad A. Trocino, and the representation made by Atty. Bugarin in their behalf.
Respondents also contended that they have a meritorious defense. 7 Petitioners filed their
Comment/Answer to the petition.8
On September 30, 1996, the Court of Appeals issued the assailed Decision granting the petition and
annulling the decision of the RTC-Cebu (Branch 10). The decretal portion of the decision reads:
WHEREFORE, the decision of the Regional Trial Court of Cebu City, Branch 10, in Civil Case No. CEB-
11103 as well as all Orders issued to implement the same are hereby ANNULLED AND SET ASIDE. The
Register of Deeds of Cebu City is hereby ENJOINED from cancelling Transfer Certificates of Title Nos.
10616 and 31856. No pronouncement as to costs.
SO ORDERED.9
Their motion for reconsideration having been denied by the Court of Appeals, petitioners filed the present
petition, setting forth the following assignment of errors:
I. THE COURT OF APPEALS ERRED IN FINDING LACK OF PRIOR KNOWLEDGE ON THE PART OF
RESPONDENTS TROCINO, REGARDING THE PROCEEDINGS BEFORE THE RTC OF CEBU CITY
AND IN NOT DISMISSING THE PETITION FOR VIOLATION OF SUPREME COURT CIRCULAR 04-94.
II. THE COURT OF APPEALS ERRED IN DECLARING THE NEED FOR PERSONAL AND/OR
EXTRATERRITORIAL SERVICE OF SUMMONS, DESPITE THE NATURE OF THE CAUSE OF ACTION
BEING ONE IN REM.
III. THE COURT OF APPEALS ERRED IN ANNULLING THE JUDGMENT, CAUSING FURTHER
USELESS LITIGATION AND UNNECESSARY EXPENSE ON PETITIONERS AND RESPONDENTS,
ESPECIALLY SINCE RESPONDENTS HAVE NOT SHOWN ANY VALID DEFENSE AS GROUND FOR
REVERSAL OF JUDGMENT OF THE RTC.
IV. THE COURT OF APPEALS ERRED IN RULING THAT ITS JUDGMENT IS APPLICABLE IN FAVOR
OF CARIDAD TROCINO.10
Summons is a writ by which the defendant is notified of the action brought against him. Service of such
writ is the means by which the court acquires jurisdiction over his person. 11 Any judgment without such
service in the absence of a valid waiver is null and void.12
The resolution of the present petition hinges on the issue of whether or not summons was effectively
served on respondents. If in the affirmative, the trial court had validly acquired jurisdiction over their
persons and therefore its judgment is valid.
To resolve whether there was valid service of summons on respondents, the nature of the action filed
against them must first be determined. As the Court explained in Asiavest Limited vs. Court of Appeals, it
will be helpful to determine first whether the action is in personam, in rem, or quasi in rem because the
rules on service of summons under Rule 14 of the Rules of Court of the Philippines apply according to
the nature of the action.13
In actions in personam, summons on the defendant must be served by handing a copy thereof to the
defendant in person, or, if he refuses to receive it, by tendering it to him. This is specifically provided in
Section 7, Rule 14 of the Rules of Court, 14 which states:
SEC. 7. Personal service of summons.-- The summons shall be served by handing a copy thereof to the
defendant in person or, if he refuses to receive it, by tendering it to him.
If efforts to find defendant personally makes prompt service impossible, substituted service may be
effected by leaving copies of the summons at the defendant's dwelling house or residence with some
person of suitable age and discretion then residing therein, or by leaving the copies at the defendant's
office or regular place of business with some competent person in charge thereof. 15 In substituted
service, it is mandated that the fact of impossibility of personal service should be explained in the proof of
service.16
When the defendant in an action in personam is a non-resident who does not voluntarily submit himself
to the authority of the court, personal service of summons within the State is essential to the acquisition
of jurisdiction over his person. This cannot be done if the defendant is not physically present in the
country, and thus, the court cannot acquire jurisdiction over his person and therefore cannot validly try
and decide the case against him.17 An exception was accorded in Gemperle vs. Schenker wherein
service of summons through the non-resident’s wife, who was a resident of the Philippines, was held
valid, as the latter was his representative and attorney-in-fact in a prior civil case filed by the non-
resident, and the second case was merely an offshoot of the first case. 18
Meanwhile, in actions in rem or quasi in rem, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res,
although summons must be served upon the defendant in order to satisfy the due process
requirements.19 Thus, where the defendant is a non-resident who is not found in the Philippines, and (1)
the action affects the personal status of the plaintiff; (2) the action relates to, or the subject matter of
which is property in the Philippines in which the defendant has or claims a lien or interest; (3) the action
seeks the exclusion of the defendant from any interest in the property located in the Philippines; or (4) the
property of the defendant has been attached in the Philippines, summons may be served extraterritorially
by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or
(c) any other manner the court may deem sufficient. 20
In the present case, petitioners’ cause of action in Civil Case No. CEB-11103 is anchored on the claim
that the spouses Jesus and Caridad Trocino reneged on their obligation to convey ownership of the two
parcels of land subject of their sale. Thus, petitioners pray in their complaint that the spouses Trocino be
ordered to execute the appropriate deed of sale and that the titles be delivered to them (petitioners); or in
the alternative, that the sale be revoked and rescinded; and spouses Trocino ordered to return to
petitioners their down payment in the amount of P500,000.00 plus interests. The action instituted by
petitioners affect the parties alone, not the whole world. Hence, it is an action in personam, i.e., any
judgment therein is binding only upon the parties properly impleaded. 21
Contrary to petitioners’ belief, the complaint they filed for specific performance and/or rescission is not an
action in rem. While it is a real action because it affects title to or possession of the two parcels of land
covered by TCT Nos. 10616 and 31856, it does not automatically follow that the action is already one in
rem. In Hernandez vs. Rural Bank of Lucena, Inc., the Court made the following distinction:
In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or
the recovery of damages. In a real action, the plaintiff seeks the recovery of real property, or, as indicated
in section 2(a) of Rule 4, a real action is an action affecting title to real property or for the recovery of
possession, or for partition or condemnation of, or foreclosure of a mortgage on, real property.
An action in personam is an action against a person on the basis of his personal liability, while an action
in rem is an action against the thing itself, instead of against the person. Hence, a real action may at the
same time be an action in personam and not necessarily an action in rem. 22
The objective sought in petitioners’ complaint was to establish a claim against respondents for their
alleged refusal to convey to them the title to the two parcels of land that they inherited from their father,
Jesus Trocino, who was one of the sellers of the properties to petitioners. Hence, to repeat, Civil Case
No. CEB-11103 is an action in personam because it is an action against persons, namely, herein
respondents, on the basis of their personal liability. As such, personal service of summons upon the
defendants is essential in order for the court to acquire of jurisdiction over their persons.23
A distinction, however, must be made with regard to service of summons on respondents Adolfo Trocino
and Mariano Trocino. Adolfo Trocino, as records show, is already a resident of Ohio, U.S.A. for 25 years.
Being a non-resident, the court cannot acquire jurisdiction over his person and validly try and decide the
case against him.
On the other hand, Mariano Trocino has been in Talibon, Bohol since 1986. To validly acquire jurisdiction
over his person, summons must be served on him personally, or through substituted service, upon
showing of impossibility of personal service. Such impossibility, and why efforts exerted towards personal
service failed, should be explained in the proof of service. The pertinent facts and circumstances
attendant to the service of summons must be stated in the proof of service or Officer’s Return. Failure to
do so would invalidate all subsequent proceedings on jurisdictional grounds. 24
In the present case, the process server served the summons and copies of the complaint on respondents
Jacob, Jesus, Jr., Adolfo, Mariano, Consolacion, Alice and Racheal, 25 through their mother, Caridad
Trocino.26 The return did not contain any particulars as to the impossibility of personal service on Mariano
Trocino within a reasonable time. Such improper service renders the same ineffective.
Due process of law requires personal service to support a personal judgment, and, when the proceeding
is strictly in personam brought to determine the personal rights and obligations of the parties, personal
service within the state or a voluntary appearance in the case is essential to the acquisition of jurisdiction
so as to constitute compliance with the constitutional requirement of due process. 27
Moreover, inasmuch as the sheriff’s return failed to state the facts and circumstances showing the
impossibility of personal service of summons upon respondents within a reasonable time, petitioners
should have sought the issuance of an alias summons. Under Section 5, Rule 14 of the Rules of Court,
alias summons may be issued when the original summons is returned without being served on any or all
of the defendants.28 Petitioners, however, did not do so, and they should now bear the consequences of
their lack of diligence.
The fact that Atty. Expedito Bugarin represented all the respondents without any exception does not
transform the ineffective service of summons into a valid one. It does not constitute a valid waiver or even
a voluntary submission to the trial court’s jurisdiction. There was not even the slightest proof showing that
respondents authorized Atty. Bugarin’s appearance for and in their behalf. As found by the Court of
Appeals:
While Caridad Trocino may have engaged the services of Atty. Bugarin, it did not necessarily mean that
Atty. Bugarin also had the authority to represent the defendant heirs. The records show that in all the
pleadings which required verification, only Caridad Trocino signed the same. There was never a single
instance where defendant heirs signed the pleading. The fact that a pleading is signed by one defendant
does not necessarily mean that it is binding on a co-defendant. Furthermore, Caridad Trocino
represented herself as the principal defendant in her Motion to Withdraw Appeal. (Rollo, p. 80)
Since the defendant heirs are co-defendants, the trial court should have verified the extent of Atty.
Bugarin’s authority when petitioners failed to appear as early as the pre-trial stage, where the parties are
required to appear. The absence of the defendant heirs should have prompted the trial court to inquire
from the lawyer whether he was also representing the other petitioners. As co-defendant and co-heirs
over the disputed properties, the defendant heirs had every right to be present during the trial. Only
Caridad Trocino appeared and testified on her own behalf. All the defenses raised were her own, not the
defendant heirs.29
Consequently, the judgment sought to be executed against respondents were rendered without
jurisdiction as there was neither a proper service of summons nor was there any waiver or voluntary
submission to the trial court’s jurisdiction. Hence, the same is void, with regard to private respondents
except Caridad Trocino.
It must be pointed out that while it was the spouses Jesus and Caridad Trocino who sold the properties to
petitioners, their right to proceed against Jesus Trocino when he died was passed on to his heirs, which
includes respondents and Caridad Trocino. Such transmission of right occurred by operation of law, more
particularly by succession, which is a mode of acquisition by virtue of which the property, rights and
obligations to the extent of the value of the inheritance of a person are transmitted. 30 When the process
server personally served the summons on Caridad Trocino, the trial court validly acquired jurisdiction
over her person alone. Hence, the trial court’s decision is valid and binding with regard to her, but only in
proportion to Caridad Trocino’s share. As aptly stated by the Court of Appeals:
This Court’s decision is therefore applicable to all the defendant heirs with the exception of defendant
Caridad Trocino considering that it was the latter who entered into the alleged sale without the consent of
her husband. She is therefore estopped from questioning her own authority to enter into the questioned
sale. Moreover, Caridad Trocino was validly served with summons and was accorded due process. 31
WHEREFORE, the petition for review is DENIED. The decision of the Court of Appeals in CA-G.R.
G.R. No. 190710 June 6, 2011
JESSE U. LUCAS, Petitioner, vs. JESUS S. LUCAS, Respondent.
Is a prima facie showing necessary before a court can issue a DNA testing order? In this petition for
review on certiorari, we address this question to guide the Bench and the Bar in dealing with a relatively
new evidentiary tool. Assailed in this petition are the Court of Appeals (CA) Decision 1 dated September
25, 2009 and Resolution dated December 17, 2009.
On July 26, 2007, petitioner, Jesse U. Lucas, filed a Petition to Establish Illegitimate Filiation (with Motion
for the Submission of Parties to DNA Testing) 2 before the Regional Trial Court (RTC), Branch 72,
Valenzuela City. Petitioner narrated that, sometime in 1967, his mother, Elsie Uy (Elsie), migrated to
Manila from Davao and stayed with a certain "Ate Belen (Belen)" who worked in a prominent nightspot in
Manila. Elsie would oftentimes accompany Belen to work. On one occasion, Elsie got acquainted with
respondent, Jesus S. Lucas, at Belen’s workplace, and an intimate relationship developed between the
two. Elsie eventually got pregnant and, on March 11, 1969, she gave birth to petitioner, Jesse U. Lucas.
The name of petitioner’s father was not stated in petitioner’s certificate of live birth. However, Elsie later
on told petitioner that his father is respondent. On August 1, 1969, petitioner was baptized at San Isidro
Parish, Taft Avenue, Pasay City. Respondent allegedly extended financial support to Elsie and petitioner
for a period of about two years. When the relationship of Elsie and respondent ended, Elsie refused to
accept respondent’s offer of support and decided to raise petitioner on her own. While petitioner was
growing up, Elsie made several attempts to introduce petitioner to respondent, but all attempts were in
vain.
Attached to the petition were the following: (a) petitioner’s certificate of live birth; (b) petitioner’s baptismal
certificate; (c) petitioner’s college diploma, showing that he graduated from Saint Louis University in
Baguio City with a degree in Psychology; (d) his Certificate of Graduation from the same school; (e)
Certificate of Recognition from the University of the Philippines, College of Music; and (f) clippings of
several articles from different newspapers about petitioner, as a musical prodigy.
Respondent was not served with a copy of the petition. Nonetheless, respondent learned of the petition
to establish filiation. His counsel therefore went to the trial court on August 29, 2007 and obtained a copy
of the petition.
Petitioner filed with the RTC a Very Urgent Motion to Try and Hear the Case. Hence, on September 3,
2007, the RTC, finding the petition to be sufficient in form and substance, issued the Order 3 setting the
case for hearing and urging anyone who has any objection to the petition to file his opposition. The court
also directed that the Order be published once a week for three consecutive weeks in any newspaper of
general circulation in the Philippines, and that the Solicitor General be furnished with copies of the Order
and the petition in order that he may appear and represent the State in the case.
On September 4, 2007, unaware of the issuance of the September 3, 2007 Order, respondent filed a
Special Appearance and Comment. He manifested inter alia that: (1) he did not receive the summons
and a copy of the petition; (2) the petition was adversarial in nature and therefore summons should be
served on him as respondent; (3) should the court agree that summons was required, he was waiving
service of summons and making a voluntary appearance; and (4) notice by publication of the petition and
the hearing was improper because of the confidentiality of the subject matter. 4
On September 14, 2007, respondent also filed a Manifestation and Comment on Petitioner’s Very Urgent
Motion to Try and Hear the Case. Respondent reiterated that the petition for recognition is adversarial in
nature; hence, he should be served with summons.
After learning of the September 3, 2007 Order, respondent filed a motion for
reconsideration.5 Respondent averred that the petition was not in due form and substance because
petitioner could not have personally known the matters that were alleged therein. He argued that DNA
testing cannot be had on the basis of a mere allegation pointing to respondent as petitioner’s father.
Moreover, jurisprudence is still unsettled on the acceptability of DNA evidence.
On July 30, 2008, the RTC, acting on respondent’s motion for reconsideration, issued an
Order6 dismissing the case. The court remarked that, based on the case of Herrera v. Alba, 7 there are
four significant procedural aspects of a traditional paternity action which the parties have to face: a prima
facie case, affirmative defenses, presumption of legitimacy, and physical resemblance between the
putative father and the child. The court opined that petitioner must first establish these four procedural
aspects before he can present evidence of paternity and filiation, which may include incriminating acts or
scientific evidence like blood group test and DNA test results. The court observed that the petition did not
show that these procedural aspects were present. Petitioner failed to establish a prima facie case
considering that (a) his mother did not personally declare that she had sexual relations with respondent,
and petitioner’s statement as to what his mother told him about his father was clearly hearsay; (b) the
certificate of live birth was not signed by respondent; and (c) although petitioner used the surname of
respondent, there was no allegation that he was treated as the child of respondent by the latter or his
family. The court opined that, having failed to establish a prima facie case, respondent had no obligation
to present any affirmative defenses. The dispositive portion of the said Order therefore reads:
WHEREFORE, for failure of the petitioner to establish compliance with the four procedural aspects of a
traditional paternity action in his petition, his motion for the submission of parties to DNA testing to
establish paternity and filiation is hereby denied. This case is DISMISSED without prejudice.
Petitioner seasonably filed a motion for reconsideration to the Order dated July 30, 2008, which the RTC
resolved in his favor. Thus, on October 20, 2008, it issued the Order 9 setting aside the court’s previous
order
Let the Petition (with Motion for the Submission of Parties to DNA Testing) be set for hearing on January
22, 2009 at 8:30 in the morning.
This time, the RTC held that the ruling on the grounds relied upon by petitioner for filing the petition is
premature considering that a full-blown trial has not yet taken place. The court stressed that the petition
was sufficient in form and substance. It was verified, it included a certification against forum shopping,
and it contained a plain, concise, and direct statement of the ultimate facts on which petitioner relies on
for his claim, in accordance with Section 1, Rule 8 of the Rules of Court. The court remarked that the
allegation that the statements in the petition were not of petitioner’s personal knowledge is a matter of
evidence. The court also dismissed respondent’s arguments that there is no basis for the taking of DNA
test, and that jurisprudence is still unsettled on the acceptability of DNA evidence. It noted that the new
Rule on DNA Evidence11 allows the conduct of DNA testing, whether at the court’s instance or upon
application of any person who has legal interest in the matter in litigation.
Respondent filed a Motion for Reconsideration of Order dated October 20, 2008 and for Dismissal of
Petition,12reiterating that (a) the petition was not in due form and substance as no defendant was named
in the title, and all the basic allegations were hearsay; and (b) there was no prima facie case, which made
the petition susceptible to dismissal.
The RTC denied the motion in the Order dated January 19, 2009, and rescheduled the hearing. 13
Aggrieved, respondent filed a petition for certiorari with the CA, questioning the Orders dated October 20,
2008 and January 19, 2009.
On September 25, 2009, the CA decided the petition for certiorari in favor of respondent, thus:
WHEREFORE, the instant petition for certiorari is hereby GRANTED for being meritorious. The assailed
Orders dated October 20, 2008 and January 19, 2009 both issued by the Regional Trial Court, Branch
172 of Valenzuela City in SP. Proceeding Case No. 30-V-07 are REVERSED and SET ASIDE.
Accordingly, the case docketed as SP. Proceeding Case No. 30-V-07 is DISMISSED. 14
The CA held that the RTC did not acquire jurisdiction over the person of respondent, as no summons had
been served on him. Respondent’s special appearance could not be considered as voluntary appearance
because it was filed only for the purpose of questioning the jurisdiction of the court over respondent.
Although respondent likewise questioned the court’s jurisdiction over the subject matter of the petition,
the same is not equivalent to a waiver of his right to object to the jurisdiction of the court over his person.
The CA remarked that petitioner filed the petition to establish illegitimate filiation, specifically seeking a
DNA testing order to abbreviate the proceedings. It noted that petitioner failed to show that the four
significant procedural aspects of a traditional paternity action had been met. The CA further held that a
DNA testing should not be allowed when the petitioner has failed to establish a prima facie case, thus:
While the tenor [of Section 4, Rule on DNA Evidence] appears to be absolute, the rule could not really
have been intended to trample on the substantive rights of the parties. It could have not meant to be an
instrument to promote disorder, harassment, or extortion. It could have not been intended to legalize
unwarranted expedition to fish for evidence. Such will be the situation in this particular case if a court may
at any time order the taking of a DNA test. If the DNA test in compulsory recognition cases is immediately
available to the petitioner/complainant without requiring first the presentation of corroborative proof, then
a dire and absurd rule would result. Such will encourage and promote harassment and extortion.
xxxx
At the risk of being repetitious, the Court would like to stress that it sees the danger of allowing an
absolute DNA testing to a compulsory recognition test even if the plaintiff/petitioner failed to establish
prima facie proof. x x x If at anytime, motu proprio and without pre-conditions, the court can indeed order
the taking of DNA test in compulsory recognition cases, then the prominent and well-to-do members of
our society will be easy prey for opportunists and extortionists. For no cause at all, or even for [sic] casual
sexual indiscretions in their younger years could be used as a means to harass them. Unscrupulous
women, unsure of the paternity of their children may just be taking the chances-just in case-by pointing to
a sexual partner in a long past one-time encounter. Indeed an absolute and unconditional taking of DNA
test for compulsory recognition case opens wide the opportunities for extortionist to prey on victims who
have no stomach for scandal.15
Petitioner moved for reconsideration. On December 17, 2009, the CA denied the motion for lack of
merit.16
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RESOLVED THE ISSUE
OF LACK OF JURISDICTION OVER THE PERSON OF HEREIN RESPONDENT ALBEIT
THE SAME WAS NEVER RAISED IN THE PETITION FOR CERTIORARI.
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RULED
THAT JURISDICTION WAS NOT ACQUIRED OVER THE PERSON OF THE
RESPONDENT.
Petitioner contends that respondent never raised as issue in his petition for certiorari the court’s lack of
jurisdiction over his person. Hence, the CA had no legal basis to discuss the same, because issues not
raised are deemed waived or abandoned. At any rate, respondent had already voluntarily submitted to
the jurisdiction of the trial court by his filing of several motions asking for affirmative relief, such as the (a)
Motion for Reconsideration of the Order dated September 3, 2007; (b) Ex Parte Motion to Resolve Motion
for Reconsideration of the Order dated November 6, 2007; and (c) Motion for Reconsideration of the
Order dated October 20, 2008 and for Dismissal of Petition. Petitioner points out that respondent even
expressly admitted that he has waived his right to summons in his Manifestation and Comment on
Petitioner’s Very Urgent Motion to Try and Hear the Case. Hence, the issue is already moot and
academic.
Petitioner argues that the case was adversarial in nature. Although the caption of the petition does not
state respondent’s name, the body of the petition clearly indicates his name and his known address. He
maintains that the body of the petition is controlling and not the caption.
Finally, petitioner asserts that the motion for DNA testing should not be a reason for the dismissal of the
petition since it is not a legal ground for the dismissal of cases. If the CA entertained any doubt as to the
propriety of DNA testing, it should have simply denied the motion. 18 Petitioner points out that Section 4 of
the Rule on DNA Evidence does not require that there must be a prior proof of filiation before DNA testing
can be ordered. He adds that the CA erroneously relied on the four significant procedural aspects of a
paternity case, as enunciated in Herrera v. Alba. 19Petitioner avers that these procedural aspects are not
applicable at this point of the proceedings because they are matters of evidence that should be taken up
during the trial.20
In his Comment, respondent supports the CA’s ruling on most issues raised in the petition for certiorari
and merely reiterates his previous arguments. However, on the issue of lack of jurisdiction, respondent
counters that, contrary to petitioner’s assertion, he raised the issue before the CA in relation to his claim
that the petition was not in due form and substance. Respondent denies that he waived his right to the
service of summons. He insists that the alleged waiver and voluntary appearance was conditional upon a
finding by the court that summons is indeed required. He avers that the assertion of affirmative defenses,
aside from lack of jurisdiction over the person of the defendant, cannot be considered as waiver of the
defense of lack of jurisdiction over such person.
The petition is meritorious.
Primarily, we emphasize that the assailed Orders of the trial court were orders denying respondent’s
motion to dismiss the petition for illegitimate filiation. An order denying a motion to dismiss is an
interlocutory order which neither terminates nor finally disposes of a case, as it leaves something to be
done by the court before the case is finally decided on the merits. As such, the general rule is that the
denial of a motion to dismiss cannot be questioned in a special civil action for certiorari, which is a
remedy designed to correct errors of jurisdiction and not errors of judgment. Neither can a denial of a
motion to dismiss be the subject of an appeal unless and until a final judgment or order is rendered. In a
number of cases, the court has granted the extraordinary remedy of certiorari on the denial of the motion
to dismiss but only when it has been tainted with grave abuse of discretion amounting to lack or excess
of jurisdiction.21 In the present case, we discern no grave abuse of discretion on the part of the trial court
in denying the motion to dismiss.
The grounds for dismissal relied upon by respondent were (a) the court’s lack of jurisdiction over his
person due to the absence of summons, and (b) defect in the form and substance of the petition to
establish illegitimate filiation, which is equivalent to failure to state a cause of action.
We need not belabor the issues on whether lack of jurisdiction was raised before the CA, whether the
court acquired jurisdiction over the person of respondent, or whether respondent waived his right to the
service of summons. We find that the primordial issue here is actually whether it was necessary, in the
first place, to serve summons on respondent for the court to acquire jurisdiction over the case. In other
words, was the service of summons jurisdictional? The answer to this question depends on the nature of
petitioner’s action, that is, whether it is an action in personam, in rem, or quasi in rem.
An action in personam is lodged against a person based on personal liability; an action in rem is directed
against the thing itself instead of the person; while an action quasi in rem names a person as defendant,
but its object is to subject that person's interest in a property to a corresponding lien or obligation. A
petition directed against the "thing" itself or the res, which concerns the status of a person, like a petition
for adoption, annulment of marriage, or correction of entries in the birth certificate, is an action in rem.22
In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly
try and decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the person of the
defendant is not a prerequisite to confer jurisdiction on the court, provided that the latter has jurisdiction
over the res. Jurisdiction over the res is acquired either (a) by the seizure of the property under legal
process, whereby it is brought into actual custody of the law, or (b) as a result of the institution of legal
proceedings, in which the power of the court is recognized and made effective. 23
The herein petition to establish illegitimate filiation is an action in rem. By the simple filing of the petition
to establish illegitimate filiation before the RTC, which undoubtedly had jurisdiction over the subject
matter of the petition, the latter thereby acquired jurisdiction over the case. An in rem proceeding is
validated essentially through publication. Publication is notice to the whole world that the proceeding has
for its object to bar indefinitely all who might be minded to make an objection of any sort to the right
sought to be established.24 Through publication, all interested parties are deemed notified of the petition.
If at all, service of summons or notice is made to the defendant, it is not for the purpose of vesting the
court with jurisdiction, but merely for satisfying the due process requirements. 25 This is but proper in order
to afford the person concerned the opportunity to protect his interest if he so chooses. 26 Hence, failure to
serve summons will not deprive the court of its jurisdiction to try and decide the case. In such a case, the
lack of summons may be excused where it is determined that the adverse party had, in fact, the
opportunity to file his opposition, as in this case. We find that the due process requirement with respect to
respondent has been satisfied, considering that he has participated in the proceedings in this case and
he has the opportunity to file his opposition to the petition to establish filiation.
To address respondent’s contention that the petition should have been adversarial in form, we further
hold that the herein petition to establish filiation was sufficient in form. It was indeed adversarial in nature
despite its caption which lacked the name of a defendant, the failure to implead respondent as defendant,
and the non-service of summons upon respondent. A proceeding is adversarial where the party seeking
relief has given legal warning to the other party and afforded the latter an opportunity to contest it. 27 In
this petition—classified as an action in rem—the notice requirement for an adversarial proceeding was
likewise satisfied by the publication of the petition and the giving of notice to the Solicitor General, as
directed by the trial court.
The petition to establish filiation is sufficient in substance. It satisfies Section 1, Rule 8 of the Rules of
Court, which requires the complaint to contain a plain, concise, and direct statement of the ultimate facts
upon which the plaintiff bases his claim. A fact is essential if it cannot be stricken out without leaving the
statement of the cause of action inadequate. 28 A complaint states a cause of action when it contains the
following elements: (1) the legal right of plaintiff, (2) the correlative obligation of the defendant, and (3) the testing. Such order shall issue after due hearing and notice to the parties upon a showing of the
act or omission of the defendant in violation of said legal right. 29 following:

The petition sufficiently states the ultimate facts relied upon by petitioner to establish his filiation to (a) A biological sample exists that is relevant to the case;
respondent. Respondent, however, contends that the allegations in the petition were hearsay as they
were not of petitioner’s personal knowledge. Such matter is clearly a matter of evidence that cannot be
determined at this point but only during the trial when petitioner presents his evidence. (b) The biological sample: (i) was not previously subjected to the type of DNA testing now
requested; or (ii) was previously subjected to DNA testing, but the results may require
confirmation for good reasons;
In a motion to dismiss a complaint based on lack of cause of action, the question submitted to the court
for determination is the sufficiency of the allegations made in the complaint to constitute a cause of action
and not whether those allegations of fact are true, for said motion must hypothetically admit the truth of (c) The DNA testing uses a scientifically valid technique;
the facts alleged in the complaint. 30
(d) The DNA testing has the scientific potential to produce new information that is relevant to
The inquiry is confined to the four corners of the complaint, and no other. 31 The test of the sufficiency of the proper resolution of the case; and
the facts alleged in the complaint is whether or not, admitting the facts alleged, the court could render a
valid judgment upon the same in accordance with the prayer of the complaint. 32
(e) The existence of other factors, if any, which the court may consider as potentially affecting
the accuracy or integrity of the DNA testing.
If the allegations of the complaint are sufficient in form and substance but their veracity and correctness
are assailed, it is incumbent upon the court to deny the motion to dismiss and require the defendant to
This Rule shall not preclude a DNA testing, without need of a prior court order, at the behest of any party,
answer and go to trial to prove his defense. The veracity of the assertions of the parties can be
including law enforcement agencies, before a suit or proceeding is commenced.
ascertained at the trial of the case on the merits. 33

The statement in Herrera v. Alba34 that there are four significant procedural aspects in a traditional
paternity case which parties have to face has been widely misunderstood and misapplied in this case. A
party is confronted by these so-called procedural aspects during trial, when the parties have presented
their respective evidence. They are matters of evidence that cannot be determined at this initial stage of
the proceedings, when only the petition to establish filiation has been filed. The CA’s observation that
petitioner failed to establish a prima facie case—the first procedural aspect in a paternity case—is
therefore misplaced. A prima facie case is built by a party’s evidence and not by mere allegations in the
initiatory pleading.
Clearly then, it was also not the opportune time to discuss the lack of a prima facie case vis-à-vis the
motion for DNA testing since no evidence has, as yet, been presented by petitioner. More essentially, it is
premature to discuss whether, under the circumstances, a DNA testing order is warranted considering
that no such order has yet been issued by the trial court. In fact, the latter has just set the said case for
hearing.
At any rate, the CA’s view that it would be dangerous to allow a DNA testing without corroborative proof is
well taken and deserves the Court’s attention. In light of this observation, we find that there is a need to
supplement the Rule on DNA Evidence to aid the courts in resolving motions for DNA testing order,
particularly in paternity and other filiation cases. We, thus, address the question of whether a prima facie
showing is necessary before a court can issue a DNA testing order.
The Rule on DNA Evidence was enacted to guide the Bench and the Bar for the introduction and use of
DNA evidence in the judicial system. It provides the "prescribed parameters on the requisite elements for
reliability and validity (i.e., the proper procedures, protocols, necessary laboratory reports, etc.), the
possible sources of error, the available objections to the admission of DNA test results as evidence as
well as the probative value of DNA evidence." It seeks "to ensure that the evidence gathered, using
various methods of DNA analysis, is utilized effectively and properly, [and] shall not be misused and/or
abused and, more importantly, shall continue to ensure that DNA analysis serves justice and protects,
rather than prejudice the public."35
Not surprisingly, Section 4 of the Rule on DNA Evidence merely provides for conditions that are aimed to
safeguard the accuracy and integrity of the DNA testing. Section 4 states:
SEC. 4. Application for DNA Testing Order. – The appropriate court may, at any time, either motu
proprio or on application of any person who has a legal interest in the matter in litigation, order a DNA
This does not mean, however, that a DNA testing order will be issued as a matter of right if, during the
hearing, the said conditions are established.
In some states, to warrant the issuance of the DNA testing order, there must be a show cause hearing
wherein the applicant must first present sufficient evidence to establish a prima facie case or a
reasonable possibility of paternity or "good cause" for the holding of the test. 36 In these states, a court
order for blood testing is considered a "search," which, under their Constitutions (as in ours), must be
preceded by a finding of probable cause in order to be valid. Hence, the requirement of a prima facie
case, or reasonable possibility, was imposed in civil actions as a counterpart of a finding of probable
cause. The Supreme Court of Louisiana eloquently explained —
Although a paternity action is civil, not criminal, the constitutional prohibition against unreasonable
searches and seizures is still applicable, and a proper showing of sufficient justification under the
particular factual circumstances of the case must be made before a court may order a compulsory blood
test. Courts in various jurisdictions have differed regarding the kind of procedures which are required, but
those jurisdictions have almost universally found that a preliminary showing must be made before a court
can constitutionally order compulsory blood testing in paternity cases. We agree, and find that, as a
preliminary matter, before the court may issue an order for compulsory blood testing, the moving party
must show that there is a reasonable possibility of paternity. As explained hereafter, in cases in which
paternity is contested and a party to the action refuses to voluntarily undergo a blood test, a show cause
hearing must be held in which the court can determine whether there is sufficient evidence to establish
a prima facie case which warrants issuance of a court order for blood testing. 371avvphi1
The same condition precedent should be applied in our jurisdiction to protect the putative father from
mere harassment suits. Thus, during the hearing on the motion for DNA testing, the petitioner must
present prima facie evidence or establish a reasonable possibility of paternity.
Notwithstanding these, it should be stressed that the issuance of a DNA testing order remains
discretionary upon the court. The court may, for example, consider whether there is absolute necessity
for the DNA testing. If there is already preponderance of evidence to establish paternity and the DNA test
result would only be corroborative, the court may, in its discretion, disallow a DNA testing.
WHEREFORE, premises considered, the petition is GRANTED. The Court of Appeals Decision dated
September 25, 2009 and Resolution dated December 17, 2009 are REVERSED and SET ASIDE. The
Orders dated October 20, 2008 and January 19, 2009 of the Regional Trial Court of Valenzuela City are
AFFIRMED.
G.R. No. 128803 September 25, 1998
ASIAVEST LIMITED, petitioner, vs.
THE COURT OF APPEALS and ANTONIO HERAS, respondents.
In issue is the enforceability in the Philippines of a foreign judgment. The antecedents are summarized in
the 24 August 1990 Decision1 of Branch 107 of the Regional Trial Court of Quezon City in Civil Case No.
Q-52452; thus:
The plaintiff Asiavest Limited filed a complaint on December 3, 1987 against the defendant Antonio Heras
praying that said defendant be ordered to pay to the plaintiff the amounts awarded by the Hong Kong
Court Judgment dated December 28, 1984 and amended on April 13, 1987, to wit:
1) US$1,810,265.40 or its equivalent in Hong Kong currency at the time of payment with legal interest
from December 28, 1984 until fully paid;
2) interest on the sum of US$1,500.00 at 9.875% per annum from October 31, 1984 to December 28,
1984; and
3) HK$905.00 at fixed cost in the action; and
4) at least $80,000.00 representing attorney's fees, litigation expenses and cost, with interest thereon
from the date of the judgment until fully paid.
On March 3, 1988, the defendant filed a Motion to Dismiss. However, before the court could resolve the
said motion, a fire which partially razed the Quezon City Hall Building on June 11, 1988 totally destroyed
the office of this Court, together with all its records, equipment and properties. On July 26, 1988, the
plaintiff, through counsel filed a Motion for Reconstitution of Case Records. The Court, after allowing the
defendant to react thereto, granted the said Motion and admitted the annexes attached thereto as the
reconstituted records of this case per Order dated September 6, 1988. Thereafter, the Motion to Dismiss,
the resolution of which had been deferred; was denied by the Court in its Order of October 4, 1988.
On October 19, 1988, defendant filed his Answer. The case was then set for pre-trial conference. At the
conference, the parties could not arrive at any settlement. However, they agreed on the following
stipulations of facts:
1. The defendant admits the existence of the judgment dated December 28, 1984 as well as its
amendment dated April 13, 1987, but not necessarily the authenticity or validity thereof;
2. The plaintiff is not doing business and is not licensed to do business in the Philippines;
3. The residence of defendant, Antonio Heras, is New Manila, Quezon City.
The only issue for this Court to determine is, whether or not the judgment of the Hong Kong Court has
been repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear
mistake of law or fact, such as to overcome the presumption established in Section 50, Rule 39 of the
Rules of Court in favor of foreign judgments.
In view of the admission by the defendant of the existence of the aforementioned judgment (Pls. See
Stipulations of Facts in the Order dated January 5, 1989 as amended by the Order of January 18, 1989),
as well as the legal presumption in favor of the plaintiff as provided for in paragraph (b); Sec. 50, (Ibid.),
the plaintiff presented only documentary evidence to show rendition, existence, and authentication of
such judgment by the proper officials concerned (Pls. See Exhibits "A" thru "B", with their submarkings).
In addition, the plaintiff presented testimonial and documentary evidence to show its entitlement to
attorney's fees and other expenses of litigation. . . . .
On the other hand, the defendant presented two witnesses, namely. Fortunata dela Vega and Russel
Warren Lousich.
The gist of Ms. dela Vega's testimony is to the effect that no writ of summons or copy of a statement of
claim of Asiavest Limited was ever served in the office of the Navegante Shipping Agency Limited and/or
for Mr. Antonio Heras, and that no service of the writ of summons was either served on the defendant at
his residence in New Manila, Quezon City. Her knowledge is based on the fact that she was the personal
secretary of Mr. Heras during his JD Transit days up to the latter part of 1972 when he shifted or
diversified to shipping business in Hong Kong; that she was in-charge of all his letters and
correspondence, business commitments, undertakings, conferences and appointments, until October
1984 when Mr. Heras left Hong Kong for good; that she was also the Officer-in-Charge or Office Manager
of Navegante Shipping Agency LTD, a Hong Kong registered and based company acting as ships agent,
up to and until the company closed shop sometime in the first quarter of 1985, when shipping business
collapsed worldwide; that the said company held office at 34-35 Connaught Road, Central Hong Kong
and later transferred to Carton House at Duddel Street, Hong Kong, until the company closed shop in
1985; and that she was certain of such facts because she held office at Caxton House up to the first
quarter of 1985.
Mr. Lousich was presented as an expert on the laws of Hong Kong, and as a representative of the law
office of the defendant's counsel who made a verification of the record of the case filed by the plaintiff in
Hong Kong against the defendant, as well as the procedure in serving Court processes in Hong Kong.
The defendant was sued on the basis of his personal guarantee of the obligations of Compania
Hermanos de Navegacion S.A. There is no record that a writ of summons was served on the person of
the defendant in Hong Kong, or that any such attempt at service was made. Likewise, there is no record
that a copy of the judgment of the High Court was furnished or served on the defendant; anyway, it is not
a legal requirement to do so under Hong Kong laws;
a) The writ of summons or claim can be served by the solicitor (lawyer) of the claimant or plaintiff. In
Hong Kong there are no Court personnel who serve writs of summons and/or most other processes.
b) If the writ of summons or claim (or complaint) is not contested, the claimant or the plaintiff is not
required to present proof of his claim or complaint nor present evidence under oath of the claim in order
to obtain a Judgment.
c) There is no legal requirement that such a Judgment or decision rendered by the Court in Hong Kong
[to] make a recitation of the facts or the law upon which the claim is based.
d) There is no necessity to furnish the defendant with a copy of the Judgment or decision rendered
against him.
e) In an action based on a guarantee, there is no established legal requirement or obligation under Hong
Kong laws that the creditor must first bring proceedings against the principal debtor. The creditor can
immediately go against the guarantor.
On cross examination, Mr. Lousich stated that before he was commissioned by the law firm of the
defendant's counsel as an expert witness and to verify the records of the Hong Kong case, he had been
acting as counsel for the defendant in a number of commercial matters; that there was an application for
service of summons upon the defendant outside the jurisdiction of Hong Kong; that there was an order of
the Court authorizing service upon Heras outside of Hong Kong, particularly in Manila or any other place
in the Philippines (p. 9, TSN, 2/14/90); that there must be adequate proof of service of summons,
otherwise the Hong Kong Court will refuse to render judgment (p. 10, ibid); that the mere fact that the
Hong Kong Court rendered judgment, it can be presumed that there was service of summons; that in this
case, it is not just a presumption because there was an affidavit stating that service was effected in [sic] a
particular man here in Manila; that such affidavit was filed by one Jose R. Fernandez of the firm Sycip
Salazar on the 21st of December 1984, and stated in essence that "on Friday, the 23rd of November
1984 he served the 4th defendant at No. 6 First Street, Quezon City by leaving it at that address with Mr.
Dionisio Lopez, the son-in-law of the 4th defendant the copy of the writ and Mr. Lopez informed me and I
barely believed that he would bring the said writ to the attention of the 4th defendant" (pp. 11-12, ibid.);
that upon filing of that affidavit, the Court was asked and granted judgment against the 4th defendant;
and that if the summons or claim is not contested, the claimant of the plaintiff is not required to present
proof of his claim or complaint or present evidence under oath of the claim in order to obtain judgment;
and that such judgment can be enforced in the same manner as a judgment rendered after full hearing.
The trial court held that since the Hong Kong court judgment had been duly proved, it is a presumptive
evidence of a right as between the parties; hence, the party impugning it had the burden to prove want of
jurisdiction over his person. HERAS failed to discharge that burden. He did not testify to state
categorically and under oath that he never received summons. Even his own witness Lousich admitted
that HERAS was served with summons in his Quezon City residence. As to De la Vega's testimony
regarding non-service of summons, the same was hearsay and had no probative value.
As to HERAS' contention that the Hong Kong court judgment violated the Constitution and the procedural
laws of the Philippines because it contained no statements of the facts and the law on which it was
based, the trial court ruled that since the issue relate to procedural matters, the law of the forum, i.e.,
Hong Kong laws, should govern. As testified by the expert witness Lousich, such legalities were not
required under Hong Kong laws. The trial Court also debunked HERAS' contention that the principle of
excussion under Article 2058 of the Civil Code of the Philippines was violated. It declared that matters of
substance are subject to the law of the place where the transaction occurred; in this case, Hong Kong
laws must govern.
The trial court concluded that the Hong Kong court judgment should be recognized and given effect in
this jurisdiction for failure of HERAS to overcome the legal presumption in favor of the foreign judgment.
It then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to pay to the
plaintiff the following sums or their equivalents in Philippine currency at the time of
payment: US$1,810,265.40 plus interest on the sum of US$1,500,000.00 at
9.875% per annum from October 31, 1984 to December 28, 1984, and HK$905
as fixed cost, with legal interests on the aggregate amount from December 28,
1984, and to pay attorney's fees in the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought an award of judicial costs and an
increase in attorney's fees in the amount of US$19,346.45 with interest until full payment of the said
obligations. On the other hand, HERAS no longer opposed the motion and instead appealed the decision
to the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 29513.
In its order2 of 2 November 1990, the trial court granted ASIAVEST's motion for reconsideration by
increasing the award of attorney's fees to "US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE
CURRENCY, AND TO PAY THE COSTS OF THIS SUIT," provided that ASIAVEST would pay the
corresponding filing fees for the increase. ASIAVEST appealed the order requiring prior payment of filing
fees. However, it later withdrew its appeal and paid the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its decision 3 reversing the decision of the trial court and
dismissing ASIAVEST's complaint without prejudice. It underscored the fact that a foreign judgment does
not of itself have any extraterritorial application. For it to be given effect, the foreign tribunal should have
acquired jurisdiction over the person and the subject matter. If such tribunal has not acquired jurisdiction,
its judgment is void.
The Court of Appeals agreed with the trial court that matters of remedy and procedure, such as those
relating to service of summons upon the defendant are governed by the lex fori, which was, in this case,
the law of Hong Kong. Relative thereto, it gave weight to Lousich's testimony that under the Hong Kong
law, the substituted service of summons upon HERAS effected in the Philippines by the clerk of Sycip
Salazar Hernandez & Gatmaitan firm would be valid provided that it was done in accordance with
Philippine laws. It then stressed that where the action is in personam and the defendant is in the
Philippines, the summons should be personally served on the defendant pursuant to Section 7, Rule 14
of the Rules of Court.4 Substituted service may only be availed of where the defendant cannot be
promptly served in person, the fact of impossibility of personal service should be explained in the proof of
service. It also found as persuasive HERAS' argument that instead of directly using the clerk of the Sycip
Salazar Hernandez & Gatmaitan law office, who was not authorized by the judge of the court issuing the
summons, ASIAVEST should have asked for leave of the local courts to have the foreign summons
served by the sheriff or other court officer of the place where service was to be made, or for special
reasons by any person authorized by the judge.
The Court of Appeals agreed with HERAS that "notice sent outside the state to a non-resident is
unavailing to give jurisdiction in an action against him personally for money recovery." Summons should
have been personally served on HERAS in Hong Kong, for, as claimed by ASIAVEST, HERAS was
physically present in Hong Kong for nearly 14 years. Since there was not even an attempt to serve
summons on HERAS in Hong Kong, the Hong Kong Supreme Court did not acquire jurisdiction over
HERAS. Nonetheless it did not totally foreclose the claim of ASIAVEST; thus:
While We are not fully convinced that [HERAS] has a meritorious defense against
[ASIAVEST's] claims or that [HERAS] ought to be absolved of any liability,
nevertheless, in view of the foregoing discussion, there is a need to deviate front
the findings of the lower court in the interest of justice and fair play. This, however,
is without prejudice to whatever action [ASIAVEST] might deem proper in order to
enforce its claims against [HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was necessary that evidence supporting the
validity of the foreign judgment be submitted, and that our courts are not bound to give effect to foreign
judgments which contravene our laws and the principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court of Appeals erred in ruling that
I.
. . . IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT EVIDENCE
"SUPPORTING THE VALIDITY OF THE JUDGMENT";
II.
. . . THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER
PHILIPPINES LAW;
III.
. . . SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN
HONG KONG;
IV.
. . . THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH
LEAVE OF PHILIPPINE COURTS;
V.
. . . THE FOREIGN JUDGMENT "CONTRAVENES PHILIPPINE LAWS, THE
PRINCIPLES OF SOUND MORALITY, AND THE PUBLIC POLICY OF THE
PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of Court, 5 which was the governing law at the
time this case was decided by the trial court and respondent Court of Appeals, a foreign judgment against
a person rendered by a court having jurisdiction to pronounce the judgment is presumptive evidence of a
right as between the parties and their successors in interest by the subsequent title. However, the
judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud,
or clear mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that in the absence of proof to the
contrary, a court, or judge acting as such, whether in the Philippines or elsewhere, is presumed to have
acted in the lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the burden to repel it on grounds provided
for in paragraph (b) of Section 50, Rule 39 of the Rules of Court is on the party challenging the foreign
judgment — HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the Hong Kong judgment. On the other
hand, ASIAVEST presented evidence to prove rendition, existence, and authentication of the judgment by
the proper officials. The judgment is thus presumed to be valid and binding in the country from which it
comes, until the contrary is shown. 6 Consequently, the first ground relied upon by ASIAVEST has merit.
The presumption of validity accorded foreign judgment would be rendered meaningless were the party
seeking to enforce it be required to first establish its validity.
The main argument raised against the Hong Kong judgment is that the Hong Kong Supreme Court did
not acquire jurisdiction over the person of HERAS. This involves the issue of whether summons was
properly and validly served on HERAS. It is settled that matters of remedy and procedure such as those
relating to the service of process upon the defendant are governed by the lex fori or the law of the
forum, 7 i.e., the law of Hong Kong in this case. HERAS insisted that according to his witness Mr.
Lousich, who was presented as an expert on Hong Kong laws, there was no valid service of summons on
him.
In his counter-affidavit,8 which served as his direct testimony per agreement of the parties, 9 Lousich
declared that the record of the Hong Kong case failed to show that a writ of summons was served upon
HERAS in Hong Kong or that any such attempt was made. Neither did the record show that a copy of the
judgment of the court was served on HERAS. He stated further that under Hong Kong laws (a) a writ of
summons could be served by the solicitor of the claimant or plaintiff; and (b) where the said writ or claim
was not contested, the claimant or plaintiff was not required to present proof under oath in order to obtain
judgment.
On cross-examination by counsel for ASIAVEST, Lousich' testified that the Hong Kong court authorized
service of summons on HERAS outside of its jurisdiction, particularly in the Philippines. He admitted also
the existence of an affidavit of one Jose R. Fernandez of the Sycip Salazar Hernandez & Gatmaitan law
firm stating that he (Fernandez) served summons on HERAS on 13 November 1984 at No. 6, 1st St.,
Quezon City, by leaving a copy with HERAS's son-in-law Dionisio Lopez. 10 On redirect examination,
Lousich declared that such service of summons would be valid under Hong Kong laws provided that it
was in accordance with Philippine laws. 11
We note that there was no objection on the part of ASIAVEST on the qualification of Mr. Lousich as an
expert on the Hong Kong law. Under Sections 24 and 25, Rule 132 of the New Rules of Evidence, the
record of public documents of a sovereign authority, tribunal, official body, or public officer may be proved
by (1) an official publication thereof or (2) a copy attested by the officer having the legal custody thereof,
which must be accompanied, if the record is not kept in the Philippines, with a certificate that such officer
has the custody. The certificate may be issued by a secretary of the embassy or legation, consul general,
consul, vice consul, or consular agent, or any officer in the foreign service of the Philippines stationed in
the foreign country in which the record is kept, and authenticated by the seal of his office. The attestation
must state, in substance, that the copy is a correct copy of the original, or a specific part thereof, as the
case may be, and must be under the official seal of the attesting officer.
There is, however, nothing in the testimony of Mr. Lousich that touched on the specific law of Hong Kong
in respect of service of summons either in actions in rem or in personam, and where the defendant is
either a resident or nonresident of Hong Kong. In view of the absence of proof of the Hong Kong law on
this particular issue, the presumption of identity or similarity or the so-called processual presumption shall
come into play. It will thus be presumed that the Hong Kong law on the matter is similar to the Philippine
law. 17
As stated in Valmonte vs. Court of Appeals, 18 it will be helpful to determine first whether the action is in
personam,in rem, or quasi in rem because the rules on service of summons under Rule 14 of the Rules
of Court of the Philippines apply according to the nature of the action.
An action in personam is an action against a person on the basis of his personal liability. An action in
rem is an action against the thing itself instead of against the person. 19 An action quasi in rem is one
wherein an individual is named as defendant and the purpose of the proceeding is to subject his interest
therein to the obligation or lien burdening the property. 20
In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly
try and decide the case. Jurisdiction over the person of a resident defendant who does not voluntarily
appear in court can be acquired by personal service of summons as provided under Section 7, Rule 14 of
the Rules of Court. If he cannot be personally served with summons within a reasonable time, substituted
service may be made in accordance with Section 8 of said Rule. If he is temporarily out of the country,
any of the following modes of service may be resorted to: (1) substituted service set forth in Section
8; 21 (2) personal service outside the country, with leave of court; (3) service by publication, also with
leave of court; 22 or (4) any other manner the court may deem sufficient. 23
However, in an action in personam wherein the defendant is a non-resident who does not voluntarily
submit himself to the authority of the court, personal service of summons within the state is essential to
the acquisition of jurisdiction over her person. 24 This method of service is possible if such defendant is
physically present in the country. If he is not found therein, the court cannot acquire jurisdiction over his
person and therefore cannot validly try and decide the case against him. 25 An exception was laid down
in Gemperle v. Schenker 26 wherein a non-resident was served with summons through his wife, who was
a resident of the Philippines and who was his representatives and attorney-in-fact in a prior civil case filed
by him; moreover, the second case was a mere offshoot of the first case.
On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is
not a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over
the res. Nonetheless summons must be served upon the defendant not for the purpose of vesting the
court with jurisdiction but merely for satisfying the due process requirements. 27 Thus, where the
defendant is a non-resident who is not found in the Philippines and (1) the action affects the personal
status of the plaintiff; (2) the action relates to, or the subject matter of which is property in the Philippines
in which the defendant has or claims a lien or interest; (3) the action seeks the exclusion of the defendant
from any interest in the property located in the Philippines; or (4) the property of the defendant has been
attached in the Philippines — service of summons may be effected by (a) personal service out of the
country, with leave of court; (b) publication, also with leave of court, or (c) any other manner the court
may deem sufficient. 28
In the case at bar, the action filed in Hong Kong against HERAS was in personam, since it was based on
his personal guarantee of the obligation of the principal debtor. Before we can apply the foregoing rules,
we must determine first whether HERAS was a resident of Hong Kong.
Fortunata de la Vega, HERAS's personal secretary in Hong Kong since 1972 until 1985, 29 testified that
HERAS was the President and part owner of a shipping company in Hong Kong during all those times
that she served as his secretary. He had in his employ a staff of twelve. 30 He had "business
commitments, undertakings, conferences, and appointments until October 1984 when [he] left Hong
Kong for good," 31 HERAS's other witness, Russel Warren Lousich, testified that he had acted as counsel
for HERAS "for a number of commercial matters." 32 ASIAVEST then infers that HERAS was a resident of
Hong Kong because he maintained a business there.
It must be noted that in his Motion to Dismiss, 33 as well as in his
Answer 34 to ASIAVEST's complaint for the enforcement of the Hong Kong court judgment, HERAS
maintained that the Hong Kong court did not have jurisdiction over him because the fundamental rule is
that jurisdiction in personamover non-resident defendants, so as to sustain a money judgment, must be
based upon personal service of summons within the state which renders the judgment. 35
For its part, ASIAVEST, in its Opposition to the Motion to Dismiss 36 contended: "The question of Hong
Kong court's 'want of jurisdiction' is therefore a triable issue if it is to be pleaded by the defendant to
'repel' the foreign judgment. Facts showing jurisdictional lack (e.g. that the Hong Kong suit was in
personam, that defendant was not a resident of Hong Kong when the suit was filed or that he did not
voluntarily submit to the Hong Kong court's jurisdiction) should be alleged and proved by the
defendant." 37
In his Reply (to the Opposition to Motion to Dismiss), 38 HERAS argued that the lack of jurisdiction over
his person was corroborated by ASIAVEST's allegation in the complaint that he "has his residence at No.
6, 1st St., New Manila, Quezon City, Philippines." He then concluded that such judicial admission
amounted to evidence that he was and is not a resident of Hong Kong.
Significantly, in the pre-trial conference, the parties came up with stipulations of facts, among which was
that "the residence of defendant, Antonio Heras, is New Manila, Quezon City." 39
We note that the residence of HERAS insofar as the action for the enforcement of the Hong Kong court
judgment is concerned, was never in issue. He never challenged the service of summons on him through
a security guard in his Quezon City residence and through a lawyer in his office in that city. In his Motion
to Dismiss, he did not question the jurisdiction of the Philippine court over his person on the ground of
invalid service of summons. What was in issue was his residence as far as the Hong Kong suit was
concerned. We therefore conclude that the stipulated fact that HERAS "is a resident of New Manila,
Quezon City, Philippines" refers to his residence at the time jurisdiction over his person was being sought
by the Hong Kong court. With that stipulation of fact, ASIAVEST cannot now claim that HERAS was a
resident of Hong Kong at the time.
Accordingly, since HERAS was not a resident of Hong Kong and the action against him was, indisputably,
one in personam, summons should have been personally served on him in Hong Kong. The
extraterritorial service in the Philippines was therefore invalid and did not confer on the Hong Kong court
jurisdiction over his person. It follows that the Hong Kong court judgment cannot be given force and effect
here in the Philippines for having been rendered without jurisdiction.
Even assuming that HERAS was formerly a resident of Hong Kong, he was no longer so in November
1984 when the extraterritorial service of summons was attempted to be made on him. As declared by his
secretary, which statement was not disputed by ASIAVEST, HERAS left Hong Kong in October 1984 "for
good." 40 His absence in Hong Kong must have been the reason why summons was not served on him
therein; thus, ASIAVEST was constrained to apply for leave to effect service in the Philippines, and upon
obtaining a favorable action on the matter, it commissioned the Sycip Salazar Hernandez & Gatmaitan
law firm to serve the summons here in the Philippines.
In Brown v. Brown, 41 the defendant was previously a resident of the Philippines. Several days after a
criminal action for concubinage was filed against him, he abandoned the Philippines. Later, a
proceeding quasi in rem was instituted against him. Summons in the latter case was served on the
defendant's attorney-in-fact at the latter's address. The Court held that under the facts of the case, it
could not be said that the defendant was "still a resident of the Philippines because he ha[d] escaped to
his country and [was] therefore an absentee in the Philippines." As such, he should have been
"summoned in the same manner as one who does not reside and is not found in the Philippines."
Similarly, HERAS, who was also an absentee, should have been served with summons in the same
manner as a non-resident not found in Hong Kong. Section 17, Rule 14 of the Rules of Court providing
for extraterritorial service will not apply because the suit against him was in personam. Neither can we
apply Section 18, which allows extraterritorial service on a resident defendant who is temporarily absent
from the country, because even if HERAS be considered as a resident of Hong Kong, the undisputed fact
remains that he left Hong Kong not only "temporarily" but "for good."
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING the petition in this case
and AFFIRMING the assailed judgment of the Court of Appeals in CA-G.R. CV No. 29513.
G.R. No. 102998 July 5, 1996
BA FINANCE CORPORATION, petitioner, vs.
HON. COURT OF APPEALS and ROBERTO M. REYES, respondents.
The case at bar is a suit for replevin and damages. The petition for review on certiorari assails the
decision of the Court of Appeals1 in CA-G.R. CV No. 23605 affirming that of the Regional Trial Court of
Manila, Branch
XX,2 which has disposed of its Civil Case No. 87-42270 in this wise:
WHEREFORE, the case against defendant-spouses (sic) Reynaldo Manahan is hereby dismissed
without prejudice, for failure to prosecute. Plaintiff having failed to show the liability of defendant John
Doe in the person of Roberto M. Reyes, the case against the latter should likewise be dismissed.
Moreover, plaintiff is hereby directed to return the vehicle seized by virtue of the order of seizure issued
by this Court with all its accessories to the said Roberto M. Reyes. 3
The decisions of both the appellate court and the court a quo are based on a like finding of the facts
hereinafter briefly narrated.
The spouses Reynaldo and Florencia Manahan executed, on 15 May 1980, a promissory note 4 binding
themselves to pay Carmasters, Inc., the amount of P83,080.00 in thirty-six monthly installments
commencing 01 July 1980. To secure payment, the Manahan spouses executed a deed of chattel
mortgage5 over a motor vehicle, a Ford Cortina 1.6 GL, with motor and serial number CUBFWE-801010.
Carmasters later assigned6 the promissory note and the chattel mortgage to petitioner BA Finance
Corporation with the conformity of the Manahans. When the latter failed to pay the due installments,
petitioner sent demand letters. The demands not having been heeded, petitioner, on 02 October 1987,
filed a complaint for replevin with damages against the spouses, as well as against a John Doe, praying
for the recovery of the vehicle with an alternative prayer for the payment of a sum of money should the
vehicle not be returned. Upon petitioner's motion and the filing of a bond in the amount of P169,161.00
the lower court issued a writ of replevin. The court, however, cautioned petitioner that should summons
be not served on the defendants within thirty (30) days from the writ's issuance, the case would be
dismissed to failure to prosecute.7 The warning was based on what the court perceived to be the
deplorable practice of some mortgagees of "freezing (the) foreclosure or replevin cases" which they
would so "conveniently utilize as a leverage for the collection of unpaid installments on mortgaged
chattels."8
The service of summons upon the spouses Manahan was caused to be served by petitioner at No. 35
Lantana St., Cubao, Quezon City. The original of the summons had the name and the signature of private
respondent Roberto M. Reyes indicating that he received, on 14 October 1987, a copy of the summons
and the complaint.9 Forthwith, petitioner, through its Legal Assistant, Danilo E. Solano, issued a
certification to the effect that it had received from Orson R. Santiago, the deputy sheriff of the Regional
Trial Court of Manila, Branch 20, the Ford Cortina seized from private respondent Roberto M. Reyes, the
John Doe referred to in the complaint, 10 in Sorsogon, Sorsogon. 11 On 20 October 1987, the lower court
came out with an order of seizure.
Alleging possession in good faith, private respondent filed, on 26 October 1987, a motion for an
extension of time within which to file his answer and/or a motion for intervention. The court granted the
motion.
A few months later, or on 18 February 1988, the court issued an order which, in part, stated:
Perusal of the record shows that an order for the seizure of personal property was
issued on October 20, 1987 in pursuance to a previous order of the Court dated
 October 13, 1987. However, to date, there is no showing that the principal
defendants were served with summons inspite of the lapse of four (4) months.
Considering, this is a replevin case and to forestall the evils that arise from this
practice, plaintiff failing to heed the Order dated October 13, 1987, particularly
second paragraph thereof, the above-entitled case is hereby ordered DISMISSED
for failure to prosecute and further ordering the plaintiff to return the property
seized with all its accessories to defendant John Doe in the person of Roberto M.
Reyes.
SO ORDERED. 12
On 26 February 1988, petitioner filed a notice of dismissal of the case "without prejudice and without
pronouncement as to costs, before service of Summons and Answer, under Section 1, Rule 17, of the
Rules of Court." 13 It also sought in another motion the withdrawal of the replevin bond. In view of the
earlier dismissal of the case (for petitioner's failure to prosecute), the court, on 02 March 1988, merely
noted the notice of dismissal and denied the motion to withdraw the replevin bond considering that the
writ of replevin had meanwhile been implemented. 14
On 09 March 1988, private respondent filed a motion praying that petitioner be directed to comply with
the court order requiring petitioner to return the vehicle to him. In turn, petitioner filed, on 14 March 1988,
a motion for the reconsideration of the orders of 18 February 1988 and 02 March 1988 contending that:
(a) the dismissal of the case was tantamount to adjudication on the merits that thereby deprived it with
the remedy to enforce the promissory note, the chattel mortgage and the deed of assignment, under
Section 3, Rule 117, of the Rules of Court; (b) the order to return the vehicle to private respondent was a
departure from jurisprudence recognizing the right of the mortgagor to foreclose the property to respond
to the unpaid obligation secured by the chattel mortgage, and (c) there were no legal and factual bases
for the court's view that the filing of the replevin case was "characterized (by) evil practices." 15
On 20 April 1988, the court granted petitioner's motion for reconsideration and accordingly recalled the
order directing the return of the vehicle to private respondent, set aside the order dismissing the case,
directed petitioner "to cause the service of summons together with a copy of the complaint on the
principal defendants within five (5) days from receipt" 16 thereof at petitioner's expense, and ordered
private respondent to answer the complaint.
A few months later, or on 02 August 1988, petitioner filed a motion to declare private respondent in
default. The court granted the motion on that same day and declared private respondent "in default for
his failure to file the . . . answer within the reglementary period." 17 The court likewise granted petitioner's
motion to set the case for the presentation, ex parte, of evidence. Petitioner, thereupon, submitted the
promissory note, the deed of chattel mortgage, the deed of assignment, a statement of account in the
name of Florencia Manahan and two demand letters.
On 27 February 1989, the trial court rendered a decision dismissing the complaint against the Manahans
for failure of petitioner to prosecute the case against them. It also dismissed the case against private
respondent for failure of petitioner to show any legal basis for said respondent's liability. The court
ratiocinated:
. . . . Roberto M. Reyes is merely ancillary debtor in this case. The defendant
spouses Manahan being the principal debtor(s) and as there is no showing that
the latter has been brought before the jurisdiction of this court, it must necessarily
follow that the plaintiff has no cause of action against said Roberto M. Reyes
herein before referred to as defendant John Doe. Under the circumstances, it is
incumbent upon the plaintiff to return the seized vehicle unto the said Roberto M.
Reyes. 18
In its appeal to the Court of Appeals, petitioner has asserted that a suit for replevin aimed at the
foreclosure of the chattel is an action quasi in rem which does not necessitate the presence of the
principal obligors as long as the court does not render any personal judgment against them. This
argument did not persuade the appellate court, the latter holding that —
. . . . In action quasi in rem an individual is named as defendant and the purpose
of the proceeding is to subject his interest therein to the obligation or lien
burdening the property, such as proceedings having for their sole object the sale
or disposition of the property of the defendant, whether by attachment,
foreclosure, or other form of remedy (Sandejas vs. Robles, 81 Phil. 421). In the
case at bar, the court cannot render any judgment binding on the defendants
spouses for having allegedly violated the terms and conditions of the promissory
note and the contract of chattel mortgage on the ground that the court has no
jurisdiction over their persons no summons having been served on them. That
judgment, it rendered, is void for having denied the defendants spouses due
process of law which contemplates notice and opportunity to be heard before
judgment is rendered, affecting one's person or property (Macabingkil vs. Yatco,
26 SCRA 150, 157).
It is next contended by appellant that as between appellant, as mortgagee, and
John Doe, whose right to possession is dubious if not totally non-existent, it is the
former which has the superior right of possession.
We cannot agree.
It is an undisputed fact that the subject motor vehicle was taken from the
possession of said Roberto M. Reyes, a third person with respect to the contract
of chattel mortgage between the appellant and the defendants spouses Manahan.
The Civil Code expressly provides that every possessor has a right to be
respected in his possession (Art. 539, New Civil Code); that good faith is always
presumed, and upon him who alleges bad faith on the part of a possessor rests
the burden of proof (Art. 527, ibid.); and that the possession of movable property
acquired in good faith is equivalent to a title; nevertheless, one who has lost any
movable or has been unlawfully deprived thereof, may recover it from the person
in possession of the same (Art. 559, ibid.). Thus, it has been held that a
possessor in good faith is entitled to be respected and protected in his possession
as if he were the true owner thereof until a competent court rules otherwise (Chus
Hai vs. Kapunan, 104 Phil. 110; Yu, et al. vs. Hon. Honrado, etc., et al., 99 SCRA
237). In the case at bar, the trial court did not err in holding that the complaint
does not state any cause of action against Roberto M. Reyes, and in ordering the
return of the subject chattel to him. 19
The appellate court, subsequently, denied petitioner's motion for reconsideration.
In the instant appeal, petitioner insists that a mortgagee can maintain an action for replevin against any
possessor of the object of a chattel mortgage even if the latter were not a party to the mortgage.
Replevin, broadly understood, is both a form of principal remedy and of a provisional relief. It may refer
either to the action itself, i.e., to regain the possession of personal chattels being wrongfully detained
from the plaintiff by another, or to the provisional remedy that would allow the plaintiff to retain the thing
during the pendency of the action and hold it pendente lite. 20 The action is primarily possessory in nature
and generally determines nothing more than the right of possession. Replevin is so usually described as
a mixed action, being partly in rem and partly in personam — in rem insofar as the recovery of specific
property is concerned, and in personam as regards to damages involved. As an "action in rem," the gist
of the replevin action is the right of the plaintiff to obtain possession of specific personal property by
reason of his being the owner or of his having a special interest therein. 21 Consequently, the person in
possession of the property sought to be replevied is ordinary the proper and only necessary party
defendant, and the plaintiff is not required to so join as defendants other persons claiming a right on the
property but not in possession thereof. Rule 60 of the Rules of Court allows an application for the
immediate possession of the property but the plaintiff must show that he has a good legal basis, i.e., a (would) only delay the determination of the merits of the case, to the prejudice of
clear title thereto, for seeking such interim possession. the parties." In Imson v. Court of Appeals, we have explained:

Where the right of the plaintiff to the possession of the specific property is so conceded or evident, the . . . . An indispensable party is one whose interest will be
action need only be maintained against him who so possesses the property. In rem actio est per quam affected by the court's action in the litigation, and without
rem nostram quae ab alio possidetur petimus, et semper adversus eum est qui rem possidet. In Northern whom no final determination of the case can be had. The
Motors, Inc. vs. Herrera, 22 the Court has said: party's interest in the subject matter of the suit and in the
relief sought are so inextricably intertwined with the other
parties' that his legal presence as a party to the
There can be no question that persons having a special right of property in the proceeding is an absolute necessity. In his absence there
goods the recovery of which is sought; such as a chattel mortgagee, may cannot be a resolution of the dispute of the parties before
maintain an action for replevin therefor. Where the mortgage authorizes the the court which is effective, complete, or equitable.
mortgagee to take possession of the property on default, he may maintain an
action to recover possession of the mortgaged chattels from the mortgagor or
from any person in whose hands he may find them. 23 Conversely, a party is not indispensable to the suit if his
interest in the controversy or subject matter is distinct and
divisible from the interest of the other parties and will not
In effect then, the mortgagee, upon the mortgagor's default, is constituted an attorney-in-fact necessarily be prejudiced by a judgment which does
of the mortgagor enabling such mortgagee to act for and in behalf of the owner. Accordingly, complete justice to the parties in court. He is not
that the defendant is not privy to the chattel mortgage should be inconsequential. By the fact indispensable if his presence would merely permit
that the object of replevin is traced to his possession, one properly can be a defendant in an complete relief between him and those already parties to
action for replevin. It is here assumed that the plaintiffs right to possess the thing is not or the action or will simply avoid multiple litigation.
cannot be disputed.

Without the presence of indispensable parties to a suit or proceeding, a judgment

In case the right of possession on the part of the plaintiff, or his authority to claim such possession or that of a court cannot attain real finality. (Footnotes omitted.)
of his principal, is put to great doubt (a contending party might contest the legal bases for plaintiffs cause
of action or an adverse and independent claim of ownership or right of possession is raised by that
party), it could become essential to have other persons involved and accordingly impleaded for a A chattel mortgagee, unlike a pledgee, need not be in, nor entitled to the possession of the property
complete determination and resolution of the controversy. For instance, in Servicewide unless and until the mortgagor defaults and the mortgagee thereupon seeks to foreclose thereon. Since
Specialists, Inc., vs. Court of Appeals, et al., G.R. No. 103301, 08 December 1995, this Court ruled. the mortgagee's right of possession is conditioned upon the actual fact of default which itself may be
controverted, the inclusion of other parties like the debtor or the mortgagor himself, may be required in
order to allow a full and conclusive determination of the case. When the mortgagee seeks a replevin in
While, in its present petition for review on certiorari, Servicewide has raised a order to effect the eventual foreclosure of the mortgage, it is not only the existence of, but also the
number of points, the crucial issue still remains, however, to be whether or not an mortgagor's default on, the chattel mortgage that, among other things, can properly uphold the right to
action filed by the mortgagee for replevin to effect a foreclosure of the property replevy the property. The burden to establish a valid justification for that action lies with the plaintiff. An
covered by the chattel mortgage would require that the mortgagor be so adverse possessor, who is not the mortgagor, cannot just be deprived of his possession, let alone be
impleaded as an indispensable party thereto. bound by the terms of the chattel mortgage contract, simply because the mortgagee brings up an action
for replevin.
Rule 60 of the Rules of Court allows a plaintiff, in an action for the recovery of
possession of personal property, to apply for a writ of replevin if it can be shown The appellate court, accordingly, acted well in arriving at its now questioned judgment.
that he is the owner of the property claimed . . . or is entitled to the
possession thereof.' The plaintiff need not be the owner so long as he is able to
specify his right to the possession of the property and his legal basis therefor. The WHEREFORE, the decision of the Court of Appeals is AFFIRMED No costs.
question then, insofar as the matter finds relation to the instant case, is whether or
not the plaintiff (herein petitioner) who has predicated his right on being the
mortgagee of a chattel mortgage should implead the mortgagor in his complaint G.R. No. L-30738 July 30, 1982
that seeks to recover possession of the encumbered property in order to effect its
foreclosure.
BOARD OF LIQUIDATORS, TRUSTEE OF THE LAND SETTLEMENT AND DEVELOPMENT
CORPORATION, plaintiff-appellant,
The answer has to be in the affirmative. In a suit for replevin, a clear right of vs.
possession must be established. A foreclosure under a chattel mortgage may JOSE ZULUETA, defendant-appellee.
properly be commenced only once there is default on the part of the mortgagor of
his obligation secured by the mortgage. The replevin in the instant case has been
sought to pave the way for the foreclosure of the object covered by the chattel
mortgage. The conditions essential for that foreclosure would be to show, firstly,
the existence of the chattel mortgage and, secondly, the default of the mortgagor.
These requirements must be established since the validity of the plaintiffs VASQUEZ, J.:
exercise of the right of foreclosure are inevitably dependent thereon. It would thus
seem, considering particularly an adverse and independent claim of ownership by This is an appeal by petition for review from a decision of the Court of First Instance of Manila dismissing
private respondent that the lower court acted improvidently when it granted the the complaint filed by plaintiff-appellant against defendant-appellee in Civil Case No. 65341.
dismissal of the complaint against Dollente, albeit on petitioner's (then plaintiff)
plea, on the ground that the "non-service of summons upon Ernesto Dollente
On November 23, 1955, a decision was rendered by the Court of First Instance of Manila, Branch VII, in
Civil Case No. 22237, entitled "Land Settlement and Development Corporation, Plaintiff, vs. Jose
Zulueta, Defendant", based on an amicable settlement between the parties, pursuant to which defendant-
appellee was ordered to pay the Land Settlement and Development Corporation the sum of P10,391.62
with interest at four (4%) per cent per annum from January 13, 1948 until the same is fully paid in the
manner stated in the amicable settlement and subject to the terms thereof, without pronouncement as to
costs.
On March 5, 1965, herein plaintiff-appellant, as trustee of the Land Settlement and Development
Corporation, filed a complaint in the Court of First Instance of Manila against defendant-appellee,
docketed as Civil Case No. 60112 to revive the judgment rendered in Civil Case No. 22237 which had not
been enforced by that time. Difficulty was encountered in serving summons on defendant-appellee,
thereby prompting the trial court to dismiss Civil Case No. 60112 in an order dated March 12, 1966,
reading as follows:
It appearing that this case has long been pending with this Court, the same
having been filed way back on March 5, 1965, and since then defendant has not
yet been served with summons, and notwithstanding such fact, no further action
has been taken by plaintiff; for lack of interest to prosecute, the instant case is
hereby DISMISSED without prejudice, and without pronouncement as to costs.
IT IS SO ORDERED. (Rollo, p. 27.)
Plaintiff-appellant's motion for reconsideration of the order of dismissal having been denied, plaintiff-
appellant filed a new complaint, docketed as Civil Case No. 65341 which is the present action and which
is also for revival and enforcement of the judgment rendered in Civil Case No. 22237.
Defendant-appellee filed a motion to dismiss the complaint in Civil Case No. 65341 on the ground that
plaintiff-appellant's cause of action had already prescribed. On January 12, 1967, the trial court denied
the motion to dismiss for the reason that the filing of Civil Case No. 60112 on March 5, 1965 interrupted
the running of the period of prescription, and it started to run again only after its dismissal on March 12,
1966; and, therefore, when Civil Case No. 65341 was filed on May 10, 1966, only 9 years, 5 months and
11 days had expired from the time that the judgment in Civil Case No. 22237 had become final and
executory. Defendant-appellee's repeated attempts to secure a reconsideration of the denial of his motion
to dismiss failed to achieve a favorable result. Defendant-appellee filed an answer to the complaint with a
counterclaim.
On September 19, 1968, after plaintiff-appellant had presented its evidence, the trial court reset the
continuation of the hearing on November 28, 1968 for the presentation of the evidence of defendant-
appellee. On the last mentioned date, the defendant-appellee failed to appear and the trial court declared
the case submitted for decision.
In a decision dated December 27, 1968, the trial court dismissed Civil Case No. 65341. The said
dismissal was reasoned out as follows:
The plaintiff contends that the filing on March 5, 1965 of the first action for revival
of judgment interrupted the period of prescription. Upon the other hand, the
defendant, arguing that the dismissal of the said action for lack of prosecution did
not stop the period of prescription, which is ten years from November 23, 1955,
has cited the decision in Conspecto vs. Fruto, et al., 31 Phil. 144, wherein it was
held that
While the commencement of the action would of course,
stop the running of the statute of limitations, its dismissal
or voluntary abandonment by plaintiff would leave the
parties in exactly the same position as if no action had
been commenced at all. Said action by reason of its
dismissal or abandonment took no time out of the period of
prescription.
and the decision in Oriental Commercial Co., Inc. vs. Jureidini, Inc., et al., 71 Phil.
25, to the effect that
Cuando se entabla una accion dentro del plazo de
prescripcion y se desiste de ella despues, o se sobresee
sin condiciones, por una razon u otra, no hace que la
accion's que se entable mas tarde, pero ya fuera del
periodo de prescripcion, se pueda considerar como
presentada dentro de dicho periodo porque quiere
contares con la accion entablada con anterioridad. La falta
de de gestion de la recurrente por cuya causa de
desestimaron sus demandas segunda y tercera, no puede
interpretarse sino como una renuncia de su parte; y, al
ejercitar su ultima accion no se ha colocado en la misma
situacion en que antes se hallaba al ejercitar sus tres
anteriores acciones. Este es el mismo criterio que
expresamos cuando se nos presento una cuestion
analoga en la causa de Conspecto contra Fruto, 31 Jur. Fil
155.
In the opinion of the Court, the stand of the defendant is well taken. It has not been intimated by the
plaintiff that the authorities relied upon by the defendant had been overruled by any subsequent
pronouncement of the Supreme Court. As the decision sought to be revived was rendered and became
final and executory on November 23, 1955, and the present action was instituted on May 10, 1966, or
more than the ten-year period provided for in Article 1144 of the Civil Code, the said action has already
prescribed. As held in Conspecto vs. Fruto, et al., cited, in Commercial Co., Inc. vs. Jureidini, Inc., et
al., the dismissal of the action filed on March 5, 1965 left the parties in exactly the same position as if no
action had been commenced at all, and took no time out of the period of prescription.
WHEREFORE, the complaint is dismissed without pronouncement as to costs.
SO ORDERED.
A motion for the reconsideration of the said decision was denied by the trial court. On August 4, 1969,
plaintiff-appellant filed the present petition for review. The petition was given due course in Our
Resolution of August 6, 1969 and the petitioner filed its brief as plaintiff-appellant. No brief was filed in
behalf of defendant-appellee.
The only issue raised in this appeal is whether or not plaintiff-appellant's cause of action in Civil Case No.
65341 had already prescribed.
Article 1144 of the New Civil Code provides that an action based upon a judgment "must be brought
within ten (10) years from the time the right of action accrues." The prescriptive period starts from the
time that the judgment becomes final and executory. In the case at bar, the decision sought to be
enforced, to wit, that rendered in Civil Case No. 22237, being based on a compromise agreement, the
same became final and executory on the date of its rendition on November 23, 1955.
There is no question that when the first revival action, docketed as Civil Case No. 60112, was filed on
March 5, 1965, only 9 years, 3 months and 12 days had elapsed from November 23, 1955. It is also a
fact that when the second action to revive judgment was filed on May 10, 1965, it was already more than
10 years from the finality of the decision rendered in Civil Case No. 22237 which is sought to be revived
therein. These circumstances render it necessary to determine whether the filing of Civil Case No. 60112,
the first action to revive judgment tolled the running of the 10-year prescriptive period to enforce the
subject judgment. In the affirmative case, it would follow that the filing of Civil Case No. 65341 on May 10,
1966 was well within the period allowed by the statute of limitations.
Article 1155 of the New Civil Code expressly provides that the "prescription of action is interrupted when
they are filed before the court ..." (Sotelo vs. Dizon, 67 Phil. 537; Cabrera vs. Tianco, 8 SCRA 582.) Such
interruption lasts during the pendency of the action. (Florendo vs. Organo, 9 Phil. 483.)
These principles apply to the prescription of the action to revive or enforce a judgment. (Marc Donnelly
vs. Court of First Instance of Manila, 44 SCRA 381.) The facts in the last cited case are almost similar to
the present action. In Marc Donnelly, a judgment was rendered by the Court of First Instance of Manila
which became final on August 5, 1957. On July 8, 1967, an action was filed to revive the judgment. Due
to the fact that summons could not be served on the defendant despite the exercise of due diligence by
the plaintiff, the revival action was dismissed "for failure to prosecute, but the dismissal shall be without
prejudice." Copy of the order of dismissal was received by the plaintiff on March 19, 1969. Twelve (12)
days later or on March 31, 1969, a second action for revival was filed. The second action was dismissed
by the trial court on the ground that the said revival action was instituted after the lapse of 10 years from
the time that the decision sought to be revived had become final and executory.
Resolving the issue of whether or not the first action for revival of judgment interrupted the period of
prescription, We reversed the dismissal of the second action to revive judgment upon the following
considerations:
The sole issue to be resolved herein is whether or not prescription has set in to
bar the filing by petitioner of his second action to revive the judgment in Civil Case
No. 23466. An action for the revival of a judgment prescribes in ten (10) years
(Art. 1144[3], Civil Code). The ten-year period is counted either from the date the
judgment became final or from the date of its entry (Vda. de Decena vs. De los
Angeles, etc., et al., L-29317, May 29, 1971, 39 SCRA 95, 99). The prescription of
an action is interrupted, among others, by its filing before the court (Art. 1155, Civil
Code).
Applying the foregoing tenets to the case at bar, we find that petitioner's filing of
the first action for revival of the judgment in Civil Case No. 23466 was well within
the ten-year prescriptive period. Final judgment was entered by the Court of
Appeals on August 5, 1957. Petitioners filed Civil Case No. 70028 (his first action
to revive the judgment) on July 8, 1967. Therefore, as of the latter date, only nine
(9) years, eleven (11) months and three (3) days had elapsed. The ten-year
prescriptive period was effectively suspended by the filing of Civil Case No.
70028.
Let us now consider the second complaint (Civil Case No. 76166) for revival of
the same judgment in Civil Case No. 23466, in which complaint petitioner also
alleged that final entry of the judgment was made on August 5, 1957. The first
such action (Civil Case No. 70028) was dismissed by the court without prejudice;
and copy of the dismissal order was received by petitioner on March 19, 1969. On
March 31, 1969, petitioner filed the second action for revival of the judgment.
When a case is ordered dismissed without prejudice, the plaintiff may file his
complaint against the same defendant in a separate action, even if the order has
already become final and executory (Rapadaz Vda. de Rapisura vs. Nicolas, etc.,
et al., L-22594, April 29, 1966, 16 SCRA 798, 801). As it is, the second case to
revive the judgment was filed even before the order of dismissal in the first case
could become final, for only twelve (12) days had expired between March 19,
1969, when petitioner received notice of the dismissal order, and March 31, 1969,
when he filed the second motion. In any event, the dismissal of the first case
being without prejudice, the filing of the second action was still within the original
period of ten (10) years. At any rate, when the defendant's address cannot with
due diligence be ascertained and no property of his can be found, the period of
prescription is tolled under article 1108(2) of the new Civil Code. In the premises,
our conclusion must necessarily be that the trial court committed a reversible error
in dismissing Civil Case No. 76166 on the ground of prescription. (44 SCRA pp.
383-384.)
As may be noted from the decision dismissing Civil Case No. 65341, the trial court relied on the rulings
in Conspecto vs. Fruto, et al., 31 Phil. 148 and Oriental Commercial Co., Inc. vs. Jureidini, Inc., et al., 71
Phil. 25. Said reliance is misplaced, the facts in the said cases being different from those appearing in the
one under consideration. In Fruto, it was held that the running of the period of limitation was not
interrupted by an action filed within the said period because the said action was discontinued by "its
dismissal or voluntary abandonment by the plaintiff." The decision went on to state that "the real reason
for the said dismissal does not clearly appear of record."
In the case under consideration, the first action for revival, Civil Case No. 60112, was dismissed not by
reason of abandonment. As in the case of Marc Donnelley, the dismissal of the first revival action as due
to the inability to serve summons on the defendant-appellee. This was because, as stated in the petition
for review, the defendant-appellee was so elusive that when summons was forwarded to his address at
Iloilo City, the same was returned unserved because defendant-appellee was in Manila; and when it was
attempted to be served in Manila, he was supposed to be in Iloilo City. (Rollo, p. 14.)
In Fruto, it is also recognized that the dismissal of an action filed within the prescriptive period does not
necessarily result in the non-interruption of the period of limitation. Thus, it was declared:
Where a suit, commenced within the period of limitation, is abandoned or
dismissed by reason of the death of the plaintiff, the operation of the statute is
prevented if the suit is recommenced, within a reasonable time, by the
representatives of the deceased (Martin vs. Archer, 3 Hill, [S.C.] 211.) (Emphasis
supplied.)
The plaintiff-appellant may not be accused of having abandoned Civil Case No. 60112. They asserted
due diligence in trying to serve summons on defendant-appellee but unfortunately, their efforts were
thwarted due to the ability of the defendant-appellee to evade service of such court process on him.
Neither may plaintiff-appellant be charged with failure to recommence its suit within a reasonable time
after its dismissal. The record reveals that plaintiff-appellant received notice of the dismissal of Civil Case
No. 60112 on March 21, 1966. Four (4) days later, or on March 25, 1966, plaintiff-appellant filed a motion
for reconsideration of said order of dismissal. Plaintiff-appellant received the order denying the motion for
reconsideration on April 26, 1966. On May 10, 1966, plaintiff-appellant filed its second action for revival,
docketed as Civil Case No. 65341.
Nor may the ruling in Jureidini defeat herein plaintiff-appellant's cause of action. In Jureidini, the plaintiff
filed three (3) cases within the period of prescription, all of which were dismissed, the first on motion of
the plaintiff, and the other two (2) for failure to prosecute. When the fourth action was filed beyond the
prescriptive period, it was held that the act of the plaintiff in failing to prosecute his first three (3) cases
may not be interpreted except as a waiver on its part and did not place the plaintiff on the same situation
where it was before the filing of the first of the three actions; and, following the view expressed in the
analogous case of Conspecto vs. Fruto, 31 Phil. 150, the fourth action should be dismissed on the
ground of prescription. It is to be noted that as in Fruto, the filing of the actions within the prescriptive
period was considered as not interrupting the running of the period of limitation due to the circumstance
that the plaintiff is deemed to have abandoned or waived its claim.
As already stated above, herein plaintiff-appellant may not be faulted with having abandoned its claim
against the defendant-appellee which the former had asserted in filing Civil Case No. 60112. The said
case was dismissed primarily due to the failure to serve summons on defendant-appellee who had
somehow managed to evade being placed under the jurisdiction of the Court. Subsequent acts of
plaintiff-appellant after the dismissal of Civil Case No. 60112 adequately negated any supposed intention
to waive or abandon its claim against defendant-appellee.
It will be noted that the two cases relied upon by the trial court were both decided when the statute of
limitations was contained in the old Code of Civil Procedure, Act No. 190. In said law, there was no
specific provision, as that now contained in Article 1155 of the Civil Code, that " the prescription of actions
is interrupted when they are filed in court." (Florendo vs. Organo, 90 Phil. 483.) It is accordingly extremely
doubted if the rulings in Fruto and Jureidini may still be availed of to uphold the view that the period of
prescription is not interrupted by an action which the plaintiff shag abandon or otherwise fail to prosecute.
The language of Article 1155 is unqualified and does not give room for making a distinction as to the
effect of the filing of an action in court or the running of the period of prescription.
The record further reveals that plaintiff-appellant made written extra-judicial demands upon defendant-
appellee by means of letters marked as Exhibits "E-2" and "F", respectively. Such written extrajudicial
demand also produced the result of interrupting the period of prescription. (Art. 1155, Civil Code; Marella
vs. Agoncillo, 44 Phil. 844.)
We are accordingly of the considered view that the trial court erred in dismissing Civil Case No. 65341.
We do not find it necessary, however, to remand the ease to the court of origin for further proceedings. In
the decision rendered by the trial court, it made a finding of the material fact upon which the plaintiff's
cause of action is based. It stated the following:
It appears from the evidence presented by the plaintiff (the defendant did not
present any evidence) that under date of November 23, 1965, a decision was
rendered in Civil Case No. 22237 of the Court of First Instance of Manila, Land
Settlement and Development Corporation vs. Jose Zulueta, based on an amicable
settlement, ordering the defendant to pay to the plaintiff the sum of P10,391.62,
with interest at 4% per annum from January 13, 1948 (Exhibit "A"); that the said
judgment has not as yet been satisfied; that as of February 15, 1965, the
outstanding obligation of the defendant is P18,501.97 (Exhibit "E"); that demands
for payment were made on the defendant on January 6, 1956 (Exhibit "E-2") and
on January 18, 1965 (Exhibit "F").
There can be no serious dispute that the plaintiff Board of Liquidators can
prosecute this action as trustee of the abolished Land Settlement and
Development Corporation, known for short as LASEDECO. The principal issue is
whether or not the action has prescribed. (Decision, Rollo, pp. 79-80.)
The defendant-appellee presented no contradictory evidence, he having failed to appear for the trial of
the case scheduled on November 28, 1968 despite notice, thereby prompting the trial court to consider
the case submitted for decision on the basis of the evidence presented by the plaintiff. The facts found by
the trial court suffice to justify the rendition of a decision on the merits which the trial court failed to do in
view of its ruling that the action is barred by the statute of limitations.
WHEREFORE, the judgment appealed from is hereby REVERSED AND SET ASIDE. In lieu thereof,
another one is rendered ordering defendant-appellee to pay plaintiff-appellant the sum of P10,391.62
with interest at four (4%) per cent per annum from January 13, 1948 until full payment, with costs against
defendant-appellee.
SO ORDERED.
G.R. No. L-46492 April 26, 1939
RAMON SOTELO, Petitioner, vs. ARSENIO P. DIZON, Judge of First Instance of
Manila,
L. PASICOLAN, Sheriff of the City of Manila, and HARRIE S. EVERETT, Respondents.
Jose Sotelo for petitioner.
Duran and Lim for respondents.
IMPERIAL, J.: chanrobles virtual law library
This petition for certiorari assails the legality of the order issued by the respondent judge on
January 5, 1939, directing the sheriff or any of his agents to execute the order of the 3d of
said month appointing R. Marino Corpus receiver, by placing him in possession of the
cinematograph business established in the Savory Theatre, together with its equipment and
existing funds.chanroblesvirtualawlibrary chanrobles virtual law library
On July 22, 1938, the respondent Harrie S. Everett brought civil case No. 53411 in the
Court of First Instance of Manila against Lazarus Joseph, to recover the ownership and
possession of the cinematograph business established in the Fox and Savory theatres, with
the equipment and existing funds. The respondent asked in his complaint that a writ of
preliminary injunction be issued. As the then defendant alleged that the cinematograph
business had been transferred by him to the partnership Joseph Brothers, the respondent
Everett amended his complaint by including as defendants the said partnership and its
partners, John Joseph and George Joseph. Everett dropped out his prayer for preliminary
injunction and in his amended complaint asked that R. Marino Corpus be appointed receiver
to take charge of the properties in litigation during the pendency of the case. On December
16, 1938 the court appointed R. Marino Corpus receiver of the cinematograph business
known as Savoy as well as all its equipment and existing funds, ordering him to take
possession thereof and administer them in accordance with law after having qualified and
filed a bond for P2,000. When the receiver tried to take possession of the properties
entrusted to him, he was met by the petitioner's allegation that he is the owner thereof by
purchase from Joseph Brothers on December 15, 1938. In view of this and of the fact that
the petitioner had refused to deliver the properties, Everett filed a supplementary complaint
on December 23, 1938 including the petitioner as defendant and asking that the order of
December 16th appointing a receiver be confirmed. On January 3, 1939 the respondent
judge issued an order allowing the supplementary complaint and at the same time
reiterating the order of December 16, 1938 appointing a receiver. On the 4th of the same
month the receiver looked for the petitioner to require him to give up the properties under
receivership, but we unable to locate him either in his office or in his house as he was
informed that the petitioner was sick in the province. On the same date, January 4, 1939,
Everett filed a motion asking that the court order the sheriff or his agent to place the
receiver in possession of the properties. On the 5th of the said month, the court favorably
acted upon the motion, and on the following day, January 6th, the deputy sheriff went to
the Savoy Theatre to make deliver thereof to the receiver, but the petitioner refused to
make delivery and forthwith filed this petition. The petitioner was served wityh the
supplementary complaint in the morning of January 6, 1939 and when he filed the petition
for certiorari in this case he had already been duly summoned. In the same morning of
January 6, 1939 and before his petition for certiorari was filed, the petitioner was likewise
notified of the order of the respondent judge issued on the 5th of the said month directing
the sheriff to place the properties in the receiver's
possession.chanroblesvirtualawlibrary chanrobles virtual law library
The petitioner contends that the order of January 5, 1939, providing for the execution of
the other order of the 3d of the same month and for the placing of the properties in the
possession of the receiver, is illegal because on said date there was yet no pending action
against him and bacause he was not duly served with the supplementary complaint, citing
in his support sections 173 and 389 of the Code of Civil Procedure reading as follows:
SEC. 173. Receivers, who may appoint. - A judge of the Supreme Court, or a judge of the
Court of First Instance in which the action is pending, may appoint one or more receivers of
the property, real, personal, or mixed, which is the subject of the action, in the manner and
under the conditions hereinafter provided.chanroblesvirtualawlibrary chanrobles virtual law
library
SEC. 389. Commencement of actions. - Civil actions must be commenced by filing a
complaint with the clerk of the court in which the action is to be instituted. The date of the
filing of the complaint upon which process is issued and duly served shall be deemed to be
the true time of the commencement of the action.
The first contention is not justified by the facts because it appears that the supplementary
complaint had been admitted by the court on January 3, 1939, hence, when the order of
the 5th of said month was issued directing the sheriff to place the receiver in possession of
the properties, there was already an action in court against the
petitioner.chanroblesvirtualawlibrary chanrobles virtual law library
As to the second legal question before us, the petitioner argues that he was not yet duly
served with the supplementary complaint when the order of January 5, 1939 was issued,
because the summons only took place on the 6th of the said month, and under section 389
no action in court was yet pending against him. We find no merit in this contention. Under
section 389, a civil action is deemed legally commenced from the date of the filing and
docketing of the complaingt with the clerk of the Court of First Instance, without taking into
account the issuance and service of the summons. Section 389 of the Code of Civil
Procedure is taken from section 405 of the California Code of Civil Procedure, and the
Supreme Court of said State has so interpreted it in Tinn vs. United States District Attorney
(148 Cal., 773); Dowling vs. Comerford (99 Cal., 204); Ex parte Fil Ki (79 Cal., 584); and
Nash vs. El Dorado County (24 Fed. 252; 1 C. J., sec. 403, pp. 1155,
1156).chanroblesvirtualawlibrary chanrobles virtual law library
Under the facts the respondent judge had jurisdiction to issue the orders of January 3 and
5, 1939, and he did not exceed the same or the discretion conferred upon him by law in
such cases. From the same facts it follows that the preliminary injunction obtained by the
petitioner in these proceedings was issued without just cause, wherefor, the petitioner is
answerable for damages which he might have caused the respondent Everett. We reserve
to the latter the right to claim and substantiate said damages in the Court of First Instance
where the principal cause is pending, upon petition which he may present for that
purpose.chanroblesvirtualawlibrary chanrobles virtual law library
For the foregoing reasons, the remedy prayed for is denied, with the cost to the petitioner.
The preliminary injunction issued in this case is set aside. So ordered.
G.R. No. 75919 May 7, 1987
MANCHESTER DEVELOPMENT CORPORATION, ET AL., petitioners,
vs.
COURT OF APPEALS, CITY LAND DEVELOPMENT CORPORATION, STEPHEN ROXAS, ANDREW
LUISON, GRACE LUISON and JOSE DE MAISIP, respondents.
Acting on the motion for reconsideration of the resolution of the Second Division of January 28,1987 and
another motion to refer the case to and to be heard in oral argument by the Court En Banc filed by
petitioners, the motion to refer the case to the Court en banc is granted but the motion to set the case for
oral argument is denied.
Petitioners in support of their contention that the filing fee must be assessed on the basis of the amended
complaint cite the case of Magaspi vs. Ramolete. 1 They contend that the Court of Appeals erred in that
the filing fee should be levied by considering the amount of damages sought in the original complaint.
The environmental facts of said case differ from the present in that —
1. The Magaspi case was an action for recovery of ownership and possession of a parcel of land with
damages.2While the present case is an action for torts and damages and specific performance with
prayer for temporary restraining order, etc. 3
2. In the Magaspi case, the prayer in the complaint seeks not only the annulment of title of the defendant
to the property, the declaration of ownership and delivery of possession thereof to plaintiffs but also asks
for the payment of actual moral, exemplary damages and attorney's fees arising therefrom in the
amounts specified therein. 4However, in the present case, the prayer is for the issuance of a writ of
preliminary prohibitory injunction during the pendency of the action against the defendants' announced
forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question, to attach such property
of defendants that maybe sufficient to satisfy any judgment that maybe rendered, and after hearing, to
order defendants to execute a contract of purchase and sale of the subject property and annul
defendants' illegal forfeiture of the money of plaintiff, ordering defendants jointly and severally to pay
plaintiff actual, compensatory and exemplary damages as well as 25% of said amounts as maybe proved
during the trial as attorney's fees and declaring the tender of payment of the purchase price of plaintiff
valid and producing the effect of payment and to make the injunction permanent. The amount of
damages sought is not specified in the prayer although the body of the complaint alleges the total amount
of over P78 Million as damages suffered by plaintiff. 5
3. Upon the filing of the complaint there was an honest difference of opinion as to the nature of the action
in the Magaspi case. The complaint was considered as primarily an action for recovery of ownership and
possession of a parcel of land. The damages stated were treated as merely to the main cause of action.
Thus, the docket fee of only P60.00 and P10.00 for the sheriff's fee were paid. 6
In the present case there can be no such honest difference of opinion. As maybe gleaned from the
allegations of the complaint as well as the designation thereof, it is both an action for damages and
specific performance. The docket fee paid upon filing of complaint in the amount only of P410.00 by
considering the action to be merely one for specific performance where the amount involved is not
capable of pecuniary estimation is obviously erroneous. Although the total amount of damages sought is
not stated in the prayer of the complaint yet it is spelled out in the body of the complaint totalling in the
amount of P78,750,000.00 which should be the basis of assessment of the filing fee.
4. When this under-re assessment of the filing fee in this case was brought to the attention of this Court
together with similar other cases an investigation was immediately ordered by the Court. Meanwhile
plaintiff through another counsel with leave of court filed an amended complaint on September 12, 1985
for the inclusion of Philips Wire and Cable Corporation as co-plaintiff and by emanating any mention of
the amount of damages in the body of the complaint. The prayer in the original complaint was
maintained. After this Court issued an order on October 15, 1985 ordering the re- assessment of the
docket fee in the present case and other cases that were investigated, on November 12, 1985 the trial
court directed plaintiffs to rectify the amended complaint by stating the amounts which they are asking for.
It was only then that plaintiffs specified the amount of damages in the body of the complaint in the
reduced amount of P10,000,000.00. 7 Still no amount of damages were specified in the prayer. Said
amended complaint was admitted.
On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay the amount of
P3,104.00 as filing fee covering the damages alleged in the original complaint as it did not consider the
damages to be merely an or incidental to the action for recovery of ownership and possession of real
property. 8 An amended complaint was filed by plaintiff with leave of court to include the government of
the Republic as defendant and reducing the amount of damages, and attorney's fees prayed for to
P100,000.00. Said amended complaint was also admitted. 9
In the Magaspi case, the action was considered not only one for recovery of ownership but also for
damages, so that the filing fee for the damages should be the basis of assessment. Although the
payment of the docketing fee of P60.00 was found to be insufficient, nevertheless, it was held that since
the payment was the result of an "honest difference of opinion as to the correct amount to be paid as
docket fee" the court "had acquired jurisdiction over the case and the proceedings thereafter had were
proper and regular." 10 Hence, as the amended complaint superseded the original complaint, the
allegations of damages in the amended complaint should be the basis of the computation of the filing
fee. 11
In the present case no such honest difference of opinion was possible as the allegations of the complaint,
the designation and the prayer show clearly that it is an action for damages and specific performance.
The docketing fee should be assessed by considering the amount of damages as alleged in the original
complaint.
As reiterated in the Magaspi case the rule is well-settled "that a case is deemed filed only upon payment
of the docket fee regardless of the actual date of filing in court . 12 Thus, in the present case the trial
court did not acquire jurisdiction over the case by the payment of only P410.00 as docket fee. Neither can
the amendment of the complaint thereby vest jurisdiction upon the Court. 13 For an legal purposes there
is no such original complaint that was duly filed which could be amended. Consequently, the order
admitting the amended complaint and all subsequent proceedings and actions taken by the trial court are
null and void.
The Court of Appeals therefore, aptly ruled in the present case that the basis of assessment of the docket
fee should be the amount of damages sought in the original complaint and not in the amended complaint.
The Court cannot close this case without making the observation that it frowns at the practice of counsel
who filed the original complaint in this case of omitting any specification of the amount of damages in the
prayer although the amount of over P78 million is alleged in the body of the complaint. This is clearly
intended for no other purpose than to evade the payment of the correct filing fees if not to mislead the
docket clerk in the assessment of the filing fee. This fraudulent practice was compounded when, even as
this Court had taken cognizance of the anomaly and ordered an investigation, petitioner through another
counsel filed an amended complaint, deleting all mention of the amount of damages being asked for in
the body of the complaint. It was only when in obedience to the order of this Court of October 18, 1985,
the trial court directed that the amount of damages be specified in the amended complaint, that
petitioners' counsel wrote the damages sought in the much reduced amount of P10,000,000.00 in the
body of the complaint but not in the prayer thereof. The design to avoid payment of the required docket
fee is obvious.
The Court serves warning that it will take drastic action upon a repetition of this unethical practice.
To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadings
should specify the amount of damages being prayed for not only in the body of the pleading but also in
the prayer, and said damages shall be considered in the assessment of the filing fees in any case. Any
pleading that fails to comply with this requirement shall not bib accepted nor admitted, or shall otherwise
be expunged from the record.
The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An
amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less
the payment of the docket fee based on the amounts sought in the amended pleading. The ruling in the
Magaspi case 14 in so far as it is inconsistent with this pronouncement is overturned and reversed.
WHEREFORE, the motion for reconsideration is denied for lack of merit.
SO ORDERED.
G.R. No. 150780 May 5, 2006
NESTLE PHILIPPINES, INC., Petitioner,
vs.
FY SONS, INCORPORATED, Respondent.
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision 1 of the
Court of Appeals (CA) in CA-G.R. CV No. 57299 dated January 11, 2001 which in turn affirmed with
modification the decision of Branch 57 of the Regional Trial Court (RTC) of Makati City in Civil Case No.
90-3169,2 as well as the CA’s resolution3 dated November 14, 2001 which denied petitioner’s motion for
reconsideration.
The antecedent facts follow.
Petitioner is a corporation engaged in the manufacture and distribution of all Nestle products nationwide.
Respondent, on the other hand, is a corporation engaged in trading, marketing, selling and distributing
food items to restaurants and food service outlets. On December 23, 1998, petitioner and respondent
entered into a distributorship agreement (agreement) whereby petitioner would supply its products for
respondent to distribute to its food service outlets. A deed of assignment was also executed by
respondent in favor of petitioner on December 13, 1988, assigning the time deposit of a certain Calixto
Laureano in the amount of P500,000 to secure respondent’s credit purchases from petitioner. A special
power of attorney was likewise executed by Laureano authorizing the respondent to use the time deposit
as collateral.
The areas covered by the agreement were Baguio, Dagupan, Angeles, Bulacan, Pampanga, Urdaneta,
La Union, Tarlac and Olongapo. At the end of 1989, the agreement expired and the parties executed a
renewal agreement on January 22, 1990. A supplemental agreement was executed on June 27, 1990, to
take effect on July 1, 1990.
On July 2, 1990, petitioner fined respondent P20,000 for allegedly selling 50 cases of Krem-Top liquid
coffee creamer to Lu Hing Market, a retail outlet in Tarlac. This was purportedly proscribed by the
agreement. Respondent paid the fine. In September 1990, Krem-Top liquid coffee creamer was sold to
Augustus Bakery and Grocery, an act again allegedly in violation of the agreement. Petitioner imposed
a P40,000 fine which respondent refused to pay.
On October 19, 1990, respondent, through counsel, wrote petitioner to complain about the latter’s
breaches of their agreement and the various acts of bad faith committed by petitioner against
respondent. Respondent demanded the payment of damages. In turn, on November 5, 1990, petitioner
sent respondent a demand letter and notice of termination, alleging that the latter had outstanding
accounts of P995,319.81. When the alleged accounts were not settled, petitioner applied the P500,000
time deposit as partial payment.
Respondent filed a complaint for damages against petitioner, alleging bad faith. 4 According to
respondent:
… [petitioner] made representations and promises of rendering support, including marketing support,
assignment of representatives by way of assistance in its development efforts, and assurances of income
in a marketing area not previously developed. Thus, [respondent] was lured into executing a
distributorship agreement with the [petitioner]…. [Respondent] thereby invested huge sums of money,
time and efforts to abide by such distributorship agreement, and to develop market areas for [petitioner’s]
products. Thereafter, the [petitioner] breached the distributorship agreement by committing various acts
of bad faith such as: failing to provide promotional support; deliberately failing to promptly supply the
[respondent] with the stocks for its orders; intentionally diminishing the [respondent’s] sales by supporting
a non-distributor; and concocting falsified charges to cause the termination of the distributorship
agreement without just cause. By such termination, [petitioner] would be able to obtain the market gains
made by [respondent] at the latter’s own efforts and expenses. When [respondent] complained to
[petitioner] about the latter’s acts of bad faith, the latter terminated the agreement on the allegation that
[respondent] did not pay its accounts. [Petitioner] also seized [respondent’s] time deposit collateral
without basis; penalized [respondent] with monetary penalty for the concocted charge; and unilaterally
suspended the supply of stocks to [respondent]. 5
Respondent sought actual damages of P1,000,000, moral damages of P200,000, exemplary damages
of P100,000, attorney’s fees of P100,000, plus the return of the P500,000 time deposit and costs of suit.
In its answer, petitioner interposed a counterclaim for P495,319.81 representing the balance of
respondent’s overdue accounts, with interest of 2% per month from the date of default until fully paid,
moral damages of P100,000, exemplary damages of P200,000, attorney’s fees of P120,000 and costs of
suit.
In a decision dated November 10, 1997, the Makati City RTC ruled in favor of the respondent:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the
defendant ordering the defendant to pay plaintiff the following:
1. The amount of P1,000,000.00 as actual damages sustained by the plaintiff by reason of the
unwarranted and illegal acts of the defendant in terminating the distributorship agreement;
2. The amount of P100,000.00 as exemplary damages;
3. The amount of P100,000.00 as attorney’s fees;
The plaintiff however, is hereby ordered to pay the defendant the amount of P53,214,26 (sic) which
amount has been established as the amount the defendant is entitled from the plaintiff.
Three-fourths costs against the defendant.
. (4)
SO ORDERED.6
Petitioner appealed the decision to the CA. On January 11, 2001, the CA rendered a decision affirming
the RTC’s decision with modification:
WHEREFORE, the judgment appealed from is AFFIRMED with the following MODIFICATIONS: (1) the
actual damages is INCREASED from P1,000,000.00 to P1,500,000.00;7 and (2) the amount
of P53,214.26 payable by the appellee to the appellant is DELETED.
SO ORDERED.8
Both the CA and the RTC found, among others, that petitioner indeed failed to provide support to
respondent, its distributor; that petitioner unjustifiably refused to deliver stocks to respondent; that the
imposition of the P20,000 fine was void for having no basis; that petitioner failed to prove respondent’s
alleged outstanding obligation; that petitioner terminated the agreement without sufficient basis in law or
equity and in bad faith; and that petitioner should be held liable for damages.
Hence this petition raising the following grounds:
(1)
THE [CA] COMMITTED A GRAVE ERROR IN LAW WHEN IT RULED THAT: "THE RATIOCINATIONS
OF THE APPELLANT AS TO THE APPELLEE’S ALLEGED VIOLATION OF THE CONTRACT ARE
THUS WEAK AND UNCONVINCING" AND "THE APPELLEE’S ALLEGED NON-PAYMENT AND
OUTSTANDING BALANCE OF P995,319.81 WAS NOT SUFFICIENTLY PROVEN" DESPITE THE FACT
THAT FLORENTINO YUE, JR., THE MANAGER OF THE RESPONDENT ADMITTED IN OPEN COURT
IN ANSWER TO THE QUESTION OF THEN PRESIDING JUDGE PHINNY C. ARAQUIL THAT THE
DISTRIBUTORSHIP AGREEMENT WAS TERMINATED BY YOUR PETITIONER BECAUSE OF THE
UNPAID BALANCE OF THE RESPONDENT OF AROUND P900,000.00.
(2)
THE [CA] COMMITTED A GRAVE ERROR IN LAW IN DISREGARDING THE TESTIMONY OF THE
WITNESS FOR THE PETITIONER, CRISTINA RAYOS WHO PREPARED THE STATEMENT OF
ACCOUNT (EXHIBIT 11) ON THE GROUNDS THAT SHE WAS NOT INVOLVED IN THE DELIVERY AS
SHE WAS ONLY IN CHARGE OF THE RECORDS AND DOCUMENTS OF ALL ACCOUNTS
RECEIVABLES AS PART OF HER DUTIES AS CREDIT AND COLLECTION MANAGER CONSIDERING
THAT THE EVIDENCE PRESENTED WAS AN EXCEPTION TO THE HEARSAY RULE UNDER
SECTION 45 (SIC), RULE 130, OF THE REVISED RULES ON EVIDENCE.
(3)
THE [CA] COMMITTED A GRAVE ERROR IN LAW IN AWARDING TO THE RESPONDENT ACTUAL
DAMAGES IN THE AMOUNT OF P1,000,000.00 AND ORDERING THE REFUND OF THE AMOUNT
OF P500,000.00 REPRESENTING THE TIME DEPOSIT OF THE RESPONDENT WHICH WAS
ASSIGNED AS SECURITY FOR THE RESPONDENT’S CREDIT LINE BECAUSE THE PETITIONER
HAD THE RIGHT TO TERMINATE THE DISTRIBUTORSHIP AGREEMENT UNDER ART. 1191 OF THE
CIVIL CODE AND PARAGRAPHS 5 AND 22 OF THE DISTRIBUTORSHIP AGREEMENT BECAUSE OF
THE FAILURE OF THE RESPONDENT TO SETTLE ITS ACCOUNT IN THE AMOUNT OF P995,319.81
AND THAT THE EVIDENCE SUBMITTED BY THE RESPONDENT ON THE ALLEGED ACTUAL
DAMAGES IT SUSTAINED AS A RESULT OF THE TERMINATION OF THE DISTRIBUTORSHIP
AGREEMENT (EXHIBIT 5) AND COMPANION EXHIBITS WERE MERELY SPECULATIVE AND DID
NOT HAVE PROBATIVE VALUE.
THE [CA] COMMITTED A GRAVE ERROR IN LAW FOR NOT AWARDING TO THE PETITIONER ITS
COUNTERCLAIM.9
On the first issue, petitioner asserts that respondent’s witness, Florentino Yue, Jr., a director and officer of
respondent corporation, admitted in open court that the respondent had an unpaid obligation to petitioner
in the amount of "around P900,000."10
Respondent counters that this statement was merely in answer to the question of the presiding judge on
what ground petitioner supposedly terminated the agreement. The witness was not being asked, nor was
he addressing, the truth of such ground. In fact, this witness later testified that "(petitioner) wrote us back
saying that they (had) terminated my contract and that I owe(d) them something like P900,000."11
Petitioner’s argument is palpably without merit and deserves scant consideration. It quoted Mr. Yue’s
statement in isolation from the rest of his testimony and took it out of context. Obviously, Yue’s statement
cannot be considered a judicial admission that respondent had an unpaid obligation of P900,000 and that
the agreement had been terminated for this reason.
On the second issue, petitioner argues that the CA should not have disregarded the testimony of
petitioner’s witness, Cristina Rayos, who prepared the statement of account on the basis of the invoices
and delivery orders corresponding to the alleged overdue accounts of respondent. 12 The CA ruled that
petitioner was not able to prove that respondent indeed had unpaid accounts, saying, among others, that
the testimony of Rayos constituted incompetent evidence:
xxx the appellee’s alleged non-payment and outstanding balance of P995,319.81 was not sufficiently
proven.
xxx xxx xxx
Anyway, the appellant’s Statement of Account showing such alleged unpaid balance is undated, and it
does not show receipt thereof by the appellee, and when, if such indeed was received. Moreover, there
are no supporting documents to sustain such unpaid accounts. The witness for the appellant who
prepared the Statement, Cristina Rayos, in fact admitted that the Invoices corresponding to the alleged
overdue accounts are not signed. Her explanation was that there were DO’s or Delivery Orders covering
the transactions. However, she did not identify the signatures appearing on the Delivery Orders marked
as Exhibits "13-A", "14-A", "15-A" and "16-A" as the persons who received the goods for the appellant. In
any case, she could not have identified the same, for she was not involved in the delivery, as she is only
in charge of the records and documents on all accounts receivables as part of her duties as Credit and
Collection Manager.13
Petitioner contends that the testimony of Rayos was an exception to the hearsay rule under Section 43,
Rule 130 of the Rules of Court: 14
Entries in the course of business. — Entries made at, or near the time of the transactions to which they
refer, by a person deceased, or unable to testify, who was in a position to know the facts therein stated,
may be received as prima facie evidence, if such person made the entries in his professional capacity or
in the performance of duty and in the ordinary or regular course of business or duty.1avvphil.net
Petitioner’s contention has no merit.
The provision does not apply to this case because it does not involve entries made in the course of
business. Rayos testified on a statement of account she prepared on the basis of invoices and delivery
orders which she, however, knew nothing about. She had no personal knowledge of the facts on which
the accounts were based since, admittedly, she was not involved in the delivery of goods and was merely
in charge of the records and documents of all accounts receivable as part of her duties as credit and
collection manager.15 She thus knew nothing of the truth or falsity of the facts stated in the invoices and
delivery orders, i.e., whether such deliveries were in fact made in the amounts and on the dates stated,
or whether they were actually received by respondent. She was not even the credit and collection
manager during the period the agreement was in effect. 16 This can only mean that she merely obtained
these documents from another without any personal knowledge of their contents.
The foregoing shows that Rayos was incompetent to testify on whether or not the invoices and delivery
orders turned over to her correctly reflected the details of the deliveries made. Thus, the CA correctly
disregarded her testimony.
Furthermore, the invoices and delivery orders presented by petitioner were self-serving. Having
generated these documents, petitioner could have easily fabricated them. Petitioner’s failure to present
any competent witness to identify the signatures and other information in those invoices and delivery
orders cast doubt on their veracity.
Petitioner next argues that respondent did not deny during the trial that it received the goods covered by
the invoices and was therefore deemed to have admitted the same. 17 This argument cannot be taken
seriously. From the very beginning, respondent’s position was that petitioner concocted falsified charges
of non-payment to justify the termination of their agreement. 18 In no way could respondent be deemed to
have admitted those deliveries.
On the third issue, petitioner questions the award of actual damages in the amount of P1,000,000 and
the refund of the P500,000 time deposit, contending that it validly terminated the agreement because of
respondent’s failure to pay its overdue accounts.
As discussed above, the CA declared that petitioner was not able to prove that respondent had unpaid
accounts, thus debunking the claim of a valid termination. The CA also held petitioner guilty of various
acts which violated the provisions of the agreement. 19 Consequently, for petitioner’s breach of the
agreement, the CA awarded actual damages to respondent in the amount of P1,000,000. Petitioner, other
than claiming that it validly terminated the agreement, did not challenge the findings of the CA that it
committed various violations of the agreement. Hence, there was legal basis for the grant of actual
damages.
Petitioner asserts that the documentary evidence presented by respondent to prove actual damages in
the amount of P4,246,015.60 should not have been considered because respondent’s complaint only
prayed for an award of P1,000,000. It further contends that the court acquires jurisdiction over the claim
only upon payment of the prescribed docket fee. 20
Indeed, a court acquires jurisdiction over the claim of damages upon payment of the correct docket
fees.21 In this case, it is not disputed that respondent paid docket fees based on the amounts prayed for
in its complaint. Respondent adduced evidence to prove its losses. It was proper for the CA and the RTC
to consider this evidence and award the sum of P1,000,000. Had the courts below awarded a sum more
than P1,000,000, which was the amount prayed for, an additional filing fee would have been assessed
and imposed as a lien on the judgment. 22However, the courts limited their award to the amount prayed
for.
Both the RTC and CA found that respondent had satisfactorily proven the factual bases for the damages
adjudged against the petitioner. This is a factual matter binding and conclusive upon this Court. 23 It is
well-settled that –
. . . findings of fact of the trial court, when affirmed by the Court of Appeals, are binding upon the
Supreme Court. This rule may be disregarded only when the findings of fact of the Court of Appeals are
contrary to the findings and conclusions of the trial court, or are not supported by the evidence on record.
But there is no ground to apply this exception to the instant case. This Court will not assess all over again
the evidence adduced by the parties particularly where as in this case the findings of both the trial court
and the Court of Appeals completely coincide. 24
Likewise, the determination of the amount of damages commensurate with the factual findings upon
which it is based is primarily the task of the trial court. 25 Considering that the amount adjudged is not
excessive, we affirm its correctness.
Moreover, given that petitioner was not able to prove that respondent had unpaid accounts in the amount
of P995,319.81, the seizure of the P500,000 time deposit was improper. As a result, the refund of this
amount with interest is also called for.
Finally, petitioner’s counterclaims are necessarily without merit. It failed to prove the alleged outstanding
accounts of respondent. Accordingly, it is not entitled to the supposed unpaid balance of P495,319.81
with interest.
Petitioner, being at fault and in bad faith, and there being no proof that respondent was guilty of any
wrongdoing, cannot claim moral and exemplary damages and attorney’s fees from respondent.
In fine, we find no error in the assailed decision and resolution of the CA. We therefore affirm them.
WHEREFORE, the petition is hereby DENIED for lack of merit. The decision of the Court of Appeals
dated January 11, 2001 and resolution dated November 14, 2001 in CA-G.R. CV No. 57299 are
hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
G.R. Nos. 79937-38 February 13, 1989
SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and D.J. WARBY, petitioners,
vs.
HON. MAXIMIANO C. ASUNCION, Presiding Judge, Branch 104, Regional Trial Court, Quezon City
and MANUEL CHUA UY PO TIONG, respondents.
Again the Court is asked to resolve the issue of whether or not a court acquires jurisdiction over a case
when the correct and proper docket fee has not been paid.
On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a complaint with the
Regional Trial Court of Makati, Metro Manila for the consignation of a premium refund on a fire insurance
policy with a prayer for the judicial declaration of its nullity against private respondent Manuel Uy Po
Tiong. Private respondent as declared in default for failure to file the required answer within the
reglementary period.
On the other hand, on March 28, 1984, private respondent filed a complaint in the Regional Trial Court of
Quezon City for the refund of premiums and the issuance of a writ of preliminary attachment which was
docketed as Civil Case No. Q-41177, initially against petitioner SIOL, and thereafter including E.B.
Philipps and D.J. Warby as additional defendants. The complaint sought, among others, the payment of
actual, compensatory, moral, exemplary and liquidated damages, attorney's fees, expenses of litigation
and costs of the suit. Although the prayer in the complaint did not quantify the amount of damages sought
said amount may be inferred from the body of the complaint to be about Fifty Million Pesos
(P50,000,000.00).
Only the amount of P210.00 was paid by private respondent as docket fee which prompted petitioners'
counsel to raise his objection. Said objection was disregarded by respondent Judge Jose P. Castro who
was then presiding over said case. Upon the order of this Court, the records of said case together with
twenty-two other cases assigned to different branches of the Regional Trial Court of Quezon City which
were under investigation for under-assessment of docket fees were transmitted to this Court. The Court
thereafter returned the said records to the trial court with the directive that they be re-raffled to the other
judges in Quezon City, to the exclusion of Judge Castro. Civil Case No. Q-41177 was re-raffled to Branch
104, a sala which was then vacant.
On October 15, 1985, the Court en banc issued a Resolution in Administrative Case No. 85-10-8752-RTC
directing the judges in said cases to reassess the docket fees and that in case of deficiency, to order its
payment. The Resolution also requires all clerks of court to issue certificates of re-assessment of docket
fees. All litigants were likewise required to specify in their pleadings the amount sought to be recovered in
their complaints.
On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q-41177 was temporarily
assigned, issuedan order to the Clerk of Court instructing him to issue a certificate of assessment of the
docket fee paid by private respondent and, in case of deficiency, to include the same in said certificate.
On January 7, 1984, to forestall a default, a cautionary answer was filed by petitioners. On August
30,1984, an amended complaint was filed by private respondent including the two additional defendants
aforestated.
Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter assigned, after his
assumption into office on January 16, 1986, issued a Supplemental Order requiring the parties in the
case to comment on the Clerk of Court's letter-report signifying her difficulty in complying with the
Resolution of this Court of October 15, 1985 since the pleadings filed by private respondent did not
indicate the exact amount sought to be recovered. On January 23, 1986, private respondent filed a
"Compliance" and a "Re-Amended Complaint" stating therein a claim of "not less than Pl0,000,000. 00 as
actual compensatory damages" in the prayer. In the body of the said second amended complaint
however, private respondent alleges actual and compensatory damages and attorney's fees in the total
amount of about P44,601,623.70.
On January 24, 1986, Judge Asuncion issued another Order admitting the second amended complaint
and stating therein that the same constituted proper compliance with the Resolution of this Court and that
a copy thereof should be furnished the Clerk of Court for the reassessment of the docket fees. The
reassessment by the Clerk of Court based on private respondent's claim of "not less than
P10,000,000.00 as actual and compensatory damages" amounted to P39,786.00 as docket fee. This was
subsequently paid by private respondent.
Petitioners then filed a petition for certiorari with the Court of Appeals questioning the said order of Judie
Asuncion dated January 24, 1986.
On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of
P20,000,000.00 as d.qmages so the total claim amounts to about P64,601,623.70. On October 16, 1986,
or some seven months after filing the supplemental complaint, the private respondent paid the additional
docket fee of P80,396.00.1
On August 13, 1987, the Court of Appeals rendered a decision ruling, among others, as follows:
WHEREFORE, judgment is hereby rendered:
1. Denying due course to the petition in CA-G.R. SP No. 1, 09715 insofar as it
seeks annulment of the order
(a) denying petitioners' motion to dismiss the complaint, as amended, and
(b) granting the writ of preliminary attachment, but giving due course to the portion
thereof questioning the reassessment of the docketing fee, and requiring the
Honorable respondent Court to reassess the docketing fee to be paid by private
respondent on the basis of the amount of P25,401,707.00. 2
Hence, the instant petition.
During the pendency of this petition and in conformity with the said judgment of respondent court, private
respondent paid the additional docket fee of P62,432.90 on April 28, 1988. 3
The main thrust of the petition is that the Court of Appeals erred in not finding that the lower court did not
acquire jurisdiction over Civil Case No. Q-41177 on the ground of nonpayment of the correct and proper
docket fee. Petitioners allege that while it may be true that private respondent had paid the amount of
P182,824.90 as docket fee as herein-above related, and considering that the total amount sought to be
recovered in the amended and supplemental complaint is P64,601,623.70 the docket fee that should be
paid by private respondent is P257,810.49, more or less. Not having paid the same, petitioners contend
that the complaint should be dismissed and all incidents arising therefrom should be annulled. In support
of their theory, petitioners cite the latest ruling of the Court in Manchester Development Corporation vs.
CA, 4 as follows:
The Court acquires jurisdiction over any case only upon the payment of the
prescribed docket fee. An amendment of the complaint or similar pleading will not
thereby vest jurisdiction in the Court, much less the payment of the docket fee
based on the amounts sought in the amended pleading. The ruling in the Magaspi
Case in so far as it is inconsistent with this pronouncement is overturned and
reversed.
On the other hand, private respondent claims that the ruling in Manchester cannot apply retroactively to
Civil Case No. Q41177 for at the time said civil case was filed in court there was no
such Manchester ruling as yet. Further, private respondent avers that what is applicable is the ruling of
this Court in Magaspi v. Ramolete, 5 wherein this Court held that the trial court acquired jurisdiction over
the case even if the docket fee paid was insufficient.
The contention that Manchester cannot apply retroactively to this case is untenable. 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 retrospective in that sense and to that extent. 6
In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full amount of the docket fee
is an indispensable step for the perfection of an appeal. In a forcible entry and detainer case before the
justice of the peace court of Manaoag, Pangasinan, after notice of a judgment dismissing the case, the
plaintiff filed a notice of appeal with said court but he deposited only P8.00 for the docket fee, instead of
P16.00 as required, within the reglementary period of appeal of five (5) days after receiving notice of
judgment. Plaintiff deposited the additional P8.00 to complete the amount of the docket fee only fourteen
(14) days later. On the basis of these facts, this court held that the Court of First Instance did notacquire
jurisdiction to hear and determine the appeal as the appeal was not thereby perfected.
In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to become a Filipino citizen by
sending it through registered mail to the Office of the Solicitor General in 1953 but the required filing fee
was paid only in 1956, barely 5V2 months prior to the filing of the petition for citizenship. This Court ruled
that the declaration was not filed in accordance with the legal requirement that such declaration should
be filed at least one year before the filing of the petition for citizenship. Citing Lazaro, this Court
concluded that the filing of petitioner's declaration of intention on October 23, 1953 produced no legal
effect until the required filing fee was paid on May 23, 1956.
In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were applied. It was an
original petition for quo warranto contesting the right to office of proclaimed candidates which was mailed,
addressed to the clerk of the Court of First Instance, within the one-week period after the proclamation as
provided therefor by law.10However, the required docket fees were paid only after the expiration of said
period. Consequently, this Court held that the date of such payment must be deemed to be the real date
of filing of aforesaid petition and not the date when it was mailed.
Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee must be paid before a
court will act on a petition or complaint. However, we also held that said rule is not applicable when
petitioner seeks the probate of several wills of the same decedent as he is not required to file a separate
action for each will but instead he may have other wills probated in the same special proceeding then
pending before the same court.
Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is deemed filed only
upon payment of the docket fee regardless of the actual date of its filing in court. Said case involved a
complaint for recovery of ownership and possession of a parcel of land with damages filed in the Court of
First Instance of Cebu. Upon the payment of P60.00 for the docket fee and P10.00 for the sheriffs fee,
the complaint was docketed as Civil Case No. R-11882. The prayer of the complaint sought that the
Transfer Certificate of Title issued in the name of the defendant be declared as null and void. It was also
prayed that plaintiff be declared as owner thereof to whom the proper title should be issued, and that
defendant be made to pay monthly rentals of P3,500.00 from June 2, 1948 up to the time the property is
delivered to plaintiff, P500,000.00 as moral damages, attorney's fees in the amount of P250,000.00, the
costs of the action and exemplary damages in the amount of P500,000.00.
The defendant then filed a motion to compel the plaintiff to pay the correct amount of the docket fee to
which an opposition was filed by the plaintiff alleging that the action was for the recovery of a parcel of
land so the docket fee must be based on its assessed value and that the amount of P60.00 was the
correct docketing fee. The trial court ordered the plaintiff to pay P3,104.00 as filing fee.
The plaintiff then filed a motion to admit the amended complaint to include the Republic as the defendant.
In the prayer of the amended complaint the exemplary damages earlier sought was eliminated. The
amended prayer merely sought moral damages as the court may determine, attorney's fees of
P100,000.00 and the costs of the action. The defendant filed an opposition to the amended complaint.
The opposition notwithstanding, the amended complaint was admitted by the trial court. The trial court
reiterated its order for the payment of the additional docket fee which plaintiff assailed and then
challenged before this Court. Plaintiff alleged that he paid the total docket fee in the amount of P60.00
and that if he has to pay the additional fee it must be based on the amended complaint.
The question posed, therefore, was whether or not the plaintiff may be considered to have filed the case
even if the docketing fee paid was not sufficient. In Magaspi, We reiterated the rule that the case was
deemed filed only upon the payment of the correct amount for the docket fee regardless of the actual
date of the filing of the complaint; that there was an honest difference of opinion as to the correct amount
to be paid as docket fee in that as the action appears to be one for the recovery of property the docket
fee of P60.00 was correct; and that as the action is also one, for damages, We upheld the assessment of
the additional docket fee based on the damages alleged in the amended complaint as against the
assessment of the trial court which was based on the damages alleged in the original complaint.
However, as aforecited, this Court overturned Magaspi in Manchester. Manchester involves an action for
torts and damages and specific performance with a prayer for the issuance of a temporary restraining
order, etc. The prayer in said case is for the issuance of a writ of preliminary prohibitory injunction during
the pendency of the action against the defendants' announced forfeiture of the sum of P3 Million paid by
the plaintiffs for the property in question, the attachment of such property of defendants that may be
sufficient to satisfy any judgment that may be rendered, and, after hearing, the issuance of an order
requiring defendants to execute a contract of purchase and sale of the subject property and annul
defendants' illegal forfeiture of the money of plaintiff. It was also prayed that the defendants be made to
pay the plaintiff jointly and severally, actual, compensatory and exemplary damages as well as 25% of
said amounts as may be proved during the trial for attorney's fees. The plaintiff also asked the trial court
to declare the tender of payment of the purchase price of plaintiff valid and sufficient for purposes of
payment, and to make the injunction permanent. The amount of damages sought is not specified in the
prayer although the body of the complaint alleges the total amount of over P78 Millon allegedly suffered
by plaintiff.
Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for the docket fee based on
the nature of the action for specific performance where the amount involved is not capable of pecuniary
estimation. However, it was obvious from the allegations of the complaint as well as its designation that
the action was one for damages and specific performance. Thus, this court held the plaintiff must be
assessed the correct docket fee computed against the amount of damages of about P78 Million, although
the same was not spelled out in the prayer of the complaint.
Meanwhile, plaintiff through another counsel, with leave of court, filed an amended complaint on
September 12, 1985 by the inclusion of another co-plaintiff and eliminating any mention of the amount of
damages in the body of the complaint. The prayer in the original complaint was maintained.
On October 15, 1985, this Court ordered the re-assessment of the docket fee in the said case and other
cases that were investigated. On November 12, 1985, the trial court directed the plaintiff to rectify the
amended complaint by stating the amounts which they were asking for. This plaintiff did as instructed. In
the body of the complaint the amount of damages alleged was reduced to P10,000,000.00 but still no
amount of damages was specified in the prayer. Said amended complaint was admitted.
Applying the principle in Magaspi that "the case is deemed filed only upon payment of the docket fee
regardless of the actual date of filing in court," this Court held that the trial court did not acquire
jurisdiction over the case by payment of only P410.00 for the docket fee. Neither can the amendment of
the complaint thereby vest jurisdiction upon the Court. For all legal purposes there was no such original
complaint duly filed which could be amended. Consequently, the order admitting the amended complaint
and all subsequent proceedings and actions taken by the trial court were declared null and void. 13
The present case, as above discussed, is among the several cases of under-assessment of docket fee
which were investigated by this Court together with Manchester. The facts and circumstances of this case
are similar to Manchester. In the body of the original complaint, the total amount of damages sought
amounted to about P50 Million. In the prayer, the amount of damages asked for was not stated. The
action was for the refund of the premium and the issuance of the writ of preliminary attachment with
damages. The amount of only P210.00 was paid for the docket fee. On January 23, 1986, private
respondent filed an amended complaint wherein in the prayer it is asked that he be awarded no less than
P10,000,000.00 as actual and exemplary damages but in the body of the complaint the amount of his
pecuniary claim is approximately P44,601,623.70. Said amended complaint was admitted and the private
respondent was reassessed the additional docket fee of P39,786.00 based on his prayer of not less than
P10,000,000.00 in damages, which he paid.
On April 24, 1986, private respondent filed a supplemental complaint alleging an additional claim of
P20,000,000.00 in damages so that his total claim is approximately P64,601,620.70. On October 16,
1986, private respondent paid an additional docket fee of P80,396.00. After the promulgation of the
decision of the respondent court on August 31, 1987 wherein private respondent was ordered to be
reassessed for additional docket fee, and during the pendency of this petition, and after the promulgation
of Manchester, on April 28, 1988, private respondent paid an additional docket fee of P62,132.92.
Although private respondent appears to have paid a total amount of P182,824.90 for the docket fee
considering the total amount of his claim in the amended and supplemental complaint amounting to about
P64,601,620.70, petitioner insists that private respondent must pay a docket fee of P257,810.49.
The principle in Manchester could very well be applied in the present case. The pattern and the intent to
defraud the government of the docket fee due it is obvious not only in the filing of the original complaint
but also in the filing of the second amended complaint.
However, in Manchester, petitioner did not pay any additional docket fee until] the case was decided by
this Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on the government, this
Court held that the court a quo did not acquire jurisdiction over the case and that the amended complaint
could not have been admitted inasmuch as the original complaint was null and void.
In the present case, a more liberal interpretation of the rules is called for considering that, unlike
Manchester, private respondent demonstrated his willingness to abide by the rules by paying the
additional docket fees as required. The promulgation of the decision in Manchester must have had that
sobering influence on private respondent who thus paid the additional docket fee as ordered by the
respondent court. It triggered his change of stance by manifesting his willingness to pay such additional
docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the total
amount of the claim. This is a matter which the clerk of court of the lower court and/or his duly authorized
docket clerk or clerk in-charge should determine and, thereafter, if any amount is found due, he must
require the private respondent to pay the same.
Thus, the Court rules as follows:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the
action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the
court may allow payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third party claims and similar pleadings, which
shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also
allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive
or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and
payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the
pleading, or if specified the same has been left for determination by the court, the additional filing fee
therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his
duly authorized deputy to enforce said lien and assess and collect the additional fee.
WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the court a quo is
hereby instructed to reassess and determine the additional filing fee that should be paid by private
respondent considering the total amount of the claim sought in the original complaint and the
supplemental complaint as may be gleaned from the allegations and the prayer thereof and to require
private respondent to pay the deficiency, if any, without pronouncement as to costs.
SO ORDERED.
G.R. No. 165147 July 9, 2008
PHILIPPINE FIRST INSURANCE CO., INC. and PARAMOUNT GENERAL INSURANCE
CORPORATION,Petitioners,
vs.
PYRAMID LOGISTICS AND TRUCKING CORPORATION (formerly PANACOR INTEGRATED
WAREHOUSING AND TRUCKING CORPORATION), Respondent.
The issue, in the main, in the present case is whether respondent, Pyramid Logistics and Trucking
Corporation (Pyramid), which filed on November 7, 2001 a complaint, 1 denominated as one for specific
performance and damages, against petitioners Philippine First Insurance Company, Inc. (Philippine First)
and Paramount General Insurance Corporation (Paramount) before the Regional Trial Court (RTC) of
Makati, docketed as Civil Case No. 01-1609, paid the correct docket fee; if in the negative, whether the
complaint should be dismissed or Pyramid can still be ordered to pay the fee.
Pyramid sought to recover the proceeds of two insurance policies issued to it, Policy No. IN-002904
issued by petitioner Paramount, and Policy No. MN-MCL-HO-00-0000007-00 issued by petitioner
Philippine First. Despite demands, petitioners allegedly failed to settle them, hence, it filed the complaint
subject of the present petition.
In its complaint, Pyramid alleged that on November 8, 2000, its delivery van bearing license plate number
PHL-545 which was loaded with goods belonging to California Manufacturing Corporation (CMC) valued
at PESOS NINE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY NINE AND SEVEN/100
(₱907,149.07) left the CMC Bicutan Warehouse but the van, together with the goods, failed to reach its
destination and its driver and helper were nowhere to be found, to its damage and prejudice; that it filed a
criminal complaint against the driver and the helper for qualified theft, and a claim with herein petitioners
as co-insurers of the lost goods but, in violation of petitioners’ undertaking under the insurance policies,
they refused without just and valid reasons to compensate it for the loss; and that as a direct
consequence of petitioners’ failure, despite repeated demands, to comply with their respective
undertakings under the Insurance Policies by compensating for the value of the lost goods, it suffered
damages and was constrained to engage the services of counsel to enforce and protect its right to
recover compensation under said policies, for which services it obligated itself to pay the sum equivalent
to twenty-five (25%) of any amount recovered as and for attorney’s fees and legal expenses. 2
Pyramid thus prayed
. . . that after due proceedings, judgment be rendered, ordering [herein petitioners] to comply with their
obligation under their respective Insurance Policies by paying to [it] jointly and severally, the claims
arising from the subject losses.
THAT, [herein petitioners] be adjudged jointly and severally to pay to [it], in addition to the foregoing, the
following:
1. The sum of PHP 50,000.00 plus PHP 1,500.00 for each Court session attended by counsel
until the instant [case] is finally terminated, as and for attorney’s fees;
2. The costs of suit[;] 3 (Underscoring supplied)
and for other reliefs just and equitable in the premises. 4
Pyramid was assessed ₱610 docket fee, apparently on the basis of the amount of ₱50,000 specified in
the prayer representing attorney’s fees, which it duly paid. 5
Pyramid later filed a 1st Amended Complaint 6 containing minor changes in its body7 but bearing the same
prayer.8Branch 148 of the Makati RTC to which the complaint was raffled admitted the Amended
Complaint.9
Petitioners filed a Motion to Dismiss on the ground of, inter alia, lack of jurisdiction, Pyramid not having
paid the docket fees in full, arguing thus:
xxxx
In the body of the Amended Complaint, plaintiff alleged that the goods belonging to California
Manufacturing Co., Inc. (CMC) is [sic] "valued at Php907,149.07" and consequently, "plaintiff incurred
expenses, suffered damages and was constrained to engage the services of counsel to enforce and
protect its right to recover compensation under the said policies and for which services, it obligated itself
to pay the sum equivalent to twenty-five (25%) of any recovery in the instant action, as and for attorney’s
fees and legal expenses".
On the other hand, in the prayer in the Complaint, plaintiff deliberately omitted to specify what these
damages are. x x x
xxxx
Verily, this deliberate omission by the plaintiff is clearly intended for no other purposes than to evade the
payment of the correct filing fee if not to mislead the docket clerk, in the assessment of the filing fee. In
fact, the docket clerk in the instant case charged the plaintiff a total of Php610.00 only as a filing fee,
which she must have based on the amount of Php50,000.00 [attorney’s fees] only.10 (Emphasis in the
original; italics and underscoring supplied)
Petitioners cited11 Manchester Development Corporation v. Court of Appeals 12 which held:
x x x [A]ll complaints, petitions, answers and other similar pleadings should specify the amount of
damages being prayed for not only in the body of the pleading but also in the prayer, and said damages
shall be considered in the assessment of the filing fees in any case. Any pleading that fails to comply with
this requirement shall not be accepted or admitted, or shall otherwise be expunged from the
record.13 (Emphasis and underscoring supplied)
They cited too Sun Insurance Office, Ltd. v. Asuncion 14 which held that "[i]t is not simply the filing of the
complaint or appropriate pleading, but the payment of the prescribed docket fee, that vests a trial court
with jurisdiction over the subject-matter or nature of the action." 15
Petitioners thus concluded:
With the above cases as a backdrop, the Supreme Court, in revising the rules of pleading and practice in
the 1997 Rules of Civil Procedure, added a tenth ground to a Motion to Dismiss – to wit, "[t]hat a
condition precedent for filing claim [sic] has not been complied with.["]
On the contrary, if plaintiff would insist that its claim against the defendants is only Php50,000.00 plus
Php 1,500.00 as appearance fee per court hearing, then it follows that it is the Metropolitan Trial Court
which has jurisdiction over this case, not this Honorable Court. Such amount is way below the minimum
jurisdictional amount prescribed by the rules in order to confer jurisdiction to the Regional Trial
Court.16 (Underscoring supplied)
To the Motion to Dismiss Pyramid filed its Opposition,17 alleging that if there was a mistake in the
assessment of the docket fees, the trial court was not precluded from acquiring jurisdiction over the
complaint as "it has the authority to direct the mistaken party to complete the docket fees in the course of
the proceedings . . ."18 The Opposition merited a Reply19 from petitioners.
By Order of June 3, 2002, the trial court20 denied the Motion to Dismiss in this wise:
xxxx
Indeed, a perusal of the Complaint reveals that while plaintiff made mention of the value of the goods,
which were lost, the prayer of plaintiff did not indicate its exact claim from the defendants. The Complaint
merely prayed defendants "to comply with their obligation under their respective insurance policies by
paying to plaintiff jointly and severally, the claims arising from the subject losses" and did not mention the
amount of PHP907,149.07, which is the value of the goods and which is also the subject of insurance.
This resulted to the assessment and payment of docket fees in the amount of P610 only. The Court, even
without the Motion to Dismiss filed by defendant, actually noted such omission which is actually
becoming a practice for some lawyers. For whatever purpose it may be, the Court will not dwell into it. In
this instant case, this being for specific performance, it is not dismissible on that ground but unless proper
docket fees are paid, the Court can only grant what was prayed for in the Complaint.
x x x x21 (Emphasis and underscoring supplied)
Petitioners’ Motion for Reconsideration22 of the denial of their Motion to Dismiss having been denied 23 by
Order of August 1, 2002, they filed their Answer with Compulsory Counterclaim ad Cautelam, 24 alleging
that they intended to file a Petition for Certiorari with the Court of Appeals. 25
Petitioners did indeed eventually file before the Court of Appeals a Petition for Certiorari (With Preliminary
Injunction and Urgent Prayer for Restraining Order) 26 posing the following two of three queries, viz:
First. Does [Pyramid’s] deliberate omission to pay the required correct docket and filing fee vest the trial
court [with] jurisdiction to entertain the subject matter of the instant case?
Second. [Is] the instant case an action for specific performance or simply one for damages or recovery of
a sum of money?
x x x x27
By Decision of June 3, 2004,28 the Court of Appeals partially granted petitioners’ petition for certiorari by
setting aside the trial judge’s assailed orders and ordering Pyramid to file the correct docket fees within a
reasonable time, it holding that while the complaint was denominated as one for specific performance, it
sought to recover from petitioners Pyramid’s "claims arising from the subject losses." The appellate court
ratiocinated:
xxxx
Indeed, it has been held that "it is not simply the filing of the complaint or appropriate initiatory pleading,
but the payment of the prescribed docket fee that vests a trial court with jurisdiction over the subject
matter or nature of the action." To determine the docket fees, it is necessary to determine the true nature
of the action by examining the allegations of the complaint. x x x
xxxx
While the captions of the complaint and 1st amended complaint denominated the case as one for
"Specific Performance and Damages", the allegations and prayer therein show that the specific
performance sought by private respondent was for petitioners to "comply with their obligation under their
respective Insurance Policies by paying to plaintiff jointly and severally, the claims arising from the
subject losses" as well as the attorney’s fees and costs of suit. Obviously, what constitutes specific
performance is the payment itself by petitioners of private respondent’s claims arising from the losses it
allegedly incurred. x x x29
xxxx
Public respondent should have ordered private respondent to pay the correct docket fees on the basis of
the allegations of the complaint. x x x
xxxx
While it has been held in Manchester Development Corporation vs. Court of Appeals x x x that "any
pleading that fails to comply with this requirement of specifying the amount of damages not only in the
body of the pleading but also in the prayer shall not be accepted nor admitted, or shall otherwise be
expunged from the record," this rule was relaxed in subsequent cases, wherein payment of the correct
docket fees was allowed within a reasonable time. . .
x x x x30 (Emphasis and underscoring supplied)
Thus the appellate court disposed:
WHEREFORE, the petition is partially granted. The Orders dated June 3, 2002 and August 1, 2002 of
public respondent are partially set aside insofar as they dispensed with the payment of the correct docket
fees. Consequently, [Pyramid] is hereby directed to pay the correct docket fees on the basis of the losses
alleged in the body of the complaint, plus the attorney’s fees mentioned in the prayer, within a reasonable
time which should not go beyond the applicable prescriptive or reglementary period. In all other respects,
the said Orders are affirmed.31(Underscoring supplied)
Petitioners filed a Motion for Reconsideration32 of the appellate court’s decision. Pyramid filed its
Comment and Opposition to the Motion for Reconsideration, 33 arguing thus:
xxxx
In the present case, [Pyramid] thru its Complaint simply sought from petitioners compliance with their
contractual undertaking as insurers of the goods insured which were lost in [its] custody. Private
respondent did not specify the extent of petitioners’ obligation as it left the matter entirely in the judgment
of the trial court to consider. Thus, the Complaint was labeled "Specific Performance" which [Pyramid]
submitted to the Clerk of Court for assessment of the docket fee, after which, it paid the same based on
the said assessment. There was no indication whatsoever that [Pyramid] had refused to pay; rather, it
merely argued against petitioners’ submissions as it maintained the correctness of the assessment
made.34 (Underscoring supplied)
By Resolution of August 23, 2004, the Court of Appeals denied petitioners’ Motion for
Reconsideration;35 hence, the present Petition for Review on Certiorari, 36 raising the issues of whether
the appellate court erred:
. . . WHEN IT APPLIED IN THE INSTANT CASE THE LIBERAL RULE ENUNCIATED IN SUN
INSURANCE OFFICE, LTD. (SIOL) VS. ASUNCION, 170 SCRA 274 AND NATIONAL STEEL
CORPORATION VS. COURT OF APPEALS, 302 SCRA 523 (1999) IN RESPECT TO THE PAYMENT OF
THE PRESCRIBED FILING AND DOCKET FEES DESPITE CLEAR SHOWING OF RESPONDENT’S
INTENTION TO EVADE THE PAYMENT OF THE CORRECT DOCKET FEE WHICH WARRANTS THE
APPLICATION OF THE DOCTRINE LAID DOWN IN MANCHESTER DEVELOPMENT
CORPORATION VS. COURT OF APPEALS, 149 SCRA 562.
. . . WHEN IT DID NOT APPLY THE RULING OF THIS HONORABLE TRIBUNAL IN MARCOPPER
MINING CORPORATION VS. GARCIA, 143 SCRA 178, TAN VS. DIRECTOR OF FORESTRY, 125
SCRA 302, AND CHINA ROAD AND BRIDGE CORPORATION VS. COURT OF APPEALS, 348 SCRA
401.37 (Underscoring supplied)
Petitioners invoke the doctrine in Manchester Development Corporation v. Court of Appeals 38 that a
pleading which does not specify in the prayer the amount sought shall not be admitted or shall otherwise
be expunged, and that the court acquires jurisdiction only upon the payment of the prescribed docket
fee.39
Pyramid, on the other hand, insists, in its Comment on the Petition, 40 on the application of Sun Insurance
Office, Ltd. (SIOL) v. Asuncion41 and subsequent rulings relaxing the Manchester ruling by allowing
payment of the docket fee within a reasonable time, in no case beyond the applicable prescriptive or
reglementary period, where the filing of the initiatory pleading is not accompanied by the payment of the
prescribed docket fee.42
In Tacay v. Regional Trial Court of Tagum, Davao del Norte, 43 the Court clarified the effect of the Sun
Insurance ruling on the Manchester ruling as follows:
As will be noted, the requirement in Circular No. 7 [of this Court which was issued based on the
Manchester ruling44] that complaints, petitions, answers, and similar pleadings should specify the amount
of damages being prayed for not only in the body of the pleading but also in the prayer, has not been
altered. What has been revised is the rule that subsequent "amendment of the complaint or similar
pleading will not thereby vest jurisdiction in the Court, much less the payment of the docket fee based on
the amount sought in the amended pleading," the trial court now being authorized to allow payment of the
fee within a reasonable time but in no case beyond the applicable prescriptive period or reglementary
period. Moreover, a new rule has been added, governing the awards of claims not specified in the
pleading – i.e., damages arising after the filing of the complaint or similar pleading – as to which the
additional filing fee therefore shall constitute a lien on the judgment.
Now, under the Rules of Court, docket or filing fees are assessed on the basis of the "sum claimed," on
the one hand, or the "value of the property in litigation or the value of the estate," on the other. . .
Where the action is purely for the recovery of money or damages, the docket fees are assessed on the
basis of the aggregate amount claimed, exclusive only of interests and costs. In this case, the complaint
or similar pleading should, according to Circular No. 7 of this Court, "specify the amount of damages
being prayed for not only in the body of the pleading but also in the prayer, and said damages shall be
considered in the assessment of filing fees in any case."
Two situations may arise. One is where the complaint or similar pleading sets out a claim purely for
money and damages and there is no statement of the amounts being claimed. In this event the rule is
that the pleading will "not be accepted nor admitted, or shall otherwise be expunged from the record." In
other words, the complaint or pleading may be dismissed, or the claims as to which amounts are
unspecified may be expunged, although as aforestated the Court may, on motion, permit amendment of
the complaint and payment of the fees provided the claim has not in the meantime become time-barred.
The other is where the pleading does specify the amount of every claim, but the fees paid are insufficient;
and here again, the rule now is that the court may allow a reasonable time for the payment of the
prescribed fees, or the balance thereof, and upon such payment, the defect is cured and the court may
properly take cognizance of the action, unless in the meantime prescription has set in and consequently
barred the right of action.45 (Emphasis and underscoring supplied)
Indeed, Pyramid captioned its complaint as one for "specific performance and damages" even if it was,
as the allegations in its body showed, seeking in the main the collection of its claims-sums of money
representing losses the amount of which it, by its own admission, "knew." 46 And, indeed, it failed to
specify in its prayer in the complaint the amount of its claims/damages.
When Pyramid amended its complaint, it still did not specify, in its prayer, the amount of claims/damages
it was seeking. In fact it has the audacity to inform this Court, in its Comment on the present Petition, that
x x x In the natural order of things, when a litigant is given the opportunity to spend less for a docket fee
after submitting his pleading for assessment by the Office of the Clerk of Court, he would not decline it
inasmuch as to request for a higher assessment under the circumstances [for such] is against his interest
and would be senseless. Placed under the same situation, petitioner[s] would certainly do likewise. To
say otherwise would certainly be dishonest, 47
which comment drew petitioners to conclude as follows:
[This] only shows respondent’s dishonesty and lack of regard of the rules. Following this line of
reasoning, respondent would do everything if only for it to spend less for the filing fee, even to the extent
of circumventing and defying the rule on the payment of the filing fee.
In spite of the fact that the respondent was already caught in the quagmire of its own cobweb of
deception, it further justified its unethical act by ratiocinating that "placed under the same situation,
petitioner would certainly do likewise, to say otherwise would certainly be dishonest". This attitude of the
respondent is very alarming! Having been caught red-handed, the honorable thing that respondent
should have done is admit its own violation rather than justify an act which it knows is a clear
contravention of the rules and jurisprudence. 48 (Italics and emphasis in the original)
Pyramid’s following justification for omitting to specify in the prayer of its complaint the amount of its
claims/damages, viz:
xxxx
x x x While respondent knew its losses and alleged them in the body of the Complaint, it was not
aware of the extent of petitioners’ respective liability under the two insurance policies. The allegation
of respondent’s losses, albeit, without repeating them in its prayer for relief was not motivated by an
intention to mislead, cheat or defraud the Court. It just left the matter of liability arising from two separate
and distinct Insurance Policies covering the same insurable risk for the trial court’s determination, hence,
respondent came up with an action for "specific performance[,]" 49 (Emphasis and underscoring supplied)
fails to impress.
As the salient allegations of Pyramid’s complaint show and as priorly stated, they constitute, in the main,
an action for collection of its claims it admittedly "knew."
Assuming arguendo that Pyramid has other claims the amounts of which are yet to be determined by the
trial court, the rule established in Manchester which was embodied in this Court’s Circular No. 7-88
issued on March 24, 1988, as modified by the Sun Insurance ruling, still applies. Consider this Court’s
pronouncement bearing on the matter in Ayala Corporation v. Madayag: 501awphil
xxxx
Apparently, the trial court misinterpreted paragraph 3 of the [Sun Insurance] ruling of this Court wherein it
stated that "where the judgment awards a claim not specified in the pleading, or if specified, the same
has been left for the determination of the court, the additional filing fee therefor shall constitute a lien on
the judgment" by considering it to mean that where in the body and prayer of the complaint there is a
prayer xxx the amount of which is left to the discretion of the Court, there is no need to specify the
amount being sought, and that any award thereafter shall constitute a lien on the judgment.
x x x While it is true that the determination of certain damages x x x is left to the sound discretion of the
court, it is the duty of the parties claiming such damages to specify the amount sought on the basis of
which the court may make a proper determination, and for the proper assessment of the appropriate
docket fees. The exceptioncontemplated as to claims not specified or to claims although specified are
left for determination of the court is limited only to any damages that may arise after the filing of the
complaint or similar pleading for then it will not be possible for the claimant to specify nor speculate as to
the amount thereof. (Emphasis and underscoring supplied)
If respondent Pyramid’s counsel had only been forthright in drafting the complaint and taking the cudgels
for his client and the trial judge assiduous in applying Circular No. 7 vis a vis prevailing jurisprudence, the
precious time of this Court, as well as of that of the appellate court, would not have been unnecessarily
sapped.
The Court at this juncture thus reminds Pyramid’s counsel to observe Canon 12 of the Code of
Professional Ethics which enjoins a lawyer to "exert every effort and consider it his duty to assist in the
speedy and efficient administration of justice," and Rule 12.04 of the same Canon which enjoins a lawyer
"not [to] unduly delay a case, impede the execution of a judgment or misuse court processes." And the
Court reminds too the trial judge to bear in mind that the nature of an action is determined by the
allegations of the pleadings51 and to keep abreast of all laws and prevailing jurisprudence, consistent with
the standard that magistrates must be the embodiments of competence, integrity and independence. 52
WHEREFORE, in light of the foregoing discussions, the petition is DENIED.
SO ORDERED.
G.R. No. 192649 June 22, 2011
HOME GUARANTY CORPORATION, Petitioner,
vs.
R-II BUILDERS INC. and NATIONAL HOUSING AUTHORITY, Respondents.
Before the Court are: (a) the Entry of Appearance filed by Atty. Lope E. Feble of the Toquero Exconde
Manalang Feble Law Offices as collaborating counsel for respondent R-II Builders, Inc. (R-II Builders),
with prayer to be furnished all pleadings, notices and other court processes at its given address; and (b)
the motion filed by R-II Builders, seeking the reconsideration of Court's decision dated 9 March 2011 on
the following grounds:1
I real property. Taking into consideration the allegations and the nature of the relief sought in the complaint
THE HONORABLE COURT ERRED IN RULING THAT RTC MANILA, BRANCH 22, HAD NO
JURISDICTION OVER THE PRESENT CASE SINCE RTC-MANILA, BRANCH 24, TO
WHICH THE INSTANT CASE WAS INITIALLY RAFFLED HAD NO AUTHORITY TO HEAR
THE CASE BEING A SPECIAL COMMERCIAL COURT.
II.
THE HONORABLE COURT ERRED IN RULING THAT THE CORRECT DOCKET FEES
WERE NOT PAID.
In urging the reversal of the Court's decision, R-II Builders argues that it filed its complaint with the Manila
RTC which is undoubtedly vested with jurisdiction over actions where the subject matter is incapable of
pecuniary estimation; that through no fault of its own, said complaint was raffled to Branch 24, the
designated Special Commercial Court (SCC) tasked to hear intra-corporate controversies; that despite
the determination subsequently made by Branch 24 of the Manila RTC that the case did not involve an
intra-corporate dispute, the Manila RTC did not lose jurisdiction over the same and its Executive Judge
correctly directed its re-raffling to Branch 22 of the same Court; that the re-raffle and/or amendment of
pleadings do not affect a court's jurisdiction which, once acquired, continues until the case is finally
terminated; that since its original Complaint, Amended and Supplemental Complaint and Second
Amended Complaint all primarily sought the nullification of the Deed of Assignment and Conveyance
(DAC) transferring the Asset Pool in favor of petitioner Home Guaranty Corporation (HGC), the subject
matter of the case is clearly one which is incapable of pecuniary estimation; and, that the court erred in
holding that the case was a real action and that it evaded the payment of the correct docket fees
computed on the basis of the assessed value of the realties in the Asset Pool.
R-II Builders' motion is bereft of merit.
The record shows that, with the raffle of R-II Builders’ complaint before Branch 24 of the Manila RTC and
said court’s grant of the application for temporary restraining order incorporated therein, HGC sought a
preliminary hearing of its affirmative defenses which included, among other grounds, lack of jurisdiction
and improper venue. It appears that, at said preliminary hearing, it was established that R-II Builders’
complaint did not involve an intra-corporate dispute and that, even if it is, venue was improperly laid since
none of the parties maintained its principal office in Manila. While it is true, therefore, that R-II Builders
had no hand in the raffling of the case, it cannot be gainsaid that Branch 24 of the RTC Manila had no
jurisdiction over the case. Rather than ordering the dismissal of the complaint, however, said court issued
the 2 January 2008 order erroneously ordering the re-raffle of the case. In Atwel v. Concepcion
Progressive Association, Inc.2 and Reyes v. Hon. Regional Trial Court of Makati, Branch 142 3which
involved SCCs trying and/or deciding cases which were found to be civil in nature, this Court significantly
ordered the dismissal of the complaint for lack of jurisdiction instead of simply directing the re-raffle of the
case to another branch.
Even then, the question of the Manila RTC's jurisdiction over the case is tied up with R-II Builder's
payment of the correct docket fees which should be paid in full upon the filing of the pleading or other
application which initiates an action or proceeding. 4 While it is, consequently, true that jurisdiction, once
acquired, cannot be easily ousted, 5 it is equally settled that a court acquires jurisdiction over a case only
upon the payment of the prescribed filing and docket fees. 6 Already implicit from the filing of the
complaint in the City of Manila where the realties comprising the Asset Pool are located, the fact that the
case is a real action is evident from the allegations of R-II Builders’ original Complaint, Amended and
Supplemental Complaint and Second Amended Complaint which not only sought the nullification of the
DAC in favor of HGC but, more importantly, prayed for the transfer of possession of and/or control of the
properties in the Asset Pool. Its current protestations to the contrary notwithstanding, no less than R-II
Builders – in its opposition to HGC’s motion to dismiss – admitted that the case is a real action as it
affects title to or possession of real property or an interest therein. 7 Having only paid docket fees
corresponding to an action where the subject matter is incapable of pecuniary estimation, R-II Builders
cannot expediently claim that jurisdiction over the case had already attached.
In De Leon v. Court of Appeals,8 this Court had, of course, ruled that a case for rescission or annulment
of contract is not susceptible of pecuniary estimation although it may eventually result in the recovery of
in the subsequent case of Serrano v. Delica, 9 however, this Court determined the existence of a real
action and ordered the payment of the appropriate docket fees for a complaint for cancellation of sale
which prayed for both permanent and preliminary injunction aimed at the restoration of possession of the
land in litigation is a real action. In discounting the apparent conflict in said rulings, the Court went on to
rule as follows in Ruby Shelter Builders and Realty Development Corporation v. Hon. Pablo C,
Formaran,10 to wit:
The Court x x x does not perceive a contradiction between Serrano and the Spouses De Leon. The Court
calls attention to the following statement in Spouses De Leon: "A review of the jurisprudence of this Court
indicates that in determining whether an action is one the subject matter of which is not capable of
pecuniary estimation, this Court has adopted the criterion of first ascertaining the nature of the principal
action or remedy sought." Necessarily, the determination must be done on a case-to-case basis,
depending on the facts and circumstances of each. What petitioner conveniently ignores is that
in Spouses De Leon, the action therein that private respondents instituted before the RTC was "solely for
annulment or rescission" of the contract of sale over a real property. There appeared to be no transfer of
title or possession to the adverse party x x x. (Underscoring Supplied)1avvphi1
Having consistently sought the transfer of possession and control of the properties comprising the Asset
Pool over and above the nullification of the Deed of Conveyance in favor of HGC, it follows R-II Builders
should have paid the correct and appropriate docket fees, computed according to the assessed value
thereof. This much was directed in the 19 May 2008 Order issued by Branch 22 of the Manila RTC which
determined that the case is a real action and admitted the Amended and Supplemental Complaint R-II
Builders subsequently filed in the case.11 In obvious evasion of said directive to pay the correct docket
fees, however, R-II Builders withdrew its Amended and Supplemental Complaint and, in lieu thereof, filed
its Second Amended Complaint which, while deleting its causes of action for accounting and conveyance
of title to and/or possession of the entire Asset Pool, nevertheless prayed for its appointment as Receiver
of the properties comprising the same. In the landmark case of Manchester Development Corporation v.
Court of Appeals,12 this Court ruled that jurisdiction over any case is acquired only upon the payment of
the prescribed docket fee which is both mandatory and jurisdictional. Although it is true that the
Manchester Rule does not apply despite insufficient filing fees when there is no intent to defraud the
government,13R-II Builders’ evident bad faith should clearly foreclose the relaxation of said rule.
In addition to the jurisdictional and pragmatic aspects underlying the payment of the correct docket fees
which have already been discussed in the decision sought to be reconsidered, it finally bears
emphasizing that the Asset Pool is comprised of government properties utilized by HGC as part of its
sinking fund, in pursuit of its mandate as statutory guarantor of government housing programs. With the
adverse consequences that could result from the transfer of possession and control of the Asset Pool, it
is imperative that R-II Builders should be made to pay the docket and filing fees corresponding to the
assessed value of the properties comprising the same.
WHEREFORE, the Court resolves to:
(a) NOTE the Entry of Appearance of Atty. Lope E. Feble of Tuquero Exconde Manalang
Feble Law Offices as collaborating counsel for respondent R-II Builders, Inc.; and DENY
counsel’s prayer to be furnished with all pleadings notices and other court processes at Unit
2704-A, West Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center
Pasig, since only the lead counsel is entitled to service of court processes;
(b) DENY with FINALITY R-II Builders, Inc.’s Motion for Reconsideration of the Decision
dated 9 March 2011 for lack of merit, the basic issues having been already passed upon and
there being no substantial argument to warrant a modification of the same. No further
pleadings or motions shall be entertained herein.
Let an Entry of Judgment in this case be made in due course.
SO ORDERED.
G.R. Nos. 175277 & 175285 September 11, 2013
UNICAPITAL, INC., UNICAPITAL REALTY, INC., and JAIME J. MARTINEZ, Petitioners,
vs.
RAFAEL JOSE CONSING, JR., and THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF
PASIG CITY, BRANCH 168, Respondents.
x-----------------------x
G.R. No. 192073
RAFAEL JOSE CONSING, JR., Petitioner,
vs.
HON. MARISSA MACARAIG-GUILLEN, in her capacity as the Presiding Judge of the Regional Trial
Court of Makati City, Branch 60 and UNICAPITAL, INC., Respondents.
Before the Court are consolidated petitions for review on certiorari 1 assailing separate issuances of the
Court of Appeals (CA) as follows:
(a) The petitions in G.R. Nos. 175277 and 175285 filed by Unicapital, Inc., (Unicapital),
Unicapital Realty, Inc. (URI), and Unicapital Director and Treasurer Jaime J. Martirez
(Martirez)assail the CA’s Joint Decision2 dated October 20, 2005 and Resolution3 dated
October 25, 2006 in CA-G.R. SP Nos. 64019and 64451 which affirmed the Resolution 4 dated
September 14,1999 and Order 5 dated February 15, 2001 of the Regional Trial Court (RTC) of
Pasig City, Branch 68 (RTC-Pasig City) in SCA No. 1759, upholding the denial of their motion
to dismiss; and
(b) The petition in G.R. No. 192073 filed by Rafael Jose Consing, Jr. (Consing, Jr.) assails the
CA’s Decision6dated September 30, 2009 and Resolution 7 dated April 28, 2010 inCA-G.R. SP
No. 101355 which affirmed the Orders dated July16, 2007 8 and September 4, 20079 of the
RTC of Makati City, Branch 60 (RTC-Makati City) in Civil Case No. 99-1418,upholding the
denial of his motion for consolidation.
The Facts
In 1997, Consing, Jr., an investment banker, and his mother, Cecilia Dela Cruz (Dela Cruz), obtained an
₱18,000,000.00 loan from Unicapital,₱12,000,000.00 of which was acquired on July 24, 1997 and the
remaining₱6,000,000.00 on August 1, 1997. The said loan was secured by Promissory Notes 10 and a
Real Estate Mortgage11 over a 42,443 square meter-parcel of land located at Imus, Cavite, registered in
the name of Dela Cruz as per Transfer Certificate of Title (TCT) No. T-687599 (subject property). 12 Prior
to these transactions, Plus Builders, Inc. (PBI), a real estate company, was already interested to develop
the subject property into a residential subdivision. 13 In this regard, PBI entered into a joint venture
agreement with Unicapital, through its real estate development arm, URI. In view of the foregoing, the
loan and mortgage over the subject property was later on modified into an Option to Buy Real
Property14 and, after further negotiations, Dela Cruz decided to sell the same to Unicapital and PBI. For
this purpose, Dela Cruz appointed Consing, Jr. as her attorney-in-fact. 15
Eventually, Unicapital, through URI, purchased one-half of the subject property for a consideration of
₱21,221,500.00 (against which Dela Cruz’s outstanding loan obligations were first offset), while PBI
bought the remaining half for the price of ₱21,047,000.00. 16 In this relation, Dela Cruz caused TCT No. T-
687599 to be divided into three separate titles as follows: (a) TCT No. T-851861 for URI; 17 (b) TCT No. T-
851862 for PBI;18 and (c)TCT No. T-51863 which was designated as a road lot. 19 However, even before
URI and PBI were able to have the titles transferred to their names, Juanito Tan Teng (Teng) and Po
Willie Yu (Yu) informed Unicapital that they are the lawful owners of the subject property as evidenced by
TCT No.T-114708;20 that they did not sell the subject property; and that Dela Cruz’s title, i.e., TCT No. T-
687599, thereto was a mere forgery. 21 Prompted by Teng and Yu’s assertions, PBI conducted further
investigations on the subject property which later revealed that Dela Cruz's title was actually of dubious
origin. Based on this finding, PBI and Unicapital sent separate demand letters 22 to Dela Cruz and
Consing, Jr., seeking the return of the purchase price they had paid for the subject property.
From the above-stated incidents stemmed the present controversies as detailed hereunder.
The Proceedings Antecedent to G.R. Nos. 175277 & 175285
On May 3, 1999, Consing, Jr. filed a complaint, denominated as a Complex Action for Declaratory
Relief23 and later amended to Complex Action for Injunctive Relief 24 (Consing, Jr.’s complaint) before the
RTC-Pasig City against Unicapital, URI, PBI, Martirez, PBI General Manager Mariano Martinez
(Martinez), Dela Cruz and Does 1-20, docketed as SCA No. 1759. In his complaint, Consing, Jr. claimed
that the incessant demands/recovery efforts made upon him by Unicapital and PBI to return to them the
purchase price they had paid for the subject property constituted harassment and oppression which
severely affected his personal and professional life.25 He also averred that he was coerced to commit a
violation of Batas Pambansa Blg. 2226 as Unicapital and PBI, over threats of filing acase against him, kept
on forcing him to issue a post-dated check in the amount sought to be recovered, notwithstanding their
knowledge that he had no funds for the same. 27 He further alleged that Unicapital and URI required him
to sign blank deeds of sale and transfers without cancelling the old one sin violation of the laws on land
registration and real estate development. 28 Likewise, Consing, Jr. added that Unicapital and PBI’s
representatives were" speaking of him in a manner that was inappropriate and libelous," 29 and that some
John Does "deliberately engaged in a fraudulent scheme to compromise Consing, Jr.’s honor, integrity
and fortune x x x consisting of falsifying or causing to be falsified, or attempting to present as falsified
certain transfers of Land Titles and Deeds for profit," 30 classifying the foregoing as ultra vires acts which
should warrant sanctions under the corporation law, Revised Securities Act and related
laws.31 Accordingly, Consing, Jr. prayed that: (a) he be declared as a mere agent of Dela Cruz, and as
such, devoid of any obligation to Unicapital, URI, and PBI for the transactions entered into concerning the
subject property; (b) Unicapital, URI, and PBI be enjoined from harassing or coercing him, and from
speaking about him in a derogatory fashion; and (c) Unicapital, URI, and PBI pay him actual and
consequential damages in the amount of ₱2,000,000.00, moral damages of at least ₱1,000,000.00,
exemplary damages of ₱1,000,000.00, all per month, reckoned from May 1, 1999 and until the
controversy is resolved, and attorney's fees and costs of suit. 32
For their part, Unicapital, URI, and Martirez (Unicapital, et al.) filed separate Motions to
Dismiss33 Consing, Jr.’s complaint (Unicapital, et al.’s motion to dismiss) on the ground of failure to state
a cause of action, considering that: (a) no document was attached against which Consing, Jr. supposedly
derived his right and against which his rights may be as certained; (b) the demands to pay against
Consing, Jr. and for him to tender post-dated checks to cover the amount due were well within the rights
of Unicapital as an unpaid creditor, as Consing, Jr. had already admitted his dealings with them; (c) the
utterances purportedly constituting libel were not set out in the complaint; and (d) the laws supposedly
violated were not properly identified. Moreover, Unicapital, et al. posited that the RTC-PasigCity did not
acquire jurisdiction over the case given that Consing, Jr. failed to pay the proper amount of docket fees.
In the same vein, they maintained that the RTC-Pasig City had no jurisdiction over their supposed
violations of the Corporation Code and Revised Securities Act, which, discounting its merits, should have
been supposedly lodged with the Securities and Exchange Commission. Finally, they pointed out that
Consing, Jr.’s complaint suffers from a defective verification and, thus, dismissible. 34
Similar to Unicapital et al.’s course of action, PBI and its General Manager, Martinez (Unicapital and PBI,
et al.), sought the dismissal of Consing, Jr.’s complaint on the ground that it does not state a cause of
action. They also denied having singled out Consing, Jr. because their collection efforts were directed at
both Consing, Jr. and Dela Cruz, which should be deemed as valid and, therefore, should not be
restrained.35
On September 14, 1999, the RTC-Pasig City issued a Resolution 36 denying the above mentioned motions
to dismiss, holding that Consing, Jr.’s complaint sufficiently stated a cause of action for tort and damages
pursuant to Article 19 of the Civil Code. It ruled that where there is abusive behavior, a complainant, like
Consing, Jr., has the right to seek refuge from the courts. It also noted that the elements of libel in a
criminal case are not the same as those for a civil action founded on the provisions of the Civil Code, and
therefore, necessitates a different treatment. It equally refused to dismiss the action on the ground of
non-payment of docket fees, despite Consing, Jr.’s escalated claims for damages therein, as jurisdiction
was already vested in it upon the filing of the original complaint. Moreover, it resolved to apply the liberal
construction rule as regards the subject complaint’s verification and certification, despite its improper
wording, considering further that such defect was not raised at the first opportunity. Consequently, it
ordered Unicapital and PBI, et al. to file their Answer and, in addition, to submit" any Comment or
Reaction within five (5) days from receipt hereof on the allegations of Consing, Jr. in his rejoinder of
September 9, 1999regarding the supposed filing of an identical case in Makati City," 37 i.e., Civil Case No.
99-1418. Unperturbed, Unicapital and PBI, et al. moved for reconsideration therefrom which was,
however, denied by the RTC-Pasig City in an Order 38 dated February 15, 2001 for lack of merit.
Aggrieved, they elevated the denial of their motions to dismiss before the CA via a petition for certiorari
and prohibition,39 docketed as CA-G.R. SP Nos. 64019 and 64451.
On October 20, 2005, the CA rendered a Joint Decision 40 holding that no grave abuse of discretion was
committed by the RTC-Pasig City in refusing to dismiss Consing, Jr.'s complaint.1âwphi1 At the outset, it
ruled that while the payment of the prescribed docket fee is a jurisdictional requirement, its non-payment
will not automatically cause the dismissal of the case. In this regard, it considered that should there be
any deficiency in the payment of such fees, the same shall constitute a lien on the judgment award. 41 It
also refused to dismiss the complaint for lack of proper verification upon a finding that the copy of the
amended complaint submitted to the RTC-Pasig City was properly notarized. 42 Moreover, it upheld the
order of the RTC-Pasig City for Unicapital and PBI, et al. to submit their comment due to the alleged
existence of a similar case filed before the RTC-Makati City. 43
Anent the substantive issues of the case, the CA concurred with the RTC-Pasig City that Consing Jr.'s
complaint states a cause of action. It found that Unicapital and PBI, et al.’s purportedly abusive manner in
enforcing their claims against Consing, Jr. was properly constitutive of a cause of action as the same, if
sufficiently proven, would have subjected him to "defamation of his name in business circles, the threats
and coercion against him to reimburse the purchase price, fraud and falsification and breach of fiduciary
obligation." It also found that the fact that Consing Jr.'s complaint contains "nebulous" allegations will not
warrant its dismissal as any vagueness therein can be clarified through a motion for a bill of
particulars."44 Furthermore, it noted that Consing, Jr. does not seek to recover his claims against any
particular provision of the corporation code or the securities act but against the actions of Unicapital and
PBI, et al.; hence, Consing, Jr.’s complaint was principally one for damages over which the RTC has
jurisdiction, and, in turn, there lies no misjoinder of causes of action. 45
Dissatisfied, only Unicapital, et al. sought reconsideration therefrom but the same was denied by the CA
in a Resolution46 dated October 25,2006. Hence, the present petitions for review on certiorari in G.R.
Nos.175277 and 175285.
The Proceedings Antecedent to G.R. No. 192073
On the other hand, on August 4, 1999, Unicapital filed a complaint 47 for sum of money with damages
against Consing, Jr. and Dela Cruz before the RTC-Makati City, docketed as Civil Case No. 99-1418,
seeking to recover (a) the amount of ₱42,195,397.16, representing the value of their indebtedness based
on the Promissory Notes (subject promissory notes) plus interests; (b) ₱5,000,000.00 as exemplary
damages; (c) attorney's fees; and (d) costs of suit. 48
PBI also filed a complaint for damages and attachment against Consing, Jr. and Dela Cruz before the
RTC of Manila, Branch 12, docketed as Civil Case No. 99-95381, also predicated on the same set of
facts as above narrated.49 In its complaint, PBI prayed that it be allowed to recover the following: (a)
₱13,369,641.79, representing the total amount of installment payments made as actual damages plus
interests; (b) ₱200,000.00 as exemplary damages; (c) ₱200,000.00 as moral damages; (d) attorney's
fees; and (e) costs of suit.50 Civil Case No. 99-95381 was subsequently consolidated with SCA No. 1759
pending before the RTC-Pasig City. 51
For his part, Consing, Jr. filed a Motion to Dismiss Civil Case No. 99-1418 which was, however, denied
by the RTC-Makati City in an Order52 dated November 16, 1999. Thereafter, he filed a Motion for
Consolidation53 (motion for consolidation) of Civil Case No. 99-1418 with his own initiated SCA No. 1759
pending before the RTC-Pasig City.
In an Order54 dated July 16, 2007, the RTC-Makati City dismissed Consing, Jr.’s motion for consolidation
and, in so doing, ruled that the cases sought to be consolidated had no identity of rights or causes of
action and the reliefs sought for by Consing, Jr. from the RTC-Pasig City will not bar Unicapital from
pursuing its money claims against him. Moreover, the RTC-Makati City noted that Consing, Jr. filed his
motion only as an after thought as it was made after the mediation proceedings between him and
Unicapital failed. Consing, Jr.'s motion for reconsideration therefrom was denied in an Order 55 dated
September 4, 2007. Hence, he filed a petition for certiorari before the CA, docketed as CA-G.R. SP No.
101355, ascribing grave abuse of discretion on the part of the RTC-Makati City in refusing to consolidate
Civil Case No. 99-1418 with SCA No. 1759 in Pasig City.
On September 30, 2009, the CA rendered a Decision 56 sustaining the Orders dated July 16, 2007 and
September 4, 2007 of the RTC-Makati City which denied Consing, Jr.’s motion for consolidation. It held
that consolidation is a matter of sound discretion on the part of the trial court which could be gleaned
from the use of the word "may" in Section 1, Rule38 of the Rules of Court. Considering that preliminary
steps (such as mediation) have already been undertaken by the parties in Civil Case No.99-1418
pending before the RTC-Makati City, its consolidation with SCA No. 1759 pending before the RTC-Pasig
City "would merely result in complications in the work of the latter court or squander the resources or
remedies already utilized in the Makati case."57 Moreover, it noted that the records of the consolidated
Pasig and Manila cases, i.e., SCA No. 1759 and Civil Case No. 99-95381, respectively, had already been
elevated to the Court, that joint proceedings have been conducted in those cases and that the pre-trial
therein had been terminated as early as October 23, 2007.Therefore, due to these reasons, the
consolidation prayed for would be impracticable and would only cause a procedural faux pas. Undaunted,
Consing, Jr. filed a motion for reconsideration therefrom but was denied by the CA in a Resolution 58 dated
April 28, 2010. Hence, the present petition for review on certiorari in G.R. No. 192073.
The Proceedings Before the Court
After the filing of the foregoing cases, the parties were required to file their respective comments and
replies. Further, considering that G.R. No.192073 (Makati case) involves the same parties and set of
facts with those in G.R. Nos. 175277 & 175285 (Pasig case), these cases were ordered consolidated per
the Court's Resolution59 dated November 17, 2010. On March 9, 2011, the Court resolved to give due
course to the instant petitions and required the parties to submit their respective memoranda. 60
The Issues Before the Court
The essential issues in these cases are as follows: (a) in G.R. Nos.175277 and 175285, whether or not
the CA erred in upholding the RTC-Pasig City’s denial of Unicapital, et al.’s motion to dismiss; and (b) in
G.R. No. 192073, whether or not the CA erred in upholding the RTC-Makati City’s denial of Consing, Jr.’s
motion for consolidation.
The Court’s Ruling
A. Propriety of the denial of
Unicapital, et al.’s motion to
dismiss and ancillary issues.
61
A cause of action is defined as the act or omission by which a party violates a right of another. It is well-
settled that the existence of a cause of action is determined by the allegations in the complaint. 62 In this
relation, a complaint is said to sufficiently assert a cause of action if, admitting what appears solely on its
face to be correct, the plaintiff would be entitled to the relief prayed for. 63 Thus, if the allegations furnish
adequate basis by which the complaint can be maintained, then the same should not be dismissed,
regardless of the defenses that may be averred by the defendants. 64 As edified in the case of Pioneer
Concrete Philippines, Inc. v. Todaro, 65 citing Hongkong and Shanghai Banking Corporation, Limited. v.
Catalan66 (HSBC):
The elementary test for failure to state a cause of action is whether the complaint alleges facts which if
true would justify the relief demanded. Stated otherwise, may the court render a valid judgment upon the
facts alleged therein? The inquiry is into the sufficiency, not the veracity of the material allegations. If the
allegations in the complaint furnish sufficient basis on which it can be maintained, it should not be
dismissed regardless of the defense that may be presented by the defendants. 67 (Emphasis supplied)
Stated otherwise, the resolution on this matter should stem from an analysis on whether or not the
complaint is able to convey a cause of action; and not that the complainant has no cause of action. Lest it
be misunderstood, failure to state a cause of action is properly a ground for a motion to dismiss under
Section 1(g), Rule 1668 of the Rules of Court(Rules), while the latter is not a ground for dismissal under
the same rule.
In this case, the Court finds that Consing, Jr.’s complaint in SCA No.1759 properly states a cause of
action since the allegations there insufficiently bear out a case for damages under Articles 19 and 26 of
the Civil Code.
Records disclose that Consing, Jr.’s complaint contains allegations which aim to demonstrate the abusive
manner in which Unicapital and PBI, et al. enforced their demands against him. Among others, the
complaint states that Consing, Jr. "has constantly been harassed and bothered by Unicapital and PBI, et
al.; x x x besieged by phone calls from them; x x x has had constant meetings with them variously, and on
a continuing basis, such that he is unable to attend to his work as an investment banker." 69 In the same
pleading, he also alleged that Unicapital and PBI, et al.’s act of "demanding a postdated check knowing
fully well that he does not have the necessary funds to cover the same, nor is he expecting to have them
is equivalent to asking him to commit a crime under unlawful coercive force." 70 Accordingly, these specific
allegations, if hypothetically admitted, may result into the recovery of damages pursuant to Article 19 of
the Civil Code which states that "every person must, in the exercise of his rights and in the performance
of his duties, act with justice, give everyone his due, and observe honesty and good faith." As explained
in the HSBC case:
When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and
results in damage to another, a legal wrong is thereby committed for which the wrongdoer must beheld
responsible. But a right, though by itself legal because it is recognized or granted by law as such, may
nevertheless become the source of some illegality. A person should be protected only when he acts in the
legitimate exercise of his right, that is, when he acts with prudence and in good faith; but not when he
acts with negligence or abuse. There is an abuse of right when it is exercised for the only purpose of
prejudicing or injuring another. The exercise of a right must be in accordance with the purpose for which it
was established, and must not be excessive or unduly harsh; there must be no intention to injure
another.71 (Emphasis supplied)
Likewise, Consing, Jr.’s complaint states a cause of action for damages under Article 26 of the Civil Code
which provides that:
Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors
and other persons. The following and similar acts, though they may not constitute a criminal offense, shall
produce a cause of action for damages, prevention and other relief:
(1) Prying into the privacy of another's residence;
(2) Meddling with or disturbing the private life or family relations of another;
(3) Intriguing to cause another to be alienated from his friends;
(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place
of birth, physical defect, or other personal condition.
The rationale therefor was explained in the case of Manaloto v. Veloso III, 72 citing Concepcion v. CA,73 to
wit:
The philosophy behind Art. 26 underscores the necessity for its inclusion in our civil law. The Code
Commission stressed in no uncertain terms that the human personality must be exalted. The sacredness
of human personality is a concomitant consideration of every plan for human amelioration. The
touchstone of every system of law, of the culture and civilization of every country, is how far it dignifies
man. If the statutes insufficiently protect a person from being unjustly humiliated, in short, if human
personality is not exalted - then the laws are indeed defective. Thus, under this article, the rights of
persons are amply protected, and damages are provided for violations of a person's dignity, personality,
privacy and peace of mind.74
To add, a violation of Article 26 of the Civil Code may also lead to the payment of moral damages under
Article 2219(10)75 of the Civil Code.
Records reveal that Consing, Jr., in his complaint, alleged that "he has come to discover that Unicapital
and PBI, et al. are speaking of him in a manner that is inappropriate and libelous; and that they have
spread their virulent version of events in the business and financial community such that he has suffered
and continues to suffer injury upon his good name and reputation which, after all, is the most sacred and
valuable wealth he possesses - especially considering that he is an investment banker." 76 In similar
regard, the hypothetical admission of these allegations may result into the recovery of damages pursuant
to Article 26, and even Article2219(10), of the Civil Code.
77
Corollary thereto, Unicapital, et al.’s contention that the case should be dismissed on the ground that it
failed to set out the actual libelous statements complained about cannot be given credence. These
incidents, as well as the specific circumstances surrounding the manner in which Unicapital and PBI, et
al. pursued their claims against Consing, Jr. may be better ventilated during trial. It is a standing rule that
issues that require the contravention of the allegations of the complaint, as well as the full ventilation, in
effect, of the main merits of the case, should not be within the province of a mere motion to dismiss, 78 as
in this case. Hence, as what is only required is that the allegations furnish adequate basis by which the
complaint can be maintained, the Court – in view of the above-stated reasons – finds that the RTC-Pasig
City’s denial of Unicapital, et al.’s motion to dismiss on the ground of failure to state a cause of action was
not tainted with grave abuse of discretion which would necessitate the reversal of the CA’s ruling. Verily,
for grave abuse of discretion to exist, the abuse of discretion must be patent and gross so as to amount
to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in
contemplation of law.79 This the Court does not perceive in the case at bar.
Further, so as to obviate any confusion on the matter, the Court equally finds that the causes of action in
SCA No. 1759 were not – as Unicapital, et al. claim – misjoined even if Consing, Jr. averred that
Unicapital and PBI, et al. violated certain provisions of the Corporation Law and the Revised Securities
Act.80
The rule is that a party’s failure to observe the following conditions under Section 5, Rule 2 of the Rules
results in a misjoinder of causes of action:81
SEC. 5. Joinder of causes of action . - A party may in one pleading assert, in the alternative or otherwise,
as many causes of action as he may have against an opposing party, subject to the following conditions:
(a) The party joining the causes of action shall comply with the rules on joinder of parties;
(b) The joinder shall not include special civil actions governed by special rules;
(c) Where the causes of action are between the same parties but pertain to different venues
or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the
causes of action falls within the jurisdiction of said court and the venue lies therein; and
(d) Where the claims in all the causes of action are principally for recovery of money the
aggregate amount claimed shall be the test of jurisdiction. (Emphasis supplied)
A careful perusal of his complaint discloses that Consing, Jr. did not seek to hold Unicapital and PBI, et
al. liable for any specific violation of the Corporation Code or the Revised Securities Act. Rather, he
merely sought damages for Unicapital and PBI, et al.’s alleged acts of making him sign numerous
documents and their use of the same against him. In this respect, Consing, Jr. actually advances an
injunction and damages case82 which properly falls under the jurisdiction of the RTC-Pasig
City.83 Therefore, there was no violation of Section 5, Rule 2 of the Rules, particularly, paragraph (c)
thereof. Besides, even on the assumption that there was a misjoinder of causes of action, still, such
defect should not result in the dismissal of Consing, Jr.’s complaint. Section 6, Rule 2 of the Rules
explicitly states that a "misjoinder of causes of action is not a ground for dismissal of an action" and that
"a misjoined cause of action may, on motion of a party or on the initiative of the court, be severed and
proceeded with separately."
Neither should Consing, Jr.’s failure to pay the required docket fees lead to the dismissal of his
complaint.1âwphi1 It has long been settled that while the court acquires jurisdiction over any case only
upon the payment of the prescribed docket fees, its non-payment at the time of the filing of the complaint
does not automatically cause the dismissal of the complaint provided that the fees are paid within a
reasonable period.84 Consequently, Unicapital, et al.’s insistence that the stringent rule on non-payment
of docket fees enunciated in the case of Manchester Development Corporation v. CA 85 should be applied
in this case cannot be sustained in the absence of proof that Consing, Jr. intended to defraud the
government by his failure to pay the correct amount of filing fees. As pronounced in the case of Heirs of
Bertuldo Hinog v. Hon. Melicor:86
Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its
non-payment at the time of filing does not automatically cause the dismissal of the case, as long as the
fee is paid within the applicable prescriptive or reglementary period, more so when the party involved
demonstrates a willingness to abide by the rules prescribing such payment.
Thus, when insufficient filing fees were initially paid by the plaintiffs and there was no intention to defraud
the government, the Manchester rule does not apply. 87 (Emphasis and italics in the original)
Indeed, while the Court acknowledges Unicapital, et al.'s apprehension that Consing, Jr.'s "metered"
claim for damages to the tune of around ₱2,000,000.00 per month 88 may balloon to a rather huge amount
by the time that this case is finally disposed of, still, any amount that may by then fall due shall be subject
to assessment and any additional fees determined shall constitute as a lien against the judgment as
explicitly provided under Section 2,89Rule 141 of the Rules.
Finally, on the question of whether or not Consing, Jr.'s complaint was properly verified, suffice it to state
that since the copy submitted to the trial court was duly notarized by one Atty. Allan B. Gepty and that it
was only Unicapital, et al.’s copy which lacks the notarization, then there was sufficient compliance with
the requirements of the rules on pleadings.90
In fine, the Court finds no reversible error on the part of the CA in sustaining the RTC-Pasig City’s denial
of Unicapital et al.’s motion to dismiss. As such, the petitions in G.R. Nos. 175277 and 175285 must be
denied.
B. Propriety of the denial of
Consing, Jr.’s motion for
consolidation.
The crux of G.R. No. 192073 is the propriety of the RTC-Makati City’s denial of Consing, Jr.’s motion for
the consolidation of the Pasig case, i.e., SCA No. 1759, and the Makati case, i.e., Civil Case No. 99-
1418.Records show that the CA upheld the RTC-Makati City’s denial of the foregoing motion, finding that
the consolidation of these cases was merely discretionary on the part of the trial court. It added that it
was "impracticable and would cause a procedural faux pas
"if it were to "allow the RTC-Pasig City to preside over the Makati case." 91
The CA’s ruling is proper.
It is hornbook principle that when or two or more cases involve the same parties and affect closely related
subject matters, the same must be consolidated and jointly tried, in order to serve the best interest of the
parties and to settle the issues between them promptly, thus, resulting in a speedy and inexpensive
determination of cases. In addition, consolidation serves the purpose of avoiding the possibility of
conflicting decisions rendered by the courts in two or more cases, which otherwise could be disposed of
in a single suit.92 The governing rule is Section 1, Rule 31 of the Rules which provides:
SEC. 1. Consolidation. - When actions involving a common question of law or fact are pending before the
court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all
the actions consolidated; and it may make such orders concerning proceedings therein as may tend to
avoid unnecessary costs or delay.
In the present case, the Court observes that the subject cases, i.e., SCA No. 1759 and Civil Case No. 99-
1418, although involving the same parties and proceeding from a similar factual milieu, should remain
unconsolidated since they proceed from different sources of obligations and, hence, would not yield
conflicting dispositions. SCA No. 1759 is an injunction and damages case based on the Civil Code
provisions on abuse of right and defamation, while Civil Case No. 99-1418 is a collection and damages
suit based on actionable documents, i.e., the subject promissory notes. In particular, SCA No. 1759 deals
with whether or not Unicapital and BPI, et al, abused the manner in which they demanded payment from
Consing, Jr., while Civil Case No. 99-1418 deals with whether or not Unicapital may demand payment
from Consing, Jr. based on the subject promissory notes. Clearly, a resolution in one case would have no
practical effect as the core issues and reliefs sought in each case are separate and distinct from the
other.
Likewise, as the CA correctly pointed out, the RTC-Makati City could not have been failured in retaining
Civil Case No. 99-1418 in its dockets since pre-trial procedures have already been undertaken therein
and, thus, its consolidation with SCA No. 1759 pending before the RTC-Pasig City would merely result in
complications on the part of the latter court or squander the resources or remedies already utilized in Civil
Case No. 99-1418.93 In this light, aside from the perceived improbability of having conflicting decisions,
the consolidation of SCA No. 1759 and Civil Case No. 99-1418 would, contrary to its objective, only delay
the proceedings and entail unnecessary costs.
All told, the Court finds the consolidation of SCA No. 1759 and Civil Case No. 99-1418 to be improper,
impelling the affirmance of the CA’s ruling. Consequently, the petition in G.R. No. 192073 must also be
denied.
WHEREFORE, the petitions in G.R. Nos. 175277, 175285 and 192073 are DENIED. Accordingly, the
Court of Appeals’ Joint Decision dated October 20, 2005 and Resolution dated October 25, 2006 in CA-
G.R. SP Nos. 64019 and 64451 and the Decision dated September 30, 2009 and Resolution dated April
28, 2010 in CA-G.R. No. 101355 are hereby AFFIRMED.
ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:
G.R. No. 187021 January 25, 2012
DOUGLAS F. ANAMA, Petitioner,
vs.
PHILIPPINE SAVINGS BANK, SPOUSES SATURNINA BARIA &TOMAS CO and THE REGISTER OF
DEEDS, METRO MANILA, DISTRICT II, Respondents.
This is a petition for review under Rule 45 assailing the March 31, 2008 Decision 1 of the Court of
Appeals (CA) and its February 27, 2009 Resolution,2 in CA G.R. No. SP-94771, which affirmed the
November 25, 2005 Order of the Regional Trial Court, Branch 167, Pasig City (RTC), granting the motion
for issuance of a writ of execution of respondents.
The Facts
The factual and procedural backgrounds of this case were succinctly recited by the CA in its decision as
follows:
Sometime in 1973, the Petitioner, Douglas F. Anama (Anama), and the Respondent, Philippine Savings
Bank (PSB), entered into a "Contract to Buy," on installment basis, the real property owned and covered
by Transfer Certificate of Title (TCT) No. 301276 in the latter’s name. However, Anama defaulted in
paying his obligations thereunder, thus, PSB rescinded the said contract and title to the property
remained with the latter. Subsequently, the property was sold by PSB to the Spouses Saturnina Baria and
Tomas Co (Co Spouses) who, after paying the purchase price in full, caused the registration of the same
in their names and were, thus, issued TCT No. 14239.
Resultantly, Anama filed before the Respondent Court a complaint for declaration of nullity of the deed of
sale, cancellation of transfer certificate of title, and specific performance with damages against PSB, the
Co Spouses, and the Register of Deeds of Metro Manila, District II.
On August 21, 1991 and after trial on the merits, the Respondent Court dismissed Anama’s complaint
and upheld the validity of the sale between PSB and the Co Spouses. Undaunted, Anama appealed, at
first, to this Court, and after failing to obtain a favorable decision, to the Supreme Court.
On January 29, 2004, the Supreme Court rendered judgment denying Anama’s petition and sustaining
the validity of the sale between PSB and the Co Spouses. Its decision became final and executory on
July 12, 2004. Pursuant thereto, the Co Spouses moved for execution, which was granted by the
Respondent Court per its Order, dated November 25, 2005.
Aggrieved, Anama twice moved for the reconsideration of the Respondent Court’s November 25, 2005
Order arguing that the Co Spouses’ motion for execution is fatally defective. He averred that the Spouses’
motion was pro forma because it lacked the required affidavit of service and has a defective notice of
hearing, hence, a mere scrap of paper. The Respondent Court, however, denied Anama’s motion(s) for
reconsideration.
Dissatisfied, the petitioner questioned the RTC Order before the CA for taking judicial cognizance of the
motion for execution filed by spouses Tomas Co and Saturnina Baria (Spouses Co) which was (1) not in
accord with Section 4 and Section 15 of the Rules of Court because it was without a notice of hearing
addressed to the parties; and (2) not in accord with Section 6, Rule 15 in conjunction with Section 13,
Rule 13 of the Rules of Court because it lacks the mandatory affidavit of service.
On March 31, 2008, the CA rendered a decision dismissing the petition. It reasoned out, among others,
that the issue on the validity of the deed of sale between respondents, Philippine Savings
Bank (PSB) and the Spouses Co, had long been laid to rest considering that the January 29, 2004
Decision of this Court became final and executory on July 12, 2004. Hence, execution was already a
matter of right on the part of the respondents and the RTC had the ministerial duty to issue a writ of
execution enforcing a final and executory decision.
The CA also stated that although a notice of hearing and affidavit of service in a motion are mandatory
requirements, the Spouses Co’s motion for execution of a final and executory judgment could be acted
upon by the RTC ex parte, and therefore, excused from the mandatory requirements of Sections 4, 5 and
6 of Rule 15 of the Rules of Court.
The CA was of the view that petitioner was not denied due process because he was properly notified of
the motion for execution of the Spouses Co. It stated that the act of the Spouses Co in resorting to
personal delivery in serving their motion for execution did not render the motion pro forma. It refused to
apply a rigid application of the rules because it would result in a manifest failure of justice considering
that petitioner’s position was nothing but an obvious dilatory tactic designed to prevent the final
disposition of Civil Case No. 44940.
Not satisfied with the CA’s unfavorable disposition, petitioner filed this petition praying for the reversal
thereof presenting the following
ARGUMENTS:
THE RESPONDENT APPELLATE COURT DID NOT TAKE INTO CONSIDERATION THE CLEAR
TEACHING OF THE HONORABLE COURT WITH REGARD TO THE REQUISITE NOTICE OF
HEARING – IT SHOULD BE ADDRESSED TO THE PARTIES NOT TO THE CLERK OF COURT, THE
LATEST (THEN) BEING GARCIA V. SANDIGANBAYAN, G.R. NO. 167103, AUGUST 31, 2006, 500
SCRA 361; DE JESUS V. JUDGE DILAG, A.M. NO. RTJ-05-1921, SEPTEMBER 30, 2005, 471 SCRA
176; LAND BANK OF THE PHILIPPINES V. NATIVIDAD, G.R. NO. 127198, MAY 16, 2005, 458 SCRA
441; ATTY. JULIUS NERI V. JUDGE JESUS S. DE LA PEÑA, A.M NO. RTJ-05-1896, APRIL 29, 2005,
457 SCRA 538; AND ALVAREZ V. DIAZ, A.M. NO. MTJ-00-1283, MARCH 3, 2004, 424 SCRA 213;
THE RESPONDENT APPELLATE COURT DID NOT TAKE INTO CONSIDERATION THE CLEAR
TEACHING OF THE HONORABLE COURT WITH REGARD TO THE REQUISITE AFFIDAVIT OF
SERVICE – IT SHOULD BE IN THE PROPER FORM AS PRESCRIBED IN THE RULES AND IT
SHOULD BE ATTACHED TO THE MOTION, THE LATEST (THEN) BEING ELLO V. COURT OF
APPEALS, G.R. NO. 141255, JUNE 21, 2005, 460 SCRA 406; LOPEZ DELA ROSA DEVELOPMENT
CORPORATION V. COURT OF APPEALS, G.R. NO. 148470, APRIL 29, 2005, 457 SCRA 614; ALVAREZ
V. DIAZ, A.M. NO. MTJ-00-1283, MARCH 3, 2004, 424 SCRA 213; EL REYNO HOMES, INC. V.
ERNESTO ONG, 397 SCRA 563; CRUZ V. COURT OF APPEALS, 388 SCRA 72, 80-81; AND MERIS V.
OFILADA, 293 SCRA 606;
THE RESPONDENT APPELLATE COURT DID NOT TAKE APPROPRIATE ACTION ON THE "FRAUD
PERPETRATED UPON THE COURT" BY RESPONDENT-SPOUSES AND THEIR LEAD COUNSEL.
SINCE THE RESPONDENT APPELLATE COURT REFUSED TO TAKE INTO CONSIDERATION THE
RESPONDENT BANK’S ACTION – THAT OF:
ENGAGING IN A DAGDAG-BAWAS (LEGALLY "INTERCALATION") OPERATION OF A PORTION OF
THE TRANSCRIPT OF STENOGRAPHIC NOTES (TSN), OCTOBER 12, 1984, OF THE REGIONAL
TRIAL COURT, BRANCH 167, PASIG CITY, IN CIVIL CASE NO. 44940, PAGES 54-55, AND
PRESENTING IT IN ITS APPELLEE’S BRIEF (IN THE OWNERSHIP CASE, CA-G.R. NO. CV-42663,
LIKEWISE, BEFORE THE RESPONDENT APPELLATE COURT) BY CITING IT ON PAGE 14 OF SAID
BRIEF, AS IMPLIEDLY COMING FROM THE TSN OF THE TRIAL COURT.
THINKING THAT THEIR FALSIFIED APPELLEE’S BRIEF WAS MATERIAL IN SAID CA-G.R. NO. CV-
42663.
IT COULD NOT RULE THAT THE SAME HAS BROUGHT ABOUT A CRUCIAL MATERIAL CHANGE IN
THE SITUATION OF THE PARTIES WHICH MAKES EXECUTION INEQUITABLE (PUNCIA V.
GERONA, 252 SCRA 424, 430-431), OR, IN THE WORDS OF DEVELOPMENT BANK OF RIZAL V. CA,
G.R. NO. 75964, DECEMBER 1, 1987, 156 SCRA 84, 90, "THERE EXISTS A COMPELLING REASON
FOR STAYING THE EXECUTION OF JUDGMENT."
Basically, petitioner argues that the respondents failed to substantially comply with the rule on notice and
hearing when they filed their motion for the issuance of a writ of execution with the RTC. He claims that
the notice of hearing in the motion for execution filed by the Spouses Co was a mere scrap of paper
because it was addressed to the Clerk of Court and not to the parties. Thus, the motion for execution did
not contain the required proof of service to the adverse party. He adds that the Spouses Co and their
counsel deliberately "misserved" the copy of their motion for execution, thus, committing fraud upon the
trial court.
Additionally, he claims that PSB falsified its appellee’s brief by engaging in a "dagdag-bawas"
("intercalation") operation in pages 54 to 55 of the TSN, dated October 12, 1984.
Position of the Spouses Co
The Spouses Co counter that the petition should be dismissed outright for raising both questions of facts
and law in violation of Section 1, Rule 45 of the Rules of Court. The Spouses Co aver that petitioner
attempts to resurrect the issue that PSB cheated him in their transaction and that the RTC committed a
"dagdag-bawas." According to the Spouses Co, these issues had long been threshed out by this Court.
At any rate, they assert that they have substantially complied with the requirements of notice and hearing
provided under Sections 4 and 5 of Rule 15 and Section 13, Rule 13 of the Rules of Court. Contrary to
petitioner’s allegations, a copy of the motion for the issuance of a writ of execution was given to petitioner
through his principal counsel, the Quasha Law Offices. At that time, the said law office had not formally
withdrawn its appearance as counsel for petitioner. Spouses Co argue that what they sought to be
executed was the final judgment of the RTC duly affirmed by the CA and this Court, thus, putting the
issues on the merits to rest. The issuance of a writ of execution then becomes a matter of right and the
court’s duty to issue the writ becomes ministerial.
Position of respondent PSB
PSB argues that the decision rendered by the RTC in Civil Case No. 44940 entitled "Douglas F. Anama v.
Philippine Savings Bank, et. al."3 had long become final and executory as shown by the Entry of
Judgment made by the Court on July 12, 2004. The finality of the said decision entitles the respondents,
by law, to the issuance of a writ of execution. PSB laments that petitioner relies more on technicalities to
frustrate the ends of justice and to delay the enforcement of a final and executory decision.
As to the principal issue, PSB points out that the notice of hearing appended to the motion for execution
filed by the Spouses Co substantially complied with the requirements of the Rules since petitioner’s then
counsel of record was duly notified and furnished a copy of the questioned motion for execution. Also, the
motion for execution filed by the Spouses Co was served upon and personally received by said counsel.
The Court’s Ruling
The Court agrees with the Spouses Co that petitioner’s allegations on the "dagdag-bawas operation of
the Transcript of Stenographic Notes," the "fraud perpetuated upon the Court by said spouses and their
lead counsel," the "ownership," and "falsification" had long been laid to rest in the case of "Douglas F.
Anama v. Philippine Savings Bank, et. al."4 For said reason, the Court cannot review those final
pronouncements. To do so would violate the rules as it would open a final judgment to another
reconsideration which is a prohibited procedure.
On the subject procedural question, the Court finds no compelling reason to stay the execution of the
judgment because the Spouses Co complied with the notice and hearing requirements under Sections 4,
5 and 6 of Rule 15. Said sections, as amended, provide:
SECTION 4. Hearing of motion. – Except for motions which the court may act upon without prejudicing
the rights of the adverse party, every written motion shall be set for hearing by the applicant.
Every written motion required to be heard and the notice of the hearing thereof shall be served in such a
manner as to ensure its receipt by the other party at least three (3) days before the date of hearing,
unless the court for good cause sets the hearing on shorter notice.
SECTION 5. Notice of hearing. – The notice of hearing shall be addressed to all parties concerned, and
shall specify the time and date of the hearing which must not be later than ten (10) days after the filing of
the motion.
SECTION 6. Proof of service necessary. – No written motion set for hearing shall be acted upon by the
court without proof of service thereof.
Pertinently, Section 13 of Rule 13 of the 1997 Rules of Civil Procedure, as amended, provides:
SEC. 13. Proof of service. – Proof of personal service shall consist of a written admission of the party
served, or the official return of the server, or the affidavit of the party serving, containing a full statement
of the date, place, and manner of service. If the service is by ordinary mail, proof thereof shall consist of
an affidavit of the person mailing of facts showing compliance with section 7 of this Rule. If service is
made by registered mail, proof shall be made by such affidavit and the registry receipt issued by the
mailing office. The registry return card shall be filed immediately upon its receipt by the sender, or in lieu
thereof the unclaimed letter together with the certified or sworn copy of the notice given by the
postmaster to the addressee.
Elementary is the rule that every motion must contain the mandatory requirements of notice and hearing
and that there must be proof of service thereof. The Court has consistently held that a motion that fails to
comply with the above requirements is considered a worthless piece of paper which should not be acted
upon. The rule, however, is not absolute. There are motions that can be acted upon by the court ex parte
if these would not cause prejudice to the other party. They are not strictly covered by the rigid
requirement of the rules on notice and hearing of motions.
The motion for execution of the Spouses Co is such kind of motion. It cannot be denied that the judgment
sought to be executed in this case had already become final and executory. As such, the Spouses Co
have every right to the issuance of a writ of execution and the RTC has the ministerial duty to enforce the
same. This right on the part of the Spouses Co and duty on the part of the RTC are based on Section 1
and Section 2 of Rule 39 of the 1997 Revised Rules of Civil Procedure provides, as follows:
Section 1. Execution upon judgments or final orders. – Execution shall issue as a matter of right, on
motion, upon a judgment or order that disposes of the action or proceeding upon the expiration of the
period to appeal therefrom if no appeal has been duly perfected.
If the appeal has been duly perfected and finally resolved, the execution may forthwith be applied for in
the court of origin, on motion of the judgment obligee, submitting therewith certified true copies of the
judgment or judgments or final order or orders sought to be enforced and of the entry thereof, with
notice to the adverse party.
The appellate court may, on motion in the same case, when the interest of justice so requires, direct the
court of origin to issue the writ of execution.
SEC. 2. Discretionary execution.—
(a) Execution of a judgment or final order pending appeal.— On motion of the prevailing party with
notice to the adverse party filed in the trial court while it has jurisdiction over the case and is in
possession of either the original record or the record on appeal, as the case may be, at the time of the
filing of such motion, said court may, in its discretion, order execution of a judgment or final order even
before the expiration of the period to appeal.
After the trial court has lost jurisdiction, the motion for execution pending appeal may be filed in the
appellate court.
Discretionary execution may only issue upon good reasons to be stated in a special order after due
hearing.
(b) Execution of several, separate or partial judgments.—A several, separate or partial judgment may be
executed under the same terms and conditions as execution of a judgment or final order pending appeal.
(2a) [Emphases and underscoring supplied]
As can be gleaned therefrom, under Paragraph 1 of Section 1 of Rule 39 of the 1997 Revised Rules of
Civil Procedure, the Spouses Co can have their motion for execution executed as a matter of right
without the needed notice and hearing requirement to petitioner. This is in contrast to the provision of
Paragraph 2 of Section 1 and Section 2 where there must be notice to the adverse party. In the case of
Far Eastern Surety and Insurance Company, Inc. v. Virginia D. Vda. De Hernandez, 5 it was written:
It is evident that Section 1 of Rule 39 of the Revised Rules of Court does not prescribe that a copy
of the motion for the execution of a final and executory judgment be served on the defeated party,
like litigated motions such as a motion to dismiss (Section 3, Rule 16), or motion for new trial (Section 2,
Rule 37), or a motion for execution of judgment pending appeal (Section 2, Rule 39), in all of which
instances a written notice thereof is required to be served by the movant on the adverse party in order to
afford the latter an opportunity to resist the application.
It is not disputed that the judgment sought to be executed in the case at bar had already become final
and executory. It is fundamental that the prevailing party in a litigation may, at any time within five (5)
years after the entry thereof, have a writ of execution issued for its enforcement and the court not only
has the power and authority to order its execution but it is its ministerial duty to do so. It has also been
held that the court cannot refuse to issue a writ of execution upon a final and executory judgment, or
quash it, or order its stay, for, as a general rule, the parties will not be allowed, after final judgment, to
object to the execution by raising new issues of fact or of law, except when there had been a change in
the situation of the parties which makes such execution inequitable or when it appears that the
controversy has ever been submitted to the judgment of the court; or when it appears that the writ of
execution has been improvidently issued, or that it is defective in substance, or is issued against the
wrong party, or that judgment debt has been paid or otherwise satisfied; or when the writ has been issued
without authority. Defendant-appellant has not shown that she falls in any of the situations afore-
mentioned. Ordinarily, an order of execution of a final judgment is not appealable. Otherwise, as was said
by this Court in Molina v. de la Riva,a case could never end. Once a court renders a final judgment, all
the issues between or among the parties before it are deemed resolved and its judicial function as
regards any matter related to the controversy litigated comes to an end. The execution of its judgment is
purely a ministerial phase of adjudication. The nature of its duty to see to it that the claim of the prevailing
party is fully satisfied from the properties of the loser is generally ministerial.
In Pamintuan v. Muñoz, We ruled that once a judgment becomes final and executory, the prevailing
party can have it executed as a matter of right, and the judgment debtor need not be given
advance notice of the application for execution .
Also of the same stature is the rule that once a judgment becomes final and executory, the prevailing
party can have it executed as a matter of right and the granting of execution becomes a ministerial
duty of the court. Otherwise stated, once sought by the prevailing party, execution of a final judgment will
just follow as a matter of course. Hence, the judgment debtor need not be given advance notice of
the application for execution nor he afforded prior hearing.
Absence of such advance notice to the judgment debtor does not constitute an infringement of the
constitutional guarantee of due process.
However, the established rules of our system of jurisprudence do not require that a defendant who has
been granted an opportunity to be heard and has had his day in court should, after a judgment has been
rendered against him, have a further notice and hearing before supplemental proceedings are taken to
reach his property in satisfaction of the judgment. Thus, in the absence of a statutory requirement, it is
not essential that he be given notice before the issuance of an execution against his tangible property;
after the rendition of the judgment he must take "notice of what will follow," no further notice being
"necessary to advance justice." [Emphases and underscoring supplied]
Likewise, in the case of Leonardo Lim De Mesa v. Hon. Court of Appeals, 6 it was stated:
In the present case, the decision ordering partition and the rendition of accounting had already become
final and executory. The execution thereof thus became a matter of right on the part of the plaintiffs,
herein private respondents, and is a mandatory and ministerial duty on the part of the court. Once a
judgment becomes final and executory, the prevailing party can have it executed as a matter of
right, and the judgment debtor need not be given advance notice of the application for execution
nor be afforded prior hearings thereon.
On the bases of the foregoing considerations, therefore, the Court of Appeals acted correctly in holding
that the failure to serve a copy of the motion for execution on petitioner is not a fatal defect. In fact, there
was no necessity for such service. [Emphases and underscoring supplied]
At any rate, it is not true that the petitioner was not notified of the motion for execution of the Spouses
Co. The records clearly show that the motion for execution was duly served upon, and received by,
petitioner’s counsel-of-record, the Quasha Ancheta Pena Nolasco Law Offices, as evidenced by a
"signed stamped received mark" appearing on said pleading. 7 The records are bereft of proof showing
any written denial from petitioner’s counsel of its valid receipt on behalf of its client. Neither is there proof
that the Quasha Ancheta Pena Nolasco Law Offices has formally withdrawn its appearance as
petitioner’s counsel-of-record. Considering that there is enough proof shown on record of personal
delivery in serving the subject motion for execution, there was a valid compliance with the Rules, thus, no
persuasive reason to stay the execution of the subject final and executory judgment.
Moreover, this Court takes note that petitioner was particularly silent on the ruling of the CA that he was
notified, through his counsel, of the motion for execution of the Spouses Co when he filed a motion for
reconsideration of the RTC’s order dated June 28, 2005, holding in abeyance said motion pending the
resolution of petitioner’s pleading filed before this Court. He did not dispute the ruling of the CA either that
the alleged defect in the Spouses Co’s motion was cured when his new counsel was served a copy of
said motion for reconsideration of the RTC’s June 28, 2005 Order. 8
The three-day notice rule is not absolute. A liberal construction of the procedural rules is proper where
the lapse in the literal observance of a rule of procedure has not prejudiced the adverse party and has
not deprived the court of its authority. Indeed, Section 6, Rule 1 of the Rules of Court provides that the
Rules should be liberally construed in order to promote their objective of securing a just, speedy and
inexpensive disposition of every action and proceeding. Rules of procedure are tools designed to
facilitate the attainment of justice, and courts must avoid their strict and rigid application which would
result in technicalities that tend to frustrate rather than promote substantial justice.
In Somera Vda. De Navarro v. Navarro, the Court held that there was substantial compliance of the rule
on notice of motions even if the first notice was irregular because no prejudice was caused the adverse
party since the motion was not considered and resolved until after several postponements of which the
parties were duly notified.
Likewise, in Jehan Shipping Corporation v. National Food Authority, the Court held that despite the lack of
notice of hearing in a Motion for Reconsideration, there was substantial compliance with the
requirements of due process where the adverse party actually had the opportunity to be heard and had
filed pleadings in opposition to the motion. The Court held:
This Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of the Rules of Court,
mandatory is the requirement in a motion, which is rendered defective by failure to comply with the
requirement. As a rule, a motion without a notice of hearing is considered pro forma and does not affect
the reglementary period for the appeal or the filing of the requisite pleading.
As an integral component of the procedural due process, the three-day notice required by the Rules is
not intended for the benefit of the movant. Rather, the requirement is for the purpose of avoiding
surprises that may be sprung upon the adverse party, who must be given time to study and meet the
arguments in the motion before a resolution of the court. Principles of natural justice demand that the
right of a party should not be affected without giving it an opportunity to be heard.
The test is the presence of opportunity to be heard, as well as to have time to study the motion
and meaningfully oppose or controvert the grounds upon which it is based.9 [Emphases and
underscoring supplied]
Likewise, in the case of KKK Foundation, Inc. v. Hon. Adelina Calderon-Bargas, 10 this Court stated:
Anent the second issue, we have consistently held that a motion which does not meet the requirements
of Sections 4 and 5 of Rule 15 of the Rules of Court is considered a worthless piece of paper, which the
Clerk of Court has no right to receive and the trial court has no authority to act upon. Service of a copy of
a motion containing a notice of the time and the place of hearing of that motion is a mandatory
requirement, and the failure of movants to comply with these requirements renders their motions fatally
defective. However, there are exceptions to the strict application of this rule. These exceptions are:
(1) where a rigid application will result in a manifest failure or miscarriage of justice especially if a party
successfully shows that the alleged defect in the questioned final and executory judgment is not apparent
on its face or from the recitals contained therein; (2) where the interest of substantial justice will be
served; (3) where the resolution of the motion is addressed solely to the sound and judicious discretion of
the court; and (4) where the injustice to the adverse party is not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed.
A notice of hearing is an integral component of procedural due process to afford the adverse parties a
chance to be heard before a motion is resolved by the court. Through such notice, the adverse party is
given time to study and answer the arguments in the motion. Records show that while Angeles’s Motion
for Issuance of Writ of Execution contained a notice of hearing, it did not particularly state the date and
time of the hearing. However, we still find that petitioner was not denied procedural due process. Upon
receiving the Motion for Issuance of Writ of Execution, the trial court issued an Order dated September 9,
2002 giving petitioner ten (10) days to file its comment. The trial court ruled on the motion only after the
reglementary period to file comment lapsed. Clearly, petitioner was given time to study and comment on
the motion for which reason, the very purpose of a notice of hearing had been achieved.
The notice requirement is not a ritual to be followed blindly.1âwphi1 Procedural due process is not based
solely on a mechanical and literal application that renders any deviation inexorably fatal. Instead,
procedural rules are liberally construed to promote their objective and to assist in obtaining a just, speedy
and inexpensive determination of any action and proceeding. [Emphases supplied]
At any rate, it is undisputed that the August 21, 1991 RTC Decision 11 in Civil Case No. 44940 is already
final and executory. Once a judgment becomes final and executory, all the issues between the parties are
deemed resolved and laid to rest. All that remains is the execution of the decision which is a matter of
right. The prevailing party is entitled to a writ of execution, the issuance of which is the trial court’s
ministerial duty. 12
The Court agrees with the respondents that petitioner mainly relies on mere technicalities to frustrate the
ends of justice and further delay the execution process and enforcement of the RTC Decision that has
been affirmed by the CA and this Court. The record shows that the case has been dragging on for almost
30 years since petitioner filed an action for annulment of sale in 1982. From the time the Spouses Co
bought the house from PSB in 1978, they have yet to set foot on the subject house and lot.
To remand the case back to the lower court would further prolong the agony of the Spouses Co. The
Court should not allow this to happen. The Spouses Co should not be prevented from enjoying the fruits
of the final judgment in their favor. In another protracted case, the Court wrote:
As a final note, it bears to point out that this case has been dragging for more than 15 years and the
execution of this Court’s judgment in PEA v. CA has been delayed for almost ten years now simply
because De Leon filed a frivolous appeal against the RTC’s order of execution based on arguments that
cannot hold water. As a consequence, PEA is prevented from enjoying the fruits of the final judgment in
its favor. The Court agrees with the Office of the Solicitor General in its contention that every litigation
must come to an end once a judgment becomes final, executory and unappealable. Just as a losing party
has the right to file an appeal within the prescribed period, the winning party also has the correlative right
to enjoy the finality of the resolution of his case by the execution and satisfaction of the judgment, which
is the "life of the law." To frustrate it by dilatory schemes on the part of the losing party is to frustrate all
the efforts, time and expenditure of the courts. It is in the interest of justice that this Court should write
finis to this litigation.13
WHEREFORE, the petition is DENIED.
SO ORDERED.
G.R. No. 130314 September 22, 1998
ANNIE TAN, petitioner,
vs.
COURT OF APPEALS and BLOOMBERRY EXPORT MANUFACTURING, INC., respondents.
Before a trial court, a motion for reconsideration that does not contain the requisite notice of hearing does
not toll the running of the period of appeals. It is a mere scrap of paper which the trial court and the
opposite party may ignore.
Petitioner seeks to set aside the August 22, 1997 Decision of the Court of Appeals 1 in CA-GR SP No.
43293, the dispositive portion of which reads: 2
WHEREFORE, [i]n view of all the foregoing considerations, the petition
for certiorari and prohibition is granted. The Order dated October 4, 1996, of
public respondent is hereby SET ASIDE and public respondent is ordered to
desist from further proceeding with the hearing of the Motion for Reconsideration.
The Decision dated July 18, 1996, of public respondent is declared final and
executory.
The Facts
Petitioner Annie Tan, doing business under the name and style "AJ & T Trading," leased a portion of the
ground floor of her building, more specifically described as Stall No. 623, Carvajal Street, Binondo,
Manila, in favor of Bloomberry Export Manufacturing, Inc. The lease was for a period of five years starting
on February 17, 1995 and ending on February 17, 2000, at a monthly rental of P20,000 for the first three
years.3 For several alleged violations of the lease contract, petitioner filed against private respondent a
complaint for ejectment, docketed as Civil Case No. 148798-CV. 4 As its rental payment was refused by
petitioner, private respondent instituted on July 13, 1995 a case for consignation, docketed as Civil Case
No. 148814-CV. 5
The two cases were consolidated. In due course, the Metropolitan Trial Court (MTC) of Manila, Branch I,
rendered on February 1, 1996 a Decision6 which disposed as follows: 7
WHEREFORE, in Civil Case No. 148798-CV for [b]reach of [c]ontract, failure to
pay rentals on time, encroachment on the adjacent premises without the consent
of [petitioner], [she] failed to substantiate her case with that degree of proof
required by law. For this reason, except for the costs of suit, this Court hereby
orders the dismissal of the complaint of [petitioner]. The counterclaim and
damages sought by [private respondent are] likewise ordered dismissed. The
case for consignation in Civil Case No. 148814-CV has become moot and
academic for failure of [petitioner] to appeal the decision of the Metropolitan [Trial]
court, Branch 15, Manila, allowing the [private respondent] to consign rental
payments to the Court of Manila. Besides, the [c]omplaint for consignation being
in conformity with law, [private respondent] is allowed to continue consigning with
this Court all rentals that [may be] due.
On appeal, the Regional Trial Court (RTC) of Manila, Branch 2, in its Decision dated July 18, 1996,
affirmed the aforementioned MTC Decision thus:
WHEREFORE, finding no cogent reasons to disturb the joint decision dated
February 1, 1996 of the Metropolitan Trial Court of Manila, Branch 1, the Court
sustains and affirms in toto the said decision.
Respondent Court related the incidents that ensued, as follows: 8
. . . [F]rom the Decision of the [RTC] dated July 18, 1996, [petitioner] filed a
Motion for Reconsideration of the aforesaid decision. The Motion for
Reconsideration did not contain any notice of hearing as required under Section
5, Rule 15 of the Revised Rule of Court.
On August 23, 1996, [private respondent] filed an ex-parte Motion for Entry of
Judgment upon the ground that said motion for reconsideration is a mere scrap of
paper which should not merit the attention of the [RTC] and in support thereof,
cited the case of Traders Royal Bank vs. Court of Appeals, 208 SCRA 199.
[Private respondent] contends that since the Motion for Reconsideration is a mere
scrap of paper aside from being pro forma, said Motion for Reconsideration did
not toll the period of appeal[;] hence, the Decision dated July 18, 1996, had
become final and executory.
On September 3, 1996, [petitioner] filed a Motion to Set for Hearing the Motion for
Reconsideration which was vehemently opposed by [private respondent] on
September 23, 1996.
On October 4, 1996, [the RTC] issued an Order granting the motion to set for
hearing [petitioner's] Motion for Reconsideration and set[ting] the hearing [for]
October 21, 1996, at 8:30 o'clock in the morning. On October 20, 1996, [private
respondent] filed a Motion for Reconsideration of the Order dated October 4,
1996, which was set for hearing on October 25, 1996.
On November 11, 1996, [the RTC] issued an Order denying [private respondent's]
Motion for Reconsideration. Hence, the Petition for Certiorari and Prohibition. . . . .
In the assailed Decision, Respondent Court of Appeals reversed the trial court's setting for hearing
petitioner's Motion for Reconsideration.
The Ruling of the Court of Appeals
Respondent Court held that the trial court acted with grave abuse of discretion in setting for hearing
petitioner's Motion for Reconsideration, notwithstanding the fact that said Motion contained no notice of
hearing.
Citing a litany of cases, it ruled that petitioner's failure to comply with the mandatory provisions of
Sections 4 and 5, Rule 15 of the Rules of Court, reduced her motion to a mere scrap of paper which did
not merit the attention of the court. Respondent Court also held that those cases in which the Court
allowed a motion for reconsideration that had not been set for hearing — Galvez v. Court of
Appeals, 9 Tamargo v. Court of Appeals 10 and Que v. Intermediate Appellate Court 11 — were
inapplicable.
Respondent Court held that the facts in Galvez drastically differ from those in the present
case. Galvez involved a motion to withdraw the information — not a motion for reconsideration — that
was filed ex parte before the arraignment of the accused. In that case, the Court held that there was no
imperative need of notice and hearing because, first, the withdrawal of an information rests on the
discretion of the trial court; and, second, the accused was not placed in jeopardy. On the other hand, the
subject of the present controversy is a motion for reconsideration directed against the Decision of the
RTC; thus, the motion affects the period to perfect an appeal.
Que is not applicable either. In said case, the trial court, set the Motion for Reconsideration (MR) for
hearing, which was actually attended by the counsel for the adverse party. This was not so in the case at
bar; petitioner's MR was set for hearing, because she belatedly moved for it upon the filing of private
respondent's Motion for Entry of Judgment. Likewise, the present case differs from Tamargo, wherein the
application of the aforesaid mandatory provisions was suspended. The Court did so in order to give
substantial justice to the petitioner and in view of the nature of the issues raised which were found to be
highly meritorious.
Hence, this petition. 12
The Issue
In her Memorandum, 13 petitioner presents a fairly accurate statement of the main issue to be resolved: 14
Whether . . . the omission [through] inadvertence of a notice of hearing of a
motion for reconsideration filed with the trial court . . . is a fatal defect which did
not stop the running of the period to appeal[,] thus rendering the assailed decision
final [and] executory.
The Court's Ruling
The petition is devoid of merit.
Sole Issue:
Omission of Notice of Hearing Fatal
Petitioner admits the categorical and mandatory character of the directives in Sections 4 and 5 of Rule 15
of the Rules of Court, which read: 15
Sec. 4. Hearing of motion. — Except for motions which the court may act upon
without prejudicing the rights of the adverse party, every written motion shall be
set for hearing by the applicant.
Every written motion required to be heard and the notice of the hearing thereof
shall be served in such a manner as to ensure its receipt by the other party at
least three (3) days before the date of hearing, unless the court for good cause
sets the hearing on shorter notice. (4a)
Sec. 5. Notice of hearing. — The notice of hearing shall be addressed to all
parties concerned, and shall specify the time and date of the hearing which must
not be later than ten (10) days after the filing of the motion. (5a)
In De la Peña v. De la Peña, 16 the Court presented a resume of earlier decisions regarding the necessity
of the notice of hearing in motions for reconsideration:
In Pojas v. Gozo-Dadole, 17 we had occasion to rule on the issue of whether a
motion for reconsideration without any notice of hearing tolls the running of the
prescriptive period. In Pojas, petitioner received copy of the decision in Civil Case
No. 3430 of the Regional Trial Court of Tagbilaran on 15 April 1986. The decision
being adverse to him petitioner filed a motion for reconsideration. For failing to
mention the date when the motion was to be resolved as required in Sec. 5, Rule
15, of the Rules of Court, the motion for reconsideration was denied. A second
motion for reconsideration met the same fate. On 2 July 1986 petitioner filed a
notice of appeal but the same was denied for being filed out of time as "the motion
for reconsideration which the Court ruled as pro forma did not stop the running of
the 15-day period to appeal." 18
In resolving the issue of whether there was grave abuse of discretion in denying
petitioner's notice of appeal, this Court ruled —
Sec. 4 of Rule 15 of the Rules of Court requires that notice
of motion be served by the movant on all parties
concerned at least three (3) days before its hearing.
Section 5 of the same Rule provides that the notice shall
be directed to the parties concerned, and shall state the
time and place for the hearing of the motion. A motion
which does not meet the requirements of Section 4 and 5
of Rule 15 of the Rules of Court is considered a worthless
piece of paper which the clerk has no right to receive and
the court has no authority to act upon. Service of copy of a
motion containing notice of the time and place of hearing
of said motion is a mandatory requirement and the failure
of the movant to comply with said requirements renders
his motion fatally defective. 19
In New Japan Motors, Inc. v. Perucho, 20 defendant filed a motion for
reconsideration which did not contain any notice of hearing. In a petition
for certiorari, we affirmed the lower court in ruling that a motion for reconsideration
that did not contain a notice of hearing was a useless scrap of paper. We held
further —
Under Sections 4 and 5 of Rule 15 of the Rules of
Court, . . . a motion is required to be accompanied by a
notice of hearing which must be served by the applicant on
all parties concerned at least three (3) days before the
hearing thereof Section 6 of the same rule commands that
"(n)o motion shall be acted upon by the Court, without
proof of service of the notice thereof . . . ." It is therefore
patent that the motion for reconsideration in question is
fatally defective for it did not contain any notice of hearing.
We have already consistently held in a number of cases
that the requirements of Sections 4, 5 and 6 of Rules 15 of
the Rules of Court are mandatory and that failure to
comply with the same is fatal to movant's cause.
In Sembrano v. Ramirez, 22 we declared that —
(A) motion without notice of hearing is a mere scrap of
paper. It does not toll the running of the period of appeal.
This requirement of notice of hearing equally applies to a
motion for reconsideration. Without such notice, the
motion is pro forma. And a pro forma motion for
reconsideration does not suspend the running of the
period to appeal.
In In re Almacen, 23 defendant lost his case in the lower court. His counsel then
filed a motion for reconsideration but did not notify the adverse counsel of the time
and place of hearing of said motion. The Court of Appeals dismissed the motion
for the reason that "the motion for reconsideration dated July 5, 1966 does not
contain a notice of time and place of hearing thereof and is, therefore a useless
piece of paper which did not interrupt the running of the period to appeal, and,
consequently, the appeal was perfected out of time." When the case was brought
to us, we reminded counsel for the defendant that —
As a law practitioner who was admitted to the bar as far
back as 1941, Atty. Almacen knew — or ought to have
known — that [for] a motion for reconsideration to stay the
running of the period of appeal, the movant must not only
serve a copy of the motion upon the adverse party . . . but
also notify the adverse party of the time and place of
hearing . . . .
 Also, in Manila Surety and Fidelity Co., Inc. v. Bath Construction and
Company, 24 we ruled —
The written notice referred to evidently is that prescribed
for motions in general by Rule 15, Sections 4 and 5
(formerly Rule 26), which provide that such notice shall
state the time and place of hearing and shall be served
upon all the parties concerned at least three days in
advance. And according to Section 6 of the same Rule no
motion shall be acted upon by the court without proof of
such notice. Indeed, it has been held that in such a case
the motion is nothing but a useless piece of paper. The
reason is obvious; unless the movant sets the time and
place of hearing the court would have no way to determine
whether that party agrees to or objects to the motion, and
if he objects, to hear him on his objection, since the Rules
themselves do not fix any period within [which] he may file
his reply or opposition. 25
In fine, the abovecited cases confirm that the requirements laid down in Sec. 5 of
Rule 15 of the Rules of Court that the notice shall be directed to the parties
concerned, and shall state the time and place for the hearing of the motion, are
mandatory. If not religiously complied with, they render the motion pro forma. As
such the motion is a useless piece of paper that will not toll the running of the
prescriptive period.
For failing to attach a notice of hearing to the Motion for Reconsideration, petitioner proffers the following
excuses: (1) her former counsel's messenger, due to an honest mistake, inadvertently omitted the fourth
page of the motion containing the crucial Notice of Hearing; and (2) because of the pressure of work, her
former counsel was unable to follow up such motion until the day said counsel requested the setting of a
hearing. 26
We are not in the least convinced. First, it is unfair to place the blame for such omission on the
messenger. The burden of preparing a complete pleading falls on counsel's shoulders, not on the
messenger's. The counsel is ultimately responsible for the acts or omissions of his agents. Hence, the
messenger's conduct can neither justify the counsel's mistake nor warrant a departure from the mandate
of the aforesaid procedural rules.
Second, it is incredible that the fourth page containing the Notice of Hearing was left behind due to
honest mistake. In fact, there was no such page. Petitioner's claim is belied by the following pertinent,
portions of the subject Motion for Reconsideration: 27
WHEREFORE, premises considered, it is respectfully prayed that the
Honorable Court cause a further REVIEW and RECONSIDERATION of its
decision on the above-captioned consolidated cases.
Quezon City for Manila, August 12, 1996.
(Sgd.) ANGELINA ARANDIA-VILLANUEVA
Counsel for Plaintiff-Appellant
39-L T. Morato Avenue, Quezon City
IBP No. 407450 6-26-96
PTR No. 227013 1-5-96 Manila
Copy furnished:
Atty. Arnel Zaragoza Dolendo
Counsel for Defendant
Rm. 408, 413 First United Bldg.
Escolta, Manila
The normal practice is to note, at the end of the pleading, that a copy was furnished to the adverse party.
Thus, petitioner's motion ended exactly at the bottom of the third page as evidenced by the "copy-
furnished" notation. It is safe to conclude that there was no accidental or excusable neglect in not
including a fourth page in this case. In other words, petitioner's counsel simply failed to include a notice of
hearing.
Finally, the fact that petitioner's former counsel calendared the motion for hearing for August 23,
1996 28 belies the excuse that an alleged fourth page had been left behind. In the first place, if a notice of
hearing had been included in the Motion for Reconsideration, there would have been no need for
petitioner to file the Motion to set the time and date of hearing. What is clear is that said counsel filed the
latter Motion, only after private respondent had submitted its Motion for Entry of Judgment 29 — with copy
furnished petitioner's counsel 30 — on the ground that petitioner's Motion for Reconsideration was a mere
scrap of paper that did not stop the period for appeal.
Petitioner pleads for liberal construction of the rule on notice of hearing, citing Tamargo, Galvez and Que.
In rebuttal, we adopt by reference the CA's excellent disquisition, cited earlier, on why these cases are
inapplicable.
Petitioner further alleges that, first, the nonadmission of her Motion for Reconsideration would result in a
miscarriage of justice, as the main case (ejectment), which was tried under summary procedure, had
been unnecessarily prolonged; and, second, the tenant lessee would be occupying the premises without
paying rentals. She also relies on People v. Leviste, 31 in which the Court held:
While it is true that any motion that does not comply with the requirements of Rule
15, Rules of Court should not be accepted for filing and, if filed, is not entitled to
judicial cognizance, the Supreme Court has likewise held that where rigid
application of the rule will result in manifest failure or miscarriage of justice,
technicalities may be disregarded in order to resolve the case.
Liberal construction of this rule has been allowed by this Court in the following cases: (1) where a rigid
application will result in a manifest failure or miscarriage of justice, 32 especially if a party successfully
shows that the alleged defect in the questioned final and executory judgment is not apparent on its face
or from the recitals contained therein; 33 (2) where the interest of substantial justice will be served; 34 (3)
where the resolution of the motion is addressed solely to the sound and judicious discretion of the
court; 35 and (4) where the injustice to the adverse party is not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed. 36Petitioner has failed to demonstrate
that the case at bar falls under any of these exceptions.
Finally, petitioner claims that she will be deprived of property without due process, as private respondent
has accumulated P348,800 in unpaid rentals and accrued interests.
We disagree. Petitioner can obtain proper payment of rentals through a motion for execution in the case
below. The MTC may have dismissed her ejectment case, but it did not exculpate private respondent
from its liabilities. Petitioner is, therefore, not being deprived of her property without due process.
Indeed, there is no miscarriage of justice to speak of. Having failed to observe very elementary rules of
procedure which are mandatory, petitioner caused her own predicament. To exculpate her from the
compulsory coverage of such rules is to undermine the stability of the judicial process, as the bench and
bar will be confounded by such irritating uncertainties as when to obey and when to ignore the Rules. We
have to draw the line somewhere. 37
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED. Costs against 1. Single = P 63.54
the petitioner.

2. Double = P150.00
SO ORDERED.
3. Triple = P209.09
G.R. No. 150870 December 11, 2002
Petitioner signified her conformity to the second quotation. The NKTI subsequently purchased "Terumo"
DRA. HONORATA G. BAYLON, petitioner, blood bags from FVA under the following purchase orders with their corresponding dates, the respective
vs. amounts involved in each sale transaction, and the names of the approving authority: 7
FACT-FINDING INTELLIGENCE BUREAU represented by DIRECTOR AGAPITO ROSALES
and the OFFICE OF THE OMBUDSMAN, respondents.
Purchase
Date Amount Approving Authority
Order No.
By the present petition for review on certiorari, petitioner prays this Court to give due course to her
appeal and to ultimately set aside the Office of the Ombudsman’s order for her suspension from public 1. April 11, 1994 94-00943 P1,270,800.00 Juan M. Flavier,
office. Jaime Galvez-Tan
Juan R. Nanagas

The following facts are not disputed: 2. May 25, 1994 94-00132 P536,025.00 Filoteo A. Alano
(recommended by
Aileen R. Javier)
Sometime in 1993, Dr. Honorata G. Baylon (petitioner), Head of the Division of Hematology and
Transfusion Medicine at the National Kidney and Transplant Institute (NKTI), was designated as Program 3. August 12, 1994 94-00147 P1,702,687.65 Juan M. Flavier
Manager of the government’s National Voluntary Blood Donation Program (Blood Donation Program) with
NKTI as the lead agency in the implementation thereof. 4. November 14, 1994 94-00172 P2,209,915.00 Juan M. Flavier

5. December 6, 1994 94-00182 P 506,585.45 Juan M. Flavier

The Blood Donation Program later became a component of the project "STOP D.E.A.T.H (Disasters,
Epidemics, and Trauma for Health): Hospitals for Philippines 2000" which was launched on February 18,
1994 by the Department of Health (DOH) headed by the then Secretary Juan M. Flavier
(Flavier).1 Petitioner remained at the helm of the Blood Donation Program. 2
On February 24, 1994, Flavier publicly disclosed the results of the United States Agency for International
Development (USAID)-sponsored study on the safety of the country’s blood banking system which found
out that the Philippines’ blood transfusion service failed to adequately meet the demand for safe blood
and that the blood sourced from commercial blood banks had a contamination rate of four
percent.3 Flavier thus ordered the closure of provincial retail outlets of commercial blood banks as a
result of which an acute shortage of transfused blood ensued because of the blood banks’ refusal to sell
blood in retaliation to the said closure order.
In March 1995, the Commission on Audit (COA) disallowed in post audit the sale transactions entered
into by the NKTI with FVA on the ground that the blood bags were purchased without public bidding,
contrary to the applicable laws or rules, thereby allegedly resulting to overpricing. 8 The COA found that
FVA sold "Terumo" blood bags to the Philippine National Red Cross (PNRC) and to blood banks Our
Lady of Fatima and Mother Seaton at prices lower than those at which it sold to the NKTI, leading to a
consequent total loss to the government in the amount of P1,964,304.70.
The Auditor of the NKTI accordingly ordered the suspension of purchases of blood bags from FVA and
eventually disallowed the payment of blood bags amounting to P6,006,133.54.

Flavier accordingly directed the full operation of the Blood Donation Program, which apparently served as
the then only viable system from which blood could be sourced.
On March 8 and 17, 1994, the NKTI, through petitioner, issued Requisition and Issue Vouchers 4 for the
purpose of purchasing blood bags for immediate distribution to DOH hospitals or medical centers where
the system of voluntary blood donation would then be put in place. As "Terumo" blood bags were
believed to be the finest in the market, the NKTI obtained a quotation therefor dated March 16,
19945 from their exclusive distributor, the FVA EX-IM Trading, Inc. (FVA), as follows:
1. [Blood Bag], Single Capacity = P 72.29 [per piece]
2. Double Capacity = P171.00
3. Triple Capacity = P263.70
A criminal complaint, docketed as OMB-0-97-0242, for violation of Section 3(e) and (g) of Republic Act
(R. A.) No. 3019 (The Anti-Graft and Corrupt Practices Act), was thus filed by the Office of the
Ombudsman against petitioner, Flavier, then DOH Undersecretaries Dr. Jaime Galvez-Tan and Dr. Juan
R. Nañagas, NKTI Executive Director Dr. Filoteo A. Alano, NKTI Deputy Executive Director Dr. Aileen R.
Javier, NKTI Property Division Chief Diana Jean F. Prado and NKTI Accounting Division Chief Maribel U.
Estrella. At the same time, an administrative complaint for gross misconduct was lodged against
petitioner and the same respondents except Flavier and Galvez-Tan.
The administrative complaint was docketed as OMB-ADM-0-97-0165, now the subject of the present
petition.
Petitioner disclaimed administrative liability. Adopting 9 her May 20, 1997 counter-affidavit 10 filed in the
criminal complaint, petitioner claimed that the acquisition of the blood bags via negotiated purchase came
under the exceptions to public bidding as provided for by law, citing the following pertinent provision of
Executive Order No. 301 (DECENTRALIZING ACTIONS ON GOVERNMENT NEGOTIATED
CONTRACTS, LEASE CONTRACTS AND RECORDS DISPOSAL):

Another quotation dated March 29, 1994 6 was later furnished by FVA reflecting the following reduced SECTION 1. Guidelines for Negotiated Contracts. – Any provision of law, decree, executive order or other
prices: issuances to the contrary notwithstanding, no contract for public services or for furnishing supplies,
materials and equipment to the government or any of its branches, agencies or instrumentalities shall be
renewed or entered into without public bidding, except under any of the following situations:
xxx
tainted with any irregularities; petitioner and the other NKTI officials were responsible for successfully
implementing a 100% voluntary blood donation system in ten regional hospitals and medical centers; and
that were it not for petitioner’s work as Program Manager of the Blood Donation Program, disastrous
consequences would have befallen patients, the DOH, and the Blood Donation Program itself.

b. Whenever the supplies are to be used in connection with a project or activity which cannot
be delayedwithout causing detriment to the public service;
c. Whenever the materials are sold by an exclusive distributor or manufacturer who does not
have sub-dealers selling at lower prices and for which no suitable substitute can be obtained
elsewhere at more advantageous terms to the government;
xxx
e. In cases where it is apparent that the requisition of the needed supplies through negotiated
purchase is most advantageous to the government to be determined by the Department Head
concerned;
x x x (Underscoring supplied).
Thus she explained: firstly, the blood bags were used in the Blood Donation Program which had to be
implemented immediately to address the scarcity of blood at the time; secondly, FVA was the only
exclusive distributor without subdealers of "Terumo" blood bags; and thirdly, negotiated purchase of the
blood bags was most advantageous to the government for the prices at which the NKTI obtained them
from FVA were the lowest compared to those at which they were acquired by other government hospitals,
as the following shows:11
By Memorandum Review of June 13, 2000, 14 Assistant Ombudsman Abelardo L. Aportadera (Aportadera)
recommended the exoneration of the respondents Nañagas and Estrella. Taking note, of the
Ombudsman’s finding of probable cause to criminally hale petitioner and company into court, Aportadera
recommended, by the same Review Memorandum, that herein petitioner and the rest of her co-
respondents be held guilty of Grave Misconduct for which they should be meted a penalty of SIX (6)
MONTHS SUSPENSION.
Aportadera’s recommendation was approved by the Ombudsman on June 16, 2000. A motion for
reconsideration of this June 16, 2000 – approved Memorandum Review having been denied by the
Memorandum Review of July 19, 2000 which the Ombudsman approved on July 28, 2000, 15 petitioner
filed on October 4, 2000 a petition with this Court for certiorari and prohibition with prayer for a temporary
restraining order (TRO) and/or writ of preliminary injunction, docketed as G. R. No. 145000, seeking the
nullification of the Ombudsman’s above-said Memorandum Reviews.
By Resolution of October 16, 2000, this Court dismissed the petition for having been brought to the
wrong forum in light of the ruling in Fabian v. Desierto16 that appeals from the decision of the
Ombudsman should be made to the Court of Appeals by a petition for review under Rule 43 of the 1997
Rules of Civil Procedure. Unlike the Fabian, this Court did not order the transfer of the petition to the
Court of Appeals for proper disposition pursuant to this Court’s Resolution in A. M. No. 99-2-02-SC dated
February 9, 1999 declaring that any appeal filed with this Court after March 15, 1999 from a decision,
resolution or order of the Ombudsman in an administrative case would no longer be referred to the
Court of Appeals. Petitioner’s Motion for Reconsideration of this Court’s October 16, 2000 Resolution was
denied on January 22, 2001.

Petitioner thus elevated the Ombudsman’s Memorandum Reviews to the Court of Appeals by a petition
BLOOD BAGS for review filed on April 18, 2001, docketed as CA-G. R. SP No. 64332. By Resolution of May 2,
HOSPITALS 2001,17 however, the Court of Appeals dismissed the petition for having been filed beyond the fifteen-day
Single Double Triple reglementary period, reckoned from petitioner’s receipt of the Ombudsman’s second Memorandum
Review on August 7, 2000.
NKTI P63.54 P150.00 P209.00
Petitioner filed a Motion for Reconsideration of the May 2, 2001 Resolution of the Court of Appeals.
Philippine General Hospital P78.00 P185.40 P285.00
Pending resolution thereof or on July 6, 2001, petitioner filed a motion for leave to submit a copy of the
Jose Reyes Memorial Medical Center P85.05 ------ –----- COA Decision No. 2001-11 dated June 21 2001 18 which lifted the audit disallowance of the payments
made for the purchases by the NKTI of the "Terumo" blood bags from FVA. In said decision, the COA
Dr. Jose Fabella Memorial Hospital P85.00 P199.00 --––-- held that the purchase of blood bags without public bidding was not violative of the law, was not
disadvantageous to the government, and did not accord undue preference to FVA. In a Resolution of
Philippine Children's Medical Center P64.00 ------ P209.09 November 21, 2001,19 the Court of Appeals denied petitioner’s Motion for Reconsideration.

Philippine Heart Center P78.00 P190.00 ------

Petitioner submitted certifications12 from various medical establishments attesting to the superior quality
and features of "Terumo" blood bags which have made them the most widely used among hospitals and
blood banks; the counter-affidavit filed in the same criminal complaint of FVA President Francisco V.
Abalos,13 who was subsequently dropped as respondent therein upon his death on January 31, 1998;
and Flavier’s December 3, 1999 sworn statement submitted also in the criminal complaint.
In his counter-affidavit, Abalos explained that the lower prices at which the FVA sold blood bags to PNRC,
Mother Seaton and Our Lady of Fatima, were meant to aid these blood banks to reduce their operational
costs so that they would sell at low prices to their buyers who were mostly the poor, as well as to reduce
FVA’s excess inventory then.
In his December 3, 1999 sworn statement, Flavier declared that the negotiated purchase of the blood
bags was justified by the conditions obtaining at the time; the NKTI’s transactions with FVA were not
Hence, the present petition for review on certiorari with an application for a TRO and/or an injunctive writ
which was filed on December 21, 2001. Public respondents filed their Comment, 20 to which petitioner filed
her Reply.21
Petitioner imputes to the Court of Appeals the commission of grave error in dismissing her petition for
review on a mere technicality. She invokes considerations of substantial justice for this Court to give her
petition due course and essentially prays that the Resolutions of the Court of Appeals be set aside and
that the Memorandum Reviews of the Ombudsman be nullified.
During the pendency of the present petition or on March 14, 2002, petitioner filed a motion 22 to grant her
leave to file a Manifestation informing that this Court rendered on December 14, 2001 a decision 23 in G.
R. No. 142738, "Dr. Honorata Baylon v. Office of the Ombudsman and Sandiganbayan," reversing and
setting aside the Ombudsman’s February 28, 2000 Resolution finding probable cause to criminally
prosecute her before the Sandiganbayan arising from the same acts subject of the Ombudsman’s
Memorandum Reviews finding her administratively liable, and that the said decision "be considered
persuasive to the instant proceeding." At the same time, petitioner filed the Manifestation. 24
By Resolution of April 10, 2002, this Court Resolved to
(a) GRANT the motion of petitioner to admit the copy of the court’s decision in G. R. No.
142738 through a manifestation as said decision of December 14, 2001 should be considered
persuasive to the instant proceeding; and
(b) NOTE the said manifestation.
Petitioner submits that the dismissal by the Court of Appeals of her petition for review by mere
technicality would cause a miscarriage of justice for, so she contends, she has raised meritorious
arguments, adduced evidence, and presented special circumstances proving her innocence of the
charge of grave misconduct.
This Court finds that the Court of Appeals correctly dismissed petitioner’s petition for review for having
been filed beyond the reglementary period.
The correctness of the Court of Appeals’ dismissal of petitioner’s petition for review notwithstanding, this
Court cannot write finis to the case at bar by the strict application of the rules of procedure governing
appeals. For judicial cases do not come and go through the portals of a court of law by the mere mandate
of technicalities.
After going over all the pleadings, evidence, and all other documents bearing on this case, this Court has
resolved to spare the present petition from dismissal to which it should have been consigned as a matter
of procedure.
The allowance of the filing of appeals or actions even when everything is lost due to non-compliance with
rules or technicalities is not a novel phenomenon for this Court. In the case of Cortes v. Court of
Appeals,25 counsel for a party in a case before the trial court failed to withdraw his appearance as such
when he was appointed as judge of the Dumaguete Regional Trial Court in January 1983. Thus, after the
lower court rendered a decision on February 16, 1983, the same was served on February 28, 1983 upon
said counsel, who was then in his judicial station, at his Cebu City address. Having learned of the
decision only on March 8, 1983, he immediately informed his client who learned of the adverse judgment
a few days later after being out on official business. On March 22, 1983, the concerned party’s new
counsel accordingly filed a notice of appeal which the lower court denied due course for having been filed
beyond the 15-day reglementary period. This Court ruled that the seven-day delay did not warrant the
outright dismissal of the appeal, taking into account the peculiar circumstances of the case and the
appeal’s ostensible merit.
Likewise, in Legasto v. Court of Appeals,26 a decision in an action for ejectment was rendered against
therein private respondents by the Metropolitan Trial Court and the Regional Trial Court. Appeal via a
petition for review was subsequently filed with the Court of Appeals which initially dismissed the petition
for having been filed two days beyond the reglementary period. On motion for reconsideration, however,
the Court of Appeals gave due course to the appeal after accepting counsel’s explanation that the making
of the petition was delayed by brownouts. Declaring that a delay in the filing of an appeal under
exceptional circumstances may be excused on grounds of substantial justice and equity, this Court
affirmed the Court of Appeals decision to give due course to the belated appeal as it raised an important
legal question bearing upon many similarly situated tenants and landlords in the country.
The same failure to file an appeal on time was excused in Philippine National Bank v. Court of
Appeals27 where this Court allowed an appeal filed three days late in the higher interest of justice, as
barring the said appeal would be inequitable and unjust in light of certain circumstances therein.
The foregoing jurisprudence and similar other cases indeed constitute a testament to what C. Viuda de
Ordoveza v. Raymundo28 described as ". . . the power of the court to suspend its own rules, or to except a
particular case from its operation, whenever the purposes of justice require it." Ginete v. Court of
Appeals29 specifically laid down the range of reasons which may provide justifications for a court to resist
a strict adherence to procedure, enumerating, thus, the following elements for an appeal to be given due
course by a suspension of the enforcement of procedural rules: (1) matters of life, liberty, honor or
property; (2) counsel’s negligence without any participatory negligence on the part of the client; (3) the
existence of special or compelling circumstances; (4) the merits of the case; (5) a cause not entirely
attributable to the fault or negligence of the party favored by the suspension of the rules; (6) a lack of any
showing that the review sought is merely frivolous and dilatory; and (7) the other party will not be unjustly
prejudiced thereby.
We find attendant in the case at bar transcendental considerations which outweigh rules of procedure
thereby providing justification for the suspension of their application. Petitioner’s evidence and arguments
in support of her claim of innocence of the charge of grave misconduct have indeed cast doubt on the
veracity of the Ombudsman’s factual conclusions in the subject administrative case against her. We
cannot thus simply brush aside petitioner’s protestations of lack of administrative culpability for the sake
of sticking to technicalities when the merits of her cause are crying out for proper judicial determination.
The tardiness of the appeal of petitioner before the Court of Appeals undoubtedly stemmed from her
counsel’s faux pas in the remedy pursued to assail the Ombudsman’s questioned Memorandum
Reviews. In the normal course of things, petitioner would have been covered by the general rule that a
client is bound by the negligence or mistakes of his counsel. Yet, the patent merits of petitioner’s cause
for the nullification of her suspension from public office nag the Court towards the realization that to deny
her the instant petition now based merely on the fiction that the counsel’s negligence binds the client is to
unjustly seal petitioner’s fate without the benefit of a review of the correctness and justness of her
imposed administrative liability. Hers, thus, is a case of an extremely different kind; the exception to the
rule on the effects of the counsel’s mistake or negligence, for the application of the rule would result in
serious injustice30 to petitioner. Especially in this case where she had nothing to do with her counsel’s
mistake and negligence, thus clearly falling within the ambit of the reasons provided for by Ginete for the
relaxation of the rules.
This Court takes note of special circumstances relative to the case at bar. The Decision of this Court in G.
R. No. 142738 categorically declared the lack of probable cause to indict petitioner for the same
acts constitutive of the administrative charge against her, hence, it ordered the Sandiganbayan to
dismiss the criminal case against petitioner and her co-accused. In the same vein, the COA Decision No.
2001-11 found no irregularity in the purchases by the NKTI of the blood bags from FVA and thus it lifted
its previous disallowance of the payments to said purchases. Such determinations in favor of petitioner
by other fora, independent they may be from the administrative action against her, serve as added
reasons to warrant the taking of a hard look at the Ombudsman’s Memorandum Reviews.
Suspension from public office is a serious incident that definitely blemishes a person’s record in
government service. It is an injury to one’s reputation and honor which produces irreversible effects on
one’s career and private life. If only to assure the judicial mind that no injustice is allowed to take place
due to a blind adherence to rules of procedure, the dismissal on technicality of petitioner’s action, which
is aimed at establishing not just her innocence but the truth, cannot stand. That the Ombudsman’s
Memorandum Reviews may have attained finality due to petitioner’s belated appeal therefrom to the
Court of Appeals does not preclude a modification or an alteration thereof, for if the execution of a
decision becomes impossible or unjust, it may be modified or altered to harmonize it with justice and the
facts.31
On the suspension of the enforcement of procedural rules to give way to matters of greater value, this
Court could not have more eloquently defined its stance, thus:
In the interest of substantial justice, procedural rules of the most mandatory character in terms of
compliance, may be relaxed. In other words, if strict adherence to the letter of the law would result in
absurdity and manifest injustice or where the merit of a party’s cause is apparent and outweighs
consideration of non-compliance with certain formal requirements, procedural rules should definitely be
liberally construed. A party-litigant is to be given the fullest opportunity to establish the merits of his
complaint or defense rather than for him to lose life, liberty, honor or property on mere technicalities. 32 x x
x
Prescinding from the foregoing, the Court resolved to give due course to the present petition and set
aside the challenged Resolutions of May 2, 2001 and November 21, 2001 of the Court of Appeals. We
will not, however, remand the case to the appellate court, a remand not being necessary where, as in this
case, We are in a position to resolve the dispute based on the records before it and the ends of justice
would not be subserved thereby.33
While factual findings of administrative and quasi-judicial agencies are generally accorded not only
respect but at times finality, 34 this holds true only when they are supported by substantial evidence.
The Ombudsman’s finding in its questioned Memorandum Reviews that petitioner is guilty of grave
misconduct was anchored principally on the fact that FVA sold the same "Terumo" blood bags to PNRC
and the Mother Seaton and Our Lady of Fatima blood banks at lower prices. Such fact, however, cannot
be regarded substantial evidence proving that petitioner is guilty of grave misconduct.
Petitioner’s countervailing evidence shows that the acquisitions of blood bags for government use were
negotiated purchases which were justified by proven reasons for their lawful execution under Executive
Order No. 30135 even without the required public bidding. It is an undisputed fact that the blood bags
were utilized for the Blood Donation Program the immediate implementation of which program was then
necessitated by circumstances of public notice so that the urgency for the blood bags’ acquisition
warranted negotiated purchase instead of by public bidding. It is undisputed that FVA was then the sole
exclusive distributor of "Terumo" blood bags, thus providing another reason for the purchases to be
exempted from public bidding.
Petitioner’s evidence too shows that the negotiated purchase was not disadvantageous to the
government, considering, among other factors, the quality of the blood bags and the price at which they
were purchased as compared to those purchased by other government hospitals, and the time element.
The Ombudsman’s conclusion that petitioner and her co-respondents did not negotiate with FVA to obtain
the best possible terms and conditions of purchase finds no support in the evidence on record. On the
contrary, as reflected above, the NKTI through petitioner sought two quotations from FVA for the blood
bags with the second quotation offering lower prices.
In grave misconduct, the elements of corruption, clear intent to violate the law or flagrant disregard of
established rule must be manifest.36 Petitioner’s actuations in the procurement of the blood bags were
clearly antithetical to what constitutes grave misconduct.
What appears from the questioned Memorandum Reviews of the Ombudsman is that they merely relied
on the singular circumstance that certain medical institutions were allowed to purchase the blood bags at
lower prices, without taking into account petitioner’s countervailing evidence.
While substantial evidence, which is more than a mere scintilla but is such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, 37 suffices to hold one
administratively liable, the substantial evidence rule does not authorize any finding to be made just as
long as there is any evidence to support it; it does not excuse administrative agencies from taking into
account countervailing evidence which fairly detracts from the evidence supporting a finding. 38 The
evidence in support of the Ombudsman’s findings does not amount to substantial evidence.
WHEREFORE, the petition at bar is hereby GRANTED. The assailed May 2, 2001 and November 21,
2001 Resolutions of the Court of Appeals, as well as the June 16, 2000 and July 28, 2000-approved
Memorandum Reviews of the Ombudsman, are hereby SET ASIDE. The respondent is hereby
ABSOLVED from any administrative liability in connection with the purchases in question.
SO ORDERED.
G.R. No. 149576 August 8, 2006
REPUBLIC OF THE PHILIPPINES, represented by the Land Registration Authority, Petitioner,
vs.
KENRICK DEVELOPMENT CORPORATION, Respondent.
The Republic of the Philippines assails the May 31, 2001 decision 1 and August 20, 2001 resolution of the
Court of Appeals in CA-G.R. SP No. 52948 in this petition for review under Rule 45 of the Rules of Court.
This case stemmed from the construction by respondent Kenrick Development Corporation of a concrete
perimeter fence around some parcels of land located behind the Civil Aviation Training Center of the Air
Transportation Office (ATO) in 1996. As a result, the ATO was dispossessed of some 30,228 square
meters of prime land. Respondent justified its action with a claim of ownership over the property. It
presented Transfer Certificate of Title (TCT) Nos. 135604, 135605 and 135606 issued in its name and
which allegedly originated from TCT No. 17508 registered in the name of one Alfonso Concepcion.
ATO verified the authenticity of respondent’s titles with the Land Registration Authority (LRA). On May 17,
1996, Atty. Jose Loriega, head of the Land Title Verification Task Force of the LRA, submitted his report.
The Registrar of Deeds of Pasay City had no record of TCT No. 17508 and its ascendant title, TCT No.
5450. The land allegedly covered by respondent’s titles was also found to be within Villamor Air Base
(headquarters of the Philippine Air Force) in Pasay City.
By virtue of the report, the Office of the Solicitor General (OSG), on September 3, 1996, filed a complaint
for revocation, annulment and cancellation of certificates of title in behalf of the Republic of the
Philippines (as represented by the LRA) against respondent and Alfonso Concepcion. It was raffled to
Branch 114 of the Regional Trial Court of Pasay City where it was docketed as Civil Case No. 96-1144.
On December 5, 1996, respondent filed its answer which was purportedly signed by Atty. Onofre Garlitos,
Jr. as counsel for respondent.
Since Alfonso Concepcion could not be located and served with summons, the trial court ordered the
issuance of an alias summons by publication against him on February 19, 1997.
The case was thereafter punctuated by various incidents relative to modes of discovery, pre-trial,
postponements or continuances, motions to dismiss, motions to declare defendants in default and other
procedural matters.
During the pendency of the case, the Senate Blue Ribbon Committee and Committee on Justice and
Human Rights conducted a hearing in aid of legislation on the matter of land registration and titling. In
particular, the legislative investigation looked into the issuance of fake titles and focused on how
respondent was able to acquire TCT Nos. 135604, 135605 and 135606.
During the congressional hearing held on November 26, 1998, one of those summoned was Atty.
Garlitos, respondent’s former counsel. He testified that he prepared respondent’s answer and transmitted
an unsigned draft to respondent’s president, Mr. Victor Ong. The signature appearing above his name
was not his. He authorized no one to sign in his behalf either. And he did not know who finally signed it.
With Atty. Garlitos’ revelation, the Republic promptly filed an urgent motion on December 3, 1998 to
declare respondent in default, 2 predicated on its failure to file a valid answer. The Republic argued that,
since the person who signed the answer was neither authorized by Atty. Garlitos nor even known to him,
the answer was effectively an unsigned pleading. Pursuant to Section 3, Rule 7 of the Rules of Court, 3 it
was a mere scrap of paper and produced no legal effect.
On February 19, 1999, the trial court issued a resolution granting the Republic’s motion. 4 It found
respondent’s answer to be sham and false and intended to defeat the purpose of the rules. The trial court
ordered the answer stricken from the records, declared respondent in default and allowed the Republic to
present its evidence ex parte.
The Republic presented its evidence ex parte, after which it rested its case and formally offered its
evidence.
Meanwhile, respondent sought reconsideration of the February 19, 1999 resolution but the trial court
denied it.
Aggrieved, respondent elevated the matter to the Court of Appeals via a petition for certiorari 5 seeking to
set aside the February 19, 1999 resolution of the trial court. Respondent contended that the trial court
erred in declaring it in default for failure to file a valid and timely answer.
On May 31, 2001, the Court of Appeals rendered the assailed decision. It found Atty. Garlitos’ statements
in the legislative hearing to be unreliable since they were not subjected to cross-examination. The
appellate court also scrutinized Atty. Garlitos’ acts after the filing of the answer 6 and concluded that he
assented to the signing of the answer by somebody in his stead. This supposedly cured whatever defect
the answer may have had. Hence, the appellate court granted respondent’s petition for certiorari. It
directed the lifting of the order of default against respondent and ordered the trial court to proceed to trial
with dispatch. The Republic moved for reconsideration but it was denied. Thus, this petition.
Did the Court of Appeals err in reversing the trial court’s order which declared respondent in default for its
failure to file a valid answer? Yes, it did.
A party may, by his words or conduct, voluntarily adopt or ratify another’s statement. 7 Where it appears
that a party clearly and unambiguously assented to or adopted the statements of another, evidence of
those statements is admissible against him. 8 This is the essence of the principle of adoptive admission.
An adoptive admission is a party’s reaction to a statement or action by another person when it is
reasonable to treat the party’s reaction as an admission of something stated or implied by the other
person. 9 By adoptive admission, a third person’s statement becomes the admission of the party
embracing or espousing it. Adoptive admission may occur when a party:
(a) expressly agrees to or concurs in an oral statement made by another; 10
11
(b) hears a statement and later on essentially repeats it;
12
(c) utters an acceptance or builds upon the assertion of another;
(d) replies by way of rebuttal to some specific points raised by another but ignores further points which he
or she has heard the other make 13 or
14
(e) reads and signs a written statement made by another.
Here, respondent accepted the pronouncements of Atty. Garlitos and built its case on them. At no
instance did it ever deny or contradict its former counsel’s statements. It went to great lengths to explain
Atty. Garlitos’ testimony as well as its implications, as follows:
1. While Atty. Garlitos denied signing the answer, the fact was that the answer was signed. Hence, the
pleading could not be considered invalid for being an unsigned pleading. The fact that the person who
signed it was neither known to Atty. Garlitos nor specifically authorized by him was immaterial. The
important thing was that the answer bore a signature.
2. While the Rules of Court requires that a pleading must be signed by the party or his counsel, it does
not prohibit a counsel from giving a general authority for any person to sign the answer for him which was
what Atty. Garlitos did. The person who actually signed the pleading was of no moment as long as
counsel knew that it would be signed by another. This was similar to addressing an authorization letter "to
whom it may concern" such that any person could act on it even if he or she was not known beforehand.
3. Atty. Garlitos testified that he prepared the answer; he never disowned its contents and he resumed
acting as counsel for respondent subsequent to its filing. These circumstances show that Atty. Garlitos
conformed to or ratified the signing of the answer by another.
Respondent repeated these statements of Atty. Garlitos in its motion for reconsideration of the trial court’s
February 19, 1999 resolution. And again in the petition it filed in the Court of Appeals as well as in the
comment 15 and memorandum it submitted to this Court.
Evidently, respondent completely adopted Atty. Garlitos’ statements as its own. Respondent’s adoptive
admission constituted a judicial admission which was conclusive on it.
Contrary to respondent’s position, a signed pleading is one that is signed either by the party himself or his
counsel. Section 3, Rule 7 is clear on this matter. It requires that a pleading must be signed by the party
or counsel representing him.
Therefore, only the signature of either the party himself or his counsel operates to validly convert a
pleading from one that is unsigned to one that is signed.
Counsel’s authority and duty to sign a pleading are personal to him. He may not delegate it to just any
person.
The signature of counsel constitutes an assurance by him that he has read the pleading; that, to the best
of his knowledge, information and belief, there is a good ground to support it; and that it is not interposed
for delay. 16Under the Rules of Court, it is counsel alone, by affixing his signature, who can certify to these
matters.
The preparation and signing of a pleading constitute legal work involving practice of law which is
reserved exclusively for the members of the legal profession. Counsel may delegate the signing of a
pleading to another lawyer 17 but cannot do so
in favor of one who is not. The Code of Professional Responsibility provides:
Rule 9.01 ― A lawyer shall not delegate to any unqualified person the performance of any task which by
law may only be performed by a member of the Bar in good standing.
18
Moreover, a signature by agents of a lawyer amounts to signing by unqualified persons, something the
law strongly proscribes.
Therefore, the blanket authority respondent claims Atty. Garlitos entrusted to just anyone was void. Any
act taken pursuant to that authority was likewise void. There was no way it could have been cured or
ratified by Atty. Garlitos’ subsequent acts.
Moreover, the transcript of the November 26, 1998 Senate hearing shows that Atty. Garlitos consented to
the signing of the answer by another "as long as it conformed to his draft." We give no value whatsoever
to such self-serving statement.
No doubt, Atty. Garlitos could not have validly given blanket authority for just anyone to sign the answer.
The trial court correctly ruled that respondent’s answer was invalid and of no legal effect as it was an
unsigned pleading. Respondent was properly declared in default and the Republic was rightly allowed to
present evidence ex parte.
Respondent insists on the liberal application of the rules. It maintains that even if it were true that its
answer was supposedly an unsigned pleading, the defect was a mere technicality that could be set aside.
Procedural requirements which have often been disparagingly labeled as mere technicalities have their
own valid raison d’ etre in the orderly administration of justice. To summarily brush them aside may result
in arbitrariness and injustice. 19
The Court’s pronouncement in Garbo v. Court of Appeals 20 is relevant:
Procedural rules are [tools] designed to facilitate the adjudication of cases. Courts and litigants alike are
thus [enjoined] to abide strictly by the rules. And while the Court, in some instances, allows a relaxation in
the application of the rules, this, we stress, was never intended to forge a bastion for erring litigants to
violate the rules with impunity. The liberality in the interpretation and application of the rules applies only
in proper cases and under justifiable causes and circumstances. While it is true that litigation is not a
game of technicalities, it is equally true that every case must be prosecuted in accordance with the
prescribed procedure to insure an orderly and speedy administration of justice.
Like all rules, procedural rules should be followed except only when, for the most persuasive of reasons,
they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of his
thoughtlessness in not complying with the prescribed procedure. 21 In this case, respondent failed to
show any persuasive reason why it should be exempted from strictly abiding by the rules.
As a final note, the Court cannot close its eyes to the acts committed by Atty. Garlitos in violation of the
ethics of the legal profession. Thus, he should be made to account for his possible misconduct.
WHEREFORE, the petition is hereby GRANTED. The May 31, 2001 decision and August 20, 2001
resolution of the Court of Appeals in CA-G.R. SP No. 52948 are REVERSED and SET ASIDE and the
February 19, 1999 resolution of the Regional Trial Court of Pasay City, Branch 114 declaring respondent
in default is hereby REINSTATED.
Let a copy of this decision be furnished the Commission on Bar Discipline of the Integrated Bar of the
Philippines for the commencement of disbarment proceedings against Atty. Onofre Garlitos, Jr. for his
possible unprofessional conduct not befitting his position as an officer of the court.
SO ORDERED.
G.R. No. 198357 December 10, 2012
BUILDING CARE CORPORATION / LEOPARD SECURITY & INVESTIGATION AGENCY and/or
RUPERTO PROTACIO, Petitioners,
vs.
MYRNA MACARAEG, Respondent.
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the Decision 1
of the Court of Appeals (CA) promulgated on March 24, 2011, and its Resolution 2 dated August 19, 2011, denying
petitioner's Motion for Reconsideration be reversed and set aside.
Petitioners are in the business of providing security services to their clients. They hired respondent as a security
guard beginning August 25, 1996, assigning her at Genato Building in Caloocan City. However, on March 9, 2008,
respondent was relieved of her post. She was re-assigned to Bayview Park Hotel from March 9-13, 2008, but after
said period, she was allegedly no longer given any assignment. Thus, on September 9, 2008, respondent filed a
complaint against petitioners for illegal dismissal, underpayment of salaries, non-payment of separation pay and
refund of cash bond. Conciliation and mediation proceedings failed, so the parties were ordered to submit their
respective position papers.3
Respondent claimed that petitioners failed to give her an assignment for more than nine months, amounting to
constructive dismissal, and this compelled her to file the complaint for illegal dismissal. 4
On the other hand, petitioners alleged in their position paper that respondent was relieved from her post as requested
by the client because of her habitual tardiness, persistent borrowing of money from employees and tenants of the
client, and sleeping on the job. Petitioners allegedly directed respondent to explain why she committed such
infractions, but respondent failed to heed such order. Respondent was nevertheless temporarily assigned to Bayview
Park Hotel from March 9-13, 2008, but she also failed to meet said client's standards and her posting thereat was not
extended.5
Respondent then filed an administrative complaint for illegal dismissal with the PNP-Security Agencies and Guard
Supervision Division on June 18, 2008, but she did not attend the conference hearings for said case. Petitioners
brought to the conference hearings a new assignment order detailing respondent at the Ateneo de Manila University
but, due to her absence, petitioners failed to personally serve respondent said assignment order. Petitioners then sent
respondent a letter ordering her to report to headquarters for work assignment, but respondent did not comply with
said order. Instead, respondent filed a complaint for illegal dismissal with the Labor Arbiter. 6
On May 13, 2009, the Labor Arbiter rendered a Decision, the dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby made dismissing the charge of illegal dismissal as wanting in merit but, as
explained above, ordering the Respondents Leopard Security and Investigation Agency and Rupert Protacio to pay
complainant a financial assistance in the amount of P5,000.00.
Other claims are DISMISSED for lack of merit.
SO ORDERED.7
Respondent then filed a Notice of Appeal with the National Labor Relations Commission (NLRC), but in a Decision
dated October 23, 2009, the NLRC dismissed the appeal for having been filed out of time, thereby declaring that the
Labor Arbiter's Decision had become final and executory on June 16, 2009.8
Respondent elevated the case to the CA via a petition for certiorari, and on March 24, 2011, the CA promulgated its
Decision, the dispositive portion of which reads as follows:
WHEREFORE, the petition for certiorari is GRANTED. The Decision dated October 23, 2009 and Resolution dated
March 2, 2010 rendered by public respondent in NLRC LAC No. 07-001892-09 (NLRC Case No. NCR-09-12628-
08) are REVERSED and SET ASIDE, and in lieu thereof, a new judgment is ENTERED declaring petitioner to
have been illegally dismissed and DIRECTING private respondents to reinstate petitioner without loss of seniority
rights, benefits and privileges; and to pay her backwages and other monetary benefits during the period of her
illegal dismissal up to actual reinstatement.
Public respondent NLRC is DIRECTED to conduct further proceedings, for the sole purpose of determining the
amount of private respondent's monetary liabilities in accordance with this decision.
SO ORDERED.9
Petitioners' motion for reconsideration of the aforequoted Decision was denied per Resolution dated August 19,
2011. Hence, the present petition, where the main issue for resolution is whether the CA erred in liberally applying
the rules of procedure and ruling that respondent's appeal should be allowed and resolved on the merits despite
having been filed out of time.
The Court cannot sustain the CA's Decision.
It should be emphasized that the resort to a liberal application, or suspension of the application of procedural rules,
must remain as the exception to the well-settled principle that rules must be complied with for the orderly
administration of justice. In Marohomsalic v. Cole,10 the Court stated:
While procedural rules may be relaxed in the interest of justice, it is well-settled that these are tools designed to
facilitate the adjudication of cases. The relaxation of procedural rules in the interest of justice was never intended to
be a license for erring litigants to violate the rules with impunity. Liberality in the interpretation and application of
the rules can be invoked only in proper cases and under justifiable causes and circumstances. While litigation is not
a game of technicalities, every case must be prosecuted in accordance with the prescribed procedure to ensure an
orderly and speedy administration of justice.11
The later case of Daikoku Electronics Phils., Inc. v. Raza,12 further explained that:
To be sure, the relaxation of procedural rules cannot be made without any valid reasons proffered for or
underpinning it. To merit liberality, petitioner must show reasonable cause justifying its non-compliance with the
rules and must convince the Court that the outright dismissal of the petition would defeat the administration of
substantial justice. x x x The desired leniency cannot be accorded absent valid and compelling reasons for such a
procedural lapse. x x x
We must stress that the bare invocation of "the interest of substantial justice" line is not some magic want that will
automatically compel this Court to suspend procedural rules. Procedural rules are not to be belittled, let alone
dismissed simply because their non-observance may have resulted in prejudice to a party's substantial rights. Utter
disregard of the rules cannot be justly rationalized by harping on the policy of liberal construction. 13
In this case, the justifications given by the CA for its liberality by choosing to overlook the belated filing of the
appeal are, the importance of the issue raised, i.e., whether respondent was illegally dismissed; and the belief that
respondent should be "afforded the amplest opportunity for the proper and just determination of his cause, free from
the constraints of technicalities,"14 considering that the belated filing of respondent's appeal before the NLRC was
the fault of respondent's former counsel. Note, however, that neither respondent nor her former counsel gave any
explanation or reason citing extraordinary circumstances for her lawyer's failure to abide by the rules for filing an
appeal. Respondent merely insisted that she had not been remiss in following up her case with said lawyer.
It is, however, an oft-repeated ruling that the negligence and mistakes of counsel bind the client. A departure from
this rule would bring about never-ending suits, so long as lawyers could allege their own fault or negligence to
support the client’s case and obtain remedies and reliefs already lost by the operation of law.15 The only exception
would be, where the lawyer's gross negligence would result in the grave injustice of depriving his client of the due
process of law.16 In this case, there was no such deprivation of due process. Respondent was able to fully present and
argue her case before the Labor Arbiter. She was accorded the opportunity to be heard. Her failure to appeal the
Labor Arbiter's Decision cannot, therefore, be deemed as a deprivation of her right to due process. In Heirs of
Teofilo Gaudiano v. Benemerito, 17 the Court ruled, thus:
The perfection of an appeal within the period and in the manner prescribed by law is jurisdictional and non-
compliance with such legal requirements is fatal and has the effect of rendering the judgment final and executory.
The limitation on the period of appeal is not without reason. They must be strictly followed as they are considered
indispensable to forestall or avoid unreasonable delays in the administration of justice, to ensure an orderly
discharge of judicial business, and to put an end to controversies. x x x
xxxx
The right to appeal is not a natural right or part of due process; it is merely a statutory privilege and may be
exercised only in the manner and in accordance with the provisions of law. Thus, one who seeks to avail of the right
to appeal must strictly comply with the requirements of the rules, and failure to do so leads to the loss of the right to
appeal."18
In Ocampo v. Court of Appeals (Former Second Division), 19 the Court declared that:
x x x we cannot condone the practice of parties who, either by their own or their counsel's inadvertence, have
allowed a judgment to become final and executory and, after the same has become immutable, seek iniquitous ways
to assail it. The finality of a decision is a jurisdictional event which cannot be made to depend on the convenience of
the parties.20
Clearly, allowing an appeal, even if belatedly filed, should never be taken lightly.1âwphi1 The judgment attains
finality by the lapse of the period for taking an appeal without such appeal or motion for reconsideration being
filed.21 In Ocampo v. Court of Appeals (Former Second Division), 22 the Court reiterated the basic rule that "when a
party to an original action fails to question an adverse judgment or decision by not filing the proper remedy within
the period prescribed by law, he loses the right to do so, and the judgment or decision, as to him, becomes final and
binding."23 The Decision of the Labor Arbiter, therefore, became final and executory as to respondent when she
failed to file a timely appeal therefrom. The importance of the concept of finality of judgment cannot be gainsaid.
As elucidated in Pasiona, Jr. v. Court of Appeals, 24 to wit:
The Court re-emphasizes the doctrine of finality of judgment. In Alcantara v. Ponce, the Court, citing its much
earlier ruling in Arnedo v. Llorente, stressed the importance of said doctrine, to wit:
x x x controlling and irresistible reasons of public policy and of sound practice in the courts demand that at the risk
of occasional error, judgments of courts determining controversies submitted to them should become final at some
definite time fixed by law, or by a rule of practice recognized by law, so as to be thereafter beyond the control even
of the court which rendered them for the purpose of correcting errors of fact or of law, into which, in the opinion of
the court it may have fallen. The very purpose for which the courts are organized is to put an end to controversy, to
decide the questions submitted to the litigants, and to determine the respective rights of the parties. With the full
knowledge that courts are not infallible, the litigants submit their respective claims for judgment, and they have a
right at some time or other to have final judgment on which they can rely as a final disposition of the issue
submitted, and to know that there is an end to the litigation.
xxxx
It should also be borne in mind that the right of the winning party to enjoy the finality of the resolution of the case is
also an essential part of public policy and the orderly administration of justice. Hence, such right is just as weighty
or equally important as the right of the losing party to appeal or seek reconsideration within the prescribed period. 25
When the Labor Arbiter's Decision became final, petitioners attained a vested right to said judgment. They had the
right to fully rely on the immutability of said Decision. In Sofio v. Valenzuela,26 it was amply stressed that:
The Court will not override the finality and immutability of a judgment based only on the negligence of a party’s
counsel in timely taking all the proper recourses from the judgment. To justify an override, the counsel’s negligence
must not only be gross but must also be shown to have deprived the party the right to due process.
In sum, the Court cannot countenance relaxation of the rules absent the showing of extraordinary circumstances to
justify the same. In this case, no compelling reasons can be found to convince this Court that the CA acted correctly
by according respondent such liberality.
IN VIEW OF THE FOREGOING, the Petition is GRANTED. The Decision of the Court of Appeals dated March
24, 2011, and its Resolution dated August 19, 2011 in CA-G.R. SP No. 114822 are hereby SET ASIDE, and the
Decision of the National Labor Relations Commission in NLRC-LAC No. 07-001892-09 (NLRC Case No. NCR-
09-12628-08), ruling that the Decision of the Labor Arbiter has become final and executory, is REINSTATED.
SO ORDERED.
G.R. No. 183965 September 18, 2009
JOANIE SURPOSA UY, Petitioner,
vs.
JOSE NGO CHUA, Respondent.
This is a Petition for Review under Rule 45 of the Rules of Court assailing the Resolution dated 25 June
2008 of the Regional Trial Court (RTC) of Cebu City, Branch 24, which granted the demurrer to evidence
of respondent Jose Ngo Chua, resulting in the dismissal of Special Proceeding No. 12562-CEB.
Petitioner Joanie Surposa Uy filed on 27 October 2003 before the RTC a Petition 1 for the issuance of a
decree of illegitimate filiation against respondent. The Complaint was docketed as Special Proceeding
No. 12562-CEB, assigned to RTC-Branch 24.
Petitioner alleged in her Complaint that respondent, who was then married, had an illicit relationship with
Irene Surposa (Irene). Respondent and Irene had two children, namely, petitioner and her brother, Allan.
Respondent attended to Irene when the latter was giving birth to petitioner on 27 April 1959, and
instructed that petitioner’s birth certificate be filled out with the following names: "ALFREDO F.
SURPOSA" as father and "IRENE DUCAY" as mother. Actually, Alfredo F. Surposa was the name of
Irene’s father, and Ducay was the maiden surname of Irene’s mother. Respondent financially supported
petitioner and Allan. Respondent had consistently and regularly given petitioner allowances before she
got married. He also provided her with employment. When petitioner was still in high school, respondent
required her to work at the Cebu Liberty Lumber, a firm owned by his family. She was later on able to
work at the Gaisano- Borromeo Branch through respondent’s efforts. Petitioner and Allan were introduced
to each other and became known in the Chinese community as respondent’s illegitimate children. During
petitioner’s wedding, respondent sent his brother Catalino Chua (Catalino) as his representative, and it
was the latter who acted as father of the bride. Respondent’s relatives even attended the baptism of
petitioner’s daughter.2
In his Answer3 to the Complaint, filed on 9 December 2003, respondent denied that he had an illicit
relationship with Irene, and that petitioner was his daughter. 4 Hearings then ensued during which
petitioner testified that respondent was the only father she knew; that he took care of all her needs until
she finished her college education; and that he came to visit her on special family occasions. She also
presented documentary evidence to prove her claim of illegitimate filiation. Subsequently, on 27 March
2008, respondent filed a Demurrer to Evidence 5 on the ground that the Decision dated 21 February 2000
of RTC-Branch 9 in Special Proceeding No. 8830-CEB had already been barred by res judicata in
Special Proceeding No. 12562-CEB before RTC-Branch 24.
It turned out that prior to instituting Special Proceeding No. 12562-CEB on 27 October 2003, petitioner
had already filed a similar Petition for the issuance of a decree of illegitimate affiliation against
respondent. It was docketed as Special Proceeding No. 8830-CEB, assigned to RTC-Branch 9. Petitioner
and respondent eventually entered into a Compromise Agreement in Special Proceeding No. 8830-CEB,
which was approved by RTC-Branch 9 in a Decision6 dated 21 February 2000. The full contents of said
Decision reads:
Under consideration is a Compromise Agreement filed by the parties on February 18, 2000, praying that
judgment be rendered in accordance therewith, the terms and conditions of which follows:
"1. Petitioner JOANIE SURPOSA UY declares, admits and acknowledges that there is no
blood relationship or filiation between petitioner and her brother Allan on one hand and
[herein respondent] JOSE NGO CHUA on the other. This declaration, admission or
acknowledgement is concurred with petitioner’s brother Allan, who although not a party to the
case, hereby affixes his signature to this pleading and also abides by the declaration herein.
2. As a gesture of goodwill and by way of settling petitioner and her brother’s (Allan) civil,
monetary and similar claims but without admitting any liability, [respondent] JOSE NGO
CHUA hereby binds himself to pay the petitioner the sum of TWO MILLION PESOS
(₱2,000,000.00) and another TWO MILLION PESOS (₱2,000,000.00) to her brother, ALLAN
SURPOSA. Petitioner and her brother hereby acknowledge to have received in full the said
compromise amount.
3. Petitioner and her brother (Allan) hereby declare that they have absolutely no more claims,
causes of action or demands against [respondent] JOSE NGO CHUA, his heirs, successors
and assigns and/or against the estate of Catalino Chua, his heirs, successors and assigns
and/or against all corporations, companies or business enterprises including Cebu Liberty
Lumber and Joe Lino Realty Investment and Development Corporation where defendant
JOSE NGO CHUA or CATALINO NGO CHUA may have interest or participation.
4. [Respondent] JOSE NGO CHUA hereby waives all counterclaim or counter-demand with
respect to the subject matter of the present petition.
5. Pursuant to the foregoing, petitioner hereby asks for a judgment for the permanent
dismissal with prejudice of the captioned petition. [Respondent] also asks for a judgment
permanently dismissing with prejudice his counterclaim."
Finding the said compromise agreement to be in order, the Court hereby approves the same. Judgment
is rendered in accordance with the provisions of the compromise agreement. The parties are enjoined to
comply with their respective undertakings embodied in the agreement. 7
With no appeal having been filed therefrom, the 21 February 2000 Decision of RTC-Branch 9 in Special
Proceeding 8830-CEB was declared final and executory.
Petitioner filed on 15 April 2008 her Opposition 8 to respondent’s Demurrer to Evidence in Special
Proceeding No. 12562-CEB. Thereafter, RTC-Branch 24 issued its now assailed Resolution dated 25
June 2008 in Special Proceeding No. 12562-CEB, granting respondent’s Demurrer.
RTC-Branch 24 summarized the arguments of respondent and petitioner in the Demurrer and Opposition,
respectively, as follows:
This is to resolve the issues put across in the Demurrer to the Evidence submitted to this Court; the
Opposition thereto; the Comment on the Opposition and the Rejoinder to the Comment.
xxxx
1. The instant case is barred by the principle of res judicata because there was a judgment
entered based on the Compromise Agreement approved by this multiple-sala Court, branch
09, on the same issues and between the same parties.
2. That such decision of Branch 09, having attained finality, is beyond review, reversal or
alteration by another Regional Trial Court and not even the Supreme Court, no matter how
erroneous.
3. Judicial Admissions or admission in petitioner’s pleadings to the effect that there is no
blood relationship between petitioner and respondent, which is a declaration against interest,
are conclusive on her and she should not be permitted to falsify.
4. That the Certificate of Live Birth showing that petitioner’s father is Alfredo Surposa is a
public document which is the evidence of the facts therein stated, unless corrected by judicial
order.
5. After receiving the benefits and concessions pursuant to their compromise agreement, she
is estopped from refuting on the effects thereof to the prejudice of the [herein respondent].
The summary of the Opposition is in this wise:
1. That the illegitimate filiation of petitioner to respondent is established by the open, and
continuous possession of the status of an illegitimate child.
2. The Demurrer to the evidence cannot set up the affirmative grounds for a Motion to
Dismiss.
 3. The question on the civil status, future support and future legitime can not be subject to
compromise.
4. The decision in the first case does not bar the filing of another action asking for the same
relief against the same defendant.9
Taking into consideration the aforementioned positions of the parties, RTC-Branch 24 held that:
Looking at the issues from the viewpoint of a judge, this Court believes that its hands are tied. Unless the
Court of Appeals strikes down the Compromise Judgment rendered by Branch 09 of the Regional Trial
Court of Cebu City, this Court will not attempt to vacate, much more annul, that Judgment issued by a co-
equal court, which had long become final and executory, and in fact executed.
This court upholds the Policy of Judicial Stability since to do otherwise would result in patent abuse of
judicial discretion amounting to lack of jurisdiction. The defense of lack of jurisdiction cannot be waived.
At any rate, such is brought forth in the Affirmative Defenses of the Answer.
This Court, saddled with many cases, suffers the brunt of allowing herein case involving same parties to
re-litigate on the same issues already closed. 10
In the end, RTC-Branch 24 decreed:
WHEREFORE, in view of the foregoing, the Demurrer to the Evidence is hereby given due course, as the
herein case is hereby ordered DISMISSED.11
RTC-Branch 24 denied petitioner’s Motion for Reconsideration 12 in a Resolution13 dated 29 July 2008.
Petitioner then filed the instant Petition raising the following issues for resolution of this Court:
I
Whether or not the principle of res judicata is applicable to judgments predicated upon a compromise
agreement on cases enumerated in Article 2035 of the Civil Code of the Philippines;
II
Whether or not the compromise agreement entered into by the parties herein before the Regional Trial
Court, Branch 09 of Cebu City effectively bars the filing of the present case. 14
At the outset, the Court notes that from the RTC Resolution granting respondent’s Demurrer to Evidence,
petitioner went directly to this Court for relief. This is only proper, given that petitioner is raising pure
questions of law in her instant Petition.a1f
Section 1, Rule 45 of the Rules of Court provides:
SECTION 1. Filing of petition with Supreme Court. – A party desiring to appeal by certiorari from a
judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court
or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review
on certiorari. The petition shall raise only questions of law which must be distinctly set forth.
Clearly, a party may directly appeal to this Court from a decision or final order or resolution of the trial
court on pure questions of law. A question of law lies, on one hand, when the doubt or difference arises
as to what the law is on a certain set of facts; a question of fact exists, on the other hand, when the doubt
or difference arises as to the truth or falsehood of the alleged facts. Here, the facts are not disputed; the
controversy merely relates to the correct application of the law or jurisprudence to the undisputed facts. 15
The central issue in this case is whether the Compromise Agreement entered into between petitioner and
respondent, duly approved by RTC-Branch 9 in its Decision dated 21 February 2000 in Special
Proceeding No. 8830-CEB, constitutes res judicata in Special Proceeding No. 12562-CEB still pending
before RTC-Branch 24.1avvphi1
The doctrine of res judicata is a rule that pervades every well- regulated system of jurisprudence and is
founded upon two grounds embodied in various maxims of the common law, namely: (1) public policy
and necessity, which makes it in the interest of the State that there should be an end to litigation, interest
reipublicae ut sit finis litium, and (2) the hardship of the individual that he should be vexed twice for the
same cause, nemo debet bis vexari pro eadem causa.16
For res judicata, to serve as an absolute bar to a subsequent action, the following requisites must concur:
(1) there must be a final judgment or order; (2) the court rendering it must have jurisdiction over the
subject matter and the parties; (3) it must be a judgment or order on the merits; and (4) there must be,
between the two cases, identity of parties, subject matter, and causes of action. 17
It is undeniable that Special Proceeding No. 8830-CEB, previously before RTC-Branch 9, and Special
Proceeding No. 12562-CEB, presently before RTC-Branch 24, were both actions for the issuance of a
decree of illegitimate filiation filed by petitioner against respondent. Hence, there is apparent identity of
parties, subject matter, and causes of action between the two cases. However, the question arises as to
whether the other elements of res judicata exist in this case.
The court rules in the negative.
A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or
put an end to one already commenced.18 In Estate of the late Jesus S. Yujuico v. Republic, 19 the Court
pronounced that a judicial compromise has the effect of res judicata. A judgment based on a compromise
agreement is a judgment on the merits.
It must be emphasized, though, that like any other contract, a compromise agreement must comply with
the requisites in Article 1318 of the Civil Code, to wit: (a) consent of the contracting parties; (b) object
certain that is the subject matter of the contract; and (c) cause of the obligation that is established. And,
like any other contract, the terms and conditions of a compromise agreement must not be contrary to law,
morals, good customs, public policy and public order. Any compromise agreement that is contrary to law
or public policy is null and void, and vests no rights in and holds no obligation for any party. It produces
no legal effect at all.20
In connection with the foregoing, the Court calls attention to Article 2035 of the Civil Code, which states:
ART. 2035. No compromise upon the following questions shall be valid:
(1) The civil status of persons;
(2) The validity of a marriage or a legal separation;
(3) Any ground for legal separation;
(4) Future support;
(5) The jurisdiction of courts;
(6) Future legitime. (Emphases ours.)
The Compromise Agreement between petitioner and respondent, executed on 18 February 2000 and
approved by RTC-Branch 9 in its Decision dated 21 February 2000 in Special Proceeding No. 8830-CEB,
obviously intended to settle the question of petitioner’s status and filiation, i.e., whether she is an
illegitimate child of respondent. In exchange for petitioner and her brother Allan acknowledging that they
are not the children of respondent, respondent would pay petitioner and Allan ₱2,000,000.00 each.
Although unmentioned, it was a necessary consequence of said Compromise Agreement that petitioner reminded that while petitioner’s admission may have evidentiary value, it does not, by itself, conclusively
also waived away her rights to future support and future legitime as an illegitimate child of respondent. establish the lack of filiation.27
Evidently, the Compromise Agreement dated 18 February 2000 between petitioner and respondent is
covered by the prohibition under Article 2035 of the Civil Code.
Proceeding from its foregoing findings, the Court is remanding this case to the RTC-Branch 24 for the
continuation of hearing on Special Proceedings No. 12562-CEB, more particularly, for respondent’s
21
Advincula v. Advincula has a factual background closely similar to the one at bar. Manuela Advincula presentation of evidence.
(Manuela) filed, before the Court of First Instance (CFI) of Iloilo, Civil Case No. 3553 for acknowledgment
and support, against Manuel Advincula (Manuel). On motion of both parties, said case was dismissed.
Not very long after, Manuela again instituted, before the same court, Civil Case No. 5659 for Although respondent’s pleading was captioned a Demurrer to Evidence, it was more appropriately a
acknowledgment and support, against Manuel. This Court declared that although Civil Case No. 3553 Motion to Dismiss on the ground of res judicata.
ended in a compromise, it did not bar the subsequent filing by Manuela of Civil Case No. 5659, asking for
the same relief from Manuel. Civil Case No. 3553 was an action for acknowledgement, affecting a
Demurrer to Evidence is governed by Rule 33 of the Rules of Court, Section 1 of which is reproduced in
person’s civil status, which cannot be the subject of compromise.
full below:

It is settled, then, in law and jurisprudence, that the status and filiation of a child cannot be compromised.
SECTION 1. Demurrer to evidence. – After the plaintiff has completed the presentation of his evidence,
Public policy demands that there be no compromise on the status and filiation of a child. 22 Paternity and
the defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has
filiation or the lack of the same, is a relationship that must be judicially established, and it is for the Court
shown no right to relief. If his motion is denied, he shall have the right to present evidence. If the motion
to declare its existence or absence. It cannot be left to the will or agreement of the parties. 23
is granted but on appeal the order of dismissal is reversed he shall be deemed to have waived the right
to present evidence.
Being contrary to law and public policy, the Compromise Agreement dated 18 February 2000 between
petitioner and respondent is void ab initio and vests no rights and creates no obligations. It produces no
Demurrer to evidence authorizes a judgment on the merits of the case without the defendant having to
legal effect at all. The void agreement cannot be rendered operative even by the parties' alleged
submit evidence on his part, as he would ordinarily have to do, if plaintiff's evidence shows that he is not
performance (partial or full) of their respective prestations.24
entitled to the relief sought. Demurrer, therefore, is an aid or instrument for the expeditious termination of
an action, similar to a motion to dismiss, which the court or tribunal may either grant or deny. 28
Neither can it be said that RTC-Branch 9, by approving the Compromise Agreement, in its Decision dated
21 February 2000 in Special Proceeding No. 8830-CEB, already made said contract valid and legal.
The Court has recently established some guidelines on when a demurrer to evidence should be granted,
Obviously, it would already be beyond the jurisdiction of RTC-Branch 9 to legalize what is illegal. RTC-
thus:
Branch 9 had no authority to approve and give effect to a Compromise Agreement that was contrary to
law and public policy, even if said contract was executed and submitted for approval by both parties.
RTC-Branch 9 would not be competent, under any circumstances, to grant the approval of the said A demurrer to evidence may be issued when, upon the facts and the law, the plaintiff has shown no right
Compromise Agreement. No court can allow itself to be used as a tool to circumvent the explicit to relief. Where the plaintiff's evidence together with such inferences and conclusions as may reasonably
prohibition under Article 2035 of the Civil Code. The following quote in Francisco v. Zandueta 25 is relevant be drawn therefrom does not warrant recovery against the defendant, a demurrer to evidence should be
herein: sustained. A demurrer to evidence is likewise sustainable when, admitting every proven fact favorable to
the plaintiff and indulging in his favor all conclusions fairly and reasonably inferable therefrom, the plaintiff
has failed to make out one or more of the material elements of his case, or when there is no evidence to
It is a universal rule of law that parties cannot, by consent, give a court, as such, jurisdiction in a matter
support an allegation necessary to his claim. It should be sustained where the plaintiff's evidence is prima
which is excluded by the laws of the land. In such a case the question is not whether a competent court
facie insufficient for a recovery. 29
has obtained jurisdiction of a party triable before it, but whether the court itself is competent under any
circumstances to adjudicate a claim against the defendant. And where there is want of jurisdiction of the
subject-matter, a judgment is void as to all persons, and consent of parties can never impart to it the The essential question to be resolved in a demurrer to evidence is whether petitioner has been able to
vitality which a valid judgment derives from the sovereign state, the court being constituted, by express show that she is entitled to her claim, and it is incumbent upon RTC-Branch 24 to make such a
provision of law, as its agent to pronounce its decrees in controversies between its people. (7 R. C. L., determination. A perusal of the Resolution dated 25 June 2008 of RTC-Branch 24 in Special Proceeding
1039.) No. 12562-CEB shows that it is barren of any discussion on this matter. It did not take into consideration
any of the evidence presented by petitioner. RTC-Branch 24 dismissed Special Proceedings No. 12562-
CEB on the sole basis of res judicata, given the Decision dated 21 February 2000 of RTC-Branch 9 in
A judgment void for want of jurisdiction is no judgment at all. It cannot be the source of any right or the
Special Proceeding No. 8830-CEB, approving the Compromise Agreement between petitioner and
creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal
respondent. Hence, the Resolution dated 25 June 2008 of RTC-Branch 24 should be deemed as having
effect. Hence, it can never become final, and any writ of execution based on it is void. It may be said to
dismissed Special Proceeding No. 12562-CEB on the ground of res judicata rather than an adjudication
be a lawless thing that can be treated as an outlaw and slain on sight, or ignored wherever and whenever
on the merits of respondent’s demurrer to evidence. Necessarily, the last line of Section 1, Rule 33 of the
it exhibits its head.26
Rules of Court should not apply herein and respondent should still be allowed to present evidence before
RTC-Branch 24 in Special Proceedings No. 12562-CEB.
In sum, Special Proceeding No. 12562-CEB before RTC-Branch 24 is not barred by res judicata, since
RTC-Branch 9 had no jurisdiction to approve, in its Decision dated 21 February 2000 in Special
It must be kept in mind that substantial justice must prevail. When there is a strong showing that grave
Proceeding No. 8830-CEB, petitioner and respondent’s Compromise Agreement, which was contrary to
miscarriage of justice would result from the strict application of the Rules, this Court will not hesitate to
law and public policy; and, consequently, the Decision dated 21 February 2000 in Special Proceeding No.
relax the same in the interest of substantial justice. The Rules of Court were conceived and promulgated
8830-CEB, being null and void for having been rendered by RTC-Branch 9 without jurisdiction, could not
to set forth guidelines in the dispensation of justice but not to bind and chain the hand that dispenses it,
have attained finality or been considered a judgment on the merits.
for otherwise, courts will be mere slaves to or robots of technical rules, shorn of judicial discretion. That is
precisely why courts in rendering real justice have always been, as they in fact ought to be,
Nevertheless, the Court must clarify that even though the Compromise Agreement between petitioner conscientiously guided by the norm that when on the balance, technicalities take backseat against
and respondent is void for being contrary to law and public policy, the admission petitioner made therein substantive rights, and not the other way around. 30
may still be appreciated against her in Special Proceeding No. 12562-CEB. RTC-Branch 24 is only
WhereforE, premises considered, the Resolution dated 25 June 2008 of the Regional Trial Court of Cebu
City, Branch 24, in Special Proceeding No. 12562-CEB is REVERSED and set aside. This case is
ordered REMANDED to the said trial court for further proceedings in accordance with the ruling of the
Court herein. No costs.
SO ORDERED.
G.R. No. 149588 September 29, 2009
FRANCISCO R. LLAMAS and CARMELITA C. LLAMAS, Petitioners,
vs.
THE HONORABLE COURT OF APPEALS, BRANCH 66 OF THE REGIONAL TRIAL COURT IN
MAKATI CITY and THE PEOPLE OF THE PHILIPPINES, Respondents.
In this petition captioned as "Annulment of Judgment and Certiorari, with Preliminary Injunction,"
petitioners assail, on the ground of lack of jurisdiction, the trial court’s decision convicting them of "other
form of swindling" penalized by Article 316, paragraph 2, of the Revised Penal Code (RPC).
The antecedent facts and proceedings that led to the filing of the instant petition are pertinently narrated
as follows:
On August 16, 1984, petitioners were charged before the Regional Trial Court (RTC) of Makati with, as
aforesaid, the crime of "other forms of swindling" in the Information, 1 docketed as Criminal Case No.
11787, which reads:
That on or about the 20th day of November, 1978, in the municipality of Parañaque, Metro Manila,
Philippines and within the jurisdiction of this Honorable Court, the above-named accused, conspiring and
confederating together and mutually helping and aiding one another, well knowing that their parcel of land
known as Lot No. 11, Block No. 6 of the Subdivision Plan (LRC) Psd 67036, Cadastral Survey of
Parañaque, LRC Record No. N-26926, Case No. 4869, situated at Barrio San Dionisio, Municipality of
Parañaque, Metro Manila, was mortgaged to the Rural Bank of Imus, did then and there willfully,
unlawfully and feloniously sell said property to one Conrado P. Avila, falsely representing the same to be
free from all liens and encumbrances whatsoever, and said Conrado P. Avila bought the aforementioned
property for the sum of ₱12,895.00 which was paid to the accused, to the damage and prejudice of said
Conrado P. Avila in the aforementioned amount of ₱12,895.00.
2
Contrary to law.
After trial on the merits, the RTC rendered its Decision 3 on June 30, 1994, finding petitioners guilty
beyond reasonable doubt of the crime charged and sentencing them to suffer the penalty of
imprisonment for two months and to pay the fine of ₱18,085.00 each.
On appeal, the Court of Appeals, in its February 19, 1999 Decision 4 in CA-G.R. CR No. 18270, affirmed
the decision of the trial court. In its December 22, 1999 Resolution, 5 the appellate court further denied
petitioners’ motion for reconsideration.
Assailing the aforesaid issuances of the appellate court, petitioners filed before this Court, on February
11, 2000, their petition for review, docketed as G.R. No. 141208. 6 The Court, however, on March 13,
2000, denied the same for petitioners’ failure to state the material dates. Since it subsequently denied
petitioners’ motion for reconsideration on June 28, 2000, 7 the judgment of conviction became final and
executory.
With the consequent issuance by the trial court of the April 19, 2001 Warrant of Arrest, 8 the police
arrested, on April 27, 2001, petitioner Carmelita C. Llamas for her to serve her 2-month jail term. The
police, nevertheless, failed to arrest petitioner Francisco R. Llamas because he was nowhere to be
found.9
On July 16, 2001, petitioner Francisco moved for the lifting or recall of the warrant of arrest, raising for
the first time the issue that the trial court had no jurisdiction over the offense charged. 10
There being no action taken by the trial court on the said motion, petitioners instituted, on September 13,
2001, the instant proceedings for the annulment of the trial and the appellate courts’ decisions.
The Court initially dismissed on technical grounds the petition in the September 24, 2001
Resolution,11 but reinstated the same, on motion for reconsideration, in the October 22, 2001
Resolution.12
After a thorough evaluation of petitioners’ arguments vis-à-vis the applicable law and jurisprudence, the
Court denies the petition.
In People v. Bitanga,13 the Court explained that the remedy of annulment of judgment cannot be availed
of in criminal cases, thus —
Section 1, Rule 47 of the Rules of Court, limits the scope of the remedy of annulment of judgment to the
following:
Section 1. Coverage. — This Rule shall govern the annulment by the Court of Appeals of judgments or
final orders and resolutions in civil actions of Regional Trial Courts for which the ordinary remedies of
new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault
of the petitioner.a1f
The remedy cannot be resorted to when the RTC judgment being questioned was rendered in a criminal
case. The 2000 Revised Rules of Criminal Procedure itself does not permit such recourse, for it excluded
Rule 47 from the enumeration of the provisions of the 1997 Revised Rules of Civil Procedure which have
suppletory application to criminal cases. Section 18, Rule 124 thereof, provides:
Sec. 18. Application of certain rules in civil procedure to criminal cases. – The provisions of Rules 42, 44
to 46 and 48 to 56 relating to procedure in the Court of Appeals and in the Supreme Court in original and
appealed civil cases shall be applied to criminal cases insofar as they are applicable and not inconsistent
with the provisions of this Rule.
There is no basis in law or the rules, therefore, to extend the scope of Rule 47 to criminal cases. As we
explained in Macalalag v. Ombudsman, when there is no law or rule providing for this remedy, recourse
to it cannot be allowed x x x.14
Here, petitioners are invoking the remedy under Rule 47 to assail a decision in a criminal case. Following
Bitanga, this Court cannot allow such recourse, there being no basis in law or in the rules.
In substance, the petition must likewise fail. The trial court which rendered the assailed decision had
jurisdiction over the criminal case.
Jurisdiction being a matter of substantive law, the established rule is that the statute in force at the time of
the commencement of the action determines the jurisdiction of the court. 15 In this case, at the time of the
filing of the information, the applicable law was Batas Pambansa Bilang 129, 16 approved on August 14,
1981, which pertinently provides:
Section 20. Jurisdiction in criminal cases. — Regional Trial Courts shall exercise exclusive original
jurisdiction in all criminal cases not within the exclusive jurisdiction of any court, tribunal or body, except
those now falling under the exclusive and concurrent jurisdiction of the Sandiganbayan which shall
hereafter be exclusively taken cognizance of by the latter.
xxxx
Section 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts in criminal cases. — Except in cases falling within the exclusive original jurisdiction of Regional
Trial Courts and of the Sandiganbayan, the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over all violations of city or municipal ordinances committed
within their respective territorial jurisdiction; and
(2) Exclusive original jurisdiction over all offenses punishable with imprisonment of not
exceeding four years and two months, or a fine of not more than four thousand pesos, or both
such fine and imprisonment, regardless of other imposable accessory or other penalties,
including the civil liability arising from such offenses or predicated thereon, irrespective of
kind, nature, value, or amount thereof: Provided, however, That in offenses involving damage
to property through criminal negligence they shall have exclusive original jurisdiction where
the imposable fine does not exceed twenty thousand pesos.
Article 316(2) of the RPC, the provision which penalizes the crime charged in the information, provides
that —
Article 316. Other forms of swindling.—The penalty of arresto mayor in its minimum and medium periods
and a fine of not less than the value of the damage caused and not more than three times such value,
shall be imposed upon:
xxxx
2. Any person who, knowing that real property is encumbered, shall dispose of the same, although such
encumbrance be not recorded.
The penalty for the crime charged in this case is arresto mayor in its minimum and medium periods,
which has a duration of 1 month and 1 day to 4 months, and a fine of not less than the value of the
damage caused and not more than three times such value. Here, as alleged in the information, the value
of the damage caused, or the imposable fine, is ₱12,895.00. Clearly, from a reading of the information,
the jurisdiction over the criminal case was with the RTC and not the Metropolitan Trial Court (MeTC). The
MeTC could not have acquired jurisdiction over the criminal action because at the time of the filing of the
information, its jurisdiction was limited to offenses punishable with a fine of not more than ₱4,000.00. 17
WHEREFORE, premises considered, the petition is DENIED.
SO ORDERED.
G.R. No. 157479 November 24, 2010
PHILIP TURNER and ELNORA TURNER, Petitioners,
vs.
LORENZO SHIPPING CORPORATION, Respondent.
This case concerns the right of dissenting stockholders to demand payment of the value of their
shareholdings.
In the stockholders’ suit to recover the value of their shareholdings from the corporation, the Regional
Trial Court (RTC) upheld the dissenting stockholders, herein petitioners, and ordered the corporation,
herein respondent, to pay. Execution was partially carried out against the respondent. On the
respondent’s petition for certiorari, however, the Court of Appeals (CA) corrected the RTC and dismissed
the petitioners’ suit on the ground that their cause of action for collection had not yet accrued due to the
lack of unrestricted retained earnings in the books of the respondent.
Thus, the petitioners are now before the Court to challenge the CA’s decision promulgated on March 4,
2003 in C.A.-G.R. SP No. 74156 entitled Lorenzo Shipping Corporation v. Hon. Artemio S. Tipon, in his
capacity as Presiding Judge of Branch 46 of the Regional Trial Court of Manila, et al. 1
Antecedents
The petitioners held 1,010,000 shares of stock of the respondent, a domestic corporation engaged
primarily in cargo shipping activities. In June 1999, the respondent decided to amend its articles of
incorporation to remove the stockholders’ pre-emptive rights to newly issued shares of stock. Feeling that
the corporate move would be prejudicial to their interest as stockholders, the petitioners voted against the
amendment and demanded payment of their shares at the rate of ₱2.276/share based on the book value
of the shares, or a total of ₱2,298,760.00.
The respondent found the fair value of the shares demanded by the petitioners unacceptable. It insisted
that the market value on the date before the action to remove the pre-emptive right was taken should be
the value, or ₱0.41/share (or a total of ₱414,100.00), considering that its shares were listed in the
Philippine Stock Exchange, and that the payment could be made only if the respondent had unrestricted
retained earnings in its books to cover the value of the shares, which was not the case.
The disagreement on the valuation of the shares led the parties to constitute an appraisal committee
pursuant to Section 82 of the Corporation Code, each of them nominating a representative, who together
then nominated the third member who would be chairman of the appraisal committee. Thus, the appraisal
committee came to be made up of Reynaldo Yatco, the petitioners’ nominee; Atty. Antonio Acyatan, the
respondent’s nominee; and Leo Anoche of the Asian Appraisal Company, Inc., the third
member/chairman.
On October 27, 2000, the appraisal committee reported its valuation of ₱2.54/share, for an aggregate
value of ₱2,565,400.00 for the petitioners. 2
Subsequently, the petitioners demanded payment based on the valuation of the appraisal committee,
plus 2%/month penalty from the date of their original demand for payment, as well as the reimbursement
of the amounts advanced as professional fees to the appraisers. 3
In its letter to the petitioners dated January 2, 2001, 4 the respondent refused the petitioners’ demand,
explaining that pursuant to the Corporation Code, the dissenting stockholders exercising their appraisal
rights could be paid only when the corporation had unrestricted retained earnings to cover the fair value
of the shares, but that it had no retained earnings at the time of the petitioners’ demand, as borne out by
its Financial Statements for Fiscal Year 1999 showing a deficit of ₱72,973,114.00 as of December 31,
1999.
Upon the respondent’s refusal to pay, the petitioners sued the respondent for collection and damages in
the RTC in Makati City on January 22, 2001. The case, docketed as Civil Case No. 01-086, was initially
assigned to Branch 132.5
On June 26, 2002, the petitioners filed their motion for partial summary judgment, claiming that:
7) xxx the defendant has an accumulated unrestricted retained earnings of ELEVEN MILLION
NINE HUNDRED SEVENTY FIVE THOUSAND FOUR HUNDRED NINETY (P11,975,490.00)
PESOS, Philippine Currency, evidenced by its Financial Statement as of the Quarter Ending
March 31, 2002; xxx
8) xxx the fair value of the shares of the petitioners as fixed by the Appraisal Committee is
final, that the same cannot be disputed xxx
9) xxx there is no genuine issue to material fact and therefore, the plaintiffs are entitled, as a
matter of right, to a summary judgment. xxx 6
The respondent opposed the motion for partial summary judgment, stating that the determination of the
unrestricted retained earnings should be made at the end of the fiscal year of the respondent, and that
the petitioners did not have a cause of action against the respondent.
During the pendency of the motion for partial summary judgment, however, the Presiding Judge of
Branch 133 transmitted the records to the Clerk of Court for re-raffling to any of the RTC’s special
commercial courts in Makati City due to the case being an intra-corporate dispute. Hence, Civil Case No.
01-086 was re-raffled to Branch 142.
Nevertheless, because the principal office of the respondent was in Manila, Civil Case No. 01-086 was
ultimately transferred to Branch 46 of the RTC in Manila, presided by Judge Artemio Tipon, 7 pursuant to
the Interim Rules of Procedure on Intra-Corporate Controversies (Interim Rules) requiring intra-corporate
cases to be brought in the RTC exercising jurisdiction over the place where the principal office of the
corporation was found.
After the conference in Civil Case No. 01-086 set on October 23, 2002, which the petitioners’ counsel did
not attend, Judge Tipon issued an order, 8 granting the petitioners’ motion for partial summary judgment,
stating:
As to the motion for partial summary judgment, there is no question that the 3-man committee mandated
to appraise the shareholdings of plaintiff submitted its recommendation on October 27, 2000 fixing the fair
value of the shares of stocks of the plaintiff at P2.54 per share. Under Section 82 of the Corporation
Code:
"The findings of the majority of the appraisers shall be final, and the award shall be paid by the
corporation within thirty (30) days after the award is made."
"The only restriction imposed by the Corporation Code is–"
"That no payment shall be made to any dissenting stockholder unless the corporation has unrestricted
retained earning in its books to cover such payment."
The evidence submitted by plaintiffs shows that in its quarterly financial statement it submitted to the
Securities and Exchange Commission, the defendant has retained earnings of P11,975,490 as of March
21, 2002. This is not disputed by the defendant. Its only argument against paying is that there must be
unrestricted retained earning at the time the demand for payment is made.
This certainly is a very narrow concept of the appraisal right of a stockholder. The law does not say that
the unrestricted retained earnings must exist at the time of the demand. Even if there are no retained
earnings at the time the demand is made if there are retained earnings later, the fair value of such stocks
must be paid. The only restriction is that there must be sufficient funds to cover the creditors after the
dissenting stockholder is paid. No such allegations have been made by the defendant. 9
On November 12, 2002, the respondent filed a motion for reconsideration.
On the scheduled hearing of the motion for reconsideration on November 22, 2002, the petitioners filed a
motion for immediate execution and a motion to strike out motion for reconsideration. In the latter motion,
they pointed out that the motion for reconsideration was prohibited by Section 8 of the Interim
Rules. Thus, also on November 22, 2002, Judge Tipon denied the motion for reconsideration and granted
the petitioners’ motion for immediate execution.10
Subsequently, on November 28, 2002, the RTC issued a writ of execution. 11
Aggrieved, the respondent commenced a special civil action for certiorari in the CA to challenge the two
aforecited orders of Judge Tipon, claiming that:
A.
JUDGE TIPON GRAVELY ABUSED HIS DISCRETION IN GRANTING SUMMARY
JUDGMENT TO THE SPOUSES TURNER, BECAUSE AT THE TIME THE "COMPLAINT"
WAS FILED, LSC HAD NO RETAINED EARNINGS, AND THUS WAS COMPLYING WITH
THE LAW, AND NOT VIOLATING ANY RIGHTS OF THE SPOUSES TURNER, WHEN IT
REFUSED TO PAY THEM THE VALUE OF THEIR LSC SHARES. ANY RETAINED
EARNINGS MADE A YEAR AFTER THE "COMPLAINT" WAS FILED ARE IRRELEVANT TO
THE SPOUSES TURNER’S RIGHT TO RECOVER UNDER THE "COMPLAINT", BECAUSE
THE WELL-SETTLED RULE, REPEATEDLY BROUGHT TO JUDGE TIPON’S ATTENTION,
IS "IF NO RIGHT EXISTED AT THE TIME (T)HE ACTION WAS COMMENCED THE SUIT
CANNOT BE MAINTAINED, ALTHOUGH SUCH RIGHT OF ACTION MAY HAVE ACCRUED
THEREAFTER.
B.
JUDGE TIPON IGNORED CONTROLLING CASE LAW, AND THUS GRAVELY ABUSED HIS
DISCRETION, WHEN HE GRANTED AND ISSUED THE QUESTIONED "WRIT OF
EXECUTION" DIRECTING THE EXECUTION OF HIS PARTIAL SUMMARY JUDGMENT IN
FAVOR OF THE SPOUSES TURNER, BECAUSE THAT JUDGMENT IS NOT A FINAL
JUDGMENT UNDER SECTION 1 OF RULE 39 OF THE RULES OF COURT AND
THEREFORE CANNOT BE SUBJECT OF EXECUTION UNDER THE SUPREME COURT’S
CATEGORICAL HOLDING IN PROVINCE OF PANGASINAN VS. COURT OF APPEALS.
Upon the respondent’s application, the CA issued a temporary restraining order (TRO), enjoining the
petitioners, and their agents and representatives from enforcing the writ of execution. By then, however,
the writ of execution had been partially enforced.
The TRO lapsed without the CA issuing a writ of preliminary injunction to prevent the execution.
Thereupon, the sheriff resumed the enforcement of the writ of execution.
The CA promulgated its assailed decision on March 4, 2003, 12 pertinently holding:
However, it is clear from the foregoing that the Turners’ appraisal right is subject to the legal condition
that no payment shall be made to any dissenting stockholder unless the corporation has unrestricted
retained earnings in its books to cover such payment. Thus, the Supreme Court held that:
The requirement of unrestricted retained earnings to cover the shares is based on the trust fund doctrine
which means that the capital stock, property and other assets of a corporation are regarded as equity in
trust for the payment of corporate creditors. The reason is that creditors of a corporation are preferred
over the stockholders in the distribution of corporate assets. There can be no distribution of assets
among the stockholders without first paying corporate creditors. Hence, any disposition of corporate
funds to the prejudice of creditors is null and void. Creditors of a corporation have the right to assume
that so long as there are outstanding debts and liabilities, the board of directors will not use the assets of
the corporation to purchase its own stock.
In the instant case, it was established that there were no unrestricted retained earnings when the Turners
filed their Complaint. In a letter dated 20 August 2000, petitioner informed the Turners that payment of
their shares could only be made if it had unrestricted earnings in its books to cover the same. Petitioner
reiterated this in a letter dated 2 January 2001 which further informed the Turners that its Financial
Statement for fiscal year 1999 shows that its retained earnings ending December 31, 1999 was at a
deficit in the amount of ₱72,973,114.00, a matter which has not been disputed by private respondents.
Hence, in accordance with the second paragraph of sec. 82, BP 68 supra, the Turners’ right to payment
had not yet accrued when they filed their Complaint on January 22, 2001, albeit their appraisal right
already existed.
In Philippine American General Insurance Co. Inc. vs. Sweet Lines, Inc., the Supreme Court declared
that:
Now, before an action can properly be commenced all the essential elements of the cause of action must I.
be in existence, that is, the cause of action must be complete. All valid conditions precedent to the
institution of the particular action, whether prescribed by statute, fixed by agreement of the parties or
implied by law must be performed or complied with before commencing the action, unless the conduct of THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT GRANTED THE
the adverse party has been such as to prevent or waive performance or excuse non-performance of the PETITION FOR CERTIORARI WHEN THE REGIONAL TRIAL COURT OF MANILA DID NOT ACT
condition. BEYOND ITS JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN GRANTING THE MOTION
FOR PARTIAL SUMMARY JUDGMENT AND IN GRANTING THE MOTION FOR IMMEDIATE
EXECUTION OF JUDGMENT;
It bears restating that a right of action is the right to presently enforce a cause of action, while a cause of
action consists of the operative facts which give rise to such right of action. The right of action does not
arise until the performance of all conditions precedent to the action and may be taken away by the II.
running of the statute of limitations, through estoppel, or by other circumstances which do not affect the
cause of action. Performance or fulfillment of all conditions precedent upon which a right of action
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT ORDERED THE
depends must be sufficiently alleged, considering that the burden of proof to show that a party has a right
DISMISSAL OF THE CASE, WHEN THE PETITION FOR CERTIORARI MERELY SOUGHT THE
of action is upon the person initiating the suit.
ANNULMENT OF THE ORDER GRANTING THE MOTION FOR PARTIAL SUMMARY JUDGMENT AND
OF THE ORDER GRANTING THE MOTION FOR IMMEDIATE EXECUTION OF THE JUDGMENT;
The Turners’ right of action arose only when petitioner had already retained earnings in the amount of
₱11,975,490.00 on March 21, 2002; such right of action was inexistent on January 22, 2001 when they
III.
filed the Complaint.

THE HONORABLE COURT OF APPEALS HAS DECIDED QUESTIONS OF SUBSTANCE NOT

In the doctrinal case of Surigao Mine Exploration Co. Inc., vs. Harris, the Supreme Court ruled:
THEREFORE DETERMINED BY THIS HONORABLE COURT AND/OR DECIDED IT IN A WAY NOT IN
ACCORD WITH LAW OR WITH JURISPRUDENCE.
Subject to certain qualifications, and except as otherwise provided by law, an action commenced before
the cause of action has accrued is prematurely brought and should be dismissed. The fact that the cause
Ruling
of action accrues after the action is commenced and while it is pending is of no moment. 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. There are reasons of public policy why there The petition fails.
should be no needless haste in bringing up litigation, and why people who are in no default and against
whom there is as yet no cause of action should not be summoned before the public tribunals to answer
complaints which are groundless. An action prematurely brought is a groundless suit. Unless the plaintiff The CA correctly concluded that the RTC had exceeded its jurisdiction in entertaining the petitioners’
has a valid and subsisting cause of action at the time his action iscommenced, the defect cannot be complaint in Civil Case No. 01-086, and in rendering the summary judgment and issuing writ of
cured or remedied by the acquisition or accrual of one while the action is pending, and a supplemental execution.
complaint or an amendment setting up such after-accrued cause of action is not permissible.
A.
The afore-quoted ruling was reiterated in Young vs Court of Appeals and Lao vs. Court of Appeals.
Stockholder’s Right of Appraisal, In General
The Turners’ apprehension that their claim for payment may prescribe if they wait for the petitioner to
have unrestricted retained earnings is misplaced. It is the legal possibility of bringing the action that
determines the starting point for the computation of the period of prescription. Stated otherwise, the A stockholder who dissents from certain corporate actions has the right to demand payment of the fair
prescriptive period is to be reckoned from the accrual of their right of action. value of his or her shares. This right, known as the right of appraisal, is expressly recognized in Section
81 of the Corporation Code, to wit:

Accordingly, We hold that public respondent exceeded its jurisdiction when it entertained the herein
Complaint and issued the assailed Orders. Excess of jurisdiction is the state of being beyond or outside
the limits of jurisdiction, and as distinguished from the entire absence of jurisdiction, means that the act
although within the general power of the judge, is not authorized and therefore void, with respect to the
particular case, because the conditions which authorize the exercise of his general power in that
particular case are wanting, and hence, the judicial power is not in fact lawfully invoked.
We find no necessity to discuss the second ground raised in this petition.
Section 81. Instances of appraisal right. - Any stockholder of a corporation shall have the right to dissent
and demand payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of incorporation has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing preferences in any
respect superior to those of outstanding shares of any class, or of extending or shortening the
term of corporate existence;

WHEREFORE, upon the premises, the petition is GRANTED. The assailed Orders and the 2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
corresponding Writs of Garnishment are NULLIFIED. Civil Case No. 02-104692 is hereby ordered substantially all of the corporate property and assets as provided in the Code; and
DISMISSED without prejudice to refiling by the private respondents of the action for enforcement of their
right to payment as withdrawing stockholders. 3. In case of merger or consolidation. (n)

SO ORDERED. Clearly, the right of appraisal may be exercised when there is a fundamental change in the charter or
articles of incorporation substantially prejudicing the rights of the stockholders. It does not vest unless
The petitioners now come to the Court for a review on certiorari of the CA’s decision, submitting that:
objectionable corporate action is taken. 13 It serves the purpose of enabling the dissenting stockholder to
have his interests purchased and to retire from the corporation. 141avvphil
Under the common law, there were originally conflicting views on whether a corporation had the power to
acquire or purchase its own stocks. In England, it was held invalid for a corporation to purchase its issued
stocks because such purchase was an indirect method of reducing capital (which was statutorily
restricted), aside from being inconsistent with the privilege of limited liability to creditors. 15 Only a few
American jurisdictions adopted by decision or statute the strict English rule forbidding a corporation from
purchasing its own shares. In some American states where the English rule used to be adopted, statutes
granting authority to purchase out of surplus funds were enacted, while in others, shares might be
purchased even out of capital provided the rights of creditors were not prejudiced. 16 The reason
underlying the limitation of share purchases sprang from the necessity of imposing safeguards against
the depletion by a corporation of its assets and against the impairment of its capital needed for the
protection of creditors.17
Now, however, a corporation can purchase its own shares, provided payment is made out of surplus
profits and the acquisition is for a legitimate corporate purpose. 18 In the Philippines, this new rule is
embodied in Section 41 of the Corporation Code, to wit:
Section 41. Power to acquire own shares. - A stock corporation shall have the power to purchase or
acquire its own shares for a legitimate corporate purpose or purposes, including but not limited to the
following cases: Provided, That the corporation has unrestricted retained earnings in its books to cover
the shares to be purchased or acquired:
1. To eliminate fractional shares arising out of stock dividends;
2. To collect or compromise an indebtedness to the corporation, arising out of unpaid
subscription, in a delinquency sale, and to purchase delinquent shares sold during said sale;
and
3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under
the provisions of this Code. (n)
The Corporation Code defines how the right of appraisal is exercised, as well as the implications of the
right of appraisal, as follows:
1. The appraisal right is exercised by any stockholder who has voted against the proposed corporate
action by making a written demand on the corporation within 30 days after the date on which the vote
was taken for the payment of the fair value of his shares. The failure to make the demand within the
period is deemed a waiver of the appraisal right. 19
2. If the withdrawing stockholder and the corporation cannot agree on the fair value of the shares within a
period of 60 days from the date the stockholders approved the corporate action, the fair value shall be
determined and appraised by three disinterested persons, one of whom shall be named by the
stockholder, another by the corporation, and the third by the two thus chosen. The findings and award of
the majority of the appraisers shall be final, and the corporation shall pay their award within 30 days after
the award is made. Upon payment by the corporation of the agreed or awarded price, the stockholder
shall forthwith transfer his or her shares to the corporation. 20
3. All rights accruing to the withdrawing stockholder’s shares, including voting and dividend rights, shall
be suspended from the time of demand for the payment of the fair value of the shares until either the
abandonment of the corporate action involved or the purchase of the shares by the corporation, except
the right of such stockholder to receive payment of the fair value of the shares. 21
4. Within 10 days after demanding payment for his or her shares, a dissenting stockholder shall submit to
the corporation the certificates of stock representing his shares for notation thereon that such shares are
dissenting shares. A failure to do so shall, at the option of the corporation, terminate his rights under this
Title X of the Corporation Code. If shares represented by the certificates bearing such notation are
transferred, and the certificates are consequently canceled, the rights of the transferor as a dissenting
stockholder under this Title shall cease and the transferee shall have all the rights of a regular
stockholder; and all dividend distributions that would have accrued on such shares shall be paid to the
transferee.22
5. If the proposed corporate action is implemented or effected, the corporation shall pay to such
stockholder, upon the surrender of the certificates of stock representing his shares, the fair value thereof
as of the day prior to the date on which the vote was taken, excluding any appreciation or depreciation in
anticipation of such corporate action. 23
Notwithstanding the foregoing, no payment shall be made to any dissenting stockholder unless the
corporation has unrestricted retained earnings in its books to cover the payment. In case the corporation
has no available unrestricted retained earnings in its books, Section 83 of the Corporation Code provides
that if the dissenting stockholder is not paid the value of his shares within 30 days after the award, his
voting and dividend rights shall immediately be restored.
The trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the payment
of the shares of stocks of the withdrawing stockholders. Under the doctrine, the capital stock, property,
and other assets of a corporation are regarded as equity in trust for the payment of corporate creditors,
who are preferred in the distribution of corporate assets. 24 The creditors of a corporation have the right to
assume that the board of directors will not use the assets of the corporation to purchase its own stock for
as long as the corporation has outstanding debts and liabilities. 25 There can be no distribution of assets
among the stockholders without first paying corporate debts. Thus, any disposition of corporate funds and
assets to the prejudice of creditors is null and void.26
B.
Petitioners’ cause of action was premature
That the respondent had indisputably no unrestricted retained earnings in its books at the time the
petitioners commenced Civil Case No. 01-086 on January 22, 2001 proved that the respondent’s legal
obligation to pay the value of the petitioners’ shares did not yet arise. Thus, the CA did not err in holding
that the petitioners had no cause of action, and in ruling that the RTC did not validly render the partial
summary judgment.
A cause of action is the act or omission by which a party violates a right of another. 27 The essential
elements of a cause of action are: (a) the existence of a legal right in favor of the plaintiff; (b) a correlative
legal duty of the defendant to respect such right; and (c) an act or omission by such defendant in violation
of the right of the plaintiff with a resulting injury or damage to the plaintiff for which the latter may maintain
an action for the recovery of relief from the defendant. 28 Although the first two elements may exist, a
cause of action arises only upon the occurrence of the last element, giving the plaintiff the right to
maintain an action in court for recovery of damages or other appropriate relief. 29
Section 1, Rule 2, of the Rules of Court requires that every ordinary civil action must be based on a
cause of action. Accordingly, Civil Case No. 01-086 was dismissible from the beginning for being without
any cause of action.
The RTC concluded that the respondent’s obligation to pay had accrued by its having the unrestricted
retained earnings after the making of the demand by the petitioners. It based its conclusion on the fact
that the Corporation Code did not provide that the unrestricted retained earnings must already exist at the
time of the demand.
The RTC’s construal of the Corporation Code was unsustainable, because it did not take into account the
petitioners’ lack of a cause of action against the respondent. In order to give rise to any obligation to pay
on the part of the respondent, the petitioners should first make a valid demand that the respondent
refused to pay despite having unrestricted retained earnings. Otherwise, the respondent could not be
said to be guilty of any actionable omission that could sustain their action to collect.
Neither did the subsequent existence of unrestricted retained earnings after the filing of the complaint
cure the lack of cause of action in Civil Case No. 01-086. The petitioners’ right of action could only spring
from an existing cause of action. Thus, a complaint whose cause of action has not yet accrued cannot be
cured by an amended or supplemental pleading alleging the existence or accrual of a cause of action
during the pendency of the action.30For, only when there is an invasion of primary rights, not before, does
the adjective or remedial law become operative.31 Verily, a premature invocation of the court’s
intervention renders the complaint without a cause of action and dismissible on such ground. 32 In short,
Civil Case No. 01-086, being a groundless suit, should be dismissed.
Even the fact that the respondent already had unrestricted retained earnings more than sufficient to cover
the petitioners’ claims on June 26, 2002 (when they filed their motion for partial summary judgment) did
not rectify the absence of the cause of action at the time of the commencement of Civil Case No. 01-086.
The motion for partial summary judgment, being a mere application for relief other than by a
pleading,33 was not the same as the complaint in Civil Case No. 01-086. Thereby, the petitioners did not
meet the requirement of the Rules of Court that a cause of action must exist at the commencement of an
action, which is "commenced by the filing of the original complaint in court." 34
The petitioners claim that the respondent’s petition for certiorari sought only the annulment of the
assailed orders of the RTC (i.e., granting the motion for partial summary judgment and the motion for
immediate execution); hence, the CA had no right to direct the dismissal of Civil Case No. 01-086.
The claim of the petitioners cannot stand.
Although the respondent’s petition for certiorari targeted only the RTC’s orders granting the motion for
partial summary judgment and the motion for immediate execution, the CA’s directive for the dismissal of
Civil Case No. 01-086 was not an abuse of discretion, least of all grave, because such dismissal was the
only proper thing to be done under the circumstances. According to Surigao Mine Exploration Co., Inc. v.
Harris:35
Subject to certain qualification, and except as otherwise provided by law, an action commenced before
the cause of action has accrued is prematurely brought and should be dismissed. The fact that the
cause of action accrues after the action is commenced and while the case is pending is of no moment. It
is a rule of law to which there is, perhaps no exception, either in law or in equity, that to recover at all
there must be some cause of action at the commencement of the suit. 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 as yet no cause of action should not be summoned before the public tribunals
to answer complaints which are groundless. An action prematurely brought is a groundless suit. 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.
Lastly, the petitioners argue that the respondent’s recourse of a special action for certiorari was the wrong
remedy, in view of the fact that the granting of the motion for partial summary judgment constituted only
an error of law correctible by appeal, not of jurisdiction.
The argument of the petitioners is baseless. The RTC was guilty of an error of jurisdiction, for it exceeded
its jurisdiction by taking cognizance of the complaint that was not based on an existing cause of action.
WHEREFORE, the petition for review on certiorari is denied for lack of merit.
We affirm the decision promulgated on March 4, 2003 in C.A.-G.R. SP No. 74156 entitled Lorenzo
Shipping Corporation v. Hon. Artemio S. Tipon, in his capacity as Presiding Judge of Branch 46 of the
Regional Trial Court of Manila, et al.
Costs of suit to be paid by the petitioners.
SO ORDERED.
G.R. No. 198680 July 8, 2013
HEIRS OF MAGDALENO YPON, NAMELY, ALVARO YPON, ERUDITA Y. BARON, CICERO YPON,
WILSON YPON, VICTOR YPON, AND HINIDINO Y. PEÑALOSA, PETITIONERS,
vs.
GAUDIOSO PONTERAS RICAFORTE A.K.A. "GAUDIOSO E. YPON," AND THE REGISTER OF
DEEDS OF TOLEDO CITY, RESPONDENTS.
RESOLUTION
PERLAS-BERNABE, J.:
This is a direct recourse to the Court from the Regional Trial Court of Toledo City, Branch 59 (RTC),
through a petition for review on certiorari 1 under Rule 45 of the Rules of Court, raising a pure question of
law. In particular, petitioners assail the July 27, 2011 2 and August 31, 20113 Orders of the RTC,
dismissing Civil Case No. T-2246 for lack of cause of action.
The Facts
On July 29, 2010, petitioners, together with some of their cousins, 4 filed a complaint for Cancellation of
Title and Reconveyance with Damages (subject complaint) against respondent Gaudioso Ponteras
Ricaforte a.k.a. "Gaudioso E. Ypon" (Gaudioso), docketed as Civil Case No. T-2246. 5 In their complaint,
they alleged that Magdaleno Ypon (Magdaleno) died intestate and childless on June 28, 1968, leaving
behind Lot Nos. 2-AA, 2-C, 2-F, and 2-J which were then covered by Transfer Certificates of Title (TCT)
Nos. T-44 and T-77-A.6 Claiming to be the sole heir of Magdaleno, Gaudioso executed an Affidavit of Self-
Adjudication and caused the cancellation of the aforementioned certificates of title, leading to their
subsequent transfer in his name under TCT Nos. T-2637 and T-2638, 7 to the prejudice of petitioners who
are Magdaleno’s collateral relatives and successors-in-interest. 8
In his Answer, Gaudioso alleged that he is the lawful son of Magdaleno as evidenced by: (a) his
certificate of Live Birth; (b) two (2) letters from Polytechnic School; and (c) a certified true copy of his
passport.9 Further, by way of affirmative defense, he claimed that: (a) petitioners have no cause of action
against him; (b) the complaint fails to state a cause of action; and (c) the case is not prosecuted by the
real parties-in-interest, as there is no showing that the petitioners have been judicially declared as
Magdaleno’s lawful heirs.10
The RTC Ruling
On July 27, 2011, the RTC issued the assailed July 27, 2011 Order, 11 finding that the subject complaint
failed to state a cause of action against Gaudioso. It observed that while the plaintiffs therein had
established their relationship with Magdaleno in a previous special proceeding for the issuance of letters
of administration,12 this did not mean that they could already be considered as the decedent’s compulsory
heirs. Quite the contrary, Gaudioso satisfactorily established the fact that he is Magdaleno’s son – and
hence, his compulsory heir – through the documentary evidence he submitted which consisted of: (a) a
marriage contract between Magdaleno and Epegenia Evangelista; (b) a Certificate of Live Birth; (c) a
Letter dated February 19, 1960; and (d) a passport. 13
The plaintiffs therein filed a motion for reconsideration which was, however, denied on August 31, 2011
due to the counsel’s failure to state the date on which his Mandatory Continuing Legal Education
Certificate of Compliance was issued.14
Aggrieved, petitioners, who were among the plaintiffs in Civil Case No. T-2246, 15 sought direct recourse
to the Court through the instant petition.
The Issue Before the Court
The core of the present controversy revolves around the issue of whether or not the RTC’s dismissal of
the case on the ground that the subject complaint failed to state a cause of action was proper.
The Court’s Ruling
The petition has no merit.
Cause of action is defined as the act or omission by which a party violates a right of another. 16 It is well-
settled that the existence of a cause of action is determined by the allegations in the complaint. 17 In this
relation, a complaint is said to assert a sufficient cause of action if, admitting what appears solely on its
face to be correct, the plaintiff would be entitled to the relief prayed for. 18Accordingly, if the allegations
furnish sufficient basis by which the complaint can be maintained, the same should not be dismissed,
regardless of the defenses that may be averred by the defendants. 19
As stated in the subject complaint, petitioners, who were among the plaintiffs therein, alleged that they
are the lawful heirs of Magdaleno and based on the same, prayed that the Affidavit of Self-Adjudication
executed by Gaudioso be declared null and void and that the transfer certificates of title issued in the
latter’s favor be cancelled. While the foregoing allegations, if admitted to be true, would consequently
warrant the reliefs sought for in the said complaint, the rule that the determination of a decedent’s lawful
heirs should be made in the corresponding special proceeding 20 precludes the RTC, in an ordinary action
for cancellation of title and reconveyance, from granting the same. In the case of Heirs of Teofilo Gabatan
v. CA,21 the Court, citing several other precedents, held that the determination of who are the decedent’s
lawful heirs must be made in the proper special proceeding for such purpose, and not in an ordinary suit
for recovery of ownership and/or possession, as in this case:
Jurisprudence dictates that the determination of who are the legal heirs of the deceased must be made in
the proper special proceedings in court, and not in an ordinary suit for recovery of ownership and
possession of property.1âwphi1 This must take precedence over the action for recovery of possession
and ownership. The Court has consistently ruled that the trial court cannot make a declaration of heirship
in the civil action for the reason that such a declaration can only be made in a special proceeding. Under
Section 3, Rule 1 of the 1997 Revised Rules of Court, a civil action is defined as one by which a party
sues another for the enforcement or protection of a right, or the prevention or redress of a wrong while a
special proceeding is a remedy by which a party seeks to establish a status, a right, or a particular fact. It
is then decisively clear that the declaration of heirship can be made only in a special proceeding
inasmuch as the petitioners here are seeking the establishment of a status or right.
In the early case of Litam, et al. v. Rivera, this Court ruled that the declaration of heirship must be made
in a special proceeding, and not in an independent civil action. This doctrine was reiterated in Solivio v.
Court of Appeals x x x:
In the more recent case of Milagros Joaquino v. Lourdes Reyes, the Court reiterated its ruling that
matters relating to the rights of filiation and heirship must be ventilated in the proper probate court in a
special proceeding instituted precisely for the purpose of determining such rights. Citing the case of
Agapay v. Palang, this Court held that the status of an illegitimate child who claimed to be an heir to a
decedent's estate could not be adjudicated in an ordinary civil action which, as in this case, was for the
recovery of property. 22 (Emphasis and underscoring supplied; citations omitted)
By way of exception, the need to institute a separate special proceeding for the determination of heirship
may be dispensed with for the sake of practicality, as when the parties in the civil case had voluntarily
submitted the issue to the trial court and already presented their evidence regarding the issue of heirship,
and the RTC had consequently rendered judgment thereon, 23 or when a special proceeding had been
instituted but had been finally closed and terminated, and hence, cannot be re-opened. 24
In this case, none of the foregoing exceptions, or those of similar nature, appear to exist. Hence, there
lies the need to institute the proper special proceeding in order to determine the heirship of the parties
involved, ultimately resulting to the dismissal of Civil Case No. T-2246.
Verily, while a court usually focuses on the complaint in determining whether the same fails to state a
cause of action, a court cannot disregard decisions material to the proper appreciation of the questions
before it.25 Thus, concordant with applicable jurisprudence, since a determination of heirship cannot be
made in an ordinary action for recovery of ownership and/or possession, the dismissal of Civil Case No.
T-2246 was altogether proper. In this light, it must be pointed out that the RTC erred in ruling on
Gaudioso’s heirship which should, as herein discussed, be threshed out and determined in the proper
special proceeding. As such, the foregoing pronouncement should therefore be devoid of any legal effect.
WHEREFORE, the petition is DENIED. The dismissal of Civil Case No. T-2246 is hereby AFFIRMED,
without prejudice to any subsequent proceeding to determine the lawful heirs of the late Magdaleno Ypon
and the rights concomitant therewith.
SO ORDERED.
G.R. No. 161135. April 8, 2005
SWAGMAN HOTELS AND TRAVEL, INC., Petitioners,
vs.
HON. COURT OF APPEALS, and NEAL B. CHRISTIAN, Respondents.
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 Court18 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.
G.R. No. L-41423 February 23, 1989
LUIS JOSEPH, petitioner
vs.
HON. CRISPIN V. BAUTISTA, PATROCINIO PEREZ, ANTONIO SIOSON, JACINTO PAGARIGAN,
ALBERTO CARDENO and LAZARO VILLANUEVA, respondents.
Petitioner prays in this appeal by certiorari for the annulment and setting aside of the order, dated July 8,
1975, dismissing petitioner's complaint, as well as the order, dated August 22, 1975, denying his motion
for reconsideration of said dismissal, both issued by respondent Judge Crispin V. Bautista of the former
Court of First Instance of Bulacan, Branch III.
Petitioner herein is the plaintiff in Civil Case No. 50-V-73 entitled "Luis Joseph vs. Patrocinio Perez,
Domingo Villa y de Jesus, Rosario Vargas, Antonio Sioson, Lazaro Villanueva and Jacinto Pagarigan",
filed before the Court of First Instance of Bulacan, Branch III, and presided over by respondent Judge
Crispin V. Bautista; while private respondents Patrocinio Perez, Antonio Sioson, Jacinto Pagarigan and
Lazaro Villanueva are four of the defendants in said case. Defendant Domingo Villa y de Jesus did not
answer either the original or the amended complaint, while defendant Rosario Vargas could not be
served with summons; and respondent Alberto Cardeno is included herein as he was impleaded by
defendant Patrocinio Perez, one of respondents herein, in her cross-claim.
The generative facts of this case, as culled from the written submission of the parties, are as follows:
Respondent Patrocinio Perez is the owner of a cargo truck with Plate No. 25-2 YT Phil. '73 for conveying
cargoes and passengers for a consideration from Dagupan City to Manila. On January 12, 1973, said
cargo truck driven by defendant Domingo Villa was on its way to Valenzuela, Bulacan from Pangasinan.
Petitioner, with a cargo of livestock, boarded the cargo truck at Dagupan City after paying the sum of P
9.00 as one way fare to Valenzuela, Bulacan. While said cargo truck was negotiating the National
Highway proceeding towards Manila, defendant Domingo Villa tried to overtake a tricycle likewise
proceeding in the same direction. At about the same time, a pick-up truck with Plate No. 45-95 B,
supposedly owned by respondents Antonio Sioson and Jacinto Pagarigan, then driven by respondent
Lazaro Villanueva, tried to overtake the cargo truck which was then in the process of overtaking the
tricycle, thereby forcing the cargo truck to veer towards the shoulder of the road and to ram a mango
tree. As a result, petitioner sustained a bone fracture in one of his legs. 1
2
The following proceedings thereafter took place:
Petitioner filed a complaint for damages against respondent Patrocinio Perez, as owner of the cargo
truck, based on a breach of contract of carriage and against respondents Antonio Sioson and Lazaro
Villanueva, as owner and driver, respectively, of the pick-up truck, based on quasi-delict.
Respondent Sioson filed his answer alleging that he is not and never was an owner of the pick-up truck
and neither would he acquire ownership thereof in the future.
On September 24, 1973, petitioner, with prior leave of court, filed his amended complaint impleading
respondents Jacinto Pagarigan and a certain Rosario Vargas as additional alternative defendants.
Petitioner apparently could not ascertain who the real owner of said cargo truck was, whether
respondents Patrocinio Perez or Rosario Vargas, and who was the real owner of said pick-up truck,
whether respondents Antonio Sioson or Jacinto Pagarigan.
Respondent Perez filed her amended answer with crossclaim against her co-defendants for indemnity
and subrogation in the event she is ordered to pay petitioner's claim, and therein impleaded cross-
defendant Alberto Cardeno as additional alternative defendant.
On September 27, 1974, respondents Lazaro Villanueva, Alberto Cardeno, Antonio Sioson and Jacinto
Pagarigan, thru their insurer, Insurance Corporation of the Philippines, paid petitioner's claim for injuries
sustained in the amount of P 1,300.00. By reason thereof, petitioner executed a release of claim
releasing from liability the following parties, viz: Insurance Corporation of the Philippines, Alberto
Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto Pagarigan.
On December 2, 1974, respondents Lazaro Villanueva, Alberto Cardeno and their insurer, the Insurance
Corporation of the Philippines, paid respondent Patrocinio Perez' claim for damages to her cargo truck in
the amount of P 7,420.61.
Consequently, respondents Sioson, Pagarigan, Cardeno and Villanueva filed a "Motion to Exonerate and
Exclude Defs/ Cross defs. Alberto Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto Pagarigan on
the Instant Case", alleging that respondents Cardeno and Villanueva already paid P 7,420.61 by way of
damages to respondent Perez, and alleging further that respondents Cardeno, Villanueva, Sioson and
Pagarigan paid P 1,300.00 to petitioner by way of amicable settlement.
Thereafter, respondent Perez filed her "Opposition to Cross-defs.' motion dated Dec. 2, 1974 and
Counter Motion" to dismiss. The so-called counter motion to dismiss was premised on the fact that the
release of claim executed by petitioner in favor of the other respondents inured to the benefit of
respondent Perez, considering that all the respondents are solidarity liable to herein petitioner.
On July 8, 1975, respondent judge issued the questioned order dismissing the case, and a motion for the
reconsideration thereof was denied. Hence, this appeal, petitioner contending that respondent judge
erred in declaring that the release of claim executed by petitioner in favor of respondents Sioson,
Villanueva and Pagarigan inured to the benefit of respondent Perez; ergo, it likewise erred in dismissing
the case.
We find the present recourse devoid of merit.
The argument that there are two causes of action embodied in petitioner's complaint, hence the judgment
on the compromise agreement under the cause of action based on quasi-delict is not a bar to the cause
of action for breach of contract of carriage, is untenable.
A cause of action is understood to be the delict or wrongful act or omission committed by the defendant in
violation of the primary rights of the plaintiff. 3 It is true that a single act or omission can be violative of
various rights at the same time, as when the act constitutes juridically a violation of several separate and
distinct legal obligations. However where there is only one delict or wrong, there is but a single cause of
action regardless of the number of rights that may have been violated belonging to one person. 4
The singleness of a cause of action lies in the singleness of the- delict or wrong violating the rights of one
person. Nevertheless, if only one injury resulted from several wrongful acts, only one cause of action
arises. 5 In the case at bar, there is no question that the petitioner sustained a single injury on his person.
That vested in him a single cause of action, albeit with the correlative rights of action against the different
respondents through the appropriate remedies allowed by law.
The trial court was, therefore, correct in holding that there was only one cause of action involved although
the bases of recovery invoked by petitioner against the defendants therein were not necessarily Identical
since the respondents were not identically circumstanced. However, a recovery by the petitioner under
one remedy necessarily bars recovery under the other. This, in essence, is the rationale for the
proscription in our law against double recovery for the same act or omission which, obviously, stems from
the fundamental rule against unjust enrichment.
There is no question that the respondents herein are solidarily liable to petitioner. On the evidence
presented in the court below, the trial court found them to be so liable. It is undisputed that petitioner, in
his amended complaint, prayed that the trial court hold respondents jointly and severally liable.
Furthermore, the allegations in the amended complaint clearly impleaded respondents as solidary
debtors. We cannot accept the vacuous contention of petitioner that said allegations are intended to
apply only in the event that execution be issued in his favor. There is nothing in law or jurisprudence
which would countenance such a procedure.
The respondents having been found to be solidarity liable to petitioner, the full payment made by some of
the solidary debtors and their subsequent release from any and all liability to petitioner inevitably resulted
in the extinguishment and release from liability of the other solidary debtors, including herein respondent
Patrocinio Perez.
The claim that there was an agreement entered into between the parties during the pre-trial conference
that, after such payment made by the other respondents, the case shall proceed as against respondent
Perez is both incredible and unsubstantiated. There is nothing in the records to show, either by way of a
pre-trial order, minutes or a transcript of the notes of the alleged pre-trial hearing, that there was indeed
such as agreement.
WHEREFORE, the challenged orders of the respondent judge are hereby AFFIRMED.
SO ORDERED.
G.R. No. 158138. April 12, 2005
PHILIPPINE BANK OF, COMMUNICATIONS, Petitioners,
vs.
ELENA LIM, RAMON CALDERON, and TRI-ORO INTERNATIONAL TRADING & MANUFACTURING
CORPORATION, Respondents.
A restrictive stipulation on the venue of actions contained in a promissory note applies to the surety
agreement supporting it, because the nature of the two contracts and the factual circumstances
surrounding their execution are intertwined or interconnected. The surety agreement is merely an
accessory to the principal loan agreement embodied in the promissory note. Hence, the enforcement of
the former depends upon the latter.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the April 29, 2003
Decision2 of the Court of Appeals (CA) in CA-GR SP No. 69786. The challenged Decision disposed as
follows:
"WHEREFORE, based on the foregoing, the instant petition is hereby GRANTED. The assailed Orders
dated June 9, 2000 and January 9, 2002 are hereby ANNULED and SET ASIDE. Civil Case No. 99-
94976 is hereby ordered DISMISSED without prejudice to the filing thereof in the venue exclusively
stipulated by the parties."3
The Facts
The facts are related by the CA as follows: This strategy is obviously intended to disconnect the SA from the PN and to support the claim of
petitioner that the stipulation on venue does not apply to the SA. However, as will be discussed below,
the cause of action to recover on the basis of the SA is inseparable from that which is based on the PN.
"On September 3, 1999, the Philippine Bank of Communications (hereinafter ‘[petitioner’]) filed a
complaint against [Respondents Elena Lim, Ramon Calderon and Tri-Oro International Trading &
Manufacturing Corporation (‘Tri-Oro’ for brevity)] with the Regional Trial Court of Manila for the collection Rule on Venue
of a deficiency amounting to ₱4,014,297.23 exclusive of interest. [Petitioner] alleged therein that
[respondents] obtained a loan from it and executed a continuing surety agreement dated November 16,
1995 in favor of [petitioner] for all loans, credits, etc., that were extended or may be extended in the Section 2 of Rule 4 of the Rules of Court provides that personal actions 11 must be commenced and tried
future to [respondents]. [Petitioner] granted a renewal of said loan upon [respondent’s] request, the most (1) in the place where the plaintiff resides, or (2) where the defendant resides, or (3) in case of non-
recent being on January 21, 1998 as evidenced by Promissory Note Renewal BD-Variable No. resident defendants, where they may be found, at the choice of the plaintiff. 12 This rule on venue does not
8298021001 in the amount of ₱3,000,000.00. It was expressly stipulated therein that the venue for any apply when the law specifically provides otherwise, or when -- before the filing of the action -- the
legal action that may arise out of said promissory note shall be Makati City, ‘to the exclusion of all other contracting parties agree in writing on the exclusive venue thereof. 13 Venue is not jurisdictional and may
courts’ x x x. [Respondents allegedly] failed to pay said obligation upon maturity. Thus, [petitioner] be waived by the parties.14
foreclosed the real estate mortgage executed by [respondents] valued at ₱1,081,600.00 leaving a
deficiency balance of ₱4,014,297.23 as of August 31, 1999.
A stipulation as to venue does not preclude the filing of the action in other places, unless qualifying or
restrictive words are used in the agreement. 15
"[Respondents] moved to dismiss the complaint on the ground of improper venue, invoking the stipulation
contained in the last paragraph of the promissory note with respect to the restrictive/exclusive venue.
In the instant case, the stipulation on the exclusivity of the venue as stated in the PN is not at issue. What
[The trial court] denied said motion asseverating that [petitioner] ha[d] separate causes of action arising
petitioner claims is that there was no restriction on the venue, because none was stipulated in the SA on
from the promissory note and the continuing surety agreement. Thus, [under] Rule 4, Section 2, of the
which petitioner had allegedly based its suit. 16 Accordingly, the action on the SA may be filed in Manila,
1997 Rules of Civil Procedure, as amended, x x x venue was properly laid in Manila. [The trial court]
petitioner’s place of residence.
supported [its] order with cases where venue was held to be merely permissive. A motion for
reconsideration of said order was likewise denied." 4
Petitioner adds that its Complaint filed in the trial court had two causes of action: the first was founded on
a breach of the PN; and the second, on a violation of the SA. 17 Consequently, it was allegedly correct to
Ruling of the Court of Appeals
join the causes of action and to file the case in Manila, per Section 5 of Rule 2 of the Rules of Court,
which reads:18
On appeal, the CA ruled that respondents’ alleged debt was based on the Promissory Note, which had
provided an exclusionary stipulation on venue "to the exclusion of all other courts." 5 The parties’ Surety
"Section 5. Joinder of Causes of Action. –A party may in one pleading assert, in the alternative or
Agreement, though silent as to venue, was an accessory contract that should have been interpreted in
otherwise, as many causes of action as he may have against an opposing party, subject to the following
consonance with the Promissory Note.6
conditions:

Hence, this Petition.7

xxxxxxxxx

The Issue
(c) Where the causes of action are between the same parties but pertain to different venue or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of action
Petitioner raises the following issue for our consideration: falls within the jurisdiction of the said court and venue lies therein." 19

"Whether or not the Honorable Court of Appeals had decided the issue of venue in a way not in accord
with law and applicable decisions of this Honorable Court and had thereby departed from the accepted
and usual course of judicial proceedings, as to call for this Honorable Supreme Court’s power of
supervision and appellate review."8
The Court’s Ruling
Surety Agreement
Suretyship arises upon the solidary binding of a person -- deemed the surety -- with the principal debtor,
for the purpose of fulfilling an obligation. 20 The prestation is not an original and direct obligation for the
performance of the surety’s own act, but merely accessory or collateral to the obligation contracted by the
principal.21 Although the surety contract is secondary to the principal obligation, the surety assumes
liability as a regular party to the undertaking. 22

The Petition is unmeritorious.

In enforcing a surety contract, the "complementary-contracts-construed-together" doctrine finds
application.23According to this principle, an accessory contract must be read in its entirety and together
Sole Issue: with the principal agreement. 24 This principle is used in construing contractual stipulations in order to
arrive at their true meaning; certain stipulations cannot be segregated and then made to control. 25 This
no-segregation principle is based on Article 1374 of the Civil Code, which we quote:
Venue

"Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful
At the outset, this Court observes that petitioner took liberties with the stipulated facts to suit its ones that sense which may result from all of them taken jointly."
allegations in the present Petition. In its Complaint, petitioner bank averred that respondents had entered
into the Surety Agreement (SA) to guarantee existing and future credit facilities, and that they had
executed the Promissory Note (PN) to document their loan.9 Now, the bank is claiming that Tri-Oro issued
the PN on which the other respondents should be made liable as sureties. 10
The aforementioned doctrine is applicable to the present case. Incapable of standing by itself, the SA can
be enforced only in conjunction with the PN. The latter documents the debt that is sought to be collected
in the action against the sureties.
The factual milieu of the present case shows that the SA was entered into to facilitate existing and future
loan agreements. Petitioner approved the loan covered by the PN, partly because of the SA that assured
the payment of the principal obligation. The circumstances that related to the issuance of the PN and the
SA are so intertwined that neither one could be separated from the other. It makes no sense to argue that
the parties to the SA were not bound by the stipulations in the PN.
Notably, the PN was a contract of adhesion that petitioner required the principal debtor to execute as a
condition of the approval of the loan. It was made in the form and language prepared by the bank. By
inserting the provision that Makati City would be "the venue for any legal action [that] may arise out of
[the] Promissory Note,"26 petitioner also restricted the venue of actions against the sureties. The legal
action against the sureties arose not only from the SA, but also from the PN.
Cause of Action
Petitioner correctly argues that there are two causes of action contained in its Complaint. A cause of
action is a party’s act or omission that violates the rights of the other. 27 Only one suit may be commenced
for a single cause of action.28 If two or more suits are instituted on the basis of the same cause of action,
only one case should remain and the others must be dismissed. 29
As against Tri-Oro International Trading & Manufacturing Corporation, petitioner’s cause of action is the
alleged failure to pay the debt in violation of the PN; as against Elena Lim and Ramon Calderon, in
violation of the SA.
Because of the variance between the causes of action, petitioner could have filed separate actions
against respondents to recover the debt, on condition that it could not recover twice from the same
cause. It could have proceeded against only one or all of them, 30 as full payment by any one of them
would have extinguished the obligation.31 By the same token, respondents could have been joined as
defendants in one suit, because petitioner’s alleged right of relief arose from the same transaction or
series of transactions that had common questions of fact. 32To avoid a multiplicity of suits, joinder of
parties is encouraged by the law.
The cause of action, however, does not affect the venue of the action. The vital issue in the present case
is whether the action against the sureties is covered by the restriction on venue stipulated in the PN. As
earlier stated, the answer is in the affirmative. Since the cases pertaining to both causes of action are
restricted to Makati City as the proper venue, petitioner cannot rely on Section 5 of Rule 2 of the Rules of
Court.
Liberal Construction
Petitioner’s final plea for liberality in applying the rules on venue must be rejected. As earlier discussed,
the PN was a contract of adhesion. Ambiguities therein are to be construed against the party that
prepared the contract. 33 On the same principle, petitioner can no longer disavow the stipulation on venue,
considering that it drafted the Surety Agreement. Besides, this alleged technicality caused no miscarriage
of substantial justice, as petitioner may refile the case. 34 The inconveniences brought about by its failure
to observe the rules on venue sprang from its own acts. Hence, it cannot blame the courts or anyone else
for the resulting delay in the adjudication of the merits of its cause.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
Costs against petitioner.
G.R. No. 182311 August 19, 2009
FIDEL O. CHUA and FILIDEN REALTY AND DEVELOPMENT CORPORATION, Petitioners,
vs.
METROPOLITAN BANK & TRUST COMPANY, ATTY. ROMUALDO CELESTRA, ATTY. ANTONIO V.
VIRAY, ATTY. RAMON MIRANDA and ATTY. POMPEYO MAYNIGO, Respondents.
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision,1 dated 31 January 2008, later upheld in a Resolution 2 dated 28 March 2008, both rendered by
the Court of Appeals in CA-G.R. CV No. 88087. The Court of Appeals, in its assailed Decision, affirmed
the Order3 dated 3 July 2006 of Branch 258 of the Regional Trial Court of Parañaque City (RTC-Branch
258), dismissing the action for damages, docketed as Civil Case No. CV-05-0402, filed by petitioners
Fidel O. Chua (Chua) and Filiden Realty and Development Corporation (Filiden), on the ground of forum
shopping.
Petitioner Chua is president of co-petitioner Filiden, a domestic corporation, engaged in the realty
business.4Respondent Metropolitan Bank and Trust Co. (respondent Metrobank) is a domestic
corporation and a duly licensed banking institution. 5
Sometime in 1988, petitioners obtained from respondent Metrobank a loan of ₱4,000,000.00, which was
secured by a real estate mortgage (REM) on parcels of land covered by Transfer Certificates of Title
(TCTs) No. (108020)1148, No. 93919, and No. 125185, registered in petitioner Chua’s name (subject
properties).6 Since the value of the collateral was more than the loan, petitioners were given an open
credit line for future loans. On 18 September 1995, 17 January 1996, 31 July 1996, 21 January 1997,
and 12 October 1998, petitioners obtained other loans from respondent Metrobank, and the real estate
mortgages were repeatedly amended in accordance with the increase in petitioners’ liabilities. 7
Having failed to fully pay their obligations, petitioners entered into a Debt Settlement Agreement 8 with
respondent Metrobank on 13 January 2000, whereby the loan obligations of the former were
restructured. The debt consisted of a total principal amount of ₱79,650,000.00, plus unpaid interest of
₱7,898,309.02, and penalty charges of ₱552,784.96. Amortization payments were to be made in
accordance with the schedule attached to the agreement.
In a letter9 dated 28 February 2001, the lawyers of respondent Metrobank demanded that petitioners fully
pay and settle their liabilities, including interest and penalties, in the total amount of ₱103,450,391 as of
16 January 2001, as well as the stipulated attorney’s fees, within three days from receipt of said letter.
When petitioners still failed to pay their loans, respondent Metrobank sought to extra-judicially foreclose
the REM constituted on the subject properties. Upon a verified Petition for Foreclosure filed by
respondent Metrobank on 25 April 2001, respondent Atty. Romualdo Celestra (Atty. Celestra) issued a
Notice of Sale dated 26 April 2001, wherein the mortgage debt was set at ₱88,101,093.98, excluding
unpaid interest and penalties (to be computed from 14 September 1999), attorney’s fees, legal fees, and
other expenses for the foreclosure and sale. The auction sale was scheduled on 31 May 2001. 10 On 4
May 2001, petitioners received a copy of the Notice of Sale. 11
On 28 May 2001, petitioner Chua, in his personal capacity and acting on behalf of petitioner Filiden, filed
before Branch 257 of the Regional Trial Court of Parañaque (RTC-Branch 257), a Complaint for
Injunction with Prayer for Issuance of Temporary Restraining Order (TRO), Preliminary Injunction and
Damages,12 against respondents Atty. Celestra, docketed as Civil Case No. CV-01-0207. Upon the
motion of petitioners, RTC-Branch 257 issued a TRO enjoining respondents Metrobank and Atty. Celestra
from conducting the auction sale of the mortgaged properties on 31 May 2001. 13
After the expiration of the TRO on 18 June 2001, and no injunction having been issued by RTC-Branch
257, respondent Atty. Celestra reset the auction sale on 8 November 2001. On 8 November 2001, the
rescheduled date of the auction sale, RTC-Branch 257 issued an Order directing that the said sale be
reset anew after 8 November 2001. The Order was served on 8 November 2001, on respondent Atty.
Celestra’s daughter, Arlene Celestra, at a coffee shop owned by the former’s other daughter, Grace
Celestra Aguirre. The auction sale, however, proceeded on 8 November 2001, and a Certificate of Sale
was accordingly issued to respondent Metrobank as the highest bidder of the foreclosed properties. 14
On 13 February 2002, petitioners filed with RTC-Branch 257 a Motion to Admit Amended Complaint 15 in
Civil Case No. CV-01-0207. The Amended Verified Complaint, 16 attached to the said Motion, impleaded
as additional defendant the incumbent Register of Deeds of Parañaque City. Petitioners alleged that the
Certificate of Sale was a falsified document since there was no actual sale that took place on 8
November 2001. And, even if an auction sale was conducted, the Certificate of Sale would still be void
because the auction sale was done in disobedience to a lawful order of RTC-Branch 257. Relevant
portions of the Amended Complaint of petitioners read:
12-E. There was actually no auction sale conducted by [herein respondent] Atty. Celestra on November
8, 2001 and the CERTIFICATE OF SALE (Annex "K-2") is therefore a FALSIFIED DOCUMENT and for
which the appropriate criminal complaint for falsification of official/public document will be filed against the
said [respondent] Celestra and the responsible officers of [herein respondent] Metrobank, in due time;
12-F. But even granting that an auction sale was actually conducted and that the said Certificate of Sale
is not a falsified document, the same document is a nullity simply because the auction sale was done in
disobedience to a lawful order of this Court and that therefore the auction sale proceeding is null and void
ab initio.17
Petitioners additionally prayed in their Amended Complaint for the award of damages given the abuse of
power of respondent Metrobank in the preparation, execution, and implementation of the Debt Settlement
Agreement with petitioners; the bad faith of respondent Metrobank in offering the subject properties at a
price much lower than its assessed fair market value; and the gross violation by respondents Metrobank
and Atty. Celestra of the injunction.
Petitioners also sought, in their Amended Complaint, the issuance of a TRO or a writ of preliminary
injunction to enjoin respondent Atty. Celestra and all other persons from proceeding with the foreclosure
sale, on the premise that no auction sale was actually held on 8 November 2001.
In an Order dated 6 March 2002, RTC-Branch 257 denied petitioners’ application for injunction on the
ground that the sale of the foreclosed properties rendered the same moot and academic. The auction
sale, which was conducted by respondents Metrobank and Atty. Celestra, after the expiration of the TRO,
and without knowledge of the Order dated 8 November 2001 of RTC-Branch 257, was considered as
proper and valid.18
Petitioners filed a Motion for Reconsideration of the 6 March 2002 Order of RTC-Branch 257. When RTC-
Branch 257 failed to take any action on said Motion, petitioners filed with the Court of Appeals a Petition
for Certiorari, docketed as CA-G.R. No. 70208. In a Decision dated 26 July 2002, the Court of Appeals
reversed the 6 March 2002 Order of RTC-Branch 257 and remanded the case for further proceedings.
The Supreme Court dismissed the appeal of respondents with finality. Thus, on 27 September 2005,
RTC-Branch 257 set the hearing for the presentation of evidence by respondent Metrobank for the
application for preliminary injunction on 9 November 2005. 19
On 2 November 2005, petitioners sought the inhibition of Acting Executive Judge Rolando How of RTC-
Branch 257, who presided over Civil Case No. CV-01-0207. Their motion was granted and the case was
re-raffled to RTC-Branch 258.20
On 28 October 2005, petitioners filed with Branch 195 of the Regional Trial Court of Parañaque (RTC-
Branch 195) a Verified Complaint for Damages against respondents Metrobank, Atty. Celestra, and three
Metrobank lawyers, namely, Atty. Antonio Viray, Atty. Ramon Miranda and Atty. Pompeyo Maynigo. The
Complaint was docketed as Civil Case No. CV-05-0402. Petitioners sought in their Complaint the award
of actual, moral, and exemplary damages against the respondents for making it appear that an auction
sale of the subject properties took place, as a result of which, the prospective buyers of the said
properties lost their interest and petitioner Chua was prevented from realizing a profit of ₱70,000,000.00
from the intended sale.21
Petitioners filed with RTC-Branch 195 a Motion to Consolidate 22 dated 27 December 2005, seeking the
consolidation of Civil Case No. CV-05-0402, the action for damages pending before said court, with Civil
Case No. CV-01-0207, the injunction case that was being heard before RTC-Branch 258, based on the
following grounds:
2. The above-captioned case is a complaint for damages as a result of the [herein
respondents’] conspiracy to make it appear as if there was an auction sale conducted on
November 8, 2001 when in fact there was none. The properties subject of the said auction
sale are the same properties subject of Civil Case No. 01-0207.
3. Since the subject matter of both cases are the same properties and the parties of both
cases are almost the same, and both cases have the same central issue of whether there
was an auction sale, then necessarily, both cases should be consolidated.
On 3 January 2006, respondents filed with RTC-Branch 195 an Opposition to Motion to Consolidate with
Prayer for Sanctions, praying for the dismissal of the Complaint for Damages in Civil Case No. CV-05-
0402, on the ground of forum shopping.23
In an Order dated 23 January 2006, RTC-Branch 195 granted the Motion to Consolidate, and ordered
that Civil Case No. CV-05-0402 be transferred to RTC-Branch 258, which was hearing Civil Case No. 01-
0207.24
After the two cases were consolidated, respondents filed two motions before RTC-Branch 258: (1) Motion
for Reconsideration of the Order dated 23 January 2006 of RTC-Branch 195, which granted the Motion to
Consolidate of petitioners; and (2) Manifestation and Motion raising the ground of forum shopping,
among the affirmative defenses of respondents. 25 RTC-Branch 258 issued an Order on 3 July 2006,
granting the first Motion of respondents, thus, dismissing Civil Case No. CV-05-0402 on the ground of
forum shopping,26 and consequently, rendering the second Motion of respondents moot. RTC-Branch 258
declared that the facts or claims submitted by petitioners, the rights asserted, and the principal parties in
the two cases were the same. RTC-Branch 258 held in its 3 July 2006 Order 27 that:
It is, therefore, the honest belief of the Court that since there is identity of parties and the rights asserted,
the allegations of the defendant are found meritorious and with legal basis, hence, the motion is
GRANTED and this case is DISMISSED due to forum shopping.
As regards the second motion, the same has already been mooted by the dismissal of this case.
WHEREFORE, premises considered, the Motion for Reconsideration filed by the defendants whereby
this case is DISMISSED due to forum shopping and the Manifestation and Motion likewise filed by the
defendants has already been MOOTED by the said dismissal.
From the foregoing Order of RTC-Branch 258, petitioners filed a Petition for Review on Certiorari with the
Court of Appeals, docketed as CA-G.R. CV No. 88087.
In a Decision dated 31 January 2008, the Court of Appeals affirmed the 3 July 2006 Order of RTC-Branch
258. The appellate court observed that although the defendants in the two cases were not identical, they
represented a community of interest. It also declared that the cause of action of the two cases, upon
which the recovery of damages was based, was the same, i.e., the feigned auction sale, such that the
nullification of the foreclosure of the subject properties, which petitioners sought in Civil Case No. CV-01-
0207, would render proper the award for damages, claimed by petitioners in Civil Case No. CV-05-0402.
Thus, judgment in either case would result in res judicata. The Court of Appeals additionally noted that
petitioners admitted in their Motion for Consolidation that Civil Case No. CV-01-0207 and Civil Case No.
CV-05-0402 involved the same parties, central issue, and subject properties. 28 In its Decision,29 the
appellate court decreed:
All told, the dismissal by the RTC-Br. 258 of the "second" case, Civil Case No. CV-05-0402, on the
ground of forum shopping should be upheld as it is supported by law and jurisprudence.
WHEREFORE, the assailed order is AFFIRMED. Costs against the [herein petitioners].
Petitioners filed a Motion for Reconsideration of the afore-mentioned Decision, which the Court of
Appeals denied in a Resolution dated 28 March 2008. 30
Hence, the present Petition, in which the following issues are raised 31:
I
WHETHER OR NOT THE "FIRST" AND THE "SECOND" CASES HAVE THE SAME
ULTIMATE OBJECTIVE, I.E., TO HAVE THE AUCTION SALE BE DECLARED AS NULL AND
VOID.
II
WHETHER OR NOT THE OUTCOME OF THE "FIRST" CASE WOULD AFFECT THE
"SECOND" CASE.
The only issue that needs to be determined in this case is whether or not successively filing Civil Case
No. CV-01-0207 and Civil Case No. CV-05-0402 amounts to forum shopping.
The Court answers in the affirmative.
The proscription against forum shopping is found in Section 5, Rule 7 of the 1997 Rules of Court, which
provides that:
SEC. 5. Certification against forum shopping.—The plaintiff or principal party shall certify under oath in
the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed
thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed
any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the
same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days
therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice,
unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-
compliance with any of the undertakings therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel
clearly constitutes willful and deliberate forum shopping, the same shall be ground for summary dismissal
with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.
Forum shopping exists when a party repeatedly avails himself of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on the same transactions and the same
essential facts and circumstances, and all raising substantially the same issues either pending in or
already resolved adversely by some other court. 32
Ultimately, what is truly important in determining whether forum shopping exists or not is the vexation
caused the courts and party-litigant by a party who asks different courts to rule on the same or related
causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility
of conflicting decisions being rendered by the different fora upon the same issue. 33
Forum shopping can be committed in three ways: (1) filing multiple cases based on the same cause of
action and with the same prayer, the previous case not having been resolved yet (where the ground for
dismissal is litis pendentia); (2) filing multiple cases based on the same cause of action and the same
prayer, the previous case having been finally resolved (where the ground for dismissal is res judicata);
and (3) filing multiple cases based on the same cause of action, but with different prayers (splitting of
causes of action, where the ground for dismissal is also either litis pendentia or res judicata). 34
In the present case, there is no dispute that petitioners failed to state in the Certificate of Non-Forum
Shopping, attached to their Verified Complaint in Civil Case No. CV-05-0402 before RTC-Branch 195, the
existence of Civil Case No. CV-01-0207 pending before RTC-Branch 258. Nevertheless, petitioners insist
that they are not guilty of forum shopping, since (1) the two cases do not have the same ultimate
objective – Civil Case No. CV-01-0207 seeks the annulment of the 8 November 2001 public auction and
certificate of sale issued therein, while Civil Case No. CV-05-0402 prays for the award of actual and
compensatory damages for respondents’ tortuous act of making it appear that an auction sale actually
took place on 8 November 2001; and (2) the judgment in Civil Case No. CV-01-0207, on the annulment
of the foreclosure sale, would not affect the outcome of Civil Case No. CV-05-0402, on the entitlement of
petitioners to damages. The Court, however, finds these arguments refuted by the allegations made by
petitioners themselves in their Complaints in both cases.
Petitioners committed forum shopping by filing multiple cases based on the same cause of action,
although with different prayers.
Sections 3 and 4, Rule 2 of the Rules of Court proscribe the splitting of a single cause of action:
Section 3. A party may not institute more than one suit for a single cause of action.
Section 4. Splitting a single cause of action; effect of.—If two or more suits are instituted on the basis of
the same cause of action, the filing of one or a judgment upon the merits in any one is available as a
ground for the dismissal of the others.
Forum shopping occurs although the actions seem to be different, when it can be seen that there is a
splitting of a cause of action. 35 A cause of action is understood to be the delict or wrongful act or
omission committed by the defendant in violation of the primary rights of the plaintiff. It is true that a
single act or omission can violate various rights at the same time, as when the act constitutes juridically a
violation of several separate and distinct legal obligations. However, where there is only one delict or
wrong, there is but a single cause of action regardless of the number of rights that may have been
violated belonging to one person. 36
Petitioners would like to make it appear that Civil Case No. CV-01-0207 was solely concerned with the
nullification of the auction sale and certification of sale, while Civil Case No. CV-05-0402 was a totally
separate claim for damages. Yet, a review of the records reveals that petitioners also included an explicit
claim for damages in their Amended Complaint 37 in Civil Case No. CV-01-0207, to wit:
20-A. The abovementioned acts of [herein respondents] Metrobank and Atty. Celestra are in gross
violation of the injunction made under Article 19 of the Civil Code, thereby entitling the [herein petitioners]
to recover damages from the said [respondents] in such amount as may be awarded by the Court.
(Emphasis ours.)
The "abovementioned acts" on which petitioners anchored their claim to recover damages were
described in the immediately preceding paragraph in the same Amended Complaint, as follows 38:
20. To reiterate, the [herein respondent] is fully aware that the assessed fair market value of the real
properties they seek to foreclose and sell at public auction yet they have knowingly offered the said
properties for sale at the amount of EIGHTY EIGHT MILLION ONE HUNDRED ONE THOUSAND
NINETY THREE PESOS AND 98/100 (PhP88,101,093.98), obviously because they know that the
[petitioners] or any other third person would not be able to seasonably raise the said amount and that
said [respondent] Bank would be the winner by default at the said sale at public auction.
Petitioners averred in their Amended Complaint in Civil Case No. CV-01-0207 that the assessed fair
market value of the subject properties was ₱176,117,000.00. 39
The Court observes that the damages being claimed by petitioners in their Complaint in Civil Case No.
CV-05-0402 were also occasioned by the supposedly fictitious 8 November 2001 foreclosure sale,
thus 40:
24. The acts of [herein respondents] in making it appear that there was an auction sale
conducted on 8 November 2001 and the subsequent execution of the fictitious Certificate of
Sale is TORTIOUS, which entitles the [herein petitioners] to file this instant action under the
principles of Human Relations, more particularly Articles 19, 20 and 21 of the Civil Code
which provide that:
xxxx
25. As a result of the aforesaid acts of the [respondents], [petitioner’s] buyers of the
mortgaged properties had lost their interest anymore (sic) in buying the said mortgaged
properties for not less than ₱175,000,000.00 as per appraisal report of the Philippine
Appraisal Co., Inc., a copy of which is hereto attached as Annex "R" and made an integral
part hereof;
26. The aborted sale of the [petitioner’s] mortgaged properties for the said amount of not less
than ₱175,000,000.00 could have paid off [petitioners’] loan obligation with [respondent]
Metrobank for the principal amount of ₱79,650,000.00 or even the contested restructured
amount of ₱103,450,391.84 (as stated in the petition for foreclosure), which would have thus
enabled the plaintiff to realize a net amount of not less than SEVENTY MILLION PESOS,
more or less;
27. By reason of the aforesaid acts of [respondents], [petitioners] suffered and will continue to
suffer actual or compensatory, moral and exemplary or corrective damages, the nature,
extent and amount of compensation of which will (sic) proven during the trial but not less than
SEVENTY MILLION PESOS.
There is no question that the claims of petitioners for damages in Civil Case No. CV-01-0207 and Civil
Case No. CV-05-0402 are premised on the same cause of action, i.e., the purportedly wrongful conduct
of respondents in connection with the foreclosure sale of the subject properties.
At first glance, said claims for damages may appear different. In Civil Case No. CV-01-0207, the
damages purportedly arose from the bad faith of respondents in offering the subject properties at the
auction sale at a price much lower than the assessed fair market value of the said properties, said to be
₱176,117,000.00. On the other hand, the damages in Civil Case No. CV-05-0402, allegedly resulted from
the backing out of prospective buyers, who had initially offered to buy the subject properties for "not less
than ₱175,000,000.00," because respondents made it appear that the said properties were already sold
at the auction sale. Yet, it is worthy to note that petitioners quoted closely similar values for the subject
properties in both cases, against which they measured the damages they supposedly suffered. Evidently,
this is due to the fact that petitioners actually based the said values on the single appraisal report of the
Philippine Appraisal Company on the subject properties. Even though petitioners did not specify in their
Amended Complaint in Civil Case No. CV-01-0207 the exact amount of damages they were seeking to
recover, leaving the same to the determination of the trial court, and petitioners expressly prayed that
they be awarded damages of not less than ₱70,000,000.00 in their Complaint in Civil Case No. CV-05-
0402, petitioners cannot deny that all their claims for damages arose from what they averred was a
fictitious public auction sale of the subject properties.1avvphi1
Petitioners’ contention that the outcome of Civil Case No. CV-01-0207 will not determine that of Civil
Case No. CV-05-0402 does not justify the filing of separate cases. Even if it were assumed that the two
cases contain two separate remedies that are both available to petitioners, these two remedies that arose
from one wrongful act cannot be pursued in two different cases. The rule against splitting a cause of
action is intended to prevent repeated litigation between the same parties in regard to the same subject
of controversy, to protect the defendant from unnecessary vexation; and to avoid the costs and expenses
incident to numerous suits. It comes from the old maxim nemo debet bis vexari, pro una et eadem causa
(no man shall be twice vexed for one and the same cause). 41
Moreover, petitioners admitted in their Motion to Consolidate 42 dated 27 December 2005 before RTC-
Branch 195 that both cases shared the same parties, the same central issue, and the same subject
property, viz:
2. The above-captioned case is a complaint for damages as a result of the [herein
respondents’] conspiracy to make it appear as if there was an auction sale conducted on
November 8, 2001 when in fact there was none. The properties subject of the said auction
sale are the same properties subject of Civil Case No. 01-0207.
3. Since the subject matter of both cases are the same properties and the parties of both
cases are almost the same, and both cases have the same central issue of whether there
was an auction sale, then necessarily, both cases should be consolidated.
If the forum shopping is not considered willful and deliberate, the subsequent case shall be dismissed
without prejudice, on the ground of either litis pendentia or res judicata. However, if the forum shopping is
willful and deliberate, both (or all, if there are more than two) actions shall be dismissed with
prejudice..43 In this case, petitioners did not deliberately file Civil Case No. CV-05-0402 for the purpose of
seeking a favorable decision in another forum. Otherwise, they would not have moved for the
consolidation of both cases. Thus, only Civil Case No. CV-05-0402 is dismissed and the hearing of Civil
Case No. CV-01-0207 before RTC-Branch 258 will be continued.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Decision dated 31 January 2008
and Resolution dated 28 March 2008 of the Court of Appeals in CA-G.R. CV No. 88087, affirming the
Order dated 3 July 2006 of Branch 258 of the Regional Trial Court of Parañaque City, dismissing Civil
Case No. CV-05-0402, is AFFIRMED, without prejudice to the proceedings in Civil Case No. CV-01-0207.
Costs against petitioners.
SO ORDERED.
G.R. No. 156185 September 12, 2011
CATALINA B. CHU, THEANLYN B. CHU, THEAN CHING LEE B. CHU, THEAN LEEWN B. CHU, and
MARTIN LAWRENCE B. CHU, Petitioners,
vs.
SPOUSES FERNANDO C. CUNANAN and TRINIDAD N. CUNANAN, BENELDA ESTATE
DEVELOPMENT CORPORATION, and SPOUSES AMADO E. CARLOS and GLORIA A.
CARLOS, Respondents.
If two or more suits are instituted on the basis of the same cause of action, the filing of one or a judgment
upon the merits in any one is available as a ground for the dismissal of the others. 1
We review the decision promulgated on November 19, 2002, 2 whereby the Court of Appeals (CA)
dismissed the petitioners’ amended complaint in Civil Case No. 12251 of the Regional Trial Court, Branch
41, in San Fernando City, Pampanga (RTC) for being barred by res judicata.
Antecedents
On September 30, 1986, Spouses Manuel and Catalina Chu (Chus) executed a deed of sale with
assumption of mortgage3 involving their five parcels of land situated in Saguin, San Fernando City,
Pampanga, registered under Transfer Certificate of Title (TCT) No. 198470-R, TCT No. 198471-R, TCT
No. 198472-R, TCT No. 198473-R, and TCT No. 199556-R, all of the Office of the Registry of Deeds of
the Province of Pampanga, in favor of Trinidad N. Cunanan (Cunanan) for the consideration
of₱5,161,090.00. They also executed a so-called side agreement, whereby they clarified that Cunanan
had paid only ₱1,000,000.00 to the Chus despite the Chus, as vendors, having acknowledged receiving
₱5,161,090.00; that the amount of ₱1,600,000.00 was to be paid directly to Benito Co and to Security
Bank and Trust Company (SBTC) in whose favor the five lots had been mortgaged; and that Cunanan
would pay the balance of ₱2,561.90.00 within three months, with a grace period of one month subject to
3%/month interest on any remaining unpaid amount. The parties further stipulated that the ownership of
the lots would remain with the Chus as the vendors and would be transferred to Cunanan only upon
complete payment of the total consideration and compliance with the terms of the deed of sale with
assumption of mortgage.4
Thereafter, the Chus executed a special power of attorney authorizing Cunanan to borrow ₱5,161,090.00
from any banking institution and to mortgage the five lots as security, and then to deliver the proceeds to
the Chus net of the balance of the mortgage obligation and the downpayment. 5
Cunanan was able to transfer the title of the five lots to her name without the knowledge of the Chus, and
to borrow money with the lots as security without paying the balance of the purchase price to the Chus.
She later transferred two of the lots to Spouses Amado and Gloria Carlos (Carloses) on July 29, 1987. As
a result, on March 18, 1988, the Chus caused the annotation of an unpaid vendor’s lien on three of the
lots. Nonetheless, Cunanan still assigned the remaining three lots to Cool Town Realty on May 25, 1989
despite the annotation.6
In February 1988, the Chus commenced Civil Case No. G-1936 in the RTC to recover the unpaid balance
from Spouses Fernando and Trinidad Cunanan (Cunanans). Five years later, on April 19, 1993, the Chus
amended the complaint to seek the annulment of the deed of sale with assumption of mortgage and of
the TCTs issued pursuant to the deed, and to recover damages. They impleaded Cool Town Realty and
Development Corporation (Cool Town Realty), and the Office of the Registry of Deeds of Pampanga as
defendants in addition to the Cunanans.7
Considering that the Carloses had meanwhile sold the two lots to Benelda Estate Development
Corporation (Benelda Estate) in 1995, the Chus further amended the complaint in Civil Case No. G-1936
to implead Benelda Estate as additional defendant. In due course, Benelda Estate filed its answer with a
motion to dismiss, claiming, among others, that the amended complaint stated no cause of action
because it had acted in good faith in buying the affected lots, exerting all efforts to verify the authenticity
of the titles, and had found no defect in them. After the RTC denied its motion to dismiss, Benelda Estate
assailed the denial on certiorari in the CA, which annulled the RTC’s denial for being tainted with grave
abuse of discretion and dismissed Civil Case No. G-1936 as against Benelda Estate. On March 1, 2001,
the Court upheld the dismissal of Civil Case No. G-1936 in G.R. No. 142313 entitled Chu, Sr. v. Benelda
Estate Development Corporation.8
On December 2, 1999, the Chus, the Cunanans, and Cool Town Realty entered into a compromise
agreement,9whereby the Cunanans transferred to the Chus their 50% share in "all the parcels of land
situated in Saguin, San Fernando, Pampanga" registered in the name of Cool Town Realty "for and in
consideration of the full settlement of their case." The RTC approved the compromise agreement in a
partial decision dated January 25, 2000.10
Thereafter, on April 30, 2001, the petitioners herein (i.e., Catalina Chu and her children) brought another
suit, Civil Case No. 12251, against the Carloses and Benelda Estate, 11 seeking the cancellation of the
TCTs of the two lots in the name of Benelda Estate, and the issuance of new TCTs in their favor, plus
damages.
The petitioners amended their complaint in Civil Case No. 12251 on February 4, 2002 to implead the
Cunanans as additional defendants. 12
The Cunanans moved to dismiss the amended complaint based on two grounds, namely: (a) bar by prior
judgment, and (b) the claim or demand had been paid, waived, and abandoned. Benelda Estate likewise
moved to dismiss the amended complaint, citing as grounds: (a) forum shopping; (b) bar by prior
judgment, and (c) failure to state a cause of action. On their part, the Carloses raised affirmative
defenses in their answer, namely: (a) the failure to state a cause of action; (b) res judicata or bar by prior
judgment; and (c) bar by statute of limitations.
On April 25, 2002, the RTC denied both motions to dismiss,13 holding that the amended complaint stated
a cause of action against all the defendants; that the action was not barred by res judicata because there
was no identity of parties and subject matter between Civil Case No.12251 and Civil Case No. G-1936;
and that the Cunanans did not establish that the petitioners had waived and abandoned their claim or
that their claim had been paid by virtue of the compromise agreement, pointing out that the compromise
agreement involved only the three parcels of land registered in the name of Cool Town Realty. 14
The Cunanans sought reconsideration, but their motion was denied on May 31, 2002. 15
On September 2, 2002, the Cunanans filed a petition for certiorari in the CA (SP-72558), assailing the
RTC’s denial of their motion to dismiss and motion for reconsideration. 16
On November 19, 2002, the CA promulgated its decision, 17 granting the petition for certiorari and
nullifying the challenged orders of the RTC. The CA ruled that the compromise agreement had ended the
legal controversy between the parties with respect to the cause of action arising from the deed of sale
with assumption of mortgage covering all the five parcels of land; that Civil Case No. G-1936 and Civil
Case No.12251 involved the violation by the Cunanans of the same legal right under the deed of sale
with assumption of mortgage; and that the filing of Civil Case No.12251 contravened the rule against
splitting of a cause of action, and rendered Civil Case No.12251 subject of a motion to dismiss based on
bar by res judicata. The CA disposed thusly:
WHEREFORE, premises considered, the present petition for certiorari is hereby GIVEN DUE COURSE
and the writ prayed for, accordingly GRANTED. Consequently, the challenged Orders of the respondent
court denying the motions to dismiss are hereby ANNULLED and SET ASIDE and a new one is hereby
rendered DISMISSING the Amended Complaint in Civil Case No. 12251.
Hence, this appeal.
Issue
Was Civil Case No. 12251 barred by res judicata although the compromise agreement did not expressly
include Benelda Estate as a party and although the compromise agreement made no reference to the
lots now registered in Benelda Estate’s name?
Ruling
We deny the petition for review.
I
The petitioners contend that the compromise agreement did not apply or extend to the Carloses and
Benelda Estate; hence, their Civil Case No. 12251 was not barred by res judicata.
We disagree.
A compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced.19 It encompasses the objects specifically stated
therein, although it may include other objects by necessary implication, 20 and is binding on the contracting
parties, being expressly acknowledged as a juridical agreement between them. 21 It has the effect and
authority of res judicata upon the parties. 22
In the construction or interpretation of a compromise agreement, the intention of the parties is to be
ascertained from the agreement itself, and effect should be given to that intention. 23 Thus,
the compromise agreement must be read as a whole.
The following pertinent portions of the compromise agreement indicate that the parties intended to
thereby settle alltheir claims against each other, to wit:
1. That the defendants SPOUSES TRINIDAD N.CUNANAN and FERNANDO C.CUNANAN for and in
consideration of the full settlement of their case in the above-entitled case, hereby TRANSFER,
DELIVER, and CONVEY unto the plaintiffs all their rights, interest, benefits, participation, possession and
ownership which consists of FIFTY (50%) percent share on all the parcels of land situated in Saguin, San
Fernando Pampanga now registered in the name of defendant, COOL TOWN REALTY &
DEVELOPMENT CORPORATION, as particularly evidenced by the corresponding Transfer Certificates
of Titles xxx
xxxx
6. That the plaintiffs and the defendant herein are waiving, abandoning, surrendering, quitclaiming,
releasing, relinquishing any and all their respective claims against each other as alleged in the pleadings
they respectively filed in connection with this case.24 (bold emphasis supplied)
The intent of the parties to settle all their claims against each other is expressed in the phrase any and all
their respective claims against each other as alleged in the pleadings they respectively filed in connection
with this case, which was broad enough to cover whatever claims the petitioners might assert based on
the deed of sale with assumption of mortgage.
There is no question that the deed of sale with assumption of mortgage covered all the five lots, to wit:
WHEREAS, the VENDORS are willing to sell the above-described properties and the VENDEE is willing
to buy the same at FIFTY FIVE (₱55.00) PESOS, Philippine Currency, per square meter, or a total
consideration of FIVE MILLION ONE HUNDRED SIXTY ONE THOUSAND and NINETY (₱5,161,090.00)
PESOS, Philippine Currency.25
To limit the compromise agreement only to the three lots mentioned therein would contravene the
avowed objective of Civil Case No. G-1936 to enforce or to rescind the entire deed of sale with
assumption of mortgage. Such interpretation is akin to saying that the Cunanans separately sold the five
lots, which is not the truth. For one, Civil Case No. G-1936 did not demand separate amounts for each of
the purchased lots. Also, the compromise agreement did not state that the value being thereby
transferred to the petitioners by the Cunanans corresponded only to that of the three lots.
Apparently, the petitioners were guilty of splitting their single cause of action to enforce or rescind the
deed of sale with assumption of mortgage. Splitting a single cause of action is the act of dividing a single
or indivisible cause of action into several parts or claims and instituting two or more actions upon
them.26 A single cause of action or entire claim or demand cannot be split up or divided in order to be
made the subject of two or more different actions.27Thus, Section 4, Rule 2 of the Rules of Court
expressly prohibits splitting of a single cause of action, viz:
Section 4. Splitting a single cause of action; effect of. — If two or more suits are instituted on the basis of
the same cause of action, the filing of one or a judgment upon the merits in any one is available as a
ground for the dismissal of the others. (4a)1avvphi1
The petitioners were not at liberty to split their demand to enforce or rescind the deed of sale with
assumption of mortgage and to prosecute piecemeal or present only a portion of the grounds upon which
a special relief was sought under the deed of sale with assumption of mortgage, and then to leave the
rest to be presented in another suit; otherwise, there would be no end to litigation. 28 Their splitting
violated the policy against multiplicity of suits, whose primary objective was to avoid unduly burdening the
dockets of the courts. Their contravention of the policy merited the dismissal of Civil Case No. 12251 on
the ground of bar by res judicata.1âwphi1
Res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled
by judgment.29 The doctrine of res judicata is an old axiom of law, dictated by wisdom and sanctified by
age, and founded on the broad principle that it is to the interest of the public that there should be an end
to litigation by the same parties over a subject once fully and fairly adjudicated. It has been appropriately
said that the doctrine is a rule pervading every well-regulated system of jurisprudence, and is put upon
two grounds embodied in various maxims of the common law: the one, public policy and necessity, which
makes it to the interest of the State that there should be an end to litigation –interest reipublicae ut sit
finis litium; the other, the hardship on the individual that he should be vexed twice for one and the same
cause – nemo debet bis vexari pro una et eadem causa. A contrary doctrine would subject the public
peace and quiet to the will and neglect of individuals and prefer the gratification of the litigious disposition
on the part of suitors to the preservation of the public tranquillity and happiness. 30
Under the doctrine of res judicata, a final judgment or decree on the merits rendered by a court of
competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits and on all
points and matters determined in the previous suit.31 The foundation principle upon which the doctrine
rests is that the parties ought not to be permitted to litigate the same issue more than once; that when a
right or fact has been judicially tried and determined by a court of competent jurisdiction, so long as it
remains unreversed, should be conclusive upon the parties and those in privity with them in law or
estate.32
Yet, in order that res judicata may bar the institution of a subsequent action, the following requisites must
concur:– (a) the former judgment must be final; (b) it must have been rendered by a court having
jurisdiction of the subject matter and the parties; (c) it must be a judgment on the merits; and (d) there
must be between the first and second actions (i) identity of parties, (ii) identity of the subject matter, and
(iii) identity of cause of action.33
The first requisite was attendant. Civil Case No. G-1936 was already terminated under the compromise
agreement, for the judgment, being upon a compromise, was immediately final and unappealable. As to
the second requisite, the RTC had jurisdiction over the cause of action in Civil Case No. G-1936 for the
enforcement or rescission of the deed of sale with assumption of mortgage, which was an action whose
subject matter was not capable of pecuniary estimation. That the compromise agreement explicitly settled
the entirety of Civil Case No. G-1936 by resolving all the claims of the parties against each other
indicated that the third requisite was also satisfied. 34
But was there an identity of parties, of subject matter, and of causes of action between Civil Case No.G-
1936 and Civil Case No. 12251?
There is identity of parties when the parties in both actions are the same, or there is privity between
them, or they are successors-in-interest by title subsequent to the commencement of the action litigating
for the same thing and under the same title and in the same capacity. 35 The requirement of the identity of
parties was fully met, because the Chus, on the one hand, and the Cunanans, on the other hand, were
the parties in both cases along with their respective privies. The fact that the Carloses and Benelda
Estate, defendants in Civil Case No. 12251, were not parties in the compromise agreement was
inconsequential, for they were also the privies of the Cunanans as transferees and successors-in-
interest. It is settled that the absolute identity of parties was not a condition sine qua non for res judicata
to apply, because a shared identity of interest sufficed. 36 Mere substantial identity of parties, or even
community of interests between parties in the prior and subsequent cases, even if the latter were not
impleaded in the first case, was sufficient. 37
As to identity of the subject matter, both actions dealt with the properties involved in the deed of sale with
assumption of mortgage. Identity of the causes of action was also met, because Case No. G-1936 and
Civil Case No. 12251 were rooted in one and the same cause of action – the failure of Cunanan to pay in
full the purchase price of the five lots subject of the deed of sale with assumption of mortgage. In other
words, Civil Case No. 12251 reprised Civil Case No. G-1936, the only difference between them being
that the petitioners alleged in the former that Benelda Estate was "not also a purchaser for value and in
good faith."38
In fine, the rights and obligations of the parties vis-à-vis the five lots were all defined and governed by the
deed of sale with assumption of mortgage, the only contract between them. That contract was single and
indivisible, as far as they were concerned. Consequently, the Chus could not properly proceed against
the respondents in Civil Case No. 12251, despite the silence of the compromise agreement as to the
Carloses and Benelda Estate, because there can only be one action where the contract is entire, and the
breach total, and the petitioners must therein recover all their claims and damages. 39 The Chus could not
be permitted to split up a single cause of action and make that single cause of action the basis of several
suits.40
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision promulgated in CA-
G.R. SP No. 72558.
The petitioners shall pay the costs of suit.
SO ORDERED.
G.R. No. 140746 March 16, 2005
PANTRANCO NORTH EXPRESS, INC., and ALEXANDER BUNCAN, Petitioner,
vs.
STANDARD INSURANCE COMPANY, INC., and MARTINA GICALE, Respondents.
Before us is a petition for review on certiorari assailing the Decision1 dated July 23 1999 and
Resolution2 dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453, entitled
"Standard Insurance Company, Inc., and Martina Gicale vs. PANTRANCO North Express, Inc., and
Alexander Buncan."
In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger jeepney owned by his
mother Martina Gicale, respondent herein. It was then raining. While driving north bound along the
National Highway in Talavera, Nueva Ecija, a passenger bus, owned by Pantranco North Express, Inc.,
petitioner, driven by Alexander Buncan, also a petitioner, was trailing behind. When the two vehicles were
negotiating a curve along the highway, the passenger bus overtook the jeepney. In so doing, the
passenger bus hit the left rear side of the jeepney and sped away.
Crispin reported the incident to the Talavera Police Station and respondent Standard Insurance Co., Inc.
(Standard), insurer of the jeepney. The total cost of the repair was P21,415.00, but respondent Standard
paid only P8,000.00. Martina Gicale shouldered the balance of P13,415.00.
Thereafter, Standard and Martina, respondents, demanded reimbursement from petitioners Pantranco
and its driver Alexander Buncan, but they refused. This prompted respondents to file with the Regional
Trial Court (RTC), Branch 94, Manila, a complaint for sum of money.
In their answer, both petitioners specifically denied the allegations in the complaint and averred that it is
the Metropolitan Trial Court, not the RTC, which has jurisdiction over the case.
On June 5, 1992, the trial court rendered a Decision 3 in favor of respondents Standard and Martina, thus:
"WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered in
favor of the plaintiffs, Standard Insurance Company and Martina Gicale, and against
defendants Pantranco Bus Company and Alexander Buncan, ordering the latter to pay as
follows:
(1) to pay plaintiff Standard Insurance the amount of P8,000.00 with interest due thereon from
November 27, 1984 until fully paid;
(2) to pay plaintiff Martina Gicale the amount of P13,415.00 with interest due thereon from
October 22, 1984 until fully paid;
(3) to pay the sum of P10,000.00 for attorney’s fees;
(4) to pay the expenses of litigation and the cost of suit.
SO ORDERED."
On appeal, the Court of Appeals, in a Decision 4 dated July 23, 1999, affirmed the trial court’s ruling,
holding that:
"The appellants argue that appellee Gicale’s claim of P13,415.00 and appellee insurance
company’s claim of P8,000.00 individually fell under the exclusive original jurisdiction of the
municipal trial court. This is not correct because under the Totality Rule provided for under
Sec. 19, Batas Pambansa Bilang 129, it is the sum of the two claims that determines the
jurisdictional amount.
xxx
In the case at bench, the total of the two claims is definitely more than P20,000.00 which at
the time of the incident in question was the jurisdictional amount of the Regional Trial Court.
Appellants contend that there was a misjoinder of parties. Assuming that there was, under the
Rules of Court (Sec. 11, Rule 7) as well as under the Rules of Civil Procedure (ditto), the
same does not affect the jurisdiction of the court nor is it a ground to dismiss the complaint.
xxx
It does not need perspicacity in logic to see that appellees Gicale’s and insurance company’s
individual claims against appellees (sic) arose from the same vehicular accident on October
28, 1984 involving appellant Pantranco’s bus and appellee Gicale’s jeepney. That being the
case, there was a question of fact common to all the parties: Whose fault or negligence
caused the damage to the jeepney?
Appellants submit that they were denied their day in court because the case was deemed
submitted for decision "without even declaring defendants in default or to have waived the
presentation of evidence." This is incorrect. Of course, the court did not declare defendants in
default because that is done only when the defendant fails to tender an answer within the
reglementary period. When the lower court ordered that the case is deemed submitted for
decision that meant that the defendants were deemed to have waived their right to present
evidence. If they failed to adduce their evidence, they should blame nobody but themselves.
They failed to be present during the scheduled hearing for the reception of their evidence
despite notice and without any motion or explanation. They did not even file any motion for
reconsideration of the order considering the case submitted for decision.
Finally, contrary to the assertion of the defendant-appellants, the evidence preponderantly
established their liability for quasi-delict under Article 2176 of the Civil Code."
Petitioners filed a motion for reconsideration but was denied by the Appellate Court in a Resolution dated
November 4, 1999.
Hence, this petition for review on certiorari raising the following assignments of error:
"I
 WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT OF
THE ACTION CONSIDERING THAT RESPONDENTS’ RESPECTIVE CAUSE OF ACTION
AGAINST PETITIONERS DID NOT ARISE OUT OF THE SAME TRANSACTION NOR ARE
THERE QUESTIONS OF LAW AND FACTS COMMON TO BOTH PETITIONERS AND
RESPONDENTS.
II
WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS CONSIDERING
THAT BASED ON THE EVIDENCE ADDUCED AND LAW APPLICABLE IN THE CASE AT
BAR, RESPONDENTS HAVE NOT SHOWN ANY RIGHT TO THE RELIEF PRAYED FOR.
III
WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO DUE
PROCESS."
For their part, respondents contend that their individual claims arose out of the same vehicular accident
and involve a common question of fact and law. Hence, the RTC has jurisdiction over the case.
I Respondent Standard’s claim is P8,000.00, while that of respondent Martina Gicale is P13,415.00, or a
Petitioners insist that the trial court has no jurisdiction over the case since the cause of action of each
respondent did not arise from the same transaction and that there are no common questions of law and
fact common to both parties. Section 6, Rule 3 of the Revised Rules of Court, 5 provides:
"Sec. 6. Permissive joinder of parties. – All persons in whom or against whom any right to
relief in respect to or arising out of the same transaction or series of transactions is alleged to
exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in
these Rules, join as plaintiffs or be joined as defendants in one complaint, where any
question of law or fact common to all such plaintiffs or to all such defendants may arise in the
action; but the court may make such orders as may be just to prevent any plaintiff or
defendant from being embarrassed or put to expense in connection with any proceedings in
which he may have no interest."
Permissive joinder of parties requires that: (a) the right to relief arises out of the same transaction or
series of transactions; (b) there is a question of law or fact common to all the plaintiffs or defendants; and
(c) such joinder is not otherwise proscribed by the provisions of the Rules on jurisdiction and venue. 6
In this case, there is a single transaction common to all, that is, Pantranco’s bus hitting the rear side of
the jeepney. There is also a common question of fact, that is, whether petitioners are negligent. There
being a single transaction common to both respondents, consequently, they have the same cause of
action against petitioners.
To determine identity of cause of action, it must be ascertained whether the same evidence which is
necessary to sustain the second cause of action would have been sufficient to authorize a recovery in the
first.7 Here, had respondents filed separate suits against petitioners, the same evidence would have been
presented to sustain the same cause of action. Thus, the filing by both respondents of the complaint with
the court below is in order. Such joinder of parties avoids multiplicity of suit and ensures the convenient,
speedy and orderly administration of justice.
Corollarily, Section 5(d), Rule 2 of the same Rules provides:
"Sec. 5. Joinder of causes of action. – A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to
the following conditions:
xxx
(d) Where the claims in all the causes of action are principally for recovery of money the
aggregate amount claimed shall be the test of jurisdiction."
The above provision presupposes that the different causes of action which are joined accrue in favor of
the same plaintiff/s and against the same defendant/s and that no misjoinder of parties is involved. 8 The
issue of whether respondents’ claims shall be lumped together is determined by paragraph (d) of the
above provision. This paragraph embodies the "totality rule" as exemplified by Section 33 (1) of B.P. Blg.
1299 which states, among others, that "where there are several claims or causes of action between the
same or different parties, embodied in the same complaint, the amount of the demand shall be the totality
of the claims in all the causes of action, irrespective of whether the causes of action arose out of the
same or different transactions."
As previously stated, respondents’ cause of action against petitioners arose out of the same transaction.
Thus, the amount of the demand shall be the totality of the claims.
total of P21,415.00. Section 19 of B.P. Blg. 129 provides that the RTC has "exclusive original jurisdiction
over all other cases, in which the demand, exclusive of interest and cost or the value of the property in
controversy, amounts to more than twenty thousand pesos (P20,000.00)." Clearly, it is the RTC that has
jurisdiction over the instant case. It bears emphasis that when the complaint was filed, R.A. 7691
expanding the jurisdiction of the Metropolitan, Municipal and Municipal Circuit Trial Courts had not yet
taken effect. It became effective on April 15, 1994.
II
The finding of the trial court, affirmed by the Appellate Court, that petitioners are negligent and thus liable
to respondents, is a factual finding which is binding upon us, a rule well-established in our jurisprudence.
It has been repeatedly held that the trial court's factual findings, when affirmed by the Appellate Court,
are conclusive and binding upon this Court, if they are not tainted with arbitrariness or oversight of some
fact or circumstance of significance and influence. Petitioners have not presented sufficient ground to
warrant a deviation from this rule.10
III
There is no merit in petitioners’ contention that they were denied due process. Records show that during
the hearing, petitioner Pantranco’s counsel filed two motions for resetting of trial which were granted by
the trial court. Subsequently, said counsel filed a notice to withdraw. After respondents had presented
their evidence, the trial court, upon petitioners’ motion, reset the hearing to another date. On this date,
Pantranco failed to appear. Thus, the trial court warned Pantranco that should it fail to appear during the
next hearing, the case will be submitted for resolution on the basis of the evidence presented.
Subsequently, Pantranco’s new counsel manifested that his client is willing to settle the case amicably
and moved for another postponement. The trial court granted the motion. On the date of the hearing, the
new counsel manifested that Pantranco’s employees are on strike and moved for another postponement.
On the next hearing, said counsel still failed to appear. Hence, the trial court considered the case
submitted for decision.
We have consistently held that the essence of due process is simply an opportunity to be heard, or an
opportunity to explain one’s side or an opportunity to seek for a reconsideration of the action or ruling
complained of.11
Petitioner Pantranco filed an answer and participated during the trial and presentation of respondents’
evidence. It was apprised of the notices of hearing issued by the trial court. Indeed, it was afforded fair
and reasonable opportunity to explain its side of the controversy. Clearly, it was not denied of its right to
due process. What is frowned upon is the absolute lack of notice and hearing which is not present here.
WHEREFORE, the petition is DENIED. The assailed Decision dated July 23 1999 and Resolution dated
November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453 are hereby AFFIRMED. Costs
against petitioners.
SO ORDERED.
G.R. No. 167246 July 20, 2011
GEORGE LEONARD S. UMALE, Petitioner,
vs.
CANOGA PARK DEVELOPMENT CORPORATION, Respondent.
Before us is a petition for review on certiorari1 filed by George Leonard S. Umale (petitioner), challenging
the August 20, 2004 Decision2 of the Court of Appeals (CA) in CA-G.R. SP. No. 78836 and its subsequent
February 23, 2005 Resolution3 that denied his motion for reconsideration. The CA reversed the
Decision4 of the Regional Trial Court (RTC)-Branch 68, Pasig City, that dismissed Canoga Park
Development Corporation’s complaint for unlawful detainer on the ground of litis pendentia.
ANTECEDENTS
On January 4, 2000, the parties entered into a Contract of Lease 5 whereby the petitioner agreed to lease,
for a period of two (2) years starting from January 16, 2000, an eight hundred sixty (860)-square-meter
prime lot located in Ortigas Center, Pasig City owned by the respondent. The respondent acquired the
subject lot from Ortigas & Co. Ltd. Partnership through a Deed of Absolute Sale, subject to the following
conditions: (1) that no shopping arcades or retail stores, restaurants, etc. shall be allowed to be
established on the property, except with the prior written consent from Ortigas & Co. Ltd. Partnership and
(2) that the respondent and/or its successors-in-interest shall become member/s of the Ortigas Center
Association, Inc. (Association), and shall abide by its rules and regulations.6
On October 10, 2000, before the lease contract expired, the respondent filed an unlawful detainer case
against the petitioner before the Metropolitan Trial Court (MTC)-Branch 68, Pasig City, docketed as Civil
Case No. 8084.7 The respondent used as a ground for ejectment the petitioner’s violation of stipulations
in the lease contract regarding the use of the property. Under this contract, the petitioner shall use the
leased lot as a parking space for light vehicles and as a site for a small drivers’ canteen, 8 and may not
utilize the subject premises for other purposes without the respondent’s prior written consent. 9 The
petitioner, however, constructed restaurant buildings and other commercial establishments on the lot,
without first securing the required written consent from the respondent, and the necessary permits from
the Association and the Ortigas & Co. Ltd. Partnership. The petitioner also subleased the property to
various merchants-tenants in violation of the lease contract.
The MTC-Branch 68 decided the ejectment case in favor of the respondent. On appeal, the RTC-Branch
155, Pasig City affirmed in toto the MTC-Branch 68 decision.10 The case, however, was re-raffled to the
RTC-Branch 267, Pasig City because the Presiding Judge of the RTC-Branch 155, upon motion, inhibited
himself from resolving the petitioner’s motion for reconsideration. 11 The RTC-Branch 267 granted the
petitioner’s motion, thereby reversing and setting aside the MTC-Branch 68 decision. Accordingly, Civil
Case No. 8084 was dismissed for being prematurely filed. 12 Thus, the respondent filed a petition for
review with the CA on April 10, 2002.13
During the pendency of the petition for review, the respondent filed on May 3, 2002 another case for
unlawful detainer against the petitioner before the MTC-Branch 71, Pasig City. The case was docketed as
Civil Case No. 9210.14 This time, the respondent used as a ground for ejectment the expiration of the
parties’ lease contract.
On December 4, 2002, the MTC-Branch 71 rendered a decision 15 in favor of the respondent, the
dispositive portion of which read, as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff [referring to the respondent] and
against the defendant and all persons claiming rights under him, as follows:
1. Defendant and all persons claiming rights under him are ordered to peacefully vacate the
premises located at Lot 9, Block 5, San Miguel Avenue, Ortigas Center, Pasig City, covered
by Transfer Certificate of Title No. 488797 of the Registry of Deeds of Pasig City and to
surrender the possession thereof to the plaintiff;
2. Defendant is ordered to pay unto plaintiff the following:
a. Damages for the use of the property after the expiration of the lease contract
therefor in the amount of One Hundred Fifty Thousand Pesos (₱150,000.00) a
month, beginning 16 January 2002 until he and all those claiming rights under him
have vacated and peacefully turned over the subject premises to the plaintiff; and
b. One Hundred Thousand Pesos (₱100,000.00) as and for attorney’s fees
together with costs of suit.
3. With respect to the commercial units built by [the] defendant on the subject land, he is
hereby ordered to remove the same from the subject land and to restore the subject land in
the same condition as it was received unto the plaintiff, at his exclusive account, failing which
the same shall be removed by the plaintiff, with expenses therefor chargeable to the
defendant.
On appeal, the RTC-Branch 68 reversed and set aside the decision of the MTC-Branch 71, and
dismissed Civil Case No. 9210 on the ground of litis pendentia.16 The petitioner, however, was still
ordered to pay rent in the amount of seventy-one thousand five hundred pesos (₱71,500.00) per month
beginning January 16, 2002, which amount is the monthly rent stipulated in the lease contract.
Aggrieved by the reversal, the respondent filed a Petition for Review under Rule 42 of the Rules of Court
with the CA. The respondent argued that there exists no litis pendentia between Civil Case Nos. 8084
and 9210 because the two cases involved different grounds for ejectment, i.e., the first case was filed
because of violations of the lease contract, while the second case was filed due to the expiration of the
lease contract. The respondent emphasized that the second case was filed based on an event or a cause
not yet in existence at the time of the filing of the first case. 17 The lease contract expired on January 15,
2002,18 while the first case was filed on October 10, 2000.
On August 20, 2004, the CA nullified and set aside the assailed decision of the RTC-Branch 68, and ruled
that there was no litis pendentia because the two civil cases have different causes of action. The decision
of the MTC- Branch 71 was ordered reinstated. Subsequently, the petitioner’s motion for reconsideration
was denied; hence, the filing of the present petition for review on certiorari.
In presenting his case before this Court, the petitioner insists that litis pendentia exists between the two
ejectment cases filed against him because of their identity with one another and that any judgment on the
first case will amount to res judicata on the other. The petitioner argues that the respondent reiterated the
ground of violations of the lease contract, with the additional ground of the expiration of the lease contract
in the second ejectment case. Also, the petitioner alleges that all of the elements of litis pendentia are
present in this case, thus, he prays for the reversal and setting aside of the assailed CA decision and
resolution, and for the dismissal of the complaint in Civil Case No. 9210 on the ground of litis
pendentia and/or forum shopping.
THE COURT’S RULING
We disagree with the petitioner and find that there is no litis pendentia.
As a ground for the dismissal of a civil action, litis pendentia refers to a situation where two actions are
pending between the same parties for the same cause of action, so that one of them becomes
unnecessary and vexatious.19
Litis pendentia exists when the following requisites are present: identity of the parties in the two actions;
substantial identity in the causes of action and in the reliefs sought by the parties; and the identity
between the two actions should be such that any judgment that may be rendered in one case, regardless
of which party is successful, would amount to res judicata in the other.20
In the present case, the parties’ bone of contention is whether Civil Case Nos. 8084 and 9210 involve the
same cause of action. The petitioner argues that the causes of action are similar, while the respondent
argues otherwise. If an identity, or substantial identity, of the causes of action in both cases exist, then the
second complaint for unlawful detainer may be dismissed on the ground of litis pendentia.
We rule that Civil Case Nos. 8084 and 9210 involve different causes of action.
Generally, a suit may only be instituted for a single cause of action. 21 If two or more suits are instituted on
the basis of the same cause of action, the filing of one or a judgment on the merits in any one is ground
for the dismissal of the others.22
Several tests exist to ascertain whether two suits relate to a single or common cause of action, such as
whether the same evidence would support and sustain both the first and second causes of action 23 (also
known as the "same evidence" test), 24 or whether the defenses in one case may be used to substantiate
the complaint in the other.25Also fundamental is the test of determining whether the cause of action in
the second case existed at the time of the filing of the first complaint. 26
Of the three tests cited, the third one is especially applicable to the present case, i.e., whether the cause
of action in the second case existed at the time of the filing of the first complaint – and to which we
answer in the negative. The facts clearly show that the filing of the first ejectment case was grounded on
the petitioner’s violation of stipulations in the lease contract, while the filing of the second case was
based on the expiration of the lease contract. At the time the respondent filed the first ejectment
complaint on October 10, 2000, the lease contract between the parties was still in effect. The lease was
fixed for a period of two (2) years, from January 16, 2000, and in the absence of a renewal agreed upon
by the parties, the lease remained effective until January 15, 2002. It was only at the expiration of the
lease contract that the cause of action in the second ejectment complaint accrued and made available to
the respondent as a ground for ejecting the petitioner. Thus, the cause of action in the second case was
not yet in existence at the time of filing of the first ejectment case.
In response to the petitioner’s contention that the similarity of Civil Case Nos. 8084 and 9210 rests on the
reiteration in the second case of the cause of action in the first case, we rule that the restatement does
not result in substantial identity between the two cases. Even if the respondent alleged violations of the
lease contract as a ground for ejectment in the second complaint, the main basis for ejecting the
petitioner in the second case was the expiration of the lease contract. If not for this subsequent
development, the respondent could no longer file a second complaint for unlawful detainer because an
ejectment complaint may only be filed within one year after the accrual of the cause of action, 27 which, in
the second case, was the expiration of the lease contract.1awphi1
Also, contrary to petitioner’s assertion, there can be no conflict between the decisions rendered in Civil
Case Nos. 8084 and 9210 because the MTC-Branch 71 decided the latter case on the sole issue of
whether the lease contract between the parties had expired. Although alleged by the respondent in its
complaint, the MTC-Branch 71 did not rule on the alleged violations of the lease contract committed by
the petitioner. We note that the damages awarded by the MTC-Branch 71 in Civil Case No. 9210 were for
those incurred after the expiration of the lease contract, 28not for those incurred prior thereto.
Similarly, we do not find the respondent guilty of forum shopping in filing Civil Case No. 9210, the second
civil case. To determine whether a party violated the rule against forum shopping, the test applied is
whether the elements of litis pendentia are present or whether a final judgment in one case will amount
to res judicata in another.29Considering our pronouncement that not all the requisites of litis pendentia are
present in this case, the CA did not err in declaring that the respondent committed no forum
shopping. Also, a close reading of the Verification and Certification of Non-Forum Shopping 30 (attached to
the second ejectment complaint) shows that the respondent did disclose that it had filed a former
complaint for unlawful detainer against the petitioner. Thus, the respondent cannot be said to have
committed a willful and deliberate forum shopping.
WHEREFORE, the instant petition is DENIED. The assailed Decision dated August 20, 2004 and
Resolution dated February 23, 2005 of the Court of Appeals in CA-G.R. SP. No. 78836 are AFFIRMED.
SO ORDERED.
G.R. No. 172909 March 5, 2014
SPOUSES SILVESTRE O. PLAZA AND ELENA Y. PLAZA, Petitioners,
vs.
GUILLERMO LUSTIVA, ELEODORA VDA. DE MARTINEZ AND VICKY SAYSON
GOLOSENO, Respondents.
Through a petition for review on certiorari, 1 filed under Rule 45 of the Rules of Court, the petitioners,
spouses Silvestre O. Plaza and Elena Y. Plaza, seek the reversal of the decision 2 dated October 24, 2005
and the Resolution3 dated April 6, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 59859.
THE FACTS
On August 28, 1997, the CA4 ruled that among the Plaza siblings, namely: Aureliano, Emiliana, Vidal,
Marciano, and Barbara, Barbara was the owner of the subject agricultural land. The decision became
final and executory and Barbara's successors, respondents Guillermo Lustiva, Eleodora Vda. de Martinez
and Vicky Sayson Goloseno, have continued occupying the property.
On September 14, 1999, Vidal’s son and daughter-in-law, the petitioners, filed a Complaint for Injunction,
Damages, Attorney’s Fees with Prayer for the Issuance of the Writ of Preliminary Injunction and/or
Temporary Restraining Order against the respondents and the City Government of Butuan. They prayed
that the respondents be enjoined from unlawfully and illegally threatening to take possession of the
subject property. According to the petitioners, they acquired the land from Virginia Tuazon in 1997;
Tuazon was the sole bidder and winner in a tax delinquency sale conducted by the City of Butuan on
December 27, 1996.
In their answer, the respondents pointed out that they were never delinquent in paying the land taxes and
were in fact not aware that their property had been offered for public auction. Moreover, Tuazon, being a
government employee, was disqualified to bid in the public auction, as stated in Section 89 of the Local
Government Code of 1991.5 As Tuazon’s participation in the sale was void, she could have not
transferred ownership to the petitioners. Equally important, the petitioners merely falsified the property
tax declaration by inserting the name of the petitioners’ father, making him appear as a co-owner of the
auctioned land. Armed with the falsified tax declaration, the petitioners, as heirs of their father,
fraudulently redeemed the land from Tuazon. Nonetheless, there was nothing to redeem as the land was
not sold. For these irregularities, the petitioners had no right to the Writ of Preliminary Injunction and/or
Temporary Restraining Order prayed for against them.
THE RTC’S RULING
In its December 14, 1999 order,6 the Regional Trial Court (RTC) of Butuan City, Branch 5, reconsidered
its earlier order,7 denied the prayer for a Writ of Preliminary Injunction, and ordered that the possession
and occupation of the land be returned to the respondents. The RTC found that the auction sale was
tainted with irregularity as the bidder was a government employee disqualified in accordance with Section
89 of the Local Government Code of 1991. The petitioners are not buyers in good faith either. On the
contrary, they were in bad faith for having falsified the tax declaration they redeemed the property with.
THE CA’S RULING
Through a petition for review on certiorari under Rule 65, the petitioners challenged the RTC’s order
before the CA.
While the petition for review on certiorari was pending before the CA, the petitioners filed an action for
specific performance8 against the City Government of Butuan. According to the petitioners, they acquired
possession and ownership over the auctioned property when they redeemed it from Tuazon. The City
Government of Butuan must therefore issue them a certificate of sale. 9
In its October 24, 2005 decision, 10 the CA affirmed the RTC’s ruling, found the petitioners guilty of forum
shopping, dismissed the case, and referred the case to the Court and to the Integrated Bar of the
Philippines for investigation and institution of the appropriate administrative action. 11 The CA, after legal
analysis, similarly concluded that for being disqualified to bid under Section 89 of the Local Government
Code of 1991, Tuazon never obtained ownership over the property; much less transmit any proprietary
rights to the petitioners. Clearly, the petitioners failed to establish any clear and unmistakable right
enforceable by the injunctive relief.
On April 6, 2006, the CA rejected the petitioners’ motion for reconsideration.
THE PARTIES’ ARGUMENTS
The petitioners filed the present petition for review on certiorari with this Court to challenge the CA
rulings. The petitioners maintain that they did not falsify the tax declaration in acquiring the auctioned
property. Moreover, assuming that Tuazon, the sole bidder, was indeed disqualified from participating in
the public auction, Section 18112of the Local Government Code of 1991 finds application. Applying the
law, it is as if there was no bidder, for which the City Government of Butuan was to be considered the
purchaser of the land in auction. Therefore, when the petitioners bought the land, they bought it directly
from the purchaser - City Government of Butuan - and not from Tuazon, as redeemers.
Also, the respondents may not question the validity of the public auction for failing to deposit with the
court the amount required by Section 26713 of the Local Government Code of 1991.
Finally, the petitioners argue that they did not commit forum shopping, as the reliefs prayed for in the
present case and in the specific performance case are not the same. In the present case, they merely
impleaded the City Government of Butuan as a nominal party to pay for the value of the land only if
possession of the land was awarded to the respondents. On the other hand, the complaint for specific
performance prayed that the City Government of Butuan execute the necessary certificate of sale and
other relevant documents pertaining to the auction.
The respondents, for their part, reiterate the lower courts’ findings that there could have been no legal
redemption in favor of the petitioners as the highest bidder was disqualified from bidding. Moreover, the
CA correctly applied the law in finding the petitioners guilty of forum shopping. Most importantly, the grant
of preliminary injunction lies in the sound discretion of the court and the petitioners failed to show proof
that they are entitled to it.
Meanwhile, on August 8, 2013, the RTC dismissed the main action and ordered the petitioners to pay the
respondents attorney’s fees and litigation expenses. 14
THE COURT’S RULING
We resolve to deny the petition for lack of merit.
The petitioners may not
raise factual issues
The petitioners maintain that they did not falsify the tax declaration they reimbursed the property with.
According to them, the document already existed in 1987, way before they acquired the land in 1997.
Contrary likewise to the lower courts’ finding, they did not purchase the land from Tuazon as
redemptioners; they directly bought the property from the City Government of Butuan.
These factual contests are not appropriate for a petition for review on certiorari under Rule 45. The Court
is not a trier of facts.15 The Court will not revisit, re-examine, and re-evaluate the evidence and the factual
conclusions arrived at by the lower courts. 16 In the absence of compelling reasons, the Court will not
disturb the rule that factual findings of the lower tribunals are final and binding on this Court. 17
Sections 181 and 267 of the Local Government Code of 1991 are inapplicable; these provisions do not
apply to the present case
The petitioners may not invoke Section 18118 of the Local Government Code of 1991 to validate their
alleged title. The law authorizes the local government unit to purchase the auctioned property only in
instances where "there is no bidder" or "the highest bid is xxx insufficient." A disqualified bidder is not
among the authorized grounds. The local government also never undertook steps to purchase the
property under Section 181 of the Local Government Code of 1991, presumably because it knew the
invoked provision does not apply.
Neither can the Court agree with the petitioners’ stance that the respondents’ defense — the petitioners’
defective title — must fail for want of deposit to the court the amount required by Section 267 of the Local
Government Code. The provision states:
Section 267. Action Assailing Validity of Tax Sale. - No court shall entertain any action assailing the
validity or any sale at public auction of real property or rights therein under this Title until the taxpayer
shall have deposited with the court the amount for which the real property was sold, together with interest
of two percent (2%) per month from the date of sale to the time of the institution of the action. The
amount so deposited shall be paid to the purchaser at the auction sale if the deed is declared invalid but
it shall be returned to the depositor if the action fails.
Neither shall any court declare a sale at public auction invalid by reason or irregularities or informalities in
the proceedings unless the substantive rights of the delinquent owner of the real property or the person
having legal interest therein have been impaired. [underscores ours; italics supplied]
A simple reading of the title readily reveals that the provision relates to actions for annulment of tax sales.
The section likewise makes use of terms "entertain" and "institution" to mean that the deposit requirement
applies only to initiatory actions assailing the validity of tax sales. The intent of the provision to limit the
deposit requirement to actions for annulment of tax sales led to the Court’s ruling in National Housing
Authority v. Iloilo City, et al.19 that the deposit requirement is jurisdictional — a condition necessary for the
court to entertain the action:
As is apparent from a reading of the foregoing provision, a deposit equivalent to the amount of the sale at
public auction plus two percent (2%) interest per month from the date of the sale to the time the court
action is instituted is a condition — a "prerequisite," to borrow the term used by the acknowledged father
of the Local Government Code — which must be satisfied before the court can entertain any action
assailing the validity of the public auction sale. The law, in plain and unequivocal language, prevents the
court from entertaining a suit unless a deposit is made. xxx. Otherwise stated, the deposit is a
jurisdictional requirement the nonpayment of which warrants the failure of the action.
xxxx
Clearly, the deposit precondition is an ingenious legal device to guarantee the satisfaction of the tax
delinquency, with the local government unit keeping the payment on the bid price no matter the final
outcome of the suit to nullify the tax sale.20
The Court would later reiterate the jurisdictional nature of the deposit in Wong v. City of Iloilo, 21 and
pronounce:
In this regard, National Housing Authority v. Iloilo City holds that the deposit required under Section 267
of the Local Government Code is a jurisdictional requirement, the nonpayment of which warrants the
dismissal of the action. Because petitioners in this case did not make such deposit, the RTC never
acquired jurisdiction over the complaints. 22
These rulings clearly render inapplicable the petitioners’ insistence that the respondents should have
made a deposit to the court. The suit filed by the petitioners was an action for injunction and damages;
the issue of nullity of the auction was raised by the respondents themselves merely as a defense and in
no way converted the action to an action for annulment of a tax sale.
The petitioners failed to show clear
and unmistakable rights to be protected
by the writ; the present action has been
rendered moot and academic by the
dismissal of the main action
As the lower courts correctly found, Tuazon had no ownership to confer to the petitioners despite the
latter’s reimbursement of Tuazon’s purchase expenses. Because they were never owners of the property,
the petitioners failed to establish entitlement to the writ of preliminary injunction. "[T]o be entitled to an
injunctive writ, the right to be protected and the violation against that right must be shown. A writ of
preliminary injunction may be issued only upon clear showing of an actual existing right to be protected
during the pendency of the principal action. When the complainant’s right or title is doubtful or disputed,
he does not have a clear legal right and, therefore, the issuance of injunctive relief is not proper." 23
Likewise, upon the dismissal of the main case by the RTC on August 8, 2013, the question of issuance of
the writ of preliminary injunction has become moot and academic. In Arevalo v. Planters Development
Bank,24 the Court ruled that a case becomes moot and academic when there is no more issue between
the parties or object that can be served in deciding the merits of the case. Upon the dismissal of the main
action, the question of the non-issuance of a writ of preliminary injunction automatically died with it. A writ
of preliminary injunction is a provisional remedy; it is auxiliary, an adjunct of, and subject to the
determination of the main action. It is deemed lifted upon the dismissal of the main case, any appeal
therefrom notwithstanding.25
The petitioners are guilty
of forum shopping
We agree with the CA that the petitioners committed forum shopping when they filed the specific
performance case despite the pendency of the present case before the CA. In the recent case of Heirs of
Marcelo Sotto, etc., et al. v. Matilde S. Palicte, 26 the Court laid down the three ways forum shopping may
be committed: 1) through litis pendentia — filing multiple cases based on the same cause of action and
with the same prayer, the previous case not having been resolved yet; 2) through res judicata — filing
multiple cases based on the same cause of action and the same prayer, the previous case having been
finally resolved; and 3) splitting of causes of action — filing multiple cases based on the same cause of
action but with different prayers — the ground to dismiss being either litis pendentia or res judicata. "The
requisites of litis pendentia are: (a) the identity of parties, or at least such as representing the same
interests in both actions; (b) the identity of rights asserted and relief prayed for, the relief being founded
on the same facts; and (c) the identity of the two cases such that judgment in one, regardless of which
party is successful, would amount to res judicata in the other." 27
Noticeable among these three types of forum shopping is the identity of the cause of action in the
different cases filed. Cause of action is "the act or omission by which a party violates the right of
another."28
The cause of action in the present case (and the main case) is the petitioners’ claim of ownership of the
land when they bought it, either from the City Government of Butuan or from Tuazon. This ownership is
the petitioners’ basis in enjoining the respondents from dispossessing them of the property. On the other
hand, the specific performance case prayed that the City Government of Butuan be ordered to issue the
petitioners the certificate of sale grounded on the petitioners’ ownership of the land when they had bought
it, either from the City Government of Butuan or from Tuazon. While it may appear that the main relief
prayed for in the present injunction case is different from what was prayed for in the specific performance
case, the cause of action which serves as the basis for the reliefs remains the same — the petitioners’
alleged ownership of the property after its purchase in a public auction.
Thus, the petitioners' subsequent filing of the specific performance action is forum shopping of the third
kind-splitting causes of action or filing multiple cases based on the same cause of action, but with
different prayers. As the Court has held in the past, "there is still forum shopping even if the reliefs prayed
for in the two cases are different, so long as both cases raise substantially the same issues." 29
Similarly, the CA correctly found that the petitioners and their counsel were guilty of forum shopping
based on litis pendentia. Not only were the parties in both cases the same insofar as the City
Government of Butuan is concerned, there was also identity of rights asserted and identity of facts
alleged. The cause of action in the specific performance case had already been ruled upon in the present
case, although it was still pending appeal before the CA. Likewise, the prayer sought in the specific
performance case-for the City Government ofButuan to execute a deed of sale in favor of the petitioners -
had been indirectly ruled upon in the present case when the R TC declared that no certificate of sale
could be issued because there had been no valid sale.
WHEREFORE, premises considered, the Court DENIES the petition for review on certiorari.1âwphi1 The
decision dated October 24, 2005 and the resolution dated April 6, 2006 of the Court of Appeals in CA-
G.R. SP No. 59859 are hereby AFFIRMED.
SO ORDERED.
G.R. No. L-53564 February 27, 1987
JUAN BAYANG, petitioner,
vs.
HON. COURT OF APPEALS and BENIGNO BIONG, respondents.
Sometime in November 1969, Juan Bayang filed a complaint for quieting of title with damages against
Benigno Biong in the Court of First Instance of Surigao del Norte, Branch 1, docketed as Civil Case No.
1892. 1 In 1970, while the case was pending, Biong succeeded in dispossessing the plaintiff of the land in
question and remained there until January 25, 1978. 2 On February 21, 1972, the case was decided in
favor of Biong, but the Court of Appeals on December 8, 1977, reversed the trial court, declaring in the
dispositive portion of its decision:
WHEREFORE, the judgment appealed from is reversed and appellants are
hereby declared owner of the property in litigation, and defendant-appellee are
(sic) hereby ordered to pay appellant the sum of P56.40 as the latter's share in
the proceeds from the sale of the copra derived from the third harvest of coconuts
from the same land, and P1,000.00 as attorney's fees, and costs of Litigation. 3
This decision became final on February 2, 1978.
On February 6, 1978, Bayang filed a second case, docketed as Civil Case No. 2589, with the CFI of
Surigao del Norte, Branch II, seeking to recover from Biong the incomes earned from the same land from
1970 up to the quarterly incomes from 1978 until the said land was delivered to the plaintiff. 4 At the pre-
trial conference held on July 10, 1978, the counsel for Bayang admitted that as of January 25, 1978,
Biong had already surrendered possession of the land in question to Bayang. 5 On August 16, 1978,
Biong filed a motion for summary judgment, reiterating the affirmative defense of res judicata raised in his
answer dated April 12, 1978, insofar as it related to the incidents concerning the case prior to January 25,
1978. 6 An opposition to this motion was duly filed by Bayang. 7
The trial court, after considering the arguments of the parties, granted the motion and rendered a
summary judgment on October 30, 1978. 8 The said decision was sustained by the Court of Appeals, and
Bayang is now before us in this petition for review by certiorari under Rule 45 of the Rules of Court.
His assignment of errors raises two basic submissions, to wit:
1. Civil Case No. 2589 should not have been decided by summary judgment.
2. The judgment in CA-G.R. No. 54720-R (appeal from judgment in Civil Case No. 1892) did not
constitute res judicata as to bar Civil Case No. 2589.
Both contentions are incorrect. We rule for the respondents.
In its decision, the Court of Appeals quoted the following excerpt from Singleton v. Philippine Trust
Co. 9 on the nature and functions of the summary judgment:
Summary judgment is one of the methods sanctioned in the present Rules of
Court for a prompt disposition of civil actions wherein there exists no serious
controversy. The procedure may be availed of not only by claimants, but also by
defending parties who may be the object of unfounded claims. A motion for
summary judgment assumes that scrutinizing of the facts will disclose that the
issues presented by the pleadings need not be tried because they are so patently
unsubstantial as not to be genuine issues, or that there is no genuine issue as to
any material facts or where the facts appear undisputed and certain from the
pleadings, depositions, admissions and affidavits.
We hold that there was no genuine or triable issue of fact raised by the parties, in view particularly of the
affirmative defense of res judicata invoked by the private respondent. That defense is sustained.
A long line of decisions has consistently held that for res judicata to apply: a) the former judgment must
be final; b) it must have been rendered by a court having jurisdiction over the subject matter and the
parties; c) it must be a judgment on the merits; and d) there must be between the first case and the
second case identity of parties, identity of subject matter and Identity of cause of action. 10
The decision in Civil Case No. 1892 became final and executory on February 2, 1978. There is no
dispute that the trial court which rendered that decision had jurisdiction over the subject-matter and the
parties to the proceeding. The case was tried on the merits. The parties to Civil Case No. 1892 and the
subsequent Civil Case No. 2589 are the same petitioner and private respondent now before us.
The petitioner would draw a distinction between the land in dispute in Civil Case No. 1892 and the
income from that land being claimed in Civil Case No. 2589. But that is in our view splitting hairs to split a
cause of action. The subject-matter is essentially the same in both cases as the income is only a
consequence or accessory of the disputed property. We cannot agree that there are involved here two
causes of action calling for two separate cases. The claim for the income from the land was incidental to,
and should have been raised by Bayang in his earlier claim for, ownership of the land.
We note that while the first case was pending, the private respondent, by the petitioner's own account,
"succeeded in dispossessing" him of the disputed land 11 and that at the pretrial conference on Civil Case
No. 2589, Bayang's counsel admitted that Biong had vacated the said property as of January 25,
1978. 12 This means that from 1970 to the date the respondent surrendered the property in 1978, Biong
was presumably collecting and enjoying the income therefrom to the exclusion of the petitioner.
Civil Case No. 1892 was commenced in November 1969 and was finally decided only on February 2,
1978. The private respondent entered the disputed property in 1970 and left it only in 1978. For about
seven years, therefore, the petitioner made no move at all to amend his complaint to include a claim for
the income supposedly received by the private respondent during that period.
Under Rule 10, Section 6, of the Rules of Court.
Sec. 6. Matters subject of 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, occurrence or events
which have happened since the date of the pleading sought to be supplemented.
If the court deems it advisable that the adverse party should plead thereto, it shall
so order, specifying the time therefor.
In the case of Jalandoni v. Martin-Guanzon, 13 this Court declared through Justice J.B.L. Reyes:
As to the value of the plaintiff's share in the products of the land during the time
that the former action was pending (which are the damages claimed under the
second cause of action), their recovery is now barred by the previous judgment.
These damages are but the result of the original cause of action, viz., the
continuing refusal by defendants in 1941 to recognize the plaintiff's right to an
interest in the property. In the same way that plaintiffs claimed for their share of
the produce from 1941 to 1947, these later damages could have been claimed in
the first action, either in the original camplaint (for their existence could be
anticipated when the first complaint was filed) or else by supplemental pleading.
To allow them to be recovered by subsequent suit would be a violation of the rule
against multiplicity of suits, and specifically of sections 3 and 4 of Rules 2 of the
Rules of Court, against the splitting of causes of action, since these damages
spring from the same cause of action that was pleading (sic) in the former case
No. 573 between the same parties (Blossom & Co., Inc. v. Manila Gas
Corporation, 55 Phil. 226; Santos v. Moir, 36 Phil. 350; Pascua v. Sideco 24 Phil.
26; Bachrach Motor Co. v. Icarangal 68 Phil. 287).
And in another case, 14 the same jurist declared:
Urtula, as defendant in the expropriation case, could have raised the matter of
interest before the trial court even if there had been no actual taking yet by the
Republic and the said court could have included the payment of interest in its
judgment but conditioned upon the actual taking, because the rate of interest
upon the amount of just compensation (6%) is a known factor, and it can
reasonably be expected that at some future time, the expropriator would take
possession of the property, though the date be not fixed. In this way, multiple suits
would be avoided. Moreover, nothing prevented appellee from calling the attention
of the appellate courts (even by motion to reconsider before judgment became
final) to the subsequent taking of possession by the condemnor, and asking for
allowance of interest on the indemnity since that followed the taking as a matter of
course, and raised no issue requiring remand of the records to the Court of origin.
As the issue of interest could have been raised in the former case but was not
raised, res judicata blocks the recovery of interest in the present case. (Tejedor
vs. Palet, 61 Phil. 494; Phil. Engineering Corp., et al. vs. Ceniza, etc., et al., L-
17834, 29 Sept. 1962). It is settled that a former judgment constitutes a bar, as
between the parties, not only as to matters expressly adjudged, but all matters
 that could have been adjudged at the time (Rule 39, sec. 49; Corda vs. Maglinti L-
17476, November 30, 1961; Rodriguez vs. Tan, 48 Off. Gaz. 3330).
Clearly, then, Civil Case No. 2589 is barred by the previous judgment in Civil Case No. 1892. This being
so, it should follow that the trial judge committed no grave abuse of discretion in deciding the latter case
by summary judgment.
We are not unmindful of the argument that affirmance of the challenged decision of the respondent court
will result in the unjust enrichment of Biong at the expense of Bayang. This assumes, of course, that the
petitioner could have proved his right to the income he now claims belatedly. The point is that he did not
make the proper claim at the proper time and in the proper proceedings, and he cannot do it now.
Whatever right he might have had is now deemed waived because of his neglect.
Nemo debet bis vexare pro una et eadem causa. This has to be so if litigants are to be spared the
annoyance, anxiety and expense that could otherwise be inflicted upon them endlessly by capricious,
malicious or vindictive suitors.
WHEREFORE, the petition is dismiss and the appealed decision is affirmed. Costs against the petitioner.
SO ORDERED.
G.R. No. L-29155 November 5, 1928
JOSEFINA RUBIO DE LARENA, plaintiff-appellant,
vs.
HERMENEGILDO VILLANUEVA, defendant-appellee.
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:
Habiendo llegado a un convenio entre la que subscribe, ejecutante, en la causa
civil No. 67 decidida por la Corte Suprema, y el ejecutado, Don Hermenegildo
Villanueva, por la presente declaro haber recibido del Sheriff Provincial de Negros
Oriental, y mi entera satisfaccion la suma de diez mil quinientos pesos (P10,500),
mas una casa residencial con su solar, situada en la plaza del Municipio de Bais,
Provincia de Negros Oriental, cuyas descripciones aparecen an un ocumento
aparte, por el importnte de la ejecusacion expidida por el Jusgado de Negros
Oriental al 14 de mayo de 1924, en vitud de una decision de la Corte Suprema.
Con este queda definitivamente cumplimentada esta ejecucion.
Y para que asi conste, firmo la presente en el Municipio de Bais, Provincia de
Negros Oriental, I. F., ante el Sheriff Provincial de esta Provincia de Negros
Oriental y el Notario Publico Don Francisco Romero, que ratifica este
compromiso.
(Fda.) JOSEFINA RUBIO, Vda. DE LARENA
Firmado en presencia de:
(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.
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.
Avanceña, C. J., Johnson Street, Malcolm, Villamor, Romualdez, an Villa-Real, JJ., concur.
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.
G.R. No. L-32958 November 8, 1930
BLOSSOM AND COMPANY, INC., plaintiff-appellant,
vs.
MANILA GAS CORPORATION, defendant-appellee.
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.
G.R. No. 143788 September 9, 2005
DANFOSS, INC., Petitioners,
vs.
CONTINENTAL CEMENT CORPORATION, Respondent.
This is a petition for review on certiorari under Rule 45 of the 1997 Rules on Civil Procedure of the
February 11, 2000 decision1 of the Court of Appeals in CA-G.R. No. SP-55645, and its resolution dated
June 7, 2000 denying petitioner’s motion for reconsideration.
The antecedents show that on November 5, 1998, respondent Continental Cement Corporation (CCC)
filed a complaint for damages against petitioner DANFOSS and Mechatronics Instruments and Controls,
Inc. (MINCI) before the Regional Trial Court of Quezon City, Branch 80, alleging that:
xxx xxx xxx
6. On 1 September 1997, Plaintiff CCC purchased from defendant MINCI two (2) unit 132 KW Danfoss
Brand Frequency Converter/Inverter for use in the Finish Mill of its Cement Plant located in Barrio Bigte,
Norzagaray, Bulacan. The said purchase is covered by a Purchase [Order] (PO) No. 36625….
6.1 Under the terms and conditions of the purchase order, the delivery of the two (2) unit Frequency
Converter are to be delivered within eight (8) to ten (10) weeks from the opening of the letter of credit;
7. Defendant MINCI, immediately relayed the purchase order of plaintiff CCC to the other defendant
DANFOSS, represented by Messrs. Klaus Stove and Hans Vigaard, who in turn forwarded the same to
their Asian Regional Office in Singapore and Head Office in Denmark for the shipment of the orders to
the Philippines.
7.1 Defendant DANFOSS’ commitment to deliver the two (2) unit Danfoss Brand Frequency
Converter/Inverter to plaintiff CCC was relayed by defendant MINCI to CCC upon the assurance of
Messrs. Stove and Vigaard of DANFOSS.
8. On September 1997, plaintiff CCC received the pro-forma invoice of defendant MINCI through fax
transmission dated 2 September 1998, indicating the mode of payment through irrevocable letter of credit
in favor of Danfoss Industries Pte. Ltd. …
8.1 Plaintiff CCC executed and opened a letter of credit under LC No. 970884 in favor of DANFOSS
INDUSTRIES PTE. LTD., with address at 6 Jalan Pesawat, Singapore 619364, which is the Asian
Regional Office of defendant DANFOSS …
9. Defendant MINCI informed plaintiff CCC through fax transmission dated 17 September 1997, that the
two (2) unit Frequency Converter/Inverter are ready for shipment, and at the same time requested for the
amendments of the letter of credit changing the port of origin/loading from Singapore to Denmark….
9.1 In compliance, plaintiff CCC amended the letter of credit changing the port of origin from Singapore to
Denmark….
10. On 6 November 1997, defendant MINCI informed plaintiff CCC that Danfoss Industries Pte. Ltd. was
still checking the status of the shipment of the two (2) unit Frequency Converter/Inverter with Danfoss
Denmark.
10.1 In reply, plaintiff CCC through a letter dated 7 November 1997, reiterated its demand that every
delay in the shipment of the two (2) unit Frequency Converter/Inverter will cause substantial losses in its
operations and requested for the early work out and the immediate shipment of the frequency converter
to avoid further loss to the company….
11. However, on 9 November 1997, defendant DANFOSS, informed the other defendant MINCI through
fax transmission, copy furnished plaintiff CCC, that the reason why DANFOSS has delivery problems was
that some of the supplied components for the new VLT 5000 series did not meet the agreed quality
standard. That means that their factory was canvassing for another supplier. And at that moment, there
was no clear message when normal production will resume….
12. Due to this information received, plaintiff CCC surmised that defendants MINCI and DANFOSS could
not be able to deliver the two (2) unit Frequency Converter within the maximum period of ten (10) weeks
period from the opening of the Letter of Credit, as one of the conditions in the Purchase Order dated 1
September 1997.
12.1 Thereafter, no definite commitment was received by plaintiff CCC from defendants MINCI and
DANFOSS for the delivery of the two (2) unit Frequency Converter.
13. By reason of the delay of the defendants MINCI and DANFOSS to deliver the two (2) unit Frequency
Converter/Inverter under PO No. 36625, plaintiff CCC, through its Purchasing Manager, informed
defendant MINCI in a letter dated 13 November 1997, of the plaintiff’s intention to cancel the said
order….
13.1 As a consequence thereof, plaintiff CCC has suffered an actual substantial production losses in the
amount of Eight Million Sixty-four Thousand Pesos (P8,064,000.00) due to the time lost and delay in the
delivery of the said two (2) unit Frequency Converter/Inverter. Likewise, plaintiff CCC was compelled to
look for another supplier.
xxx xxx xxx2
On February 17, 1999, petitioner DANFOSS filed a motion to dismiss the complaint on the ground that it
did not state a cause of action:
xxx xxx xxx
The above allegations of the complaint clearly establish the following key constitutive facts:
1. Defendant’s period of delivery is from 8 to 10 weeks from the opening of the letter of credit on
September 9, 1997 or until November 19, 1997.
2. Defendant Danfoss, although having problems with its supplier during the period prior to defendant’s
cancellation, nevertheless, plaintiff never alleged that Danfoss Denmark cannot perform its obligation to
deliver by the 10th week or on November 20, 1997. Admittedly, plaintiff only surmised that defendant
Danfoss could not deliver.
3. Before the period for delivery has expired on November 19, 1997, the plaintiff cancelled its order on
November 13, 1997. The cancellation took place seven (7) days before the expiry of the defendant’s
obligation to deliver on November 19, 1997.
strongly supported by evidence during the hearing of the merits of the case may well negates (sic) the
defendant’s contrary stand.
As to the argument of the defendant MINCI that it cannot be held liable jointly with the defendant Danfoss
due to the fact that it was merely an "agent" of Danfoss, the Court finds the same a debatable issue
considering the stand of plaintiff that the defendant MINCI dealt with the former not as an agent but also
as a principal. The issue at hand necessitates the presentation of evidence which has to be done during
the hearing on the merits of the case where the issue of damages incurred by either of the parties may
well be taken up and judgment be rendered after presentation of evidence by the parties.

4. Neither plaintiff nor defendant Danfoss changed the date of delivery, what plaintiff changed in the letter
of credit was only the port of origin/loading from Singapore to Denmark. The period of delivery as
stipulated in the pro forma invoice issued by defendant MINCI remained intact, that is for a period of 6 to
10 weeks from the opening of the letter of credit on September 9, 1997 or until November 19, 1997 was
still in force when the plaintiff cancelled its order on November 13, 1997. Defendant Danfoss has not
incurred in delay and has 7 days more within which to make delivery. Plaintiff, having cancelled the order
on November 13, 1997 before the expiry of defendant Danfoss’ delivery commitment, defendant
Danfoss’s principal could not have been in default.
5. Plaintiff never made an extrajudicial demand for the delivery of two (2) units Frequency Converter on
its due date. On the contrary, as above alleged, plaintiff cancelled its order on November 13, 1997.
6. Plaintiff’s claim for damages could not have accrued until after defendant incurred in delay.
WHEREFORE, premises considered, the two motions to dismiss, interposed separately by the
defendants as earlier stated, are both denied.
SO ORDERED.5
Danfoss filed a motion for reconsideration of the order but it was denied. On appeal to the Court of
Appeals, the latter also denied Danfoss’ petition for lack of merit. The CA likewise denied petitioner’s
motion for reconsideration, hence, this appeal.
The only issue for our consideration is whether or not the CA erred in affirming the denial by the court a
quo of petitioner’s motion to dismiss the complaint for damages on the ground that it failed to state a
cause of action.

The above allegations neither prove any right of the plaintiffs arising from the transactions nor a violation
of such right. It is submitted that this Honorable Court based on the complaint, cannot render a valid Section 1 (g), Rule 16 of the 1997 Revised Rules on Civil Procedure provides that:
judgment against the defendant Danfoss. The plaintiff’s cause of action against Danfoss or plaintiff’s right
to demand delivery cannot arise earlier than November 19, 1997, which is the last day for the defendant
Section 1. Grounds – Within the time for but before filing the answer to the complaint or pleading
Danfoss’s principal (Danfoss Denmark) to deliver the two (2) units Frequency Converter. As admitted by
asserting a claim, a motion to dismiss may be made on any of the following grounds:
the plaintiff, it cancelled its order on November 13, 1997, or six (6) days before the expiry of the
defendant’s obligation to deliver. Indeed, defendant Danfoss’s obligation to deliver is not yet demandable.
The period of 8 to 10 weeks for the delivery of plaintiff’s purchase order of two (2) units Frequency xxx xxx xxx
Converter was established for the benefit of both the plaintiff and the defendant Danfoss. As such,
plaintiff cannot demand delivery before the period stipulated….
(g) That the pleading asserting the claim states no cause of action;

xxx xxx xxx

A cause of action is defined under Section 2, Rule 2 of the same Rules as:

From the allegations of the complaint, there is also no clear and categorical demand for the fulfillment of
the plaintiff’s obligation to deliver by the 10th week or on November 19, 1997. Sec. 2. Cause of action, defined. – A cause of action is the act or omission by which a party violates a
right of another.

WHEREFORE, it is respectfully prayed of this Honorable Court that the Complaint be dismissed for
failure to state a cause of action. 3 It is the delict or wrongful act or omission committed by the defendant in violation of the primary right of
the plaintiff.6

The court a quo denied the motion to dismiss in its order 4 dated May 28, 1999, holding that:
In order to sustain a dismissal on the ground of lack of cause of action, the insufficiency must appear on
the face of the complaint. And the test of the sufficiency of the facts alleged in the complaint to constitute
xxx xxx xxx a cause of action is whether or not, admitting the facts alleged, the court can render a valid judgment
thereon in accordance with the prayer of the complaint. For this purpose, the motion to dismiss must
hypothetically admit the truth of the facts alleged in the complaint. 7
In the Court’s opinion, the issue of whether or not the defendants incur delay in the delivery of the
equipment in question within the period stipulated is a debatable question which necessitates actual trial
on the merits where the parties have to adduce evidence in support of their respective stance. After a careful perusal of the allegations in respondent’s complaint for damages against petitioner, we
rule that the same failed to state a cause of action. When respondent sued petitioner for damages,
petitioner had not violated any right of respondent from which a cause of action had arisen. Respondent
While the defendants contend that the stipulated period of delivery had not lapsed yet when the plaintiff
only surmised that petitioner would not be able to deliver the two units frequency converter/inverter on
cancelled its order of the two equipments in question as the cancellation took place seven (7) days
the date agreed upon by them. Based on this apprehension, it cancelled its order six days prior to the
before the expiry date of the defendants’ obligation to deliver, the plaintiff’s position is that the acts of the
agreed date of delivery. How could respondent hold petitioner liable for damages (1) when petitioner had
defendants had made compliance with their obligation to deliver within the period stipulated, impossible,
not yet breached its obligation to deliver the goods and (2) after respondent made it impossible for
hence, there was no need for a demand as the law provides that "when demand would be useless, as
petitioner to deliver them by cancelling its order even before the agreed delivery date?
when the obligor has rendered it beyond his power to perform." The plaintiff’s contention if properly and
The trial court erred in ruling that the issue of whether or not the defendants incurred delay in the delivery BANK OF AMERICA, NT and SA, petitioner,
of the equipment within the period stipulated was a debatable question. It said that trial on the merits was vs.
necessary and the parties had to adduce evidence in support of their respective positions. 8 But what was AMERICAN REALTY CORPORATION and COURT OF APPEALS, respondents.
there to argue about when, based on the allegations of the complaint, petitioner was not yet due to
deliver the two units frequency converter/inverter when respondent cancelled its order? It still had six
days within which to comply with its obligation. The court a quo should not have denied petitioner’s Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted over a third
motion to dismiss the complaint (for its failure to state a cause of action) when, on its face, it was clear party mortgagor's property situated in the Philippines by filing an action for the collection of the principal
that petitioner had not yet reneged on its obligation to deliver the frequency converter/inverter on the date loan before foreign courts?
mutually agreed upon by the parties. Moreover, the obligation itself was negated by no less than
respondent’s own act of cancelling its order even before the prestation became due and demandable.
Sought to be reversed in the instant petition for review on certiorari under Rule 45 of the Rules of Court
Where therefore was the breach? Where was the damage caused by petitioner? There was none.
are the decision 1 of public respondent Court of Appeals in CA G.R. CV No. 51094, promulgated on 30
September 1997 and its resolution, 2 dated 22 May 1998, denying petitioner's motion for reconsideration.
Consequently, it was wrong for the CA to affirm the order of the trial court denying petitioner’s motion to
dismiss the complaint for its failure to state a cause of action.
Petitioner Bank of America NT & SA (BANTSA) is an international banking and financing institution duly
licensed to do business in the Philippines, organized and existing under and by virtue of the laws of the
The principle of anticipatory breach enunciated in Blossom & Company, Inc. v. Manila Gas State of California, United States of America while private respondent American Realty Corporation
Corporation 9 does not apply here. In that case, Blossom & Company, Inc. entered into a contract with (ARC) is a domestic corporation.
Manila Gas Corporation for the sale and delivery of water gas and coal gas tar at stipulated prices for a
period of four years. On the second year of the contract, Manila Gas willfully and deliberately refused to
Bank of America International Limited (BAIL), on the other hand, is a limited liability company organized
deliver any coal and water gas tar to Blossom and Company, Inc. because it was asking for a higher price
and existing under the laws of England.
than what had been previously stipulated by them. The price of its tar products had gone up. We held
that:
As borne by the records, BANTSA and BAIL on several occasions granted three major multi-million
United States (US) Dollar loans to the following corporate borrowers: (1) Liberian Transport Navigation,
… even if the contract is divisible in its performance and the future periodic deliveries are not yet due, if
S.A.; (2) El Challenger S.A. and (3) Eshley Compania Naviera S.A. (hereinafter collectively referred to as
the obligor has already manifested his refusal to comply with his future periodic obligations, "the contract
"borrowers"), all of which are existing under and by virtue of the laws of the Republic of Panama and are
is entire and the breach total," hence, there can only be one action for damages. 10
foreign affiliates of private
respondent. 3
Thus, the principle contemplates future periodic deliveries and a willful refusal to comply therewith. Here,
the obligation was single and indivisible – to deliver two units of frequency converter/inverter by
Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers signed
November 19, 1997. The records do not show that petitioner refused to deliver the goods on the date
and entered into restructuring agreements. As additional security for the restructured loans, private
agreed upon. On the contrary, petitioner exerted efforts to make good its obligation by looking for other
respondent ARC as third party mortgagor executed two real estate mortgages, 4 dated 17 February 1983
suppliers who could provide it the parts needed to make timely delivery of the frequency
and 20 July 1984, over its parcels of land including improvements thereon, located at Barrio Sto. Cristo,
converter/inverter ordered by respondent.
San Jose Del Monte, Bulacan, and which are covered by Transfer Certificate of Title Nos. T-78759, T-
78760, T-78761, T-78762 and T-78763.
Furthermore, respondent’s complaint suffered from another fatal infirmity. It was premature. The
obligation of petitioner to respondent was not yet due and demandable at the time the latter filed the
Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting
complaint. The alleged violation of respondent’s right being no more than mere speculation, there was no
petitioner BANTSA to file civil actions 5 before foreign courts for the collection of the principal loan, to wit:
need to call for judicial intervention.

a) In England, in its High Court of Justice, Queen's Bench

The premature invocation of the court’s intervention was fatal to respondent’s cause of action. 11 Hence,
Division, Commercial Court (1992-Folio No 2098) against
the dismissal of respondent’s complaint was in order.
Liberian Transport Navigation S.A., Eshley Compania
Naviera S.A., El Challenger S.A., Espriona Shipping
In sum, since respondent’s fear that petitioner might not be able to deliver the frequency Company S.A., Eddie Navigation Corp., S.A., Eduardo
converter/inverter on time was not the cause of action referred to by the Rules and jurisprudence, the Katipunan Litonjua and Aurelio Katipunan Litonjua on June
motion to dismiss the respondent’s complaint for damages for lack of cause of action should have been 17, 1992.
granted by the trial court. In addition, the dismissal of the complaint was warranted on the ground of
prematurity.
b) In England, in its High Court of Justice, Queen's Bench
Division, Commercial Court (1992-Folio No. 2245) against
WHEREFORE, we hereby GRANT the petition. The assailed decision of the CA dated February 11, 2000 El Challenger S.A., Espriona Shipping Company S.A.,
and its resolution dated June 7, 2000 are REVERSED and SET ASIDE. Civil Case No. Q-98-35997 Eduardo Katipuan Litonjua & Aurelio Katipunan Litonjua on
pending before the Regional Trial Court of Quezon City, Branch 80, is hereby DISMISSED. July 2, 1992;

SO ORDERED. c) In Hongkong, in the Supreme Court of Hongkong High

Court (Action No. 4039 of 1992) against Eshley Compania
Naviera S.A., El Challenger S.A., Espriona Shipping
G.R. No. 133876 December 29, 1999 Company S.A. Pacific Navigators Corporation, Eddie
Navigation Corporation S.A., Litonjua Chartering (Edyship)
Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo
Katipunan Litonjua on November 19, 1992; and
 d) In Hongkong, in the Supreme Court of Hongkong High
Court (Action No. 4040 of 1992) against Eshley Compania
Naviera S.A., El Challenger S.A., Espriona Shipping
Company, S.A., Pacific Navigators Corporation, Eddie
Navigation Corporation S.A., Litonjua Chartering (Edyship)
Co., Jr. and Eduardo Katipunan Litonjua on November 21,
1992.
In the civil suits instituted before the foreign courts, private respondent ARC, being a third party
mortgagor, was private not impleaded as party-defendant.
On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of Bulacan,
Philippines an application for extrajudicial foreclosure 6 of real estate mortgage.
(P39,000,000.00). 12 Accordingly, Transfer Certificate of Title Nos. T-187781(m), T-187782(m), T-
187783(m), T-16653P(m) and T-16652P(m) were issued in the latter's name.
13
After trial, the lower court rendered a decision in favor of private respondent ARC dated 12 May 1993,
the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the filing in foreign
courts by the defendant of collection suits against the principal debtors operated
as a waiver of the security of the mortgages. Consequently, the plaintiff's rights as
owner and possessor of the properties then covered by Transfer Certificates of
Title Nos. T-78759, T-78762, T-78763, T-78760 and T-78761, all of the Register of
Deeds of Meycauayan, Bulacan, Philippines, were violated when the defendant
caused the extrajudicial foreclosure of the mortgages constituted thereon.

On 22 January 1993, after due publication and notice, the mortgaged real properties were sold at public Accordingly, the defendant is hereby ordered to pay the plaintiff the following
auction in an extrajudicial foreclosure sale, with Integrated Credit and Corporation Services Co (ICCS) as sums, all with legal interest thereon from the date of the filing of the complaint up
the highest bidder for the sum of Twenty four Million Pesos (P24,000.000.00). 7 to the date of actual payment:

On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159, an 1) Actual or compensatory damages in the amount of Ninety Nine Million Pesos
action for damages 8 against the petitioner, for the latter's act of foreclosing extrajudicially the real estate (P99,000,000.00);
mortgages despite the pendency of civil suits before foreign courts for the collection of the principal loan.

2) Exemplary damages in the amount of Five Million Pesos (P5,000,000.00); and

In its answer 9 petitioner alleged that the rule prohibiting the mortgagee from foreclosing the mortgage
after an ordinary suit for collection has been filed, is not applicable in the present case, claiming that:
3) Costs of suit.

a) The plaintiff, being a mere third party mortgagor and not a party to the principal
restructuring agreements, was never made a party defendant in the civil cases
filed in Hongkong and England;
b) There is actually no civil suit for sum of money filed in the Philippines since the
civil actions were filed in Hongkong and England. As such, any decisions (sic)
which may be rendered in the abovementioned courts are not (sic) enforceable in
the Philippines unless a separate action to enforce the foreign judgments is first
filed in the Philippines, pursuant to Rule 39, Section 50 of the Revised Rules of
Court.
c) Under English Law, which is the governing law under the principal agreements,
the mortgagee does not lose its security interest by filing civil actions for sums of
money.
On 14 December 1993, private respondent filed a motion for
suspension 10 of the redemption period on the ground that "it cannot exercise said right of redemption
without at the same time waiving or contradicting its contentions in the case that the foreclosure of the
mortgage on its properties is legally improper and therefore invalid."
SO ORDERED.
On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting petitioner to
file a motion for reconsideration which the appellate court denied.
Hence, the instant petition for review 14 on certiorari where herein petitioner BANTSA ascribes to the
Court of Appeals the following assignment of errors:
1. The Honorable Court of Appeals disregarded the
doctrines laid down by this Hon. Supreme Court in the
cases of Caltex Philippines, Inc. vs. Intermediate Appellate
Courtdocketed as G.R. No. 74730 promulgated on August
25, 1989 and Philippine Commercial International Bank
vs. IAC, 196 SCRA 29 (1991 case), although said cases
were duly cited, extensively discussed and specifically
mentioned, as one of the issues in the assignment of
errors found on page 5 of the decision dated September
30, 1997.

In an order 11 dated 28 January 1994, the trial court granted the private respondent's motion for 2. The Hon. Court of Appeals acted with grave abuse of
suspension after which a copy of said order was duly received by the Register of Deeds of Meycauayan, discretion when it awarded the private respondent actual
Bulacan. and exemplary damages totalling P171,600,000.00, as of
July 12, 1998 although such huge amount was not asked
nor prayed for in private respondent's complaint, is
On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure sale, contrary to law and is totally unsupported by evidence
consolidated its ownership over the real properties, resulting to the issuance of Transfer Certificate of (sic).
Title Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in its name.

In fine, this Court is called upon to resolve two main issues:

On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real properties to
Stateland Investment Corporation for the amount of Thirty Nine Million Pesos
 1. Whether or not the petitioner's act of filing a collection
suit against the principal debtors for the recovery of the
loan before foreign courts constituted a waiver of the
remedy of foreclosure.
2. Whether or not the award by the lower court of actual
and exemplary damages in favor of private respondent
ARC, as third-party mortgagor, is proper.
The petition is bereft of merit.
First, as to the issue of availability of remedies, petitioner submits that a waiver of the remedy of
foreclosure requires the concurrence of two requisites: an ordinary civil action for collection should be
filed and subsequently a final judgment be correspondingly rendered therein.
According to petitioner, the mere filing of a personal action to collect the principal loan does not suffice; a
final judgment must be secured and obtained in the personal action so that waiver of the remedy of
foreclosure may be appreciated. To put it differently, absent any of the two requisites, the mortgagee-
creditor is deemed not to have waived the remedy of foreclosure.
We do not agree.
Certainly, this Court finds petitioner's arguments untenable and upholds the jurisprudence laid down in
Bachrach 15and similar cases adjudicated thereafter, thus:
In the absence of express statutory provisions, a mortgage creditor may institute
against the mortgage debtor either a personal action or debt or a real action to
foreclose the mortgage. In other words, he may he may pursue either of the two
remedies, but not both. By such election, his cause of action can by no means be
impaired, for each of the two remedies is complete in itself. Thus, an election to
bring a personal action will leave open to him all the properties of the debtor for
attachment and execution, even including the mortgaged property itself. And, if he
waives such personal action and pursues his remedy against the mortgaged
property, an unsatisfied judgment thereon would still give him the right to sue for a
deficiency judgment, in which case, all the properties of the defendant, other than
the mortgaged property, are again open to him for the satisfaction of the
deficiency. In either case, his remedy is complete, his cause of action
undiminished, and any advantages attendant to the pursuit of one or the other
remedy are purely accidental and are all under his right of election. On the other
hand, a rule that 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
(Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio vs.
San Agustin, 25 Phil., 404), 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.
In Danao vs. Court of Appeals, 16 this Court, reiterating jurisprudence enunciated in Manila Trading and
Supply Co vs. Co Kim 17 and Movido vs.
RFC, 18 invariably held:
. . . The rule is now settled that a mortgage creditor may elect to waive his security
and bring, instead, an ordinary action to recover the indebtedness with the right to
execute a judgment thereon on all the properties of the debtor, including the
subject matter of the mortgage . . . , subject to the qualification that if he fails in
the remedy by him elected, he cannot pursue further the remedy he has waived.
(Emphasis Ours)
Anent real properties in particular, the Court has laid down the rule that a mortgage creditor may institute
against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. 19
In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not
cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, 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 provision of Rule 68 of the of the 1997 Rules of Civil
Procedure. 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.
In the case at bench, private respondent ARC constituted real estate mortgages over its properties as
security for the debt of the principal debtors. By doing so, private respondent subjected itself to the
liabilities of a third party mortgagor. Under the law, third persons who are not parties to a loan may secure
the latter by pledging or mortgaging their own property. 20
Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a third
person who secures the fulfillment of another's obligation by mortgaging his own property, to be solidarily
bound with the principal obligor. The signatory to the principal contract—loan—remains to be primarily
bound. It is only upon default of the latter that the creditor may have recourse on the mortgagors by
foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan. 21
In the instant case, petitioner's contention that the requisites of filing the action for collection and rendition
of final judgment therein should concur, is untenable.
Thus, in Cerna vs. Court of Appeals, 22 we agreed with the petitioner in said case, that the filing of a
collection suit barred the foreclosure of the mortgage:
A mortgagee who files a suit for collection abandons the remedy of foreclosure of
the chattel mortgage constituted over the personal property as security for the
debt or value of the promissory note when he seeks to recover in the said
collection suit.
. . . When the mortgagee elects to file a suit for collection, not foreclosure, thereby
abandoning the chattel mortgage as basis for relief, he clearly manifests his lack
of desire and interest to go after the mortgaged property as security for the
promissory note . . . .
Contrary to petitioner's arguments, we therefore reiterate the rule, for clarity and emphasis, that the mere
act of filing of an ordinary action for collection operates as a waiver of the mortgage-creditor's remedy to
foreclose the mortgage. By the mere filing of the ordinary action for collection against the principal
debtors, the petitioner in the present case is deemed to have elected a remedy, as a result of which a
waiver of the other necessarily must arise. Corollarily, no final judgment in the collection suit is required
for the rule on waiver to apply.
Hence, in Caltex Philippines, Inc. vs. Intermediate-Appellate Court, 23 a case relied upon by petitioner,
supposedly to buttress its contention, this Court had occasion to rule that the mere act of filing a
collection suit for the recovery of a debt secured by a mortgage constitutes waiver of the other remedy of
foreclosure.
In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of the debt.
Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner then may opt
to exercise only one of two remedies so as not to violate the rule against splitting a cause of action.
As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc, vs. Icarangal. 24
 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 non-payment 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 rules above stated, cannot split up his single cause of action by
filing a complaint for payment of the debt, and thereafter another complaint for
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.
Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine enunciated in Caltex
wherein this High Court relaxed the application of the general rules to wit:
In the present case, however, we shall not follow this rule to the letter but declare
that it is the collection suit which was waived and/or abandoned. This ruling is
more in harmony with the principles underlying our judicial system. It is of no
moment that the collection suit was filed ahead, what is determinative is the fact
that the foreclosure proceedings ended even before the decision in the collection
suit was rendered. . . .
Notably, though, petitioner took the Caltex ruling out of context. We must stress that the Caltex case was
never intended to overrule the well-entrenched doctrine enunciated Bachrach, which to our mind still
finds applicability in cases of this sort. To reiterate, Bachrach is still good law.
We then quote the decision 25 of the trial court, in the present case, thus:
The aforequoted ruling in Caltex is the exception rather than the rule, dictated by
the peculiar circumstances obtaining therein. In the said case, the Supreme Court
chastised Caltex for making ". . . a mockery of our judicial system when it initially
filed a collection suit then, during the pendency thereof, foreclosed extrajudicially
the mortgaged property which secured the indebtedness, and still pursued the
collection suit to the end." Thus, to prevent a mockery of our judicial system", the
collection suit had to be nullified because the foreclosure proceedings have
already been pursued to their end and can no longer be undone.
xxx xxx xxx
In the case at bar, it has not been shown whether the defendant pursued to the
end or are still pursuing the collection suits filed in foreign courts. There is no
occasion, therefore, for this court to apply the exception laid down by the
Supreme Court in Caltex by nullifying the collection suits. Quite obviously, too, the
aforesaid collection suits are beyond the reach of this Court. Thus the only way
the court may prevent the spector of a creditor having "plural redress for a single
breach of contract" is by holding, as the Court hereby holds, that the defendant
has waived the right to foreclose the mortgages constituted by the plaintiff on its
properties originally covered by Transfer Certificates of Title Nos. T-78759, T-
78762, T-78760 and T-78761. (RTC Decision pp., 10-11)
In this light, the actuations of Caltex are deserving of severe criticism, to say the least. 26
Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs. IAC. 27 Again, petitioner
tried to fit a square peg in a round hole. It must be stressed that far from overturning the doctrine laid
down in Bachrach, this Court in PCIB buttressed its firm stand on this issue by declaring:
While the law allows a mortgage creditor to either institute a personal action for
the debt or a real action to foreclosure the mortgage, he cannot pursue both
remedies simultaneously or successively as was done by PCIB in this case.
xxx xxx xxx
Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3
million promissory note secured by real estate mortgages and subsequently filed
a petition for extrajudicial foreclosure, it violates the rule against splitting a cause
of action.
Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil suits
before foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages
constituted over the properties of third-party mortgagor and herein private respondent ARC. Moreover, by
filing the four civil actions and by eventually foreclosing extrajudicially the mortgages, petitioner in effect
transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our statute
books.
In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the collection suit
was filed, considering that the creditor should not be afforded "plural redress for a single breach of
contract." For cause of action should not be confused with the remedy created for its enforcement. 28
Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy chosen in
addressing the creditor's cause. Hence, a suit brought before a foreign court having competence and
jurisdiction to entertain the action is deemed, for this purpose, to be within the contemplation of the
remedy available to the mortgagee-creditor. This pronouncement would best serve the interest of justice
and fair play and further discourage the noxious practice of splitting up a lone cause of action.
Incidentally, BANTSA alleges that under English Law, which according to petitioner is the governing law
with regard to the principal agreements, the mortgagee does not lose its security interest by simply filing
civil actions for sums of money. 29
We rule in the negative.
This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the case at
bench, Philippine law shall apply notwithstanding the evidence presented by petitioner to prove the
English law on the matter.
In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction that there is
no judicial notice of any foreign law. A foreign law must be properly pleaded and proved as a fact. 30 Thus,
if the foreign law involved is not properly pleaded and proved, our courts will presume that the foreign law
is the same as our local or domestic or internal
law. 31 This is what we refer to as the doctrine of processual presumption.
In the instant case, assuming arguendo that the English Law on the matter were properly pleaded and
proved in accordance with Section 24, Rule 132 of the Rules of Court and the jurisprudence laid down
in Yao Kee, et al. vs.
Sy-Gonzales, 32 said foreign law would still not find applicability.
Thus, when the foreign law, judgment or contract is contrary to a sound and established public policy of
the forum, the said foreign law, judgment or order shall not be applied. 33
Additionally, prohibitive laws concerning persons, their acts or property, and those which have for their
object public order, public policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determinations or conventions agreed upon in a foreign country. 34
The public policy sought to be protected in the instant case is the principle imbedded in our jurisdiction
proscribing the splitting up of a single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent —
If two or more suits are instituted on the basis of the same cause of action, the
filing of one or a judgment upon the merits in any one is available as a ground for
the dismissal of the others.
Moreover, foreign law should not be applied when its application would work undeniable injustice to the
citizens or residents of the forum. To give justice is the most important function of law; hence, a law, or
judgment or contract that is obviously unjust negates the fundamental principles of Conflict of Laws. 35
Clearly then, English Law is not applicable.
As to the second pivotal issue, we hold that the private respondent is entitled to the award of actual or
compensatory damages inasmuch as the act of petitioner BANTSA in extrajudicially foreclosing the real
estate mortgages constituted a clear violation of the rights of herein private respondent ARC, as third-
party mortgagor.
Actual or compensatory damages are those recoverable because of pecuniary loss in business, trade,
property, profession, job or occupation and the same must be proved, otherwise if the proof is flimsy and
non-substantial, no damages will be given. 36 Indeed, the question of the value of property is always a
difficult one to settle as valuation of real property is an imprecise process since real estate has no
inherent value readily ascertainable by an appraiser or by the court. 37 The opinions of men vary so much
concerning the real value of property that the best the courts can do is hear all of the witnesses which the
respective parties desire to present, and then, by carefully weighing that testimony, arrive at a conclusion
which is just and equitable. 38
In the instant case, petitioner assails the Court of Appeals for relying heavily on the valuation made by
Philippine Appraisal Company. In effect, BANTSA questions the act of the appellate court in giving due
weight to the appraisal report composed of twenty three pages, signed by Mr. Lauro Marquez and
submitted as evidence by private respondent. The appraisal report, as the records would readily show,
was corroborated by the testimony of Mr. Reynaldo Flores, witness for private respondent.
On this matter, the trial court observed:
The record herein reveals that plaintiff-appellee formally offered as evidence the
appraisal report dated March 29, 1993 (Exhibit J, Records, p. 409), consisting of
twenty three (23) pages which set out in detail the valuation of the property to
determine its fair market value (TSN, April 22, 1994, p. 4), in the amount of
P99,986,592.00 (TSN, ibid., p. 5), together with the corroborative testimony of one
Mr. Reynaldo F. Flores, an appraiser and director of Philippine Appraisal
Company, Inc. (TSN, ibid., p. 3). The latter's testimony was subjected to extensive
cross-examination by counsel for defendant-appellant (TSN, April 22, 1994, pp. 6-
22). 39
In the matter of credibility of witnesses, the Court reiterates the familiar and well-entrenched rule that the
factual findings of the trial court should be respected. 40 The time-tested jurisprudence is that the findings
and conclusions of the trial court on the credibility of witnesses enjoy a badge of respect for the reason
that trial courts have the advantage of observing the demeanor of witnesses as they testify. 41
This Court will not alter the findings of the trial court on the credibility of witnesses, principally because
they are in a better position to assess the same than the appellate court. 42 Besides, trial courts are in a
better position to examine real evidence as well as observe the demeanor of witnesses. 43
Similarly, the appreciation of evidence and the assessment of the credibility of witnesses rest primarily
with the trial court. 44 In the case at bar, we see no reason that would justify this Court to disturb the
factual findings of the trial court, as affirmed by the Court of Appeals, with regard to the award of actual
damages.
In arriving at the amount of actual damages, the trial court justified the award by presenting the following
ratiocination in its assailed decision 45, to wit:
Indeed, the Court has its own mind in the matter of valuation. The size of the
subject real properties are (sic) set forth in their individuals titles, and the Court
itself has seen the character and nature of said properties during the ocular
inspection it conducted. Based principally on the foregoing, the Court makes the
following observations:
1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del
Monte, Bulacan, which is (sic) not distant from Metro Manila — the biggest urban
center in the Philippines — and are easily accessible through well-paved roads;
2. The properties are suitable for development into a subdivision for low cost
housing, as admitted by defendant's own appraiser (TSN, May 30, 1994, p. 31);
3. The pigpens which used to exist in the property have already been demolished.
Houses of strong materials are found in the vicinity of the property (Exhs. 2, 2-1 to
2-7), and the vicinity is a growing community. It has even been shown that the
house of the Barangay Chairman is located adjacent to the property in question
(Exh. 27), and the only remaining piggery (named Cherry Farm) in the vicinity is
about 2 kilometers away from the western boundary of the property in question
(TSN, November 19, p. 3);
4. It will not be hard to find interested buyers of the property, as indubitably shown
by the fact that on March 18, 1994, ICCS (the buyer during the foreclosure sale)
sold the consolidated real estate properties to Stateland Investment Corporation,
in whose favor new titles were issued, i.e., TCT Nos. T-187781(m); T-187782(m),
T-187783(m); T-16653P(m) and T-166521(m) by the Register of Deeds of
Meycauayan (sic), Bulacan;
5. The fact that ICCS was able to sell the subject properties to Stateland
Investment Corporation for Thirty Nine Million (P39,000,000.00) Pesos, which is
more than triple defendant's appraisal (Exh. 2) clearly shows that the Court
cannot rely on defendant's aforesaid estimate (Decision, Records, p. 603).
It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of witnesses
command great respect and consideration especially when the conclusions are supported by the
evidence on record. 46Applying the foregoing principle, we therefore hold that the trial court committed no
palpable error in giving credence to the testimony of Reynaldo Flores, who according to the records, is a
licensed real estate broker, appraiser and director of Philippine Appraisal Company, Inc. since 1990. 47 As
the records show, Flores had been with the company for 26 years at the time of his testimony.
Of equal importance is the fact that the trial court did not confine itself to the appraisal report dated 29
March 1993, and the testimony given by Mr. Reynaldo Flores, in determining the fair market value of the
real property. Above all these, the record would likewise show that the trial judge in order to appraise
himself of the characteristics and condition of the property, conducted an ocular inspection where the
opposing parties appeared and were duly represented.
Based on these considerations and the evidence submitted, we affirm the ruling of the trial court as
regards the valuation of the property —
. . . a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare
properties (sic) translates to just about Two Hundred Fifty Four Pesos (P254.00)
per square meter. This appears to be, as the court so holds, a better
approximation of the fair market value of the subject properties. This is the
amount which should be restituted by the defendant to the plaintiff by way of
actual or compensatory damages . . . . 48
Further, petitioner ascribes error to the lower court awarding an amount allegedly not asked nor prayed
for in private respondent's complaint.
Notwithstanding the fact that the award of actual and compensatory damages by the lower court
exceeded that prayed for in the complaint, the same is nonetheless valid, subject to certain qualifications.
On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:
Sec. 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 judgement; 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.
The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs. Asociacion de Agricultures de Talisay-
Silay, Inc. 49citing Northern Cement Corporation vs. Intermediate Appellate Court 50 is enlightening:
There have been instances where the Court has held that even without the
necessary amendment, the amount proved at the trial may be validly awarded, as
in Tuazon v. Bolanos (95 Phil. 106), where we said that if the facts shown entitled
plaintiff to relief other than that asked for, no amendment to the complaint was
necessary, especially where defendant had himself raised the point on which
recovery was based. The appellate court could treat the pleading as amended to
conform to the evidence although the pleadings were actually not amended.
Amendment is also unnecessary when only clerical error or non substantial
matters are involved, as we held in Bank of the Philippine Islands vs. Laguna(48
Phil. 5). In Co Tiamco vs. Diaz (75 Phil. 672), we stressed that the rule on
amendment need not be applied rigidly, particularly where no surprise or prejudice
is caused the objecting party. And in the recent case of National Power
Corporation vs. Court of Appeals (113 SCRA 556), we held that where there is a
variance in the defendant's pleadings and the evidence adduced by it at the trial,
the Court may treat the pleading as amended to conform with the evidence.
It is the view of the Court that pursuant to the above-mentioned rule and in light of
the decisions cited, the trial court should not be precluded from awarding an
amount higher than that claimed in the pleading notwithstanding the absence of
the required amendment. But it is upon the condition that the evidence of such
higher amount has been presented properly, with full opportunity on the part of the
opposing parties to support their respective contentions and to refute each other's
evidence.
The failure of a party to amend a pleading to conform to the evidence adduced
during trial does not preclude an adjudication by the court on the basis of such
evidence which may embody new issues not raised in the pleadings, or serve as
a basis for a higher award of damages. Although the pleading may not have been
amended to conform to the evidence submitted during trial, judgment may
nonetheless be rendered, not simply on the basis of the issues alleged but also
the basis of issues discussed and the assertions of fact proved in the course of
trial. The court may treat the pleading as if it had been amended to conform to the
evidence, although it had not been actually so amended. Former Chief Justice
Moran put the matter in this way:
When evidence is presented by one party, with the
expressed or implied consent of the adverse party, as to
issues not alleged in the pleadings, judgment may be
rendered validly as regards those issues, which shall be
considered as if they have been raised in the pleadings.
There is implied consent to the evidence thus presented
when the adverse party fails to object thereto.
Clearly, a court may rule and render judgment on the basis of the evidence before
it even though the relevant pleading had not been previously amended, so long as
no surprise or prejudice is thereby caused to the adverse party. Put a little
differently, so long as the basis requirements of fair play had been met, as where
litigants were given full opportunity to support their respective contentions and to
object to or refute each other's evidence, the court may validly treat the pleadings
as if they had been amended to conform to the evidence and proceed to
adjudicate on the basis of all the evidence before it.
In the instant case, inasmuch as the petitioner was afforded the opportunity to refute and object to the
evidence, both documentary and testimonial, formally offered by private respondent, the rudiments of fair
play are deemed satisfied. In fact, the testimony of Reynaldo Flores was put under scrutiny during the
course of the cross-examination. Under these circumstances, the court acted within the bounds of its
jurisdiction and committed no reversible error in awarding actual damages the amount of which is higher
than that prayed for. Verily, the lower court's actuations are sanctioned by the Rules and supported by
jurisprudence.
Similarly, we affirm the grant of exemplary damages although the amount of Five Million Pesos
(P5,000,000.00) awarded, being excessive, is subject to reduction. Exemplary or corrective damages are
imposed, by way of example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages. 51 Considering its purpose, it must be fair and reasonable in every
case and should not be awarded to unjustly enrich a prevailing party. 52 In our view, an award of
P50,000.00 as exemplary damages in the present case qualifies the test of reasonableness.
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The decision of the
Court of Appeals is hereby AFFIRMED with MODIFICATION of the amount awarded as exemplary
damages. According, petitioner is hereby ordered to pay private respondent the sum of P99,000,000.00
as actual or compensatory damages; P50,000.00 as exemplary damage and the costs of suit.
SO ORDERED.
G.R. No. 164521 December 18, 2008
ALLANDALE SPORTSLINE, INC., AND MELBAROSE R. SASOT, petitioners,
vs.
THE GOOD DEVELOPMENT CORPORATION, respondent.
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
May 15, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 59475 which dismissed the
petition of Allandale Sportsline, Inc. and Melbarose R. Sasot from the January 13, 1998 Decision 2 of the
Regional Trial Court (RTC) of Pasig City, Branch 158 in Civil Case No. 61053; and the June 12, 2004 CA
Resolution3 which denied petitioners’ motion for reconsideration.
The relevant facts are as follows:
Allandale Sportsline, Inc. (ASI) obtained a loan of P204,000.00 from The Good Development Corp.
(GDC) under a Promissory Note signed by Melbarose R. Sasot (Melbarose) and Allandale R. Sasot
(Allandale), President and Vice-President, respectively, of ASI, with Theresa L. Manipon (Manipon) as
one of three co-makers.4 The Promissory Note provides that the loan is payable in daily equal
installments of P2,000.00 with interest at the rate of 26.002% per annum. In case of default in the
payment of any installment, the entire balance of the obligation shall become immediately due and
payable, and subject to liquidated penalty/ collection charge equivalent to 2% of the principal.5
To provide additional security, ASI and Melbarose executed in favor of GDC a Deed of Mortgage 6 in
which they acceded that:
xxxx should the MORTGAGORS fail to comply with any of the terms of the promissory note
and this mortgage contract, the MORTGAGEE shall automatically have the absolute right
without need of prior notice or demand to forthwith judicially or extrajudicially
foreclose this mortgage and proceed against all or any of the mortgaged rights, interests
and properties for the full satisfaction of the MORTGAGORS' entire obligation to the
MORTGAGEE and, in such event, the MORTGAGORS shall be further liable to the
MORTGAGEE in the same judicial or extrajudicial foreclosure proceedings for payment of
attorney's fees in an amount equivalent to twenty five (25%) per cent of the unpaid
indebtedness but in no case less that Five hundred pesos (500.00); liquidated damages in an
amount equivalent to twenty-five (25%) percent of said outstanding obligation and all the
expenses and costs incidental to the above proceeding xxx. 7 (Emphasis supplied)
The properties subject of the mortgage are itemized in an inventory attached to the deed. They include:
List A -- all the merchandise and stocks in trade found in the commercial establishment owned by ASI
and Melbarose at #514 M.V. delos Santos St., Sampaloc, Manila, valued at P100,000.00; List B -- all the
furniture, fixtures, appliances, equipment and other personal property found in said business
establishment, valued at P3,500.00; and List C -- one Toyota Corona 2DR. HT. with Motor No. 18R-
1474348, valued at P40,000.00 and one Toyota Corolla 4DR. SDN with Motor No. 4K-5872110, valued
at P35,000.00.8
On June 24, 1991, GDC demanded that Melbarose pay the unpaid account of P179,000.00 or surrender
the mortgaged chattels within five days from notice.9
When no payment was made, GDC filed with the RTC a Complaint 10 for Replevin and/or Sum of Money
with Damages against ASI, Melbarose, Manipon, Florante Edrino and John Doe. 11 It is significant that
plaintiff GDC prayed for alternative reliefs, to wit:
WHEREFORE, for all the foregoing it is most respectfully prayed of this Honorable Court that:
1. A Writ of Replevin be issued ordering the seizure of the above described chattels or
personal property with all the accessories or equipments and directing their transfer to
Plaintiff for the purposes of foreclosure &/or transfer in accordance with the law to satisfy
Defendants' obligation in favor of Plaintiff; and
2. After due notice and trial:
a. to enforce said seizure and Plaintiff's right over aforedescribed chattels and/or
personal property; and
b. to order Defendants to pay Plaintiff jointly and severally the sum of P43,750.00
as and for attorney's fees and the sum equivalent to 25% of the obligation as and
for liquidated damages, plus other expenses of litigation and costs of suit.
On the Alternative Cause of Action, in the event that manual delivery of said chattels or
personal property cannot be obtained for some reason or another, to render judgment
ordering Defendants to pay plaintiff, jointly and severally as follows:
1. The sum of P175,000.00 plus interest thereon at 26.002% per annum from date of maturity
until said sum shall have been fully paid.
2. The sum of P43,750.00 as and for Attorney's fees, the sum equivalent to 25% of the
obligation as and for liquidated damages, such other expenses of litigation and costs of suit. 12
The RTC issued a Writ of Replevin,13 and by virtue thereof, the Sheriff seized and delivered to GDC only
one unit of Toyota Corona with Motor No. 18R-1474348 and two appliances. 14
On December 2, 1991, GDC filed an Amended Complaint to include in its application for replevin the
items under List A.15 After admitting the Amended Complaint, the RTC issued an Alias Writ of
Replevin16 over the items in List A, and, by virtue thereof, the Sheriff seized and delivered to GDC the
assorted items enumerated therein.17
It appears that a Second Alias Writ of Replevin18 was issued over one unit Toyota Corolla with Motor No.
4K-5872110, but the records do not indicate that the Sheriff made a return on the writ.
Meanwhile, ASI and Melbarose filed their Answer with Counterclaim. 19 They claimed that their loan
obligation to GDC was only for P200,000.00, and after deducting P18,000.00, which amount was
retained by GDC as advanced interest payment, and P29,000.00, which represents payments made from
June 4, 1991 to July 8, 1991, their unpaid obligation was only P171,000.00;20 that they repeatedly
tendered payment of this amount, but GDC rejected their efforts for no valid reason; that the
unreasonable refusal of GDC to accept their tender of payment relieved them of their loan
obligation;21 that its Complaint being obviously without merit, GDC should be held liable to them for
damages.22
Manipon filed a separate Answer in which she did not deny the authenticity of her signature on the
Promissory Note, but argued that she did not knowingly or voluntarily sign the instrument as a co-maker,
for at that time she was under the impression that the instrument she was signing was her own loan
application with GDC.23
In its Pre-Trial Order dated May 22, 1992, the RTC identified only these issues: (a) whether GDC was
entitled to collect P175,000.00, as well as the interests, attorney's fees and other expenses and costs; (b)
whether ASI and Melbarose made a valid tender of payment; (c) whether Manipon was a real party-in-
interest; and (d) whether the prevailing party was entitled to damages. 24
However, it is significant that at the trial that ensued, GDC disclosed that after it obtained possession of
the properties subject of the writs of replevin, it caused the auction sale of some of them and realized
proceeds amounting to P78,750.00.
While there is no certificate of sale in the records of the case, respondent's witness Leonila Buenviaje
testified thus:
ATTY. MAMARIL:
xxxx
Q - In this case, Miss witness, you were able to seize by way of a writ of replevin some
properties of the defendants. What did you do with these properties?
A - It was being sold by auction sale.
Q - Could you tell this Honorable Court if the auction sale pushed through?
A - Yes, sir.
Q - How much were you able to realize from the auction sale?
xxxx
A - We had pulled amounting to P55,050.00. The Karaoke – P3,200.00; the t.v.
- P500.00; and athletic uniforms amounting to P20,000.00.
Q - So, all in all how much could that be?
xxxx
A - More than P78,000.00. I think P78,750.00.25
On cross-examination, the same witness further described the auction sale:
ATTY. QUINONES:
xxxx
Q - Are you sure that these has been sold already, Miss Buenviaje?
A - Yes, sir.
Q - When was it sold?
A - I forgot the exact date.
Q - Do you have any document that those items were already sold?
A - We have a certificate of sale from the Sheriff.
xxxx
Q - And the car Toyota Corona was also seized and sold?
A - Yes, sir.
Q - And in turn you were able to sell it to a third party?
A - Yes, sir.
Q - And that car was sold already in the amount of P56,000.00, is that correct?
 A - P55,000.00.26
Moreover, GDC presented to the RTC a Statement of Account dated August 24, 1992, which indicated
that the total outstanding balance of the loan obligation of ASI and Melbarose was reduced
to P191,111.82 after the proceeds of the auction sale conducted on June 19, 1992 in the amount
of P78,750.00 was deducted from the earlier balance of P266,126.17.27
The RTC rendered a Decision, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, judgment is rendered in favor of the plaintiff Good
Development Corporation against defendants Melbarose Sasot, Allandale Sportsline Inc., and
Ma. Theresa Manipon ordering them to pay the plaintiff jointly and severally the amount
of P269,611.82 plus legal interest thereon effective to date until the full amount is fully
paid, and 25% of the total amount due as liquidated damages.
SO ORDERED.28 (Emphasis supplied)
ASI, Sasot and Manipon appealed to the CA, which rendered the Decision assailed herein, to wit:
WHEREFORE, premises considered, the instant appeal is DENIED. The assailed decision of
the RTC of Pasig City, Branch 158 in Civil Case No. 61053 is hereby AFFIRMED.
SO ORDERED. 29
Their Motion for Reconsideration was also denied by the CA. 30
Only ASI and Sasot (petitioners) took the present recourse, raising the following issues:
I. Whether or not petitioners’ check payment of Php171,000.00, PCIB Check No. 851688, to
cover the total balance of their loan to respondent, became a valid tender of payment by
virtue of the respondent’s acceptance thereof;
II. Whether or not the "parol evidence rule" applies on the promissory note in question when
the co-makers thereon are total strangers to one another;
III. Whether or not petitioners are entitled to the return of their properties pursuant to Section
9, Rule 60 of the Rules of Court.
IV. Whether or not there is legal basis in the award of liquidated damages. 31
The second issue deserves scant consideration for lack of basis. Manipon did not join in the petition.
Hence, the finding of the RTC, as affirmed by the CA, that she was a co-maker of Promissory Note and a
real party-in-interest is already final and conclusive. Petitioners cannot now question this finding by
raising the defense that Manipon signed the promissory note without knowledge of the nature of her
liability under the instrument. Such defense is personal to Manipon and cannot be invoked by petitioners,
unless it is shown that their interests are so interwoven with
32
and dependent on Manipon’s as to be inseparable. However, in their pleadings, petitioners do not deny
the authenticity and due execution of the Promissory Note, whereas Manipon has maintained that said
instrument was not duly executed; hence, their defenses are clearly separate and distinct.
Only three issues are left to be resolved.
Anent the first issue, petitioners contend that they were relieved of their obligation to pay GDC
(respondent) when they made several attempts to tender payment but respondent refused to accept
them without any valid reason. Petitioners claim that the first tender of payment was made on July 3,
1991 when petitioner Sasot sent respondent a PCIB check postdated October 31, 1991 in the amount
of P171,000.00.33 Respondent rejected the check, citing that the amount was insufficient for, as of July 4,
1991, the balance of the principal loan was P175,000.00, not P171,000.00; and its maturity was
September 13, 1991, not October 31, 1991.34
On October 15, 1997, petitioners tendered payment of P171,000.00 in cash,35 but respondent refused to
accept it due to the insufficiency of the amount.36 Instead, respondent sent petitioners a Statement of
Account dated October 29, 1991, indicating that as of October 15, 1991 the total balance due
was P228,071.61.37
On October 29, 1991, petitioners tendered cash payment of P174,986.96,38 but respondent still refused to
accept it for insufficiency of the amount. 39
The question then is whether petitioners’ tender of payment and respondent’s refusal thereof discharged
petitioners from their obligation.
Tender of payment, without more, produces no effect; rather, tender of payment must be followed by a
valid consignation in order to produce the effect of payment and extinguish an obligation. 40
Tender of payment is but a preparatory act to consignation. It is the manifestation by the debtor of a
desire to comply with or pay an obligation. If refused without just cause, the tender of payment will
discharge the debtor of the obligation to pay but only after a valid consignation of the sum due shall have
been made with the proper court.41
Consignation is the deposit of the proper amount with a judicial authority, before whom the debtor must
establish compliance with the following mandatory requirements: (1) there was a debt due; (2) the
consignation of the obligation had been made because the creditor to whom tender of payment was
made refused to accept it, or because he was absent or incapacitated, or because several persons claim
to be entitled to receive the amount due, or because the title to the obligation has been lost; (3) previous
notice of the consignation had been given to the person interested in the performance of the obligation;
(4) the amount due was placed at the disposal of the court; and (5) after the consignation had been
made, the person interested was notified thereof. Failure to prove any of these requirements is enough
ground to render a consignation ineffective. 42
Petitioners did not allege or prove that after their tender of payment was refused by respondents, they
attempted or pursued consignation of the payment with the proper court. Their tender of payment not
having been followed by a valid consignation, it produced no effect whatsoever, least of all the
extinguishment of the loan obligation. Therefore, the first issue of the validity or invalidity of their tender of
payment is completely moot and academic, for either way the discussion will go, it will lead to no other
conclusion but that, without an accompanying valid consignation, the tender of payment did not result in
the payment and extinguishment of the loan obligation. The Court cannot take cognizance of such a
purely hypothetical issue.43
The third and fourth issues are interrelated because their resolution depends on the nature of the remedy
which respondent actually adopted.
As emphasized at the outset, the reliefs respondent prayed for in its Complaint and Amended Complaint
are in the alternative: delivery of the mortgaged properties preparatory to foreclosure or payment of the
unpaid loan.44
Moreover, after respondent acquired possession of the mortgaged properties through the writs of
replevin, it caused the auction sale of assorted sports outfits, one unit Sansio Karaoke, one unit Sony T.V.
Set and one unit Toyota Corona, and earned proceeds amounting to P78,750.00.45 While it appears that
respondent failed to obtain the other personal properties covered by the Deed of Mortgage and the writs
of replevin, there is no doubt that it had effectively elected the remedy of extra-judicial foreclosure of the
mortgage security over the remedy of collection of the unpaid loan.
The RTC was aware that respondent had elected one remedy. In its Decision, it cited the fact that some
of the mortgaged properties which were delivered to respondent by means of the Writs of Replevin had
been sold on auction, and acknowledged that the proceeds from said auction sale should be deducted
from the loan account of petitioners. The RTC noted:
The seized pieces of personal properties by virtue of the writ of replevin and alias writ of
replevin were sold in an auction sale where [respondent] realized P78,750.00 from the sale.46
xxxx
[Respondent] realized P78,500.00[sic] from the auction sale of the seized personal property
by virtue of the writ of replevin. The amount realized from the auction sale is clearly
insufficient to cover the unpaid balance, interest, attorney’s fees, costs of the suit and other
expenses incidental to litigation. This amount was deducted from the [petitioners’] total
obligation in the amount of P269,111.82 [sic] resulting in the net total obligation
of P191,111.82 as of August 24, 1992.47 (Emphasis supplied)
Yet, it is curious that in the dispositive portion of its Decision, the RTC granted respondent the remedy of
collection of sum of money. The dispositive portion of the RTC Decision is reproduced below for
emphasis:
WHEREFORE, in view of the foregoing, judgment is rendered in favor of the [respondent]
Good Development Corporation against [petitioners] Melbarose Sasot, Allandale Sportsline
Inc., and Ma. Theresa Manipon ordering them to pay the [respondent] jointly and severally the
amount of P269,611.82 [sic] plus legal interest thereon effective to date until the full amount
is fully paid, and 25% of the total amount due as liquidated damages.
SO ORDERED.
Not only is there no more reference to the conduct of the auction sale of the mortgaged properties, there
is also no longer any acknowledgment that the proceeds earned from the auction sale should be
deducted from the total unpaid loan.
This is a glaring error.
In Bachrach Motor Co., Inc. v. Icarangal,48 the Court held that the remedies available to any mortgage
creditor are alternative, not cumulative or successive, 49 viz.:
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 non-payment 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 rules above stated, cannot split up his single cause of action by filing a complaint
for payment of the debt, and thereafter another complaint for 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. (Emphasis supplied)
By causing the auction sale of the mortgaged properties, respondent effectively adopted and pursued the
remedy of extra-judicial foreclosure,50 using the writ of replevin as a tool to get hold of the mortgaged
properties.51 As emphasized in Bachrach, one effect of respondent’s election of the remedy of extra-
judicial foreclosure is its waiver of the remedy of collection of the unpaid loan.
Therefore, there was no more legal basis for the RTC to grant respondent the relief of collecting from
petitioners "the amount of Php269,611.82 [sic] plus legal interest thereon effective to date until the full
amount is fully paid," nor for the CA to affirm it.
However, another effect of its election of the remedy of extra-judicial foreclosure is that whatever
deficiency remains after applying the proceeds of the auction sale to the total loan obligation may still be
recovered by respondent.52
But to recover any deficiency after foreclosure, the rule is that a mortgage creditor must institute an
independent civil action.53 However, in PCI Leasing & Finance, Inc. v. Dai54 the Court held that the claim
should at least be included in the pre-trial brief. In said case, the mortgage-creditor had foreclosed on the
mortgaged properties and sold the same at public auction during the trial on the action for damages with
replevin. After judgment on the replevin case was rendered, the mortgage-creditor filed another case, this
time for the deficiency amount. The Court dismissed the second case on the ground of res judicata,
noting that:
Petitioner ignores the fact that it prayed in the replevin case that in the event manual delivery
of the vessel could not be effected, the court "render judgment in its favor by ordering [herein
respondents] to pay x x x the sum of P3,502,095.00 plus interest and penalty thereon from
October 12, 1994 until fully paid as provided in the Promissory Note."
Since petitioner had extrajudicially foreclosed the chattel mortgage over the vessel
even before the pre-trial of the case, it should have therein raised as issue during the
pre-trial the award of a deficiency judgment. After all, the basis of its above-stated
alternative prayer was the same as that of its prayer for replevin – the default of respondents
in the payment of the monthly installments of their loan. But it did not. (Emphasis supplied)
The question in the present case therefore is whether respondent instituted the proper action for the
deficiency amount or raised its claim at the pre-trial.
An examination of the Complaint and Amended Complaint reveals that respondent did not allege any
deficiency account. Nor did it raise the matter in its Pre-Trial Brief. 55 This is only to be expected because
the auction sale of the properties was apparently conducted on June 19, 1992, long after it filed its
Complaint/Amended Complaint and Pre-trial Brief.
However, the Court notes that evidence on the deficiency amount was duly presented by respondent and
examined by petitioners. Respondent’s employee Leonila Buenviaje testified that the proceeds
respondent earned from the auction sale of the mortgaged properties amounted to
only P78,750.00.56 Another employee, Grace Borja, testified that after applying the proceeds of P78,750
to the unpaid account of petitioners, there remained a deficiency of P91,111.82.57 Documentary evidence
of the deficiency amount was also presented in the form of the August 24, 1992 Statement of Account
marked Exhibits "F-1" and "F-2."58 Thus, an independent action to recover the deficiency will merely entail
the presentation of the same evidence of the same claim, in the process taxing the time and resources of
the parties and the courts.59 Therefore, in the higher interest of justice and equity, the Court takes it upon
itself to grant the claim of respondent to the deficiency amount of P191,111.82, as stated in its August 24,
1992 Statement of Account.
Yet another effect of the election by respondent of the remedy of extra-judicial foreclosure is the
inapplicability of Section 9, Rule 60 of the Rules of Court, which states:
Section 9. Judgment. – After trial of the issues, the court shall determine who has the right of
possession to and the value of the property and shall render judgment in the alternative for
the delivery thereof to the party entitled to the same, or for its value in case delivery can not
be made and also for such damages as either party may prove, with costs.
As already discussed, the properties of petitioners which were seized by virtue of the Writs of Replevin
were extra-judicially foreclosed and sold at public auction by respondent in the exercise of its absolute
right under the contract entered into by the parties, without need of prior notice or demand to forthwith
judicially or extra-judicially foreclose this mortgage and proceed against all or any of the mortgaged
rights, interests and properties for the full satisfaction of the mortgagors' entire obligation to the
mortgagee.
Finally, under the same Deed of Mortgage, it is provided that in case of default, petitioners shall be liable
for liquidated penalty/collection charge in the amount equivalent to "twenty-five (25%) percent of said
outstanding obligation." It being settled that petitioners defaulted on their loan obligation to respondent,
the former are liable for liquidated damages.
WHEREFORE, the Court PARTLY GRANTS the petition and MODIFIES the May 15, 2003 Decision and
June 12, 2004 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 59475, as follows:
1. The award in the January 13, 1998 Decision of the Regional Trial Court of Pasig City, Branch 158 in
Civil Case No. 61053, in favor of respondent, in "the amount of Php269,611.82 plus legal interest thereon
effective to date until the full amount is fully paid" is DELETED;
2. Respondent The Golden Development Corporation is AWARDED P191,111.82 as the deficiency
amount subject to legal interest effective September 12, 1997 up to the date of full payment;
3. Respondent is AWARDED 25% of the deficiency amount as liquidated damages.
The claim of petitioners Allandale Sportsline, Inc. and Melbarose R. Sasot to recover properties subject of
the writs of replevin is DENIED.
G.R. No. L-16797 February 27, 1963
RODRIGO ENRIQUEZ, ET AL., plaintiffs-appellees,
vs.
SOCORRO A. RAMOS, ET AL., defendants-appellants.
Direct appeal on points of law from a decision of the Court of First Instance of Rizal in its Civil Case No.
Q-4232.
The record is to the effect that on 24 November 1958, Rodrigo Enriquez and the spouses Urbano Dizon
and Aurea Soriano de Dizon sold to Socorro A. Ramos, by a notarial deed of even date, eleven (11)
parcels of land situated in Bago Bantay, Quezon City, and covered by their corresponding certificates of
title, for the stipulated price of P101,000.00. The vendee paid P5,000.00 down, P2,500.00 in cash, and
P2,500.00 by a check drawn against the Philippine National Bank, and agreed to satisfy the balance of
P96,000.00 within ninety (90) days. To secure the said balance, the vendee Socorro A. Ramos, in the
same deed of sale, mortgaged the eleven parcels in favor of the vendors. By way of additional security,
Socorro A. Ramos, as attorney-in-fact of her children, Enrique, Antonio, Milagros, and Lourdes, and as
judicial guardian of her minor child Angelita Ramos, executed another mortgage on Lot No. 409 of the
Malinta Estate.
Because of the vendee-mortgagor's failure to comply with some conditions of the mortgage, this action
for foreclosure of the mortgage was filed by the vendors-mortgagees in the court below, on 29 April 1959.
Defendant Socorro Ramos moved to dismiss, alleging that the plaintiffs previously had filed action
against her in the Court of First Instance of Manila on 24 February 1959 for the recovery of P2,500.00
paid by check as part of the down payment on the price of the mortgaged lands; that at the time this first
suit was filed, the mortgage debt was already accrued and demandable; that plaintiffs were, therefore,
guilty of splitting a single cause of action, and under section 4 of Rule 2 of the Rules of Court, the filing of
the first action for P2,500.00 was a defense that could be pleaded in abatement of the second suit. Upon
opposition by the plaintiffs, the Court of First Instance of Quezon City denied the motion to dismiss; but
defendant Ramos repleaded the averments as a special defense in her answer. After trial, on 16
December 1959, the Court of First Instance of Quezon City rendered judgment against defendant
Ramos; ordered her to pay P96,000.00, with 12% interest from 24 February 1959 until payment, 10% of
the amount due as attorney's fees, and the costs of the suit; and further decreed the foreclosure sale of
the mortgaged properties in case of non-payment within ninety (90) days.
Socorro Ramos appealed directly to this Court, and here insists that the action should be dismissed on
account of the alleged splitting of appellee's cause of action, and that the obligation not having fixed a
period, although one was intended, the court below should have set first a date of maturity before
ordering payment or foreclosure.
We find no merit in the appeal.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved
by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not
covered by this stipulation of facts. 1äwphï1.ñët
An examination of the first complaint filed against appellant in the Court of First Instance of Manila shows
that it was based on appellants' having unlawfully stopped payment of the check for P2,500.00 she had
issued in favor of appellees; while the complaint in the present action was for non-payment of the
balance of P96,000.00 guaranteed by the mortgage. The claim for P2,500.00 was, therefore, a distinct
debt not covered by the security; and since the mortgage was constituted on lands situated in Quezon
City, the appellees could not ask for its foreclosure in the Manila courts. The two causes of action being
different, section 4 of Rule 2 does not apply.
On the second assignment of error: the stipulation in the mortgage contract that the obligation for
P96,000.00 was to be —
without interest, payable within ninety (90) days from this date, provided that in case of
default it shall bear interest at the rate of 12% per annum,
clearly fixes a date of maturity, the stipulated twelve per cent in case of default being nothing more than a
penalty, designed to induce the debtor to pay on or before the expiration of the ninety (90) days. Hence,
there was no call upon the court to set another due date.
Finding no error in the judgment appealed from, the same is affirmed, with costs against appellants.
G.R. No. L-26266 December 29, 1972
RAMON A. TARNATE, petitioner-appellant,
vs.
LUCILO U. GARCIA and The Hon. VICTORIANO H. ENDAYA as presiding Judge of the Municipal
Court of Batangas, respondents-appellees.
Appeal from an order of the Court of First Instance of Batangas denying a petition to restrain the
Municipal Court of Batangas, Batangas, from proceeding with its Civil Case No. 1091 on the ground of
pendency of another action between the same parties for the same cause.
On 17 August 1964 herein respondent Lucilo U. Garcia filed a complaint for forcible entry against herein
petitioner Ramon A. Tarnate in the Municipal Court of Batangas, Batangas, which complaint was
docketed as Civil Case No. 1083, alleging inter alia that:
2. — On August 2, 1964 plaintiff was and, for some time prior thereto, had been in
possession of a strip of land situated in the Municipality of Batangas, Province of
Batangas and known as the old or abandoned bed of the Calumpang River, said
strip of land being graphically indicated on a sketch with two parallel lines in blue
ink. Copy of the sketch is hereto attached and made integral part hereof as Annex
"A";
3. — On August 2, 1964 the defendant, without the knowledge and consent of the
plaintiff, unlawfully, surreptitiously and forcibly, and with the use of armed men,
entered upon and took possession of aforementioned land and placed barbed
wire fence along the western side thereof, said barbed wire fence being indicated
graphically with broken lines in red ink between points "X" and "Y" on the sketch
marked Annex "A", thereby illegally depriving plaintiff of possession of said land
and preventing him from hauling therefrom truckloads of sand, so that, unless
restrained by the Court, the defendant will continue to commit further acts of
dispossession and unwarranted intrusion into the land in question, to the damage
and prejudice of the plaintiff;
On 10 September 1964 respondent Garcia filed another complaint for forcible entry against the same
defendant in the same court, which was docketed as Civil Case No. 1091, alleging inter alia:
2. That on August 2, 1964 plaintiff was and, for some time prior thereto, had been
in lawful and peaceful possession of strips of land in the Municipality of Batangas,
 Province of Batangas and known as the old or abandoned bed of the Calumpang
River, said strips of land being graphically indicated on a sketch with two parallel
lines in blue ink, which is situated east of lots 57, 59 and 60 of the Batangas
cadastre. Copy of the sketch is hereto attached and made integral part hereof as
Annex "A";
3. That plaintiff's possession over a portion of said strips of land more specifically
that portion situated east of Lot 57 is in consequence of his ownership thereof and
as regards those portions east of Lots 59 and 60, supra, as LESSEE thereof;
4. That on August 2, 1964 the defendant, by means of force, strategy and stealth
and with the use of armed men, unlawfully, surreptitiously and forcibly, entered
upon and took possession of the aforementioned strips of land, placed thereon a
barbed wire fence, the same being indicated graphically with broken lines in red
ink between points of "X" and "Y"on the sketch marked Annex "A", thereby
unlawfully and illegally deprived plaintiff of the possession of said strips of land
and prevented him from hauling therefrom truckloads of sand and since the date
defendant has remained in illegal possession of the premises and, up to the
present, still retain such unlawful possession thereof, to the damage and
prejudice of plaintiff.
On 28 October 1964 Tarnate moved to dismiss the second case (No. 1091) on the ground of pendency of
another action between the same parties for the same cause. Garcia opposed the motion.
On 23 December 1964 the municipal court denied the motion to dismiss because it did not find the
ground for dismissal to be indubitable.
Having failed to secure a reconsideration, petitioner Tarnate filed a petition for prohibition
and mandamus against the municipal court of Batangas and Lucilo U. Garcia in the Court of First
Instance of Batangas (Special Civil Case No. 1033), praying that the order of denial by the municipal
court be annulled and that the said court be commanded not to give due course to, but to order the
dismissal of Civil Case No. 1091.
After trial, where evidence was introduced and stipulations of facts were made by the parties, the Court of
First Instance of Batangas rendered judgment on 12 January 1966 denying the writ prayed for.
The present case before Us is a direct appeal from the aforesaid judgment of the Court of First Instance
of Batangas. The said court gave due course to the appeal and ordered the transmittal of the original
records on 26 April 1966, or before the effectivity of Republic Act 5440.
The issue here is whether or not the municipal court abused its discretion in denying the motion to
dismiss the second complaint because the ground therefor, namely, pendency of another action between
the same parties for the same cause, was not indubitable. The court of first instance held that there was
no abuse of discretion and that if the municipal court committed an error it was an error of judgment,
which was not correctible by certiorari or prohibition.
Why two separate complaints instead of only one were filed by herein private respondent is explained by
him in his opposition to the petitioner's motion to dismiss in the municipal court, thus:
We wish to state that before plaintiff instituted the first action, he made a cursory
inspection of the fence illegally introduced by defendant on the premises in
dispute. Believing that the said fence covers only Lot 58, Batangas Cadastre, of
which he is the administrator of his son Adrian Garcia, be instituted CIVIL CASE
NO. 1083 against the defendant....
However, a couple of weeks after the institution of the first case or specifically on
September 1, 1964, plaintiff engaged the services of a Private Land Surveyor to
undertake a relocation survey of Lots 57, 58, 59 and 60, Batangas, cadastre, in
order to determine the correct boundaries of said lots in relation to the fence
illegally constructed by defendant RAMON A. TARNATE on the abandoned river
bed in question. The result of the relocation survey was that shown in the
approved relocation plan showing that the said fence not only intruded upon Lot
85, Batangas Cadastre which is the subject matter of the first case, but also
encroaches upon Lots 57, 59 and 60, Batangas Cadastre, which are the subject
matter of the case at bar. (Emphasis supplied)
In the court of first instance the parties stipulated in the course of the trial that Civil Case No. 1083
referred to "that portion of the old bed of the Calumpang River east of Lot 58" and that Civil Case No.
1091 referred to the bed of the "old course of the Calumpang River east of Lot 57, 59 and 60."
While from the strictly technical viewpoint there was a splitting of the cause of action in pursuing the
same remedy in two separate complaints notwithstanding the fact that the alleged forcible entry
constituted one and the same act, still a realistic and practical approach dictated the action taken by the
municipal court. It should be remembered that the first complaint was commenced on 17 August 1964
and had not yet been tried when the second was filed about three weeks later. The two cases could be
tried together as one, or the second complaint could be treated as an amendment of the first. Either way
the entire controversy between the parties could be judicially settled, disregarding unessential procedural
niceties, especially in the light of the reasonable explanation offered by the plaintiff below.
WHEREFORE, the order appealed from is hereby affirmed, with costs against the appellant.
G.R. No. 182435 August 13, 2012
LILIA B. ADA, LUZ B. ADANZA, FLORA C. BA YLON, REMO BA YLON, JOSE BA YLON, ERIC BA
YLON, FLORENTINO BA YLON, and MA. RUBY BA YLON, Petitioners,
vs.
FLORANTE BA YLON, Respondent.
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. 47096 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
land10 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 Pleading17 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
On appeal, the CA rendered a Decision24 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.
G.R. No. L-64013 November 28, 1983
UNION GLASS & CONTAINER CORPORATION and CARLOS PALANCA, JR., in his capacity as
President of Union Glass & Container Corporation, petitioners,
vs.
THE SECURITIES AND EXCHANGE COMMISSION and CAROLINA HOFILEÑA, respondents.
This petition for certiorari and prohibition seeks to annul and set aside the Order of the Securities and
Exchange Commission, dated September 25, 1981, upholding its jurisdiction in SEC Case No. 2035,
entitled "Carolina Hofileña, Complainant, versus Development Bank of the Philippines, et al.,
Respondents."
Private respondent Carolina Hofileña, complainant in SEC Case No. 2035, is a stockholder of Pioneer
Glass Manufacturing Corporation, Pioneer Glass for short, a domestic corporation engaged in the
operation of silica mines and the manufacture of glass and glassware. Since 1967, Pioneer Glass had
obtained various loan accommodations from the Development Bank of the Philippines [DBP], and also
from other local and foreign sources which DBP guaranteed.
As security for said loan accommodations, Pioneer Glass mortgaged and/or assigned its assets, real and
personal, to the DBP, in addition to the mortgages executed by some of its corporate officers over their
personal assets. The proceeds of said financial exposure of the DBP were used in the construction of a
glass plant in Rosario, Cavite, and the operation of seven silica mining claims owned by the corporation.
It appears that through the conversion into equity of the accumulated unpaid interests on the various
loans amounting to P5.4 million as of January 1975, and subsequently increased by another P2.2 million
in 1976, the DBP was able to gain control of the outstanding shares of common stocks of Pioneer Glass,
and to get two, later three, regular seats in the corporation's board of directors.
Sometime in March, 1978, when Pioneer Glass suffered serious liquidity problems such that it could no
longer meet its financial obligations with DBP, it entered into a dacion en pago agreement with the latter,
whereby all its assets mortgaged to DBP were ceded to the latter in full satisfaction of the corporation's
obligations in the total amount of P59,000,000.00. Part of the assets transferred to the DBP was the glass
plant in Rosario, Cavite, which DBP leased and subsequently sold to herein petitioner Union Glass and
Container Corporation, hereinafter referred to as Union Glass.
On April 1, 1981, Carolina Hofileña filed a complaint before the respondent Securities and Exchange
Commission against the DBP, Union Glass and Pioneer Glass, docketed as SEC Case No. 2035. Of the
five causes of action pleaded therein, only the first cause of action concerned petitioner Union Glass as
transferee and possessor of the glass plant. Said first cause of action was based on the alleged illegality
of the aforesaid dacion en pago resulting from: [1] the supposed unilateral and unsupported
undervaluation of the assets of Pioneer Glass covered by the agreement; [2] the self-dealing indulged in
by DBP, having acted both as stockholder/director and secured creditor of Pioneer Glass; and [3] the
wrongful inclusion by DBP in its statement of account of P26M as due from Pioneer Glass when the
same had already been converted into equity.
Thus, with respect to said first cause of action, respondent Hofileña prayed that the SEC issue an
order:têñ.£îhqwâ£
1. Holding that the so called dacion en pago conveying all the assets of Pioneer
Glass and the Hofileña personal properties to Union Glass be declared null and
void on the ground that the said conveyance was tainted with.têñ.£îhqwâ£
A. Self-dealing on the part of DBP which was acting both
as a controlling stockholder/director and as secured
creditor of the Pioneer Glass, all to its advantage and to
that of Union Glass, and to the gross prejudice of the
Pioneer Glass,
B. That the dacion en pago is void because there was
gross undervaluation of the assets included in the so-
called dacion en pago by more than 100% to the prejudice
of Pioneer Glass and to the undue advantage of DBP and
Union Glass;
C. That the DBP unduly favored Union Glass over another
buyer, San Miguel Corporation, notwithstanding the clearly
advantageous terms offered by the latter to the prejudice
of Pioneer Glass, its other creditors and so-called 'Minority
stockholders.'
2. Holding that the assets of the Pioneer Glass taken over by DBP and part of
which was delivered to Union Glass particularly the glass plant to be returned
accordingly.
3. That the DBP be ordered to accept and recognize the appraisal conducted by
1
the Asian Appraisal Inc. in 1975 and again in t978 of the asset of Pioneer Glass.
In her common prayer, Hofileña asked that DBP be sentenced to pay Pioneer Glass actual,
consequential, moral and exemplary damages, for its alleged illegal acts and gross bad faith; and for
DBP and Union Glass to pay her a reasonable amount as attorney's fees. 2
On April 21, 1981, Pioneer Glass filed its answer. On May 8, 1981, petitioners moved for dismissal of the
case on the ground that the SEC had no jurisdiction over the subject matter or nature of the suit.
Respondent Hofileña filed her opposition to said motion, to which herein petitioners filed a rejoinder.
On July 23, 1981, SEC Hearing Officer Eugenio E. Reyes, to whom the case was assigned, granted the
motion to dismiss for lack of jurisdiction. However, on September 25, 1981, upon motion for
reconsideration filed by respondent Hofileña, Hearing Officer Reyes reversed his original order by
upholding the SEC's jurisdiction over the subject matter and over the persons of petitioners. Unable to
secure a reconsideration of the Order as well as to have the same reviewed by the Commission En Banc,
petitioners filed the instant petition for certiorari and prohibition to set aside the order of September 25,
1981, and to prevent respondent SEC from taking cognizance of SEC Case No. 2035.
The issue raised in the petition may be propounded thus: Is it the regular court or the SEC that has
jurisdiction over the case?
In upholding the SEC's jurisdiction over the case Hearing Officer Reyes rationalized his conclusion
thus:têñ.£îhqwâ£
As correctly pointed out by the complainant, the present action is in the form of a
derivative suit instituted by a stockholder for the benefit of the corporation,
respondent Pioneer Glass and Manufacturing Corporation, principally against
another stockholder, respondent Development Bank of the Philippines, for alleged
illegal acts and gross bad faith which resulted in the dacion en pago arrangement
now being questioned by complainant. These alleged illegal acts and gross bad
faith came about precisely by virtue of respondent Development Bank of the
Philippine's status as a stockholder of co-respondent Pioneer Glass
Manufacturing Corporation although its status as such stockholder, was gained as
a result of its being a creditor of the latter. The derivative nature of this instant
action can also be gleaned from the common prayer of the complainant which
seeks for an order directing respondent Development Bank of the Philippines to
pay co-respondent Pioneer Glass Manufacturing Corporation damages for the
alleged illegal acts and gross bad faith as above-mentioned.
As far as respondent Union Glass and Container Corporation is concerned, its
inclusion as a party-respondent by virtue of its being an indispensable party to the
present action, it being in possession of the assets subject of the dacion en
pago and, therefore, situated in such a way that it will be affected by any judgment
thereon, 3
In the ordinary course of things, petitioner Union Glass, as transferee and possessor of the glass plant
covered by the dacion en pago agreement, should be joined as party-defendant under the general rule
which requires the joinder of every party who has an interest in or lien on the property subject matter of
the dispute. 4 Such joinder of parties avoids multiplicity of suits as well as ensures the convenient, speedy
and orderly administration of justice.
But since petitioner Union Glass has no intra-corporate relation with either the complainant or the DBP, its
joinder as party-defendant in SEC Case No. 2035 brings the cause of action asserted against it outside
the jurisdiction of the respondent SEC.
The jurisdiction of the SEC is delineated by Section 5 of PD No. 902-A as follows:têñ.£îhqwâ£
Sec. 5. In addition to the regulatory and adjudicative function of the Securities and
Exchange Commission over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and
devices, it shall have original and exclusive jurisdiction to hear and decide cases
involving:
a] Devices and schemes employed by or any acts, of the board of directors,
business associates, its officers or partners, amounting to fraud and
misrepresentation which may be detrimental to the interest of the public and/or
the stockholders, partners, members of associations or organizations registered
with the Commission
b] Controversies arising out of intra-corporate or partnership relations, between
and among stockholders, members or associates; between any or all of them and
the corporation, partnership, or association of which they are stockholders,
members or associates, respectively; and between such corporation, partnership
or association and the state insofar as it concerns their individual franchise or
right to exist as such entity;
c] Controversies in the election or appointments of directors, trustees, officers or
managers of such corporations, partnerships or associations.
This grant of jurisdiction must be viewed in the light of the nature and function of the SEC under the law.
Section 3 of PD No. 902-A confers upon the latter "absolute jurisdiction, supervision, and control over all
corporations, partnerships or associations, who are grantees of primary franchise and/or license or permit
issued by the government to operate in the Philippines ... " The principal function of the SEC is the
supervision and control over corporations, partnerships and associations with the end in view that
investment in these entities may be encouraged and protected, and their activities pursued for the
promotion of economic development. 5
It is in aid of this office that the adjudicative power of the SEC must be exercised. Thus the law explicitly
specified and delimited its jurisdiction to matters intrinsically connected with the regulation of
corporations, partnerships and associations and those dealing with the internal affairs of such
corporations, partnerships or associations.
Otherwise stated, in order that the SEC can take cognizance of a case, the controversy must pertain to
any of the following relationships: [a] between the corporation, partnership or association and the public;
[b] between the corporation, partnership or association and its stockholders, partners, members, or
officers; [c] between the corporation, partnership or association and the state in so far as its franchise,
permit or license to operate is concerned; and [d] among the stockholders, partners or associates
themselves.
The fact that the controversy at bar involves the rights of petitioner Union Glass who has no intra-
corporate relation either with complainant or the DBP, places the suit beyond the jurisdiction of the
respondent SEC. The case should be tried and decided by the court of general jurisdiction, the Regional
Trial Court. This view is in accord with the rudimentary principle that administrative agencies, like the
SEC, are tribunals of limited jurisdiction 6 and, as such, could wield only such powers as are specifically
granted to them by their enabling statutes. 7 As We held in Sunset View Condominium Corp. vs.
Campos, Jr.: 8têñ.£îhqwâ£
Inasmuch as the private respondents are not shareholders of the petitioner
condominium corporation, the instant cases for collection cannot be a 'controversy
arising out of intra-corporate or partnership relations between and among
stockholders, members or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members
or associates, respectively,' which controversies are under the original and
exclusive jurisdiction of the Securities & Exchange Commission, pursuant to
Section 5 [b] of P.D. No. 902-A. ...
As heretofore pointed out, petitioner Union Glass is involved only in the first cause of action of Hofileñas
complaint in SEC Case No, 2035. While the Rules of Court, which applies suppletorily to proceedings
before the SEC, allows the joinder of causes of action in one complaint, such procedure however is
subject to the rules regarding jurisdiction, venue and joinder of parties. 9 Since petitioner has no intra-
corporate relationship with the complainant, it cannot be joined as party-defendant in said case as to do
so would violate the rule or jurisdiction. Hofileñas complaint against petitioner for cancellation of the sale
of the glass plant should therefore be brought separately before the regular court But such action, if
instituted, shall be suspended to await the final outcome of SEC Case No. 2035, for the issue of the
validity of the dacion en pago posed in the last mentioned case is a prejudicial question, the resolution of
which is a logical antecedent of the issue involved in the action against petitioner Union Glass. Thus,
Hofileñas complaint against the latter can only prosper if final judgment is rendered in SEC Case No.
2035, annulling the dacion en pago executed in favor of the DBP.
WHEREFORE, the instant petition is hereby granted, and the questioned Orders of respondent SEC,
dated September 25, 1981, March 25, 1982 and May 28, 1982, are hereby set aside. Respondent
Commission is ordered to drop petitioner Union Glass from SEC Case No. 2035, without prejudice to the
filing of a separate suit before the regular court of justice. No pronouncement as to costs.
SO ORDERED.1äwphï1.ñët
G.R. No. L-66620 September 24, 1986
REMEDIO V. FLORES, petitioner,
vs.
HON. JUDGE HEILIA S. MALLARE-PHILLIPPS, IGNACIO BINONGCAL & FERNANDO
CALION, respondents.
The Court rules that the application of the totality rule under Section 33(l) of Batas Pambansa Blg. 129
and Section 11 of the Interim Rules is subject to the requirements for the permissive joinder of parties
under Section 6 of Rule 3 which provides as follows:
Permissive joinder of parties.-All persons in whom or against whom any right to
relief in respect to or arising out of the same transaction or series of transactions
is alleged to exist, whether jointly, severally, or in the alternative, may, except as
otherwise provided in these rules, join as plaintiffs or be joined as defendants in
one complaint, where any question of law or fact common to all such plaintiffs or
to all such defendants may arise in the action; but the court may make such
orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he
may have no interest.
Petitioner has appealed by certiorari from the order of Judge Heilia S. Mallare-Phillipps of the Regional
Trial Court of Baguio City and Benguet Province which dismissed his complaint for lack of jurisdiction.
Petitioner did not attach to his petition a copy of his complaint in the erroneous belief that the entire
original record of the case shall be transmitted to this Court pursuant to the second paragraph of Section
39 of BP129. This provision applies only to ordinary appeals from the regional trial court to the Court of
Appeals (Section 20 of the Interim Rules). Appeals to this Court by petition for review on certiorari are
governed by Rule 45 of the Rules of Court (Section 25 of the Interim Rules).
However, the order appealed from states that the first cause of action alleged in the complaint was
against respondent Ignacio Binongcal for refusing to pay the amount of P11,643.00 representing cost of
truck tires which he purchased on credit from petitioner on various occasions from August to October,
1981; and the second cause of action was against respondent Fernando Calion for allegedly refusing to
pay the amount of P10,212.00 representing cost of truck tires which he purchased on credit from
petitioner on several occasions from March, 1981 to January, 1982.
On December 15, 1983, counsel for respondent Binongcal filed a Motion to Dismiss on the ground of lack
of jurisdiction since the amount of the demand against said respondent was only P11,643.00, and under
Section 19(8) of BP129 the regional trial court shall exercise exclusive original jurisdiction if the amount
of the demand is more than twenty thousand pesos (P20,000.00). It was further averred in said motion
that although another person, Fernando Calion, was allegedly indebted to petitioner in the amount of
P10,212.00, his obligation was separate and distinct from that of the other respondent. At the hearing of
said Motion to Dismiss, counsel for respondent Calion joined in moving for the dismissal of the complaint
on the ground of lack of jurisdiction. Counsel for petitioner opposed the Motion to Dismiss. As above
stated, the trial court dismissed the complaint for lack of jurisdiction.
Petitioner maintains that the lower court has jurisdiction over the case following the "novel" totality rule
introduced in Section 33(l) of BP129 and Section 11 of the Interim Rules.
The pertinent portion of Section 33(l) of BP129 reads as follows:
... Provided,That where there are several claims or causes of action between the
same or different parties, embodied in the same complaint, the amount of the
demand shall be the totality of the claims in all the causes of action, irrespective
of whether the causes of action arose out of the same or different transactions. ...
Section 11 of the Interim Rules provides thus:
Application of the totality rule.-In actions where the jurisdiction of the court is
dependent on the amount involved, the test of jurisdiction shall be the aggregate
sum of all the money demands, exclusive only of interest and costs, irrespective
of whether or not the separate claims are owned by or due to different parties. If
any demand is for damages in a civil action, the amount thereof must be
specifically alleged.
Petitioner compares the above-quoted provisions with the pertinent portion of the former rule under
Section 88 of the Judiciary Act of 1948 as amended which reads as follows:
... Where there are several claims or causes of action between the same parties
embodied in the same complaint, the amount of the demand shall be the totality of
the demand in all the causes of action, irrespective of whether the causes of
action arose out of the same or different transactions; but where the claims or
causes of action joined in a single complaint are separately owned by or due to
different parties, each separate claim shall furnish the jurisdictional test. ...
and argues that with the deletion of the proviso in the former rule, the totality rule was reduced to clarity
and brevity and the jurisdictional test is the totality of the claims in all, not in each, of the causes of action,
irrespective of whether the causes of action arose out of the same or different transactions.
This argument is partly correct. There is no difference between the former and present rules in cases
where a plaintiff sues a defendant on two or more separate causes of action. In such cases, the amount
of the demand shall be the totality of the claims in all the causes of action irrespective of whether the
causes of action arose out of the same or different transactions. If the total demand exceeds twenty
thousand pesos, then the regional trial court has jurisdiction. Needless to state, if the causes of action are
separate and independent, their joinder in one complaint is permissive and not mandatory, and any cause
of action where the amount of the demand is twenty thousand pesos or less may be the subject of a
separate complaint filed with a metropolitan or municipal trial court.
On the other hand, there is a difference between the former and present rules in cases where two or
more plaintiffs having separate causes of action against a defendant join in a single complaint. Under the
former rule, "where the claims or causes of action joined in a single complaint are separately owned by or
due to different parties, each separate claim shall furnish the jurisdictional test" (Section 88 of the
Judiciary Act of 1948 as amended, supra). This was based on the ruling in the case of Vda. de Rosario
vs. Justice of the Peace, 99 Phil. 693. As worded, the former rule applied only to cases of permissive
joinder of parties plaintiff. However, it was also applicable to cases of permissive joinder of parties
defendant, as may be deduced from the ruling in the case of Brillo vs. Buklatan, thus:
 Furthermore, the first cause of action is composed of separate claims against
several defendants of different amounts each of which is not more than P2,000
and falls under the jurisdiction of the justice of the peace court under section 88 of
Republic Act No, 296. The several claims do not seem to arise from the same
transaction or series of transactions and there seem to be no questions of law or
of fact common to all the defendants as may warrant their joinder under Rule 3,
section 6. Therefore, if new complaints are to be filed in the name of the real party
in interest they should be filed in the justice of the peace court. (87 Phil. 519, 520,
reiterated in Gacula vs. Martinez, 88 Phil. 142, 146)
Under the present law, the totality rule is applied also to cases where two or more plaintiffs having
separate causes of action against a defendant join in a single complaint, as well as to cases where a
plaintiff has separate causes of action against two or more defendants joined in a single complaint.
However, the causes of action in favor of the two or more plaintiffs or against the two or more defendants
should arise out of the same transaction or series of transactions and there should be a common
question of law or fact, as provided in Section 6 of Rule 3.
The difference between the former and present rules in cases of permissive joinder of parties may be
illustrated by the two cases which were cited in the case of Vda. de Rosario vs. Justice of the Peace
(supra) as exceptions to the totality rule. In the case of Soriano y Cia vs. Jose (86 Phil. 523), where
twenty-nine dismissed employees joined in a complaint against the defendant to collect their respective
claims, each of which was within the jurisdiction of the municipal court although the total exceeded the
jurisdictional amount, this Court held that under the law then the municipal court had jurisdiction. In said
case, although the plaintiffs' demands were separate, distinct and independent of one another, their joint
suit was authorized under Section 6 of Rule 3 and each separate claim furnished the jurisdictional test. In
the case of International Colleges, Inc. vs. Argonza (90 Phil. 470), where twenty-five dismissed teachers
jointly sued the defendant for unpaid salaries, this Court also held that the municipal court had jurisdiction
because the amount of each claim was within, although the total exceeded, its jurisdiction and it was a
case of permissive joinder of parties plaintiff under Section 6 of Rule 3.
Under the present law, the two cases above cited (assuming they do not fall under the Labor Code)
would be under the jurisdiction of the regional trial court. Similarly, in the abovecited cases of Brillo vs.
Buklatan and Gacula vs. Martinez (supra), if the separate claims against the several defendants arose
out of the same transaction or series of transactions and there is a common question of law or fact, they
would now be under the jurisdiction of the regional trial court.
In other words, in cases of permissive joinder of parties, whether as plaintiffs or as defendants, under
Section 6 of Rule 3, the total of all the claims shall now furnish the jurisdictional test. Needless to state
also, if instead of joining or being joined in one complaint separate actions are filed by or against the
parties, the amount demanded in each complaint shall furnish the jurisdictional test.
In the case at bar, the lower court correctly held that the jurisdictional test is subject to the rules on
joinder of parties pursuant to Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Court and that,
after a careful scrutiny of the complaint, it appears that there is a misjoinder of parties for the reason that
the claims against respondents Binongcal and Calion are separate and distinct and neither of which falls
within its jurisdiction.
WHEREFORE, the order appealed from is affirmed, without pronouncement as to costs.
SO ORDERED.
G.R. No. 181622 November 20, 2013
GENESIS INVESTMENT, INC., CEBU JAYA REALTY INC., and SPOUSES RHODORA and LAMBERT
LIM,Petitioners,
vs.
HEIRS of CEFERINO EBARASABAL,* NAMELY: ROGELIO EBARASABAL, SPOUSES LIGAYA E.
GULIMLIM AND JOSE GULIMLIM, SPOUSES VISITACION E. CONEJOS and ELIAS CONEJOS, BEN
TEJERO, POCAS TEJERO, GERTRUDES TEJERO, BANING HAYO, LACIO EBARASABAL and
JULIETA EBARASABAL; HEIRS OF FLORO EBARASABAL, namely: SOFIA ABELONG, PEPITO
EBARASABAL AND ELPIDIO EBARASABAL; HEIRS OF LEONA EBARASABAL- APOLLO, namely:
SILVESTRA A. MOJELLO and MARCELINO APOLLO; HEIRS OF PEDRO EBARASABAL, namely:
BONIFACIO EBARASABAL, SERGIO EBARASABAL and JAIME EBARASABAL; HEIRS of ISIDRO
EBARASABAL, NAMELY: SPOUSES CARLOSA E. NUEVO and FORTUNATO NUEVA;** HEIRS of
BENITO EBARASABAL, namely: PAULO BAGAAN, SPOUSES CATALINA A. MARIBAO and RENE
MARIBAO, VICENTE ABRINICA and PATRON EBARASABAL; HEIRS of JULIAN EBARASABAL,
NAMELY: ALFREDO BAGAAN, JUAN BAGAAN, AVELINO BAGAAN, FERDINAND BAGAAN,
MAURO BAGAAN, SPOUSES ROWENA B. LASACA and FRANCISCO LACASA,*** SPOUSES
MARIA B. CABAG and EMILIO CABAG and ESTELITA BAGAAN, all being represented herein by
VICTOR MOJELLO, FEDERICO BAGAAN and PAULINO EBARASABAL, as their Attorneys-in-
Fact, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the Decision1 and Resolution,2 dated July 11, 2007 and January 10, 2008,
respectively, of the Court of Appeals (CA) in CA-G.R. CEB-SP No. 01017.
The antecedents of the case are as follows:
On November 12, 2003, herein respondents filed against herein petitioners a Complaint 3 for Declaration
of Nullity of Documents, Recovery of Shares, Partition, Damages and Attorney's Fees. The Complaint
was filed with the Regional Trial Court (RTC) of Barili, Cebu.
On August 5, 2004, herein petitioners filed a Motion to Dismiss 4 contending, among others, that the RTC
has no jurisdiction to try the case on the ground that, as the case involves title to or possession of real
property or any interest therein and since the assessed value of the subject property does not exceed
₱20,000.00 (the same being only ₱11,990.00), the action falls within the jurisdiction of the Municipal Trial
Court (MTC).5
In its Order6 dated September 29, 2004, the RTC granted petitioners' Motion to Dismiss, holding as
follows:
xxxx
And while the prayer of the plaintiffs for the annulment of documents qualified the case as one incapable
of pecuniary estimation thus, rendering it cognizable supposedly by the second level courts but
considering that Republic Act No. 7691 expressly provides to cover "all civil actions" which phrase
understandably is to include those incapable of pecuniary estimation, like the case at bar, this Court is of
the view that said law really finds application here more so that the same case also "involves title to, or
possession of, real property, or any interest therein." For being so, the assessed value of the real
property involved is determinative of which court has jurisdiction over the case. And the plaintiffs
admitting that the assessed value of the litigated area is less than ₱20,000.00, the defendants are correct
in arguing that the case is beyond this Court's jurisdiction. 7
Respondents filed a Motion for Partial Reconsideration, 8 arguing that their complaint consists of several
causes of action, including one for annulment of documents, which is incapable of pecuniary estimation
and, as such, falls within the jurisdiction of the RTC.9
On March 17, 2005, the RTC issued an Order granting respondents' Motion for Partial Reconsideration
and reversing its earlier Order dated September 29, 2004. The RTC ruled, thus:
On the issue of want of jurisdiction, this court likewise finds to be with merit the contention of the movants
as indeed the main case or the primary relief prayed for by the movants is for the declaration of nullity or
annulment of documents which unquestionably is incapable of pecuniary estimation and thus within the
exclusive original jurisdiction of this court to try although in the process of resolving the controversy,
claims of title or possession of the property in question is involved which together with all the other
remaining reliefs prayed for are but purely incidental to or as a consequence of the foregoing principal
relief sought.10
Petitioners filed a Motion for Reconsideration,11 but the RTC denied it in its Order dated June 23, 2005.
Aggrieved, petitioners filed a petition for certiorari with the CA. However, the CA dismissed the petition via
its assailed Decision dated July 11, 2007, holding that the subject matter of respondents' complaint is
incapable of pecuniary estimation and, therefore, within the jurisdiction of the RTC, considering that the
main purpose in filing the action is to declare null and void the documents assailed therein. 12
Petitioners' Motion for Reconsideration was, subsequently, denied in the CA Resolution dated January
10, 2008.
Hence, the instant petition for review on certiorari raising the sole issue, to wit:
Whether or not the Honorable Court of Appeals gravely erred in concluding that the Regional Trial Court,
Branch 60 of Barili, Cebu has jurisdiction over the instant case when the ALLEGATIONS IN THE
COMPLAINT clearly shows that the main cause of action of the respondents is for the Recovery of their
Title, Interest, and Share over a Parcel of Land, which has an assessed value of ₱11,990.00 and thus,
within the jurisdiction of the Municipal Trial Court. 13
The petition lacks merit.
For a clearer understanding of the case, this Court, like the CA, finds it proper to quote pertinent portions
of respondents' Complaint, to wit:
xxxx
1. Plaintiffs are all Filipino, of legal age, surviving descendants – either as grandchildren or great
grandchildren – and heirs and successors-in-interest of deceased Roman Ebarsabal, who died on 07
September 1952 x x x
xxxx
8. During the lifetime of Roman Ebarsabal, he acquired a parcel of land situated in Basdaku, Saavedra,
Moalboal, Cebu, x x x.
xxxx
with a total assessed value of ₱2,890.00 x x x. However, for the year 2002, the property was already
having (sic) a total assessed value of ₱11,990.00 x x x.
9. Upon the death of said Roman Ebarsabal, his eight (8) children named in par. 7 above, became co-
owners of his above-described property by hereditary succession; taking peaceful possession and
enjoyment of the same in fee simple pro indiviso, paying the real estate taxes thereon and did not
partition the said property among themselves until all of them likewise died, leaving, however, their
respective children and descendants and/or surviving heirs and successors-in-interest, and who are now
the above-named plaintiffs herein;
10. The plaintiffs who are mostly residents in (sic) Mindanao and Manila, have just recently uncovered
the fact that on 28th January 1997, the children and descendants of deceased Gil Ebarsabal, namely:
Pelagio, Hipolito, Precela, Fructuosa, Roberta, Florentino, Erlinda, Sebastian, Cirilo, all surnamed
Ebarsabal, have executed among themselves a Deed of Extrajudicial Settlement with Sale of Roman
Ebarsabal's entire property described above, by virtue of which they allegedly extrajudicially settled the
same and, for ₱2,600,000.00 – although only the sum of ₱950,000.00 was reflected in their Deed of Sale
for reason only known to them, they sold the whole property to defendants Genesis Investment Inc.
represented by co-defendant Rhodora B. Lim, the wife of Lambert Lim, without the knowledge,
permission and consent of the plaintiffs who are the vendors' co-owners of the lot in question, x x x.
11. Surprisingly, however, the defendant Genesis managed to have the Tax Declaration of the property
issued in the name of co-defendant Cebu Jaya Realty Incorporated, a firm which, as already intimated
above, is also owned by Spouses Lambert and Rhodora B. Lim, instead of in the name of Genesis
Investment, Incorporated, which is actually the vendee firm of the lot in question.
xxxx
Hence, the reason why Cebu Jaya Realty, Incorporated is joined and impleaded herein as a co-
defendant.
12. Without the participation of the plaintiffs who are co-owners of the lot in question in the proceedings,
the aforementioned extrajudicial settlement with sale cannot be binding upon the plaintiff-co-owners.
13. Further, where as in this case, the other heirs who are the plaintiffs herein, did not consent to the sale
of their ideal shares in the inherited property, the sale was only to be limited to the pro indiviso share of
the selling heirs.
xxxx
14. By representation, the plaintiffs, are therefore, by law, entitled to their rightful shares from the estate
of the deceased Roman Ebarsabal consisting of seven (7) shares that would have been due as the
shares of seven (7) other children of Roman Ebarsabal who are also now deceased, namely: Ceferino,
Floro, Leona, Pedro, Isidoro, Julian and Benito, all surnamed Ebarsabal.
15. The defendants who had prior knowledge of the existence of the other heirs who are co-owners of the
vendors of the property they purchased, had unlawfully acted in bad faith in insisting to buy the whole
property in co-ownership, only from the heirs and successors-in-interest of deceased Gil Ebarsabal, who
is only one (1) of the eight (8) children of deceased Roman Ebarsabal, and without notifying thereof in
whatever manner the plaintiffs who are the heirs and successors-in-interest of the other co-owners of the
property-in-question; thus, have compelled the plaintiffs herein to file this instant case in court to protect
their interests, x x x.
xxxx
PRAYER
WHEREFORE, in view of all the foregoing, it is most respectfully prayed of this Honorable Court that,
after due notice and hearing, judgment shall be rendered in favor of the plaintiffs, as follows, to wit:
1 – Declaring as null and void and not binding upon the plaintiffs, the following documents to wit:
(a) Deed of Extrajudicial Settlement with Sale executed by and between the heirs
of deceased Gil Ebarsabal headed by Pedro Ebarsabal, and Genesis Investment,
Inc., represented by Rhodora Lim, dated 28th of January, 1997, marked as
Annex-A;
 (b) Memorandum of Agreement executed between Pedro Ebarsabal and Genesis
Investment, Inc., represented by Rhodora Lim dated 27 January, which document
is notarized;
(c) Tax Declaration of Real Property issued to Cebu Jaya Realty, Inc., marked as
Annex-D;
2 – Ordering the defendants to make partition of the property in litigation with the plaintiffs into eight (8)
equal shares; to get one (1) share thereof, which is the only extent of what they allegedly acquired by
purchase as mentioned above, and to transfer, restore or reconvey and deliver to the plaintiffs, seven (7)
shares thereof, as pertaining to and due for the latter as the heirs and successors-in-interest of the seven
(7) brothers and sister of deceased Gil Ebarsabal already named earlier in this complaint;
xxxx
Further reliefs and remedies just and equitable in the premises are also herein prayed for.
x x x x14
It is true that one of the causes of action of respondents pertains to the title, possession and interest of
each of the contending parties over the contested property, the assessed value of which falls within the
jurisdiction of the MTC. However, a complete reading of the complaint would readily show that, based on
the nature of the suit, the allegations therein, and the reliefs prayed for, the action is within the jurisdiction
of the RTC.
As stated above, it is clear from the records that respondents' complaint was for "Declaration of Nullity of
Documents, Recovery of Shares, Partition, Damages and Attorney's Fees." In filing their Complaint with
the RTC, respondents sought to recover ownership and possession of their shares in the disputed parcel
of land by questioning the due execution and validity of the Deed of Extrajudicial Settlement with Sale as
well as the Memorandum of Agreement entered into by and between some of their co-heirs and herein
petitioners. Aside from praying that the RTC render judgment declaring as null and void the said Deed of
Extrajudicial Settlement with Sale and Memorandum of Agreement, respondents likewise sought the
following: (1) nullification of the Tax Declarations subsequently issued in the name of petitioner Cebu
Jaya Realty, Inc.; (2) partition of the property in litigation; (3) reconveyance of their respective shares; and
(3) payment of moral and exemplary damages, as well as attorney's fees, plus appearance fees.1âwphi1
Clearly, this is a case of joinder of causes of action which comprehends more than the issue of partition
of or recovery of shares or interest over the real property in question but includes an action for
declaration of nullity of contracts and documents which is incapable of pecuniary estimation. 15
As cited by the CA, this Court, in the case of Singson v. Isabela Sawmill, 16 held that:
In determining whether an action is one the subject matter of which is not capable of pecuniary
estimation, this Court has adopted the criterion of first ascertaining the nature of the principal action or
remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of
pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance
would depend on the amount of the claim. However, where the basic issue is something other than the
right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the
principal relief sought, this Court has considered such actions as cases where the subject of the litigation
may not be estimated in terms of money, and are cognizable by courts of first instance [now Regional
Trial Courts].17
This rule was reiterated in Russell v. Vestil 18 and Social Security System v. Atlantic Gulf and Pacific
Company of Manila Inc.19
Contrary to petitioners contention, the principal relief sought by petitioners is the nullification of the
subject Extrajudicial Settlement with Sale entered into by and between some of their co-heirs and
respondents, insofar as their individual shares in the subject property are concerned. Thus, the recovery
of their undivided shares or interest over the disputed lot, which were included in the sale, simply
becomes a necessary consequence if the above deed is nullified. Hence, since the principal action
sought in respondents Complaint is something other than the recovery of a sum of money, the action is
incapable of pecuniary estimation and, thus, cognizable by the RTC. 20 Well entrenched is the rule that
jurisdiction over the subject matter of a case is conferred by law and is determined by the allegations in
the complaint and the character of the relief sought, irrespective of whether the party is entitled to all or
some of the claims asserted.21
Moreover, it is provided under Section 5 (c), Rule 2 of the Rules of Court that where the causes of action
are between the same parties but pertain to different venues or jurisdictions, the joinder may be allowed
in the RTC provided one of the causes of action falls within the jurisdiction of said court and the venue
lies therein. Thus, as shown above, respondents complaint clearly falls within the jurisdiction of the RTC.
WHEREFORE, the petition is DENIED. The Decision and Resolution dated July 11, 2007 and January
10, 2008, respectively, of the Court of Appeals in CA-G.R. CEB-SP No. 01017 are AFFIRMED.
SO ORDERED.
G.R. No. 171456 August 9, 2007
UNIWIDE HOLDINGS, INC., petitioner,
vs.
ALEXANDER M. CRUZ, respondent.
DECISION
CARPIO MORALES, J.:
Petitioner, Uniwide Holdings, Inc. (UHI), whose principal office is located in Parañaque City, entered into
a Franchise Agreement1 (the agreement) granting respondent, Alexander M. Cruz (Cruz), a five-year
franchise to adopt and use the "Uniwide Family Store System" for the establishment and operation of a
"Uniwide Family Store" along Marcos Highway, Sta. Cruz, Cogeo, Marikina City.
Article 10.22 of the agreement called for Cruz as franchisee to pay UHI a monthly service fee of P50,000
or three percent of gross monthly purchases, whichever is higher, payable within five days after the end
of each month without need of formal billing or demand from UHI. In case of any delay in the payment of
the monthly service fee, Cruz would, under Article 10.3 3 of the agreement, be liable to pay an interest
charge of three percent per month.
It appears that Cruz had purchased goods from UHI’s affiliated companies First Paragon Corporation
(FPC) and Uniwide Sales Warehouse Club, Inc. (USWCI).
In August 2002, FPC and USWCI executed Deeds of Assignment 4 in favor of UHI assigning all their rights
and interests over Cruz’s accounts payable to them.
As of August 13, 2002, Cruz had outstanding obligations with UHI, FPC, and USWCI in the total amount
of P1,358,531.89, drawing UHI to send him a letter of even date for the settlement thereof in five days.
His receipt of the letter notwithstanding, Cruz’s accounts remained unsettled.
Thus UHI filed a complaint5 for collection of sum of money before the Regional Trial Court (RTC) of
Parañaque docketed as Civil Case No. 04-0278 against Cruz on the following causes of action:
 First Cause of Action
10. Being entitled to the payment of monthly service fee pursuant to the FA, which
defendant failed to pay despite demand, plaintiff suffered actual damages in the amount
of Phil. Peso: One Million Three Hundred Twenty Seven Thousand Six Hundred Sixty Nine &
83/100 (P1,327,669.83), computed as of 05 April 2004, for which defendant should be held
liable together with legal interest thereon from the date of filing of this Complaint, until fully
paid.
Second Cause of Action
11. Being the assignee of the receivable of FPC, which receivable defendant failed to
pay despite demand, plaintiff suffered actual damages in the amount of Phil. Peso: Sixty
Four Thousand One Hundred Sixty Five & 96/100 (P64,165.96) for which defendant should
be held liable together with the legal interest thereon computed from date of receipt of
plaintiff’s demand letter, or on August 16, 2002 to be exact, until fully paid.
Third Cause of Action
12. Being the assignee of the receivable of USWCI, which receivable defendant failed
to pay despite demand, plaintiff suffered actual damages in the total amount of Phil.
Peso: One Million Five Hundred Seventy Nine Thousand Sixty One & 36/100
(P1,579,061.36), computed as of 05 April 2004, inclusive of the two and a half percent (2.5%)
monthly interest, as and by way of penalty, and the three (3%) annual interest on the unpaid
amount, for which defendant should be held liable, with legal interest thereon from the date of
filing of this Complaint, until fully paid.
Fourth Cause of Action
13. By reason of defendant’s obstinate refusal or failure to pay his indebtedness, plaintiff was
constrained to file this Complaint and in the process incur expenses by way of attorney’s fees,
which could be reasonably estimated to reach at least Phil. Peso: Two Hundred Fifty
Thousand (P250,000.00) and for which defendant should be held answerable for. 6 (Emphasis
and underscoring supplied)
To the complaint Cruz filed a motion to dismiss7 on the ground of improper venue, he invoking Article 27.5
of the agreement which reads:
27.5 Venue Stipulation – The Franchisee consents to the exclusive jurisdiction of the courts of
Quezon City, the Franchisee waiving any other venue.8 (Emphasis supplied)
Branch 258 of the Parañaque RTC, by Order 9 of December 12, 2005, granted Cruz’s motion
to dismiss.
Hence, the present petition before this Court, raising the sole legal issue of:
WHETHER A CASE BASED ON SEVERAL CAUSES OF ACTION IS DISMISSIBLE ON THE
GROUND OF IMPROPER VENUE WHERE ONLY ONE OF THE CAUSES OF ACTION
ARISES FROM A CONTRACT WITH EXCLUSIVE VENUE STIPULATION.10 (Underscoring
supplied)
Petitioner contends that nowhere in the agreement is there a mention of FPC and USWCI, and neither
are the two parties thereto, hence, they cannot be bound to the stipulation on "exclusive venue."
The petition is impressed with merit.
The general rule on venue of personal actions, as in petitioner’s complaint for collection of sum of money,
is embodied in Section 2, Rule 4 of the Rules of Court which provides:
Sec. 2. Venue of personal actions. – All other actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any
of the principal defendants resides, or in the case of a nonresident defendant, where he may
be found, at the election of the plaintiff. (Emphasis and underscoring supplied)
The afore-quoted provision is, however, qualified by Section 4 of the same rule which allows parties,
before the filing of the action, to validly agree in writing on an exclusive venue. 11
The forging of a written agreement on an exclusive venue of an action does not, however, preclude
parties from bringing a case to other venues.
Where there is a joinder of causes of action between the same parties one of which does not arise out of
the contract where the exclusive venue was stipulated upon, the complaint, as in the one at bar, may be
brought before other venues provided that such other cause of action falls within the jurisdiction of the
court and the venue lies therein. 12
Based on the allegations in petitioner’s complaint, the second and third causes of action are based on the
deeds of assignment executed in its favor by FPC and USWCI. The deeds bear no exclusive venue
stipulation with respect to the causes of action thereunder. Hence, the general rule on venue applies –
that the complaint may be filed in the place where the plaintiff or defendant resides. 13
It bears emphasis that the causes of action on the assigned accounts are not based on a breach of the
agreement between UHI and Cruz. They are based on separate, distinct and independent contracts-
deeds of assignment in which UHI is the assignee of Cruz’s obligations to the assignors FPC and
USWCI. Thus, any action arising from the deeds of assignment cannot be subjected to the exclusive
venue stipulation embodied in the agreement. So San Miguel Corporation v. Monasterio14 enlightens:
Exclusive venue stipulation embodied in a contract restricts or confines parties
thereto when the suit relates to breach of said contract. But where the exclusivity clause
does not make it necessarily encompassing, such that even those not related to the
enforcement of the contract should be subject to the exclusive venue, the stipulation
designating exclusive venues should be strictly confined to the specific undertaking or
agreement. Otherwise, the basic principles of freedom to contract might work to the great
disadvantage of a weak party-suitor who ought to be allowed free access to courts of
justice.15(Emphasis and underscoring supplied)
In fine, since the other causes of action in petitioner’s complaint do not relate to a breach of the
agreement it forged with Cruz embodying the exclusive venue stipulation, they should not be subjected
thereto. As San Miguel further enlightens:
Restrictive stipulations are in derogation of the general policy of making it more convenient for
the parties to institute actions arising from or in relation to their agreements. Thus, the
restriction should be strictly construed as relating solely to the agreement for which the
exclusive venue stipulation is embodied. Expanding the scope of such limitation on a
contracting party will create unwarranted restrictions which the parties might find unintended
or worse, arbitrary and oppressive.16 (Underscoring supplied)
WHEREFORE, the petition is GRANTED. The December 12, 2005 Order of Regional Trial Court of
Parañaque City, Branch 258 in Civil Case No. 04-0278 is SET ASIDE. The case is REMANDED to said
court which is directed to reinstate the case to its docket and conduct further proceedings thereon with
dispatch.
SO ORDERED.
G.R. Nos. 175277 & 175285 September 11, 2013
UNICAPITAL, INC., UNICAPITAL REALTY, INC., and JAIME J. MARTINEZ, Petitioners,
vs.
RAFAEL JOSE CONSING, JR., and THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF
PASIG CITY, BRANCH 168, Respondents.
x-----------------------x
G.R. No. 192073
RAFAEL JOSE CONSING, JR., Petitioner,
vs.
HON. MARISSA MACARAIG-GUILLEN, in her capacity as the Presiding Judge of the Regional Trial
Court of Makati City, Branch 60 and UNICAPITAL, INC., Respondents.
Before the Court are consolidated petitions for review on certiorari 1 assailing separate issuances of the
Court of Appeals (CA) as follows:
(a) The petitions in G.R. Nos. 175277 and 175285 filed by Unicapital, Inc., (Unicapital),
Unicapital Realty, Inc. (URI), and Unicapital Director and Treasurer Jaime J. Martirez
(Martirez)assail the CA’s Joint Decision2 dated October 20, 2005 and Resolution 3 dated
October 25, 2006 in CA-G.R. SP Nos. 64019and 64451 which affirmed the Resolution 4 dated
September 14,1999 and Order5 dated February 15, 2001 of the Regional Trial Court (RTC) of
Pasig City, Branch 68 (RTC-Pasig City) in SCA No. 1759, upholding the denial of their motion
to dismiss; and
(b) The petition in G.R. No. 192073 filed by Rafael Jose Consing, Jr. (Consing, Jr.) assails the
CA’s Decision6dated September 30, 2009 and Resolution 7 dated April 28, 2010 inCA-G.R. SP
No. 101355 which affirmed the Orders dated July16, 2007 8 and September 4, 20079 of the
RTC of Makati City, Branch 60 (RTC-Makati City) in Civil Case No. 99-1418,upholding the
denial of his motion for consolidation.
The Facts
In 1997, Consing, Jr., an investment banker, and his mother, Cecilia Dela Cruz (Dela Cruz), obtained an
₱18,000,000.00 loan from Unicapital,₱12,000,000.00 of which was acquired on July 24, 1997 and the
remaining₱6,000,000.00 on August 1, 1997. The said loan was secured by Promissory Notes 10 and a
Real Estate Mortgage11 over a 42,443 square meter-parcel of land located at Imus, Cavite, registered in
the name of Dela Cruz as per Transfer Certificate of Title (TCT) No. T-687599 (subject property). 12 Prior
to these transactions, Plus Builders, Inc. (PBI), a real estate company, was already interested to develop
the subject property into a residential subdivision.13 In this regard, PBI entered into a joint venture
agreement with Unicapital, through its real estate development arm, URI. In view of the foregoing, the
loan and mortgage over the subject property was later on modified into an Option to Buy Real
Property14 and, after further negotiations, Dela Cruz decided to sell the same to Unicapital and PBI. For
this purpose, Dela Cruz appointed Consing, Jr. as her attorney-in-fact. 15
Eventually, Unicapital, through URI, purchased one-half of the subject property for a consideration of
₱21,221,500.00 (against which Dela Cruz’s outstanding loan obligations were first offset), while PBI
bought the remaining half for the price of ₱21,047,000.00. 16 In this relation, Dela Cruz caused TCT No. T-
687599 to be divided into three separate titles as follows: (a) TCT No. T-851861 for URI; 17 (b) TCT No. T-
851862 for PBI;18 and (c)TCT No. T-51863 which was designated as a road lot. 19 However, even before
URI and PBI were able to have the titles transferred to their names, Juanito Tan Teng (Teng) and Po
Willie Yu (Yu) informed Unicapital that they are the lawful owners of the subject property as evidenced by
TCT No.T-114708;20 that they did not sell the subject property; and that Dela Cruz’s title, i.e., TCT No. T-
687599, thereto was a mere forgery. 21 Prompted by Teng and Yu’s assertions, PBI conducted further
investigations on the subject property which later revealed that Dela Cruz's title was actually of dubious
origin. Based on this finding, PBI and Unicapital sent separate demand letters 22 to Dela Cruz and
Consing, Jr., seeking the return of the purchase price they had paid for the subject property.
From the above-stated incidents stemmed the present controversies as detailed hereunder.
The Proceedings Antecedent to G.R. Nos. 175277 & 175285
On May 3, 1999, Consing, Jr. filed a complaint, denominated as a Complex Action for Declaratory
Relief23 and later amended to Complex Action for Injunctive Relief 24 (Consing, Jr.’s complaint) before the
RTC-Pasig City against Unicapital, URI, PBI, Martirez, PBI General Manager Mariano Martinez
(Martinez), Dela Cruz and Does 1-20, docketed as SCA No. 1759. In his complaint, Consing, Jr. claimed
that the incessant demands/recovery efforts made upon him by Unicapital and PBI to return to them the
purchase price they had paid for the subject property constituted harassment and oppression which
severely affected his personal and professional life. 25 He also averred that he was coerced to commit a
violation of Batas Pambansa Blg. 2226 as Unicapital and PBI, over threats of filing acase against him, kept
on forcing him to issue a post-dated check in the amount sought to be recovered, notwithstanding their
knowledge that he had no funds for the same. 27 He further alleged that Unicapital and URI required him
to sign blank deeds of sale and transfers without cancelling the old one sin violation of the laws on land
registration and real estate development. 28 Likewise, Consing, Jr. added that Unicapital and PBI’s
representatives were" speaking of him in a manner that was inappropriate and libelous," 29 and that some
John Does "deliberately engaged in a fraudulent scheme to compromise Consing, Jr.’s honor, integrity
and fortune x x x consisting of falsifying or causing to be falsified, or attempting to present as falsified
certain transfers of Land Titles and Deeds for profit," 30 classifying the foregoing as ultra vires acts which
should warrant sanctions under the corporation law, Revised Securities Act and related
laws.31 Accordingly, Consing, Jr. prayed that: (a) he be declared as a mere agent of Dela Cruz, and as
such, devoid of any obligation to Unicapital, URI, and PBI for the transactions entered into concerning the
subject property; (b) Unicapital, URI, and PBI be enjoined from harassing or coercing him, and from
speaking about him in a derogatory fashion; and (c) Unicapital, URI, and PBI pay him actual and
consequential damages in the amount of ₱2,000,000.00, moral damages of at least ₱1,000,000.00,
exemplary damages of ₱1,000,000.00, all per month, reckoned from May 1, 1999 and until the
controversy is resolved, and attorney's fees and costs of suit. 32
For their part, Unicapital, URI, and Martirez (Unicapital, et al.) filed separate Motions to
Dismiss33 Consing, Jr.’s complaint (Unicapital, et al.’s motion to dismiss) on the ground of failure to state
a cause of action, considering that: (a) no document was attached against which Consing, Jr. supposedly
derived his right and against which his rights may be as certained; (b) the demands to pay against
Consing, Jr. and for him to tender post-dated checks to cover the amount due were well within the rights
of Unicapital as an unpaid creditor, as Consing, Jr. had already admitted his dealings with them; (c) the
utterances purportedly constituting libel were not set out in the complaint; and (d) the laws supposedly
violated were not properly identified. Moreover, Unicapital, et al. posited that the RTC-PasigCity did not
acquire jurisdiction over the case given that Consing, Jr. failed to pay the proper amount of docket fees.
In the same vein, they maintained that the RTC-Pasig City had no jurisdiction over their supposed
violations of the Corporation Code and Revised Securities Act, which, discounting its merits, should have
been supposedly lodged with the Securities and Exchange Commission. Finally, they pointed out that
Consing, Jr.’s complaint suffers from a defective verification and, thus, dismissible. 34
Similar to Unicapital et al.’s course of action, PBI and its General Manager, Martinez (Unicapital and PBI,
et al.), sought the dismissal of Consing, Jr.’s complaint on the ground that it does not state a cause of
action. They also denied having singled out Consing, Jr. because their collection efforts were directed at
both Consing, Jr. and Dela Cruz, which should be deemed as valid and, therefore, should not be
restrained.35
On September 14, 1999, the RTC-Pasig City issued a Resolution 36 denying the above mentioned motions
to dismiss, holding that Consing, Jr.’s complaint sufficiently stated a cause of action for tort and damages
pursuant to Article 19 of the Civil Code. It ruled that where there is abusive behavior, a complainant, like
Consing, Jr., has the right to seek refuge from the courts. It also noted that the elements of libel in a
criminal case are not the same as those for a civil action founded on the provisions of the Civil Code, and
therefore, necessitates a different treatment. It equally refused to dismiss the action on the ground of
non-payment of docket fees, despite Consing, Jr.’s escalated claims for damages therein, as jurisdiction
was already vested in it upon the filing of the original complaint. Moreover, it resolved to apply the liberal
construction rule as regards the subject complaint’s verification and certification, despite its improper
wording, considering further that such defect was not raised at the first opportunity. Consequently, it
ordered Unicapital and PBI, et al. to file their Answer and, in addition, to submit" any Comment or
Reaction within five (5) days from receipt hereof on the allegations of Consing, Jr. in his rejoinder of
September 9, 1999regarding the supposed filing of an identical case in Makati City," 37 i.e., Civil Case No.
99-1418. Unperturbed, Unicapital and PBI, et al. moved for reconsideration therefrom which was,
however, denied by the RTC-Pasig City in an Order 38 dated February 15, 2001 for lack of merit.
Aggrieved, they elevated the denial of their motions to dismiss before the CA via a petition for certiorari
and prohibition,39 docketed as CA-G.R. SP Nos. 64019 and 64451.
On October 20, 2005, the CA rendered a Joint Decision 40 holding that no grave abuse of discretion was
committed by the RTC-Pasig City in refusing to dismiss Consing, Jr.'s complaint.1âwphi1 At the outset, it
ruled that while the payment of the prescribed docket fee is a jurisdictional requirement, its non-payment
will not automatically cause the dismissal of the case. In this regard, it considered that should there be
any deficiency in the payment of such fees, the same shall constitute a lien on the judgment award. 41 It
also refused to dismiss the complaint for lack of proper verification upon a finding that the copy of the
amended complaint submitted to the RTC-Pasig City was properly notarized. 42 Moreover, it upheld the
order of the RTC-Pasig City for Unicapital and PBI, et al. to submit their comment due to the alleged
existence of a similar case filed before the RTC-Makati City. 43
Anent the substantive issues of the case, the CA concurred with the RTC-Pasig City that Consing Jr.'s
complaint states a cause of action. It found that Unicapital and PBI, et al.’s purportedly abusive manner in
enforcing their claims against Consing, Jr. was properly constitutive of a cause of action as the same, if
sufficiently proven, would have subjected him to "defamation of his name in business circles, the threats
and coercion against him to reimburse the purchase price, fraud and falsification and breach of fiduciary
obligation." It also found that the fact that Consing Jr.'s complaint contains "nebulous" allegations will not
warrant its dismissal as any vagueness therein can be clarified through a motion for a bill of
particulars."44 Furthermore, it noted that Consing, Jr. does not seek to recover his claims against any
particular provision of the corporation code or the securities act but against the actions of Unicapital and
PBI, et al.; hence, Consing, Jr.’s complaint was principally one for damages over which the RTC has
jurisdiction, and, in turn, there lies no misjoinder of causes of action. 45
Dissatisfied, only Unicapital, et al. sought reconsideration therefrom but the same was denied by the CA
in a Resolution46 dated October 25,2006. Hence, the present petitions for review on certiorari in G.R.
Nos.175277 and 175285.
The Proceedings Antecedent to G.R. No. 192073
On the other hand, on August 4, 1999, Unicapital filed a complaint 47 for sum of money with damages
against Consing, Jr. and Dela Cruz before the RTC-Makati City, docketed as Civil Case No. 99-1418,
seeking to recover (a) the amount of ₱42,195,397.16, representing the value of their indebtedness based
on the Promissory Notes (subject promissory notes) plus interests; (b) ₱5,000,000.00 as exemplary
damages; (c) attorney's fees; and (d) costs of suit. 48
PBI also filed a complaint for damages and attachment against Consing, Jr. and Dela Cruz before the
RTC of Manila, Branch 12, docketed as Civil Case No. 99-95381, also predicated on the same set of
facts as above narrated.49 In its complaint, PBI prayed that it be allowed to recover the following: (a)
₱13,369,641.79, representing the total amount of installment payments made as actual damages plus
interests; (b) ₱200,000.00 as exemplary damages; (c) ₱200,000.00 as moral damages; (d) attorney's
fees; and (e) costs of suit.50 Civil Case No. 99-95381 was subsequently consolidated with SCA No. 1759
pending before the RTC-Pasig City. 51
For his part, Consing, Jr. filed a Motion to Dismiss Civil Case No. 99-1418 which was, however, denied
by the RTC-Makati City in an Order52 dated November 16, 1999. Thereafter, he filed a Motion for
Consolidation53 (motion for consolidation) of Civil Case No. 99-1418 with his own initiated SCA No. 1759
pending before the RTC-Pasig City.
In an Order54 dated July 16, 2007, the RTC-Makati City dismissed Consing, Jr.’s motion for consolidation
and, in so doing, ruled that the cases sought to be consolidated had no identity of rights or causes of
action and the reliefs sought for by Consing, Jr. from the RTC-Pasig City will not bar Unicapital from
pursuing its money claims against him. Moreover, the RTC-Makati City noted that Consing, Jr. filed his
motion only as an after thought as it was made after the mediation proceedings between him and
Unicapital failed. Consing, Jr.'s motion for reconsideration therefrom was denied in an Order 55 dated
September 4, 2007. Hence, he filed a petition for certiorari before the CA, docketed as CA-G.R. SP No.
101355, ascribing grave abuse of discretion on the part of the RTC-Makati City in refusing to consolidate
Civil Case No. 99-1418 with SCA No. 1759 in Pasig City.
On September 30, 2009, the CA rendered a Decision 56 sustaining the Orders dated July 16, 2007 and
September 4, 2007 of the RTC-Makati City which denied Consing, Jr.’s motion for consolidation. It held
that consolidation is a matter of sound discretion on the part of the trial court which could be gleaned
from the use of the word "may" in Section 1, Rule38 of the Rules of Court. Considering that preliminary
steps (such as mediation) have already been undertaken by the parties in Civil Case No.99-1418
pending before the RTC-Makati City, its consolidation with SCA No. 1759 pending before the RTC-Pasig
City "would merely result in complications in the work of the latter court or squander the resources or
remedies already utilized in the Makati case." 57 Moreover, it noted that the records of the consolidated
Pasig and Manila cases, i.e., SCA No. 1759 and Civil Case No. 99-95381, respectively, had already been
elevated to the Court, that joint proceedings have been conducted in those cases and that the pre-trial
therein had been terminated as early as October 23, 2007.Therefore, due to these reasons, the
consolidation prayed for would be impracticable and would only cause a procedural faux pas. Undaunted,
Consing, Jr. filed a motion for reconsideration therefrom but was denied by the CA in a Resolution 58 dated
April 28, 2010. Hence, the present petition for review on certiorari in G.R. No. 192073.
The Proceedings Before the Court
After the filing of the foregoing cases, the parties were required to file their respective comments and
replies. Further, considering that G.R. No.192073 (Makati case) involves the same parties and set of
facts with those in G.R. Nos. 175277 & 175285 (Pasig case), these cases were ordered consolidated per
the Court's Resolution59 dated November 17, 2010. On March 9, 2011, the Court resolved to give due
course to the instant petitions and required the parties to submit their respective memoranda. 60
The Issues Before the Court
The essential issues in these cases are as follows: (a) in G.R. Nos.175277 and 175285, whether or not
the CA erred in upholding the RTC-Pasig City’s denial of Unicapital, et al.’s motion to dismiss; and (b) in
G.R. No. 192073, whether or not the CA erred in upholding the RTC-Makati City’s denial of Consing, Jr.’s
motion for consolidation.
The Court’s Ruling
A. Propriety of the denial of
Unicapital, et al.’s motion to
dismiss and ancillary issues.
A cause of action is defined as the act or omission by which a party violates a right of another. 61 It is well-
settled that the existence of a cause of action is determined by the allegations in the complaint. 62 In this
relation, a complaint is said to sufficiently assert a cause of action if, admitting what appears solely on its
face to be correct, the plaintiff would be entitled to the relief prayed for. 63 Thus, if the allegations furnish
adequate basis by which the complaint can be maintained, then the same should not be dismissed,
regardless of the defenses that may be averred by the defendants. 64 As edified in the case of Pioneer
Concrete Philippines, Inc. v. Todaro,65 citing Hongkong and Shanghai Banking Corporation, Limited. v.
Catalan66 (HSBC):
The elementary test for failure to state a cause of action is whether the complaint alleges facts which if
true would justify the relief demanded. Stated otherwise, may the court render a valid judgment upon the
facts alleged therein? The inquiry is into the sufficiency, not the veracity of the material allegations. If the
allegations in the complaint furnish sufficient basis on which it can be maintained, it should not be
dismissed regardless of the defense that may be presented by the defendants. 67 (Emphasis supplied)
Stated otherwise, the resolution on this matter should stem from an analysis on whether or not the
complaint is able to convey a cause of action; and not that the complainant has no cause of action. Lest it
be misunderstood, failure to state a cause of action is properly a ground for a motion to dismiss under
Section 1(g), Rule 1668 of the Rules of Court(Rules), while the latter is not a ground for dismissal under
the same rule.
In this case, the Court finds that Consing, Jr.’s complaint in SCA No.1759 properly states a cause of
action since the allegations there insufficiently bear out a case for damages under Articles 19 and 26 of
the Civil Code.
Records disclose that Consing, Jr.’s complaint contains allegations which aim to demonstrate the abusive
manner in which Unicapital and PBI, et al. enforced their demands against him. Among others, the
complaint states that Consing, Jr. "has constantly been harassed and bothered by Unicapital and PBI, et
al.; x x x besieged by phone calls from them; x x x has had constant meetings with them variously, and on
a continuing basis, such that he is unable to attend to his work as an investment banker." 69 In the same
pleading, he also alleged that Unicapital and PBI, et al.’s act of "demanding a postdated check knowing
fully well that he does not have the necessary funds to cover the same, nor is he expecting to have them
is equivalent to asking him to commit a crime under unlawful coercive force." 70 Accordingly, these specific
allegations, if hypothetically admitted, may result into the recovery of damages pursuant to Article 19 of
the Civil Code which states that "every person must, in the exercise of his rights and in the performance
of his duties, act with justice, give everyone his due, and observe honesty and good faith." As explained
in the HSBC case:
When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and
results in damage to another, a legal wrong is thereby committed for which the wrongdoer must beheld
responsible. But a right, though by itself legal because it is recognized or granted by law as such, may
nevertheless become the source of some illegality. A person should be protected only when he acts in the
legitimate exercise of his right, that is, when he acts with prudence and in good faith; but not when he
acts with negligence or abuse. There is an abuse of right when it is exercised for the only purpose of
prejudicing or injuring another. The exercise of a right must be in accordance with the purpose for which it
was established, and must not be excessive or unduly harsh; there must be no intention to injure
another.71 (Emphasis supplied)
Likewise, Consing, Jr.’s complaint states a cause of action for damages under Article 26 of the Civil Code
which provides that:
Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors
and other persons. The following and similar acts, though they may not constitute a criminal offense, shall
produce a cause of action for damages, prevention and other relief:
(1) Prying into the privacy of another's residence;
(2) Meddling with or disturbing the private life or family relations of another;
(3) Intriguing to cause another to be alienated from his friends;
(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place
of birth, physical defect, or other personal condition.
The rationale therefor was explained in the case of Manaloto v. Veloso III, 72 citing Concepcion v. CA,73 to
wit:
The philosophy behind Art. 26 underscores the necessity for its inclusion in our civil law. The Code
Commission stressed in no uncertain terms that the human personality must be exalted. The sacredness
of human personality is a concomitant consideration of every plan for human amelioration. The
touchstone of every system of law, of the culture and civilization of every country, is how far it dignifies
man. If the statutes insufficiently protect a person from being unjustly humiliated, in short, if human
personality is not exalted - then the laws are indeed defective. Thus, under this article, the rights of
persons are amply protected, and damages are provided for violations of a person's dignity, personality,
privacy and peace of mind.74
To add, a violation of Article 26 of the Civil Code may also lead to the payment of moral damages under
Article 2219(10)75 of the Civil Code.
Records reveal that Consing, Jr., in his complaint, alleged that "he has come to discover that Unicapital
and PBI, et al. are speaking of him in a manner that is inappropriate and libelous; and that they have
spread their virulent version of events in the business and financial community such that he has suffered
and continues to suffer injury upon his good name and reputation which, after all, is the most sacred and
valuable wealth he possesses - especially considering that he is an investment banker." 76 In similar
regard, the hypothetical admission of these allegations may result into the recovery of damages pursuant
to Article 26, and even Article2219(10), of the Civil Code.
Corollary thereto, Unicapital, et al.’s contention 77 that the case should be dismissed on the ground that it
failed to set out the actual libelous statements complained about cannot be given credence. These
incidents, as well as the specific circumstances surrounding the manner in which Unicapital and PBI, et
al. pursued their claims against Consing, Jr. may be better ventilated during trial. It is a standing rule that
issues that require the contravention of the allegations of the complaint, as well as the full ventilation, in
effect, of the main merits of the case, should not be within the province of a mere motion to dismiss, 78 as
in this case. Hence, as what is only required is that the allegations furnish adequate basis by which the
complaint can be maintained, the Court – in view of the above-stated reasons – finds that the RTC-Pasig
City’s denial of Unicapital, et al.’s motion to dismiss on the ground of failure to state a cause of action was
not tainted with grave abuse of discretion which would necessitate the reversal of the CA’s ruling. Verily,
for grave abuse of discretion to exist, the abuse of discretion must be patent and gross so as to amount
to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in
contemplation of law.79 This the Court does not perceive in the case at bar.
Further, so as to obviate any confusion on the matter, the Court equally finds that the causes of action in
SCA No. 1759 were not – as Unicapital, et al. claim – misjoined even if Consing, Jr. averred that
Unicapital and PBI, et al. violated certain provisions of the Corporation Law and the Revised Securities
Act.80
The rule is that a party’s failure to observe the following conditions under Section 5, Rule 2 of the Rules
results in a misjoinder of causes of action:81
SEC. 5. Joinder of causes of action . - A party may in one pleading assert, in the alternative or otherwise,
as many causes of action as he may have against an opposing party, subject to the following conditions:
(a) The party joining the causes of action shall comply with the rules on joinder of parties;
(b) The joinder shall not include special civil actions governed by special rules;
(c) Where the causes of action are between the same parties but pertain to different venues
or jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the
causes of action falls within the jurisdiction of said court and the venue lies therein; and
(d) Where the claims in all the causes of action are principally for recovery of money the
aggregate amount claimed shall be the test of jurisdiction. (Emphasis supplied)
A careful perusal of his complaint discloses that Consing, Jr. did not seek to hold Unicapital and PBI, et
al. liable for any specific violation of the Corporation Code or the Revised Securities Act. Rather, he
merely sought damages for Unicapital and PBI, et al.’s alleged acts of making him sign numerous
documents and their use of the same against him. In this respect, Consing, Jr. actually advances an
injunction and damages case82 which properly falls under the jurisdiction of the RTC-Pasig
City.83 Therefore, there was no violation of Section 5, Rule 2 of the Rules, particularly, paragraph (c)
thereof. Besides, even on the assumption that there was a misjoinder of causes of action, still, such
defect should not result in the dismissal of Consing, Jr.’s complaint. Section 6, Rule 2 of the Rules
explicitly states that a "misjoinder of causes of action is not a ground for dismissal of an action" and that
"a misjoined cause of action may, on motion of a party or on the initiative of the court, be severed and
proceeded with separately."
Neither should Consing, Jr.’s failure to pay the required docket fees lead to the dismissal of his
complaint.1âwphi1 It has long been settled that while the court acquires jurisdiction over any case only
upon the payment of the prescribed docket fees, its non-payment at the time of the filing of the complaint
does not automatically cause the dismissal of the complaint provided that the fees are paid within a
reasonable period.84 Consequently, Unicapital, et al.’s insistence that the stringent rule on non-payment
of docket fees enunciated in the case of Manchester Development Corporation v. CA 85 should be applied
in this case cannot be sustained in the absence of proof that Consing, Jr. intended to defraud the
government by his failure to pay the correct amount of filing fees. As pronounced in the case of Heirs of
Bertuldo Hinog v. Hon. Melicor:86
Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its
non-payment at the time of filing does not automatically cause the dismissal of the case, as long as the
fee is paid within the applicable prescriptive or reglementary period, more so when the party involved
demonstrates a willingness to abide by the rules prescribing such payment.
Thus, when insufficient filing fees were initially paid by the plaintiffs and there was no intention to defraud
the government, the Manchester rule does not apply. 87 (Emphasis and italics in the original)
Indeed, while the Court acknowledges Unicapital, et al.'s apprehension that Consing, Jr.'s "metered"
claim for damages to the tune of around ₱2,000,000.00 per month 88 may balloon to a rather huge amount
by the time that this case is finally disposed of, still, any amount that may by then fall due shall be subject
to assessment and any additional fees determined shall constitute as a lien against the judgment as
explicitly provided under Section 2, 89Rule 141 of the Rules.
Finally, on the question of whether or not Consing, Jr.'s complaint was properly verified, suffice it to state
that since the copy submitted to the trial court was duly notarized by one Atty. Allan B. Gepty and that it
was only Unicapital, et al.’s copy which lacks the notarization, then there was sufficient compliance with
the requirements of the rules on pleadings. 90
In fine, the Court finds no reversible error on the part of the CA in sustaining the RTC-Pasig City’s denial
of Unicapital et al.’s motion to dismiss. As such, the petitions in G.R. Nos. 175277 and 175285 must be
denied.
B. Propriety of the denial of
Consing, Jr.’s motion for
consolidation.
The crux of G.R. No. 192073 is the propriety of the RTC-Makati City’s denial of Consing, Jr.’s motion for
the consolidation of the Pasig case, i.e., SCA No. 1759, and the Makati case, i.e., Civil Case No. 99-
1418.Records show that the CA upheld the RTC-Makati City’s denial of the foregoing motion, finding that
the consolidation of these cases was merely discretionary on the part of the trial court. It added that it
was "impracticable and would cause a procedural faux pas
"if it were to "allow the RTC-Pasig City to preside over the Makati case." 91
The CA’s ruling is proper.
It is hornbook principle that when or two or more cases involve the same parties and affect closely related
subject matters, the same must be consolidated and jointly tried, in order to serve the best interest of the
parties and to settle the issues between them promptly, thus, resulting in a speedy and inexpensive
determination of cases. In addition, consolidation serves the purpose of avoiding the possibility of
conflicting decisions rendered by the courts in two or more cases, which otherwise could be disposed of
in a single suit.92 The governing rule is Section 1, Rule 31 of the Rules which provides:
SEC. 1. Consolidation. - When actions involving a common question of law or fact are pending before the
court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all
the actions consolidated; and it may make such orders concerning proceedings therein as may tend to
avoid unnecessary costs or delay.
In the present case, the Court observes that the subject cases, i.e., SCA No. 1759 and Civil Case No. 99-
1418, although involving the same parties and proceeding from a similar factual milieu, should remain
unconsolidated since they proceed from different sources of obligations and, hence, would not yield
conflicting dispositions. SCA No. 1759 is an injunction and damages case based on the Civil Code
provisions on abuse of right and defamation, while Civil Case No. 99-1418 is a collection and damages
suit based on actionable documents, i.e., the subject promissory notes. In particular, SCA No. 1759 deals
with whether or not Unicapital and BPI, et al, abused the manner in which they demanded payment from
Consing, Jr., while Civil Case No. 99-1418 deals with whether or not Unicapital may demand payment
from Consing, Jr. based on the subject promissory notes. Clearly, a resolution in one case would have no
practical effect as the core issues and reliefs sought in each case are separate and distinct from the
other.
Likewise, as the CA correctly pointed out, the RTC-Makati City could not have been failured in retaining
Civil Case No. 99-1418 in its dockets since pre-trial procedures have already been undertaken therein
and, thus, its consolidation with SCA No. 1759 pending before the RTC-Pasig City would merely result in
complications on the part of the latter court or squander the resources or remedies already utilized in Civil
Case No. 99-1418.93 In this light, aside from the perceived improbability of having conflicting decisions,
the consolidation of SCA No. 1759 and Civil Case No. 99-1418 would, contrary to its objective, only delay
the proceedings and entail unnecessary costs.
All told, the Court finds the consolidation of SCA No. 1759 and Civil Case No. 99-1418 to be improper,
impelling the affirmance of the CA’s ruling. Consequently, the petition in G.R. No. 192073 must also be
denied.
WHEREFORE, the petitions in G.R. Nos. 175277, 175285 and 192073 are DENIED. Accordingly, the
Court of Appeals’ Joint Decision dated October 20, 2005 and Resolution dated October 25, 2006 in CA-
G.R. SP Nos. 64019 and 64451 and the Decision dated September 30, 2009 and Resolution dated April
28, 2010 in CA-G.R. No. 101355 are hereby AFFIRMED.
ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:
G. R. No. 166876 March 24, 2006
ARTEMIO INIEGO,1Petitioner,
vs.
The HONORABLE JUDGE GUILLERMO G. PURGANAN, in his official capacity as Presiding Judge
of the Regional Trial Court, Branch 42, City of Manila, and FOKKER C. SANTOS, Respondents.
For this Court to grant this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner
has to persuade us on two engaging questions of law. First, he has to convince us that actions for
damages based on quasi-delict are actions that are capable of pecuniary estimation, and therefore would
fall under the jurisdiction of the municipal courts if the claim does not exceed the jurisdictional amount
of P400,000.00 in Metro Manila. Second, he has to convince us that the moral and exemplary damages
claimed by the private respondent should be excluded from the computation of the above-mentioned
jurisdictional amount because they arose from a cause of action other than the negligent act of the xxxx
defendant.

Petitioner urges us to reverse the 28 October 2004 Decision and 26 January 2005 Resolution of the
Court of Appeals, Eighth Division, in CA-G.R. SP No. 76206 denying due course to the petition for
certiorari filed by petitioner under Rule 65, elevating the 21 October 2002 Omnibus Order and the 21
January 2003 Order of the Regional Trial Court (RTC), Branch 42, City of Manila. The dispositive portion
of the 28 October 2004 Decision of the Court of Appeals reads:
WHEREFORE, in view of all the foregoing, the motion to declare defendant Iniego in default and the said
defendant’s motion to dismiss are denied.3
On 7 November 2002, petitioner filed a Motion for Reconsideration of the Omnibus Order of 21 October
2002. On 21 January 2003, public respondent issued an Order denying petitioner’s motion for
reconsideration. Pertinent portions of the 21 January 2003 Order are reproduced hereunder:

WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED for lack of merit. 2
What this court referred to in its Order sought to be reconsidered as not capable of pecuniary estimation
is the CAUSE OF ACTION, which is quasi-delict and NOT the amount of damage prayed for.
The factual and procedural antecedents of this case are as follows:

xxxx
On 1 March 2002, private respondent Fokker Santos filed a complaint for quasi-delict and damages
against Jimmy T. Pinion, the driver of a truck involved in a traffic accident, and against petitioner Artemio
Iniego, as owner of the said truck and employer of Pinion. The complaint stemmed from a vehicular WHEREFORE, in view of the foregoing, the motion for reconsideration is DENIED. 4
accident that happened on 11 December 1999, when a freight truck allegedly being driven by Pinion hit
private respondent’s jitney which private respondent was driving at the time of the accident.
Petitioner elevated the 21 October 2002 and 21 January 2003 Orders of the RTC to the Court of Appeals
on petition for certiorari under Rule 65 of the Rules of Court. On 28 October 2004, the Court of Appeals
On 24 August 2002, private respondent filed a Motion to Declare defendant in Default allegedly for failure promulgated the assailed Decision, the dispositive portion thereof reads:
of the latter to file his answer within the final extended period. On 28 August 2002, petitioner filed a
Motion to Admit and a Motion to Dismiss the complaint on the ground, among other things, that the RTC
WHEREFORE, the petition is DENIED DUE COURSE and dismissed for lack of merit. 5
has no jurisdiction over the cause of action of the case.

On 22 November 2004, petitioner moved for reconsideration, which was denied by the Court of Appeals
On 21 October 2002, public respondent Judge Guillermo G. Purganan, acting as presiding judge of the
on 26 January 2005. Hence, this present petition.
RTC, Branch 42, Manila, issued the assailed Omnibus Order denying the Motion to Dismiss of the
petitioner and the Motion to Declare Defendant in Default of the private respondent. Pertinent portions of
the Omnibus Order and the dispositive portion thereof read: Petitioner claims that actions for damages based on quasi-delict are actions that are capable of
pecuniary estimation; hence, the jurisdiction in such cases falls upon either the municipal courts (the
Municipal Trial Courts, Metropolitan Trial Courts, Municipal Trial Courts In Cities, And Municipal Circuit
In his opposition to the motion to declare him in default and his Motion to Admit defendant IÑEGO alleged
Trial Courts), or the Regional Trial Courts, depending on the value of the damages claimed.
that he never received the Order dated 12 August 2002. But believing in good faith, without being
presumptuous, that his 3rd Motion for additional Time to file or any appropriate [pleading] would be
granted, he filed the aforesaid Motion received by the Court on 23 August 2002. Petitioner argues further that should this Court find actions for damages capable of pecuniary estimation,
then the total amount of damages claimed by the private respondent must exceed P400,000.00 in order
that it may fall under the jurisdiction of the RTC. Petitioner asserts, however, that the moral and
The explanation of defendant IÑEGO has merit. The order dated 12 August 2002 was sent to a wrong
exemplary damages claimed by private respondent be excluded from the computation of the total amount
address, thus defendant IÑEGO did not receive it. Since it was not received, he was not aware that the
of damages for jurisdictional purposes because the said moral and exemplary damages arose, not from
court would grant no further extension. The Motion to Admit Motion to Dismiss has to be granted and the
the quasi-delict, but from the petitioner’s refusal to pay the actual damages.
Motion to declare Defendant IÑEGO [in default] has to be DENIED.

I
xxxx

Actions for damages based on quasi-delicts are primarily and effectively actions for the recovery of a sum
The plaintiff opines that this court has exclusive jurisdiction because the cause of action is the claim for
of money for the damages suffered because of the defendant’s alleged tortious acts, and are therefore
damages, which exceeds P400,000.00. The complaint prays for actual damages in the amount
capable of pecuniary estimation.
of P40,000.00, moral damages in the amount of P300,000.00, and exemplary damages in the amount
of P150,000.00. Excluding attorney’s fees in the amount of P50,000.00, the total amount of damages
being claimed is P490,000.00. In a recent case,6 we did affirm the jurisdiction of a Municipal Circuit Trial Court in actions for damages
based on quasi-delict, although the ground used to challenge said jurisdiction was an alleged forum
shopping, and not the applicability of Section 19(1) of Batas Pambansa Blg. 129.
Proceeding on the assumption that the cause of action is the claim of (sic) for damages in the total
amount of P490,000.00, this court has jurisdiction. But is the main cause of action the claim for
damages? According to respondent Judge, what he referred to in his assailed Order as not capable of pecuniary
estimation is the cause of action, which is a quasi-delict, and not the amount of damage prayed
for.7 From this, respondent Judge concluded that since fault or negligence in quasi-delicts cannot be the
This court is of the view that the main cause of action is not the claim for damages but quasi-delict.
subject of pecuniary estimation, the RTC has jurisdiction. The Court of Appeals affirmed respondent
Damages are being claimed only as a result of the alleged fault or negligence of both defendants under
Judge in this respect.8
Article 2176 of the Civil Code in the case of defendant Pinion and under Article 2180 also of the Civil
Code in the case of defendant Iniego. But since fault or negligence (quasi-delicts) could not be the
subject of pecuniary estimation, this court has exclusive jurisdiction.
Respondent Judge’s observation is erroneous. It is crystal clear from B.P. Blg. 129, as amended by
Republic Act No. 7691, that what must be determined to be capable or incapable of pecuniary estimation
is not the cause of action, but the subject matter of the action. 9 A cause of action is "the delict or wrongful
act or omission committed by the defendant in violation of the primary rights of the plaintiff." 10 On the
other hand, the "subject matter of the action" is "the physical facts, the thing real or personal, the money,
lands, chattels, and the like, in relation to which the suit is prosecuted, and not the delict or wrong
committed by the defendant." 11
The case of Lapitan v. Scandia, Inc., et al., 12 has guided this Court time and again in determining whether
the subject matter of the action is capable of pecuniary estimation. In Lapitan, the Court spoke through
the eminent Mr. Justice Jose B.L. Reyes:
In determining whether an action is one the subject matter of which is not capable of pecuniary
estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or
remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of
pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance
[now Regional Trial Courts] would depend on the amount of the claim. However, where the basic issue is
something other than the right to recover a sum of money, where the money claim is purely incidental to,
or a consequence of, the principal relief sought like suits to have the defendant perform his part of the
contract (specific performance) and in actions for support, or for annulment of a judgment or to foreclose
a mortgage, this court has considered such actions as cases where the subject of the litigation may not
be estimated in terms of money, and are cognizable exclusively by courts of first instance [now Regional
Trial Courts]. x x x.13 (Emphasis supplied.)
Actions for damages based on quasi-delicts are primarily and effectively actions for the recovery of a sum
of money for the damages suffered because of the defendant’s alleged tortious acts. The damages
claimed in such actions represent the monetary equivalent of the injury caused to the plaintiff by the
defendant, which are thus sought to be recovered by the plaintiff. This money claim is the principal relief
sought, and is not merely incidental thereto or a consequence thereof. It bears to point out that the
complaint filed by private respondent before the RTC actually bears the caption "for DAMAGES."
Fault or negligence, which the Court of Appeals claims is not capable of pecuniary estimation, is not
actionable by itself. For such fault or negligence to be actionable, there must be a resulting damage to a
third person. The relief available to the offended party in such cases is for the reparation, restitution, or
payment of such damage, without which any alleged offended party has no cause of action or relief. The
fault or negligence of the defendant, therefore, is inextricably intertwined with the claim for damages, and
there can be no action based on quasi-delict without a claim for damages.
We therefore rule that the subject matter of actions for damages based on quasi-delict is capable of
pecuniary estimation.
II
The amount of damages claimed is within the jurisdiction of the RTC, since it is the claim for all kinds of
damages that is the basis of determining the jurisdiction of courts, whether the claims for damages arise
from the same or from different causes of action.
Despite our concurrence in petitioner’s claim that actions for damages based on quasi-delict are actions
that are capable of pecuniary estimation, we find that the total amount of damages claimed by the private
respondent nevertheless still exceeds the jurisdictional limit of P400,000.00 and remains under the
jurisdiction of the RTC.
Petitioner argues that in actions for damages based on quasi-delict, claims for damages arising from a
different cause of action (i.e., other than the fault or negligence of the defendant) should not be included
in the computation of the jurisdictional amount. According to petitioner, the moral and exemplary
damages claimed by the respondents in the case at bar are not direct and proximate consequences of
the alleged negligent act. Petitioner points out that the complaint itself stated that such moral and
exemplary damages arose from the alleged refusal of defendants to honor the demand for damages, and
therefore there is no reasonable cause and effect between the fault or negligence of the defendant and
the claim for moral and exemplary damages. 14 If the claims for moral and exemplary damages are not
included in the computation for purposes of determining jurisdiction, only the claim for actual damages in
the amount of P40,000.00 will be considered, and the MeTC will have jurisdiction.
We cannot give credence to petitioner’s arguments. The distinction he made between damages arising
directly from injuries in a quasi-delict and those arising from a refusal to admit liability for a quasi-delict is
more apparent than real, as the damages sought by respondent originate from the same cause of action:
the quasi-delict. The fault or negligence of the employee and the juris tantum presumption of negligence
of his employer in his selection and supervision are the seeds of the damages claimed, without
distinction.
Even assuming, for the sake of argument, that the claims for moral and exemplary damages arose from a
cause of action other than the quasi-delict, their inclusion in the computation of damages for jurisdictional
purposes is still proper. All claims for damages should be considered in determining the jurisdiction of the
court regardless of whether they arose from a single cause of action or several causes of action. Rule 2,
Section 5, of the Rules of Court allows a party to assert as many causes of action as he may have
against the opposing party. Subsection (d) of said section provides that where the claims in all such
joined causes of action are principally for recovery of money, the aggregate amount claimed shall be the
test of jurisdiction.15
Hence, whether or not the different claims for damages are based on a single cause of action or different
causes of action, it is the total amount thereof which shall govern. Jurisdiction in the case at bar remains
with the RTC, considering that the total amount claimed, inclusive of the moral and exemplary damages
claimed, is P490,000.00.
In sum, actions for damages based on quasi-delicts are actions that are capable of pecuniary estimation.
As such, they fall within the jurisdiction of either the RTC or the municipal courts, depending on the
amount of damages claimed. In this case, the amount of damages claimed is within the jurisdiction of the
RTC, since it is the claim for all kinds of damages that is the basis of determining the jurisdiction of
courts, whether the claims for damages arise from the same or from different causes of action.
WHEREFORE, the petition for review on certiorari is hereby DENIED for lack of merit. The Decision and
Resolution of the Court of Appeals dated 28 October 2004 and 26 January 2005, respectively, are
AFFIRMED insofar as they held that the Regional Trial Court has jurisdiction. No costs.
SO ORDERED.
A.M. No. 08-8-7-SC November 21, 2000
RE: THE RULE OF PROCEDURE FOR SMALL CLAIMS CASES
RESOLUTION
Acting on the recommendation of the Chairperson, Technical Working Group, Committee on Revision of
the Rules of Court, submitting for the consideration and approval of the Court the proposed "The Rule of
Procedure for Small Claims Cases," the Court Resolved to APPROVE the same.
The Rule shall take effect on October 01, 2008 following its publication two (2) newspaper of general
circulation.
September 9, 2008

(Sgd.)REYNATO S. PUNO
Chief Justice
RULE OF PROCEDURE FOR SMALL CLAIMS CASES
Section 1. Title. - This Rule shall be known as " The Rule of Procedure for Small Claims Cases."
Section 2. Scope. - This Rule shall govern the procedure in actions before the Metropolitan trial Courts,
Municipal Trial Courts in Cities, Municipal Trial Courts and Municipal Circuit Trial Courts for payment of
money where the value of the claim does not exceed One Hundred Thousand Pesos (P100,000.00)
exclusive of interest and costs.
Section 3. Definiton of Terms. - For purposes of this Rule:
(a) Plaintiff - refers to the party who initiated a small claims action. The term includes a
defendant who has filed a counterclaim against plainfill;
(b) Defendant - is the party against whom the plaintiff has filed a small claims action. The
term includes a plaintiff against whom a defendant has filed a claim, or a person who replies
to the claim;
(c) Person - is an individual, corporation, partnership, limited liability partnership, association,
or other juridical entity endowed with personality by law;
(d) Individual - is a natural person;
(e) Motion - means a party's request, written or oral, to the court for an orderaction. It shall
include an informal written request to the court, such as a letter;
(f) Good cause - means circumtances sufficient to justify the requested order or other action,
as determined by the judge; and
(g) Affidavit - means a written statement or declaration of facts that are shown or affirmed to
be true.
Section 4. Applicability - The Metropolitan Trial Courts, Municipal Trial Courts in Cities, Municipal Trial
Courts, and Municipal Circuit Trial Courts shall apply this Rule in all actions which are; (a) purely civil in
nature where the claim or relief prayed for by the plaintiff is solely for payment or reimbursement of sum
of money, and (b) the civil aspect of criminal action, or reserved upon the filing of the criminal action in
court, pursuant to Rule of 111 of the Revised Rules of Criminal Procedure.
These claims or demands may be;
(a) For money owned under any of the following;
1. Contract of Lease;
2. Contract of Loan;
3. Contract of Services;
4. Contract of Sale; or
5. Contract of Mortgage;
(b) For damages arising from any of the following;
1. Fault or negligence;
2. Quasi-contract; or
3. Contract;
(c) The enforcement of a barangay amicable settlement or an arbitration award involving a
money claim covered by this Rule pursuant to Sec. 417 of Republic Act 7160, otherwise
known as the Local Government Code of 1991.
Section 5. Commencement of Small Claims Action. - A small claims action is commenced by filing with
the court an accomplished and verified Statement of Claim (Form 1 - SCC) in duplicate, accompanied by
a Certification of Non-forum Shopping (Form 1-A,SCC), and two (2) duly certified photocopies of the
actionable document/s subjects of the claim, as well as the affidavits of witnesses and other evidence to
support the claim. No evidence shall be allowed during the hearing which was not attached to or
submitted together with the Claim, unless good cause is shown for the admission of additional evidence.
No formal pleading, other than the Statement of Claim described in this Rule, is necessary to initiate a
small claims action.
Section 6. Joinder of Claims - Plaintiff may join in a single statement of claim one or more separate small
claims against a defendant provided that the total amount claimed, exclusive of interest and costs, does
not exceed P100,00.00.
Section 7. Affidavits - The affidavits submitted under this Rule shall state only facts of direct personal
knowledge of the affiants which are admissible in evidence.
A violation of this requirement shall subject the party, and the counsel who assisted the party in the
preparation of the affidavits, if any, to appropriate disciplinary action. The inadmissible affidavit(s) or
portion(s) thereof shall be expunged from the record.
Section 8. Payment of Filing Fees. - The plaintiff shall pay the docket and other legal fees prescribed
under Rule 141 of the Revised Rules of Court, unless allowed to litigate as an indigent.
A claim filed with a motion to sue as indigent (Form 6-SCC) shall be referred to the Executive Judge for
immediate action in case of multi-sala courts, or to the Presiding Judge of the court hearing the small
claims case. If the motion is granted by the Executive Judge, the case shall be raffled off or assigned to
the court designated to hear small claims cases. If the motion is denied, the plaintiff shall be given five (5)
days within which to pay the docket fees, otherwise, the case shall be dismissed without prejudice. In no
case shall a party, even if declared an indigent, be exempt from the payment of the P1,000.00 fee for
service of summons and processes in civil cases.
Section 9. Dismissal of the Claim. - After the court determines that the case falls under this Rule, it may,
from an examination of the allegations of the Statement of Claim and such evidence attached thereto, by
itself, dismiss the case outright of any of the grounds apparent from the Claim for the dismissal of a civil
action.
Section 10. Summons and Notice of Hearing - If no ground for dismissal is found, the court shall
forthwith issue Summons (Form 2-SCC) on the day of receipt of the Statement of Claim, directing the
defendant to submit a verified Response.
The court shall also issue a Notice (Form 4-SCC) to both parties, directing them to appear before it on a
specific date and time for hearing, with a warning that no unjustified postponement shall be allowed, as
provided in Section 19 of this Rule.
The summons and notice to be served on the defendant shall be accompanied by a copy of the
Statement of Claim and documents submitted by plaintiff, and a copy of the Response (Form 3-SCC) to
be accomplished by the defendant. The Notice shall contain an express prohibition against the filing of a
motion to dismiss or any other motion under Section 14 of this Rule.
Section 11. Response - The defendant shall file with the court and serve on the plaintiff a duly
accomplished and verified Response within a non - extendible period of ten (10) days from receipt of
summons. The Response shall be accompanied by certified photocopies of documents, as well as
affidavits of witnesses and other evidence in support thereof. No evidence shall be allowed during the
hearing which was not attached to or submitted together with the Response, unless good cause is shown
for the admission of additional evidence.
Section 12. Effect of Failure to File Response - Should the defendant fail to file his response within the
required period, the court by itself shall render judgement as may be warranted by the facts alleged in the
Statement of claim limited to what is prayed for. The court however, may, in its discretion, reduce the
amount of damages for being excessive or unconscionable
Section 13. Counterclaims Within the Coverage of this Rule - If at the time the action is commenced, the
defendant possesses a claim against the plaintiff that (a) is within the coverage of this rule, exclusive of
interest and costs; (b) arises out of the same transaction or event that is the subject matter of the
plaintiff's claim; (c) does not require for its adjudication the joinder of third parties; and (d) is not the
subject of another pending action, the claim shall be filed as a counterclaim in the response; otherwise,
the defendant shall be barred from suit on the counterclaim.
The defendant may also elect to the file a counterclaim against the plaintiff that does not arise out of the
same transaction or occurrence , provided that the amount and nature thereof are within the coverage of
this Rule and the prescribed docket and the other legal fees are paid.
Section 14. Prohibited Pleadings and Motions - The following pleadings, motions, and petitions shall not
be allowed in the cases covered by this Rule:
(a) Motion to dismiss the compliant except on the ground of lack of jurisdiction;
(b) Motion for a bill of particulars;
(c) Motion for new trial, or for reconsideration of a judgement, or for reopening of trial;
(d) Petiton for relief from judgement;
(e) Motion for extension of time to file pleadings, affidavits, or any other paper;
(f) Memoranda;
(g) Petition for certiorari, mandamus, or prohibition against any interlocutory order issued by
the court;
(h) Motion to declare the defendant in default;
(i) Dilatory motions for postponement;
(j) Reply;
(k) Third-party complaints; and
(l) Interventions.
Section 15. Availability of Forms; Assistance by Court Personnel. - The Clerk of Court or other personnel
shall provide such assistance as may be requested by a plaintiff or a defendant regarding the availability
of forms and other information about the coverage, requirements as well as procedure for small claims
cases.
Section 16. Appearance. - the parties shall appear at the designated date of hearing personally or
through a representative authorized under a Special Power of Attorney (Form 5-SCC ) to enter into an
amicable settlement, to submit of Judicial Dispute Resolution (JDR) and to enter into stipulations or
admissions of facts and of documentary exhibits
Section 17. Appearance of Attorneys Not Allowed. - No attorney shall appear in behalf of or represent a
party at the hearing, unless the attorney is the plaintiff or defendant.
If the court determines that a party cannot properly present his/her claim or defense and needs
assistance, the court may, in its discretion, allow another individual who is not an attorney to assist that
party upon the latter's consent.
Section 18. Non-appearance of Parties. - Failure of the plaintiff to appear shall be cause for the dismissal
of the claim without prejudice. The defendant who appears shall be entitled to judgement on a permissive
counterclaim.
Failure of the defendant to appear shall have the same effect as failure to file a Response under Section
12 of this Rule. This shall not apply where one of two or more defendants who are sued under a common
cause of action and have pleaded a common defense appears at the hearing.
Failure of both parties to appear shall cause the dismissal with prejudice of both the claim and
counterclaim.
Section 19. Postponement When Allowed. - A request for postponement of a hearing may be granted
only upon proof of the physical inability of the party to appear before the court on the scheduled date and
time. A party may avail of only one (1) postponement.
Section 20. Duty of the Court. - At the beginning of the court session, the judge shall read aloud a short
statement explaining the nature, purpose and the rule of procedure of small claims cases.
Section 21. Judicial Dispute Resolution. - At the hearing, the judge shall conduct Judicial Dispute
Resolution (JDR) through mediation, conciliation, early neutral evaluation, or any other mode of JDR. Any
settlement (Form 7-SCC) or resolution (Form 8-SCC) of the dispute shall be reduced into writing, signed
by the parties and submitted to the court for approval (Form 12-SCC).
Section 22. Failure of JDR. - If JDR fails and the parties agree in writing (Form 10-SCC) that the hearing
of the case shall be presided over by the judge who conducted the JDR, the hearing shall so proceed in
an informal and expeditious manner and terminated within one (1) day.
Absent such agreement, (a) in case of a multi-sala court , the case shall, on the same day, be
transmitted (Form 11-SCC) to the Office of the Clerk of Court for immediate referral by the Executive
Judge to the pairing judge for hearing and decision within five (5) working days from referral; and (b) in
case of single sala court, the pairing judge shall hear and decide the case in the court of origin within five
(5) working days from referral by the JDR judge.
Section 23. Decision. - After the hearing, the court shall render its decision on the same day, based on
the facts established by the evidence (Form 13-SCC). The decision shall immediately be entered by the
Clerk of Court in the court docket for civil cases and a copy thereof forthwith served on the parties.
The decision shall be final and unappealable.
Section 24. Execution. - If the decision is rendered in favor of the plaintiff, execution shall issue upon
motion (Form 9-SCC).
Section 25. Applicability. of the Rules of Civil Procedure - The Rules of Civil procedure shall apply
suppletorily insofar as they are not inconsistent with this rule.
Section 26. Effectivity. - This Rule shall take effect on October 01, 2008 for the pilot courts designated to
apply the procedure for small claims cases following its publication in two newspaper of general
circulation.
RATIONALE
of the
Proposed Rule of Procedure for Small Claims Cases
a. Introduction
The most significant recurring theme of every program for judicial reform of the Supreme
Court is the pressing need for a more accessible, much swifter and less expensive delivery of
justice. Undeniably, the slow grind of the wheels of justice is the result of a variety of factors,
foremost of which is the perennial congestion of court dockets which has transformed court
litigation into a protracted battle, that invariably exhausts the time, effort and resources of
party-litigants, especially the poor. Many strategies have been devised to unclog heavy court
dockets, and one such approach is the use on mandatory Pre-trial and Alternative Dispute
Resolutions mechanisms such as mediation, arbitration and conciliation. Another scheme that
has been widely used in many foreign legal system but which has yet to be tried in the
Philippines is the small claims case processing method used by small claims courts, often
referred to as the "People’s Court," as it comes most directly into contact with the citizenry of
a jurisdiction.
Small claims courts are courts of limited jurisdiction that hear civil cases between private
litigants. Courts authorized to try small claims may also have other judicial functions, and the
name by which such a court is known varies by jurisdiction: it may be known by such names
as county court or magistrate’s court. Small claims courts can be found in Australia, Canada,
Ireland, Israel, New Zealand, South Africa, Hong Kong, Singapore, the United Kingdom and
the United States.
b. The History and the Reforms of Small Claims Court
1.In the United States 1
For almost a century now, small claims courts have provided a form of
alternative dispute resolution (ADR) in the United States. Originating
around 1912 or 1913, these courts were established primarily as a
means for small businesses to collect money from borrowers through
a process that was faster, less formal, and less expensive than
traditional civil litigation.
Following the lead of the establishment of the initial small claim court
in Kansas, USA in 1912 or 1913, every state in the United States has
created some form of a small claims court system. Although the
financial claims limits, methods or procedure, and overall structure
vary from state to state, the concept is essentially the same, i.e., that
relatively minor disputes, involving dollar amounts that are insufficient
to warrant processing the case through the normal court procedure,
justify expeditious and simplified handling.
The consumer justice reform movements of the 1960s and 1970s
brought renewed research and interest in the small claims courts. This
movement emphasized the need for reform of small claims courts to
facilitate the adjudication of consumer grievances. Although
"consumer justice reformers" were concerned that businesses and
corporations were more likely to use attorneys in small claims courts
thereby placing inexperienced individual defendants at a
disadvantage, studies showed that defendants with an attorney were
more likely to win against plaintiff’s than unrepresented defendants,
whereas palintiffs without attorneys did just as well as represented
plaintiffs against unrepresented defendants. The result was an
appraisal of the need to bar attorneys and collection agencies
from the small claims courts.lawphil.net
Small claims courts in the United States are often considered courts of
equity and are not necessarily bound by the letter of the law. The
courts have flexibility to use more holistic approaches to problem
solving and dispute resolution than what is typical. Most judges act
according to what makes sense to them, even if this means setting
aside legal formalities. Moreover, traditional rules of evidence and
court processes do not apply. The rules of small claims courts
emphasize conciliation and pragmatism over winning, and rules of
evidence and evil procedure have been simplified to allow maximum
access to the courts by individuals unable to afford an attorney.
2. Small Claims Courts in Canada2
All provinces in Canada have procedures for small claims. In general,
there are two different models. In most provinces, as in British
Columbia, Alberta, and new Brunswick, small claims courts operate
independently of the superior courts. In other jurisdictions, the small
claims courts are either branches or divisions of the superior courts.
The small claims courts are meant to be an easier and less expensive
way to resolve disputes than in the superior courts. Small Claims
Court procedure is regulated both by provincial legislation and rules in
most provinces. It is simplified and less costly with no strict pleading
requirements and formal discovery process.
3. Small Claims Courts in England and Wales? 3
 From early times, England had a tradition of local courts where
ordinary men could pursue justice in the form of civil claims without
the aid of lawyers. Some were set up by local statutes, others by
custom. These local courts could not keep pace with the changes in
the society brought about by the Industrial Revolution. By the 1830s,
the decade of great liberal reform, there was a great public awakening
to the urgent need for constitutional reform in the administration of
justice. The result was the County Courts Act of 1846, described in its
preamble as an "Act For The More Easy Recovery of Small Debts and
Demands in England. " It was initially a poor man’s court. Andrew
Amos, the first judge at Marylebone County, described regular litigants
as being "a great proportion of the poorer classes, gaining their
livelihoods by bricklaying, gardening or other out of door occupations
against whom are usually issued in the summer months." The county
court’s jurisdiction for claims brought in contract and tort gradually
increased from ₤50 in1888 to ₤5,000 in 1894.
The purpose and structure of the county court system has in many
ways remained the same since 1846. The aim is still to make civil
justice available locally – there are now 223 county courts in England
and Wales. They have continued to be responsive to the needs of
smaller cases which, although small in terms of their financial value,
are important to the litigants involved. However, recent decades have
seen two major changes in relation to small claims – first, the
introduction of the Civil procedure Rules reforms of 1998 with
emphasis on proportionality.
4 USAID after consultation with various Supreme Court officials in conjunction with the 2000
Since January 1996, when the small claims limits in England and
Wales was trebled overnight to ₤3,000, district judges have been
expected to play the role of "interventionist" and assist litigants in
presenting their own cases personally at small claims hearings. Like
adjudicators in other parts of the world, district judges in these
countries have been encouraged to intervene to an increasing extent
at small claims hearings. Such interventionism is, indeed, vital and
although there may be wide variations between jurisdictions in the
methods that are adopted to deal with small claims, the idea of the
adjudicator freely entering the arena of the dispute to assist
unrepresented litigants is fundamental in almost all matters about
small claims.
4. Small Claims Tribunals in Singapore5
The Small Claims Tribunals in Singapore have been in operation since
1 February 1985. The tribunals have fulfilled an integral role in
providing the community with accessible justice for civil claims
involving small amounts. Various features and programs have been
put in place to enhance access to justice for the community, by
removing barriers such as cost, delay, distance, time and
inconvenience. The Tribunals, constituted as part of the Subordinate
Courts of Singapore, were established for the primary purpose of
providing a quick and inexpensive avenue for the resolution of small
claims arising from disputes between consumers and suppliers. There
was a need for a less expensive and less formal forum to deal with
such small claims. Hence, in 1985, the Small Claims Tribunals Act
was passed, which authorized the setting up of one or more Tribunals
to help consumers who have claims of up to $2,000 relating to
disputes arising from contracts for the sale of goods or the provision of
services.
c. Introduction of the Concept of Small Claims Court in the Philippines
The idea of establishing Small Claims Courts in the Philippines was first proposed to the
Supreme Court through a study conducted in 1999 by Justice Josue N. Bellosillo, former
Senior Associate Justice of the Supreme Court. After observing small claims courts and
interviewing judges of such courts in Dallas, Texas, United States in 1999, Justice Bellosillo
proposed in a Report that courts can be established in the Philippines to handle exclusively
small claims without the participation of lawyers and where ordinary litigants can prosecute
and defend a small claims action through ready-made forms. He envisioned the small claims
courts as another positive approach, in addition to mandatory pre-trial, for solving court
congestion and delay. 6The study and report was subsequently endorsed for legislative action
to Senator Franklin Drilon who later funded a project for this purpose.
At the regular session of the Fourteenth Congress, House Bill No. 2921 entitled "An Act
Establishing Small Claims Courts" was introduced by Congressman Jose V. Yap. Thereafter,
on July 3, 2007, Senate Bill No. 800 entitled "Philippines Small Claims Court Act" was filed by
Senator Ramon A. Revilla, Jr. and, on September 3, 2007, the bill passed First Reading and
was referred to the Committee(s) on Justice and Human Rights and Finance. The same is still
pending with these committees at present.
In 2007, the United States Agency for International Development (USAID) awarded a two-
year grant to the American Bar Association Rule of Law Initiative (ABA-ROLI) to pursue
judicial reform activities in the Philippines for the fiscal period October 2007 to September 30,
2009. 7In a letter to Chief Justice Reynato S. Puno dated October 10, 2007, ABA-ROLI
proposed the establishment of small claims pilot courts among first level courts in different
regions of the Philippines. The small claims pilot court project was proposed by ABA to
Action Plan for Judicial Reform.
Among the critical issues being addressed by the APJR are case congestion and delay. The
congestion of case dockets is central to a multitude of problems, either as cause or effect; it is
either the manifestation of the source of other difficulties. Addressing this concern is thus an
imperative8 which is why present reforms in judicial systems and procedures have included
the following:
1. streamlining procedural rules to eliminate provisions that cause delay and permit
dilatory tactics;
2. re-engineering the jurisdictional structure of the courts to ensure easy
geographical access to the courts particularly by the poor litigants.
9
3. improving the case management system toward more transparency,
accountability and integrity of the judicial process and for better efficiency; and
4. strengthening of the mediation mechanism to promote early dispute resolution
nationwide. This involves the institutionalization of court-annexed mediation, and
the establishment of a Mediation Center to continually monitor and assess the
performance of the system and provide training and research.
Notwithstanding the absence of a law at the present time creating small claims courts in our
country, 10the Supreme Court through a program in partnership with ABA-ROLI and USAID,
can promulgate and implement a simplified rule of procedure exclusively for small claims and
assign a certain number of existing first level courts to take cognizance of small claims. 11This
does not need legislative action as the Court can designate several first level courts all over
the country to jump-start the pilot project. Thus, pursuant to its rule-making power, 12the Court
under the present Constitution can adopt a special rule of procedure to govern small claims
cases and select pilot courts that would empower the people to bring suits before them pro
se to resolve legal disputes involving simple issues of law and procedure without the need for
legal representations and extensive judicial intervention. This system will enhance access to
justice especially by those who cannot afford the high costs of litigation even in cases of
relatively small value.13 It is expeditious rules and means, our Court can improve the
perception of justice in this country, thus giving citizens a renewed "stake" in preserving 2. Contract of loan;
peace in the land. This is a hopeful message to our people that "there is no need to despair
for there is deliverance in law; that is a promise that has been fulfilled by law in the past; it is a 3. Contract of services;
promise law will again fulfill in the future." 14
4. Contract of sale; or

In December 2007, the Supreme Court established a Technical Working Group composed of 5. Contract of mortgage;
the Court Administrator, the Program Management Office Administrator, selected judges and
other officials of the Supreme Court and the Integrated Bar of the Philippines to undertake the b. For damages arising from:
following activities:
1. Fault or negligence;
5. The development of Rules and Procedures to Implement pilot Small Claims
2. Quasi-contract; or
Courts;
6. The establishment of Criteria to Select Appropriate regions/Judges for pilot Small
3. Contract;
Claims Courts and set Peso Limits for the Small Claims Courts;
c. Enforcement of a barangay amicable settlement or an
7. Through the Philippine Judicial Academy, the conduct of training programs for
arbitration award involving money claims covered by this
Judges and their personnel participating in the Pilot Small Claims Courts project;
Rule pursuant to Sec. 417 of Republic Act No. 7160,
and
otherwise known as the "Local Government Code of
1991."
8. The employment of "justice on Wheels" buses to launch pilot small claims
tribunals.
Explanatory Note: The kinds of cases that can be filed in Small Claims
15 Court vary, but the case must seek money only. For example, a suit
cannot be brought in Small Claims Court to force a person or business
to fix a damaged good; or to demand fulfillment of a promised
On June 23, 2008, the Technical Working Group finalized its draft of a Rule of procedure for obligation which is not purely for money, or to seek money to
Small Claims Cases. Highlights of the Proposed Rule are the following; compensate for pain and suffering. Some of the kinds of cases which
are allowed as small claims include the following:

I. The Rule governs the procedure in actions before the first level courts, i.e.,
Metropolitan Trial Courts, Municipal Trials Courts in Cities, Municipal Trial 1. Actual damage caused to vehicles, other personal
Courts and Municipal Circuit Trial Courts (excluding Shari’a Circuit Courts) property, real property or person;
for the payment of money where the value of the claim does not exceed One 2. Payment or reimbursement for property, deposit, or money
Hundred Thousand Pesos (₧100,000.00) exclusive of interest and costs. loaned;

3. Payment for services rendered, insurance claim, rent,

Explanatory note: The purpose of a small claims process is to provide an commissions, or for goods sold and delivered;
inexpensive and expeditious means to settle disputes over small amounts. For
purposes of the project, the amount has been set for claims involving amounts of 4. Money claim pursuant to contact, warranty or agreement;
not more than ₧100,000.00. and

5. Purely civil action for payment of money covered by

The theory behind the small claims system is that ordinary litigation fails to bring
practical justice to the parties when the disputed claim is small, because the time
and expense required by the ordinary litigation process is so disproportionate to
the amount involved that it discourages a just resolution of the dispute. The small
claims process is designed to function quickly and informally. There are no
attorneys, no formal pleadings and no strict legal rules of evidence. The small
claims court system is not a " typical inferior court." Parties are encouraged to file
small claims court actions to resolve their minor disputes as opposed to resorting
to self-help or forcible means to seek their remedy. (Pace v. Hillcrest Motor
Co.,161 Cal. Rptr. 663, 664 Ct. App. 1980)
bounced or stopped check.
3. A small claims action is commenced by filing with the court an
accomplished and verified Statement of Claim in duplicate, accompanied by
Certification of Non-Forum Shopping, a nd two (2) duly certified
photocopies of the actionable document/s subject of the claim. No evidence
shall be allowed during the hearing which was not attached to or submitted
together with the Claim, unless good cause is shown for the admission of
additional evidence.

II. This Rule applies to all actions that are: (a) purely civil in nature where the
claim or relief prayed for by the plaintiff is solely for
payment/reimbursement of a sum of money, and (b) the civil aspect of
criminal actions, either filed prior to the institution of the criminal action, or
reserved upon the filing of the criminal action in court, pursuant to Rule 111
of the Revised Rules of Criminal Procedure. These claims or demands may
be:
a. For money owed under any of the following:
1. Contract of lease;
4. Plaintiff may join in a single Statement of Claim one or more separate small
claims against a defendant as long as the costs, does not exceed
P100,000.00.
5. The plaintiff shall pay the prescribed fees upon filing, unless allowed to
litigate as an indigent.
6. For the purposes of this rule: (a) Plaintiff is the party who has filed a small
claims action. The term includes a defendant who has filed a counterclaim
against a plaintiff, (b) Defendant is the party against whom the plaintiff has a
filed a small claims action. The term includes a plaintiff against whom
 defendant has filed a claim, or a person who replies to the claim; (c) Person
is an individual, corporation, partnership, limited liability partnership,
association, or other entity; (d) Individual is natural person: (e) Motion
means a party’s request, written or oral, to the court for an order or other
action. It shall include an informal written request to the court, such as a
letter; (f) Good cause means circumstances sufficient to justify the
requested order or other action, as determined by the judge; and (g)
Affidavit means a written statement or declaration of facts that are sworn or
affirmed to be true.
Explanatory Note: A plaintiff may commence an action in the small claims court by
filing a Statement of claim under oath with the Clerk of the first level court in
person or by mail. The claim form shall be a simple non technical form approved
or adopted by the Supreme Court. The claim form shall set forth (1) the name and
address of the defendant, if known; (2) the amount and the basis of the claim: (3)
that the plaintiff, where possible, has demanded payment and, in applicable
cases, possession of the property; (4) that the defendant has failed or refused to
pay, and where applicable, has refused to surrender the property; and (5) that the
plaintiff understands that the judgement on his or her claim will be conclusive and
without a right of appeal. The plaintiff should attach to the claim all documents
necessary to proved his/her right to reliefs prayed for. The form or accompanying
instructions shall include information that the plaintiff (1) may not represented by
an attorney; (2) has no right to appeal; and (3) may ask the court to waive fees for
filing and serving the claim on the ground that the plaintiff is indigent unable to
pay them, using the forms approved by the Supreme Court for the purpose.
7. The Court may dismiss the case outright on any of the grounds for
dismissal of a civil actions provided by the Rules of the Civil Procedure. A
defendant may challenges jurisdiction or venue or court location by
including these defenses in his Response before appearing in the hearing,
the court shall inquire into the facts sufficiently to determine whether
jurisdiction and authority of the court over the action are proper, and shall
make its determination accordingly.
Explanatory Note: Jurisdiction and venue requirements in small claims action
shall be the same as in other civil actions provided in the Rules of Civil Procedure.
A defendant may challenge jurisdiction or venue or court location by including
these defenses in his Response before appearing in the scheduled hearing. In all
cases, even if the defendant does not ask for dismissal of the case in the
Response or appear at the hearing, the court shall inquire into the facts
sufficiently to determine whether jurisdiction and authority of the court over the
action are proper, and shall make its determination accordingly.
8. No Motion to Dismiss shall be allowed except on the grounds under Section
13 thereof (See No. X below).
9. Should the defendant fail to file a response within the required period, the
court shall render judgement as may be warranted by the facts alleged in
the Statement of Claim and limited to what prayed for therein. The court
may, in its discretion, reduce the amount of damages for being excessive or
otherwise unconscionable.
10. If at the time the action is commenced, a defendant possesses a claim
against the plaintiff that (a) is within the coverage of this Rule, exclusive of
interest and costs; (b) arises out of the same transaction or event that is the
subject matter of the plaintiff’s claim; (c) does not require, for its
adjudication, the joiner or third parties; and (d) is not the subject of another
pending action, this claim shall be included as a counterclaim in the
Response, otherwise, such counterclaim shall be barred.
The defendant may also elect to include in the Response a counterclaim
against the plaintiff that does not arise out of the transaction or occurrence
provided that the amount and nature thereof are within the coverage of this
Rule and the prescribed docket fees are paid.
Explanatory Note: If a defendant has claim against a plaintiff that exceeds the
limits stated in Section 2 of this Rule, and the claim relates to the contract,
transaction, matter, or event which is the subject of the plaintiff’s claim, the
defendant may commence an action against the plaintiff in a court of competent
jurisdiction. If said claim which is beyond the limit of money claim provided in this
Rule is filed with the Response befire the Small Claims Court, the latter shall
dismiss the counterclaim.
11. Prohibited pleadings and motions: (a) Motion to dismiss the complaint
except on the ground of lack of jurisdiction; (b) Motion for bill of particulars;
(c) Motion for new trial, or for reconsideration of a judgement, or for
reopening of trial; (d) Petition for relief from judgement; (e) Motion for
extension of time to file pleadings, affidavits, or any other paper; (f)
Memoranda; (g) Petition for certiorari, mandamus, or prohibition against
any interlocutory order issued by the court; (h) Motion to declare the
defendant in default; (i) Dilatory motions for postponement; (j) Reply; (k)
Third-party complaints; and (l) Interventions.
12. Availability of Forms for the Parties who shall be assisted by Clerk of Court.
13. The parties must personally appear at the hearing; if unable, then through a
designated representative who must be duly authorized to enter into an
amicable settlement.
14. Attorneys are not allowed at the hearing, except as plaintiff or defendant.
However this does not preclude them from offerings their services in
assisting the party to small claims case to prepare for the hearing or for
other matters outside of the hearing. If the court determines that a party
cannot properly present his/her claim of defense and needs assistance, the
court may, in its discretion, allow another individual, who is not an attorney,
to assist that party upon the latter’s consent.
Explanatory Note: Except as permitted by this section, no attorney shall appear in
a small claims action except when the latter shall maintain or defend an action in
any of the following capacities:
1. By or against himself or herself;
2. By or against a partnership in which he or she is general partner and
in which all the partners are attorneys; or
3. By or against a professional corporation of which he or she is an
officer or director and of which all other officers and directors are
attorneys.
Nothing in this section shall prevent an attorney from doing any of the following:
4. Providing advice to a party to a small claims action, either before or
after the commencement of the action; or
5. Submitting an affidavit as a witness for a party in order to state facts of
which he or she has personal knowledge and about which he or she
competent to do so.
If the court determines that the party does not speak or understand English or
Filipino sufficiently to comprehend the proceedings or give testimony, to the
questions of the court, if any, and needs assistance in so doing, the court may
permit another individual (other than an attorney) to assist that the party. Any
additional continuances shall be at the sound discretion of the court. If the court
interpreter or other competent interpreter of the language or dialect known to the
 party is not available to aid that party in a small claims action, at the first hearing
of the case the court shall postpone the hearing one time only to allow the party
the opportunity to obtain another individual (other than an attorney) to assist that
party An additional continuances shall be at the sound discretion of the court.
XV. Non-appearance of Parties. Failure of the plaintiff to appear shall be a cause
for the dismissal of the complaint without prejudice. The defendant who
appears shall be entitled to judgement on a permissive counterclaim.
On the other hand failure of the defendant to appear shall have the same
effect as failure to file a Response under Section 12 of this Rule. This is
however shall not apply where one of two or more defendants sued under a
common cause of action and who pleaded a common defense shall appear
at the hearing.
Failure of both parties to appear shall causes the dismissal with prejudice
of both the claim and counterclaim.
XVI. A request for postponement of a hearing may be granted only upon proof of
the physical inability of the party to appear before the court on that date and
time. Every party may avail of only one (1) postponement.
Explanatory Note: A Party may submit an oral or written request to postpone a
hearing date for good cause, as follows:
0. If the written request is writing, it may be made either by letter or on a
form adopted or approved by the Supreme Court;
1. The request shall be filed before the hearing date and accompanied
by proof of physical inability, unless the court determines that the
requesting party has good cause to file the request on the date of
hearing itself: and
2. If the court finds that the interest of justice would be served by
postponing the hearing, the court shall do so and shall notify all parties
by mail on the same day of the new hearing date, time and place.
This section does not limit the inherent power of the court to order postponement
of hearing in strictly appropriate circumstances. The postponement fee of One
Hundred Pesos (or as provided in Rule 141, Revised Rules of Court, as amended
on Legal Fees) shall be charged and collected before the filing of a request for
postponement and rescheduling of a hearing date.
XIX.
XVII. Judicial Dispute Resolution. At the hearing, the court shall exert all efforts
to encourage the parties to resolve their dispute through mediation,
conciliation, early neutral evaluating or any other mode of JDR. Any
settlement or resolution of the dispute shall be reduced into writing, signed
by the parties, and submitted to the court for approval.
XVIII. If JDR fails and the parties agree in writing (Form 10-SCC) that the hearing
of the case shall be presided over by the judge who conducted the JDR, the
hearing shall so proceed in an informal and expeditious manner and
terminated within one (1) day.
Absent such agreement, (a) in case of a multi-sala court, the court shall, on
the same day, be transmitted (Form 11-SCC) to the Office of the Clerk of
Court for immediate referral by the Executive Judge to the pairing judge for
hearing and decision within five (5) working days from referral; and )b) in
case of a single sala court, the pairing judge shall hear and decide the case
in the court of origin within five (5) working days from referral by the JDR
judge.
Explanatory Note: In hearing before the small claims court, witnesses shall still be
sworn in. The judge shall conduct the hearing in an informal manner so as to do
substantial justice between the parties. The judge shall have the discretion to
admit all evidence which may be of probative value although not in accordance
with formal rules of practice, procedure, pleading or evidence provided in the
Rules of Court, except that privileged communications shall not be admissible.
The object of such hearings shall be to determine the rights of the litigants on the
merits and to dispense expeditious justice between the parties.
An interventionist role by judges in such hearings is effective in eliciting evidence
from litigants in person. It is seen by unrepresented parties as a "helping hand"
which they appreciate, provided that judges avoid the danger of appearing to be
partial. By discussing the facts of the case, judges find what common ground
does exist between the parties. This tends to narrow the differences between the
parties and make the final judicial decision easier – whereas traditional open court
trials, with the presence of lawyers and the use of cross-examination tend to
polarize the parties, increase antagonism and heighten the differences.
In this regard, Lord Woolf, Great Britain’s case management expert, has
observed:
"The role of the judge in small claims is not only that of an adjudicator.
It is a key safeguard of the rights of both parties. In most cases, the
judge is effectively a substitute for a legal representative. His duty is to
ascertain the main matters at issue, to elicit the evidence, to reach a
view on the facts of the matter and to give a decision. In some cases
he may encourage the parties to settle. In doing so he should ensure
that both parties have presented the evidence and called the
witnesses germane to their case and that he has identified and
considered any issue of law which is pertinent to the case in hand. He
must also hold the ring and ensure that each party has a fair chance
to present his own case and to challenge that of his opponent."
The key judicial skills in conducting such hearings are to maintain a balance
between informality and fairness, to ensure a level playing field and to protect the
weak and the scrupulous. In practice, this is achieved by preventing interruptions
and parties talking over each other, and making it clear that both parties will have
plenty of time to say all that they wish before the end of the hearing.
Decision. After the hearing, the court shall, on the same day, render its
decision using the form provided. The decision shall immediately be
entered by the Clerk of Court in the court docket for civil cases and a copy
thereof served on the parties. The decision is final and unappealable.
Explanatory Note: Despite the relative informality of the procedure, judgements
are based upon a strict application of the substantive law and an objective judicial
analysis of the facts. The judge is duty-bound to give the legal basis for the
findings.
The prohibition against appeals assures immediate and swift justice.
The right to appeal is not a natural right nor a part due process. It is merely a
statutory privilege and a procedural remedy of statutory origin, a remedy that may
be exercised only in the manner and in accordance with the provisions of the law
authorizing such exercise. The applicable provisions of the law allowing appeals
 from decisions of the first level courts are Sections 36 of B.P. Blg. 129, as
amended, also known as "The Judiciary Reorganization Act of 1980." The
procedure on appeal is subject to the limitations and restrictions provided by this
Act and any such rules as the Supreme Court may hereafter prescribe. Sec. 36 of
B.P. Blg. 129 provides an instance wherein the Supreme Court may adopt special
procedures, including cases where appeal may not be allowed, to achieve an
expeditious and inexpensive determination of particular cases requiring summary
disposition.
XX. Execution. If the decision is rendered in favor of the plaintiff, execution shall
issue upon motion (Form 9-SCC).
G.R. No. L-770 April 27, 1948
ANGEL T. LIMJOCO, petitioner,
vs.
INTESTATE ESTATE OF PEDRO O. FRAGRANTE, deceased, respondent.
Under date of May 21, 1946, the Public Service Commission, through Deputy Commissioner Fidel
Ibañez, rendered its decision in case No. 4572 of Pedro O. Fragante, as applicant for a certificate of
public convenience to install, maintain and operate an ice plant in San Juan, Rizal, whereby said
commission held that the evidence therein showed that the public interest and convenience will be
promoted in a proper and suitable manner "by authorizing the operation and maintenance of another ice
plant of two and one-half (2-½) tons in the municipality of San Juan; that the original applicant Pedro O.
Fragante was a Filipino Citizen at the time of his death; and that his intestate estate is financially capable
of maintaining the proposed service". The commission, therefore, overruled the opposition filed in the
case and ordered "that under the provisions of section 15 of Commonwealth Act No. 146, as amended a
certificate of public convenience be issued to the Intestate Estate of the deceased Pedro Fragante,
authorizing said Intestate Estate through its Special or Judicial Administrator, appointed by the proper
court of competent jurisdiction, to maintain and operate an ice plant with a daily productive capacity of
two and one-half (2-1/2) tons in the Municipality of San Juan and to sell the ice produced from said plant
in the said Municipality of San Juan and in the Municipality of Mandaluyong, Rizal, and in Quezon City",
subject to the conditions therein set forth in detail (petitioner's brief, pp. 33-34).
Petitioner makes four assignments of error in his brief as follows:
1. The decision of the Public Service Commission is not in accordance with law.
2. The decision of the Public Service Commission is not reasonably supported by evidence.
3. The Public Service Commission erred in not giving petitioner and the Ice and Cold Storage
Industries of the Philippines, Inc., as existing operators, a reasonable opportunity to meet the
increased demand.
4. The decision of the Public Service Commission is an unwarranted departure from its
announced policy with respect to the establishment and operation of ice plant. (Pp. 1-2,
petitioner's brief.)
In his argument petitioner contends that it was error on the part of the commission to allow the
substitution of the legal representative of the estate of Pedro O. Fragante for the latter as party applicant
in the case then pending before the commission, and in subsequently granting to said estate the
certificate applied for, which is said to be in contravention of law.
If Pedro O. Fragante had not died, there can be no question that he would have had the right to
prosecute his application before the commission to its final conclusion. No one would have denied him
that right. As declared by the commission in its decision, he had invested in the ice plant in question P
35,000, and from what the commission said regarding his other properties and business, he would
certainly have been financially able to maintain and operate said plant had he not died. His transportation
business alone was netting him about P1,440 a month. He was a Filipino citizen and continued to be
such till his demise. The commission declared in its decision, in view of the evidence before it, that his
estate was financially able to maintain and operate the ice plant. The aforesaid right of Pedro O. Fragante
to prosecute said application to its conclusion was one which by its nature did not lapse through his
death. Hence, it constitutes a part of the assets of his estate, for which a right was property despite the
possibility that in the end the commission might have denied application, although under the facts of the
case, the commission granted the application in view of the financial ability of the estate to maintain and
operate the ice plant. Petitioner, in his memorandum of March 19, 1947, admits (page 3) that the
certificate of public convenience once granted "as a rule, should descend to his estate as an asset". Such
certificate would certainly be property, and the right to acquire such a certificate, by complying with the
requisites of the law, belonged to the decedent in his lifetime, and survived to his estate and judicial
administrator after his death.
If Pedro O. Fragrante had in his lifetime secured an option to buy a piece of land and during the life of the
option he died, if the option had been given him in the ordinary course of business and not out of special
consideration for his person, there would be no doubt that said option and the right to exercise it would
have survived to his estate and legal representatives. In such a case there would also be the possibility
of failure to acquire the property should he or his estate or legal representative fail to comply with the
conditions of the option. In the case at bar Pedro O. Fragrante's undoubted right to apply for and acquire
the desired certificate of public convenience — the evidence established that the public needed the ice
plant — was under the law conditioned only upon the requisite citizenship and economic ability to
maintain and operate the service. Of course, such right to acquire or obtain such certificate of public
convenience was subject to failure to secure its objective through nonfulfillment of the legal conditions,
but the situation here is no different from the legal standpoint from that of the option in the illustration just
given.
Rule 88, section 2, provides that the executor or administrator may bring or defend actions, among other
cases, for the protection of the property or rights of the deceased which survive, and it says that such
actions may be brought or defended "in the right of the deceased".
Rule 82, section 1, paragraph (a), mentions among the duties of the executor or administrator, the
making of an inventory of all goods, chattels, rights, credits, and estate of the deceased which shall come
to his possession or knowledge, or to the possession of any other person for him.
In his commentaries on the Rules of Court (Volume II, 2nd ed., pages 366, 367) the present chief Justice
of this Court draws the following conclusion from the decisions cited by him:
Therefore, unless otherwise expressly provided by law, any action affecting the property
or rights (emphasis supplied) of a deceased person which may be brought by or against him if
he were alive, may likewise be instituted and prosecuted by or against the administrator,
unless the action is for recovery of money, debt or interest thereon, or unless, by its very
nature, it cannot survive, because death extinguishes the right . . . .
It is true that a proceeding upon the application for a certificate of public convenience before the Public
Service Commission is not an "action". But the foregoing provisions and citations go to prove that the
decedent's rights which by their nature are not extinguished by death go to make up a part and parcel of
the assets of his estate which, being placed under the control and management of the executor or
administrator, can not be exercised but by him in representation of the estate for the benefit of the
creditors, devisees or legatees, if any, and the heirs of the decedent. And if the right involved happens to
consist in the prosecution of an unfinished proceeding upon an application for a certificate of public
convenience of the deceased before the Public Service Commission, it is but logical that the legal
representative be empowered and entitled in behalf of the estate to make the right effective in that
proceeding.
Manresa (Vol. III, 6th ed., p. 11) says that No. 10 of article 334 and article 336 of the Civil Code,
respectively, consider as immovable and movable things rights which are not material. The same eminent
commentator says in the cited volume (p. 45) that article 336 of the Civil Code has been deficiently
drafted in that it is not sufficiently expressive of all incorporeal rights which are also property for juridical
purposes.
Corpus Juris (Vol. 50, p. 737) states that in the broad sense of the term, property includes, among other
things, "an option", and "the certificate of the railroad commission permitting the operation of a bus line",
and on page 748 of the same volume we read:
However, these terms (real property, as estate or interest) have also been declared to include
every species of title, inchoate or complete, and embrace rights which lie in contract, whether
executory or executed. (Emphasis supplied.)
Another important question raised by petitioner is whether the estate of Pedro O. Fragrante is a "person"
within the meaning of the Public Service Act.
Words and Phrases, First Series, (Vol. 6, p, 5325), states the following doctrine in the jurisdiction of the
State of Indiana:
As the estate of the decedent is in law regarded as a person, a forgery committed after the
death of the man whose name purports to be signed to the instrument may be prosecuted as
with the intent to defraud the estate. Billings vs. State, 107 Ind., 54, 55, 6 N. E. 914, 7 N. E.
763, 57 Am. Rep. 77.
The Supreme Court of Indiana in the decision cited above had before it a case of forgery committed after
the death of one Morgan for the purpose of defrauding his estate. The objection was urged that the
information did not aver that the forgery was committed with the intent to defraud any person. The Court,
per Elliott, J., disposed of this objection as follows:
. . . The reason advanced in support of this proposition is that the law does not regard the
estate of a decedent as a person. This intention (contention) cannot prevail. The estate of the
decedent is a person in legal contemplation. "The word "person" says Mr. Abbot, "in its legal
signification, is a generic term, and includes artificial as well as natural persons," 2 Abb. Dict.
271; Douglas vs. Pacific, etc. Co., 4 Cal. 304; Planters', etc., Bank vs. Andrews, 8 Port. (Ala.)
404. It said in another work that 'persons are of two kinds: natural and artificial. A natural
person is a human being. Artificial persons include (1) a collection or succession of natural
persons forming a corporation; (2) a collection of property to which the law attributes the
capacity of having rights and duties. The latter class of artificial persons is recognized only to
a limited extent in our law. "Examples are the estate of a bankrupt or deceased person." 2
Rapalje & L. Law Dict. 954. Our own cases inferentially recognize the correctness of the
definition given by the authors from whom we have quoted, for they declare that it is
sufficient, in pleading a claim against a decedent's estate, to designate the defendant as the
estate of the deceased person, naming him. Ginn vs. Collins, 43 Ind. 271. Unless we accept
this definition as correct, there would be a failure of justice in cases where, as here, the
forgery is committed after the death of a person whose name is forged; and this is a result to
be avoided if it can be done consistent with principle. We perceive no difficulty in avoiding
such a result; for, to our minds, it seems reasonable that the estate of a decedent should be
regarded as an artificial person. It is the creation of law for the purpose of enabling a
disposition of the assets to be properly made, and, although natural persons as heirs,
devises, or creditors, have an interest in the property, the artificial creature is a distinct legal
entity. The interest which natural persons have in it is not complete until there has been a due
administration; and one who forges the name of the decedent to an instrument purporting to
be a promissory note must be regarded as having intended to defraud the estate of the
decedent, and not the natural persons having diverse interests in it, since ha cannot be
presumed to have known who those persons were, or what was the nature of their respective
interest. The fraudulent intent is against the artificial person, — the estate — and not the
natural persons who have direct or contingent interest in it. (107 Ind. 54, 55, 6 N.E. 914-915.)
In the instant case there would also be a failure of justice unless the estate of Pedro O. Fragrante is
considered a "person", for quashing of the proceedings for no other reason than his death would entail
prejudicial results to his investment amounting to P35,000.00 as found by the commission, not counting
the expenses and disbursements which the proceeding can be presumed to have occasioned him during
his lifetime, let alone those defrayed by the estate thereafter. In this jurisdiction there are ample
precedents to show that the estate of a deceased person is also considered as having legal personality
independent of their heirs. Among the most recent cases may be mentioned that of "Estate of Mota vs.
Concepcion, 56 Phil., 712, 717, wherein the principal plaintiff was the estate of the deceased Lazaro
Mota, and this Court gave judgment in favor of said estate along with the other plaintiffs in these words:
. . . the judgment appealed from must be affirmed so far as it holds that defendants
Concepcion and Whitaker are indebted to he plaintiffs in the amount of P245,804.69 . . . .
Under the regime of the Civil Code and before the enactment of the Code of Civil Procedure, the heirs of
a deceased person were considered in contemplation of law as the continuation of his personality by
virtue of the provision of article 661 of the first Code that the heirs succeed to all the rights and
obligations of the decedent by the mere fact of his death. It was so held by this Court in Barrios vs. Dolor,
2 Phil., 44, 46. However, after the enactment of the Code of Civil Procedure, article 661 of the Civil Code
was abrogated, as held in Suiliong & Co. vs. Chio-Taysan, 12 Phil., 13, 22. In that case, as well as in
many others decided by this Court after the innovations introduced by the Code of Civil Procedure in the
matter of estates of deceased persons, it has been the constant doctrine that it is the estate or the mass
of property, rights and assets left by the decedent, instead of the heirs directly, that becomes vested and
charged with his rights and obligations which survive after his demise.
The heirs were formerly considered as the continuation of the decedent's personality simply by legal
fiction, for they might not have been flesh and blood — the reason was one in the nature of a legal
exigency derived from the principle that the heirs succeeded to the rights and obligations of the decedent.
Under the present legal system, such rights and obligations as survive after death have to be exercised
and fulfilled only by the estate of the deceased. And if the same legal fiction were not indulged, there
would be no juridical basis for the estate, represented by the executor or administrator, to exercise those
rights and to fulfill those obligations of the deceased. The reason and purpose for indulging the fiction is
identical and the same in both cases. This is why according to the Supreme Court of Indiana in
Billings vs. State, supra, citing 2 Rapalje & L. Dictionary, 954, among the artificial persons recognized by
law figures "a collection of property to which the law attributes the capacity of having rights and duties",
as for instance, the estate of a bankrupt or deceased person.
Petitioner raises the decisive question of whether or not the estate of Pedro O. Fragrante can be
considered a "citizen of the Philippines" within the meaning of section 16 of the Public Service Act, as
amended, particularly the proviso thereof expressly and categorically limiting the power of the
commission to issue certificates of public convenience or certificates of public convenience and necessity
"only to citizens of the Philippines or of the United States or to corporations, copartnerships, associations,
or joint-stock companies constituted and organized under the laws of the Philippines", and the further
proviso that sixty per centum of the stock or paid-up capital of such entities must belong entirely to
citizens of the Philippines or of the United States.
Within the Philosophy of the present legal system, the underlying reason for the legal fiction by which, for
certain purposes, the estate of the deceased person is considered a "person" is the avoidance of
injustice or prejudice resulting from the impossibility of exercising such legal rights and fulfilling such legal
obligations of the decedent as survived after his death unless the fiction is indulged. Substantially the
same reason is assigned to support the same rule in the jurisdiction of the State of Indiana, as
announced in Billings vs. State, supra, when the Supreme Court of said State said:
. . . It seems reasonable that the estate of a decedent should be regarded as an artificial
person. it is the creation of law for the purpose of enabling a disposition of the assets to be
properly made . . . .
Within the framework and principles of the constitution itself, to cite just one example, under the bill of
rights it seems clear that while the civil rights guaranteed therein in the majority of cases relate to natural
persons, the term "person" used in section 1 (1) and (2) must be deemed to include artificial or juridical
persons, for otherwise these latter would be without the constitutional guarantee against being deprived
of property without due process of law, or the immunity from unreasonable searches and seizures. We
take it that it was the intendment of the framers to include artificial or juridical, no less than natural,
persons in these constitutional immunities and in others of similar nature. Among these artificial or
juridical persons figure estates of deceased persons. Hence, we hold that within the framework of the
Constitution, the estate of Pedro O. Fragrante should be considered an artificial or juridical person for the
purposes of the settlement and distribution of his estate which, of course, include the exercise during the
judicial administration thereof of those rights and the fulfillment of those obligations of his which survived
after his death. One of those rights was the one involved in his pending application before the Public
Service Commission in the instant case, consisting in the prosecution of said application to its final
conclusion. As stated above, an injustice would ensue from the opposite course.
How about the point of citizenship? If by legal fiction his personality is considered extended so that any
debts or obligations left by, and surviving, him may be paid, and any surviving rights may be exercised for
the benefit of his creditors and heirs, respectively, we find no sound and cogent reason for denying the
application of the same fiction to his citizenship, and for not considering it as likewise extended for the
purposes of the aforesaid unfinished proceeding before the Public Service Commission. The outcome of
said proceeding, if successful, would in the end inure to the benefit of the same creditors and the heirs.
Even in that event petitioner could not allege any prejudice in the legal sense, any more than he could
have done if Fragrante had lived longer and obtained the desired certificate. The fiction of such extension
of his citizenship is grounded upon the same principle, and motivated by the same reason, as the fiction
of the extension of personality. The fiction is made necessary to avoid the injustice of subjecting his
estate, creditors and heirs, solely by reason of his death to the loss of the investment amounting to
P35,000, which he has already made in the ice plant, not counting the other expenses occasioned by the
instant proceeding, from the Public Service Commission of this Court.
We can perceive no valid reason for holding that within the intent of the constitution (Article IV), its
provisions on Philippine citizenship exclude the legal principle of extension above adverted to. If for
reasons already stated our law indulges the fiction of extension of personality, if for such reasons the
estate of Pedro O. Fragrante should be considered an artificial or juridical person herein, we can find no
justification for refusing to declare a like fiction as to the extension of his citizenship for the purposes of
this proceeding.
Pedro O. Fragrante was a Filipino citizen, and as such, if he had lived, in view of the evidence of record,
he would have obtained from the commission the certificate for which he was applying. The situation has
suffered but one change, and that is, his death. His estate was that of a Filipino citizen. And its economic
ability to appropriately and adequately operate and maintain the service of an ice plant was the same that
it received from the decedent himself. In the absence of a contrary showing, which does not exist here,
his heirs may be assumed to be also Filipino citizens; and if they are not, there is the simple expedient of
revoking the certificate or enjoining them from inheriting it.
Upon the whole, we are of the opinion that for the purposes of the prosecution of said case No. 4572 of
the Public Service Commission to its final conclusion, both the personality and citizenship of Pedro O.
Fragrante must be deemed extended, within the meaning and intent of the Public Service Act, as
amended, in harmony with the constitution: it is so adjudged and decreed.
Decision affirmed, without costs. So ordered.
G.R. No. L-2832 November 24, 1906
REV. JORGE BARLIN, in his capacity as apostolic administrator of this vacant bishopric and legal
representative of the general interests of the Roman Catholic Apostolic Church in the diocese of
Nueva Caceres, plaintiff-appellee,
vs.
P. VICENTE RAMIREZ, ex-rector of the Roman Catholic Apostolic Parochial Church of Lagonoy,
AND THE MUNICIPALITY OF LAGONOY, defendants-appellants.
WILLARD, J.:
There had been priests of the Roman Catholic Church in the pueblo of Lagonoy, in the Province of
Ambos Camarines, since 1839. On the 13th of January, 1869, the church and convent were burned. They
were rebuilt between 1870 and 1873. There was evidence that this was done by the order of the
provincial governor. The labor necessary for this reconstruction was performed by the people of the
pueblo the direction of the cabeza de barangay. Under the law then in force, each man in the pueblo was
required to work for the government, without compensation, for forty days every year. The time spent in
the reconstruction of these buildings was counted as a part of the forty days. The material necessary was
brought and paid for in part by the parish priest from the funds of the church and in part was donated by
certain individuals of the pueblo. After the completion of the church it was always administered, until
November 14, 1902, by a priest of a Roman Catholic Communion and all the people of the pueblo
professed that faith and belonged to that church.
The defendant, Ramirez, having been appointed by the plaintiff parish priest, took possession of the
church on the 5th of July, 1901. he administered it as such under the orders of his superiors until the 14th
day of November, 1902. His successor having been then appointed, the latter made a demand on this
defendant for the delivery to him of the church, convent, and cemetery, and the sacred ornaments, books,
jewels, money, and other property of the church. The defendant, by a written document of that date,
refused to make such delivery. That document is as follows:
At 7 o'clock last night I received through Father Agripino Pisino your respected order of the
12th instant, wherein I am advised of the appointment of Father Pisino as acting parish priest
of this town, and directed to turn over to him this parish and to report to you at the vicarage. In
reply thereto, I have the honor to inform you that the town of Lagonoy, in conjunction with the
parish priest thereof, has seen fit to sever connection with the Pope at Rome and his
representatives in these Islands, and join the Filipino Church, the head of which is at Manila.
This resolution of the people was reduced to writing and triplicate copies made, of which I beg
to inclose a copy herewith.
For this reason I regret to inform you that I am unable to obey your said order by delivering to
Father Agripino Pisino the parish property of Lagonoy which, as I understand, is now outside
of the control of the Pope and his representatives in these Islands. May God guard you many
years.
Lagonoy, November 14, 1902.
(Signed) VICENTE RAMIREZ.
RT. REV. VICAR OF THIS DISTRICT.
The document, a copy of which is referred to in this letter, is as follows:
LAGONOY, November, 9, 1902.
The municipality of this town and some of its most prominent citizens having learned through
the papers from the capital of these Islands of the constitution of the Filipino National Church,
separate from the control of the Pope at Rome by reason of the fact that the latter has
refused to either recognize or grant the rights to the Filipino clergy which have many times
been urged, and it appearing to us that the reasons advanced why such offices should be
given to the Filipino clergy are evidently well-founded, we have deemed it advisable to consult
with the parish priest of this town as to whether it would be advantageous to join the said
Filipino Church and to separate from the control of the Pope as long as he continues to ignore
the rights of the said Filipino clergy, under the conditions that there will be no change in the
articles of faith, and that the sacraments and other dogmas will be recognized and particularly
that of the immaculate conception of the mother of our Lord. But the moment the Pope at
Rome recognizes and grants the rights heretofore denied to the Filipino clergy we will return
to his control. In view of this, and subject to this condition, the reverend parish priest, together
with the people of the town, unanimously join in declaring that from this date they separate
themselves from the obedience and control of the Pope and join the Filipino National Church.
This assembly and the reverend parish priest have accordingly adopted this resolution written
in triplicate, and resolved to send a copy thereof to the civil government of this province for its
 information, and do sign the same below. Vicente Ramirez, Francisco Israel, Ambrosio
Bocon, Florentino Relloso, Macario P. Ledesma, Cecilio Obias, Balbino Imperial, Juan
Preseñada, Fernando Deudor, Mauricio Torres, Adriano Sabater.
At the meeting at which the resolution spoken of in this document was adopted, there were present about
100 persons of the pueblo. There is testimony in the case that the population of the pueblo was at that
time 9,000 and that all but 20 of the inhabitants were satisfied with the action there taken. Although it is of
no importance in the case, we are inclined to think that the testimony to this effect merely means that
about 100 of the principal men of the town were in favor of the resolution and about 20 of such principal
men were opposed to it. After the 14th of November, the defendant, Ramirez, continued in the
possession of the church and other property and administered the same under the directions of his
superior, the Obispo Maximo of the Independent Filipino Church. The rites and ceremonies and the
manner of worship were the same after the 14th day of November as they were before, but the relations
between the Roman Catholic Church and the defendant had been entirely severed.
In January, 1904, the plaintiff brought this action against the defendant, Ramirez, alleging in his amended
complaint that the Roman Catholic Church was the owner of the church building, the convent, cemetery,
the books, money, and other property belonging thereto, and asking that it be restored to the possession
thereof and that the defendant render an account of the property which he had received and which was
retained by him, and for other relief.
The answer of the defendant, Ramirez, in addition to a general denial of the allegation of the complaint,
admitted that he was in the possession and administration of the property described therein with the
authority of the municipality of Lagonoy and of the inhabitants of the same, who were the lawful owners
of the said property. After this answer had been presented, and on the 1st day of November, 1904, the
municipality of Lagonoy filed a petition asking that it be allowed to intervene in the case and join with the
defendant, Ramirez, as a defendant therein. This petition been granted, the municipality of the 1st day of
December filed an answer in which it alleged that the defendant, Ramirez, was in possession of the
property described in the complaint under the authority and with the consent of the municipality of
Lagonoy and that such municipality was the owner thereof.
Plaintiff answered this complaint, or answer in intervention, and the case was tried and final judgment in
entered therein in favor of the plaintiff and against the defendants. The defendants then brought the case
here by a bill of exceptions.
That the person in the actual possession of the church and other property described in the complaint is
the defendant, Ramirez, is plainly established by the evidence. It does not appear that the municipality,
as a corporate body, ever took any action in reference to this matter until they presented their petition for
intervention in this case. In fact, the witnesses for the defense, when they speak of the ownership of the
buildings, say that they are owned by the people of the pueblo, and one witness, the president, said that
the municipality as a corporation had nothing whatever to do with the matter. That the resolution adopted
on the 14th of November, and which has been quoted above, was not the action of the municipality, as
such, is apparent from an inspection thereof.
The witnesses for the defenses speak of a delivery of the church by the people of the pueblo to the
defendant, Ramirez, but there is no evidence in the case of any such delivery. Their testimony in regard
to the delivery always refers to the action taken on the 14th of November, a record of which appears that
in the document above quoted. It is apparent that the action taken consisted simply in separating
themselves from the Roman Catholic Church, and nothing is said therein in reference to the material
property then in possession of the defendant, Ramirez.
There are several grounds upon which this judgment must be affirmed.
(1) As to the defendant, Ramirez, it appears that he took possession of the property as the servant or
agent of the plaintiff. The only right which he had to the possession at the time he took it, was the right
which was given to him by the plaintiff, and he took possession under the agreement to return that
possession whenever it should be demanded of him. Under such circumstances he will not be allowed,
when the return of such possession is demanded by him the plaintiff, to say that the plaintiff is not the
owner of the property and is not entitled to have it delivered back to him. The principle of law that a tenant
can not deny his landlord's title, which is found in section 333, paragraph 2, of the Code of Civil
Procedure, and also in the Spanish law, is applicable to a case of this kind. An answer of the defendant,
Ramirez, in which he alleged that he himself was the owner of the property at the time he received it from
the plaintiff, or in which he alleged that the pueblo was the owner of the property at that time, would
constitute no defense. There is no claim made by him that since the delivery of the possession of the
property to him by the plaintiff he has acquired the title thereto by other means, nor does he is own behalf
make any claim whatever either to the property or to the possession thereof.
(2) The municipality of Lagonoy, in its answer, claims as such, to be the owner of the property. As we
have said before, the evidence shows that it never was in the physical possession of the property. But
waiving this point and assuming that the possession of Ramirez, which he alleges in his answer is the
possession of the municipality, gives the municipality the rights of a possessor, the question still arises,
Who has the better right to the present possession of the property? The plaintiff, in 1902, had been in the
lawful possession thereof for more than thirty years and during all that time its possession had never
been questioned or disturbed. That possession has been taken away from it and it has the right now to
recover the possession from the persons who have so deprived it of such possession, unless the latter
can show that they have a better right thereto. This was the preposition which was discussed and settled
in the case of Bishop of Cebu vs. Mangaron, 1No. 1748, decided June 1, 1906. That decision holds that
as against one who has been in possession for the length of the plaintiff has been in possession, and
who had been deprived of his possession, and who can not produce any written evidence of title, the
mere fact that the defendant is in possession does not entitle the defendant to retain that possession. In
order that he may continue in possession, he must show a better right thereto.
The evidence in this case does not show that the municipality has, as such, any right of whatever in the
property in question. It has produced no evidence of ownership. Its claim of ownership is rested in its
brief in this court upon the following propositions: That the property in question belonged prior to the
treaty of Paris to the Spanish Government; that by the treaty of Paris the ownership thereof passed to the
Government of the United States; that by section 12 of the act of Congress of July 1, 1902, such property
was transferred to the Government of the Philippine Islands, and that by the circular of that Government,
dated November 11, 1902, the ownership and the right to the possession of this property passed to the
municipality of Lagonoy. If, for the purposes of the argument, we should admit that the other propositions
are true, there is no evidence whatever to support the last proposition, namely that the Government of
the Philippine Islands has transferred the ownership of this church to the municipality of Lagonoy. We
have found no circular of the date above referred to. The one of February 10, 1903, which is probably the
one intended, contains nothing that indicates any such transfer. As to the municipality of Lagonoy,
therefore, it is very clear that it has neither title, ownership, nor right of possession.
(3) We have said that it would have no such title or ownership ever admitting that the Spanish
Government was the owner of the property and it has passed by the treaty of Paris to the American
Government. But this assumption is not true. As a matter of law, the Spanish Government at the time the
treaty of peace was signed, was not the owner of this property, nor of any other property like it, situated in
the Philippine Islands.
It does not admit of doubt that from the earliest times the parish churches in the Philippine Islands were
built by the Spanish Government. Law 2, title 2, book 1, of the Compilation of the Laws of the Indies is, in
part, as follows:
Having erected all the churches, cathedrals, and parish houses of the Spaniards and natives
of our Indian possessions from their discovery at the cost and expense of our royal treasury,
and applied for their service and maintenance the part of the tithes belonging to us by
apostolic concession according to the division we have made.
Law 3 of the same title to the construction of parochial churches such as the one in question. That law is
as follows:
The parish churches which was erected in Spanish towns shall be of durable and decent
construction. Their costs shall be divided and paid in three parts: One by our royal treasury,
another by the residents and Indian encomenderos of the place where such churches are
constructed, and the other part by the Indians who abide there; and if within the limits of a
city, village, or place there should be any Indians incorporated to our royal crown, we
 command that for our part there be contributed the same amount as the residents
and encomenderos, respectively, contribute; and the residents who have no Indians shall also
contribute for this purpose in accordance with their stations and wealth, and that which is so
given shall be deducted from the share of the Indians should pay.1âwphil.net
Law 11 of the same title is as follows:
We command that the part of the tithes which belongs to the fund for the erection of churches
shall be given to their superintendents to be expended for those things necessary for these
churches with the advice of the prelates and officials, and by their warrants, and not
otherwise. And we request and charge the archbishops and bishops not to interfere in the
collection and disbursement thereof, but to guard these structures.
Law 4, title 3, book 6, is as follows:
In all settlements, even though the Indians are few, there shall be erected a church where
mass can be decently held, and it shall have a donor with a key, notwithstanding the fact that
it be the subject to or separate from a parish.
Not only were all the parish churches in the Philippines erected by the King and under his direction, but it
was made unlawful to erect a church without the license of the King. This provision is contained in Law 2,
title 6, book 1, which is as follows:
Whereas it is our intention to erect, institute, found, and maintain all cathedrals, parish
churches, monasteries, votive hospitals, churches, and religious and pious establishments
where they are necessary for the teaching, propagation, and preaching of the doctrine of our
sacred Roman Catholic faith, and to aid to this effect with out royal treasury whenever
possible, and to receive information of such places where they should be founded and are
necessary, and the ecclesiastical patronage of all our Indies belonging to us:
We command that there shall not be erected, instituted, founded, or maintained any
cathedral, parish church, monastery, hospital, or votive churches, or other pious or religious
establishment without our express permission as is provided in Law 1, title 2, and Law 1, title
3, of this book, notwithstanding any permission heretofore given by our viceroy or other
ministers, which in this respect we revoke and make null, void, and of no effect.
By agreement at an early date between the Pope and the Crown of Spain, all tithes in the Indies were
given by the former to the latter and the disposition made the King of the fund thus created is indicated by
Law 1, title 16, book 1, which is as follows:
Whereas the ecclesiastical tithes from the Indies belong to us by the apostolic concessions of
the supreme pontiffs, we command the officials of our royal treasury of those provinces to
collect and cause to be collected all tithes due and to become due from the crops and flocks
of the residents in the manner in which it has been the custom to pay the same, and from
these tithes the churches shall be provided with competent persons of good character to
serve them and with all ornaments and things which may be necessary for divine worship, to
the end that these churches may be well served and equipped, and we shall be informed of
God, our Lord; this order shall be observed where the contrary has not already been directed
by us in connection with the erection of churches.
That the condition of things existing by virtue of the Laws of the Indies was continued to the present time
is indicated by the royal order of the 31st of January, 1856, and by the royal order of the 13th of August,
1876, both relating to the construction and repair of churches, there being authority for saying that the
latter order was in force in the Philippines.
This church, and other churches similarly situated in the Philippines, having been erected by the Spanish
Government, and under its direction, the next question to be considered is, To whom did these churches
belong?
Title 28 of the third partida is devoted to the ownership of things and, after discussing what can be called
public property and what can be called private property, speaks, in Law 12, of those things which are
sacred, religious, or holy. That law is as follows:
Law XII. — HOW SACRED OR RELIGIOUS THINGS CAN NOT BE OWNED BY ANY
PERSON.
No sacred, religious, or holy thing, devoted to the service of God, can be the subject of
ownership by any man, nor can it be considered as included in his property holdings.
Although the priests may have such things in their possession, yet they are not the owners
thereof. They, hold them thus as guardians or servants, or because they have the care of the
same and serve God in or without them. Hence they were allowed to take from the revenues
of the church and lands what was reasonably necessary for their support; the balance,
belonging to God, was to be devoted to pious purposes, such as the feeding and clothing of
the poor, the support of orphans, the marrying of poor virgins to prevent their becoming evil
women because of their poverty, and for the redemption of captives and the repairing of the
churches, and the buying of chalices, clothing, books, and others things which they might be
in need of, and other similar charitable purposes.
And then taking up for consideration the first of the classes in to which this law has divided these things,
it defines in Law 13, title 28, third partida, consecrated things. That law is as follows:
Sacred things, we say, are those which are consecrated by the bishops, such as churches,
the altars therein, crosses, chalices, censers, vestments, books, and all other things which
are in tended for the service of the church, and the title to these things can not be alienated
except in certain specific cases as we have already shown in the first partida of this book by
the laws dealing with this subject. We say further that even where a consecrated church is
razed, the ground upon which it formerly stood shall always be consecrated ground. But if any
consecrated church should fall into the hands of the enemies of our faith it shall there and
then cease to be sacred as long as the enemy has it under control, although once recovered
by the Christians, it will again become sacred, reverting to its condition before the enemy
seized it and shall have all the right and privileges formerly belonging to it.
That the principles of the partida in reference to churches still exist is indicated by Sanchez Roman,
whose work on the Civil Law contains the following statement:
First Group. Spiritual and corporeal or ecclesiastical. A. Spiritual. — From early times
distinction has been made by authors and by law between things governed by divine law,
called divine, and those governed by human law, called human, and although the former can
not be the subject of civil juridical relations, their nature and species should be ascertained
either to identify them and exclude them from such relations or because they furnish a
complete explanation of the foregoing tabulated statement, or finally because the laws of
the partida deal with them.
Divine things are those which are either directly or indirectly established by God for his service and
sanctification of men and which are governed by divine or canonical laws. This makes it necessary to
divide them into spiritual things, which are those which have a direct influence on the religious
redemption of man such as the sacrament, prayers, fasts, indulgences, etc., and corporeal or
ecclesiastical, which are those means more or less direct for the proper religious salvation of man.
7. First Group. Divine things. B. Corporeal or ecclesiastical things (sacred, religious, holy, and
temporal belonging to the church). — Corporeal or ecclesiastical things are so divided.
 (a) Sacred things are those devoted to God, religion, and worship in general, such as
temples, altars, ornaments, etc. These things can not be alienated except for some pious
purpose and in such cases as are provided for in the laws, according to which their control
pertains to the ecclesiastical authorities, and in so far as their use is concerned, to the
believers and the clergy. (2 Derecho Civil Español, Sanchez Roman, p. 480; 8 Manresa,
Commentaries on the Spanish Civil Code, p. 636; 3 Alcubilla, Diccionario de la Administracion
Española, p. 486.)
The partidas defined minutely what things belonged to the public in general and what belonged to private
persons. In the first group churches are not named. The present Civil Code declares in article 338 that
property is of public or private ownership. Article 339, which defines public property, is as follows:
Property of public ownership is —
1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges
constructed by the State, and banks, shores, roadsteads, and that of similar character.
2. That belonging exclusively to the state without being for public use and which is destined to
some public service, or to the development of the national wealth, such as walls, fortresses,
and other works for the defense of the territory, and mines, until their concession has been
granted.
The code also defines the property of provinces and of pueblos, and in defining what property is of public
use, article 344 declares as follows:
Property for public use in provinces and in towns comprises the provincial and town roads,
the squares, streets, fountains, and public waters, the promenades, and public works of
general service supported by the said towns or provinces.
All other property possessed by either is patrimonial, and shall be governed by the provisions
of this code, unless otherwise prescribe in special laws.
It will be noticed that in either one of these articles is any mention made of churches. When the Civil
Code undertook to define those things in a pueblo which were for the common use of the inhabitants of
the pueblo, or which belonged to the State, while it mentioned a great many other things, it did not
mention churches.
It has been said that article 25 of the Regulations for the Execution of the Mortgage Law indicates that
churches belong to the State and are public property. That article is as follows:
There shall be excepted from the record required by article 2 of the law:
First. Property which belongs exclusively to the eminent domain of the State, and which is for
the use of all, such as the shores of the sea, islands, rivers and their borders, wagon roads,
and the roads of all kinds, with the exception of railroads; streets, parks, public promenades,
and commons of towns, provided they are not lands of common profit to the inhabitants; walls
of cities and parks, ports, and roadsteads, and any other analogous property during the time
they are in common and general use, always reserving the servitudes established by law on
the shores of the sea and borders of navigable rivers.
Second. Public temples dedicated to the Catholic faith.
A reading of this article shows that far from proving that churches belong to the State and to the eminent
domain thereof, it proves the contrary, for, if they had belonged to the State, they would have been
included in the first paragraph instead of being placed in a paragraph by themselves.
The truth is that, from the earliest times down to the cession of the Philippines to the United States,
churches and other consecrated objects were considered outside of the commerce of man. They were
not public property, nor could they be subjects of private property in the sense that any private person
could the owner thereof. They constituted a kind of property distinctive characteristic of which was that it
was devoted to the worship of God.
But, being material things was necessary that some one should have the care and custody of them and
the administration thereof, and the question occurs, To whom, under the Spanish law, was intrusted that
possession and administration? For the purposes of the Spanish law there was only one religion. That
was the religion professed by the Roman Catholic Church. It was for the purposes of that religion and for
the observance of its rites that this church and all other churches in the Philippines were erected. The
possession of the churches, their care and custody, and the maintenance of religious worship therein
were necessarily, therefore, intrusted to that body. It was, by virtue of the laws of Spain, the only body
which could under any circumstances have possession of, or any control over, any church dedicated to
the worship of God. By virtue of those laws this possession and right of control were necessarily
exclusive. It is not necessary or important to give any name to this right of possession and control
exercised by the Roman Catholic Church in the church buildings of the Philippines prior to 1898. It is not
necessary to show that the church as a juridical person was the owner of the buildings. It is sufficient to
say that this right to the exclusive possession and control of the same, for the purposes of its creation,
existed.
The right of patronage, existing in the King of Spain with reference to the churches in the Philippines, did
not give him any right to interfere with the material possession of these buildings.
Title 6 of book 1 of the Compilation of the laws of the Indies treats Del Patronazgo Real de las Indias.
There is nothing in any one of the fifty-one laws which compose this title which in any way indicates that
the King of Spain was the owner of the churches in the Indies because he had constructed them. These
laws relate to the right of presentation to ecclesiastical charges and offices. For example, Law 49 of the
title commences as follows:
Because the patronage and right of presentation of all archbishops, bishops, dignitaries,
prevents, curates, and doctrines and all other beneficiaries and ecclesiastical offices
whatsoever belong to us, no other person can obtain or possess the same without our
presentation as provided in Law 1 and other laws of this title.
Title 15 of the first partida treats of the right of patronage vesting in private persons, but there is nothing
in any one of its fifteen laws which in any way indicates that the private patron is the owner of the church.
When it is said that this church never belonged to the Crown of Spain, it is not intended to say that the
Government and had no power over it. It may be that by virtue of that power of eminent domain which is
necessarily resides in every government, it might have appropriated this church and other churches, and
private property of individuals. But nothing of this kind was ever attempted in the Philippines.
It, therefore, follows that in 1898, and prior to the treaty of Paris, the Roman Catholic Church had by law
the exclusive right to the possession of this church and it had the legal right to administer the same for
the purposes for which the building was consecrated. It was then in the full and peaceful possession of
the church with the rights aforesaid. That these rights were fully protected by the treaty of Paris is very
clear. That treaty, in article 8, provides, among other things, as follows:
And it is hereby declared that the relinquishment or cession, as the case may be, to which the
preceding paragraph refers, can not in any respect impair the property or rights which by law
belong to the peaceful possession of property of all kinds, or provinces, municipalities, public
or private establishments, ecclesiastical or civic bodies, or any other associations having legal
capacity to acquire and possess property in the aforesaid territories renounced or ceded, or of
private individuals, or whatsoever nationality such individuals may be.
It is not necessary, however, to invoke the provisions of that treaty. Neither the Government of the United
States, nor the Government of these Islands, has ever attempted in any way to interfere with the rights
which the Roman Catholic Church had in this building when Spanish sovereignty ceased in the
Philippines. Any interference that has resulted has been caused by private individuals, acting without any
authority from the Government.
No point is made in the brief of the appellant that any distinction should be made between the church and
the convent. The convent undoubtedly was annexed to the church and, as to it, the provisions of Law 19,
title 2, book 1, of the Compilation of the Laws of the Indies would apply. That law is as follows:
We command that the Indians of each town or barrio shall construct such houses as may be
deemed sufficient in which the priests of such towns or barrios may live comfortably adjoining
the parish church of the place where that may be built for the benefit of the priests in charge
of such churches and engaged in the education and conversion of their Indian parishioners,
and they shall not be alienated or devoted to any other purpose.
The evidence in this case makes no showing in regard to the cemetery. It is always mentioned in
connection with the church and convent and no point is made by the possession of the church and
convent, he is not also entitled to recover possession of the cemetery. So, without discussing the
question as to whether the rules applicable to churches are all respects applicable to cemeteries, we hold
for the purpose of this case that the plaintiff has the same right to the cemetery that he has to the church.
(4) It is suggested by the appellant that the Roman Catholic Church has no legal personality in the
Philippine Islands. This suggestion, made with reference to an institution which antedates by almost a
thousand years any other personality in Europe, and which existed "when Grecian eloquence still
flourished in Antioch, and when idols were still worshiped in the temple of Mecca," does not require
serious consideration. In the preamble to the budget relating to ecclesiastical obligations, presented by
Montero Rios to the Cortes on the 1st of October 1871, speaking of the Roman Catholic Church, he says:
Persecuted as an unlawful association since the early days of its existence up to the time of
Galieno, who was the first of the Roman emperors to admit it among the juridicial entities
protected by the laws of the Empire, it existed until then by the mercy and will of the faithful
and depended for such existence upon pious gifts and offerings. Since the latter half of the
third century, and more particularly since the year 313, when Constantine, by the edict of
Milan, inaugurated an era of protection for the church, the latter gradually entered upon the
exercise of such rights as were required for the acquisition, preservation, and transmission of
property the same as any other juridical entity under the laws of the Empire. (3 Dictionary of
Spanish Administration, Alcubilla, p. 211. See also the royal order of the 4th of December,
1890, 3 Alcubilla, 189.)
The judgment of the court below is affirmed, with the costs of this instance against the appellant. After the
expiration of twenty days from the date hereof let judgment be entered in accordance herewith, and ten
days thereafter the record be remanded to the court below for execution. So ordered.
G.R. No. L-53856 August 21, 1980
OSCAR VENTANILLA ENTERPRISES CORPORATION, petitioner,
vs.
HON. ALFREDO M. LAZARO, Presiding Judge of the Court of First Instance of Manila, Branch
XXXV; CLERK OF COURT and DEPUTY SHERIFF of the Court of First Instance of Manila, Branch
XXXV; EMPEROR FILMS INT'L. (PHILS.), INC. and RICARDO C. VENTANILLA, respondents.
AQUINO, J.:
Petitioner Oscar Ventanilla Enterprises Corporation, in these special civil actions of certiorari and
prohibition, seeks to restrain the enforcement against it of the judgment of the Court of First Instance of
Manila dated November 14, 1978 in Civil Case No. 107607 entitled "Emperor Films Int'l. (Phils.), Inc. vs.
Broadway Theater".
A similar petition was filed in the Court of Appeals by the herein petitioner. It was dismissed because that
Court can issue the writs of certiorari and prohibition only in aid of its appellate jurisdiction and there was
no more appeal in Civil Case No. 107607. Moreover, as reasoned out by the Court of Appeals, the
petitioner, not being a party in Civil Case No. 107607, cannot ask for a review of any order issued in that
case (CA-G.R. No. SP-09510-R, April 30,1980).
It is at once obvious that the complaint in Civil Case No. 107607 is defective because the defendant is
not a natural or juridical person. However, that defect was cured by the answer of Ricardo C. Ventanilla,
the lessee of the Broadway Theater (who admitted having issued three postdated checks to guarantee
his wife's obligation to the plaintiff), and by the compromise agreement dated October 11, 1978 executed
between the plaintiff and Ricardo C. Ventanilla, who, in effect, substituted himself for defendant
"Broadway theater".
In that compromise agreement, which is in reality a confession of judgment, Ricardo C. Ventanilla, as
defendant, acknowledged that he was obligated to pay Emperor Films Int'l. (Phils.), Inc. the sum of
P12,662 which he promised to pay in installments. He agreed that, in case he defaulted in the payment of
any installment, "execution shall immediately issue".
The lower court rendered judgment in accordance with the compromise agreement. Oscar Ventanilla
Enterprises Corporation alleged that the deputy sheriff of Branch XXXV of the Court of First Instance of
Manila would enforce against the Broadway Theater the writ of execution issued in Civil Case No.
107607. It claims to be the owner of the Broadway Theater located at Burgos Avenue, Cabanatuan City
which it leased to Ricardo C. Ventanilla for a ten-year period starting January 1, 1975 (Annex A).
We hold that Oscar Ventanilla Enterprises Corporation is entitled to the writ of prohibition enjoining the
sheriff from levying on the Broadway Theater for the satisfaction of the judgment rendered against
Ricardo C. Ventanilla who is a mere lessee of the theater.
This incident would not have arisen if Emperor Films Int'l. (Phils.), Inc. had sued directly Ricardo C.
Ventanilla and not "Broadway Theater" and if respondent Judge had perceived the anomaly that the
defendant is not a natural or juridical person and had ordered the substitution of Ricardo C. Ventanilla for
"Broadway Theater" as the real party defendant in Civil Case No. 107607.
WHEREFORE, the lower court and the sheriff of Manila are directed to desist from enforcing the
judgment in question against the properties of the petitioner in the Broadway Theater at Cabanatuan City.
No costs.
SO ORDERED.
G.R. No. L-58028 April 18, 1989
CHIANG KAI SHEK SCHOOL, petitioner,
vs.
COURT OF APPEALS and FAUSTINA FRANCO OH, respondents.
An unpleasant surprise awaited Fausta F. Oh when she reported for work at the Chiang Kai Shek School
in Sorsogon on the first week of July, 1968. She was told she had no assignment for the next semester.
Oh was shocked. She had been teaching in the school since 1932 for a continuous period of almost 33
years. And now, out of the blue, and for no apparent or given reason, this abrupt dismissal.
Oh sued. She demanded separation pay, social security benefits, salary differentials, maternity benefits
and moral and exemplary damages. 1 The original defendant was the Chiang Kai Shek School but when
it filed a motion to dismiss on the ground that it could not be sued, the complaint was amended. 2 Certain
officials of the school were also impleaded to make them solidarily liable with the school.
The Court of First Instance of Sorsogon dismissed the complaint. 3 On appeal, its decision was set aside
by the respondent court, which held the school suable and liable while absolving the other
defendants. 4 The motion for reconsideration having been denied, 5 the school then came to this Court in
this petition for review on certiorari.
The issues raised in the petition are:
1. Whether or not a school that has not been incorporated may be sued by reason alone of its long
continued existence and recognition by the government,
2. Whether or not a complaint filed against persons associated under a common name will justify a
judgment against the association itself and not its individual members.
3. Whether or not the collection of tuition fees and book rentals will make a school profit-making and not
charitable.
4. Whether or not the Termination Pay Law then in force was available to the private respondent who was
employed on a year-to-year basis.
5. Whether or not the awards made by the respondent court were warranted.
We hold against the petitioner on the first question. It is true that Rule 3, Section 1, of the Rules of Court
clearly provides that "only natural or juridical persons may be parties in a civil action." It is also not denied
that the school has not been incorporated. However, this omission should not prejudice the private
respondent in the assertion of her claims against the school.
As a school, the petitioner was governed by Act No. 2706 as amended by C.A. No. 180, which provided
as follows:
Unless exempted for special reasons by the Secretary of Public Instruction, any
private school or college recognized by the government shall be incorporated
under the provisions of Act No. 1459 known as the Corporation Law, within 90
days after the date of recognition, and shall file with the Secretary of Public
Instruction a copy of its incorporation papers and by-laws.
Having been recognized by the government, it was under obligation to incorporate under the Corporation
Law within 90 days from such recognition. It appears that it had not done so at the time the complaint
was filed notwithstanding that it had been in existence even earlier than 1932. The petitioner cannot now
invoke its own non-compliance with the law to immunize it from the private respondent's complaint.
There should also be no question that having contracted with the private respondent every year for thirty
two years and thus represented itself as possessed of juridical personality to do so, the petitioner is now
estopped from denying such personality to defeat her claim against it. According to Article 1431 of the
Civil Code, "through estoppel an admission or representation is rendered conclusive upon the person
making it and cannot be denied or disproved as against the person relying on it."
As the school itself may be sued in its own name, there is no need to apply Rule 3, Section 15, under
which the persons joined in an association without any juridical personality may be sued with such
association. Besides, it has been shown that the individual members of the board of trustees are not
liable, having been appointed only after the private respondent's dismissal. 6
It is clear now that a charitable institution is covered by the labor laws 7 although the question was still
unsettled when this case arose in 1968. At any rate, there was no law even then exempting such
institutions from the operation of the labor laws (although they were exempted by the Constitution
from ad valorem taxes). Hence, even assuming that the petitioner was a charitable institution as it claims,
the private respondent was nonetheless still entitled to the protection of the Termination Pay Law, which
was then in force.
While it may be that the petitioner was engaged in charitable works, it would not necessarily follow that
those in its employ were as generously motivated. Obviously, most of them would not have the means for
such charity. The private respondent herself was only a humble school teacher receiving a meager salary
of Pl80. 00 per month.
At that, it has not been established that the petitioner is a charitable institution, considering especially that
it charges tuition fees and collects book rentals from its students. 8 While this alone may not indicate that
it is profit-making, it does weaken its claim that it is a non-profit entity.
The petitioner says the private respondent had not been illegally dismissed because her teaching
contract was on a yearly basis and the school was not required to rehire her in 1968. The argument is
that her services were terminable at the end of each year at the discretion of the school. Significantly, no
explanation was given by the petitioner, and no advance notice either, of her relief after teaching year in
and year out for all of thirty-two years, the private respondent was simply told she could not teach any
more.
The Court holds, after considering the particular circumstance of Oh's employment, that she had become
a permanent employee of the school and entitled to security of tenure at the time of her dismissal. Since
no cause was shown and established at an appropriate hearing, and the notice then required by law had
not been given, such dismissal was invalid.
The private respondent's position is no different from that of the rank-and-file employees involved
in Gregorio Araneta University Foundation v. NLRC, 9 of whom the Court had the following to say:
Undoubtedly, the private respondents' positions as deans and department heads
of the petitioner university are necessary in its usual business. Moreover, all the
private respondents have been serving the university from 18 to 28 years. All of
them rose from the ranks starting as instructors until they became deans and
department heads of the university. A person who has served the University for 28
years and who occupies a high administrative position in addition to teaching
duties could not possibly be a temporary employee or a casual.
The applicable law is the Termination Pay Law, which provided:
SECTION 1. In cases of employment, without a definite period, in a commercial,
industrial, or agricultural establishment or enterprise, the employer or the
employee may terminate at any time the employment with just cause; or without
just cause in the case of an employee by serving written notice on the employer at
least one month in advance, or in the case of an employer, by serving such notice
to the employee at least one month in advance or one-half month for every year
of service of the employee, whichever, is longer, a fraction of at least six months
being considered as one whole year.
The employer, upon whom no such notice was served in case of termination of
employment without just cause may hold the employee liable for damages.
The employee, upon whom no such notice was served in case of termination of
employment without just cause shall be entitled to compensation from the date of
termination of his employment in an I amount equivalent to his salaries or wages
correspond to the required period of notice. ... .
The respondent court erred, however, in awarding her one month pay instead of only one-half month
salary for every year of service. The law is quite clear on this matter. Accordingly, the separation pay
should be computed at P90.00 times 32 months, for a total of P2,880.00.
Parenthetically, R.A. No. 4670, otherwise known as the Magna Carta for Public School Teachers, confers
security of tenure on the teacher upon appointment as long as he possesses the required
qualification. 10 And under the present policy of the Department of Education, Culture and Sports, a
teacher becomes permanent and automatically acquires security of tenure upon completion of three
years in the service. 11
While admittedly not applicable to the case at bar, these I rules nevertheless reflect the attitude of the
government on the protection of the worker's security of tenure, which is now guaranteed by no less than
the Constitution itself. 12
We find that the private respondent was arbitrarily treated by the petitioner, which has shown no cause
for her removal nor had it given her the notice required by the Termination Pay Law. As the respondent
court said, the contention that she could not report one week before the start of classes is a flimsy
justification for replacing her. 13 She had been in its employ for all of thirty-two years. Her record was
apparently unblemished. There is no showing of any previous strained relations between her and the
petitioner. Oh had every reason to assume, as she had done in previous years, that she would continue
teaching as usual.
It is easy to imagine the astonishment and hurt she felt when she was flatly and without warning told she
was dismissed. There was not even the amenity of a formal notice of her replacement, with perhaps a
graceful expression of thanks for her past services. She was simply informed she was no longer in the
teaching staff. To put it bluntly, she was fired.
For the wrongful act of the petitioner, the private respondent is entitled to moral damages. 14 As a
proximate result of her illegal dismissal, she suffered mental anguish, serious anxiety, wounded feelings
and even besmirched reputation as an experienced teacher for more than three decades. We also find
that the respondent court did not err in awarding her exemplary damages because the petitioner acted in
a wanton and oppressive manner when it dismissed her. 15
The Court takes this opportunity to pay a sincere tribute to the grade school teachers, who are always at
the forefront in the battle against illiteracy and ignorance. If only because it is they who open the minds of
their pupils to an unexplored world awash with the magic of letters and numbers, which is an
extraordinary feat indeed, these humble mentors deserve all our respect and appreciation.
WHEREFORE, the petition is DENIED. The appealed decision is AFFIRMED except for the award of
separation pay, which is reduced to P2,880.00. All the other awards are approved. Costs against the
petitioner.
This decision is immediately executory.
SO ORDERED.
G.R. No. 173297 March 6, 2013
STRONGHOLD INSURANCE COMPANY, INC., Petitioner,
vs.
TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA, BRAMIE T. TAYACTAC, and
MANUEL D. MARANON, JR., Respondents.
The personality of a corporation is distinct and separate from the personalities of its stockholders. Hence,
its stockholders are not themselves the real parties in interest to claim and recover compensation for the
damages arising from the wrongful attachment of its assets. Only the corporation is the real party in
interest for that purpose.
The Case
Stronghold Insurance Company, Inc. (Stronghold Insurance), a domestic insurance company, assails the
decision promulgated on January 31, 2006,1 whereby the Court of Appeals (CA) in CA-G.R. CV No.
79145 affirmed the judgment rendered on April 28, 2003 by the Regional Trial Court in Parafiaque City
(RTC) holding Stronghold Insurance and respondent Manuel D. Marafion, Jr. jointly and solidarily liable
for damages to respondents Tomas Cuenca, Marcelina Cuenca, Milagros Cuenca (collectively referred to
as Cuencas), and Bramie Tayactac, upon the latter’s claims against the surety bond issued by Stronghold
Insurance for the benefit of Marañon.2
Antecedents
On January 19, 1998, Marañon filed a complaint in the RTC against the Cuencas for the collection of a
sum of money and damages. His complaint, docketed as Civil Case No. 98-023, included an application
for the issuance of a writ of preliminary attachment. 3 On January 26, 1998, the RTC granted the
application for the issuance of the writ of preliminary attachment conditioned upon the posting of a bond
of ₱1,000,000.00 executed in favor of the Cuencas. Less than a month later, Marañon amended the
complaint to implead Tayactac as a defendant. 4
On February 11, 1998, Marañon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount of
₱1,000,000.00 issued by Stronghold Insurance. Two days later, the RTC issued the writ of preliminary
attachment.5 The sheriff served the writ, the summons and a copy of the complaint on the Cuencas on
the same day. The service of the writ, summons and copy of the complaint were made on Tayactac on
February 16, 1998.6
Enforcing the writ of preliminary attachment on February 16 and February 17, 1998, the sheriff levied
upon the equipment, supplies, materials and various other personal property belonging to Arc Cuisine,
Inc. that were found in the leased corporate office-cum-commissary or kitchen of the corporation. 7 On
February 19, 1998, the sheriff submitted a report on his proceedings, 8 and filed an ex parte motion
seeking the transfer of the levied properties to a safe place. The RTC granted the ex parte motion on
February 23, 1998.9
On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to Dismiss and to
Quash Writ of Preliminary Attachment on the grounds that: (1) the action involved intra-corporate matters
that were within the original and exclusive jurisdiction of the Securities and Exchange Commission
(SEC); and (2) there was another action pending in the SEC as well as a criminal complaint in the Office
of the City Prosecutor of Parañaque City. 10
On March 5, 1998, Marañon opposed the motion.11
On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of Preliminary Attachment,
stating that the action, being one for the recovery of a sum of money and damages, was within its
jurisdiction.12
Under date of September 3, 1998, the Cuencas and Tayactac moved for the reconsideration of the denial
of their Motion to Dismiss and to Quash Writ of Preliminary Attachment, but the RTC denied their motion
for reconsideration on September 16, 1998.
Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari and prohibition to
challenge the August 10, 1998 and September 16, 1998 orders of the RTC on the basis of being issued
with grave abuse of discretion amounting to lack or excess of jurisdiction (C.A.-G.R. SP No. 49288). 13
On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No. 49288, 14 granting the
petition. It annulled and set aside the challenged orders, and dismissed the amended complaint in Civil
Case No. 98-023 for lack of jurisdiction, to wit:
WHEREFORE, the Orders herein assailed are hereby ANNULLED AND SET ASIDE, and the judgment is
hereby rendered DISMISSING the Amended Complaint in Civil Case No. 98-023 of the respondent court,
for lack of jurisdiction.
SO ORDERED.
On December 27, 1999, the CA remanded to the RTC for hearing and resolution of the Cuencas and
Tayactac’s claim for the damages sustained from the enforcement of the writ of preliminary attachment. 15
On February 17, 2000,16 the sheriff reported to the RTC, as follows:
On the scheduled inventory of the properties (February 17, 2000) and to comply with the Resolution of
the Court of Appeals dated December 24, 1999 ordering the delivery of the attached properties to the
defendants, the proceedings thereon being:
1. With the assistance for (sic) the counsel of Cuencas, Atty. Pulumbarit, Atty. Ayo, defendant
Marcelina Cuenca, and two Court Personnel, Robertson Catorce and Danilo Abanto, went to
the warehouse where Mr. Marañon recommended for safekeeping the properties in which he
personally assured its safety, at No. 14, Marian II Street, East Service Road, Parañaque
Metro Manila.
2. That to our surprise, said warehouse is now tenanted by a new lessee and the properties
were all gone and missing.
3. That there are informations (sic) that the properties are seen at Conti’s Pastry & Bake Shop
owned by Mr. Marañon, located at BF Homes in Parañaque City.
On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to Deliver Attached
Properties and to Set Case for Hearing, 17 praying that: (1) the Branch Sheriff be ordered to immediately
deliver the attached properties to them; (2) Stronghold Insurance be directed to pay them the damages
being sought in accordance with its undertaking under the surety bond for ₱1,000,0000.00; (3) Marañon
be held personally liable to them considering the insufficiency of the amount of the surety bond; (4) they
be paid the total of ₱1,721,557.20 as actual damages representing the value of the lost attached
properties because they, being accountable for the properties, would be turning that amount over to Arc
Cuisine, Inc.; and (5) Marañon be made to pay ₱200,000.00 as moral damages, ₱100,000.00 as
exemplary damages, and ₱100,000.00 as attorney’s fees.
Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the Cuencas and
Tayactac filed their reply on May 5, 2000.
On May 25, 2000, Marañon filed his own comment/opposition to the Motion to Require Sheriff to Deliver
Attached Properties and to Set Case for Hearing of the Cuencas and Tayactac, arguing that because the
attached properties belonged to Arc Cuisine, Inc. 50% of the stockholding of which he and his relatives
owned, it should follow that 50% of the value of the missing attached properties constituted liquidating
dividends that should remain with and belong to him. Accordingly, he prayed that he should be required to
return only ₱100,000.00 to the Cuencas and Tayactac. 18
On June 5, 2000, the RTC commanded Marañon to surrender all the attached properties to the RTC
through the sheriff within 10 days from notice; and directed the Cuencas and Tayactac to submit the
affidavits of their witnesses in support of their claim for damages. 19
On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and Compliance. 20
Ruling of the RTC
After trial, the RTC rendered its judgment on April 28, 2003, holding Marañon and Stronghold Insurance
jointly and solidarily liable for damages to the Cuencas and Tayactac, 21 viz:
WHEREFORE, premises considered, as the defendants were able to preponderantly prove their
entitlement for damages by reason of the unlawful and wrongful issuance of the writ of attachment,
MANUEL D. MARAÑON, JR., plaintiff and defendant, Stronghold Insurance Company Inc., are found to
be jointly and solidarily liable to pay the defendants the following amount to wit:
(1) Ph₱1,000,000.00 representing the amount of the bond;
(2) PhP 100,000.00 as moral damages;
(3) PhP 50,000.00 as exemplary damages;
(4) Php 100,000.00 as attorney’s fees; and
(5) To pay the cost of suit.
SO ORDERED.
Ruling of the CA
Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145), assigning the following errors
to the RTC, to wit:
I.
THE LOWER COURT ERRED IN ORDERING SURETY-APPELLANT TO PAY THE AMOUNT OF
₱1,000,000.00 REPRESENTING THE AMOUNT OF THE BOND AND OTHER DAMAGES TO THE
DEFENDANTS.
II.
THE LOWER COURT ERRED IN NOT TAKING INTO ACCOUNT THE INDEMNITY AGREEMENT (EXH.
"2-SURETY") EXECUTED BY MANUEL D. MARAÑON, JR. IN FAVOR OF STRONGHOLD WHEREIN
HE BOUND HIMSELF TO INDEMNIFY STRONGHOLD OF WHATEVER AMOUNT IT MAY BE HELD
LIABLE ON ACCOUNT OF THE ISSUANCE OF THE ATTACHMENT BOND.22
On January 31, 2006, the CA, finding no reversible error, promulgated its decision affirming the judgment
of the RTC.23
Stronghold Insurance moved for reconsideration, but the CA denied its motion for reconsideration on
June 22, 2006.
Issues
Hence, this appeal by petition for review on certiorari by Stronghold Insurance, which submits that:
 I.
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR AND DECIDED QUESTIONS
OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND APPLICABLE DECISIONS OF
THE HONORABLE COURT CONSIDERING THAT THE COURT OF APPEALS AFFIRMED THE
ERRONEOUS DECISION OF THE TRIAL COURT HOLDING RESPONDENT MARA[Ñ]ON AND
PETITIONER STRONGHOLD JOINTLY AND SOLIDARILY LIABLE TO PAY THE RESPONDENTS
CUENCA, et al., FOR PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND
WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT, DESPITE THE FACT THAT:
A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF THE PROPERTIES
ATTACHED AND THUS, ARE NOT THE PROPER PARTIES TO CLAIM ANY PURPORTED
DAMAGES ARISING THEREFROM.
B) THE PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND
WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT WERE CAUSED BY THE
NEGLIGENCE OF THE BRANCH SHERIFF OF THE TRIAL COURT AND HIS FAILURE TO
COMPLY WITH THE PROVISIONS OF THE RULES OF COURT PERTAINING TO THE
ATTACHMENT OF PROPERTIES.
C) THE TRIAL COURT GRAVELY ERRED WHEN IT HELD PETITIONER STRONGHOLD TO
BE SOLIDARILY LIABLE WITH RESPONDENT MARA[Ñ]ON TO RESPONDENTS CUENCA
et al., FOR MORAL DAMAGES, EXEMPLARY DAMAGES, ATTORNEY’S FEES AND COST
OF SUIT DESPITE THE FACT THAT THE GUARANTY OF PETITIONER STRONGHOLD
PURSUANT TO ITS SURETY BOND IS LIMITED ONLY TO THE AMOUNT OF
₱1,000,000.00.
II
IN ANY EVENT, THE DECISION OF THE COURT APPEALS SHOULD HAVE HELD RESPONDENT
MARA[Ñ]ON TO BE LIABLE TO INDEMNIFY PETITIONER STRONGHOLD FOR ALL PAYMENTS,
DAMAGES, COSTS, LOSSES, PENALTIES, CHARGES AND EXPENSES IT SUSTAINED IN
CONNECTION WITH THE INSTANT CASE, PURSUANT TO THE INDEMNITY AGREEMENT ENTERED
INTO BY PETITIONER STRONGHOLD AND RESPONDENT MARA[Ñ]ON. 24
On their part, the Cuencas and Tayactac counter:
A. Having actively participated in the trial and appellate proceedings of this case before the
Regional Trial Court and the Court of Appeals, respectively, petitioner Stronghold is legally
and effectively BARRED by ESTOPPEL from raising for the first time on appeal before this
Honorable Court a defense and/or issue not raised below. 25
B. Even assuming arguendo without admitting that the principle of estoppel is not applicable
in this instant case, the assailed Decision and Resolution find firm basis in law considering
that the writ of attachment issued and enforced against herein respondents has been
declared ILLEGAL, NULL AND VOID for having been issued beyond the jurisdiction of the
trial court.
C. There having been a factual and legal finding of the illegality of the issuance and
consequently, the enforcement of the writ of attachment, Maranon and his surety Stronghold,
consistent with the facts and the law, including the contract of suretyship they entered into,
are JOINTLY AND SEVERALLY liable for the damages sustained by herein respondents by
reason thereof.
D. Contrary to the allegations of Stronghold, its liability as surety under the attachment bond
without which the writ of attachment shall not issue and be enforced against herein
respondent if prescribed by law. In like manner, the obligations and liability on the attachment
bond are also prescribed by law and not left to the discretion or will of the contracting parties
to the prejudice of the persons against whom the writ was issued.
E. Contrary to the allegations of Stronghold, its liability for the damages sustained by herein
respondents is both a statutory and contractual obligation and for which, it cannot escape
accountability and liability in favor of the person against whom the illegal writ of attachment
was issued and enforced. To allow Stronghold to delay, excuse or exempt itself from liability is
unconstitutional, unlawful, and contrary to the basic tenets of equity and fair play.
F. While the liability of Stronghold as surety indeed covers the principal amount of
₱1,000,000.00, nothing in the law and the contract between the parties limit or exempt
Stronghold from liability for other damages. Including costs of suit and interest.26
In his own comment,27
Marañon insisted that he could not be personally held liable under the attachment bond because the
judgment of the RTC was rendered without jurisdiction over the subject matter of the action that involved
an intra-corporate controversy among the stockholders of Arc Cuisine, Inc.; and that the jurisdiction
properly pertained to the SEC, where another action was already pending between the parties.
Ruling
Although the question of whether the Cuencas and Tayactac could themselves recover damages arising
from the wrongful attachment of the assets of Arc Cuisine, Inc. by claiming against the bond issued by
Stronghold Insurance was not raised in the CA, we do not brush it aside because the actual legal interest
of the parties in the subject of the litigation is a matter of substance that has jurisdictional impact, even on
appeal before this Court.
The petition for review is meritorious.
There is no question that a litigation should be disallowed immediately if it involves a person without any
interest at stake, for it would be futile and meaningless to still proceed and render a judgment where
there is no actual controversy to be thereby determined. Courts of law in our judicial system are not
allowed to delve on academic issues or to render advisory opinions. They only resolve actual
controversies, for that is what they are authorized to do by the Fundamental Law itself, which forthrightly
ordains that the judicial power is wielded only to settle actual controversies involving rights that are
legally demandable and enforceable. 28
To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of the Rules of Court
requires that unless otherwise authorized by law or the Rules of Court every action must be prosecuted
or defended in the name of the real party in interest. 29 Under the same rule, a real party in interest is one
who stands to be benefited or injured by the judgment in the suit, or one who is entitled to the avails of
the suit. Accordingly, a person , to be a real party in interest in whose name an action must be
prosecuted, should appear to be the present real owner of the right sought to be enforced, that is, his
interest must be a present substantial interest, not a mere expectancy, or a future, contingent,
subordinate, or consequential interest. 30
Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of cause of
action.31The reason for this is that the courts ought not to pass upon questions not derived from any
actual controversy. Truly, a person having no material interest to protect cannot invoke the jurisdiction of
the court as the plaintiff in an action. 32 Nor does a court acquire jurisdiction over a case where the real
party in interest is not present or impleaded.
The purposes of the requirement for the real party in interest prosecuting or defending an action at law
are: (a) to prevent the prosecution of actions by persons without any right, title or interest in the case; (b)
to require that the actual party entitled to legal relief be the one to prosecute the action; (c) to avoid a
multiplicity of suits; and (d) to discourage litigation and keep it within certain bounds, pursuant to sound
public policy.33 Indeed, considering that all civil actions must be based on a cause of action, 34 defined as
the act or omission by which a party violates the right of another, 35 the former as the defendant must be
allowed to insist upon being opposed by the real party in interest so that he is protected from further suits
regarding the same claim.36 Under this rationale, the requirement benefits the defendant because "the
defendant can insist upon a plaintiff who will afford him a setup providing good res judicata protection if
the struggle is carried through on the merits to the end." 37
The rule on real party in interest ensures, therefore, that the party with the legal right to sue brings the
action, and this interest ends when a judgment involving the nominal plaintiff will protect the defendant
from a subsequent identical action. Such a rule is intended to bring before the court the party rightfully
interested in the litigation so that only real controversies will be presented and the judgment, when
entered, will be binding and conclusive and the defendant will be saved from further harassment and
vexation at the hands of other claimants to the same demand. 38
But the real party in interest need not be the person who ultimately will benefit from the successful
prosecution of the action. Hence, to aid itself in the proper identification of the real party in interest, the
court should first ascertain the nature of the substantive right being asserted, and then must determine
whether the party asserting that right is recognized as the real party in interest under the rules of
procedure. Truly, that a party stands to gain from the litigation is not necessarily controlling. 39
It is fundamental that the courts are established in order to afford reliefs to persons whose rights or
property interests have been invaded or violated, or are threatened with invasion by others’ conduct or
acts, and to give relief only at the instance of such persons. The jurisdiction of a court of law or equity
may not be invoked by or for an individual whose rights have not been breached. 40
The remedial right or the remedial obligation is the person’s interest in the controversy. The right of the
plaintiff or other claimant is alleged to be violated by the defendant, who has the correlative obligation to
respect the right of the former. Otherwise put, without the right, a person may not become a party plaintiff;
without the obligation, a person may not be sued as a party defendant; without the violation, there may
not be a suit. In such a situation, it is legally impossible for any person or entity to be both plaintiff and
defendant in the same action, thereby ensuring that the controversy is actual and exists between
adversary parties. Where there are no adversary parties before it, the court would be without jurisdiction
to render a judgment.41
There is no dispute that the properties subject to the levy on attachment belonged to Arc Cuisine, Inc.
alone, not to the Cuencas and Tayactac in their own right. They were only stockholders of Arc Cuisine,
Inc., which had a personality distinct and separate from that of any or all of them. 42 The damages
occasioned to the properties by the levy on attachment, wrongful or not, prejudiced Arc Cuisine, Inc., not
them. As such, only Arc Cuisine, Inc. had the right under the substantive law to claim and recover such
damages. This right could not also be asserted by the Cuencas and Tayactac unless they did so in the
name of the corporation itself. But that did not happen herein, because Arc Cuisine, Inc. was not even
joined in the action either as an original party or as an intervenor.
The Cuencas and Tayactac were clearly not vested with any direct interest in the personal properties
coming under the levy on attachment by virtue alone of their being stockholders in Arc Cuisine, Inc. Their
stockholdings represented only their proportionate or aliquot interest in the properties of the corporation,
but did not vest in them any legal right or title to any specific properties of the corporation. Without doubt,
Arc Cuisine, Inc. remained the owner as a distinct legal person. 43
Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas and Tayactac lacked
the legal personality to claim the damages sustained from the levy of the former’s properties. According
to Asset Privatization Trust v. Court of Appeals,44 even when the foreclosure on the assets of the
corporation was wrongful and done in bad faith the stockholders had no standing to recover for
themselves moral damages; otherwise, they would be appropriating and distributing part of the
corporation’s assets prior to the dissolution of the corporation and the liquidation of its debts and
liabilities. Moreover, in Evangelista v. Santos,45 the Court, resolving whether or not the minority
stockholders had the right to bring an action for damages against the principal officers of the corporation
for their own benefit, said:
As to the second question, the complaint shows that the action is for damages resulting from
mismanagement of the affairs and assets of the corporation by its principal officer, it being alleged that
defendant’s maladministration has brought about the ruin of the corporation and the consequent loss of
value of its stocks. The injury complained of is thus primarily to the corporation, so that the suit for the
damages claimed should be by the corporation rather than by the stockholders (3 Fletcher, Cyclopedia of
Corporation pp. 977-980). The stockholders may not directly claim those damages for themselves for that
would result in the appropriation by, and the distribution among them of part of the corporate assets
before the dissolution of the corporation and the liquidation of its debts and liabilities, something which
cannot be legally done in view of section 16 of the Corporation Law, which provides:
No shall corporation shall make or declare any stock or bond dividend or any dividend whatsoever except
from the surplus profits arising from its business, or divide or distribute its capital stock or property other
than actual profits among its members or stockholders until after the payment of its debts and the
termination of its existence by limitation or lawful dissolution.
xxxx
In the present case, the plaintiff stockholders have brought the action not for the benefit of the corporation
but for their own benefit, since they ask that the defendant make good the losses occasioned by his
mismanagement and pay to them the value of their respective participation in the corporate assets on the
basis of their respective holdings. Clearly, this cannot be done until all corporate debts, if there be any,
are paid and the existence of the corporation terminated by the limitation of its charter or by lawful
dissolution in view of the provisions of section 16 of the Corporation Law. (Emphasis ours)
It results that plaintiffs complaint shows no cause of action in their favor so that the lower court did not err
in dismissing the complaint on that ground.
While plaintiffs ask for remedy to which they are not entitled unless the requirement of section 16 of the
Corporation Law be first complied with, we note that the action stated in their complaint is susceptible of
being converted into a derivative suit for the benefit of the corporation by a mere change in the prayer.
Such amendment, however, is not possible now, since the complaint has been filed in the wrong court, so
that the same has to be dismissed.46
That Marañon knew that Arc Cuisine, Inc. owned the properties levied on attachment but he still excluded
Arc Cuisine, Inc. from his complaint was of no consequence now. The Cuencas and Tayactac still had no
right of action even if the affected properties were then under their custody at the time of the attachment,
considering that their custody was only incidental to the operation of the corporation.
It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine, Inc. a proper action to
recover damages resulting from the attachment. Such action would be one directly brought in the name
of the corporation. Yet, that was not true here, for, instead, the Cuencas and Tayactac presented the
claim in their own names.
In view of the outcome just reached, the Court deems it unnecessary to give any extensive consideration
to the remaining issues.
WHEREFORE, the Court GRANTS the petition for review; and REVERSES and SETS ASIDE the
decision of the Court of Appeals in CA-G.R. CV No. 79145 promulgated on January 31,2006.
No pronouncements on costs of suit.
SO ORDERED.
G.R. Nos. 161166-67 February 03, 2005
MAYOR RHUSTOM L. DAGADAG, petitioner,
vs.
MICHAEL C. TONGNAWA and ANTONIO GAMMOD, respondents.
Before us is a petition for review on certiorari1 assailing the joint Decision2 dated July 31, 2003 and
Resolution dated December 10, 2003 of the Court of Appeals in CA-G.R. SP Nos. 54511 and 57315. The
dispositive portion of the joint Decision reads:
"WHEREFORE, these consolidated Petitions for Review are hereby GRANTED. The assailed
Resolutions dated October 21, 1997 and May 31, 1999 of the Civil Service Commission upholding
Respondent’s [now petitioner Mayor Rhustom L. Dagadag] Order of Suspension dated June 29, 1999,
and January 24, 2000 upholding Respondent’s Order of Separation, are hereby REVERSED AND SET
ASIDE. Petitioners Michael C. Tongnawa and Antonio B. Gammod are hereby accordingly REINSTATED
WITH CORRESPONDING BACKWAGES.
SO ORDERED."3
Petitioner was formerly the mayor of the municipality of Tanudan, Province of Kalinga. Michael Tongnawa
and Antonio Gammod, respondents, are the municipal engineer and municipal planning and development
coordinator, respectively, of the said municipality.
On July 24, 1995, petitioner, while then the mayor of Tanudan, sent respondents a memorandum ordering
them to explain within 72 hours why they should not be administratively sanctioned for acts unbecoming
of public servants and failure to perform their duties. Respondents submitted to petitioner their respective
explanations.
On August 1, 1995, petitioner issued Executive Order No. 95-002 creating a Municipal Grievance
Committee to investigate the charges against respondents. Guilbert Dangpason, then the vice-mayor of
Tanudan, was designated Chairman.
After investigation, the Committee found respondents liable for insubordination, non-performance of
duties and absences without official leaves (AWOL).
On November 27, 1995, petitioner issued an order suspending respondents from their respective
positions for two months or from December 1, 1995 to February 28, 1996.
Respondents then appealed to the Civil Service Commission (CSC) contending that their right to due
process has been violated. On May 23, 1996, during the pendency of respondents’ appeal, petitioner
issued an order dropping them from the roll of employees effective May 28, 1996 by reason of their
unauthorized absences. Again, they appealed to the CSC.
On October 21, 1997, the CSC issued Resolution No. 974229 affirming petitioner’s order suspending
respondents from the service for two months. They moved for a reconsideration but was denied by
the CSC on May 31, 1999, prompting them to file with the Court of Appeals a petition for review, docketed
as CA-G.R. SP No. 54511.
Meanwhile, on June 29, 1999, the CSC issued Resolution No. 991136 affirming petitioner’s
order dropping respondents from the roll. When their motion for reconsideration was denied by the
CSC, respondents filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP 57315.
As mentioned earlier, the Court of Appeals, in its joint Decision in CA-G.R. SP Nos. 54511 and 57315,
granted respondents’ petitions for review, reversing the CSC challenged Resolutions and reinstating them
to their respective positions and ordering the payment of their corresponding backwages.
In reversing the CSC, the Court of Appeals held:
"As a general rule, findings of the CSC are not disturbed on appeal, but if there are substantial facts
which may alter the results of the case, this Court is tasked to evaluate and take them into consideration.
Petitioners (now respondents) ascribed irregularities in the conduct of the Grievance Committee hearing
and submitted two Affidavits subscribed by one William Tumbali and by former Vice-Mayor Guilbert
Dangpason, then chairman of the said Grievance Committee. Dangpason attested that while it is true that
there was a meeting held, no investigation was actually conducted. The Petitioners maintained that they
were not given an opportunity to explain their side and prove their defenses. They claimed that the
minutes on which the suspension of the Petitioners was solely based do not state the true proceedings,
therefore, depriving them of their right to be heard.
None other than the Chairman of the Grievance Committee, assigned to investigate the alleged
negligence of the Petitioners, had renounced the contents of the minutes of the supposed investigation.
Dangpason who ‘wish(ed) to set the record straight…in fairness to all concerned’ categorically declared
that the Petitioners were not given an opportunity to defend themselves since there was no actual
investigation conducted and even expressed his willingness ‘to testify and confirm’ his declarations just to
ascertain the truth. These declarations of Dangpason and Tumbali were not denied by the Respondent.
In the absence therefore of any showing of ill intent or bad faith on the part of Dangpason and Tumbali,
their Affidavits are to be afforded great weight and credence.
In the light of this clear and convincing evidence, Petitioners were able to rebut or overcome the
presumption of regularity in the conduct of the Grievance Committee hearing. Accordingly, the minutes
cannot solely be the basis for Petitioners’ suspension.
xxx
x x x, we find that the suspension of the Petitioners has no factual basis.
xxx
It must be emphasized that, in administrative proceedings, it is not the duty of Petitioners to disperse
what the Respondent failed to prove. The Respondent must first affirmatively show rationally adequate
evidence that Petitioners’ suspension was for a justifiable cause. Petitioners’ suspension was not justified
and, therefore, illegal because Respondent failed to prove the allegations and accusations against the
Petitioners.
The Petitioners likewise assailed the resolution of the CSC affirming Respondent’s Order of Separation
as having been done in violation of their right to due process.
xxx
The previous rule required that the absences of an officer or employee before he can be dropped from
the roll must be ‘for at least thirty (30) days without approved leave.’ However, the above-quoted rule now
provides that the absences without authorized leave must be continuous, which means uninterrupted, or
unbroken totaling at least 30 days. Clearly, the amendment is intended to make the requirement on
absences ‘continuous’ and not just totaling ‘at least 30 days.’
Considering that statutes prescribing the grounds for the suspension or removal of an officer are penal in
nature, the same should be strictly construed. Thus, where the law enumerates the grounds for
disciplinary action, no other grounds may be invoked for his suspension or removal. Hence, although the
unauthorized absences of Petitioners Tongnawa and Gammod totaled 41 and 43 days, respectively, it is
clear from the records that the days when the Petitioners were absent, although more than 30 days, were
not continuous as required by the law, but intermittent. Furthermore, there was no evidence, much less
allegation, that the gap or break was a special or a regular holiday. Clearly, one of the requirements for
the dropping from the rolls is not attendant. Hence, there was no valid termination of Petitioners’ services.
Inescapable then is the conclusion that since the Petitioners were illegally suspended and unjustifiably
separated from their work, they are entitled to reinstatement and backwages."
Petitioner filed a joint motion for reconsideration but was denied by the Court of Appeals.
Hence, the instant petition.
Basically, petitioner alleges that his "suspension and dismissal orders against the respondents are
supported by substantial evidence." 4 Moreover, the sworn declarations of William Tumbali and Guilbert
Dangpason, the designated Chairman of the Municipal Grievance Committee, that there was actually no
investigation conducted on petitioner’s charges, are "devoid of credibility." 5
In their joint comment, respondents aver that petitioner has no legal personality to file the instant petition
because he had ceased to be the municipal mayor of Tanudan, Kalinga; and that the CSC, being the
aggrieved party, is the proper party to file this petition.
The fundamental issue before us is: who may appeal from the Decision of the Court of Appeals?
In resolving the issue, the concept of "real party in interest" becomes relevant.
Section 2, Rule 3 of the 1997 Rules of Civil Procedure, as amended, provides:
"SEC. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law
or these Rules, every action must be prosecuted or defended in the name of the real party in interest."
The established rule is that a real party in interest is one who would be benefited or injured by the
judgment, or one entitled to the avails of the suit. The word "interest," as contemplated by the Rules,
means material interest or an interest in issue and to be affected by the judgment, as distinguished from
mere interest in the question involved or a mere incidental interest. Stated differently, the rule refers to a
real or present substantial interest as distinguished from a mere expectancy, or a future, contingent,
subordinate, or consequential interest. As a general rule, one who has no right or interest to protect
cannot invoke the jurisdiction of the court as party-plaintiff in an action. 6
We hold that the CSC and the mayor of Tanudan are real parties in interest in this case and, therefore,
can contest the assailed joint Decision of the Court of Appeals before us.
The CSC is the party adversely affected by the questioned Decision of the Court of Appeals because it
has been mandated by the Constitution to preserve and safeguard the integrity of our civil service
system.7 Thus, any transgression by herein respondents of the CSC rules and regulations will adversely
affect its integrity. Significantly, it has not challenged the assailed Decision.
As regards the mayor of Tanudan, there are two (2) reasons why he may interpose such appeal. The first
is rooted in his power to appoint officials and employees of his municipality. 8 Both respondents were
appointed by petitioner during his incumbency. In Francisco Abella, Jr. vs. Civil Service
Commission,9 the Court En Banc (through Justice Artemio V. Panganiban) held that the municipal mayor,
being the appointing authority, is the real party in interest to challenge the CSC’s disapproval of the
appointment of his appointee, thus:
"x x x. The power of appointment necessarily entails the exercise of judgment and discretion (Sevilla vs.
Parina, 128 Phil. 639, 643, October 30, 1967; Manalang vs. Quitoriano, 94 Phil. 903, 911, April 30,
1954). Luego vs. Civil Service Commission (227 Phil. 303, August 5, 1986) declared:
‘Appointment is an essentially discretionary power and must be performed by the officer in which it is
vested according to his best lights, the only condition being that the appointee should possess the
qualifications required by law. If he does, then the appointment cannot be faulted on the ground that there
are others better qualified who should have been preferred. This is a political question involving
considerations of wisdom which only the appointing authority can decide’ (Rimonte vs. Civil Service
Commission, 314 Phil. 421, 430, May 29, 1995).
Significantly, ‘the selection of the appointee – taking into account the totality of his qualifications, including
those abstract qualities that define his personality – is the prerogative of the appointing authority (Lapinid
vs. Civil Service Commission, 274 Phil. 381, 387, May 14, 1991, per Cruz J.; Jimenez vs. Francisco, 127
Phil. 1025, 1032, February 28, 1957; Branganza vs. Commission on Elections, 127 Phil. 442, 447,
August 15, 1967). No tribunal, not even this Court (Lapinid vs. Civil Service Commission, supra; Amponin
vs. Commission on Elections, 128 Phil. 412, 415, September 29, 1967), may compel the exercise of an
appointment for a favored person (Sevilla vs. Patrina, supra; Manalang vs. Quitoriano, supra; Torio vs.
Civil Service Commission, 209 SCRA 677, 691, June 9, 1992; Medalla vs. Sto. Tomas, 208 SCRA 351,
357, May 5, 1992).
The CSC’s disapproval of an appointment is a challenge to the exercise of the appointing
authority’s discretion. The appointing authority must have the right to contest the disapproval.
Thus, Section 2 of Rule VI of CSC Memorandum Circular 40, s. 1998 is justified insofar as it allows
the appointing authority to request reconsideration or appeal.
In Central Bank vs. Civil Service Commission (171 SCRA 744, 756, April 10, 1989), this Court has
affirmed that the appointing authority stands to be adversely affected when the CSC disapproves
an appointment. Thus, the said authority can ‘defend its appointment since it knows the reasons
for the same’ (id., p. 757, per Gancayco, J.). It is also the act of the appointing authority that is
being questioned when an appointment is disapproved (id.).
x x x." (underscoring ours)
Similarly, where a municipal mayor orders the suspension or dismissal of a municipal employee on
grounds he believes to be proper, but his order is reversed or nullified by the CSC or the Court of Appeals
(as in this case), he has the right to contest such adverse ruling. His right to appeal flows from the fact
that his power to appoint carries with it the power to remove. Being chief executive of the
municipality, he possesses this disciplinary power over appointive municipal officials and employees. 10 To
be sure, whenever his order imposing administrative sanctions upon erring municipal personnel is
challenged, he should be allowed to defend his action considering that he is the appointing authority.
The second reason why the municipal mayor of Tanudan has legal personality to challenge the Decision
of the Court of Appeals is because the salaries of the respondents, being municipal officials, are drawn
from the municipal funds. Obviously, the mayor has real and substantial interest in the outcome of the
administrative cases against respondents.
Admittedly, however, petitioner, at the time he filed with this Court the instant petition assailing the
Appellate Court Decision, was no longer the mayor of Tanudan.
Section 17, Rule 3 of the 1997 Rules of Civil Procedure, as amended, is relevant, thus:
"Sec. 17. Death or separation of a party who is a public officer. – When a public officer is a party in
an action in his official capacity and during its pendency dies, resigns or otherwise ceases to hold
office, the action may be continued and maintained by or against his successor if, within thirty (30)
days after the successor takes office or such time as may be granted by the court, it is satisfactorily
shown to the court by any party that there is a substantial need for continuing or maintaining it
and that the successor adopts or continues or threatens to adopt or continue the action of his
predecessor. Before a substitution is made, the party or officer to be affected, unless expressly
assenting thereto, shall be given reasonable notice of the application therefor and accorded an
opportunity to be heard." (underscoring ours)
Interpreting the above rule, in gr_ Miranda vs. Carreon,11 gr_ Heirs of Mayor Nemencio Galvez vs. Court
of Appeals,12 and Roque, et al. vs. Delgado, et al.,13 we held that where the petitioner (a public officer)
ceases to be mayor, the appeal and/or action he initiated may be continued and maintained by his
successor if there is substantial need to do so. If the successor failed to pursue the appeal and/or action,
the same should be dismissed.
Records show that upon petitioner’s cessation from public office, his successor did not file any
manifestation to the effect that he is continuing and maintaining this appeal.
We thus agree with the respondents that petitioner has lost his legal personality to interpose the instant
petition.
WHEREFORE, the instant petition is hereby DENIED. Costs against petitioner.
SO ORDERED.
G.R. No. 161298 January 31, 2006
Spouses ANTHONY and PERCITA OCO, Petitioners, vs.VICTOR LIMBARING, Respondent.
Basic in procedural law is the rule that every action must be prosecuted or defended in the name of the
real party in interest. In the present case, the respondent, who was not a party to the contracts being
sued upon, was not able to prove material interest in the litigation. For his failure to do so, the trial court
cannot be faulted for dismissing the action to rescind the contracts. His status as trustor remained a bare
allegation, as he had failed to rebut the legal presumption: that there is absence of a trust when the
purchase price in a deed of sale is paid by a parent in favor of a child. Here, the prima facie presumption
is "that there is a gift in favor of the child." Any allegation to the contrary must be proven by clear and
satisfactory evidence, a burden that was not discharged by the plaintiff.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the August 26, 2003
Decision2 and the November 25, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 69386.
The challenged Decision disposed as follows:
"WHEREFORE, the order dated October 2, 2000 of the Regional Trial Court, Branch 15, Ozami[s] City in
Civil Case No. OZC 99-14 is hereby REVERSED. The agreement entered upon by plaintiff-appellant and
defendant-appellee Percita L. Oco is hereby RESCINDED. After returning the agreed purchase amount
of P60,000.00 to defendants-appellees, the Register of Deeds of Ozami[s] City shall issue the new
Transfer Certificates of Title in the name of plaintiff-appellant thereby canceling the TCT Nos. T-22073
and T-22072."4
The Facts
The pertinent facts are not disputed. Sometime in 1996, Sabas Limbaring subdivided his Lot 2325-D,
covered by Transfer Certificate of Title (TCT) No. 5268, into two lots denominated as Lot Nos. 2325-D-1
and 2325-D-2.5 He then executed in favor of Jennifer Limbaring a Deed of Sale for Lot 2325-D-2
for P60,000; and, in favor of Sarah Jane Limbaring, another Deed for Lot 2325-D-1 for P14,440.
Accordingly, TCT No. 5268 was cancelled and TCT Nos. T-21921 and T-21920 were issued in the names
of Jennifer and Sarah Jane, respectively. 6
Sensing some irregularities in the transaction, Percita Oco, the daughter of Sabas Limbaring, left Puerto
Princesa City and went to Ozamis City. 7 She then filed a case of perjury and falsification of documents
against respondent, her uncle who was the father of Jennifer and Sarah Jane. During the pre-litigation
conference called by City Prosecutor Luzminda Uy on July 1, 1996, the parties agreed that the two
parcels of land should be reconveyed to Percita, who was to pay respondent all the expenses that had
been and would be incurred to transfer the titles to her name. 8
Respondent demanded P30,000 for the estimated expenses for documentation, capital gains, and
documentary stamp taxes; registration fees for the Register of Deeds; and other incidental expenses for
clearances from the Department of Agrarian Reform (DAR). 9 Percita succeeded in lowering the amount
to P25,000, for which she executed an undertaking worded as follows:
"I, Percita Oco, of legal age, and residing at Puerto Princesa, do hereby undertake to give the full amount
of Twenty Five Thousand (P25,000.00) Pesos to my uncle Victor Limbaring after document No. 230,
series of 1996; Transfer Certificate of Title No. T-21920 and Transfer Certificate of Title No. T-21921 shall
have been cancelled and revoked.
"Ozamis City, Philippines, July 1, 1996."10
Pursuant to their agreement, respondent facilitated the transfer of the titles to her from the names of his
daughters. After the transfer had been effected on July 12, 1996, Percita left for Puerta Princesa on July
17, 1996, without paying the P25,000. Several demands were made, but she refused to pay.
On April 6, 1999, respondent filed against Spouses Anthony and Percita Oco a Complaint for the
rescission of the sales contracts, with recovery of possession and ownership of the two parcels of
land.11 Among others, he claimed 1) that he was the actual buyer of the lots, but the vendees whose
names appeared on the Deeds were his daughters; 2) that he initially refused to reconvey the properties
because he had paid for them with his hard-earned money, which was partly used by Sabas Limbaring
for medical expenses; 3) that Percita had prepared the two Deeds of Sale, which his daughters signed
despite receiving no consideration as stated in the Deeds; 4) that because she refused to pay
the P25,000, the Limbaring clan held a meeting on October 26, 1996, during which it was agreed
that P1,000 per month would be given to respondent from the rentals of Sabas Limbaring’s house; and 5)
that the agreement was not implemented, because Percita had failed to cooperate. 12
On May 27, 1999, Spouses Oco filed a Motion to Dismiss on the ground that the plaintiff (herein
respondent) was not the real party in interest. 13 In his Opposition to the Motion to Dismiss, respondent
contended that he was a trustor, whose property was being held in trust by his daughters. 14 He also
averred that, on the assumption that he was not the real party in interest, he was entitled to an
amendment of the pleadings.15
On August 30, 1999, the RTC issued an Order denying the Motion to Dismiss. It ruled that evidence was
required to resolve the parties’ respective allegations.16
On October 4, 1999, Spouses Oco filed an Answer with Counterclaim, alleging in the main: 1) that
respondent had tried to secure a DAR clearance and to have a certificate of title issued in his name, but
failed because Republic Act (RA) 6657 prohibited the acquisition of more than five hectares of agricultural
land; 2) that through deceit and manipulation, respondent was able to convince Sabas Limbaring to
execute the two Deeds of Sale, notwithstanding the lack of any consideration; 3) that Sabas informed
Percita that the agricultural land had never been sold; 4) that she refused to pay the P25,000, because
the suspensive conditions stated in the Promissory Note had not been complied with; 5) that she paid for
all the expenses incurred in their transaction; 6) that for her alleged failure to pay the P25,000 and for
"other deceits," respondent filed a criminal Complaint docketed as Criminal Case No. 2985; 7) that
respondent was guilty of forum shopping for filing that case despite the institution of the civil aspect in the
criminal case; 8) that respondent was not the real party in interest and had no legal standing to sue; 9)
that the lots, which were acquired by Jennifer and Sarah Jane without paying any consideration, should
be returned to Percita without any consideration; and 10) that the Deeds of Sale reconveying the lots
acknowledged receipt of consideration. 17
Respondent testified on his behalf. He then formally offered his exhibits. 18 After filing their Comments to
Plaintiff’s Formal Offer of Exhibits, Spouses Oco filed a Demurrer to Evidence, to which he filed his
Opposition.19
On October 2, 2000, the RTC granted the demurrer and dismissed the Complaint and Counterclaim, 20 on
the ground that respondent was not the real party in interest. The trial court also held that Jennifer and
Sarah Jane had already acknowledged receipt of the consideration for the reconveyance of the lots. It
added that the P25,000 was an independent obligation for the reimbursement of the expenses incurred
for the transfer of the titles.21
Ruling of the Court of Appeals
The CA held that a trust relationship was created when respondent purchased the lots in favor of his
daughters.22Thus, he was a real party in interest.
The appellate court also ruled that the P25,000 was part of the consideration for the reconveyance of the
two parcels of land.23 The CA held that, since Percita had admitted her failure to pay the amount,
respondent had the right to rescind the contracts of reconveyance. 24
25
The assailed November 25, 2003 CA Resolution denied reconsideration. Hence, this Petition.
The Issues
Petitioners state the issues in this wise:
"I. The Honorable Court of Appeals gravely erred in finding respondent the trustor of the subject
properties and in declaring respondent the real party in interest for the rescission of the two deeds of
absolute sale executed by Jennifer Limbaring and Sarah Jane Limbaring in favor of the petitioners.
"II. The Honorable Court of Appeals gravely erred in declaring that respondent has fully complied [with]
his obligation in the undertaking executed by petitioner after the ownership of the subject properties were
transferred to petitioners.
"III. The Honorable Court of Appeals gravely erred and gravely abused [its] discretion in ordering the
rescission of the Deed of Absolute Sale executed by Jennifer Limbaring and Sarah Jane Limbaring in
favor of the petitioners involving the subject properties.
"IV. The Honorable Court of Appeals gravely abused [its] discretion when it ignored the pending case
before the Fourth Division of the Honorable Court of Appeals with the same transaction, essential facts
and circumstances in this case." 26
The threshold issue is whether respondent, who was the plaintiff in the trial court, was a real party in
interest in the suit to rescind the Deeds of Reconveyance.
The Court’s Ruling
The Petition is meritorious.
Main Issue:
Real Party in Interest
Petitioners contend that respondent was not a trustor, and therefore not the real party in interest and had
no legal right to institute the suit. 27 The real parties in interest were Jennifer and Sarah Jane, to whom the
subject properties had been given as gifts. 28
The controversy centers on Rule 3 of the Rules of Court, specifically an elementary rule in remedial law,
which is quoted as follows:
"Sec. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law
or these Rules, every action must be prosecuted or defended in the name of the real party in interest."
As applied to the present case, this provision has two requirements: 1) to institute an action, the plaintiff
must be the real party in interest; and 2) the action must be prosecuted in the name of the real party in
interest.29 Necessarily, the purposes of this provision are 1) to prevent the prosecution of actions by
persons without any right, title or interest in the case; 2) to require that the actual party entitled to legal
relief be the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage litigation
and keep it within certain bounds, pursuant to sound public policy. 30
Interest within the meaning of the Rules means material interest or an interest in issue to be affected by
the decree or judgment of the case, as distinguished from mere curiosity about the question
involved.31 One having no material interest to protect cannot invoke the jurisdiction of the court as the
plaintiff in an action.32 When the plaintiff is not the real party in interest, the case is dismissible on the
ground of lack of cause of action. 33
Action on Contracts
The parties to a contract are the real parties in interest in an action upon it, as consistently held by the
Court.34 Only the contracting parties are bound by the stipulations in the contract; 35 they are the ones who
would benefit from and could violate it.36 Thus, one who is not a party to a contract, and for whose benefit
it was not expressly made, cannot maintain an action on it. One cannot do so, even if the contract
performed by the contracting parties would incidentally inure to one’s benefit. 37
As an exception, parties who have not taken part in a contract may show that they have a real interest
affected by its performance or annulment. 38 In other words, those who are not principally or subsidiarily
obligated in a contract, in which they had no intervention, may show their detriment that could result from
it.39 Contracts pour autrui are covered by this exception.40 In this latter instance, the law requires that the
"contracting parties must have clearly and deliberately conferred a favor upon a third person." A "mere
incidental benefit is not enough."
Action on the Contracts
Presently Involved
Respondent’s Complaint, entitled "Rescission of Contract & Recovery of Possession & Ownership of Two
Parcels of Land," is clearly an action on a contract. The agreements sought to be rescinded 41 clearly
show that the parties to the Deeds of Absolute Sale were Jennifer and Sarah Jane Limbaring 42 as
vendors and Percita Oco as vendee. Clearly then, the action upon the contracts may -- as a rule -- be
instituted only by Jennifer and Sarah Jane against Percita.
Respondent is not a real party in interest. He was not a party to the contracts and has not demonstrated
any material interest in their fulfillment. Evidently, the allegations in the Complaint do not show that the
properties would be conveyed to him, even if Percita were to be proven to have committed a breach of
the subject agreements.
Trust Relationship
To show material interest, respondent argues that a trust was created when he purchased the properties
from Sabas Limbaring in favor of his daughters. As trustor, he allegedly stands to be benefited or injured
by any decision in the case.43
Trust is the legal relationship between one person who has equitable ownership of a property and
another who owns the legal title to the property. 44 The trustor is the one who establishes the trust; the
beneficiary, the person for whose benefit the trust was created; and the trustee, the one in whom, by
conferment of a legal title, confidence has been reposed as regards the property of the beneficiary. 45
Trusts may be either express or implied.46 Express trusts are those created by direct and positive acts of
the parties, such as by some writing, deed or will; or by words either expressly or impliedly evidencing an
intention to create a trust. Implied trusts are those that, without being expressed, are deducible from the
nature of the transaction as matters of intent; or that are super-induced in the transaction by operation of
law as a matter of equity, independently of the particular intention of the parties. 47
Respondent has presented only bare assertions that a trust was created. Noting the need to prove the
existence of a trust, this Court has held thus:
"As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such
proof must be clear and satisfactorily show the existence of the trust and its elements. While implied
trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts with
extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations.
Trustworthy evidence is required because oral evidence can easily be fabricated." 48
On this point, the Civil Code states as follows:
"ART. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party
but the price is paid by another for the purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is
conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by
law, it being disputably presumed that there is a gift in favor of the child."
Under the last sentence of Article 1448, respondent’s alleged acts -- paying the price of the subject
properties and, in the titles, naming his children as owners -- raise the presumption that a gift was
effected in their favor. Respondent failed to rebut this presumption. Absent any clear proof that a trust
was created, he cannot be deemed a real party in interest. 49 That he should be deemed a trustor on the
basis merely of having paid the purchase price is plainly contradicted by the presumption based on
Article 1448 of the Civil Code "that there is a gift in favor of the child," not a trust in favor of the parent.
Other Issues
Having found that respondent is not a real party in interest, this Court deems it no longer necessary to
rule on the other issues raised by petitioner.
WHEREFORE, the Petition is GRANTED, and the assailed Decision and Resolution are SET ASIDE.
Civil Case No. OZC99-14, entitled "Victor Limbaring v. Spouses Percita L. Oco and Anthony Oco," is
DISMISSED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 120465 September 9, 1999
WILLIAM UY and RODEL ROXAS, petitioners,
vs.
COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING AUTHORITY, respondents.
Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the owners
thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Tadiangan,
Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing
project.
On February 14, 1989, the NHA Board passed Resolution No. 1632 approving the acquisition of said
lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties
executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels of land,
however, only five were paid for by the NHA because of the report 1 it received from the Land
Geosciences Bureau of the Department of Environment and Natural Resources (DENR) that the
remaining area is located at an active landslide area and therefore, not suitable for development into a
housing project.
On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the sale over the three parcels of
land. The NHA, through Resolution No. 2394, subsecguently offered the amount of P1.225 million to the
landowners as daños perjuicios.
On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon City a Complaint for
Damages against NHA and its General Manager Robert Balao.
After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial
court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially
offered by NHA to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a
new one dismissing the complaint. It held that since there was "sufficient justifiable basis" in cancelling
the sale, "it saw no reason" for the award of damages. The Court of Appeals also noted that petitioners
were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial
court.
. . . In paragraph 4 of the complaint, plaintiffs alleged themselves to be
"sellers' agents" for the several owners of the 8 lots subject matter of
the case. Obsviously, William Uy and Rodel Roxas in filing this case
acted as attorneys-in-fact of the lot owners who are the real parties in
interest but who were omitted to be pleaded as party-plaintiffs in the
case. This omission is fatal. Where the action is brought by an
attorney-in-fact of a land owner in his name, (as in our present action)
and not in the name of his principal, the action was properly dismissed
(Ferrer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de Leon, 105
Phil. 1175) because the rule is that every action must be prosecuted in
the name of the real parties-in-interest (Section 2, Rule 3, Rules of
Court).
When plaintiffs UY and Roxas sought payment of damages in their
favor in view of the partial rescission of Resolution No. 1632 and the
Deed of Absolute Sale covering TCT Nos. 10998, 10999 and 11292
(Prayer complaint, page 5, RTC records), it becomes obviously
indispensable that the lot owners be included, mentioned and named
as party-plaintiffs, being the real party-in-interest. UY and Roxas, as
attorneys-in-fact or apoderados, cannot by themselves lawfully
commence this action, more so, when the supposed special power of
attorney, in their favor, was never presented as an evidence in this
case. Besides, even if herein plaintiffs Uy and Roxas were authorized
by the lot owners to commence this action, the same must still be filed
in the name of the principal, (Filipino Industrial Corporation vs. San
Diego, 23 SCRA 706 [1968]). As such indispensable party, their
joinder in the action is mandatory and the complaint may be dismissed
if not so impleaded (NDC vs. CA, 211 SCRA 422 [1992]). 2
Their motion for reconsideration having been denied, petitioners seek relief from this Court contending
that:
I. THE RESPONDENT CA ERRED IN DECLARING THAT
RESPONDENT NHA HAD ANY LEGAL BASIS FOR RESCINDING
 THE SALE INVOLVING THE LAST THREE (3) PARCELS COVERED
BY NHA RESOLUTION NO. 1632.
II. GRANTING ARGUENDO THAT THE RESPONDENT NHA HAD
LEGAL BASIS TO RESCIND THE SUBJECT SALE, THE
RESPONDENT CA NONETHELESS ERRED IN DENYING HEREIN
PETITIONERS' CLAIM TO DAMAGES, CONTRARY TO THE
PROVISIONS OF ART. 1191 OF THE CIVIL CODE.
III. THE RESPONDENT CA ERRED IN DISMISSING THE SUBJECT
COMPLAINT FINDING THAT THE PETITIONERS FAILED TO JOIN
AS INDISPENSABLE PARTY PLAINTIFF THE SELLING LOT-
OWNERS. 3
We first resolve the issue raised in the the third assignment of error.
Petitioners claim that they lodged the complaint not in behalf of their principals but in their own name as
agents directly damaged by the termination of the contract. The damages prayed for were intended not
for the benefit of their principals but to indemnify petitioners for the losses they themselves allegedly
incurred as a result of such termination. These damages consist mainly of "unearned income" and
advances. 4 Petitioners, thus, attempt to distinguish the case at bar from those involving agents
or apoderedos instituting actions in their own name but in behalf of their principals. 5 Petitioners in this
case purportedly brought the action for damages in their own name and in their own behalf.
We find this contention unmeritorious.
Sec. 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the
name of the real party-in-interest. The real party-in-interest is the party who stands to be benefited or
injured by the judgment or the party entitled to the avails of the suit. "Interest, within the meaning of the
rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished
from mere interest in the question involved, or a mere incidental interest. 6 Cases construing the real
party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of
real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the
party who, by the substantive law, has the right sought to be enforced. 7
Do petitioners, under substantive law, possess the right they seek to enforce? We rule in the negative.
The applicable substantive law in this case is Article 1311 of the Civil Code, which states:
Contracts take effect only between the parties, their assigns, and
heirs, except in case where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation, or by
provision of law. . . .
If a contract should contain some stipulation in favor of a third person,
he may demand its fulfillment provided he communicated his
acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The contracting parties
must have clearly and deliberately conferred a favor upon a third
person. (Emphasis supplied.)
Petitioners are not parties to the contract of sale between their principals and NHA. They are mere
agents of the owners of the land subject of the sale. As agents, they only render some service or do
something in representation or on behalf of their principals. 8 The rendering of such service did not make
them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only
by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in
an action upon that contract must, generally, either be parties to said contract. 9
Neither has there been any allegation, much less proof, that petitioners are the heirs of their principals.
Are petitioners assignees to the rights under the contract of sale? In McMicking vs. Banco Español-
Filipino, 10 we held that the rule requiring every action to be prosecuted in the name of the real party-in-
interest.
. . . recognizes the assignments of rights of action and also recognizes
that when one has a right of action assigned to him he is then the real
party in interest and may maintain an action upon such claim or right.
The purpose of [this rule] is to require the plaintiff to be the real party
in interest, or, in other words, he must be the person to whom the
proceeds of the action shall belong, and to prevent actions by persons
who have no interest in the result of the same. . . .
Thus, an agent, in his own behalf, may bring an action founded on a contract made for his principal, as
an assignee of such contract. We find the following declaration in Section 372 (1) of the Restatement of
the Law on Agency (Second): 11
Sec. 372. Agent as Owner of Contract Right
(1) Unless otherwise agreed, an agent who has or who acquires an
interest in a contract which he makes on behalf of his principal can,
although not a promisee, maintain such action thereon maintain such
action thereon as might a transferee having a similar interest.
The Comment on subsection (1) states:
a. Agent a transferee. One who has made a contract on behalf of
another may become an assignee of the contract and bring suit
against the other party to it, as any other transferee. The customs of
business or the course of conduct between the principal and the agent
may indicate that an agent who ordinarily has merely a security
interest is a transferee of the principals rights under the contract and
as such is permitted to bring suit. If the agent has settled with his
principal with the understanding that he is to collect the claim against
the obligor by way of reimbursing himself for his advances and
commissions, the agent is in the position of an assignee who is the
beneficial owner of the chose in action. He has an irrevocable power
to sue in his principal's name. . . . And, under the statutes which
permit the real party in interest to sue, he can maintain an action in his
own name. This power to sue is not affected by a settlement between
the principal and the obligor if the latter has notice of the agent's
interest. . . . Even though the agent has not settled with his principal,
he may, by agreement with the principal, have a right to receive
payment and out of the proceeds to reimburse himself for advances
and commissions before turning the balance over to the principal. In
such a case, although there is no formal assignment, the agent is in
the position of a transferee of the whole claim for security; he has an
irrevocable power to sue in his principal's name and, under statutes
which permit the real party in interest to sue, he can maintain an
action in his own name.
Petitioners, however, have not shown that they are assignees of their principals to the subject contracts.
While they alleged that they made advances and that they suffered loss of commissions, they have not
established any agreement granting them "the right to receive payment and out of the proceeds to
reimburse [themselves] for advances and commissions before turning the balance over to the
principal[s]."
Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second
paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute
Sale "clearly and deliberately" conferring a favor to any third person.
That petitioners did not obtain their commissions or recoup their advances because of the non-
performance of the contract did not entitle them to file the action below against respondent NHA. Section
372 (2) of the Restatement of the Law on Agency (Second) states:
(2) An agent does not have such an interest in a contract as to entitle him to
maintain an action at law upon it in his own name merely because he is entitled to
a portion of the proceeds as compensation for making it or because he is liable for
its breach.
The following Comment on the above subsection is illuminating:
The fact that an agent who makes a contract for his principal will gain or suffer
loss by the performance or nonperformance of the contract by the principal or by
the other party thereto does not entitle him to maintain an action on his own
behalf against the other party for its breach. An agent entitled to receive a
commission from his principal upon the performance of a contract which he has
made on his principal's account does not, from this fact alone, have any claim
against the other party for breach of the contract, either in an action on the
contract or otherwise. An agent who is not a promisee cannot maintain an action
at law against a purchaser merely because he is entitled to have his
compensation or advances paid out of the purchase price before payment to the
principal. . . .
Thus, in Hopkins vs. Ives, 12 the Supreme Court of Arkansas, citing Section 372 (2) above, denied the
claim of a real estate broker to recover his alleged commission against the purchaser in an agreement to
purchase property.
In Goduco vs. Court of appeals, 13 this Court held that:
. . . granting that appellant had the authority to sell the property, the
same did not make the buyer liable for the commission she claimed.
At most, the owner of the property and the one who promised to give
her a commission should be the one liable to pay the same and to
whom the claim should have been directed. . . .
As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the
contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore,
they are not the real parties-in-interest in this case.
Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless since
the same would not bind the real parties-in-
interest. 14
Nevertheless, to forestall further litigation on the substantive aspects of this case, we shall proceed to
rule on me merits. 15
Petitioners submit that respondent NHA had no legal basis to "rescind" the sale of the subject three
parcels of land. The existence of such legal basis, notwithstanding, petitioners argue that they are still
entitled to an award of damages.
Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under
Article 1191 of the Civil Code. The right of rescission or, more accurately, resolution, of a party to an
obligation under Article 1191 is predicated on a breach of faith by the other party that violates the
reciprocity between them. 16 The power to rescind, therefore, is given to the injured party. 17 Article 1191
states:
The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other
parties to the contract, the vendors, did not commit any breach, much less a substantial breach, 18 of their
obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they
fulfilled. The NHA did not suffer any injury by the performance thereof.
The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation was based
on the negation of the cause arising from the realization that the lands, which were the object of the sale,
were not suitable for housing.
Cause is the essential reason which moves the contracting parties to enter into it. 19 In other words, the
cause is the immediate, direct and proximate reason which justifies the creation of an obligation through
the will of the contracting parties. 20 Cause, which is the essential reason for the contract, should be
distinguished from motive, which is the particular reason of a contracting party which does not affect the
other party. 21
For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor
(petitioners' principals) in entering into the contract is to obtain the price. For the vendee, NHA, it is the
acquisition of the land. 22 The motive of the NHA, on the other hand, is to use said lands for housing. This
is apparent from the portion of the Deeds of Absolute Sale 23 stating:
WHEREAS, under the Executive Order No. 90 dated December 17, 1986, the
VENDEE is mandated to focus and concentrate its efforts and resources in
providing housing assistance to the lowest thirty percent (30%) of urban income
earners, thru slum upgrading and development of sites and services projects;
WHEREAS, Letters of Instructions Nos. 555 and 557 [as] amended by Letter of
Instruction No. 630, prescribed slum improvement and upgrading, as well as the
development of sites and services as the principal housing strategy for dealing
with slum, squatter and other blighted communities;
xxx xxx xxx
WHEREAS, the VENDEE, in pursuit of and in compliance with the above-stated
purposes offers to buy and the VENDORS, in a gesture of their willing to
cooperate with the above policy and commitments, agree to sell the aforesaid
property together with all the existing improvements there or belonging to the
VENDORS;
NOW, THEREFORE, for and in consideration of the foregoing premises and the
terms and conditions hereinbelow stipulated, the VENDORS hereby, sell, transfer,
cede and convey unto the VENDEE, its assigns, or successors-in-interest, a
parcel of land located at Bo. Tadiangan, Tuba, Benguet containing a total area of
FIFTY SIX THOUSAND EIGHT HUNDRED NINETEEN (56,819) SQUARE
METERS, more or less . . . .
Ordinarily, a party's motives for entering into the contract do not affect the contract. However, when the
motive predetermines the cause, the motive may be regarded as the cause. In Liguez vs. Court of
Appeals, 24 this Court, speaking through Justice J.B.L. REYES, HELD:
. . . it is well to note, however, that Manresa himself (Vol. 8, pp. 641-
642), while maintaining the distinction and upholding the
inoperativeness of the motives of the parties to determine the validity
of the contract, expressly excepts from the rule those contracts that
are conditioned upon the attainment of the motives of either party.
The same view is held by the Supreme Court of Spain, in its decisions
of February 4, 1941, and December 4, 1946, holding that the motive
may be regarded as causa when it predetermines the purpose of the
contract.
In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract
were the lands not suitable for housing. In other words, the quality of the land was an implied condition
for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for its
being a party to the sale.
Were the lands indeed unsuitable for housing as NHA claimed?
We deem the findings contained in the report of the Land Geosciences Bureau dated 15 July 1991
sufficient basis for the cancellation of the sale, thus:
In Tadiangan, Tuba, the housing site is situated in an area of moderate
topography. There [are] more areas of less sloping ground apparently
habitable. The site is underlain by . . . thick slide deposits (4-45m)
consisting of huge conglomerate boulders (see Photo No. 2) mix[ed]
with silty clay materials. These clay particles when saturated have
some swelling characteristics which is dangerous for any civil
structures especially mass housing development. 25
Petitioners contend that the report was merely "preliminary," and not conclusive, as indicated in its title:
MEMORANDUM
TO: EDWIN G. DOMINGO
Chief, Lands Geology Division
FROM: ARISTOTLE A. RILLON
Geologist II
SUBJECT: Preliminary Assessment of
Tadiangan Housing Project in Tuba, Benguet 26
Thus, page 2 of the report states in part:
xxx xxx xxx
Actually there is a need to conduct further geottechnical [sic] studies
in the NHA property. Standard Penetration Test (SPT) must be carried
out to give an estimate of the degree of compaction (the relative
density) of the slide deposit and also the bearing capacity of the soil
materials. Another thing to consider is the vulnerability of the area to
landslides and other mass movements due to thick soil cover.
Preventive physical mitigation methods such as surface and
subsurface drainage and regrading of the slope must be done in the
area. 27
We read the quoted portion, however, to mean only that further tests are required to determine the
"degree of compaction," "the bearing capacity of the soil materials," and the "vulnerability of the area to
landslides," since the tests already conducted were inadequate to ascertain such geological attributes. It
is only in this sense that the assessment was "preliminary."
Accordingly, we hold that the NHA was justified in canceling the contract. The realization of the mistake
as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract
inexistent. 28 Article 1318 of the Civil Code states that:
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (Emphasis supplied.)
Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they
would not be entitled to any award of damages.
WHEREFORE, the instant petition is hereby DENIED.
G.R. No. 157449 April 6, 2010
NEMESIO GOCO, LYDIA G. FABIAN, NATALIA BROTONEL, FLORA GAYOSO, BLEMIE SORIANO,
ELPIDIA NAVALES, SERGIO ROMASANTA, CATALINA NAMIS and NANCY PAMATIGA, represented
by their Attorneys-in-Fact, LYDIA G. FABIAN, ELPIDIA NAVALES and NATALIA
BROTONEL, Petitioners,
vs.
HONORABLE COURT OF APPEALS, ATTY. HICOBLINO CATLY, LOURDES CATLY and the
REGISTER OF DEEDS, CALAPAN CITY, ORIENTAL MINDORO, Respondents.
The subject of the present petition for certiorari 1 is Lot No. 2042, a parcel of land located in Calapan,
Oriental Mindoro and covered by Original Certificate of Title (OCT) No. 529, registered in the name of
Feliciano Alveyra (Alveyra).
In 1952, the Municipality of Calapan (now a City) acquired a one-half interest over Lot No. 2042 in
satisfaction of a judgment award in its favor against Alveyra. Upon registration, however, the entire Lot
No. 2042 was included in Transfer Certificate of Title (TCT) No. 21306; OCT No. 529 was accordingly
cancelled.
To determine the extent of Alveyra and the Municipality of Calapan’s interest over Lot No. 2042, an action
to quiet title2 was instituted, which case eventually reached the Court of Appeals (CA). 3 The CA, in a
decision dated October 28, 1974, subdivided Lot No. 2042 into two lots: one-half or Lot No. 2042-A
(referring to the northern portion) was declared as the property of the heirs of Alveyra who had since
died, while the other half, Lot No. 2042-B (referring to the southern portion), was declared owned by the
Municipality of Calapan.
We affirmed the CA’s decision on February 23, 1976 in G.R. No. 40820. The petitioners’ title over Lot No.
2042-A was registered as TCT No. T-46154 and that of the Municipality of Calapan as TCT No. T-46155.
Meanwhile, while the heirs of Alveyra and the Municipality of Calapan were litigating their conflicting
rights over Lot No. 2042, the heirs sold their one-half interest over the land (Lot No. 2042-A) to
respondent spouses Hicoblino and Lourdes Catly (respondent Catlys). Respondent Catlys then filed a
petition for judicial approval of the subdivision plan of Lot No. 2042-A. 4 On July 31, 1996, the trial court
approved the petition and ordered the subdivision of Lot No. 2042-A to into four lots and the registration
of four new titles under the name of the respondents. 5
In 1999, respondent Catlys alleged that a portion of their Lot No. 2042-A was being occupied by the
petitioners and sought to recover possession of the lot, initially, by instituting an ejectment case against
the petitioners. 6 When the ejectment case was dismissed,7 respondent Catlys then filed a complaint for
recovery of possession8 against the petitioners; the case is still pending decision before the Regional
Trial Court (RTC) of Calapan City, Branch 39.
Allegedly to defend themselves against the cases filed by respondent Catlys and to protect their vested
rights as lawful occupants of the land, the petitioners filed a complaint for declaration of nullity of the four
certificates of title issued in respondent Caltys’ names. 9 The petitioners claimed they are occupants of the
original Lot No. 2042 since 1946 and anchored their continued right to occupy as lessees of the
Municipality of Calapan. They also alleged that the titles issued in respondent Catlys’ names (covering
Lot No. 2042-A which were subdivided into four lots) included portions that they claimed were part of Lot
No. 2042-B which belonged to the Municipality of Calapan. The petitioners consider the inclusion of these
portions of Lot No. 2042-B prejudicial to their interest as its actual occupants, hence, they questioned
respondent Catlys’ titles. Respondent Catlys, in turn, moved for the dismissal of the complaint asserting
that it failed to state a cause of action and that the petitioners (plaintiffs below) were not the real parties in
interest.
In its September 7, 1999 Order, 10 the Regional Trial Court (RTC) of Oriental Mindoro, Branch 39, ordered
the dismissal of the complaint for declaration of nullity of respondent Catlys’ titles. It found that the
petitioners were in fact occupying portions of respondent Catlys’ Lot No. 2042-A. Although the petitioners
were asserting a legal right to occupy the land by virtue of a lease contract, the lease covered only Lot
No. 2042-B – the southern portion which belonged to the Municipality of Calapan. The trial court
discovered that the petitioners were occupying areas outside those covered by their lessor’s title and
concluded they had no cause of action against respondent Catlys. The relevant portion of the September
7, 1999 Order said:
As consistently admitted by the [petitioners], they are occupying the lot belonging to the Municipal
Government of Calapan as occupant-lessees x x x it was ascertained that the [petitioners] are outside the
area covered by the Municipal Government’s title.11
Corollary to this, it declared that the petitioners were not the real parties in interest who could assail and
seek the annulment of the respondents’ title.
The petitioners’ move to have the September 7, 1999 Order reconsidered was denied by the RTC in its
March 30, 2000 Order.12 They sought the reversal of the trial court’s Orders by filing a petition for
certiorari under Rule 65 of the Rules of Court before the CA.
In a decision dated October 7, 2002,13 the CA dismissed the petition and affirmed the RTC’s dismissal of
the complaint for annulment of respondent Catlys’ titles. It ruled that petitioners erred in filing a certiorari
petition under Rule 65 of the Rules of Court to assail an order of dismissal by the trial court. An order
sustaining a motion to dismiss is a final adjudication on the merits of the case and the remedy of the
plaintiff is to appeal the order. This procedural lapse notwithstanding, the CA proceeded to consider the
petition as an ordinary appeal filed under Rule 41.
Ruling on the merits of case, the CA agreed with the RTC that the petitioners have no cause of action
against respondent Catlys. The petitioners were assailing respondents Catlys’ titles which were derived
from TCT No. T-46154 covering Lot No. 2042-A. These titles, however, are separate and distinct from the
land that the petitioners are occupying which is registered as TCT No. T-46155 covering Lot No. 2042-B
in the name of the Municipality of Calapan. Thus, their claimed vested rights in Lot No. 2042-B were not
at all impaired by respondent Catlys’ titles. Even assuming that a portion of respondent Catlys’ lot
includes that belonging to the Municipality of Calapan, the petitioners do not possess sufficient interest to
assail respondent Catlys’ titles as they are mere lessees.
The petitioners filed a motion for reconsideration of the CA’s decision dated October 7, 2002. 14 The CA
denied the motion in a resolution dated March 6, 2003. 15 The petitioners now seek to reverse these CA
rulings before the Court via a petition for certiorari filed under Rule 65 of the Rules of Court. The
petitioners reiterate the same arguments they raised before the RTC and insist that they have sufficient
interest in praying for the annulment of respondent Catlys’ titles, as their vested rights have been
impaired.
THE COURT’S RULING
The Court resolves to dismiss the petition.
A petition for certiorari resolves only errors of jurisdiction
The petitioners have twice erroneously availed of the remedy of a certiorari petition, first, before the CA
against the RTC order dismissing its complaint for annulment of title, and second, before the Court
against the CA’s decision thereon.
Time and again, we have discussed the nature of a certiorari petition – it is intended to correct only errors
of jurisdiction where the court or tribunal has acted with grave abuse of discretion. A writ of certiorari
cannot be used for any other purpose; it cannot be used to resolve questions or issues beyond its
competence such as errors of judgment. Certiorari will not be issued to cure errors by the trial court in its
appreciation of the evidence of the parties, its conclusions anchored on the said findings, and its
conclusions of law.16
The supervisory jurisdiction of a court over the issuance of a writ of certiorari cannot be exercised for the
purpose of reviewing the intrinsic correctness of a judgment of the lower court on the basis either of the
law or the facts of the case, or of the wisdom or legal soundness of the decision. Even if the findings of
the court are incorrect, as long as it has jurisdiction over the case, such correction is normally beyond the
province of certiorari. Where the error is not one of jurisdiction, but of an error of law or fact - a mistake of
judgment - appeal is the remedy. 17 [Emphasis supplied.]1avvphi1
In the two certiorari petitions the petitioners filed before the CA and before the Court, they assailed
rulings of the lower courts by claiming that the findings and conclusions of these courts were merely
speculative and based on misapprehension of facts. These assigned errors, however, constitute an
attack on the correctness or soundness of the decision assailed and does not at all affect the jurisdiction
of the court to issue such decision. In other words, they amount to no more than errors of judgment
correctible by an appeal, not by a writ of certiorari that will issue only when there is no appeal, or any
plain, speedy, and adequate remedy in the ordinary course of law. 18
Since an order of dismissal by the trial court is a final order from which an ordinary appeal under Rule 41
can be taken,19 the petitioners should have taken this avenue against the RTC order of September 7,
1999 instead of resorting to a petition for certiorari before the CA. Supreme Court Circular No. 2-90 is
unequivocal in directing the dismissal of an inappropriate mode of appeal:
4. Erroneous Appeals – An appeal taken to either the Supreme Court or the Court of Appeals by the
wrong or inappropriate mode shall be dismissed.
But rather than dismissing outright the petition, the CA, "in the interest of justice," decided to treat it as an
appeal filed under Rule 41 and consider the errors raised by the petitioners. As it turned out, however, the
CA still ruled for the petition’s dismissal because it found that petitioners’ did not have any cause of action
against respondent Catlys and were not the real parties in interest.
As the petitioners now raise before this Court the same errors of judgment already raised before and
resolved by the CA, the dismissal of the present certiorari petition is in order for being the wrong remedy.
Errors of judgment committed by the CA are reviewable by this Court via a petition for review on certiorari
under Rule 45 of the Rules of Court. Erroneous findings and conclusion do not render the appellate court
vulnerable to the corrective writ of certiorari. 20
The petitioners’ invocation of a liberal application of the rules of procedure is unavailing. Even if the Court
were to consider the present petition as an appeal filed under Rule 45, we would ultimately order its
dismissal for failing to find any reversible error committed by the CA.
An action for annulment of title, like any other civil action, must be instituted by the real party in interest
Section 2, Rule 3 of the Rules of Court 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.
This provision has two requirements: 1) to institute an action, the plaintiff must be the real party in
interest; and 2) the action must be prosecuted in the name of the real party in interest. Interest within the
meaning of the Rules of Court means material interest or an interest in issue to be affected by the decree
or judgment of the case, as distinguished from mere curiosity about the question involved. One having no
material interest to protect cannot invoke the jurisdiction of the court as the plaintiff in an action. When the
plaintiff is not the real party in interest, the case is dismissible on the ground of lack of cause of action. 21
An action for annulment of certificates of title to property into the issue of ownership of the land covered
by a Torrens title and the relief generally prayed for by the plaintiff is to be declared as the land’s true
owner.22 The real party in interest in such action therefore is the person claiming title or ownership
adverse to that of the registered owner. The case of Tankiko v. Cezar 23 has illustrated for us the
application of this principle in the following manner:
It is evident that respondents are not the real parties in interest. Because they admit that they are not the
owners of the land but mere applicants for sales patents thereon, it is daylight clear that the land is public
in character and that it should revert to the State. This being the case, Section 101 of the Public Land Act
categorically declares that only the government may institute an action to recover ownership of a public
land.
xxxx
Under Section 2, Rule 3 of the Rules of Court, every action must be prosecuted or defended in the name
of the real party in interest. It further defines a "real party in interest" as one who stands to be benefited or
injured by the judgment in the suit. x x x The interest of the party must be personal and not one based on
a desire to vindicate the constitutional right of some third and unrelated party.
Clearly, a suit filed by a person who is not a party in interest must be dismissed. Thus, in Lucas v. Durian,
the Court affirmed the dismissal of a Complaint filed by a party who alleged that the patent was obtained
by fraudulent means and, consequently, prayed for the annulment of said patent and the cancellation of a
certificate of title. The Court declared that the proper party to bring the action was the government, to
which the property would revert. Likewise affirming the dismissal of a Complaint for failure to state a
cause of action, the Court in Nebrada v. Heirs of Alivio noted that the plaintiff, being a mere homestead
applicant, was not the real party in interest to institute an action for reconveyance.
xxxx
Verily, the Court stressed that "if the suit is not brought in the name of or against the real party in interest,
a motion to dismiss may be filed on the ground that the complaint states no cause of action." 24 [Emphasis
supplied.]
The petitioners demand the annulment of respondent Catlys’ titles because they allege that these
included portions belonging to the Municipality of Calapan. This allegation is a clear recognition of the
Municipality’s superior interest over the lot. In instituting the action for annulment of respondent Catlys’
titles, what the petitioners are asserting is a right that is not personal to them, but to that of the local
government. That they are lessees who were granted by the Municipality of Calapan the option to
purchase the portion they occupy does not suffice to constitute as parties with material interest to
commence the action.
WHEREFORE, premises considered, we hereby DISMISS the petitioners’ Petition for Certiorari filed
under Rule 65 of the Rules of Court. The Decision of October 7, 2002 and Resolution of March 6, 2003 in
CA-G.R. SP No. 58307 are AFFIRMED. Cost against the petitioners.
SO ORDERED.
G.R. No. 76225 March 31, 1992
ESPIRIDION TANPINGCO, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, and BENEDICTO HORCA, SR., respondents.
May a tenanted parcel of land be donated by the landowner so that it can be the site of a public high
school without securing the consent of the tenant-lessee? Who bears the responsibility of paying
disturbance compensation? These are the issues raised in this case.
On May 10, 1985, a complaint for payment of disturbance compensation with damages was filed by
petitioner Espiridion Tanpingco against respondent Benedicto Horca, Sr. with the Regional Trial Court of
Palo, Leyte.
It is alleged in the complaint that the petitioner is the tenant-lessee in the respondent's parcel of
agricultural riceland situated at Brgy. Buenavista, Jaro, Leyte under a leasehold contract entered into
sometime in April, 1976; that in a letter dated April 9, 1985, the respondent through his representative
informed him to desist from working on the subject land, having already donated the same on February 3,
1985; that the respondent openly ordered the petitioner to vacate the landholding and is determined to
oust him from the premises in violation of the law; that the petitioner is willing to accept payment of
disturbance compensation in an amount computed in accordance with law and in the alternative to
remain as tenant-lessee of the subject riceland.
On July 5, 1985, the case was called for pre-trial following which the trial court gave the respondent until
July 9, 1985 to file his answer. The respondent filed instead a Motion to Dismiss alleging principally that
the complaint states no cause of action because the respondent is not the real party-in-interest having
already donated the subject land to the Ministry of Education, Culture, and Sports, Region VIII, as a
school site of the Buenavista Barangay High School; and that the donation not having in anyway
benefited the respondent, no disturbance compensation is due the petitioner since under Section 36 (1)
of the Agrarian Reform Code as amended, disturbance compensation holds true only in cases wherein
the lessor-owner derives financial benefits from the conversion of the agricultural land into non-
agricultural purposes.
The trial court granted the respondent's Motion to Dismiss and denied the petitioner's Motion for
Reconsideration.
On June 20, 1986, the Intermediate Appellate Court rendered the decision now assailed, the dispositive
portion of which reads as follows:
WHEREFORE, finding no merit in the instant appeal, the same is hereby
DISMISSED with costs taxed against the appellant.
From the aforesaid decision, petitioner Esperidion Tanpingco interposed the present petition under the
following assignment of errors.
I
Was it proper for the trial court to grant the Motion to Dismis filed by the defendant
inspite of explicit mandate against such action as contained in Section 17 of P.D.
No. 946?
II
Was respondent Court correct in sustaining the validity of the conversion of the
subject tenanted riceland into a school site?
III
Was it correct in ruling that a tenant is not entitled to payment of disturbance
compensation in case his tenanted landholding is donated and converted into a
school site?
Anent the first assignment of error, the petitioner anchors his contention mainly on Section 17 of
Presidential Decree No. 946 which provides:
Sec. 17. Pleading, Hearing, Limitation on Postponements. — The defendant shall
file answer to the complaint (not a motion to dismiss), within a non-extendible
period of ten (10) days from service of
summons . . .
In Sucaldito and De Guzman v. Hon. Montejo (193 SCRA 556 [1991]), the Court declared that where the
law speaks in clear and categorical language, there is no room for interpretation. However, technicalities
may be disregarded in order to resolve the case on its merits. (Ruiz v. Court of Appeals, G.R. No. 93454,
September 13, 1991 citing Tesoro v. Mathay, 185 SCRA 124 [1990]).
On this point, the respondent appellate court noted that:
The rationale of the rule requiring a defendant in an agrarian case to file an
answer and not a motion to dismiss is to expedite the proceedings. The filing of
the motion to dismiss and the granting thereof by the lower court based upon
indubitable grounds precisely expedited the proceedings and conforms with the
spirit and intention of P.D. 946 which requires courts trying agrarian cases to
employ every reasonable means to ascertain the facts of every case in
accordance with justice and equity without regard to technicalities of law and
procedure and empowering the Court to adopt any appropriate measure or
procedure in any situation or matter not provided for or covered by the Decree
(Section 16, 3rd and 4th sentences, P.D. 946).
We, therefore, take exception to the literal application of Section 17 of P.D. No. 946 for as stated
in Salonga v. Warner Barnes and Co., Ltd. (88 Phil. 125 [1951], an action is brought for a practical
purpose, nay to obtain actual and positive relief. If the party sued upon is not the proper party, any
decision that may be rendered against him would be futile, for it cannot be enforced or executed. The
effort that may be employed will be wasted.
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted in the name of the
real party-in-interest. A corollary proposition to this rule is that an action must be brought against the real
party-in-interest, or against a party which may be bound by the judgment to be rendered therein (Salonga
v. Warner Barnes and Co., Ltd. supra citing Salmon and Pacific Commercial Co., v. Tan Cuenco, 36 Phil.
556 [1917]). The real party-in-interest is one who stands to be benefited or be injured by the judgment, or
the party entitled to the avails of the suit (Rebollido v. Court of Appeals, 170 SCRA 800 [1989] citing
Samahan ng mga Nangungupahan sa Azcarraga Textile Market, Inc., et al. v. Court of Appeals, 165
SCRA 598 [1988]). If the suit is not brought against the real party-in-interest, a motion to dismiss may be
filed on the ground that the complaint states no cause of action (Section 1(g), Rule 16, Rules of Court).
Hence, the resolution of the dispute hinges upon the determination of whether or not the private
respondent is the real party-in-interest against whom the suit should be brought.
The private respondent bolsters his claim that he is not the real party-in-interest on Section 10 of
Republic Act No. 3844 (Code of Agrarian Reforms of the Philippines) which provides that:
. . . In the case the agricultural lessor sells, alienates or transfers the legal
possession of the landholding, the purchaser or transferee thereof shall be
subrogated to the rights and substituted to the obligation of the agricultural lessor.
In effect, the private respondent is of the view that the Ministry of Education, Culture and Sports, as
donee, became the new lessor of the agricultural lessee by operation of law and is therefore the real
party-in-interest against whom the claim for disturbance compensation should be directed.
We agree with the contentions of the private respondent. The petitioner should have impleaded the
Ministry of Education, Culture and Sports as the party-defendant for as stated in Roman Catholic
Archbishop of Manila v. Court of Appeals (198 SCRA 300 [1991]), a donation, as a mode of acquiring
ownership, results in an effective transfer of title over the property from the donor to the donee and once
a donation is accepted, the donee becomes the absolute owner of the property donated.
Under Article 428 of the New Civil Code, the owner has the right to dispose of a thing without other
limitations than those established by law. As an incident of ownership therefore, there is nothing to
prevent a landowner from donating his naked title to the land. However, the new owner must respect the
rights of the tenant. Section 7 of R.A. No. 3844, as amended (Code of Agrarian Reforms of the
Philippines) gives the agricultural lessee the right to work on the landholding once the leasehold
relationship is established. It also entitles him to security of tenure on his landholding. He can only be
ejected by the court for cause. Time and again, this Court has guaranteed the continuity and security of
tenure of a tenant even in cases of a mere transfer of legal possession. As elucidated in the case
of Bernardo v. Court of Appeals (168 SCRA 439 [1988]), security of tenure is a legal concession to
agricultural lessees which they value as life itself and deprivation of their landholdings is tantamount to
deprivation of their only means of livelihood. Also, under Section 10 of the same Act, the law explicitly
provides that the leasehold relation is not extinguished by the alienation or transfer of the legal
possession of the landholding. The only instances when the agricultural leasehold relationship is
extinguished are found in Section 8, 28 and 36 of the Code of Agrarian Reforms of the Philippines. The
donation of the land did not terminate the tenancy relationship. However, the donation itself is valid.
Considering that the tenant in the case at bar is willing to accept payment of disturbance compensation in
exchange for his right to cultivate the landholding in question, the real issue is who should pay the
compensation. We rule that the Ministry of Education, Culture and Sports as the new owner cannot oust
the petitioner from the subject riceland and build a public high school thereon until after there is payment
of the disturbance compensation in accordance with Section 36 (1) of R.A. No. 3844, as amended.
In view of the foregoing, we are of the opinion and so hold that the trial court correctly dismissed the
complaint for payment of disturbance compensation because the private respondent is not the real party-
in-interest. And having arrived at this conclusion, we do not deem it necessary to pass upon the other
errors assigned by the petitioner for as stated in Filamer Christian Institute v. Court of Appeals (190
SCRA 485 [1990]), a person who was not impleaded in the complaint could not be bound by the decision
rendered therein, for no man shall be affected by a proceeding to which he is a stranger. The remedy
then of the petitioner is to claim his disturbance compensation from the new owner or whatever agency,
local or national, is in a position to pay for it.
WHEREFORE, the petition is hereby DENIED. The decision dated 20 June 1986
of the Intermediate Appellate Court is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. L-2246 January 31, 1951
JOVITO R. SALONGA, plaintiff-appellee,
vs.
WARNER, BARNES AND CO., LTD., defendant-appellant.
This is an appeal from a decision of the Court of First Instance of Manila ordering the defendant, as agent
of Westchester Fire Insurance Company of New York, to pay to the plaintiff the sum of P727. 82 with
legal interest thereon from the filing of the complaint until paid, and the costs. The case was taken to this
court because it involves only questions of law.
On August 28, 1946, Westchester Fire Insurance Company of New York entered into a contract with Tina
J. Gamboa whereby said company insured one case of rayon yardage which said Tina J. Gamboa
shipped from San Francisco, California, on steamer Clovis Victory, to Manila, Philippines and consigned
to Jovito Salonga, plaintiff herein. According to the contract of insurance, the insurance company
undertook to pay to the sender or her consignee the damages that may be caused to the goods shipped
subject to the condition that the liability of the company will be limited to the actual loss which the insured
may suffer not to the exceed the sum of (2,000. The ship arrived in Manila on September 10, 1946. On
October 7, the shipment was examined by C. B. Nelson and Co., marine surveyors, at the request of the
plaintiff, and in their examination the surveyors found a shortage in the shipment in the amount of
P1,723,12. On October 9, plaintiff filed a claim for damages in the amount of P1,723.12 against the
American President Lines, agents of the ship Clovis Victory, demanding settlement, and when apparently
no action was taken on this claim, plaintiff demanded payment thereof from Warner, Barnes and Co.,
Ltd., as agent of the insurance company in the Philippines, and this agent having refused to pay the
claim, on April 17, 1947, plaintiff instituted the present action.
In the meantime, the American President Lines, in a letter dated November 25, 1946, agreed to pay to
the plaintiff the amount of P476.17 under its liability in the bill of lading, and when this offer was rejected,
the claim was finally settled in the amount of P1,021.25. As a result, the amount claimed in the complaint
as the ultimate liability of the defendant under the insurance contract was reduced to P717.82 only.
After trial, at which both parties presented their respective evidence, the court rendered judgment as
stated in the early part of this decision. The motion for reconsideration filed by the defendant having been
denied, the case was appealed to this court.
Appellant now assigns the following errors:
I
The trial court erred in finding that the loss or damage of the case of rayon yardage
(Pilferage, as found by the marine surveyors)is included in the risks insured against as
enunciated in the insurance policy.
II
The trial court erred in holding that defendant, as agent of Westchester Fire Insurance
Company of New York, United States of America, is responsible upon the insurance claim
subject to the suit.
III
The trial court erred in denying defendant's motion for new trial and to set aside the decision.
(Appellant's assignments of error).
We will begin by discussing the second error assigned by appellant for the reason that if our view on the
question raised is in favor of the claim of appellant there would be no need to proceed with the discussion
of the other errors assigned, for that would put an end to the controversy.
As regards the second assignment of error, counsel claims that the defendant cannot be made
responsible to pay the amount in litigation because (1) said defendant has no contractual relation with
either the plaintiff or his consignor; (2) the defendant is not the real party in interest against whom the suit
should be brought; and (3) a judgment for or against an agent in no way binds the real party in interest.
1. We are of the opinion that the first point is well taken. It is a well known rule that a contractual
obligation or liability, or an action ex-contractu, must be founded upon a contract, oral or written, either
express or implied. This is axiomatic. If there is no contract, there is no corresponding liability, and no
cause of action may arise therefrom. This is what is provided for in article 1257 of the Civil Code. This
article provides that contracts are binding upon the parties who make them and their heirs, excepting,
with respect to the latter, where the rights and obligations are not transmissible, and when the contract
contains a stipulation in favor of a third person, he may demand its fulfillment if he gives notice of his
acceptance before it is revoked. This is also the ruling laid down by this court in the case of E. Macias
and Co. vs. Warner, Barnes and Co. (43 Phil. 155) wherein, among others, the court said:
xxx xxx xxx
. . . There is no contract of any kind, either oral or written, between the plaintiff and Warner,
Barnes and Company. Plaintiff's contracts are with the insurance companies, and are in
writing, and the premiums were paid to the insurance companies and the policies were issued
by, and in the name of, the insurance companies, and on the face of the policy itself, the
plaintiff knew that the defendant was acting as agent, for, and was representing, the
respective insurance companies in the issuance and delivery of the policies. The defendant
company did not contract or agree to do anything or to pay the plaintiff any money at any time
or on any condition, either as agent or principal.
xxx xxx xxx
Every cause of action ex-contractu must be founded upon a contract, oral or written, either
express or implied.
Warner, Barnes and Co., as principal or agent, did not make any contract, either oral or
written, with the plaintiff. The contracts were made between the respective insurance
companies and the insured, and were made by the insurance companies, through Warner,
Barnes and Co., as their agent.
As in the case of a bank draft, it is not the cashier of the bank who makes the contract to pay
the money evidenced by the draft, it is the bank, acting through its cashier, that makes the
contract. So, in the instant case, it was the insurance companies, acting through Warner,
Barnes and Co., as their agent, that made the written contracts with the insured. (E. Macias
and Co. vs. Warner, Barnes and Co., 43 Phil., 155, 161, 162.)
Bearing in mind the above rule, we find that the defendant has not taken part, directly or indirectly, in the
contract in question. The evidence shows that the defendant did not enter into any contract either with the
plaintiff or his consignor — Tina J. Gamboa. The contract of marine insurance, Exhibit C, was made and
executed only by and between the Westchester Fire Insurance Company of New York and Tina J.
Gamboa. The contract was entered in New York. There is nothing therein which may affect, in favor or
adversely, the defendant, the fulfillment of which may be demanded by or against it. That contract is
purely bilateral, binding only upon Gamboa and the insurance company. When the lower court, therefore,
imposed upon the defendant an obligation which it has never assumed, either expressly or impliedly, or
when it extended to the defendant the effects of a contract which was entered into exclusively by and
between the Westchester Fire Insurance Company of New York and Tina J. Gamboa, the error it has
committed is evident. This is contrary to law.
We do not find any material variance between this case and the case of E. Macias and Co. vs. Warner,
Barnes and Co., supra, as pointed out by counsel for appellee, in so far as the principle we are
considering is concerned. Both cases involve similar facts which call for the application of a similar ruling.
In both cases the issue is whether an agent, who acts within the scope of his authority, can assume
personal liability for a contract entered into by him in behalf of his principal. And in the Macias case we
said that the agent did not assume personal liability because the only party bound was the principal. And
in this case this principle acquires added force and effect when we consider the fact that the defendant
did not sign the contract as agent of the foreign insurance company as the defendant did in the Macias
case. The Macias case, therefore, is on all fours with this case and is decisive of the question under
consideration.
2. Counsel next contends that Warner, Barnes and Co., Ltd., is not the real party in interest against whom
the suit should be brought. It is claimed that this action should have been filed against its principal, the
Westchester Fire Insurance Company of New York. This point is also well taken. Section 2, Rule 3 of the
Rules of Court requires that "every action must be prosecuted in the name of the real party in interest." A
corollary proposition to this rule is that an action must be brought against the real party in interest, or
against a party which may be bound by the judgment to be rendered therein (Salmon and Pacific
Commercial Co. vs. Tan Cueco, 36 Phil., 556). The real party in interest is the party who would be
benefited or injured by the judgment, or the "party entitled to the avails of the suit" (1 Sutherland, Court
Pleading Practice and Forms, p. 11). And in the case at bar, the defendant issued upon in its capacity as
agent of Westchester Fire Insurance Company of New York in spite of the fact that the insurance contract
has not been signed by it. As we have said, the defendant did not assume any obligation thereunder
either as agent or as a principal. It cannot, therefore, be made liable under said contract, and hence it
can be said that this case was filed against one who is not the real party in interest.
We agree with counsel for the appellee that the defendant is a settlement and adjustment agent of the
foreign insurance company and that as such agent it has the authority to settle all the losses and claims
that may arise under the policies that may be issued by or in behalf of said company in accordance with
the instructions it may receive from time to time from its principal, but we disagree with counsel in his
contention that as such adjustment and settlement agent, the defendant has assumed personal liability
under said policies, and, therefore, it can be sued in its own right. An adjustment and settlement agent is
no different from any other agent from the point of view of his responsibility, for he also acts in a
representative capacity. Whenever he adjusts or settles a claim, he does it in behalf of his principal, and
his action is binding not upon himself but upon his principal. And here again, the ordinary rule of agency
applies. The following authorities bear this out:
An insurance adjuster is ordinarily a special agent for the person or company for whom he
acts, and his authority is prima facie coextensive with the business intrusted to him. . . .
An adjuster does not discharge functions of a quasi-judicial nature, but represents his
employer, to whom he owes faithful service, and for his acts, in the employer's interest, the
employer is responsible so long as the acts are done while the agent is acting within the
scope of his employment. (45 C. J. S., 1338-1340.)
It, therefore, clearly appears that the scope and extent of the functions of an adjustment and settlement
agent do not include personal liability. His functions are merely to settle and adjusts claims in behalf of his
principal if those claims are proven and undisputed, and if the claim is disputed or is disapproved by the
principal, like in the instant case, the agent does not assume any personal liability. The recourse of the
insured is to press his claim against the principal.
3. This brings us to the consideration of the third point. It is claimed that a judgment, for or against an
agent, in no way binds the real party in interest. In our opinion this point is also well taken, for it is but a
sequel to the principle we have pointed out above. The reason is obvious. An action is brought for a
practical purpose, nay to obtain actual and positive relief. If the party sued upon is not the proper party,
any decision that may be rendered against him would be futile, for it cannot be enforced or executed. The
effort that may be employed will be wasted. Such would be the result of this case if it will be allowed to
proceed against the defendant, for even if a favorable judgment is obtained against it, it cannot be
enforced because the real party is not involved. The defendant cannot be made to pay for something it is
not responsible. Thus, in the following authorities it was held:
. . . Section 114 of the Code of Civil Procedure requires an action to be brought in the name
of the real party in interest; and a corollary proposition requires that an action shall be brought
against the persons or entities which are to be bound by the judgment obtained therein. An
action upon a cause of action pertaining to his principal cannot be brought by an attorney-in-
fact in his name (Arroyo vs. Granada and Gentero, 18 Phil., 484); nor can an action based
upon a right of action belonging to a principal be brought in the name of his representative
(Lichauco vs. Limjuco and Gonzalo, 19 Phil., 12). Actions must be brought by the real parties
in interest and against the persons who are to be bound by the judgment obtained therein.
(Salmon and Pacific Commercial Co. vs. Tan Cueco, 36 Phil., 557-558.)
xxx xxx xxx
An action to set aside an instrument of transfer of land should be brought in the name of the
real party in interest. An apoderado or attorney in fact is not a real party. He has no interest in
the litigation and has absolutely no right to bring the defendant into court or to put him to the
expense of a suit, and there is no pro-vision of law permitting action to be brought in such
manner. A judgment for or against the apoderado in no way binds or affects the real party,
and a decision in the suit would be utterly futile. It would touch no interest, adjust no question,
bind no one, and settle no litigation. Courts should not be required to spend their time
solemnly considering and deciding cases where no one could be bound and no interest
affected by such deliberation and decision. (Arroyo vs. Granada and Gentero, 18 Phil., 484.)
If the case cannot be filed against the defendant as we have pointed out, what then is the remedy of the
plaintiff under the circumstances? Is the case of the plaintiff beyond remedy? We believe that the only
way by which the plaintiff can bring the principal into this case or make it come under the courts in this
jurisdiction is to follow the procedure indicated in section 14, Rule 7, of the Rules of Court concerning
litigations involving foreign corporations. This rule says that if the defendant is a foreign corporation and it
has not designated an agent in the Philippines on whom service may be made in case of litigation, such
service may be made on any agent it may have in the Philippines. And in our opinion the Westchester
Fire Insurance Company of new York comes within the import of this rule for even if it has not designated
an agent as required by law, it has however a settling agent who may serve the purpose. In other words,
an action may be brought against said insurance company in the Philippines and the process may be
served on the defendant to give our courts the necessary jurisdiction. This is the way we have pointed out
in the case of General Corporation of the Philippines and Mayon Investment Co. vs. Union Insurance
Society of Canton Ltd. et al., (87 Phil., 313).
In view of the foregoing, we are of the opinion and so hold that the lower court erred in holding the
defendant responsible for the loss or damage claimed in the complaint. And having arrived at this
conclusion, we do not deem it necessary to pass upon the other errors assigned by the appellant.
Wherefore, the decision appealed from is hereby reversed. The complaint is hereby dismissed, with costs
against the appellee.
G.R. No. 186993 August 22, 2012
THEODORE and NANCY ANG, represented by ELDRIGE MARVIN B. ACERON, Petitioners,
vs.
SPOUSES ALAN and EM ANG, Respondents.
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 August 28, 2008 and the Resolution 2 dated February 20, 2009 rendered
by the Court of Appeals (CA) in CA-G.R. SP No. 101159. The assailed decision annulled and set aside
the Orders dated April 12, 20073 and August 27, 20074 issued by the Regional Trial Court (RTC) of
Quezon City, Branch 81 in Civil Case No. Q-06-58834.
The Antecedent Facts
On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in the amount of Three
Hundred Thousand U.S. Dollars (US$300,000.00) from Theodore and Nancy Ang (petitioners). On even
date, the respondents executed a promissory note 5 in favor of the petitioners wherein they promised to
pay the latter the said amount, with interest at the rate of ten percent (10%) per annum, upon demand.
However, despite repeated demands, the respondents failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking them to pay their
outstanding debt which, at that time, already amounted to Seven Hundred Nineteen Thousand, Six
Hundred Seventy-One U.S. Dollars and Twenty-Three Cents (US$719,671.23), inclusive of the ten
percent (10%) annual interest that had accumulated over the years. Notwithstanding the receipt of the
said demand letter, the respondents still failed to settle their loan obligation.
On August 6, 2006, the petitioners, who were then residing in Los Angeles, California, United States of
America (USA), executed their respective Special Powers of Attorney 6 in favor of Attorney Eldrige Marvin
B. Aceron (Atty. Aceron) for the purpose of filing an action in court against the respondents. On
September 15, 2006, Atty. Aceron, in behalf of the petitioners, filed a Complaint 7 for collection of sum of
money with the RTC of Quezon City against the respondents.
On November 21, 2006, the respondents moved for the dismissal of the complaint filed by the petitioners
on the grounds of improper venue and prescription.8 Insisting that the venue of the petitioners’ action was
improperly laid, the respondents asserted that the complaint against them may only be filed in the court
of the place where either they or the petitioners reside. They averred that they reside in Bacolod City
while the petitioners reside in Los Angeles, California, USA. Thus, the respondents maintain, the filing of
the complaint against them in the RTC of Quezon City was improper.
The RTC Orders
9
On April 12, 2007, the RTC of Quezon City issued an Order which, inter alia, denied the respondents’
motion to dismiss. In ruling against the respondents’ claim of improper venue, the court explained that:
Attached to the complaint is the Special Power of Attorney x x x which clearly states that plaintiff Nancy
Ang constituted Atty. Eldrige Marvin Aceron as her duly appointed attorney-in-fact to prosecute her claim
against herein defendants. Considering that the address given by Atty. Aceron is in Quezon City, hence,
being the plaintiff, venue of the action may lie where he resides as provided in Section 2, Rule 4 of the
1997 Rules of Civil Procedure.10
The respondents sought reconsideration of the RTC Order dated April 12, 2007, asserting that there is no
law which allows the filing of a complaint in the court of the place where the representative, who was
appointed as such by the plaintiffs through a Special Power of Attorney, resides. 11
The respondents’ motion for reconsideration was denied by the RTC of Quezon City in its Order 12 dated
August 27, 2007.
The respondents then filed with the CA a petition for certiorari 13 alleging in the main that, pursuant to
Section 2, Rule 4 of the Rules of Court, the petitioners’ complaint may only be filed in the court of the
place where they or the petitioners reside. Considering that the petitioners reside in Los Angeles,
California, USA, the respondents assert that the complaint below may only be filed in the RTC of Bacolod
City, the court of the place where they reside in the Philippines.
The respondents further claimed that, the petitioners’ grant of Special Power of Attorney in favor of Atty.
Aceron notwithstanding, the said complaint may not be filed in the court of the place where Atty. Aceron
resides, i.e., RTC of Quezon City. They explained that Atty. Aceron, being merely a representative of the
petitioners, is not the real party in interest in the case below; accordingly, his residence should not be
considered in determining the proper venue of the said complaint.
The CA Decision
On August 28, 2008, the CA rendered the herein Decision, 14 which annulled and set aside the Orders
dated April 12, 2007 and August 27, 2007 of the RTC of Quezon City and, accordingly, directed the
dismissal of the complaint filed by the petitioners. The CA held that the complaint below should have
been filed in Bacolod City and not in Quezon City. Thus:
As maybe clearly gleaned from the foregoing, the place of residence of the plaintiff’s attorney-in-fact is of
no moment when it comes to ascertaining the venue of cases filed in behalf of the principal since what
should be considered is the residence of the real parties in interest, i.e., the plaintiff or the defendant, as
the case may be. Residence is the permanent home – the place to which, whenever absent for business
or pleasure, one intends to return. Residence is vital when dealing with venue. Plaintiffs, herein private
respondents, being residents of Los Angeles, California, U.S.A., which is beyond the territorial jurisdiction
of Philippine courts, the case should have been filed in Bacolod City where the defendants, herein
petitioners, reside. Since the case was filed in Quezon City, where the representative of the plaintiffs
resides, contrary to Sec. 2 of Rule 4 of the 1997 Rules of Court, the trial court should have dismissed the
case for improper venue.15
The petitioners sought a reconsideration of the Decision dated August 28, 2008, but it was denied by the
CA in its Resolution dated February 20, 2009. 16
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit this lone issue for this Court’s resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW WHEN
IT RULED THAT THE COMPLAINT MUST BE DISMISSED ON THE GROUND THAT VENUE WAS NOT
PROPERLY LAID.17
The Court’s Ruling
The petition is denied.
Contrary to the CA’s disposition, the petitioners maintain that their complaint for collection of sum of
money against the respondents may be filed in the RTC of Quezon City. Invoking Section 3, Rule 3 of the
Rules of Court, they insist that Atty. Aceron, being their attorney-in-fact, is deemed a real party in interest
in the case below and can prosecute the same before the RTC. Such being the case, the petitioners
assert, the said complaint for collection of sum of money may be filed in the court of the place where Atty.
Aceron resides, which is the RTC of Quezon City.
On the other hand, the respondents in their Comment 18 assert that the petitioners are proscribed from
filing their complaint in the RTC of Quezon City. They assert that the residence of Atty. Aceron, being
merely a representative, is immaterial to the determination of the venue of the petitioners’ complaint.
The petitioners’ complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of personal actions are fixed for the convenience of the
plaintiffs and their witnesses. Equally settled, however, is the principle that choosing the venue of an
action is not left to a plaintiff’s caprice; the matter is regulated by the Rules of Court. 19
The petitioners’ complaint for collection of sum of money against the respondents is a personal action as
it primarily seeks the enforcement of a contract. The Rules give the plaintiff the option of choosing where
to file his complaint. He can file it in the place (1) where he himself or any of them resides, or (2) where
the defendant or any of the defendants resides or may be found. The plaintiff or the defendant must be
residents of the place where the action has been instituted at the time the action is commenced. 20
However, if the plaintiff does not reside in the Philippines, the complaint in such case may only be filed in
the court of the place where the defendant resides. In Cohen and Cohen v. Benguet Commercial Co.,
Ltd.,21 this Court held that there can be no election as to the venue of the filing of a complaint when the
plaintiff has no residence in the Philippines. In such case, the complaint may only be filed in the court of
the place where the defendant resides. Thus:
Section 377 provides that actions of this character "may be brought in any province where the defendant
or any necessary party defendant may reside or be found, or in any province where the plaintiff or one of
the plaintiffs resides, at the election of the plaintiff." The plaintiff in this action has no residence in the
Philippine Islands. Only one of the parties to the action resides here. There can be, therefore, no election
by plaintiff as to the place of trial. It must be in the province where the defendant resides. x x
x.22 (Emphasis ours)
Here, the petitioners are residents of Los Angeles, California, USA while the respondents reside in
Bacolod City. Applying the foregoing principles, the petitioners’ complaint against the respondents may
only be filed in the RTC of Bacolod City – the court of the place where the respondents reside. The
petitioners, being residents of Los Angeles, California, USA, are not given the choice as to the venue of
the filing of their complaint.
Thus, the CA did not commit any reversible error when it annulled and set aside the orders of the RTC of
Quezon City and consequently dismissed the petitioners’ complaint against the respondents on the
ground of improper venue.
In this regard, it bears stressing that the situs for bringing real and personal civil actions is fixed by the
Rules of Court to attain the greatest convenience possible to the litigants and their witnesses by affording
them maximum accessibility to the courts. 23 And even as the regulation of venue is primarily for the
convenience of the plaintiff, as attested by the fact that the choice of venue is given to him, it should not
be construed to unduly deprive a resident defendant of the rights conferred upon him by the Rules of
Court.24
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.
Contrary to the petitioners’ claim, Atty. Aceron, despite being the attorney-in-fact of the petitioners, is not
a real party in interest in the case below. Section 2, Rule 3 of the Rules of Court reads:
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.
(Emphasis ours)
Interest within the meaning of the Rules of Court means material interest or an interest in issue to be
affected by the decree or judgment of the case, as distinguished from mere curiosity about the question
involved.25 A real party in interest is the party who, by the substantive law, has the right sought to be
enforced.26
Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest in the case below as
he does not stand to be benefited or injured by any judgment therein. He was merely appointed by the
petitioners as their attorney-in-fact for the limited purpose of filing and prosecuting the complaint against
the respondents. Such appointment, however, does not mean that he is subrogated into the rights of
petitioners and ought to be considered as a real party in interest.
Being merely a representative of the petitioners, Atty. Aceron in his personal capacity does not have the
right to file the complaint below against the respondents. He may only do so, as what he did, in behalf of
the petitioners – the real parties in interest. To stress, the right sought to be enforced in the case below
belongs to the petitioners and not to Atty. Aceron. Clearly, an attorney-in-fact is not a real party in
interest.27
The petitioner’s reliance on Section 3, Rule 3 of the Rules of Court to support their conclusion that Atty.
Aceron is likewise a party in interest in the case below is misplaced. Section 3, Rule 3 of the Rules of
Court provides that:
Sec. 3. Representatives as parties. – Where the action is allowed to be prosecuted and 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 property in interest. A representative may be a trustee of an
expert 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. (Emphasis ours)
Nowhere in the rule cited above is it stated or, at the very least implied, that the representative is likewise
deemed as the real party in interest. The said rule simply states that, in actions which are allowed to be
prosecuted or defended by a representative, the beneficiary shall be deemed the real party in interest
and, hence, should be included in the title of the case.
Indeed, to construe the express requirement of residence under the rules on venue as applicable to the
attorney-in-fact of the plaintiff would abrogate the meaning of a "real party in interest", as defined in
Section 2 of Rule 3 of the 1997 Rules of Court vis-à-vis Section 3 of the same Rule. 28
On this score, the CA aptly observed that:
As may be unerringly gleaned from the foregoing provisions, there is nothing therein that expressly
allows, much less implies that an action may be filed in the city or municipality where either a
representative or an attorney-in-fact of a real party in interest resides. Sec. 3 of Rule 3 merely provides
that the name or names of the person or persons being represented must be included in the title of the
case and such person or persons shall be considered the real party in interest. In other words, the
principal remains the true party to the case and not the representative. Under the plain meaning rule, or
verba legis, if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and
applied without interpretation. xxx29 (Citation omitted)
At this juncture, it bears stressing that the rules on venue, like the other procedural rules, are designed to
insure a just and orderly administration of justice or the impartial and even-handed determination of every
action and proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted
freedom to choose the court where he may file his complaint or petition. The choice of venue should not
be left to the plaintiff's whim or caprice. He may be impelled by some ulterior motivation in choosing to file
a case in a particular court even if not allowed by the rules on venue. 30
WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED. The Decision
dated August 28, 2008 and Resolution dated February 20, 2009 rendered by the Court of Appeals in CA-
G.R. SP No. 101159 are AFFIRMED.
SO ORDERED.
G.R. No. L-59731 January 11, 1990
ALFREDO CHING, petitioner,
vs.
THE HONORABLE COURT OF APPEALS & PEDRO ASEDILLO, respondents.
This is a petition for review on certiorari which seeks to nullify the decision of respondent Court of
Appeals (penned by Hon. Rodolfo A. Nocon with the concurrence of Hon. Crisolito Pascual and Juan A.
Sison) in CA-G.R. No. 12358-SP entitled Alfredo Ching v. Hon. M. V. Romillo, et al. which in effect
affirmed the decision of the Court of First Instance of Rizal, now Regional Trial Court (penned by Judge
Manuel V. Romillo, Jr. then District Judge, Branch XXVII Pasay City) granting ex-parte the cancellation of
title registered in the name of Ching Leng in favor of Pedro Asedillo in Civil Case No. 6888-P entitled
Pedro Asedillo v. Ching Leng and/or Estate of Ching Leng.
The facts as culled from the records disclose that:
In May 1960, Decree No. N-78716 was issued to spouses Maximo Nofuente and Dominga Lumandan in
Land Registration Case No. N-2579 of the Court of First Instance of Rizal and Original Certificate of Title
No. 2433 correspondingly given by the Register of Deeds for the Province of Rizal covering a parcel of
land situated at Sitio of Kay-Biga Barrio of San Dionisio, Municipality of Paranaque, Province of Rizal,
with an area of 51,852 square meters (Exhibit "7", p. 80, CA, Rollo).
In August 1960, 5/6 portion of the property was reconveyed by said spouses to Francisco, Regina,
Perfects, Constancio and Matilde all surnamed Nofuente and Transfer Certificate of Title No. 78633 was
issued on August 10, 1960 accordingly (Exhibit "8", pp. 81 and 82, Ibid.).
By virtue of a sale to Ching Leng with postal address at No. 44 Libertad Street, Pasay City, Transfer
Certificate of Title No. 91137 was issued on September 18, 1961 and T.C.T. No. 78633 was deemed
cancelled. (Exhibit "5-2", pp. 76-77 and 83, Ibid.).
On October 19, 1965, Ching Leng died in Boston, Massachusetts, United States of America. His
legitimate son Alfredo Ching filed with the Court of First Instance of Rizal (now RTC) Branch III, Pasay
City a petition for administration of the estate of deceased Ching Leng docketed as Sp. Proc. No. 1956-P.
Notice of hearing on the petition was duly published in the "Daily Mirror", a newspaper of general
circulation on November 23 and 30 and December 7, 1965. No oppositors appeared at the hearing on
December 16, 1965, consequently after presentation of evidence petitioner Alfredo Ching was appointed
administrator of Ching Leng's estate on December 28, 1965 and letters of administration issued on
January 3, 1966 (pp. 51-53, Rollo). The land covered by T.C.T. No. 91137 was among those included in
the inventory submitted to the court (p. 75, Ibid.).
Thirteen (13) years after Ching Leng's death, a suit against him was commenced on December 27, 1978
by private respondent Pedro Asedillo with the Court of First Instance of Rizal (now RTC), Branch XXVII,
Pasay City docketed as Civil Case No. 6888-P for reconveyance of the abovesaid property and
cancellation of T.C.T. No. 91137 in his favor based on possession (p. 33, Ibid.). Ching Leng's last known
address is No. 44 Libertad Street, Pasay City which appears on the face of T.C.T. No. 91137
(not No. 441 Libertad Street, Pasay City, as alleged in private respondent's complaint). (Order dated May
29, 1980, p. 55, Ibid.). An amended complaint was filed by private respondent against Ching Leng and/or
Estate of Ching Leng on January 30, 1979 alleging "That on account of the fact that the defendant has
been residing abroad up to the present, and it is not known whether the defendant is still alive or dead,
he or his estate may be served by summons and other processes only by publication;" (p. 38, Ibid.).
Summons by publication to Ching Leng and/or his estate was directed by the trial court in its order dated
February 7, 1979. The summons and the complaint were published in the "Economic Monitor", a
newspaper of general circulation in the province of Rizal including Pasay City on March 5, 12 and 19,
1979. Despite the lapse of the sixty (60) day period within which to answer defendant failed to file a
responsive pleading and on motion of counsel for the private respondent, the court a quo in its order
dated May 25, 1979, allowed the presentation of evidence ex-parte. A judgment by default was rendered
on June 15, 1979, the decretal portion of which reads:
WHEREFORE, finding plaintiffs causes of action in the complaint to be duly substantiated by
the evidence, judgment is hereby rendered in favor of the plaintiff and against the defendant
declaring the former (Pedro Asedillo) to be the true and absolute owner of the property
covered by T.C.T. No. 91137; ordering the defendant to reconvey the said property in favor of
the plaintiff; sentencing the defendant Ching Leng and/or the administrator of his estate to
surrender to the Register of Deeds of the Province of Rizal the owner's copy of T.C.T. No.
91137 so that the same may be cancelled failing in which the said T.C.T. No. 91137 is hereby
cancelled and the Register of Deeds of the Province of Rizal is hereby ordered to issue, in
lieu thereof, a new transfer certificate of title over the said property in the name of the plaintiff
Pedro Asedillo of legal age, and a resident of Estrella Street, Makati, Metro Manila, upon
payment of the fees that may be required therefor, including the realty taxes due the
Government.
IT IS SO ORDERED. (pp. 42-44, Ibid.)
Said decision was likewise served by publication on July 2, 9 and 16, 1979 pursuant to Section 7 of Rule
13 of the Revised Rules of Court (CA Decision, pp. 83-84, Ibid.). The title over the property in the name of
Ching Leng was cancelled and a new Transfer Certificate of Title was issued in favor of Pedro Asedillo (p.
77, CA Rollo) who subsequently sold the property to Villa Esperanza Development, Inc. on September 3,
1979 (pp. 125-126, Ibid.).
On October 29, 1979 petitioner Alfredo Ching learned of the abovestated decision. He filed a verified
petition on November 10, 1979 to set it aside as null and void for lack of jurisdiction which was granted by
the court on May 29, 1980 (penned by Hon. Florentino de la Pena, Vacation Judge, pp. 54-59, Rollo).
On motion of counsel for private respondent the said order of May 29, 1980 was reconsidered and set
aside, the decision dated June 15, 1979 aforequoted reinstated in the order dated September 2, 1980.
(pp. 60-63, Ibid.)
On October 30, 1980, petitioner filed a motion for reconsideration of the said latter order but the same
was denied by the trial court on April 12, 1981 (pp. 77-79, Ibid.)
Petitioner filed an original petition for certiorari with the Court of Appeals but the same was dismissed on
September 30, 1981. His motion for reconsideration was likewise denied on February 10, 1982 (pp. 81-
90, Ibid.)
Private respondent Pedro Asedillo died on June 7, 1981 at Makati, Metro Manila during the pendency of
the case with the Court of Appeals (p. 106, CA Rollo).
Hence, the instant petition.
Private respondent's comment was filed on June 1, 1982 (p. 117, Ibid.) in compliance with the resolution
dated April 26, 1982 (p. 109, Ibid.) Petitioner filed a reply to comment on June 18, 1982 (p. 159, Ibid ),
and the Court gave due course to the petition in the resolution of June 28, 1982 (p. 191, Ibid.)
Petitioner raised the following:
 ASSIGNMENTS OF ERROR
I
WHETHER OR NOT A DEAD MAN CHING LENG AND/OR HIS ESTATE MAY BE VALIDLY
SERVED WITH SUMMONS AND DECISION BY PUBLICATION.
II
WHETHER OR NOT AN ACTION FOR RECONVEYANCE OF PROPERTY AND
CANCELLATION OF TITLE IS IN PERSONAM, AND IF SO, WOULD A DEAD MAN AND/OR
HIS ESTATE BE BOUND BY SERVICE OF SUMMONS AND DECISION BY PUBLICATION.
III
WHETHER OR NOT THE PROCEEDINGS FOR RECONVEYANCE AND CANCELLATION
OF TITLE CAN BE HELD EX-PARTE.
IV
WHETHER OR NOT THE TRIAL COURT ACQUIRED JURISDICTION OVER THE SUBJECT
MATTER AND THE PARTIES.
V court never acquired jurisdiction over his person. The ex-parte proceedings for cancellation of title could
WHETHER OR NOT PRIVATE RESPONDENT IS GUILTY OF LACHES IN INSTITUTING
THE ACTION FOR RECONVEYANCE AFTER THE LAPSE OF 19 YEARS FROM THE TIME
THE DECREE OF REGISTRATION WAS ISSUED.
Petitioner's appeal hinges on whether or not the Court of Appeals has decided a question of substance in
a way probably not in accord with law or with the applicable decisions of the Supreme Court.
Petitioner avers that an action for reconveyance and cancellation of title is in personam and the court a
quo never acquired jurisdiction over the deceased Ching Leng and/or his estate by means of service of
summons by publication in accordance with the ruling laid down in Ang Lam v. Rosillosa et al., 86 Phil.
448 [1950].
On the other hand, private respondent argues that an action for cancellation of title is quasi in rem, for
while the judgment that may be rendered therein is not strictly a judgment in in rem, it fixes and settles
the title to the property in controversy and to that extent partakes of the nature of the judgment in rem,
hence, service of summons by publication may be allowed unto Ching Leng who on the face of the
complaint was a non-resident of the Philippines in line with the doctrine enunciated in Perkins v. Dizon,
69 Phil. 186 [1939].
The petition is impressed with merit.
An action to redeem, or to recover title to or possession of, real property is not an action in rem or an
action against the whole world, like a land registration proceeding or the probate of a will; it is an action in
personam, so much so that a judgment therein is binding only upon the parties properly impleaded and
duly heard or given an opportunity to be heard. Actions in personam and actions in rem differ in that the
former are directed against specific persons and seek personal judgments, while the latter are directed
against the thing or property or status of a person and seek judgments with respect thereto as against the
whole world. An action to recover a parcel of land is a real action but it is an action in personam, for it
binds a particular individual only although it concerns the right to a tangible thing (Ang Lam v.
Rosillosa, supra).
Private respondent's action for reconveyance and cancellation of title being in personam, the judgment in
question is null and void for lack of jurisdiction over the person of the deceased defendant Ching Leng.
Verily, the action was commenced thirteen (13) years after the latter's death. As ruled by this Court
in Dumlao v. Quality Plastic Products, Inc. (70 SCRA 475 [1976]) the decision of the lower court insofar
as the deceased is concerned, is void for lack of jurisdiction over his person. He was not, and he could
not have been validly served with summons. He had no more civil personality. His juridical personality,
that is fitness to be subject of legal relations, was lost through death (Arts. 37 and 42 Civil Code).
The same conclusion would still inevitably be reached notwithstanding joinder of Ching Leng's estate as
co-defendant. it is a well-settled rule that an estate can sue or be sued through an executor or
administrator in his representative capacity (21 Am. Jr. 872). Contrary to private respondent's claims,
deceased Ching Leng is a resident of 44 Libertad Street, Pasay City as shown in his death certificate
and T. C. T. No. 91137 and there is an on-going intestate proceedings in the same court, Branch III
commenced in 1965, and notice of hearing thereof duly published in the same year. Such misleading and
misstatement of facts demonstrate lack of candor on the part of private respondent and his counsel,
which is censurable.
The complaint for cancellation of Ching Leng's Torrens Title must be filed in the original land registration
case, RTC, Pasig, Rizal, sitting as a land registration court in accordance with Section 112 of the Land
Registration Act (Act No. 496, as amended) not in CFI Pasay City in connection with, or as a mere
incident in Civil Case No. 6888-P (Estanislao v. Honrado, 114 SCRA 748 [1982]).
Section 112 of the same law requires "notice to all parties in interest." Since Ching Leng was already in
the other world when the summons was published he could not have been notified at all and the trial
not have been held (Estanislao v. Honrado, supra).
The cited case of Perkins v. Dizon, supra is inapplicable to the case at bar since petitioner Perkins was a
non-resident defendant sued in Philippine courts and sought to be excluded from whatever interest she
has in 52,874 shares of stocks with Benguet Consolidated Mining Company. The action being a quasi in
rem summons by publication satisfied the constitutional requirement of due process.
The petition to set aside the judgment for lack of jurisdiction should have been granted and the amended
complaint of private respondent based on possession and filed only in 1978 dismissed outrightly. Ching
Leng is an innocent purchaser for value as shown by the evidence adduced in his behalf by petitioner
herein, tracing back the roots of his title since 1960, from the time the decree of registration was issued.
The sole remedy of the landowner whose property has been wrongfully or erroneously registered in
another's name—after one year from the date of the decree—is not to set aside the decree, but
respecting the decree as incontrovertible and no longer open to review, to bring an ordinary action in the
ordinary court of justice for damages if the property has passed unto the hands of an innocent purchaser
for value (Sy, Sr. v. Intermediate Appellate Court, G.R. No. 66742; Teoville Development Corporation v.
IAC, et al., G.R. No. 75011, June 16, 1988).
Failure to take steps to assert any rights over a disputed land for 19 years from the date of registration of
title is fatal to the private respondent's cause of action on the ground of laches. Laches is the failure or
neglect, for an unreasonable length of time to do that which by exercising due diligence could or should
have been done, earlier; it is negligence or omission to assert a right within a reasonable time warranting
a presumption that the party entitled to assert it either has abandoned it or declined to assert it (Bailon-
Casilao v. Court of Appeals, G.R. No. 78178, April 15, 1988; Villamor v. Court of Appeals, G.R. No.
41508, June 27, 1988).
The real purpose of the Torrens system is to quiet title to land and to stop forever any question as to its
legality. Once a title is registered, the owner may rest secure, without the necessity of waiting in the
portals of the court, or sitting on the "mirador su casa," to avoid the possibility of losing his land (National
Grains Authority v. IAC, 157 SCRA 388 [1988]).
A Torrens title is generally a conclusive evidence of the ownership of the land referred to therein (Section
49, Act 496). A strong presumption exists that Torrens titles are regularly issued and that they are valid. A
Torrens title is incontrovertible against any "information possessoria" or title existing prior to the issuance
thereof not annotated on the title (Salamat Vda. de Medina v. Cruz, G.R. No. 39272, May 4, 1988).
PREMISES CONSIDERED, (1) the instant petition is hereby GRANTED; (2) the appealed decision of the
Court of Appeals is hereby REVERSED and SET ASIDE; (3) the trial court's decision dated June 15,
1979 and the Order dated September 2, 1980 reinstating the same are hereby declared NULL and VOID
for lack of jurisdiction and (4) the complaint in Civil Case No. 6888-P is hereby DISMISSED.
SO ORDERED.
G.R. No. 143870 September 30, 2005
MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioners,
vs.
RIVERA VILLAGE LESSEE HOMEOWNERS ASSOCIATION, INCORPORATED, Respondent.
We resolve the Petition for Review on Certiorari 1 dated August 23, 2000 filed by the Manila International Airport
Authority (MIAA), assailing the Decision2 of the Court of Appeals dated June 30, 2000 which directed the issuance
of a writ of preliminary injunction restraining petitioner from evicting the homeowners of Rivera Village from their
dwellings.
The antecedents, culled from the petition and the assailed Decision, are as follows:
The then Civil Aeronautics Administration (CAA) was entrusted with the administration, operation, management,
control, maintenance and development of the Manila International Airport (MIA), now the Ninoy Aquino
International Airport. Among its powers was the power to enter into, make and execute concessions and concession
rights for purposes essential to the operation of the airport.
On May 25, 1965, the CAA, through its Director, Capt. Vicente C. Rivera, entered into individual lease contracts
with its employees (lessees) for the lease of portions of a four (4)-hectare lot situated in what is now known as
Rivera Village located in Barangay 199 and 200 in Pasay City. The leases were for a twenty-five (25)-year period to
commence on May 25, 1965 up to May 24, 1990 at ₱20.003 per annum as rental.
On May 4, 1982, Executive Order No. (EO) 778 was issued (later amended by EO 903 on July 21, 1983), creating
petitioner MIAA, transferring existing assets of the MIA to MIAA, and vesting the latter with the power to
administer and operate the MIA.
Sometime in January 1995, MIAA stopped issuing accrued rental bills and refused to accept rental payments from
the lessees. As a result, respondent Rivera Village Lessee Homeowners Association, Inc. (homeowners association),
purportedly representing the lessees, requested MIAA to sell the subject property to its members, invoking the
provisions of Presidential Decree No. (PD) 1517 or the Urban Land Reform Act and PD 2016.
The MIAA, on February 14, 1996, denied the request, claiming that the subject property is included in its
Conceptual Development Plan intended for airport-related activities.
Respondent then filed a petition for mandamus and prohibition with prayer for the issuance of a preliminary
injunction4 against MIAA and the National Housing Authority (NHA). The petition, docketed as Civil Case No. 97-
1598 in the Regional Trial Court of Pasay City, Branch 109, sought to restrain the MIAA from implementing its
Conceptual Development Plan insofar as Rivera Village is concerned. It also sought to compel MIAA to segregate
Rivera Village from the scope of the Conceptual Development Plan and the NHA to take the necessary steps for the
disposition of the property in favor of the members of the homeowners association.
MIAA filed an answer5 alleging that the petition fails to state a cause of action in view of the expiration of the lease
contracts and the lack of personality to sue of the homeowners association. MIAA also claimed that the
homeowners association is not entitled to a writ of mandamus because it does not have a clear legal right to possess
the subject property and MIAA does not have a corresponding duty to segregate Rivera Village from its Conceptual
Development Plan.
A preliminary hearing on MIAA’s affirmative defenses was conducted, after which the trial court issued an Order6
dated October 12, 1998, denying the prayer for the issuance of a temporary restraining order and/or writ of
preliminary injunction and dismissing the petition for lack of merit. The dispositive portion of the Order reads:
In view of all the foregoing, the prayer for the issuance of a temporary restraining order and/or writ of preliminary
injunction is hereby denied for lack of merit and the above-entitled petition is hereby ordered dismissed for lack of
merit.
SO ORDERED.7
The trial court held that PD 1818 bars the issuance of a restraining order, preliminary injunction or preliminary
mandatory injunction in any case, dispute or controversy involving infrastructure projects of the government or any
public utility operated by the government. It also ruled that the petition failed to state a cause of action inasmuch as
petitioner therein (respondent homeowners association) is not the real party-in-interest, the individual members of
the association being the ones who have possessory rights over their respective premises. Moreover, the lease
contracts have already expired.
As regards the contention that the lessees are entitled to possess the subject property by virtue of PD 1517,
Proclamation No. 1967 and PD 2016, which respectively identify parcels of urban land as part of the Urban Land
Reform Zone, specify certain areas in Metro Manila, including Rivera Village, as areas for priority development or
urban land reform zones, and prohibit the eviction of occupant families from such lands, the trial court declared that
the subject property has been reserved by MIAA for airport-related activities and, as such, is exempt from the
coverage of the Comprehensive and Continuing Urban Development and Housing Program under Republic Act No.
(RA) 7279.
Respondent filed an appeal with the Court of Appeals, interposing essentially the same arguments raised before the
trial court. The appellate court annulled and set aside the order of the trial court and remanded the case for further
proceedings. The dispositive portion of the assailed Decision states:
WHEREFORE, the assailed October 12, 1998 Order is annulled, set aside and reversed. The case is remanded to the
court a quo for further proceedings.
A writ of preliminary injunction is issued restraining and preventing respondent MIAA from evicting the members
of petitioner Rivera Village Association from their respective lots in the Rivera Village. Petitioner is ordered to post
a bond in the amount of ₱500,000.00 with the condition that petitioner will pay to respondent MIAA all damages it
may sustain by reason of the injunction if the court should finally decided that petitioner is not entitled thereto.
Upon approval of the bond, the writ of preliminary injunction shall forthwith issue.
SO ORDERED.8
The appellate court foremost ruled that the case can be construed as a class suit instituted by the Rivera Village
lessees. The homeowners association, considered as the representative of the lessees, merely instituted the suit for
the benefit of its members. It does not claim to have any right or interest in the lots occupied by the lessees, nor seek
the registration of the titles to the land in its name.
On the issue of the expiration of the lease contracts and the application of PD 1517, Proclamation No. 1967 and PD
2016, the Court of Appeals held that the expiration of the lease contracts cannot adversely affect the rights acquired
by the lessees under the foregoing laws. Besides, the lease contracts were impliedly renewed by virtue of MIAA’s 1. Has PD 2016 modified PD 1818?
acceptance of rental payments from May 25, 1990 up to December 1994. This resulted in an implied new lease
under Article 1670 of the Civil Code.
2. Did the petition filed by respondent with the trial court state a cause of action against petitioner?

Moreover, the appellate court construed Sec. 5(c) of RA 7279 to mean that if the government lot has not been
utilized during the ten (10)-year period for the purpose for which it has been reserved prior to 1983, then said lot is 3. Is petitioner obliged to dispose of the subject properties in favor of the members of respondent association after
encompassed by the law and is subject to distribution to the legitimate and qualified residents of the area after appropriate proceedings?
appropriate proceedings have been undertaken.
4. Is respondent entitled to the issuance of a writ of preliminary injunction? 14
As to whether PD 1818 bars the issuance of an injunctive writ in this case, the appellate court ruled that PD 1818 is
a general law on the issuance of restraining orders and writs of preliminary injunction. On the other hand, PD 2016
We first resolve the threshold question of whether respondent has personality to sue.
is a special law specifically prohibiting the eviction of tenants from lands identified as areas for priority
development. Thus, the trial court can issue an injunctive writ if the act sought to be restrained will enforce the
eviction of tenants from urban land reform zones. MIAA contends that the real parties-in-interest in the petition filed with the trial court are the individual members of
the homeowners association. Not having been brought in the name of the real parties-in-interest, the suit was
correctly dismissed by the trial court for failure to state a cause of action.
The court, however, declared that it cannot make a definitive ruling on the rights of the members of the homeowners
association vis-à-vis the MIAA Conceptual Development Plan, considering the need for a full-blown trial to ferret
out whether the claimed rights under the pertinent laws have ripened to actual legal and vested rights in their favor. The 1997 Rules of Civil Procedure (Rules of Court) 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 A case is dismissible for lack of personality to sue upon proof that
MIAA now seeks a review of the Decision of the Court of Appeals. In the instant petition, MIAA contends that the
the plaintiff is not the real party-in-interest, hence grounded on failure to state a cause of action. 16
appellate court erred in ruling that PD 2016, which prohibits the eviction of occupant families from real property
identified as areas for priority development or urban land reform zones, has modified PD 1818, which bars the
issuance of injunctive writ in cases involving infrastructure projects of the government, including public utilities for The petition before the trial court was filed by the homeowners association, represented by its President, Panfilo R.
the transport of goods and commodities. Chiutena, Sr., upon authority of a Board Resolution empowering the latter to file "[A]ll necessary action to the
Court of Justice and other related acts necessary to have our Housing Project number 4 land be titled to the
members of the Association."
It argues that the petition filed by the homeowners association with the trial court fails to state a cause of action
because the homeowners association is not the real party-in-interest in the suit. Allegedly, the Board Resolution
presented by respondent shows that it was only the board of directors of the association, as distinguished from the Obviously, the petition cannot be considered a class suit under Sec. 12, Rule 317 of the Rules of Court, the requisites
members thereof, which authorized respondent to act as its representative in the suit. therefor not being present in the case, notably because the petition does not allege the existence and prove the
requisites of a class suit, i.e., that the subject matter of the controversy is one of common or general interest to many
persons and the parties are so numerous that it is impracticable to bring them all before the court, and because it was
MIAA also stresses that the subject property has recently been reserved by MIAA for airport-related activities and,
brought only by one party.
as such, Sec. 5(c) of RA 7279 applies. Under the said law, lands which are used, reserved or otherwise set aside for
government offices, facilities and other installations are exempt from the coverage of the law.
In Board of Optometry v. Colet,18 we held that courts 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
Moreover, MIAA avers that the Court of Appeals should not have granted injunctive relief to respondent,
the decision secured is favorable to the plaintiffs, a quandary would result if the decision were otherwise as those
considering that the grant of an injunction would inflict greater damage to petitioner and to the public.
who were deemed impleaded by their self-appointed representatives would certainly claim denial of due process.

Respondent filed a Comment9 dated November 20, 2000, arguing that MIAA is mandated by law to dispose of
There is, however, merit in the appellate court’s pronouncement that the petition should be construed as a suit
Rivera Village to the homeowners thereof. Under existing laws, the homeowners have the right to possess and enjoy
brought by the homeowners association as the representative of the members thereof under Sec. 3, Rule 3 of the
the property. To accept MIAA’s pretense that the property has been recently reserved for airport-related activities
Rules of Court, which provides:
and therefor exempt from the coverage of RA 7279 will allegedly violate the right of the homeowners as bona fide
tenants to socialized housing.
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
Respondent further argues that PD 1818 is inapplicable to this case because it has established a clear and
deemed to be the real party in interest. A representative may be a trustee of an express trust, a guardian, an
unmistakable right to an injunction. Besides, PD 2016 which protects from eviction tenants of lands identified for
executor or administrator, or a party authorized by law or these Rules. An agent acting in his own name and for the
priority development, is a later enactment which should be deemed to prevail over PD 1818.
benefit of an undisclosed principal may sue or be sued without joining the principal except when the contract
involves things belonging to the principal. [Emphasis supplied.]
In the Resolution 10 dated January 24, 2001, the petition was given due course and the parties were required to
submit their respective memoranda.
It is a settled rule that every action must be prosecuted or defended in the name of the real party-in-interest. Where
the action is allowed to be prosecuted or defended by a representative acting in a fiduciary capacity, the beneficiary
Accordingly, MIAA submitted its Memorandum11 dated March 20, 2001, while respondent filed its Memorandum12 must be included in the title of the case and shall be deemed to be the real party-in-interest. The name of such
dated April 20, 2001. For its part, NHA manifested that it is adopting the memorandum of MIAA as its own insofar beneficiaries shall, likewise, be included in the complaint. 19
as the same is germane and material to NHA’s stand. 13
Moreover, Sec. 4, Rule 8 of the Rules of Court provides that facts showing the capacity of a party to sue or be sued,
As presented and discussed by the parties, the issues are the following: or the authority of a party to sue or be sued in a representative capacity must be averred in the complaint. In order to
maintain an action in a court of justice, the plaintiff must have an actual legal existence, that is, he or she or it must
be a person in law and possessed of a legal entity as either a natural or an artificial person. The party bringing suit
has the burden of proving the sufficiency of the representative character that he claims. If a complaint is filed by one
who claims to represent a party as plaintiff but who, in fact, is not authorized to do so, such complaint is not deemed
filed and the court does not acquire jurisdiction over the complaint. It must be stressed that an unauthorized
complaint does not produce any legal effect.20
In this case, the petition filed with the trial court sufficiently avers that the homeowners association, through its
President, is suing in a representative capacity as authorized under the Board Resolution attached to the petition.
Although the names of the individual members of the homeowners association who are the beneficiaries and real
parties-in-interest in the suit were not indicated in the title of the petition, this defect can be cured by the simple
expedient of requiring the association to disclose the names of the principals and to amend the title and averments
of the petition accordingly.
Essentially, the purpose of the rule that actions should be brought or defended in the name of the real party-in-
interest is to protect against undue and unnecessary litigation and to ensure that the court will have the benefit of
having before it the real adverse parties in the consideration of a case. This rule, however, is not to be narrowly and
restrictively construed, and its application should be neither dogmatic nor rigid at all times but viewed in
consonance with extant realities and practicalities. 21 As correctly noted by the Court of Appeals, the dismissal of this
case based on the lack of personality to sue of petitioner-association will only result in the filing of multiple suits by
the individual members of the association.
What is more decisive to the resolution of the present controversy, however, is a matter not addressed by the parties
in the case before this Court, that is, the fact that the petition filed before the trial court is for mandamus to compel
MIAA to segregate Rivera Village from the scope of its Conceptual Development Plan and the NHA to take the
necessary steps for the disposition of the subject property in favor of the members of the homeowners association.
Parenthetically, while the procedural rule is that a party is required to indicate in his brief an assignment of errors
and only those assigned shall be considered by the appellate court in deciding the case, it is equally settled that
appellate courts have ample authority to rule on matters not assigned as errors in an appeal, if these are
indispensable or necessary to the just resolution of the pleaded issues. 22
For instance, the Court has allowed the consideration of other grounds not raised or assigned as errors specifically
in the following instances: (1) grounds not assigned as errors but affecting jurisdiction over the subject matter; (2)
matters not assigned as errors on appeal but are evidently plain or clerical errors within the contemplation of the
law; (3) matters not assigned as errors on appeal but consideration of which is necessary in arriving at a just
decision and complete resolution of the case or to serve the interest of justice or to avoid dispensing piecemeal
justice; (4) matters not specifically assigned as errors on appeal but raised in the trial court and are matters of record
having some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; (5)
matters not assigned as errors on appeal but closely related to an error assigned; and (6) matters not assigned as
errors on appeal but upon which the determination of a question properly assigned is dependent. 23
In this case, although the propriety of the filing of a petition for mandamus was no longer raised as an issue before
this Court, MIAA asserted in its answer24 to the original petition that the homeowners association is not entitled to a
writ of mandamus because it has not shown any legal right to possess the subject property and a correlative
obligation on the part of MIAA to segregate the property from its Conceptual Development Plan. MIAA averred:
28. Petitioner is not entitled to the issuance of a writ of mandamus. For a writ of mandamus to issue, it is essential
that petitioner has a legal right to the thing demanded and that it is the imperative duty of respondent to perform the
act required. The legal right of petitioner to the thing demanded must be well-defined, clear and certain. The
corresponding duty of respondent to perform the required act must also be clear and specific (Cf. Lemi v. Valencia,
26 SCRA 203, 210 [1968]).
29. Petitioner, in view of the expiration of the lease contracts of its individual members, has failed to show that it
has the legal right to possess the subject property.
30. There is therefore no corresponding duty on the part of respondent MIAA to segregate the property from the
scope of its Conceptual Development Plan.25
The question of whether the homeowners association is entitled to the issuance of a writ of mandamus was again
raised in the memorandum26 filed by MIAA with the Court of Appeals. MIAA alleged:
Appellant is not entitled to the issuance of a writ of mandamus. For a writ of mandamus to issue, it is essential that
the appellant has a legal right to the thing demanded and that it is the imperative duty of respondent to perform the
act required. The legal right of appellant to the thing demanded must be well-defined, clear and certain. The
corresponding duty of respondent to perform the required act must also be clear and specific (cf. Lemi v. Valencia,
26 SCRA 203, 210 [1968]).
In view of the expiration of the lease contracts of its individual members, appellant has failed to show that it has the
legal right to possess the subject property. There is therefore no corresponding duty on the part of the MIAA to
segregate the property from the scope of its conceptual development plan.27
The question of whether mandamus is the proper remedy was clearly raised in the trial court and the Court of
Appeals although it was largely ignored by both courts. This issue being indispensable to the resolution of this case,
we shall rule on the matter.
A writ of mandamus can be issued only when petitioner’s legal right to the performance of a particular act which is
sought to be compelled is clear and complete. A clear legal right is a right which is indubitably granted by law or is
inferable as a matter of law.28
In order that a writ of mandamus may aptly issue, it is essential that, on the one hand, petitioner has a clear legal
right to the claim that is sought and that, on the other hand, respondent has an imperative duty to perform that which
is demanded of him. Mandamus will not issue to enforce a right, or to compel compliance with
a duty, which is questionable or over which a substantial doubt exists. The principal function of the writ of
mandamus is to command and to expedite, not to inquire and to adjudicate. Thus, it is neither the office nor the aim
of the writ to secure a legal right but to implement that which is already established. Unless the right to relief sought
is unclouded, mandamus will not issue.
In this case, the Court of Appeals itself conceded that no definitive ruling as regards the rights of the individual
members of the homeowners association could yet be made considering the need for a full determination of whether
their claimed rights under the pertinent laws have ripened into actual legal and vested rights. The appellate court
even outlined the requisites under PD 1517 which have yet to be complied with, namely: (1) the submission to the
NHA of a proposal to acquire the subject property as required under Sec. 929 of PD 1517;
and (2) proof that the members of the homeowners association are qualified to avail of the benefits under PD 1517
as mandated by Sec. 630 of the same law.
Resort to mandamus is evidently premature because there is no showing that the members of the homeowners
association have already filed an application or proposal with the NHA to acquire their respective lots. There is still
an administrative remedy open to the members of the homeowners association which they should have first
pursued, failing which they cannot invoke judicial action.31
We note that while respondent alleges that its members enlisted themselves with the NHA in order to avail of the
benefits of the law, the NHA, in its answer32 to the petition, denied this allegation for being self-serving. Whatever
rights the members of the homeowners association may have under the relevant laws are still in substantial doubt or
dispute. Hence, the petition for mandamus was appropriately dismissed for failure to state a cause of action.
So, too, should the prayer for the issuance of a writ of prohibition contained in the same petition be denied. Writs of
certiorari, prohibition and mandamus are prerogative writs of equity and their granting is ordinarily within the
sound discretion of the courts to be exercised on equitable principles. Said writs should only be issued when the
right to the relief is clear.33 As our findings in this case confirm, the homeowners association failed to establish a
clear legal right to the issuance of the writs of mandamus and prohibition prayed for.
There is, moreover, another ground for the dismissal of the petition filed before the trial court which appears to have
been overlooked by the parties in this case.
In the original petition filed before the trial court, the homeowners association averred that although EO 903
transferred to MIAA the properties and assets of MIA, such transfer was made subject to what the homeowners
association claims to be the existing rights of its members. 34 MIAA dismissed this allegation as an erroneous
conclusion of law.35
We cite the complete text of the relevant provision of EO 903 to fully understand the import thereof and its effect on
the present controversy. Section 3 thereof states:
Sec. 3. Creation of the Manila International Airport Authority.—There is hereby established a body corporate to be
known as the Manila International Airport Authority which shall be attached to the Ministry of Transportation and
Communications. The principal office of the Authority shall be located at the New Manila International Airport. The
Authority may establish such offices, branches, agencies or subsidiaries as it may deem proper and necessary;
Provided, That any subsidiary that may be organized shall have the prior approval of the President.
The land where the Airport is presently located as well as the surrounding land area of approximately six
hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the
Authority,
subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake
an actual survey of the area transferred within one year from the promulgation of this Executive Order and the
corresponding title to be issued in the name of the authority. Any portion thereof shall not be disposed through
sale or through any other mode unless specifically approved by the President of the Philippines. [Emphasis
supplied.]
As can clearly be seen from the foregoing provision, while it is true that the ownership and administration of the
airport and its surrounding land was assigned to MIAA subject to existing rights, which we may here understand to
be the rights granted under PD 1517, EO 903 specifically requires the approval of the President of the Philippines
before any disposition by sale or any other mode may be made concerning the property transferred to MIAA.
The Executive Secretary as representative of the President of the Philippines is, therefore, an indispensable party in
actions seeking to compel the sale or disposition of properties of the MIAA. Section 7, Rule 3 of the Rules of Court
provides that parties-in-interest without whom no final determination can be had of an action shall be joined either
as plaintiffs or defendants.
Thus, the presence of all indispensable parties is a condition 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 plaintiff is
mandated to implead all indispensable parties, and the absence of one 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. One who is
a party to a case is not bound by any decision of the court; otherwise, he will be deprived of his right to due
process.36
For the foregoing reasons, the prayer for the issuance of the writ of preliminary injunction must perforce be denied.
Preliminary injunction is a mere ancillary remedy which cannot stand separately or proceed independently of the
main case. Having declared that the petition filed before the trial court was correctly dismissed, the determination of
the homeowners association’s entitlement to a writ of preliminary injunction is already moot and academic. 37
Besides, as earlier noted, the right of the members of the homeowners association to possess and purchase the
subject property is still uncertain considering that they have not completed the process for the acquisition of their
lots as outlined in PD 1517.
Injunction is a preservative remedy aimed at protecting substantive rights and interests. The writ of preliminary
injunction is issued by the court to prevent threatened or continuous irreparable injury to parties before their claims
can be thoroughly studied and adjudicated. Its sole objective is to preserve the status quo until the merits of the case
can be heard fully. The writ is issued upon the satisfaction of two requisites, namely: (1) the existence of a right to
be protected; and (2) acts which are violative of said right. In the absence of a clear legal right, the issuance of the
injunctive relief constitutes grave abuse of discretion. Injunction is not designed to protect contingent or future
rights. Where the complainant’s right is doubtful or disputed, injunction is not proper. The possibility of irreparable
damage without proof of actual existing right is not a ground for an injunction. 38
With this conclusion, we deem it unnecessary to discuss the other issues raised in this petition.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated June 30, 2000 is
REVERSED and SET ASIDE. Civil Case No. 97-1598 of the Regional Trial Court of Pasay City is ordered
DISMISSED.
SO ORDERED.
G.R. No. 160347 November 29, 2006
ARCADIO and MARIA LUISA CARANDANG, Petitioners,
vs.
HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN, VICTOR DE GUZMAN,
REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and QUIRINO DE GUZMAN, JR., Respondents.
This is a Petition for Review on Certiorari assailing the Court of Appeals Decision 1 and Resolution
affirming the Regional Trial Court (RTC) Decision rendering herein petitioners Arcadio and Luisa
Carandang [hereinafter referred to as spouses Carandang] jointly and severally liable for their loan to
Quirino A. de Guzman.
The Court of Appeals summarized the facts as follows:
[Quirino de Guzman] and [the Spouses Carandang] are stockholders as well as corporate officers of
Mabuhay Broadcasting System (MBS for brevity), with equities at fifty four percent (54%) and forty six
percent (46%) respectively.
On November 26, 1983, the capital stock of MBS was increased, from ₱500,000 to P1.5 million and
₱345,000 of this increase was subscribed by [the spouses Carandang]. Thereafter, on March 3, 1989,
MBS again increased its capital stock, from ₱1.5 million to ₱3 million, [the spouses Carandang] yet again
subscribed to the increase. They subscribed to ₱93,750 worth of newly issued capital stock.
[De Guzman] claims that, part of the payment for these subscriptions were paid by him, ₱293,250 for the
November 26, 1983 capital stock increase and ₱43,125 for the March 3, 1989 Capital Stock increase or a
total of ₱336,375. Thus, on March 31, 1992, [de Guzman] sent a demand letter to [the spouses
Carandang] for the payment of said total amount.
[The spouses Carandang] refused to pay the amount, contending that a pre-incorporation agreement was
executed between [Arcadio Carandang] and [de Guzman], whereby the latter promised to pay for the
stock subscriptions of the former without cost, in consideration for [Arcadio Carandang’s] technical
expertise, his newly purchased equipment, and his skill in repairing and upgrading radio/communication
equipment therefore, there is no indebtedness on their part [sic].
On June 5, 1992, [de Guzman] filed his complaint, seeking to recover the ₱336,375 together with
damages. After trial on the merits, the trial court disposed of the case in this wise:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of [de Guzman]. Accordingly,
[the spouses Carandang] are ordered to jointly and severally pay [de Guzman], to wit:
(1) ₱336,375.00 representing [the spouses Carandang’s] loan to de Guzman;
 (2) interest on the preceding amount at the rate of twelve percent (12%) per annum from June
5, 1992 when this complaint was filed until the principal amount shall have been fully paid;
(3) ₱20,000.00 as attorney’s fees;
(4) Costs of suit.
The spouses Carandang appealed the RTC Decision to the Court of Appeals, which affirmed the same in
the 22 April 2003 assailed Decision:
WHEREFORE, in view of all the foregoing the assailed Decision is hereby AFFIRMED. No costs. 2
The Motion for Reconsideration filed by the spouses Carandang was similarly denied by the Court of
Appeals in the 6 October 2003 assailed Resolution:
WHEREFORE, in view thereof, the motion for reconsideration is hereby DENIED and our Decision of
April 22, 2003, which is based on applicable law and jurisprudence on the matter is hereby AFFIRMED
and REITERATED.3
The spouses Carandang then filed before this Court the instant Petition for Review on Certiorari, bringing
forth the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
FAILING TO STRICTLY COMPLY WITH SECTION 16, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING
THAT THERE IS AN ALLEGED LOAN FOR WHICH PETITIONERS ARE LIABLE, CONTRARY TO
EXPRESS PROVISIONS OF BOOK IV, TITLE XI, OF THE NEW CIVIL CODE PERTAINING TO LOANS.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE RESPONDENTS WERE ABLE TO DISCHARGE THEIR BURDEN OF PROOF, IN COMPLETE
DISREGARD OF THE REVISED RULES ON EVIDENCE.
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT FAILED TO APPLY SECTIONS 2 AND 7, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
V.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE PURPORTED LIABILITY OF PETITIONERS ARE JOINT AND SOLIDARY, IN VIOLATION OF
ARTICLE 1207 OF THE NEW CIVIL CODE. 4
Whether or not the RTC Decision is void for failing to comply with Section 16, Rule 3 of the Rules of
Court
The spouses Carandang claims that the Decision of the RTC, having been rendered after the death of
Quirino de Guzman, is void for failing to comply with Section 16, Rule 3 of the Rules of Court, which
provides:
SEC. 16. Death of party; duty of counsel. – Whenever a party to a pending action dies, and the claim is
not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after
such death of the fact thereof, and to give the name and address of his legal representative or
representatives. Failure of counsel to comply with this duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator and the court may appoint a guardian ad litem for the minor
heirs.
The court shall forthwith order the legal representative or representatives to appear and be substituted
within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail
to appear within the specified period, the court may order the opposing party, within a specified time, to
procure the appointment of an executor or administrator for the estate of the deceased and the latter
shall immediately appear for and on behalf of the deceased. The court charges in procuring such
appointment, if defrayed by the opposing party, may be recovered as costs.
The spouses Carandang posits that such failure to comply with the above rule renders void the decision
of the RTC, in adherence to the following pronouncements in Vda. de Haberer v. Court of Appeals 5 and
Ferreria v. Vda. de Gonzales6 :
Thus, it has been held that when a party dies in an action that survives and no order is issued by the
court for the appearance of the legal representative or of the heirs of the deceased in substitution of the
deceased, and as a matter of fact no substitution has ever been effected, the trial held by the court
without such legal representatives or heirs and the judgment rendered after such trial are null and void
because the court acquired no jurisdiction over the persons of the legal representatives or of the heirs
upon whom the trial and judgment would be binding. 7
In the present case, there had been no court order for the legal representative of the deceased to appear,
nor had any such legal representative appeared in court to be substituted for the deceased; neither had
the complainant ever procured the appointment of such legal representative of the deceased, including
appellant, ever asked to be substituted for the deceased. As a result, no valid substitution was effected,
consequently, the court never acquired jurisdiction over appellant for the purpose of making her a party to
the case and making the decision binding upon her, either personally or as a representative of the estate
of her deceased mother.8
However, unlike jurisdiction over the subject matter which is conferred by law and is not subject to the
discretion of the parties,9 jurisdiction over the person of the parties to the case may be waived either
expressly or impliedly.10Implied waiver comes in the form of either voluntary appearance or a failure to
object.11
In the cases cited by the spouses Carandang, we held that there had been no valid substitution by the
heirs of the deceased party, and therefore the judgment cannot be made binding upon them. In the case
at bar, not only do the heirs of de Guzman interpose no objection to the jurisdiction of the court over their
persons; they are actually claiming and embracing such jurisdiction. In doing so, their waiver is not even
merely implied (by their participation in the appeal of said Decision), but express (by their explicit
espousal of such view in both the Court of Appeals and in this Court). The heirs of de Guzman had no
objection to being bound by the Decision of the RTC.
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal defense which can only
be asserted by the party who can thereby waive it by silence.
It also pays to look into the spirit behind the general rule requiring a formal substitution of heirs. The
underlying principle therefor is not really because substitution of heirs is a jurisdictional requirement, but
because non-compliance therewith results in the undeniable violation of the right to due process of those
who, though not duly notified of the proceedings, are substantially affected by the decision rendered
therein.12 Such violation of due process can only be asserted by the persons whose rights are claimed to
have been violated, namely the heirs to whom the adverse judgment is sought to be enforced.
Care should, however, be taken in applying the foregoing conclusions. In People v. Florendo, 13 where we
likewise held that the proceedings that took place after the death of the party are void, we gave another
reason for such nullity: "the attorneys for the offended party ceased to be the attorneys for the deceased
upon the death of the latter, the principal x x x." Nevertheless, the case at bar had already been
submitted for decision before the RTC on 4 June 1998, several months before the passing away of de
Guzman on 19 February 1999. Hence, no further proceedings requiring the appearance of de Guzman’s
counsel were conducted before the promulgation of the RTC Decision. Consequently, de Guzman’s
counsel cannot be said to have no authority to appear in trial, as trial had already ceased upon the death
of de Guzman.
In sum, the RTC Decision is valid despite the failure to comply with Section 16, Rule 3 of the Rules of
Court, because of the express waiver of the heirs to the jurisdiction over their persons, and because
there had been, before the promulgation of the RTC Decision, no further proceedings requiring the
appearance of de Guzman’s counsel.
Before proceeding with the substantive aspects of the case, however, there is still one more procedural
issue to tackle, the fourth issue presented by the spouses Carandang on the non-inclusion in the
complaint of an indispensable party.
Whether or not the RTC should have dismissed the case for failure to state a cause of action, considering
that Milagros de Guzman, allegedly an indispensable party, was not included as a party-plaintiff
The spouses Carandang claim that, since three of the four checks used to pay their stock subscriptions
were issued in the name of Milagros de Guzman, the latter should be considered an indispensable party.
Being such, the spouses Carandang claim, the failure to join Mrs. de Guzman as a party-plaintiff should
cause the dismissal of the action because "(i)f a suit is not brought in the name of or against the real
party in interest, a motion to dismiss may be filed on the ground that the complaint states no cause of
action."14
The Court of Appeals held:
We disagree. The joint account of spouses Quirino A de Guzman and Milagros de Guzman from which
the four (4) checks were drawn is part of their conjugal property and under both the Civil Code and the
Family Code the husband alone may institute an action for the recovery or protection of the spouses’
conjugal property.
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that "x x x Under the New Civil
Code, the husband is the administrator of the conjugal partnership. In fact, he is the sole administrator,
and the wife is not entitled as a matter of right to join him in this endeavor. The husband may defend the
conjugal partnership in a suit or action without being joined by the wife. x x x Under the Family Code, the
administration of the conjugal property belongs to the husband and the wife jointly. However, unlike an
act of alienation or encumbrance where the consent of both spouses is required, joint management or
administration does not require that the husband and wife always act together. Each spouse may validly
exercise full power of management alone, subject to the intervention of the court in proper cases as
provided under Article 124 of the Family Code. x x x."
The Court of Appeals is correct. Petitioners erroneously interchange the terms "real party in interest" and
"indispensable party." A real party in interest is the party who stands to be benefited or injured by the
judgment of the suit, or the party entitled to the avails of the suit. 15 On the other hand, an indispensable
party is a party in interest without whom no final determination can be had of an action, 16 in contrast to a
necessary party, which is one who is not indispensable but who ought to be joined as a party if complete
relief is to be accorded as to those already parties, or for a complete determination or settlement of the
claim subject of the action.17
The spouses Carandang are indeed correct that "(i)f a suit is not brought in the name of or against the
real party in interest, a motion to dismiss may be filed on the ground that the complaint states no cause of
action."18 However, what dismissal on this ground entails is an examination of whether the parties
presently pleaded are interested in the outcome of the litigation, and not whether all persons interested in
such outcome are actually pleaded. The latter query is relevant in discussions concerning indispensable
and necessary parties, but not in discussions concerning real parties in interest. Both indispensable and
necessary parties are considered as real parties in interest, since both classes of parties stand to be
benefited or injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3 August
1988. As they did not execute any marriage settlement, the regime of conjugal partnership of gains
govern their property relations.19
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.20 Credits are personal properties,21 acquired during the time the loan or other credit
transaction was executed. Therefore, credits loaned during the time of the marriage are presumed to be
conjugal property.
Consequently, assuming that the four checks created a debt for which the spouses Carandang are liable,
such credits are presumed to be conjugal property. There being no evidence to the contrary, such
presumption subsists. As such, Quirino de Guzman, being a co-owner of specific partnership
property,22 is certainly a real party in interest. Dismissal on the ground of failure to state a cause of action,
by reason that the suit was allegedly not brought by a real party in interest, is therefore unwarranted.
So now we come to the discussion concerning indispensable and necessary parties. When an
indispensable party is not before the court, the action should likewise be dismissed. 23 The absence of an
indispensable party renders all subsequent actuations of the court void, for want of authority to act, not
only as to the absent parties but even as to those present. 24 On the other hand, the non-joinder of
necessary parties do not result in the dismissal of the case. Instead, Section 9, Rule 3 of the Rules of
Court provides for the consequences of such non-joinder:
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.
Non-compliance with the order for the inclusion of a necessary party would not warrant the dismissal of
the complaint. This is an exception to Section 3, Rule 17 which allows the dismissal of the complaint for
failure to comply with an order of the court, as Section 9, Rule 3 specifically provides for the effect of such
non-inclusion: it shall 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. Section 11, Rule 3 likewise
provides that the non-joinder of parties is not a ground for the dismissal of the action.
Other than the indispensable and necessary parties, there is a third set of parties: the pro-forma parties,
which are those who are required to be joined as co-parties in suits by or against another party as may
be provided by the applicable substantive law or procedural rule. 25 An example is provided by Section 4,
Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided by law.
Pro-forma parties can either be indispensable, necessary or neither indispensable nor necessary. The
third case occurs if, for example, a husband files an action to recover a property which he claims to be
part of his exclusive property. The wife may have no legal interest in such property, but the rules
nevertheless require that she be joined as a party.
In cases of pro-forma parties who are neither indispensable nor necessary, the general rule under
Section 11, Rule 3 must be followed: such non-joinder is not a ground for dismissal. Hence, in a case
concerning an action to recover a sum of money, we held that the failure to join the spouse in that case
was not a jurisdictional defect.26 The non-joinder of a spouse does not warrant dismissal as it is merely a
formal requirement which may be cured by amendment. 27
Conversely, in the instances that the pro-forma parties are also indispensable or necessary parties, the
rules concerning indispensable or necessary parties, as the case may be, should be applied. Thus,
dismissal is warranted only if the pro-forma party not joined in the complaint is an indispensable party.
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 superceded:
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. Hular28 and Adlawan v. Adlawan,29 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,30 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. 31
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.32
We therefore hold that Milagros de Guzman is not an indispensable party in the action for the recovery of
the allegedly loaned money to the spouses Carandang. As such, she need not have been impleaded in
said suit, and dismissal of the suit is not warranted by her not being a party thereto.
Whether or not respondents were able to prove the loan sought to be collected from petitioners
In the second and third issues presented by the spouses Carandang, they claim that the de Guzmans
failed to prove the alleged loan for which the spouses Carandang were held liable. As previously stated,
spouses Quirino and Milagros de Guzman paid for the stock subscriptions of the spouses Carandang,
amounting to ₱336,375.00. The de Guzmans claim that these payments were in the form of loans and/or
advances and it was agreed upon between the late Quirino de Guzman, Sr. and the spouses Carandang
that the latter would repay him. Petitioners, on the other hand, argue that there was an oral pre-
incorporation agreement wherein it was agreed that Arcardio Carandang would always maintain his 46%
equity participation in the corporation even if the capital structures were increased, and that Quirino de
Guzman would personally pay the equity shares/stock subscriptions of Arcardio Carandang with no cost
to the latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth assigned error that [the de Guzmans] failed to prove by
preponderance of evidence, either the existence of the purported loan or the non-payment thereof.
Simply put, preponderance of evidence means that the evidence as a whole adduced by one side is
superior to that of the other. The concept of preponderance of evidence refers to evidence that is of
greater weight, or more convincing, than that which is offered in opposition to it; it means probability of
truth.
[The spouses Carandang] admitted that it was indeed [the de Guzmans] who paid their stock
subscriptions and their reason for not reimbursing the latter is the alleged pre-incorporation agreement, to
which they offer no clear proof as to its existence.
It is a basic rule in evidence that each party must prove his affirmative allegation. Thus, the plaintiff or
complainant has to prove his affirmative allegations in the complaints and the defendant or respondent
has to prove the affirmative allegations in his affirmative defenses and counterclaims. 33
The spouses Carandang, however, insist that the de Guzmans have not proven the loan itself, having
presented evidence only of the payment in favor of the Carandangs. They claim:
It is an undeniable fact that payment is not equivalent to a loan. For instance, if Mr. "A" decides to pay for
Mr. "B’s" obligation, that payment by Mr. "A" cannot, by any stretch of imagination, possibly mean that
there is now a loan by Mr. "B" to Mr. "A". There is a possibility that such payment by Mr. "A" is purely out
of generosity or that there is a mutual agreement between them. As applied to the instant case, that
mutual agreement is the pre-incorporation agreement (supra) existing between Mr. de Guzman and the
petitioners --- to the effect that the former shall be responsible for paying stock subscriptions of the latter.
Thus, when Mr. de Guzman paid for the stock subscriptions of the petitioners, there was no loan to speak
of, but only a compliance with the pre-incorporation agreement. 34
The spouses Carandang are mistaken. If indeed a Mr. "A" decides to pay for a Mr. "B’s" obligation, the
presumption is that Mr. "B" is indebted to Mr. "A" for such amount that has been paid. This is pursuant to
Articles 1236 and 1237 of the Civil Code, which provide:
Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he paid
without the knowledge or against the will of the debtor, he can recover only insofar as the payment has
been beneficial to the debtor.
Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter,
cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage,
guarantee, or penalty.
Articles 1236 and 1237 are clear that, even in cases where the debtor has no knowledge of payment by a
third person, and even in cases where the third person paid against the will of the debtor, such payment
would produce a debt in favor of the paying third person. In fact, the only consequences for the failure to
inform or get the consent of the debtor are the following: (1) the third person can recover only insofar as
the payment has been beneficial to the debtor; and (2) the third person is not subrogated to the rights of
the creditor, such as those arising from a mortgage, guarantee or penalty. 35
We say, however, that this is merely a presumption. By virtue of the parties’ freedom to contract, the
parties could stipulate otherwise and thus, as suggested by the spouses Carandang, there is indeed a
possibility that such payment by Mr. "A" was purely out of generosity or that there was a mutual
agreement between them. But such mutual agreement, being an exception to presumed course of events
as laid down by Articles 1236 and 1237, must be adequately proven.
The de Guzmans have successfully proven their payment of the spouses Carandang’s stock
subscriptions. These payments were, in fact, admitted by the spouses Carandang. Consequently, it is
now up to the spouses Carandang to prove the existence of the pre-incorporation agreement that was
their defense to the purported loan.
Unfortunately for the spouses Carandang, the only testimony which touched on the existence and
substance of the pre-incorporation agreement, that of petitioner Arcardio Carandang, was stricken off the
record because he did not submit himself to a cross-examination of the opposing party. On the other
hand, the testimonies of Romeo Saavedra, 36 Roberto S. Carandang,37 Gertrudes Z. Esteban,38 Ceferino
Basilio,39 and Ma. Luisa Carandang40touched on matters other than the existence and substance of the
pre-incorporation agreement. So aside from the fact that these witnesses had no personal knowledge as
to the alleged existence of the pre-incorporation agreement, the testimonies of these witnesses did not
even mention the existence of a pre-incorporation agreement.
Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa Carandang even contradicted the
existence of a pre-incorporation agreement because when they were asked by their counsel regarding
the matter of the check payments made by the late Quirino A. de Guzman, Sr. in their behalf, they said
that they had already paid for it thereby negating their own defense that there was a pre-incorporation
agreement excusing themselves from paying Mr. de Guzman the amounts he advanced or loaned to
them. This basic and irrefutable fact can be gleaned from their testimonies which the private respondents
are quoting for easy reference:
a. With respect to the testimony of Ma. Luisa Carandang
Q: Now, can you tell this Honorable Court how do you feel with respect to the Complaint of the plaintiff in
this case charging you that you paid for this year and asking enough to paid (sic) your tax?
A: We have paid already, so, we are not liable for anything payment (sic). 41
b. With respect to the testimony of Arcadio Carandang
"Q: How much?
A: ₱40,000.00 to ₱50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there were receipts issued for the payment
of your shares; which receipts were marked as Exhibits "G" to "L" (Plaintiff).
I’m showing to you these receipts so marked by the plaintiff as their exhibits which were issued in the
name of Ma. Luisa Carandang, your wife; and also, Arcadio M. Carandang. Will you please go over this
Official Receipt and state for the records, who made for the payment stated in these receipts in your
name?
A: I paid for those shares." 42
There being no testimony or documentary evidence proving the existence of the pre-incorporation
agreement, the spouses Carandang are forced to rely upon an alleged admission by the original plaintiff
of the existence of the pre-incorporation agreement.
Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the existence of the pre-
incorporation agreement by virtue of paragraphs 13 and 14 of their Answer and paragraph 4 of private
respondents’ Reply.
Paragraphs 13 and 14 of petitioners’ Answer dated 7 July 1992 state in full:
13. Sometime in November, 1973 or thereabout, herein plaintiff invited defendant Arcadio M. Carandang
to a joint venture by pooling together their technical expertise, equipments, financial resources and
franchise. Plaintiff proposed to defendant and mutually agreed on the following:
1. That they would organize a corporation known as Mabuhay Broadcasting Systems, Inc.
2. Considering the technical expertise and talent of defendant Arcadio M. Carandang and his
new equipments he bought, and his skill in repairing and modifying radio/communication
equipments into high proficiency, said defendant would have an equity participation in the
corporation of 46%, and plaintiff 54% because of his financial resources and franchise.
3. That defendant would always maintain his 46% equity participation in the corporation even
if the capital structures are increased, and that plaintiff would personally pay the equity
shares/stock subscriptions of defendant with no cost to the latter.
4. That because of defendant’s expertise in the trade including the marketing aspects, he
would be the President and General Manager, and plaintiff the Chairman of the Board.
5. That considering their past and trustworthy relations, they would maintain such relations in
the joint venture without any mental reservation for their common benefit and success of the
business.
14. Having mutually agreed on the above arrangements, the single proprietorship of plaintiff
was immediately spun-off into a corporation now known as Mabuhay Broadcasting System,
Inc. The incorporators are plaintiff and his family members/nominees controlling jointly 54% of
the stocks and defendant Arcadio M. Carandang controlling singly 46% as previously
agreed.43
Meanwhile, paragraphs 3 and 4 of private respondents’ Reply dated 29 July 1992 state in full:
3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer only insofar the plaintiff and defendant
Arcadio M. Carandang organized a corporation known as Mabuhay Broadcasting Systems, Inc. Plaintiff
specifically denies the other allegations in paragraph 13 of the Answer, the same being devoid of any
legal or factual bases. The truth of the matter is that defendant Arcadio M. Carandang was not able to
pay plaintiff the agreed amount of the lease for a number of months forcing the plaintiff to terminate
lease. Additionally, the records would show that it was the defendant Arcadio M. Carandang who
proposed a joint venture with the plaintiff.
It appears that plaintiff agreed to the formation of the corporation principally because of a directive of then
President Marcos indicating the need to broaden the ownership of radio broadcasting stations. The
plaintiff owned the franchise, the radio transmitter, the antenna tower, the building containing the radio
transmitter and other equipment. Verily, he would be placed in a great disadvantage if he would still have
to personally pay for the shares of defendant Arcadio M. Carandang.
44
4. Plaintiff admits the allegations in paragraph 14 of the Answer.
In effect, the spouses Carandang are relying on the fact that Quirino de Guzman stated that he admitted
paragraph 14 of the Answer, which incidentally contained the opening clause "(h)aving mutually agreed
on the above arrangements, x x x."
Admissions, however, should be clear and unambiguous. This purported admission by Quirino de
Guzman reeks of ambiguity, as the clause "(h)aving mutually agreed on the above arrangements," seems
to be a mere introduction to the statement that the single proprietorship of Quirino de Guzman had been
converted into a corporation. If Quirino de Guzman had meant to admit paragraph 13.3, he could have
easily said so, as he did the other paragraphs he categorically admitted. Instead, Quirino de Guzman
expressly stated the opposite: that "(p)laintiff specifically denies the other allegations of paragraph 13 of
the Answer."45 The Reply furthermore states that the only portion of paragraph 13 which Quirino de
Guzman had admitted is paragraph 13.1, and only insofar as it said that Quirino de Guzman and Arcardio
Carandang organized Mabuhay Broadcasting Systems, Inc. 46
All the foregoing considered, we hold that Quirino de Guzman had not admitted the alleged pre-
incorporation agreement. As there was no admission, and as the testimony of Arcardio Carandang was
stricken off the record, we are constrained to rule that there was no pre-incorporation agreement
rendering Quirino de Guzman liable for the spouses Carandang’s stock subscription. The payment by the
spouses de Guzman of the stock subscriptions of the spouses Carandang are therefore by way of loan
which the spouses Carandang are liable to pay.1âwphi1
Whether or not the liability of the spouses Carandang is joint and solidary
Finally, the Court of Appeals also upheld the RTC Decision insofar as it decreed a solidary liability.
According to the Court of Appeals:
With regards (sic) the tenth assigned error, [the spouses Carandang] contend that:
"There is absolutely no evidence, testimonial or documentary, showing that the purported obligation of
[the spouses Carandang] is joint and solidary. x x x
"Furthermore, the purported obligation of [the spouses Carandang] does not at all qualify as one of the
obligations required by law to be solidary x x x."
It is apparent from the facts of the case that [the spouses Carandang] were married way before the
effectivity of the Family Code hence; their property regime is conjugal partnership under the Civil Code.
It must be noted that for marriages governed by the rules of conjugal partnership of gains, an obligation
entered into by the husband and wife is chargeable against their conjugal partnership and it is the
partnership, which is primarily bound for its repayment. Thus, when the spouses are sued for the
enforcement of the obligation entered into by them, they are being impleaded in their capacity as
representatives of the conjugal partnership and not as independent debtors, such that the concept of joint
and solidary liability, as between them, does not apply. 47
The Court of Appeals is correct insofar as it held that when the spouses are sued for the enforcement of
the obligation entered into by them, they are being impleaded in their capacity as representatives of the
conjugal partnership and not as independent debtors. Hence, either of them may be sued for the whole
amount, similar to that of a solidary liability, although the amount is chargeable against their conjugal
partnership property. Thus, in the case cited by the Court of Appeals, Alipio v. Court of Appeals, 48 the two
sets of defendant-spouses therein were held liable for ₱25,300.00 each, chargeable to their respective
conjugal partnerships.
WHEREFORE, the Decision of the Court of Appeals, affirming the judgment rendered against the
spouses Carandang, is hereby AFFIRMED with the following MODIFICATION: The spouses Carandang
are ORDERED to pay the following amounts from their conjugal partnership properties:
(1) ₱336,375.00 representing the spouses Carandang’s loan to Quirino de Guzman; and
(2) Interest on the preceding amount at the rate of twelve percent (12%) per annum from 5
June 1992 when the complaint was filed until the principal amount can be fully paid; and
(3) ₱20,000.00 as attorney’s fees.
No costs.
SO ORDERED.
G.R. No. 173946 June 19, 2013
BOSTON EQUITY RESOURCES, INC., Petitioner,
vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.
Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1) the
Decision,1 dated 28 February 2006 and (2) the Resolution, 2 dated 1 August 2006 of the Court of Appeals
in CA-G.R. SP No. 88586. The challenged decision granted herein respondent's petition for certiorari
upon a finding that the trial court committed grave abuse of discretion in denying respondent's motion to
dismiss the complaint against her.3 Based on this finding, the Court of Appeals reversed and set aside the
Orders, dated 8 November 20044 and 22 December 2004,5respectively, of the Regional Trial Court (RTC)
of Manila, Branch 24.
The Facts
On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the issuance of a
writ of preliminary attachment against the spouses Manuel and Lolita Toledo. 6 Herein respondent filed an
Answer dated 19 March 1998 but on 7 May 1998, she filed a Motion for Leave to Admit Amended
Answer7 in which she alleged, among others, that her husband and co-defendant, Manuel Toledo
(Manuel), is already dead.8 The death certificate9 of Manuel states "13 July 1995" as the date of death. As
a result, petitioner filed a motion, dated 5 August 1999, to require respondent to disclose the heirs of
Manuel.10 In compliance with the verbal order of the court during the 11 October 1999 hearing of the
case, respondent submitted the required names and addresses of the heirs. 11 Petitioner then filed a
Motion for Substitution,12 dated 18 January 2000, praying that Manuel be substituted by his children as
party-defendants. It appears that this motion was granted by the trial court in an Order dated 9 October
2000.13
Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order containing, among
others, the dates of hearing of the case. 14
The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence and its exhibits
were thereafter admitted.
On 26 May 2004, the reception of evidence for herein respondent was cancelled upon agreement of the
parties. On 24 September 2004, counsel for herein respondent was given a period of fifteen days within
which to file a demurrer to evidence.15 However, on 7 October 2004, respondent instead filed a motion to
dismiss the complaint, citing the following as grounds: (1) that the complaint failed to implead an
indispensable party or a real party in interest; hence, the case must be dismissed for failure to state a
cause of action; (2) that the trial court did not acquire jurisdiction over the person of Manuel pursuant to
Section 5, Rule 86 of the Revised Rules of Court; (3) that the trial court erred in ordering the substitution
of the deceased Manuel by his heirs; and (4) that the court must also dismiss the case against Lolita
Toledo in accordance with Section 6, Rule 86 of the Rules of Court. 16
The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having been filed
out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that: "Within the time for but
before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made
x x x."17 Respondent’s motion for reconsideration of the order of denial was likewise denied on the ground
that "defendants’ attack on the jurisdiction of this Court is now barred by estoppel by laches" since
respondent failed to raise the issue despite several chances to do so. 18
Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the trial court
seriously erred and gravely abused its discretion in denying her motion to dismiss despite discovery,
during the trial of the case, of evidence that would constitute a ground for dismissal of the case. 19
The Court of Appeals granted the petition based on the following grounds:
It is elementary that courts acquire jurisdiction over the person of the defendant x x x only when the latter
voluntarily appeared or submitted to the court or by coercive process issued by the court to him, x x x. In
this case, it is undisputed that when petitioner Boston filed the complaint on December 24, 1997,
defendant Manuel S. Toledo was already dead, x x x. Such being the case, the court a quo could not
have acquired jurisdiction over the person of defendant Manuel S. Toledo.
x x x the court a quo’s denial of respondent’s motion to dismiss was based on its finding that
respondent’s attack on the jurisdiction of the court was already barred by laches as respondent failed to
raise the said ground in its [sic] amended answer and during the pre-trial, despite her active participation
in the proceedings.
However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the proceeding,
even for the first time on appeal. By timely raising the issue on jurisdiction in her motion to dismiss x x x
respondent is not estopped from raising the question on jurisdiction.
Moreover, when issue on jurisdiction was raised by respondent, the court a quo had not yet decided the
case, hence, there is no basis for the court a quo to invoke estoppel to justify its denial of the motion for
reconsideration;
It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was already dead.
The complaint should have impleaded the estate of Manuel S. Toledo as defendant, not only the wife,
considering that the estate of Manuel S. Toledo is an indispensable party, which stands to be benefited or
be injured in the outcome of the case. x x x
xxxx
Respondent’s motion to dismiss the complaint should have been granted by public respondent judge as
the same was in order. Considering that the obligation of Manuel S. Toledo is solidary with another
debtor, x x x, the claim x x x should be filed against the estate of Manuel S. Toledo, in conformity with the
provision of Section 6, Rule 86 of the Rules of Court, x x x. 20
The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition.
The Issues
Petitioner claims that the Court of Appeals erred in not holding that:
1. Respondent is already estopped from questioning the trial court’s jurisdiction;
2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an
indispensable party;
3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting the
dismissal of the case before the lower court; and
4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner
file its claim against the estate of Manuel.
In essence, what is at issue here is the correctness of the trial court’s orders denying respondent’s
motion to dismiss.
The Ruling of the Court
We find merit in the petition.
Motion to dismiss filed out of time
To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent. Well
settled is the rule that the special civil action for certiorari is not the proper remedy to assail the denial by
the trial court of a motion to dismiss. The order of the trial court denying a motion to dismiss is merely
interlocutory, as it neither terminates nor finally disposes of a case and still leaves something to be done
by the court before a case is finally decided on the merits. 21 Therefore, "the proper remedy in such a case
is to appeal after a decision has been rendered." 22
As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher Education: 23
A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted only to
correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of jurisdiction.
Its function is limited to keeping an inferior court within its jurisdiction and to relieve persons from arbitrary
acts – acts which courts or judges have no power or authority in law to perform. It is not designed to
correct erroneous findings and conclusions made by the courts. (Emphasis supplied)
Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of
discretion in denying respondent’s motion to dismiss. It, in fact, acted correctly when it issued the
questioned orders as respondent’s motion to dismiss was filed SIX YEARS AND FIVE MONTHS AFTER
SHE FILED HER AMENDED ANSWER. This circumstance alone already warranted the outright
dismissal of the motion for having been filed in clear contravention of the express mandate of Section 1,
Rule 16, of the Revised Rules of Court. Under this provision, a motion to dismiss shall be filed within the
time for but before the filing of an answer to the complaint or pleading asserting a claim. 24
More importantly, respondent’s motion to dismiss was filed after petitioner has completed the
presentation of its evidence in the trial court, giving credence to petitioner’s and the trial court’s
conclusion that the filing of the motion to dismiss was a mere ploy on the part of respondent to delay the
prompt resolution of the case against her.
Also worth mentioning is the fact that respondent’s motion to dismiss under consideration herein is not
the first motion to dismiss she filed in the trial court. It appears that she had filed an earlier motion to
dismiss26 on the sole ground of the unenforceability of petitioner’s claim under the Statute of Frauds,
which motion was denied by the trial court. More telling is the following narration of the trial court in its
Order denying respondent’s motion for reconsideration of the denial of her motion to dismiss:
As can be gleaned from the records, with the admission of plaintiff’s exhibits, reception of defendants’
evidence was set on March 31, and April 23, 2004 x x x . On motion of the defendants, the hearing on
March 31, 2004 was cancelled.
On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces tecum to
one Gina M. Madulid, to appear and testify for the defendants on April 23, 2004. Reception of defendants’
evidence was again deferred to May 26, June 2 and June 30, 2004, x x x.
On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad
testificandum to the said Gina Madulid. On May 26, 2004, reception of defendants [sic] evidence was
cancelled upon the agreement of the parties. On July 28, 2004, in the absence of defendants’ witness,
hearing was reset to September 24 and October 8, 2004 x x x.
On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to file a demurrer
to evidence. On October 7, 2004, defendants filed instead a Motion to Dismiss x x x. 27
Respondent’s act of filing multiple motions, such as the first and earlier motion to dismiss and then the
motion to dismiss at issue here, as well as several motions for postponement, lends credibility to the
position taken by petitioner, which is shared by the trial court, that respondent is
deliberately impeding the early disposition of this case. The filing of the second motion to dismiss was,
therefore, "not only improper but also dilatory." 28 Thus, the trial court, "far from deviating or straying off
course from established jurisprudence on the matter, x x x had in fact faithfully observed the law and
legal precedents in this case." 29 The Court of Appeals, therefore, erred not only in entertaining
respondent’s petition for certiorari, it likewise erred in ruling that the trial court committed grave abuse of
discretion when it denied respondent’s motion to dismiss.
On whether or not respondent is estopped from
questioning the jurisdiction of the trial court
At the outset, it must be here stated that, as the succeeding discussions will demonstrate, jurisdiction
over the person of Manuel should not be an issue in this case. A protracted discourse on jurisdiction is,
nevertheless, demanded by the fact that jurisdiction has been raised as an issue from the lower court, to
the Court of Appeals and, finally, before this Court. For the sake of clarity, and in order to finally settle the
controversy and fully dispose of all the issues in this case, it was deemed imperative to resolve the issue
of jurisdiction.
1. Aspects of Jurisdiction
Petitioner calls attention to the fact that respondent’s motion to dismiss questioning the trial court’s
jurisdiction was filed more than six years after her amended answer was filed. According to petitioner,
respondent had several opportunities, at various stages of the proceedings, to assail the trial court’s
jurisdiction but never did so for six straight years. Citing the doctrine laid down in the case of Tijam, et al.
v. Sibonghanoy, et al.30 petitioner claimed that respondent’s failure to raise the question of jurisdiction at
an earlier stage bars her from later questioning it, especially since she actively participated in the
proceedings conducted by the trial court.
Petitioner’s argument is misplaced, in that, it failed to consider that the concept of jurisdiction has several
aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the parties; (3) jurisdiction
over the issues of the case; and (4) in cases involving property, jurisdiction over the res or the thing which
is the subject of the litigation.31
The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches is
jurisdiction over the subject matter. Thus, in Tijam, the case relied upon by petitioner, the issue involved
was the authority of the then Court of First Instance to hear a case for the collection of a sum of money in
the amount of ₱1,908.00 which amount was, at that time, within the exclusive original jurisdiction of the
municipal courts.
In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was the jurisdiction
of the trial court over the subject matter of the case. Accordingly, in Spouses Gonzaga v. Court of
Appeals,32 the issue for consideration was the authority of the regional trial court to hear and decide an
action for reformation of contract and damages involving a subdivision lot, it being argued therein that
jurisdiction is vested in the Housing and Land Use Regulatory Board pursuant to PD 957 (The
Subdivision and Condominium Buyers Protective Decree). In Lee v. Presiding Judge, MTC, Legaspi
City,33 petitioners argued that the respondent municipal trial court had no jurisdiction over the complaint
for ejectment because the issue of ownership was raised in the pleadings. Finally, in People v.
Casuga,34 accused-appellant claimed that the crime of grave slander, of which she was charged, falls
within the concurrent jurisdiction of municipal courts or city courts and the then courts of first instance,
and that the judgment of the court of first instance, to which she had appealed the municipal court's
conviction, should be deemed null and void for want of jurisdiction as her appeal should have been filed
with the Court of Appeals or the Supreme Court.
In all of these cases, the Supreme Court barred the attack on the jurisdiction of the respective courts
concerned over the subject matter of the case based on estoppel by laches, declaring that parties cannot
be allowed to belatedly adopt an inconsistent posture by attacking the jurisdiction of a court to which they
submitted their cause voluntarily.35
Here, what respondent was questioning in her motion to dismiss before the trial court was that court’s
jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by laches finds no
application in this case. Instead, the principles relating to jurisdiction over the person of the parties are
pertinent herein.
The Rules of Court provide:
RULE 9
EFFECT OF FAILURE TO PLEAD
Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or
the evidence on record that the court has no jurisdiction over the subject matter, that there is another
action pending between the same parties for the same cause, or that the action is barred by a prior
judgment or by statute of limitations, the court shall dismiss the claim.
RULE 15
MOTIONS
Sec. 8. Omnibus motion. – Subject to the provisions of Section 1 of Rule 9, a motion attacking a
pleading, order, judgment, or proceeding shall include all objections then available, and all objections not
so included shall be deemed waived.
Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived even if not
alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject matter. x x x Lack of
jurisdiction over the subject matter can always be raised anytime, even for the first time on appeal, since
jurisdictional issues cannot be waived x x x subject, however, to the principle of estoppel by laches." 36
Since the defense of lack of jurisdiction over the person of a party to a case is not one of those defenses
which are not deemed waived under Section 1 of Rule 9, such defense must be invoked when an answer
or a motion to dismiss is filed in order to prevent a waiver of the defense. 37 If the objection is not raised
either in a motion to dismiss or in the answer, the objection to the jurisdiction over the person of the
plaintiff or the defendant is deemed waived by virtue of the first sentence of the above-quoted Section 1 Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against Sereno only.
of Rule 9 of the Rules of Court.38

Based on the foregoing pronouncements, there is no basis for dismissing the complaint against
The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its questioned respondent herein. Thus, as already emphasized above, the trial court correctly denied her motion to
decision, stating that "issue on jurisdiction may be raised at any stage of the proceeding, even for the first dismiss.
time on appeal" and that, therefore, respondent timely raised the issue in her motion to dismiss and is,
consequently, not estopped from raising the question of jurisdiction. As the question of jurisdiction
involved here is that over the person of the defendant Manuel, the same is deemed waived if not raised On whether or not the estate of Manuel
in the answer or a motion to dismiss. In any case, respondent cannot claim the defense since "lack of
jurisdiction over the person, being subject to waiver, is a personal defense which can only be asserted by
Toledo is an indispensable party
the party who can thereby waive it by silence." 39

Rule 3, Section 7 of the 1997 Rules of Court states:

2. Jurisdiction over the person of a defendant is acquired through a valid service of summons; trial court
did not acquire jurisdiction over the person of Manuel Toledo
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.
In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A defendant
is informed of a case against him when he receives summons. "Summons is a writ by which the
defendant is notified of the action brought against him. Service of such writ is the means by which the An indispensable party is one who has such an interest in the controversy or subject matter of a case that
court acquires jurisdiction over his person."40 a final adjudication cannot be made in his or her absence, without injuring or affecting that interest. He or
she is a party who has not only an interest in the subject matter of the controversy, but "an interest of
such nature that a final decree cannot be made without affecting that interest or leaving the controversy
In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since there was no
in such a condition that its final determination may be wholly inconsistent with equity and good
valid service of summons upon him, precisely because he was already dead even before the complaint
conscience. It has also been considered that an indispensable party is a person in whose absence there
against him and his wife was filed in the trial court. The issues presented in this case are similar to those
cannot be a determination between the parties already before the court which is effective, complete or
in the case of Sarsaba v. Vda. de Te.41
equitable." Further, an indispensable party is one who must be included in an action before it may
properly proceed.44
In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed from
employment and ordering the payment of his monetary claims. To satisfy the claim, a truck in the
On the other hand, a "person is not an indispensable party if his interest in the controversy or subject
possession of Sereno’s employer was levied upon by a sheriff of the NLRC, accompanied by Sereno and
matter is separable from the interest of the other parties, so that it will not necessarily be directly or
his lawyer, Rogelio Sarsaba, the petitioner in that case. A complaint for recovery of motor vehicle and
injuriously affected by a decree which does complete justice between them. Also, a person is not an
damages, with prayer for the delivery of the truck pendente lite was eventually filed against Sarsaba,
indispensable party if his presence would merely permit complete relief between him or her and those
Sereno, the NLRC sheriff and the NLRC by the registered owner of the truck. After his motion to dismiss
already parties to the action, or if he or she has no interest in the subject matter of the action." It is not a
was denied by the trial court, petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus
sufficient reason to declare a person to be an indispensable party simply because his or her presence will
motion to dismiss citing, as one of the grounds, lack of jurisdiction over one of the principal defendants, in
avoid multiple litigations.45
view of the fact that Sereno was already dead when the complaint for recovery of possession was filed.

Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is not an
Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of the issues
indispensable party to the collection case, for the simple reason that the obligation of Manuel and his
submitted for resolution in both cases is similar: whether or not a case, where one of the named
wife, respondent herein, is solidary.
defendants was already dead at the time of its filing, should be dismissed so that the claim may be
pursued instead in the proceedings for the settlement of the estate of the deceased defendant. The
petitioner in the Sarsaba Case claimed, as did respondent herein, that since one of the defendants died The contract between petitioner, on the one hand and respondent and respondent’s husband, on the
before summons was served on him, the trial court should have dismissed the complaint against all the other, states:
defendants and the claim should be filed against the estate of the deceased defendant. The petitioner in
Sarsaba, therefore, prayed that the complaint be dismissed, not only against Sereno, but as to all the
defendants, considering that the RTC did not acquire jurisdiction over the person of Sereno. 42 This is FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay BOSTON EQUITY
exactly the same prayer made by respondent herein in her motion to dismiss. RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED (₱1,400,000.00)] x x x. 47

The Court, in the Sarsaba Case, resolved the issue in this wise:
x x x We cannot countenance petitioner’s argument that the complaint against the other defendants
should have been dismissed, considering that the RTC never acquired jurisdiction over the person of
Sereno. The court’s failure to acquire jurisdiction over one’s person is a defense which is personal to the
person claiming it. Obviously, it is now impossible for Sereno to invoke the same in view of his death.
Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap the benefit of having the
case dismissed against all of the defendants. Failure to serve summons on Sereno’s person will not be a
cause for the dismissal of the complaint against the other defendants, considering that they have been
served with copies of the summons and complaints and have long submitted their respective responsive
pleadings. In fact, the other defendants in the complaint were given the chance to raise all possible
defenses and objections personal to them in their respective motions to dismiss and their subsequent
answers.43 (Emphasis supplied.)
The provisions and stipulations of the contract were then followed by the respective signatures of
respondent as "MAKER" and her husband as "CO-MAKER." 48 Thus, pursuant to Article 1216 of the Civil
Code, petitioner may collect the entire amount of the obligation from respondent only. The
aforementioned provision states: "The creditor may proceed against any one of the solidary debtors or
some or all of them simultaneously. The demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others, so long as the debt has not been fully
collected."
In other words, the collection case can proceed and the demands of petitioner can be satisfied by
respondent only, even without impleading the estate of Manuel. Consequently, the estate of Manuel is not
an indispensable party to petitioner’s complaint for sum of money.
However, the Court of Appeals, agreeing with the contention of respondent, held that the claim of
petitioner should have been filed against the estate of Manuel in accordance with Sections 5 and 6 of
Rule 86 of the Rules of Court. The aforementioned provisions provide:
SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for money
against the decedent, arising from contract, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and judgment for money against the decedent, must be filed
within the time limited in the notice; otherwise, they are barred forever, except that they may be set forth
as counterclaims in any action that the executor or administrator may bring against the claimants. x x x.
SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with another
debtor, the claim shall be filed against the decedent as if he were the only debtor, without prejudice to the
right of the estate to recover contribution from the other debtor. x x x.
The Court of Appeals erred in its interpretation of the above-quoted provisions.
In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of the
Revised Rules of Court, which latter provision has been retained in the present Rules of Court without
any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et.
al.,49 held:50
Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was taken, this
Court held that where two persons are bound in solidum for the same debt and one of them dies, the
whole indebtedness can be proved against the estate of the latter, the decedent’s liability being absolute
and primary; x x x. It is evident from the foregoing that Section 6 of Rule 87 provides the procedure
should the creditor desire to go against the deceased debtor, but there is certainly nothing in the said
provision making compliance with such procedure a condition precedent before an ordinary action
against the surviving solidary debtors, should the creditor choose to demand payment from the latter,
could be entertained to the extent that failure to observe the same would deprive the court jurisdiction to
take cognizance of the action against the surviving debtors. Upon the other hand, the Civil Code
expressly allows the creditor to proceed against any one of the solidary debtors or some or all of them
simultaneously. There is, therefore, nothing improper in the creditor’s filing of an action against the
surviving solidary debtors alone, instead of instituting a proceeding for the settlement of the estate of the
deceased debtor wherein his claim could be filed.
The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank v.
Asuncion51where the Supreme Court pronounced:
A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein
prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely sets up
the procedure in enforcing collection in case a creditor chooses to pursue his claim against the estate of
the deceased solidary debtor. The rule has been set forth that a creditor (in a solidary obligation) has the
option whether to file or not to file a claim against the estate of the solidary debtor. x x x
xxxx
It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said
provision gives the creditor the right to "proceed against anyone of the solidary debtors or some or all of
them simultaneously." The choice is undoubtedly left to the solidary creditor to determine against whom
he will enforce collection. In case of the death of one of the solidary debtors, he (the creditor) may, if he
so chooses, proceed against the surviving solidary debtors without necessity of filing a claim in the estate
of the deceased debtors. It is not mandatory for him to have the case dismissed as against the surviving
debtors and file its claim against the estate of the deceased solidary debtor, x x x. For to require the
creditor to proceed against the estate, making it a condition precedent for any collection action against
the surviving debtors to prosper, would deprive him of his substantive rightsprovided by Article 1216 of
the New Civil Code. (Emphasis supplied.)
As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied
literally, Article 1216 of the New Civil Code would, in effect, be repealed since under the Rules of Court,
petitioner has no choice but to proceed against the estate of [the deceased debtor] only. Obviously, this
provision diminishes the [creditor’s] right under the New Civil Code to proceed against any one, some or
all of the solidary debtors. Such a construction is not sanctioned by principle, which is too well settled to
require citation, that a substantive law cannot be amended by a procedural rule. Otherwise stated,
Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over Article 1216 of the New
Civil Code, the former being merely procedural, while the latter, substantive.
Based on the foregoing, the estate of Manuel is not an indispensable party and the case can proceed as
against respondent only. That petitioner opted to collect from respondent and not from the estate of
Manuel is evidenced by its opposition to respondent’s motion to dismiss asserting that the case, as
against her, should be dismissed so that petitioner can proceed against the estate of Manuel.
On whether or not the inclusion of Manuel as
party defendant is a misjoinder of party
Section 11 of Rule 3 of the Rules of Court states that "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."
Based on the last sentence of the afore-quoted provision of law, a misjoined party must have the capacity
to sue or be sued in the event that the claim by or against the misjoined party is pursued in a separate
case. In this case, therefore, the inclusion of Manuel in the complaint cannot be considered a misjoinder,
as in fact, the action would have proceeded against him had he been alive at the time the collection case
was filed by petitioner. This being the case, the remedy provided by Section 11 of Rule 3 does not obtain
here. The name of Manuel as party-defendant cannot simply be dropped from the case. Instead, the
procedure taken by the Court in Sarsaba v. Vda. de Te, 52whose facts, as mentioned earlier, resemble
those of this case, should be followed herein. There, the Supreme Court agreed with the trial court when
it resolved the issue of jurisdiction over the person of the deceased Sereno in this wise:
As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the person of
Patricio Sereno since there was indeed no valid service of summons insofar as Patricio Sereno is
concerned. Patricio Sereno died before the summons, together with a copy of the complaint and its
annexes, could be served upon him.
However, the failure to effect service of summons unto Patricio Sereno, one of the defendants herein,
does not render the action DISMISSIBLE, considering that the three (3) other defendants, x x x, were
validly served with summons and the case with respect to the answering defendants may still proceed
independently. Be it recalled that the three (3) answering defendants have previously filed a Motion to
Dismiss the Complaint which was denied by the Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a claim
against the estate of Patricio Sereno, but the case with respect to the three (3) other accused [sic] will
proceed. (Emphasis supplied.)53
As a result, the case, as against Manuel, must be dismissed.
In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3 of the
Rules of Court, which states that: only natural or juridical persons, or entities authorized by law may be
parties in a civil action." Applying this provision of law, the Court, in the case of Ventura v.
Militante,54 held:
Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of justice, the
plaintiff must have an actual legal existence, that is, he, she or it must be a person in law and possessed
of a legal entity as either a natural or an artificial person, and no suit can be lawfully prosecuted save in
the name of such a person.
The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes a
judicial proceeding, to name the proper party defendant to his cause of action. In a suit or proceeding in
personam of an adversary character, the court can acquire no jurisdiction for the purpose of trial or
judgment until a party defendant who actually or legally exists and is legally capable of being sued, is
brought before it. It has even been held that the question of the legal personality of a party defendant is a
question of substance going to the jurisdiction of the court and not one of procedure.
The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving spouse
Ms. Sulpicia Ventura" as the defendant.1âwphi1 Petitioner moved to dismiss the same on the ground that
the defendant as named in the complaint had no legal personality. We agree.
x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent, a
decedent does not have the capacity to be sued and may not be named a party defendant in a court
action. (Emphases supplied.)
Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by law, the
complaint may be dismissed on the ground that the pleading asserting the claim states no cause of
action or for failure to state a cause of action pursuant to Section 1(g) of Rule 16 of the Rules of Court,
because a complaint cannot possibly state a cause of action against one who cannot be a party to a civil
action.55
Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is the
dismissal of the case as against him, thus did the trial court err when it ordered the substitution of Manuel
by his heirs. Substitution is proper only where the party to be substituted died during the pendency of the
case, as expressly provided for by Section 16, Rule 3 of the Rules of Court, which states:
Death of party;duty of counsel. – Whenever a party to a pending action dies, and the claim is not thereby
extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death
of the fact thereof, and to give the name and address of his legal representative or representatives. x x x
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator x x x.
The court shall forthwith order said legal representative or representatives to appear and be substituted
within a period of thirty (30) days from notice. (Emphasis supplied.)
Here, since Manuel was already dead at the time of the filing of the complaint, the court never acquired
jurisdiction over his person and, in effect, there was no party to be substituted.
WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the Resolution
dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586 are REVERSED and SET ASIDE.
The Orders of the Regional Trial Court dated 8 November 2004 and 22 December 2004, respectively, in
Civil Case No. 97-86672, are REINSTATED. The Regional Trial Court, Branch 24, Manila is hereby
DIRECTED to proceed with the trial of Civil Case No. 97-86672 against respondent Lolita G. Toledo only,
in accordance with the above pronouncements of the Court, and to decide the case with dispatch.
SO ORDERED.
G.R. No. 166519 March 31, 2009
NIEVES PLASABAS and MARCOS MALAZARTE, Petitioners,
vs.
COURT OF APPEALS (Special Former Ninth Division), DOMINADOR LUMEN, and AURORA
AUNZO,Respondents.
Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court are the May 12, 2004
Decision1of the Court of Appeals (CA) in CA-G.R. CV No. 43085 and the December 1, 2004
Resolution2 denying reconsideration of the challenged decision.
The pertinent facts and proceedings follow.
In 1974, petitioners3 filed a complaint for recovery of title to property with damages before the Court of
First Instance (now, Regional Trial Court [RTC]) of Maasin, Southern Leyte against respondents. The
case was docketed as Civil Case No. R-1949. The property subject of the case was a parcel of coconut
land in Canturing, Maasin, Southern Leyte, declared under Tax Declaration No. 3587 in the name of
petitioner Nieves with an area of 2.6360 hectares. 4In their complaint, petitioners prayed that judgment be
rendered confirming their rights and legal title to the subject property and ordering the defendants to
vacate the occupied portion and to pay damages. 5
Respondents, for their part, denied petitioners’ allegation of ownership and possession of the premises,
and interposed, as their main defense, that the subject land was inherited by all the parties from their
common ancestor, Francisco Plasabas.6
Revealed in the course of the trial was that petitioner Nieves, contrary to her allegations in the complaint,
was not the sole and absolute owner of the land. Based on the testimonies of petitioners’ witnesses, the
property passed on from Francisco to his son, Leoncio; then to Jovita Talam, petitioner Nieves’
grandmother; then to Antonina Talam, her mother; and then to her and her siblings—Jose, Victor and
Victoria.7
After resting their case, respondents raised in their memorandum the argument that the case should
have been terminated at inception for petitioners’ failure to implead indispensable parties, the other co-
owners – Jose, Victor and Victoria.
In its April 19, 1993 Order, 8 the trial court, without ruling on the merits, dismissed the case without
prejudice, thus:
This Court, much as it wants to decide the instant case on the merits, being one of the old inherited
cases left behind, finds difficulty if not impossibility of doing so at this stage of the proceedings when both
parties have already rested their cases. Reluctantly, it agrees with the defendants in the observation that
some important indispensable consideration is conspicuously wanting or missing.
It is not the Court’s wish to turn its back on the crucial part of the case, which is the pronouncement of the
judgment to settle the issues raised in the pleadings of the parties once and for all, after all the time, effort
and expense spent in going through the trial process.
But, rules are rules. They have to be followed, to arrive at a fair and just verdict. Section 7, Rule 3 of the
Rules of Court provides:
"x x x 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."
What the Court wants to say here is that the instant case should have been dismissed without prejudice a
long time ago for lack of cause of action as the plaintiffs spouses Marcos Malazarte and Nieves Plasabas
Malazarte have no complete legal personality to sue by themselves alone without joining the brothers
and sisters of Nieves who are as INDISPENSABLE as the latter in the final determination of the case.
Not impleading them, any judgment would have no effectiveness.
They are that indispensable that a final decree would necessarily affect their rights, so that the Court
cannot proceed without their presence. There are abundant authorities in this regard. Thus –
"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. (People, et al. v. Rodriguez, et al., G.R. Nos. L-14059-62, September 30, 1959) (sic)
"Parties in interest without whom no final determination can be had of an action shall be joined either as
plaintiffs or defendants. (Sec. 7, Rule 3, Rules of Court). The burden of procuring the presence of all
indispensable parties is on the plaintiff. (39 Amjur [sic] 885). The evident purpose of the rule is to prevent
the multiplicity of suits by requiring the person arresting a right against the defendant to include with him,
either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that the whole
matter in dispute may be determined once and for all in one litigation. (Palarca v. Baginsi, 38 Phil. 177,
178).
"An indispensable party is a party who has such an interest in the controversy or subject matter that a
final adjudication cannot be made, in his absence, without inquiring or affecting such interest; a party who
has not only an interest of such a nature that a final decree cannot be made without affecting his interest
or leaving the controversy in such a condition that its final determination may be wholly inconsistent with
equity and good conscience. (67 C.J.S. 892). Indispensable parties are those without whom no action
can be finally determined." (Sanidad v. Cabataje, 5 Phil. 204)
WHEREFORE, IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, both the complaint and the
counterclaim in the instant case are ordered DISMISSED without prejudice. No pronouncement as to
costs.
SO ORDERED.9
Aggrieved, petitioners elevated the case to the CA. In the challenged May 12, 2004 Decision, 10 the
appellate court affirmed the ruling of the trial court. The CA, further, declared that the non-joinder of the
indispensable parties would violate the principle of due process, and that Article 487 of the Civil Code
could not be applied considering that the complaint was not for ejectment, but for recovery of title or a
reivindicatory action.11
With their motion for reconsideration denied in the further assailed December 1, 2004
Resolution,12 petitioners filed the instant petition.
The Court grants the petition and remands the case to the trial court for disposition on the merits.
Article 487 of the Civil Code provides that any one of the co-owners may bring an action for
ejectment.1avvphi1.zw+ The article covers all kinds of actions for the recovery of possession, including
an accion publiciana and a reivindicatory action. A co-owner may file suit without necessarily joining all
the other co-owners as co-plaintiffs because the suit is deemed to be instituted for the benefit of all. Any
judgment of the court in favor of the plaintiff will benefit the other co-owners, but if the judgment is
adverse, the same cannot prejudice the rights of the unimpleaded co-owners. 13
With this disquisition, there is no need to determine whether petitioners’ complaint is one for ejectment or
for recovery of title. To repeat, Article 487 of the Civil Code applies to both actions.
Thus, petitioners, in their complaint, do not have to implead their co-owners as parties. The only
exception to this rule is when the action is for the benefit of the plaintiff alone who claims to be the sole
owner and is, thus, entitled to the possession thereof. In such a case, the action will not prosper unless
the plaintiff impleads the other co-owners who are indispensable parties. 14
Here, the allegation of petitioners in their complaint that they are the sole owners of the property in
litigation is immaterial, considering that they acknowledged during the trial that the property is co-owned
by Nieves and her siblings, and that petitioners have been authorized by the co-owners to pursue the
case on the latter’s behalf.15Impleading the other co-owners is, therefore, not mandatory, because, as
mentioned earlier, the suit is deemed to be instituted for the benefit of all.
In any event, the trial and appellate courts committed reversible error when they summarily dismissed the
case, after both parties had rested their cases following a protracted trial commencing in 1974, on the
sole ground of failure to implead indispensable parties. The rule is settled that the non-joinder of
indispensable parties is not a ground for the dismissal of an action. The remedy is to implead the non-
party claimed to be indispensable. Parties may be added by order of the court on motion of the party or
on its own initiative at any stage of the action and/or at such times as are just. If petitioner refuses to
implead an indispensable party despite the order of the court, the latter may dismiss the
complaint/petition for the plaintiff’s/petitioner's failure to comply therewith. 16
WHEREFORE, premises considered, the instant petition is GRANTED, and the case is REMANDED to
the trial court for appropriate proceedings. The trial court is further DIRECTED to decide on the merits of
the civil case WITH DISPATCH.
SO ORDERED.
G.R. No. 183059 August 28, 2009
ELY QUILATAN & ROSVIDA QUILATAN-ELIAS, Petitioners,
vs.
HEIRS OF LORENZO QUILATAN, namely NENITA QUILATAN-YUMPING, LIBRADA QUILATAN-SAN
PEDRO, FLORENDA QUILATAN-ESTEBRAN and GODOFREDO QUILATAN and the MUNICIPAL
ASSESSOR OF TAGUIG, METRO MANILA (now TAGUIG CITY), Respondents.
The issue for resolution is whether the Court of Appeals correctly reversed the decision of the Regional
Trial Court (RTC) of Pasig City, Branch 266, and ordered the dismissal without prejudice of Civil Case No.
67367 on the ground of failure to implead all the indispensable parties to the case.
On August 15, 1999, petitioners Ely Quilatan and Rosvida Quilatan-Elias filed Civil Case No. 67367 for
nullification of Tax Declaration Nos. D-014-00330 and D-014-00204 and Partition of the Estate of the late
Pedro Quilatan with damages against respondent heirs of Lorenzo Quilatan. They claim that during his
lifetime, Pedro Quilatan owned two parcels of land covered by Tax Declaration Nos. 1680 and 2301, both
located in Taguig, Metro Manila; that sometime in 1998, 1 they discovered that said tax declarations were
cancelled without their knowledge and new ones were issued, to wit: Tax Declaration No. D-014-00204
and D-014-00330, under the names of Spouses Lorenzo Quilatan and Anita Lizertiquez as owners
thereof.2
On June 22, 2004, the trial court rendered its decision declaring as void the cancellation of Tax
Declaration Nos. 1680 and 2301. At the same time, it ordered the partition of the subject properties into
three equal shares among the heirs of Francisco, Ciriaco and Lorenzo, all surnamed Quilatan.
On appeal, the Court of Appeals reversed without prejudice the decision of the trial court on the ground
that petitioners failed to implead other co-heirs who are indispensable parties to the case. Thus, the
judgment of the trial court was null and void for want of jurisdiction. 3 Petitioners filed a motion for
reconsideration4 but it was denied.
Hence, this petition for review where petitioners argue that the issue of failure to implead indispensable
parties was a mere afterthought because respondents did not raise the same in their Answer to the
complaint, but only for the first time in their Motion for Reconsideration of the June 22, 2004 decision of
the trial court.5 Petitioners further argue that the order of dismissal without prejudice and the re-filing of
the case in order to implead the heirs of Ciriaco only invite multiplicity of suits since the second action
would be a repetition of the first action, where the judgment therein rightly partitioned the subject
properties into three equal shares, apportioning each share to the heirs of the children of Pedro
Quilatan.6
The petition lacks merit.
Records show that Pedro Quilatan died intestate in 1960 and was survived by his three children, namely,
Ciriaco, Francisco and Lorenzo, all of whom are now deceased. Ciriaco was survived by his children,
namely Purita Santos, Rosita Reyes, Renato Quilatan, Danilo Quilatan, and Carlito Quilatan; Francisco
was survived by herein petitioners and their two other siblings, Solita Trapsi and Rolando Quilatan; while
Lorenzo was survived by his children, herein respondents.
In the complaint filed by petitioners before the trial court, they failed to implead their two siblings, Solita
and Rolando, and all the heirs of Ciriaco, as co-plaintiffs or as defendants. It is clear that the central
thrust of the complaint filed in Civil Case No. 67367 was to revert the subject properties back to the
estate of Pedro Quilatan, thereby making all his heirs pro indiviso co-owners thereof, and to partition
them equally among themselves; and that all the co-heirs and persons having an interest in the subject
properties are indispensable parties to an action for partition, which will not lie without the joinder of said
parties.
Respondents could not be blamed if they did not raise this issue in their Answer because in an action for
partition of real estate, it is the plaintiff who is mandated by the Rules to implead all the indispensable
parties, considering that the absence of one such 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.71avvphi1
Thus, the Court of Appeals correctly applied Section 1, Rule 69 and Section 7, Rule 3 of the Rules of
Court, which read:
SECTION 1. Complaint in action for partition of real estate. — A person having the right to compel the
partition of real estate may do so as in this rule prescribed, setting forth in his complaint the nature and
extent of his title and an adequate description of the real estate of which partition is demanded and
joining as defendants all the other persons interested in the property. (Emphasis supplied)
SECTION 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.
In Moldes v. Villanueva,8 the Court held that:
An indispensable party is one who has such an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest. A party who has
not only an interest in the subject matter of the controversy, but also has an interest of such nature that a
final decree cannot be made without affecting his interest or leaving the controversy in such a condition
that its final determination may be wholly inconsistent with equity and good conscience. He is a person in
whose absence there cannot be a determination between the parties already before the court which is
effective, complete, or equitable. In Commissioner Andrea D. Domingo v. Herbert Markus Emil Scheer,
the Court held that the joinder of indispensable parties is mandatory. Without the presence of
indispensable parties to the suit, the judgment of the court cannot attain real finality. Strangers to a case
are not bound by the judgment rendered by the court. The absence of an indispensable party renders all
subsequent actions of the court null and void, with no authority to act not only as to the absent party but
also as to those present. The responsibility of impleading all the indispensable parties rests on the
petitioner/plaintiff.
Likewise, in Metropolitan Bank and Trust Company v. Hon. Floro T. Alejo, the Court ruled that the evident
aim and intent of the Rules regarding the joinder of indispensable and necessary parties is a complete
determination of all possible issues, not only between the parties themselves but also as regards to other
persons who may be affected by the judgment. A valid judgment cannot even be rendered where there is
want of indispensable parties.
On the issue of multiplicity of suits, the Court of Appeals correctly ordered the dismissal of Civil Case No.
67367 without prejudice for want of jurisdiction. The dismissal could have been avoided had petitioners,
instead of merely stating in their complaint the unimpleaded indispensable parties, joined them as parties
to the case in order to have a complete and final determination of the action. As aptly observed by the
appellate court:
Indeed, a perusal of the records will show that plaintiffs-appellees did not implead their other co-heirs,
either as plaintiffs or defendants in the case. Their complaint squarely stated that Pedro Quilatan had
three children, namely, Ciriaco Quilatan, Francisco Quilatan, and Lorenzo Quilatan, who are now all
deceased. Ciriaco Quilatan is survived by his children, namely, Purita Santos, Rosita Reyes, Renato
Quilatan, Danilo Quilatan, and Carlito Quilatan. Defendants-appellants are the children of Lorenzo
Quilatan. The plaintiffs-appellees, along with Solita Trapsi and Rolando Quilatan, are the children of
Francisco Quilatan. However, Purita Santos, Rosita Reyes, Renato Quilatan, Danilo Quilatan, Carlito
Quilatan, Solita Trapsi, and Rolando Quilatan were not joined as parties in the instant case. 9
The rationale for treating all the co-owners of a property as indispensable parties in a suit involving the
co-owned property is explained in Arcelona v. Court of Appeals: 10
As held by the Supreme Court, were the courts to permit an action in ejectment to be maintained by a
person having merely an undivided interest in any given tract of land, a judgment in favor of the
defendants would not be conclusive as against the other co-owners not parties to the suit, and thus the
defendant in possession of the property might be harassed by as many succeeding actions of ejectment,
as there might be co-owners of the title asserted against him. The purpose of this provision was to
prevent multiplicity of suits by requiring the person asserting a right against the defendant to include with
him, either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that the
whole matter in dispute may be determined once and for all in one litigation.
In fine, 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. Hence, the trial
court should have ordered the dismissal of the complaint.
WHEREFORE, the Petition for Review on Certiorari is hereby DENIED. The Decision of the Court of
Appeals dated March 17, 2008 in CA-G.R. CV No. 88851 which reversed the decision of the Regional
Trial Court of Pasig City, Branch 266, for want of jurisdiction for failure to implead all indispensable
parties is AFFIRMED. The case is REMANDED to the trial court which is hereby DIRECTED to implead
all indispensable parties.
SO ORDERED.
G.R. No. 141970 September 10, 2001
METROPOLITAN BANK, & TRUST COMPANY, petitioner,
vs.
Hon. FLORO T. ALEJO, in His Capacity as Presiding Judge of Branch 172 of the Regional Trial
Court of Valenzuela; and SY TAN SE, represented by his Attorney-in-Fact, SIAN SUAT
NGO, respondents.
PANGANIBAN, J.:
In a suit to nullify an existing Torrens Certificate of Title (TCT) in which a real estate mortgage is
annotated, the mortgagee is an indispensable party. In such suit, a decision canceling the TCT and the
mortgage annotation is subject to a petition for annulment of judgment, because the non-joinder of the
mortgagee deprived the court of jurisdiction to pass upon the controversy.
The Case
Before this Court is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court, assailing the
March 25, 1999 Resolution of the Court of Appeals (CA) in CA-GR SP No. 50638, which states in full:
"This resolves the petition for annulment of judgment based on ‘external (sic) fraud’ filed by
petitioner Metropolitan Bank and Trust Company seeking to annul the Decision dated August
12, 1998 rendered by respondent judge, Honorable Floro T. Alejo, Presiding Judge of the
Regional Trial Court, Branch 172, Valenzuela, Metro Manila, in Civil Case No. 4930-V-96
entitled ‘Sy Tan Se, represented by his attorney-in-fact Sian Suat Ngo v. Raul Acampado, et
al.
"This Court has observed that petitioner knew of the questioned Decision sometime [i]n
October 1998 (Petition, Rollo, p. 3). This being the case, petitioner should have first sought
recourse by way of petition for relief from judgment under Rule 38 of the 1997 Rules of Civil
Procedure. Accordingly, the petition for annulment of judgment is DENIED DUE COURSE
and DISMISSED outright for being insufficient in form and substance (Section 2, Rule 47,
1997 Rules of Civil Procedure)."
Also challenged is the January 27, 2000 CA Resolution 2 denying petitioner’s Motion for Reconsideration.
The Facts
On November 21, 19953 and January 30, 1996,4 Spouses Raul and Cristina Acampado obtained loans
from petitioner in the amounts of P5,000,000 and P2,000,000, respectively. As security for the payment of
these credit accommodations, the Acampados executed in favor of petitioner a Real Estate
Mortgage5 and an Amendment of Real Estate Mortgage 6 over a parcel of land registered in their names.
The land was covered by TCT No. V-41319 in the Registry of Deeds of Valenzuela City, where the
contracts were also registered on November 20, 1995 and January 23, 1996, respectively. 7
On June 3, 1996, a Complaint for Declaration of Nullity of TCT No. V-41319 was filed by Respondent Sy
Tan Se against Spouses Acampado. In the Regional Trial Court (RTC) of Valenzuela, Branch 172, it was
docketed as Civil Case No. 4930-V-96,8 the progenitor of the present controversy.
Despite being the registered mortgagee of the real property covered by the title sought to be annulled,
petitioner was not made a party to Civil Case No. 4930-V-96, 9 nor was she notified of its existence.
Because the spouses defaulted in the payment of their loan, extrajudicial foreclosure proceedings over
the mortgaged property were initiated on April 19, 1997.
On June 17, 1997, the sheriff of Valenzuela conducted an auction sale of the property, during which
petitioner submitted the highest and winning bid.10 On July 15, 1997, a Certificate of Sale was issued in
its favor.11 This sale was entered in the Registry of Deeds of Valenzuela on July 28, 1997.
When the redemption period lapsed exactly a year after, on July 28, 1998, petitioner executed an Affidavit
of Consolidation of Ownership to enable the Registry of Deeds of Valenzuela to issue a new TCT in its
name.
Upon presentation to the Register of Deeds of the Affidavit of Consolidation of Ownership, petitioner was
informed of the existence of the August 12, 1998 RTC Decision in Civil Case No. 4930-V-96, annulling
TCT No. V-41319. The dispositive portion of the Decision 12 stated:
"WHEREFORE, judgment is hereby rendered declaring as null and void Transfer Certificate
of Title No.V-41319 in the name of defendant Raul Acampado for having proceeded from an
illegitimate source. With costs against the defendant.
SO ORDERED."
On January 27, 1999, petitioner filed with the Court of Appeals a Petition for Annulment of the RTC
Decision.
Ruling of the Court of Appeals
For being insufficient in form and substance, the Petition for Annulment was outrightly dismissed by the
CA. It ruled that petitioner ought to have filed, instead, a petition for relief from judgment or an action for
quieting of title.
Hence, this Petition.13
Issues
In its Memorandum, petitioner presents the following issues:
"I
x x x [W]hether or not a petition for annulment of judgment under Rule 47 of the 1997 Rules
of Civil Procedure is the proper remedy available to petitioner under the circumstances."
"II
x x x [W]hether or not the judgment of the trial court in Civil Case No. 4930-V-96 should be
annulled."14
The Court’s Ruling
The Petition is meritorious.
First Issue:
Proper Remedy
Respondents aver that a petition for annulment is not proper, because there were three different
remedies available but they were not resorted to by petitioner.
We are not persuaded. First, a petition for relief, the remedy pointed to by the Court of Appeals, was not
available to petitioner. Section 1, Rule 38 of the Rules of Court, states:
"Petition for relief from judgment, order, or other proceedings.-When a judgment or final order
is entered, or any other proceeding is thereafter taken against a party in any court through
fraud, accident, mistake, or excusable negligence, he may file a petition in such court and in
the same case praying that the judgment, order or proceeding be set aside." (Italics supplied)
It must be emphasized that petitioner was never a party to Civil Case No. 4930-V-96. In Lagula et al. v.
Casimiro et al.,15 the Court held that -- relative to a motion for relief on the ground of fraud, accident,
mistake, or excusable negligence -- Rule 38 of the Rules of Court "only applies when the one deprived of
his right is a party to the case." Since petitioner was never a party to the case or even summoned to
appear therein, then the remedy of relief from judgment under Rule 38 of the Rules of Court was not
proper. This is plainly provided in the italicized words of the present provision just quoted.
Second, in denying petitioner’s Motion for Reconsideration of the Decision dismissing the Petition for
Annulment of Judgment, the Court of Appeals reasoned that another remedy, an action for quieting of
title, was also available to petitioner.
We do not agree. It should be stressed that this case was instituted to ask for relief from the peremptory
declaration of nullity of TCT No. V-41319, which had been issued without first giving petitioner an
opportunity to be heard. Petitioner focused on the judgment in Civil Case No. 4930-V-96 which adversely
affected it, and which it therefore sought to annul. Filing an action for quieting of title will not remedy what
it perceived as a disregard of due process; it is therefore not an appropriate remedy.
Equally important, an action for quieting of title is filed only when there is a cloud on title to real property
or any interest therein. As defined, a "cloud on title is a semblance of title which appears in some legal
form but which is in fact unfounded."16 In this case, the subject judgment cannot be considered as a cloud
on petitioner’s title or interest over the real property covered by TCT No. V-41319, which does not even
have a semblance of being a title.
It would not be proper to consider the subject judgment as a cloud that would warrant the filing of an
action for quieting of title, because to do so would require the court hearing the action to modify or
interfere with the judgment or order of another co-equal court. Well-entrenched in our jurisdiction is the
doctrine that a court has no power to do so, as that action may lead to confusion and seriously hinder the
administration of justice.17 Clearly, an action for quieting of title is not an appropriate remedy in this case.
Third, private respondent cites a last remedy: the intervention by petitioner in Civil Case No. 4930-V-96.
The availability of this remedy hinges on petitioner’s knowledge of the pendency of that case, which
would have otherwise been alerted to the need to intervene therein. Though presumed by private
respondent, any such knowledge prior to October 1998 is, however, emphatically denied by petitioner.
The Petition for Annulment before the Court of Appeals precisely alleged that private respondent
purposely concealed the case by excluding petitioner as a defendant in Civil Case No. 4930-V-96, even if
the latter was an indispensable party. Without due process of law, the former intended to deprive
petitioner of the latter’s duly registered property right. Indeed, the execution of the Decision in Civil Case
No. 4930-V-96 necessarily entailed its enforcement against petitioner, even though it was not a party to
that case. Hence, the latter concludes that annulment of judgment was the only effective remedy open to
it.
The allegation of extrinsic fraud, if fully substantiated by a preponderance of evidence, may be the basis
for annulling a judgment.18 The resort to annulment becomes proper because of such allegation, coupled
with the unavailability of the other remedies pointed to by respondents.
Second Issue:
Lack of Jurisdiction
It is undisputed that the property covered by TCT No. V-41319 was mortgaged to petitioner, and that the
mortgage was annotated on TCT No. V-41319 before the institution of Civil Case No. 4930-V-96. It is also
undisputed that all subsequent proceedings pertaining to the foreclosure of the mortgage were entered in
the Registry of Deeds. The nullification and cancellation of TCT No. V-41319 carried with it the
nullification and cancellation of the mortgage annotation.
Although a mortgage affects the land itself and not merely the TCT covering it, the cancellation of the
TCT and the mortgage annotation exposed petitioner to real prejudice, because its rights over the
mortgaged property would no longer be known and respected by third parties. Necessarily, therefore, the
nullification of TCT No. V-41319 adversely affected its property rights, considering that a real mortgage is
a real right and a real property by itself. 19
Evidently, petitioner is encompassed within the definition of an indispensable party; thus, it should have
been impleaded as a defendant in Civil Case No. 4930-V-96.
"An indispensable party is a party who has such an interest in the controversy or subject
matter that a final adjudication cannot be made, in his absence, without injuring or affecting
that interest[;] a party who has not only an interest in the subject matter of the controversy,
but also has an interest of such nature that a final decree cannot be made without affecting
his interest or leaving the controversy in such a condition that its final determination may be
wholly inconsistent with equity and good conscience. It has also been considered that an
indispensable party is a person in whose absence there cannot be a determination between
the parties already before the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before it may properly go
forward.
"A person is not an indispensable party, however, if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be
directly or injuriously affected by a decree which does complete justice between them." 20
The joinder of indispensable parties to an action is mandated by Section 7, Rule 3 of the Revised Rules
of Civil Procedures, which we quote:
"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."
Aside from the above provision, jurisprudence requires such joinder, as the following excerpts indicate:
"Indispensable parties must always be joined either as plaintiffs or defendants, for the court
cannot proceed without them. x x x. 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." 21
"x x x. Without the precence of indispensable parties to a suit or proceeding, a judgment of a
Court cannot attain real finality." 22
"Whenever it appears to the court in the course of a proceeding that an indispensable party
has not been joined, it is the duty of the court to stop the trial and to order the inclusion of
such party. (The Revised Rules of Court, Annotated & Commented by Senator Vicente J.
Francisco, Vol. I, p. 271, 1973 ed., See also Cortez vs. Avila, 101 Phil. 705.) Such an order is
unavoidable, for the ‘general rule with reference to the making of parties in a civil action
requires the joinder of all necessary parties wherever possible, and the joinder of all
indispensable parties under any and all conditions, the presence of those latter parties being
a sine qua non of the exercise of judicial power.’ (Borlasa vs. Polistico, 47 Phil. 345, at p.
347.) It is precisely ‘when an indispensable party is not before the court (that) the action
should be dismissed.’ (People vs. Rodriguez, 106 Phil. 325. at p. 327.) The absence of an
indispensable party renders all subsequent actuations 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." 23(emphasis
supplied)
"The evident aim and intent of the Rules regarding the joinder of indispensable and
necessary parties is a complete determination of all possible issues, not only between the
parties themselves but also as regards to other persons who may be affected by the
judgment. A valid judgment cannot even be rendered where there is want of indispensable
parties."24
From the above, it is clear that the presence of indispensable parties is necessary to vest the court with
jurisdiction, which is "the authority to hear and determine a cause, the right to act in a case." 25 We stress
that the absence of indispensable parties renders all subsequent actuations of the court null and void,
because of that court’s want of authority to act, not only as to the absent parties but even as to those
present.
It is argued that petitioner cannot possibly be an indispensable party, since the mortgage may not even
be valid because of the possible absence of compliance with the requirement 26 that the mortgagor be the
absolute owner of the thing mortgaged. It should be emphasized, however, that at the time the mortgage
was constituted, there was an existing TCT (No. V-41319), which named the mortgagors, the Acampado
spouses, as the registered owners of the property. In Seno v. Mangubat27 this Court held as follows:
"The well-known rule in this jurisdiction is that a person dealing with a registered land has a
right to rely upon the face of the Torrens Certificate of Title and to dispense with the need of
inquiring further, except when the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry.
xxx xxx xxx
"Thus, where innocent third persons relying on the correctness of the certificate of title issued,
acquire rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate for that would impair public confidence in the certificate of title;
otherwise everyone dealing with property registered under the Torrens system would have to
inquire in every instance as to whether the title ha[s] been regularly or irregularly issued by
the court. Indeed this is contrary to the evident purpose of the law."
The peremptory disregard of the annotations registered and entered in TCT No. V-41319 constituted a
deprivation of private property without due process of law and was therefore unquestionably unjust and
iniquitous. This, we cannot countenance.
Clearly, it was the trial court’s duty to order petitioner’s inclusion as a party to Civil Case No. 4930-V-96.
This was not done. Neither the court nor private respondents bothered to implead petitioner as a party to
the case. In the absence of petitioner, an indispensable party, the trial court had no authority to act on the
case. Its judgment therein was null and void due to lack of jurisdiction over an indispensable party.
In Leonor v. Court of Appeals28 and Arcelona v. Court of Appeals,29 we held thus:
"A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any
right nor the creator of any obligation. All acts performed pursuant to it and all claims
emanating from it have no legal effect. Hence, it can never become final and any writ of
execution based on it is void:"x x x it may be said to be a lawless thing which can be treated
as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head."
WHEREFORE, the Petition is GRANTED and the assailed Resolutions of the Court of Appeals
are REVERSED. The Decision of the Regional Trial Court in Civil Case No. 4930-V-41319 is
hereby NULLIFIED and SET ASIDE. No costs.
SO ORDERED.
G.R. No. 189486 September 5, 2012
SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and the HEIRS OF THE LATE GRACE G.
CHEU,Petitioners,
vs.
GILBERT G. GUY, Respondent.
x-----------------------x
G.R. No. 189699
SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and the HEIRS OF THE LATE GRACE G.
CHEU,Petitioners,
vs.
THE HON. OFELIA C. CALO, in her capacity as Presiding Judge of the RTC -Mandaluyong City -
Branch 211 and GILBERT G. GUY, Respondents.
With 519,997 shares of stock as reflected in Stock Certificate Nos. 004-014, herein respondent Gilbert G.
Guy (Gilbert) practically owned almost 80 percent of the 650,000 subscribed capital stock of GoodGold
Realty & Development Corporation (GoodGold), 1 one of the multi-million corporations which Gilbert
claimed to have established in his 30s. GoodGold’s remaining shares were divided among Francisco Guy
(Francisco) with 130,000 shares, Simny Guy (Simny), Benjamin Lim and Paulino Delfin Pe, with one
share each, respectively. Gilbert is the son of spouses Francisco and Simny. Simny, one of the
petitioners, however, alleged that it was she and her husband who established GoodGold, putting the
bulk of its shares under Gilbert’s name. She claimed that with their eldest son, Gaspar G. Guy (Gaspar),
having entered the Focolare Missionary in 1970s, renouncing worldly possessions, 2 she and Francisco
put the future of the Guy group of companies in Gilbert’s hands. Gilbert was expected to bring to new
heights their family multi-million businesses and they, his parents, had high hopes in him.
Simny further claimed that upon the advice of their lawyers, upon the incorporation of GoodGold, they
issued stock certificates reflecting the shares held by each stockholder duly signed by Francisco as
President and Atty. Emmanuel Paras as Corporate Secretary, with corresponding blank endorsements at
the back of each certificate – including Stock Certificate Nos. 004-014 under Gilbert’s name. 3 These
certificates were all with Gilbert’s irrevocable endorsement and power of attorney to have these stocks
transferred in the books of corporation. 4 All of these certificates were always in the undisturbed
possession of the spouses Francisco and Simny, including Stock Certificate Nos. 004-014. 5
In 1999, the aging Francisco instructed Benjamin Lim, a nominal shareholder of GoodGold and his
trusted employee, to collaborate with Atty. Emmanuel Paras, to redistribute GoodGold’s shareholdings
evenly among his children, namely, Gilbert, Grace Guy-Cheu (Grace), Geraldine Guy (Geraldine), and
Gladys Guy (Gladys), while maintaining a proportionate share for himself and his wife, Simny. 6
Accordingly, some of GoodGold’s certificates were cancelled and new ones were issued to represent the
redistribution of GoodGold’s shares of stock. The new certificates of stock were signed by Francisco and
Atty. Emmanuel Paras, as President and Corporate Secretary, respectively.
The shares of stock were distributed among the following stockholders:
NAME NO. OF SHARES
Francisco Guy [husband] 195,000
Simny G. Guy [wife] 195,000
Gilbert G. Guy [son] 65,000
Geraldine G. Guy [daughter] 65,000
Grace G.Cheu (or her heirs) [daughter] 65,000
Gladys G.Yao [daughter] 65,000
Total 650,0007
In September 2004, or five years after the redistribution of GoodGold’s shares of stock, Gilbert filed with
the Regional Trial Court (RTC) of Manila, a Complaint for the "Declaration of Nullity of Transfers of
Shares in GoodGold and of General Information Sheets and Minutes of Meeting, and for Damages with
Application for a Preliminary Injunctive Relief," against his mother, Simny, and his sisters, Geraldine,
Grace, and Gladys.8 Gilbert alleged, among others, that no stock certificate ever existed; 9 that his
signature at the back of the spurious Stock Certificate Nos. 004-014 which purportedly endorsed the
same and that of the corporate secretary, Emmanuel Paras, at the obverse side of the certificates were
forged, and, hence, should be nullified. 10
Gilbert, however, withdrew the complaint, after the National Bureau of Investigation (NBI) submitted a
report to the RTC of Manila authenticating Gilbert’s signature in the endorsed certificates. 11 The NBI
report stated:
FINDINGS:
Comparative analysis of the specimens submitted under magnification using
varied lighting process and with the aid of photographic enlargements disclosed
the presence of significant and fundamental similarities in the personal
handwriting habits existing between the questioned signatures of "GILBERT G.
GUY" and "EMMANUEL C. PARAS," on one hand, and their corresponding
standard specimen/exemplar signatures, on the other hand, such as in:
- Basic design of letters/elements;
- Manner of execution/line quality;
- Minute identifying details.
CONCLUSION:
A. The questioned and the standard specimen/exemplar signatures of Gilbert G.
Guy were written by one and the same person;
B. The questioned and the standard specimen/exemplar signatures of
"EMMANUEL C. PARAS" were written by one and the same person. (Emphasis
supplied)12
The present controversy arose, when in 2008, three years after the complaint with the RTC of Manila was
withdrawn, Gilbert again filed a complaint, this time, with the RTC of Mandaluyong, captioned as "Intra-
Corporate Controversy: For the Declaration of Nullity of Fraudulent Transfers of Shares of Stock
Certificates, Fabricated Stock Certificates, Falsified General Information Sheets, Minutes of Meetings,
and Damages with Application for the Issuance of a Writ of Preliminary and Mandatory Injunction,"
docketed as SEC-MC08-112, against his mother, Simny, his sisters, Geraldine, Gladys, and the heirs of
his late sister Grace.13
Gilbert alleged that he never signed any document which would justify and support the transfer of his
shares to his siblings and that he has in no way, disposed, alienated, encumbered, assigned or sold any
or part of his shares in GoodGold.14 He also denied the existence of the certificates of stocks. According
to him, "there were no certificates of stocks under his name for the shares of stock subscribed by him
were never issued nor delivered to him from the time of the inception of the corporation." 15
Gilbert added that the Amended General Information Sheets (GIS) of GoodGold for the years 2000 to
2004 which his siblings submitted to the Securities and Exchange Commission (SEC) were spurious as
these did not reflect his true shares in the corporation which supposedly totaled to 595,000 shares; 16 that
no valid stockholders’ annual meeting for the year 2004 was held, hence proceedings taken thereon,
including the election of corporate officers were null and void; 17 and, that his siblings are foreign citizens,
thus, cannot own more than forty percent of the authorized capital stock of the corporation. 18
Gilbert also asked in his complaint for the issuance of a Writ of Preliminary and Mandatory Injunction to
protect his rights.19
In an Order dated 30 June 2008, 20 the RTC denied Gilbert’s Motion for Injunctive Relief21 which
constrained him to file a motion for reconsideration, and, thereafter, a Motion for Inhibition against Judge
Edwin Sorongon, praying that the latter recuse himself from further taking part in the case.
Meanwhile, Gilbert’s siblings filed a manifestation claiming that the complaint is a nuisance and
harassment suit under Section 1(b), Rule 1 of the Interim Rules of Procedure on Intra-Corporate
Controversies.
In an Order dated 6 November 2008,22 the RTC denied the motion for inhibition. The RTC also dismissed
the case, declaring it a nuisance and harassment suit, viz.:
WHEREFORE, the court resolves:
(1) To DENY as it is hereby DENIED respondent’s Motion for Inhibition;
(2) To DENY as it is hereby DENIED respondent’s Motion for Reconsideration of the June 30, 2008
Order; and,
(3) To declare as it is herby declared the instant case as a nuisance or harassment suit. Accordingly,
pursuant to Section 1(b), Rule 1 of the Interim Rules of Procedure for Intra-Corporate Dispute, the instant
case is hereby DISMISSED. No pronouncement as to costs. 23
This constrained Gilbert to assail the above Order before the Court of Appeals (CA). The petition for
review was docketed as CA-G.R. SP No. 106405.
In a Decision24 dated 27 May 2009, the CA upheld Judge Sorongon’s refusal to inhibit from hearing the
case on the ground that Gilbert failed to substantiate his allegation of Judge Sorongon’s partiality and
bias.25
The CA, in the same decision, also denied Gilbert’s Petition for the Issuance of Writ of Preliminary
Injunction for failure to establish a clear and unmistakable right that was violated as required under
Section 3, rule 58 of the 1997 Rules of Civil Procedure. 26
The CA, however, found merit on Gilbert’s contention that the complaint should be heard on the merits. It
held that:
A reading of the Order, supra, dismissing the respondent’s complaint for being a harassment suit
revealed that the court a quo relied heavily on the pieces of documentary evidence presented by the
Petitioners to negate Respondent’s allegation of fraudulent transfer of shares of stock, fabrication of stock
certificates and falsification of General Information Sheets (GIS), inter alia. It bears emphasis that the
Respondent is even questioning the genuiness and authenticity of the Petitioner’s documentary
evidence. To our mind, only a full-blown trial on the merits can afford the determination of the
genuineness and authenticity of the documentary evidence and other factual issues which will ultimately
resolve whether there was indeed a transfer of shares of stock. 27
Hence, these consolidated petitions.
G.R. No. 189486 is a Petition for Review under Rule 45 of the Rules of Court filed by Simny, Geraldine,
Gladys, and the heirs of the late Grace against Gilbert, which prays that this Court declare Civil Case No.
SEC-MC08-112, a harassment or nuisance suit.
Meanwhile, during the pendency of G.R. No. 189486, the trial court set the pre-trial conference on the
case subject of this controversy, constraining the petitioners to file a Motion to defer the pre-trial, which
was, however, denied by the court a quo in an Order dated 11 September 2009, 28 viz.:
In a Resolution dated September 3, 2009, the Honorable Court of Appeals (CA) (Former Second
Division) denied the Motion for Partial Reconsideration filed [by petitioners] herein. Inasmuch as there is
no longer any impediment to proceed with the instant case and the fact that this court was specifically
directed by the May 27, 2009 Decision of the CA Second Division to proceed with the trial on the merits
with dispatch, this court resolves to deny the motion under consideration.
WHEREFORE, premises considered, the Motion to Defer Pre-Trial Conference and Further Proceedings
filed by petitioners is hereby DENIED. Set the pre-trial on October 20, 2009, at 8:30 in the morning.
The denial of the petitioners’ motion to defer pre-trial, compelled them to file with this Court a Petition for
Certiorari with Urgent Application for the Issuance of TRO and/or A Writ of Preliminary Injunction,
docketed as G.R. No. 189699. Because of the pendency of the G.R. No. 189486 before us, the
petitioners deemed proper to question the said denial before us as an incident arising from the main
controversy.29
OUR RULING
Suits by stockholders or members of a corporation based on wrongful or fraudulent acts of directors or
other persons may be classified into individual suits, class suits, and derivative suits. 30
An individual suit may be instituted by a stockholder against another stockholder for wrongs committed
against him personally, and to determine their individual rights 31 – this is an individual suit between
stockholders. But an individual suit may also be instituted against a corporation, the same having a
separate juridical personality, which by its own may be sued. It is of course, essential that the suing
stockholder has a cause of action against the corporation. 32
Individual suits against another stockholder or against a corporation are remedies which an aggrieved
stockholder may avail of and which are recognized in our jurisdiction as embedded in the Interim Rules
on Intra-Corporate Controversy. Together with this right is the parallel obligation of a party to comply with
the compulsory joinder of indispensable parties whether they may be stockholders or the corporation
itself.
The absence of an indispensable
party in a case 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.33
It bears emphasis that this controversy started with Gilbert’s complaint filed with the RTC of Mandaluyong
City in his capacity as stockholder, director and Vice-President of GoodGold. 34
Gilbert’s complaint essentially prayed for the return of his original 519,997 shares in GoodGold, by
praying that the court declare that "there were no valid transfers of the contested shares to defendants
and Francisco."35 It baffles this Court, however, that Gilbert omitted Francisco as defendant in his
complaint. While Gilbert could have opted to waive his shares in the name of Francisco to justify the
latter’s non-inclusion in the complaint, Gilbert did not do so, but instead, wanted everything back and
even wanted the whole transfer of shares declared fraudulent. This cannot be done, without including
Francisco as defendant in the original case. The transfer of the shares cannot be, as Gilbert wanted,
declared entirely fraudulent without including those of Francisco who owns almost a third of the total
number.
Francisco, in both the 2004 and 2008 complaints, is an indispensable party without whom no final
determination can be had for the following reasons: (a) the complaint prays that the shares now under
the name of the defendants and Francisco be declared fraudulent; (b) Francisco owns 195,000 shares
some of which, Gilbert prays be returned to him; (c) Francisco signed the certificates of stocks evidencing
the alleged fraudulent shares previously in the name of Gilbert. The inclusion of the shares of Francisco
in the complaint makes Francisco an indispensable party. Moreover, the pronouncement about the
shares of Francisco would impact on the hereditary rights of the contesting parties or on the conjugal
properties of the spouses to the effect that Francisco, being husband of Simny and father of the other
contesting parties, must be included for, otherwise, in his absence, there cannot be a determination
between the parties already before the court which is effective, complete, or equitable.
The definition in the Rules of Court, Section 7, Rule 3 thereof, of indispensable parties as "parties in
interest without whom no final determination can be had of an action" has been jurisprudentially
amplified. In Sps. Garcia v. Garcia, et.al., 36 this Court held that:
An indispensable party is a party who has such an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has
not only an interest in the subject matter of the controversy, but also has an interest of such nature that a
final decree cannot be made without affecting his interest or leaving the controversy in such a condition
that its final determination may be wholly inconsistent with equity and good conscience. It has also been
considered that an indispensable party is a person in whose absence there cannot be a determination
between the parties already before the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before it may properly go forward.
This was our pronouncements in Servicewide Specialists Inc. v. CA, 37 Arcelona v. CA,38 and Casals v.
Tayud Golf and Country Club, Inc.39
Settled is the rule that joinder of indispensable parties is compulsory 40 being a sine qua non for the
exercise of judicial power,41 and, it is precisely "when an indispensable party is not before the court that
the action should be dismissed" for such absence 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. 42
It bears emphasis that Gilbert, while suing as a stockholder against his co-stockholders, should have also
impleaded GoodGold as defendant. His complaint also prayed for the annulment of the 2004
stockholders’ annual meeting, the annulment of the 2004 election of the board of directors and of its
officers, the annulment of 2004 GIS submitted to the SEC, issuance of an order for the accounting of all
monies and rentals of GoodGold, and the issuance of a writ of preliminary and mandatory injunction. We
have made clear that GoodGold is a separate juridical entity distinct from its stockholders and from its
directors and officers. The trial court, acting as a special commercial court, cannot settle the issues with
finality without impleading GoodGold as defendant. Like Francisco, and for the same reasons, GoodGold
is an indispensable party which Gilbert should have impleaded as defendant in his complaint.
Allegations of deceit, machination,
false pretenses, misrepresentation,
and threats are largely conclusions
of law that, without supporting
statements of the facts to which the
allegations of fraud refer, do not
sufficiently state an effective cause of
action.43
"In all averments of fraud or mistake, the circumstances constituting fraud or mistake must be stated with
particularity"44 to "appraise the other party of what he is to be called on to answer, and so that it may be
determined whether the facts and circumstances alleged amount to fraud." 45 These particulars would
necessarily include the time, place and specific acts of fraud committed. 46 "The reason for this rule is that
an allegation of fraud concerns the morality of the defendant’s conduct and he is entitled to know fully the
ground on which the allegations are made, so he may have every opportunity to prepare his case to clear
himself at the trial."47
The complaint of Gilbert states:
13. The said spurious Amended GIS for the years 2000, 2001, 2002, 2003, 2004 and also in another
falsified GIS for the year 2004, the petitioners indicated the following alleged stockholders of
GOODGOLD with their respective shareholdings, to wit:

NAME NO. OF SHARES
Francisco Guy Co Chia 195,000
Simny G. Guy 195,000
Gilbert G. Guy 65,000
Geraldine G. Guy 65,000
Grace G.-Cheu 65,000
Gladys G.Yao 65,000
Total 650,000
14. The above spurious GIS would show that form the original 519,997 shares of stocks owned by the
respondent, which is equivalent to almost 80% of the total subscriptions and/or the outstanding capital
stock of GOODGOLD, respondent’s subscription was drastically reduced to only 65,000 shares of stocks
which is merely equivalent to only 10 percent of the outstanding capital stock of the corporation.
15. Based on the spurious GIS, shares pertaining to Benjamin Lim and Paulino Delfin Pe were omitted
and the total corporate shares originally owned by incorporators including herein respondent have been
fraudulently transferred and distributed, as follows: x x x (Emphasis supplied)
xxxx
18. To date, respondent is completely unaware of any documents signed by him that would justify and
support the foregoing transfer of his shares to the defendants. Respondent strongly affirms that he has
not in any way, up to this date of filing the instant complaint, disposed, alienated, encumbered, assigned
or sold any or part of the shares of stocks of GOODGOLD corporation owned by him and registered
under his name under the books of the corporation.
19. Neither has respondent endorsed, signed, assigned any certificates of stock representing the tangible
evidence of his stocks ownership, there being no certificates of stocks issued by the corporation nor
delivered to him since its inception on June 6, 1988. Considering that the corporation is merely a family
corporation, plaintiff does not find the issuance of stock certificates necessary to protect his corporate
interest and he did not even demand for its issuance despite the fact that he was the sole subscriber who
actually paid his subscription at the time of incorporation. 48
Tested against established standards, we find that the charges of fraud which Gilbert accuses his siblings
are not supported by the required factual allegations. In Reyes v. RTC of Makati, 49 which we now
reiterate, mutatis mutandis, while the complaint contained allegations of fraud purportedly committed by
his siblings, these allegations are not particular enough to bring the controversy within the special
commercial court’s jurisdiction; they are not statements of ultimate facts, but are mere conclusions of law:
how and why the alleged transfer of shares can be characterized as "fraudulent" were not explained and
elaborated on.50 As emphasized in Reyes:
Not every allegation of fraud done in a corporate setting or perpetrated by corporate officers will bring the
case within the special commercial court’s jurisdiction. To fall within this jurisdiction, there must be
sufficient nexus showing that the corporation’s nature, structure, or powers were used to facilitate the
fraudulent device or scheme.51 (Emphasis supplied)
Significantly, no corporate power or office was alleged to have facilitated the transfer of Gilbert’s shares.
How the petitioners perpetrated the fraud, if ever they did, is an indispensable allegation which Gilbert
must have had alleged with particularity in his complaint, but which he failed to.
Failure to specifically allege the
fraudulent acts in intra-corporate
controversies is indicative of a
harassment or nuisance suit and may
be dismissed motu proprio.
In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute a ground for
dismissal since such a defect can be cured by a bill of particulars. 52 Thus:
Failure to allege fraud or mistake with as much particularity as is desirable is not fatal if the general
purport of the claim or defense is clear, since all pleadings should be so construed as to do substantial
justice. Doubt as to the meaning of the pleading may be resolved by seeking a bill of particulars.
A bill of particulars may be ordered as to a defense of fraud or mistake if the circumstances constituting
fraud or mistake are not stated with the particularity required by the rule. 53
The above-stated rule, however, does not apply to intra-corporate controversies. In Reyes, 54 we
pronounced that "in cases governed by the Interim Rules of Procedure on Intra-Corporate Controversies
a bill of particulars is a prohibited pleading. It is essential, therefore, for the complaint to show on its face
what are claimed to be the fraudulent corporate acts if the complainant wishes to invoke the court’s
special commercial jurisdiction." This is because fraud in intra-corporate controversies must be based on
"devises and schemes employed by, or any act of, the board of directors, business associates, officers or
partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, or members of any corporation, partnership, or association," as
stated under Rule 1, Section 1 (a)(1) of the Interim Rules. The act of fraud or misrepresentation
complained of becomes a criterion in determining whether the complaint on its face has merits, or within
the jurisdiction of special commercial court, or merely a nuisance suit.
It did not escape us that Gilbert, instead of particularly describing the fraudulent acts that he complained
of, just made a sweeping denial of the existence of stock certificates by claiming that such were not
necessary, GoodGold being a mere family corporation. 55 As sweeping and bereft of particulars is his claim
that he "is unaware of any document signed by him that would justify and support the transfer of his
shares to herein petitioners."56 Even more telling is the contradiction between the denial of the existence
of stock certificates and the denial of the transfer of his shares of stocks "under his name under the
books of the corporations."
It is unexplained that while Gilbert questioned the authenticity of his signatures indorsing the stock
certificates, and that of Atty. Emmanuel Paras, the corporate secretary, he did not put in issue as doubtful
the signature of his father which also appeared in the certificate as President of the corporation. Notably,
Gilbert, during the entire controversy that started with his 2004 complaint, failed to rebut the NBI Report
which authenticated all the signatures appearing in the stock certificates.
Even beyond the vacant pleadings, its nature as nuisance is palpable. To recapitulate, it was only after
five years following the redistribution of GoodGold’s shares of stock, that Gilbert filed with the RTC of
Manila, a Complaint for the "Declaration of Nullity of Transfers of Shares in GoodGold and of General
Information Sheets and Minutes of Meeting, and for Damages with Application for a Preliminary Injunctive
Relief," against his mother, Simny, and his sisters, Geraldine, Grace, and Gladys. 57 Gilbert alleged,
among others, that no stock certificate ever existed;58 that his signature at the back of the spurious Stock
Certificate Nos. 004-014 which purportedly endorsed the same and that of the corporate secretary,
Emmanuel Paras, at the obverse side of the certificates were forged, and, hence, should be
nullified.59 Gilbert withdrew this complaint after the NBI submitted a report to the RTC of Manila
authenticating Gilbert’s signature in the endorsed certificates. And, it was only after three years from the
withdrawal of the Manila complaint, that Gilbert again filed in 2008 a complaint also for declaration of
nullity of the transfer of the shares of stock, this time with the RTC of Mandaluyong. The caption of the
complaint is "Intra-Corporate Controversy: For the Declaration of Nullity of Fraudulent Transfers of
Shares of Stock Certificates, Fabricated Stock Certificates, Falsified General Information Sheets, Minutes
of Meetings, and Damages with Application for the Issuance of a Writ of Preliminary and Mandatory
Injunction," docketed as SEC-MC08-112, against his mother, Simny, his sisters, Geraldine, Gladys, and
the heirs of his late sister Grace.60 1âwphi1
When a stock certificate is endorsed
in blank by the owner thereof, it
constitutes what is termed as "street
certificate," so that upon its face, the
holder is entitled to demand its
transfer his name from the issuing
corporation.
With Gilbert’s failure to allege specific acts of fraud in his complaint and his failure to rebut the NBI report,
this Court pronounces, as a consequence thereof, that the signatures appearing on the stock certificates,
including his blank endorsement thereon were authentic. With the stock certificates having been
endorsed in blank by Gilbert, which he himself delivered to his parents, the same can be cancelled and
transferred in the names of herein petitioners.
In Santamaria v. Hongkong and Shanghai Banking Corp., 61 this Court held that when a stock certificate is
endorsed in blank by the owner thereof, it constitutes what is termed as "street certificate," so that upon
its face, the holder is entitled to demand its transfer into his name from the issuing corporation. Such
certificate is deemed quasi-negotiable, and as such the transferee thereof is justified in believing that it
belongs to the holder and transferor.1âwphi1
While there is a contrary ruling, as an exception to the general rule enunciated above, what the Court
held in Neugene Marketing Inc., et al., v CA,62 where stock certificates endorsed in blank were stolen from
the possession of the beneficial owners thereof constraining this Court to declare the transfer void for
lack of delivery and want of value, the same cannot apply to Gilbert because the stock certificates which
Gilbert endorsed in blank were in the undisturbed possession of his parents who were the beneficial
owners thereof and who themselves as such owners caused the transfer in their names. Indeed, even if
Gilbert’s parents were not the beneficial owners, an endorsement in blank of the stock certificates
coupled with its delivery, entitles the holder thereof to demand the transfer of said stock certificates in his
name from the issuing corporation. 63
Interestingly, Gilbert also used the above discussed reasons as his arguments in Gilbert Guy v. Court of
Appeals, et a.l,64 a case earlier decided by this Court. In that petition, Lincoln Continental, a corporation
purportedly owned by Gilbert, filed with the RTC, Branch 24, Manila, a Complaint for Annulment of the
Transfer of Shares of Stock against Gilbert’s siblings, including his mother, Simny. The complaint
basically alleged that Lincoln Continental owns 20,160 shares of stock of Northern Islands; and that
Gilbert’s siblings, in order to oust him from the management of Northern Islands, falsely transferred the
said shares of stock in his sisters’ names.65 This Court dismissed Gilbert’s petition and ruled in favor of his
siblings viz:
One thing is clear. It was established before the trial court, affirmed by the Court of Appeals, that Lincoln
Continental held the disputed shares of stock of Northern Islands merely in trust for the Guy sisters. In
fact, the evidence proffered by Lincoln Continental itself supports this conclusion. It bears emphasis that
this factual finding by the trial court was affirmed by the Court of Appeals, being supported by evidence,
and is, therefore, final and conclusive upon this Court.
Article 1440 of the Civil Code provides that:
"ART. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as
regards property for the benefit of another person is known as the trustee; and the person for whose
benefit the trust has been created is referred to as the beneficiary."
In the early case of Gayondato v. Treasurer of the Philippine Islands, this Court defines trust, in its
technical sense, as "a right of property, real or personal, held by one party for the benefit of another."
Differently stated, a trust is "a fiduciary relationship with respect to property, subjecting the person holding
the same to the obligation of dealing with the property for the benefit of another person."
Both Lincoln Continental and Gilbert claim that the latter holds legal title to the shares in question. But
record shows that there is no evidence to support their claim. Rather, the evidence on record clearly
indicates that the stock certificates representing the contested shares are in respondents' possession.
Significantly, there is no proof to support his allegation that the transfer of the shares of stock to
respondent sisters is fraudulent. As aptly held by the Court of Appeals, fraud is never presumed but must
be established by clear and convincing evidence. Gilbert failed to discharge this burden. We agree with
the Court of Appeals that respondent sisters own the shares of stocks, Gilbert being their mere
trustee. 66 (Underlining supplied).
This Court finds no cogent reason to divert from the above stated ruling, these two cases having similar
facts.
WHEREFORE, premises considered, the petitions in G.R. Nos. 189486 and 189699 are
hereby GRANTED. The Decision dated 27 May 2009 of the Court of Appeals in CA-G .R. SP No. 106405
and its Resolution dated 03 September 2009 are REVERSED and SET ASIDE. The
Court DECLARES that SEC-MC08-112 now pending before the Regional Trial Court, Branch 211,
Mandaluyong City, is a nuisance suit and hereby ORDERS it to IMMEDIATELY DISMISS the same for
reasons discussed herein.
SO ORDERED.
G.R. No. 169276 June 16, 2009
DIONISIA MONIS LAGUNILLA and RAFAEL MONIS, Petitioners,
vs.
ANDREA MONIS VELASCO and MACARIA MONIS, Respondents.
For review is the Court of Appeals (CA) Decision1 dated July 13, 2005 in CA-G.R. CV No. 56998 affirming
with modification the Regional Trial Court (RTC) Decision 2 dated April 24, 1997 in Civil Case No. 466 for
Annulment of Documents and Damages.
The facts, as culled from the records, are as follows:
Rev. Fr. Patricio (Patricio), Magdalena Catalina (Magdalena), Venancio, and respondent Macaria, all
surnamed Monis, as well as respondent Andrea Monis - Velasco (Andrea), are siblings. Venancio is the
father of petitioners Dionisia Monis Lagunilla and Rafael Monis. During their lifetime, Patricio and
Magdalena acquired several properties which included several parcels of land in the province of La Union
and another one situated in Quezon City, with an area of 208.35 sq. m. (otherwise known as the Quezon
City property).3 The Quezon City property was co-owned by Patricio and Magdalena, together with
Andrea and Pedro Velasco.
After the death of Patricio and Magdalena, or on February 24, 1993, Andrea and Macaria (to the
exclusion of Venancio’s children) executed a Deed of Extrajudicial Settlement with Donation 4 (hereinafter
referred to as the subject Deed) involving the Quezon City property, and donated the same to Andrea’s
son, Pedro Monis Velasco, Jr. (Pedro). By virtue of said Deed, Transfer Certificate of Title (TCT) No. RT-
60455 (190472)5 was cancelled and a new one (TCT No. 85837) was issued in the name of Pedro. 6
On June 1, 1993, petitioners instituted an action for Annulment of Documents and Damages 7 before the
Regional Trial Court (RTC) of Balaoan, La Union against respondents. The case was raffled to Branch 34
and was docketed as Civil Case No. 466. In their complaint, petitioners sought the annulment of the
subject Deed, allegedly because of the fraudulent act committed by respondents in executing the same.
They claimed that respondents misrepresented that they were the only surviving heirs of Patricio and
Magdalena when, in fact, they (petitioners) were also surviving heirs by virtue of their right to represent
their deceased father Venancio. In short, being Patricio and Magdalena’s nephew and niece, they were
asserting their rights, as co-heirs, to the Quezon City property. Respondents’ fraudulent act was,
according to petitioners, a ground for the annulment of the subject Deed. As a consequence of the nullity
of the extrajudicial settlement, they further sought the cancellation of the title and tax declarations issued
pursuant thereto, in the name of Pedro.
Respondents countered that nowhere in the subject Deed did they assert to be the only surviving heirs of
Patricio and Magdalena. Admittedly, however, they claimed to be the only legitimate sisters of the
deceased. They added that annulment of the Deed was not tenable, considering that petitioners already
received advances on their share of the properties of the decedent; besides, there were other properties
that had not been the subject of partition from which they could obtain reparation, if they are so entitled.
Contrary to petitioners’ claim, respondents insisted that there was no way that the subject Deed could be
annulled in the absence of any valid ground to rely on. 8
No amicable settlement was reached during the pre-trial; thus, trial on the merits ensued.
After petitioners rested their case, they moved for the amendment of the complaint to implead additional
party and to conform to the evidence presented. 9 Petitioners averred that the resolution of the case would
affect the interest of Pedro as donee; hence, he is an indispensable party. The RTC, however, denied the
motion, as the amendment of the complaint would result in the introduction of a different cause of action
prejudicial to respondents. The court further held that the amendment of the complaint would unduly
delay the resolution of the case.
On April 24, 1997, the RTC decided in favor of respondents, disposing, as follows:
WHEREFORE, taken in the above light, the Court hereby orders the case DISMISSED and further orders
the plaintiffs to pay the defendants jointly and severally the following, thus:
1) ₱100,000.00 as moral damages;
2) ₱50,000.00 as exemplary damages;
3) ₱100,000.00 as attorney’s fees; and
4) To pay the costs of this suit.
SO ORDERED.10
Applying Article 887 of the Civil Code, the RTC ruled that petitioners are not compulsory heirs; thus, they
could not invoke bad faith as a ground to rescind the subject Deed. As to respondents’ declaration that
they were the only surviving heirs of the decedents, the trial court said that it was, in a way, a non-
recognition of petitioners’ claim that they, too, are heirs. The court, likewise, gave credence to
respondents’ claim that petitioners had previously received advances on their share of the inheritance. As
to the remedy of rescission, the court declared that it was not available in the instant case because of the
existence of other remedies that may be availed of by petitioners, considering that there were other
properties from which they could obtain reparation, assuming they are entitled. 11
On appeal to the Court of Appeals, the appellate court affirmed with modification the trial court’s decision,
viz.:
WHEREFORE, premises considered, the assailed decision dated April 24, 1997 of the Regional Trial
Court of Balao[a]n, La Union in Civil Case No. 466 is hereby AFFIRMED with MODIFICATION, in that the
award of exemplary damages and attorney’s fees is deleted. No pronouncement as to costs.
SO ORDERED.12
The appellate court made a definitive conclusion that petitioners, together with respondents, are heirs of
Macaria and Patricio. However, considering that petitioners are not compulsory heirs, it agreed with the
RTC that they could not use "bad faith" as a ground to rescind the contract as provided for in Article 1104
of the New Civil Code. The appellate court also agreed with the trial court that bad faith on the part of
respondents was wanting. While recognizing the doctrine that the subject Deed was not binding on
petitioners because they did not participate therein, the appellate court refused to annul the contract on
the basis thereof, in view of the existence of other properties previously received by petitioners and those
that may still be the subject of partition. The court further denied the prayer to annul the donation made in
favor of Pedro, inasmuch as it was belatedly raised by petitioners. 13 The appellate court likewise found
the deletion of the award of exemplary damages and attorney’s fees proper. 141awphi1
Unsatisfied, petitioners come to this Court in this petition for review on certiorari raising the following
issues:
I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AND MANIFESTLY OVERLOOKED RELEVANT FACTS NOT DISPUTED AND WHICH IF PROPERLY
CONSIDERED WOULD JUSTIFY A DIFFERENT CONCLUSION THAT THERE IS FRAUD OR BAD
FAITH ON THE PART OF DEFENDANTS-APPELLEES IN EXCLUDING PLAINTIFFS-APPELLANTS
FROM THE DEED OF EXTRA JUDICIAL SETTLEMENT WITH DONATION.
II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT "THE MERE ACT OF REPUDIATING THE INTEREST OF A CO-OWNER IS NOT
SUFFICIENT TO SUPPORT A FINDING OF BAD FAITH SINCE NO BAD FAITH CAN BE ATTRIBUTED
TO A PERSON WHO ONLY EXERCISES A PRIVILEGE GRANTED BY LAW."
III. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT THERE IS ABSENCE OF FRAUD OR BAD FAITH ON THE PART OF
DEFENDANTS-APPELLEES IN EXCLUDING PLAINTIFFS-APPELLANTS IN THE EXTRA JUDICIAL
SETTLEMENT BASED ON AN INFERENCE THAT IS MANIFESTLY MISTAKEN THAT PLAINTIFFS-
APPELLANTS HAVE ALREADY OBTAINED THEIR ADVANCE OF INHERITANCE FROM THE
DECEDENTS.
IV. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW
AND GRAVE ABUSE OF DISCRETION IN CONCLUDING THAT THE ASSAILED EXTRAJUDICIAL
SETTLEMENT CANNOT BE ANNULLED SINCE THE MISREPRESENTATION IS NOT SO GRAVE IN
CHARACTER AS TO AMOUNT TO BAD FAITH (AND) RULE 74, SECTION 1, SECOND PARAGRAPH,
DOES NOT DISCOUNT THE POSSIBILITY THAT SOME HEIRS MAY HAVE BEEN EXCLUDED IN THE
EXECUTION OF THE EXTRAJUDICIAL SETTLEMENT.
V. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION TANTAMOUNT TO AN ERROR OF LAW IN CONCLUDING THAT THE DEED OF
EXTRAJUDICIAL SETTLEMENT WITH DONATION CANNOT BE ANNULLED.
VI. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
AWARDING MORAL DAMAGES DESPITE FINDING THAT THE SUIT WAS MADE IN GOOD FAITH.
VII. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT THAT THE MOTION TO AMEND
COMPLAINT TO IMPLEAD ADDITIONAL PARTY AND TO CONFORM TO THE EVIDENCE
PRESENTED FILED BY THE PLAINTIFFS-APPELLANTS IS NOT PROPER. 15
In fine, petitioners challenge the appellate court’s conclusions on the validity of the extrajudicial
settlement with donation and the denial of the motion to amend the complaint to implead an
indispensable party and conform to the evidence presented.
Much as we would like to make a definitive conclusion on the respective rights of all the parties and
decide, once and for all, their interests over the subject property, we are barred by a jurisdictional issue.
Jurisdiction is the power invested in courts for administering justice, that is, to hear and decide cases. For
the court to exercise the authority to dispose of the case on the merits, it must acquire jurisdiction over
the subject matter and the parties. 16
Courts acquire jurisdiction over a party plaintiff upon the filing of the complaint. On the other hand,
jurisdiction over the person of a party defendant is assured upon the service of summons in the manner
required by law or, otherwise, by his voluntary appearance. As a rule, if a defendant has not been
summoned, the court acquires no jurisdiction over his person, and a personal judgment rendered against
such defendant is null and void. A decision that is null and void for want of jurisdiction of the trial court is
not a decision in contemplation of law and can never become final and executory. 17
Corollary to the issue of jurisdiction, and equally important, is the mandatory rule on joinder of
indispensable parties set forth in 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.
The general rule with reference to parties to a civil action requires the joinder of all necessary parties,
where possible, and the joinder of all indispensable parties under any and all conditions. 18 The evident
intent of the Rules on the joinder of indispensable and necessary 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.19
In this case, petitioners challenge the denial of their motion to amend the complaint to implead Pedro
who, they claim, is an indispensable party to the case. We are, therefore, compelled to address this
important question.
In Regner v. Logarta20 and Arcelona v. CA,21 we laid down the test to determine if a party is an
indispensable party, viz.:
An indispensable party is a party who has an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has
not only an interest in the subject matter of the controversy, but also has an interest of such nature that a
final decree cannot be made without affecting his interest or leaving the controversy in such a condition
that its final determination may be wholly inconsistent with equity and good conscience. It has also been
considered that an indispensable party is a person in whose absence there cannot be a determination
between the parties already before the court which is effective, complete or equitable. Further, an
indispensable party is one who must be included in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. Also, a person is not an indispensable
party if his presence would merely permit complete relief between him and those already parties to the
action, or if he has no interest in the subject matter of the action. It is not a sufficient reason to declare a
person to be an indispensable party that his presence will avoid multiple litigation. 22
In upholding the denial of the motion to amend the complaint, the appellate court concluded that the sole
desire of petitioners in instituting the case was the annulment of the extrajudicial settlement. Effectively, it
separated the question of the validity of the extrajudicial settlement from the validity of the donation.
Accordingly, the court said, the latter issue could be threshed out in a separate proceeding later. This
explains why Pedro was not considered an indispensable party by the trial and appellate courts.1avvphi1
We beg to differ.
Even without having to scrutinize the records, a mere reading of the assailed decision readily reveals that
Pedro is an indispensable party. At the time of the filing of the complaint, the title to the Quezon City
property was already registered in the name of Pedro, after TCT No. 60455 (190472) in the names of
Pedro Velasco, Andrea, Magdalena and Patricio Monis was cancelled, pursuant to the extrajudicial
settlement with donation executed by respondents. The central thrust of the complaint was that
respondents, by themselves, could not have transferred the Quezon City property to Pedro because
petitioners, as heirs of Patricio and Magdalena, also have rights over it. Accordingly, petitioners
specifically prayed that the extrajudicial settlement with donation be annulled and the transfer certificate
of title and tax declarations (in the name of Pedro) issued pursuant thereto be canceled. The pertinent
portion of the complaint is quoted for easy reference:
WHEREFORE, in view of the foregoing, it is respectfully prayed that judgment be rendered as follows –
1. By ordering the annulment of Annex "A" hereof as well as the cancellation of transfer certificate of title
and tax declarations issued pursuant thereto. 23
If such prayer and thrust were to be denied (as held by the trial and appellate courts), the problem would
be less obvious, as the status quo would be maintained. However, if they were to be upheld, Pedro’s title
to the property would undoubtedly be directly and injuriously affected. Even if we only resolve the validity
of the extrajudicial settlement, there would be no final adjudication of the case without involving Pedro’s
interest.
Verily, Pedro’s interest in the subject matter of the suit and in the relief sought are so inextricably
intertwined with that of the other parties. His legal presence as a party to the proceedings is, therefore,
an absolute necessity. 24 His interest in the controversy and in the subject matter is not separable from the
interest of the other parties.
It is unfortunate that petitioners failed to implead Pedro as defendant in their complaint. Interestingly,
however, they realized such mistake, albeit belatedly, and thus sought the amendment of the complaint to
join him as a defendant, but the RTC refused to grant the same.
Well-settled is the rule that joinder of indispensable parties is mandatory. 25 It is a condition sine qua non
to the exercise of judicial power.26 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.27 Without the presence of indispensable parties to the suit, the judgment of the court
cannot attain finality.28 One who is not a party to a case is not bound by any decision of the court;
otherwise, he will be deprived of his right to due process. 29That is why the case is generally remanded to
the court of origin for further proceedings.30
In light of these premises, no final ruling can be had on the validity of the extrajudicial settlement. While
we wish to abide by the mandate on speedy disposition of cases, we cannot render a premature
judgment on the merits. To do so could result in a possible violation of due process. The inclusion of
Pedro is necessary for the effective and complete resolution of the case and in order to accord all parties
the benefit of due process and fair play. 31
Nevertheless, as enunciated in Commissioner Domingo v. Scheer, 32 Lotte Phil. Co., Inc. v. Dela
Cruz,33 and PepsiCo, Inc. v. Emerald Pizza, Inc., 34 the non-joinder of indispensable parties is not a
ground for the dismissal of an action. The remedy is to implead the non-party claimed to be
indispensable. Parties may be added by order of the court on motion of the party or on its own initiative at
any stage of the action and/or at such times as are just. If the plaintiff refuses to implead an
indispensable party despite the order of the court, then the court may dismiss the complaint for the
plaintiff’s failure to comply with a lawful court order.
In light of the foregoing, a remand of the case to the trial court is imperative.
WHEREFORE, the Decision of the Court of Appeals dated July 13, 2005 in CA-G.R. CV No. 56998 is
SET ASIDE. Let the case be REMANDED to the Regional Trial Court for the inclusion of Pedro Velasco,
Jr. as an indispensable party, and for further proceedings.
SO ORDERED.
G.R. No. 151900 August 30, 2005
CHRISTINE CHUA, Petitioners,
vs.
JORGE TORRES and ANTONIO BELTRAN, Respondents.
The Court settles an issue, heretofore undecided, on whether the absence of the signature in the
required verification and certification against forum-shopping of a party misjoined as a plaintiff is a valid
ground for the dismissal of the complaint. We rule in the negative.
The relevant facts in this Petition for Review are culled from the records.
On 24 October 2001, a complaint for damages was lodged before the Regional Trial Court (RTC) of
Caloocan City, Branch 126.1 The complaint was filed by Christine Chua, herein petitioner, impleading her
brother Jonathan Chua as a necessary co-plaintiff. Named as defendants in the suit were herein
respondents Jorge Torres and Antonio Beltran. Torres was the owner of the 9th Avenue Caltex Service
Center (Caltex Service Center), while Beltran was an employee of the said establishment as the head of
its Sales and Collection Division.2
The complaint alleged that on 3 April 2000, Jonathan Chua issued in favor of the Caltex Service Center
his personal Rizal Commercial Banking Corporation (RCBC) Check No. 0412802 in the amount of Nine
Thousand Eight Hundred Forty Nine Pesos and Twenty Centavos (₱9,849.20) in payment for purchases
of diesel oil. However, the check was dishonored by the drawee bank when presented for payment on the
ground that the account was closed. Beltran then sent petitioner a demand letter informing her of the
dishonor of the check and demanding the payment thereof. Petitioner ignored the demand letter on the
ground that she was not the one who issued the said check.
Without bothering to ascertain who had actually issued the check, Beltran instituted against petitioner a
criminal action for violation of Batas Pambansa Bilang 22 (B.P. 22). Subsequently, a criminal information
was filed against petitioner with the Metropolitan Trial Court (MTC) of Caloocan City, Branch 50. 3 The
MTC then issued a warrant of arrest against petitioner. The police officers tasked with serving the warrant
looked for her in her residence, in the auto repair shop of her brother, and even at the Manila Central
University were she was enrolled as a medical student, all to the alleged embarrassment and "social
humiliation" of petitioner.4
Beltran’s purported negligence amounted to either malicious prosecution or serious defamation in
prosecuting petitioner resulting from the issuance of a check she herself did not draw, and served cause
for a claim of moral damages. On the other hand, Torres, as employer of Beltran, was alleged to have
failed to observe the diligence of a good father of the family to prevent the damage suffered by petitioner.
Exemplary damages and attorney’s fees were likewise sought, thus bringing the
aggregate total of damages claimed to Two Million Pesos (₱2,000,000.00), plus costs of suit. 5
Significantly, while Jonathan Chua was named as a plaintiff to the suit, it was explicitly qualified in the
second paragraph of the complaint that he was being "impleaded here-in as a necessary party-
plaintiff".6 There was no allegation in the complaint of any damage or injury sustained by Jonathan, and
the prayer therein expressly named petitioner as the only party to whom respondents were sought to
recompense.7 Neither did Jonathan Chua sign any verification or certification against forum-shopping,
although petitioner did sign an attestation, wherein she identified herself as "the principal plaintiff". 8
Upon motion of respondents, the RTC ordered the dismissal of the complaint 9 on the ground that
Jonathan Chua had not executed a certification against forum-shopping. The RTC stressed that Section
5, Rule 7 of the Rules of Civil Procedure, the rule requiring the
certification, makes no distinction whether the plaintiff required to execute the certification is a principal
party, a nominal party or a necessary party. Instead, the provision requires that a plaintiff or principal
party who files a complaint or initiatory pleading execute such certification. Jonathan Chua, being a
plaintiff in this case, was obliged to execute or sign such certification. 10 Hence, his failure to do so in
violation of the mandatory rule requiring the certification against forum-shopping constituted valid cause
for the dismissal of the petition. 11
After the RTC denied the motion for reconsideration 12 lodged by petitioner, the matter was elevated
directly to this Court by way of petition for review under Rule 45, raising a purely legal question, 13 cast, if
somewhat unwieldily, as "whether or not a co-plaintiff impleaded only as a necessary party, who however
has no claim for relief or is not asserting any claim for relief in the complaint, should also make a
certification against forum shopping."14
Preliminarily, it bears noting that Jonathan Chua did not sign as well any verification to the complaint,
ostensibly in violation of Section 7, Rule 4 of the Rules of Civil Procedure. The RTC failed to mention
such fact, as does petitioner in her present petition. In their arguments before this Court, respondents do
refer in passing to the verification requirement 15 , but do not place any particular focus thereto. The
verification requirement is separate from the certification requirement. 16 It is noted that as a matter of
practice, the verification is usually accomplished at the same time as the certification against forum-
shopping; hence the customary nomenclature, "Verification and Certification of Non Forum-Shopping" or
its variants. For this reason, it is quite possible that the RTC meant to assail as well the failure of
Jonathan Chua to verify the complaint.
The verification requirement is significant, as it is intended to secure an assurance that the allegations in
the pleading are true and correct and not the product of the imagination or a matter of speculation, and
that the pleading is filed in good faith. 17 The absence of a proper verification is cause to treat the pleading
as unsigned and dismissible.18 It would be as well that the Court discuss whether under the
circumstances, Jonathan Chua is also required to execute a verification in respect to petitioner’s
complaint.
Having established the proper parameters of the petition, we proceed to the core issues. We find the
petition has merit, although we appreciate the situation differently from petitioner. Our decision proceeds
from the fundamental premise that Jonathan Chua was misjoined as a party plaintiff in this case.
It is elementary that it is only in the name of a real party in interest that a civil suit may be
prosecuted.19 Under Section 2, Rule 3 of the Rules of Civil Procedure, 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. "Interest" within the meaning of the rule means material interest, an interest in issue and to be
affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental
interest.20 One having no right or interest to protect cannot invoke the jurisdiction of the court as a party
plaintiff in an action.21 To qualify a person to be a real party in interest in whose name an action must be
prosecuted, he must appear to be the present real owner of the right sought to enforced. 22
The subject complaint does not allege any rights of Jonathan Chua violated by respondents, present any
rights of his to be enforced, or seek in his behalf any rights to the avails of suit. In short, Jonathan claims
nothing, and for nothing, in the subject complaint. If he alone filed the complaint, it would have been
dismissed on the ground that the complaint states no cause of action, instituted as it was by a person
who was not a real party in interest.
But was it proper for petitioner to have even impleaded Jonathan as a co-plaintiff in the first place?
Petitioner alleged in her complaint that Jonathan was a necessary party, and remains consistent to that
claim even before this Court. She however fails to demonstrate how Jonathan can be considered as a
necessary party, other than by noting that he was "the one who really
issued the check in controversy." 23 Such fact, if proven, may establish the malice of respondents in filing
the criminal case against petitioner for violation of B.P. 22, but does not create the need to require
Jonathan’s participation as a necessary party.
Section 8, Rule 7 of the Rules of Civil Procedure defines a necessary party as "one who is not
indispensable but who ought to be joined as a party if complete relief is to be accorded as to those
already parties, or for a complete determination or settlement of the claim subject of the
action."24 Necessary parties are those whose presence is necessary to adjudicate the whole controversy,
but whose interests are so far separable that a final decree can be made in their absence without
affecting them.25
An example of a necessary party may be found in Seno v. Mangubat.26 Petitioner therein sold her
property through a deed of sale to three vendees. Two of the vendees then sold their shares to the third
buyer, who then sold the property to another set of persons. Thereafter, petitioner, who claimed that the
true intent of the first sale was an equitable mortgage, filed a complaint seeking the reformation of the
deed of sale and the annulment of the second sale. The question arose whether the two vendees who
had since disposed of their shares should be considered as indispensable parties or necessary parties.
In concluding that they were only necessary parties, the Court reasoned:
In the present case, there are no rights of defendants Andres Evangelista and Bienvenido Mangubat to
be safeguarded if the sale should be held to be in fact an absolute sale nor if the sale is held to be an
equitable mortgage. Defendant Marcos Mangubat became the absolute owner of the subject property by
virtue of the sale to him of the shares of the aforementioned defendants in the property. Said defendants
no longer have any interest in the subject property. However, being parties to the instrument
sought to be reformed, their presence is necessary in order to settle all the possible issues of the
controversy. Whether the disputed sale be declared an absolute sale or an equitable mortgage, the
rights of all the defendants will have been amply protected. Defendants-spouses Luzame in any event
may enforce their rights against defendant Marcos Mangubat. 27
In Seno, the persons deemed by the Court as necessary parties may have had already disposed of their
interests in the property. However, should the lower court therein grant the prayer for the reformation of
the deed of sale, the ruling will undoubtedly have an effect on such parties, on matters such as the
purchase price which they may have received, and on whatever transmission of rights that may have
occurred between them and the vendor.
In contrast, Jonathan Chua does not stand to be affected should the RTC rule either favorably or
unfavorably of the complaint. This is due to the nature of the cause of action of the complaint, which
alleges an injury personal to petitioner, and the relief prayed for, which is to be adjudicated solely to
petitioner. There is no allegation in the complaint alleging any violation or omission of any right of
Jonathan, either arising from contract or from law.
It may be so that Jonathan may be called to testify by his sister, in order to prove the essential allegation
that she did not issue the check in question, and perhaps such testimony would be vital to petitioner’s
cause of action. But this does not mean that Jonathan should be deemed a necessary party, as such
circumstance would merely place him in the same class as those witnesses whose testimony would be
necessary to prove the allegations of the complaint. But the fact remains that Jonathan would stand
unaffected by the final ruling on the complaint. The judicial confirmation or rejection of the allegations
therein, or grant or denial of the reliefs prayed for will not infringe on or augment any of his rights under
the law. If there would be any effect to Jonathan of the RTC’s ultimate decision on the complaint, it would
be merely emotional, arising from whatever ties of kinship he may retain towards his sister, and no
different from whatever effects that may be similarly sustained on petitioner’s immediate family.
Since we are unconvinced by petitioner’s basic premise that Jonathan was a necessary party, it is
unnecessary to directly settle the issue as couched by petitioner of "whether or not a co-plaintiff
impleaded only as a necessary party, who however has no claim for relief or is not asserting any claim for
relief in the complaint, should also make a certification against forum shopping." 28 We can note, as the
RTC did, that Section 5, Rule 7 of the 1997 Rules of Civil Procedure makes no distinctions that would
expressly exempt a necessary party from executing the certification against forum shopping.
Nonetheless, there are dimensions to the matter, heretofore unraised, that may unsettle a strict
application of the rule, such as if the necessary party is impleaded as a plaintiff or counterclaimant
without his knowledge or against his will.29 But these circumstances relevant to a necessary party are not
present in this case, and thus require no further comment upon for now.
Instead, what the Court may rule upon is whether the absence of the signature of the person misjoined
as a party-plaintiff in either the verification page or certification against forum-shopping is ground for the
dismissal of the action. We rule that it is not so, and that the RTC erred in dismissing the instant
complaint. There is no judicial precedent affirming or rejecting such a view, but we are comfortable with
making such a pronouncement. A misjoined party plaintiff has no business participating in the case as a
plaintiff in the first place, and it would make little sense to require the misjoined party in complying with all
the requirements expected of plaintiffs.
At the same time, Section 11, Rule 3 of the 1997 Rules of Civil Procedure states:
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. 30
Clearly, misjoinder of parties is not fatal to the complaint. The rule prohibits dismissal of a suit on the
ground of non-joinder or misjoinder of parties. 31 Moreover, the dropping of misjoined parties from the
complaint may be done motu proprio by the court, at any stage, without need for a motion to such effect
from the adverse party.32 Section 11, Rule 3 indicates that the misjoinder of parties, while erroneous, may
be corrected with ease through amendment, without further hindrance to the prosecution of the suit.
It should then follow that any act or omission committed by a misjoined party plaintiff should not be cause
for impediment to the prosecution of the case, much less for the dismissal of the suit. After all, such party
should not have been included in the first place, and no efficacy should be accorded to whatever act or
omission of
the party.33 Since the misjoined party plaintiff receives no recognition from the court as either an
indispensable or necessary party-plaintiff, it then follows that whatever action or inaction the misjoined
party may take on the verification or certification against forum-shopping is inconsequential. Hence, it
should not have mattered to the RTC that Jonathan Chua had failed to sign the certification against
forum-shopping, since he was misjoined as a plaintiff in the first place. The fact that Jonathan was
misjoined is clear on the face of the complaint itself, and the error of the RTC in dismissing the complaint
is not obviated by the fact that the adverse party failed to raise this point. After all, the RTC could
have motu proprio dropped Jonathan as a plaintiff, for the reasons above-stated which should have been
evident to it upon examination of the complaint.
There may be a school of thought that would nonetheless find some satisfaction in petitioner’s woes
before the RTC, as it was her error in the first place of wrongfully impleading her brother as a party
plaintiff which ultimately served as cause for the dismissal of the complaint. The blame may in the final
analysis lie with petitioner, yet we should not construe the rules of procedure to quench an unnecessary
thirst to punish at the expense of the intellectual integrity of the rules. For our Rules of Court do not
regard the misjoinder of parties as an error of fatal consequence, and the logical extension of this
principle is to consider those procedural acts or omissions of misjoined parties as of similar import.
WHEREFORE, the Petition is GRANTED. The Orders dated 3 December 2001 and 15 January 2002 of
the Regional Trial Court of Caloocan City, Branch 126, in Civil Case No. C-19863 are SET ASIDE, and
the Complaint in the aforementioned case is REINSTATED. The lower court is enjoined to hear and
decide the case with deliberate dispatch. No pronouncement as to costs.
SO ORDERED.
G.R. No. L-44339 December 2, 1987
CRISANTA F. SENO, CAROLA SENO SANTOS, MANUEL SENO, JR., DIANA SENO CONDER, EMILY
SENO and WALTER SENO, plaintiffs,
vs.
MARCOS MANGUBAT and Spouses FRANCISCO LUZAME and VERGITA PENAFLOR, ANDRES
EVANGELISTA and BIENVENIDO MANGUBAT, defendants.
This is an appeal that was certified to this Court by the Court of Appeals 1 from the order of the Court of
First Instance of Rizal, Branch 1, dated September 29,1972 in Civil Case No. 12205 dismissing the action
for reformation of instrument and annulment of subsequent sale. 2
This case stemmed from a complaint filed by plaintiffs on August 29, 1969 seeking 1) the reformation of a
Deed of Sale executed in favor of defendant Marcos Mangubat and, 2) the annulment of a subsequent
sale to defendant spouses Francisco Luzame and Vergita Penaflor of a parcel of land in Barrio Dongalo,
Paranaque, Rizal covered by OCT No. 1197 of the Land Registry of Rizal.
The material allegations of the complaint so far as they affect the present appeal are to the following
effect: that plaintiff Crisanta Seno, a widow, approached defendant Marcos Mangubat sometime in 1961
to negotiate with him a mortgage over the subject parcel of land so she can pay off a previous
indebtedness; that she had herein defendant agreed on a mortgage for the sum of P15,000.00 with
interest of 2% a month payable every month and that as long as the interest is being paid, the mortgage
over the property will not be foreclosed; that on the assurance of defendant Marcos Mangubat, a
practicing lawyer, that he win respect their true agreement on the mortgage, plaintiff Crisanta F. Seno
agreed to the execution of a Deed of Absolute Sale over the subject property for a consideration of
P5,000.00 in favor of defendant Marcos Mangubat and certain Andres Evangelista and Bienvenido
Mangubat on July 17, 1961; 3 that defendant Marcos Mangubat was able to obtain a title in his name and
the other alleged vendees Andres Evangelista and Bienvenido Mangubat; that on January 8, 1962
Andres Evangelista and Bienvenido Mangubat executed a Deed of Absolute Sale transferring their share
in the subject property to defendant Marcos Mangubat; that defendant Marcos Mangubat was able to
obtain a title over the subject property in his name by virtue of this latter sale; that plaintiff Crisanta F.
Seno continued paying defendant Marcos Mangubat the usurious 2% interest per month; that sometime
in 1963, when plaintiff Crisanta F. Seno failed to pay the monthly interest of 2%, she was sued for
ejectment by defendant Marcos Mangubat alleging non-payment of rentals; that sometime in the later
week of January 1969, plaintiff Crisanta F. Seno learned that defendant Marcos Mangubat sold the
subject property in favor of spouses Francisco Luzame and Vergita Penaflor for the sum of P10,000.00
on January 14, 1969;4 that defendant spouses Francisco Luzame and Vergita Penaflor bought the
property in bad faith since they had knowledge of the circumstances surrounding the transaction between
plaintiff and defendant Marcos Mangubat; that defendant spouses Luzame filed an ejectment case
against plaintiff Crisanta Seno for alleged non-payment of rentals.
On motion of defendant spouses Luzame and Penaflor, the trial court ordered on October 20, 1975 the
inclusion as defendants of Andres Evangelista and Bienvenido Mangubat on the ground that they are
indispensable parties, on December 29, 1971, plaintiffs filed their amended complaint in compliance with
the court's order of October 20, impleading Andres Evangelista and Bienvenido Mangubat as defendants.
The newly impleaded defendants moved for the dismissal of the case against them on the ground of
prescription which motion was granted by the court in its order of July 3, 1972, the dispositive portion of
which reads —
xxx xxx xxx
Considering that under Art. 1144 of the Civil Code of the Philippines, an action
upon a written contract must be brought within 10 years from the time the right of
action accrued, and considering further the opposition of plaintiffs which we find to
be justified and meritorious, this Court resolves to dismiss as it hereby dismisses
the case only as against defendants Andres Evangelista and Bienvenido
Mangubat.
xxx xxx xxx 5
Defendants Luzame and Penaflor in their motion for reconsideration represented by Atty. Jose Manacop
and defendant Marcos Mangubat in his Supplement to motion for reconsideration or in support of Atty.
Manacop's motion for reconsideration asked the court a quo to dismiss the case against all the
defendants. The court a quo in its order of September 27, 1972 reconsidered its order of July 3rd and
dismissed the case against all the defendants holding that the court is no longer in a position to grant
plaintiffs' demands, principally the reformation of subject Deed of Absolute Sale.
The motion for reconsideration filed by the plaintiffs of the foregoing order was denied by the trial court in
its order of January 17, 1973; 6 hence, an appeal was brought before the Court of Appeals praying for the
reversal of the orders of the court a quo dated September 27, 1972 and January 17, 1973 and for the
remand of the case to the court a quo for further proceedings.
The Court of Appeals certified the instant case to this Court holding that the assignment of errors made
by plaintiffs in their appeal raised purely legal questions, to wit —
1) Are defendants Andres Evangelista and Bienvenido Mangubat indispensable
parties in the case without whom no action can be properly taken thereon?
2) If they are such, has the action prescribed against them in view of Art. I 1 44,
Civil Code?
3) If they are not, was the dismissal of said defendants a legal grounds for
dismissal of the complaint as against the other defendants? and
4) Was the dismissal of the case without a hearing on the merits in accordance
with law? 7
The first issue We need to resolve is whether or not defendants Andres Evangelista and Bienvenido
Mangubat are indispensable parties. Plaintiffs contend that said defendants being more dummies of
defendant Marcos Mangubat and therefore not real parties in interest, there is no room for the application
of Sec. 7, Rule 3 of the Revised Rules of Court.
For the determination of this issue, We find it necessary to consider the distinction between indispensable
and proper parties as clearly stated in Sections 7 and 8, Rule 3 of the Revised Rules of Court which
provide:
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.
Sec. 8. Joinder of proper parties. — When persons who are not indispensable but
who ought to be parties if complete relief is to be accorded as between those
already parties, have not been made parties and are subject to the jurisdiction of
the court as to both service of process and venue, the court shall order them
summoned to appear in the action. But the court may, in its discretion, proceed in
the action without making such persons parties, and the judgment rendered
therein shall be without prejudice to the rights of such persons.
Under Section 7, indispensable parties must always be joined either as plaintiffs or defendants, for the
court cannot proceed without them. Necessary parties 8 must be joined, under Section 8, in order to
adjudicate the whole controversy and avoid multiplicity of suits. 9
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. Necessary
parties are those whose presence is necessary to adjudicate the whole controversy, but whose interests
are so far separable that a final decree can be made in their absence without affecting them. 10
Defendants cite Alberto vs. Mananghala 11 to support their theory that defendants Andres Evangelista
and Bienvenido Mangubat are indispensable parties. Thus —
xxx xxx xxx
One of the issues raised by the parties is whether the transactions carried out by
and between Arcadio Ramos and the deceased Vicente Feliciano is a sale with
pacto de retro or simply an equitable mortgage. If it be held that it is an equitable
mortgage, then their right would be defeated and they would be held liable for
warranty and eviction under the law to Casimiro Mananghala This being so, it
would seem clear that the presence of all the heirs of Vicente Feliciano in this
case is indispensable in order that they may protect their interests. They are
entitled to be heard. They may have a valid defense which may have the effect of
defeating the claim of the plaintiffs. This however, was not done, for some of the
 heirs of Vicente Feliciano were not served with summons and consequently have
not entered their appearance. This is in violation of Section 7, Rule 3 of the Rules
of Court.
xxx xxx xxx
We, however, find this case inapplicable to the case at bar.
In the present case, there are no rights of defendants Andres Evangelista and Bienvenido Mangubat to
be safeguarded if the sale should be held to be in fact an absolute sale nor if the sale is held to be an
equitable mortgage. Defendant Marcos Mangubat became the absolute owner of the subject property by
virtue of the sale to him of the shares of the aforementioned defendants in the property. Said defendants
no longer have any interest in the subject property. However, being parties to the instrument sought to be
reformed, their presence is necessary in order to settle all the possible issues of tile controversy. Whether
the disputed sale be declared an absolute sale or an equitable mortgage, the rights of all the defendants
will have been amply protected. Defendants-spouses Luzame in any event may enforce their rights
against defendant Marcos Mangubat.
In fact the plaintiffs were not after defendants Andres Evangelista and Bienvenido Mangubat as shown by
their non-inclusion in the complaint and their opposition to the motion to include said defendants in the
complaint as indispensable parties. It was only because they were ordered by the court a quo that they
included the said defendants in the complaint. The lower court erroneously held that the said defendants
are indispensable parties.
Notwithstanding, defendants Andres Evangelista and Bienvenido Mangubat not being indispensable
parties but only proper parties, their joinder as parties defendants was correctly ordered being in
accordance with Sec. 8 of Rule 3.
We, therefore, need to settle the next issue of whether the action against them has prescribed in view of
Art. 1144, Civil Code, which provides:
The following actions must be brought ten years from the time the right of action
accrues:
1) Upon a written contract;
xxx xxx xxx
The complaint clearly alleged that the deed of sale executed on July 17, 1961 did not express the true
intention of the parties and should be reformed into the mortgage it actually was. Such allegations are
binding for purposes of determining the motion to dismiss (which hypothetically admits the allegations in
the complaint). The prescriptive period for such actions based upon a written contract and for reformation
thereof is ten years as provided in Article 1144 of the Civil Code. Such right to reformation is expressly
recognized in Article 1365 of the same Code which provides:
If two parties agree upon the mortgage or pledge of real or personal property, but
the instrument states that the property is sold absolutely or with a right of
repurchase, reformation of the instrument is proper. 12
Article 1605 of the Civil Code 13 in conjunction with Article 1604 14 likewise allows the apparent vendor
to ask for the reformation of the instrument.
Plaintiffs argue that:
A grave and palpable error was committed by the court a quo in holding that the
prescriptive period must be counted from the date of execution of the deed of sale
on July 17, 1961 up to the date of filing of the Amended Complaint on December
29, 1971.
The important reckoning point is the date of filing of the original complaint on
August 29, 1969. It has been held that amendments in pleadings do not
necessarily expunge those previously filed; That amendments made, more so
when ordered by the court, relate back to the date of the original complaint, as in
the case at bar, the claim asserted in the amended pleading arose out of the
same conduct, transaction or occurrence, and that amendment presupposes the
existence of something to be amended, and, therefore, the tolling of the period
should relate back to the filing of the pleading sought to be amended (Philippine
Independent Church v. Mateo, et al., L-14793, April 28, 1961). 15
In the case of Pangasinan Transportation Co. vs. Philippine Farming Co., Ltd., 16 this Court held that
where the original complaint states a cause of action but does it imperfectly and afterwards an amended
complaint is filed correcting the defect, the plea of prescription will relate to the time of the filing of the
original complaint. However, in the case of Aetna Insurance Co. vs. Luzon Stevedoring
Corporation, 17 We held that this rule would not apply to the party impleaded for the first time in the
amended complaint.
In Aetna, the defendant Barber Lines Far East Service was impleaded for the first time in the amended
complaint which was filed after the one-year period for prescription. The order of the lower court
dismissing the amended complaint against the said defendant was affirmed by this Court.
In the instant case, defendants Andres Evangelista and Bienvenido Mangubat were only impleaded in the
amended complaint of December 29, 1971 or ten (10) years, five (5) months and twelve (12) days from
July 17, 1961 the date of execution of the subject Deed of Absolute Sale, clearly more than the ten (10)
year prescriptive period.
Anent the third and fourth issues, the theory of the plaintiffs is that the complaint should not have been
dismiss as against said defendants but instead the court a quo should have proceeded with a trial on the
merits because there is an issue of fact appearing on the pleadings, that is, that defendants Andres
Evangelista and Bienvenido Mangubat were mere dummies of defendant Marcos Mangubat.
It should be remembereenvenidd that the court a quo dismissed the complaint against defendants Andres
Evangelista and Bio Mangubat upon their motion to dismiss on the ground of prescription.
Section 3, Rule 16 relating to motion to dismiss , provides that "after hearing, the court may deny or grant
the motion or allow amendment, or may defer the hearing and determination of the motion until the trial if
the ground alleged therein does not appear to be indubitable."
A motion to dismiss on the ground of prescription will be given due course only if the complaint shows
upon its face that the action has already prescribed. 18 If it does not so appear, the determination of the
motion to dismiss must be deferred until trial. 19
Under the circumstances of this case, the ground of prescription alleged by aforementioned defendants
was apparent on the face of the complaint. As earlier pointed out in this decision, the action against said
defendants has prescribed. The court a quo properly ordered its dismissal as what it originally did in its
order of July 3, 1972.
The plaintiffs now maintain that assuming the action against defendants Andres Evangelista and
Bienvenido Mangubat had already prescribed, this defense was personal to them and could not legally
encompass the position of defendant Marcos Mangubat; that the latter defendant, could be held solely
responsible to plaintiffs, having become absolute owner of the property subject matter of the July 17,
1961 instrument, or in the least he could be held accountable for his 1/3 share of the property. 20
One case which the lower court particularly applied to justify dismissal of the case against the other
defendants was Pillado vs. Francisco. 21 In said case, plaintiffs filed an action for the annulment of the
contract of sale of a certain real estate executed by the Philippine National Bank (PNB) in favor of the
spouses Estela Francisco and Vivencio Lasala Defendant PNB submitted an answer while defendant
spouses filed a motion to dismiss on the ground that the complaint stated no cause of action and that
plaintiffs have no legal capacity to sue. Said defendant spouses subsequently filed an additional motion
to dismiss on the ground that the cause of action of plaintiff, if any, had prescribed. The court ordered the
dismissal of the complaint which dismissal became final. Plaintiffs then asked the court to continue the
case against PNB but the latter moved for the dismissal on the ground that the court had lost, or had
been divested of its jurisdiction over the case through the release of the defendant spouses, who were
indispensable parties. The court granted the motion to dismiss holding that defendant spouses who were
the vendees were indispensable parties in an action for the rescission of the sale. From this order, the
plaintiff appealed to this Court. This Court affirmed the order holding that the indispensable parties having
been discharged by the trial court, the Court is no longer in a position to grant the plaintiff's demands,
principally the revocation of the Deed of Sale in their favor.
As We have already held that defendants Andres Evangelista and Bienvenido Mangubat are not
indispensable but proper parties, Pillado cannot therefore, be applied to the case at bar. In that case, the
parties discharged were indispensable being the purchasers and the present holders of the subject
property. In the instant case, the parties discharged were the original vendees who have since transferred
their interest in the subject property to one of the original co-vendees, and the latter after having been
vested with absolute title over the subject property sold the same to defendants spouses Luzame.
Whereas in the former case, the court was no longer in a position to grant the relief sought by the
plaintiffs, in the latter, the trial court may still be able to grant plaintiffs' demands for reformation of the
instrument and annulment of subsequent sale if after trial on the merits, plaintiffs prove their allegations
that defendants Andres Evangelista and Bienvenido Mangubat were in fact were dummies of Marcos
Mangubat and that the sale executed on July 17, 1961 was in reality an equitable mortgage.
By the dismissal of the case against defendants Andres Evangelista and Bienvenido Mangubat, the
court a quo had lost jurisdiction over them. We have already pointed out that the joinder of proper parties
is necessary in order to determine all the possible issues of the controversy; but if for some reason or
another it is not possible to join them, as when they are out of the jurisdiction of the Court, the court may
proceed without them, and the judgment that may be rendered shall be without prejudice to their
rights.22 Hence, notwithstanding the absence of said defendants, the court could still proceed with the trial
of the case as against the remaining defendants in accordance with Sec. 8 of Rule 3.
Nevertheless, the court is constrained to affirm the dismissal of the complaint against all the defendants
as there is merit in the argument raised by defendants-appellees that plaintiffs are barred by laches to
bring suit against them.
Laches (or estoppel by laches) is unreasonable delay in the bringing of a cause of action before the
courts of justice. 23 As defined by this Court, "laches is failure or neglect for an unreasonable and
unexplained length of time, to do that which by exercising due diligence, could or should have been done
earlier, it is negligence or omission to assert a right within a reasonable time, warranting a presumption
that the party entitled thereto either has abandoned it or declined to assert it. 24
A perusal of the records shows that from t he time of the execution of the deed of sale on July 17, 1961 to
the time of the filing of the present complaint on August 29, 1969 or a period of 8 years, I month and 12
days, plaintiffs never took any step to enforce their rights which they claim to have despite the several
opportunities available to them.
Defendant Marcos Mangubat filed an ejectment suit against plaintiff Crisanta Seno in 1963 and this fact
was admitted by the plaintiffs in their complaint. For failure of plaintiff to appear in the case, a decision
was rendered by the trial court ordering plaintiffs to vacate the subject property 25 which decision was duly
executed. 26
It further appears from the complaint that plaintiffs were well aware of the transfer of the title from the
name of plaintiff Crisanta Seno to the names of defendants Marcos Mangubat, Andres Evangelista and
Bienvenido Mangubat and subsequently to the name of defendant Marcos Mangubat alone as early as
1963 when the ejectment case was filed against plaintiffs, and also they did not do anything about it.
In January 1969, plaintiffs learned of the sale of the subject property to defendants-spouses Luzame. but
it was only on August 29, 1969 when plaintiffs brought this action and only after an ejectment case was
filed by said defendant spouses against plaintiff Crisanta Seno before the Municipal Court of Paranaque,
Rizal on August 4, 1969.
As defendants-appellees contend, before the nine-year period lapsed, plaintiffs never raised a voice to
protest against all these proceedings. They chose to sleep on their rights and to rely on defendants'
alleged word that their true agreement would be respected rather than bring their grievances to a court of
law. However, when an ejectment case was filed against them just when the 10-year prescriptive period
for bringing of their suit was nearly over, they finally decided to stake their claim against the defendants.
The essence of laches is not merely lapse of time. It is essential that there be also acquiescence in the
alleged wrong or lack of diligence in seeking a remedy. 27 The doctrine of laches or of "stale demands" is
based on public policy which requires, for the peace of society, the discouragement of stale claims and,
unlike the statute of limitations not a mere question of time but is principally a question of the inequity or
unfairness of permitting a right or claim to be enforced or asserted. 28
By the negligence of plaintiffs in asserting their rights for an unreasonable length of time, they are now
forever precluded from enforcing whatever right they may have against defendants. Indeed, it is
an indicia of the infirmity of their claim.
Moreover, as against plaintiff's allegation that the defendant spouses Luzame are purchasers in bad faith.
We hold that the legal presumption of good faith on the part of said defendant spouses must prevail.
Plaintiffs would have Us believe that defendant spouses being their erstwhile neighbors and friends had
knowledge of the circumstances surrounding the transaction between plaintiff Crisanta Seno and
Defendant Marcos Mangubat which therefore makes them purchasers in bad faith.
Defendant spouses, however, claim that they came to know of the existence of the original title of plaintiff
Crisanta Seno only when they verified the title to the land in 1969 when it was being offered to them by
co-defendant Marcos Mangubat. They deny that they are neighbors much less friends of plaintiffs,
In order that a purchaser of land with a Torrens title may be considered as a purchaser in good faith, it is
enough that he examines the latest certificate of title which in this case is that issued in the name of the
immediate transferor. 29 The purchaser is not bound by the original certificate of title but only by the
certificate of title of the person from whom he has purchased the property. 30
Good faith, while it is always to be presumed in the absence of proof to the contrary, requires a well-
founded belief that the person from whom title was received was himself the owner of the land, with the
right to convey it. 31 In this regard, a buyer of real estate should exercise ordinary care in purchasing
land, 32 so that one who purchases real property should make inquiries about the right of those in
possession thereof. 33
The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely
upon the face of the Torrens Certificate of Title and to dispense with the need of inquiring further, except
when the party concerned has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry. 34
It is true that by the possession of plaintiffs of the subject property, defendant spouses Luzame should
have been put on their guard and should have taken precautionary steps in ascertaining the interest of
the possessors of the land. The defendant spouses did verify the title to the property with the Register of
Deeds and finding that the latest title was in the name of defendant Marcos Mangubat, they, had every
reason to rely on such title. Besides, there was the ejectment suit filed by defendant Marcos Mangubat
against plaintiff Crisanta Seno which was decided in favor of the former. The defendant spouses could
not be faulted for believing that the possession of the plaintiffs was in the concept of lessee; in fact said
defendant spouses also filed an ejectment suit against plaintiffs.
This Court had occasion to rule that possession by the appellees, either by themselves or through their
predecessors in interest, if there was such possession at all, would be unavailing against the holder of a
Torrens Certificate of Title covering the parcels of land now in question. 35
Thus, where innocent third persons relying on the correctness of the certificate of title issued, acquire
rights over the property, the court cannot disregard such rights and order the total cancellation of the
certificate for that would impair public confidence in the certificate of title; otherwise everyone dealing with
property registered under the torrens system would have to inquire in every instance as to whether the
title had been regularly or irregularly issued by the court. Indeed, this is contrary to the evident purpose of
the law. Every person dealing with registered land may safely rely on the correctness of the certificate of
title issued therefore and the law will in no way oblige him to go behind the certificate to determine the
condition of the property. Stated differently, an innocent purchaser for value relying on a torrens title
issued is protected . 36
We therefore hold and find that defendants spouses Luzame are purchasers in good faith and for value of
the questioned property.
IN VIEW OF THE FOREGOING CONSIDERATIONS, the order of dismissal dated September 29, 1972
and the order denying the motion for reconsideration dated January 13, 1973 of the Court of First
Instance of Rizal, Branch I, are hereby AFFIRMED. No costs.
SO ORDERED.
G.R. No. 176405 August 20, 2008
LEO WEE, petitioner,
vs.
GEORGE DE CASTRO (on his behalf and as attorney-in-fact of ANNIE DE CASTRO and FELOMINA
UBAN) and MARTINIANA DE CASTRO, respondents.
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court filed
by petitioner Leo Wee, seeking the reversal and setting aside of the Decision 2 dated 19 September 2006
and the Resolution3 dated 25 January 2007 of the Court of Appeals in CA-G.R. SP No. 90906. The
appellate court, in its assailed Decision, reversed the dismissal of Civil Case. No. 1990, an action for
ejectment instituted by respondent George de Castro, on his own behalf and on behalf of Annie de
Castro, Felomina de Castro Uban and Jesus de Castro 4 against petitioner, by the Municipal Trial Court
(MTC) of Alaminos City, which was affirmed by the Regional Trial Court (RTC), Branch 54, Alaminos City,
Pangasinan; and, ruling in favor of the respondents, ordered the petitioner to vacate the subject property.
In its assailed Resolution dated 25 January 2007, the Court of Appeals refused to reconsider its earlier
Decision of 19 September 2006.
In their Complaint5 filed on 1 July 2002 with the MTC of Alaminos City, docketed as Civil Case No. 1990,
respondents alleged that they are the registered owners of the subject property, a two-storey building
erected on a parcel of land registered under Transfer Certificate of Title (TCT) No. 16193 in the Registry
of Deeds of Pangasinan, described and bounded as follows:
A parcel of land (Lot 13033-D-2, Psd-01550-022319, being a portion of Lot 13033-D, Psd-
018529, LRC Rec. No. ____) situated in Pob., Alaminos City; bounded on the NW. along line
1-2 by Lot 13035-D-1 of the subdivision plan; on the NE. along line 2-3 by Vericiano St.; on
the SE. along line 3-4 by Lot 13033-D-2 of the subdivision plan; on the SW. along line 4-1 by
Lot 575, Numeriano Rabago. It is coverd by TCT No. 16193 of the Register of Deeds of
Pangasinan (Alaminos City) and declared for taxation purposes per T.D. No. 2075, and
assessed in the sum of P93,400.00.6
Respondents rented out the subject property to petitioner on a month to month basis for P9,000.00 per
month.7 Both parties agreed that effective 1 October 2001, the rental payment shall be increased
from P9,000.00 to P15,000.00. Petitioner, however, failed or refused to pay the corresponding increase
on rent when his rental obligation for the month of 1 October 2001 became due. The rental dispute was
brought to the Lupon Tagapagpamayapa of Poblacion, Alaminos, Pangasinan, in an attempt to amicably
settle the matter but the parties failed to reach an agreement, resulting in the issuance by
the Barangay Lupon of a Certification to file action in court on 18 January 2002. On 10 June 2002,
respondent George de Castro sent a letter to petitioner terminating their lease agreement and demanding
that the latter vacate and turn over the subject property to respondents. Since petitioner stubbornly
refused to comply with said demand letter, respondent George de Castro, together with his siblings and
co-respondents, Annie de Castro, Felomina de Castro Uban and Jesus de Castro, filed the Complaint for
ejectment before the MTC.
It must be noted, at this point, that although the Complaint stated that it was being filed by all of the
respondents, the Verification and the Certificate of Non-Forum Shopping were signed by respondent
George de Castro alone. He would subsequently attach to his position paper filed before the MTC on 28
October 2002 the Special Powers of Attorney (SPAs) executed by his sisters Annie de Castro and
Felomina de Castro Uban dated 7 February 2002 and 14 March 2002 respectively, authorizing him to
institute the ejectment case against petitioner.
Petitioner, on the other hand, countered that there was no agreement between the parties to increase the
monthly rentals and respondents' demand for an increase was exorbitant. The agreed monthly rental was
only for the amount of P9,000.00 and he was religiously paying the same every month. Petitioner then
argued that respondents failed to comply with the jurisdictional requirement of conciliation before
the Barangay Lupon prior to the filing of Civil Case. No. 1990, meriting the dismissal of their Complaint
therein. The Certification to file action issued by the Barangay Lupon appended to the respondents'
Complaint merely referred to the issue of rental increase and not the matter of ejectment. Petitioner
asserted further that the MTC lacked jurisdiction over the ejectment suit, since respondents' Complaint
was devoid of any allegation that there was an "unlawful withholding" of the subject property by the
petitioner.8
During the Pre-Trial Conference9 held before the MTC, the parties stipulated that in May 2002, petitioner
tendered to respondents the sum of P9,000.00 as rental payment for the month of January 2002;
petitioner paid rentals for the months of October 2001 to January 2002 but only in the amount
of P9,000.00 per month; respondents, thru counsel, sent a letter to petitioner on 10 June 2002
terminating their lease agreement which petitioner ignored; and the Barangay Lupon did issue a
Certification to file action after the parties failed to reach an agreement before it.
After the submission of the parties of their respective Position Papers, the MTC, on 21 November 2002,
rendered a Decision10 dismissing respondents' Complaint in Civil Case No. 1990 for failure to comply with
the prior conciliation requirement before the Barangay Lupon. The decretal portion of the MTC Decision
reads:
WHEREFORE, premised considered, judgment is hereby rendered ordering the dismissal of
this case. Costs against the [herein respondents].
On appeal, docketed as Civil Case No. A-2835, the RTC of Alaminos, Pangasinan, Branch 54,
promulgated its Decision11 dated 27 June 2005 affirming the dismissal of respondents' Complaint for
ejectment after finding that the appealed MTC Decision was based on facts and law on the matter. The
RTC declared that since the original agreement entered into by the parties was for petitioner to pay only
the sum of P9.000.00 per month for the rent of the subject property, and no concession was reached by
the parties to increase such amount to P15.000.00, petitioner cannot be faulted for paying only the
originally agreed upon monthly rentals. Adopting petitioner's position, the RTC declared that respondents'
failure to refer the matter to the Barangay court for conciliation process barred the ejectment case,
conciliation before the Lupon being a condition sine qua non in the filing of ejectment suits. The RTC
likewise agreed with petitioner in ruling that the allegation in the Complaint was flawed, since
respondents failed to allege that there was an "unlawful withholding" of possession of the subject
property, taking out Civil Case No. 1990 from the purview of an action for unlawful detainer. Finally, the
RTC decreed that respondents' Complaint failed to comply with the rule that a co-owner could not
maintain an action without joining all the other co-owners. Thus, according to the dispositive portion of the
RTC Decision:
 WHEREFORE the appellate Court finds no cogent reason to disturb the findings of the court
a quo. The Decision dated November 21, 2002 appealed from is hereby AFFIRMED IN
TOTO.12
13
Undaunted, respondents filed a Petition for Review on Certiorari with the Court of Appeals where it was
docketed as CA-G.R. SP No. 90906. Respondents argued in their Petition that the RTC gravely erred in
ruling that their failure to comply with the conciliation process was fatal to their Complaint, since it is only
respondent George de Castro who resides in Alaminos City, Pangasinan, while respondent Annie de
Castro resides in Pennsylvania, United States of America (USA); respondent Felomina de Castro Uban,
in California, USA; and respondent Jesus de Castro, now substituted by his wife, Martiniana, resides in
Manila. Respondents further claimed that the MTC was not divested of jurisdiction over their Complaint
for ejectment because of the mere absence therein of the term "unlawful withholding" of their subject
property, considering that they had sufficiently alleged the same in their Complaint, albeit worded
differently. Finally, respondents posited that the fact that only respondent George de Castro signed the
Verification and the Certificate of Non-Forum Shopping attached to the Complaint was irrelevant since
the other respondents already executed Special Powers of Attorney (SPAs) authorizing him to act as their
attorney-in-fact in the institution of the ejectment suit against the petitioner.
On 19 September 2006, the Court of Appeals rendered a Decision granting the respondents' Petition and
ordering petitioner to vacate the subject property and turn over the same to respondents. The Court of
Appeals decreed:
WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Decision
dated June 27, 2005 issued by the RTC of Alaminos City, Pangasinan, Branch 54, is
REVERSED and SET ASIDE. A new one is hereby rendered ordering [herein petitioner] Leo
Wee to SURRENDER and VACATE the leased premises in question as well as to pay the
sum of P15,000.00 per month reckoned from March, 2002 until he shall have actually turned
over the possession thereof to petitioners plus the rental arrearages of P30,000.00
representing unpaid increase in rent for the period from October, 2001 to February, 2002, with
legal interest at 6% per annum to be computed from June 7, 2002 until finality of this decision
and 12% thereafter until full payment thereof. Respondent is likewise hereby ordered to pay
petitioners the amount of P20,000.00 as and for attorney's fees and the costs of suit. 14
In a Resolution dated 25 January 2007, the appellate court denied the Motion for Reconsideration
interposed by petitioner for lack of merit.
Petitioner is now before this Court via the Petition at bar, making the following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT
CONCILIATION PROCESS IS NOT A JURISDICTIONAL REQUIREMENT THAT NON-
COMPLIANCE THEREWITH DOES NOT AFFECT THE JURISDICTION IN EJECTMENT
CASE;
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE
SUFFICIENCY OF THE ALLEGATIONS IN THE COMPLAINT FOR EJECTMENT DESPITE
THE WANT OF ALLEGATION OF "UNLAWFUL WITHOLDING PREMISES" (sic)
QUESTIONED BY PETITIONER;
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FILING
OF THE COMPLAINT OF RESPONDENT GEORGE DE CASTRO WITHOUT JOINING ALL
HIS OTHER CO-OWNERS OVER THE SUBJECT PROPERTY IS PROPER;
IV.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT APPLYING SUPREME
COURT CIRCULAR NO. 10 WHICH DIRECTS A PLEADER TO INDICATE IN HIS
PLEADINGS HIS OFFICIAL RECEIPT OF HIS PAYMENT OF HIS IBP DUES. 15
Petitioner avers that respondents failed to go through the conciliation process before the Barangay
Lupon, a jurisdictional defect that bars the legal action for ejectment. The Certification to file action dated
18 January 2002 issued by the Barangay Lupon, appended by the respondents to their Complaint in Civil
Case No. 1990, is of no moment, for it attested only that there was confrontation between the parties on
the matter of rental increase but not on unlawful detainer of the subject property by the petitioner. If it was
the intention of the respondents from the very beginning to eject petitioner from the subject property, they
should have brought up the alleged unlawful stay of the petitioner on the subject property for conciliation
before the Barangay Lupon.
The barangay justice system was established primarily as a means of easing up the congestion of cases
in the judicial courts. This could be accomplished through a proceeding before the barangaycourts which,
according to the one who conceived of the system, the late Chief Justice Fred Ruiz Castro, is essentially
arbitration in character; and to make it truly effective, it should also be compulsory. With this primary
objective of the barangay justice system in mind, it would be wholly in keeping with the underlying
philosophy of Presidential Decree No. 1508 (Katarungang Pambarangay Law), which would be better
served if an out-of-court settlement of the case is reached voluntarily by the parties. 16 To ensure this
objective, Section 6 of Presidential Decree No. 1508 requires the parties to undergo a conciliation
process before the Lupon Chairman or the Pangkat ng Tagapagkasundo as a precondition to filing a
complaint in court subject to certain exceptions. The said section has been declared compulsory in
nature.17
Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160 (The Local Government
Code), which took effect on 1 January 1992.
The pertinent provisions of the Local Government Code making conciliation a precondition to the filing of
complaints in court are reproduced below:
SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint in court. - No complaint,
petition, action, or proceeding involving any matter within the authority of the lupon shall be
filed or instituted directly in court or any other government office for adjudication, unless there
has been a confrontation between the parties before the lupon chairman or the pangkat, and
that no conciliation or settlement has been reached as certified by the lupon secretary or
pangkat secretary as attested to by the lupon or pangkat chairman or unless the settlement
has been repudiated by the parties thereto.
(b) Where parties may go directly to court. - The parties may go directly to court in the
following instances:
(1) Where the accused is under detention;
(2) Where a person has otherwise been deprived of personal liberty calling
for habeas corpus proceedings;
(3) Where actions are coupled with provisional remedies such as preliminary
injunction, attachment, delivery of personal property, and support pendente lite;
and
(4) Where the action may otherwise be barred by the statute of limitations.
 (c) Conciliation among members of indigenous cultural communities. - The customs and
traditions of indigenous cultural communities shall be applied in settling disputes between
members of the cultural communities.
SEC. 408. Subject Matter for Amicable Settlement; Exception Thereto. - The lupon of each
barangay shall have authority to bring together the parties actually residing in the same city or
municipality for amicable settlement of all disputes except:
(a) Where one party is the government or any subdivision or instrumentality thereof;
(b) Where one party is a public officer or employee, and the dispute relates to the
performance of his official functions;
(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five
thousand pesos (P5,000.00);
(d) Offenses where there is no private offended party;
(e) Where the dispute involves real properties located in different cities or municipalities
unless the parties thereto agree to submit their differences to amicable settlement by an
appropriate lupon;
(f) Disputes involving parties who actually reside in barangays of different cities or
municipalities, except where such barangay units adjoin each other and the parties thereto
agree to submit their differences to amicable settlement by an appropriate lupon;
(g) Such other classes of disputes which the President may determine in the interest of justice
or upon the recommendation of the Secretary of Justice.
There is no question that the parties to this case appeared before the Barangay Lupon for conciliation
proceedings. There is also no dispute that the only matter referred to the Barangay Lupon for conciliation
was the rental increase, and not the ejectment of petitioner from the subject property. This is apparent
from a perusal of the Certification to file action in court issued by the Barangay Lupon on 18 January
2002, to wit:
CERTIFICATION TO FILE COMPLAINTS
This is to certify that:
1. There was personal confrontation between parties before the barangay Lupon regarding
rental increase of a commercial building but conciliation failed;
2. Therefore, the corresponding dispute of the above-entitled case may now be filed in
Court/Government Office.18 (Emphasis ours.)
The question now to be resolved by this Court is whether the Certification dated 18 January 2002 issued
by the Barangay Lupon stating that no settlement was reached by the parties on the matter of rental
increase sufficient to comply with the prior conciliation requirement under the Katarungang
Pambarangay Law to authorize the respondents to institute the ejectment suit against petitioner.
The Court rules affirmatively.
While it is true that the Certification to file action dated 18 January 2002 of the Barangay Lupon refers
only to rental increase and not to the ejectment of petitioner from the subject property, the submission of
the same for conciliation before the Barangay Lupon constitutes sufficient compliance with the provisions
of the Katarungang Pambarangay Law. Given the particular circumstances of the case at bar, the
conciliation proceedings for the amount of monthly rental should logically and reasonably include also the
matter of the possession of the property subject of the rental, the lease agreement, and the violation of
the terms thereof.
We now proceed to discuss the meat of the controversy.
The contract of lease between the parties did not stipulate a fixed period. Hence, the parties agreed to
the payment of rentals on a monthly basis. On this score, Article 1687 of the Civil Code provides:
Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to
year, if the rent agreed upon is annual; from month to month, if it is monthly; from week
to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. However,
even though a monthly rent is paid, and no period for the lease has been set, the courts may
fix a longer term for the lease after the lessee has occupied the premises for over one year. If
the rent is weekly, the courts may likewise determine a longer period after the lessee has
been in possession for over six months. In case of daily rent, the courts may also fix a longer
period after the lessee has stayed in the place for over one month. (Emphasis supplied.)
The rentals being paid monthly, the period of such lease is deemed terminated at the end of each month.
Thus, respondents have every right to demand the ejectment of petitioners at the end of each month, the
contract having expired by operation of law. Without a lease contract, petitioner has no right of
possession to the subject property and must vacate the same. Respondents, thus, should be allowed to
resort to an action for ejectment before the MTC to recover possession of the subject property from
petitioner.
Corollarily, petitioner's ejectment, in this case, is only the reasonable consequence of his unrelenting
refusal to comply with the respondents' demand for the payment of rental increase agreed upon by both
parties. Verily, the lessor's right to rescind the contract of lease for non-payment of the demanded
increased rental was recognized by this Court in Chua v. Victorio19:
The right of rescission is statutorily recognized in reciprocal obligations, such as contracts of
lease. In addition to the general remedy of rescission granted under Article 1191 of the Civil
Code, there is an independent provision granting the remedy of rescission for breach of any
of the lessor or lessee's statutory obligations. Under Article 1659 of the Civil Code, the
aggrieved party may, at his option, ask for (1) the rescission of the contract; (2) rescission and
indemnification for damages; or (3) only indemnification for damages, allowing the contract to
remain in force.
Payment of the rent is one of a lessee's statutory obligations, and, upon non-payment
by petitioners of the increased rental in September 1994, the lessor acquired the right
to avail of any of the three remedies outlined above. (Emphasis supplied.)
Petitioner next argues that respondent George de Castro cannot maintain an action for ejectment against
petitioner, without joining all his co-owners.
Article 487 of the New Civil Code is explicit on this point:
ART. 487. Any one of the co-owners may bring an action in ejectment.

This article covers all kinds of action for the recovery of possession, i.e., forcible entry and unlawful
detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of ownership
(accion de reivindicacion). As explained by the renowned civilist, Professor Arturo M. Tolentino 20:
A co-owner may bring such an action, without the necessity of joining all the other co-
owners as co-plaintiffs, because the suit is deemed to be instituted for the benefit of
all. If the action is for the benefit of the plaintiff alone, such that he claims possession for
himself and not for the co-ownership, the action will not prosper. (Emphasis added.)
In the more recent case of Carandang v. Heirs of De Guzman,21 this Court declared that a co-owner is not
even a necessary party to an action for ejectment, for complete relief can be afforded even in his
absence, thus:
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 the 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 afforded in the suit
even without their participation, since the suit is presumed to have been filed for the benefit of
all co-owners.
Moreover, respondents Annie de Castro and Felomina de Castro Uban each executed a Special Power
of Attorney, giving respondent George de Castro the authority to initiate Civil Case No. 1990.
A power of attorney is an instrument in writing by which one person, as principal, appoints another as his
agent and confers upon him the authority to perform certain specified acts or kinds of acts on behalf of
the principal. The written authorization itself is the power of attorney, and this is clearly indicated by the
fact that it has also been called a "letter of attorney." 22
Even then, the Court views the SPAs as mere surplusage, such that the lack thereof does not in any way
affect the validity of the action for ejectment instituted by respondent George de Castro. This also
disposes of petitioner's contention that respondent George de Castro lacked the authority to sign the
Verification and the Certificate of Non-Forum Shopping. As the Court ruled in Mendoza v. Coronel23:
We likewise hold that the execution of the certification against forum shopping by the
attorney-in-fact in the case at bar is not a violation of the requirement that the parties
must personally sign the same. The attorney-in-fact, who has authority to file, and who
actually filed the complaint as the representative of the plaintiff co-owner, pursuant to a
Special Power of Attorney, is a party to the ejectment suit. In fact, Section 1, Rule 70 of the
Rules of Court includes the representative of the owner in an ejectment suit as one of the
parties authorized to institute the proceedings. (Emphasis supplied.)
Failure by respondent George de Castro to attach the said SPAs to the Complaint is innocuous, since it is
undisputed that he was granted by his sisters the authority to file the action for ejectment against
petitioner prior to the institution of Civil Case No. 1990. The SPAs in his favor were respectively executed
by respondents Annie de Castro and Felomina de Castro Uban on 7 February 2002 and 14 March 2002;
while Civil Case No. 1990 was filed by respondent George de Castro on his own behalf and on behalf of
his siblings only on 1 July 2002, or way after he was given by his siblings the authority to file said action.
The Court quotes with approval the following disquisition of the Court of Appeals:
Moreover, records show that [herein respondent] George de Castro was indeed authorized by
his sisters Annie de Castro and Felomina de Castro Uban, to prosecute the case in their
behalf as shown by the Special Power of Attorney dated February 7, 2002 and March 14,
2002. That these documents were appended only to [respondent George de Castro's]
position paper is of no moment considering that the authority conferred therein was given
prior to the institution of the complaint in July, 2002. x x x. 24
Respondent deceased Jesus de Castro's failure to sign the Verification and Certificate of Non-Forum
Shopping may be excused since he already executed an Affidavit 25 with respondent George de Castro
that he had personal knowledge of the filing of Civil Case No. 1990. In Torres v. Specialized Packaging
Development Corporation,26 the Court ruled that the personal signing of the verification requirement was
deemed substantially complied with when, as in the instant case, two out of 25 real parties-in-interest,
who undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in the
petition, signed the verification attached to it.
In the same vein, this Court is not persuaded by petitioner's assertion that respondents' failure to allege
the jurisdictional fact that there was "unlawful withholding" of the subject property was fatal to their cause
of action.
It is apodictic that what determines the nature of an action as well as which court has jurisdiction over it
are the allegations in the complaint and the character of the relief sought. In an unlawful detainer case,
the defendant's possession was originally lawful but ceased to be so upon the expiration of his right to
possess. Hence, the phrase "unlawful withholding" has been held to imply possession on the part of
defendant, which was legal in the beginning, having no other source than a contract, express or implied,
and which later expired as a right and is being withheld by defendant. 27
In Barba v. Court of Appeals,28 the Court held that although the phrase "unlawfully withholding" was not
actually used by therein petitioner in her complaint, the Court held that her allegations, nonetheless,
amounted to an unlawful withholding of the subject property by therein private respondents, because they
continuously refused to vacate the premises even after notice and demand.
In the Petition at bar, respondents alleged in their Complaint that they are the registered owners of the
subject property; the subject property was being occupied by the petitioner pursuant to a monthly lease
contract; petitioner refused to accede to respondents' demand for rental increase; the respondents sent
petitioner a letter terminating the lease agreement and demanding that petitioner vacate and turn over
the possession of the subject property to respondents; and despite such demand, petitioner failed to
surrender the subject property to respondents. 29 The Complaint sufficiently alleges the unlawful
withholding of the subject property by petitioner, constitutive of unlawful detainer, although the exact
words "unlawful withholding" were not used. In an action for unlawful detainer, an allegation that the
defendant is unlawfully withholding possession from the plaintiff is deemed sufficient, without necessarily
employing the terminology of the law.30
Petitioner's averment that the Court of Appeals should have dismissed respondents' Petition in light of the
failure of their counsel to attach the Official Receipt of his updated payment of Integrated Bar of the
Philippines (IBP) dues is now moot and academic, since respondents' counsel has already duly complied
therewith. It must be stressed that judicial cases do not come and go through the portals of a court of law
by the mere mandate of technicalities.31 Where a rigid application of the rules will result in a manifest
failure or miscarriage of justice, technicalities should be disregarded in order to resolve the case. 32
Finally, we agree in the ruling of the Court of Appeals that petitioner is liable for the payment of back
rentals, attorney's fees and cost of the suit. Respondents must be duly indemnified for the loss of income
from the subject property on account of petitioner's refusal to vacate the leased premises.
WHEREFORE, premises considered, the instant Petition is DENIED. The Decision dated 19 September
2006 and Resolution dated 25 January 2007 of the Court of Appeals in CA-G.R. SP No. 90906 are
hereby AFFIRMED in toto. Costs against petitioner.
SO ORDERED.
G.R. No. 178411 June 23, 2010
OFFICE OF THE CITY MAYOR OF PARAÑAQUE CITY, OFFICE OF THE CITY ADMINISTRATOR OF
PARAÑAQUE CITY, OFFICE OF THE CITY ENGINEER OF PARAÑAQUE CITY, OFFICE OF THE CITY
PLANNING AND DEVELOPMENT COORDINATOR, OFFICE OF THE BARANGAY CAPTAIN AND
SANGGUNIANG PAMBARANGAY OF BARANGAY VITALEZ, PARAÑAQUE CITY, TERESITA A.
GATCHALIAN, ENRICO R. ESGUERRA, ERNESTO T. PRACALE, JR., MANUEL M. ARGOTE,
CONRADO M. CANLAS, JOSEPHINE S. DAUIGOY, ALLAN L. GONZALES, ESTER C. ASEHAN,
MANUEL A. FUENTES, and MYRNA P. ROSALES, Petitioners,
vs.
MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, ARTURO V. EBIO, EDUARDO V. EBIO,
RENATO V. EBIO, LOURDES E. MAGTANGOB, MILA V. EBIO, and ARNEL V. EBIO, Respondents.
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the January 31, 2007 Decision 1 and June 8, 2007 Resolution2 of the Court of Appeals
(CA) in CA-G.R. SP No. 91350 allegedly for being contrary to law and jurisprudence. The CA had
reversed the Order3 of the Regional Trial Court (RTC) of Parañaque City, Branch 196, issued on April 29,
2005 in Civil Case No. 05-0155.
Below are the facts.
Respondents claim that they are the absolute owners of a parcel of land consisting of 406 square meters,
more or less, located at 9781 Vitalez Compound in Barangay Vitalez, Parañaque City and covered by Tax
Declaration Nos. 01027 and 01472 in the name of respondent Mario D. Ebio. Said land was an accretion
of Cut-cut creek. Respondents assert that the original occupant and possessor of the said parcel of land
was their great grandfather, Jose Vitalez. Sometime in 1930, Jose gave the land to his son, Pedro
Vitalez. From then on, Pedro continuously and exclusively occupied and possessed the said lot. In 1966,
after executing an affidavit declaring possession and occupancy, 4 Pedro was able to obtain a tax
declaration over the said property in his name. 5 Since then, respondents have been religiously paying
real property taxes for the said property. 6
Meanwhile, in 1961, respondent Mario Ebio married Pedro’s daughter, Zenaida. Upon Pedro’s advice, the
couple established their home on the said lot. In April 1964 and in October 1971, Mario Ebio secured
building permits from the Parañaque municipal office for the construction of their house within the said
compound.7 On April 21, 1987, Pedro executed a notarized Transfer of Rights 8 ceding his claim over the
entire parcel of land in favor of Mario Ebio. Subsequently, the tax declarations under Pedro’s name were
cancelled and new ones were issued in Mario Ebio’s name. 9
On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed Resolution No. 08, series
of 199910seeking assistance from the City Government of Parañaque for the construction of an access
road along Cut-cut Creek located in the said barangay. The proposed road, projected to be eight (8)
meters wide and sixty (60) meters long, will run from Urma Drive to the main road of Vitalez
Compound11 traversing the lot occupied by the respondents. When the city government advised all the
affected residents to vacate the said area, respondents immediately registered their opposition thereto.
As a result, the road project was temporarily suspended. 12
In January 2003, however, respondents were surprised when several officials from the barangay and the
city planning office proceeded to cut eight (8) coconut trees planted on the said lot. Respondents filed
letter-complaints before the Regional Director of the Bureau of Lands, the Department of Interior and
Local Government and the Office of the Vice Mayor. 13 On June 29, 2003, the Sangguniang Barangay of
Vitalez held a meeting to discuss the construction of the proposed road. In the said meeting, respondents
asserted their opposition to the proposed project and their claim of ownership over the affected
property.14 On November 14, 2003, respondents attended another meeting with officials from the city
government, but no definite agreement was reached by and among the parties. 15
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents ordering them to vacate
the area within the next thirty (30) days, or be physically evicted from the said property. 16 Respondents
sent a letter to the Office of the City Administrator asserting, in sum, their claim over the subject property
and expressing intent for a further dialogue. 17 The request remained unheeded.1avvphi1
Threatened of being evicted, respondents went to the RTC of Parañaque City on April 21, 2005 and
applied for a writ of preliminary injunction against petitioners. 18 In the course of the proceedings,
respondents admitted before the trial court that they have a pending application for the issuance of a
sales patent before the Department of Environment and Natural Resources (DENR). 19
On April 29, 2005, the RTC issued an Order 20 denying the petition for lack of merit. The trial court
reasoned that respondents were not able to prove successfully that they have an established right to the
property since they have not instituted an action for confirmation of title and their application for sales
patent has not yet been granted. Additionally, they failed to implead the Republic of the Philippines, which
is an indispensable party.
Respondents moved for reconsideration, but the same was denied. 21
Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31, 2007, the Court of
Appeals issued its Decision in favor of the respondents. According to the Court of Appeals--
The issue ultimately boils down to the question of ownership of the lands adjoining Cutcut Creek
particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion beside RL 8.
The evidentiary records of the instant case, shows that RL 8 containing an area of 291 square meters is
owned by Guaranteed Homes, Inc. covered by TCT No. S-62176. The same RL 8 appears to have been
donated by the Guaranteed Homes to the City Government of Parañaque on 22 March 1966 and which
was accepted by the then Mayor FLORENCIO BERNABE on 5 April 1966. There is no evidence however,
when RL 8 has been intended as a road lot.
On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed the accreted property
since 1930 per his Affidavit dated 21 March 1966 for the purpose of declaring the said property for
taxation purposes. The property then became the subject of Tax Declaration No. 20134 beginning the
year 1967 and the real property taxes therefor had been paid for the years 1966, 1967, 1968, 1969,
1970, 1972, 1973, 1974, 1978, 1980, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, and 2004.
Sometime in 1964 and 1971, construction permits were issued in favor of Appellant MARIO EBIO for the
subject property. On 21 April 1987, PEDRO VITALEZ transferred his rights in the accreted property to
MARIO EBIO and his successors-in-interest.
Applying [Article 457 of the Civil Code considering] the foregoing documentary evidence, it could be
concluded that Guaranteed Homes is the owner of the accreted property considering its ownership of the
adjoining RL 8 to which the accretion attached. However, this is without the application of the provisions
of the Civil Code on acquisitive prescription which is likewise applicable in the instant case.
xxxx
The subject of acquisitive prescription in the instant case is the accreted portion which [was] duly proven
by the Appellants. It is clear that since 1930, Appellants together with their predecessor-in-interest,
PEDRO VITALEZ[,] have been in exclusive possession of the subject property and starting 1964 had
introduced improvements thereon as evidenced by their construction permits. Thus, even by
extraordinary acquisitive prescription[,] Appellants have acquired ownership of the property in question
since 1930 even if the adjoining RL 8 was subsequently registered in the name of Guaranteed Homes. x
x x.
xxxx part of the public domain. And respondents should have included the State as it is an indispensable party
to the action.

Further, it was only in 1978 that Guaranteed Homes was able to have RL 8 registered in its name, which
is almost fifty years from the time PEDRO VITALEZ occupied the adjoining accreted property in 1930. x x We do not agree.
x.

It is an uncontested fact that the subject land was formed from the alluvial deposits that have gradually
xxxx settled along the banks of Cut-cut creek. This being the case, the law that governs ownership over the
accreted portion is Article 84 of the Spanish Law of Waters of 1866, which remains in effect, 26 in relation
to Article 457 of the Civil Code.
We likewise note the continuous payment of real property taxes of Appellants which bolster their right
over the subject property. x x x.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over alluvial deposits along
the banks of a creek. It reads:
xxxx

ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams, rivers, and lakes, by
In sum, We are fully convinced and so hold that the Appellants [have] amply proven their right over the accessions or sediments from the waters thereof, belong to the owners of such lands. 27
property in question.

Interestingly, Article 457 of the Civil Code states:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The challenged Order of
the court a quo is REVERSED and SET ASIDE.
Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which they gradually
receive from the effects of the current of the waters.
SO ORDERED.22

On June 8, 2007, the appellate court denied petitioners’ motion for reconsideration. Hence, this petition
raising the following assignment of errors:
I. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT OF
APPEALS THAT RESPONDENTS HAVE A RIGHT IN ESSE IS IN ACCORD WITH THE LAW AND
ESTABLISHED JURISPRUDENCE[;]
II. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT OF
APPEALS THAT THE SUBJECT LOT IS AVAILABLE FOR ACQUISITIVE PRESCRIPTION IS IN
ACCORD WITH THE LAW AND ESTABLISHED JURISPRUDENCE[;] AND
III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE COMPLAINT … FILED
BY RESPONDENTS IN THE LOWER COURT.23
The issues may be narrowed down into two (2): procedurally, whether the State is an indispensable party
to respondents’ action for prohibitory injunction; and substantively, whether the character of respondents’
possession and occupation of the subject property entitles them to avail of the relief of prohibitory
injunction.
It is therefore explicit from the foregoing provisions that alluvial deposits along the banks of a creek do
not form part of the public domain as the alluvial property automatically belongs to the owner of the
estate to which it may have been added. The only restriction provided for by law is that the owner of the
adjoining property must register the same under the Torrens system; otherwise, the alluvial property may
be subject to acquisition through prescription by third persons. 28
In contrast, properties of public dominion cannot be acquired by prescription. No matter how long the
possession of the properties has been, there can be no prescription against the State regarding property
of public domain.29 Even a city or municipality cannot acquire them by prescription as against the State. 30
Hence, while it is true that a creek is a property of public dominion, 31 the land which is formed by the
gradual and imperceptible accumulation of sediments along its banks does not form part of the public
domain by clear provision of law.
Moreover, an indispensable party is one whose interest in the controversy is such that a final decree
would necessarily affect his/her right, so that the court cannot proceed without their presence. 32 In
contrast, a necessary party is one whose presence in the proceedings is necessary to adjudicate the
whole controversy but whose interest is separable such that a final decree can be made in their absence
without affecting them.33

In the instant case, the action for prohibition seeks to enjoin the city government of Parañaque from
The petition is without merit.
proceeding with its implementation of the road construction project. The State is neither a necessary nor
an indispensable party to an action where no positive act shall be required from it or where no obligation
An action for injunction is brought specifically to restrain or command the performance of an act. 24 It is shall be imposed upon it, such as in the case at bar. Neither would it be an indispensable party if none of
distinct from the ancillary remedy of preliminary injunction, which cannot exist except only as part or as its properties shall be divested nor any of its rights infringed.
an incident to an independent action or proceeding. Moreover, in an action for injunction, the auxiliary
remedy of a preliminary prohibitory or mandatory injunction may issue. 25
We also find that the character of possession and ownership by the respondents over the contested land
entitles them to the avails of the action.
In the case at bar, respondents filed an action for injunction to prevent the local government of
Parañaque City from proceeding with the construction of an access road that will traverse through a
A right in esse means a clear and unmistakable right. 34 A party seeking to avail of an injunctive relief must
parcel of land which they claim is owned by them by virtue of acquisitive prescription.
prove that he or she possesses a right in esse or one that is actual or existing. 35 It should not be
contingent, abstract, or future rights, or one which may never arise. 36
Petitioners, however, argue that since the creek, being a tributary of the river, is classified as part of the
public domain, any land that may have formed along its banks through time should also be considered as
In the case at bar, respondents assert that their predecessor-in-interest, Pedro Vitalez, had occupied and
possessed the subject lot as early as 1930. In 1964, respondent Mario Ebio secured a permit from the
local government of Parañaque for the construction of their family dwelling on the said lot. In 1966, Pedro
executed an affidavit of possession and occupancy allowing him to declare the property in his name for
taxation purposes. Curiously, it was also in 1966 when Guaranteed Homes, Inc., the registered owner of
Road Lot No. 8 (RL 8) which adjoins the land occupied by the respondents, donated RL 8 to the local
government of Parañaque.
From these findings of fact by both the trial court and the Court of Appeals, only one conclusion can be
made: that for more than thirty (30) years, neither Guaranteed Homes, Inc. nor the local government of
Parañaque in its corporate or private capacity sought to register the accreted portion. Undoubtedly,
respondents are deemed to have acquired ownership over the subject property through prescription.
Respondents can assert such right despite the fact that they have yet to register their title over the said
lot. It must be remembered that the purpose of land registration is not the acquisition of lands, but only
the registration of title which the applicant already possessed over the land. Registration was never
intended as a means of acquiring ownership.37 A decree of registration merely confirms, but does not
confer, ownership.38
Did the filing of a sales patent application by the respondents, which remains pending before the DENR,
estop them from filing an injunction suit?
We answer in the negative.
Confirmation of an imperfect title over a parcel of land may be done either through judicial proceedings or
through administrative process. In the instant case, respondents admitted that they opted to confirm their
title over the property administratively by filing an application for sales patent.
Respondents’ application for sales patent, however, should not be used to prejudice or derogate what
may be deemed as their vested right over the subject property. The sales patent application should
instead be considered as a mere superfluity particularly since ownership over the land, which they seek
to buy from the State, is already vested upon them by virtue of acquisitive prescription. Moreover, the
State does not have any authority to convey a property through the issuance of a grant or a patent if the
land is no longer a public land. 39
Nemo dat quod dat non habet. No one can give what he does not have. Such principle is equally
applicable even against a sovereign entity that is the State.
WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007 Decision, as well as the
July 8, 2007 Resolution, of the Court of Appeals in CA-G.R. SP No. 91350 are hereby AFFIRMED.
With costs against petitioners.
SO ORDERED.
G.R. No. 160347 November 29, 2006
ARCADIO and MARIA LUISA CARANDANG, Petitioners,
vs.
HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN, VICTOR DE GUZMAN,
REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and QUIRINO DE GUZMAN, JR., Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari assailing the Court of Appeals Decision 1 and Resolution
affirming the Regional Trial Court (RTC) Decision rendering herein petitioners Arcadio and Luisa
Carandang [hereinafter referred to as spouses Carandang] jointly and severally liable for their loan to
Quirino A. de Guzman.
The Court of Appeals summarized the facts as follows:
[Quirino de Guzman] and [the Spouses Carandang] are stockholders as well as corporate officers of
Mabuhay Broadcasting System (MBS for brevity), with equities at fifty four percent (54%) and forty six
percent (46%) respectively.
On November 26, 1983, the capital stock of MBS was increased, from ₱500,000 to P1.5 million and
₱345,000 of this increase was subscribed by [the spouses Carandang]. Thereafter, on March 3, 1989,
MBS again increased its capital stock, from ₱1.5 million to ₱3 million, [the spouses Carandang] yet again
subscribed to the increase. They subscribed to ₱93,750 worth of newly issued capital stock.
[De Guzman] claims that, part of the payment for these subscriptions were paid by him, ₱293,250 for the
November 26, 1983 capital stock increase and ₱43,125 for the March 3, 1989 Capital Stock increase or a
total of ₱336,375. Thus, on March 31, 1992, [de Guzman] sent a demand letter to [the spouses
Carandang] for the payment of said total amount.
[The spouses Carandang] refused to pay the amount, contending that a pre-incorporation agreement was
executed between [Arcadio Carandang] and [de Guzman], whereby the latter promised to pay for the
stock subscriptions of the former without cost, in consideration for [Arcadio Carandang’s] technical
expertise, his newly purchased equipment, and his skill in repairing and upgrading radio/communication
equipment therefore, there is no indebtedness on their part [sic].
On June 5, 1992, [de Guzman] filed his complaint, seeking to recover the ₱336,375 together with
damages. After trial on the merits, the trial court disposed of the case in this wise:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of [de Guzman]. Accordingly,
[the spouses Carandang] are ordered to jointly and severally pay [de Guzman], to wit:
(1) ₱336,375.00 representing [the spouses Carandang’s] loan to de Guzman;
(2) interest on the preceding amount at the rate of twelve percent (12%) per annum from June
5, 1992 when this complaint was filed until the principal amount shall have been fully paid;
(3) ₱20,000.00 as attorney’s fees;
(4) Costs of suit.
The spouses Carandang appealed the RTC Decision to the Court of Appeals, which affirmed the same in
the 22 April 2003 assailed Decision:
WHEREFORE, in view of all the foregoing the assailed Decision is hereby AFFIRMED. No costs. 2
The Motion for Reconsideration filed by the spouses Carandang was similarly denied by the Court of
Appeals in the 6 October 2003 assailed Resolution:
WHEREFORE, in view thereof, the motion for reconsideration is hereby DENIED and our Decision of
April 22, 2003, which is based on applicable law and jurisprudence on the matter is hereby AFFIRMED
and REITERATED.3
The spouses Carandang then filed before this Court the instant Petition for Review on Certiorari, bringing
forth the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
FAILING TO STRICTLY COMPLY WITH SECTION 16, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING
THAT THERE IS AN ALLEGED LOAN FOR WHICH PETITIONERS ARE LIABLE, CONTRARY TO
EXPRESS PROVISIONS OF BOOK IV, TITLE XI, OF THE NEW CIVIL CODE PERTAINING TO LOANS.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE RESPONDENTS WERE ABLE TO DISCHARGE THEIR BURDEN OF PROOF, IN COMPLETE
DISREGARD OF THE REVISED RULES ON EVIDENCE.
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT FAILED TO APPLY SECTIONS 2 AND 7, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
V.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE PURPORTED LIABILITY OF PETITIONERS ARE JOINT AND SOLIDARY, IN VIOLATION OF
ARTICLE 1207 OF THE NEW CIVIL CODE. 4
Whether or not the RTC Decision is void for failing to comply with Section 16, Rule 3 of the Rules of
Court
The spouses Carandang claims that the Decision of the RTC, having been rendered after the death of
Quirino de Guzman, is void for failing to comply with Section 16, Rule 3 of the Rules of Court, which
provides:
SEC. 16. Death of party; duty of counsel. – Whenever a party to a pending action dies, and the claim is
not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after
such death of the fact thereof, and to give the name and address of his legal representative or
representatives. Failure of counsel to comply with this duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator and the court may appoint a guardian ad litem for the minor
heirs.
The court shall forthwith order the legal representative or representatives to appear and be substituted
within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail
to appear within the specified period, the court may order the opposing party, within a specified time, to
procure the appointment of an executor or administrator for the estate of the deceased and the latter
shall immediately appear for and on behalf of the deceased. The court charges in procuring such
appointment, if defrayed by the opposing party, may be recovered as costs.
The spouses Carandang posits that such failure to comply with the above rule renders void the decision
of the RTC, in adherence to the following pronouncements in Vda. de Haberer v. Court of Appeals 5 and
Ferreria v. Vda. de Gonzales6 :
Thus, it has been held that when a party dies in an action that survives and no order is issued by the
court for the appearance of the legal representative or of the heirs of the deceased in substitution of the
deceased, and as a matter of fact no substitution has ever been effected, the trial held by the court
without such legal representatives or heirs and the judgment rendered after such trial are null and void
because the court acquired no jurisdiction over the persons of the legal representatives or of the heirs
upon whom the trial and judgment would be binding. 7
In the present case, there had been no court order for the legal representative of the deceased to appear,
nor had any such legal representative appeared in court to be substituted for the deceased; neither had
the complainant ever procured the appointment of such legal representative of the deceased, including
appellant, ever asked to be substituted for the deceased. As a result, no valid substitution was effected,
consequently, the court never acquired jurisdiction over appellant for the purpose of making her a party to
the case and making the decision binding upon her, either personally or as a representative of the estate
of her deceased mother.8
However, unlike jurisdiction over the subject matter which is conferred by law and is not subject to the
discretion of the parties,9 jurisdiction over the person of the parties to the case may be waived either
expressly or impliedly.10Implied waiver comes in the form of either voluntary appearance or a failure to
object.11
In the cases cited by the spouses Carandang, we held that there had been no valid substitution by the
heirs of the deceased party, and therefore the judgment cannot be made binding upon them. In the case
at bar, not only do the heirs of de Guzman interpose no objection to the jurisdiction of the court over their
persons; they are actually claiming and embracing such jurisdiction. In doing so, their waiver is not even
merely implied (by their participation in the appeal of said Decision), but express (by their explicit
espousal of such view in both the Court of Appeals and in this Court). The heirs of de Guzman had no
objection to being bound by the Decision of the RTC.
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal defense which can only
be asserted by the party who can thereby waive it by silence.
It also pays to look into the spirit behind the general rule requiring a formal substitution of heirs. The
underlying principle therefor is not really because substitution of heirs is a jurisdictional requirement, but
because non-compliance therewith results in the undeniable violation of the right to due process of those
who, though not duly notified of the proceedings, are substantially affected by the decision rendered
therein.12 Such violation of due process can only be asserted by the persons whose rights are claimed to
have been violated, namely the heirs to whom the adverse judgment is sought to be enforced.
Care should, however, be taken in applying the foregoing conclusions. In People v. Florendo, 13 where we
likewise held that the proceedings that took place after the death of the party are void, we gave another
reason for such nullity: "the attorneys for the offended party ceased to be the attorneys for the deceased
upon the death of the latter, the principal x x x." Nevertheless, the case at bar had already been
submitted for decision before the RTC on 4 June 1998, several months before the passing away of de
Guzman on 19 February 1999. Hence, no further proceedings requiring the appearance of de Guzman’s
counsel were conducted before the promulgation of the RTC Decision. Consequently, de Guzman’s
counsel cannot be said to have no authority to appear in trial, as trial had already ceased upon the death
of de Guzman.
In sum, the RTC Decision is valid despite the failure to comply with Section 16, Rule 3 of the Rules of
Court, because of the express waiver of the heirs to the jurisdiction over their persons, and because
there had been, before the promulgation of the RTC Decision, no further proceedings requiring the
appearance of de Guzman’s counsel.
Before proceeding with the substantive aspects of the case, however, there is still one more procedural
issue to tackle, the fourth issue presented by the spouses Carandang on the non-inclusion in the
complaint of an indispensable party.
Whether or not the RTC should have dismissed the case for failure to state a cause of action, considering
that Milagros de Guzman, allegedly an indispensable party, was not included as a party-plaintiff
The spouses Carandang claim that, since three of the four checks used to pay their stock subscriptions
were issued in the name of Milagros de Guzman, the latter should be considered an indispensable party.
Being such, the spouses Carandang claim, the failure to join Mrs. de Guzman as a party-plaintiff should
cause the dismissal of the action because "(i)f a suit is not brought in the name of or against the real
party in interest, a motion to dismiss may be filed on the ground that the complaint states no cause of
action."14
The Court of Appeals held:
We disagree. The joint account of spouses Quirino A de Guzman and Milagros de Guzman from which
the four (4) checks were drawn is part of their conjugal property and under both the Civil Code and the
Family Code the husband alone may institute an action for the recovery or protection of the spouses’
conjugal property.
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that "x x x Under the New Civil
Code, the husband is the administrator of the conjugal partnership. In fact, he is the sole administrator,
and the wife is not entitled as a matter of right to join him in this endeavor. The husband may defend the
conjugal partnership in a suit or action without being joined by the wife. x x x Under the Family Code, the
administration of the conjugal property belongs to the husband and the wife jointly. However, unlike an
act of alienation or encumbrance where the consent of both spouses is required, joint management or
administration does not require that the husband and wife always act together. Each spouse may validly
exercise full power of management alone, subject to the intervention of the court in proper cases as
provided under Article 124 of the Family Code. x x x."
The Court of Appeals is correct. Petitioners erroneously interchange the terms "real party in interest" and
"indispensable party." A real party in interest is the party who stands to be benefited or injured by the
judgment of the suit, or the party entitled to the avails of the suit. 15 On the other hand, an indispensable
party is a party in interest without whom no final determination can be had of an action, 16 in contrast to a
necessary party, which is one who is not indispensable but who ought to be joined as a party if complete
relief is to be accorded as to those already parties, or for a complete determination or settlement of the
claim subject of the action.17
The spouses Carandang are indeed correct that "(i)f a suit is not brought in the name of or against the
real party in interest, a motion to dismiss may be filed on the ground that the complaint states no cause of
action."18 However, what dismissal on this ground entails is an examination of whether the parties
presently pleaded are interested in the outcome of the litigation, and not whether all persons interested in
such outcome are actually pleaded. The latter query is relevant in discussions concerning indispensable
and necessary parties, but not in discussions concerning real parties in interest. Both indispensable and
necessary parties are considered as real parties in interest, since both classes of parties stand to be
benefited or injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3 August
1988. As they did not execute any marriage settlement, the regime of conjugal partnership of gains
govern their property relations.19
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.20 Credits are personal properties,21 acquired during the time the loan or other credit
transaction was executed. Therefore, credits loaned during the time of the marriage are presumed to be
conjugal property.
Consequently, assuming that the four checks created a debt for which the spouses Carandang are liable,
such credits are presumed to be conjugal property. There being no evidence to the contrary, such
presumption subsists. As such, Quirino de Guzman, being a co-owner of specific partnership
property,22 is certainly a real party in interest. Dismissal on the ground of failure to state a cause of action,
by reason that the suit was allegedly not brought by a real party in interest, is therefore unwarranted.
So now we come to the discussion concerning indispensable and necessary parties. When an
indispensable party is not before the court, the action should likewise be dismissed. 23 The absence of an
indispensable party renders all subsequent actuations of the court void, for want of authority to act, not
only as to the absent parties but even as to those present. 24 On the other hand, the non-joinder of
necessary parties do not result in the dismissal of the case. Instead, Section 9, Rule 3 of the Rules of
Court provides for the consequences of such non-joinder:
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.
Non-compliance with the order for the inclusion of a necessary party would not warrant the dismissal of
the complaint. This is an exception to Section 3, Rule 17 which allows the dismissal of the complaint for
failure to comply with an order of the court, as Section 9, Rule 3 specifically provides for the effect of such
non-inclusion: it shall 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. Section 11, Rule 3 likewise
provides that the non-joinder of parties is not a ground for the dismissal of the action.
Other than the indispensable and necessary parties, there is a third set of parties: the pro-forma parties,
which are those who are required to be joined as co-parties in suits by or against another party as may
be provided by the applicable substantive law or procedural rule. 25 An example is provided by Section 4,
Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided by law.
Pro-forma parties can either be indispensable, necessary or neither indispensable nor necessary. The
third case occurs if, for example, a husband files an action to recover a property which he claims to be
part of his exclusive property. The wife may have no legal interest in such property, but the rules
nevertheless require that she be joined as a party.
In cases of pro-forma parties who are neither indispensable nor necessary, the general rule under
Section 11, Rule 3 must be followed: such non-joinder is not a ground for dismissal. Hence, in a case
concerning an action to recover a sum of money, we held that the failure to join the spouse in that case
was not a jurisdictional defect.26 The non-joinder of a spouse does not warrant dismissal as it is merely a
formal requirement which may be cured by amendment. 27
Conversely, in the instances that the pro-forma parties are also indispensable or necessary parties, the
rules concerning indispensable or necessary parties, as the case may be, should be applied. Thus,
dismissal is warranted only if the pro-forma party not joined in the complaint is an indispensable party.
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 superceded:
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. Hular28 and Adlawan v. Adlawan,29 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,30 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. 31
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. 32
We therefore hold that Milagros de Guzman is not an indispensable party in the action for the recovery of
the allegedly loaned money to the spouses Carandang. As such, she need not have been impleaded in
said suit, and dismissal of the suit is not warranted by her not being a party thereto.
Whether or not respondents were able to prove the loan sought to be collected from petitioners
In the second and third issues presented by the spouses Carandang, they claim that the de Guzmans
failed to prove the alleged loan for which the spouses Carandang were held liable. As previously stated,
spouses Quirino and Milagros de Guzman paid for the stock subscriptions of the spouses Carandang,
amounting to ₱336,375.00. The de Guzmans claim that these payments were in the form of loans and/or
advances and it was agreed upon between the late Quirino de Guzman, Sr. and the spouses Carandang
that the latter would repay him. Petitioners, on the other hand, argue that there was an oral pre-
incorporation agreement wherein it was agreed that Arcardio Carandang would always maintain his 46%
equity participation in the corporation even if the capital structures were increased, and that Quirino de
Guzman would personally pay the equity shares/stock subscriptions of Arcardio Carandang with no cost
to the latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth assigned error that [the de Guzmans] failed to prove by
preponderance of evidence, either the existence of the purported loan or the non-payment thereof.
Simply put, preponderance of evidence means that the evidence as a whole adduced by one side is
superior to that of the other. The concept of preponderance of evidence refers to evidence that is of
greater weight, or more convincing, than that which is offered in opposition to it; it means probability of
truth.
[The spouses Carandang] admitted that it was indeed [the de Guzmans] who paid their stock
subscriptions and their reason for not reimbursing the latter is the alleged pre-incorporation agreement, to
which they offer no clear proof as to its existence.
It is a basic rule in evidence that each party must prove his affirmative allegation. Thus, the plaintiff or
complainant has to prove his affirmative allegations in the complaints and the defendant or respondent
has to prove the affirmative allegations in his affirmative defenses and counterclaims. 33
The spouses Carandang, however, insist that the de Guzmans have not proven the loan itself, having
presented evidence only of the payment in favor of the Carandangs. They claim:
It is an undeniable fact that payment is not equivalent to a loan. For instance, if Mr. "A" decides to pay for
Mr. "B’s" obligation, that payment by Mr. "A" cannot, by any stretch of imagination, possibly mean that
there is now a loan by Mr. "B" to Mr. "A". There is a possibility that such payment by Mr. "A" is purely out
of generosity or that there is a mutual agreement between them. As applied to the instant case, that
mutual agreement is the pre-incorporation agreement (supra) existing between Mr. de Guzman and the
petitioners --- to the effect that the former shall be responsible for paying stock subscriptions of the latter.
Thus, when Mr. de Guzman paid for the stock subscriptions of the petitioners, there was no loan to speak
of, but only a compliance with the pre-incorporation agreement. 34
The spouses Carandang are mistaken. If indeed a Mr. "A" decides to pay for a Mr. "B’s" obligation, the
presumption is that Mr. "B" is indebted to Mr. "A" for such amount that has been paid. This is pursuant to
Articles 1236 and 1237 of the Civil Code, which provide:
Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no
interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he paid
without the knowledge or against the will of the debtor, he can recover only insofar as the payment has
been beneficial to the debtor.
Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the latter,
cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage,
guarantee, or penalty.
Articles 1236 and 1237 are clear that, even in cases where the debtor has no knowledge of payment by a
third person, and even in cases where the third person paid against the will of the debtor, such payment
would produce a debt in favor of the paying third person. In fact, the only consequences for the failure to
inform or get the consent of the debtor are the following: (1) the third person can recover only insofar as
the payment has been beneficial to the debtor; and (2) the third person is not subrogated to the rights of
the creditor, such as those arising from a mortgage, guarantee or penalty. 35
We say, however, that this is merely a presumption. By virtue of the parties’ freedom to contract, the
parties could stipulate otherwise and thus, as suggested by the spouses Carandang, there is indeed a
possibility that such payment by Mr. "A" was purely out of generosity or that there was a mutual
agreement between them. But such mutual agreement, being an exception to presumed course of events
as laid down by Articles 1236 and 1237, must be adequately proven.
The de Guzmans have successfully proven their payment of the spouses Carandang’s stock
subscriptions. These payments were, in fact, admitted by the spouses Carandang. Consequently, it is
now up to the spouses Carandang to prove the existence of the pre-incorporation agreement that was
their defense to the purported loan.
Unfortunately for the spouses Carandang, the only testimony which touched on the existence and
substance of the pre-incorporation agreement, that of petitioner Arcardio Carandang, was stricken off the
record because he did not submit himself to a cross-examination of the opposing party. On the other
hand, the testimonies of Romeo Saavedra, 36 Roberto S. Carandang,37 Gertrudes Z. Esteban,38 Ceferino
Basilio,39 and Ma. Luisa Carandang40touched on matters other than the existence and substance of the
pre-incorporation agreement. So aside from the fact that these witnesses had no personal knowledge as
to the alleged existence of the pre-incorporation agreement, the testimonies of these witnesses did not
even mention the existence of a pre-incorporation agreement.
Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa Carandang even contradicted the
existence of a pre-incorporation agreement because when they were asked by their counsel regarding
the matter of the check payments made by the late Quirino A. de Guzman, Sr. in their behalf, they said
that they had already paid for it thereby negating their own defense that there was a pre-incorporation
agreement excusing themselves from paying Mr. de Guzman the amounts he advanced or loaned to
them. This basic and irrefutable fact can be gleaned from their testimonies which the private respondents
are quoting for easy reference:
a. With respect to the testimony of Ma. Luisa Carandang
Q: Now, can you tell this Honorable Court how do you feel with respect to the Complaint of the plaintiff in
this case charging you that you paid for this year and asking enough to paid (sic) your tax?
A: We have paid already, so, we are not liable for anything payment (sic). 41
b. With respect to the testimony of Arcadio Carandang
"Q: How much?
A: ₱40,000.00 to ₱50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there were receipts issued for the payment
of your shares; which receipts were marked as Exhibits "G" to "L" (Plaintiff).
I’m showing to you these receipts so marked by the plaintiff as their exhibits which were issued in the
name of Ma. Luisa Carandang, your wife; and also, Arcadio M. Carandang. Will you please go over this
Official Receipt and state for the records, who made for the payment stated in these receipts in your
name?
A: I paid for those shares."42
There being no testimony or documentary evidence proving the existence of the pre-incorporation
agreement, the spouses Carandang are forced to rely upon an alleged admission by the original plaintiff
of the existence of the pre-incorporation agreement.
Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the existence of the pre-
incorporation agreement by virtue of paragraphs 13 and 14 of their Answer and paragraph 4 of private
respondents’ Reply.
Paragraphs 13 and 14 of petitioners’ Answer dated 7 July 1992 state in full:
13. Sometime in November, 1973 or thereabout, herein plaintiff invited defendant Arcadio M. Carandang
to a joint venture by pooling together their technical expertise, equipments, financial resources and
franchise. Plaintiff proposed to defendant and mutually agreed on the following:
1. That they would organize a corporation known as Mabuhay Broadcasting Systems, Inc.
2. Considering the technical expertise and talent of defendant Arcadio M. Carandang and his
new equipments he bought, and his skill in repairing and modifying radio/communication
equipments into high proficiency, said defendant would have an equity participation in the
corporation of 46%, and plaintiff 54% because of his financial resources and franchise.
3. That defendant would always maintain his 46% equity participation in the corporation even
if the capital structures are increased, and that plaintiff would personally pay the equity
shares/stock subscriptions of defendant with no cost to the latter.
4. That because of defendant’s expertise in the trade including the marketing aspects, he
would be the President and General Manager, and plaintiff the Chairman of the Board.
5. That considering their past and trustworthy relations, they would maintain such relations in
the joint venture without any mental reservation for their common benefit and success of the
business.
14. Having mutually agreed on the above arrangements, the single proprietorship of plaintiff
was immediately spun-off into a corporation now known as Mabuhay Broadcasting System,
Inc. The incorporators are plaintiff and his family members/nominees controlling jointly 54% of
the stocks and defendant Arcadio M. Carandang controlling singly 46% as previously
agreed.43
Meanwhile, paragraphs 3 and 4 of private respondents’ Reply dated 29 July 1992 state in full:
3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer only insofar the plaintiff and defendant
Arcadio M. Carandang organized a corporation known as Mabuhay Broadcasting Systems, Inc. Plaintiff
specifically denies the other allegations in paragraph 13 of the Answer, the same being devoid of any
legal or factual bases. The truth of the matter is that defendant Arcadio M. Carandang was not able to
pay plaintiff the agreed amount of the lease for a number of months forcing the plaintiff to terminate
lease. Additionally, the records would show that it was the defendant Arcadio M. Carandang who
proposed a joint venture with the plaintiff.
It appears that plaintiff agreed to the formation of the corporation principally because of a directive of then
President Marcos indicating the need to broaden the ownership of radio broadcasting stations. The
plaintiff owned the franchise, the radio transmitter, the antenna tower, the building containing the radio
transmitter and other equipment. Verily, he would be placed in a great disadvantage if he would still have
to personally pay for the shares of defendant Arcadio M. Carandang.
4. Plaintiff admits the allegations in paragraph 14 of the Answer. 44
In effect, the spouses Carandang are relying on the fact that Quirino de Guzman stated that he admitted
paragraph 14 of the Answer, which incidentally contained the opening clause "(h)aving mutually agreed
on the above arrangements, x x x."
Admissions, however, should be clear and unambiguous. This purported admission by Quirino de
Guzman reeks of ambiguity, as the clause "(h)aving mutually agreed on the above arrangements," seems
to be a mere introduction to the statement that the single proprietorship of Quirino de Guzman had been
converted into a corporation. If Quirino de Guzman had meant to admit paragraph 13.3, he could have
easily said so, as he did the other paragraphs he categorically admitted. Instead, Quirino de Guzman
expressly stated the opposite: that "(p)laintiff specifically denies the other allegations of paragraph 13 of
the Answer."45 The Reply furthermore states that the only portion of paragraph 13 which Quirino de
Guzman had admitted is paragraph 13.1, and only insofar as it said that Quirino de Guzman and Arcardio
Carandang organized Mabuhay Broadcasting Systems, Inc. 46
All the foregoing considered, we hold that Quirino de Guzman had not admitted the alleged pre-
incorporation agreement. As there was no admission, and as the testimony of Arcardio Carandang was
stricken off the record, we are constrained to rule that there was no pre-incorporation agreement
rendering Quirino de Guzman liable for the spouses Carandang’s stock subscription. The payment by the
spouses de Guzman of the stock subscriptions of the spouses Carandang are therefore by way of loan
which the spouses Carandang are liable to pay.1âwphi1
Whether or not the liability of the spouses Carandang is joint and solidary
Finally, the Court of Appeals also upheld the RTC Decision insofar as it decreed a solidary liability.
According to the Court of Appeals:
With regards (sic) the tenth assigned error, [the spouses Carandang] contend that:
"There is absolutely no evidence, testimonial or documentary, showing that the purported obligation of
[the spouses Carandang] is joint and solidary. x x x
"Furthermore, the purported obligation of [the spouses Carandang] does not at all qualify as one of the
obligations required by law to be solidary x x x."
It is apparent from the facts of the case that [the spouses Carandang] were married way before the
effectivity of the Family Code hence; their property regime is conjugal partnership under the Civil Code.
It must be noted that for marriages governed by the rules of conjugal partnership of gains, an obligation
entered into by the husband and wife is chargeable against their conjugal partnership and it is the
partnership, which is primarily bound for its repayment. Thus, when the spouses are sued for the
enforcement of the obligation entered into by them, they are being impleaded in their capacity as
representatives of the conjugal partnership and not as independent debtors, such that the concept of joint
and solidary liability, as between them, does not apply. 47
The Court of Appeals is correct insofar as it held that when the spouses are sued for the enforcement of
the obligation entered into by them, they are being impleaded in their capacity as representatives of the
conjugal partnership and not as independent debtors. Hence, either of them may be sued for the whole
amount, similar to that of a solidary liability, although the amount is chargeable against their conjugal
partnership property. Thus, in the case cited by the Court of Appeals, Alipio v. Court of Appeals, 48 the two
sets of defendant-spouses therein were held liable for ₱25,300.00 each, chargeable to their respective
conjugal partnerships.
WHEREFORE, the Decision of the Court of Appeals, affirming the judgment rendered against the
spouses Carandang, is hereby AFFIRMED with the following MODIFICATION: The spouses Carandang
are ORDERED to pay the following amounts from their conjugal partnership properties:
(1) ₱336,375.00 representing the spouses Carandang’s loan to Quirino de Guzman; and
(2) Interest on the preceding amount at the rate of twelve percent (12%) per annum from 5
June 1992 when the complaint was filed until the principal amount can be fully paid; and
(3) ₱20,000.00 as attorney’s fees.
No costs.
SO ORDERED.
G.R. No. L-72714 June 29, 1989
MELECIO V. EMATA, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. DANIEL C. MACARAEG in his capacity as
Presiding Judge of Branch LV, Regional Trial Court of Manila and SERVICEWIDE SPECIALISTS.
INC., respondents.
On July 18, 1985 the then Intermediate Appellate Court promulgated a decision in AC-G.R. CV No.
02939-R 1affirming in toto the decision of the Regional Trial Court of Manila, Branch LV, in Civil Case No.
141977 2 an action for replevin and damages.
The factual antecedents culminating in and constituting the bases of both decisions had their inchoation
in petitioner's purchase of a car on installment from Violago Motor Sales Corporation (Violago, for brevity)
with a down payment of P 14,982.00. Petitioner likewise executed in favor of the seller a promissory note
and a chattel mortgage over the car as security for the payment of the note. Said promissory note
provides:
For value received, I/We, jointly and severally promise to pay VIOLAGO MOTOR
SALES CORPORATION or order, at its office in the (sic) San Fernando,
Pampanga the principal sum of fifty seven thousand two hundred four pesos only
(P 57,204.00) Philippine currency, which amount includes interest at 12% per
annum based on the diminishing balance, the said principal sum, to be payable,
without need of notice or demand, in installments of the amounts following and at
the dates hereinafter set forth, to wit: P 1,589.00 monthly for 36 months due and
payable on the 25th day of each month starting SEPTEMBER 25, 1978 thru and
inclusive of AUGUST 25, 1981 ..., provided that interest at 14% per annum shall
be added on each unpaid installment from maturity hereof until fully paid. 3
Thus, the total amount that the petitioner was supposed to pay was P 72,186.00, with P 57,204.00 as the
balance after deducting the down payment. The total amount payable was P 22,246.00 more than the
"list cash price" of P 49,940.00 for said vehicle.
After the execution of said documents, Violago endorsed the promissory note and assigned the chattel
mortgage to Filinvest Credit Corporation (hereafter, Filinvest for short) upon payment by the latter of P
34,958.00, the unpaid balance of the list cash price of the car. Three years later, Filinvest assigned to
private respondent Servicewide Specialists, Inc. the remaining installment balance due on and
corresponding to the period from February 25, 1981 to August 25, 1981.
Alleging non-payment of five (5) consecutive installments from February 25 to June 25, 1981, private
respondent initiated the case in the trial court for a writ of replevin to effect the seizure of the car or,
alternatively, for the payment by petitioner of the sum of P 1,332.40, with interest thereon of fourteen
percent (14%) per annum from July 10, 1981 until fully paid and, additionally, for attorney's fees and
costs of suit.
Herein petitioner, in answer thereto and as summarized by the court a quo, alleged that "the promissory
note does not express the true intent and agreement of the parties, the same having been procured
through fraud, deceit, trickery and misrepresentation, that the chattel mortgage was intended to secure
the payment of P 34,958.00 which was the unpaid balance of the purchase price of the Toyota car; that
he was made to sign the note and the mortgage in blank; that he has paid, and even overpaid, Filinvest
by P 9,388.22; that the promissory note by inflating its value and charging more than the prescribed rates
in violation of the Financing Company Act (Republic Act No. 5980) violates the Usury Law; that the note
and the mortgage are null and void; and that the demand set forth in the complaint has long been
extinguished." 4 Furthermore, petitioner claimed that Filinvest, aside from charging usurious interest as
earlier stated, violated the provisions of the Truth in Lending Act (Republic Act No. 3765) for failure to
provide him a copy of the disclosure statement containing entries required by said law. He consequently
set up a counterclaim against Filinvest for various items of damages and attorney's fees all amounting to
more than P 1,100,000.00. 5
On November 5, 1981, petitioner filed a "Motion to Implead Filinvest Credit Corporation" on the theory
that "for all legal purposes the corporation sought to be impleaded is the real party in interest" because it
retained interest over the balance of the petitioner's account in spite of its assignment to private
respondent. 6 An opposition thereto was filed by private respondent corporation on January 18, 1982. 7
Subsequently, in its order of April 26, 1982, the court below held in abeyance the pre-trial hearing of the
case since, "(u)pon motion of Atty. Melecio Virgilio Emata," said petitioner was given a "Period of fifteen
(15) days to file the third-party complaint against the third party defendant (Filinvest)." 8 Petitioner ,
however, did not file any third-party complaint, hence the trial court set the case for pre-trial on May 3,
1983, it being understood that petitioner was no longer interested in impleading the herein private
respondent as a third-party defendant therein.
On May 2, 1983, petitioner filed an urgent motion to cancel the scheduled pre-trial and the trial court
reset the same to June 9, 1983. Another motion for postponement of the scheduled pre-trial filed by
petitioner on June 8, 1983 was denied by the lower court, which consequently issued an order declaring
petitioner as in default for failure to appear at the pre-trial of June 9, 1983. Respondent corporation was
then allowed to present evidence ex parte despite an opposition of petitioner.
However, upon a subsequent motion of petitioner, in its order of August 17, 1983 the trial court not only
lifted the default order but also allowed him to cross-examine private respondent's sole witness "as a last
opportunity to adduce evidence in support of the material allegations of his answer." The same order
declared that the order of April 26, 1982, hereinbefore stated, must be maintained since petitioner had
opted not to comply therewith, hence his motion to implead Filinvest was in effect already resolved in said
order of April 26, 1982. 9
At the continuation of the trial on September 1, 1983, the court a quo, in order to 587654321 simplify the
proceedings, allowed both parties to submit their respective lists of payments made by petitioner to
respondent corporation, with the court determining the proper application of each payment. The parties
then filed their respective memoranda and submitted the case for decision.
On March 6, 1984, judgment was rendered by the trial court as follows:
WHEREFORE, premises considered, judgment is hereby rendered against the
defendant and in favor of the plaintiff, ordering the former to deliver to the latter
the Toyota Car hereinabove described, or to pay the latter the sum of P 11,332.40,
plus interest thereon at the rate of 14% per annum.
In either case, the defendant is also ordered to pay the plaintiff the following
sums: P 2,800.00 as attorney's fees and P 424.50 as bonding fees.
Should the defendant fail to satisfy, or comply with the foregoing, his bondsman or
surety, Sanpiro Insurance Corporation, shall be hable therefor in accordance with
the counter-bond.
10
With costs against the defendant.
Petitioner takes exception to respondent court's affirmance of said decision, hence this petition. Petitioner
raises both procedural and substantive issues. Initially, he complains that the trial court erred in requiring
him to file a third- party complaint against Filinvest, instead of impleading the latter either as party plaintiff
or defendant. 11 He insists that Filinvest is the real party in interest in the present case and it should be
impleaded under Rule 3 of the Rules of Court which 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.
Sec. 11. Misjoinder and non-joinder of parties. -Misjoinder of parties is not 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 party may be severed and proceeded
with separately.
which he complements with a provision in Rule 6, to wit:
Sec. 14. Bringing new parties. When the presence of parties other than those to
the original action is required for the granting of complete relief in the
determination of a counterclaim or cross-claim, the court shall order them to be
brought in as defendants if jurisdiction over them can be obtained.
Concededly, additional parties may be brought in under the above-quoted provisions of the Rules. A third-
party complaint, however, is not to be eschewed or disregarded in the procedural scheme since it may, in
fact, be the very vehicle for impleading a third person as a party to the case. Thus, for purposes of
Section 14 of Rule 6, above quoted, the court may authorize the filing of the proper third-party complaint
to implead the other parties not included in the original complaint, in keeping with the injunction that "all
pleadings shall be liberally construed so as to do substantial justice." 12
We reject petitioner's complaint that the order of the court a quo requiring the filing of a third-party
complaint is improper. A third- party complaint is "a claim that a defending party may, with leave of court,
file against a person not a party to the action, called the third- party defendant, for contribution, indemnity,
subrogation or any other relief in respect of his opponent's claim." 13 Obviously, a third-party complaint
against Filinvest, had petitioner filed the same, would be a claim in respect of the plaintiffs claim since the
former arises from the same transaction on which the plaintiffs claim is based, that is, the promissory
note which was eventually assigned to private respondent. 14Although the petitioner did not admit in his
answer that any amount is due from the corporation sought to be impleaded, that is not indicative of nor
does it support his thesis of the alleged impropriety of a third-party complaint. Apparently, petitioner failed
to take into consideration that the remedy is also applicable where the defendant seeks "any other relief
in respect of his opponent's claim," a remedial grant of power broad enough to include the relief he seeks
in the case at bar.
Petitioner cannot rely on the provisions of Section 10, Rule 3 which envisages a party who should be
joined as a plaintiff but who does not assent to such joinder. Obviously and necessarily, such unwilling
party must be a real party in interest. In the case at bar, Filinvest's position and the evidence thereon was
that it was not a real party in interest, as it was no longer entitled to the avails of the suit by reason of the
anterior assignment it made in favor of private respondent. Hence, at the very least, its capacity was in
issue and it would be a case of procedural petitio principii for the trial court to have categorized it as an
unwilling co-plaintiff, with the procedural consequences thereof, although such operative issue was still
unresolved. Furthermore, the option lies with the plaintiff on whether or not to join an additional party in
his complaint. The original plaintiff cannot be compelled, on the mere representations of the defendant, to
implead anyone, especially if it does not appear that such joinder is proper or is necessary for the
complete and expeditious adjudication of the case.
Nor can the general rule in Section 11, Rule 3, on the power to order the addition or dropping of a party at
any stage of action, be of solace to the petitioner. This is a power addressed to the sound discretion of
the court to be exercised on such terms as are just, and by this is meant that it must be just to all the
other parties. 15 Obviously, given the facts of this case, the trial court wisely exercised its discretion in
refusing to give in to the unjustified importunings of petitioner.
Petitioner should be reminded that the courts, as the arbiters of the rights of the parties, stand in a better
position and are clothed with ample authority to rule on the procedural measures that are proper in cases
before them. If a party believes that the order of the court is not in accordance with law, he is not without
other alternative remedial avenues. If, on the other hand, the order does not suffer from any legal
infirmities, the same is binding on the parties and to this they must submit with grace. We cannot but be
displeased with petitioner's unseemly motivation and stance when he "adopted an attitude of inaction and
completely ignored" the order of the trial court requiring the filing of a third-party complaint, especially in
view of the factual finding that it was he who manifested on April 26, 1982 that he would file said third
party complaint . 16
Apart from all these considerations, the inclusion of Filinvest would at any rate have been a useless
recourse in the light of the fact that the arguments on which this petition is moored are bereft of merit .
On the issue of usury, the present rule that usury at present is legally non-existent 17 would not apply to
the instant case. The present controversy arose before the adoption on December 3, 1982 of Resolution
No. 224 by the Central Bank Monetary Board on which the existing rule is based.
Nevertheless, the records of this case reveal that the Usury Law, Act No. 2655, is not applicable thereto.
The amount added to the cash price of the car is what is commonly known as the "time price differential"
and not interest within the meaning of the Usury Law. The law is applicable only in case of a loan or
forbearance of money, goods or credit which is not the case here. The transaction involved here being
admittedly a conditional sale based on an installment plan and not a loan, it has been held that the
alleged increase in the price of the article sold cannot be considered a mere pretext to cover a usurious
loan. "The increase in price, when the sale is on credit serves not only to cover the expenses generally
entailed by such transactions on credit, but also to encourage cash sales, so useful to commerce. It is up
to the purchaser to decide which price he prefers in making the purchase. ... if on the contrary, he prefers
to buy on credit, he cannot complain of the increase of the price demanded by the vendor. " 18
Neither is the Usury Law applicable to the assignment of indebtedness to Filinvest and to private
respondent. The Financing Company Act provides for the rate of the purchase discount that may be
availed of by a financing company. The purchase discount is defined as the "difference between the value
of the receivable purchased or credit assigned, and the net amount paid by the finance company for such
purchase or assignment, exclusive of fees, service charges, interest and other charges incident to the
extension of the credit." 19 Under Section 5 of the same Act, it is provided that:
In case of assignment of credit or the buying of installment papers, accounts
receivable and the evidences of indebtedness by financing companies, the
purchase discount, exclusive of interest and other charges, shall be limited to
fourteen per cent (14%), or such percentage as may be prescribed by the
Monetary Board of the value of the credit assigned or the value of the installment
papers, accounts .receivable and other evidences of indebtedness purchased
baged on a period of twelve months or less, and to one and one-sixth per cent (I
-1/ 6%), or such percentage as may be prescribed by the Monetary Board, for
each additional month or fraction thereof in excess of twelve months, regardless
of the terms and conditions of the assignment or purchase.
The petitioner avers that the amount of P 22,246.00, or forty-four and five-hundredths percent (44.05%),
added to the list cash price is way above the purchase discount prescribed by Republic Act No. 5980, as
well as Central Bank Circular No. 586 providing for nineteen percent (19%) per annum as the effective
rate of yield from purchase of receivables. 20 We do not have to unnecessarily clutter this decision with
unduly involved or extensively complex computations to demonstrate the incorrectness of petitioner's
position. The finding of the trial court, that the stipulated interest in the promissory note is well within the
allowable rate, is adequately supported by the evidence of record. Although, forty-four and five-
hundredths percent (44.05%) was added to the list cash price of the car, the same was actually spread
over a three-year period of amortization. Thus, whether it be fourteen percent (14%) plus one and one-
sixth percent (1-1/6%) under Republic Act No. 5980 or nineteen percent (19%) under Circular No. 586, it
is clear that the yield or purchase discount, as the case may be, is within the limits prescribed by law.
No violation of the Truth in Lending Act, Republic Act No. 3765, was established either. The disclosure
statement furnished to petitioner shows on its face that it contains all the data required by law and that it
was signed by the seller on July 31, 1978 before the assignment of the indebtedness to private
respondent. We agree with private respondent that the petitioner, a practicing lawyer for more than
twenty years, would not be so gullible or negligent as to sign documents in blank knowing fully well the
legal implications and consequences of such action . 21 Of course, petitioner does not deny that Filinvest
had nothing to do with the disclosure statement since it is the private respondent which is obligated to
furnish, as in fact it did furnish, petitioner a copy of said statement . 22
Regarding the computations of the petitioner based on the formula provided by Circular No. 158 of the
Central Bank implementing the Truth in Lending Act, 23 petitioner should not confuse "time price
differential" with the "simple annual rate" determined by the formula. "Simple annual rate" is the uniform
percentage which represents the ratio, on an annual basis, between the finance charges and the amount
to be financed. It is not the measure of the total amount that is allowed to be added to the cash price.
IN VIEW OF THE FOREGOING, no reversible error having been committed by respondent court, its
assailed decision is hereby AFFIRMED
SO ORDERED.
G.R. No. 179169 March 3, 2010
LEONIS NAVIGATION CO., INC. and WORLD MARINE PANAMA, S.A., Petitioners,
vs.
CATALINO U. VILLAMATER and/or The Heirs of the Late Catalino U. Villamater, represented herein
by Sonia Mayuyu Villamater; and NATIONAL LABOR RELATIONS COMMISSION, Respondents.
This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, seeking to annul and set
aside the Decision2 dated May 3, 2007 and the Resolution3 dated July 23, 2007 of the Court of Appeals
(CA) in CA-G.R. SP No. 85594, entitled "Leonis Navigation Co., Inc., et al. v. Catalino U. Villamater, et
al."
The antecedents of this case are as follows:
Private respondent Catalino U. Villamater (Villamater) was hired as Chief Engineer for the ship MV Nord
Monaco, owned by petitioner World Marine Panama, S.A., through the services of petitioner Leonis
Navigation Co., Inc. (Leonis), as the latter’s local manning agent. Consequent to this employment,
Villamater, on June 4, 2002, executed an employment contract, 4 incorporating the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels as
prescribed by the Philippine Overseas Employment Administration (POEA).
Prior to his deployment, Villamater underwent the required Pre-Employment Medical Examination
(PEME). He passed the PEME and was declared "Fit to Work." 5 Thereafter, Villamater was deployed on
June 26, 2002.
Sometime in October 2002, around four (4) months after his deployment, Villamater suffered intestinal
bleeding and was given a blood transfusion. Thereafter, he again felt weak, lost considerable weight, and
suffered intermittent intestinal pain. He consulted a physician in Hamburg, Germany, who advised
hospital confinement. Villamater was diagnosed with Obstructive Adenocarcinoma of the Sigmoid, with
multiple liver metastases, possibly local peritoneal carcinosis and infiltration of the bladder, possibly lung
metastasis, and anemia; Candida Esophagitis; and Chronic Gastritis. He was advised to undergo
chemotherapy and continuous supportive treatment, such as pain-killers and blood transfusion. 6
Villamater was later repatriated, under medical escort, as soon as he was deemed fit to travel. As soon
as he arrived in the Philippines, Villamater was referred to company-designated physicians. The
diagnosis and the recommended treatment abroad were confirmed. He was advised to undergo six (6)
cycles of chemotherapy. However, Dr. Kelly Siy Salvador, one of the company-designated physicians,
opined that Villamater’s condition "appears to be not work-related," but suggested a disability grading of
1.7
In the course of his chemotherapy, when no noticeable improvement occurred, Villamater filed a
complaint8 before the Arbitration Branch of the National Labor Relations Commission (NLRC) for
payment of permanent and total disability benefits in the amount of US$80,000.00, reimbursement of
medical and hospitalization expenses in the amount of ₱11,393.65, moral damages in the sum of
₱1,000,000.00, exemplary damages in the amount of ₱1,000,000.00, as well as attorney’s fees.
After the submission of the required position papers, the Labor Arbiter rendered a decision 9 dated July
28, 2003 in favor of Villamater, holding that his illness was compensable, but denying his claim for moral
and exemplary damages. The Labor Arbiter disposed as follows—
WHEREFORE, foregoing premises considered, judgment is hereby rendered declaring complainant’s
illness to be compensable and ordering respondents LEONIS NAVIGATION CO., INC. and WORLD
MARINE PANAMA, S.A. liable to pay, jointly and severally, complainant CATALINO U. VILLAMATER, the
amount of US$60,000.00 or its Philippine Peso equivalent at the time of actual payment, representing the
latter’s permanent total disability benefits plus ten percent (10%) thereof as Attorney’s Fees.
All other claims are dismissed for lack of merit.
SO ORDERED.10
Petitioners appealed to the NLRC. Villamater also filed his own appeal, questioning the award of the
Labor Arbiter and claiming that the 100% degree of disability should be compensated in the amount of
US$80,000.00, pursuant to Section 2, Article XXI of the ITF-JSU/AMOSUP Collective Bargaining
Agreement (CBA) between petitioners and Associated Marine Officers & Seamen’s Union of the
Philippines, which covered the employment contract of Villamater.
On February 4, 2004, the NLRC issued its resolution, 11 dismissing the respective appeals of both parties
and affirming in toto the decision of the Labor Arbiter.
Petitioners filed their motion for reconsideration of the February 4, 2004 resolution, but the NLRC denied
the same in its resolution dated June 15, 2004.
Aggrieved, petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before the CA.
After the filing of the required memoranda, the CA rendered its assailed May 3, 2007 Decision,
dismissing the petition. The appellate court, likewise, denied petitioners’ motion for reconsideration in its
July 23, 2007 Resolution.
Hence, this petition based on the following grounds, to wit:
First, the Court of Appeals erroneously held that [the] Commission’s Dismissal Decision does not
constitute grave abuse of discretion amounting to lack or excess of jurisdiction but mere error of
judgment, considering that the decision lacks evidentiary support and is contrary to both evidence on
record and prevailing law and jurisprudence.
Second, the Court of Appeals seriously erred in upholding the NLRC’s decision to award Grade 1
Permanent and Total Disability Benefits in favor of seaman Villamater despite the lack of factual and legal
basis to support such award, and more importantly, when it disregarded undisputed facts and substantial
evidence presented by petitioners which show that seaman Villamater’s illness was not work-related and
hence, not compensable, as provided by the Standard Terms of the POEA Contract.
Third, the Court of Appeals erred in holding that non-joinder of indispensable parties warrant the outright
dismissal of the Petition for Review on Certiorari.
Fourth, the Court of Appeals erroneously held that final and executory decisions or resolutions of the
NLRC render appeals to superior courts moot and academic.
Last, the Court of Appeals seriously erred in upholding the award of attorney’s fees considering that the
grant has neither factual nor legal basis. 12
Before delving into the merits of this petition, we deem it fit to discuss the procedural issues raised by
petitioners.
First. It is worthy to note that the CA dismissed the petition, considering that (1) the June 15, 2004
Resolution of the NLRC had already become final and executory on June 26, 2004, and the same was
already recorded in the NLRC Book of Entries of Judgments; and that (2) the award of the Labor Arbiter
was already executed, thus, the case was closed and terminated.
According to Sections 14 and 15, Rule VII of the 2005 Revised Rules of Procedure of the NLRC—
Section 14. Finality of decision of the commission and entry of judgment. – a) Finality of the Decisions,
Resolutions or Orders of the Commission. – Except as provided in Section 9 of Rule X, the decisions,
resolutions or orders of the Commission shall become final and executory after ten (10) calendar days
from receipt thereof by the parties.
b) Entry of Judgment. – Upon the expiration of the ten (10) calendar day period provided in paragraph (a)
of this Section, the decision, resolution, or order shall be entered in a book of entries of judgment.
The Executive Clerk or Deputy Executive Clerk shall consider the decision, resolution or order as final
and executory after sixty (60) calendar days from date of mailing in the absence of return cards,
certifications from the post office, or other proof of service to parties.
Section 15. Motions for reconsideration. – Motion for reconsideration of any decision, resolution or order
of the Commission shall not be entertained except when based on palpable or patent errors; provided
that the motion is under oath and filed within ten (10) calendar days from receipt of decision, resolution or
order, with proof of service that a copy of the same has been furnished, within the reglementary period,
the adverse party; and provided further, that only one such motion from the same party shall be
entertained.
Should a motion for reconsideration be entertained pursuant to this SECTION, the resolution shall be
executory after ten (10) calendar days from receipt thereof. 13
Petitioners received the June 15, 2004 resolution of the NLRC, denying their motion for reconsideration,
on June 16, 2004. They filed their petition for certiorari before the CA only on August 9, 2004, 14 or 54
calendar days from the date of notice of the June 15, 2004 resolution. Considering that the above-
mentioned 10-day period had lapsed without petitioners filing the appropriate appeal, the NLRC issued
an Entry of Judgment dated June 28, 2004.
Moreover, by reason of the finality of the June 15, 2004 NLRC resolution, the Labor Arbiter issued on July
29, 2004 a Writ of Execution.15 Consequently, Leonis voluntarily paid Villamater’s widow, Sonia M.
Villamater (Sonia), the amount of ₱3,649,800.00, with Rizal Commercial and Banking Corporation
(RCBC) Manager’s Check No. 000000855016 dated August 12, 2004, as evidenced by the
Acknowledgment Receipt17 dated August 13, 2004, and the Cheque Voucher 18 dated August 12, 2004.
Following the complete satisfaction of the judgment award, the Labor Arbiter issued an Order 19 dated
September 8, 2004 that reads—
There being complete satisfaction of the judgment award as shown by the record upon receipt of the
complainant of the amount of ₱3,649,800.00, voluntarily paid by the respondent, as full and final
satisfaction of the Writ of Execution dated July 29, 2004; and finding the same to be not contrary to law,
morals, good custom, and public policy, and pursuant to Section 14, Rule VII of the Rules of Procedure of
the National Labor Relations Commission (NLRC), this case is hereby ordered DISMISSED with
prejudice, and considered CLOSED and TERMINATED.
SO ORDERED.
Petitioners never moved for a reconsideration of this Order regarding the voluntariness of their payment
to Sonia, as well as the dismissal with prejudice and the concomitant termination of the case.
However, petitioners argued that the finality of the case did not render the petition for certiorari before the
CA moot and academic. On this point, we agree with petitioners.
In the landmark case of St. Martin Funeral Home v. NLRC,20 we ruled that judicial review of decisions of
the NLRC is sought via a petition for certiorari under Rule 65 of the Rules of Court, and the petition
should be filed before the CA, following the strict observance of the hierarchy of courts. Under Rule 65,
Section 4,21 petitioners are allowed sixty (60) days from notice of the assailed order or resolution within
which to file the petition. Thus, although the petition was not filed within the 10-day period, petitioners
reasonably filed their petition for certiorari before the CA within the 60-day reglementary period under
Rule 65.
Further, a petition for certiorari does not normally include an inquiry into the correctness of its evaluation
of the evidence. Errors of judgment, as distinguished from errors of jurisdiction, are not within the
province of a special civil action for certiorari, which is merely confined to issues of jurisdiction or grave
abuse of discretion. It is, thus, incumbent upon petitioners to satisfactorily establish that the NLRC acted
capriciously and whimsically in order that the extraordinary writ of certiorari will lie. By grave abuse of
discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, and it must be shown that the discretion was exercised arbitrarily or despotically.
The CA, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed decision or
resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding
evidence that is material to or decisive of the controversy; and it cannot make this determination without
looking into the evidence of the parties. Necessarily, the appellate court can only evaluate the materiality
or significance of the evidence, which is alleged to have been capriciously, whimsically, or arbitrarily
disregarded by the NLRC, in relation to all other evidence on record. 22 Notably, if the CA grants the
petition and nullifies the
decision or resolution of the NLRC on the ground of grave abuse of discretion amounting to excess or
lack of jurisdiction, the decision or resolution of the NLRC is, in contemplation of law, null and void ab
initio; hence, the decision or resolution never became final and executory. 23
In the recent case Bago v. National Labor Relations Commission, 24 we had occasion to rule that although
the CA may review the decisions or resolutions of the NLRC on jurisdictional and due process
considerations, particularly when the decisions or resolutions have already been executed, this does not
affect the statutory finality of the NLRC decisions or resolutions in view of Rule VIII, Section 6 of the 2002
New Rules of Procedure of the NLRC, viz.:
RULE VIII
xxxx
SECTION 6. EFFECT OF FILING OF PETITION FOR CERTIORARI ON EXECUTION. – A petition for
certiorari with the Court of Appeals or the Supreme Court shall not stay the execution of the assailed
decision unless a temporary restraining order is issued by the Court of Appeals or the Supreme Court. 25
Simply put, the execution of the final and executory decision or resolution of the NLRC shall proceed
despite the pendency of a petition for certiorari, unless it is restrained by the proper court. In the present
case, petitioners already paid Villamater’s widow, Sonia, the amount of ₱3,649,800.00, representing the
total and permanent disability award plus attorney’s fees, pursuant to the Writ of Execution issued by the
Labor Arbiter. Thereafter, an Order was issued declaring the case as "closed and terminated." However,
although there was no motion for reconsideration of this last Order, Sonia was, nonetheless, estopped
from claiming that the controversy had already reached its end with the issuance of the Order closing and
terminating the case. This is because the Acknowledgment Receipt she signed when she received
petitioners’ payment was without prejudice to the final outcome of the petition for certiorari pending before
the CA.
Second. We also agree with petitioners in their position that the CA erred in dismissing outright their
petition for certiorari on the ground of non-joinder of indispensable parties. It should be noted that
petitioners impleaded only the then deceased Villamater 26 as respondent to the petition, excluding his
heirs.
Rule 3, Section 7 of the Rules of Court defines indispensable parties as those who are parties in interest
without whom there can be no final determination of an action. 27 They are those parties who possess
such an interest in the controversy that a final decree would necessarily affect their rights, so that the
courts cannot proceed without their presence. 28 A party is indispensable if his interest in the subject
matter of the suit and in the relief sought is inextricably intertwined with the other parties’ interest. 29
Unquestionably, Villamater’s widow stands as an indispensable party to this case.
Under Rule 3, Section 11 of the Rules of Court, neither misjoinder nor non-joinder 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.
The proper remedy 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 an opportunity to amend his complaint in order to include indispensable parties. If the plaintiff
ordered to include the indispensable party 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. 30
On the merits of this case, the questions to be answered are: (1) Is Villamater entitled to total and
permanent disability benefits by reason of his colon cancer? (2) If yes, would he also be entitled to
attorney’s fees?
As to Villamater’s entitlement to total and permanent disability benefits, petitioners argue, in essence,
that colon cancer is not among the occupational diseases listed under Section 32-A of the POEA
Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-Board Ocean Going
Vessels (POEA Standard Contract), and that the risk of contracting the same was not increased by
Villamater’s working conditions during his deployment. Petitioners posit that Villamater had familial history
of colon cancer; and that, although dietary considerations may be taken, his diet -- which might have
been high in fat and low in fiber and could have thus increased his predisposition to develop colon cancer
-- might only be attributed to him, because it was he who chose what he ate on board the vessels he was
assigned to. Petitioners also cited the supposed declaration of their company-designated physicians who
attended to Villamater that his disease was not work-related.
We disagree.
It is true that under Section 32-A of the POEA Standard Contract, only two types of cancers are listed as
occupational diseases – (1) Cancer of the epithelial lining of the bladder (papilloma of the bladder); and
(2) cancer, epithellematous or ulceration of the skin or of the corneal surface of the eye due to tar, pitch,
bitumen, mineral oil or paraffin, or compound products or residues of these substances. Section 20 of the
same Contract also states that those illnesses not listed under Section 32 are disputably presumed as
work-related. Section 20 should, however, be read together with Section 32-A on the conditions to be
satisfied for an illness to be compensable, 31 to wit:
For an occupational disease and the resulting disability or death to be compensable, all the following
conditions must be established:
1. The seafarer’s work must involve the risk described herein;
2. The disease was contracted as a result of the seafarer’s exposure to the described risks;
3. The disease was contracted within a period of exposure and under such other factors
necessary to contract it;
4. There was no notorious negligence on the part of the seafarer.
Colon cancer, also known as colorectal cancer or large bowel cancer, includes cancerous growths in the
colon, rectum and appendix. With 655,000 deaths worldwide per year, it is the fifth most common form of
cancer in the United States of America and the third leading cause of cancer-related deaths in the
Western World. Colorectal cancers arise from adenomatous polyps in the colon. These mushroom-
shaped growths are usually benign, but some develop into cancer over time. Localized colon cancer is
usually diagnosed through colonoscopy. 32
Tumors of the colon and rectum are growths arising from the inner wall of the large intestine. Benign
tumors of the large intestine are called polyps. Malignant tumors of the large intestine are called cancers.
Benign polyps can be easily removed during colonoscopy and are not life-threatening. If benign polyps
are not removed from the large intestine, they can become malignant (cancerous) over time. Most of the
cancers of the large intestine are believed to have developed as polyps. Colorectal cancer can invade
and damage adjacent tissues and organs. Cancer cells can also break away and spread to other parts of
the body (such as liver and lung) where new tumors form. The spread of colon cancer to distant organs is
called metastasis of the colon cancer. Once metastasis has occurred in colorectal cancer, a complete
cure of the cancer is unlikely.33
Globally, colorectal cancer is the third leading cause of cancer in males and the fourth leading cause of
cancer in females. The frequency of colorectal cancer varies around the world. It is common in the
Western world and is rare in Asia and in Africa. In countries where the people have adopted western
diets, the incidence of colorectal cancer is increasing. 34
Factors that increase a person’s risk of colorectal cancer include high fat intake, a family history of
colorectal cancer and polyps, the presence of polyps in the large intestine, and chronic ulcerative colitis. 35
Diets high in fat are believed to predispose humans to colorectal cancer. In countries with high colorectal
cancer rates, the fat intake by the population is much higher than in countries with low cancer rates. It is
believed that the breakdown products of fat metabolism lead to the formation of cancer-causing
chemicals (carcinogens). Diets high in vegetables and high-fiber foods may rid the bowel of these
carcinogens and help reduce the risk of cancer. 36
A person’s genetic background is an important factor in colon cancer risk. Among first-degree relatives of
colon-cancer patients, the lifetime risk of developing colon cancer is 18%. Even though family history of
colon cancer is an important risk factor, majority (80%) of colon cancers occur sporadically in patients
with no family history of it. Approximately 20% of cancers are associated with a family history of colon
cancer. And 5% of colon cancers are due to hereditary colon cancer syndromes. Hereditary colon cancer
syndromes are disorders where affected family members have inherited cancer-causing genetic defects
from one or both of the parents.37
In the case of Villamater, it is manifest that the interplay of age, hereditary, and dietary factors contributed
to the development of colon cancer. By the time he signed his employment contract on June 4, 2002, he
was already 58 years old, having been born on October 5, 1943, 38 an age at which the incidence of colon
cancer is more likely.39He had a familial history of colon cancer, with a brother who succumbed to death
and an uncle who underwent surgery for the same illness. 40 Both the Labor Arbiter and the NLRC found
his illness to be compensable for permanent and total disability, because they found that his dietary
provisions while at sea increased his risk of contracting colon cancer because he had no choice of what
to eat on board except those provided on the vessels and these consisted mainly of high-fat, high-
cholesterol, and low-fiber foods.
While findings of the Labor Arbiter, which were affirmed by the NLRC, are entitled to great weight and are
binding upon the courts, nonetheless, we find it also worthy to note that even during the proceedings
before the Labor Arbiter, Villamater cited that the foods provided on board the vessels were mostly meat,
high in fat and high in cholesterol. On this matter, noticeably, petitioners were silent when they argued
that Villamater’s affliction was brought about by diet and genetics. It was only after the Labor Arbiter
issued his Decision, finding colon cancer to be compensable because the risk was increased by the
victuals provided on board, that petitioners started claiming that the foods available on the vessels also
consisted of fresh fruits and vegetables, not to mention fish and poultry. It is also worth mentioning that
while Dr. Salvador declared that Villamater’s cancer "appears to be not work-related," she nevertheless
suggested to petitioners Disability Grade 1, which, under the POEA Standard Contract, "shall be
considered or shall constitute total and permanent disability." 41 During his confinement in Hamburg,
Germany, Villamater was diagnosed to have colon cancer and was advised to undergo chemotherapy
and medical treatment, including blood transfusions. These findings were, in fact, confirmed by the
findings of the company-designated physicians. The statement of Dr. Salvador that Villamater’s colon
cancer "appears to be not work-related" remained at that, without any medical explanation to support the
same. However, this statement, not definitive as it is, was negated by the same doctor’s suggestion of
Disability Grade 1. Under Section 20-B of the Philippine Overseas Employment Administration-Standard
Employment Contract (POEA-SEC), it is the company-designated physician who must certify that the
seafarer has suffered a permanent disability, whether total or partial, due to either injury or illness, during
the term of his employment.42
On these points, we sustain the Labor Arbiter and the NLRC in granting total and permanent disability
benefits in favor of Villamater, as it was sufficiently shown that his having contracted colon cancer was, at
the very least, aggravated by his working conditions, 43 taking into consideration his dietary provisions on
board, his age, and his job as Chief Engineer, who was primarily in charge of the technical and
mechanical operations of the vessels to ensure voyage safety. Jurisprudence provides that to establish
compensability of a non-occupational disease, reasonable proof of work-connection and not direct causal
relation is required. Probability, not the ultimate degree of certainty, is the test of proof in compensation
proceedings.44
The Labor Arbiter correctly awarded Villamater total and permanent disability benefits, computed on the
basis of the schedule provided under the POEA Standard Contract, considering that the schedule of
payment of benefits under the ITF-JSU/AMOSUP CBA refers only to permanent disability as a result of
an accident or injury.45
By reason of Villamater’s entitlement to total and permanent disability benefits, he (or in this case his
widow Sonia) is also entitled to the award of attorney’s fees, not under Article 2208(2) of the Civil Code,
"[w]hen the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest," but under Article 2208(8) of the same Code, involving actions for
indemnity under workmen’s compensation and employer’s liability laws.
WHEREFORE, the petition is DENIED and the assailed May 3, 2007 Decision and the July 23, 2007
Resolution of the Court of Appeals are AFFIRMED. Costs against petitioners.
SO ORDERED.
G.R. No. 201816 April 8, 2013
HEIRS OFF AUSTINO MESINA and GENOVEVA S. MESINA, rep. by NORMAN MESINA, Petitioners,
vs.
HEIRS OF DOMINGO FIAN, SR., rep. by THERESA FIAN YRAY, ET AL., Respondents.
Before Us is a Petition for Review under Rule 45 of the Decision 1 dated April 29, 2011 of the Court of
Appeals (CA) in CA-G.R. CV No. 01366 and its Resolution dated April 12, 2012 denying reconsideration.
The Facts
The late spouses Faustino and Genoveva Mesina (spouses Mesina), during their lifetime, bought from
the spouses Domingo Fian Sr. and MariaFian (spouses Fian) two parcels of land on installment. The
properties maybe described as follows:
Parcel 1 – A parcel of land, Cadastral Lot No. 6791-Rem. situated in the Brgy. Of Gungab, Poblacion,
Albuera, Leyte. x x x Containing an area of ONE THOUSAND SIX HUNDRED THIRTY TWO (1,632)
SQUARE METERS x x x.
Parcel 2 – A parcel of land, Cadastral Lot No. 6737-Rem, situated in the Brgy. of Gungab, Poblacion,
Albuera, Leyte. x x x Containing an area of THREE THOUSAND SEVEN HUNDRED THIRTY (3,730)
SQUARE METERS x x x.2
Upon the death of the spouses Fian, their heirs––whose names do not appear on the records, claiming
ownership of the parcels of land and taking possession of them––refused to acknowledge the payments
for the lots and denied that their late parents sold the property to the spouses Mesina. Meanwhile, the
spouses Mesina passed away.
Notwithstanding repeated demands, the Heirs of Fian refused to vacate the lots and to turn possession
over to the heirs of the spouses Mesina, namely: Norman S. Mesina (Norman), Victor S. Mesina (Victor),
Maria Divina S. Mesina (Maria) and Lorna Mesina-Barte (Lorna). Thus, on August 8, 2005, Norman, as
attorney-in-fact of his siblings Victor, Maria and Lorna, filed an action for quieting of title and damages
before the Regional Trial Court (RTC), Branch 14 in Baybay, Leyte against the Heirs of Fian, naming only
Theresa Fian Yray (Theresa) as the representative of the Heirs of Fian. The case, entitled Heirs of Sps.
Faustino S. Mesina & Genoveva S. Mesina, represented by Norman Mesina v. Heirs of Domingo Fian,
Sr., represented by Theresa Fian Yray, was docketed as Civil Case No. B-05-08-20. The allegations of
the Complaint on the parties read:
1. Plaintiffs are the HEIRS OF SPS. FAUSTINO S. MESINO and GENOVEVA S. MESINA, and
represented in this instance by NORMAN MESINA as shown by the Special Power of Attorneys x x x, of
legal age, married, Filipino, and a resident of Poblacion Albuera, Leyte, where he may be served with
court orders, notices, and other processes, while defendants are the HEIRS OF DOMINGO FIAN, SR.,
likewise of legal ages, Filipinos, and residents of Poblacion Albuera, Leyte, and respresented in this
instance of THERESA FIAN YRAY, where she may be served with summons, court orders, notices, and
other processes.3
Thereafter, or on September 5, 2005, respondent Theresa filed a Motion to Dismiss the complaint,
arguing that the complaint states no cause of action and that the case should be dismissed for gross
violation of Sections 1 and 2, Rule 3 of the Rules of Court, which state in part:
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. x x x
Section 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. x x x
She claims that the "Heirs of Mesina" could not be considered as a juridical person or entity authorized
by law to file a civil action. Neither could the "Heirs of Fian" be made as defendant, not being a juridical
person as well. She added that since the names of all the heirs of the late spouses Mesina and spouses
Fian were not individually named, the complaint is infirmed, warranting its dismissal.
On November 24, 2005, petitioners filed their Opposition to the Motion to Dismiss.
Ruling of the RTC
Finding merit in the motion to dismiss, the RTC, on November 22, 2005, granted the motion and
dismissed the complaint, ruling that the Rules of Court is explicit that only natural or juridical persons or
entities authorized by law may be parties in a civil action. Also, nowhere in the complaint are the Heirs of
Fian individually named. The RTC Order reads:
Anent the Motion to Dismiss filed by defendant, Theresa Fian Yray through counsel, finding merit in such
motion, the same is granted.
The Rules of Court is explicit that only natural or juridical persons or entities authorized by law may be
parties in a civil action (Section 1, Rule 3, Revised Rules of Court). Certainly, the Heirs of Faurstino s.
Mesina and Genoveva S. Mesina, represented by Norman Mesina as plaintiffs as well as Heirs of
Domingo Fian, Sr. represented by Theresa Fian Yray as defendants, do not fall within the category as
natural or juridical persons as contemplated by law to institute or defend civil actions. Said heirs not
having been individually named could not be the real parties in interest. Hence, the complaint states no
cause of action.
Accordingly, the case is hereby dismissed.
SO ORDERED.4
On December 27, 2005, petitioners moved for reconsideration of the November 22, 2005 Order of the
RTC. The next day, or on December 28, 2005, respondent Theresa filed her Vehement Opposition to the
motion for reconsideration.
On February 29, 2006, the RTC issued its Resolution denying the motion for reconsideration. The
dispositive portion of the Resolution reads:
WHEREFORE, the motion prayed for must necessary fail.
SO ORDERED.5
Aggrieved, petitioners appealed to the CA.
Ruling of the CA
In affirming the RTC, the CA, on April 29, 2011, rendered its Decision, ruling that all the heirs of the
spouses Fian are indispensable parties and should have been impleaded in the complaint. The appellate
court explained that this failure to implead the other heirs of the late spouses Fian is a legal obstacle to
the trial court’s exercise of judicial power over the case and any order or judgment that would be
rendered is a nullity in view of the absence of indispensable parties. The CA further held that the RTC
correctly dismissed the complaint for being improperly verified. The CA disposed of the appeal in this
wise:
WHEREFORE, in view of all the foregoing, the appeal of petitioners is DENIED for lack of merit. The
assailed November 22, 2005 Order and February 28, 2006 Resolution both issued by the Regional Trial
Court, Branch 14 of Baybay, Leyte are AFFIRMED.
SO ORDERED.6
Petitioners filed their Motion for Reconsideration, which was denied by the CA in its Resolution dated
April 12, 2012.
Hence, this petition.
Assignment of Errors
Petitioner now comes before this Court, presenting the following assigned errors, to wit:
A. THE CA ERRED IN AFFIRMING THE ORDER AND RESOLUTION X X X OF RTC, BAYBAY, LEYTE
IN DISMISSING THE CASE ON THE GROUND THAT THE COMPLAINT STATES NO CAUSE OF
ACTION;
B. PETITIONERS HAVE SUBSTANTIALLY COMPLIED WITH THE RULE ON VERIFICATION AND
CERTIFICATION AGAINST FORUM SHOPPING; AND
C. CASES SHOULD BE DECIDED ON THE MERITS AND NOT ON MERE TECHNICALITIES. 7
The Court’s Ruling
The petition is meritorious.
As regards the issue on failure to state a cause of action, the CA ruled that the complaint states no cause
of action because all the heirs of the spouses Fian are indispensable parties; hence, they should have
been impleaded in the complaint.
The CA, affirming the RTC, held that the dismissal of the complaint is called for in view of its failure to
state a cause of action. The CA reasoned that:
Without the presence of all the heirs of spouses Fian as defendants, the trial court could not validly
render judgment and grant relief to petitioners. x x x 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. Hence, the court a quo correctly ordered for the dismissal of the action on
the ground that the complaint failed to name or implead all the heirs of the late spouses Fian. 8
Failure to state a cause of action refers to the insufficiency of the pleading. A complaint states a cause of
action if it avers the existence of the three essential elements of a cause of action, namely:
(a) The legal right of the plaintiff;
(b) The correlative obligation of the defendant; and
(c) The act or omission of the defendant in violation of said right. 9
By a simple reading of the elements of a failure to state a cause of action, it can be readily seen that the
inclusion of Theresa’s co-heirs does not fall under any of the above elements. The infirmity is, in fact, not
a failure to state a cause of action but a non-joinder of an indispensable party.
Non-joinder means the "failure to bring a person who is a necessary party or in this case an
indispensable party into a lawsuit." 10 An indispensable party, on the other hand, is a party-in-interest
without whom no final determination can be had of the action, and who shall be joined either as plaintiff or
defendant.11
As such, this is properly a non-joinder of indispensable party, the indispensable parties who were not
included in the complaint being the other heirs of Fian, and not a failure of the complaint to state a cause
of action.
Having settled that, Our pronouncement in Pamplona Plantation Company, Inc. v. Tinghil is instructive as
regards the proper course of action on the part of the courts in cases of non-joinder of indispensable
parties, viz:
The non-joinder of indispensable parties is not a ground for the dismissal of an action. At any stage of a
judicial proceeding and/or at such times as are just, parties may be added on the motion of a party or on
the initiative of the tribunal concerned. If the plaintiff refuses to implead an indispensable party despite
the order of the court, that court may dismiss the complaint for the plaintiff’s failure to comply with the
order. The remedy is to implead the non-party claimed to be indispensable. 12 x x x (Emphasis Ours.)
Thus, the dismissal of the case for failure to state a cause of action is improper. What the trial court
should have done is to direct petitioner Norman Mesina to implead all the heirs of Domingo Fian, Sr. as
defendants within a reasonable time from notice with a warning that his failure to do so shall mean
dismissal of the complaint.
Anent the issue on defective verification, Section 4, Rule 7 of the Rules of Court provides as follows:
Sec. 4. Verification. – Except when otherwise specifically required by law or rule, pleadings need not be
under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein
are true and correct of his personal knowledge or based on authentic records. (Emphasis Ours.)
The alleged defective verification states that:
I, NORMAN S. MESINA, legal age, married, Filipino, and a resident of Poblacion, Albuera, Leyte, after
having been duly sworn to in accordance with law, hereby depose and say that:
xxxx
2. The allegations herein are true and correct to the best of our knowledge; 13 x x x
Both the RTC and the CA found said verification defective, since the phrase "or based on authentic
records," as indicated under the second paragraph of Sec. 4, Rule 7 as afore-quoted, was omitted.
We do not agree.
That the verification of the complaint does not include the phrase "or based on authentic records" does
not make the verification defective. Notably, the provision used the disjunctive word "or." The word "or" is
a disjunctive article indicating an alternative. 14 As such, "personal knowledge" and "authentic records"
need not concur in a verification as they are to be taken separately.
Also, verification, like in most cases required by the rules of procedure, is a formal requirement, not
jurisdictional. It is mainly intended to secure an assurance that matters which are alleged are done in
good faith or are true and correct and not of mere speculation. Thus, when circumstances so warrant, as
in the case at hand, "the court may simply order the correction of unverified pleadings or act on it and
waive strict compliance with the rules in order that the ends of justice may thereby be served." 15
WHEREFORE, premises considered, the petition is GRANTED. The assailed April 29, 2011 Decision and
April 12, 2012 Resolution of the CA in CA-G.R. CV No. 01366, and the November 22, 2005 Order and
February 29,2006 Resolution of the RTC, Branch 14 in Baybay, Leyte, dismissing the complaint in Civil
Case No. 8-05-08-20, are hereby REVERSED and SET ASIDE. Petitioner Norman Mesina is ORDERED
to implead all the Heirs of Domingo Fian, Sr. as defendants in said civil case within thirty (30) days from
notice of finality of this Decision. Failure on the part of petitioner Mesina to comply with this directive shall
result in the dismissal of Civil Case No. B-05-08-20. Upon compliance by petitioner Mesina with this
directive, the RTC, Branch 14 in Baybay, Leyte is ORDERED to undertake appropriate steps and
proceedings to expedite adjudication of the case.
SO ORDERED.
G.R. No. 152272 March 5, 2012
JUANA COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C. BAUTISTA, BRIGIDO
DIMACULANGAN, DOLORES P. PRADO, IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M.
MERCADO, LEOVINO C. DATARIO, AIDA A. ABAYON, NAPOLEON M. DIMAANO, ROSITA G.
ESTIGOY and NELSON A. LOYOLA, Petitioners,
vs.
FIL-ESTATE LAND, INC., FIL ESTATE ECOCENTRUM CORPORATION, LA PAZ HOUSING AND
DEVELOPMENT CORPORATION, WARBIRD SECURITY AGENCY, ENRIQUE RIVILLA, MICHAEL E.
JETHMAL and MICHAEL ALUNAN, Respondents.
x-----------------------x
G. R. No. 152397
FIL-ESTATE LAND, INC., FIL ESTATE ECOCENTRUM CORPORATION, LA PAZ HOUSING AND
DEVELOPMENT CORPORATION, WARBIRD SECURITY AGENCY, ENRIQUE RIVILLA, MICHAEL E.
JETHMAL and MICHAEL ALUNAN, Petitioners,
vs.
JUANA COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C. BAUTISTA, BRIGIDO
DIMACULANGAN, DOLORES P. PRADO, IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M.
MERCADO, LEOVINO C. DATARIO, AIDA A. ABAYON, NAPOLEON M. DIMAANO, ROSITA G.
ESTIGOY and NELSON A. LOYOLA, Respondents.
DECISION
MENDOZA, J.:
Before the Court are two (2) consolidated petitions assailing the July 31, 2001 Decision 1 and February 21,
2002 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 60543, which annulled and set aside
the March 3, 1999 Order3 of the Regional Trial Court, Branch 25, Biñan, Laguna (RTC), granting the
application for the issuance of a writ of preliminary injunction, and upheld the June 16, 2000 Omnibus
Order4 denying the motion to dismiss.
The Facts:
On January 20, 1999, Juana Complex I Homeowners Association, Inc. (JCHA), together with individual
residents of Juana Complex I and other neighboring subdivisions (collectively referred as JCHA, et.
al.), instituted a complaint5for damages, in its own behalf and as a class suit representing the regular
commuters and motorists of Juana Complex I and neighboring subdivisions who were deprived of the
use of La Paz Road, against Fil-Estate Land, Inc. (Fil-Estate), Fil-estate Ecocentrum Corporation (FEEC),
La Paz Housing & Development Corporation (La Paz), and Warbird Security Agency and their respective
officers (collectively referred as Fil-Estate, et al.).
The complaint alleged that JCHA, et al. were regular commuters and motorists who constantly travelled
towards the direction of Manila and Calamba; that they used the entry and exit toll gates of South Luzon
Expressway (SLEX) by passing through right-of-way public road known as La Paz Road; that they had
been using La Paz Road for more than ten (10) years; that in August 1998, Fil-estate excavated, broke
and deliberately ruined La Paz Road that led to SLEX so JCHA, et al. would not be able to pass through
the said road; that La Paz Road was restored by the residents to make it passable but Fil-estate
excavated the road again; that JCHA reported the matter to the Municipal Government and the Office of
the Municipal Engineer but the latter failed to repair the road to make it passable and safe to motorists
and pedestrians; that the act of Fil-estate in excavating La Paz Road caused damage, prejudice,
inconvenience, annoyance, and loss of precious hours to them, to the commuters and motorists because
traffic was re-routed to narrow streets that caused terrible traffic congestion and hazard; and that its
permanent closure would not only prejudice their right to free and unhampered use of the property but
would also cause great damage and irreparable injury.
Accordingly, JCHA, et al. also prayed for the immediate issuance of a Temporary Restraining
Order (TRO) or a writ of preliminary injunction (WPI) to enjoin Fil-Estate, et al. from stopping and
intimidating them in their use of La Paz Road.
On February 10, 1999, a TRO was issued ordering Fil-Estate, et al, for a period of twenty (20) days, to
stop preventing, coercing, intimidating or harassing the commuters and motorists from using the La Paz
Road. 6
Subsequently, the RTC conducted several hearings to determine the propriety of the issuance of a WPI.
On February 26, 1999, Fil-Estate, et al. filed a motion to dismiss 7 arguing that the complaint failed to state
a cause of action and that it was improperly filed as a class suit. On March 5, 1999, JCHA, et al. filed
their comment8 on the motion to dismiss to which respondents filed a reply. 9
10
On March 3, 1999, the RTC issued an Order granting the WPI and required JCHA, et al. to post a bond.
On March 19, 1999, Fil-Estate, et al. filed a motion for reconsideration 11 arguing, among others, that
JCHA, et al. failed to satisfy the requirements for the issuance of a WPI. On March 23, 1999, JCHA, et al.
filed their opposition to the motion. 12
The RTC then issued its June 16, 2000 Omnibus Order, denying both the motion to dismiss and the
motion for reconsideration filed by Fil-Estate, et al.
Not satisfied, Fil-Estate, et al. filed a petition for certiorari and prohibition before the CA to annul (1) the
Order dated March 3, 1999 and (2) the Omnibus Order dated June 16, 2000. They contended that the
complaint failed to state a cause of action and that it was improperly filed as a class suit. With regard to
the issuance of the WPI, the defendants averred that JCHA, et al. failed to show that they had a clear
and unmistakable right to the use of La Paz Road; and further claimed that La Paz Road was a torrens
registered private road and there was neither a voluntary nor legal easement constituted over it. 13
On July 31, 2001, the CA rendered the decision partially granting the petition, the dispositive portion of
which reads:
WHEREFORE, the petition is hereby partially GRANTED. The Order dated March 3, 1999 granting the
writ of preliminary injunction is hereby ANNULLED and SET ASIDE but the portion of the Omnibus Order
dated June 16, 2000 denying the motion to dismiss is upheld.
SO ORDERED.14
The CA ruled that the complaint sufficiently stated a cause of action when JCHA, et al. alleged in their
complaint that they had been using La Paz Road for more than ten (10) years and that their right was
violated when Fil-Estate closed and excavated the road. It sustained the RTC ruling that the complaint
was properly filed as a class suit as it was shown that the case was of common interest and that the
individuals sought to be represented were so numerous that it was impractical to include all of them as
parties. The CA, however, annulled the WPI for failure of JCHA, et al. to prove their clear and present
right over La Paz Road. The CA ordered the remand of the case to the RTC for a full-blown trial on the
merits.
Hence, these petitions for review.
In G.R. No. 152272, JCHA, et al. come to this Court, raising the following issues:
(A)
THE HONORABLE COURT OF APPEALS, IN HOLDING THAT A FULL-BLOWN TRIAL ON THE
MERITS IS REQUIRED TO DETERMINE THE NATURE OF THE LA PAZ ROAD, HAD DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION.
(B)
THE HONORABLE COURT OF APPEALS, IN HOLDING THAT THE PETITIONERS FAILED TO
SATISFY THE REQUIREMENTS FOR THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION,
HAD DECIDED NOT IN ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT.15
In G.R. No. 152397, on the other hand, Fil-Estate, et al. anchor their petition on the following issues:
I.
The Court of Appeals’ declaration that respondents’ Complaint states a cause of action is
contrary to existing law and jurisprudence.
II.
The Court of Appeals’ pronouncement that respondents’ complaint was properly filed as a
class suit is contrary to existing law and jurisprudence.
III.
The Court of Appeals’ conclusion that full blown trial on the merits is required to determine the
nature of the La Paz Road is contrary to existing laws and jurisprudence. 16
JCHA, et al. concur with the CA that the complaint sufficiently stated a cause of action. They, however,
disagree with the CA’s pronouncement that a full-blown trial on the merits was necessary. They claim that
during the hearing on the application of the writ of injunction, they had sufficiently proven that La Paz
Road was a public road and that commuters and motorists of their neighboring villages had used this
road as their means of access to the San Agustin Church, Colegio De San Agustin and to SLEX in going
to Metro Manila and to Southern Tagalog particularly during the rush hours when traffic at Carmona
Entry/Exit and Susana Heights Entry/Exit was at its worst.
JCHA, et al. argue that La Paz Road has attained the status and character of a public road or burdened
by an apparent easement of public right of way. They point out that La Paz Road is the widest road in the
neighborhood used by motorists in going to Halang Road and in entering the SLEX-Halang toll gate and
that there is no other road as wide as La Paz Road existing in the vicinity. For residents of San Pedro,
Laguna, the shortest, convenient and safe route towards SLEX Halang is along Rosario Avenue joining
La Paz Road.
Finally, JCHA, et al. argue that the CA erred when it voided the WPI because the public nature of La Paz
Road had been sufficiently proven and, as residents of San Pedro and Biñan, Laguna, their right to use
La Paz Road is undeniable.
In their Memorandum,17 Fil-Estate, et al. explain that La Paz Road is included in the parcels of land
covered by Transfer Certificates of Title (TCT) Nos. T-120008, T-90321 and T-90607, all registered in the
name of La Paz. The purpose of constructing La Paz Road was to provide a passageway for La Paz to its
intended projects to the south, one of which was the Juana Complex I. When Juana Complex I was
completed, La Paz donated the open spaces, drainage, canal, and lighting facilities inside the Juana
Complex I to the Municipality of Biñan. The streets within the subdivisions were then converted to public
roads and were opened for use of the general public. The La Paz Road, not being part of the Juana
Complex I, was excluded from the donation. Subsequently, La Paz became a shareholder of FEEC, a
consortium formed to develop several real properties in Biñan, Laguna, known as Ecocentrum Project. In
exchange for shares of stock, La Paz contributed some of its real properties to the Municipality of Biñan,
including the properties constituting La Paz Road, to form part of the Ecocentrum Project.
Fil-Estate, et al. agree with the CA that the annulment of the WPI was proper since JCHA, et al. failed to
prove that they have a clear right over La Paz Road. Fil-Estate, et al. assert that JCHA, et al. failed to
prove the existence of a right of way or a right to pass over La Paz Road and that the closure of the said
road constituted an injury to such right. According to them, La Paz Road is a torrens registered private
road and there is neither a voluntary nor legal easement constituted over it. They claim that La Paz Road
is a private property registered under the name of La Paz and the beneficial ownership thereof was
transferred to FEEC when La Paz joined the consortium for the Ecocentrum Project.
Fil-Estate, et al., however, insist that the complaint did not sufficiently contain the ultimate facts to show a
cause of action. They aver the bare allegation that one is entitled to something is an allegation of a
conclusion which adds nothing to the pleading.
They likewise argue that the complaint was improperly filed as a class suit for it failed to show that JCHA,
et al. and the commuters and motorists they are representing have a well-defined community of interest
over La Paz Road. They claim that the excavation of La Paz Road would not necessarily give rise to a
common right or cause of action for JCHA, et al. against them since each of them has a separate and
distinct purpose and each may be affected differently than the others.
The Court’s Ruling
The issues for the Court’s resolution are: (1) whether or not the complaint states a cause of action; (2)
whether the complaint has been properly filed as a class suit; and (2) whether or not a WPI is warranted.
Section 2, Rule 2 of the Rules of Court defines a cause of action as an act or omission by which a party
violates the right of another. A complaint states a cause of action when it contains three (3) essential
elements of a cause of action, namely:
(1) the legal right of the plaintiff,
(2) the correlative obligation of the defendant, and
(3) the act or omission of the defendant in violation of said legal right. 18
The question of whether the complaint states a cause of action is determined by its averments regarding
the acts committed by the defendant. 19 Thus, it must contain a concise statement of the ultimate or
essential facts constituting the plaintiff’s cause of action. 20 To be taken into account are only the material
allegations in the complaint; extraneous facts and circumstances or other matters aliunde are not
considered.21
The test of sufficiency of facts alleged in the complaint as constituting a cause of action is whether or not
admitting the facts alleged, the court could render a valid verdict in accordance with the prayer of said
complaint.22 Stated differently, if the allegations in the complaint furnish sufficient basis by which the
complaint can be maintained, the same should not be dismissed regardless of the defense that may be
asserted by the defendant.23
In the present case, the Court finds the allegations in the complaint sufficient to establish a cause of
action. First,JCHA, et al.’s averments in the complaint show a demandable right over La Paz Road.
These are: (1) their right to use the road on the basis of their allegation that they had been using the road
for more than 10 years; and (2) an easement of a right of way has been constituted over the said roads.
There is no other road as wide as La Paz Road existing in the vicinity and it is the shortest, convenient
and safe route towards SLEX Halang that the commuters and motorists may use. Second, there is an
alleged violation of such right committed by Fil-Estate, et al. when they excavated the road and
prevented the commuters and motorists from using the same. Third, JCHA, et al. consequently suffered
injury and that a valid judgment could have been rendered in accordance with the relief sought therein.
With respect to the issue that the case was improperly instituted as a class suit, the Court finds the
opposition without merit.
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.
The necessary elements for the maintenance 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. 24
In this case, the suit is clearly one that benefits all commuters and motorists who use La Paz Road. As
succinctly stated by the CA:
The subject matter of the instant case, i.e., the closure and excavation of the La Paz Road, is initially
shown to be of common or general interest to many persons. The records reveal that numerous
individuals have filed manifestations with the lower court, conveying their intention to join private
respondents in the suit and claiming that they are similarly situated with private respondents for they
were also prejudiced by the acts of petitioners in closing and excavating the La Paz Road. Moreover, the
individuals sought to be represented by private respondents in the suit are so numerous that it is
impracticable to join them all as parties and be named individually as plaintiffs in the complaint. These
individuals claim to be residents of various barangays in Biñan, Laguna and other barangays in San
Pedro, Laguna.
Anent the issue on the propriety of the WPI, Section 3, Rule 58 of the Rules of Court lays down the rules
for the issuance thereof. Thus:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief
consists in restraining the commission or continuance of the acts complained of, or in the
performance of an act or acts, either for a limited period or perpetually;
(b) That the commission, continuance or non-performance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or
(c) That a party, court, or agency or a person is doing, threatening, or attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.
A writ of preliminary injunction is available to prevent a threatened or continuous irremediable injury to
parties before their claims can be thoroughly studied and adjudicated. 25 The requisites for its issuance
are: (1) the existence of a clear and unmistakable right that must be protected; and (2) an urgent and
paramount necessity for the writ to prevent serious damage. 26 For the writ to issue, the right sought to be
protected must be a present right, a legal right which must be shown to be clear and positive. 27 This
means that the persons applying for the writ must show that they have an ostensible right to the final
relief prayed for in their complaint. 28
In the case at bench, JCHA, et al. failed to establish a prima facie proof of violation of their right to justify
the issuance of a WPI. Their right to the use of La Paz Road is disputable since they have no clear legal
right therein. As correctly ruled by the CA:
Here, contrary to the ruling of respondent Judge, private respondents failed to prove as yet that they
have a clear and unmistakable right over the La Paz Road – which was sought to be protected by the
injunctive writ. They merely anchor their purported right over the La Paz Road on the bare allegation that
they have been using the same as public road right-of-way for more than ten years. A mere allegation
does not meet the standard of proof that would warrant the issuance of the injunctive writ. Failure to
establish the existence of a clear right which should be judicially protected through the writ of injunction is
a sufficient ground for denying the injunction.
Consequently, the case should be further heard by the RTC so that the parties can fully prove their
respective positions on the issues.1âwphi1
Due process considerations dictate that the assailed injunctive writ is not a judgment on the merits but
merely an order for the grant of a provisional and ancillary remedy to preserve the status quo until the
merits of the case can be heard. The hearing on the application for issuance of a writ of preliminary
injunction is separate and distinct from the trial on the merits of the main case. 29 The evidence submitted
during the hearing of the incident is not conclusive or complete for only a "sampling" is needed to give the
trial court an idea of the justification for the preliminary injunction pending the decision of the case on the
merits.30 There are vital facts that have yet to be presented during the trial which may not be obtained or
presented during the hearing on the application for the injunctive writ. 31 Moreover, the quantum of
evidence required for one is different from that for the other. 32
WHEREFORE, the petitions are DENIED. Accordingly, the July 31, 2001 Decision and February 21, 2002
Resolution of the Court of Appeals in CA-G.R. SP No. 60543 are AFFIRMED.
SO ORDERED.
G.R. No. L-63559 May 30, 1986
NEWSWEEK, INC., petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, and NATIONAL FEDERATION OF SUGARCANE
PLANTERS INC., BINALBAGAN-ISABELA PLANTERS ASSOCIATION, INC., ASOCIACION DE
AGRICULTORES DE LA CARLOTA, LA CASTELLANA y PONTEVEDRA, INC., DONEDCO
PLANTERS ASSOCIATION INC., ARMANDO GUSTILO, ENRIQUE ROJAS, ALFREDO
MONTELIBANO, JR., PABLO SOLA, JOSE MONTALVO, VICENTE GUSTILO, JOSEPH MARANON,
ROBERTO CUENCA, JOSE SICANGCO, FLORENCIO ALONSO, MIGUEL GATUSLAO, PEDRO
YULO, MARINO RUBIN and BENJAMIN BAUTISTA, respondents.
Petitioner, Newsweek, Inc., a foreign corporation licensed to do business in the Philippines, in this special
action for certiorari, prohibition with preliminary injunction, seeks to annul the decision of the Intermediate
Appellate Court dated December 17, 1982 sustaining the Order of the then Court of First Instance of
Bacolod City which denied petitioner's Motion to Dismiss the complaint for libel filed by private
respondents (Civil Case No. 15812), and the Resolution dated March 10, 1983 which denied its Motion
for Reconsideration.
It appears that on March 5, 1981, private respondents, incorporated associations of sugarcane planters
in Negros Occidental claiming to have 8,500 members and several individual sugar planters, filed Civil
Case No. 15812 in their own behalf and/or as a class suit in behalf of all sugarcane planters in the
province of Negros Occidental, against petitioner and two of petitioners' non-resident
correspondents/reporters Fred Bruning and Barry Came. The complaint alleged that petitioner and the
other defendants committed libel against them by the publication of the article "An Island of Fear" in the
February 23, 1981 issue of petitioner's weekly news magazine Newsweek. The article supposedly
portrayed the island province of Negros Occidental as a place dominated by big landowners or
sugarcane planters who not only exploited the impoverished and underpaid sugarcane workers/laborers,
but also brutalized and killed them with imprunity. Complainants therein alleged that said article, taken as
a whole, showed a deliberate and malicious use of falsehood, slanted presentation and/or
misrepresentation of facts intended to put them (sugarcane planters) in bad light, expose them to public
ridicule, discredit and humiliation here in the Philippines and abroad, and make them objects of hatred,
contempt and hostility of their agricultural workers and of the public in general. They prayed that
defendants be ordered to pay them PlM as actual and compensatory damages, and such amounts for
moral, exemplary and corrective damages as the court may determine, plus expenses of litigation,
attorney's fees and costs of suit. A photo copy of the article was attached to the complaint.
On November 5, 1981, petitioner filed a motion to dismiss on the grounds that (1) the printed article sued
upon is not actionable in fact and in law; and (2) the complaint is bereft of allegations that state, much
less support a cause of action. It pointed out the non-libelous nature of the article and, consequently, the
failure of the complaint to state a cause of action. Private respondents filed an Opposition to the motion
to dismiss and petitioner filed a reply.
On March 17, 1982, the trial court denied the motion to dismiss, stating that the grounds on which the
motion to dismiss are predicated are not indubitable as the complaint on its face states a valid cause of
action; and the question as to whether the printed article sued upon its actionable or not is a matter of
evidence. Petitioner's motion for reconsideration was denied on May 28, 1982.
On June 18, 1982, petitioner filed a petition for certiorari with respondent Court (CA-G. R. No. 14406)
seeking the annulment of the aforecited trial court's Orders for having been issued with such a grave
abuse of discretion as amounting to lack of jurisdiction and praying for the dismissal of the complaint for
failure to state a cause of action.
As earlier stated, respondent Court affirmed the trial court's Orders in a Decision dated December 17,
1982 and ordered the case to be tried on the merits on the grounds that -(1) the complaint contains
allegations of fact which called for the presentation of evidence; and (2) certiorari under Rule 65 cannot
be made to substitute for an appeal where an appeal would lie at a proper time. Subsequently, on March
10, 1983, the respondent Court denied petitioner's Motion for Reconsideration of the aforesaid decision,
hence this petition.
The proper remedy which petitioner should have taken from the decision of respondent Court is an
appeal by certiorari under Rule 45 of the Rules of Court and not the special civil action of certiorari and
prohibition under Rule 65 of said Rules. However, since the petition was filed on time within fifteen days
from notice of the Resolution denying the motion for reconsideration, we shall treat the same as a petition
for review on certiorari. The two (2) issues raised in the petition are: (1) whether or not the private
respondents' complaint failed to state a cause of action; and (2) whether or not the petition for certiorari
and prohibition is proper to question the denial of a motion to dismiss for failure to state a cause of action.
First, petitioner argues that private respondents' complaint failed to state a cause of action because the
complaint made no allegation that anything contained in the article complained of regarding sugarcane
planters referred specifically to any one of the private respondents; that libel can be committed only
against individual reputation; and that in cases where libel is claimed to have been directed at a group,
there is actionable defamation only if the libel can be said to reach beyond the mere collectivity to do
damage to a specific, individual group member's reputation.
We agree with petitioner.
In the case of Corpus vs. Cuaderno, Sr. (16 SCRA 807) this Court ruled that "in order to maintain a libel
suit, it is essential that the victim be identifiable (People vs. Monton, L-16772, November 30, 1962),
although it is not necessary that he be named (19 A.L.R. 116)." In an earlier case, this Court declared
that" ... defamatory matter which does not reveal the Identity of the person upon whom the imputation is
cast, affords no ground of action unless it be shown that the readers of the libel could have Identified the
personality of the individual defamed." (Kunkle vs. Cablenews-American and Lyons 42 Phil. 760).
This principle has been recognized to be of vital importance, especially where a group or class of
persons, as in the case at bar, claim to have been defamed, for it is evident that the larger the collectivity,
the more difficult it is for the individual member to prove that the defamatory remarks apply to him. (Cf. 70
ALR 2d. 1384).
In the case of Uy Tioco vs. Yang Shu Wen , 32 Phil. 624, this Court held as follows:
Defamatory remarks directed at a class or group of persons in general language
only, are not actionable by individuals composing the class or group unless the
statements are sweeping; and it is very probable that even then no action would
lie where the body is composed of so large a number of persons that common
sense would tell those to whom the publication was made that there was room for
persons connected with the body to pursue an upright and law abiding course and
that it would be unreasonable and absurd to condemn all because of the actions
of a part. (supra p. 628).
It is evident from the above ruling that where the defamation is alleged to have been directed at a group
or class, it is essential that the statement must be so sweeping or all-embracing as to apply to every
individual in that group or class, or sufficiently specific so that each individual in the class or group can
prove that the defamatory statement specifically pointed to him, so that he can bring the action
separately, if need be.
We note that private respondents filed a "class suit" in representation of all the 8,500 sugarcane planters
of Negros Occidental. Petitioner disagrees and argues that the absence of any actionable basis in the
complaint cannot be cured by the filing of a class suit on behalf of the aforesaid sugar planters.
We find petitioner's contention meritorious.
The case at bar is not a class suit. It is not a case where one or more may sue for the benefit of all
(Mathay vs. Consolidated Bank and Trust Company, 58 SCRA 559) or where the representation of class
interest affected by the judgment or decree is indispensable to make each member of the class an actual
party (Borlaza vs. Polistico, 47 Phil. 348). We have here a case where each of the plaintiffs has a
separate and distinct reputation in the community. They do not have a common or general interest in the
subject matter of the controversy.
The disputed portion of the article which refers to plaintiff Sola and which was claimed to be libelous
never singled out plaintiff Sola as a sugar planter. The news report merely stated that the victim had been
arrested by members of a special police unit brought into the area by Pablo Sola, the mayor of
Kabankalan. Hence, the report, referring as it does to an official act performed by an elective public
official, is within the realm of privilege and protected by the constitutional guarantees of free speech and
press.
The article further stated that Sola and the commander of the special police unit were arrested. The Court
takes judicial notice of this fact. (People vs. Sola, 103 SCRA 393.)
The second issue to be resolved here is whether or not the special civil action of certiorari or prohibition
is available to petitioner whose motion to dismiss the complaint and subsequent motion for
reconsideration were denied.
As a general rule, an order denying a motion to dismiss is merely interlocutory and cannot be subject of
appeal until final judgment or order is rendered. (Sec. 2 of Rule 4 1). The ordinary procedure to be
followed in such a case is to file an answer, go to trial and if the decision is adverse, reiterate the issue on
appeal from the final judgment. The same rule applies to an order denying a motion to quash, except that
instead of filing an answer a plea is entered and no appeal lies from a judgment of acquittal.
This general rule is subject to certain exceptions. If the court, in denying the motion to dismiss or motion
to quash, acts without or in excess of jurisdiction or with grave abuse of discretion, then certiorari or
prohibition lies. The reason is that it would be unfair to require the defendant or accused to undergo the
ordeal and expense of a trial if the court has no jurisdiction over the subject matter or offense, or is not
the court of proper venue, or if the denial of the motion to dismiss or motion to quash is made with grave
abuse of discretion or a whimsical and capricious exercise of judgment. In such cases, the ordinary
remedy of appeal cannot be plain and adequate. The following are a few examples of the exceptions to
the general rule.
In De Jesus vs. Garcia (19 SCRA 554), upon the denial of a motion to dismiss based on lack of
jurisdiction over the subject matter, this Court granted the petition for certiorari and prohibition against the
City Court of Manila and directed the respondent court to dismiss the case.
In Lopez vs. City Judge (18 SCRA 616), upon the denial of a motion to quash based on lack of
jurisdiction over the offense, this Court granted the petition for prohibition and enjoined the respondent
court from further proceeding in the case.
In Enriquez vs. Macadaeg (84 Phil. 674), upon the denial of a motion to dismiss based on improper
venue, this Court granted the petition for prohibition and enjoined the respondent judge from taking
cognizance of the case except to dismiss the same.
In Manalo vs. Mariano (69 SCRA 80), upon the denial of a motion to dismiss based on bar by prior
judgment, this Court granted the petition for certiorari and directed the respondent judge to dismiss the
case.
In Yuviengco vs. Dacuycuy (105 SCRA 668), upon the denial of a motion to dismiss based on the Statute
of Frauds, this Court granted the petition for certiorari and dismissed the amended complaint.
In Tacas vs. Cariaso (72 SCRA 527), this Court granted the petition for certiorari after the motion to
quash based on double jeopardy was denied by respondent judge and ordered him to desist from further
action in the criminal case except to dismiss the same.
In People vs. Ramos (83 SCRA 11), the order denying the motion to quash based on prescription was set
aside on certiorari and the criminal case was dismissed by this Court.
Respondent Court correctly stated the general rule and its exceptions. However, it ruled that none of the
exceptions is present in the case at bar and that the case appears complex and complicated,
necessitating a full-blown trial to get to the bottom of the controversy.
Petitioner's motion to dismiss is based on the ground that the complaint states no cause of action against
it by pointing out the non-libelous nature of the article sued upon. There is no need of a trial in view of the
conclusion of this Court that the article in question is not libelous. The specific allegation in the complaint,
to the effect that the article attributed to the sugarcane planters the deaths and brutalization of sugarcane
workers, is not borne out by a perusal of the actual text.
The complaint contains a recital of the favorable working conditions of the agricultural workers in the
sugar industry and the various foundations and programs supported by planters' associations for the
benefit of their workers. Undoubtedly, the statements in the article in question are sweeping and
exaggerated; but, paraphrasing the ruling in the Uy Tioco case above quoted, it would be unreasonable
and absurd to condemn the majority of the sugarcane planters, who have at heart the welfare of their
workers, because of the actions of a part. Nonetheless, articles such as the one in question may also
serve to prick the consciences of those who have but are not doing anything or enough for those who do
not have.
On the other hand, petitioner would do well to heed the admonition of the President to media that they
should check the sources of their information to ensure the publication of the truth. Freedom of the press,
like all freedoms, should be exercised with responsibility.
WHEREFORE, the decision of the Intermediate Appellate Court is reversed and the complaint in Civil
Case No. 15812 of the Court of First Instance of Negros Occidental is dismissed, without pronouncement
as to costs.
SO ORDERED.
G.R. No. L-23136 August 26, 1974
ISMAEL MATHAY, JOSEFINA MATHAY, DIOGRACIAS T. REYES and S. ADOR DIONISIO, plaintiffs-
appellants,
vs.
THE CONSOLIDATED BANK AND TRUST COMPANY, JOSE MARINO OLONDRIZ, WILFRIDO C.
TECSON, SIMON R. PATERNO, FERMIN Z. CARAM, JR., ANTONIO P. MADRIGAL, JOSE P.
MADRIGAL, CLAUDIO TEEHANKEE, and ALFONSO JUAN OLONDRIZ, defendants-appellees.
CIPRIANO AZADA, MARIA CRISTINA OLONDRIZ PERTIERRA jointly with her husband ARTURO
PERTIERRA, and MARIA DEL PUY OLONDRIZ DE STEVENS, movants-intervenors-appellants.
Deogracias T. Reyes & Associates for appellants.
Tañada, Teehankee & Carreon for appellees.
Paterno Pedrena for appellee Fermin Z. Caram, Jr.
ZALDIVAR, J.:p
In this appeal, appellants-plaintiffs and movants-intervenors seek the reversal of the order dated March
21, 1964 of the Court of First Instance of Manila dismissing the complaint together with all other pending
incidents in Civil Case No. 55810.
The complaint in this case, filed on December 24, 1963 as a class suit, under Section 12, Rule 3, of the
Rules of Court, contained six causes of action. Under the first cause of action, plaintiffs-appellants
alleged that they were, on or before March 28, 1962, stockholders in the Consolidated Mines, Inc.
(hereinafter referred to as CMI), a corporation duly organized and existing under Philippine laws; that the
stockholders of the CMI, including the plaintiffs-appellants, passed, at a regular stockholders' meeting, a
Resolution providing: (a) that the Consolidated Bank & Trust Co. (hereinafter referred to as Bank) be
organized with an authorized capital of P20,000,000.00; (b) that the organization be undertaken by a
Board of Organizers composed of the President and Members of the Board of Directors of the CMI; (c)
that all stockholders of the CMI, who were legally qualified to become stockholders, would be entitled to
subscribe to the capital stock of the proposed Bank "at par value to the same extent and in the same
amount as said stockholders' respective share holdings in the CMI," as shown in its stock books on a
date to be fixed by the Board of Directors [which date was subsequently fixed as January 15, 1963],
provided that the right to subscribe should be exercised within thirty days from the date so fixed, and "that
if such right to subscription be not so exercised then the stockholders concerned shall be deemed to
have thereby waived and released ipso factotheir right to such subscription in favor of the Interim Board
of Organizers of the Defendant Bank or their assignees;" and (d) that the Board of Directors of the CMI
be authorized to declare a "special dividend" in an amount it would fix, which the subscribing
stockholders might authorize to be paid directly to the treasurer of the proposed Bank in payment of the
subscriptions; that the President and members of the Board of Directors of the CMI, who are the
individuals-defendants-appellees in the instant case, constituted themselves as the Interim Board of
Organizers; that said Board sent out, on or about November 20, 1962, to the CMI stockholders, including
the plaintiffs-appellants, circular letters with "Pre-Incorporation Agreement to Subscribe" forms that
provided that the payment of the subscription should be made in cash from time to time or by the
application of the special dividend declared by the CMI, and that the subscription must be made within
the period from December 4, 1962 to January 15, 1963, "otherwise such subscription right shall be
deemed to have been thereby ipso facto waived and released in favor of the Board of Organizers of the
Defendant Bank and their assignees"; that the plaintiffs-appellants accomplished and filed their
respective "Pre-Incorporation Agreement to Subscribe" and paid in full their subscriptions; that plaintiffs-
appellants and the other CMI subscribing stockholders in whose behalf the action was brought also
subscribed to a very substantial amount of shares; that on June 25, 1963, the Board of Organizers
caused the execution of the Articles or Incorporation of the proposed Bank indicating an original
subscription of 50,000 shares worth P5,000,000 subscribed and paid only by six of the individuals-
defendants-appellees, namely, Antonio P. Madrigal, Jose P. Madrigal Simon R. Paterno, Fermin Z.
Caram, Jr., Claudio Teehankee, and Wilfredo C. Tecson, thereby excluding the plaintiffs-appellants and
the other CMI subscribing stockholders who had already subscribed; that the execution of said Articles of
Incorporation was "in violation of law and in breach of trust and contractual agreement as a means to
gain control of Defendant Bank by Defendant Individuals and persons or entities chosen by them and for
their personal profit or gain in disregard of the rights of Plaintiffs and other CMI Subscribing
Stockholders;" that the paid-in capital stock was raised, as required by the Monetary Board, to
P8,000,000.00, and individuals-defendants-appellees caused to be issued from the unissued shares
30,000 shares amounting to P3,000,000.00, all of which were again subscribed and paid for entirely by
individuals-defendants-appellees or entities chosen by them "to the exclusion of Plaintiffs and other CMI
subscribing stockholders" "in violation of law and breach of trust and of the contractual agreement
embodied in the contractual agreement of March 28, 1962"; that the Articles were filed with the Securities
and Exchange Commission which issued the Certificate of Incorporation on June 25, 1963; that as of the
date of the Complaint, the plaintiffs-appellants and other CMI subscribing stockholders had been denied,
through the unlawful acts and manipulation of the defendant Bank and Individuals-defendants-appellees,
the right to subscribe at par value, in proportion to their equities established under their respective "Pre-
Incorporation Agreements to Subscribe" to the capital stock, i.e., (a) to the original issue of 50,000 shares
and/or (b) to the additional issue of 30,000 shares, and/or (c) in that portion of said original or additional
issue which was unsubscribed; that the individuals-defendants-appellees and the persons chosen by
them had unlawfully acquired stockholdings in the defendant-appellee Bank in excess of what they were
lawfully entitled and held such shares "in trust" for the plaintiffs-appellants and the other CMI
stockholders; that it would have been vain and futile to resort to intra corporate remedies under the facts
and circumstances alleged above. As relief on the first cause of action, plaintiffs-appellants prayed that
the subscriptions and share holdings acquired by the individuals-defendants- appellees and the persons
chosen by them, to the extent that plaintiffs-appellants and the other CMI stockholders had been deprived
of their right to subscribe, be annulled and transferred to plaintiffs-appellants and other CMI subscribing
stockholders.
Besides reproducing all the above allegations in the other causes of action, plaintiffs-appellants further
alleged under the second cause of action that on or about August 28, 1963, defendants-appellees
Antonio P. Madrigal, Jose P. Madrigal: Fermin Z. Caram, Jr., and Wilfredo C. Tecson "falsely certified to
the calling of a special stockholders' meeting allegedly pursuant to due notice and call of Defendant
Bank" although plaintiffs-appellants and other CMI stockholders were not notified thereof, and amended
the Articles of Incorporation increasing the number of Directors from 6 to 7, and had the illegally created
Position of Director filled up by defendant-appellee Alfonso Juan Olondriz, who was not competent or
qualified to hold such position. In the third cause of action, plaintiffs-appellants claimed actual damages in
an amount equivalent to the difference between the par value of the shares they were entitled, but failed,
to acquire and the higher market value of the same shares. In the fourth cause of action, Plaintiffs-
appellants claimed moral damages; in the fifth, exemplary damages; and in the sixth, attorney's fees.
In his manifestation to the court on January 4, 1964, Francisco Sevilla, who was one of the original
plaintiffs, withdrew. On January 15, 1964 Cipriano Azada, Maria Cristina Olondriz Pertierra, Maria del Puy
Olondriz de Stevens (who later withdrew as intervenors-appellants) and Carmen Sievert de Amoyo, filed
a motion to intervene, and to join the plaintiffs-appellants on record, to which motion defendants-
appellees, except Fermin Z. Caram, Jr., filed, on January 17, 1964 their opposition.
On February 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a motion to dismiss on the
grounds that (a) plaintiffs-appellants had no legal standing or capacity to institute the alleged class suit;
(b) that the complaint did not state a sufficient and valid cause of action; and (c) that plaintiffs-appellants'
complaint against the increase of the number of directors did not likewise state a cause of action.
Plaintiffs-appellants filed their opposition thereto on February 21, 1964.
On March 4, 1964 appellants, plaintiffs and intervenors, filed a verified petition for a writ of preliminary
injunction to enjoin defendants-appellees from considering or ratifying by resolution, at the meeting of the
stockholders of defendant-appellee Bank to be held the following day, the unlawful apportionment of the
shares of the defendant-appellee Bank and the illegal amendment to its Articles of Incorporation
increasing the number of Directors, The Court, after hearing, granted the writ, but subsequently set it
aside upon the appellees' filing a counter bond.
Some subscribers to the capital stock of the Bank like Concepcion Zuluaga, et al., and Carlos Moran
Sison, et al., filed separate manifestations that they were opposing and disauthorizing the suit of
plaintiffs-appellants.
On March 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a supplemental ground for
their motion to dismiss, to wit, that the stockholders, except Fermin Z. Caram, Jr., who abstained, had
unanimously, at their regular annual meeting held on March 5, 1964, ratified and confirmed all the
actuations of the organizers-directors in the incorporation, organization and establishment of the Bank.
In its order, dated March 21, 1964, the trial court granted the motion to dismiss, holding, among other
things, that the class suit could not be maintained because of the absence of a showing in the complaint
that the plaintiffs-appellants were sufficiently numerous and representative, and that the complaint failed
to state a cause of action. From said order, appellants, plaintiffs and intervenors, interposed this appeal to
this Court on questions of law and fact, contending that the lower court erred as follows:
1. In holding that plaintiffs-appellants could not maintain the present class suit
because of the absence of a showing in the complaint that they were sufficiently
numerous and representative;
II. In holding that the instant action could not be maintained as a class suit
because plaintiffs-appellants did not have a common legal interest in the subject
matter of the suit;
III. In dismissing the present class suit on the ground that it did not meet the
requirements of Rule 3, section 12 of the Rules of Court;
IV. In holding that the complaint was fatally defective in that it failed to state with
particularity that plaintiffs-appellants had resorted to, and exhausted, intra-
corporate remedies;
V. In resolving defendants-appellees' motion on the basis of facts not alleged in
the complaint;
VI. In holding that plaintiffs-appellants' complaint stated no valid cause of action
against defendants-appellees;
VII. In not holding that a trust relationship existed between the Interim Board of
Organizers of defendant-appellee Bank and the CMI subscribing stockholders and
in not holding that the waiver was in favor of the Board of Trustees for the CMI
subscribing stockholders;
VIII. In holding that the failure of plaintiffs-appellants to allege that they had paid
or had offered to pay for the shares allegedly pertaining to them constituted
another ground for dismissal;
 XI. In holding that the allegations under the second cause of action stated no valid
cause of action due to a fatal omission to allege that plaintiffs-appellants were
stockholders of record at the time of the holding of the special stockholders'
meeting;
X. In holding that plaintiffs-appellants' complaint stated no cause of action against
defendant-appellee Bank; and
XI. In considering the resolution of ratification and confirmation and in holding that
the resolution rendered the issues in this case moot.
The assigned error revolve around two questions namely: (1) whether the instant action could be
maintained as a class suit, and (2) whether the complaint stated a cause of action. These issues alone
will be discussed.
1. Appellants contended in the first three assigned errors that the trial court erred in holding that the
present suit could not be maintained as a class suit, and in support thereof argued that the propriety of a
class suit should be determined by the common interest in the subject matter of the controversy; that in
the instant case there existed such common interest which consisted not only in the recovery of the
shares of which the appellants were unlawfully deprived, but also in divesting the individuals-defendants-
appellees and the person or entities chosen by them of control of the appellee Bank. 1 ; that the complaint
showed that besides the four plaintiff-appellants of record, and the four movant-intervenors-appellants
there were in the appellee Bank many other stockholders who, tough similarly situated as the appellants,
did not formally include themselves as parties on record in view of the representative character of the
suit; that the test, in order to determine the legal standing of a party to institute a class suit, was not one,
of number, but whether or not the interest of said party was representative of the persons in whose behalf
the class suit was instituted; that granting arguendo, that the plaintiffs-appellants were not sufficiently
numerous and representative, the court should not have dismissed the action, for insufficiency of number
in a class suit was not a ground for a motion to dismiss, and the court should have treated the suit as an
action under Rule 3, section 6, of the Rules of Court which permits a joinder of parties.
Defendants-appellees, on the contrary, stressed that the instant suit was instituted as a class suit and the
plaintiffs-appellants did not sue in their individual capacities for the protection of their individual interests;
that the plaintiffs appellants of record could not be considered numerous and representative, as said
plaintiffs-appellants were only four out of 1,500 stockholders, and owned only 8 shares out of the 80,000
shares of stock of the appellee Bank; that even if to the four plaintiffs-appellants were added the four
movants-intervenors-appellants the situation would be the same as two of the intervenors, to wit, Ma.
Cristina Olondriz Pertierra and Ma. del Puy Olondriz de Stevens, could not sue as they did not have their
husbands' consent; that it was necessary that in a class suit the complaint itself should allege facts
showing that the plaintiffs were sufficiently numerous and representative, and this did not obtain in the
instant case, as the complaint did not. even allege how many other CMI stockholders were "similarly
situated"; that the withdrawal of one plaintiff, Francisco Sevilla, the subsequent disclaimers of any interest
in the suit made in two separate pleadings by other CMI stockholders and the disauthorization of their
being represented by plaintiffs-appellants by the 986 (out of 1,663) stockholders who attended the annual
meeting of bank stockholders on March 5, 1964, completely negated plaintiffs-appellants' pretension that
they were sufficiently numerous and representative or that there were many other stockholders similarly
situated whom the plaintiffs-appellants allegedly represented; that plaintiffs-appellants did not have that
common or general interest required by the Rules of Court in the subject matter of the suit. 2
In their Reply Brief, appellants insisted that non-compliance with Section 12, Rule 3, not being one
enumerated in Rules 16 and 17, was not a ground for dismissal; that the requirements for a class had
been complied with; that the required common interest existed even if the interests were several for there
was a common question of law or fact and a common relief was sought; that the common or general
interest could be in the object of the action, in the result of the proceedings, or in the question involved in
the action, as long as there was a common right based on the same essential facts; that plaintiffs-
appellants adequately represented the aggrieved group of bank stockholders, inasmuch as appellants'
interests were not antagonistic to those of the latter, and appellants were in the same position as the
group in whose behalf the complaint was filed.
The governing statutory provision for the maintenance of a class suit is Section 12 of Rule 3 of the Rules
of Court, which reads as follows:
Sec. 12. Class suit — When the subject matter of the controversy is one of
common or general interest to many persons, and the parties are so numerous
that it is impracticable to bring them all before the court, one or more may sue or
defend for the benefit of -ill. But in such case the court shall make sure that the
parties actually before it are sufficiently numerous and representative so that all
interests concerned are fully protected. Any party in interest shall have a right to
intervene in protection of his individual interest.
The necessary elements for the maintenance of a class suit are accordingly: (1) that the subject matter of
the controversy be one of common or general interest to many persons, and (2) that such persons be so
numerous as to make it impracticable to bring them all to the court. 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 quit
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, 3 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. 4
The complaint in the instant case explicitly declared that the plaintiffs- appellants instituted the "present
class suit under Section 12, Rule 3, of the Rules of Court in. behalf of CMI subscribing stockholders" 5 but
did not state the number of said CMI subscribing stockholders so that the trial court could not infer, much
less make sure as explicitly required by the sufficiently numerous and representative in order that all
statutory provision, that the parties actually before it were interests concerned might be fully protected,
and that it was impracticable to bring such a large number of parties before the court.
The statute also requires, as a prerequisite to a class suit, that the subject-matter of the controversy be of
common or general interest to numerous persons. Although it has been remarked that the "innocent
'common or general interest' requirement is not very helpful in determining whether or not the suit is
proper",6 the decided cases in our jurisdiction have more incisively certified the matter when there is such
common or general interest in the subject matter of the controversy. By the phrase "subject matter of the
action" is meant "the physical facts, the things real or personal, the money, lands, chattels, and the like, in
relation to which the suit is prosecuted, and not the delict or wrong committed by the defendant." 7
This Court has ruled that a class suit did not lie in an action for recovery of real property where separate
portions of the same parcel were occupied and claimed individually by different parties to the exclusion of
each other, such that the different parties had determinable, though undivided interests, in the property in
question.8 It his likewise held that a class suit would not lie against 319 defendants individually occupying
different portions of a big parcel of land, where each defendant had an interest only in the particular
portion he was occupying, which portion was completely different from the other portions individually
occupied by other defendants, for the applicable section 118 of the Code of Civil Procedure relates to a
common and general interest in single specific things and not to distinct ones. 9In an action for the
recovery of amounts that represented surcharges allegedly collected by the city from some 30,000
customers of four movie houses, it was held that a class suit did not lie, as no one plaintiff had any right
to, or any share in the amounts individually claimed by the others, as each of them was entitled, if at all,
only to the return of what he had personally paid. 10
The interest, subject matter of the class suits in the above cited cases, is analogous to the interest
claimed by appellants in the instant case. The interest that appellants, plaintiffs and intervenors, and the
CMI stockholders had in the subject matter of this suit — the portion of stocks offering of the Bank left
unsubscribed by CMI stockholders who failed to exercise their right to subscribe on or before January 15,
1963 — was several, not common or general in the sense required by the statute. Each one of the
appellants and the CMI stockholders had determinable interest; each one had a right, if any, only to his
respective portion of the stocks. No one of them had any right to, or any interest in, the stock to which
another was entitled. Anent this point, the trial court correctly remarked:
 It appears to be the theory of the plaintiffs borne out by the prayer, that each
subscribing CMI stockholder is entitled to further subscribe to a certain Proportion
depending upon his stockholding in the CMI, of the P8 million capital stock of the
defendant bank open to subscription (out of the 20 million authorized capital
stock) as well as the unsubscribed portion of the P8 million stock offering which
were left unsubscribed by those CMI stockholders who for one reason or another
had failed to exercise their subscription rights on or before January 15, 1963.
Under the plaintiffs' theory therefore, each subscribing CMI stockholder was
entitled to subscribe to a definite number of shares both in the original offering of
P8 million and in that part thereof not subscribed on or before the deadline
mentioned, so that one subscribing CMI stockholder may be entitled to subscribe
to one share, another to 3 shares and a third to 11 shares, and so on, depending
upon the amount and extent of CMI stockholding. But except for the fact that a
question of law — the proper interpretation of the waiver provisions of the CMI
stockholders' resolution of March 28, 1962 — is common to all, each CMI
subscribing stock holder has a legal interest in, and a claim to, only his respective
proportion of shares in the defendant bank, and none with regard to any of the
shares to which another stockholder is entitled. Thus plaintiff Ismael Mathay has
no legal interest in, or claim to, any share claimed by any or all of his co-plaintiffs
from the defendant individuals. Hence, no CMI subscribing stockholder or, for that
matter, not any number of CMI stockholders can maintain a class suit in behalf of
others,... 11
Even if it be assumed, for the sake of argument, that the appellants and the CMI stockholders suffered
wrongs that had been committed by similar means and even pursuant to a single plan of the Interim
Board of Organizers of the Bank, the wrong suffered by each of them would constitute a wrong separate
from those suffered by the other stockholders, and those wrongs alone would not create that common or
general interest in the subject matter of the controversy as would entitle any one of them to bring a class
suit on behalf of the others. Anent this point it has been said that:
Separate wrongs to separate persons, although committed by similar means and
even pursuant to a single plan, do not alone create a 'common' or 'general'
interest in those who are wronged so as to entitle them to maintain a
representative action. 12
Appellants, however, insisted, citing American authorities, 13 that a class suit might be brought even if the
interests of plaintiffs-appellants might be several as long as there was a common question of law or fact
affecting them and a common relief was sought. We have no conflict with the authorities cited; those
were rulings under the Federal Rules of Civil Procedure, pursuant to Rule 23 of which, there were three
types of class suits, namely: the true, the hybrid, and the spurious, and these three had only one feature
in common, that is, in each the persons constituting the class must be so numerous as to make it
impracticable to bring them all before the court. The authorities cited by plaintiffs-appellants refer to the
spurious class action (Rule 23 (a) (3) which involves a right sought to be enforced, which is several, and
there is a common question of law or fact affecting the several rights and a common relief is
sought. 14 The spurious class action is merely a permissive joinder device; between the members of the
class there is no jural relationship, and the right or liability of each is distinct, the class being formed
solely by the presence of a common question of law or fact. 15 This permissive joinder is provided in
Section 6 of Rule 3, of our Rules of Court. Such joinder is not and cannot be regarded as a class suit,
which this action purported and was intended to be as per averment of the complaint.
It may be granted that the claims of all the appellants involved the same question of law. But this alone,
as said above, did not constitute the common interest over the subject matter indispensable in a class
suit. The right to purchase or subscribe to the shares of the proposed Bank, claimed by appellants herein,
is analogous to the right of preemption that stockholders have when their corporation increases its
capital. The right to preemption, it has been said, is personal to each stockholder, 16 and while a
stockholder may maintain a suit to compel the issuance of his proportionate share of stock, it has been
ruled, nevertheless, that he may not maintain a representative action on behalf of other stockholders who
are similarly situated. 17 By analogy, the right of each of the appellants to subscribe to the waived stocks
was personal, and no one of them could maintain on behalf of others similarly situated a representative
suit.
Straining to make it appear that appellants and the CMI subscribing stockholders had a common or
general interest in the subject matter of the suit, appellants stressed in their brief that one of the reliefs
sought in the instant action was "to divest defendant individuality and the persons or entities chosen by
them of control of the defendant bank." 18 This relief allegedly sought by appellants did not, however,
appear either in the text or in the prayer of the complaint.
Appellants, furthermore, insisted that insufficiency of number in a class suit was not a ground for
dismissal of one action. This Court has, however, said that where it appeared that no sufficient
representative parties had been joined, the dismissal by the trial court of the action, despite the
contention by plaintiffs that it was a class suit, was correct. 19 Moreover, insofar as the instant case is
concerned, even if it be granted for the sake of argument, that the suit could not be dismissed on that
ground, it could have been dismissed, nevertheless, on the ground of lack of cause of action which will
be presently discussed. .
2. Appellants supported their assigned error that the court erred in holding that the complaint stated no
valid cause of action, by claiming that paragraph 15 together with the other allegations of the complaint to
the effect that defendants-appellees had unlawfully acquired stockholdings in the capital stock of
defendant-appellee Bank in excess of what they were lawfully entitled to, in violation of law and in breach
of trust and the contractual agreement, constituted a valid and sufficient cause of action; 20 and that only
the allegations in the complaint should have been considered by the trial court in determining whether the
complaint stated a cause of action or not.
Defendants-appellees, on the contrary, maintained that the allegations of the complaint should not be the
only ones to be considered in determining whether there is a cause of action; that even if the ultimate
facts alleged in the first cause of action of the complaint be the only ones considered the complaint would
still fail to state a valid cause of action on the following grounds: first, there was no allegation regarding
appellants' qualification to subscribe to the capital stock of the appellee Bank, for under the CMI
stockholders' resolution of March 28, 1962, only those qualified under the law were entitled to subscribe,
and under the regulations of the Monetary Board, only natural-born Filipino citizens could be stockholders
of a banking corporation organized under the laws of the Philippines, and nowhere did the complaint
alleged that plaintiffs-appellants were natural born Filipino citizens. 21 Second, appellants' averment in
paragraph 8 that they "subscribed," and their averment in paragraph 15 that they were "denied the right
to subscribe ... to the capital stock of the defendant Bank", were inconsistent, and hence neutralized each
other, thereby leaving in shambles the first cause of action. Third, there was no allegation that appellants
had not yet received or had not been issued the corresponding certificates of stock covering the shares
they had subscribed and paid for. Fourth, the allegations failed to show the existence of the supposed
trust; and fifth, the complaint failed to allege that plaintiffs-appellants had paid or offered to pay for the
shares allegedly pertaining to them. 22
Let us premise the legal principles governing the motion to dismiss on the ground of lack of cause of
action.
Section 1, Rule 16 of the Rules of Court providing in part that: .
Within the time for pleading a motion to dismiss may be made on any of the
following grounds: ....
(g) That the complaint states no cause of action. ..1.
explicitly requires that the sufficiency of the complaint must be tested exclusively on the basis of the
complaint itself and no other should be considered when the ground for motion to dismiss is that the
complaint states no cause of action. Pursuant thereto this Court has ruled that:
As a rule the sufficiency of the complaint, when Challenged in a motion to dismiss, must be determined
exclusively on the basis of the facts alleged therein. 23
It has been likewise held that a motion to dismiss based on lack of cause of action hypothetically admits
the truth of the allegations of fact made in the complaint. 24 It is to be noted that only the facts well
pleaded in the complaint, and likewise, any inferences fairly deducible therefrom, are deemed admitted
by a motion to dismiss. Neither allegations of conclusions 25 nor allegations of facts the falsity of which
the court may take judicial notice are deemed admitted. 26 The question, therefore, submitted to the Court
in a motion to dismiss based on lack of cause of action is not whether the facts alleged in the complaint
are true, for these are hypothetically admitted, but whether the facts alleged are sufficient to constitute a
cause of action such that the court may render a valid judgment upon the facts alleged therein.
A cause of action is an act or omission of one party in violation of the legal right of the other. Its essential
elements are, namely: (1) the existence of a legal right in the plaintiff, (2) a correlative legal duty in the
defendant, and (3) an act or omission of the defendant in violation of plaintiff's right with consequential
injury or damage to the plaintiff for which he may maintain an action for the recovery of damages or other
appropriate relief. 27 On the other hand, Section 3 of Rule 6 of the Rules of Court provides that the
complaint must state the ultimate facts constituting the plaintiff's cause of action. Hence, where the
complaint states ultimate facts that constitute the three essential elements of a cause of action, the
complaint states a cause of action; 28 otherwise, the complaint must succumb to a motion to dismiss on
that ground.
The legal principles having been premised, let us now analyze and discuss appellant's various causes of
action.
Appellants' first cause of action, pursuant to what has been premised above, should have consisted of:
(1) the right of appellants as well as of the other CMI stockholders to subscribe, in proportion to their
equities established under their respective "Pre-Incorporation Agreements to Subscribe", to that portion
of the capital stock which was unsubscribed because of failure of the CMI stockholders to exercise their
right to subscribe thereto; (2) the legal duty of the appellant to have said portion of the capital stock to be
subscribed by appellants and other CMI stockholders; and (3) the violation or breach of said right of
appellants and other CMI stockholders by the appellees.
Did the complaint state the important and substantial facts directly forming the basis of the primary right
claimed by plaintiffs? Before proceeding to elucidate this question, it should be noted that a bare
allegation that one is entitled to something is an allegation of a conclusion. Such allegations adds nothing
to the pleading, it being necessary to plead specifically the facts upon which such conclusion is
founded. 29 The complaint alleged that appellants were stockholders of the CMI; that as such
stockholders, they were entitled; by virtue of the resolution of March 28, 1962, to subscribe to the capital
stock of the proposed Consolidated Bank and Trust Co., at par value to the same extent and in the same
amount as said stockholders' respective share holdings in the CMI as shown in the latter's stock book as
of January 15, 1963, the right to subscribe to be exercised until January 15, 1963, provided said
stockholders of the CMI were qualified under the law to become stockholders of the proposed
Bank; 30 that appellants accomplished and filed their respective "Pre-Incorporation Agreements to
Subscribe" and fully paid the subscription. 31
These alleged specific facts did not even show that appellants were entitled to subscribe to the capital
stock of the proposed Bank, for said right depended on a condition precedent, which was, that they were
qualified under the law to become stockholders of the Bank, and there was no direct averment in the
complaint of the facts that qualified them to become stockholders of the Bank. The allegation of the fact
that they subscribed to the stock did not, by necessary implication, show that they were possessed of the
necessary qualifications to become stockholders of the proposed Bank.
Assuming arguendo that appellants were qualified to become stockholders of the Bank, they could
subscribe, pursuant to the explicit terms of the resolution of March 28, 1962, "to the same extent and in
the same amount as said stockholders' respective stockholdings in the CMI" as of January 15,
1963. 32 This was the measure of the right they could claim to subscribe to waived stocks. Appellants did
not even aver that the stocks waived to the subscription of which they claimed the right to subscribe,
were comprised in "the extent and amount" of their respective share holdings in the CMI. It is not
surprising that they did not make such an averment for they did not even allege the amount of shares of
stock to which they claimed they were entitled to subscribe. The failure of the complaint to plead
specifically the above facts rendered it impossible for the court to conclude by natural reasoning that the
appellants and other CMI stockholders had a right to subscribe to the waived shares of stock, and made
any allegation to that effect a conclusion of the pleader, not an ultimate fact, in accordance with the test
suggested by the California Supreme Court, to wit:
If from the facts in evidence, the result can be reached by that process of natural
reasoning adopted in the investigation of truth, it becomes an ultimate fact, to be
found as such. If, on the other hand, resort must be had to the artificial processes
of the law, in order to reach a final determination, the result is a conclusion of
law. 33
Let us now pass to the second and third elements that would have constituted the first cause of action.
Did the complaint allege as ultimate facts the legal duty of defendants-appellees to have a portion of the
capital stock subscribed to by appellants? Did the complaint allege as ultimate facts that defendants
appellees had violated appellants' right?
Even if it be assumed arguendo that defendants-appellees had the duty to have the waived stocks
subscribed to by the CMI stockholders, this duty was not owed to all the CMI stockholders, but only to
such CMI stockholders as were qualified to become stockholders of the proposed Bank. Inasmuch as it
has been shown that the complaint did not contain ultimate facts to show that plaintiffs-appellants were
qualified to become stockholders of the Bank, it follows that the complaint did not show that defendants-
appellees were under duty to have plaintiffs-appellants subscribe to the stocks of the proposed Bank. It
inevitably follows also that the complaint did not contain ultimate facts to show that the right of the
plaintiffs-appellants to subscribe to the shares of the proposed Bank had been violated by defendants-
appellees. How could a non-existent right be violated?
Let us continue the discussion further. The complaint alleged that by virtue of the resolution of March 28,
1962, the President and Members of the Board of Directors of the CMI would be constituted as a Board
of Organizers to undertake and carry out the organization of the Bank; 34 that the Board of Organizers
was constituted and proceeded with the establishment of the Bank, 35 that the persons composing the
Board of Organizers were the individuals-defendants-appellees; 36 that the Board of Organizers sent our
circular letters with "Pre-Incorporation Agreement to Subscribe" forms 37 which specified, among others,
"such subscription right shall be deemed ipso facto waived and released in favor of the Board of
Organizers of the defendant Bank and their assignees"; 38 that in the Articles of Incorporation prepared by
the Board of Organizers, the individuals-defendants-appellees alone appeared to have subscribe to the
50, shares; 39 and that individuals-defendants-appellees again subscribe to all the additional 30,000
shares. 40 From these facts, appellants concluded that they were denied their right to subscribe in
proportion to their equities; 41 that the individuals-defendants-appellees unlawfully acquired stockholdings
far in excess of what they were lawfully entitled in violation of law and in breach of trust and of contractual
agreement; 42and that, because of matters already alleged, the individuals-defendants-appellees "hold
their shares in the defendant bank in trust for plaintiffs." 43
The allegation in the complaint that the individuals-defendants-appellees held their shares "in trust" for
plaintiffs-appellants without averment of the facts from which the court could conclude the existence of
the alleged trust, was not deemed admitted by the motion to dismiss for that was a conclusion of law.
Express averments "that a party was the beneficial owner of certain property; ... that property or money
was received or held in trust, or for the use of another; that particular funds were trust funds; that a
particular transaction created an irrevocable trust; that a person held Property as constructive trustee;
that on the transfer of certain property a trust resulted" have been considered as mere conclusions of
law. 44 The facts alleged in the complaint did not, by logical reasoning, necessarily lead to the conclusion
that defendants-appellees were trustees in favor of appellants of the shares of stock waived by the CMI
stockholders who failed to exercise their right to subscribe. In this connection, it has been likewise said
that:
"The general rule is that an allegation of duty in terms unaccompanied by a statement of the facts
showing the existence of the duty, is a mere conclusion of law, unless there is a relation set forth from
which the law raises the duty." 45
In like manner, the allegation that individuals-defendants-appellees held said shares in trust was no more
than an interpretation by appellants of the effect of the waiver clause of the Resolution and as such it was
again a mere conclusion of law. It has been said that:
The following are also conclusions of law: ... an allegation characterizing an
instrument or purporting to interpret it and state its effects, ... 46
Allegations in petition in the nature of conclusions about the meaning of contract, inconsistent with stated
terms of the contract, cannot be considered. 47
The allegation that the defendants-appellee acquired stockholdings far in excess of what they were
lawfully entitled, in violation of law and in breach of trust and of contractual agreement, is also mere
conclusion of law.
Of course, the allegation that there was a violation of trust duty was plainly a conclusion of law, for "a
mere allegation that it was the duty of a party to do this or that, or that he was guilty of a breach of duty, is
a statement of a conclusion not of fact." 48
An averment ... that an act was 'unlawful' or 'wrongful' is a mere legal conclusion
or opinion of the pleader. 49
Moreover, plaintiffs-appellants did not state in the complaint the amount of subscription the individual
defendant-appellee were entitled to; hence there was no basis for the court to determine what amount
subscribed to by them was excessive.
From what has been said, it is clear that the ultimate facts stated under the first cause of action are not
sufficient to constitute a cause of action.
The further allegations in the second cause of action that the calling of a special meeting was "falsely
certified", that the seventh position of Director was "illegally created" and that defendant Alfonso Juan
Olondriz was "not competent or qualified" to be a director are mere conclusions of law, the same not
being necessarily inferable from the ultimate facts stated in the first and second causes of action. It has
been held in this connection that:
An averment that ... an act was 'unlawful' or 'wrongful' is a mere legal conclusion
or opinion of the pleader. The same is true of allegations that an instrument was
'illegally' certified or ... that an act was arbitrarily done ..." 50
A pleader states a mere conclusion when he makes any of the following
allegations: that a party was incapacitated to enter into a contract or convey
property ... 51
The third, fourth, fifth and sixth causes of action depended on the first cause of action, which, as has
been shown, did not state ultimate facts sufficient to constitute a cause of action. It stands to reason,
therefore, that said causes of action would also be fatally defective.
It having been shown that the complaint failed to state ultimate facts to constitute a cause of action, it
becomes unnecessary to discuss the other assignments of errors.
WHEREFORE, the instant appeal is dismissed, and the order dated March 21, 1964 of the Court of First
Instance of Manila dismissing the complaint in Civil Case No. 55810 is affirmed, with costs in this
instance against appellants. It is so ordered.
G.R. No. L-22909 January 28, 1925
VICTORIANO BORLASA, ET AL., plaintiffs-appellants,
vs.
VICENTE POLISTICO, ET AL., defendants-appellees.
Sumulong and Lavides for appellants.
Ramon Diokno for appellees.
STREET, J.:
This action was instituted in the Court of First Instance of Laguna on July 25, 1917, by Victoriano Borlasa
and others against Vicente Polistico and others, chiefly for the purpose of securing the dissolution of a
voluntary association named Turuhan Polistico & Co., and to compel the defendants to account for and
surrender the money and property of the association in order that its affairs may be liquidated and its
assets applied according to law. The trial judge having sustained a demurrer for defect of parties and the
plaintiffs electing not to amend, the cause was dismissed, and from this order an appeal was taken by the
plaintiffs to this court.
The material allegations of the complaint, so far as affects the present appeal, are to the following effect:
In the month of April, 1911, the plaintiffs and defendants, together with several hundred other persons,
formed an association under the name of Turuhan Polistico & Co. Vicente Polistico, the principal
defendant herein, was elected president and treasurer of the association, and his house in Lilio, Laguna,
was made its principal place of business. The life of the association was fixed at fifteen years, and under
the by-laws each member obligated himself to pay to Vicente Polistico, as president-treasurer, before 3
o'clock in the afternoon of every Sunday the sum of 50 centavos, except that on every fifth Sunday the
amount was P1, if the president elected to call this amount, as he always did. It is alleged that from April,
1911, until April, 1917, the sums of money mentioned above were paid weekly by all of the members of
the society with few irregularities. The inducement to these weekly contributions was found in provisions
of the by-laws to the effect that a lottery should be conducted weekly among the members of the
association and that the successful member should be paid the amount collected each week, from which,
however, the president-treasurer of the society was to receive the sum of P200, to be held by him as
funds of the society.
It is further alleged that by virtue of these weekly lotteries Vicente Polistico, as president-treasurer of the
association, received sums of money amounting to P74,000, more or less, in the period stated, which he
still retains in his power or has applied to the purchase of real property largely in his own name and partly
in the names of others. The defendants in the complaint are the members of the board of directors of the
association, including Vicente Polistico, as president-treasurer, Alfonso Noble, secretary, Felix Garcia and
Vivencio Zulaybar, as promoter (propagandistas), and Afroniano de la Peña and Tomas Orencia, as
members (vocales) of the board.
In an amended answer the defendants raised the question of lack of parties and set out a list of some
hundreds of persons whom they alleged should be brought in as parties defendant on the ground, among
others, that they were in default in the payment of their dues to the association. On November 28, 1922,
the court made an order requiring the plaintiffs to amend their complaint within a stated period so as to
include all of the members of the Turnuhan Polistico & Co. either as plaintiffs or defendants. The plaintiffs
excepted to this order, but acquiesced to the extent of amending their complaint by adding as additional
parties plaintiff some hundreds of persons, residents of Lilio, said to be members of the association and
desirous of being joined as plaintiffs. Some of these new plaintiffs had not been named in the list
submitted by the defendants with their amended answer; and on the other hand many names in said list
were here omitted, it being claimed by the plaintiffs that the persons omitted were not residents of Lilio
but residents of other places and that their relation to the society, so far as the plaintiffs could discover,
was fictitious. The defendants demurred to the amended complaint on the ground that it showed on its
face a lack of necessary parties and this demurrer was sustained, with the ultimate result of the dismissal
of the action, as stated in the first paragraph of this opinion.
The trial judge appears to have supposed that all the members of the Turnuhan Polistico & Co. should be
brought in either plaintiffs or defendants. This notion is entirely mistaken. The situation involved is
precisely the one contemplated in section 118 of the Code of Civil Procedure, where one or more may
sue for the benefit of all. It is evident from the showing made in the complaint, and from the proceedings
in the court below, that it would be impossible to make all of the persons in interest parties to the cases
and to require all of the members of the association to be joined as parties would be tantamount to a
denial of justice.
The general rule with reference to the making of parties in a civil action requires, of course, the joinder of
all necessary parties wherever possible, and the joinder of all indispensable parties under any and all
conditions, the presence of those latter being a sine qua non of the exercise of judicial power. The class
suit contemplates an exceptional situation where there are numerous persons all in the same plight and
all together constituting a constituency whose presence in the litigation is absolutely indispensable to the
administration of justice. Here the strict application of the rule as to indispensable parties would require
that each and every individual in the class should be present. But at this point the practice is so far
relaxed as to permit the suit to proceed, when the class is sufficient represented to enable the court to
deal properly and justly with that interest and with all other interest involved in the suit. In the class suit,
then, representation of a class interest which will be affected by the judgment is indispensable; but it is
not indispensable to make each member of the class an actual party.
A common illustration in American procedure of the situation justifying a class suit is that presented by
the creditors' bill, which is filed by one party interested in the estate of an insolvent, to secure the
distribution of the assets distributable among all the creditors. In such cases the common practice is for
one creditor to sue as plaintiff in behalf of himself and other creditors. (Johnson vs. Waters, 111 U.S.,
640; 28 Law. ed., 547.) Another illustration is found in the case of Smith vs. Swormstedt (16 How., 288;
14 Law. ed., 942), where a limited number of individuals interested in a trust for the benefit of
superannuated preachers were permitted to maintain an action in their own names and as
representatives of all other persons in the same right.
His Honor, the trial judge, in sustaining this demurrer was possibly influenced to some extent by the case
of Rallonza vs. Evangelista (15 Phil., 531); but we do not consider that case controlling, inasmuch as that
was an action for the recovery of real property and the different parties in interest had determinable,
though undivided interests, in the property there in question. In the present case, the controversy
involves an indivisible right affecting many individuals whose particular interest is of indeterminate extent
and is incapable of separation.
The addition of some hundreds of persons to the number of the plaintiffs, made in the amendment to the
complaint of December 13, 1922, was unnecessary, and as the presence of so many parties is bound to
prove embarrassing to the litigation from death or removal, it is suggested that upon the return of this
record to the lower court for further proceedings, the plaintiff shall again amend their complaint by
dismissing as to unnecessary parties plaintiffs, but retaining a sufficient number of responsible persons to
secure liability for costs and fairly to present all the members of the association.
There is another feature of the complaint which makes a slight amendment desirable, which is, that the
complaint should be made to show on its face that the action is intended to be litigated as a class suit.
We accordingly recommend that the plaintiffs further amend by adding after the names of the parties
plaintiffs the words, "in their own behalf and in behalf of other members of Turuhan Polistico & Co."
The order appealed from is reversed, the demurrer of the defendants based upon supposed lack of
parties is overruled, and the defendants are required to answer to the amended complaint within the time
allowed by law and the rules of the court. The costs of this appeal will be paid by the defendants. So
ordered.
Johnson, Malcolm, Villamor, Ostrand, Johns, and Romualdez, JJ., concur.
G.R. No. 111014 May 31, 1996
LIANA'S SUPERMARKET, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL LABOR UNION, respondents.
BELLOSILLO, J.:p
LIANA's SUPERMARKET, as its name implies, is a departmentized self-service retail market selling
foods, convenience goods, and household merchandise with business outlets in Sucat, Parañaque, and
Pasig City. Sometime in 1980, 1981 and 1982 it employed as sales ladies, cooks, packers, cashiers,
electricians, warehousemen, etc., members of private respondent National Labor Union. However in the
course of their employment they were allegedly underpaid and required, among others, to work more
than eight (8) hours a day without overtime pay and deprived of legal holiday pay and monthly
emergency allowance. Starting late 1982 and early 1983 they aired their grievances to petitioner through
Peter Sy, its General Manager, and Rosa Sy, its Consultant, but were only scolded and threatened with
outright dismissal. Consequently, they formed a labor union and affiliated it with respondent National
Labor Union. Thereafter they demanded from petitioner recognition and compliance with Existing labor
laws.
On 30 April 1983 petitioner entered into a three-year contract with Warner Laputt, owner of BAVSPIA
International Services, to supply petitioner with laborers.
About November and December 1984 Rosa Sy met with the employees individually and told them to quit
their membership with the union under pain of being suspended, dismissed or criminally prosecuted.
When they refused, many were dismissed without any charges and others were given memorandum on
concocted offenses and violations.
Meanwhile in March and April 1984 petitioner through Peter Sy and Rosa Sy required the other
employees to resign from employment and to accomplish information sheets and/or application forms
with BAVSPIA otherwise they would be dismissed and/or not paid their salaries. With some degree of
reluctance they complied. Nonetheless, they were allowed to continue working with petitioner under the
same terms and conditions of their previous employment.
On 24 March 1984 respondent Union on behalf of its members filed a complaint against petitioner and/or
Peter Sy, Rosa Sy, BAVSPIA and Warner Laputt before the Labor Arbiter for underpayment of wages,
nonpayment of overtime pay, monthly emergency allowance, legal holiday pay, service incentive leave
pay and 13th month pay (NLRC-NCR Case No. 3-1270-84). On 24 May 1984 the complaint was
amended since respondent Union manifested through its authorized representative that it was intended
as a class suit.
On 28 August 1984 another case was filed, docketed as NLRC-NCR Case No. 8-3043-84, with Elorde
Fadilla, Jr., et al., as complainants.
On 22 October 1984 a third case was filed, docketed as NLRC-NCR Case No. 10-3755-84, with
Carmelita Reyes, Elizabeth Mahanlud, Danny Sida, Omar Napiri and Edgar Mahusay as individual
complainants.
On 12 December 1984 still another case was filed, docketed as NLRC-NCR Case No. 12-4312-84, with
Gloria Estoque and Estrellita Bansig as individual complainants.
Subsequently the four (4) cases were consolidated. Respondent National Labor Union submitted two (2)
lists of one hundred thirty-six (136) workers, seventy-three (73) assigned at Sucat and sixty-three (63) at
Pasig City. There were eighty-five (85) original complainants in the lists. However Sixteen (16)
complainants later filed motions to withdraw with prejudice and five (5) were found to be non-employees
of petitioner. On 27 January 1987 three (3) other complainants settled with petitioner and moved to
dismiss their complaints. Thus, a total of twenty-four (24) complainants were dropped from the lists
thereby reducing the number to sixty-one (61). But twenty-seven (27) more employees submitted their
sworn statements thus increasing again the number of complainants to eighty-eight (88).
When petitioner learned of the charges before the Labor Arbiter it demanded the resignation of the
employees from the Union and withdrawal of their cases or face criminal charges. It also threatened to
withhold their wages and even to dismiss them from their employment. Since they refused to resign
petitioner dismissed them. Hence, charges of unfair labor practice and illegal dismissal were added as
causes of action in their complaints.
Petitioner contended that there was no unfair labor practice because there was no ongoing union activity
before the alleged illegal dismissals; but even if there were, the dismissals were not effected by petitioner
as complainants were not its employees but of BAVSPZA. If what were referred to as illegal dismissals
were those of complainants who resigned, there can be no unfair labor practice as their resignations
were voluntary and their applications with BAVSPIA were of their own volition.
On 6 February 1987, after the consolidated cases were submitted for decision, petitioner filed what was
purportedly a compromise agreement between itself and the local chapter of respondent Union. It
appeared to have been signed by representatives of petitioner and the President, Vice President and
another officer of the local chapter of respondent Union with a prayer that the consolidated cases be
dismissed.
BAVSPIA participated during the initial stages of the hearings but later moved to have its name dropped
as co-respondent when it noted, after complainants have rested, that the evidence formally offered was
directed only against petitioner.
On 28 February 1989 the Labor Arbiter held that (1) petitioner was the employer of complainants with
BAVSPIA being engaged in labor-only contracting; (2) complainants were illegally dismissed; (3) Peter Sy
and Rosa Sy were not personally liable; and, (4) the charge of unfair labor practice and all labor
standards claims were unsubstantiated by evidence. Corollarily, petitioner was ordered to reinstate all the
complainants and to pay them backwages and all benefits reckoned from the date of their respective
dismissals until actual reinstatement but not to exceed three (3) years, and if reinstatement was no longer
feasible the complainants should be granted separation pay equivalent to one-half month salary for every
year of service, a fraction of at least six (6) months to be considered as one (1) whole year. 1
On 30 June 1993 public respondent National Labor Relations Commission affirmed the ruling of the
Labor Arbiter.2
The petitioner now asks how many individual complainants are there in these cases, whether seven (7)
or eighty-five (85); whether these complainants were illegally dismissed; and, whether a compromise
agreement with a motion to dismiss filed by a local chapter of respondent Union may be given legal
effect.
Petitioner claims that there are only seven (7) individual complainants in these cases whose names
appear in the captions of the decision of the Labor Arbiter. Anent thereto, petitioner argues that Sec. 3,
Rule 6, of the Rules of Court clearly provides that the names and residences of the parties plaintiff and
defendant must be stated in the complaint; similarly, Sec. 1, Rule III, of the New Rules of Procedure of
respondent NLRC states that the full names of all the real parties in interest, whether natural or juridical
persons or entities authorized by law, shall be stated in the caption of the complaint or petition as well as
in the decision, award or judgment. Moreover, according to petitioner, these cases do not fall under the
term "class suit" as defined in Sec. 12, Rule 3, of the Rules of Court because the parties are not so
numerous that it would be impracticable to bring them all before the court. It is further the position of
petitioner that BAVSPIA is the true employer of the complainants and the resignations of certain
employees were voluntary. Petitioner still further argues that the compromise agreement duly signed by
the officers of the local chapter of respondent Union and filed while the case was still pending before the
Labor Arbiter is binding on all the complainants.
We disagree with petitioner. This is a "representative suit" as distinguished from "class suit" defined in
Sec. 12, Rule 3, of the Rules of
Court —
Sec. 12. Class suit. — When the subject matter of the controversy is one of
common or general interest to many persons, and the parties are so numerous
that it is impracticable to bring them all before the court, one or more may sue or
defend for the benefit of all. But in such case the court shall make sure that the
parties actually before it are sufficiently numerous and representative so that all
interests concerned are fully protected. Any party in interest shall have a right to
intervene in protection of his individual interest.
In Re: Request of the Heirs of the Passengers of the Doña Paz to Set Aside the Order Dated
January 4, 1988 of Judge B. D. Chingcuangco,3 the Court had occasion to explain "class suit"
—
What is contemplated, as will be noted, is that (a) the subject matter in
controversy is of common or general interest to many persons, and (b) those
persons are so numerous as to make it impracticable to bring them all before the
court . . . What makes the situation a proper case for a class suit is the
circumstance that there is only one right or cause of action pertaining or
belonging in common to many persons (emphasis supplied), not separately or
severally to distinct individuals . . . . The object of the suit is to obtain relief for or
against numerous persons as a group or as an integral entity, and not as
separate, distinct individuals whose rights or liabilities are separate from and
independent of those affecting the others. . . The other factor that serves to
distinguish the rule on class suits . . . is . . . the numerousness of parties
involved . . . The rule is that for a class suit to be allowed, it is needful inter
alia that the parties be so numerous that it would be impracticable to bring them
all before the court.
In the present case, there are multiple rights or causes of action pertaining separately to several, distinct
employees who are members of respondent Union. Therefore, the applicable rule is that provided in Sec.
3, Rule 3, of the Rules of Court on "representative parties," which states —
Sec. 3. Representative parties. A trustee of a an express trust, a guardian,
executor or administrator or a party authorized by statute (emphasis supplied),
may sue or be sued without joining the party for whose benefit the action is
presented or defended; but the court may, at any stage of the proceedings, order
such beneficiary to be made a party. . .
One of the rights granted by Art. 242 of the Labor Code to a legitimate labor organization, like respondent
Union, is to sue and be sued in its registered name. In Liberty Manufacturing Workers Union v. Court of
First Instance of Bulacan,4 citing National Brewery and Allied Industries Labor Union of the Philippines v.
San Miguel Brewery, Inc.,5and Itogon-Suyoc Mines, Inc. v. Sañgilo-Itogon Workers' Union, 6 the Court held
that the aforementioned provision authorizes a union to file a "representative suit" for the benefit of its
members in the interest of avoiding an otherwise cumbersome procedure of joining all union members in
the complaint, even if they number by the hundreds. The Court further rationalized that —
To hold otherwise and compel the 57 union members-employees to file
57 separate cases on their own individual and respective causes of action before
the municipal court rather than through the present single collective action filed by
petitioner union on their behalf and for their benefit would be to unduly clog the
court dockets and slow down the prompt and expeditious determination of cases
by the sheer number, time and volume of paper work that would be involved and
required in disposing of 57 identical cases that could be adjudged in a single case
such as that filed before the lower court.
What is worse then . . . by such an unrealistic approach, the courts would not
keep faith with the Constitutional injunction to extend protection to labor . . .
In another case, Davao Free Workers Front v. Court of Industrial Relations,7 the Court stated that the
detail that the number and names of the striking members of petitioner union were not specified in the
decision nor in the complaint is of no consequence. Reiterating the rule in the Liberty case, the Court
held that it was the function precisely of a labor union to carry the representation of its members and to
file an action for their benefit and behalf without joining them and avoid the cumbersome procedure of
joining each and every member as a separate party. Still, in La Carlota Sugar Central v. Court of
Industrial Relations,8 the Court emphasized that it would be an unwarranted impairment of the right to
self-organization through formation of labor associations if thereafter such collective entities would be
barred from instituting action in their representative capacity.
A "representative suit" is akin to a "class suit" in the limited sense that the phrases found in Sec. 12 of
Rule 3, "one or more may sue or defend for the benefit of all," and "the parties actually before it are
sufficiently numerous and representative," are similar to the phrase may sue or be sued without joining
the party for whose benefit the action is presented or defended" found in Sec. 3 of the same Rule. In
other words, both suits are always filed in behalf of another or others. That is why the two terms are
sometimes used interchangeably. Apparently respondent Union, the Labor Arbiter and respondent
Commission merely denominated the suit, although erroneously, as a "class suit" when, in reality, it is a
"representative suit." Anyway, the issue as to the actual number of complainants in this case was
correctly resolved by the Labor Arbiter with this ratiocination —
The very first complaint (No. 3-1270-84) filed in these consolidated cases was
captioned National Labor Union for and in behalf of its members as complainants.
It was dated March 24, 1984. When the same was amended on May 24, 1984,
the same caption for complainants also appeared . . . Consistently with the
instruction of said Arbiter as to the number of complainants allegedly prejudiced
by the acts of respondents, their counsel submitted two lists (Exhs. A-1 & A-2)
containing a total of one hundred thirty-six names. However, said counsel
submitted in evidence only around sixty affidavits of complainants, thereby giving
credence to the allegation of respondents that not all those listed are actually
complaining. Nonetheless and considering that respondents recognized that there
are eighty-five complainants (Exhs. 48 & 49) we hold that the instant cases have
been filed by the said Union for and in behalf of such number (85) of
complainants.9
Section 1, Rule III, of the NLRC New Rules of Procedure cited by petitioner is simply inapplicable
because it was issued on 31 August 1990 or six (6) years after the complaints in these cases were filed in
1984.
The evidence clearly establishes that complainants were employed by petitioner. According to the Labor
Arbiter —
As to the issue of which company is the employer of complainants, we hold that it
is respondent Liana's. This is so because we find the co-respondent BAVSPIA
engaged in labor-only contracting which is prohibited under the Labor Code. 10
Article 106, par. 4, of the Labor Code provides that there is "labor-only contracting" where the
person supplying workers to an employer does not have substantial capital or investment in
the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the
principal business of such employer.
In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him. The conclusion of the Labor Arbiter was bolstered by the
fact that —
. . . even the employees who allegedly resigned from Liana's and
applied/accepted by BAVSPIA were also re-assigned to Liana's. These
employees were performing jobs which are necessary and desirable in the usual
business or trade of Liana's. Even the premises, tools and equipment used by the
employees were those of Liana's. And, more important, these employees were
under the control and supervision of said respondent Liana's. 11
Likewise, the evidence sufficiently proves that complainants were illegally dismissed by petitioner —
Coming now to the main thrust of these complaints — the issue of illegal
dismissal — we find that indeed the complainants were illegally dismissed.
Respondents' contention that complainants were dismissed not by them but by
BAVSPIA is untenable precisely because the latter was engaged in labor-only
contracting. In this connection, respondent Liana's (has) not been able to show
that the dismissals of complainants were for a just cause and, if ever, they were
accorded due process. In short, said respondent Liana's failed to prove that their
(its) dismissals of complainants were justified.
xxx xxx xxx
The alleged resignation of thirty-three other complainants (who later applied to
BAVSPIA) cannot be given effect, not because they were forced to do so but in
view of our finding that said BAVSPIA was engaged in labor-only contracting.
Hence, they could not have been working without any employer. Besides,
resigned from Liana's and then apply to BAVSPIA only to be re-assigned later to
the former, not to mention the glaring fact that all such letters of resignations are
uniformly worded. 12
Before money claims can be the object of settlement through a union, the individual consent of the
employees concerned should first be procured. This is because waiver of money claims is considered a
personal right which must be protected by the courts on consideration of public policy. To really give teeth
to the constitutional mandate of giving laborers maximum protection and security, they must be protected
not only against their employer but also against the leaders of their own labor union. Thus, in General
Rubber and Footwear Corporation v. Drilon, 13 citing Kaisahan ng Manggagawa sa La Campana
v. Sarmiento, 14 it was held —
Money claims due to laborers cannot be the object of settlement or compromise
effected by a union or counsel without the specific individual consent of each
laborer concerned. The beneficiaries are the individual complainants themselves.
The union to which they belong can only assist them but cannot decide for
them . . . .
There is no evidence on record that the compromise agreement was approved by the complainants
individually. The document does not bear their signatures except those of the local Union's President,
Vice President and another officer. Neither is there evidence to show that the compromise agreement
was ever approved by the Labor Arbiter. Clearly then, it cannot bind the complainants.
The grave abuse of discretion imputed to public respondent NLRC does not exist. But the alternative
award of separation pay granted by the Labor Arbiter in an amount equivalent to one-half month salary
for every year of service must be modified, It has been our consistent ruling that in awarding separation
pay to an illegally dismissed employee, in lieu of reinstatement, the amount to be awarded shall be
equivalent to one month salary for every year of service. 15 We have no reason to hold otherwise.
WHEREFORE, the resolution of the National Labor Relations Commission dated 30 June 1993 affirming
the decision of the Labor Arbiter dated 28 February 1989 is AFFIRMED, subject to the modification that
the separation pay granted as an alternative relief shall be equivalent to one-month salary for every year
of service, a fraction of at least six (6) months to be considered one (1) whole year.
Costs against petitioner.
SO ORDERED.
G.R. No. L-21839 April 30, 1968
INSURANCE COMPANY OF NORTH AMERICA, plaintiff-appellant,
vs.
UNITED STATES LINES CO. and THE MANILA PORT SERVICE and/or MANILA RAILROAD
COMPANYdefendants-appellees.
William H. Quasha and Associates for plaintiff-appellant.
Ross, Selph and Carrascoso for defendant-appellee United States Lines Company.
Macaranas, Enage and Pampol na for defendant-appellee Manila Railroad Company.
ZALDIVAR, J.:
Appeal by plaintiff Insurance Company of North America from the decision of the Court of First Instance
of Manila dismissing the action in Civil Case No. 48660.
On October 10, 1960, there were loaded on "SS Pioneer Mart" at the port of New York 12 cases of
cinematograph film, shipped by the Eastman Kodak Co. and consigned to the order of the Prudential
Bank & Trust Co., Manila. The shipment had an invoice value of $8,685.36, and the cargo was insured
with plaintiff insurance company against the risk of loss and damage. The "SS Pioneer Mart" was
operated by defendant United States Lines Co., a foreign corporation licensed to do business in the
Philippines and operating under the name of American Pioneer Lines.
The shipment arrived in Manila on November 6, 1960, and the last package thereof was discharged on
November 7, 1960 into defendant Manila Port Service, a subsidiary of defendant Manila Railroad
Company, which was the arrastre operator at the Port of Manila. Upon the presentation of the pertinent
documents and payment of the arrastre service fees the broker of the consignee made demand for the
delivery of the shipment from the Manila Port Service. Of the 12 cases constituting the shipment, only
nine cases were first delivered. Later, two cases were found, one of which was found short of its
contents. One case was missing and could not be delivered to the consignee.
On November 14, 1960, within the 15-day period from the date of discharge of the last package of the
shipment, the broker of the consignee filed a provisional claim for loss and damage with the Manila Port
Service for one case missing and one case partly short of its contents. The consignee filed its claim
against the United States Lines Co., as operator of the carrying vessel, and against the plaintiff insurance
company through the Eastman Kodak Co. for the insurance. The insurance was paid by the plaintiff to the
consignee, in the sum of $1,228.48, and the plaintiff insurance company thereby became subrogated to
all the rights of the consignee to recover the value of the loss. Plaintiff made demands upon the United
States Lines Co. and with the Manila Port Service for the payment of the sum equivalent to what was
paid to the consignee as insurance of the goods that were lost. Upon refusal by the United States Lines
Co. and the Manila Port Service to make payment, plaintiff filed an action against the said parties,
including the Manila Railroad Co., in the Court of First Instance of Manila, for the recovery of the sum of
$1,228.48 or its peso equivalent at the current rate of exchange, with legal interest from the date of the
filing of the complaint plus the costs of the suit. The Manila Railroad Company was made party defendant
because the Manila Port Service is a subsidiary of the railroad company.
The action filed by the plaintiff against the defendants was an alternative one — an action in admiralty
against the United States Lines Co. on its liability as a carrier, and against the Manila Port Service and/or
the Manila Railroad Company on their liability is the arrastre operator of the Port of Manila. Thus
paragraph 8 of the complaint contains the following allegation:
8. The losses occurred while the vessel had custody of the cargo and failed to discharge the
same or, alternately, after discharge of the cargo, while defendant Port Service had custody of
the goods, in either of which case, there was violation of the duty properly to safely carry and
discharge the goods on the part of the vessel or, in the alternative, to make delivery of the
goods on the part of defendant Port Service.
After trial the lower court, on June 20, 1963, rendered decision, finding that the total value of the lost
merchandise was $1,116.80, to which had been added the cost of survey of $37.65 and an over-
insurance of $111.68, such that the total liability arising from the loss amounted to $1,266.13. The lower
court found that the full shipment had been unloaded from the carrying vessel unto the care and custody
of defendant Manila Port Service in good order. We quote the following paragraph of the decision:
Having thus received the said cargo which was fully discharged unto the care and custody of
the Manila Port Service, it goes without saying that the responsibility for the loss devolves
upon them. As the operator of the arrastre service, it is their duty to receive and take good
care of the same in order that they may be delivered completely to the consignee to whom
they belong. If any part of the cargo be missing, it is they who should answer for the loss
because they are the depositary.
But while the lower court had declared that defendant Manila Port Service was responsible for the loss, it
nevertheless dismissed the case upon the ground that it had no jurisdiction over the action of the plaintiff
against defendants Manila Port Service and Manila Railroad Company, it appearing that the value of the
claim of the plaintiff against said defendants was less than P5,000.00 so that the action was well within
the exclusive jurisdiction of the Municipal Court of Manila. Said the lower court in its decision:
... This Court holds the view that when this case was filed against the shipping company, it
was properly vested with jurisdiction to entertain the same notwithstanding the small amount
involved herein, which falls within the jurisdiction of the Municipal Court. The Manila Port
Service, however, is an alternative defendant and the claim against the same cannot be
considered a mere incident of the admiralty jurisdiction, for it is a separate claim for the
recovery of the missing goods from its warehouse with a total value well within the exclusive
jurisdiction of the Municipal Court. If the action had been filed directly against the said Manila
Port Service, there is no doubt that the same could not be filed with this Court for lack of
jurisdiction. It makes no difference that it is made an alternative defendant, because the
action against the shipping company falls within the exclusive jurisdiction of the Court of First
Instance. If they had filed this case against the said party directly without including the
defendant Manila Port Service, there is no doubt that the same could have been entertained.
Its jurisdiction could not be questioned. After it has been established, therefore, that the
shipping company had been relieved of this cargo by full discharge thereof unto the care and
custody of the Manila Port Service, this case assumes an entirely different color. It no longer
is an admiralty case but an ordinary civil case which must be governed by the law governing
jurisdiction of our courts. It would have been a different situation if the amount alleged herein
were more than P5,000, because then after the admiralty aspect had disappeared in this
case, the ordinary civil aspect thereof would still bring it within the ordinary jurisdiction of this
court, but, as already pointed out, it happens in this case that the amount is so far below the
jurisdictional limit of this Court that it must, of necessity, find that it had no jurisdiction to try
and determine the controversy with respect to the said party....
In the present appeal, plaintiff-appellant maintains that the lower court erred: (1) when it ruled that
plaintiff's alternative action against defendant operator of the carrying vessel and the defendant arrastre
operator as separable; (2) when it ruled that plaintiff's action ceased to be admiralty after the evidence
had established that the shipment had been discharged to the defendant arrastre operator complete and
in good order; and (3) in not rendering judgment against defendant Manila Port Service and/or Manila
Railroad Company as arrastre operator.
The appeal is well taken. The reason of the lower court in dismissing plaintiff's action is not in accord with
the ruling of this Court in a line of decisions.1 The circumstances obtaining, and the question of law
involved, in the case of Rizal Surety and Insurance Co. v. Manila Railroad Co., et al., G. R. No. L-20875,
April 30, 1966, are similar to those that We find in the present case. The ruling that We made in the Rizal
Surety case, which We herein quote in part, squarely settle the questions involved in the present appeal:
The sole issue is one purely of law, whether or not the court below had jurisdiction over the
case.
The complaint in this case named as alternative defendants under alternative causes of
action (1) C. F. Sharp & Co., Inc., for breach of contract of carriage by sea, and (2) Manila
Port Service and Manila Railroad Company, for violation of arrastre contract. The cause of
action against C. F. Sharp & Co., Inc., being in admiralty, comes within the jurisdiction of the
Court of First Instance whereas, the cause of action against the Manila Port Service and
Manila Railroad Company comes within the exclusive original jurisdiction of the municipal
court inasmuch as the amount of the demand is less than P5,000.00.
At the time the complaint was filed, plaintiff did not know at what precise stage of the series of
transactions the loss complained of occurred. If the loss took place in transit, C. F. Sharp &
 Co., Inc. would be liable therefor, but if the loss occurred after the goods were landed and
discharged from the carrying vessel, the Manila Port Service would bear the loss. Hence, the
joinder of causes of action and parties defendants in the alternative which is permitted by
Section 5 of Rule 2 of the Rules of Court, quoted hereunder:
SEC. 5. Joinder of causes of action. — Subject to rules regarding jurisdiction,
venue and joinder of parties, a party may in one pleading state, in the alternative
or otherwise, as many causes of action as he may have against an oppossing
party (a) if the said causes of action arise out of the same contract, transaction or
relation between the parties, or (b) if the causes of action are for demands for
money, or are of the same nature and character.
In the cases falling under clause (a) of the preceding paragraph, the action shall
be filed in the inferior court unless any of the causes joined falls within the
jurisdiction of the Court of First Instance, in which case it shall be filed in the latter
court.
In the cases falling under clause (b) the jurisdiction shall be determined by the
aggregate amount of the demands, if for money or by their nature and character, if
otherwise.
And, since one of the causes of action is cognizable by the Court of First Instance the suit
should be filed, as was correctly done by the plaintiff, in said court, notwithstanding that the
other cause of action — if standing alone — would fall within the jurisdiction of the municipal
court, by reason of the amount of the demand. In International Harvester Co. of the
Philippines v. Judge Aragon, where a similar action was filed with the municipal court, we held
that the municipal court lacked jurisdiction over the case inasmuch as one of the alternative
causes of action, against the shipping firm, was an action in admiralty, cognizable by the
Court of First Instance.
The subsequent dismissal of the cases against C. F. Sharp & Co., Inc. did not bring the case
within the exclusive original jurisdiction of the municipal court nor deprive the Court of First
Instance of Manila of the jurisdiction it had already acquired over the case when the complaint
was filed. It is well settled that jurisdiction once acquired is not lost but continues until the
case is finally terminated.
WHEREFORE, the decision appealed from should be, as it is hereby, reversed and the defendants-
appellees, Manila Port Service and/or Manila Railroad Co., are ordered to pay plaintiff-appellant
Insurance Company of North America the sum of $1,266.13, or its peso equivalent at the current rate of
exchange, with legal interest from the date of the filing of the complaint until payment is made; with costs
against the said defendants-appellees. It is so ordered.
G.R. No. 143365 December 4, 2008
GENEROSO SALIGUMBA, ERNESTO SALIGUMBA, and HEIRS OF SPOUSES VALERIA
SALIGUMBA AND ELISEO SALIGUMBA, SR., petitioners,
vs.
MONICA PALANOG, respondent.
This is a petition for review of the Decision dated 24 May 2000 of the Regional Trial Court, Branch 5,
Kalibo, Aklan (RTC-Branch 5) in Civil Case No. 5288 for Revival of Judgment. The case is an offshoot of
the action for Quieting of Title with Damages in Civil Case No. 2570.
The Facts
Monica Palanog, assisted by her husband Avelino Palanog (spouses Palanogs), filed a complaint dated
28 February 1977 for Quieting of Title with Damages against defendants, spouses Valeria Saligumba and
Eliseo Saligumba, Sr. (spouses Saligumbas), before the Regional Trial Court, Branch 3, Kalibo, Aklan
(RTC-Branch 3). The case was docketed as Civil Case No. 2570. In the complaint, spouses Palanogs
alleged that they have been in actual, open, adverse and continuous possession as owners for more than
50 years of a parcel of land located in Solido, Nabas, Aklan. The spouses Saligumbas allegedly
prevented them from entering and residing on the subject premises and had destroyed the barbed wires
enclosing the land. Spouses Palanogs prayed that they be declared the true and rightful owners of the
land in question.
When the case was called for pre-trial on 22 September 1977, Atty. Edilberto Miralles (Atty. Miralles),
counsel for spouses Saligumbas, verbally moved for the appointment of a commissioner to delimit the
land in question. Rizalino Go, Deputy Sheriff of Aklan, was appointed commissioner and was directed to
submit his report and sketch within 30 days.1 Present during the delimitation were spouses Palanogs,
spouses Saligumbas, and Ernesto Saligumba, son of spouses Saligumbas. 2
After submission of the Commissioner’s Report, spouses Palanogs, upon motion, were granted 10 days
to amend their complaint to conform with the items mentioned in the report. 3
Thereafter, trial on the merits ensued. At the hearing on 1 June 1984, only the counsel for spouses
Palanogs appeared. The trial court issued an order resetting the hearing to 15 August 1984 and likewise
directed spouses Saligumbas to secure the services of another counsel who should be ready on that
date.4 The order sent to Eliseo Saligumba, Sr. was returned to the court unserved with the notation
"Party–Deceased" while the order sent to defendant Valeria Saligumba was returned with the notation
"Party in Manila."5
At the hearing on 15 August 1984, spouses Palanogs’ direct examination was suspended and the
continuation of the hearing was set on 25 October 1984. The trial court stated that Atty. Miralles, who had
not withdrawn as counsel for spouses Saligumbas despite his appointment as Municipal Circuit Trial
Court judge, would be held responsible for the case of spouses Saligumbas until he formally withdrew as
counsel. The trial court reminded Atty. Miralles to secure the consent of spouses Saligumbas for his
withdrawal.6 A copy of this order was sent to Valeria Saligumba but the same was returned unserved with
the notation "Party in Manila."7
The hearing set on 25 October 1984 was reset to 25 January 1985 and the trial court directed that a copy
of this order be sent to Eliseo Saligumba, Jr. at COA, PNB, Manila. 8
The presentation of evidence for spouses Palanogs resumed on 25 January 1985 despite the motion of
Atty. Miralles for postponement on the ground that his client was sick. The exhibits were admitted and
plaintiffs spouses Palanogs rested their case. Reception of evidence for the defendants spouses
Saligumbas was scheduled on 3, 4, and 5 June 1985. 9
On 3 June 1985, only spouses Palanogs and counsel appeared. Upon motion of the spouses Palanogs,
spouses Saligumbas were deemed to have waived the presentation of their evidence.
On 3 August 1987, after a lapse of more than two years, the trial court considered the case submitted for
decision.
On 7 August 1987, RTC-Branch 3 rendered a judgment in Civil Case No. 2570 declaring spouses
Palanogs the lawful owners of the subject land and ordering spouses Saligumbas, their agents,
representatives and all persons acting in privity with them to vacate the premises and restore possession
to spouses Palanogs.
The trial court, in a separate Order dated 7 August 1987, directed that a copy of the court’s decision be
furnished plaintiff Monica Palanog and defendant Valeria Saligumba.
Thereafter, a motion for the issuance of a writ of execution of the said decision was filed but the trial
court, in its Order dated 8 May 1997, ruled that since more than five years had elapsed after the date of
its finality, the decision could no longer be executed by mere motion.
Thus, on 9 May 1997, Monica Palanog (respondent), now a widow, filed a Complaint seeking to revive
and enforce the Decision dated 7 August 1987 in Civil Case No. 2570 which she claimed has not been
barred by the statute of limitations. She impleaded petitioners Generoso Saligumba and Ernesto
Saligumba, the heirs and children of the spouses Saligumbas, as defendants. The case was docketed as
Civil Case No. 5288 before the RTC-Branch 5.
Petitioner Generoso Saligumba, for himself and in representation of his brother Ernesto who was out of
the country working as a seaman, engaged the services of the Public Attorney’s Office, Kalibo, Aklan
which filed a motion for time to allow them to file a responsive pleading. Petitioner Generoso Saligumba
filed his Answer10 alleging that: (1) respondent had no cause of action; (2) the spouses Saligumbas died
while Civil Case No. 2570 was pending and no order of substitution was issued and hence, the trial was
null and void; and (3) the court did not acquire jurisdiction over the heirs of the spouses Saligumbas and
therefore, the judgment was not binding on them.
Meanwhile, on 19 December 1997, the trial court granted respondent’s motion to implead additional
defendants namely, Eliseo Saligumba, Jr. and Eduardo Saligumba, who are also the heirs and children of
spouses Saligumbas.11 They were, however, declared in default on 1 October 1999 for failure to file any
responsive pleading.12
The Trial Court’s Ruling
On 24 May 2000, the RTC-Branch 5 rendered a decision in favor of respondent ordering the revival of
judgment in Civil Case No. 2570. The trial court ruled that the non-substitution of the deceased spouses
did not have any legal significance. The land subject of Civil Case No. 2570 was the exclusive property of
defendant Valeria Saligumba who inherited the same from her deceased parents. The death of her
husband, Eliseo Saligumba, Sr., did not change the complexion of the ownership of the property that
would require his substitution. The spouses Saligumbas’ children, who are the petitioners in this case,
had no right to the property while Valeria Saligumba was still alive. The trial court further found that when
defendant Valeria Saligumba died, her lawyer, Atty. Miralles, did not inform the court of the death of his
client. The trial court thus ruled that the non-substitution of the deceased defendant was solely due to the
negligence of counsel. Moreover, petitioner Ernesto Saligumba could not feign ignorance of Civil Case
No. 2570 as he was present during the delimitation of the subject land. The trial court likewise held that
the decision in Civil Case No. 2570 could not be the subject of a collateral attack. There must be a direct
action for the annulment of the said decision.
Petitioners elevated the matter directly to this Court. Hence, the present petition.
The Court’s Ruling
The instant case is an action for revival of judgment and the judgment sought to be revived in this case is
the decision in the action for quieting of title with damages in Civil Case No. 2570. This is not one for
annulment of judgment.
An action for revival of judgment is no more than a procedural means of securing the execution of a
previous judgment which has become dormant after the passage of five years without it being executed
upon motion of the prevailing party. It is not intended to re-open any issue affecting the merits of the
judgment debtor’s case nor the propriety or correctness of the first judgment. 13 An action for revival of
judgment is a new and independent action, different and distinct from either the recovery of property case
or the reconstitution case, wherein the cause of action is the decision itself and not the merits of the
action upon which the judgment sought to be enforced is rendered. 14Revival of judgment is premised on
the assumption that the decision to be revived, either by motion or by independent action, is already final
and executory.15
The RTC-Branch 3 Decision dated 7 August 1987 in Civil Case No. 2570 had been rendered final and
executory by the lapse of time with no motion for reconsideration nor appeal having been filed. While it
may be true that the judgment in Civil Case No. 2570 may be revived and its execution may be had, the
issue now before us is whether or not execution of judgment can be issued against petitioners who claim
that they are not bound by the RTC-Branch 3 Decision dated 7 August 1987 in Civil Case No. 2570.
Petitioners contend that the RTC-Branch 3 Decision of 7 August 1987 in Civil Case No. 2570 is null and
void since there was no proper substitution of the deceased spouses Saligumbas despite the trial court’s
knowledge that the deceased spouses Saligumbas were no longer represented by counsel. They argue
that they were deprived of due process and justice was not duly served on them.
Petitioners argue that the trial court even acknowledged the fact of death of spouses Saligumbas but
justified the validity of the decision rendered in that case despite lack of substitution because of the
negligence or fault of their counsel. Petitioners contend that the duty of counsel for the deceased
spouses Saligumbas to inform the court of the death of his clients and to furnish the name and address of
the executor, administrator, heir or legal representative of the decedent under Rule 3 presupposes
adequate or active representation by counsel. However, the relation of attorney and client was already
terminated by the appointment of counsel on record, Atty. Miralles, as Municipal Circuit Trial Court judge
even before the deaths of the spouses Saligumbas were known. Petitioners invoke the Order of 1 June
1984 directing the spouses Saligumbas to secure the services of another lawyer to replace Atty. Miralles.
The registered mail containing that order was returned to the trial court with the notation that Eliseo
Saligumba, Sr. was "deceased." Petitioners thus question the decision in Civil Case No. 2570 as being
void and of no legal effect because their parents were not duly represented by counsel of record.
Petitioners further argue that they have never taken part in the proceedings in Civil Case No. 2570 nor
did they voluntarily appear or participate in the case. It is unfair to bind them in a decision rendered
against their deceased parents. Therefore, being a void judgment, it has no legal nor binding effect on
petitioners.
Civil Case No. 2570 is an action for quieting of title with damages which is an action involving real
property. It is an action that survives pursuant to Section 1, Rule 87 16 as the claim is not extinguished by
the death of a party. And when a party dies in an action that survives, Section 17 of Rule 3 of the Revised
Rules of Court17 provides for the procedure, thus:
Section 17. Death of Party. - After a party dies and the claim is not thereby extinguished, the
court shall order, upon proper notice, the legal representative of the deceased to appear
and to be substituted for the deceased, within a period of thirty (30) days, or within such time
as may be granted. If the legal representative fails to appear within said time, the court may
order the opposing party to procure the appointment of a legal representative of the deceased
within a time to be specified by the court, and the representative shall immediately appear for
and on behalf of the interest of the deceased. The court charges involved in procuring such
appointment, if defrayed by the opposing party, may be recovered as costs. The heirs of the
deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator and the court may appoint guardian ad litem for
the minor heirs. (Emphasis supplied)
Under the express terms of Section 17, in case of death of a party, and upon proper notice, it is the duty
of the court to order the legal representative or heir of the deceased to appear for the deceased. In the
instant case, it is true that the trial court, after receiving an informal notice of death by the mere notation
in the envelopes, failed to order the appearance of the legal representative or heir of the deceased. There
was no court order for deceased’s legal representative or heir to appear, nor did any such legal
representative ever appear in court to be substituted for the deceased. Neither did the respondent ever
procure the appointment of such legal representative, nor did the heirs ever ask to be substituted.
It appears that Eliseo Saligumba, Sr. died on 18 February 1984 while Valeria Saligumba died on 2
February 1985. No motion for the substitution of the spouses was filed nor an order issued for the
substitution of the deceased spouses Saligumbas in Civil Case No. 2570. Atty. Miralles and petitioner
Eliseo Saligumba, Jr., despite notices sent to them to appear, never confirmed the death of Eliseo
Saligumba, Sr. and Valeria Saligumba. The record is bereft of any evidence proving the death of the
spouses, except the mere notations in the envelopes enclosing the trial court’s orders which were
returned unserved.
Section 17 is explicit that the duty of the court to order the legal representative or heir to appear arises
only "upon proper notice." The notation "Party-Deceased" on the unserved notices could not be the
"proper notice" contemplated by the rule. As the trial court could not be expected to know or take judicial
notice of the death of a party without the proper manifestation from counsel, the trial court was well within
its jurisdiction to proceed as it did with the case. Moreover, there is no showing that the court’s
proceedings were tainted with irregularities.18
Likewise, the plaintiff or his attorney or representative could not be expected to know of the death of the
defendant if the attorney for the deceased defendant did not notify the plaintiff or his attorney of such
death as required by the rules.19 The judge cannot be blamed for sending copies of the orders and
notices to defendants spouses in the absence of proof of death or manifestation to that effect from
counsel.20
Section 16, Rule 3 of the Revised Rules of Court likewise expressly provides:
SEC. 16. Duty of attorney upon death, incapacity or incompetency of party. - Whenever a
party to a pending case dies, becomes incapacitated or incompetent, it shall be the duty of his
attorney to inform the court promptly of such death, incapacity or incompetency, and to give
the name and residence of his executor, administrator, guardian or other legal representative.
It is the duty of counsel for the deceased to inform the court of the death of his client. The failure of
counsel to comply with his duty under Section 16 to
inform the court of the death of his client and the non-substitution of such party will not invalidate the
proceedings and the judgment thereon if the action survives the death of such party. The decision
rendered shall bind the party’s successor-in-interest. 21
The rules operate on the presumption that the attorney for the deceased party is in a better position than
the attorney for the adverse party to know about the death of his client and to inform the court of the
name and address of his legal representative. 22
Atty. Miralles continued to represent the deceased spouses even after the latter’s demise. Acting on their
behalf, Atty. Miralles even asked for postponement of the hearings and did not even confirm the death of
his clients nor his appointment as Municipal Circuit Trial Court judge. These clearly negate petitioners’
contention that Atty. Miralles ceased to be spouses Saligumbas’ counsel.
Atty. Miralles still remained the counsel of the spouses Saligumbas despite the alleged appointment as
judge. Records show that when Civil Case No. 2570 was called for trial on 25 October 1984, Atty. Miralles
appeared and moved for a postponement. The 25 October 1984 Order reads:
ORDER
Upon petition of Judge Miralles who is still the counsel on record of this case and who is held
responsible for anything that will happen in this case, postpone the hearing of this case to
JANUARY 25, 1985 AT 8:30 in the morning. x x x23
The trial court issued an Order dated 1 June 1984 directing the defendants to secure the services of
another counsel. This order was sent to Eliseo Saligumba, Sr. by registered mail but the same was
returned with the notation "Party-Deceased" while the notice to Valeria Saligumba was returned with the
notation "Party in Manila." 24Eliseo Saligumba, Sr. died on 18 February 1984. When Atty. Miralles
appeared in court on 25 October 1984, he did not affirm nor inform the court of the death of his client.
There was no formal substitution. The trial court issued an order resetting the hearing to 25 January 1985
and directed that a copy of the order be furnished petitioner Eliseo Saligumba, Jr. at COA, PNB, Manila
by registered mail.25 When the case was called on 25 January 1985, Atty. Miralles sought for another
postponement on the ground that his client was sick and under medical treatment in Manila. 26 Again,
there was no manifestation from counsel about the death of Eliseo Saligumba, Sr. The trial court issued
an Order dated 25 January 1985 setting the reception of evidence for the defendants on 3, 4, and 5 June
1985. A copy of this order was sent to Eliseo Saligumba, Jr. by registered mail. Nonetheless, as the trial
court in Civil Case No. 5288 declared, the non-substitution of Eliseo Saligumba, Sr. did not have any
legal significance as the land subject of Civil Case No. 2570 was the exclusive property of Valeria
Saligumba who inherited it from her deceased parents.
This notwithstanding, when Valeria Saligumba died on 2 February 1985, Atty. Miralles again did not
inform the trial court of the death of Valeria Saligumba. There was no formal substitution nor submission
of proof of death of Valeria Saligumba. Atty. Miralles was remiss in his duty under Section 16, Rule 3 of
the Revised Rules of Court. The counsel of record is obligated to protect his client’s interest until he is
released from his professional relationship with his client. For its part, the court could recognize no other
representation on behalf of the client except such counsel of record until a formal substitution of attorney
is effected.27
An attorney must make an application to the court to withdraw as counsel, for the relation does not
terminate formally until there is a withdrawal of record; at least, so far as the opposite party is concerned,
the relation otherwise continues until the end of the litigation. 28 Unless properly relieved, the counsel is
responsible for the conduct of the case.29 Until his withdrawal shall have been approved, the lawyer
remains counsel of record who is expected by his client as well as by the court to do what the interests of
his client require. He must still appear on the date of hearing for the attorney-client relation does not
terminate formally until there is a withdrawal of record. 30
Petitioners should have questioned immediately the validity of the proceedings absent any formal
substitution. Yet, despite the court’s alleged lack of jurisdiction over the persons of petitioners, petitioners
never bothered to challenge the same, and in fact allowed the proceedings to go on until the trial court
rendered its decision. There was no motion for reconsideration, appeal or even an action to annul the
judgment in Civil Case No. 2570. Petitioners themselves could not feign ignorance of the case since
during the pendency of Civil Case No. 2570, petitioner Ernesto Saligumba, son of the deceased spouses,
was among the persons present during the delimitation of the land in question before the Commissioner
held on 5 November 1977.31 Petitioner Eliseo Saligumba, Jr. was likewise furnished a copy of the trial
court’s orders and notices. It was only the Answer filed by petitioner Generoso Saligumba in Civil Case
No. 5288 that confirmed the dates when the spouses Saligumbas died and named the latter’s children.
Consequently, Atty. Miralles was responsible for the conduct of the case since he had not been properly
relieved as counsel of record. His acts bind his clients and the latter’s successors-in-interest.
In the present case for revival of judgment, the other petitioners have not shown much interest in the
case. Petitioners Eliseo Saligumba, Jr. and Eduardo Saligumba were declared in default for failure to file
their answer. Petitioner Ernesto Saligumba was out of the country working as a seaman. Only petitioner
Generoso Saligumba filed an Answer to the complaint. The petition filed in this Court was signed only by
petitioner Generoso Saligumba as someone signed on behalf of petitioner Ernesto Saligumba without the
latter’s authority to do so.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 24 May 2000 of the Regional Trial
Court, Branch 5, Kalibo, Aklan in Civil Case No. 5288. Costs against petitioners.
SO ORDERED.
G.R. No. 149787 June 18, 2008
JUDGE ANTONIO C. SUMALJAG, petitioner,
vs.
SPOUSES DIOSDIDIT and MENENDEZ M. LITERATO; and MICHAELES MAGLASANG
RODRIGO, respondents.
Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Decision1of the Court of Appeals ("CA") dated June 26, 2001 and its related Resolution 2 dated September
4, 2001 in CA-G.R. SP No. 59712. The assailed Decision dismissed the petition for certiorari filed by
petitioner Judge Antonio C. Sumaljag (the "petitioner") in the interlocutory matter outlined below in Civil
Cases B-1239 and B-1281 before the trial court. The challenged Resolution denied the petitioner's
motion for reconsideration.
ANTECEDENT FACTS
On November 16, 1993, Josefa D. Maglasang ("Josefa") filed with the Regional Trial Court ("RTC"),
Branch 14, Baybay, Leyte a complaint 3 (docketed as Civil Case No. B-1239) for the nullity of the deed of
sale of real property purportedly executed between her as vendor and the spouses Diosdidit and
Menendez Literato (the "respondent spouses") as vendees. The complaint alleged that this deed of sale
dated October 15, 1971 of Lot 1220-D is spurious. Josefa was the sister of Menendez Maglasang
Literato ("Menendez"). They were two (2) of the six (6) heirs who inherited equal parts of a 6.3906-
hectare property (Lot 1220) passed on to them by their parents Cristito and Inecita Diano
Maglasang.4 Lot 1220-D was partitioned to Josefa, while Lot 1220-E was given to Menendez.
The respondent spouses' response to the complaint was an amended answer with counterclaim 5 denying
that the deed of sale was falsified. They impleaded the petitioner with Josefa as counterclaim defendant
on the allegation that the petitioner, at the instance of Josefa, occupied Lot 1220-D and Lot 1220-E
without their (the respondent spouses') authority; Lot 1220-E is theirs by inheritance while 1220-D had
been sold to them by Josefa. They also alleged that the petitioner acted in bad faith in acquiring the two
(2) lots because he prepared and notarized on September 26, 1986 the contract of lease over the whole
of Lot 1220 between all the Maglasang heirs (but excluding Josefa) and Vicente Tolo, with the lease
running from 1986 to 1991; thus, the petitioner then knew that Josefa no longer owned Lot 1220-D.
Civil Case No. 12816 is a complaint that Menendez filed on April 4, 1996 with the RTC for the declaration
of the inexistence of lease contract, recovery of possession of land, and damages against the petitioner
and Josefa after the RTC dismissed the respondent spouses' counterclaim in Civil Case No. 1239. The
complaint alleged that Josefa, who had previously sold Lot 1220-D to Menendez, leased it, together with
Lot 1220-E, to the petitioner. Menendez further averred that the petitioner and Josefa were in bad faith in
entering their contract of lease as they both knew that Josefa did not own the leased lots. Menendez
prayed, among others, that this lease contract between Josefa and the petitioner be declared null and
void.
Josefa died on May 3, 1999 during the pendency of Civil Case Nos. B-1239 and B-1281.
On August 13, 1999, Atty. Zenen A. Puray ("Atty. Puray") - the petitioner's and Josefa's common counsel -
asked the RTC in Civil Case No. 1239 that he be given an extended period or up to September 10, 1999
within which to file a formal notice of death and substitution of party.
The RTC granted the motion in an order dated August 13, 1999. 7 On August 26, 1999, Atty. Puray filed
with the RTC a notice of death and substitution of party, 8 praying that Josefa - in his capacity as plaintiff
and third party counterclaim defendant - be substituted by the petitioner. The submission alleged that
prior to Josefa's death, she executed a Quitclaim Deed9 over Lot 1220-D in favor of Remismundo D.
Maglasang10 who in turn sold this property to the petitioner.
Menendez, through counsel, objected to the proposed substitution, alleging that Atty. Puray filed the
notice of death and substitution of party beyond the thirty-day period provided under Section 16, Rule 3
of the 1997 Rules of Civil Procedure, as amended. She recommended instead that Josefa be substituted
by the latter's full-blood sister, Michaeles Maglasang Rodrigo ("Michaeles").
The RTC denied Atty. Puray's motion for substitution and instead ordered the appearance of Michaeles
as representative of the deceased Josefa. This Order provides:
WHEREFORE, in view of the foregoing, the motion is hereby DENIED for lack of merit and
instead order the appearance of Mrs. Mechailes Maglasang-Rodrigo of Brgy. Binulho,
Albuera, Leyte, as representative of the deceased Josefa Maglasang.
SO ORDERED.11
The RTC subsequently denied the petitioner's motion for reconsideration in an order 12 dated May 25,
2000.
The petitioner went to the CA on a petition for certiorari (docketed as CA-G.R. SP No. 59712) to question
the above interlocutory orders. In a Decision13 dated June 26, 2001, the CA dismissed the petition for lack
of merit. The appellate court similarly denied the petitioner's motion for reconsideration in its
Resolution14 dated September 4, 2001.
The present petition essentially claims that the CA erred in dismissing CA-G.R. No. SP 59712 since: (a)
the property under litigation was no longer part of Josefa's estate since she was no longer its owner at
the time of her death; (b) the petitioner had effectively been subrogated to the rights of Josefa over the
property under litigation at the time she died; (c) without an estate, the heir who was appointed by the
lower court no longer had any interest to represent; (d) the notice of death was seasonably submitted by
the counsel of Josefa to the RTC within the extended period granted; and (e) the petitioner is a transferee
pendente lite who the courts should recognize pursuant to Rule 3, Section 20 of the Rules of Court.
THE COURT'S RULING
We resolve to deny the petition for lack of merit.
The Governing Rule.
The rule on substitution in case of death of a party is governed by Section 16, Rule 3 of the 1997 Rules
of Civil Procedure, as amended, which provides:
Section 16. Death of a party; duty of counsel. -Whenever a party to a pending action dies,
and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court
within thirty (30) days after such death of the fact thereof, and to give the name and address
of his legal representative or representatives. Failure of counsel to comply with this duty shall
be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so
named shall fail to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or administrator for the
estate of the deceased, and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing
party, may be recovered as costs. (Emphasis ours)
The purpose behind this rule is the protection of the right to due process of every party to the litigation
who may be affected by the intervening death. The deceased litigant is herself or himself protected as
he/she continues to be properly represented in the suit through the duly appointed legal representative of
his estate.15
Application of the Governing Rule.
a. Survival of the pending action
A question preliminary to the application of the above provision is whether Civil Case Nos. B-1239 and B-
1281 are actions that survive the death of Josefa. We said in Gonzalez v. Pagcor:16
"The criteria for determining whether an action survives the death of a plaintiff or petitioner
was elucidated upon in Bonilla v. Barcena (71 SCRA 491 (1976). as follows:
. . . The question as to whether an action survives or not depends on the nature of
the action and the damage sued for. In the causes of action which survive, the
wrong complained [of] affects primarily and principally property and property
rights, the injuries to the person being merely incidental, while in the causes of
action which do not survive, the injury complained of is to the person, the property
and rights of property affected being incidental. . . .
Since the question involved in these cases relate to property and property rights, then we are dealing
with actions that survive so that Section 16, Rule 3 must necessarily apply.
b. Duty of Counsel under the Rule.
The duty of counsel under the aforecited provision is to inform the court within thirty (30) days after the
death of his client of the fact of death, and to give the name and address of the deceased's legal
representative or representatives. Incidentally, this is the only representation that counsel can undertake
after the death of a client as the fact of death terminated any further lawyer-client relationship. 17
In the present case, it is undisputed that the counsel for Josefa did in fact notify the lower court, although
belatedly, of the fact of her death.18 However, he did as well inform the lower court that -
"2. That before she died she executed a QUITCLAIM DEED in favor of REMISMUNDO D.
MAGLASANG over the land in question (Lot No. 1220-D of Benolho, Albuera, Leyte),
evidenced by a QUITCLAIM DEED, copy of which is hereto attached as Annex "B" who in
turn sold it in favor of JUDGE ANTONIO SUMALJAG, evidenced by a DEED OF ABSOLUTE
SALE, copy of which is hereto attached as Annex "C"."
Further, counsel asked that "the deceased Josefa Maglasang in her capacity as plaintiff and as Third
Party Counterclaim Defendant be substituted in the case at bar by JUDGE ANTONIO SUMALJAG whose
address is 38 Osmena Street, Ormoc City" pursuant to "Section 16, Rule 3 of the 1997 Rules of Civil
Procedure".
This notification, although filed late, effectively informed the lower court of the death of litigant Josefa
Maglasang so as to free her counsel of any liability for failure to make a report of death under Section 16,
Rule 3 of the Rules of Court. In our view, counsel satisfactorily explained to the lower court the
circumstances of the late reporting, and the latter in fact granted counsel an extended period. The
timeliness of the report is therefore a non-issue.
The reporting issue that goes into the core of this case is whether counsel properly gave the court the
name and address of the legal representative of the deceased that Section 16, Rule 3 specifies. We rule
that he did not. The "legal representatives" that the provision speaks of, refer to those authorized by law
- the administrator, executor or guardian19 who, under the rule on settlement of estate of deceased
persons,20 is constituted to take over the estate of the deceased. Section 16, Rule 3 likewise expressly
provides that "the heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator . . .". Significantly, the person - now the present
petitioner - that counsel gave as substitute was not one of those mentioned under Section 16, Rule 3.
Rather, he is a counterclaim co-defendant of the deceased whose proferred justification for the requested
substitution is the transfer to him of the interests of the deceased in the litigation prior to her death.
Under the circumstances, both the lower court and the CA were legally correct in not giving effect to
counsel's suggested substitute.
First, the petitioner is not one of those allowed by the Rules to be a substitute. Section 16, Rule 3 speaks
for itself in this respect.
Second, as already mentioned above, the reason for the Rule is to protect all concerned who may be
affected by the intervening death, particularly the deceased and her estate. We note in this respect that
the Notice that counsel filed in fact reflects a claim against the interest of the deceased through the
transfer of her remaining interest in the litigation to another party. Interestingly, the transfer is in favor of
the very same person who is suggested to the court as the substitute. To state the obvious, the
suggested substitution effectively brings to naught the protection that the Rules intend; plain common
sense tells us that the transferee who has his own interest to protect, cannot at the same time represent
and fully protect the interest of the deceased transferor.
Third, counsel has every authority to manifest to the court changes in interest that transpire in the course
of litigation. Thus, counsel could have validly manifested to the court the transfer of Josefa's interests in
the subject matter of litigation pursuant to Section 19, Rule 3. 21 But this can happen only while the client-
transferor was aliveand while the manifesting counsel was still the effective and authorized counsel for
the client-transferor, not after the death of the client when the lawyer-client relationship has terminated.
The fact that the alleged transfer may have actually taken place is immaterial to this conclusion, if only for
the reason that it is not for counsel, after the death of his client, to make such manifestation because he
then has lost the authority to speak for and bind his client. Thus, at most, the petitioner can be said to be
a transferee pendente lite whose status is pending with the lower court.
Lastly, a close examination of the documents attached to the records disclose that the subject matter of
the Quitclaim allegedly executed by Josefa in favor of Remismundo is Lot 1220-E, while the subject
matter of the deed of sale executed by Remismundo in the petitioner's favor is Lot 1220-D. This
circumstance alone raises the possibility that there is more than meets the eye in the transactions related
to this case.
c. The Heirs as Legal Representatives.
The CA correctly harked back to the plain terms of Section 16, Rule 3 in determining who the appropriate
legal representative/s should be in the absence of an executor or administrator. The second paragraph of
the Section 16, Rule 3 of the 1997 Rules of Court, as amended, is clear - the heirs of the deceased may
be allowed to be substituted for the deceased, without requiring the appointment of an executor or
administrator. Our decisions on this matter have been clear and unequivocal. In San Juan, Jr. v. Cruz,
this Court held:
The pronouncement of this Court in Lawas v. Court of Appeals x x x that priority is given to
the legal representative of the deceased (the executor or administrator) and that it is only in
case of unreasonable delay in the appointment of an executor or administrator, or in cases
where the heirs resort to an extra-judicial settlement of the estate that the court may adopt the
alternative of allowing the heirs of the deceased to be substituted for the deceased, is no
longer true.22 (Emphasis ours)
We likewise said in Gochan v. Young: 23
For the protection of the interests of the decedent, this Court has in previous instances recognized the
heirs as proper representatives of the decedent, even when there is already an administrator appointed
by the court. When no administrator has been appointed, as in this case, there is all the more reason to
recognize the heirs as the proper representatives of the deceased.
Josefa's death certificate24 shows that she was single at the time of her death. The records do not show
that she left a will. Therefore, as correctly held by the CA, in applying Section 16, Rule 3, her heirs are
her surviving sisters (Michaelis, Maria, Zosima, and Consolacion) and the children of her deceased sister,
Lourdes (Manuel, Cesar, Huros and Regulo) who should be her legal representatives. Menendez,
although also a sister, should be excluded for being one of the adverse parties in the cases before the
RTC.
WHEREFORE, premises considered, we DENY the petition for lack of merit. We AFFIRM the Court of
Appeals decision that the surviving heirs of the deceased Josefa - namely Michaelis M. Rodrigo; Maria
M. Cecilio; Zosima D. Maglasang; Consolacion M. Bag-aw; and the children of Lourdes M. Lumapas,
namely Manuel Lumapas, Cesar Lumapas, Huros Lumapas and Regulo Maquilan - should be her
substitutes and are hereby so ordered to be substituted for her in Civil Case Nos. B-1239 and B-1281.
Costs against the petitioner.
G.R. No. 141834 July 30, 2007
COMMISSIONER RUFUS B. RODRIGUEZ and ASSOCIATE COMMISSIONER ALAN ROULLO YAP of
the Bureau of Immigration, Petitioners,
vs.
SAMUEL A. JARDIN,1 Respondent.
This petition for review on certiorari2 seeks to set aside the decision of the Court of Appeals (CA) in CA-
G.R. SP No. 544653 and its resolution denying reconsideration.
In the evening of May 8, 1999, Edgardo D. Cabrrera, Gerardo R. Gorrospe and Dorotea T. Hiyas,
intelligence agents of the Bureau of Immigration (BI), saw respondent Samuel A. Jardin, chief of the BI's
Law and Intelligence Division, with three unidentified male companions, including a Japanese national
who arrived on board a flight from Osaka, Japan, at the arrival area of the Ninoy Aquino International
Airport (NAIA). Cabrrera noticed that the Japanese national's fifth finger on the left hand was missing.
This aroused his suspicion, mutilation being a common practice among members of the Yakuza. 4 Hence,
the BI agents closely watched respondent and his companions.
After identifying the Japanese national as Mizutani Ryoichiro, an alien declared undesirable in 1999 and
prohibited from entering the Philippines, 5 they immediately apprehended him and sent him back to Japan
pursuant to an exclusion order.6
The following day, the BI agents filed a spot report 7 (relating the previous night's incident) with the chief of
intelligence of the BI stationed in NAIA. Acting immigration officer Jude C. Hinolan, in his
memorandum,8 confirmed the spot report and relayed the service of the exclusion order on the airline and
the consequent deportation of Ryoichiro.
On May 14, 1999, petitioner Rufus Rodriguez, immigration commissioner at that time, ordered associate
commissioner Ma. Luisa Ylagan-Cortez to investigate the allegations contained in the spot report of the
agents and Hinolan's memorandum. 9 Accordingly, Ylagan-Cortez ordered respondent to file his sworn
explanation.10
Respondent denied the allegations against him. 11 He averred that his relatives requested his assistance
in welcoming a niece's fiancé, Mizutani Ryoichiro. 12 Although he was aware that a Mizutani Ryoichiro had
been declared an undesirable alien, he was informed that the blacklisted Ryoichiro was born in
198813 while his niece told him that her fiancé was in his fifties. 14 Furthermore, respondent reasoned that
the accusations against Ryoichiro were unfounded because neither a conviction nor a police report
linking Ryoichiro to the Yakuza was ever presented.15
16
On June 4, 1999, Ylagan-Cortez, as acting immigration commissioner, ordered the preventive
suspension of respondent for 90 days. 17 The administrative case against respondent was then referred to
petitioner Alan Roullo Yap, an associate commissioner at that time, for formal investigation and reception
of evidence.18 Respondent moved for the suspension of proceedings and reconsideration 19 but petitioner
Yap denied his motion.20
On July 8, 1999, respondent sought the review of the June 4, 1999 order by the Secretary of Justice. 21
Despite the lapse of his preventive suspension on September 4, 1999 and pending the resolution of his
appeal with the Secretary of Justice, respondent filed a special civil action for certiorari 22 with the CA,
assailing the June 4, 1999 order. On November 19, 1999, the appellate court nullified the order and
directed petitioners to reinstate respondent to his position. 23 Petitioners' motion for reconsideration was
denied.24
On February 21, 2000, petitioners in their official capacities filed this appeal. 25 They contended that the
CA erred in granting respondent's petition for certiorari and in annulling the June 4, 1999 order. 26
On June 15, 2002, respondent moved to declare the petition moot. He averred that petitioner Rodriguez
had in the meantime been replaced by Andrea D. Domingo as immigration commissioner while petitioner
Yap had been appointed to the Office of the Government Corporate Counsel. 27 Despite the lapse of 30
days, no substitution was effected pursuant to Section 17, Rule 3 of the Rules of Court which provides:
Sec. 17. Death or separation of a party who is a public officer. — When a public officer is a party in an
action in his official capacity and during its pendency dies, resigns, or otherwise ceases to hold office, the
action may be continued and maintained by or against his successor if within thirty (30) days after the
successor takes office or such time as may be granted by the court, it is satisfactorily shown to the court
by any party that there is a substantial need for continuing or maintaining it and that the successor adopts
or continues or threatens to continue or adopt the action of his predecessor. Before a substitution is
made, the party or officer affected, unless expressly assenting thereto, shall be given reasonable notice
of the application therefor and accorded an opportunity to be heard.1avvphil
On April 30, 2003, the Office of the Solicitor General (OSG) manifested that Andrea D. Domingo had
indeed been appointed the new immigration commissioner replacing petitioner Rodriguez. The OSG also
stated that Commissioner Domingo was not adopting the position of her predecessor, petitioner
Rodriguez.28
Despite serious misgivings, we agree with respondent but purely on technicality.
Well-settled is the rule that failure to make a substitution pursuant to Section 17, Rule 3 of the Rules of
Court is a ground for the dismissal of an action.29 For the valid substitution of a public officer who has
sued or has been sued in his or her official capacity, the following requisites must be satisfied:
1. satisfactory proof by any party that there is substantial need for continuing or maintaining
the action;
2. the successor adopts or continues or threatens to adopt or continue the acts of his or her
predecessor;
3. the substitution must be effected within 30 days after the successor assumes office or
within the time granted by the court; and,
4. notice of the application to the other party.
Here, petitioner Rodriguez's successor categorically expressed her lack of interest in pursuing this
appeal, hence, the failure to effect a substitution.
WHEREFORE, the petition is hereby DENIED.
No costs.
SO ORDERED.
G.R. No. 148444 September 3, 2009
ASSOCIATED BANK (now UNITED OVERSEAS BANK [PHILS.]), Petitioner,
vs.
SPOUSES RAFAEL and MONALIZA PRONSTROLLER, Respondents.
SPOUSES EDUARDO and MA. PILAR VACA, Intervenors.
RESOLUTION
NACHURA, J.:
For resolution are the Motion for Reconsideration 1 filed by petitioner Associated Bank (now United
Overseas Bank [Phils.]) and Motion for Leave to Intervene 2 filed by Spouses Eduardo and Ma. Pilar Vaca
(spouses Vaca).
After a thorough examination of petitioner’s motion for reconsideration, together with its voluminous
attachments, it is readily apparent that no new issues are raised and the arguments presented are a
mere rehash of what have been discussed in its pleadings, all of which have been considered and found
unmeritorious in the July 14, 2008 Decision.3
Be that as it may, we would like to reiterate that the second letter-agreement modified the first one
entered into by petitioner, through Atty. Jose Soluta, Jr. (Atty. Soluta). In previously allowing Atty. Soluta to
enter into the first letter-agreement without a board resolution expressly authorizing him, petitioner had
clothed him with apparent authority to modify the same via the second letter-agreement. 4
As early as June 1993, respondents already requested a modification of the earlier agreement such that
the full payment should be made upon receipt of this Court’s decision confirming petitioner’s right to the
subject property. Instead of acting on the request, the Board of Directors deferred action on it. It was only
after one year and after the bank’s reorganization that the board rejected respondents’ request. We
cannot, therefore, blame respondents for believing that the second letter-agreement signed by Atty.
Soluta was petitioner’s action on their request. 5
We also would like to stress that the first letter-agreement was not rescinded by respondents’ failure to
deposit in escrow their full payment simply because the date of full payment had already been modified
by the later agreement. Neither was the second letter-agreement rescinded by respondents’ new offer
because the offer was made only to demonstrate their capacity to purchase the subject property. 6
In our Decision, we affirmed the factual findings of the Court of Appeals (CA) because they were amply
supported by the evidence on record. Well-established is the rule that if there is no showing of error in the
appreciation of facts by the CA, this Court treats them as conclusive. The conclusions of law that the
appellate court drew from those facts are likewise accurate and convincing. 7
Hence, we deny with finality petitioner’s motion for reconsideration. No further pleadings will be
entertained.
After the promulgation of the July 14, 2008 Decision, spouses Vaca filed a Motion for Leave to Intervene
alleging that they are the registered owners of the subject property and are thus real parties-in-interest.
They add that they stand to be deprived of their family home without having been given their day in court.
They also contend that the Court should order petitioner to reimburse the spouses Vaca the amount
received from the latter.
The Motion for Leave to Intervene must be denied.
Section 2, Rule 19 of the Rules of Court, provides:
SEC. 2. Time to intervene. – The motion to intervene may be filed at any time before rendition of
judgment by the trial court. A copy of the pleading-in-intervention shall be attached to the motion and
served on the original parties.8
Obviously, the spouses Vaca’s motion for leave to intervene before this Court was belatedly filed.
The purpose of intervention is to enable a stranger to an action to become a party to protect his interest,
and the court, incidentally, to settle all conflicting claims. 9 The spouses Vaca are not strangers to the
action. Their legal interest in the litigation springs from the sale of the subject property by petitioner in
their favor during the pendency of this case. As transferee pendente lite, the spouses Vaca are the
successors-in-interest of the transferor, the petitioner, who is already a party to the action. Thus, the
applicable provision is Section 19, Rule 3 of the Rules of Court, governing transfers of interest pendente
lite. It provides:
SEC. 19. Transfer of interest. – In case of any transfer of interest, the action may be continued by or
against the original party, unless the court upon motion directs the person to whom the interest is
transferred to be substituted in the action or joined with the original party.
In Natalia Realty, Inc. v. Court of Appeals,10 citing Santiago Land Development Corporation v. Court of
Appeals,11we have ruled that:
[A] transferee pendente lite of the property in litigation does not have a right to intervene. We held that a
transferee stands exactly in the shoes of his predecessor-in-interest, bound by the proceedings and
judgment in the case before the rights were assigned to him. It is not legally tenable for a transferee
pendente lite to still intervene. Essentially, the law already considers the transferee joined or substituted
in the pending action, commencing at the exact moment when the transfer of interest is perfected
between the original party-transferor and the transferee pendente lite. 121avvphi1
That the Certificate of Title covering the subject property is in the name of the spouses Vaca is of no
moment. It is noteworthy that a notice of lis pendens was timely annotated on petitioner’s title. This was
done prior to the sale of the property to the spouses Vaca, the cancellation of petitioner’s title, and the
issuance of the new Transfer Certificate of Title in the name of the spouses. By virtue of the notice of lis
pendens, the spouses Vaca are bound by the outcome of the litigation subject of the lis pendens. Their
interest is subject to the incidents or results of the pending suit, and their Certificate of Title will afford
them no special protection.13
Lastly, the spouses Vaca’s claim for reimbursement, if any, must be ventilated in a separate action
against petitioner. To allow the intervention would unduly delay and prejudice the rights especially of
respondents who have been deprived of the subject property for so long. IN LIGHT OF THE
FOREGOING, we deny petitioner’s motion for reconsideration and the Spouses Vaca’s Motion for
Intervention. SO ORDERED.
G.R. No. 146989 February 7, 2007
MELENCIO GABRIEL, represented by surviving spouse, FLORDELIZA V. GABRIEL, Petitioner,
vs.
NELSON BILON, ANGEL BRAZIL AND ERNESTO PAGAYGAY, Respondents.
This is a petition for review on certiorari1 assailing the Decision and Resolution of the Court of Appeals,
respectively dated August 4, 2000 and February 7, 2001, in CA-G.R. SP No. 52001 entitled "Nelson
Bilon, et al. v. National Labor Relations Commission, et al."
The challenged decision reversed and set aside the decision 2 of the National Labor Relations
Commission (NLRC) dismissing respondents’ complaint for illegal dismissal and illegal deductions, and
reinstating the decision of the Labor Arbiter finding petitioner guilty of illegal dismissal but not of illegal
deductions subject to the modification that respondents be immediately reinstated to their former
positions without loss of seniority rights and privileges instead of being paid separation pay.
Petitioner, represented by his surviving spouse, Flordeliza V. Gabriel, was the owner-operator of a public
transport business, "Gabriel Jeepney," with a fleet of 54 jeepneys plying the Baclaran-Divisoria-Tondo
route. Petitioner had a pool of drivers, which included respondents, operating under a "boundary system"
of ₱400 per day.
The facts3 are as follows:
On November 15, 1995, respondents filed their separate complaints for illegal dismissal, illegal
deductions, and separation pay against petitioner with the National Labor Relations Commission (NLRC).
These were consolidated and docketed as NLRC-NCR Case No. 00-11-07420-95. 4
On December 15, 1995, the complaint was amended, impleading as party respondent the Bacoor
Transport Service Cooperative, Inc., as both parties are members of the cooperative.
Respondents alleged the following:
1) That they were regular drivers of Gabriel Jeepney, driving their respective units bearing
Plate Nos. PHW 553, NXU 155, and NWW 557, under a boundary system of ₱400 per day,
plying Baclaran to Divisoria via Tondo, and vice versa, since December 1990, November
1984 and November 1991, respectively, up to April 30, 1995, 5 driving five days a week, with
average daily earnings of ₱400;
2) That they were required/forced to pay additional ₱55.00 per day for the following: a)
₱20.00 police protection; b) ₱20.00 washing; c) ₱10.00 deposit; and [d)] ₱5.00 garage fees;
3) That there is no law providing the operator to require the drivers to pay police protection,
deposit, washing, and garage fees.
4) That on April 30, 1995, petitioner told them not to drive anymore, and when they went to
the garage to report for work the next day, they were not given a unit to drive; and
5) That the boundary drivers of passenger jeepneys are considered regular employees of the
jeepney operators. Being such, they are entitled to security of tenure. Petitioner, however,
dismissed them without factual and legal basis, and without due process.
On his part, petitioner contended that:
1) He does not remember if the respondents were ever under his employ as drivers of his
passenger jeepneys. Certain, however, is the fact that neither the respondents nor other
drivers who worked for him were ever dismissed by him. As a matter of fact, some of his
former drivers just stopped reporting for work, either because they found some other
employment or drove for other operators, and like the respondents, the next time he heard
from them was when they started fabricating unfounded complaints against him;
2) He made sure that none of the jeepneys would stay idle even for a day so he could collect
his earnings; hence, it had been his practice to establish a pool of drivers. Had respondents
manifested their desire to drive his units, it would have been immaterial whether they were his
former drivers or not. As long as they obtained the necessary licenses and references, they
would have been accommodated and placed on schedule;
3) While he was penalized or made to pay a certain amount in connection with similar
complaints by other drivers in a previous case before this, it was not because his culpability
was established, but due to technicalities involving oversight and negligence on his part by
not participating in any stage of the investigation thereof; and
4) Respondents’ claim that certain amounts, as enumerated in the complaint, were deducted
from their day’s earnings is preposterous. Indeed, there were times when deductions were
made from the day’s earnings of some drivers, but such were installment payments for the
amount previously advanced to them. Most drivers, when they got involved in accidents or
violations of traffic regulations, managed to settle them, and in the process they had to spend
some money, but most of the time they did not have the needed amount so they secured
cash advances from him, with the understanding that the same should be paid back by
installments through deductions from their daily earnings or boundary.
On the other hand, Bacoor Transport Service Cooperative, Inc. (BTSCI) declared that it should not be
made a party to the case because: 1) [I]t has nothing to do with the employment of its member-drivers.
The matter is between the member-operator and their respective member-drivers. The member-drivers’
tenure of employment, compensation, work conditions, and other aspects of employment are matters of
arrangement between them and the member-operators concerned, and the BTSCI has nothing to do with
it, as can be inferred from the Management Agreement between BTSCI and the member-operators; and
2) [T]he amount allegedly deducted from respondents and the purpose for which they were applied were
matters that the cooperative was not aware of, and much less imposed on them.
On September 17, 1996, respondents filed a motion to re-raffle the case for the reason that the Labor
Arbiter (Hon. Roberto I. Santos) failed "to render his decision within thirty (30) calendar days, without
extension, after the submission of the case for decision."
On September 18, 1996, said Labor Arbiter inhibited himself from further handling the case due to
"personal reasons."
On November 8, 1996, Labor Arbiter Ricardo C. Nora, to whom the case was re-raffled, ordered the
parties to file their respective memoranda within ten days, after which the case was deemed submitted
for resolution.
On March 17, 1997, the Labor Arbiter (Hon. Ricardo C. Nora) handed down his decision, the dispositive
portion of which is worded as follows:
WHEREFORE, premises considered, judgment is hereby rendered declaring the illegality of
[respondents’] dismissal and ordering [petitioner] Melencio Gabriel to pay the [respondents] the total
amount of ONE MILLION THIRTY FOUR THOUSAND PESOS [₱1,034,000,] representing [respondents’]
backwages and separation pay
[Petitioner] Melencio Gabriel is likewise ordered to pay attorney’s fees equivalent to five percent (5%) of
the judgment award or the amount of ₱51,700 within ten (10) days from receipt of this Decision.
Incidentally, on April 4, 1997, petitioner passed away. On April 18, 1997, a copy of the above decision
was delivered personally to petitioner’s house. According to respondents, petitioner’s surviving spouse,
Flordeliza Gabriel, and their daughter, after reading the contents of the decision and after they had
spoken to their counsel, refused to receive the same. Nevertheless, Bailiff Alfredo V. Estonactoc left a
copy of the decision with petitioner’s wife and her daughter but they both refused to sign and
acknowledge receipt of the decision.7
The labor arbiter’s decision was subsequently served by registered mail at petitioner’s residence and the
same was received on May 28, 1997.
On May 16, 1997, counsel for petitioner filed an entry of appearance with motion to dismiss the case for
the reason that petitioner passed away last April 4, 1997.
On June 5, 1997, petitioner appealed the labor arbiter’s decision to the National Labor Relations
Commission, First Division, contending that the labor arbiter erred:
1. In holding that [petitioner] Gabriel dismissed the complainants, Arb. Nora committed a
serious error in the findings of fact which, if not corrected, would cause grave or irreparable
damage or injury to [petitioner] Gabriel;
2. In holding that ‘strained relations’ already exist between the parties, justifying an award of
separation pay in lieu of reinstatement, Arb. Nora not only committed a serious error in the
findings of fact, but he also abused his discretion;
3. In computing the amount of backwages allegedly due [respondents] from 30 April 1995 to
15 March 1997, Arb. Nora abused his discretion, considering that the case had been
submitted for decision as early as 1 March 1996 and that the same should have been decided
as early as 31 March 1996;
4. In using ‘₱400.00’ and ‘22 days’ as factors in computing the amount of backwages
allegedly due [respondents], Arb. Nora abused his discretion and committed a serious error in
the findings of fact, considering that there was no factual or evidentiary basis therefor;
5. In using ‘33.5 months’ as factor in the computation of the amount of backwages allegedly
due [respondents], Arb. Nora committed a serious error in the findings of fact[,] because even
if it is assumed that backwages are due from 30 April 1995 to 15 March 1997, the period
between the two dates is only 22½ months, and not 33½ months as stated in the appealed
decision; and
6. In not dismissing the case[,] despite notice of the death of [petitioner] Gabriel before final
judgment, Arb. Nora abused his discretion and committed a serious error of law. 8
On July 3, 1997, respondents filed a motion to dismiss petitioner’s appeal on the ground that the "surety
bond is defective" and the appeal was "filed out of time," which move was opposed by petitioner.
Subsequently, on April 28, 1998, the NLRC promulgated its first decision, the dispositive portion of which
reads:
WHEREFORE, premises considered, the appealed decision is hereby reversed and set aside. The
above-entitled case is hereby dismissed for lack of employer-employee relationship.
Respondents filed a motion for reconsideration. They claimed that the decision did not discuss the issue
of the timeliness of the appeal. The lack of employer-employee relationship was mentioned in the
dispositive portion, which issue was not raised before the labor arbiter or discussed in the body of the
questioned decision. In view of the issues raised by respondents in their motion, the NLRC rendered its
second decision on October 29, 1998. The pertinent portions are hereby quoted thus:
… In the case at bar, [petitioner] Melencio Gabriel was not represented by counsel during the pendency
of the case. A decision was rendered by the Labor Arbiter a quo on March 17, 1997 while Mr. Gabriel
passed away on April 4, 1997 without having received a copy thereof during his lifetime. The decision
was only served on April 18, 1997 when he was no longer around to receive the same. His surviving
spouse and daughter cannot automatically substitute themselves as party respondents. Thus, when the
bailiff tendered a copy of the decision to them, they were not in a position to receive them. The
requirement of leaving a copy at the party’s residence is not applicable in the instant case because this
presupposes that the party is still living and is just not available to receive the decision.
The preceding considered, the decision of the labor arbiter has not become final because there was no
proper service of copy thereof to [petitioner] ….
Undoubtedly, this case is for recovery of money which does not survive, and considering that the decision
has not become final, the case should have been dismissed and the appeal no longer entertained….
WHEREFORE, in view of the foregoing, the Decision of April 28, 1998 is set aside and vacated.
Furthermore, the instant case is dismissed and complainants are directed to pursue their claim against
the proceedings for the settlement of the estate of the deceased Melencio Gabriel.
Aggrieved by the decision of the NLRC, respondents elevated the case to the Court of Appeals (CA) by
way of a petition for certiorari. On August 4, 2000, the CA reversed the decisions of the NLRC:
…
Article 223 of the Labor Code categorically mandates that "an appeal by the employer may be
perfected only upon the posting of a cash bond or surety bond x x x." It is beyond peradventure then that
the non-compliance with the above conditio sine qua non, plus the fact that the appeal was filed beyond
the reglementary period, should have been enough reasons to dismiss the appeal.
In any event, even conceding ex gratia that such procedural infirmity [were] inexistent, this petition would
still be tenable based on substantive aspects.
The public respondent’s decision, dated April 28, 1998, is egregiously wrong insofar as it was anchored
on the absence of an employer-employee relationship. Well-settled is the rule that the boundary system
used in jeepney and (taxi) operations presupposes an employer-employee relationship (National Labor
Union v. Dinglasan, 98 Phil. 649) ….
The NLRC ostensibly tried to redeem itself by vacating the decision April 28, 1998…. By so doing,
however, it did not actually resolve the matter definitively. It merely relieved itself of such burden by
suggesting that the petitioners "pursue their claim against the proceedings for the settlement of the estate
of the deceased Melencio Gabriel…."
In the instant case, the decision (dated March 17, 1997) of the Labor Arbiter became final and executory
on account of the failure of the private respondent to perfect his appeal on time….
Thus, we disagree with the ratiocination of the NLRC that the death of the private respondent on April 4,
1997 ipso facto negates recovery of the money claim against the successors-in-interest …. Rather, this
situation comes within the aegis of Section 3, Rule III of the NLRC Manual on Execution of Judgment,
which provides:
SECTION 3. Execution in Case of Death of Party. – Where a party dies after the finality of the
decision/entry of judgment of order, execution thereon may issue or one already issued may be enforced
in the following cases:
a) x x x
b) In case of death of the losing party, against his successor-in-interest, executor or
administrator;
c) In case of death of the losing party after execution is actually levied upon any of his
property, the same may be sold for the satisfaction thereof, and the sheriff making the sale
shall account to his successor-in-interest, executor or administrator for any surplus in his
hands.
Notwithstanding the foregoing disquisition though, We are not entirely in accord with the labor arbiter’s
decision awarding separation pay in favor of the petitioners. In this regard, it [is] worth mentioning that
 in Kiamco v. NLRC,11citing Globe-Mackay Cable and Radio Corp. v. NLRC,12 the Supreme Court
qualified the application of the "strained relations" principle when it held --
"If in the wisdom of the Court, there may be a ground or grounds for the non-application of the above-
cited provision (Art. 279, Labor Code) this should be by way of exception, such as when the
reinstatement may be inadmissible due to ensuing strained relations between the employer and
employee.
In such cases, it should be proved that the employee concerned occupies a position where he enjoys the
trust and confidence of his employer, and that it is likely that if reinstated, an atmosphere of antipathy and
antagonism may be generated as to adversely affect the efficiency and productivity of the employee
concerned x x x Obviously, the principle of ‘strained relations’ cannot be applied indiscriminately.
Otherwise, reinstatement can never be possible simply because some hostility is invariably engendered
between the parties as a result of litigation. That is human nature.
Besides, no strained relations should arise from a valid legal act of asserting one’s right; otherwise[,] an
employee who shall assert his right could be easily separated from the service by merely paying his
separation pay on the pretext that his relationship with his employer had already become strained."
Anent the award of backwages, the Labor Arbiter erred in computing the same from the date the
petitioners were illegally dismissed (i.e. April 30, 1995) up to March 15, 1997, that is two (2) days prior to
the rendition of his decision (i.e. March 17, 1997).
… persons served and the date of receipt which return shall be immediately attached and shall form part of
WHEREFORE, premises considered, the petition is GRANTED, hereby REVERSING and SETTING
ASIDE the assailed decisions of the National Labor Relations Commission, dated April 28, 1998 ans
October 29, 1998. Consequently, the decision of the Labor Arbiter, dated March 17, 1997, is hereby
REINSTATED, subject to the MODIFICATION that the private respondent is ORDERED to immediately
REINSTATE petitioners Nelson Bilon, Angel Brazil and Ernesto Pagaygay to their former position without
loss of seniority rights and privileges, with full backwages from the date of their dismissal until their actual
reinstatement. Costs against private respondent.
SO ORDERED.13
Petitioner filed a motion for reconsideration but the same was denied by the CA in a resolution dated
February 7, 2001.
Hence, this petition raising the following issues: 14
ITHE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER’S APPEAL TO THE NATIONAL
LABOR RELATIONS COMMISSION WAS FILED OUT OF TIME.
IITHE COURT OF APPEALS ERRED IN HOLDING THAT THE ALLEGED DEFECTS IN PETITIONER’S
APPEAL BOND WERE OF SUCH GRAVITY AS TO PREVENT THE APPEAL FROM BEING
PERFECTED.
IIITHE COURT OF APPEALS ERRED IN GRANTING RESPONDENTS’ PETITION FOR CERTIORARI
DESPITE THE FACT THAT THE SAME ASSAILED A DECISION WHICH HAD BEEN VACATED IN
FAVOR OF A NEW ONE WHICH, IN TURN, HAS SOLID LEGAL BASIS.
IVTHE COURT OF APPEALS ERRED IN APPLYING SECTION 3, RULE III, OF THE MANUAL ON
EXECUTION OF JUDGMENT OF THE NATIONAL LABOR RELATIONS COMMISSION WHICH, BY ITS
OWN EXPRESS TERMS, IS NOT APPLICABLE.
A resolution of the case requires a brief discussion of two issues which touch upon the procedural and
substantial aspects of the case thus: a) whether petitioner’s appeal was filed out of time; and b) whether
the claim survives.
As regards the first issue, the Court considers the service of copy of the decision of the labor arbiter to
have been validly made on May 28, 1997 when it was received through registered mail. As correctly
pointed out by petitioner’s wife, service of a copy of the decision could not have been validly effected on
April 18, 1997 because petitioner passed away on April 4, 1997.
Section 4, Rule III of the New Rules of Procedure of the NLRC provides:
SEC. 4. Service of Notices and Resolutions. – (a) Notices or summons and copies of orders,
resolutions or decisions shall be served on the parties to the case personally by the bailiff or authorized
public officer within three (3) days from receipt thereof or by registered mail; Provided, That where a party
is represented by counsel or authorized representative, service shall be made on such counsel or
authorized representative; Provided further, That in cases of decision and final awards, copies thereof
shall be served on both parties and their counsel ….
For the purpose of computing the period of appeal, the same shall be counted from receipt of such
decisions, awards or orders by the counsel of record.
(b) The bailiff or officer personally serving the notice, order, resolution or decision shall submit his return
within two (2) days from date of service thereof, stating legibly in his return, his name, the names of the
the records of the case. If no service was effected, the serving officer shall state the reason therefore in
the return.
Section 6, Rule 13 of the Rules of Court which is suppletory to the NLRC Rules of Procedure states that:
"[s]ervice of the papers may be made by delivering personally a copy to the party or his counsel, or by
leaving it in his office with his clerk or with a person having charge thereof. If no person is found in his
office, or his office is not known, or he has no office, then by leaving the copy, between the hours of eight
in the morning and six in the evening, at the party’s or counsel’s residence, if known, with a person of
sufficient age and discretion then residing therein."
The foregoing provisions contemplate a situation wherein the party to the action is alive upon the delivery
of a copy of the tribunal’s decision. In the present case, however, petitioner died before a copy of the
labor arbiter’s decision was served upon him. Hence, the above provisions do not apply. As aptly stated
by the NLRC:
… In the case at bar, respondent Melencio Gabriel was not represented by counsel during the pendency
of the case. A decision was rendered by the Labor Arbiter a quo on March 17, 1997 while Mr. Gabriel
passed away on April 4, 1997, without having received a copy thereof during his lifetime. The decision
was only served on April 18, 1997 when he was no longer around to receive the same. His surviving
spouse and daughter cannot automatically substitute themselves as party respondents. Thus, when the
bailiff tendered a copy of the decision to them, they were not in a position to receive them. The
requirement of leaving a copy at the party’s residence is not applicable in the instant case because this
presupposes that the party is still living and is not just available to receive the decision.
The preceding considered, the decision of the Labor Arbiter has not become final because there was no
proper service of copy thereof to party respondent…. 15
Thus, the appeal filed on behalf of petitioner on June 5, 1997 after receipt of a copy of the
decision via registered mail on May 28, 1997 was within the ten-day reglementary period prescribed
under Section 223 of the Labor Code.
On the question whether petitioner’s surety bond was defective, Section 6, Rule VI of the New Rules of
Procedure of the NLRC provides:
SEC. 6. Bond. – In case the decision of a Labor Arbiter … involves monetary award, an appeal by the The Court also agrees with the labor arbiter and the CA that respondents were illegally dismissed by
employer shall be perfected only upon the posting of a cash or surety bond issued by a reputable petitioner. Respondents were not accorded due process.21 Moreover, petitioner failed to show that the
bonding company duly accredited by the Commission or the Supreme Court in an amount equivalent to cause for termination falls under any of the grounds enumerated in Article 282
the monetary award, exclusive of moral and exemplary damages and attorney’s fees.

(then Article 283)22 of the Labor Code.23 Consequently, respondents are entitled to reinstatement without
The employer as well as counsel shall submit a joint declaration under oath attesting that the surety bond loss of seniority rights and other privileges and to their full backwages computed from the date of
posted is genuine and that it shall be in effect until final disposition of the case. dismissal up to the time of their actual reinstatement in accordance with Article 279 of the Labor Code.

The Commission may, in meritorious cases and upon Motion of the Appellant, reduce the amount of the Reinstatement is obtainable in this case because it has not been shown that there is an ensuing "strained
bond. (As amended on Nov. 5, 1993). relations" between petitioner and respondents. This is pursuant to the principle laid down in Globe-
Mackay Cable and Radio Corporation v. NLRC 24 as quoted earlier in the CA decision.

The Court believes that petitioner was able to comply substantially with the requirements of the above
Rule. As correctly pointed out by the NLRC: With regard to respondents’ monetary claim, the same shall be governed by Section 20 (then Section
21), Rule 3 of the Rules of Court which provides:1awphi1.net

While we agree with complainants-appellees that the posting of the surety bond is jurisdictional, We do
not believe that the "defects" imputed to the surety bond posted for and in behalf of respondent-appellant
Gabriel are of such character as to affect the jurisdiction of this Commission to entertain the instant
appeal.
It matters not that, by the terms of the bond posted, the "Liability of the surety herein shall expire on June
5, 1998 and this bond shall be automatically cancelled ten (10) days after the expiration." After all, the
bond is accompanied by the joint declaration under oath of respondent-appellant’s surviving spouse and
counsel attesting that the surety bond is genuine and shall be in effect until the final disposition of the
case.
SEC. 20. Action on contractual money claims. – When the action is for recovery of money arising from
contract, express or implied, and the defendant dies before entry of final judgment in the court in which
the action was pending at the time of such death, it shall not be dismissed but shall instead be allowed to
continue until entry of final judgment. A favorable judgment obtained by the plaintiff therein shall be
enforced in the manner provided in these Rules for prosecuting claims against the estate of a deceased
person. (21a)
In relation to this, Section 5, Rule 86 of the Rules of Court states:

Anent complainants-appellees contention that the surety bond posted is defective for being in the name
of BTSCI which did not appeal and for having been entered into by Mrs. Gabriel without BTSCI’s
authority, the same has been rendered moot and academic by the certification issued by Gil CJ. San
Juan, Vice-President of the bonding company to the effect that "Eastern Assurance and Surety
Corporation Bond No. 2749 was posted for and on behalf appellant Melencio Gabriel and/or his heirs"
and that "(T)he name "Bacoor Transport Service Cooperative, Inc." was indicated in said bond due
merely in (sic) advertence."
SEC. 5. Claims which must be filed under the notice. If not filed, barred ; exceptions. – All claims for
money against the decedent arising from contract, express or implied, whether the same be due, not due,
or contingent, ... and judgment for money against the decedent, must be filed within the time limited in the
notice; otherwise they are barred forever, except that they may be set forth as counterclaims in any
action that the executor or administrator may bring against the claimants….
Thus, in accordance with the above Rules, the money claims of respondents must be filed against the
estate of petitioner Melencio Gabriel. 25

At any rate, the Supreme Court has time and again ruled that while Article 223 of the Labor Code, as
amended requiring a cash or surety bond in the amount equivalent to the monetary award in the WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated
judgment appealed from for the appeal to be perfected, may be considered a jurisdictional requirement, August 4, 2000 and February 7, 2001, respectively, in CA-G.R. SP No. 52001 are AFFIRMED but with
nevertheless, adhering to the principle that substantial justice is better served by allowing the appeal on the MODIFICATION that the money claims of respondents should be filed against the estate of Melencio
the merits threshed out by this Honorable Commission, the foregoing requirement of the law should be Gabriel, within such reasonable time from the finality of this Decision as the estate court may fix.
given a liberal interpretation (Pantranco North Express, Inc. v. Sison, 149 SCRA 238; C.W. Tan Mfg. v.
NLRC, 170 SCRA 240; YBL v. NLRC, 190 SCRA 160; Rada v. NLRC, 205 SCRA 69; Star Angel
Handicraft v. NLRC, 236 SCRA 580).16

On the other hand, with regard to the substantive aspect of the case, the Court agrees with the CA that
an employer-employee relationship existed between petitioner and respondents. In Martinez v. National
Labor Relations Commission,17 citing National Labor Union v. Dinglasan, 18 the Court ruled that:

[T]he relationship between jeepney owners/operators and jeepney drivers under the boundary system is
that of employer-employee and not of lessor-lessee because in the lease of chattels the lessor loses
complete control over the chattel leased although the lessee cannot be reckless in the use thereof,
otherwise he would be responsible for the damages to the lessor. In the case of jeepney
owners/operators and jeepney drivers, the former exercises supervision and control over the latter. The
fact that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary"
[that] they pay to the owner/operator is not sufficient to withdraw the relationship between them from that
of employer and employee. Thus, private respondents were employees … because they had been
engaged to perform activities which were usually necessary or desirable in the usual business or trade of
the employer.19

The same principle was reiterated in the case of Paguio Transport Corporation v. NLRC.20